Avnet, Inc.
AVNET INC (Form: DEF 14A, Received: 09/26/2013 06:01:34)
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

SCHEDULE 14A

(Rule 14a-101)

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934

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þ Definitive Proxy Statement

 

¨ Definitive Additional Materials

 

¨ Soliciting Material Pursuant to §240.14a-12

AVNET, INC.

 

(Name of Registrant as Specified In Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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LOGO

AVNET, INC.

 

 

NOTICE OF 2013 ANNUAL MEETING OF SHAREHOLDERS

 

 

To Be Held Friday, November 8, 2013

TO ALL SHAREHOLDERS OF AVNET, INC.:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of AVNET, INC., a New York corporation (“Avnet”), will be held at the Avnet, Inc. Corporate Headquarters, 2211 South 47th Street, Phoenix, Arizona 85034, on Friday, November 8, 2013, at 7:30 a.m., local time, for the following purposes:

 

  1. To elect the nine (9) director nominees named in the attached proxy statement to serve until the next annual meeting and until their successors have been elected and qualified.

 

  2. To conduct an advisory vote on executive compensation.

 

  3. To approve the Avnet, Inc. 2013 Stock Compensation and Incentive Plan.

 

  4. To ratify the appointment of KPMG LLP as the independent registered public accounting firm to audit the consolidated financial statements of Avnet for the fiscal year ending June 28, 2014.

 

  5. To take action with respect to such other matters as may properly come before the Annual Meeting (including postponements and adjournments).

The Board of Directors has fixed the close of business on September 10, 2013, as the record date for the Annual Meeting. Only holders of record of shares of Avnet’s Common Stock at the close of business on such date shall be entitled to notice of and to vote at the Annual Meeting or any adjournment thereof.

By Order of the Board of Directors

 

LOGO

Michael R. McCoy

Secretary

September 26, 2013


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TABLE OF CONTENTS

 

Proxy Statement

     1   

Proxy and Revocation of Proxy

     1   

Quorum and Voting

     2   

Broker Voting

     2   

Proposals and Required Vote

     2   

Corporate Governance

     3   

Corporate Governance Guidelines

     3   

Director Independence

     4   

Director Nominations

     4   

Director Communications

     5   

Management Succession

     5   

Code of Conduct

     5   

Reporting of Ethical Concerns

     6   

Board Leadership Structure

     6   

Stock Ownership Guidelines

     6   

Avnet Website

     6   

Political Spending and Lobbying

     7   

The Board of Directors and its Committees

     8   

Audit Committee

     8   

Compensation Committee

     9   

Corporate Governance Committee

     9   

Executive Committee

     9   

The Board’s Role in Risk Oversight

     9   

Proposal 1 — Election of Directors

     11   

Audit Committee Report

     15   

Principal Accounting Firm Fees

     16   

Beneficial Ownership of Common Stock by Management and Others

     18   

Section 16(a) Beneficial Ownership Reporting Compliance

     19   

Executive Officers of the Company

     20   

Compensation Committee Report

     21   

Compensation Discussion and Analysis

     22   

Introduction

     22   

Executive Summary

     22   

Executive Compensation Program Highlights

     23   

2012 Advisory Vote on Executive Compensation

     25   

Compensation Governance and Process

     25   

Elements of Executive Compensation

     28   

Additional Compensation Elements

     34   

Additional Information

     35   

Compensation of Avnet Executive Officers

     37   

Director Compensation

     48   

Proposal 2 — Advisory Vote on Named Executive Officer Compensation

     51   

Proposal 3 — Approval of the Avnet, Inc. 2013 Stock Compensation and Incentive Plan

     52   

Proposal 4 — Ratification of Appointment of KPMG as Independent Registered Public Accounting Firm

     61   

General

     61   

2014 Annual Meeting

     61   

Delivery of Documents to Security Holders

     62   

Appendix A — Reconciliation of Non-GAAP Measures

     A-1   

Appendix B — Avnet, Inc. 2013 Stock Compensation and Incentive Plan

     B-1   


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AVNET, INC.

2211 South 47th Street

Phoenix, Arizona 85034

 

 

PROXY STATEMENT

Dated September 26, 2013

 

 

FOR ANNUAL MEETING OF SHAREHOLDERS

To Be Held November 8, 2013

This Proxy Statement is being furnished in connection with the solicitation of proxies by the Board of Directors of Avnet, Inc. (“Avnet” or the “Company”) to be voted at the annual meeting of shareholders to be held at Avnet’s Corporate Headquarters, 2211 South 47 th Street, Phoenix, Arizona 85034, on November 8, 2013, and at any and all postponements or adjournments thereof (the “Annual Meeting”), with respect to the matters referred to in the accompanying notice. The approximate date on which this Proxy Statement and the enclosed form of proxy are first being sent or given to shareholders is September 26, 2013. Only holders of record of outstanding shares of the Company’s common stock, par value $1.00 per share (the “Common Stock”), at the close of business on September 10, 2013, the record date, are entitled to notice of and to vote at the Annual Meeting. Each shareholder is entitled to one vote per share held on the record date. The aggregate number of shares of Common Stock outstanding (net of treasury shares) at September 10, 2013, was 137,469,902 comprising all of Avnet’s capital stock outstanding as of that date.

At the meeting you will be asked to elect the nine director nominees named in the Proxy Statement, conduct an advisory vote on executive compensation, approve the Avnet, Inc. 2013 Stock Compensation and Incentive Plan and ratify the appointment of KPMG LLP as the independent registered public accounting firm to audit the consolidated financial statements of Avnet for the fiscal year ending June 28, 2014.

Proxies for shares of Common Stock may be submitted by completing and mailing the proxy card that accompanies this Proxy Statement or by submitting your proxy voting instructions by telephone or through the Internet. Shareholders who hold their shares through a broker, bank or other nominee should contact their nominee to determine whether they may submit their proxy by telephone or Internet. Shares of Common Stock represented by a proxy properly signed or submitted and received at or prior to the Annual Meeting will be voted in accordance with the shareholder’s instructions. If a proxy card is signed, dated and returned without indicating any voting instructions, shares of Common Stock represented by the proxy will be voted as the Board recommends. The Board of Directors is not currently aware of any business to be acted upon at the Annual Meeting other than as described in this Proxy Statement. If, however, other matters are properly brought before the Annual Meeting, the persons appointed as proxies will have discretion to vote according to their best judgment, unless otherwise indicated on any particular proxy. The persons appointed as proxies will have discretion to vote on adjournment of the Annual Meeting. Proxies will extend to, and be voted at, any adjournment or postponement of the Annual Meeting to the extent permitted under the Business Corporation Law of the State of New York and the Company’s By-laws.

Proxy and Revocation of Proxy

Any person who signs and returns the enclosed proxy or properly votes by telephone or Internet may revoke it by submitting a written notice of revocation or a later dated proxy that is received by Avnet prior to the Annual Meeting, or by voting in person at the Annual Meeting. However, a proxy will not be revoked by simply attending the Annual Meeting and not voting. All written notices of revocation and other communications with respect to revocation by Avnet shareholders should be addressed as follows: Michael McCoy, Secretary, Avnet, Inc., 2211 South 47 th Street, Phoenix, Arizona 85034. To revoke a proxy previously submitted by telephone or Internet, a shareholder of record can simply vote again at a later date, using the same procedures, in which case the later submitted vote will be


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recorded and the earlier vote will thereby be revoked. Please note that any shareholder whose shares are held of record by a broker, bank or other nominee, and who provides voting instructions on a form received from the nominee, may revoke or change his or her voting instructions only by contacting the nominee who holds his or her shares. Such shareholders may not vote in person at the Annual Meeting unless the shareholder obtains a legal proxy from the broker, bank or other nominee.

Quorum and Voting

The presence at the Annual Meeting, in person or by proxy, of the shareholders of record entitled to cast at least a majority of the votes that all shareholders are entitled to cast is necessary to constitute a quorum. Each vote represented at the Annual Meeting in person or by proxy will be counted toward a quorum. If a quorum should not be present, the Annual Meeting may be adjourned from time to time until a quorum is obtained. Abstentions and broker non-votes, which are more fully discussed below, will not be counted as a “vote cast” and therefore will have no effect on the outcome of any proposal.

Broker Voting

Brokers holding shares of record for a customer have the discretionary authority to vote on certain limited matters if they do not receive timely instructions from the customer regarding how the customer wants the shares voted. There are also some matters (“non-routine matters”) with respect to which brokers do not have discretionary authority to vote if they do not receive timely instructions from the customer. When a broker does not have discretion to vote on a particular matter and the customer has not given timely instructions on how the broker should vote, then what is referred to as a “broker non-vote” results. Any broker non-vote would be counted as present at the meeting for purposes of determining a quorum, but would be treated as not entitled to vote with respect to non-routine matters. Therefore, a broker non-vote would not count as a vote in favor of or against such matters and, accordingly, would not affect the outcome of the vote.

The election of directors (Proposal 1), the advisory vote on executive compensation (Proposal 2), and the proposal to adopt the Avnet, Inc. 2013 Stock Compensation and Incentive Plan (Proposal 3) are classified as non-routine matters. Accordingly, brokers, banks and other nominees will not be permitted to vote on any proposal other than the ratification of the appointment of the independent registered public accounting firm (Proposal 4) without instructions from the beneficial owners. As a result, the Company encourages all beneficial owners to provide voting instructions to your nominees to ensure that your shares are voted at the Annual Meeting.

Proposals and Required Vote

Proposal 1

To be elected, each director nominee must receive the affirmative vote of a plurality of the votes of the Common Stock present or represented at the Annual Meeting and entitled to vote. Votes may be cast in favor of or withheld with respect to each nominee. Votes that are withheld will be counted toward a quorum, but will be excluded entirely from the tabulation of votes for the election of directors and, therefore, will not affect the outcome of the vote on such election. However, Avnet’s Corporate Governance Guidelines (the “Guidelines”) require that, in an uncontested election, any director nominee who receives a greater number of votes “withheld” than votes “for” in the election must promptly submit a letter of resignation to the Board following the certification of the shareholder election results. The Guidelines specify the procedures that the Board of Directors must follow in such event and the time frame within which the Board must determine and publicly announce the results of its deliberation.

Proposal 2

As required by Section 14A of the Securities Exchange Act of 1934 (the “Exchange Act”), the Board of Directors is requesting that the Company’s shareholders approve, on a non-binding basis, the

 

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compensation of the Company’s Named Executive Officers as disclosed in this Proxy Statement. Approval, on a non-binding basis, of this proposal requires the affirmative vote of a majority of the votes cast on the proposal at the Annual Meeting. Only votes cast “for” or “against” the proposal will be counted in determining whether the proposal has been adopted. Brokers who hold shares of Common Stock as nominees will not have discretionary authority to vote such shares on this proposal. Thus, a shareholder who does not vote on this proposal at the Annual Meeting (whether due to abstention or a broker non-vote) will not affect the outcome of the vote but will reduce the number of affirmative votes required to achieve a majority for this matter by reducing the total number of shares from which the majority is calculated. Although the vote is non-binding, the Compensation Committee and the Board of Directors will review the results of the vote, consider shareholder concerns and take them into account in future determinations concerning the executive compensation program.

Proposal 3

Approval of the Avnet, Inc. 2013 Stock Compensation and Incentive Plan requires the affirmative vote of a majority of the votes cast at the Annual Meeting. Only votes cast “for” or “against” the proposal will be counted in determining whether the proposal has been adopted. Brokers who hold shares of Common Stock as nominees will not have discretionary authority to vote such shares on this proposal. Thus, a shareholder who does not vote at the Annual Meeting (whether due to abstention or a broker non-vote) will not affect the outcome of the vote but will reduce the number of affirmative votes required to achieve a majority for this matter by reducing the total number of shares from which the majority is calculated.

Proposal 4

Ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for fiscal 2014 requires the affirmative vote of the holders of a majority of the Common Stock present or represented at the meeting and entitled to vote. Abstentions are not counted in determining the votes cast in connection with the ratification of the appointment of KPMG LLP, but do have the effect of reducing the number of affirmative votes required to achieve a majority for this matter by reducing the total number of shares from which the majority is calculated. Brokers who hold shares of Common Stock as nominees will have discretionary authority to vote such shares on this proposal.

The Board of Directors recommends you vote “FOR” all of the directors named in Proposal 1 and “FOR” proposals  2, 3 and 4.

CORPORATE GOVERNANCE

Avnet is committed to good corporate governance practices. This commitment is not new — the Company has developed and evolved its corporate governance practices over many years. The Board of Directors believes that good corporate governance practices provide an important framework that promotes long-term value, strength and stability for shareholders.

Corporate Governance Guidelines

The Corporate Governance Guidelines (the “Guidelines”) collect in one document many of the corporate governance practices and procedures that have evolved at Avnet over the years. Among other things, the Guidelines address the duties of the Board of Directors, director qualifications and selection process, director compensation, Board operations, management succession, Board committee matters and director orientation and continuing education. The Guidelines also provide for annual self-evaluations by the Board and its committees. The Board reviews the Guidelines on an annual basis. The Guidelines are available on the Company’s website at www.ir.avnet.com/documents.cfm .

As a general policy, as set forth in the Guidelines, the Board recommends certain limits as to the service of directors on other boards of public companies. These limits are as follows: (1) the

 

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Company’s Chairman of the Board and its Chief Executive Officer may serve on up to two additional boards; (2) Directors who are actively employed on a full-time basis may serve on up to two additional boards; and (3)  Directors who are retired from active full-time employment may serve on up to five additional boards.

Director Independence

The Board of Directors believes that a substantial majority of its members should be independent directors. The Board has determined that the following Directors are independent under the Guidelines: J. Veronica Biggins, Michael A. Bradley, R. Kerry Clark, James A. Lawrence, Frank R. Noonan, Ray M. Robinson, William H. Schumann, III and William P. Sullivan (the “Independent Directors”).

Director Nominations

The Corporate Governance Committee is responsible for identifying, screening and recommending candidates for election to the Company’s Board of Directors. The Committee reviews the business experience, education and skills of candidates as well as character and judgment. Although the Corporate Governance Committee does not have a formal policy concerning diversity, Avnet believes that valuing diversity makes good business sense and the charter of the Corporate Governance Committee includes a statement that it considers diversity as an important factor for service on the Board and reviews factors such as age, gender, race and culture. These factors, and others considered useful by the Board, are reviewed in the context of an assessment of the perceived needs of the Board at a particular point in time. Directors must also possess the highest personal and professional ethics, integrity and values and be committed to representing the long-term interests of all shareholders. Board members are expected to diligently prepare for, attend and participate in all Board and applicable Committee meetings. Each Board member is expected to ensure that other existing and future commitments do not materially interfere with the member’s service as a Director.

The Corporate Governance Committee reviews whether a potential candidate will meet the Board’s independence standards and any other director or committee membership requirements imposed by law, regulation or stock exchange rules.

Director candidates recommended by the Corporate Governance Committee are subject to full Board approval and subsequent election by the shareholders. The Board of Directors is also responsible for electing directors to fill vacancies on the Board that occur due to retirement, resignation, expansion of the Board or other events occurring between the shareholders’ annual meetings. The Corporate Governance Committee may retain a search firm, from time to time, to assist in identifying and evaluating director candidates. When a search firm is used, the Committee provides specified criteria for director candidates, tailored to the needs of the Board at that time, and pays the firm a fee for these services. Recommendations for director candidates are also received from Board members and management and may be solicited from professional associations as well.

The Corporate Governance Committee will consider recommendations of director candidates received from shareholders on the same basis as recommendations of director candidates received from other sources. The director selection criteria discussed above will be used to evaluate all recommended director candidates. Shareholders who wish to suggest an individual for consideration for election to the Company’s Board of Directors may submit a written recommendation to the Corporate Governance Committee by sending it to: Michael McCoy, Secretary, Avnet, Inc., 2211 South 47 th Street, Phoenix, Arizona 85034. Shareholder recommendations must contain the following information:

 

   

The shareholder’s name, address, number of shares of Avnet Common Stock beneficially owned and, if the shareholder is not a record shareholder, evidence of beneficial ownership;

 

   

A statement in support of the director candidate’s recommendation;

 

   

The director candidate’s detailed biographical information describing experience and qualifications, including current employment and a list of any other boards of directors on which the candidate serves;

 

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A description of all agreements, arrangements or understandings between the shareholder and the director candidate;

 

   

The candidate’s consent to be contacted by a representative of the Corporate Governance Committee for interviews and his or her agreement to provide further information, if needed;

 

   

The candidate’s consent for a background check; and

 

   

The candidate’s consent to serve as a director, if nominated and elected.

