SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12

ARROW ELECTRONICS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

ARROW ELECTRONICS, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.

(1) Title of each class of securities to which transaction applies:

- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:

- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1

- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:

- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registrations statement number, or
the form or schedule and the date of its filing.

(1) Amount previously paid:

- --------------------------------------------------------------------------------

(2) Form, schedule or registration statement no.:

- --------------------------------------------------------------------------------
(3) Filing party:

- --------------------------------------------------------------------------------
(4) Date filed:

- --------------------------------------------------------------------------------
- ---------------
(1)Set forth the amount on which the filing fee is calculated and state
how it was determined.
2

[LOGO]

April 5, 1994

Dear Shareholder:

You are cordially invited to attend the Annual Meeting of Shareholders of
Arrow Electronics, Inc., which will be held on Tuesday, May 10, 1994 at 11:00
A.M., at Chemical Banking Corporation, 270 Park Avenue, New York, New York. The
formal Notice of Annual Meeting and Proxy Statement, fully describing the
matters to be acted upon at the meeting, appear on the following pages.

The matters scheduled to be considered at the meeting are the election of
directors, a proposal to adopt the Arrow Electronics, Inc. Chief Executive
Officer Performance Bonus Plan, and the ratification of the appointment of
Arrow's auditors.

The Board of Directors recommends the approval of the proposals being
presented at the Annual Meeting of Shareholders as being in the best interest of
Arrow. We urge you to read the Proxy Statement and give these proposals your
careful attention before completing the enclosed proxy card.

Your vote is important regardless of the number of shares you own. Please
be sure you are represented at the meeting, whether or not you plan to attend,
by signing, dating and mailing the proxy card promptly. A postage-paid return
envelope is enclosed for your convenience.

Sincerely yours,

/s/ JOHN C. WADDELL

John C. Waddell
Chairman of the Board
3

ARROW ELECTRONICS, INC.
25 HUB DRIVE
MELVILLE, NEW YORK 11747
------------------------

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD MAY 10, 1994
------------------------
April 5, 1994

To the Shareholders of
Arrow Electronics, Inc.:

The Annual Meeting of Shareholders of Arrow Electronics, Inc., a New York
corporation ("Arrow"), will be held at Chemical Banking Corporation, 270 Park
Avenue, New York, New York, on May 10, 1994 at 11:00 A.M., prevailing local
time, for the following purposes:

1. To elect directors of Arrow for the ensuing year.

2. To consider and act upon a proposal to approve the adoption of the Arrow
Electronics, Inc. Chief Executive Officer Performance Bonus Plan.

3. To consider and act upon a proposal to ratify the appointment of Ernst &
Young as Arrow's independent auditors for the fiscal year ending December
31, 1994.

4. To transact such other business as may properly come before the meeting
or any adjournments thereof.

Only shareholders of record at the close of business on March 25, 1994 are
entitled to notice of and to vote at the meeting or any adjournments thereof.

By Order of the Board of Directors,

Robert E. Klatell
Secretary

IMPORTANT
Please complete, sign and date the enclosed proxy and return it promptly in
the enclosed return envelope which has been provided for your convenience,
whether or not you plan to attend the meeting. The prompt return of proxies will
assure a quorum and reduce solicitation expense.
4

ARROW ELECTRONICS, INC.

25 HUB DRIVE

MELVILLE, NEW YORK 11747

------------------------

ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD MAY 10, 1994

------------------------

PROXY STATEMENT

------------------------

This Proxy Statement, mailed to shareholders on April 5, 1994, is furnished
in connection with the solicitation by the Board of Directors of Arrow
Electronics, Inc., a New York corporation ("Arrow"), of proxies to be voted at
the Annual Meeting of Shareholders to be held in New York, New York on May 10,
1994, and any adjournments thereof, for the purposes set forth in the
accompanying notice. Each proxy will be voted with respect to all shares
represented by it in accordance with the directions specified thereon and
otherwise in accordance with the judgment of the persons designated as proxies.
Any proxy on which no directions are specified will be voted for the election of
directors and in favor of the actions described by the proxy. Any proxy may be
revoked at any time prior to exercise by written notice to the Secretary of
Arrow by the person giving the proxy.

The cost of soliciting proxies will be borne by Arrow. Solicitation of
proxies is being made by Arrow through the mail, in person and by telephone. In
addition to regular employees of Arrow who may engage in such solicitation,
Arrow has retained D.F. King & Co., Inc. to assist in soliciting proxies at an
anticipated cost not in excess of $10,500 plus expenses. Arrow will also request
brokers and other nominees to forward soliciting materials to the beneficial
owners of the stock held of record by such persons and will reimburse such
persons for their expenses in forwarding such materials.

Only shareholders of record of Arrow's common stock at the close of
business on March 25, 1994 are entitled to notice of and to vote at the meeting
or any adjournments thereof. On March 25, 1994, Arrow had outstanding 31,465,958
shares of common stock. The only shareholder known to
5

management to own beneficially more than 5% of the outstanding common stock of
Arrow as of March 25, 1994 is Oppenheimer Group, Inc., Oppenheimer Tower, World
Financial Center, New York, New York 10281, which, based upon information set
forth in its Schedule 13G dated February 1, 1994 and filed with the Securities
and Exchange Commission, beneficially owned 3,084,793 shares (9.8%), including
2,130,475 shares (6.8%) beneficially owned by Oppenheimer Capital.

At March 25, 1994, all executive officers and directors of Arrow as a group
were the beneficial owners of 1,584,829 shares (5%), including 976,289 shares
held by the Arrow Electronics Stock Ownership Plan, of which Mr. Stephen P.
Kaufman, Mr. Robert E. Klatell, and Mr. John C. Waddell are the trustees,
including shares allocated to the accounts of Messrs. Kaufman, Klatell, and
Waddell (pursuant to certain regulations promulgated by the Securities and
Exchange Commission, Messrs. Kaufman, Klatell, and Waddell may be deemed to have
beneficial ownership of these shares by virtue of their shared power as trustees
to vote such shares); options to purchase 385,458 shares granted under Arrow's
Stock Option Plan (of which 259,961 options are currently exercisable),
including options to purchase 185,625 shares, 89,000 shares, 18,000 shares,
10,000 shares, 97,000 shares, and 10,000 shares granted to Mr. Kaufman, Mr.
Klatell, Mr. Waddell, Mr. Carlo Giersch, Mr. Steven W. Menefee, and Mr. Robert
J. McInerney, respectively (of which 141,293 options, 58,334 options, 9,000
options, 6,667 options, 73,000 options and 2,500 options, respectively, are
currently exercisable); and 151,493 shares awarded under Arrow's Restricted
Stock Plan (of which 78,743 shares have vested and are not forfeitable),
including 46,375 shares, 26,875 shares, 12,718 shares, 31,750 shares, and 7,625
shares awarded to Messrs. Kaufman, Klatell, Waddell, Menefee, and McInerney,
respectively (of which 32,000 shares, 14,625 shares, 2,343 shares, 4,750 shares,
and 2,625 shares, respectively, have vested and are not forfeitable).

