<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
[ ] Confidential for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</TABLE>
ARROW ELECTRONICS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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)(4) and 0-12.
(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 Logo to Come]
STEPHEN P. KAUFMAN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
April 10, 2000
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Arrow Electronics, Inc., which will be held on Tuesday, May 23, 2000 at 11:00
A.M., at the offices of The Chase Manhattan Bank, 270 Park Avenue, New York, New
York. The formal Notice of Annual Meeting and Proxy Statement, fully describing
the matters to be acted upon at the meeting, appear on the following pages.
The matters scheduled to be considered at the meeting are the election of
directors, a proposal to amend and restate the Arrow Electronics, Inc. Chief
Executive Officer 1999 Performance Bonus Plan to permit participation in the
plan by up to four additional officers at the discretion of the compensation
committee of the Board of Directors, and the ratification of the appointment of
Arrow's auditors.
The Board of Directors recommends the approval of the proposals being
presented at the Annual Meeting of Shareholders as being in the best interest of
Arrow. We urge you to read the Proxy Statement and give these proposals your
careful attention before completing the enclosed proxy card.
Your vote is important regardless of the number of shares you own. Please
be sure you are represented at the meeting, whether or not you plan to attend,
by signing, dating and mailing the proxy card promptly. A postage-paid return
envelope is enclosed for your convenience. You may also vote your shares by
touch-tone telephone from the U.S. and Canada by using the toll-free telephone
number on your proxy card.
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 23, 2000
------------------------
April 10, 2000
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 Bank,
270 Park Avenue, New York, New York, on May 23, 2000 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 and restate the Arrow
Electronics, Inc. Chief Executive Officer 1999 Performance Bonus Plan.
3. To consider and act upon a proposal to ratify the appointment of Ernst
& Young LLP as Arrow's independent auditors for the fiscal year ending
December 31, 2000.
4. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Only shareholders of record at the close of business on April 3, 2000 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 or
vote your shares by touch-tone telephone, whether or not you plan to attend the
meeting. Your prompt response 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 23, 2000
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement, mailed to shareholders on April 10, 2000, 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 23,
2000, 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 of $7,500 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 April 3, 2000 are entitled to notice of and to vote at the meeting
or any adjournments thereof. On April 3, 2000, Arrow had outstanding 96,375,744
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 April 3, 2000.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS(1)
- ------------------- ------------------ ----------
<S> <C> <C>
Sanford C. Bernstein & Co., Inc. 13,886,400(2) 14.4%
767 Fifth Avenue
New York, New York 10153
Wellington Management Company, LLP 8,268,200(3) 8.6%
75 State Street
Boston, Massachusetts 02109
Vanguard Windsor Funds -- Vanguard Windsor Fund 8,147,200(4) 8.5%
Post Office Box 2600
Valley Forge, Pennsylvania 19482
The Prudential Insurance Company of America 4,913,746(5) 5.1%
751 Broad Street
Newark, New Jersey 07102
</TABLE>
- ---------------
(1) Calculation is based upon shares of common stock outstanding as of April 3,
2000.
(2) Based upon a Schedule 13G dated February 8, 2000 filed with the Securities
and Exchange Commission and reflects sole dispositive power with respect to
13,886,400 shares, sole voting power with respect to 7,351,270 shares, and
shared voting power with respect to 1,591,049 shares beneficially owned by
Sanford C. Bernstein & Co., Inc., a registered investment adviser.
(3) Based upon a Schedule 13G dated February 9, 2000 filed with the Securities
and Exchange Commission and reflects shared dispositive power with respect
to 8,268,200 shares and shared voting power with respect to 3,000 shares
beneficially owned by Wellington Management Company, LLP, a registered
investment adviser.
(4) Based upon a Schedule 13G dated February 8, 2000 filed with the Securities
and Exchange Commission and reflects sole voting power and shared
dispositive power with respect to the shares beneficially owned by Vanguard
Windsor Funds -- Vanguard Windsor Fund, a registered investment company.
(5) Based upon a Schedule 13G dated January 31, 2000 filed with the Securities
and Exchange Commission and reflects shared voting power and shared
dispositive power with respect to 4,351,996 shares and sole voting power and
sole dispositive power with respect to 561,750 shares beneficially owned by
The Prudential Insurance Company of America, an insurance company and
registered investment adviser.
2
<PAGE> 6
At April 3, 2000, all executive officers and directors of Arrow as a group
were the beneficial owners of 6,989,400 shares (7.3%), including 2,137,152
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 3,519,760 shares granted under Arrow's
Stock Option Plan or under stock option plans of companies acquired by Arrow and
assumed by Arrow as part of the acquisition (of which 2,681,670 options are
currently exercisable), including options to purchase 1,561,250 shares, 297,000
shares, 213,000 shares, 157,500 shares, and 105,000 shares granted to Mr.
Kaufman, Mr. Francis M. Scricco, Mr. Klatell, Mrs. Betty Jane Scheihing, and Ms.
