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.
<PAGE>
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
