EMPLOYMENT
AGREEMENT (the “Agreement”) made as of the 30th day of
December, 2008 by and between ARROW ELECTRONICS, INC., a New York
corporation with its principal office at 50 Marcus Drive, Melville,
New York 11747 (the “Company”), and JOHN P. McMAHON,
residing 6 Whistler Lane, Southborough, Massachusetts 01772 (the
“Executive”).
WHEREAS,
the Executive, has been employed by the Company, as a Senior Vice
President, Human Resources, with the responsibilities and duties of
an executive officer of the Company under an Employment Agreement
dated as of February 1 st
, 2007 (the
“Old Agreement”); and
WHEREAS,
the Old Agreement contains provisions that do not comply with
section 409A of the Internal Revenue Code of 1986, as amended, and
applicable regulations thereunder (“409A”) and other
provisions that are obsolete; and
WHEREAS,
the Company and Executive wish to novate the Old Agreement and to
replace it with 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 and 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, Human Resources, but the
Board of Directors shall have the right to adjust the duties,
responsibilities, and title of the Executive as the Board of
Directors may from time to time deem to be in the interests of the
Company (provided, however, that during the Employment Period,
without the consent of the Executive, he shall not be assigned any
titles, duties or responsibilities which, in the aggregate,
represent a material diminution in, or are materially inconsistent
with, his prior title, duties, and responsibilities as a Senior
Vice President, Human Resources).
If
the Board of Directors does not either continue the Executive in
the office of a Senior Vice President, Human Resources, or elect
him 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 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 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.
(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 $375,000 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 generally.
(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 $225,000 per year,
provided, however, that the Executive’s actual incentive
payment for 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
200% of 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”). The timing of payment
under the SERP shall be in accordance with its terms.
(d)
Automobile . While the Executive is actively working for the
Company, the Company will pay the Executive a monthly automobile
allowance of $850. Such allowance shall cease when the
Executive’s employment with the Company terminates for any
reason.
(e)
Expenses . During the Employment Period, the Company agrees
to reimburse the Executive, upon the submission of appropriate
vouchers, for out-of-pocket
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expenses
(including, without limitation, expenses for travel, lodging and
entertainment) incurred by the Executive in the course of his
duties hereunder in accordance with its expense reimbursement
policy. Any reimbursement that is taxable to Executive shall be
paid no later than the end of the year following the year in which
it is incurred.
(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, defend
and hold harmless 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 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.
(i)
Rental Subsidy . To assist you with your move to New York,
the Company will provide you with a two-year rental subsidy in the
amount of $3,083 per month commencing April 2008 and
continuing through March 2010, payable on the first day of
each month.
3. The
Employment Period .
The
“Employment Period,” as used in the Agreement, shall
mean the period beginning March 19, 2007 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,
2010; 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.
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For
purposes of this Agreement, the Executive will be deemed
“disabled” if he is absent from work because he is
incapacitated due to an accident or physical or mental impairment,
and one of the following conditions is also satisfied:
(i) Executive is expected to return to his duties with the
Company within 6 months after the beginning of his absence or
(ii) Executive is unable to perform his duties or those of a
substantially similar position of employment due to a
medically-determinable physical or mental impairment which can be
expected to result in death or last for a continuous period of not
less than 6 months. If the Executive is absent on account of
being disabled (as defined in the preceding sentence), during such
absence the Company shall continue to pay to the Executive his base
salary, any additional compensation authorized by the
Company’s Board of Directors, and other remuneration and
benefits provided in accordance with Paragraph 2 hereof, all
without delay, diminution or proration of any kind whatsoever
(except that his remuneration hereunder shall be reduced by the
amount of any payments he may otherwise receive as a result of his
disability pursuant to a disability program provided by or through
the Company), and his medical benefits and life insurance shall
remain in full force. Unless terminated earlier in accordance with
Paragraph 3(a), (c) or (d), the Employment Period shall
end on the 180 th
consecutive
day of his disability absence, and Executive’s compensation
under Paragraph 2 shall immediately cease, except the medical
benefits covering the Executive and his family shall remain in
place (subject to the eligibility requirements and other conditions
contained 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 8 and the obligations of the
Executive contained in Paragraphs 9(b) and 9(c) shall continue in
effect as provided therein.
6.
Termination Without Cause .
In
the event that the Company discharges the Executive without cause
prior to the expiration of the Employment Period, the
Executive’s post-discharge compensation and
benefits
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will be as
follows, subject to the Executive’s execution of a release as
set forth in Paragraph 7 below:
(a) The
Executive will be placed on inactive or “RA” status
beginning on the day following his last day of active work and
ending on the earliest of (i) the date the Employment Period
was scheduled to expire, (ii) the day the Executive begins
employment for a person or entity other than the Company, or
(iii) the day the Executive fails to observe any provision of
this Agreement, including his obligations under Paragraphs 8 and 9
(the “RA Period”), during which time he will be paid
the salary provided in subparagraph 2(a) on the same schedule as if
he still were an active employee (less the customary deductions),
subject to any required delay described in subparagraph
(c) below;
(b) The
Executive will be paid an amount equal to two-thirds of the
targeted incentive provided in Paragraph 2(b) for the year in which
he ce
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