<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 /X/
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 14a-11(c) or 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):
/ / $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:
/X / 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
[ARROW ELECTRONICS, INC. LOGO]
STEPHEN P. KAUFMAN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
April 3, 1996
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Arrow Electronics, Inc., which will be held on Tuesday, May 14, 1996 at 11:00
A.M., at Chemical Banking Corporation, 270 Park Avenue, New York, 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, a proposal to amend the Certificate of Incorporation of Arrow to
increase the number of authorized shares of common stock, 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 14, 1996
------------------------
April 3, 1996
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 Chemical Banking Corporation, 270 Park
Avenue, New York, New York, on May 14, 1996 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 amend the Certificate of
Incorporation of Arrow to increase the number of authorized shares of
common stock from 80,000,000 shares to 120,000,000 shares.
3. 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, 1996.
4. 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 29, 1996 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 14, 1996
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement, mailed to shareholders on April 3, 1996, 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 New York, New York on May 14,
1996, 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 29, 1996 are entitled to notice of and to vote at the meeting
or any adjournments thereof. On March 29, 1996, Arrow had outstanding 50,764,377
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 29, 1996.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS(1)
- ----------------------------------------------------------- ------------------ ----------
<S> <C> <C>
Oppenheimer Group, Inc. 7,394,111(2) 14.6%
Oppenheimer Tower
World Financial Center
New York, New York 10281
Pioneering Management Corporation 3,503,400(3) 6.9%
60 State Street
Boston, Massachusetts 02109
Neuberger & Berman L.P. 3,138,657(4) 6.2%
605 Third Avenue
New York, New York 10158-3698
A I M Management Group Inc. 2,537,800(5) 5.0%
11 Greenway Plaza, Suite 1919
Houston, Texas 77046
</TABLE>
- ---------------
(1) Percentage of beneficial ownership is calculated upon shares of common stock
outstanding as of March 29, 1996.
(2) Based upon a Schedule 13G dated February 1, 1996 filed with the Securities
and Exchange Commission and includes 6,739,867 shares beneficially owned by
Oppenheimer Capital, a registered investment advisor.
(3) Based upon a Schedule 13G dated January 26, 1996 filed with the Securities
and Exchange Commission and reflects sole voting power with respect to
3,503,400 shares, sole dispositive power with respect to 172,700 shares, and
shared dispositive power with respect to 3,330,700 of the shares
beneficially owned by Pioneering Management Corporation, a registered
investment advisor.
(4) Based upon a Schedule 13G dated February 12, 1996 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.
(5) Based upon a Schedule 13G dated February 12, 1996 filed with the Securities
and Exchange Commission and includes shares beneficially owned by A I M
Advisors, Inc. and A I M Capital Management, Inc., registered investment
advisors.
At March 29, 1996, all executive officers and directors of Arrow as a group
were the beneficial owners of 2,458,354 shares (4.8%), including 914,444 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 1,140,082 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 625,875 options are
currently exercisable), including options to purchase 735,625 shares, 119,000
shares,
2
<PAGE> 6
9,000 shares, 10,000 shares, 60,000 shares, and 82,499 shares granted to Mr.
Kaufman, Mr. Klatell, Mr. Waddell, Mr. Carlo Giersch, Mr. Steven W. Menefee, and
Mr. Robert S. Throop, respectively (of which 377,291 options, 104,000 options,
9,000 options, 3,333 options, 25,000 options, and 41,860 options, respectively,
are currently exercisable); and 175,043 shares awarded under Arrow's Restricted
Stock Plan (of which 88,593 shares have vested and are not forfeitable),
including 43,500 shares, 33,775 shares, 2,518 shares, 53,750 shares, and 13,000
shares awarded to Messrs. Kaufman, Klatell, Waddell, Menefee, and Throop,
respectively (of which 32,000 shares, 24,775 shares, 68 shares, 24,750 shares,
and 2,500 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
nonvotes) have no effect on the election of directors. Proxies in the enclosed
form will be voted for the election as directors of the nine 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.
