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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-K

x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2018

OR

o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to           

Commission file number 1-4482

ARROW ELECTRONICS INC
(Exact name of registrant as specified in its charter)
New York
11-1806155
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification Number)
9201 East Dry Creek Road, Centennial, Colorado
80112
(Address of principal executive offices)
(Zip Code)
(303) 824-4000
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Common Stock, $1 par value
 
New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.     Yes o No x
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.           Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company.  See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. 
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o 
Smaller reporting company o
 
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o   No x

The aggregate market value of voting stock held by non-affiliates of the registrant as of the last business day of the registrant's most recently completed second fiscal quarter was $6,477,885,555.

There were 84,917,353 shares of Common Stock outstanding as of February 1, 2019.

DOCUMENTS INCORPORATED BY REFERENCE

The definitive proxy statement related to the registrant's Annual Meeting of Shareholders, to be held May 9, 2019 is incorporated by reference in Part III to the extent described therein.


TABLE OF CONTENTS

 
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2



PART I
Item 1.    Business.

Arrow Electronics, Inc. (the "company" or "Arrow") is a global provider of products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions. The company has one of the world’s broadest portfolios of product offerings available from leading electronic components and enterprise computing solutions suppliers, coupled with a range of services, solutions, and tools that help industrial and commercial customers introduce innovative products, reduce their time to market, and enhance their overall competitiveness. Arrow was incorporated in New York in 1946 and serves over 200,000 customers.

Arrow's diverse worldwide customer base consists of original equipment manufacturers ("OEMs"), value-added resellers ("VARs"), Managed Service Providers ("MSPs"), contract manufacturers ("CMs"), and other commercial customers. These customers include manufacturers of industrial equipment (such as machine tools, factory automation, and robotic equipment) and consumer products serving industries ranging from telecommunications, automotive and transportation, aerospace and defense, medical, professional services, and alternative energy, among others.

The company has two business segments, the global components business and the global enterprise computing solutions ("ECS") business. The company distributes electronic components to OEMs and CMs through its global components business segment and provides enterprise computing solutions to VARs and MSPs through its global ECS business segment. For 2018, approximately 70% of the company's sales were from the global components business segment, and approximately 30% of the company's sales were from the global ECS business segment. The financial information about the company's business segments and geographic operations is found in Note 16 to the Consolidated Financial Statements.

The company maintains over 300 sales facilities and 49 distribution and value-added centers, serving over 80 countries. Both business segments have operations in each of the three largest electronics markets; the Americas; Europe, Middle East, and Africa ("EMEA"); and Asia Pacific regions. Through this network, Arrow guides innovation forward by helping its customers deliver new technologies, new materials, new ideas, and new electronics that impact the business community and consumers.

The company's financial objectives are to grow sales faster than the market, increase the markets served, grow profits faster than sales, and increase return on invested capital. To achieve its objectives, the company seeks to capture significant opportunities to grow across products, markets, and geographies. To supplement its organic growth strategy, the company continually evaluates strategic acquisitions to broaden its product and value-added service offerings, increase its market penetration, and expand its geographic reach.
  
Global Components

Global components markets and distributes electronic components and provides a comprehensive range of value-added capabilities throughout the entire life cycle of technology products and services. The company provides customers with the ability to deliver the latest technologies to the market through design engineering, global marketing and integration, global logistics, and supply chain management. The company offers the convenience of accessing, from a single source, multiple technologies and products from its suppliers with rapid or scheduled deliveries. Additionally, the company offers expertise in sustainable technology solutions to guide enterprise customers through the entire technology life cycle. Most of the company's customers require delivery of their orders on schedules or volumes that are generally not available on direct purchases from manufacturers.
Within the global components business segment, net sales of approximately 68% consist of semiconductor products and related services; approximately 19% consist of passive, electro-mechanical, and interconnect products, consisting primarily of capacitors, resistors, potentiometers, power supplies, relays, switches, and connectors; approximately 10% consist of computing and memory; and approximately 3% consist of other products and services.

Over the past three years, the global components business segment completed 6 strategic acquisitions to broaden its digital capabilities to meet the evolving needs of customers and suppliers. These acquisitions also expanded the global components business segment's portfolio of products and services offerings at every phase of technology deployment, including custom hardware and software, and new Internet of Things based business models.



3

Global ECS

The company's global ECS business segment is a leading value-added provider of comprehensive computing solutions and services. Global ECS’ portfolio of computing solutions includes data-center, cloud, security, and analytics solutions. Global ECS brings broad market access, extensive supplier relationships, scale, and resources to help its VARs and MSPs meet the needs of their end-users. Global ECS works with VARs and MSPs to tailor complex IT solutions for their end-users. Customers have access to various services including engineering and integration support, warehousing and logistics, marketing resources, and authorized hardware and software training. Global ECS’ suppliers benefit from demand creation, speed to market, and efficient supply chain management.

Within the global ECS business segment, net sales of approximately 39% consist of software, 37% consist of storage, 12% consist of industry standard servers, 6% consist of proprietary servers, and 6% consist of other products and services.

Over the past three years, the global ECS business segment completed two strategic acquisitions to further expand its portfolio of products. Aligned with the vision of guiding innovation forward in the IT channel, the company is investing in emerging and adjacent markets, such as managed services and unified computing, within the ECS business.

Customers and Suppliers

The company and its affiliates serve over 200,000 industrial and commercial customers. Industrial customers range from major OEMs and CMs to small engineering firms, while commercial customers primarily include VARs, MSPs, and OEMs. No single customer accounted for more than 2% of the company's 2018 consolidated sales.

The company’s sales teams focus on an extensive portfolio of products and services to support customers’ material management and production needs, including connecting customers to the company’s field application engineers that provide technical support and serve as a gateway to the company’s supplier partners. The company’s sales representatives generally focus on a specific customer segment, particular product lines or a specific geography, and provide end-to-end product offerings and solutions with an emphasis on helping customers introduce innovative products, reduce their time to market, and enhance their overall competitiveness.

Substantially all of the company's sales are made on an order-by-order basis, rather than through long-term sales contracts. As such, the nature of the company's business does not provide visibility of material forward-looking information from its customers and suppliers beyond a few months.

No single supplier accounted for more than 10% of the company's consolidated sales in 2018. The company believes that many of the products it sells are available from other sources at competitive prices. However, certain parts of the company's business, such as the company's global ECS business segment, rely on a limited number of suppliers with the strategy of providing focused support, extensive product knowledge, and customized service to suppliers and VARs. Most of the company's purchases are pursuant to distributor agreements, which are typically non-exclusive and cancelable by either party at any time or on short notice.

Distribution Agreements

Certain agreements with suppliers protect the company against the potential write-down of inventories due to technological change or suppliers' price reductions. These contractual provisions typically provide certain protections to the company for product obsolescence and price erosion in the form of return privileges, scrap allowances, and price protection. Under the terms of the related distributor agreements and assuming the company complies with certain conditions, such suppliers are required to credit the company for reductions in suppliers' list prices. As of December 31, 2018, this type of arrangement covered approximately 49% of the company's consolidated inventories. In addition, under the terms of many such agreements, the company has the right to return to the supplier, for credit, a defined portion of those inventory items purchased within a designated period of time.

A supplier, which elects to terminate a distribution agreement, may be required to purchase from the company the total amount of its products carried in inventory. As of December 31, 2018, this type of repurchase arrangement covered approximately 54% of the company's consolidated inventories.

While these inventory practices do not wholly protect the company from inventory losses, the company believes that they currently provide substantial protection from such losses.


4

Competition

The company operates in a highly competitive environment, both in the United States and internationally. The company competes with other large multinational and national electronic components and enterprise computing solutions distributors, as well as numerous other smaller, specialized competitors who generally focus on narrower markets, products, or particular sectors. The company also competes for customers with its suppliers. The size of the company's competitors vary across markets sectors, as do the resources the company has allocated to the sectors in which it does business. Therefore, some of the company's competitors may have a more extensive customer and/or supplier base than the company in one or more of its market sectors. There is significant competition within each market sector and geography served that creates pricing pressure and the need to continually improve services. Other competitive factors include rapid technological changes, product availability, credit availability, speed of delivery, ability to tailor solutions to customer needs, quality and depth of product lines and training, as well as service and support provided by the distributor to the customer.

The company also faces competition from companies entering or expanding into the logistics and product fulfillment, electronic catalog distribution, and e-commerce supply chain services markets. As the company seeks to expand its business into new areas in order to stay competitive in the market, the company may encounter increased competition from its current and/or new competitors.

The company believes that it is well equipped to compete effectively with its competitors in all of these areas due to its comprehensive product and service offerings, highly-skilled work force, and global distribution network.

Employees

The company and its affiliates employed approximately 20,100 employees worldwide as of December 31, 2018.

Available Information

The company files its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements, and other documents with the U.S. Securities and Exchange Commission ("SEC") under the Securities Exchange Act of 1934. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The company's SEC filings are available to the public on the SEC's Web site at http://www.sec.gov and through the New York Stock Exchange ("NYSE"), 11 Wall Street, New York, New York 10005, on which the company's common stock is listed.

A copy of any of the company's filings with the SEC, or any of the agreements or other documents that constitute exhibits to those filings, can be obtained by request directed to the company at the following address and telephone number:

Arrow Electronics, Inc.
9201 East Dry Creek Road
Centennial, Colorado 80112
(303) 824-4000
Attention: Corporate Secretary

The company also makes these filings available, free of charge, through its website (http://www.arrow.com) as soon as reasonably practicable after the company files such materials with the SEC. The company does not intend this internet address to be an active link or to otherwise incorporate the contents of the website into this Annual Report on Form 10-K.


5

Executive Officers

The following table sets forth the names, ages, and the positions held by each of the executive officers of the company as of February 7, 2019:

Name
Age
Position
Michael J. Long
60
Chairman, President, and Chief Executive Officer
Matt Anderson
40
Senior Vice President, Chief Digital Officer
Sean J. Kerins
56
President, Arrow Global Enterprise Computing Solutions
Andy King
55
President, Arrow Global Components
Chuck Kostalnick
53
Senior Vice President, Chief Supply Chain Officer
Vincent P. Melvin
55
Senior Vice President, Chief Information Officer
M. Catherine Morris
60
Senior Vice President, Chief Strategy Officer
Chris D. Stansbury
53
Senior Vice President, Chief Financial Officer
Gregory P. Tarpinian
57
Senior Vice President, Chief Legal Officer
Gretchen K. Zech
49
Senior Vice President, Chief Human Resources Officer

Set forth below is a brief account of the business experience during the past five years of each executive officer of the company.

Michael J. Long has been Chairman of the Board of Directors, President, and Chief Executive Officer of the company for more than five years.

Matt Anderson was appointed Senior Vice President, Chief Digital Officer in July 2017. Prior thereto he served as Chief Digital Officer from October 2014 to June 2017. Prior to joining Arrow he served as General Manager and Chief Digital Officer at Hibu from January 2013 to September 2014.

Sean J. Kerins was appointed President of Arrow Global Enterprise Computing Solutions in May 2014. Prior thereto he served as President of North America Enterprise Computing Solutions from July 2010 to May 2014.

Andy King was appointed President of Arrow Global Components in November 2015. Prior thereto he served as President of EMEA Components from November 2013 to November 2015.

Chuck Kostalnick was appointed Senior Vice President, Chief Supply Chain Officer in July 2017. Prior thereto he served as President, Arrow Sustainable Technology Solutions from August 2016 to July 2017. Before joining Arrow he served as Executive Vice President and Chief Business Officer at Sanmina from September 2013 to July 2016.

Vincent P. Melvin has been Senior Vice President and Chief Information Officer of the company for more than five years.

M. Catherine Morris has been Senior Vice President and Chief Strategy Officer of the company for more than five years.

Chris D. Stansbury was appointed Senior Vice President and Chief Financial Officer in May 2016. Prior thereto he served as Vice President, Finance and Chief Accounting Officer from August 2014 to May 2016. Prior to joining Arrow he served as the Vice President, Finance and Chief Financial Officer for Hewlett Packard’s Global Networking business from September 2013 to July 2014.

Gregory P. Tarpinian was appointed Senior Vice President and Chief Legal Officer in January 2015. Prior thereto he served as the Vice President of Legal Affairs for more than five years.

Gretchen K. Zech has been Senior Vice President and Chief Human Resources Officer of the company for more than five years.

6

Item 1A. Risk Factors.

Described below and throughout this report are certain risks that the company's management believes are applicable to the company's business and the industries in which it operates. If any of the described events occur, the company's business, results of operations, financial condition, liquidity, or access to the capital markets could be materially adversely affected. When stated below that a risk may have a material adverse effect on the company's business, it means that such risk may have one or more of these effects. There may be additional risks that are not presently material or known. There are also risks within the economy, the industry, and the capital markets that could materially adversely affect the company, including those associated with an economic recession, inflation, a global economic slowdown, political instability, employee attraction and retention, and those associated with customers' inability or refusal to pay for the products and services provided by the company. There are also risks associated with the occurrence of natural disasters such as tsunamis, hurricanes, tornadoes, and floods. These factors affect businesses generally, including the company, its customers and suppliers and, as a result, are not discussed in detail below, but are applicable to the company. Included below are some risks pertaining to specific government regulation, however, not all regulations applicable to the company or unanticipated regulation changes (such as changes in tax regulations in the various geographies we operate) have been described. The continuing expansion of government laws and regulations, some that may apply specifically to the company's industry and others to the market generally, as well as any actions taken by activist investors, could negatively impact the company's profitability.
 
If the company is unable to maintain its relationships with its suppliers or if the suppliers materially change the terms of their existing agreements with the company, the company's business could be materially adversely affected.

A substantial portion of the company's inventory is purchased from suppliers with which the company has entered into non-exclusive distribution agreements. These agreements are typically cancelable on short notice (generally 30 to 90 days). Some of the company's businesses rely on a limited number of suppliers to provide a high percentage of their revenues. For example, sales of products from one of the company's suppliers accounted for approximately 9% of the company's consolidated sales. To the extent that the company's significant suppliers reduce the number of products they sell through distribution, are unwilling to continue to do business with the company, or are unable to continue to meet or significantly alter their obligations, the company's business could be materially adversely affected. In addition, to the extent that the company's suppliers modify the terms of their contracts to the detriment of the company, limit supplies due to capacity constraints, or other factors, there could be a material adverse effect on the company's business. Further, the supplier landscape has experienced a consolidation, which could negatively impact the company if the surviving, consolidated suppliers decide to exclude the company from their supply chain efforts.

The competitive pressures the company faces could have a material adverse effect on the company's business.

The company operates in a highly competitive international environment. The company competes with other large multinational and national electronic components and enterprise computing solutions distributors, as well as numerous other smaller, specialized competitors who generally focus on narrower markets, products, industries, or particular sectors. The company also competes for customers with its suppliers. The size of the company's competitors vary across market sectors, as do the resources the company has allocated to the sectors in which it does business. Therefore, some of the company's competitors may have a more extensive customer and/or supplier base than the company in one or more of its market sectors. There is significant competition within each market sector and geography that creates pricing pressure and the need for constant attention to improve services. Other competitive factors include rapid technological changes, product availability, credit availability, speed of delivery, ability to tailor solutions to customer needs, quality and depth of product lines and training, as well as service and support provided by the distributor to the customer. The company also faces competition from companies in the logistics and product fulfillment, catalog distribution, and e-commerce supply chain services markets. As the company continues to expand its business into new areas in order to stay competitive in the market, such as in the area of the "Internet of Things" and its expansion in the digital market, the company may encounter increased competition from its current and/or new competitors. The company's failure to maintain and enhance its competitive position could have a material adverse effect on its business.

The company may not be able to adequately anticipate, prevent, or mitigate damage resulting from criminal and other illegal or fraudulent activities committed against it.

It is clear that global businesses like ours are facing increasing risks of criminal, illegal, and other fraudulent acts.  The evolving nature of such threats, in light of new and sophisticated methods used by criminals, including phishing, misrepresentation, social engineering and forgery, are making it increasingly difficult for us to anticipate and adequately mitigate these risks. In addition, designing and implementing measures to defend against, prevent, and detect these types of activities are increasingly costly and invasive into the operations of the business.  As a result, we could experience a material loss in the future to the extent that controls and other measures we implement to address these threats fail to prevent or detect such acts.



7


Products sold by the company may be found to be defective and, as a result, warranty and/or product liability claims may be asserted against the company, which may have a material adverse effect on the company.
 
The company sells its components at prices that are significantly lower than the cost of the equipment or other goods in which they are incorporated. As a result, the company may face claims for damages (such as consequential damages) that are disproportionate to the revenues and profits it receives from the components involved in the claims. While the company typically has provisions in its supplier agreements that hold the supplier accountable for defective products, and the company and its suppliers generally exclude consequential damages in their standard terms and conditions, the company's ability to avoid such liabilities may be limited as a result of differing factors, such as the inability to exclude such damages due to the laws of some of the countries where it does business. The company's business could be materially adversely affected as a result of a significant quality or performance issue in the products sold by the company, if it is required to pay for the associated damages. Although the company currently has product liability insurance, such insurance is limited in coverage and amount. Further, when relying on contractual liability exclusions, the company could lose customers if their claims are not addressed to their satisfaction.
 
Declines in value and other factors pertaining to the company's inventory could materially adversely affect its business.

The market for the company's products and services is subject to rapid technological change, evolving industry standards, changes in end-market demand, oversupply of product, and regulatory requirements, which can contribute to the decline in value or obsolescence of inventory. Although most of the company's suppliers provide the company with certain protections from the loss in value of inventory (such as price protection and certain rights of return), the company cannot be sure that such protections will fully compensate it for the loss in value, or that the suppliers will choose to, or be able to, honor such agreements. For example, many of the company's suppliers will not allow products to be returned after they have been held in inventory beyond a certain amount of time, and, in most instances, the return rights are limited to a certain percentage of the amount of product the company purchased in a particular time frame. All of these factors pertaining to inventory could have a material adverse effect on the company's business.

The company is subject to environmental laws and regulations that could materially adversely affect its business.

A number of jurisdictions in which the company's products are sold have enacted laws addressing environmental and other impacts from product disposal, use of hazardous materials in products, use of chemicals in manufacturing, recycling of products at the end of their useful life, and other related matters. These laws prohibit the use of certain substances in the manufacture of the company's products and impose a variety of requirements for modification of manufacturing processes, registration, chemical testing, labeling, and other matters. Failure to comply with these laws or any other applicable environmental regulations could result in fines or suspension of sales. Additionally, these directives and regulations may result in the company having non-compliant inventory that may be less readily salable or have to be written off.

Some environmental laws impose liability, sometimes without fault, for investigating or cleaning up contamination on or emanating from the company's currently or formerly owned, leased, or operated property, as well as for damages to property or natural resources and for personal injury arising out of such contamination. As the distribution business, in general, does not involve the manufacture of products, it is typically not subject to significant liability in this area. However, there may be occasions, including through acquisitions, where environmental liability arises. Two sites for which the company assumed responsibility as part of the Wyle Electronics ("Wyle") acquisition are known to have environmental issues, one at Norco, California and the other at Huntsville, Alabama. The company was also named as a defendant in a private lawsuit filed in connection with alleged contamination at a small industrial building formerly leased by Wyle Laboratories in El Segundo, California. The lawsuit was settled, but the possibility remains that government entities or others may attempt to involve the company in further characterization or remediation of groundwater issues in the area. The presence of environmental contamination could also interfere with ongoing operations or adversely affect the company's ability to sell or lease its properties. The discovery of contamination for which the company is responsible, the enactment of new laws and regulations, or changes in how existing requirements are enforced, could require the company to incur costs for compliance or subject it to unexpected liabilities.

Expansion into the electronic asset disposition market has broadened the company's risk profile.
 
The company provides services related to electronic devices being disposed of by business customers. These services include, the data sanitation of storage devices from customer equipment and either recycling the equipment through resale or disposing of it in an environmentally compliant manner.  The company may also hold equipment in order to protect and preserve customer data.  If the company does not meet its contractual and regulatory obligations with respect to such data, it could be subject to financial damages, penalties, and damage to reputation.  Also, the company's or its subcontractors' failure to comply with applicable environmental laws and regulations in disposing of the equipment could result in liability.  Such environmental liability may be

8

joint and several, meaning that the company could be held responsible for more than its share of the liability involved.   To the extent that company fails to comply with its obligations and such failure is not covered by insurance, the company's business could be adversely affected.

The company may not have adequate or cost-effective liquidity or capital resources.

The company requires cash or committed liquidity facilities for general corporate purposes, such as funding its ongoing working capital, acquisitions, and capital expenditure needs, as well as to refinance indebtedness. At December 31, 2018, the company had cash and cash equivalents of $509.3 million. In addition, the company currently has access to committed credit lines of $2.0 billion and a committed asset securitization program of $1.2 billion, of which the company had outstanding borrowings of $810.0 million at December 31, 2018. The company's ability to satisfy its cash needs depends on its ability to generate cash from operations and to access the financial markets, both of which are subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond its control.

The company may, in the future, need to access the financial markets to satisfy its cash needs. The company's ability to obtain external financing is affected by various factors including general financial market conditions and the company's debt ratings. Further, any increase in the company's level of debt, change in status of its debt from unsecured to secured debt, or deterioration of its operating results may cause a reduction in its current debt ratings. Any downgrade in the company's current debt rating or tightening of credit availability could impair the company's ability to obtain additional financing or renew existing credit facilities on acceptable terms. Under the terms of any external financing, the company may incur higher financing expenses and become subject to additional restrictions and covenants. For example, the company's existing debt agreements contain restrictive covenants, including covenants requiring compliance with specified financial ratios, and a failure to comply with these or any other covenants may result in an event of default. An increase in the company's financing costs or loss of access to cost-effective capital resources could have a material adverse effect on the company's business.

The agreements governing some of the company's financing arrangements contain various covenants and restrictions that limit some of management's discretion in operating the business and could prevent the company from engaging in some activities that may be beneficial to its business.

The agreements governing the company's financings contain various covenants and restrictions that, in certain circumstances, could limit its ability to:

•
grant liens on assets;
•
make investments;
•
merge, consolidate, or transfer all or substantially all of its assets;
•
incur additional debt; or
•
engage in certain transactions with affiliates.

As a result of these covenants and restrictions, the company may be limited in how it conducts its business and may be unable to raise additional debt, compete effectively, or make investments.

The company's lack of long-term sales contracts may have a material adverse effect on its business.

Most of the company's sales are made on an order-by-order basis, rather than through long-term sales contracts. The company generally works with its customers to develop non-binding forecasts for future orders. Based on such non-binding forecasts, the company makes commitments regarding the level of business that it will seek and accept, the inventory that it purchases, and the levels of utilization of personnel and other resources. A variety of conditions, both specific to each customer and generally affecting each customer's industry may cause customers to cancel, reduce, or delay orders that were either previously made or anticipated, file for bankruptcy protection or fail, or default on their payments. Generally, customers cancel, reduce, or delay purchase orders and commitments without penalty. The company seeks to mitigate these risks, in some cases, by entering into noncancelable/nonreturnable sales agreements, but there is no guarantee that such agreements will adequately protect the company. Significant or numerous cancellations, reductions, delays in orders by customers, loss of customers, and/or customer defaults on payments could materially adversely affect the company's business.

The company's revenues originate primarily from the sales of semiconductor, PEMCO (passive, electro-mechanical and connector), IT hardware and software products, the sales of which are traditionally cyclical.

The semiconductor industry historically has experienced fluctuations in product supply and demand, often associated with changes in technology and manufacturing capacity and subject to significant economic market upturns and downturns. Sales of

9

semiconductor products and related services represented approximately 45%, 46%, and 42% of the company's consolidated sales in 2018, 2017, and 2016, respectively. The sale of the company's PEMCO products closely tracks the semiconductor market. Accordingly, the company's revenues and profitability, particularly in its global components business segment, tend to closely follow the strength or weakness of the semiconductor market. Further, economic weakness could cause a decline in spending in information technology, which could have a negative impact on the company's ECS business. A cyclical downturn in the technology industry could have a material adverse effect on the company's business and negatively impact its ability to maintain historical profitability levels.

The company's non-U.S. sales represent a significant portion of its revenues, and consequently, the company is exposed to risks associated with operating internationally.

In 2018, 2017, and 2016, approximately 59%, 58%, and 57%, respectively, of the company's sales came from its operations outside the United States. As a result of the company's international sales and locations, its operations are subject to a variety of risks that are specific to international operations, including the following:

•
import and export regulations that could erode profit margins or restrict exports;
•
the burden and cost of compliance with international laws, treaties, and technical standards and changes in those regulations; 
•
potential restrictions on transfers of funds;
•
import and export duties and value-added taxes;
•
transportation delays and interruptions;
•
the burden and cost of compliance with complex multi-national tax laws and regulations;
•
uncertainties arising from local business practices and cultural considerations;
•
enforcement of the Foreign Corrupt Practices Act, or similar laws of other jurisdictions;
•
foreign laws that potentially discriminate against companies which are headquartered outside that jurisdiction;
•
volatility associated with sovereign debt of certain international economies;
•
the uncertainty surrounding the implementation and effects of Brexit;
•
potential military conflicts and political risks; and
•
currency fluctuations, which the company attempts to minimize through traditional hedging instruments.

Furthermore, products the company sells which are either manufactured in the United States or based on U.S. technology ("U.S. Products") are subject to the Export Administration Regulations ("EAR") when exported and re-exported to and from all international jurisdictions, in addition to the local jurisdiction's export regulations applicable to individual shipments. Licenses or proper license exemptions may be required by local jurisdictions' export regulations, including EAR, for the shipment of certain U.S. Products to certain countries, including China, India, Russia, and other countries in which the company operates. Non-compliance with the EAR or other applicable export regulations can result in a wide range of penalties including the denial of export privileges, fines, criminal penalties, and the seizure of inventories. In the event that any export regulatory body determines that any shipments made by the company violate the applicable export regulations, the company could be fined significant sums and/or its export capabilities could be restricted, which could have a material adverse effect on the company's business.

Also, the company's gross margins in the components business in the Asia/Pacific region tend to be lower than those in the other markets in which the company sells products and services. If sales in this market increase as a percentage of overall sales, consolidated gross margins will be lower. While the company has and will continue to adopt measures to reduce the potential impact of losses resulting from the risks of doing business abroad, it cannot ensure that such measures will be adequate and, therefore, could have a material adverse effect on its business.

Moreover, our effective tax rate may be adversely impacted by, among other things, changes in the mix of our earnings among countries having different statutory tax rates, changes in the valuation of deferred tax assets, and certain international tax policy efforts, including the Organization for Economic Co-operation and Development’s ("OECD") Base Erosion and Profit Shifting ("BEPS") Project, the European Commission’s state aid investigations, and other initiatives adversely affecting taxation of international businesses. Furthermore, many of the countries where we are subject to taxes are independently evaluating their tax policy and some have already passed tax legislation which affect international businesses.  For instance, on December 22, 2017, the U.S. federal government enacted tax legislation ("Tax Act"), which significantly changed the tax laws by favorably reducing the corporate federal tax rate (35% to 21%) and moving to a territorial system, while simultaneously imposing an unfavorable one-time tax on accumulated foreign earnings, limiting deductibility of certain import related costs, including interest expense, and creating a new tax on certain international activities. Additionally, our tax returns are subject to periodic audits by U.S. and foreign tax authorities, and these audits may result in allocations of income and/or deductions that may result in tax assessments different from amounts that we have estimated. We regularly assess the likelihood of adverse outcomes resulting from these audits to determine the adequacy of our provision for taxes. Such tax changes, to the extent they are brought against us, could increase

10

our effective tax rates in many of the countries where we have operations and ultimately have an adverse effect on our overall tax liability, along with increasing the complexity, burden and cost of tax compliance, all of which could impact our operating results, cash flows, and financial condition.

When the company makes acquisitions, it may take on additional liabilities or not be able to successfully integrate such acquisitions.

As part of the company's history and growth strategy, it has acquired other businesses. Acquisitions involve numerous risks, including the following:

•
effectively combining the acquired operations, technologies, or products;
•
unanticipated costs or assumed liabilities, including those associated with regulatory actions or investigations;
•
not realizing the anticipated financial benefit from the acquired companies;
•
diversion of management's attention;
•
negative effects on existing customer and supplier relationships; and
•
potential loss of key employees, especially those of the acquired companies.

Further, the company has made, and may continue to make acquisitions of, or investments in new services, businesses or technologies to expand its current service offerings and product lines. Some of these may involve risks that may differ from those traditionally associated with the company's core distribution business, including undertaking product or service warranty responsibilities that in its traditional core business would generally reside primarily with its suppliers. If the company is not successful in mitigating or insuring against such risks, it could have a material adverse effect on the company's business.

The company's goodwill and identifiable intangible assets could become impaired, which could reduce the value of its assets and reduce its net income in the year in which the write-off occurs.

Goodwill represents the excess of the cost of an acquisition over the fair value of the assets acquired. The company also ascribes value to certain identifiable intangible assets, which consist primarily of customer relationships and trade names, among others, as a result of acquisitions. The company may incur impairment charges on goodwill or identifiable intangible assets if it determines that the fair values of the goodwill or identifiable intangible assets are less than their current carrying values. The company evaluates, on a regular basis, whether events or circumstances have occurred that indicate all, or a portion, of the carrying amount of goodwill or identifiable intangible assets may no longer be recoverable, in which case an impairment charge to earnings would become necessary.

Refer to Notes 1 and 3 of the Notes to the Consolidated Financial Statements and 'Critical Accounting Policies' in Management's Discussion and Analysis of Financial Condition and Results of Operations for further discussion of the impairment testing of goodwill and identifiable intangible assets.

A decline in general economic conditions, a substantial increase in market interest rates, or the company’s inability to meet long term working capital or operating income projections could impact future valuations of the company's reporting units, and the company could be required to record an impairment charge in the future, which could impact the company's consolidated balance sheet, as well as the company's consolidated statement of operations. If the company was required to recognize an impairment charge in the future, the charge would not impact the company's consolidated cash flows, current liquidity, capital resources, and covenants under its existing revolving credit facility, asset securitization program, and other outstanding borrowings.
If the company fails to maintain an effective system of internal controls or discovers material weaknesses in its internal controls over financial reporting, it may not be able to report its financial results accurately or timely or detect fraud, which could have a material adverse effect on its business.

An effective internal control environment is necessary for the company to produce reliable financial reports, safeguard assets, and is an important part of its effort to prevent financial fraud. The company is required to annually evaluate the effectiveness of the design and operation of its internal controls over financial reporting. Based on these evaluations, the company may conclude that enhancements, modifications, or changes to internal controls are necessary or desirable. While management evaluates the effectiveness of the company's internal controls on a regular basis, these controls may not always be effective. There are inherent limitations on the effectiveness of internal controls, including collusion, management override, and failure in human judgment. In addition, control procedures are designed to reduce rather than eliminate financial statement risk. If the company fails to maintain an effective system of internal controls, or if management or the company's independent registered public accounting firm discovers material weaknesses in the company's internal controls, it may be unable to produce reliable financial reports or prevent fraud, which could have a material adverse effect on the company's business. In addition, the company may be subject

11

to sanctions or investigation by regulatory authorities, such as the SEC or the NYSE. Any such actions could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of the company's financial statements, which could cause the market price of its common stock to decline or limit the company's access to capital.

Cyber security and privacy breaches may hurt the company’s business, damage its reputation, increase its costs, and cause losses.

The company’s information technology systems could be subject to invasion, cyber-attack, or data privacy breaches by employees, others with authorized access, and unauthorized persons. Such attacks could result in disruption to the company’s operations, loss or disclosure of, or damage to, the company’s or any of its customer’s or supplier’s data, confidential information, or reputation. The company’s information technology systems security measures may also be breached due to employee error, malfeasance, or otherwise. Additionally, outside parties may attempt to fraudulently induce employees, customers or suppliers to disclose sensitive information in order to gain access to the company’s data and information technology systems. Any such breach could result in significant legal and financial exposure, damage to the company’s reputation, loss of competitive advantage, and a loss of confidence in the security of the company’s information technology systems that could potentially have an impact on the company’s business. Because the techniques used to obtain unauthorized access, disable or degrade, or sabotage the company’s information technology systems change frequently and often are not recognized until launched, the company may be unable to anticipate these techniques or to implement adequate preventive measures. Further, third parties, such as hosted solution providers, that provide services for the company’s operations, could also be a source of security risk in the event of a failure of their own security systems and infrastructure. In addition, sophisticated hardware and operating system software and applications that the company procures from third parties may contain defects in design or manufacture, including "bugs" and other problems that could unexpectedly interfere with the operation of the company’s information technology systems.

The company makes investments seeking to address risks and vulnerabilities, including ongoing monitoring, updating networks and systems, and personnel awareness training of potential cybersecurity threats to help ensure employees remain diligent in identifying potential risks. In addition, we have deployed monitoring capabilities to support early detection, internal and external escalation, and effective responses to potential anomalies. As part of the company’s regular review of potential risks, the company analyzes emerging cybersecurity threats as well as the company’s plan and strategies to address them and presents them to senior management. Although the company has developed systems and processes that are designed to protect information and prevent data loss and other security breaches, including systems and processes designed to reduce the impact of a security breach, such measures cannot provide absolute security. Such breaches, whether successful or unsuccessful, could result in the company incurring costs related to, for example, rebuilding internal systems, defending against litigation, responding to regulatory inquiries or actions, paying damages, or taking other remedial steps.

Also, global privacy legislation, enforcement, and policy activity are rapidly expanding and creating a complex compliance environment. The company’s failure to comply with federal, state, or international privacy related or data protection laws and regulations could result in proceedings against the company by governmental entities or others. Although the company has insurance coverage for protecting against loss from cyber security risks, it may not be sufficient to cover all possible claims, and the company may suffer losses that could have a material adverse effect on its business.

The company relies heavily on its internal information systems, which, if not properly functioning, could materially adversely affect the company's business.

The company's current global operations reside on multiple technology platforms.  The size and complexity of the company's computer systems make them potentially vulnerable to breakdown, malicious intrusion, and random attack.

In 2018, the company completed the process of implementing a global enterprise resource planning ("ERP") system to standardize its global components processes worldwide and adopt best-in-class capabilities.  The company committed significant resources to this new ERP system, which replaced multiple legacy systems of the company.  This conversion was extremely complex, in part, because of the wide range of processes and the multiple legacy systems that must be integrated globally.  To date, the company has not experienced any identifiable significant issues. Failure to properly or adequately address any unaccounted for or unforeseen issues could impact the company's ability to perform necessary business operations, which could materially adversely affect the company's business.

The company may be subject to intellectual property rights claims, which are costly to defend, could require payment of damages or licensing fees and could limit the company's ability to use certain technologies in the future.

Certain of the company's products and services include intellectual property owned primarily by the company's third party suppliers and, to a lesser extent, the company itself. Substantial litigation and threats of litigation regarding intellectual property rights exist

12

in the semiconductor/integrated circuit, software and some service industries. From time to time, third parties (including certain companies in the business of acquiring patents not for the purpose of developing technology but with the intention of aggressively seeking licensing revenue from purported infringers) may assert patent, copyright and/or other intellectual property rights to technologies that are important to the company's business. In some cases, depending on the nature of the claim, the company may be able to seek indemnification from its suppliers for itself and its customers against such claims, but there is no assurance that it will be successful in obtaining such indemnification or that the company is fully protected against such claims. In addition, the company is exposed to potential liability for technology that it develops itself or combines multiple technologies of its suppliers for which it may have limited or no indemnification protections. In any dispute involving products or services that incorporate intellectual property from multiple sources or is developed, licensed by the company, or obtained through acquisition, the company's customers could also become the targets of litigation. The company is obligated in many instances to indemnify and defend its customers if the products or services the company sells are alleged to infringe any third party's intellectual property rights. Any infringement claim brought against the company, regardless of the duration, outcome, or size of damage award, could:

•
result in substantial cost to the company;
•
divert management's attention and resources;
•
be time consuming to defend;
•
result in substantial damage awards; or
•
cause product shipment delays.

Additionally, if an infringement claim is successful, the company may be required to pay damages or seek royalty or license arrangements, which may not be available on commercially reasonable terms. The payment of any such damages or royalties may significantly increase the company's operating expenses and harm the company's operating results and financial condition. Also, royalty or license arrangements may not be available at all. The company may have to stop selling certain products or using technologies, which could affect the company's ability to compete effectively.

Compliance with government regulations regarding the use of "conflict minerals" may result in increased costs and risks to the company.

As part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Act"), the SEC has promulgated disclosure requirements regarding the use of certain minerals, which are mined from the Democratic Republic of Congo and adjoining countries, known as conflict minerals. The disclosure rules were effective in May 2014. The company must publicly disclose the process it took to determine whether it manufactures (as defined in the Act) any products that contain conflict minerals. Customers typically rely on the company to provide critical data regarding the parts they purchase, including conflict mineral information. The company's material sourcing is broad-based and multi-tiered, and it is not able to easily verify the origins for conflict minerals used in all of the products it sells. The company has many suppliers and each provides conflict mineral information in a different manner, if at all. Accordingly, because the supply chain is complex, the company may face reputational challenges if it is unable to sufficiently verify the origins of conflict minerals used in its products. Additionally, customers may demand that the products they purchase be free of conflict minerals. This may limit the number of suppliers that can provide products in sufficient quantities to meet customer demand or at competitive prices.

New tariffs may result in increased prices and could adversely affect our business and results of operations.

Recently, the U.S. government imposed tariffs on certain products imported into the U.S. and the Chinese government imposed tariffs on certain products imported into China, which have increased the prices of many of the products that the company purchases from its suppliers. The new tariffs, along with any additional tariffs or trade restrictions that may be implemented by the U.S. or other countries, could result in further increased prices. While the company intends to pass price increases on to our customers, the effect of tariffs on prices may impact sales and results of operations. Retaliatory tariffs imposed by other countries on U.S. goods have not yet had a significant impact, but we cannot predict further developments. The tariffs and the additional operational costs incurred in minimizing the number of products subject to the tariffs could adversely affect the operating profits for certain of our businesses and customer demand for certain products which could have an adverse effect on our business and results of operations.

Item 1B. Unresolved Staff Comments.

None.



13

Item 2.    Properties.

The company owns and leases sales offices, distribution and value-added centers, and administrative facilities worldwide. Its executive office is located in Centennial, Colorado and occupies a 129,000 square foot facility under a long-term lease expiring in 2033. The company owns 12 locations throughout the Americas, EMEA, and Asia Pacific regions and occupies approximately 600 additional locations under leases due to expire on various dates through 2033. The company believes its facilities are well maintained and suitable for company operations.


14


Item 3.    Legal Proceedings.

Environmental and Related Matters

In connection with the purchase of Wyle in August 2000, the company acquired certain of the then outstanding obligations of Wyle, including Wyle's indemnification obligations to the purchasers of its Wyle Laboratories division for environmental clean-up costs associated with any then existing contamination or violation of environmental regulations. Under the terms of the company's purchase of Wyle from the sellers, the sellers agreed to indemnify the company for certain costs associated with the Wyle environmental obligations, among other things. In 2012, the company entered into a settlement agreement with the sellers pursuant to which the sellers paid $110.0 million and the company released the sellers from their indemnification obligation. As part of the settlement agreement the company accepted responsibility for any potential subsequent costs incurred related to the Wyle matters. The company is aware of two Wyle Laboratories facilities (in Huntsville, Alabama and Norco, California) at which contaminated groundwater was identified and will require environmental remediation. As further discussed in Note 15 of the Notes to the Consolidated Financial Statements, the Huntsville, Alabama site is subject to a consent decree, entered into in February 2015, between the company and the Alabama Department of Environmental Management ("ADEM"). The Norco, California site is subject to a consent decree, entered in October 2003, between the company, Wyle Laboratories, and the California Department of Toxic Substance Control (the "DTSC"). In addition, the company was named as a defendant in several lawsuits related to the Norco facility and a third site in El Segundo, California which have now been settled to the satisfaction of the parties.

The company expects these environmental liabilities to be resolved over an extended period of time. Costs are recorded for environmental matters when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Accruals for environmental liabilities are adjusted periodically as facts and circumstances change, assessment and remediation efforts progress, or as additional technical or legal information becomes available. Environmental liabilities are difficult to assess and estimate due to various unknown factors such as the timing and extent of remediation, improvements in remediation technologies, and the extent to which environmental laws and regulations may change in the future. Accordingly, the company cannot presently fully estimate the ultimate potential costs related to these sites until such time as a substantial portion of the investigation at the sites is completed and remedial action plans are developed and, in some instances implemented. To the extent that future environmental costs exceed amounts currently accrued by the company, net income would be adversely impacted and such impact could be material.

Accruals for environmental liabilities are included in "Accrued expenses" and "Other liabilities" in the company's consolidated
balance sheets.

As successor-in-interest to Wyle, the company is the beneficiary of various Wyle insurance policies that covered liabilities arising out of operations at Norco and Huntsville. To date, the company has recovered approximately $37.0 million from certain insurance carriers relating to environmental clean-up matters at the Norco site. The company is considering the best way to pursue its potential claims against insurers regarding liabilities arising out of operations at Huntsville. The resolution of these matters will likely take several years. The company has not recorded a receivable for any potential future insurance recoveries related to the Norco and Huntsville environmental matters, as the realization of the claims for recovery are not deemed probable at this time.

The company believes the settlement amount together with potential recoveries from various insurance policies covering environmental remediation and related litigation will be sufficient to cover any potential future costs related to the Wyle acquisition; however, it is possible unexpected costs beyond those anticipated could occur.

Other

From time to time, in the normal course of business, the company may become liable with respect to other pending and threatened litigation, environmental, regulatory, labor, product, and tax matters. While such matters are subject to inherent uncertainties, it is not currently anticipated that any such matters will materially impact the company's consolidated financial position, liquidity, or results of operations.

Item 4.    Mine Safety Disclosures.

Not applicable.

15



PART II

Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

The company's common stock is listed on the NYSE (trading symbol: "ARW").

Record Holders

On February 1, 2019, there were approximately 1,466 shareholders of record of the company's common stock.

Dividend History

The company did not pay cash dividends on its common stock during 2018 or 2017. While from time to time the Board of Directors (the "Board") considers the payment of dividends on the common stock, the declaration of future dividends is dependent upon the company's earnings, financial condition, and other relevant factors, including debt covenants.

Equity Compensation Plan Information

The following table summarizes information, as of December 31, 2018, relating to the Omnibus Incentive Plan, which was approved by the company's shareholders and under which cash-based awards, non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance share units, covered employee annual incentive awards, and other stock-based awards may be granted.
Plan Category
 
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights
 
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights
 
Number of Securities Remaining Available for Future Issuance
Equity compensation plans approved by security holders
 
2,907,744

 
$
65.46

 
3,885,282

Total
 
2,907,744

 
$
65.46

 
3,885,282



16

Performance Graph

The following graph compares the performance of the company's common stock for the periods indicated with the performance of the Standard & Poor's MidCap 400 Index ("S&P 400 Stock Index"), the Standard & Poor's 500 Stock Index ("S&P 500 Stock Index") and the average performance of a group consisting of the company's peer companies ("Peer Group") on a line-of-business basis. During 2018, the companies included in the Peer Group are Anixter International Inc., Avnet, Inc., Celestica Inc., Flex Ltd., Jabil, Inc., Tech Data Corporation, and WESCO International, Inc. The graph assumes $100 invested on December 31, 2013 in the company, the S&P 400 Stock Index, the S&P 500 Stock Index and the Peer Group. Total return indicies reflect reinvestment of dividends and are weighted on the basis of market capitalization at the time of each reported data point.

The company changed its benchmark index from the Standard & Poor's 500 Stock Index to the S&P 400 Stock Index because it is more representative of Arrow’s market capitalization and peer group. Both indicies are included in the graph below for comparison purposes but the comparison to the S&P 500 Stock Index will not be presented in future 10-K filings.

CHART-393C215BD174589BA79.JPG

 
2013
2014
2015
2016
2017
2018
Arrow Electronics
100
107
100
131
148
127
Peer Group
100
115
115
135
157
106
S&P 400 Midcap Stock Index
100
110
107
130
151
134
S&P 500 Stock Index
100
114
115
129
157
150




17

Issuer Purchases of Equity Securities

The following table shows the company's Board of Directors (the "Board") approved share-repurchase programs as of December 31, 2018:

Month of Board Approval
 
Dollar Value Approved for Repurchase
 
Dollar Value of Shares Repurchased
 
Approximate
Dollar Value of
Shares that May
Yet be
Purchased
Under the
Program
December 2016
 
400,000

 
271,388

 
128,612

December 2018
 
600,000

 
—

 
600,000

Total
 
$
1,000,000

 
$
271,388

 
$
728,612

The following table shows the share-repurchase activity for the quarter ended December 31, 2018 (in thousands except share and per share data):

Month
 
Total
Number of
Shares
Purchased(a)
 
Average
Price Paid
per Share
 
Total Number of
Shares
Purchased as
Part of Publicly
Announced
Program(b)
 
Approximate
Dollar Value of
Shares that May
Yet be
Purchased
Under the
Program
September 30 through October 27, 2018
 
—

 
$
—

 
—

 
$
278,639

October 28 through November 24, 2018
 
1,526,466

 
74.11

 
1,526,466

 
165,513

November 25 through December 31, 2018
 
501,401

 
73.80

 
499,917

 
728,612

Total
 
2,027,867

 
 

 
2,026,383

 
 


(a)
Includes share repurchases under the Share-Repurchase Programs and those associated with shares withheld from employees for stock-based awards, as permitted by the Omnibus Incentive Plan, in order to satisfy the required tax withholding obligations.

(b)
The difference between the "total number of shares purchased" and the "total number of shares purchased as part of publicly announced program" for the quarter ended December 31, 2018 is 1,484 shares, which relate to shares withheld from employees for stock-based awards, as permitted by the Omnibus Incentive Plan, in order to satisfy the required tax withholding obligations.  The purchase of these shares were not made pursuant to any publicly announced repurchase plan.

 

18

Item 6.    Selected Financial Data.

The following table sets forth certain selected consolidated financial data and must be read in conjunction with the company's consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K (dollars in thousands except per share data).
For the years ended December 31:
 
2018 (a)
 
2017 (b)
 
2016 (c)
 
2015 (d)
 
2014 (e)
 
 
 
 
(Adjusted)
 
(Adjusted)
 
**
 
**
Sales
 
$
29,676,768

 
$
26,554,563

 
$
23,487,872

 
$
23,282,020

 
$
22,768,674

Gross profit
 
3,700,912

 
3,356,968

 
3,144,322

 
3,035,250

 
2,995,895

Operating income
 
1,147,512

 
945,736

 
876,826

 
824,482

 
762,257

Net income attributable to shareholders
 
716,195

 
402,176

 
522,815

 
497,726

 
498,045

Net income per share:
 
 
 
 
 
 
 
 
 
 
Basic
 
$
8.19

 
$
4.54

 
$
5.75

 
$
5.26

 
$
5.05

Diluted
 
$
8.10

 
$
4.48

 
$
5.68

 
$
5.20

 
$
4.98

 
 
 
 
 
 
 
 
 
 
 
At December 31:
 
 
 
 
 
 
 
 
 
 
Accounts receivable, net and inventories
 
$
12,824,141

 
$
11,428,106

 
$
9,566,080

 
$
8,627,908

 
$
8,379,107

Total assets
 
17,784,445

 
16,459,267

 
14,203,479

 
13,021,930

 
12,435,301

Long-term debt
 
3,239,115

 
2,933,045

 
2,696,334

 
2,380,575

 
2,067,898

Shareholders' equity
 
5,324,990

 
4,949,255

 
4,411,136

 
4,142,443

 
4,153,970


Amounts discussed below are before tax except for amounts related to the effects of the Tax Act.

(a)
Operating income and net income attributable to shareholders include identifiable intangible asset amortization of $49.4 million, loss on disposition of businesses, net of $3.6 million, and restructuring, integration, and other charges of $60.4 million. Net income attributable to shareholders also includes a net loss on investment of $14.2 million, impact of Tax Act of $28.3 million, and pension settlement of $1.7 million.

(b)
Operating income and net income attributable to shareholders include identifiable intangible asset amortization of $50.1 million, loss on disposition of businesses, net of $21.0 million, and restructuring, integration, and other charges of $74.6 million. Net income attributable to shareholders also includes a net loss on investment of $6.6 million, pension settlement of $16.7 million, loss on extinguishment of debt of $59.5 million, and the impact of the Tax Act of $124.7 million.

(c)
Operating income and net income attributable to shareholders include identifiable intangible asset amortization of $54.9 million and restructuring, integration, and other charges of $61.4 million. Net income attributable to shareholders also includes a net gain on investment of $2.9 million, and a pension settlement of $12.2 million.

(d)
Operating income and net income attributable to shareholders include identifiable intangible asset amortization of $51.0 million and restructuring, integration, and other charges of $68.8 million. Net income attributable to shareholders also includes a loss on extinguishment of debt of $2.9 million and a loss on investment, net of $1.0 million.

(e)
Operating income and net income attributable to shareholders include identifiable intangible asset amortization of $44.1 million, restructuring, integration, and other charges of $39.8 million, and a non-cash impairment charge associated with discontinuing the use of a trade name of $78.0 million. Net income attributable to shareholders also includes a gain on investment of $29.7 million.

**
The results presented for years 2014 and 2015 have not been adjusted for the effect of the adoption of Topic 606, ASU No. 2017-07, and other prior period reclassifications, see Notes 1 and 2. This does not materially affect the comparability of the results with years 2016 through 2018.

19

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Overview

Arrow Electronics, Inc. (the "company") is a global provider of products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions. The company has one of the world’s broadest portfolios of product offerings available from leading electronic components and enterprise computing solutions suppliers, coupled with a range of services, solutions and tools that help industrial and commercial customers introduce innovative products, reduce their time to market, and enhance their overall competitiveness. The company has two business segments, the global components business segment and the global enterprise computing solutions ("ECS") business segment.  The company distributes electronic components to original equipment manufacturers ("OEMs") and contract manufacturers ("CMs") through its global components business segment and provides enterprise computing solutions to value-added resellers ("VARs") and managed service providers ("MSPs") through its global ECS business segment.  For 2018, approximately 70% of the company's sales were from the global components business segment and approximately 30% of the company's sales were from the global ECS business segment.

The company's financial objectives are to grow sales faster than the market, increase the markets served, grow profits faster than sales, and increase return on invested capital. To achieve its objectives, the company seeks to capture significant opportunities to grow across products, markets, and geographies. To supplement its organic growth strategy, the company continually evaluates strategic acquisitions to broaden its product and value-added service offerings, increase its market penetration, and expand its geographic reach.

Executive Summary

Consolidated sales for 2018 increased by 11.8%, compared with the year-earlier period, due to a 13.8% increase in global components business segment sales and a 7.2% increase in global ECS business segment sales. Adjusted for the change in foreign currencies, acquisitions, and dispositions, consolidated sales increased 10.9% compared with the year-earlier period.

Net income attributable to shareholders increased to $716.2 million in 2018 compared with $402.2 million in the year-earlier period. The following items impacted the comparability of the company's results for the years ended December 31, 2018 and 2017, all amounts are before tax except for amounts related to the effects of the Tax Act.

•
restructuring, integration, and other charges of $60.4 million in 2018 and $74.6 million in 2017;
•
identifiable intangible asset amortization of $49.4 million in 2018 and $50.1 million in 2017;
•
net loss on investments of $14.2 million in 2018 and $6.6 million in 2017;
•
loss on disposition of businesses, net, of $3.6 million in 2018 and $21.0 million in 2017;
•
loss on extinguishment of debt of $59.5 million in 2017;
•
pension settlement of $1.7 million in 2018 and $16.7 million in 2017; and
•
Income tax benefit of $28.3 million in 2018 and expense of $124.7 million in 2017, related to the Tax Act.

Excluding the aforementioned items, net income attributable to shareholders increased to $781.0 million in 2018 compared with $674.5 million in the year-earlier period.

Certain Non-GAAP Financial Information

In addition to disclosing financial results that are determined in accordance with accounting principles generally accepted in the United States ("GAAP"), the company also discloses certain non-GAAP financial information, including:

•
Sales, income, or expense items as adjusted for the impact of changes in foreign currencies (referred to as "impact of changes in foreign currencies"), by re-translating prior period results at current period foreign exchange rates, and the impact of acquisitions by adjusting the company's prior periods to include the operating results of businesses acquired, including the amortization expense related to acquired intangible assets, as if the acquisitions had occurred at the beginning of the earliest period presented (referred to as "impact of acquisitions") and the impact of dispositions by adjusting the company's operating results for businesses disposed, as if the dispositions had occurred at the beginning of the earliest period presented (referred to as "impact of dispositions");
•
Operating income as adjusted to exclude identifiable intangible asset amortization, restructuring, integration, and other charges, and loss on disposition of businesses, net; and
•
Net income attributable to shareholders as adjusted to exclude identifiable intangible asset amortization, restructuring, integration, and other charges, loss on disposition of businesses, net, gain (loss) on investments, net, loss on extinguishment of debt, pension settlements, and impact of the Tax Act.

20


Management believes that providing this additional information is useful to the reader to better assess and understand the company's operating performance, especially when comparing results with previous periods, primarily because management typically monitors the business adjusted for these items in addition to GAAP results. However, analysis of results on a non-GAAP basis should be used as a complement to, and in conjunction with, data presented in accordance with GAAP.

Sales

Substantially all of the company's sales are made on an order-by-order basis, rather than through long-term sales contracts.  As such, the nature of the company's business does not provide for the visibility of material forward-looking information from its customers and suppliers beyond a few months.

Following is an analysis of net sales by business segment for the years ended December 31 (in millions):
 
2018
 
2017
 
Change
Consolidated sales, as reported*
$
29,677

 
$
26,555

 
11.8
%
Impact of changes in foreign currencies
—

 
252

 
 
Impact of acquisitions
—

 
158

 
 
Impact of dispositions
(27
)
 
(230
)
 
 
Consolidated sales, as adjusted*
$
29,649

 
$
26,734

 
10.9
%
 
 
 
 
 
 
Global components sales, as reported*
$
20,857

 
$
18,330

 
13.8
%
Impact of changes in foreign currencies
—

 
174

 
 
Impact of acquisitions
—

 
85

 
 
Impact of dispositions
—

 
—

 
 
Global components sales, as adjusted*
$
20,857

 
$
18,589

 
12.2
%
 

 

 
 
Global ECS sales, as reported*
$
8,820

 
$
8,224

 
7.2
%
Impact of changes in foreign currencies
—

 
77

 
 
Impact of acquisitions
—

 
73

 
 
Impact of dispositions
(27
)
 
(230
)
 
 
Global ECS sales, as adjusted*
$
8,792

 
$
8,145

 
8.0
%
* The sum of the components for sales, as adjusted, may not agree to totals, as presented, due to rounding.

Consolidated sales for 2018 increased by $3.1 billion, or 11.8%, compared with the year-earlier period. The increase in 2018 was driven by an increase in global components business segment sales of $2.5 billion, or 13.8%, and an increase in global ECS business segment sales of $595.8 million, or 7.2%, compared with the year-earlier period. Adjusted for the impact of changes in foreign currencies, acquisitions, and dispositions, the company's consolidated sales increased by 10.9% in 2018, compared with the year-earlier period.

In the global components business segment, sales for 2018 increased 13.8% compared with the year-earlier period, with double-digit sales growth in Arrow’s core businesses across all three regions (Americas, EMEA, and Asia), as well as high double digit growth coming from Arrow’s strategic investment in Digital and Sustainable Technology Solutions businesses. The increase for 2018 is attributable to suppliers awarding additional business to the company, and reflects strong growth in the industrial, aerospace and defense verticals year over year. Adjusted for the impact of changes in foreign currencies and acquisitions, the company's global components business segment sales increased by 12.2% in 2018, compared with the year-earlier period.

In the global ECS business segment, sales for 2018 increased 7.2% compared with the year-earlier period. Growth was driven by infrastructure software, security, storage, and industry-standard servers. Adjusted for the impact of changes in foreign currencies, acquisitions, and dispositions, the company's global ECS business segment sales increased by 8.0% in 2018, compared with the year-earlier period.




21


Following is an analysis of net sales by business segment for the years ended December 31 (in millions):
 
 
2017
 
2016
 
Change
Consolidated sales, as reported*
 
$
26,555

 
$
23,488

 
13.1
%
Impact of changes in foreign currencies
 
—

 
142

 
 
Impact of acquisitions
 
—

 
48

 
 
Consolidated sales, as adjusted*
 
$
26,555

 
$
23,679

 
12.1
%
 
 
 
 
 
 
 
Global components sales, as reported*
 
$
18,330

 
$
15,409

 
19.0
%
Impact of changes in foreign currencies
 
—

 
87

 
 
Impact of acquisitions
 
—

 
10

 
 
Global components sales, as adjusted*
 
$
18,330

 
$
15,505

 
18.2
%
 
 
 
 
 
 
 
Global ECS sales, as reported*
 
$
8,224

 
$
8,079

 
1.8
%
Impact of changes in foreign currencies
 
—

 
56

 
 
Impact of acquisitions
 
—

 
38

 
 
Global ECS sales, as adjusted
 
$
8,224

 
$
8,173

 
0.6
%
* The sum of the components for sales, as adjusted, may not agree to totals, as presented, due to rounding.

Consolidated sales for 2017 increased by $3.1 billion, or 13.1%, compared with the year-earlier period. The increase in 2017 was driven by an increase in global components business segment sales of $2.9 billion, or 19.0%, and an increase in global ECS business segment sales of $145.1 million, or 1.8%, compared with the year-earlier period. Adjusted for the impact of changes in foreign currencies and acquisitions, the company's consolidated sales increased by 12.1% in 2017, compared with the year-earlier period.

In the global components business segment, sales for 2017 increased 19.0% compared with the year-earlier period, with double-digit sales growth in Arrow's core business across all three regions (Americas, EMEA, and Asia), as well as high double digit growth coming from Arrow's strategic investments in its Digital and Sustainable Technology Solutions businesses. The increase for 2017 is attributable to suppliers awarding additional business to the company, and reflects strong growth in the industrial, transportation, aerospace and defense, consumer, and communications verticals year over year. Adjusted for the impact of changes in foreign currencies and acquisitions, the company's global components business segment sales increased by 18.2% in 2017, compared with the year-earlier period.

In the global ECS business segment, sales growth for 2017 was increased 1.8% compared with the year-earlier period, with declining revenue in the first half of the year offset by growth in the second half of the year. Adjusted for the impact of changes in foreign currencies and acquisitions, the company's global ECS business segment sales increased by 0.6% in 2017, compared with the year-earlier period.


22

Gross Profit

Following is an analysis of gross profit for the years ended December 31 (in millions):
 
 
2018
 
2017
 

Change
Consolidated gross profit, as reported
 
$
3,701

 
$
3,357

 
10.2
%
 
Impact of changes in foreign currencies
 
—

 
31

 
 
 
Impact of acquisitions
 
—

 
49

 
 
 
Impact of dispositions
 
(6
)
 
(60
)
 
 
 
Consolidated gross profit, as adjusted
 
$
3,695

 
$
3,377

 
9.4
%
 
Consolidated gross profit as a percentage of sales, as reported
 
12.5
%
 
12.6
%
 
(10
)
bps
Consolidated gross profit as a percentage of sales, as adjusted
 
12.5
%
 
12.6
%
 
(10
)
bps

The company recorded gross profit of $3.7 billion and $3.4 billion for 2018 and 2017, respectively. The increase in gross profit was primarily due to increased demand and supplier awards in the components business. Gross profit margins for 2018 decreased by approximately 10 basis points, compared with the year-earlier period, primarily due to declining margins in the global ECS business attributable to less favorable business mix. Declines were mostly offset by improving margins in the global components business.

Following is an analysis of gross profit for the years ended December 31 (in millions):
 
 
2017
 
2016
 

Change
Consolidated gross profit, as reported
 
$
3,357

 
$
3,144

 
6.8
%
 
Impact of changes in foreign currencies
 
—

 
18

 
 
 
Impact of acquisitions
 
—

 
13

 
 
 
Consolidated gross profit, as adjusted
 
$
3,357

 
$
3,175

 
5.7
%
 
Consolidated gross profit as a percentage of sales, as reported
 
12.6
%
 
13.4
%
 
(80
)
bps
Consolidated gross profit as a percentage of sales, as adjusted
 
12.6
%
 
13.4
%
 
(80
)
bps

The company recorded gross profit of $3.4 billion and $3.1 billion for 2017 and 2016, respectively. The increase in gross profit was primarily due to increased demand and supplier awards in the components business. Gross profit margins for 2017 decreased by approximately 80 basis points, compared with the year-earlier period, primarily due to an increase in lower margin distribution services in the Americas and EMEA Components businesses. The increase in supplier awards initially drive lower margin fulfillment volume.

Selling, General, and Administrative Expenses and Depreciation and Amortization

Following is an analysis of operating expenses for the years ended December 31 (in millions):
 
 
2018
 
2017
 
Change
Selling, general, and administrative expenses, as reported
 
$
2,303

 
$
2,162

 
6.5
%
 
Depreciation and amortization, as reported
 
186

 
154

 
21.3
%
 
Operating expenses, as reported
 
2,489

 
2,316

 
7.5
%
 
Impact of changes in foreign currencies
 
—

 
25

 
 
 
Impact of acquisitions
 
—

 
30

 
 
 
Impact of dispositions
 
(7
)
 
(56
)
 
 
 
Operating expenses, as adjusted*
 
$
2,483

 
$
2,315

 
7.3
%
 
Operating expenses as a percentage of sales, as reported
 
8.4
%
 
8.7
%
 
(30
)
bps
Operating expenses as a percentage of sales, as adjusted
 
8.4
%
 
8.7
%
 
(30
)
bps
* The sum of the components for operating expenses, as adjusted, may not agree to totals, as presented, due to rounding.


23

Selling, general, and administrative expenses increased by $141.0 million, or 6.5%, in 2018, on a sales increase of 11.8%, compared with the year-earlier period. Selling, general, and administrative expenses, as a percentage of sales, was 7.8% and 8.1% for 2018 and 2017, respectively.

Depreciation and amortization expense as a percentage of operating expenses was 7.5% for 2018 compared with 6.6% in the year-earlier period. During 2018 the company recorded $22.4 million of depreciation related to a global enterprise resource tool ("ERP") placed into service during the first quarter of 2018. Included in depreciation and amortization expense is identifiable intangible asset amortization of $49.4 million for 2018 compared to $50.1 million for 2017.

Adjusted for the impact of changes in foreign currencies, acquisitions, and dispositions, operating expenses for 2018 increased 7.3%, on a sales increase, as adjusted, of 10.9%. Adjusted for the impact of changes in foreign currencies and acquisitions, operating expenses as a percentage of sales for 2018 were 8.4% compared to 8.7% for 2017. The decline in operating expense as a percentage of sales reflects the operational efficiencies the company achieved to align costs to the business mix.

Following is an analysis of operating expenses for the years ended December 31 (in millions):
 
 
2017
 
2016
 
Change
Selling, general, and administrative expenses, as reported
 
$
2,162

 
$
2,047

 
5.6
 %
 
Depreciation and amortization, as reported
 
154

 
159

 
(3.5
)%
 
Operating expenses, as reported
 
2,316

 
2,206

 
5.0
 %
 
Impact of changes in foreign currencies
 
—

 
9

 
 
 
Impact of acquisitions
 
—

 
9

 
 
 
Operating expenses, as adjusted
 
$
2,316

 
$
2,224

 
4.1
 %
 
Operating expenses as a percentage of sales, as reported
 
8.7
%
 
9.4
%
 
(70
)
bps
Operating expenses as a percentage of sales, as adjusted
 
8.7
%
 
9.4
%
 
(70
)
bps

Selling, general, and administrative expenses increased $115.1 million, or 5.6%, in 2017, on a sales increase of 13.1%, compared with the year-earlier period. Selling, general, and administrative expenses, as a percentage of sales, was 8.1% and 8.7%, for 2017 and 2016, respectively.

Depreciation and amortization expense as a percentage of operating expenses was 6.6% for 2017 compared with 7.2% in the year-earlier period. Included in depreciation and amortization expense is identifiable intangible asset amortization of $50.1 million for 2017 compared to $54.9 million for 2016.

Adjusted for the impact of changes in foreign currencies and acquisitions, operating expenses for 2017 increased 4.1%, on a sales increase, as adjusted, of 12.1%. Adjusted for the impact of changes in foreign currencies and acquisitions, operating expenses as a percentage of sales for 2017 were 8.7% compared to 9.4% for 2016. The decline in operating expense as a percentage of sales reflects the operational efficiencies the company achieved to align costs to the business mix.

Restructuring, Integration, and Other Charges

2018 Charges

In 2018, the company recorded restructuring, integration, and other charges of $60.4 million. Included in the restructuring, integration, and other charges for 2018 is a restructuring and integration charge of $23.7 million related to initiatives taken by the company to improve operating efficiencies, which includes personnel costs of $15.3 million, facilities costs of $8.2 million, and other costs of $0.1 million. These restructuring initiatives are due to the company's continued efforts to lower cost and drive operational efficiency. Integration costs are primarily related to the integration of acquired businesses within the company's pre-existing business and the consolidation of certain operations. Also included is a charge of $7.5 million related to restructuring and integration actions taken in prior periods.

Included in restructuring, integration, and other charges for 2018 are other expenses of $29.1 million. In 2018, the company recorded acquisition related charges of $10.2 million related to professional and other fees directly related to recent acquisition activity as well as contingent consideration for acquisitions completed in prior years, and $11.2 million in charges related to relocation and infrastructure upgrades of the company’s data centers, and other centralization efforts to maximize operating efficiencies.

24


2017 Charges

In 2017, the company recorded restructuring, integration, and other charges of $74.6 million. Included in the restructuring, integration, and other charges for 2017 is a restructuring and integration charge of $46.8 million related to initiatives taken by the company to improve operating efficiencies, which includes personnel costs of $37.6 million, facilities costs of $8.2 million, and other costs of $1.0 million. These restructuring initiatives are due to the company's continued efforts to lower cost and drive operational efficiency. Integration costs are primarily related to the integration of acquired businesses within the company's pre-existing business and the consolidation of certain operations. Also included is a charge of $6.2 million related to restructuring and integration actions taken in prior periods.

Included in restructuring, integration, and other charges for 2017 are other expenses of $21.6 million, which includes the following charges and credits. Additional expenses of $2.1 million to increase its accrual for the Wyle Laboratories ("Wyle") environmental obligation (see Note 15), acquisition related charges of $7.7 million related to contingent consideration for acquisitions completed in prior years, and a net loss on real estate transactions of $3.1 million.

2016 Charges

In 2016, the company recorded restructuring, integration, and other charges of $61.4 million. Included in the restructuring, integration, and other charges for 2016 is a restructuring and integration charge of $32.9 million related to initiatives taken by the company to improve operating efficiencies, which includes personnel costs of $25.8 million, facilities costs of $5.8 million, and other costs of $1.3 million. These restructuring initiatives are due to the company's continued efforts to lower cost and drive operational efficiency. Integration costs are primarily related to the integration of acquired businesses within the company's pre-existing business and the consolidation of certain operations. Also included is a charge of $3.6 million related to restructuring and integration actions taken in prior periods.
 
Included in restructuring, integration, and other charges for 2016 are other expenses of $24.9 million, which include the following charges and credits. In 2016, the company recorded additional expenses of $11.8 million to increase its accrual for the Wyle environmental obligation (see Note 15), acquisition related charges of $8.7 million related to contingent consideration for acquisitions completed in prior years, and a fraud loss, net of insurance recoveries, of $4.3 million. Also in 2016, the company released a $2.4 million legal reserve.

As of December 31, 2018, the company does not anticipate there will be any material adjustments relating to the aforementioned restructuring plans. Refer to Note 9, "Restructuring, Integration, and Other Charges" of the Notes to the Consolidated Financial Statements for further discussion of the company's restructuring and integration activities.

Operating Income
                                                                                                                              
Following is an analysis of operating income for the years ended December 31 (in millions):
 
 
2018
 
2017
 
Change
Consolidated operating income, as reported
 
$
1,148

 
$
946

 
21.3
%
 
Identifiable intangible asset amortization
 
49

 
50

 


 
Restructuring, integration, and other charges
 
60

 
75

 


 
Loss on disposition of businesses, net
 
4

 
21

 
 
 
Consolidated operating income, as adjusted*
 
$
1,261

 
$
1,091

 
15.5
%

Consolidated operating income as a percentage of sales, as reported
 
3.9
%
 
3.6
%
 
30

bps
Consolidated operating income, as adjusted, as a percentage of sales, as reported
 
4.2
%
 
4.1
%
 
10

bps
* The sum of the components for consolidated operating income, as adjusted, may not agree to totals, as presented, due to rounding.

The company recorded operating income of $1.1 billion, or 3.9% of sales, in 2018 compared with operating income of $945.7 million, or 3.6% of sales, in 2017.  Included in operating income for 2018 and 2017 were the previously discussed identifiable intangible asset amortization of $49.4 million and $50.1 million, respectively, and restructuring, integration, and other charges of $60.4 million and $74.6 million, respectively. Included in operating income for 2018 and 2017 is a loss on disposition of businesses, net of $3.6 million and $21.0 million, respectively. Excluding these items, operating income, as adjusted, was $1.3 billion, or 4.2% of sales, in 2018 compared with operating income, as adjusted, of $1.1 billion, or 4.1% of sales, in 2017. Operating margins, as

25

adjusted, increased 10 bps compared with the year-earlier period, despite a 10 basis point decrease in gross margins due to the company's ability to efficiently manage operating costs.

Following is an analysis of operating income for the years ended December 31 (in millions):
 
 
2017
 
2016
 
Change
Consolidated operating income, as reported
 
$
946

 
$
877

 
7.9
%
 
Identifiable intangible asset amortization
 
50

 
55

 
 
 
Restructuring, integration, and other charges
 
75

 
61

 
 
 
Loss on disposition of businesses, net
 
21

 
—

 
 
 
Consolidated operating income, as adjusted*
 
$
1,091

 
$
993

 
9.9
%
 
Consolidated operating income as a percentage of sales, as reported
 
3.6
%
 
3.7
%
 
(10
)
bps
Consolidated operating income, as adjusted, as a percentage of sales, as reported
 
4.1
%
 
4.2
%
 
(10
)
bps
* The sum of the components for consolidated operating income, as adjusted, may not agree to totals, as presented, due to rounding.

The company recorded operating income of $945.7 million, or 3.6% of sales, in 2017 compared with operating income of $876.8 million, or 3.7% of sales, in 2016. Included in operating income for 2017 and 2016 were the previously discussed identifiable intangible asset amortization of $50.1 million and $54.9 million, respectively, and restructuring, integration, and other charges of $74.6 million and $61.4 million, respectively. Included in operating income for 2017 is a loss on disposition of businesses, net of $21.0 million. Excluding these items, operating income, as adjusted, was $1.1 billion, or 4.1% of sales, in 2017 compared with operating income, as adjusted, of $993.1 million, or 4.2% of sales, in 2016. Operating margins, as adjusted, remained consistent compared with the year-earlier period, despite an 80 basis point decrease in gross margins due to the company's ability to efficiently manage operating costs.

Gain (Loss) on Investments, Net

During 2018 and 2017, the company recorded a net loss of $14.2 million and $6.6 million related to changes in fair value of certain investments, respectively. During 2016, the company recorded a gain of $2.9 million related to changes in fair value of certain investments.

Loss on Disposition of Businesses, Net

During 2018 and 2017 the company recorded a loss on disposition of businesses, net of $3.6 million and $21.0 million, respectively, related to the sale of two non-strategic businesses.

Loss on Extinguishment of Debt

During 2017, the company recorded a loss on extinguishment of debt of $59.5 million related to the redemption of the company's 6.875% senior debenture due 2018 and refinance of a portion of the company's 6.00% notes due April 2020, 5.125% notes due March 2021, and 7.50% notes due January 2027.

Pension Settlements

During 2018 the company recorded settlement expense of $1.7 million upon terminating a defined benefit plan acquired in a prior period acquisition.

On December 31, 2018, the Wyle defined benefit plan was terminated by the company with estimated plan settlement expected to occur in 2019. The company has made other arrangements with the participants in the plan and is terminating the plan to reduce administrative burdens. Prior to the termination of the plan, the company adopted an amendment to the Wyle defined benefit plan that provided eligible plan participants with the option to receive an early distribution of their pension benefits. The settlement loss is expected to be approximately $25,500. Benefit payments of $60,530 are expected to be paid in 2019.

During 2017 and 2016, the Company entered into a settlement for a portion of its Wyle defined benefit plan. The company recorded pension settlement expense of $16.7 million and $12.2 million during 2017 and 2016, respectively.


26


Interest and Other Financing Expense, Net

Net interest and other financing expense increased 30.0% in 2018 to $214.8 million, compared with $165.3 million in 2017, primarily due to higher average debt outstanding and an increase in variable interest rates.

Net interest and other financing expense increased by 9.2% in 2017 to $165.3 million, compared with $151.3 million in 2016, primarily due to higher average debt outstanding.

Income Taxes

For the year ended December 31, 2018, the company recorded provision for income taxes of $187.8 million, equivalent to an effective tax rate of 20.7%. The company's provision for income taxes and effective tax rates are impacted by such costs as restructuring, integration, and other charges, identifiable intangible asset amortization, loss on disposition of businesses, net, loss on investments, net, pension settlements, and tax law changes. Excluding the impact of the aforementioned items, the company's effective tax rate for 2018 was 24.2%.

For the year ended December 31, 2017, the company recorded provision for income taxes of $286.5 million, equivalent to an effective tax rate of 41.3%. The company's provision for income taxes and effective tax rates are impacted by such costs as restructuring, integration, and other charges, identifiable intangible asset amortization, loss on disposition of businesses, net, loss on extinguishment of debt, loss on investments, net, pension settlements, and tax law changes. Excluding the impact of the aforementioned items, the company's effective tax rate for 2017 was 26.2%.

For the year ended December 31, 2016, the company reported provision for income taxes of $190.7 million, equivalent to an effective tax rate of 26.7%. The company's provision for income taxes and effective tax rates are impacted by such costs as restructuring, integration, and other charges, identifiable intangible asset amortization, loss on investments, net, and pension settlements. Excluding the impact of the aforementioned items, the company’s effective tax rate for 2016 would have been 27.3%.
The company’s effective tax rate deviates from the statutory U.S. federal income tax rate mainly due to the mix of foreign taxing jurisdictions in which the company operates and where its foreign subsidiaries generate taxable income. In 2017, the effective tax rate increased significantly primarily due to the change in U.S. tax law. Specifically, on December 22, 2017, the U.S. federal government enacted comprehensive tax legislation (the “Tax Act”), which significantly revised the U.S. corporate income tax law by, among other things, lowering the U.S. federal corporate income tax rate from 35% to 21%, implementing a territorial tax system, imposing a one-time transition tax on foreign unremitted earnings, and setting limitations on deductibility of certain costs (e.g., interest expense).
During the fourth quarter of 2017, the company recorded a net charge of $124.7 million in provisional tax due to the Tax Act, in accordance with the U.S. Securities and Exchange Commission’s Staff Accounting Bulletin (“SAB 118”). During the fourth quarter of 2018, the company completed its analysis of the impact from the Tax Act and recorded a $28.3 million tax benefit as an adjustment to the Transition tax on non-U.S. subsidiaries’ unremitted earnings. The impact of the Tax Act is summarized in the table below and is further described in the accompanying Notes to Consolidated Financial Statements (Note 8).

 
 
2017 Impact
 
2018 Adjustment
 
Total Impact of Tax Act
Transition tax on non-U.S subsidiaries' earnings
 
$
196

 
$
(28
)
 
$
168

Re-measurement of U.S. deferred tax assets and liabilities
 
(71
)
 
—

 
(71
)
Total impact of the Tax Act on the provision for income taxes
 
$
125

 
$
(28
)
 
$
97


As of December 31, 2018, after considering the impact of taxable losses, tax payments, tax credits, and other tax accruals, the company’s remaining long-term cash tax payable for one-time transition tax on foreign unremitted earnings is $38.0 million.



27

Net Income Attributable to Shareholders

Following is an analysis of net income attributable to shareholders for the years ended December 31 (in millions):
 
2018
 
2017
Net income attributable to shareholders, as reported**
$
716

 
$
402

Identifiable intangible asset amortization*
49

 
49

Restructuring, integration, and other charges
60

 
75

Loss on disposition of businesses, net
4

 
21

Loss on investments, net
14

 
7

Loss on extinguishment of debt
—

 
60

Pension settlements
2

 
17

Tax effect of adjustments above
(35
)
 
(80
)
Impact of the Tax Act
(28
)
 
125

Net income attributable to shareholders, as adjusted**
$
781

 
$
674

* Identifiable intangible asset amortization does not include amortization related to the noncontrolling interest
** The sum of the components for net income attributable to shareholders, as adjusted, may not agree to totals, as presented, due to rounding.

The company recorded net income attributable to shareholders of $716.2 million for 2018, compared with net income attributable to shareholders of $402.2 million in the year-earlier period.  Net income attributable to shareholders, as adjusted, was $781.0 million for 2018, compared with $674.5 million in the year-earlier period.

Following is an analysis of net income attributable to shareholders for the years ended December 31 (in millions):
 
2017
 
2016
Net income attributable to shareholders, as reported**
$
402

 
$
523

Identifiable intangible asset amortization*
49

 
53

Restructuring, integration, and other charges
75

 
61

Loss on disposition of businesses, net
21

 
—

(Gain) loss on investments, net
7

 
(3
)
Loss on extinguishment of debt
60

 
—

Pension settlements
17

 
12

Tax effect of adjustments above
(80
)
 
(38
)
Impact of the Tax Act
125

 
—

Net income attributable to shareholders, as adjusted**
$
674

 
$
608

* Identifiable intangible asset amortization does not include amortization related to the noncontrolling interest
** The sum of the components for net income attributable to shareholders, as adjusted, may not agree to totals, as presented, due to rounding.