ELECTION OF DIRECTORS

The entire Board of Directors of Arrow is to be elected, and those persons
elected will hold office until the next Annual Meeting of Shareholders and until
their respective successors shall have been duly elected and qualified. Persons
receiving a plurality of the votes cast at the Annual Meeting will be elected
directors. Consequently, any shares not voted (whether by abstention or broker
non-votes) have no effect on the election of directors. Proxies in the enclosed
form will be voted for the election as directors of the nine nominees named
below. Management does not contemplate that any of the nominees will be unable
to serve as a director, but if that contingency should occur prior to the voting
of the proxies, the persons named in the accompanying proxy reserve the right to

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6

substitute another person of their choice when voting at the meeting or any
adjournment thereof. All nominees are currently directors of Arrow and were
elected at Arrow's last annual meeting except for Steven W. Menefee who was
appointed a director in July 1993.

SHARES OF
COMMON STOCK PERCENTAGE
OWNED OF
BENEFICIALLY OUTSTANDING
POSITION WITH ARROW AND DIRECTOR AS OF COMMON
NAME AGE BUSINESS EXPERIENCE SINCE MARCH 25, 1994 STOCK
- ----------------------- --- -------------------------------- -------- --------------- -----------

Daniel W. Duval 57 President and Chief Executive 1987 2,000 --
Officer of Robbins & Myers,
Inc., a manufacturer of fluids
management systems, for more
than five years; director of
Robbins & Myers, Inc. and
National City Bank of Dayton.
Carlo Giersch 56 President and Chief Executive 1990 35,000(1) .1%
Officer of Spoerle Electronic,
Arrow's 70% owned German
affiliate, for more than five
years.
J. Spencer Gould 71 Retired; Vice President-Finance 1987 26,444(2) .08%
and Chief Financial Officer of
The Stanley Works, a
manufacturer of tools, hardware
and related products, for the
five years ended November 1987;
director of Imo Industries Inc.
Stephen P. Kaufman 52 President and Chief Executive 1983 1,211,789(3) 3.9%
Officer of Arrow for more than
five years.
Lawrence R. Kem 58 General partner of Rudolph Stone 1987 1,000 --
Associates, an investment man-
agement firm, for more than five
years.
Robert E. Klatell 48 Senior Vice President, General 1989 1,103,029(3) 3.5%
Counsel, and Secretary of Arrow
for more than five years, Chief
Financial Officer since January
1992, and Treasurer since Oc-
tober 1990.
Steven W. Menefee 49 Vice President of Arrow and 1993 88,750(4) .3%
President of the Arrow/Schweber
Electronics Group since Novem-
ber 1990; prior thereto Vice
President of Avnet, Inc., a
distributor of electronic
components and computer products
for more than five years.

3
7

Richard S. Rosenbloom 61 David Sarnoff Professor of Busi- 1992 1,000 --
ness Administration at Harvard
Business School for more than
five years; director of Lex
Service PLC and Executone
Information Systems, Inc.
John C. Waddell 56 Chairman of the Board of Arrow 1969 1,007,007(3) 3.2%
for more than five years.

- ---------------
(1) Includes shares owned individually and options to purchase shares granted
under Arrow's Stock Option Plan. See page 2.

(2) Includes 200 shares held by Mr. Gould's spouse, as to which shares he
disclaims beneficial ownership.

(3) Includes shares owned individually, options to purchase shares granted under
Arrow's Stock Option Plan, shares awarded under Arrow's Restricted Stock
Plan, and shares held by Arrow's Stock Ownership Plan. See page 2.

(4) Includes options to purchase shares granted under Arrow's Stock Option Plan
and shares awarded under Arrow's Restricted Stock Plan. See page 2.

The audit committee of the Board of Directors consists of Mr. Kem, Mr.
Gould, and Mr. Thomas M. Davidson. The audit committee evaluates and reviews
such matters as Arrow's accounting policies, reporting practices, internal audit
function, and internal accounting controls. The committee also reviews the scope
and results of the audit conducted by Arrow's independent auditors.

The compensation committee of the Board of Directors consists of Mr. Duval,
Mr. Kem, and Mr. Rosenbloom. The compensation committee approves the salaries
and incentive compensation of senior corporate officers, advises the Board
generally with regard to other compensation and employee benefit matters, and
approves stock option and restricted stock awards.

The charitable contributions committee of the Board of Directors consists
of Mr. Waddell, Mr. Klatell, and Mr. Davidson. The charitable contributions
committee reviews community and civic programs and services of educational,
cultural, and other social organizations, and approves the charitable
contributions to be made by the company.

The nominating committee of the Board of Directors consists of Mr.
Rosenbloom, Mr. Duval, and Mr. Kaufman. Shareholder recommendations for nominees
for membership on the Board of Directors will be considered by the nominating
committee. Such recommendations may be submitted to the Secretary of Arrow, who
will forward them to the chairman of the nominating committee.

During 1993 there were 7 meetings of the Board of Directors, 4 meetings of
the audit committee, 4 meetings of the compensation committee, 1 meeting of the
charitable contributions committee, and 1 meeting of the nominating committee.
All directors attended 75% or more of the meetings of the Board of Directors and
the committees on which they served.

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8

EXECUTIVE COMPENSATION AND OTHER MATTERS

SUMMARY COMPENSATION TABLE

The following table provides certain summary information concerning the
compensation for the past three years of the Chief Executive Officer and each of
the other four most highly compensated executive officers of the company (the
"named executive officers").

LONG TERM COMPENSATION
AWARDS
-----------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
NAME AND ------------------------- STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS AWARD(S)(2) OPTIONS COMPENSATION(3)
- --------------------------------- ---- --------- -------- ----------- ---------- ---------------

Stephen P. Kaufman, 1993 $ 504,000 $635,644 $ 190,000 25,000 $11,572
President and Chief 1992 474,000 484,753 141,250 83,000 11,230
Executive Officer 1991 424,000 358,241 90,000 112,000 10,905
Carlo Giersch, 1993 604,230 -- -- 10,000 --
President and Chief
Executive Officer of
Spoerle Electronic(4)
Steven W. Menefee, 1993 304,783 307,856 152,000 15,000 7,075
Vice President and 1992 285,200 235,188 425,500 42,000 6,866
President of the 1991 254,950 171,500 60,000 20,000 --
Arrow/Schweber
Electronics Group
Robert E. Klatell, 1993 308,983 286,572 152,000 15,000 11,572
Senior Vice President 1992 289,400 215,431 113,000 62,000 11,230
and Chief Financial 1991 249,400 190,863 90,000 62,000 10,905
Officer
Robert J. McInerney 1993 240,200 274,347 62,625 7,500 11,572
Vice President and 1992 225,200 157,719 56,500 7,500 11,230
President of the 1991 209,450 126,894 30,000 7,500 10,905
Commercial Systems Group

- ---------------

(1) Includes amounts deferred under Arrow's Savings Plan.

(2) Reflects the fair market value as of the date of grant of the stock awards
granted in 1993. All of such awards vest in four annual installments of 25%,
beginning one year after grant, and all awarded shares have dividend and
voting rights equivalent to all shares of common stock. As of December 31,
1993, the aggregate number and value of unvested restricted stock awards
held by Messrs. Kaufman, Menefee, Klatell, and McInerney were 16,625
($694,094), 27,000 ($1,127,250), 14,125 ($589,719), and 5,750 ($240,063),
respectively.

