-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, hIsEuzpxgC9nhtv54M80Sj7F9Pqdj4lPsNXjlsaJRDaVcBDFrwVlNc0J84YRoFdc VM4ZIFtTOI1dDswO/eV51g== 0000950152-95-001310.txt : 19950622 0000950152-95-001310.hdr.sgml : 19950622 ACCESSION NUMBER: 0000950152-95-001310 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950621 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIONEER STANDARD ELECTRONICS INC CENTRAL INDEX KEY: 0000078749 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 340907152 STATE OF INCORPORATION: OH FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-05734 FILM NUMBER: 95548409 BUSINESS ADDRESS: STREET 1: 4800 E 131ST ST CITY: CLEVELAND STATE: OH ZIP: 44105 BUSINESS PHONE: 2165873600 10-K405 1 PIONEER STANDARD 10-K405 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K X Annual Report Pursuant to Section 13 or 15(d) ---- of the Securities Exchange Act of 1934 (Fee required) For the fiscal year ended March 31, 1995 or Transition Report Pursuant to Section 13 or 15(d) --- of the Securities Exchange Act of 1934 Commission File No. 0-5734 Pioneer-Standard Electronics, Inc. ------------------------------------------------------ (Exact name of Registrant as specified in its charter) Ohio 34-0907152 - ------------------------------- ---------------------- (State or other jurisdiction of (I.R.S. employer iden- incorporation or organization) tification no.) 4800 East 131st Street, Cleveland, Ohio 44105 - --------------------------------------- ---------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (216) 587-3600 -------------- Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered - ------------------- ----------------------------------------- None None Securities registered pursuant to Section 12(g) of the Act: Common Shares, without par value -------------------------------- (Title of class) Common Share Purchase Rights ---------------------------- (Title of class) 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 --------------------- --------------------- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of 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. X ----- The aggregate market value of voting shares of the Registrant held by non-affiliates (which excludes voting shares held by officers and Directors of the Registrant) was $314,199,517 as of June 1, 1995, computed on the basis of the last reported sale price per share ($22.875) of such shares on The Nasdaq Stock Market. The number of Common Shares outstanding as of June 1, 1995 was 14,933,771. 2 DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's definitive Proxy Statement to be used in connection with its Annual Meeting of Shareholders to be held on July 25, 1995 are incorporated by reference into Part III of this Form 10-K. Except as otherwise stated, the information contained in this Annual Report on Form 10-K is as of March 31, 1995. The Common Share information contained in this Form 10-K reflects a three-for-two share split effected in the form of a 50% share dividend declared on June 23, 1994 paid on August 1, 1994 to shareholders of record on July 6, 1994. PART I Item 1. Business (a) Pioneer-Standard Electronics, Inc. was organized as an Ohio corporation in 1963 and maintains its principal office at 4800 East 131st Street, Cleveland, Ohio 44105 (telephone number (216) 587-3600). The Company first offered its securities to the public in 1971. In November, 1982, the Company purchased substantially all of the assets of the Electronics and Military divisions of The Harvey Group, Inc., a New York corporation. On December 28, 1990, the Company purchased from Lex Electronics, Inc., a New York corporation, certain assets of Lex's Computer Systems Division. On June 1, 1994, Pioneer-Standard Canada Inc., a newly-formed Canadian subsidiary of the Company, purchased from United Westburne Inc., a Canadian corporation, certain of the assets and assumed certain liabilities of Westburne's Zentronics Division, which the Company believes is one of the largest distributors of electronic components and computer products in Canada. There have not been any material changes in the nature of the business done by the Company since April 1, 1994. Except as otherwise stated, the term "Company" as used herein shall mean Pioneer-Standard Electronics, Inc. and Pioneer-Standard Canada Inc. (b) The Company is engaged in the distribution of industrial and end-user electronic products, which business comprises only one basic industry segment. (c) The following is a description of various aspects of the Company's business: Industrial and End-User Distribution - The Company distributes a broad range of electronics components and computer products manufactured by others. These products are sold to original equipment manufacturers, value-added resellers, research laboratories, government agencies, and end-users, including manufacturing -2- 3 companies, and service and other non-manufacturing organizations. These products are classified into three broad categories: semiconductors, computer products, and passive and electromechanical components. During fiscal 1995, semiconductor products accounted for 37% of the Company's sales compared with 41% in 1994 and 37% in 1993. These products include microprocessors, memory devices, programmable logic devices, analog and digital integrated circuits and other semiconductor devices. During fiscal 1995, computer products accounted for 38% of the Company's sales compared with 33% in 1994 and 39% in 1993. These products include computers (primarily mini and personal), display terminals, disk drives, development systems and networking products. During fiscal 1995, passive and electromechanical products accounted for 22% of the Company's sales, compared with 24% in 1994 and 21% in 1993. These products include capacitors, connectors, resistors, potentiometers, switches and power conditioning equipment. As a part of its distributor operations, the Company provides value-added services including point of use inventory management, systems integration, just-in-time kitting operations, memory and logic device programming and connector assemblies to customer specifications. Sales amounts for these services are included among the three broad categories discussed above. Miscellaneous products accounted for 3% of sales in 1995, 2% of sales in 1994 and for 3% of sales in 1993. Pioneer Technologies Group, Inc. - The Company owns 50% of the outstanding common stock of Pioneer Technologies Group, Inc. ("Pioneer Technologies"), a Maryland corporation headquartered in Gaithersburg, Maryland. The business of Pioneer Technologies is substantially the same as that of the Company. The companies have an agreement which provides, among other things, that they have the right to buy each other's products at cost of the product plus handling. In addition, Pioneer Technologies utilizes the Company's data processing system for processing order, warehousing, accounting and administrative information, for which it is charged a monthly fee. For further information as to transactions between the companies, including certain first right of refusal agreements concerning the Company's 50% ownership of Pioneer Technologies, see Note 9 (Pioneer Technologies Group, Inc.) of Notes to Financial Statements of the Company. Products Distributed and Sources of Supply - The Company (together with Pioneer Technologies) is the third largest of the approximately 1,500 electronics distributors serving North American markets in terms of combined sales. The Company markets electronic components supplied by over 100 manufacturers. A majority of the Company's revenues comes from products sourced by relatively few suppliers. During the 1995 fiscal year, products purchased from the Company's five largest suppliers accounted for 73% of total sales volume, with Digital Equipment Corporation and Intel Corporation being the largest two suppliers. The loss of any one -3- 4 of the top five suppliers and/or a combination of certain other suppliers could have a material adverse effect on the Company's sales and earnings unless alternative products manufactured by others are available to the Company. The majority of the products sold by the Company are purchased pursuant to distributor agreements which generally provide for inventory return privileges by the Company upon cancellation of a distributor agreement. The distributor agreements also typically provide protection to the Company for product obsolescence and price erosion. The Company believes it has good relationships with its suppliers. Customers - The Company serves over 19,000 customers in many major markets of North America. No single customer accounted for more than five percent of the Company's total sales for the fiscal year ended March 31, 1995. Backlog - The Company historically has not had a significant backlog of orders, although some shipments may be scheduled for delivery over an extended period of time. There was not a significant backlog during the last fiscal year. Competition - The sale and distribution of industrial electronic components and computer products are highly competitive, primarily with respect to price and product availability, but also with respect to service, variety and availability of products carried, number of locations and promptness of service. Many of the distributors with whom the Company competes are regional or local distributors. However, several of the Company's strongest competitors have national and international distribution businesses. The Company also experiences competition from manufacturers, including some of the Company's suppliers, who may sell directly to the industrial and end-user account base. Employees - The Company currently has 1,399 employees, with approximately 1,376 of these persons employed on a full-time basis and the balance on a part-time basis. The Company is not a party to any collective bargaining agreement, has had no strikes or work stoppages and considers its employee relations to be excellent. (d) Prior to fiscal 1995, the distribution of the Company's products has been primarily in the United States. The Company gained a West Coast presence through its March, 1989 acquisition of the assets of Compumech Electronics, Inc. and its December, 1990 acquisition of certain assets of the Lex Computer Systems Division of Lex Electronics, Inc. The Company entered the Canadian market through its June, 1994 acquisition of certain assets of the Zentronics division of United Westburne Inc. Export sales are not a significant portion of the Company's sales. -4- 5 Item 2. Properties The Company's major distribution facilities used in the business are set forth below:
Owned or Expiration Date Location Sq. Ft. Leased of Lease (1) -------- ------- -------- -------------- Chicago, Illinois 11,300 Leased April 14, 1998 Cleveland, Ohio (2) 87,000 Owned Dallas, Texas 13,500 Leased October 31, 1999 Dayton, Ohio 60,800 Owned Eden Prairie, Minnesota 12,800 Leased August 31, 1997 Freemont, California 12,000 Leased March 15, 1999 Irvine, California 14,700 Leased February 1, 1997 Lexington, Massachusetts 26,400 Owned Montreal, Canada 12,100 Leased February 28, 1999 Solon, Ohio 86,300 Leased March 31, 1996 Solon, Ohio 30,000 Leased June 30, 1995 Solon, Ohio 41,000 Leased March 31, 1999 Solon, Ohio 44,700 Leased May 31, 1999 Toronto, Canada 32,700 Leased May 31, 1997 Twinsburg, Ohio (3) 106,000 Owned Woodbury, New York 35,600 Leased September 30, 1997
- --------------- (1) The major leases contain renewal options for periods ranging from one to twenty years. (2) Corporate headquarters. (3) Corporate Distribution Center. The Company also has entered into various leases for distribution facilities of 10,000 square feet or less. Item 3. Legal Proceedings As of March 31, 1995, the Company was not a party to any material pending legal proceedings. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of the Company's security holders during the last quarter of its fiscal year ended March 31, 1995. -5- 6 Executive Officers of the Company(1) The name, age and positions of each executive officer of the Company as of June 1, 1995 are as follows:
Name Age Position ---- --- -------- James L. Bayman 58 Chief Executive Officer of the Company since April 3, 1995, and President of the Company since June, 1984. Chief Operating Officer of the Company from June, 1984 to April 3, 1995. Preston B. Heller, Jr. 65 Chairman of the Board of the Company since June, 1984. Chief Executive Officer of the Company from June, 1984 to April 3, 1995. Arthur Rhein 49 Senior Vice President of the Company since April, 1993 and Vice President - Marketing of the Company from 1986 to April, 1993. Prior thereto, Vice President - Northeast Division of the Company from 1984 to 1986. John V. Goodger 59 Vice President, Treasurer, and Assistant Secretary of the Company since February, 1990. Prior thereto, Vice President, Treasurer and Assistant Secretary of Ferro Corporation from 1987 to 1990 and Vice President and Treasurer of Ferro Corporation from 1984 to 1990. Janice M. Margheret 40 Senior Vice President of the Company since April, 1993 and Vice President and Controller of the Company from July, 1987 to April, 1993. Prior thereto, Group Controller of the Company from 1983 to 1987.