The company recorded net income attributable to shareholders of $402.2 million for 2017, compared with net income attributable to shareholders of $522.8 million in the year-earlier period. Net income attributable to shareholders, as adjusted, was $674.5 million for 2017, compared with $608.0 million in the year-earlier period.


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Liquidity and Capital Resources

At December 31, 2018 and 2017, the company had cash and cash equivalents of $509.3 million and $730.1 million, respectively, of which $394.4 million and $465.4 million, respectively, were held outside the United States.  Liquidity is affected by many factors, some of which are based on normal ongoing operations of the company's business and some of which arise from fluctuations related to global economics and markets. Cash balances are generated and held in many locations throughout the world. It is the company's current intent to permanently reinvest these funds outside the United States and its current plans do not demonstrate a need to repatriate cash to fund its United States operations. If these funds were to be needed for the company's operations in the United States, the company would be required to pay withholding and other taxes related to distributions to repatriate these funds. Additionally, local government regulations may restrict the company's ability to move cash balances to meet cash needs under certain circumstances. The company currently does not expect such regulations and restrictions to impact its ability to make acquisitions or to conduct operations throughout the global organization.

During 2018, the net amount of cash provided by the company's operating activities was $272.7 million, the net amount of cash used for investing activities was $463.0 million, and the net amount of cash used for financing activities was $36.8 million. The effect of exchange rate changes on cash was an increase of $6.4 million.

During 2017, the net amount of cash provided by the company's operating activities was $124.6 million, the net amount of cash used for investing activities was $188.8 million, and the net amount of cash provided by financing activities was $256.7 million. The effect of exchange rate changes on cash was an increase of $3.2 million.

During 2016, the net amount of cash provided by the company's operating activities was $359.7 million, the net amount of cash used for investing activities was $241.4 million, and the net amount of cash provided by financing activities was $162.2 million. The effect of exchange rate changes on cash was a decrease of $19.2 million.

Cash Flows from Operating Activities

The company maintains a significant investment in accounts receivable and inventories. As a percentage of total assets, accounts receivable and inventories were approximately 71.8% and 69.4% at December 31, 2018 and 2017, respectively.

The net amount of cash provided by the company's operating activities during 2018 was $272.7 million and was primarily due to earnings from operations, adjusted for non-cash items, offset, in part, by an increase in net working capital to support the increase in sales.

The net amount of cash provided by the company's operating activities during 2017 was $124.6 million and was primarily due to earnings from operations, adjusted for non-cash items, offset, in part, by an increase in net working capital to support the increase in sales.

The net amount of cash provided by the company's operating activities during 2016 was $359.7 million and was primarily due to earnings from operations, adjusted for non-cash items, offset, in part, by an increase in net working capital to support the increase in sales.

Working capital, as a percentage of sales, which the company defines as accounts receivable, net, plus inventory, net, less accounts
payable, divided by annualized sales, was 16.4%, 15.5%, and 14.9% in 2018, 2017, and 2016, respectively.

Cash Flows from Investing Activities

The net amount of cash used for investing activities during 2018 was $463.0 million. The use of cash from investing activities included $331.6 million of cash consideration paid for acquired businesses, net of cash acquired, $135.3 million for capital expenditures, and $20.0 million for the acquisition of a customer relationship intangible asset. The sources of cash from investing activities included $32.0 million of proceeds from the sale of businesses. Capital expenditures for 2018 are related to relocation and infrastructure upgrades of the company's data centers, and continued development of Digital and Cloud capabilities.

The net amount of cash used for investing activities during 2017 was $188.8 million, primarily reflecting $203.9 million for capital expenditures and $24.4 million of proceeds from the sale of property, plant, and equipment. Included in capital expenditures for 2017 is $62.5 million related to the company's global ERP initiative.


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The net amount of cash used for investing activities during 2016 was $241.4 million, primarily reflecting $64.8 million of cash consideration paid, net of cash acquired, for the acquisition of three businesses, $164.7 million for capital expenditures, and $12.0 million for the acquisition of an equity method investment. Included in capital expenditures for 2016 is $57.7 million related to the company's global ERP initiative.

Cash Flows from Financing Activities

The net amount of cash used for financing activities during 2018 was $36.8 million. The uses of cash from financing activities included $300.0 million of payments for the redemption of notes and $243.3 million of repurchases of common stock. The sources of cash from financing activities included $306.6 million of net proceeds from long-term bank borrowings, $192.2 million of proceeds from short-term bank borrowings, and $8.8 million of proceeds from the exercise of stock options.

The net amount of cash provided by financing activities during 2017 was $256.7 million. The uses of cash from financing activities included $558.9 million of net repayments on long-term bank borrowings, $174.2 million of repurchases of common stock, $41.3 million of net repayments on short-term bank borrowings, and $23.4 million of payments to acquire additional shares of Data Modul AG. The sources of cash from financing activities included $986.2 million of net proceeds from note offerings, $47.8 million of proceeds from long-term bank borrowings, and $22.2 million of proceeds from the exercise of stock options.

The net amount of cash provided by financing activities during 2016 was $162.2 million. The uses of cash from financing activities included $216.4 million of repurchases of common stock and $2.0 million of other acquisition related payments. The sources of cash from financing activities during 2016 were $48.7 million of increase in short-term and other borrowings, $313.0 million of net proceeds from long-term bank borrowings, and $19.0 million of proceeds from the exercise of stock options and other benefits related to stock-based compensation arrangements.

During March 2018, the company redeemed $300.0 million principal amount of its 3.00% notes due March 2018.

During 2017, the company completed the sale of $500.0 million principal amount of 3.875% notes due 2028. The net proceeds of the offering of $494.6 million were used to redeem the company's 6.875% senior debenture due June 2018 and refinance a portion of the company's 6.00% notes due April 2020, 5.125% notes due March 2021, and 7.50% notes due January 2027. The company recorded a loss on extinguishment of debt of $59.5 million for the year ended December 31, 2017.

During 2017, the company completed the sale of $500.0 million principal amount of 3.25% notes due 2024. The net proceeds of the offering of $493.8 million are expected to be used to redeem the company's debt obligations and for general corporate purposes.

The company has a revolving credit facility that may be used by the company for general corporate purposes including working capital in the ordinary course of business, letters of credit, repayment, prepayment or purchase of long-term indebtedness, acquisitions, and as support for the company's commercial paper program, as applicable. In December 2018, the company amended its revolving credit facility and, among other things, increased its borrowing capacity from $1.8 billion to $2.0 billion and extended its term to mature in December 2023. Interest on borrowings under the revolving credit facility is calculated using a base rate or a Eurocurrency rate plus a spread (1.18% at December 31, 2018), which is based on the company's credit ratings, or an effective interest rate of 2.37% at December 31, 2018. The facility fee, which is based on the company's credit ratings, was .20% of the total borrowing capacity at December 31, 2018. The company had no outstanding borrowings under the revolving credit facility at December 31, 2018 and 2017. During the years ended December 31, 2018 and 2017, the average daily balance outstanding under the revolving credit facility was $55.3 million and $18.9 million, respectively.

The company has a commercial paper program and the maximum aggregate balance of commercial paper may not exceed the borrowing capacity of $1.2 billion. The company had no outstanding borrowings under this program as of December 31, 2018 and 2017. During the years ended December 31, 2018 and 2017, the average daily balance outstanding under the commercial paper program was $807.8 million and $625.7 million, respectively. The commercial paper program had an effective interest rate of 2.93% for the year-ended December 31, 2018.


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The company has an asset securitization program collateralized by accounts receivable of certain of its subsidiaries. In June 2018, the company amended its asset securitization program and, among other things, increased its borrowing capacity from $910.0 million to $1.2 billion and extended its term to mature to June 2021. The asset securitization program is conducted through Arrow Electronics Funding Corporation ("AFC"), a wholly-owned, bankruptcy remote subsidiary. The asset securitization program does not qualify for true sale treatment. Accordingly, the accounts receivable and related debt obligation remain on the company's consolidated balance sheets. Interest on borrowings is calculated using a base rate plus a spread (.40% at December 31, 2018), or an effective interest rate of 2.91% at December 31, 2018.  The facility fee is .40% of the total borrowing capacity. The company had $810.0 million and $490.0 million in outstanding borrowings under the asset securitization program at December 31, 2018 and 2017, respectively. During the years ended December 31, 2018 and 2017, the average daily balance outstanding under the asset securitization program was $969.0 million and $692.4 million, respectively.

Both the revolving credit facility and asset securitization program include terms and conditions that limit the incurrence of additional borrowings and require that certain financial ratios be maintained at designated levels. The company was in compliance with all covenants as of December 31, 2018 and is currently not aware of any events that would cause non-compliance with any covenants in the future.

The company has $200.0 million in uncommitted lines of credit. There were $180.0 million in outstanding borrowings under the uncommitted lines of credit at December 31, 2018 and no outstanding borrowings at December 31, 2017. These borrowings were provided on a short-term basis and the maturity is agreed upon between the company and the lender. The lines had an effective interest rate of 3.39% at December 31, 2018. During 2018 and 2017, the average daily balance outstanding under the uncommitted lines of credit was $22.7 million and $5.2 million, respectively.

In the normal course of business certain of the company’s subsidiaries have agreements to sell, without recourse, selected trade receivables to financial institutions. The company does not retain financial or legal interests in these receivables, and, accordingly they are accounted for as sales of the related receivables and the receivables are removed from the company’s consolidated balance sheets. Financing costs related to these transactions were not material and are included in "Interest and other financing expense, net" in the company’s consolidated statements of operations.

Management believes that the company's current cash availability, its current borrowing capacity under its revolving credit facility and asset securitization program, and its expected ability to generate future operating cash flows are sufficient to meet its projected cash flow needs for the foreseeable future. The company also may issue debt or equity securities in the future and management believes the company will have adequate access to capital markets, if needed. The company continually evaluates liquidity requirements and would seek to amend its existing borrowing capacity or access the financial markets as deemed necessary.

Contractual Obligations

Payments due under contractual obligations at December 31, 2018 are as follows (in thousands):
 
Within 1 Year
 
1-3 Years
 
4-5 Years
 
After 5 Years
 
Total
Debt
$
240,732

 
$
1,150,483

 
$
644,910

 
$
1,443,723

 
$
3,479,848

Interest on long-term debt
112,507

 
193,480

 
142,494

 
133,026

 
581,507

Capital leases
1,054

 
194

 
—

 
—

 
1,248

Operating leases
85,770

 
119,984

 
82,329

 
147,294

 
435,377

Purchase obligations (a)
6,030,938

 
218,417

 
12,640

 
446

 
6,262,441

Other (b)
26,750

 
8,788

 
1,778

 
39,463

 
76,779

 
$
6,497,751

 
$
1,691,346

 
$
884,151

 
$
1,763,952

 
$
10,837,200


(a)
Amounts represent an estimate of non-cancelable inventory purchase orders and other contractual obligations related to information technology and facilities as of December 31, 2018. Most of the company's inventory purchases are pursuant to authorized distributor agreements, which are typically cancelable by either party at any time or on short notice, usually within a few months.

(b)
Includes estimates of contributions required to meet the requirements of the Wyle defined benefit plan. Amounts are subject to change based upon the performance of plan assets, as well as the discount rate used to determine the obligation. Also included are amounts relating to the Tax Act transition tax payable and personnel, facilities, and certain other costs resulting from restructuring and integration activities.

31


Under the terms of various joint venture agreements, the company is required to pay its pro-rata share of the third party debt of the joint ventures in the event that the joint ventures are unable to meet their obligations. At December 31, 2018, the company's pro-rata share of this debt was approximately $2.9 million.

At December 31, 2018, the company had a liability for unrecognized tax positions of $35.9 million. The timing of the resolution of these uncertain tax positions is dependent on the tax authorities' income tax examination processes. Material changes are not expected, however, it is possible that the amount of unrecognized tax benefits with respect to uncertain tax positions could increase or decrease during 2019. Currently, the company is unable to make a reasonable estimate of when tax cash settlement would occur and how it would impact the effective tax rate.

Share-Repurchase Programs

The following table shows the company's Board of Directors (the "Board") approved share-repurchase programs as of December 31, 2018:
Month of Board Approval
 
Dollar Value Approved for Repurchase
 
Dollar Value of Shares Repurchased
 
Approximate
Dollar Value of
Shares that May
Yet be
Purchased
Under the
Program
December 2016
 
400,000

 
271,388

 
128,612

December 2018
 
600,000

 
—

 
600,000

Total
 
$
1,000,000

 
$
271,388

 
$
728,612

Off-Balance Sheet Arrangements

The company has no off-balance sheet financing or unconsolidated special purpose entities.

Critical Accounting Policies and Estimates

The company's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the company to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and the related disclosure of contingent assets and liabilities. The company evaluates its estimates on an ongoing basis. The company bases its estimates on historical experience and on various other assumptions that are believed reasonable under the circumstances; the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The company believes the following critical accounting policies involve the more significant judgments and estimates used in the preparation of its consolidated financial statements:

Revenue Recognition

The company recognizes revenue when there is persuasive evidence of an arrangement, delivery has occurred or services are rendered, the sales price is fixed or determinable, and collectability is reasonably assured. Revenue typically is recognized at time of shipment. Sales are recorded net of discounts, rebates, and returns, which historically have not been material. Tariffs are included in sales as the company has enforceable rights to additional consideration to cover the cost of tariffs.

The Company allows its customers to return product for exchange or credit in limited circumstances. A liability is recorded at the time of sale for estimated product returns based upon historical experience. The Company also provides volume rebates and other discounts to certain customers which are considered variable consideration. A provision for customer rebates and other discounts is recorded as a reduction of revenue at the time of sale based on an evaluation of the contract terms and historical experience.

A portion of the company's business involves shipments directly from its suppliers to its customers. In these transactions, the company is responsible for negotiating price both with the supplier and customer, payment to the supplier, establishing payment

32

terms with the customer, product returns, and has risk of loss if the customer does not make payment. As the principal with the customer, the company recognizes the sale and cost of sale of the product upon receiving notification from the supplier that the product was shipped.

The Company has contracts with certain customers where the Company’s performance obligation is to arrange for the products or services to be provided by another party. In these arrangements, as the Company assumes an agency relationship in the transaction, revenue is recognized in the amount of the net fee associated with serving as an agent. These arrangements relate to the sale of supplier service contracts to customers where the company has no future obligation to perform under these contracts or the rendering of logistics services for the delivery of inventory for which the company does not assume the risks and rewards of ownership.

Accounts Receivable

The company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The allowances for doubtful accounts are determined using a combination of factors, including the length of time the receivables are outstanding, the current business environment, and historical experience.

Inventories

Inventories are stated at the lower of cost or net realizable value. Write-downs of inventories to market value are based upon contractual provisions governing price protection, stock rotation, and obsolescence, as well as assumptions about future demand and market conditions. If assumptions about future demand change and/or actual market conditions are less favorable than those projected by the company, additional write-downs of inventories may be required. Due to the large number of transactions and the complexity of managing the process around price protections and stock rotations, estimates are made regarding adjustments to the book cost of inventories. Actual amounts could be different from those estimated.

Income Taxes

Income taxes are accounted for under the liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of differences between the tax bases of assets and liabilities and their financial reporting amounts using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The carrying value of the company's deferred tax assets is dependent upon the company's ability to generate sufficient future taxable income in certain tax jurisdictions. Should the company determine that it is more likely than not that some portion or all of its deferred tax assets will not be realized, a valuation allowance to reduce the deferred tax assets is established in the period such determination is made. The assessment of the need for a valuation allowance requires considerable judgment on the part of management with respect to the benefits that could be realized from future taxable income, as well as other positive and negative factors.

It is also the company's policy to provide for uncertain tax positions and the related interest and penalties based upon management's assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. To the extent the company prevails in matters for which a liability for an unrecognized tax benefit is established, or is required to pay amounts in excess of the liability, or when other facts and circumstances change, the company's effective tax rate in a given financial statement period may be materially affected.
                                
In accordance with SAB 118, the SEC’s staff accounting bulletin issued to address complexities involved in accounting for the U.S. government’s Tax Act enacted on December 22, 2017, the company completed its assessment of the enactment-date Tax Act effects based on U.S. GAAP guidance under ASC 740 and appropriately recorded tax impact in the fourth quarter of 2018 taking into account newly issued tax laws, regulations, and notices from the U.S. Department of Treasury and Internal Revenue Service tax authorities.

Contingencies and Litigation

The company is subject to proceedings, lawsuits, and other claims related to environmental, regulatory, labor, product, tax, and other matters and assesses the likelihood of an adverse judgment or outcome for these matters, as well as the range of potential losses. A determination of the reserves required, if any, is made after careful analysis. The reserves may change in the future due to new developments impacting the probability of a loss, the estimate of such loss, and the probability of recovery of such loss from third parties.

33


Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. The company tests goodwill for impairment annually as of the first day of the fourth quarter and/or when an event occurs or circumstances change such that it is more likely than not that an impairment may exist. Examples of such events and circumstances that the company would consider include the following:

•
macroeconomic conditions such as deterioration in general economic conditions, limitations on accessing capital, fluctuations in foreign exchange rates, or other developments in equity and credit markets;
•
industry and market considerations such as a deterioration in the environment in which the company operates, an increased competitive environment, a decline in market-dependent multiples or metrics (considered in both absolute terms and relative to peers), a change in the market for the company's products or services, or a regulatory or political development;
•
cost factors such as increases in raw materials, labor, or other costs that have a negative effect on earnings and cash flows;
•
overall financial performance such as negative or declining cash flows or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods;
•
other relevant entity-specific events such as changes in management, key personnel, strategy, or customers; contemplation of bankruptcy; or litigation;
•
events affecting a reporting unit such as a change in the composition or carrying amount of its net assets, a more-likely-than-not expectation of selling or disposing all, or a portion, of a reporting unit, the testing for recoverability of a significant asset group within a reporting unit, or recognition of a goodwill impairment loss in the financial statements of a subsidiary that is a component of a reporting unit; and
•
a sustained decrease in share price (considered in both absolute terms and relative to peers).

Goodwill is tested at a level of reporting referred to as "the reporting unit." The company's reporting units are defined as each of the three regional businesses within the global components business segment, which are the Americas, EMEA, and Asia/Pacific, each of the two regional businesses within the global ECS business segment, which are North America and EMEA, and eInfochips which was acquired in 2018.

An entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the quantitative goodwill impairment test is unnecessary. The company has elected not to perform the qualitative assessment and performed the quantitative goodwill impairment test. The quantitative goodwill impairment test, used to identify both the existence of impairment and the amount of impairment loss, compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of the reporting unit is less than its fair value, no impairment exists. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

The company estimates the fair value of a reporting unit using the income approach. For the purposes of the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. The assumptions included in the income approach include forecasted revenues, gross profit margins, operating income margins, working capital cash flow, forecasted capital expenditures, perpetual growth rates, and long-term discount rates, among others, all of which require significant judgments by management. Actual results may differ from those assumed in the company's forecasts. The company also reconciles its discounted cash flow analysis to its current market capitalization allowing for a reasonable control premium. As of the first day of the fourth quarters of 2018, 2017, and 2016, the company's annual impairment testing did not indicate impairment at any of the company's reporting units.

A decline in general economic conditions or global equity valuations could impact the judgments and assumptions about the fair value of the company's businesses, and the company could be required to record an impairment charge in the future, which could impact the company's consolidated balance sheet, as well as the company's consolidated statement of operations. If the company was required to recognize an impairment charge in the future, the charge would not impact the company's consolidated cash flows, current liquidity, capital resources, and covenants under its existing revolving credit facility, asset securitization program, and other outstanding borrowings.


34

As of December 31, 2018, the company has $2.6 billion of goodwill, of which approximately $1.1 billion, $84.1 million and $61.2 million was allocated to the Americas, EMEA, and Asia/Pacific reporting units within the global components business segment, respectively, $788.1 million and $399.1 million was allocated to the North America and EMEA reporting units within the global ECS business segment, respectively, and $181.0 million was allocated to the eInfochips reporting unit. As of the date of the company's latest impairment test, the fair value of the Americas, EMEA, and Asia/Pacific reporting units within the global components business segment, the fair value of the North America and EMEA reporting units within the global ECS business segment, and the fair value of the eInfochips reporting unit exceeded their carrying values by approximately 14%, 152%, 13%, 435%, 140%, and 3%, respectively.

Impact of Recently Issued Accounting Standards

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2018-15, Intangibles—Goodwill and Other— Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force) ("ASU No. 2018-15"). ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop internal-use software. ASU No. 2018-15 is effective for the company in the first quarter of 2020, with early adoption permitted, and is to be applied either retrospectively or prospectively. The company is currently evaluating the potential effects of adopting the provisions of ASU No. 2018-15. The adoption is not expected to be material to the financial statements.

In February 2018, the FASB issued Accounting Standards Update No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) ("ASU No. 2018-02"). ASU No. 2018-02 provides financial statement preparers with an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period that is impacted by U.S. federal government tax legislation enacted in 2017. Effective January 1, 2018, the company adopted the provisions of ASU No. 2018-02 on a prospective basis as an adjustment to retained earnings of $4,116.

In August 2017, the FASB issued Accounting Standards Update No. 2017-12, Derivatives and Hedging (Topic 815) ("ASU No. 2017-12"). ASU No. 2017-12 simplifies certain aspects of hedge accounting and results in a more accurate portrayal of the economics of an entity’s risk management activities in its financial statements. ASU No. 2017-12 is effective for the company in the first quarter of 2019, with early adoption permitted, and is to be applied on a modified retrospective basis. The company is currently evaluating the potential effects of adopting the provisions of ASU No. 2017-12. The adoption is not expected to be material to the financial statements.

In March 2017, the FASB issued Accounting Standards Update No. 2017-07, Compensation - Retirement Benefits (Topic 715) ("ASU No. 2017-07"). ASU No. 2017-07 requires that the service cost component of pension expense be included in the same line item as other compensation costs arising from services rendered by employees, with the other components of pension expense being classified outside of a subtotal of income from operations. Effective January 1, 2018, the company adopted the provisions of ASU No. 2017-07 on a retrospective basis for the presentation requirements.

In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326) ("ASU No. 2016-13"). ASU No. 2016-13 revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. In November 2018 the FASB issued ASU No. 2018-19,  Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which provides supplemental guidance and clarification to ASU No. 2016-13 and must be adopted concurrently with the adoption of ASU No. 2016-13, cumulatively referred to as “Topic 326.” Topic 326 is effective for the company in the first quarter of 2020, with early adoption permitted, and is to be applied using a modified retrospective approach. The company is currently evaluating the potential effects of adopting the provisions of ASU No. 2016-13.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) ("ASU No. 2016-02"). ASU No. 2016-02 requires the entity to recognize the assets and liabilities for the rights and obligations created by leased assets. Leases will be classified as either finance or operating, with classification affecting expense recognition in the income statement. In July 2018 the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, and ASU No. 2018-11, Leases (Topic 842) Targeted Improvements, which provide supplemental adoption guidance and clarification to ASU No. 2016-02, and must be adopted concurrently with the adoption of ASU No. 2016-02, cumulatively referred to as “Topic 842”. Topic 842 is effective for the company in the first quarter of 2019, with early adoption permitted, and is to be applied using either a modified retrospective approach, or an optional transition method which allows an entity to apply the new standard at the adoption date with a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

The company expects to adopt Topic 842 in the first quarter of 2019 under the optional transition method described above. In addition, the company will elect the short-term lease exception outlined in ASC 842. While the company continues to evaluate

35

the effects of adopting the provisions of Topic 842, the company expects most existing operating lease commitments will be recognized as operating lease liabilities and right-of-use assets upon adoption. The adoption is not expected to be material to the financial statements, and based on our ongoing assessment, will increase total assets by less than 3%.

In January 2016, the FASB issued Accounting Standards Update No. 2016-01, Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825) ("ASU No. 2016-01"). ASU No. 2016-01 revises the classification and measurement of investments in certain equity investments and the presentation of certain fair value changes for certain financial liabilities measured at fair value. ASU No. 2016-01 requires the change in fair value of many equity investments to be recognized in net income. Effective January 1, 2018, the company adopted the provisions of ASU No. 2016-01 on a prospective basis as an adjustment to retained earnings of $18,238.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU No. 2014-09"). ASU No. 2014-09 supersedes all existing revenue recognition guidance. Under ASU No. 2014-09, an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In March, April, May, and December 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net) ("ASU No. 2016-08"); ASU No. 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing ("ASU No. 2016-10"); ASU No. 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients ("ASU No. 2016-12"); and ASU No. 2016-19, Technical Corrections and Improvements ("ASU No. 2016-19"), respectively. ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12, and ASU No. 2016-19 provide supplemental adoption guidance and clarification to ASU No. 2014-09, and must be adopted concurrently with the adoption of ASU No. 2014-09, cumulatively referred to as "Topic 606".

On January 1, 2018, the company adopted Topic 606 applying the full retrospective method. The primary impact of adoption relates to the application of principal versus agent indicators and the determination of whether goods and services are distinct. In addition, the company is deferring certain revenue due to the determination of when transfer of control occurs. The deferrals are expected to be recognized within a year of the transaction date.

Information Relating to Forward-Looking Statements

This report includes forward-looking statements that are subject to numerous assumptions, risks, and uncertainties, which could cause actual results or facts to differ materially from such statements for a variety of reasons, including, but not limited to: industry conditions, the company's implementation of its new enterprise resource planning system, changes in product supply, pricing and customer demand, competition, other vagaries in the global components and global ECS markets, changes in relationships with key suppliers, increased profit margin pressure, the effects of additional actions taken to become more efficient or lower costs, risks related to the integration of acquired businesses, changes in legal and regulatory matters, and the company’s ability to generate additional cash flow.  Forward-looking statements are those statements which are not statements of historical fact.  These forward-looking statements can be identified by forward-looking words such as "expects," "anticipates," "intends," "plans," "may," "will," "believes," "seeks," "estimates," and similar expressions.  Shareholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made.  The company undertakes no obligation to update publicly or revise any of the forward-looking statements.

36

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

The company is exposed to market risk from changes in foreign currency exchange rates and interest rates.

Foreign Currency Exchange Rate Risk

The company, as a large global organization, faces exposure to adverse movements in foreign currency exchange rates. These exposures may change over time as business practices evolve and could materially impact the company's financial results in the future. The company's primary exposure relates to transactions in which the currency collected from customers is different from the currency utilized to purchase the product sold in Europe, the Asia Pacific region, Canada, and Latin America. The company's policy is to hedge substantially all such currency exposures for which natural hedges do not exist. Natural hedges exist when purchases and sales within a specific country are both denominated in the same currency and, therefore, no exposure exists to hedge with foreign exchange forward, option, or swap contracts (collectively, the "foreign exchange contracts"). In many regions in Asia, for example, sales and purchases are primarily denominated in U.S. dollars, resulting in a "natural hedge." Natural hedges exist in most countries in which the company operates, although the percentage of natural offsets, as compared with offsets that need to be hedged by foreign exchange contracts, will vary from country to country. The company does not enter into foreign exchange contracts for trading purposes. The risk of loss on a foreign exchange contract is the risk of nonperformance by the counterparties, which the company minimizes by limiting its counterparties to major financial institutions. The fair values of the foreign exchange contracts, which are nominal, are estimated using market quotes. The notional amount of the foreign exchange contracts at December 31, 2018 and 2017 was $607.7 million and $504.1 million, respectively.

The translation of the financial statements of the non-United States operations is impacted by fluctuations in foreign currency exchange rates. The change in consolidated sales and operating income was impacted by the translation of the company's international financial statements into U.S. dollars. This resulted in increased sales and operating income of $253.2 million and $4.6 million, respectively, for 2018, compared with the year-earlier period, based on 2017 sales and operating income at the average rate for 2018. Sales and operating income would decrease by approximately $756.8 million and $37.8 million, respectively, if average foreign exchange rates had declined by 10% against the U.S. dollar in 2018. These amounts were determined by considering the impact of a hypothetical foreign exchange rate on the sales and operating income of the company's international operations.

Interest Rate Risk

The company's interest expense, in part, is sensitive to the general level of interest rates in North America, Europe, and the Asia Pacific region. The company historically has managed its exposure to interest rate risk through the proportion of fixed-rate and floating-rate debt in its total debt portfolio. Additionally, the company utilizes interest rate swaps in order to manage its targeted mix of fixed- and floating-rate debt.

At December 31, 2018, approximately 68% of the company's debt was subject to fixed rates and 32% of its debt was subject to floating rates.  A one percentage point change in average interest rates would cause net interest and other financing expense in 2018 to increase by $18.6 million. This was determined by considering the impact of a hypothetical interest rate on the company's average floating rate on investments and average outstanding variable debt.  This analysis does not consider the effect of the level of overall economic activity that could exist.  In the event of a change in the level of economic activity, which may adversely impact interest rates, the company could likely take actions to further mitigate any potential negative exposure to the change.  However, due to the uncertainty of the specific actions that might be taken and their possible effects, the sensitivity analysis assumes no changes in the company's financial structure.

In July 2017, the Financial Conduct Authority (the authority that regulates LIBOR) announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. The Alternative Reference Rates Committee ("ARRC") has proposed that the Secured Overnight Financing Rate ("SOFR") is the rate that represents best practice as the alternative to USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR. ARRC has proposed a paced market transition plan to SOFR from USD-LIBOR and organizations are currently working on industry wide and company specific transition plans as it relates to derivatives and cash markets exposed to USD-LIBOR. The company has an asset securitization program, revolving credit facility, certain lines of credit, and interest rate swaps that are indexed to USD-LIBOR and is monitoring this activity and evaluating the related risks.







37


Item 8.    Financial Statements and Supplementary Data.

Report of Independent Registered Public Accounting Firm


To the Shareholders and the Board of Directors of Arrow Electronics, Inc.


Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Arrow Electronics, Inc. (the Company) as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2018, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 7, 2019 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

/s/ Ernst & Young LLP





We have served as the Company’s auditor since 1975.
Denver, Colorado
February 7, 2019



38

ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)

 
 
Years Ended December 31,
  
 
2018
 
2017
 
2016
 
 
 
 
(Adjusted)
 
(Adjusted)
Sales
 
$
29,676,768

 
$
26,554,563

 
$
23,487,872

Cost of sales
 
25,975,856

 
23,197,595

 
20,343,550

Gross profit
 
3,700,912

 
3,356,968

 
3,144,322

Operating expenses:
 
 
 
 
 
 
Selling, general, and administrative expenses
 
2,303,051

 
2,162,045

 
2,046,910

Depreciation and amortization
 
186,384

 
153,599

 
159,195

Loss on disposition of businesses, net
 
3,604

 
21,000

 
—

Restructuring, integration, and other charges
 
60,361

 
74,588

 
61,391

 
 
2,553,400

 
2,411,232

 
2,267,496

Operating income
 
1,147,512

 
945,736

 
876,826

Equity in earnings (losses) of affiliated companies
 
(2,332
)
 
3,424

 
7,573

Gain (loss) on investments, net
 
(14,166
)
 
(6,577
)
 
2,896

Loss on extinguishment of debt
 
—

 
59,545

 
—

Employee benefit plan expense
 
6,870

 
23,869

 
20,464

Interest and other financing expense, net
 
214,771

 
165,252

 
151,312

Income before income taxes
 
909,373

 
693,917

 
715,519

Provision for income taxes
 
187,799

 
286,541

 
190,731

Consolidated net income
 
721,574

 
407,376


524,788

Noncontrolling interests
 
5,379

 
5,200

 
1,973

Net income attributable to shareholders
 
$
716,195

 
$
402,176

 
$
522,815

Net income per share:
 
 

 
 

 
 
Basic
 
$
8.19

 
$
4.54

 
$
5.75

Diluted
 
$
8.10

 
$
4.48

 
$
5.68

Weighted-average shares outstanding:
 
 
 
 

 
 
Basic
 
87,476

 
88,681

 
90,960

Diluted
 
88,444

 
89,766

 
92,033


See accompanying notes.
 
 

39

ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)

 
Years Ended December 31,
 
2018
 
2017
 
2016
 
 
 
(Adjusted)
 
(Adjusted)
Consolidated net income
$
721,574

 
$
407,376

 
$
524,788

Other comprehensive income:
 
 
 
 
 
Foreign currency translation adjustment and other
(163,927
)
 
248,317

 
(108,872
)
Unrealized gain (loss) on investment securities, net of taxes
—

 
8,852

 
(2,439
)
Unrealized gain (loss) on interest rate swaps designated as cash flow hedges, net of taxes
931

 
(2,359
)
 
373

Employee benefit plan items, net of taxes
8,253

 
8,853

 
10,148

Other comprehensive income (loss)
(154,743
)
 
263,663

 
(100,790
)
Comprehensive income
566,831

 
671,039

 
423,998

Less: Comprehensive income attributable to noncontrolling interests
2,848

 
10,207

 
16

Comprehensive income attributable to shareholders
$
563,983

 
$
660,832

 
$
423,982


See accompanying notes.


40

ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except par value)
 
 
December 31,
 
 
2018
 
2017
 
 
 
 
(Adjusted)
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
509,327

 
$
730,083

Accounts receivable, net
 
8,945,463

 
8,125,588

Inventories
 
3,878,678

 
3,302,518

Other current assets
 
274,832

 
256,028

Total current assets
 
13,608,300

 
12,414,217

Property, plant, and equipment, at cost:
 
 

 
 

Land
 
7,882

 
12,866

Buildings and improvements
 
158,712

 
160,664

Machinery and equipment
 
1,425,933

 
1,330,730

 
 
1,592,527

 
1,504,260

Less: Accumulated depreciation and amortization
 
(767,827
)
 
(665,785
)
Property, plant, and equipment, net
 
824,700

 
838,475

Investments in affiliated companies
 
83,693

 
88,347

Intangible assets, net
 
372,644

 
286,215

Goodwill
 
2,624,690

 
2,470,047

Other assets
 
270,418

 
361,966

Total assets
 
$
17,784,445

 
$
16,459,267

LIABILITIES AND EQUITY
 
 

 
 

Current liabilities:
 
 

 
 

Accounts payable
 
$
7,631,879

 
$
6,756,830

Accrued expenses
 
912,292

 
841,675

Short-term borrowings, including current portion of long-term debt
 
246,257

 
356,806

Total current liabilities
 
8,790,428

 
7,955,311

Long-term debt
 
3,239,115

 
2,933,045

Other liabilities
 
378,536

 
572,971

Commitments and contingencies (Notes 14 and 15)
 


 


Equity:
 
 

 
 

Shareholders' equity:
 
 

 
 

Common stock, par value $1:
 
 

 
 

Authorized - 160,000 shares in both 2018 and 2017
 
 

 
 

Issued - 125,424 shares in both 2018 and 2017
 
125,424

 
125,424

Capital in excess of par value
 
1,135,934

 
1,114,167

Treasury stock (40,233 and 37,733 shares in 2018 and 2017, respectively), at cost
 
(1,972,254
)
 
(1,762,239
)
Retained earnings
 
6,335,335

 
5,596,786

    Accumulated other comprehensive loss
 
(299,449
)
 
(124,883
)
Total shareholders' equity
 
5,324,990

 
4,949,255

Noncontrolling interests
 
51,376

 
48,685

Total equity
 
5,376,366

 
4,997,940

Total liabilities and equity
 
$
17,784,445

 
$
16,459,267

 
See accompanying notes. 

41

ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
 
Years Ended December 31,
  
 
2018
 
2017
 
2016
 
 
 
 
(Adjusted)
 
(Adjusted)
Cash flows from operating activities:
 
 
 
 
 

Consolidated net income
 
$
721,574

 
$
407,376

 
$
524,788

Adjustments to reconcile consolidated net income to net cash provided by operations:
 
 
 
 
 
 
Depreciation and amortization
 
186,384

 
153,599

 
159,195

Amortization of stock-based compensation
 
46,238

 
39,122

 
39,825

Equity in (earnings) losses of affiliated companies
 
2,332

 
(3,424
)
 
(7,573
)
Loss on extinguishment of debt
 
—

 
59,545

 
—

Deferred income taxes
 
1,236

 
38,412

 
28,740

(Gain) loss on investments, net
 
14,166

 
8,020

 
(2,300
)
Loss on disposition of businesses, net
 
3,604

 
21,000

 
—

Impairment of property, plant, and equipment
 
—

 
4,761

 
—

Other
 
9,198

 
5,705

 
5,972

Change in assets and liabilities, net of effects of acquired and disposed businesses:
 
 
 
 
 
 
Accounts receivable
 
(1,007,308
)
 
(1,079,094
)
 
(600,925
)
Inventories
 
(618,875
)
 
(379,835
)
 
(403,980
)
Accounts payable
 
936,423

 
816,602

 
582,165

Accrued expenses
 
112,123

 
(5,013
)
 
46,439

Other assets and liabilities
 
(134,405
)
 
37,781

 
(12,674
)
Net cash provided by operating activities
 
272,690

 
124,557

 
359,672

Cash flows from investing activities:
 
 
 
 
 
 
Cash consideration paid for acquired businesses, net of cash acquired
 
(331,563
)
 
(3,628
)
 
(64,751
)
Proceeds from disposition of businesses
 
32,013

 
—

 
—

Acquisition of property, plant, and equipment
 
(135,336
)
 
(203,949
)
 
(164,695
)
Proceeds from sale of property, plant, and equipment
 
5,421

 
24,433

 
—

Cash paid for customer relationship intangible asset
 
(20,000
)
 
—

 
—

Other
 
(13,500
)
 
(5,614
)
 
(12,000
)
Net cash used for investing activities
 
(462,965
)
 
(188,758
)
 
(241,446
)
Cash flows from financing activities:
 
 
 
 
 
 
Change in short-term and other borrowings
 
192,192

 
(41,316
)
 
48,684

Proceeds from long-term bank borrowings, net
 
306,635

 
47,760

 
313,000

Proceeds from note offering, net
 
—

 
986,203

 
—

Redemption of notes
 
(300,000
)
 
(558,887
)
 
—

Proceeds from exercise of stock options
 
8,819

 
22,195

 
18,967

Repurchases of common stock
 
(243,305
)
 
(174,239
)
 
(216,446
)
Purchase of shares from noncontrolling interest
 
—

 
(23,350
)
 
—

Other
 
(1,174
)
 
(1,620
)
 
(2,007
)
Net cash provided by (used for) financing activities
 
(36,833
)
 
256,746

 
162,198

Effect of exchange rate changes on cash
 
6,352

 
3,218

 
(19,194
)
Net increase (decrease) in cash and cash equivalents
 
(220,756
)
 
195,763

 
261,230

Cash and cash equivalents at beginning of year
 
730,083

 
534,320

 
273,090

Cash and cash equivalents at end of year
 
$
509,327

 
$
730,083

 
$
534,320

See accompanying notes. 

42

ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
 
Common Stock at Par Value
 
Capital in Excess of Par Value
 
Treasury Stock
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Noncontrolling Interests
 
Total
Balance at December 31, 2015
$
125,424

 
$
1,107,314

 
$
(1,480,069
)
 
$
4,674,480

 
$
(284,706
)
 
$
52,368

 
$
4,194,811

Effect of new accounting principles
—

 
—

 
—

 
(2,685
)
 
—

 
—

 
(2,685
)
Consolidated net income (Adjusted)
—

 
—

 
—

 
522,815

 
—

 
1,973

 
524,788

Other comprehensive loss (Adjusted)
—

 
—

 
—

 
—

 
(98,833
)
 
(1,957
)
 
(100,790
)
Amortization of stock-based compensation
—

 
39,825

 
—

 
—

 
—

 
—

 
39,825

Shares issued for stock-based compensation awards
—

 
(40,072
)
 
59,039

 
—

 
—

 
—

 
18,967

Tax benefits related to stock-based compensation awards
—

 
5,047

 
—

 
—

 
—

 
—

 
5,047

Repurchases of common stock
—

 
—

 
(216,446
)
 
—

 
—

 
—

 
(216,446
)
Distributions
—

 
—

 
—

 
—

 
—

 
(202
)
 
(202
)
Balance at December 31, 2016 (Adjusted)
125,424

 
1,112,114

 
(1,637,476
)
 
5,194,610

 
(383,539
)
 
52,182

 
4,463,315

Consolidated net income (Adjusted)
—

 
—

 
—

 
402,176

 
—

 
5,200

 
407,376

Other comprehensive income (Adjusted)
—

 
—

 
—

 
—

 
258,656

 
5,007

 
263,663

Amortization of stock-based compensation
—

 
39,122

 
—

 
—

 
—

 
—

 
39,122

Shares issued for stock-based compensation awards
—

 
(27,281
)
 
49,476

 
—

 
—

 
—

 
22,195

Purchase of subsidiary shares from non-controlling interest
—

 
(9,788
)
 
—

 
—

 
—

 
(13,562
)
 
(23,350
)
Repurchases of common stock
—

 
—

 
(174,239
)
 
—

 
—

 
—

 
(174,239
)
Distributions
—

 
—

 
—

 
—

 
—

 
(142
)
 
(142
)
Balance at December 31, 2017 (Adjusted)
125,424

 
1,114,167

 
(1,762,239
)
 
5,596,786

 
(124,883
)
 
48,685

 
4,997,940

Effect of new accounting principles
—

 
—

 
—

 
22,354

 
(22,354
)
 
—

 
—

Consolidated net income
—

 
—

 
—

 
716,195

 
—

 
5,379

 
721,574

Other comprehensive loss
—

 
—

 
—

 
—

 
(152,212
)
 
(2,531
)
 
(154,743
)
Amortization of stock-based compensation
—

 
46,238

 
—

 
—

 
—

 
—

 
46,238

Shares issued for stock-based compensation awards
—

 
(24,471
)
 
33,290

 
—

 
—

 
—

 
8,819

Repurchases of common stock
—

 
—

 
(243,305
)
 
—

 
—

 
—

 
(243,305
)
Distributions
—

 
—

 
—

 
—

 
—

 
(157
)
 
(157
)
Balance at December 31, 2018
$
125,424

 
$
1,135,934

 
$
(1,972,254
)
 
$
6,335,335

 
$
(299,449
)
 
$
51,376

 
$
5,376,366


See accompanying notes.

43

ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

1.Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the company and its majority-owned subsidiaries. All significant intercompany transactions are eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the company to make significant estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash equivalents consist of highly liquid investments, which are readily convertible into cash, with original maturities of three months or less.

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined on a moving average cost basis, which approximates the first-in, first-out method. Substantially all inventories represent finished goods held for sale.

Property, Plant, and Equipment

Property, plant, and equipment are stated at cost. Depreciation is computed on the straight-line method over the estimated useful lives of the assets. The estimated useful lives for depreciation of buildings is generally 20 to 30 years, and the estimated useful lives of machinery and equipment is generally three to ten years. Leasehold improvements are amortized over the shorter of the term of the related lease or the life of the improvement. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. If the carrying value of the asset can not be recovered from estimated future cash flows, undiscounted and without interest, the fair value of the asset is calculated using the present value of estimated net future cash flows. If the fair value is less than the carrying amount of the asset, a loss is recognized for the difference.

Software Development Costs

The company capitalizes certain internal and external costs incurred to acquire or create internal-use software. Capitalized software costs are amortized on a straight-line basis over the estimated useful life of the software, which is generally three to twelve years. At December 31, 2018 and 2017, the company had unamortized software development costs of $539,398 and $535,203, respectively, which are included in "Machinery and equipment" in the company's consolidated balance sheets. During 2016, the company changed the useful life on its global ERP software from ten to twelve years. The impact of the change was not material.

Identifiable Intangible Assets

Amortization of definite-lived intangible assets is computed on the straight-line method over the estimated useful lives of the assets, while indefinite-lived intangible assets are not amortized. Identifiable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. The company also tests indefinite-lived intangible assets, consisting of acquired trade names, for impairment at least annually as of the first day of the fourth quarter. If the fair value is less than the carrying amount of the asset, a loss is recognized for the difference.

Investments

Investments are accounted for using the equity method if the investment provides the company the ability to exercise significant influence, but not control, over an investee. Significant influence is generally deemed to exist if the company has an ownership interest in the voting stock of the investee between 20% and 50%, although other factors, such as representation on the investee's

44
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

Board of Directors, are considered in determining whether the equity method is appropriate. The company records its investments in equity method investees meeting these characteristics as "Investments in affiliated companies" in the company's consolidated balance sheets.

All other equity investments, which consist of investments for which the company does not possess the ability to exercise significant influence, are measured at fair value, using quoted market prices, and are included in "Other assets" in the company's consolidated balance sheets. Changes in fair value are recorded in "Gain (Loss) on investments, net" in the company's consolidated statements of operations. During the year-ended December 31, 2018, the company recorded a net loss on investments of $14.2 million.

The company records equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes. The company does not currently hold any equity investments without readily determinable fair values.

Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. The company tests goodwill for impairment annually as of the first day of the fourth quarter and/or when an event occurs or circumstances change such that it is more likely than not that an impairment may exist. Examples of such events and circumstances that the company would consider include the following:

•
macroeconomic conditions such as deterioration in general economic conditions, limitations on accessing capital, fluctuations in foreign exchange rates, or other developments in equity and credit markets;
•
industry and market considerations such as a deterioration in the environment in which the company operates, an increased competitive environment, a decline in market-dependent multiples or metrics (considered in both absolute terms and relative to peers), a change in the market for the company's products or services, or a regulatory or political development;
•
cost factors such as increases in raw materials, labor, or other costs that have a negative effect on earnings and cash flows;
•
overall financial performance such as negative or declining cash flows or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods;
•
other relevant entity-specific events such as changes in management, key personnel, strategy, or customers; contemplation of bankruptcy; or litigation;
•
events affecting a reporting unit such as a change in the composition or carrying amount of its net assets, a more-likely-than-not expectation of selling or disposing all, or a portion, of a reporting unit, the testing for recoverability of a significant asset group within a reporting unit, or recognition of a goodwill impairment loss in the financial statements of a subsidiary that is a component of a reporting unit; and
•
a sustained decrease in share price (considered in both absolute terms and relative to peers).


Goodwill is tested at a level of reporting referred to as "the reporting unit." The company's reporting units are defined as each of the three regional businesses within the global components business segment, which are the Americas; Europe, the Middle East, and Africa ("EMEA"); and Asia/Pacific, each of the two regional businesses within the global ECS business segment, which are North America and EMEA, and eInfochips which was acquired in 2018.

An entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the quantitative goodwill impairment test is unnecessary. The company has elected not to perform the qualitative assessment and performed the quantitative goodwill impairment test. The quantitative goodwill impairment test, used to identify both the existence of impairment and the amount of impairment loss, compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of the reporting unit is less than its fair value, no impairment exists. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

The company estimates the fair value of a reporting unit using the income approach. For the purposes of the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. The assumptions included in the income approach include forecasted revenues, gross profit margins, operating income margins, working capital cash flow, forecasted capital expenditures, perpetual growth rates, and long-term discount rates, among others,

45
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

all of which require significant judgments by management. Actual results may differ from those assumed in the company's forecasts. The company also reconciles its discounted cash flow analysis to its current market capitalization allowing for a reasonable control premium. As of the first day of the fourth quarters of 2018, 2017, and 2016, the company's annual impairment testing did not indicate impairment at any of the company's reporting units.

A decline in general economic conditions or global equity valuations could impact the judgments and assumptions about the fair value of the company's businesses, and the company could be required to record an impairment charge in the future, which could impact the company's consolidated balance sheet, as well as the company's consolidated statement of operations. If the company was required to recognize an impairment charge in the future, the charge would not impact the company's consolidated cash flows, current liquidity, capital resources, and covenants under its existing revolving credit facility, asset securitization program, and other outstanding borrowings.

As of December 31, 2018, the company has $2.6 billion of goodwill, of which approximately $1.1 billion, $84.1 million and $61.2 million was allocated to the Americas, EMEA, and Asia/Pacific reporting units within the global components business segment, respectively, $788.1 million and $399.1 million was allocated to the North America and EMEA reporting units within the global ECS business segment, respectively, and $181.0 million was allocated to the eInfochips reporting unit. As of the date of the company's latest impairment test, the fair value of the Americas, EMEA, and Asia/Pacific reporting units within the global components business segment, the fair value of the North America and EMEA reporting units within the global ECS business segment, and the fair value of the eInfochips reporting unit exceeded their carrying values by approximately 14%, 152%, 13%, 435%, 140%, and 3% respectively.

Foreign Currency Translation and Remeasurement

The assets and liabilities of international operations are translated at the exchange rates in effect at the balance sheet date. Revenue and expense accounts are translated at the monthly average exchange rates. Adjustments arising from the translation of the foreign currency financial statements of the company's international operations are reported as a component of "Accumulated other comprehensive loss" in the company's consolidated balance sheets.

For foreign currency remeasurement from each local currency into the appropriate functional currency, monetary assets and liabilities are remeasured to functional currencies using current exchange rates in effect at the balance sheet date. Gains or losses from these remeasurements were not significant and have been included in the company’s consolidated statements of operations. Non-monetary assets and liabilities are recorded at historical exchange rates.

Income Taxes

Income taxes are accounted for under the liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of differences between the tax bases of assets and liabilities and their financial reporting amounts using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The carrying value of the company's deferred tax assets is dependent upon the company's ability to generate sufficient future taxable income in certain tax jurisdictions. Should the company determine that it is more likely than not that some portion or all of its deferred tax assets will not be realized, a valuation allowance to reduce the deferred tax assets is established in the period such determination is made. The assessment of the need for a valuation allowance requires considerable judgment on the part of management with respect to the benefits that could be realized from future taxable income, as well as other positive and negative factors.

It is also the company's policy to provide for uncertain tax positions and the related interest and penalties based upon management's assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. To the extent the company prevails in matters for which a liability for an unrecognized tax benefit is established, or is required to pay amounts in excess of the liability, or when other facts and circumstances change, the company's effective tax rate in a given financial statement period may be materially affected.


46
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

Net Income Per Share

Basic net income per share is computed by dividing net income attributable to shareholders by the weighted-average number of common shares outstanding for the period. Diluted net income per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock.

Comprehensive Income

Comprehensive income consists of consolidated net income, foreign currency translation adjustment, unrealized gains or losses on post-retirement benefit plans, and unrealized gains or losses on investment securities and interest rate swaps designated as cash flow hedges. Unrealized gains or losses on investment securities and interest rate swaps are net of any reclassification adjustments for realized gains or losses included in consolidated net income. Foreign currency translation adjustments included in comprehensive income were not tax effected as investments in international affiliates are deemed to be permanent. All other comprehensive income items are net of related income taxes.

Stock-Based Compensation

The company records share-based payment awards exchanged for employee services at fair value on the date of grant and expenses the awards in the consolidated statements of operations over the requisite employee service period. Stock-based compensation expense includes an estimate for forfeitures. Stock-based compensation expense related to awards with a market or performance condition which cliff vest, are recognized over the vesting period on a straight line basis. Stock-based compensation awards with service conditions only are also recognized on a straight-line basis.

Segment Reporting

Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The company's operations are classified into two reportable business segments: global components and global ECS.

Revenue Recognition

The company recognizes revenue when there is persuasive evidence of an arrangement, delivery has occurred or services are rendered, the sales price is fixed or determinable, and collectability is reasonably assured. Revenue typically is recognized at time of shipment. Sales are recorded net of discounts, rebates, and returns, which historically have not been material. Tariffs are included in sales as the company has enforceable rights to additional consideration to cover the cost of tariffs.

The Company allows its customers to return product for exchange or credit in limited circumstances. A liability is recorded at the time of sale for estimated product returns based upon historical experience. The Company also provides volume rebates and other discounts to certain customers which are considered variable consideration. A provision for customer rebates and other discounts is recorded as a reduction of revenue at the time of sale based on an evaluation of the contract terms and historical experience.

A portion of the company's business involves shipments directly from its suppliers to its customers. In these transactions, the company is responsible for negotiating price both with the supplier and customer, payment to the supplier, establishing payment terms with the customer, product returns, and has risk of loss if the customer does not make payment. As the principal with the customer, the company recognizes the sale and cost of sale of the product upon receiving notification from the supplier that the product was shipped.
The Company has contracts with certain customers where the Company’s performance obligation is to arrange for the products or services to be provided by another party. In these arrangements, as the Company assumes an agency relationship in the transaction, revenue is recognized in the amount of the net fee associated with serving as an agent. These arrangements relate to the sale of supplier service contracts to customers where the company has no future obligation to perform under these contracts or the rendering of logistics services for the delivery of inventory for which the company does not assume the risks and rewards of ownership.


47
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

Shipping and Handling Costs

The company reports shipping and handling costs, primarily related to outbound freight, in the consolidated statements of operations as a component of selling, general, and administrative expenses. Shipping and handling costs included in selling, general, and administrative expenses totaled $103,533, $90,709, and $79,257 in 2018, 2017, and 2016, respectively.

Impact of Recently Issued Accounting Standards

In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2018-15, Intangibles—Goodwill and Other— Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force) ("ASU No. 2018-15"). ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop internal-use software. ASU No. 2018-15 is effective for the company in the first quarter of 2020, with early adoption permitted, and is to be applied either retrospectively or prospectively. The company is currently evaluating the potential effects of adopting the provisions of ASU No. 2018-15. The adoption is not expected to be material to the financial statements.

In February 2018, the FASB issued Accounting Standards Update No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) ("ASU No. 2018-02"). ASU No. 2018-02 provides financial statement preparers with an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period that is impacted by U.S. federal government tax legislation enacted in 2017. Effective January 1, 2018, the company adopted the provisions of ASU No. 2018-02 on a prospective basis as an adjustment to increase retained earnings of $4,116.

In August 2017, the FASB issued Accounting Standards Update No. 2017-12, Derivatives and Hedging (Topic 815) ("ASU No. 2017-12"). ASU No. 2017-12 simplifies certain aspects of hedge accounting and results in a more accurate portrayal of the economics of an entity’s risk management activities in its financial statements. ASU No. 2017-12 is effective for the company in the first quarter of 2019, with early adoption permitted, and is to be applied on a modified retrospective basis. The company is currently evaluating the potential effects of adopting the provisions of ASU No. 2017-12. The adoption is not expected to be material to the financial statements.

In March 2017, the FASB issued Accounting Standards Update No. 2017-07, Compensation - Retirement Benefits (Topic 715) ("ASU No. 2017-07"). ASU No. 2017-07 requires that the service cost component of pension expense be included in the same line item as other compensation costs arising from services rendered by employees, with the other components of pension expense being classified outside of a subtotal of income from operations. Effective January 1, 2018, the company adopted the provisions of ASU No. 2017-07 on a retrospective basis for the presentation requirements.

In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326) ("ASU No. 2016-13"). ASU No. 2016-13 revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. In November 2018 the FASB issued ASU No. 2018-19,  Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which provides supplemental guidance and clarification to ASU No. 2016-13 and must be adopted concurrently with the adoption of ASU No. 2016-13, cumulatively referred to as "Topic 326." Topic 326 is effective for the company in the first quarter of 2020, with early adoption permitted, and is to be applied using a modified retrospective approach. The company is currently evaluating the potential effects of adopting the provisions of ASU No. 2016-13.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) ("ASU No. 2016-02"). ASU No. 2016-02 requires the entity to recognize the assets and liabilities for the rights and obligations created by leased assets. Leases will be classified as either finance or operating, with classification affecting expense recognition in the income statement. In July 2018 the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, and ASU No. 2018-11, Leases (Topic 842) Targeted Improvements, which provide supplemental adoption guidance and clarification to ASU No. 2016-02, and must be adopted concurrently with the adoption of ASU No. 2016-02, cumulatively referred to as "Topic 842." Topic 842 is effective for the company in the first quarter of 2019, with early adoption permitted, and is to be applied using either a modified retrospective approach, or an optional transition method which allows an entity to apply the new standard at the adoption date with a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

The company expects to adopt Topic 842 in the first quarter of 2019 under the optional transition method described above. In addition, the company will elect the short-term lease exception outlined in ASC 842. While the company continues to evaluate

48
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

the effects of adopting the provisions of Topic 842, the company expects most existing operating lease commitments will be recognized as operating lease liabilities and right-of-use assets upon adoption. The adoption is not expected to be material to the financial statements, and based on our ongoing assessment, will increase total assets by less than 3%.

In January 2016, the FASB issued Accounting Standards Update No. 2016-01, Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825) ("ASU No. 2016-01"). ASU No. 2016-01 revises the classification and measurement of investments in certain equity investments and the presentation of certain fair value changes for certain financial liabilities measured at fair value. ASU No. 2016-01 requires the change in fair value of many equity investments to be recognized in net income. Effective January 1, 2018, the company adopted the provisions of ASU No. 2016-01 on a prospective basis as an adjustment to increase retained earnings of $18,238.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU No. 2014-09"). ASU No. 2014-09 supersedes all existing revenue recognition guidance. Under ASU No. 2014-09, an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In March, April, May, and December 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net) ("ASU No. 2016-08"); ASU No. 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing ("ASU No. 2016-10"); ASU No. 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients ("ASU No. 2016-12"); and ASU No. 2016-19, Technical Corrections and Improvements ("ASU No. 2016-19"), respectively. ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12, and ASU No. 2016-19 provide supplemental adoption guidance and clarification to ASU No. 2014-09, and must be adopted concurrently with the adoption of ASU No. 2014-09, cumulatively referred to as "Topic 606."

On January 1, 2018, the company adopted Topic 606 applying the full retrospective method, including an adjustment to retained earnings of $2,685. The primary impact of adoption relates to the application of principal versus agent indicators and the determination of whether goods and services are distinct. In addition, the company is deferring certain revenue due to the determination of when transfer of control occurs. The deferrals are expected to be recognized within a year of the transaction date.

49
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)


The following table presents the effect of the adoption of Topic 606, ASU No. 2017-07, and other prior period reclassifications. The effect of these changes for each quarter of 2017 is presented in Note 17.
 
 
Year Ended December 31, 2017
 
Year Ended December 31, 2016
 
 
As Previously Reported
 
Adjustments**
 
Adjusted for New Standards
 
As Previously Reported
 
Adjustments**
 
Adjusted for New Standards
Sales
 
$
26,812,508

 
$
(257,945
)
 
$
26,554,563

 
$
23,825,261

 
$
(337,389
)
 
$
23,487,872

Cost of sales
 
23,455,169

 
(257,574
)
 
23,197,595

 
20,681,062

 
(337,512
)
 
20,343,550

Gross profit
 
3,357,339

 
(371
)
 
3,356,968

 
3,144,199

 
123

 
3,144,322

Operating expenses:
 
 
 
 
 


 
 
 
 
 


Selling, general, and administrative expenses
 
2,162,996

 
(951
)
 
2,162,045

 
2,052,863

 
(5,953
)
 
2,046,910

Depreciation and amortization
 
153,599

 
—

 
153,599

 
159,195

 
—

 
159,195

Loss on disposition of businesses, net
 
21,000

 
—

 
21,000

 
—

 
—

 
—

Restructuring, integration, and other charges
 
91,294

 
(16,706
)
 
74,588

 
73,602

 
(12,211
)
 
61,391

 
 
2,428,889

 
(17,657
)
 
2,411,232

 
2,285,660

 
(18,164
)
 
2,267,496

Operating income
 
928,450

 
17,286

 
945,736

 
858,539

 
18,287

 
876,826

Equity in earnings of affiliated companies
 
3,424

 
—

 
3,424

 
7,573

 
—

 
7,573

Gain (loss) on investments, net
 
(14,231
)
 
7,654

 
(6,577
)
 
—

 
2,896

 
2,896

Loss on extinguishment of debt
 
59,545

 
—

 
59,545

 
—

 
—

 
—

Employee benefit plan expense
 
—

 
23,869

 
23,869

 
—

 
20,464

 
20,464

Interest and other financing expense, net
 
163,810

 
1,442

 
165,252

 
150,715

 
597

 
151,312

Income before income taxes
 
694,288

 
(371
)
 
693,917

 
715,397

 
122

 
715,519

Provision for income taxes
 
287,126

 
(585
)
 
286,541

 
190,674

 
57

 
190,731

Consolidated net income
 
407,162

 
214

 
407,376

 
524,723

 
65

 
524,788

Noncontrolling interests
 
5,200

 
—

 
5,200

 
1,973

 
—

 
1,973

Net income attributable to shareholders
 
$
401,962

 
$
214

 
$
402,176

 
$
522,750

 
$
65

 
$
522,815

Net income per share:
 
 
 
 
 
 
 
 
 
 
 
 
Basic*
 
$
4.53

 
$
0.01

 
$
4.54

 
$
5.75

 
$
—

 
$
5.75

Diluted*
 
$
4.48

 
$
—

 
$
4.48

 
$
5.68

 
$
—

 
$
5.68

* The sum of the as previously reported and as adjusted may not agree to totals, as presented, due to rounding.
** Topic 606 impacted sales and cost of sales. ASU No. 2017-07 and other reclassifications impacted operating and non-operating expenses.


2. Acquisitions

The company accounts for acquisitions using the acquisition method of accounting. The results of operations of acquisitions are included in the company's consolidated results from their respective dates of acquisition. The company allocates the purchase price of each acquisition to the tangible assets, liabilities, and identifiable intangible assets acquired based on their estimated fair values. In certain circumstances, a portion of purchase price may be contingent upon the achievement of certain operating results. The fair values assigned to identifiable intangible assets acquired and contingent consideration were determined primarily by using an income approach which was based on assumptions and estimates made by management. Significant assumptions utilized in

50
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

the income approach were based on company specific information and projections, which are not observable in the market and are thus considered Level 3 measurements by authoritative guidance (see Note 7). The excess of the purchase price over the fair value of the identified assets and liabilities has been recorded as goodwill.

2018 Acquisitions

On January 8, 2018, the company acquired eInfochips for a purchase price of $327,628, which included $14,769 of cash acquired. eInfochips services customers at every phase of technology deployment, including custom hardware and software, and new Internet of Things based business models. eInfochips is recorded in the company's global components business segment.

Since the date of the acquisition, eInfochips sales of $89,139 were included in the company's consolidated results of operations.

The following table summarizes the allocation of the net consideration paid to the fair value of the assets acquired and liabilities assumed for the eInfochips acquisition:
Accounts receivable, net
$
13,670

Inventories
1,512

Property, plant, and equipment
3,485

Other assets
46,488

Identifiable intangible assets
128,000

Goodwill
197,126

Accounts payable
(520
)
Accrued expenses
(33,836
)
Deferred tax liability
(41,474
)
Other liabilities
(1,592
)
Cash consideration paid, net of cash acquired
$
312,859



In connection with the eInfochips acquisition, the company allocated $109,000 and $19,000 to customer relationships and trade name with a life of 15 years and 10 years, respectively.

Assets and liabilities acquired are initially recognized based on preliminary estimates. During the fourth quarter of 2018,  the company finalized the valuation of identifiable intangible assets and the related deferred taxes. Final estimates were recorded which resulted in an increase of $22,755 in other assets, $56,290 in identifiable intangible assets, $25,241 in accrued expenses, and $19,505 in deferred tax liability.

The goodwill related to the eInfochips acquisition represents the expected synergies from combining operations and was recorded in the company's global components business segment and is not tax deductible.

During 2018, the company completed one additional acquisition with a purchase price of approximately $18,704, net of cash acquired. The impact of this acquisition was not material to the company's consolidated financial position or results of operations.

The following table summarizes the company's consolidated results of operations for 2017, as well as the unaudited pro forma consolidated results of operations of the company, as though the 2018 acquisitions occurred on January 1, 2017:
  
For the Year Ended December 31, 2017
 
As Reported
 
Pro Forma
Sales
$
26,554,563

 
$
26,712,335

Net income attributable to shareholders
402,176

 
405,966

Net income per share:
 
 
 
Basic
$
4.54

 
$
4.58

Diluted
$
4.48

 
$
4.52




51
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

2017 Acquisitions

During 2017, the company acquired an additional 11.9% of the noncontrolling interest common shares of Data Modul AG for $23,350, increasing the company's ownership interest in Data Modul to 69.2%. The impact of this acquisition was not material to the company's consolidated financial position or results of operations.

During 2017, the company completed two acquisitions for $3,628, net of cash acquired. The impact of these acquisitions was not material to the company's consolidated financial position or results of operations. The pro forma impact of the 2017 acquisitions on the consolidated results of operations of the company for 2017, as though the acquisitions occurred on January 1, 2017, was also not material.

2016 Acquisitions

During 2016, the company completed three acquisitions for $63,869, net of cash acquired. The impact of these acquisitions was not material to the company's consolidated financial position or results of operations. The pro forma impact of the 2016 acquisitions on the consolidated results of operations of the company for 2016, as though the acquisitions occurred on January 1, 2016, was also not material.

3. Goodwill and Intangible Assets

Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. The company tests goodwill and other indefinite-lived intangible assets for impairment annually as of the first day of the fourth quarter, or more frequently if indicators of potential impairment exist.

As of the first day of the fourth quarters of 2018, 2017, and 2016, the company's annual impairment testing did not result in any indicators of impairment of goodwill of companies acquired.

Goodwill of companies acquired, allocated to the company's business segments, is as follows:
 
 
Global
Components
 
Global ECS
 
Total
Balance as of December 31, 2016 (a)
 
$
1,239,741

 
$
1,152,479

 
$
2,392,220

Acquisitions
 
6,149

 
—

 
6,149

Loss on disposition of businesses, net
 
—

 
(7,922
)
 
(7,922
)
Foreign currency translation adjustment
 
18,979

 
60,621

 
79,600

Balance as of December 31, 2017 (b)
 
$
1,264,869

 
$
1,205,178

 
$
2,470,047

Acquisitions
 
197,126

 
14,175

 
211,301

Loss on disposition of businesses, net

 
—

 
—

 
—

Foreign currency translation adjustment
 
(24,494
)
 
(32,164
)
 
(56,658
)
Balance as of December 31, 2018 (b)
 
$
1,437,501

 
$
1,187,189

 
$
2,624,690



(a)
The total carrying value of goodwill of companies acquired as of December 31, 2016 in the table above is reflected net of $1,018,780 of accumulated impairment charges, of which $716,925 was recorded in the global components business segment and $301,855 was recorded in the global ECS business segment.
(b)
The total carrying value of goodwill of companies acquired as of December 31, 2018 and December 31, 2017, in the table above is reflected net of $1,026,702 of accumulated impairment charges, of which $716,925 was recorded in the global components business segment and $309,777 was recorded in the global ECS business segment.


52
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

Intangible assets, net, are comprised of the following as of December 31, 2018:
 
Weighted-Average Life
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net
Non-amortizable trade names
indefinite
 
$
101,000

 
$
—

 
$
101,000

Customer relationships
11 years
 
475,050

 
(221,822
)
 
253,228

Developed technology
5 years
 
6,340

 
(4,311
)
 
2,029

Amortizable trade name
9 years
 
19,940

 
(3,553
)
 
16,387

 
 
 
$
602,330

 
$
(229,686
)
 
$
372,644



Intangible assets, net, are comprised of the following as of December 31, 2017:
 
Weighted-Average Life
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net
Non-amortizable trade names
indefinite
 
$
101,000

 
$
—

 
$
101,000

Customer relationships
10 years
 
440,167

 
(259,337
)
 
180,830

Developed technology
5 years
 
6,340

 
(3,043
)
 
3,297

Amortizable trade name
5 years
 
2,409

 
(1,321
)
 
1,088

 
 
 
$
549,916

 
$
(263,701
)
 
$
286,215



In December 2018, the company completed an asset acquisition of a $20,000 customer relationship intangible asset with an assigned useful life of 10 years. The intangible asset is included in the company’s global components segment.

Amortization expense related to identifiable intangible assets was $49,356, $50,071, and $54,886 for the years ended December 31, 2018, 2017, and 2016, respectively. Amortization expense for each of the years 2019 through 2023 is estimated to be approximately $44,336, $38,434, $32,462, $30,180, and $24,271, respectively.


4. Investments in Affiliated Companies

The company owns a 50% interest in several joint ventures with Marubun Corporation (collectively "Marubun/Arrow") and several interests ranging from 43% to 50% in other joint ventures and equity method investments.  These investments are accounted for using the equity method.

The following table presents the company's investment in the following joint ventures at December 31:

  
 
2018
 
2017
Marubun/Arrow
 
$
73,253

 
$
70,167

Other
 
10,440

 
18,180

 
 
$
83,693

 
$
88,347



The equity in earnings of affiliated companies for the years ended December 31 consists of the following:

  
 
2018
 
2017
 
2016
Marubun/Arrow
 
$
5,543

 
$
6,842

 
$
7,629

Other
 
(7,875
)
 
(3,418
)
 
(56
)
 
 
$
(2,332
)
 
$
3,424

 
$
7,573




53
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

Under the terms of various joint venture agreements, the company is required to pay its pro-rata share of the third party debt of the joint ventures in the event that the joint ventures are unable to meet their obligations. At December 31, 2018, the company's pro-rata share of this debt was approximately $2,860. There were no outstanding borrowings under the third party debt agreements of the joint ventures as of December 31, 2017. The company believes there is sufficient equity in each of the joint ventures to meet the obligations.

5. Accounts Receivable

Accounts receivable, net, consists of the following at December 31:
 
 
2018
 
2017
Accounts receivable
 
$
9,021,051

 
$
8,181,879

Allowances for doubtful accounts
 
(75,588
)
 
(56,291
)
Accounts receivable, net
 
$
8,945,463

 
$
8,125,588



The company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments.  The allowances for doubtful accounts are determined using a combination of factors, including the length of time the receivables are outstanding, the current business environment, and historical experience. The company also has notes receivables with certain customers, which are included in "Accounts Receivable, net" in the company's consolidated balance sheets. One such customer, with a combined note and accounts receivable balance of approximately $24,252 and $24,600, as of December 31, 2018 and 2017, respectively, became delinquent on its repayment of the note during the fourth quarter of 2016. The company believes that it has adequately reserved for potential losses; however, it is possible that it could incur a loss in excess of the reserve.

6. Debt

Short-term borrowings, including current portion of long-term debt, consists of the following at December 31:
 
 
2018
 
2017
3.00% note, due 2018
 
$
—

 
$
299,857

Borrowings on lines of credit
 
180,000

 
—

Other short-term borrowings
 
66,257

 
56,949

 
 
$
246,257

 
$
356,806


Other short-term borrowings are primarily utilized to support working capital requirements. The weighted-average interest rate on these borrowings was 2.49% and 2.60% at December 31, 2018 and 2017, respectively.

The company has $200,000 in uncommitted lines of credit. There were $180,000 of outstanding borrowings under the uncommitted lines of credit at December 31, 2018 and no outstanding borrowings at December 31, 2017. These borrowings were provided on a short-term basis and the maturity is agreed upon between the company and the lender. The lines had an effective interest rate of 3.39% at December 31, 2018.

54
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)


Long-term debt consists of the following at December 31:
 
 
2018
 
2017
Asset securitization program
 
$
810,000

 
$
490,000

6.00% notes, due 2020
 
209,147

 
208,971

5.125% notes, due 2021
 
130,546

 
130,400

3.50% notes, due 2022
 
347,288

 
346,518

4.50% notes, due 2023
 
297,622

 
297,122

3.25% notes, due 2024
 
494,091

 
493,161

4.00% notes, due 2025
 
345,762

 
345,182

7.50% senior debentures, due 2027
 
109,776

 
109,694

3.875% notes, due 2028
 
494,095

 
493,563

Other obligations with various interest rates and due dates
 
788

 
18,434

 
 
$
3,239,115

 
$
2,933,045



The 7.50% senior debentures are not redeemable prior to their maturity.  All other notes may be called at the option of the company subject to "make whole" clauses.

The estimated fair market value of long-term debt at December 31, using quoted market prices, is as follows:
 
 
2018
 
2017
3.00% notes, due 2018
 
$
—

 
$
300,500

6.00% notes, due 2020
 
214,500

 
224,000

5.125% notes, due 2021
 
134,500

 
139,000

3.50% notes, due 2022
 
345,000

 
355,000

4.50% notes, due 2023
 
303,500

 
315,500

3.25% notes, due 2024
 
467,000

 
491,000

4.00% notes, due 2025
 
340,500

 
356,500

7.50% senior debentures, due 2027
 
128,000

 
138,500

3.875% notes, due 2028
 
458,500

 
501,000



The carrying amount of the company's short-term borrowings in various countries, borrowings on lines of credit, revolving credit facility, asset securitization program, and other obligations approximate their fair value.

The company has a revolving credit facility that may be used by the company for general corporate purposes including working capital in the ordinary course of business, letters of credit, repayment, prepayment or purchase of long-term indebtedness, acquisitions, and as support for the company's commercial paper program, as applicable. In December 2018, the company amended its revolving credit facility and, among other things, increased its borrowing capacity from $1,800,000 to $2,000,000 and extended its term to mature in December 2023. Interest on borrowings under the revolving credit facility is calculated using a base rate or a Eurocurrency rate plus a spread (1.18% at December 31, 2018), which is based on the company's credit ratings, or an effective interest rate of 2.37% at December 31, 2018. The facility fee, which is based on the company's credit ratings, was .20% of the total borrowing capacity at December 31, 2018. There were no outstanding borrowings under the revolving credit facility at December 31, 2018 and 2017.

The company has a commercial paper program and the maximum aggregate balance of commercial paper notes outstanding may not exceed the borrowing capacity of $1,200,000. The company had no outstanding borrowings under this program as of December 31, 2018 and 2017. The commercial paper program had an effective interest rate of 2.93% for the year-ended December 31, 2018.

The company has an asset securitization program collateralized by accounts receivable of certain of its subsidiaries. In June 2018, the company amended its asset securitization program and, among other things, increased its borrowing capacity from $910,000

55
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

to $1,200,000 and extended its term to mature to June 2021. The asset securitization program is conducted through Arrow Electronics Funding Corporation ("AFC"), a wholly-owned, bankruptcy remote subsidiary. The asset securitization program does not qualify for true sale treatment. Accordingly, the accounts receivable and related debt obligation remain on the company's consolidated balance sheets. Interest on borrowings is calculated using a base rate plus a spread (.40% at December 31, 2018), or an effective interest rate of 2.91% at December 31, 2018. The facility fee is .40% of the total borrowing capacity.

At December 31, 2018 and 2017, the company had $810,000 and $490,000, respectively, in outstanding borrowings under the asset securitization program, which was included in "Long-term debt" in the company's consolidated balance sheets. Total collateralized accounts receivable of approximately $2,754,400 and $2,270,500, respectively, were held by AFC and were included in "Accounts receivable, net" in the company's consolidated balance sheets. Any accounts receivable held by AFC would likely not be available to other creditors of the company in the event of bankruptcy or insolvency proceedings before repayment of any outstanding borrowings under the asset securitization program.

Both the revolving credit facility and asset securitization program include terms and conditions that limit the incurrence of additional borrowings and require that certain financial ratios be maintained at designated levels. The company was in compliance with all covenants as of December 31, 2018 and is currently not aware of any events that would cause non-compliance with any covenants in the future.  

During March 2018, the company redeemed $300,000 principal amount of its 3.00% notes due March 2018.

During 2017, the company completed the sale of $500,000 principal amount of 3.875% notes due in 2028. The net proceeds of the offering of $494,625 were used to redeem the company's 6.875% senior debenture due June 2018 and refinance a portion of the company's 6.00% notes due April 2020, 5.125% notes due March 2021, and 7.50% notes due January 2027. The company recorded a loss on extinguishment of debt of $59,545 for 2017.

During 2017, the company completed the sale of $500,000 principal amount of 3.25% notes due in 2024. The net proceeds of the offering of $493,810 are expected to be used to redeem the company's debt obligations and for general corporate purposes.

In the normal course of business certain of the company’s subsidiaries have agreements to sell, without recourse, selected trade receivables to financial institutions. The company does not retain financial or legal interests in these receivables, and, accordingly they are accounted for as sales of the related receivables and the receivables are removed from the company’s consolidated balance sheets. Financing costs related to these transactions were not material and are included in "Interest and other financing expense, net" in the company’s consolidated statements of operations.

Annual payments of borrowings during each of the years 2019 through 2023 are $245,203, $1,019,711, $130,578, $347,288, and $297,622, respectively, and $1,443,722 for all years thereafter.

Interest and other financing expense, net, includes interest and dividend income of $47,860, $31,156, and $18,084 in 2018, 2017, and 2016, respectively. Interest paid, net of interest and dividend income, amounted to $213,913, $156,974, and $141,816 in 2018, 2017, and 2016, respectively.

7. Financial Instruments Measured at Fair Value


Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  The company utilizes a fair value hierarchy, which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.  The fair value hierarchy has three levels of inputs that may be used to measure fair value:

Level 1
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2
Quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3
Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable.

56
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)


The following table presents assets (liabilities) measured at fair value on a recurring basis at December 31, 2018:
 
 
Balance Sheet Location
 
Level 1
 
Level 2
 
Level 3
 
Total
Cash equivalents (a)
 
Cash and cash equivalents / other assets
 
$
22,883

 
$
—

 
$
—

 
$
22,883

Equity investments (b)
 
Other assets
 
38,045

 
—

 
—

 
38,045

Interest rate swaps
 
Other liabilities
 
—

 
(589
)
 
—

 
(589
)
Foreign exchange contracts
 
Other current assets
 
—

 
4,163

 
—

 
4,163

Foreign exchange contracts
 
Accrued expenses
 
—

 
(2,384
)
 
—

 
(2,384
)
 
 
 
 
$
60,928

 
$
1,190

 
$
—

 
$
62,118



The following table presents assets (liabilities) measured at fair value on a recurring basis at December 31, 2017:
 
 
Balance Sheet Location
 
Level 1
 
Level 2
 
Level 3
 
Total
Cash equivalents (c)
 
Cash and cash equivalents / other assets
 
$
3,267

 
$
286,671

 
$
—

 
$
289,938

Equity investments (b)
 
Other assets
 
52,683

 
—

 
—

 
52,683

Interest rate swaps
 
Other liabilities
 
—

 
(149
)
 
—

 
(149
)
Foreign exchange contracts
 
Other current assets
 
—

 
5,499

 
—

 
5,499

Foreign exchange contracts
 
Accrued expenses
 
—

 
(8,581
)
 
—

 
(8,581
)
Contingent consideration
 
Accrued expenses
 
—

 
—

 
(3,176
)
 
(3,176
)
 
 
 
 
$
55,950

 
$
283,440

 
$
(3,176
)
 
$
336,214


(a)
Cash equivalents include highly liquid investments with an original maturity of less than three months.
(b)
The company has an 8.4% equity ownership interest in Marubun Corporation and a portfolio of mutual funds with quoted market prices. During 2018, 2017, and 2016 the company recorded unrealized gains (losses) of $(13,693), $14,651, and $(4,064), respectively, on equity securities held at the end of each year.
(c)
Cash equivalents at December 31, 2017 included $286,671 invested in certificates of deposit, with an original maturity of less than three months, held in anticipation of our acquisition of eInfochips, which closed in January 2018 (see Note 2).

Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to goodwill and identifiable intangible assets (see Notes 2 and 3). The company tests these assets for impairment if indicators of potential impairment exist or at least annually if indefinite lived.

Derivative Instruments

The company uses various financial instruments, including derivative instruments, for purposes other than trading. Certain derivative instruments are designated at inception as hedges and measured for effectiveness both at inception and on an ongoing basis. Derivative instruments not designated as hedges are marked-to-market each reporting period with any unrealized gains or losses recognized in earnings.

Interest Rate Swaps

The company occasionally enters into interest rate swap transactions that convert certain fixed-rate debt to variable-rate debt or variable-rate debt to fixed-rate debt in order to manage its targeted mix of fixed- and floating-rate debt. The company uses the hypothetical derivative method to assess the effectiveness of its interest rate swaps designated as fair value hedges on a quarterly basis. The effective portion of the change in the fair value of interest rate swaps designated as fair value hedges is recorded as a change to the carrying value of the related hedged debt, and the effective portion of the change in fair value of interest rate swaps designated as cash flow hedges is recorded in the shareholders' equity section in the company's consolidated balance sheets in "Accumulated other comprehensive income." The ineffective portion of the interest rate swaps, if any, is recorded in "Interest and

57
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

other financing expense, net" in the company's consolidated statements of operations. As of December 31, 2018, all outstanding interest rate swaps were designated as fair value hedges.

The terms of outstanding interest rate swap contracts at December 31, 2018 are as follows:
Maturity Date
 
Notional Amount
 
Interest rate due from counterparty
 
Interest rate due to counterparty
April 2020
 
50,000
 
6.000%
 
6 mo. USD LIBOR + 3.896


Foreign Exchange Contracts

The company’s foreign currency exposure relates primarily to international transactions where the currency collected from customers can be different from the currency used to purchase the product. The company’s transactions in its foreign operations are denominated primarily in the following currencies: Euro, Indian Rupee, Canadian Dollar, British Pound, Australian Dollar, and Chinese Renminbi. The company enters into foreign exchange forward, option, or swap contracts (collectively, the "foreign exchange contracts") to mitigate the impact of changes in foreign currency exchange rates.  These contracts are executed to facilitate the hedging of foreign currency exposures resulting from inventory purchases and sales and generally have terms of no more than six months. Gains or losses on these contracts are deferred and recognized when the underlying future purchase or sale is recognized or when the corresponding asset or liability is revalued. The company does not enter into foreign exchange contracts for trading purposes. The risk of loss on a foreign exchange contract is the risk of nonperformance by the counterparties, which the company minimizes by limiting its counterparties to major financial institutions.  The fair value of the foreign exchange contracts are estimated using market quotes.  The notional amount of the foreign exchange contracts at December 31, 2018 and 2017 was $607,747 and $504,084, respectively.

Gains and losses related to non-designated foreign currency exchange contracts are recorded in "Cost of sales" in the company's consolidated statements of operations. Gains and losses related to designated foreign currency exchange contracts, are recorded in "Cost of sales," "Selling, general, and administrative expenses," and "Interest and other financing expense, net" based upon the nature of the underlying hedged transaction, in the company's consolidated statements of operations and were not material for 2018, 2017, and 2016.

The effects of derivative instruments on the company's consolidated statements of operations and other comprehensive income are as follows for the years ended December 31:
 
 
2018
 
2017
 
2016
Gain (Loss) Recognized in Income
 
 
 
 
 
 
Foreign exchange contracts
 
$
6,940

 
$
(20,877
)
 
$
1,535

Interest rate swaps
 
(1,236
)
 
(831
)
 
(608
)
Total
 
$
5,704

 
$
(21,708
)
 
$
927

Loss Recognized in Other Comprehensive Income before reclassifications
 
 
 
 
 
 
Foreign exchange contracts
 
$
(409
)
 
$
(2,022
)
 
$
(153
)
Interest rate swaps
 
—

 
(4,672
)
 
—

Total
 
$
(409
)
 
$
(6,694
)
 
$
(153
)


Other

The carrying amount of cash and cash equivalents, accounts receivable, net, and accounts payable approximate their fair value due to the short maturities of these financial instruments.


58
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

8. Income Taxes

The provision for income taxes for the years ended December 31 consists of the following:
 
2018
 
2017
 
2016
Current:
 
 
 
 
 
Federal
$
(12,345
)
 
$
119,298

 
$
45,371

State
20,141

 
(6,156
)
 
7,022

International
178,767

 
134,987

 
109,598

 
$
186,563

 
$
248,129

 
$
161,991

Deferred:
 
 
 
 
 
Federal
$
19,207

 
$
31,167

 
$
29,973

State
312

 
13,535

 
7,161

International
(18,283
)
 
(6,290
)
 
(8,394
)
 
1,236

 
38,412

 
28,740

 
$
187,799

 
$
286,541

 
$
190,731



The principal causes of the difference between the U.S. federal statutory tax rate of 21% and effective income tax rates for the years ended December 31 are as follows:
 
2018
 
2017
 
2016
United States
$
186,677

 
$
115,664

 
$
235,317

International
722,696

 
578,253

 
480,202

Income before income taxes
$
909,373

 
$
693,917

 
$
715,519

 
 
 
 
 
 
Provision at statutory tax rate
$
190,968

 
$
242,415

 
$
250,446

State taxes, net of federal benefit
18,888

 
5,184

 
9,219

International effective tax rate differential
7,480

 
(88,444
)
 
(64,002
)
Capital loss
60,757

 
—

 
—

Change in valuation allowance
(66,557
)
 
1,408

 
7,174

Other non-deductible expenses
14,128

 
12,700

 
3,516

Changes in tax accruals
(3,968
)
 
(7,973
)
 
(3,679
)
Tax credits
(7,884
)
 
(8,170
)
 
(14,510
)
Tax Act's transition tax (a)
(28,323
)
 
196,010

 
—

Tax Act's impact on deferred taxes (b)
—

 
(71,261
)
 
—

Other
2,310

 
4,672

 
2,567

Provision for income taxes
$
187,799

 
$
286,541

 
$
190,731



(a)
For the year ended December 31, 2017, the company accrued a provisional estimate of $196,010 of tax expense for the Tax Act’s one-time transition tax on the foreign subsidiaries’ accumulated, unremitted earnings in accordance with U.S. Securities and Exchange Commission’s Staff Accounting Bulletin (“SAB 118”). Additionally, during the fourth quarter of 2018 the company recorded a $28,323 benefit upon finalizing its analysis of the impact from the Tax Act.
(b)
For the year ended December 31, 2017, the company accrued $71,261 in provisional tax benefit related to the net change in deferred tax liabilities stemming from the Tax Act’s reduction of the U.S. federal tax rate from 35% to 21%, and disallowance of certain incentive based compensation tax deductibility under Internal Revenue Code Section 162(m).

With the effective date of January 1, 2018, the Tax Act also introduced a provision to tax global intangible low-taxed income (“GILTI”) of foreign subsidiaries and a measure to tax certain intercompany payments under base erosion anti-abuse tax (“BEAT”)

59
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

regime. For the period ended December 31, 2018, the company did not generate intercompany transactions that met BEAT threshold, but did generate GILTI tax, which was not material to the company's consolidated financial position or results of operations. The company elected to account for GILTI tax as a current period cost.

During the fourth quarter of 2018, the company completed its analysis of the impact from the Tax Act and recorded a favorable adjustment in the amount of $28,323, recorded within "Provision for income taxes" in the company's consolidated statements of operations, which is entirely related to the previously recorded provisional estimate for the Transition tax on non-U.S. subsidiaries’ unremitted earnings of $196,010.

After considering the impact of taxable losses, tax payments, tax credits, and other tax accruals, as of December 31, 2018, the company’s remaining cash tax payable for the transition tax on foreign unremitted earnings is $38,000, which is reported as a long-term tax payable due to the company’s intent to pay this federal transition tax over a period of eight years as permitted by the Tax Act.
 
The company evaluates and establishes liabilities for uncertain tax positions that may be challenged by local tax authorities and that may not be fully sustained, despite the belief that the underlying tax positions are fully supportable. Uncertain tax positions are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, developments in case law and closing of statutes of limitations. Such adjustments are reflected in the tax provision as appropriate.

At December 31, 2018, the company had a liability for unrecognized tax position of $35,879. The timing of the resolution of these uncertain tax positions is dependent on the tax authorities' income tax examination processes. Material changes are not expected, however, it is possible that the amount of unrecognized tax benefits with respect to uncertain tax positions could increase or decrease during 2019. Currently, the company is unable to make a reasonable estimate of when tax cash settlement would occur and how it would impact the effective tax rate.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31 is as follows:
 
2018
 
2017
 
2016
Balance at beginning of year
$
24,361

 
$
31,534

 
$
36,935

Additions based on tax positions taken during a prior period
583

 
2,342

 
2,356

Reductions based on tax positions taken during a prior period
(1,248
)
 
(1,242
)
 
(6,305
)
Additions related to positions taken upon finalization of Tax Act during the current period
16,506

 
—

 
—

Additions based on tax positions taken during the current period
3,133

 
6,543

 
3,935

Reductions based on tax positions taken during the current period
(233
)
 
—

 
—

Reductions related to settlement of tax matters
(136
)
 
(2,921
)
 
(2,795
)
Reductions related to a lapse of applicable statute of limitations
(7,087
)
 
(11,895
)
 
(2,592
)
Balance at end of year
$
35,879

 
$
24,361

 
$
31,534


Interest costs related to unrecognized tax benefits are classified as a component of "Interest and other financing expense, net" in the company's consolidated statements of operations. In 2018, 2017, and 2016, the company recognized $945, $(2,792), and $(1,946), respectively, of interest benefit (expense) related to unrecognized tax benefits. At December 31, 2018 and 2017, the company had accrued a liability of $4,189 and $3,301, respectively, for the payment of interest related to unrecognized tax benefits.

In many cases the company's uncertain tax positions are related to tax years that remain subject to examination by tax authorities. The following describes the open tax years, by major tax jurisdiction, as of December 31, 2018:


60
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

United States - Federal
 
2015 - present
United States - States
 
2012 - present
Germany (c)
 
2010 - present
Hong Kong
 
2012 - present
Italy (c)
 
2013 - present
Sweden
 
2013 - present
United Kingdom
 
2015 - present

(c) Includes federal as well as local jurisdictions.

Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated balance sheets. These temporary differences result in taxable or deductible amounts in future years.

The deferred tax assets and liabilities consist of the following at December 31:
 
2018
 
2017
Deferred tax assets:
 
 
 
  Net operating loss carryforwards
$
129,641

 
$
113,327

  Capital loss carryforwards
60,606

 
—

  Inventory adjustments
52,094

 
42,376

  Allowance for doubtful accounts
17,016

 
12,368

  Accrued expenses
27,088

 
28,229

  Interest carryforward
5,008

 
15,964

  Stock-based compensation awards
12,824

 
12,982

  Integration and restructuring
2,547

 
6,726

  Other
—

 
17,015

 
306,824

 
248,987

  Valuation allowance
(80,471
)
 
(13,915
)
Total deferred tax assets
$
226,353

 
$
235,072

 
 
 
 
Deferred tax liabilities:
 
 
 
  Goodwill
$
(121,346
)
 
$
(109,994
)
  Depreciation
(131,848
)
 
(116,725
)
  Intangible assets
(18,754
)
 
(18,760
)
  Other comprehensive income items
(8,301
)
 
(5,542
)
  Other
(6,634
)
 
—

Total deferred tax liabilities
$
(286,883
)
 
$
(251,021
)
Total net deferred tax assets (liabilities)
$
(60,530
)
 
$
(15,949
)


At December 31, 2018, the company had international tax loss carryforwards of approximately $391,598, of which $26,663 have expiration dates ranging from 2019 to 2038, and the remaining $364,935 have no expiration date. Deferred tax assets related to these international tax loss carryforwards were $120,148 with a corresponding valuation allowance of $7,533.

At December 31, 2018, the company also had deferred tax assets of $1,496 related to U.S. Federal net operating loss carryforwards from acquired subsidiaries. These U.S. Federal net operating losses expire in various years beginning after 2027. Additionally, as of December 31, 2018, the company had U.S. state net operating loss carryforwards related deferred tax assets of approximately $7,997 with a corresponding valuation allowance for the same amount. Valuation allowances are needed when deferred tax assets

61
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

may not be realized due to the uncertainty of the timing and the ability of the company to generate sufficient future taxable income in certain tax jurisdictions.

The company historically considered the undistributed earnings of its foreign subsidiaries to be indefinitely reinvested and as a result has not provided for taxes on such earnings. The company has not changed previous indefinite reinvestment assertion following the enactment of the Tax Act, which required a one-time transition tax for deemed repatriation of accumulated undistributed earnings of certain foreign subsidiaries. At December 31, 2018, cumulative undistributed earnings of foreign subsidiaries were approximately $4,800,000, which partially have been already subjected to U.S. transition tax as part of the Tax Act. If the company determines that all or a portion of its foreign earnings are no longer indefinitely reinvested, then the company may be subject to additional foreign withholding taxes and U.S. state income taxes, beyond the Tax Act’s one-time transition tax.

Income taxes paid, net of income taxes refunded, amounted to $226,422, $231,183, and $190,109 in 2018, 2017, and 2016, respectively.

9. Restructuring, Integration, and Other Charges

Restructuring initiatives are due to the company's continued efforts to lower cost and drive operational efficiency. Integration costs are primarily related to the integration of acquired businesses within the company's pre-existing business and the consolidation of certain operations. The following table presents the components of the restructuring, integration, and other charges for the years ended December 31:

 
 
2018
 
2017
 
2016
Restructuring and integration charges - current period actions
 
$
23,698

 
$
46,816

 
$
32,894

Restructuring and integration charges - actions taken in prior periods
 
7,517

 
6,191

 
3,611

Other charges
 
29,146

 
21,581

 
24,886

 
 
$
60,361

 
$
74,588

 
$
61,391



2018 Restructuring and Integration Charge

The following table presents the components of the 2018 restructuring and integration charge of $23,698 and activity in the related restructuring and integration accrual for 2018:

 
 
Personnel
Costs
 
Facilities Costs
 
Other
 
Total
Restructuring and integration charge
 
$
15,323

 
$
8,240

 
$
135

 
$
23,698

Payments
 
(12,099
)
 
(3,547
)
 
(35
)
 
(15,681
)
Foreign currency translation
 
(478
)
 
(177
)
 
(1
)
 
(656
)
Balance as of December 31, 2018
 
$
2,746

 
$
4,516

 
$
99

 
$
7,361


 

62
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

2017 Restructuring and Integration Charge

The following table presents the components of the 2017 restructuring and integration charge of $46,816 and activity in the related restructuring and integration accrual for 2017 and 2018:

 
 
Personnel 
Costs
 
Facilities Costs
 
Other
 
Total
Restructuring and integration charge
 
$
37,615

 
$
8,192

 
$
1,009

 
$
46,816

Payments
 
(23,384
)
 
(3,494
)
 
(926
)
 
(27,804
)
Foreign currency translation
 
1,045

 
176

 
17

 
1,238

Balance as of December 31, 2017
 
15,276

 
4,874

 
100

 
20,250

Restructuring and integration charge
 
2,456

 
2,870

 
61

 
5,387

Payments
 
(11,450
)
 
(2,696
)
 
(58
)
 
(14,204
)
Foreign currency translation
 
(1,550
)
 
(284
)
 
(9
)
 
(1,843
)
Balance as of December 31, 2018
 
$
4,732

 
$
4,764

 
$
94

 
$
9,590



Restructuring and Integration Accruals Related to Actions Taken Prior to 2017

Included in restructuring, integration, and other charges for 2018 are restructuring and integration charges of $2,130 related to restructuring and integration actions taken prior to 2017. The restructuring and integration charge includes adjustments to personnel costs of $1,131 and facilities costs of $999. The restructuring and integration accruals related to actions taken prior to 2017 of $8,878, include accruals for personnel costs of $8,060, accruals for facilities costs of $688, and accrual for other costs of $130.

Restructuring and Integration Accrual Summary

In summary, the restructuring and integration accruals aggregate $25,829 at December 31, 2018, all of which are expected to be spent in cash, and are expected to be utilized as follows:

•
The accruals for personnel costs totaling $15,538 relate to the termination of personnel that have scheduled payouts of $14,299 in 2019 and $1,239 in 2020. 
•
The accruals for facilities totaling $9,968 relate to vacated leased properties that have scheduled payments of $4,074 in 2019, $1,954 in 2020, $1,134 in 2021, $781 in 2022, $765 in 2023, and $1,260 thereafter.
•
The accruals for other totaling $323 have scheduled payments of $21 in 2019 and $302 in 2020.

Other Charges

Included in restructuring, integration, and other charges for 2018 are other expenses of $29,146. The following items represent other charges and credits recorded to restructuring, integration, and other charges for the year ended December 31, 2018:

•
acquisition related charges for 2018 of $10,236 related to professional and other fees directly related to recent acquisition activity as well as contingent consideration for acquisitions completed in prior years; and
•
$11,188 in charges related to relocation and infrastructure upgrades of the company’s data centers, and other centralization efforts to maximize operating efficiencies.

Included in restructuring, integration, and other charges for 2017 are other expenses of $21,581. The following items represent other charges and credits recorded to restructuring, integration, and other charges for the year ended December 31, 2017:

•
an additional expense of $2,071 to increase its accrual for the Wyle environmental obligation (see Note 15);
•
acquisition related charges for 2017 of $7,658 related to contingent consideration for acquisitions completed in prior years, which were conditional upon the financial performance of the acquired companies and the continued employment of the selling shareholders, as well as professional and other fees directly related to recent acquisition activity; and
•
a net loss on real estate transaction of $3,144.


63
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

Included in restructuring, integration, and other charges for 2016 are other expenses of $24,886. The following items represent other charges and credits recorded to restructuring, integration, and other charges for the year ended December 31, 2016:

•
an additional expense of $11,771 to increase its accrual for the Wyle environmental obligation (see Note 15);
•
acquisition related charges for 2016 of $8,705 related to contingent consideration for acquisitions completed in prior years, which were conditional upon the financial performance of the acquired companies and the continued employment of the selling shareholders, as well as professional and other fees directly related to recent acquisition activity;
•
a fraud loss, net of insurance recoveries and incremental expenses, of $4,329; and
•
a credit related to the release of a $2,376 legal reserve.

In January 2016, the company determined that it was the target of criminal fraud by persons impersonating a company executive, which resulted in unauthorized transfers of cash from a company account in Europe to outside bank accounts in Asia. Legal actions by the company and law enforcement are ongoing. The information gathered by the company indicates that this was an isolated event not associated with a security breach or loss of data. Additionally, no officers or employees of the company were involved in the fraud.

10. Shareholders' Equity

Accumulated Other Comprehensive Income (Loss)

The following table presents the changes in Accumulated other comprehensive income (loss), excluding noncontrolling interests:
 
 
Foreign Currency Translation Adjustment and Other
 
Unrealized Gain (loss) on Investment Securities, Net
 
Unrealized Gain (Loss) on Interest Rate Swaps Designated as Cash Flow Hedges, Net
 
Employee Benefit Plan Items, Net
 
Total
Balance as of December 31, 2016
 
$
(348,241
)
 
$
6,094

 
$
(2,947
)
 
$
(38,445
)
 
$
(383,539
)
Other comprehensive income (loss) before reclassifications (a)
 
253,066

 
8,852

 
(2,870
)
 
(3,812
)
 
255,236

Amounts reclassified into income (loss)
 
(9,756
)
 
—

 
511

 
12,665

 
3,420

Net change in accumulated other comprehensive income (loss) for the year ended December 31, 2017
 
243,310

 
8,852

 
(2,359
)
 
8,853

 
258,656

Balance as of December 31, 2017
 
(104,931
)
 
14,946

 
(5,306
)
 
(29,592
)
 
(124,883
)
Reclassification to Retained Earnings (b)

 
—

 
(14,946
)
 
(1,185
)
 
(6,223
)
 
(22,354
)
Other comprehensive income (loss) before reclassifications (a)
 
(161,359
)
 
—

 
—

 
4,939

 
(156,420
)
Amounts reclassified into income (loss)
 
(37
)
 
—

 
931

 
3,314

 
4,208

Net change in accumulated other comprehensive income (loss) for the year ended December 31, 2018
 
(161,396
)
 
(14,946
)
 
(254
)
 
2,030

 
(174,566
)
Balance as of December 31, 2018
 
$
(266,327
)
 
$
—

 
$
(5,560
)
 
$
(27,562
)
 
$
(299,449
)

(a)
Foreign currency translation adjustment includes intra-entity foreign currency transactions that are of a long-term investment nature of $11,712 and $(64,610) for 2018 and 2017, respectively.
(b)
Amount relates to unrealized gains and losses on investments and stranded tax effects reclassified from "Accumulated other comprehensive income" to "Retained earnings" in accordance with ASU No. 2018-02 and ASU No. 2016-01 (Note 1).


64
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

Common Stock Outstanding Activity

The following table sets forth the activity in the number of shares outstanding (in thousands):
 
 
Common Stock Issued
 
Treasury Stock
 
Common Stock Outstanding
Common stock outstanding at December 31, 2015
 
125,424

 
34,501

 
90,923

Shares issued for stock-based compensation awards
 
—

 
(1,372
)
 
1,372

Repurchases of common stock
 
—

 
3,382

 
(3,382
)
Common stock outstanding at December 31, 2016
 
125,424

 
36,511

 
88,913

Shares issued for stock-based compensation awards
 
—

 
(1,097
)
 
1,097

Repurchases of common stock
 
—

 
2,319

 
(2,319
)
Common stock outstanding at December 31, 2017
 
125,424

 
37,733

 
87,691

Shares issued for stock-based compensation awards
 
—

 
(709
)
 
709

Repurchases of common stock
 
—

 
3,209

 
(3,209
)
Common stock outstanding at December 31, 2018
 
125,424

 
40,233

 
85,191


The company has 2,000,000 authorized shares of serial preferred stock with a par value of one dollar. There were no shares of serial preferred stock outstanding at December 31, 2018 and 2017.

Share-Repurchase Programs

The following table shows the company's Board of Directors (the "Board") approved share-repurchase programs as of December 31, 2018:
Month of Board Approval
 
Dollar Value Approved for Repurchase
 
Dollar Value of Shares Repurchased
 
Approximate
Dollar Value of
Shares that May
Yet be
Purchased
Under the
Program
December 2016
 
$
400,000

 
$
271,388

 
$
128,612

December 2018
 
600,000

 
—

 
600,000

Total
 
$
1,000,000

 
$
271,388

 
$
728,612




65
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

11. Net Income Per Share

The following table presents the computation of net income per share on a basic and diluted basis for the years ended December 31 (shares in thousands):
 
 
2018
 
2017
 
2016
Net income attributable to shareholders
 
$
716,195

 
$
402,176

 
$
522,815

Weighted-average shares outstanding - basic
 
87,476

 
88,681

 
90,960

Net effect of various dilutive stock-based compensation awards
 
968

 
1,085

 
1,073

Weighted-average shares outstanding - diluted
 
88,444

 
89,766

 
92,033

Net income per share:
 
 
 
 
 
 
Basic
 
$
8.19

 
$
4.54

 
$
5.75

Diluted (a)
 
$
8.10

 
$
4.48

 
$
5.68



(a)
Stock-based compensation awards for the issuance of 651 shares, 380 shares, and 766 shares for the years ended December 31, 2018, 2017, and 2016, respectively, were excluded from the computation of net income per share on a diluted basis as their effect was anti-dilutive.

12. Employee Stock Plans

Omnibus Plan

The company maintains the Arrow Electronics, Inc. 2004 Omnibus Incentive Plan (the "Omnibus Plan"), which provides an array of equity alternatives available to the company when designing compensation incentives. The Omnibus Plan permits the grant of cash-based awards, non-qualified stock options, incentive stock options ("ISOs"), stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, covered employee annual incentive awards, and other stock-based awards. The Compensation Committee of the company's Board of Directors (the "Compensation Committee") determines the vesting requirements, termination provision, and the terms of the award for any awards under the Omnibus Plan when such awards are issued.

Under the terms of the Omnibus Plan, a maximum of 19,100,000 shares of common stock may be awarded. There were 3,885,282 and 4,896,220 shares available for grant under the Omnibus Plan as of December 31, 2018 and 2017, respectively. Generally, shares are counted against the authorization only to the extent that they are issued. Restricted stock, restricted stock units, performance shares, and performance units count against the authorization at a rate of 1.69 to 1.

The company recorded, as a component of "Selling, general, and administrative expenses," amortization of stock-based compensation of $46,238, $39,122, and $39,825 in 2018, 2017, and 2016, respectively. The actual tax benefit realized from share-based payment awards during 2018, 2017, and 2016 was $7,517, $18,846, and $19,745, respectively.

Stock Options

Under the Omnibus Plan, the company may grant both ISOs and non-qualified stock options. ISOs may only be granted to employees of the company, its subsidiaries, and its affiliates. The exercise price for options cannot be less than the fair market value of Arrow's common stock on the date of grant. Options generally vest in equal installments over a four-year period. Options currently outstanding have contractual terms of ten years.


66
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

The following information relates to the stock option activity for the year ended December 31, 2018:

 
Shares
 
Weighted- Average Exercise Price
 
Weighted- Average Remaining Contractual Life
 
Aggregate Intrinsic Value
Outstanding at December 31, 2017
1,540,369

 
$
58.34

 
 
 
 
 
 
Granted
332,928

 
 
81.88

 
 
 
 
 
 
Exercised
(176,783
)
 
 
49.86

 
 
 
 
 
 
Forfeited
(64,537
)
 
 
67.79

 
 
 
 
 
 
Outstanding at December 31, 2018
1,631,977

 
 
63.69

 
81
months
 
$
14,401

Exercisable at December 31, 2018
787,871

 
$
54.75

 
65
months
 
$
11,579


The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the company's closing stock price on the last trading day of 2018 and the exercise price, multiplied by the number of in-the-money options) received by the option holders had all option holders exercised their options on December 31, 2018. This amount changes based on the market value of the company's stock.

The total intrinsic value of options exercised during 2018, 2017, and 2016 was $5,368, $15,320, and $10,511, respectively.

Cash received from option exercises during 2018, 2017, and 2016 was $8,819, $22,195, and $18,967, respectively, and is included within the financing activities section in the company's consolidated statements of cash flows.

The fair value of stock options was estimated using the Black-Scholes valuation model with the following weighted-average assumptions for the years ended December 31:

 
2018
 
2017
 
2016
Volatility (percent) (a)
24
 
26
 
31
Expected term (in years) (b)
5.5
 
5.1
 
5.2
Risk-free interest rate (percent) (c)
2.7
 
1.9
 
1.3

(a)
Volatility is measured using historical daily price changes of the company's common stock over the expected term of the option.
(b)
The expected term represents the weighted-average period the option is expected to be outstanding and is based primarily on the historical exercise behavior of employees.
(c)
The risk-free interest rate is based on the U.S. Treasury zero-coupon yield with a maturity that approximates the expected term of the option.

There is no expected dividend yield.

The weighted-average fair value per option granted was $23.12, $20.01, and $16.93 during 2018, 2017, and 2016, respectively.

Performance Awards

The Compensation Committee, subject to the terms and conditions of the Omnibus Plan, may grant performance share and/or performance unit awards (collectively "performance awards"). The fair value of a performance award is the fair market value of the company's common stock on the date of grant. Such awards will be earned only if performance goals over performance periods established by or under the direction of the Compensation Committee are met. The performance goals and periods may vary from participant-to-participant, group-to-group, and time-to-time. The performance awards will be delivered in common stock at the end of the service period based on the company's actual performance compared to the target metric and may be from 0% to 185%

67
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

of the initial award. Compensation expense is recognized using the graded vesting method over the three-year service period and is adjusted each period based on the current estimate of performance compared to the target metric.

Restricted Stock

Subject to the terms and conditions of the Omnibus Plan, the Compensation Committee may grant shares of restricted stock and/or restricted stock units. Restricted stock units are similar to restricted stock except that no shares are actually awarded to the participant on the date of grant. Shares of restricted stock and/or restricted stock units awarded under the Omnibus Plan may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable period of restriction established by the Compensation Committee and specified in the award agreement (and in the case of restricted stock units until the date of delivery or other payment). Compensation expense is recognized on a straight-line basis as shares become free of forfeiture restrictions (i.e. vest) generally over a four-year period.

Non-Employee Director Awards

The company's Board shall set the amounts and types of equity awards that shall be granted to all non-employee directors on a periodic, nondiscriminatory basis pursuant to the Omnibus Plan, as well as any additional amounts, if any, to be awarded, also on a periodic, nondiscriminatory basis, based on each of the following: the number of committees of the Board on which a non-employee director serves, service of a non-employee director as the chair of a Committee of the Board, service of a non-employee director as Chairman of the Board or Lead Director, or the first selection or appointment of an individual to the Board as a non-employee director. Non-employee directors currently receive annual awards of fully-vested restricted stock units valued at $150. All restricted stock units are settled in common stock following the director's separation from the Board.

Unless a non-employee director gives notice setting forth a different percentage, 50% of each director's annual retainer fee is deferred and converted into units based on the fair market value of the company's stock as of the date it was payable. A non-employee director can choose between one-year cliff vesting or keep the deferral until separation from the Board. After separation from the board, the deferral will be converted into a share of company stock and distributed to the non-employee director as soon as practicable following such date.

Summary of Non-Vested Shares

The following information summarizes the changes in non-vested performance shares, performance units, restricted stock, and restricted stock units for 2018:

 
Shares
 
Weighted- Average Grant Date Fair Value
Non-vested shares at December 31, 2017
1,176,965

 
$
62.60

Granted
538,712

 
 
77.97

Vested
(523,477
)
 
 
62.49

Forfeited
(99,335
)
 
 
66.50

Non-vested shares at December 31, 2018
1,092,865

 
$
69.87



The total fair value of shares vested during 2018, 2017, and 2016 was $42,381, $42,470, and $52,026, respectively.

As of December 31, 2018, there was $39,954 of total unrecognized compensation cost related to non-vested shares and stock options which is expected to be recognized over a weighted-average period of 2.41 years.

13. Employee Benefit Plans

The company maintains an unfunded Arrow supplemental executive retirement plan ("SERP") under which the company will pay supplemental pension benefits to certain employees upon retirement. As of December 31, 2018, there were 10 current and 22 former corporate officers participating in this plan. The Board determines those employees who are eligible to participate in the Arrow SERP.

68
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)


The Arrow SERP, as amended, provides for the pension benefits to be based on a percentage of average final compensation, based on years of participation in the Arrow SERP. The Arrow SERP permits early retirement, with payments at a reduced rate, based on age and years of service subject to a minimum retirement age of 55. Participants whose accrued rights under the Arrow SERP, prior to the 2002 amendment, which were adversely affected by the amendment, will continue to be entitled to such greater rights.

Additionally, as part of the company's acquisition of Wyle in 2000, Wyle provided retirement benefits for certain employees under a defined benefit plan. Benefits under this plan were frozen as of December 31, 2000.

On December 31, 2018, the Wyle defined benefit plan was terminated by the company with estimated plan settlement expected to occur in 2019. The company has made other arrangements with the participants in the plan and is terminating the plan to reduce administrative burdens. Prior to the termination of the plan, the company adopted an amendment to the Wyle defined benefit plan that provided eligible plan participants with the option to receive an early distribution of their pension benefits. The settlement loss is expected to be approximately $25,500. Benefit payments of $60,530 are expected to be paid in 2019.

In 2017, the company entered into a settlement for a portion of its Wyle defined benefit plan. Participants will receive benefits through an insurance annuity contract. The settlement of $42,985 was completed during October 2017 and the company incurred a settlement expense of $16,706, which is recorded in the "Employee benefit plan expense" line item in the company's consolidated statements of operations.

In 2016, the company adopted an amendment to its Wyle defined benefit plan that provided eligible plan participants with the option to receive an early distribution of their pension benefits. Lump sum payments of $26,063 were made during June 2016 and the company incurred a settlement expense of $12,211, which is recorded in the "Employee benefit plan expense" line item in the company's consolidated statements of operations.


69
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

The company uses a December 31 measurement date for the Arrow SERP and the Wyle defined benefit plan. Pension information for the years ended December 31 is as follows:
 
Arrow SERP
 
Wyle Defined Benefit Plan
 
2018
 
2017
 
2018
 
2017
Accumulated benefit obligation
$
82,951

 
$
90,368

 
$
59,399

 
$
60,374

Changes in projected benefit obligation:
 
 
 
 
 
 
 
Projected benefit obligation at beginning of year
97,607

 
91,038

 
60,374

 
97,984

Service cost
3,103

 
2,310

 
—

 
—

Interest cost
3,338

 
3,552

 
2,114

 
3,860

Actuarial loss (gain)
(8,874
)
 
4,929

 
(322
)
 
7,595

Benefits paid
(4,596
)
 
(4,222
)
 
(2,767
)
 
(6,080
)
Settlement
—

 
—

 
—

 
(42,985
)
Projected benefit obligation at end of year
90,578

 
97,607

 
59,399

 
60,374

Changes in plan assets:
 
 
 
 
 
 
 
Fair value of plan assets at beginning of year
—

 
—

 
46,663

 
71,470

Actual return on plan assets
—

 
—

 
29

 
10,258

Company contributions
—

 
—

 
11,000

 
14,000

Benefits paid
—

 
—

 
(2,767
)
 
(6,080
)
Settlement
—

 
—

 
—

 
(42,985
)
Fair value of plan assets at end of year
—

 
—

 
54,925

 
46,663

Funded status
$
(90,578
)
 
$
(97,607
)
 
$
(4,474
)
 
$
(13,711
)
Amounts recognized in the company's consolidated balance sheets:
 
 
 
 
 
 
 
Current liabilities
$
(4,532
)
 
$
(4,535
)
 
$
(4,474
)
 
$
—

Noncurrent liabilities
(86,046
)
 
(93,072
)
 
—

 
(13,711
)
Net liabilities at end of year
(90,578
)
 
(97,607
)
 
(4,474
)
 
(13,711
)
Components of net periodic pension cost:
 
 
 
 
 
 
 
Service cost
3,103

 
2,310

 
—

 
—

Interest cost
3,338

 
3,552

 
2,114

 
3,860

Expected return on plan assets
—

 
—

 
(2,648
)
 
(3,449
)
Amortization of net loss
1,531

 
1,216

 
702

 
1,666

Settlement charge
—

 
—

 
—

 
16,706

Net periodic pension cost
$
7,972

 
$
7,078

 
$
168

 
$
18,783

Weighted-average assumptions used to determine benefit obligation:
 
 
 
 
 
 
 
Discount rate
4.20
%
 
3.50
%
 
2.60
%
 
3.60
%
Rate of compensation increase
5.00
%
 
5.00
%
 
N/A

 
N/A

Expected return on plan assets
N/A

 
N/A

 
2.25
%
 
5.25
%
Weighted-average assumptions used to determine net periodic pension cost:
 
 
 
 
 
 
 
Discount rate
3.50
%
 
4.00
%
 
3.60
%
 
4.00
%
Rate of compensation increase
5.00
%
 
5.00
%
 
N/A

 
N/A

Expected return on plan assets
N/A

 
N/A

 
5.25
%
 
4.75
%





70
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

The amounts reported for net periodic pension cost and the respective benefit obligation amounts are dependent upon the actuarial assumptions used. The company reviews historical trends, future expectations, current market conditions, and external data to determine the assumptions. The discount rate represents the market rate for a high-quality corporate bond. The rate of compensation increase is determined by the company, based upon its long-term plans for such increases. The expected return on plan assets is based on current and expected asset allocations, historical trends, and projected returns on those assets. The actuarial assumptions used to determine the net periodic pension cost are based upon the prior year's assumptions used to determine the benefit obligation.

Benefit payments are expected to be paid as follows:

 
Arrow SERP
2019
$
4,532

2020
4,481

2021
5,825

2022
6,058

2023
6,405

2024-2026
33,724



The company makes contributions to the Wyle defined benefit plan so that minimum contribution requirements, as determined by government regulations, are met. The company made contributions of $11,000 and $14,000 in 2018 and 2017, respectively. The company is planning on contributing $4,700 to the plan in 2019, however, there is no requirement to make any contributions in 2019. The company has funded $81,962 of the Arrow SERP obligation for the former corporate officers in a rabbi trust comprised primarily of life insurance policies and mutual fund assets.

The fair values of the company's pension plan assets for the Wyle defined benefit plan at December 31, 2018, utilizing the fair value hierarchy discussed in Note 7, are as follows:

 
Level 1
 
Level 2
 
Level 3
 
Total
Fixed Income:
 
 
 
 
 
 
 
Mutual funds
$
54,925

 
$
—

 
$
—

 
$
54,925

Total
$
54,925

 
$
—

 
$
—

 
$
54,925


The fair values of the company's pension plan assets for the Wyle defined benefit plan at December 31, 2017, utilizing the fair value hierarchy discussed in Note 7, are as follows:

 
Level 1
 
Level 2
 
Level 3
 
Total
Equities:
 
 
 
 
 
 
 
U.S. common stocks
$
17,039

 
$
—

 
$
—

 
$
17,039

International mutual funds
6,975

 
—

 
—

 
6,975

Index mutual funds
2,942

 
—

 
—

 
2,942

Fixed Income:
 
 
 
 
 
 
 
Mutual funds
19,707

 
—

 
—

 
19,707

Total
$
46,663

 
$
—

 
$
—

 
$
46,663



As of December 31, 2018, 100% of plan assets are invested in fixed income to facilitate the settlement of the Wyle defined benefit plan termination in 2019.


71
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

Comprehensive Income Items

In 2018, 2017, and 2016, actuarial (gains) losses of $(6,339), $3,795, and $740, respectively, were recognized in comprehensive income, net of related taxes, related to the company's defined benefit plans. In 2018, 2017, and 2016, a reclassification adjustment of comprehensive income was recognized, net of related taxes, as a result of being recognized in net periodic pension cost for an actuarial loss of $1,758, $12,070, and $10,625, respectively.

Accumulated other comprehensive income (loss) at December 31, 2018 and 2017 includes unrecognized actuarial losses, primarily related to the Wyle defined benefit plan, net of related taxes, of $26,939 and $28,569, respectively, that have not yet been recognized in net periodic pension cost.

The actuarial loss included in accumulated other comprehensive income (loss), net of related taxes, which is expected to be recognized in net periodic pension cost is $536 as of December 31, 2019.

Defined Contribution Plan

The company has defined contribution plans for eligible employees, which qualify under Section 401(k) of the Internal Revenue Code. The company's contribution to the plans, which are based on a specified percentage of employee contributions, amounted to $20,523, $13,627, and $13,432 in 2018, 2017, and 2016, respectively. The company made discretionary contributions to the company's defined contribution 401(k) plan, which amounted to $7,503, $7,574, and $7,572 in 2018, 2017, and 2016, respectively. Certain international subsidiaries maintain separate defined contribution plans for their employees and made contributions thereunder, which amounted to $18,996, $18,815, and $12,882 in 2018, 2017, and 2016, respectively.

14. Lease Commitments

The company leases certain office, distribution, and other property under non-cancelable operating leases expiring at various dates through 2033. Rental expense under non-cancelable operating leases, net of sublease income, amounted to $88,988, $83,636, and $78,521 in 2018, 2017, and 2016, respectively.

Aggregate minimum rental commitments under all non-cancelable operating leases, exclusive of real estate taxes, insurance, and leases related to facilities closed as a result of the integration of acquired businesses and the restructuring of the company, are as follows:
2019
 
$
85,770

2020
 
67,158

2021
 
52,826

2022
 
44,801

2023
 
37,528

Thereafter
 
147,294



15. Contingencies

Environmental Matters

In connection with the purchase of Wyle in August 2000, the company acquired certain of the then outstanding obligations of Wyle, including Wyle's indemnification obligations to the purchasers of its Wyle Laboratories division for environmental clean-up costs associated with any then existing contamination or violation of environmental regulations. Under the terms of the company's purchase of Wyle from the sellers, the sellers agreed to indemnify the company for certain costs associated with the Wyle environmental obligations, among other things. In 2012, the company entered into a settlement agreement with the sellers pursuant to which the sellers paid $110,000 and the company released the sellers from their indemnification obligation. As part of the settlement agreement the company accepted responsibility for any potential subsequent costs incurred related to the Wyle matters. The company is aware of two Wyle Laboratories facilities (in Huntsville, Alabama and Norco, California) at which contaminated groundwater was identified and will require environmental remediation. In addition, the company was named as a defendant in several lawsuits related to the Norco facility and a third site in El Segundo, California which have now been settled to the satisfaction of the parties.

72
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)


The company expects these environmental liabilities to be resolved over an extended period of time. Costs are recorded for environmental matters when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Accruals for environmental liabilities are adjusted periodically as facts and circumstances change, assessment and remediation efforts progress, or as additional technical or legal information becomes available. Environmental liabilities are difficult to assess and estimate due to various unknown factors such as the timing and extent of remediation, improvements in remediation technologies, and the extent to which environmental laws and regulations may change in the future. Accordingly, the company cannot presently fully estimate the ultimate potential costs related to these sites until such time as a substantial portion of the investigation at the sites is completed and remedial action plans are developed and, in some instances, implemented. To the extent that future environmental costs exceed amounts currently accrued by the company, net income would be adversely impacted and such impact could be material.

Accruals for environmental liabilities are included in "Accrued expenses" and "Other liabilities" in the company's consolidated balance sheets. The company has determined that there is no amount within the environmental liability range that is a better estimate than any other amount, and therefore has recorded the accruals at the minimum amount of the ranges.

As successor-in-interest to Wyle, the company is the beneficiary of various Wyle insurance policies that covered liabilities arising out of operations at Norco and Huntsville. To date, the company has recovered approximately $37,000 from certain insurance carriers relating to environmental clean-up matters at the Norco site. The company is considering the best way to pursue its potential claims against insurers regarding liabilities arising out of operations at Huntsville. The resolution of these matters will likely take several years. The company has not recorded a receivable for any potential future insurance recoveries related to the Norco and Huntsville environmental matters, as the realization of the claims for recovery are not deemed probable at this time.

The company believes the settlement amount together with potential recoveries from various insurance policies covering environmental remediation and related litigation will be sufficient to cover any potential future costs related to the Wyle acquisition; however, it is possible unexpected costs beyond those anticipated could occur.

Environmental Matters - Huntsville

In February 2015, the company and the Alabama Department of Environmental Management ("ADEM") finalized and executed
a consent decree in connection with the Huntsville, Alabama site. Characterization of the extent of contaminated soil and groundwater is complete and has been approved by ADEM. Approximately $6,200 was spent to date and the company currently anticipates no additional investigative and related expenditures. The nature and scope of subsequent remediation at the site has not yet been determined, but assuming the outcome includes source control and certain other measures, the cost is estimated to be between $4,200 and $10,000.

Despite the amount of work undertaken and planned to date, the company is unable to estimate any potential costs in addition to those discussed above because the complete scope of the work is not yet known, and, accordingly, the associated costs have yet to be determined.

Environmental Matters - Norco

In October 2003, the company entered into a consent decree with Wyle Laboratories and the California Department of Toxic Substance Control (the "DTSC") in connection with the Norco site. In April 2005, a Remedial Investigation Work Plan was approved by DTSC that provided for site-wide characterization of known and potential environmental issues. Investigations performed in connection with this work plan and a series of subsequent technical memoranda continued until the filing of a final Remedial Investigation Report early in 2008. Work is under way pertaining to the remediation of contaminated groundwater at certain areas on the Norco site and of soil gas in a limited area immediately adjacent to the site. In 2008, a hydraulic containment system ("HCS") was installed to capture and treat groundwater before it moves into the adjacent offsite area. In September 2013, the DTSC approved the final Remedial Action Plan ("RAP") and work is currently progressing under the RAP. The approved RAP included the potential for additional remedial action after the five year review of the HCS if the review found that contaminants were not sufficiently reduced in the offsite area. The HCS five year review submitted to DTSC in December 2016 identified significant reductions in contaminants offsite except in a key area identified in the RAP. This exception triggered the need for additional offsite remediation that began in 2018.



73
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

Approximately $69,300 was spent to date on remediation, project management, regulatory oversight, and investigative and feasibility study activities. The company currently estimates that these activities will give rise to an additional $12,500 to $23,200. Project management and regulatory oversight include costs incurred by project consultants for project management and costs billed by DTSC to provide regulatory oversight.

Despite the amount of work undertaken and planned to date, the company is unable to estimate any potential costs in addition to those discussed above because the complete scope of the work under the RAP is not yet known, and, accordingly, the associated costs have yet to be determined.

Other

From time to time, in the normal course of business, the company may become liable with respect to other pending and threatened litigation, environmental, regulatory, labor, product, and tax matters. While such matters are subject to inherent uncertainties, it is not currently anticipated that any such matters will materially impact the company's consolidated financial position, liquidity, or results of operations.

16. Segment and Geographic Information

The company is a global provider of products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions.  The company distributes electronic components to original equipment manufacturers and contract manufacturers through its global components business segment and provides enterprise computing solutions to value-added resellers and managed service providers through its global ECS business segment.  As a result of the company's philosophy of maximizing operating efficiencies through the centralization of certain functions, selected fixed assets and related depreciation, as well as borrowings, are not directly attributable to the individual operating segments and are included in the corporate business segment.

Sales, by segment by geographic area, are as follows:

 
 
2018
 
2017
 
2016
Components:
 
 
 
 
 
 
Americas
 
$
7,816,533

 
$
7,010,385

 
$
5,921,803

EMEA (a)
 
5,733,222

 
4,868,862

 
4,086,607

Asia/Pacific
 
7,307,096

 
6,451,209

 
5,400,429

Global components
 
$
20,856,851

 
$
18,330,456

 
$
15,408,839

 
 
 
 
 
 
 
ECS:
 
 
 
 
 
 
Americas
 
$
5,742,526

 
$
5,388,888

 
$
5,352,106

EMEA (a)
 
3,077,391

 
2,835,219

 
2,726,927

Global ECS
 
$
8,819,917

 
$
8,224,107

 
$
8,079,033

Consolidated (b)
 
$
29,676,768

 
$
26,554,563

 
$
23,487,872


(a)    Defined as Europe, the Middle East, and Africa.

(b)
Includes sales related to the United States of $12,157,306, $11,038,930, and $10,137,041 for 2018, 2017, and 2016, respectively.


74
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

Operating income (loss), by segment, are as follows:

 
2018
 
2017
 
2016
Operating income (loss):
 
 
 
 
 
Global components
$
1,007,638

 
$
801,027

 
$
686,466

Global ECS
427,605

 
444,710

 
441,926

Corporate (c)
(287,731
)
 
(300,001
)
 
(251,566
)
Consolidated
$
1,147,512

 
$
945,736

 
$
876,826


(c)
Includes restructuring, integration, and other charges of $60,361, $74,588, and $61,391 in 2018, 2017, and 2016, respectively. Also included in 2018 and 2017 was a net loss on the disposition of businesses of $3,604 and $21,000, respectively.

Total assets, by segment, at December 31 are as follows:

 
 
2018
 
2017
Global components
 
$
11,425,579

 
$
10,229,168

Global ECS
 
5,632,102

 
5,426,675

Corporate
 
726,764

 
803,424

Consolidated
 
$
17,784,445

 
$
16,459,267



Net property, plant, and equipment, by geographic area, is as follows:
 
 
2018
 
2017
Americas (d)
 
$
673,228

 
$
688,637

EMEA
 
110,996

 
108,232

Asia/Pacific
 
40,476

 
41,606

Consolidated
 
$
824,700

 
$
838,475


(d)
Includes net property, plant, and equipment related to the United States of $670,201 and $683,988 at December 31, 2018 and 2017, respectively.


75
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

17. Quarterly Financial Data (Unaudited)

The company operates on a quarterly calendar that closes on the Saturday closest to the end of the calendar quarter.

A summary of the company's consolidated quarterly results of operations is as follows:
 
 
First Quarter
 
Second Quarter (b)
 
Third Quarter
 
Fourth Quarter (c)
2018
 
 
 
 
 
 
 
 
Sales
 
$
6,875,613

 
$
7,392,528

 
$
7,490,445

 
$
7,918,182

Gross profit
 
868,944

 
932,820

 
923,778

 
975,370

Operating income
 
235,995

 
286,827

 
290,310

 
334,380

Net income attributable to shareholders
 
139,094

 
169,915

 
176,533

 
230,653

 
 
 
 
 
 
 
 
 
Net income per share (a):
 
 
 
 
 
 
 
 
Basic
 
$
1.58

 
$
1.94

 
$
2.02

 
$
2.66

Diluted
 
$
1.56

 
$
1.92

 
$
1.99

 
$
2.63

 
 
 
 
 
 
 
 
 
2017 (Adjusted)
 
 
 
 
 
 
 
 
Sales
 
$
5,736,780

 
$
6,422,226

 
$
6,856,108

 
$
7,539,449

Gross profit
 
761,197

 
824,024

 
842,567

 
929,180

Operating income
 
193,025

 
230,446

 
235,441

 
286,824

Net income attributable to shareholders
 
114,737

 
99,722

 
134,064

 
53,653

 
 
 
 
 
 
 
 
 
Net income per share (a):
 
 
 
 
 
 
 
 
Basic
 
$
1.29

 
$
1.12

 
$
1.52

 
$
0.61

Diluted
 
$
1.27

 
$
1.11

 
$
1.50

 
$
0.60


(a)
Quarterly net income per share is calculated using the weighted-average shares outstanding during each quarterly period, while net income per share for the full year is calculated using the weighted-average shares outstanding during the year. Therefore, the sum of the net income per share for each of the four quarters may not equal the net income per share for the full year.

(b)
Net income attributable to shareholders includes a loss on extinguishment of debt of $58.8 million during the second quarter of 2017.

(c)
Net income attributable to shareholders includes a U.S. Tax Act benefit of $28.3 million and expense of $124.7 million during the fourth quarter of 2018 and 2017, respectively.


76
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

The following table presents the effect of the adoption of Topic 606, ASU No. 2017-07, and other prior period reclassifications for each quarter of 2017 (see Note 1).
 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
As Previously Reported
Adjusted for New Standards
 
As Previously Reported
Adjusted for New Standards
 
As Previously Reported
Adjusted for New Standards
 
As Previously Reported
Adjusted for New Standards
2017
 
 
 
 
 
 
 
 
 
 
 
Sales
$
5,759,552

$
5,736,780

 
$
6,465,346

$
6,422,226

 
$
6,953,740

$
6,856,108

 
$
7,633,870

$
7,539,449

Cost of sales
4,999,665

4,975,583

 
5,641,380

5,598,202

 
6,110,382

6,013,541

 
6,703,742

6,610,269

Operating income
191,722

193,025

 
229,822

230,446

 
235,992

235,441

 
270,914

286,824

Net income attributable to shareholders
$
113,768

$
114,737

 
$
99,679

$
99,722

 
$
134,630

$
134,064

 
$
53,885

$
53,653


Operating income for the fourth quarter of 2017 was impacted by a reclassification of pension settlement expense of $16,706 due to the implementation of ASU No. 2017-07. The settlement expense was reclassified to "Employee benefit plan expense" (see Note 13).

18. Subsequent Events
 
During the first quarter of 2019, the company entered into a series of foreign exchange forward contracts ("forward contracts") to sell Euro and buy United States Dollars, with various maturity dates as noted in the table below.

Maturity Date
Notional Amount
March 2023
EUR 50,000
September 2024
EUR 50,000
April 2025
EUR 100,000
January 2028
EUR 100,000
Total
EUR 300,000


The forward contracts have been designated as a net investment hedge which is in place to hedge a portion of the company's net investment in subsidiaries with euro-denominated net assets. The change in the fair value of derivatives designated as, and effective as, net investment hedges will be recorded in "Accumulated other comprehensive loss" in the company's Consolidated Balance Sheets. Amounts excluded from the assessment of hedge effectiveness will be included in "Interest and other financing expense, net" in the company's Consolidated Statements of Operations.

77
ARROW ELECTRONICS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)



Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The company's management, under the supervision and with the participation of the company's Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the company's disclosure controls and procedures as of December 31, 2018 (the "Evaluation"). Based upon the Evaluation, the company's Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) are effective.

Management's Report on Internal Control Over Financial Reporting

The company's management is responsible for establishing and maintaining adequate "internal control over financial reporting" (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). Management evaluates the effectiveness of the company's internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Management, under the supervision and with the participation of the company's Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of the company's internal control over financial reporting as of December 31, 2018, and concluded that it is effective.

The company acquired two separate entities during the year ended December 31, 2018, which are included in the company's 2018 consolidated financial statements and constitute 2.1% and 5.1% of total and net assets, respectively, as of December 31, 2018 and less than 1.0% and 2.0% of sales and net income attributable to shareholders, respectively, for the year ended December 31, 2018. The company has excluded these two entities from its annual assessment of and conclusion on the effectiveness of the company's internal control over financial reporting.

The company's independent registered public accounting firm, Ernst & Young LLP, has audited the effectiveness of the company's internal control over financial reporting as of December 31, 2018, as stated in their report, which is included herein.




78

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Arrow Electronics, Inc.

Opinion on Internal Control Over Financial Reporting
We have audited Arrow Electronics, Inc.’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Arrow Electronics, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on the COSO criteria. 

As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of two separate entities acquired during the year ended December 31, 2018, which are included in the 2018 consolidated financial statements of the Company and constituted 2.1% and 5.1% of total and net assets, respectively, as of December 31, 2018 and less than 1.0% and 2.0% of sales and net income attributable to shareholders, respectively, for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of these two entities.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2018, and the related notes and schedule and our report dated February 7, 2019 expressed an unqualified opinion thereon.

Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP
Denver, Colorado
February 7, 2019

79


Item 9B. Other Information.
    
None.

80


PART III

Item 10.     Directors, Executive Officers and Corporate Governance.

See "Executive Officers" in Part I of this Annual Report on Form 10-K. In addition, the information set forth under the headings "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the company's Proxy Statement, filed in connection with the Annual Meeting of Shareholders scheduled to be held on May 9, 2019, are incorporated herein by reference.

Information about the company's audit committee financial experts set forth under the heading "The Board and its Committees" in the company's Proxy Statement, filed in connection with the Annual Meeting of Shareholders scheduled to be held on May 9, 2019, is incorporated herein by reference.

Information about the company's code of ethics governing the Chief Executive Officer, Chief Financial Officer, and Corporate Controller, known as the "Finance Code of Ethics," as well as a code of ethics governing all employees, known as the "Worldwide Code of Business Conduct and Ethics," is available free of charge on the company's website at https://investor.arrow.com in the Leadership and Governance section and is available in print to any shareholder upon request.

Information about the company's "Corporate Governance Guidelines" and written committee charters for the company's Audit Committee, Compensation Committee, and Corporate Governance Committee is available free of charge on the company's website at https://investor.arrow.com in the Leadership and Governance section and is available in print to any shareholder upon request.

Item 11.     Executive Compensation.

The information required by Item 11 is included in the company's Proxy Statement filed in connection with the Annual Meeting of Shareholders scheduled to be held on May 9, 2019, and is incorporated herein by reference.

Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by Item 12 is included in the company's Proxy Statement filed in connection with the Annual Meeting of Shareholders scheduled to be held on May 9, 2019, and is incorporated herein by reference.

Item 13.     Certain Relationships and Related Transactions, and Director Independence.

The information required by Item 13 is included in the company's Proxy Statement filed in connection with the Annual Meeting of Shareholders scheduled to be held on May 9, 2019, and is incorporated herein by reference.

Item 14.     Principal Accounting Fees and Services.

The information required by Item 14 is included in the company's Proxy Statement filed in connection with the Annual Meeting of Shareholders scheduled to be held on May 9, 2019, and is incorporated herein by reference.


81


PART IV

Item 15.     Exhibits and Financial Statement Schedules.

(a)
The following documents are filed as part of this report:
Page
 
 
 
 
 
1
Financial Statements.
 
 
 
 
 
 
 
Report of Independent Registered Public Accounting Firm
38
 
 
 
 
 
 
Consolidated Statements of Operations for the years ended December 31, 2018, 2017, and 2016
39
 
 
 
 
 
 
Consolidated Statements of Comprehensive Income for the years ended December 31, 2018, 2017, and 2016
40
 
 
 
 
 
 
Consolidated Balance Sheets as of December 31, 2018 and 2017
41
 
 
 
 
 
 
Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017, and 2016
42
 
 
 
 
 
 
Consolidated Statements of Equity for the years ended December 31, 2018, 2017, and 2016
43
 
 
 
 
 
 
Notes to the Consolidated Financial Statements
44
 
 
 
 
 
2
Financial Statement Schedule.
 
 
 
 
 
 
 
Schedule II - Valuation and Qualifying Accounts
89
 
 
 
 
 
All other schedules are omitted since the required information is not present, or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements, including the notes thereto.
 
 
 
 
 
 
3
Exhibits.
 
 
 
 
 
 
 
See Index of Exhibits included on pages 83 - 88
 



82


INDEX OF EXHIBITS

Exhibit
Number
 
Exhibit
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 

 
 
 
 
 
 
 

83

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

84

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

85

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

86

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

87

 
 
 
 
 
 
 
 
 
 
 
 
10(l)
 
Form of Indemnification Agreement between the company and each director (incorporated by reference to Exhibit 10(g) to the company's Annual Report on Form 10-K for the year ended December 31, 1986, Commission File No. 1-4482).
 
 
 
21
 
 
 
 
23
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema Document.
 
 
 
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document.
 
 
 
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document.
 
 
 
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Documents.
 
 
 
101.DEF
 
XBRL Taxonomy Definition Linkbase Document.

88

ARROW ELECTRONICS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In thousands)

 
Balance at beginning of year
 
Charged to income
 
Other (a)
 
Write-down
 
Balance at end of year
Allowance for doubtful accounts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year ended December 31, 2018
$
56,291

 
$
34,936

 
$
(1,958
)
 
$
13,681

 
$
75,588

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year ended December 31, 2017
$
52,256

 
$
12,887

 
$
2,831

 
$
11,683

 
$
56,291

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year ended December 31, 2016
$
49,659

 
$
8,336

 
$
(392
)
 
$
5,347

 
$
52,256


(a)
"Other" primarily includes the effect of fluctuations in foreign currencies and the allowance for doubtful accounts of the businesses acquired by the company.



89


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
ARROW ELECTRONICS, INC.
 
 
 
 
 
 
 
By:
/s/ Gregory P. Tarpinian
 
 
 
 
Gregory P. Tarpinian
 
 
 
 
Senior Vice President, General Counsel, and Secretary
 
 
 
 
February 7, 2019
 
 
 
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 7, 2019:
 
 
 
 
 
By:
/s/ Michael J. Long
 
 
 
     Michael J. Long, Chairman, President, and Chief Executive Officer (principal executive officer)
 
 
 
 
 
 
By:
/s/ Chris D. Stansbury
 
 
 
     Chris D. Stansbury, Senior Vice President and Chief Financial Officer (principal financial officer)
 
 
 
 
 
 
 
By:
/s/ Richard A. Seidlitz
 
 
 
Richard A. Seidlitz, Corporate Controller (principal accounting officer)
 
 
 
 
 
 
 
By:
/s/ Barry W. Perry
 
 
 
 Barry W. Perry, Lead Independent Director
 
 
 
 
 
 
 
By:
/s/ Philip K. Asherman
 
 
 
     Philip K. Asherman, Director
 
 
 
 
 
 
 
By:
/s/ Steven H. Gunby
 
 
 
     Steven H. Gunby, Director
 
 
 
 
 
 
 
By:
/s/ Gail E. Hamilton
 
 
 
     Gail E. Hamilton, Director
 
 
 
 
 
 
 
By:
/s/ Richard S. Hill
 
 
 
     Richard S. Hill, Director
 
 
 
 
 
 
 
By:
/s/ Fran Keeth
 
 
 
     Fran Keeth, Director
 
 
 
 
 
 
 
By:
/s/ Andrew C. Kerin
 
 
 
     Andrew C. Kerin, Director
 
 
 
 
 
 
 
By:
/s/ Stephen C. Patrick
 
 
 
     Stephen C. Patrick, Director
 
 
 
 
 
 
 
By:
/s/ Laurel J. Krzeminski
 
 
 
     Laurel J. Krzeminski, Director
 
 

90



Exhibit 10(b)(i)
AMENDMENT NO. 4
TO
WYLE ELECTRONICS RETIREMENT PLAN

(As Amended and Restated January 1, 2015)

    The Wyle Electronics Retirement Plan, as amended and restated effective January 1, 2015 (the “Plan”), is amended, effective as of December 31, 2018, as follows:

1.
Section 4.6 is amended to read as follows:
“4.6    Retirement Date Under Window Programs. Notwithstanding any other provision of this Article IV, an Eligible Participant described in Paragraph 8.7 or 8.9 may elect an Early Distribution Date described in and in accordance with the provisions thereof.”

2.    The second subparagraph of Paragraph 7.1(a) is amended to read as follows:
“An Eligible Participant who has met the requirements for the 2016 Window Program described in Paragraph 8.7 or the 2019 Window Program described in Paragraph 8.9 may elect to receive benefits commencing as of an Early Distribution Date described in and in accordance with the provisions thereof.”

3.    The following new Paragraph is added at the end of Article VIII:
“8.9
2019 Window Program.
(a)    2019 Window Program Eligibility. Any Eligible Participant (as defined in this Paragraph 8.9) shall be eligible during the Window Election Period to elect the commencement of benefits hereunder effective as of, and as soon as administratively feasible after, the Early Distribution Date, in lieu of any other benefit under this Plan, in any one of the available forms of distribution described in subparagraph (b).
(b)    Available Forms of Distribution. Any Eligible Participant may elect during the Window Election Period, as the method of payment under the 2019 Window Program, any one of the available forms of distribution described in this subparagraph (b).
(i)    Monthly retirement income payable in the applicable normal form of retirement benefit described in Paragraph 8.1(a), which shall be equal to the Eligible Participant’s benefit earned as of December 31, 2018, adjusted as provided in Paragraph 8.1(a), if applicable, and reduced as follows:
(A)    If the Eligible Participant is already eligible for an Early Retirement Benefit or the election of an Early Retirement Date, whichever is applicable, in accordance with the provisions of Paragraph 4.2 on the Early Distribution Date, such reduction shall be made in accordance with Paragraph 4.2; or

1
Amendment #4 to 01-01-2015 Restatement of Wyle Electronic Retirement Plan (plan termination    )




(B)    If the Eligible Participant is not already eligible for an Early Retirement Benefit or the election of an Early Retirement Date, whichever is applicable, in accordance with the provisions of Paragraph 4.2 on the Early Distribution Date, such monthly retirement income shall equal the immediate annuity equivalent (using the 2019 Window Period Applicable Interest Rate and 2019 Window Period Applicable Mortality Table) of the Eligible Participant’s Actuarially Equivalent Lump Sum Benefit.
(ii)    For the Eligible Participants described in subparagraph (b)(i)(A) above, monthly retirement income payable in any form of benefit described in Paragraphs 8.1(b) through (d), the amount of which shall be of equivalent Actuarial Value to the immediately monthly pension payable in the applicable normal form described in Paragraph 8.1(a). Calculation of the amount of the benefit so payable shall be made in accordance with the Joint and Survivor Factors set forth in Exhibit A.
(iii)    For Eligible Participants described in subparagraph (b)(i)(B), monthly retirement income payable in the form of the 75% Spousal Benefit Arrangement described in Paragraph 8.1(b).
(iv)    A single lump sum payment, which shall be the Eligible Participant’s Actuarially Equivalent Lump Sum Benefit. If this option is elected, and the Eligible Participant is an active participant in the Arrow Savings Plan, the Eligible Participant may elect to roll over such payment to the Arrow Savings Plan.
Surviving Spouses and alternate payees who are considered to be Eligible Participants because of the operation of the last paragraph of subparagraph (e)(iii) hereof may elect during the Window Election Period, as the method of payment under the 2019 Window Program, monthly retirement income payable in the life annuity form of retirement benefit described in Paragraph 8.1(a) or the single lump sum payment described in subparagraph (b)(iv) above.
Eligible Participants described in subparagraph (e)(iii)(D) whose Annuity Commencement Dates are on or after September 19, 2018, may only elect during the Window Election Period, as the method of payment under the 2019 Window Program, the single lump sum payment described in subparagraph (b)(iv) above with respect to the remainder of their vested accrued benefit as of the Early Distribution Date.
(c)    Elections. Any election under this Paragraph 8.9 shall be in writing on a form approved by the Committee, shall be filed in accordance with such procedures as the Committee shall establish and shall be subject to the written consent of the Eligible Participant’s spouse (as defined in Paragraph 8.1(e)) in accordance with the provisions of Paragraph 8.1(f), if applicable. If an Eligible Participant who has filed an election under this Paragraph 8.9 becomes legally married prior to the Early Distribution Date, such election shall be subject to such spousal consent requirements.
(d)    Death Prior to Payment of Window Program Benefit.

2
Amendment #4 to 01-01-2015 Restatement of Wyle Electronic Retirement Plan (plan termination    )




(i)    Election of Monthly Retirement Income. If an Eligible Participant who is legally married on the Early Distribution Date elects a joint and survivor annuity form of benefit under subparagraphs (b)(i), (ii) or (iii) hereof but dies before receipt of any payment pursuant to such election, the percentage of the Preretirement Spousal Death Benefit described in Paragraph 8.3 shall be equal to the elected percentage of the joint and survivor annuity form described in subparagraph (a) or (b) of Paragraph 8.1. If an Eligible Participant who is legally married on the Early Distribution Date elects a life annuity under subparagraph (b)(ii) but dies before receipt of any payment pursuant to such election, the Eligible Participant’s surviving spouse shall receive a Preretirement Spousal Death Benefit for his or her Plan benefit, calculated and paid in accordance with Paragraph 8.3. If an Eligible Participant is not legally married on the Early Distribution Date, but would otherwise be described in this subparagraph (d)(i), no Plan benefit will be payable to any beneficiary (other than an alternate payee of an Eligible Participant under a QDRO, as defined in Paragraph 11.3, to the extent required by the terms of the applicable QDRO).
(ii)    Election of Single Lump Sum Payment. If an Eligible Participant who is legally married on the Early Distribution Date makes an election under subparagraph (b)(iv) and dies during the period beginning on the Early Distribution Date and ending 30 days thereafter, without having received any payment, the Eligible Participant’s surviving spouse may elect the payment of benefits hereunder effective as of, and as soon as administratively feasible after, the Early Distribution Date, but in no event later than 30 days after the Early Distribution Date, in the form of a lump sum equal to the Actuarially Equivalent Lump Sum Benefit, in lieu of the Preretirement Spousal Death Benefit described in Paragraph 8.3. If an Eligible Participant is not legally married on the Early Distribution Date, but would otherwise be described in this subparagraph (d)(ii), the Actuarially Equivalent Lump Sum Benefit will be paid to the Eligible Participant’s estate, except to the extent required by the terms of a QDRO.
(e)    Definitions. The following definitions and principles shall apply for purposes of this Paragraph 8.9:
(i)    ‘Actuarially Equivalent Lump Sum Benefit’ means a single sum distribution of equivalent Actuarial Value to the Eligible Participant’s monthly retirement income determined under Paragraph 6.1 (normal retirement benefit) or 4.3 (deferred retirement benefit), whichever is applicable, payable in the form of a single life annuity. The Actuarial Value of a normal retirement benefit or deferred retirement benefit, as the case may be, shall be determined as of the Early Distribution Date on the basis of the 2019 Window Period Applicable Interest Rate and 2019 Window Period Applicable Mortality Table, as follows:
(A)    ‘2019 Window Period Applicable Interest Rate’ means the average of the spot segment interest rates (i.e., the first, second and third segment rates, based on the monthly corporate bond yield curve ‘spot’ rates (without regard to a 24-month average)) in effect for the September preceding the Plan Year in which occurs the Early Distribution Date.

3
Amendment #4 to 01-01-2015 Restatement of Wyle Electronic Retirement Plan (plan termination    )




(B)    ‘2019 Window Period Applicable Mortality Table’ means the applicable mortality table specified by the Commissioner of Internal Revenue for purposes of Section 417(e) of the Code for the Plan Year in which occurs the Early Distribution Date.
In the case of an Eligible Participant described in subparagraph (e)(iii)(D) whose Annuity Commencement Date is on or after September 19, 2018, the provisions of this subparagraph (e)(i) shall be applied with respect to the remainder of such Participant’s monthly retirement income payable in the form in which it is being paid as of the Early Distribution Date.
(ii)    ‘Early Distribution Date’ means a date designated by the Committee to occur as soon as administratively practicable after the last day of the Window Election Period, with actual distribution or commencement of benefits in no event later than 30 days thereafter, unless a later date and payment terms are approved by the Committee with respect to all similarly situated Eligible Participants on account of reasonable administrative delay.
(iii)     ‘Eligible Participant’ means any Participant who:
(A)    Is vested to any extent in his or her Plan benefit;
(B)     Is living on the Early Distribution Date;
(C)    Is not eligible for a small benefit distribution under Paragraph 8.5 on the Early Distribution Date, based on the Actuarial Value (as determined under subparagraph (e)(i)) of his or her vested benefit under the Plan;
(D)    Has not yet received or commenced receiving distribution of his or her vested accrued benefit prior to the Early Distribution Date, except to the extent that a Participant with an Annuity Commencement Date of September 19, 2018, or later has not received the remainder of his or her vested accrued benefit as of the Early Distribution Date; and
(E)    Is not subject to a QDRO to the extent that such QDRO prohibits him from electing one or more of the options available to such Eligible Participant under this Paragraph 8.9.
A surviving spouse of a Participant who would be an Eligible Participant but for the requirement of subparagraph (e)(iii)(B) above or an alternate payee of an Eligible Participant under a QDRO shall be considered an Eligible Participant for purposes of the elections described in the last paragraph of subparagraph (b).
(iv)    Notwithstanding the foregoing subparagraph (e)(iii), the following Participants and other individuals are specifically excluded from eligibility under this Paragraph 8.9, even if they would otherwise meet the requirements of subparagraph (e)(iii):

4
Amendment #4 to 01-01-2015 Restatement of Wyle Electronic Retirement Plan (plan termination    )




(A)    Any Participant, surviving spouse or alternate payee under a QDRO who is required to have commenced distributions under Section 401(a)(9) of the Code as of the Early Distribution Date;
(B)     Any Participant who had provided a pending draft or issued domestic relations order relating to his or her benefit under the Plan to the Committee prior to receipt of payments under this Section 8.9, with respect to which order the Committee has not made a final determination of its qualified status prior to January 1, 2019;
(C)    Any alternate payee under a pending draft or issued domestic relations order described in subparagraph (e)(iv)(B) above;
(D)    Any Participant, surviving spouse, or alternate payee under a QDRO who could not be located by the Committee prior to the date that is two weeks prior to the last day of the Window Election Period, after a diligent search had been performed;
(E)    Any Participant, surviving spouse or alternate payee under a QDRO whose relevant data had not been validated prior to the date that is two weeks prior to the last day of the Window Election Period, after a reasonable effort by the Committee;
(F)    Any surviving spouse of a Participant who would have been an Eligible Participant but for the requirement of subparagraph (e)(iii)(B) because the Participant’s death occurred at any time prior to the Early Distribution Date;
(G)    Any surviving spouse or alternate payee under a QDRO whose Plan benefit has an actuarial present value of no more than $5,000 on the Early Distribution Date, based on the Actuarial Value (as determined under subparagraph (e)(i)) of his or her Plan benefit;
(H)    Any surviving spouse or alternate payee under a QDRO who received or commenced receiving distribution of his or her Plan benefit prior to the Early Distribution Date.
(v)    ‘Window Election Period’ means the 45-day period (but including extensions of uniform applicability for similarly situated Eligible Participants as approved by the Committee) designated by the Committee to begin as soon as administratively practicable after the Company receives a favorable determination letter issued by the Internal Revenue Service with respect to the Plan’s termination. An Eligible Participant may revoke his or her election of an available form of distribution by a written revocation that is received by the Committee any time prior to the Early Distribution Date.    
(f)    Application to Benefits Accrued Under Sylvan Ginsbury, Ltd. Pension Plan. This Paragraph 8.9 shall apply, but shall not modify either the rules of calculation or

5
Amendment #4 to 01-01-2015 Restatement of Wyle Electronic Retirement Plan (plan termination    )




the optional forms of benefit available, with respect to benefits accrued under the Sylvan Ginsbury, Ltd. Pension Plan prior to its merger into the Plan, as described in the last paragraph of Paragraph 8.1(a). If a lump sum payment is elected with respect to benefits accrued under the Sylvan Ginsbury, Ltd. Pension Plan, the applicable interest rate and mortality tables indicated in Paragraph 8.6 shall apply.
(g)    Limited Applicability of the 2019 Window Program. This Paragraph 8.9 shall have no applicability, and shall create no additional rights to benefits, with respect to any person who is not, or is not considered to be, an Eligible Participant, or with respect to any such individual who fails to make an election during the Window Election Period.”





