<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
ARROW ELECTRONICS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
ARROW ELECTRONICS, INC.
25 HUB DRIVE
MELVILLE, NEW YORK 11747
[Arrow Electronics, Inc. Logo]
STEPHEN P. KAUFMAN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
April 4, 1997
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, 1997 at 11:00
A.M., at the offices of The Chase Manhattan 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, proposed amendments to the Arrow Electronics, Inc. Stock Option Plan
and the Arrow Electronics, Inc. Restricted Stock Plan increasing the number of
shares of common stock issuable thereunder and making certain other
modifications to the plans, proposals to adopt the Arrow Electronics, Inc. Non-
Employee Directors Stock Option Plan and the Arrow Electronics, Inc.
Non-Employee Directors Deferral Plan, 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, 1997
------------------------
April 4, 1997
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 the offices of The Chase Manhattan
Corporation, 270 Park Avenue, New York, New York, on May 14, 1997 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 Arrow Stock Option Plan
to increase the number of shares authorized to be issued pursuant to
options awarded thereunder from 6,000,000 shares to 10,500,000 shares
and to make certain other modifications to the plan.
3. To consider and act upon a proposal to amend the Arrow Restricted Stock
Plan to increase the number of shares authorized to be awarded
thereunder from 1,480,000 shares to 1,980,000 shares and to make certain
other modifications to the plan.
4. To consider and act upon a proposal to adopt the Arrow Non-Employee
Directors Stock Option Plan.
5. To consider and act upon a proposal to adopt the Arrow Non-Employee
Directors Deferral Plan.
6. 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, 1997.
7. 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 27, 1997 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, 1997
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement, mailed to shareholders on April 4, 1997, 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,
1997, 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 27, 1997 are entitled to notice of and to vote at the meeting
or any adjournments thereof. On March 27, 1997, Arrow had outstanding 49,538,629
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 27, 1997.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS(1)
- ----------------------------------------------------------- ------------------ ----------
<S> <C> <C>
Oppenheimer Group, Inc. 9,625,876(2) 19.4%
Oppenheimer Tower
World Financial Center
New York, New York 10281
Pioneering Management Corporation 5,100,200(3) 10.3%
60 State Street
Boston, Massachusetts 02109
Neuberger & Berman, LLC 4,149,258(4) 8.4%
605 Third Avenue
New York, New York 10158-3698
Chieftain Capital Management, Inc. 3,028,250(5) 6.1%
12 East 49th Street
New York, New York 10017
</TABLE>
- ---------------
(1) Percentage of beneficial ownership is calculated upon shares of common stock
outstanding as of March 27, 1997.
(2) Based upon a Schedule 13G dated January 10, 1997 filed with the Securities
and Exchange Commission and includes 9,389,566 shares beneficially owned by
Oppenheimer Capital, a registered investment advisor.
(3) Based upon a Schedule 13G dated January 21, 1997 filed with the Securities
and Exchange Commission and reflects sole voting power with respect to
5,100,200 shares, sole dispositive power with respect to 218,500 shares, and
shared dispositive power with respect to 4,881,700 of the shares
beneficially owned by Pioneering Management Corporation, a registered
investment advisor.
(4) Based upon a Schedule 13G dated February 10, 1997 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 and includes
sole voting power with respect to 1,006,750 shares and shared voting power
with respect to 1,813,000 shares.
(5) Based upon a Schedule 13G dated February 6, 1997 filed with the Securities
and Exchange Commission and reflects shared voting power and shared
dispositive power with respect to the shares beneficially owned by Chieftain
Capital Management, Inc., a registered investment advisor.
At March 27, 1997, all executive officers and directors of Arrow as a group
were the beneficial owners of 2,541,876 shares (5.1%), including 861,804 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 1,270,382 shares granted under Arrow's
Stock Option Plan or under stock option plans of
2
<PAGE> 6
companies acquired by Arrow and assumed by Arrow as part of the acquisition (of
which 793,432 options are currently exercisable), including options to purchase
665,625 shares, 84,000 shares, 9,000 shares, 20,000 shares, 70,000 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
463,959 options, 69,000 options, 9,000 options, 10,002 options, 48,334 options,
and 62,000 options, respectively, are currently exercisable); and 245,793 shares
awarded under Arrow's Restricted Stock Plan (of which 129,843 shares have vested
and are not forfeitable), including 47,500 shares, 36,475 shares, 1,018 shares,
5,700 shares, 55,750 shares, and 13,000 shares awarded to Messrs. Kaufman,
Klatell, Waddell, Giersch, Menefee, and Throop, respectively (of which 36,750
shares, 28,525 shares, 93 shares, 750 shares, 37,250 shares, and 5,750 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 meeting will be elected
directors. Consequently, any shares not voted (whether by abstention or broker
non-votes) have no effect on the election of directors. Proxies in the enclosed
form will be voted for the election as directors of the ten 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 of the nominees are currently directors of Arrow and
were elected at Arrow's last annual meeting, with the exception of Mr. Kelley,
who was appointed by the Board of Directors on December 13, 1996.
<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 27, 1997 STOCK
- ---------------------- --- ---------------------------- -------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Daniel W. Duval 60 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 59 Chief Executive Officer of 1990 75,700(1) .2%
Spoerle Electronic, Arrow's
80% owned German affiliate,
for more than five years.
Stephen P. Kaufman 55 Chairman of the Board of Ar- 1983 1,574,929(2) 3.2%
row since May 1994 and
President and Chief
Executive Officer 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 27, 1997 STOCK
- ---------------------- --- ---------------------------- -------- --------------- -----
<S> <C> <C> <C> <C> <C>
Gaynor N. Kelley 65 Chairman of the Board and 1996 500 --%
Chief Executive Officer of
The Perkin-Elmer
Corporation, an analytical
instruments and coating
systems company, for more
than five years ending June
1996; director of Hercules,
Inc., Alliant Techsystems,
Inc., and Northeast
Utilities.
Roger King 56 Director of Orient Overseas 1995 -- --%
(International) Limited, an
investment holding company,
with investments principally
in integrated containerized
transportation businesses,
since 1992; 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 ending
February 1996.
Robert E. Klatell 51 Executive Vice President of 1989 993,044(2) 2%
Arrow since November 1995,
Senior Vice President for
more than five years prior
thereto, General Counsel and
Secretary for more than five
years, Chief Financial
Officer from January 1992
until April 1996, and
Treasurer for more than five
years prior to April 1996.
Karen Gordon Mills 43 President of MMP Group Inc., 1994 300 --%
a consulting firm, since
January 1993; prior thereto
Managing Director of E.S.
Jacobs & Company, an equity
investment business, for
more than five years;
director of Telex
Communications Inc., The
Scotts Company, and Triangle
Pacific Co.
Richard S. Rosenbloom 64 David Sarnoff Professor of 1992 2,500 --%
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 27, 1997 STOCK
- ---------------------- --- ---------------------------- -------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Robert S. Throop 59 Vice President of Arrow 1994 97,347(3) .2%
since March 1995; Chairman
and Chief Executive Officer
of Anthem Electronics, Inc.,
an electronics distributor
acquired by Arrow in
November 1994, for more than
five years ending December
1996; director of The Coast
Distribution System and The
Manitowoc Company, Inc.
John C. Waddell 59 Vice Chairman of the Board 1969 871,822(2) 1.8%
of Arrow since May 1994 and
Chairman of the Board for
more than five years prior
thereto.
</TABLE>
- ---------------
(1) Includes shares owned individually, options to purchase shares granted under
Arrow's Stock Option Plan, and shares awarded under Arrow's Restricted Stock
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) 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, shares awarded under Arrow's
Restricted Stock Plan, and shares allocated under Arrow's Stock Ownership
Plan. See page 2.
The audit committee of the Board of Directors consists of Mr. Duval, Mr.
Kelley, 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.
Rosenbloom, Mr. Duval, and Ms. Mills. 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 Ms. Mills,
Mr. Duval, 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 programs and services of educational,
environmental, health care, cultural, and other social organizations, and
approves the charitable contributions to be made by the company.
5
<PAGE> 9
During 1996 there were six meetings of the Board of Directors, four
meetings of the audit committee, five meetings of the compensation committee,
seven meetings of the nominating committee, and two meetings of the charitable
contributions committee. All directors attended 75% or more of the meetings of
the Board of Directors and the committees on which they served.
EXECUTIVE COMPENSATION AND OTHER MATTERS
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning the
compensation for the past three years of the Chief Executive Officer and each of
the other four most highly compensated executive officers of the company (the
"named executive officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -----------------------
------------------------------------------- RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION(2) AWARD(S)(3) OPTIONS(4) COMPENSATION(5)
- ---------------------------- ---- -------- ---------- --------------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stephen P. Kaufman, 1996 $700,000 $ 689,500 $ 39,625 $ 208,500 40,000(6) $ 9,250
President and Chief 1995 649,045 1,039,250 50,375 167,500 25,000(7) 9,120
Executive Officer 1994 574,000 743,000 62,650 170,000 25,000 9,120
Carlo Giersch, Chief 1996 664,673 -- -- 140,738 10,000 --
Executive Officer of 1995 698,178 -- -- 125,625 10,000 --
Spoerle Electronic 1994 618,582 -- -- -- -- --
Robert S. Throop, 1996 527,000 37,500 25,688 -- -- 14,200
Vice President(8) 1995 521,765 106,000 20,750 125,625 10,000 9,120
1994 595,391 231,498 -- 340,000 20,000 16,145
Steven W. Menefee, 1996 353,533 185,000 107,856(9) 104,250 10,000 9,250
Senior Vice President 1995 360,712 310,000 81,400 125,625 45,000 9,120
1994 330,200 230,000 75,063 136,000 15,000 9,120
Robert E. Klatell, 1996 389,400 137,000 31,700 140,738 15,000 9,250
Executive Vice President 1995 369,400 192,200 43,713 125,625 15,000 9,120
1994 339,400 227,000 53,319 136,000 15,000 9,120
</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, with respect to compensation in 1995, the fair market value as of
the date of grant of stock awards granted 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, 1996, the aggregate number and value of unvested restricted stock awards
held by Messrs. Kaufman, Giersch, Throop, Menefee, and Klatell were 11,750
($622,750), 5,700 ($302,100), 8,000 ($424,000), 19,250 ($1,020,250), and
8,700 ($461,100), respectively.
(4) Includes, with respect to compensation in 1995, stock options awarded in
early 1996 in respect of employment during 1995.
6
<PAGE> 10
(5) For 1996, includes a contribution by Arrow of $4,500 to Arrow's Stock
Ownership Plan and a matching contribution by Arrow of $4,750 to Arrow's
Savings Plan for each of Messrs. Kaufman, Throop, Menefee, and Klatell. In
addition, for 1996, includes $4,950 of income imputed to Mr. Throop relating
to group life insurance premiums paid by Arrow.
(6) Includes stock options awarded in early 1997 in respect of employment during
1996.
(7) 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. See "Employment Agreements" on page 13.
(8) Mr. Throop was Chairman and Chief Executive Officer of Anthem until December
1996. Reflects compensation received during 1994 pursuant to arrangements
established by Anthem prior to its acquisition by Arrow. 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 pursuant to
Anthem's stock option plans prior to the acquisition.
(9) Does not include $118,308 paid to Mr. Menefee in connection with his
relocation to California.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants during 1996 and
in early 1997 in respect of employment during 1996 to the named executive
officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------
% OF
TOTAL
NUMBER OF OPTIONS POTENTIAL REALIZABLE VALUE
SECURITIES GRANTED AT ASSIGNED RATES OF
UNDERLYING TO STOCK PRICE APPRECIATION
OPTIONS EMPLOYEES EXERCISE OR FOR OPTION TERM(3)
GRANTED IN FISCAL BASE PRICE EXPIRATION -------------------------------
NAME (#)(1) YEAR ($/SH)(2) DATE 5% 10%
- ------------------------ --------- --------- ----------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Stephen P. Kaufman 25,000 2.7% $52.125 12/13/06 $ 855,125 $ 2,133,625
15,000 1.6 58.125 2/25/07 423,075 1,190,175
Carlo Giersch 10,000 1.1 52.125 12/13/06 342,050 853,450
Robert S. Throop -- -- -- -- -- --
Steven W. Menefee 10,000 1.1 52.125 12/13/06 342,050 853,450
Robert E. Klatell 15,000 1.6 52.125 12/13/06 513,075 1,280,175
All shareholders N/A N/A N/A N/A 1,670,722,444 4,234,201,166
Various
in 2006
All optionees 937,860 100 51.131 and 2007 33,011,734 80,973,895
All optionees value as a
percent of all
shareholders value N/A N/A N/A N/A 2% 1.9%
</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.
