-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B/oTjebdV/nCB0PblBM14ZmPGZ5MjOSuMFCJFVfhiD5XN/KxRpKzTjm1CVeZBmWt 7PUBPBBAzt+nJ0nBZ0086w== 0000007536-98-000005.txt : 19980401 0000007536-98-000005.hdr.sgml : 19980401 ACCESSION NUMBER: 0000007536-98-000005 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980331 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARROW ELECTRONICS INC CENTRAL INDEX KEY: 0000007536 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 111806155 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-04482 FILM NUMBER: 98581265 BUSINESS ADDRESS: STREET 1: 25 HUB DR CITY: MELVILLE STATE: NY ZIP: 11747 BUSINESS PHONE: 5163911300 10-K405 1 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 For the fiscal year ended December 31, 1997 OR ______ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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 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 6, 1998 was $3,336,528,009. 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: 97,274,399 shares outstanding at March 6, 1998. The following documents are incorporated herein by reference: 1. Proxy Statement filed in connection with Annual Meeting of Shareholders to be held May 13, 1998(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, value-added programs, and total quality assurance, the company is the distributor of choice for over 600 suppliers. The company's global distribution network spans the world's three dominant electronics markets - 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 over 200 sales facilities and 26 distribution centers in 33 countries. In January 1997, the company acquired the volume electronic component distribution businesses of Premier Farnell plc with operations in 15 countries. In February 1997, the company, through its subsidiary, Gates/Arrow Distributing, Inc. ("Gates/Arrow"), acquired a majority interest in Consan Incorporated, a leading technical distributor of mass storage products in the United States. In November 1997, the company formed a joint venture, Arrow/Altech Industries (Pty) Ltd., with Allied Technologies Limited , a member of the Altron Group, to distribute electronic components throughout South Africa. In December 1997, the company, through Gates/Arrow, acquired a majority interest in Support Net, Inc., one of the preeminent technical distributors of IBM mid-range products in the United States. On January 5, 1998, the company implemented the previously announced realignment of its North American components operations and created the following business units: * Arrow Contract Manufacturing Services (CMS) Distribution Group - exclusively serving contract manufacturing customers, the group offers a broad line card of semiconductors and industrial computer products, as well as passive, electromechanical and connector devices. * Arrow Alliance Group - focuses on delivering the full line card, including semiconductors, passives, connectors, and industrial computer products, to large customers with complex needs. The group offers tailored solutions and innovative programs from a single point of contact. * Arrow Industrial Computer Products Group - focuses on providing demand creation, fulfillment, and value-added services to industrial customers who mainly buy subsystems and industrial computer products. * Arrow Semiconductor Group - concentrates on core semiconductor customers, offering a broad semiconductor line card to drive demand creation and fulfillment and providing customers with value-added solutions. * Arrow Supplier Services Group - manages all semiconductor supplier relationships, including line card strategy, marketing programs, purchasing, asset management, and market price programs, as well as Arrow's value-added programs and the technical resource center. * Arrow Passive Electromechanical Connector (PEMCO) Group - formerly called Capstone Electronics, specializes in providing high-quality passive, electromechanical, and connector products to original equipment manufacturers (other than those customers of the Arrow CMS Distribution Group and the Arrow Alliance Group). * Arrow/Zeus Electronics - is a fully-dedicated specialist serving the high- reliability, military and aerospace markets. * Gates/Arrow - is a full-line technical distributor of computer systems, peripherals, and software to value-added resellers in the U.S. and Canada. Through its wholly-owned subsidiary, Arrow Electronics Distribution Group- Europe B.V., Arrow is the largest pan-European electronics distributor. In its Northern European region, the company is among the largest distributors in Britain, Denmark, Finland, Norway and Sweden. In its Central European region the company is the largest distributor in Germany, Austria, Switzerland, Belgium and the Netherlands and in its Southern European region it is the largest distributor in Italy, France, Spain and Portugal. Arrow is the largest electronics distributor in the Asia/Pacific region. Components Agent Limited (C.A.L.), the Lite-On Group, and the Melbourne-based Veltek and Zatek companies in Australia are the region's leading multi-national distributors. C.A.L., headquartered in Hong Kong, maintains additional facilities in key cities in Singapore, Malaysia, the People's Republic of China, India, and South Korea. Lite-On, headquartered in Taipei, serves customers in Taiwan, South Korea, Singapore, and Malaysia. Arrow Ally serves customers in Taipei and Arrow Components (NZ) services customers in New Zealand. The company distributes a broad range of electronic components, computer products, and related equipment. About 63 percent of the company's consolidated sales are comprised of semiconductor products; industrial and commercial computer products, including microcomputer boards and systems, design systems, desktop computer systems, terminals, printers, disk drives, controllers, and communication control equipment account for about 27 percent; 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 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 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 as well as other value-added services such as kitting and memory programming capabilities. 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 160,000 industrial and commercial customers. 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 two percent of the company's 1997 or 1996 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. There are approximately 600 manufacturers whose products are sold by the company. Intel Corporation accounted for approximately 16 percent of the business' purchases. No other supplier accounted for more than 8 percent of 1997 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 63 percent 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 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 multi-national, national, and numerous regional and local distributors. As the world's largest electronics distributor, the company's financial resources and sales are greater than those of its competitors. The company and its affiliates employ over 9,800 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 56 Chairman and Chief Executive Officer Robert E. Klatell 52 Executive Vice President, General Counsel, and Secretary Francis M. Scricco 48 Executive Vice President and Chief Operating Officer Carlo Giersch 60 Chief Executive Officer of Spoerle Electronic Gerald Luterman 54 Senior Vice President, Chief Financial Officer, and Treasurer Steven W. Menefee 53 Senior Vice President Betty Jane Scheihing 49 Senior Vice President Jan M. Salsgiver 41 Vice President 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. Robert E. Klatell has been Executive Vice President since July 1995 and has served as Senior Vice President, General Counsel, and Secretary of the company for more than five years. He also served as Chief Financial Officer from January 1992 to April 1996 and Treasurer from 1990 to April 1996. Francis M. Scricco joined the company in September 1997 as Executive Vice President and Chief Operating Officer. From March 1994 through August 1997 he was a Group Vice President at Fischer Scientific International, Inc. Prior thereto he was President of Whirlpool Canada. Carlo Giersch has been Chief Executive Officer of Spoerle Electronic for more than five years. Gerald Luterman has been Senior Vice President, Chief Financial Officer, and Treasurer of the company since April 1996. Prior thereto he was Executive Vice President and Chief Financial Officer of American Express Travel Related Services Consumer Card Group for more than five years. Steven W. Menefee has been a Senior Vice President of the company since July 1995 and prior thereto a Vice President of the company since November 1990. Betty Jane Scheihing became Senior Vice President in May 1996 and has served as Vice President of the company for more than five years prior thereto. Jan M. Salsgiver has been a Vice President of the company since September 1993 and President of the Arrow Supplier Services Group since its inception in January 1998. Prior thereto she was President of the Arrow/Schweber Electronics Group since November 1995 and President of Zeus Electronics from July 1993 to November 1995. Prior to July 1993, she held a variety of senior marketing positions in the company. 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 2053. Five 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, the company was previously engaged in the refining and selling of lead. The subsidiary was sold in 1988, except for a battery-breaking site used by the subsidiary in Plant City, Florida, which had been placed on the National Priorities List under the Federal Super Fund program. The company remains liable for the environmental remediation of the site, and in 1992 entered into a consent decree setting forth the terms of that remediation with the U.S. EPA and the State of Florida. The environmental remediation of the site has been substantially completed. All contaminated soils on the site have been collected, treated and stabilized, and the EPA has acknowledged that the soil stabilization aspects of the consent decree have been met. Groundwater on the site has been treated and is being monitored, as required by the consent decree, to ensure that it continues to meet the standards set forth in the decree. Approximately 11 acres of wetlands have been recreated and are being managed in accordance with the requirements of the consent decree. Final approval of the wetlands phase of the remediation is expected shortly. The company believes that the amount expected to be expended in any year in connection with the continued monitoring of the site and the completion of activities thereon 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 1997 and 1996 were as follows (restated to reflect the two-for-one stock split effective October 15, 1997): Year High Low - ---- ---- --- 1997: Fourth Quarter $36 $25-1/8 Third Quarter 32-1/16 26-5/16 Second Quarter 29-7/16 25-3/4 First Quarter 29-7/8 25-7/8 1996: Fourth Quarter $27-11/16 $21-1/2 Third Quarter 23-9/16 18-3/4 Second Quarter 26-13/16 21-1/8 First Quarter 25 17-5/8 Holders On March 6, 1998, there were approximately 4,000 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 five 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 global multi-currency credit facility, senior notes, and senior debentures (see Note 4 of the Notes to Consolidated Financial Statements) limit, among other things, the payment of cash dividends and the incurrence of additional borrowings and require that working capital, net worth, and certain other financial ratios be maintained at designated levels.
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 (In thousands except per share data) For the year: 1997(a) 1996 1995 1994(b)(c) 1993(b)(d) - ----------------------------------------------------------------------------------------- Sales $7,763,945 $6,534,577 $5,919,420 $4,649,234 $3,560,856 Operating income 374,721 400,627 423,209 255,974 226,089 Equity in earnings (loss) of affiliated companies 781 (97) 2,493 - 1,673 Interest expense 67,117 37,959 46,361 36,168 26,573 - ----------------------------------------------------------------------------------------- Net income $ 163,656 $ 202,709 $202,544 $ 111,889 $ 106,559 - ----------------------------------------------------------------------------------------- Diluted earnings per share (e) $ 1.64 $ 1.98 $ 2.03 $ 1.16 $ 1.12 - ----------------------------------------------------------------------------------------- At year-end: - ----------------------------------------------------------------------------------------- Accounts receivable and inventories $2,475,407 $1,947,719 $1,979,160 $1,422,457 $1,094,175 Total assets 3,537,873 2,710,351 2,701,016 2,038,774 1,569,152 Total long-term debt and subordinated debentures 823,099 344,562 451,706 349,398 314,859 Shareholders' equity 1,360,758 1,358,482 1,195,881 837,885 701,799 - ----------------------------------------------------------------------------------------- (a) Net income includes special charges totaling $59.5 million associated with the realignment of Arrow's North American components operations and the acquisition and integration of the volume electronic component distribution businesses of Premier Farnell plc. Excluding these charges, operating income, net income, and net income per share on a diluted basis were $434.2 million, $204.1 million, and $2.05, respectively. (b) 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 for years prior thereto have been restated to include the operations of Gates and Anthem. Also, 1994 includes special charges of $45.3 million associated with the acquisition and integration of Gates and Anthem. Excluding these charges, operating income, net income, and net income per share on a diluted basis were $301.3 million, $140.7 million, and $1.44, respectively. (c) Includes results of Silverstar which was accounted for under the equity method prior to January 1994. (d) Net income is after a restructuring charge of $7.8 million associated with the disposition of a business unit by Anthem. Excluding this charge, operating income, net income, and net income per share on a diluted basis were $233.9 million, $111.1 million, and $1.17, respectively. (e) All per share amounts have been restated to reflect the two-for-one stock split effective October 15, 1997.