6
Amendment #4 to 01-01-2015 Restatement of Wyle Electronic Retirement Plan (plan termination    )

Exhibit 10(i)


$2,000,000,000

THIRD AMENDED AND RESTATED CREDIT AGREEMENT
among
ARROW ELECTRONICS, INC.,
THE SUBSIDIARY BORROWERS
The Several Banks
from Time to Time Parties Hereto,

BNP PARIBAS,
BANK OF AMERICA, N.A.,
THE BANK OF NOVA SCOTIA,
MUFG BANK, LTD.,
ING BANK N.V., DUBLIN BRANCH,
MIZUHO BANK, LTD. AND
SUMITOMO MITSUI BANKING CORPORATION,
as Syndication Agents


and


JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
__________
JPMORGAN CHASE BANK, N.A.,
BNP PARIBAS SECURITIES CORP.,
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
THE BANK OF NOVA SCOTIA,
MUFG BANK, LTD.,
ING BANK N.V., DUBLIN BRANCH,
MIZUHO BANK, LTD. AND
SUMITOMO MITSUI BANKING CORPORATION
as Joint Lead Arrangers and Joint Bookrunners
Dated as of December 14, 2018
 


 

Page
SECTION 1. DEFINITIONS
1
1.1 Defined Terms 1
1.2 Other Definitional Provisions 26
1.3 Accounting Determinations
26
SECTION 2. THE COMMITTED RATE LOANS 27
2.1 Committed Rate Loans 27
2.2 Procedure for Committed Rate Loan Borrowing 27
2.3 Repayment of Committed Rate Loans; Evidence of Debt
28
2.4 Termination or Reduction of Revolving Commitments
28
2.5 [reserved]
28
2.6 [reserved]
29
2.7 [reserved]
29
2.8 [reserved]
29
2.9 [reserved]
29
2.10 Revolving Commitment Increases
29
2.11 Refunding of Committed Rate Loans Denominated in Available Foreign Currencies
30
2.12 Certain Borrowings of Committed Rate Loans and Refunding of Loans
32
2.13 Extension of Termination Date
32
SECTION 3. THE COMPETITIVE ADVANCE LOANS
33
3.1 Competitive Advance Loans
33
3.2 Procedure for Competitive Advance Loan Borrowing
34
3.3 Repayment of Competitive Advance Loans; Evidence of Debt
35
SECTION 4. THE SWING LINE LOANS
35
4.1 Swing Line Loans
35

-i-
 

4.2 Procedure for Swing Line Borrowing
36
4.3 Repayment of Swing Line Loans; Evidence of Debt
36
4.4 Allocating Swing Line Loans; Swing Line Loan Participations
37
4.5 Replacement of Swing Line Banks
38
SECTION 5. THE LETTERS OF CREDIT
39
5.1 L/C Commitment
39
5.2 Procedure for Issuance of Letters of Credit under this Agreement
40
5.3 Fees, Commissions and Other Charges
40
5.4 L/C Participations
41
5.5 Reimbursement Obligation of the Specified Borrowers
41
5.6 Obligations Absolute
42
5.7 Letter of Credit Payments
42
5.8 Application
43
5.9 Replacement of Issuing Banks
43
SECTION 6. LOCAL CURRENCY FACILITIES
43
6.1 Terms of Local Currency Facilities
43
6.2 Reporting of Local Currency Outstandings
44
6.3 Refunding of Local Currency Loans
45
SECTION 7. [RESERVED]
46
SECTION 8. CERTAIN PROVISIONS APPLICABLE TO THE LOANS AND LETTERS OF CREDIT
46
8.1 Facility Fee; Other Fees; Other Payments
46
8.2 Computation of Interest and Fees
47

-ii-    
 

8.3 Pro Rata Treatment and Payments
47
8.4 Illegality
48
8.5 Requirements of Law
48
8.6 Taxes
50
8.7 Company’s Options upon Claims for Increased Costs and Taxes
53
8.8 Break Funding Payments
54
8.9 Determinations
55
8.10 Change of Lending Office
55
8.11 Company Controls on Exposure; Calculation of Exposure; Prepayment if Exposure exceeds Revolving Commitments
55
8.12 Conversion and Continuation Options
56
8.13 Minimum Amounts of Tranches
57
8.14 Interest Rates and Interest Payment Dates
57
8.15 Inability to Determine Interest Rate
57
8.16 Optional Prepayments
59
8.17 Defaulting Banks
59
SECTION 9. REPRESENTATIONS AND WARRANTIES
62
9.1 Financial Condition
62
9.2 No Change
62
9.3 Corporate Existence; Compliance with Law
62
9.4 Corporate Power; Authorization; Enforceable Obligations
62
9.5 No Legal Bar
63
9.6 No Material Litigation
63
9.7 No Default
63

-iii-    
 

9.8 Ownership of Property; Liens
63
9.9 Intellectual Property
63
9.10 Local Currency Facilities
63
9.11 Taxes
64
9.12 Federal Regulations
64
9.13 ERISA
64
9.14 Investment Company Act; Other Regulations
65
9.15 Subsidiaries
65
9.16 Accuracy and Completeness of Information
65
9.17 Purpose of Loans
65
9.18 Environmental Matters
65
9.19 Anti-Corruption Laws and Sanctions
66
9.20 EEA Financial Institutions
66
SECTION 10. CONDITIONS PRECEDENT
67
10.1 Conditions to Closing Date
67
10.2 Conditions to Each Extension of Credit
68
SECTION 11. AFFIRMATIVE COVENANTS
69
11.1 Financial Statements
69
11.2 Certificates; Other Information
70
11.3 Payment of Obligations
71
11.4 Conduct of Business and Maintenance of Existence
71
11.5 Maintenance of Property; Insurance
72
11.6 Inspection of Property; Books and Records; Discussions
72

-iv-    
 

11.7 Notices
72
11.8 Environmental Laws
73
11.9 Additional Subsidiary Guarantees
73
11.10 Foreign Subsidiary Borrowers
73
SECTION 12. NEGATIVE COVENANTS
73
12.1 Financial Condition Covenants
74
12.2 Limitation on Indebtedness of Subsidiaries
74
12.3 Limitation on Liens
74
12.4 Limitation on Fundamental Changes
76
12.5 [Reserved]
76
12.6 Limitations on Acquisitions
76
12.7 Limitation on Restrictions on Subsidiary Distributions
77
SECTION 13. EVENTS OF DEFAULT
77
SECTION 14. THE ADMINISTRATIVE AGENT; THE SYNDICATION AGENTS; THE ARRANGERS
80
14.1 Appointment
80
14.2 Delegation of Duties
80
14.3 Exculpatory Provisions
80
14.4 Reliance by Administrative Agent
80
14.5 Notice of Default
81
14.6 Non-Reliance on Administrative Agent and Other Banks
81
14.7 Indemnification
81
14.8 Administrative Agent in Its Individual Capacity
82

-v-    
 

14.9 Successor Administrative Agent
82
14.10 The Arrangers and Syndication Agents
83
14.11 Certain ERISA Matters
83
SECTION 15. MISCELLANEOUS
84
15.1 Amendments and Waivers
84
15.2 Notices
87
15.3 No Waiver; Cumulative Remedies
88
15.4 Survival of Representations and Warranties
89
15.5 Payment of Expenses
89
15.6 Successors and Assigns; Participations and Assignments
90
15.7 Adjustments; Set-off
93
15.8 Power of Attorney
93
15.9 Judgment
94
15.10 Counterparts
94
15.11 Severability
94
15.12 Integration
94
15.13 GOVERNING LAW
95
15.14 Submission To Jurisdiction; Waivers
95
15.15 Acknowledgements
95
15.16 WAIVERS OF JURY TRIAL
96
15.17 USA Patriot Act
96
15.18 Acknowledgement and Consent to Bail-In of EEA Financial Institutions
96
15.19 Confidentiality
96

SCHEDULES

-vi-    
 

I        - Banks and Commitments
II        - Subsidiary Borrowers
III        - Certain Information Concerning Swing Line Loans and Letters of Credit
IV        - Administrative Schedule
1.1        - Existing Joint Ventures
9.10        - Outstanding Local Currency Loans
9.13        - Excluded ERISA Arrangements
9.15        - Subsidiary Guarantors as of the Closing Date
9.18        - Environmental Matters
12.2        - Existing Indebtedness
13(i)        - Disclosed Litigation

EXHIBITS
Exhibit A    -    Form of Joinder Agreement
Exhibit B    -    Form of Schedule Amendment
Exhibit C    -    Form of Local Currency Facility Addendum
Exhibit D    -    [Reserved]
Exhibit E     -     Form of Borrowing Certificate
Exhibit F-1    -    Form of Company Guarantee
Exhibit F-2    -    Form of Subsidiary Guarantee
Exhibit G-1     -    Form of Opinion of Milbank, Tweed, Hadley & McCloy
Exhibit G-2     -     Form of Opinion of General Counsel
Exhibit G-3    -    Form of Opinions Relating to Foreign Subsidiary Borrowers
Exhibit H     -     Form of Certificate Pursuant to Subsection 11.2
Exhibit I     -    Form of Assignment and Assumption
Exhibit J-1         Form of Extension Request
Exhibit J-2    -    Form of Continuation Notice
Exhibit K    -    Form of New Bank Supplement
Exhibit L    -    Form of Revolving Commitment Increase Supplement
Exhibit M    -    Form of Tax Certificates


-vii-    




THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December 14, 2018, among:
(i)    ARROW ELECTRONICS, INC., a New York corporation (the “Company”);
(ii)    the SUBSIDIARY BORROWERS (as hereinafter defined);
(iii)    the several banks and other financial institutions from time to time parties to this Agreement (the “Banks”); and
(iv)    JPMORGAN CHASE BANK, N.A., as administrative agent for the Banks hereunder (in such capacity, the “Administrative Agent”).
W I T N E S S E T H :
WHEREAS, the Company has requested the Banks to make available a revolving credit facility by amending and restating the Second Amended and Restated Five-Year Credit Agreement of the Company, dated as of December 23, 2016, among the Company, certain of its subsidiaries, certain financial institutions, JPMorgan Chase Bank, N.A., as administrative agent, and others (as in effect on the date hereof, the “Existing Credit Agreement”); and
WHEREAS, the Banks are willing to make such credit facility available upon and subject to the terms and conditions hereafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto hereby agree that, effective as of the Closing Date (as defined below), the Existing Credit Agreement shall be amended and restated in its entirety as follows:
SECTION 1. DEFINITIONS
1.1     Defined Terms. As used in this Agreement, the following terms shall have the following meanings:
“ABR”: for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the NYFRB Rate in effect on such day plus ½ of 1% and (c) the Adjusted Eurocurrency Rate for a one month Interest Period on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus 1%; provided that for the purpose of this definition, the Adjusted Eurocurrency Rate for any day shall be based on the Eurocurrency Screen Rate (or if the Eurocurrency Screen Rate is not available for such one month Interest Period, the Interpolated Rate) at approximately 11:00 a.m. London time on such day. Any change in the ABR due to a change in the Prime Rate, the NYFRB Rate or the Adjusted Eurocurrency Rate shall be effective from and including the effective date of such change in the Prime Rate, the NYFRB Rate or the Adjusted Eurocurrency Rate, respectively. If the ABR is being used as an alternate rate of interest pursuant to Section 8.15, then the ABR shall be the greater of clauses (a) and (b) above and shall be determined without reference to clause (c) above. For the avoidance of doubt, if the ABR as determined pursuant to the foregoing would be less than 1.00%, such rate shall be deemed to be 1.00% for purposes of this Agreement.
“ABR Loans”: Loans denominated in Dollars the rate of interest applicable to which is based upon the ABR.


2

“Adjusted Eurocurrency Rate”: with respect to any Eurocurrency Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/100th of 1%) equal to (a) the Eurocurrency Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.
“Acceleration Date”: any date on which the Commitments shall have been terminated and/or the Loans shall have been declared immediately due and payable pursuant to Section 13.
“Additional Local Currencies”: Australian Dollars, Singapore Dollars, New Taiwan Dollars, South Korean Won, Chinese Yuan, Brazilian Real, Malaysian Ringgit and any other available and freely convertible non-Dollar currency selected by the Company and approved by the Administrative Agent in the manner described in subsection 15.1(b).
“Adjusted Consolidated EBITDA”: for any fiscal period, without duplication (a) the Consolidated Net Income for such period, plus (b) to the extent deducted from earnings in determining Consolidated Net Income for such period, the sum, in each case for such period, of income taxes, interest expense, depreciation expense, amortization expense, including amortization of any goodwill or other intangibles, minus (c) to the extent included in determining Consolidated Net Income for such period, non-cash equity earnings of unconsolidated Affiliates, plus (d) to the extent excluded in determining Consolidated Net Income for such period, cash distributions received by the Company from unconsolidated Affiliates plus (e) to the extent deducted from earnings in determining Consolidated Net Income for such period, the aggregate amount of all non-cash compensation expense paid to directors, officers and employees plus (f) to the extent deducted from earnings in determining Consolidated Net Income for such period, non-cash charges due to impairments recorded in such period in accordance with Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 142, all as determined on a consolidated basis in accordance with GAAP plus (or minus) (g) losses (or gains) related to the early extinguishment of notes, bonds or other fixed income obligations plus (or minus) (h) losses (or gains) due to integration or restructuring charges to the extent disclosed in public filings; provided that in determining Adjusted Consolidated EBITDA for any period of four consecutive fiscal quarters during which any business is acquired by the Company, such Adjusted Consolidated EBITDA shall be measured on a pro forma basis to include the consolidated EBITDA of the acquired business (determined for such business in the manner Adjusted Consolidated EBITDA is determined for the Company, as described above in this definition), plus identifiable, board-approved and publicly announced acquisition-related synergies which are expected to be realized over a twelve-month period following such acquisition.
“Administrative Agent”: as defined in the preamble hereto.
“Administrative Schedule”: Schedule IV to this Agreement, which contains interest rate definitions and administrative information in respect of each Currency and each Type of Loan.
“Affected Bank”: any Bank affected by the events described in subsection 8.4, 8.5 or 8.6, as the case may be, but only for the period during which such Bank shall be affected by such events.
“Affiliate”: as to any Person, (a) any other Person (other than a Subsidiary) which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person or (b) any Person who is a director or officer of the Company or any of its Subsidiaries. For purposes of this definition, “control” of a Person means the power, directly or indirectly, either to (i) vote 10% or more of the securities having ordinary voting power for the election of directors of such Person or (ii) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.

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“Agreement”: Third Amended and Restated Credit Agreement, as amended, supplemented or otherwise modified from time to time.
“Agreement Currency”: as defined in subsection 15.9.
“Allocable Share”: as to any Assenting Bank at any time, a fraction, (a) with respect to Revolving Commitments, the numerator of which shall be the Revolving Commitment of such Assenting Bank then in effect and the denominator of which shall be the aggregate of the Revolving Commitments of all Assenting Banks then in effect and (b) with respect to Swing Line Commitments, the numerator of which shall be the Swing Line Commitment of such Assenting Bank then in effect and the denominator of which shall be the aggregate of the Swing Line Commitments of all Assenting Banks then in effect.
“Anti-Corruption Laws”: all laws, rules, and regulations of any jurisdiction applicable to the Company, any Person that is an Affiliate of the Company under clause (ii) of the definition of Affiliate, or its Subsidiaries from time to time concerning or relating to bribery, money laundering or corruption.
“Applicable Margin”: for each Type of Loan for any day, the rate per annum determined based upon the Rating in effect on such date by each of S&P, Moody’s and Fitch set forth under the relevant column heading below opposite such Rating:


Level
Rating
(S&P/Moody’s/Fitch)
Applicable Margin for Eurocurrency Loans
Applicable Margin for ABR Loans
I
Greater than or equal to
BBB+/Baa1/BBB+
1.000%
0.000%
II
BBB/Baa2/BBB
1.100%
0.100%
III
BBB-/Baa3/BBB-
1.175%
0.175%
IV
BB+/Ba1/BB+
1.375%
0.375%
V
Less than
BB+/Ba1/BB+
1.700%
0.700%


; provided that, if the Ratings from the rating agencies fall within different Pricing Levels and (a) only two rating agencies provide a Rating, then (i) if the ratings differ by one Pricing Level, the Pricing Level for the higher of such Ratings shall apply, and (ii) if there is a split in Ratings of more than one level, the Pricing Level that is one level lower than the Pricing Level of the higher Rating shall apply, (b) if all three rating agencies provide a Rating, then (i) if two of the Ratings are at the same Pricing Level, such Pricing Level shall apply, (ii) if each of the Ratings fall within different Pricing Levels and there is not a split in Ratings by more than two levels, the Pricing Level of such Rating between the highest Rating and the lowest Rating shall apply and (iii) if each of the Ratings fall within different Pricing Levels and there is a split in the Ratings by more than two levels, the Pricing Level that is one level below the highest of the three Ratings shall apply and (c) if the Company does not have any Rating, Pricing Level V shall apply; provided, further, that if only one rating agency provides a Rating, or if only two rating agencies provide Ratings that are at the same Pricing Level, then such Ratings shall apply.
“Application”: an application, in such form as the Issuing Bank may specify from time to time, requesting the Issuing Bank to issue a Letter of Credit.
“Approved Fund”: as defined in subsection 15.6.

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“Arrangers”: JPMorgan Chase Bank, N.A., BNP Paribas Securities Corp., Merrill Lynch, Pierce, Fenner & Smith, Incorporated (or any other registered broker-dealer wholly-owned by Bank of America Corporation to which all or substantially all of Bank of America Corporation’s or any of its subsidiaries’ investment banking, commercial lending services or related businesses may be transferred following the date hereof), The Bank of Nova Scotia, MUFG Bank, Ltd. ING Bank N.V., Dublin Branch, Mizuho Bank, Ltd. and Sumitomo Mitsui Banking Corporation, as joint lead arrangers and joint bookrunners.
“Arrow Note Documents”: the collective reference to the Indenture dated as of January 15, 1997 between the Company and The Bank of New York Mellon (as successor to Bank of Montreal Trust Company), as Trustee, all supplemental indentures in respect thereof, and all notes issued thereunder and under any such supplemental indenture, as any such document may be amended, restated, supplemented or otherwise modified and in effect from time to time.
“Assenting Bank”: as defined in subsection 8.7(a).
“Assignee”: as defined in subsection 15.6(b).
“Assignment and Assumption”: each Assignment and Assumption, substantially in the form of Exhibit I, executed and delivered pursuant to subsection 15.6(b).
“Available Foreign Currencies”: (i) with respect to Committed Rate Loans, Pounds Sterling, euro, Hong Kong Dollars and Swedish Kroner, and any other currency agreed upon by the Company, the Administrative Agent and all of the Banks, (ii) with respect to Competitive Advance Loans, any currency agreed upon by the Borrower of such Competitive Advance Loan and the Bank that makes such Competitive Advance Loan and (iii) with respect to Letters of Credit, Pounds Sterling and euro.
“Bail-In Action”: the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.
“Bail-In Legislation”: with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.
“Bank Parent”: with respect to any Bank, any Person as to which such Bank is, directly or indirectly, a Subsidiary.
“Bankruptcy Event”: with respect to any Person, such Person becomes the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or liquidation of its business appointed for it, or, in the good faith determination of the Administrative Agent, has taken any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any such proceeding or appointment, provided that a Bankruptcy Event shall not result solely by virtue (i) of any ownership interest, or the acquisition of any ownership interest, in such Person by a Governmental Authority or instrumentality thereof, or (ii) in the case of a solvent Person, the precautionary appointment of an administrator, guardian, custodian or other similar official by a Governmental Authority under or based on the law of the country where such Person is subject to home jurisdiction supervision if applicable law requires that such appointment not be publicly disclosed, in any such case, where such ownership interest or action, does not result in or provide

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such Person with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Person (or such Governmental Authority or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Person.
“Banks”: as defined in the preamble hereto; provided, that unless the context otherwise requires, each reference herein to the Banks shall be deemed to include any Conduit Bank.
“Beneficial Ownership Certification”: a certification regarding beneficial ownership or control as required by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation”: 31 C.F.R. § 1010.230.
“Benefit Plan”: any of (a) an “employee benefit plan” (as defined in Section 3(3) of ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in Section 4975 of the Code to which Section 4975 of the Code applies, and (c) any Person whose assets include (for purposes of the Plan Asset Regulations or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee benefit plan” or “plan”.
“Board”: the Board of Governors of the Federal Reserve System or any successor.
“Borrowers”: the collective reference to the Company, the Subsidiary Borrowers and the Local Currency Borrowers.
“Borrowing”: (a) Committed Rate Loans made, converted or continued on the same date, in the same currency and, in the case of Eurocurrency Loans, as to which a single Interest Period is in effect, (b) a Competitive Advance Loan or group of Competitive Advance Loans made on the same date and as to which a single Interest Period is in effect or (c) Swing Line Loans.
“Borrowing Date”: any Business Day on which the Company or any Subsidiary Borrower requests the Banks to make Loans hereunder.
“Business”: as defined in subsection 9.18(b).
“Business Day”: (a) when such term is used in respect of any amount denominated or to be denominated in (i) any Available Foreign Currency, a London Banking Day which is also a day other than a Saturday or Sunday on which banks are open for general banking business in (x) the city which is the principal financial center of the country of issuance of such Available Foreign Currency, (y) in the case of euros only, Frankfurt, Germany (or such other principal financial center as the Administrative Agent may from time to time nominate for this purpose) and (z) New York City and (ii) Dollars, a London Banking Day which is also a day other than a Saturday or Sunday on which banks are open for general banking business in New York City and (b) when such term is used for the purpose of determining the date on which the Eurocurrency Rate is determined under this Agreement for any Loan denominated in euro for any Interest Period therefor and for purposes of determining the first and last day of any Interest Period, references in this Agreement to Business Days shall be deemed to be references to Target Operating Days.
“Capital Lease Obligations”: with respect to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and

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accounted for as capital leases on a balance sheet of such Person under GAAP; and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP.
“Capital Stock”: any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, options or rights to purchase any of the foregoing.
“Change in Control”: one or more of the following events:
(a)     less than a majority of the members of the Company’s board of directors shall be persons who either (i) were serving as directors on the Closing Date or (ii) were nominated as directors and/or approved by the vote of the majority of the directors who are directors referred to in clause (i) above or this clause (ii); or
(b)     a Person or group of Persons acting in concert (other than the direct or indirect beneficial owners of the Capital Stock of the Company as of the Closing Date) shall, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise, have become the direct or indirect beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended from time to time) of securities of the Company representing 40% or more of the combined voting power of the outstanding voting securities for the election of directors or shall have the right to elect a majority of the board of directors of the Company.
“Closing Date”: the date on which the conditions precedent set forth in subsection 10.1 shall be satisfied.
“Code”: the Internal Revenue Code of 1986, as amended from time to time.
“Commercial Letter of Credit”: as defined in subsection 5.1(b).
“Committed Exposure”: as to any Bank, the sum of (a) the aggregate Dollar Equivalent Amount of the principal amount of all outstanding Committed Rate Loans and Local Currency Loans made by such Bank or its Local Currency Bank affiliates, agencies or branches plus (b) such Bank’s Swing Line Exposure and L/C Exposure.
“Committed Rate Loan”: as defined in subsection 2.1; a Committed Rate Loan bearing interest based upon the ABR shall be a “Committed Rate ABR Loan”, and a Committed Rate Loan bearing interest based upon a Eurocurrency Rate shall be a “Committed Rate Eurocurrency Loan”.
“Commitment Period”: the period from and including the Closing Date to and including the earlier of (i) the Termination Date and, (ii) such other date on which the Commitments shall terminate as provided herein.
“Commitments”: the Revolving Commitments and the Swing Line Commitments.
“Commonly Controlled Entity”: an entity, whether or not incorporated, which is under common control with the Company within the meaning of Section 4001 of ERISA or is part of a group which includes the Company and which is treated as a single employer under Section 414 of the Code.

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“Company”: as defined in the preamble hereto.
“Company Guarantee”: the guarantee of the Company, substantially in the form of Exhibit F-1, as amended, supplemented or otherwise modified from time to time.
“Competitive Advance Loan”: as defined in subsection 3.1.
“Competitive Advance Loan Offer”: with respect to any Competitive Advance Loan Request in any Currency, an offer from a Bank in respect of such Competitive Advance Loan Request, containing the information in respect of such Competitive Advance Loan Offer and delivered to the Person, in the manner and by the time specified for a Competitive Advance Loan Offer in respect of such Currency in the Administrative Schedule.
“Competitive Advance Loan Request”: with respect to any Competitive Advance Loan in any Currency, a request from the Specified Borrower in respect of such Loan, containing the information in respect of such Competitive Advance Loan and delivered to the Person, in the manner and by the time specified for a Competitive Advance Loan Request in respect of such Currency in the Administrative Schedule.
“Conduit Bank”: any special purpose corporation organized and administered by any Bank for the purpose of making Loans and funding L/C Participant obligations otherwise required to be made or funded by such Bank and designated to the Administrative Agent and the Company by such Bank in a written instrument; provided, that the designation by any Bank of a Conduit Bank shall not relieve the designating Bank of any of its obligations to fund a Loan or an L/C Participant obligation under this Agreement if, for any reason, its Conduit Bank fails to fund any such Loan or L/C Participant obligation, and the designating Bank (and not the Conduit Bank) shall have the sole right and responsibility to deliver all consents and waivers required or requested under this Agreement with respect to its Conduit Bank, and provided, further, that no Conduit Bank shall (a) be entitled to receive any greater amount pursuant to subsection 8.5, 8.6, 8.8, or 15.5 than the designating Bank would have been entitled to receive in respect of the extensions of credit made by such Conduit Bank or (b) be deemed to have any Commitment.
“Consolidated Cash Interest Expense”: for any period, (a) the amount which would, in conformity with GAAP, be set forth opposite the caption “interest expense” or any like caption on a consolidated income statement of the Company and its Subsidiaries minus (b) the amount of non-cash interest (including interest paid by the issuance of additional securities) included in such amount; provided that in the case of any Permitted Receivables Securitization, “Consolidated Cash Interest Expense” shall be adjusted to include (without duplication) an amount equal to the interest (or other fees in the nature of interest or discount) accrued and paid or payable in cash for such period by the special purpose entity to the Receivable Financiers under such Permitted Receivables Securitization.
“Consolidated Interest Coverage Ratio”: for any period, the ratio of (a) Adjusted Consolidated EBITDA to (b) Consolidated Cash Interest Expense for such period.
“Consolidated Leverage Ratio”: on any date, the ratio of (a) Consolidated Total Debt on such date to (b) Adjusted Consolidated EBITDA for the period of four consecutive fiscal quarters most recently ended on or prior to such date.
“Consolidated Net Income”: for any fiscal period, the consolidated net income (or loss) of the Company and its Subsidiaries after excluding all unusual, extraordinary and non-recurring gains

2018 Arrow Electronics Credit Agreement
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and after adding all unusual, extraordinary and non-recurring losses, in all cases of the Company and its Subsidiaries determined on a consolidated basis during the relevant period in accordance with GAAP.
“Consolidated Total Debt”: at the date of determination thereof, (i) all Indebtedness of the Company and its Subsidiaries (excluding Indebtedness of the Company owing to any of its Subsidiaries or Indebtedness of any Subsidiary of the Company owing to the Company or any other Subsidiary of the Company), as determined on a consolidated basis in accordance with GAAP plus (ii) without duplication of amounts included in clause (i) above, an amount equal to the aggregate unpaid amount of cash proceeds advanced by the Receivables Financiers to the special purpose entity under any Permitted Receivables Securitization at the date of determination.
“Continuation Notice”: as defined in subsection 2.13(a).
“Continuing Bank”: as defined in subsection 2.13(a).
“Contractual Obligation”: as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.
“Converted Local Currency Loan”: as defined in subsection 6.3(b).
“Converted Specified Loan”: as defined in subsection 2.11(b).
“Credit Documents”: this Agreement, the Applications, the Subsidiary Guarantees, the Company Guarantee and the Local Currency Facilities.
“Currencies”: the collective reference to Dollars and Foreign Currencies.
“Default”: any of the events specified in Section 13, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied.
“Defaulting Bank”: any Bank that (a) has failed, within two Business Days of the date required to be funded or paid, to (i) fund any portion of its Loans, (ii) fund any portion of its participations in Letters of Credit, Swing Line Loans or Local Currency Loans or (iii) pay over to the Administrative Agent or any Bank any other amount required to be paid by it hereunder, unless, in the case of clause (i) above, such Bank notifies the Administrative Agent in writing that such failure is the result of such Bank’s good faith determination that a condition precedent to funding (specifically identified and including the particular condition precedent, if any) has not been satisfied, (b) has notified the Company, any other Borrower, any other Bank or the Administrative Agent in writing, or has made a public statement to the effect, that it does not intend or expect to comply with any of its funding obligations under this Agreement (unless such writing or public statement indicates that such position is based on such Bank’s good faith determination that a condition precedent (specifically identified and including the particular condition precedent, if any) to funding a Loan under this Agreement cannot be satisfied) or generally under other agreements in which it commits to extend credit, (c) has failed, within three Business Days after request by the Administrative Agent or any other Bank, acting in good faith, to provide a certification in writing from an authorized officer of such Bank that it will comply with its obligations (and is financially able to meet such obligations) to fund prospective Loans and participations in then outstanding Letters of Credit and Swing Line Loans under this Agreement, provided that such Bank shall cease to be a Defaulting

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Bank pursuant to this clause (c) upon receipt by such Bank or the Administrative Agent, as applicable, of such certification in form and substance satisfactory to it and the Administrative Agent, or (d) has become the subject of a Bankruptcy Event or a Bail-In Action.
“Disposition”: with respect to any Property, any sale, sale and leaseback, assignment, conveyance, transfer or other disposition thereof; and the terms “Dispose” and “Disposed of” shall have correlative meanings.
“Dollar Equivalent Amount”: with respect to (i) the amount of any Foreign Currency or other currency (other than Dollars) on any date, the equivalent amount in Dollars of such amount, as determined by the Administrative Agent using the Exchange Rate and (ii) any amount in Dollars, such amount.
“Dollars” and “$”: dollars in lawful currency of the United States of America.
“Domestic Subsidiary”: as to any Person, a Subsidiary of such Person organized under the laws of a State of the United States or the District of Columbia.
“Domestic Subsidiary Borrower”: each Subsidiary of the Company listed as a Domestic Subsidiary Borrower in Schedule II as amended from time to time in accordance with subsection 15.1(b)(i).
“EEA Financial Institution”: (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent;
“EEA Member Country”: any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority”: any public administrative authority or any Person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“Environmental Laws”: any and all foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including, without limitation, common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or may at any time hereafter be in effect.
“ERISA”: the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder.
“EU Bail-In Legislation Schedule”: the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor Person), as in effect from time to time.
“euro”: the single currency of participating member states of the European Union.

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“Eurocurrency”: when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted Eurocurrency Rate (or, in the case of a Competitive Advance Loan, the Eurocurrency Rate).
“Eurocurrency Rate”: with respect to any Eurocurrency Borrowing for any applicable Currency and for any Interest Period, the Eurocurrency Screen Rate at approximately 11:00 a.m., London time (or in the case of Euro or Hong Kong Dollars, Brussels time or Hong Kong time, respectively), two Business Days prior to the commencement of such Interest Period; provided that if the Eurocurrency Screen Rate shall not be available at such time for such Interest Period (an “Impacted Interest Period”) with respect to the applicable currency then the Eurocurrency Rate shall be the Interpolated Rate.
“Eurocurrency Screen Rate”: in respect of Dollars and each Available Foreign Currency, the rate determined as the Eurocurrency Screen Rate for Dollars or such Available Foreign Currency in the manner set forth in the Administrative Schedule; provided, that if the Eurocurrency Screen Rate as so determined would be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
“Event of Default”: any of the events specified in Section 13, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied.
“Exchange Rate”: (a) with respect to any Foreign Currency on any date, the equivalent of such amount in Dollars determined by using the rate of exchange for the purchase of Dollars with such Foreign Currency last provided (either by publication or otherwise provided to the Administrative Agent) by the applicable Thomson Reuters Corp. source on the Business Day immediately preceding the date of determination, or if such service ceases to be available or ceases to provide a rate of exchange for the purchase of Dollars with the Foreign Currency, as provided by such other publicly available information service which provides that rate of exchange at such time in place of Thomson Reuters Corp., chosen by the Administrative Agent and the Company or, in the absence of such agreement, in the Administrative Agent’s sole discretion (or if such service ceases to be available or ceases to provide such rate of exchange, the equivalent of such amount in Dollars as determined by the Administrative Agent using any method of determination it deems appropriate in its sole discretion) or (b) with respect to any currency (other than Dollars or any Foreign Currency) on any date, the equivalent of such amount in Dollars as determined by the Administrative Agent using any method of determination it deems appropriate in its sole discretion.
“Existing Credit Agreement”: as defined in the recitals hereof.
“Existing Joint Ventures”: the Persons specified on Schedule 1.1.
“Exposure”: at any date, (a) as to all the Banks, the aggregate Dollar Equivalent Amount of (i) the outstanding principal amount of all Loans then outstanding and (ii) all L/C Obligations then outstanding, (b) as to any Bank, the aggregate Dollar Equivalent Amount of (i) the outstanding principal amount of all Committed Rate Loans, Local Currency Loans and Competitive Advance Loans made by such Bank or its Local Bank affiliates, branches or agencies and (ii) such Bank’s Swing Line Exposure and L/C Exposure and (c) as to any Borrower, the aggregate Dollar Equivalent Amount of the outstanding principal amount of all Loans to such Borrower then outstanding.

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“Extensions of Credit”: the collective reference to the making of any Loans (including, without limitation, participating in any Swing Line Loans) and the issuance of, or participation in, any Letters of Credit but excluding the continuation or conversion of any Loan pursuant to a Notice of Conversion or a Notice of Continuation.
“Extension Request”: as defined in subsection 2.13(a).
“Facility Fee Rate”: a rate per annum determined based upon the Rating in effect on such date by each of S&P, Moody’s and Fitch set forth under the relevant column heading below opposite such Rating:

Pricing Level
Rating
(S&P/Moody’s/Fitch)
Facility Fee Rate
I
Greater than or equal to BBB+/Baa1/BBB+
0.125%
II
BBB/Baa2/BBB
0.150%
III
BBB-/Baa3/BBB-
0.200%
IV
BB+/Ba1/BB+
0.250%
V
Less than
BB+/Ba1/BB+
0.300%


; provided that, if the Ratings from the rating agencies fall within different Pricing Levels and (a) only two rating agencies provide a Rating, then (i) if the ratings differ by one Pricing Level, the Pricing Level for the higher of such Ratings shall apply, and (ii) if there is a split in Ratings of more than one level, the Pricing Level that is one level lower than the Pricing Level of the higher Rating shall apply, (b) if all three rating agencies provide a Rating, then (i) if two of the Ratings are at the same Pricing Level, such Pricing Level shall apply, (ii) if each of the Ratings fall within different Pricing Levels and there is not a split in Ratings by more than two levels, the Pricing Level of such Rating between the highest Rating and the lowest Rating shall apply and (iii) if each of the Ratings fall within different Pricing Levels and there is a split in the Ratings by more than two levels, the Pricing Level that is one level below the highest of the three Ratings shall apply and (c) if the Company does not have any Rating, Pricing Level V shall apply; provided, further, that if only one rating agency provides a Rating, or if only two rating agencies provide Ratings that are at the same Pricing Level, then such Ratings shall apply.
“FATCA”: sections 1471 through 1474 of the Code, as of the date of this Agreement (and any amended or successor versions thereof that are substantially comparable and are not materially more onerous to comply with), any regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code, and any law, regulation, rule, promulgation, guidance notes, practices or official agreement implementing an official government agreement with respect to the foregoing.
“Federal Funds Effective Rate”: for any day, the rate calculated by the NYFRB based on such day’s federal funds transactions by depositary institutions (as determined in such manner as the NYFRB shall set forth on its public website from time to time) and published on the next succeeding Business Day by the NYFRB as the federal funds effective rate; provided that if the

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Federal Funds Effective Rate as so determined would be less than zero, such rate shall be deemed to zero for the purposes of this Agreement.
“Financing Lease”: any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee.
“Fitch: Fitch Ratings Inc. or any successor thereto.
“Foreign Currencies”: the collective reference to the Available Foreign Currencies and the Additional Local Currencies.
“Foreign Currency Revolving Commitment”: as to any Bank and any Available Foreign Currency, the obligation of such Bank to make Committed Rate Loans hereunder denominated in such Available Foreign Currency in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Bank’s name on Schedule I under the caption “[Name of applicable Available Foreign Currency] Revolving Commitment Amount”, as such amount may be changed from time to time in accordance with the provisions of this Agreement.
“Foreign Currency Revolving Commitment Percentage”: as to any Bank and any Available Foreign Currency at any time, the percentage which such Bank’s Foreign Currency Revolving Commitment in such Available Foreign Currency then constitutes of the aggregate Foreign Currency Revolving Commitments of all Banks in such Available Foreign Currency.
“Foreign Currency Exposure”: at any date, the aggregate Dollar Equivalent Amount of (a) the outstanding principal amount of all Loans then outstanding which are denominated in a currency other than Dollars and (b) all L/C Obligations then outstanding which are denominated in a currency other than Dollars.
“Foreign Currency Exposure Sublimit”: at any date, (a) with respect to euros, a Dollar Equivalent Amount equal to $500,000,000, (b) with respect to Pounds Sterling, a Dollar Equivalent Amount equal to $200,000,000, (c) with respect to Hong Kong Dollars, a Dollar Equivalent Amount equal to $100,000,000, and (d) with respect to Swedish Kroner, a Dollar Equivalent Amount equal to $100,000,000.
“Foreign Subsidiary”: any Subsidiary that is not a Domestic Subsidiary.
“Foreign Subsidiary Borrower”: each Subsidiary of the Company listed as a Foreign Subsidiary Borrower in Schedule II as amended from time to time in accordance with subsection 15.1(b)(i); provided that with respect to any Subsidiary for which a Foreign Subsidiary Opinion has not previously been delivered, if the aggregate Exposure of such Subsidiary owing to all Banks exceeds $20,000,000 for a period of 30 consecutive days, then, unless a Foreign Subsidiary Opinion is delivered within 30 days after the end of such period, such Subsidiary shall cease to be a Foreign Subsidiary Borrower 30 days after the end of such period with respect to all Exposure of such Subsidiary owing to the Banks in excess of $20,000,000.
“Foreign Subsidiary Opinion”: with respect to any Foreign Subsidiary Borrower, a legal opinion of counsel to such Foreign Subsidiary Borrower addressed to the Administrative Agent and the Banks concluding that such Foreign Subsidiary Borrower and the Credit Documents to which

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it is a party substantially comply with the matters listed on Exhibit G-3 hereto, with such deviations therefrom as the Administrative Agent shall consent (such consent not to be unreasonably withheld).
“Fronting Exposure”: at any time there is a Defaulting Bank, such Defaulting Bank’s Revolving Commitment Percentage of the outstanding L/C Obligations (other than L/C Obligations as to which such Defaulting Bank’s participation obligation has been reallocated to other non-Defaulting Banks or cash collateralized in accordance with the terms hereof).
“Funding Office”: (i) for each Type of Committed Rate Loan and each Currency, the Funding Office set forth in respect thereof in the Administrative Schedule or such other office or offices as a Bank may from time to time notify the Company and the Administrative Agent, which office may include any Affiliate of such Bank or any domestic or foreign branch of such Bank or such Affiliate and (ii) for each Competitive Advance Loan, as agreed by the Borrower that borrows such Competitive Advance Loan, the Bank that makes such Competitive Advance Loan and the Administrative Agent.
“Funding Time”: (i) for each Swing Line Loan, Type of Committed Rate Loan and each Currency, the Funding Time set forth in respect thereof in the Administrative Schedule and (ii) for each Competitive Advance Loan, as agreed by the Borrower that borrows such Competitive Advance Loan, the Bank that makes such Competitive Advance Loan and the Administrative Agent.
“GAAP”: generally accepted accounting principles in the United States of America in effect from time to time.
“Governing Documents”: as to any Person, the certificate or articles of incorporation and by-laws or other organizational or governing documents of such Person.
“Governmental Authority”: any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, taxing, central banking, judicial, regulatory or administrative functions of or pertaining to government (including any supra-national body exercising such powers or functions, such as the European Union or the European Central Bank).
“Guarantee Obligation”: as to any Person (the “guaranteeing person”), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other monetary obligations (the “primary obligations”) of any other third Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount

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of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person’s maximum reasonably anticipated liability in respect thereof as determined by the Company in good faith.
“Guarantor”: the Company or any Subsidiary in its capacity as a party to the Company Guarantee or a Subsidiary Guarantee, as the case may be.
“Hedging Agreements”: (a) Interest Rate Agreements and (b) any swap, futures, forward or option agreements or other agreements or arrangements designed to limit or eliminate the risk and/or exposure of a Person to fluctuations in currency exchange rates between the Company or any of its Subsidiaries and Hedging Banks.
“Hedging Banks”: any Bank or any of its subsidiaries or affiliates which from time to time enter into Hedging Agreements with the Company or any of its Subsidiaries.
“Hong Kong Dollars”: the lawful currency of Hong Kong.
“IBA”: as defined in subsection 1.4.
“Impacted Interest Period”: as defined in the definition of “Eurocurrency Rate.”
“Increasing Bank”: as defined in subsection 2.10(c).
“Indebtedness”: of any Person at any date, without duplication, (a) the principal amount of all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), (b) the principal amount of any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (c) the portion of all obligations of such Person under Financing Leases which must be capitalized in accordance with GAAP, (d) the principal or stated amount of all obligations of such Person in respect of letters of credit, banker’s acceptances or similar obligations issued or created for the account of such Person, (e) all liabilities arising under Hedging Agreements of such Person, (f) the amount of all Guarantee Obligations of such Person (other than guarantees by the Company or any Subsidiary in respect of current trade liabilities of the Company or any Subsidiary incurred in the ordinary course of business and payable in accordance with customary terms), and (g) the principal amount of all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof.
“Insolvent”: with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA.
“Intellectual Property”: as defined in subsection 9.9.
“Interest Payment Date”: (a) as to any ABR Loan, the last day of each March, June, September and December and on the Termination Date, (b) as to any Committed Rate Loan that is a Eurocurrency Loan having an Interest Period of three months or less, the last day of such Interest Period, (c) as to any Committed Rate Loan that is a Eurocurrency Loan having an Interest Period

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longer than three months, each day which is three months after the first day of such Interest Period and the last day of such Interest Period, (d) as to any Swing Line Loan that is an ABR Loan, the last Business Day of each calendar month during which such Swing Line Loan is outstanding, (e) as to any Swing Line Loan that is a Eurocurrency Loan, the last date of the Interest Period applicable thereto, and (f) as to any Competitive Advance Loan, the date or dates set forth in the applicable Competitive Advance Loan Request or otherwise agreed upon by the relevant Borrower and Bank at the time the terms of such Competitive Advance Loan are determined as provided in subsection 3.2.
“Interest Period”: (c) with respect to any Committed Rate Loan that is a Eurocurrency Loan:
(i)     initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurocurrency Loan and ending one week or one, two, three or six months thereafter, as selected by the relevant Borrower in its Notice of Borrowing or Notice of Conversion, as the case may be, given with respect thereto; and
(ii)     thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurocurrency Loan and ending one week or one, two, three or six months thereafter, as selected by the relevant Borrower by a Notice of Continuation with respect thereto; and
(d)     with respect to any Swing Line Loan that is a Eurocurrency Loan, the period commencing on the borrowing date with respect to such Eurocurrency Loan and ending on the earlier of (i) the date which is 30 days after the making of such Swing Line Loan, (ii) the date on which such Swing Line Loan is required to be repaid pursuant to subsection 4.3 and (iii) the date on which such Swing Line Loan is repaid in full;
provided that, all of the foregoing provisions relating to Interest Periods are subject to the following:
(1)     if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day;
(2)     any Interest Period that would otherwise extend beyond the Termination Date shall end on the Termination Date; and
(3)     solely with respect to Committed Rate Loans, any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month.
“Interest Rate Agreement”: any interest rate protection agreement, interest rate future, interest rate option, interest rate swap, interest rate cap or other interest rate hedge or arrangement under which the Company is a party or a beneficiary.
“Interpolated Rate”: at any time, for any Interest Period, the rate per annum (rounded to the same number of decimal places as the Eurocurrency Screen Rate) determined by the Administrative Agent (which determination shall be conclusive and binding absent manifest error)

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to be equal to the rate that results from interpolating on a linear basis between: (a) the Eurocurrency Screen Rate (for the longest period for which the Eurocurrency Screen Rate is available for the applicable currency) that is shorter than the Impacted Interest Period; and (b) the Eurocurrency Screen Rate for the shortest period (for which that Eurocurrency Screen Rate is available for the applicable currency) that exceeds the Impacted Interest Period, in each case, at such time.
“IRS”: as defined in subsection 8.6.
“Issuing Bank”: in respect of any Currency, each Bank listed as an Issuing Bank in Schedule III in respect of such Currency.
“Issuing Office”: in respect of each Issuing Bank, the Issuing Office set forth for such Issuing Bank in Schedule III or such other office or offices as a Bank may from time to time notify the Company and the Administrative Agent, which office may include any Affiliate of such Bank or any domestic or foreign branch of such Bank or such Affiliate.
“Joinder Agreement”: each Joinder Agreement, substantially in the form of Exhibit A, from time to time executed and delivered hereunder pursuant to subsection 15.1 (b).
“Judgment Currency”: as defined in subsection 15.9.
“L/C Commitment”: as to any Issuing Bank, the obligation of such Issuing Bank to provide Letters of Credit hereunder in an amount at any one time outstanding not to exceed the amount set forth opposite such Bank’s name on Schedule III under the caption “L/C Commitment Amount”, as such amount may be changed from time to time in accordance with the provisions of this Agreement.
“L/C Exposure”: at any time, the total L/C Obligations. The L/C Exposure of any Bank at any time shall be its Revolving Commitment Percentage of the total L/C Exposure at such time.
“L/C Obligations”: at any time, an amount equal to the sum of the Dollar Equivalent Amount of (a) the aggregate then undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount of drawings under Letters of Credit which have not then been reimbursed pursuant to subsection 5.5(a).
“L/C Participant”: in respect of each Letter of Credit, each Bank (other than the Issuing Bank in respect of such Letter of Credit) in its capacity as the holder of a participating interest in such Letter of Credit.
“Letters of Credit”: as defined in subsection 5.1(b).
“Lien”: any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any Financing Lease having substantially the same economic effect as any of the foregoing).
“Liquidity”: the sum of (a) cash and cash equivalents and short-term investments convertible into cash within sixty (60) days held by the Company and its Subsidiaries, plus (b) so long as the Company is able to satisfy the conditions to borrowing set forth in subsection 10.2 (including, but not limited to, compliance with the financial covenants pursuant to subsection 12.1), the aggregate

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amount of Undrawn Revolving Commitments, plus (c) any amount then available to the Company or its Subsidiaries under any Permitted Receivables Securitization or other legally committed credit facilities (provided that, in the case of this clause (c), the Company or the applicable Subsidiary is able to satisfy all conditions to the availability of such financing).
“Loan”: any Committed Rate Loan, Competitive Advance Loan, Swing Line Loan or Local Currency Loan.
“Loan Party”: the Company and each Subsidiary of the Company which is a party to a Credit Document.
“Local Currency Bank”: any Bank (or, if applicable, any affiliate, branch or agency thereof) party to a Local Currency Facility.
“Local Currency Bank Maximum Borrowing Amount”: as defined in subsection 6.1(b).
“Local Currency Borrower”: each Subsidiary of the Company organized under the laws of a jurisdiction outside the United States that the Company designates as a “Local Currency Borrower” in a Local Currency Facility Addendum.
“Local Currency Facility”: any Qualified Credit Facility that the Company designates as a “Local Currency Facility” pursuant to a Local Currency Facility Addendum or that is set forth on Schedule 9.10.
“Local Currency Facility Addendum”: a Local Currency Facility Addendum received by the Administrative Agent, substantially in the form of Exhibit C and conforming to the requirements of Section 6.
“Local Currency Facility Agent”: with respect to each Local Currency Facility, the Local Currency Bank acting as agent for the Local Currency Banks party thereto.
“Local Currency Facility Maximum Borrowing Amount”: as defined in subsection 6.1(b).
“Local Currency Loan”: any loan made pursuant to a Local Currency Facility.
“London Banking Day”: any day on which banks in London are open for general banking business, including dealings in foreign currency and exchange.
“Material Adverse Effect”: a material adverse effect on (a) the business, operations, property or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole, (b) the ability of the Company to perform its obligations under this Agreement or other Credit Documents or (c) the validity or enforceability of this Agreement or any of the other Credit Documents or the rights or remedies of the Administrative Agent or the Banks hereunder or thereunder.
“Materials of Environmental Concern”: any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
“Moody’s”: Moody’s Investors Service, Inc. or any successor thereto.

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“Multiemployer Plan”: a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA.
“New Bank”: as defined in subsection 2.10(b).
“New Bank Supplement”: as defined in subsection 2.10(b).
“Non-Excluded Taxes”: as defined in subsection 8.6.
“Non-Extending Bank”: as defined in subsection 2.13(a).
“Non-U.S. Bank”: as defined in subsection 8.6.
“Notice of Borrowing”: with respect to any Committed Rate Loan of any Type in any Currency, a notice from the Specified Borrower in respect of such Loan, containing the information in respect of such Loan and delivered to the Person, in the manner and by the time specified for a Notice of Borrowing in respect of such Currency and such Type of Loan in the Administrative Schedule.
“Notice of Continuation”: with respect to a Committed Rate Eurocurrency Loan in any Currency, a notice from the Specified Borrower in respect of such Loan, containing the information in respect of such Loan and delivered to the Person, in the manner and by the time specified for a Notice of Continuation in respect of such Currency in the Administrative Schedule.
“Notice of Conversion”: with respect to a Committed Rate Loan in Dollars which a Specified Borrower wishes to convert from a Eurocurrency Loan to an ABR Loan, or from an ABR Loan to a Eurocurrency Loan, as the case may be, a notice from such Borrower setting forth the amount of such Loan to be converted, the date of such conversion and, in the case of conversions of ABR Loans to Eurocurrency Loans, the length of the initial Interest Period applicable thereto. Each Notice of Conversion shall be delivered to (i) the Administrative Agent at its address set forth in subsection 15.2 and shall be delivered before 12:00 Noon, New York City time, on the Business Day of the requested conversion in the case of conversions to ABR Loans, before 12:00 Noon, New York City time, three Business Days before the requested conversion in the case of conversions to Eurocurrency Loans in Currencies other than Honk Kong Dollars or before 12:00 Noon, Hong Kong time, four Business Days before the requested conversion of Eurocurrency Loans in Hong Kong Dollas.
“Notice of Local Currency Outstandings”: with respect to each Local Currency Facility Agent, a notice from such Local Currency Facility Agent containing the information, delivered to the Person, in the manner and by the time specified for a Notice of Local Currency Outstandings in the Administrative Schedule.
“Notice of Prepayment”: with respect to prepayment of any Swing Line Loan or Committed Rate Loan of any Type in any Currency, a notice from the Specified Borrower in respect of such Loan, containing the information in respect of such prepayment and delivered to the Person, in the manner and by the time specified for a Notice of Prepayment in respect of such Swing Line Loan, Committed Rate Loan or Currency and such Type of Loan in the Administrative Schedule.
“Notice of Swing Line Borrowing”: with respect to a Swing Line Loan of any Type, a notice from the Specified Borrower in respect of such Swing Line Loan, containing the information in

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respect of such Swing Line Loan specified for a Notice of Swing Line Borrowings in the Administrative Schedule and delivered to the applicable Swing Line Bank.
“Notice of Swing Line Outstandings”: with respect to each Swing Line Bank, a notice from such Swing Line Bank containing the information, delivered to the Person, in the manner and by the time, specified for a Notice of Swing Line Outstandings in the Administrative Schedule.
“Notice of Swing Line Refunding”: with respect to each Swing Line Bank, a notice from such Swing Line Bank containing the information, delivered to the Person, in the manner and by the time specified for a Notice of Swing Line Refunding in the Administrative Schedule.
“NYFRB”: the Federal Reserve Bank of New York.
“NYFRB Rate”: for any day, the greater of (a) the Federal Funds Effective Rate in effect on such day and (b) the Overnight Bank Funding Rate in effect on such day (or for any day that is not a Business Day, for the immediately preceding Business Day); provided that if none of such rates are published for any day that is a Business Day, the term “NYFRB Rate” means the rate for a federal funds transaction quoted at 11:00 a.m. on such day received by the Administrative Agent from a Federal funds broker of recognized standing selected by it; provided, further, that if any of the aforesaid rates shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
“Objecting Bank”: as defined in subsection 15.1(e).
“Offered Increase Amount”: as defined in subsection 2.10(a).
“Other Connection Taxes”: with respect to any recipient, taxes imposed as a result of a present or former connection between such recipient and the jurisdiction imposing such tax (other than connections arising from such recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Credit Document, or sold or assigned an interest in any Loan or Credit Document).
“Other Taxes”: any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Credit Document, including any interest, additions to tax or penalties applicable thereto, except for any such taxes that are (i) taxes excluded under subsection 8.6(a) or (ii) Other Connection Taxes imposed with respect to an assignment (other than an assignment under subsection 8.7(b)).
“Overnight Bank Funding Rate”: for any day, the rate comprised of both overnight federal funds and overnight Eurodollar borrowings by U.S.-managed banking offices of depository institutions (as such composite rate shall be determined by the NYFRB as set forth on its public website from time to time) and published on the next succeeding Business Day by the NYFRB as an overnight bank funding rate.
“Participant”: as defined in subsection 15.6(c).
“Participant Register”: as defined in subsection 15.6(c).

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“Patriot Act”: as defined in subsection 15.17.
“Payment Office”: (i) for each Type of Committed Rate Loan and each Currency, the Payment Office set forth in respect thereof in the Administrative Schedule or such other office or offices as a Bank may from time to time notify the Company and the Administrative Agent, which office may include any Affiliate of such Bank or any domestic or foreign branch of such Bank or such Affiliate and (ii) for each Competitive Advance Loan, as agreed by the Specified Borrower that borrows such Competitive Advance Loan, the Bank that makes such Competitive Advance Loan and the Administrative Agent.
“Payment Time”: (i) for each Swing Line Loan, Type of Committed Rate Loan and each Currency, the Payment Time set forth in respect thereof in the Administrative Schedule and (ii) for each Competitive Advance Loan, as agreed by the Specified Borrower that borrows such Competitive Advance Loan, the Bank that makes such Competitive Advance Loan and the Administrative Agent.
“PBGC”: the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA or any successor entity.
“Permitted Acquisition”: on any date of determination, the acquisition of all or part of any Person or business unit in any transaction or series of transactions by the Company or any Subsidiary.
“Permitted Joint Venture”: on any date of determination, a limited-purpose corporation, partnership, limited liability company, joint venture or other similar legal arrangement (whether created by contract or conducted through a separate legal entity, but excluding any Subsidiary) now or hereafter formed or invested in by the Company or any of its Subsidiaries with another Person or Persons in order to conduct a common venture or enterprise with such Person or Persons.
“Permitted Receivables Agreement”: the Transfer and Administration Agreement, dated as of March 21, 2001, by and among the Company, Arrow Electronics Funding Corporation, Bank of America, National Association, as the administrative agent for the conduit investors and the alternate investors, and the other parties party thereto, as the same may be amended from time to time.
“Permitted Receivables Securitization”: any transaction involving one or more sales, contributions or other conveyances by the Company or any Subsidiary of any Receivables to a special purpose entity (which may be a Subsidiary or Affiliate of the Company), which special purpose entity finances such sales, contributions or other conveyances by in turn conveying an interest in such Receivables to one or more Receivable Financiers, provided that such transaction shall not involve any recourse to the Company or any Subsidiary (other than such special purpose entity) for any reason other than (i) repurchases of non-eligible Receivables, (ii) indemnification for losses (including any adjustments for dilutions), other than credit losses related to the Receivables conveyed in such transaction and (iii) payment of costs, fees, expenses and indemnities relating to such transaction.
“Person”: an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.
“Plan”: at a particular time, any employee benefit plan (within the meaning of Section 3(3) of ERISA) which is covered by ERISA and in respect of which the Company or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an “employer” (as defined in Section 3(5) of ERISA).

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“Plan Asset Regulation”: the U.S. Department of Labor regulations, §2510.3 101, as modified by Section 3(42) of ERISA, as amended from time to time.
“Pounds”, “Pounds Sterling” and “Sterling”: the lawful currency of the United Kingdom.
“Prime Rate”: the rate of interest last quoted by The Wall Street Journal as the “Prime Rate” in the U.S. or, if The Wall Street Journal ceases to quote such rate, the highest per annum interest rate published by the Federal Reserve Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein, any similar rate quoted therein (as determined by the Administrative Agent) or any similar release by the Federal Reserve Board (as determined by the Administrative Agent). Each change in the Prime Rate shall be effective from and including the date such change is publicly announced or quoted as being effective.
“Properties”: as defined in subsection 9.18(a).
“Protesting Bank”: as defined in subsection 15.1(b).
“PTE”: a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.
“Qualified Credit Facility”: a credit facility (a) providing for one or more Local Currency Banks to make loans denominated in an Additional Local Currency to a Local Currency Borrower, (b) providing for such loans to bear interest at a rate or rates determined by the Company and such Local Currency Bank or Local Currency Banks and (c) otherwise conforming to the requirements of Section 6.
“Ratings”: the actual or implied senior unsecured non-credit enhanced debt ratings of the Company in effect from time to time by Moody’s, S&P or Fitch, as the case may be.
“Re-Allocation Date”: as defined in subsection 2.10(e).
“Receivables”: all accounts receivable of the Company or any of its Subsidiaries, and all proceeds thereof and rights (contractual and other) and collateral related thereto.
“Receivable Financier”: any Person (other than a Subsidiary or Affiliate of the Company) that finances the acquisition by a special purpose entity of Receivables from the Company or any Subsidiary.
“Register”: as defined in subsection 15.6(b).
“Regulation D”: Regulation D of the Board, as in effect from time to time and all official rulings and interpretations thereunder or thereof.
“Regulation U”: Regulation U of the Board, as in effect from time to time and all official rulings and interpretations thereunder or thereof.
“Reimbursement Obligation”: in respect of each Letter of Credit, the obligation of the account party thereunder to reimburse the Issuing Bank for all drawings made thereunder in accordance with Section 5 and the Application related to such Letter of Credit.

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“Replacement Bank”: a bank or financial institution that assumes certain Commitments and obligations and purchases certain Loans and rights pursuant to subsection 8.7(b), 8.17(e) or 15.1(e).
“Reportable Event”: any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty-day notice period is waived under DOL Reg. § 4043.
“Requested Specified Loan”: as defined in subsection 2.12(a).
“Required Banks”: at any time, Banks holding more than 50% of the aggregate amount of the Revolving Commitments (or, at any time after the Revolving Commitments shall have expired or terminated, Banks holding more than 50% of the aggregate amount of the Exposure of all Banks at such time).
“Requirement of Law”: as to any Person, the Governing Documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
“Responsible Officer”: as to any Person, the chief executive officer, the chairman of the board, the president, the chief financial officer, the chief accounting officer, any executive or senior vice president or the treasurer of such Person.
“Restricted Payments”: any payment on account of, or assets set apart for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any Capital Stock, whether now or hereafter outstanding, or any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations.
“Revolving Borrowing Percentage”: (a) with respect to Committed Rate Loans denominated in Dollars to be made by any Bank at any time, the ratio (expressed as a percentage) of the amount of such Bank’s Undrawn Revolving Commitment at such time to the aggregate amount of the Undrawn Revolving Commitments of all the Banks at such time; provided, that in determining any Bank’s Undrawn Revolving Commitment for the purpose of determining such Bank’s Revolving Borrowing Percentage of any such Committed Rate Loans whose proceeds will be simultaneously applied to repay Swing Line Loans or Local Currency Loans or to pay Reimbursement Obligations, such Bank’s Revolving Commitment Percentage of the amount of such Swing Line Loans and Reimbursement Obligations, and the amount of such Local Currency Loans owing to such Bank, will not be considered Committed Exposure of such Bank (such Revolving Borrowing Percentage of each Bank at any time to be calculated by the Administrative Agent on the basis of its most recent calculations of the Undrawn Revolving Commitments of the Banks) and (b) with respect to Committed Rate Loans denominated in any Available Foreign Currency to be made by any Bank at any time, a percentage equal to such Bank’s Foreign Currency Revolving Commitment Percentage in the Currency of such Committed Rate Loans.
“Revolving Commitment”: as to any Bank, the obligation of such Bank to make Committed Rate Loans and/or acquire participating interests in Swing Line Loans hereunder and/or in Local Currency Facilities and issue and/or acquire participating interests in Letters of Credit hereunder in an aggregate Dollar Equivalent Amount at any one time outstanding not to exceed the amount set forth opposite such Bank’s name on Schedule I under the caption “Dollar Revolving Commitment

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Amount”, as such amount may be changed from time to time in accordance with the provisions of this Agreement.
“Revolving Commitment Increase Notice”: as defined in subsection 2.10(a).
“Revolving Commitment Increase Supplement”: as defined in subsection 2.10(c).
“Revolving Commitment Percentage”: as to any Bank at any time, the percentage which such Bank’s Revolving Commitment then constitutes of the aggregate amount of the Revolving Commitments (or, at any time after the Revolving Commitments shall have expired or terminated, the percentage which the amount of the Exposure of such Bank at such time constitutes of the aggregate amount of the Exposure of all the Banks at such time). Notwithstanding the foregoing, in accordance with subsection 8.17 when a Defaulting Bank shall exist, Revolving Commitment Percentages shall be determined without regard to any Defaulting Bank’s Revolving Commitment.
“S&P”: Standard & Poor’s Financial Services LLC or any successor thereto.
“Sanctioned Country”: at any time, a country, region or territory which is, or whose government is, the subject or target of any Sanctions.
“Sanctioned Person”: at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State, or by the United Nations Security Council, the European Union, any member state of the European, Union Her Majesty’s Treasury of the United Kingdom or other relevant sanctions authority or otherwise subject to any Sanctions (b) any Person located, operating, organized or resident in a Sanctioned Country or (c) any Person owned or controlled by any such Person or Persons described in the foregoing clauses (a) or (b).
“Sanctions”: economic or financial sanctions, restrictive measures or trade embargoes enacted, imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, or (b) the United Nations Security Council, the European Union, any European Union member state, Her Majesty’s Treasury of the United Kingdom or other relevant sanctions authority.
“Schedule Amendment”: each Schedule Amendment, substantially in the form of Exhibit B, executed and delivered pursuant to subsection 15.1.
“Single Employer Plan”: any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan.
“Specified Borrower”: the collective reference to the Company and the Subsidiary Borrowers.
“Specified Loans”: as defined in subsection 2.11(a).
“Specified Foreign Currency Bank”: as defined in subsection 2.12(a).
“Standby Letter of Credit”: as defined in subsection 5.1(b).

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“Statutory Reserve Rate”: a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentage (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Federal Reserve Board to which the Administrative Agent is subject with respect to the Adjusted Eurocurrency Rate, for eurocurrency funding (currently referred to as “Eurocurrency liabilities” in Regulation D). Such reserve percentage shall include those imposed pursuant to Regulation D. Eurocurrency Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Bank under Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.
“Subsidiary”: as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of the Company.
“Subsidiary Borrower”: the collective reference to the Foreign Subsidiary Borrowers and the Domestic Subsidiary Borrowers.
“Subsidiary Guarantee”: each Subsidiary Guarantee, substantially in the form of Exhibit F-2, to be executed and delivered from time to time by any other Domestic Subsidiary pursuant to subsection 11.9, in each case, as the same may be amended, supplemented or otherwise modified from time to time.
“Syndication Agents”: BNP Paribas, Bank of America, N.A., The Bank of Nova Scotia, MUFG Bank, Ltd, ING Bank N.V., Dublin Branch, Mizuho Bank, Ltd, and Sumitomo Mitsui Banking Corporation.
“Swedish Kroner”: the lawful currency of Sweden.
“Swing Line Bank”: in respect of any Specified Borrower, each Bank listed as a Swing Line Bank in respect of such Specified Borrower in Schedule III and any other Bank party hereto as a “Swing Line Bank” from time to time.
“Swing Line Commitment”: as to any Swing Line Bank, the obligation of such Swing Line Bank to make Swing Line Loans hereunder in an amount at any one time outstanding not to exceed the amount set forth opposite such Bank’s name on Schedule III under the caption “Swing Line Commitment Amount”, as such amount may be changed from time to time in accordance with the provisions of this Agreement.
“Swing Line Exposure”: at any time, the sum of the aggregate principal amount of all outstanding Swing Line Loans at such time. The Swing Line Exposure of any Bank at any time shall be the sum of (a) its Revolving Commitment Percentage of the total Swing Line Exposure at such time related to Swing Line Loans other than any Swing Line Loans made by such Bank in its capacity as a Swing Line Bank and (b) if such Bank shall be a Swing Line Bank, the principal amount

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of all Swing Line Loans made by such Bank outstanding at such time (to the extent that the other Banks shall not have funded their participations in such Swing Line Loans); provided that in the case of subsections 2.1 and 8.17 when a Defaulting Bank shall exist, the Swing Line Exposure of any Bank shall be adjusted to give effect to any reallocation effected pursuant to subsection 8.17.
“Swing Line Limit”: in respect of any Specified Borrower, the amount listed as the Swing Line Limit in respect of such Specified Borrower in Schedule III or the Joinder Agreement for such Specified Borrower, but not in any case for all Specified Borrowers to exceed an aggregate amount equal to $500,000,000.
“Swing Line Loan”: as defined in subsection 4.1.
“Swing Line Rate”: a rate per annum equal to (a) at the sole option of the Specified Borrower requesting such Swing Line Loan, either (i) the Eurocurrency Rate for an Interest Period of one month or such shorter period as may be agreed between the Specified Borrower requesting such Swing Line Loan and the Swing Line Banks or (ii) ABR, plus (b) the Applicable Margin.
“Target Operating Day”: any day that is not (a) a Saturday or Sunday, (b) Christmas Day or New Year’s Day or (c) any other day on which the Trans-European Real-time Gross Settlement Operating System (or any successor settlement system) is not operating (as determined by the Administrative Agent).
“Termination Date”: December 14, 2023, as such date may be extended pursuant to subsection 2.13 hereof.
“Total Assets”: at a particular date, the assets of the Company and its Subsidiaries, determined on a consolidated basis in accordance with GAAP.
“Total Revolving Commitments”: at any time, the aggregate amount of the Revolving Commitments then in effect.
“Total Swing Line Commitments”: at any time, the aggregate amount of the Swing Line Commitments then in effect.
“Tranche”: the collective reference to Eurocurrency Loans of the same Type in any Currency the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day).
“Type”: in respect of any Loan, its character as a Committed Rate Loan, Competitive Advance Loan or Swing Line Loan, as the case may be.
“UCC”: the Uniform Commercial Code as from time to time in effect in the relevant jurisdiction.
“Undrawn Revolving Commitment”: as to any Bank at any time, the amount of such Bank’s Revolving Commitment minus the amount of such Bank’s Committed Exposure at such time but not less than zero.

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“Uniform Customs”: the Uniform Customs and Practice for Documentary Credits (2007 Revision), International Chamber of Commerce Publication No. 600 as the same may be amended from time to time.
“U.S. Tax Compliance Certificate”: as defined in subsection 8.6(e)(i)(B)(3).
“Withholding Agent”: any Loan Party and the Administrative Agent.
“Write-Down and Conversion Powers”: with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.
1.2     Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto.
(a)     As used herein and in any certificate or other document made or delivered pursuant hereto, accounting terms relating to the Company and its Subsidiaries not defined in subsection 1.1 and accounting terms partly defined in subsection 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP (provided that all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made without giving effect to (i) any election under Accounting Standards Codification 825-10-25 (previously referred to as Statement of Financial Accounting Standards 159) (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of the Company or any Subsidiary at “fair value”, as defined therein and (ii) any treatment of Indebtedness in respect of convertible debt instruments under Accounting Standards Codification 470-20 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any such Indebtedness in a reduced or bifurcated manner as described therein, and such Indebtedness shall at all times be valued at the full stated principal amount thereof). Notwithstanding anything in this Agreement to the contrary, for purposes of interpreting any provision contained herein or determining compliance with any covenant or any other provision contained herein, including for calculating compliance with the financial covenants in this Agreement, the effects of Accounting Standards Codification 842 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) on leases and debt obligations shall, in each case, be disregarded.
(b)     The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified.
(c)     The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.
(d)     The phrases “to the knowledge of the Company” and “of which any Subsidiary is aware” and phrases of similar import when used in this Agreement shall mean to the actual knowledge of a Responsible Officer of the Company or any such Subsidiary, as the case may be.

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1.3     Accounting Determinations. Unless otherwise specified herein, all accounting determinations for purposes of calculating or determining compliance with the terms found in subsection 1.1 or the standards and covenants found in subsection 12.1 and otherwise to be made under this Agreement shall be made in accordance with GAAP applied on a basis consistent in all material respects with that used in preparing the financial statements referred to in subsection 9.1. If GAAP shall change from the basis used in preparing such financial statements, the certificates required to be delivered pursuant to subsection 11.2 demonstrating compliance with the covenants contained herein shall set forth calculations setting forth the adjustments necessary to demonstrate how the Company is in compliance with the financial covenants based upon GAAP as in effect on the Closing Date.
1.4     Interest Rates; LIBOR Notification. The interest rate on Eurocurrency Loans is determined by reference to the Eurocurrency Rate, which is derived from the London interbank offered rate. The London interbank offered rate is intended to represent the rate at which contributing banks may obtain short-term borrowings from each other in the London interbank market. In July 2017, the U.K. Financial Conduct Authority announced that, after the end of 2021, it would no longer persuade or compel contributing banks to make rate submissions to the ICE Benchmark Administration (together with any successor to the ICE Benchmark Administrator, the “IBA”) for purposes of the IBA setting the London interbank offered rate. As a result, it is possible that commencing in 2022, the London interbank offered rate may no longer be available or may no longer be deemed an appropriate reference rate upon which to determine the interest rate on Eurodollar Loans. In light of this eventuality, public and private sector industry initiatives are currently underway to identify new or alternative reference rates to be used in place of the London interbank offered rate. In the event that the London interbank offered rate is no longer available or in certain other circumstances as set forth in subsection 8.15(b) of this Agreement, such subsection 8.15(b) provides a mechanism for determining an alternative rate of interest. The Administrative Agent will notify the Borrower, pursuant to subsection 8.15(b), in advance of any change to the reference rate upon which the interest rate on Eurocurrency Loans is based. However, the Administrative Agent does not warrant or accept any responsibility for, and shall not have any liability with respect to, the administration, submission or any other matter related to the London interbank offered rate or other rates in the definition of “Eurocurrency Rate” or with respect to any alternative or successor rate thereto, or replacement rate thereof, including without limitation, whether the composition or characteristics of any such alternative, successor or replacement reference rate, as it may or may not be adjusted pursuant to subsection 8.15(b), will be similar to, or produce the same value or economic equivalence of, the Eurocurrency Rate, or have the same volume or liquidity as did the London interbank offered rate prior to its discontinuance or unavailability.

SECTION 2.     THE COMMITTED RATE LOANS
2.1     Committed Rate Loans. (a) Subject to the terms and conditions hereof, each Bank severally agrees to make loans on a revolving credit basis (“Committed Rate Loans”) to any Specified Borrower from time to time during the Commitment Period; provided, that no Committed Rate Loan shall be made by any Bank if, after giving effect to the making of such Loan and the simultaneous application of the proceeds thereof, (i) the aggregate amount of the Exposure of all the Banks would exceed the aggregate amount of the Revolving Commitments, (ii) the aggregate amount of the Foreign Currency Exposure in respect of any Available Foreign Currency would exceed the Foreign Currency Exposure Sublimit for such Currency (iii) in the case of Committed Rate Loans denominated in an Available Foreign Currency, the aggregate principal amount of Committed Rate Loans outstanding to a Bank in such Currency would exceed the Foreign Currency Revolving Commitment of such Bank in such Currency or (iv) the aggregate amount of the Exposure of a Bank would exceed the Revolving Commitment of such Bank. During the Commitment Period, the Specified Borrowers may use the Revolving Commitments by borrowing, prepaying the

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Committed Rate Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof.
(a)     The Committed Rate Loans may be made in Dollars or any Available Foreign Currency and may from time to time be (i) Committed Rate Eurocurrency Loans, (ii) in the case of Committed Rate Loans in Dollars only, Committed Rate ABR Loans or (iii) a combination thereof, as determined by the relevant Specified Borrower and set forth in the Notice of Borrowing or Notice of Conversion with respect thereto; provided, that no Committed Rate Eurocurrency Loan shall be made after the day that is one month prior to the Termination Date.
2.2     Procedure for Committed Rate Loan Borrowing. Any Specified Borrower may request the Banks to make Committed Rate Loans on any Business Day during the Commitment Period by delivering a Notice of Borrowing. Each borrowing of Committed Rate Loans (other than pursuant to a Swing Line refunding pursuant to subsection 4.4, pursuant to subsection 5.5(c) or pursuant to subsection 6.3) shall be in an amount equal to (a) in the case of Committed Rate ABR Loans, $1,000,000 or a whole multiple of $500,000 in excess thereof (or, if the then aggregate undrawn amount of the Revolving Commitments is less than $1,000,000, such lesser amount) and (b) in the case of Committed Rate Eurocurrency Loans, (i) if in Dollars, $5,000,000 or increments of $500,000 in excess thereof, and (ii) if in any Available Foreign Currency, an amount in such Available Foreign Currency of which the Dollar Equivalent Amount is at least $5,000,000; provided, that any borrowing of Committed Rate Loans may be in an aggregate amount that is equal to the entire unused balance of the Total Revolving Commitment. Upon receipt of any such Notice of Borrowing from a Specified Borrower, the Administrative Agent shall promptly notify each Bank that has a Revolving Commitment in the relevant Currency of receipt of such Notice of Borrowing and of such Bank’s Revolving Borrowing Percentage of the Committed Rate Loans to be made pursuant thereto. Subject to the terms and conditions hereof, each Bank that has a Revolving Commitment in the relevant Currency will make its Revolving Borrowing Percentage of each such borrowing available to the Administrative Agent for the account of such Specified Borrower at the Funding Office, and at or prior to the Funding Time, for the Currency of such Loan in funds immediately available to the Administrative Agent in the applicable Currency. The amounts made available by each Bank will then be made available to such Specified Borrower at the Funding Office, in like funds as received by the Administrative Agent.
2.3     Repayment of Committed Rate Loans; Evidence of Debt. (a) Each Specified Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Bank on the Termination Date (or such earlier date on which the Loans become due and payable pursuant to Section 13), the then unpaid principal amount of each Committed Rate Loan made by such Bank to such Specified Borrower. Each Specified Borrower hereby further agrees to pay to the Administrative Agent for the account of each Bank, interest on the unpaid principal amount of the Committed Rate Loans made to such Specified Borrower from time to time outstanding from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in subsection 8.14.
(a)     Each Bank shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of each Specified Borrower to such Bank resulting from each Committed Rate Loan of such Bank from time to time, including the amounts of principal and interest payable and paid to such Bank from time to time under this Agreement.
(b)     The Administrative Agent shall maintain the Register pursuant to subsection 15.6(b), and a subaccount therein for each Bank, in which shall be recorded (i) the amount of each Committed Rate Loan made hereunder and each Interest Period (if any) applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from each Specified

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Borrower to each Bank under Committed Rate Loans and (iii) the amount of any sum received by the Administrative Agent from each Specified Borrower in respect of Committed Rate Loans, and the amount of each Bank’s share thereof.
(c)     The entries made in the Register and the accounts of each Bank maintained pursuant to subsection 2.3(b) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of each Specified Borrower therein recorded absent manifest error; provided, however, that the failure of any Bank or the Administrative Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of each Specified Borrower to repay (with applicable interest) the Committed Rate Loans made to such Specified Borrower by such Bank in accordance with the terms of this Agreement. In the event of any conflict between the records maintained by any Bank and the records maintained by the Administrative Agent in such matters, the records of the Administrative Agent shall control in the absence of manifest error.
2.4     Termination or Reduction of Revolving Commitments. The Company shall have the right, upon not less than five Business Days’ notice (which may be conditioned on a refinancing) to the Administrative Agent, to terminate the Revolving Commitments or, from time to time, to reduce the amount of the Revolving Commitments. Any such reduction shall be in an amount equal to $5,000,000 or a whole multiple thereof and shall reduce permanently the Revolving Commitments then in effect; provided that the Revolving Commitments may not be optionally reduced at any time to an amount which is less than the amount of the Exposure of all the Banks at such time; and provided further that the Revolving Commitments may not be reduced to an amount which is less than $50,000,000 unless they are terminated in full. Any reduction or termination of Revolving Commitments of any Bank that is also a Swing Line Bank which would result in the Swing Line Commitment of such Bank exceeding the Revolving Commitment of such Bank shall automatically result in a reduction or termination, as applicable, of the Swing Line Commitment of such Bank, such that the Swing Line Commitment of such Bank does not the exceed the Revolving Commitment of such Bank.
2.5     [reserved].
2.6     [reserved].
2.7     [reserved].
2.8     [reserved].
2.9     [reserved].
2.10     Revolving Commitment Increases. (a) At any time after the Closing Date, provided that no Event of Default shall have occurred and be continuing, the Borrowers may request an increase of the Revolving Commitments in an aggregate amount up to $500,000,000 by notice to the Administrative Agent in writing of the amount (the “Offered Increase Amount”) of such proposed increase (such notice, a “Revolving Commitment Increase Notice”). The Borrowers may offer to any Bank or any bank or other financial institution that is not an existing Bank the opportunity to provide a new Revolving Commitment pursuant to paragraph (b) below, which other bank or other financial institution shall be subject to the consent of the Administrative Agent (which consent shall not be unreasonably withheld or delayed).
(a)     Any additional bank or financial institution that the Borrowers select to offer the opportunity to provide any portion of the increased Revolving Commitments, and that

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elects to become a party to this Agreement and provide a Revolving Commitment, shall execute a New Bank Supplement with the Borrowers and the Administrative Agent, substantially in the form of Exhibit K (a “New Bank Supplement”), whereupon such bank or financial institution (a “New Bank”) shall become a Bank for all purposes and to the same extent as if originally a party hereto and shall be bound by and entitled to the benefits of this Agreement, and Schedule I shall be deemed to be amended to add the name and Revolving Commitment of such New Bank, provided that the Revolving Commitment of any such New Bank shall be in a principal amount not less than $10,000,000.
(b)     Any Bank that accepts an offer to it by the Borrowers to increase its Revolving Commitment pursuant to this subsection 2.10 shall, in each case, execute a Revolving Commitment Increase Supplement with the Borrowers and the Administrative Agent, substantially in the form of Exhibit L (a “Revolving Commitment Increase Supplement”), whereupon such Bank (an “Increasing Bank”) shall be bound by and entitled to the benefits of this Agreement with respect to the full amount of its Revolving Commitment as so increased, and Schedule I shall be deemed to be amended to so increase the Revolving Commitment of such Bank.
(c)     The effectiveness of any New Bank Supplement or Revolving Commitment Increase Supplement shall be contingent upon receipt by the Administrative Agent of such corporate resolutions of the Borrowers and legal opinions of counsel to the Borrowers as the Administrative Agent shall reasonably request with respect thereto.
(d)     (i)   Except as otherwise provided in subparagraphs (ii) and (iii) of this paragraph (e), if any bank or financial institution becomes a New Bank pursuant to subsection 2.10(b) or any Bank’s Revolving Commitment is increased pursuant to subsection 2.10(c), additional Committed Rate Loans made on or after the date of the effectiveness thereof (the “Re-Allocation Date”) shall be made in accordance with the pro rata provisions of subsection 8.3 based on the Revolving Commitment Percentages (or relevant Foreign Currency Revolving Commitment Percentages, as the case may be) in effect on and after such Re-Allocation Date (except to the extent that any such pro rata borrowings would result in any Bank making an aggregate principal amount of Committed Rate Loans in excess of its Revolving Commitment (or relevant Foreign Currency Revolving Commitment Percentages, as the case may be), in which case such excess amount will be allocated to, and made by, the relevant New Banks and Increasing Banks to the extent of, and in accordance with the pro rata provisions of subsection 8.3 based on, their respective Revolving Commitments (or relevant Foreign Currency Revolving Commitments, as the case may be)). On each Re-Allocation Date, the Administrative Agent shall deliver a notice to each Bank of the adjusted Revolving Commitment Percentages after giving effect to any increase in the Revolving Commitments made pursuant to this subsection 2.10 on such Re-Allocation Date.
(i)     In the event that on any such Re-Allocation Date there is an unpaid principal amount of Committed Rate ABR Loans, the applicable Borrower shall make prepayments thereof and one or more Borrowers shall make borrowings of Committed Rate ABR Loans and/or Committed Rate Eurocurrency Loans, as the applicable Borrower shall determine, so that, after giving effect thereto, the Committed Rate ABR Loans and Committed Rate Eurocurrency Loans outstanding are held as nearly as may be in accordance with the pro rata provisions of subsection 8.3 based on such new Revolving Commitment Percentage.

