EXHIBIT 10.1
October 9, 2006
Mark Settle
1674 Alexander Way
Los Altos, CA 94024
Re: Modifications to January 1, 2003 Employment Agreement
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and Release
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Dear Mark:
The purpose of this letter agreement (this "Agreement") is to document
certain changes we have agreed to make to your employment agreement with Arrow
Electronics, Inc. ("Arrow") dated January 1, 2003 ("2003 Agreement") for the
purpose of amending and/or clarifying certain provisions of the 2003 Agreement
and making certain changes necessary to bring the 2003 Agreement into compliance
with section 409A of the Internal Revenue Code. Accordingly, notwithstanding any
provision of the 2003 Agreement to the contrary:
1. August 31, 2006 will be treated as your last day of active work for
Arrow (you will not be required to be present in the Arrow offices
after August 29, 2006), and commencing on September 1, 2006 and ending
on the earlier of (a) March 15, 2007 and (b) the day you begin
employment (including self-employment) for a person or entity other
than Arrow, you will be on inactive or "RA" status. You may provide
paid consulting services to a third party or parties without the same
being deemed employment hereunder provided that the total number of
days on which such services are provided during the term hereof do not
exceed ninety, and further provided that you reimburse Arrow (and
Arrow may deduct from any sums then owing you) one half of any
consulting fees (not counting expense reimbursement which you receive
for providing such services) for more than a total of ten days up to a
total of thirty days and the entirety of any consulting fees earned
for providing such services thereafter. You will immediately notify
Arrow's Vice-President, Global Human Resources, in writing, upon
securing employment or consulting engagements. The period during which
you are on RA status described in this paragraph 1 will be referred to
herein as your "RA Period."
Your active participation in the Arrow 401(k) Plan, the Arrow ESOP
and the Arrow SERP will end on August 31, 2006, and you will earn no
vesting service and no additional benefits under those plans after
August 31, 2006. For purposes of receiving a distribution of your
vested account balance under the 401(k) Plan or ESOP, August 31, 2006
will be the date of your severance from service with Arrow. Under the
terms of the SERP, you will not be vested in your SERP benefit by
August 31, 2006 (and would not have been vested in your SERP benefit
even had you remained employed during the whole of the term of the
2003 Agreement). However, in consideration of the terms of this
Agreement, Arrow will make a lump-sum payment to you on the date
which is eight days after the execution of this agreement in the
amount of $250,000.
2. You will remain covered by the Arrow medical plan during your RA
Period under the same terms and conditions as an active employee. At
the end of the RA Period you will be entitled to continuation of
medical coverage for you and your eligible dependents under the plan's
COBRA provisions at your own expense except that Arrow will pay to
you, as part of the lump-sum payment to be made to you on March 15,
2007 as described below, the amount of $25,515 in respect of the cost
that would have been incurred by Arrow in maintaining your current
family medical coverage during the period March 16, 2007 to January
31, 2008. Your participation in all other welfare benefit and fringe
benefit plans, programs and arrangements of Arrow will end on August
31, 2006, subject to any right you may have under the terms of a plan
to convert to individual coverage. You will be entitled to your rights
under paragraph 4 of the 2003 Agreement should you become "disabled"
as defined therein prior to January 31, 2008 on the same terms and
conditions as an active employee, subject, in respect of any benefits
payable for any period prior to February 1, 2008, to an offset of the
payments made to you hereunder in respect of salary and bonus.
3. In accordance with the terms of the 2003 Agreement, any unvested Arrow
nonqualified stock options, restricted stock and performance shares
granted to you prior to August 31, 2006 which would have vested prior
to January 31, 2008 will vest at August 31, 2006. In addition, while
not legally obliged to do so, Arrow will vest you in your 2005-2007
Performance Shares. The vesting of the restricted stock and
performance shares is subject to the payment by you of all applicable
taxes. For the avoidance of doubt, Schedule A attached hereto shows
the nonqualified stock options, restricted stock and performance
shares that will vest on August 31, 2006. Arrow hereby waives its
right of first refusal with respect to any vested restricted stock.
Any stock options, restricted stock and performance shares that remain
unvested as of September 1, 2006 will be forfeited as of that date.
For purposes of the exerciseability of any Arrow vested nonqualified
stock options held by you at August 31, 2006, you will not be
considered to have terminated employment with Arrow until January 31,
2008 or such earlier date as you request in writing in advance of such
date if you determine that such a shortened exerciseability period
would be advantageous to you under Internal Revenue Code section 409A
final regulations or other guidance. Accordingly, until such date, you
will continue to be able to exercise, any such vested nonqualified
stock options you hold. After such date any such options still
outstanding and unexercised will be forfeited. Vested Arrow
performance shares will be paid out in accordance with their terms. No
new option, restricted stock or performance awards will be made to you
after August 31, 2006.
