<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
ARROW ELECTRONICS, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
ARROW ELECTRONICS, INC.
25 HUB DRIVE
MELVILLE, NEW YORK 11747
[LOGO]
STEPHEN P. KAUFMAN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
March 31, 1995
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Arrow Electronics, Inc., which will be held on Tuesday, May 9, 1995 at 11:00
A.M., at Arrow's executive offices, 25 Hub Drive, Melville, New York. The formal
Notice of Annual Meeting and Proxy Statement, fully describing the matters to be
acted upon at the meeting, appear on the following pages.
The matters scheduled to be considered at the meeting are the election of
directors and the ratification of the appointment of Arrow's auditors.
The Board of Directors recommends the approval of the proposals being
presented at the Annual Meeting of Shareholders as being in the best interest of
Arrow. We urge you to read the Proxy Statement and give these proposals your
careful attention before completing the enclosed proxy card.
Your vote is important regardless of the number of shares you own. Please
be sure you are represented at the meeting, whether or not you plan to attend,
by signing, dating and mailing the proxy card promptly. A postage-paid return
envelope is enclosed for your convenience.
Sincerely yours,
/s/ Stephen P. Kaufman
Stephen P. Kaufman
Chairman and Chief Executive Officer
<PAGE> 3
ARROW ELECTRONICS, INC.
25 HUB DRIVE
MELVILLE, NEW YORK 11747
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 9, 1995
------------------------
March 31, 1995
To the Shareholders of
Arrow Electronics, Inc.:
The Annual Meeting of Shareholders of Arrow Electronics, Inc., a New York
corporation ("Arrow"), will be held at Arrow's executive offices, 25 Hub Drive,
Melville, New York, on May 9, 1995 at 11:00 A.M., prevailing local time, for the
following purposes:
1. To elect directors of Arrow for the ensuing year.
2. To consider and act upon a proposal to ratify the appointment of Ernst &
Young LLP as Arrow's independent auditors for the fiscal year ending
December 31, 1995.
3. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Only shareholders of record at the close of business on March 24, 1995 are
entitled to notice of and to vote at the meeting or any adjournments thereof.
By Order of the Board of Directors,
Robert E. Klatell
Secretary
IMPORTANT
Please complete, sign and date the enclosed proxy and return it promptly in
the enclosed return envelope which has been provided for your convenience,
whether or not you plan to attend the meeting. The prompt return of proxies will
assure a quorum and reduce solicitation expense.
<PAGE> 4
ARROW ELECTRONICS, INC.
25 HUB DRIVE
MELVILLE, NEW YORK 11747
------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 9, 1995
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement, mailed to shareholders on March 31, 1995, is
furnished in connection with the solicitation by the Board of Directors of Arrow
Electronics, Inc., a New York corporation ("Arrow"), of proxies to be voted at
the Annual Meeting of Shareholders to be held in Melville, New York on May 9,
1995, and any adjournments thereof, for the purposes set forth in the
accompanying notice. Each proxy will be voted with respect to all shares
represented by it in accordance with the directions specified thereon and
otherwise in accordance with the judgment of the persons designated as proxies.
Any proxy on which no directions are specified will be voted for the election of
directors and in favor of the actions described by the proxy. Any proxy may be
revoked at any time prior to exercise by written notice to the Secretary of
Arrow by the person giving the proxy.
The cost of soliciting proxies will be borne by Arrow. Solicitation of
proxies is being made by Arrow through the mail, in person and by telephone. In
addition to regular employees of Arrow who may engage in such solicitation,
Arrow has retained D.F. King & Co., Inc. to assist in soliciting proxies at an
anticipated cost not in excess of $11,000 plus expenses. Arrow will also request
brokers and other nominees to forward soliciting materials to the beneficial
owners of the stock held of record by such persons and will reimburse such
persons for their expenses in forwarding such materials.
Only shareholders of record of Arrow's common stock at the close of
business on March 24, 1995 are entitled to notice of and to vote at the meeting
or any adjournments thereof. On March 24, 1995, Arrow had outstanding 46,442,926
shares of common stock.
<PAGE> 5
The following table sets forth certain information with respect to the only
shareholders known to management to own beneficially more than 5% of the
outstanding common stock of Arrow as of March 24, 1995.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS(1)
----------------------------------------------------------- ------------------ ----------
<S> <C> <C>
Oppenheimer Group, Inc. 5,820,173(2) 12.5%
Oppenheimer Tower
World Financial Center
New York, New York 10281
FMR Corp. 3,948,727(3) 8.5%
82 Devonshire Street
Boston, Massachusetts 02109
Neuberger & Berman 2,431,592(4) 5.2%
605 Third Avenue
New York, New York 10158
</TABLE>
---------------
(1) Percentage of beneficial ownership is calculated upon shares of common stock
outstanding as of March 24, 1995.
(2) Based upon a Schedule 13G dated February 1, 1995 filed with the Securities
and Exchange Commission and includes 5,113,191 shares beneficially owned by
Oppenheimer Capital, a registered investment advisor.