<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 29, 1996 STOCK
- ---------------------- --- ------------------------- -------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Daniel W. Duval 59 President and Chief 1987 2,100 --%
Executive 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 58 Chief Executive Officer 1990 113,000(1) .2%
of Spoerle Electronic,
Arrow's 70% owned German
affiliate, for more than
five years.
Stephen P. Kaufman 54 Chairman of the Board of 1983 1,693,569(2)(3) 3.3%
Arrow since May 1994 and
President and Chief
Executive Officer of
Arrow for more than five
years.
</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 29, 1996 STOCK
- ---------------------- --- ------------------------- -------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Roger King 55 Director of Orient 1995 -- --%
Overseas (International)
Limited, an investment
holding company, with
investments principally
in integrated containerized
transportation businesses,
since 1992; until February
1996 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 50 Executive Vice President 1989 1,078,084(2) 2.1%
of Arrow since November
1995, Senior Vice
President for more than
five years prior thereto,
Chief Financial Officer
since January 1992, and
General Counsel, Trea-
surer, and Secretary for
more than five years.
Karen Gordon Mills 42 President of MMP Group 1994 300 --%
Inc., 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
Armor All Products, Telex
Communications Inc., The
Scotts Company, and
Triangle Pacific Co.
Richard S. Rosenbloom 63 David Sarnoff Professor 1992 2,500 --%
of Business Administration
at Harvard Business School
for more than five years;
director of 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 29, 1996 STOCK
- ---------------------- --- ------------------------- -------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Robert S. Throop 58 Chairman and Chief Execu- 1994 206,000(4) .4%
tive 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 Coast Distribution
System and The Manitowoc
Company, Inc.
John C. Waddell 58 Vice Chairman of the 1969 925,962(2) 1.8%
Board of Arrow since May
1994 and Chairman of the
Board of Arrow 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 6,875 shares held by a charitable trust of which Mr.
Kaufman and members of his immediate family are the trustees.
(4) 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. Duval and Mr.
King. 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,
Ms. Mills, 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. Duval,
Ms. Mills, and Mr. Rosenbloom. 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.
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
5
<PAGE> 9
programs and services of educational, environmental, health care, cultural, and
other social organizations, and approves the charitable contributions to be made
by the company.
During 1995 there were five meetings of the Board of Directors, three
meetings of the audit committee, six meetings of the compensation committee,
eight meetings of the nominating committee, and one meeting 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. Mr. Duval did
not file on a timely basis a report on Form 4 in connection with the purchase of
100 shares of Arrow common stock by his spouse.
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(4) COMPENSATION(5)
- --------------------------- ---- --------- ---------- --------------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stephen P. Kaufman, 1995 $ 649,045 $1,039,250 $50,375 $ 167,500 25,000(6) $ 9,120
President and Chief 1994 574,000 743,000 62,650 170,000 25,000 9,120
Executive Officer 1993 504,000 570,000 65,644 190,000 25,000 11,572
Carlo Giersch, 1995 698,178 -- -- 125,625 10,000 --
Chief Executive Officer of 1994 618,582 -- -- -- -- --
Spoerle Electronic 1993 604,230 -- -- -- 10,000 --
Robert S. Throop, 1995 521,765 106,000 20,750 125,625 10,000 9,120
Chairman and Chief 1994 595,391 231,498 -- 340,000 20,000 16,145
Executive Officer of
Anthem Electronics(7)
Steven W. Menefee, 1995 360,712 310,000 81,400 125,625 45,000 9,120
Senior Vice President 1994 330,200 230,000 75,063 136,000 15,000 9,120
1993 304,783 241,000 66,856 152,000 15,000 7,075
Robert E. Klatell, 1995 369,400 192,200 43,713 125,625 15,000 9,120
Executive Vice President 1994 339,400 227,000 53,319 136,000 15,000 9,120
and Chief Financial 1993 308,983 220,000 66,572 152,000 15,000 11,572
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.