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(ii)     In the event that on any such Re-Allocation Date there is an unpaid principal amount of Committed Rate Eurocurrency Loans, such Committed Rate Eurocurrency Loans shall remain outstanding with the respective holders thereof until the expiration of their respective Interest Periods (unless the applicable Borrower elects to prepay any thereof in accordance with the applicable provisions of this Agreement), and on the last day of the respective Interest Periods the applicable Borrower shall make prepayments thereof and the applicable Borrowers shall make borrowings of Committed Rate ABR Loans and/or Committed Rate Eurocurrency Loans so that, after giving effect thereto, the Committed Rate ABR Loans and Committed Rate Eurocurrency Loans outstanding are held by all of the Banks as nearly as may be in accordance with the pro rata provisions of subsection 8.3 based on such new Revolving Commitment Percentage.
(iii)     In the event that on any such Re-Allocation Date there is any outstanding L/C Exposure, the interests of each L/C Participant shall be adjusted in accordance with the pro rata provisions of subsection 8.3 based on the Revolving Commitment Percentages (or relevant Foreign Currency Revolving Commitment Percentages, as the case may be) in effect on and after such Re-Allocation Date.
(e)     Notwithstanding anything to the contrary in this subsection 2.10, no Bank shall have any obligation to increase its Revolving Commitment unless it agrees to do so in its sole discretion.
2.11     Refunding of Committed Rate Loans Denominated in Available Foreign Currencies. (a) Notwithstanding noncompliance with the conditions precedent set forth in subsection 10.2, if any Committed Rate Loans denominated in any Available Foreign Currency (any such Loans, “Specified Loans”) are outstanding on (i) any date on which an Event of Default pursuant to subsection 13(g) shall have occurred with respect to the Company or (ii) any Acceleration Date, then, at 10:00 A.M., New York City time, on the second Business Day immediately succeeding (x) the date on which such Event of Default occurred (in the case of clause (i) above) or (y) such Acceleration Date (in the case of clause (ii) above), the Administrative Agent shall be deemed to have received a notice from the Company pursuant to subsection 2.2 requesting that Committed Rate ABR Loans be made pursuant to subsection 2.1 on such second Business Day in an aggregate amount equal to the Dollar Equivalent Amount of the aggregate amount of all Specified Loans, and the procedures set forth in subsection 2.2 shall be followed in making such Committed Rate ABR Loans. The proceeds of such Committed Rate ABR Loans shall be applied to repay such Specified Loans.
(a)     If, for any reason, Committed Rate ABR Loans may not be made pursuant to paragraph (a) of this subsection 2.11 to repay Specified Loans as required by such paragraph, effective on the date such Committed Rate ABR Loans would otherwise have been made, (i) the principal amount of each relevant Specified Loan shall be converted into Dollars (calculated on the basis of the Exchange Rate as of the immediately preceding Business Day) (“Converted Specified Loans”) and (ii) each Bank severally, unconditionally and irrevocably agrees that it shall purchase in Dollars a participating interest in such Converted Specified Loans in an amount equal to the amount of Committed Rate ABR Loans which would otherwise have been made by such Bank pursuant to paragraph (a) of this subsection 2.11. Each Bank will immediately transfer to the Administrative Agent, in immediately available funds, the amount of its participation, and the proceeds of such participation shall be distributed by the Administrative Agent to each Bank having such Specified Loans in such amount as will reduce the amount of the participating interest retained by such Bank in the Converted Specified Loans to the amount of the Committed Rate ABR Loans which would otherwise have been made by it pursuant to paragraph (a) of this subsection 2.11. All

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Converted Specified Loans shall bear interest at the rate which would otherwise be applicable to Committed Rate ABR Loans. Each Bank shall share on a pro rata basis (calculated by reference to its participating interest in such Converted Specified Loans) in any interest which accrues thereon and in all repayments thereof.
(b)     If, for any reason, Committed Rate ABR Loans may not be made pursuant to paragraph (a) of this subsection 2.11 to repay Specified Loans as required by such paragraph and the principal amount of any Specified Loans may not be converted into Dollars in the manner contemplated by paragraph (b) of this subsection 2.11, (i) the Administrative Agent shall determine the Dollar Equivalent Amount of such Specified Loans (calculated on the basis of the Exchange Rate determined as of the Business Day immediately preceding the date on which Committed Rate ABR Loans would otherwise have been made pursuant to said paragraph (a)) and (ii) effective on the date on which Committed Rate ABR Loans would otherwise have been made pursuant to said paragraph (a), each Bank severally, unconditionally and irrevocably agrees that it shall purchase in Dollars a participating interest in such Specified Loans in an amount equal to the amount of Committed Rate ABR Loans which would otherwise have been made by such Bank pursuant to paragraph (a) of this subsection 2.11. Each Bank will immediately transfer to the Administrative Agent, in immediately available funds, the amount of its participation, and the proceeds of such participation shall be distributed by the Administrative Agent to each relevant Bank having Specified Loans in such amount as will reduce the Dollar Equivalent Amount as of such date of the amount of the participating interest retained by such Bank in such Specified Loans to the amount of the Committed Rate ABR Loans which were to have been made by it pursuant to paragraph (a) of this subsection 2.11. Each Bank shall share on a pro rata basis (calculated by reference to its participating interest in such Specified Loans) in any interest which accrues thereon, in all repayments of principal thereof and in the benefits of any collateral furnished in respect thereof and the proceeds of such collateral.
(c)     If any amount required to be paid by any Bank to any other Bank pursuant to this subsection 2.11 in respect of any Specified Loan is not paid to such Bank on the date such payment is due from such Bank, such obligor Bank shall pay to such obligee Bank on demand an amount equal to the product of (i) such amount, times (ii) the daily average Federal funds rate, as quoted to such obligee Bank during the period from and including the date such payment is required to the date on which such payment is immediately available to such obligee Bank, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. A certificate of an obligee Bank submitted to any obligor Bank through the Administrative Agent with respect to any amounts owing under this subsection (d) shall be conclusive in the absence of manifest error.
2.12     Certain Borrowings of Committed Rate Loans and Refunding of Loans. (a) If on any Borrowing Date on which a Specified Borrower has requested the Banks (the “Specified Foreign Currency Banks”) to make Committed Rate Loans denominated in an Available Foreign Currency (the “Requested Specified Loans”) (i) the principal amount of the Requested Specified Loans to be made by any Specified Foreign Currency Bank exceeds the unused amount of the Revolving Commitment of such Specified Foreign Currency Bank in the requested Available Foreign Currency (before giving effect to the making and payment of any Loans required to be made pursuant to this subsection 2.12 on such Borrowing Date), (ii) the principal amount of such Requested Specified Loan, when added to the outstanding principal amount of all other Committed Rate Loans of such Specified Foreign Currency Banks denominated in the Available Foreign Currency in which the Requested Specified Loans are to be made, does not exceed the aggregate amount of such Specified Foreign Currency Banks’ Foreign Currency Revolving Commitments in such requested

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Available Foreign Currency and (iii) the Dollar Equivalent of the amount of the excess described in the foregoing clause (i) is less than or equal to the aggregate unused amount of the Revolving Commitments of all Banks other than such Specified Foreign Currency Banks (before giving effect to the making and payment of any Loans pursuant to this subsection 2.12 on such Borrowing Date), each Bank other than such Specified Foreign Currency Banks shall make a Committed Rate Loan denominated in Dollars to the Company (or any Specified Borrower identified by the Company) on such Borrowing Date, and the proceeds of such Committed Rate Loans shall be simultaneously applied to repay outstanding Committed Rate Loans denominated in Dollars of such Specified Foreign Currency Banks in each case in amounts such that, after giving effect to (1) such borrowings and repayments and (2) the borrowing from such Specified Foreign Currency Banks of the Requested Specified Loans, the excess described in the foregoing clause (i) will be eliminated. To effect such borrowings and repayments, (x) not later than 12:00 Noon, New York City time, on such Borrowing Date, the proceeds of such Committed Rate Loans denominated in Dollars shall be made available by each Bank other than such Specified Foreign Currency Banks to the Administrative Agent at its office specified in subsection 15.2 in Dollars and in immediately available funds and the Administrative Agent shall apply the proceeds of such Committed Rate Loans denominated in Dollars toward repayment of outstanding Committed Rate Loans denominated in Dollars of such Specified Foreign Currency Banks (as directed by the Company) and (y) concurrently with the repayment of such Loans on such Borrowing Date, (I) such Specified Foreign Currency Banks shall, in accordance with the applicable provisions hereof, make the Requested Specified Loans in an aggregate amount equal to the amount so requested by the relevant Specified Borrower and (II) the relevant Borrower shall pay to the Administrative Agent for the account of the Specified Foreign Currency Banks whose Loans to such Borrower are repaid on such Borrowing Date pursuant to this subsection 2.12 all interest accrued on the amounts repaid to the date of repayment, together with any amounts payable pursuant to subsection 8.8 in connection with such repayment, provided that the Administrative Agent shall have provided notice to the Company prior to the making of such Requested Specified Loans that the making thereof would obligate the Company to pay amounts pursuant to subsection 8.8.
(a)     If any borrowing of Committed Rate Loans is required pursuant to this subsection 2.12, the Company shall notify the Administrative Agent in the manner provided for Committed Rate Loans in subsection 2.2, except that the minimum borrowing amounts and threshold multiples in excess thereof applicable to Committed Rate ABR Loans set forth in subsection 2.2 shall not be applicable to the extent that such minimum borrowing amounts exceed the amounts of Committed Rate Loans required to be made pursuant to this subsection 2.12.
2.13     Extension of Termination Date. (a) The Company may, by written notice to the Administrative Agent in the form of Exhibit J-1 (the “Extension Request”) given no earlier than 60 days prior to the upcoming anniversary of the Closing Date but no later than 45 days prior to such anniversary of the Closing Date, request that the then applicable Termination Date be extended to the date that is one calendar year after the then applicable Termination Date. Such extension shall be effective with respect to each Bank that, by a written notice in the form of Exhibit J-2 (a “Continuation Notice”) to the Administrative Agent given no later than 20 days prior to the then applicable anniversary of the Closing Date, consents, in its sole discretion, to such extension (each Bank giving a Continuation Notice being referred to herein as a “Continuing Bank” and each Bank other than a Continuing Bank being referred to herein as a “Non-Extending Bank”), provided that (i) such extension shall be effective only if the aggregate Revolving Commitments of the Continuing Banks constitute at least a majority of the Total Revolving Commitments on the date of the Extension Request, (ii) any Bank that fails to submit a Continuation Notice at least 20 days prior to the then applicable anniversary of the Closing Date shall be deemed not to have consented to such extension and shall constitute a Non-Extending Bank and (iii) the Company may give no more than two Extension Requests during the term of this Agreement. No Bank shall have any obligation to consent to any extension of the

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Termination Date. The Administrative Agent shall notify each Bank of the receipt of an Extension Request promptly after receipt thereof. The Administrative Agent shall notify the Company and the Banks no later than 15 days prior to the then applicable anniversary of the Closing Date which Banks are Continuing Banks and which Banks are Non-Extending Banks, and whether the Administrative Agent has received Continuation Notices from Banks holding Revolving Commitments aggregating at least a majority of the Total Revolving Commitments on the date of the Extension Request.
(a)     The Commitments of each Non-Extending Bank shall terminate at the close of business on the Termination Date in effect prior to the delivery of such Extension Request without giving any effect to such proposed extension. On such Termination Date, the Company shall pay to the Administrative Agent, for the account of each Non-Extending Bank, an amount equal to such Non-Extending Bank’s Loans, together with accrued but unpaid interest and fees thereon and all other amounts then payable hereunder to such Non-Extending Bank. If, however, on or before the applicable Termination Date in effect immediately prior to the effectiveness of the Extension Request pursuant to this subsection 2.13, the Company obtains a Replacement Bank pursuant to subsection 15.1(e) for any such Non-Extending Bank and such Replacement Bank agrees to the extension of the Termination Date pursuant to this subsection 2.13, then such Replacement Bank shall for all purposes of this subsection 2.13 and this Agreement be deemed to be a Continuing Bank, and the Loans of such Bank shall not be due and payable pursuant to this subsection 2.13(b).
SECTION 3.     THE COMPETITIVE ADVANCE LOANS
3.1     Competitive Advance Loans. (a) Subject to the terms and conditions hereof, any Specified Borrower may, from time to time during the Commitment Period, request the Banks to offer bids, and any Bank may, in its sole discretion, offer such bids, to make competitive advance loans (“Competitive Advance Loans”) to such Specified Borrower on the terms and conditions set forth in such bids. Each Competitive Advance Loan shall bear interest at the rates, be payable on the dates, and shall mature on the date, agreed between such Specified Borrower and Bank at the time such Competitive Advance Loan is made; provided, that (i) each Competitive Advance Loan shall mature not earlier than 1 day and not later than 180 days, after the date such Competitive Advance Loan is made and (ii) no Competitive Advance Loan shall mature after the Termination Date. During the Commitment Period, the Specified Borrowers may accept bids from Banks from time to time for Competitive Advance Loans, and borrow and repay Competitive Advance Loans, all in accordance with the terms and conditions hereof; provided, that no Competitive Advance Loan shall be made if, after giving effect to the making of such Loan and the simultaneous application of the proceeds thereof, (i) the aggregate amount of the Exposure of all the Banks would exceed the aggregate amount of the Revolving Commitments, or (ii) the aggregate amount of the Foreign Currency Exposure in respect of any Available Foreign Currency would exceed the Foreign Currency Exposure Sublimit for such Currency. Subject to the foregoing, any Bank may, in its sole discretion, make Competitive Advance Loans in an aggregate outstanding amount exceeding the amount of such Bank’s Revolving Commitment.
(a)     The Competitive Advance Loans may be made in Dollars or any Available Foreign Currency, as agreed between the Specified Borrower and Bank in respect thereof at the time such Competitive Advance Loan is made.
3.2     Procedure for Competitive Advance Loan Borrowing. (a) Any Specified Borrower may request Competitive Advance Loans by delivering a Competitive Advance Loan Request. The Administrative Agent shall notify each Bank promptly by facsimile transmission of the contents of each Competitive Advance Loan Request received by the Administrative Agent. Each Bank may elect, in its sole

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discretion, to offer irrevocably to make one or more Competitive Advance Loans to the Specified Borrower by delivering a Competitive Advance Loan Offer to the Administrative Agent.
(a)     Before the acceptance time set forth in the applicable Competitive Advance Loan Request, the Specified Borrower, in its absolute discretion, shall:
(i)     cancel such Competitive Advance Loan Request by giving the Administrative Agent telephone notice to that effect, or
(ii)     by giving telephone notice to the Administrative Agent immediately confirmed in writing or by facsimile transmission, subject to the provisions of subsection 3.2(c), accept one or more of the offers made by any Bank or Banks pursuant to subsection 3.2(a) of the amount of Competitive Advance Loans for each relevant maturity date and reject any remaining offers made by Banks pursuant to subsection 3.2(a).
(b)     The Specified Borrower’s acceptance of Competitive Advance Loans in response to any Competitive Advance Loan Request shall be subject to the following limitations:
(i)     The amount of Competitive Advance Loans accepted for each maturity date specified by any Bank in its Competitive Advance Loan Offer shall not exceed the maximum amount for such maturity date specified in such Competitive Advance Loan Offer;
(ii)     the aggregate amount of Competitive Advance Loans accepted for all maturity dates specified by any Bank in its Competitive Advance Loan Offer shall not exceed the aggregate maximum amount specified in such Competitive Advance Loan Offer for all such maturity dates;
(iii)     the Specified Borrower may not accept offers for Competitive Advance Loans for any maturity date in an aggregate principal amount in excess of the maximum principal amount requested in the related Competitive Advance Loan Request; and
(iv)     if the Specified Borrower accepts any of such offers, it must accept offers based solely upon pricing for such relevant maturity date and upon no other criteria whatsoever and if two or more Banks submit offers for any maturity date at identical pricing and the Specified Borrower accepts any of such offers but does not wish to (or by reason of the limitations set forth in subsection 3.2(c)(iii) cannot) borrow the total amount offered by such Banks with such identical pricing, the Administrative Agent shall allocate offers from all of such Banks in amounts among them pro rata according to the amounts offered by such Banks (or as nearly pro rata as shall be practicable).
(c)     If the Specified Borrower notifies the Administrative Agent that a Competitive Advance Loan Request is cancelled, the Administrative Agent shall give prompt telephone notice thereof to the Banks.
(d)     If the Specified Borrower accepts one or more of the offers made by any Bank or Banks, the Administrative Agent promptly shall notify each Bank which has made such a Competitive Advance Loan Offer of (i) the aggregate amount of such Competitive Advance Loans to be made for each maturity date and (ii) the acceptance or rejection of any offers to make such

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Competitive Advance Loans made by such Bank. Before the Funding Time for the applicable Currency, each Bank whose Competitive Advance Loan Offer has been accepted shall make available to the Administrative Agent for the account of the Specified Borrower at the Funding Office for the applicable Currency the amount of Competitive Advance Loans in the applicable Currency to be made by such Bank, in immediately available funds.
3.3     Repayment of Competitive Advance Loans; Evidence of Debt. (a) Each Specified Borrower that borrows any Competitive Advance Loan hereby unconditionally promises to pay to the Bank that made such Competitive Advance Loan on the maturity date, as agreed by such Specified Borrower and Bank (or such earlier date on which all the Loans become due and payable pursuant to Section 13), the then unpaid principal amount of such Competitive Advance Loan. Each Specified Borrower hereby further agrees to pay interest on the unpaid principal amount of the Competitive Advance Loans made by any Bank to such Specified Borrower from time to time outstanding from the date thereof until payment in full thereof at the rate per annum, and on the dates, agreed by such Specified Borrower and Bank at the time such Competitive Advance Loan is made. All payments in respect of Competitive Advance Loans shall be made by such Specified Borrower to the Administrative Agent for the account of the Bank that makes such Competitive Advance Loan to the Payment Office and by the Payment Time for the applicable Currency.
(a)     Each Bank shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of each Specified Borrower to such Bank resulting from each Competitive Advance Loan of such Bank from time to time, including the amounts of principal and interest payable and paid to such Bank from time to time in respect of Competitive Advance Loans. The entries made in the accounts of each Bank maintained pursuant to this subsection 3.3(b) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of each Specified Borrower therein recorded, absent manifest error; provided, however, that the failure of any Bank to maintain any such account, or any error therein, shall not in any manner affect the obligation of each Specified Borrower to repay (with applicable interest) the Competitive Advance Loans made to such Specified Borrower by such Bank in accordance with the terms of this Agreement. In the event of any conflict between the records maintained by any Bank and the records maintained by the Administrative Agent in such matters, the records of the Administrative Agent shall control in the absence of manifest error.
SECTION 4.     THE SWING LINE LOANS
4.1     Swing Line Loans. Subject to the terms and conditions hereof, each Swing Line Bank severally agrees to make swing line loans (“Swing Line Loans”) to any Specified Borrower from time to time during the Commitment Period in Dollars; provided, that no Swing Line Loan shall be made if, after giving effect to the making of such Loan and the simultaneous application of the proceeds thereof, (i) the aggregate amount of the Exposure of all the Banks would exceed the aggregate amount of the Revolving Commitments, (ii) the aggregate amount of the Swing Line Loans made by a Swing Line Bank would exceed the Swing Line Commitment of such Swing Line Bank, (iii) the aggregate amount of the Exposure of a Swing Line Bank would exceed the Revolving Commitment of such Bank, (iv) the aggregate amount of all outstanding Swing Line Loans of such Specified Borrower would exceed the Swing Line Limit for such Specified Borrower or (v) the aggregate amount of all outstanding Swing Line Loans would exceed the Swing Line Limit. During the Commitment Period, the Specified Borrowers may borrow and prepay the Swing Line Loans in whole or in part, all in accordance with the terms and conditions hereof.
4.2     Procedure for Swing Line Borrowing. (a) Any Specified Borrower may request any Swing Line Bank to make Swing Line Loans during the Commitment Period on any Business Day by

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giving to such Swing Line Bank a Notice of Swing Line Borrowing no later than 1:00 p.m., New York City time, on the applicable Borrowing Date, or such later time as may be agreed by such Swing Line Bank, acting in its sole discretion, in respect of such Swing Line Loan. Each borrowing of Swing Line Loans shall be in an amount equal to (a) in the case of ABR Loans, $1,000,000 or a whole multiple of $500,000 in excess thereof (or, if the then aggregate undrawn amount of the Swing Line Commitments is less than $1,000,000, such lesser amount) and (b) in the case of Eurocurrency Loans $1,000,000 or increments of $500,000 thereafter; provided, that any borrowing of Swing Line Loans may be in an aggregate amount that is equal to the entire unused balance of the Total Swing Line Commitments. Subject to the terms and conditions hereof, on the Borrowing Date of each Swing Line Loan, the relevant Swing Line Bank shall make the proceeds thereof available to the relevant Specified Borrower in immediately available funds in Dollars by the Funding Time in accordance with the wire instructions for remittance specified by the Specified Borrower in the Notice of Swing Line Borrowing.
(a)     Upon the making of any Swing Line Loan, any payment of principal or interest with respect to a Swing Line Loan and on the last Business Day of each month on which a Swing Line Bank has any outstanding Swing Line Loans, such Bank shall deliver to the Administrative Agent a Notice of Swing Line Outstandings.
4.3     Repayment of Swing Line Loans; Evidence of Debt. (a) With respect to each Swing Line Loan, each Specified Borrower hereby unconditionally promises to pay to the applicable Swing Line Bank on the earlier of (i) the Termination Date, (ii) the date which is 30 days after the making of such Swing Line Loan, (iii) the date on which such Swing Line Loans become due and payable pursuant to subsection 4.4 and (iv) the date on which all the Loans become due and payable pursuant to Section 13, the then unpaid principal amount of such Swing Line Loan made to such Specified Borrower. Each Specified Borrower hereby further agrees to pay the applicable Swing Line Bank interest on the unpaid principal amount of the Swing Line Loans made to such Specified Borrower from time to time outstanding from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in subsection 8.14.
(a)     Each Swing Line Bank shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of each Specified Borrower to such Swing Line Bank resulting from each Swing Line Loan of such Bank from time to time, including the amounts of principal and interest payable and paid to such Swing Line Bank from time to time under this Agreement.
(b)     The Administrative Agent shall maintain the Register pursuant to subsection 15.6(b), and a subaccount therein for each Swing Line Bank, in which shall be recorded (i) the amount of each Swing Line Loan made hereunder and each Interest Period (if any) applicable thereto and (ii) the amount of any principal or interest due and payable or to become due and payable from each Specified Borrower to each Swing Line Bank under Swing Line Loans.
(c)     The entries made in the Register and the accounts of each Swing Line Bank maintained pursuant to subsection 4.3(b) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of each Specified Borrower therein recorded absent manifest error; provided, however, that the failure of any Swing Line Bank or the Administrative Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of each Specified Borrower to repay (with applicable interest) the Swing Line Loans made to such Specified Borrower by such Swing Line Bank in accordance with the terms of this Agreement. In the event of any conflict between the records maintained by

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any Swing Line Bank and the records maintained by the Administrative Agent in such matters, the records of the Administrative Agent shall control in the absence of manifest error.
4.4     Allocating Swing Line Loans; Swing Line Loan Participations. (a) If any Event of Default shall occur and be continuing, any Swing Line Bank may, in its sole and absolute discretion, direct that the Swing Line Loans owing to it be refunded, by delivering a Notice of Swing Line Refunding. Upon receipt of a Notice of Swing Line Refunding, the Administrative Agent shall promptly give notice of the contents thereof to the Banks and, unless an Event of Default described in subsection 13(g) in respect of the Company or the relevant Specified Borrower has occurred, to the Company and the relevant Specified Borrower. Each such Notice of Swing Line Refunding shall be deemed to constitute delivery by such Specified Borrower of a Notice of Borrowing of Committed Rate Eurocurrency Loans in Dollars in the amount of the Swing Line Loans to which it relates, for an Interest Period of one month’s duration. Subject to the terms and conditions hereof, each Bank (including each Swing Line Bank in its capacity as a Bank having a Revolving Commitment) hereby agrees to make a Committed Rate Loan to such Specified Borrower pursuant to Section 2 in Dollars in an amount equal to such Bank’s Revolving Borrowing Percentage of the aggregate amount of the Swing Line Loans to which such Notice of Swing Line Refunding relates. Unless any of the events described in subsection 13(g) in respect of the Company or such Specified Borrower shall have occurred (in which case the procedures of subsection 4.4(b) shall apply), each Bank shall make the amount of such Committed Rate Loan available to the Administrative Agent at the Funding Office, at or prior to the Funding Time, in Dollars in funds immediately available to the Administrative Agent. The proceeds of such Committed Rate Loans shall be immediately made available to such Swing Line Bank by the Administrative Agent and applied by such Swing Line Bank to repay the Swing Line Loans to which such Notice of Swing Line Refunding related.
(a)     If prior to the time a Committed Rate Loan would otherwise have been made pursuant to subsection 4.4(a), one of the events described in subsection 13(g) shall have occurred in respect of the Company or the relevant Specified Borrower, each Bank (other than the relevant Swing Line Bank) shall, on the date such Committed Rate Loan would have been made pursuant to the Notice of Swing Line Refunding referred to in subsection 4.4(a) (the “Refunding Date”), purchase an undivided participating interest in the outstanding Swing Line Loans to which such Notice of Swing Line Refunding related, in an amount equal to (i) such Bank’s Revolving Commitment Percentage times (ii) the aggregate principal amount of such Swing Line Loans then outstanding which would otherwise have been repaid with Committed Rate Loans (the “Swing Line Participation Amount”). On the Refunding Date, (x) each Bank shall transfer to such Swing Line Bank, in immediately available funds, such Bank’s Swing Line Participation Amount, and upon receipt thereof such Swing Line Bank shall, if requested by any Bank, deliver to such Bank a participation certificate dated the date of such Swing Line Bank’s receipt of such funds and evidencing such Bank’s ownership of its Swing Line Participation Amount and (y) the interest rate on the applicable Swing Line Loan will automatically be converted to the applicable Eurocurrency Rate with an Interest Period of one month plus the Applicable Margin for Committed Rate Loans. If any amount required to be paid by any Bank to any Swing Line Bank pursuant to this subsection 4.4 in respect of any Swing Line Participation Amount is not paid to such Swing Line Bank on the date such payment is due from such Bank, such Bank shall pay to such Swing Line Bank on demand an amount equal to the product of (i) such amount, times (ii) the daily average Federal funds rate, as quoted by such Swing Line Bank, during the period from and including the date such payment is required to the date on which such payment is immediately available to the Swing Line Bank, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. A certificate of a Swing Line Bank submitted to any Bank with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error.

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(b)     Whenever, at any time after the Administrative Agent or any Swing Line Bank has received from any Bank such Bank’s Swing Line Participation Amount, the Administrative Agent or such Swing Line Bank receives any payment on account of the related Swing Line Loans, the Administrative Agent or such Swing Line Bank will distribute to such Bank its Revolving Commitment Percentage of such payment on account of its Swing Line Participation Amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Bank’s participating interest was outstanding and funded); provided, however, that in the event that such payment received by the Administrative Agent or such Swing Line Bank is required to be returned, such Bank will return to the Administrative Agent or such Swing Line Bank any portion thereof previously distributed to it by the Administrative Agent or such Swing Line Bank, as applicable.
(c)     Each Bank’s obligation to make Committed Rate Loans pursuant to subsection 4.4(a) and to purchase participating interests pursuant to subsection 4.4(b) shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any set-off, counterclaim, recoupment, defense or other right which such Bank may have against any other Bank or any Specified Borrower, or any Specified Borrower may have against any Bank or any other Person, as the case may be, for any reason whatsoever; (ii) the occurrence or continuance of a Default or an Event of Default; (iii) any adverse change in the condition (financial or otherwise) of the Company or any of its Subsidiaries; (iv) any breach of this Agreement by any party hereto; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.
4.5     Replacement of Swing Line Banks. (a) Any Swing Line Bank may be replaced at any time by written agreement among the Company, the Administrative Agent, the replaced Swing Line Bank and the successor Swing Line Bank. The Administrative Agent shall notify the Banks of any such replacement of a Swing Line Bank. At the time any such replacement shall become effective, the Company shall pay all unpaid interest accrued for the account of the replaced Swing Line Bank. From and after the effective date of any such replacement, (x) the successor Swing Line Bank shall have all the rights and obligations of the replaced Swing Line Bank under this Agreement with respect to Swing Line Loans made thereafter and (y) references herein to the term “Swing Line Bank” shall be deemed to refer to such successor or to any previous Swing Line Bank, or to such successor and all previous Swing Line Banks, as the context shall require. After the replacement of a Swing Line Bank hereunder, the replaced Swing Line Bank shall remain a party hereto and shall continue to have all the rights and obligations of a Swing Line Bank under this Agreement with respect to Swing Line Loans made by it prior to its replacement, but shall not be required to make additional Swing Line Loans.
(a)     Subject to the appointment and acceptance of a successor Swing Line Bank, any Swing Line Bank may resign as a Swing Line Bank at any time upon thirty days’ prior written notice to the Administrative Agent, the Company and the Banks, in which case, such Swing Line Bank shall be replaced in accordance with subsection 4.5(a) above.
SECTION 5.     THE LETTERS OF CREDIT
5.1     L/C Commitment. (a) For the avoidance of doubt, Letters of Credit outstanding immediately prior to the Closing Date shall be Letters of Credit hereunder. Subject to the terms and conditions hereof, each Issuing Bank agrees to issue letters of credit for the account of any Specified Borrower on any Business Day during the Commitment Period in such form as shall be reasonably acceptable to such Issuing Bank; provided, that no Letter of Credit shall be issued if, after giving effect thereto (i) the aggregate amount

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of the Exposure of all the Banks would exceed the aggregate amount of the Revolving Commitments, (ii) the aggregate amount of L/C Obligations of an Issuing Bank would exceed the L/C Commitment of such Issuing Bank, (iii) the aggregate amount of the Exposure of an Issuing Bank would exceed the Revolving Commitment of such Bank, (iv) the aggregate amount of the Foreign Currency Exposure in respect of any Available Foreign Currency would exceed the Foreign Currency Exposure Sublimit for such Currency or (iv) the aggregate amount of the L/C Obligations would exceed the Dollar Equivalent Amount of $200,000,000.
(a)     Each Letter of Credit shall:
(i)     be denominated in Dollars or an Available Foreign Currency and shall be either (A) a standby letter of credit issued to support obligations of a Specified Borrower, contingent or otherwise, to provide credit support for workers’ compensation, other insurance programs and other lawful corporate purposes (a “Standby Letter of Credit”) or (B) a commercial letter of credit issued in respect of the purchase of goods and services in the ordinary course of business of the Company and its Subsidiaries (a “Commercial Letter of Credit”; together with the Standby Letters of Credit, the “Letters of Credit”) and,
(ii)     expire no later than the earlier of 365 days after its date of issuance and five Business Days prior to the Termination Date although any such Letter of Credit may be automatically extended for periods of one year from the current or any future expiration date of the Letter of Credit (unless the Issuing Bank elects not to extend such Letter of Credit) and the extended maturity date is not beyond five Business Days prior to the Termination Date (it being understood that if the Termination Date is extended pursuant to subsection 2.13, no Letter of Credit shall expire after the Termination Date applicable to the Non-Extending Banks if, after giving effect to the issuance of such Letter of Credit, the aggregate face amount of all Letters of Credit expiring after the Termination Date applicable to the Non-Extending Banks would exceed the aggregate amount of the Commitments of the Continuing Banks).
(b)     Each Letter of Credit shall be subject to the Uniform Customs or International Standby Practices (ISP98) or Uniform Customs & Practice for Documentary Credits (UCP600), as the case may be, and, to the extent not inconsistent therewith, the laws of any State of the United States or, if acceptable to the Required Banks and the relevant account party, the jurisdiction of the Issuing Office at which such Letter of Credit is issued.
(c)     Notwithstanding anything in the contrary in this Agreement, no Issuing Bank shall be under any obligation to issue, amend, renew or extend any Letter of Credit if: (i) any order, judgment or decree of any governmental body or arbitrator shall by its terms purport to enjoin or restrain such Issuing Bank from issuing, renewing, amending or extending such Letter of Credit, or any law, rule, regulation or treaty applicable to such Issuing Bank or any request or directive (whether or not having the force of law) from any governmental body with jurisdiction over such Issuing Bank shall prohibit, or request that such Issuing Bank refrain from, the issuance, renewal, amendment or extension of letters of credit generally or any Letter of Credit in particular or shall impose upon such Issuing Bank with respect to any Letter of Credit any restriction, reserve or capital requirement (for which such Issuing Bank is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon such Issuing Bank any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which such Issuing Bank in good faith deems material to it; (ii) the issuance, renewal, amendment or extension of any Letter of Credit would

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violate one or more policies of such Issuing Bank applicable to letters of credit generally; (iii) such Issuing Bank does not as of the issuance date of the requested Letter of Credit issue, renew, amend or extend Letters of Credit in the requested currency; or (iv) any Bank is at that time a Defaulting Bank, unless such Issuing Bank has entered into arrangements, including the delivery of cash collateral, satisfactory to such Issuing Bank (in its sole discretion) with the Company or such Bank to eliminate such Issuing Bank’s actual or potential Fronting Exposure (after giving effect to subsection 8.17) with respect to the Defaulting Bank arising from either the Letter of Credit then proposed to be issued, renewed, amended or extended or that Letter of Credit and all other L/C Exposure as to which such Issuing Bank has actual or potential Fronting Exposure (after giving effect to subsection 8.17) with respect to the Defaulting Bank, as it may elect in its sole discretion.
5.2     Procedure for Issuance of Letters of Credit under this Agreement. Any Specified Borrower may from time to time request that an Issuing Bank issue a Letter of Credit by delivering to such Issuing Bank at its Issuing Office an Application therefor (with a copy to the Administrative Agent), completed to the satisfaction of the Issuing Bank, and such other certificates, documents and other papers and information as such Issuing Bank may reasonably request. Upon receipt by an Issuing Bank of any Application, and subject to the terms and conditions hereof, such Issuing Bank will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter of Credit requested thereby (but in no event shall any Issuing Bank be required to issue any Letter of Credit earlier than five Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed by such Issuing Bank and such Specified Borrower. Such Issuing Bank shall advise the Administrative Agent of the terms of such Letter of Credit on the date of issuance thereof and shall promptly thereafter furnish copies thereof and each amendment thereto to the Company, and through the Administrative Agent, each Bank.
5.3     Fees, Commissions and Other Charges. (a)      Each Specified Borrower for whose account a Letter of Credit is issued hereunder shall pay to the Administrative Agent, for the account of the Banks (including the Issuing Bank) pro rata according to their Revolving Commitment Percentages, a letter of credit commission with respect to each Letter of Credit, computed at a rate equal to the then Applicable Margin for Committed Rate Eurocurrency Loans on the daily average undrawn face amount of such Letter of Credit. Such commissions shall be payable in arrears on the last Business Day of each March, June, September and December to occur after the date of issuance of each Letter of Credit and on the expiration date of such Letter of Credit and shall be nonrefundable.
(a)     In addition to the foregoing fees and commissions, each Specified Borrower for whose account a Letter of Credit is issued hereunder shall (i) pay or reimburse the Issuing Bank for such normal and customary costs and expenses as are incurred or charged by such Issuing Bank in issuing, effecting payment under, amending or otherwise administering such Letter of Credit and (ii) pay the Issuing Bank such other fees as shall be agreed by the Issuing Bank and such Specified Borrower.
(b)     The Administrative Agent shall, promptly following its receipt thereof, distribute to the Issuing Bank and the Banks all fees and commissions received by the Administrative Agent for their respective accounts pursuant to this subsection.
5.4     L/C Participations. (a) Each Issuing Bank irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce the Issuing Bank to issue Letters of Credit hereunder, each L/

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C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from such Issuing Bank, on the terms and conditions hereinafter stated, for such L/C Participant’s own account and risk, an undivided interest equal to such L/C Participant’s Revolving Commitment Percentage in such Issuing Bank’s obligations and rights under each Letter of Credit issued by such Issuing Bank hereunder and the amount of each draft paid by such Issuing Bank thereunder. Each L/C Participant unconditionally and irrevocably agrees with each Issuing Bank that, if a draft is paid under any Letter of Credit issued by such Issuing Bank for which the Specified Borrower which is the account party under such Letter of Credit has not reimbursed such Issuing Bank to the full extent required by the terms of this Agreement, such L/C Participant shall pay to such Issuing Bank upon demand at such Issuing Bank’s Issuing Office an amount equal to such L/C Participant’s Revolving Commitment Percentage of the amount of such draft, or any part thereof, which is not so reimbursed.
(a)     If any amount required to be paid by any L/C Participant to any Issuing Bank pursuant to subsection 5.4(a) in respect of any unreimbursed portion of any payment made by such Issuing Bank under any Letter of Credit is not paid to such Issuing Bank on the date such payment is due from such L/C Participant, such L/C Participant shall pay to such Issuing Bank on demand an amount equal to the product of (i) such amount, times (ii) (A) in the case of any such payment obligation denominated in Dollars, the daily average Federal funds rate, as quoted by such Issuing Bank, or (B) in the case of any such payment obligation denominated in an Available Foreign Currency, the rate customary in such Currency for settlement of similar inter-bank obligations, as quoted by such Issuing Bank, in each case during the period from and including the date such payment is required to the date on which such payment is immediately available to the Issuing Bank, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. A certificate of an Issuing Bank submitted to any L/C Participant with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error.
(b)     Whenever, at any time after an Issuing Bank has made payment under any Letter of Credit and has received from any L/C Participant its pro rata share of such payment in accordance with subsection 5.4(a) the Issuing Bank receives any payment related to such Letter of Credit (whether directly from the account party or otherwise, including by way of set-off or proceeds of collateral applied thereto by such Issuing Bank), or any payment of interest on account thereof, such Issuing Bank will distribute to such L/C Participant its pro rata share thereof; provided, however, that in the event that any such payment received by such Issuing Bank shall be required to be returned by the Issuing Bank, such L/C Participant shall return to such Issuing Bank the portion thereof previously distributed by such Issuing Bank to it.
5.5     Reimbursement Obligation of the Specified Borrowers. (a) Each Specified Borrower for whose account a Letter of Credit is issued hereunder agrees to reimburse the Issuing Bank in respect of such Letter of Credit on each date on which such Issuing Bank notifies such Specified Borrower (with a copy to the Administrative Agent at its address in the Administrative Schedule for Notices of Borrowing for the applicable Currency) of the date and amount of a draft presented under such Letter of Credit and paid by such Issuing Bank for the amount of (i) such draft so paid and (ii) any taxes, fees, charges or other reasonable costs or expenses incurred by such Issuing Bank in connection with such payment; provided if any Issuing Bank shall notify the Specified Borrower of a drawing after 2:00 p.m. local time of such Issuing Bank’s Issuing Office on the date of any drawing under a Letter of Credit, the Specified Borrower will not be required to reimburse such Issuing Bank until the next succeeding Business Day. Each such payment shall be made to such Issuing Bank at its Issuing Office in the Currency in which payment of such draft was made and in immediately available funds.

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(a)     Interest shall be payable on any and all amounts remaining unpaid by any Specified Borrower under this subsection from the date such amounts become payable (whether at stated maturity, by acceleration or otherwise) until payment in full at the rate which is (i) in the case of such amounts payable in Dollars, 2% above the ABR from time to time and (ii) in the case of such amounts payable in any other currency, 2% above the rate reasonably determined by the Issuing Bank as the cost of funding such overdue amount from time to time on an overnight basis.
(b)     Each notice of a drawing under any Letter of Credit denominated in Dollars shall constitute a request by the Specified Borrower for a borrowing pursuant to subsection 2.2 of Committed Rate ABR Loans in the amount of such drawing plus any amounts payable pursuant to subsection 5.5(a)(ii) in respect of such drawing. The Borrowing Date with respect to such borrowing shall be the date of such drawing.
5.6     Obligations Absolute. (a) The obligations of the Specified Borrowers under this Section 5 shall be absolute, irrevocable and unconditional under any and all circumstances and irrespective of any set-off, counterclaim or defense to payment which any Specified Borrower may have or have had against the Issuing Bank or any beneficiary of a Letter of Credit.
(a)     Each Specified Borrower for whose account a Letter of Credit is issued hereunder also agrees with the Issuing Bank in respect of such Letter of Credit that such Issuing Bank shall not be responsible for, and such Specified Borrower’s Reimbursement Obligations under subsection 5.5(a) shall not be affected by, among other things, (i) the enforceability, validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be unenforceable, invalid, fraudulent or forged, provided, that reliance upon such documents by such Issuing Bank shall not have constituted gross negligence or willful misconduct of such Issuing Bank or (ii) any dispute between or among such Specified Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or (iii) any claims whatsoever of any Specified Borrower against any beneficiary of such Letter of Credit or any such transferee.
(b)     No Issuing Bank shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions caused by such Issuing Bank’s gross negligence or willful misconduct.
(c)     Each Specified Borrower for whose account a Letter of Credit is issued hereunder agrees that any action taken or omitted by any Issuing Bank under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct, shall be binding on such Specified Borrower and shall not result in any liability of such Issuing Bank to such Specified Borrower.
5.7     Letter of Credit Payments. If any draft shall be presented for payment to an Issuing Bank under any Letter of Credit, such Issuing Bank shall promptly notify the account party of the date and amount thereof. The responsibility of the Issuing Bank to the account party in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are in conformity with such Letter of Credit.

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5.8     Application. To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Section 5, the provisions of this Section 5 shall apply.
5.9     Replacement of Issuing Banks. (a) Any Issuing Bank may be replaced at any time by written agreement among the Company, the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent shall notify the Banks of any such replacement of any Issuing Bank. At the time any such replacement shall become effective, the Company shall pay all unpaid fees accrued for the account of the replaced Issuing Bank. From and after the effective date of any such replacement, (x) the successor Issuing Bank shall have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (y) references herein to the term “Issuing Bank” shall be deemed to refer to and include such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit.
(a)     Subject to the appointment and acceptance of a successor Issuing Bank, any Issuing Bank may resign as an Issuing Bank at any time upon thirty days’ prior written notice to the Administrative Agent, the Company and the Banks, in which case, such Issuing Bank shall be replaced in accordance with subsection 5.9(a) above.
SECTION 6.     LOCAL CURRENCY FACILITIES
6.1     Terms of Local Currency Facilities. (a) Subject to the provisions of this Section 6, the Company may in its discretion from time to time designate any Subsidiary of the Company organized under the laws of any jurisdiction outside the United States as a “Local Currency Borrower” and any Qualified Credit Facility to which such Local Currency Borrower and any one or more Banks (or its affiliates, agencies or branches) is a party as a “Local Currency Facility”, with the consent of each such Bank in its sole discretion, by delivering a Local Currency Facility Addendum to the Administrative Agent) and the Banks (through the Administrative Agent) executed by the Company, each such Local Currency Borrower and each such Bank, provided, that on the effective date of such designation no Event of Default shall have occurred and be continuing. Concurrently with the delivery of a Local Currency Facility Addendum, the Company or the relevant Local Currency Borrower shall furnish to the Administrative Agent copies of all documentation executed and delivered by any Local Currency Borrower in connection therewith, together with, if applicable, an English translation thereof. Except as otherwise provided in this Section 6 or in the definition of “Qualified Credit Facility” in subsection 1.1, the terms and conditions of each Local Currency Facility shall be determined by mutual agreement of the relevant Local Currency Borrower(s) and Local Currency Bank(s). The documentation governing each Local Currency Facility shall (i) contain an express acknowledgement that such Local Currency Facility shall be subject to the provisions of this Section 6 and (ii) designate a Local Currency Facility Agent for such Local Currency Facility. Each of the Company and, by agreeing to any Local Currency Facility designation as contemplated hereby, each relevant Local Currency Bank (if any) party thereto, acknowledges and agrees that each reference in this Agreement to any Bank shall, to the extent applicable, be deemed to be a reference to such Local Currency Bank. In the event of any inconsistency between the terms of this Agreement and the terms of any Local Currency Facility, the terms of this Agreement shall prevail.
(a)     The documentation governing each Local Currency Facility shall set forth (i) the maximum amount (expressed in Dollars) available to be borrowed from all Local Currency

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Banks under such Local Currency Facility (as the same may be reduced from time to time, a “Local Currency Facility Maximum Borrowing Amount”) and (ii) with respect to each Local Currency Bank party to such Local Currency Facility, the maximum Dollar Equivalent Amount available to be borrowed from such Local Currency Bank thereunder (as the same may be reduced from time to time, a “Local Currency Bank Maximum Borrowing Amount”).
(b)     Except as otherwise required by applicable law, in no event shall the Local Currency Banks party to a Local Currency Facility have the right to accelerate the Local Currency Loans outstanding thereunder, or to terminate their commitments (if any) to make such Local Currency Loans prior to the earlier of the stated termination date in respect thereof or the Termination Date, except, in each case, in connection with an acceleration of the Loans or a termination of the Commitments pursuant to Section 13 of this Agreement, provided, that nothing in this paragraph (c) shall be deemed to require any Local Currency Bank to make a Local Currency Loan if the applicable conditions precedent to the making of such Local Currency Loan set forth in the relevant Local Currency Facility have not been satisfied. No Local Currency Loan may be made under a Local Currency Facility if (i) after giving effect thereto, the conditions precedent in subsection 10.2 would not be satisfied or (ii) after giving effect to the making of such Local Currency Loan and the simultaneous application of the proceeds thereof, (A) the aggregate amount of the Exposure of all the Banks would exceed the aggregate amount of the Revolving Commitments, or (B) the amount of such Local Currency Bank’s Committed Exposure would exceed the amount of such Local Currency Bank’s Revolving Commitment.
(c)     The relevant Local Currency Borrower shall furnish to the Administrative Agent copies of any amendment, supplement or other modification (including any change in commitment amounts or in the Local Currency Banks participating in any Local Currency Facility) to the terms of any Local Currency Facility promptly after the effectiveness thereof (together with, if applicable, an English translation thereof). If any such amendment, supplement or other modification to a Local Currency Facility shall (i) add a Local Currency Bank as a Local Currency Bank thereunder or (ii) change the Local Currency Facility Maximum Borrowing Amount or any Local Currency Bank Maximum Borrowing Amount with respect thereto, the Company shall promptly furnish an appropriately revised Local Currency Facility Addendum, executed by the Company, the relevant Local Currency Borrower and the affected Local Currency Banks (or any agent acting on their behalf), to the Administrative Agent and the Banks (through the Administrative Agent).
(d)     The Company may terminate its designation of a facility as a Local Currency Facility, with the consent of each Local Currency Bank party thereto in its sole discretion, by written notice to the Administrative Agent, which notice shall be executed by the Company, the relevant Local Currency Borrower and each Local Currency Bank party to such Local Currency Facility (or any agent acting on their behalf). Once notice of such termination is received by the Administrative Agent, such Local Currency Facility and the loans and other obligations outstanding thereunder shall immediately cease to be subject to the terms of this Agreement and shall cease to benefit from the Company Guarantee.
6.2     Reporting of Local Currency Outstandings. On the date of the making of any Local Currency Loan having a maturity of 30 or more days to a Local Currency Borrower and on the last Business Day of each month on which a Local Currency Borrower has any outstanding Local Currency Loans, the Local Currency Facility Agent for such Local Currency Borrower, shall deliver to the Administrative Agent a Notice of Local Currency Outstandings. The Administrative Agent will, at the request of any Local Currency

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Facility Agent, advise such Local Currency Facility Agent of the Exchange Rate used by the Administrative Agent in calculating the Dollar Equivalent Amount of Local Currency Loans under the related Local Currency Facility on any date.
6.3     Refunding of Local Currency Loans. (a) Notwithstanding noncompliance with the conditions precedent set forth in subsection 10.2, if any Local Currency Loans are outstanding on (i) any date on which an Event of Default pursuant to subsection 13(g) shall have occurred with respect to the Company, (ii) any Acceleration Date or (iii) any date on which an Event of Default pursuant to subsection 13(a)(ii) shall have occurred and be continuing for three or more Business Days and, in the case of clause (iii) above, any Local Currency Bank party to the affected Local Currency Facility shall have given notice thereof to the Administrative Agent requesting that the Local Currency Loans (“Affected Local Currency Loans”) outstanding thereunder be refunded pursuant to this subsection 6.3, then, at 10:00 A.M., New York City time, on the second Business Day immediately succeeding (x) the date on which such Event of Default occurs (in the case of clause (i) above), (y) such Acceleration Date (in the case of clause (ii) above) or (z) the date on which such notice is received by the Administrative Agent (in the case of clause (iii) above), the Administrative Agent shall be deemed to have received a notice from the Company pursuant to subsection 2.2 requesting that Committed Rate ABR Loans be made pursuant to subsection 2.1 on such second Business Day in an aggregate amount equal to the Dollar Equivalent Amount of the aggregate amount of all Local Currency Loans (in the case of clause (i) or (ii) above) or the Affected Local Currency Loans (in the case of clause (iii) above), and the procedures set forth in subsection 2.2 shall be followed in making such Committed Rate ABR Loans. The proceeds of such Committed Rate ABR Loans shall be applied to repay such Local Currency Loans.
(a)     If, for any reason, Committed Rate ABR Loans may not be made pursuant to paragraph (a) of this subsection 6.3 to repay Local Currency Loans as required by such paragraph, effective on the date such Committed Rate ABR Loans would otherwise have been made, (i) the principal amount of each relevant Local Currency Loan shall be converted into Dollars (calculated on the basis of the Exchange Rate as of the immediately preceding Business Day) (“Converted Local Currency Loans”) and (ii) each Bank severally, unconditionally and irrevocably agrees that it shall purchase in Dollars a participating interest in such Converted Local Currency Loans in an amount equal to the amount of Committed Rate ABR Loans which would otherwise have been made by such Bank pursuant to paragraph (a) of this subsection 6.3 unless such purchase would cause the Exposure of such Bank to exceed the Revolving Commitment of such Bank. Each Bank will immediately transfer to the Administrative Agent, in immediately available funds, the amount of its participation, and the proceeds of such participation shall be distributed by the Administrative Agent to each relevant Local Currency Bank in such amount as will reduce the amount of the participating interest retained by such Local Currency Bank in the Converted Local Currency Loans to the amount of the Committed Rate ABR Loans which would otherwise have been made by it pursuant to paragraph (a) of this subsection 6.3. All Converted Local Currency Loans shall bear interest at the rate which would otherwise be applicable to Committed Rate ABR Loans. Each Bank shall share on a pro rata basis (calculated by reference to its participating interest in such Converted Local Currency Loans) in any interest which accrues thereon and in all repayments thereof.
(b)     If, for any reason, Committed Rate ABR Loans may not be made pursuant to paragraph (a) of this subsection 6.3 to repay Local Currency Loans as required by such paragraph and the principal amount of any Local Currency Loans may not be converted into Dollars in the manner contemplated by paragraph (b) of this subsection 6.3, (i) the Administrative Agent shall determine the Dollar Equivalent Amount of such Local Currency Loans (calculated on the basis of the Exchange Rate determined as of the Business Day immediately preceding the date on which

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Committed Rate ABR Loans would otherwise have been made pursuant to said paragraph (a)) and (ii) effective on the date on which Committed Rate ABR Loans would otherwise have been made pursuant to said paragraph (a), each Bank severally, unconditionally and irrevocably agrees that it shall purchase in Dollars a participating interest in such Local Currency Loans in an amount equal to the amount of Committed Rate ABR Loans which would otherwise have been made by such Bank pursuant to paragraph (a) of this subsection 6.3 unless such purchase would cause the Exposure of such Bank to exceed the Revolving Commitment of such Bank. Each Bank will immediately transfer to the Administrative Agent, in immediately available funds, the amount of its participation, and the proceeds of such participation shall be distributed by the Administrative Agent to each relevant Local Currency Bank in such amount as will reduce the Dollar Equivalent as of such date of the amount of the participating interest retained by such Local Currency Bank in such Local Currency Loans to the amount of the Committed Rate ABR Loans which were to have been made by it pursuant to paragraph (a) of this subsection 6.3. Each Bank shall share on a pro rata basis (calculated by reference to its participating interest in such Local Currency Loans) in any interest which accrues thereon, in all repayments of principal thereof and in the benefits of any collateral furnished in respect thereof and the proceeds of such collateral.
(c)     If any amount required to be paid by any Bank to any Local Currency Bank pursuant to this subsection 6.3 in respect of any Local Currency Loan is not paid to such Local Currency Bank on the date such payment is due from such Bank, such Bank shall pay to such Local Currency Bank on demand an amount equal to the product of (i) such amount, times (ii) the daily average Federal funds rate, as quoted by such Local Currency Bank during the period from and including the date such payment is required to the date on which such payment is immediately available to the Local Currency Bank, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. A certificate of a Local Currency Bank submitted to any Bank through the Administrative Agent with respect to any amounts owing under this subsection (d) shall be conclusive in the absence of manifest error.
SECTION 7.     [RESERVED]
SECTION 8.     CERTAIN PROVISIONS APPLICABLE TO THE LOANS AND
LETTERS OF CREDIT
8.1     Facility Fee; Other Fees; Other Payments. (a) The Company shall pay to the Administrative Agent for the account of each Bank holding a Revolving Commitment a facility fee for the period from and including the Closing Date to, but excluding, the Termination Date, computed at the Facility Fee Rate in effect from time to time on the average daily amount of the Revolving Commitment (used and unused) of such Bank during the period for which payment is made, payable quarterly in arrears on the last day of each March, June, September and December and on the Termination Date or such earlier date on which the Revolving Commitments shall terminate as provided herein, commencing on the first of such dates to occur after the date hereof.
(a)     The Company shall pay to the applicable Issuing Bank for its own account a fronting fee of 0.125% per annum on the undrawn and unexpired amount of each Letter of Credit, in each case payable quarterly in arrears on the last day of each March, June, September and December and on the Termination Date or such earlier date on which the Revolving Commitments shall terminate as provided herein, commencing on the first of such dates to occur after the date hereof or the issuance date, as relevant.

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(b)     The Company agrees to pay to the Administrative Agent, for its own account and for the account of the Arrangers and the Banks, the fees in the amounts and on the dates agreed to by such parties in writing prior to the date of this Agreement.
8.2     Computation of Interest and Fees. (a) Facility fees and, whenever it is calculated on the basis of the Prime Rate, interest shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed; and, otherwise, interest and Letter of Credit commissions shall be calculated on the basis of a 360-day year for the actual days elapsed. Notwithstanding the foregoing, any determination of the Eurocurrency Rate for Loans denominated in Australian Dollars, Singapore Dollars and Hong Kong Dollars shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the relevant Specified Borrower and the Banks of each determination of an Adjusted Eurocurrency Rate. Any change in the ABR due to a change in the Prime Rate or the NYFRB Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate or the NYFRB Rate, respectively. The Administrative Agent shall as soon as practicable notify the relevant Borrower and the Banks of the effective date and the amount of each such change in interest rate.
(a)     Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrowers and the Banks in the absence of manifest error.
8.3     Pro Rata Treatment and Payments. (a) Each payment by the Company on account of any facility fee hereunder and any reduction of the Revolving Commitments of the Banks shall be made pro rata according to the respective Revolving Commitment Percentages of the Banks. Each disbursement of Committed Rate Loans in any Currency shall be made by the Banks holding Revolving Commitments in such Currency pro rata according to the respective Revolving Borrowing Percentages of such Banks. Each payment (including each prepayment) by any Borrower on account of principal of and interest on any Loans in any Currency shall be made pro rata according to the respective principal amounts of the Loans of such Type and Currency of such Borrower then due and owing to the Banks. All payments (including prepayments) to be made by any Borrower hereunder, whether on account of principal, interest, fees, Reimbursement Obligations or otherwise, shall be made without set off or counterclaim. All payments in respect of Swing Line Loans, Committed Rate Loans or Letters of Credit in any Currency shall be made in such Currency and in immediately available funds at the Payment Office (and in the case of Swing Line Loan, to the applicable Swing Line Bank), and at or prior to the Payment Time, for such Type of Loans and such Currency, on the due date thereof. The Administrative Agent shall distribute to the applicable Banks any payments received by the Administrative Agent promptly upon receipt in like funds as received. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension.
(a)     Unless the Administrative Agent shall have been notified in writing by any Bank prior to a Borrowing Date in respect of Committed Rate Loans that such Bank will not make the amount that would constitute its Revolving Borrowing Percentage of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Bank is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the relevant Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Bank shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to (A) in the case of any such Committed Rate Loans denominated in Dollars,

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the daily average Federal funds rate, as quoted by the Administrative Agent, or (B) in the case of any Committed Rate Loans denominated in an Available Foreign Currency, the rate customary in such Currency for settlement of similar inter-bank obligations, as quoted by the Administrative Agent, in each case for the period until such Bank makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Bank with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. If such Bank’s Revolving Borrowing Percentage of such borrowing is not made available to the Administrative Agent by such Bank within three Business Days of such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to ABR Loans in such Currency hereunder, on demand, from the relevant Borrower.
8.4     Illegality. Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation thereof by any Governmental Authority charged with the administration or interpretation thereof shall make it unlawful for any Bank to make or maintain Loans or to make or maintain Extensions of Credit to one or more Foreign Subsidiary Borrowers or Local Currency Borrowers contemplated by this Agreement, the commitment of such Bank hereunder to make Loans to such Foreign Subsidiary Borrowers or Local Currency Borrowers, continue Loans to such Foreign Subsidiary Borrowers or Local Currency Borrowers as such, and maintain Extensions of Credit to such Foreign Subsidiary Borrowers or Local Currency Borrowers shall forthwith be cancelled to the extent necessary to remedy or prevent such illegality. Nothing in this subsection 8.4 shall affect the obligation of the Banks to make or maintain Loans to the Company. Notwithstanding anything herein to the contrary, (i) all requests, rules, guidelines, requirements and directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or by United States or foreign regulatory authorities, in each case pursuant to Basel III, and (ii) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements and directives thereunder or issued in connection therewith or in implementation thereof, shall in each case be deemed to be a change in any Requirement of Law, regardless of the date enacted, adopted, issued or implemented.
8.5     Requirements of Law. (a) If the adoption of or any change in any Requirement of Law (other than the Certificate of Incorporation and By-Laws or other organizational or governing documents of the Banks) or in the interpretation or application thereof or compliance by any Bank or Issuing Bank with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof:
(i)     shall subject any Bank or Issuing Bank or any corporation controlling such Bank or from which such Bank obtains funding or credit to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit or any Eurocurrency Loan or Local Currency Loan made by it, or change the basis of taxation of payments to such Bank, Issuing Bank or such corporation in respect thereof (except for (A) Non-Excluded Taxes covered by subsection 8.6, (B) taxes excluded under subsection 8.6(a) and (C) changes in the rate of tax on the overall net income of such Bank or Issuing Bank or such corporation);
(ii)     shall impose, modify or hold applicable any reserve, special deposit, deposit insurance, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Bank or Issuing Bank or any corporation controlling such Bank or Issuing Bank or from which such Bank obtains

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funding or credit which is not otherwise included in the determination of the Adjusted Eurocurrency Rate hereunder or the interest rate on such Local Currency Loans under the relevant Local Currency Facility; or
(iii)     shall impose on such Bank or Issuing Bank or any corporation controlling such Bank any other condition;
and the result of any of the foregoing is to increase the cost to such Bank or Issuing Bank or such corporation, by an amount which such Bank or Issuing Bank or such corporation reasonably deems to be material, of making, converting into, continuing or maintaining Eurocurrency Loans or Local Currency Loans or issuing or participating in Letters of Credit or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Company shall promptly pay such Bank or Issuing Bank, within five Business Days after its demand, any additional amounts necessary to compensate such Bank or Issuing Bank for such increased cost or reduced amount receivable, together with interest on each such amount from the date due until payment in full at a rate per annum equal to the ABR. If any Bank or Issuing Bank becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly notify the Company, through the Administrative Agent, of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this subsection submitted by such Bank or Issuing Bank, through the Administrative Agent, to the Company shall be conclusive in the absence of manifest error. This covenant shall survive the termination of this Agreement and the payment of Loans and all other amounts payable hereunder.
(b)     If any Bank shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or liquidity requirements or in the interpretation or application thereof or compliance by such Bank or any corporation controlling such Bank or Issuing Bank with any request or directive regarding capital adequacy or liquidity requirements (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof does or shall have the effect of reducing the rate of return on such Bank’s or Issuing Bank or such corporation’s capital as a consequence of its obligations hereunder or under any Letter of Credit to a level below that which such Bank or Issuing Bank or such corporation could have achieved but for such change or compliance (taking into consideration such Bank’s or Issuing Bank or such corporation’s policies with respect to capital adequacy or liquidity requirements) by an amount reasonably deemed by such Bank or Issuing Bank to be material, then from time to time, after submission by such Bank or Issuing Bank to the Company (with a copy to the Administrative Agent) of a written request therefor (which written request shall be conclusive in the absence of manifest error), the Company shall pay to such Bank or Issuing Bank such additional amount or amounts as will compensate such Bank or Issuing Bank for such reduction.
(c)     In addition to, and without duplication of, amounts which may become payable from time to time pursuant to paragraphs (a) and (b) of this subsection 8.5, each Borrower agrees to pay to each Bank which requests compensation under this paragraph (c) by notice to such Borrower, on the last day of each Interest Period with respect to any Committed Rate Eurocurrency Loan made by such Bank to such Borrower, at any time when such Bank shall be required to maintain reserves against “Eurocurrency liabilities” under Regulation D (or, at any time when such Bank may be required by the Board or by any other Governmental Authority, whether within the United States or in another relevant jurisdiction, to maintain reserves against any other category of liabilities which includes deposits by reference to which the Eurocurrency Rate is determined as provided in this Agreement or against any category of extensions of credit or other assets of such Bank which includes any such Committed Rate Eurocurrency Loans), an additional amount (determined by such Bank’s

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calculation or, if an accurate calculation is impracticable, reasonable estimate using such reasonable means of allocation as such Bank shall determine) equal to the actual costs, if any, incurred by such Bank during such Interest Period as a result of the applicability of the foregoing reserves to such Committed Rate Eurocurrency Loans.
(d)     A certificate of each Bank, Issuing Bank, Swing Line Bank or Local Currency Bank setting forth such amount or amounts as shall be necessary to compensate such Bank, Issuing Bank, Swing Line Bank or Local Currency Bank as specified in paragraph (a), (b) or (c) above, as the case may be, and setting forth in reasonable detail an explanation of the basis of requesting such compensation in accordance with paragraph (a), (b) or (c) above, including calculations in detail comparable to the detail set forth in certificates delivered to such Bank in similar circumstances under comparable provisions of other comparable credit agreements, shall be delivered to the relevant Borrower and shall be conclusive absent manifest error. The relevant Borrower shall pay each Bank, Issuing Bank, Swing Line Bank or Local Currency Bank the amount shown as due on any such certificate delivered to it within 10 days after its receipt of the same.
(e)     Failure or delay on the part of any Bank or the Issuing Bank to demand compensation pursuant to this subsection shall not constitute a waiver of such Bank’s or the Issuing Bank’s right to demand such compensation; provided that the Company shall not be required to compensate a Bank or the Issuing Bank pursuant to this subsection for any increased costs or reductions incurred more than six months prior to the date that such Bank or the Issuing Bank, as the case may be, notifies the Company of the event giving rise to such increased costs or reductions and of such Bank’s or the Issuing Bank’s intention to claim compensation therefor; provided further that, if the event giving rise to such increased costs or reductions is retroactive, then the six-month period referred to above shall be extended to include the period of retroactive effect thereof.
(f)     Notwithstanding the foregoing provisions of this subsection, a Bank shall not be entitled to compensation pursuant to this subsection in respect of any Competitive Advance Loan if the event that would otherwise entitle it to such compensation shall have been publicly announced prior to submission of the Competitive Advance Loan Offer pursuant to which such Loan was made.
(g)     The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.
(h)     Notwithstanding anything herein to the contrary, (i) all requests, rules, guidelines, requirements and directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or by United States or foreign regulatory authorities, in each case pursuant to Basel III, and (ii) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements and directives thereunder or issued in connection therewith or in implementation thereof, shall in each case be deemed to be a change in any Requirement of Law, regardless of the date enacted, adopted, issued or implemented.
8.6     Taxes. (a) Unless required by applicable Requirements of Law, all payments made by or on behalf of any Loan Party under this Agreement or any other Credit Documents shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding, in the case of the

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Administrative Agent and each Bank, (i) net income taxes, doing business taxes, branch profits or similar taxes, and franchise taxes imposed on the Administrative Agent or such Bank (including, without limitation for all purposes of this subsection 8.6, each Bank in its capacity as an Issuing Bank or as a Swing Line Bank), as the case may be, that are Other Connection Taxes, (ii) taxes that are attributable to such Bank’s failure to comply with the requirements of subsection 8.6(e), (iii) United States withholding taxes in effect on the date such Bank becomes a party to this Agreement, except to the extent that such Bank’s assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the applicable Loan Party with respect to such taxes pursuant to this subsection 8.6(a) and (iv) any withholding taxes imposed by FATCA (any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions and withholdings, “Non-Excluded Taxes”); provided that, if any taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, are required to be withheld from any amounts payable to the Administrative Agent or any Bank, as determined in good faith by the applicable Withholding Agent, (i) such amounts shall be paid to the relevant Governmental Authority in accordance with applicable law and (ii) if such taxes are Non-Excluded Taxes or Other Taxes, the amounts so payable by the applicable Loan Party to the Administrative Agent or such Bank shall be increased to the extent necessary to yield to the Administrative Agent or such Bank (after payment of all Non-Excluded Taxes and Other Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement as if such withholding or deduction had not been made.
(a)     In addition, the Company or the relevant Loan Party shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.
(b)     Whenever any taxes are payable by any Loan Party, as promptly as possible thereafter such Loan Party or the Company shall send to the Administrative Agent for its own account or for the account of the relevant Bank, as the case may be, a certified copy of an original official receipt received by the applicable Loan Party showing payment thereof. If (i) such Loan Party or the Company fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority, (ii) Loan Party or the Company fails to remit to the Administrative Agent the required receipts or other required documentary evidence or (iii) any Non-Excluded Taxes or Other Taxes are imposed directly upon the Administrative Agent or any Bank, such Loan Party and/or the Company shall indemnify the Administrative Agent and such Bank for such amounts and any incremental taxes, interest or penalties that may become payable by the Administrative Agent or such Bank as a result of any such failure, in the case of (i) and (ii), or any such direct imposition, in the case of (iii). The agreements in subsection 8.6 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.
(c)     Each Bank shall indemnify the Administrative Agent for the full amount of any taxes, levies, imposts, duties, charges, fees, deductions, withholdings or similar charges imposed by any Governmental Authority that are attributable to such Bank and that are payable or paid by the Administrative Agent, together with all interest, penalties, reasonable costs and expenses arising therefrom or with respect thereto, as determined by the Administrative Agent in good faith (but only to the extent that any Loan Party has not already indemnified the Administrative Agent for such taxes, levies, imposts, duties, charges, fees, deductions, withholdings or similar charges and without limiting the obligation of the Loan Parties to do so). A certificate as to the amount of such payment or liability delivered to any Bank by the Administrative Agent shall be conclusive absent manifest error.

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(d)     (i) (A) Each Bank (including each Assignee) that is a “United States person” as defined in Section 7701(a)(30) of the Code shall deliver to the Company and the Administrative Agent on or before the date on which it becomes a party to this Agreement and from time to time thereafter upon the request of the Company or the Administrative Agent two properly completed and duly signed copies of United States Internal Revenue Service (the “IRS”) Form W-9 (or any successor form) certifying that such Bank is exempt from U.S. federal withholding tax.
(A)     Each Bank (including each Assignee) that is not a “United States person” as defined in Section 7701(a)(30) of the Code (a “Non-U.S. Bank”) shall deliver to the Company and the Administrative Agent (or, in the case of a Participant, to the Bank from which the related participation shall have been purchased) on or before the date on which it becomes a party to this Agreement (or, in the case of any Participant, on or before the date such Participant purchases the related participation) and from time to time thereafter upon the request of the Company or the Administrative Agent or promptly upon the expiration, obsolescence or invalidity of any form previously delivered by such Non-U.S. Bank, whichever of the following is applicable:
(1)     in the case of a Non-U.S. Bank claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Credit Document, two duly completed and duly signed copies of IRS Form W-8BEN or W-8-BEN-E (as applicable) establishing an exemption from, or reduction of, U.S. federal withholding tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Credit Document, IRS Form W-8BEN or W-8BEN-E (as applicable) establishing an exemption from, or reduction of, U.S. federal withholding tax pursuant to the “business profits” or “other income” article of such tax treaty;
(2)     two duly completed and duly signed copies of IRS Form W-8ECI;
(3)     in the case of a Non-U.S. Bank claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit M-1 to the effect that such Non-U.S. Bank is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Company within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” related to the Company as described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) two duly completed and duly signed copies of IRS Form W-8BEN or W-8BEN-E (as applicable); or
(4)     to the extent a Non-U.S. Bank is not the beneficial owner, two duly completed and duly signed copies of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, IRS Form W-8BEN-E, a U.S. Tax Compliance Certificate substantially in the form of Exhibit M-2 or Exhibit M-3, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Non-U.S. Bank is a partnership and one or more direct or indirect partners of such Non-U.S. Bank are claiming the portfolio interest exemption, such Non-U.S. Bank may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit M-4 on behalf of each such direct and indirect partner;
(ii)     Upon the written request of any Borrower, each Bank promptly will provide to such Borrower and to the Administrative Agent, or file with the relevant taxing authority (with a copy to the Administrative Agent) such form, certification or similar documentation (each duly completed, accurate and signed) as is required by the relevant

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jurisdiction in order to obtain an exemption from, or reduced rate of Non-Excluded Taxes to which such Bank or the Administrative Agent is entitled pursuant to an applicable tax treaty or the law of the relevant jurisdiction; provided, however, such Bank will not be required to (x) disclose information which in its reasonable judgment it deems confidential or proprietary or (y) incur a cost if such cost would, in its reasonable judgment, be substantial in comparison to the cost of the Company under this subsection 8.6 of such Bank’s failure to provide such form, certification or similar documentation. Such Bank shall certify in the case of any such form, certification or similar documentation so provided (to the extent it may accurately and properly do so) that it is entitled to receive payments under this Agreement without deduction or withholding, or at a reduced rate of deduction or withholding of Non-Excluded Taxes. A Bank shall be required to furnish a form under this paragraph (e)(ii) only if it is entitled to claim an exemption from or a reduced rate of withholding under applicable law. A Bank that is not entitled to claim an exemption from or a reduced rate of withholding under applicable law, promptly upon written request of the applicable Borrower, shall inform the applicable Borrower in writing.
(iii)     If a payment made to a Bank under any Credit Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Bank were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Bank shall deliver to the Company and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Company or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Company or the Administrative Agent as may be necessary for the Company and the Administrative Agent to comply with their obligations under FATCA and to determine that such Bank has complied with such Bank’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this subsection 8.6(e)(iii), “FATCA” shall include any amendments made to FATCA after the date of this Agreement. Solely for purposes of determining withholding taxes imposed under FATCA, from and after the effective date of the Amendment, any Borrower and the Administrative Agent shall treat (and the Banks hereby authorize the Administrative Agent to treat) each of the Loans as not qualifying as a “grandfathered obligation” within the meaning of Treasury Regulation Section 1.1471-2(b)(2)(i).
Each Bank agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Company and the Administrative Agent in writing of its legal inability to do so.
(e)     If any Bank determines, in its sole discretion, that it has received a refund of any Non-Excluded Taxes or Other Taxes as to which it has been indemnified by a Loan Party or with respect to which a Loan Party has paid additional amounts pursuant to this subsection 8.6, it shall pay over such refund to such Loan Party (but only to the extent of indemnity payments made, or additional amounts paid, by such Loan Party under this subsection 8.6 with respect to the Non-Excluded Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of such Bank and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided, that such Loan Party, upon the request of such Bank, agrees to repay the amount paid over to such Loan Party (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to such Bank in the event such Bank is required to repay

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such refund to such Governmental Authority. This paragraph shall not be construed to require any Bank to make available its tax returns (or any other information relating to its taxes which it deems confidential) to any Loan Party or any other Person.
8.7     Company’s Options upon Claims for Increased Costs and Taxes. In the event that any Affected Bank shall decline to make Loans pursuant to subsection 8.4 or shall have notified the Company that it is entitled to claim compensation pursuant to subsection 8.5 or 8.6, the Company may exercise any one or both of the following options:
(a)     The Company may request one or more of the Banks which are not Affected Banks to take over all (but not part) of any Affected Banks’ then outstanding Loans and to assume all (but not part) of any Affected Bank’s Revolving Commitments and/or Swing Line Commitments, if any, and obligations hereunder, and if applicable, under any Local Currency Facility. If one or more Banks shall so agree in writing (collectively, the “Assenting Banks”; individually, an “Assenting Bank”) with respect to an Affected Bank, (i) the Revolving Commitments and/or Swing Line Commitments, if any, of each Assenting Bank and the obligations of such Assenting Bank under this Agreement shall be increased by its respective Allocable Share of the Revolving Commitments and/or Swing Line Commitments, as applicable, and of the obligations of such Affected Bank under this Agreement and if applicable, under any Local Currency Facility and (ii) each Assenting Bank shall make Loans to the Company, according to such Assenting Bank’s respective Allocable Share of the Revolving Commitments and/or Swing Line Commitments, as applicable, in an aggregate principal amount equal to the outstanding principal amount of the Loans and, if applicable, Local Currency Loans and Swing Line Loans, of such Affected Bank, on a date mutually acceptable to the Assenting Banks, such Affected Bank and the Company. The proceeds of such Loans, together with funds of the Company, shall be used to prepay the Loans, and if applicable, Local Currency Loans and/or Swing Loans, of such Affected Bank, together with all interest accrued thereon and all other amounts owing to such Affected Bank hereunder (including any amounts payable pursuant to subsection 8.8 in connection with such prepayment), and, upon such assumption by the Assenting Bank and prepayment by the Company, such Affected Bank shall cease to be a “Bank” for purposes of this Agreement and shall no longer have any obligations or rights hereunder (other than any obligations or rights which according to this Agreement shall survive the termination of this Agreement).
(b)     The Company may designate a Replacement Bank to assume the Revolving Commitments and/or Swing Line Commitments, if any, and the obligations of any such Affected Bank hereunder and if applicable, under any Local Currency Facility, and to purchase the outstanding Loans of such Affected Bank and such Affected Bank’s rights hereunder and with respect thereto, without recourse upon, or warranty by, or expense to, such Affected Bank (unless such Affected Bank agrees otherwise), for a purchase price equal to the outstanding principal amount of the Loans and, if applicable, Local Currency Loans and/or Swing Loans, of such Affected Bank plus (i) all interest accrued and unpaid thereon and all other amounts owing to such Affected Bank hereunder and (ii) any amount which would be payable to such Affected Bank pursuant to subsection 8.8, and upon such assumption and purchase by the Replacement Bank, such Replacement Bank, if it is not already a Bank, shall be deemed to be a “Bank” for purposes of this Agreement and such Affected Bank shall cease to be a “Bank” for purposes of this Agreement and shall no longer have any obligations or rights hereunder (other than any obligations or rights which according to this Agreement shall survive the termination of this Agreement).

