10-K405 1 1994 FORM 10K Form 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1994 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from............to................. Commission file number 1-4482 ARROW ELECTRONICS, INC. (Exact name of registrant as specified in its charter) New York 11-1806155 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 25 Hub Drive Melville, New York 11747 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (516) 391-1300 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange on Title of Each Class Which Registered Common Stock, $1 par value New York Stock Exchange Preferred Share Purchase Rights New York Stock Exchange 5-3/4% Convertible Subordinated Debentures due 2002 New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] The aggregate market value of voting stock held by nonaffiliates of the registrant as of March 8, 1995 was $1,888,554,056. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Common Stock, $1 par value: 46,387,259 shares outstanding at March 8, 1995. The following documents are incorporated herein by reference: 1. Proxy Statement filed in connection with Annual Meeting of Shareholders to be held May 9, 1995 (incorporated in Part III). PART I Item 1. Business. Arrow Electronics, Inc. (the "company") is the world's largest distributor of electronic components and computer products to industrial and commercial customers. As the global electronics distribution industry's leader in state-of-the-art operating systems, employee productivity, innovative value-added programs, and total quality assurance, the company is the distributor of choice for over 350 suppliers. The company's global distribution network spans North America, Europe, and the Asia/Pacific region. The company is the largest electronics distributor in each of these vital industrialized regions, serving a diversified base of original equipment manufacturers (OEMs) and commercial customers worldwide. OEMs include manufacturers of computer and office products, industrial equipment (including machine tools, factory automation, and robotic equipment), telecommunications products, aircraft and aerospace equipment, and scientific and medical devices. Commercial customers are mainly value-added resellers (VARs) of computer systems. The company maintains 160 sales facilities and 15 distribution centers in 28 countries. During 1994, the company acquired Gates/FA Distributing, Inc. and Anthem Electronics, Inc. in transactions accounted for as poolings of interests and, accordingly, the company's consolidated financial statements have been restated to include the operations of Gates and Anthem for all periods presented. In January 1994, the company acquired an additional 15% interest in Spoerle Electronic, the largest electronics distributor in Germany, bringing its holdings to 70%, and increased its holdings in Silverstar Ltd. S.p.A., the largest distributor in Italy, to a majority share. In addition, the company acquired Field Oy, the largest distributor of electronic components in Finland. In February, the company acquired TH:s Elektronic AB, a prominent distribution group headquartered in Stockholm. In April, the company acquired Copenhagen-based Exatec A/S, one of Denmark's largest distributors. In May, the company acquired Texny Glorytact (HK) Limited, a large semiconductor specialist in Hong Kong. In October, the company acquired The Megachip Group, a large distributor of memory and computer products in France, Germany, and the U.K. In November, the company acquired Veltek Australia Pty Ltd. and Zatek Australia Pty Ltd., two Melbourne-based broadline distributors. In 1993, the company acquired a 15% share in Spoerle increasing its holdings to a majority interest. The company also acquired Zeus Components, Inc. a distributor of high-reliability electronic components and value-added services, Microprocessor & Memory Distribution Limited, a focused U.K. distributor of high- technology semiconductor products, and Components Agent Limited, one of the largest distributors in Hong Kong. In addition, the company acquired Amitron S.A. and ATD Electronica S.A., distributors serving the Spanish and Portuguese markets, and CCI Electronique, a distributor serving the French marketplace. In North America, the company is organized into five product- specific sales and marketing groups: The Arrow/Schweber Electronics Group is the largest dedicated semiconductor distributor in the 2 world. Anthem Electronics, Inc. is a leading distributor of semiconductors and computer products. Zeus Electronics is the only specialist distributor serving the military and high-reliability markets. Capstone Electronics focuses exclusively on the distribution of passive, electromechanical, and interconnect products. And Gates/Arrow Distributing, Inc. distributes commercial computer products and systems. Through its wholly-owned subsidiary, Arrow Electronics Distribution Group - Europe B. V., Arrow is the largest pan-European electronics distributor. The company's European strategy stresses two key elements: strong, locally-managed distributors to satisfy widely varying customer preferences and business practices; and an electronic backbone uniting Arrow's European partners with one another and with Arrow worldwide to leverage inventory investment and better meet the needs of customers in all of Europe's leading industrial electronics markets. In most of these markets, Arrow companies hold the number one position: Arrow Electronics (UK) Ltd. in Britain; Spoerle Electronic in Central Europe; Silverstar Ltd. S.p.A. in Italy; and Amitron-Arrow and ATD Electronica S.A. in Spain and Portugal. Arrow Electronique and Megachip form the largest electronics distribution group in France, and Arrow's Nordic companies, Field Oy, TH:s Elektronik, and Exatec A/S, are among the largest distributors in the markets of Finland, Norway, Sweden, and Denmark. Arrow is the first American electronics distributor to be present in the Asia/Pacific markets. Arrow's Components Agent Limited (C.A.L.) and Lite-On Group are the region's leading multinational distributor. C.A.L., headquartered in Hong Kong, maintains additional facilities in key cities in Singapore, Malaysia, the People's Republic of China, and South Korea. In early 1995, the company acquired Lite-On Group and Ally, Inc. Lite-On, headquartered in Taipei, serves customers in Taiwan, South Korea, Singapore, and Malaysia. Ally serves customers in Taipei; an additional Arrow company serves India. Within these dynamic markets, Arrow is benefiting from two important growth factors: the decision by many of Arrow's traditional North American customers to locate production facilities in the region and the surging demand for electronic products resulting from rising living standards and massive investments in infrastructure. The company distributes a broad range of electronic components, computer products, and related equipment manufactured by others. About 66% of the company's consolidated sales are of semiconductor products; industrial and commercial computer products, including microcomputer boards and systems, design systems, desktop computer systems, terminals, printers, disc drives, controllers, and communication control equipment account for about 25%; and the remaining sales are of passive, electromechanical, and interconnect products, principally capacitors, resistors, potentiometers, power supplies, relays, switches and connectors. Most manufacturers of electronic components and computer products rely on independent authorized distributors, such as the company, to augment their product marketing operations. As a stocking, marketing and financial intermediary, the distributor relieves its manufacturers of a portion of the costs and personnel associated with stocking and selling their products (including otherwise sizable investments in finished goods inventories and 3 accounts receivable), while providing geographically dispersed selling, order processing, and delivery capabilities. At the same time, the distributor offers a broad range of customers the convenience of diverse inventories and rapid or scheduled deliveries. The growth of the electronics distribution industry has been fostered by the many manufacturers who recognize their authorized distributors as essential extensions of their marketing organizations. The company and its affiliates serve approximately 140,000 industrial and commercial customers in North America, Europe, and the Asia/Pacific region. Industrial customers range from major original equipment manufacturers to small engineering firms, while commercial customers include value-added resellers, small systems integrators, and large end-users. Most of the company's customers require delivery of the products they have ordered on schedules that are generally not available on direct purchases from manufacturers, and frequently their orders are of insufficient size to be placed directly with manufacturers. No single customer accounted for more than 1% of the company's 1994 sales. The electronic components and other products offered by the company are sold by field sales representatives, who regularly call on customers in assigned market areas, and by telephone from the company's selling locations, from which inside sales personnel with access to pricing and stocking data provided by computer display terminals accept and process orders. Each of the company's North American selling locations, warehouses, and primary distribution centers is electronically linked to the business' central computer, which provides fully integrated, on-line, real-time data with respect to nationwide inventory levels and facilitates control of purchasing, shipping, and billing. The company's foreign operations utilize Arrow's Worldwide Stock Check System, which affords access to the company's on-line, real-time inventory system. Of the approximately 350 manufacturers whose products are sold by the company, the ten largest accounted for about 65% of the business' purchases during 1994. Intel Corporation and Texas Instruments accounted for approximately 21% and 10%, respectively, of the business' purchases because of the market demand for microprocessors. No other supplier accounted for more than 9% of 1994 purchases. The company does not regard any one supplier of products to be essential to its operations and believes that many of the products presently sold by the company are available from other sources at competitive prices. Most of the company's purchases are pursuant to authorized distributor agreements which are typically cancelable by either party at any time or on short notice. Approximately 65% of the company's inventory consists of semiconductors. It is the policy of most manufacturers to protect authorized distributors, such as the company, against the potential write-down of such inventories due to technological change or manufacturers' price reductions. Under the terms of the related distributor agreements, and assuming the distributor complies with certain conditions, such suppliers are required to credit the distributor for inventory losses incurred through reductions in manufacturers' list prices of the items. In addition, under the terms of many such agreements, the distributor has the right to return to the manufacturer for credit a defined portion of those inventory items purchased within a designated period of time. A manufacturer who elects to terminate a distributor agreement is 4 generally required to purchase from the distributor the total amount of its products carried in inventory. While these industry practices do not wholly protect the company from inventory losses, management believes that they currently provide substantial protection from such losses. The company's business is extremely competitive, particularly with respect to prices, franchises, and, in certain instances, product availability. The company competes with several other large multinational, national, and numerous regional and local, distributors. As the world's largest electronics distributor, the company is greater in terms of financial resources and sales than most of its competitors. The company and its affiliates employ approximately 6,500 people worldwide. Executive Officers The following table sets forth the names and ages of, and the positions and offices with the company held by, each of the executive officers of the company. Name Age Position or Office Held Stephen P. Kaufman 53 Chairman and Chief Executive Officer John C. Waddell 57 Vice Chairman Robert E. Klatell 49 Senior Vice President, Chief Financial Officer, General Counsel, Secretary, and Treasurer Philip D. Ellett 42 Vice President; President Gates/Arrow Distributing, Inc. Carlo Giersch 57 President and Chief Executive Officer of Spoerle Electronic Steven W. Menefee 50 Vice President; President, Arrow/Schweber Electronics Group John J. Powers, III 40 Vice President; President, Anthem Electronics Wesley S. Sagawa 47 Vice President; President, Capstone Electronics Corp. Jan Salsgiver 38 Vice President; President, Zeus Electronics Robert S. Throop 57 Vice President; Chairman and Chief Executive Officer, Anthem Electronics Set forth below is a brief account of the business experience during the past five years of each executive officer of the company. Stephen P. Kaufman has been Chairman since May 1994 and President and Chief Executive Officer of the company for more than five years prior thereto. John C. Waddell has been Vice Chairman of the company since May 1994 and Chairman for more than five years prior thereto. Robert E. Klatell has been Senior Vice President and has served as General Counsel and Secretary of the company for more than five years. He has been Chief Financial Officer since January 1992 and Treasurer of the company since October 1990. 5 Philip D. Ellett became a Vice President of the company and President of Gates/Arrow Distributing, Inc. in September 1994, following the acquisition of Gates/FA Distributing, Inc. He had been President of Gates/FA Distributing, Inc. since December 1990 and prior thereto he was Executive Vice President. Carlo Giersch has been President and Chief Executive Officer of Spoerle Electronic for more than five years. Steven W. Menefee has been a Vice President of the company and President of the company's Arrow/Schweber Electronics Group since November 1990. For more than five years prior thereto, he was a Vice President of Avnet, Inc., principally an electronics distributor, and an executive of Avnet's Electronic Marketing Group. John J. Powers, III became a Vice President of the company in November 1994, following the acquisition of Anthem Electronics, Inc. He has been President of Anthem Electronics since June 1992; prior thereto he was Senior Vice President of Anthem Electronics. Wesley S. Sagawa has been a Vice President of the company and President of Capstone Electronics Corp., the company's subsidiary which markets passive, electromechanical, and interconnect products for more than five years. Jan Salsgiver has been a Vice President of the company since September 1993 and President of the company's Zeus Electronics since July 1993. For more than five years prior thereto, she held a variety of senior marketing positions in the company, the most recent of which was Vice President, Semiconductor Marketing of the Arrow/Schweber Electronics Group. Robert S. Throop has been Chairman and Chief Executive Officer of Anthem Electronics, Inc. for more than five years. He became a Vice President of the company in March 1995. Item 2. Properties. The company's executive office, located in Melville, New York, is owned by the company. The company occupies additional locations under leases due to expire on various dates to 2016. Six additional facilities are owned by the company, and another facility has been sold and leased back in connection with the financing thereof. Item 3. Legal Proceedings. Through a wholly-owned subsidiary, Schuylkill Metals Corporation, the company was previously engaged in the refining and selling of lead. In September 1988, the company sold its refining business. In mid-1986 the refining business ceased operations at its battery breaking facility in Plant City, Florida, which facility had been placed on the list of hazardous waste sites targeted for cleanup under the federal Super Fund Program. The Plant City site was not sold to the purchaser of the refining business, and the company remains subject to various environmental cleanup obligations at the site under federal and state law. During 1991, the company engaged in settlement negotiations with the EPA, resulting in the execution of a consent decree defining those obligations which was 6 entered by a federal court in Florida and became effective on April 22, 1992. The consent decree requires the company to fund and implement remedial design and remedial action activity addressing environmental impacts to site soils and sediment, underlying ground water, and wetland areas. The company, through its technical contractors, has begun implementation of these requirements and substantial progress has been made in each of the areas requiring remediation. Remediation of the wetlands areas on the site, including the creation of certain new wetlands areas under agreement with the EPA and the Florida Department of Environmental Conservation, has been substantially completed. A waste water treatment plant has been built on site by the company's contractors, and processing of ground and pond water for discharge to the Plant City Treatment Works has commenced. A contract for the stabilization of contaminated soils has been let and stabilization facilities erected. Soil processing has begun and material meeting the specifications of the consent decree are being produced. The extent of such remediation activities (including the estimated cost thereof and the time necessary to complete them), however, is subject to change based upon conditions actually encountered during remediation. Moreover, the EPA reserves the right to seek additional action if it subsequently finds further contamination or other conditions rendering the work insufficiently protective of human health or the environment. The company believes that the amount expected to be expended in any year to fund such activities will not have a material adverse impact on the company's liquidity, capital resources or results of operations. Item 4. Submission of Matters to a Vote of Security Holders. None. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters. Market Information The company's common stock is listed on the New York Stock Exchange (trading symbol: "ARW"). The high and low sales prices during each quarter of 1994 and 1993 were as follows: Year High Low 1994: Fourth Quarter $38-5/8 $33-3/4 Third Quarter 40-1/8 35-1/8 Second Quarter 41-1/8 33-5/8 First Quarter 45-1/8 36-1/8 1993: Fourth Quarter $42-1/4 $33-5/8 Third Quarter 43-1/8 34-5/8 Second Quarter 36-1/4 29-3/4 First Quarter 34-3/8 26-1/2 7 Holders On March 8, 1995, there were approximately 4,500 shareholders of record of the company's common stock. Dividend History and Restrictions The company has not paid cash dividends on its common stock during the past two years. While the Board of Directors considers the payment of dividends on the common stock from time to time, the declaration of future dividends will be dependent upon the company's earnings, financial condition, and other relevant factors. The terms of the company's U.S. credit agreement, senior notes, and certain foreign debt (see Note 4 of the Notes to Consolidated Financial Statements) restrict the payment of cash dividends, limit long-term debt and short-term borrowings, and require that the ratio of earnings to interest expense, ratio of operating cash flow to interest expense, working capital, net worth, and tangible net worth be maintained at designated levels. 8 Item 6. Selected Financial Data The following table sets forth certain selected consolidated financial data and should be read in conjunction with the company's consolidated financial statements and related notes appearing elsewhere in this Annual Report.
SELECTED FINANCIAL DATA (a) (In thousands except per share data) For the year: 1994(b) 1993(c)(d) 1992 1991(e) 1990 Sales $4,649,234 $3,560,856 $2,423,033 $1,658,177 $1,542,672 Operating income 255,974 226,089 163,699 79,201 74,527 Equity in earnings of affiliated companies - 1,673 6,550 5,657 6,395 Interest expense 36,168 26,573 31,607 31,247 31,667 Earnings before extraordinary charges 111,889 106,559 84,885 33,889 32,962 Extraordinary charges, net of income taxes - - 5,424 - - Net income $ 111,889 $ 106,559 $ 79,461 $ 33,889 $ 32,962 Per common share: Earnings before extraordinary charges(f) $ 2.40 $ 2.33 $ 2.05 $ 1.05 $ 1.13 Extraordinary charges - - (.14) - - Net income (f) $ 2.40 $ 2.33 $ 1.91 $ 1.05 $ 1.13 At year-end: Accounts receivable and inventories $1,422,457 $1,094,175 $ 781,267 $ 696,440 $ 478,561 Total assets 2,038,774 1,569,152 1,080,163 995,064 676,327 Long-term debt, including current portion 250,634 195,165 117,517 243,640 105,104 Subordinated debentures, including current portion 125,000 125,000 125,000 105,965 107,300 Total long-term debt and subordinated debentures 375,634 320,165 242,517 349,605 212,404 Shareholders' equity 837,885 701,799 566,100 392,293 287,175 (a) In 1994, Arrow acquired Gates/FA Distributing, Inc. ("Gates") and Anthem Electronics, Inc. ("Anthem") in transactions accounted for as poolings of interests. Accordingly, all financial information has been restated to include the operations of Gates and Anthem. (b) Includes special charges of $45.3 million reflecting expenses associated with the integration of Gates and Anthem. Excluding these charges, operating income, net income, and net income per share were $301.3 million, $140.7 million, and $3.02, respectively. (c) Includes results of Spoerle Electronic, which were accounted for under the equity method prior to January 1993 when Arrow increased its holdings to a majority interest (see Note 2 of the Notes to Consolidated Financial Statements). (d) Net income is after a restructuring charge of $7.8 million reflecting the disposition of the Eagle Technology Business Unit by Anthem. Excluding this charge, operating income, net income, and net income per share were $233.9 million, $111.1 million, and $2.43, respectively. (e) Includes a special charge of $9.8 million reflecting expenses associated with the integration of the North American electronics distribution businesses of Lex Service PLC acquired in September 1991. Excluding this charge, operating income, net income, and net income per share were $89 million, $40.4 million, and $1.29, respectively. (f) After preferred stock dividends of $.9 million in 1993, $3.9 million in 1992, $4.6 million in 1991, and $4.9 million in 1990.
9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. For an understanding of the significant factors that in- fluenced the company's performance during the past three years, the following discussion should be read in conjunction with the consolidated financial statements and other information appearing elsewhere in this report. During 1994, the company acquired Gates/FA Distributing, Inc. ("Gates") and Anthem Electronics, Inc. ("Anthem") in transactions accounted for as poolings of interests. Accordingly, the company's consolidated financial statements have been restated to include Gates and Anthem for all periods presented. The consolidated financial statements do not reflect the sales attrition which may result from the merger of Gates and Anthem with the company or the cost savings and synergies Arrow expects to achieve. Beginning in January 1993, the consolidated financial statements include the consolidated results of Spoerle Electronic ("Spoerle"), which had been accounted for under the equity method prior to January 1993 when the company increased its holdings to a majority interest. See Note 2 of the Notes to Consolidated Financial Statements for information with respect to the acquisitions. Sales Consolidated sales of $4.6 billion were 31% higher than 1993 sales of $3.6 billion. This increase principally reflects increased activity levels in each of the company's distribution groups throughout the world, the consolidation of Silverstar Ltd. S.p.A. ("Silverstar"), which had been accounted for under the equity method prior to January 1994 when the company increased its holdings to a majority interest, and, to a lesser extent, acquisitions in Europe and the Asia/Pacific region. In 1993, consolidated sales of $3.6 billion were 47% ahead of 1992 sales of $2.4 billion. Excluding Spoerle, sales were $3.2 billion, an advance of 32% over the year-earlier period. This sales growth was principally due to increased activity levels in each of the company's distribution groups, and, to a lesser extent, acquisitions in North America, Europe, and the Asia/Pacific region, offset in part by weaker currencies in Europe. Consolidated sales of $2.4 billion in 1992 were 46% higher than 1991 sales of $1.7 billion. This increase principally reflected the acquisitions of the North American and European businesses of Lex Service PLC ("Lex") in September 1991 and February 1992, respectively, and increased North American sales. Operating Income The company's consolidated operating income increased to $256 million in 1994, compared with operating income of $226.1 million in 1993. Included in the 1994 results are special integration charges of $45.3 million associated with the integration of Gates and Anthem. Excluding the special integration charges, operating income was $301.3 million. The improvement in operating income, excluding 10 the special integration charges, reflects the impact of increased sales, continued economies of scale and expense containment efforts reducing operating expenses as a percentage of sales, and the consolidation of Silverstar, offset in part by lower gross profit margins. Gross profit margins decreased from prior periods as a result of proportionately higher sales of low-margin microprocessors and commercial computer products, coupled with competitive pricing pressures. Operating expenses as a percentage of sales, excluding the special integration charges, were 11.1%, the lowest in the company's history. In 1993, the company's consolidated operating income increased to $226.1 million, compared with 1992 operating income of $163.7 million. The significant improvement in operating income reflected the impact of increased sales and the consolidation of Spoerle, offset in part by lower gross profit margins primarily reflecting proportionately higher sales of low-margin microprocessors and commercial computer products. Operating income in 1993 included a restructuring charge of $7.8 million associated with the sale by Anthem of its Eagle Technology Business Unit. Excluding this restructuring charge, operating income was $233.9 million. The company's 1992 consolidated operating income increased to $163.7 million, compared with operating income of $79.2 million in 1991. Operating income in 1991 included the recognition of approximately $9.8 million of costs associated with the integration of the North American businesses of Lex. The significant improve- ment in operating income in 1992 primarily reflected the impact of the company's acquisitions, improved gross profit margins reflecting a product mix more heavily weighted to semiconductor products, and improved North American sales. The rapid and successful integration of these businesses resulted in the realization of sizable economies of scale which, when combined with increased sales, enabled the company to reduce operating expenses as a percentage of sales from 15.3% in 1991 to 13.2% in 1992, the then lowest level in the company's history. Such economies of scale principally resulted from reductions in personnel performing duplicative functions and the elimination of duplicative administrative facilities, selling and stocking locations, and computer and telecommunications equipment. Interest Interest expense of $36.2 million in 1994 increased by $9.6 million from the 1993 level. The increase principally reflected the consolidation of Silverstar and, to a lesser extent, the interest related to borrowings associated with acquisitions. In 1993, interest expense decreased to $26.6 million from $31.6 million in 1992. The decrease principally reflects the full- year effect of the retirement during 1992 of $46 million of the company's 13-3/4% subordinated debentures and the refinancing of the company's remaining high-yield debt with securities bearing lower interest rates, offset in part by the consolidation of Spoerle and borrowings associated with acquisitions. Interest expense of $31.6 million in 1992 increased by $.4 million from the 1991 level, reflecting the company's borrowings to finance the cash portion of the purchase price of the North American and European businesses of Lex, to pay fees and expenses relating to 11 the acquisitions, to refinance existing credit facilities of the company, and to provide the company with working capital. Such increased borrowings were partially offset by the company's redemption of $46 million of its 13-3/4% subordinated debentures with the proceeds from the public offering of 4,703,500 common shares and lower effective interest rates. Income Taxes The company recorded a provision for taxes, excluding the special charges associated with the integration of Gates and Anthem, at an effective tax rate of 40.6% in 1994, compared with 41% in 1993. The lower effective tax rate is the result of increased earnings in foreign countries with lower tax rates. In 1993, the company's effective tax rate was 41%, compared with 38.8% in 1992. The higher effective tax rate reflected increased U.S. taxes resulting from higher statutory rates and the consolidation of Spoerle. The company recorded a provision for taxes at an effective tax rate of 38.8% in 1992, compared with 36.8% in 1991. The higher effective tax rate reflected the depletion of the company's remain- ing $5.8 million U.S. net operating loss carryforwards in 1991. Net Income Net income in 1994 was $111.9 million, an advance from $106.6 million in 1993. Excluding the special integration charges associated with Gates and Anthem, net income in 1994 was $140.7 million. Excluding the restructuring charge associated with the sale by Anthem of its Eagle Technology Business Unit, net income was $111.1 million in 1993. The increase in net income was due principally to increased operating income offset in part by higher interest expense. Net income in 1993 was $106.6 million, an advance from $79.5 million in 1992 (after giving effect to extraordinary charges of $5.4 million reflecting the net unamortized discount and issuance expenses associated with the redemption of high-coupon subordinated debentures and other debt in 1992). The increase in net income is due principally to the increase in operating income and lower interest expense offset in part by higher taxes. The company recorded net income of $84.9 million in 1992, before extraordinary charges aggregating $5.4 million, compared with net income of $33.9 million in 1991. Including these charges, net income in 1992 was $79.5 million. Included in 1991's results was a special charge of $9.8 million ($6.5 million after taxes) associated with the integration of the North American businesses of Lex. The improvement in net income was principally the result of the increase in operating income offset in part by the higher provision for income taxes. 12 During 1994, the company increased its holdings in Silverstar to a majority interest and, accordingly, has consolidated its results. In 1993 and 1992, the company's share of Silverstar's net income was included in the equity in earnings of affiliated companies. The decrease in the equity in earnings of affiliated companies in 1993 was the result of the consolidation of Spoerle. Liquidity and Capital Resources The company maintains a high level of current assets, primarily accounts receivable and inventories. Consolidated current assets as a percentage of total assets were approximately 76% in 1994 and 1993. Working capital increased by $103.6 million, or 14%, compared with 1993, as a result of increased sales, the consolidation of Silverstar, and acquisitions. Working capital increased in 1993 by $204.7 million, or 37%, compared with 1992, as a result of increased sales, the consolidation of Spoerle, and acquisitions. Working capital increased by $80.1 million in 1992 as a result of acquisitions in Europe and increased sales. The net amount of cash provided by operations in 1994 was $125.2 million, the principal element of which was the cash flow resulting from higher net earnings offset in part by increased working capital needs to support sales growth. The net amount of cash used by the company for investing purposes was $122.9 million, including $108.5 million for various acquisitions (see Note 2 of the Notes to Consolidated Financial Statements for additional information regarding these acquisitions). Cash flows from financing activities were $13.4 million, principally from increased borrowings in part to finance the 1994 acquisitions in Europe and the Asia/Pacific region. The net amount of cash provided by operations in 1993 was $35.7 million, the principal element of which was the cash flow resulting from higher net earnings offset by increased working capital needs to support sales growth. The net amount of cash used by the company for investing activities amounted to $114.8 million, including $87.9 million for various acquisitions. Cash flows from financing activities were $122.2 million, principally resulting from increased borrowings to finance the 1993 acquisitions in the U.S., Europe, and the Asia/Pacific region (see Note 2 of the Notes to Consolidated Financial Statements for additional information regarding these acquisitions). In September 1993, the company completed the conversion of all of its outstanding series B $19.375 convertible exchangeable preferred stock into 1,009,086 shares of its common stock. This conversion eliminated the company's obligation to pay $1.3 million of annual dividends. The net amount of cash provided by operating activities in 1992 was $76 million, attributable primarily to the net earnings of the company. The net amount of cash used by the company for investing activities amounted to $57.3 million, including $37.2 million for acquisitions in Europe. 13 The aggregate cost of the company's acquisition of the electronics distribution businesses of Lex in the U.K. and France, and Spoerle's acquisition of the Lex electronics distribution business in Germany, was $52 million, of which $32 million was paid in cash and $20 million was paid in the form of a senior subordinated note due in June 1997. The company financed the cash portion of the purchase price through the sale of 66,196 shares of series B convertible exchangeable preferred stock and U.K. bank borrowings. In addition, a portion of the proceeds from the company's public offering of common stock and the issuance of the 5- 3/4% convertible subordinated debentures was used to repay the senior subordinated note. The net amount of cash used for financing activities in 1992 was $21.1 million, principally reflecting the redemption of high- yield subordinated debentures, repayment of long-term debt, and the payment of preferred stock dividends and financing fees, offset by the public offering of 4,703,500 shares of common stock and the 5- 3/4% convertible subordinated debentures, the issuance of the senior secured notes, and U.K. bank borrowings. In September 1992, the company completed the conversion of all of its outstanding depositary shares, each representing one-tenth share of its $19.375 convertible exchangeable preferred stock, into 3,615,056 shares of its common stock. This conversion eliminated the company's obligation to pay $4.6 million of annual dividends relating to the depositary shares. 14 Item 8. Financial Statements. REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS The Board of Directors and Shareholders Arrow Electronics, Inc. We have audited the accompanying consolidated balance sheet of Arrow Electronics, Inc. as of December 31, 1994 and 1993, and the related consolidated statements of income, cash flows and shareholders' equity for each of the three years in the period ended December 31, 1993. Our audits also included the financial statement schedules listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Arrow Electronics, Inc. at December 31, 1994 and 1993, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. ERNST & YOUNG LLP New York, New York February 22, 1995 15 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING The consolidated financial statements of Arrow Electronics, Inc. have been prepared by management, which is responsible for their integrity and objectivity. These statements, prepared in accordance with generally accepted accounting principles, reflect our best use of judgment and estimates where appropriate. Management also prepared the other information in the annual report and is responsible for its accuracy and consistency with the consolidated financial statements. The company's system of internal controls is designed to provide reasonable assurance that company assets are safeguarded from loss or unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and are properly recorded. In establishing the basis for reasonable assurance, management balances the costs of the internal controls with the benefits they provide. The system contains self-monitoring mechanisms, and compliance is tested through an extensive program of site visits and audits by the company's operating controls staff. The Audit Committee of the Board of Directors, consisting entirely of outside directors, meets regularly with management, operating controls staff, and independent auditors, and reviews audit plans and results as well as management's actions taken in discharging its responsibilities for accounting, financial reporting, and internal controls. Management, operating controls staff, and independent auditors have direct and confidential access to the Audit Committee at all times. The company's independent auditors, Ernst & Young LLP, were engaged to audit the consolidated financial statements in accordance with generally accepted auditing standards. These standards include a study and evaluation of internal controls for the purpose of establishing a basis for reliance thereon relative to the scope of their audit of the consolidated financial statements. Stephen P. Kaufman Chairman and Chief Executive Officer Robert E. Klatell Senior Vice President and Chief Financial Officer 16 ARROW ELECTRONICS, INC. CONSOLIDATED BALANCE SHEET (Dollars in thousands) ASSETS
December 31, 1994 1993 Current assets: Cash and short-term investments................................... $ 105,606 $ 80,962 Accounts receivable, less allowance for doubtful accounts ($31,132 in 1994 and $24,263 in 1993).................. 697,021 501,747 Inventories....................................................... 725,436 592,428 Prepaid expenses and other assets................................. 30,180 27,179 Total current assets................................................ 1,558,243 1,202,316 Property, plant and equipment at cost Land.............................................................. 11,970 12,076 Buildings and improvements........................................ 53,962 43,107 Machinery and equipment........................................... 84,740 71,499 150,672 126,682 Less accumulated depreciation and amortization.................... 60,857 48,438 89,815 78,244 Investment in affiliated company.................................... - 13,371 Cost in excess of net assets of companies acquired, less accumulated amortization ($36,057 in 1994 and $26,233 in 1993).............................................. 334,297 216,221 Other assets........................................................ 56,419 59,000 $2,038,774 $1,569,152 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable.................................................. $ 411,766 $ 264,121 Accrued expenses.................................................. 191,574 131,902 Short-term borrowings, including current maturities of long-term debt.................................................. 86,123 41,075 Total current liabilities........................................... 689,463 437,098 Long-term debt...................................................... 224,398 189,859 Other liabilities................................................... 56,335 43,937 Subordinated debentures............................................. 125,000 125,000 Minority interest................................................... 105,693 71,459 Shareholders' equity: Common stock, par value $1: Authorized--80,000,000 shares Issued--46,167,913 shares in 1994 and 45,753,346 shares in 1993 46,168 45,753 Capital in excess of par value.................................... 388,913 378,309 Retained earnings................................................. 400,089 288,200 Foreign currency translation adjustment........................... 6,367 (7,492) 841,537 704,770 Less unamortized employee stock awards and other.................. 3,652 2,971 Total shareholders' equity.......................................... 837,885 701,799 $2,038,774 $1,569,152 See accompanying notes.
17 ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENT OF INCOME (In thousands except per share data)
Years Ended December 31, 1994 1993 1992 Sales..............................................$4,649,234 $3,560,856 $2,423,033 Costs and expenses: Cost of products sold............................ 3,832,169 2,901,648 1,938,569 Selling, general and administrative expenses..... 487,982 403,870 304,808 Depreciation and amortization.................... 27,759 21,439 15,957 Integration charges.............................. 45,350 - - Restructuring charge............................. - 7,810 - 4,393,260 3,334,767 2,259,334 Operating income................................... 255,974 226,089 163,699 Equity in earnings of affiliated companies......... - 1,673 6,550 Interest expense................................... 36,168 26,573 31,607 Earnings before income taxes, minority interest and extraordinary charges....................... 219,806 201,189 138,642 Provision for income taxes......................... 91,206 82,409 53,757 Earnings before minority interest and extraordinary charges........................ 128,600 118,780 84,885 Minority interest.................................. 16,711 12,221 - Extraordinary charges............................. - - 5,424 Net income.........................................$ 111,889 $ 106,559 $ 79,461 Net income used in per common share calculation (reflecting deduction of preferred stock dividends).......................$ 111,889 $ 105,679 $ 75,558 Per common share: Primary: Earnings before extraordinary charges..........$ 2.40 $ 2.33 $ 2.05 Extraordinary charges.......................... - - (.14) Net income.....................................$ 2.40 $ 2.33 $ 1.91 Fully diluted: Earnings before extraordinary charges..........$ 2.31 $ 2.22 $ 1.96 Extraordinary charges.......................... - - (.12) Net income.....................................$ 2.31 $ 2.22 $ 1.84 Average number of common shares and common share equivalents outstanding: Primary........................................ 46,634 45,360 39,570 Fully diluted.................................. 50,407 49,908 43,406 See accompanying notes.
18 ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (In thousands)
Years Ended December 31, 1994 1993 1992 Cash flows from operating activities: Net income......................................... $111,889 $106,559 $79,461 Adjustments to reconcile net income to net cash provided by (used for) operations: Minority interest in earnings................... 16,711 12,221 - Integration charges............................. 45,350 - - Restructuring charge............................ - 7,810 - Extraordinary charges........................... - - 5,424 Depreciation and amortization................... 29,821 23,871 18,377 Equity in undistributed earnings of affiliated companies.......................... - (1,673) 2,551 Deferred income taxes........................... 8,167 2,678 15,018 Change in assets and liabilities, net of effects of acquired businesses: Accounts receivable......................... (80,315) (86,782) (14,663) Inventories................................. (73,425) (86,158) (31,908) Prepaid expenses and other assets........... 2,754 1,112 (447) Accounts payable............................ 93,987 49,095 18,543 Accrued expenses............................ (37,275) 2,668 (19,381) Other....................................... 7,511 4,281 3,015 Net cash provided by operating activities.......... 125,175 35,682 75,990 Cash flows from investing activities: Acquisition of property, plant and equipment, net.. (22,773) (21,340) (8,750) Cash consideration paid for acquired businesses.... (108,478) (87,875) (37,183) Repayment by (investment in and loans to) affiliate 7,000 (7,000) (9,949) Collection of notes receivable from (advances to) officers........................... 1,397 1,369 (1,407) Net cash used for investing activities............. (122,854) (114,846) (57,289) Cash flows from financing activities: Change in short-term borrowings ................... (35,811) 16,860 (1,520) Proceeds from (repayment of) credit facilities..... 15,184 56,911 (121,582) Proceeds from long-term debt....................... 36,037 24,750 86,633 Repayment of long-term debt and subordinated debentures....................................... (6,151) (804) (199,656) Proceeds from exercise of stock options and warrants..................................... 4,897 5,702 9,140 Proceeds from (distributions to) minority partners. (524) 2,993 - Proceeds from common stock offering................ - 17,705 74,258 Proceeds from issuance of subordinated debentures.. - - 125,000 Proceeds from preferred stock offering............. - - 15,721 Dividends paid..................................... - (880) (4,609) Financing fees paid................................ (200) (1,041) (4,467) Net cash provided by (used for) financing activities 13,432 122,196 (21,082) Effect of exchange rate changes on cash.............. 7,779 314 (2,162) Net increase (decrease) in cash and short-term investments............................. 23,532 43,346 (4,543) Cash and short-term investments at beginning of year.................................. 80,962 10,559 15,102 Cash and short-term investments from affiliate at beginning of year............................... 1,112 27,057 - Cash and short-term investments at end of year....... $105,606 $ 80,962 $ 10,559 Supplemental disclosures of cash flow information: Cash paid during the year for: Income taxes..................................... $ 92,514 $ 62,904 $ 29,917 Interest......................................... 31,753 22,228 33,436 See accompanying notes.
19 ARROW ELECTRONICS,INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (In thousands)
Preferred Common Foreign Unamortized Stock Stock Capital in Currency Employee at Par at Par Excess of Retained Translation Stock Awards Value Value Par Value Earnings Adjustment and Other Total Balance at December 31, 1991 as previously reported $237 $19,920 $199,680 $ 3,799 $ 2,851 $ (651) $225,836 Pooling of interests with Gates/FA Distributing, Inc. - 2,740 13,586 965 - - 17,291 Pooling of interests with Anthem Electronics, Inc. - 10,277 35,984 102,905 - - 149,166 Balance as restated 237 32,937 249,250 107,669 2,851 (651) 392,293 Net income - - - 79,461 - - 79,461 Issuance of common stock - 5,474 68,784 - - - 74,258 Issuance of preferred stock 66 - 15,655 - - - 15,721 Conversion of preferred stock (237) 3,615 (3,698) - - - (320) Exercise of stock options - 1,428 8,740 - - 11 10,179 Exercise of stock warrants - 14 141 - - - 155 Tax benefits related to exercise of stock options - - 10,538 - - - 10,538 Restricted stock awards, net - 84 920 - - (1,004) - Amortization of employee stock awards - - - - - 500 500 Advances to officers for exercise of stock options - - - - - (2,601) (2,601) Preferred stock cash dividends - - - (4,609) - - (4,609) Translation adjustments - - - - (9,369) (9,369) Other - - (105) - - (1) (106) Balance at December 31, 1992 66 43,552 350,225 182,521 (6,518) (3,746) 566,100 Net income - - - 106,559 - - 106,559 Issuance of common stock - 562 17,143 - - - 17,705 Conversion of preferred stock (66) 1,009 (991) - - - (48) Exercise of stock options - 537 4,640 - - 13 5,190 Exercise of stock warrants - 45 467 - - - 512 Tax benefits related to exercise of stock options - - 5,590 - - - 5,590 Restricted stock awards, net - 48 1,235 - - (1,283) - Amortization of employee stock awards - - - - - 731 731 Collection of notes receivable from officers - - - - - 1,369 1,369 Accrued interest - - - - - (55) (55) Preferred stock cash dividends - - - (880) - - (880) Translation adjustments - - - - (974) - (974) Balance at December 31, 1993 - 45,753 378,309 288,200 (7,492) (2,971) 701,799 Net income - - - 111,889 - - 111,889 Exercise of stock options - 337 4,560 - - - 4,897 Tax benefits related to exercise of stock options - - 3,147 - - - 3,147 Restricted stock awards, net - 78 2,897 - - (2,975) - Amortization of employee stock awards - - - - - 1,182 1,182 Collection of notes receivable from officers - - - - - 1,397 1,397 Advances to officers for exercise of stock options - - - - - (173) (173) Accrued interest - - - - - (112) (112) Translation adjustments - - - - 13,859 - 13,859 Balance at December 31, 1994 $ - $46,168 $388,913 $400,089 $ 6,367 $(3,652) $837,885 See accompanying notes.