(3) For 1993, includes a contribution by Arrow of $7,075 to Arrow's Stock
Ownership Plan for each of the named executive officers except Mr. Giersch
and a matching contribution by Arrow of $4,497 to Arrow's Savings Plan for
each of Messrs. Kaufman, Klatell, and McInerney.

(4) Spoerle Electronic became a majority owned affiliate of Arrow in January
1993.

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9

STOCK OPTION GRANTS IN LAST FISCAL YEAR

The following table provides information on option grants during 1993 to
the named executive officers.

INDIVIDUAL GRANTS
---------------------------------------------------
% OF
TOTAL
NUMBER OF OPTIONS POTENTIAL REALIZABLE VALUE AT
SECURITIES GRANTED ASSIGNED RATES OF STOCK PRICE
UNDERLYING TO APPRECIATION FOR OPTION
OPTIONS EMPLOYEES EXERCISE OR TERM(3)
GRANTED IN FISCAL BASE PRICE EXPIRATION ------------------------------
NAME (#)(1) YEAR ($/SH)(2) DATE 5% 10%
- --------------------- --------- --------- ----------- ---------- ------------ --------------

Stephen P. Kaufman 25,000 6.2% $38.00 12/9/03 $ 597,500 $ 1,514,000
Carlo Giersch 10,000 2.5 28.625 2/9/03 180,050 456,250
Steven W. Menefee 15,000 3.7 38.00 12/9/03 358,500 908,400
Robert E. Klatell 15,000 3.7 38.00 12/9/03 358,500 908,400
Robert J. McInerney 7,500 1.9 38.00 12/9/03 179,250 454,200
All shareholders N/A N/A N/A N/A 821,608,778 2,081,867,788
various
All optionees(4) 401,950 100 37.30 in 2003 9,429,747 23,895,927
All optionees value
as a percent of all
shareholders value N/A N/A N/A N/A 1.1% 1.1%

- ---------------
(1) All of such grants become exercisable in three annual installments,
commencing on the date of grant (except for certain grants included in "All
optionees" which become exercisable in three annual installments, commencing
on the first anniversary of the date of grant) and expire 10 years after the
date of grant.

(2) All at fair market value at date of grant.

(3) Represents gain that would be realized assuming the options were held for
the entire ten-year option period and the stock price increased at annual
compounded rates of 5% and 10%. Potential realizable values for shareholders
are based on 31,287,463 shares outstanding at December 31, 1993 from a base
price of $41.75 per share. These amounts represent assumed rates of
appreciation only. Actual gains, if any, on stock option exercises and
common stock holdings will be dependent on overall market conditions and on
the future performance of the company and its common stock. There can be no
assurance that the amounts reflected in this table will be achieved.

(4) Information based on all stock option grants made to employees in 1993.
Exercise price shown is the weighted average of all grants. Actual exercise
prices ranged from $27.50 to $39.75 reflecting the fair market value of the
stock on the date of the option grant.

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10

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES

The following table provides information concerning the exercise of stock
options during 1993 by each of the named executive officers and the year-end
value of their unexercised options.

NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS AT IN-THE-MONEY
FISCAL OPTIONS AT
SHARES YEAR-END FISCAL YEAR-END
ACQUIRED -------------- --------------------
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED(1) UNEXERCISABLE UNEXERCISABLE
- ----------------------------- ------- ----------- -------------- --------------------

Stephen P. Kaufman 50,000 $ 1,517,969 141,293/44,332 $3,816,230/$701,114
Carlo Giersch -- -- 6,667/3,333 87,504/43,662
Steven W. Menefee -- -- 73,000/24,000 2,005,500/357,750
Robert E. Klatell 54,000 1,578,250 58,334/30,666 1,356,101/526,900
Robert J. McInerney 13,320 363,785 10,000/7,500 152,813/53,125

- ---------------
(1) Represents the difference between the fair market value of the shares at
date of exercise and the exercise price multiplied by the number of options
exercised.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

A primary role of the compensation committee (the "committee") is to
oversee compensation practices for Arrow's senior executive officers. The
committee's responsibilities include the review of salaries, benefits, and other
compensation of Arrow's senior managers and making recommendations to the full
Board of Directors with respect to these matters. The committee is comprised
entirely of Board members who are independent, nonemployee directors of the
company.

The committee's primary objective in establishing compensation programs and
levels for Arrow's key executive officers is to support Arrow's goal of
maximizing the value of shareholders' interests in Arrow. To achieve this
objective, the committee believes it is necessary to:

-- Set levels of base compensation that will attract and retain superior
executives in a highly competitive environment.

-- Encourage long-term decision making that enhances shareholder value. The
committee believes that this objective is promoted by emphasizing grants
of stock options and restricted stock, thereby creating a direct link
between shareholder value creation and executive compensation.

-- Provide incentive compensation that varies directly with both company
performance and individual contribution to that performance.

COMPONENTS OF COMPENSATION

Base Salary

The committee annually reviews each executive officer's base salary. The
factors which influence committee determinations regarding base salary include:
comparable levels of pay among executives at regional and national market
competitors (including the larger companies in the peer

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11

group contained in the graph on page 10), internal pay equity considerations,
level of responsibilities, prior experience, breadth of knowledge, and job
performance. Such compensation is generally competitive with comparable jobs at
comparable companies.

In conducting its salary deliberations, the committee does not strictly tie
senior executive base pay to a defined competitive standard. Rather, the
committee elects to maintain flexibility in its decision making capacity so as
to permit salary recommendations that best reflect the individual contributions
made by the company's top executives.

Based upon the overall success of Arrow, the committee believes that it is
appropriate to compensate Mr. Kaufman at a level at least equal to that paid to
chief executive officers of comparable companies. The committee values highly
Mr. Kaufman's breadth of knowledge and recognizes his significant contribution
to the success of Arrow.

Mr. Kaufman's annual base pay remained constant in 1990 and 1991 at a level
of $424,000. For 1992, his base salary was increased to $474,000 in recognition
of his role in the strategic acquisition of the North American electronics
distribution businesses of Lex Service PLC, which increased Arrow's sales and
earnings. In 1993, his base salary was increased to $504,000 in recognition of
the continued growth in Arrow's sales and earnings and the further expansion of
Arrow into strategic markets.

Annual Incentives

Each year, the Board of Directors -- in consultation with
management -- establishes short-term financial goals which relate to one or more
indicators of corporate financial performance. For 1993, the short-term
incentive award opportunity was contingent upon Arrow attaining a prespecified
level of sales, profitability, and asset utilization.

Incentive targets are established for participating executives under the
Management Incentive Compensation Plan ("MICP") based on the participant's level
and breadth of responsibility, potential contribution to the success of the
company, and competitive considerations. The participant's actual award is
determined at the end of the year based on Arrow's actual performance against
the predetermined financial goals, as well as the attainment of specific
individual goals or contributions to Arrow's success.

Annual incentives of the named executive officers, including Mr. Kaufman,
reflect Arrow's attainment of predetermined financial goals and the level of
achievement by each executive officer of the targets established under the MICP.
Specifically, Mr. Kaufman was paid an annual incentive of $570,000 in connection
with 1993's performance, representing a 170% level of achievement of the
prespecified financial goals. The MICP awards earned by the other participating
named executive officers averaged 82% of their respective salaries, representing
a range of 115% to 200% level of achievement of the goals.