(3) Based upon a Schedule 13G dated February 13, 1995 filed with the Securities
and Exchange Commission and includes 3,939,090 shares beneficially owned by
Fidelity Management & Research Company, a wholly-owned subsidiary of FMR
Corp. and a registered investment advisor to several investment companies,
of which 3,579,000 shares are owned by Fidelity Magellan Fund, a registered
investment company. According to such Schedule 13G, Edward C. Johnson 3d,
Chairman of FMR Corp., and his wife each own 24.9% of the outstanding voting
common stock of FMR Corp. and together with other family members form a
controlling group with respect to FMR Corp.
(4) Based upon a Schedule 13G dated February 10, 1995 filed with the Securities
and Exchange Commission and reflects shared power to make decisions whether
to retain or dispose of such shares of many unrelated clients.
At March 24, 1995, all executive officers and directors of Arrow as a group
were the beneficial owners of 2,563,743 shares (5.5%), including 911,096 shares
held by the Arrow Electronics Stock Ownership Plan, of which Mr. Stephen P.
Kaufman, Mr. Robert E. Klatell, and Mr. John C. Waddell are the trustees,
including shares allocated to the accounts of Messrs. Kaufman, Klatell, and
Waddell (pursuant to certain regulations promulgated by the Securities and
Exchange Commission, Messrs. Kaufman, Klatell, and Waddell may be deemed to have
beneficial ownership of these shares by virtue of their shared power as trustees
to vote such shares); options to purchase 1,172,314 shares granted under Arrow's
Stock Option Plan or under stock option plans of companies acquired by Arrow and
assumed by Arrow as part of the acquisition (of which 492,868 options are
currently exercisable), including options to purchase 710,625 shares, 104,000
shares, 18,000 shares, 10,000 shares, 72,000 shares, and 127,740 shares granted
to Mr. Kaufman, Mr. Klatell, Mr. Waddell, Mr. Carlo Giersch, Mr. Steven W.
Menefee, and Mr. Robert S. Throop, respectively (of which 185,626 options,
89,000 options, 15,000 options, 6,667 options, 57,000
2
<PAGE> 6
options, and 74,654 options, respectively, are currently exercisable); and
158,668 shares awarded under Arrow's Restricted Stock Plan (of which 76,818
shares have vested and are not forfeitable), including 51,375 shares, 30,875
shares, 5,918 shares, 35,750 shares, and 10,000 shares awarded to Messrs.
Kaufman, Klatell, Waddell, Menefee, and Throop, respectively (of which 38,250
shares, 20,000 shares, 68 shares, 15,500 shares, and no shares, respectively,
have vested and are not forfeitable).
ELECTION OF DIRECTORS
The entire Board of Directors of Arrow is to be elected, and those persons
elected will hold office until the next Annual Meeting of Shareholders and until
their respective successors shall have been duly elected and qualified. Persons
receiving a plurality of the votes cast at the Annual Meeting will be elected
directors. Consequently, any shares not voted (whether by abstention or broker
non-votes) have no effect on the election of directors. Proxies in the enclosed
form will be voted for the election as directors of the twelve nominees named
below. Management does not contemplate that any of the nominees will be unable
to serve as a director, but if that contingency should occur prior to the voting
of the proxies, the persons named in the accompanying proxy reserve the right to
substitute another person of their choice when voting at the meeting or any
adjournment thereof. All nominees are currently directors of Arrow and were
elected at Arrow's last annual meeting except for Karen Gordon Mills, Anne Pol,
and Robert S. Throop who were appointed directors during 1994 and Roger King who
will be nominated and become a director upon his election at this annual
meeting.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK PERCENTAGE
OWNED OF
BENEFICIALLY OUTSTANDING
POSITION WITH ARROW AND DIRECTOR AS OF COMMON
NAME AGE BUSINESS EXPERIENCE SINCE MARCH 24, 1995 STOCK
----- --- ----------------------------- -------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Daniel W. Duval 58 President and Chief Executive 1987 2,000 -- %
Officer of Robbins & Myers,
Inc., a manufacturer of
fluids management systems,
for more than five years;
director of Robbins & Myers,
Inc. and National City Bank
of Dayton.
Carlo Giersch 57 President and Chief Executive 1990 110,000(1) .2%
Officer of Spoerle
Electronic, Arrow's 70% owned
German affiliate, for more
than five years.
Stephen P. Kaufman 53 Chairman of the Board of Ar- 1983 1,673,096(2)(3) 3.6%
row since May 1994 and Presi-
dent and Chief Executive
Officer of Arrow for more
than five years.
Lawrence R. Kem 59 General partner of Rudolph 1987 1,000 -- %
Stone Associates, an invest-
ment management firm, for
more than five years;
director of Northland
Cranberries, Inc.
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK PERCENTAGE
OWNED OF
BENEFICIALLY OUTSTANDING
POSITION WITH ARROW AND DIRECTOR AS OF COMMON
NAME AGE BUSINESS EXPERIENCE SINCE MARCH 24, 1995 STOCK
---------------------- --- ----------------------------- -------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Roger King 54 Chairman and Chief Executive -- -- -- %
Officer of ODS System-Pro
Holdings Limited, a reseller
of computers and related
products and services, for
more than five years.