7
<PAGE> 11
(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 50,126,686 shares outstanding at December 31, 1996 from a base
price of $53 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.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
The following table provides information concerning the exercise of stock
options during 1996 by each of the named executive officers and the year-end
value of their unexercised options.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS AT IN-THE-MONEY
FISCAL OPTIONS AT
SHARES YEAR-END FISCAL YEAR-END
ACQUIRED --------------- --------------------
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED(1) UNEXERCISABLE UNEXERCISABLE
- ---------------------------- -------- ----------- --------------- --------------------
<S> <C> <C> <C> <C>
Stephen P. Kaufman -- $ -- 398,959/376,666(2) $9,155,625/3,303,332(2)
Carlo Giersch -- -- 6,668/ 13,332 40,008/ 79,992
Robert S. Throop 18,200 618,478 58,667/ 23,832 921,889/ 324,293
Steven W. Menefee -- -- 43,334/ 26,666 366,042/ 138,333
Robert E. Klatell -- -- 114,000/ 20,000 3,229,250/ 120,000
</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 1997 in respect of employment during
1996.
8
<PAGE> 12
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.
-- 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:
levels of pay among executives of the larger companies in the peer group
reflected 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 the 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 North America, and only one other company
included within the peer group has significant operations outside North America.
Therefore, the committee believes that Arrow requires greater breadth of
management, skills, and experience to manage successfully 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.
The committee values highly Mr. Kaufman's breadth of knowledge and
recognizes his significant contribution to the success of Arrow. In 1996, Mr.
Kaufman's base salary was increased to
9
<PAGE> 13
$700,000, 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 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 1996, Mr. Kaufman received a bonus payment of $689,500 under 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 1996,
the short-term incentive award opportunity was contingent upon Arrow attaining
prespecified levels 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
29% of their respective salaries, representing a range of 26% to 78% 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
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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 1996 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 40,000 stock options and 4,000 shares of
restricted stock in respect of 1996 in recognition of Arrow's continued growth
and Arrow's further expansion into strategic markets.
SUMMARY
Each year, the Board of Directors 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 of Directors and the committee administer Arrow's long-term executive
compensation programs to ensure that Arrow's objectives of linking executive pay
to improved financial performance and increased shareholder value continue to be
fostered.
Richard S. Rosenbloom, Chairman
Daniel W. Duval
Karen Gordon Mills
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COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG ARROW ELECTRONICS, INC., S&P 500 STOCK 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. The graph assumes $100 invested on December 31, 1991 in Arrow, the
S&P Stock 500 Index, and the peer companies group. Total return indices reflect
reinvested dividends and are weighted on a market capitalization basis at the
time of each reported data point.
<TABLE>
<CAPTION>
Measurement Period Electronics S&P 500 Stock
(Fiscal Year Covered) Arrow Distributor Index Index
<S> <C> <C> <C>
1991 100 100 100
1992 182 140 104
1993 265 166 112
1994 228 172 110
1995 273 242 148
1996 340 275 178
</TABLE>
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 1997, 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. Each non-employee
director serving as Chairman of any committee receives an additional annual fee
of $1,500. In addition, if approved by the shareholders at this meeting, the
non-employee directors will also be entitled to receive benefits under the
Non-Employee Directors Stock Option Plan and the Non-Employee Directors Deferral
Plan.
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EMPLOYMENT AGREEMENTS
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 such options expire 10 years after the date of grant.
Mr. Menefee has an employment agreement with Arrow terminating December 31,
1999, which is subject to renewal from year to year unless either Arrow or Mr.
Menefee elects not to renew. 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 ($465,270 based on the average exchange rate during 1996) 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 the occurrence of certain
changes in the constitution of the 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 95 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
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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, the Board of Directors
determines those employees who are eligible to participate in the SERP and the
amount of their maximum annual pension upon retirement on or after attaining age
60. Of the named executive officers, Messrs. Kaufman, Klatell, and Menefee have
been designated by Arrow as participants in the SERP, with maximum annual
pensions of $300,000, $150,000, and $175,000, respectively. If a designated
participant retires between the ages of 55 and 60, the amount of the annual
pension is reduced based upon a formula contained in the SERP. In addition, if
there is a change of control of Arrow and the employment of a designated
participant who is at least age 50 with 15 years of service is involuntarily
terminated other than for cause or disability, or such participant terminates
employment for good reason, the participant will receive the maximum annual
pension.
CERTAIN TRANSACTIONS
In each of July 1996 and January 1997, Arrow acquired an additional five
percent interest in Spoerle Electronic from Mr. Giersch at a cost of 25 million
deutsche marks and 23.5 million deutsche marks, respectively ($16,900,000 and
$14,100,000, respectively, based on the exchange rate on the date of payment).
As a result of these acquisitions, Arrow's holding in Spoerle Electronic
increased to an 80% share.
PROPOSED AMENDMENT OF THE ARROW STOCK OPTION PLAN
The Board of Directors believes that the future growth and profitability of
Arrow depends, in large measure, on its ability to retain and motivate key
employees with outstanding ability. To further this goal, in 1981 the Board of
Directors adopted a stock option plan (the "Arrow Stock Option Plan"), which was
approved by Arrow's shareholders in 1982. As so adopted, the Arrow Stock Option
Plan provided for the grant of incentive stock options ("ISOs"). In 1986, the
Arrow Stock Option Plan was amended to also provide for the grant of
nonqualified stock options ("ASOs") to purchase shares of Arrow common stock.
ISOs and ASOs are hereinafter occasionally collectively referred to as
"Options." On November 12, 1987, the Board of Directors adopted an amendment and
restatement of the Arrow Stock Option Plan, subject to shareholder approval
(which was obtained on January 11, 1988), that, among other things, increased
the number of shares of Arrow common stock issuable under the Arrow Stock Option
Plan by 750,000, permitted the grant of ASOs at an exercise price determined by
the Board of Directors, and extended the expiration date of the Arrow Stock
Option Plan to November 11, 1997. On June 6, 1991, the Board of Directors
adopted an amendment and restatement of the Arrow Stock Option Plan, subject to
shareholder approval (which was obtained on September 25, 1991), that, among
other things, further increased the aggregate number of shares of Arrow common
stock that may be issued pursuant to Options awarded thereunder by 1,250,000. On
February 9, 1993, the Board of Directors adopted an amendment of the Arrow Stock
Option Plan, subject to shareholder approval (which was obtained on May 18,
1993), that further increased the aggregate number of shares of Arrow common
stock
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<PAGE> 18
that may be issued pursuant to Options awarded thereunder by 1,500,000. On
October 7, 1994, the Board of Directors adopted an amendment of the Arrow Stock
Option Plan, subject to shareholder approval (which was obtained on November 23,
1994), that further increased the aggregate number of shares of Arrow common
stock that may be issued pursuant to the Options awarded thereunder by
1,500,000.
In order for Arrow to have sufficient Options available for future grants
under the Arrow Stock Option Plan, on February 25, 1997, the Board of Directors
approved an amendment and restatement of the Arrow Stock Option Plan, subject to
shareholder approval, increasing the aggregate number of shares of Arrow common
stock that may be issued pursuant to Options awarded thereunder by 4,500,000 and
extending the termination date of the Arrow Stock Option Plan to December 31,
2006. In addition, the amendment provides that during the extended term of the
Arrow Stock Option Plan no individual may receive in any calendar year Options
with respect to more than 10 percent of the aggregate number of shares of Arrow
common stock that may be issued pursuant to the plan. This limitation is
intended to ensure that the compensation income that certain Arrow officers
realize in respect of the Options granted under the Arrow Stock Option Plan will
qualify as "performance-based compensation" under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). While Section 162(m) places
certain limitations on the amount that may be deducted by Arrow in respect of
compensation earned by its Chief Executive Officer and its other four most
highly compensated officers, amounts which qualify as "performance-based
compensation" under Section 162(m) will not be subject to the deduction
limitation. Finally, the amendments to the Arrow Stock Option Plan include
certain technical changes which are intended to ensure that the plan complies
with recent changes in the rules applicable under the Securities Exchange Act of
1934, as amended. The effectiveness of the above-described amendment to the
Arrow Stock Option Plan is subject to the approval of Arrow's shareholders at
the meeting.
The principal provisions of the Arrow Stock Option Plan are summarized
below. This summary does not purport to be a complete description of the Arrow
Stock Option Plan and is qualified in its entirety by the terms of the plan
itself. A copy of the Arrow Stock Option Plan, as amended, is attached as Annex
A and incorporated herein by reference. Defined terms used below have the
meanings set forth in the Arrow Stock Option Plan, unless otherwise indicated
herein. The Arrow Stock Option Plan is intended to offer those employees of
Arrow and its subsidiaries who are most responsible for the growth and
profitability of Arrow a means of becoming owners of shares of Arrow common
stock and thereby to encourage such employees to continue in the employ of Arrow
or a subsidiary. Accordingly, the Board of Directors recommends to the
shareholders the approval of the proposed amendments of the Arrow Stock Option
Plan.
SUMMARY OF THE ARROW ELECTRONICS, INC. STOCK OPTION PLAN
The Arrow Stock Option Plan, as amended, provides for the granting of
Options to purchase up to 10,500,000 shares of Arrow common stock to key
employees of Arrow and its subsidiaries. No individual may receive in any
calendar year Options with respect to more than 10 percent of the total number
of shares available under the plan during the term of the plan. Arrow common
stock issued pursuant to the Arrow Stock Option Plan may be either authorized
but unissued Arrow common stock or reacquired Arrow common stock, or both. The
Arrow Stock Option Plan shall be administered by the Board of Directors or by a
committee of two or more non-employee directors of Arrow, as may be appointed by
the Board of Directors. References to the Board of Directors in the
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<PAGE> 19
following description of the Arrow Stock Option Plan should be deemed to refer
to the committee if at such time a committee is appointed.
The Board of Directors shall determine the employees to whom grants of
Options shall be made under the Arrow Stock Option Plan, the number of shares of
Arrow common stock subject to the Options to be granted to each employee
selected, the time or times when Options will be granted, the exercise price per
share of Arrow common stock and the period during which Options will be
exercisable. The exercise price of an ISO may not be less than the fair market
value of the shares of Arrow common stock on the date the ISO is granted. The
exercise price of ASOs shall be determined in the discretion of the Board of
Directors. No employee is eligible to receive an ISO if the employee owns stock
(including stock the ownership of which is attributed to the employee pursuant
to Section 424(d) of the Code) possessing more than 10 percent of the total
voting power of all classes of stock of Arrow or a subsidiary. The aggregate
fair market value, determined on the date of grant, of shares with respect to
which ISOs are granted which are exercisable for the first time by any employee
during any calendar year may not exceed $100,000.
Options granted to an employee under the Arrow Stock Option Plan may not be
transferred by the employee otherwise than by will or by the laws of descent and
distribution and such Options may be exercised, during the employee's lifetime,
only by the employee. The terms of an Option may provide that it is exercisable
only in specified installments during the option period. Any such Option shall
be exercisable in full, however, and shall become free of the installment
requirements if the employee's employment with Arrow or its subsidiaries is
terminated by reason of the employee's death, total and permanent disability, as
determined by the Board of Directors, retirement under a retirement plan of
Arrow or a subsidiary at or after the employee's normal retirement date or, with
the consent of the Board of Directors, at the employee's early retirement date.