4. Subject to paragraph 9 below, a lump sum of $194,424.93, covering the
salary continuation amounts, equal to your monthly salary in effect
immediately before the RA Period commenced, otherwise payable to you
during the six-month period beginning on September 1, 2006 and ending
on February 28, 2007, along with interest at 5.5 per annum (included
in the above amount) to compensate you for the delays in payment, will
be paid to you on March 15, 2007. The balance of your salary for the
period March 1, 2007 through January 31, 2008 discounted at a rate of
5.5% per annum will be paid to you in a lump sum of $350,180 on March
15, 2007. All payments of compensation, benefits and any other amounts
payable by the Company hereunder, including for the avoidance of doubt
the vesting of restricted shares, the exercise of options and the
payout of the performance shares, shall be subject to all legally
required and customary withholding. You will not be paid any car
allowance after August 31, 2006.
5. Subject to paragraph 9 below, you will receive the following bonus
amounts: (a) an amount equal to 88.88% of the bonus payable to you
under Arrow's MICP for 2006, being comprised of 66.66% in respect of
the period January 1 - August 31, 2006 based on Arrow's 2006 results
and 22.22% (being 2/3 of 33.33%) in respect of the period September 1
- December 31, 2006 based on your target bonus for 2006 (the "Target
Bonus"); (b) an amount equal to 66.66% of the Target Bonus in respect
of 2007; and (c) an amount equal to 5.55% of the Target Bonus in
respect of 2008. Such amounts will be paid to you in a lump sum on
March 15, 2007, provided you are still on RA status on December 31,
2006. The amounts referred to in (b) and (c) above will be discounted
from the dates such bonuses would otherwise have been payable to you,
being March 31, 2008 in respect of the 2007 bonus and March 31, 2009
in respect of the 2008 bonus, at a rate of 5.5% per annum, resulting
in an aggregate payment on March 15, 2007 in respect of the bonus
periods referred to in (b) and (c) of $133,198. The amount payable in
respect of 2006 will depend on Arrow's 2006 financial results. (Were
the 2006 corporate MICP to pay out at 100% of target, the 2006 payment
would be $173,329.)
6. You will receive on September 1 a cash amount equal to your accrued
vacation through August 31, 2006 and your vacation accrual will cease
as of August 31, 2006.
7. Your salary deferral for October - December 2004 under the Arrow
Deferred Compensation Plan (as adjusted for deemed investment
experience, less any amounts previously paid out at a scheduled
withdrawal date) will be paid to you at March 15, 2007. Any other
amounts deferred by you under the Arrow Deferred Compensation Plan,
including amounts deferred in respect of your 2004 bonus, (as adjusted
for deemed investment experience, less any amounts previously paid out
at a scheduled withdrawal date) will be paid to you at March 1, 2007.
8. Arrow agrees to pay (i) the cost of outplacement consulting services
reasonably incurred by you in seeking to find another comparable
position of employment, (ii) legal fees incurred in ascertaining the
application of IRC 409A, and (iii) relocation expenses, up to an
aggregate amount of $50,000. Such payment will be made against the
receipt of appropriate invoices . All legal fees described above will
be incurred and paid no later than March 15, 2007, and all other costs
described in this paragraph will be incurred and paid no later than
January 31, 2008.
9. You will not be required to attend to Arrow's business from and after
August 29, 2006, but you agree to be available to advise, consult and
perform specific tasks from time to time until the earlier of (a)
January 31,2008 and (b) the day you begin employment (including
self-employment) for a person or entity other than Arrow, at Arrow's
expense and reasonable request. The indemnification provided under
paragraph 2(g) of the 2003 Agreement will apply in respect of any
services rendered by you pursuant to this paragraph 9. You and Arrow
agree to reasonably cooperate with each other as part of either
party's response to any inquiry, investigation, audit, charge, demand
or litigation against you or Arrow arising out of any act or omission
or alleged act or omission by you or Arrow during your employment with
Arrow.
10. The change of control agreement dated November 5, 2001 between you and
Arrow shall terminate on August 31, 2006.
11. You hereby resign from all offices you hold at Arrow effective August
31, 2006.
12. You agree that, not later than September 30, you will return all
equipment, files, documents, and any other property belonging to
Arrow. You should contact Melanie Young to make all necessary
arrangements.
13. You and Arrow agree that neither of you will disclose or cause to be
disclosed any negative, adverse or derogatory comments or information
about Arrow or you, about any product or service provided by Arrow, or
about Arrow's prospects for the future. Furthermore, you and Arrow
represent that you have made no such communication to any public
official, to any person associated with the media, or to any other
person or entity. You and Arrow each acknowledge that each of you
relies upon this representation in agreeing to enter into this
Agreement.