Item 7. Management's Discussion and Analysis of Financial ------------------------------------------------- Condition and Results of Operations. ------------------------------------ For an understanding of the significant factors that influenced 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. Sales In 1997, consolidated sales increased to $7.8 billion, an increase of 19 percent over 1996 sales of $6.5 billion. This sales growth was due to increased activity levels throughout the world and acquisitions, principally the volume electronic component distribution businesses of Premier Farnell plc offset, in part, by the impact of a stronger U.S. dollar. Consolidated sales of $6.5 billion in 1996 were 10 percent higher than 1995 sales of $5.9 billion. This sales growth was principally due to increased sales of commercial computer products and microprocessors. The sales of semiconductor products were characterized by an oversupply of product, competitive pricing pressures, and reductions in memory prices. In 1995, consolidated sales increased to $5.9 billion, a 27 percent increase over 1994 sales of $4.6 billion. This sales growth reflected strong activity levels in each of the company's businesses as well as the impact of key strategic acquisitions and alliances forged around the world during 1994. Operating Income In 1997, the company's consolidated operating income decreased to $374.7 million, compared with operating income of $400.6 million in 1996, principally as a result of special charges of $37.9 million associated with the realignment of the North American components operations and $21.6 million associated with the acquisition and integration of the volume electronic component distribution businesses of Premier Farnell plc. The improvement in operating income, excluding the special charges, reflects the impact of increased sales, acquisitions, and continuing economies of scale offset, in part, by lower gross profit margins caused by competitive pricing pressures and a greater sales mix of commercial computer products. Operating expenses, excluding the special charges, as a percent of sales declined to 9.7 percent in 1997, the lowest in the company's history. The company's consolidated operating income decreased to $400.6 million in 1996, compared with operating income of $423.2 million in 1995. The reduction in operating income reflected a further decline in gross margins due to proportionately higher sales of lower margin commercial computer products and microprocessors throughout the world and competitive pricing pressures in Europe and the Asia/Pacific region offset, in part, by the impact of increased sales and the benefits of continuing economies of scale. Operating expenses as a percent of sales declined to 9.8 percent in 1996. In 1995, the company's consolidated operating income increased to $423.2 million, compared with operating income of $256 million in 1994. Included in the 1994 results were special charges of $45.3 million associated with the acquisition and integration of Gates and Anthem into Arrow. The improvement in operating income outpaced the growth in sales as the company benefited from cost savings following the integration of Gates and Anthem. These cost savings principally reflected reductions in personnel performing duplicative functions and the elimination of duplicative administrative facilities, computer and telecommunications equipment, and selling and stocking locations. Operating expenses as a percentage of sales declined to 10.3 percent in 1995. Interest In 1997, interest expense increased to $67.1 million from $38 million in 1996, reflecting increases in borrowings associated with acquisitions, the repurchase of the company's common stock, and investments in working capital. Interest expense of $38 million in 1996 decreased by $8.4 million from the 1995 level. The decrease reflected the conversion of the company's 5 3/4% convertible subordinated debentures in October 1995, lower borrowings resulting from improved working capital usage, and lower borrowing costs offset, in part, by borrowings to fund purchases of common stock. In 1995, interest expense increased to $46.4 million from $36.2 million in 1994, reflecting increases in working capital required to support higher sales, interest related to borrowings associated with acquisitions, and capital expenditures. Income Taxes In 1997, the company recorded a provision for taxes at an effective tax rate of 41 percent, excluding the special charges, compared with 39.9 percent in 1996. The increased rate for 1997 is due to increased earnings in countries with higher marginal tax rates and the non-deductibility of goodwill amortization. The company recorded a provision for taxes at an effective tax rate of 39.9 percent in 1996, compared with 40.4 percent in 1995. The lower effective rate was the result of decreased earnings in countries with higher tax rates. In 1995, the company recorded a provision for taxes at an effective tax rate of 40.4 percent compared with 40.6 percent, excluding the special charges associated with the Gates and Anthem acquisitions, in 1994. Net Income In 1997, the company's net income advanced to $204.1 million from $202.7 million in 1996, before the special charges of $59.5 million ($40.4 million after taxes). The increase in net income is attributable to higher operating income offset, in part, by an increase in interest expense. Net income in 1996 was $202.7 million, an increase from $202.5 million in 1995. The increase in net income was attributable to decreases in interest expense, income taxes, and minority interest offset, in part, by lower operating income. In 1995, the company's net income advanced to $202.5 million from $140.7 million in 1994, before the special charges of $45.3 million ($28.8 million after taxes) associated with Gates and Anthem. The significant improvement in net income was principally the result of the increase in operating income offset, in part, by higher interest expense. 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 74 percent and 78 percent in 1997 and 1996, respectively. Working capital increased by $160 million, or 13 percent, in 1997 compared with 1996, primarily as a result of increased sales and acquisitions. This percentage increase was less than the percentage increase of sales as a result of improvements in working capital usage. The net amount of cash used for the company's operating activities in 1997 was $14.2 million, principally reflecting earnings offset by increased working capital requirements supporting higher sales. The net amount of cash used for investing activities was $410.8 million, including $381.5 million for acquisitions and investments. The net amount of cash provided by financing activities was $422.1 million, principally reflecting the $392.8 million of proceeds from the issuance of the company's senior notes and senior debentures and increases in the company's credit facilities offset, in part, by the purchase of the company's common stock. In January 1997, the company issued $200 million of 10 year senior notes bearing interest at 7% and $200 million of 30 year senior debentures bearing interest at 7 1/2%. The net proceeds of $392.8 million were used primarily to fund acquisitions, working capital, and other general corporate purposes. In 1996, working capital increased by five percent, or $56 million, compared with 1995. This percentage increase was less than the percentage increase of sales as a result of improvements in working capital usage. The net amount of cash provided by operations in 1996 was $308.6 million, the principal element of which was the cash flow resulting from net earnings and improved working capital usage. The net amount of cash used by the company for investing purposes was $57.1 million, including $38.9 million for various acquisitions. Cash flows used for financing activities were $202.6 million, principally reflecting the reduction in the company's borrowings, purchases of common stock, and distributions to partners. Working capital increased by $349 million, or 40 percent, in 1995 compared with 1994, primarily as a result of increased sales and, to a lesser extent, acquisitions in Europe and the Asia/Pacific region. The net amount of cash used for the company's operating activities in 1995 was $114.1 million, as the growth in accounts receivable and inventories outpaced the increase in net income. The net amount of cash used for investing activities was $132.7 million, including $90.7 million for various investments and acquisitions. The net amount of cash provided by financing activities was $228.1 million, principally reflecting the company's borrowings to finance investments and acquisitions, distributions to partners, and the repayment of certain debt. In October 1995, the company redeemed its 5 3/4% convertible subordinated debentures due 2002, which resulted in the issuance of 7,544,508 shares of common stock and eliminated approximately $125 million in long-term debt and $7.2 million in annual interest charges. Market and Other Risks - ---------------------- The company, as a large international organization, faces exposure to adverse movements in foreign currency exchange rates. These exposures may change over time as business practices evolve and could have a material impact on the company's financial results in the future. The company's primary exposure relates to transactions in which the currency collected from customers is different from the currency utilized to purchase the product sold in Europe and the Asia/Pacific region. At the present time, the company hedges only these currency exposures and does not hedge anticipated foreign currency cash flows and earnings or its investments in businesses in Europe and the Asia/Pacific region as in many instances there are natural offsetting positions. The translation of the financial statements of the non-North American operations is impacted by fluctuation in foreign currency exchange rates. Had the various average foreign currency exchange rates remained the same during 1997 as compared with 1996, 1997 sales and operating income would have been approximately $182 million and $11 million higher, respectively, than the actual results for 1997. The company's interest expense is sensitive to the general level of short-term interest rates in the United States and Europe. To mitigate the impact of fluctuations in interest rates, at December 31, 1997, the company has approximately 48 percent of its debt as fixed rate long-term borrowings and 52 percent of its debt subject to short-term floating rates. Interest expense would fluctuate by approximately $5 million if average short-term interest rates had changed by one percentage point in 1997. This amount was determined by considering the impact of a hypothetical interest rate on the company's borrowing cost. This analysis does not consider the effect of the level of overall economic activity that could exist in such an environment. Further, in the event of a change of such magnitude, management could likely take actions to further mitigate any potential negative exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no changes in the company's financial structure. The Company has initiated a comprehensive, worldwide review of its computer systems so as to identify all "Year 2000" issues and has implemented a plan to resolve those issues. The company believes that, after modifications to its systems, the Year 2000 issue will not pose significant operational problems. However, if such modifications are not completed, the Year 2000 issue may have a material impact on the operations of the company. The costs associated with the required systems modifications is expected to be less than $20 million over the next two years. Information Relating to Forward-Looking Statements This report includes forward-looking statements that are subject to certain risks and uncertainties which could cause actual results or facts to differ materially from such statements for a variety of reasons, including, but not limited to: industry conditions, changes in product supply, pricing, and customer demand, competition, other vagaries in the computer and electronic components markets, and changes in relationships with key suppliers. Shareholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The company undertakes no obligation to update publicly or revise any forward-looking statements. Accounting Matters In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income," and Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosure about Segments of an Enterprise and Related Information." SFAS 130 requires that changes in comprehensive income be shown in a financial statement that is displayed with the same prominence as other financial statements. SFAS 131 specifies new guidelines for determining a company's operating segments and related requirements for disclosure. Both statements are effective for fiscal years beginning after December 15, 1997 and will be adopted in the fiscal year ending December 31, 1998. 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, 1997 and 1996, and the related consolidated statements of income, cash flows, and shareholders' equity for each of the three years in the period ended December 31, 1997. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and the schedule are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements and the schedule 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, 1997 and 1996, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. ERNST & YOUNG LLP New York, New York February 16, 1998 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 the company's 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. Members of management, the operating controls staff, and the 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 Gerald Luterman Senior Vice President and Chief Financial Officer
ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENT OF INCOME (In thousands except per share data) Years Ended December 31, -------------------------------------- 1997 1996 1995 ---- ---- ---- Sales $7,763,945 $6,534,577 $5,919,420 ---------- ---------- ---------- Costs and expenses: Cost of products sold 6,574,415 5,492,556 4,888,746 Selling, general and administrative expenses 712,213 604,412 574,166 Depreciation and amortization 43,096 36,982 33,299 Integration charge 21,600 - - Realignment charge 37,900 - - ---------- ---------- ---------- 7,389,224 6,133,950 5,496,211 ---------- ---------- ---------- Operating income 374,721 400,627 423,209 Equity in earnings (loss) of affiliated companies 781 (97) 2,493 Interest expense, net 67,117 37,959 46,361 ---------- ---------- ---------- Earnings before income taxes and minority interest 308,385 362,571 379,341 Provision for income taxes 131,617 144,667 153,139 ---------- ---------- ---------- Earnings before minority interest 176,768 217,904 226,202 Minority interest 13,112 15,195 23,658 ---------- ---------- ---------- Net income $ 163,656 $ 202,709 $ 202,544 ========== ========== ========== Per common share: Basic $ 1.67 $ 2.01 $ 2.15 ========== ========== ========== Diluted $ 1.64 $ 1.98 $ 2.03 ========== ========== ========== Average number of common shares and common share equivalents outstanding: Basic 98,006 100,972 94,174 ========== ========== ========== Diluted 99,769 102,380 101,736 ========== ========== ========== See accompanying notes.