Shares of Arrow common stock acquired by an employee under the Arrow Stock
Option Plan are subject to Arrow's right of first refusal and may not be sold or
otherwise disposed of until the employee first offers to sell them to Arrow at
the market price on the date such offer is received by the Secretary of Arrow.
If Arrow fails to accept the offer to purchase the shares of Arrow common stock
within seven days after receipt of such offer, such shares will be free of all
restrictions under the Arrow Stock Option Plan.
The Arrow Stock Option Plan provides that if there is any change in the
outstanding shares of Arrow common stock by reason of any stock split, stock
dividend, recapitalization, merger, consolidation, reorganization, combination
or exchange of shares or other similar event, the Board of Directors may, in its
discretion, and without further shareholder approval, make such adjustments as
may be equitably required in the number or kind of shares that may be issued
under the plan, in the number or kind of shares which are subject to outstanding
options or in the purchase price per share relating thereto.
The Board of Directors may amend the Arrow Stock Option Plan at any time,
but no amendment that increases the aggregate number of shares which may be
subject to Options granted pursuant to the Option Plan shall be effective unless
and until the amendment is approved by the shareholders of Arrow (other than
equitable adjustments referred to in the immediately preceding paragraph which
will not constitute amendments).
As amended, the Arrow Stock Option Plan will terminate on December 31, 2006
unless terminated earlier by action of the Board of Directors.
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<PAGE> 20
It is expected that Options to purchase shares under the Arrow Stock Option
Plan will be granted in the future to highly paid corporate officers and
divisional managers and employees, including those named in the tables appearing
under "EXECUTIVE COMPENSATION AND OTHER MATTERS." Such future grants are not
presently determinable. See the tables appearing under "EXECUTIVE COMPENSATION
AND OTHER MATTERS" for previous grants and awards.
FEDERAL INCOME TAX CONSEQUENCES
Arrow has been advised that under the present provisions of the Code the
federal income tax consequences of the Arrow Stock Option Plan are as set forth
below.
1. With respect to ASOs: The granting of an ASO to an employee will not
result in taxable income to the employee or a deduction in computing the income
tax of Arrow or any subsidiary. Upon exercise of an ASO, the excess of the fair
market value of the shares acquired over the option price is (a) taxable to the
optionee as ordinary income and (b) deductible in computing Arrow's income tax,
subject to satisfying applicable withholding requirements and general rules
relating to reasonableness of compensation.
2. With respect to ISOs: An optionee will not be deemed to receive any
income at the time an ISO is granted or exercised. If an optionee does not
dispose of the shares acquired on exercise of an ISO within the two year period
beginning on the day after the day of the grant of the ISO or within the one
year period beginning on the day after the day of the transfer of the shares to
the optionee, under present federal income tax law the gain (if any) on a
subsequent sale (i.e., the excess of the proceeds received over the option
price) will be long-term capital gain and any loss will be treated as a
long-term capital loss.
If the optionee disposes of the shares within the two year or one year
period referred to above, the disposition is a "disqualifying disposition," and
the optionee will generally realize ordinary income taxable as compensation in
the year of the disqualifying disposition to the extent of the excess of the
fair market value of the shares on the date of purchase over the option price,
and the balance, if any, will be long-term or short-term capital gain depending,
generally, on whether the shares were held more than one year after the ISO was
exercised. To the extent the optionee recognizes compensation income with
respect to a disqualifying disposition, Arrow will be entitled to a
corresponding deduction.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the outstanding shares
of Arrow common stock is required for the approval of the proposed amendments to
the Arrow Stock Option Plan. Consequently, any shares not voted (whether by
abstention or broker non-votes) have the same effect as votes against the
proposed amendments to the Arrow Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THIS
PROPOSAL.
PROPOSED AMENDMENT OF THE ARROW RESTRICTED STOCK PLAN
To provide an incentive to key employees of Arrow to continue in the employ
of Arrow, in 1979 the Board of Directors adopted, and the shareholders approved,
a Restricted Stock Plan (the "Arrow Restricted Stock Plan"). In 1982, the Arrow
Restricted Stock Plan was amended, with
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<PAGE> 21
shareholder approval, to provide for the grant of up to 580,000 shares and, in
1986, by the Board of Directors to provide for a revised schedule of the lapse
of restrictions on shares awarded under the Arrow Restricted Stock Plan. On
November 12, 1987, the Board of Directors adopted an amendment and restatement
of the Arrow Restricted Stock Plan, subject to shareholder approval (which was
obtained on January 11, 1988), which, among other things, increased the
aggregate number of shares that may be awarded under the Arrow Restricted Stock
Plan by 250,000 and extended the term of the Arrow Restricted Stock Plan to
December 31, 1998. On June 6, 1991, the Board of Directors adopted an amendment
and restatement of the Arrow Restricted Stock Plan, subject to shareholder
approval (which was obtained on September 25, 1991), which, among other things,
increased the aggregate number of shares that may be awarded under the Arrow
Restricted Stock Plan by 500,000. On October 7, 1994, the Board of Directors
adopted an amendment to the Arrow Restricted Stock Plan, subject to shareholder
approval (which was obtained on November 23, 1994), which increased the
aggregate number of shares that may be awarded under the Arrow Restricted Stock
Plan by 150,000. Because the Board of Directors wants to ensure that the Arrow
Restricted Stock Plan continues to meet the goals for which it was adopted, on
February 25, 1997, the Board of Directors adopted an amendment and restatement
of the Arrow Restricted Stock Plan, subject to shareholder approval, increasing
the aggregate number of shares that may be awarded under the Arrow Restricted
Stock Plan by 500,000 and extending the term of the plan to December 31, 2006.
In addition, the amendments to the Arrow Restricted Stock Plan include certain
technical changes which are intended to ensure that the plan complies with
recent changes in the rules applicable under the Securities Exchange Act of
1934, as amended. The effectiveness of the above-described amendments to the
Arrow Restricted Stock Plan is subject to the approval of Arrow's shareholders
at the meeting.
The principal provisions of the Arrow Restricted Stock Plan are summarized
below. This summary does not purport to be a complete description of the Arrow
Restricted Stock Plan and is qualified in its entirety by the terms of the plan
itself. A copy of the Arrow Restricted Stock Plan is attached as Annex B and
incorporated herein by reference. Defined terms used below have the meanings set
forth in the Arrow Restricted Stock Plan, unless otherwise indicated. The shares
covered by the Arrow Restricted Stock Plan are referred to hereinafter as the
"Restricted Shares." The Board of Directors believes that the Arrow Restricted
Stock Plan encourages the retention and motivation of key employees and,
accordingly, the Board of Directors recommends to the shareholders the approval
of the proposed amendment to the Arrow Restricted Stock Plan.
SUMMARY OF THE ARROW ELECTRONICS, INC. RESTRICTED STOCK PLAN
The Arrow Restricted Stock Plan, as amended, provides for the issuance of
up to 1,980,000 Restricted Shares to key employees of Arrow and its
subsidiaries. Restricted Shares issued pursuant to the Arrow Restricted Stock
Plan may be either authorized but unissued shares or reacquired shares, or both.
The Arrow Restricted Stock Plan shall be administered by the Board of Directors
or by a committee of two or more non-employee directors of Arrow, as may be
appointed by the Board of Directors. No committee has been appointed, and the
Arrow Restricted Stock Plan is therefore administered by the Board of Directors.
References to the Board of Directors in the following description of the Arrow
Restricted Stock Plan should be deemed to refer to the committee if at such time
a committee is appointed.
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The Board of Directors shall determine the employees to whom awards of
Restricted Shares shall be made under the Arrow Restricted Stock Plan, the
number of Restricted Shares covered by each award and the time or times when
awards of Restricted Shares will be made. Restricted Shares shall be awarded
under the Arrow Restricted Stock Plan to employees without such employees being
required to pay for such Restricted Shares. However, the Board of Directors may
require that Restricted Shares awarded to an employee be issued only upon
payment of a purchase price determined by the Board of Directors but not in
excess of $1 per share.
Restricted Shares awarded to an employee pursuant to the Arrow Restricted
Stock Plan may not be sold, assigned, transferred, pledged, alienated,
hypothecated or otherwise disposed of except as provided in the Arrow Restricted
Stock Plan. Except as the Board of Directors may otherwise determine, Restricted
Shares awarded under the Arrow Restricted Stock Plan become free of such
restrictions with respect to 25% of such Restricted Shares as of each of the
first, second, third and fourth anniversaries of the grant date of such
Restricted Shares. In addition, Restricted Shares awarded an employee will
become free of such restrictions if the employee's employment with Arrow or its
subsidiaries is terminated by reason of the employee's death, permanent
disability, as determined by the Board of Directors, retirement under a
retirement plan of Arrow or a subsidiary at or after the employee's normal
retirement date or, with the consent of the Board of Directors, at the
employee's early retirement date. If an employee's employment with Arrow is
terminated for any other reason, any Restricted Shares awarded to the employee
which have not become free of such restrictions (by reason of the expiration of
the time periods specified above) will be forfeited to Arrow (or, if the
employee purchased the Restricted Shares, will become subject to optional
repurchase by Arrow at the price paid by the employee).
Shares awarded under the Arrow Restricted Stock Plan which become free of
the restrictions described in the preceding paragraph will remain subject to
Arrow's right of first refusal. Thus, such Restricted Shares may not be sold or
otherwise disposed of until the employee first offers to sell the Restricted
Shares to Arrow at the market price per share on the date such offer is received
by the Secretary of Arrow. If Arrow fails to accept the offer to purchase such
Restricted Shares within seven days after receipt of such offer, the Restricted
Shares will be free of all restrictions under the Arrow Restricted Stock Plan.
Employees awarded Restricted Shares will have full voting rights on such
Restricted Shares and will have the right to receive and retain cash dividends
paid on such Restricted Shares from the date of award.
The Arrow Restricted Stock Plan provides that if there is any change in the
outstanding shares of Arrow Common Stock by reason of any stock split, stock
dividend, recapitalization, merger, consolidation, reorganization, combination
or exchange of shares or other similar event, the Board of Directors may, in its
discretion, and without further shareholder approval, make such adjustments as
may be equitably required in the number or kind of Restricted Shares that may be
issued under the Arrow Restricted Stock Plan, in the number or kind of
Restricted Shares which have been awarded under the Arrow Restricted Stock Plan
or in the repurchase price per Restricted Share relating thereto; any additional
Restricted Shares or other property received in respect of the Restricted Shares
issued pursuant to an award under the Arrow Restricted Stock Plan may be
subjected to the restrictions imposed by the Arrow Restricted Stock Plan. In
addition to the restrictions specified in the Arrow Restricted Stock Plan, the
Board of Directors may impose such other restrictions on Restricted Shares
issued under the Arrow Restricted Stock Plan as it deems
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advisable, including restrictions required under applicable securities laws or
stock exchange rules or regulations.
The Board of Directors may amend the Arrow Restricted Stock Plan at any
time, but no amendment that increases the aggregate number of Restricted Shares
which may be issued pursuant to the Arrow Restricted Stock Plan shall be
effective unless and until the amendment is approved by the shareholders of
Arrow (other than equitable adjustments referred to in the immediately preceding
paragraph which will not constitute amendments).
As amended, the Arrow Restricted Stock Plan will terminate on December 31,
2006 unless terminated earlier by action of the Board of Directors.
It is expected that awards of Restricted Shares under the Arrow Restricted
Stock Plan will be made in the future to highly paid corporate officers and
divisional managers and employees, including those named in the tables appearing
under "EXECUTIVE COMPENSATION AND OTHER MATTERS." Such future awards are not
presently determinable. See the "SUMMARY COMPENSATION TABLE" for previous grants
and awards.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the outstanding shares
of Arrow common stock is required for the approval of the proposed amendment to
the Arrow Restricted Stock Plan. Consequently, any shares not voted (whether by
abstention or broker non-votes) have the same effect as votes against the
proposed amendment to the Arrow Restricted Stock Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THIS
PROPOSAL.