-6- 7 William A. Papenbrock 56 Secretary of the Company since 1986. Mr. Papenbrock is a partner of the law firm of Calfee, Halter & Griswold(2).
__________________________ (1) The description of Executive Officers called for in this Item is included pursuant to Instruction 3 to Section (b) of Item 401 of Regulation S-K. (2) The law firm of Calfee, Halter & Griswold serves as counsel to the Company. There is no relationship by blood, marriage or adoption among the above-listed officers. Messrs. Heller, Bayman, Rhein, and Goodger and Ms. Margheret have entered into Amended and Restated Employment Agreements with the Company, all of which are included as Exhibits hereto. Messrs. Heller, Bayman, Rhein, and Goodger and Ms. Margheret hold office until terminated as set forth in their Amended and Restated Employment Agreements. Mr. Papenbrock holds office until his successor is elected by the Board of Directors. -7- 8 PART II Item 5. Market for Registrant's Common Stock and Related Stockholder Matters The Company's Common Shares, without par value, are traded on The Nasdaq Stock Market. Common Share prices are quoted daily under the symbol PIOS. The high and low sales prices for the Common Shares, and the cash dividends paid on the Common Shares, for each quarter of the two most recent fiscal years and additional information required by this Item is included under Exhibit 99(c) to this Form 10-K Annual Report. Cash dividends are payable quarterly, upon authorization of the Board of Directors. Regular payment dates are the 1st day of August, November, February and May. The Company maintains a Dividend Reinvestment Plan whereby cash dividends, and a maximum of an additional $5,000 per month, may be invested in the Company's Common Shares at no commission cost. On April 25, 1989, the Company adopted a Common Share Purchase Rights Plan. For further information about the Common Share Purchase Rights Plan, see Note 6 (Common Share Purchase Rights Plan) of Notes to Financial Statements of the Company. Item 6. Selected Financial Data The information required by this Item, is included under Exhibit 99(d) to this Form 10-K Annual Report. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The information required by this Item is included under Exhibit 99(e) to this Form 10-K Annual Report. Item 8. Financial Statements and Supplementary Data The information required by this Item is included under Exhibit 99(f) to this Form 10-K Annual Report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. -8- 9 PART III Item 10. Directors and Executive Officers of the Registrant Information required by this item as to the Directors of the Company appearing under the caption "Election of Directors" in the Company's Proxy Statement to be used in connection with the Annual Meeting of Shareholders to be held on July 25, 1995 (the "1995 Proxy Statement") is incorporated herein by reference. Information required by this item as to the executive officers of the Company is included in Part I of this Annual Report on Form 10-K. Item 11. Executive Compensation The information required by this item is incorporated herein by reference to "Compensation of Executive Officers" in the 1995 Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management The information required by this item is incorporated herein by reference to "Share Ownership" in the 1995 Proxy Statement. Item 13. Certain Relationships and Related Transactions The information required by this item is incorporated herein by reference to "Election of Directors - Certain Transactions" in the 1995 Proxy Statement. -9- 10 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) The following financial statements and schedules are filed as part of this report on Exhibit 99(f) as indicated: (1) Financial Statements and Schedules Pioneer-Standard Electronics, Inc. Report of independent auditors Balance sheet as of March 31, 1995 and 1994 For the years ended March 31, 1995, 1994 and 1993: Statements of income Statements of shareholders' equity Statements of cash flows Notes to financial statements Report of independent auditors Schedules for years ended March 31, 1995, 1994 and 1993: VIII - Valuation and qualifying accounts Quarterly Financial Data Pioneer Technologies Group, Inc. Report of independent auditors Balance sheet as of March 31, 1995 and 1994 For the years ended March 31, 1995, 1994 and 1993: Statements of income and retained earnings Statements of cash flows Notes to financial statements Schedules for years ended March 31, 1995, 1994 and 1993: VIII - Valuation and qualifying accounts All other schedules have been omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements or the notes thereto. -10- 11 (2) Exhibits See the Index to Exhibits at page E-1 of this Form 10-K. (b) Reports on Form 8-K No Current Reports on Form 8-K were filed during the quarter ended March 31, 1995. -11- 12 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. PIONEER-STANDARD ELECTRONICS, INC. Date: June 20, 1995 By: /s/ James L. Bayman ------------------- James L. Bayman, President and Chief Executive Officer 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 and on the dates indicated: Signature and Title Date - ------------------- ---- /s/ Preston B. Heller, Jr. Chairman of the ) - ---------------------------- Board ) Preston B. Heller, Jr. ) ) ) /s/ John V. Goodger Vice President, ) - ---------------------------- Treasurer and ) John V. Goodger Assistant Secretary ) ) ) /s/ Janice M. Margheret Senior Vice ) - ---------------------------- President ) Janice M. Margheret ) ) /s/ James L. Bayman Director ) - ---------------------------- ) James L. Bayman ) ) /s/ Frederick A. Downey Director ) June 20, 1995 - ---------------------------- ) Frederick A. Downey ) ) /s/ Victor Gelb Director ) - ---------------------------- ) Victor Gelb ) ) /s/ Gordon E. Heffern Director ) - ---------------------------- ) Gordon E. Heffern ) ) /s/ Arthur Rhein Director ) - ---------------------------- ) Arthur Rhein ) ) Director ) - ---------------------------- ) Edwin Z. Singer ) ) /s/ Thomas C. Sullivan Director ) - ---------------------------- ) Thomas C. Sullivan ) ) /s/ Karl E. Ware Director ) - ---------------------------- ) Karl E. Ware -12- 13 Pioneer-Standard Electronics, Inc. Exhibit Index
Sequential Exhibit No. Description Page No. - ----------- ----------- ---------- 3.(a) Amended Articles of Incorporation of Pioneer-Standard Electronics, Inc., which is incorporated herein by reference from the Company's Annual Report on Form 10-K for the year ended March 31, 1982. N/A (b) Amended Code of Regulations, as amended, which is incorporated herein by reference from the Company's Annual Report on Form 10-K for the year ended March 31, 1988. N/A 4.(a) Credit Agreement dated as of January 23, 1992 by and among the Company and three banks, which is incorporated herein by reference from the Company's Annual Report on Form 10-K for the year ended March 31, 1992. N/A (b) Amendment Agreement dated as of June 30, 1993 by and among the Company, National City Bank, Society National Bank (successor in interest to Ameritrust Company National Association) and Star Bank, N.A., which is incorporated herein by reference from the Company's Annual Report on Form 10-K for the year ended March 31, 1994. N/A (c) Second Amendment Agreement dated as of May 27, 1994 by and among the Company, National City Bank, Society National Bank (successor in interest to Ameritrust Company National Association) and Star Bank, N.A. and National City Bank, as Agent, which is incorporated herein by reference from the Company's Annual Report on Form 10-K for the year ended March 31, 1994. N/A (d) Consolidated Amendment No. 1 to Credit Agreement dated as of October 28, 1994 by and among the Company, National City Bank and Star Bank, N.A. and National City Bank, as Agent. 16 (e) Consolidated Amendment No. 2 to Credit Agreement dated as of February 28, 1995 by and among the Company, National City Bank and Star Bank, N.A. and National City Bank, as Agent. 22 (f) Rights Agreement dated as of April 25, 1989 by and between the Company and AmeriTrust Company National Association, which is incorporated herein by reference from the Company's Annual Report on Form 10-K for the year ended March 31, 1989. N/A
E-1 14
Sequential Exhibit No. Description Page No. - ----------- ----------- ---------- (g) Note Purchase Agreement dated as of October 31, 1990 by and between the Company and Teachers Insurance and Annuity Association of America, which is incorporated herein by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1990. N/A (h) Amendment No. 1 to Note Purchase Agreement dated as of November 1, 1991 by and between the Company and Teachers Insurance and Annuity Association of America, which is incorporated herein by reference from the Company's Annual Report on Form 10-K for the year ended March 31, 1993. N/A 10.(a) Amended and Restated Employment Agreement effective as of April 3, 1995 by and between the Company and Preston B. Heller, Jr. 33 (b) Amended and Restated Employment Agreement effective as of April 3, 1995 by and between the Company and James L. Bayman. 46 (c) Amended and Restated Employment Agreement effective as of April 3, 1995 by and between the Company and Janice M. Margheret. 61 (d) Amended and Restated Employment Agreement effective as of April 3, 1995 by and between the Company and Arthur Rhein. 76 (e) Amended and Restated Employment Agreement effective as of April 3, 1995 by and between the Company and John V. Goodger. 91 (f) Stock Purchase Agreement dated July 24, 1986 among Pioneer-Standard Electronics, Inc. and the other shareholders of Pioneer Technologies Group, Inc., which is incorporated herein by reference from the Company's Current Report on Form 8-K dated July 24, 1986. N/A (g) 1982 Incentive Stock Option Plan, as amended, which is incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1988. N/A (h) Amended and Restated 1991 Stock Option Plan, which is incorporated by reference from the Company's Form S-8 Registration Statement dated April 28, 1994. N/A (i) Asset Purchase Agreement dated April 22, 1994 between Pioneer-Standard Electronics, Inc. and Westburne Industrial Enterprises Ltd., which is incorporated herein by reference from the Company's Current Report on Form 8-K dated June 1, 1994. N/A
E-2 15
Sequential Exhibit No. Description Page No. - ----------- ----------- ---------- 11. Statement regarding computation of per share earnings. 106 21. Subsidiaries of the Registrant, which is incorporated herein by reference from the Company's Annual Report on Form 10-K for the year ended March 31, 1994. N/A 24. Consents of Ernst & Young LLP, Independent Auditors. 107 27. Financial Data Schedule 109 99.(a) Certificate of Insurance Policy effective November 1, 1995 between Chubb Group of Insurance Companies and Pioneer-Standard Electronics, Inc. 110 99.(b) Forms of Amended and Restated Indemnification Agreement entered into by and between the Company and each of its Directors and Executive Officers, which is incorporated herein by reference from the Company's Annual Report on Form 10-K for the year ended March 31, 1994. N/A 99.(c) Dividend Information and Price Range of Common Shares 111 99.(d) Selected Financial Data 112 99.(e) Management's Discussion and Analysis of Financial Condition and Results of Operations. 113 99.(f) Financial Statements and Schedules listed under Items 14(a). 116