ARROW ELECTRONICS, INC. CONSOLIDATED BALANCE SHEET (Dollars in thousands) December 31, ----------------------- 1997 1996 ASSETS ---- ---- Current assets: Cash and short-term investments $ 112,665 $ 136,400 Accounts receivable, less allowance for doubtful accounts ($46,055 in 1997 and $39,753 in 1996) 1,245,354 902,878 Inventories 1,230,053 1,044,841 Prepaid expenses and other assets 42,268 36,004 ---------- ---------- Total current assets 2,630,340 2,120,123 ---------- --------- Property, plant and equipment at cost Land 9,699 8,712 Buildings and improvements 75,431 77,257 Machinery and equipment 143,030 127,633 ---------- ---------- 228,160 213,602 Less accumulated depreciation and amortization 113,923 98,377 ---------- ---------- 114,237 115,225 ---------- ---------- Investment in affiliated companies 54,914 34,200 Cost in excess of net assets of companies acquired, less accumulated amortization ($69,899 in 1997 and $57,802 in 1996) 645,152 388,787 Other assets 93,230 52,016 ---------- ---------- $3,537,873 $2,710,351 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 767,088 $ 594,474 Accrued expenses 285,673 180,129 Short-term borrowings, including current maturities of long-term debt 143,723 71,504 ---------- ---------- Total current liabilities 1,196,484 846,107 ---------- ---------- Long-term debt 823,099 344,562 Other liabilities 87,254 68,488 Minority interest 70,278 92,712 Shareholders' equity: Common stock, par value $1: Authorized--120,000,000 shares in 1997 and 1996 Issued--102,949,640 and 102,392,770 shares in 1997 and 1996 102,950 102,392 Capital in excess of par value 506,656 498,717 Retained earnings 968,998 805,342 Foreign currency translation adjustment (35,881) 8,753 ---------- ---------- 1,542,723 1,415,204 Less: Treasury stock (6,011,903 and 2,139,398 shares in 1997 and 1996), at cost 164,207 49,065 Unamortized employee stock awards 17,758 7,657 ---------- ---------- Total shareholders' equity 1,360,758 1,358,482 ---------- ---------- $3,537,873 $2,710,351 ========== ========== See accompanying notes.
ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (In thousands) Years Ended December 31, ------------------------------- 1997 1996 1995 ---- ---- ---- Cash flows from operating activities: Net income $163,656 $202,709 $202,544 Adjustments to reconcile net income to net cash provided by (used for) operations: Integration charge 21,600 - - Realignment charge 37,900 - - Minority interest in earnings 13,112 15,195 23,658 Depreciation and amortization 47,057 39,453 35,192 Equity in undistributed (earnings) loss of affiliated companies (781) 97 (2,493) Deferred income taxes (9,814) 10,280 14,210 Change in assets and liabilities, net of effects of acquired businesses: Accounts receivable (219,488) 45,845 (221,840) Inventories (94,144) (8,426) (288,301) Prepaid expenses and other assets (8,048) (2,893) (8,675) Accounts payable 36,784 26,276 139,257 Accrued expenses (4,917) (23,870) (3,848) Other 2,913 3,926 (3,791) -------- -------- -------- Net cash provided by (used for) operating activities (14,170) 308,592 (114,087) -------- -------- -------- Cash flows from investing activities: Acquisition of property, plant and equipment (29,335) (28,596) (42,254) Proceeds from sale of building - 10,442 - Cash consideration paid for acquired businesses (364,499) (38,851) (59,119) Investment in affiliates (16,973) 1,734 (31,538) Other - (1,791) 190 -------- -------- -------- Net cash used for investing activities (410,807) (57,062) (132,721) -------- -------- -------- Cash flows from financing activities: Change in short-term borrowings 55,018 (53,992) 49,976 Change in credit facilities 122,830 (96,906) 289,680 Proceeds from long-term debt 392,844 - 5,701 Repayment of long-term debt (338) (7,097) (102,370) Proceeds from exercise of stock options 20,209 12,323 13,717 Distributions to minority partners (17,464) (7,967) (28,590) Purchases of common stock (151,010) (48,993) - -------- -------- -------- Net cash provided by (used for) financing activities 422,089 (202,632) 228,114 -------- -------- -------- Effect of exchange rate changes on cash (20,847) (6,445) 7,035 -------- -------- -------- Net increase (decrease) in cash and short-term investments (23,735) 42,453 (11,659) Cash and short-term investments at beginning of year 136,400 93,947 105,606 -------- -------- -------- Cash and short-term investments at end of year $112,665 $136,400 $ 93,947 ======== ======== ======== Supplemental disclosures of cash flow information: Cash paid during the year for: Income taxes $121,251 $130,834 $142,101 Interest 52,265 38,118 44,019 See accompanying notes.
ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (In thousands) Common Foreign Unamortized Stock Capital in Currency Employee at Par Excess of Retained Translation Treasury Stock Awards Value Par Value Earnings Adjustment Stock and Other Total -------- --------- -------- ----------- -------- ----------- ---------- Balance at December 31, 1994 $ 92,336 $342,745 $400,089 $ 6,367 $ (13) $ (3,639) $ 837,885 Net income - - 202,544 - - - 202,544 Conversion of subordinated debentures 7,546 114,911 - - - - 122,457 Exercise of stock options 1,134 12,583 - - - - 13,717 Tax benefits related to exercise of stock options - 4,758 - - - - 4,758 Restricted stock awards, net 280 4,679 - - (11) (4,948) - Amortization of employee stock awards - - - - - 2,313 2,313 Other - - - - - 176 176 Translation adjustments - - - 12,031 - - 12,031 -------- -------- -------- -------- --------- --------- --------- Balance at December 31, 1995 101,296 479,676 602,633 18,398 (24) (6,098) 1,195,881 Net income - - 202,709 - - - 202,709 Exercise of stock options 924 11,774 - - (375) - 12,323 Tax benefits related to exercise of stock options - 3,345 - - - - 3,345 Restricted stock awards, net 172 3,922 - - 327 (4,421) - Amortization of employee stock awards - - - - - 2,862 2,862 Purchases of common stock - - - - (48,993) - (48,993) Translation adjustments - - - (9,645) - - (9,645) -------- -------- -------- -------- --------- --------- ---------- Balance at December 31, 1996 $102,392 $498,717 $805,342 $ 8,753 $ (49,065) $ (7,657) $1,358,482 (continued)
ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (In thousands) Common Foreign Unamortized Stock Capital in Currency Employee at Par Excess of Retained Translation Treasury Stock Awards Value Par Value Earnings Adjustment Stock and Other Total -------- --------- -------- ----------- -------- ----------- ---------- Balance at December 31, 1996 $102,392 $498,717 $805,342 $ 8,753 $ (49,065) $ (7,657) $1,358,482 Net income - - 163,656 - - - 163,656 Exercise of stock options 198 (8,626) - - 28,637 - 20,209 Tax benefits related to exercise of stock options - 7,074 - - - - 7,074 Restricted stock awards, net 360 9,491 - - 7,231 (17,082) - Amortization of employee stock awards - - - - - 6,981 6,981 Purchases of common stock - - - - (151,010) - (151,010) Translation adjustments - - - (44,634) - - (44,634) -------- -------- -------- -------- --------- -------- ---------- Balance at December 31, 1997 $102,950 $506,656 $968,998 $(35,881) $(164,207) $(17,758) $1,360,758 ======== ======== ======== ========= ========== ========= ========== See accompanying notes.
ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies 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. Use of Estimates - ---------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. 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 consolidated statement of cash flows. The carrying amount reported in the consolidated balance sheet for short- term investments approximates fair value. Financial Instruments - --------------------- The company uses various financial instruments, including derivative financial instruments, for purposes other than trading. The company does not use derivative financial instruments for speculative purposes. Derivatives used as part of the company's risk management strategy are designated at inception as hedges and measured for effectiveness both at inception and on an ongoing basis. 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 component of shareholders' equity. The results of foreign operations are translated at the monthly weighted average exchange rates. 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. Stock Split - ----------- The company's board of directors authorized a two-for-one stock split effected in the form of a 100 percent stock dividend distributed on October 15, 1997, to shareholders of record on October 3, 1997. Shareholders' equity has been restated to give retroactive recognition to the stock split in prior periods by reclassifying from capital in excess of par value to common stock the par value of the additional shares arising from the split. All references in the financial statements and the related notes to the number of shares and per share amounts have been restated to reflect the two-for-one stock split in all years. Net Income Per Share - -------------------- The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per Share," which modifies the way in which earnings per share ("EPS") is calculated in 1997. Accordingly, all prior period EPS data presented has been restated. Basic EPS is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the company. Diluted EPS for 1995 has been calculated assuming that the 5 3/4% convertible subordinated debentures were converted into common stock at the beginning of the year and the related interest expense, net of taxes, was eliminated. 2. Acquisitions During 1997, the company acquired the volume electronic component distribution businesses of Premier Farnell plc for approximately $298,000,000 and a majority interest in Consan Incorporated and Support Net, Inc. During 1997, the company increased its holdings in Spoerle Electronic Handelsgesellschaft mbH ("Spoerle") to 80 percent; Silverstar Ltd., S.p.A. ("Silverstar") to 98 percent; and TH:s Elektronik AB, Exatec A/S, Amitron S.A., and ATD Electronica S.A. to 100 percent. The aggregate cost of these acquisitions was $364,499,000. A summary of the allocation of the aggregate consideration paid for the aforementioned acquisitions, excluding amounts paid for increases in majority holdings, to the fair market value of the assets acquired and liabilities assumed is as follows (in thousands): Current assets: Accounts receivable $166,109 Inventory 127,016 Other 4,011 $297,136 -------- Property, plant and equipment 6,756 Cost in excess of net assets of companies acquired 264,266 Other assets 445 ------- 568,603 Current liabilities: Accounts payable 162,056 Accrued expenses 61,334 Other 20,698 244,088 -------- -------- Net consideration paid $324,515 ======== In September 1997, the company recorded a special charge of $21,600,000 before taxes ($.17 per share on a diluted basis) associated with the integration of the volume electronic component distribution businesses of Premier Farnell plc and related transaction fees. Such integration costs include real estate termination costs, severance and other expenses related to personnel performing duplicative functions, professional fees, and the disposal of duplicative fixed assets. During 1996, the company increased its holding in Spoerle to 75 percent and Silverstar to 93 percent. The cost of each acquisition has been allocated among the net assets acquired on the basis of the respective fair values of the assets acquired and liabilities assumed. For financial reporting purposes, the acquisitions are accounted for as purchase transactions beginning in the respective month of acquisition. The aggregate consideration paid for all acquisitions exceeded the net assets acquired by $296,379,000 and $20,674,000 in 1997 and 1996, respectively. In connection with certain acquisitions, the company may be required to make additional payments that are contingent upon the acquired businesses achieving certain operating goals. During 1996, the company made additional payments of $9,675,000 which have been capitalized as cost in excess of net assets of companies acquired. 3. Investment in Affiliated Companies During 1997, the company acquired a 50 percent interest in Altech Industries (Pty) Ltd., a joint venture with Allied Technologies Limited, a South African electronics distributor. The company also has a 45 percent interest in Strong Electronics Co., Ltd., a joint venture with Lite-On Inc., a Taiwan-based electronics distributor. 