Long-Term Incentives

Arrow reinforces the importance of producing satisfactory returns to
shareholders over the long-term through the operation of its Stock Option Plan
and its Restricted Stock Plan. Stock option and restricted stock awards provide
executives with the opportunity to acquire an equity interest in

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12

Arrow and align the executive's interest with that of the shareholders to create
shareholder value as reflected in growth in the price of Arrow's shares.

Option exercise prices are equal to 100% of the fair market value of
Arrow's shares on the date of option grant and are exercisable in three
installments. This ensures that participants will derive benefits only as
shareholders realize corresponding gains over an extended time period. Options
have a maximum term of 10 years.

Restricted stock is granted to participants in order to help foster a
shareholder perspective among the participants. A long-term focus is
encouraged -- and executive retention is reinforced -- through the four-year
vesting schedule to which shares of restricted stock are subject.

Each year, the committee reviews the history of stock option and restricted
stock awards and makes grant decisions based on the committee's assessment of
each individual executive's contribution and performance during the year and on
competitive compensation practices in comparable companies. The grants to Mr.
Kaufman and each of the other named executive officers in 1993 are consistent
with grants in prior years relative to Arrow's performance and the individual's
contributions, and represent Arrow's continued emphasis on executive
compensation which is linked to increases in the value of Arrow's stock.
Generally, the size of the grants of such long-term incentives reflects the
committee's assessment of each individual's contributions and performance during
the year.

The committee is aware of the limitations that recent tax legislation has
placed on the tax deductibility of compensation in excess of $1 million which is
earned in any year by an executive officer. One of the primary determinants of
deductibility is that compensation be "performance-based." Proposed regulations
were only released late in 1993 and are not yet in final form. The committee
believes that at the present time option grants under its Stock Option Plan meet
the Internal Revenue Service's performance-based criteria. In order to assure
that the executive compensation is deductible to the extent possible as
performance-based compensation, the committee has recommended that the Board
adopt, subject to shareholder approval, the Arrow Electronics, Inc. Chief
Executive Officer Performance Bonus Plan. See pages 12-15 for a summary of this
plan. The committee will continue to monitor developments in this area.

SUMMARY

Each year, the Board and the committee review all elements of cash and
noncash compensation paid to the executive officers of Arrow. The committee
manages all elements of executive pay in order to ensure that pay levels are
consistent with Arrow's compensation philosophies. In addition, the Board and
the committee administer Arrow's long-term executive compensation programs to
ensure that Arrow's objectives of linking executive pay to improved Arrow
financial performance and increased shareholder value continue to be fostered.

Daniel W. Duval, Chairman
Lawrence R. Kem
Richard S. Rosenbloom

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COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG ARROW ELECTRONICS, INC., S&P 500 INDEX &
ELECTRONICS DISTRIBUTOR INDEX

The following graph compares the performance of Arrow for the periods
indicated with the performance of the Standard & Poor's 500 Stock Index and the
average performance of a group consisting of the company's peer corporations on
a line-of-business basis. The corporations making up the peer companies group
are Anthem Electronics, Inc., Avnet, Inc., Jaco Electronics, Inc., Kent
Electronics Corporation, Marshall Industries, Milgray Electronics, Inc.,
Pioneer-Standard Electronics, Inc., Sterling Electronics Corporation, Western
Micro Technology, and Wyle Laboratories. Total return indices reflect reinvested
dividends and are weighted on a market capitalization basis at the time of each
reported data point.

Electronics
Measurement Period S&P 500 In- Distributor
(Fiscal Year Covered) Arrow dex Index

1988 100 100 100
1989 058 132 146
1990 066 128 125
1991 238 167 158
1992 432 180 185
1993 630 198 200

Assumes $100 invested on December 31, 1988 in Arrow, S&P 500 Index and peer
companies group.

DIRECTORS' COMPENSATION

The members of the Board of Directors who are not employees receive an
annual fee of $23,000 for the term expiring in May 1994 and a fee of $1,000 for
each Board of Directors meeting personally attended and each committee meeting
personally attended. In addition, each director serving as Chairman of any
committee receives an additional annual fee of $1,500.

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EMPLOYMENT AGREEMENTS

Arrow has employment agreements with each of the named executive officers.
Mr. Kaufman has an employment agreement with Arrow terminating December 31,
1995, which provides for an annual base salary of not less than $400,000. Mr.
Klatell has an employment agreement with Arrow terminating December 31, 1996,
which provides for an annual base salary of not less than $235,000. Mr. Menefee
and Mr. McInerney have employment agreements with Arrow terminating December 31,
1994 (subject to automatic renewals from year to year unless either Arrow or the
executive elects not to renew), which provide for annual base salaries of not
less than $245,000 and $175,000, respectively. Mr. Giersch has an employment
agreement with Spoerle Electronic terminating on his 65th birthday (subject to
earlier termination by either Spoerle Electronic or Mr. Giersch upon six months
written notice), which provides for an annual base salary of not less than
700,000 deutsche marks ($420,200 based on the exchange rate on March 25, 1994)
with annual adjustments beginning January 1, 1995 in the same proportion in
which salaries of the employees of Spoerle have been adjusted in the preceding
year.

EXTENDED SEPARATION BENEFITS

Arrow maintains a broad-based program to shelter employees at all levels
from any adverse consequences which might result from a change in control of the
company (as defined in the program). Pursuant to a policy adopted by the Board
of Directors in 1988, the period of salary continuation normally extended to
employees whose employment is terminated as a result of a workforce reduction or
reorganization (which period ranges from two to 12 weeks depending upon length
of service with Arrow) is tripled if employment is terminated by the company
(other than for cause) as a result of a change in control. In addition to this
policy, Arrow has entered into one-year employment agreements with approximately
65 management-level employees, pursuant to which among other matters, such
employees will receive one year's compensation and continuation for up to one
year of medical and life insurance benefits if their employment is terminated by
the company (other than for cause) within 12 months following a change in
control. Arrow also has agreements with approximately 20 divisional and group
vice presidents who are not executive officers, which provide such vice
presidents with two times their annualized includible compensation (as defined
in the Internal Revenue Code of 1986, as amended (the "Code")) and continuation
for up to three years of medical, life, and other welfare benefits if their
employment is terminated by the company (other than for cause), if their
responsibilities or base salaries are materially diminished, or if certain other
adverse changes occur within 24 months following a change in control. Similar
agreements provide the executive officers with three times their annualized
includible compensation and continuation for up to three years of their benefits
if their employment is terminated by the company (other than for cause approved
by three-fourths of the directors then serving), if their responsibilities or
base salaries are materially diminished, or if certain other adverse changes
occur within 24 months following a change in control. The amounts payable
pursuant to such agreements to the executive officers (other than Messrs.
Waddell, Kaufman, and Klatell) and to the other vice presidents will be reduced,
if necessary, to avoid excise tax under Section 4999 of the Code.