Jan Salsgiver, respectively (of which 1,362,500 options, 108,500 options,
179,250 options, 114,375 options, and 82,500 options, respectively, are
currently exercisable); 761,246 shares awarded under Arrow's Restricted Stock
Plan (of which 408,196 shares have vested and are not forfeitable), including
97,250 shares, 135,000 shares, 95,450 shares, 38,500 shares, and 41,000 shares
awarded to Mr. Kaufman, Mr. Scricco, Mr. Klatell, Mrs. Scheihing, and Ms.
Salsgiver, respectively (of which 91,250 shares, 58,000 shares, 76,600 shares,
17,000 shares, and 24,750 shares, respectively, have vested and are not
forfeitable); options to purchase 142,000 shares granted under Arrow's
Non-Employee Directors Stock Option Plan (of which 47,250 shares are currently
exercisable and 31,750 shares are exercisable within 60 days from the date of
this Proxy Statement); and 9,882 common stock units deferred under Arrow's
Non-Employee Directors Deferral Plan.
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 eleven 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. Scricco,
who was appointed by the Board of Directors in August 1999.
Mr. Robert S. Throop, a director since 1994, has chosen to retire from the
Board of Directors and is not standing for re-election. The company and his
fellow directors gratefully acknowledge his many contributions and years of
service to Arrow and the industry.
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 APRIL 3, 2000 STOCK
---- --- ----------------------- -------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Daniel W. Duval 63 Vice Chairman of Robbins & Myers, 1987 29,075(1) --%
Inc., a manufacturer of fluids
management systems, since January
1999, and President and Chief Ex-
ecutive Officer for more than five
years prior thereto; director of
Robbins & Myers, Inc. and National
City Bank, Ohio.
Carlo Giersch 62 Chairman of Spoerle Electronic, 1990 294,400(2) .3%
Arrow's wholly-owned German
subsidiary, for more than five
years.
John N. Hanson 58 Chief Executive Officer of 1997 25,582(1) --%
Harnischfeger Industries, Inc., a
manufacturer of equipment for
mining, pulp and papermaking, and
material handling, since May 1999,
Vice Chairman since November 1998,
President since June 1996, and
Chief Operating Officer from June
1995 to May 1999; President and
Chief Operating Officer of Joy
Mining Machinery prior thereto;
director of Harnischfeger
Industries, Inc.
Stephen P. Kaufman 58 Chairman of the Board and Chief 1983 3,795,652(3) 3.9%
Executive Officer of Arrow for
more than five years and President
for more than five years ending
June 1999; director of Polaroid
Corporation and Harris
Corporation.
</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 APRIL 3, 2000 STOCK
---- --- ----------------------- -------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Roger King 59 Chief Executive Officer of Sa Sa 1995 26,875(1) --%
International Holdings Limited, a
retailer of cosmetics, since
August 1999; Executive Director of
Orient Overseas (International)
Limited, an investment holding
company, with investments
principally in integrated
containerized transportation
businesses, for more than five
years; Chairman and Chief Execu-
tive 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 54 Executive Vice President of Arrow 1989 2,467,132(4) 2.6%
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 ending April 1996.
Karen Gordon Mills 46 President of MMP Group, Inc., a 1994 29,350(1) --%
consulting firm, for more than
five years; Managing Director of
Solera Capital LLC, a venture
capital firm, since August 1999;
director of The Scotts Company and
The Guardian Life Insurance
Company of America.
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK PERCENTAGE
OWNED OF
BENEFICIALLY OUTSTANDING
POSITION WITH ARROW AND DIRECTOR AS OF COMMON
NAME AGE BUSINESS EXPERIENCE SINCE APRIL 3, 2000 STOCK
---- --- ----------------------- -------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Barry W. Perry 53 President and Chief Operating 1999 19,800(5) --%
Officer of Engelhard Cor-
poration, an environmental
technology, specialty chemical,
and engineered materials company,
since January 1997, Group Vice
President and General Manager from
1993 to 1997.
Richard S. Rosenbloom 67 David Sarnoff Professor of 1992 28,300(6) --%
Business Administration at Harvard
Business School for more than five
years prior to July 1998 and
Professor Emeritus subsequent
thereto.
Francis M. Scricco 50 President of Arrow since June 1999 432,000(7) .4%
1999, Chief Operating Officer
since September 1997, and
Executive Vice President from
September 1997 to June 1999; Group
President of Fisher Scientific
International, Inc., a labora-
tory equipment manufacturer, from
March 1994 to September 1997.
John C. Waddell 62 Vice Chairman of the Board of 1969 2,145,188(8) 2.2%
Arrow for more than five years.
</TABLE>
- ---------------
(1) Includes shares owned individually, options to purchase shares granted under
Arrow's Non-Employee Directors Stock Option Plan, and common stock units
deferred under Arrow's Non-Employee Directors Deferral Plan. See page 3.
(2) 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 3.
(3) Includes 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 3.
6
<PAGE> 10
(4) 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 3.
(5) Includes options to purchase shares granted under Arrow's Non-Employee
Directors Stock Option Plan and common stock units deferred under Arrow's
Non-Employee Directors Deferral Plan. See page 3.
(6) Includes shares owned individually and options to purchase shares granted
under Arrow's Non-Employee Directors Stock Option Plan. See page 3.