4. Debt Long-term debt consisted of the following at December 31 (in thousands): 1997 1996 -------- -------- Global multi-currency credit facility $377,765 $267,512 7% senior notes, due 2007 196,033 - 7 1/2% senior debentures, due 2027 197,623 - 8.29% senior notes 75,000 75,000 Other obligations with various interest rates and due dates 1,678 2,254 -------- -------- 848,099 344,766 Less installments due within one year 25,000 204 -------- -------- $823,099 $344,562 ======== ======== The company's revolving credit agreement (the "global multi-currency credit facility") was amended in September 1996 to increase to $650,000,000 the amount of available credit, to reduce the applicable borrowing rates, and to extend the maturity date to September 2001. The interest rate for loans under this facility is at the applicable eurocurrency rate (5.71875 percent for U.S. dollar denominated loans at December 31, 1997) plus a margin of .20 percent. The company may also utilize the facility's competitive advance option to obtain loans, generally at a lower rate. The company pays the banks a facility fee of .08 percent per annum. The 8.29% senior notes are payable in three equal annual installments commencing in 1998. The 7% senior notes and the 7 1/2% senior debentures are not redeemable prior to their maturity. The global multi-currency credit facility, the senior notes, and the senior debentures limit, among other things, the payment of cash dividends and the incurrence of additional borrowings and require that working capital, net worth, and certain other financial ratios be maintained at designated levels. The company maintains uncommitted lines of credit with a group of banks under which up to $100,000,000 could be borrowed at December 31, 1997 on such terms as the company and the banks may agree. Borrowings under the lines of credit are classified as long-term debt as the company has the ability to renew them or refinance them under the global multi-currency credit facility. There are no fees or compensating balances associated with these borrowings. There were no outstanding borrowings under the lines of credit at December 31, 1997. Short-term borrowings are principally utilized to support the working capital requirements of certain foreign operations. The weighted average interest rates of these borrowings at December 31, 1997 and 1996 were 8 percent and 9 percent, respectively. At December 31, 1997, the estimated fair market value of the 7% senior notes was 103 percent of par, the 7 1/2% senior debentures was 107 percent of par, and the 8.29% senior notes was 104 percent of par. The balance of the company's borrowings approximate their fair value. 5. Income Taxes The provision for income taxes consists of the following (in thousands): 1997 1996 1995 -------- -------- -------- Current Federal $ 81,278 $ 78,715 $ 78,639 State 19,679 21,482 19,989 Foreign 31,096 29,507 37,330 -------- -------- -------- 132,053 129,704 135,958 -------- -------- -------- Deferred Federal (9,321) 4,758 2,625 State (2,130) 1,087 600 Foreign 11,015 9,118 13,956 -------- -------- -------- (436) 14,963 17,181 -------- -------- -------- $131,617 $144,667 $153,139 ======== ======== ======== The principal causes of the difference between the U.S. statutory and effective income tax rates are as follows (in thousands): 1997 1996 1995 -------- -------- -------- Provision at statutory rate $107,935 $126,900 $132,769 State taxes, net of federal benefit 11,407 14,670 13,383 Foreign tax rate differential 2,499 6,625 4,959 Other 9,776 (3,528) 2,028 -------- -------- -------- $131,617 $144,667 $153,139 ======== ======== ======== For financial reporting purposes, income before income taxes attributable to the United States was $216,993,000 in 1997, $279,149,000 in 1996, and $252,894,000 in 1995, and income before income taxes attributable to foreign operations was $91,392,000 in 1997, $83,422,000 in 1996, and $126,447,000 in 1995. The significant components of the company's deferred tax assets, which are included in other assets, are as follows (in thousands): 1997 1996 ------- ------- Inventory reserves $14,407 $12,730 Allowance for doubtful accounts 10,803 8,045 Accrued expenses 7,789 5,675 Realignment reserve 11,002 - Integration reserve 20,807 7,151 Other (1,076) (5,101) ------- ------- $63,822 $28,500 ======= ======= Included in other liabilities are deferred tax liabilities of $40,327,000 and $36,156,000 at December 31, 1997 and 1996, 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. 6. Shareholders' Equity The company has 2,000,000 authorized shares of serial preferred stock with a par value of $1. 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 acquires 20 percent 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 percent 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, and may be redeemed by the company at a price of $.01 per right at any time until ten days after a 20 percent ownership position has been acquired. In the event that the company merges with, or transfers 50 percent 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. As amended in 1998, the rights expire on March 1, 2008. 7. Realignment Charge During 1997, the company announced the realignment of its North American components operations into seven operating groups based upon customer needs. The company recorded a special charge of $37,900,000 before taxes ($.24 per share on a diluted basis) for costs associated with the realignment, including real estate termination costs, severance and other expenses related to personnel as well as costs of communicating the realignment to customers, suppliers, and employees. 8. Earnings Per Share The following table sets forth the calculation of basic and diluted earnings per share for the years ended December 31 (in thousands): 1997 1996 1995 -------- -------- -------- Net income for basic EPS $163,656(a) $202,709 $202,544 Add interest on 5 3/4% convertible subordinated debentures, net of income taxes - - 3,471 -------- -------- -------- Net income for diluted EPS $163,656(a) $202,709 $206,015 ======== ======== ======== Weighted average common shares outstanding for basic EPS 98,006 100,972 94,174 Net effect of dilutive stock options and restricted stock awards 1,763 1,408 1,504 Assumed conversion of 5 3/4% convertible subordinated debentures - - 6,058 -------- -------- -------- Weighted average common shares outstanding for diluted EPS 99,769 102,380 101,736 ======== ======== ======= Basic EPS $ 1.67(a) $ 2.01 $ 2.15 ======== ======== ======= Diluted EPS $ 1.64(a) $ 1.98 $ 2.03 ======== ======== ======= (a) Net income includes special charges totaling $59,500,000 ($40,435,000 after taxes) associated with the realignment of the North American components operations and the acquisition and integration of the volume electronic component distribution businesses of Premier Farnell plc. Excluding these charges, net income and net income per share on a basic and diluted basis were $204,091,000, $2.08, and $2.05, respectively. 9. Employee Stock Plans Restricted Stock Plan - --------------------- Under the terms of the Arrow Electronics, Inc. Restricted Stock Plan (the "Plan"), a maximum of 3,960,000 shares of common stock may be awarded at the discretion of the board of directors to key employees of the company. 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 vesting restrictions generally over a four-year period. The company awarded 99,000 shares of common stock in early 1998 to 60 key employees in respect of 1997, 292,304 shares of common stock to 209 key employees during 1997, 239,720 shares of common stock to 81 key employees during 1996, and 212,700 shares of common stock to 79 key employees during 1995. Forfeitures of shares awarded under the Plan were 31,250, 49,274, and 20,850, during 1997, 1996, and 1995, respectively. The aggregate market value of outstanding awards under the Plan at the respective dates of award is being amortized over the vesting period, and the unamortized balance is included in shareholders' equity as unamortized 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 for an aggregate of 21,000,000 shares of common stock were authorized for grant to key employees at prices determined by the board of directors at 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. Effective May 1997, future options granted under the plan become exercisable in equal installments over a four-year period. Previously, options became exercisable over a two- or three-year period. Options currently outstanding have terms of ten years. The company applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for the Option Plan. Accordingly, no compensation expense has been recognized in the company's accounts for this plan. The following information relates to the option plan for the years ended December 31: Average Average Average Exercise Exercise Exercise 1997 Price 1996 Price 1995 Price --------- -------- --------- -------- --------- -------- Options outstanding at beginning of year 7,107,042 $20.25 4,877,150 $16.69 4,328,076 $13.91 Granted 2,648,340 29.51 3,267,920 23.67 1,834,900 20.64 Exercised (1,316,962) 15.34 (923,970) 13.75 (1,133,008) 12.11 Forfeited (206,611) 22.16 (114,058) 18.88 (152,818) 18.07 --------- ------ --------- ------ --------- ------ Options outstanding at end of year 8,231,809 $24.00 7,107,042 $20.25 4,877,150 $16.69 Prices per share of ========= ====== ========= ====== ========= ====== options outstanding $1.81-32.25 $1.81-27.69 $1.81-27.69 Options available for future grant: Beginning of year 432,700 3,586,562 5,334,778 End of year 6,962,805 432,700 3,586,562 The following table summarizes information about stock options outstanding at December 31, 1997: Options Outstanding Options Exercisable - ------------------------------------------------- --------------------------- Weighted Weighted Weighted Maximum Average Average Average Exercise Number Remaining Exercise Number Exercise Price Outstanding Contractual Life Price Exercisable Price - -------- ----------- ---------------- -------- -------------- ---------- $20.00 1,472,040 72 months $15.86 1,447,431 $15.86 25.00 2,335,003 91 months 21.31 1,435,190 21.11 30.00 3,221,766 111 months 26.69 1,075,994 26.00 35.00 1,203,000 119 months 31.98 - - --------- --------- All 8,231,809 103 months $24.00 3,958,615 $20.52 ========= ========= Had stock-based compensation costs been determined as prescribed by Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," net income would have been reduced by $7.6 million ($.06 per share on a diluted basis) in 1997 and $5.2 million ($.04 per share on a diluted basis) in 1996. The estimated weighted average fair value, utilizing the Black-Scholes option- pricing model, at date of option grant during 1997 and 1996 was $9.41 and $5.99, per option, respectively. The weighted average fair value was estimated using the following assumptions: 1997 1996 ---- ---- Expected life (months) 47 31 Risk-free interest rate (percent) 5.8 5.6 Expected volatility (percent) 29 30 There is no expected dividend yield. 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 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 1997, 1996, and 1995 amounted to $5,147,000, $4,218,000, and $3,878,000, respectively. 10. Retirement Plans 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 $4,988,000, $4,608,000, and $3,966,000 in 1997, 1996, and 1995, respectively. Certain domestic and foreign subsidiaries maintain separate defined contribution plans for their employees and made contributions thereunder, which amounted to $1,915,000, $1,162,000, and $822,000 in 1997, 1996, and 1995, respectively. The company maintains an unfunded supplemental retirement plan for certain executives. The company's board of directors determines those employees eligible to participate in the plan and their maximum annual benefit upon retirement. 11. Lease Commitments The company leases certain office, warehouse, and other property under noncancelable operating leases expiring at various dates through 2053. Rental expenses of noncancelable operating leases amounted to $29,190,000 in 1997, $29,390,000 in 1996, and $27,594,000 in 1995. Aggregate minimum rental commitments under all noncancelable operating leases, exclusive of real estate taxes, insurance, and leases related to facilities closed in connection with the North American realignment and the integration of the acquired businesses, approximate $153,039,000. Such commitments on an annual basis are: 1998- $29,004,000; 1999-$23,453,000; 2000-$16,546,000; 2001-$12,400,000; 2002- $10,986,000; and $60,650,000 thereafter. 12. Financial Instruments The company enters into foreign exchange forward contracts (the "contracts") to mitigate the impact of changes in foreign currency exchange rates, principally French francs, German deutsche marks, Italian lira, and British pound sterling. These contracts are executed to facilitate the netting of offsetting foreign currency exposures resulting from inventory purchases and sales, and generally have terms of no more than three months. Gains or losses on these contracts are deferred and recognized when the underlying future purchase is recognized. The company does not enter into forward contracts for trading purposes. The risk of loss on a contract is the risk of nonperformance by the counterparties which the company minimizes by limiting its counterparties to major financial institutions. The fair value of the contracts is estimated using market quotes. The notional amount of the contracts at December 31, 1997 and December 31, 1996, was $97,321,000 and $53,462,000, respectively. The carrying amount, which is nominal, approximated fair value at December 31, 1997 and 1996. 