E-3 EX-4.D 2 PIONEER STANDARD 10-K405 EX-4(D) 1 Exhibit 4(d) CONSOLIDATED AMENDMENT NO. 1 TO CREDIT AGREEMENT This Consolidated Amendment No. 1 to Credit Agreement (this "Amendment"), dated as of October 28, 1994, is entered into by and among Pioneer-Standard Electronics, Inc. (Borrower), National City Bank, Society National Bank (successor in interest to Ameritrust Company National Association) and Star Bank, N.A. (together "banks") and National City Bank in its capacity as agent of the banks ("NCB-Agent") for the purposes of the Credit Agreement referred to below and the related writings. WITNESSETH: WHEREAS, the parties have entered into a Credit Agreement dated January 23, 1992, as amended by a certain Amendment Agreement dated as of June 30, 1993 (the "First Amendment") and a certain Second Amendment Agreement dated as of May 27, 1994 (the "Second Amendment") (as amended, the "Credit Agreement" all terms used in the Credit Agreement being used herein with the same meaning), which sets forth the terms and conditions upon which Borrower may obtain (a) "subject loans" on a revolving basis until the "conversion date" (originally January 1, 1995 but previously extended until January 1, 1997), as that term is defined in the Credit Agreement, and on an amortizing basis thereafter and (b) "subject BAs"; and WHEREAS, the parties desire to amend certain provisions of the Credit Agreement to (a) increase the aggregate amount of the subject commitments from thirty-five million dollars ($35,000,000) to forty-five million dollars ($45,000,000) and (b) extend the term of the subject commitments from January 1, 1997 until January 1, 1998; and WHEREAS, in light of the fact that certain previous amendments set forth in the First Amendment and/or the Second Amendment have been affected by later amendments and/or will be affected by this Amendment and for ease of reference, the parties also desire to restate and consolidate in this Amendment all amendments to the Credit Agreement that are effective on and as of the date hereof; NOW, THEREFORE, in consideration of the premises above and the mutual covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: SECTION I - AMENDMENTS TO CREDIT AGREEMENT A. Subsections 2A.01 and 2A.02 of the Credit Agreement are hereby amended in their entirety to read as follows: 2A.01 AMOUNTS - The aggregate amount of the subject commitments shall be forty-five million dollars ($45,000,000), but that amount may be reduced from time to time pursuant to subsection 2A.03 or 2A.04 and the subject commitments may be terminated pursuant to section 5B. The amount of each bank's subject commitment (subject to such reduction or termination), and the proportion (expressed as a percentage) that it bears to all of the subject commitments, is set forth opposite the bank's name below, to-wit: $22,500,000 50% National City Bank 2 13,500,000 30% Society National Bank 9,000,000 20% Star Bank, N.A. ----------- ---- $45,000,000 100% 2A.02 TERM - Each subject commitment shall commence as of the date of this Agreement and shall remain in effect on a revolving basis until January 1, 1998 (the "conversion date") and thereafter on an amortizing basis until its expiration on the last amortizing date, EXCEPT that a later conversion date may be established from time to time pursuant to subsection 2A.06 and EXCEPT that the subject commitments shall end in any event upon any earlier reduction thereof to zero pursuant to subsection 2A.03 or 2A.04 or any earlier termination pursuant to section 5B. B. Subsection 3B.01, 3B.02, 3B.03, 3B.04 and 3B.05 of the Credit Agreement are hereby amended their entirety to read as follows: 3B.01 NET WORTH - Borrower will not suffer or permit the sum of the consolidated net worth of the companies at any time to be less than the then required minimum amount. The required minimum amount shall be eighty- nine million dollars ($89,000,000) EXCEPT that the required minimum amount shall be permanently increased (a) on June 30, 1994 and on each quarterly date thereafter by an amount equal to the sum of fifty percent (50%) of the consolidated net income of the companies, if any, for the quarter-annual period then ending plus (b) upon each issuance or other sale by Borrower of any of its equity securities by an amount equal to the net proceeds (after costs and expenses) thereof. 3B.02 LEVERAGE - Borrower will not suffer or permit the total liabilities of the companies at any time to exceed an amount equal to two hundred twenty-five percent (225%) of the sum of the net worth of the companies, all as determined on a consolidated basis. 3B.03 WORKING CAPITAL - Borrower will not suffer or permit the companies' aggregate working capital at any time to fall below sixty million dollars ($60,000,000). 3B.04 CURRENT RATIO - Borrower will not suffer or permit the current assets of the companies at any time to fall below an amount equal to one and seven-tenths (1.7) times the amounts of their current liabilities, all as determined on a consolidated basis. 3B.05 FIXED CHARGE COVERAGE - Borrower will not suffer or permit the aggregate of (a) the aggregate net income of the companies (EXCEPT Borrower's equity in any income or loss of PTGI) plus (b) the aggregate interest expense of the companies plus (c) the aggregate federal, state and local income taxes of the companies plus (d) the aggregate operating lease expense of the companies 3 for any four-quarter period to be less than an amount equal to one hundred eighty percent (180%) of the sum of (a) the aggregate interest expense of the companies plus (b) The aggregate operating lease expense of the companies for that four-quarter period, all as determined on a consolidated basis. C. Subsection 3D.01 of the Credit Agreement is hereby amended by replacing the period at the end thereof with the word "or" and by adding to the end thereof the following new clause (iii): (iii) Borrower's investment in Pioneer-Standard Canada Inc. (exclusive of retained earnings of Pioneer-Standard Canada Inc.) so long as the aggregate amount of such investments does not exceed ten million eight hundred thousand dollars ($10,800,000). D. Subsection 3D.02 of the Credit Agreement is hereby amended by replacing the period at the end thereof with the word "or" and by adding to the end thereof the following new clause (v): (v) any advance or loan to, or guaranty of the obligations of, Pioneer-Standard Canada Inc., so long as the aggregate amount of all such advances, loans and guaranties does not exceed eighteen million five hundred thousand dollars ($18,500,000) at any one time. E. Subsection 3D.03(ii)(A) of the Credit Agreement is hereby amended by deleting the reference to "fifteen million dollars ($15,000,000)" and substituting in lieu thereof a reference to "twenty million dollars ($20,000,000)". F. The following new definition is hereby added to section 9 of the Credit Agreement: company refers to Borrower or to a subsidiary of Borrower, as the case may be; SECTION II - CONDITIONS PRECEDENT It is a condition precedent to the effectiveness of this Amendment that, prior to or on the date hereof, the following items shall have been delivered to NCB-Agent (in form and substance acceptable to NCB-Agent): (A) an Amended and Restated Promissory Note ("Amended Note") in favor of each bank, in the form of EXHIBIT A to this Amendment, with all blanks appropriately completed, duly executed by Borrower; (B) an Acknowledgment of Receipt of a copy of, and Consent and Agreement to the terms of, this Amendment and the Amended Notes by Pioneer-Standard Canada Inc. with respect to a certain Continuing Guaranty of Payment executed and delivered to NCB-Agent by such entity and dated May 27, 1994; (C) a Certificate, dated as of the date hereof, of the secretary of Borrower certifying (1) that Borrower's Articles of Incorporation and Code of Regulations have not been amended since the execution of the Credit Agreement (or certifying that true, correct and complete copies of any 4 amendments are attached., (2) that copies of resolutions of the Board of Directors of Borrower are attached with respect to the approval of this Amendment and of the matters contemplated hereby and authorizing the execution, delivery and performance by Borrower of this Amendment and each other document to be delivered pursuant hereto and (3) as to the incumbency and signatures of the officers of Borrower signing this Amendment and each other document to be delivered pursuant hereto; and (D) Such other documents as NCB-Agent may request to implement this Amendment and the transactions contemplated hereby. If NCB-Agent or banks shall consummate the transactions contemplated hereby prior to the fulfillment of any of the conditions precedent set forth above, the consummation of such transactions shall constitute only an extension of the time for the fulfillment of such conditions and not a waiver thereof. Upon receipt of the properly completed and executed Amended Notes, banks agree to return to Borrower the previously executed notes respecting the subject loans and the same be marked "Replaced or "Substituted" or with words of like import. SECTION III - AGREEMENTS CONCERNING PIONEER-STANDARD CANADA INC. Borrower agrees to cause it s subsidiary, Pioneer-Standard Canada Inc., to comply with all the provisions of sections 3A, 3B, 3C and 3D of the Credit Agreement and agrees that all references to financial information in section 3A shall be deemed to be references to financial information of Borrower and its subsidiaries on a consolidated basis; provided, that Pioneer-Standard Canada Inc, shall not be required to comply with the provisions of subsection 3D.06 (captioned "DIVIDENDS"). SECTION IV - REPRESENTATIONS AND WARRANTIES Borrower hereby represents and warrants to each of the other parties to this Amendment that (A) none of the representations and warranties made in subsections 4B.01 through 4B.08 of the Credit Agreement has ceased to be true and complete in any material respect as of the date hereof; and (B) as of the date hereof no "default under this Agreement" has occurred that is continuing. SECTION V - ACKNOWLEDGMENTS CONCERNING OUTSTANDING LOANS Borrower acknowledges and agrees that, as of the date hereof, all of Borrower's outstanding loan obligations to banks are owed without any offset, deduction, defense or counterclaim of any nature whatsoever. SECTION VI - REFERENCES On and after the effective date of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", or words of like import referring to the Credit Agreement, and in the subject notes of other related writings to the "Credit Agreement" "thereof", or words of like import referring to the Credit Agreement shall mean and refer to the Credit Agreement as amended hereby. The Credit Agreement, as amended by this Amendment, is and shall be in full force and effect and is hereby ratified and confirmed in all respects. To the extent any amendment set forth in the First 5 Amendment or the Second Amendment is omitted from this Amendment, the same shall be deemed eliminated as between Borrower and the other parties hereto as of the date hereof. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of NCB-Agent or banks under the Credit Agreement or constitute a waiver of any provisions of the Credit Agreement except as specifically set forth herein. From and after the date of this Amendment references in the Credit Agreement to Exhibit B shall be deemed to the references to the form of the Amended Note attached hereto as Exhibit A. SECTION VII - COUNTERPARTS AND GOVERNING LAW This Amendment may be executed in any number of counterparts, each counterpart to be executed by one or more of the parties but, when taken together, all counterparts shall constitute one agreement. This Amendment, and the respective rights and obligations of the parties hereto shall be construed in accordance with and governed by Ohio Law. IN WITNESS WHEREOF, the Borrower, NCB-Agent and the banks have caused this Amendment to be executed by their authorized officers as of the date and year first above written. National City Bank, Agent Pioneer-Standard Electronics, Inc. By: /s/ JANICE E. FOCKE By: /s/ JOHN V. GOODGER ----------------------------- ------------------------------ Printed Name: Janice E. Focke Printed Name: John V. Goodger ------------------- -------------------- Title: Vice President Title: Vice President, Treasurer -------------------------- --------------------------- National City Bank Star Bank, N.A. By: /s/ JANICE E. FOCKE By: /s/ JOHN D. BARRETT ----------------------------- ------------------------------ Printed Name: Janice E. Focke Printed Name: John D. Barrett ------------------- -------------------- Title: Vice President Title: Vice President -------------------------- --------------------------- Society National Bank By: /s/ MICHAEL J. THOMPSON ------------------------------ Printed Name: Michael J. Thompson ------------------- Title: Vice President -------------------------- 6 AMENDED AND RESTATED PROMISSORY NOTE $ Cleveland, Ohio 1994 ------------------ ------------------ FOR VALUE RECEIVED, the undersigned, Pioneer-Standard Electronics, Inc. (Borrower), an Ohio corporation, promises to pay to the order of _____________, at the main office of National City Bank (NCB), Cleveland, Ohio, the principal sum of DOLLARS ----------------------------- (or, if less, the aggregate unpaid principal balance form time to time shown on the reverse side), together with interest computed in the manner provided in the Credit Agreement referred to below, which principal and interest is payable in accordance with provisions in the Credit Agreement. This note is issued to an Agreement dated January 23, 1992, as amended from time to time (as amended, the "Credit Agreement") by and among Borrower, three banks and NCB (as agent of the banks for the purposes of the Credit Agreement) which establishes "subject commitments" (one by each bank) aggregating forty-five million dollars ($45,000,000) pursuant to which Borrower may obtain subject loans from the banks