APPROVAL OF ADOPTION OF ARROW NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
On February 25, 1997 the Board of Directors adopted the Arrow Electronics,
Inc. Non-Employee Directors Stock Option Plan (the "Directors Option Plan"), the
effectiveness of which is subject to the approval of Arrow's shareholders at the
meeting. The principal provisions of the Directors Option Plan are summarized
below. This summary does not purport to be a complete description of the
Directors Option Plan and is qualified in its entirety by the terms of the plan
itself, a copy of which is attached as Annex C and incorporated herein by
reference. Defined terms used below have the meanings set forth in the Directors
Option Plan, unless otherwise indicated.
SUMMARY OF THE ARROW ELECTRONICS, INC.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
The Directors Option Plan provides for the granting of options ("Director
Options") to purchase Arrow common stock to each member of the Board of
Directors who is not an employee of Arrow or any subsidiary of the company
(each, a "Non-Employee Director"). The amount, timing and other material terms
of the Director Options are fixed under the Directors Option Plan. Each
Non-Employee Director who is serving on the Board of Directors as of the date
immediately following the meeting will receive a Director Option to purchase
7,500 shares of Arrow common stock. Each Non-Employee Director who joins the
Board after the date immediately following the meeting will receive a Director
Option to purchase 7,500 shares of Arrow common stock as of the date he or she
first joins the Board. On the date following each annual meeting of Arrow
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shareholders after 1997, each Non-Employee Director then serving on the Board
will receive a Director Option to purchase 2,000 shares of Arrow common stock.
The aggregate number of shares of Arrow common stock authorized to be issued
under the Directors Option Plan is 250,000, subject to adjustment in the event
of a change in capitalization of Arrow. The exercise price of each Director
Option will be equal to the Fair Market Value of the underlying shares as of the
grant date of such Director Option. Each Director Option will become exercisable
with respect to 25% of the covered shares as of each of the first, second,
third, and fourth anniversaries of the date the Director Option was granted,
provided that the Optionee continues to serve on the Board as of each such
anniversary date. However, in the event of a termination of a Non-Employee
Director's service on the Board as a result of the Non-Employee Director's
Retirement, Disability or death or a termination of service within two years
following a Change in Control of the Company, any Director Options then held by
the Non-Employee Director will become fully exercisable. In addition, in the
event of a dissolution or liquidation of Arrow, a sale of substantially all of
Arrow's assets or a merger or consolidation in which Arrow is not the surviving
company, all outstanding Director Options will become fully exercisable unless
equivalent options of the acquiror are substituted for such Director Options.
The ordinary term of each Director Option is ten years, but a Director Option
may terminate sooner if the Optionee ceases to serve on the Board. If an
Optionee's service on the Board terminates for any reason other than Cause,
Retirement, Disability or death, the Optionee's Director Options will terminate
90 days after such termination of service. If an Optionee's service on the Board
terminates for Cause, the Optionee's Director Options will terminate
immediately. If an Optionee's service on the Board terminates due to Retirement
or Disability, the Optionee's Director Options will terminate one year after the
Optionee's termination from the Board, but in no event after the expiration of
the ten-year term of the Director Option. If, however, an Optionee dies prior to
the termination of a Director Option held by the Optionee, the Director Option
will be exercisable by the Optionee's beneficiary for one year after the
Optionee's death, but in no event after the expiration of the ten-year term of
the Director Option.
In the event of a future change in the capitalization of Arrow, appropriate
adjustments will be made to the aggregate number of shares available under the
Directors Option Plan, to the number of shares underlying both future and
outstanding Director Options and to the exercise price of outstanding Director
Options, to the extent necessary.
The term of the Directors Option Plan is five years. It may be earlier
terminated or amended by the Board, except that the Board may not increase the
aggregate number of shares available under the plan or the number of shares
subject to any Director Option without shareholder approval, other than as
necessary to reflect a change in capitalization. The Board will serve as the
administrator of the Directors Option Plan for the purpose of resolving any
ambiguities or disputes regarding the terms of the Directors Option Plan or any
Director Options granted thereunder.
Under the terms of the Directors Option Plan described above, as of May 15,
1997 Daniel W. Duval, Gaynor N. Kelley, Roger King, Karen Gordon Mills, and
Richard S. Rosenbloom will each receive an initial grant of options to purchase
7,500 shares with an exercise price equal to the Fair Market Value of the
underlying shares as of that date.
FEDERAL INCOME TAX CONSEQUENCES
Arrow has been advised that the following are the federal income tax
consequences of the Directors Option Plan. The granting of a Director Option
will not result in taxable income to the Optionee or a deduction in computing
the income tax of Arrow or any subsidiary. Upon exercise of a
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Director Option, the excess of the fair market value of the shares acquired over
the option price is (a) taxable to the Optionee as ordinary income and (b)
deductible in computing Arrow's income tax.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the outstanding shares
of Arrow common stock is required for the approval of the Directors Option Plan.
Consequently, any shares not voted (whether by abstention or broker non-votes)
have the same effect as votes against the adoption of the Directors Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THIS
PROPOSAL.
APPROVAL OF ADOPTION OF ARROW NON-EMPLOYEE
DIRECTORS DEFERRAL PLAN
On February 25, 1997 the Board of Directors adopted the Arrow Electronics,
Inc. Non-Employee Directors Deferral Plan (the "Directors Deferral Plan"), the
effectiveness of which is subject to the approval of Arrow's shareholders at the
meeting. The principal provisions of the Directors Deferral Plan are summarized
below. This summary does not purport to be a complete description of the
Directors Deferral Plan and is qualified in its entirety by the terms of the
plan itself, a copy of which is attached as Annex D and incorporated herein by
reference. Defined terms used below have the meanings set forth in the Directors
Deferral Plan, unless otherwise indicated.
SUMMARY OF THE ARROW ELECTRONICS, INC.
NON-EMPLOYEE DIRECTORS DEFERRAL PLAN
The Directors Deferral Plan covers each director of Arrow who is not an
employee of Arrow or any subsidiary of Arrow (each a "Non-Employee Director").
Under the Directors Deferral Plan, a percentage of the annual retainer fee
payable to each Non-Employee Director may be withheld by Arrow and paid upon the
Non-Employee Director's termination from the Board of Directors. Unless a
Non-Employee Director makes a contrary election, 50 percent of the Non-Employee
Director's annual retainer fee will be deferred under the plan. However, a
Non-Employee Director may elect a different percentage or elect not to defer any
portion of his or her annual retainer fee. Amounts that are deferred under the
Directors Deferral Plan will be converted into phantom share units of Arrow
common stock and the phantom share units will be credited to a recordkeeping
account in the name of the Non-Employee Director. Until the time that the
phantom share units are paid out, the Non-Employee Director's account will be
adjusted to reflect any dividends paid on Arrow common stock. This will be done
by crediting the Non-Employee Director's account with a number of additional
whole and fractional phantom share units arrived at by multiplying the amount of
the dividends paid on each share of common stock by the number of whole phantom
stock units credited to the Non-Employee Director and dividing the product by
the then Fair Market Value of Arrow common stock.
Upon the termination of a Non-Employee Director's service on the Board,
each whole phantom share unit credited to the Non-Employee Director's account
will be converted into one share of common stock and each fractional phantom
share unit credited to the Non-Employee Director's account will be converted
into cash based on the then Fair Market Value of Arrow common stock. The shares
of Arrow common stock and cash will then be distributed in a lump sum to the
Non-
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Employee Director, or in the event of the Non-Employee Director's death, to his
or her designated beneficiary, spouse or estate. An aggregate of 500,000 shares
of common stock will be available for distributions under the Directors Deferral
Plan, subject to adjustment in the event of a change in the capitalization of
Arrow. The Board of Directors may, in its discretion, permit early payment of a
Non-Employee Director's account, to the extent that the Non-Employee Director
experiences an unforeseen financial emergency. Notwithstanding the foregoing,
upon a change in control of Arrow or the adoption by Arrow of a plan of
dissolution or liquidation of Arrow, or approval by shareholders of an agreement
for the sale of substantially all of the assets of Arrow and its subsidiaries or
a merger or consolidation in which Arrow is not to be the surviving corporation,
the deferral account of each Non-Employee Director will be paid immediately in
the manner described above.
It is intended that the Non-Employee Directors will not realize taxable
income with respect to the amounts deferred under the Director Deferral Plan
until such amounts are distributed. When shares are distributed to a
Non-Employee Director he or she will realize income equal to the fair market
value of such shares and Arrow should be entitled to an income tax deduction in
an equal amount.
The closing price of a share of Arrow common stock on March 27, 1997 was
$56.125, as reported on the New York Stock Exchange Consolidated Reporting Tape.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the outstanding shares
of Arrow common stock is required for the approval of the Directors Deferral
Plan. Consequently, any shares not voted (whether by abstention or broker
non-votes) have the same effect as votes against the adoption of the Directors
Deferral Plan.
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 1997. 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 14, 1998. 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 5, 1997.
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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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ANNEX A
ARROW ELECTRONICS, INC.
STOCK OPTION PLAN
(AS AMENDED AND RESTATED EFFECTIVE AS OF MAY 15, 1997)
ARTICLE 1
ESTABLISHMENT AND PURPOSE
1.1 Establishment. Arrow Electronics, Inc., a New York corporation (the
"Company"), hereby amends and restates its stock option plan for certain
employees as described herein which shall be known as the ARROW ELECTRONICS,
INC. STOCK OPTION PLAN, as amended and restated (the "Plan"). The Plan is
intended to grant options which qualify as incentive stock options satisfying
the requirements of Section 422 of the Internal Revenue Code of 1986, as
amended, and to grant nonqualified stock options which are not intended to so
qualify under said Section 422.
1.2 Purpose. The purpose of the Plan is to secure for the Company and its
shareholders the benefits of the incentive inherent in the ownership of the
Company's common stock by the key employees of the Company and its Subsidiaries
who are largely responsible for the Company's future growth and financial
success.
ARTICLE 2
DEFINITIONS
For purposes of the Plan, the following terms shall have the meanings
provided herein:
2.1 "Board" means the Board of Directors of the Company.
2.2 "Code" means the Internal Revenue Code of 1986, as amended.
2.3 "Committee" means the committee provided in Section 3.1 consisting of
two or more Outside Directors of the Board.
2.4 "Disability" means total and permanent disability as determined by the
Committee.
2.5 "Fair Market Value" means the closing price of a Share reported on the
Consolidated Tape (as such price is reported in the Wall Street Journal.)
2.6 "Incentive Option" means an option granted under the Plan to purchase
Shares and which is intended to qualify as an incentive stock option under
Section 422 of the Code.
2.7 "Nonqualified Option" means an option granted under the Plan to
purchase Shares and which is not intended to qualify as an Incentive Option.
2.8 "Option" means, collectively, Incentive Options and Nonqualified
Options.
2.9 "Outside Director" means a director who qualifies as both an Outside
Director within the meaning of Section 162(m) of the Code and a Non-Employee
Director within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934, as amended.
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2.10 "Shares" means shares of the Company's common stock, par value $1 per
share.
2.11 "Subsidiary" means any corporation which qualifies as a "subsidiary
corporation" of the Company under Section 424(f) of the Code or, if applicable,
as a "parent corporation" of the Company under Section 424(e) of the Code.
ARTICLE 3
ADMINISTRATION
3.1 Administration. The Plan shall be administered by the Board. The Board
may appoint a committee consisting of two or more directors to administer the
Plan and may, to the full extent permitted by law, authorize and empower such
Committee to do any and all things which the Board is authorized and empowered
to do with respect to the Plan. All subsequent references herein to the
Committee shall be deemed to refer to the Board if at the time there is no
Committee serving.