(3) Reflects the fair market value as of the date of grant of the stock awards
granted in 1995 and in early 1996 in respect of employment during 1995. 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, 1995, the
aggregate number and value of unvested restricted stock awards held by
Messrs. Kaufman, Giersch, Throop, Menefee, and Klatell, including the grant
in early 1996 in respect of employment during
6
<PAGE> 10
1995, were 11,500 ($425,313), 3,000 ($125,625), 10,500 ($380,625), 29,000
($1,173,125), and 9,000 ($331,875), respectively.
(4) Includes stock options awarded in early 1996 in respect of employment during
1995.
(5) For 1995, includes a contribution by Arrow of $4,500 to Arrow's Stock
Ownership Plan and a matching contribution by Arrow of $4,620 to Arrow's
Savings Plan for each of Messrs. Kaufman, Throop, Menefee, and Klatell.
(6) Does not include options to purchase 500,000 shares of common stock granted
to Mr. Kaufman in February 1995 as part of the entering into of a new
employment agreement with Arrow terminating December 31, 2001. See
"Employment Agreements" on page 13.
(7) Anthem became a wholly-owned subsidiary of Arrow in November 1994. Reflects
compensation received during 1994 pursuant to employment and incentive
arrangements established by Anthem prior to the acquisition. Does not
include options to purchase 107,740 shares of Arrow common stock issued in
1994 in exchange for options to purchase Anthem common stock granted by
Anthem pursuant to Anthem's stock option plans prior to the acquisition.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants during 1995 and
in early 1996 in respect of employment during 1995 to the named executive
officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------
% OF
TOTAL
NUMBER OF OPTIONS POTENTIAL REALIZABLE VALUE
SECURITIES GRANTED AT ASSIGNED RATES OF
UNDERLYING TO STOCK PRICE APPRECIATION
OPTIONS EMPLOYEES EXERCISE OR FOR OPTION TERM(3)
GRANTED IN FISCAL BASE PRICE EXPIRATION -------------------------------
NAME (#)(1) YEAR ($/SH)(2) DATE 5% 10%
- ------------------------ --------- --------- ----------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Stephen P. Kaufman(4) 25,000 3.2% 41.875 2/13/06 $ 704,125 $ 1,741,375
Carlo Giersch 10,000 1.3 41.875 2/13/06 281,650 696,550
Robert S. Throop 10,000 1.3 41.875 2/13/06 281,650 696,550
Steven W. Menefee 30,000 3.8 50.875 7/11/05 574,950 1,819,650
15,000 1.9 41.875 2/13/06 422,475 1,044,825
Robert E. Klatell 15,000 1.9 41.875 2/13/06 422,475 1,044,825
All shareholders N/A N/A N/A N/A 1,368,914,304 3,469,367,205
various
in 2005
All optionees(4) 789,100 100 43.27 and 2006 21,123,339 53,863,098
All optionees value as a
percent of all
shareholders value N/A N/A N/A N/A 1.5% 1.6%
</TABLE>
- ---------------
(1) All of such grants become exercisable in three annual installments,
commencing on the date of grant (except for 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%. Potential realizable values for shareholders
are based on 50,625,529 shares outstanding at
7
<PAGE> 11
December 31, 1995 from a base price of $43.00 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 500,000 shares of common stock granted
to Mr. Kaufman in February 1995 as part of the entering into of a new
employment agreement with Arrow terminating December 31, 2001. The options
become exercisable in three equal annual installments commencing on the
first anniversary of the date of grant, at an exercise price of $41.15 for
those options exercisable on the first anniversary of the grant, $42.82 for
those exercisable on the second anniversary, and $44.56 for those
exercisable on the third anniversary. All such options expire 10 years after
the date of 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 1995 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(2) FISCAL YEAR-END(2)
ACQUIRED ---------------- --------------------
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED(1) UNEXERCISABLE UNEXERCISABLE
- -------------------------- -------- ----------- ---------------- --------------------
<S> <C> <C> <C> <C>
Stephen P. Kaufman -- -- 210,625/525,000 $4,908,753/$432,080
Carlo Giersch 10,000 $ 150,000 3,333/ 6,667 3,750/ 7,500
Robert S. Throop 37,040 1,031,963 58,808/ 41,891 729,239/ 201,757
Steven W. Menefee 57,000 1,385,375 25,000/ 35,000 75,625/ 56,250
Robert E. Klatell -- -- 104,000/ 15,000 2,089,875/ 56,250
</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) Includes stock options awarded in early 1996 in respect of employment during
1995.