UNFUNDED PENSION PLAN

Arrow maintains the Unfunded Pension Plan for Selected Executives of Arrow
Electronics, Inc. (the "SERP"). Under the SERP, Arrow's Board of Directors
determines those employees who are

11
15

eligible to participate in the SERP and the amount of their maximum annual
pension upon retirement on or after attaining age 60. Messrs. Kaufman, Klatell,
Menefee, and McInerney have been designated by Arrow as participants in the
SERP, with maximum annual pensions of $225,000, $150,000, $125,000, and
$125,000, respectively. If a designated participant retires between the ages of
55 and 60, the amount of the annual pension is reduced based upon a formula
contained in the SERP. In addition, if there is a change of control of Arrow and
the employment of a designated participant who is at least age 50 with 15 years
of service is involuntarily terminated other than for cause or disability, or
such participant terminates employment for good reason, the participant will
receive the maximum annual pension.

CERTAIN TRANSACTIONS

In each of January 1993 and January 1994, Arrow acquired an additional 15%
interest in Spoerle Electronic from Mr. Giersch, bringing its holdings in
Spoerle Electronic to a 70% share. The aggregate cost of each acquisition was
approximately $25 million. In addition, in January 1994, Arrow acquired an
additional 1% interest in its Italian affiliate, Silverstar Ltd. S.p.A., from
Mr. Giersch's wife for $300,000. Spoerle Electronic leases certain of its
premises from a partnership in which Mr. Giersch's wife, directly or indirectly,
has the entire beneficial interest and paid aggregate rentals of 3 million
deutsche marks ($1,812,500 based on the exchange rate on March 25, 1994) to the
partnership during 1993. The management of Spoerle Electronic believes that such
rentals are at fair market rates.

In May 1989, Mr. Waddell received an unsecured personal loan of $120,000
from Arrow, bearing interest at Arrow's average U.S. borrowing rate. This
obligation was satisfied in full in 1994.

PROPOSED ADOPTION OF THE CHIEF EXECUTIVE OFFICER
PERFORMANCE BONUS PLAN

In early 1994 the compensation committee (the "committee") of the Board
recommended to the Board the adoption of the Arrow Electronics, Inc. Chief
Executive Officer Performance Bonus Plan (the "Performance Bonus Plan" or the
"Plan"), subject to shareholder approval. The Board subsequently ratified the
committee's recommendation and determined to submit the Performance Bonus Plan
to the shareholders. The shareholders are now requested to approve the adoption
of this Plan.

The summary of the Performance Bonus Plan which follows is subject to the
specific provisions contained in the official text.

PURPOSE

The purpose of the Performance Bonus Plan is to specifically motivate the
company's Chief Executive Officer ("CEO") through awards of annual cash bonuses
to achieve strategic, financial and operating objectives, reward his
contribution toward improvement in financial performance as measured by earnings
per share of the company and the return on equity of the company, provide the
CEO with an additional incentive to contribute to the success of the company and
offer a total compensation package that is competitive in the industry and
includes a bonus component which is intended to qualify as performance-based
compensation deductible to the company under the Code.

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16

The Plan is intended to provide a special incentive for the CEO to increase
the profits of the company and the return to shareholders by rewarding the
superior performance of his duties with an annual cash bonus. Accordingly, the
CEO's maximum potential cash bonus is calculated pursuant to a preestablished
formula which is applied by the committee against specified measures of
corporate performance.

ADMINISTRATION

The Performance Bonus Plan for the CEO is administered by the committee,
whose members are currently "disinterested persons" as such term is defined
under Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended. The members of the committee also qualify as "outside directors" as
that term is defined in proposed regulations (the "Proposed Regulations") issued
by the Internal Revenue Service under Section 162(m) of the Code. No committee
member is eligible to receive any bonus award under the Plan. Under the Plan,
the committee has the authority to determine the bonus which the CEO may receive
for his services during that year pursuant to the bonus formula under the Plan.
The committee has discretion under the Plan to award an amount less than the
amount calculated pursuant to the bonus formula based upon certain subjective
factors as discussed below.

DISCONTINUANCE, TERMINATION OR AMENDMENT

Except as permitted by Section 162(m) of the Code, the committee does not
have the authority to modify the material terms of the pre-established
performance goal which is based upon earnings per share and return on equity,
the bonus formula or the eligibility requirements of the Plan without majority
shareholder approval in accordance with Section 162(m) of the Code. The
committee may discontinue the Plan at any time and may determine to reduce or
eliminate a bonus in the then current or any succeeding year. The Performance
Bonus Plan otherwise shall terminate on December 31, 1998 or an earlier date if
the Board so resolves.

CALCULATION OF BONUS AWARD

The bonus formula under the Plan consists of the following calculations. On
or before December 31 of the year preceding a service year or by such later date
as is permitted by Section 162(m) of the Code (the "Determination Date"), the
committee will determine the bonus for that service year which shall equal .5%
times Base Compensation (as defined below) for each $.01 increase in EPS (as
defined below) over the established target (the "Target Level EPS") achieved
during the service year, plus 2% times Base Compensation for each .5% increase
in the ROE (as defined below) over the established target (the "Target Level
ROE") achieved during the service year.

At the end of the year, the amount calculated pursuant to the bonus formula
may be reduced (but not increased) by the committee based upon any additional
corporate performance or individual performance factors or other factors,
circumstances or events which the committee deems relevant. Such reductions are
not mandated by the Plan and are within the committee's sole discretion.

Target Level EPS and Target Level ROE for each year are determined by the
committee on or before the Determination Date for such year based upon
information provided to the committee by management. Base Compensation is
defined as the annual compensation of the CEO. EPS is

13
17

defined as earnings per share as computed in accordance with generally accepted
accounting practices, as adjusted to omit the effects of extraordinary and
non-recurring items. ROE is defined as the rate of return on shareholders'
equity as measured by the net income of the company divided by the total
shareholders' equity at the beginning of the year, computed in accordance with
generally accepted accounting principles, as adjusted to omit the effects of
extraordinary and non-recurring items. For 1994, the Target Level EPS has been
established to be each $.01 increase of EPS above an EPS of $2.15 and the Target
Level ROE has been established to be each .5% increase of ROE above an ROE of
10%.

In no event shall the CEO be entitled to receive a bonus under the
Performance Bonus Plan in excess of $1,000,000 for any fiscal year of the
company.

NEW PLAN BENEFITS

The benefits payable in the future under the Performance Bonus Plan are not
currently determinable. If EPS and ROE for 1994 equal those achieved in 1993,
application of the above described bonus formula, the 1994 Target Level EPS, and
the 1994 Target Level ROE would produce a 1994 bonus under the Plan of $366,000
for Mr. Kaufman.

PAYMENT OF BONUS AWARDS

Payment of the CEO's bonus award for a particular service year shall be
made in cash, less applicable withholding taxes, in the following year as soon
as practicable after the completion of the committee's computation and
certification with respect to the award. No bonus award under the Plan is
permitted to be paid unless the committee has certified that based upon the
bonus formula a requisite percentage of the Target Level EPS and/or Target Level
ROE was achieved and that therefore the CEO is entitled to a bonus. Such
certification must be made in writing by the committee or set forth in the
approved minutes of the committee.