20 ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1994, 1993, AND 1992 1. Summary of Significant Accounting Policies Basis of Presentation In 1994, the company acquired Gates/FA Distributing, Inc. ("Gates") and Anthem Electronics, Inc. ("Anthem") in transactions accounted for as poolings of interests. Accordingly, the consolidated financial statements have been restated to include the operations of Gates and Anthem. Certain prior year balances have been reclassified to conform to the current year's presentation. Principles of Consolidation The consolidated financial statements include the accounts of the company and its majority-owned subsidiaries. The company's investments in affiliated companies which are not majority-owned are accounted for using the equity method. All significant intercompany transactions are eliminated. Inventories Inventories are stated at the lower of cost or market. Cost is determined on the first-in, first-out (FIFO) method. Property and Depreciation Depreciation is computed on the straight-line method for financial reporting purposes and on accelerated methods for tax reporting purposes. Leasehold improvements are amortized over the shorter of the term of the related lease or the life of the improvement. Cost in Excess of Net Assets of Companies Acquired The cost in excess of net assets of companies acquired is being amortized on a straight-line basis, principally over 40 years. Foreign Currency The assets and liabilities of foreign operations are translated at the exchange rates in effect at the balance sheet date, with the related translation gains or losses reported as a separate compo- nent of shareholders' equity. The results of foreign operations are translated at the weighted average exchange rates for the year. The company has entered into forward foreign exchange contracts to hedge payments on purchased inventory. Gains and losses are deferred and included in other assets or other liabilities, respectively. They are recognized in income when payments are made. 21 ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED Income Taxes Income taxes are accounted for under the liability method. Deferred taxes reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts. Net Income Per Common Share Net income per common share for 1994 is based upon the weighted average number of common shares outstanding and common share equivalents of 634,739. Net income per common share on a fully diluted basis assumes that the 5-3/4% convertible subordinated debentures were converted to common stock at the beginning of the year and the related interest expense, net of taxes, was eliminated. Net income per common share for 1993 is based upon the weighted average number of common shares outstanding and common share equivalents of 828,212 after deducting preferred stock dividends related to the series B $19.375 convertible exchangeable preferred stock (the "series B preferred stock"), which was converted into common stock in September 1993. Net income per common share on a fully diluted basis assumes that the series B preferred stock and the 5-3/4% convertible subordinated debentures were converted to common stock at the beginning of the year. The dividends related to the series B preferred stock and the interest expense on the 5-3/4% convertible subordinated debentures, net of taxes, were eliminated. Net income per common share for 1992 is based upon the weighted average number of common shares outstanding and common share equivalents of 1,241,108 after deducting preferred stock dividends related to the $19.375 convertible exchangeable preferred stock, which was converted into common stock in September 1992, and the series B preferred stock. Net income per common share on a fully diluted basis assumes that the $19.375 convertible exchangeable preferred stock was converted to common stock at the beginning of the year and the series B preferred stock issued in February 1992 and the 5-3/4% convertible subordinated debentures issued in November 1992 were converted to common stock at their respective dates of issuance. The dividends related to the $19.375 convertible exchangeable preferred stock and the series B preferred stock, and the interest expense on the 5-3/4% convertible subordinated debentures, net of taxes, were eliminated. The 9% convertible subordinated debentures are not assumed to be converted into common stock in 1992 as they would have been antidilutive. Cash and Short-term Investments Short-term investments which have a maturity of ninety days or less at time of purchase are considered cash equivalents in the statement of cash flows. The carrying amount reported in the balance sheet for short-term investments approximates its fair value. 22 ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 2. Acquisitions of Electronics Distribution Businesses On August 29, 1994, the company acquired Gates through the exchange of approximately 3,743,000 shares of newly issued company stock. On November 26, 1994, the company acquired Anthem through the exchange of approximately 10,803,000 shares of newly issued company stock. These acquisitions were accounted for as poolings of interests and, accordingly, the company's consolidated financial statements have been restated to include the operations of Gates and Anthem for all periods presented. As Gates' fiscal year-end had been June 30, its year-end and reported financial results have been adjusted to conform to the financial presentation of the company. Combined revenues and net income of the company, Gates, and Anthem are as follows:
1994 1993 1992 (In thousands) Revenues: Arrow $3,712,880 $2,535,584 $1,621,535 Gates 313,974 362,079 263,136 Anthem 622,380 663,193 538,362 Combined $4,649,234 $3,560,856 $2,423,033 Net income: Arrow $ 87,913 $ 81,559 $ 44,820 Gates 3,814 6,988 4,207 Anthem 20,162 18,012 30,434 Combined $ 111,889 $ 106,559 $ 79,461
The combined financial summaries do not reflect the cost savings expected to be achieved from the combination of Gates and Anthem with the company's business or the sales attrition which may result. The cost savings will result principally from reductions in personnel performing duplicative functions and the elimination of duplicative administrative facilities, selling and stocking locations, and computer and telecommunications equipment. The combined financial summary for 1994 includes special charges of $45,350,000 before taxes ($.62 per share on a primary basis) of costs associated with the integration of the Gates and Anthem businesses and related transaction fees. Such integration costs include real estate termination costs and severance and other expenses related to personnel performing duplicative functions. 23 ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED In January 1994, the company acquired an additional 15% share of Spoerle Electronic Handelsgesellschaft mbH and Co. and its general partner, Spoerle GmbH (collectively "Spoerle"), the largest distributor of electronic components in Germany, increasing its holdings to 70%. The company also acquired an additional 11% share of Silverstar Ltd. S.p.A. ("Silverstar"), the largest distributor of electronic components in Italy, increasing its holdings to 61%. In addition, the company acquired Field Oy, the largest distributor of electronic components in Finland. In February, the company acquired TH:s Elektronik AB, a prominent distribution group headquartered in Stockholm. In April, the company acquired Copenhagen-based Exatec A/S, one of Denmark's largest distributors. In May, the company acquired Texny Glorytact (HK) Limited, a large semiconductor specialist in Hong Kong. In October, the company acquired The Megachip Group, a large distributor of memory and computer products in France, Germany, and the U.K. In November, the company acquired Veltek Australia Pty Ltd. and Zatek Australia Pty Ltd., two Melbourne-based broadline distributors. The Veltek/Zatek group is one of Australia's leading distributors. The aggregate cost of these acquisitions was $98,734,000. Each acquisition was accounted for as a purchase transaction beginning in the month of acquisition. A summary of the allocation of the aggregate consideration paid for the aforementioned acquisitions, except Spoerle and Silverstar, to the fair market value of the assets acquired and liabilities assumed is as follows (in thousands): Current assets: Accounts receivable $37,381 Inventories 23,305 Other 924 $ 61,610 Property, plant and equipment 5,820 Cost in excess of net assets of companies acquired 68,375 Other assets 415 136,220 Current liabilities: Accounts payable $26,807 Accrued expenses 13,533 Other 29,699 70,039 Net consideration paid $ 66,181
During 1994, the company made additional payments of $9,744,000 in connection with acquisitions in prior years. These payments were contingent upon the acquired businesses achieving certain operating income or net income levels. The contingent payments are capitalized as cost in excess of net assets of companies acquired. In January 1993, the company acquired an additional 15% share of Spoerle, increasing its holdings to 55%. In May, the company acquired the high-reliability electronic component distribution and value-added service businesses of Zeus Components, Inc. In June, 24 ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED the company acquired Microprocessor & Memory Distribution Limited, a U.K.-based electronics distributor which focuses on the distribution of high-technology semiconductor products. In August, the company acquired Components Agent Limited, one of the largest electronics distributors in Hong Kong. During the third quarter of 1993, the company acquired a majority interest in Amitron S.A. and the ATD Group, electronics distributors serving the Spanish and Portuguese markets. In November, the company augmented its French operations by acquiring CCI Electronique. The aggregate cost of these acquisitions was $87,875,000, including $4,757,000 for non- competition agreements. Each acquisition was accounted for as a purchase transaction beginning in the month of acquisition. 3. Investments in Affiliated Companies At December 31, 1993, the company had a 50% interest in Silverstar. Prior to 1993, when it increased its holdings to a 55% majority interest, the company had a 40% interest in Spoerle. The investment in Silverstar through 1993 was accounted for using the equity method, as was the investment in Spoerle prior to 1993. For the year ended December 31, 1993, Silverstar recorded net sales of $158,546,000, gross profit of $46,111,000, income before taxes of $8,959,000 and net income of $4,000,000. For the year ended December 31, 1992, Spoerle and Silverstar recorded net sales of $487,179,000, gross profit of $135,200,000, income before income taxes of $32,185,000, and net income of $26,082,000. 4. Debt Long-term debt at December 31, 1994 and 1993 consisted of the following:
1994 1993 (In thousands) 8.29% senior notes due 2000............ $ 75,000 $ 75,000 U.S. credit agreement due 1998......... 20,000 35,000 U.S. short-term credit agreements...... 47,100 - U.S. loan agreement due 1995........... 20,000 35,151 Deutsche mark term loan due 2000....... 45,170 28,794 Pound sterling term loan due 1999...... 28,823 18,596 Other obligations with various interest rates........................ 14,541 2,624 250,634 195,165 Less installments due within one year .. 26,236 5,306 $224,398 $189,859
The senior notes are payable in three equal annual installments commencing in 1998. The senior notes restrict the payment of cash dividends, limit long-term debt and short-term borrowings, and require net worth and the ratio of operating cash flow to interest expense be maintained at designated levels. 25 ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED The company's credit agreement with a group of banks (the "U.S. credit agreement") was amended in January 1994 to release all collateral, to increase to $175,000,000 the amount of borrowings available, to reduce the borrowing rate, and to extend the maturity date to January 1998. At February 22, 1995, the company had outstanding borrowings of $35,000,000 under the U.S. credit agreement and unused borrowing capacity of $140,000,000. At the company's option, the interest rate for loans under the U.S. credit agreement is at the agent bank's prevailing prime rate (8.5% at December 31, 1994) or the U.S. dollar London Interbank Offered Rate ("LIBOR") (6% at December 31, 1994) plus .5%. The company pays the banks a commitment fee of .1875% per annum on the aggregate unused portion of the U.S. credit agreement. The U.S. credit agreement restricts the payment of cash dividends, limits long-term debt and short-term borrowings, and requires that working capital, net worth, and the ratio of earnings to interest expense be maintained at designated levels. During 1994, the company obtained lines of credit (the "U.S. short-term credit agreements") with a group of banks under which up to $85,000,000 may be borrowed on such terms as the company and the banks may agree. The average interest rate at December 31, 1994 was 6.59%. There are no fees or compensating balances associated with these lines. On February 22, 1995, the company had outstanding borrowings of $54,000,000 under such agreements and unused borrowing capacity of $31,000,000. The agreements are also convertible into one-year loans on their maturity dates. These agreements are classified as long-term debt as the company intends to refinance them on a long-term basis either through continued short-term borrowings or the U.S. credit agreement. The U.S. loan agreement was assumed in conjunction with the acquisition of Gates. The interest rate is fixed at 7.38% and the loan matures on October 27, 1995. The agreement is secured by Gates' receivables and inventory and requires that working capital, tangible net worth, and the ratio of earnings to interest expense be maintained at designated levels. The company's wholly-owned German subsidiary has a 70,000,000 deutsche mark term loan from a group of foreign banks. The loan is payable in installments and bears interest at deutsche mark LIBOR (5.25% at December 31, 1994) plus .75%. The loan is secured by an assignment of the subsidiary's interest in profit distributions from Spoerle and is guaranteed by the company. The obligations of the company under the guarantee are subordinated to the company's obligations under the U.S. credit agreement and the senior notes. The company's wholly-owned U.K. subsidiary has a loan agreement which, as amended in December 1994, includes a 15,000,000 Sterling term loan, payable in semi-annual installments from 1995 through 1999, and a revolving credit facility which provides for loans of up to 7,000,000 Sterling. Borrowings under the loan agreement bear interest at sterling LIBOR (6% at December 31, 1994) plus .75% and are secured by the assets and common stock of the subsidiary. The loan 26 ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED agreement also requires that operating cash flow, as defined, and the ratio of earnings to interest expense be maintained by the subsidiary at designated levels. The company's $125,000,000 of 5-3/4% convertible subordinated debentures are due in 2002. The debentures are convertible at any time prior to maturity, unless previously redeemed, into shares of the company's common stock, at a conversion price of $33.125. The debentures are not redeemable at the option of the company prior to October 1995. In 1992, the company redeemed certain of its subordinated debentures and the then existing term loan under the U.S. credit agreement. The redemptions resulted in an extraordinary charge of $5,424,000 after taxes, reflecting net unamortized discount and issuance expenses. The aggregate annual maturities of long-term debt and subordinated debentures, for each of the five years in the period ending December 31, 1999 are: 1995--$26,236,000; 1996--$60,862,000; 1997--$18,515,000; 1998--$59,802,000; and 1999--$46,557,000. The weighted average interest rate of foreign short-term borrowings at December 31, 1994 and 1993 was 10% and 7.82%, respectively. At December 31, 1994, the closing price of the 5-3/4% convertible subordinated debentures on the New York Stock Exchange was 114% of par. The estimated fair market value of the 8.29% senior notes at December 31, 1994 was 98% of par. The balance of the company's borrowings approximate their fair value. 5. Income Taxes The provision for income taxes for 1994, 1993, and 1992 consists of the following:
1994 1993 1992 Current Federal..................... $ 53,465 $56,519 $34,072 State....................... 15,317 13,600 9,282 Foreign..................... 28,063 9,376 - 96,845 79,495 43,354 Deferred Federal..................... (8,437) (67) 8,514 State....................... (2,824) (241) 1,889 Foreign..................... 5,622 3,222 - (5,639) 2,914 10,403 $ 91,206 $82,409 $53,757
27 ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED The principal causes of the difference between the U.S. statutory and effective income tax rates for 1994, 1993, and 1992 are as follows:
1994 1993 1992 (In thousands) Provision at statutory rate... $76,932 $70,381 $47,139 State taxes, net of federal benefit..................... 8,120 8,715 7,435 Foreign tax rate differential 4,841 3,448 - Tax benefit of loss and credit carryforwards............... - (292) (1,029) Other differences............. 1,313 157 212 Income tax provision.......... $91,206 $82,409 $53,757
For financial reporting purposes, income before income taxes attributable to the United States, excluding the special integration charges of $45,350,000, was $184,241,000 in 1994 and $162,578,000 in 1993, and income before income taxes attributable to foreign operations was $80,915,000 in 1994 and $38,116,000 in 1993. The significant components of the company's deferred tax assets are as follows:
1994 1993 (In thousands) Inventory reserves............ $ 7,183 $ 6,128 Allowance for doubtful accounts..................... 4,552 2,121 Accrued expenses.............. 9,282 8,070 Acquired net operating loss carryforwards, net........... 639 2,931 Other.......................... 3,144 2,885 $24,800 $22,135
At December 31, 1994, the company had approximately $3,000,000 of acquired U.S. net operating loss carryforwards available for tax return purposes which expire in the years 2001 through 2006. Such carryforwards are subject to certain annual restrictions on the amount that can be utilized for tax return purposes. In France, the company had approximately $9,500,000 of net operating loss carryforwards, of which approximately $6,000,000 were acquired, which expire through 1999. Included in other liabilities are defe- rred tax liabilities of $19,626,000 and $12,434,000 at December 31, 1994 and 1993, respectively. The deferred tax liabilities are principally the result of the differences in the bases of the German assets and liabilities for tax and financial reporting purposes. 23 ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 6. Shareholders' Equity The company has 2,000,000 authorized shares of serial preferred stock with a par value of $1. In February 1992, the company issued 66,196 shares of newly-created series B preferred stock for approximately $15,721,000 to provide partial funding for the acquisition of the European electronics distribution businesses of Lex. In September 1993, the company completed the conversion of all of its outstanding series B preferred stock into 1,009,086 shares of its common stock. This conversion eliminated approximately $1,300,000 of annual dividends. In 1988, the company paid a dividend of one preferred share purchase right on each outstanding share of common stock. Each right, as amended, entitles a shareholder to purchase one one- hundredth of a share of a new series of preferred stock at an exercise price of $50 (the "exercise price"). The rights are exercisable only if a person or group acquired 20% or more of the company's common stock or announces a tender or exchange offer that will result in such person or group acquiring 30% or more of the company's common stock. Rights owned by the person acquiring such stock or transferees thereof will automatically be void. Each other right will become a right to buy, at the exercise price, that number of shares of common stock having a market value of twice the exercise price. The rights, which do not have voting rights, expire on March 2, 1998 and may be redeemed by the company at a price of $.01 per right at any time until ten days after a 20% ownership position has been acquired. In the event that the company merges with, or transfers 50% or more of its consolidated assets or earning power to, any person or group after the rights become exercisable, holders of the rights may purchase, at the exercise price, a number of shares of common stock of the acquiring entity having a market value equal to twice the exercise price. 7. Employee Stock Plans Restricted Stock Plan Under the terms of the Arrow Electronics, Inc. Restricted Stock Plan (the "Plan"), a maximum of 1,480,000 shares of common stock may be awarded at the discretion of the Board of Directors to key employees of the company. As many as 100 employees may be considered for awards under the Plan. Shares awarded under the Plan may not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of, except as provided in the Plan. Shares awarded become free of such restrictions over a four-year period. The company awarded 106,350 shares of common stock in early 1995 to 79 key employees in respect of 1994, 77,350 shares of common stock to 50 key employees during 1994, 49,250 shares of common stock to 35 key employees during 1993, and 84,000 shares of common stock to 32 key employees during 1992. Forfeitures of shares awarded under the Plan were 1,000, 7,625, and 11,875 during 1994, 1993, and 1992, respectively. The aggregate 29 ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED market value of outstanding awards under the Plan at the respective dates of award is being amortized over a four-year period and the unamortized balance is included in shareholders' equity as unamor- tized employee stock awards. Stock Option Plan Under the terms of the Arrow Electronics, Inc. Stock Option Plan (the "Option Plan"), both nonqualified and incentive stock options were authorized for grant to key employees at prices determined by the Board of Directors in its discretion or, in the case of incentive stock options, prices equal to the fair market value of the shares at the dates of grant. Options currently outstanding have terms of ten years and become exercisable in equal annual installments over two or three-year periods from date of grant. In 1994, the shareholders of the company approved an increase in the number of shares of common stock authorized for stock options to an aggregate of 6,000,000 shares. The options issued and outstanding under the option plans of Gates and Anthem at the dates of their acquisition have been converted into options to purchase shares of the company's common stock at the same exchange ratio as utilized in acquiring these businesses and all unissued options under those plans were cancelled. The following information relates to the option plans:
Years ended December 31, 1994 1993 1992 Options outstanding at beginning of year...... 1,806,818 1,827,305 2,659,652 Granted.................. 789,123 680,228 711,639 Exercised................ (336,481) (546,857) (1,432,948) Forfeited................ (95,422) (153,858) (111,038) Options outstanding at end of year............ 2,164,038 1,806,818 1,827,305 Prices per share of options outstanding....$2.53-52.43 $2.53-52.43 $2.53-53.43 Average price per share of options exercised... $14.44 $9.49 $7.10 Average price per share of options outstanding. $27.82 $21.61 $15.31 Exercisable options...... 1,262,715 1,071,270 978,197 Options available for future grant: Beginning of year.... 2,446,345 1,270,619 1,349,632 End of year.......... 2,667,389 2,446,345 1,270,619
30 ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED Stock Ownership Plan The company maintains a noncontributory employee stock ownership plan which enables most North American employees to acquire shares of the company's common stock. Contributions, which are determined by the Board of Directors, are in the form of company common stock or cash which is used to purchase the company's common stock for the benefit of participating employees. Contributions to the plan for 1994, 1993, and 1992 aggregated $2,765,000, $2,525,000, and $2,360,000, respectively. 8. Retirement Plan The company has a defined contribution plan for eligible employees, which qualifies under Section 401(k) of the Internal Revenue Code. The company's contribution to the plan, which is based on a specified percentage of employee contributions, amounted to $3,235,000, $3,055,000, and $2,773,000 in 1994, 1993, and 1992, respectively. 9. Lease Commitments The company leases certain office, warehouse, and other property under noncancellable operating leases expiring at various dates through 2016. Rental expenses of noncancellable operating leases amounted to $21,736,000 in 1994, $19,495,000 in 1993, and $15,952,000 in 1992. Aggregate minimum rental commitments under all noncancellable operating leases approximate $94,041,000, exclusive of real estate taxes, insurance, and leases related to facilities closed in connection with the integration of the acquired businesses. Such commitments on an annual basis are: 1995-$21,691,000; 1996-$16,353,000; 1997-$12,347,000; 1998-$9,640,000; 1999-$7,838,000 and $26,172,000 thereafter. The company's obligations under capitalized leases are reflected as a component of other liabilities. 31 ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 10. Segment and Geographic Information The company is engaged in one business segment, the distribu- tion of electronic components, systems, and related products. The geographic distribution of consolidated sales, operating income, and identifiable assets for 1994 and 1993 is as follows (in thousands):
Sales to Identifiable Unaffiliated Operating Assets at 1994 Customers Income (Loss) December 31, 1994 North America.... $3,339,210 $224,007 $1,176,196 Europe........... 1,146,726 89,879 739,863 Asia/Pacific..... 163,298 4,288 96,773 Eliminations and Corporate.. - (16,850) 25,942 Integration charges (45,350) $4,649,234 $255,974 $2,038,774 Sales to Identifiable Unaffiliated Operating Assets at 1993 Customers Income (Loss) December 31,1993 North America.... $2,915,887 $208,371 $1,095,414 Europe........... 600,935 40,153 367,102 Asia/Pacific..... 44,034 1,706 57,416 Eliminations and Corporate.. - (16,331) 35,849 Restructuring charge (7,810) Investment in affil- iated company 13,371 $3,560,856 $226,089 $1,569,152
32 ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 11. Quarterly Financial Data (Unaudited) A summary of the company's quarterly results of operations for 1994 and 1993 follows:
First Second Third Fourth Quarter Quarter Quarter Quarter (In thousands except per share data) 1994: Sales.......................$1,117,679 $1,113,991 $1,161,423 $1,256,141 Gross profit................ 197,584 201,362 200,916 217,203 Net income.................. 33,379 32,903 21,779 23,828 Per common share: Primary................... .72 .71 .47 .51 Fully diluted............. .68 .68 .45 .49 Excluding integration charges, net income and net income per share on a primary basis in the third and fourth quarters were $34,904,000 and $.75, and $39,553,000 and $.85, respectively. First Second Third Fourth Quarter Quarter Quarter Quarter (In thousands except per share data) 1993: Sales.......................$775,379 $832,113 $966,171 $987,193 Gross profit................ 155,700 157,461 173,535 172,512 Net income.................. 25,212 27,324 29,211 24,812 Per common share: Primary................... .56 .60 .63 .54 Fully diluted............. .53 .57 .60 .52 Excluding the restructuring charge, net income and net income per share on a primary basis in the fourth quarter were $29,311,000 and $.63, respectively.
33 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure. None. Part III Item 10. Directors and Executive Officers of the Registrant. See "Executive Officers" in the response to Item 1 above. In addition, the information set forth under the heading "Election of Directors" in the company's Proxy Statement filed in connection with the Annual Meeting of Shareholders scheduled to be held May 9, 1995 hereby is incorporated herein by reference. Item 11. Executive Compensation. The information set forth under the heading "Executive Compensation and Other Matters" in the company's Proxy Statement filed in connection with the Annual Meeting of Shareholders scheduled to be held May 9, 1995 hereby is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management. The information on page 3 and under the heading "Election of Directors" in the company's Proxy Statement filed in connection with the Annual Meeting of Shareholders scheduled to be held May 9, 1995 hereby is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions. The information set forth under the heading "Executive Compensation and Other Matters" in the company's Proxy Statement filed in connection with the Annual Meeting of Shareholders scheduled to be held May 9, 1995 hereby is incorporated herein by reference. Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a)1. Financial Statements. The financial statements listed in the accompanying index to financial statements and financial statement schedules are filed as part of this annual report. 2. Financial Statement Schedules. The financial statement schedules listed in the accompany- ing index to financial statements and financial statement schedules are filed as part of this annual report. All other schedules have been omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements, including the notes thereto. 34 ARROW ELECTRONICS, INC. INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (Item 14 (a)) Page Report of Ernst & Young LLP, independent auditors 15 Management's responsibility for financial reporting 16 Consolidated balance sheet at December 31, 1994 and 1993 17 For the years ended December 31, 1994, 1993 and 1992: Consolidated statement of income 18 Consolidated statement of cash flows 19 Consolidated statement of shareholders' equity 20 Notes to consolidated financial statements for the years ended December 31, 1994, 1993 and 1992 21 Consolidated schedules for the three years ended December 31, 1994: II - Valuation and qualifying accounts 47 35 3. Exhibits. (2)(a) Restated Agreement of Purchase and Sale, dated as of September 20, 1987, between Ducommun Incorporated and Arrow Electronics, Inc. (incorporated by reference to Exhibit 2(b) to the company's Registration Statement on Form S-4, Commission File No. 33-17942). (b) Letter Agreement dated January 11, 1988 between Ducommun Incorporated and Arrow Electronics, Inc. (incorporated by reference to Exhibit 2(b) to the company's Current Report on Form 8-K dated January 21, 1988, Commission File No. 1-4482). (c) Acquisition Agreement, dated July 28, 1988, between Craig, Hochreiter & Co., Incorporated and Arrow Electronics, Inc., as amended and supplemented (incorporated by reference to Exhibit 2 to the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1988, Commission File No. 1-4482). (d)(i) Acquisition Agreement, dated July 6, 1989, between Arrow Electronics (UK) Limited and Electrocomponents plc (incorporated by reference to Exhibit 2(d)(i) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482). (ii) English language translation of Acquisition Agreement, dated July 6, 1989, between Spoerle Electronic Handelsgesellschaft mbH & Co. and Retron Manger Electronic GmbH and Eldi GmbH Electronik Distributor (incorporated by reference to Exhibit 2(d)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482). (iii) Umbrella Agreement, dated July 6, 1989, between Electrocomponents plc; Retron Elektronische Bauteile und Gerate Handelsgesellschaft mbH, Manger Elektronik GmbH, and Eldi GmbH Elektronik Distributor; Arrow Electronics, Inc.; Arrow Electronics (UK) Limited; and Spoerle Electronic Handelsgesellschaft GmbH & Co. (incorporated by reference to Exhibit 2(d)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482). (e)(i) Agreement of Purchase and Sale, as amended, by and among Lex Service PLC, Lex Burlington Inc., and Arrow Electronics, Inc. (incorporated by reference to Exhibit 6(a) to the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1991, Commission File No. 1-4482). (ii) Stockholders' Agreement dated as of September 27, 1991 by and among Arrow Electronics, Inc., Lex Service PLC, and Lex Burlington Inc. (incorporated by reference to Exhibit 2(e)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). (iii) Amendment No. 1 dated as of February 28, 1992 to the Stockholders' Agreement in (2)(e)(ii) above (incorporated by reference to Exhibit 2(g)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). 36 (iv) Amendment No. 2 dated as of July 30, 1992 to the Stockholders' Agreement in (2)(e)(ii) above (incorporated by reference to Exhibit 2(e)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (v) Amendment No. 3 dated as of February 1, 1993 to the Stockholders' Agreement in (2)(e)(ii) above (incorporated by reference to Exhibit 2(e)(v) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (vi) Registration Rights Agreement dated as of September 27, 1991 by and among Arrow Electronics, Inc., Lex Service PLC, and Lex Burlington Inc. (incorporated by reference to Exhibit 2(e)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). (vii) Amendment No. 1 dated as of February 28, 1992 to the Registration Rights Agreement in (2)(e)(vi) above (incorporated by reference to Exhibit (2)(g)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). (viii) Amendment No. 2 dated as of July 30, 1992 to the Registration Rights Agreement in (2)(e)(vi) above (incorporated by reference to Exhibit (2)(e)(viii) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (ix) Amendment No. 3 dated as of February 1, 1993 to the Registration Rights Agreement in (2)(e)(vi) above (incorporated by reference to Exhibit (2)(e)(ix) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (f)(i) Share Purchase Agreement dated as of October 10, 1991 among EDI Electronics Distribution International B.V., Aquarius Investments Ltd., Andromeda Investments Ltd., and the other persons named therein (incorporated by reference to Exhibit 2.2 to the company's Registration Statement on Form S-3, Registration No. 33-42176). (ii) Standstill Agreement dated as of October 10, 1991 among Arrow Electronics, Inc., Aquarius Investments Ltd., Andromeda Investments Ltd., and the other persons named therein (incorporated by reference to Exhibit 4.1 to the company's Registration Statement on Form S-3, Registration No. 33-42176). (iii) Shareholder's Agreement dated as of October 10, 1991 among EDI Electronics Distribution International B.V., Giorgio Ghezzi, Germano Fanelli, and Renzo Ghezzi (incorporated by reference to Exhibit 2(f)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1993, Commission File No. 1-4482). (g) Asset Purchase Agreement, dated as of February 12, 1993, between Zeus Components, Inc. and Arrow Electronics, Inc. (incorporated by reference to Exhibit 10(1) to 37 the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (h) Agreement dated as of February 28, 1992 among Lex Service PLC, Arrow Electronics (UK) Limited, EDI Electronics Distribution International (France) SA, Arrow Electronics GmbH, and Arrow Electronics, Inc. (incorporated by reference to Exhibit 2(1) to the company's Current Report on Form 8-K, dated March 11, 1992, Commission File No. 1-4482). (i) Subscription Agreement dated February 7, 1992, between Arrow Electronics, Inc. and various purchasers, pertaining to the sale of the company's Series B $19.375 Convertible Exchangeable Preferred Stock (incorporated by reference to Exhibit 2(h) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). (j) Share Purchase Agreement dated as of July 2, 1993 between Baring Brothers (Guernsey) Limited and Others and Arrow Electronics (UK) Limited (incorporated by reference to Exhibit 10(l) to the company's Annual Report on Form 10-K for the year ended December 31, 1993, Commission File No.1-4482). (k) Share Sale Agreement dated as of August 17, 1993 between Ocean Information Holdings Limited and Arrow Electronics, Inc. (incorporated by reference to Exhibit 10(m) to the company's Annual Report on Form 10-K for the year ended December 3, 1993, Commission File No. 1-4482.) (l) Agreement and Plan of Merger, dated as of June 24, 1994, by and among Arrow Electronics, Inc., AFG Acquisition Company and Gates/FA Distributing, Inc. (incorporated by reference to Exhibit 2 to the company's Registration Statement on Form S-4, Commission File No. 35-54413). (m) Agreement and Plan of Merger, dated as of September 21, 1994, by and among Arrow Electronics, Inc., MTA Acquisition Company and Anthem Electronics, Inc. (incorporated by reference to Exhibit 2 to the company's Registration Statement on Form S-4, Commission File No. 33-55645). (3) (a) Amended and Restated Certificate of Incorporation of the company, as amended. (b) By-Laws of the company, as amended (incorporated by reference to Exhibit 3(b) to the company's Annual Report on Form 10-K for the year ended December 31, 1986, Commission File No. 1-4482). (4) (a) Indenture, including Debenture, dated as of November 25, 1992 between the company and the Bank of Montreal Trust Company, as Trustee, with respect to the company's 5-3/4% Convertible Subordinated Debentures due 2002 (incorporated by reference to Exhibit 4(a) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (b)(i) Rights Agreement dated as of March 2, 1988 between Arrow Electronics, Inc. and Manufacturers Hanover Trust Company, as Rights Agent, which includes as Exhibit A a 38 Certificate of Amendment of the Restated Certificate of Incorporation for Arrow Electronics, Inc. for the Participating Preferred Stock, as Exhibit B a letter to shareholders describing the Rights and a summary of the provisions of the Rights Agreement and as Exhibit C the forms of Rights Certificate and Election to Exercise (incorporated by reference to Exhibit 1 to the company's Current Report on Form 8-K dated March 3, 1988, Commission File No. 1-4482). (ii) First Amendment, dated June 30, 1989, to the Rights Agreement in (4)(b)(i) above (incorporated by reference to Exhibit 4(b) to the Company's Current Report on Form 8-K dated June 30, 1989, Commission File No. 1-4482). (iii) Second Amendment, dated June 8, 1991, to the Rights Agreement in (4)(b)(i) above (incorporated by reference to Exhibit 4(i)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). (iv) Third Amendment, dated July 19, 1991, to the Rights Agreement in (4)(b)(i) above (incorporated by reference to Exhibit 4(i)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). (v) Fourth Amendment, dated August 26, 1991, to the Rights Agreement in (4)(b)(i) above (incorporated by reference to Exhibit 4(i)(v) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). (10)(a) Investment Management Agreement, dated as of September 28, 1981, between the company and Fayez Sarofim & Co. (incorporated by reference to Exhibit 10(b)(ii) to the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1981, Commission File No. 1-4482). (b)(i) Arrow Electronics Savings Plan, as amended and restated through January 1, 1989 (incorporated by reference to Exhibit 10(b)(i) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482). (ii) Amendment No. 1, dated December 7, 1989, to the Arrow Electronics Savings Plan in (10)(b)(i) above (incorporated by reference to Exhibit 10(b)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (iii) Amendment No. 2, dated January 18, 1990, to the Arrow Electronics Savings Plan in (10)(b)(i) above (incorporated by reference to Exhibit 10(b)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). (iv) Amendment No. 3, dated February 21, 1992, to the Arrow Electronics Savings Plan in (10)(b)(i) above (incorporated by reference to Exhibit 10(b)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). 39 (v) Supplement, dated September 27, 1991, to the Arrow Electronics Savings Plan in (10)(b)(i) above (incorporated by reference to Exhibit 10(b)(v) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (vi) Supplement No. 3, dated August 24, 1993, to the Arrow Electronics Savings Plan in 10(b)(i) above (incorporated by reference to Exhibit 10(b)(vi) in the company's Annual Report on Form 10-K for the year ended December 31, 1993, Commission File No. 1-4482). (vii) Supplement No. 4, dated December 28, 1994, to the Arrow Electronics Savings Plan in 10(b)(i) above. (viii) Arrow Electronics Stock Ownership Plan, as amended and restated through January 1, 1989 (incorporated by reference to Exhibit 10(b)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482). (ix) Amendment No. 1, dated November 29, 1989, to the Arrow Electronics Stock Ownership Plan in (10)(b)(viii) above (incorporated by reference to Exhibit 10(b)(vii) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (x) Amendment No. 2, dated December 7, 1989, to the Arrow Electronics Stock Ownership Plan in (10)(b)(viii) above (incorporated by reference to Exhibit 10(b)(viii) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (xi) Amendment No. 3, dated January 18, 1990, to the Arrow Electronics Stock Ownership Plan in (10)(b)(viii) above (incorporated by reference to Exhibit 10(b)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). (xii) Amendment No. 4, dated December 31, 1992 to the Arrow Electronics Stock Ownership Plan in (10)(b)(viii) above (incorporated by reference to Exhibit 10(b)(x) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (xiii) Supplement No. 1, dated September 8, 1992, to the Arrow Electronics Stock Ownership Plan in (10)(b)(viii) above (incorporated by reference to Exhibit 10(b)(xi) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (xiv) Supplement No. 3, dated August 24, 1993, to the Arrow Electronics Stock Ownership Plan in (10)(b)(viii) above incorporated by reference to Exhibit 10(b)(xiii) in the company's Annual Report on Form 10-K for the year ended December 21, 1993, Commission File No. 1-4482). (xv) Supplement to No. 4, dated December 28, 1994, to the Arrow Electronics Stock Ownership Plan in (10)(b)(viii) above. 40 (xvi) Capstone Electronics Corp. Profit- Sharing Plan, effective January 1, 1990 (incorporated by reference to Exhibit 10(b)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482). (xvii) Supplement No. 1, dated September 8, 1992, to the Capstone Electronics Profit-Sharing Plan in (10)(b)(xiv) above (incorporated by reference to Exhibit 10(b)(xvi) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (xviii) Supplement No. 2, dated August 24, 1993, to the Capstone Electronics Profit Sharing Plan in (10)(b)(xvi) above (incorporated by reference to Exhibit 10(b)(xvi) in the company's annual Report on Form 10-K for the year ended December 31, 1993, Commission File No. 1-4482). (xix) Supplement No. 3, dated December 28, 1994 to Capstone Electronics Profit Sharing Plan in 10(b)(xvi) above. (c)(i) Employment Agreement, dated as of October 16, 1990, between the company and John C. Waddell (incorporated by reference to Exhibit 10(c)(i) to the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482). (ii) Employment Agreement, dated as of February 22, 1995, between the company and Stephen P. Kaufman. (iii) Employment Agreement, dated as of March 13, 1991, between the company and Robert E. Klatell (incorporated by reference to Exhibit 10(c)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482). (iv) Form of agreement between the company and the employees parties to the Employment Agreements listed in 10(c)(i), (ii), and (iii) above providing extended separation benefits under certain circumstances (incorporated by reference to Exhibit 10(c)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1988, Commission File No. 1-4482). (v) Form of Employment Agreement, dated as of September 1, 1994 between the company and Steven W. Menefee. (vi) Form of Employment Agreement, as amended and restated as of January 1, 1990, between the company and Wesley S. Sagawa (incorporated by reference to Exhibit 10(c)(vi) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482). (vii) Employment Agreement, dated as of March 17, 1993, between the company and Jan Salsgiver (incorporated by reference to Exhibit 10(c)(xii) to the company's Annual Report on Form 10-K for the year ended December 3, 1993, Commission File No. 1-4482). (viii) Form of Employment Agreement, dated as of August 29, 1994, between the company and Philip D. Ellett. 41 (ix) Form of Employment Agreement, dated as of September 21, 1994, between the company and John J. Powers, III. (x) Form of Employment Agreement, dated as of September 21, 1994, between the company and Robert S. Throop. (xi) Form of agreement between the company and all corporate Vice Presidents, including the employees parties to the Employment Agreements listed in 10(c)(v)-(x) above, providing extended separation benefits under certain circumstances (incorporated by reference to Exhibit 10(c)(ix) to the company's Annual Report on Form 10-K for the year ended December 31, 1988, Commission File No. 1-4482). (xii) Form of agreement between the company and non-corporate officers providing extended separation benefits under certain circumstances (incorporated by reference to Exhibit 10(c)(x) to the company's Annual Report on Form 10-K for the year ended December 31, 1988, Commission File No. 1-4482). (xiii) Unfunded Pension Plan for Selected Executives of Arrow Electronics, Inc., as amended. (xiv) English translation of the Service Agreement, dated January 19, 1993, between Spoerle Electronic and Carlo Giersch (incorporated by reference to Exhibit 10(f)(v) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (d)(i) Senior Note Purchase Agreement, dated as of December 29,1992, with respect to the company's 8.29% Senior Secured Notes due 2000 (incorporated by reference to Exhibit 10(d) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (ii) First Amendment, dated as of December 22, 1993, to the Senior Note Purchase Agreement in 10(d)(i) above (incorporated by reference to Exhibit 10(d)(ii) in the company's Annual Report on form 10-K for the year ended December 31, 1993, Commission File No. 1-4482). (e) Amended and Restated Credit Agreement, dated as of January 28, 1994 among Arrow Electronics, Inc., the several Banks from time to time parties hereto, Bankers Trust Company and Chemical Bank, as agents (incorporated by reference to Exhibit 10(e) to the company's Annual Report on Form 10-K for the year ended December 31, 1993, Commission File No. 1-4482). (f)(i) English translation of the Agreement of Purchase and Sale, dated January 19, 1993, between Carlo Giersch and Arrow Electronics GmbH with respect to the purchase of an additional 15% interest in Spoerle Electronic (incorporated by reference to Exhibit 10(f)(i) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). 42 (ii) English translation of the Offer Agreement, with supplemental letters attached, dated January 19, 1993, between Arrow Electronics GmbH and Carlo Giersch with respect to the purchase of a second 15% interest in Spoerle Electronic (incorporated by reference to Exhibit 10(f)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (iii) English translation of the Partnership Agreement of Spoerle Electronic, dated January 19, 1993 (incorporated by reference to Exhibit 10(f)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (iv) English translation of the Articles of Spoerle GmbH, dated as of January 1, 1993 (incorporated by reference to Exhibit 10(f)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (g) Amendment and Restatement Agreement relating to a Facilities Agreement dated February 28, 1992, between Arrow Electronics (UK) Limited and National Westminster Bank PLC. (h)(i) Credit Agreement, dated April 14, 1993, between Berliner Handels- und Frankfurter Bank and Arrow Electronics GmbH (incorporated by reference to Exhibit 10(h)(i) in the company's Annual Report on Form 10-K for the year ended December 31, 1993, Commission File No. 1-4482). (ii) Amendment, dated January 28, 1994, to the Credit Agreement in (10)(h)(i) above (incorporated by reference to Exhibit 10(h)(ii) in the company's Annual Report on Form 10-K for the year ended December 31, 1993, Commission File No. 1-4482). (iii) Guarantee, dated January 16, 1990, between Arrow Electronics, Inc. and Berliner Handels- und Frankfurter Bank (incorporated by reference to Exhibit 10(h)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482). (iv) Subordination Agreement, dated January 16, 1990, between Berliner Handels- und Frankfurter Bank, Arrow Electronics, Inc., and The First National Bank of Chicago (incorporated by reference to Exhibit 10(h)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482). (v) First Amendment, dated December 29, 1992, to the Subordination Agreement in (10)(h)(iv) above (incorporated by reference to Exhibit 10(h)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). 43 (vi) Second Amendment, dated January 26, 1993, to the Subordination Agreement in (10)(h)(iv) above (incorporated by reference to Exhibit 10(h)(v) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (vii) Third Amendment, dated April 12, 1993, to the Subordination Agreement in (10)(h)(iv) above (incorporated by reference to Exhibit 10(h)(vii) in the company's annual Report on Form 10-K for the year ended December 31, 1993, Commission File No. 1-4482). (viii) Fourth Amendment, dated January 28, 1994, to the Subordination Agreement in (10)(h)(iv) above (incorporated by reference to Exhibit 10(h)(viii) to the company's Annual Report on Form 10-K for the year ended December 31, 1993, Commission File No. 1-4482). (viv) Assignments, dated January 16, 1990, by Arrow Electronics GmbH in favor of Berliner Handels-und Frankfurter Bank (incorporated by reference to Exhibit 10(h)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482). (i)(i) Arrow Electronics, Inc. Stock Option Plan, as amended. (ii) Form of Stock Option Agreement under (i)(i) above (incorporated by reference to Exhibit 10(k)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1986, Commission File No. 1-4482). (iii) Form of Nonqualified Stock Option Agreement under (i)(i) above (incorporated by reference to Exhibit 10(k)(iv) to the company's Registration Statement on Form S-4, Registration No. 33-17942). (j)(i) Restricted Stock Plan of Arrow Electronics, Inc., as amended and restated. (ii) Form of Award Agreement under (j)(i) above (incorporated by reference to Exhibit 10(l)(iv) to the company's Registration Statement on Form S-4, Registration No. 33-17942). (k) Form of Indemnification Agreement between the company and each director (incorporated by reference to Exhibit 10(m) to the company's Annual Report on Form 10-K for the year ended December 31, 1986, Commission File No. 1-4482). (11) Statement Re: Computation of Earnings Per Share. (22) List of Subsidiaries. (24) Consent of Ernst & Young (28) (i) Record of Decision, issued by the EPA on September 28, 1990, with respect to environmental clean-up in Plant City, Florida (incorporated by reference to Exhibit 28 to 44 the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482). (ii) Consent Decree lodged with the U.S. District Court for the Middle District of Florida, Tampa Division, on December 18, 1991, with respect to environmental clean-up in Plant City, Florida (incorporated by reference to Exhibit 28(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). (b) Reports on Form 8-K During the quarter ending December 31, 1994, the following Current Reports on Form 8-K were filed: Date of Report (Date of Earliest Event Reported) Items Reported December 7, 1994 Item 2 45 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registra- tion Statements (Forms S-8 No. 33-55565, 33-66594, No. 33-48252, No. 33-20428 and No. 2-78185) and in the related Prospectuses pertaining to the employee stock plans of Arrow Electronics, Inc., in Amendment No. 1 to the Registration Statement (Form S-3 No. 33- 54473) and in the related Prospectus pertaining to the registration of 1,376,843 shares of Arrow Electronics, Inc. common stock, in Amendment No. 1 to the Registration Statement (Form S-3 No. 33-67890) and in the related Prospectus pertaining to the registration of 1,009,086 shares of Arrow Electronics, Inc. Common Stock, and in Amendment No. 1 to the Registration Statement (Form S-3 No. 33-42176) and in the related Prospectus pertaining to the registration of up to 944,445 shares of Arrow Electronics, Inc. Common Stock held by Aquarius Investments Ltd. and Andromeda Investments Ltd. of our report dated February 22, 1995 with respect to the consolidated financial statements and schedules of Arrow Electronics, Inc. included in this Annual Report on Form 10- K for the year ended December 31, 1994. ERNST & YOUNG LLP New York, New York March 27, 1995 46 ARROW ELECTRONICS, INC. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS For the three years ended December 31, 1994
Additions Balance at Balance beginning Charged Charged at end of year to income to other Write-offs of year Allowance for doubtful accounts(1) 1994 $24,263,000 $20,289,000 $3,251,000(2) $16,671,000 $31,132,000 1993 $16,278,000 $17,330,000 $3,060,000(3) $12,405,000 $24,263,000 1992 $14,489,000 $16,596,000 $1,288,000(4) $16,095,000 $16,278,000 (1) The company acquired Gates/FA Distributing, Inc. and Anthem Electronics, Inc. in transactions accounted for as poolings of interests, accordingly all financial information has been restated to include the accounts of the acquired companies for all periods presented. (2) Represents the allowance for doubtful accounts of the electronics distribution businesses acquired by the company in 1994 including the Megachip Group, Field Oy, TH:s Elektronik AB, Exatec A/S, Texny Glorytact (HK) Limited, Veltek Australia Pty Ltd., Zatek Australia Pty Ltd., and Silverstar Ltd. S.p.A. (3) Represents the allowance for doubtful accounts of the electronics distribution businesses acquired by the company in 1993 including Zeus Components, Inc., Microprocessor & Memory Distribution Limited, Amitron-Arrow S.A., ATD Electronica S.A., CCI Electronique S.A., and Spoerle Electronic. (4) Represents the allowance for doubtful accounts of the European electronics distribution businesses acquired from Lex Service PLC in 1992.
47 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized. ARROW ELECTRONICS, INC. By/s/ Robert E. Klatell Robert E. Klatell Senior Vice President March 29, 1995 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: By/s/ Stephen P. Kaufman March 29, 1995 Stephen P. Kaufman, Chairman, Principal Executive Officer, and Director By/s/ Robert E. Klatell March 29, 1995 Robert E. Klatell, Senior Vice President, Principal Financial Officer, and Director By/s/ Paul J. Reilly March 29, 1995 Paul J. Reilly, Controller and Principal Accounting Officer By/s/ Daniel W. Duval March 29, 1995 Daniel W. Duval, Director By/s/ Carlo Giersch March 29, 1995 Carlo Giersch, Director By/s/ J. Spencer Gould March 29, 1995 J. Spencer Gould, Director By/s/ Lawrence R. Kem March 29, 1995 Lawrence R. Kem, Director By/s/ Steven W. Menefee March 29, 1995 Steven W. Menefee, Director By/s/ Karen Gordon Mills March 29, 1995 Karen Gordon Mills, Director By/s/ Anne Pol March 29, 1995 Anne Pol, Director By/s/ Richard S. Rosenbloom March 29, 1995 Richard S. Rosenbloom, Director By/s/ Robert S. Throop March 29, 1995 Robert S. Throop, Director By/s/ John C. Waddell March 29, 1995 John C. Waddell, Vice Chairman 48
EX-3 2 EX-3(A),CERTIFICATE OF INCORPORATION RESTATED CERTIFICATE OF INCORPORATION OF ARROW ELECTRONICS, INC. Under Section 807 of the Business Corporation Law 1. The name of the Corporation is ARROW ELECTRONICS, INC. 2. The date of filing of the Certificate of Incorporation of the Corporation in the office of the Department of State is November 20, 1946. 3. The text of the certificate of incorporation hereby is restated without amendment or change to read as follows: FIRST: The name of the Corporation is ARROW ELECTRONICS, INC. SECOND: The purposes for which this Corporation is formed are as follows: To design, patent, manufacture, fabricate, buy, sell, distribute, import, export, and generally deal in electrical devices, wireless telegraph and telephone instruments, sets, apparatus and parts thereof, radio transmitting and receiving instruments, sets, apparatus and parts thereof, electronic devices, instruments, sets, apparatus and parts thereof, as well as television instruments, sets, apparatus and parts thereof. To buy, sell and trade in all machinery, supplies and merchandise, and to do any and every act or thing that may be appurtenant, incidental to or necessary in connection with the foregoing purposes. To take, buy, exchange, lease or otherwise acquire real estate and any interest or right therein, and to hold, own, operate, control, maintain, manage and develop the same and to construct, maintain, alter, manage and control directly or through ownership of stock in any other corporation any and all kinds of buildings, stores, offices, warehouses, mills, shops, factories, machinery and plants, and any and all other structures and erections which may at any time be necessary, useful or advantageous for the purposes of this Corporation. To sell, assign and transfer, convey, lease or otherwise alienate or dispose of, and to mortgage or otherwise encumber the lands, buildings, real and personal property of the Corporation wherever situated, and any and all legal and equitable interests therein. To purchase, sell, lease, manufacture, deal in and deal with every kind of goods, wares and merchandise, and every kind of personal property, including patents and patent rights, chattels, easements, privileges and franchises which may lawfully be purchased, sold, produced, or dealt in by corporations formed under Article Two of the Stock Corporation Law of the State of New York. To purchase, acquire, hold and dispose of the stocks, bonds and other evidences of indebtedness of any corporation, domestic or foreign, and to issue in exchange therefor its stocks, bonds or other obligations, and to exercise in respect thereof all the rights, powers and privileges of individual owners, including the right to vote thereon; and to aid in any manner permitted by law any corporation of which any bonds or other securities or evidences of indebtedness or stocks are held by this corporation, and to do any acts or things designed to protect, preserve, improve or enhance the value of any such bonds or other securities or evidence of indebtedness of stock. The foregoing and the following clauses shall be construed as objects and powers in furtherance and not in limitation of the general powers conferred by the laws of the State of New York; and it is hereby expressly provided that the foregoing and the following enumeration of specific powers shall not be held to limit or restrict in any manner the powers of this Corporation, and that this Corporation may do all and everything necessary, suitable or proper for the accomplishment of any of the purposes or objects hereinabove enumerated either alone or in association with other corporations, firms or individuals, to the same extent and as fully as individuals might or could do as principals, agents, contractors or otherwise. Nothing in this certificate contained, however, shall authorize the Corporation to carry on any business or exercise any powers in any state or county which a similar corporation organized under the laws of such state or country could not carry on or exercise; or to engage within or without the State of New York in the business of a lighting or a transportation corporation, or in the common carrier business, or to issue bills, notes or other evidence of debt for circulation of money. THIRD: The total number of shares of all classes of stock which the Corporation shall have authority to issue is Eighty-Two Million (82,000,000) shares, consisting of: (a) Two Million (2,000,000) shares of Preferred Stock having a par value of $1 per share (hereinafter referred to as "Preferred Stock"); and (b) Eighty Million (80,000,000) shares of Common Stock having a par value of $1 per share (hereinafter referred to as "Common Stock"). A. Preferred Stock: Shares of Preferred Stock may be issued from time to time in one or more series, as may from time to time be determined by the Board of Directors, each of said series to be distinctly designated. All shares of any one series of Preferred Stock shall be alike in every particular, except that there may be different dates from which dividends, if any, thereon shall be cumulative, if made cumulative. The voting powers and the preferences and relative, participating, optional and other special rights or each such series, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding; and, subject to the provisions of subparagraph 1 of Paragraph C of this Article THIRD, the Board of Directors of the Corporation is hereby expressly granted authority to fix by resolution or resolutions adopted prior to the issuance of any shares of a particular series of Preferred Stock, the voting powers and the designations, preferences and relative, optional and other special rights and the qualifications, limitations and restrictions of such series, including, but without limiting the generality of the foregoing, the following: (a) The distinctive designation of, and the number of shares of Preferred Stock which shall constitute such series, which number may be increased (except where otherwise provided by the Board of Directors) or decreased (but not below the number of shares thereof then outstanding) from time to time by like action of the Board of Directors; (b) The rate and times at which, and the terms and conditions on which, dividends, if any, on Preferred Stock of such series shall be paid, the extent of the preference or relation, if any, of such dividends to the dividends payable on any other class or classes, or series of the same or other classes of stock and whether such dividends shall be cumulative or non-cumulative; (c) The right, if any, of the holders of Preferred Stock of such series to convert the same into, or exchange the same for, shares of any other class or classes or of any series of the same or any other class or classes of stock of the Corporation and the terms and conditions of such conversion or exchange; (d) Whether or not Preferred Stock of such series shall be subject to redemption, and the redemption price or prices and the time or times at which, and the terms and conditions on which Preferred Stock of such series may be redeemed; (e) The rights, if any, of the holders of Preferred Stock of such series upon the voluntary or involuntary liquidation, merger, consolidation, distribution or sale of assets, dissolution or winding-up, of the Corporation; (f) The terms of the sinking fund or redemption or purchase account, if any, to be provided for the Preferred Stock of such series; and (g) The voting powers, if any, of the holders of such series of Preferred Stock which may, without limiting the generality of the foregoing, include the right, voting as a series by itself or together with other series of Preferred Stock or all series of Preferred Stock as a class, to elect one or more directors of the Corporation if there shall have been a default in the payment of dividends on any one or more series of Preferred Stock or under such other circumstances and on such conditions as the Board of Directors may determine; provided, however, that each holder of Preferred Stock shall have no more than one vote in respect of each share of Preferred Stock held by him on any matter voted upon by the shareholder. B. Common Stock 1. After the requirements with respect to preferential dividends on the Preferred Stock (fixed in accordance with the provisions of Paragraph A of this Article THIRD), if any, shall have been met and after the Corporation shall have complied with all the requirements, if any, with respect to the setting aside of sums as sinking funds or redemption or purchase accounts (fixed in accordance with the provisions of Paragraph A of this Article THIRD), and subject further to any other conditions which may be fixed in accordance with the provisions of Paragraph A of this Article THIRD, then and not otherwise the holders of Common Stock shall be entitled to receive such dividends as may be declared from time to time by the Board of Directors. 2. After distribution, in full of the preferential amount, if any (fixed in accordance with the provisions of Paragraph A of this Article THIRD), to be distributed to the holders of Preferred Stock in the event of voluntary or involuntary liquidation, distribution or sale of assets, dissolution or winding-up, of the Corporation, the holders of the Common stock shall be entitled to receive all the remaining assets of the Corporation, tangible and intangible, of whatever kind available for distribution to shareholders ratably in proportion to the number of shares of Common Stock held by them respectively. 3. Except as may otherwise be required by law or by the provisions of such resolution or resolutions as may be adopted by the Board of Directors pursuant to Paragraph A of this Article THIRD, each holder of Common Stock shall have one vote in respect of each share of Common Stock held by him on all matters voted upon by the shareholders. C. Other Provisions: 1. No holder of any of the shares of any class or series of stock or of options, warrants or other rights to purchase shares of any class or series of stock or of other securities of the Corporation shall have any preemptive right to purchase or subscribe for any unissued stock of any class or series or any additional shares of any class or series to be issued by reason of any increase of the authorized capital stock of the Corporation of any class or series, or bonds, certificates of indebtedness, debentures or other securities convertible into or exchangeable for stock of the Corporation of any class or series, or carrying any right to purchase stock of any class or series, but any such unissued stock, additional authorized issue of shares of any class or series of stock or securities convertible into or exchangeable for stock, or carrying any right to purchase stock, may be issued and disposed of pursuant to resolution of the Board of Directors to such persons, firms, corporations or associations, whether such holders or others, and upon such terms as may be deemed advisable by the Board of Directors in the exercise of its sole discretion. 2. The relative powers, preferences and rights of each series of Preferred Stock in relation to the powers, preferences and rights of each other series of Preferred Stock shall, in each case be as fixed from time to time by the Board of Directors in the resolution or resolutions adopted pursuant to authority granted in Paragraph A of this Article THIRD and the consent, by class or series vote or otherwise, of the holders of such of the series of Preferred Stock as are from time to time outstanding shall not be required for the issuance by the Board of Directors of any other series of Preferred Stock whether or not the powers, preferences and rights of such other series shall be fixed by the Board of Directors as senior to, or on a parity with, the powers, preferences and rights of such outstanding series, or any of them; provided, however, that the Board of Directors may provide in the resolution or resolutions as to any series of Preferred Stock adopted pursuant to Paragraph A of this Article THIRD that the consent of the holders of a majority (or such greater proportion as shall be therein fixed) of the outstanding shares of such series voting thereon shall be required for the issuance of any or all other series of Preferred Stock. 3. Subject to the provisions of subparagraph 2 of this Paragraph C, shares of any series of Preferred Stock may be issued from time to time as the Board of Directors of the Corporation shall determine and on such terms and for such consideration as shall be fixed by the Board of Directors. 4. Shares of Common Stock may be issued from time to time as the Board of Directors of the Corporation shall determine and on such terms and for such consideration as shall be fixed by the Board of Directors. 5. The authorized amount of shares of Common Stock and of Preferred Stock may, without a class or series vote, be increased or decreased from time to time by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote thereon. D. The voting powers and the designations, preferences and relative, optimal and other special rights and the qualifications, limitations and restrictions of the $19.375 Convertible Exchangeable Preferred Stock are as follows: (A) DESIGNATION AND SIZE OF ISSUE The distinctive designation of the series shall be "$19.375 Convertible Exchangeable Preferred Stock" (hereinafter referred to as this "Series"). The number of shares which shall constitute this Series shall be 280,000 shares. Each share of this Series shall have a par value of $1.00. (B) DIVIDENDS (1) The annual rate of dividends payable on each share of this Series shall be $19.375. (2) Dividends shall be payable in cash, quarterly on the first day of February, May, August and November of each year, commencing August 1, 1986 (each such date hereinafter referred to as a "Dividend Payment Date"), except that if such date is not a Business Day (as hereinafter defined), then such dividend shall be payable on the next succeeding calendar day which is a Business Day. The amount of dividends payable on shares of this Series for each full quarterly dividend period shall be computed by dividing by four the annual rate per share set forth in Section (B)(1). Dividends payable on shares of this Series for the initial dividend period and for any period less than a full quarterly period shall be computed on the basis of a 360-day year of twelve 30-day months. Dividends shall be payable to the record holders of shares of this Series as of the close of business on a date, not more than sixty (60) days preceding the payment date thereof, fixed by the Board of Directors of the Corporation. Dividends in arrears may be declared and paid at any time, without reference to any regular Dividend Payment Date, to record holders of Shares of this Series as of the close of business on a date, not more than sixty (60) days preceding the payment date thereof, fixed by the Board of Directors of the Corporation. As used in this Paragraph D, the term "Business Day" means a day other than Saturday or Sunday and other than a day on which banking institutions in New York, New York are authorized by law or executive order to close. (3) Dividends payable on shares of this Series shall be cumulative and shall accumulate on each Dividend Payment Date from the date of original issue. Accumulation of dividends shall not bear interest. (4) Except as hereinafter provided, so long as any shares of this Series are outstanding, no dividend (other than a dividend in Common Stock or in any other stock of the Corporation ranking junior to this Series as to dividends and upon liquidation (collectively, the "Junior Stock")) shall be declared or paid or set aside for payment, and no other distribution shall be declared or made, upon the Junior Stock or upon any other stock of the Corporation ranking on a parity with this Series as to dividends or upon liquidation, nor shall any Junior Stock nor any other stock of the Corporation ranking on a parity with this Series as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for Junior Stock of the Corporation), unless, in each case, the full cumulative dividends on all outstanding shares of this Series shall have been paid or contemporaneously are declared and paid through the last Dividend Payment Date. When dividends are not paid in full upon the shares of this Series and any other stock of the Corporation ranking on a parity as to dividends with this Series, all dividends declared upon shares of this Series and any stock of the Corporation ranking on a parity as to dividends with this Series shall be declared pro rata so that the amount of dividends declared per share on this Series and such other stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of this Series and such other stock bear to each other. Holders of shares of this Series shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on this Series. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on this Series which may be in arrears. (C) REDEMPTION (1) The Corporation, at the option of the Board of Directors, may, subject to the provisions of Section (B)(4), (C)(2) and (C)(8) hereof, redeem at any time or from time to time all or any part of the outstanding shares of this Series. The redemption price for each share of this Series called for redemption during the periods set forth below shall be the amount set forth opposite such period.