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8.8     Break Funding Payments. In the event of (a) the payment of any principal of any Eurocurrency Loan or Committed Rate Loan that bears interest at the Eurocurrency Rate other than on the last day of an Interest Period therefor (including as a result of an Event of Default and as a result of the provisions of subsection 2.11 or 2.12), (b) the conversion of any Eurocurrency Loan other than on the last day of an Interest Period therefor, (c) the failure to borrow, convert, continue or prepay any Eurocurrency Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice is permitted to be revocable hereunder and is revoked in accordance herewith), (d) the failure to borrow any Competitive Advance Loan that bears interest at the Eurocurrency Rate after accepting the Competitive Advance Loan Offer to make such Loan, or (e) the assignment as a result of a request by the Company pursuant to subsection 8.7 of any Eurocurrency Loan other than on the last day of an Interest Period therefor or of any Competitive Advance Loan that bears interest at the Eurocurrency Rate, then, in any such event, the Company shall compensate each Bank for the loss, cost and expense attributable to such event. In the case of a Eurocurrency Loan, the interest rate loss to any Bank attributable to any such event shall be deemed to be an amount determined by such Bank to be equal to the excess, if any, of (i) the amount of interest that such Bank would pay for a deposit equal to the principal amount of such Bank denominated in the Currency of such Loan for the period from the date of such payment, conversion, failure or assignment to the last day of the then current Interest Period for such Loan (or, in the case of a failure to borrow, convert or continue, the duration of the Interest Period that would have resulted from such borrowing, conversion or continuation) if the interest rate payable on such deposit were equal to the Eurocurrency Rate for such Currency for such Interest Period, over (ii) the amount of interest that such Bank would earn on such principal amount for such period if such Bank were to invest such principal amount for such period at the interest rate that would be bid by such Bank (or an affiliate of such Bank) for deposits denominated in such Currency from other banks in the eurocurrency market at the commencement of such period. The Company shall also compensate each relevant Bank for any loss, cost or expense suffered by such Bank as a result of the conversion, pursuant to subsection 2.11(b), of the Currency in which a Loan is denominated, or the purchase or sale, pursuant to subsection 2.11(c), of a participating interest in any Loan. A certificate of any Bank setting forth any amount or amounts that such Bank is entitled to receive pursuant to this subsection shall be delivered to the Company and shall be conclusive absent manifest error. The Company shall pay such Bank the amount shown as due on any such certificate within 10 days after receipt thereof.
8.9     Determinations. In making the determinations contemplated by subsections 8.5, 8.6 and 8.8, each Bank may make such estimates, assumptions, allocations and the like that such Bank in good faith determines to be appropriate. Upon request of the Company, each Bank shall furnish to the Company, at any time after demand for payment of an amount under subsection 8.5(a) or 8.8, a certificate outlining in reasonable detail the computation of any amounts owing. Any certificate furnished by a Bank shall be binding and conclusive in the absence of manifest error.
8.10     Change of Lending Office. If an event occurs with respect to any Bank that makes operable the provisions of subsection 8.4 or entitles such Bank to make a claim under subsection 8.5 or 8.6, such Bank shall, if requested in writing by the Company, to the extent not inconsistent with such Bank’s internal policies, use reasonable efforts to (a) designate another office or offices for the making and maintaining of its Loans or (b) obtain a different source of funds or credit, as the case may be, the designation or obtaining of which will eliminate such operability or reduce materially the amount such Bank is so entitled to claim, provided that such designation or obtaining would not, in the sole discretion of such Bank, result in such Bank incurring any costs unless the Company has agreed to reimburse such Bank therefor.
8.11     Company Controls on Exposure; Calculation of Exposure; Prepayment if Exposure exceeds Revolving Commitments. (a) The Company will implement and maintain internal accounting controls to monitor the borrowings and repayments of Loans by the Borrowers and the issuance of and

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drawings under Letters of Credit, with the object of preventing any request for an Extension of Credit that would result in (i) the Exposure of the Banks being in excess of the Revolving Commitments, or (ii) the Foreign Currency Exposure in respect of any Currency exceeding the Foreign Currency Exposure Sublimit for such Currency, and of promptly identifying and remedying any circumstance where, by reason of changes in exchange rates, (A) the aggregate amount of the Exposure exceeds the Revolving Commitments, or (B) the amount of the Foreign Currency Exposure in respect of any Currency exceeds the Foreign Currency Exposure Sublimit for such Currency. In the event that at any time the Company determines that (i) the aggregate amount of the Exposure of the Banks exceeds the aggregate amount of the Revolving Commitments by more than 5%, or (ii) the amount of the Foreign Currency Exposure in respect of any Currency exceeds the Foreign Currency Exposure Sublimit for such Currency, the Company will, as soon as practicable but in any event within five Business Days of making such determination, make or cause to be made such repayments or prepayments of Loans as shall be necessary to cause (A) the aggregate amount of the Exposure of the Banks to no longer exceed the Revolving Commitments, and (B) the amount of the Foreign Currency Exposure in respect of any Currency not to exceed the Foreign Currency Exposure Sublimit for such Currency.
(a)     The Administrative Agent will calculate the aggregate amount of the Exposure of the Banks from time to time, and in any event not less frequently than once during each calendar month. In making such calculations, the Administrative Agent will rely on the information most recently received by it from the Swing Line Banks in respect of outstanding Swing Line Loans, from Banks in respect of outstanding Competitive Advance Loans, from Local Currency Facility Agents in respect of outstanding Local Currency Loans and Issuing Banks in respect of L/C Obligations. Upon making each such calculation, the Administrative Agent will inform the Company and the Banks of the results thereof.
(b)     In the event that on any date the Administrative Agent calculates that (i) the aggregate amount of the Exposure of the Banks exceeds the aggregate amount of the Revolving Commitments by more than 5%, or (ii) the Foreign Currency Exposure in respect of any Currency exceeds the Foreign Currency Exposure Sublimit for such Currency, the Administrative Agent will give notice to such effect to the Company. After receipt of any such notice, the Company will, as soon as practicable but in any event within five Business Days of receipt of such notice, make or cause to be made such repayments or prepayments of Loans as shall be necessary to cause (i) the aggregate amount of the Exposure of the Banks to no longer exceed the Revolving Commitments, or (ii) the Foreign Currency Exposure in any respect of any Currency not to exceed the Foreign Currency Exposure Sublimit for such Currency.
(c)     If at any time the Committed Exposure of any Bank exceeds such Bank’s Revolving Commitment, upon demand of such Bank, the Company will within one Business Day prepay Loans in such amounts that after giving effect to such prepayment the Committed Exposure of such Bank does not exceed its Revolving Commitment.
(d)     Any prepayment required to be made pursuant to this subsection 8.11 shall be accompanied by payment of amounts payable, if any, pursuant to subsection 8.8 in respect of the amount so prepaid.
8.12     Conversion and Continuation Options. (a) By giving a Notice of Conversion, any Specified Borrower may elect from time to time (i) to convert such Specified Borrower’s Committed Rate Eurocurrency Loans in Dollars to Committed Rate ABR Loans or (ii) to convert such Specified Borrower’s Committed Rate ABR Loans to Committed Rate Eurocurrency Loans in Dollars. Upon receipt of any Notice of Conversion the Administrative Agent shall promptly notify each relevant Bank thereof. All or any part

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of Committed Rate Eurocurrency Loans outstanding in Dollars or Committed Rate ABR Loans may be converted as provided herein, provided that (i) no Committed Rate ABR Loan may be converted into a Committed Rate Eurocurrency Loan when any Event of Default has occurred and is continuing and the Administrative Agent has or the Required Banks have determined that such a conversion is not appropriate and (ii) no Committed Rate ABR Loan may be converted into a Committed Rate Eurocurrency Loan after the date that is one month prior to the relevant Termination Date.
(a)     By giving a Notice of Continuation, any Specified Borrower may continue all or any part of such Specified Borrower’s Committed Rate Eurocurrency Loans as Committed Rate Eurocurrency Loans in the same Currency for one or more different additional Interest Periods.
(b)     Any Specified Borrower may convert Committed Rate Loans outstanding in Dollars or one Available Foreign Currency to Committed Rate Loans in Dollars or a different Currency by repaying such Loans in the first Currency and borrowing Loans of such different Currency in accordance with the applicable provisions of this Agreement.
(c)     If any Specified Borrower shall fail to timely give a Notice of Continuation or a Notice of Conversion in respect of any of such Specified Borrower’s Committed Rate Eurocurrency Loans with respect to which an Interest Period is expiring, such Specified Borrower shall be deemed to have given a Notice of Continuation for a Eurocurrency Loan for an Interest Period of one month.
8.13     Minimum Amounts of Tranches. All borrowings of Committed Rate Loans and Swing Line Loans, all conversions and continuations of Committed Rate Loans and all selections of Interest Periods shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of (i) in the case of Eurocurrency Loans or Committed Rate Loans comprising each Tranche in Dollars shall be not less than $5,000,000, (ii) in the case of ABR Loans or Committed Rate Loans comprising each Tranche in Dollars shall not be less than $1,000,000 and (iii) Committed Rate Loans comprising each Tranche in any Available Foreign Currency shall be not less than the Dollar Equivalent Amount in such Currency of $5,000,000; provided that any borrowing of Committed Rate Loans may be in an aggregate amount that is equal to the entire unused balance of the Total Revolving Commitments and any borrowing of Swing Line Loans may be in an aggregate amount that is equal to the entire unused balance of the Total Swing Line Commitments.
8.14     Interest Rates and Interest Payment Dates. (a) Each Eurocurrency Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Adjusted Eurocurrency Rate for such Interest Period plus the Applicable Margin.
(a)     Each ABR Loan shall bear interest at a rate per annum equal to the ABR plus the Applicable Margin.
(b)     Each Swing Line Loan shall bear interest at the Swing Line Rate applicable to such Swing Line Loan.
(c)     If all or a portion of (i) the principal amount of any Swing Line Loan or Committed Rate Loan or (ii) any interest payable thereon or other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum which is (x) in the case of overdue principal, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this subsection plus 2% or (y) in the case of overdue interest, the rate described in paragraph (b) of this subsection

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plus 2%, in each case from the date of such non-payment until such amount is paid in full (as well after as before judgment).
(d)     Interest on Swing Line Loans and Committed Rate Loans shall be payable in arrears on each Interest Payment Date; provided, that interest accruing pursuant to paragraph (d) of this subsection shall be payable from time to time on demand.
8.15     Inability to Determine Interest Rate. (a) If on or prior to the date on which the Eurocurrency Rate is determined for any Interest Period in respect of any Eurocurrency Loan in any Currency:
(i)     the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted Eurocurrency Rate or the Eurocurrency Rate, as applicable (including because the Eurocurrency Screen Rate is not available or published on a current basis), for the applicable currency and such Interest Period, or
(ii)     the Administrative Agent is advised by the Required Banks (or, in the case of a Eurocurrency Competitive Advance Loan, the Bank that is required to make such Loan) that the Adjusted Eurocurrency Rate or the Eurocurrency Rate, as applicable, for the applicable currency and such Interest Period will not adequately and fairly reflect the cost to such Banks (or Bank) of making or maintaining their Loans (or its Loan) included in such Borrowing for the applicable currency and such Interest Period;
then the Administrative Agent shall give notice thereof to the Company and the Banks by telephone, telecopy or electronic mail as soon as practicable thereafter. If such notice is given (x) any Eurocurrency Loans requested to be made in such affected Currency on the first day of such affected Interest Period shall be made as ABR Loans in Dollars in the Dollar Equivalent Amount, (y) any Committed Rate Loans that were to have been converted on the first day of such affected Interest Period from ABR Loans to Eurocurrency Loans shall be continued as ABR Loans and (z) any Eurocurrency Loans in such affected Currency that were to have been continued as such shall be converted, on the first day of such Interest Period, to ABR Loans in Dollars in the Dollar Equivalent Amount. Until such notice has been withdrawn by the Administrative Agent, no further Eurocurrency Loans in such affected Currency shall be made, converted to or continued as such.
(b)     If at any time the Administrative Agent determines (which determination shall be conclusive absent manifest error) that (i) the circumstances set forth in clause (a)(i) have arisen and such circumstances are unlikely to be temporary or (ii) the circumstances set forth in clause (a)(i) have not arisen but either (w) the supervisor for the administrator of the Eurocurrency Screen Rate has made a public statement that the administrator of the Eurocurrency Screen Rate is insolvent (and there is no successor administrator that will continue publication of the Eurocurrency Screen Rate), (x) the administrator of the Eurocurrency Screen Rate has made a public statement identifying a specific date after which the Eurocurrency Screen Rate will permanently or indefinitely cease to be published by it (and there is no successor administrator that will continue publication of the Eurocurrency Screen Rate), (y) the supervisor for the administrator of the Eurocurrency Screen Rate has made a public statement identifying a specific date after which the Eurocurrency Screen Rate will permanently or indefinitely cease to be published or (z) the supervisor for the administrator of the Eurocurrency Screen Rate or a Governmental Authority having jurisdiction over the Administrative Agent has made a public statement identifying a specific date after which the Eurocurrency Screen Rate may no longer be used for determining interest rates for loans, then the Administrative Agent and the Borrower shall endeavor to establish an alternate rate of interest to

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the Eurocurrency Rate that gives due consideration to the then prevailing market convention for determining a rate of interest for syndicated loans in the United States at such time, and shall enter into an amendment to this Agreement to reflect such alternate rate of interest and such other related changes to this Agreement as may be applicable (but for the avoidance of doubt, such related changes shall not include a reduction of the Applicable Margin); provided that, if such alternate rate of interest as so determined would be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement. Notwithstanding anything to the contrary in Section 15.1, such amendment shall become effective without any further action or consent of any other party to this Agreement so long as the Administrative Agent shall not have received, within five Business Days of the date notice of such alternate rate of interest is provided to the Banks, a written notice from the Required Banks stating that such Required Banks object to such amendment. Until an alternate rate of interest shall be determined in accordance with this clause (b) (but, in the case of the circumstances described in clause (ii)(w), clause (ii)(x) or clause (ii)(y) of the first sentence of this Section 8.15(b), only to the extent the Eurocurrency Screen Rate for the applicable currency and such Interest Period is not available or published at such time on a current basis), (w) any Committed Rate Loans that were to have been converted on the first day of such affected Interest Period from ABR Loans to Eurocurrency Loans shall be continued as ABR Loans, (x) (1) if any Notice of Borrowing requests a Eurocurrency Loan (1) denominated in Dollars, such Loan shall be made as an ABR Loan and (2) denominated in a Foreign Currency, then such Notice of Borrowing shall be ineffective, (y) any Eurocurrency Loans that were to have been continued as such shall be converted, on the first day of such Interest Period, to ABR Loans in Dollars (or the Dollar Equivalent Amount in the case of Eurocurrency Loans denominated in a Foreign Currency) and (z) any request by the Borrower for a Eurocurrency Competitive Advance Loan shall be ineffective.
8.16     Optional Prepayments. By giving a Notice of Prepayment (which may be conditioned on a refinancing), any Specified Borrower may, at any time and from time to time, prepay Committed Rate Loans, Competitive Advance Loans, or Swing Line Loans made to such Specified Borrower, in whole or in part, without premium or penalty (except as provided in subsection 8.8 or as provided in the applicable Competitive Advance Loan Offer). Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Bank thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with any amounts payable pursuant to subsection 8.8. Partial prepayments shall be in an aggregate principal amount of $1,000,000 or a whole multiple of $500,000 in excess thereof or an aggregate principal Dollar Equivalent Amount of at least $1,000,000 for Loans denominated in a Foreign Currency.
8.17     Defaulting Banks. Notwithstanding any provision of this Agreement to the contrary, if any Bank becomes a Defaulting Bank, then the following provisions shall apply for so long as such Bank is a Defaulting Bank:
(a)     fees shall cease to accrue on the unfunded portion of the Revolving Commitment of such Defaulting Bank pursuant to subsection 8.1(a);
(b)     the Revolving Commitment and Exposure of such Defaulting Bank shall not be included in determining whether the Required Banks have taken or may take any action hereunder (including any consent to any amendment, waiver or other modification pursuant to subsection 15.1); provided, that this clause (b) shall not apply to the vote of a Defaulting Bank in the case of an amendment, waiver or other modification requiring the consent of such Bank or each Bank directly affected thereby;

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(c)     if any Swing Line Exposure or L/C Exposure exists at the time such Bank becomes a Defaulting Bank then:
(i)     all or any part of the Swing Line Exposure and L/C Exposure of such Defaulting Bank shall be reallocated among the non-Defaulting Banks in accordance with their respective Revolving Commitment Percentages but only to the extent that (x) the sum of the Exposures of all non-Defaulting Banks does not exceed the total of all non-Defaulting Banks’ Revolving Commitments and (y) the Exposure of each non-Defaulting Bank does not exceed such non-Defaulting Banks’ Revolving Commitment;
(ii)     if the reallocation described in clause (i) above cannot, or can only partially, be effected, the Company (or applicable Specified Borrower) shall within one Business Day following notice by the Administrative Agent (x) first, prepay such Swing Line Exposure and (y) second, cash collateralize for the benefit of the Issuing Banks only the Borrowers’ obligations corresponding to such Defaulting Bank’s L/C Exposure (after giving effect to any partial reallocation pursuant to clause (i) above) in accordance with the procedures set forth in Section 13 for so long as such L/C Exposure is outstanding;
(iii)     if the Company (or applicable Specified Borrower) cash collateralizes any portion of such Defaulting Bank’s L/C Exposure pursuant to clause (ii) above, no Loan Party shall be required to pay any fees pursuant to subsection 5.3(a) with respect to such Defaulting Bank’s L/C Exposure during the period such Defaulting Bank’s L/C Exposure is cash collateralized;
(iv)     if the L/C Exposure of the non-Defaulting Banks is reallocated pursuant to clause (i) above, then the fees payable to the Banks pursuant to subsection 5.3(a) shall be adjusted in accordance with such non-Defaulting Banks’ Revolving Commitment Percentages; and
(v)     if all or any portion of such Defaulting Bank’s L/C Exposure is neither reallocated nor cash collateralized pursuant to clause (i) or (ii) above, then, without prejudice to any rights or remedies of the Issuing Banks or any other Bank hereunder, all fees payable under subsection 5.3(a) with respect to such Defaulting Bank’s L/C Exposure shall be payable to the Issuing Banks in accordance with their percentages of the L/C Exposure until and to the extent that such L/C Exposure is reallocated and/or cash collateralized;
(d)     so long as such Bank is a Defaulting Bank, (i) participating interests in any newly made Swing Line Loan shall be allocated among non-Defaulting Banks in a manner consistent with subsection 8.17(c)(i) (and such Defaulting Bank shall not participate therein) and each Swing Line Bank shall continue to fund Swing Line Loans in accordance with and subject to Section 4 so long as and to the extent the related Exposure will be 100% covered by the Revolving Commitments of the non-Defaulting Banks in accordance with subsection 8.17(c)(i) and (ii) participating interests in any newly issued or increased Letter of Credit shall be allocated among non-Defaulting Banks in a manner consistent with subsection 8.17(c)(i) (and such Defaulting Bank shall not participate therein) and no Issuing Bank shall be required to issue, amend or increase any Letter of Credit, unless it is reasonably satisfied that the Defaulting Bank’s then outstanding L/C Exposure will be 100% covered by the Revolving Commitments of the non-Defaulting Banks and/or cash collateral will be

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provided by the Company (or applicable Specified Borrower) in accordance with subsection 8.17(c); and
(e)     the Company may designate a Replacement Bank to assume the Revolving Commitments and/or Swing Line Commitments, if any, and the obligations of any Bank that becomes a Defaulting Bank, and to purchase the outstanding Loans of such Defaulting Bank and such Defaulting Bank’s rights hereunder and with respect thereto, without recourse upon, or warranty by, or expense to, such Defaulting Bank (unless such Defaulting Bank agrees otherwise), for a purchase price equal to the outstanding principal amount of the Loans of such Defaulting Bank plus (i) all interest accrued and unpaid thereon and all other amounts owing to such Defaulting Bank hereunder and (ii) any amount which would be payable to such Defaulting Bank pursuant to subsection 8.8 (assuming that all Loans of such Defaulting Bank were prepaid on the date of such assumption), and upon such assumption and purchase by the Replacement Bank, such Replacement Bank, if it is not already a Bank, shall be deemed to be a “Bank” for purposes of this Agreement and such Defaulting Bank shall cease to be a “Bank” for purposes of this Agreement and shall no longer have any obligations or rights hereunder (other than any obligations or rights which according to this Agreement shall survive the termination of this Agreement).
If (i) a Bankruptcy Event or a Bail-In Action with respect to a Bank Parent shall occur following the date hereof and for so long as such event shall continue or (ii) the Issuing Bank has a good faith belief that any Bank has defaulted in fulfilling its obligations under one or more other agreements in which such Bank commits to extend credit, such Issuing Bank shall not be required to issue, amend or increase any Letter of Credit, unless such Issuing Bank, as the case may be, shall have entered into arrangements with the Loan Parties or such Bank, satisfactory to such Issuing Bank, as the case may be, to defease any risk to it in respect of such Bank hereunder.
In the event that the Administrative Agent, the Company, each Swing Line Bank and each Issuing Bank agrees that a Defaulting Bank has adequately remedied all matters that caused such Bank to be a Defaulting Bank, then the Swing Line Exposure and L/C Exposure of the Banks shall be readjusted to reflect the inclusion of such Bank’s Revolving Commitment and on such date such Bank shall purchase at par such of the Loans of the other Banks (and, only if such Bank is a Swing Line Bank, Swing Line Loans) as the Administrative Agent shall determine may be necessary in order for such Bank to hold such Loans in accordance with its Revolving Commitment Percentage and, if such Bank is a Swing Line Bank, Swing Line Commitment Percentage. Subject to subsection 15.18, no reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Bank arising from that Bank having become a Defaulting Bank, including any claim of a non-Defaulting Bank as a result of such non-Defaulting Bank’s increased exposure following such reallocation.
Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Bank (whether voluntary or mandatory, at maturity, pursuant to Section 13 or otherwise) or received by the Administrative Agent from a Defaulting Bank pursuant to subsection 15.7 shall be applied at such time or times as may be determined by the Administrative Agent as follows: first, to the payment of any amounts owing by such Defaulting Bank to the Administrative Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by such Defaulting Bank to any Issuing Bank or Swing Line Bank hereunder; third, to cash collateralize the Issuing Banks’ L/C Exposure with respect to such Defaulting Bank in accordance with subsection 5.1; fourth, as the Company may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which such Defaulting Bank has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fifth, if so determined by the Administrative Agent and the Company, to be held in a

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deposit account and released pro rata in order to (x) satisfy such Defaulting Bank’s potential future funding obligations with respect to Loans under this Agreement and (y) cash collateralize the Issuing Banks’ future Fronting Exposure (after giving effect to subsection 8.17) with respect to such Defaulting Bank with respect to future Letters of Credit issued under this Agreement, in accordance with subsection 5.1; sixth, to the payment of any amounts owing to the Banks, the Issuing Banks or Swing Line Banks as a result of any judgment of a court of competent jurisdiction obtained by any Bank, the Issuing Banks or Swing Line Banks against such Defaulting Bank as a result of such Defaulting Bank’s breach of its obligations under this Agreement; seventh, so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Bank as a result of such Defaulting Bank’s breach of its obligations under this Agreement; and eighth, to such Defaulting Bank or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Loans or L/C Exposure in respect of which such Defaulting Bank has not fully funded its appropriate share, and (y) such Loans were made or the related Letters of Credit were issued at a time when the conditions set forth in subsection 10.2 were satisfied or waived, such payment shall be applied solely to pay the Loans of, and L/C Exposure owed to, all non-Defaulting Banks on a pro rata basis prior to being applied to the payment of any Loans of, or L/C Exposure owed to, such Defaulting Bank until such time as all Loans and funded and unfunded participations in L/C Obligations and Swing Line Loans are held by the Banks pro rata in accordance with the applicable Commitments without giving effect to subsection 8.17(c). Any payments, prepayments or other amounts paid or payable to a Defaulting Bank that are applied (or held) to pay amounts owed by a Defaulting Bank or to post cash collateral pursuant to this subsection 8.17 shall be deemed paid to and redirected by such Defaulting Bank, and each Bank irrevocably consents hereto.
SECTION 9.     REPRESENTATIONS AND WARRANTIES
To induce the Syndication Agents, the Administrative Agent and the Banks to enter into this Agreement and to make the Loans and issue or participate in the Letters of Credit, the Company and each Subsidiary Borrower (insofar as the representations and warranties by such Subsidiary Borrower relate to it) hereby represents and warrants to each Syndication Agent, the Administrative Agent and each Bank that:
9.1     Financial Condition. The audited consolidated balance sheets of the Company and its consolidated Subsidiaries as at December 31, 2017 and the related consolidated statements of income and of cash flows for the fiscal year ended on such date, reported on by Ernst & Young LLP, copies of which have heretofore been furnished to each Bank or will be furnished to each Bank that has not already received such copies, present fairly the consolidated financial position of the Company and its consolidated Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the fiscal year then ended. The unaudited consolidating balance sheet of the Company and its consolidated Subsidiaries as at September 30, 2018 and the related unaudited consolidating statement of operations and retained earnings for the portion of the fiscal year ended on September 30, 2018, present fairly the consolidating financial position of the Company and its consolidated Subsidiaries as at such date, and the consolidating results of their operations for the fiscal year then ended. All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by such accountants or Responsible Officer, as the case may be, and as disclosed therein). Neither the Company nor any of its consolidated Subsidiaries had, at the date of the most recent balance sheet referred to above, any material Guarantee Obligation, contingent liability or liability for taxes, or any long-term lease or unusual forward or long-term commitment, including, without limitation, any interest rate or foreign currency swap or exchange transaction, which is not reflected in the foregoing statements or referred to in the notes thereto. During the period from September 30, 2018 to and including the Closing Date, there has been no sale, transfer or other disposition by the Company or any of

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its consolidated Subsidiaries of any material part of their consolidated business or property and no purchase or other acquisition of any business or property (including any Capital Stock of any other Person) material in relation to the consolidated financial condition of the Company and its consolidated Subsidiaries at September 30, 2018 except as disclosed in writing to the Banks prior to the Closing Date or disclosed in any of the Company’s filings with the Securities and Exchange Commission prior to the date hereof.
9.2     No Change. Since December 31, 2017 there has been no development or event which has had or could reasonably be expected to have a Material Adverse Effect.
9.3     Corporate Existence; Compliance with Law. The Company and each of its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate or other power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation or other entity and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except where the failure to be duly qualified or in good standing could not reasonably be expected to have a Material Adverse Effect, and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.
9.4     Corporate Power; Authorization; Enforceable Obligations. Each of the Company and its Subsidiaries has the corporate or other power and authority, and the legal right, to make, deliver and perform the Credit Documents to which it is a party and to borrow hereunder and has taken all necessary corporate action to authorize the borrowings on the terms and conditions of this Agreement and the execution, delivery and performance of the Credit Documents to which it is a party. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of the Credit Documents. This Agreement has been, and each other Credit Document to which the Company or any of its Subsidiaries is a party will be, duly executed and delivered on behalf of the Company or such Subsidiary, as the case may be. This Agreement constitutes, and each other Credit Document to which it is a party when executed and delivered will constitute, a legal, valid and binding obligation of the Company or any of its Subsidiaries party thereto enforceable against the Company or such Subsidiary, as the case may be, in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
9.5     No Legal Bar. The execution, delivery and performance of the Credit Documents to which the Company or any of its Subsidiaries is a party, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or Contractual Obligation of the Company or of any of its Subsidiaries (except for violations of Contractual Obligations which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect) and will not result in, or require, the creation or imposition of any Lien on any of its or their respective properties or revenues pursuant to any such Requirement of Law or Contractual Obligation, except for the Liens expressly permitted by subsection 12.3.
9.6     No Material Litigation. No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Company, threatened by or

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against the Company or any of its Subsidiaries or against any of its or their respective properties or revenues with respect to any of the Credit Documents or any of the transactions contemplated hereby or thereby.
9.7     No Default. No Default or Event of Default has occurred and is continuing.
9.8     Ownership of Property; Liens. Each of the Company and its Subsidiaries has good record and marketable title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other property, except where the failure to have such title or such leasehold interest, as the case may be, could not reasonably be expected to have a Material Adverse Effect, and none of such property is subject to any Lien except as permitted by subsection 12.3.
9.9     Intellectual Property. Each of the Company and each of its Subsidiaries owns, or is licensed to use, all domestic and foreign trademarks, tradenames, patents and patent applications, copyrights, technology, know-how and processes necessary for the conduct of its business as currently conducted (the “Intellectual Property”) except for those the failure to own or license which could not reasonably be expected to have a Material Adverse Effect. No claim has been asserted and is pending or, to the knowledge of the Company, has been threatened by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property which could reasonably be expected to have a Material Adverse Effect, nor does the Company know of any valid basis for any such claim. The use of such Intellectual Property by the Company and its Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements that, in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
9.10     Local Currency Facilities. Schedule 9.10 sets forth, as of the Closing Date, all Local Currency Facilities (including the Local Currency Borrower, Local Currency Banks, Local Currency Facility Agent, Local Currency Facility Maximum Borrowing Amount and Local Currency Bank Maximum Borrowing Amount with respect thereto).
9.11     Taxes. Each of the Company and its consolidated Subsidiaries has filed or caused to be filed all tax returns which, to the knowledge of the Company, are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any unfiled tax returns for taxes, and unpaid taxes, fees and other charges, (a) the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the Company or its consolidated Subsidiaries, as the case may be, or (b) which in each case, individually or in the aggregate, would not cause the Company and its consolidated Subsidiaries to have a liability in excess of $25,000,000 or the Dollar Equivalent Amount thereof); no notice of tax Lien has been filed, and, to the knowledge of the Company, no claim is being asserted by any taxing authority, with respect to any such tax, fee or other charge except for claims the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the Company or its consolidated Subsidiaries, as the case may be, and claims for amounts which, in the aggregate, do not exceed $25,000,000.
9.12     Federal Regulations. No part of the proceeds of any Loans will be used for “purchasing” or “carrying” any “margin stock” within the respective meanings of each of the quoted terms under Regulation U as now and from time to time hereafter in effect or for any purpose which violates the provisions of the regulations of such Board of Governors. If requested by any Bank or the Administrative

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Agent, the Company will furnish to the Administrative Agent and each Bank a statement to the foregoing effect in conformity with the requirements of FR Form U-1 referred to in said Regulation U.
9.13     ERISA. Each Plan which is intended to be qualified under Section 401(a) (or 403(a) as appropriate) of the Code and each related trust agreement, annuity contract or other funding instrument which is intended to be tax-exempt under Section 501(a) of the Code is so qualified and tax-exempt and has been so qualified and tax-exempt during the period from its adoption to date. No event has occurred in connection with which the Company or any Commonly Controlled Entity or any Plan, directly or indirectly, could reasonably be expected to be subject to any material liability under ERISA, the Code or any other law, regulation or governmental order or under any agreement, instrument, statute, rule of law or regulation pursuant to or under which the Company or a Subsidiary has agreed to indemnify or is required to indemnify any person against liability incurred under, or for a violation or failure to satisfy the requirements of, any such statute, regulation or order. No Reportable Event has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Single Employer Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. Excluding those arrangements set forth on Schedule 9.13, the present value of all accrued benefits under each Single Employer Plan maintained by the Company or any Commonly Controlled Entity or for which the Company or any Commonly Controlled Entity has or could have any liability (based on those assumptions used to fund the Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits by more than 10%. Neither the Company nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan, and neither the Company nor any Commonly Controlled Entity could reasonably be expected to become subject to any material liability under ERISA if the Company or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. No Multiemployer Plan is Insolvent, and neither the Company nor any Commonly Controlled Entity has received notice that any Multiemployer Plan is in “endangered” or “critical” condition (within the meaning of Section 432 of the Code or Section 305 of ERISA). The present value (determined using actuarial and other assumptions which are reasonable in respect of the benefits provided and the employees participating) of the unfunded liability of the Company and each Commonly Controlled Entity for benefits under all unfunded retirement or severance plans, programs, policies or other arrangements (including, without limitation, post-retirement benefits to be provided to their current and former employees under Plans which are welfare benefit plans (as defined in Section 3(1) of ERISA)), whether or not funded, does not, in the aggregate, exceed $15,000,000 (excluding those arrangements set forth on Schedule 9.13).
9.14     Investment Company Act; Other Regulations. Neither the Company nor any Subsidiary of the Company is an “investment company”, or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended. Neither the Company nor any Subsidiary of the Company is subject to regulation under any Federal or State statute or regulation which specifically limits its ability to incur Indebtedness.
9.15     Subsidiaries. The outstanding stock and securities (or other evidence of ownership) of the Subsidiaries, partnerships or joint ventures owned by the Company and its Subsidiaries are owned by the Company and its Subsidiaries free and clear of all Liens, warrants, options or rights of others of any kind whatsoever except for Liens permitted by subsection 12.3. Schedule 9.15 is a complete list of all Subsidiaries that, as of the Closing Date, are required to execute a Subsidiary Guarantee pursuant to subsection 11.9.
9.16     Accuracy and Completeness of Information. No document furnished or statement made in writing to the Banks by the Company in connection with the negotiation, preparation or execution

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of this Agreement or any of the other Credit Documents contains any untrue statement of a material fact, or omits to state any such material fact necessary in order to make the statements contained therein not misleading, in either case which has not been corrected, supplemented or remedied by subsequent documents furnished or statements made in writing to the Banks.
9.17     Purpose of Loans. The proceeds of the Loans and Letters of Credit shall be used by the Company for general corporate purposes of the Company and, to the extent permitted hereunder, its Subsidiaries, including working capital in the ordinary course of business, letters of credit, repayment, prepayment or purchase of long-term indebtedness and acquisitions, and shall not be used, and the Company shall procure that its Subsidiaries and their respective directors, officer, employees and agents shall not use, the proceeds of the Loans and Letters of Credit, (a) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (b) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, or (c) in a manner that would result in the violation of any Sanctions applicable to any party hereto.
9.18     Environmental Matters. Except as set forth on Schedule 9.18 or as could not, in the aggregate, reasonably be expected to have a Material Adverse Effect:
(a)     The facilities and properties owned or operated by the Company or any of its Subsidiaries (the “Properties”) do not contain, and to the knowledge of the Company or its Subsidiaries, have not previously contained, any Materials of Environmental Concern in amounts or concentrations which (i) constitute or constituted a violation of, or (ii) could reasonably be expected to give rise to liability under, any applicable Environmental Law.
(b)     The Properties and all operations at the Properties are in compliance with all applicable Environmental Laws, and there is no contamination at, under or to the knowledge of the Company about the Properties or violation of any Environmental Law with respect to the Properties or the business operated by the Company or any of its Subsidiaries (the “Business”) which could materially interfere with the continued operation of the Properties or the Business.
(c)     Neither the Company nor any of its Subsidiaries has received any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the Business, nor does the Company or any of its Subsidiaries have knowledge or reason to believe that any such notice will be received or is being threatened.
(d)     To the knowledge of the Company or any of its Subsidiaries, Materials of Environmental Concern have not been transported or disposed of from the Properties in violation of, or in a manner or to a location which could reasonably be expected to give rise to liability under, any Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could reasonably be expected to give rise to liability under, any applicable Environmental Law.
(e)     No judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Company or any of its Subsidiaries, threatened, under any Environmental Law to which the Company or any Subsidiary is or to the knowledge of the Company will be named as a party with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other analogous administrative or

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judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business.
(f)     There has been no release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of the Company or any Subsidiary in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could reasonably give rise to liability under any applicable Environmental Laws.
(g)     Neither the Company nor any Subsidiary has assumed any liability of any other Person under Environmental Laws.
9.19     Anti-Corruption Laws and Sanctions. The Company has implemented and maintains in effect policies and procedures designed to ensure compliance by the Company, any Person that is an Affiliate of the Company under clause (ii) of the definition of Affiliate, its Subsidiaries and their respective directors, officers, employees and, to the extent commercially reasonable, agents with Anti-Corruption Laws and applicable Sanctions. The Company, its Affiliates, its Subsidiaries and their respective directors, officers and employees and, to the knowledge of the Company, its advisors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects. None of (a) the Company, any Affiliate or any Subsidiary or, to the knowledge of the Company, any of their respective directors, officers or employees, or (b) to the knowledge of the Company, any advisor or agent of the Company, any Affiliate or any Subsidiary that will act in any capacity in connection with or benefit from the credit facility established hereby, is a Sanctioned Person. The transactions contemplated by this Agreement will not violate Anti-Corruption Laws or applicable Sanctions.
9.20     EEA Financial Institutions. No Loan Party is an EEA Financial Institution.
SECTION 10.     CONDITIONS PRECEDENT
10.1     Conditions to Closing Date. The occurrence of the Closing Date, and the agreement of each Bank to make the initial Extension of Credit requested to be made by it on or after the Closing Date, shall be subject to the satisfaction, on or prior to December 31, 2018, of the following conditions precedent:
(a)     Credit Documents. The Administrative Agent (or its counsel) shall have received (i) this Agreement, executed and delivered by a duly authorized officer of the Administrative Agent, each Bank, the Company and each Subsidiary that will be a Subsidiary Borrower party hereto on the Closing Date, (ii) a Company Guarantee executed and delivered by a duly authorized officer of the Company and (iii) a Subsidiary Guarantee, executed and delivered on behalf of each Domestic Subsidiary listed on Schedule 9.15 by a duly authorized officer of such Domestic Subsidiary.
(b)     Corporate Proceedings of each Loan Party. The Administrative Agent shall have received copies of the resolutions, in form and substance satisfactory to the Administrative Agent, of the Board of Directors (or other governing body) of each Loan Party (except any Foreign Subsidiary Borrower) authorizing (i) the execution, delivery and performance of each Credit Document to which it is a party and (ii) in the case of each Borrower (except any Foreign Subsidiary Borrower), the borrowings contemplated hereunder, certified by the Secretary, an Assistant Secretary, or the Vice President and General Counsel of such Loan Party as of the Closing Date, which certificate shall be in form and substance satisfactory to the Administrative Agent and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded.

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(c)     Fees and Expenses. The Administrative Agent shall have received or shall substantially simultaneously with the closing receive the fees and expenses to be received on or prior to the Closing Date pursuant to subsection 8.1(c).
(d)     Legal Opinions. The Administrative Agent shall have received the following executed legal opinions:
(i)     the executed legal opinion of Milbank, Tweed, Hadley & McCloy, counsel to the Company and the Subsidiary Borrowers, substantially in the form of Exhibit G-1, with such modifications therein as shall be reasonably requested or approved by the Administrative Agent; and
(ii)     the executed legal opinion of Gregory P. Tarpinian, general counsel of the Company, substantially in the form of Exhibit G-2, with such modifications therein as shall be reasonably requested or approved by the Administrative Agent.
Each such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement and the other Credit Documents as the Administrative Agent may reasonably require.
(e)     No Material Litigation. No litigation, inquiry, injunction or restraining order shall be pending, entered or threatened (including any proposed statute, rule or regulation) which in the reasonable judgment of any Bank could have a Material Adverse Effect.
(f)     Existing Credit Agreement. (i) Other than with respect to the reallocation of participations in Letters of Credit and Swing Line Loans as set forth in clause (ii) below, any principal, interest, fees or other amounts owing or accrued and unpaid under the Existing Credit Agreement to any Person which is a Bank under (and as defined in) the Existing Credit Agreement shall have been paid in full to such Person and (ii) the participations in Letters of Credit and Swing Line Loans outstanding under the Existing Credit Agreement immediately prior to the Closing Date will be reallocated so as to be held by the Banks ratably in accordance with their respective Commitments.
(g)     Additional Matters. All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the transactions contemplated by this Agreement and the other Credit Documents shall be reasonably satisfactory in form and substance to the Administrative Agent.
(h)     KYC Information. Each Bank shall have received all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act, in each case at least five days prior to the Closing Date.
(i)     Beneficial Ownership Certification. To the extent the Borrower qualifies as a “legal entity customer” under the Beneficial Ownership Regulation, at least five days prior to the Closing Date, any Bank that has requested, in a written notice to the Borrower at least 10 days prior to the Closing Date, a Beneficial Ownership Certification in relation to the Borrower, shall have received such Beneficial Ownership Certification (provided that, upon the execution and delivery by such Bank of its signature page to this Agreement, the condition set forth in this clause (i) shall be deemed to be satisfied).

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10.2     Conditions to Each Extension of Credit. The agreement of each Bank to make any Extension of Credit requested to be made by it on any date (including, without limitation, its initial Extension of Credit, but excluding any Committed Rate Loan made pursuant to a Notice of Swing Line Refunding, pursuant to subsections 5.5(c) or 6.3 or pursuant to subsection 8.12(c) if the Dollar Equivalent Amount thereof is not increased) is subject to the applicable Borrower’s delivery of a Notice of Borrowing or Notice of Swing Line Borrowing, as applicable, in accordance with the terms hereof and the satisfaction of the following conditions precedent:
(a)     Representations and Warranties. Each of the representations and warranties made by the Company and its Subsidiaries in or pursuant to the Credit Documents (other than subsections 9.2 and 9.6) shall be true and correct in all material respects on and as of such date as if made on and as of such date except for representations and warranties expressly stated to relate to a specific earlier date, in which case such representations and warranties are true and correct as of such earlier date.
(b)     No Default. No Default or Event of Default shall have occurred and be continuing on such date after giving effect to the Extension of Credit requested to be made on such date.
(c)     Hong Kong Dollar Borrowing. In the case of the first requested borrowing in Hong Kong Dollars subsequent to the Closing Date, the Administrative Agent shall have received such additional information as reasonably requested by the Administrative Agent to comply with applicable “know your customer” and regulatory requirements in connection with the making of Loans in Hong Kong Dollars.
(d)     Borrowing Certificate. In the case of the first requested borrowing subsequent to the Closing Date, the Administrative Agent shall have received a certificate of the Company, dated as of such date, substantially in the form of Exhibit E, with appropriate insertions and attachments, satisfactory in form and substance to the Administrative Agent, executed by any Responsible Officer of the Company.
(e)     Foreign Subsidiary Borrowers. In the case of the first requested borrowing by each Foreign Subsidiary Borrower, the Company shall deliver and, in the case of any Foreign Subsidiary Borrower organized under the laws of Hong Kong, the Banks shall deliver (solely with respect to clause (iii) below) to the Administrative Agent (i) on or prior to such date a copy of the resolutions (or other comparable document under applicable law), in form and substance satisfactory to the Administrative Agent, of the Board of Directors (or other governing body) of such Foreign Subsidiary Borrower authorizing (1) the execution, delivery and performance of each Credit Document to which it will be party and (2) the borrowings contemplated hereunder, certified by the Secretary or an Assistant Secretary or other authorized officer of such Foreign Subsidiary Borrower as of the Borrowing Date, which certificate shall be in form and substance satisfactory to the Administrative Agent and shall state that the resolutions (or other comparable document under applicable law) thereby certified have not been amended, modified, revoked or rescinded (ii) in the case of any Foreign Subsidiary Borrower organized under the laws of Hong Kong, a Foreign Subsidiary Opinion with respect to such Foreign Subsidiary Borrower, (iii) five Business Days prior to such date all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including any additional information requested by the Banks in connection with subsection 15.17 and (iv) five Business Days prior to such date, to the extent such Foreign Subsidiary Borrower qualifies as a

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“legal entity customer” under the Beneficial Ownership Regulation, a Beneficial Ownership Certification in relation to such Foreign Subsidiary Borrower.
Each request for an Extension of Credit by any Borrower shall constitute a representation and warranty by the Company and such Borrower that as of the date of such Extension of Credit the conditions contained in this subsection 10.2 have been satisfied.
SECTION 11.     AFFIRMATIVE COVENANTS
The Company hereby agrees that, so long as the Commitments remain in effect, any Letter of Credit remains outstanding and unpaid or any Loan or any other amount is owing to any Bank, any Syndication Agent or the Administrative Agent hereunder or under any Local Currency Facility, the Company shall and (except in the case of delivery of financial information, reports and notices) shall cause each of its Subsidiaries to:
11.1     Financial Statements. Furnish to the Administrative Agent:
(a)     as soon as available, but in any event within the earlier of (i) 120 days after the end of each fiscal year of the Company or (ii) 30 days after the date on which such financial statements are required to be filed with the Securities and Exchange Commission under the Securities Act of 1933, a copy of the audited consolidated balance sheet of the Company and its consolidated Subsidiaries as at the end of such year and the related consolidated statements of operations and shareholders’ equity and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a “going concern” or like qualification or exception, or qualification arising out of the scope of the audit, by Ernst & Young or other independent certified public accountants of nationally recognized standing reasonably acceptable to the Required Banks; provided that the Company may in lieu of furnishing such financial statements furnish to the Administrative Agent its Form 10-K filed with the Securities and Exchange Commission or any successor or analogous Governmental Authority for such year;
(b)     as soon as available, but in any event within the earlier of (i) 60 days after the end of each of the first three quarterly periods of each fiscal year of the Company or (ii) 15 days after the date on which such financial statements are required to be filed with the Securities and Exchange Commission under the Securities Act of 1933, the unaudited consolidated balance sheet of the Company and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of operations and shareholders’ equity and of cash flows of the Company and its consolidated Subsidiaries for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for such quarter of the previous year, certified by a Responsible Officer as fairly presenting in all material respects when considered in relation to the consolidated financial statements of the Company and its consolidated Subsidiaries (subject to normal year-end audit adjustments); provided that the Company may in lieu of furnishing such unaudited consolidated balance sheet furnish to the Administrative Agent its Form 10-Q filed with the Securities and Exchange Commission or any successor or analogous Governmental Authority for the relevant quarterly period; and
The financial statements to be furnished pursuant to this subsection 11.1 shall fairly present the consolidated (or consolidating) financial position and results of operations of the Company and its consolidated Subsidiaries in accordance with GAAP (subject, in the case of subsection 11.1(b), to normal year-end audit adjustments and the absence of complete footnotes) applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or Responsible Officer, as the case

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may be, and disclosed therein). Any information available on the website of the Company at www.arrow.com or filed with the Securities and Exchange Commission under the Securities Act of 1933 and available on www.sec.gov shall be deemed to have been furnished to the Administrative Agent upon the giving of notice by the Company to the Administrative Agent that such information has been made available on any of such websites.
11.2     Certificates; Other Information. Furnish to the Administrative Agent (or in the case of paragraph (h) below, the applicable Bank):
(a)     concurrently with the delivery of the financial statements referred to in subsection 11.1(a), a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate;
(b)     concurrently with the delivery of the financial statements referred to in subsection 11.1(a), a certificate of a Responsible Officer substantially in the form of Exhibit H;
(c)     concurrently with the delivery of the financial statements referred to in subsection 11.1(a) and (b), a certificate of a Responsible Officer (i) stating that, to the best of such Responsible Officer’s knowledge, the Company has observed and performed all of its covenants and other agreements contained in this Agreement and the other Credit Documents to which it is a party to be observed or performed by it, (ii) that such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified therein and (iii) setting forth calculations supporting compliance with subsections 12.1(a) and (b);
(d)     as soon as delivered, a copy of the letter, addressed to the Company, of the certified public accountants who prepared the financial statements referred to in subsection 11.1(a) for such fiscal year and otherwise referred to as a “management letter”;
(e)     within five days after the same are sent, copies of all financial statements and reports which the Company sends to its stockholders generally, and within five days after the same are filed, copies of all financial statements and reports which the Company or any of its Subsidiaries may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority;
(f)     concurrently with the delivery of the financial statements referred to in subsections 11.1(a) and 11.1(b), a certificate of a Responsible Officer (i) setting forth the name of each Foreign Subsidiary Borrower and each outstanding Swing Line Loan, Competitive Advance Loan, Local Currency Loan made and Letter of Credit issued to the Foreign Subsidiary Borrowers as of the date of such financial statements and (ii) certifying that (x) the Borrower is in compliance with subsection 11.9 and setting forth calculations in reasonable detail supporting compliance with such subsection and (y) each Foreign Subsidiary Opinion required to be delivered pursuant to Section 11.10 or the definition of Foreign Subsidiary Borrower has been so delivered;
(g)     promptly following request by the Administrative Agent thereof, (i) copies of any documents described in Sections 101(k) or 101(l) of ERISA that the Company or any Commonly Controlled Entity may request with respect to any Multiemployer Plan or (ii) any plan funding notices described in Section 101(f) of ERISA with respect to any Single Employer Plan or any Multiemployer Plan provided to or received by the Company or any Commonly Controlled Entity; provided, that if the Company or any Commonly Controlled Entity has not requested such

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documents or notices from the administrator or sponsor of the applicable Multiemployer Plan, then, upon reasonable request of the Administrative Agent, the Company and/or the Commonly Controlled Entities shall promptly make a request for such documents or notices from such administrator or sponsor and the Company shall provide copies of such documents and notices to the Administrative Agent promptly after receipt thereof; and
(h)     promptly, such additional documents, instruments, legal opinions or financial and other information as the Administrative Agent or any Bank may from time to time reasonably request, including, for the avoidance of doubt, for purposes of compliance with applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act and the Beneficial Ownership Regulation.
Any information available on the website of the Company at www.arrow.com or filed with the Securities and Exchange Commission under the Securities Act of 1933 and available on www.sec.gov shall be deemed to have been furnished to the Administrative Agent (or Bank, if applicable) upon the giving of notice by the Company to the Administrative Agent (or Bank, if applicable) that such information has been made available on any of such websites.
11.3     Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its obligations of whatever nature, including, without limitation, all obligations in respect of taxes, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Company or its Subsidiaries, as the case may be, or where the failure to pay, discharge or otherwise satisfy could not reasonably be expected to have a Material Adverse Effect.
11.4     Conduct of Business and Maintenance of Existence. (a) Continue to engage in business of the same general type as now conducted by it and preserve, renew and keep in full force and effect its corporate existence in their respective jurisdictions of incorporation or organization and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business except as otherwise permitted pursuant to subsection 12.4; comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect; and (b) maintain in effect and enforce policies and procedures designed to ensure compliance by the Company, any Person that is an Affiliate of the Company under clause (ii) of the definition of Affiliate, its Subsidiaries and their respective directors, officers, employees and, to the extent commercially reasonable, agents with Anti-Corruption Laws and applicable Sanctions.
11.5     Maintenance of Property; Insurance. Keep all property useful and necessary in its business in good working order and condition, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect; maintain with financially sound and reputable insurance companies insurance on all its property in at least such amounts and against at least such risks (but including in any event public liability, product liability and business interruption) as are usually insured against in the same general area by companies engaged in the same or a similar business; and furnish to the Administrative Agent, upon written request, full information as to the insurance carried.
11.6     Inspection of Property; Books and Records; Discussions. Keep proper books of records and account in which the entries are, in all material respects, full, true and correct in conformity with sound business practice and all Requirements of Law of all dealings and transactions in relation to its business

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and activities; and, upon reasonable notice under the circumstances, permit representatives of the Administrative Agent to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Company and its Subsidiaries with officers and employees of the Company and its Subsidiaries and with its independent certified public accountants.
11.7     Notices. Promptly, after the Company becomes aware thereof, give notice to the Administrative Agent of:
(a)     the occurrence of any Default or Event of Default;
(b)     any (i) default or event of default under any Contractual Obligation of the Company or any of its Subsidiaries or (ii) litigation, investigation or proceeding which may exist at any time between the Company or any of its Subsidiaries and any Governmental Authority, which in either case of clauses (i) or (ii), if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect or cause a Default or an Event of Default;
(c)     any litigation or proceeding affecting the Company or any of its Subsidiaries (i) in which the amount involved is $25,000,000 or more and not covered by insurance or (ii) in which injunctive or similar relief is sought which could reasonably be expected to have a Material Adverse Effect;
(d)     the following events: (i) the occurrence or expected occurrence of any Reportable Event with respect to any Single Employer Plan, a failure to make any required contribution to a Plan that could reasonably be expected to have a Material Adverse Effect, the creation of any Lien in favor of the PBGC or a Plan, the termination (other than a standard termination under Section 4041(b) of ERISA) of or withdrawal from any Single Employer Plan or Multiemployer Plan, or the Insolvency of any Multiemployer Plan, or (ii) the institution of proceedings or the taking of any other action by the PBGC or the Company or any Commonly Controlled Entity or any Single Employer Plan or Multiemployer Plan with respect to the withdrawal from or the termination (other than a standard termination under Section 4041(b) of ERISA) of any Single Employer Plan or Multiemployer Plan, or the Insolvency of any Multiemployer Plan;
(e)     any change, development or event involving a prospective change, which has had or could reasonably be expected to have a Material Adverse Effect; and
(f)     any change in the information provided in the Beneficial Ownership Certification delivered to the Administrative Agent that would result in a change to the list of beneficial owners identified in such certification.
Each notice pursuant to this subsection shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Company proposes to take with respect thereto.
11.8     Environmental Laws.
(a)     Comply with, and take all reasonable efforts to ensure compliance by all tenants and subtenants, if any, in all material respects with, all applicable Environmental Laws and obtain and comply in all material respects with and maintain, and undertake all reasonable efforts

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to ensure that all tenants and subtenants obtain and comply in all material respects with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws.
(b)     Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws except to the extent that the same are being contested in good faith by appropriate proceedings and the pendency of such proceedings could not reasonably be expected to have a Material Adverse Effect.
11.9     Additional Subsidiary Guarantees. In the event that the total assets of any Domestic Subsidiary which is not a Guarantor and that owns any assets or generates any revenues (excluding any Domestic Subsidiary the sole activities of which consist of entering into one or more Permitted Receivables Securitizations) exceed 5% of Total Assets as of the end of any fiscal quarter, take all actions necessary to cause such Domestic Subsidiary to execute and deliver a Subsidiary Guarantee, within 30 days of the occurrence of such event.
11.10     Foreign Subsidiary Borrowers. Within 45 days after the Closing Date, the Company shall deliver to the Administrative Agent (i) an executed Foreign Subsidiary Opinion of counsel to each Foreign Subsidiary Borrower (other than any Foreign Subsidiary Borrower with respect to which a Foreign Subsidiary Opinion was previously delivered) that is a party to this Agreement on the Closing Date if the aggregate Exposure of such Foreign Subsidiary Borrower owing to all Banks as of the Closing Date exceeds $20,000,000 and (ii) a copy of all documentation with respect to all Local Currency Facilities.
SECTION 12.     NEGATIVE COVENANTS
The Company hereby agrees that, so long as the Commitments remain in effect, any Letter of Credit remains outstanding and unpaid or any other amount is owing to any Bank, any Syndication Agent or the Administrative Agent hereunder, any other Credit Document or under any Local Currency Facility:
12.1     Financial Condition Covenants. The Company shall not:
(a)     Consolidated Leverage Ratio. Permit the Consolidated Leverage Ratio on the last day of any fiscal quarter ending after the Closing Date to exceed a ratio of 4.00 to 1.00.
(b)     Consolidated Interest Coverage Ratio. Permit the Consolidated Interest Coverage Ratio for any period of four consecutive fiscal quarters of the Company ending with any fiscal quarter ending after the Closing Date to be less than a ratio of 3.00 to 1.00.
12.2     Limitation on Indebtedness of Subsidiaries. The Company shall not permit any of its Subsidiaries to, and the Subsidiaries shall not, directly or indirectly, create, incur, assume or suffer to exist any Indebtedness, except (a) any Indebtedness of Subsidiaries pursuant to any of the Credit Documents, (b) any Indebtedness of any Domestic Subsidiary otherwise permitted hereunder so long as such Domestic Subsidiary shall have executed and delivered to the Administrative Agent a Subsidiary Guarantee and such Subsidiary Guarantee shall be in full force and effect, (c) cash pooling arrangements in connection with cash management systems entered into by the Company or any Subsidiaries in the ordinary course of business; provided that such arrangements do not have a negative balance, (d) Indebtedness in respect of drafts on Italian banks with regard to working capital needs in the ordinary course of business, (e) Indebtedness of any Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets,

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including Capital Lease Obligations, and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof (provided that such Indebtedness is incurred prior to or within 180 days after such acquisition or the completion of such construction or improvement; and provided, further, that the principal amount of any such Indebtedness incurred by any Domestic Subsidiary shall not exceed $50,000,000 in the aggregate), (f) Indebtedness of any Foreign Subsidiary owing to the Company or any other Subsidiary, (g) Indebtedness outstanding on the date hereof and specified on Schedule 12.2 and any refinancings, refundings, renewals or extensions thereof (without increasing the principal amount thereof, or shortening the maturity of the principal amount thereof), (h) Indebtedness consisting of liabilities of any Subsidiary in respect of a Permitted Receivables Securitization in an aggregate amount up to $2,500,000,000, (i) any other Indebtedness of Foreign Subsidiaries in an aggregate amount not to exceed $400,000,000 in addition to Indebtedness of Foreign Subsidiaries outstanding on the Closing Date and specified on Schedule 12.2, (j) Indebtedness arising from agreements providing for indemnification, adjustment of purchase price or similar obligations (including Indebtedness consisting of the deferred purchase price of acquired property), or from guaranties or letters of credit, surety bonds or performance bonds securing the performance of the Company or any of its Subsidiaries pursuant to such agreements, in connection with acquisitions or permitted dispositions of any business, assets or Subsidiary of the Company or any of its Subsidiaries, (k) Indebtedness of a Person or Indebtedness attaching to assets of a Person that in either case becomes a Subsidiary or Indebtedness attaching to assets that in either case are acquired by the Company or any of its Subsidiaries, provided that such Indebtedness existed at the time such Person became a Subsidiary or at the time such assets were acquired and, in each case, was not created in contemplation or in connection thereof, and any extension, renewal an replacement of any such Indebtedness that do not increase the outstanding principal amount thereof, (l) Indebtedness of any Domestic Subsidiary owing to the Company or any other Domestic Subsidiary and (m) any other Indebtedness in an aggregate principal amount outstanding not to exceed $200,000,000.
12.3     Limitation on Liens. The Company shall not, and shall not permit any of its Domestic Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for:
(a)     Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Company or its Domestic Subsidiaries, as the case may be, in conformity with GAAP;
(b)     carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business securing obligations which are not overdue for a period of more than 60 days or which are being contested in good faith by appropriate proceedings;
(c)     pledges or deposits in connection with workers’ compensation, unemployment insurance and other social security legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements;
(d)     Liens in connection with the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;
(e)     easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and which do not in any case materially detract from the value of the property subject thereto or

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materially interfere with the ordinary conduct of the business of the Company or such Domestic Subsidiary;
(f)     Liens created in connection with Indebtedness incurred pursuant to subsection 12.2(h);
(g)     Liens securing Indebtedness permitted by subsection 12.2(k) and any Lien existing on any property or asset prior to the acquisition thereof by the Company or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary after the date hereof prior to the time such Person becomes a Subsidiary; provided that, in each case, (i) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other property or assets of the Company or any Subsidiary and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be, and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof;
(h)     Liens on fixed or capital assets acquired, constructed or improved by the Company or any Subsidiary, including with respect to Capital Lease Obligations; provided that (i) such security interests and the Indebtedness secured thereby are incurred prior to or within 180 days after such acquisition or the completion of such construction or improvement, (ii) the Indebtedness secured thereby does not exceed the cost of acquiring, constructing or improving such fixed or capital assets and (iii) such security interests shall not apply to any other property or assets of the Company or any Subsidiary;
(i)     any Lien on a bank account of the Company or any Subsidiary arising in connection with the cash pooling arrangements referred to in subsection 12.2(c);
(j)     Liens arising out of any judgment or award (i) with respect to which an appeal or proceeding for review is being prosecuted in good faith by appropriate proceedings diligently conducted, and with respect to which a stay of execution is in effect; and (ii) that does not constitute an Event of Default under clause (i) of Section 13; and
(k)     Liens (not otherwise permitted hereunder) which secure obligations not exceeding (as to the Company and all Domestic Subsidiaries) a Dollar Equivalent Amount equal to $100,000,000 at any time outstanding.
12.4     Limitation on Fundamental Changes. The Company shall not, and shall not permit any of its Domestic Subsidiaries to, directly or indirectly, enter into any merger, consolidation or amalgamation, consummate a division, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets, except:
(i)     any Domestic Subsidiary may be merged or consolidated (a) with or into the Company (provided that the Company shall be the continuing or surviving corporation), (b) with or into any wholly owned Domestic Subsidiary or (c) with or into any other Person if the Company would be permitted to sell the Capital Stock of such Subsidiary directly to such Person under this subsection 12.4; and

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(ii)     any Domestic Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation, dissolution, division or otherwise) or the Capital Stock of any other Domestic Subsidiary (a) to the Company, (b) to any wholly owned Domestic Subsidiary or (c) to any other Person if the Company would be permitted to sell such assets directly to such Person under this subsection 12.4;
for the avoidance of doubt, the Company shall be permitted to convey, sell, lease, assign or otherwise dispose of the Capital Stock of any Subsidiary if, at the time of such transaction and after giving effect thereto and to the use of proceeds thereof, such Capital Stock would not constitute all or substantially all of the Company’s property, business or assets.

12.5     [Reserved].
12.6     Limitations on Acquisitions. The Company shall not, and shall not permit any of its Subsidiaries to, purchase any assets constituting a business unit of, or the Capital Stock of, any Person, or make any investment in or loan or advance to any joint venture except for (a) investments in Existing Joint Ventures on the Closing Date and investments in an aggregate amount not to exceed $50,000,000 in such Existing Joint Ventures in excess of investments in existence on the Closing Date, and (b) Permitted Joint Ventures and Permitted Acquisitions; provided that immediately prior to and after giving effect to such investment in a Permitted Joint Venture or Permitted Acquisition:
(i)     no Default or Event of Default shall have occurred and be continuing; and
(ii)     such Permitted Joint Ventures and Permitted Acquisitions are funded (x) with common stock of the Company; or (y) cash or other consideration, so long as, at the time of and after giving pro forma effect to such Permitted Joint Venture or Permitted Acquisition funded with consideration other than common stock of the Company, either (A) the Consolidated Leverage Ratio is less than or equal to 4.00 to 1.00 or (B) the Company has Liquidity of at least $450,000,000; provided that the criteria set forth under this clause (b)(ii) shall not be a condition to investments in Permitted Joint Ventures or Permitted Acquisitions for aggregate consideration not exceeding $100,000,000 in each fiscal year of the Company.
12.7     Limitation on Restrictions on Subsidiary Distributions. The Company shall not, and shall not permit any of its Subsidiaries to, enter into or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Subsidiary to (a) make Restricted Payments in respect of any Capital Stock of such Subsidiary held by, or pay any Indebtedness owed to, the Company or any other Subsidiary, (b) make investments in the Company or any other Subsidiary or (c) transfer any of its assets to the Company or any other Subsidiary, except for such encumbrances or restrictions existing under or by reason of (i) any restrictions existing under the Credit Documents, (ii) any restrictions with respect to a Subsidiary imposed pursuant to an agreement that has been entered into in connection with the Disposition of all or substantially all of the Capital Stock or assets of such Subsidiary, (iii) conditions imposed by law, regulation, court order, rule or decree, (iv) restrictions relating to any special purpose entity under any Permitted Receivables Securitization, (v) any restriction imposed on any Subsidiary that is in effect at the time such Person becomes a Subsidiary (provided that such restriction was not entered into in contemplation of such Person becoming a Subsidiary) and (vi) any restriction in any agreement evidencing Indebtedness of any Foreign Subsidiary permitted by subsection 12.2.

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SECTION 13.     EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a)     (i) Any Specified Borrower shall fail to pay any principal of any Loan or any Reimbursement Obligation owing by it when due (whether at the stated maturity, by acceleration or otherwise) in accordance with the terms hereof; or (ii) any Local Currency Borrower shall fail to pay any principal of on any Local Currency Loan when due in accordance with the applicable terms of the relevant Local Currency Facility; or (iii) any Specified Borrower or Local Currency Borrower shall fail to pay any interest on any Loan or Local Currency Loan or any fee or any other amount payable hereunder or under any Local Currency Facility, within five days after any such interest or other amount becomes due in accordance with the terms thereof or hereof; or
(b)     Any representation or warranty made or deemed made by the Company or any Subsidiary herein or in any other Credit Document or which is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Credit Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or
(c)     The Company or any Subsidiary shall default in the observance or performance of any agreement contained in Section 12 and, with respect to subsections 12.2 and 12.3, such default shall continue unremedied for a period of 20 days; or
(d)     The Company or any Subsidiary shall default in the observance or performance of any other agreement contained in this Agreement or any other Credit Document (other than as provided in paragraphs (a) through (c) of this subsection), and such default shall continue unremedied for a period of 30 days after the Company has knowledge thereof; or
(e)     Any of the Credit Documents shall cease, for any reason, to be in full force and effect, or the Company shall so assert in writing (except for the termination of any Local Currency Facility if all Local Currency Loans and other amounts owing thereunder are paid in full); or
(f)     The Company or any of its consolidated Subsidiaries shall (i) default in any payment of principal of or interest of any Indebtedness (other than the Loans and Reimbursement Obligations) or in the payment of any Guarantee Obligation or in connection with any Permitted Receivables Securitization, in each case with an outstanding principal amount in excess of a Dollar Equivalent Amount equal to $100,000,000 when due beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness or Guarantee Obligation was created; or (ii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness, Guarantee Obligation or Permitted Receivables Securitization or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or such Guarantee Obligation to become payable; or
(g)     (i) Any Specified Borrower, or any Subsidiary that, directly or indirectly, accounts for more than 5% of Total Assets, at any date shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating

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to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it as bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Company or any such Subsidiary shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against any Specified Borrower or any Subsidiary that directly or indirectly accounts for more than 5% of Total Assets any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against any Specified Borrower or any Subsidiary that directly or indirectly accounts for more than 5% of Total Assets any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or
(h)     (i) Any Person shall engage in any non-exempt “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan; (ii) any failure to meet applicable minimum funding standards (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Company or any Commonly Controlled Entity; (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Banks, likely to result in the termination of such Plan for purposes of Title IV of ERISA; (iv) any Single Employer Plan or Multiemployer Plan shall terminate for purposes of Title IV of ERISA, (v) the Company or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Banks is likely to, incur any liability in connection with the termination of or withdrawal from a Single Employer Plan or Multiemployer Plan or the Insolvency of a Multiemployer Plan; or (vi) any other event or condition shall occur or exist with respect to a Single Employer Plan or Multiemployer Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to subject the Company to any tax, penalty or other liabilities in the aggregate material in relation to the business, operations, property or financial or other condition of the Company; or
(i)     One or more judgments or decrees (other than those related to the litigation listed on Schedule 13(i) shall be entered against the Company or any of its Subsidiaries involving in the aggregate a liability (not paid or fully covered by insurance) of a Dollar Equivalent Amount equal to $100,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; or
(j)     The Company Guarantee or any Subsidiary Guarantee shall cease, for any reason, to be in full force and effect (other than, in the case of any Subsidiary Guarantee, in accordance with the terms thereof) or any Guarantor party thereto shall so assert; or
(k)     A Change in Control shall occur;

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then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (g) above with respect to any Specified Borrower or Guarantor, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) shall become immediately due and payable and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Required Banks, the Administrative Agent may, or upon the request of the Required Banks, the Administrative Agent shall, by notice to the Company declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Required Banks, the Administrative Agent may, or upon the request of the Required Banks, the Administrative Agent shall, by notice to the Company, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) to be due and payable forthwith, whereupon the same shall immediately become due and payable. With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to the preceding sentence, the applicable Borrower shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the aggregate then undrawn and unexpired amount of Letters of Credit issued for its account. Each Borrower hereby grants to the Administrative Agent, for the benefit of the Issuing Banks and the L/C Participants, a security interest in such cash collateral to secure all obligations of such Borrower under this Agreement and the other Credit Documents. Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other obligations of the applicable Borrower hereunder. After all such Letters of Credit shall have expired or been fully drawn upon, all Reimbursement Obligations shall have been satisfied and all other obligations of the applicable Borrower hereunder shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the applicable Borrower. The Borrowers shall execute and deliver to the Administrative Agent, for the account of the Issuing Banks and the L/C Participants, such further documents and instruments as the Administrative Agent may request to evidence the creation and perfection of the within security interest in such cash collateral account.
Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived.
SECTION 14.     THE ADMINISTRATIVE AGENT; THE SYNDICATION AGENTS;
THE ARRANGERS
14.1     Appointment. Each Bank hereby irrevocably designates and appoints JPMorgan Chase Bank, N.A., as the Administrative Agent of such Bank under this Agreement and the other Credit Documents, and each such Bank irrevocably authorizes JPMorgan Chase Bank, N.A., as the Administrative Agent for such Bank, to take such action on its behalf under the provisions of this Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Credit Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Credit Document or otherwise exist against the Administrative Agent.

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14.2     Delegation of Duties. The Administrative Agent may execute any of their respective duties under this Agreement and the other Credit Documents by or through Affiliates, branches, agents, sub-agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care.
14.3     Exculpatory Provisions. Neither the Administrative Agent nor any of its respective officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Credit Document (except for its or such Person’s own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Banks for any recitals, statements, representations or warranties made by the Company or any officer thereof contained in this Agreement or any other Credit Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Credit Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Credit Document or for any failure of the Company to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement (other than conditions precedent set forth in subsection 10.1) or any other Credit Document, or to inspect the properties, books or records of the Company.
14.4     Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex, email or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Company), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Credit Document unless it shall first receive such advice or concurrence of the Required Banks or all of the Banks, as may be required hereunder, as it deems appropriate or it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected from liability to the Banks in acting, or in refraining from acting, under this Agreement and the other Credit Documents in accordance with a request of the Required Banks or all of the Banks, as may be required hereunder, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Banks and their respective successors and assigns.
14.5     Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received notice from a Bank or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”. In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Banks. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Banks or all of the Banks, as may be required hereunder; provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Banks.

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14.6     Non-Reliance on Administrative Agent and Other Banks. Each Bank expressly acknowledges that neither the Administrative Agent nor any of its respective officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of the Company, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Bank. Each Bank represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Company and made its own decision to make its Loans hereunder and enter into this Agreement and the other Credit Documents to which it is or will be a party. Each Bank also represents that it will, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Credit Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Company and its Subsidiaries. Except for notices, reports and other documents expressly required to be furnished to the Banks by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Company and its Subsidiaries which may come into the possession of the Administrative Agent and any Issuing Bank or any of their respective officers, directors, employees, agents, attorneys-in-fact or Affiliates.
14.7     Indemnification. The Banks agree to indemnify the Administrative Agent, each Swing Line Bank and each Issuing Bank in their respective capacities as such (to the extent not reimbursed by the Company and without limiting the obligation of the Company to do so), ratably according to their respective Revolving Commitment Percentages in effect on the date on which indemnification is sought under this subsection (or, if indemnification is sought after the date upon which the Revolving Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with their Revolving Commitment Percentages immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against the Administrative Agent, any Swing Line Bank or any Issuing Bank in any way relating to or arising out of this Agreement, any of the other Credit Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent, any Swing Line Bank or any Issuing Bank under or in connection with any of the foregoing; provided that no Bank shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Administrative Agent’s, such Swing Line Bank’s or such Issuing Bank’s, as the case may be, gross negligence or willful misconduct. The agreements in this subsection shall survive the payment of the Loans, the Reimbursement Obligations and all other amounts payable hereunder.
14.8     Administrative Agent in Its Individual Capacity. The Administrative Agent and its respective Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Company and any of its Subsidiaries as though the Administrative Agent were not the Administrative Agent hereunder and under the other Credit Documents. With respect to its Loans made or renewed by it and with respect to any Letter of Credit issued or participated in by it, the Administrative Agent shall have the same rights and powers under this Agreement and the other Credit Documents as any Bank and may exercise the same as though it were not the Administrative Agent, and the terms “Bank” and “Banks” shall include the Administrative Agent in its respective individual capacities.

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14.9     Successor Administrative Agent. The Administrative Agent may resign as Administrative Agent upon 10 days’ notice to the Banks; provided that any such resignation shall not be effective until a successor agent has been appointed and approved in accordance with this subsection 14.9, and such successor agent has accepted its appointment. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Credit Documents, then the Required Banks shall appoint from among the Banks a successor administrative agent(s) for the Banks, which successor agent shall be approved by the Company (which approval shall not be unreasonably withheld or delayed or be required during the existence of an Event of Default), whereupon such successor administrative agent shall succeed to the rights, powers and duties of the Administrative Agent and the term “Administrative Agent” shall mean such successor agent effective upon such appointment and approval, and the former Administrative Agent’s rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement. After any retiring Administrative Agent’s resignation as Administrative Agent, the provisions of this subsection shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Credit Documents. If no successor(s) shall have been so appointed by the Required Banks and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Banks and the Issuing Banks, appoint a successor Administrative Agent, which shall be a bank with an office in New York, New York, or an Affiliate of any such bank.
14.10     The Arrangers and Syndication Agents. Each Bank acknowledges that none of the Arrangers and the Syndication Agents, in such respective capacity, shall have any duties or responsibilities, or shall incur any liabilities, under this Agreement or the other Credit Documents. None of the Arrangers and the Syndication Agents, in such respective capacity, shall have or deemed to have any fiduciary relationship with any Bank.
14.11     Certain ERISA Matters. (a) Each Bank (x) represents and warrants, as of the date such Person became a Bank party hereto, to, and (y) covenants, from the date such Person became a Bank party hereto to the date such Person ceases being a Bank party hereto, for the benefit of the Administrative Agent, each Arranger and each of their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower or any other Loan Party, that at least one of the following is and will be true:
(i)     such Bank is not using “plan assets” (within the meaning of the Plan Asset Regulations) of one or more Benefit Plans in connection with the Loans, the Letters of Credit or the Commitments,
(ii)     the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption for certain transactions determined by independent qualified professional asset managers), PTE 95-60 (a class exemption for certain transactions involving insurance company general accounts), PTE 90-1 (a class exemption for certain transactions involving insurance company pooled separate accounts), PTE 91-38 (a class exemption for certain transactions involving bank collective investment funds) or PTE 96-23 (a class exemption for certain transactions determined by in-house asset managers), is applicable, and all of the conditions with respect to such exemption are and will continue to be satisfied, with respect to such Bank’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement,
(iii)      (A) such Bank is an investment fund managed by a “Qualified Professional Asset Manager” (within the meaning of Part VI of PTE 84-14), (B) such

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Qualified Professional Asset Manager made the investment decision on behalf of such Bank to enter into, participate in, administer and perform the Loans, the Letters of Credit, the Commitments and this Agreement, (C) the entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84-14 and (D) to the best knowledge of such Bank, the requirements of subsection (a) of Part I of PTE 84-14 are, and will continue to be, satisfied with respect to such Bank’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement, or
(iv)     such other representation, warranty and covenant as may be agreed in writing between the Administrative Agent, in its sole discretion, and such Bank.
(b)     In addition, unless sub-clause (i) in the immediately preceding clause (a) is true with respect to a Bank or such Bank has not provided another representation, warranty and covenant as provided in sub-clause (iv) in the immediately preceding clause (a), such Bank further (x) represents and warrants, as of the date such Person became a Bank party hereto, to, and (y) covenants, from the date such Person became a Bank party hereto to the date such Person ceases being a Bank party hereto, for the benefit of, the Administrative Agent, each Arranger and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower or any other Loan Party, that none of the Administrative Agent, any Arranger, any Syndication Agent or any of their respective Affiliates is a fiduciary with respect to the assets of such Bank (including in connection with the reservation or exercise of any rights by the Administrative Agent under this Agreement, any Credit Document or any documents related to hereto or thereto).
(c)     The Administrative Agent, each Arranger and each Syndication Agent hereby informs the Banks that each such Person is not undertaking to provide investment advice or to give advice in a fiduciary capacity, in connection with the transactions contemplated hereby, and that such Person has a financial interest in the transactions contemplated hereby in that such Person or an Affiliate thereof (i) may receive interest or other payments with respect to the Loans, the Letters of Credit, the Commitments, this Agreement and any other Credit Documents (ii) may recognize a gain if it extended the Loans, the Letters of Credit or the Commitments for an amount less than the amount being paid for an interest in the Loans, the Letters of Credit or the Commitments by such Bank or (iii) may receive fees or other payments in connection with the transactions contemplated hereby, the Credit Documents or otherwise, including structuring fees, commitment fees, arrangement fees, facility fees, upfront fees, underwriting fees, ticking fees, agency fees, administrative agent or collateral agent fees, utilization fees, minimum usage fees, letter of credit fees, fronting fees, deal-away or alternate transaction fees, amendment fees, processing fees, term out premiums, banker’s acceptance fees, breakage or other early termination fees or fees similar to the foregoing.
SECTION 15.     MISCELLANEOUS
15.1     Amendments and Waivers. (a) Neither this Agreement nor any other Credit Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this subsection. The Required Banks may, or, with the written consent of the Required Banks, the Administrative Agent may, from time to time, (i) enter into with the Loan Parties party thereto written amendments, supplements or modifications to this Agreement and the other Credit Documents for the purpose of adding any provisions to this Agreement or the other Credit Documents or changing in any

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manner the rights of the Banks or of the Loan Parties hereunder or thereunder or (ii) waive, on such terms and conditions as the Required Banks or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Credit Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (i) reduce the amount or extend the scheduled date of maturity of any Loan or reduce the stated rate of any interest or fee payable hereunder or extend the scheduled date of any payment thereof or increase the aggregate amount or extend the expiration date of any Bank’s Commitment, in each case without the consent of each Bank directly affected thereby, or (ii) amend, modify or waive any provision of this subsection or reduce the percentage specified in the definition of Required Banks, or consent to the assignment or transfer by the Company of any of its rights and obligations under this Agreement and the other Credit Documents or amend, modify or waive subsection 8.3(a) or 15.6(a), or amend, modify or waive any other provision hereof specifying the number or percentage of Banks required to waive, amend or modify any rights hereunder or any determination granting consent hereunder, or release any Subsidiary from its Subsidiary Guarantee or release the Company from the Company Guarantee, in each case without the written consent of all the Banks, or (iii) amend, modify or waive any provision of Section 14 or other provision affecting the rights or duties of the Administrative Agent without the written consent of the Administrative Agent, or (iv) amend, modify or waive any provision of Section 5 or other provision affecting the rights or duties of any Issuing Bank without the written consent of the Issuing Banks or (v) amend, modify or waive any provision of Section 4 or other provision affecting the rights or duties of any Swing Line Bank without the written consent of the Swing Line Banks. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Banks and shall be binding upon the Company, the Subsidiary Borrowers, the Banks, the Syndication Agents, the Administrative Agent and all future holders of the Loans. In the case of any waiver, the Company, the Banks and the Administrative Agent shall be restored to their former position and rights hereunder and under any other Credit Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon.
(a)     In addition to amendments effected pursuant to the foregoing paragraph (a), Schedules II, III and IV may be amended as follows:
(i)     (A) Schedule II will be amended to add Subsidiaries of the Company as additional Subsidiary Borrowers upon (A) execution and delivery by the Company, any such Subsidiary Borrower and the Administrative Agent, of a Joinder Agreement providing for any such Subsidiary to become a Subsidiary Borrower, and (B) delivery to the Administrative Agent of (1) if reasonably requested by the Administrative Agent, a legal opinion in respect of such additional Subsidiary Borrower and (2) such other documents with respect thereto as the Administrative Agent shall reasonably request or as requested by any Bank pursuant to a Requirement of Law. Notwithstanding the provisions of this subsection 15.1(b)(i), if at any time after the Closing Date the Company intends to amend Schedule II to add an additional Foreign Subsidiary Borrower the Company shall, upon not less than 15 Business Days’ notice,  deliver to the Administrative Agent a designation letter duly executed by the Company and such respective Foreign Subsidiary which shall designate such Foreign Subsidiary as a Foreign Subsidiary Borrower for purposes of this Agreement. The Administrative Agent shall promptly notify each Bank of each such designation by the Company and the identity of the respective Foreign Subsidiary.  If the Company shall designate as a Foreign Subsidiary Borrower hereunder any Subsidiary not organized under the laws of the United States or any State thereof, any Bank may, with notice to the Administrative Agent and the Company, fulfill its Commitment

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by causing an Affiliate of such Bank to act as the Bank in respect of such Foreign Subsidiary Borrower.
(A)     As soon as practicable after receiving notice from the Administrative Agent of the Company’s intent to designate a Foreign Subsidiary as a Foreign Subsidiary Borrower, and in any event at least 10 Business Days prior to the delivery of an executed Joinder Agreement pursuant to this subsection 15.1(b)(i), for a designated Foreign Subsidiary Borrower that is organized under the laws of a jurisdiction other than of the United States or a political subdivision thereof, any Bank that may not legally lend to, establish credit for the account of and/or do any business whatsoever with such designated Foreign Subsidiary Borrower directly or through an Affiliate (or can not cause any such Affiliate) of such Bank as provided in the immediately preceding paragraph (a “Protesting Bank”) shall so notify the Company and the Administrative Agent in writing. With respect to each Protesting Bank, the Company shall, effective on or before the date that such designated Foreign Subsidiary Borrower shall have the right to borrow hereunder, (A) notify the Administrative Agent and such Protesting Bank of the designation of a Replacement Bank to assume the Revolving Commitments and/or Swing Line Commitments, if any, and the obligations of such Protesting Bank in accordance with clause (e) below, (B) notify the Administrative Agent and such Protesting Bank that the Revolving Commitments and/or Swing Line Commitments of such Protesting Bank shall be terminated; provided that such Protesting Bank shall have received payment of an amount equal to the outstanding principal of its Loans and/or L/C Obligations, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Company or the relevant designated Foreign Subsidiary Borrower (in the case of all other amounts), or (C) cancel its request to designate such Foreign Subsidiary as a Foreign Subsidiary Borrower hereunder.
(ii)     Schedule II will be amended to remove any Subsidiary as a Subsidiary Borrower upon (A) execution and delivery by the Company of a Schedule Amendment providing for such amendment, (b) repayment in full of all outstanding Loans of such Subsidiary Borrower and interest thereon and other amounts owed by such Subsidiary Borrower hereunder and (c) cash collateralization of all outstanding Letters of Credit issued for the account of such Subsidiary Borrower.
(iii)     Schedule III will be amended to designate other Banks as additional or replacement Swing Line Banks or additional Issuing Banks, upon execution and delivery by the Company, the Administrative Agent and such additional or replacement Swing Line Bank or additional Issuing Bank, as the case may be, of a Schedule Amendment providing for such amendment. In the case of any replacement of a Swing Line Bank pursuant to a Schedule Amendment, the existing Swing Line Bank replaced pursuant thereto shall cease to be a Swing Line Bank upon the effectiveness of such Schedule Amendment and the repayment of all Swing Line Loans owing to such replaced Swing Line Bank.
(iv)     Schedule III will be amended to change administrative information with respect to Swing Line Banks or Issuing Banks, upon execution and delivery by the Company, the Administrative Agent and Swing Line Bank or Issuing Bank, as the case may be, of a Schedule Amendment providing for such amendment.