If a CEO is first employed between February 1 and September 30 of a service
year, such CEO will be eligible under the Plan to receive a pro rata portion of
the bonus award (less any discretionary reductions) based on the length of time
employed during the year. Except as otherwise provided in the Plan, if the CEO
retires, becomes disabled or terminates employment with the company during a
given year, he is eligible to receive a pro rata portion of the bonus (less any
discretionary reductions) to be paid after completion of the year as determined
by the committee under the bonus formula based upon the Target Level EPS and
Target Level ROE for the year and the length of time worked during that year.

REASONS FOR SHAREHOLDER APPROVAL

The company desires to deduct from its corporate income, for the purpose of
computing the company's federal corporate income tax liability, certain
compensation received by Mr. Kaufman from the company, including any bonus award
under the Plan. Under recently enacted Section 162(m) of the Code, the deduction
from corporate income for salaries or other compensation, to the extent
previously available to publicly-traded corporations such as the company, will
generally be disallowed for compensation in excess of $1,000,000 per annum paid
to a "covered employee". A "covered employee" is defined in Section 162(m) of
the Code to include, among others, the CEO of a corporation, the securities of
which are publicly traded. Section 162(m) of the Code applies to taxable years
commencing on or after January 1, 1994.

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18

Performance-based compensation is not subject to the $1,000,000 cap on
deductibility if certain requirements are met. Performance-based compensation
payable to a "covered employee" may be deducted by a publicly-traded corporation
where the payment is made solely upon the attainment by the covered employee of
"pre-established goals", the performance goals are set by a committee of the
board of directors comprised solely of two or more "outside directors" and
disclosure of the performance goals and other material terms of the compensation
arrangement is made to shareholders of the corporation who thereafter approve
the performance goals and the other material terms of the arrangement. In
addition, before any payments of performance-based compensation are made, such
committee must certify that the performance goals and other material terms of
the arrangement have been satisfied.

The company has reviewed Section 162(m) of the Code and the Proposed
Regulations and believes that for fiscal year 1994 awards under both the
Performance Bonus Plan should qualify as performance-based compensation for Mr.
Kaufman. Given the absence of final regulations, decided cases or revenue
rulings, however, the effect of Section 162(m) of the Code on the deductibility
of Mr. Kaufman's compensation, including without limitation the effect of the
approval, if any, by the shareholders at the meeting of this Proposal, cannot be
ascertained with certainty. As a result, notwithstanding the foregoing
discussion, no assurance can be given as to the deductibility of Mr. Kaufman's
compensation under Section 162(m) of the Code, any further temporary or final
regulations, interpretations, decided cases or revenue rulings.

In the event the shareholders of the company ratify the Performance Bonus
Plan, including the above-described performance goal and bonus formula, the
company intends to deduct Mr. Kaufman's bonus for the purpose of determining the
company's corporate income tax liability for company tax years ending on or
after December 31, 1994.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THIS
PROPOSAL.

The affirmative vote of the holders of a majority of the shares of common
stock cast at the Annual Meeting is required for approval of the Performance
Bonus Plan. Consequently, any shares not voted (whether by abstention or broker
non-votes) have no effect on the adoption of the Performance Bonus Plan.

APPROVAL OF APPOINTMENT OF AUDITORS

The shareholders will be asked to ratify the appointment of Ernst & Young
as Arrow's independent auditors for 1994. Arrow expects that representatives of
Ernst & Young will be present at the meeting with the opportunity to make a
statement if they desire to do so and that such representatives will be
available to answer appropriate inquiries raised at the meeting.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
RATIFICATION OF SUCH APPOINTMENT.

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19

SUBMISSION OF SHAREHOLDER PROPOSALS

Arrow anticipates that the next Annual Meeting of Shareholders will be held
on or about May 11, 1995. In order to be eligible for inclusion in Arrow's proxy
statement and proxy for such meeting, proposals of shareholders must be received
by Arrow on or before December 5, 1994.

OTHER MATTERS

Management does not expect any matters to come before the meeting other
than those referred to in this Proxy Statement. However, if any other matters
should properly come before the meeting, it is intended that proxies in the
accompanying form will be voted thereon in accordance with the judgment of the
person or persons voting such proxies.

By Order of the Board of Directors,

Robert E. Klatell
Secretary

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20
ARROW ELECTRONICS, INC.

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, MAY 10, 1994

The undersigned hereby appoints Stephen P. Kaufman, Robert E. Klatell, and
John C. Waddell, and any one or more of them, with full power of substitution,
as proxy or proxies of the undersigned to vote all shares of stock of ARROW
ELECTRONICS, INC. which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Shareholders to be held on May 10,
1994 at 11:00 A.M., New York City time, at Chemical Banking Corporation, 270
Park Avenue, New York, New York, or any adjournments thereof, as set forth on
the reverse hereof:

PLEASE RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE
21
/X/ Please Mark
your votes
as this
-------------
COMMON

MANAGEMENT RECOMMENDS A VOTE FOR

FOR AGAINST ABSTAIN
1. Authority to vote FOR the NOMINEES: 2. Authority to vote FOR / / / / / /
election of directors Daniel W. Duval Robert E. Klatell the adoption of the
in accordance with the Carlo Giersch Steven W. Menefee Arrow Electronics, Inc.
accompanying Proxy Statement. J. Spencer Gould Richard S. Rosenbloom Chief Executive Officer
Stephen P. Kaufman John C. Waddell Performance Bonus Plan.
Lawrence R. Kem
FOR WITHHOLD 3. Ratification of the / / / / / /
all nominees for all nominees (INSTRUCTION: To withhold authority to vote appointment of Ernst &
/ / / / for any individual nominee write that Young as independent
nominee's name in the space provided below.) auditors of the books
and accounts of Arrow
------------------------------------------- for the fiscal year
ending December 31,
1994.

4. In accordance with
their discretion upon
such other matters as
may properly come
before the meeting or
any adjournment thereof.

THIS PROXY IS BEING SOLICITED BY THE
MANAGEMENT AND WILL BE VOTED AS
SPECIFIED. IF NOT OTHERWISE
SPECIFIED, IT WILL BE VOTED FOR
THE ELECTION OF DIRECTORS AND FOR
THE PROPOSALS DESCRIBED IN ITEMS
2, 3, AND 4 ABOVE.

Dated: , 1994
-----------------------

-----------------------------------
Signature of Shareholder(s)

PLEASE SIGN EXACTLY AS NAME APPEARS
TO THE LEFT. WHEN SIGNING AS
ATTORNEY, ADMINISTRATOR, EXECUTOR,
GUARDIAN OR TRUSTEE, PLEASE ADD
YOUR FULL TITLE AS SUCH. IF SHARES
ARE REGISTERED IN THE NAMES OF JOINT
TENANTS OR TRUSTEES, EACH JOINT
TENANT OR TRUSTEE SHOULD SIGN.

ARROW ELECTRONICS, INC.