(7) Includes options to purchase shares granted under Arrow's Stock Option Plan
and shares awarded under Arrow's Restricted Stock Plan. See page 3.
(8) Includes shares owned individually, options to purchase shares granted under
Arrow's Non-Employee Directors Stock Option Plan, and shares held by Arrow's
Stock Ownership Plan. See page 3.
The audit committee of the Board of Directors consists of Mr. King, Mr.
Hanson, Mr. Perry, and Mr. Rosenbloom. 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, Mrs. Mills, and Mr. Perry. The compensation committee
determines the base salary of the Chief Executive Officer, implements the CEO
Performance Bonus Plan, reviews and approves the salaries and incentive
compensation of other senior managers, advises the Board of Directors generally
with regard to other compensation and employee benefit matters, collects
information in connection with the evaluation of the performance of the Chief
Executive Officer, and approves stock option and restricted stock awards.
The nominating committee of the Board of Directors consists of Mrs. Mills,
Mr. Duval, Mr. Hanson, and Mr. King. 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 nominating committee. The nominating committee is
primarily responsible for making recommendations with respect to committee
assignments and is also responsible for developing the corporate governance
guidelines for Arrow.
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.
Under Arrow's corporate governance guidelines, the independent directors
meet at least twice a year in executive session; once under the guidance of the
chairman of the compensation committee to evaluate the performance of the Chief
Executive Officer and once under the guidance of the chairman of the nominating
committee to discuss senior management development and succession.
7
<PAGE> 11
During 1999 there were seven meetings of the Board of Directors, four
meetings of the audit committee, six meetings of the compensation committee,
three meetings of the nominating committee, and one meeting of the charitable
contributions committee. All directors attended 75% or more of the meetings of
the Board of Directors and the committees on which they served.
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) AWARDS(3) OPTIONS(4) COMPENSATION(5)
------------------ ---- --------- ---------- --------------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stephen P. Kaufman, 1999 $875,000 $1,000,000 $22,100 $ -- 130,000 $9,600
Chairman and Chief 1998 825,000 200,000 42,581 -- 75,000 9,600
Executive Officer 1997 750,000 644,000 58,350 258,000 25,000 9,550
Francis M. Scricco, 1999 462,500 320,000 94,330 203,750 70,000 9,600
President and Chief 1998 400,000 175,000 72,057 277,875 20,000 4,800
Operating Officer(6) 1997 133,333 117,000 4,000 64,500 7,000 --
Robert E. Klatell, 1999 450,000 178,000 29,318 152,813 15,000 9,600
Executive Vice President 1998 425,000 135,000 45,102 154,375 15,000 9,600
1997 400,000 168,000 58,868 161,250 15,000 9,550
Betty Jane Scheihing, 1999 335,000 174,000 31,141 132,438 12,500 9,600
Senior Vice President 1998 330,000 145,000 35,312 138,938 12,500 9,600
1997 281,667 229,000 31,188 453,563 42,500 9,550
Jan Salsgiver, 1999 332,500 197,000 29,656 132,438 10,000 9,600
President, North 1998 325,000 107,500 33,972 138,938 10,000 9,600
American Components 1997 300,000 205,000 44,731 129,000 10,000 9,550
</TABLE>
- ---------------
(1) Includes amounts deferred under retirement plans.
(2) Includes reimbursement of a portion of the tax liability incurred as a
result of the vesting of restricted stock awards and auto allowance, if any.
(3) Includes, with respect to compensation in 1998, the fair market value as of
the date of grant of stock awards granted in early 1999 in respect of
employment during 1998. All of such awards vest in four annual installments
of 25%, beginning one year after grant. As of December 31, 1999, the
aggregate number and value of unvested restricted stock awards held by Mr.
Kaufman, Mr. Scricco, Mr. Klatell, Mrs. Scheihing, and Ms. Salsgiver, were
8,000 ($203,000), 87,750 ($2,226,656), 22,850 ($579,819), 24,500 ($621,688),
and 18,500 ($469,438), respectively.
(4) Includes, with respect to 1998, stock options awarded in early 1999 in
respect of employment during 1998.
(5) For 1999, includes a contribution by Arrow of $4,800 to Arrow's Stock
Ownership Plan and a matching contribution by Arrow of $4,800 to Arrow's
Savings Plan.
8
<PAGE> 12
(6) Mr. Scricco's employment with Arrow commenced September 1, 1997.
Compensation for 1997 does not include the value of restricted stock awards
($2,467,500) and the number of stock options (200,000) granted to Mr.
Scricco in consideration of the commencement of his employment with Arrow.
Compensation with respect to 1998 does not include $105,112 paid to Mr.