3.2 Powers of the Committee. The Committee shall have all the powers
vested in it by the terms of the Plan, such powers to include exclusive
authority (within the limitations described herein) to select the employees to
be granted Options, to determine the number of Shares subject to, and the terms
of, the Options to be granted to each employee selected, to determine the time
when Options will be granted and the period during which Options will be
exercisable, and to prescribe the form of the instruments, if any, embodying
Options. The Committee shall be authorized to interpret the Plan and the Options
granted under the Plan, to establish, amend and rescind any rules and
regulations relating to the Plan, and to make any other determinations which it
believes necessary or advisable for the administration of the Plan. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or in any Option in the manner and to the extent the
Committee deems necessary or desirable to carry it into effect. Any decision of
the Committee in the administration of the Plan, as described herein, shall be
final and conclusive. The Committee may act only by a majority of its members in
office, except that the members thereof may authorize any one or more of their
number or any officer of the Company to execute and deliver documents on behalf
of the Committee.
ARTICLE 4
ELIGIBILITY AND PARTICIPATION
Options may be granted only to key employees of the Company and its
Subsidiaries. Any key employee of the Company or of a subsidiary shall be
eligible to receive one or more Incentive Options, provided at the time such
Incentive Option is granted, he does not own stock (including stock the
ownership of which is attributed to him pursuant to Section 424(d) of the Code)
possessing more than 10 percent of the total voting power of all classes of
stock of the Company or a Subsidiary.
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ARTICLE 5
SHARES SUBJECT TO PLAN
5.1 Amount of Stock. There may be issued under the Plan an aggregate of
not more than 10,500,000 Shares, subject to adjustment as provided in Section
5.2. Shares issued pursuant to the Plan may be either authorized but unissued
Shares or reacquired Shares, or both. In the event that Options shall terminate
or expire without being exercised in whole or in part, new Options may be
granted covering the Shares not purchased under such lapsed Options. No
individual optionee may receive in any calendar year Options with respect to
more than 10% of the aggregate number of Shares that may be issued pursuant to
the Plan.
5.2 Dilution and Other Adjustments. In the event of any change in the
outstanding Shares by reason of any stock split, stock dividend,
recapitalization, merger, consolidation, reorganization, combination or exchange
of shares or other similar event, if the Committee shall determine, in its sole
discretion, that such change equitably requires an adjustment in the number or
kind of shares that may be issued under the Plan, in the number or kind of
shares which are subject to outstanding Options, or in the purchase price per
share relating thereto, such adjustment shall be made by the Committee and shall
be conclusive and binding for all purposes of the Plan.
ARTICLE 6
TERMS AND CONDITIONS OF OPTIONS
6.1 Terms of Options. An Option granted under the Plan shall be in such
form as the Committee may from time to time approve. Each Option shall be
subject to the terms and conditions provided in this Article 6 and shall contain
such additional terms and conditions as the Committee may deem desirable, but in
no event shall such terms and conditions be inconsistent with the Plan. In
addition, the terms and conditions of Incentive Options shall in all cases be
consistent with the provisions of the Code applicable to "incentive stock
options" as described in Section 422 of the Code.
6.2 Option Price. The purchase price per Share under an Option will be
determined by the Committee in its discretion, provided, however, that the
purchase price per Share under an Option may not be less than the Fair Market
Value of a Share at the date the Option is granted.
6.3 Option Period. The period during which an Option may be exercised
shall be fixed by the Committee, but no Incentive Option shall be exercisable
after the expiration of ten years from the date such Incentive Option is granted
and no Nonqualified Option shall be exercisable after the expiration of ten
years and one day from the date such Nonqualified Option is granted.
6.4 Consideration. As consideration for the grant of an Option, the
optionee shall state his present intention to remain continuously in the employ
of the Company or a Subsidiary for at least one year from the date the Option is
granted. No Option shall be exercisable until after the expiration of such
one-year period. Except as provided in Section 6.7, the holder of an Option must
be in the employ of the Company or a Subsidiary at the time the Option is
exercised. An optionee shall be deemed to be in the employ of the Company or a
Subsidiary during any period of military, sick leave or other leave of absence
meeting the requirements of Section 1.421-7(h)(2) of the Federal Income Tax
Regulations, or similar or successor section.
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6.5 Exercise of Option. An Option may be exercised in whole or in part
from time to time during the option period (or, if determined by the Committee,
in specified installments during the option period) by giving written notice of
exercise to the Secretary of the Company specifying the number of Shares to be
purchased. Notice of exercise of Option must be accompanied by payment in full
of the purchase price either by cash or check or in Shares owned by the
optionee, having a Fair Market Value at the date of exercise equal to such
purchase price, or in a combination of the foregoing. No Shares shall be issued
in connection with the exercise of an Option until full payment therefor has
been made. An optionee shall have the rights of a shareholder only with respect
to Shares for which certificates have been issued to him.
6.6 Nontransferability of Options. No Option granted under the Plan shall
be transferable by the optionee otherwise than by will or by the laws of descent
and distribution and such Option shall be exercisable, during his lifetime, only
by him.
6.7 Retirement, Death or Disability of an Optionee.
(a) If an Option is exercisable in specified installments as provided in
Section 6.5 and if the optionee's employment with the Company and its
Subsidiaries terminates by reason of his death, Disability or retirement under a
retirement plan of the Company or a Subsidiary at or after his normal retirement
date or, with the consent of the Committee, at an early retirement date, his
Option shall be exercisable in full, and any restrictions imposed upon exercise
of the Option by reason of the installment requirements shall be of no further
force and effect.
(b) If an optionee's employment with the Company or a Subsidiary terminates
by reason of his Disability, he may exercise his Option during the period ending
on the earlier of the date one year from such termination of employment or
expiration of the option period provided in the Option pursuant to Section 6.3.
(c) In the event of the death of an optionee while in the employ of the
Company or a Subsidiary, or within the one-year period following his termination
of employment by reason of Disability, or within the three-month period
following his retirement in accordance with subparagraph (d), the Option granted
to him shall be exercisable by the executors, administrators, legatees or
distributees of his estate, as the case may be. In such case, the Option shall
be exercisable to the extent provided in the Option agreement, but in no event
shall such agreement provide that the number of shares remaining subject to the
Option be less than the number of Shares purchasable by the employee on the date
of his death nor more than the total number of Shares remaining under the
Option. The period during which such Option may be exercised shall end on the
earlier of the date one year from the optionee's death or expiration of the
option period provided in the Option pursuant to Section 6.3. In the event an
Option is exercised by the executors, administrators, legatees or distributees
of the estate of a deceased optionee, the Company shall be under no obligation
to issue Shares thereunder unless and until the Company is satisfied that the
person or persons exercising the Option are the duly appointed legal
representatives of the deceased optionee's estate or the proper legatees or
distributees thereof.
(d) If an optionee's employment with the Company and its Subsidiaries
terminates by reason of his retirement under a retirement plan of the Company or
a Subsidiary at or after his normal
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retirement date or, with the consent of the Committee, at an early retirement
date, he may exercise his Option during the period ending on the earlier of the
date three months from such termination of employment or expiration of the
option period provided in the Option pursuant to Section 6.3.
6.8 Annual Limitation for Incentive Options. The maximum aggregate fair
market value of the shares of stock of the Company or a Subsidiary (determined
as of the date of grant of the Incentive Option) for which Incentive Options are
exercisable for the first time by an employee during any calendar year (under
the Plan and all other incentive stock option plans of the Company and its
Subsidiaries) shall not exceed $100,000 as, and to the extent, required by
Section 422(d) of the Code.
6.9 Right of First Refusal. Shares acquired under the Plan by an optionee
may not be sold or otherwise disposed of in any way (including a transfer by
gift or by reason of the death of the optionee) until the optionee (or his legal
representative, legatee or distributee of his estate) first offers to sell the
Shares to the Company as herein provided. The price per share at which the
Shares shall be offered to the Company shall be the closing price per Share
reported on the Consolidated Tape (as such price is reported in The Wall Street
Journal) on the date the optionee's offer is received by the Secretary of the
Company. If the Company fails to accept the offer to purchase such Shares within
seven days after such date, the Shares shall thereafter be free of all
restrictions under the Plan.
6.10 Withholding. No Option may be exercised, unless the optionee has
paid, or has made provision satisfactory to the Committee for payment of,
federal, state and local income taxes, or any other taxes (other than stock
transfer taxes) which the Company may be obligated to collect as a result of
such issuance. In its sole discretion, the Committee may permit an optionee to
satisfy the obligation imposed by this Section, in whole or in part, by
instructing the Company to withhold up to that number of Shares otherwise
deliverable to the optionee with a Fair Market Value equal to the amount of tax
to be withheld. Any fractional share of Common Stock required to satisfy such
tax obligations shall be disregarded and the amount due shall be paid in cash by
the optionee.
ARTICLE 7
MISCELLANEOUS PROVISIONS
7.1 No Implied Rights. No employee or other person shall have any claim or
right to be granted an Option under the Plan. Neither the Plan nor any action
taken hereunder shall be construed as giving any employee any right to be
retained in the employ of the Company or any Subsidiary or affect any right of
the Company or any Subsidiary to terminate any employee's employment.
7.2 Securities Law Compliance. No Shares shall be issued hereunder unless
counsel for the Company shall be satisfied that such issuance will be in
compliance with applicable Federal and State securities laws.
7.3 Ratification of Actions. By accepting any Option or other benefits
under the Plan, each employee and each person claiming under or through him
shall be conclusively deemed to have indicated his acceptance and ratification
of, and consent to, any action taken under the Plan by the Company, the Board or
the Committee.
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7.4 Gender. The masculine pronoun means the feminine and the singular
means the plural wherever appropriate.
ARTICLE 8
AMENDMENTS OR DISCONTINUANCE
The Plan may be amended at any time and from time to time by the Board but
no amendment which increases the aggregate number of Shares which may be issued
pursuant to the Plan shall be effective unless and until the same is approved by
the shareholders of the Company. No amendment of the Plan shall adversely affect
any right of any optionee with respect to any Option theretofore granted without
such optionee's written consent.
ARTICLE 9
TERMINATION
The Plan shall terminate upon the earlier of the following dates or events
to occur:
(a) Upon the adoption of a resolution of the Board terminating the
Plan; or
(b) December 31, 2006.
No termination of the Plan shall alter or impair any of the rights or
obligations of any person, without his consent, under any Option theretofore
granted under the Plan.
ARTICLE 10
DISSOLUTION OR MERGER
Upon a dissolution or liquidation of the Company, or a sale of
substantially all of the assets of the Company and its Subsidiaries and the
acquiring entity does not substitute new and equivalent options for the
outstanding Options hereunder, or a merger or consolidation in which the Company
is not to be the surviving corporation and the surviving corporation does not
substitute new and equivalent Options for the outstanding Options hereunder,
each optionee shall be given at least ten days prior written notice of the
occurrence of such event, every Option outstanding hereunder shall become fully
exercisable, and each optionee may exercise his Option, in whole or in part,
prior to or simultaneously with such event. Upon the occurrence of any such
event, any Option not exercised pursuant hereto shall terminate.
ARTICLE 11
SHAREHOLDER APPROVAL AND ADOPTION
The Plan shall be submitted to the shareholders of the Company for their
approval and adoption and Options hereunder may be granted prior to such
approval and adoption but contingent upon such approval and adoption. The
shareholders of the Company shall be deemed to have approved and adopted the
Plan only if it is approved and adopted at a meeting of the shareholders duly
held by vote taken in the manner required by the laws of the State of New York.
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ANNEX B
ARROW ELECTRONICS, INC.
RESTRICTED STOCK PLAN
(AS AMENDED AND RESTATED EFFECTIVE AS OF MAY 15, 1997)
ARTICLE 1
ESTABLISHMENT AND PURPOSE
1.1 Establishment. Arrow Electronics, Inc., a New York corporation (the
"Company"), hereby amends and restates its restricted stock plan for executives
as described herein which shall be known as the ARROW ELECTRONICS, INC.
RESTRICTED STOCK PLAN, as amended and restated (the "Plan").
1.2 Purpose. The Plan is intended to promote the interests of the Company
by providing a method pursuant to which certain key employees of the Company and
its Subsidiaries may become owners of shares of Arrow Electronics, Inc. common
stock, par value $1 per share ("Shares"), under the terms and conditions of, and
in the manner contemplated by, this Plan and thereby encourage such employees to
continue in the employ of the Company or a Subsidiary.