If Redeemed During the Twelve-Month Redemption Period Beginning May, 1 Price Per Share 1986 $269.40 1987 $267.40 1988 $265.50 1989 $263.60 1990 $261.60 1991 $259.70 1992 $257.80 1993 $255.80 1994 $253.90 1995 $251.90
and $250 if redeemed on or after May 1, 1996 together in each case with accumulated and unpaid dividends to the date fixed for redemption. (2) Notwithstanding the provisions of Section (C)(1) above, the Corporation may not redeem any shares of this Series prior to May 1, 1988 unless the Closing Price (as determined in Section (C)(3)) of the Corporation's Common Stock shall have equaled or exceeded 150% of the then applicable conversion price per share (as fixed or determined in accordance with Section (D)) for at least twenty (20) Trading Days (as hereinafter defined) within thirty (30) consecutive Trading Days ending within five Trading Days prior to the date notice of redemption is given. For purposes of this Paragraph D, Trading Day means, so long as the Common Stock is listed or admitted to trading on the New York Stock Exchange (or any successor to such Exchange), a day on which the New York Stock Exchange (or such successor) is open for the transaction of business, or, if the Common Stock is not listed or admitted to trading on such Exchange, a day on which the principal national securities exchange on which the Common Stock is listed is open for the transaction of business, or, if the Common Stock is not listed or admitted to trading on any national securities exchange, a day on which any New York Stock Exchange member firm is open for the transaction of business. (3) For purposes of this Paragraph D, the Closing Price of the Corporation's Common Stock shall be the last sale price as shown on the Composite Tape of the New York Stock Exchange, or, in the case no such sale takes place on such day, the average of the closing bid and asked prices on the New York Stock Exchange, or, if the Common Stock is not listed or admitted to trading on such Exchange, on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or, if it is not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices as furnished by any New York Stock Exchange member firm selected from time to time by the Board of Directors of the Corporation for such purpose (other than the Corporation or a subsidiary thereof). (4) In the event that fewer than all the outstanding shares of this Series are to be redeemed, the number of shares to be redeemed shall be determined by the Board of Directors, and the shares to be redeemed shall be determined by lot or by any other method as may be determined by the Board of Directors in its sole discretion to be equitable. (5) In the event the Corporation shall redeem shares of this Series, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than thirty (30) nor more than sixty (60) days prior to the redemption date, to each record holder of the shares to be redeemed, at such holder's address as the same appears on the books of the Corporation. Each such notice shall state: (i) the redemption date; (ii) the total number of shares of this Series to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where certificates for cash shares are to be surrendered for payment of the redemption price; (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date; and (vi) the conversion rights of the shares to be redeemed, the period within which conversion rights may be exercised, and the conversion rate at the time applicable. (6) If notice shall have been given as provided in Section (C)(5) and the Corporation shall have provided moneys at the time and place specified for the payment of the redemption price pursuant to such notice, then from and after the redemption date, dividends on the shares of this Series so called for redemption shall cease to accrue, such shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price without interest) shall cease. Upon surrender (in accordance with the notice) of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price set forth in Section (C)(1). In case fewer than all the shares represented by any such certificate are to be redeemed, a new certificate shall be issued representing the unredeemed shares, without cost to the holder thereof. (7) Any shares of this Series which have been redeemed shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without designation as to series, until such shares are once more designated as part of a particular series by the Board of Directors. (8) Notwithstanding the foregoing provisions of this Section (C), unless the full cumulative dividends on all outstanding shares of this Series and any other Preferred Stock ranking on a parity with this Series shall have been paid or contemporaneously are declared and paid through the last Dividend Payment Date, no shares of this Series shall be redeemed, and the Corporation shall not purchase or otherwise acquire any shares of this Series. (D) CONVERSION RIGHTS (1) Each holder of a share of this Series shall have the right, at any time, or, as to any share of this Series called for redemption or exchange, at any time prior to the close of business on the date fixed for such redemption or exchange, to convert such share into fully paid and nonassessable shares of Common Stock of the Corporation at a rate of 15.244 shares of Common Stock for each share of this Series, subject to adjustment as provided in this Section (D) (the "conversion rate"). For purposes of this Paragraph D and the conversion of Debentures referred to in Section (E), the relationship between the "conversion rate" and the "conversion price" per share of Common Stock shall be such that the conversion price shall equal $250 divided by the conversion rate. The initial conversion price shall be $16.40 per share of Common Stock. (2) If any shares of this Series are surrendered for conversion subsequent to the record date preceding a Dividend Payment Date but on or prior to such Dividend Payment Date (except shares called for redemption on a redemption date between such record date and Dividend Payment Date), the registered holder of such shares at the close of business on such record date shall be entitled to receive the dividend payable on such shares on such Dividend Payment Date notwithstanding the conversion thereof. Shares of this Series surrendered for conversion during the period from the close of business on any record date for the payment of dividends next preceding any Dividend Payment Date to the opening of business on such Dividend Payment Date shall (except in the case of shares which have been called for redemption on a redemption date within such period) be accompanied by payment in New York Clearing House funds or other funds acceptable to the Corporation of an amount equal to the dividend payable on such Dividend Payment Date on the share being surrendered for conversion. Except as provided in this Section (D)(2), no adjustments in respect of or payments of dividends on shares surrendered for conversion or any dividend on the Common Stock issued upon conversion shall be made upon the conversion of any shares of this Series. (3) The Corporation shall not be required, in connection with any conversion of shares of this Series, to issue a fraction of a share of its Common Stock, but in lieu thereof the Corporation shall, subject to Section (D)(6)(e), make a cash payment (calculated to the nearest cent -- five mills being considered as nearer to the next highest cent) equal to such fraction multiplied by the Closing Price of the Common Stock on the last Trading Day prior to the date of conversion. (4) Any holder of shares of this Series electing to convert such shares into Common Stock shall surrender the certificate or certificates for such shares at the office of the Transfer Agent therefor (or at such other place as the Corporation may designate by notice to the holders of shares of this Series) during regular business hours, duly endorsed to the Corporation or in blank, or accompanied by instruments of transfer to the Corporation or in blank, in form satisfactory to the Corporation, and shall give written notice to the Corporation at such office that such holder elects to convert such shares of this Series. The Corporation shall, as soon as practicable (subject to Section (D)(6)(e) hereof) after such deposit of certificates for shares of this Series, accompanied by the written notice above prescribed and the payment of cash in the amount required by Section (D)(2), issued and deliver at such office to the holder for whose account such shares were surrendered, or to his nominee, certificates representing the number of shares of Common Stock and the cash, if any, to which such holder is entitled upon such conversion. (5) Conversion shall be deemed to have been made as of the date of surrender of certificates for the shares of this Series, to be converted, and the giving of written notice and payment, as prescribed in Section (D)(2) and (D)(4); and the person entitled to receive the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of such Common Stock on such date. The Corporation shall not be required to deliver certificates for shares of its Common Stock while the stock transfer books for such stock or for this Series are duly closed for any purpose, but certificates for shares of Common Stock shall be issued and delivered as soon as practicable after the opening of such books. (6) The conversion rate shall be adjusted from time to time as follows: (a) In case the Corporation shall, at any time or from time to time while any of the Stock is outstanding, (i) pay a dividend in shares of its Common Stock, (ii) subdivide its outstanding shares of Common Stock, (iii) combine its outstanding shares of Common Stock into a smaller number of shares, or (iv) issue by reclassification of its shares of Common Stock any shares of stock of the Corporation, the conversion price and the conversion rate in effect immediately prior to such action shall be adjusted so that the holder of any shares of this Series thereafter surrendered for conversion shall be entitled to receive the number of shares of capital stock of the Corporation which such holder would have owned or have been entitled to receive immediately following such action had such shares of this Series been converted immediately prior thereto. An adjustment made pursuant to this Section (D)(6)(a) shall become effective retroactively to immediately after the opening of business on the day following the record date in the case of a dividend or distribution and shall become effective immediately after the opening of business on the day following the effective date in the case of subdivision, combination or reclassification. If, as a result of an adjustment made pursuant to this Section (D)(6)(a), the holder of any shares of this Series thereafter surrendered for conversion shall become entitled to receive shares of two or more classes of capital stock of the Corporation, the Board of Directors (whose determination shall be conclusive) shall determine the allocation of the adjusted conversion price and/or conversion rate between or among shares of such classes of capital stock. (b) In case the Corporation shall, at any time or from time to time while any of the Stock is outstanding, issue rights or warrants to all holders of shares of its Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the current market price per share of Common Stock (as defined in Section (D)(6)(d), at such record date, the conversion rate shall be adjusted so that it shall equal the rate determined by multiplying the conversion rate in effect immediately prior to the date of issuance of such rights or warrants by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and the denominator of which shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at such current market price. Such adjustment shall become effective retroactively immediately after the record date for the determination of stockholders entitled to receive such rights or warrants. (c) In case the Corporation shall, at any time or from time to time while any of the Stock is outstanding, distribute to all holders shares of its Common Stock, evidences of its indebtedness or securities or assets (excluding cash distributions payable out of consolidated earnings or retained earnings, or dividends payable in shares of Common Stock) or rights to subscribe (excluding those referred to in (b)), then in each such case the conversion rate shall be adjusted so that it shall equal the rate determined by multiplying the conversion rate in effect immediately prior to the date of such distribution by a fraction, the numerator or which shall be the current market price per share (determined as provided in Section (D)(6)(d)) of the Common Stock on the record date referred to below, and the denominator of which shall be such current market price per share of the Common Stock less the fair market value (as determined by the Board of Directors of the Corporation, whose determination shall be conclusive) of the portion of the assets or evidences of indebtedness so distributed or of such subscription rights or warrants applicable to one share of Common Stock. Such adjustment shall become effective retroactively immediately after the record date for the determination of stockholders entitled to receive such distribution. (d) For the purpose of any computation under Section (D)(6)(b) and (D)(6)(c), the current market price of a share of Common Stock on any date shall be the average of the daily Closing Prices for 10 consecutive Business Days before the day in question. (e) The Corporation shall be entitled to make such additional adjustments in the conversion price, in addition to those required by subsections D(6)(a), D(6)(b) and D(6)(c), as shall be necessary in order that any dividend or distribution in shares of stock, subdivision, reclassification or combination of shares of Common Stock, issuance of rights or warrants, evidences of indebtedness or assets (other than cash), referred to above, shall not be taxable to the Shareholders. (f) In any case in which this Section (D)(6) shall require that an adjustment be made retroactively immediately following a record date, the Corporation may elect to defer (but only for five (5) Business Days following the filing of the statement referred to in Section (D)(6)(g)) issuing to the holder of any shares of this Series converted after such record date (i) the shares of Common Stock and other capital stock of the Corporation issuable upon such conversion over and above (ii) the shares of Common Stock and other capital stock of the Corporation issuable upon such conversion on the basis of the conversion rate prior to adjustment. (g) Notwithstanding any other provisions of this Section (D)(6), the Corporation shall not be required to make any adjustment of the conversion rate unless such adjustment would require an increase or decrease of at least 1% in such rate. Any lesser adjustment shall be carried forward and shall be made at the time of and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to an increase or decrease of at least 1% in such rate. (h) Whenever an adjustment in the conversion rate is required, the Corporation shall forthwith place on file with its Transfer Agent a statement signed by its President or a Vice President and by its Secretary or Treasurer or one of its Assistant Secretaries or Assistant Treasurers, stating the adjusted conversion rate determined as provided herein. Such statements shall set forth in reasonable detail such facts as shall be necessary to show the reason and the manner of computing such adjustment. Promptly after the adjustment of the conversion rate, the Corporation shall mail a notice thereof to each holder of shares of this Series. (i) The term "Common Stock" as used in this Paragraph D means the Corporation's Common Stock, $1.00 par value, as the same exists at the date of filing of the Certificate of Designation relating to this Series or any other class of stock resulting from successive changes or reclassifications of such Common Stock consisting solely of changes in par value, or from par value to no par value, or from no par value to par value. In the event that at any time as a result of an adjustment made pursuant to Section (D)(6)(a), the holder of any share of this Series thereafter surrendered for conversion shall become entitled to receive any shares of the Corporation other than shares of its Common Stock, the conversion rate of such other shares so receivable upon conversion of any share shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to Common Stock contained in subparagraphs (a) through (g) of this Section (D)(6), and the provisions of Section (D)(1) through (5) and (7) through (11) with respect to the Common Stock shall apply on like or similar terms to any such other shares. (7) In case of either (a) any consolidation or merger to which the Corporation is a party, other than a merger or consolidation in which the Corporation is the surviving or continuing corporation and which does not result in any reclassification of, or change (other than a change in par value or from par value to no par value or from no par value to par value, or as a result of a subdivision or combination) in, outstanding shares of Common Stock, or (b) any sale or conveyance to another corporation of the property of the Corporation as an entirety, then the Corporation, or such successor corporation, as the case may be, shall make appropriate provision so that the holder of each share of this Series then outstanding shall have the right to convert such share of this Series into the kind and amount of shares of stock or other securities and property receivable upon such consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock into which such shares of this Series might have been converted immediately prior to such consolidation, merger, sale or conveyance, subject to adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section (D). The provisions of this Section (D)(7) shall apply similarly to successive consolidations, mergers, sales or conveyances. (8) Any shares of this Series which shall at any time have been converted shall, after such conversion, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors. The Corporation shall at all times reserve and keep available out of its authorized but unissued stock, for the purpose of effecting the conversion of the shares of this Series, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of this Series; provided, however, that nothing contained herein shall preclude the Corporation from satisfying its obligations in respect of the conversion of the shares by delivery of purchased shares of Common Stock which are held in the treasury of the Corporation. (9) If any shares of Common Stock required to be reserved for purposes of conversion of shares of this Series hereunder require registration with or approval of any governmental authority before such shares may be issued upon conversion, the Corporation shall cause such shares to be duly registered or approved, as the case may be. The Corporation will endeavor to list the shares of Common Stock required to be delivered upon conversion of shares of this Series prior to such delivery upon each national securities exchange upon which the outstanding Common Stock is listed at the time of such delivery. (10) The Corporation shall pay any and all issue or other taxes that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of shares of this Series pursuant hereto. The Corporation shall not, however, be required to pay any tax which is payable in respect of any transfer involved in the issue or delivery of Common Stock in a name other than that in which the shares of this Series so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of such tax, or has established, to the satisfaction of the Corporation, that such tax has been paid. (11) Before taking any action that would result in the conversion price being less than the then par value of the Common Stock, the Corporation shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at the conversion price. (E) EXCHANGE FOR DEBENTURES (1) The shares of this Series are exchangeable in whole, but not in part, at the sole option of the Corporation, at any time on and after May 1, 1988, on any Dividend Payment Date, into the Corporation's 7 3/4% Convertible Subordinated Debentures Due 2011 (the "Debentures") described in the Corporation's Registration Statement on Form S-2 (Registration No. 33-4785) as filed with the Securities and Exchange Commission (the "Registration Statement"); provided, that on or prior to the date fixed for exchange (the "Exchange Date") the Corporation shall have paid to the holders of outstanding shares of this Series and of Preferred Stock ranking on a parity with this Series all accumulated and unpaid dividends to the Exchange Date. Holders of outstanding shares of this Series shall be entitled to receive $250 principal amount of Debentures in exchange for each share of this Series held on the Exchange Date. (2) In the event the Corporation shall exchange shares of this Series, notice of such exchange shall be given by first class mail, postage prepaid, mailed not less than thirty (30) nor more than sixty (60) days prior to the Exchange Date, to each record holder of shares of this Series, at such holder's address as the same appears on the books of the Corporation. Each such notice shall state: (a) the Exchange Date; (b) the place or places where certificates for such shares are to be surrendered for exchange into Debentures; (c) that dividends on the shares to be exchanged will cease to accrue on the Exchange Date; and (d) the conversion price of the shares to be redeemed, the Period within which conversion rights may be exercised and the conversion rate at the time applicable. Prior to giving notice of intention to exchange, the Corporation shall execute and deliver with a bank or trust company selected by the Corporation, and qualify under the Trust Indenture Act of 1939, an Indenture (the "Indenture") in substantially the form filed as an exhibit to the Registration Statement with such changes therein as may be required by law or usage. The Corporation shall cause the Debentures to be authenticated on the Dividend Payment Date on which the exchange is effective, and the Corporation shall pay interest on the Debentures at the rate and on the dates specified in the Indenture from the Exchange Date. (3) Notice having been mailed as aforesaid, from and after the Exchange Date (unless the Corporation shall default in issuing Debentures in exchange for shares of this Series or in making the final dividend payment on the Exchange Date), dividends on the shares of this Series shall cease to accrue, such shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the Debentures) shall cease. Upon surrender (in accordance with the notice provided for above in Section (E)(2)) of the certificates for any shares of this Series so exchanged (properly endorsed or assigned for transfer, if the Board of Directors shall so require and the notice shall so state), such shares shall be exchanged by the Corporation into Debentures as aforesaid. (4) All shares of this Series which have been exchanged shall, after such exchange, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors. (F) VOTING (1) The shares of this Series shall have the following voting rights: (a) If and whenever at any time or times dividends payable on shares of this Series shall have been in arrears and unpaid in an aggregate amount equal to or exceeding the amount of dividends payable thereon for six quarterly dividend periods, then the holders of shares of this Series, together with the holders of any other series of Preferred Stock as to which dividends are in arrears and unpaid in an aggregate amount equal to or exceeding the amount of dividends payable thereon for six quarterly dividend periods, shall have the exclusive right, voting separately as a class with such other series, to elect two directors of the Corporation, such directors to be in addition to the number of directors constituting the Board of Directors immediately prior to the accrual of such right, the remaining directors to be elected by the other class or classes of stock entitled to vote therefor at each meeting of stockholders held for the purpose of electing directors. (b) Such voting right may be exercised initially either at a special meeting of the holders of the Preferred Stock having such voting right, called as hereinafter provided, or at any annual meeting of stockholders held for the purpose of electing directors, and thereafter at each such annual meeting until such time as all dividends accumulated on the shares of this Series shall have been paid in full, at which time such voting right and the term of the directors elected pursuant to Section (F)(1)(a) shall terminate, subject to revesting on the basis set forth in Section (F)(1)(a). (c) At any time when such voting right shall have vested in holders of the Preferred Stock, and if such right shall not already have been initially exercised, a proper officer of the Corporation shall, upon the written request of the record holders of 10% in number of shares of Preferred Stock having such voting right then outstanding, addressed to the Secretary of the Corporation, call a special meeting of the holders of Preferred Stock having such voting right and of any other class or classes of stock having voting power with respect to the election of such directors. Such meeting shall be held at the earliest practicable date upon the notice required for annual meetings of stockholders at the place for holding annual meetings of stockholders of the Corporation or, if none, at a place designated by the Board of Directors. If such meeting is not called by the proper officers of the Corporation within 30 days after the personal service of such written request upon the Secretary of the Corporation, or within 35 days after mailing the same within the United States of America, by registered mail, addressed to the Secretary of the Corporation at its principal office (such mailing to be evidenced by the registry receipt issued by the postal authorities), then the record holders of 10% in number of shares of the Preferred Stock then outstanding which would be entitled to vote at such meeting may designate in writing one of their number to call such meeting at the expense of the Corporation, and such meeting may be called by such person so designated upon the notice required for annual meetings of stockholders and shall be held at the same place as is elsewhere provided for in this Section (F)(1)(c) or such other place as is selected by such designated stockholder. Any holder of the Preferred Stock who would be entitled to vote at such meeting shall have access to the stock books of the Corporation for the purpose of causing a meeting of stockholders to be called pursuant to the provisions of this Section (F)(1). Notwithstanding the provisions of this Section (F)(1), no such special meeting shall be called during a period within 90 days immediately preceding the date fixed for the next annual meeting of stockholders. (d) At any meeting held for the purpose of electing directors at which the holders of the Preferred Stock shall have the right to elect directors as provided herein, the presence in person or by proxy of the holders of fifty percent (50%) of the then outstanding shares of Preferred Stock having such right shall be required and shall be sufficient to constitute a quorum of such class for the election of directors by such class. At any such meeting or adjournment thereof (i) the absence of a quorum of the holders of the Preferred Stock having such right shall not prevent the election of directors other than those to be elected by the holders of the Preferred Stock, and the absence of a quorum or quorums of the holders of capital stock entitled to elect such other directors shall not prevent the election of directors to be elected by the holders of the Preferred Stock entitled to elect such directors and (ii) except as otherwise required by law, in the absence of a quorum of the holders of any class of stock entitled to vote for the election of directors, a majority of the holders present in person or by proxy of such class shall have the power to adjourn the meeting for the election of directors which the holders of such class are entitled to elect, from time to time, without notice other than announcement at the meeting, until a quorum is present. (e) Any vacancy in the Board of Directors in respect of a director elected by holders of Preferred Stock pursuant to the voting right created under this Section (F)(1) shall be filled by vote of the remaining director so elected, or if there be no such remaining director, by the holders of Preferred Stock entitled to elect such director or directors at a special meeting called in accordance with the procedures set forth in Section (F)(1)(c), or, if no such special meeting is called, at the next annual meeting of stockholders. Upon any termination of such voting right, subject to the requirements of the Business Corporation Law of New York, the term of office of all directors elected by holders of Preferred Stock voting separately as a class shall terminate. (f) So long as any shares of this Series remain outstanding, the Corporation shall not, either directly or indirectly or through merger or consolidation with any other corporation, without the affirmative vote at a meeting or the written consent with or without a meeting of the holders of at least 66 2/3% in number of shares of this Series then outstanding, amend, alter or repeal any of the provisions of this Paragraph D relating to this Series or the Certificate of Incorporation of the Corporation, or authorize any reclassification of the shares of this Series, so as in any such case to affect adversely the preferences, special rights or powers of the shares of this Series. (g) In exercising the voting rights set forth in this Section (F)(l), each share of Preferred Stock entitled to such voting right shall have equal voting power, notwithstanding any greater or lesser general voting powers of one or more series of Preferred Stock. (2) No consent of holders of shares of this Series shall be required for (i) the creation of any indebtedness of any kind of the Corporation, (ii) the authorization or issuance of any class of stock of the Corporation subordinate to the shares of this Series as to dividends and upon liquidation, dissolution or winding up of the Corporation or (iii) subject to Section (F)(1)(f), the issuance of any shares of Preferred Stock. (G) LIQUIDATION RIGHTS (1) Upon the dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, the holders of the shares of this Series shall be entitled to receive out of the assets of the Corporation available for distribution to stockholders, before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to this Series upon liquidation, the amount of $250 per share, plus all accumulated and unpaid dividends to the date of final distribution. (2) Neither the sale, lease or exchange (for cash, shares of stock, securities or other consideration) of all or substantially all the property and assets of the Corporation nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this Section (G). (3) After the payment to the holders of the shares of this Series of the full preferential amounts provided for in this Section (G), the holders of this Series as such shall have no right or claim to any of the remaining assets of the Corporation. (4) In the event the assets of the Corporation available for distribution to the holders of shares of this Series upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to Section (G)(1), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the shares of this Series upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of this Series, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (H) PRIORITY (1) For purposes of this Paragraph D, any stock of any class or series of the Corporation shall be deemed to rank: (i) Prior to the shares of this Series, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, as the case may be, in preference or priority to the holders of shares of this Series; (ii) On a parity with shares of this Series, either as to dividends or upon liquidation, whether or not the dividend rates, Dividend Payment Dates, or redemption or liquidation prices per share or sinking fund provisions, if any, are different from those of this Series, if the holders of such stock are entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of shares of this Series; and (iii) Junior to shares of this Series, either as to dividends or upon liquidation, if such class or series shall be Common Stock or if the holders of shares of this Series shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, as the case may be, in preference or priority to the holders of shares of such class or series. E. The voting powers and the designations, preferences and relative, optimal and other special rights and the qualifications, limitations and restrictions of the Participating Preferred Stock are as follows: (A) DESIGNATION AND SIZE OF ISSUE The distinctive designation of the series shall be "Participating Preferred Stock" (hereinafter referred to as this "Series"). The number of shares which shall constitute this Series shall be 200,000 shares. Each share of this Series shall have a par value of $1.00. The number of authorized shares of this Series may be increased or decreased (but not below the number of shares thereof then outstanding) by further resolution duly adopted by the Board of Directors of the Corporation and by the filing of a certificate pursuant to the provisions of the Business Corporation Law of the State of New York stating that such increase or decrease has been so authorized. (B) DIVIDENDS (1) Dividends on each share or fraction of a share of this Series shall be payable, when and as declared by the Board of Directors or by a committee of said Board of Directors duly authorized by said Board to declare such dividends, on each date that dividends (other than dividends payable in capital stock of the Corporation) are payable on capital stock comprising part of the Reference Package (as defined in paragraph (2) of this Section (B)), in an amount per whole share of this Series equal to the aggregate amount of dividends (other than dividends payable in capital stock of the Corporation) that would be payable on such date to a holder of the Reference Package. Each such dividend shall be paid to the holders of record of shares of this Series as they appear on the stock register of the Corporation on such record date, not exceeding 60 days preceding the payment date thereof, as shall be fixed by the Board of Directors of the Corporation or by a committee of said Board of Directors duly authorized to fix such date. Dividends on account of arrears for any past dividend payment dates may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date, not exceeding 60 days preceding the payment date thereof, as may be fixed by the Board of Directors of the Corporation or by a committee of said Board of Directors duly authorized to fix such date. Dividends on each share of this Series or fraction of such share shall be cumulative from the date such share or fraction of a share is originally issued; provided that any such share or fraction originally issued after a dividend record date and on or prior to the dividend payment date to which such record date relates shall not be entitled to receive the dividend payable on such dividend payment date or any amount in respect of the period from such original issuance to such dividend payment date. For purposes of this paragraph (1), any redemption, purchase or other acquisition of any capital stock for any consideration by the Corporation pro rata or by lot from the holders thereof shall be deemed to be a dividend on such capital stock. (2) The term "Reference Package" shall initially mean 100 shares of Common Stock, par value $1.00 per share ("Common Stock"), of the Corporation. In the event the Corporation shall at any time after the Separation Date (as defined in the Rights Agreement, dated as of March 2, 1988, between the Corporation and Manufacturers Hanover Trust Company, as Rights Agent) (i) declare or pay a dividend on any capital stock comprising part of the Reference Package payable in capital stock, (ii) subdivide any capital stock comprising part of the Reference Package, (iii) combine any capital stock comprising part of the Reference Package into a smaller number of shares or (iv) issue in a reclassification, merger or consolidation any shares of capital stock in respect of or in lieu of any existing capital stock comprising part of the Reference Package, then and in each such case the Reference Package after such event shall be the capital stock that a holder of the Reference Package immediately prior to such event would hold thereafter as a result thereof. (3) No full dividends shall be declared or paid or set apart for payment on the Preferred Stock of any series ranking, as to dividends, on a parity with or junior to this Series for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on this Series for all dividend payment periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full, as aforesaid, upon the shares of this Series and any other Preferred Stock ranking on a parity as to dividends with this Series, all dividends declared upon shares of this Series and any other Preferred Stock ranking on a parity as to dividends with this Series shall be declared pro rata so that the amount of dividends declared per share on this Series and such other Preferred Stock shall in all cases bear to each other the same ratio that accumulated dividends per share on the shares of this Series and such other Preferred Stock bear to each other. Holders of shares of this Series shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided on this Series. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on this Series which may be in arrears. (4) So long as any shares of this Series are outstanding, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to this Series as to dividends and upon liquidation) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking junior to or on a parity with this Series as to dividends or upon liquidation, nor shall any Common Stock or any other stock of the Corporation ranking junior to or on a parity with this Series as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to this Series as to dividends and upon liquidation) unless, in each case, the full cumulative dividends (including the dividend to be due upon payment of such dividend, distribution, redemption, purchase or other acquisition) on all outstanding shares of this Series shall have been, or shall contemporaneously be, paid. (5) Notwithstanding anything in this Section (B) to the contrary, the holders of shares of every other series of Preferred Stock shall be entitled to the receipt of dividends in preference or priority to the holders of shares of this Series. (C) REDEMPTION (1) The shares of this Series shall be redeemable at the option of the Corporation, as a whole or in part, at any time or from time to time after the date which is two years following the Separation Date referred to in paragraph (2) of Section (B), at a redemption price per share equal to the Market Price (as hereinafter defined) of the Common Stock on the Trading Day (as hereinafter defined) immediately prior to the date fixed for redemption, multiplied by one hundred (the "Multiplier"), plus in each case a sum equal to dividends accrued but unpaid. (2) In the event the Corporation shall at any time on or after the date of original issuance of shares of this Series declare or pay any dividend on the shares of Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding Common Stock (by reclassification or otherwise than by payment of a dividend in Common Stock), into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of Participating Preferred Stock were entitled (without giving effect to such event), shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (3) As used herein, the term "Market Price" per share of the Common Stock on any date of determination shall mean the average of the daily closing prices per share of the Common Stock (determined as described below) on each of the 20 consecutive Trading Days through and including the Trading Day immediately preceding such date; provided, however, that if the Company shall at any time (i) declare a dividend on the Common Stock payable in Common Stock, (ii) subdivide the outstanding Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares of Common Stock or (iv) issue any shares in a reclassification of the Common Stock, and such event or an event of a type analogous to any such event shall have caused the closing prices used to determine the Market Price on any Trading Days not to be fully comparable with the closing price on such date of determination, each such closing price so used shall be appropriately adjusted in order to make it fully comparable with the closing price on such date of determination. The closing price per share of the Common Stock on any date shall be the last sale price, regular way, or, in case no such sale takes place on such date, the average of the closing bid and asked prices, regular way, for each share of the Common Stock, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if the Common Stock is not listed or admitted to trading on any national securities exchange, the average of the high bid and low asked prices for each share of Common Stock in the over- the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then in use, or, if on any such date the Common Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the securities selected by the Board of Directors of the Corporation; provided, however, that if any such date the Common Stock is not listed or admitted for trading on a national securities exchange or traded in the over- the-counter market, the closing price per share of the Common Stock on such date shall mean the fair value per share of Common Stock on such date as determined in good faith by the Board of Directors of the Corporation, after consultation with a nationally recognized investment banking firm with respect to the fair value per share of such securities, and set forth in a certificate delivered to the Corporation. (4) As used herein, the term "Trading Day", when used with respect to the Common Stock, shall mean a day on which the principal national securities exchange on which the Common Stock is listed or admitted to trading is open for the transaction of businesses or, if the Common Stock is not listed or admitted to trading on any national securities exchange, a Business Day (defined to mean any day on which banking institutions in New York, New York are generally authorized or obligated by law or executive order to close.) (5) In the event that fewer than all the outstanding shares of the Series are to be redeemed, the number of shares to be redeemed and the method for selection of those shares shall be as determined by the Board of Directors. (6) In the event the Corporation shall redeem shares of this Series, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed, at such holder's address as the same appears on the stock register of the Corporation. Each such notice shall state: (i) the redemption date; (ii) the number of shares of this Series to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date. (7) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price) dividends on the shares of this Series so called for redemption shall cease, and said shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as shareholders of the Corporation (except the right to receive from the Corporation the redemption price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price aforesaid. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (8) Any shares of this Series which shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors. (9) Notwithstanding the foregoing provisions of this Section (C), if any dividends on this Series are in arrears, no shares of this Series shall be redeemed unless all outstanding shares of this Series are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire any shares of this Series; provided, however, that the foregoing shall not prevent the purchase or acquisition of shares of this Series pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of this Series. (D) CONVERSION OR EXCHANGE The holders of shares of this Series shall not have any rights herein to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of capital stock of the Corporation. (E) VOTING (1) The shares of this Series shall have the following voting rights: (a) If and whenever at any time or times dividends payable on shares of this Series shall have been in arrears and unpaid in an aggregate amount equal to or exceeding the amount of dividends payable thereon for six quarterly dividend periods, then the holders of shares of this Series, together with the holders of any other series of Preferred Stock as to which dividends are in arrears and unpaid in an aggregate amount equal to or exceeding the amount of dividends payable thereon for six quarterly dividend periods, shall have the exclusive right, voting separately as a class with such other series, to elect two directors of the Corporation, such directors to be in addition to the number of directors constituting the Board of Directors immediately prior to the accrual of such right, the remaining directors to be elected by the other class or classes of stock entitled to vote therefor at each meeting of shareholders held for the purpose of electing directors. (b) Such voting right may be exercised initially either at a special meeting of the holders of the Preferred Stock having such voting right, called as hereinafter provided, or at any annual meeting of shareholders held for the purpose of electing directors, and thereafter at each such annual meeting until such time as all dividends accumulated on the shares of this Series shall have been paid in full, at which time such voting right and the term of the directors elected pursuant to Section (E)(1)(a) shall terminate, subject to revesting on the basis set forth in Section (E)(1)(a). (c) At any time when such voting right shall have vested in holders of the Preferred Stock, and if such right shall not already have been initially exercised, a proper officer of the Corporation shall, upon the written request of the record holders of 10% in number of shares of Preferred Stock having such voting right then outstanding, addressed to the Secretary of the Corporation, call a special meeting of the holders of Preferred Stock having such voting right and of any other class or classes of stock having voting power with respect to the election of such directors. Such meeting shall be held at the earliest practicable date upon the notice required for annual meetings of shareholders at the place for holding annual meetings of shareholders of the Corporation or, if none, at a place designated by the Board of Directors. If such meeting is not called by the proper officers of the Corporation within 30 days after the personal service of such written request upon the Secretary of the Corporation, or within 35 days after mailing the same within the United States of America, by registered mail, addressed to the Secretary of the Corporation at its principal office (such mailing to be evidenced by the registry receipt issued by the postal authorities), then the record holders of 10% in number of shares of the Preferred Stock then outstanding which would be entitled to vote at such meeting may designate in writing one of their number to call such meeting at the expense of the Corporation, and such meeting may be called by such person so designated upon the notice required for annual meetings of shareholders and shall be held at the same place as is elsewhere provided for in this Section (E)(1)(c) or such other place as is selected by such designated shareholder. Any holder of the Preferred Stock who would be entitled to vote at such meeting shall have access to the stock books of the Corporation for the purpose of causing a meeting of shareholders to be called pursuant to the provisions of this Section (E)(1). Notwithstanding the provisions of this Section (E)(1), no such special meeting shall be called during a period within 90 days immediately preceding the date fixed for the next annual meeting of shareholders. (d) At any meeting held for the purpose of electing any directors at which the holders of the Preferred Stock shall have the right to elect directors as provided herein, the presence in person or by proxy of the holders of fifty percent (50%) of the then outstanding shares of Preferred Stock having such right shall be required and shall be sufficient to constitute a quorum of such class for the election of directors by such class. At any such meeting or adjournment thereof (i) the absence of a quorum of the holders of the Preferred Stock having such right shall not prevent the election of directors other than those to be elected by the holders of the Preferred Stock, and the absence of a quorum or quorums of the holders of capital stock entitled to elect such other directors shall not prevent the election of directors to be elected by the holders of the Preferred Stock entitled to elect such directors and (ii) except as otherwise required by law, in the absence of a quorum of the holders of any class of stock entitled to vote for the election of directors, a majority of the holders present in person or by proxy of such class shall have the power to adjourn the meeting for the election of directors which the holders of such class are entitled to elect, from time to time, without notice other than announcement at the meeting, until a quorum is present. (e) Any vacancy in the Board of Directors in respect of a director elected by holders of Preferred Stock pursuant to the voting right created under this Section (E)(1) shall be filled by vote of the remaining director so elected, or if there be no such remaining director, by the holders of Preferred Stock entitled to elect such director or directors at a special meeting called in accordance with the procedures set forth in Section (E)(1)(c), or, if no such special meeting is called, at the next annual meeting of shareholders. Upon any termination of such voting right, subject to the requirements of the Business Corporation Law of New York, the term of office of all directors elected by holders of Preferred Stock voting separately as a class shall terminate. (f) So long as any shares of this Series remain outstanding, the Corporation shall not, either directly or indirectly or through merger or consolidation with any other corporation, without the affirmative vote at a meeting or the written consent with or without a meeting of the holders of at least 66 2/3% in number of shares of this Series then outstanding, amend, alter or repeal any of the provisions of this Paragraph E relating to this Series or the Certificate of Incorporation of the Corporation, or authorize any reclassification of the shares of this Series, so as in any such case to affect adversely the preferences, special rights or powers of the shares of this Series. (g) In exercising the voting rights set forth in this Section (E)(1), each share of Preferred Stock entitled to such voting right shall have equal voting power, notwithstanding any greater or lesser general voting powers of one or more series of Preferred Stock. (2) No consent of holders of shares of this Series shall be required for (i) the creation of any indebtedness of any kind of the Corporation, (ii) the authorization or issuance of any class of stock of the Corporation subordinate to the shares of this Series as to dividends and upon liquidation, dissolution or winding up of the Corporation or (iii) subject to Section (E)(1)(f), the issuance of the shares of Preferred Stock. (F) LIQUIDATION RIGHTS (1) Upon the dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, the holders of the shares of this Series shall be entitled to receive out of the assets of the Corporation available for distribution to stockholders, before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to this Series upon liquidation, the amount of $5,000 per share, plus all accumulated and unpaid dividends to the date of final distribution. (2) Neither the sale, lease or exchange (for cash, shares of stock, securities or other consideration) of all or substantially all the property and assets of the Corporation nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this Section (F). (3) After the payment to the holders of the shares of this Series of the full preferential amounts provided for in this Section (F), the holders of this Series as such shall have no right or claim to any of the remaining assets of the Corporation. (4) In the event the assets of the Corporation available for distribution to the holders of shares of this Series upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to Section (F)(1), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the shares of this Series upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of this Series, ratably, in proportion to the full distributable amounts for which holders of all such party shares are respectively entitled upon such dissolution, liquidation or winding up. (5) Notwithstanding anything in this Section (F) to the contrary, the holders of shares of every other series of Preferred Stock shall be entitled to the receipt of amounts distributable upon dissolution, liquidation or winding up of the Corporation in preference or priority to the holders of shares of this Series. (G) PRIORITY (1) For purposes of this Section G, any stock of any class or series of the Corporation shall be deemed to rank: (i) Prior to the shares of this Series, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, as the case may be, in preference or priority to the holders of shares of this Series; (ii) On a parity with shares of this Series, either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates, or redemption or liquidation prices per share or sinking fund provisions, if any, are different from those of this Series, if the holders of such stock are entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of shares of this Series; and (iii) Junior to shares of this Series, either as to dividends or upon liquidation, if such class or series shall be Common Stock or if the holders of shares of this Series shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, as the case may be, in preference or priority to the holders of shares of such class or series. F. The voting powers and the designations, preferences and relative, optimal and other special rights and the qualifications, limitations and restrictions of the Series B $19.375 Convertible Exchangeable Preferred Stock are as follows: (A) DESIGNATION AND SIZE OF ISSUE The distinctive designation of the series shall be "Series B $19.375 Convertible Exchangeable Preferred Stock" (hereinafter referred to as this "Series"). The number of shares which shall constitute this Series shall be 66,500 shares. Each share of this Series shall have a par value of $1.00. (B) DIVIDENDS (1) The annual rate of dividends payable on each share of this Series shall be $19.375. (2) Dividends shall be payable in cash, quarterly on the first day of January, April, July and October of each year, commencing April 1, 1992 (each such date hereinafter referred to as a "Dividend Payment Date"), except that if such date is not a Business Day (as hereinafter defined), then such dividend shall be payable on the next succeeding calendar day which is a Business Day. The amount of dividends payable on shares of this Series for each full quarterly dividend period shall be computed by dividing by four the annual rate per share set forth in Section (B)(1). Dividends payable on shares of this Series for the initial dividend period and for any period less than a full quarterly period shall be computed on the basis of a 360-day year of twelve 30-day months. Dividends shall be payable to the record holders of shares of this Series as of the close of business on a date, not more than sixty (60) days preceding the payment date thereof, fixed by the Board of Directors of the Corporation. Dividends in arrears may be declared and paid at any time, without reference to any regular Dividend Payment Date, to record holders of Shares of this Series as of the close of business on a date, not more than sixty (60) days preceding the payment date thereof, fixed by the Board of Directors of the Corporation. As used in this Paragraph F, the term "Business Day" means a day other than Saturday or Sunday and other than a day on which banking institutions in New York, New York are authorized by law or executive order to close. (3) Dividends payable on shares of this Series shall be cumulative and shall accumulate on each Dividend Payment Date from the date of original issue. Accumulation of dividends shall not bear interest. (4) Except as hereinafter provided, so long as any shares of this Series are outstanding, no dividend (other than a dividend in Common Stock or in any other stock of the Corporation ranking junior to this Series as to dividends and as to liquidation (collectively, the "Junior Stock")) shall be declared or paid or set aside for payment, and no other distribution shall be declared or made, upon the Junior Stock or upon any other stock of the Corporation ranking on a parity with this Series as to dividends or as to liquidation, nor shall any Junior Stock nor any other stock of the Corporation ranking on a parity with this Series as to dividends or as to liquidation be redeemed, purchased or otherwise acquired for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for Junior Stock of the Corporation), unless, in each case, the full cumulative dividends on all outstanding shares of this Series shall have been paid or contemporaneously are declared and paid through the last Dividend Payment Date. When dividends are not paid in full upon the shares of this Series and any other stock of the Corporation ranking on a parity as to dividends with this Series, all dividends declared upon shares of this Series and any stock of the Corporation ranking on a parity as to dividends with this Series shall be declared pro rata so that the amount of dividends declared per share on this Series and such other stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of this Series and such other stock bear to each other. Holders of shares of this Series shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on this Series. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on this Series which may be in arrears. (C) REDEMPTION (1) The Corporation, at the option of the Board of Directors, may, subject to the provisions of Section (B)(4), (C)(2) and (C)(8) hereof, redeem at any time or from time to time all or any part of the outstanding shares of this Series. The redemption price for each share of this Series called for redemption shall be $250 together with accumulated and unpaid dividends to the date fixed for redemption. (2) Notwithstanding the provisions of Section (C)(1) above, the Corporation may not redeem any shares of this Series (i) prior to February 7, 1994 and (ii) prior to the dates set forth below unless the Closing Price (as determined in Section (C)(3)) of the Corporation's Common Stock shall have equaled or exceeded the amount set forth opposite such date for at least twenty (20) Trading Days (as hereinafter defined) within thirty (30) consecutive Trading Days ending within five Trading Days prior to the date notice of redemption is given. In order to Redeem Closing Price Must Prior to February 7, Equal or Exceed 1995 $22 1996 $21 1997 $20 For purposes of this Paragraph F, Trading Day means, so long as the Common Stock is listed or admitted to trading on the New York Stock Exchange (or any successor to such Exchange), a day on which the New York Stock Exchange (or such successor) is open for the transaction of business, or, if the Common Stock is not listed or admitted to trading on such Exchange, a day on which the principal national securities exchange on which the Common Stock is listed is open for the transaction of business, or, if the Common Stock is not listed or admitted to trading on any national securities exchange, a day on which any New York Stock Exchange member firm is open for the transaction of business. (3) For purposes of this Paragraph F, the Closing Price of the Corporation's Common Stock shall be the last sale price as shown on the Composite Tape of the New York Stock Exchange, or, in the case no such sale takes place on such day, the average of the closing bid and asked prices on the New York Stock Exchange, or, if the Common Stock is not listed or admitted to trading on such Exchange, on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or, if it is not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices as furnished by any New York Stock Exchange member firm selected from time to time by the Board of Directors of the Corporation for such purpose (other than the Corporation or a subsidiary thereof). (4) In the event that fewer than all the outstanding shares of this Series are to be redeemed, the number of shares to be redeemed shall be determined by the Board of Directors, and the shares to be redeemed shall be determined by lot or by any other method as may be determined by the Board of Directors in its sole discretion to be equitable. (5) In the event the Corporation shall redeem shares of this Series, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than thirty (30) nor more than sixty (60) days prior to the redemption date, to each record holder of the shares to be redeemed, at such holder's address as the same appears on the books of the Corporation. Each such notice shall state: (i) the redemption date; (ii) the total number of shares of this Series to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where certificates for cash shares are to be surrendered for payment of the redemption price; (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date; and (vi) the conversion rights of the shares to be redeemed, the period within which conversion rights may be exercised, and the conversion rate at the time applicable. (6) If notice shall have been given as provided in Section (C)(5) and the Corporation shall have provided moneys at the time and place specified for the payment of the redemption price pursuant to such notice, then from and after the redemption date, dividends on the shares of this Series so called for redemption shall cease to accrue, such shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price without interest) shall cease. Upon surrender (in accordance with the notice) of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price set forth in Section (C)(1). In case fewer than all the shares represented by any such certificate are to be redeemed, a new certificate shall be issued representing the unredeemed shares, without cost to the holder thereof. (7) Any shares of this Series which have been redeemed shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without designation as to series, until such shares are once more designated as part of a particular series by the Board of Directors. (8) Notwithstanding the foregoing provisions of this Section (C), unless the full cumulative dividends on all outstanding shares of this Series and any other Preferred Stock ranking on a parity with this Series shall have been paid or contemporaneously are declared and paid through the last Dividend Payment Date, no shares of this Series shall be redeemed, and the Corporation shall not purchase or otherwise acquire any shares of this Series. (D) CONVERSION RIGHTS (1) (a) Common Stock. Each holder of a share of this Series shall have the right, at any time on and after February 7, 1994, or, as to any share of this Series called for redemption or exchange, at any time prior to the close of business on the date fixed for such redemption or exchange, to convert such share into fully paid and nonassessable shares of Common Stock of the Corporation at a rate of 15.244 shares of Common Stock for each share of this Series, subject to adjustment as provided in this Section (D) (the "conversion rate"). For purposes of this Paragraph F and the conversion of Debentures referred to in Section (E), the relationship between the "conversion rate" and the "conversion price" per share of Common Stock shall be such that the conversion price shall equal $250 divided by the conversion rate. The initial conversion price shall be $16.40 per share of Common Stock. (b) $19.375 Convertible Exchangeable Preferred Stock. Subject to the limitations set forth below, at any time after February 7, 1994, the holders of a majority of shares of this Series may give notice to the Corporation requesting the conversion of all, but not fewer than all, such shares into fully paid and nonassessable shares of the $19.375 Convertible Exchangeable Preferred Stock of the Corporation (the "Series A Stock"). Upon such notice, the Corporation shall (i) notify all other holders of shares of this Series that such holders may also, upon prompt notice to the Corporation, request such conversion and (ii) use its best efforts to prepare and enter into documentation required to effect the conversion of all, but not fewer than all, of the shares of this Series whose holders have elected conversion, into fully paid and nonassessable shares of the Series A Stock. The rate at which shares of this Series may be converted into shares of Series A Stock shall be one share of Series A Stock for each share of this Series, subject to adjustment as provided in this Section (D) (the "Series A conversion rate"). The Corporation shall not be required to effect any conversion under this paragraph (b) if (i) such conversion would conflict with or result in a breach of or default under any agreement or instrument to which the Corporation is a party, or result in any violation of any provision of the Corporation's Certificate of Incorporation or By-Laws or any statute, order, rule or regulation of any of any court, governmental agency or body having jurisdiction over the Corporation or any of its properties, (ii) such conversion would require approval of any shareholders of the Corporation, (iii) such conversion, would, in the good faith judgement of the Board of Directors of the Corporation, be unduly burdensome, or (iv) the Series A Stock is no longer outstanding or listed on any national securities exchange. (2) If any shares of this Series are surrendered for conversion subsequent to the record date preceding a Dividend Payment Date but on or prior to such Dividend Payment Date (except shares called for redemption on a redemption date between such record date and Dividend Payment Date), the registered holder of such shares at the close of business on such record date shall be entitled to receive the dividend payable on such shares on such Dividend Payment Date notwithstanding the conversion thereof. Shares of this Series surrendered for conversion during the period from the close of business on any record date for the payment of dividends next preceding any Dividend Payment Date to the opening of business on such Dividend Payment Date shall (except in the case of shares which have been called for redemption on a redemption date within such period) be accompanied by payment in New York Clearing House funds or other funds acceptable to the Corporation of an amount equal to the dividend payable on such Dividend Payment Date on the share being surrendered for conversion. Except as provided in this Section (D)(2), no adjustments in respect of or payments of dividends on shares surrendered for conversion or any dividend on the Common Stock or Series A Stock, as the case may be, issued upon conversion shall be made upon the conversion of any shares of this Series. (3) The Corporation shall not be required, in connection with any conversion of shares of this Series into Common Stock, to issue a fraction of a share of its Common Stock, but in lieu thereof the Corporation shall, subject to Section (D)(6)(e), make a cash payment (calculated to the nearest cent -- five mills being considered as nearer to the next highest cent) equal to such fraction multiplied by the Closing Price of the Common Stock on the last Trading Day prior to the date of conversion. (4) Any holder of shares of this Series electing to convert such shares shall surrender the certificate or certificates for such shares at the office of the Transfer Agent therefor (or at such other place as the Corporation may designate by notice to the holders of shares of this Series) during regular business hours, duly endorsed to the Corporation or in blank, or accompanied by instruments of transfer to the Corporation or in blank, in form satisfactory to the Corporation, and shall give written notice to the Corporation at such office that such holder elects to convert such shares of this Series. The Corporation shall, as soon as practicable (subject to Section (D)(6)(e) hereof) after such deposit of certificates for shares of this Series, accompanied by the written notice above prescribed and the payment of cash in the amount required by Section (D)(2), issue and deliver at such office to the holder for whose account such shares were surrendered, or to his nominee, certificates representing the number of new shares, and the cash, if any, to which such holder is entitled upon such conversion. (5) Conversion shall be deemed to have been made as of the date of surrender of certificates for the shares of this Series, to be converted, and the giving of written notice and payment, as prescribed in Section (D)(2) and (D)(4); and the person entitled to receive the new shares issuable upon such conversion shall be treated for all purposes as the record holder of such new shares on such date. The Corporation shall not be required to deliver certificates for such new shares while the stock transfer books for such stock or for this Series are duly closed for any purpose, but certificates for the new shares shall be issued and delivered as soon as practicable after the opening of such books. (6) The conversion rate shall be adjusted from time to time as follows: (h) In case the Corporation shall, at any time or from time to time while any of the Stock is outstanding, (i) pay a dividend in shares of its Common Stock, (ii) subdivide its outstanding shares of Common Stock, (iii) combine its outstanding shares of Common Stock into a smaller number of shares, or (iv) issue by reclassification of its shares of Common Stock any shares of stock of the Corporation, the conversion price and the conversion rate in effect immediately prior to such action shall be adjusted so that the holder of any shares of this Series thereafter surrendered for conversion shall be entitled to receive the number of shares of capital stock of the Corporation which such holder would have owned or have been entitled to receive immediately following such action had such shares of this Series been converted immediately prior thereto. An adjustment made pursuant to this Section (D)(6)(a) shall become effective retroactively to immediately after the opening of business on the day following the record date in the case of a dividend or distribution and shall become effective immediately after the opening of business on the day following the effective date in the case of subdivision, combination or reclassification. If, as a result of an adjustment made pursuant to this Section (D)(6)(a), the holder of any shares of this Series thereafter surrendered for conversion shall become entitled to receive shares of two or more classes of capital stock of the Corporation, the Board of Directors (whose determination shall be conclusive) shall determine the allocation of the adjusted conversion price and/or conversion rate between or among shares of such classes of capital stock. (i) In case the Corporation shall, at any time or from time to time while any of the Stock is outstanding, issue rights or warrants to all holders of shares of its Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the current market price per share of Common Stock (as defined in Section (D)(6)(d), at such record date, the conversion rate shall be adjusted so that it shall equal the rate determined by multiplying the conversion rate in effect immediately prior to the date of issuance of such rights or warrants by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and the denominator of which shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at such current market price. Such adjustment shall become effective retroactively immediately after the record date for the determination of stockholders entitled to receive such rights or warrants. (j) In case the Corporation shall, at any time or from time to time while any of the Stock is outstanding, distribute to all holders of shares of its Common Stock, evidences of its indebtedness or securities or assets (excluding cash distributions payable out of consolidated earnings or retained earnings, or dividends payable in shares of Common Stock) or rights to subscribe (excluding those referred to in (b)), then in each such case the conversion rate shall be adjusted so that it shall equal the rate determined by multiplying the conversion rate in effect immediately prior to the date of such distribution by a fraction, the numerator of which shall be the current market price per share (determined as provided in Section (D)(6)(d)) of the Common Stock on the record date referred to below, and the denominator of which shall be such current market price per share of the Common Stock less the fair market value (as determined by the Board of Directors of the Corporation, whose determination shall be conclusive) of the portion of the assets or evidences of indebtedness so distributed or of such subscription rights or warrants applicable to one share of Common Stock. Such adjustment shall become effective retroactively immediately after the record date for the determination of stockholders entitled to receive such distribution. (k) For the purpose of any computation under Section (D)(6)(b) and (D)(6)(c), the current market price of a share of Common Stock on any date shall be the average of the daily Closing Prices for 10 consecutive Business Days before the day in question. (l) The Corporation shall be entitled to make such additional adjustments in the conversion price, in addition to those required by subsections D(6)(a), D(6)(b) and D(6)(c), as shall be necessary in order that any dividend or distribution in shares of stock, subdivision, reclassification or combination of shares of Common Stock, issuance of rights or warrants, evidences of indebtedness or assets (other than cash), referred to above, shall not be taxable to the Shareholders. (m) In any case in which this Section (D)(6) shall require that an adjustment be made retroactively immediately following a record date, the Corporation may elect to defer (but only for five (5) Business Days following the filing of the statement referred to in Section (D)(6)(g)) issuing to the holder of any shares of this Series converted after such record date (i) the shares of Common Stock and other capital stock of the Corporation issuable upon such conversion over and above (ii) the shares of Common Stock and other capital stock of the Corporation issuable upon such conversion on the basis of the conversion rate prior to adjustment. (n) Notwithstanding any other provisions of this Section (D)(6), the Corporation shall not be required to make any adjustment of the conversion rate unless such adjustment would require an increase or decrease of at least 1% in such rate. Any lesser adjustment shall be carried forward and shall be made at the time of and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to an increase or decrease of at least 1% in such rate. (o) Whenever an adjustment in the conversion rate is required, the Corporation shall forthwith place on file with its Transfer Agent a statement signed by its President or a Vice President and by its Secretary or Treasurer or one of its Assistant Secretaries or Assistant Treasurers, stating the adjusted conversion rate determined as provided herein. Such statements shall set forth in reasonable detail such facts as shall be necessary to show the reason and the manner of computing such adjustment. Promptly after the adjustment of the conversion rate, the Corporation shall mail a notice thereof to each holder of shares of this Series. (p) The term "Common Stock" as used in this Paragraph F means the Corporation's Common Stock, $1.00 par value, as the same exists at the date of filing of the Certificate of Designation relating to this Series or any other class of stock resulting from successive changes or reclassifications of such Common Stock consisting solely of changes in par value, or from par value to no par value, or from no par value to par value. In the event that at any time as a result of an adjustment made pursuant to Section (D)(6)(a), the holder of any share of this Series thereafter surrendered for conversion shall become entitled to receive any shares of the Corporation other than shares of its Common Stock, the conversion rate of such other shares so receivable upon conversion of any share shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to Common Stock contained in subparagraphs (a) through (g) of this Section (D)(6), and the provisions of Section (D)(1) through (5) and (8) through (12) with respect to the Common Stock shall apply on like or similar terms to any such other shares. (7) The Series A conversion rate shall be adjusted from time to time as follows: (a) In case the Corporation shall, at any time or from time to time while any of the Stock is outstanding, (i) pay a dividend in shares of its Series A Stock, (ii) subdivide its outstanding shares of Series A Stock, (iii) combine its outstanding shares of Series A Stock into a smaller number of shares, or (iv) issue by reclassification of its shares of Series A Stock any shares of stock of the Corporation, the Series A conversion rate in effect immediately prior to such action shall be adjusted so that the holder of any shares of this Series thereafter surrendered for conversion shall be entitled to receive the number of shares of capital stock of the Corporation which such holder would have owned or have been entitled to receive immediately following such action had such shares of this Series been converted immediately prior thereto. An adjustment made pursuant to this Section (D)(7)(a) shall become effective retroactively to immediately after the opening of business on the day following the record date in the case of a dividend or distribution and shall become effective immediately after the opening of business on the day following the effective date in the case of subdivision, combination or reclassification. If, as a result of an adjustment made pursuant to this Section (D)(7)(a), the holder of any shares of this Series thereafter surrendered for conversion shall become entitled to receive shares of two or more classes of capital stock of the Corporation, the Board of Directors (whose determination shall be conclusive) shall determine the allocation of the adjusted Series A conversion rate between or among shares of such classes of capital stock. (b) In case the Corporation shall, at any time or from time to time while any of the Stock is outstanding, issue rights or warrants to all holders of shares of its Series A Stock entitling them to subscribe for or purchase shares of Series A Stock at a price per share less than the current market price per share of Series A Stock (as defined in Section (D)(7)(d), at such record date, the Series A conversion rate shall be adjusted so that it shall equal the rate determined by multiplying the Series A conversion rate in effect immediately prior to the date of issuance of such rights or warrants by a fraction, the numerator of which shall be the number of shares of Series A Stock outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Series A Stock offered for subscription or purchase, and the denominator of which shall be the number of shares of Series A Stock outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at such current market price. Such adjustment shall become effective retroactively immediately after the record date for the determination of stockholders entitled to receive such rights or warrants. (c) In case the Corporation shall, at any time or from time to time while any of the Stock is outstanding, distribute to all holders of shares of its Series A Stock, evidences of its indebtedness or securities or assets (excluding cash distributions payable out of consolidated earnings or retained earnings, or dividends payable in shares of Series A Stock) or rights to subscribe (excluding those referred to in (b)), then in each such case the Series A conversion rate shall be adjusted so that it shall equal the rate determined by multiplying the Series A conversion rate in effect immediately prior to the date of such distribution by a fraction, the numerator of which shall be the current market price per share (determined as provided in Section (D)(7)(d)) of the Series A Stock on the record date referred to below, and the denominator of which shall be such current market price per share of the Series A Stock less the fair market value (as determined by the Board of Directors of the Corporation, whose determination shall be conclusive) of the portion of the assets or evidences of indebtedness so distributed or of such subscription rights or warrants applicable to one share of Series A Stock. Such adjustment shall become effective retroactively immediately after the record date for the determination of stockholders entitled to receive such distribution. (d) For the purpose of any computation under Section (D)(7)(b) and (D)(7)(c), the current market price of a share of Series A Stock on any date shall be the average of the daily Closing Prices for 10 consecutive Business Days before the day in question. (e) The Corporation shall be entitled to make such additional adjustments in the Series A conversion rate, in addition to those required by subsections D(7)(a), D(7)(b) and D(7)(c), as shall be necessary in order that any dividend or distribution in shares of stock, subdivision, reclassification or combination of shares of Series A Stock, issuance of rights or warrants, evidences of indebtedness or assets (other than cash), referred to above, shall not be taxable to the Shareholders. (f) In any case in which this Section (D)(7) shall require that an adjustment be made retroactively immediately following a record date, the Corporation may elect to defer (but only for five (5) Business Days following the filing of the statement referred to in Section (D)(7)(g)) issuing to the holder of any shares of this Series converted after such record date (i) the shares of Series A Stock and other capital stock of the Corporation issuable upon such conversion over and above (ii) the shares of Series A Stock and other capital stock of the Corporation issuable upon such conversion on the basis of the Series A conversion rate prior to adjustment. (g) Notwithstanding any other provisions of this Section (D)(7), the Corporation shall not be required to make any adjustment of the Series A conversion rate unless such adjustment would require an increase or decrease of at least 1% in such rate. Any lesser adjustment shall be carried forward and shall be made at the time of and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to an increase or decrease of at least 1% in such rate. (h) Whenever an adjustment in the Series A conversion rate is required, the Corporation shall forthwith place on file with its Transfer Agent a statement signed by its President or a Vice President and by its Secretary or Treasurer or one of its Assistant Secretaries or Assistant Treasurers, stating the adjusted Series A conversion rate determined as provided herein. Such statements shall set forth in reasonable detail such facts as shall be necessary to show the reason and the manner of computing such adjustment. Promptly after the adjustment of the Series A conversion rate, the Corporation shall mail a notice thereof to each holder of shares of this Series. (8) In case of either (a) any consolidation or merger to which the Corporation is a party, other than a merger or consolidation in which the Corporation is the surviving or continuing corporation and which does not result in any reclassification of, or change (other than a change in par value or from par value to no par value or from no par value to par value, or as a result of a subdivision or combination) in, outstanding shares of Common Stock, or (b) any sale or conveyance to another corporation of the property of the Corporation as an entirety, then the Corporation, or such successor corporation, as the case may be, shall make appropriate provision so that the holder of each share of this Series then outstanding shall have the right to convert such share of this Series into the kind and amount of shares of stock or other securities and property receivable upon such consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock into which such shares of this Series might have been converted immediately prior to such consolidation, merger, sale or conveyance, subject to adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section (D). The provisions of this Section (D)(8) shall apply similarly to successive consolidations, mergers, sales or conveyances. (9) Any shares of this Series which shall at any time have been converted shall, after such conversion, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors. The Corporation shall at all times reserve and keep available out of its authorized but unissued stock, for the purpose of effecting the conversion of the shares of this Series, such number of its duly authorized shares of Common Stock and Series A Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of this Series; provided, however, that nothing contained herein shall preclude the Corporation from satisfying its obligations in respect of the conversion of the shares by delivery of purchased shares of Common Stock or Series A Stock, as the case may be, which are held in the treasury of the Corporation. (10) If any shares of Common Stock or Series A Stock required to be reserved for purposes of conversion of shares of this Series hereunder require registration with or approval of any governmental authority before such shares may be issued upon conversion, the Corporation shall cause such shares to be duly registered or approved, as the case may be. The Corporation will endeavor to list the shares of Common Stock or Series A Stock, as the case may be, required to be delivered upon conversion of shares of this Series prior to such delivery upon each national securities exchange upon which the outstanding Common Stock is listed at the time of such delivery. (11) The Corporation shall pay any and all issue or other taxes that may be payable in respect of any issue or delivery of shares of Common Stock or Series A Stock, as the case may be, on conversion of shares of this Series pursuant hereto. The Corporation shall not, however, be required to pay any tax which is payable in respect of any transfer involved in the issue or delivery of Common Stock or Series A Stock, as the case may be, in a name other than that in which the shares of this Series so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of such tax, or has established, to the satisfaction of the Corporation, that such tax has been paid. (12) Before taking any action that would result in the conversion price being less than the then par value of the Common Stock, the Corporation shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at the conversion price. (E) EXCHANGE FOR DEBENTURES (1) The shares of this Series are exchangeable in whole, but not in part, at the sole option of the Corporation, at any time, on any Dividend Payment Date, into the Corporation's 7 3/4% Convertible Subordinated Debentures Due 2017 (the "Debentures") in the form attached as Exhibit C to the Subscription Agreement, dated as of February 7, 1992, between the Corporation and the purchasers of the Preferred Stock (the "Subscription Agreement"); provided, that on or prior to the date fixed for exchange (the "Exchange Date") the Corporation shall have paid to the holders of outstanding shares of this Series and of Preferred Stock ranking on a parity with this Series all accumulated and unpaid dividends to the Exchange Date. Holders of outstanding shares of this Series shall be entitled to receive $250 principal amount of Debentures in exchange for each share of this Series held on the Exchange Date. (2) In the event the Corporation shall exchange shares of this Series, notice of such exchange shall be given by first class mail, postage prepaid, mailed not less than thirty (30) nor more than sixty (60) days prior to the Exchange Date, to each record holder of shares of this Series, at such holder's address as the same appears on the books of the Corporation. Each such notice shall state: (a) the Exchange Date; (b) the place or places where certificates for such shares are to be surrendered for exchange into Debentures; (c) that dividends on the shares to be exchanged will cease to accrue on the Exchange Date; and (d) the conversion price of the shares to be redeemed, the period within which conversion rights may be exercised and the conversion rate at the time applicable. (3) Notice having been mailed as aforesaid, from and after the Exchange Date (unless the Corporation shall default in issuing Debentures in exchange for shares of this Series or in making the final dividend payment on the Exchange Date), dividends on the shares of this Series shall cease to accrue, such shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the Debentures) shall cease. Upon surrender (in accordance with the notice provided for above in Section (E)(2)) of the certificates for any shares of this Series so exchanged (properly endorsed or assigned for transfer, if the Board of Directors shall so require and the notice shall so state), such shares shall be exchanged by the Corporation into Debentures as aforesaid. (4) All shares of this Series which have been exchanged shall, after such exchange, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors. (F) VOTING (1) The shares of this Series shall have the following voting rights: (a) If and whenever at any time or times dividends payable on shares of this Series shall have been in arrears and unpaid in an aggregate amount equal to or exceeding the amount of dividends payable thereon for six quarterly dividend periods, then the holders of shares of this Series, together with the holders of any other series of Preferred Stock as to which dividends are in arrears and unpaid in an aggregate amount equal to or exceeding the amount of dividends payable thereon for six quarterly dividend periods, shall have the exclusive right, voting separately as a class with such other series, to elect two directors of the Corporation, such directors to be in addition to the number of directors constituting the Board of Directors immediately prior to the accrual of such right, the remaining directors to be elected by the other class or classes of stock entitled to vote therefor at each meeting of stockholders held for the purpose of electing directors. (b) Such voting right may be exercised initially either at a special meeting of the holders of the Preferred Stock having such voting right, called as hereinafter provided, or at any annual meeting of stockholders held for the purpose of electing directors, and thereafter at each such annual meeting until such time as all dividends accumulated on the shares of this Series shall have been paid in full, at which time such voting right and the term of the directors elected pursuant to Section (F)(1)(a) shall terminate, subject to revesting on the basis set forth in Section (F)(1)(a). (c) At any time when such voting right shall have vested in holders of the Preferred Stock, and if such right shall not already have been initially exercised, a proper officer of the Corporation shall, upon the written request of the record holders of 10% in number of shares of Preferred Stock having such voting right then outstanding, addressed to the Secretary of the Corporation, call a special meeting of the holders of Preferred Stock having such voting right and of any other class or classes of stock having voting power with respect to the election of such directors. Such meeting shall be held at the earliest practicable date upon the notice required for annual meetings of stockholders at the place for holding annual meetings of stockholders of the Corporation or, if none, at a place designated by the Board of Directors. If such meeting is not called by the proper officers of the Corporation within 30 days after the personal service of such written request upon the Secretary of the Corporation, or within 35 days after mailing the same within the United States of America, by registered mail, addressed to the Secretary of the Corporation at its principal office (such mailing to be evidenced by the registry receipt issued by the postal authorities), then the record holders of 10% in number of shares of the Preferred Stock then outstanding which would be entitled to vote at such meeting may designate in writing one of their number to call such meeting at the expense of the Corporation, and such meeting may be called by such person so designated upon the notice required for annual meetings of stockholders and shall be held at the same place as is elsewhere provided for in this Section (F)(1)(c) or such other place as is selected by such designated stockholder. Any holder of the Preferred Stock who would be entitled to vote at such meeting shall have access to the stock books of the Corporation for the purpose of causing a meeting of stockholders to be called pursuant to the provisions of this Section (F)(1). Notwithstanding the provisions of this Section (F)(1), no such special meeting shall be called during a period within 90 days immediately preceding the date fixed for the next annual meeting of stockholders. (d) At any meeting held for the purpose of electing directors at which the holders of the Preferred Stock shall have the right to elect directors as provided herein, the presence in person or by proxy of the holders of fifty percent (50%) of the then outstanding shares of Preferred Stock having such right shall be required and shall be sufficient to constitute a quorum of such class for the election of directors by such class. At any such meeting or adjournment thereof (i) the absence of a quorum of the holders of the Preferred Stock having such right shall not prevent the election of directors other than those to be elected by the holders of the Preferred Stock, and the absence of a quorum or quorums of the holders of capital stock entitled to elect such other directors shall not prevent the election of directors to be elected by the holders of the Preferred Stock entitled to elect such directors and (ii) except as otherwise required by law, in the absence of a quorum of the holders of any class of stock entitled to vote for the election of directors, a majority of the holders present in person or by proxy of such class shall have the power to adjourn the meeting for the election of directors which the holders of such class are entitled to elect, from time to time, without notice other than announcement at the meeting, until a quorum is present. (e) Any vacancy in the Board of Directors in respect of a director elected by holders of Preferred Stock pursuant to the voting right created under this Section (F)(1) shall be filled by vote of the remaining director so elected, or if there be no such remaining director, by the holders of Preferred Stock entitled to elect such director or directors at a special meeting called in accordance with the procedures set forth in Section (F)(1)(c), or, if no such special meeting is called, at the next annual meeting of stockholders. Upon any termination of such voting right, subject to the requirements of the Business Corporation Law of New York, the term of office of all directors elected by holders of Preferred Stock voting separately as a class shall terminate. (f) So long as any shares of this Series remain outstanding, the Corporation shall not, either directly or indirectly or through merger or consolidation with any other corporation, without the affirmative vote at a meeting or the written consent with or without a meeting of the holders of at least 66 2/3% in number of shares of this Series then outstanding, amend, alter or repeal any of the provisions of this Paragraph F relating to this Series or the Certificate of Incorporation of the Corporation, or authorize any reclassification of the shares of this Series, so as in any such case to affect adversely the preferences, special rights or powers of the shares of this Series. (g) In exercising the voting rights set forth in this Section (F)(l), each share of Preferred Stock entitled to such voting right shall have equal voting power, notwithstanding any greater or lesser general voting powers of one or more series of Preferred Stock. (2) No consent of holders of shares of this Series shall be required for (i) the creation of any indebtedness of any kind of the Corporation, (ii) the authorization or issuance of any class of stock of the Corporation subordinate to the shares of this Series as to dividends and as to liquidation, dissolution or winding up of the Corporation or (iii) subject to Section (F)(1)(f), the issuance of any shares of Preferred Stock. (G) LIQUIDATION RIGHTS (1) Upon the dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, the holders of the shares of this Series shall be entitled to receive out of the assets of the Corporation available for distribution to stockholders, before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to this Series as to liquidation, the amount of $250 per share, plus all accumulated and unpaid dividends to the date of final distribution. (2) Neither the sale, lease or exchange (for cash, shares of stock, securities or other consideration) of all or substantially all the property and assets of the Corporation nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this Section (G). (3) After the payment to the holders of the shares of this Series of the full preferential amounts provided for in this Section (G), the holders of this Series as such shall have no right or claim to any of the remaining assets of the Corporation. (4) In the event the assets of the Corporation available for distribution to the holders of shares of this Series upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to Section (G)(1), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the shares of this Series upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of this Series, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (H) PRIORITY (1) For purposes of this Paragraph F, any stock of any class or series of the Corporation shall be deemed to rank: (i) Prior to the shares of this Series, either as to dividends or as to liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, as the case may be, in preference or priority to the holders of shares of this Series; (ii) On a parity with shares of this Series, either as to dividends or as to liquidation, whether or not the dividend rates, Dividend Payment Dates, or redemption or liquidation prices per share or sinking fund provisions, if any, are different from those of this Series, if the holders of such stock are entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of shares of this Series; and (iii) Junior to shares of this Series, either as to dividends or as to liquidation, if such class or series shall be Common Stock or if the holders of shares of this Series shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, as the case may be, in preference or priority to the holders of shares of such class or series. (2) The shares of this Series shall rank pari passu with the Corporation's $19.375 Convertible Exchangeable Preferred Stock. FOURTH: The Office of the Corporation within the State of New York shall be located in the County of New York, City of New York. FIFTH: The post office address to which the Secretary of State shall mail a copy of any process against the Corporation served upon him, is Arrow Electronics, Inc., c/o Prentice Hall Corporation System Inc., 15 Columbus Circle, New York, New York 10023-7773. SIXTH: The duration of the Corporation shall be perpetual. SEVENTH: The number of directors shall be no less than three and no more than fifteen. Directors need not be shareholders. EIGHTH: The Secretary of State is designated as the agent of the Corporation upon whom process in any action or proceeding against it may be served within the State of New York. NINTH: The following provisions are inserted for the regulation and conduct of the affairs of the Corporation, and it is expressly provided that they are intended to be in furtherance and not in limitation or exclusion of the powers conferred by law: No contract or other transaction between the Corporation and any other firm or corporation shall be affected or invalidated by reason of the fact that any one or more of the directors or officers of this Corporation is or are interested in, or is a member, stockholder, director, or officer, or are members, stockholders, directors, or officers of such other firm or corporation; and any director or officer or officers, individually or jointly, may be a party or parties to, or may be interested in, any contract or transaction of this Corporation, or in which this Corporation is interested, and no contract, act, or transaction of this Corporation with any person or persons, firm, association or corporation, shall be affected or invalidated by reason of the fact that any director or directors, officer or officers of this Corporation is a party or are parties to, or interested in, such contract, act or transaction, or in any way connected with such person or persons, firm, association or corporation, and each and every person who may become a director or officer of this Corporation is relieved from any liability that might otherwise exist from thus contracting with this Corporation for the benefit of himself or any firm, association or corporation in which he may be in anywise interested. Subject to such restrictions and regulations contained in By-Laws adopted by the stockholders, the Board of Directors may make, alter, amend and rescind the By- laws, and may provide therein for the appointment of an executive committee from their own members, to exercise all or any of the powers of the Board, which may lawfully be delegated when not in session. The By-Laws may be amended or repealed, at any time, by the stockholders. The Board of Directors shall have power, in its discretion, to provide for and to pay to directors rendering unusual or exceptional services to the Corporation, special compensation appropriate to the value of such services. By resolution duly adopted by the holders of not less than a majority of the shares of stock then issued and outstanding and entitled to vote at any regular or special meeting of the stockholders of the Corporation duly called and held as provided in the By-Laws of the Corporation, any director or directors of the Corporation may be removed from office at any time or times, with our without cause. The Board of Directors may at any time remove any officer of the Corporation with or without cause. Any person made a party to any action, suit or proceeding by reason of the fact that he, is testator or intestate, is or was a director, officer or employee of the Corporation or of any corporation which he served as such at the request of the Corporation shall be indemnified by the Corporation against the reasonable expenses, including attorney's fees, actually and necessarily incurred by him in connection with the defense of such action, suit or proceedings, or in connection with any appeal therein, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such officer, director or employee is liable for negligence or misconduct in the performance of his duties. The foregoing right or indemnification shall not be deemed exclusive of any other rights to which any officer or director or employee may be entitled apart from the provisions of this section. The Corporation may use and apply its surplus earnings or accumulated profits, not otherwise by law to be reserved, to the purchase or acquisition of property and to the purchase or acquisition of its own capital stock from time to time and to such extent and in such manner and upon such terms as its Board of Directors shall determine; and neither the property nor the capital stock so purchased or acquired, nor any of its own capital stock taken in payment of satisfaction of any debt due to the Corporation, shall be regarded as profits for the purpose of declaration or payment of dividends, unless otherwise determined by a majority of the Board of Directors. A director of this Corporation shall not be personally liable to the Corporation or its shareholders for damages for any breach of fiduciary duty as a director, except for liability resulting from a judgment or other final adjudication adverse to the director: (i) for acts or omissions in bad faith or which involve intentional misconduct or a knowing violation of the law, (ii) for any transaction from which the director derived a financial profit or other advantage to which the director was not legally entitled, or (iii) under Section 719 of the New York Business Corporation Law. TENTH: A. 1. In addition to any affirmative vote required by law or under any other provision of this Certificate of Incorporation, and except as otherwise expressly provided in Paragraph B: (i) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with or into (A) any 30% Shareholder (as hereinafter defined) or (B) any other corporation (whether or not itself a 30% Shareholder) which, after such merger or consolidation, would be an Affiliate (as hereinafter defined) of a 30% Shareholder, or (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of related transactions) to or with any 30% Shareholder of any assets of the Corporation or any Subsidiary having an aggregate fair market value of $5,000,000 or more, or (iii) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of related transactions) of any securities of the Corporation or any Subsidiary to any 30% Shareholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate fair market value of $5,000,000 or more, provided, however, that this clause (iii) shall not be applicable to any issuance or transfer to a 30% Shareholder if the acquisition of the 30% Interest (as hereinafter defined) by such 30% Shareholder was approved by the Board of Directors of the Corporation prior to the time that such 30% Shareholder became a 30% Shareholder and such 30% Shareholder is entitled to acquire such shares pursuant to an agreement approved by a majority of the continuing directors, or (iv) any reclassification of securities (including any reverse stock split), recapitalization, reorganization or any similar transaction designed to reduce materially, or having the effect of reducing materially, the percentage of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, considered for the purpose of this Article TENTH as one class ("Voting Shares"), which are held by the holders ("Public Holders") of Voting Shares other than any 30% Shareholder, shall require the affirmative vote of the holders of at least 90% of the Voting Shares. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that some lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise. 2. The term "business combination" as used in this Article TENTH shall mean any transaction which is referred to in any one or more of clauses (i) through (iv) of subparagraph 1 of this Paragraph A. B. The provisions of Paragraph A of this Article TENTH shall not be applicable to any particular business combination, and such business combination shall require only such affirmative vote as is required by law and any other provision of this Certificate of Incorporation, if all of the following conditions shall have been satisfied: 1. The ratio of: (a) the aggregate amount of the cash and the fair market value of other consideration to be received per share by holders of common stock of the Corporation ("Common Stock") in such business combination, (b) the market price of the Common Stock immediately prior to the announcement of such business combination, is at least as great as the ratio of (i) the highest per share price (including brokerage commissions, transfer taxes and soliciting dealers' fees) which such 30% Shareholder has theretofore paid for any shares of Common Stock already owned by it, to (ii) the market price of the Common Stock immediately prior to the initial acquisition by such 30% Shareholder of any Common Stock; and 2. The aggregate amount of the cash and fair market value of other consideration to be received per share by holders of Common Stock in such business combination (i) is not less than the highest per share price (including brokerage commissions, transfer taxes and soliciting dealers' fees) paid by such 30% Shareholder in acquiring any of its holdings of Common Stock, and (ii) is not less than the earnings per share of Common Stock for the four full consecutive fiscal quarters immediately preceding the record date for solicitation of votes on such business combination multiplied by the then price/earnings multiple (if any) of such 30% Shareholder as customarily computed and reported in the financial community; and 3. The consideration to be received by holders of Common Stock in such business combination shall be in the same form and of the same kind as the consideration paid by the 30% Shareholder in acquiring the shares of Common Stock already owned by it; and 4. After such 30% Shareholder has acquired ownership of not less than 30% of the then outstanding Voting Shares (a "30% Interest") and prior to the consummation of such business combination: (i) the 30% Shareholder shall have taken steps to ensure that the Corporation's Board of Directors include at all times representation by continuing director(s) (as hereinafter defined) proportionate to the ratio that the Voting Shares which from time to time are not owned by any 30% Shareholder bear to all Voting Shares outstanding at such respective times (with a continuing director to occupy any resulting fractional board position); (ii) there shall have been no reduction in the rate of dividends payable on the Common Stock except as necessary to ensure that a quarterly dividend payment does not exceed 15% of the net income of the Corporation for the four full consecutive fiscal quarters immediately preceding the declaration date of such dividend, or except as may have been approved by a unanimous vote of all directors which the Corporation would have if there were no vacancies (the "whole Board"); (iii) such 30% Shareholder shall not have acquired any newly issued shares of stock, directly or indirectly, from the Corporation (except upon conversion of convertible securities acquired by it prior to obtaining a 30% Interest or as a result of a pro rata stock dividend or stock split); and (iv) such 30% Shareholder shall not have acquired any additional shares of the Corporation's outstanding Common Stock or securities convertible into or exchangeable for Common Stock except as a part of the transaction which resulted in such 30% Shareholder acquiring its 30% interest; and 5. Prior to the consummation of such business combination, such 30% Shareholder shall not have (i) received the benefit, directly or indirectly (except proportionately as a shareholder), of any loans, advances, guarantees, pledges or other financial assistance or tax credits provided by the Corporation, or (ii) made any major changes in the Corporation's business or equity capital structure without the unanimous approval of the whole Board; and 6. A proxy statement responsive to the requirements of the Securities Exchange Act of 1934 shall have been mailed to all holders of Voting Shares for the purpose of soliciting shareholder approval of such business combination. Such proxy statement shall contain at the front thereof, in a prominent place, any recommendations as to the advisability (or inadvisability) of the business combination which the continuing directors, or any of them, may have furnished in writing and, if deemed advisable by a majority of the continuing directors, an opinion of a reputable investment banking firm as to the fairness (or lack of fairness) of the terms of such business combination, from the point of view of the Public Holders (such investment banking firm to be selected by a majority of the continuing directors, to be furnished with all information it reasonably requests and to be paid a reasonable fee for its services upon receipt by the Corporation of such opinion). C. For the purposes of this Article TENTH: 1. A "person" shall mean any individual, firm, corporation or other entity. 2. "30% Shareholder" shall mean, in respect of any business combination, any person (other than the Corporation) who or which, as of the record date for the determination of shareholders entitled to notice of and to vote on such business combination, (a) is the beneficial owner, directly or indirectly, of not less than 30% of the Voting Shares, or (b) is an Affiliate of the Corporation and at any time prior thereto was the beneficial owner, directly or indirectly, of not less than 30% of the then outstanding Voting Shares, or (c) is an assignee of or has otherwise succeeded to any shares of capital stock of the Corporation which were at any time prior thereto beneficially owned by any 30% Shareholder, and such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933, provided, however, that this clause (c) shall not be applicable to any assignment or succession of shares of capital stock that were previously owned by any 30% Shareholder if the acquisition of the 30% Interest by each 30% Shareholder that previously owned any of such shares was approved by the Board of Directors of the Corporation prior to the time that such 30% Shareholder became a 30% Shareholder and each assignment or succession of such shares from such a 30% Shareholder is in accordance with an agreement between such 30% Shareholder and the Corporation approved by a majority of the continuing directors that permits such an assignment or succession. 3. A person shall be the "beneficial owner" of any Voting Shares: (a) which such person or any of its Affiliates or Associates (as hereinafter defined) beneficially owns, directly or indirectly, or (b) which such person or any of its Affiliates or Associates has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants, or options, or otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or understanding, or (c) which are beneficially owned, directly or indirectly, by any other person with which such first mentioned person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of capital stock of the Corporation. 4. The outstanding Voting Shares shall include shares deemed owned through application of subparagraph 3 above but shall not include any other Voting Shares which may be issuable pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise. 5. "Continuing director" shall mean a person who was a member of the Board of Directors of the Corporation elected by the Public Holders prior to the date as of which any 30% Shareholder acquired in excess of 10% of the then outstanding Voting Shares, or a person designated (before his initial election as a director) as a continuing director by a majority of the then continuing directors. 6. "Other consideration to be received" shall mean Common Stock of the Corporation retained by its Public Holders in the event of a business combination in which the Corporation is the surviving corporation. 7. "Affiliate" and "Associate" shall have the respective meanings given those terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on January 1, 1978. 8. "Subsidiary" means any corporation of which a majority of any class of equity security (as defined in Rule 3a11-l of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on January 1, 1978) is owned, directly or indirectly, by the Corporation. D. A majority of the continuing directors shall have the power and duty to determine for the purposes of this Article TENTH, on the basis of information known to them, (a) the number of Voting Shares beneficially owned by any person, (b) whether a person is an Affiliate or Associate of another, (c) whether a person has an agreement, arrangement or understanding with another as to the matters referred to in subparagraph 3 of Paragraph C, or (d) whether the assets subject to any business combination have an aggregate fair market value of $5,000,000 or more. E. Any amendment, alteration, change or repeal of this Article TENTH of this Certificate of Incorporation shall require the affirmative vote of the holders of at least 90% of the then outstanding Voting Shares; provided, however, that this Paragraph E shall not apply to, and such 90% vote shall not be required for, any amendment, alteration, change or repeal unanimously recommended to the shareholders by the whole Board if all members of the whole Board are continuing directors. F. Nothing contained in this Article TENTH shall be construed to relieve any 30% Shareholder from any fiduciary obligation imposed by law. 4. The restatement hereinabove set forth was authorized by the Board of Directors of the Corporation at a meeting duly held on October 23, 1991. IN WITNESS WHEREOF, we have signed this certificate and affirm the statements contained therein as true under penalties of perjury. Dated: October 23, 1991 s/ROBERT E. KLATELL Robert E. Klatell, Senior Vice President s/WAYNE BRODY Wayne Brody, Assistant Secretary CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF ARROW ELECTRONICS, INC. UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW CONFORMED COPY AS AMENDED THROUGH NOVEMBER 28, 1994 WINTHROP, STIMSON, PUTNAM & ROBERTS ONE BATTERY PARK PLAZA NEW YORK, NEW YORK 10004-1490
EX-10 3 EX-10(B)(VII),SUPP 4, ARROW SAVINGS PLAN Exhibit 10(b)(vii) SUPPLEMENT NO. 4 ARROW ELECTRONICS SAVINGS PLAN In connection with the acquisition by Arrow Electronics, Inc. of all of the issued and outstanding shares of common stock of Gates/FA Distributing, Inc. (the "Gates Acquisition"), the Plan is amended as follows: S4.1 In the case of an individual who becomes an employee of an Employer or Affiliate on or about November 7, 1994 in connection with the Gates Acquisition, service with Gates/FA Distributing, Inc. shall be treated, for purposes of Section 2.1 and for purposes of determining such individual's Years of Service under the Plan, as though it were service with an Employer or Affiliate. For this purpose, any service measured in terms of elapsed time shall be converted to Hours of Service on the basis that one month equals 190 Hours of Service, one week equals 45 Hours of Service and one day equals 10 hours of Service. December 28, 1994 EX-10 4 EX-10(B)(XV),SUPP 4, STOCK OWNERSHIP PLAN Exhibit 10(b)(xv) SUPPLEMENT NO. 4 ARROW ELECTRONICS STOCK OWNERSHIP PLAN In connection with the acquisition by Arrow Electronics, Inc. of all of the issued and outstanding shares of common stock of Gates/FA Distributing, Inc. (the "Gates Acquisition"), the Plan is amended as follows: S4.1 In the case of an individual who becomes an employee of an Employer or Affiliate on or about November 7, 1994 in connection with the Gates Acquisition, service with Gates/FA Distributing, Inc. shall be treated, for purposes of Section 2.1 and for purposes of determining such individual's Years of Service under the Plan, as though it were service with an Employer or Affiliate. For this purpose, any service measured in terms of elapsed time shall be converted to Hours of Service on the basis that one month equals 190 Hours of Service, one week equals 45 Hours of Service and one day equals 10 hours of Service. December 28, 1994 EX-10 5 EX-10(B)(XIX),SUPP 3,CAPSTONE SAVINGS PLAN Exhibit 10(b)(xix) SUPPLEMENT NO. 3 CAPSTONE ELECTRONICS PROFIT SHARING PLAN In connection with the acquisition by Arrow Electronics, Inc. of all of the issued and outstanding shares of common stock of Gates/FA Distributing, Inc. (the "Gates Acquisition"), the Plan is amended as follows: S3.1 In the case of an individual who becomes an employee of an Employer or Affiliate on or about November 7, 1994 in connection with the Gates Acquisition, service with Gates/FA Distributing, Inc. shall be treated, for purposes of Section 2.1 and for purposes of determining such individual's Years of Service under the Plan, as though it were service with an Employer or Affiliate. For this purpose, any service measured in terms of elapsed time shall be converted to Hours of Service on the basis that one month equals 190 Hours of Service, one week equals 45 Hours of Service and one day equals 10 hours of Service. December 28, 1994 EX-10 6 EX-10(C)(II),EMP AGREEMENT - KAUFMAN EXHIBIT 10(c)(ii) EMPLOYMENT AGREEMENT made as of the 22nd day of February, 1995 by and between ARROW ELECTRONICS, INC., a New York corporation with its principal office at 25 Hub Drive, Melville, New York 11747 (the "Company"), and STEPHEN P. KAUFMAN, residing at 101 Lloyd Harbour Road, Huntington, New York 11743 (the "Executive"). WHEREAS, the Executive is now and has been employed by the Company as its Chairman and Chief Executive Officer, with the responsibilities and duties of a principal executive officer of the Company; WHEREAS, the Company and the Executive wish to provide for the continued employment of the Executive as an employee of the Company and for him to continue to render services to the Company on the terms set forth in, and in accordance with the provisions of, this Agreement; NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties agree as follows: 1. Employment and Duties. a) Employment. The Company hereby employs the Executive for the Employment Period defined in Paragraph 3, to perform such duties for the Company, its subsidiaries and affiliates and to hold such offices as may be specified from time to time by the Company's Board of Directors, subject to the following provisions of this Agreement. The Executive hereby accepts such employment. b) Duties and Responsibilities through June 30, 1998. During the Initial Period (as defined in Paragraph 3), it is contemplated that the Executive will be the Chairman and Chief Executive Officer of the Company but the Board of Directors shall have the right to adjust the duties, responsibilities and title of the Executive as the Board of Directors may from time to time deem to be in the interests of the Company (provided, however, that they remain commensurate with his duties and responsibilities as they exist on the date hereof). If the Board of Directors does not either continue the Executive in the office of Chairman and Chief Executive Officer or elect him to some other principal executive office satisfactory to the Executive, the Executive shall have the right to decline to give further service to the Company and shall have the rights and obligations which would accrue to him under Paragraph 8 if he were discharged without cause. If the Executive decides to exercise such right to decline to give further service, he shall within thirty days after such action or omission by the Board of Directors give written notice to the Company stating his objection and the action he thinks necessary to correct it, and he shall permit the Company to have a thirty day period in which to correct its action or omission. If the Company makes a correction satisfactory to the Executive, the Executive shall be obligated to continue to serve the Company. If the Company does not make such a correction, the Executive's rights and obligations under Paragraph 8 shall accrue at the expiration of such thirty day period. c) Duties and Responsibilities from July 1, 1998 to December 31, 2001. During the Transition Period (as defined in Paragraph 3), the Executive shall remain an employee of the Company and shall hold himself available to assist the Company on mutually-agreed projects involving significant matters similar to those with respect to which he has been involved on the Company's behalf at the close of the Initial Period. d) Time Devoted to Duties. During the Initial Period, the Executive shall devote substantially all of his normal business time and efforts to the business of the Company, its subsidiaries and its affiliates, the amount of such time to be sufficient, in his discretion, to permit him diligently and faithfully to serve and endeavor to further their interests to the best of his ability. Subject to the foregoing, it is expressly agreed and understood that the Executive may participate in various civic and philanthropic activities, may serve on boards of directors and committees of not-for-profit organizations of the Executive's choice, and, consistent with the policies of the Company, may serve as a member of one or more corporate boards of directors (unless the Company's Board of Directors concludes that such service would be inappropriate or not in the best interests of the Company). During the Transition Period, the Executive shall devote such time to the business of the Company as may be reasonably required by the Company in light of his modified duties, but not to exceed 50% of his normal time commitment during the Initial Period. e) Location of Office. The Company shall not require the Executive to locate his office more than fifty miles from his then current residence address, without his prior written consent. 2. Compensation. a) Monetary Remuneration and Benefits through June 30, 1998. During the Initial Period, the Company shall pay to the Executive for all services rendered by him in any capacity: i. commencing January 1, 1995, a minimum base salary of $650,000 per year (payable in accordance with the Company's then prevailing practices, but in no event less frequently than in equal monthly installments), subject to increase from time to time in the sole discretion of the Board of Directors of the Company, except that such salary shall be increased annually by a percentage at least equal to the average percentage increase granted to all salaried employees of the Company; and provided further that, should the Company institute a company-wide pay cut/furlough program, such salary may be decreased by up to 15%, but only for as long as said company-wide program is in effect; ii. such additional compensation by way of salary or bonus or fringe benefits as the Board of Directors of the Company in its sole discretion shall authorize or agree to pay, payable on such terms and conditions as it shall determine; and -2- iii. such employee benefits that are made available by the Company to its other principal executives. b) Monetary Remuneration and Benefits from July 1, 1998 to December 31, 2001. During the Transition Period, the Company shall pay to the Executive for all services rendered by him in any capacity: i. a base salary of not less than $400,000 per year (payable in accordance with the Company's then-prevailing practices, but in no event less frequently than in equal monthly installments); and ii. such employee benefits that are made available by the Company to its other principal executives. c) Performance Bonus Plan. The Executive shall participate in the Company's Chief Executive Officer Performance Bonus Plan (the "Plan") until the Plan is terminated or June 30, 1998, whichever occurs first. d) Supplemental Executive Retirement Plan. The Executive shall continue to participate in the Company's Unfunded Pension Plan for Selected Executives, which shall provide him with a minimum benefit of $300,000 per year at the normal retirement age of 60. e) Vacation. During the Employment Period, the Executive will be given four weeks' vacation with full pay each year, to be taken at the Executive's discretion; provided, however, that the Executive will use his best efforts to ensure that such vacation does not unduly interfere with the operation and performance of the business of the Company, its subsidiaries or its affiliates. f) Expenses. During the Employment Period, the Company agrees to reimburse the Executive, upon the submission of appropriate vouchers, for out-of-pocket expenses (including, without limitation, expenses for travel, lodging and entertainment) incurred by the Executive in the course of his duties hereunder. g) Office and Staff. The Company will provide the Executive with an office, secretary and such other facilities as may be reasonably required for the proper discharge of his duties hereunder. From July 1, 1998 to December 31, 2001 said office and secretarial support shall be provided in the city of the Executive's principal residence. h) Indemnification. The Company agrees to indemnify the Executive for any and all liabilities to which he may be subject as a result of his employment hereunder (and as a result of his service as an officer or director of the Company, or as an officer or director of any of its subsidiaries or affiliates), as well as the costs of any legal action brought or threatened against him as a result of such employment, to the fullest extent permitted by law. -3- i) Participation in Plans. Notwithstanding any other provision of this Agreement, the Executive shall have the right to participate in any and all of the plans or programs made available by the Company (or its subsidiaries, divisions or affiliates) to, or for the benefit of, executives (including, during the Initial Period, the annual stock option and restricted stock grant programs) or employees in general, on a basis consistent with other senior executives. 3. The Employment Period. The "Employment Period", as used in the Agreement, shall mean the period beginning as of the date hereof and terminating on the last day of the calendar month in which the first of the following occurs: a) the death of the Executive; b) the disability of the Executive as determined in accordance with Paragraph 4 hereof and subject to the provisions thereof; c) the termination of the Executive's employment by the Company for cause in accordance with Paragraph 6 hereof; or d) December 31, 2001. The Executive shall have the right to terminate the Employment period on six months' written notice to the Company upon the happening of any of the following events if such event has not been approved by the Board of Directors of the Company: 1) a merger or consolidation with another corporation; 2) a sale of all or substantially all the assets of the Company; or 3) acquisition of more than fifty percent of the voting stock of the Company by another entity, individual or united group. If the Executive exercises such right, the Employment Period shall terminate on the date specified in his notice to the Company provided the date is six months or more after the date such notice is given. The portion of the Employment Period ending June 30, 1998 is herein called the "Initial Period", and the portion of the Employment Period after June 30, 1998 is herein called the "Transition Period." 