Under the Company’s By-laws, shareholders may also nominate a candidate for election at an annual meeting of shareholders. Details regarding this nomination procedure and the required notice and information are set forth elsewhere in this Proxy Statement under the heading “2014 Annual Meeting.”

Director Communications

Shareholders and other interested parties may contact any or all of the Company’s Directors by writing to the Board of Directors or to the Secretary, Avnet, Inc., 2211 South 47 th Street, Phoenix, AZ 85034. They may also submit an email to the Chairman of the Board, the chair of the Audit Committee or the non-employee Directors as a group, by filling out the email form on the Company’s website at www.ir.avnet.com/governance.cfm under the caption “Committee Composition.”

Communications received are distributed to the Board, or to any individual Director or group of Directors as appropriate, depending on the facts and circumstances outlined in the communication. The Avnet Board of Directors has requested that items that are unrelated to the duties and responsibilities of the Board be excluded, including spam, junk mail and mass mailings, product and services inquiries, product and services complaints, resumes and other forms of job inquiries, surveys and business solicitations or advertisements. Any product and services inquiries or complaints will be forwarded to the proper department for handling. In addition, material that is unduly hostile, threatening, illegal or similarly unsuitable will be excluded. Any such communication will be made available to any non-employee Director upon request.

Management Succession

The Board of Directors is actively engaged and involved in talent management. The Board reviews the Company’s human resources strategy at least annually. Additionally, the Board regularly reviews and discusses a management succession plan designed to provide for continuity in and development of senior management. This plan, on which Avnet’s Chief Executive Officer (“CEO”) and Chief Human Resources Officer reports at least annually, addresses (a) emergency CEO succession, (b) CEO succession in the ordinary course of business, and (c) succession for other members of senior management. This plan assesses senior management experience, performance, skills and planned career paths. Additionally, the Corporate Governance Committee periodically reviews the Company’s succession plans with respect to the CEO.

Code of Conduct

The Company adopted a Code of Conduct that applies to Directors, officers and employees, including the CEO and all financial and accounting personnel. A copy of the Code of Conduct can be reviewed at www.ir.avnet.com/documents.cfm . Any future amendments to, or waivers for executive officers and Directors from certain provisions of the Code of Conduct, will be posted on the Company’s website.

 

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Reporting of Ethical Concerns

The Audit Committee of the Board of Directors has established procedures for employees, shareholders, vendors and others to communicate concerns about the Company’s ethical conduct or business practices including accounting, internal controls or financial reporting issues. Matters may be reported in the following ways:

Employees of the Company are encouraged to contact their manager, a Human Resources representative or a Code of Conduct Advisor and discuss matters of concern.

All persons, including employees, may contact:

 

   

The Legal Department, by telephone at (480) 643-7106, or by mail at 2211 South 47 th Street, Phoenix, Arizona 85034; or

 

   

The Ethics Alertline at 1-800-861-2899 (within the United States and Canada) or via the Internet at www.avnet.alertline.com . Reports via the Ethics Alertline will be treated confidentially within the limits of the law, and may be made on an anonymous basis.

Board Leadership Structure

Pursuant to the Guidelines, the Board of Directors has the flexibility to decide whether it is best for the Company at a given point in time for the roles of the CEO and Chairman of the Board to be separate or combined and, if separate, whether the Chairman should be selected from the independent directors or be an employee of the Company. The Board believes that the Company and its shareholders are best served by maintaining this flexibility rather than mandating a particular leadership structure. In the event that the Chairman is an employee of the Company, the Guidelines provide for an active lead independent director.

To promote free and open discussion and communication, Independent Directors meet in executive session without management present at regularly scheduled Board meetings. Independent Directors may meet at other times at the discretion of an independent Chairman, the lead independent director or upon the request of any Independent Director.

Mr. Schumann, an Independent Director of the Company, serves as the Chairman and Mr. Hamada is the CEO. The Board of Directors has concluded that the current leadership structure provides an appropriate framework for the Directors to provide independent, objective and effective oversight of management at this point in time.

Stock Ownership Guidelines

The Board has adopted stock ownership guidelines providing that Directors should own, within five years of joining the Board, shares of Avnet, Inc. common stock worth at least five times the director’s annual cash retainer. Shares that are awarded to directors as part of director compensation, as well as phantom shares acquired by directors under a deferred compensation plan, count towards the guideline. The Board will evaluate whether exceptions should be made in the case of any director who, due to his or her unique financial circumstances, would incur a hardship by complying with this requirement. As of June 29, 2013, each Director was in compliance with these guidelines.

Avnet Website

In addition to the information about Avnet and its subsidiaries contained in this Proxy Statement, extensive information about the Company can be found on its website located at www.avnet.com , including information about the Company’s management team, products and services and its corporate governance practices. The corporate governance information on Avnet’s website includes the Guidelines, the Code of Conduct, the charters for each of the standing committees of the Board of Directors, how a shareholder can communicate with the Corporate Governance Committee to nominate a director candidate for election and how shareholders and other interested parties can

 

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communicate with the Chairman of the Board, the chair of the Audit Committee and the non-employee Directors as a group. In addition, amendments to the Code of Conduct and waivers granted to the Company’s Directors and executive officers under the Code of Conduct, if any, will be posted in this area of the website. These documents can be accessed at www.ir.avnet.com/documents.cfm . Printed versions of the Guidelines, the Code of Conduct and the charters for the Board committees can be obtained, free of charge, by writing to the Company at: Michael McCoy, Secretary, Avnet, Inc., 2211 South 47 th Street, Phoenix, AZ 85034.

In addition, the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those Reports, if any, filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as well as Section 16 filings made by any of the Company’s executive officers and Directors with respect to Avnet Common Stock, are available on the Company’s website ( www.avnet.com under the “Investor Relations — SEC Filings” caption) as soon as reasonably practicable after the report is electronically filed with, or furnished to, the SEC.

This information about Avnet’s website and its content, together with other references to the website made in this Proxy Statement, is for information only. The content of the Company’s website is not and should not be deemed to be incorporated by reference in this Proxy Statement or otherwise filed with the SEC.

Political Spending and Lobbying

The Company does not currently engage in any direct lobbying efforts and does not provide direct financial support to any political party or candidate for public office. Additionally, the Company does not currently have a Company administered political action committee and does not contribute directly to any other political action committee. While the Company does have a limited charitable contributions program and a charitable matching program for its employees, such programs prohibit contributions to political or lobbying organizations, candidates or campaigns.

 

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THE BOARD OF DIRECTORS AND ITS COMMITTEES

Avnet’s Board of Directors held six meetings during fiscal 2013 — four regular quarterly meetings, one annual strategic planning meeting and one special telephonic meeting. The non-employee Directors met separately in executive session five times during fiscal 2013.

During fiscal 2013, each Director standing for reelection attended at least 75% of the combined number of meetings of the Board held during the period for which the Director served and of the committees on which such Director served.

All members of the Board of Directors are expected to attend the annual meeting of shareholders, unless unusual circumstances prevent such attendance. Board and committee meetings are scheduled in conjunction with the annual meeting of shareholders. All of the Directors standing for reelection attended Avnet’s 2012 annual meeting of shareholders.

The Board currently has, and appoints the members of, a standing Audit Committee, Compensation Committee and Corporate Governance Committee. Each of these committees is comprised solely of non-employee Directors, reports regularly to the full Board and annually evaluates its performance. The members of the committees as of the date of this Proxy Statement are identified in the following table.

 

Director

   Audit    Compensation    Corporate
Governance

J. Veronica Biggins

      ü    Chair

Michael A. Bradley

      ü    ü

R. Kerry Clark

   ü    ü   

James A. Lawrence

   Chair      

Frank R. Noonan

   ü      

Ray M. Robinson

         ü

William H. Schumann, III

   ü    ü    ü

William P. Sullivan

      Chair    ü

Audit Committee

The Audit Committee is charged with assisting and representing the Board of Directors in fulfilling its oversight responsibilities with respect to the integrity of the financial statements of the Company, the independence, qualifications and performance of the Company’s independent external auditors, the performance of the Company’s internal audit function and compliance with legal and regulatory requirements, as well as the Company’s internal ethics and compliance program and enterprise risk management activities. Moreover, the Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm. Additionally, the Audit Committee reviews and approves transactions with any related person in which the Company is a participant and involves an amount that equals or exceeds $120,000 per year. All of the members of the Audit Committee are independent under the independence requirements of the NYSE listing standards, the independence standards adopted by the Board, and also meet the additional requirements for audit committee independence established by the SEC. The Board of Directors has determined that the four members of the Audit Committee (Messrs. Clark, Lawrence, Noonan and Schumann) qualify as “audit committee financial experts,” as defined in rules adopted by the SEC. Please see the Audit Committee Report set forth elsewhere in this Proxy Statement for more information about the Committee and its operations. The Committee operates under a written charter that outlines the Committee’s purpose, member qualifications, authority and responsibilities. The Committee reviews its charter and conducts an evaluation of its own effectiveness annually. The charter is available on the Company’s website at www.ir.avnet.com/documents.cfm . During fiscal 2013, the Audit Committee held eight meetings.

 

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Compensation Committee

The Compensation Committee oversees the Company’s overall compensation structure, policies and programs and assists the Board of Directors in fulfilling its responsibilities with respect to administering the Company’s long-term incentive plan, reviews and approves compensation arrangements with executive officers of the Company, and evaluates the performance of and recommends the compensation for the CEO. The Committee’s objective is to establish and administer a “total compensation program” that fairly and competitively rewards long-term performance and enhances shareholder value. All members of the Committee meet the independence requirements of the NYSE listing standards and the independence standards adopted by the Board of Directors. The Committee operates under a written charter that outlines the purpose, member qualifications, authority and responsibilities of the Committee. The Committee reviews its charter and conducts an evaluation of its own effectiveness annually. A copy of the Committee charter is available on the Company’s website at www.ir.avnet.com/documents.cfm . During fiscal 2013, the Compensation Committee held five meetings.

Corporate Governance Committee

The Corporate Governance Committee is charged with identifying, screening and recommending to the Board of Directors appropriate candidates to serve as directors of the Company and is responsible for overseeing the process for evaluating the Board of Directors and its Committees. This Committee also reviews the Company’s succession plans and oversees and makes recommendations with respect to corporate governance issues affecting the Board of Directors and the Company. All of the members of the Corporate Governance Committee are independent under Avnet’s independence standards and the NYSE listing standards. The Committee operates under a written charter that outlines the Committee’s purpose, member qualifications, authority and responsibilities. The Committee reviews its charter and conducts an evaluation of its own effectiveness annually. The charter is available on the Company’s website at www.ir.avnet.com/documents.cfm . During fiscal 2013, the Corporate Governance Committee held four meetings.

Executive Committee

The Board of Directors has an Executive Committee which is charged with the authority of the full Board and, between meetings of the Board, is authorized to exercise the powers of the Board in the management of the business and affairs of Avnet to the extent permitted by law. The Executive Committee is comprised of the Chairman and four other Directors. The Executive Committee did not meet in fiscal 2013.

The Board’s Role in Risk Oversight

One function of the Board is oversight of risk management at Avnet. “Risk” is present in every business, and the Board seeks to understand and advise on risk in conjunction with the activities of the Board and its committees. The Board considers “risk” for these purposes to be the possibility that an undesired event could occur that adversely affects the achievement of the Company’s objectives. Examples of the types of risks that the Company faces include:

 

   

operational risks, such as disruptions to the Company’s information systems and logistics capabilities and risks relating to compliance with governmental regulations;

 

   

macroeconomic risks, such as global economic or financial disruption;

 

   

strategic risks, such as risks associated with emerging markets and the concentration of revenue; and

 

   

“event” risks, such as natural or pandemic disasters impacting the Company’s operations.

A business deals with risks in various ways. Some risks may be easily perceived and controlled, while others are unknown. Some risks can be avoided or mitigated by particular behavior, while some risks

 

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are unavoidable. Potential impacts and the severity of the potential impacts vary, and the appropriate range of response to a perceived risk can vary depending upon the potential severity of the adverse effects that might occur in connection with the risk. Some risk taking is engaged in voluntarily by Avnet and most businesses, particularly where risk may be acceptable because of the greater perceived potential for reward. Avnet engages in numerous activities seeking to align its voluntary risk-taking with Company’s strategy, especially in the area of encouraging innovation.

Management is responsible for identifying risk and risk controls related to significant business activities, and developing programs and recommendations to determine the sufficiency of risk identification, the balance of potential risk to potential reward and the appropriate manner in which to control risk. The Company has implemented a formalized Enterprise Risk Management program and established an Enterprise Risk Council with executive-level sponsorship and active participation from all functional areas of the business. The Board implements its risk oversight responsibilities by having management provide periodic briefing and information sessions on its Enterprise Risk Management findings and activities. In some cases, risk oversight in specific areas is a responsibility of a Board committee, such as the Audit Committee’s oversight of issues related to internal control over financial reporting and the Compensation Committee’s oversight of risks related to compensation programs.

The Compensation Committee has assessed the Company’s compensation programs and concluded that the Company’s compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. The Compensation Committee and management assessed Avnet’s executive and broad-based compensation and benefits programs on a worldwide basis to determine if the programs’ provisions and operations create undesired or unintentional risk of a material nature. Management has evaluated all compensation programs and focused on the programs with variability of payout, with the ability of a participant to directly affect payout and the controls on participant action and payout.

Based on the foregoing, management believes that the Company’s compensation policies and practices do not create inappropriate or unintended significant risk to the Company as a whole, and that the incentive compensation programs provide incentives that do not encourage risk-taking beyond the Company’s ability to effectively identify and manage significant risks. Further, management believes that the incentive compensation programs are compatible with effective internal controls and the Company’s risk management practices, and are supported by the oversight and administration of the Compensation Committee with regard to executive compensation programs.

 

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PROPOSAL 1

ELECTION OF DIRECTORS

Nine (9) directors are to be elected at the Annual Meeting to hold office until the next annual meeting of shareholders and until their successors have been elected and qualified. It is the intention of the persons named in the enclosed proxy card to vote each properly signed and returned proxy (unless otherwise directed by the shareholder executing such proxy) for the election of each of the nine director nominees listed below. Each nominee has consented to being named herein and to serving if elected. All of the nominees were elected Directors at the Annual Meeting of Shareholders held on November 2, 2012.

Directors will be elected by a plurality of the votes properly cast at the Annual Meeting. Only votes cast “for” the election of Directors will be counted in determining whether a nominee for Director has been elected. Thus, shareholders who do not vote, or who withhold their vote, will not affect the outcome of the election. Additionally, brokers do not have discretionary authority to vote on the election of directors if they do not receive timely instructions from the beneficial owners. As a result, the Company encourages all beneficial owners to provide voting instructions to your nominees to ensure that your shares are voted in the election of directors.

Under the Guidelines, however, any director nominee who receives a greater number of votes “withheld” than votes “for” in the election must promptly submit a letter of resignation to the Board following the certification of the election results. The Board must then determine whether to accept the director’s resignation in accordance with the procedures set forth in the Guidelines and publicly announce the results of its deliberation.

In case any of the nominees below should become unavailable for election for any presently unforeseen reason, the persons named in the enclosed form of proxy will have the right to use their discretion to vote for a substitute or to vote for the remaining nominees and leave a vacancy on the Board of Directors. Under Avnet’s By-laws, any such vacancy may be filled by a majority vote of the Directors then in office or by the shareholders at any meeting thereof. Alternatively, the Board of Directors may reduce the size of the Board to eliminate the vacancy.