Scricco in connection with his relocation to Arrow's headquarters, and the
value of restricted stock awards ($850,000) and a bonus ($233,000) granted
to Mr. Scricco to compensate him for the loss of certain compensation from
his previous employer as a result of his employment with Arrow. Compensation
with respect to 1999 does not include $74,965 paid to Mr. Scricco as
reimbursement for additional expenses incurred in connection with his
relocation to Arrow's headquarters. See also "Certain Transactions" on page
15.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in respect of
employment during 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE
SECURITIES OPTIONS AT ASSUMED RATES OF
UNDERLYING GRANTED TO STOCK PRICE APPRECIATION
OPTIONS EMPLOYEES EXERCISE OR FOR OPTION TERM (3)
GRANTED IN FISCAL BASE PRICE EXPIRATION -------------------------------
NAME (#)(1) YEAR ($/SH)(2) DATE 5% 10%
---- ---------- ---------- ----------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Stephen P. Kaufman 130,000 7.2% $20.3750 12/15/09 $ 1,665,781 $ 4,221,425
Francis M. Scricco 50,000 2.8 21.5000 7/21/09 676,060 1,713,275
20,000 1.1 20.3750 12/15/09 256,274 649,450
Robert E. Klatell 15,000 .8 20.3750 12/15/09 192,206 487,088
Betty Jane Scheihing 12,500 .7 20.3750 12/15/09 160,171 405,906
Jan Salsgiver 10,000 .6 20.3750 12/15/09 128,137 324,725
All shareholders N/A N/A N/A N/A 1,531,114,143 3,880,142,703
Various in
All optionees 1,814,601 100 19.8765 2009 22,682,875 57,482,930
All optionees value as
a percent of all
shareholders value N/A N/A N/A N/A 1.5% 1.5%
</TABLE>
- ---------------
(1) All of such grants become exercisable in four annual installments,
commencing on the first anniversary of the date of grant and expire 10 years
after the date of the grant.
(2) All at fair market value at date of grant.
(3) Represents gain that would be realized assuming the options were held for
the entire 10-year option period and the stock price increased at annual
compounded rates of 5% and 10%. Potential realizable values for shareholders
are based on 95,945,291 shares outstanding at December 31, 1999 from a base
price of $25.3750 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.
9
<PAGE> 13
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
The following table provides information concerning the number and year-end
value of the unexercised stock options of each of the named executive officers.
None of the named executive officers exercised any stock options during 1999.
<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 UNEXERCISABLE UNEXERCISABLE
---- -------- -------- ----------------- --------------------
<S> <C> <C> <C> <C>
Stephen P. Kaufman -- -- 1,343,750/217,500 $6,438,410/1,395,313
Francis M. Scricco -- -- 103,500/193,500 -- / 492,500
Robert E. Klatell -- -- 175,500/ 37,500 1,312,125/ 224,063
Betty Jane Scheihing -- -- 111,250/ 46,250 540,313/ 186,719
Jan Salsgiver -- -- 80,000/ 25,000 309,375/ 149,375
</TABLE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
A primary role of the compensation committee (the "committee") is to
oversee compensation practices for Arrow's senior executive officers. The
committee's responsibilities include reviewing the 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 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:
prevailing levels of pay among executives of the companies in the peer group
reflected in the graph on page 13, internal pay equity considerations, level of
responsibilities, prior experience, breadth of knowledge, and job performance.
For specialized functions, the committee also takes into account compensation
levels in other industries from which Arrow recruits executives. Base salaries
for Arrow executives are generally
10
<PAGE> 14
competitive with base salaries at comparable companies. The base salaries of
senior executive officers of Arrow are slightly above the median of those for
the identified peer group, because, with one exception, Arrow is significantly
larger than those companies. 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,
again with one exception, that Arrow requires greater breadth of management
skills and experience to manage successfully its larger and more complex
business.
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 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 pages 14 and 15.
The committee values highly Mr. Kaufman's breadth of knowledge and
recognizes his significant contribution to the success of Arrow. In 1999, Mr.
Kaufman's base salary was increased to $875,000 in recognition of the quality of
his leadership of the company and its industry.
Annual Incentives -- CEO Bonus
Arrow's Chief Executive Officer Performance Bonus Plan, a five-year plan
which was adopted in 1999, provided for a performance-based bonus for Arrow's
chief executive officer based upon net income, sales, and average net working
capital utilization. The purpose of the plan was to enable Arrow to motivate the
chief executive officer to achieve strategic, financial and operating
objectives, and to reward his contribution toward improvement in financial
performance as measured by the level of net income and the ratio of sales to
average net working capital of Arrow. The plan sets forth a pre-established
bonus formula based upon annual performance goals which establishes the maximum
bonus that may be paid in each year. The committee has the discretion to
determine the actual amount of the bonus to be paid, which amount may not exceed
the maximum bonus calculated under the bonus formula. For 1999, application of
the formula established a maximum bonus under the plan of $1,362,300. In
exercising its discretion, the committee considered the level of achievement by
the company of financial and other goals, and awarded Mr. Kaufman a bonus of
$1,000,000 for 1999. The committee also recommended amending the plan to permit
up to four additional officers to participate in the plan at the discretion of
the committee. The plan is designed to qualify under Section 162(m) of the
Internal Revenue Code in order to permit the company to deduct all compensation
paid to the participants under the plan.
Annual Incentives -- Management Incentive Compensation Plan
Each year, for other executive officers of Arrow, management -- in
consultation with the committee -- establishes short-term financial goals which
relate to one or more indicators of corporate financial performance. For 1999,
the short-term incentive award opportunity was contingent upon Arrow attaining
specified levels of 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
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<PAGE> 15
against the predetermined financial goals, as well as the attainment of specific
individual goals or contributions to Arrow's success.