4. Disability. The Company has a disability benefit program now in effect for certain of its executive employees including the Executive. During the Employment Period the Company will continue to maintain in effect for the Executive such benefit program or one granting -4- benefits to the Executive at least equal to those provided by the current Disability Income Agreement dated November 1, 1982 between the Company and the Executive entered into pursuant to such program. If at any time during the Employment Period the Executive shall become disabled as defined under the terms of the disability benefit program applicable to the Executive, the Employment Period shall terminate on the last day of the month in which such disability is determined. Until such termination of the Employment Period, the Company shall continue to pay to the Executive, until the commencement of the disability payments, his base salary and any additional compensation authorized by the Company's Board of Directors, and shall continue during such interim period to provide the Executive with the remuneration and benefits provided for in accordance with Paragraph 2 hereof and the insurance required by Paragraph 7 hereof, all without delay, diminution or proration of any kind whatsoever. In the event that, notwithstanding such a determination of disability, the Executive is determined not to be totally and permanently disabled and such disability payments cease prior to December 31, 2001, the Executive shall be entitled to resume employment with the Company under the terms of this agreement for the then remaining balance of the Employment Period. 5. Parachute Payments. There is currently an agreement between the Executive and the Company dated June 1, 1988 relating to the rights of the parties in the event of a "change of control" of the Company as therein defined, which is comparable to similar agreements between the Company and certain other principal executive officers. At no time during the Employment Period shall the terms and conditions applicable to the Executive in the event of a change of control (including the basis on which the Executive may become entitled to compensation or benefits in connection with such a change) be less favorable than the most favorable terms and conditions applicable to any other principal executive officer of the Company. 6. Termination for Cause. In the event of any malfeasance, willful misconduct, active fraud or gross negligence by the Executive in connection with his employment hereunder, the Company shall have the right to terminate the Employment Period by giving the Executive notice in writing of the reason for such proposed termination. If the Executive shall not have corrected such conduct to the satisfaction of the Company within thirty days after such notice, the Employment Period shall terminate and the Company shall have no further obligation to the Executive hereunder but the restriction on the Executive's activities contained in Paragraph 9 and the obligations of the Executive contained in Paragraph 10(b) and 10(c) shall continue in effect as provided therein. 7. Death Benefit. The Executive is a participant in the Company's Management Insurance Program. During the Employment Period, the Company will continue to maintain in effect for the Executive such program or some other form of life insurance providing the Executive's estate or named beneficiary a benefit upon the Executive's death at least equal to the net after-tax benefit provided by the Management Insurance Program. -5- 8. Termination Without Cause. In the event that the Company discharges the Executive without cause, the Executive shall be entitled to the salary provided in Paragraph 2, the full vesting of any restricted stock awards and the immediate exercisability of any stock options, as well as his rights under Paragraphs 4 and 7, for the full Employment Period (which, in that event, shall continue until December 31, 2001 unless sooner terminated by the Executive's disability or death), and the Company shall have no right to set off payments due the Executive with any amounts he may earn from gainful employment elsewhere. It is expressly agreed and understood that the Executive shall be under no obligation to seek such employment. The provisions of Paragraph 9 restricting the Executive's activities and Executive's obligations under Paragraph 10(b) and 10(c) shall continue in effect. The provisions of this Paragraph 8 shall not act to limit the Executive's ability to recover damages from the Company for breaching this agreement by terminating the Employment Agreement without cause, except as otherwise permitted by Paragraph 3. 9. Non-Competition Trade Secrets. During the Employment Period and for a period of two years after the termination of the Employment Period, the Executive will not, directly or indirectly: a) Disclosure of Information. Use, attempt to use, disclose or otherwise make known to any person or entity (other than to the Board of Directors of the Company or otherwise in the course of the business of the Company, its subsidiaries or affiliates and except as may be required by applicable law): i. any knowledge or information, including, without limitation, lists of customers or suppliers, trade secrets, know-how, inventions, discoveries, processes and formulae, as well as all data and records pertaining thereto, which he may acquire in the course of his employment, in any manner which may be detrimental to or cause injury or loss to the Company, its subsidiaries or affiliates; or ii. any knowledge or information of a confidential nature (including all unpublished matters) relating to, without limitation, the business, properties, accounting, books and records, trade secrets or memoranda of the Company, its subsidiaries or affiliates, which he now knows or may come to know in any manner which may be detrimental to or cause injury or loss to the Company its subsidiaries or affiliates. b) Non-Competition. Engage or become interested in the United States, Canada or Mexico (whether as an owner, shareholder, partner, lender or other investor, director, officer, employee, consultant or otherwise) in the business of distributing electronic parts, components, supplies or systems, or any other business that is competitive with the principal business or businesses then conducted by the Company, its subsidiaries or affiliates (provided, however, that nothing contained herein shall prevent the Executive from acquiring or owning less than 1% of the issued and outstanding capital stock or debentures of a -6- corporation whose securities are listed on the New York Stock Exchange, American Stock Exchange, or the National Association of Securities Dealers Automated Quotation System, if such investment is otherwise permitted by the Company's Human Resource and Conflict of Interest policies); c) Solicitation. Solicit or participate in the solicitation of any business of any type conducted by the Company, its subsidiaries or affiliates, during said term or thereafter, from any person, firm or other entity which was or at the time is a supplier or customer, or prospective supplier or customer, of the Company, its subsidiaries or affiliates; or d) Employment. Employ or retain, or arrange to have any other person, firm or other entity employ or retain, or otherwise participate in the employment or retention of, any person who was an employee or consultant of the Company, its subsidiaries or affiliates, at any time during the period of twelve consecutive months immediately preceding such employment or retention. The Executive will promptly furnish in writing to the Company, its subsidiaries or affiliates, any information reasonably requested by the Company (including any third party confirmations) with respect to any activity or interest the Executive may have in any business. Except as expressly herein provided, nothing contained herein is intended to prevent the Executive, at any time after the termination of the Employment Period, from either (i) being gainfully employed or (ii) exercising his skills and abilities outside of such geographic areas, provided in either case the provisions of this Agreement are complied with. 10. Preservation of Business. a) General. During the Employment Period and subject to Paragraph 1(c) hereof, the Executive will use his best efforts to advance the business and organization of the Company, its subsidiaries and affiliates, to keep available to the Company, its subsidiaries and affiliates, the services of present and future employees and to advance the business relations with its suppliers, distributors, customers and others. b) Patents and Copyrights etc. The Executive agrees, without additional compensation, to make available to the Company all knowledge possessed by him relating to any methods, developments, inventions, processes, discoveries and/or improvements (whether patented, patentable or unpatentable) which concern in any way the business of the Company, its subsidiaries or affiliates, whether acquired by the Executive before or during his employment or retention hereunder. Any methods, developments, inventions, processes, discoveries and/or improvements (whether patented, patentable or unpatentable) which the Executive may conceive of or make, related directly or indirectly to the business or affairs of the Company, its subsidiaries or affiliates, or any part thereof, during the Employment Period, shall be and remain the property of the Company. The Executive agrees promptly to communicate and disclose all such methods, developments, inventions, processes discoveries and/or -7- improvements to the Company and to execute and deliver to it any instruments deemed necessary by the Company to effect the disclosure and assignment thereof to it. The Executive also agrees, on request and at the expense of the Company, to execute patent applications and any other instruments deemed necessary by the Company for the prosecution of such patent applications or the acquisition of Letters Patent in the United States or any other country and for the assignment to the Company of any patents which may be issued. The Company shall indemnify and hold the Executive harmless from any and all costs, expenses, liabilities or damages sustained by the Executive by reason of having made such patent application or being granted such patents. Any writings or other materials written or produced by the Executive or under his supervision (whether alone or with others and whether or not during regular business hours), during the Employment Period which are related, directly or indirectly, to the business or affairs of the Company, its subsidiaries or affiliates, or are capable of being used therein, and the copyright thereof, common law or statutory, including all renewals and extensions, shall be and remain the property of the Company. The Executive agrees promptly to communicate and disclose all such writings or materials to the Company and to execute and deliver to it any instruments deemed necessary by the Company to effect the disclosure and assignment thereof to it. The Executive further agrees, on request and at the expense of the Company, to take any and all action deemed necessary by the Company to obtain copyrights or other protections for such writings or other materials or to protect the Company's right, title and interest therein. The Company shall indemnify and hold the Executive harmless from any and all costs, expenses, liabilities or damages sustained by the Executive by reason of the Executive's compliance with the Company's request. c. Return of Documents. Upon the termination of the Employment Period, including any termination of employment described in Paragraph 8 and any termination of employment described in Paragraph 1(b), the Executive will promptly return to the Company all copies of information protected by Paragraph 9(a) hereof or pertaining to matters covered by subparagraph (b) of this Paragraph 10 which are in his possession, custody or control, whether prepared by him or others. 11. Separability. The Executive agrees that the provisions of Paragraphs 9 and 10 hereof constitute independent and separable covenants which shall survive the termination of the Employment Period and which shall be enforceable by the Company notwithstanding any rights or remedies the Executive may have under any other provisions hereof. The Company agrees that the provisions of Paragraphs 4, 7 and 8 hereof constitute independent and separable covenants which shall survive the termination of the Employment Period and which shall be enforceable by the Executive notwithstanding any rights or remedies the Company may have under any other provisions hereof. 12. Specific Performance. The Executive acknowledges that (i) the services to be rendered under the provisions of this Agreement and the obligations of the Executive assumed herein are of a -8- special, unique and extraordinary character; (ii) it would be difficult or impossible to replace such services and obligations; (iii) the Company, its subsidiaries and affiliates will be irreparably damaged if the provision hereof are not specifically enforced; and (iv) the award of monetary damages will not adequately protect the Company, its subsidiaries and affiliates in the event of a breach hereof by the Executive. The Company acknowledges that (i) the Executive will be irreparably damaged if the provisions of Paragraphs 1(b), 4, 7 and 8 hereof are not specifically enforced; and (ii) the award of monetary damages will not adequately protect the Executive in the event of a breach thereof by the Company. By virtue thereof, the Executive agrees and consents that if he violates any of the provisions of this Agreement, and the Company agrees and consents that if it violates any of the provisions of Paragraphs 1(b), 4, 7 and 8 hereof, the other party, in addition to any other rights and remedies available under this Agreement or otherwise, shall (without any bond or other security being required and without the necessity of proving monetary damages) be entitled to a temporary and/or permanent injunction to be issued by a court of competent jurisdiction restraining the breaching party from committing or continuing any violation of this Agreement, or any other appropriate decree of specific performance. Such remedies shall not be exclusive and shall be in addition to any other remedy which any of them may have. 12. Miscellaneous. a) Entire Agreement; Amendment. This Agreement constitutes the whole employment agreement between the parties and may not be modified, amended or terminated except by a written instrument executed by the parties hereto. All other agreements between the parties pertaining to the employment or remuneration of the Executive not specifically contemplated hereby or incorporated or merged herein are terminated and shall be of no further force or effect. b) Assignment. Except as stated below, this Agreement is not assignable by the Company without the written consent of the Executive, or by the Executive without the written consent of the Company, and any purported assignment by either party of such party's rights and/or obligations under this Agreement shall be null and void; provided, however, that, notwithstanding the foregoing, the Company may merge or consolidate with or into another corporation, or sell all or substantially all of its assets to another corporation or business entity or otherwise reorganize itself, provided the surviving corporation or entity, if not the Company, shall assume this Agreement and become obligated to perform all of the terms and conditions hereof, in which event the Executive's obligations shall continue in favor of such other corporation or entity, subject however to the provisions of Paragraph 3. c) Waivers, etc. No waiver of any breach or default hereunder shall be considered valid unless in writing, and no such waiver shall be deemed a waiver of any subsequent breach or default of the same or similar nature. The failure of any party to insist upon strict adherence to any term of this Agreement on any occasion shall not operate or be construed as a waiver of the right to insist upon strict adherence to that term of any other term of this Agreement on that or any other occasion. d) Provisions Overly Broad. In the event that any term or provision of this Agreement shall be deemed by a court of competent jurisdiction to be overly broad in scope, -9- duration or area of applicability, the court considering the same shall have the power and hereby is authorized and directed to modify such term or provision to limit such scope, duration or area, or all of them, so that such term or provision is no longer overly broad and to enforce the same as so limited. Subject to the foregoing sentence, in the event any provision of this Agreement shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall attach only to such provision and shall not affect or render invalid or unenforceable any other provision of this Agreement. e) Notices. Any notice permitted or required hereunder shall be in writing and shall be deemed to have been given on the date of delivery or, if mailed by registered or certified mail, postage prepaid, on the date of mailing: i. if to the Executive to: Stephen P. Kaufman 101 Lloyd Harbour Road Huntington, New York 11743 ii. if to the Company to: Arrow Electronics, Inc. 25 Hub Drive Melville, New York 11747 Attention: Senior Vice President and General Counsel Either party may, by notice to the other, change his or its address for notice hereunder. f) New York Law. This Agreement shall be construed and governed in all respects by the internal laws of the State of New York, without giving effect to principles of conflicts of law. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. Attest: ARROW ELECTRONICS, INC. /s/ WAYNE BRODY By: /s/ ROBERT E. KLATELL ---------------------------- ---------------------- Assistant Secretary Senior Vice President THE EXECUTIVE /s/ STEPHEN P. KAUFMAN --------------------------- Stephen P. Kaufman
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EX-10 7 EX-10(C)(V),EMP AGREEMENT - MENEFEE EXHIBIT 10(c)(v) EMPLOYMENT AGREEMENT made as of the 1st day of September 1994 by and between ARROW ELECTRONICS, INC., a New York corporation with its principal office at 25 Hub Drive, Melville, New York 11747 (the "Company"), and STEVEN W. MENEFEE, residing at 56 Snake Hill Road, Cold Spring Harbor, New York 11724 (the "Executive"). WHEREAS, the Executive is now and has been employed by the Company as a Vice President, with the responsibilities and duties of a principal executive officer of the Company; and WHEREAS, the Company and the Executive wish to provide for the continued employment of the Executive as an employee of the Company and for him to continue to render services to the Company on the terms set forth in, and in accordance with the provisions of, this Agreement; NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties agree as follows: 1. Employment and Duties. a) Employment. The Company hereby employs the Executive for the Employment Period defined in Paragraph 3, to perform such duties for the Company, its subsidiaries and affiliates and to hold such offices as may be specified from time to time by the Company's Board of Directors. The Executive hereby accepts such employment. b) Duties and Responsibilities. It is contemplated that the Executive will be a Vice President of the Company and President of the Arrow/Schweber Electronics Group, but the Board of Directors shall have the right to adjust the duties, responsibilities, and title of the Executive as the Board of Directors may from time to time deem to be in the interests of the Company; provided, however, that during the Employment Period, without the consent of the Executive, he shall not be assigned any titles, duties or responsibilities which, in the aggregate, represent a material diminution in, or are materially inconsistent with, his prior title, duties, and responsibilities. c) Time Devoted to Duties. The Executive shall devote all of his normal business time and efforts to the business of the Company, its subsidiaries and its affiliates, the amount of such time to be sufficient, in the reasonable judgment of the Board of Directors, to permit him diligently and faithfully to serve and endeavor to further their interests to the best of his ability. d) Location of Office. The Company shall not require the Executive to locate his office more than fifty miles from his current residence address, without his prior written consent. 2. Compensation. a) Monetary Remuneration and Benefits. During the Employment Period, the Company shall pay to the Executive for all services rendered by him in any capacity: i. a minimum base salary of $320,000 per year (payable in accordance with the Company's then prevailing practices, but in no event less frequently than in equal monthly installments), subject to increase if the Board of Directors of the Company in its sole discretion so determines; ii. such additional compensation by way of salary or bonus or fringe benefits as the Board of Directors of the Company in its sole discretion shall authorize or agree to pay, payable on such terms and conditions as it shall determine; and iii. such employee benefits that are made available by the Company to its other principal executives. b) Automobile. During the Employment Period, the Company will pay the Executive a monthly automobile allowance of $800. c) Expenses. During the Employment Period, the Company agrees to reimburse the Executive, upon the submission of appropriate vouchers, for out-of-pocket expenses (including, without limitation, expenses for travel, lodging and entertainment) incurred by the Executive in the course of his duties hereunder. d) Office and Staff. The Company will provide the Executive with an office, secretary and such other facilities as may be reasonably required for the proper discharge of his duties hereunder. e) Indemnification. The Company agrees to indemnify the Executive for any and all liabilities to which he may be subject as a result of his employment hereunder (and as a result of his service as an officer or director of the Company, or as an officer or director of any of its subsidiaries or affiliates), as well as the costs of any legal action brought or threatened against him as a result of such employment, to the fullest extent permitted by law. -2- f) Participation in Plans. Notwithstanding any other provision of this Agreement, the Executive shall have the right to participate in any and all of the plans or programs made available by the Company (or it subsidiaries, divisions or affiliates) to, or for the benefit of, executives or employees in general. 3. The Employment Period. The "Employment Period," as used in the Agreement, shall mean the period beginning as of the date hereof and terminating on the last day of the calendar month in which the first of the following occurs: a) the death of the Executive; b) the disability of the Executive as determined in accordance with Paragraph 4 hereof and subject to the provisions thereof; c) the termination of the Executive's employment by the Company for cause in accordance with Paragraph 5 hereof; or d) December 31, 1997; provided, however, that, unless sooner terminated as otherwise provided herein, the Employment Period shall automatically be extended for one or more twelve (12) month periods beyond the then scheduled expiration date thereof unless between the 18th and 12th month preceding such scheduled expiration date either the Company or the Executive gives the other written notice of its or his election not to have the Employment Period so extended. 4. Disability. For purposes of this Agreement, the Executive will be deemed "disabled" upon the earlier to occur of (i) his becoming disabled as defined under the terms of the disability benefit program applicable to the Executive, if any, and (ii) his absence from his duties hereunder on a full-time basis for one hundred eighty (180) consecutive days as a result of his incapacity due to accident or physical or mental illness. If the Executive becomes disabled (as defined in the preceding sentence), the Employment Period shall terminate on the last day of the month in which such disability is determined. Until such termination of the Employment Period, the Company shall continue to pay to the Executive his base salary, any additional compensation authorized by the Company's Board of Directors, and other remuneration and benefits provided in accordance with Paragraph 2 hereof, all without delay, diminution or proration of any kind whatsoever (except that his remuneration hereunder shall be reduced by the amount of any payments he may otherwise -3- receive as a result of his disability pursuant to a disability program provided by or through the Company). In the event that, notwithstanding such a determination of disability, the Executive is determined not to be totally and permanently disabled prior to the then scheduled expiration of the Employment Period, the Executive shall be entitled to resume employment with the Company under the terms of this Agreement for the then remaining balance of the Employment Period. 5. Termination for Cause. In the event of any malfeasance, willful misconduct, active fraud or gross negligence by the Executive in connection with his employment hereunder, the Company shall have the right to terminate the Employment Period by giving the Executive notice in writing of the reason for such proposed termination. If the Executive shall not have corrected such conduct to the satisfaction of the Company within thirty days after such notice, the Employment Period shall terminate and the Company shall have no further obligation to the Executive hereunder but the restriction on the Executive's activities contained in Paragraph 7 and the obligations of the Executive contained in Paragraphs 8(b) and 8(c) shall continue in effect as provided therein. 6. Termination Without Cause. In the event that the Company discharges the Executive during the Employment Period without cause, the Executive shall be entitled to the salary provided in Paragraph 2, the full vesting of any restricted stock awards and the immediate exercisability of any stock options, for the full Employment Period (which, in that event, shall continue until the then scheduled expiration of the Employment Period unless sooner terminated by the Executive's disability or death), and the Company shall have no right to set off payments due the Executive with any amounts he may earn from gainful employment elsewhere. It is expressly agreed and understood that the Executive shall be under no obligation to seek such employment. The provisions of Paragraph 7 restricting the Executive's activities and the Executive's obligations under Paragraphs 8(b) and 8(c) shall continue in effect. The provisions of this Paragraph 6 shall not act to limit the Executive's ability to recover damages from the Company for breaching this Agreement by terminating the Employment Period without cause, except as otherwise permitted by Paragraph 3. -4- 7. Non-Competition: Trade Secrets. During the Employment Period and for a period of one year after the termination of the Employment Period, the Executive will not, directly or indirectly: a) Disclosure of Information. Use, attempt to use, disclose or otherwise make known to any person or entity (other than to the Board of Directors of the Company or otherwise in the course of the business of the Company, its subsidiaries or affiliates and except as may be required by applicable law): i. any knowledge or information, including, without limitation, lists of customers or suppliers, trade secrets, know-how, inventions, discoveries, processes and formulae, as well as all data and records pertaining thereto, which he may acquire in the course of his employment, in any manner which may be detrimental to or cause injury or loss to the Company, its subsidiaries or affiliates; or ii. any knowledge or information of a confidential nature (including all unpublished matters) relating to, without limitation, the business, properties, accounting, books and records, trade secrets or memoranda of the company, its subsidiaries or affiliates, which he now knows or may come to know in any manner which may be detrimental to or cause injury or loss to the Company, its subsidiaries or affiliates; b) Non-Competition. Engage or become interested in the United States, Canada or Mexico (whether as an owner, shareholder, partner, lender or other investor, director, officer, employee, consultant or otherwise) in the business of distributing electronic parts, components, supplies or systems, or any other business that is competitive with the principal business or businesses then conducted by the Company, its subsidiaries or affiliates (provided, however, that nothing contained herein shall prevent the Executive from acquiring or owning less than 1% of the issued and outstanding capital stock or debentures of a corporation whose securities are listed on the New York Stock Exchange, American Stock Exchange, or the National Association of Securities Dealers Automated Quotation System, if such investment is otherwise permitted by the Company's Human Resource and Conflict of Interest policies); c) Solicitation. Solicit or participate in the solicitation of any business of any type conducted by the Company, its subsidiaries or affiliates, during said term or thereafter, from any person, firm or other entity which was or -5- at the time is a supplier or customer, or prospective supplier or customer, of the Company, its subsidiaries or affiliates; or d) Employment. Employ or retain, or arrange to have any other person, firm or other entity employ or retain, or otherwise participate in the employment or retention of, any person who was an employee or consultant of the Company, its subsidiaries or affiliates, at any time during the period of twelve consecutive months immediately preceding such employment or retention. The Executive will promptly furnish in writing to the Company, its subsidiaries or affiliates, any information reasonably requested by the Company (including any third party confirmations) with respect to any activity or interest the Executive may have in any business. Except as expressly herein provided, nothing contained herein is intended to prevent the Executive, at any time after the termination of the Employment Period, from either (i) being gainfully employed or (ii) exercising his skills and abilities outside of such geographic areas, provided in either case the provisions of this Agreement are complied with. 8. Preservation of Business. a) General. During the Employment Period, the Executive will use his best efforts to advance the business and organization of the Company, its subsidiaries and affiliates, to keep available to the Company, its subsidiaries and affiliates, the services of present and future employees and to advance the business relations with its suppliers, customers and others. b) Patents and Copyrights, etc. The Executive agrees, without additional compensation, to make available to the Company all knowledge possessed by him relating to any methods, developments, inventions, processes, discoveries and/or improvements (whether patented, patentable or unpatentable) which concern in any way the business of the Company, its subsidiaries or affiliates, whether acquired by the Executive before or during his employment hereunder. Any methods, developments, inventions, processes, discoveries and/or improvements (whether patented, patentable or unpatentable) which the Executive may conceive of or make, related directly or indirectly to the business or affairs of the Company, its subsidiaries or affiliates, or any part thereof, during the Employment Period, shall be and remain the property of the Company. The Executive agrees promptly to communicate and disclose all such methods, developments, inventions, processes, discoveries and/or improvements to the Company and to -6- execute and deliver to it any instruments deemed necessary by the Company to effect the disclosure and assignment thereof to it. The Executive also agrees, on request and at the expense of the Company, to execute patent applications and any other instruments deemed necessary by the Company for the prosecution of such patent applications or the acquisition of Letters Patent in the United States or any other country and for the assignment to the Company of any patents which may be issued. The Company shall indemnify and hold the Executive harmless from any and all costs, expenses, liabilities or damages sustained by the Executive by reason of having made such patent applications or being granted such patents. Any writings or other materials written or produced by the Executive or under his supervision (whether alone or with others and whether or not during regular business hours), during the Employment Period which are related, directly or indirectly, to the business or affairs of the Company, its subsidiaries or affiliates, or are capable of being used therein, and the copyright thereof, common law or statutory, including all renewals and extensions, shall be and remain the property of the Company. The Executive agrees promptly to communicate and disclose all such writings or materials to the Company and to execute and deliver to it any instruments deemed necessary by the Company to effect the disclosure and assignment thereof to it. The Executive further agrees, on request and at the expense of the Company, to take any and all action deemed necessary by the Company to obtain copyrights or other protections for such writings or other materials or to protect the Company's right, title and interest therein. The Company shall indemnify and hold the Executive harmless from any and all costs, expenses, liabilities or damages sustained by the Executive by reason of the Executive's compliance with the Company's request. C. Return of Documents. Upon the termination of the Employment Period, including any termination of employment described in Paragraph 6, the Executive will promptly return to the Company all copies of information protected by Paragraph 7(a) hereof or pertaining to matters covered by subparagraph (b) of this Paragraph 8 which are in his possession, custody or control, whether prepared by him or others. 9. Separability. The Executive agrees that the provisions of Paragraphs 7 and 8 hereof constitute independent and separable covenants which shall survive the termination of the Employment Period and which shall be enforceable by the Company notwithstanding any rights or remedies the Executive may have under any other provisions hereof. The Company agrees that the provisions of Paragraph 6 hereof constitute independent and separable covenants which shall survive the termination of the Employment -7- Period and which shall be enforceable by the Executive notwithstanding any rights or remedies the Company may have under any other provisions hereof 10. Specific Performance. The Executive acknowledges that (i) the services to be rendered under the provisions of this Agreement and the obligations of the Executive assumed herein are of a special, unique and extraordinary character; (ii) it would be difficult or impossible to replace such services and obligations; (iii) the Company, its subsidiaries and affiliates will be irreparably damaged if the provisions hereof are not specifically enforced; and (iv) the award of monetary damages will not adequately protect the company, its subsidiaries and affiliates in the event of a breach hereof by the Executive. The Company acknowledges that (i) the Executive will be irreparably damaged if the provisions of Paragraphs 1(b) and 6 hereof are not specifically enforced and (ii) the award of monetary damages will not adequately protect the Executive in the event of a breach thereof by the Company. By virtue thereof, the Executive agrees and consents that if he violates any of the provisions of this Agreement, and the Company agrees and consents that if it violates any of the provisions of Paragraphs 1(b) and 6 hereof, the other party, in addition to any other rights and remedies available under this Agreement or otherwise, shall (without any bond or other security being required and without the necessity of proving monetary damages) be entitled to a temporary and/or permanent injunction to be issued by a court of competent jurisdiction restraining the breaching party from committing or continuing any violation of this Agreement, or any other appropriate decree of specific performance. Such remedies shall not be exclusive and shall be in addition to any other remedy which any of them may have. 11. Miscellaneous. a) Entire Agreement; Amendment. This Agreement constitutes the whole employment agreement between the parties and may not be modified, amended or terminated except by a written instrument executed by the parties hereto. It is specifically agreed and understood, however, that the provisions of (i) that certain letter agreement dated as of November 1, 1990 granting to the Executive extended separation benefits in the event of a change in control of the Company and (ii) the Executive's current incentive compensation agreement (i.e., for 1994), shall survive and shall not be affected hereby. All other agreements between the parties pertaining to the employment or remuneration of the Executive not specifically contemplated hereby or incorporated or merged herein are -8- terminated and shall be of no further force or effect. b) Assignment. Except as stated below, this Agreement is not assignable by the Company without the written consent of the Executive, or by the Executive without the written consent of the Company, and any purported assignment by either party of such party's rights and/or obligations under this Agreement shall be null and void; provided, however, that, notwithstanding the foregoing, the Company may merge or consolidate with or into another corporation, or sell all or substantially all of its assets to another corporation or business entity or otherwise reorganize itself, provided the surviving corporation or entity, if not the Company, shall assume this Agreement and become obligated to perform all of the terms and conditions hereof, in which event the Executive's obligations shall continue in favor of such other corporation or entity. c) Waivers, etc. No waiver of any breach or default hereunder shall be considered valid unless in writing, and no such waiver shall be deemed a waiver of any subsequent breach or default of the same or similar nature. The failure of any party to insist upon strict adherence to any term of this Agreement on any occasion shall not operate or be construed as a waiver of the right to insist upon strict adherence to that term or any other term of this Agreement on that or any other occasion. d) Provisions Overly Broad. In the event that any term or provision of this Agreement shall be deemed by a court of competent jurisdiction to be overly broad in scope, duration or area of applicability, the court considering the same shall have the power and hereby is authorized and directed to modify such term or provision to limit such scope, duration or area, or all of them, so that such term or provision is no longer overly broad and to enforce the same as so limited. Subject to the foregoing sentence, in the event any provision of this Agreement shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall attach only to such provision and shall not affect or render invalid or unenforceable any other provision of this Agreement. e) Notices. Any notice permitted or required hereunder shall be in writing and shall be deemed to have been given on the date of delivery or, if mailed by registered or certified mail, postage prepaid, on the date of mailing: i. if to the Executive to: Steven W. Menefee 56 Snake Hill Road Cold Spring Harbor, New York 11724 -9- ii. if to the Company to: Arrow Electronics, Inc. 25 Hub Drive Melville, New York 11747 Attention: Senior Vice President and General Counsel Either party may, by notice to the other, change his or its address for notice hereunder. f) New York Law. This Agreement shall be construed and governed in all respects by the internal laws of the State of New York, without giving effect to principles of conflicts of law. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. Attest: ARROW ELECTRONICS, INC. /s/ ROBERT E. KLATELL By: /s/ STEPHEN P. KAUFMAN ------------------ --------------------- Secretary THE EXECUTIVE /s/ STEVEN W. MENEFEE ------------------------ Steven W. Menefee
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EX-10 8 EX-10(C)(VIII),EMP AGREEMENT - ELLETT EXHIBIT 10(c)(viii) EMPLOYMENT AGREEMENT made as of the 29th day of August 1994 by and between ARROW ELECTRONICS, INC., a New York corporation with its principal office at 25 Hub Drive, Melville, New York 11747 (the "Company"), and Philip Ellett, residing at 411 Barrington Park Drive, Greer, South Carolina 29650 (the "Executive"). WHEREAS, the Company wishes to employ the Executive as a Vice President, with the responsibilities and duties of a principal executive officer of the Company; and WHEREAS, the Company and the Executive wish to provide for the employment of the Executive as an employee of the Company and for him to render services to the Company on the terms set forth in, and in accordance with the provisions of, this Agreement; NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties agree as follows: 1. Employment and Duties. a) Employment. The Company hereby employs the Executive for the Employment Period defined in Paragraph 3, to perform such duties for the Company, its subsidiaries and affiliates and to hold such offices as may be specified from time to time by the Company's Board of Directors. The Executive hereby accepts such employment. b) Duties and Responsibilities. It is contemplated that the Executive will be a Vice President of the Company and President of the Gates/Arrow Group, but the Board of Directors shall have the right to adjust the duties, responsibilities, and title of the Executive as the Board of Directors may from time to time deem to be in the interests of the Company; provided, however, that during the Employment Period, without the consent of the Executive, he shall not be assigned any titles, duties or responsibilities which, in the aggregate, represent a material diminution in, or are materially inconsistent with, his prior title, duties, and responsibilities. c) Time Devoted to Duties. The Executive shall devote all of his normal business time and efforts to the business of the Company, its subsidiaries and its affiliates, the amount of such time to be sufficient, in the reasonable judgment of the Board of Directors, to permit him diligently and faithfully to serve and endeavor to further their interests to the best of his ability. d) Location of Office. The Company shall not require the Executive to locate his office more than fifty miles from his current residence address, without his prior written consent. 2. Compensation a) Monetary Remuneration and Benefits. During the Employment Period, the Company shall pay to the Executive for all services rendered by him in any capacity: i. a minimum base salary of $265,000 per year (payable in accordance with the Company's then prevailing practices, but in no event less frequently than in equal monthly installments), subject to increase if the Board of Directors of the Company in its sole discretion so determines; ii. such additional compensation by way of salary or bonus or fringe benefits as the Board of Directors of the Company in its sole discretion shall authorize or agree to pay, payable on such terms and conditions as it shall determine; and iii. such employee benefits that are made available by the Company to its other principal executives. b) Automobile. During the Employment Period, the Company will pay the Executive a monthly automobile allowance of $800. c) Expenses. During the Employment Period, the Company agrees to reimburse the Executive, upon the submission of appropriate vouchers, for out-of-pocket expenses (including, without limitation, expenses for travel, lodging and entertainment) incurred by the Executive in the course of his duties hereunder. d) Office and Staff. The Company will provide the Executive with an office, secretary and such other facilities as may be reasonably required for the proper discharge of his duties hereunder. e) Indemnification. The Company agrees to indemnify the Executive for any and all liabilities to which he may be subject as a result of his employment hereunder (and as a result of his service as an officer or director of the Company, or as -2- an officer or director of any of its subsidiaries or affiliates), as well as the costs of any legal action brought or threatened against him as a result of such employment, to the fullest extent permitted by law. f) Participation in Plans. Notwithstanding any other provision of this Agreement, the Executive shall have the right to participate in any and all of the plans or programs made available by the Company (or it subsidiaries, divisions or affiliates) to, or for the benefit of, executives or employees of the Gates/Arrow Group in general. 3. The Employment Period. The "Employment Period," as used in the Agreement, shall mean the period beginning as of the date hereof and terminating on the last day of the calendar month in which the first of the following occurs: a) the death of the Executive; b) the disability of the Executive as determined in accordance with Paragraph 4 hereof and subject to the provisions thereof; c) the termination of the Executive's employment by the Company for cause in accordance with Paragraph 5 hereof; or d) December 31, 1996; provided, however, that, unless sooner terminated as otherwise provided herein, the Employment Period shall automatically be extended for one or more twelve (12) month periods beyond the then scheduled expiration date thereof unless between the 12th and 6th month preceding such scheduled expiration date either the Company or the Executive gives the other written notice of its or his election not to have the Employment Period so extended. 4. Disability. For purposes of this Agreement, the Executive will be deemed "disabled" upon the earlier to occur of (i) his becoming disabled as defined under the terms of the disability benefit program applicable to the Executive, if any, and (ii) his absence from his duties hereunder on a full-time basis for one hundred eighty (180) consecutive days as a result of his incapacity due to accident or physical or mental illness. If the Executive becomes disabled (as defined in the preceding sentence), the Employment Period shall terminate on the last day -3- of the month in which such disability is determined. Until such termination of the Employment Period, the Company shall continue to pay to the Executive his base salary, any additional compensation authorized by the Company's Board of Directors, and other remuneration and benefits provided in accordance with Paragraph 2 hereof, all without delay, diminution or proration of any kind whatsoever (except that his remuneration hereunder shall be reduced by the amount of any payments he may otherwise receive as a result of his disability pursuant to a disability program provided by or through the Company). In the event that, notwithstanding such a determination of disability, the Executive is determined not to be totally and permanently disabled prior to the then scheduled expiration of the Employment Period, the Executive shall be entitled to resume employment with the Company under the terms of this Agreement for the then remaining balance of the Employment Period. 5. Termination for Cause. In the event of any malfeasance, willful misconduct, active fraud or gross negligence by the Executive in connection with his employment hereunder, the Company shall have the right to terminate the Employment Period by giving the Executive notice in writing of the reason for such proposed termination. If the Executive shall not have corrected such conduct to the satisfaction of the Company within thirty days after such notice, the Employment Period shall terminate and the Company shall have no further obligation to the Executive hereunder but the restriction on the Executive's activities contained in Paragraph 7 and the obligations of the Executive contained in Paragraphs 8(b) and 8(c) shall continue in effect as provided therein. 6. Termination Without Cause. In the event that the Company discharges the Executive during the Employment Period without cause, the Executive shall be entitled to the salary provided in Paragraph 2, the full vesting of any restricted stock awards and the immediate exercisability of any stock options, for the full Employment Period (which, in that event, shall continue until the then scheduled expiration of the Employment Period unless sooner terminated by the Executive's disability or death), and the Company shall have no right to set off payments due the Executive with any amounts he may earn from gainful employment elsewhere. It is expressly agreed and understood that the -4- Executive shall be under no obligation to seek such employment. The provisions of Paragraph 7 restricting the Executive's activities and the Executive's obligations under Paragraphs 8(b) and 8(c) shall continue in effect. The provisions of this Paragraph 6 shall not act to limit the Executive's ability to recover damages from the Company for breaching this Agreement by terminating the Employment Period without cause, except as otherwise permitted by Paragraph 3. 7. Non-Competition: Trade Secrets. During the Employment Period and for a period of one year after the termination of the Employment Period, the Executive will not, directly or indirectly: a) Disclosure of Information. Use, attempt to use, disclose or otherwise make known to any person or entity (other than to the Board of Directors of the Company or otherwise in the course of the business of the Company, its subsidiaries or affiliates and except as may be required by applicable law): i. any knowledge or information, including, without limitation, lists of customers or suppliers, trade secrets, know-how, inventions, discoveries, processes and formulae, as well as all data and records pertaining thereto, which he may acquire in the course of his employment, in any manner which may be detrimental to or cause injury or loss to the Company, its subsidiaries or affiliates; or ii. any knowledge or information of a confidential nature (including all unpublished matters) relating to, without limitation, the business, properties, accounting, books and records, trade secrets or memoranda of the Company, its subsidiaries or affiliates, which he now knows or may come to know in any manner which may be detrimental to or cause injury or loss to the Company, its subsidiaries or affiliates; b) Non-competition. Engage or become interested in the United States, Canada or Mexico (whether as an owner, shareholder, partner, lender or other investor, director, officer, employee, consultant or otherwise) in the business of distributing electronic parts, components, supplies or systems, or any other business that is competitive with the principal business or businesses then conducted by the Company, its -5- subsidiaries or affiliates (provided, however, that nothing contained herein shall prevent the Executive from acquiring or owning less than 1% of the issued and outstanding capital stock or debentures of a corporation whose securities are listed on the New York Stock Exchange, American Stock Exchange, or the National Association of Securities Dealers Automated Quotation System, if such investment is otherwise permitted by the Company's Human Resource and Conflict of Interest policies); c) Solicitation. Solicit or participate in the solicitation of any business of any type conducted by the Company, its subsidiaries or affiliates, during said term or thereafter, from any person, firm or other entity which was or at the time is a supplier or customer, or prospective supplier or customer, of the Company, its subsidiaries or affiliates; or d) Employment. Employ or retain, or arrange to have any other person, firm or other entity employ or retain, or otherwise participate in the employment or retention of, any person who was an employee or consultant of the Company, its subsidiaries or affiliates, at any time during the period of twelve consecutive months immediately preceding such employment or retention. The Executive will promptly furnish in writing to the Company, its subsidiaries or affiliates, any information reasonably requested by the Company (including any third party confirmations) with respect to any activity or interest the Executive may have in any business. Except as expressly herein provided, nothing contained herein is intended to prevent the Executive, at any time after the termination of the Employment Period, from either (i) being gainfully employed or (ii) exercising his skills and abilities outside of such geographic areas, provided in either case the provisions of this Agreement are complied with. 8. Preservation of Business. a) General. During the Employment Period, the Executive will use his best efforts to advance the business and organization of the Company, its subsidiaries and affiliates, to keep available to the Company, its subsidiaries and affiliates, the services of present and future employees and to advance the business relations with its suppliers, customers and others. -6- b) Patents and Copyrights, etc. The Executive agrees, without additional compensation, to make available to the Company all knowledge possessed by him relating to any methods, developments, inventions, processes, discoveries and/or improvements (whether patented, patentable or unpatentable) which concern in any way the business of the Company, its subsidiaries or affiliates, whether acquired by the Executive before or during his employment hereunder. Any methods, developments, inventions, processes, discoveries and/or improvements (whether patented, patentable or unpatentable) which the Executive may conceive of or make, related directly or indirectly to the business or affairs of the Company, its subsidiaries or affiliates, or any part thereof, during the Employment Period, shall be and remain the property of the Company. The Executive agrees promptly to communicate and disclose all such methods, developments, inventions, processes, discoveries and/or improvements to the Company and to execute and deliver to it any instruments deemed necessary by the Company to effect the disclosure and assignment thereof to it. The Executive also agrees, on request and at the expense of the Company, to execute patent applications and any other instruments deemed necessary by the Company for the prosecution of such patent applications or the acquisition of Letters Patent in the United States or any other country and for the assignment to the Company of any patents which may be issued. The Company shall indemnify and hold the Executive harmless from any and all costs, expenses, liabilities or damages sustained by the Executive by reason of having made such patent applications or being granted such patents. Any writings or other materials written or produced by the Executive or under his supervision (whether alone or with others and whether or not during regular business hours), during the Employment Period which are related, directly or indirectly, to the business or affairs of the Company, its subsidiaries or affiliates, or are capable of being used therein, and the copyright thereof, common law or statutory, including all renewals and extensions, shall be and remain the property of the Company. The Executive agrees promptly to communicate and disclose all such writings or materials to the Company and to execute and deliver to it any instruments deemed necessary by the Company to effect the disclosure and assignment thereof to it. The Executive further agrees, on request and at the expense of the Company, to take any and all action deemed necessary by the Company to obtain copyrights or other protections for such writings or other materials or to protect the Company's right, title and interest therein. The Company shall indemnify and hold the Executive harmless from any and all costs, expenses, -7- liabilities or damages sustained by the Executive by reason of the Executive's compliance with the Company's request. c. Return of Documents. Upon the termination of the Employment Period, including any termination of employment described in Paragraph 6, the Executive will promptly return to the Company all copies of information protected by Paragraph 7(a) hereof or pertaining to matters covered by subparagraph (b) of this Paragraph 8 which are in his possession, custody or control, whether prepared by him or others. 9. Separability. The Executive agrees that the provisions of Paragraphs 7 and 8 hereof constitute independent and separable covenants which shall survive the termination of the Employment Period and which shall be enforceable by the Company notwithstanding any rights or remedies the Executive may have under any other provisions hereof. The Company agrees that the provisions of Paragraph 6 hereof constitute independent and separable covenants which shall survive the termination of the Employment Period and which shall be enforceable by the Executive notwithstanding any rights or remedies the Company may have under any other provisions hereof. 10. Specific Performance. The Executive acknowledges that (i) the services to be rendered under the provisions of this Agreement and the obligations of the Executive assumed herein are of a special, unique and extraordinary character; (ii) it would be difficult or impossible to replace such services and obligations; (iii) the Company, its subsidiaries and affiliates will be irreparably damaged if the provisions hereof are not specifically enforced; and (iv) the award of monetary damages will not adequately protect the Company, its subsidiaries and affiliates in the event of a breach hereof by the Executive. The Company acknowledges that (i) the Executive will be irreparably damaged if the provisions of Paragraphs 1(b) and 6 hereof are not specifically enforced and (ii) the award of monetary damages will not adequately protect the Executive in the event of a breach thereof by the Company. By virtue thereof, the Executive agrees and consents that if he violates any of the provisions of this Agreement, and the Company agrees and consents that if it violates any of the provisions of Paragraphs 1(b) and 6 hereof, the other party, in addition to any other rights and remedies available under this Agreement or otherwise, shall (without any bond or other security being required and without the necessity -8- of proving monetary damages) be entitled to a temporary and/or permanent injunction to be issued by a court of competent jurisdiction restraining the breaching party from committing or continuing any violation of this Agreement, or any other appropriate decree of specific performance. Such remedies shall not be exclusive and shall be in addition to any other remedy which any of them may have. 11. Miscellaneous. a) Entire Agreement; Amendment. This Agreement constitutes the whole employment agreement between the parties and may not be modified, amended or terminated except by a written instrument executed by the parties hereto. It is specifically agreed and understood, however, that the provisions of that certain letter agreement dated as of the date hereof granting to the Executive extended separation benefits in the event of a change in control of the Company, shall survive and shall not be affected hereby. All other agreements between the parties pertaining to the employment or remuneration of the Executive not specifically contemplated hereby or incorporated or merged herein are terminated and shall be of no further force or effect. b) Assignment. Except as stated below, this Agreement is not assignable by the Company without the written consent of the Executive, or by the Executive without the written consent of the Company, and any purported assignment by either party of such party's rights and/or obligations under this Agreement shall be null and void; provided, however, that, notwithstanding the foregoing, the Company may merge or consolidate with or into another corporation, or sell all or substantially all of its assets to another corporation or business entity or otherwise reorganize itself, provided the surviving corporation or entity, if not the Company, shall assume this Agreement and become obligated to perform all of the terms and conditions hereof, in which event the Executive's obligations shall continue in favor of such other corporation or entity. c) Waivers, etc. No waiver of any breach or default hereunder shall be considered valid unless in writing, and no such waiver shall be deemed a waiver of any subsequent breach or default of the same or similar nature. The failure of any party to insist upon strict adherence to any term of this Agreement on any occasion shall not operate or be construed as a waiver of the right to insist upon strict adherence to that term or any other term of this Agreement on that or any other occasion. -9- d) Provisions Overly Broad. In the event that any term or provision of this Agreement shall be deemed by a court of competent jurisdiction to be overly broad in scope, duration or area of applicability, the court considering the same shall have the power and hereby is authorized and directed to modify such term or provision to limit such scope, duration or area, or all of them so that such term or provision is no longer overly broad and to enforce the same as so limited. Subject to the foregoing sentence, in the event any provision of this Agreement shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall attach only to such provision and shall not affect or render invalid or unenforceable any other provision of this Agreement. e) Notices. Any notice permitted or required hereunder shall be in writing and shall be deemed to have been given on the date of delivery or, if mailed by registered or certified mail, postage prepaid, on the date of mailing: i. if to the Executive to: Philip Ellett 411 Barrington Park Drive Greer, South Carolina 29650 ii. if to the Company to: Arrow Electronics, Inc. 25 Hub Drive Melville, New York 11747 Attention: Senior Vice President and General Counsel Either party may, by notice to the other, change his or its address for notice hereunder. f) New York Law. This Agreement shall be construed and governed in all respects by the internal laws of the State of New York, without giving effect to principles of conflicts of law. -10- IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. Attest: ARROW ELECTRONICS, INC. /s/ WAYNE BRODY By: /s/ ROBERT E. KLATELL ------------------- ------------------- Secretary THE EXECUTIVE /s/ PHILIP ELLETT ------------------- Philip Ellett
-11-