The information set forth below as to each nominee has been furnished by such nominee as of September 10, 2013.

 

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The Board recommends a vote “FOR” all of the nominees named below.

 

Name

  

Age

  

Year

First

Elected

  

Principal Occupations During Last Five Years;

Other Directorships and Activities

J. Veronica Biggins

   66    1997    Ms. Biggins is a Managing Director and a member of the executive committee of Diversified Search LLC, an executive and board search firm. She was Managing Partner of the Atlanta office of Hodge Partners from 2007 until 2011 when it became a part of Diversified Search. Ms. Biggins served as Assistant to the President of the United States and Director of Presidential Personnel under President William Clinton. Ms. Biggins has served on the board of Southwest Airlines Co. since 2011. Ms. Biggins’ background includes 20 years of experience with NationsBank (now Bank of America) and its predecessor. She previously served as a director of Zep Inc. (2007 — 2012) and AirTran Holdings, Inc. prior to its acquisition by Southwest Airlines (2001 — 2011). Ms. Biggins serves on a number of non-profit Boards. Ms. Biggins brings extensive experience related to identifying and recruiting executive talent, as well as extensive board experience and perspective resulting from past and present service on boards of public companies in various industries.

Michael A. Bradley

   64    2012    Mr. Bradley has served as Chief Executive Officer of Teradyne, Inc. since May 2004 and as a director since April 2004. He was President of Teradyne from May 2003 until January 2013, President of Teradyne’s Semiconductor Test Division from April 2001 until May 2003 and Teradyne’s Chief Financial Officer from July 1999 until April 2001. Mr. Bradley has also been a director of Entegris, Inc. and its predecessor company, Mykrolis Corporation, since 2001. The Board benefits from Mr. Bradley’s extensive experience in the semiconductor industry and from his experience in running a global technology operation. The Board believes he provides additional perspective in the areas of corporate governance and financial reporting.

R. Kerry Clark

   61    2012    R. Kerry Clark served as Chairman and Chief Executive Officer of Cardinal Health, Inc., a provider of health care products and services, until his retirement in 2009. Mr. Clark joined Cardinal Health in April 2006 as President and Chief Executive Officer and became Chairman in November 2007. Prior to joining Cardinal Health, he held various positions at The Procter & Gamble Company, including President of P&G Asia; President, Global Market Development and Business Operations; and Vice Chairman of the Board. He is a director of General Mills (since 2009) and Textron, Inc. (since 2003). He is also a director of Hauser Capital Partners LLC and Hauser Private Equity LLC. Mr. Clark brings to the Board business leadership, corporate strategy and operating expertise. Mr. Clark also lends a global business perspective. Additionally, Mr. Clark provides additional insight and value in corporate governance, talent development, change management, marketing and business development.

 

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Name

  

Age

  

Year

First

Elected

  

Principal Occupations During Last Five Years;

Other Directorships and Activities

Richard P. Hamada

   55    2011    Mr. Hamada has served as the Chief Executive Officer of Avnet since July 2011 and a director since February 2011. Prior to that, he served as the President (May 2010 — July 2011) and as the Chief Operating Officer of Avnet (2006 — 2011). Mr. Hamada is also a member of the College of Business Administration Advisory Board for San Diego State University. As a result of his long tenure as an Avnet executive, Mr. Hamada provides the Board with extensive knowledge of the Company, its operations and the industry in which it operates. Mr. Hamada also has extensive executive management experience.

James A. Lawrence

   60    2011    Mr. Lawrence is currently the Chairman of Rothschild North America. He has served as the Chief Executive Officer of Rothschild North America and as co-head of global investment banking since June 2010. He previously served as Chief Financial Officer of Unilever PLC from September 2007 — December 2009. Prior to that, Mr. Lawrence served as Vice Chairman and Chief Financial Officer of General Mills, Inc., a consumer foods company (October 1998 — August 2007), Executive Vice President and Chief Financial Officer of Northwest Airlines (1996 — 1998) and Chief Executive Officer of Pepsi-Cola Asia Middle East Africa Group (1992 — 1996). The Board benefits from Mr. Lawrence’s nine years of prior experience serving on Avnet’s board (1999 — 2008) and his breadth of global business experience including strategy development and compliance. As a former chief financial officer for a public company, Mr. Lawrence has experience in finance and accounting, particularly as it applies to public companies such as Avnet.

Frank R. Noonan

   71    2004    Mr. Noonan is the retired Chairman and Chief Executive Officer of R. H. Donnelley Co. (1991 — 2002), publisher of yellow pages directories. Before that, Mr. Noonan served as Senior Vice President, Finance, with Dun & Bradstreet. Mr. Noonan is a director of NewStar Financial, Inc. and former director of RiskMetrics Group, Inc. (2008 — 2010). The Board benefits from Mr. Noonan’s financial services experience, including his extensive experience in the areas of financial reporting, compliance, corporate governance and risk management.

Ray M. Robinson

   65    2000    Since 2003, Mr. Robinson has served as Chairman of the Board of Citizens Bancshares Corporation, the largest African-American owned bank in the southeast United States. He also serves as the Vice Chairman of East Lake Community Foundation (since 2003). Previously, Mr. Robinson was the President of AT&T’s Southern Region Business Services Division (1995 — 2003). Mr. Robinson is also a director of Aaron Rents, Inc., Acuity Brands, Inc., and AMR Corp. Mr. Robinson previously served as a director of ChoicePoint, Inc. (2004 — 2008) and Rail America (2010 — 2012). The Board benefits from Mr. Robinson’s extensive leadership and management skills, and his service on the boards and board committees of other public companies provides important insights into governance and board functions.

 

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Name

  

Age

  

Year

First

Elected

  

Principal Occupations During Last Five Years;

Other Directorships and Activities

William H. Schumann, III

   63    2010    Mr. Schumann retired from FMC Technologies in August 2012 where he served as Executive Vice President since February 2007 and served as CFO from 2001 through 2011. He previously served on the board of UAP Holding Corp. (2005 — 2008) and Great Lakes Advisors, Inc. (1993 — 2011). Mr. Schumann has served on the board of directors of AMCOL International and McDermott International since 2012. The Board benefits from Mr. Schumann’s financial and management expertise, including his extensive expertise in financial and strategic planning, financial reporting, compliance and risk management.

William P. Sullivan

   63    2008    Mr. Sullivan has served as the Chief Executive Officer of Agilent Technologies, Inc. and as a director since March 2005. Prior to that, he served as the Executive Vice President and Chief Operating Officer of Agilent (2002 — 2005) and Senior Vice President and General Manager of its Semiconductor Products Group (1998 — 2002). Mr. Sullivan is also a director of URS Corporation (since 2006) and the Children’s Discovery Museum of San Jose. As the chief executive officer of a public company, Mr. Sullivan brings significant executive and operational experience regarding issues facing large multinational companies with global operations, particularly as it relates to the technology industry. The Board also benefits from his knowledge of the most current issues in the conduct and governance of public companies.

 

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A summary of each director’s qualifications and experiences is set forth in the matrix below. This matrix allows the Corporate Governance Committee and the Board to identify areas of expertise and experience that may benefit the Board in the future, as well as gaps in those areas that may arise as directors retire. The Corporate Governance Committee and the Board use this information as part of its process for identifying and recommending new directors for the Board.

 

LOGO

AUDIT COMMITTEE REPORT

The Audit Committee represents and assists the Board in fulfilling its oversight responsibilities with respect to the integrity of the Company’s financial statements, the independence, qualification and performance of the Company’s corporate internal auditor and its independent registered public accounting firm, and compliance with legal and regulatory requirements. The Audit Committee operates under a written charter, which sets forth its purpose, member qualifications, authority and responsibilities. The Audit Committee reviews its charter on a regular basis and most recently reviewed it at the Committee’s regularly scheduled meeting on May 9, 2013. The charter is available on the Company’s website at www.ir.avnet.com/governance.cfm .

 

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The Audit Committee monitors the activities and performance of the Company’s internal audit function, including scope of reviews, department staffing levels and reporting and follow-up procedures. The Audit Committee also oversees policies with respect to risk assessment and risk management. In addition, the Audit Committee oversees the Company’s internal ethics and compliance program and receives quarterly reports from the General Counsel or Chief Compliance Officer. The Audit Committee also meets regularly with KPMG LLP, the Company’s independent registered public accounting firm (“KPMG”), in executive sessions. Management has responsibility for the preparation, presentation and integrity of the Company’s financial statements and the reporting process, including the system of internal controls.

The Audit Committee meets with KPMG and management to review the Company’s financial results before publication of the Company’s quarterly earnings press releases and the filing of the Company’s quarterly reports on Form 10-Q and annual report on Form 10-K. The Committee also monitors the activities and performance of KPMG, including audit scope, audit fees, auditor independence and non-audit services performed by KPMG. All services to be performed by the Company’s independent registered public accounting firm are subject to pre-approval by the Audit Committee and management provides quarterly reports to the Committee on the status and fees for all such projects.

The Audit Committee has reviewed and discussed the audited financial statements for fiscal year 2013 with management and KPMG. This review included a discussion with KPMG and management of Avnet’s accounting principles, the reasonableness of significant estimates and judgments, including disclosure of critical accounting estimates, and the conduct of the audit. The Committee has discussed with KPMG the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T. KPMG provided the Audit Committee with the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding KPMG’s communications with the Audit Committee concerning independence and the Committee discussed with KPMG its independence. The Audit Committee has concluded that KPMG is independent from the Company and its management. KPMG also discussed with the Committee its internal quality control procedures. In reliance on this review and these discussions, and the report of KPMG, the Audit Committee has recommended to the Board, and the Board has approved, the inclusion of the audited financial statements in the Company’s Annual Report on Form 10-K for the year ended June 29, 2013, for filing with the Securities and Exchange Commission.

 

James A. Lawrence, Chair    Frank R. Noonan
R. Kerry Clark    William H. Schumann, III

PRINCIPAL ACCOUNTING FIRM FEES

The table below provides information relating to fees charged for services performed by KPMG LLP, the Company’s independent registered public accounting firm, in both fiscal 2013 and fiscal 2012. All of the services described in the table were approved in conformity with the Audit Committee’s pre-approval process.

 

     Fiscal 2013      Fiscal 2012  

Audit Services

   $ 6,372,000       $ 6,430,000   

Audit-Related Services

             235,000   

Tax Services

     456,000         890,000   

All Other Services

     2,000           
  

 

 

    

 

 

 

TOTAL

   $ 6,829,702       $ 7,555,000   
  

 

 

    

 

 

 

 

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Audit Services.     In both years, Audit Services consisted of work performed by the principal auditor associated with the audit of the Company’s consolidated financial statements, including reviews performed on the Company’s Form 10-Q filings, certain statutory audits required for the Company’s subsidiaries, and fees incurred in connection with the audit of internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002. Audit fees also included assistance with registration statements filed by the Company, including consents.

Audit-Related Services.     In fiscal 2012, Audit-Related Services included certain compliance-related services, agreed-upon procedures and assistance with certain acquisition due diligence efforts.

Tax Services.     In both years, Tax Services consisted primarily of assistance with respect to global tax compliance (federal, international, state and local), tax audits, tax advice associated with organizational structure and tax-related due diligence in connection with certain acquisitions.

All Other Services.     In fiscal 2013, All Other Services comprised the subscription to certain KPMG LLP Proprietary accounting research databases.

All services to be provided by the Company’s independent registered public accounting firm are subject to pre-approval by the Audit Committee. The Audit Committee has adopted an “External Auditor Scope of Services Policy,” which requires the Audit Committee’s pre-approval of all services to be performed by the Company’s independent registered public accounting firm. In each case, pre-approval is required either by the Audit Committee or by the Chair of the Audit Committee, who is authorized to approve individual projects up to $250,000 with the total for such projects not to exceed $500,000, and must then report them to the full Committee by the next Committee meeting. Management provides quarterly reports to the Audit Committee on the fees for all projects requiring services by KPMG LLP.

 

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BENEFICIAL OWNERSHIP OF COMMON STOCK BY MANAGEMENT AND OTHERS

The following table sets forth information with respect to the Common Stock of Avnet beneficially owned at September 10, 2013, or, in respect of any 5% Holder, the date of such holder’s most recent Schedule 13D or Schedule 13G filed with the SEC, by (a) persons that, to Avnet’s knowledge, were the beneficial owners of more than 5% of Avnet’s outstanding Common Stock (“5% Holders”), (b) each Director and director nominee of Avnet, (c) each of the executive officers named in the Summary Compensation Table in this Proxy Statement and (d) all Directors and executive officers of Avnet as a group. Except where specifically noted in the table, all the shares listed for a person or the group are directly held by such person or group members, with sole voting and dispositive power.

 

Name

   Common
Stock(a)
    Stock
Options
Exercisable
Within
60 Days
     Total
Common
Stock
Beneficially
Owned
     Percent
of
Class
 

5% Holders

          

BlackRock, Inc. (1)

     11,511,317           11,511,317         8.39

40 East 52 nd Street

New York, NY 10022

          

Artisan Partners Holdings LP (2)

     10,700,452           10,700,452         7.80

875 East Wisconsin Avenue, Suite 800

Milwaukee, WI 53202

          

The Vanguard Group (3)

     7,014,616           7,014,616         5.11

100 Vanguard Blvd.

Malvern, PA 19355

          

Directors and Named Executive Officers

          

J. Veronica Biggins

     37,539 (4)       0         37,539         *   

David R. Birk

     108,018 (5)       48,979         156,997         *   

Michael A. Bradley

     4,478        0         4,478         *   

R. Kerry Clark

     7,099 (6)       0         7,099         *   

Harley Feldberg

     97,507 (7)       192,010         289,517         *   

Philip Gallagher

     59,590 (8)       88,637         148,227         *   

Richard Hamada

     177,466 (9)       235,087         412,553         *   

James A. Lawrence

     41,324        0         41,324         *   

MaryAnn G. Miller

     25,613 (10)       35,073         60,686         *   

Kevin Moriarty

     28,072 (11)       0         28,072         *   

Frank R. Noonan

     33,583 (12)       0         33,583         *   

Ray M. Robinson

     30,725 (13)       2,300         33,025         *   

Raymond Sadowski

     240,734 (14)       174,460         415,194         *   

William H. Schumann, III

     20,662 (15)       0         20,662         *   

William P. Sullivan

     24,045        0         24,045         *   

All directors and executive officers as a group (18 persons)

     1,000,615        788,944         1,789,559         1.29

 

 

 

* Less than 1%.

 

(a) This column includes Restricted Stock Units allocated but not yet delivered to each executive officer and Phantom Stock Units owned by non-employee Directors.

 

(1) This information is based solely on information provided in Amendment No. 3 to a Schedule 13G filed with the Securities and Exchange Commission on February 1, 2013, by BlackRock, Inc., which reports sole voting power and sole dispositive power with respect to 11,511,317 shares.

 

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(2) This information is based solely on information provided in Amendment No. 1 to a Schedule 13G filed with the Securities and Exchange Commission on February 7, 2013, by Artisan Partners Holdings LP which reports shared voting power with respect to 10,325,268 shares and shared dispositive power with respect to 10,700,452 shares.

 

(3) This information is based solely on information provided in a Schedule 13G filed with the Securities and Exchange Commission on February 13, 2013, by The Vanguard Group, which reports sole voting power with respect to 146,098 shares, sole dispositive power with respect to 6,882,118 shares and shared dispositive power with respect to 132,498 shares.

 

(4) Includes 20,728 Phantom Stock Units.

 

(5) Includes 21,176 Restricted Stock Units allocated but not yet delivered.

 

(6) Includes 7,099 Phantom Stock Units.

 

(7) Includes 28,726 Restricted Stock Units allocated but not yet delivered. Also includes 57,041 shares of Common Stock held by a family trust for which Mr. Feldberg is a trustee.

 

(8) Includes 19,397 Restricted Stock Units allocated but not yet delivered. Also includes 23,467 shares of Common Stock held by a family trust for which Mr. Gallagher is a trustee.