upon certain terms and conditions. This note is issued in substitution for that certain $______________ Note dated ______________ 19 ________ (the "Old Note"). This Note is not intended as a novation of the obligations of Borrower under the Old Note but rather is merely a restatement of the obligations thereunder after giving effect to the recent amendment to the Credit Agreement. Reference is made to the Credit Agreement for the definitions of certain terms, for provisions governing the making of subject loans, the acceleration of the maturity thereof, rights of prepayment, and for other provisions to which this note is subject. Any endorsement by the payee on the reverse side of this note (or any allonge thereto) shall be presumptive evidence of the data so endorsed. Address: Pioneer-Standard Electronics, Inc. 4800 East 131st Street Cleveland, Ohio 44105 By:_______________________________ Printed:__________________________ Title:____________________________ EXHIBIT A EX-4.E 3 EXHIBIT 4.E 1 Exhibit 4(e) CONSOLIDATED AMENDMENT NO. 2 TO CREDIT AGREEMENT This Consolidated Amendment No. 2 to Credit Agreement (this "Amendment"), dated as of February 28, 1995, is entered into by and among Pioneer-Standard Electronics, Inc. (Borrower), National City Bank, Society National Bank (Successor in interest to Ameritrust Company National Association) and Star Bank, N.A. (together "banks") and National City Bank in its capacity as agent of the banks ("NCB-Agent") for the purposes of the Credit Agreement referred to below and the related writings. WITNESSETH: WHEREAS, the parties have entered into a Credit Agreement dated January 23, 1992, as amended by Amendment Agreement dated as of June 30, 1993 (the "First Amendment"), Second Amendment Agreement dated as of May 27, 1994 (the "Second Amendment") and Consolidated Amendment No. 1 dated as October 28, 1994 (as amended, the "Credit Agreement"; all terms used in the Credit Agreement being used herein with the same meaning), which sets forth the terms and conditions upon which Borrower may obtain (a) "subject loans" on a revolving basis until the "conversion date" (originally January 1, 1995 but previously extended until January 1, 1998), as that term is defined in the Credit Agreement, and on an amortizing basis thereafter and (b) "subject BAs"; and WHEREAS, the parties desire to amend certain provisions of the Credit Agreement to (a) increase the aggregate amount of the subject commitments from forty-five million dollars ($45,000,000) to sixty-five million dollars ($65,000,000) and (b) amend certain covenants; and WHEREAS, in light of the fact that certain previous amendments set forth in the First Amendment, the Second Amendment and/or Consolidated Amendment No. 1 have been affected by later amendments and/or will be affected by this Amendment and for ease of reference, the parties also desire to restate and consolidate in this Amendment all amendments to the Credit Agreement that are effective on and as of the date hereof; NOW, THEREFORE, in consideration of the premises above and the mutual covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: SECTION I - AMENDMENTS TO CREDIT AGREEMENT A. Subsections 2A.01 and 2A.02 of the Credit Agreement are hereby amended in their entirety to read as follows: 2A.01 AMOUNTS - The aggregate amount of the subject commitments shall be sixty-five million dollars ($65,000,000), but that amount may be reduced from time to time pursuant to subsection 2A.03 or 2A.04 and the subject commitments may be terminated pursuant to section 5B. The amount of each bank's subject commitment (subject to such reduction or termination), and the proportion (expressed as a percentage) that it bears to all of the subject commitments, is set forth opposite the bank's name below, to-wit: 2
$32,500,000 50% National City Bank 19,500,000 30% Society National Bank 13,000,000 20% Star Bank, N.A. ----------- $65,000,000 100% Total
2A.02 TERM - Each subject commitment shall commence as of the date of this Agreement and shall remain in effect on a revolving basis until January 1, 1998 (the "conversion date") and thereafter on an amortizing basis until its expiration on the last amortizing date, EXCEPT that a later conversion date may be established from time to time pursuant to subsection 2A.06 and EXCEPT that the subject commitments shall end in any event upon any earlier reduction thereof to zero pursuant to subsection 2A.03 or 2A.04 or any earlier termination pursuant to section 5B. B. Subsection 2C.02 of the Credit Agreement is hereby amended in its entirety to read as follows: 2C.02 MAXIMUM -- NCB-Agent shall not issue any subject BA (a) prior to the conversion date if, after giving effect thereto, the aggregate credit exposure of all the banks would exceed the aggregate of the subject commitments as then in effect; (b) after the conversion date unless concurrently therewith Borrower shall make a principal payment in respect of the subject loans in an aggregate principal amount equal to the face amount of the subject BA in question, which payment shall be subject to subsections 2B.10 and 8.10 if and to the extent at all relevant; and (c) at any time if the aggregate face amounts of the subject BA's would exceed forty-five million dollars ($45,000,000). C. Subsections 3B.01, 3B.02, 3B.03, 3B.04 and 3B.05 of the Credit Agreement are hereby amended in their entirety to read as follows: 3B.02 NET WORTH -- Borrower will not suffer or permit the consolidated net worth of the companies at any time to be less than the then required minimum amount. The required minimum amount shall be ninety-eight million four hundred forty-eight thousand dollars ($98,448,000) EXCEPT that the required minimum amount shall be permanently increased (a) on March 31, 1995 and on each quarterly date thereafter by an amount equal to the sum of fifty percent (50%) of the consolidated net income of the companies, if any, for the quarter-annual period then ending plus (b) upon each issuance or other sale by Borrower of any of its equity securities by an amount equal to the net proceeds (after costs and expenses) thereof. 3B.02 LEVERAGE -- Borrower will not suffer or permit the total liabilities of the companies at any time to exceed an amount equal to two hundred twenty-five percent (225%) of the sum of the net worth of the companies, all as determined on a consolidated basis. -2- 3 3B.02 WORKING CAPITAL -- Borrower will not suffer or permit the companies' consolidated working capital at any time to fall below one hundred million dollars ($100,000,000). 3B.04 CURRENT RATION -- Borrower will not suffer or permit the current assets of the companies at any time to fall below an amount equal to one and seven-tenths (1.7) times the amount of their current liabilities, all as determined on a consolidated basis. 3B.05 FIXED CHARGE COVERAGE -- Borrower will not suffer or permit the aggregate of (a) the consolidated net income of the companies (EXCEPT Borrower's equity in any income or loss of PTGI) plus (b) the consolidated interest expense of the companies plus (c) the consolidated federal, state and local income taxes of the companies plus (d) the consolidated operating lease expense of the companies for any four-quarter period to be less than an amount equal to one hundred eighty percent (180%) of the sum of (a) the consolidated interest expense of the companies plus (b) the consolidated operating lease expense of the companies for the four-quarter period, all as determined on a fully consolidated basis. D. Subsection 3D.01 of the Credit Agreement is hereby amended by replacing the period at the end thereof with the word "or" and by adding to the end thereof the following new clauses (iii) and (iv): (iii) Borrower's investment in Pioneer-Standard Canada Inc. (exclusive of retained earnings of Pioneer-Standard Canada Inc.) so long as the aggregate amount of such investments does not exceed ten million eight hundred thousand dollars ($10,800,000) or (iv) any acquisition of the assets or stock of any corporation if the aggregate of the consideration paid by Borrower for such acquisition does not exceed twelve million dollars ($12,000,000). E. Subsection 3D.02 of the Credit Agreement is hereby amended by replacing the period at the end thereof with the word "or" and by adding to the end thereof the following new clause (v): (v) any advance or loan to, or guaranty of the obligations of, Pioneer-Standard Canada Inc., so long as the aggregate amount of all such advances, loans and guaranties does not exceed twenty million dollars ($20,000,000) at any one time. F. Subsection3D.03(ii)(A) of the Credit Agreement is hereby amended by deleting the reference to "fifteen million dollars ($15,000,000)" and substituting in lieu thereof a reference to "twenty million dollars ($20,000,000)". -3- 4 G. Subsection 3D.05 of the Credit Agreement is hereby amended in its entirety to read as follows: 3D.05 FIXED ASSETS -- Borrower will not invest (net after trade-ins, if any) in fixed assets and leasehold improvements during any fiscal year (commencing with the present year) more than the sum of (a) an amount equal to thirty-five percent (35%) of Borrower's net income, if any, for the fiscal year next preceding the fiscal year in question plus (b) its allowable obsolescence, amortization and depreciation charges for the fiscal year next preceding the fiscal year in question. H. The following new definition is hereby added to section 9 of the Credit Agreement: company refers to Borrower or to a subsidiary of Borrower, as the case may be; SECTION II - CONDITIONS PRECEDENT It is a condition precedent to the effectiveness of this Amendment that, prior to or on the date hereof, the following items shall have been delivered to NCB-Agent (in form and substance acceptable to NCB-Agent): (A) an Amended and Restated Promissory Note ("Amended Note") in favor of each bank, in the form of Exhibit A to this Amendment, with all blanks appropriately completed, duly executed by Borrower; (B) an Acknowledgment of Receipt of a copy of, and Consent and Agreement to the terms of, this Amendment and the Amended Notes by Pioneer-Standard Canada Inc. with respect to a certain Continuing Guaranty of Payment executed and delivered to NCB-Agent by such entity and dated May 27, 1994; (C) a Certificate, dated as of the date hereof, of the secretary of Borrower certifying (1) that Borrower's Articles of Incorporation and Code of Regulations have not been amended since the execution of the Credit Agreement (or certifying that true, correct and complete copies of any amendments are attached), (2) that copies of resolutions of the Board of Directors of Borrower are attached with respect to the approval of this Amendment and of the matters contemplated hereby and authorizing the execution, delivery and performance by Borrower of this Amendment and each other document to be delivered pursuant hereto and (3) as to the incumbency and signatures of the officers of Borrower signing this Amendment and each other document to be delivered pursuant hereto; (D) a non-refundable documentation fee in the amount of $7,500; and (E) Such other documents as NCB-Agent may request to implement this Amendment and the transactions contemplated hereby. -4- 5 If NCB-Agent or banks shall consummate the transactions contemplated hereby prior to the fulfillment of any of the conditions precedent set forth above, the consummation of such transactions shall constitute only an extension of time for the fulfillment of such conditions and not a waiver thereof. Upon receipt of the properly completed and executed Amended Notes, banks agree to return to Borrower the previously executed notes respecting the subject loans and the same shall be marked "Replaced" or "Substituted" or with words of like import. SECTION III - AGREEMENTS CONCERNING PIONEER-STANDARD CANADA INC. Borrower agrees to cause its subsidiary, Pioneer-Standard Canada Inc., to comply with all the provisions of sections 3A, 3B, 3C and 3D of the Credit Agreement and agrees that all references to financial information in section 3A shall be deemed to be references to financial information of Borrower and its subsidiaries on a consolidating and consolidated basis; provided, that Pioneer-Standard Canada Inc. shall not be required to comply with the provisions of subsection 3D.06 (captioned "DIVIDENDS"). SECTION IV - REPRESENTATIONS AND WARRANTIES Borrower hereby represents and warrants to each of the other parties to this Amendment that (A) none of the representations and warranties made in subsections 4B.01 through 4B.08 of the Credit Agreement has ceased to be true and complete in any material respect as of the date hereof; and (B) as of the date hereof no "default under this Agreement" has occurred that is continuing. SECTION V - ACKNOWLEDGMENTS CONCERNING OUTSTANDING LOANS Borrower acknowledges and agrees that, as of the date hereof, all of Borrower's outstanding loan obligations to banks are owed without any offset, deduction, defense or counterclaim of any nature whatsoever. SECTION VI - REFERENCES On an after the effective date of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", or words of like import referring to the Credit Agreement, and in the subject notes or other related writings to the "Credit Agreement", "thereof", or words of like import referring to the Credit Agreement shall mean and refer to the Credit Agreement as amended hereby. The Credit Agreement, as amended by this Amendment, is and shall continue to be in full force and effect and is hereby ratified and confirmed in all respects. To the extent any amendment set forth in the First Amendment, the Second Amendment or Consolidated Amendment No. 1 is omitted from this Amendment, the same shall be deemed eliminated as between Borrower and the other parties hereto as of the date hereof. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of NCB-Agent or banks under the Credit Agreement or constitute a waiver of any provision of the Credit Agreement except as specifically set forth herein. From and after the date of this Amendment references in the Credit Agreement to Exhibit B shall be deemed to be references to the form of the Amended Note attached hereto as Exhibit A. -5- 6 SECTION VII - COUNTERPARTS AND GOVERNING LAW This Amendment may be executed in any number of counterparts, each counterpart to be executed one or more of the parties but, when taken together, all counterparts shall constitute one agreement. This Amendment, and the respective rights and obligations of the parties hereto shall be construed in accordance with and governed by Ohio Law. IN WITNESS WHEREOF, the Borrower, NCB-Agent and the banks have caused this Amendment to be executed by their authorized officers as of the date and year first above written. National City Bank, Agent Pioneer-Standard Electronics, Inc. By: /s/ JANICE E. FOCKE By: /s/ JOHN V. GOODGER ----------------------------- -------------------------------- Printed Name: Janice E. Focke Printed Name: John V. Goodger ------------------- ---------------------- Title: Vice President Title: Vice President -------------------------- ----------------------------- National City Bank Star Bank, N.A. By: /s/ JANICE E. FOCKE By: /s/ JOHN D. BARRETT ----------------------------- --------------------------------- Printed Name: Janice E. Focke Printed Name: John D. Barrett ------------------- ----------------------- Title: Vice President Title: Vice President -------------------------- ------------------------------ Society National Bank By: /s/ RICHARD A. POHLE ----------------------------- Printed Name: Richard A. Pohle ------------------- Title: Vice President -------------------------- 7 AMENDED AND RESTATED PROMISSORY NOTE $____________________ Cleveland, Ohio February _____, 1995 FOR VALUE RECEIVED, the undersigned, Pioneer-Standard Electronics, Inc (Borrower), an Ohio corporation, promises to pay to the order of _____________, at the main office of National City Bank (NCB), Cleveland, Ohio, the principal sum of _________________________________DOLLARS (or, if less, the aggregate unpaid principal balance form time to time shown on the reverse side), together with interest computed in the manner provided in the Credit Agreement referred to below, which principal and interest is payable in accordance with provisions in the Credit Agreement. This note is issued pursuant to an Agreement dated January 23, 1992, as amended form time to time (as amended, the "Credit Agreement") by and among Borrower, three banks and NCB (as agent of the banks for the purposes of the Credit Agreement) which establishes "subject commitments" (one by each bank) aggregating sixty-five million dollars ($65,000,000) pursuant to which Borrower may obtain subject loans form the banks upon certain terms and conditions. This note is issued in substitution for that certain $____________ Note dated October 28, 1994 (the "Old Note"). This Note is not intended as a novation of the obligations of Borrower under the Old Note but rather is merely a restatement of the obligations thereunder after giving effect to the most recent amendment to the Credit Agreements. Reference is made to the Credit Agreement for the definitions of certain terms, for provisions governing the making of subject loans, the acceleration of the maturity thereof, rights of prepayment, and for other provisions to which this note is subject. Any endorsement by the payee on the reverse side of this note (or any along thereto) shall be presumptive evidence of the data so endorsed. Address: Pioneer-Standard Electronics, Inc. 4800 East 131st Street Cleveland, Ohio 44105 By:_______________________________ Printed Name:_____________________ Title:____________________________ EXHIBIT A 8 ACKNOWLEDGMENT, CONSENT AND AGREEMENT WITH RESPECT TO GUARANTY The undersigned hereby acknowledge receipt of a copy of a certain Consolidated Amendment No.2 to Credit Agreement (the "Agreement"), dated as of February 28, 1995 and entered into by and among Pioneer-Standard Electronic, Inc.("Borrower"), National City Bank, Society National Bank (successor in interest to Amentrust Company National Association) and Star Bank, N.A. (collectively the "banks") and National City Bank in its capacity as agent of the banks ("NCB-Agent"). By executing this Acknowledgment, Consent and Agreement the undersigned agrees to remain bound by the terms and conditions of that certain Continuing Guaranty of Payment executed and delivered to NCB-Agent by the undersigned and dated as of May 27, 1994 (the "Guaranty"). The Guaranty was executed in connection with the second amendment to a certain Credit Agreement between Borrower, banks and NCB-Agent, which Credit Agreement has been herefore amended and is now being amended by the Amendment. The undersigned further acknowledges that the liability of the undersigned pursuant to the Gauranty shall continue and be unaffected by the Amendment and shall extend, without limitation, to any and all obligations of Borrower in connection with the Amended Notes referred to in the Amendment. The undersigned expressly consents to Borrower's execution of the Amended Notes and the Amendment and agrees that banks and NCB-Agent may rely on this Acknowledgment, Consent and Agreement in increasing and extending the financial accommodations to Borrower as contemplated and evidenced by such documents. PIONEER-STANDARD CANADA, INC. Dated: February 28, 1995 By: /s/ JOHN V. GOODGER ------------------------------- Printed Name: JOHN V. GOODGER --------------------- Title: Vice President ---------------------------- 9 AMENDED AND RESTATED PROMISSORY NOTE $13,000,000 Cleveland, Ohio February 28, 1995 FOR VALUE RECEIVED, the undersigned, Pioneer-Standard Electronics, Inc. (Borrower), an Ohio corporation, promises to pay to the order of STAR BANK, N.A., at the main office of National City Bank (NCB), Cleveland, Ohio, the principal sum of THIRTEEN MILLION DOLLARS (or, if less, the aggregate unpaid principal balance from time to time shown on the reverse side), together with interest computed in the manner provided in the Credit Agreement referred to below, which principal and interest is payable in accordance with provisions in the Credit Agreement. This note is issued pursuant to an Agreement dated January 23, 1992, as amended from time to time (as amended, the "Credit Agreement") by and among Borrower, three banks and NCB (as agent of the banks for the purposes of the Credit Agreement) which establishes "subject commitments" (one by each bank) aggregating sixty-five million dollars ($65,000,000) pursuant to which Borrower may obtain subject loans from the banks upon certain terms and conditions. This note is issued in substitution for that certain $9,000,000 Note dated October 28, 1994 (the "Old Note"). This Note is not intended as a novation of the obligations of Borrower under the Old Note but rather is merely a restatement of the obligations thereunder after giving effect to the most recent amendment to the Credit Agreement. Reference is made to the Credit Agreement for the definitions of certain terms, for provisions governing the making of subject loans, the acceleration of the maturity thereof, rights of prepayment, and for other provisions to which this note is subject. Any endorsement by the payee on the reverse side of this note (or any allonge thereto) shall be presumptive evidence of the data so endorsed. Address: Pioneer-Standard Electronics, Inc. 4800 East 131st Street Cleveland, Ohio 44105 By: /s/ John V. Godger ------------------------------------- Printed Name: John V. Godger --------------------------- Title: Vice President Treasurer ---------------------------------- 10 AMENDED AND RESTATED PROMISSORY NOTE $19,500,000 Cleveland, Ohio February 28, 1995 FOR VALUE RECEIVED, the undersigned, Pioneer-Standard Electronics, Inc. (Borrower), an Ohio corporation, promises to pay to the order of SOCIETY NATIONAL BANK, at the main office of National City Bank (NCB), Cleveland, Ohio, the principal sum of NINETEEN MILLION FIVE HUNDRED THOUSAND DOLLARS (or, if less, the aggregate unpaid principal balance from time to time shown on the reverse side), together with interest computed in the manner provided in the Credit Agreement referred to below, which principal and interest is payable in accordance with provisions in the Credit Agreement. This note is issued pursuant to an Agreement dated January 23, 1992, as amended from time to time (as amended, the "Credit Agreement") by and among Borrower, three banks and NCB (as agent of the banks for the purposes of the Credit Agreement) which establishes "subject commitments" (one by each bank) aggregating sixty-five million dollars ($65,000,000) pursuant to which Borrower may obtain subject loans from the banks upon certain terms and conditions. This note is issued in substitution for that certain $13,500,000 Note dated October 28, 1994 (the "Old Note"). This Note is not intended as a novation of the obligations of Borrower under the Old Note but rather is merely a restatement of the obligations thereunder after giving effect to the most recent amendment to the Credit Agreement. Reference is made to the Credit Agreement for the definitions of certain terms, for provisions governing the making of subject loans, the acceleration of the maturity thereof, rights of prepayment, and for other provisions to which this note is subject. Any endorsement by the payee on the reverse side of this note (or any allonge thereto) shall be presumptive evidence of the data so endorsed. Address: Pioneer-Standard Electronics, Inc. 4800 East 131st Street Cleveland, Ohio 44105 By: /s/ John V. Godger ------------------------------------- Printed Name: John V. Godger --------------------------- Title: Vice President Treasurer ---------------------------------- 11 AMENDED AND RESTATED PROMISSORY NOTE $32,000,000 Cleveland, Ohio February 28, 1995 FOR VALUE RECEIVED, the undersigned, Pioneer-Standard Electronics, Inc. (Borrower), an Ohio corporation, promises to pay to the order of NATIONAL CITY BANK, at the main office of National City Bank (NCB), Cleveland, Ohio, the principal sum of THIRTY-TWO MILLION FIVE HUNDRED THOUSAND DOLLARS (or, if less, the aggregate unpaid principal balance from time to time shown on the reverse side), together with interest computed in the manner provided in the Credit Agreement referred to below, which principal and interest is payable in accordance with provisions in the Credit Agreement. This note is issued pursuant to an Agreement dated January 23, 1992, as amended from time to time (as amended, the "Credit Agreement") by and among Borrower, three banks and NCB (as agent of the banks for the purposes of the Credit Agreement) which establishes "subject commitments" (one by each bank) aggregating sixty-five million dollars ($65,000,000) pursuant to which Borrower may obtain subject loans from the banks upon certain terms and conditions. This note is issued in substitution for that certain $22,500,000 Note dated October 28, 1994 (the "Old Note"). This Note is not intended as a novation of the obligations of Borrower under the Old Note but rather is merely a restatement of the obligations thereunder after giving effect to the most recent amendment to the Credit Agreement. Reference is made to the Credit Agreement for the definitions of certain terms, for provisions governing the making of subject loans, the acceleration of the maturity thereof, rights of prepayment, and for other provisions to which this note is subject. Any endorsement by the payee on the reverse side of this note (or any allonge thereto) shall be presumptive evidence of the data so endorsed. Address: Pioneer-Standard Electronics, Inc. 4800 East 131st Street Cleveland, Ohio 44105 By: /s/ John V. Godger ------------------------------------- Printed Name: John V. Godger --------------------------- Title: Vice President Treasurer ---------------------------------- EX-10.A 4 PIONEER STANDARD 10-K405 EX-10(A) 1 Exhibit 10(a) EXECUTION COPY AMENDED AND RESTATED EMPLOYMENT AGREEMENT BETWEEN PIONEER-STANDARD ELECTRONICS, INC. AND PRESTON B. HELLER, JR. June 12, 1995 2 Table of Contents -----------------