EX-10 9 EX-10(C)(IX), EMP AGREEMENT - POWERS EXHIBIT 10(c)(ix) EMPLOYMENT AGREEMENT made as of the 21st day of September, 1994 by and between ARROW ELECTRONICS, INC., a New York corporation with its principal office at 25 Hub Drive, Melville, New York 11747 (the "Company"), and JOHN J. POWERS, III, residing at 12200 Old Snakey Road, Los Altos Hills, CA 94022 (the "Executive"). WHEREAS, the Company wishes to employ the Executive as a Vice President, with the responsibilities and duties of a principal executive officer of the Company; and WHEREAS, the Company and the Executive wish to provide for the employment of the Executive as an employee of the Company and for him to render services to the Company on the terms set forth in, and in accordance with the provisions of, this Agreement; NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties agree as follows: 1. Employment and Duties. a) Employment. The Company hereby employs the Executive for the Employment Period defined in Paragraph 3, to perform such duties for the Company, its subsidiaries and affiliates and to hold such offices as may be specified from time to time by the Company's Board of Directors. The Executive hereby accepts such employment. b) Duties and Responsibilities. It is contemplated that the Executive will be a Vice President of the Company and President of Anthem Electronics, Inc., but the Board of Directors shall have the right to adjust the duties, responsibilities, and title of the Executive as the Board of Directors may from time to time deem to be in the interests of the Company; provided, however, that during the Employment Period, without the consent of the Executive, he shall not be assigned any titles, duties or responsibilities which, in the aggregate, represent a material diminution in, or are materially inconsistent with, his prior title, duties, and responsibilities. c) Time Devoted to Duties. The Executive shall devote all of his normal business time and efforts to the business of the Company, its subsidiaries and its affiliates, the amount of such time to be sufficient, in the reasonable judgment of the Board of Directors, to permit him diligently -1- and faithfully to serve and endeavor to further their interests to the best of his ability. d) Location of Office. The Company shall not require the Executive to locate his office more than fifty miles from his current residence address, without his prior written consent. 2. Compensation. a) Monetary Remuneration and Benefits. During the Employment Period, the Company shall pay to the Executive for all services rendered by him in any capacity: i. a minimum base salary of $300,000 per year (payable in accordance with the Company's then prevailing practices, but in no event less frequently than in equal monthly installments), subject to increase if the Board of Directors of the Company in its sole discretion so determines; ii. such additional compensation by way of salary or bonus or fringe benefits as the Board of Directors of the Company in its sole discretion shall authorize or agree to pay, payable on such terms and conditions as it shall determine; and iii. such employee benefits that are made available by the Company to its other principal executives. b) Automobile. During the Employment Period, the Company will pay the Executive a monthly automobile allowance of $700. c) Expenses. During the Employment Period, the Company agrees to reimburse the Executive, upon the submission of appropriate vouchers, for out-of-pocket expenses (including, without limitation, expenses for travel, lodging and entertainment) incurred by the Executive in the course of his duties hereunder. d) Office and Staff. The Company will provide the Executive with an office, secretary and such other facilities as may be reasonably required for the proper discharge of his duties hereunder. e) Indemnification. The Company agrees to indemnify the Executive for any and all liabilities to which he may be subject as a result of his employment hereunder (and as a result of his service as an officer or director of the Company, or as an officer or director of any of its subsidiaries or -2- affiliates), as well as the costs of any legal action brought or threatened against him as a result of such employment, to the fullest extent permitted by law. f) Participation in Plans. Notwithstanding any other provision of this Agreement, the Executive shall have the right to participate in any and all of the plans or programs made available by the Company (or it subsidiaries, divisions or affiliates) to, or for the benefit of, executives or employees of the [Name of Business Unit] in general. 3. The Employment Period. The "Employment Period," as used in the Agreement, shall mean the period beginning as of the date hereof and terminating on the last day of the calendar month in which the first of the following occurs: a) the death of the Executive; b) the disability of the Executive as determined in accordance with Paragraph 4 hereof and subject to the provisions thereof; c) the termination of the Executive's employment by the Company for cause in accordance with Paragraph 5 hereof; or d) December 31, 1996; provided, however, that, unless sooner terminated as otherwise provided herein, the Employment Period shall automatically be extended for one or more twelve (12) month periods beyond the then scheduled expiration date thereof unless between the 12th and 6th month preceding such scheduled expiration date either the Company or the Executive gives the other written notice of its or his election not to have the Employment Period so extended. 4. Disability. For purposes of this Agreement, the Executive will be deemed "disabled" upon the earlier to occur of (i) his becoming disabled as defined under the terms of the disability benefit program applicable to the Executive, if any, and (ii) his absence from his duties hereunder on a full-time basis for one hundred eighty (180) consecutive days as a result of his incapacity due to accident or physical or mental illness. If the Executive becomes disabled (as defined in the preceding sentence), the Employment Period shall terminate on the last day of the month in which such disability is determined. Until such termination of the Employment Period, the Company shall continue to pay to the Executive his base salary, any additional compensation authorized by the Company's Board of Directors, and -3- other remuneration and benefits provided in accordance with Paragraph 2 hereof, all without delay, diminution or proration of any kind whatsoever (except that his remuneration hereunder shall be reduced by the amount of any payments he may otherwise receive as a result of his disability pursuant to a disability program provided by or through the Company). In the event that, notwithstanding such a determination of disability, the Executive is determined not to be totally and permanently disabled prior to the then scheduled expiration of the Employment Period, the Executive shall be entitled to resume employment with the Company under the terms of this Agreement for the then remaining balance of the Employment Period. 5. Termination for Cause. In the event of any malfeasance, willful misconduct, active fraud or gross negligence by the Executive in connection with his employment hereunder, the Company shall have the right to terminate the Employment Period by giving the Executive notice in writing of the reason for such proposed termination. If the Executive shall not have corrected such conduct to the satisfaction of the Company within thirty days after such notice, the Employment Period shall terminate and the Company shall have no further obligation to the Executive hereunder but the restriction on the Executive's activities contained in Paragraph 7 and the obligations of the Executive contained in Paragraphs 8(b) and 8(c) shall continue in effect as provided therein. 6. Termination Without Cause. In the event that the Company discharges the Executive during the Employment Period without cause, the Executive shall be entitled to the salary provided in Paragraph 2, the full vesting of any restricted stock awards and the immediate exercisability of any stock options, for the full Employment Period (which, in that event, shall continue until the then scheduled expiration of the Employment Period unless sooner terminated by the Executive's disability or death), and the Company shall have no right to set off payments due the Executive with any amounts he may earn from gainful employment elsewhere. It is expressly agreed and understood that the Executive shall be under no obligation to seek such employment. The provisions of Paragraph 7 restricting the Executive's activities and the Executive's obligations under Paragraphs 8(b) and 8(c) shall continue in effect. The provisions of this Paragraph 6 shall not act to limit the Executive's ability to recover damages from the Company for breaching this Agreement by terminating the Employment Period without cause, except as -4- otherwise permitted by Paragraph 3. 7. Non-Competition; Trade Secrets. During the Employment Period and for a period of one year after the termination of the Employment Period, the Executive will not, directly or indirectly: a) Disclosure of Information. Use, attempt to use, disclose or otherwise make known to any person or entity (other than to the Board of Directors of the Company or otherwise in the course of the business of the Company, its subsidiaries or affiliates and except as may be required by applicable law): i. any knowledge or information, including, without limitation, lists of customers or suppliers, trade secrets, know-how, inventions, discoveries, processes and formulae, as well as all data and records pertaining thereto, which he may acquire in the course of his employment, in any manner which may be detrimental to or cause injury or loss to the Company, its subsidiaries or affiliates; or ii. any knowledge or information of a confidential nature (including all unpublished matters) relating to, without limitation, the business, properties, accounting, books and records, trade secrets or memoranda of the Company, its subsidiaries or affiliates, which he now knows or may come to know in any manner which may be detrimental to or cause injury or loss to the Company, its subsidiaries or affiliates; b) Non-Competition. Engage or become interested in the United States, Canada or Mexico (whether as an owner, shareholder, partner, lender or other investor, director, officer, employee, consultant or otherwise) in the business of distributing electronic parts, components, supplies or systems, or any other business that is competitive with the principal business or businesses then conducted by the Company, its subsidiaries or affiliates (provided, however, that nothing contained herein shall prevent the Executive from acquiring or owning less than 1% of the issued and outstanding capital stock or debentures of a corporation whose securities are listed on the New York Stock Exchange, American Stock Exchange, or the National Association of Securities Dealers Automated Quotation System, if such investment is otherwise permitted by the Company's Human Resource and Conflict of Interest policies); -5- c) Solicitation. Solicit or participate in the solicitation of any business of any type conducted by the Company, its subsidiaries or affiliates, during said term or thereafter, from any person, firm or other entity which was or at the time is a supplier or customer, or prospective supplier or customer, of the Company, its subsidiaries or affiliates; or d) Employment. Employ or retain, or arrange to have any other person, firm or other entity employ or retain, or otherwise participate in the employment or retention of, any person who was an employee or consultant of the Company, its subsidiaries or affiliates, at any time during the period of twelve consecutive months immediately preceding such employment or retention. The Executive will promptly furnish in writing to the Company, its subsidiaries or affiliates, any information reasonably requested by the Company (including any third party confirmations) with respect to any activity or interest the Executive may have in any business. Except as expressly herein provided, nothing contained herein is intended to prevent the Executive, at any time after the termination of the Employment Period, from either (i) being gainfully employed or (ii) exercising his skills and abilities outside of such geographic areas, provided in either case the provisions of this Agreement are complied with. 8. Preservation of Business. a) General. During the Employment Period, the Executive will use his best efforts to advance the business and organization of the Company, its subsidiaries and affiliates, to keep available to the Company, its subsidiaries and affiliates, the services of present and future employees and to advance the business relations with its suppliers, customers and others. b) Patents and Copyrights, etc. The Executive agrees, without additional compensation, to make available to the Company all knowledge possessed by him relating to any methods, developments, inventions, processes, discoveries and/or improvements (whether patented, patentable or unpatentable) which concern in any way the business of the Company, its subsidiaries or affiliates, whether acquired by the Executive before or during his employment hereunder. Any methods, developments, inventions, processes, discoveries and/or improvements (whether patented, patentable or unpatentable) which the Executive may conceive of or make, related directly or indirectly to the business or affairs of the Company, its subsidiaries or affiliates, or any part thereof, -6- during the Employment Period, shall be and remain the property of the Company. The Executive agrees promptly to communicate and disclose all such methods, developments, inventions, processes, discoveries and/or improvements to the Company and to execute and deliver to it any instruments deemed necessary by the Company to effect the disclosure and assignment thereof to it. The Executive also agrees, on request and at the expense of the Company, to execute patent applications and any other instruments deemed necessary by the Company for the prosecution of such patent applications or the acquisition of Letters Patent in the United States or any other country and for the assignment to the Company of any patents which may be issued. The Company shall indemnify and hold the Executive harmless from any and all costs, expenses, liabilities or damages sustained by the Executive by reason of having made such patent applications or being granted such patents. Any writings or other materials written or produced by the Executive or under his supervision (whether alone or with others and whether or not during regular business hours), during the Employment Period which are related, directly or indirectly, to the business or affairs of the Company, its subsidiaries or affiliates, or are capable of being used therein, and the copyright thereof, common law or statutory, including all renewals and extensions, shall be and remain the property of the Company. The Executive agrees promptly to communicate and disclose all such writings or materials to the Company and to execute and deliver to it any instruments deemed necessary by the Company to effect the disclosure and assignment thereof to it. The Executive further agrees, on request and at the expense of the Company, to take any and all action deemed necessary by the Company to obtain copyrights or other protections for such writings or other materials or to protect the Company's right, title and interest therein. The Company shall indemnify and hold the Executive harmless from any and all costs, expenses, liabilities or damages sustained by the Executive by reason of the Executive's compliance with the Company's request. c. Return of Documents. Upon the termination of the Employment Period, including any termination of employment described in Paragraph 6, the Executive will promptly return to the Company all copies of information protected by Paragraph 7(a) hereof or pertaining to matters covered by subparagraph (b) of this Paragraph 8 which are in his possession, custody or control, whether prepared by him or others. 9. Separability. The Executive agrees that the provisions of Paragraphs 7 and 8 hereof constitute independent and separable covenants which shall survive the termination of the Employment Period and which shall be enforceable by the Company notwithstanding any -7- rights or remedies the Executive may have under any other provisions hereof. The Company agrees that the provisions of Paragraph 6 hereof constitute independent and separable covenants which shall survive the termination of the Employment Period and which shall be enforceable by the Executive notwithstanding any rights or remedies the Company may have under any other provisions hereof. 10. Specific Performance. The Executive acknowledges that (i) the services to be rendered under the provisions of this Agreement and the obligations of the Executive assumed herein are of a special, unique and extraordinary character; (ii) it would be difficult or impossible to replace such services and obligations; (iii) the Company, its subsidiaries and affiliates will be irreparably damaged if the provisions hereof are not specifically enforced; and (iv) the award of monetary damages will not adequately protect the Company, its subsidiaries and affiliates in the event of a breach hereof by the Executive. The Company acknowledges that (i) the Executive will be irreparably damaged if the provisions of Paragraphs 1(b) and 6 hereof are not specifically enforced and (ii) the award of monetary damages will not adequately protect the Executive in the event of a breach thereof by the Company. By virtue thereof, the Executive agrees and consents that if he violates any of the provisions of this Agreement, and the Company agrees and consents that if it violates any of the provisions of Paragraphs 1(b) and 6 hereof, the other party, in addition to any other rights and remedies available under this Agreement or otherwise, shall (without any bond or other security being required and without the necessity of proving monetary damages) be entitled to a temporary and/or permanent injunction to be issued by a court of competent jurisdiction restraining the breaching party from committing or continuing any violation of this Agreement, or any other appropriate decree of specific performance. Such remedies shall not be exclusive and shall be in addition to any other remedy which any of them may have. 11. Miscellaneous. a) Entire Agreement; Amendment. This Agreement constitutes the whole employment agreement between the parties and may not be modified, amended or terminated except by a written instrument executed by the parties hereto. It is specifically agreed and understood, however, that the provisions of that certain letter agreement dated as of the date hereof granting to the Executive extended separation benefits in the event of a change in control of the Company, shall survive and shall not be affected hereby. All other agreements between the -8- parties pertaining to the employment or remuneration of the Executive not specifically contemplated hereby or incorporated or merged herein are terminated and shall be of no further force or effect. b) Assignment. Except as stated below, this Agreement is not assignable by the Company without the written consent of the Executive, or by the Executive without the written consent of the Company, and any purported assignment by either party of such party's rights and/or obligations under this Agreement shall be null and void; provided, however, that, notwithstanding the foregoing, the Company may merge or consolidate with or into another corporation, or sell all or substantially all of its assets to another corporation or business entity or otherwise reorganize itself, provided the surviving corporation or entity, if not the Company, shall assume this Agreement and become obligated to perform all of the terms and conditions hereof, in which event the Executive's obligations shall continue in favor of such other corporation or entity. c) Waivers, etc. No waiver of any breach or default hereunder shall be considered valid unless in writing, and no such waiver shall be deemed a waiver of any subsequent breach or default of the same or similar nature. The failure of any party to insist upon strict adherence to any term of this Agreement on any occasion shall not operate or be construed as a waiver of the right to insist upon strict adherence to that term or any other term of this Agreement on that or any other occasion. d) Provisions Overly Broad. In the event that any term or provision of this Agreement shall be deemed by a court of competent jurisdiction to be overly broad in scope, duration or area of applicability, the court considering the same shall have the power and hereby is authorized and directed to modify such term or provision to limit such scope, duration or area, or all of them, so that such term or provision is no longer overly broad and to enforce the same as so limited. Subject to the foregoing sentence, in the event any provision of this Agreement shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall attach only to such provision and shall not affect or render invalid or unenforceable any other provision of this Argeement. e) Notices. Any notice permitted or required hereunder shall be in writing and shall be deemed to have been given on the date of delivery or, if mailed by registered or certified mail, postage prepaid, on the date of mailing: i. if to the Executive to: -9- John J. Powers, III 12200 Old Snakey Road Los Altos Hills, CA 94022 ii. if to the Company to: Arrow Electronics, Inc. 25 Hub Drive Melville, New York 11747 Attention: Senior Vice President and General Counsel Either party may, by notice to the other, change his or its address for notice hereunder. f) New York Law. This Agreement shall be construed and governed in all respects by the internal laws of the State of New York, without giving effect to principles of conflicts of law. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. Attest: ARROW ELECTRONICS, INC. By: ----------------------------- --------------------- Secretary THE EXECUTIVE /s/ JOHN J. POWERS, III ------------------------ John J. Powers, III -10- EX-10 10 EX-10(C)(X), EMP AGREEMENT - THROOP EXHIBIT 10(c)(x) EMPLOYMENT AGREEMENT made as of the 21st day of September, 1994 by and between ARROW ELECTRONICS, INC., a New York corporation with its principal office at 25 Hub Drive, Melville, New York 11747 (the "Company"), and ROBERT S. THROOP, residing at 3 Eucalyptus Court, Woodside, CA 94062 (the "Executive"). WHEREAS, the Executive is now and has been employed by Anthem Electronics, Inc. ("Anthem") as its Chairman of the Board of Directors, with the responsibilities and duties of a principal executive officer of Anthem; and WHEREAS, the Company and the Executive wish to provide for the continued employment of the Executive as an employee of Anthem and for him to continue to render services to Anthem and the Company on the terms set forth in, and in accordance with the provisions of, this Agreement; NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties agree as follows: 1. Employment and Duties. a) Employment. The Company hereby employs the Executive for the Employment Period defined in Paragraph 3, to perform such duties for the Company, its subsidiaries and affiliates and to hold such offices as may be specified from time to time by the Company's Board of Directors, subject to the following provisions of this Agreement. The Executive hereby accepts such employment. b) Duties and Responsibilities through 1996. During the Initial Period (as defined in Paragraph 3), it is contemplated that the Executive will serve as the Chairman of the Board of Directors of Anthem but the Board of Directors shall have the right to adjust the duties, responsibilities and title of the Executive as the Board of Directors may from time to time deem to be in the interests of the Company (provided, however, that they remain commensurate with his duties and responsibilities as they exist on the date hereof). If the Board of Directors does not either continue the Executive in the office of Chairman of the Board of Directors of Anthem during the Initial Period or elect him to some other principal executive office satisfactory to the Executive, or does not provide him in any such case with duties and responsibilities commensurate with such an office, the Executive shall have the right to decline to give further service to the Company and shall have the rights and obligations which would accrue to him under Paragraph 8 if he were discharged without cause. If the Executive decides to exercise such right to decline to give further service, he shall within thirty days after such action or omission by the Board of Directors give written notice to the Company stating his objection and the action he thinks necessary to correct it, and he shall permit the Company to have a thirty day period in which to correct its action or omission. If the Company makes a correction satisfactory to the Executive, the Executive shall be obligated to continue to serve the Company. If the Company does not make such a correction, the Executive's rights and obligations under Paragraph 8 shall accrue at the expiration of such thirty day period. c) Duties and Responsibilities from 1996 through 2001. During the Transition Period (as defined in Paragraph 3), the Executive shall remain an employee of the Company and shall hold himself available to advise the Company with respect to significant matters similar to those with respect to which he has been involved on the Company's behalf at the close of the Initial Period. d) Time Devoted to Duties. Except as otherwise provided under this Agreement, the Executive shall devote substantially all of his normal business time and efforts during the Initial Period to the business of the Company, its subsidiaries and its affiliates, the amount of such time to be sufficient, in his discretion, to permit him diligently and faithfully to serve and endeavor to further their interests to the best of his ability. During the Transition Period, the Executive shall devote such reduced amount of time to the business of the Company, its subsidiaries and its affiliates as the Board of Directors and the Executive may from time to time agree. Subject to the foregoing, it is expressly agreed and understood that the Executive may participate in various civic and philanthropic activities and may serve on boards of directors and committees of not-for-profit organizations of the Executive's choice. e) Nomination to Board. The Executive shall be nominated for a position on the Board of Directors during the entire Employment Period. 2. Compensation. a) Monetary Remuneration and Benefits through 1996. During the Initial Period, the Company shall pay to the Executive for all services rendered by him in any capacity: i. a minimum base salary of $500,000 per year (payable in accordance with the Company's then prevailing practices, but in no event less frequently than in equal monthly installments), subject to increase if the Board of Directors of the Company in its sole discretion so determines; -2- ii. such additional compensation by way of salary or bonus or fringe benefits as the Board of Directors of the Company in its sole discretion shall authorize or agree to pay, payable on such terms and conditions as it shall determine; iii. such employee benefits that are made available by the Company to the other principal executives of Anthem. b) Monetary Remuneration and Benefits from 1996 through 2001. During the Transition Period, the Company shall pay to the Executive for all services rendered by him in any capacity: i. a base salary of $225,000 per year (payable in accordance with the Company's then prevailing practices, but in no event less frequently than in equal monthly installments); and ii. such employee benefits that are made available by Anthem to its employees in general. c) Additional Compensation. During the Employment Period, the Board of Directors may grant to the Executive such additional compensation as it determines. Such additional compensation may be in cash, stock options, restricted stock or any other form in its discretion. d) Automobile. During the Initial Period, the Company will pay the Executive a monthly automobile allowance equal to the highest such allowance paid to any other executive(s) of the Company, but not less than $1,150. e) Vacation. During the Employment Period, the Executive will be given four weeks vacation with full pay each year, to be taken at the Executive's discretion; provided, however, that the Executive will use his best efforts to ensure that such vacation does not unduly interfere with the operation and performance of the business of the Company, its subsidiaries or its affiliates. f) Expenses. During the Employment Period, the Company agrees to reimburse the Executive, upon the submission of appropriate vouchers, for out-of-pocket expenses (including, without limitation, expenses for travel, lodging and entertainment) incurred by the Executive in the course of his duties hereunder. g) Office and Staff. The Company will provide the -3- Executive with an office, secretary and such other facilities as may be reasonably required for the proper discharge of his duties hereunder. Such office shall be located at the executive offices of Anthem. h) Indemnification. The Company agrees to indemnify the Executive for any and all liabilities to which he may be subject as a result of his employment hereunder (and as a result of his service as an officer or director of the Company, or as an officer or director of any of its subsidiaries or affiliates), as well as the costs of any legal action brought or threatened against him as a result of such employment, to the fullest extent permitted by law. i) Participation in Plans. During the Employment Period, notwithstanding any other provision of this Agreement, the Executive shall have the right to participate in any and all of the plans or programs made available by Anthem to, or for the benefit of, executives or employees in general. j) Effect on Other Agreements. Changes in compensation, title and responsibility incident to the commencement of the Transition Period shall not, in themselves, entitle the Executive to terminate his employment for Good Reason within the meaning of the agreement between the Executive and the Company dated September 21, 1994 (relating to the rights of the parties in the event of a "change of control" as therein defined). 3. The Employment Period. The "Employment Period", as used in the Agreement, shall mean the period beginning as of the date hereof and terminating on the last day of the calendar month in which the first of the following occurs: a) the death of the Executive; b) the disability of the Executive as determined in accordance with Paragraph 4 hereof and subject to the provisions thereof; c) the termination of the Executive's employment by the Company for cause in accordance with Paragraph 6 hereof; or d) December 31, 2001. The portion of the Employment Period ending December 31, 1996 (or earlier, if applicable), is herein called the "Initial -4- Period", and the portion of the Employment Period after December 31, 1996 is herein called the "Transition Period". 4. Disability. For purposes of this Agreement, the Executive will be deemed "disabled" upon the earlier to occur of (i) his becoming disabled as defined under the terms of the disability benefit program applicable to the Executive, if any, and (ii) his absence from his duties hereunder on a full-time basis for one hundred eighty (180) consecutive days as a result of his incapacity due to accident or physical or mental illness. If the Executive becomes disabled (as defined in the preceding sentence), the Employment Period shall terminate on the last day of the month in which such disability is determined. Until such termination of the Employment Period, the Company shall continue to pay to the Executive his base salary, any additional compensation authorized by the Company's Board of Directors, and other remuneration and benefits provided in accordance with Paragraph 2 hereof, all without delay, diminution or proration of any kind whatsoever (except that his remuneration hereunder shall be reduced by the amount of any payments he may otherwise receive as a result of his disability pursuant to a disability program provided by or through the Company). In the event that, notwithstanding such a determination of disability, the Executive is determined not to be totally and permanently disabled prior to the then scheduled expiration of the Employment Period, the Executive shall be entitled to resume employment with the Company under the terms of this Agreement for the then remaining balance of the Employment Period. 5. Parachute Payments. The Executive and the Company have simultaneously executed an agreement between the Executive and the Company dated September 21, 1994 relating to the rights of the parties in the event of a "change of control" of the Company as therein defined, which is comparable to similar agreements between the Company and certain other principal executive officers. 6. Termination for Cause. In the event of any malfeasance, willful misconduct, active fraud or gross negligence by the Executive in connection with his employment hereunder, the Company shall -5- have the right to terminate the Employment Period by giving the Executive notice in writing of the reason for such proposed termination. If the Executive shall not have corrected such conduct to the satisfaction of the Company within thirty days after such notice, the Employment Period shall terminate and the Company shall have no further obligation to the Executive hereunder but the restriction on the executive's activities contained in Paragraph 9 and the obligations of the Executive contained in Paragraph 10(b) and 10(c) shall continue in effect as provided therein. 7. Death Benefit. During the Employment Period, the Executive shall participate in such group life insurance or death benefit arrangements as may, from time to time, be extended to executive officers of Anthem generally. 8. Termination Without Cause. In the event that the Company discharges the Executive without cause, the Executive shall be entitled to the salary provided in Paragraph 2, the full vesting of any restricted stock awards and the immediate exercisability of any stock options, as well as his rights under Paragraphs 4 and 7, for the full Employment Period (which, in that event, shall continue until December 31, 2001 unless sooner terminated by the Executive's disability or death). The Company shall have no right to set off payments due the Executive with any amounts he may earn from gainful employment elsewhere. It is expressly agreed and understood that the Executive shall be under no obligation to seek such employment. The provisions of Paragraph 9 restricting the Executive's activities and Executive's obligations under Paragraph 10(b) and 10(c) shall continue in effect. The provisions of this Paragraph 8 shall not act to limit the Executive's ability to recover damages from the Company for breaching this agreement by terminating the Employment Agreement without cause, except as otherwise permitted by Paragraph 3. 9. Non-Competition; Trade Secrets. During the Employment Period and for a period of two years after the termination of the Employment Period, the Executive will not, directly or indirectly: a) Disclosure of Information. Use, attempt to use, disclose or otherwise make known to any person or entity -6- (other than to the Board of Directors of the Company or otherwise in the course of the business of the Company, its subsidiaries or affiliates and except as may be required by applicable law): i. any knowledge or information, including, without limitation, lists of customers or suppliers, trade secrets, know-how, inventions, discoveries, processes and formulae, as well as all data and records pertaining thereto, which he may acquire in the course of his employment, in any manner which may be detrimental to or cause injury or loss to the Company, its subsidiaries or affiliates; or ii. any knowledge or information of a confidential nature (including all unpublished matters) relating to, without limitation, the business, properties, accounting, books and records, trade secrets or memoranda of the Company, its subsidiaries or affiliates, which he now knows or may come to know in any manner which may be detrimental to or cause injury or loss to the Company its subsidiaries or affiliates. b) Non-Competition. Engage or become interested in the United States, Canada or Mexico (whether as an owner, shareholder, partner, lender or other investor, director, officer, employee, consultant or otherwise) in the business of distributing electronic parts, components, supplies or systems, or any other business that is competitive with the principal business or businesses then conducted by the Company, its subsidiaries or affiliates; c) Solicitation. Solicit or participate in the solicitation of any business of any type conducted by the Company, its subsidiaries or affiliates, during said term or thereafter, from any person, firm or other entity which was or at the time is a supplier or customer, or prospective supplier or customer, of the Company, its subsidiaries or affiliates; or d) Employment. Employ or retain, or arrange to have any other person, firm or other entity employ or retain, or otherwise participate in the employment or retention of, any person who was an employee or consultant of the Company, its subsidiaries or affiliates, at any time during the period of twelve consecutive months immediately preceding such employment or retention. The Executive will promptly furnish in writing to the Company, its subsidiaries or affiliates, any information reasonably requested by the Company (including any third party -7- confirmations) with respect to any activity or interest the Executive may have in any business. Except as expressly herein provided, nothing contained herein is intended to prevent the Executive, at any time after the termination of the Employment Period, from either (i) being gainfully employed or (ii) exercising his skills and abilities outside of such geographic areas, provided in either case the provisions of this Agreement are complied with. 10. Preservation of Business. a) General. During the Employment Period and subject to Paragraph 1(d) hereof, the Executive will use his best efforts to advance the business and organization of the Company, its subsidiaries and affiliates, to keep available to the Company, its subsidiaries and affiliates, the services of present and future employees and to advance the business relations with its suppliers, distributors, customers and others. b) Patents and Copyrights, etc. The Executive agrees, without additional compensation, to make available to the Company all knowledge possessed by him relating to any methods, developments, inventions, processes, discoveries and/or improvements (whether patented, patentable or unpatentable) which concern in any way the business of the Company, it subsidiaries or affiliates, whether acquired by the Executive before or during his employment or retention hereunder. Any methods, developments, inventions, processes, discoveries and/or improvements (whether patented, patentable or unpatentable) which the Executive may conceive of or make, related directly or indirectly to the business or affairs of the Company, its subsidiaries or affiliates, or any part thereof, during the Employment Period, shall be and remain the property of the Company. The Executive agrees promptly to communicate and disclose all such methods, developments, inventions, processes, discoveries and/or improvements to the Company and to execute and deliver to it any instruments deemed necessary by the Company to effect the disclosure and assignment thereof to it. The Executive also agrees, on request and at the expense of the Company, to execute patent applications and any other instruments deemed necessary by the Company for the prosecution of such patent applications or the acquisition of Letters Patent in the United States or any other country and for the assignment to the Company of any patents which may be issued. The Company shall indemnify and hold the Executive harmless from any and all costs, expenses, liabilities or damages sustained by the Executive by reason of having made such patent application or being granted such patents. -8- Any writings or other materials written or produced by the Executive or under his supervision (whether alone or with others and whether or not during regular business hours), during the Employment Period which are related, directly or indirectly, to the business or affairs of the Company, its subsidiaries or affiliates, or are capable of being used therein, and the copyright thereof, common law or statutory, including all renewals and extensions, shall be and remain the property of the Company. The Executive agrees promptly to communicate and disclose all such writings or materials to the Company and to execute and deliver to it any instruments deemed necessary by the Company to effect the disclosure and assignment thereof to it. The Executive further agrees, on request and at the expense of the Company, to take any and all action deemed necessary by the Company to obtain copyrights or other protections for such writings or other materials or to protect the Company's right, title and interest therein. The Company shall indemnify and hold the Executive harmless from any and all costs, expenses, liabilities or damages sustained by the Executive by reason of the Executive's compliance with the Company's request. c. Return of Documents. Upon the termination of the Employment Period, including any termination of employment described in Paragraph 8 and any termination of employment described in Paragraph 1(e), the Executive will promptly return to the Company all copies of information protected by Paragraph 9(a) hereof or pertaining to matters covered by subparagraph (b) of this Paragraph 10 which are in his possession, custody or control, whether prepared by him or others. 11. Separability. The Executive agrees that the provisions of Paragraphs 9 and 10 hereof constitute independent and separable covenants which shall survive the termination of the Employment Period and which shall be enforceable by the Company notwithstanding any rights or remedies the Executive may have under any other provisions hereof. The Company agrees that the provisions of Paragraphs 4, 7 and 8 hereof constitute independent and separable covenants which shall survive the termination of the Employment Period and which shall be enforceable by the Executive notwithstanding any rights or remedies the Company may have under any other provisions hereof. 12. Specific Performance. The Executive acknowledges that (i) the services to be rendered under the provisions of this Agreement and the obligations of the Executive assumed herein are of a special, unique and extraordinary character; (ii) it would be difficult -9- or impossible to replace such services and obligations; (iii) the Company, it subsidiaries and affiliates will be irreparably damaged if the provision hereof are not specifically enforced; and (iv) the award of monetary damages will not adequately protect the Company, its subsidiaries and affiliates in the event of a breach hereof by the Executive. The Company acknowledges that (i) the Executive will be irreparably damaged if the provisions of Paragraphs 1(b), 4, 7, 8 and 13 hereof are not specifically enforced; and (ii) the award of monetary damages will not adequately protect the Executive in the event of a breach thereof by the Company. By virtue thereof, the Executive agrees and consents that if he violates any of the provisions of this Agreement, and the Company agrees and consents that if it violates any of the provisions of Paragraphs 1(b), 4, 7, 8 and 13 hereof, the other party, in addition to any other rights and remedies available under this Agreement or otherwise, shall (without any bond or other security being required and without the necessity of proving monetary damages) be entitled to a temporary and/or permanent injunction to be issued by a court of competent jurisdiction restraining the breaching party from committing or continuing any violation of this Agreement, or any other appropriate decree of specific performance. Such remedies shall not be exclusive and shall be in addition to any other remedy which any of them may have. 13. No Participation in Supplemental Retirement Plan. The parties agree the Executive does not fall within the class of employees eligible to participate in the Company's Supplemental Executive Retirement Plan (SERP) and will not be a participant therein. 14. Assistance in Litigation. During the term of this Agreement or at any time thereafter, the Executive shall, upon reasonable notice, furnish such information and proper assistance to the Company as may reasonably be required by the Company in connection with any litigation in which it or any of its subsidiaries or affiliates is, or may become, a party. 15. Reimbursement of Legal Expenses. In the event that any dispute shall arise between the Executive and the Company relating to his rights under this Agreement, and it is determined by agreement between the parties, or by a final judgment of a court of competent jurisdiction that is no longer subject to appeal, that the Executive has been substantially successful in his claims, -10- reasonable legal fees and disbursements of the executive in connection with such dispute shall be paid by the Company. 16. Miscellaneous. a) Entire Agreement; Amendment. This Agreement constitutes the whole employment agreement between the parties and may not be modified, amended or terminated except by a written instrument executed by the parties hereto. All other agreements between the parties pertaining to the employment or remuneration of the Executive not specifically contemplated hereby or incorporated or merged herein are terminated and shall be of no further force or effect. b) Assignment. Except as stated below, this Agreement is not assignable by the Company without the written consent of the Executive, or by the Executive without the written consent of the Company, and any purported assignment by either party of such party's rights and/or obligations under this Agreement shall be null and void; provided, however, that, notwithstanding the foregoing, the Company may merge or consolidate with or into another corporation, or sell all or substantially all of its assets to another corporation or business entity or otherwise reorganize itself, provided the surviving corporation or entity, if not the Company, shall assume this Agreement and become obligated to perform all of the terms and conditions hereof, in which event the Executive's obligations shall continue in favor of such other corporation or entity, subject however to the provisions of Paragraph 3. c) Waivers, etc, No waiver of any breach or default hereunder shall be considered valid unless in writing, and no such waiver shall be deemed a waiver of any subsequent breach or default of the same or similar nature. The failure of any party to insist upon strict adherence to any term of this Agreement on any occasion shall not operate or be construed as a waiver of the right to insist upon strict adherence to that term of any other term of this Agreement on that or any other occasion. d) Provisions Overly Broad. In the event that any term or provision of this Agreement shall be deemed by a court of competent jurisdiction to be overly broad in scope, duration or area of applicability, the court considering the same shall have the power and hereby is authorized and directed to modify such term or provision to limit such scope, duration or area, or all of them, so that such term or provision is no longer overly board and to enforce the same as so limited. Subject to the foregoing sentence, in the event any provision of this Agreement shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall attach only to such provision and shall not affect or render invalid or -11- unenforceable any other provision of this Agreement. e) Notices. Any notice permitted or required hereunder shall be in writing and shall be deemed to have been given on the date of delivery or, if mailed by registered or certified mail, postage prepaid, on the date of mailing: i. if to the Executive to: Robert S. Throop 3 Eucalyptus Court Woodside, CA 94062 ii. if to the Company to: Arrow Electronics, Inc. 25 Hub Drive Melville, New York 11747 Attention: General Counsel Either party may, by notice to the other, change his or its address for notice hereunder. f) New York Law. This Agreement shall be construed and governed in all respects by the internal laws of the State of New York, without giving effect to principles of conflicts of law. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. Attest: ARROW ELECTRONICS, INC. /s/ ROBERT E. KLATELL By: /s/ STEPHEN P. KAUFMAN -------------------- ---------------------- Secretary President THE EXECUTIVE /s/ ROBERT S. THROOP -------------------- Robert S. Throop -12- EX-10 11 EX-10(C)(XIII), SERP EXHIBIT 10(c)(xiii) UNFUNDED PENSION PLAN FOR SELECTED EXECUTIVES OF ARROW ELECTRONICS, INC. EFFECTIVE JANUARY 1, 1990 EDITION OF MARCH 1, 1995 TABLE OF CONTENTS
ARTICLE Page ---- 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 Beneficiary . . . . . . . . . . . . . . . . . . . . . 1 1.2 Board . . . . . . . . . . . . . . . . . . . . . . . . 2 1.3 Change in Control Termination . . . . . . . . . . . . 2 1.4 Code . . . . . . . . . . . . . . . . . . . . . . . . 2 1.5 Committee . . . . . . . . . . . . . . . . . . . . . . 2 1.6 Company . . . . . . . . . . . . . . . . . . . . . . . 2 1.7 Disability Benefits . . . . . . . . . . . . . . . . . 2 1.8 Early Retirement Date . . . . . . . . . . . . . . . . 3 1.9 Early Retirement Pension . . . . . . . . . . . . . . 3 1.10 Effective Date . . . . . . . . . . . . . . . . . . . 3 1.11 Employer . . . . . . . . . . . . . . . . . . . . . . 3 1.12 ERISA . . . . . . . . . . . . . . . . . . . . . . . . 3 1.13 Normal Retirement Date . . . . . . . . . . . . . . . . 3 1.14 Normal Retirement Pension. . . . . . . . . . . . . . . 3 1.15 Participant . . . . . . . . . . . . . . . . . . . . . 4 1.16 Plan . . . . . . . . . . . . . . . . . . . . . . . . 4 1.17 Plan Year . . . . . . . . . . . . . . . . . . . . . . 4 1.18 Retirement Pension . . . . . . . . . . . . . . . . . 4 1.19 Service . . . . . . . . . . . . . . . . . . . . . . . 4 1.20 Supplement . . . . . . . . . . . . . . . . . . . . . 5 1.21 Termination of Employment . . . . . . . . . . . . . . 5 1.22 Total Disability . . . . . . . . . . . . . . . . . . 5 2 PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . 6 2.1 Participation . . . . . . . . . . . . . . . . . . . . 6 2.2 Termination of Further Accruals . . . . . . . . . . . 6 3 RETIREMENT PENSIONS . . . . . . . . . . . . . . . . . . . . 7 3.1 Normal Retirement Pension . . . . . . . . . . . . . . 7 3.2 Early Retirement Pension . . . . . . . . . . . . . . 7 3.3 Reduction for Disability Payments . . . . . . . . . . 8 3.4 Change in Control Pension . . . . . . . . . . . . . . 8 3.5 No Benefits prior to Early Retirement . . . . . . . . 8 3.6 Method of Payment . . . . . . . . . . . . . . . . . . 8 3.7 Noncompetition . . . . . . . . . . . . . . . . . . . 9 4 DEATH BENEFIT . . . . . . . . . . . . . . . . . . . . . . . 10 4.1 Death Benefit for Participants Receiving Benefits . . 10 4.2 No Other Death Benefits . . . . . . . . . . . . . . . 10
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ARTICLE Page ---- 5 AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . 10 5.1 Right Reserved . . . . . . . . . . . . . . . . . . . . 10 5.2 Restrictions on Board Action . . . . . . . . . . . . . 10 5.3 Action to Bind Employers . . . . . . . . . . . . . . . 11 6 COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . . 11 6.1 Establishment of Committee; Authority . . . . . . . . 11 6.2 Powers of Committee . . . . . . . . . . . . . . . . . 12 6.3 Determinations by Committee . . . . . . . . . . . . . 12 6.4 Directions to Pay Benefits . . . . . . . . . . . . . . 12 6.5 Liability Limited; Indemnification . . . . . . . . . . 12 7 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 13 7.1 Payment to Incompetent . . . . . . . . . . . . . . . . 13 7.2 Doubt as to Right to Payment . . . . . . . . . . . . . 14 7.3 Withholding . . . . . . . . . . . . . . . . . . . . . 14 7.4 Source of Payment . . . . . . . . . . . . . . . . . . 14 7.5 Spendthrift Clause . . . . . . . . . . . . . . . . . . 15 7.6 Reimbursement of Legal Expenses . . . . . . . . . . . 15 7.7 Usage . . . . . . . . . . . . . . . . . . . . . . . . 16 7.8 Data . . . . . . . . . . . . . . . . . . . . . . . . . 16 7.9 Separability . . . . . . . . . . . . . . . . . . . . . 16 7.10 Captions . . . . . . . . . . . . . . . . . . . . . . . 16 7.11 Name . . . . . . . . . . . . . . . . . . . . . . . . . 16 7.12 Governing Law . . . . . . . . . . . . . . . . . . . . 17 7.13 Right of Discharge Reserved . . . . . . . . . . . . . 17 Exhibit A . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Supplement No. 1 . . . . . . . . . . . . . . . . . . . . . . . . . 19 Supplement No. 2 . . . . . . . . . . . . . . . . . . . . . . . . . 20 Supplement No. 3 . . . . . . . . . . . . . . . . . . . . . . . . . 21 Supplement No. 4 . . . . . . . . . . . . . . . . . . . . . . . . . 22 Supplement No. 5 . . . . . . . . . . . . . . . . . . . . . . . . . 23
- ii - PREAMBLE Effective January 1, 1990, Arrow Electronics, Inc. adopted the Unfunded Pension Plan for Selected Executives of Arrow Electronics, Inc. (the "Plan") in order to provide retirement benefits for a selected group of its executives. This document describes the benefits available under the Plan and is intended to represent a binding obligation of Arrow Electronics, Inc. (and any other Employer of the executive) to provide those benefits, subject to the terms and conditions of the Plan as from time to time in effect. The Plan reads as follows: ARTICLE I DEFINITIONS The following words and phrases, as used herein, shall have the following meanings, unless a different meaning is otherwise expressly provided or plainly required by the context: 1.1 Beneficiary. The person (including a trust, estate, foundation, or other entity) designated by the Participant (at such time and in such manner as the Committee shall authorize) to receive the death benefit described in Article 4. If an individual is designated as Beneficiary and dies prior to becoming entitled to benefits hereunder (or if no valid designation of Beneficiary is in effect for any other reason), the Beneficiary shall be the Participant's estate unless otherwise provided in the Beneficiary designation. 1.2 Board. The Board of Directors of the Company, or any duly authorized committee thereof. 1.3 Change in Control Termination. In the case of a Participant who, pursuant to an employment agreement, is entitled to additional benefits in the event of employment termination for certain reasons following a change in the ownership or control of the Company, (i) the involuntary termination of the Participant's employment other than for Cause or Disability, or (ii) the voluntary termination of the Participant's employment for Good Reason (as each of such capitalized terms is defined in such agreement), in either case within 24 months after such change. 1.4 Code. The Internal Revenue Code of 1986, as amended from time to time. Reference to a specific provision of the Code shall include such provision, any valid regulation or ruling promulgated thereunder, and any comparable provision of future law that amends, supplements or supersedes such provision. 1.5 Committee. The Committee established pursuant to Article 6. 1.6 Company. Arrow Electronics, Inc., a New York Corporation, or any successor thereof by merger, consolidation, purchase of substantially all of the business and assets of the Company, or otherwise. 1.7 Disability Benefits. Amounts payable to a Participant from an Employer (or Employer-paid insurance policy) on account of Total Disability. - 2 - 1.8 Early Retirement Date. The first day of the month coincident with or next following the date on which a Participant (a) has been a Participant for at least five years and (b) has attained age 50 and (c) has completed a number of years of Service such that, when such years of Service are added to the Participant's age, the total is at least 72. 1.9 Early Retirement Pension. A Retirement Pension payable pursuant to Section 3.2. 1.10 Effective Date. January 1, 1990. 1.11 Employer. The Company, and any subsidiary or affiliate that adopts the Plan with the approval of the Company. 1.12 ERISA. The Employee Retirement Income Security Act of 1974, as amended from time to time. Reference to a specific provision of ERISA shall include such provision, any valid regulation or ruling promulgated thereunder and any comparable provision of future law that amends, supplements, or supersedes such provision. 1.13 Normal Retirement Date. The first day of the month coincident with or next following the earlier of a Participant's 60th birthday or the date on which the Participant's age plus completed years of Service equal at least 90. 1.14 Normal Retirement Pension. The maximum annual Retirement Pension that a Participant may receive under this - 3 - Plan. Unless otherwise determined by the Board and set forth in a Supplement, the Normal Retirement Pension of a Participant shall be an annual amount equal to $6,000 multiplied by the Participant's years (and any fraction of a year) of Service; provided, however, that no Participant's Normal Retirement Pension determined pursuant to this formula may exceed $175,000. 1.15 Participant. An individual who has been admitted to participation in the Plan by the Board in accordance with Article II. 1.16 Plan. The Unfunded Pension Plan for Selected Executives of Arrow Electronics, Inc., as in effect from time to time. 1.17 Plan Year. The calendar year. 1.18 Retirement Pension. A life annuity payable to a Participant under this Plan, guaranteed for 5 years as provided in Section 4.1. 1.19 Service. The number of an employee's aggregate years of service with an Employer. Service shall include any years during which a Participant receives Disability Benefits if the Participant's Total Disability continues to the Participant's Normal Retirement Date or to any earlier date on which the Participant begins to receive an Early Retirement Pension, but excluding any years after such Normal Retirement Date or earlier date. If the Total Disability of a Participant terminates prior to the Participant's Normal Retirement Date (or such earlier - 4 - date, if applicable), the period of Total Disability shall be credited for the purpose of determining Service only if the Participant (i) returns to service with an Employer, or (ii) is not offered employment with an Employer which is comparable to the position held prior to the Total Disability. 1.20 Supplement. A supplement to this Plan which sets forth some of the terms and conditions applicable to one or more specified Participants. 1.21 Termination of Employment. References under this Plan to a termination of employment, or to a Participant or employee who terminates employment, or the like, mean an employee's ceasing to be in the active employ of an Employer for any reason, including quit, discharge, disability, death, or retirement. 1.22 Total Disability. "Total Disability" as defined in any individual disability income policy maintained by an Employer for the benefit of the Participant or, if no such policy is maintained, in the disability income plan maintained for executive employees of the Company or another Employer as evidenced by a disability income agreement with the Participant. - 5 - ARTICLE 2 PARTICIPATION 2.1 Participation. The Board may, in its discretion, admit an employee to participation in the Plan, as of such date as the Board may determine. Once so admitted, an employee shall continue to be a Participant and accrue benefits under this Plan until termination of employment with an Employer, subject to Section 2.2. Notwithstanding the foregoing, no employee may become a Participant who is not a member of a "select group of management or highly compensated employees" within the meaning of sections 201(2), 301(a)(3) and 401(a)(1) of ERISA. The names of the Participants shall be set forth from time to time in Exhibit A hereto. 2.2 Termination of Further Accruals. The Board may direct that any Participant cease to accrue additional benefits as of any date coincident with or following such Board action. - 6 - ARTICLE 3 RETIREMENT PENSIONS 3.1 Normal Retirement Pension. A Participant whose employment terminates on or after the Participant's Normal Retirement Date shall receive a Normal Retirement Pension beginning as of the first day of the month coincident with or next following the date of termination. For purposes of this Section 3.1, a Participant whose employment terminates prior to the Normal Retirement Date on account of Total Disability shall be treated as having terminated employment on the Normal Retirement Date if such Total Disability does not terminate prior to the Normal Retirement Date and the Participant does not elect to receive an Early Retirement Pension under Section 3.2. 3.2 Early Retirement Pension. A Participant whose employment terminates after the Participant's Early Retirement Date and prior to the Normal Retirement Date shall receive an Early Retirement Pension beginning as of the first day of the month coincident with or next following such termination. The annual amount of such Early Retirement Pension shall be equal to such Participant's Normal Retirement Pension reduced by 8.75% for each full year and .729% for each month in any remaining portion of a year by which the commencement of the Early Retirement Pension precedes the Participant's Normal Retirement Date. If a Participant's employment terminates for reason of Total Disability, an Early Retirement Pension shall not begin without - 7 - the Participant's prior written consent during any period for which Disability Benefits are received. 3.3 Reduction for Disability Payments. A Participant's Retirement Pension shall be reduced by the amount (if any) of the Participant's Disability Benefits. 3.4 Change in Control Pension. A Participant who incurs a Change in Control Termination after attaining age 50 and completing at least 15 years of Service shall receive a Retirement Pension, beginning as of the first day of the month coincident with or next following such termination, in an amount equal to the Participant's Normal Retirement Pension, with no reduction for early payment. A Participant who is not party to an agreement described in Section 1.3 shall not be eligible for a Retirement Pension under this Section 3.4. Without the Participant's written consent, no action by the Company during the period of time during which such an agreement is in effect may adversely affect the Participant's rights under this Section 3.4. 3.5 No Benefits prior to Early Retirement. Except as provided in Section 3.4, a Participant whose employment terminates prior to the Participant's Early Retirement Date (or Normal Retirement Date) shall receive no benefits from this Plan. 3.6 Method of Payment. A Participant's annual Retirement Pension shall be paid in twelve equal monthly - 8 - installments, and shall be paid up to and including the month in which the Participant dies. 3.7 Noncompetition. All rights of a Participant under this Plan shall terminate, and no further payments of any Retirement Pension shall be made to the Participant or the Participant's Beneficiary, in the event that, following termination of employment, the Participant directly or indirectly, alone, as an employee, agent, independent contractor, lender, consultant, owner, partner or joint venturer, or as an officer, director or stockholder of any corporation, or otherwise, is employed by, participates in, is engaged in, or is connected with any person or entity which is engaged in a business of the type and character engaged in, and competitive with that conducted, by the Company. Ownership of 3% or less of the stock or other securities of a corporation, the stock of which is listed on a national securities exchange or is quoted on the NASDAQ National Market, shall not constitute a violation of this provision, so long as the Participant does not in fact have the power to control, or direct the management of, or is not otherwise associated with, such corporation. - 9 - ARTICLE 4 DEATH BENEFIT 4.1 Death Benefit for Participant Receiving Benefits. If a Participant whose Retirement Pension has commenced dies prior to the receipt of 60 monthly payments, the Participant's Beneficiary shall be entitled to receive monthly payments in the same amount as the Participant received prior to death (determined before the application of Section 3.3) until 60 monthly payments have been made to the Participant and Beneficiary in the aggregate. 4.2 No Other Death Benefits. Except for the death benefit provided under Section 4.1, no death benefit shall be paid under this Plan. ARTICLE 5 AMENDMENT AND TERMINATION 5.1 Right Reserved. Subject to Section 5.2, the Company, by action of the Board, may at any time amend the Plan in any respect or terminate the Plan, provided that no Retirement Pension which is in pay status as of the date of amendment or Plan termination (or death benefits in respect thereof) shall be reduced thereby. 5.2 Restrictions on Board Action. Without the express written consent of the Participant, no action taken by the Board pursuant to Section 2.2 or 5.1 shall (i) reduce a Participant's Normal Retirement Pension below the amount of the Participant's - 10 - Normal Retirement Pension determined immediately prior to such action under the terms of the Plan then in effect as if his employment had terminated on such date, nor (ii) adversely affect the right of the Participant (and the Participant's Beneficiary) to receive payment in respect of such Normal Retirement Pension upon satisfaction by the Participant of the conditions precedent to entitlement to a Retirement Pension as they exist under the terms of the Plan in effect immediately prior to such action, and at the time and on the terms then in effect. 5.3 Action to Bind Employers. By the execution of the Plan, each Employer designates the Company as the Employer entitled to administer the Plan in accordance with Article 6. Subject to Section 5.2, the Company shall have the further right to amend or terminate the Plan on behalf of each Employer. The Company shall furnish written notice of such action and a copy of any such amendment to any other Employer affected thereby, whereupon such amendment or termination shall become binding upon such Employer. ARTICLE 6 COMMITTEE 6.1 Establishment of Committee; Authority. The Committee shall be comprised of one or more members appointed from time to time by the Board and serving at the pleasure of the Board. The Committee shall make all determinations required of it by the terms of the Plan, and its constructions and interpretations of the Plan, as well as its determinations as to - 11 - rights and obligations under the Plan, shall be final and binding upon all persons; provided, that no member of the Committee shall be entitled to act on or decide any matter relating specifically to such member (and any such matter shall be determined by the compensation committee of the Board as if it were the Committee). 6.2 Powers of Committee. The Committee shall have all powers necessary or helpful for purposes of administration of the Plan. 6.3 Determinations by Committee. In addition to the specific responsibilities stated elsewhere in the Plan, the Committee, acting directly or through its agent, shall be responsible for determination of the Service and benefits to which any Participant is or may become entitled under the terms of the Plan. 6.4 Directions to Pay Benefits. All benefit payments under the Plan shall be upon and in accordance with the written directions of the Committee or its agent. 6.5 Liability Limited; Indemnification. The members of the Committee and each of them shall be free from all liability, joint and several, for their acts and conduct, and for the acts and conduct of any duly constituted agents. The Employers shall indemnify and save them harmless from the effects and consequences of their acts and conduct in such official capacity except to the extent that such effects and consequences flow from their own willful misconduct. Under no circumstances - 12 - will members of the committee (or any other employee of an Employer) be personally liable for the payment of Plan benefits. ARTICLE 7 MISCELLANEOUS 7.1 Payment to Incompetent. If any Participant or Beneficiary entitled to benefits under this Plan shall be legally incompetent (or shall be a minor), such benefits may be paid in any one or more of the following ways, as the Committee in its sole discretion shall determine: 7.1.1 To the Participant's or Beneficiary's legal representatives; 7.1.2 Directly to such Participant or Beneficiary; 7.1.3 To the spouse or guardian of such Participant or Beneficiary or to the person with whom such Participant or Beneficiary resides. Payment to any person in accordance with the foregoing provisions of this Section 7.1 will, to the extent of the payment, discharge the Employers, and none of the foregoing nor the Committee will be required to see to the proper application of any such payment. Without in any manner limiting the provisions of this Section 7.1, in the event that any amount is payable hereunder to any legally incompetent Participant or Beneficiary, the Committee may - 13 - in its discretion utilize the procedures described in Section 7.2. 7.2 Doubt as to Right to Payment. If any doubt exists as to the right of any person to any benefits hereunder or the amount or time of payment of such benefits (including, without limitation, any case of doubt as to identity, or any case in which any notice has been received from any other person claiming any interest in amounts payable hereunder, or any case in which a claim from other persons may exist by reason of community property or similar laws), the Committee will be entitled, in its discretion, to direct that payment of such benefits be deferred until such right or amount or time is determined or until order of a court of competent jurisdiction, or to pay such sum into court in accordance with appropriate rules of law in such case then provided, or to make payment only upon receipt of a bond or similar indemnification (in such amount and in such form as is satisfactory to the Committee). 7.3 Withholding. All payments under this Plan shall be subject to any applicable withholding requirements imposed by any tax or other law. 7.4 Source of Payment. All benefits under this Plan shall be paid by the Company and/or the Employer of the Participant out of general assets, and any rights of a Participant or Beneficiary under the Plan shall be mere unsecured contractual rights. The Company and the Participants intend that any arrangements made to assist the Company or other Employer to - 14 - meet obligations under this Plan shall be unfunded for tax purposes and for purposes of Title I of ERISA, and no trust, security, escrow or similar account shall be established in connection with the Plan. However, the Company and/or another Employer may in its discretion establish a "rabbi trust" to assist in meeting the obligation to pay benefits under the Plan, and amounts paid from any such rabbi trust shall discharge the obligations of the Company and/or other Employer hereunder to the extent of such payments. No Participant or Beneficiary shall have a preferred claim on or beneficial ownership interest in the assets of such rabbi trust. 7.5 Spendthrift Clause. Except as otherwise provided by law, no benefit, distribution or payment under the Plan may be anticipated, assigned (either at law or in equity), alienated or subject to attachment, garnishment, levy, execution or other legal or equitable process. 7.6 Reimbursement of Legal Expenses. In the event that any dispute shall arise between a Participant and the Company and/or the Participant's Employer relating to rights under this Plan, and it is determined by agreement between the parties, or by a final judgment of a court of competent jurisdiction that is no longer subject to appeal, that the Participant has been substantially successful in such dispute, reasonable legal fees and disbursements of the Participant in connection with such dispute shall be paid by the Company and/or the Participant's Employer. - 15 - 7.7 Usage. Whenever applicable, the singular, when used in the Plan, will include the plural. 7.8 Data. Any Participant or Beneficiary entitled to benefits under the Plan must furnish to the Committee such documents, evidence or information as the Committee considers necessary or desirable for the purpose of administering the Plan, or to protect the Committee; and it is a condition of the Plan that each such Participant must furnish promptly true and complete data, evidence or information and sign such documents as the Committee may require before any benefits become payable under the Plan. 7.9 Separability. If any provision of the Plan is held invalid or unenforceable, its invalidity or unenforceability will not affect any other provisions of the Plan, and the Plan will be construed and enforced as if such provision had not been included therein. 7.10 Captions. The captions contained herein and the table of contents prefixed hereto are inserted only as a matter of convenience and for reference and in no way define, limit, enlarge or describe the scope or intent of the Plan nor shall, in any way, affect the Plan or the construction of any provision thereof. 7.11 Name. This Plan may be known as the Unfunded Pension Plan for Selected Executives of Arrow Electronics, Inc. - 16 - 7.12 Governing Law. This Plan shall be construed and governed in all respects according to the laws of the State of New York, where it is adopted, without regard to principles of conflict of laws, except to the extent preempted by federal law. 7.13 Right of Discharge Reserved. The establishment of the Plan shall not be construed to confer upon an employee or Participant any legal right to be retained in the employ of an Employer or give any employee or any other person any right to benefits, except to the extent expressly provided for hereunder. All employees will remain subject to discharge to the same extent as if the Plan had never been adopted, and may be treated without regard to the effect such treatment might have upon them under the Plan. IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its duly authorized officer and its corporate seal to be hereunto affixed, this 1st day of March, 1995. Arrow Electronics, Inc. By /s/ ROBERT E. KLATELL --------------------------- Title: Senior Vice President [corporate seal] ATTEST: /s/ WAYNE BRODY -------------------- - 17 -