13. Segment and Geographic Information The company is engaged in one business, the distribution of electronic components, systems, and related products. The geographic distribution of consolidated sales, operating income (loss), and identifiable assets is as follows (in thousands): Sales to Identifiable Unaffiliated Operating Assets at Customers Income (Loss) December 31, ------------ ------------ ------------ 1997 - ---- North America $4,964,660 $322,813 $1,847,976 Europe 2,279,951 117,918 1,394,456 Asia/Pacific 519,334 11,617 199,884 Realignment and integration charges - (59,500) - Corporate - (18,127) 40,643 Investment in affiliated companies - - 54,914 ---------- -------- ---------- $7,763,945 $374,721 $3,537,873 ========== ======== ========== 1996 - ---- North America $4,309,839 $317,846 $1,463,528 Europe 1,855,821 101,326 1,040,326 Asia/Pacific 368,917 96 155,830 Corporate - (18,641) 16,467 Investment in affiliated company - - 34,200 ---------- -------- ---------- $6,534,577 $400,627 $2,710,351 ========== ======== ========== 1995 - ---- North America $3,929,016 $295,941 $1,476,420 Europe 1,719,523 135,519 1,018,755 Asia/Pacific 270,881 8,884 134,947 Corporate - (17,135) 34,863 Investment in affiliated company - - 36,031 ---------- -------- ---------- $5,919,420 $423,209 $2,701,016 ========== ======== ========== 14. Quarterly Financial Data (Unaudited) A summary of the company's quarterly results of operations follows (in thousands except per share data): First Second Third Fourth Quarter Quarter Quarter Quarter ---------- ---------- ---------- ---------- 1997 - ---- Sales $1,855,333 $1,848,742 $1,949,396 $2,110,474 Gross profit 285,561 293,390 291,546 319,033 Net income 50,294 51,779 9,282(a) 52,301 Per common share: Basic .51 .52 .10(a) .54 Diluted .50 .52 .09(a) .53 1996 - ---- Sales $1,703,318 $1,601,651 $1,597,379 $1,632,229 Gross profit 281,817 265,336 243,985 250,883 Net income 56,808 54,097 43,756 48,048 Per common share: Basic .56 .53 .43 .48 Diluted .56 .53 .43 .47 (a) Net income includes special charges totaling $59,500,000 ($40,435,000 after taxes) associated with the realignment of the North American components operations and the acquisition and integration of the volume electronic component distribution businesses of Premier Farnell plc. Excluding these charges, net income and net income per share on a basic and diluted basis were $49,717,000, $.51, and $.50, respectively. 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 13, 1998 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 13, 1998 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 13, 1998 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 13, 1998 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 schedule are filed as part of this annual report. 2. Financial Statement Schedule. ----------------------------- The financial statement schedule listed in the accompanying index to financial statements is 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. ARROW ELECTRONICS, INC. INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (Item 14 (a)) Page ---- Report of Ernst & Young LLP, independent auditors 14 Management's responsibility for financial reporting 15 Consolidated statement of income for the years ended December 31, 1997, 1996 and 1995 16 Consolidated balance sheet at December 31, 1997 and 1996 17 For the years ended December 31, 1997, 1996 and 1995: Consolidated statement of cash flows 18 Consolidated statement of shareholders' equity 19 Notes to consolidated financial statements for the years ended December 31, 1997, 1996 and 1995 21 Consolidated schedule for the three years ended December 31, 1997: II - Valuation and qualifying accounts 41 3. Exhibits. (2)(a)(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). (b) 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). (c) 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). (d) Master Agreement, dated as of December 20, 1996, among Premier Farnell plc and Arrow Electronics, Inc. relating to the sale and purchase of the Farnell Volume Business.(incorporated by reference to Exhibit 2(d) to the company's Annual Report on Form 10K for the year ended December 31, 1996, Commission File No. 1-4482). (3)(a)(i) Restated Certificate of Incorporation of the company, as amended (incorporated by reference to Exhibit 3(a) to the company's Annual Report on Form 10-K for the year ended December 31, 1994 Commission File No. 1-4482). (ii) Certificate of Amendment of the Certificate of Incorporation of Arrow Electronics, Inc., dated as of August 30, 1996 (incorporated by reference to Exhibit 3 to the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, Commission File No. 1- 4482). (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)(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 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)(a)(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)(a)(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)(a)(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)(a)(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). (vi) Fifth Amendment, dated February 25, 1998, to the Rights Agreement in (4)(i)above (incorporated by reference to Exhibit 7 to the company's current report on Form 8 A/A dated March 2, 1998, Commission File No. 1-4482). (b)(i) Indenture, dated as of January 15, 1997, between the company and the Bank of Montreal Trust Company, as Trustee. (incorporated by reference to Exhibit 4 (b)(i) to the company's Annual Report on Form 10K for the year ended December 31, 1996, Commission File No. 1-4482). (ii) Officers' Certificate, as defined by the Indenture in 4(b)(i) above, dated as of January 22, 1997, with respect to the company's $200,000,000 7% Senior Notes due 2007 and $200,000,000 7 1/2% Senior Debentures due 2027. (incorporated by reference to Exhibit 4 (b)(ii) to the company's Annual Report on Form 10K for the year ended December 31, 1996, Commission File No. 1-4482). (10)(a)(i) Arrow Electronics Savings Plan, as amended and restated through December 28, 1994 (incorporated by reference to Exhibit 10(a)(iii) to the company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996, Commission File No. 1-4482). (ii) Amendment No. 1, dated March 29, 1996, to the Arrow Electronics Savings Plan in (10)(a)(i) above (incorporated by reference to Exhibit 10(a)(iv) to the company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996, Commission File No. 1-4482). (iii) Arrow Electronics Stock Ownership Plan, as amended and restated through December 28, 1994 (incorporated by reference to Exhibit 10(a)(i) to the company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996, Commission File No. 1-4482). (iv) Amendment No. 1, dated March 29, 1996, to the Arrow Electronics Stock Ownership Plan in (10)(a)(iii) above (incorporated by reference to Exhibit 10(a)(ii) to the company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996, Commission File No. 1-4482). (b)(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 (incorporated by reference to Exhibit 10(c)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1995, Commission File No. 1-4482). (iii) Employment Agreement, dated as of January 1, 1998 between the company and Robert E. Klatell. (iv) Form of agreement between the company and the employees parties to the Employment Agreements listed in 10(b)(i)-(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) Employment Agreement, dated as of January 1, 1998, between the company and Betty Jane Scheihing. (vi) Employment Agreement, dated as of September 1, 1997, between the company and Jan M. Salsgiver. (vii) Employment Agreement, dated as of September 1, 1997, between the company and Francis M. Scricco. (viii) Employment Agreement, dated as of April 15, 1996, between the company and Gerald Luterman (incorporated by reference to Exhibit 10(c)(vi) to the company's Annual Report on Form 10K for the year ended December 31, 1996, Commission File No. 1-4482). (ix) Employment Agreement, dated as of September 21, 1994, between the company and Robert S. Throop (incorporated by reference to Exhibit 10(c)(x) to the company's Annual Report on Form 10-K for the year ended December 31, 1994, Commission File No. 1-4482). (x) Employment Agreement, dated as of September 1, 1994 between the company and Steven W. Menefee (incorporated by reference to Exhibit 10(c)(v) to the company's Annual Report on Form 10-K for the year ended December 31, 1994, Commission File No. 1-4482). (xi) Form of agreement between the company and all corporate Vice Presidents, including the employees parties to the Employment Agreements listed in 10(b)(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). (xi) Unfunded Pension Plan for Selected Executives of Arrow Electronics, Inc., as amended (incorporated by reference to Exhibit 10(c)(xiii) to the company's Annual Report on Form 10-K for the year ended December 31, 1994, Commission File No. 1-4482). (xii) 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). (c)(i) Senior Note Purchase Agreement, dated as of December 29, 1992, with respect to the company's 8.29 percent 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(c)(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). (iii) Second Amendment, dated as of April 24, 1995, to the Senior Note Purchase Agreement in 10(c)(i) above. (incorporated by reference to Exhibit 10(c)(iii) in the company's Annual Report on form 10-K for the year ended December 31, 1996, Commission File No. 1-4482). (iv) Third Amendment, dated as of December 23, 1996, to the Senior Note Purchase Agreement in 10(c)(i) above. (incorporated by reference to Exhibit 10(c)(iv) in the company's Annual Report on form 10-K for the year ended December 31, 1996, Commission File No. 1-4482). (d)(i) Amended and Restated Credit Agreement, dated as of August 16, 1995 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(d) in the company's Annual Report on form 10-K for the year ended December 31, 1995, Commission File No. 1-4482). (ii) First Amendment, dated as of September 30, 1996, to the Arrow Electronics, Inc. Second Amended and Restated Credit Agreement, dated August 16, 1995 in (10)(d)(i) above (incorporated by reference to Exhibit 10 to the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, Commission File No. 1-4482). (e)(i) Arrow Electronics, Inc. Stock Option Plan, as amended and restated, effective as of May 15, 1997 (incorporated by reference to 99(a) to the company's Registration Statement on Form S-8, Registration No. 333-45631). (ii) Form of Stock Option Agreement under (e)(i) above. (iii) Form of Nonqualified Stock Option Agreement under (e)(i) above (incorporated by reference to Exhibit 10(k)(iv) to the company's Registration Statement on Form S-4, Registration No. 33-17942). (f)(i) Restricted Stock Plan of Arrow Electronics, Inc., as amended and restated effective May 15, 1997 (incorporated by reference to Exhibit 99(b) to the company's Registration Statement on Form S- 8, Registration No. 333-45631). (ii) Form of Restricted Stock Award Agreement under (f)(i) above. (g)(i) Non-Employee Directors Stock Option Plan as of May 15, 1997 (incorporated by reference to Exhibit 99(c) to the company's Registration Statement on Form S-8, Registration No.333-45631). (ii) Form of Nonqualified Stock Option Agreement under 10(g)(i) above. (h) Non-Employee Directors Referral Plan as of May 15, 1997 (in corporated by reference to Exhibit 99(d) to the Company's Registration Statement on Form S-8, Registration No. 333-45631). (i) 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. (21) List of Subsidiaries. (23) Consent of Ernst & Young LLP (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 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 ended December 31, 1997, the following Current Reports on Form 8-K were filed: Date of Report (Date of Earliest Event Reported) Items Reported ------------------------------- -------------- None EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Forms S-8 No. 333-45631, No. 33-55565, No. 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. 333-19431) and in the related Prospectus pertaining to the registration and issuance of the senior notes and senior debentures 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 16, 1998 with respect to the consolidated financial statements and schedule of Arrow Electronics, Inc. included in this Annual Report on Form 10-K for the year ended December 31, 1997. ERNST & YOUNG LLP New York, New York March 30, 1998
ARROW ELECTRONICS, INC. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS For the three years ended December 31, 1997 Additions ------------------------ Balance at Balance beginning Charged Charged at end of year to income to other(1) Write-offs of year ----------- ----------- ---------- ----------- ------------ Allowance for doubtful accounts 1997 $39,753,000 $20,360,000 $1,896,000 $15,954,000 $46,055,000 =========== =========== ========== =========== =========== 1996 $38,670,000 $15,495,000 $ - $14,412,000 $39,753,000 =========== =========== ========== =========== =========== 1995 $31,132,000 $21,344,000 $ 67,000 $13,873,000 $38,670,000 =========== =========== ========== =========== =========== (1) Represents the allowance for doubtful accounts of the businesses acquired by the company during each year.