CHIEF EXECUTIVE OFFICER
PERFORMANCE BONUS PLAN

ARTICLE 1

ESTABLISHMENT AND PURPOSE

1.1 Establishment. The Company hereby establishes the
Chief Executive Officer Performance Bonus Plan.
1.2 Purpose. The purpose of this Plan is to enable the
Company through awards of annual cash bonuses to specifically motivate the
Chief Executive Officer to achieve strategic financial and operating
objectives, reward his or her contribution toward improvement in financial
performance as measured by the growth in the earnings per share and/or growth
in the return on equity of the Company, provide the Chief Executive Officer
with an additional incentive to contribute to the success of the Company and to
offer a total compensation package that is competitive in the industry and
includes a bonus component which is intended to qualify as performance-based
compensation deductible to the Company under Section 162(m) of the Code. The
Plan sets forth a pre-established Bonus Formula and sets an annual performance
goal pursuant to which the Committee can objectively calculate the Chief
Executive Officer's maximum potential annual cash bonus for each Service Year
with the Company.
23
ARTICLE 2

DEFINITIONS

As used in this Plan, the following capitalized terms have the
meanings hereinafter set forth:
2.1 "Base Compensation" shall mean the annual
compensation of the Participant for the Service Year.
2.2 "Board" shall mean the Board of Directors of the
Company.
2.3 "Bonus" shall mean the amount payable under Section
5.1 as computed under the Bonus Formula and adjusted in accordance with Article
6, if determined to be applicable by the Committee.
2.4 "Bonus Formula" shall mean the formula set forth in
Sections 5.1(a) and 5.1(b).
2.5 "Chief Executive Officer" shall mean the duly elected
and qualified Chief Executive Officer of the Company or any other single
individual determined by the Committee to be serving under a comparable title
as the principal executive officer of the Company.
2.6 "Code" shall mean the Internal Revenue Code of 1986,
as amended.
2.7 "Committee" shall mean the Compensation Committee of
the Board consisting of two or more Outside Directors.
2.8 "Company" shall mean Arrow Electronics, Inc., a New
York corporation, or any successor which assumes the Plan.
2.9 "Continuous Employment" shall mean a period of
uninterrupted service in the full-time employ of the
Company. A

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24
temporary absence or interruption during a period of government or military
service or a leave of absence approved by the Committee or the Company shall
not be considered a Termination of Employment.
2.10 "Effective Date" shall mean January 1, 1994, the
effective date of the Plan.
2.11 "Employee" shall mean the Chief Executive Officer of
the Company.
2.12 "EPS" shall mean consolidated net earnings per share
of the Company for a particular Service Year computed in accordance with
Generally Accepted Accounting Principles applied on a consistent basis, as
adjusted by the Company to omit the effects of nonrecurring items and
extraordinary items. The Committee, in its discretion, may make any
adjustments that is deems advisable to account for any dilution of shares.
2.13 "First Employment Date" shall have the meaning
ascribed to it in Section 7.3 hereof.
2.14 "Outside Director" shall have the meaning ascribed to
such term in Section 162(m) of the Code and the regulations thereunder.
2.15 "Participant" shall mean a Chief Executive Officer
who is determined to be eligible for an award under this Plan by the Committee.
2.16 "Plan" shall mean this Arrow Electronics, Inc. Chief
Executive Officer Performance Bonus Plan.
2.17 "Retirement" shall mean retirement under a retirement
plan of the Company or a Subsidiary at or after his

-3-
25
normal retirement age or, with consent of the Committee, at an early retirement
date.
2.18 "ROE" shall mean the rate of return on shareholders'
equity as measured by the net income of the Company for a particular Service
Year divided by the total shareholders' equity at the beginning of the Service
Year, computed in accordance with Generally Accepted Accounting Principles
applied on a consistent basis, as adjusted by the Company to omit the effects
of nonrecurring items and extraordinary items.
2.19 "Service Year" shall mean a fiscal year of the
Company during which this Plan is in effect and a Participant has performed
services in the position of Chief Executive Officer.
2.20 "Subsidiary" shall mean any corporation a majority of
the outstanding voting stock of which is owned directly or indirectly by the
Company.
2.21 "Target Level EPS" shall mean the targets set forth
in Section 5.2 and as may be modified pursuant to Section 5.4 hereof.
2.22 "Target Level ROE" shall mean the targets set forth
in Section 5.3 and as may be modified pursuant to Section 5.4 hereof.
2.23 "Termination of Employment" shall mean a termination
of service with the Company for reasons other than a governmental or military
service leave or personal leave of absence or interruption in service approved
by the Committee or the Company.

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26
ARTICLE 3

ADMINISTRATION

3.1 Administration. The Plan shall be administered and
interpreted by the Committee, which shall be composed of not less than two
directors who are Outside Directors and are not eligible to participate in the
Plan.
3.2 Powers of the Committee. The Committee shall have
all the powers vested in it by the terms of the Plan, such powers to include,
but not be limited to, the exclusive authority (within the limitations
described herein) to select which employee of the Company is eligible to
participate in the Plan; to determine and certify annually, prior to January 1
of a Service Year, the Target Level EPS, and the Target Level ROE; to
determine and certify annually by applying the Bonus Formula on or after
December 31 of a Service Year, the Bonus; to reduce, but not increase, any
Bonus in its sole discretion based upon other corporate or individual
performance factors or measures deemed relevant; and to correct any defect,
supply any omission or reconcile any inconsistency in this Plan or in any award
hereunder in the manner and to the extent it shall deem necessary to carry this
Plan into effect, subject to the requirements of Section 162(m). The Committee
shall be authorized to interpret and administer the Plan and to make all other
determinations, including factual determinations, that the Committee deems to
be necessary or advisable in its discretion for the administration of the Plan
and the awards made hereunder. Any decision, interpretation or other action
made or taken in good faith by the

-5-
27
Committee arising out of or in connection with the Plan shall be final, binding
and conclusive on the Company and all employees and their respective heirs,
executors, administrators, successors and assigns. The Committee shall not be
liable for any decision or action taken in good faith in connection with the
administration of the Plan. Without limiting the generality of the foregoing,
any such decision or action taken by the Committee in reliance upon any
information supplied to it by any officer of the Company, the Company's legal
counsel or the independent public accountants in connection with the
administration of the Plan shall be deemed to have been taken in good faith.

-6-
28
ARTICLE 4

ELIGIBILITY

The only employee of the Company who shall be eligible to be
granted a bonus award under this Plan shall be the Chief Executive Officer.
Unless permitted under Section 162(m) of the Code and other applicable law, the
Committee shall have no authority to broaden the eligibility requirements of
this Plan without obtaining shareholder approval as required by Section 162(m)
of the Code.

-7-
29
ARTICLE 5

BONUS COMPUTATION

5.1 Bonus Formula. For each Service Year for which the
Plan is effective, a Bonus shall be payable in accordance with the following
formula:
(a) .5% x Base Compensation for each Target Level EPS
achieved during the Service Year, plus
(b) 2.0% x Base Compensation for each Target Level ROE
achieved during the Service Year.
Prior to payment of the Bonus, the Committee shall certify in writing or in the
minutes of its proceedings, the amount of the Bonus, the calculation pursuant
to the Bonus Formula, the satisfaction of all material terms of the Plan
and the amount of any discretionary reductions under Article 6 hereof.
5.2 Target Level EPS. For the Service Year beginning
January 1, 1994, each $.01 increase of EPS above an EPS of $2.15.
5.3 Target Level ROE. For the Service Year beginning
January 1, 1994, each 0.5% increase of ROE above an ROE of 10%.
5.4 Adjustment of Target Levels. Prior to January 1 of
the Service Year (or some such other time as may be required under Section
162(m) of the Code and the regulations thereunder), the Committee, in its
discretion, may adjust the Target Level EPS and/or the Target Level ROE in
order to maintain an appropriate incentive for continued performance by
recognizing changes in general industry conditions. The Committee shall be
authorized to request that Company management provide to it any and all
information necessary in order to adjust such Target Levels prior

-8-
30
to January 1 (or some such other time as may be required under Section 162(m)
of the Code and the regulations thereunder). After its determination, the
Target Level EPS and/or the Target Level ROE shall be certified by Committee in
writing or in minutes of its proceedings.
5.5 Maximum Amount. In no event shall the Employee be
entitled to receive under the terms of this Plan a Bonus in excess of
$1,000,000 for any fiscal year of the Company.