EX-10 12 EX-10(G), UK CREDIT FACILITY CONFORMED COPY EXHIBIT 10(g) DATED 20TH DECEMBER 1994 ARROW ELECTRONICS (UK) LIMITED - and - NATIONAL WESTMINSTER BANK Plc ---------------------------------------------------------------------------- AMENDMENT AND RESTATEMENT AGREEMENT RELATING TO A FACILITIES AGREEMENT DATED 28TH FEBRUARY 1992 AS AMENDED BY AN AMENDMENT AND RESTATEMENT AGREEMENT DATED 2ND AUGUST 1993 ---------------------------------------------------------------------------- THIS AGREEMENT is made the 20TH day of December 1994 BETWEEN: (1) ARROW ELECTRONICS (UK) LIMITED registered in England under number 2395760 and whose registered office is at St Martin's Way, Cambridge Road, Bedford, MK42 OLF (the "Company"); and (2) NATIONAL WESTMINSTER BANK Plc of 41 Lothbury, London EC2P 2BP acting through certain of its branches (the "Bank"). WHEREAS: (A) Pursuant to a facilities agreement dated 28th February 1992 and made between (1) the Company and (2) the Bank (as amended by an Amendment and Restatement Agreement dated 2nd August 1993 made between the same parties) (the "Facilities Agreement"), the Bank has made a term loan facility and overdraft and ancillary facilities available to the Company upon the terms and conditions thereof. (B) The parties hereto have agreed to enter into this Agreement to amend and vary certain provisions of the Facilities Agreement, and to restate the Facilities Agreement as so amended and varied. NOW IT IS HEREBY AGREED as follows: 1. INTERPRETATION 1.1 Definitions Words and expressions defined in the form of Facilities Agreement set out in the Schedule hereto shall have the same meanings when used herein. In addition, the following expressions shall have the following meanings (except where the context requires otherwise): "Act" means the Companies Act 1985; "Certified Copy" means, in relation to any document, a copy of each document bearing the endorsement "Certified a true, complete and accurate copy of the original, which has not been amended, altered, changed or supplemented otherwise than by each document, a certified copy of which is attached hereto" signed and dated by a duly authorised officer of the Company or other body in question; and "Fees Letter" means the letter in the agreed form of even date herewith from the Bank to the Company being described on its face as the Fees Letter. - 1 - 1.2 Interpretation Clauses 1.2 and 1.3 of the Facilities Agreement shall be deemed to be incorporated, mutatis mutandis, herein. 2. AMENDMENT It is hereby agreed that as and from the date upon which the Bank gives notice to the Company that the conditions precedent set out in Clause 3.1 below are satisfied, the Facilities Agreement shall be amended so as to be in the form set out in the Schedule hereto and shall take effect in such form. 3. CONDITIONS PRECEDENT The amendments referred to in Clause 2 above are subject to the following conditions being satisfied on or prior to 22nd December 1994: (a) the Bank shall have received all of the following in form and substance satisfactory to the Bank: (i) a letter addressed to the Bank and signed by a director of the Company confirming that the certified copies of the Memoranda and Articles of Association and Certificates of Incorporation of each of the Charging Group Companies as designated in Schedule 5 to the Facilities Agreement which were delivered to the Bank as a condition precedent to the Facilities Agreement, (each of which constitutional documents were certified to be true copies) are, as at 20th December 1994, true, complete and accurate copies of the originals, which have not been amended, varied or supplemented otherwise than by each document, a certified copy of which is attached thereto; (ii) Certified Copies of board resolutions of the Company approving and authorising the execution, delivery and performance of this Agreement on the terms and conditions hereof and thereof and authorising a person or persons to sign or otherwise attest the due execution of such documents and any other documents to be executed or delivered pursuant hereto or thereto together with a certificate of a duly authorised officer of such company setting out the names and signatures of the persons authorised to sign such documents on behalf of such company; (iii) a certificate of the Company addressed to the Bank and signed by a director of the Company stating that the execution by it of this Agreement and the performance by it of its obligations - 2 - hereunder are within its corporate powers, have been duly approved by all necessary corporate action and will not cause any limit or restriction on any of its powers (whether imposed by law, decree, rule, regulation, its Memorandum or Articles of Association, agreement or otherwise) or on the right or ability of its directors to exercise such powers, to be exceeded or breached; and (iv) confirmation from each Charging Group Company that its Guarantee shall remain in full force and effect; (b) no Default has occurred and is continuing; (c) the representations and warranties made pursuant to Clause 5 below are true and accurate in all material respects as at the date they are made; (d) evidence in the form of a subscription letter that EDI has subscribed for ordinary shares in the Company in an aggregate amount of at least pound sterling 3,150,000; and (e) the Company shall have paid to the Bank the amendment fee referred to in paragraph (i) of the Fees Letter. 4. FEES AND EXPENSES The Company shall pay to the Bank fees and expenses in accordance with the terms of the Fees Letter. For the avoidance of doubt, all liabilities and obligations of the Company under the Fees Letter are hereby deemed to be included under the Facilities Agreement as amended by this Agreement. 5. EXISTING DRAWINGS It is hereby agreed that each outstanding Drawing under the Acquisition Facilities (as defined in the Facilities Agreement prior to its amendment pursuant hereto) shall as and from the date on which the Bank gives notice under Clause 2, be deemed to be outstanding under the Term Loan Facility. 6. UNDERTAKINGS 6.1 The Company undertakes that it shall, during the period up to and including 30th June 1995, (at its own cost) promptly, upon the Bank's request, provide the Bank with such assistance as the Bank may reasonably require in the process of subparticipation of the Term Loan Facility. - 3 - 6.2 The Company undertakes that it shall make the financial earnout payment due in April 1995 in relation to MMD and pursuant to the Techdis Acquisition Agreement from external resources. 6.3 The Company undertakes that within 1 month of the date of this Agreement it will deliver to the Bank a legal mortgage (in form and substance satisfactory to the Bank) in relation to the Distribution Centre, duly executed by the Company in favour of the Bank. 7. REPRESENTATIONS AND WARRANTIES On the date hereof, the Company shall be deemed to represent and warrant to the Bank in the terms of Clause 12.1 of the form of Facilities Agreement set out in the Schedule hereto. 8. LIMITATION Save as expressly amended by this Agreement, the Facilities Agreement remains in full force and effect. 9. LAW This Agreement shall be governed by and construed in accordance with English law. IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly executed the day and year first above written. - 4 - SCHEDULE -------- Dated 28th February 1992 ARROW ELECTRONICS (UK) LIMITED - and - NATIONAL WESTMINSTER BANK Plc ------------------------------- FACILITIES AGREEMENT ------------------------------- WILDE SAPTE 1 Fleet Place London EC4M 7WS Tel. 071 246 7000 Fax. 071 246 7777 Ref : HCD/608807 BF0058352.04 TABLE OF CONTENTS
Clause Title Pages ------ ----- ----- 1 INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 FACILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3 PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4 CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 5. AVAILABILITY AND DRAWINGS UNDER THE FACILITIES . . . . . . . . . . . . . . . . . . . . 10 6. INTEREST AND COMMISSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7. REPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8. PREPAYMENT OF THE TERM LOAN FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . 16 9. CHANGE IN CIRCUMSTANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 10. PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 11. SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 12. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 13. UNDERTAKINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14. FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 15. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 16. SET-OFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 17. SEVERABILITY, WAIVERS, REMEDIES CUMULATIVE . . . . . . . . . . . . . . . . . . . . . . 34 18. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 19. ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 20. COSTS AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 21. CURRENCY INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 22. PUBLICITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 23. LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 SCHEDULE 1 DRAWDOWN NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 SCHEDULE 2 MANDATORY LIQUID ASSET COSTS FORMULA . . . . . . . . . . . . . . . . . . . . . . . . 40 SCHEDULE 3 DEFINITIONS FOR FINANCIAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 42 SCHEDULE 4 SECURITY DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 SCHEDULE 5 THE GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
THIS AGREEMENT is made the 28th day of February 1992 BETWEEN:- (1) ARROW ELECTRONICS (UK) LIMITED registered in England under number 2395760 and whose registered office is at St. Martins Way, Cambridge Road, Bedford MK42 OLF (the "Company"); and (2) NATIONAL WESTMINSTER BANK Plc of 41 Lothbury, London EC2P 2BP acting through certain of its branches ("the Bank"). WHEREAS:- The Bank has agreed, at the request of the Company, to make the Facilities available to the Company upon the terms and conditions set forth below. NOW IT IS HEREBY AGREED as follows:- 1. INTERPRETATION 1.1 In this Agreement (which expression shall include the Schedules hereto) the following expressions shall have the following meanings (except where the context otherwise requires) namely:- "Accounts" means at any particular time the most recent directors' report and consolidated audited accounts of the Company and its Subsidiaries delivered to the Bank pursuant to Clause 13.1; "Acquisition Agreement" means the agreement (in the agreed form) dated 28th February 1992, for the acquisition, inter alia, of the entire issued share capital of Jermyn and made between, inter alia, (1) Lex Service PLC (Reg. No. 229121) and (2) the Company together with any documents and agreements ancillary thereto, whether or not referred to therein; "Acquisition Documents" means the Acquisition Agreement and the Disclosure Letter; "Arrow" means Arrow Electronics, Inc., a corporation incorporated in the State of New York, U.S.A.; "Arrow Inc Indebtedness" means the aggregate obligations and liabilities (whether present, future, actual and/or contingent) of Arrow and its subsidiaries (incorporated in the USA) for the payment or repayment of money incurred in respect of: (i) monies borrowed or raised; (ii) any bond, note, loan stock, debenture or similar instrument; (iii) acceptance credit, bill discounting, note purchase, factoring facilities or documentary credit facilities; and (iv) counter-indemnities, guarantees or other assurances against financial loss in respect of the liability or obligation of any person falling, within any of (i) to (iii) above; PROVIDED ALWAYS THAT there shall be no double-counting; - 1 - "Associated Company" has the meaning ascribed thereto by Section 416 of the Income and Corporation Taxes Act 1988 and such expression shall include "Associated Undertaking" as defined in Section 20 of Schedule 4A to the Companies Act 1985; "Auditors" means Messrs. Ernst & Young or such other firm of accountants of similar standing whose appointment as auditors of the Company shall have been previously approved by the Bank, acting reasonably; "Axiom" means Axiom Electronics Limited, a company incorporated in England and Wales and registered under number 952393; "Bank Guarantee" means any guarantee, bond, indemnity, letter of credit, documentary or other credit, or any other instrument of suretyship or payment issued, undertaken, made or to be made, as the case may be, by the Bank under the Working Capital Facility; "Base Rate" means the Bank's published base rate from time to time; "Business Day" means any day, except Saturdays and Sundays, on which banks generally are open for business in the City of London of the type contemplated by this Agreement; "Capital Expenditure" has the meaning set out in Schedule 3; "Cash Flow" has the meaning set out in Schedule 3; "Charging Group" means those Group Companies which are so designated in Schedule 5 and such additional subsidiaries as the Bank may agree in writing from time to time can be designated as part of the Charging Group; "Charging Group Company" means each company in the Charging Group; "Commitment Period" means the period from and including the date hereof to but excluding the Final Repayment Date; "Completion" means the initial completion of the purchase by the Company of Jermyn in accordance with the terms of the Acquisition Agreement; "Corporation Tax" means corporation tax chargeable in the context of a scheme of Taxation applied to United Kingdom resident companies generally at the rate applicable to such companies (disregarding the provisions of Section 13 of the Income and Corporation Taxes Act 1988 concerning the small companies' rate) or Tax of a similar nature enacted in addition to or in substitution for corporation tax; "Debenture" means the debenture, in the Bank's standard form (as varied from time to time) granted by each Charging Group Company to the Bank; "Default" means any of the events specified in Clause 15; "Deferred Consideration" has the meaning set out in Schedule 3; "Depreciation" has the meaning set out in Schedule 3; "Disclosure Letter" means the disclosure letter from the Vendor to, inter alios, the Company dated 28th February 1992 relating to the Acquisition Agreement; - 2 - "Distribution Centre Mortgage" means the mortgage in the Bank's standard form granted, or to be granted, by the Company in favour of the Bank; "Distribution Centre Property" means the freehold land and buildings known as Distribution Centre, Cross Park, Cambridge Road, Bedford and divided into two sites, Site 1 being registered at H.M. Land Registry under title number BD 185026 and Site 4 (registration at H.M. Land Registry pending); "Drawdown Date" means the date being a Business Day, on which a Drawing is to be made pursuant to a Drawdown Notice; "Drawdown Notice" means a notice of drawing substantially in the form of the notice set out in Schedule 1; "Drawing" means any and each drawing made under the Term Loan Facility and thereafter the principal amount of each such Drawing from time to time outstanding; "EBIT" has the meaning set out in Schedule 3; "EDI" means Arrow Electronics Distribution Group Europe BV, a corporation incorporated in the Netherlands; "Electronics" means RR Electronics Limited, a company incorporated in England and Wales and registered under number 282397; "Eligible Receivables" means any of any debts, monies and liabilities due and payable to the Company which fulfil the following criteria:- (i) is a trade debt required to be paid in full within 60 days of the date upon which the invoice relating thereto is originally dispatched; (ii) is not owed by an Associated Company of the Company or any Subsidiary thereof or by any Group Company or any Subsidiary thereof save for arms length transactions on normal commercial terms for the business in question between any Group Company, Associated Company of the Company or any Subsidiary of any such company; (iii) is free and clear of liens and set-offs created by the Company and discounts (other than discounts in the ordinary course of trade); (iv) which is evidenced by invoices; (v) is not, so far as the Company is then aware, subject to any dispute, counterclaim or defence; (vi) is unconditional and not dependent on any performance by the Company; and (vii) neither the debtor nor the receivable due from such debtor is the subject of bona fide legal proceedings with any Group Company which are not vexatious or frivolous; "Encumbrance" means any mortgage, charge, assignment by way of security, pledge, lien, hypothecation or other security interest of any kind whatsoever; "Existing, Subordination Deed" means the deed of subordination dated 31st July 1989 executed by, inter alios, the Company, Arrow UK Inc. and the Bank; - 3 - "Facilities" means the Term Loan Facility and the Working Capital Facility; "Facility Documents" means this Agreement and the Security Documents; "FFE Contracts" means any and all forward foreign exchange contracts (in the Bank's standard form) entered into, or to be entered into, as the case may be, by the Company with the Bank under the Working Capital Facility; "FFE Facility" means the forward foreign exchange facility referred to in Clause 5.2.5 under which FFE Contracts may from time to time be entered into by the Company; "FFE Nominal Amount" means at any time and in relation to the Company, the nominal Sterling value (as certified by the Bank) of all FFE Contracts then outstanding in respect of the Company; "Final Repayment Date" means in relation to all Drawings, 31st December 1999; "Finance Leases" has the meaning set out in Schedule 3; "Financial Information" means the report addressed to the Bank dated 10th January 1992 together with a supplementary report dated 27th February 1992 in the agreed form on the Group prepared by Messrs. Ernst & Young; "Financial Year" in relation to a company has the meaning ascribed to such expression by Section 223 of the Companies Act 1985; "First New Security Documents" means the Techdis Debenture, the Techdis Guarantee, the MMD Debenture and the MMD Guarantee; "GAAP" means accounting principles generally accepted in the United Kingdom consistently applied and consistent with the Reference Accounts; "Group" means the Company and Techdis and their respective Subsidiaries together with all the Subsidiaries of the Company from time to time during the Security Period; "Group Company" means each company in the Group; "Group Dormant Company" means each and any Group Company which is or becomes, at any time, and remains a dormant company within the meaning of such expression in accordance with Section 250 of the Companies Act 1985 and to which the Bank agrees in writing to be designated as such (such agreement not to be unreasonably withheld or delayed); "Guarantee" means the guarantee in the Bank's standard form (as varied from time to time) granted by each Charging Group Company to the Bank; "Indebtedness" has the meaning set out in Schedule 3; "Instalment" has the meaning set out in Clause 7.1.1; "Instalment Repayment Date" has the meaning set out in Clause 7.1.1; "Interest Date" means the last day of each Interest Period; "Interest Period" means in relation to any Drawing a period of 1, 3 or 6 months or such other period as the Bank may agree and:- - 4 - (a) the first Interest Period shall commence on the relevant Drawdown Date; (b) each subsequent Interest Period shall commence on the day following the last day of the immediately preceding Interest Period; (c) an Interest Period which would otherwise end on a day which is not a Business Day shall be extended to the next Business Day unless that next Business Day falls in the next calendar month when the Interest Period shall end on the immediately preceding Business Day; (d) if any Interest Period commences on the last Business Day in a month or if there is no corresponding day in the month in which it is to end then it shall end on the last Business Day in such month; (e) if an Interest Period is extended or shortened by the application of the foregoing, the following Interest Period shall (without prejudice to the application of the foregoing) end on the day on which it would have ended if the preceding Interest Period had not been so extended or shortened; and (f) any amount to be repaid under Clause 7 shall have a final Interest Period expiring on the relevant Instalment Repayment Date or Final Repayment Date, as the case may be; "Interest Rate Protection Contracts" means all and each of the interest rate protection contracts entered into by the Company and the Bank; "Jermyn" means Jermyn Holdings Limited, a company incorporated in England and Wales and registered under number 1369015; "LIBOR" means the percentage rate per annum (rounded up, if necessary to the nearest 1/16th of one per cent) at which the Bank offers Sterling deposits in an amount comparable to the relevant Drawing for a period equal to such Interest Period to prime banks in the London inter-bank market at or about 11.00 a.m. (London time) on the first day of such Interest Period; "Management Accounts" means the management accounts to be provided by the Company to the Bank pursuant to Clause 13.1 (c); "Mandatory Liquid Asset Costs" means the additional cost to the Bank of compliance with the relative reserve asset ratio required by the Bank of England from time to time, expressed as a rate per cent per annum calculated on the basis of the application of the formula set out in Schedule 2; "Margin" means three quarters of one per cent (0.75%) per annum; "MMD" means Microprocessor and Memory Distribution Limited, a company incorporated in England and Wales and registered under number 1920668; "MMD Debenture" means the mortgage debenture dated 17th August 1993 granted, by MMD in favour of the Bank; "MMD Guarantee" means the unlimited composite cross-guarantee dated 17th August 1993 granted by MMD in favour of the Bank; "Net Working Capital" has the meaning set out in Schedule 3; - 5 - "Overdraft Facility Limit" means pound sterling 7,000,000; "Permitted Encumbrance" means any Encumbrance:- (i) being a lien arising by operation of law as a result of transactions undertaken bona fide in the ordinary course of business; (ii) being a lien over goods and documents of title thereto arising in the ordinary course of letter of credit transactions; (iii) arising by way of retention of title to goods by the supplier of those goods where such retention of title is permitted by the Company; (iv) over or affecting any asset acquired by a Group Company after the date hereof and subject to which such asset is acquired, provided that:- (a) such Encumbrance was not created at the request of that Group Company in contemplation of the acquisition of such asset by that Group Company; (b) the amount, actual or contingent, thereby secured has not been increased in contemplation of, or since the date of, the acquisition of such asset by that Group Company; and (c) such Encumbrance shall be discharged within 12 months of such acquisition and except where the amount, actual or contingent, thereby secured does not exceed pound sterling 300,000 until such discharge the person or persons in whose favour the Encumbrance has been created shall enter into such form of subordination and priority agreement as the Bank shall require; (v) over, or affecting any assets of any company which becomes a Charging Group Company after the date hereof, where such Encumbrance is created prior to the date on which such company becomes a Group Company, provided that:- (a) such Encumbrance was not created at the request of any Group Company in contemplation of such company becoming a Group Company and such company was not acquired with the assistance of the Working Capital Facility; (b) the amount thereby secured, actual or contingent, has not been increased at the request of such company, or any Group Company in contemplation of, or since the date of such company becoming a Group Company; and (c) such Encumbrance shall be discharged within 12 months of such acquisition and except where the amount, actual or contingent, thereby secured does not exceed pound sterling 300,000 until such discharge the person or persons in whose favour the Encumbrance has been created shall enter into such form of subordination and priority agreement as the Bank shall require; (vi) being a lien arising by operation of law in the ordinary course of trading where the amount payable in respect of the lien is either not yet due for payment or is being contested in good faith; (vii) which comprises the Existing Security; - 6 - (viii) which comprises security created pursuant to a Security Document hereunder; "Potential Default" means an event which with the giving of notice and/or lapse of time and/or the satisfaction of any other condition would be a Default; "Qualifying Bank" means an institution which is, for the time being, recognised by the United Kingdom Inland Revenue as carrying on through its lending office situated in the United Kingdom for the purposes hereof a bona fide banking business in the United Kingdom for the purposes of Section 349(3) of the Income and Corporation Taxes Act 1988 and which makes loans from such lending office situated in the United Kingdom; "Reference Accounts" means the audited consolidated accounts of Jermyn and its Subsidiaries for the period ended 29th December 1991 which comprise the English element of the Completion Balance Sheets (as defined in the Acquisition Agreement) and of the Company and its Subsidiaries for the period ended 31st December 1991; "Security Documents" means the documents listed in Schedule 4, the First New Security Documents, the Distribution Centre Mortgage and any other documents entered into at any time by way of security for the obligations of the Company hereunder; "Security Period" means the period starting from the date of this Agreement and ending on the date when all monies and liabilities (whether present, future, actual or contingent) owing under any of the Facility Documents have been paid or, as the case may be, discharged in full and the Bank has no further obligations hereunder or thereunder; "Shares Charge" means a charge dated 20th March 1992 in favour of the Bank given by EDI over the entire issued share capital of the Company as security for the obligations of the Company hereunder; "Sterling" "Pounds" and "pound sterling" means the lawful currency for the time being of the United Kingdom; "Sterling, Equivalent" means, in relation to an amount in US Dollars on the day on which the calculation falls to be made, the amount of Sterling which could be purchased with such amount of US Dollars on the basis of the Bank's spot buying rate for Sterling against US Dollars at or about 11.00 a.m. on the second Business Day immediately prior to that date; "Subsidiary" has the meaning ascribed to it by Section 736 of the Companies Act 1985; "Tangible Net Worth" has the meaning set out in Schedule 3; "Tax" includes all present and future taxes, charges, imposts, duties, levies, deductions, withholdings or fees of any kind whatsoever payable at the instance of or imposed by any statutory, governmental, international, state, federal, provincial, local or municipal authority, agency, body or department whatsoever or any central bank or monetary agency, in each case whether in the United Kingdom or elsewhere, together with any penalties, additions, fines, surcharges or interest relating thereto and "Taxes" and "Taxation" shall be construed accordingly; "Techdis" means Techdis Limited, a company incorporated in England and Wales and registered under number 2058603; - 7 - "Techdis Acquisition Agreement" means the agreement dated 2nd July 1993 for the acquisition, inter alia, of the entire issued share capital of Techdis and made between, inter alios, (1) the persons whose names and addresses are set out therein and (2) the Company together with any documents and agreements ancillary thereto, whether or not referred to therein; "Techdis Debenture" means the mortgage debenture dated 17th August 1993 granted by Techdis in favour of the Bank; "Techdis Guarantee" means the unlimited composite cross-guarantee dated 17th August 1993 granted by Techdis in favour of the Bank; "Techdis Shares" means the shares in Techdis acquired by the Company pursuant to the Techdis Acquisition Agreement; "Term Loan" means the aggregate of all Drawings; "Term Loan Facility" means the term loan facility referred to in Clause 2(i); "Term Loan Facility Limit" means, subject to Clause 5.1.6, pound sterling 15,000,000; "Total Debt" has the meaning set out in Schedule 3; "Total Financing Costs" has the meaning set out in Schedule 3; "Total Interest Costs" has the meaning set out in Schedule 3; "US Dollars", "US$", or "$" means the lawful currency for the time being of the U.S.A.; "U.S.A." means the United States of America; "VAT" means value added tax as provided for in the Value Added Tax Act 1983 (and legislation, whether delegated or otherwise) supplemental thereto and any similar or turnover Tax replacing or introduced in addition to any of the same; "Working Capital Available Amount" means, subject to the terms of this Agreement, that amount which at any time represents the Working Capital Facility Limit less the Working Capital Facility Liabilities; "Working Capital Facility" means the facilities to be made available by the Bank hereunder, subject to the Working Capital Facility Limit, the terms and conditions of which are set out in this Agreement; "Working Capital Facility Liabilities" means, at any time, the aggregate of (i) 20 per cent or such other percentage amount as the Bank acting reasonably may determine of the FFE Nominal Amount of all FFE Contracts issued under the Working Capital Facility (the "FFE Contract Amount"), and (ii) the sum of all other liabilities whether actual or contingent of the Company to the Bank under the Working Capital Facility from time to time (excluding interest accruing but not yet due), in each case as certified by the Bank, such certificate, in the absence of manifest error, to be binding on the Company. (For these purposes all US Dollar amounts shall be computed on the basis of their Sterling Equivalent); and "Working Capital Facility Limit" means pound sterling 9,000,000. - 8 - 1.2 Clause headings and the table of contents are inserted for convenience of reference only and shall not affect the construction of this Agreement. 1.3 In this Agreement, unless the context otherwise requires:- (a) references to Clauses and Schedules are to be construed as references to the Clauses of and Schedules to this Agreement as amended from time to time and references to Clauses shall, unless otherwise specifically stated, be construed as references to the Clauses in the Clause in which the reference appears and references to this Agreement include its Schedules as amended from time to time; (b) references to (or to any specified provisions of) this Agreement or any other document shall be construed as references to this Agreement, that provision or that document as in force for the time being and as amended from time to time; (c) references to any statute, order or regulation shall be construed as references to such statute, order or regulation as amended, re-enacted or consolidated from time to time; (d) references to any person shall be construed as references to that person or that person's assigns or successors in title, in whole or in part; (e) references to a document in the agreed form are to the form of the relevant document initialled by Wilde Sapte on behalf of the Bank and Herbert Smith on behalf of the Company; and (f) references to the singular include the plural and vice versa. 2. FACILITIES Upon and subject to the terms and conditions of this Agreement, the Bank agrees to make available to the Company:- (i) the Term Loan Facility in a maximum principal amount of up to the Term Loan Facility Limit; and (ii) the Working Capital Facility in an aggregate maximum principal amount of up to the Working Capital Facility Limit as more particularly described in Clause 5.2. 3. PURPOSE 3.1 The purpose of the Term Loan Facility is to assist the Company to:- (i) finance certain acquisitions including the Distribution Centre Property and; (ii) finance the Company's general corporate purposes. 3.2 The purpose of the Working Capital Facility is to assist the Company's general working capital requirements. - 9 - 4. CONDITIONS PRECEDENT All conditions precedent have been satisfied. 5. AVAILABILITY AND DRAWINGS UNDER THE FACILITIES 5.1 Availability and Drawings under the Term Loan Facility 5.1.1 Subject to the other terms hereof, the Company may make up to two (2) Drawings. 5.1.2 As at 20th December 1994 the following Drawing was outstanding under the Term Loan Facility: a Drawing of an amount of pound sterling 7,400,000 with the next Interest Date on 30th December 1994. 5.1.3 The Company shall give the Bank notice of its intention to borrow a further Drawing in the form of a Drawdown Notice. 5.1.4 Once given, a Drawdown Notice shall be irrevocable and shall oblige the Company to borrow in accordance with its terms. 5.1.5 A Drawdown Notice shall be delivered to the Bank not later than 10:00 a.m. (London time) one Business Day before the proposed Drawdown Date (or within such shorter period as the Bank may allow). 5.1.6 Any part of the Term Loan Facility undrawn at the close of business on the 30th April 1995 shall be cancelled and shall not be available for borrowing by the Company. 5.1.7 If the Drawing is not made in full on the relative Drawdown Date the Company will on demand pay to the Bank such amount as the Bank may certify (by a certificate prepared, and having the same effect, as described in Clause 8.3) as necessary to compensate it for any losses or costs on account of funds borrowed or contracted for in order to fund such Drawing. 5.1.8 Notwithstanding any other provisions of this Agreement, no Drawdown Notice may be served and no further Drawing may be made:- (a) if a Default or Potential Default has occurred and is continuing unremedied and/or unwaived or if a Default would occur on such Drawing being made; or (b) unless the representations and warranties set out in Clause 12 are, or will be, true and accurate on the date on which the relative Drawdown Notice is served and on the relative Drawdown Date. 5.2 Availability and Drawings under the Working Capital Facility 5.2.1 Utilisation Subject to the other terms of this Agreement, the Bank hereby agrees to make the Working Capital Facility available to the Company during the Commitment Period on a revolving basis to be utilised on any Business Day by way of:- (i) overdraft in accordance with Clause 5.2.2; - 10 - (ii) the issue of Bank Guarantees in accordance with Clause 5.2.3; (iii) the entering into of FFE Contracts, subject to the availability of the relevant currencies, in accordance with Clause 5.2.5; and (iv) such other banking facilities as the Bank and the Company may agree; PROVIDED THAT at no time shall the Working Capital Facility Liabilities exceed the Working Capital Facility Limit and PROVIDED FURTHER THAT the Working Capital Facility Liabilities shall not at any time exceed that amount which represents the aggregate of fifty (50) per cent of Eligible Receivables. 5.2.2 Overdraft Facility The Company may utilise the Working Capital Facility by way of borrowing on overdraft subject to the Overdraft Facility Limit. Overdrafts may be denominated in Sterling or US Dollars and will be provided on the Company's Sterling or Dollar accounts respectively held with the Bank. Notwithstanding the provisions of Clause 15 all amounts advanced to the Company by way of overdraft shall be repayable on demand and subject to the Bank's usual terms and conditions for such facilities. Any such overdraft will be made available on the basis that, subject to renegotiation, it shall only be available for the ensuing 12 month period the first such period commencing on the date hereof PROVIDED THAT at no time shall the Bank be obliged to make advances by way of overdraft under the Working Capital Facility or make other banking facilities available if the making of any of the same would result in the Working Capital Facility Liabilities exceeding the Working Capital Facility Limit. 5.2.3 Bank Guarantees 5.2.3.1 The Bank shall not be obliged to issue any Bank Guarantee under the Working Capital Facility unless the Bank has received a request from the Company for the Bank to issue a Bank Guarantee:- (i) in respect of letters of credit or bills of exchange, at least 5 Business Days (or such other period as agreed between the Bank and the Company) prior to the proposed issue; and (ii) in respect of any other instrument at least 10 Business Days prior to the proposed issue and subject to:- (a) the Bank approving the form and purpose of the proposed Bank Guarantee including the maximum liability and maturity thereof; (c) no Default or Potential Default having occurred and continuing unremedied and unwaived or occurring as a result of the issue of the Bank Guarantee; and (d) the representations and warranties set out in Clause 12 being true and accurate on the date on which the request is served and on the date of issue of the Bank Guarantee subject to any matter, fact or circumstance disclosed pursuant to Clause 12.3; then the Bank shall issue a Bank Guarantee unless the issue of such Bank Guarantee would result in the maximum liability thereunder leading to a breach of the Working - 11 - Capital Facility Limit when aggregated with the other outstanding Working Capital Facility Liabilities. 5.2.3.2 No Bank Guarantee will be issued under which a claim could be made on the Bank on or after the Final Repayment Date. 5.2.4 Counter-Indemnity 5.2.4.1 In consideration of the Bank making available the Working Capital Facility, the Company hereby unconditionally and irrevocably agrees and undertakes to the Bank as follows:- (a) it will at all times indemnify the Bank and keep the Bank indemnified from and against all actions, suits, proceedings, claims, demands, liabilities, damages, costs, expenses, losses and charges whatsoever in relation to each Bank Guarantee issued for its account and it will pay to the Bank on demand the amount of all payments made (whether directly or by way of set-off, counterclaim or otherwise howsoever) and all losses, costs and expenses suffered or incurred from time to time by the Bank under or by reason or in consequence of any Bank Guarantee and any of the aforesaid indemnities relating thereto; (b) it hereby irrevocably authorises the Bank to comply with the terms of any demand served or purporting to be served on the Bank pursuant to a Bank Guarantee issued for its account without any reference to or further authority from it and without any enquiry by the Bank into the justification for such demand or the validity thereof and hereby agrees that any payment which the Bank shall make in accordance with such demand or purported demand shall be binding on and be accepted by the Company as conclusive and binding evidence that the Bank was liable to comply with the terms of such demand and was liable to do so in the manner and for the amount in which the Bank effected such compliance; (c) the liability of the Company under this indemnity shall not be discharged, lessened or impaired by any time being given or by any thing being done or other circumstance whatsoever which, but for this provision, would or might operate to exonerate or discharge it; and (d) the Company hereby agrees that the indemnity contained in this Clause shall constitute and be a continuing security to the Bank and that the said indemnity shall extend to each Bank Guarantee as it may, from time to time, be varied, modified, amended or extended. 5.2.4.2 The Company hereby agrees that it shall pay to the Bank interest (at the rate then applicable to advances made by way of overdraft pursuant to Clause 5.2.2) on the amount of each payment, loss, cost and expense made, suffered or incurred from time to time by the Bank under or by reason or in consequence of any Bank Guarantee in respect of the Company and any of the aforesaid indemnities relating thereto from and including the date upon which such payment, loss, cost or expense is made, suffered or incurred as aforesaid up to and including the date upon which payment or reimbursement of such amount is demanded from the Company. - 12 - 5.2.5 FFE Contracts The Bank shall not be obliged to enter into any FFE Contract with a maturity of longer than 12 months or which would or may result in the Bank incurring a loss or being under any liability or obligation (actual or contingent) after the Final Repayment Date. Any utilisation of the FFE Facility is subject to a maximum aggregate net limit of pound sterling 2,000,000 calculated by reference to the FFE Contract Amount. 5.2.6 Secured Debt For the avoidance of doubt it is hereby agreed that the obligations and liabilities of the Company to the Bank under the Working Capital Facility from time to time are secured pursuant to the terms of the Security Documents. 5.2.7 Bank's Certificate Conclusive The Bank's certificate as to the amount of the Working Capital Facility Liabilities at any given time and any other figure under this Clause 5 shall, in the absence of manifest error, be conclusive and binding on the Company. 6. INTEREST AND COMMISSION 6.1 Rates 6.1.1 The Company may by notice substantially in the form of a Drawdown Notice (but with references to the Drawing and the payment instructions omitted) received by the Bank not later than 10.00 a.m. (London time) on the third Business Day preceding the first day of each next succeeding Interest Period select the duration of such Interest Period for each Drawing. Each Interest Period in respect of each Drawing shall be for a period of 3 months' duration unless the Company shall have otherwise notified the Bank PROVIDED THAT if the Term Loan is already outstanding, any subsequent Drawing shall have a first Interest Period that expires on the same day as the Interest Period then applicable to the Term Loan. 6.1.2 The Company shall pay interest on each Drawing to the Bank from the Drawdown Date to the date on which that Drawing is repaid in full (after as well as before judgment) and such interest shall be calculated in respect of successive Interest Periods. Without prejudice to the provisions of Clauses 6.2, 10.3, 10.4.1, 10.4.2 and 10.4.3, the rate of interest applicable to each Drawing for any Interest Period (or part thereof) shall be the rate per annum determined by the Bank to be the aggregate of:- (i) the Margin; (ii) LIBOR; and (iii) Mandatory Liquid Asset Costs. 6.1.3 Interest on all amounts outstanding by way of overdraft under the Working Capital Facility shall accrue from day to day at the rate per annum which is the greater of (a) six and a half per cent (6.5%) per annum; and (b) the relevant Base Rate of the Bank for the time being and from time to time plus the Margin. In the case of a US Dollar overdraft all interest payable thereon shall be made in US Dollars. - 13 - 6.1.4 (a) The Company shall pay commission on the maximum amount of the aggregate of the Bank's actual and contingent liability under each Bank Guarantee which constitutes a bond, guarantee or similar commitment at the rate of 2 per cent per annum which shall be paid quarterly in advance. (b) The Company shall pay fees to the Bank in respect of FFE Contracts and Bank Guarantees constituting documentary credits or other similar engagements in such amount as may be agreed between the Bank and the Company from time to time in accordance with the Bank's usual scale of charges. 6.2 Market Disruption If the Bank shall determine that, by reason of circumstances affecting the London inter-bank market generally, reasonable and adequate means do not exist for determining under Clause 6.1.2 the rate of interest applicable to the Drawings:- (i) the Bank shall promptly notify the Company in writing of such event; (ii) the Bank and the Company shall discuss an alternative basis for making and continuing the Drawings during subsequent Interest Periods (either for an alternative period or periods or by obtaining Sterling funds in another market or markets) or as the case may be for calculating the rate of interest applicable to the Drawings, in either case on the basis that the net return to the Bank shall be the same as it would have been had such circumstances not occurred; (iii) subject to paragraph (iv) below, unless the Bank and the Company shall have agreed upon such alternative basis within thirty (30) days of the date of service of the notice referred to in Clause 6.2(i) the Company shall pay interest from the relevant Interest Date at a rate equal to the Margin plus such amount as is certified by the Bank as being the cost to the Bank of continuing to make the Drawings available, which certificate shall, save for manifest error, be conclusive evidence of such interest and, so long as there shall continue to be no agreement upon such alternative basis, the Company shall be entitled to prepay part or all of the Drawings on the last day of an Interest Period upon 30 days' written notice from the Company to the Bank; (iv) if within 30 days of the date of service of the notice referred to in Clause 6.2(i) the Bank and the Company shall agree upon such an alternative basis, then such basis shall be effective in respect of the Drawings from (and, if applicable, retroactive to) the beginning of the Interest Period in respect of the Term Loan beginning on or after the date of service of such notice by the Bank to the expiry of the first Interest Period which expires after such circumstances no longer exist. 6.3 Default Interest 6.3.1 If the Company does not pay any sum due and payable under any of the Facilities on the due date the Company shall pay interest on such sum (or, as the case may be, the amount thereof for the time being due and unpaid) from such date to the date of actual payment in full (after as well as before judgment), calculated by reference to successive interest periods (each of such duration as the Bank may from time to time select and the first beginning on such due date) ("default interest periods") at the percentage rate per annum determined by the Bank to be the aggregate of:- (i) 2 per cent per annum; - 14 - (ii) the Margin; (iii) LIBOR; and (iv) Mandatory Liquid Asset Costs. 6.3.2 So long as the default continues, such rate shall be recalculated in accordance with the provisions of this Clause at the end of each such default interest period (the amount of unpaid interest accrued during such preceding default interest period in respect of such sum being added to the sum in default and bearing interest accordingly). 6.3.3 If the Company does not pay any sum due and payable under the Working Capital Facility, it shall pay interest on such sum (or, as the case may be, the amount thereof for the time being due and unpaid) from such date to the date of actual payment in full (after as well as before judgment), at a rate equal to 2 per cent. above the rates referred to in Clauses 6.1.3 and 6.1.4 as the case may be. 6.4 The Bank's Determination The determination by the Bank of any interest payable for any period or part thereof shall, save for manifest error, be conclusive. The Bank will notify the Company of the rate of interest payable for any default interest period, Interest Period or part thereof (and, in the case of additional interest payable under Clause 6.3, of the amount of such additional interest). 6.5 Calculation and Payment of Interest Interest on all Drawings or, as the case may require, other amounts due from the Company under this Agreement, at the rates determined as aforesaid shall:- (a) accrue from day to day; (b) be calculated on the basis of the actual number of days elapsed, and (i) a 365 day year or (ii) in respect of a sum due in US Dollars a 360 day year; and (c) except as otherwise provided in this Agreement be paid by the Company in arrear on each Interest Date and, if an Interest Period exceeds 6 months, every 6 months in arrear. 7. REPAYMENT 7.1 The Term Loan Facility 7.1.1 Subject to the terms of this Agreement, the Company shall until the Term Loan is repaid in full repay the Term Loan by payment to the Bank on the dates set out in Column A below (each date being an "Instalment Repayment Date") of the Sterling amount (together with any amount payable on such Instalment Repayment Date pursuant to Clause 7.1.2, an "Instalment") set out in Column B below opposite the relevant Instalment Repayment Date. - 15 -
Column A Column B -------- -------- pounds sterling 30 June 1995 300,000 31 December 1995 300,000 30 June 1996 1,400,000 31 December 1996 1,400,000 30 June 1997 1,900,000 31 December 1997 1,900,000 30 June 1998 1,900,000 31 December 1998 1,900,000 30 June 1999 2,000,000 31 December 1999 (the "Final Repayment Date") 2,000,000
7.1.2 Any amounts repaid or prepaid may not be reborrowed. 7.2 The Working Capital Facility 7.2.1 Subject to the other terms hereof, all amounts due under the Working Capital Facility shall be repaid on or before the Final Repayment Date whether outstanding by way of overdraft pursuant to Clause 5.2.2 or otherwise and including all payments, if any, to be made of cash collateral equal to the Bank's maximum liability (actual or contingent) in respect of the Bank Guarantees and the FFE Contracts. 7.2.2 Any part of the Working Capital Facility not utilised as at the close of business on the last day of the Commitment Period shall be automatically cancelled at that time. 8. PREPAYMENT OF THE TERM LOAN FACILITY 8.1 The Company may prepay all or any part of the Term Loan (the amount of any partial prepayment being, an integral multiple of pound sterling 100,000) on an Interest Date provided that the Bank shall have received not less than 10 days' prior irrevocable written notice of the Company's intention to make such prepayment specifying the amount to be prepaid. Notice of intended prepayment having been given, it shall be obligatory for the prepayment to be made in accordance with the notice. No amount prepaid may be re-drawn. 8.2 Any amount of the Term Loan prepaid pursuant to this Clause shall be applied in and towards the discharge of the Instalments outstanding at the date of such prepayment such that the amount prepaid shall be applied first, consecutively in respect of the next two Instalments falling after each prepayment date and second, pro rata to the remaining Instalments PROVIDED THAT if pursuant to this Clause a prepayment is applied, consecutively, against the next two Instalments in full, a repayment must be made in respect of the next Instalment on the relevant Instalment Repayment Date specified in Clause 7.1.1, before prepayments may be applied to the then immediately succeeding two Instalments. 8.3 If any repayment or prepayment is made otherwise than on an Interest Date relative to the amount paid, the Company shall pay to the Bank on demand such additional amount as the Bank may certify as necessary to compensate the Bank for any loss or expense on account of funds borrowed, contracted for or utilised to fund the amounts so repaid or prepaid beyond the above date. Any certificate issued by the Bank pursuant to this Clause (or under Clause 5.1.7) shall state the amount and show the calculation of any such loss or expense after giving credit for any incidental saving effected by the Bank in mitigation thereof, and shall be conclusive save in the case of manifest error. - 16 - 8.4 The Company may not prepay all or any part of the Term Loan except in accordance with the express terms of this Agreement. 9. CHANGE IN CIRCUMSTANCES 9.1 If the introduction of, or any change in, any applicable law, statute, rule or regulation or any change in the interpretation thereof by any regulatory or other authority charged with the administration thereof or by any court shall make it unlawful for the Bank to advance or leave outstanding the Term Loan or otherwise to maintain or give effect to its obligations under this Agreement the Bank shall notify the Company of such illegality and the Bank's obligations under this Agreement shall be forthwith cancelled and the Company shall, within such period (if any) as may be allowed by law or forthwith if no such period is allowed, prepay to the Bank the Term Loan. Any such prepayment shall be subject to Clause 8.3. Without prejudice to the Bank's rights under this Clause 9.1 the Bank will use reasonable endeavours to mitigate the effect of such illegality and in particular (without prejudice to the generality of the foregoing) shall consider in consultation with the Company continuing the Term Loan through another office or transferring the Facilities to one or more of its affiliates or other financial institutions. 9.2 If the introduction, abolition, withdrawal of, or any change in:- (a) any applicable law, regulation, practice or concession; or (b) any official directive or regulatory requirement or request (whether or not having the force of law) of the Bank of England, the European Community, or of any other governmental, monetary or other authority (whether in the United Kingdom or elsewhere) or any change in the interpretation (or introduction of any interpretation) or application thereof shall:- (i) subject the Bank to any Tax, or increase the amount of any Tax in connection with it having agreed to make available and maintaining the Term Loan or any part thereof or in connection with this Agreement or any of the Security Documents or any document or transaction contemplated herein or therein or any part thereof other than Corporation Tax on the Bank's overall net income; or (ii) change the basis of Taxation of the Bank in respect of payments of principal, interest or any other payment due or to become due in connection with the Facilities or any part thereof or in connection with this Agreement or any of the Security Documents or any document or transaction contemplated herein or therein or any part thereof (or the treatment for Taxation purposes of such payments); or (iii) change the basis on which the Bank is treated for Taxation purposes in respect of any principal, interest or other amounts paid by the Bank on, or otherwise in respect of, deposits from third parties used to effect or maintain the Term Loan or any part thereof or in connection with this Agreement or any of the Security Documents or any document or transaction contemplated herein or therein; or (iv) impose, modify or deem applicable any reserve, cash ratio, special deposit, capital adequacy, and/or liquidity requirement or any other analogous requirement, or require the making of any special deposits, against or in respect of any assets or liabilities of, deposits with or for the - 17 - account of, or loans by, the Bank for which the Bank is not entitled to be fully compensated under Clause 6.1.2; or (v) change the manner in which the Bank allocates capital resources to its obligations under the Facilities so that it is unable to obtain the rate of return on its overall capital which it would have been able to obtain but for its entering into and/or performing its obligations and/or assuming or maintaining its commitment under this Agreement; or (vi) impose on the Bank any other condition directly affecting its participation in the Facilities; and the result of any of the foregoing is either to increase the cost to the Bank of making available or maintaining the Term Loan or any part thereof or to reduce the amount of any payment received or receivable by the Bank or to reduce its return from the Facilities, then and in any such case:- (w) the Bank shall promptly notify the Company; (x) subject to the Bank taking the steps referred to in (y) below, the Company shall pay from time to time to the Bank on demand all amounts which the Bank certifies (in a certificate which shall set out in reasonable detail so far as is practicable the basis of the computation of such amounts) is necessary to compensate the Bank for the additional cost or reduction; (y) without prejudice to the foregoing, the Bank confirms that, if it notifies the Company as aforesaid, it will take such steps as it considers reasonable to reduce or avoid the additional cost or reduction and, if the Company so requests, the Bank shall consult the Company with a view to finding a means of reducing or avoiding the additional cost or reduction and, in particular, shall consider continuing the Term Loan through another office or, upon the written request of the Company, shall use all reasonable endeavours to assign the whole of its rights and obligations under this Agreement to another financial institution acceptable to the Company PROVIDED THAT the Bank shall not be obliged to continue such negotiations for a period of longer than 30 days; and (z) the Company, at any time after receipt of such notification as is referred to in (w) above, so long as the circumstances giving rise to such additional cost, or, as the case may be, reduction continue, shall be entitled on giving not less than 10 days' notice to the Bank (which shall be irrevocable) to prepay the Term Loan or any part thereof. Any such prepayment shall be subject to the provisions of Clause 8. 9.3 The certificate or notification of the Bank as to any of the matters referred to in Clauses 9.1 and 9.2 above shall, save for any manifest error, be conclusive and binding on the Company. 10. PAYMENTS 10.1 All payments to be made by the Company under this Agreement shall be made in immediately available funds during normal banking hours on the day in question to the Bank not later than 12.00 noon (London time) on such day. 10.2 If, but for this Clause, any sum would become due for payment under this Agreement on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day unless that next Business Day falls in the next - 18 - calendar month when payment shall be made on the immediately preceding Business Day and interest shall be adjusted accordingly. 10.3 The Company shall indemnify the Bank on demand against any loss or expense (including, but not limited to any loss of the Margin or any other loss or expense sustained or incurred or to be sustained or incurred by the Bank in liquidating or employing deposits required or contracted for to effect or maintain the Term Loan or any part thereof) which the Bank may sustain or incur as a consequence of (i) a default by the Company in the payment on the due date of any sum due under this Agreement or (ii) the repayment of the Term Loan pursuant to Clause 15. 