For 1999, the level of achievement by the participating named executive
officers ranged between 74% and 89% of the targets established under the MICP.
The MICP awards earned by the participating named executive officers averaged
55% of their respective salaries.
Long-Term Incentives
Arrow reinforces the importance of producing satisfactory returns to
shareholders over the long-term through the operation of its Stock Option Plan
and its Restricted Stock Plan. Stock option and restricted stock awards provide
executives with the opportunity to acquire an equity interest in 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, with respect to options granted
after May 1, 1997, are exercisable in four annual installments. Prior thereto,
options were exercisable in three installments. This ensures that participants
will derive benefits only as shareholders realize corresponding gains over an
extended time period. Options have a maximum term of 10 years.
Restricted stock is granted to participants in order to help foster a
shareholder perspective among the participants. A long-term focus is encouraged
and executive retention is reinforced through the four-year vesting schedule to
which shares of restricted stock are subject.
Each year, the committee reviews the history of stock option and restricted
stock awards and makes grant decisions based on the committee's assessment of
each individual executive's contribution and performance during the year and on
competitive compensation practices in comparable companies. In respect of 1999
and 1998, the number of stock options granted to Mr. Kaufman includes a grant of
options in lieu of restricted stock awards.
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
Barry W. Perry
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<PAGE> 16
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG ARROW ELECTRONICS, INC., S&P 500 STOCK INDEX AND
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 Arrow's peer corporations on a
line-of-business basis. The corporations making up the peer companies group are
Avnet, Inc., Bell Microproducts, Inc., and Pioneer-Standard Electronics, Inc.
The graph assumes $100 invested on December 31, 1994 in Arrow, the S&P 500 Stock
Index, and the peer companies group. The peer companies group reflects the
deletion of two companies included in the peer companies group in the Proxy
Statement of last year: Marshall Industries, Inc., which was acquired by Avnet,
Inc., and Bell Industries, Inc., whose electronics distribution group was
acquired by Arrow. Total return indices reflect reinvested dividends and are
weighted on a market capitalization basis at the time of each reported data
point.
[LINE GRAPH]
<TABLE>
<CAPTION>
ELECTRONICS DISTRIBUTOR
ARROW INDEX S&P 500 STOCK INDEX
----- ----------------------- -------------------
<S> <C> <C> <C>
1994 100.00 100.00 100.00
1995 120.00 120.00 134.00
1996 149.00 152.00 161.00
1997 180.00 174.00 211.00
1998 149.00 156.00 268.00
1999 141.00 166.00 320.00
</TABLE>
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<PAGE> 17
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 2000 and a fee of $1,000 for
each Board of Directors or committee meeting attended. Each non-employee
director serving as chairman of any committee receives an additional annual fee
of $3,000.
Under the Arrow Non-Employee Directors Stock Option Plan, each non-employee
director joining the Board of Directors receives an option to purchase 15,000
shares of Arrow common stock having an exercise price equal to the fair market
value of the underlying common stock on the date of grant. Pursuant to such
plan, on the date following each annual meeting of shareholders, each
non-employee director then serving on the Board of Directors will receive, under
the plan, an option to purchase 4,000 shares of Arrow common stock having an
exercise price equal to the fair market value of the underlying common stock on
the date of grant.
Under the Arrow Non-Employee Directors Deferral Plan, a percentage of the
annual retainer 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. Each 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 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. Upon the
termination of service on the Board of Directors, 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 will be converted into
cash.
EMPLOYMENT AGREEMENTS
In February 1995, Mr. Kaufman entered into an employment agreement with
Arrow terminating December 31, 2001, which provides for an annual base salary of
not less than $400,000. As part of entering into that agreement, Mr. Kaufman
received options to purchase 1,000,000 shares of Arrow common stock which became
exercisable in three equal annual installments, at an exercise price of $20.58,
$21.41, and $22.28, respectively. All such options expire 10 years after the
date of grant.
Mr. Scricco has an employment agreement with Arrow terminating at any time
after September 1, 2000, on not less than 12 months' notice. The employment
agreement provides for a minimum base salary of $400,000 per year.
Mr. Klatell has an employment agreement with Arrow terminating on January
1, 2001, which is subject to renewal from year to year unless either Arrow or
Mr. Klatell elects not to renew. The employment agreement provides for a minimum
base salary of $425,000 per year.
Mrs. Scheihing has a year-to-year employment agreement with Arrow which
provides for a minimum base salary of $315,000 per year.
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<PAGE> 18
Ms. Salsgiver has an employment agreement with Arrow terminating on
December 21, 2000, which is subject to renewal from year to year unless either
Arrow or Ms. Salsgiver elects not to renew. The employment agreement provides
for a minimum base salary of $300,000 per year.
Arrow has entered into agreements with each of the named executive officers
which provide for payments of three times their annualized includible
compensation and continuation for up to three years of their benefits if their
employment is terminated by the company (other than for cause approved by
three-fourths of the directors then serving), if their responsibilities or base
salaries are materially diminished, or if certain other adverse changes occur
within 24 months following a change of control of Arrow. The amounts payable
pursuant to such agreements to the named executive officers (other than Messrs.