Robert E. Klatell 49 Senior Vice President, 1989 1,056,836(2) 2.3%
General Counsel, and
Secretary of Arrow for more
than five years, Chief
Financial Officer since
January 1992, and Treasurer
since October 1990.
Steven W. Menefee 50 Vice President of Arrow and 1993 107,750(4) .2%
President of the Arrow/
Schweber Electronics Group
since November 1990; prior
thereto Vice President of
Avnet, Inc., a distributor of
electronic components and
computer products for more
than five years.
Karen Gordon Mills 41 President of MMP Group Inc., 1994 300 -- %
a consulting firm, since
January 1993; prior thereto
Managing Director of E.S.
Jacobs & Company, an equity
investment business, for more
than five years; director of
The Scotts Company, Telex
Communications Inc., Triangle
Pacific Co. and Armor All
Products.
Anne Pol 47 President of the Shipping & 1994 -- -- %
Weighing Division of Pitney
Bowes, Inc., a manufacturer
of mailing and shipping
systems, since July 1993;
prior thereto various
executive positions with
Pitney Bowes Inc. for more
than five years; director of
UGI Inc.
Richard S. Rosenbloom 62 David Sarnoff Professor of 1992 2,000 -- %
Business Administration at
Harvard Business School for
more than five years;
director of Lex Service PLC
and Executone Information
Systems, Inc.
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK PERCENTAGE
OWNED OF
BENEFICIALLY OUTSTANDING
POSITION WITH ARROW AND DIRECTOR AS OF COMMON
NAME AGE BUSINESS EXPERIENCE SINCE MARCH 24, 1995 STOCK
---------------------- --- ----------------------------- -------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Robert S. Throop 57 Chairman and Chief Executive 1994 321,052(5) .7%
Officer of Anthem
Electronics, Inc., an
electronics distributor
acquired by Arrow in November
1994, for more than five
years and Vice President of
Arrow since March 1995;
director of The Manitowoc
Company, Inc. and The Coast
Distribution System.
John C. Waddell 57 Vice Chairman of the Board of 1969 935,014(2) 2.0%
Arrow since May 1994 and
Chairman of the Board of Ar-
row for more than five years
prior thereto.
</TABLE>
---------------
(1) Includes shares owned individually and options to purchase shares granted
under Arrow's Stock Option Plan. See page 2.
(2) Includes shares owned individually, options to purchase shares granted under
Arrow's Stock Option Plan, shares awarded under Arrow's Restricted Stock
Plan, and shares held by Arrow's Stock Ownership Plan. See page 2.
(3) Does not include 11,875 shares held by a charitable trust of which Mr.
Kaufman and members of his immediate family are the trustees.
(4) Includes options to purchase shares granted under Arrow's Stock Option Plan
and shares awarded under Arrow's Restricted Stock Plan. See page 2.
(5) Includes shares owned individually, options to purchase shares granted under
Arrow's Stock Option Plan, options to purchase shares granted under Anthem's
stock option plans prior to the acquisition, and shares awarded under
Arrow's Restricted Stock Plan.
The audit committee of the Board of Directors consists of Mr. Kem, Ms. Pol,
and Mr. J. Spencer Gould, a current director not standing for reelection. The
audit committee evaluates and reviews such matters as Arrow's accounting
policies, reporting practices, internal audit function, and internal accounting
controls. The committee also reviews the scope and results of the audit
conducted by Arrow's independent auditors.
The compensation committee of the Board of Directors consists of Mr. Duval,
Mr. Kem, and Mr. Rosenbloom. The compensation committee approves the salaries
and incentive compensation of senior managers, advises the Board generally with
regard to other compensation and employee benefit matters, and approves stock
option and restricted stock awards.
The nominating committee of the Board of Directors consists of Mr.
Rosenbloom, Mr. Duval, and Ms. Mills. Shareholder recommendations for nominees
for membership on the Board of Directors will be considered by the nominating
committee. Such recommendations may be submitted to the Secretary of Arrow, who
will forward them to the chairman of the nominating committee.
5
<PAGE> 9
The charitable contributions committee of the Board of Directors consists
of Mr. Waddell, Mr. Klatell, and Mr. Throop. The charitable contributions
committee reviews community and civic programs and services of educational,
cultural, and other social organizations, and approves the charitable
contributions to be made by the company.
During 1994 there were 10 meetings of the Board of Directors, 4 meetings of
the audit committee, 4 meetings of the compensation committee, 4 meetings of the
nominating committee, and 2 meetings of the charitable contributions committee.
All directors attended 75% or more of the meetings of the Board of Directors and
the committees on which they served.
EXECUTIVE COMPENSATION AND OTHER MATTERS
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning the
compensation for the past three years of the Chief Executive Officer and each of
the other four most highly compensated executive officers of the company (the
"named executive officers").