10.4.1 All sums payable to the Bank pursuant to or in connection with this Agreement and the Security Documents, or any document contemplated by or entered into pursuant hereto or thereto, shall be paid in full without any set-off or counterclaim whatsoever and free and clear of all deductions or withholdings whatsoever save only as may be required by law. 10.4.2 If any deduction or withholding is required by law in respect of any payment due to the Bank pursuant to or in connection with this Agreement and the Security Documents, or any document contemplated by or entered into pursuant hereto or thereto, the Company shall:- (a) ensure or procure that the deduction or withholding is made and that it does not exceed the minimum legal requirement therefor, (b) pay, or procure the payment of, the full amount deducted or withheld to the relevant Taxation or other authority in accordance with the applicable law; (c) (i) if the payment is to be made by the Company, increase the payment in respect of which the deduction or withholding is required so that the net amount received by the Bank after the deduction or withholding (and after taking account of any Tax liability which arises as a consequence of the increase) shall be equal to the amount which the Bank would have been entitled to receive in the absence of any requirement to make a deduction or withholding; or (ii) if the payment Is to be made by any person other than the Company, pay directly to the Bank such sum (a "compensating sum") as will, after taking into account any Tax liability of the Bank in respect of the compensating sum, enable the Bank to receive, on the due date for payment, a net sum equal to the sum which the Bank would have received in the absence of any obligation to make a deduction or withholding; and (d) within 30 days of receipt deliver to the Bank appropriate receipts evidencing the deduction or withholding which has been made or procure the delivery of such receipts. 10.4.3 If the Bank determines, in its absolute discretion, that it has received, realised, utilised and retained a Tax benefit by reason of any deduction or withholding in respect of which the Company has made an increased payment or paid a compensating sum under this Clause 10.4, the Bank shall, provided it has received all amounts which are then due and payable by the Company and any other person under any of the provisions of this Agreement and the Security Documents, pay to the Company (to the extent that the Bank can do so without prejudicing the amount of such benefit, or repayment and the right of the Bank to obtain any other benefit - 19 - relief or allowance which may be available to it) such amount, if any, as the Bank in its absolute discretion shall determine will leave the Bank in no worse position than the Bank would have been in if the deduction or withholding had not been required PROVIDED THAT:- (1) the Bank shall have an absolute discretion as to the time at which and the order and manner in which it realises or utilises any Tax benefit and shall not be obliged to arrange its business and tax affairs in any particular way in order to be eligible for any credit or refund or similar benefit; (2) the Bank shall not be obliged to disclose any information regarding its business, tax affairs or tax computations; (3) if the Bank has made a payment to the Company pursuant to this Clause 10.4.3 on account of any Tax benefit and it subsequently transpires that the Bank did not receive that Tax benefit, or received a lesser Tax benefit, the Company shall on demand pay to the Bank such sum as the Bank may determine as being necessary to restore the after-tax position of the Bank to that which it would have been had no adjustment or the correct adjustment (as the case may require) under this proviso (3) been made. Any sums payable by the Company to the Bank under this proviso (3) shall be subject to the provisions of Clause 20.5; (4) the Bank shall not be obliged to make any payment under this Clause 10.4 if, by doing so, it would contravene the terms of any applicable law or any notice, direction or requirement of any governmental or regulatory authority (whether or not having the force of law). 10.5 If the Company is required to make an increased payment under Clause 10.4.2 above (but only so long as such requirement exists), subject to giving to the Bank not less than 10 days' prior written notice (which shall be irrevocable) the Company may prepay the Term Loan or any part thereof together with accrued interest thereon. Any such prepayment shall be subject to the provisions of Clause 8.3. 11. SECURITY 11.1 The obligations of the Company under this Agreement shall be secured by the interests and rights conferred on the Bank under the Security Documents. 11.2 It is hereby agreed that all obligations and liabilities of the Company to the Bank incurred under or in connection with the Interest Rate Protection Contracts shall be treated, for all purposes, as obligations and liabilities incurred under this Agreement and that, for the avoidance of doubt, the Company's obligations and liabilities under the Interest Rate Protection Contracts shall be secured pursuant to the terms of the Security Documents. 12. REPRESENTATIONS AND WARRANTIES 12.1 The Company acknowledges that the Bank has entered into this Agreement in full reliance on the following statements and hereby represents and warrants to the Bank that:- (a) each Group Company is a private limited company duly incorporated and validly existing under the laws of England and each of them possesses the capacity to sue and be sued in its own name and has the power to carry on its business as now being conducted and to own its property and other assets; - 20 - (b) each Group Company has or will have the power to execute, deliver and perform its obligations under each of the Facility Documents, the Acquisition Documents, and the Techdis Acquisition Agreement and any other document or instrument executed, delivered or to be executed or delivered by it under any of such documents; all necessary corporate, shareholder and other action has been taken or will be taken to authorise the execution, delivery and performance of the same and no limitation on its powers to borrow, to guarantee and to grant security will be exceeded as a result of the transactions contemplated by such documents; (c) the Facility Documents, the Acquisition Documents, the Techdis Acquisition Agreement and any other document or instrument executed or delivered or to be executed or delivered by any Group Company thereunder constitute or. as the case may be, will constitute valid and legally binding obligations of the Group Companies which are party thereto and, in the case of the Acquisition Agreement of Arrow; (d) the execution and delivery of the Facility Documents, the Acquisition Documents, the Techdis Acquisition Agreement and any other document or instrument executed or delivered or to be executed or delivered thereunder by any Group Company (as applicable), and the performance of obligations thereunder, and compliance with the provisions thereof, will not (i) contravene any existing applicable law, statute, rule or regulation or any judgment, decree or permit to which any of the same are subject, (ii) conflict with, or result in any breach of any of the terms of, or constitute a default under, any agreement or other instrument to which any Group Company is a party or is subject or by which it or any of its property is bound, (iii) contravene or conflict with any provision of the Memorandum and Articles of Association of any Group Company; (e) all licences, consents and authorisations as are or may be necessary to enable each Group Company to carry on its business at the date hereof and to perform its obligations under the Facility Documents (other than the Distribution Centre Mortgage, where this representation and warranty is given before the same has been duly executed and delivered), the Acquisition Agreement and the Techdis Acquisition Agreement and to fulfil the transactions contemplated thereby are in full force and effect; (f) no Group Company has taken any corporate action nor is any Group Company aware that any steps have been taken or legal proceedings started or threatened in writing against any Group Company for winding-up, dissolution or re-organisation or for the appointment of a receiver, administrative receiver, administrator, trustee or similar officer of it or of all or any material part of its assets (for the purposes of this representation and warranty "material" shall mean the aggregate amount of all claims arising under actions of the type referred to in this Clause 12.1(f) which amount shall not exceed 5 per cent of the consolidated net assets of the Group as shown by the latest Accounts); (g) no Group Company is in breach of or default under any agreement to which it is a party or which is binding on it or any of its assets to an extent or in a manner which would be likely to have a material adverse effect on the consolidated financial condition of the Group taken as a whole; (h) no legal action, litigation, or administrative proceeding is taking place or has been threatened in writing against any Group Company and, so far as - 21 - the Company is aware, no such legal action, litigation or administrative proceeding is pending or threatened; (i) Schedule 5 contains a true and complete list of all Group Companies all of which are beneficially owned (directly or indirectly) by the Company; (j) other than Permitted Encumbrances, no Encumbrance exists over all or any of the present or future revenues or assets of any Group Company; (k) the Reference Accounts were, save as specified therein, prepared in accordance with accounting principles generally accepted in the United Kingdom consistently applied and give a true and fair view of the state of affairs of the Company and its Subsidiaries and Jermyn and its Subsidiaries as at the date to which they are made up and as at such date there were no material liabilities of the Company and its Subsidiaries or Jermyn and its Subsidiaries which were not disclosed by or shown as being provided for in such accounts which ought to have been disclosed and (other than as disclosed in the Financial Information) since such date there has been no material adverse change in the consolidated financial condition or business of the Group taken as a whole; (l) all information prepared by the Company for inclusion in the Financial Information, or prepared by the Company and supplied to Messrs Ernst & Young for the purpose of compiling the Financial Information, was at 10th January 1992, in the case of factual information, true and correct in all material respects and, in the case of projections fair and reasonable and without prejudice to the generality of the foregoing:- (i) the forecasts contained in the Financial Information have been diligently prepared and the assumptions upon which they are based as to the future prospects of the business of the Group have been carefully considered and are honestly believed to be reasonable having regard to the information available and to the market conditions prevailing at the time of their preparation and that the Company has made all reasonable enquiries so as to ascertain (so far as possible) all such information and market conditions which are relevant to their preparation; and (ii) save as disclosed in the Financial Information there is no fact or matter known to the Company concerning the business or the affairs of the Group or relating to the Financial Information which is or might be material for disclosure to a lender contemplating granting facilities to the Company of the kind provided for in this Agreement and on the terms of this Agreement; (m) the Accounts have been prepared in accordance with GAAP and give a true and fair view of the state of affairs of the Group as at the date to which they are made up and as at such date there were no material liabilities of any Group Company not disclosed in the Accounts which ought to have been disclosed and (other than as disclosed in the Financial Information) since such date there has been no material adverse change in the financial condition or prospects of the Group; - 22 - (n) the copies of the Memorandum and Articles of Association and Certificate of Incorporation of each Charging Group Company and of the resolutions of the boards of each of those companies certified by their respective duly authorised officers produced to the Bank on or prior to 22nd December 1994 are true up to date and complete copies; (o) save pursuant to the Shares Charge, none of the share capital of any Group Company is under option or mortgaged or charged or otherwise encumbered; (p) (a) no Encumbrances save for Permitted Encumbrances will exist over any assets of any Group Company (save pursuant to the Security Documents); and (b) no Group Company will have any Indebtedness outstanding (save under this Agreement, or otherwise permitted under Clause 13.4(f); (q) Arrow, EDI and any other Subsidiary of Arrow, between them, beneficially own at least 75% of the issued share capital of the Company; and (r) Arrow beneficially owns at least 51% of the issued share capital of EDI. 12.2 The representations and warranties set out in Clause 12.1(a) through (o) inclusive shall survive the execution of this Agreement and the making of each Drawing and subject to Clause 12.3 shall be deemed to be repeated by the Company on each Drawdown Date and on each Interest Date as if made with reference to the facts and circumstances existing at that time save that:- (a) the representation and warranty contained in Clause 12.1(h) shall, when repeated on each Interest Date and Drawdown Date, be qualified by the addition at the end of the words "which would be likely to have a material adverse affect on the financial condition of the Group taken as a whole"; (b) without prejudice to the rights of the Bank in respect of the period prior thereto, if at any time after 22nd December 1994 it transpires that any of such representations and warranties are incorrect as at the date hereof or such Drawdown Date, the representations and warranties contained in sub-Clauses (i), (l) and (n) shall not be repeated on each Interest Date or Drawdown Date; (c) the representation and warranty contained in Clause 12.1(k) shall not be given until the first Drawdown Date after the Reference Accounts are finalised and dated. 12.3 The Company may, before each Drawdown Date under the Term Loan Facility or each Interest Date, disclose to the Bank in writing such facts and circumstances as the Company considers relevant to qualify any such representation and warranty save in respect of the representations and warranties repeated at Clause 12.1(h), (i) and (j). Thereafter on each occasion when such representation and warranty is deemed to be repeated, it shall be deemed to be qualified by such disclosure, and the Company shall be deemed to make a further representation and warranty, to be repeated on each Drawdown Date and each Interest Date with reference to the facts and circumstances existing at that time, that such disclosed facts and circumstances are true and subsisting respectively and it is expressly agreed such disclosure shall only affect the provisions of Clause 15.1(c). - 23 - 13. UNDERTAKINGS 13.1 During the Security Period the Company undertakes with the Bank to:- (a) inform the Bank of any occurrence (including without limitation any third party claim or liability) of which it becomes aware which would or would be likely to affect adversely its ability to perform its obligations under the Facility Documents and of any Default or Potential Default, promptly upon becoming aware thereof, and will from time to time, if so requested by the Bank, confirm to the Bank in writing that, save as otherwise stated in such confirmation, no such occurrence or Default or Potential Default has occurred and is continuing; (b) as soon as the same become available, but in any event within 120 days after the end of each of its Financial Years, deliver to the Bank 2 prints of its Accounts for such Financial Year together with the Auditor's report thereon and a copy of the management letter (if any) addressed by the Auditors to the directors in connection with the auditing of such Accounts together with 2 prints of the audited accounts of each Group Company in the form that is required to be registered with the Registrar of Companies; (c) provide the Bank as soon as available (and, in any event within 30 days of the end of each month with monthly management accounts (incorporating profit and loss accounts, balance sheets and cash flow summaries) relating to the Group in a form satisfactory to the Bank together with revised cash flow forecasts showing the position for the balance of each then current Financial Year in a form satisfactory to the Bank and in a form which can be compared with the projections provided to the Bank under Clause 13.1(d) below together with a commentary on significant variances against such projections provided to the Bank; (d) (i) prior to the end of each Financial Year deliver to the Bank copies of such budgetary information as is then available in such form as then prepared and (ii) as soon as the following is available but in any event no later than 60 days after the commencement of each successive financial year, deliver to the Bank 2 copies of a projected consolidated profit and loss account, balance sheet and cash flow statement (including details of cash disbursements), and a projected consolidated statement of the source and application of funds for the Group for that Financial Year, which shall be broken down to show the consolidated position of the Group as at the end of each month, (e) maintain the accounting reference date of each member of the Group at 31st December; (f) furnish to the Bank such information about the business, financial condition, operations and prospects of any Group Company as the Bank may from time to time reasonably require; (g) promptly inform the Bank of:- (i) any acquisition of beneficial ownership of common stock in Arrow amounting (whether by one transaction or a series of transactions) to 5% or more of the then issued common stock of Arrow; or - 24 - (ii) any acquisition of 5% or more of the then issued common stock of Arrow by any beneficial owner of 5% or more of the then issued common stock of Arrow; or (iii) any change in the beneficial ownership of any common stock in Arrow relevant to the provisions of Clause 15.1(r); in any such case of which it or any of its directors are aware, promptly after becoming so aware. 13.2 Except as the Bank may otherwise agree in writing, the Company hereby undertakes with the Bank that during the Security Period:- (a) the ratio of EBIT to Total Interest Costs in respect of each Financial Year of the Company ending on each date referred to in Column A below shall not be less than the ratio set out in Column B below opposite such date:
Column A Column B -------- -------- 31st December 1994 5.30:1 31st December 1995 2.80:1 31st December 1996 3.90:1 31st December 1997 4.80:1 31st December 1998 4.80:1
(b) the ratio of Total Debt to Tangible Net Worth of the Group for each Financial Year of the Company ending on a date listed in Column A below shall not at any time during such Financial Year exceed the ratio set opposite each date in Column B below:
Column A Column B -------- -------- 31st December 1994 0.60:1 31st December 1995 0.55:1 31st December 1996 0.40:1 31st December 1997 0.30:1 31st December 1998 0.30:1 31st December 1999 0.30:1
(c) the Capital Expenditure for the Group in each of the Financial Year of the Company ending on a date listed in Column A below will not exceed the figure stated in Column B below:
Column A Column B -------- -------- 31st December 1994 Pound Sterling 4,800,000 31st December 1995 Pound Sterling 5,000,000 31st December 1996 Pound Sterling 2,000,000 31st December 1997 Pound Sterling 2,000,000 31st December 1998 Pound Sterling 2,000,000 31st December 1999 Pound Sterling 2,000,000
(d) it will seek to procure (so far as the Company is able to do) that the Auditors will at the Company's cost on the adoption of the Accounts for each Financial Year of the Company give a certificate in a form satisfactory to the Bank certifying that the Company is not in breach of the financial covenants set out in Clauses 13.2 (a), (b) and (c) for the period or at the year end in respect of which the Accounts are made up. - 25 - 13.3 During the Security Period, the Company shall itself and (where applicable) shall procure that each of the other members of the Group shall, save with the prior written consent of the Bank (such consent not to be unreasonably withheld or delayed):- (a) do all things within its control necessary to maintain its corporate existence; (b) ensure that it has the right and is duly qualified to conduct its business as it is conducted in all applicable jurisdictions, and will use its reasonable endeavours to obtain and maintain all rights necessary for the conduct of its business; (c) carry on its business in a prudent manner, taking into account the type of business involved and its usual practice; (d) ensure that its assets are kept in good and substantial repair and that it complies with any contractual obligations relating to repair of such assets, subject to the provisions of the Security Documents; (e) at all times comply substantially with all laws and regulations of significant effect to it in respect of the conduct of the Group's business and obtain and maintain in full force and effect all governmental and other regulatory consents, licences and approvals required for the conduct of any part of the Group's business and notify the Bank in writing promptly upon its learning of any violation by any Group Company of any law, statute, regulation or ordinance of any government entity, or of any agent thereof, applicable to any Group Company which violation in any respect would or is likely materially and adversely to affect the Group's business or the security constituted by any of the Security Documents; (f) effect and maintain insurance over and in respect of its business and assets (including insurance against the loss of profits) against such risks and in such amounts as the Bank may from time to time require, and, in any event, against such risks and for such amounts as is normal for a business of the type being carried on by the relevant Group Company, and, on demand, produce to the Bank receipts for the last premiums payable in respect of such insurances; (g) apply the proceeds of insurances (i) insofar as they represent the destruction of a capital asset either in replacement thereof or in the purchase of a capital asset of a similar nature or purpose or in prepayment (or permanent reduction) of first, the Term Loan and second, the Working Capital Facility Liabilities and (ii) insofar as they represent damage to any asset in repair or replacement of that asset or in the purchase of a capital asset of a similar nature or purpose or in prepayment of first, the Term Loan and second, the Working Capital Facility Liabilities; (h) promptly after the same are instituted and served upon the relevant Group Company or, to its knowledge, threatened, provide details to the Bank of any litigation, arbitration or administrative proceedings which affect any Group Company and which involve liability or potential liability (other than costs) in aggregate in excess of pound sterling 300,000; (i) permit the Bank and any person (being an accountant, auditor, solicitor, valuer or other professional advisor to the Bank, or an officer or employee of any subsidiary of the Bank authorised by the Bank) to have, - 26 - at all reasonable times during normal business hours and on reasonable notice subject to such persons being bound by similar codes of confidentiality to that owed by a bank to its customer, access to the premises and accounting books and other financial records of any Group Company, to make extracts from and take copies of any such books or records, and to discuss any matter with its officers; (j) promptly upon registration of any transfer of any shares in the Company, inform the Bank of such transfer, and promptly inform the Bank of any change in the beneficial ownership of any such shares, of which the Company or its directors become aware; (k) procure that any company which becomes a Group Company, and which is not a Group Dormant Company, executes such guarantees and charges (if appropriate in substantially the form of the Guarantee and the Debenture) in favour of the Bank as the Bank may lawfully require; (l) take all necessary steps to ensure that no payment of principal, interest or other sums made to the Bank under this Agreement or the Security Documents is made in breach of the provisions of any applicable law including, in particular Sections 151-158 (inclusive) of the Companies Act 1985; (m) pay and discharge all Taxes and governmental charges prior to the date on which the same become overdue unless, and only to the extent that, such Taxes and charges shall be contested in good faith by appropriate proceedings, pending determination of which payment may lawfully be withheld, and there shall be set aside adequate reserves with respect to any such Taxes or charges so contested in accordance with GAAP; (n) procure that all Indebtedness (other than Indebtedness arising in the ordinary course of trading) of any Group Company to Arrow or any Subsidiary of Arrow other than a Group Company is subordinated to the Indebtedness owing to the Bank hereunder in terms satisfactory to the Bank; (o) within 90 days after the date hereof the Company and all other Group Companies or its Subsidiaries shall (where appropriate) have opened all necessary accounts with the Bank and maintain all of the Group's UK transmission banking business with the Bank; and (p) procure that (i) the Group Dormant Companies shall not all together own, beneficially or legally, any property or assets whose aggregate value exceeds pound sterling 5,000 in total, and that (ii) no Group Dormant Company shall carry on any business or trading or other activity unless (x) in the case of (i) such Group Dormant Companies as shall be necessary to ensure the remaining Group Dormant Companies comply with (i) and, in the case of (ii) that Group Dormant Company, have first executed and delivered to the Bank a Guarantee and Debenture substantially in the form of the Guarantee and the Debenture, and (y) the condition in Clause 13.3(1) in relation to the Company has been satisfied in relation to that Group Dormant Company mutatis mutandis. 13.4 During the Security Period the Company shall not, and shall procure that no Group Company will, without the prior written consent of the Bank (such consent not to be unreasonably withheld or delayed):- - 27 - (a) make any change in its business as presently conducted, which would result in a substantial change in the business carried on by the Group as a whole, or carry on any other business which is substantial in relation to the business of the Group as presently conducted; (b) sell, transfer, lease or otherwise dispose of all or part of its assets, other than:- (i) sales of stock made in the ordinary course of trading on normal credit terms taking into account the type of business involved and the Company's usual practice, (ii) disposals by one Group Company to another Group Company provided that the Group Company receiving the asset:- (a) is a wholly owned Subsidiary of the Company incorporated in England; (b) has net assets both before and after receiving the asset; and (c) is a Charging Group Company; (iii) disposals of assets for market value on an arms-length basis for consideration payable on normal commercial terms where the consideration does not exceed pound sterling 200,000 for each individual asset; (c) sell or otherwise dispose of any asset on terms whereby such asset is or may be leased to or re-acquired on credit terms by itself or any other Group Company; (d) acquire any asset (other than the Distribution Centre Property) which costs more than pound sterling 25,000 otherwise than in the ordinary course and for the purposes of its business (other than the acquisition of Techdis under the Techdis Acquisition Agreement); (e) enter or contract to enter into any hire purchase, conditional sale or leasing agreement in respect of any asset, where the consideration payable (or where the market value of the asset) exceeds pound sterling 50,000; (f) incur or permit to subsist any Indebtedness which when aggregated with the Indebtedness of other members of the Group from time to time will exceed pound sterling 750,000 other than:- (i) pursuant to this Agreement; (ii) as subordinated under a subordination agreement entered into pursuant to Clause 13.3(n); and (iii) Indebtedness owed by one Group Company to another Group Company provided that both Group Companies are wholly owned subsidiaries (direct or indirect) of the Company, and have guaranteed the obligations of the Company to the Bank under this Agreement supported by mortgage debentures or such other security as the Bank may require; - 28 - (g) create or permit to subsist any Encumbrance, other than Permitted Encumbrances; (h) pay any fees or commissions to any person other than on arms-length terms, and for the purposes of carrying on its business; (i) make any loans or give any credit (other than normal trade credit) to any person, or give any guarantee or indemnity in respect of the obligations of any person other than:- (i) pursuant to this Agreement; (ii) the making of loans or giving of credit to any Charging Group Company; (iii) loans to employees of any Charging Group Company; (j) incorporate or acquire any Subsidiary which is not a subsidiary immediately after Completion (other than Techdis and MMD); (k) agree to any variation or amendment of:- (i) the Acquisition Documents and the Techdis Acquisition Agreement (other than of an administrative nature); (ii) the Memorandum and Articles of Association of the Company or any other Group Company; (l) declare or pay any dividend or other distribution in respect of the share capital of any class in the Company or any other Group Company unless payable to another Group Company in the UK; (m) redeem or purchase any shares in the capital of the Company or any other Group Company, or reduce the share capital of the Company or any other Group Company; (n) merge or consolidate with any other person; (o) cease to be resident in the United Kingdom or transfer in whole or in part the business or trade of the Company and each Group Company to a person who is not resident in the United Kingdom; and (p) use or purport to use or apply any asset of any Group Company for any purpose which shall cause any Group Company to be in breach of s.151 of the Companies Act 1985. 14. FEES 14.1 The Company shall pay to the Bank a fee of 0.375 per cent. per annum on the difference between the Term Loan Facility Limit and the Term Loan. Such fee shall accrue from day to day on the basis of the actual number of days elapsed and a year of 365 days, shall be payable quarterly in arrears and on the Final Repayment Date, the first such payment to be made three months from the date hereof. 14.2 All fees are exclusive of any VAT thereon which, if chargeable, shall be paid by the Company. - 29 - 15. DEFAULT 15.1 Without prejudice to the Bank's rights under Clause 7 (Repayment) if:- (a) any amount due and payable under this Agreement is not paid on the due date save that if the relevant payment is not received on the due date resulting either (i) from a technical failure in the CHAPS or other banking transmission system used for the payment of sums hereunder, or (ii) the inadvertent failure by the Company to make such relevant payment on the due date therefor, then there shall not be a Default hereunder until 3 Business Days including the original date for payment have elapsed PROVIDED THAT the Bank shall, in the case of the circumstances set out in Clause 15.1(a)(ii), be satisfied that such failure was inadvertent; or (b) the Company or any Charging Group Company is in breach of or fails to comply in full with any provision of, or undertakings on its part contained in, any of this Agreement and the Security Documents, other than an obligation of the type referred to in Clause 15.1(a) which, in any case, in the Bank's opinion has or will have a material adverse effect on the ability of the Company or any Charging Group Company to perform its obligations hereunder or under the Security Documents and, if capable of remedy, is not remedied within 10 Business Days of such breach or failure; or (c) any representation, warranty or statement made to the Bank in this Agreement, the Security Documents or any certificate or document delivered by the Company or any Charging Group Company pursuant hereto or thereto is or proves to be incorrect, in the case of statements of fact, or not fair and reasonable, in the case of views, opinions, projections or forecasts, in each case when made or deemed to be repeated, in a manner which in the Bank's reasonable opinion has or will have a material adverse effect on the ability of the Company or any Charging Group Company to perform its obligations hereunder or under the Security Documents; or (d) any Indebtedness of any Group Company (other than as subordinated under a subordination agreement entered into pursuant to Clause 13.3(n)) is not paid within 5 Business Days after the due date or upon the expiry of any applicable grace period or is declared to be or otherwise becomes due and payable prior to its specified maturity date or any creditor or creditors of any Group Company becomes entitled to declare any Indebtedness of any Group Company due and payable prior to its specified maturity date or any such Indebtedness to a creditor or creditors of any Group Company becomes capable of being declared due and payable prior to its stated maturity as a result of a default which is analogous to those set out in this Clause 15; or (e) a creditor attaches or takes possession of, or a distress, execution, sequestration or other process is levied or enforced upon or sued out against, the whole or any part of the undertakings, assets, rights or revenues of any Group Company and is not discharged within 10 Business Days; or (f) the whole or any material part (for the purposes of this Clause 15.1(f) "material" shall mean a value of the assets of the Group in aggregate of pound sterling 300,000 calculated by reference to the latest Accounts delivered to the Bank as varied, if relevant, by the management accounts delivered to the - 30 - Bank pursuant to Clause 13. 1 (c)) of the security granted under the Security Documents fails or ceases to have full force and effect or to be continuing or is terminated (or purported to be terminated) or disputed or becomes the subject of a bona fide dispute, in jeopardy, invalid or unenforceable; or (g) any Group Company suspends payment of its debts or is unable or admits inability to pay its debts as they fall due or commences negotiations with one or more of its creditors with a view to the general readjustment or rescheduling of all or part of its Indebtedness or proposes, or enters into any composition or other arrangement for the benefit of its creditors generally or any class of creditors or proceedings are commenced in relation to any member of the Group under any law, regulation or procedure relating to reconstruction or readjustments of debts; or (h) any Group Company takes any action, or any legal proceedings which are not of a vexatious or frivolous nature are started or other steps which are not of a vexatious or frivolous nature are taken for (i) such company to be adjudicated or found bankrupt or insolvent (ii) the winding-up or dissolution of such company or (iii) the appointment of a liquidator or trustee or of a receiver, administrative receiver, or similar officer of such company or the whole or any part of its undertakings, assets, rights or revenues in respect of which the relevant Group Company has not commenced legal proceedings to discharge the same within 5 Business Days of becoming aware of such proceedings or steps other than pursuant to a solvent member's voluntary liquidation or a solvent scheme of arrangement or reconstruction, the terms of which have in each case been previously approved by the Bank (such consent not to be unreasonably withheld or delayed); or (i) an application is made to the Court for an administration order under the Insolvency Act 1986 in relation to any Group Company; or (j) any event or proceeding is taken with respect to any Group Company in any jurisdiction to which it is subject which has an effect substantially similar to any one of the events mentioned in Clauses 15.1 (g), (h) or (i); or (k) any Group Company suspends or ceases or threatens to suspend or cease to carry on its business other than as a result of the transfer by one Group Company to another Group Company (the recipient fulfilling the conditions set out in Clause 13.4(b)(ii)(a) through (c) inclusive of the whole or a substantial part of its business, or (l) any encumbrancer takes possession of or a receiver is appointed of all or any part of the property and assets of any Charging Group Company provided always that the amount of all claims by all such encumbrances only, shall not exceed in aggregate pound sterling 300,000 (calculated by reference to the latest Accounts delivered to the Bank as varied, if relevant, by the management accounts delivered to the Bank pursuant to Clause 13.1(c) of the Charging Group taken as a whole; or (m) any licence, authorisation. consent or approval at any time necessary to enable any Group Company to conduct its business shall be avoided, withheld or materially modified or shall fail to remain in full force and effect, or the terms upon which the same have been granted are not for the time being complied with and the result or effect of any such event or - 31 - occurrence is such as materially to prejudice, in the Bank's reasonable opinion, its interests under the Facility Documents; or (n) at any time there occurs a change in the financial condition or prospects of the Group taken as a whole, which event, in the Bank's reasonable opinion, has or could be expected to have a material adverse effect on the ability of the Company to perform its obligations hereunder; or (o) (i) any of Arrow, EDI, or any subsidiary of Arrow or EDI accounting for at least 10% of Arrow's tangible net worth calculated in accordance with generally accepted accounting principles used in the U.S.A., shall voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code or any other Federal or state bankruptcy, insolvency, liquidation or similar law; or (ii) any of Arrow, EDI and any subsidiary of Arrow or EDI other than a Group Company shall (i) consent to the institution of, or fail to contravene in a timely and appropriate manner, any such proceeding or the filing of any such petition as mentioned in sub-paragraph (i) above, (ii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator or similar official for itself or for a substantial part of its property or assets, (iii) file an answer admitting the material allegations of a petition filed against it in any such proceedings, (iv) make a general assignment for the benefit of creditors, (v) become unable, admit in writing its inability or fail generally to pay its debts as they become due, or (vi) take corporate or other action for the purpose of effecting any of the foregoing; or (iii) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of any of Arrow, EDI and any subsidiary of Arrow or EDI other than a Group Company, or a substantial part of the property or assets of any of Arrow, EDI and any subsidiary of Arrow or EDI under Title 11 of the United States Code or any other Federal or state bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator or similar official for any of Arrow, EDI and any subsidiary of Arrow or EDI other than a Group Company or for a substantial part of the property of any of Arrow or EDI; and the relevant company has not commenced legal proceedings in order to dismiss or unstay such proceeding or petition within 10 days of becoming aware of the same or there shall be entered an order or decree approving or ordering any of the foregoing; or (iv) any event occurs or proceeding is taken with respect to any of Arrow, EDI and any subsidiary of Arrow or EDI other than a Group Company in any jurisdiction to which such company is subject which has an effect equivalent or similar to any of the events mentioned in paragraphs (i) to (iii) above; or (p) all or any part of the property or undertakings of any Group Company is compulsorily acquired by or by the order of any local or other governmental authority and as a result the business of the Group taken as a whole is materially adversely affected; or - 32 - (q) whilst it remains the immediate holding company of the Company, EDI ceases to be a wholly-owned subsidiary of Arrow, or the Company ceases to be a Subsidiary of EDI, in each case other than by way of transfer of the whole or any part of the share capital of EDI or the Company to another Subsidiary of Arrow provided always that security shall be granted to the Bank in substantially the same form as the Bank's security at the date hereof and a subordination agreement as the Bank considers necessary shall be entered into by the Company and that Subsidiary other than pursuant to a solvent members' voluntary liquidation or a solvent scheme of arrangement or reconstruction, in any such case carried out with the prior written consent of the Bank (such consent not to be unreasonably withheld or delayed), where the resulting entity forthwith gives a guarantee and debenture or such other security as the Bank shall require to the Bank in such form as the Bank shall require; or (r) the common stock of Arrow ceases permanently to be dealt in or is suspended for a period exceeding 5 Business Days on a recognised stock exchange; or any person or persons acting together acquire common stock in Arrow which, when aggregated with common stock already owned by any of them, entities such person or persons to exercise or control the exercise of 50% or more of the votes exercisable at shareholders' meetings of Arrow; or (s) any event occurs or proceeding is taken with respect to any holding company of the Company other than Arrow or any Subsidiary of Arrow to which Clause 15.1 (o) applies in any jurisdiction which such holding company is subject which has an effect equivalent or similar to any of the events mentioned in Clause 15.1(g),(h) or (i); or (t) the facts or circumstances revealed by any disclosure under Clause 12.3 are such that in the opinion of the Bank (acting reasonably), they would or would be likely to prejudice materially the ability of the Company to meet its obligations under this Agreement or any of the Security Documents PROVIDED THAT for the avoidance of doubt, such opinion may be formed by the Bank at any time after the disclosure under Clause 12.3 has been made, whether before or at the time of or after any repetition or repetitions under Clause 12 of the relevant representation and warranty; or (v) any Arrow Inc Indebtedness in excess of, in aggregate US $10,000,000: (i) is declared to be or otherwise becomes due and payable prior to its specified maturity and is not discharged within 10 Business Days; or (ii) is not paid when due or within any applicable grace period; or any creditor or creditors of Arrow or any of its subsidiaries (incorporated in the USA) exercise any right they may have to preclude Arrow or any of its subsidiaries (incorporated in the USA) from extending credit or making advances to the Company; then such event shall constitute a Default and at any time when any Default remains unremedied (save in the case of a Default by any Group Company, except for the Company, when a Default shall only occur if such Default shall, in the opinion of the Bank, be such that such Group Company or the Company is unable to meet its obligations under this Agreement or the Security Documents) the Bank may, by notice to the Company, cancel the Facilities and require the Company immediately - 33 - to repay the Term Loan together with accrued interest thereon and immediately to pay all other sums payable under the Facility Documents, whereupon the same shall become immediately due and payable. 15.2 If a Default has occurred then the Bank shall be entitled, but not obliged, to appoint any firm of chartered accountants, to undertake such investigations in the Company as it requires. Clause 20.2 shall, mutatis mutandis, apply to the costs incurred as a result of the implementation of the provisions of this Clause 15.2. 16. SET-OFF The Company authorises the Bank to apply any credit balance on any account of the Company with the Bank in satisfaction of any sum due and payable by the Company to the Bank and for this purpose the Bank is authorised to purchase with the money standing to the credit of any such account such other currencies as may be necessary to effect such application. 17. SEVERABILITY, WAIVERS, REMEDIES CUMULATIVE 17.1 If at any time any provision hereof is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction neither the legality, validity or enforceability of the remaining provisions hereof nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. 17.2 No failure to exercise, nor any delay in exercising, any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise thereof or the exercise of any other right or remedy. The rights and remedies herein provided are cumulative and not exclusive of any fights or remedies provided by law. 18. NOTICES 18.1 Each communication to be made hereunder shall be made in writing and may be made by letter or facsimile, and each communication by the Bank hereunder shall be copied to Arrow at the address set out in Clause 18.3(C) PROVIDED THAT inadvertent failure to send such copy communication or for Arrow to receive the same shall not invalidate the service of any communication hereunder AND PROVIDED FURTHER THAT each communication to the Bank shall be delivered to all addresses (A1), (A2) and (A3) save for communications pursuant to Clause 13.1 which shall be sent only to the Bank addressee at the address set out in (A2). 18.2 Any communication or document to be made or delivered by one person to another pursuant to this Agreement shall (unless the one has by 15 days' written notice to the other specified another address) be made or delivered to that other person at the address given in Clause 18.3. - 34 - 18.3 The addresses referred to in Clause 18.2 above are:- (A1) for notices to the Bank:- National Westminster Bank Plc Corporate Banking Group National Westminster House Trinity Gardens 9-11 Bromham Road Bedford MK40 2UQ Attention: George Derbyshire Facsimile: 0234 272503 (A2) National Westminster Bank Plc Acquisition Finance 135 Bishopsgate London EC2M 3UR Attention: P.A.S.C. Harmer Facsimile: 071 375 5464 (A3) National Westminster Bank Plc Group Treasury Settlement Level 6 King's Cross House 200 Pentonville Road London N1 9HL Attention: Manager, Commercial Loans Facsimile: 071 239 8257 (B1) for notices to the Company: Arrow Electronics (UK) Limited St. Martins Business Centre Cambridge Road Bedford MK42 OLF Attention: Managing Director Facsimile: 0234 211434 (B2) Arrow Electronics (UK) Limited Unit 11 Vestry Road Industrial Estate Sevenoaks Kent TN14 5EU Attention: Alistair Oag Facsimile: 0732 740394 (C) for copies to Arrow: Arrow Electronics, Inc. 25 Hub Drive Melville New York USA - 35 - Attention: R.E. Klatell Facsimile: 0101 516 391 1683 18.4 Any notice to the Company shall be deemed to have been given:- (a) if sent by facsimile transmission, on the Business Day on which transmitted or if it is transmitted on a day which is not a Business Day or after 5.30 p.m. on any Business Day, on the next following Business Day; (b) in the case of a written notice lodged by hand at the time of actual delivery or if it is delivered on a day which is not a Business Day or after 5.30 p.m. on any Business Day, on the next following Business Day; (c) if posted, on the second Business Day following the day on which it was properly despatched by first class mail postage prepaid. 18.5 Any notice to the Bank shall be deemed to have been given only on actual receipt by each of the addressees referred to in (A1), (A2) and (A3) above. 19. ASSIGMENTS 19.1 This agreement shall be binding upon and enure to the benefit of the parties hereto and their respective successors and assigns. 19.2 The Company may not assign or transfer all or any of its rights, benefits and obligations hereunder without the prior written consent of the Bank. 19.3 The Bank may assign or transfer any of its rights and obligations under this Agreement to any Qualifying Bank and the Company shall enter into such documents as the Bank shall require to effect or perfect any such transfer or novate any of the Bank's obligations to the transferee. 19.4 The Bank may, after it has informed the Company, disclose to a proposed assignee, transferee or other person proposing to enter into a contract with the Bank regarding this Agreement such information in the possession of the Bank relating to the Company, including, without limitation, this Agreement, the Security Documents and any of the Financial Information, as it sees fit provided that it shall require any proposed assignee or transferee to enter into a confidentiality undertaking acceptable to the Bank and the Company (acting reasonably). 20. COSTS AND EXPENSES 20.1 The Company undertakes on demand, to reimburse the Bank all out-of-pocket costs and expenses (including legal, audit and valuation fees) reasonably incurred by it in the review, negotiation, preparation and execution of the Facility Documents, the Acquisition Agreement, the Techdis Acquisition Agreement and any other documents incidental hereto or thereto. 20.2 The Company shall from time to time on demand reimburse the Bank for all costs and expenses (including legal fees) incurred in or in connection with the preservation and/or enforcement of any of the rights of the Bank under the Facility Documents or in connection with any proposed amendment to any of the Facility Documents or any request for a consent or waiver hereunder or thereunder. - 36 - 20.3 All stamp, documentary, registration or other like duties or Taxes, including any penalties, additions, fines, surcharges or interest relating thereto, which are imposed or chargeable on or in connection with any of the Facility Documents shall be paid by the Company. 20.4 (a) Subject to Clause (b) below, any VAT payable in respect of any supply for VAT purposes made pursuant to or in connection with any of the Facility Documents or any transaction or document contemplated herein or therein made by the Bank shall be paid on demand to the Bank by the Company and the Bank shall issue or procure the issue of a VAT invoice in respect of each such payment. (b) All payments made by the Company under this Agreement and the Security Documents are calculated without regard to VAT. If any such payment constitutes the whole or any part of the consideration for a taxable or deemed taxable supply (whether that supply is taxable pursuant to the exercise of an option or otherwise) by the Bank, the amount of that payment shall be increased by an amount equal to the amount of VAT which is chargeable in respect of the taxable supply in question. (c) No payment or other consideration to be made or furnished by the Bank to the Company pursuant to or in connection with this Agreement or the Security Documents or any transaction or document contemplated herein or therein may be increased or added to by reference to (or as a result of any increase in the rate of) VAT which shall be or may become chargeable in respect of the taxable supply in question. 20.5 If the Bank makes a payment or suffers a loss in respect of which it is entitled to be indemnified or reimbursed by the Company pursuant to any provision of any of the Facility Documents and the Bank is advised by the Bank's auditors that:- (i) the loss or payment is not or is unlikely to be deductible or wholly deductible in computing the profits of the Bank for the purposes of Tax whilst the payment to be made by way of indemnity or reimbursement (for the purpose of this Clause 20.5, the "Payment") by the Company will or is likely to be taxable or partly taxable in the Bank's hands; or (ii) the Payment is or is likely to be taxable or partly taxable in the Bank's hands in any accounting period of the Bank earlier than the accounting period in which the loss or payment is or is likely to be deductible; then:- the Payment shall be increased to an amount ("the grossed-up Payment") which is certified by the Bank's auditors as being equal, after taking into account any Tax liability likely to be suffered or incurred by the Bank in respect of the grossed-up Payment, to the amount that would have been received by the Bank if the Payment by the Company had not been taxable PROVIDED THAT if it is subsequently certified by the Bank's auditors that any payment by the Company to the Bank under this Clause 20.5 by way of grossed-up Payment was calculated on an incorrect basis, such adjustment shall be made as between the Bank and the Company as the Bank's auditors may certify to be necessary to restore the after-tax position of the Bank to that which it would have been if no such adjustment had been necessary. - 37 - 21. CURRENCY INDEMNITY Any payment or payments made to or for the account of or received by the Bank in respect of any monies or liabilities due, arising or incurred by the Company to the Bank in a currency (the "Currency of Payment") other than the currency in which the payment should have been made pursuant to this Agreement (the "Currency of Obligation") in whatever circumstances (including, without limitation, as a result of a judgment against the Company) and for whatever reason shall only constitute a discharge to the Company to the extent of the Currency of Obligation amount which the Bank is able on the date or dates of receipt of such payment or payments (or if not a Business Day on the next succeeding Business Day) to purchase with the Currency of Payment amount in the London foreign exchange market. If the amount of the Currency of Obligation which the Bank is so able to purchase falls short of the amount originally due to the Bank under this Agreement, then the Company shall indemnify and hold the Bank harmless against any loss or damage arising as a result thereof by paying to the Bank that amount in the Currency of Obligation certified by the Bank as necessary so to indemnify it (and, for the avoidance of doubt, the provisions of this Clause 21 shall apply to any monies payable pursuant to this Clause 21). It is hereby declared that this indemnity shall constitute a separate and independent obligation from the other obligations contained in this Agreement, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted from time to time and shall continue in full force and effect notwithstanding any judgment or order for a liquidated sum or sums in respect of amounts due under this Agreement or under any such judgment or order. The certificate of the Bank as to the amount of any such loss or damage shall, in the absence of manifest error, be conclusive and binding on the Company. 22. PUBLICITY 22.1 The Company agrees that it will not issue any press release or other publicity material relating to the transactions contemplated by this Agreement and the Techdis Acquisition Agreement which refers to the Bank without obtaining the Bank's consent to the manner and context in which the reference is made. 22.2 The costs of any publicity material in relation to this Clause shall, mutatis mutandis, be subject to the provisions of Clause 22. 22.3 The Bank may not issue any press release or other publicity material relating to the transaction contemplated by this Agreement and the Techdis Acquisition Agreement which refers to the Company without obtaining the Company's consent to the manner and context in which the reference is made. 23 LAW This Agreement shall be governed by and construed in accordance with English law. IN WITNESS whereof the parties hereto have caused this Agreement to be duly executed the day and year first written above. - 38 - SIGNED by R. E. KLATELL ) for and on behalf of ) ARROW ELECTRONICS (UK) LIMITED ) ROBERT E. KLATELL in the presence of:- ) Geoffrey Maddock Solicitor, Herbert Smith SIGNED by PIERS HARMER ) for and on behalf of ) NATIONAL WESTMINSTER BANK Plc ) PIERS HARMER in the presence of:- ) Geoffrey Maddock Solicitor, Herbert Smith SIGNED by ) for and on behalf of ) ARROW ELECTRONICS (UK) LIMITED ) ALISTAIR OAG SIGNED by ) for and on behalf of ) NATIONAL WESTMINSTER BANK Plc ) PIERS HARMER - 5 -
EX-10 13 EX-10(I)(I), STOCK OPTION PLAN EXHIBIT 10(i)(i) ARROW ELECTRONICS, INC. STOCK OPTION PLAN - 1991 (as amended and restated) Through March 1995 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 or, if at any given time there is no committee serving, the Board. 2.4 "Disability" means total and permanent disability as determined by the Committee. 2.5 "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. 2.6 "Nonqualified Option" means an option granted under the Plan to purchase Shares and which is not intended to qualify as an Incentive Option. 2.7 "Option" means, collectively, Incentive Options and Nonqualified Options. 2.8 "Shares" means shares of the Company's common stock, par value $1 per share. 2.9 "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 three 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. If a Committee is appointed, no member thereof shall be an employee of the Company or a Subsidiary or shall have been eligible within one year prior to his appointment to receive an Option or to receive awards under any other plan of the Company or its Subsidiaries under which participants are entitled to acquire stock, stock options or stock appreciation rights of the Company or any of its Subsidiaries. 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. ARTICLE 5 Shares Subject to Plan 5.1 Amount of Stock. There may be issued under the Plan an aggregate of not more than 6,000,000 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. 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 seem 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 Incentive Option may not be less than the fair market value of a Share at the date the Incentive 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 Incentive 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. 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 (as determined by the Committee) 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 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 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. 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. 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) November 11, 1997. 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. EX-10 14 EX-10(J)(I), RESTRICTED STOCK PLAN EXHIBIT 10(j)(i) ARROW ELECTRONICS, INC. RESTRICTED STOCK PLAN - 1991 (as amended and restated) Through March 1995 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 $1.00 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 three 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, no member thereof shall be an employee of the Company or a Subsidiary or shall have been eligible within one year prior to his appointment to receive awards of Shares ("Awards") under the Plan or to receive awards under any other plan of the Company or its Subsidiaries under which participants are entitled to acquire stock or stock options of the Company or any of its Subsidiaries. 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. 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 $1.00 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 1,480,000 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 therefore, the Award shall be forfeited and rescinded as to all Shares which are, at the date 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 an 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 are partly paid, may not be sold, assigned, transferred, pledged, alienated, hypothecated or otherwise disposed of 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. 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. 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 grantees 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) November 11, 1997. 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. EX-11 15 Exhibit 11
ARROW ELECTRONICS, INC. STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE Year Ended December 31, 1994 1993 1992 1991 1990 (In thousands except per share data) Primary Average shares of common stock outstanding 45,999 44,532 38,329 26,879 24,439 Net effect of dilutive stock options - based on the treasury method 635 828 1,241 974 375 Total 46,634 45,360 39,570 27,853 24,814 Net income $ 111,889 $ 106,559 $ 79,461 $ 33,889 $ 32,962 Less preferred stock dividends - (880) (3,903) (4,596) (4,899) Total $ 111,889 $ 105,679 $ 75,558 $ 29,293 $ 28,063 Per share amount $ 2.40 $ 2.33 $ 1.91 $ 1.05 $ 1.13 Fully Diluted Average shares of common stock outstanding 45,999 44,532 38,329 26,879 24,439 Net effect of dilutive stock options - based on the treasury method 635 911 1,263 1,070 398 Assumed conversion of 9% convertible subordi- nated debentures - - - 851 862 Assumed conversion of 5-3/4% convertible sub- ordinated debentures 3,773 3,774 381 - - Assumed conversion of preferred stock - 691 3,433 3,615 3,879 Total 50,407 49,908 43,406 32,415 29,578 Net income $ 111,889 $ 106,559 $ 79,461 $ 33,889 $ 32,962 Add interest on 9% convertible subordi- nated debentures, net of income tax effect - - - 1,649 2,700 Add interest on 5-3/4% convertible subordi- nated debentures, net of income tax effect 4,313 4,313 455 - - Total $ 116,202 $ 110,872 $ 79,916 $ 35,538 $ 35,662 Per share amount $ 2.31 $ 2.22 $ 1.84 $ 1.10(A)$ 1.21(A) (A) This calculation is submitted in accordance with Regulation S-K Item 601(b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15 because it produces an anti-dilutive result.
EX-22 16 ARROW ELECTRONICS, INC. SUBSIDIARY LISTING 1. Arrow Electronics, Inc. a New York corporation 2. Arrow Electronics International, Inc., a Virgin Islands corporation 3. Arrow Electronics Canada Ltd., a Canadian Corporation 4. Lex Electronics, Ltd., a Canadian Corporation 5. Arrow Electronics Credit Corporation, a Delaware Corporation 6. Schuylkill Metals of Plant City, Inc., a Delaware Corporation 7. Arrow Electronics International, Inc., a Delaware Corporation 8. Arrow Electronics (UK) Inc., a Delaware Corporation 9. Arrow/TEK Ltd., a Japanese Joint Venture (50% owned) 10. Capstone Electronics Corp., a Delaware Corporation 11. High Tech Ad, Inc., a New York Corporation 12. Gates/Arrow Distributing, Inc., a Delaware Corporation 13. Anthem Electronics, Inc., a Delaware Corporation, including subsidiaries: A. Anthem Enterprises B. Lionex Corp. C. Anthem Technology Systems 14. Arrow-Field OY and subsidiaries, a Finnish Company 15. Arrow-TH:s Elektronik AB, and subsidiaries, a Swedish Company (owned 85%) 16. Exactec A/S, and subsidiaries, a Danish company (owned 85%) 17. Arrow Electronics Distribution Group - Europe B.V., a Dutch company, and Subsidiaries which include: A. Arrow Electronics (UK) Limited, a British Company, and subsidiaries: 1. RR Electronics Limited, a British Company 2. Axiom Electronics Ltd., a British Company 3. Jermyn Holdings Limited, a British Company & Subsidiaries 4. Techdis Limited, a British company, and subsidiary: a. Microprocessor & Memory Distribution Ltd., a British Company B. EDI Electronics Distribution International (France) SA, a French Company and subsidiaries: 1. Arrow Electronique S.A., a French Company, and subsidiaries: a. Generim S.A., a French Company b. Feutrier S.A., a French Company c. CCI Electronique S.A., a French Company d. Megachip S.A., a French Company (owned 75%) and subsidiaries C. Arrow Electronics GmbH, a German Company (which owns 70% interest of Spoerle Electronic Handelgesellschaft mbH, a German company, and subsidiaries) D. Arrow ATD Netherlands B.V., a Dutch company (which owns 67% of ATD Electronica S.A., a Spanish company E. ARROW-Amitron Netherlands B.V., a Dutch company (which owns 55% of the shares of Amitron-Arrow S.A.) F. Silverstar Ltd. S.p.A. (86% owned) & subsidiaries G. Arrow Australia Pty Ltd. (100% owned) and subsidiaries: 1. Veltek Australia Pty Ltd. (75% owned) 2. Zatek Australia Pty Ltd. (75% owned) 18. Components Agent Limited, a British Virgin Island company (owned 90%) and Subsidiaries which include: A. Components Agent Limited, a Hong Kong company B. Components Agent China Limited, a Hong Kong company C. Components Agent Korea Limited, a Hong Kong company D. Components Assembly & Sales Pte Ltd, a Singapore company E. Casl. (M) Sdn. Berhad, a Malaysian company, and subsidiaries F. Salson Holdings Limited, a British Virgin Islands company, and subsidiary: 1. Qinhuangdao Arrow Electronics Company Limited, a company of the People s Republic of China G. Components Korea Company Limited, a Korean company 19. Texny (Holdings) Limited, a British Virgin Islands company (owned 95%) and Subsidiaries: A. Texny (H.K.) Limited, a Hong Kong company, and subsidiary: 1. Glorytact Company Limited, a Hong Kong company B. Intex-semi Limited, a Hong Kong company (inactive company) C. Colourmedia Animation Limited, a Hong Kong company (inactive company) 20. Strong Electronics Co., Ltd. and subsidiaries, a Taiwanese Joint Venture (owned 45%) 21. Ally/Arrow, Inc. a Taiwanese company (75% owned) EX-27 17 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1994 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS DEC-31-1994 JAN-1-1994 DEC-31-1994 YEAR 1 105,606 0 697,021 31,132 725,436 1,558,243 150,672 60,857 2,038,774 689,463 349,398 0 0 46,168 791,717 2,038,774 4,649,234 4,649,234 3,832,169 4,393,260 0 20,289 36,168 219,806 91,206 111,889 0 0 0 111,889 2.40 2.31