ARTICLE 2
ADMINISTRATION
2.1 Administration. The Plan shall be administered by the Board of
Directors of the Company (the "Board"). The Board may appoint a committee (the
"Committee") consisting of two or more directors to administer the Plan and may
to the full extent permitted by law, authorize and empower such Committee to do
any and all things which the Board is authorized or empowered to do with respect
to the Plan. If a Committee is appointed, each member of the Committee shall at
all times qualify as a Non-Employee Director within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934, as amended. All subsequent references
herein to the Committee shall be deemed to refer to the Board if at the time
there is no Committee serving.
2.2 Powers of the Committee. The Committee shall have all the powers
vested in it by the terms of the Plan, such powers to include exclusive
authority (within the limitations described herein) to select the employees to
be granted Awards under the Plan, to determine the size and terms of the Awards
to be made to each employee selected, to determine the time when Awards will be
granted, and to prescribe the form of the instruments, if any, embodying Awards
made under the Plan. The Committee shall be authorized to interpret the Plan and
the Awards granted under the Plan, to establish, amend and rescind any rules and
regulations relating to the Plan, and to make any other determinations which it
believes necessary or advisable for the administration of the Plan. The
Committee may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Award in the manner and to the extent the
Committee deems desirable to carry it into effect. Any decision of the Committee
in the administration of the Plan, as described herein, shall be final and
conclusive. The Committee may act only by a majority of its members in office,
except that the members thereof may authorize any one or more of their number or
any officer of the Company to execute and deliver documents on behalf of the
Committee.
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ARTICLE 3
ELIGIBILITY AND PARTICIPATION
3.1 Eligibility. Shares, subject to restrictions as hereafter specified,
may be awarded only to key employees of the Company or a Subsidiary.
3.2 Restricted Stock Awards. The Committee shall determine the persons to
whom Awards of Shares, subject to restrictions as hereafter specified, will be
made, the number of Shares covered by each Award, and the time or times when
Awards will be made. The Committee shall also determine whether an employee to
whom an Award under this Plan is made shall be required to purchase the Shares
subject to the Award from the Company for an amount determined by the Committee
but not in excess of $1 per Share. If payment of such an amount is required, it
shall be paid prior to the issuance of the Shares to the employee.
ARTICLE 4
SHARES SUBJECT TO PLAN
4.1 Shares Subject to Plan. There may be issued under the Plan an
aggregate of not more than 1,980,000 Shares, subject to adjustment as provided
in Section 4.2. Shares issued pursuant to the Plan may be either authorized but
unissued Shares or reacquired Shares, or both. If any Shares issued under the
Plan shall be reacquired by the Company pursuant to Section 5.2, such Shares may
again be issued under the Plan.
4.2 Dilution and Other Adjustments. In the event of any change in the
outstanding Shares by reason of any stock split, stock dividend,
recapitalization, merger, consolidation, reorganization, combination or exchange
of shares or other similar event, if the Committee shall determine, in its
discretion, that such change equitably requires an adjustment in the number or
kind of Shares that may be issued under the Plan pursuant to Section 4.1, in the
number or kind of Shares which have been awarded to any person hereunder, or in
the repurchase option price per share relating thereto such adjustment shall be
made by the Committee and shall be conclusive and binding for all purposes of
the Plan. Such adjustment may include subjecting any additional Shares or other
property received in respect of the Shares issued pursuant to an Award to the
restrictions imposed under the Plan upon such Shares.
ARTICLE 5
RESTRICTIONS ON SHARES
5.1 Transferability. Shares issued pursuant to Section 3.2 may not be
sold, assigned, transferred, pledged, alienated, hypothecated or otherwise
disposed of as long as the Company has the right to reacquire the Shares as
hereinafter provided in this Article 5.
5.2 Termination of Employment. If the Award grantee's employment with the
Company and its Subsidiaries terminates for any reason, except as specified in
Section 5.3 prior to the end of the period specified in Section 5.4,
(a) if the Shares were transferred to the grantee without his payment
of any purchase price therefor, the Award shall be forfeited and rescinded
as to all Shares which are, at the date
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of such termination of employment, subject to the restrictions imposed
hereunder, and the grantee shall promptly return such Shares to the
Company, or
(b) if the Shares were sold to the grantee pursuant to Section 3.2,
the Company shall have the option, which it may exercise at any time within
90 days after the grantee's termination of employment, to purchase such
Shares from the grantee at the price per Share at which the Shares were
sold to the grantee.
5.3 Retirement, Death, Total and Permanent Disability. If an Award
grantee's employment with the Company and its Subsidiaries terminates by reason
of his death, Disability or retirement under a retirement plan of the Company or
a Subsidiary at or after his normal retirement age or, with the consent of the
Committee, at an early retirement date, the restrictions imposed upon any Shares
pursuant to Sections 5.1 and 5.2 shall lapse and be of no further force and
effect. The Shares shall thereafter be freely transferable by the grantee or his
estate, subject to the right of first refusal provided for in Section 5.5.
5.4 Lapse of Restrictions. Except as otherwise provided above or as the
Committee may otherwise determine, Shares subject to an Award under the Plan
will become free of the restrictions imposed by Sections 5.1 and 5.2, subject to
the Company's right of first refusal as provided for in Section 5.5, according
to the following schedule:
(a) 25% of the Shares on the first anniversary of the date of the
Award.
(b) 25% of the Shares on the second anniversary thereof,
(c) 25% of the Shares on the third anniversary thereof,
(d) 25% of the Shares on the fourth anniversary thereof.
5.5 Right of First Refusal. Shares acquired under the Plan by a grantee
may not be sold or otherwise disposed of in any way (including a transfer by
gift or by reason of the death of the grantee) until the grantee (or his
personal representative) first offers to sell the Shares to the Company as
herein provided. The price per Share at which the Shares shall be offered to the
Company shall be the closing price per Share reported on the Consolidated Tape
(as such price is reported in The Wall Street Journal) on the date the grantee's
offer is received by the Secretary of the Company. If the Company fails to
accept the offer to purchase such Shares within seven days after such date, the
Shares shall thereafter be free of all restrictions under this Plan.
5.6 Other Restrictions. The Committee shall impose such other restrictions
on any Shares issued pursuant to the Plan as it may deem advisable, including,
without limitation, restrictions under the Securities Act of 1933, as amended,
under the rules or regulations of any stock exchange upon which the Shares or
any other class of shares of the Company are then listed, and under any blue sky
or securities laws applicable to such Shares.
5.7 Certificate Legend. In addition to any legend placed on certificates
for Shares pursuant to Section 5.6, each certificate representing Shares issued
pursuant to the Plan shall bear the following legend or such other legend as may
be specified by the Committee:
"The shares represented by this certificate may not be sold,
assigned, transferred, pledged, alienated, hypothecated or
otherwise disposed of
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and are subject to the restrictions on transfer and forfeiture
and resale obligations set forth in the Restricted Stock Plan of
Arrow Electronics, Inc. (the "Company"), a copy of which is on
file with the Secretary of the Company."
ARTICLE 6
VOTING AND DIVIDEND RIGHTS
6.1 Voting Rights. Grantees holding Shares issued hereunder shall have
full voting rights on such Shares.
6.2 Dividend Rights. Grantees holding Shares issued hereunder shall have
the right to receive and retain dividends paid thereon, subject to Section 4.2
hereof.
ARTICLE 7
MISCELLANEOUS PROVISIONS
7.1 No Implied Rights. No employee or other person shall have any claim or
right to be granted an Award under the Plan. Neither the Plan nor any action
taken hereunder shall be construed as giving any employee any right to be
retained in the employ of the Company or any Subsidiary.
7.2 Subsidiary. As used herein, the term "Subsidiary" shall mean any
corporation a majority of the outstanding voting stock of which is owned,
directly or indirectly, by the Company.
7.3 Securities Law Compliance. No Shares shall be issued hereunder unless
counsel for the Company shall be satisfied that such issuance will be in
compliance with applicable Federal and State securities laws.
7.4 Taxes. The employee granted an Award (or his personal representative)
shall pay to the Company any amount requested by it in respect of any Federal,
State or local income or other taxes required by law to be withheld with respect
to the Shares issued to the employee. If the amount requested is not promptly
paid, the Committee may determine that the Shares are forfeited to the Company
pursuant to Section 5.2. In its sole discretion, the Committee may permit a
grantee to satisfy the obligation imposed by this Section, in whole or in part,
by delivering to the Company Shares owned by the grantee, which for these
purposes, shall be valued at the closing price per Share reported on the
Consolidated Tape (as such price is reported in The Wall Street Journal) as of
the last trading date preceding delivery of such Shares to the Company.
7.5 Expenses. The expenses of the Plan shall be borne by the Company.
However, if an Award is made to an employee of a Subsidiary of the Company, such
Subsidiary shall pay to the Company an amount equal to the fair market value of
the Shares, as determined by the Committee, on the date such Shares are no
longer subject to the restrictions imposed by Sections 5.1 and 5.2, minus the
amount, if any, received by the Company in respect of the purchase of such
Shares.
7.6 Ratification of Actions. By accepting any Award or other benefit under
the Plan, each employee and each person claiming under or through him shall be
conclusively deemed to have indicated his acceptance and ratification of, and
consent to, any action taken under the Plan by the Company, the Board or the
Committee.
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7.7 Gender. The masculine pronoun means the feminine and the singular
means the plural wherever appropriate.
ARTICLE 8
AMENDMENTS OR DISCONTINUANCE
The Plan may be amended at any time and from time to time by the Board but
no amendment which increases the aggregate number of Shares which may be issued
pursuant to the Plan shall be effective unless and until the same is approved by
the shareholders of the Company. No amendment of the Plan shall adversely affect
any right of any grantee with respect to any Award theretofore granted without
such grantee's written consent.
ARTICLE 9
TERMINATION
This Plan shall terminate upon the earlier of the following dates or events
to occur:
(a) upon the adoption of a resolution of the Board terminating the
Plan; or
(b) December 31, 2006.
No termination of the Plan shall alter or impair any of the rights or
obligations of any person, without his consent, under any Award theretofore
granted under the Plan.
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ANNEX C
ARROW ELECTRONICS, INC.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
ARTICLE 1
ESTABLISHMENT AND PURPOSE
1.1 Establishment. Arrow Electronics, Inc., a New York corporation (the
"Company"), hereby establishes the ARROW ELECTRONICS, INC. NON-EMPLOYEE DIRECTOR
STOCK OPTION PLAN (the "Plan"). The Plan is designed to grant to non-employee
directors of the Company options which are not intended to qualify as incentive
stock options under Section 422 of the Internal Revenue Code of 1986, as
amended.
1.2 Purpose. The purpose of the Plan is to secure for the Company and its
shareholders the benefits of the incentive inherent in the ownership of the
Company's common stock by non-employee directors of the Company and to thereby
promote the Company's future growth and financial success.
ARTICLE 2
DEFINITIONS
For purposes of the Plan, the following terms shall have the meanings
provided herein:
2.1 "Board" means the Board of Directors of the Company.
2.2 "Disability" means a disability rendering a director unable to serve as
a member of the Board, as determined by the Board.
2.3 "Change in Control" means a change in control with respect to the
Company of a nature that would be required to be reported (assuming such event
has not been "previously reported") in response to Item 1(a) of the Current
Report on Form 8-K, as in effect on the Effective Date, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"); provided that, without limitation, such a change in control shall be
deemed to have occurred at such time as (a) any "person" (as the term person is
used for purposes of Section 13(d) or 14(d) of the Exchange Act) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 30% or more of the combined voting power of the
Company's outstanding Shares or other securities ordinarily having the right to
vote at elections of the directors of the Company ("Voting Securities"); or (b)
individuals who constitute the Board as of the Effective Date (the "Incumbent
Board") cease for any reason to constitute at least a majority thereof, provided
that any person becoming a director subsequent to the Effective Date whose
election, or nomination for election by the Company's shareholders was approved
by a vote of at least three quarters of the directors comprising the Incumbent
Board (either by a specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for director, without
objection to such nomination) shall be, for purposes of this clause (b),
considered as though such person were a member of the Incumbent Board.