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS
ANNUAL COMPENSATION -----------------------
-------------------------------------------- RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION(2) AWARD(S)(3) OPTIONS COMPENSATION(4)
--------------------- ---- --------- -------- --------------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stephen P. Kaufman, 1994 $ 574,000 $743,000 $62,650 $ 170,000 25,000 $ 9,120
President and Chief 1993 504,000 570,000 65,644 190,000 25,000 11,572
Executive Officer 1992 474,000 450,000 34,753 141,250 83,000 11,230
Carlo Giersch, 1994 618,582 -- -- -- -- --
President and Chief 1993 604,230 -- -- -- 10,000 --
Executive Officer of
Spoerle Electronic(5)
Robert S. Throop, 1994 595,391 231,498 -- 340,000 20,000 16,145
Chairman and Chief
Executive Officer of
Anthem Electronics,
Inc.(6)
Steven W. Menefee, 1994 330,200 230,000 75,063 136,000 15,000 9,120
Vice President and 1993 304,783 241,000 66,856 152,000 15,000 7,075
President of the 1992 285,200 214,000 21,188 425,500 42,000 6,866
Arrow/Schweber
Electronics Group
Robert E. Klatell, 1994 339,400 227,000 53,319 136,000 15,000 9,120
Senior Vice President 1993 308,983 220,000 66,572 152,000 15,000 11,572
and Chief Financial 1992 289,400 180,000 35,431 113,000 62,000 11,230
Officer
</TABLE>
---------------
(1) Includes amounts deferred under retirement plans.
(2) Represents reimbursement of a portion of the tax liability incurred as a
result of the vesting of restricted stock awards.
6
<PAGE> 10
(3) Reflects the fair market value as of the date of grant of the stock awards
granted in 1994. All of such awards vest in four annual installments of 25%,
beginning one year after grant, and all awarded shares have dividend and
voting rights equivalent to all shares of common stock. As of December 31,
1994, the aggregate number and value of unvested restricted stock awards
held by Messrs. Kaufman, Menefee, Klatell, and Throop were 13,125
($470,859), 20,250 ($726,469), 10,875 ($390,141), and 10,000 ($358,750),
respectively.
(4) For 1994, includes a contribution by Arrow of $4,500 to Arrow's Stock
Ownership Plan and a matching contribution by Arrow of $4,620 to Arrow's
Savings Plan for each of Messrs. Kaufman, Menefee, and Klatell, and a
matching contribution by Anthem Electronics, Inc. ("Anthem") of $4,620 to
Anthem's 401(k) Plan on behalf of Mr. Throop.
(5) Spoerle Electronic became a majority owned affiliate of Arrow in January
1993.
(6) Anthem became a wholly-owned subsidiary of Arrow in November 1994. Reflects
compensation received during 1994 pursuant to employment and incentive
arrangements established by Anthem prior to the acquisition. Does not
include options to purchase 107,740 shares of Arrow common stock issued in
exchange for options to purchase Anthem common stock granted by Anthem
pursuant to Anthem's stock option plans prior to the acquisition.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants during 1994 to
the named executive officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------
% OF
TOTAL
NUMBER OF OPTIONS POTENTIAL REALIZABLE VALUE
SECURITIES GRANTED AT ASSIGNED RATES OF
UNDERLYING TO STOCK PRICE APPRECIATION
OPTIONS EMPLOYEES EXERCISE OR FOR OPTION TERM(3)
GRANTED IN FISCAL BASE PRICE EXPIRATION -------------------------------
NAME (#)(1) YEAR ($/SH)(2) DATE 5% 10%
------------------------ --------- --------- ----------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Stephen P. Kaufman 25,000 3.6% 34.00 12/15/04 $ 534,560 $ 1,354,681
Carlo Giersch -- -- -- -- -- --
Robert S. Throop(4) 20,000 2.9 34.00 12/15/04 427,648 1,083,745
Steven W. Menefee 15,000 2.2 34.00 12/15/04 320,736 812,809
Robert E. Klatell 15,000 2.2 34.00 12/15/04 320,736 812,809
All shareholders N/A N/A N/A N/A 1,041,741,845 2,638,971,644
various
All optionees(5) 684,000 100 34.94 in 2004 15,027,480 38,091,960
All optionees value
as a percent of all
shareholders value N/A N/A N/A N/A 1.4% 1.4%
</TABLE>
---------------
(1) All of such grants become exercisable in three annual installments,
commencing on the date of grant (except for the grants to Mr. Throop and
certain grants included in "All optionees", which become exercisable in
three annual installments, commencing on the first anniversary of the date
of grant) and expire 10 years after the date of grant.
(2) All at fair market value at date of grant.
(3) Represents gain that would be realized assuming the options were held for
the entire ten-year option period and the stock price increased at annual
compounded rates of 5% and 10%.
7
<PAGE> 11
Potential realizable values for shareholders are based on 46,156,041 shares
outstanding at December 30, 1994 from a base price of $35.875 per share.
These amounts represent assumed rates of appreciation only. Actual gains, if
any, on stock option exercises and common stock holdings will be dependent
on overall market conditions and on the future performance of the company
and its common stock. There can be no assurance that the amounts reflected
in this table will be achieved.
(4) Does not include options to purchase 107,740 shares of Arrow common stock
issued to Mr. Throop as part of Arrow's acquisition of Anthem in exchange
for options to purchase Anthem common stock granted to Mr. Throop by Anthem
prior to the acquisition.
(5) Information based on all option grants made to employees by Arrow in 1994.