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 recommendations to the full
Board of Directors with respect to these matters. The committee is comprised
entirely of Board members who are independent, non-employee 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.
8
<PAGE> 12
-- 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 1995, Mr. Kaufman's base salary was increased to $650,000 in recognition
of the continued growth in Arrow's sales and earnings and the further expansion
of Arrow into strategic markets.
9
<PAGE> 13
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 1995 Mr. Kaufman received a bonus payment of
$939,250 under the Chief Executive Bonus Plan. The committee also awarded Mr.
Kaufman a $100,000 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 1995,
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. Throop, Menefee, and Klatell reflect Arrow's
attainment of predetermined financial goals and the level of achievement by
Messrs. Throop, Menefee, and Klatell of the targets established under the MICP.
The MICP awards earned by the named participating executive officers averaged
45% of their respective salaries, representing a range of 85% to 130% level of
achievement of the goals.
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 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.
10
<PAGE> 14
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 1995 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 and 4,000 shares of
restricted stock in 1995 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.
Richard S. Rosenbloom, Chairman
Daniel W. Duval
Karen Gordon Mills
11
<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.
[GRAPH]
<TABLE>
<CAPTION>
Electronics
Measurement Period S&P 500 Distributor
(Fiscal Year Covered) Arrow Index Index
<S> <C> <C> <C>
1990 100 100 100
1991 360 131 104
1992 654 140 128
1993 954 155 147
1994 820 157 142
1995 983 215 175
</TABLE>
Assumes $100 invested on December 31, 1990 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 1996, 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
non-employee director serving as chairman of any committee receives an
additional annual fee of $1,500.
12
<PAGE> 16
EMPLOYMENT AGREEMENTS
Arrow has employment agreements with each of the named executive officers.
In February 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 of $41.15 for those
options exercisable on the first anniversary of the grant, $42.82 for those
exercisable on the second anniversary, and $44.56 for those exercisable on the
third anniversary. All of such options expire 10 years after the date of grant.
Mr. Klatell and Mr. Menefee have employment agreements with Arrow
terminating on December 31, 1996 and December 31, 1997, respectively, each of
which is subject to renewal from year to year unless either Arrow or the
executive elects not to renew. Mr. Klatell's agreement provides for an annual
base salary of not less than $235,000. Mr. Menefee's agreement 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 ($488,724 based on the average exchange rate during 1995)
with annual adjustments 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 any person
becoming the beneficial owner, directly or indirectly, of 30% or more of the
combined voting power of Arrow's voting securities or certain changes occurring
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
13
<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
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, bearing interest at the prime rate, was secured by a
pledge of shares of common stock, and was due and payable on April 12, 1997. The
loan was repaid as of December 31, 1995.
PROPOSED AMENDMENT OF THE CERTIFICATE OF INCORPORATION
Of the 80,000,000 currently authorized shares of common stock, as of
December 31, 1995, 50,625,529 shares of common stock of Arrow were outstanding,
and 4,585,178 shares of common stock were required to be reserved for issuance
relating to outstanding options and options and restricted stock awards
available for grant. The proposed amendment to the Certificate of Incorporation
would increase the number of authorized shares of common stock from 80,000,000
to 120,000,000. The Board of Directors of Arrow believes that additional shares
of common stock should be available for issuance by the Board of Directors. The
reason for the proposed increase in the number of authorized shares of common
stock is to make such additional shares available for future issuance as share
dividends and stock splits, as restricted stock awards, upon exercise of stock
options, for cash, for acquisitions of property or stock of other corporations,
and for other purposes, as occasion may arise.