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 Executive Vice President March 30, 1998 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 30, 1998 ------------------------------- Stephen P. Kaufman, Chairman, Principal Executive Officer, and Director By: /s/ Robert E. Klatell March 30, 1998 ------------------------------- Robert E. Klatell, Executive Vice President, Secretary, and Director By: /s/ Gerald Luterman March 30, 1998 ------------------------------- Gerald Luterman, Senior Vice President and Principal Financial Officer By: /s/ Paul J. Reilly March 30, 1998 ------------------------------- Paul J. Reilly, Vice President, Controller and Principal Accounting Officer By: /s/ Daniel W. Duval March 30, 1998 ------------------------------- Daniel W. Duval, Director By: /s/ Carlo Giersch March 30, 1998 ------------------------------- Carlo Giersch, Director By: /s/ John N. Hanson March 30, 1998 ------------------------------- John N. Hanson, Director By: /s/ Roger King March 30, 1998 ------------------------------- Roger King, Director By: /s/ Karen Gordon Mills March 30, 1998 ------------------------------- Karen Gordon Mills, Director By: /s/ Richard S. Rosenbloom March 30, 1998 ------------------------------- Richard S. Rosenbloom, Director By: /s/ Robert S. Throop March 30, 1998 ------------------------------- Robert S. Throop, Director By: /s/ John C. Waddell March 30, 1998 ------------------------------- John C. Waddell, Director EX-10 2 EMPLOYMENT AGREEMENT ROBERT E. KLATELL EMPLOYMENT AGREEMENT made as of the 1st day of January, 1998 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 E. KLATELL, residing at 1094 Ponus Ridge Road, New Canaan, Connecticut 06840 (the "Executive"). WHEREAS, the Executive is now and has been employed by the Company as an Executive Vice President, 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. It is contemplated that the Executive will be an Executive Vice President 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 Executive Vice President 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) Time Devoted to Duties. 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). 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. In the event that, during the Employment Period, the Executive elects to relocate his current residence so as to reduce the burden of commuting, the Company shall provide him with the maximum amount of relocation assistance and support offered to senior executives who relocate their residences at the Company's request. 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 $425,000 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 iii. such employee benefits that are made available by the Company to its other principal executives. b) Annual Incentive Payment. The Executive shall participate in the Company's Management Incentive Plan (or such successor or replacement plan or program in which the Company's principal executives, other than the Chief Executive Officer, generally participate) and shall have a targeted incentive thereunder of not less than $220,000 per annum; provided, however, that the Executive's actual incentive payment in any year shall be measured by the Company's performance against goals established for that year and that such performance may produce an incentive payment ranging from one-half to twice the targeted amount. c) Supplemental Executive Retirement Plan. The Executive shall continue to participate in the Company's Unfunded Pension Plan for Selected Executives; provided, however, that the Executive's initial date of participation in such plan shall be deemed to be May 1, 1971 for purposes of calculating his retirement benefit and all other matters thereunder. d) Automobile. During the Employment Period, the Company will pay the Executive a monthly automobile allowance of $1,200. 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. 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. 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 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) January 1, 2001; 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. 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. 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 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, and his medical benefits and life insurance shall remain in full force. After termination of the Employment Period as a result of the disability of the Executive, the medical benefits covering the Executive and his family shall remain in place (subject to the eligibility requirements and other conditions continued in the underlying plan, as described in the Company's employee benefits manual, and subject to the requirement that the Executive continue to pay the "employee portion" of the cost thereof), and the Executive's life insurance policy under the Management Insurance Program shall be transferred to him, as provided in the related agreement, subject to the obligation of the Executive to pay the premiums therefor. 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 January 1, 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 in 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. 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 January 1, 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 Period 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 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, 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. 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 special, unique and extraordinary character; (ii) it would be difficult 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 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. 13. 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 June 1, 1988 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, 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 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: Robert E. Klatell 1094 Ponus Ridge Road New Canaan, Connecticut 06840 ii. if to the Company to: Arrow Electronics, Inc. 25 Hub Drive Melville, New York 11747 Attention: President 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/Stephen P. Kaufman - ----------------------- ------------------------- Assistant Secretary President THE EXECUTIVE /s/ Robert E. Klatell --------------------- EX-4 3 EMPLOYMENT AGREEMENT BETTY JANE SCHEIHING EMPLOYMENT AGREEMENT made as of the 1st day of January 1998 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 Betty Jane Scheihing, residing at 2419 N.E. Lakeview Drive, Sebring, Florida 33870 (the "Executive"). WHEREAS, the Executive is now and has been employed by the Company as a Senior Vice President, with the responsibilities and duties of an 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 her to continue to render services to the Company on the terms set forth in, and in accordance with the provisions of, this Employment Agreement (the "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. It is contemplated that the Executive will be a Senior Vice President 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 during the Employment Period, without the consent of the Executive, she shall not be assigned any titles, duties or responsibilities which, in the aggregate, represent a material diminution in, or are materially inconsistent with, her prior title, duties, and responsibilities as a Senior Vice President). If the Board of Directors does not either continue the Executive in the office of Vice President or elect her to some other 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 her under Paragraph 6 if she were discharged without cause. If the Executive decides to exercise such right to decline to give further service, she shall within forty-five days after such action or omission by the Board of Directors give written notice to the Company stating her objection and the action she thinks necessary to correct it, and she shall permit the Company to have a forty- five 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 6 shall accrue at the expiration of such forty-five day period. c) Time Devoted to Duties. The Executive shall devote all of her 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 her diligently and faithfully to serve and endeavor to further their interests to the best of her ability. 2. Compensation. ------------ a) Monetary Remuneration and Benefits. During the Employment Period, the Company shall pay to the Executive for all services rendered by her in any capacity: i. a minimum base salary of $315,000 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; provided 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 iii. such employee benefits that are made available by the Company to its other executives. b) Annual Incentive Payment. The Executive shall participate in the Company's Management Incentive Plan (or such alternative, successor, or replacement plan or program in which the Company's principal executives, other than the Chief Executive Officer, generally participate) and shall have a targeted incentive thereunder of not less than $185,000 per annum; provided, however, that the Executive's actual incentive payment in any year shall be measured by the Company's performance against goals established for that year and that such performance may produce an incentive payment ranging from none to twice the targeted amount. The Executive's incentive payment for any year will be appropriately pro-rated to reflect a partial year of employment. c) Supplemental Executive Retirement Plan. The Executive shall continue to participate in the Company's Unfunded Pension Plan for Selected Executives (the "SERP"). d) Automobile. During the Employment Period, the Company will pay the Executive a monthly automobile allowance of $850. e) 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 her duties hereunder. f) 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 her duties hereunder. g) Indemnification. The Company agrees to indemnify the Executive for any and all liabilities to which she may be subject as a result of her employment hereunder (and as a result of her 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 her as a result of such employment, to the fullest extent permitted by law. h) 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 (including 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 5 hereof; or d) December 31, 1999; 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 her 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) her becoming disabled as defined under the terms of the disability benefit program applicable to the Executive, if any, and (ii) her absence from her duties hereunder on a full-time basis for one hundred eighty (180) consecutive days as a result of her 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 her 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 her remuneration hereunder shall be reduced by the amount of any payments she may otherwise receive as a result of her disability pursuant to a disability program provided by or through the Company), and her medical benefits and life insurance shall remain in full force. After termination of the Employment Period as a result of the disability of the Executive, the medical benefits covering the Executive and her family shall remain in place (subject to the eligibility requirements and other conditions continued in the underlying plan, as described in the Company's employee benefits manual, and subject to the requirement that the Executive continue to pay the "employee portion" of the cost thereof), and the Executive's life insurance policy under the Management Insurance Program shall be transferred to her, as provided in the related agreement, subject to the obligation of the Executive to pay the premiums therefor. 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 her 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 without cause, the Executive shall be entitled to the salary provided in Paragraph 2(a), two-thirds of the targeted incentive provided in Paragraph 2(b), the vesting of any restricted stock awards and the immediate exercisability of any stock options, as well as her rights under Paragraph 4, which would have vested or become exercisable during the full Employment Period (which, in that event, shall continue until December 31, 1999 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 she 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 Paragraph 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 she may acquire in the course of her 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 she 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 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 her 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 her 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 her 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 her 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 her 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 her possession, custody or control, whether prepared by her 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 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 she violates any of the provisions of this Agreement, and the Company agrees and consents that if it violates any of the provisions of Paragraphs 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 October 24, 1989 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. 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: Betty Jane Scheihing 2419 N.E. Lakeview Drive Sebring, Florida 33870 ii. if to the Company to: Arrow Electronics, Inc. 25 Hub Drive Melville, New York 11747 Attention: Executive Vice President Either party may, by notice to the other, change her 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 Executive Vice President THE EXECUTIVE /s/Betty Jane Scheihing ----------------------- EX-10 4 EMPLOYMENT AGREEMENT JAN M. SALSGIVER EMPLOYMENT AGREEMENT made as of the 1st day of September 1997 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 JAN M. SALSGIVER, residing at 250 East 87th Street, New York, New York 10128 (the "Executive"). WHEREAS, the Executive is now and has been employed by the Company as a Vice President, with the responsibilities and duties of an 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 her to continue to render services to the Company on the terms set forth in, and in accordance with the provisions of, this Employment Agreement (the "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. It is contemplated that the Executive will be a Vice President 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 during the Employment Period, without the consent of the Executive, she shall not be assigned any titles, duties or responsibilities which, in the aggregate, represent a material diminution in, or are materially inconsistent with, her prior title, duties, and responsibilities as a Vice President). If the Board of Directors does not either continue the Executive in the office of Vice President or elect her to some other 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 her under Paragraph 6 if she were discharged without cause. If the Executive decides to exercise such right to decline to give further service, she shall within forty-five days after such action or omission by the Board of Directors give written notice to the Company stating her objection and the action she thinks necessary to correct it, and she shall permit the Company to have a forty- five 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 6 shall accrue at the expiration of such forty-five day period. c) Time Devoted to Duties. The Executive shall devote all of her 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 her diligently and faithfully to serve and endeavor to further their interests to the best of her ability. 