 

(9) Includes 56,286 Restricted Stock Units allocated but not yet delivered. Also includes 121,180 shares of Common Stock held by a family trust for which Mr. Hamada is a trustee.

 

(10) Includes 15,788 Restricted Stock Units allocated but not yet delivered.

 

(11) Includes 28,072 Restricted Stock Units allocated but not yet delivered.

 

(12) Includes 28,765 Phantom Stock Units and 4,818 shares of Common Stock held by a trust for which Mr. Noonan is a trustee.

 

(13) Includes 26,924 Phantom Stock Units.

 

(14) Includes 33,877 Restricted Stock Units allocated but not yet delivered.

 

(15) Includes 7,374 Phantom Stock Units.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Pursuant to Section 16(a) of the Exchange Act, Avnet’s Directors, executive officers and beneficial owners of more than 10% of the outstanding Common Stock are required to file reports with the Securities and Exchange Commission concerning their ownership of and transactions in Avnet Common Stock and are also required to provide Avnet with copies of such reports. Based solely on such reports and related information furnished to Avnet, Avnet believes that in fiscal 2013 all such filing requirements were complied with in a timely manner by all Directors and executive officers.

 

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EXECUTIVE OFFICERS OF THE COMPANY

As of September 10, 2013, the executive officers of the Company were:

 

Name

   Age     

Office

Gerard W. Fay

     54       Senior Vice President and Chief Logistics and Operations Officer

Harley Feldberg

     60       Senior Vice President and President, Avnet Electronics Marketing

Philip R. Gallagher

     52       Senior Vice President and President, Avnet Technology Solutions

Richard P. Hamada

     55       Chief Executive Officer

Erin Lewin

     43       Senior Vice President and General Counsel

MaryAnn Miller

     56       Senior Vice President and Chief Human Resources Officer

Kevin Moriarty

     48       Senior Vice President, Chief Financial Officer and Controller

Steven R. Phillips

     50       Senior Vice President and Chief Information Officer

Raymond Sadowski

     59       Senior Vice President and Chief Administrative Officer

Mr. Fay was appointed Senior Vice President in February 2013 and has been Chief Global Logistics and Operations Officer since July 2011. He previously served as Senior Vice President of Global Strategic Accounts for Avnet United from August 2005 to July 2011. Mr. Fay joined Avnet in 2005 with the Company’s acquisition of electronic components distributor Memec, where he served as President of Memec Americas. Beginning October 1, 2013, Mr. Fay will succeed Mr. Feldberg as President, Avnet Electronics Marketing.

Mr. Feldberg has been Senior Vice President since November 2004. He became an executive officer in July 2004 when he was promoted to President, Avnet Electronics Marketing. Mr. Feldberg previously served as President of Avnet Electronics Marketing Americas from June 2002 until June 2004 and has served as a corporate Vice President since November 1996. Mr. Feldberg served as President of Avnet Electronics Marketing Asia from December 2000 to June 2002. While Mr. Feldberg will continue serving as Senior Vice President of the Company, effective October 1, 2013, he will cease serving as President, Avnet Electronics Marketing.

Mr. Gallagher was appointed as President, Avnet Technology Solutions, in March 2009, and has been Senior Vice President of Avnet since November 2007. Mr. Gallagher served as President of Avnet Electronics Marketing Americas from July 2004 until March 2009.

Mr. Hamada was appointed as a Director in February 2011 and Chief Executive Officer in July 2011. He previously served as President from May 2010 until July 2011 and served as the Chief Operating Officer from July 2006 until July 2011. He was Senior Vice President of Avnet from November 2002 until August 2010. Mr. Hamada served as the President of Technology Solutions from July 2003 until July 2006 and President of the Computer Marketing operating group from January 2002 until July 2003. He was appointed Vice President of Avnet in November 1999.

Ms. Lewin was appointed Senior Vice President and General Counsel in February 2013. Previously, she served as Vice President and General Counsel, Americas, from September 2009 to February 2013, and Vice President and Chief Ethics and Compliance Officer from November 2007 to September 2009. Before joining Avnet in 2007, Ms. Lewin was managing director and associate general counsel of US Airways.

Ms. Miller was appointed Senior Vice President in May 2011 and served as Vice President from November 2009 to May 2011. She has served as Chief Human Resources Officer since April 2009. She previously served as Senior Vice President Global Human Resources from July 2008 to March 2009 and Vice President of Talent and Organizational Effectiveness from July 2006 to June 2008.

 

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Mr. Moriarty joined the Company in January 2013 and is the Company’s Chief Financial Officer and a Senior Vice President. Prior to joining the Company, Mr. Moriarty served in a variety of senior leadership positions at Honeywell International, Inc. from 2002 until December 2012. From 2009 until 2012 he served as Vice President and Chief Financial Officer for Honeywell International’s Aerospace Business Group and served as Vice President and Chief Financial Officer for the company’s Performance Materials and Technologies Group from 2008 until 2009.

Mr. Phillips was appointed Senior Vice President and Chief Information Officer of Avnet in 2011 having served as Vice President and Chief Information Officer since 2006. He joined Avnet with the 2005 acquisition of Memec where he served as Senior Vice President and Chief Information Officer since 2004.

Mr. Sadowski currently serves as the Senior Vice President and Chief Administrative Officer. He has been Senior Vice President of Avnet since November 1992 and was Chief Financial Officer from February 1993 until Mr. Moriarty’s appointment as Chief Financial Officer in January 2013. Prior to that, Mr. Sadowski held various management positions in Avnet’s finance organization including the position of Controller.

Officers of the Company are generally elected each year at the meeting of the Board of Directors following the annual meeting of shareholders and hold office until the next such annual meeting or until their earlier death, resignation or removal.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed the Compensation Discussion and Analysis (“CD&A”) and discussed it with management. Based on its review and discussion with management, the Committee recommended to the Board of Directors that the CD&A be included in the Company’s 2013 Proxy Statement and incorporated by reference into the Company’s annual report on Form 10-K. This Report is provided by the following independent directors, who comprise the Committee:

 

William P. Sullivan, Chair    R. Kerry Clark
J. Veronica Biggins    William H. Schumann III
Michael A. Bradley   

 

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COMPENSATION DISCUSSION AND ANALYSIS

Introduction

This section explains how the Compensation Committee of Avnet’s Board of Directors made its compensation decisions for the fiscal year ended June 29, 2013 (“fiscal 2013”), for the Named Executive Officers (the “NEOs”). The compensation paid to the NEOs for fiscal 2013 is set forth in the Summary Compensation Table, which is included elsewhere in this Proxy Statement. These officers and their titles as of the end of fiscal 2013 are:

 

   

Richard Hamada, Chief Executive Officer, Avnet, Inc. (the “CEO”);

 

   

Kevin Moriarty, Senior Vice President and Chief Financial Officer, Avnet, Inc. (the “CFO”);

 

   

Raymond Sadowski, Senior Vice President and Chief Administrative Officer, Avnet, Inc.;

 

   

Harley Feldberg, Senior Vice President, Avnet, Inc. and President, Avnet Electronics Marketing;

 

   

Philip Gallagher, Senior Vice President, Avnet, Inc. and President, Avnet Technology Solutions;

 

   

MaryAnn Miller, Senior Vice President and Chief Human Resources Officer, Avnet, Inc. (the “CHRO”); and

 

   

David R. Birk, former Senior Vice President and General Counsel, Avnet, Inc.

Mr. Moriarty was appointed as the Company’s CFO effective as of January 2, 2013. Mr. Sadowski served as the Company’s Chief Financial Officer until Mr. Moriarty’s appointment, at which time Mr. Sadowski was appointed as the Company’s Chief Administrative Officer. Mr. Birk ceased serving as Senior Vice President and General Counsel effective as of December 31, 2012.

Executive Summary

The Company’s fiscal 2013 results reflect the impact of slower global economic growth, particularly in the Company’s higher margin western regions, and businesses’ cautious spending on technology. As a result of challenging market conditions early in the fiscal year, the Company responded by aligning both expenses and working capital to marketplace realities and focusing the portfolio on profitable growth opportunities. These ongoing activities helped to offset the impact of a decline in revenue and the associated margin pressure as the Company generated $626 million of operating income and cash flow from operations grew 32% to $696 million. The Company continued to invest in future growth opportunities as it deployed $262 million of this cash to acquire companies that are expected to strengthen its competitive position and enhance its margins, and used $207 million to repurchase shares of Common Stock. In addition, on August 12, 2013, the Company announced that its Board of Directors approved the initiation of a quarterly cash dividend of $0.15 per common share. The increase in Mr. Hamada’s compensation reflects the fact that fiscal 2012 was his first year in the CEO position, and he was therefore targeted at 66% of the CEO comparator group median. In fiscal 2013, with his enhanced experience in the CEO position, he was targeted at 80% of the CEO comparator group median.

 

     Fiscal 2012      Fiscal 2013      % Change  
     $ in millions, except per share data  

Sales

   $ 25,707.5       $ 25,458.9         (1.0 )% 

Operating income

   $ 884.2       $ 626.0         (29.2 )% 

Net income

   $ 567.0       $ 450.1         (20.6 )% 

Diluted earnings per share

   $ 3.79       $ 3.21         (15.3 )% 

Total CEO compensation (1)

   $ 4.62       $ 4.98         7.5

 

 

 

(1) The CEO’s total compensation is based on the compensation reported in the Summary Compensation Table.

 

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The graph below displays the Company’s sales and the as-adjusted net income and as-adjusted operating income over the last five fiscal years.

 

LOGO

 

 

* In addition to presenting financial results that are determined in accordance with generally accepted accounting principles in the United States (“GAAP”), the Company also presents net income and operating income adjusted to exclude certain items in the table above. See Appendix A to this Proxy Statement for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures. Non-GAAP measures should be viewed in addition to, and not as an alternative for, financial results prepared in accordance with GAAP.

In March 2013, and for the fifth consecutive year, Avnet was named No. 1 in Fortune magazine’s annual “World’s Most Admired Companies” list in the Wholesaler: Office Equipment and Electronics category. Avnet was recognized as a leader in people management, social responsibility, quality of management, and quality of products/services.

Executive Compensation Program Highlights

The Company’s compensation program incorporates the following compensation governance practices:

 

  ü  

Pay-for-Performance Alignment.     A significant portion of total compensation is dependent upon the achievement of short- and long-term goals that are designed to increase shareholder value over time and result in a superior total shareholder return (“TSR”). As executives gain responsibility and seniority at Avnet and exercise more direct influence over the Company’s financial and operational performance, base salary as a percentage of total compensation will typically decrease and performance-based pay will increase.

 

  ü  

Focus on Long-Term Incentive Compensation.     Avnet’s compensation programs are designed to provide a meaningful portion of compensation in the form of equity-based awards to support the goal of having executives think and behave like owners and to consider the impact of their actions on TSR. Of these awards, restricted stock units (“RSUs”) typically vest in equal installments over approximately 4.5 years, stock options typically vest in equal installments over four years and performance share units (“PSUs”) vest, if at all, at the end of a three-year period.

 

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  ü  

Performance Assessed in Overlapping Periods with Multiple Metrics.     Incentive compensation is earned over several different and overlapping periods, ensuring that performance during any one period is not maximized to the detriment of other periods. The incentive programs employ multiple performance metrics to assure focus is on the entire business.

 

  ü  

Award Caps.     An award under the Company’s annual cash incentive plan is capped at 225% of the target and performance share unit awards under the Company’s Long-Term Incentive Plan (“LTIP”) are capped at 200% of the target.

 

  ü  

Pay Competitively.     The Company provides fair and competitive compensation to attract, engage and retain the executive talent that is critical to the long-term success of the Company. When determining an executive’s compensation, the Committee generally targets the median compensation for base salary, annual incentive and long-term incentive — and therefore total compensation — of executives in comparable positions at the companies in its peer group, taking into consideration the executive’s experience in the position and the long-term performance of the individual executive. In instances of exceptional performance, compensation received may exceed median levels of the market. Conversely, in instances where either Avnet and/or an individual executive did not achieve pre-established performance goals, actual compensation earned may be below median levels of the market.

 

  ü  

Stock Ownership Guidelines.     The Company has meaningful stock ownership guidelines for its directors and executive officers, and as of June 29, 2013, each of the directors and current executive officers was in compliance with these guidelines.

 

  ü  

Recoupment.     The Company has adopted an incentive compensation recoupment policy.

 

  ü  

Minimal Perquisites.     The Company provides a minimal level of perquisites.

 

  ü  

Annual Risk Assessment.     The Compensation Committee has assessed the Company’s compensation programs and concluded that the Company’s policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.

 

  ü  

Independent Decisions.     The Compensation Committee is made up entirely of independent directors and the Compensation Committee’s independent compensation consultants did not provide any services to management.

The Company’s compensation program does not include the following practices, as the Company believes such practices may not be in the best interest of its shareholders:

 

  ×  

No Hedging or Pledging .    The Company’s insider trading policy prohibits directors and executive officers from hedging or pledging Avnet securities.

 

  ×  

No Tax Gross-Ups .    The Company does not provide a tax gross-up on perquisites, and with respect to the CEO and CFO, on any payments made upon a change of control. The Company expects to eliminate all tax gross-ups as new employment agreements are executed.

 

  ×  

No Repricing of Awards .    Repricing stock options is prohibited without shareholder approval. The Company does not have a history of repricing equity awards.

 

  ×  

No Above-Market Returns .    The Company does not offer preferential or above-market returns on deferred compensation.

 

  ×  

No Discounted Stock Options .    The Company does not grant stock options with an exercise price below the fair market value of the Company’s Common Stock on the date of the grant.

 

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2012 Advisory Vote on Executive Compensation

At the Company’s annual meeting in 2012, the Company submitted its executive compensation program to an advisory vote of its shareholders (also known as the “say on pay vote”). This advisory vote received the support from over 97% of the total votes cast on this particular proposal at the annual meeting. The Company pays careful attention to any feedback received from its shareholders about the Company’s executive compensation program, including the say on pay vote. After the annual meeting, the Company conducted a shareholder outreach program with a number of its largest shareholders to seek their feedback on the Company’s corporate governance and executive compensation practices. While the Compensation Committee and the Board, as applicable, had already approved the executive compensation program for fiscal 2013 by the time the Company held its say on pay vote in November 2012, the Compensation Committee carefully considered and continues to consider the results of the say on pay vote and the feedback received from its shareholders in its subsequent executive compensation decision making.

Compensation Governance and Process

The Company’s executive compensation program is designed to achieve the Company’s short- and long-term business objectives and, to that end, to align executives’ interests with those of the Company’s shareholders. In considering the elements of the executive compensation program, the Compensation Committee focuses on pay-for-performance on both an annual and long-term basis and consideration of marketplace best practices. Guided by this philosophy, discussions with respect to executive compensation generally start in conjunction with the review of the Company’s budget for the new fiscal year at the Board’s strategic planning session held in June. After substantive consideration, the Board approves the annual budget. This budget then serves as the basis for establishing the target performance levels for the annual cash incentive plan.

Role of the Compensation Committee

The Compensation Committee, which is composed entirely of independent directors, has primary responsibility for the approval and implementation of the compensation programs for executive officers, determines the target compensation, including the amount and related performance goals, for all executive officers except the CEO, and recommends the target compensation of the CEO to the independent directors of the Board for their consideration and approval. In addition to determining or recommending the target compensation to be received, the Compensation Committee reviews, at least annually, the Company’s incentive compensation arrangements for the executive officers to ensure that such arrangements do not encourage excessive risk-taking.