Page ---- 1. Employment . . . . . . . . . . . . . . . . . . . . . . . 1 2. Period of Employment . . . . . . . . . . . . . . . . . . 1 3. Position, Duties, Responsibilities . . . . . . . . . . . 1 4. Compensation, Compensation Plans, Perquisites . . . . . 2 5. Employee Benefit Plans . . . . . . . . . . . . . . . . . 2 6. Effect of Death or Disability . . . . . . . . . . . . . 3 7. Termination . . . . . . . . . . . . . . . . . . . . . . 4 8. Competition . . . . . . . . . . . . . . . . . . . . . . 6 9. Confidential Information . . . . . . . . . . . . . . . . 6 10. Noninterference . . . . . . . . . . . . . . . . . . . . 7 11. Remedy . . . . . . . . . . . . . . . . . . . . . . . . 7 12. Withholding . . . . . . . . . . . . . . . . . . . . . . 7 13. Notices . . . . . . . . . . . . . . . . . . . . . . . . 8 14. General Provisions . . . . . . . . . . . . . . . . . . . 8 15. Amendment or Modification; Waiver . . . . . . . . . . . 9 16. Severability . . . . . . . . . . . . . . . . . . . . . . 9 17. Successors to the Company . . . . . . . . . . . . . . . 9 18. Operation of Agreement . . . . . . . . . . . . . . . . . 10 19. Enforcement Costs . . . . . . . . . . . . . . . . . . . 10
3 AMENDED AND RESTATED EMPLOYMENT AGREEMENT AMENDED AND RESTATED EMPLOYMENT AGREEMENT between PIONEER-STANDARD ELECTRONICS, INC., an Ohio corporation (the "Company"), and PRESTON B. HELLER ("Heller"), dated June ___, 1995, to be effective April 3, 1995. W I T N E S S E T H: WHEREAS: The Company and Heller have given consideration to an employment agreement providing for the services of Heller as Chairman of the Board; and WHEREAS: This agreement is deemed necessary at the present time to meet the need for a continued strong management without substantial change; and WHEREAS: Together with other officers of the Company, Heller has been responsible for the success of the business of the Company; NOW, THEREFORE, it is hereby agreed by and between the Company and Heller as follows: 1 . Employment The Company hereby agrees to continue to employ Heller, and Heller hereby agrees to remain in the employ of the Company, for the period set forth in Section 2 below (the "Period of Employment"), in the position and with the duties and responsibilities set forth in Section 3 below, and upon the other terms and conditions hereinafter stated. 2 . Period of Employment For the purposes of this Agreement, the Period of Employment, subject only to the provisions of Section 6 below (relating to Death or Disability), shall continue until termination of employment as set forth in Section 7 (relating to Termination). 3 . Position, Duties, Responsibilities 3.01 During the Period of Employment, Heller shall serve as Chairman of the Board and shall have the authority, power and duties with regard to his position as may from time to time be assigned by the Board of Directors or Chief Executive Officer of the Company. 3.02. At all times during the Period of Employment Heller shall serve and continue to serve as Chairman of the Board of the Company. 3.03. Throughout the Period of Employment Heller shall not be required to devote more than ten (10) days per month during normal business hours to the business and affairs of the Company, 4 but nothing in this Agreement shall preclude Heller from devoting reasonable time required for serving as a director or member of an advisory committee of any organization involving no conflict of interest with the interests of the Company, from engaging in charitable and community activities, and from managing his personal investments, provided that such activities do not materially interfere with the regular performance of his duties and responsibilities under this Agreement. 3.04. Heller's office shall be located at the corporate offices of the Company in the Greater Cleveland Area, State of Ohio, and Heller shall not be required to locate his office elsewhere without his prior written consent, nor shall be required to be absent therefrom on travel status or otherwise more than a total of sixty (60) days in any calendar year nor more than five (5) consecutive days at any one time. 4 . Compensation, Compensation Plans, Perquisites 4.01 (a) For all services rendered by Heller in any capacity during the Period of Employment, including without limitation, services as an executive officer, director or member of any committee of the Company or of any subsidiary, division or affiliate thereof, Heller shall be paid as compensation a base salary, payable not less often than monthly, at the rate of no less than $25,000 per month. (b) Any increase in salary or other compensation shall in no way diminish any other obligation of the Company under this Agreement, unless specifically agreed to in writing by Heller. 4.02. During the Period of Employment Heller shall be and continue to be a full participant in the Company's Employees' Profit Sharing Plan or any equivalent successor plan that may be adopted by the Company. 4.03. During the Period of Employment Heller shall be entitled to perquisites, including without limitation, an office, secretarial and clerical staff, and to fringe benefits comparable to those enjoyed by the other executive officers of the Company, but in each case at least equal to those attached to his office on the date of this Agreement, as well as to reimbursement, upon proper accounting, of reasonable expenses and disbursements incurred by him in the course of his duties. 5 . Employee Benefit Plans 5.01. The compensation, together with other matters provided for in Section 4 above, is in addition to the benefits provided for in this Section 5. 5.02. Heller, his dependents, beneficiaries and estate shall be entitled to all payments and benefits and service credit for benefits during the Period of Employment to which executive -2- 5 officers of the Company, their dependents and beneficiaries are entitled as the result of the employment of such executive officers during the Period of Employment under the terms of employee plans and practices of the Company, including, without limitation, the Company's retirement program consisting of its Employees' Profit Sharing Plan, its group life insurance plan, its accidental death and dismemberment insurance, disability, medical and health and welfare plans, any key person individual life and disability policies, automobile expense reimbursement, club membership fees and dues, and other present or equivalent successor plans and practices of the Company, its subsidiaries and divisions, for which officers, their dependents and beneficiaries are eligible, and to all payments or other benefits under any such plan or practice after the Period of Employment as a result of participation in such plan or practice during the Period of Employment. 6 . Effect of Death or Disability 6.01. In the event of the death of Heller during the Period of Employment, the Period of Employment shall be deemed to have ended as of the close of business on the last day of the month in which death shall have occurred, and his legal representative shall be entitled to (i) the compensation provided for in paragraph 4.01(a) above for the month in which death shall take place at the rate being paid at the time of death, and (ii) any benefits provided pursuant to paragraph 5.02 hereof which are payable pursuant to the terms of the applicable plan or practice. 6.02 (a) The term "Disability," as used in this Agreement, shall mean an illness or accident which prevents Heller from performing his duties under this Agreement for a period of six (6) consecutive months. The Period of Employment shall be deemed to have ended as of the close of business on the last day of such six (6) months' period but without prejudice to any payments due Heller in respect of disability. (b) In the event of the Disability of Heller during the Period of Employment, Heller shall be entitled to (i) the compensation provided for in paragraph 4.01(a) above, at the rate being paid at the time of the commencement of Disability, for the period of such Disability but not in excess of six (6) months, and (ii) any benefits provided pursuant to paragraph 5.02 hereof which are payable pursuant to the terms of the applicable plan or practice. (c) The amount of any payments due under this paragraph 6.02 shall be reduced by any payments to which Heller may be paid for the same period under any disability plan of the Company or of any subsidiary or affiliate thereof. -3- 6 7. Termination 7.01. GENERAL. The Company may terminate Heller with or without cause at any time during the Period of Employment, subject to the provisions of this Section 7. 7.02. CHANGE OF CONTROL. Within one (1) year of a Change of Control of the Company, as defined in paragraph 18.02, Heller shall have the right to terminate his employment with the Company and there shall be paid or provided to Heller, his dependents, beneficiaries and estate, as liquidated damages or severance pay, or both, the following: (a) The compensation provided for in paragraph 4.01(a) above for the month in which Termination shall have occurred at the rate being paid at the time of Termination; and an amount equal to his previous twenty four (24) months of base salary plus an amount equal to any cash incentive bonus paid for the two (2) previously completed fiscal years. Such amount shall be paid to Heller in one payment, immediately upon Termination. (b) For two (2) years following the date of Termination, Heller, his dependents, beneficiaries and estate, shall continue to be entitled to all benefits provided pursuant to paragraph 5.02 hereof which are payable pursuant to the terms of the applicable plan or practice, and service credit for benefits under all employee benefit plans of the Company, including, without limitation, the Company's profit sharing plan referred to in paragraph 5.02 above, upon the same basis as immediately prior to Termination and, to the extent that such benefits or service credit for benefits shall not be payable or provided under any such plans to Heller, his dependents, beneficiaries and estate, by reason of his no longer being an employee of the Company as the result of Termination, or any such plan, program or arrangement is discontinued or the benefits thereunder are materially reduced, the Company shall itself arrange to provide benefits substantially similar to those which Heller, his dependents and beneficiaries were entitled to receive under such plans, programs and arrangements immediately prior to termination to Heller, his dependents, beneficiaries and estate. Any termination by the Company within the period of ninety (90) days prior to the execution of a letter of intent or a definitive agreement which could lead to a Change of Control and the closing of the transaction actually resulting in the Change of Control, as defined in paragraph 18.02, shall be deemed to be a termination under this paragraph 7.02. An election by Heller to terminate his employment under the provisions of this paragraph 7.02 shall not be deemed a Voluntary Termination of employment by Heller under paragraph 7.03 of this Agreement or any plan or practice of the Company. -4- 7 7.03. FOR CAUSE OR VOLUNTARY TERMINATION. For the purpose of any provision of this Agreement, the termination of Heller's employment shall be deemed to have been For Cause only if: (a) termination of his employment shall have been the result of Heller's conviction of any of the following: (i) embezzlement; (ii) misappropriation of money or other property of the Company; or (iii) any felony; or (b) there has been a breach by Heller during the Period of Employment of the provisions of paragraph 3.02 above, relating to his position and duties, Section 8 relating to Competition, Section 9 relating to Confidential Information, or Section 10 relating to Noninterference, and such breach results in demonstrably material injury to the Company, and with respect to any alleged breach of paragraph 3.02 hereof, Heller shall have failed to remedy such proven breach within thirty (30) days from his receipt of written notice from the Company. If Heller's employment is terminated by the Company For Cause, or if Heller shall Voluntarily Terminate his employment with the Company, Heller shall be entitled to the compensation provided for in paragraph 4.01(a) through the date of such termination. Heller shall not be entitled to any additional compensation or benefits (except for any vested benefits), and shall continue to be bound by the provisions of Section 8 of this Agreement (relating to Competition), the provisions of Section 9 of this Agreement (relating to Confidential Information), and the provisions of Section 10 (relating to Noninterference). 