While Arrow frequently has various acquisitions under consideration, Arrow
has not entered into any agreements regarding the issuance of a significant
number of additional shares and does not have any other present intention to
issue any of the additional shares of common stock to be authorized. The Board
of Directors believes it is desirable that Arrow have such additional shares
14
<PAGE> 18
available for situations in which their issuance may be suitable without the
delay which would result from holding a meeting of shareholders to authorize the
issuance of additional shares.
If the proposed amendment is adopted, the additional shares of common stock
may be issued by the Board of Directors of Arrow without further action by the
shareholders, except as may be required by law or pursuant to Arrow's listing
agreement with the New York Stock Exchange.
The issuance of additional shares of common stock otherwise than on a
pro-rata basis to all holders of such stock would reduce the proportionate
interest of such stockholders.
The affirmative vote of the holders of a majority of the outstanding shares
of the common stock of Arrow is sufficient for the adoption of the proposal to
approve the amendment to the Certificate of Incorporation increasing the number
of authorized shares of common stock. Consequently, any shares not voted
(whether by abstention or broker non-votes) have the same effect as votes
against the proposed amendment to the Certificate of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THIS
PROPOSAL.
APPROVAL OF APPOINTMENT OF AUDITORS
The shareholders will be asked to ratify the appointment of Ernst & Young
LLP as Arrow's independent auditors for 1996. Arrow expects that representatives
of Ernst & Young LLP will be 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 15, 1997. 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, 1996.
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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<PAGE> 19
ANNEX A
PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION
The Certificate of Incorporation is proposed to be amended to increase the
authorized number of common stock by deleting the first paragraph of Article
THIRD thereof in its entirety and by substituting in lieu therefor a new first
paragraph of Article THIRD, to read in its entirety as follows:
"THIRD: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is One Hundred Twenty-Two Million
(122,000,000) shares, consisting of:
(a) Two Million (2,000,000) shares of Preferred Stock having a par
value of $1 per share (hereinafter referred to as "Preferred Stock");
and
(b) One Hundred Twenty Million (120,000,000) shares of Common Stock
having a par value of $1 per share (hereinafter referred to as "Common
Stock")."
A-1
<PAGE> 20
ARROW ELECTRONICS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, MAY 14, 1996
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 14, 1996 at
11:00 A.M., New York City time, at Chemical Banking Corporation, 270 Park
Avenue, New York, New York, or any adjournments thereof, as set forth on the
reverse hereof:
PLEASE RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE
- --------------------------------------------------------------------------------
-FOLD AND DETACH HERE-
<PAGE> 21
Please mark
your votes as /x/
indicated in
this example.
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 Karen Gordon Mills
Carlo Giersch Richard S. Rosenbloom
Stephen P. Kaufman Robert S. Throop
Roger King John C. Waddell
Robert E. Klatell
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. Authority to vote FOR the adoption of a proposed amendment to the
Certificate of Incorporation of Arrow Electronics, Inc. to increase the
number of authorized shares of common stock from 80,000,000 to 120,000,000.
FOR AGAINST ABSTAIN
/ / / / / /
3. Ratification of the appointment of Ernst & Young as independent auditors of
the books and accounts of Arrow for the fiscal year ending December 31, 1996.
FOR AGAINST ABSTAIN
/ / / / / /
4. 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, 3
AND 4 ABOVE.
Dated: , 1996
------------------------------
------------------------------------------
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.
- --------------------------------------------------------------------------------
-FOLD AND DETACH HERE-