Notwithstanding
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anything in the foregoing to the contrary, no Change in Control shall be deemed
to have occurred for purposes of the vesting of any Option if the transaction
that would otherwise constitute the change in control results in the Optionee to
whom such Option was granted acquiring, either alone or together with a group,
directly or indirectly, 30% or more of the combined voting power of the
Company's Voting Securities.
2.4 "Effective Date" shall mean the date immediately following approval of
the Plan by the shareholders of the Company as prescribed under Article 8.
2.5 "Fair Market Value" means the closing price of a Share reported on the
Consolidated Tape (as such price is reported in the Wall Street Journal.)
2.6 "Non-Employee Director" means a member of the Board who is not an
employee of the Company or any subsidiary of the Company.
2.7 "Option" means an option granted under the Plan to purchase Shares.
2.8 "Optionee" means any person granted an Option under the Plan.
2.9 "Qualifying Termination" means a cessation of an Optionee's service on
the Board for any reason (or no reason) within twenty-four (24) months following
a Change in Control.
2.10 "Retirement" means retirement of an Optionee from the Board after
attainment of the mandatory retirement age under the Company's director
retirement policy as in effect from time to time.
2.11 "Shares" means shares of the Company's common stock, par value $1 per
share.
ARTICLE 3
OPTION TERMS
3.1 Option Grants. The following Options shall be granted under the Plan:
(a) Each Non-Employee Director serving on the Board as of the
Effective Date of the Plan shall receive an Option to purchase 7,500 Shares
as of the Effective Date.
(b) Each Non-Employee Director who becomes a member of the Board after
the Effective Date of the Plan shall receive an Option to purchase 7,500
Shares as of the earlier of the date on which he or she is initially
elected to serve on the Board by vote of the Company's stockholders or the
date on which he or she is initially appointed to serve on the Board
pursuant to the Company's bylaws and articles of incorporation as then in
effect.
(c) Each Non-Employee Director serving on the Board as of the date
immediately following each annual meeting of the Company's shareholders
occurring after the Effective Date of the Plan shall receive an Option to
purchase 2,000 Shares as of each such date.
(d) A former employee of the Company or a subsidiary of the Company
shall be entitled to receive an Option under subsection 3.1(a), (b), and
(c) provided that he or she qualifies as a Non-Employee Director as of the
date that such Option would be granted under the provisions of such
subsection.
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3.2 Purchase Price. The purchase price for Shares under each Option shall
be equal to 100% of the Fair Market Value of such Shares on the date of grant.
3.3 Vesting. Each Option shall become exercisable with respect to 25% of
the Shares subject thereto effective as of each of the first, second, third and
fourth anniversaries of the grant date; provided, that the Optionee continues to
serve on the Board as of such dates. Notwithstanding the foregoing, any and all
Options held by an Optionee shall become fully (100%) exercisable in the event
of the Optionee's Retirement, Disability, Qualifying Termination or death, or
upon the earlier occurrence of a Corporate Event, as provided under Article 7.
If an Optionee ceases to serve on the Board for any reason other than
Retirement, Disability, a Qualifying Termination or death, that portion of an
Option which is not then vested shall automatically be forfeited.
3.4 Duration. Each Option shall terminate on the date which is the tenth
anniversary of the grant date, unless terminated earlier as follows:
(a) If an Optionee's service on the Board terminates for any reason
other than Cause, Retirement, Disability or death, the Optionee may for a
period of ninety (90) days after such termination exercise any Option to
the extent, and only to the extent, that such Option or portion thereof has
become vested and exercisable in accordance with the terms of the Plan,
after which time the Option shall automatically terminate in full.
(b) If an Optionee's service on the Board terminates for Cause, all
Options granted to the Optionee hereunder shall immediately terminate in
full and no rights thereunder may be exercised.
(c) If an Optionee's service on the Board terminates by reason of the
Optionee's Retirement or Disability, the Optionee may, for a period of one
(1) year after such termination, exercise any Option in part or in full,
after which time the Option shall automatically terminate in full, subject
to paragraph (d) immediately below.
(d) In the event of the death of an Optionee (i) while serving on the
Board, (ii) within the three-month period following the Optionee's
termination of service on the Board for any reason other than Cause,
Retirement, Disability or death or (iii) within the one-year period
following the Optionee's termination of service on the Board by reason of
Retirement or Disability, any Option granted to the Optionee shall be
exercisable (to the extent provided under Section 3.3) by the executors,
administrators, legatees or distributees of the Optionee's estate, as the
case may be, for a period of one (1) year after the Optionee's death. In
the event an Option is exercised by the executors, administrators, legatees
or distributees of the estate of a deceased Optionee, the Company shall be
under no obligation to issue Shares thereunder unless and until the Company
is satisfied that the person or persons exercising the Option are the duly
appointed legal representatives of the deceased Optionee's estate or the
proper legatees or distributees thereof.
(e) For purposes of this Section 3.4, an Optionee shall not be deemed
to have terminated service on the Board during any period the Optionee
continues to serve as an honorary or emeritus Board member.
3.5 Amount of Stock. There may be issued under the Plan an aggregate of
not more than 250,000 Shares, subject to adjustment as provided in Section 3.6.
Shares issued pursuant to the Plan may either be authorized but unissued Shares
or reacquired Shares, or both. In the event that
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<PAGE> 42
Options shall terminate or expire without being exercised in whole or in part,
the Shares underlying the unexercised portion of such Options may be the subject
of future Options granted pursuant to the terms of the Plan.
3.6 Dilution and Other Adjustments. In the event of any change in the
outstanding Shares by reason of any stock split, stock dividend,
recapitalization, merger, consolidation, reorganization, combination or exchange
of shares or other similar event, if the Board shall determine, in its sole
discretion, that such change equitably requires an adjustment in the number or
kind of shares available under the Plan, the number and kind of shares that may
be the subject of future Options grants under the Plan, the number or kind of
shares which are subject to outstanding Options, the purchase price per share
relating thereto or the repurchase option price per share, such adjustment shall
be made by the Board and shall be conclusive and binding for all purposes of the
Plan.
3.7 Exercise of Options. An Option may be exercised in whole or in part
from time to time during the applicable exercise period by giving written notice
of exercise to the Secretary of the Company specifying the number of Shares to
be purchased. Notice of exercise of an Option must be accompanied by payment in
full of the purchase price either by cash or check or in Shares owned by the
Optionee having a Fair Market Value at the date of exercise equal to such
purchase price, or in a combination of the foregoing. No Shares shall be issued
in connection with the exercise of an Option until full payment therefor has
been made. An Optionee shall have the rights of a shareholder only with respect
to Shares for which certificates have been issued to the Optionee.
3.8 Nontransferability of Options. No Option granted under the Plan shall
be transferable by the Optionee otherwise than by will or by the laws of descent
and distribution and such Option shall be exercisable, during the Optionee's
lifetime, only by the Optionee.
3.9 Right of First Refusal. Shares acquired under the Plan by an Optionee
may not be sold or otherwise disposed of in any way (including a transfer by
gift or by reason of the death of the Optionee) until the Optionee (or his legal
representative, legatee or distributee of his estate) first offers to sell the
Shares to the Company as herein provided. The price per share at which the
Shares shall be offered to the Company shall be the Fair Market Value on the
date the Optionee's offer is received by the Secretary of the Company. If the
Company fails to accept the offer to purchase such Shares within seven (7) days
after such date, the Shares shall thereafter be free of all restrictions under
the Plan.
ARTICLE 4
ADMINISTRATION
The Plan is intended to be self-effectuating and does not require the
exercise of discretion with respect to the granting or terms of any Options.
However, to the extent necessary, the Board shall act as the Plan administrator
for the purpose of resolving any ambiguities, claims or disputes arising with
respect to the Plan or any agreements or Options under the Plan. As such the
Board is authorized to make any rulings and determinations that it deems to be
appropriate and consistent with the terms and intent of the Plan and all such
rulings and determinations shall be final and binding upon all parties for all
purposes. Any member of the Board making a claim or request to the Board with
respect to his or her rights or interests under the Plan shall recuse himself or
herself from the Board's determination with respect to such claim or request.
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ARTICLE 5
MISCELLANEOUS PROVISIONS
5.1 No Implied Rights. Neither the Plan nor any action taken hereunder
shall be construed as giving any individual any right to be retained as a member
of the Board.
5.2 Securities Law Compliance. No Shares shall be issued hereunder unless
counsel for the Company shall be satisfied that such issuance will be in
compliance with applicable Federal and State securities laws.
5.3 Ratification of Actions. By accepting any Option or other benefits
under the Plan, each Optionee and each person claiming under or through the
Optionee shall be conclusively deemed to have indicated acceptance and
ratification of, and consent to, any action taken under the Plan by the Company
and the Board.
ARTICLE 6
AMENDMENTS OR DISCONTINUANCE
The Plan shall continue in effect until December 31, 2001 unless it is
earlier terminated by action of the Board. The Plan may be amended at any time
and from time to time by the Board, except that (other than as provided in
Section 3.6) no such amendment shall increase the aggregate number of Shares
available under the Plan or the number of Shares that may be the subject of the
Option grants prescribed under the Plan unless such amendment is approved by the
shareholders of the Company. No such termination or amendment of the Plan shall
adversely affect any right of any Optionee with respect to any Option
theretofore granted without such Optionee's written consent.
ARTICLE 7
CORPORATE EVENT
Upon a dissolution or liquidation of the Company, or a sale of
substantially all of the assets of the Company and its Subsidiaries in which the
acquiring entity does not substitute new and equivalent options for the
outstanding Options hereunder, or a merger or consolidation in which the Company
is not to be the surviving corporation and the surviving corporation does not
substitute new and equivalent Options for the outstanding Options hereunder (a
"Corporate Event"), each Optionee shall be given at least ten days prior written
notice of the occurrence of such event, every Option outstanding hereunder shall
become fully exercisable, and each Optionee may exercise his Option, in whole or
in part, prior to or simultaneously with such event. Upon the occurrence of any
such event, any Option not exercised pursuant hereto shall terminate.
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ARTICLE 8
SHAREHOLDER APPROVAL AND ADOPTION
The Plan shall be submitted to the shareholders of the Company for their
approval and adoption. The shareholders of the Company shall be deemed to have
approved and adopted the Plan only if it is approved and adopted at a meeting of
the shareholders duly held by vote taken in the manner required by the laws of
the State of New York.
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<PAGE> 45
ANNEX D
ARROW ELECTRONICS, INC.
NON-EMPLOYEE DIRECTORS DEFERRAL PLAN
ARTICLE 1
NAME AND PURPOSE
The name of this Plan is the Arrow Electronics, Inc. Non-Employee Directors
Deferral Plan. Its purpose is to provide for deferral of the payment of a
portion of the annual retainer fees payable to non-employee directors of the
Company.
ARTICLE 2
EFFECTIVE DATE
The Plan is effective as of May 15, 1997 (the "Effective Date").
ARTICLE 3
COVERED DIRECTORS
Each director who is not an employee of the Company or any subsidiary of
the Company shall be covered under the Plan (each a "Non-Employee Director").
ARTICLE 4
DEFERRAL
Fifty percent (50%) of each payment comprising any annual retainer fees
payable by the Company to each Non-Employee Director shall automatically be
withheld by the Company and deferred hereunder, except to the extent that the
Non-Employee Director has made an Optional Deferral Election in accordance with
Article 5.
ARTICLE 5
OPTIONAL DEFERRAL ELECTIONS
A Non-Employee Director may submit a written election to the Secretary of
the Company not to have the deferral provisions of the Plan apply to his or her
retainer fees or to have a deferral of a percentage other than 50% apply (an
"Optional Deferral Election") as follows:
(a) Prior to the Effective Date of the Plan, each Non-Employee
Director may submit an Optional Deferral Election, which may specify that
no portion of the Non-Employee Director's retainer fees will be deferred
under the Plan or that a selected percentage other than 50% of the
Non-Employee Director's retainer fees will be deferred under the Plan. Such
Optional Deferral Election will be effective unless and until it is revoked
in writing.