2. Compensation. ------------ a) Monetary Remuneration and Benefits. During the Employment Period, the Company shall pay to the Executive for all services rendered by her 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; provided 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 iii. such employee benefits that are made available by the Company to its other executives. b) Annual Incentive Payment. The Executive shall participate in the Company's Management Incentive Plan (or such alternative, successor, or replacement plan or program in which the Company's principal operating executives, other than the Chief Executive Officer, generally participate) and shall have a targeted incentive thereunder of not less than $200,000 per annum; provided, however, that the Executive's actual incentive payment in any year shall be measured by the Company's performance against goals established for that year and that such performance may produce an incentive payment ranging from none to twice the targeted amount. The Executive's incentive payment for any year will be appropriately pro-rated to reflect a partial year of employment. c) Supplemental Executive Retirement Plan. The Executive shall continue to participate in the Company's Unfunded Pension Plan for Selected Executives (the "SERP"). d) Automobile. During the Employment Period, the Company will pay the Executive a monthly automobile allowance of $800. e) 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 her duties hereunder. f) 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 her duties hereunder. g) Indemnification. The Company agrees to indemnify the Executive for any and all liabilities to which she may be subject as a result of her employment hereunder (and as a result of her 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 her as a result of such employment, to the fullest extent permitted by law. h) 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 (including 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 5 hereof; or d) December 31, 2000; 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 her 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) her becoming disabled as defined under the terms of the disability benefit program applicable to the Executive, if any, and (ii) her absence from her duties hereunder on a full-time basis for one hundred eighty (180) consecutive days as a result of her 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 her 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 her remuneration hereunder shall be reduced by the amount of any payments she may otherwise receive as a result of her disability pursuant to a disability program provided by or through the Company), and her medical benefits and life insurance shall remain in full force. After termination of the Employment Period as a result of the disability of the Executive, the medical benefits covering the Executive and her family shall remain in place (subject to the eligibility requirements and other conditions continued in the underlying plan, as described in the Company's employee benefits manual, and subject to the requirement that the Executive continue to pay the "employee portion" of the cost thereof), and the Executive's life insurance policy under the Management Insurance Program shall be transferred to her, as provided in the related agreement, subject to the obligation of the Executive to pay the premiums therefor. 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 her 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 without cause, the Executive shall be entitled to the salary provided in Paragraph 2(a), two-thirds of the targeted incentive provided in Paragraph 2(b), the vesting of any restricted stock awards and the immediate exercisability of any stock options, as well as her rights under Paragraph 4, which would have vested or become exercisable during the full Employment Period (which, in that event, shall continue until December 31, 2000 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 she 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 Paragraph 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 she may acquire in the course of her 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 she 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 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 her 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 her 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 her 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 her 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 her 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 her possession, custody or control, whether prepared by her 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 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 she violates any of the provisions of this Agreement, and the Company agrees and consents that if it violates any of the provisions of Paragraphs 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 October 24, 1989 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. 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: Jan M. Salsgiver 250 East 87th Street Apartment 29D New York, New York 10128 ii. if to the Company to: Arrow Electronics, Inc. 25 Hub Drive Melville, New York 11747 Attention: Executive Vice President Either party may, by notice to the other, change her 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 Executive Vice President THE EXECUTIVE /s/Jan M. Salsgiver ------------------- EX-10 5 EMPLOYMENT AGREEMENT FRANCIS M. SCRICCO EMPLOYMENT AGREEMENT made as of the 1st day of September, 1997 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 FRANCIS M. SCRICCO, residing at 136 High Street, Exeter, New Hampshire 03833 (the "Executive"). WHEREAS, the Company wishes to employ the Executive as Executive Vice President and Chief Operating Officer, with the responsibilities and duties of a principal executive officer of the Company; and WHEREAS, the Executive wishes to accept such employment and to render services to the Company on the terms set forth in, and in accordance with the provisions of, this Employment Agreement (the "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. It is contemplated that the Executive will be Executive Vice President and Chief Operating 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 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 title, duties, and responsibilities as Executive Vice President and Chief Operating Officer). If the Board of Directors does not either continue the Executive in the office of Executive Vice President and Chief Operating 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 6 if he were discharged without cause. If the Executive decides to exercise such right to decline to give further service, he shall within forty-five 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 forty-five 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 6 shall accrue at the expiration of such forty-five day period. c) Time Devoted to Duties. 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 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. 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 at the rate of $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), subject to increase from time to time in the sole discretion of the Board of Directors of the Company; provided 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 iii. such employee benefits that are made available by the Company to its other principal executives. b) Annual Incentive Payment. The Executive shall participate in the Company's Management Incentive Plan (or such alternative, successor, or replacement plan or program in which the Company's principal operating executives, other than the Chief Executive Officer, generally participate) and shall have a targeted incentive thereunder of not less than $350,000 per annum; provided, however, that the Executive's actual incentive payment in any year shall be measured by the Company's performance against goals established for that year and that such performance may produce an incentive payment ranging from none to twice the targeted amount. The Executive's incentive payment for any year will be appropriately pro-rated to reflect a partial year of employment. c) Supplemental Executive Retirement Plan. The Executive shall participate in the Company's Unfunded Pension Plan for Selected Executives (the "SERP"), which shall provide him with an annual minimum benefit of $125,000 per year upon retirement at age 60. d) Automobile. During the Employment Period, the Company will pay the Executive a monthly automobile allowance of $1,000. e) 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. f) 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. g) 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. h) 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 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 5 hereof; or d) September 1, 2000; provided, however, that, if the Company does not give the Executive at least twelve months notice of its intention to permit this Agreement to expire on September 1, 2000 (unless sooner terminated as otherwise provided herein), the Employment Period shall automatically be extended for one or more months beyond the scheduled expiration date thereof to give the Executive the benefit of twelve months notice of termination. 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 any other remuneration and benefits provided in accordance with Paragraph 2, 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), and his medical benefits and life insurance shall remain in full force. After termination of the Employment Period as a result of the disability of the Executive, the medical benefits covering the Executive and his family shall remain in place (subject to the eligibility requirements and other conditions continued in the underlying plan, as described in the Company's employee benefits manual, and subject to the requirement that the Executive continue to pay the "employee portion" of the cost thereof), and the Executive's life insurance policy under the Management Insurance Program shall be transferred to him, as provided in the related agreement, subject to the obligation of the Executive to pay the premiums therefor. 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 Paragraph 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 without cause, the Executive shall be entitled to the salary provided in Paragraph 2(a), two thirds of the targeted incentive provided in Paragraph 2(b), the vesting of any restricted stock awards and the immediate exercisability of any stock options, as well as his rights under Paragraph 4, which would have vested or become exercisable during the full Employment Period (which, in that event, shall continue until September 1, 2000 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 Executive's obligations under Paragraph 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 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 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, 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. 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 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, 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 Paragraph 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 Paragraph 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. 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 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 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: Francis M. Scricco 136 High Street Exeter, New Hampshire 03833 ii. if to the Company to: Arrow Electronics, Inc. 25 Hub Drive Melville, New York 11747 Attention: Robert E. Klatell Executive Vice President 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 Executive Vice President THE EXECUTIVE /s/Francis M. Scricco --------------------- EX-10 6 FORM OF STOCK OPTION AGREEMENT ARROW LOGO INTERNAL CORRESPONDENCE - -------------------------------------------------------------------------- Arrow Electronics, Inc. TO: (employee name) FROM: Robert E. Klatell LOCATION: Melville DATE: December 18, 1997 PHONE: (516) 391-1830 FAX: (516) 391-1683 - --------------------------------------------------------------------------- SUBJECT: STOCK OPTION AGREEMENT - --------------------------------------------------------------------------- The Board of Directors has authorized the grant to you of a stock option to purchase xxx shares shares of Arrow common stock at a price of $27.50 per share under the Arrow Electronics, Inc. Stock Option Plan (the "Plan"), as evidenced by the accompanying Award Certificate. Please be aware of the following: 1. Your stock option will become exercisable, or "vest", in installments and may not be exercised until vested; 2. Your stock option will vest in accordance with the Vesting Schedule shown on the Award Certificate, so long as you remain a full-time employee through the vesting dates (except for certain instances specified in the Plan which will cause immediate vesting); 3. Your stock option will expire in ten years after the grant date shown on the Award Certificate and any portion not exercised within ten years will be forfeited; 4. This Stock Option Agreement and the accompanying Award Certificate summarize your stock option and the Plan (copies of which are available upon request), but they do not expand your rights or create new rights under the Plan; 5. By accepting this stock option, you confirm your present intention to remain in the employ of Arrow or one of its subsidiaries for at least one year; 6. Neither the authorization by the Board of Directors of your stock option nor this Stock Option Agreement modifies in any way the terms of your employment with Arrow. In order to accept your stock option, you must sign one copy of this memorandum and return it to me at Arrow's corporate headquarters, 25 Hub Drive, Melville, New York, NY 11747, by December 31, 1997. By signing this agreement you agree to accept the award, subject to the terms of this Stock Option Agreement, the Award Certificate, and the Plan (each of which are incorporated in, and made part of, this agreement). If the signed memorandum is not returned by the date indicated, your stock option will be forfeited. ARROW ELECTRONICS, INC. ACCEPTED BY: By: /s/Robert E. Klatell /s/Employee -------------------- ------------------------- Robert E. Klatell (name) Executive Vice President ************************************************************************* * S A M P L E C E R T I F I C A T E * * * * ARROW ELECTRONICS, INC. * * STOCK OPTION PLAN * * * * STOCK OPTION AWARD CERTIFICATE * * * * The Board of Directors of Arrow Electronics, Inc. has granted * * a stock option to * * * * Employee name * * * * Grant Date: October 20, 1997 Exercise Price: $27.50 No. of Shares:xx * * * * Vesting Schedule * * ----------------------------------------------------------- * * * * Date Number of Shares * * * * October 20, 1998 xxx * * October 20, 1999 xxx * * October 20, 2000 xxx * * October 20, 2001 xxx * * * * The stock option is subject to the terms and conditions of the * * Stock Option Plan and the award agreement thereunder. * * * * IN WITNESS WHEREOF, this certificate has been executed by the * * undersigned on behalf of the Board of Directors of Arrow * * Electronics, Inc., and the seal of the corporation has been * * affixed, this this 8th day of December, 1997. * * * * * * SAMPLE * * ------------------ * * Signature * ************************************************************************* EX-10 7 FORM OF RESTRICTED STOCK AWARDS AGREEMENT ARROW LOGO INTERNAL CORRESPONDENCE - ---------------------------------------------------------------------------- Arrow Electronics, Inc. To: Employee name FROM: Robert E. Klatell LOCATION: Melville DATE: November 14, 1997 PHONE: (516) 391-1830 FAX: (516) 391-1683 - ---------------------------------------------------------------------------- SUBJECT: RESTRICTED STOCK AWARD AGREEMENT - ---------------------------------------------------------------------------- The Board of Directors has authorized an award of xxx shares to you under the Arrow Electronics, Inc. Restricted Stock Plan (the "Plan"), as evidenced by the accompanying Award Certificate. Please be aware of the following: 1. Arrow will deliver the shares included in your award to you after they have "vested" (i.e., become free from the forfeiture provisions of the Plan); 2. The shares will vest in accordance with the