14. Release. In consideration for all the foregoing provisions, each of
you and Arrow and its affiliates hereby releases the other and its
agents, directors and employees from and against any and all claims
(statutory, contractual or otherwise) arising out of your employment
or the termination thereof or any discrimination in connection
therewith and for any further additional payments of any kind or
nature whatsoever except as expressly set forth herein. Without
limiting the foregoing, you hereby release Arrow from any claim under
the Age Discrimination in Employment Act and any other similar law.
Nothing contained herein will be construed as impacting your right to
claim unemployment benefits following the termination hereof, if any,
or preventing you or Arrow from providing information to or making a
claim with any governmental agency to the extent permitted or required
by law. This release will, however, constitute an absolute bar to the
recovery of any damages or additional compensation, consideration or
relief of any kind or nature whatsoever arising out of or in
connection with such claim.
15. Except as modified hereby, the 2003 Agreement, including the
restrictions on your activities contained in Paragraph 7 thereof and
your obligations contained in Paragraphs 8(b) and 8(c) thereof, shall
continue in full force and effect and for purposes of Paragraph 7
thereof, it is hereby agreed that the words "for a period of two
years after the termination of the Employment Period" shall mean two
years after termination of "RA" status i.e., March 15, 2009.
16. This Agreement is made in the State of New York and will be governed
by the laws of the State of New York. If any portion hereof will be
deemed void or unenforceable by a court of competent jurisdiction,
the same will reform such portion as nearly as possible to effectuate
its intent or sever said portion and give enforcement to the
remainder of the Agreement and Release.
17. Rescission/Advice of Counsel. You acknowledge that Arrow advised you
to consult with an attorney prior to signing this release; advised
you that you had twenty-one (21) days in which to consider whether
you should sign this release; and advised you that if you signed this
release, you would be given seven (7) days following the date on
which you signed the release to revoke it and that the release would
not be effective until after this seven-day period had lapsed.
Therefore, notwithstanding the above provisions, no payments called
for by Arrow herein shall be made until the expiration of such
revocation period.
Please indicate your agreement to the foregoing modifications to the
2003 Agreement by signing and dating both copies of this letter on the lines
provided below, and returning one of the fully executed copies to the
undersigned.
Very truly yours,
Arrow Electronics, Inc.
By:
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Peter S. Brown
Agreed, acknowledged and accepted:
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Mark Settle Date
SCHEDULE A
Equity Awards Vesting Schedule
Mark Settle
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VESTED SHARES
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Grant Vesting Grant
Type of Equity Date Date Amount Vested Exercisable Price
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NQ 11/5/2001 11/5/2002 7,500 7,500 7,500 $25.50
NQ 11/5/2001 11/5/2003 7,500 7,500 7,500 $25.50
NQ 11/5/2001 11/5/2004 7,500 7,500 7,500 $25.50
NQ 11/5/2001 11/5/2005 7,500 7,500 7,500 $25.50
NQ 2/27/2003 2/27/2004 2,500 2,500 2,500 $13.85
NQ 2/27/2003 2/27/2005 2,500 2,500 2,500 $13.85
NQ 2/27/2003 2/27/2006 2,500 2,500 2,500 $13.85
NQ 2/27/2004 2/27/2005 2,500 2,500 2,500 $24.60
NQ 2/27/2004 2/27/2006 2,500 2,500 2,500 $24.60
NQ 2/28/2005 2/28/2006 1,500 1,500 1,500 $26.90
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Sub Total 44,000 44,000 44,000
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UNVESTED SHARES THAT WILL VEST DURING NOTICE PERIOD
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Grant Vesting Grant
Type of Equity Date Date Amount Vested Exercisable Price
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NQ 2/27/2003 2/27/2007 2,500 0 0 $13.85
NQ 2/27/2004 2/27/2007 2,500 0 0 $24.60
NQ 2/28/2005 2/28/2007 1,500 0 0 $26.90
Restricted Stock 2/27/2003 2/27/2007 1,800 0 0 $0.00
Performance Shares 2/27/2004 2/27/2007 7,800 0 0 $0.00
Performance Shares 2/28/2005 2/29/2008 5,000 0 0 $0.00
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Sub Total 21,100 0 0
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UNVESTED SHARES
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Grant Vesting Grant
Type of Equity Date Date Amount Vested Exercisable Price
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NQ 2/27/2004 2/27/2008 2,500 0 0 $24.60
NQ 2/28/2005 2/29/2008 1,500 0 0 $26.90
NQ 2/28/2005 2/28/2009 1,500 0 0 $26.90
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Sub Total 5,500 0 0
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Total 70,600