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<PAGE> 46
(b) Each Non-Employee Director initially elected after the Effective
Date of the Plan may submit an Optional Deferral Election prior to his or
her receipt of any portion of any retainer fee, which may specify that no
portion of the Non-Employee Director's retainer fees will be deferred under
the Plan or that a selected percentage other than 50% of the Non-Employee
Directors's retainer fees will be deferred under the Plan. Such Optional
Deferral Election will be effective unless and until it is revoked in
writing.
(c) On an ongoing basis, each Non-Employee Director who has not made a
standing Optional Deferral Election may make an Optional Deferral Election
requesting the cessation of deferrals from his or her future payments of
annual retainer fees or specifying that a selected percentage other than
50% of the Non-Employee Director's retainer fees will be deferred under the
Plan. In addition, any Non-Employee Director who has previously made a
standing Optional Deferral Election may submit a new Optional Deferral
Election, which will supersede the prior Optional Deferral Election. Any
such election will take effect as of the commencement of the calendar year
following the year in which the election is made and will be honored unless
and until it is revoked in writing prior to the commencement of the
calendar year in which such revocation is to become effective. However, any
amounts deferred prior to the effective date of the new Optional Deferral
Election will continue to be deferred under the Plan.
ARTICLE 6
MAINTENANCE OF DEFERRED ACCOUNTS
A record keeping account shall be established and maintained in the name of
each Non-Employee Director. Amounts which are deferred hereunder shall be
converted into units ("Units") based on the Fair Market Value of the Company's
common stock, and such Units (including any fractional Units) shall be credited
to the Non-Employee Director's account. The conversion and crediting of
deferrals shall occur as of the date that such deferred amounts would otherwise
have been payable to the Non-Employee Director. The Fair Market Value per Unit
shall be the closing price of a share of common stock of the Company (a "Share")
reported on the Consolidated Tape (as such price is reported in the Wall Street
Journal) (the "Share Closing Price"). Dividend equivalents earned on the basis
of whole Units previously credited to a Non-Employee Director's account shall be
credited to the Non-Employee Director's account as Units, including fractional
Units, on the date any such dividend has been declared to be payable on Shares.
Units, excluding fractional Units, shall earn dividend equivalents from the date
such Units are credited to a Non-Employee Director's account until the date such
Units are converted into Shares and distributed. Dividend equivalents shall be
computed by multiplying the dividend paid per Share during the period Units are
credited to a Non-Employee Director's account times the number of whole Units so
credited, but Units shall earn such dividend equivalents only as, if and when
dividends are declared and paid on Shares.
ARTICLE 7
METHOD OF DISTRIBUTION OF DEFERRALS
No distribution of deferrals may be made except as provided in this Article
7 and Article 12. As of the last business day of the calendar month in which a
Non-Employee Director's service as a
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<PAGE> 47
director of the Company ceases, each whole Unit then credited to the
Non-Employee Director's deferral account shall be converted into one Share and
any fractional Unit shall be converted into cash by multiplying such fraction by
the Share Closing Price as of such date. Such Shares and cash shall be
distributed to the Non-Employee Director, in a single lump sum, as soon as
practicable following such date. At the written request of a Non-Employee
Director, the Board of Directors, in its sole discretion, may accelerate payment
of amounts deferred hereunder, upon a showing of unforeseeable emergency by such
Non-Employee Director. For purposes of this paragraph, "unforeseeable emergency"
is defined as severe financial hardship resulting from extraordinary and
unanticipated circumstances arising as a result of one or more recent events
beyond the control of the Non-Employee Director. In any event, payment may not
be made to the extent such emergency is or may be relieved: (1) through
reimbursement or compensation by insurance or otherwise; (2) by liquidation of
the Non-Employee Director's assets, to the extent the liquidation of such assets
would not, itself, cause severe financial hardship; and (3) by cessation of
deferrals under the Plan. Examples of events that are not considered to be
unforeseeable emergencies include the need to send a Non-Employee Director's
child to college or the desire to purchase a home. Notwithstanding anything to
the contrary, upon a Change in Control or the adoption by the Company of a plan
of dissolution or liquidation of the Company, or approval by shareholders of an
agreement for the sale of substantially all of the assets of the Company and its
subsidiaries or a merger or consolidation in which the Company is not to be the
surviving corporation, the deferral account of each Non-Employee Director shall
be converted and distributed immediately in the manner described above. For
these purposes the term "Change in Control" means a change in control with
respect to the Company of a nature that would be required to be reported
(assuming such event has not been "previously reported") in response to Item
1(a) of the Current Report on Form 8-K, as in effect on the Effective Date,
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); provided that, without limitation, such a change
in control shall be deemed to have occurred at such time as (a) any "person" (as
the term person is used for purposes of Section 13(d) or 14(d) of the Exchange
Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of 30% or more of the combined voting
power of the Company's outstanding Shares or other securities ordinarily having
the right to vote at elections of the directors of the Company ("Voting
Securities"); or (b) individuals who constitute the Board as of the Effective
Date (the "Incumbent Board") cease for any reason to constitute at least a
majority thereof, provided that any person becoming a director subsequent to the
Effective Date whose election, or nomination for election by the Company's
shareholders was approved by a vote of at least three quarters of the directors
comprising the Incumbent Board (either by a specific vote or by approval of the
proxy statement of the Company in which such person is named as a nominee for
director, without objection to such nomination) shall be, for purposes of this
clause (b), considered as though such person were a member of the Incumbent
Board.
ARTICLE 8
RIGHT OF FIRST REFUSAL
Shares distributed under the Plan may not be sold or otherwise disposed of
in any way (including a transfer by gift or by reason of the death of the
grantee) until the Non-Employee Director (or his personal representative) first
offers to sell the Shares to the Company as herein provided. The price per Share
at which the Shares shall be offered to the Company shall be the closing price
per Share reported on the Consolidated Tape (as such price is reported in The
Wall
D-3
<PAGE> 48
Street Journal) on the date the offer is received by the Secretary of the
Company. If the Company fails to accept the offer to purchase such Shares within
seven days after such date, the Shares shall thereafter be free of all
restrictions under this Plan.
ARTICLE 9
SHARES SUBJECT TO THE PLAN
There may be issued under the Plan an aggregate of not more than 500,000
Shares, subject adjustment as provided below. Shares issued pursuant to the Plan
may be either authorized but unissued Shares or reacquired Shares, or both. In
the event of any change in the outstanding Shares by reason of any stock split,
stock dividend, recapitalization, merger, consolidation, reorganization,
combination or exchange of shares or other similar event, if the Board shall
determine, in its discretion, that such change equitably requires an adjustment
in the number or kind of Shares that may be issued under the Plan or in the
repurchase option price per share relating thereto such adjustment shall be made
by the Board and shall be conclusive and binding for all purposes of the Plan.
ARTICLE 10
UNFUNDED STATUS OF THE PLAN
A Non-Employee Director shall not have any interest in any amount credited
to his or her account until it is distributed in accordance with the Plan.
Distributions under the Plan shall be made only from the share capital and the
general assets of the Company. All amounts deferred under the Plan shall remain
the sole property of the Company, subject to the claims of its general creditors
and available for its use for whatever purposes are desired. With respect to
amounts deferred, a Non-Employee Director is merely a general creditor of the
Company; and the obligation of the Company hereunder is purely contractual and
shall not be funded or secured in any way.
ARTICLE 11
NON-ALIENABILITY AND NON-TRANSFERABILITY
The rights of a Non-Employee Director to the payment of deferred
compensation as provided in the Plan shall not be assigned, transferred, pledged
or encumbered or be subject in any manner to alienation or anticipation. A
Non-Employee Director may not borrow against amounts credited to the
Non-Employee Director's account and such amounts shall not be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, change, garnishment, execution or levy of any kind, whether
voluntary or involuntary, prior to distribution in accordance with Article 7.
D-4
<PAGE> 49
ARTICLE 12
STATEMENT OF ACCOUNT
Statements will be sent to each Non-Employee Director at the beginning of
each calendar year as to the balance in the Non-Employee Director's account as
of the end of the previous calendar year.
ARTICLE 13
ADMINISTRATION
The Plan is intended to be self-effectuating and does not require the
exercise of discretion by the Company. However, to the extent necessary, the
Board of Directors shall act as the Plan administrator for purposes of resolving
any ambiguities, claims or disputes arising with respect to the Plan or any
deferrals under the Plan. As such the Board is authorized to make any rulings
and determinations that it deems to be appropriate and consistent with the terms
and intent of the Plan and all such rulings and determinations shall be final
and binding upon all parties for all purposes. Any member of the Board making a
claim or request to the Board with respect to his or her rights or interests
under the Plan shall recuse himself or herself from the Board's determination
with respect to such claim or request. Notwithstanding anything to the contrary
in the Plan, the Board shall not have any authority to take any action under the
Plan where such action would affect the Company's ability to account for any
business combination as a "pooling of interests."
ARTICLE 14
AMENDMENT AND TERMINATION
The Plan may, at any time, be amended, modified or terminated by the Board
of Directors. No amendment, modification or termination shall, without the
consent of a Non-Employee Director, adversely affect such Non-Employee
Director's rights with respect to amounts accrued in his or her deferral
account. Notwithstanding the foregoing or anything else to the contrary
contained in the Plan, as a consequence of any such amendment, modification or
termination, the Board may provide in its sole discretion that the account of
any Non-Employee Director may be paid on an accelerated basis without regard to
the tax affect that it may have for the Non-Employee Director or his
beneficiaries or estate.
ARTICLE 15
NOTICES
All notices to the Company hereunder shall be delivered to the attention of
the Secretary of the Company.
D-5
<PAGE> 50
PROXY
ARROW ELECTRONICS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, MAY 14, 1997
The undersigned herby 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, 1997, at 11:00 A.M., New York City time, at the offices of The Chase
Manhattan 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
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<PAGE> 51
Please mark your votes as indicated in this example. [X]
FOR WITHHOLD
All Nominees For All Nominees
1. Authority to vote FOR the election of [ ] [ ]
directors in accordance with the
accompanying Proxy Statement.
NOMINEES:
Daniel W. Duval Gaynor N. Kelley Richard S. Rosenbloom
Carlo Giersch Roger King Robert S. Throop
Stephen P. Kaufman Robert E. Klatell John C. Waddell
Karen Gordon Mills
(INSTRUCTION: To withhold authority to vote for any individual nominee
write that nominee's name in the space provided below.)
____________________________________________________________________________
MANAGEMENT RECOMMENDS A VOTE FOR
FOR AGAINST ABSTAIN
2. Authority to vote FOR the adoption of a proposed [ ] [ ] [ ]
amendment to the Arrow Stock Option Plan increasing
the number of shares authorized to be issued pursuant
to options awarded thereunder from 6,000,000 shares
to 10,500,000 shares, extending the term of the plan,
and making certain other modifications to the plan.
3. Authority to vote FOR the adoption of a proposed [ ] [ ] [ ]
amendment to the Arrow Restricted Stock Plan
increasing the number of shares authorized to be
awarded thereunder from 1,480,000 shares to
1,980,000 shares, extending the term of the plan,
and making certain other modifications to the plan.
4. Authority to vote FOR the adoption of the proposed [ ] [ ] [ ]
Non-Employee Directors Stock Option Plan.
5. Authority to vote FOR the adoption of the proposed [ ] [ ] [ ]
Non-Employee Directors Deferral Plan.
6. Ratification of the appointment of Ernst & Young as [ ] [ ] [ ]
independent auditors of the books and accounts of
Arrow for the fiscal year ending December 31, 1997.
7. 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, 4, 5, AND 6 ABOVE.
Signature(s) _____________________________________________ Date _______________
Please sign exactly as name appears above. 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.
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