Does not include (a) options to purchase 597,797 shares of Arrow common
stock issued in exchange for options to purchase Anthem common stock granted
by Anthem prior to its acquisition and (b) options to purchase 138,271
shares of Arrow common stock issued in exchange for options to purchase
common stock of Gates/FA Distributing, Inc. ("Gates") granted by Gates prior
to its acquisition by Arrow. Exercise price shown is the weighted average of
all grants. Actual exercise prices ranged from $34 to $44 reflecting the
fair market value of the common stock on the date of the option grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
The following table provides information concerning the exercise of stock
options during 1994 by each of the named executive officers and the year-end
value of their unexercised options.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS AT IN-THE-MONEY
FISCAL OPTIONS AT
SHARES YEAR-END FISCAL YEAR-END
ACQUIRED ----------------- --------------------
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED(1) UNEXERCISABLE UNEXERCISABLE
------------------------- -------- ----------- ----------------- --------------------
<S> <C> <C> <C> <C>
Stephen P. Kaufman -- -- 185,626 /24,999 $3,495,548/$ 31,249
Carlo Giersch -- -- 6,667 / 3,333 48,336/ 24,164
Robert S. Throop(2) -- -- 71,832 /55,908 1,283,767/ 89,826
Steven W. Menefee 40,000 $ 1,306,250 57,000 /15,000 708,375/ 18,750
Robert E. Klatell -- -- 89,000 /15,000 1,401,375/ 18,750
</TABLE>
---------------
(1) Represents the difference between the fair market value of the shares at
date of exercise and the exercise price multiplied by the number of options
exercised.
(2) Does not include $36,899 value realized upon the acquisition of 1,750 shares
of Anthem common stock pursuant to stock options granted by Anthem and
exercised by Mr. Throop prior to Arrow's acquisition of Anthem. Includes
options to purchase 107,740 shares of Arrow common stock issued in exchange
for options to purchase Anthem common stock granted by Anthem pursuant to
Anthem's stock option plans prior to the acquisition.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
A primary role of the compensation committee (the "committee") is to
oversee compensation practices for Arrow's senior executive officers. The
committee's responsibilities include the review of salaries, benefits, and other
compensation of Arrow's senior managers and making recommen-
8
<PAGE> 12
dations to the full Board of Directors with respect to these matters. The
committee is comprised entirely of Board members who are independent,
nonemployee directors of the company.
The committee's primary objective in establishing compensation programs and
levels for Arrow's key executive officers is to support Arrow's goal of
maximizing the value of shareholders' interests in Arrow. To achieve this
objective, the committee believes it is necessary to:
-- Set levels of base compensation that will attract and retain superior
executives in a highly competitive environment.
-- Encourage long-term decision making that enhances shareholder value. The
committee believes that this objective is promoted by emphasizing grants
of stock options and restricted stock, thereby creating a direct link
between shareholder value creation and executive compensation.
-- Provide incentive compensation that varies directly with both company
performance and individual contribution to that performance.
COMPONENTS OF COMPENSATION
Base Salary
The committee annually reviews each executive officer's base salary. The
factors which influence committee determinations regarding base salary include:
comparable levels of pay among executives at the larger companies in the peer
group contained in the graph on page 12, internal pay equity considerations,
level of responsibilities, prior experience, breadth of knowledge, and job
performance. Such compensation is generally competitive with comparable jobs at
comparable companies. For comparative purposes the committee selects the larger
companies in its peer group because Arrow is the largest company in such peer
group. Levels of compensation for base salary of senior executive officers of
Arrow are slightly above the median of the peer group. Arrow is significantly
larger than all of the other companies except one that is included within the
peer group. Arrow also has substantial sales outside the United States, and only
one other company included within the peer group has operations outside North
America. Therefore, the committee believes that Arrow requires greater breadth
of management, skills and experience to successfully manage its larger and more
complex businesses.
In conducting its salary deliberations, the committee does not strictly tie
senior executive base pay to a defined competitive standard. Rather, the
committee elects to maintain flexibility in its decision making capacity so as
to permit salary recommendations that best reflect the individual contributions
made by the company's top executives. Each of the named executive officers has
an employment agreement which provides for a minimum base salary. See page 13.
Based upon the overall success of Arrow, the committee believes that it is
appropriate to compensate Mr. Kaufman at a level at least equal to that paid to
chief executive officers of comparable companies. The committee values highly
Mr. Kaufman's breadth of knowledge and recognizes his significant contribution
to the success of Arrow.
In 1992, Mr. Kaufman's base salary was increased to $474,000 in recognition
of his role in the strategic acquisition of the North American electronics
distribution businesses of Lex Service PLC, which increased Arrow's sales and
earnings. In 1993 and 1994, his base salary was increased to
9
<PAGE> 13
$504,000 and $574,000, respectively, in recognition of the continued growth in
Arrow's sales and earnings and the further expansion of Arrow into strategic
markets.
