ARROW ELECTRONICS, INC.
25 HUB DRIVE
MELVILLE, NEW YORK 11747
[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 Wednesday, 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,
Stephen P. Kaufman
Chairman and Chief Executive Officer
<PAGE>
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>
Preliminary Copy
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
___________ shares of common stock.
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<PAGE>
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.
Name and Address Number of Shares Percent of
of Beneficial Owner Beneficially Owned Class(1)
- ------------------- ------------------ ----------
Oppenheimer Group, Inc. 7,394,111(2) _____%
Oppenheimer Tower
World Financial Center
New York, New York 10281
Pioneering Management Corporation 3,503,400(3) _____%
60 State Street
Boston, Massachusetts 02109
Neuberger & Berman LP 3,138,657(4) _____%
605 Third Avenue
New York, New York 10158-3698
A I M Management Group Inc. 2,537,800(5) _____%
11 Greenway Plaza, Suite 1919
Houston, Texas 77046
- ---------------
(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 _________ shares (_._%),
including _______ 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, 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,
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<PAGE>
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 Percentage of
Stock Owned Outstanding
Position with Arrow and Director Beneficially as of Common
Name Age Business Experience Since March 29, 1996 Stock
- ---- --- ------------------- ----- -------------- -----
<S> <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 of 1990 113,000<F1> _._%
Spoerle Electronic,
Arrow's 70% owned
German affiliate, for more
than five years.
Stephen P. Kaufman 54 Chairman of the Board of 1983 ____<F2><F3> _._%
Arrow since May 1994
and President and Chief
Executive Officer of
Arrow for more than five
years.
-5-
<PAGE>
<CAPTION>
Shares of Common Percentage of
Stock Owned Outstanding
Position with Arrow and Director Beneficially as of Common
Name Age Business Experience Since March 29, 1996 Stock
- ---- --- ------------------- ----- -------------- -----
<S> <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 ____<F2> _._%
of Arrow since November
1995, Senior Vice
President for more than
five years prior thereto,
Chief Financial Officer
since January 1992, and
General Counsel,
Treasurer, and Secretary
for more than five years.
Karen Gordon Mills 42 President of MMP Group 1994 300 _._%
Inc. 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.
-6-
<PAGE>
<CAPTION>
Shares of Common Percentage of
Stock Owned Outstanding
Position with Arrow and Director Beneficially as of Common
Name Age Business Experience Since March 29, 1996 Stock
- ---- --- ------------------- ----- -------------- -----
<S> <C> <C> <C> <C>
Robert S. Throop 58 Chairman and Chief Executive 1994 206,000<F4> _._%
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 ____<F2> _._%
Board of Arrow since
May 1994 and Chairman
of the Board of Arrow for
more than five years prior
thereto.
<FN>
- -------------------
<F1> Includes shares owned individually and options to purchase shares
granted under Arrow's Stock Option Plan. See page 2.
<F2> 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.
<F3> Does not include 6,875 shares held by a charitable trust of which Mr.
Kaufman and members of his immediate family are the trustees.
<F4> 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.
</FN>
</TABLE>
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. 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.
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<PAGE>
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 1995 there were 5 meetings of the Board of Directors, 3
meetings of the audit committee, 6 meetings of the compensation committee, 8
meetings of the nominating committee, and 1 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 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>
Long-Term
Annual Compensation Compensation Awards
----------------------------------------------------- ------------------------
<CAPTION>
Restricted Securities
Name and Other Annual Stock Underlying All Other
Principal Position Year Salary<F1> Bonus Compensation<F2> Award(s)<F3> Options<F4> Compensation<F5>
- ------------------------ ------ ----------- ----------- --------------- ----------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stephen P. Kaufman, 1995 $649,045 $1,039,250 $50,375 $167,500 25,000<F6> $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, Chief 1995 698,178 -- -- 125,625 10,000 --
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,
Inc.<F7>
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
<FN>
- -----------------
<F1> Includes amounts deferred under retirement plans.
<F2> Represents reimbursement of a portion of the tax liability incurred as a
result of the vesting of restricted stock awards.
<F3> 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 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.
<F4> Includes stock options awarded in early 1996 in respect of employment
during 1995.
-8-
<PAGE>
<F5> For 1995, includes a contribution by Arrow of $4,500 to Arrow's Stock
Ownership Plan and a matching contribution by Arrow of $4,620 to Arrow's
Savings Plan for each of Messrs. Kaufman, Throop, Menefee, and Mr.
Klatell.
<F6> Does not include options to purchase 500,000 shares of common stock
granted to Mr. Kaufman in March 1995 as part of the entering into of a new
employment agreement with Arrow terminating December 31, 2001. See
"Employment Agreements" page ___.