7.04. WITHOUT CAUSE. Subject to compliance by Heller with the provisions of Section 8 of this Agreement (relating to Competition), the provisions of Section 9 of this Agreement (relating to Confidential Information), and the provisions of Section 10 of this Agreement (relating to Noninterference), if the Company shall terminate Heller's employment, Without Cause, there shall be paid or provided to Heller, his dependents, beneficiaries and estate, as liquidated damages or severance pay, or both, the compensation provided for in paragraph 4.01(a) above for the month in which termination shall have occurred at the rate being paid at the time of such termination, and the amount (the "Payment Amount") per month, which shall consist of 1/24th of the total of an amount equal to his previous twenty-four (24) months of base salary plus an amount equal to any cash incentive. Such Payment Amount shall be paid to Heller or, in case of his prior death, to his legal representative, in monthly installments at the end of each month commencing with the month next following that in which such termination shall have occurred, and continuing for a period of twenty-four (24) months. Heller shall also receive any benefits provided pursuant to paragraph 5.02 hereof which are payable pursuant to the terms of the applicable plan or practice. In the event the Company fails to make such payments when due, then the remaining payments shall become due and payable immediately. -5- 8 7.05. ARBITRATION. In the event that Heller's employment shall be terminated by the Company during the Period of Employment or the Company shall withhold payments or provision of benefits because Heller is alleged to be engaged in activities prohibited by Sections 8, 9 or 10 of this Agreement or for any other reason, Heller shall have the right, in addition to all other rights and remedies provided by law, at his election either to seek arbitration in the metropolitan area of Cleveland, Ohio, under the rules of the American Arbitration Association by serving a notice to arbitrate upon the Company or to institute a judicial proceeding, in either case within one hundred and twenty (120) days after having received notice of termination of his employment or within such longer period as may reasonably be necessary for Heller to take action in the event that his illness or incapacity should preclude his taking such action within such one hundred and twenty (120) day period. 8. Competition There shall be no obligation on the part of the Company to make any further payments provided for in paragraph 7.04 above if Heller shall, during the two (2) years following termination of Heller's employment for any reason except Change of Control as described in paragraph 7.02, engage in Competition with the Company as hereinafter defined. The word "Competition" for purposes of this Section 8 and any other provision of this Agreement shall mean taking any employment or consulting position with or control of one of the Company's top twenty-five (25) competitors as listed in the most current issue at the date of termination of Electronic Buyer's News and/or Electronic News; provided, however, that in no event shall ownership of less than 5% of the outstanding capital stock entitled to vote for the election of directors of a corporation with a class of equity securities held of record by more than 500 persons be deemed Competition with the Company within the meaning of this Section 8. 9 . Confidential Information 9.01. Except for information which is already in the public domain, or which is publicly disclosed by persons other than Heller, or which is required by law or court order to be disclosed, or information given to Heller by a third party not bound by any obligation of confidentiality, Heller shall at all times during and after his employment with the Company hold in strictest confidence any and all confidential information within his knowledge and which is material to the business of the Company (whether acquired prior to or during his employment with the Company) concerning the inventions, products, processes, methods of distribution, customers, services, business, suppliers or trade secrets of the Company, except that Heller may, in connection with the performance of his duties to the Company, divulge confidential information to the directors, officers, employees and shareholders of the Company and to the advisors, accountants, attorneys or lenders of the Company or such other individuals as deemed prudent in the course -6- 9 of business to carry out the responsibilities and duties of his position. Such confidential information includes, without limitation, financial information, sales information, price lists, marketing data, the identity and lists of actual and potential customers and technical information, all to the extent that such information is not intended by the Company for public dissemination. 9.02. Heller also agrees that upon leaving the Company's employ he will not take with him, without the prior written consent of an officer authorized to act in the matter by the Board of Directors of the Company, any Company document, contract, internal financial or management reports, customers list, product list, price list, catalog, employee list, procedures, software, MIS data, drawing, blueprint, specification or other document of the Company, its subsidiaries, affiliates and divisions, which is of a confidential nature relating to the Company, its subsidiaries, affiliates and divisions, or, without limitation, relating to its or their methods of purchase or distribution, or any description of any trade secret, formulae or secret processes. 10. Noninterference Except for Change of Control as described in paragraph 7.02, Heller shall not, at any time during or within two (2) years after his employment is terminated with the Company, without the prior written consent of the Company, directly or indirectly, induce or attempt to induce any key employee, key agent or other key representative or associate of the Company to terminate his or her relationship with the Company, or in any way directly or indirectly interfere with such a relationship or any relationship between the Company and any of its top fifty (50) suppliers or top two hundred fifty (250) customers, both in terms of the Company's sales volume, provided that purchasing goods from a supplier to the Company or making a sale to any of the Company's customers shall not be deemed to be interference. 11. Remedy Heller acknowledges that Sections 8, 9 and 10 hereof were negotiated at arms length and are required for the fair and reasonable protection of the Company. Heller and the Company further acknowledge and agree that a breach of those obligations and agreements will result in irreparable and continuing damage to the Company for which there will be no adequate remedy at law and, therefore, Heller and the Company agree that in the event of any breach of said obligations and agreements the Company, and its successors and assigns, shall be entitled to injunctive relief and such other and further relief, including monetary damages, as is proper in the circumstances. It is further agreed that the running of the periods provided above in Sections 8 and 10, shall be tolled during any period which Heller shall be adjudged to have been in violation of any of his obligations under such Sections. -7- 10 12. Withholding Anything to the contrary notwithstanding, all payments required to be made by the Company hereunder to Heller or his estate or beneficiaries, shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Company may reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, the Company may accept other provisions to the end that it has sufficient funds to pay all taxes required by law to be withheld in respect of such payments or any of them. 13. Notices All notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be sufficiently given if and when mailed in the continental United States by registered or certified mail or personally delivered to the party entitled thereto at the address stated below or to such changed address as the addressee may have given by a similar notice: To the Company: Pioneer-Standard Electronics, Inc. 4800 East 131st Street Cleveland, Ohio 44105 Attention: Secretary or Assistant Secretary To Heller: Preston B. Heller, Jr. 13599 County Line Road Chagrin Falls, Ohio 44022 14. General Provisions 14.01. There shall be no right of set-off or counter claim, in respect any claim, debt or obligation, against payments to Heller, his dependents, beneficiaries or estate provided for in this Agreement. 14.02. No right or interest to or in any payments shall be assignable by Heller; provided, however, that this provision shall not preclude him from designating one or more beneficiaries to receive any amount that may be payable after his death and shall not preclude the legal representative of his estate from assigning any right hereunder to the person or persons entitled thereto under his will or, in the case of intestacy, to the person or persons entitled thereto under the laws of intestacy applicable to his estate. The term "beneficiaries" as used in this Agreement shall mean a beneficiary or beneficiaries so designated to receive any such amount or, if no beneficiary has been so designated, the legal representative of Heller's estate. -8- 11 14.03. No right, benefit or interest hereunder, shall be subject to anticipation, alienation, sale, assignment, encumbrance, charge, pledge, hypothecation, or set-off in respect of any claim, debt or obligation, or to execution, attachment, levy or similar process, or assignment by operation of law. Any attempt, voluntary or involuntary, to effect any action specified in the immediately preceding sentence shall, to the full extent permitted by law, be null, void and of no effect. 14.04. In the event of Heller's death or a judicial determination of his incompetence, reference in this Agreement to Heller shall be deemed, where appropriate, to refer to his legal representative or, where appropriate, to his beneficiary or beneficiaries. 14.05. The titles to sections in this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the title of any section. 14.06. This Agreement shall be binding upon and shall inure to the benefit of (a) Heller and, subject to the provisions of paragraphs 14.02 and 14.03, his heirs and legal representatives, and (b) the Company and its successors as provided in Section 17 hereof. 15. Amendment or Modification; Waiver No provision of this Agreement may be amended or waived unless such amendment or waiver is authorized by the Board of Directors of the Company or any authorized committee of the Board of Directors and is agreed to in writing, signed by Heller and by an officer of the Company thereunto duly authorized by either the Board of Directors or the Compensation Committee. Except as otherwise specifically provided in this Agreement, no waiver by either party hereto of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a subsequent breach of such condition or provision or a waiver of a similar or dissimilar provision or condition at the same or at any prior or subsequent time. 16. Severability In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions and portions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law. -9- 12 17. Successors to the Company Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the Company and any successor of the Company, including, without limitation, any corporation which acquires directly or indirectly all or substantially all of the assets of the Company whether by merger, consolidation, sale or otherwise (and such successor shall thereafter be deemed "the Company" for the purposes of this Agreement), but shall not otherwise be assignable by the Company. 18. Operation of Agreement 18.01. This Agreement shall be effective April 3, 1995, and shall supersede the Amended and Restated Employment Agreement effective April 1, 1993 between Heller and the Company. 