Annual Incentives
Arrow's Chief Executive Officer Performance Bonus Plan ("Chief Executive
Bonus Plan"), which was adopted in 1994, provides for a performance-based bonus
for Arrow's chief executive officer based upon target level earnings per share
and target level return on shareholders' equity. The purpose of the Chief
Executive Bonus Plan is to enable Arrow to specifically motivate the chief
executive officer to achieve strategic financial and operating objectives,
reward his contribution toward improvement in financial performance as measured
by the growth in earnings per share and/or growth in the return on equity of
Arrow, provide the chief executive officer with an additional incentive to
contribute to the success of Arrow and to offer a total compensation package
that is competitive in the industry and includes a bonus component which is
intended to qualify as performance-based compensation deductible to Arrow under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
The Chief Executive Bonus Plan sets forth a pre-established bonus formula and
sets an annual performance goal pursuant to which the committee can objectively
calculate the chief executive officer's potential annual cash bonus for each
service year with Arrow. For 1994 Mr. Kaufman received a bonus payment of
$693,000 under the Chief Executive Bonus Plan. The committee also awarded Mr.
Kaufman a $50,000 discretionary bonus payment to recognize his accomplishments
with regard to long-term strategic planning and management development which the
committee believes are not recognized in the bonus formula set forth in the
Chief Executive Bonus Plan.
Each year, for other executive officers of Arrow, the committee -- in
consultation with management -- establishes short-term financial goals which
relate to one or more indicators of corporate financial performance. For 1994,
the short-term incentive award opportunity was contingent upon Arrow attaining a
prespecified level of sales, profitability, and asset utilization.
Incentive targets are established for participating executives under the
Management Incentive Compensation Plan ("MICP") based on the participant's level
and breadth of responsibility, potential contribution to the success of the
company, and competitive considerations. The participant's actual award is
determined at the end of the year based on Arrow's actual performance against
the predetermined financial goals, as well as the attainment of specific
individual goals or contributions to Arrow's success.
Annual incentives of Messrs. Menefee and Klatell reflect Arrow's attainment
of predetermined financial goals and the level of achievement by Messrs. Menefee
and Klatell of the targets established under the MICP. The MICP awards earned by
participating executive officers averaged 66% of their respective salaries,
representing a range of 85% to 136% level of achievement of the goals. The MICP
awards earned by Messrs. Menefee and Klatell represented 64% and 54% of their
respective salaries.
Long-Term Incentives
Arrow reinforces the importance of producing satisfactory returns to
shareholders over the long-term through the operation of its Stock Option Plan
and its Restricted Stock Plan. Stock option and restricted stock awards provide
executives with the opportunity to acquire an equity interest in
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<PAGE> 14
Arrow and align the executive's interest with that of the shareholders to create
shareholder value as reflected in growth in the price of Arrow's shares.
Option exercise prices are equal to 100% of the fair market value of
Arrow's shares on the date of option grant and are exercisable in three
installments. This ensures that participants will derive benefits only as
shareholders realize corresponding gains over an extended time period. Options
have a maximum term of 10 years.
Restricted stock is granted to participants in order to help foster a
shareholder perspective among the participants. A long-term focus is
encouraged -- and executive retention is reinforced -- through the four-year
vesting schedule to which shares of restricted stock are subject.
Each year, the committee reviews the history of stock option and restricted
stock awards and makes grant decisions based on the committee's assessment of
each individual executive's contribution and performance during the year and on
competitive compensation practices in comparable companies. The grants to Mr.
Kaufman and each of the other named executive officers in 1994 are consistent
with grants in prior years relative to Arrow's performance and the individual's
contributions, and represent Arrow's continued emphasis on executive
compensation which is linked to increases in the value of Arrow's stock.
Generally, the size of the grants of such long-term incentives reflects the
committee's assessment of each individual's contributions and performance during
the year. Mr. Kaufman was granted 25,000 stock options in 1994 and 5,000 shares
of restricted stock in recognition of Arrow's continued growth in sales and
earnings and Arrow's further expansion into strategic markets.
SUMMARY
Each year, the Board and the committee review all elements of cash and
noncash compensation paid to the executive officers of Arrow. The committee
manages all elements of executive pay in order to ensure that pay levels are
consistent with Arrow's compensation philosophies. In addition, the Board and
the committee administer Arrow's long-term executive compensation programs to
ensure that Arrow's objectives of linking executive pay to improved Arrow
financial performance and increased shareholder value continue to be fostered.
Daniel W. Duval, Chairman
Lawrence R. Kem
Richard S. Rosenbloom
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<PAGE> 15
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG ARROW ELECTRONICS, INC., S&P 500 INDEX &
ELECTRONICS DISTRIBUTOR INDEX
The following graph compares the performance of Arrow for the periods
indicated with the performance of the Standard & Poor's 500 Stock Index and the
average performance of a group consisting of the company's peer corporations on
a line-of-business basis. The corporations making up the peer companies group
are Avnet, Inc., Jaco Electronics, Inc., Kent Electronics Corporation, Marshall
Industries, Milgray Electronics, Inc., Pioneer-Standard Electronics, Inc.,
Sterling Electronics Corporation, Western Micro Technology, Inc., and Wyle
Electronics. Total return indices reflect reinvested dividends and are weighted
on a market capitalization basis at the time of each reported data point.