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(v)     Schedule IV will be amended to change administrative information contained therein (other than any interest rate definition, Funding Time, Payment Time or notice time contained therein) or to add Available Foreign Currencies (and related interest rate definitions and administrative information), upon execution and delivery by the Company and the Administrative Agent of a Schedule Amendment providing for such amendment.
(vi)     Schedule IV will be amended to conform any Funding Time, Payment Time or notice time contained therein to then-prevailing market practices, upon execution and delivery by the Company, the Required Banks and the Administrative Agent of a Schedule Amendment providing for such amendment.
(vii)     Schedule IV will be amended to change any interest rate definition contained therein, upon execution and delivery by the Company, all the Banks and the Administrative Agent of a Schedule Amendment providing for such amendment.
(b)     The Administrative Agent shall give prompt notice to each Bank of any amendment effected pursuant to subsection 15.1(b).
(c)     Notwithstanding the provisions of this subsection 15.1, any Local Currency Facility may be amended, supplemented or otherwise modified in accordance with its terms so long as after giving effect thereto either (i) such Local Currency Facility ceases to be a “Local Currency Facility” and the Company so notifies the Administrative Agent or (ii) the Local Currency Facility continues to meet the requirements of a Local Currency Facility set forth herein.
(d)     The Company may designate a Replacement Bank to assume the Revolving Commitments and/or Swing Line Commitments, if any, and the obligations of any Bank (an “Objecting Bank”) that is a Protesting Bank under clause (b) above or refuses to consent to (x) an amendment, supplement or waiver that both requires the consent of all the Banks in order to become effective and is acceptable to one or more other Banks constituting the Required Banks or (y) any Extension Request, and to purchase the outstanding Loans of such Objecting Bank and such Objecting Bank’s rights hereunder and with respect thereto, without recourse upon, or warranty by, or expense to, such Objecting Bank (unless such Objecting Bank agrees otherwise), for a purchase price equal to the outstanding principal amount of the Loans of such Objecting Bank plus (i) all interest accrued and unpaid thereon and all other amounts owing to such Objecting Bank hereunder and (ii) any amount which would be payable to such Objecting Bank pursuant to subsection 8.8 (assuming that all Loans of such Objecting Bank were prepaid on the date of such assumption), and upon such assumption and purchase by the Replacement Bank, such Replacement Bank, if it is not already a Bank, shall be deemed to be a “Bank” for purposes of this Agreement and such Objecting Bank shall cease to be a “Bank” for purposes of this Agreement and shall no longer have any obligations or rights hereunder (other than any obligations or rights which according to this Agreement shall survive the termination of this Agreement).
(e)     Notwithstanding the foregoing, the Administrative Agent, with the consent of the Company, may amend, modify or supplement any Credit Document without the consent of any Bank or the Required Banks in order to correct, amend or cure any ambiguity, inconsistency or defect or correct any typographical error or other manifest error in any Credit Document.
15.2     Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein,

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shall be deemed to have been duly given or made when delivered by hand, or five days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, addressed as follows in the case of the Company, the Subsidiary Borrowers and the Administrative Agent, and as set forth in Schedule I in the case of the other parties hereto, or to such other address as may be hereafter notified by the respective parties hereto and any future holders of the Loans:
The Company:
Arrow Electronics, Inc.
 
7459 South Lima Street
Englewood, Colorado 80112
 
Attention: Assistant Treasurer, Arrow Electronics
 
Telephone: +1-303-824-4558
with a copy to:
Arrow Electronics, Inc.
 
9201 East Dry Creek Road
Centennial, Colorado 80112
 
Attention: General Counsel, Arrow Electronics
 
Telephone: +1-303-824-3753
The Administrative Agent:
JPMorgan Chase Bank, N.A.
 
383 Madison Avenue, 24th Floor
 
New York, New York 10179
 
Attention: Dan Luby
Email: daniel.g.lubyjr@jpmorgan.com
 
Telephone: +1-212-270-6920
with a copy to:
JPMorgan Chase Bank, N.A.
 
500 Stanton Christiana Road, NCC5, 1st Floor
 
Newark, Delaware 19713-2107
 
Attention: Jacqueline Zellman
 
Email: jacqueline.l.zellman@jpmorgan.com
Telecopy: +1-302-634-8459
 
Telephone: +1-302-634-1980
The Subsidiary Borrowers:
c/o Arrow Electronics, Inc.
 
7459 South Lima Street
Englewood, Colorado 80112
 
Attention: Assistant Treasurer, Arrow Electronics
 
Telephone: +1-303-824-4558
with a copy to:
Arrow Electronics, Inc.
 
9201 East Dry Creek Road
Centennial, Colorado 80112
 
Attention: General Counsel, Arrow Electronics
 
Telephone: +1-303-824-3753
; provided that any Notice of Borrowing, Notice of Swing Line Borrowing, Notice of Continuation, Notice of Conversion, Notice of Swing Line Outstandings, Notice of Swing Line Refunding, Notice of Local

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Currency Outstandings, Notice of Prepayment, or any notice pursuant to subsections 2.4, 5.2 or 8.16 shall not be effective until received during the recipient’s normal business hours.
15.3     No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Bank, any right, remedy, power or privilege hereunder or under the other Credit Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.
15.4     Survival of Representations and Warranties All representations and warranties made hereunder, in the other Credit Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the other Credit Documents and the making of the Loans hereunder and the issuance of Letters of Credit.
15.5     Payment of Expenses. The Company agrees (a) to pay or reimburse the Administrative Agent and each Arranger for all its reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Credit Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the fees and disbursements of counsel to the Administrative Agent and each Arranger, (b) to pay or reimburse each Bank and the Administrative Agent, each Swing Line Bank and any Issuing Bank for all its reasonable costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Credit Documents and any such other documents upon the occurrence of an Event of Default, including, without limitation, the fees and disbursements of counsel to the Administrative Agent and to the several Banks and any Issuing Bank (including the allocated fees and expenses of in-house counsel), and (c) to pay, indemnify, and hold each Bank, each Agent, each Arranger and the Administrative Agent, each Swing Line Bank and any Issuing Bank harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Credit Documents and any such other documents, and (d) to pay, indemnify, and hold each Bank, each Agent, each Arranger and the Administrative Agent, each Swing Line Bank and any Issuing Bank (and their affiliates and its and their respective directors, officers, employees and agents) (collectively, the “indemnified person”) harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the other Credit Documents and any such other documents, including, without limitation, any of the foregoing relating to the use of proceeds of the Loans or the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the Company, any of its Subsidiaries or any of the Properties (it being understood that costs and expenses incurred in connection with the enforcement or preservation of rights under this Agreement and the other Credit Documents shall be paid or reimbursed in accordance with clause (b) above rather than this clause (d)) (all the foregoing in this clause (d), collectively, the “indemnified liabilities”), provided, that the Company shall have no obligation hereunder to any indemnified person with respect to indemnified liabilities to the extent such indemnified liabilities are found by a final, nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such indemnified person. Without limiting the foregoing, and to the extent permitted by applicable law, the Company agrees not to assert and

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to cause its Subsidiaries not to assert, and hereby waives and agrees to cause its Subsidiaries to waive, all rights for contribution or any other rights of recovery with respect to all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, under or related to Environmental Laws, that any of them might have by statute or otherwise against any indemnified person. No indemnified person shall be liable for any damages arising from the use by others of information or other materials obtained through electronic, telecommunications or other information transmission systems, except to the extent any such damages are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such indemnified person. No indemnified person shall be liable for any indirect, special, exemplary, punitive or consequential damages in connection with this Agreement or the other Credit Documents or the transactions contemplated hereby or thereby. Any payments required to be made by the Company under this subsection 15.5 shall be made within 30 days of the demand therefor. The agreements in this subsection shall survive repayment of the Loans and all other amounts payable hereunder.
15.6     Successors and Assigns; Participations and Assignments. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any affiliate of the Issuing Bank that issues any Letter of Credit), except that (i) no Specified Borrower may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Bank (and any attempted assignment or transfer by a Specified Borrower without such consent shall be null and void) and (ii) no Bank may assign or otherwise transfer its rights or obligations hereunder except in accordance with this subsection.
(a)     (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Bank may assign to one or more assignees, other than a natural person, a Defaulting Bank or the Company or any Affiliate or Subsidiary of the Company (each, an “Assignee”), all or a portion of its rights and obligations under this Agreement (including all or a portion of its Revolving Commitments and/or Swing Line Commitments, if any, and the Loans at the time owing to it) with the prior written consent of:
(A)     the Company (each such consent not to be unreasonably withheld), provided that no consent of the Company shall be required for an assignment to a Bank, an affiliate of a Bank, an Approved Fund (as defined below) or, if an Event of Default under subsections 13(a), 13(c) or 13(g) has occurred and is continuing, any other Person; and
(B)     the Administrative Agent; and
(C)     the Issuing Bank and each Swing Line Bank (in the case of assignments of the Revolving Commitments).
(ii)     Assignments shall be subject to the following additional conditions:
(A)     except in the case of an assignment to a Bank, an affiliate of a Bank or an Approved Fund or an assignment of the entire remaining amount of the assigning Bank’s Revolving Commitments and/or Swing Line Commitments or Loans, the amount of the Revolving Commitments and/or Swing Line Commitments or Loans of the assigning Bank subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unless each of the Company and the Administrative Agent otherwise consent, provided that (1) no such consent of the Company shall be required if an Event of Default under subsection 13(a), 13(c) or 13(g) has occurred and is continuing

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and (2) such amounts shall be aggregated in respect of each Bank and its affiliates or Approved Funds, if any; provided further that after giving effect to any such assignment, the transferor Bank’s aggregate Dollar Equivalent Amount of its Local Currency Bank Maximum Borrowing Amount under all Local Currency Facilities may not exceed its Revolving Commitment hereunder;
(B)     the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500;
(C)     after giving effect to any such assignment, the transferor or transferee Bank’s Swing Line Commitment, if any, may not exceed its Revolving Commitment hereunder and any purported assignment which would result in the transferor or transferee Bank’s Swing Line Commitment, if any, exceeding its Revolving Commitment hereunder shall not be effective; and
(D)     the Assignee, if it shall not be a Bank, shall deliver to the Administrative Agent an administrative questionnaire.
For the purposes of this subsection 15.6, “Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Bank, (b) an affiliate of a Bank or (c) an entity or an affiliate of an entity that administers or manages a Bank.
(iii)     Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) below, from and after the effective date specified in each Assignment and Assumption the Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Bank under this Agreement, and the assigning Bank thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Bank’s rights and obligations under this Agreement, such Bank shall cease to be a party hereto but shall continue to be entitled to the benefits of subsections 8.5, 8.6, 8.8 and 15.5). Any assignment or transfer by a Bank of rights or obligations under this Agreement that does not comply with this subsection 15.6 shall be treated for purposes of this Agreement as a sale by such Bank of a participation in such rights and obligations in accordance with paragraph (c) of this subsection.
(iv)     The Administrative Agent, acting for this purpose as a non-fiduciary agent of the Company, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Banks, and the Commitments of, and principal amount (and stated interest) of the Loans and L/C Obligations owing to, each Bank pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive absent manifest error, and the Company, the Administrative Agent, the Issuing Bank and the Banks shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Bank hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Company, the Issuing Bank and any Bank, at any reasonable time and from time to time upon reasonable prior notice.

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(v)     Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Bank and an Assignee, the Assignee’s completed administrative questionnaire (unless the Assignee shall already be a Bank hereunder), the processing and recordation fee referred to in paragraph (b) of this subsection and any written consent to such assignment required by paragraph (b) of this subsection, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.
(b)     (i) Any Bank may, without the consent of any Loan Party, the Administrative Agent or the Issuing Bank, sell participations to one or more banks or other entities (a “Participant”) in all or a portion of such Bank’s rights and obligations under this Agreement (including all or a portion of its Revolving Commitments and the Loans owing to it); provided that (A) such Bank’s obligations under this Agreement shall remain unchanged, (B) such Bank shall remain solely responsible to the other parties hereto for the performance of such obligations and (C) the Company, the Administrative Agent, the Issuing Bank and the other Banks shall continue to deal solely and directly with such Bank in connection with such Bank’s rights and obligations under this Agreement. Any agreement pursuant to which a Bank sells such a participation shall provide that such Bank shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement may provide that such Bank will not, without the consent of the Participant, agree to any amendment, modification or waiver that (1) requires the consent of each Bank directly affected thereby pursuant to the proviso to the second sentence of subsection 15.1(a) and (2) directly affects such Participant. Subject to paragraph (c)(ii) of this subsection, each Participant shall be entitled to the benefits, and subject to the limitations, of subsections 8.5, 8.6 and 8.8 to the same extent as if it were a Bank and had acquired its interest by assignment pursuant to paragraph (b) of this subsection. To the extent permitted by law, each Participant also shall be entitled to the benefits of subsection 15.7(b) as though it were a Bank, provided such Participant shall be subject to subsection 15.7(a) as though it were a Bank. Each Bank that sells a participation, acting solely for this purpose as a non-fiduciary agent of the Company, shall maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under this Agreement (the “Participant Register”); provided that no Bank shall have any obligation to disclose all or any portion of the Participant Register to any Person (including the identity of any Participant or any information relating to a Participant’s interest in any Commitments, Loans, Letters of Credit or its other obligations under any Credit Document) except to the extent that such disclosure is necessary to establish that such Commitment, Loan, Letter of Credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations and Section 1.163-5(b)(1) of the proposed United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Bank, each Loan Party and the Administrative Agent shall treat each person whose name is recorded in the Participant Register pursuant to the terms hereof as the owner of such participation for all purposes of this Agreement, notwithstanding notice to the contrary.
(i)     A Participant shall not be entitled to receive any greater payment under subsection 8.5 or 8.6 than the applicable Bank would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Company’s prior written consent or to the extent such entitlement to receive a greater payment results from an adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any

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Bank with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof that occurs after the Participant acquired the applicable participation. No Participant shall be entitled to the benefits of subsection 8.6 unless such Participant complies with such subsection as if it were a Bank.
(c)     Any Bank may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Bank, including any pledge or assignment to secure obligations to a Federal Reserve Bank or other central banking authority or central bank having jurisdiction over such Bank, and this subsection shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Bank from any of its obligations hereunder or substitute any such pledgee or Assignee for such Bank as a party hereto.
(d)     The Company, upon receipt of written notice from the relevant Bank, agrees to issue Notes to any Bank requiring Notes to facilitate transactions of the type described in paragraph (d) above.
(e)     Notwithstanding the foregoing, any Conduit Bank may assign any or all of the Loans it may have funded hereunder to its designating Bank without the consent of the Company or the Administrative Agent and without regard to the limitations set forth in subsection 15.6(b). Each of the Company, each Bank and the Administrative Agent hereby confirms that it will not institute against a Conduit Bank or join any other Person in instituting against a Conduit Bank any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any state bankruptcy or similar law, for one year and one day after the payment in full of the latest maturing commercial paper note issued by such Conduit Bank; provided, however, that each Bank designating any Conduit Bank hereby agrees to indemnify, save and hold harmless each other party hereto for any loss, cost, damage or expense arising out of its inability to institute such a proceeding against such Conduit Bank during such period of forbearance.
15.7     Adjustments; Set-off. (a) If any Bank (a “benefitted Bank”) shall at any time receive any payment of all or part of its Loans or the Reimbursement Obligations then due and owing to it, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in subsection 13(g), or otherwise), in a greater proportion than any such payment to or collateral received by any other Bank, if any, in respect of such other Bank’s Loans or the Reimbursement Obligations then due and owing to it, or interest thereon, such benefitted Bank shall purchase for cash from the other Banks a participating interest in such portion of each such other Bank’s Loan or the Reimbursement Obligations owing to it, or shall provide such other Banks with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefitted Bank to share the excess payment or benefits of such collateral or proceeds ratably with each of the Banks; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefitted Bank, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. Each of the Company and the Subsidiary Borrowers agrees that each Bank so purchasing a portion of another Bank’s Loan may exercise all rights of payment (including, without limitation, rights of set-off) with respect to such portion as fully as if such Bank were the direct holder of such portion.
(a)     In addition to any rights and remedies of the Banks provided by law, each Bank shall have the right, without prior notice to the Company or any Subsidiary Borrower, any

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such notice being expressly waived by the Company and the Subsidiary Borrowers to the extent permitted by applicable law, upon any amount becoming due and payable by the Company hereunder or under this Agreement or the other Credit Documents (whether at the stated maturity, by acceleration or otherwise) to set-off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Bank or any branch or agency thereof to or for the credit or the account of the Company or such Subsidiary Borrower, as the case may be. Each Bank agrees promptly to notify the Company and the Administrative Agent after any such set-off and application made by such Bank, provided that the failure to give such notice shall not affect the validity of such set-off and application.
15.8     Power of Attorney. Each Subsidiary Borrower hereby grants to the Company an irrevocable power of attorney to act as its attorney-in-fact with regard to matters relating to this Agreement, the Applications and each other Credit Document, including, without limitation, execution and delivery of any amendments, supplements, waivers or other modifications hereto or thereto, receipt of any notices hereunder or thereunder and receipt of service of process in connection herewith or therewith. Each Subsidiary Borrower hereby explicitly acknowledges that the Administrative Agent and each Bank has executed and delivered this Agreement and each other Credit Document to which it is a party, and has performed its obligations under this Agreement and each other Credit Document to which it is a party, in reliance upon the irrevocable grant of such power of attorney pursuant to this subsection 15.8. The power of attorney granted by each Subsidiary Borrower hereunder is coupled with an interest.
15.9     Judgment. (a) If for the purpose of obtaining judgment in any court it is necessary to convert a sum due hereunder in one currency into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the first currency with such other currency on the Business Day preceding the day on which final judgment is given.
(a)     The obligation of the Company or any Subsidiary Borrower in respect of any sum due to any Bank or the Administrative Agent hereunder shall, notwithstanding any judgment in a currency (the “Judgment Currency”) other than that in which such sum is denominated in accordance with the applicable provisions of this Agreement or the other Credit Documents (the “Agreement Currency”), be discharged only to the extent that on the Business Day following receipt by such Bank or the Administrative Agent (as the case may be) of any sum adjudged to be so due in the Judgment Currency such Bank or the Administrative Agent (as the case may be) may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to such Bank or the Administrative Agent (as the case may be) in the Agreement Currency, the Company or such Subsidiary Borrower (as the case may be) agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such Bank or the Administrative Agent (as the case may be) against such loss, and if the amount of the Agreement Currency so purchased exceeds the sum originally due to any Bank or the Administrative Agent (as the case may be), such Bank or the Administrative Agent (as the case may be) agrees to remit to the Company or such Subsidiary Borrower (as the case may be) such excess.
15.10     Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by email, electronic copy or telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set

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of the copies of this Agreement signed by all the parties shall be lodged with the Company and the Administrative Agent.
15.11     Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
15.12     Integration. This Agreement and the other Credit Documents represent the agreement of the Company, the Subsidiary Borrowers, the Syndication Agents, the Administrative Agent and the Banks with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent or any Bank relative to subject matter hereof not expressly set forth or referred to herein or in the other Credit Documents.
15.13     GOVERNING LAW. THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS (OTHER THAN ANY LOCAL CURRENCY FACILITY) AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS (OTHER THAN ANY LOCAL CURRENCY FACILITY) SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
15.14     Submission To Jurisdiction; Waivers. (a) Each of the Company and the Subsidiary Borrowers hereby irrevocably and unconditionally:
(i)     submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Credit Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the exclusive general jurisdiction of the Courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; provided, that nothing contained herein or in any other Credit Document will prevent any Bank or the Administrative Agent from bringing any action to enforce any award or judgment or exercise any right under any Credit Document in any other forum in which jurisdiction can be established;
(ii)     consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;
(iii)     agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Company at its address set forth in subsection 15.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto;
(iv)     agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law; and

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(v)     waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this subsection any special, exemplary, punitive or consequential damages.
(b)     Each Subsidiary Borrower hereby irrevocably appoints the Company as its agent for service of process in any proceeding referred to in subsection 15.14(a) and agrees that service of process in any such proceeding may be made by mailing or delivering a copy thereof to it care of the Company at its address for notice set forth in subsection 15.2.
15.15     Acknowledgements. Each of the Company and the Subsidiary Borrowers hereby acknowledges that:
(a)     it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Credit Documents;
(b)     none of the Syndication Agents, Arrangers, the Administrative Agent or any Bank has any fiduciary relationship with or duty to the Company and the Subsidiary Borrowers arising out of or in connection with this Agreement or any of the other Credit Documents, and the relationship between the Syndication Agents, the Administrative Agent and the Banks, on one hand, and the Company and the Subsidiary Borrowers, on the other hand, in connection herewith or therewith is solely that of debtor and creditor;
(c)     each Bank and its Affiliates may be providing debt financing, equity capital or other services (including financial advisory services) to other companies in respect of which the Borrower may have conflicting interests regarding the transactions described herein and otherwise; and
(d)     no joint venture is created hereby or by the other Credit Documents or otherwise exists by virtue of the transactions contemplated hereby among the Banks or among the Company and the Subsidiary Borrowers and the Banks.
15.16     WAIVERS OF JURY TRIAL. THE COMPANY, THE SUBSIDIARY BORROWERS, THE SYNDICATION AGENTS, THE ADMINISTRATIVE AGENT AND THE BANKS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
15.17     USA Patriot Act. Each Bank hereby notifies each Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001) (the “Patriot Act”), it is required to obtain, verify and record information that identifies each Borrower, which information includes the name and address of each Borrower and other information that will allow such Bank to identify each Borrower in accordance with the Patriot Act.
15.18     Acknowledgement and Consent to Bail-In of EEA Financial Institutions. Notwithstanding anything to the contrary in any Credit Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any Credit Document, to the extent such liability is unsecured, may be subject to the write-down and conversion powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

2018 Arrow Electronics Credit Agreement
98

(a)     the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and
(b)     the effects of any Bail-In Action on any such liability, including, if applicable:
(i)     a reduction in full or in part or cancellation of any such liability;
(ii)     a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent entity, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Credit Document; or
(iii)     the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of any EEA Resolution Authority.
15.19     Confidentiality. Each of the Administrative Agent, and the Banks agree to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any Governmental Authority (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any other Credit Document or any suit, action or proceeding relating to this Agreement or any other Credit Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this subsection, to (x) any Assignee of or Participant in, or any prospective Assignee of or Participant in, any of its rights or obligations under this Agreement or (y) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction, or to any credit insurance provider, in each case, relating to a Borrower and its obligations, (g) with the consent of the Borrower to whom the Information pertains, (h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this subsection or an agreement described in clause (f) hereof or (y) becomes available to the Administrative Agent or any Bank on a non-confidential basis from a source other than the Borrowers or (i) to data service providers, including league table providers, that serve the lending industry (but, in the case of this clause (i), solely to the extent that (x) such Information is information about the terms of the financing contemplated hereby routinely provided by arrangers to data services providers and (y) such Information is provided to such data service providers no earlier than the fifth Business Day after the Closing Date). “Information” means all information received from the Borrowers or their Affiliates relating to the Borrowers, their subsidiaries or their businesses, other than any such information that is available to the Administrative Agent or any Bank on a non-confidential basis prior to disclosure by the Borrowers.
Each Bank acknowledges that information furnished to it pursuant to this Agreement or the other Credit Documents may include material non-public information concerning the Borrowers and their Affiliates and their related parties or their respective securities, and confirms that it has developed compliance procedures regarding the use of material non-public information and that it will handle such material non-

2018 Arrow Electronics Credit Agreement
99

public information in accordance with those procedures and applicable law, including Federal and state securities laws.
All information, including requests for waivers and amendments, furnished by the Borrowers or the Administrative Agent pursuant to, or in the course of administering, this Agreement or the other Credit Documents will be syndicate-level information, which may contain material non-public information about the Borrowers and their Affiliates and their related parties or their respective securities. Accordingly, each Bank represents to the Borrowers and the Administrative Agent that it has identified in its administrative questionnaire a credit contact who may receive information that may contain material non-public information in accordance with its compliance procedures and applicable law, including Federal and state securities laws.


2018 Arrow Electronics Credit Agreement




IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.
ARROW ELECTRONICS, INC.

By: /s/ Chris D. Stansbury
Name: Christopher D. Stansbury
Title: Senior Vice President and Chief Financial Officer


ARROW CENTRAL EUROPE GMBH

By: /s/ Chris D. Stansbury
Name: Christopher D. Stansbury
Title: Director


ARROW ASIA PAC LIMITED

By: /s/ Chris D. Stansbury
Name: Christopher D. Stansbury
Title: Director


COMPONENTS AGENT (CAYMAN) LIMITED

By:: /s/ Chris D. Stansbury
Name: Christopher D. Stansbury
Title: Director


ARROW ELECTRONICS (C.I.) LIMITED

By:: /s/ Chris D. Stansbury
Name: Christopher D. Stansbury
Title: Director

B.V. ARROW ELECTRONICS DLC

By: /s/ Chris D. Stansbury
Name: Christopher D. Stansbury
Title: Director


[Signature Page to Arrow Electronics 2018 Credit Agreement]



JPMORGAN CHASE BANK, N.A.,
as Administrative Agent

By: /s/ Peter B. Thauer
Name: Peter B. Thauer
Title: Managing Director



JPMORGAN CHASE BANK, N.A.,
as a Bank

By: /s/ Peter B. Thauer
Name: Peter B. Thauer
Title: Managing Director


[Signature Page to Arrow Electronics 2018 Credit Agreement]




JPMORGAN CHASE BANK, N.A., as a Administrative Agent



By: /s/ Peter B. Thauer
Name: Peter B. Thauer    
Title: Managing Director


JPMORGAN CHASE BANK, N.A., as a Bank



By: /s/ Peter B. Thauer
Name: Peter B. Thauer    
Title: Managing Director


- 102 -
509265-1622-13506-Active.14917686.4
Bank signature page to the Arrow Electronics 2018 Credit Agreement, dated as of the date first above written



BANK OF AMERICA, N.A., as a Bank



By: /s/ Molly Daniello
Name: Molly Daniello    
Title: Vice President


 
Bank signature page to the Arrow Electronics 2018 Credit Agreement, dated as of the date first above written



BNP Paribas, as a Bank



By: /s/ Brendan Heneghan
Name: Brendan Heneghan    
Title: Director



By: /s/ Karim Remtoula
Name: Karim Remtoula    
Title: Vice President


- 104 -
509265-1622-13506-Active.14917686.4
Bank signature page to the Arrow Electronics 2018 Credit Agreement, dated as of the date first above written



ING Bank N.V., Dublin Branch, as a Bank



By: /s/ Sean Hassett
Name: Sean Hassett    
Title: Director

For any Bank requiring a second signature line:


By: /s/ Barry Fehily
Name: Barry Fehily
Title: Managing Director



- 105 -
509265-1622-13506-Active.14917686.4
Bank signature page to the Arrow Electronics 2018 Credit Agreement, dated as of the date first above written



Mizuho Bank, Ltd., as a Bank



By: /s/ Donna DeMagistris
Name: Donna DeMagistris    
Title: Authorized Signatory


- 106 -
509265-1622-13506-Active.14917686.4
Bank signature page to the Arrow Electronics 2018 Credit Agreement, dated as of the date first above written



MUFG Bank, Ltd., as a Bank



By: /s/ Lillian Kim
Name: Lillian Kim    
Title: Director


- 107 -
509265-1622-13506-Active.14917686.4
Bank signature page to the Arrow Electronics 2018 Credit Agreement, dated as of the date first above written



SUMITOMO MITSUI BANKING CORPORATION, as a Bank


By: /s/ James D. Weinstein
Name: James D. Weinstein    
Title: Managing Director


- 108 -
509265-1622-13506-Active.14917686.4
Bank signature page to the Arrow Electronics 2018 Credit Agreement, dated as of the date first above written



THE BANK OF NOVA SCOTIA, as a Bank



By: /s/ Jason Rinne
Name: Jason Rinne    
Title: Director


- 109 -
509265-1622-13506-Active.14917686.4
Bank signature page to the Arrow Electronics 2018 Credit Agreement, dated as of the date first above written



Danske Bank A/S, as a Bank



By: /s/ Jørgen Linnet
Name: Jørgen Linnet    
Title: Chief Loan Manager

For any Bank requiring a second signature line:


By: /s/ Barry Fehily
Name: Jesper Larsen
Title: Senior Loan Manager


- 110 -
509265-1622-13506-Active.14917686.4
Bank signature page to the Arrow Electronics 2018 Credit Agreement, dated as of the date first above written



GOLDMAN SACHS BANK USA, as a Bank



By: /s/ Rebecca Kratz
Name: Rebecca Kratz    
Title: Authorized Signatory


- 111 -
509265-1622-13506-Active.14917686.4
Bank signature page to the Arrow Electronics 2018 Credit Agreement, dated as of the date first above written



HSBC Bank USA, National Association, as a Bank



By: /s/ DAVID WAGSTAFF
Name: DAVID WAGSTAFF    
Title: MANAGING DIRECTOR


- 112 -
509265-1622-13506-Active.14917686.4




PNC BANK, NATIONAL ASSOCIATION, as a Bank



By: /s/ Sean Piper
Name: Sean Piper    
Title: AVP


- 113 -
509265-1622-13506-Active.14917686.4
Bank signature page to the Arrow Electronics 2018 Credit Agreement, dated as of the date first above written



WELLS FARGO BANK, NATIONAL ASSOCIATION, as a Bank



By: /s/ Mark H. Halldorson
Name: Mark H. Halldorson    
Title: Director


- 114 -
509265-1622-13506-Active.14917686.4
Bank signature page to the Arrow Electronics 2018 Credit Agreement, dated as of the date first above written



Bank of China, Chicago Bank as a Bank



By: /s/ Kefei Xu
Name: Kefei Xu    
Title: SVP and Branch Manager


- 115 -
509265-1622-13506-Active.14917686.4
Bank signature page to the Arrow Electronics 2018 Credit Agreement, dated as of the date first above written



BARCLAYS BANK PLC as a Bank



By: /s/ Amir Barash
Name: Amir Barash    
Title: Director
Executed in New York


- 116 -
509265-1622-13506-Active.14917686.4
Bank signature page to the Arrow Electronics 2018 Credit Agreement, dated as of the date first above written



Branch Banking and Trust Company as a Bank



By: /s/ Jim Wright
Name: Jim Wright    
Title: Assistant Vice President



- 117 -
509265-1622-13506-Active.14917686.4
Bank signature page to the Arrow Electronics 2018 Credit Agreement, dated as of the date first above written



Santander Bank, N.A., as a Bank



By: /s/ Andres Barbosa
Name: Andres Barbosa    
Title: Executive Director

For any Bank requiring a second signature line:

By: /s/ Daniel Kostman
Name: Daniel Kostman
Title: Executive Director



- 118 -
509265-1622-13506-Active.14917686.4
Bank signature page to the Arrow Electronics 2018 Credit Agreement, dated as of the date first above written



Standard Chartered Bank, as a Bank



By: /s/ Daniel Mattern
Name: Daniel Mattern    
Title: Associate Director
Standard Chartered Bank



- 119 -
509265-1622-13506-Active.14917686.4
Bank signature page to the Arrow Electronics 2018 Credit Agreement, dated as of the date first above written



U.S. BANK NATIONAL ASSOCIATION, as a Bank



By: /s/ Matt S. Scullin
Name: Matt S. Scullin
Title: Senior Vice President



- 120 -
509265-1622-13506-Active.14917686.4


Schedule I
BANKS AND COMMITMENTS

Bank
Dollar Revolving Commitment Amount

Euro Revolving Commitment Amount

(Dollar Equivalent Amount)
Pounds Sterling Revolving Commitment Amount 
(Dollar Equivalent Amount)
Hong Kong Dollar Revolving Commitment Amount 
(Dollar Equivalent Amount)
Swedish Kroner Revolving Commitment Amount
(Dollar Equivalent Amount)
 
 
 
 
 
 
JPMORGAN CHASE BANK, N.A.

$150,000,000.00


$37,500,000.00


$15,000,000.00


$7,500,000.00


$8,333,333.33

 
 
 
 
 
 
BANK OF AMERICA, N.A.

$150,000,000.00


$37,500,000.00


$15,000,000.00


$7,500,000.00


$8,333,333.33

 
 
 
 
 
 
BNP PARIBAS

$150,000,000.00


$37,500,000.00


$15,000,000.00


$7,500,000.00


$8,333,333.33

 
 
 
 
 
 
ING BANK N.V., DUBLIN BRANCH

$150,000,000.00


$37,500,000.00


$15,000,000.00


$7,500,000.00


$8,333,333.33

 
 
 
 
 
 
MIZUHO BANK, LTD.

$150,000,000.00


$37,500,000.00


$15,000,000.00


$7,500,000.00


$8,333,333.33

 
 
 
 
 
 
MUFG BANK, LTD.

$150,000,000.00


$37,500,000.00


$15,000,000.00


$7,500,000.00


$8,333,333.33

 
 
 
 
 
 
MIZUHO BANK, LTD.

$150,000,000.00


$37,500,000.00


$15,000,000.00


$7,500,000.00


$8,333,333.33

 
 
 
 
 
 
SUMITOMO MITSUI BANKING CORPORATION

$150,000,000.00


$37,500,000.00


$15,000,000.00


$7,500,000.00


$0.00

 
 
 
 
 
 
THE BANK OF NOVA SCOTIA

$150,000,000.00


$37,500,000.00


$15,000,000.00


$7,500,000.00


$8,333,333.33

 
 
 
 
 
 
DANSKE BANK A/S

$100,000,000.00


$25,000,000.00


$10,000,000.00


$5,000,000.00


$5,555,556.56


I-121


 
 
 
 
 
 
GOLDMAN SACHS BANK USA

$100,000,000.00


$25,000,000.00


$10,000,000.00


$5,000,000.00


$5,555,556.56

 
 
 
 
 
 
HSBC BANK USA, N.A.

$100,000,000.00


$25,000,000.00


$10,000,000.00


$5,000,000.00


$5,555,556.56

 
 
 
 
 
 
PNC BANK, N.A.

$100,000,000.00


$25,000,000.00


$10,000,000.00


$5,000,000.00


$5,555,556.56

 
 
 
 
 
 
WELLS FARGO BANK, NATIONAL ASSOCIATION

$100,000,000.00


$25,000,000.00


$10,000,000.00


$5,000,000.00


$5,555,556.56

 
 
 
 
 
 
BANK OF CHINA, CHICAGO BRANCH

$50,000,000.00


$12,500,000.00


$5,000,000.00


$2,500,000.00


$0.00

 
 
 
 
 
 
BARCLAYS BANK PLC

$50,000,000.00


$12,500,000.00


$5,000,000.00


$2,500,000.00


$2,777,778.78

 
 
 
 
 
 
BRANCH BANKING AND TRUST COMPANY

$50,000,000.00


$12,500,000.00


$5,000,000.00


$2,500,000.00


$2,777,778.78

 
 
 
 
 
 
SANTANDER BANK, N.A.

$50,000,000.00


$12,500,000.00


$5,000,000.00


$2,500,000.00


$2,777,778.78

 
 
 
 
 
 
STANDARD CHARTERED BANK

$50,000,000.00


$12,500,000.00


$5,000,000.00


$2,500,000.00


$2,777,778.78

 
 
 
 
 
 
U.S. BANK NATIONAL ASSOCIATION

$50,000,000.00


$12,500,000.00


$5,000,000.00


$2,500,000.00


$2,777,778.78

 
 
 
 
 
 
TOTAL:

$2,000,000,000


$500,000,000


$200,000,000


$100,000,000


$100,000,000



I-122


Schedule II
SUBSIDIARY BORROWERS
FOREIGN SUBSIDIARY BORROWERS
Name and Address:
Jurisdiction of Incorporation:
Arrow Central Europe GmbH 
Max-Planck StraBe 1-3
D-63303 Dreieich
Germany
Germany
 
 
Arrow Asia Pac Limited 
2/F, Green 18 Phase 2
Hong Kong Science Park
Pak Shek Kok, N.T., Hong Kong
Hong Kong
 
 
Components Agent (Cayman) Limited 
Century Yard, Cricket Square, Hutchins Drive
PO Box 2681 GT
George Town, Grand Cayman
British West Indies
British West Indies
 
 
Arrow Electronics (C.I.) Limited 
89 Nexus Way
Camana Bay, PO Box 31106
Grand Cayman KY1-1205
Cayman Islands
British West Indies
 
 
B.V. Arrow Electronics DLC
Dirk Hartogweg 9
Venlo, NL 5928LV
Netherlands



II-1


Schedule III

Certain Information Concerning Swing Line Loans and Letters of Credit

I.    Issuing Banks and Issuing Offices

Name of Issuing Bank
Issuing Office
Currency
JPMorgan Chase Bank, N.A. c/o JPMorgan Treasury Services
10420 Highland Manor Drive
Floor 04
Tampa, Florida 33620-9128, United States
Attention: Manager, Standby Letter of Credit
(T) 800-6341969
(F) 856-294-5267

All Available Currencies
Bank of America, N.A.
Bank of America (as LC Issuing Agent)
Charles Herron
Ph: 570-496-9564
charles.p.herron@baml.com
Bank of America Merrill Lynch
Trade Services
1 Fleet Way
Scranton, PA 18507
All Available Currencies
BNP Paribas
BNP Paribas
787 Seventh Avenue
New York, NY 10019
c/o BNP Paribas RCC, Inc.
Trade Finance
525 Washington Blvd.
Jersey City, NJ 07310
Attn: Maria Albuquerque
Phone: (201) 850-6761
Fax: (973) 988-4471
maria.albuquerque@us.bnpparibas.com
nytfstandby@us.bnpparibas.com
All Available Currencies
The Bank of Nova Scotia
GWS LoanOps US Corp
The Bank of Nova Scotia
720 King Street West, 2nd Floor
Toronto, Ontario, Canada M5V 2T3
212.225.5705
212.225.5709
GWSLC_USCorp@scotiabank.com
All Available Currencies
MUFG Bank, Ltd.
MUFG Bank, Ltd.
International Operations Department (IOD)
MUFG Union Bank, N.A.
Harborside Financial Center, 500 Plaza III
Jersey City, NJ 07311
Attention: Antonina Bondi
Telephone: (201) 413-8823
Facsimile: (201) 521-2336
Email: abondi@us.mufg.jp; IOD_SBLC@us.mufg.jp
All Available Currencies

III-1


ING Bank N.V., Dublin Branch
Name: Alan Maher
Company: ING Bank N.V., Dublin Branch
Title Director
Address: ING Bank N.V., Dublin Branch, Block 4
Dundrum Town Centre, Sandyford Road
Dublin 16 A4W6
Telephone: +353 1 638 4008
Facsimile: +353 1 638 4050
E-mail address:
Alan.maher@ie.ing.com
Wlo.exe.cfil.cb.locations@ing.nl
All Available Currencies
Mizuho Bank, Ltd.
Mizuho Bank, Ltd.
1800 Plaza Ten
Harborside Financial Ctr
Jersey City, NJ 07311
Attn: Jane Yoon
Telephone: (201) 626-9235
Fax: (201) 626-9941
LAU_USCorp1@mizuhocbus.com
All Available Currencies
Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Banking Corporation
277 Park Avenue
New York, NY 10172
Attn: Nadine Burnett
Office: 212-224-4031
Cell: 347-443-7362
Fax: 212-224-4384
nadine_burnett@smbcgroup.com
All Currencies Except for Swedish Kroner



III-2


Schedule 1.1
Existing Joint Ventures
Arrow-Altech Holdings (Pty) Limited, a South African company, and its subsidiaries.
Marubun-Arrow Asia Limited, a British Virgin Islands company, and its subsidiaries.
Marubun-Arrow USA, LLC, a Delaware limited liability company, and its subsidiaries.





Schedule 9.10
Outstanding Local Currency Loans
None.




Schedule 9.13
Excluded ERISA Arrangements
1.    Extended Separation Benefits
The Company 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. A change in control is defined in the program to include such time that any person becomes the beneficial owner, directly or indirectly, of 30% or more of the combined voting power of the Company’s voting securities or certain changes occur in the constitution of the Company’s Board of Directors. Pursuant to a policy adopted by the Board of Directors in 1998, 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 six to 24 weeks depending upon the length of service with the Company) 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, the Company has entered into employment agreements with certain 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. The Company also has agreements with a number of divisional and group vice presidents who are not executive officers, which provide such vice presidents with a multiple of their annualized includible compensation (as defined in the Internal Revenue 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. Arrow’s executive officers have entered into employment and change of control agreements. Under the employment agreements, if the executive is terminated without cause, the executive will continue to receive, through the end of the then-remaining term of the agreement, all base salary and benefits (such as life, health, and disability insurance) and cause the immediate vesting of any unvested stock options which would have vested through the then‑remaining term of the agreement. The executive is also entitled to certain restricted units or shares and, in some instances, performance units or shares. Under the change of control agreements, if the executive’s employment is terminated (i) without cause by Arrow or (ii) for good reason by the executive after a change in control, the eligible terminated executive is entitled to receive: (i) all unpaid salary through the date of termination (as defined in the employment agreement) and all earned and unpaid benefits and awards (including both cash and stock components); (ii) a lump-sum payment of 2.99 times the executive’s annualized includable compensation as defined in Internal Revenue Code Section 280G(d)(1); and (iii) continuation of coverage under the Company’s then current medical plan until the executive reaches 65 years of age (or otherwise becomes eligible for Medicare) or begins receiving equivalent benefits from a new employer. In addition, all stock options vest immediately and the executive may be entitled to restricted units or shares, and performance shares or shares. The amounts payable pursuant to such agreements to the executive officers and to the other vice presidents will be reduced, if necessary, to avoid excise tax under Section 4999 of the Code.




2.    Unfunded Pension Plan
The Company maintains the Unfunded Pension Plan for Selected Executives of the Company (“SERP”). Under the SERP, the Company’s Board of Directors determines those employees who are eligible to participate in the SERP and the amount of their maximum annual pension upon retirement on or after attaining age 60. Approximately 25 current and former executives are designated participants in the SERP. The gross SERP benefit is calculated by multiplying 2.5% of final average performance-based compensation (salary and annual incentive) by the participant’s years of credited service (up to a maximum of 18 years). Final average compensation is the highest average of any three years during the participant’s final five years of service. The gross benefit is reduced by 50% of the Social Security benefit and the projected benefit of the Company’s 401(k) matching contributions. The benefits provided under the SERP are payable as a life annuity with 60 payments guaranteed, commencing at age 60, assuming continued employment through normal retirement.
3.    Wyle Executive Severance Obligations
In connection with the acquisition of the Wyle Group of Companies, the Company has severance obligations under agreements with certain existing Wyle executives. Those severance obligations could constitute severance arrangements for purposes of ERISA.
4.    Executive Deferred Compensation Plan
The company maintains an Executive Deferred Compensation Plan for approximately 450 highly paid U.S. executives, of which approximately 100 employees participate. The Plan allows eligible executives to voluntarily elect to defer a portion of their salary (up to 80%) and bonus/commissions (up to 100%). Deferrals must be for a minimum of two years. At the end of the deferral period participants may elect to have deferrals distributed to them in either lump sum or installment payments over a designated number of years. Deferrals will be paid out in a lump sum distribution if termination precedes retirement/long term disability. Deferrals can be invested among different deemed investment options. All deferrals and any earnings on those deferrals are general unsecured obligations of the company.
5.    Wyle SERP Plan
The company maintains an unfunded pension plan for approximately 19 former executives of the Wyle Group of Companies. This plan provides for payment equal to the excess of the amounts such executives would normally be expected to receive under the terms of the Wyle qualified plan, over the maximum amounts allowed by ERISA under the qualified plan.
6.    Wyle Defined Benefit Plan
The company is responsible for retirement benefits for certain employees the Wyle provided under a defined benefit plan. Benefits under that plan were frozen as of December 31, 2000. The company makes contributions to the plan so that minimum contribution requirements, as determined by government regulations, are met.





Schedule 9.15
Subsidiary Guarantors
Arrow Electronics (UK), Inc.
Arrow Enterprise Computing Solutions, Inc.






Schedule 9.18
Environmental Matters
In connection with the purchase of Wyle Electronics (“Wyle”) in August 2000, the company acquired certain of the then outstanding obligations of Wyle, including Wyle’s indemnification obligations to the purchasers of its Wyle Laboratories division for environmental clean-up costs associated with any then existing contamination or violation of environmental regulations. Under the terms of the company’s purchase of Wyle from the sellers, the sellers agreed to indemnify the company for certain costs associated with the Wyle environmental obligations, among other things. In 2012, the company entered into a settlement agreement with the sellers pursuant to which the sellers paid $110,000,000 and the company released the sellers from their indemnification obligation. As part of the settlement agreement the company accepted responsibility for any potential subsequent costs incurred related to the Wyle matters. The company is aware of two Wyle Laboratories facilities (in Huntsville, Alabama and Norco, California) at which contaminated groundwater was identified and will require environmental remediation. In addition, the company was named as a defendant in several lawsuits related to the Norco facility and a third site in El Segundo, California which have now been settled to the satisfaction of the parties.
The company expects these environmental liabilities to be resolved over an extended period of time. Costs are recorded for environmental matters when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Accruals for environmental liabilities are adjusted periodically as facts and circumstances change, assessment and remediation efforts progress, or as additional technical or legal information becomes available. Environmental liabilities are difficult to assess and estimate due to various unknown factors such as the timing and extent of remediation, improvements in remediation technologies, and the extent to which environmental laws and regulations may change in the future. Accordingly the company cannot presently fully estimate the ultimate potential costs related to these sites until such time as a substantial portion of the investigation at the sites is completed and remedial action plans are developed and, in some instances implemented. To the extent that future environmental costs exceed amounts currently accrued by the company, net income would be adversely impacted and such impact could be material.
Accruals for environmental liabilities are included in “Accrued expenses” and “Other liabilities” in the company’s consolidated balance sheets. The company has determined that there is no amount within the environmental liability range that is a better estimate than any other amount, and therefore has recorded the accruals at the minimum amount of the ranges.
As successor-in-interest to Wyle, the company is the beneficiary of various Wyle insurance policies that covered liabilities arising out of operations at Norco and Huntsville. To date, the company has recovered approximately $37,000,000 from certain insurance carriers relating to environmental clean-up matters at the Norco site. The company is considering the best way to pursue its potential claims against insurers regarding liabilities arising out of




operations at Huntsville. The resolution of these matters will likely take several years. The company has not recorded a receivable for any potential future insurance recoveries related to the Norco and Huntsville environmental matters, as the realization of the claims for recovery are not deemed probable at this time. The company believes the settlement amount together with potential recoveries from various insurance policies covering environmental remediation and related litigation will be sufficient to cover any potential future costs related to the Wyle acquisition; however, it is possible unexpected costs beyond those anticipated could occur.
Environmental Matters - Huntsville
In February 2015, the company and the Alabama Department of Environmental Management (“ADEM”) finalized and executed a consent decree in connection with the Huntsville, Alabama site.
Characterization of the extent of contaminated soil and groundwater is complete and has been approved by ADEM. Approximately $6,100,000 was spent to date and the company currently anticipates no additional investigative and related expenditures. The nature and scope of subsequent remediation at the site has not yet been determined, but assuming the outcome includes source control and certain other measures, the cost is estimated to be between $4,300,000 and $10,000,000. Despite the amount of work undertaken and planned to date, the company is unable to estimate any potential costs in addition to those discussed above because the complete scope of the work is not yet known, and, accordingly, the associated costs have yet to be determined.
Environmental Matters - Norco
In October 2003, the company entered into a consent decree with Wyle Laboratories and the California Department of Toxic Substance Control (the “DTSC”) in connection with the Norco site. In April 2005, a Remedial Investigation Work Plan was approved by DTSC that provided for site-wide characterization of known and potential environmental issues. Investigations performed in connection with this work plan and a series of subsequent technical memoranda continued until the filing of a final Remedial Investigation Report early in 2008. Work is under way pertaining to the remediation of contaminated groundwater at certain areas on the Norco site and of soil gas in a limited area immediately adjacent to the site. In 2008, a hydraulic containment system (“HCS”) was installed to capture and treat groundwater before it moves into the adjacent offsite area. In September 2013, the DTSC approved the final Remedial Action Plan (“RAP”) and work is currently progressing under the RAP. The approved RAP included the potential for additional remedial action after the five year review of the HCS if the review found that contaminants were not sufficiently reduced in the offsite area. The HCS five year review submitted to DTSC in December 2016 identified significant reductions in contaminants offsite except in a key area identified in the RAP. This exception triggered the need for additional offsite remediation that began in 2018.
Approximately $67,500,000 was spent to date on remediation, project management, regulatory oversight, and investigative and feasibility study activities. The company currently estimates that these activities will give rise to an additional $14,300,000 to $25,000,000. Project




management and regulatory oversight include costs incurred by project consultants for project management and costs billed by DTSC to provide regulatory oversight. Despite the amount of work undertaken and planned to date, the company is unable to estimate any potential costs in addition to those discussed above because the complete scope of the work under the RAP is not yet known, and, accordingly, the associated costs have yet to be determined.





Schedule 12.2
Existing Indebtedness
1.
Contingent obligations to repurchase receivables under that certain Agreement for The Purchase and Sale of Accounts Receivable, dated as of September 24, 2013, by and between Arrow Enterprise Computing Solutions, Inc. and IBM Credit LLC.
Existing Foreign Subsidiary Indebtedness
Borrower
#VALUE!
#VALUE!
#VALUE!
Arrow Brazil
$3,648,032.04
N/A
N/A
Arrow, Korea
$1,769,206.00
Loans
Various
ECS Europe
$103,143.62
Loans
Various
Data Modul
$5,328,798.19
Loans
Various
Chip 1 Stop
$144,184.53
Loans
Various
Arrow (China) Electronics Trading Co. Ltd.
$40,000,000.00
Loans
Various
ATM Electronics Technology (Shenzen) Co. Ltd.
$3,000,000.00
Loans
Various
Ultra Source Electronics (SZ) Co. Ltd.
$3,000,000.00
Loans
Various
Arrow Electronics (Shenzen) Co. Ltd.
$4,000,000.00
Loans
Various
Total Foreign Indebtedness

$60,993,364.38

 
 






Schedule 13(i)
Disclosed Litigation
None.





EXHIBIT A TO
CREDIT AGREEMENT

FORM OF JOINDER AGREEMENT
JOINDER AGREEMENT, dated as of the date set forth below, entered into pursuant to the THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December 14, 2018 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”; terms defined therein being used herein as therein defined), among ARROW ELECTRONICS, INC., the Subsidiary Borrowers from time to time parties thereto, the several Banks from time to time parties thereto, BNP PARIBAS, BANK OF AMERICA, N.A., THE BANK OF NOVA SCOTIA, MUFG BANK, LTD., ING BANK N.V., DUBLIN BRANCH, MIZUHO BANK, LTD. and SUMITOMO BANKING CORPORATION as Syndication Agents, JPMORGAN CHASE BANK, N.A., BNP PARIBAS SECURITIES CORP., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, THE BANK OF NOVA SCOTIA, MUFG BANK, LTD., ING BANK N.V., DUBLIN BRANCH, MIZUHO BANK, LTD. and SUMITOMO MITSUI BANKING CORPORATION as Joint Lead Arrangers and Joint Bookrunners, JPMORGAN CHASE BANK, N.A., as Administrative Agent.
W I T N E S S E T H:
WHEREAS, the parties to this Joinder Agreement wish to amend Schedule II to the Credit Agreement in the manner hereinafter set forth; and
WHEREAS, this Joinder Agreement is entered into pursuant to subsection 15.1(b) of the Credit Agreement;
NOW, THEREFORE, in consideration of the premises, the parties hereto hereby agree as follows:
Each of the undersigned Subsidiaries of the Company hereby acknowledges that it has received and reviewed a copy (in execution form) of the Credit Agreement, and agrees to:
join the Credit Agreement as a Subsidiary Borrower;
be bound by all covenants, agreements and acknowledgements attributable to a Subsidiary Borrower in the Credit Agreement; and
perform all obligations required of it by the Credit Agreement.
Each of the undersigned Subsidiaries of the Company hereby represents and warrants that the representations and warranties with respect to it contained in, or made or deemed made by it in, Section 9 of the Credit Agreement are true and correct on the date hereof.
The address and jurisdiction of incorporation of each undersigned Subsidiary of the Company is set forth in Annex I to this Joinder Agreement.
THIS JOINDER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.


    

IN WITNESS WHEREOF, each of the undersigned has caused this Joinder Agreement to be duly executed and delivered by its proper and duly authorized officer as of the date set forth above.
    [NAME OF SUBSIDIARY],
    as a Subsidiary Borrower
By:__________________________
Name:
Title:



ARROW ELECTRONICS, INC.



    By:__________________________
     Name:
     Title:


ACKNOWLEDGED AND AGREED TO:

JPMORGAN CHASE BANK, N.A.,
as Administrative Agent



By:__________________________
Name:
Title:





ANNEX I


[Insert administrative information concerning Subsidiaries]





EXHIBIT B TO
    CREDIT AGREEMENT

FORM OF SCHEDULE AMENDMENT

SCHEDULE AMENDMENT, dated as of the date set forth below, entered into pursuant to the THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December 14, 2018 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”; terms defined therein being used herein as therein defined), among ARROW ELECTRONICS, INC., the Subsidiary Borrowers from time to time parties thereto, the several Banks from time to time parties thereto, BNP PARIBAS, BANK OF AMERICA, N.A., THE BANK OF NOVA SCOTIA, MUFG BANK, LTD., ING BANK N.V., DUBLIN BRANCH, MIZUHO BANK, LTD. and SUMITOMO BANKING CORPORATION as Syndication Agents, JPMORGAN CHASE BANK, N.A., BNP PARIBAS SECURITIES CORP., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, THE BANK OF NOVA SCOTIA, MUFG BANK, LTD., ING BANK N.V., DUBLIN BRANCH, MIZUHO BANK, LTD. and SUMITOMO MITSUI BANKING CORPORATION as Joint Lead Arrangers and Joint Bookrunners, JPMORGAN CHASE BANK, N.A., as Administrative Agent.
W I T N E S S E T H:
WHEREAS, the parties to this Schedule Amendment wish to amend Schedule [II] [III] [IV], as specified in Annex I hereto, to the Credit Agreement in the manner hereinafter set forth; and
WHEREAS, this Schedule Amendment is entered into pursuant to subsection 15.1(b) of the Credit Agreement;
NOW, THEREFORE, in consideration of the premises, the parties hereto hereby agree as follows:
1.    Schedule [II][III] [IV], as specified in Annex I hereto, is hereby amended as set forth in Annex I hereto.
2.    [The Company hereby represents and warrants that, after giving effect to the amendments effected hereby, the representations and warranties contained in Section 9 of the Credit Agreement are true and correct on the date hereof.]


    


3.    THIS SCHEDULE AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.


    


IN WITNESS WHEREOF, each of the undersigned has caused this Schedule Amendment to be duly executed and delivered by its proper and duly authorized officer as of the date set forth above.

ARROW ELECTRONICS, INC.


By:__________________________
Name:
Title:


ACKNOWLEDGED AND AGREED TO:

JPMORGAN CHASE BANK, N.A.,
as Administrative Agent


By:__________________________
Name:
Title:

[NAMES OF OTHER PARTIES, IF ANY, REQUIRED PURSUANT TO SUBSECTION 15.1(b)]





ANNEX I


[Describe amendments]





EXHIBIT C TO
    CREDIT AGREEMENT

[FORM OF LOCAL CURRENCY FACILITY ADDENDUM]
LOCAL CURRENCY FACILITY ADDENDUM
To:
JPMorgan Chase Bank, N.A., as Administrative Agent
From:
Arrow Electronics, Inc.
1.    This Local Currency Facility Addendum is being delivered to you pursuant to subsection 6.1 of the THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December 14, 2018 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”; terms defined therein being used herein as therein defined), among ARROW ELECTRONICS, INC., the Subsidiary Borrowers from time to time parties thereto, the several Banks from time to time parties thereto, BNP PARIBAS, BANK OF AMERICA, N.A., THE BANK OF NOVA SCOTIA, MUFG BANK, LTD., ING BANK N.V., DUBLIN BRANCH, MIZUHO BANK, LTD. and SUMITOMO BANKING CORPORATION as Syndication Agents, JPMORGAN CHASE BANK, N.A., BNP PARIBAS SECURITIES CORP., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, THE BANK OF NOVA SCOTIA, MUFG BANK, LTD., ING BANK N.V., DUBLIN BRANCH, MIZUHO BANK, LTD. and SUMITOMO MITSUI BANKING CORPORATION as Joint Lead Arrangers and Joint Bookrunners, and JPMORGAN CHASE BANK, N.A., as Administrative Agent.
2.    The effective date (the “Effective Date”) of this Local Currency Facility Addendum will be __________ __, 20__
3.    Please be advised that, as of the Effective Date, the credit facility described below is hereby designated as a “Local Currency Facility” for the purposes of the Credit Agreement.


2

Type of Facility:
 
 
Additional Local Currenc(y)(ies):
 
 
Local Currency Facility Maximum Borrowing Amount:
 
$
Local Currency Banks:
Name of Bank
Local Currency Bank Maximum Borrowing Amount
 
 
$
List of Documentation Governing
Local Currency Facility
(the “Documentation”):
 
 

Arrow Electronics, Inc. hereby represents and warrants that (i) the Documentation complies in all respects with the requirements of Section 6 of the Credit Agreement and (ii) _____ of _____ contains an express acknowledgement that such Local Currency Facility shall be subject to the provisions of Section 6 of the Credit Agreement.
ARROW ELECTRONICS, INC.


By ___________________________
Title:
[LOCAL CURRENCY FACILITY BORROWER]


By ___________________________
Title:
[LOCAL CURRENCY BANK]


By ___________________________
Title:



3

Accepted and Acknowledged:

JPMORGAN CHASE BANK, N.A., as Administrative Agent



By ________________________________
Title:



    




EXHIBIT E TO
    CREDIT AGREEMENT

FORM OF
BORROWING CERTIFICATE

Pursuant to subsection 10.2(d) of the THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December 14, 2018 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”; terms defined therein being used herein as therein defined), among ARROW ELECTRONICS, INC., the Subsidiary Borrowers from time to time parties thereto, the several Banks from time to time parties thereto, BNP PARIBAS, BANK OF AMERICA, N.A., THE BANK OF NOVA SCOTIA, MUFG BANK, LTD., ING BANK N.V., DUBLIN BRANCH, MIZUHO BANK, LTD. and SUMITOMO BANKING CORPORATION as Syndication Agents, JPMORGAN CHASE BANK, N.A., BNP PARIBAS SECURITIES CORP., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, THE BANK OF NOVA SCOTIA, MUFG BANK, LTD., ING BANK N.V., DUBLIN BRANCH, MIZUHO BANK, LTD. and SUMITOMO MITSUI BANKING CORPORATION as Joint Lead Arrangers and Joint Bookrunners, and JPMORGAN CHASE BANK, N.A., as Administrative Agent, the Company hereby certifies as follows:
1.    The representations and warranties of the Company set forth in the Credit Agreement (other than subsections 9.2 and 9.6 thereof) and each of the other Credit Documents are true and correct in all material respects on and as of the date hereof with the same effect as if made on the date hereof, except for representations and warranties expressly stated to relate to a specific earlier date, in which case such representations and warranties are true and correct as of such earlier date;
2.    No Default or Event of Default has occurred and is continuing as of the date hereof or will occur after giving effect to the making of the Loans on the date hereof and the consummation of each of the transactions contemplated by the Credit Documents; and
3.    There are no liquidation or dissolution proceedings pending or to the knowledge of the Company threatened against the Company, any Domestic Subsidiary that (directly or indirectly) accounts for more than 5% of Total Assets or any Subsidiary Borrower, nor to the knowledge of the Company


    




has any other event occurred affecting or threatening the existence of the Company, any Subsidiary Borrower, or any of the Company’s Subsidiaries, except as permitted by the Credit Agreement.
Unless otherwise defined herein, capitalized terms which are defined in the Credit Agreement and used herein are so used as so defined.


    




IN WITNESS WHEREOF, the Company has caused this Certificate to be executed on its behalf by the undersigned on and as of the date set forth above.
ARROW ELECTRONICS, INC.


By: _____________________
Name:
Title:






EXHIBIT F-1 TO
    CREDIT AGREEMENT
FORM OF COMPANY GUARANTEE
GUARANTEE, dated as of December 14, 2018, made by ARROW ELECTRONICS, INC., a New York corporation (the “Guarantor”), in favor of JPMORGAN CHASE BANK, N.A., as administrative agent (in such capacity, the “Administrative Agent”) for the several banks and other financial institutions (the “Banks”) parties to the THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December 14, 2018 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”; terms defined therein being used herein as therein defined), among ARROW ELECTRONICS, INC., the Subsidiary Borrowers from time to time parties thereto, the several Banks from time to time parties thereto, BNP PARIBAS, BANK OF AMERICA, N.A., THE BANK OF NOVA SCOTIA, MUFG BANK, LTD., ING BANK N.V., DUBLIN BRANCH, MIZUHO BANK, LTD. and SUMITOMO BANKING CORPORATION as Syndication Agents, JPMORGAN CHASE BANK, N.A., BNP PARIBAS SECURITIES CORP., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, THE BANK OF NOVA SCOTIA, MUFG BANK, LTD., ING BANK N.V., DUBLIN BRANCH, MIZUHO BANK, LTD. and SUMITOMO MITSUI BANKING CORPORATION as Joint Lead Arrangers and Joint Bookrunners and the Administrative Agent.
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Banks have severally agreed to make Loans to, and issue and participate in Letters of Credit for the account of, the Subsidiary Borrowers upon the terms and subject to the conditions set forth therein; and
WHEREAS, pursuant to the Local Currency Facilities, the Local Currency Banks have severally agreed, and will agree, to make Loans to the Local Currency Borrowers upon the terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition precedent to the obligation of the Banks to make their respective Loans and other extensions of credit to the Subsidiary Borrowers and the Local Currency Borrowers under the Credit Agreement and the Local Currency Facilities, respectively, that the Guarantor shall have executed and delivered this Guarantee to the Administrative Agent for the ratable benefit of the Banks; and
WHEREAS, the Guarantor is, directly or indirectly, the parent of each Subsidiary Borrower and Local Currency Borrower, and it is to the advantage of Guarantor that the Banks make their Loans and other extensions of credit to the Subsidiary Borrowers and the Local Currency Borrowers;
NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent, the Arrangers and the Banks to enter into the Credit Agreement and the Local Currency Facilities, and to induce the Banks to make their respective Loans to the Subsidiary Borrowers and the Local Currency Borrowers under the Credit Agreement and the Local Currency Facilities, respectively, the Guarantor hereby agrees with the Administrative Agent, for the ratable benefit of the Banks, as follows:


2

1.
Defined Terms. (1)   Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
a.
As used herein, “Obligations” means the collective reference to the unpaid principal of and interest on the Loans to Subsidiary Borrowers and on the Local Currency Loans and all other obligations and liabilities of the Subsidiary Borrowers and Local Currency Borrowers to the Administrative Agent and the Banks (including, without limitation, interest accruing at the then applicable rate provided in the Credit Agreement or any applicable Local Currency Facility after the maturity of the Loans or the Local Currency Loans and interest accruing at the then applicable rate provided in the Credit Agreement or any applicable Local Currency Facility after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Subsidiary Borrower or Local Currency Borrower whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the Credit Agreement, any Local Currency Facility or any other Credit Documents or any other document made, delivered or given in connection therewith, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Administrative Agent or to the Banks that are required to be paid by the Guarantor, any Subsidiary Borrower or any Local Currency Borrower pursuant to the terms of the Credit Agreement, any Local Currency Facility, this Agreement or any other Credit Document).
b.
The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Guarantee shall refer to this Guarantee as a whole and not to any particular provision of this Guarantee, and section and paragraph references are to this Guarantee unless otherwise specified.
c.
The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.
1.Guarantee. 1.1     The Guarantor hereby unconditionally and irrevocably guarantees to the Administrative Agent, for the ratable benefit of the Banks and their respective successors, indorsees, transferees and assigns, the prompt and complete payment and performance by each Subsidiary Borrower and each Local Currency Borrower when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations.
a.
The Guarantor further agrees to pay any and all expenses (including, without limitation, all reasonable fees and disbursements of counsel) which may be paid or incurred by the Applicable Administrative Agent or any Bank in enforcing, or obtaining advice of counsel in respect of, any rights with respect to, or collecting, any or all of the Obligations and/or enforcing any rights with respect to, or collecting against, the Guarantor under this Guarantee. This Guarantee shall remain in full force and effect until the Obligations are paid in full and the Commitments are terminated, notwithstanding that from time to time prior thereto the Subsidiary Borrowers and the Local Currency Borrowers or any of them may be free from any Obligations.


3

b.
No payment or payments made by any Subsidiary Borrower, any Local Currency Borrower or any other Person or received or collected by the Applicable Administrative Agent or any Bank from any Subsidiary Borrower, any Local Currency Borrower or any other Person by virtue of any action or proceeding or any set-off or appropriation or application, at any time or from time to time, in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of the Guarantor hereunder which shall, notwithstanding any such payment or payments (other than payments made by the Guarantor in respect of the Obligations or payments received or collected from the Guarantor in respect of the Obligations), remain liable for the Obligations until the Obligations are paid in full and the Commitments are terminated.
c.
The Guarantor agrees that whenever, at any time, or from time to time, it shall make any payment to the Applicable Administrative Agent or any Bank on account of its liability hereunder, it will notify the Applicable Administrative Agent and such Bank in writing that such payment is made under this Guarantee for such purpose.
2.Right of Set-off. Upon the occurrence and during the continuation of any Event of Default, the Applicable Administrative Agent and each Bank is hereby irrevocably authorized at any time and from time to time without notice to the Guarantor, any such notice being expressly waived by the Guarantor, to set off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Applicable Administrative Agent or such Bank to or for the credit or the account of the Guarantor, or any part thereof in such amounts as the Administrative Agent or such Bank may elect, against or on account of the obligations and liabilities of the Guarantor to the Applicable Administrative Agent or such Bank hereunder and claims of every nature and description of the Applicable Administrative Agent or such Bank against the Guarantor, in any currency, whether arising hereunder, under the Credit Agreement or any Credit Document, as the Applicable Administrative Agent or such Bank may elect, whether or not the Applicable Administrative Agent or such Bank has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. The Applicable Administrative Agent and each Bank shall notify the Guarantor promptly of any such set-off and the application made by the Applicable Administrative Agent or such Bank, as the case may be, of the proceeds thereof; provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Applicable Administrative Agent and each Bank under this paragraph are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Applicable Administrative Agent or such Bank may have.
3.Subrogation. Notwithstanding any payment or payments made by the Guarantor hereunder, or any set-off or application of funds of the Guarantor by the Applicable Administrative Agent or any Bank, the Guarantor shall not be entitled to exercise any right of subrogation arising in respect of any of the rights of the Applicable Administrative Agent or any Bank against a Subsidiary Borrower or against any collateral security or guarantee or right of offset held by the Applicable Administrative Agent or any Bank for the payment of the Obligations, nor shall the Guarantor seek or be entitled to seek any contribution or reimbursement from a Subsidiary Borrower in respect of payments made by the Guarantor hereunder, until all amounts owing to the Applicable Administrative Agent and the Banks by such Subsidiary Borrower on account of the Obligations and on account of all other obligations of the Guarantor to the Applicable Administrative Agent and the Banks under the Credit Documents are paid in full and the Commitments are terminated. If any amount shall be paid to the Guarantor on account of such subrogation rights at any time when all of the Obligations and such other amounts shall not have been paid in full, such amount shall be


4

held by the Guarantor in trust for the Applicable Administrative Agent and the Banks, segregated from other funds of the Guarantor, and shall, forthwith upon receipt by the Guarantor, be turned over to the Applicable Administrative Agent in the exact form received by the Guarantor (duly indorsed by the Guarantor to the Applicable Administrative Agent, if required), to be applied against the Obligations and the other obligations of the Guarantor under the Credit Documents, whether matured or unmatured, in such order as the Applicable Administrative Agent may determine.
4.Amendments, etc. with respect to the Obligations; Waiver of Rights. The Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against the Guarantor, and without notice to or further assent by the Guarantor, any demand for payment of any of the Obligations made by the Applicable Administrative Agent or any Bank may be rescinded by the Applicable Administrative Agent or such Bank, and any of the Obligations continued, and the Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Applicable Administrative Agent or any Bank, and the Credit Agreement and the other Credit Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Applicable Administrative Agent (or the Required Banks or all the Banks, as the case may be) may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Applicable Administrative Agent or any Bank for the payment of the Obligations may be waived, surrendered or released. Neither the Applicable Administrative Agent nor any Bank shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Obligations or for this Guarantee or any property subject thereto. When making any demand hereunder against the Guarantor, the Applicable Administrative Agent or any Bank may, but shall be under no obligation to, make a similar demand on any Subsidiary Borrower or any Local Currency Borrower or any other guarantor, and any failure by the Applicable Administrative Agent or any Bank to make any such demand or to collect any payments from any Subsidiary Borrower or any Local Currency Borrower or any such other guarantor or any release of any Subsidiary Borrower or any Local Currency Borrower or such other guarantor shall not relieve the Guarantor of its obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of the Applicable Administrative Agent or any Bank against the Guarantor. For the purposes hereof “demand” shall include the commencement and continuance of any legal proceedings.
5.Guarantee Absolute and Unconditional. The Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Applicable Administrative Agent or any Bank upon this Guarantee or acceptance of this Guarantee; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Guarantee; and all dealings between any Subsidiary Borrower or any Local Currency Borrower or the Guarantor, on the one hand, and the Applicable Administrative Agent and the Banks, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Guarantee. The Guarantor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon any Subsidiary Borrower or any Local Currency Borrower or the Guarantor with respect to the Obligations. This Guarantee shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (a) the validity, regularity or enforceability of the Credit Agreement, any Local Currency Facility or any other Credit Document, any of the Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Applicable Administrative Agent or any Bank, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by any Subsidiary Borrower or any Local Currency Borrower against the Applicable


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Administrative Agent or any Bank, or (c) any other circumstance whatsoever (with or without notice to or knowledge of any Subsidiary Borrower or any Local Currency Borrower or the Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of any Subsidiary Borrower or any Local Currency Borrower for the Obligations, or of the Guarantor under this Guarantee, in bankruptcy or in any other instance. When pursuing its rights and remedies hereunder against the Guarantor, the Applicable Administrative Agent and any Bank may, but shall be under no obligation to, pursue such rights and remedies as it may have against any Subsidiary Borrower or any Local Currency Borrower or any other Person or against any collateral security or guarantee for the Obligations or any right of offset with respect thereto, and any failure by the Applicable Administrative Agent or any Bank to pursue such other rights or remedies or to collect any payments from any Subsidiary Borrower or any Local Currency Borrower or any such other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of any Subsidiary Borrower or any Local Currency Borrower or any such other Person or of any such collateral security, guarantee or right of offset, shall not relieve the Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Applicable Administrative Agent or any Bank against the Guarantor. This Guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the Guarantor and its successors and assigns thereof, and shall inure to the benefit of the Applicable Administrative Agent and the Banks, and their respective successors, indorsees, transferees and assigns (in each case as permitted by the Credit Agreement), until all the Obligations and the obligations of the Guarantor under this Guarantee shall have been satisfied by payment in full and the Commitments shall be terminated, notwithstanding that from time to time during the term of the Credit Agreement any Subsidiary Borrower or any Local Currency Borrower may be free from any Obligations.
6.Confirmation. (a) Each Joinder Agreement delivered by the Guarantor to the Applicable Administrative Agent shall constitute a confirmation by the Guarantor that the Obligations guaranteed hereby include all Obligations of each Subsidiary Borrower named in such Joinder Agreement.
(b) Each Local Currency Facility Addendum delivered by the Guarantor to the Applicable Administrative Agent shall constitute a confirmation by the Guarantor that the Obligations guaranteed hereby include all Obligations of each Local Currency Borrower under each Local Currency Facility named in such Local Currency Facility Addendum.

7.Reinstatement. This Guarantee shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Applicable Administrative Agent or any Bank upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of any Subsidiary Borrower or any Local Currency Borrower or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, any Subsidiary Borrower or any Local Currency Borrower or any substantial part of its respective property, or otherwise, all as though such payments had not been made.
8.Payments. 1.2 The Guarantor hereby agrees that the Obligations will be paid to the Applicable Administrative Agent without set-off or counterclaim in the Currency in which they are denominated at the office for payment thereof set forth in the Credit Agreement or the applicable Local Currency Facility, as the case may be.
a.
The obligation of the Guarantor in respect of any sum due to any Bank or the Applicable Administrative Agent hereunder shall, notwithstanding any judgment in a currency (the “Judgment Currency”) other than that in which such sum is denominated in accordance with the applicable provisions of the Credit Agreement, any Local Currency Facility or the other


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Credit Documents (the “Agreement Currency”), be discharged only to the extent that on the Business Day following receipt by such Bank or the Applicable Administrative Agent (as the case may be) of any sum adjudged to be so due in the Judgment Currency such Bank or the Applicable Administrative Agent (as the case may be) may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to such Bank or the Applicable Administrative Agent (as the case may be) in the Agreement Currency, the Guarantor agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such Bank or the Applicable Administrative Agent (as the case may be) against such loss, and if the amount of the Agreement Currency so purchased exceeds the sum originally due to any Bank or the Applicable Administrative Agent (as the case may be), such Bank or the Applicable Administrative Agent (as the case may be) agrees to remit to the Guarantor such excess.
9.Counterparts. This Guarantee may be executed in any number of counterparts, and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which taken together shall constitute one and the same instrument.
10.Authority of Administrative Agent. The Guarantor acknowledges that the rights and responsibilities of the Applicable Administrative Agent under this Guarantee with respect to any action taken by the Applicable Administrative Agent or the exercise or non-exercise by the Applicable Administrative Agent of any option, right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Guarantee shall, as between the Applicable Administrative Agent and the Banks, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Applicable Administrative Agent and the Guarantor, the Applicable Administrative Agent shall be conclusively presumed to be acting as agent for the Banks with full and valid authority so to act or refrain from acting, and the Guarantor shall not be under any obligation, or entitlement, to make any inquiry respecting such authority.
11.Notices. All notices, requests and demands to or upon the Applicable Administrative Agent, any Bank or the Guarantor to be effective shall be in writing (or by telex, telecopy or similar electronic transfer confirmed in writing) and shall be deemed to have been duly given or made (a) when delivered by hand or (b) if given by mail, when deposited in the mails by certified mail, return receipt requested, or (c) if by telex, telecopy or similar electronic transfer, when sent and receipt has been confirmed, addressed as follows:
12.if to the Applicable Administrative Agent or any Bank, at its address or transmission number for notices provided in subsection 15.2 of the Credit Agreement; and
13.if to the Guarantor, at its address or transmission number for notices provided in subsection 15.2 of the Credit Agreement.
The Applicable Administrative Agent, each Bank and the Guarantor may change its address and transmission numbers for notices by notice in the manner provided in this Section 12.
14.Severability. Any provision of this Guarantee which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or


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unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
15.Integration. This Guarantee represents the agreement of the Guarantor with respect to the subject matter hereof and there are no promises or representations by the Applicable Administrative Agent or any Bank relative to the subject matter hereof not reflected herein.
16.Amendments in Writing; No Waiver; Cumulative Remedies. 1.3 None of the terms or provisions of this Guarantee may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Guarantor and the Applicable Administrative Agent, provided that any provision of this Guarantee may be waived by the Applicable Administrative Agent and the Banks in a letter or agreement executed by the Applicable Administrative Agent or by telecopy, email, facsimile or other electronic transmission from the Applicable Administrative Agent.
a.
Neither the Applicable Administrative Agent nor any Bank shall by any act (except by a written instrument pursuant to Section 15(a) hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Applicable Administrative Agent or any Bank, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Applicable Administrative Agent or any Bank of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Applicable Administrative Agent or such Bank would otherwise have on any future occasion.
b.
The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law.
17.Section Headings. The section headings used in this Guarantee are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.
18.Successors and Assigns. This Guarantee shall be binding upon the successors and assigns of the Guarantor and shall inure to the benefit of the Applicable Administrative Agent and the Banks and their successors and assigns (in each case as permitted by the Credit Agreement).
19.Governing Law. This Guarantee shall be governed by, and construed and interpreted in accordance with, the law of the State of New York.






IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be duly executed and delivered by its duly authorized officer as of the day and year set forth above.
ARROW ELECTRONICS, INC.


By:__________________________________
    Name:
    Title:





EXHIBIT F-2
FORM OF SUBSIDIARY GUARANTEE
GUARANTEE, dated as of [ ], [__] (this “Guarantee”), made by Arrow Electronics (UK), Inc., a Delaware corporation and Arrow Enterprise Computing Solutions, Inc., a Delaware corporation (collectively, the “Guarantor”), in favor of JPMORGAN CHASE BANK, N.A., as administrative agent (in such capacity, the “Administrative Agent”) for the several banks and other financial institutions (the “Banks”) parties to the THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December 14, 2018 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”; terms defined therein being used herein as therein defined), among ARROW ELECTRONICS, INC., the Subsidiary Borrowers from time to time parties thereto, the several Banks from time to time parties thereto, BNP PARIBAS, BANK OF AMERICA, N.A., THE BANK OF NOVA SCOTIA, MUFG BANK, LTD., ING BANK N.V., DUBLIN BRANCH, MIZUHO BANK, LTD. and SUMITOMO BANKING CORPORATION as Syndication Agents, JPMORGAN CHASE BANK, N.A., BNP PARIBAS SECURITIES CORP., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, THE BANK OF NOVA SCOTIA, MUFG BANK, LTD., ING BANK N.V., DUBLIN BRANCH, MIZUHO BANK, LTD. and SUMITOMO MITSUI BANKING CORPORATION as Joint Lead Arrangers and Joint Bookrunners and the Administrative Agent.
W I T N E S S E T H:
WHEREAS, Arrow Electronics, Inc. (the “Company”) is the borrower party to the Credit Agreement;
WHEREAS, the Guarantor is a wholly owned subsidiary of the Company;
WHEREAS, proceeds of extensions of credit under the Credit Agreement may be used in part to enable the Company to make loans and advances to the Guarantor in connection with the operation of its business;
WHEREAS, the Guarantor and the Company share an identity of interests as members of a combined group of companies engaged in substantially similar businesses, and the Guarantor will derive substantial direct and indirect benefits from such extensions of credit; and
WHEREAS, the Credit Agreement requires that the Guarantor enter into this Guarantee and pursuant hereto guarantee the Obligations (as such term is defined below) for the benefit of the Administrative Agent and the Banks (together, the “Guaranteed Parties”).
AGREEMENT
NOW, THEREFORE, the Guarantor hereby agrees with the Administrative Agent for its benefit and the ratable benefit of the Guaranteed Parties as follows:
SECTION 1.    THE GUARANTEE. The guarantee of the Guarantor hereunder is as follows:
SECTION 1.1    Guarantee of Extensions of Credit to the Company. The Guarantor hereby unconditionally and irrevocably guarantees to the Guaranteed Parties and their successors, endorsees, transferees and assigns (in each case as permitted by the Credit Agreement), the prompt and complete payment


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when due (whether at stated maturity, by acceleration or otherwise) and performance of all Obligations (including all interest and costs of enforcement or preservation and protection of collateral, if any, which would be owing by the Company but for the effect of the Bankruptcy Code, as hereinafter defined). The Guarantor agrees that this Guarantee is a guaranty of payment and performance and not of collection, and that its obligations under this Guarantee shall be joint and several with any other Persons which may at any time or from time to time be or become directly or indirectly financially responsible to the Guaranteed Parties with respect to the Obligations and shall be under all circumstances primary, absolute and unconditional, irrespective of, and unaffected by:
(a)    the genuineness, validity, regularity, enforceability or any future amendment of, or change in this Guarantee, any other Credit Document or other agreement, document or instrument to which the Company or any of its subsidiaries is or are or may become a party;
(b)    the absence of any action to enforce this Guarantee, any other Credit Document or the waiver or consent by the Guaranteed Parties with respect to any of the provisions thereof;
(c)    the existence, value or condition of, or failure of the Guaranteed Parties to perfect a Lien, if any, against, any security for the Obligations or any action, or the absence of any action, by the Guaranteed Parties in respect thereof (including, without limitation, the release of any such security);
(d)    any bankruptcy, insolvency, reorganization, arrangement, adjustment, composition, liquidation or the like of the Company or the Guarantor including, but not limited to, (i) any Guaranteed Party’s election, in any proceeding instituted under Title 11 of the United States Code (11 U.S.C. § 101 et seq.) or any replacement of supplemental federal statutes dealing with the bankruptcy of debtors (the “Bankruptcy Code”), of the application of Section 1111(b)(2) of the Bankruptcy Code, (ii) any borrowing or grant of a security interest by the Company or any Subsidiary as debtor-in-possession, under Section 364 of the Bankruptcy Code, or (iii) the disallowance of all or any portion of any Guaranteed Party’s claim(s) for repayment of the Obligations under Section 502 of the Bankruptcy Code;
(e)    any merger or consolidation of the Company or the Guarantor into or with any other Person, or any sale, lease or transfer of any or all of the assets of the Company or the Guarantor to any other Person;
(f)    any circumstance which might constitute a defense available to, or a discharge of, the Company or the Guarantor;
(g)    absence of any notice to, or knowledge by, the Guarantor of the existence or occurrence of any of the matters or events set forth in the foregoing subdivisions (a) through (f);
(h)    any sale, transfer or other disposition by the Company of any stock of the Guarantor; or
(i)    any other fact or circumstance;
it being agreed by the Guarantor that its obligations under this Guarantee shall not be discharged until the payment and performance, in full, of the Obligations (including all interest and costs of enforcement or preservation and protection of Collateral which would be owing by the Company but for the affect of the Bankruptcy Code) and the termination of the Commitments or release of the Guarantor by the Guaranteed Parties, whichever shall occur first. Subject to the limitations contained in Section 1.2 hereof, the Guarantor shall be regarded, and shall be in the same position, as principal debtor with respect to the


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Obligations and specifically agrees that, notwithstanding any discharge of the Company or any other Person or the operation of any other provision of the Bankruptcy Code with respect to the Obligations or any such Persons, the Guarantor shall be fully responsible for paying all interest and costs of enforcement or preservation and protection of collateral which may at any time accrue with respect to the Obligations or which would accrue but for the operation of any provision of or doctrine with respect to the Bankruptcy Code. The Guarantor expressly waives all rights it may have now or in the future under any statute, or at common law, or at law or in equity, or otherwise, to compel the Guaranteed Parties to proceed in respect of the Obligations against the Company, any other Loan Party or any other party or against any security for the payment and performance of the Obligations before proceeding against, or as a condition to proceeding against, the Guarantor. The Guarantor agrees that any notice or directive given at any time to the Guaranteed Parties which is inconsistent with the waiver in the immediately preceding sentence shall be null and void and may be ignored by the Guaranteed Parties, and, in addition, may not be pleaded or introduced as evidence in any litigation relating to this Guarantee for the reason that such pleading or introduction would be at variance with the written terms of this Guarantee unless the Guaranteed Parties have specifically agreed otherwise in writing. It is agreed between the Guarantor and the Guaranteed Parties that the foregoing waivers are of the essence of the transaction contemplated by the Credit Documents and that, but for this Guarantee and such waivers, the Guaranteed Parties would decline to extend credit under the Credit Documents.
As used in this Guarantee, the term “Obligations” means the unpaid principal of and interest on (including interest accruing on or after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Company, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans and all other obligations and liabilities of the Company to the Guaranteed Parties, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, any Credit Document and any other document made, delivered or given in connection herewith or therewith, including, without limitation, each other obligation and liability, whether direct or contingent, due or to become due, or now existing or hereafter incurred, whether on account of principal, interest, fees, indemnities, costs, or expenses (including, without limitation, all fees and disbursements of counsel to the Administrative Agent or to the Banks) that are required to be paid by the Company pursuant to the terms of the Credit Agreement or any of the other Credit Documents.
SECTION 1.2 Maximum Guaranteed Amount. Notwithstanding any other provision of this Guarantee to the contrary, if the obligations of the Guarantor hereunder would otherwise be held or determined by a court of competent jurisdiction in any action or proceeding involving any state corporate law or any state or Federal bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other law affecting the rights of creditors generally, to be void, invalid or unenforceable to any extent on account of the amount of the Guarantor’s liability under this Guarantee, then notwithstanding any other provision of this Guarantee to the contrary, the amount of such liability shall, without any further action by the Guarantor or any other Person, be automatically limited and reduced to the highest amount which is valid and enforceable as determined in such action or proceeding.
SECTION 1.3 Demand by the Guaranteed Parties. In addition to the terms of the Guarantee set forth in Section 1.1 hereof, but subject to the limitations contained in Section 1.2 hereof, and in no manner imposing any other limitation on such terms, it is expressly understood and agreed that, if the then outstanding principal amount of the Obligations (together with all accrued interest thereon) becomes due and payable, then the Guarantor shall, upon demand in writing therefore by the Administrative Agent to the Guarantor, pay to the holder or holders of the Obligations the outstanding Obligations due and owing to such holder or holders. Payment by the Guarantor shall be made to the Guaranteed Parties, to be credited and applied


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against the Obligations, in immediately available Federal funds to an account designated by the Guaranteed Parties or at the address set forth herein for the giving of notice of the Guaranteed Parties or at any other address that may be specified in writing from time to time by the Guaranteed Parties.
SECTION 1.4 Enforcement of Guarantee. In no event shall the Guaranteed Parties have any obligation (although they are entitled, at their option) to proceed against the Company or any other Person or any real or personal property pledged to secure the Obligations before seeking satisfaction from the Guarantor, and the Guaranteed Parties may proceed, prior or subsequent to, or simultaneously with, the enforcement of the Guaranteed Parties, rights hereunder, to exercise any right or remedy which it or they may have against any property, real or personal, as a result of any Lien it or they may have as security for all or any portion of the Obligations.
SECTION 1.5 Waiver. The Guarantor hereby waives diligence, presentment and demand (whether for nonpayment or protest or of acceptance, maturity, extension of time, change in nature or form of the Obligations), acceptance of further security, release of further security, composition or agreement arrived at as to the amount of, or the terms of, the Obligations, notice of adverse change in the Company’s or any Subsidiary’s financial condition or any other fact which might be in conflict with the terms of this Guarantee. The Guarantor hereby waives any requirement on the part of any Guaranteed Party to mitigate the damages resulting from any default under any Credit Document. The Guarantor represents, warrants and agrees that, as of the date of this Guarantee, its obligations under this Guarantee are not subject to any offsets or defenses of any kind against the Guaranteed Parties, the Company or any Subsidiary that executes a Credit Document. The Guarantor further agrees that its obligations under this Guarantee shall not be subject to any counterclaims, offsets or defenses of any kind which may arise in the future against the Guaranteed Parties of the Company or any other Loan Party that executes a Credit Document.
SECTION 1.6 Benefit of Guarantee. The provisions of this Guarantee are for the benefit of the Guaranteed Parties and their respective successors, transferees, endorsees and assigns, and nothing herein contained shall impair, as between the Loan Parties and the Guaranteed Parties, the obligations of the Loan Parties under the Credit Document. In the event all or any part of the Obligations are transferred, endorsed or assigned by the Guaranteed Parties to any Person or Persons in accordance with the terms of the Credit Agreement, any reference to “Guaranteed Parties” herein shall be deemed to refer equally to such Person or Persons.
SECTION 1.7 Modification of Obligations. If the Guaranteed Parties shall at any time or from time to time, with or without the consent of, or notice to, the Guarantor:
(a)    change or extend the manner, place or terms of payment of, or renew or alter all or any portion of, the Obligations;
(b)    take any action under or in respect of the Credit Documents in the exercise of any remedy, power or privilege contained therein or available to it at law, equity or otherwise, or waive or refrain from exercising any such remedies, powers or privileges;
(c)    amend or modify, in any manner whatsoever, the Credit Documents;
(d)    extend or waive the time for and of the Guarantor’s, any Loan Party’s or any other Person’s performance of, or compliance with, any term, covenant or agreement on its part to be performed or observed under the Credit Documents, or waive such performance or compliance or consent to a failure of, or departure from, such performance or compliance;


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(e)    take and hold security or collateral for the payment of the Obligations, or sell, exchange, release, dispose of, or otherwise deal with, any property pledged, mortgaged or conveyed, or in which the Guaranteed Parties have been granted a Lien, to secure any indebtedness of the Guarantor or the Loan Parties to the Guaranteed Parties;
(f)    release or limit the liability of anyone who may be liable in any manner for the payment of any amounts owed by the Guarantor or the Loan Parties to the Guaranteed Parties;
(g)    modify or terminate the terms of any intercreditor or subordination agreement pursuant to which claims of other creditors of the Guarantor or the Loan Parties are subordinated to the claims of the Guaranteed Parties; or
(h)    apply any sums by whomever paid or however realized to any amounts owing by the Guarantor or the Loan Parties to the Guaranteed Parties in such manner as the Guaranteed Parties shall determine in their discretion;
then the Guaranteed Parties shall not incur any liability to the Guarantor pursuant hereto as a result thereof and no such action shall impair or otherwise affect or release the obligations of the Guarantor under this Guarantee.
SECTION 1.8 Reinstatement. This Guarantee shall remain in full force and effect and continue to be effective in the event any petition is filed by or against the Company or the Guarantor for liquidation or reorganization, in the event the Company or the Guarantor becomes insolvent or makes an assignment for the benefit of creditors or in the event a receiver or trustee is appointed for all or any significant part of the Company’s or the Guarantor’s assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any part thereof, is pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by the Guaranteed Parties, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.
SECTION 1.9 Subrogation.
(a)    Subject to subsection (b) below, if the Guarantor makes a payment in respect of the Obligations, it shall be subrogated to the rights of the payees against the Company with respect to such payment.
(b)    The Guarantor shall not exercise any rights of subrogation under this Guarantee, by any payment made hereunder or otherwise, nor shall the Guarantor seek any reimbursement from any of the Loan Parties in respect of payments made by the Guarantor hereunder, unless and until all of the Obligations shall have been paid to the Guaranteed Parties and discharged, in full, and the Commitments are terminated, and if any payment shall be made to the Guarantor on account of such subrogation, contribution or reimbursement rights at any time when the Obligations shall not have been paid and discharged, in full, or the Commitments are not terminated, each and every amount so paid shall be held by the Guarantor in trust for the Guaranteed Parties and forthwith be paid to the Guaranteed Parties to be credited and applied against the Obligations, whether matured or unmatured.
(c)    If, pursuant to applicable law, the Guarantor, by payment or otherwise, becomes subrogated to all or any of the rights of the Guaranteed Parties under any of the Credit Documents, the rights


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of the Guaranteed Parties to which the Guarantor shall be subrogated shall be accepted by the Guarantor “as is” and without any representation or warranty of any kind by the Guaranteed Parties, express or implied, with respect to the legality, value, validity or enforceability of any such rights, or the existence, availability, value, merchantability or fitness for any particular purpose of any collateral and shall be without recourse to the Guaranteed Parties.
(d)    If the Guaranteed Parties may, under applicable law, proceed to realize their benefits under any of the Credit Documents giving the Guaranteed Parties a Lien upon any collateral, whether owned by any of the Loan Parties or by any other Person, either by judicial foreclosure or by non-judicial sale or enforcement, the Guaranteed Parties may, at their sole option, determine which of their remedies or rights they may pursue without affecting any of their rights and remedies under this Guarantee. If, in the exercise of any of their rights and remedies, the Guaranteed Parties shall forfeit any of their rights or remedies, including their right to enter a deficiency judgment against any of the Loan Parties of any other Person, whether because of any applicable laws pertaining to “election of remedies” or the like, the Guarantor hereby consents to such action by the Guaranteed Parties and, to the extent permitted by applicable law, waives any claim based upon such action, even if such action by the Guaranteed Parties shall result in a full or partial loss of any rights of subrogation which the Guarantor might otherwise have had but for such action by the Guaranteed Parties. Any election of remedies which results in the denial or impairment of the right of the Guaranteed Parties to seek a deficiency judgment against any of the Loan Parties shall not, to the extent permitted by applicable law, impair the Guarantor’s obligation to pay the full amount of the Obligations. In the event the Guaranteed Parties shall bid at any foreclosure or trustee’s sale or at any private sale permitted by law, the Guaranteed Parties may bid all or less than the amount of the Obligations and the amount of such bid need not be paid by the Guaranteed Parties but shall be credited against the Obligations. To the extent permitted by applicable law, the amount of the successful bid at any such sale, whether the Guaranteed Parties or any other party is the successful bidder, shall be conclusively deemed to be the fair market value of the collateral and the difference between such bid amount and the remaining balance of the Obligations shall be conclusively deemed to be the amount of the Obligations guaranteed under this Guarantee, notwithstanding that any present or future law or court decision or ruling may have the effect of reducing the amount of any deficiency claim to which the Guaranteed Parties might otherwise be entitled but for such bidding at any such sale.
SECTION 1.10 Continuing Guarantee. This Guarantee is a continuing guaranty and shall (i) remain in full force and effect until payment in full (including after the Termination Date) of the Obligations, and any other amounts which may be owing hereunder, and termination of the Commitments, (ii) be binding upon the Guarantor and its successors and permitted assigns, and (iii) inure, together with the rights and remedies of the Guaranteed Parties hereunder, to the benefit of the Guaranteed Parties and their respective successors, transferees and assigns.
SECTION 2. DELIVERIES. In a form satisfactory to the Guaranteed Parties, the Guarantor shall deliver to the Guaranteed Parties, concurrently with the execution of this Guarantee, such other instruments, certificates and documents as are required to be delivered by the Guarantor to the Guaranteed Parties under the Credit Agreement.
SECTION 3. REPRESENTATIONS. WARRANTIES AND COVENANTS. The Guarantor represents and warrants to the Administrative Agent and the Guaranteed Parties that:
(a)    the execution, delivery and performance by the Guarantor of this Guarantee are within the Guarantor's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental authority and do not contravene, or constitute


7

a default under, any provision of applicable law or regulation or of the certificate of incorporation or bylaws of the Guarantor or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Guarantor or result in the creation or imposition of any Lien on any asset of the Guarantor; and
(b)    this, Guarantee constitutes a legal, valid and binding agreement of the Guarantor, enforceable against the Guarantor in accordance with its terms, except as such enforceability may be limited by the affect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and general principles of equity.
SECTION 4. FURTHER ASSURANCES. The Guarantor agrees, upon the written request of the Guaranteed Parties, and at the Guarantor’s expense, to execute and deliver to the Guaranteed Parties, from time to time, any additional instruments or documents considered necessary by the Guaranteed Parties to cause this Guarantee to be, become or remain valid and effective in accordance with its terms.
SECTION 5. [INTENTIONALLY OMITTED]
SECTION 6. RIGHT OF SET‑OFF. In addition to and not in limitation of all rights of offset that any Guaranteed Party may have under applicable law or under the Credit Agreement, each Guaranteed Party shall upon the occurrence and during the continuation of any Event of Default and whether or not such Guaranteed Party has made any demand or whether the Guarantor's obligations are matured, have the right to appropriate and apply to the payment of the Guarantor's obligations hereunder, all deposits (general or special, time or demand, provisional or final) then or thereafter held by, and other indebtedness or property then or thereafter owing by, such Guaranteed Party, whether or not related to this Guarantee or any transaction hereunder.
SECTION 7. MISCELLANEOUS PROVISIONS.
SECTION 7.1 Amendments. Any amendment or waiver of any provision of this Guarantee and any consent to any departure by the Guarantor from any provision of this Guarantee, shall be effective only if made pursuant to a written instrument executed by the Guarantor and the Administrative Agent (or, if a waiver or a consent, a written letter or agreement executed by the Administrative Agent).
SECTION 7.2 Expenses. The Guarantor shall promptly pay to the Guaranteed Parties the amount (as reduced by the amounts paid by the Company) of any and all reasonable out-of-pocket costs and expenses of the Guaranteed Parties (both before and after the execution hereof) in connection with (a) the development, preparation and execution of, and any amendment, supplement or modification to this Guarantee and any of the other Credit Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, (b) any action by any Guaranteed Party to commence, defend, or intervene in any litigation or to file a petition complaint, answer, motion or other pleadings necessary to protect or enforce the rights of the Guaranteed Parties under this Guarantee or any other Credit Document, provided that only the Administrative Agent, for and on behalf of itself or any Guaranteed Party, may commence any such litigation, (c) the taking by any Guaranteed Party of any other action in or with respect to any suit or proceeding (bankruptcy or otherwise) necessary to protect the rights of the Guaranteed Parties under this Guarantee or any other Credit Document or to respond to any subpoena, deposition or interrogatory with respect to any litigation involving the Guarantor, or (d) the taking by any Guaranteed Party of any action to attempt to enforce or to enforce any rights of the Guaranteed Parties to collect any of the Obligations, including all reasonable fees, expenses and disbursements of attorneys and paralegals. Any payments to be made by the Guarantor under this Section 7.2 shall be made within 30 days of the demand therefor.


8

SECTION 7.3 Headings. The headings in this Guarantee are for purposes of reference only and shall not otherwise affect the meaning or construction or any provision of this Guarantee.
SECTION 7.4 Severability. The provisions of this Guarantee are severable, and if any clause or provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect in that jurisdiction only such clause or provision, or part thereof, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Guarantee in any jurisdiction.
SECTION 7.5 Notices. All notices, approvals, consents and other communications to any party hereunder shall be in writing and sent by certified or registered mail, return receipt requested, or by overnight delivery service, with all charges prepaid to such party at its address set forth on Schedule A attached hereto, or by facsimile transmission, promptly confirmed in writing, sent by first class mail, to the telecopy number set forth on, Schedule A attached hereto, or such other address or telecopy number as such party may hereafter specify by notice to the Administrative Agent and the Guarantor. All such notices, approvals, consents or other communications shall be deemed given (i) if sent by certified or registered mail, five (5) Business Days after being postmarked (ii) if sent by overnight delivery service, when received at the address specified on Schedule A or when delivery is refused and (iii) if sent by facsimile transmission, when receipt of such transmission is acknowledged.
SECTION 7.6 Remedies Cumulative. Each right, power and remedy of the Guaranteed Parties provided in this Guarantee or now or hereafter existing at law or in equity or by statute or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for in this Guarantee or now or hereafter existing at law or in equity or by statute or otherwise. The exercise or partial exercise by the Guaranteed Parties of any one or more of such rights, powers or remedies shall not preclude the simultaneous or later exercise by the Guaranteed Parties of all such other rights, powers or remedies, and no failure or delay on the part of the Guaranteed Parties to exercise any such right power or remedy shall operate as a waiver thereof.
SECTION 7.7 Statute of Limitations. To the full extent permitted by applicable law, the Guarantor hereby waives the right to plead any statute of limitations as a defense to performance of its obligations under, or enforcement of, this Guarantee.
SECTION 7.8 Final Expression. This Guarantee, together with any other agreement executed in connection herewith, is intended by the parties as a final expression of this Guarantee and is intended as a complete and exclusive statement of the terms and conditions thereof. Acceptance of or acquiescence in a course of performance rendered under this Guarantee shall not be relevant to determine the meaning of this Guarantee even though the accepting or acquiescing party had knowledge of the nature of the performance and opportunity for objection.
SECTION 7.9 Financial Status. The Guarantor hereby assumes responsibility for keeping itself informed of the financial condition of the Company and any and all endorsers and other guarantors of any instrument or document evidencing all or any part of the Obligations and of all other circumstances bearing upon the risk of nonpayment of the Obligations or any part thereof that diligent inquiry would reveal, and the Guarantor hereby agrees that the Guaranteed Parties shall have no duty to advise the Guarantor of information known to the Guaranteed Parties regarding such condition or any such circumstances. In the event the Guaranteed Parties, in their discretion, undertake at any time or from time to time to provide any such information to the undersigned, the Guaranteed Parties shall be under no obligation (i) to undertake any investigation not a part of their regular business routine, (ii) to disclose any information which pursuant


9

to accepted or reasonable commercial lending practices the Guaranteed Parties wish to maintain confidential, or (iii) to make any other or future disclosures of such information or any other information to the Guarantor.
SECTION 7.10 Authority of Administrative Agent. The Guarantor acknowledges that the rights and responsibilities of the Administrative Agent under this Guarantee with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Guarantee shall, as between the Administrative Agent and the Banks, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and the Guarantor, the Administrative Agent shall be conclusively presumed to be acting as agent for the Banks with full and valid authority so to act or refrain from acting, and the Guarantor shall not be obligated or entitled to make any inquiry respecting such authority.
SECTION 7.11 Assignability. This Guarantee shall be binding on the Guarantor and its successors and permitted assigns and shall inure to the benefit of the Guaranteed Parties and their respective successors, transferees and assigns (in each case as permitted by the Credit Agreement). The Guarantor may not assign this Guarantee.
SECTION 7.12 Non-Waiver. The failure of the Guaranteed Parties to enforce any right or remedy hereunder, or promptly to enforce any such right or remedy, shall not constitute a waiver thereof, nor give rise to any estoppel against the Guaranteed Parties, nor excuse the Guarantor from its obligations hereunder.
SECTION 7.13 Termination. Subject to the provisions of Section 1.8 hereof, this Guarantee shall terminate upon the receipt by each of the Guaranteed Parties of evidence satisfactory to it of the payment (or prepayment) in full of the Obligations and any other amounts which may be owing hereunder and the termination of the Commitments, or the release of the Guarantor by the Guaranteed Parties, whichever shall occur first. In addition, upon certification by the Company that the Guarantor has been sold to a third party in compliance with the provisions of the Credit Agreement, so long as no Default or Event of Default has occurred and is continuing, this Guarantee shall terminate. At the time of any such termination, the Guaranteed Parties, at the request and expense of the Guarantor, will execute and deliver to the Guarantor a proper instrument or instruments acknowledging the satisfaction and termination (as applicable) of this Guarantee.
SECTION 7.14 Counterparts. This Guarantee may be executed in any number of counterparts, and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which taken together shall constitute one and the same instrument.
SECTION 7.15 GOVERNING LAW. THIS GUARANTEE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
SECTION 7.16 Submission to Jurisdiction: Waivers. The Guarantor hereby irrevocably and unconditionally:
(a)    submits for itself and its property in any legal action or proceeding relating to this Guarantee, or for recognition and enforcement of any judgment in respect thereof, to the exclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York and appellate courts from any thereof; provided, that nothing contained herein will


10

prevent any Bank or the Administrative Agent from bringing any action to enforce any award or judgment or exercise any right hereunder in any other forum in which jurisdiction can be established;
(b)    consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;
(c)    agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Guarantor at its address set forth on Schedule A hereto or at such other address of which the Administrative Agent shall have been notified pursuant thereto;
(d)    agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law;
(e)    waives the right to assert any counterclaims in respect of, and all statutes of limitations which may be relevant to, such action or proceeding;
(f)    waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any such action or proceeding referred to in this Section 7.16 against any Guaranteed Party unless such action or proceeding is based on gross negligence, willful misconduct, miscalculation of amounts owed by the Guarantor or knowing violations of law; and
(g)    waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section 7.16 any special, exemplary, punitive, indirect or consequential damages unless such damages are the result of willful misconduct or knowing violations of law.
SECTION 7.17 Acknowledgement. The Guarantor hereby acknowledges that:
(a)    it has been advised by counsel in the negotiation, execution and delivery of this Guarantee;
(b)    No Guaranteed Party has any fiduciary relationship to the Guarantor, and the relationship between the Administrative Agent and the Guaranteed Parties, on the one hand, and the Guarantor, on the other hand, is solely that of debtor and creditor, and
(c)    no joint venture exists among the Guaranteed Parties or among the Guarantor and the Guaranteed Parties.
SECTION 7.18 WAIVERS OF JURY TRIAL. THE GUARANTOR AND THE GUARANTEED PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTEE AND FOR ANY COUNTERCLAIM THEREIN.
[SIGNATURE PAGE FOLLOWS]


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IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be duly executed and delivered as of the date set forth above.
ARROW ENTERPRISE COMPUTING SOLUTIONS, INC.


By:     
Name: Chris Stansbury
Title: Chief Financial Officer


ARROW ELECTRONICS (UK), INC.


By:     
Name: Chris Stansbury
Title: Chief Financial Officer


12

SCHEDULE A TO SUBSIDIARY GUARANTEE
Notices
Address and Other Information:
•
Guarantors:     Arrow Electronics (UK), Inc.
c/o Arrow Electronics, Inc.
7459 South Lima Street
Englewood, Colorado 80112
Attention: Assistant Treasurer, Arrow Electronics
Telephone: +1-303-824-4558
•Arrow Enterprise Computing Solutions, Inc.
c/o Arrow Electronics, Inc.
7459 South Lima Street
Englewood, Colorado 80112
Attention: Assistant Treasurer, Arrow Electronics
Telephone: +1-303-824-4558
•
Administrative Agent:    JPMorgan Chase Bank, N.A.
383 Madison Avenue, 24th Floor
New York, New York 10017
Attention: Dan Luby
Email: daniel.g.lubyjr@jpmorgan.com
Telephone: +1-212-270-6920
•
    With a copy to:
JPMorgan Chase Bank, N.A.
500 Stanton Christiana Road, Floor 3, Ops 2
Newark, Delaware 19713
Attention: Thomas Defosse
Email: thomas.defosseiv@chase.com
Telephone: +1-302-634-1965
•







EXHIBIT G-3 TO
CREDIT AGREEMENT
OPINIONS RELATING TO THE
FOREIGN SUBSIDIARY BORROWERS
Opinions for the Foreign Subsidiary Borrowers:
1.    The Foreign Subsidiary Borrower is validly existing and in good standing (if applicable) under the laws of the jurisdiction of its organization (the “Jurisdiction”).
20.The Foreign Subsidiary Borrower has the power and authority, and the legal right, to make, deliver and perform its obligations under the Credit Agreement and to borrow under the Credit Agreement. The Foreign Subsidiary Borrower has taken all necessary corporate action to authorize the performance of its obligations as a “Foreign Subsidiary Borrower” under the Credit Agreement and to authorize the execution, delivery and performance of the Credit Agreement.
21.Except for consents, authorizations, approvals, notices and filings described on an attached schedule, all of which have been obtained, made or waived and are in full force and effect, no consent or authorization of, approval by, notice to, filing with or other act by or in respect of, any Governmental Authority is required in connection with the borrowings by the Foreign Subsidiary Borrower under the Credit Agreement or with the execution, delivery, performance, validity or enforceability of the Credit Agreement.
22.The Credit Agreement has been duly executed and delivered on behalf of the Foreign Subsidiary Borrower.
23.The execution and delivery of the Credit Agreement by the Foreign Subsidiary Borrower, the performance of its obligations thereunder, the consummation of the transactions contemplated thereby, the compliance by the Foreign Subsidiary Borrower with any of the provisions thereof, the borrowings under the Credit Agreement and the use of proceeds thereof, all as provided therein, (a) will not violate, or constitute a default under, any Requirement of Law of the Foreign Subsidiary Borrower and (b) will not result in, or require, the creation or imposition of any Lien on any of its properties or revenues pursuant to any such Requirement of Law.
24.There are no taxes imposed by the Jurisdiction (a) on or by virtue of the execution, delivery, enforcement or performance of the Credit Agreement or (b) on any payment to be made by the Foreign Subsidiary Borrower pursuant to the Credit Agreement other than any Non-Excluded Taxes payable by the Foreign Subsidiary Borrower as provided in subsection 8.6 of the Credit Agreement.
25.To ensure the legality, validity, enforceability or admissibility in evidence of the Credit Agreement, it is not necessary that the Credit Agreement or any other Credit Documents or any other document be filed, registered or recorded with, or executed or notarized before, any court of other authority of the Jurisdiction or that any registration charge or stamp or similar tax be paid on or in respect of the Credit Agreement.


2

26.The Credit Agreement is in proper legal form under the laws of the Jurisdiction for the enforcement thereof against the Foreign Subsidiary Borrower under the laws of the Jurisdiction.
27.In any action or proceeding arising out of or relating to the Credit Agreement in any court in the Jurisdiction, such court would recognize and give effect to the choice of law provisions in the Credit Agreement wherein the parties thereto agree that the Credit Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York.
28.It is not necessary under the laws of the Jurisdiction (a) in order to enable the Applicable Administrative Agent and the Banks or any of them to enforce their respective rights under the Credit Agreement or (b) by reason of the execution of the Credit Agreement [or the Joinder Agreement to which the Foreign Subsidiary Borrower is a party] or the performance of the Credit Agreement that any of them should be licensed, qualified or entitled to carry on business in the Jurisdiction.
29.Neither the Applicable Administrative Agent nor any of the Banks will be deemed to be resident, domiciled, carrying on business or subject to taxation in the Jurisdiction merely by reason of the execution of the Credit Agreement [or the Joinder Agreement to which the Foreign Subsidiary Borrower is a party] or the performance or enforcement of any thereof. The performance by the Applicable Administrative Agent and the Banks or any of them of any action required or permitted under the Credit Agreement will not violate any law or regulation, or be contrary to the public policy, of the Jurisdiction.
30.If any judgment of a competent court referred to in Section 15.14(a)(i) of the Credit Agreement were rendered against the Foreign Subsidiary Borrower in connection with any action arising out of or relating to the Credit Agreement, such judgment would be recognized and could be sued upon in the courts of the Jurisdiction, and such courts would grant a judgment which would be enforceable against the Foreign Subsidiary Borrower in the Jurisdiction without any retrial unless it is shown that (a) the foreign court did not have jurisdiction in accordance with its jurisdictional rules, (b) the party against whom the judgment of such foreign court was obtained had no notice of the proceedings or (c) the judgment of such foreign court was obtained through collusion or fraud or was based upon clear mistake of fact or law.
The foregoing opinions may be subject to customary assumptions and qualifications.






EXHIBIT H TO
CREDIT AGREEMENT
FORM OF
CERTIFICATE OF RESPONSIBLE OFFICER
PURSUANT TO SUBSECTION 11.2(b)
Pursuant to subsection 11.2(b) of the THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December 14, 2018 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”; terms defined therein being used herein as therein defined), among ARROW ELECTRONICS, INC., the Subsidiary Borrowers from time to time parties thereto, the several Banks from time to time parties thereto, BNP PARIBAS, BANK OF AMERICA, N.A., THE BANK OF NOVA SCOTIA, MUFG BANK, LTD., ING BANK N.V., DUBLIN BRANCH, MIZUHO BANK, LTD. and SUMITOMO BANKING CORPORATION as Syndication Agents, JPMORGAN CHASE BANK, N.A., BNP PARIBAS SECURITIES CORP., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, THE BANK OF NOVA SCOTIA, MUFG BANK, LTD., ING BANK N.V., DUBLIN BRANCH, MIZUHO BANK, LTD. and SUMITOMO MITSUI BANKING CORPORATION as Joint Lead Arrangers and Joint Bookrunners, JPMORGAN CHASE BANK, N.A., as Administrative Agent, the undersigned, [Responsible Officer of the Company] (the “Responsible Officer”), hereby certifies, to the best of his/her knowledge, as follows:
1.    [For the fiscal year of the Company ending ________ __, ____, the Company has observed or performed all of its covenants and other agreements contained in the Credit Agreement and the other Credit Documents to which it is a party to be observed or performed by it, I have obtained no knowledge of any Default or Event of Default except as specified herein [specify Default or Event of Default, if any];]
31.The financial statements delivered concurrently herewith pursuant to subsections 11.1(a) and (b) of the Credit Agreement fairly present the consolidated (or consolidating, as appropriate) financial position and results of operations of the Company and its consolidated Subsidiaries in accordance with GAAP applied consistently throughout the periods reflected therein and with the prior periods (except as approved by the accountants performing such audit or the Responsible Officer making such certification, as the case may be, and disclosed therein).
32.The calculations set forth on Schedule A hereto support the statement in paragraph 1 above in respect of subsections 12.1(a) and (b) and 12.2 of the Credit Agreement.






IN WITNESS WHEREOF, the Company has caused this Certificate to be executed on its behalf by the undersigned on and as of the __ day of _________, 20___.
ARROW ELECTRONICS, INC.
By: _____________________
Name:
Title:



            

EXHIBIT I TO
CREDIT AGREEMENT
FORM OF
ASSIGNMENT AND ASSUMPTION
This Assignment and Assumption (the “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into between the Assignor named below (the “Assignor”) and the Assignee named below (the “Assignee”). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent below (i) all of the Assignor’s rights and obligations in its capacity as a Bank under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including any Letters of Credit, guarantees, Committed Rate Loan, Competitive Advance Loan, Swing Line Loan and Local Currency Loan included in such facilities) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Bank) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as the “Assigned Interest”). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.

1.    Assignor:        ______________________________

2.
Assignee:        ______________________________
[and is an affiliate/Approved Fund of [identify Bank]]

3.
Borrower(s):        ______________________________

4.
Administrative Agent:    JPMorgan Chase Bank, N.A., as Administrative Agent under the Credit Agreement

5.
Credit Agreement:    The THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December 14, 2018, among ARROW ELECTRONICS, INC.,


    


the Subsidiary Borrowers from time to time parties thereto, the several Banks from time to time parties thereto, BNP PARIBAS, BANK OF AMERICA, N.A., THE BANK OF NOVA SCOTIA, MUFG BANK, LTD., ING BANK N.V., DUBLIN BRANCH, MIZUHO BANK, LTD. and SUMITOMO BANKING CORPORATION as Syndication Agents, JPMORGAN CHASE BANK, N.A., BNP PARIBAS SECURITIES CORP., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, THE BANK OF NOVA SCOTIA, MUFG BANK, LTD., ING BANK N.V., DUBLIN BRANCH, MIZUHO BANK, LTD. and SUMITOMO MITSUI BANKING CORPORATION as Joint Lead Arrangers and Joint Bookrunners, JPMORGAN CHASE BANK, N.A., as Administrative Agent.

2

    



6.
Assigned Interest:
    
Facility Assigned
Aggregate Amount of Commitment/Loans for all Banks
Amount of Commitment/Loans Assigned
Percentage Assigned of Commitment/Loans
“Revolving Commitment”
$
$
   %
“Swing Line Commitment”,
$
$
   %
“Committed Rate Loan”,
$
$
   %
“Swing Line Loan”,
$
$
   %

Effective Date: ______________, 20__ [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

The Assignee agrees to deliver to the Administrative Agent a completed administrative questionnaire in which the Assignee designates one or more credit contacts to whom all syndicate-level information (which may contain material non-public information about the Company, the Loan Parties and their affiliates or their respective securities) will be made available and who may receive such information in accordance with the Assignee’s compliance procedures and applicable laws, including Federal and state securities laws.


3

    


The terms set forth in this Assignment and Assumption are hereby agreed to:

ASSIGNOR

_________________________________
NAME OF ASSIGNOR

By: _____________________
Name:
Title:

ASSIGNEE

_________________________________
NAME OF ASSIGNEE

By: _____________________
Name:
Title:

4

    


[Consented to:]

J.P. CHASE BANK, N.A.,
As an Issuing Bank, Swing Line Bank and the Administrative Agent

By: _____________________
Name:
Title:

BANK OF AMERICA, N.A.,
as an Issuing Bank and as a Swing Line Bank

By:                    
Name:    
Title:    

THE BANK OF NOVA SCOTIA,
as an Issuing Bank and as a Swing Line Bank

By:                    
Name:    
Title:    

BNP PARIBAS,
as an Issuing Bank and as a Swing Line Bank

By:                    
Name:    
Title:    

By:                    
Name:    
Title:    

MUFG BANK, LTD.,
as an Issuing Bank and as a Swing Line Bank

By:                    
Name:    
Title:    

ING BANK N.V., DUBLIN BRANCH,
as an Issuing Bank and as a Swing Line Bank

By:                    
Name:    
Title:    

MIZUHO BANK, LTD.,

5

    


as an Issuing Bank as a Swing Line Bank

By:                    
Name:    
Title:    


SUMITOMO MITSUI BANKING CORPORATION,
as an Issuing Bank and as a Swing Line Bank

By:                    
Name:    
Title:    


[ARROW ELECTRONICS, INC.  

By: _____________________
Name:
Title:]


6

    




ANNEX 1

THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December 14, 2018, among ARROW ELECTRONICS, INC., the Subsidiary Borrowers from time to time parties thereto, the several Banks from time to time parties thereto, BNP PARIBAS, BANK OF AMERICA, N.A., THE BANK OF NOVA SCOTIA, MUFG BANK, LTD., ING BANK N.V., DUBLIN BRANCH, MIZUHO BANK, LTD. and SUMITOMO BANKING CORPORATION as Syndication Agents, JPMORGAN CHASE BANK, N.A., BNP PARIBAS SECURITIES CORP., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, THE BANK OF NOVA SCOTIA, MUFG BANK, LTD., ING BANK N.V., DUBLIN BRANCH, MIZUHO BANK, LTD. and SUMITOMO MITSUI BANKING CORPORATION as Joint Lead Arrangers and Joint Bookrunners, JPMORGAN CHASE BANK, N.A., as Administrative Agent.
    

STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION

1. Representations and Warranties.

1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Credit Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Documents or any collateral thereunder, (iii) the financial condition of the Company, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Credit Document or (iv) the performance or observance by the Company, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Credit Document.

1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Bank under the Credit Agreement, (ii) it satisfies the requirements specified in the Credit Agreement that are required to be satisfied by it in order to acquire the Assigned Interest and become a Bank, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Bank thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Bank thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 11.1 thereof, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Bank and (v) if it is a Non-U.S. Bank, attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Documents and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Credit Documents are required to be performed by it as a Bank, including its obligation pursuant to subsection 8.6 of the Credit Agreement and (c) appoints and authorizes the Applicable Administrative Agent, each Swing

7

    




Line Bank and each Issuing Bank to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement or any instrument or document furnished pursuant hereto or thereto as are delegated to the Administrative Agent, each Swing Line Bank and each Issuing Bank, as the case may be, by the terms thereof, together with such powers as are incidental thereto..

2. Payments. From and after the Effective Date, the Applicable Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.

3. General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by email or telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York.

8

            

EXHIBIT J-1 TO
CREDIT AGREEMENT


FORM OF EXTENSION REQUEST
__________, 20__
JPMorgan Chase Bank, N.A., as Administrative Agent
EXTENSION REQUEST, dated as of the date set forth below, entered into pursuant to the THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December 14, 2018 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”; terms defined therein being used herein as therein defined), among ARROW ELECTRONICS, INC., the Subsidiary Borrowers from time to time parties thereto, the several Banks from time to time parties thereto, BNP PARIBAS, BANK OF AMERICA, N.A., THE BANK OF NOVA SCOTIA, MUFG BANK, LTD., ING BANK N.V., DUBLIN BRANCH, MIZUHO BANK, LTD. and SUMITOMO BANKING CORPORATION as Syndication Agents, JPMORGAN CHASE BANK, N.A., BNP PARIBAS SECURITIES CORP., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, THE BANK OF NOVA SCOTIA, MUFG BANK, LTD., ING BANK N.V., DUBLIN BRANCH, MIZUHO BANK, LTD. and SUMITOMO MITSUI BANKING CORPORATION as Joint Lead Arrangers and Joint Bookrunners, JPMORGAN CHASE BANK, N.A., as Administrative Agent.
Pursuant to Section 2.13(a) of the Credit Agreement, the Company hereby requests that the Banks extend the Termination Date now in effect by a period of one year, to December 14, [2024/2025].
 
Very truly yours,
ARROW ELECTRONICS, INC.
By____________________________
Name:
Title:



            

EXHIBIT J-2 TO
CREDIT AGREEMENT

FORM OF CONTINUATION NOTICE
__________, 20__

JPMorgan Chase Bank, as Administrative Agent
CONTINUATION NOTICE, dated as of the date set forth below, entered into pursuant to the THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December 14, 2018 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”; terms defined therein being used herein as therein defined), among ARROW ELECTRONICS, INC., the Subsidiary Borrowers from time to time parties thereto, the several Banks from time to time parties thereto, BNP PARIBAS, BANK OF AMERICA, N.A., THE BANK OF NOVA SCOTIA, MUFG BANK, LTD., ING BANK N.V., DUBLIN BRANCH, MIZUHO BANK, LTD. and SUMITOMO BANKING CORPORATION as Syndication Agents, JPMORGAN CHASE BANK, N.A., BNP PARIBAS SECURITIES CORP., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, THE BANK OF NOVA SCOTIA, MUFG BANK, LTD., ING BANK N.V., DUBLIN BRANCH, MIZUHO BANK, LTD. and SUMITOMO MITSUI BANKING CORPORATION as Joint Lead Arrangers and Joint Bookrunners, JPMORGAN CHASE BANK, N.A., as Administrative Agent.
The undersigned Bank is delivering this Continuation Notice in response to the Extension Request dated __________, 20__. Pursuant to Section 2.13(a) of the Credit Agreement, the undersigned Bank hereby consents, in its sole discretion, to the extension of the Termination Date to December 14, [2024/2025], as requested by the Company in the Extension Request.
Very truly yours,
[NAME OF BANK]

By____________________________
Name:
Title:



            

EXHIBIT K TO
CREDIT AGREEMENT

FORM OF NEW BANK SUPPLEMENT
SUPPLEMENT, dated _______ __, to the THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December 14, 2018 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”; terms defined therein being used herein as therein defined), among ARROW ELECTRONICS, INC., the Subsidiary Borrowers from time to time parties thereto, the several Banks from time to time parties thereto, BNP PARIBAS, BANK OF AMERICA, N.A., THE BANK OF NOVA SCOTIA, MUFG BANK, LTD., ING BANK N.V., DUBLIN BRANCH, MIZUHO BANK, LTD. and SUMITOMO BANKING CORPORATION as Syndication Agents, JPMORGAN CHASE BANK, N.A., BNP PARIBAS SECURITIES CORP., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, THE BANK OF NOVA SCOTIA, MUFG BANK, LTD., ING BANK N.V., DUBLIN BRANCH, MIZUHO BANK, LTD. and SUMITOMO MITSUI BANKING CORPORATION as Joint Lead Arrangers and Joint Bookrunners, JPMORGAN CHASE BANK, N.A., as Administrative Agent.
W I T N E S S E T H:
WHEREAS, the Credit Agreement provides in subsection 2.10 thereof that any bank or financial institution, although not originally a party thereto, may become a party to the Credit Agreement in accordance with the terms thereof by executing and delivering to the Borrowers and the Administrative Agent a supplement to the Credit Agreement in substantially the form of this Supplement; and
WHEREAS, the undersigned was not an original party to the Credit Agreement but now desires to become a party thereto;
NOW, THEREFORE, the undersigned hereby agrees as follows:
The undersigned agrees to be bound by the provisions of the Credit Agreement and agrees that it shall, on the date this Supplement is accepted by the Borrowers and the Administrative Agent, become a Bank for all purposes of the Credit Agreement to the same extent as if originally a party thereto, with a Revolving Commitment of $__________________.
The undersigned (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Supplement and to consummate the transactions contemplated hereby and to become a Bank under the Credit Agreement, (ii) from and after the date hereof, it shall be bound by the provisions of the Credit Agreement as a Bank thereunder and, to the extent of its Commitment, shall have the obligations of a Bank thereunder, (iii) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 11.1 thereof, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Supplement on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Bank and (v) if it is a Non-U.S. Bank, attached to this Supplement is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the undersigned, (b) agrees that (i) it will, independently and without reliance on the Administrative Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Documents and (ii) it will be bound by the provisions of the Credit Agreement and perform in accordance with their terms all of the obligations which by the terms of


    


the Credit Documents are required to be performed by it as a Bank, including its obligations pursuant to subsection 8.6 of the Credit Agreement and (c) appoints and authorizes the Administrative Agent, each Swing Line Bank and each Issuing Bank to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement or any instrument or document furnished pursuant hereto or thereto as are delegated to the Administrative Agent, each Swing Line Bank and each Issuing Bank, as the case may be, by the terms thereof, together with such powers as are incidental thereto.
The undersigned agrees to deliver to the Administrative Agent a completed administrative questionnaire in which the undersigned designates one or more credit contacts to whom all syndicate-level information (which may contain material non-public information about the Company, the Loan Parties and their affiliates or their respective securities) will be made available and who may receive such information in accordance with the undersigned’s compliance procedures and applicable laws, including Federal and state securities laws.

2

    


IN WITNESS WHEREOF, the undersigned has caused this Supplement to be executed and delivered by a duly authorized officer on the date set forth above.
[NAME OF NEW BANK]
By:         

Title:
Accepted this _____ day of
______________, 20__
ARROW ELECTRONICS, INC.
By:         

Title:
Accepted this _____ day of
______________, 20__
[OTHER BORROWERS]
By:         

Title:
Accepted this _____ day of
______________, 20__
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
By:         

Title:

3

    




4



EXHIBIT L TO
CREDIT AGREEMENT

FORM OF REVOLVING COMMITMENT INCREASE SUPPLEMENT
SUPPLEMENT, dated _______ __,20__ to the THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December 14, 2018 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”; terms defined therein being used herein as therein defined), among ARROW ELECTRONICS, INC., the Subsidiary Borrowers from time to time parties thereto, the several Banks from time to time parties thereto, BNP PARIBAS, BANK OF AMERICA, N.A., THE BANK OF NOVA SCOTIA, MUFG BANK, LTD., ING BANK N.V., DUBLIN BRANCH, MIZUHO BANK, LTD. and SUMITOMO BANKING CORPORATION as Syndication Agents, JPMORGAN CHASE BANK, N.A., BNP PARIBAS SECURITIES CORP., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, THE BANK OF NOVA SCOTIA, MUFG BANK, LTD., ING BANK N.V., DUBLIN BRANCH, MIZUHO BANK, LTD. and SUMITOMO MITSUI BANKING CORPORATION as Joint Lead Arrangers and Joint Bookrunners, JPMORGAN CHASE BANK, N.A., as Administrative Agent.

W I T N E S S E T H:
WHEREAS, pursuant to the provisions of subsection 2.10 of the Credit Agreement, the undersigned may increase the amount of its Revolving Commitment in accordance with the terms thereof by executing and delivering to the Borrowers and the Administrative Agent a supplement to the Credit Agreement in substantially the form of this Supplement; and
WHEREAS, the undersigned now desires to increase the amount of its Revolving Commitment under the Credit Agreement;
NOW THEREFORE, the undersigned hereby agrees as follows:
1. The undersigned agrees, subject to the terms and conditions of the Credit Agreement, that on the date this Supplement is accepted by the Borrowers and the Administrative Agent it shall have its Revolving Commitment increased by $______________, thereby making the amount of its Revolving Commitment $______________.
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be executed and delivered by a duly authorized officer on the date set forth above.
[NAME OF BANK]
By:         

Title:




Accepted this _____ day of
______________, 20__
ARROW ELECTRONICS, INC.
By:         

Title:
[OTHER BORROWERS]
By:         

Title:
Accepted this _____ day of
______________, 20__
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
By:         

Title:


EXHIBIT M-1

[FORM OF]
TAX CERTIFICATE
(For Non-U.S. Banks That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Third Amended and Restated Credit Agreement dated as of December 14, 2018 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among Arrow Electronics, Inc., the Subsidiary Borrowers, BNP Paribas, Bank of America, N.A., The Bank of Nova Scotia, MUFG Bank, Ltd., ING Bank N.V., Dublin Branch, Mizuho Bank, Ltd. and Sumitomo Mitsui Banking Corporation as syndication agents for the Banks thereunder, JPMorgan Chase Bank, N.A., as Administrative Agent, for the Banks thereunder and each Bank from time to time party thereto.
Pursuant to the provisions of Section 8.6 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Loan(s) (as well as any note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) it is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a “ten percent shareholder” of any Borrower within the meaning of Section 881(c)(3)(B) of the Code, (iv) it is not a “controlled foreign corporation” related to any Borrower as described in Section 881(c)(3)(C) of the Code and (v) the interest payments in question are not effectively connected with the undersigned's conduct of a U.S. trade or business.
The undersigned has furnished the Administrative Agent and the Company with a certificate of its non-U.S. Person status on IRS Form W-8BEN or IRS Form W-8BEN-E. By executing this certificate, the undersigned agrees that (1) if the information provided in this certificate changes, the undersigned shall promptly so inform the Company and the Administrative Agent and (2) the undersigned shall have at all times furnished the Company and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
[NAME OF BANK]
By:______________________________________
    Name:
    Title:
Date: ________ __, 20[ ]




EXHIBIT M-2

[FORM OF]
TAX CERTIFICATE
(For Non-U.S. Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Third Amended and Restated Credit Agreement dated as of December 14, 2018 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among Arrow Electronics, Inc., the Subsidiary Borrowers, BNP Paribas, Bank of America, N.A., The Bank of Nova Scotia, MUFG Bank, Ltd., ING Bank N.V., Dublin Branch, Mizuho Bank, Ltd. and Sumitomo Mitsui Banking Corporation, as syndication agents for the Banks thereunder, JPMorgan Chase Bank, N.A., as Administrative Agent, for the Banks thereunder and each Bank from time to time party thereto.
Pursuant to the provisions of Section 8.6 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a “ten percent shareholder” of any Borrower within the meaning of Section 881(c)(3)(B) of the Code, (iv) it is not a “controlled foreign corporation” related to any Borrower as described in Section 881(c)(3)(C) of the Code and (v) the interest payments in question are not effectively connected with the undersigned's conduct of a U.S. trade or business.
The undersigned has furnished its participating Bank with a certificate of its non-U.S. Person status on IRS Form W-8BEN or IRS Form W-8BEN-E. By executing this certificate, the undersigned agrees that (1) if the information provided in this certificate changes, the undersigned shall promptly so inform such Bank in writing and (2) the undersigned shall have at all times furnished such Bank with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

[NAME OF PARTICIPANT]
By:______________________________________
    Name:
    Title:
Date: ________ __, 20[ ]



EXHIBIT M-3


[FORM OF]
TAX CERTIFICATE
(For Non-U.S. Participants That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Third Amended and Restated Credit Agreement dated as of December 14, 2018 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among Arrow Electronics, Inc., the Subsidiary Borrowers, BNP Paribas, Bank of America, N.A., The Bank of Nova Scotia, MUFG Bank, Ltd., ING Bank N.V., Dublin Branch, Mizuho Bank, Ltd. and Sumitomo Mitsui Banking Corporation, as syndication agents for the Banks thereunder, JPMorgan Chase Bank, N.A., as Administrative Agent, for the Banks thereunder and each Bank from time to time party thereto.
Pursuant to the provisions of Section 8.6 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such participation, (iii) with respect to such participation, neither the undersigned nor any of its direct or indirect partners/members is a “bank” extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a “ten percent shareholder” of any Borrower within the meaning of Section 881(c)(3)(B) of the Code, (v) none of its direct or indirect partners/members is a “controlled foreign corporation” related to any Borrower as described in Section 881(c)(3)(C) of the Code and (vi) the interest payments in question are not effectively connected with the undersigned's or its direct or indirect partners/members' conduct of a U.S. trade or business.
The undersigned has furnished its participating Bank with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or IRS Form W-8BEN-E or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or IRS Form W-8BEN-E from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided in this certificate changes, the undersigned shall promptly so inform such Bank and (2) the undersigned shall have at all times furnished such Bank with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

[NAME OF PARTICIPANT]
By:______________________________________
    Name:
    Title:
Date: ________ __, 20[ ]







-Active.12520089.4        
EXHIBIT M-3


[FORM OF]
TAX CERTIFICATE
(For Non-U.S. Banks That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Third Amended and Restated Credit Agreement dated as of December 14, 2018 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among Arrow Electronics, Inc., the Subsidiary Borrowers, BNP Paribas, Bank of America, N.A., The Bank of Nova Scotia, MUFG Bank, Ltd., ING Bank N.V., Dublin Branch, Mizuho Bank, Ltd. and Sumitomo Mitsui Banking Corporation, as syndication agents for the Banks thereunder, JPMorgan Chase Bank, N.A., as Administrative Agent, for the Banks thereunder and each Bank from time to time party thereto.
Pursuant to the provisions of Section 8.6 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Loan(s) (as well as any note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such Loan(s) (as well as any note(s) evidencing such Loan(s)), (iii) with respect to the extension of credit pursuant to this Credit Agreement or any other Credit Document, neither the undersigned nor any of its direct or indirect partners/members is a “bank” extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a “ten percent shareholder” of any Borrower within the meaning of Section 881(c)(3)(B) of the Code, (v) none of its direct or indirect partners/members is a “controlled foreign corporation” related to any Borrower as described in Section 881(c)(3)(C) of the Code and (vi) the interest payments in question are not effectively connected with the undersigned's or its direct or indirect partners/members' conduct of a U.S. trade or business.
The undersigned has furnished the Administrative Agent and the Company with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption (i) an IRS Form W-8BEN or IRS Form W-8BEN-E or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or IRS Form W-8BEN-E from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided in this certificate changes, the undersigned shall promptly so inform the Company and the Administrative Agent and (2) the undersigned shall have at all times furnished the Company and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
[NAME OF BANK]
By:______________________________________
    Name:
    Title:
Date: ________ __, 20[ ]



Exhibit 21

ARROW ELECTRONICS, INC. & SUBSIDIARIES
Organizational (Legal Entity) Structure
As of December 31, 2018

Entity Name

Country
A.E. Petsche Belgium BVBA
 
Belgium
A.E. Petsche Canada, Inc.
 
Canada
A.E. Petsche Company S. de R.L. de C.V.
 
Mexico
A.E. Petsche Company, Inc.
 
Texas
A.E. Petsche SAS
 
France
A.E. Petsche UK Limited
 
United Kingdom
Aiqi Xinxing (Beijing) Information Technology Co. Ltd.
 
China
Annuity Systems Pty Ltd
 
Australia
Arrow (Shanghai) Trading Co. Ltd.
 
China
Arrow Altech Distribution (Pty) Ltd.
 
South Africa
Arrow Altech Holdings (Pty) Ltd.
 
South Africa
Arrow Argentina S.A.
 
Argentina
Arrow Asia Distribution Limited
 
Hong Kong
Arrow Asia Pac Ltd.
 
Hong Kong
Arrow Brasil S.A.
 
Brazil
Arrow Capital Solution BVBA
 
Belgium
Arrow Capital Solutions Nederlands BV
 
Netherlands
Arrow Capital Solutions SAS
 
France
Arrow Capital Solutions UK Ltd
 
United Kingdom
Arrow Capital Solutions, Inc.
 
Delaware
Arrow Central Europe GmbH
 
Germany
Arrow Central Europe Holding Munich GmbH
 
Germany
Arrow Chip One Stop Holdings GK
 
Japan
Arrow Componentes ACCR, S.R.L.
 
Costa Rica
Arrow Components (M) Sdn Bhd
 
Malaysia
Arrow Components (NZ)
 
New Zealand
Arrow Components Mexico S.A. de C.V.
 
Mexico
Arrow Components Sweden AB
 
Sweden
Arrow Denmark, ApS
 
Denmark
Arrow Eastern Europe GmbH
 
Germany
Arrow eCommerce B.V.
 
Netherlands
Arrow ECS (Ireland) Limited
 
Ireland
Arrow ECS (Ireland) Limited (fka Commtech Solutions Limited)
 
Ireland
Arrow ECS (NI) Limited (fka Commtech Distribution Limited)
 
United Kingdom
Arrow ECS a.s.
 
Czech Republic
Arrow ECS AG

Germany



Country (continued)
 
State in which Incorporated or Country in which Organized (continued)
Arrow ECS ANZ Limited
 
New Zealand
Arrow ECS ANZ Pty Ltd
 
Australia
Arrow ECS Asia PTE. Ltd
 
Singapore
Arrow ECS Australia Pty Limited
 
Australia
Arrow ECS B.V.
 
Netherlands
Arrow ECS Baltic OU
 
Estonia
Arrow ECS Brasil Distribuidora Ltda.
 
Brazil
Arrow ECS Canada Ltd.
 
Canada
Arrow ECS Central GmbH
 
Germany
Arrow ECS Denmark A/S
 
Denmark
Arrow ECS Finland OY
 
Finland
Arrow ECS FZCO
 
UAE
Arrow ECS GmbH
 
Germany
Arrow ECS Internet Security AG
 
Austria
Arrow ECS Internet Security, S.L.
 
Spain
Arrow ECS Kft.
 
Hungary
Arrow ECS New Zealand Limited
 
New Zealand
Arrow ECS Nordic A/S
 
Denmark
Arrow ECS Norway AS
 
Norway
Arrow ECS Pty Ltd.
 
Australia
Arrow ECS SA/NV
 
Belgium
Arrow ECS SARL
 
Morocco
Arrow ECS Sarl
 
Luxembourg
Arrow ECS Services A/S
 
Denmark
Arrow ECS Services Sp.z.o.o.
 
Poland
Arrow ECS Sp.z.o.o.
 
Poland
Arrow ECS SPA
 
Italy
Arrow ECS Support Center Morocco, S.A.R.L.A.U
 
Morocco
Arrow ECS Support Center, Ltd.
 
Israel
Arrow ECS Sweden AB
 
Sweden
Arrow ECS, SAS
 
France
Arrow Electronice S.R.L.
 
Romania
Arrow Electronics (China) Trading Co. Ltd.
 
China
Arrow Electronics (CI) Ltd.
 
Cayman Islands
Arrow Electronics (Jersey) Limited
 
Jersey
Arrow Electronics (Shanghai) Co. Ltd.
 
China
Arrow Electronics (Shenzhen) Co. Ltd.
 
China
Arrow Electronics (Sweden) KB
 
Sweden
Arrow Electronics (Thailand) Limited
 
Thailand
Arrow Electronics (U.K.), Inc.
 
Delaware
Arrow Electronics (UK) Ltd.
 
United Kingdom
Arrow Electronics ANZ Holdings Pty Ltd.
 
Australia
Arrow Electronics Asia (S) Pte Ltd.
 
Singapore



Country (continued)
 
State in which Incorporated or Country in which Organized (continued)
Arrow Electronics Asia Limited
 
Hong Kong
Arrow Electronics Australia Pty Ltd.
 
Australia
Arrow Electronics B.V.
 
Netherlands
Arrow Electronics Canada Ltd.
 
Canada
Arrow Electronics China Ltd.
 
Hong Kong
Arrow Electronics Components (Shanghai) Co. Ltd.
 
China
Arrow Electronics Czech Republic s.r.o.
 
Czech Republic
Arrow Electronics D.O.O.
 
Slovenia
Arrow Electronics Danish Holdings ApS
 
Denmark
Arrow Electronics EMEA Group GmbH
 
Germany
Arrow Electronics EMEASA S.r.l.
 
Italy
Arrow Electronics Estonia OU
 
Estonia
Arrow Electronics Funding Corporation
 
Delaware
Arrow Electronics GmbH & Co. KG
 
Germany
Arrow Electronics Hellas S.A.
 
Greece
Arrow Electronics Holdings Vagyonkezelo, Kft
 
Hungary
Arrow Electronics Hungary Kereskedelmi Bt
 
Hungary
Arrow Electronics India Ltd.
 
Hong Kong
Arrow Electronics India Private Limited
 
India
Arrow Electronics International Holdings, LLC
 
Delaware
Arrow Electronics International, Inc.
 
Delaware
Arrow Electronics Italia S.r.l
 
Italy
Arrow Electronics Japan GK
 
Japan
Arrow Electronics Japan K.K.
 
Japan
Arrow Electronics Korea Limited
 
South Korea
Arrow Electronics Labuan Pte Ltd.
 
Malaysia
Arrow Electronics Mexico, S. de R.L. de C.V.
 
Mexico
Arrow Electronics Norwegian Holdings AS
 
Norway
Arrow Electronics Poland Sp.z.o.o.
 
Poland
Arrow Electronics Russ OOO
 
Russia
Arrow Electronics Slovakia s.r.o.
 
Slovakia
Arrow Electronics South Africa LLP
 
South Africa
Arrow Electronics Taiwan Ltd.
 
Taiwan
Arrow Electronics UK Holding Ltd.
 
United Kingdom
Arrow Electronics Ukraine, LLC
 
Ukraine
Arrow Electronics, Ltd.
 
United Kingdom
Arrow Elektronik Ticaret, A.S.
 
Turkey
Arrow Enterprise Computing Solutions India Private Limited
 
India
Arrow Enterprise Computing Solutions Ltd.
 
Israel
Arrow Enterprise Computing Solutions Ltd.
 
United Kingdom
Arrow Enterprise Computing Solutions, Inc.
 
Delaware
Arrow Enterprise Computing Solutions, S.A.
 
Spain
Arrow Finland OY
 
Finland



Country (continued)
 
State in which Incorporated or Country in which Organized (continued)
Arrow France, S.A.
 
France
Arrow Global Asset Disposition, Inc.
 
Delaware
Arrow Global Supply Chain Services Inc.
 
United States of America
Arrow Holdings (Delaware) LLC
 
Delaware
Arrow Iberia Electronica Lda.
 
Portugal
Arrow Iberia Electronica, S.L.U.
 
Spain
Arrow International Holdings L.P.
 
Cayman Islands
Arrow International Holdings Limited
 
Cayman Islands
Arrow Nordic Components AB
 
Sweden
Arrow Norway A/S
 
Norway
Arrow SEED (Hong Kong) Limited
 
Hong Kong
Arrow S-Tech Norway AS
 
Norway
Arrow Systems Integration, Inc.
 
Delaware
Arrow United Holdings LLC
 
Delaware
Arrow United International Holdings LP
 
Cayman Islands
Arrow Value Recovery Belgium BVBA
 
Belgium
Arrow Value Recovery Czech Republic sro
 
Czech Republic
Arrow Value Recovery Denmark ApS
 
Denmark
Arrow Value Recovery EMEA BV
 
Netherlands
Arrow Value Recovery Finland Oy (fka Greentech Finland, OY)
 
Finland
Arrow Value Recovery France SAS
 
France
Arrow Value Recovery Germany GmbH
 
Germany
Arrow Value Recovery Netherlands BV
 
Netherlands
Arrow Value Recovery Sweden AB (fka Greentech Sweden AB)
 
Sweden
Arrow Value Recovery UK LTD
 
United Kingdom
Arrow/Artlink Technology (Hong Kong) Limited
 
Hong Kong
Arrow/Components (Agent) Ltd.
 
Hong Kong
Arrow/Rapac, Ltd.
 
Israel
ARROWECS Portugal Sociedade Unipessoal LDA
 
Portugal
Artlink Technology Co. Ltd.
 
Taiwan
ARW Electronics, Ltd.
 
Israel
ARW Enterprise Computing Solutions, S.A.
 
Spain
ARW Portugal Unipessoal LDA
 
Portugal
ASI Dedicated Services, LLC
 
Delaware
ASI Electrical Services, LLC
 
United States of America
ASI Managed Services, LLC
 
Delaware
Aspen Labs, LLC
 
Idaho
Aspencore China Investment LLC
 
United States of America
Aspencore Media GmbH (fka ICC Media GmbH)
 
Germany
Aspencore, LLC
 
Delaware
Asplenium SA
 
France
ATM Electronic Corp.
 
British Virgin Islands
ATM Electronic Corp.
 
Taiwan



Country (continued)
 
State in which Incorporated or Country in which Organized (continued)
ATM Electronic Corporation (HK) Limited
 
Hong Kong
ATM Electronics Hong Kong Limited
 
Hong Kong
ATM Electronics Technology (Shenzhen) Co. Ltd
 
China
B.V. Arrow Electronics DLC
 
Netherlands
Beijing Arrow SEED Technology Co. Ltd
 
China
Beijing Canon Advertising Co. Ltd.
 
China
Broomco (4184) Limited
 
United Kingdom
Centia Group Ltd.
 
United Kingdom
Centia Ltd.
 
United Kingdom
Channel Support Pty Ltd
 
Australia
Chip One Stop (Hong Kong) Ltd.
 
Hong Kong
Chip One Stop (Shenzhen) Ltd
 
China
Chip One Stop, Inc.
 
Japan
Commtech IOM 2 Unlimited
 
Isle of Man
Commtech Solutions (UK) Limited
 
United Kingdom
Components Agent (Cayman) Limited
 
Cayman Islands
Components Agent Asia Holdings, Ltd.
 
Mauritius
COMPUTERLINKS (UK) Ltd.
 
United Kingdom
COMPUTERLINKS S.A.
 
France
Conrac Asia Display Products Pte. Ltd.
 
Singapore
Converge (Shanghai) International Trading Co., Ltd.
 
China
Converge Asia Pte, Ltd.
 
Singapore
Converge Electronics Trading (India) Private Ltd.
 
India
Converge France SAS
 
France
Converge Netherlands BV
 
Netherlands
Converge Scandinavia AB
 
Sweden
CSS Computer Security Solutions Erwerbs GmbH
 
Germany
CSS Computer Security Solutions Holding GmbH
 
Germany
CSS Computer Security Solutions Ltd.
 
United Kingdom
CT3 Europe Limited
 
Ireland
Data Modul AG
 
Germany
Data Modul Electronics Technology (Shanghai) Co. Ltd.
 
China
Data Modul France S.a r.l
 
France
Data Modul FZE
 
United Arab Emirates
Data Modul Hong Kong Ltd.
 
Hong Kong
Data Modul Iberia S.L.
 
Spain
Data Modul Inc.
 
New York
Data Modul Italia S.r.l.
 
Italy
Data Modul Ltd.
 
United Kingdom
Data Modul Suisse GmbH
 
Switzerland
Data Modul Weikersheim GmbH
 
Germany
Dicopel, Inc.
 
California
Distribution Central (MY) Sdn. Bhd.
 
Malaysia
Distribution Central HK Pty Limited
 
Hong Kong



Country (continued)
 
State in which Incorporated or Country in which Organized (continued)
Distribution Central Pte Limited (SG)
 
Singapore
EC America, Inc.
 
Virginia
EDN Asia Advertising Pte Ltd.
 
Singapore
E-InfoChips KK
 
Japan
e-InfoChips Limited
 
India
e-InfoChips, Inc.
 
United States of America
Embedded Developer, LLC
 
United States of America
eMedia Asia Limited
 
Barbados
Erf 211 Hughes (Pty) Limited
 
South Africa
Eshel Technology Group, Inc.
 
California
Eurocomponentes, S.A.
 
Argentina
Excel Tech, Inc.
 
South Korea
Firewall Systems Pty Limited
 
Australia
Fusion Distribution FZCO
 
UAE
immixGovernment, Inc.
 
Virginia
immixGroup, Inc.
 
Virginia
immixSolutions, Inc.
 
Virginia
immixTechnology, Inc.
 
Virginia
Intex-semi Ltd.
 
Hong Kong
IPVista A/S
 
Denmark
ITM USA Enterprises, Inc.
 
Florida
License Central Pty Ltd
 
Australia
Lite-On Korea, Ltd.
 
South Korea
Marubun Arrow Europe Kft.
 
Hungary
Marubun Corporation
 
Japan
Marubun USA Corporation
 
United States of America
Marubun/Arrow (HK) Limited
 
Hong Kong
Marubun/Arrow (Philippines) Inc.
 
Philippines
Marubun/Arrow (S) Pte Ltd.
 
Singapore
Marubun/Arrow (Shanghai) Co., Ltd.
 
China
Marubun/Arrow (Shenzhen) Electronic Product Consulting Company Limited
 
China
Marubun/Arrow (Thailand) Co., Ltd.
 
Thailand
Marubun/Arrow Asia Ltd.
 
British Virgin Islands
Marubun/Arrow USA II, LLC
 
Delaware
Marubun/Arrow USA, LLC
 
Delaware
Marubun-Arrow (M) Sdn. Bhd
 
Malaysia
Marubun-Arrow Mexico, S. de R.L. de C.V.
 
Mexico
Networld Systems Pty Ltd
 
Australia
NIC Components Asia PTE Ltd.
 
Singapore
NIC Components Corp.
 
New York
NIC Components Europe Limited
 
United Kingdom
NIC Eurotech Limited
 
United Kingdom
Nu Horizons Electronics (Shanghai) Co., Ltd.
 
China



Country (continued)
 
State in which Incorporated or Country in which Organized (continued)
Nu Horizons Electronics Asia PTE Ltd.
 
Singapore
Nu Horizons Electronics Hong Kong Ltd.
 
Hong Kong
NUH Electronics India Private Limted
 
India
NuHo Singapore Holdings, LLC
 
Delaware
Openway Group SA
 
France
Openway SAS
 
France
Pansystem S.r.l.
 
Italy
Pax8, Inc.
 
United States of America
PCG Parent Corp.
 
Delaware
PCG Trading, LLC
 
Delaware
Power and Signal Group GmbH
 
Germany
PT Marubun Arrow Indonesia
 
Indonesia
R.D. Trading Limited
 
United Kingdom
Rack Systems Pty Ltd
 
Australia
Red Education Pty Ltd
 
Australia
Renewal Systems Pty Ltd
 
Australia
Richardson RFPD (Malaysia) Sdn Bhd
 
Malaysia
Richardson RFPD (Thailand) Limited
 
Thailand
Richardson RFPD Australia Pty. Ltd.
 
Australia
Richardson RFPD Canada, Inc.
 
Canada
Richardson RFPD Electronics Trading (China) Co., Ltd.
 
China
Richardson RFPD France SAS
 
France
Richardson RFPD Germany GmbH
 
Germany
Richardson RFPD Hong Kong
 
Hong Kong
Richardson RFPD Israel Ltd.
 
Israel
Richardson RFPD Italy Srl
 
Italy
Richardson RFPD Japan KK
 
Japan
Richardson RFPD Korea Ltd.
 
South Korea
Richardson RFPD Singapore
 
Singapore
Richardson RFPD Spain SL
 
Spain
Richardson RFPD Taiwan
 
Taiwan
Richardson RFPD UK Ltd.
 
United Kingdom
Richardson RFPD, Inc.
 
Delaware
San Systems Pty Ltd
 
Australia
Schuylkill Metals of Plant City, Inc.
 
Delaware
Seneca Data Distributors, Inc.
 
New York
Silicon Frameworks, LLC
 
Idaho
SiliconEgypt Technologies, LLC
 
Egypt
SiliconExpert Holdings LLC
 
Delaware
SiliconExpert Technologies, Inc.
 
California
Sphinx CST Limited
 
United Kingdom
Sphinx CST Networks Limited
 
United Kingdom
Sphinx Group Limited
 
United Kingdom
Sphinx Professional Services Limited
 
United Kingdom



Country (continued)
 
State in which Incorporated or Country in which Organized (continued)
Spoerle Hungary Kereskedelmi Kft
 
Hungary
Titan Supply Chain Services Limited
 
United Kingdom
Titan Supply Chain Services, Pte Ltd.
 
Singapore
TLW Electronics, Ltd.
 
Hong Kong
Transim Technology Corporation
 
California
U.S. Micro Operating Company, LLC
 
Nevada
Ultra Source Electronics (SZ) Co, LTD
 
China
Ultra Source Technology Corp.
 
Taiwan
Ultra Source Trading Hong Kong Limited
 
Hong Kong
Verwaltungsgesellschaft Arrow Electronics GmbH
 
Germany
Yongming Xincheng (Beijing) Technology CO., Ltd.
 
China





EXHIBIT 23




Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements:

1.Registration Statement (Form S-3 No. 333-223547) and related prospectus,
2.Registration Statement (Form S-8 No. 333-45631),
3.Registration Statement (Form S-8 No. 333-118563),
4.Registration Statement (Form S-8 No. 333-184671), and
5.Registration Statement (From S-8 No. 333-207660);

of our reports dated February 7, 2019, with respect to the consolidated financial statements and schedule of Arrow Electronics, Inc. and the effectiveness of internal control over financial reporting of Arrow Electronics, Inc. included in this Annual Report (Form 10-K) of Arrow Electronics, Inc. for the year ended December 31, 2018.


/s/ Ernst & Young LLP


Denver, Colorado
February 7, 2019





Exhibit 31(i)
Arrow Electronics, Inc.
Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002

I, Michael J. Long, certify that:

1.
I have reviewed this Annual Report on Form 10-K of Arrow Electronics, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors  (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Date:
February 7, 2019
 
By:
/s/ Michael J. Long
 
 
 
 
  Michael J. Long
 
 
 
 
  Chairman, President, and Chief Executive Officer
 
 
 







Exhibit 31(ii)
Arrow Electronics, Inc.
Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002

I, Chris D. Stansbury, certify that:

1.
I have reviewed this Annual Report on Form 10-K of Arrow Electronics, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors  (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:
February 7, 2019
 
By:
/s/ Chris D. Stansbury

 
 
 
 
  Chris D. Stansbury
 
 
 
 
  Senior Vice President and Chief Financial Officer
 
 
 
 
 
 
 
 

 





Exhibit 32(i)

Arrow Electronics, Inc.
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”)

In connection with the Annual Report on Form 10-K of Arrow Electronics, Inc. (the "company") for the year ended December 31, 2018 (the "Report"), I, Michael J. Long, Chairman, President, and Chief Executive Officer of the company, certify, pursuant to the requirements of Section 906, that, to the best of my knowledge:

1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company.


Date:
February 7, 2019
 
By:
/s/ Michael J. Long
 
 
 
 
  Michael J. Long
 
 
 
 
  Chairman, President, and Chief Executive
 
 
 
 
  Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the company and will be retained by the company and furnished to the Securities and Exchange Commission or its staff upon request.

 
 


 





Exhibit 32(ii)

Arrow Electronics, Inc.
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”)

In connection with the Annual Report on Form 10-K of Arrow Electronics, Inc. (the "company") for the year ended December 31, 2018 (the "Report"), I, Chris D. Stansbury, Senior Vice President, Finance, and Chief Financial Officer of the company, certify, pursuant to the requirements of Section 906, that, to the best of my knowledge:

1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
                                                                                                          
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company.


Date: 
February 7, 2019
 
By:
/s/ Chris D. Stansbury
 
 
 
 
  Chris D. Stansbury
 
 
 
 
  Senior Vice President and Chief Financial Officer
 
 
 
 
 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the company and will be retained by the company and furnished to the Securities and Exchange Commission or its staff upon request.