At the Compensation Committee’s regularly scheduled meeting in August, the CEO, the CHRO and the Compensation Committee’s independent compensation consultant present marketplace data developed by the independent consultant, summaries of each executive’s performance and compensation recommendations for each executive officer. The CHRO and the Compensation Committee’s independent consultant assist the Compensation Committee in its deliberations with respect to these recommendations. The Compensation Committee uses the comparative data as a reference for determining whether the compensation plans and levels targeted for each executive appear to be near the median amount paid by peer companies, taking into consideration the NEO’s experience in the position and the long-term performance of the individual NEO. In assessing the compensation plans for the CEO and the other executive officers, the Compensation Committee considers total compensation opportunities, both short- and long-term, while at the same time focusing attention on the competitiveness of each component of compensation. Actual cash incentive payouts, actual value received from long-term incentive awards and actual overall compensation levels with respect to any given year for any particular officer may vary from the targeted levels based on Avnet’s enterprise and business unit performance and relative performance to its industry. As part of the compensation setting process, the Compensation Committee reviews total compensation tally sheets for each executive officer.

 

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Following the end of each fiscal year, the Chairman leads the Board in conducting an annual evaluation of CEO performance relative to the performance goals and objectives established for the Company and the CEO for the fiscal year just ended. The CEO completes a self-assessment that is provided to each Director. This assessment covers topics such as enterprise performance based on the Company scorecard, economic profit dollar growth, profitable growth initiatives, capital allocation strategies, TSR optimization and succession planning. Each director reviews this self-assessment and discusses the CEO’s performance during an executive session of the Board. Following this discussion, the Chairman of the Board provides the CEO with the Board’s views as to CEO performance. The results of the Board’s evaluation are then considered in establishing the goals and compensation plan for the CEO for the new fiscal year.

Role of Management

At the beginning of each fiscal year, the CEO evaluates the performance of the Company’s executive officers against the strategic and financial operating plan for the prior fiscal year. The CEO’s evaluation of individual performance also focuses on each executive officer’s performance relative to each person’s performance goals.

The Company does not have a pre-defined framework that determines which objectives may be more or less important, and the emphasis placed on specific objectives may vary among the executive officers depending on the specific roles and responsibilities of each executive officer, as well as the particular challenges, both in terms of business and professional development, faced by the executive. Individual objectives typically include financial objectives, such as sales, net and gross profit, operating income and economic profit, as well as objectives relating to other major business initiatives, such as implementation of new enterprise resource planning software or integrating a significant acquisition.

As part of the performance management process, each executive officer is also evaluated on ten performance dimensions, which reference the manner in which the individual accomplishes his or her goals, including commitment to Avnet’s “core values” of integrity, customer service, accountability, teamwork and innovation. These core values form the foundation of Avnet’s performance and values-based culture of excellence and underpin Avnet’s overall profitable growth strategies focused on inspired and engaged people, unparalleled customer service and technology, services and solutions that matter. While this qualitative evaluation does not carry a specific weight, it does factor into the overall assessment of the executive’s performance when setting target compensation levels.

During fiscal 2013, the CEO, in consultation with the CHRO, developed base salary and short- and long-term target award recommendations for the other executive officers. Individual factors that were considered include the following:

 

   

the value of the job in the marketplace as compared with similar jobs within Avnet’s peer group;

 

   

the relative importance of the job within the executive ranks of the Company as determined by scope of responsibility and performance expectations;

 

   

the number of years and breadth of experience the executive officer has within the particular job;

 

   

the individual performance of the executive relative to the specific financial targets or business objectives set forth for the job; and

 

   

the executive officer’s expected contribution to the future performance of the Company.

Once an executive officer’s role and responsibilities are defined, “value of the job in the marketplace” and “relative importance of the position within the executive ranks” are the most determinative factors in setting compensation targets for that executive officer, adjusted to take into consideration the executive officer’s experience and past and expected future performance.

 

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Role of Independent Compensation Consultant

From 2008 until May 2013, the Compensation Committee engaged Steven Hall & Partners (“SH&P”) as the Compensation Committee’s independent compensation consultant. During fiscal 2013, representatives of SH&P attended, either in person or by telephonic conference call, four meetings of the Compensation Committee.

In May 2013, the Compensation Committee retained Meridian Compensation Partners, LLC (“Meridian”), as the Compensation Committee’s independent compensation consultant.

The compensation consultant provides the Compensation Committee with expertise relating to compensation philosophy, compensation levels, market trends and peer group analysis. In addition, the compensation consultant advises the Compensation Committee on best-practice ideas for governance of executive compensation as well as areas of potential risk and concern in the Company’s executive compensation program, and undertakes special projects at the request of the Committee chair.

The Compensation Committee has sole authority with regard to retaining and approving fees for its independent consultant. The Compensation Committee assessed the independence of SH&P and Meridian pursuant to the SEC and New York Stock Exchange rules and concluded that no conflict of interest exists that prevented, or will prevent, them from being independent consultants to the Compensation Committee.

Competitive Marketplace Assessment

As part of its compensation setting process, the Compensation Committee regularly reviews the composition of the comparator group in consultation with its independent consultant. With respect to fiscal 2013 compensation, SH&P conducted a comprehensive review of the executive compensation program at the Company as compared to a 17-company comparator group. The group includes companies with a similar industry focus and/or of similar size and complexity with whom Avnet competes for talent.

For fiscal 2013, the comparator group was selected based on five metrics: (i) technology distributors, (ii) electronic manufacturing services (“EMS”) and/or electronic components manufacturing (“ECM”) companies, and (iii) S&P 500 information technology index members similar to the Company with respect to (a) revenue, (b) market capitalization or (c) operating income margin. With respect to operating income margin, the peer group included companies that had a similar operating income margin based on a three-year average.

For fiscal 2013, the comparator group consisted of:

 

Technology Distributors

Arrow Electronics, Inc.

Anixter International, Inc.

Ingram Micro, Inc.

SYNNEX Corporation

Tech Data Corporation

  

EMS/ECM

Celestica, Inc.

Flextronics International Ltd.

Jabil Circuit, Inc.

  

Revenues

Intel Corporation

Oracle Corp.

Xerox Corp.

 

Market Capitalization

Advanced Micro Devices, Inc.

Harris Corporation

VeriSign, Inc.

 

Operating Income Margins

Dell, Inc.

Micron Technology, Inc.

Novellus Systems, Inc.

The Compensation Committee continually monitors the make-up of the peer group used and evaluates the peer group against the Company’s operations. The fiscal 2013 peer group was approved by the Compensation Committee in May 2012. A comparison of Avnet’s fiscal 2012 revenue, operating margin and market capitalization compared to the comparator group’s then most recent annual information is included below:

 

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Avnet’s revenues were at the 72 nd percentile of the comparator group;

 

   

Avnet’s operating margin was at the 32 nd percentile of the comparator group; and

 

   

Avnet’s market capitalization was at the 64 th percentile of the comparator group.

To benchmark Avnet compensation levels for the CEO, CFO and Group Presidents positions, data derived from the SEC filings of the comparator group have been supplemented with a variety of relevant, published surveys which provided data on compensation in the technology sector and general industry. For other positions for which SEC proxy data is generally not available, only survey data compiled by SH&P was utilized. All of the data sources have been weighted based on relevance, reliability and an assessment of the appropriateness of the match of responsibilities.

Following the completion of the benchmarking review by SH&P, the Compensation Committee and management reviewed the data in light of trends, past compensation levels and the percentage changes as part of the executive compensation decision-making process. As part of this process, each executive’s proposed individual target compensation was evaluated against the marketplace data, including a review of the individual compensation elements such as base pay, variable cash incentive and long-term incentives. This allowed for the determination of any gaps in compensation that may need to be addressed. While the target was the median marketplace compensation level for each pay element, an individual executive’s target compensation may have been above or below the median, based on other factors, such as the experience in the position and the long-term performance of the individual executive. For fiscal 2013, the compensation of Mr. Hamada was targeted at 80% of the CEO comparator group median. While benchmarking data is one consideration in this process, it is not the sole determinative factor. For further information on this process, please see “Compensation Governance and Process” above.

Elements of Executive Compensation

The primary components of the Company’s compensation program and the objectives of each component are set forth in the table below.

 

        Key Objective  

Component

 

Philosophy

  Align with
Market
Trends
    Attract
and
Retain
    Reward
Short-Term
Performance
    Reward
Long-Term
Performance
    Align with
Shareholders’
Interest
 

Base salary

  Fixed element reflecting the executive’s long-term performance and skill set     X        X         

Annual cash incentive

  Annual cash incentive compensation is based on the performance of the Company and business unit (where appropriate) for which the executive has direct responsibility     X        X        X          X   

Long-term incentives

  LTIP awards are based generally on each executive’s individual contribution in a particular fiscal period and the executive’s potential to contribute to the long-term success of the Company     X        X          X        X   

In addition, each NEO is also eligible to receive certain other benefits as described in the “Additional Compensation Elements” section of this CD&A.

 

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In support of what the Compensation Committee feels is a strong pay-for-performance orientation, an executive’s potential compensation is heavily weighted toward incentive (variable) compensation and shareholder value creation, most of which is paid out based on the long-term performance of the Company, including its TSR. The compensation mix at target for the CEO and the other NEOs for fiscal 2013 is displayed below.

 

LOGO

Base Salary

Executive salaries are reviewed on an annual basis, as well as at the time of a promotion or other material change in responsibilities. Annual reviews are generally conducted in the first quarter of each fiscal year. Base salaries of the executive officers are individually determined by the Compensation Committee based on the factors described above in the “Compensation Governance and Process” section of this CD&A. For fiscal 2013, the Compensation Committee approved the following annual salaries:

 

NEO

   2013 Base Salary      % Change from 2012  

Mr. Hamada

   $ 900,000         6

Mr. Sadowski

   $ 538,000         0

Mr. Feldberg

   $ 593,000         3

Mr. Gallagher

   $ 525,000         2

Ms. Miller

   $ 425,000         6

Mr. Birk

   $ 500,000         0

As Mr. Moriarty was not an employee in 2012, his salary is not included in the table above. For the second half of fiscal 2013, during which time he served as the Company’s CFO, Mr. Moriarty received a base salary of $250,000.

Annual Cash Incentives

In addition to base salary, executive officers are eligible to receive annual incentive cash compensation based on the performance of the Company and, where appropriate, the business unit for which the executive has direct responsibility. Awards are made pursuant to the Executive Incentive Plan (the “Incentive Plan”).

The target cash incentive compensation for fiscal 2013 for the NEOs as a percentage of the NEO’s base salary and the percent change in incentive compensation from fiscal 2012 is set forth in the following table:

 

NEO

   2013 Target
Cash Incentive
     Percentage of 2013
Base Salary
    % Change from 2012  

Mr. Hamada

   $ 1,000,000         111     18

Mr. Moriarty

   $ 200,000         80     N/A   

Mr. Sadowski

   $ 437,000         81     6

Mr. Feldberg

   $ 593,000         100     3

Mr. Gallagher

   $ 525,000         100     12

Ms. Miller

   $ 325,000         76     25

Mr. Birk

   $ 375,000         75     0

 

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The increases in target cash incentive compensation take into account the NEO’s experience in the position and the long-term performance of the individual NEO. Additionally, the increases for certain of the NEOs reflect the Company’s practice of progressively moving NEOs to the comparator group median over a definitive time period. Mr. Moriarty joined the Company at the start of the second half of Avnet’s fiscal 2013 and had an initial target cash incentive of $200,000.

Performance Goals .    As discussed above, the process for setting the annual cash incentive compensation begins in conjunction with the review of the Company’s budget for the new fiscal year at the Board’s strategic planning session held in June. When determining the budget, the Board seeks to ensure that it is fair, challenging and forward-looking, without encouraging excessive risk-taking. Additionally, when determining the fiscal 2013 budget, the Board considered the Company’s results in fiscal 2012, the projected growth and the operating environment as projected by industry analysts. At the meeting in August, the Compensation Committee or the Board, as appropriate, finalizes the annual cash incentive performance goals, the target cash incentive compensation and payout ranges under the Incentive Plan.

The performance goals for all NEOs are, at least in part, based on Company-wide performance. Performance goals for operating group presidents (Messrs. Feldberg and Gallagher) are weighted more heavily on the performance of the applicable operating group (75% of target award) but contain a component based on the performance of the entire Company as well (25% of target award). Performance goals for the other NEOs are entirely based on Company-wide performance.

Company-Wide Performance Goals .    Company-wide performance goals are based on the percentage achievement of Avnet’s 2013 net income after tax, excluding certain items (“NIAT”), as modified by the ratio of actual return on capital employed, excluding certain items (“ROCE”), to target ROCE. NIAT and ROCE were selected as the performance metrics because the Compensation Committee believes that those metrics are aligned with the creation of long-term shareholder value. The NIAT target for fiscal 2013 represented an 8% increase from the NIAT actually achieved in fiscal 2012.

Operating Group Performance Goals .    Operating group performance goals are based upon the achievement of the applicable operating group’s net income before tax, excluding certain items (“NIBT”), as modified by the ratio of the actual ROCE to target ROCE of the respective operating group. The NIBT target for fiscal 2013 for the Electronics Marketing operating group represented an 8% increase over the NIBT actually achieved by this group in fiscal 2012. The NIBT target for fiscal 2013 for the Technology Solutions operating group represented a 15% increase over the NIBT actually achieved by this group in fiscal 2012.

Target Payout .    The table below outlines the payout range that applies to each performance level.

 

Performance Level

   Payout Range
     (as percentage of target
incentive opportunity)

Below 50% of performance goal

   0%

At 50% of performance goal but less than 95% of performance goal

     25% - 90%  

Between 95% and 105% of performance goal

     95% - 105%

Between 106% of performance goal and maximum

   110% - 225%

The factor on the NIAT and/or NIBT portion of the incentive is linear for actual results between 95% and 105% of the performance goal. If actual NIAT were less than 95% or greater than 105% of the performance goal, the factor would be equal to the percentage of actual results to the performance goal squared. For example, if actual NIAT were 110% of the performance goal, a factor of 121% (110% times 110%) would be applied to the target incentive compensation and if actual NIAT were 90% of the performance goal, a factor of 81% (90% times 90%) would be applied to the target incentive compensation. Maximum cash incentive compensation is limited to 225% of the target cash incentive compensation. No cash incentive compensation will be earned if actual performance is less than 50% of the performance goal.

 

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Actual Payout .    Based upon actual performance of the Company and the operating group, where applicable, the NEOs were paid the following cash incentive amounts:

 

NEO

   Target Cash
Incentive
     Cash Incentive Paid
for Fiscal 2013
     Percentage of
Target Achieved
 

Mr. Hamada

   $ 1,000,000         447,879         45

Mr. Moriarty

   $ 200,000         81,820         41

Mr. Sadowski

   $ 437,000         195,723         45

Mr. Feldberg (1)

   $ 593,000         295,629         50

Mr. Gallagher (2)

   $ 525,000         234,085         45

Ms. Miller

   $ 325,000         145,561         45

Mr. Birk

   $ 375,000         271,478         72

 

 

 

(1) Mr. Feldberg earned 52% of his target cash incentive for the portion of his incentive tied to the results of Avnet Electronics Marketing, which represented 75% of his total target cash incentive, and earned 45% of his target cash incentive for the portion tied to Avnet’s consolidated results, which represented 25% of his total target cash incentive. Therefore, he earned 50% of his total target cash incentive as reflected in the total above (52% times 75% plus 45% times 25%).

 

(2) Mr. Gallagher earned 45% of his target cash incentive for the portion of his incentive tied to the results of Avnet Technology Solutions, which represented 75% of his total target cash incentive, and earned 45% of his target cash incentive for the portion tied to Avnet’s consolidated results, which represented 25% of his total target cash incentive. Therefore, he earned 45% of his total target cash incentive as reflected in the total above (45% times 75% plus 45% times 25%).