<TABLE>
<CAPTION>
Electronics
Measurement Period S&P 500 Distributor
(Fiscal Year Covered) Arrow Index Index
<S> <C> <C> <C>
1989 100 100 100
1990 113 97 85
1991 406 127 90
1992 739 136 110
1993 1,077 150 126
1994 926 152 124
</TABLE>
Assumes $100 invested on December 31, 1989 in Arrow, S&P 500 Index and peer
companies group.
DIRECTORS' COMPENSATION
The members of the Board of Directors who are not employees receive an
annual fee of $30,000 for the term expiring in May 1995, a fee of $1,000 for
each Board of Directors meeting personally attended and each committee meeting
personally attended, and a fee of $500 for telephonic participation in each
Board of Directors meeting and each committee meeting. In addition, each
director serving as Chairman of any committee receives an additional annual fee
of $1,500.
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<PAGE> 16
EMPLOYMENT AGREEMENTS
Arrow has employment agreements with each of the named executive officers.
In March 1995 Mr. Kaufman entered into a new employment agreement with Arrow
terminating December 31, 2001, which provides for an annual base salary of not
less than $650,000 through June 30, 1998 during which period Mr. Kaufman will
serve as Chairman of the Board and Chief Executive Officer of Arrow and not less
than $400,000 thereafter. As part of entering into the new agreement, Mr.
Kaufman received options to purchase 500,000 shares of Arrow common stock which
become exercisable in three equal annual installments commencing on the first
anniversary of the date of grant, at an exercise price equal to market price on
date of grant plus 1% per quarter from the date of grant to the exercise date,
and expire 10 years after the date of grant.
Mr. Klatell has an employment agreement with Arrow terminating December 31,
1996, which provides for an annual base salary of not less than $235,000. Mr.
Menefee has an employment agreement with Arrow terminating December 31, 1997
(subject to automatic renewals from year to year unless either Arrow or the
executive elects not to renew), which provides for an annual base salary of not
less than $320,000. Mr. Giersch has an employment agreement with Spoerle
Electronic terminating on his 65th birthday (subject to earlier termination by
either Spoerle Electronic or Mr. Giersch upon six months written notice), which
provides for an annual base salary of not less than 700,000 deutsche marks
($433,140 based on the average exchange rate during 1994) with annual
adjustments beginning January 1, 1995 in the same proportion in which salaries
of the employees of Spoerle have been adjusted in the preceding year. Mr. Throop
has an employment agreement with Arrow terminating December 31, 2001, which
provides for an annual base salary of not less than $500,000 through December
31, 1996 and not less than $225,000 thereafter.
EXTENDED SEPARATION BENEFITS
Arrow maintains a broad-based program to shelter employees at all levels
from any adverse consequences which might result from a change in control of the
company. A change in control is defined in the program to include such time that
any person becomes the beneficial owner, directly or indirectly, of 30% or more
of the combined voting power of Arrow's voting securities or certain changes
occur in the constitution of Arrow's Board of Directors. Pursuant to a policy
adopted by the Board of Directors in 1988, the period of salary continuation
normally extended to employees whose employment is terminated as a result of a
workforce reduction or reorganization (which period ranges from two to 12 weeks
depending upon length of service with Arrow) is tripled if employment is
terminated by the company (other than for cause) as a result of a change in
control. In addition to this policy, Arrow has entered into one-year employment
agreements with approximately 65 management-level employees, pursuant to which
among other matters, such employees will receive one year's compensation and
continuation for up to one year of medical and life insurance benefits if their
employment is terminated by the company (other than for cause) within 12 months
following a change in control. Arrow also has agreements with approximately 20
divisional and group vice presidents who are not executive officers, which
provide such vice presidents with two times their annualized includible
compensation (as defined in the Code) and continuation for up to three years of
medical, life, and other welfare benefits if their employment is terminated by
the company (other than for cause), if their responsibilities or base salaries
are materially diminished, or if certain other adverse changes occur within 24
months following a change in control. Similar agreements provide the executive
officers with three times their annualized includible compensation and
continuation for
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<PAGE> 17
up to three years of their benefits if their employment is terminated by the
company (other than for cause approved by three-fourths of the directors then
serving), if their responsibilities or base salaries are materially diminished,
or if certain other adverse changes occur within 24 months following a change in
control. The amounts payable pursuant to such agreements to the executive
officers (other than Messrs. Waddell, Kaufman, and Klatell) and to the other
vice presidents will be reduced, if necessary, to avoid excise tax under Section
4999 of the Code.
UNFUNDED PENSION PLAN
Arrow maintains the Unfunded Pension Plan for Selected Executives of Arrow
Electronics, Inc. (the "SERP"). Under the SERP, Arrow's Board of Directors
determines those employees who are eligible to participate in the SERP and the
amount of their maximum annual pension upon retirement on or after attaining age
60. Of the named executive officers, Messrs. Kaufman, Klatell and Menefee have
been designated by Arrow as participants in the SERP, with maximum annual
pensions of $300,000, $150,000 and $175,000, respectively. If a designated
participant retires between the ages of 55 and 60, the amount of the annual
pension is reduced based upon a formula contained in the SERP. In addition, if
there is a change of control of Arrow and the employment of a designated
participant who is at least age 50 with 15 years of service is involuntarily
terminated other than for cause or disability, or such participant terminates
employment for good reason, the participant will receive the maximum annual
pension.