<F7> Anthem became a wholly-owned subsidiary of Arrow in November 1994.
Reflects compensation received during 1994 pursuant to employment and
incentive arrangements established by Anthem prior to the acquisition.
Does not include options to purchase 107,740 shares of Arrow common stock
issued in 1994 in exchange for options to purchase Anthem common stock
granted by Anthem pursuant to Anthem's stock option plans prior to the
acquisition.
</FN>
</TABLE>
Stock Option Grants in Last Fiscal Year
The following table provides information on option grants during 1995
and in early 1996 in respect of employment during 1995 to the named executive
officers.
<TABLE>
Individual Grants
-----------------------------------------------------
<CAPTION>
% of Total
Number of Options Potential Realizable Value
Securities Granted to at Assigned Rates of
Underlying Employees Exercise or Stock Price Appreciation
Options in Fiscal Base Price Expiration for Option Term<F3>
Name Granted (#)<F1> Year ($/Sh)<F2> Date 5% 10%
- ---- -------------- ----------- ----------- ----------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stephen P. Kaufman<F4> 25,000 3.2% $41.875 12/15/05 $704,125 $1,741,375
Carlo Giersch 10,000 1.3 41.875 12/15/05 281,650 696,550
Robert S. Throop 10,000 1.3 41.875 12/15/05 281,650 696,550
Steven W. Menefee 45,000 5.7 47.875 12/15/05 997,425 2,864,475
Robert E. Klatell 15,000 1.9 41.875 12/15/05 422,475 1,044,825
All shareholders N/A N/A N/A N/A 1,368,914,304 3,469,367,205
All optionees 790,600 100 43.27 various in 21,165,586 53,967,502
2005
All optionees value as a N/A N/A N/A N/A 1.5% 1.6%
percent of all
shareholders value
<FN>
- -------------------
<F1> 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.
<F2> All at fair market value at date of grant.
<F3> 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 December 30,
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.
<F4> Does not include options to purchase 500,000 shares of common stock
granted to Mr. Kaufman in March 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 equal to market price on the 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.
</FN>
</TABLE>
-9-
<PAGE>
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
Year-End<F2> Fiscal Year-End <F2>
Shares --------------- ---------------
Acquired on Value Exercisable/ Exercisable/
Name Exercise Realized<F1> 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
<FN>
- -------------------
<F1> 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.
<F2> Includes stock options awarded in early 1996 in respect of employment
during 1995.
</FN>
</TABLE>
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, 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 __, internal pay
equity considerations, level of responsibilities, prior experience, breadth of
knowledge, and job performance. Such
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<PAGE>
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___.
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 1994 and 1995, Mr. Kaufman's base salary was increased to
$574,000 and $650,000, 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 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
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<PAGE>
targets established under the MICP. The MICP awards earned by the named
participating executive officers averaged 46% 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.
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
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<PAGE>
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.
(A comparative performance graph was included plotting the cumulative five-year
returns of Arrow, the S&P 500 Index and the Electronics Distributor Index for
the years 1990 to 1995 based on the data presented in the table below.)
================================================================================
1990 1991 1992 1993 1994 1995
- ---------------------------------===============================================
Arrow 100 360 654 954 820 983
- --------------------------------------------------------------------------------
S&P 500 Index 100 131 140 155 157 215
- --------------------------------------------------------------------------------
Electronics Distributor Index 100 104 128 147 142 175
================================================================================
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 1995, a fee of
$1,000 for each Board of Directors meeting personally attended and each
committee personally attended, and a fee of $500 for telephonic participation in
each Board of Directors meeting and each committee. In addition, each director
serving as Chairman of any committee receives an additional annual fee of
$1,500.
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<PAGE>
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 the 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 ($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
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 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
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<PAGE>
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 2,146,603 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 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 NYSE.
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.
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<PAGE>
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>
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")."
<PAGE>
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
<PAGE>
Please mark
your votes as
indicated in
this example [X]
1. Authority to vote FOR the election of directors in accordance with the
accompanying Proxy Statement.
FOR WITHHOLD
all for all
nominees nominees
[] []
Management recommends a vote FOR
NOMINEES:
Daniel W. Duval Karen Gordon Mills
Carlo Giersch Richard S. Rosenbloom
Stephen P. Kaufman Robert S. Throop
Roger King John C. Wadell
Robert E. Klatell
(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 FOR AGAINST ABSTAIN
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.
3. Ratification of the FOR AGAINST ABSTAIN
appointment of Ernst & [] [] []
Young as independent
auditors of the books and
accounts of Arrow for the
fiscal year ending December
31, 1996.
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.
<PAGE>