Kaufman and Klatell) 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. Mr. Kaufman, Mr. Scricco, Mr. Klatell, Mrs. Scheihing, and Ms. Salsgiver
have been designated by Arrow as participants in the SERP, with maximum annual
pensions of $450,000, $125,000, $250,000, $250,000, and $250,000, respectively.
If a designated participant retires between the ages of 55 and 60, the amount of
the annual pension is reduced as provided 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
Spoerle Electronic leases certain of its premises from a partnership in
which Mr. Giersch's wife, directly or indirectly, has the entire beneficial
interest, and paid aggregate rentals of 4,880,000 deutsche marks ($2,660,000
based on the average exchange rate during 1999) to the partnership during 1999.
The management of Spoerle Electronic believes that such rentals are at fair
market value.
In connection with Mr. Scricco's relocation to Arrow's headquarters, Mr.
Scricco received from Arrow non-interest bearing loans in the aggregate amount
of $1,069,039 to assist in the purchase of his new residence. The loans are
partially secured by a mortgage on his new residence and are to be repaid from
the proceeds of the sale of his prior residence.
PROPOSED AMENDMENT AND RESTATEMENT OF THE
ARROW ELECTRONICS, INC.
CHIEF EXECUTIVE OFFICER
1999 PERFORMANCE BONUS PLAN
In 1999, the Board of Directors adopted, and the company's shareholders
approved, the Arrow Electronics, Inc. Chief Executive Officer 1999 Performance
Bonus Plan (the "Plan"). As adopted, the only individual eligible to participate
in the Plan was Arrow's Chief Executive Officer. In February
15
<PAGE> 19
2000, the compensation committee of the Board of Directors recommended amending
the Plan to permit participation in the Plan by the company's Chief Executive
Officer and any other officer of Arrow who may be selected by the committee from
time to time in its sole discretion. However, no more than five individuals,
including the Chief Executive Officer, may be selected by the committee to
participate with respect to any year. Therefore, the committee has prepared an
amendment and restatement of the Plan (the "Amended and Restated Plan"). Except
for the eligibility requirements, the terms of the Amended and Restated Plan are
identical to those of the Plan approved by the shareholders in 1999.
The committee has recommended to the Board of Directors the adoption of the
Amended and Restated Plan, subject to shareholder approval. The Board of
Directors accepted the committee's recommendation and determined to submit the
Amended and Restated Plan to the shareholders. Because Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code") prohibits the amendment
of the eligibility requirements of the Plan without the majority approval of the
company's shareholders, the shareholders are now requested to approve the
adoption of the Amended and Restated Plan.
The summary of the Amended and Restated Plan which follows is subject to
the specific provisions contained in the official text.
PURPOSE
The purposes of the Amended and Restated Plan are to (i) motivate the
company's Chief Executive Officer and any other senior officers of the company
who are selected by the committee to participate in the Amended and Restated
Plan (each a "participant") through the award of annual cash bonuses to achieve
strategic, financial and operating objectives, (ii) reward each participant's
contribution toward improvement in financial performance as measured by the
growth in Arrow's net income and the ratio of sales to average net working
capital of Arrow, (iii) provide each participant with an additional incentive to
contribute to the success of the company, and (iv) 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 by the
company under the Code.
The Amended and Restated Plan is intended to provide a special incentive
for each participant to increase the profits of Arrow and the return to
shareholders by rewarding superior performance by each participant with an
annual cash bonus. Accordingly, each participant's maximum potential cash bonus
is calculated pursuant to a pre-established formula which is applied by the
committee against specified measures of corporate performance.
ADMINISTRATION
The Amended and Restated Plan is administered by the committee, whose
members qualify as "outside directors" as that term is defined in treasury
regulations issued by the Internal Revenue Service under Section 162(m) of the
Code (the "Regulations"). No committee member is eligible to receive any bonus
award under the Amended and Restated Plan. Under the Amended and Restated Plan,
the committee calculates the maximum bonus that may be paid in each year to each
participant in accordance with a pre-established bonus formula based upon annual
performance goals. Based upon certain subjective factors, as discussed below,
the committee has the discretion
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<PAGE> 20
to determine the actual amount of the bonus to be paid to each participant,
which may not exceed the maximum bonus calculated under the bonus formula.
DISCONTINUANCE, TERMINATION OR AMENDMENT
Except as permitted by Section 162(m) of the Code, the committee does not
have the authority to modify the material terms of the pre-established
performance goal, which is based upon the company's net income and the ratio of
sales to average net working capital of the company, nor may it modify the bonus
formula or the eligibility requirements of the Amended and Restated Plan without
majority shareholder approval in accordance with Section 162(m) of the Code. The
committee may discontinue the Amended and Restated Plan at any time and may
determine to reduce or eliminate a bonus in any year. The Amended and Restated
Plan terminates on December 31, 2003.