The percentages of target cash incentive earned were calculated as follows:

 

     Avnet     EM     TS  

Target incentive tied to income metric
($ in millions)

      

NIAT/NIBT goal

   $ 680.535      $ 774.145      $ 356.559   

NIAT/NIBT actual

   $ 507,764      $ 622,503      $ 271,024   

% of goal achieved

     74.61     80.41     76.01

% of goal squared

     55.67     64.66     57.78

Incentive tied to return on capital metric

      

ROCE goal

     13.71     14.54     12.64

ROCE actual

     11.03     11.59     9.74

% of goal achieved

     80.45     79.71     77.06

Total incentive earned

     44.79     51.54     44.52

The actual annual cash incentive earned for fiscal 2013 was below target due to the fact that actual NIAT, NIBT and ROCE performance was below the budgeted amounts. As a result of such performance, except with respect to Mr. Birk, the annual cash incentive compensation awarded to each of the NEOs decreased from fiscal 2012, consistent with the Company’s pay-for-performance philosophy. With respect to Mr. Birk, the Company agreed to fix a portion of his annual cash incentive upon Mr. Birk ceasing to serve as Senior Vice President and General Counsel. As a result of such arrangement, Mr. Birk received the target amount of annual cash incentive for the second half of fiscal 2013. For additional information regarding the fiscal 2013 performance of the Company and its operating groups, please refer to the Company’s Annual Report on Form 10-K for the year ended June 29, 2013.

 

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Signing Bonus

In connection with his appointment as the Company’s CFO, Mr. Moriarty received a signing bonus of $680,000, of which $400,000 was paid during fiscal 2013 and $280,000 will be paid after his one-year anniversary with the Company. The purpose of this bonus was to encourage Mr. Moriarty to join the Company and to offset certain future compensation payments from his previous employer.

Long-Term Incentives

The Board believes that long-term incentive compensation in the form of equity awards for all executive officers is a valuable compensation component. Equity awards under the LTIP provide a strong incentive to increase shareholder value over time and improve TSR, as well as aid in retention. When granting long-term incentive compensation awards, the Compensation Committee reviews the relevant comparator group and survey compensation data and generally targets the median marketplace compensation level for long-term incentives. Comparator group data is not the sole determinative factor and awards under the LTIP may be above or below the median, based on a variety of factors.

The Compensation Committee generally awards a mix of RSUs, stock options and PSUs to the Company’s executive officers. The following is an overview of the long-term incentive program components.

 

Equity

  Target %
of LTIP
 

Purpose

 

Award Terms

Restricted Stock Units

  25%  

• Align with shareholders’ interest

• Aid in retention

• Value is tied to the performance of the Company’s stock

 

• Paid out in shares of Common Stock

• Typically vest in equal installments over approximately 4.5 years

Stock Options

  25%  

• Align with shareholders’ interest

• Aid in retention

• Value is tied to stock price appreciation

 

• Typically vest in equal installments over four years

• Exercise price equal to the closing price on the grant date

• Expire 10 years from grant date

Performance Share Units

  50%  

• Further align with shareholders’ interest by providing incentive to increase shareholder value and TSR

• Aid in retention

• Value is tied to relative performance of the Company and its shares against its peer group

 

• Paid out in shares of Common Stock

• Cliff vest at end of three year performance period

• 75% of PSUs vest, if at all, based on relative economic profit performance during performance period

• 25% of PSUs vest, if at all, based on relative TSR performance at end of performance period

RSUs typically vest in five installments, with the first installment vesting in January following the grant and the balance vesting in four equal annual installments thereafter. Stock options typically vest in four equal annual installments on the anniversaries of the grant date. Vesting of each of the awards granted under the LTIP is generally contingent upon continued employment, except in the case of death, disability, retirement of the employee or a change of control, as more fully discussed in “Potential Payouts Upon Termination and Change of Control,” below.

 

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Performance Share Units .    The PSUs awarded in fiscal 2013 vest based upon a three-year performance cycle covering the Company’s fiscal years 2013, 2014 and 2015. The vesting of the PSUs is subject to Avnet achieving relative economic profit performance (“Relative EP”) and relative total shareholder return performance (“Relative TSR”) equal to at least the respective threshold levels set forth below. The Compensation Committee or, where applicable, the Board uses Relative EP as a performance goal because the Board believes that economic profit growth and the creation of shareholder value ultimately leads to growth in TSR and executives are able to directly influence this metric.

For purposes of the PSU awards:

 

   

“Relative EP” means Avnet’s economic profit per dollar of average capital compared to the economic profit per dollar of average capital of the companies in the S&P Supercomposite Technology Distributors Index Sub-Industry Index, excluding Avnet (the “Index”), during the performance period.

 

   

“Economic profit” for a business means operating income after tax (assuming an effective tax rate of 35%), less a capital charge of 10% on the amount of capital invested in the business. For purposes of the PSUs, “operating income” excludes certain items as determined by the Compensation Committee, such as restructuring charges, asset writedowns, impairments and financial impacts of accounting, tax, and regulatory changes, etc.

 

   

“Relative TSR” means the percentile rank (from 0%ile for the lowest to 100%ile for the highest) of Avnet’s “Total Shareholder Return” compared to the individual total shareholder return of each company in the Index.

 

   

“Total Shareholder Return” means the percent calculated using the following formula:

Average stock price at the end of period – average stock price at the start of period + dividends

Average stock price at the start of period

When calculating the average stock price at the beginning and end of the relevant period, the Company uses the 30-trading day average immediately before and including the start day and the 30-trading day average immediately before and including the end day of the applicable period.

As noted above, 75% of the PSUs vest depending upon Relative EP and 25% of the PSUs vest depending upon Relative TSR. Based upon the Company’s actual Relative EP and Relative TSR during the three-year performance period, the recipient is eligible to receive a percentage of the target number of shares ranging from 0% to 200% of participant’s targeted number of shares as set forth below:

 

Relative EP Scale

          

Relative EP relative to the Index

     -10     -5     0     +5     +10

Payout Percent of Target

     0     50     100     150     200

 

Relative TSR Scale

          

Percentile Rank

     0     25     50     75     100

Payout Percent of Target

     0     50     100     150     200

If Avnet’s actual Relative EP or Relative TSR is between two achievement levels set forth in the table above, the percentage vesting shall be determined by linear interpolation.

 

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Fiscal 2013 Awards .    The 2013 LTIP awards to the NEOs are listed in the following table.

 

NEO

   RSUs
(#)
     Stock
Options
(#)
     PSUs
(#)
     Target Value of
LTIP Awards
 

Mr. Hamada

     27,750         79,296         55,505       $ 3,600,000   

Mr. Moriarty *

     25,000         68,000         8,500       $ 1,831,000   

Mr. Sadowski

     11,565         33,040         23,125       $ 1,500,000   

Mr. Feldberg

     10,020         28,636         20,045       $ 1,300,000   

Mr. Gallagher

     8,095         23,128         16,190       $ 1,050,000   

Ms. Miller

     6,165         17,620         12,335       $ 800,000   

Mr. Birk

     7,710         22,028         15,420       $ 1,000,000   

 

 

 

* Mr. Moriarty’s award reflects equity granted to encourage Mr. Moriarty to join the Company and to offset certain future compensation payments from his previous employer.

With respect to Mr. Moriarty’s award, the RSUs vest ratably over three years, beginning on January 2, 2014, the options vest ratably over four years beginning on January 2, 2014, and the PSUs vest, if at all, based upon a three-year performance cycle covering the Company’s fiscal years 2013, 2014 and 2015.

Performance Stock Units Earned .     The payout percentages for the PSU awards for the past 5 years are set forth in the following table:

 

Performance Period

   Payout %  

Fiscal Years 2011 — 2013

     90

Fiscal Years 2010 — 2012

     150

Fiscal Years 2009 — 2011

     100

Fiscal Years 2008 — 2010

     100

Fiscal Years 2007 — 2009

     50

Additional Compensation Elements

Retirement Benefits

Avnet provides a retirement benefit to each NEO under a tax-qualified retirement plan and a retirement benefit under nonqualified retirement plans. The Avnet pension plan (the “Pension Plan”) is a type of tax-qualified defined benefit plan commonly referred to as a cash balance plan. The nonqualified retirement plans consist of the Avnet restoration pension plan (the “Restoration Plan”) and the supplemental executive officer’s retirement plan (the “SERP”). The plans are more fully described in the “Pension Benefits” discussion below. The SERP was closed to new participants effective December 31, 2011, and the Restoration Plan was adopted effective January 1, 2012. Pursuant to the terms of the Restoration Plan and the SERP, any benefit payable under the Restoration Plan reduces the benefit payable under the SERP. These plans are important retention tools in the Avnet compensation program because the receipt of benefits under these plans is contingent upon the satisfaction of certain age and service requirements. Additionally, as the benefits provided under the nonqualified retirement plans are based in part on a participant’s yearly cash compensation, including a participant’s annual cash incentive compensation, the plans include a performance based element. The Company balances the effectiveness of these plans as a compensation and retention tool with the cost of these plans.

Deferred Compensation

The Company maintains a Deferred Compensation Plan for highly compensated employees including all of the NEOs. The program permits these employees to set aside a portion of their income for retirement on a pre-tax basis, in addition to the amounts allowed under the Company’s 401(k) Plan, at a minimal administrative cost to the Company. Under this unfunded program, amounts deferred by a

 

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participant are credited with earnings based upon the returns actually obtained through the “deemed investment” selected by the executive, as described in more detail following the Nonqualified Deferred Compensation Table. The Company does not offer preferential or above market returns on the compensation deferred.

Perquisites

The Company provides NEOs with a limited number of perquisites that the Company and the Compensation Committee believe are reasonable and consistent with Avnet’s overall compensation program, and necessary to remain competitive. Costs associated with perquisites provided by the Company are included in the “All Other Compensation” column in the Summary Compensation Table.

Change of Control Agreements

Each NEO has a change of control agreement with the Company. The change of control agreements are intended to encourage retention in the face of the disruptive impact of an actual or attempted change of control of the Company. The agreements are also intended to align executive and shareholder interests by enabling executives to consider corporate transactions that are in the best interests of the shareholders and other constituents of the Company without undue concern over whether the transactions may jeopardize the executives’ own employment. More detailed descriptions of these programs are included under the heading “Potential Payouts Upon Termination and Change of Control.”

Additional Information

Stock Ownership Guidelines

With a significant portion of each executive officer’s total compensation delivered in the form of equity-based incentives, executive officers have a substantial interest and incentive to ensure profitable growth of the Company and to drive long-term shareholder value. To further reinforce this focus, the Compensation Committee has established stock ownership guidelines for all executive officers. The guidelines provide that the executive officers should hold shares of the Company’s Common Stock or RSUs, with a market value equal to a multiple of each officer’s base salary, as set forth below:

 

Chief Executive Officer

  Shares with market value equal to 5 times base salary

Chief Financial Officer, General Counsel and Operating Group Presidents

  Shares with market value equal to 3 times base salary

Other Executive Officers

  Shares with market value equal to 1 times base salary

Holding Period for Common Stock

Until the ownership level under the Company’s stock ownership guidelines is met, executives must hold at least 50% of any net shares he or she receives upon the exercise of options or upon the delivery of any RSU or PSU awards.

Insider Trading Policy

The Company’s insider trading policy expressly prohibits ownership of financial instruments or participation in investment strategies that hedge the economic risk of owning the Company’s securities. Additionally, executive officers and directors are prohibited from pledging Avnet securities as collateral for loans. The Company’s insider trading policy prohibits executive officers and directors from trading in securities of Avnet or engaging in any other action to take advantage of, or pass on to others, material nonpublic information relating to Avnet or any other company with which Avnet has a relationship, including Avnet’s customers, suppliers or potential parties in a business transaction.

 

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Recoupment Policy

Pursuant to the Company’s incentive compensation recoupment policy, in the event of a restatement of the Company’s financial results due to the misconduct of any employee, the Independent Directors are authorized to take action to recoup all or part of any incentive compensation received by an executive officer. For purposes of this policy, incentive compensation includes any cash or stock-based award under the Company’s Incentive Plan or LTIP, the amount of which is determined in whole or in part upon achievement of specific financial performance targets. The policy defines misconduct as the willful commission of an illegal act, fraud, intentional misconduct or gross recklessness in the performance of an employee’s duties and responsibilities. In determining whether to take action to recoup any incentive compensation received by an executive officer, the Independent Directors will take into consideration whether the executive officer engaged in the misconduct or was in a position, including in a supervisory role, to have been able to have reasonably prevented the misconduct that caused the restatement.

Equity Grant Practices

The Compensation Committee typically makes its compensation recommendations and decisions at its regularly scheduled meeting in August, which is generally scheduled at least one year in advance. Pursuant to the Company’s equity incentive plans, the exercise price of each stock option awarded to the executive officers is the closing price of Avnet’s Common Stock on the date of grant. Options and other equity-based awards may be granted in connection with a new hire or a promotion, in which case awards may be granted at the Compensation Committee meeting at or about the time of hiring or promotion. Scheduling decisions are made without regard to anticipated earnings or the major announcements by the Company.

Deductibility of Executive Compensation

Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), limits to $1 million the amount of remuneration that Avnet may deduct in any calendar year for its CEO and three other highest-paid named executive officers, other than the CFO. The limitation applies only to compensation that is not considered “performance based” as defined in the Section 162(m) regulations.

In designing the Company’s compensation programs, the Compensation Committee considers the effect of Section 162(m) of the Code, as well as other factors relevant to the Company’s business needs. The Company has historically taken, and intends to continue to take, reasonable and appropriate actions with respect to achieving deductibility of annual incentive and long-term compensation. To maintain flexibility, the Compensation Committee does not have a policy requiring all compensation to be deductible.

D&O Insurance

As permitted by Section 726 of the Business Corporation Law of New York, Avnet has in force directors’ and officers’ liability insurance and corporate reimbursement insurance. The policy insures Avnet against losses from claims against its directors and officers when they are entitled to indemnification by Avnet, and insures Avnet’s directors and officers against certain losses from claims against them in their official capacities. All duly elected directors and officers of Avnet and its subsidiaries are covered under this insurance. The primary insurer is Federal Insurance Company, a Chubb Group insurance company. Excess insurers include ACE American Insurance Company, Arch Insurance Company, Zurich American Insurance Company, National Union Fire Insurance Co. of Pittsburgh, PA, Allied World National Assurance Company, Federal Insurance Company, and Lloyd’s of London. The coverage was renewed effective August 1, 2013, for a one-year term. The total premium paid for both primary and excess insurance was $1,167,363.

 

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COMPENSATION OF AVNET EXECUTIVE OFFICERS

The following table sets forth information concerning the compensation provided by Avnet for the years indicated to the Named Executive Officers.

