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18
indemnification from VEBA. VEBA merged with a publicly–traded, German conglomerate in June 2000.
The combined entity, now known as E.ON AG, remains responsible for VEBA’s liabilities. E.ON AG
acknowledged liability under the terms of the VEBA contract in connection with the Norco and Huntsville
sites and made an initial, partial payment. Neither the company’s demands for subsequent payments nor
its demand for defense and indemnification in the related litigation and other costs associated with the
Norco site were met.
Related Litigation
In October 2005, the company filed suit against E.ON AG in the Frankfurt am Main Regional Court in
Germany. The suit seeks indemnification, contribution, and a declaration of the parties’ respective rights
and obligations in connection with the Riverside County litigation (discussed below) and other costs
associated with the Norco site. In its answer to the company’s claim filed in March 2009 in the German
proceedings, E.ON AG filed a counterclaim against the company for approximately $16.0 million. The
company believes it has reasonable defenses to the counterclaim and plans to defend its position
vigorously. The company believes that the ultimate resolution of the counterclaim will not materially
adversely impact the company’s consolidated financial position, liquidity, or results of operations. The
litigation is currently suspended while the company engages in a court-facilitated mediation with E.ON
AG. The mediation commenced in December 2009 and is ongoing.
The company was named as a defendant in several suits related to the Norco facility, all of which were
consolidated for pre-trial purposes. In January 2005, an action was filed in the California Superior Court in
Riverside County, California (Gloria Austin, et al. v. Wyle Laboratories, Inc. et al.). Approximately 90
plaintiff landowners and residents sued a number of defendants under a variety of theories for
unquantified damages allegedly caused by environmental contamination at and around the Norco site.
Also filed in the Superior Court in Riverside County were Jimmy Gandara, et al. v. Wyle Laboratories, Inc.
et al. in January 2006, and Lisa Briones, et al. v. Wyle Laboratories, Inc. et al. in May 2006; both of which
contain allegations similar to those in the Austin case on behalf of approximately 20 additional plaintiffs.
All of these matters have now been resolved to the satisfaction of the parties.
The company was also named as a defendant in a lawsuit filed in September 2006 in the United States
District Court for the Central District of California (Apollo Associates, L.P., et anno. v. Arrow Electronics,
Inc. et al.) in connection with alleged contamination at a third site, an industrial building formerly leased by
Wyle Laboratories, in El Segundo, California. The lawsuit was settled, though 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.
Impact on Financial Statements
The company believes that any cost which it may incur in connection with environmental conditions at the
Norco, Huntsville, and El Segundo sites and the related litigation is covered by the contractual
indemnifications (except, under the terms of the environmental indemnification, for the first $.5 million),
discussed above. The company believes that recovery of costs incurred to date associated with the
environmental clean-up of the Norco and Huntsville sites, is probable. Accordingly, the company
increased the receivable for amounts due from E.ON AG by $3.3 million during 2010 to $44.2 million.
The company’s net costs for such indemnified matters may vary from period to period as estimates of
recoveries are not always recognized in the same period as the accrual of estimated expenses.
Also included in the proceedings against E.ON AG is a claim for the reimbursement of pre-acquisition tax
liabilities of Wyle in the amount of $8.7 million for which E.ON AG is also contractually liable to indemnify
the company. E.ON AG has specifically acknowledged owing the company not less than $6.3 million of
such amounts, but its promises to make payments of at least that amount were not kept. The company
also believes that the recovery of these amounts is probable.
In connection with the acquisition of Wyle, the company acquired a $4.5 million tax receivable due from
E.ON AG (as successor to VEBA) in respect of certain tax payments made by Wyle prior to the effective
date of the acquisition, the recovery of which the company also believes is probable.