CALCULATION OF MAXIMUM BONUS AWARD
The formula which establishes the maximum bonus that may be payable to each
participant under the Amended and Restated Plan consists of the following
calculations. On or before December 31 of the year preceding a service year (as
defined in the Amended and Restated Plan) or by such later date as is permitted
by Section 162(m) of the Code (the "Determination Date"), the committee will
establish the Target Level Net Income and the Base Factor (as defined in the
Amended and Restated Plan) for that service year. The maximum bonus payable to
each participant for that service year shall equal the sum of (a) 1% of the
excess of Net Income (as defined below) for the service year over the Target
Level Net Income for such service year, and (b) so long as Net Income for the
service year exceeds the Target Level Net Income for the service year, the
product of (i) the Base Factor for such service year and (ii) a fraction, the
numerator of which shall be the Sales (as defined below) for such service year
and the denominator of which shall be the Average Net Working Capital (as
defined below) for such service year.
The amount calculated pursuant to the bonus formula may be reduced (but not
increased) by the committee based upon any additional corporate performance or
individual performance factors or other factors, circumstances or events which
the committee deems relevant. Such reductions are not mandated by the Amended
and Restated Plan and are within the committee's sole discretion.
Target Level Net Income and the Base Factor for each service year are
determined by the committee prior to the Determination Date of such service year
based upon information provided to the committee by management. For the 2000
year the Target Level Net Income is $50,000,000 and the Base Factor is $100,000.
Net Income is defined as the consolidated net income of the company for a
particular service year computed in accordance with generally accepted
accounting principles, as reported in the company's audited financial
statements, and as adjusted by the committee to omit the effects of nonrecurring
items or extraordinary items. Sales is defined as the gross operating sales
revenue generated by the company, on a consolidated basis, computed in
accordance with generally accepted accounting principles, as reported in the
company's audited financial statements. Average Net Working Capital is defined
as the average Monthly Net Working Capital (as defined below) for the period
commencing on and including the month preceding the service year and ending on
the last day of such service year. Monthly Net Working Capital is defined as (a)
the sum of the company's accounts receivable and inventory as of the last
business day of the relevant month, less (b) the company's accounts payable as
of the last business day of such month, with all such amounts being net of
reserves (where appropriate) and determined in accordance with such generally
accepted accounting principles.
17
<PAGE> 21
NEW AMENDED AND RESTATED PLAN BENEFITS
The benefits payable in the future under the Amended and Restated Plan are
not currently determinable. In 1999, only Mr. Kaufman was eligible to
participate in the Plan and based upon the bonus formula in effect for 1999 his
maximum bonus was $1,362,300. In the exercise of the committee's discretion,
however, he was paid a bonus under the Plan of $1,000,000. Subject to
shareholder approval of the Amended and Restated Plan, the committee has
selected Messrs. Kaufman and Scricco as participants for 2000. If Net Income,
Sales and Average Net Working Capital for 2000 equal those achieved in 1999,
application of the above-described bonus formula would have produced a maximum
2000 bonus under the Amended and Restated Plan, before the exercise of any
discretion by the committee, of $1,362,300 for each participant. In no event
shall any participant be entitled to receive a bonus under the Amended and
Restated Plan for any fiscal year of the company in excess of $5,000,000.
PAYMENT OF BONUS AWARDS
Payment of each participant's bonus awards for a particular service year
shall be made in cash, less applicable withholding taxes, in the following year
as soon as practicable after the completion of the committee's computation and
certification with respect to the award. No bonus award under the Amended and
Restated Plan is permitted to be paid unless the committee has certified that
based upon the bonus formula, the Net Income for the service year exceeds the
Target Level Net Income for such service year. Such certification must be made
in writing by the committee or set forth in the approved minutes of the
committee.
If an individual is first employed between February 1 and September 30 of a
service year and is thereafter designated by the committee as a participant for
such year, such participant will be eligible under the Amended and Restated Plan
to receive a pro rata portion of the bonus award (less any discretionary
reductions) based on the length of time employed during the year. Except as
otherwise provided in the Amended and Restated Plan, if the participant retires,
becomes disabled or terminates employment with the company during a given year,
he or she is eligible to be paid after completion of the year a pro rata portion
of the bonus (less any discretionary reductions) as determined by the committee
under the bonus formula.
REASONS FOR SHAREHOLDER APPROVAL
The company desires to deduct from its corporate income, for the purpose of
computing the company's federal corporate income tax liability, certain
compensation received by each participant from the company, including any bonus
award under the Amended and Restated Plan. Under Section 162(m) of the Code, the
deduction from corporate income for salaries or other compensation will
generally be disallowed for compensation in excess of $1,000,000 per annum paid
to a "covered employee." Generally, a "covered employee" is defined in Section
162(m) of the Code to include the chief executive officer and the four other
most highly compensated officers of a corporation the securities of which are
publicly traded. Section 162(m) of the Code applies to taxable years commencing
on or after January 1, 1994.