SUMMARY COMPENSATION TABLE

 

Name and Principal

Position

  Year     Salary
($)
    Bonus
($)
    Stock
Awards
($) (1)
    Option
Awards
($) (1)
    Non-Equity
Incentive Plan
Compensation
($)
    Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($) (2)
    All Other
Compensation
($) (3)
    Total
($)
 
(a)   (b)     (c)     (d)     (e)     (f)     (g)     (h)     (i)     (j)  

Richard Hamada

    2013        900,000               2,699,960        900,010        447,879               29,183        4,977,032   

Chief Executive Officer

    2012        850,000               1,794,307        578,537        470,320        899,504        36,620        4,629,288   
    2011        700,000               1,747,907        443,988        1,535,139        1,039,262        28,185        5,494,481   

Kevin Moriarty

    2013        250,000        400,000        1,068,315        762,960        81,820               5,850        2,568,945   

Senior Vice President and

                 

Chief Financial Officer

                 

Raymond Sadowski

    2013        538,000               1,124,997        375,004        195,723        3,307        18,538        2,255,569   

Senior Vice President and

    2012        538,000               852,310        274,821        227,967        541,135        20,872        2,455,105   

Chief Administrative Officer

    2011        538,000               943,829        239,765        793,886        675,172        14,692        3,205,344   

Harley Feldberg

    2013        593,000               975,008        325,019        295,629        8,445        23,154        2,220,255   

Senior Vice President and

    2012        575,000               801,040        258,266        319,729        661,461        18,773        2,634,269   

President, Avnet Electronics

Marketing

    2011        550,000               1,004,979        255,287        1,117,882        928,486        30,116        3,886,750   

Philip Gallagher

    2013        525,000               787,563        262,503        234,085               19,951        1,829,102   

Senior Vice President and

    2012        515,000               634,518        204,540        313,557        559,340        20,489        2,247,444   

President, Avnet Technology

Solutions

    2011        500,000               830,330        210,884        597,051        351,137        23,124        2,512,526   

MaryAnn Miller

    2013        425,000               599,955        199,987        145,561        118,404        21,942        1,510,849   

Senior Vice President and

Chief Human Resources

Officer

                 

David Birk

    2013        500,000               750,106        250,018        271,478               22,329        1,793,931   

Former Senior Vice President

and General Counsel

                 

 

 

 

(1)

Amounts shown under the heading “Stock Awards” reflect the grant date fair value of awards of RSUs and PSUs, computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. The grant date fair value of RSUs awarded to each NEO in fiscal 2013 is as follows: Mr. Hamada — $899,933; Mr. Moriarty — $797,250; Mr. Sadowski — $375,053; Mr. Feldberg — $324,949; Mr. Gallagher — $262,521; Ms. Miller — $199,931; and Mr. Birk — $250,035. With respect to PSUs, the grant date fair value was computed based upon the target outcome of the performance conditions as of the grant date, which was consistent with the estimates used by the Company to measure compensation cost determined as of the grant date. Assuming the target performance is achieved for PSUs awarded in fiscal 2013, the grant date fair value of the award to each NEO is as follows: Mr. Hamada — $1,800,027; Mr. Moriarty — $271,065; Mr. Sadowski — $749,944; Mr. Feldberg — $650,059; Mr. Gallagher — $525,042; Ms. Miller — $400,024; and Mr. Birk — $500,071. Assuming the maximum payout of PSUs granted in fiscal 2013 is achieved, the grant date value of such awards would be $3,600,054, $542,130, $1,499,888, $1,300,119, $1,050,083, $800,048 and $1,000,141 for Messrs. Hamada, Moriarty, Sadowski, Feldberg, Gallagher, Ms. Miller, and Mr. Birk, respectively. Amounts shown under the heading “Option Awards” reflect the grant date fair values for stock option awards calculated using the Black-Scholes option pricing model. For information on the assumptions used to calculate the value of the awards, refer to Note 12 to the Company’s Consolidated Financial Statements in its Annual Report on Form 10-K for the year ended June 29, 2013. The amounts included in these columns relate to awards made in the fiscal year and reflect the aggregate grant date fair value

 

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  computed in accordance with FASB ASC Topic 718 and do not correspond to the actual amount that will be realized by the NEOs.

 

(2) The amount includes the net change in the actuarial present value of accumulated benefits under the Company’s qualified and nonqualified retirement plans. The year-over-year decrease was primarily due to the change in the discount rate applied to the plans as interest rates at the end of fiscal 2013 were higher than at the end of fiscal 2012. For Messrs. Hamada, Gallagher and Birk, the impact of the change in the discount rate resulted in a net decrease in the total net change of the actuarial present value of accumulated benefits under the qualified and nonqualified retirement plans, and as such these net negative amounts are not reflected in the table above. For fiscal 2013 the increase in the actuarial present value of accumulated benefits under the Company’s qualified plan was $24,163, $21,685 and $60,131 for Messrs. Hamada, Gallagher and Birk, respectively. For fiscal 2013, the decrease in the actuarial present value of accumulated benefits under the Company’s nonqualified retirement plan was $116,935, $40,374 and $71,396 for Messrs. Hamada, Gallagher and Birk, respectively. Mr. Moriarty is not a participant in the SERP. He will become a participant in the Pension and Restoration Plans effective July 1, 2014.

 

(3) The amount includes (a) Company-paid expenses associated with a leased automobile for each of the NEOs and (b) the cost of annual physical exams. None of the perquisites and personal benefits exceeded the greater of $25,000 or 10% of the total amount of these benefits for the NEO.

Grants of Plan-Based Awards

The following table provides information about equity and non-equity plan-based awards to the NEOs in fiscal 2013 relating to: (1) annual cash incentive awards; (2) PSUs; (3) RSUs; and (4) stock options. The actual payouts earned in fiscal 2013 under the Non-Equity Incentive Plan Awards are included in the Summary Compensation Table as are the grant date fair values associated with the awards under the Equity Incentive Plan, All Other Stock Awards and All Other Option Awards in the table below.

 

         

 

Estimated Future Payouts
Under Non-Equity Incentive Plan
Awards (1)

   

 

Estimated Future Payouts
Under Equity Incentive Plan
Awards (#) (2)(3)

    All Other
Stock
Awards:
Number of
Shares of
Stock or
Units (#) (3)
    All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#) (3)
    Exercise
or Base
Price of
Option
Awards
($/Sh)
    Grant
Date Fair
Value of
Stock and
Options
Awards
         

Name

  Grant
Date
    Threshold
($)
    Target
($)
    Maximum
($)
    Threshold
(#)
    Target
(#)
    Maximum
(#)
             
(a)   (b)     (c)     (d)     (e)     (f)     (g)     (h)     (i)     (j)     (k)     (l)          

Richard Hamada

    8/09/2012        250,000        1,000,000        2,250,000                                    79,296        32.43        900,010       
    8/09/2012                             1        55,505        111,010                             1,800,027       
    8/09/2012                                                  27,750                      899,933       

Kevin Moriarty

    1/02/2013        50,000        200,000        450,000                                    68,000        31.89        762,960       
    1/02/2013                             1        8,500        17,000                             271,065       
    1/02/2013                                                  25,000                      797,250       

Raymond Sadowski

    8/09/2012        109,250        437,000        983,250                                    33,040        32.43        375,004       
    8/09/2012                             1        23,125        46,250                             749,944       
    8/09/2012                                                  11,565                      375,053       

Harley Feldberg

    8/09/2012        148,250        593,000        1,334,250                                    28,636        32.43        325,019       
    8/09/2012                             1        20,045        40,090                             650,059       
    8/09/2012                                                  10,020                      324,949       

Philip Gallagher

    8/09/2012        131,250        525,000        1,181,250                                    23,128        32.43        262,503       
    8/09/2012                             1        16,190        32,380                             525,042       
    8/09/2012                                                  8,095                      262,521       

MaryAnn Miller

    8/09/2012        81,250        325,000        731,250                                    17,620        32.43        199,987       
    8/09/2012                             1        12,335        24,670                             400,024       
    8/09/2012                                                  6,165                      199,931       

David Birk

    8/09/2012        93,750        375,000        843,750                                    22,028        32.43        250,018       
    8/09/2012                             1        15,420        30,840                             500,071       
    8/09/2012                                                  7,710                      250,035       

 

 

 

(1) As discussed in the CD&A, the possible payout at threshold level is pegged at 25% of target amount, at 100% of target amount if all of the pre-established financial goals are achieved, and up to a maximum of 225% of the target amount if the achievement of the pre-established financial goals reaches or exceeds the target maximum. Achievement below the threshold would yield a payout of $0.

 

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(2) This column represents grants of PSUs. As discussed in the CD&A, based upon the Company’s actual Relative EP and Relative TSR during the three-year performance period, the executive is eligible to receive a percentage of the target number of shares ranging from 0% to 200% of his or her targeted number of shares.

 

(3) The vesting schedules for the PSUs, RSUs and the stock option grants made in fiscal 2013 are as follows:

 

Type of Awards Made in Fiscal 2013

 

Vesting Schedule

Performance Share Units (PSUs)

  vest, if at all, at the end of fiscal 2015 (June 27, 2015)

Restricted Stock Units (RSUs)

  20% each on the first business day in January of 2013 through 2017, except for Mr. Moriarty, whose award will vest ratably over 3 years beginning on January 2, 2014

Stock Options

  25% on each of the first through fourth anniversary of the grant date

For additional description of the terms and awards of RSUs, stock options and PSUs made in fiscal 2013, see the description of long-term incentives in the CD&A and Note 12 to the Company’s Consolidated Financial Statements included in Avnet’s Form 10-K for the fiscal year ended June 29, 2013.

 

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Outstanding Equity Awards at Fiscal Year-End

The following table provides information on the current holdings of stock options and stock awards by the NEOs as of June 29, 2013. This table includes unexercised and unvested option grants, unvested RSUs, and PSUs with performance conditions that have not yet been satisfied. Each equity grant is shown separately for each NEO. The vesting schedule for each grant is shown following this table, based on the option grant date or stock award date. The market value of the stock awards is based on the closing market price of Avnet Common Stock as of June 29, 2013, which was $33.60. The PSUs are subject to specified performance objectives over the performance period. The market values as of June 29, 2013, shown in columns (h) and (j) below, assume 100% achievement of these performance objectives. For additional information about the option grants and stock awards, see the description of long-term incentives in the CD&A and Note 12 to the Company’s Consolidated Financial Statements included in Avnet’s Form 10-K for the fiscal year ended June 29, 2013.

 

    Option Awards     Stock Awards  

Name

  Option
Grant
Date
    Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
    Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
    Option
Exercise
Price ($)
    Option
Expiration
Date
    Stock
Award
Grant
Date
    Number
of Shares
or Units
of Stock
That
Have Not
Vested
(RSUs)(#)
    Market
Value of
Shares or
Units of
Stock
That Have
Not
Vested
($)
    Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
(PSUs)(#)
    Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
($)
 
(a)         (b)     (c)     (e)     (f)           (g)     (h)     (i)     (j)  

Richard Hamada

    9/23/2005        16,215               24.78        9/22/2015                                 
    8/10/2006        9,759               16.96        8/09/2016                                 
    8/09/2007        30,932               34.34        8/08/2017                                 
    8/07/2008        45,128               28.80        8/06/2018                                 
    8/13/2009        33,846        11,282        24.75        8/12/2019        8/13/2009        3,587        120,523                 
    8/12/2010        25,458        25,458        24.41        8/11/2020        11/5/2010        7,412        249,043                 
    8/11/2011        14,957        44,871        27.94        8/10/2021        8/11/2011        12,843        431,525        42,815        1,438,584   
    8/09/2012               79,296        32.43        8/08/2022        8/09/2012        22,200        745,920        55,505        1,864,968   

Kevin Moriarty

    1/02/2013               68,000        31.89        1/01/2023        1/02/2013        25,200        840,000        8,500        285,600   

Raymond Sadowski

    9/19/2003        50,000               18.13        9/18/2013                                 
    9/23/2004        25,860               17.47        9/22/2014                                 
    9/23/2005        16,516               24.78        9/22/2015                                 
    8/10/2006        21,688               16.96        8/09/2016                                 
    8/09/2007        16,160               34.34        8/08/2017                                 
    8/07/2008        25,572               28.80        8/06/2018                                 
    8/13/2009        19,179        6,393        24.75        12/31/2018        8/13/2009        2,033        68,309                 
    8/12/2010        13,748        13,748        24.41        12/31/2018        11/5/2010        4,002        134,467                 
    8/11/2011        7,105        21,315        27.94        12/31/2018        8/11/2011        6,102        205,027        20,335        683,256   
    8/09/2012               33,040        32.43        12/31/2018        8/09/2012        9,252        310,867        23,125        777,000   

Harley Feldberg

    5/13/2004        50,000               21.92        5/12/2014                                 
    9/23/2005        19,520               24.78        9/22/2015                                 
    8/09/2007        19,852               34.34        8/08/2017                                 
    8/07/2008        30,084               28.80        8/06/2018                                 
    8/13/2009        22,563        7,521        24.75        8/12/2019        8/13/2009        2,391        80,338                 
    8/12/2010        14,638        14,638        24.41        8/11/2020        11/5/2010        4,262        143,203                 
    8/11/2011        6,677        20,031        27.94        8/10/2021        8/11/2011        5,733        192,629        19,115        642,264   
    8/09/2012               28,636        32.43        8/08/2022        8/09/2012        8,016        269,338        20,045        673,512   

Philip Gallagher

    8/09/2007        10,156               34.34        8/08/2017                                 
    8/07/2008        14,292               28.80        8/06/2018                                 
    3/02/2009        5,625               16.15        3/01/2019                                 
    8/13/2009        18,051        6,017        24.75        8/12/2019        8/13/2009        1,913        64,277                 
    8/12/2010        12,092        12,092        24.41        8/11/2020        11/5/2010        3,522        118,339                 
    8/11/2011        5,288        15,864        27.94        8/10/2021        8/11/2011        4,542        152,611        15,140        508,704   
    8/09/2012               23,128        32.43        8/08/2022        8/09/2012        6,476        217,594        16,190        543,984   

MaryAnn Miller

    5/08/2009        6,000               22.08        5/07/2019                                 
    8/13/2009        6,768        2,256        24.75        8/12/2019        8/13/2009        717        24,091                 
    8/12/2010        5,728        5,728        24.41        8/11/2020        11/5/2010        1,668        56,045                 
    8/11/2011        3,526        10,578        27.94        8/10/2021        8/11/2011        3,027        101,707        10,090        339,024   
    8/09/2012               17,620        32.43        8/08/2022        8/09/2012        4,932        165,715        12,335        414,456   

David Birk

    9/23/2005        15,316               24.78        9/22/2015                                 
    8/10/2006        16,964               16.96        8/09/2016                                 
    8/09/2007        12,764               34.34        8/08/2017                                 
    8/07/2008        21,360               28.80        8/06/2018                                 
    8/13/2009        16,020        5,340        24.75        12/31/2018        8/13/2009        1,698        57,053                 
    8/12/2010        9,928        9,928        24.41        12/31/2018        11/5/2010        2,892        97,171                 
    8/11/2011        4,674        14,022        27.94        12/31/2018        8/11/2011        4,014        134,870        13,380        449,568   
    8/09/2012               22,028        32.43        12/31/2018        8/09/2012        6,168        207,245        15,420        518,112   

 

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Vesting schedules:

Stock Options — All stock options vest in 25% annual increments commencing on the first anniversary of the grant date. Stock options typically expire the day before the tenth anniversary of the grant date. Pursuant to their award agreements and as a result of their retirement, the options granted to Messrs. Birk and Sadowski expire the earlier of the original stock option expiration date or five years from their respective retirement dates.

Restricted Stock Unit Awards (RSUs) — All RSUs, except for the award dated January 2, 2013, to Mr. Moriarty, vest in 20% annual increments commencing in the January following the Grant Date. The award dated January 2, 2013, to Mr. Moriarty will vest ratably over 3 years beginning on January 2, 2014.

Performance Share Units (PSUs) — All PSUs vest, if at all, depending on whether performance objectives are met, on the last day of the fiscal year coincident with the end of the three-year performance period.

Option Exercises and Stock Vested

The following table provides information as to each of the NEOs: (1) stock option exercises during fiscal 2013, including the number of shares acquired upon exercise and the value realized, and (2) the number of shares acquired upon the vesting of stock awards in the form of RSUs and PSUs, and the value realized, each before payment of any applicable withholding tax.

 

     Option Awards      Stock Awards  

Name

   Number of
Shares
Acquired
on Exercise
(#)
     Value Realized
on Exercise
($)
     Number of
Shares
Acquired
on Vesting
(#)
     Value Realized
on Vesting
($)
 
(a)    (b)      (c)      (d)      (e)  

Richard Hamada

                     54,218         1,951,909   

Kevin Moriarty

                               

Raymond Sadowski

     50,000         1,023,000         28,508         1,029,732   

Harley Feldberg

                     80,092         2,722,127   

Philip Gallagher

                     23,858         867,308   

MaryAnn Miller

                     11,870         428,790   

David Birk

                     20,789         750,000   

The value realized on vesting of stock awards includes RSUs that vested on January 2, 2013, the 50,000 RSUs that vested on June 24, 2013, for Mr. Feldberg, and the vesting of PSUs on June 29, 2013, which covered the fiscal 2011-2013 performance period. The value realized with respect to the RSUs is as follows: Mr. Hamada — 20,711 shares and $653,848; Mr. Sadowski — 10,414 shares and $328,770; Mr. Feldberg — 60,828 shares and $1,975,840; Mr. Gallagher — 7,943 shares and $250,761; Ms. Miller — 4,331 shares and $136,729; and Mr. Birk — 7,722 shares and $243,784. The value realized with respect to the PSUs is as follows: Mr. Hamada — 33,507 shares and $1,298,061; Mr. Sadowski — 18,094 shares and $700,962; Mr. Feldberg — 19,264 shares and $746,287; Mr. Gallagher — 15,915 shares and $616,547; Ms. Miller — 7,539 shares and $292,061; and Mr. Birk — 13,067 shares and $506,216.