CERTAIN TRANSACTIONS
In January 1994, Arrow acquired an additional 15% interest in Spoerle
Electronic from Mr. Giersch, bringing its holdings in Spoerle Electronic to a
70% share. The cost of the acquisition was approximately $25 million. Spoerle
Electronic leases certain of its premises from a partnership in which Mr.
Giersch's wife, directly or indirectly, has the entire beneficial interest and
paid aggregate rentals of 3.9 million deutsche marks ($2,426,000 based on the
average exchange rate during 1994) to the partnership during 1994. The
management of Spoerle Electronic believes that such rentals are at fair market
rates.
In December 1992, Anthem extended a loan to Mr. Throop in the amount of
$1,236,000 to assist Mr. Throop in exercising outstanding options under Anthem's
stock option plans. The outstanding amount was to become due and payable on
November 30, 1995, and the loan was secured by a pledge of shares of common
stock. Mr. Throop repaid the loan in full in 1994, shortly after Arrow's
acquisition of Anthem.
Prior to its acquisition by Arrow, Anthem extended a loan to John J.
Powers, III, currently an executive officer of Arrow, in the amount of $175,837
to assist Mr. Powers in exercising outstanding options under Anthem's stock
option plans. The loan bears interest at the prime rate, is secured by a pledge
of shares of common stock, and is due and payable on April 12, 1997. As of March
24, 1995, the outstanding amount of Mr. Powers' loan was $175,837.
APPROVAL OF APPOINTMENT OF AUDITORS
The shareholders will be asked to ratify the appointment of Ernst & Young
LLP as Arrow's independent auditors for 1995. Arrow expects that representatives
of Ernst & Young LLP will be
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present at the meeting with the opportunity to make a statement if they desire
to do so and that such representatives will be available to answer appropriate
inquiries raised at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
RATIFICATION OF SUCH APPOINTMENT.
SUBMISSION OF SHAREHOLDER PROPOSALS
Arrow anticipates that the next Annual Meeting of Shareholders will be held
on or about May 7, 1996. In order to be eligible for inclusion in Arrow's proxy
statement and proxy for such meeting, proposals of shareholders must be received
by Arrow on or before December 2, 1995.
OTHER MATTERS
Management does not expect any matters to come before the meeting other
than those referred to in this Proxy Statement. However, if any other matters
should properly come before the meeting, it is intended that proxies in the
accompanying form will be voted thereon in accordance with the judgment of the
person or persons voting such proxies.
By Order of the Board of Directors,
Robert E. Klatell
Secretary
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ARROW ELECTRONICS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, MAY 9, 1995
The undersigned hereby appoints Stephen P. Kaufman, Robert E. Klatell, and
John C. Waddell, and any one or more of them, with full power of substitution,
as proxy or proxies of the undersigned to vote all shares of stock of ARROW
ELECTRONICS, INC. which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Shareholders to be held on May 9, 1995 at 11:00
A.M., New York City time, at the executive offices of the corporation, 25 Hub
Drive, Melville, New York, or any adjournments thereof, as set forth on the
reverse hereof:
PLEASE RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE
<PAGE> 20
Please mark
------------ /x/ your votes
COMMON as this
MANAGEMENT RECOMMENDS A VOTE FOR
1. Authority to vote FOR the election of directors in accordance with the
accompanying Proxy Statement.
NOMINEES:
Daniel W. Duval Steven W. Menefee
Carlo Giersch Karen Gordon Mills
Stephen P. Kaufman Anne Pol
Lawrence R. Kern Richard S. Rosenbloom
Roger King Robert S. Throop
Robert E. Klatell John C. Waddell
FOR WITHHOLD
all nominees for all nominees
/ / / /
(INSTRUCTION: To withhold authority to vote for any individual nominee write
that nominee's name in the space provided below.)
2. Ratification of the appointment of Ernst & Young as independent auditors of
the books and accounts of Arrow for the fiscal year ending December 31, 1995.
FOR AGAINST ABSTAIN
/ / / / / /
3. In accordance with their discretion upon such other matters as may properly
come before the meeting or any adjournments thereof.
THIS PROXY IS BEING SOLICITED BY THE
MANAGEMENT AND WILL BE VOTED AS SPECIFIED.
IF NOT OTHERWISE SPECIFIED, IT WILL BE
VOTED FOR THE ELECTION OF DIRECTORS AND
FOR THE PROPOSALS DESCRIBED IN ITEMS 2
AND 3 ABOVE.
Dated , 1995
------------------------------
------------------------------------------
Signature of Shareholder(s)
------------------------------------------
Signature of Shareholder(s)
PLEASE SIGN EXACTLY AS NAME APPEARS TO THE
LEFT. WHEN SIGNING AS ATTORNEY,
ADMINISTRATOR, EXECUTOR, GUARDIAN OR
TRUSTEE, PLEASE ADD YOUR FULL TITLE AS
SUCH. IF SHARES ARE REGISTERED IN THE
NAMES OF JOINT TENANTS OR TRUSTEES, EACH
JOINT TENANT OR TRUSTEE SHOULD SIGN.