Performance-based compensation is not subject to the $1,000,000 cap on
deductibility if certain requirements are met. Performance-based compensation
payable to a "covered employee" can be exempted from the Section 162(m)
limitation if the payment is made solely upon the attainment by
18
<PAGE> 22
the covered employee of pre-established performance goals, the performance goals
are set by a committee of the board of directors comprised solely of two or more
"outside directors" and disclosure of the performance goals and other material
terms of the compensation arrangement is made to shareholders of the corporation
who thereafter approve the performance goals and the other material terms of the
arrangement prior to the payment of any performance-based compensation. In
addition, before any payments of performance-based compensation are made, such
committee must certify that the performance goals and other material terms of
the arrangement have been satisfied.
The company has reviewed Section 162(m) of the Code and the Regulations and
believes that bonuses paid to participants under the Amended and Restated Plan
should qualify as performance-based compensation.
In the event the shareholders of the company ratify the Amended and
Restated Plan, including the above-described performance goal and bonus formula,
the company intends to deduct any bonuses paid to the participants for the
purpose of determining the company's corporate income tax liability for tax
years ending on or after December 31, 2000.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THIS
PROPOSAL.
The affirmative vote of the holders of a majority of the shares of common
stock cast at the Annual Meeting is required for approval of the Amended and
Restated Plan. Consequently, any shares not voted (whether by abstention or
broker non-votes) have no effect on the adoption of the Amended and Restated
Plan.
APPROVAL OF APPOINTMENT OF AUDITORS
The shareholders will be asked to ratify the appointment of Ernst & Young
LLP as Arrow's independent auditors for 2000. 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 10, 2001. 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 4, 2000.
19
<PAGE> 23
OTHER MATTERS
Management does not expect any matters to come before the meeting other
than those to which reference is made 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
20
<PAGE> 24
PROXY
ARROW ELECTRONICS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, MAY 23, 2000
The undersigned hereby appoints Stephen P. Kaufman, Robert E. Klatell, and
John C. Waddell, and any one or more of them, with full power of substitution,
as proxy or proxies of the undersigned to vote all shares of stock of ARROW
ELECTRONICS, INC. which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Shareholders to be held on May 23, 2000, at
11:00 a.m., prevailing local time, at the offices of The Chase Manhattan Bank,
270 Park Avenue, New York, New York, or any adjournments thereof, as set forth
on the reverse hereof.
PLEASE RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF TWO WAYS:
1. Call toll free 1-800-840-1208 on a touchtone telephone and follow the
instructions on the reverse side. There is NO CHARGE to you for this
call.
OR
2. Mark, sign and date your proxy card and return it promptly in the
enclosed envelope.
PLEASE VOTE
<PAGE> 25
Please mark
your votes as
indicated in
this example.
[ x ]
1. Authority to vote FOR the election of directors in accordance with the
accompanying Proxy Statement.
FOR WITHHOLD
FOR ALL
[ ] [ ]
NOMINEES:
01 Daniel W. Duval 02 Carlo Giersch 03 John N. Hanson
04 Stephen P. Kaufman 05 Roger King 06 Robert E. Klatell
07 Karen Gordon Mills 08 Barry W. Perry 09 Richard S. Rosenbloom
10 Francis M. Scricco 11 John C. Waddell
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
2. Approval of the amendment and restatement of the Arrow Electronics, Inc.
Chief Executive Officer 1999 Performance Bonus Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Ratification of the appointment of Ernst & Young LLP as independent auditors
of the books and accounts of Arrow for the fiscal year ending December 31,
2000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. In accordance with their discretion upon such other matters as may properly
come before the meeting or any adjournments thereof.
THIS PROXY IS BEING SOLICITED BY THE MANAGEMENT AND WILL BE VOTED AS SPECIFIED.
IF NOT OTHERWISE SPECIFIED, IT WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND
FOR THE PROPOSALS DESCRIBED IN ITEMS 2 AND 3 ABOVE AND OTHERWISE IN ACCORDANCE
WITH THEIR DISCRETION.
*** IF YOU WISH TO VOTE BY TELEPHONE, PLEASE READ THE INSTRUCTIONS BELOW ***
DATE
--------------/-------------/2000
---------------------------------
Signature
----------------------------------
Signature, if Jointly Held
IF ACTING AS ATTORNEY, EXECUTOR,
TRUSTEE OR IN OTHER REPRESENTATIVE
CAPACITY, PLEASE SIGN NAME AND
TITLE.
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
[PHONE GRAPHIC] VOTE BY TELEPHONE [PHONE GRAPHIC]
QUICK*** EASY***IMMEDIATE
Your telephone vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card.
- - You will be asked to enter a Control Number which is located in the box in
the lower right hand corner of this form.
OPTION #1: To vote as the Board of Directors recommends on ALL proposals: Press
1.
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
OPTION #2: If you choose to vote on each proposal separately, press 0. You will
hear these instructions:
Proposal 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL
nominees, press 9.
To withhold FOR AN INDIVIDUAL nominee, press 0 and listen to
the instructions.
Proposal 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
The Instructions are the same for all remaining proposals.
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
PLEASE DO NOT RETURN THE ABOVE PROXY CARD IF VOTED BY PHONE.
CALL** TOLL FREE** ON A TOUCHTONE TELEPHONE
1-800-840-1208 - ANYTIME
There is NO CHARGE to you for this call.