Vesting Schedule shown on the Award Certificate, so long as you remain an employee through the vesting dates (except for certain instances specified in the Plan which will cause immediate vesting); 3. If you wish to sell any of your shares included in the award, the Plan requires that you first offer to sell them to Arrow; 4. This Restricted Stock Award Agreement and the accompanying Award Certificate summarize your award and, in certain instances, modify the Plan (copies of which are available upon request), but they do not expand your rights or create new rights under the Plan; 5. This award is being made to only a select number of individuals, and we ask you not to tell anyone outside your family that you have received the award; 6. Neither the authorization by the Board of Directors of your award or this Restricted Stock Award Agreement modifies in any way the terms of your employment with Arrow. In order to accept your award, you must sign one copy of this memorandum and each copy of the attached stock power, and return them to me at Arrow's corporate headquarters, 25 Hub Drive, Melville, New York 11747, by December 15, 1997. By signing this agreement you agree to accept the award, subject to the terms of this Restricted Stock Award Agreement, the Award Certificate, and the Plan (each of which are incorporated in, and made part of, this agreement). If the signed letter and stock powers are not returned by the date indicated, your Restricted Stock Award will be forfeited. ARROW ELECTRONICS, INC. ACCEPTED BY: By: /s/Robert E. Klatell /s/Employee -------------------- ----------------------- Robert E. Klatell Name Executive Vice President ***************************************************************************** * S A M P L E C E R T I F I C A T E * * ARROW ELECTRONICS, INC. * * RESTRICTED STOCK PLAN * * AWARD CERTIFICATE * * The Board of Directors of Arrow Electronics, Inc. has granted a * * Restricted Stock Award to * * * * Employee Name * * * * * * Award Date: January 13, 1998 Number of Shares: xxx * * * * Vesting Schedule * * * * ------------------------------------------------------------ * * Date Number of Shares * * * * January 13, 1999 xxx * * January 13, 2000 xxx * * January 13, 2001 xxx * * January 13, 2002 xxx * * * * * * The Award is subject to the terms and conditions of the Restricted * * Stock Plan and the award agreement thereunder. * * * * * * IN WITNESS WHEREOF, this certificate has been executed by the undersigned* * on behalf of the Board of Directors of Arrow Electronics, Inc., and the * * seal of the corporation has been affixed, this 26th day of January, 1998.* * * * * * SAMPLE * * ------------------------- * * Signature * * * * * ***************************************************************************** EX-10 8 FORM OF NONQUALIFIED STOCK OPTION AGREEMENT NONQUALIFIED STOCK OPTION AGREEMENT under the NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN of ARROW ELECTRONICS, INC. Date of Grant: Option for 15,000 Shares THIS AGREEMENT, dated as of __________________, between ARROW ELECTRONICS, INC. (the "Company") and ________________ (the "Optionee") is entered into under the terms of the Arrow Electronics, Inc. Non-Employee Directors Stock Option Plan (the "Plan") and shall be construed in accordance with the provisions of the Plan (which are incorporated herein by reference). The terms of the Plan shall govern in the event of any inconsistency with the terms of this Option Agreement. Except as otherwise expressly set forth herein, the capitalized terms used in this Option Agreement shall have the meanings set forth in the Plan. 1. Grant of Option. The Company hereby grants to Optionee the option (the "Option") to purchase from the Company, all or any part of an aggregate of 15,000 shares of common stock, par value $1.00 per share, of the Company ("Shares"), at the purchase price of $32.25 per share (the "Exercise Price"). 2. Terms and Conditions of the Option. (a) Expiration Date. The Option will terminate and expire, to the extent not previously exercised, on the tenth (10th) anniversary of the Date of Grant (the "Expiration Date"), or at such earlier time as may be specified herein. (b) Exercise of Option. The Option shall become exercisable with respect to 25% of the Shares subject thereto effective as of each of the first, second, third, and fourth anniversaries of the grant date; provided, that the Optionee continues to serve on the Board as of such dates. Notwithstanding the foregoing, the Option shall become fully (100%) exercisable in the event of the Optionee's Retirement, Disability, Qualifying Termination or death, or upon the earlier occurrence of a Corporate Event, as provided under the Plan (c) Manner of Exercise. The Option may be exercised in whole or in part from time to time during the applicable exercise period by giving written notice of exercise to the Secretary of the Company specifying the number of Shares to be purchased. Notice of exercise must be accompanied by payment in full of the purchase price either by cash or check or (if permitted by the Company) in Shares owned by the Optionee having a Fair Market Value at the date of exercise equal to such purchase price, or in a combination of the foregoing. 3. Non-Transferability. The Option is not assignable or transferable otherwise than by will or by the laws of descent and distribution. During the lifetime of the Optionee, the Option may be exercised only by the Optionee. 4. Effect of Termination of Board Service. The exercise periods that apply to the Option upon termination of the Optionee's service on the Board are set forth below. (a) If the Optionee's service on the Board terminates for any reason other than Cause, Retirement, Disability or death, the Optionee may for a period of ninety (90) days after such termination exercise the Option to the extent, and only to the extent, that the Option or portion thereof has become vested and exercisable, after which time the Option shall automatically terminate in full. (b) If the Optionee's service on the Board terminates for Cause, the Option shall immediately terminate in full and no rights thereunder may be exercised. (c) If the Optionee's service on the Board terminates by reason of the Optionee's Retirement or Disability, the Optionee may, for a period of one (1) year after such termination, exercise the Option in part or in full, after which time the Option shall automatically terminate in full, subject to paragraph (d) immediately below. (d) In the event of the death of the Optionee (i) while serving on the Board, (ii) within the three-month period following the Optionee's termination of service on the Board for any reason other than Cause, Retirement, Disability or death or (iii) within the one-year period following the Optionee's termination of service on the Board by reason of Retirement or Disability, the Option shall be exercisable (to the extent, and only to the extent, provided under the terms of Section 3.3 of the Plan) by the executors, administrators, legatees or distributees of the Optionee's estate, as the case may be, for a period of one (1) year after the Optionee's death. (e) For purposes of this Section 4, the Optionee shall not be deemed to have terminated service on the Board during any period the Optionee continues to serve as an honorary or emeritus Board member. 5. Certain Adjustments. In the event of a change in the capital of the Company (as described in Section 3.6 of the Plan) if the Board shall determine, in its sole discretion, that such change equitably requires such an adjustment, appropriate adjustment shall be made with respect to the number or kind of shares subject to the Option or the Exercise Price or repurchase price applicable with respect to the Option, all in accordance with Section 3.6 of the Plan. 6. Corporate Event. Upon a dissolution or liquidation of the Company, or a sale of substantially all of the assets of the Company and its Subsidiaries in which the acquiring entity does not substitute a new and equivalent option for the Option, or a merger or consolidation in which the Company is not to be the surviving corporation and the surviving corporation does not substitute a new and equivalent option for the Option (a "Corporate Event"), the Optionee shall be given at least ten days prior written notice of the occurrence of such event, the Option shall become fully exercisable, and the Optionee may exercise the Option, in whole or in part, prior to or simultaneously with such event. To the extent the Option is not exercised prior to the occurrence of any such event, the Option shall terminate upon such event. 7. Securities Law Compliance. The Company shall not be required to issue or deliver any certificate for any Shares purchased hereunder prior to compliance with applicable federal and state laws and regulations with respect to the issuance, registration, listing or sale of such Shares. 8. Amendments or Discontinuance. Subject to the terms of the Plan, the Plan and the Option may be amended by the Board from time to time, provided that no amendment of the Plan or the Option shall adversely affect the Option without the consent of the Optionee. 9. Miscellaneous; Governing Law. (a) The Option and this Option Agreement shall be construed, administered and governed in all respects under and by the internal laws of the State of New York (and not its choice of law provisions). (b) Neither the grant of the Option nor any provision of this Option Agreement shall confer any right on the Optionee to remain a director of the Company IN WITNESS WHEREOF, this Option Agreement is executed as of the date first written above. ARROW ELECTRONICS, INC. By: SAMPLE FORM -------------------- Name: Robert E. Klatell Title: Executive Vice President The undersigned Optionee hereby accepts the foregoing Option and Option Agreement and undertakings on the part of the Optionee contained herein and in the Plan, and agrees to all of the terms and conditions this Option Agreement and the Plan. DATED: _______________, 19 ___ ______________________________ Optionee EX-11 9 COMPUTATION OF EARNINGS PER SHARE
Exhibit 11 ARROW ELECTRONICS, INC. STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE (IN THOUSANDS EXCEPT PER SHARE DATA) Year Ended December 31, 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- Net income $163,656 $202,709 $202,544 $111,889 $106,559 Less: preferred stock dividends (880) -------- -------- -------- -------- -------- Net income for basic EPS 163,656 202,709 202,544 111,889 105,679 Add: preferred stock dividends 880 Add: interest on 5 3/4% convertible subordinated debentures, net of income taxes - - 3,471 4,313 4,313 -------- -------- -------- -------- -------- Net income for diluted EPS $163,656 $202,709 $206,015 $116,202 $110,872 ======== ======== ======== ======== ======== Weighted average common shares outstanding for basic EPS (A) 98,006 100,972 94,174 91,653 88,718 Net effect of dilutive stock options and restricted stock awards 1,763 1,408 1,504 1,203 1,255 Assumed conversion of 5 3/4% convertible subordinated debentures - - 6,058 7,547 7,547 Assumed conversion of preferred stock - - - - 1,382 ------- ------- ------- ------- ------- Weighted average common shares outstanding for diluted EPS (A) 99,769 102,380 101,736 100,404 98,902 ======= ======= ======= ======= ======= Basic EPS (A) $1.67 $2.01 $2.15 $1.22 $1.19 ======= ======= ======= ======= ======= Diluted EPS (A) $1.64 $1.98 $2.03 $1.16 $1.12 ======= ======= ======= ======= ======= (A) All share and per amounts have been restated to reflect the two-for-one stock split effective October 15, 1997.
EX-21 10 SUBSIDIARY LISTING ARROW ELECTRONICS, INC. SUBSIDIARY LISTING as of 12/31/97 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. Schweber Electronics Corporation, a New York corporation 5. 10556 Newfoundland Limited, a Newfoundland company 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 and subsidiaries: A. Arrow Electronics (Sweden) Partnership, a Swedish partnership B. Arrow Electronics (UK) Limited Partnership, a British limited partnership and subsidiary: 1. Arrow Electronics Luxembourg S.a.r.l., a Luxembourg company 9. Arrow Altech Holdings (PTY) Ltd., a South African company and subsidiary: A. Arrow Altech Distribution (PTY) Ltd., a South African company 10. Arrow Electronics South Africa LLP, a South African limited partnership 11. Hi-Tech Ad, Inc., a New York corporation 12. Gates/Arrow Distributing, Inc., a Delaware corporation 13. Consan Incorporated., a Minnesota corporation (75% owned) 14. SN Holding, Inc. a Delaware corporation and subsidiary: A. Support Net, Inc., an Indiana corporation (50% owned) 15. 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) S.A., a French company and subsidiaries: 1. Arrow Electronique S.A., a French company, and subsidiaries: a. CCI Electronique S.A., a French company b. Arrow Computer Products S.N.C. (f/k/a Megachip S.A., a French company and subsidiaries which include: i. Multichip Gmbh, a German company. ii. Multchip UK, a British company C. Arrow Electronics GmbH, a German company (which owns 80% interest of Spoerle Electronic Handelsgesellschaft mbH, a German company, and subsidiaries: 1. HED Heinrich Electronics Distribution GmbH & Co. Handelsgesellschaft, a German company 2. Farnell Electronic Services GmbH, a German company D. ATD Electronica S.A., a Spanish company E. Amitron-Arrow S.A., a Spanish company F. Silverstar Ltd. S.p.A. (98% owned) & subsidiaries G. Arrow Components Sweden AB, a Swedish Company and subsidiaries which include: 1. Arrow Nordic Components AB, a Swedish company 2. Arrow Norway A/S, a Norwegian company 3. Microtronica A/S, a Norwegian company 4. Microtronica AB, a Swedish company H. Arrow Denmark A/S, a Danish company I. Arrow Finland Oy, a Finnish company and subsidiary: 1. Microtronica Oy, a Finnish company 16. Arrow Electronics (UK) Limited Partnership, a British limited partnership and subsidiary: A. Electronic Services Distribution Limited, a British company 17. Arrow Electronics Italy S.a.r.l., an Italian company and subsidiary: A. Intesi S.p.A., an Italian company 18. Arrow Electronics, Australia Pty Ltd., an Australian company and subsidiaries: A. Veltek Australia Pty Ltd. (75% owned), an Australian company B. Zatek Australia Pty Ltd. (75% owned), an Australian company 19. Arrow Electronics Asia Pacific, Inc., a Delaware corporation 20. Components Agent Limited, a British Virgin Islands company (90% owned) and subsidiaries which include: A. Components Agent Limited, a Hong Kong company B. Arrow Electronics China Limited, a Hong Kong company C. Arrow Korea (HK) Limited, a Hong Kong company 1. Arrow Electronics Korea Limited, a South Korean company D. Components Assembly & Sales Pte Ltd, a Singaporen company and subsidiary: 1. Casl. (M) Sdn. Berhad, a Malaysian company E. Salson Holdings Limited, a British Virgin Islands company, and subsidiary: 1. Intex-semi Limited, a Hong Kong company F. Arrow Electronics (Indonesia) Pte Limited, an Indonesian company G. Arrow Electronics (India) Limited, a Hong Kong company H. Microtronica (HK) Limited, a Hong Kong company I. Microtronica (S) Pte. Limited, a Singaporean company J. Microtronica (M) Sdn. Bhd., a Malayasian company K. Arrow Asia Pac Ltd., a Hong Kong company L. Kingsview Limited, a British Virgin Islands company M. Hotung Limited, a British Virgin Islands company 21. Texny (Holdings) Limited, a British Virgin Islands company and subsidiaries: A. Texny (H.K.) Limited, a Hong Kong company, and subsidiary: 22. Strong Electronics Co., Ltd., a Taiwanese Joint Venture (45% owned) and subsidiaries 23. Arrow/Ally, Inc. a Taiwanese company (75% owned) and subsidiary: A. Creative Model Limited, a Hong Kong company 24. Arrow Components (NZ) Limited, a New Zealand company (75% owned) EX-27 11 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1997 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S.DOLLARS DEC-31-1997 JAN-1-1997 DEC-31-1997 12-MOS 1 112,665 0 1,245,354 46,055 1,230,053 2,630,340 228,160 113,923 3,537,873 1,196,484 823,099 0 0 102,950 1,257,808 3,537,873 7,763,945 7,763,945 6,574,415 7,389,224 0 15,954 67,117 308,385 131,617 163,656 0 0 0 163,656 1.67 1.64
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