-9-
31
ARTICLE 6

DISCRETIONARY ADJUSTMENTS

The Committee shall have the authority to reduce (but not
increase) the Bonus based upon any additional corporate performance or
individual performance factors which the Committee deems relevant. The
Committee may adopt, amend or rescind guidelines which indicate the amount of
the reduction the Committee may desire to make in a Bonus based upon such
factors.

-10-
32
ARTICLE 7

PAYMENT

7.1 Payment. The Bonus for a Service Year shall be paid
in cash (less any taxes required to be withheld for federal, state or local
taxes) to the Chief Executive Officer as soon as practicable after the
completion of the computations and certification by the Committee described in
Articles 5 and 6. No Bonus shall be permitted to be paid under this Plan
unless the Committee has certified in writing or in the written minutes of its
meetings that based upon the Bonus Formula a requisite percentage of the Target
Level EPS and/or Target Level ROE was achieved for the Service Year under
review and that, therefore, the Chief Executive Officer is eligible for a
Bonus.
7.2 Partial Amount. If the Chief Executive Officer is
first employed in the position of Chief Executive Officer on a date between
February 1 and [September 30] of a Service Year (the "First Employment Date")
such Chief Executive Officer shall be eligible to receive a pro rata portion of
his or her Bonus for that Service Year (as determined and certified pursuant to
Articles 5 and 6) according to the number of whole months (including accrued
vacation time) of Continuous Employment served in that Service Year; provided,
however, that no such pro rata Bonus may be paid if the Committee determines
that as of the First Employment Date the achievement of any Target Level EPS or
any Target Level ROE with respect to the Service Year is not "substantially
uncertain" as required by any regulations promulgated under Section 162(m) of
the Code.

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33
7.3 Termination of Employment. If the Chief Executive
Officer retires or experiences a Termination of Employment for any other reason
during a Service Year, such Chief Executive Officer shall be eligible to
receive a pro rata portion of his Bonus for that Service Year (as determined
and certified pursuant to Articles 5 and 6) according to the number of whole
months (including accrued vacation time) of Continuous Employment served in
that Service Year prior to Retirement or other Termination of Employment.

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34
ARTICLE 8

MISCELLANEOUS

8.1 No Implied Rights. Neither the establishment of this
Plan nor the payment of any award hereunder nor any action of the Company or of
the Compensation Committee with respect to this Plan shall be held or construed
to confer upon any Participant any legal right to be continued in the employ of
the Company or to receive any particular rate of cash compensation other than
pursuant to the terms of this Plan and the determination of the Committee, and
the Corporation expressly reserves the right to discharge any Participant
whenever the interest of the Company may so require without liability to the
Company, the Board of Directors or the Compensation Committee, except as to any
rights which may be expressly conferred upon a Participant under this Plan.
This Plan shall not be deemed to constitute a contract between the Company or
any Subsidiary of the Company and the Participant.
8.2 No Assignment. No awards payable under this Plan
shall be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, or charge, or any such attempted action shall
be void, and no such benefit or interest shall be in any manner liable for or
subject to debts, contracts, liabilities, engagements, or torts of any
Participants. If any Participant shall become bankrupt or shall attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge any
award payable under this Plan, then the Committee in its discretion may hold or
apply such benefit or any part thereof to

-13-
35
or for the benefit of such Participant or his beneficiary, his spouse,
children, blood relatives, or other dependents, or any of them, in such manner
and such proportions as the Committee may consider proper.
8.3 No Impairment. The adoption of the Plan shall not
affect any other compensation plans in effect for the Company or any Subsidiary
of the Company, nor shall the Plan preclude the Company or any Subsidiary
thereof from establishing any other forms of incentive or other compensation
for the Chief Executive Officer.
8.4 Binding Effect. The Plan shall be binding upon the
successors and assigns of the Company.
8.5 No Rights to Investments. The Participant shall have
no right, title, or interest whatsoever in or to any investments which the
Company may make to aid it in meeting its obligation hereunder. Nothing
contained in this Plan, and no action taken pursuant to this provision, shall
create or be construed to create a trust of any kind, or a fiduciary
relationship between the Company and the participant or any other person. To
the extent that any person acquires a right to receive payments from the
Company under this Plan, such right shall be no greater than the right of an
unsecured general creditor of the Company. All payments to be made hereunder
shall be paid in cash from the general funds of the Company and no special or
separate fund shall be established and no segregation of assets shall be made
to assure payments of such amounts.

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8.6 No interest shall be payable to any person upon any
bonus award or installment thereof, whether contingent or otherwise.
8.7 Construction. All questions pertaining to the
construction, regulation, validity and effect of the provisions of this Plan
shall be determined in accordance with the laws of the State of New York, to
the extent that Federal law does not preempt New York law and is not otherwise
applicable in accordance with the terms of the Plan.
8.8 Expenses. Except for applicable taxes incurred by
the Participant, all expenses and costs in connection with the administration
and operation of the Plan shall be borne by the Company.
8.9 Acceptance. By accepting the award of any Actual
Bonus or other benefit under the Plan, the Participant and each person, if any,
claiming under or through the Participant shall be conclusively deemed to have
indicated such person's acceptance and ratification, and consent to, any action
taken under the Plan by the Company, the Board or the Committee.
8.10 Effective Upon Shareholder Approval. Subject to
approval by the shareholders of the Company, pursuant to the requirements of
Section 162(m) of the Code and any regulations promulgated thereunder, this
Plan shall be effective for Service Years commencing on or after January 1,
1994. No bonus awards shall be paid hereunder until such shareholder approval
has been obtained.

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ARTICLE 9

AMENDMENTS OR DISCONTINUANCE

The Committee may modify, revise, suspend or discontinue this
Plan (or making awards hereunder) either temporarily or permanently at any time
and from time to time; provided, however, that any amendment to the Plan
(including any Exhibit hereto) that would require the vote or approval of the
Company's shareholders in order to assure compliance with Section 162(m) of the
Code or any regulations or other applicable laws or regulations, shall only be
made if, prior to payment of any award under such amended Plan, the required
shareholder approval has been obtained.
No amendment of the Plan shall adversely affect any right or
obligations under the Plan with respect to any awards earned pursuant to
Articles 5 and 6 hereof but not yet paid to the Participant without such
Participant's written consent.

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ARTICLE 10

TERMINATION

This Plan shall terminate upon the earlier of the following
dates or events to occur:
(a) upon the adoption of a resolution of the Board
terminating the Plan; or
(b) December 31, 1998.
No termination of the Plan shall alter or impair any of the
rights or obligation of any person, without his consent, under the terms of any
payment theretofore made under the Plan.

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