Pension Benefits

Further to the discussion of the retirement benefits discussed in the CD&A, Avnet provides a retirement benefit under a tax-qualified retirement plan and a retirement benefit under nonqualified retirement plans. The Pension Plan is a type of tax-qualified defined benefit plan commonly referred to as a cash balance

 

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plan. A participant’s benefit under the Pension Plan is based on the value of the participant’s cash balance account, which is used for record keeping purposes and does not represent any assets of the Pension Plan segregated on behalf of a participant. In general, the Pension Plan defines annual earnings as a participant’s base salary, commissions, royalties, annual cash incentive compensation and amounts deferred pursuant to plans described in Sections 125 or 401(k) (i.e., the Avnet 401(k) Plan) of the Code. Currently, the maximum amount of earnings on which benefits can be accrued is $255,000, which is the 2013 annual maximum established by the IRS. The Pension Plan offers participants distributions in the form of various monthly annuity payments and, in most cases, a lump sum distribution option is also available to participants who have terminated employment with Avnet.

The nonqualified retirement plans consist of the Restoration Plan and the SERP. The Restoration Plan is an excess benefit plan that provides retirement income to eligible employees whose Pension Plan benefit is limited by Code limits on compensation. The Restoration Plan uses the same eligibility, vesting, formula and distribution criteria (except in cases where Code section 409A applies) found in the Pension Plan, but without considering the Code imposed limits on the Pension Plan. The excess benefit over the Code imposed limits in the Pension Plan is paid from the Restoration Plan.

The SERP provides for: (1) payment of a death benefit to the designated beneficiary of each participating officer who dies while he or she is an employee of the Company in an amount equal to twice the yearly earnings (including salary and cash incentive compensation) of such officer; (2) a supplemental retirement benefit payable at age 65 (if the officer has satisfied certain age and service requirements) payable monthly for two years and in a lump sum thereafter to such officer or his or her beneficiary with the total benefit equaling the present value of ten years of payments in an amount not to exceed 36% of the officer’s eligible compensation, which is defined as the average of the highest two of the last five year’s cash compensation prior to termination; or (3) a supplemental early retirement benefit equal to the benefit described in (2) above, except that such amount is reduced for each month prior to age 65 that the participant begins to receive the benefit.

As discussed in the CD&A, the SERP was closed to new participants effective December 31, 2011, and the Restoration Plan was adopted effective January 1, 2012. Pursuant to the terms of both plans, any benefit payable under the Restoration Plan will reduce the benefit payable under the SERP. Thus, the maximum benefit payable to vested participants in both nonqualified plans will equal the benefit payable under the SERP.

 

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The table below shows the number of years of service credited to each such NEO, the actuarial present value of accumulated benefits payable to each of the NEOs as of the end of the fiscal year and the payments made during the last fiscal year under the Pension Plan and the nonqualified retirement plans. The present value of the accumulated benefit was determined using interest rate assumptions consistent with those used in the Company’s financial statements.

Pension Benefits

 

Name

 

Plan Name

  Number of
Years
Credited
Service
(#)
    Present
Value of
Accumulated
Benefit
($)
    Payments During
Last Fiscal Year

($)
 
(a)   (b)   (c)     (d)     (e)  

Richard Hamada

  Avnet Pension Plan     28.5        259,650          
  Nonqualified Retirement Plans     29.6        3,892,529          

Kevin Moriarty

  Avnet Pension Plan     0.0                 
  Restoration Plan (1)     0.0                 

Raymond Sadowski

  Avnet Pension Plan     33.5        358,560          
  Nonqualified Retirement Plans     34.9        2,702,905      $ 55,771 (2)  

Harley Feldberg

  Avnet Pension Plan     30.0        374,994          
  Nonqualified Retirement Plans     31.7        3,528,027          

Philip Gallagher

  Avnet Pension Plan     29.5        220,016          
  Nonqualified Retirement Plans     30.6        1,926,555          

MaryAnn Miller

  Avnet Pension Plan     5.5        108,047          
  Nonqualified Retirement Plans (3)     3.7        1,093,214          

David Birk

  Avnet Pension Plan     31.5        583,007          
  Nonqualified Retirement Plans     32.5        3,075,618      $ 57,039 (2)  

 

 

 

(1) Mr. Moriarty is not a participant in the SERP. He will become a participant in the Pension and Restoration Plans effective July 1, 2014.

 

(2) As both Messrs. Birk and Sadowski will be retiring effective December 31, 2013, and their SERP benefits were ascertainable at the time they provided their one-year notice of retirement, FICA tax on the present value of the nonqualified retirement benefits was due at the time of such notification. A portion of the first benefit payment was advanced in order to facilitate the required tax withholding and the associated taxability of such advance.

 

(3) As of the end of fiscal 2013, Ms. Miller’s benefit under the SERP has not yet vested.

Nonqualified Deferred Compensation

Avnet offers the Avnet Deferred Compensation Plan (“DCP”) for highly compensated employees defined as those earning $255,000 or more in target income, including all of the NEOs. The DCP allows these employees to set aside a portion of their income for retirement on a pre-tax basis, in addition to the amounts allowed under the Avnet 401(k) Plan. A DCP participant may defer up to 50% of his or her salary and up to 100% of his or her incentive and bonus compensation earned during the plan year (regardless of when paid). Participants may choose from a selection of mutual funds and other investment vehicles in which the deferred amount is then deemed to be invested. Earnings on the amounts deferred are determined by the returns actually obtained through the “deemed investment” options and added to the account. As such, there are no “above-market” earnings. The deferred compensation and the amount earned are held under the Avnet Deferred Compensation

 

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Rabbi Trust, but are subject to the claims of general creditors of the Company. Also, the obligation to distribute the amounts according to the participants’ designation is a general obligation of the Company. Of the NEOs, Messrs. Feldberg and Gallagher were participants in the DCP and deferred a portion of their cash compensation in fiscal 2013.

 

Name

   Executive
Contributions in
Last FY
($)
     Registrant
Contributions in
Last FY
($)
     Aggregate
Earnings/
(Loss) in
Last FY
($)
     Aggregate
Withdrawals/
Distributions
($)
     Aggregate
Balance
at Last
FYE
($)
 
(a)    (b)      (c)      (d)      (e)      (f)  

Richard Hamada

                                       

Kevin Moriarty

                                       

Raymond Sadowski

                                       

Harley Feldberg

     182,408                 335,236                 2,566,940   

Philip Gallagher

     57,913                 92,880                 623,999   

MaryAnn Miller

                                       

David Birk

                                       

Potential Payouts Upon Termination

Employment Agreements and Change of Control Agreements

Employment Agreements

Each of the NEOs, with the exception of Ms. Miller, has entered into an employment agreement with Avnet. These employment agreements are generally terminable by either the NEO or the Company upon one-year advance written notice to the other. Mr. Moriarty’s agreement is terminable by either party upon 90-days advance written notice. The employment agreements contain provisions dealing with termination for cause, and termination upon a death or disability. For purposes of these agreements, “cause” includes gross misconduct, breach of any material term of the agreement, willful breach, habitual neglect or wanton disregard of the executive’s duties, or conviction of any criminal act. Pursuant to Mr. Hamada’s employment agreement, if Mr. Hamada should become disabled, the Company will pay an annual disability benefit of $300,000 until the earlier of his 65th birthday, the disability ceases or death. Additionally, Messrs. Hamada’s and Moriarty’s agreements include provisions dealing with termination upon a change in office and duties. The amount of compensation (including base salary and incentive compensation) to be paid to each NEO is not fixed and is to be agreed upon by the NEO and the Company from time to time. The employment agreements contain restrictive covenants relating to non-competition, confidential information and non-solicitation of employees.

Change of Control Agreements

Each of the NEOs has entered into change of control agreements with the Company. With respect to Mr. Hamada and Mr. Moriarty, in the event of actual or constructive termination within 24 months of a change of control, the Company must pay to such executive all accrued base salary and pro-rata incentive payments, plus 2.99 times the sum of (i) the executive’s then current annual base salary, and (ii) the executive’s target incentive compensation for the year in which such termination occurred. Further, unvested stock options shall accelerate and vest in accordance with the early vesting provisions under the applicable stock compensation plans, and all equity incentive awards granted, but not yet delivered, will be accelerated and delivered. Pursuant to their change of control agreements, Mr. Hamada and Mr. Moriarty are not entitled to a tax gross-up for excise taxes related to payments made upon a change of control.

With respect to Messrs. Sadowski, Feldberg, Gallagher and Birk and Ms. Miller, the amount payable under these agreements are substantially the same as noted above, except that the incentive

 

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component of the payment (in clause (ii), above) is 2.99 times the average of executive’s incentive payments for the highest two of the previous five fiscal years and each, other than Ms. Miller, is entitled to a tax gross-up for excise taxes related to payments made upon a change of control if such excise tax applies.

Pursuant to these agreements, a constructive termination includes a material diminution in the executive’s responsibilities, a material change in the geographic location at which the executive is primarily required to perform services for the Company, a material reduction in the executive’s base compensation or any other action or inaction that constitutes a material breach by the Company under its employment agreement with the executive. A change of control is defined as including the acquisition of voting or dispositive power with respect to 50% or more of the outstanding shares of Avnet Common Stock, a change in the individuals serving on the Board of Directors so that those serving on the effective date of the applicable agreement and those persons appointed by such individuals to the Board no longer constitute a majority of the Board, or the approval by shareholders of a liquidation, dissolution or sale of substantially all of the assets of the Company.

Potential Payouts upon Termination Table

The following table sets forth the estimated payments and value of benefits that each of the NEOs would be entitled to receive under their employment and change of control agreements, as applicable, in the event of the termination of their employment under various scenarios. The table assumes that the termination occurred on June 29, 2013, which is the Company’s fiscal year end.

As used in this section:

 

   

“Death” refers to the death of executive;

 

   

“Disability” refers to the executive becoming permanently and totally disabled during the term of the executive’s employment as certified by competent medical personnel;

 

   

“Company Termination Without Cause” means that the executive is fired without cause (as defined in the employment agreement);

 

   

“Change of Control Termination” means the occurrence of both a change of control and the constructive termination of the executive within 24 months of the change; and

 

   

“Retirement” for the purpose of determining benefit under the stock plans, means all of the following: (a) age 55, (b) five years of service, (c) age plus years of service is equal to at least 65, and (d) the executive must have signed a non-compete agreement.

 

       Death
$
     Disability
$
     Company
Termination
w/o Cause
$
     Change
of Control
$
     Retirement
$
 

Richard Hamada:

              

Severance

                             6,727,500           

Settlement of previously vested stock options

     1,140,173         1,140,173         1,140,173         1,140,173         1,140,173   

Settlement of unvested stock options

             680,551         680,551         680,551         680,551   

Settlement of RSUs

     1,547,011         1,547,011         1,547,011         1,547,011         1,547,011   

Settlement of PSUs

     2,706,547         4,429,387         4,429,387         4,429,387         4,429,387   

Accrued vacation pay out

     44,688         44,688         44,688         44,688         44,688   

Welfare benefits

             2,335,754                 75,214           

Life insurance benefit

     500,000                                   

Avnet pension

     136,203         272,406         272,406         272,406         272,406   

Nonqualified retirement plans

     2,695,758         3,527,543         3,527,543         3,527,543         3,527,543   

Excise taxes and gross up

                                       

Kevin Moriarty

              

Severance

                     828,022         3,289,000           

Settlement of previously vested stock options

                                       

 

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Table of Contents
       Death
$
     Disability
$
     Company
Termination
w/o Cause
$
     Change
of Control
$
     Retirement
$
 

Settlement of unvested stock options

                             116,280           

Settlement of RSUs

     840,000                         840,000           

Settlement of PSUs

     47,600         47,600                 285,600           

Accrued vacation pay out

     9,635         9,635         9,635         9,635         9,635   

Welfare benefits

                             39,564           

Life insurance benefit

     500,000                                   

Avnet pension

                                       

Restoration Plan

                                       

Excise taxes and gross up

                                       

Raymond Sadowski

              

Severance

                             3,672,177           

Settlement of previously vested stock options

     2,156,219         2,156,219         2,156,219         2,156,219         2,156,219   

Settlement of unvested stock options

             342,222         342,222         342,222         342,222   

Settlement of RSU

     718,670         718,670         718,670         718,670         718,670   

Settlement of PSUs

     1,322,462         2,068,214         2,068,214         2,068,214         2,068,214   

Accrued vacation pay out

     41,386         41,386         41,386         41,386         41,386   

Welfare benefits

                             53,923         74,421   

Life insurance benefit

     500,000                                   

Avnet pension

     184,514         369,028         369,028         369,028         369,028   

Nonqualified retirement plans

     1,467,446         2,789,687         2,789,687         2,789,687         2,789,687   

Excise taxes and gross up

                                       

Harley Feldberg

              

Severance

                             4,741,624           

Settlement of previously vested stock options

     1,272,567         1,272,567         1,272,567         1,272,567         1,272,567   

Settlement of unvested stock options

             347,963         347,963         347,963         347,963   

Settlement of RSUs

     685,508         685,508         685,508         685,508         685,508   

Settlement of PSUs

     1,299,950         1,963,046         1,963,046         1,963,046         1,963,046   

Accrued vacation pay out

     45,615         45,615         45,615         45,615         45,615   

Welfare benefits

                             55,455           

Life insurance benefit

     500,000                                   

Avnet pension

     192,048         384,095         384,095         384,095         384,095   

Nonqualified retirement plans

     1,777,258         3,546,886         3,546,886         3,546,886         3,546,886   

Excise taxes and gross up

                                       

Philip Gallagher

              

Severance

                             3,552,824           

Settlement of previously vested stock options

     467,564         467,564         467,564         467,564         467,564   

Settlement of unvested stock options

                             281,225           

Settlement of RSUs

     552,821                         552,821           

Settlement of PSUs

     1,055,208         1,055,208                 1,587,432           

Accrued vacation pay out

     40,385         40,385         40,385         40,385         40,385   

Welfare benefits

                             63,614           

Life insurance benefit

     500,000                                   

Avnet pension

     116,526         233,051         233,051         233,051         233,051   

Nonqualified retirement plans

     1,518,170         1,292,410         1,292,410         1,292,410         1,292,410   

Excise taxes and gross up

                                       

MaryAnn Miller

              

Severance

                             2,463,126           

Settlement of previously vested stock options

     201,614         201,614         201,614         201,614         201,614   

Settlement of unvested stock options

                             153,092           

Settlement of RSUs

     347,558                         347,558           

Settlement of PSUs

     617,478         617,478                 1,006,790           

Accrued vacation pay out

     32,692         32,692         32,692         32,692         32,692   

 

46


Table of Contents
       Death
$
     Disability
$
     Company
Termination
w/o Cause
$
     Change
of Control
$
     Retirement
$
 

Welfare benefits

                             66,194           

Life insurance benefit

     500,000                                   

Avnet pension

     56,407         112,813         112,813         112,813         112,813   

SERP

     1,141,122                                   

Restoration Plan

     34,266         34,266         34,266         34,266         34,266   

Excise taxes and gross up

                                       

David Birk

              

Severance

                             3,202,402           

Settlement of previously vested stock options

     779,366         779,366         779,366         779,366         779,366   

Settlement of unvested stock options

             243,635         243,635         243,635         243,635   

Settlement of RSUs

     496,339         496,339         496,339         496,339         496,339   

Settlement of PSUs

     911,467         1,406,731         1,406,731         1,406,731         1,406,731   

Accrued vacation pay out

     38,477         38,477         38,477         38,477         38,477   

Welfare benefits

                             61,218         1,082   

Life insurance benefit

     500,000                                   

Avnet pension

     291,504         583,007         583,007         583,007         583,007   

Nonqualified retirement plans

     1,542,956         3,075,618         3,075,618         3,075,618         3,075,618   

Excise taxes and gross up

                                     </