18.02. For the purpose of this Agreement, the term "Change in Control" of the Company shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 as in effect on the date of this Agreement; provided that, without limitation, such a change in control shall be deemed to have occurred if and when (a) any "person" (as such term is used in Sections 13(d) and 14(d) (2) of the Securities Exchange Act of 1934) is or becomes a beneficial owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities or (b) during any period of twelve (12) consecutive months, commencing before or after the date of this Agreement, individuals who, at the beginning of such twelve (12) month period were directors of the Company for whom Heller, as a shareholder, shall have voted, cease for any reason to constitute at least a majority of the Board of Directors of the Company. 19. Enforcement Costs The Company is aware that upon the occurrence of a Change in Control the Board of Directors or a shareholder of the Company may then cause or attempt to cause the Company to refuse to comply with its obligations under this Agreement, or may cause or attempt to cause the Company to institute, or may institute, litigation seeking to have this Agreement declared unenforceable, or may take, or attempt to take, other action to deny Heller the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement could be frustrated. It is the intent of the Company that Heller not be required to incur the expenses associated with the enforcement of his rights under this Agreement by litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended to Heller hereunder, nor be bound to negotiate any settlement of his rights hereunder under threat of incurring such -10- 13 expenses. Accordingly, if following a Change in Control it should appear to Heller that the Company has failed to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or other legal action designed to deny, diminish or to recover from, Heller, or in the event the Company fails or refuses to comply with the obligations under this Agreement, the benefits intended to be provided to Heller hereunder, and that Heller has complied with all of his obligations under this Agreement, the Company irrevocably authorizes Heller from time to time to retain counsel of his choice at the expense of the Company as provided in this Section 19, to represent Heller in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company or any Director, officer, shareholder or other person affiliated with the Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between the Company and such counsel, the Company irrevocably consents to Heller entering into an attorney-client relationship with such counsel, and in that connection the Company and Heller agree that a confidential relationship shall exist between Heller and such counsel. The reasonable fees and expenses of counsel selected from time to time by Heller as hereinabove provided shall be paid or reimbursed to Heller by the Company on a regular, periodic basis upon presentation by Heller of a statement or statements prepared by such counsel in accordance with its customary practices, up to a maximum aggregate amount of $500,000. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. ATTEST: PIONEER-STANDARD ELECTRONICS, INC. /s/ Colleen M. Simon By/s/ James L Bayman - ----------------------- ---------------------------------- James L. Bayman, Chief Executive Officer and President ATTEST: /s/ Beverly M Fisher /s/ Preston B. Heller - ----------------------- ---------------------------------- Preston B. Heller, Jr. -11- EX-10.B 5 PIONEER STANDARD 10-K405 EX-10(B) 1 Exhibit 10(b) EXECUTION COPY AMENDED AND RESTATED EMPLOYMENT AGREEMENT BETWEEN PIONEER-STANDARD ELECTRONICS, INC. AND JAMES L. BAYMAN June 12, 1995 2 Table of Contents
Page ---- 1. Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Period of Employment . . . . . . . . . . . . . . . . . . . . . . . . 1 3. Position, Duties, Responsibilities . . . . . . . . . . . . . . . . . 1 4. Compensation, Compensation Plans, Perquisites . . . . . . . . . . . 2 5. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . 4 6. Effect of Death or Disability . . . . . . . . . . . . . . . . . . . 4 7. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 8. Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 9. Confidential Information . . . . . . . . . . . . . . . . . . . . . . 8 10. Noninterference . . . . . . . . . . . . . . . . . . . . . . . . . . 8 11. Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 12. Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 13. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 14. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 10 15. Amendment or Modification; Waiver . . . . . . . . . . . . . . . . . 11 16. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 17. Successors to the Company . . . . . . . . . . . . . . . . . . . . . 11 18. Operation of Agreement . . . . . . . . . . . . . . . . . . . . . . . 11 19. Enforcement Costs . . . . . . . . . . . . . . . . . . . . . . . . . 12
3 AMENDED AND RESTATED EMPLOYMENT AGREEMENT AMENDED AND RESTATED EMPLOYMENT AGREEMENT between PIONEER-STANDARD ELECTRONICS, INC., an Ohio corporation (the "Company"), and JAMES L. BAYMAN ("Bayman"), dated June ___, 1995, to be effective April 3, 1995. W I T N E S S E T H: WHEREAS: The Company and Bayman have given consideration to an employment agreement providing for the services of Bayman as President and Chief Executive Officer; and WHEREAS: This agreement is deemed necessary at the present time to meet the need for a continued strong management without substantial change; and WHEREAS: Together with other officers of the Company, Bayman has been responsible for the success of the business of the Company; NOW, THEREFORE, it is hereby agreed by and between the Company and Bayman as follows: 1. Employment The Company hereby agrees to continue to employ Bayman, and Bayman hereby agrees to remain in the employ of the Company, for the period set forth in Section 2 below (the "Period of Employment"), in the position and with the duties and responsibilities set forth in Section 3 below, and upon the other terms and conditions hereinafter stated. 2. Period of Employment For the purposes of this Agreement, the Period of Employment, subject only to the provisions of Section 6 below (relating to Death or Disability), shall continue until termination of employment as set forth in Section 7 (relating to Termination). 3. Position, Duties, Responsibilities 3.01 (a) During the Period of Employment, Bayman shall serve as President and Chief Executive Officer of the Company and shall have the responsibility for all of the operations of the Company including the authority, power and duties with regard to his position as may from time to time be assigned by the Board of Directors of the Company. Bayman's duties will include the supervision and direction of the corporate professional staff assigned to him for supervision, the strategic direction of the Company's operations, and liaison with the Company's affiliate, Pioneer/Technologies Group, Inc. ("Technologies"). He shall at all times during such period have the authority, power and duties of the person charged with the general management of the business and affairs of the areas assigned to him with authority to manage and 4 direct all operations and affairs of those areas and to employ and discharge all employees thereof, reporting and being responsible only to the Board of Directors of the Company. 3.01 (b) At all times during the Period of Employment, Bayman shall hold a position of responsibility and importance and a position of scope, with the functions, duties and responsibilities attached thereto, at least equal in responsibility and importance and in scope to and commensurate with his position on the date of this Agreement described in general terms in Section 3.01(a) above. 3.02. It is further contemplated that at all times during the Period of Employment Bayman shall serve and continue to serve as President and Chief Executive Officer of the Company and, if and when reelected, as a member of its Board of Directors. In the event that Bayman's employment is terminated for any reason as provided in paragraph 7 below, Bayman agrees that he shall immediately submit his written resignation as a member of the Board of Directors of the Company. 3.03. Throughout the Period of Employment Bayman shall devote his full time and undivided attention during normal business hours to the business and affairs of the Company, except for reasonable vacations afforded the Company's executive officers consistent with past practices and except for illness or incapacity, but nothing in this Agreement shall preclude Bayman from devoting reasonable time required for serving as a director or member of an advisory committee of any organization involving no conflict of interest with the interests of the Company, from engaging in charitable and community activities, and from managing his personal investments, provided that such activities do not materially interfere with the regular performance of his duties and responsibilities under this Agreement. 3.04. Bayman's office shall be located at the corporate offices of the Company in the Greater Cleveland Area, State of Ohio, and Bayman shall not be required to locate his office elsewhere without his prior written consent, nor shall he be required to be absent therefrom on travel status or otherwise more than a total of sixty (60) days in any calendar year nor more than fifteen (15) consecutive days at any one time. 4. Compensation, Compensation Plans, Perquisites 4.01 (a) For all services rendered by Bayman in any capacity during the Period of Employment, including without limitation, services as an executive officer, director or member of any committee of the Company or of any subsidiary, division or affiliate thereof, Bayman shall be paid as compensation: (i) A base salary, payable not less often than monthly, at the rate of no less than $20,833 per month, with such increases in such rate as shall be awarded from time to time in -2- 5 accordance with the Company's regular administrative practices of salary increases applicable to executives of the Company in effect on the date of this Agreement; and (ii) A cash incentive bonus equal to the product of 8/10 of 1% of the sum of the "actual operating income" of the Company plus its equity earnings in profits/losses from Technologies, multiplied by the ratio of the Company's "actual return on capital" to 22.0%, or such equivalent successor bonus plan as may be adopted by the Company with Bayman's written consent. The term "actual operating income" shall be defined as the income before income tax (state and federal income tax), interest, and the Company's equity earnings in profits/losses from Technologies. The term "actual return on capital" shall be defined as the Company's "actual operating income" divided by the sum of its interest-bearing debt, plus equity, less the Company's equity investment in Technologies (the denominator shall be calculated for each fiscal year as the average of such amounts as at the end of each of the Company's four (4) fiscal quarters). The Company shall calculate and pay 75% of such bonus to Bayman at the end of each of the first three (3) fiscal quarters. After April 1 and before June 16 of the next fiscal year, and after audited financial statements are available to the Company, the Company shall pay Bayman the balance of any bonus due Bayman based on the full year calculation less payments made for the first three (3) fiscal quarters, which payment shall be vested in the event of termination by reason of Death or Disability (Section 6), Change of Control, (Section 7.02), or Without Cause (Section 7.04), but shall be forfeited in the event of termination For Cause or Voluntary Termination (Section 7.03). (b) Any increase in salary or bonus or other compensation shall in no way diminish any other obligation of the Company under this Agreement, unless specifically agreed to in writing by Bayman. 4.02. During the Period of Employment Bayman shall be and continue to be a full participant in the Company's Employees' Profit Sharing Plan or any equivalent successor plan that may be adopted by the Company. 4.03. During the Period of Employment Bayman shall be entitled to perquisites, including without limitation, an office, secretarial and clerical staff, and to fringe benefits comparable to those enjoyed by the other executive officers of the Company, but in each case at least equal to those attached to his office on the date of this Agreement, as well as to reimbursement, upon proper accounting, of reasonable expenses and disbursements incurred by him in the course of his duties. -3- 6 5. Employee Benefit Plans 5.01. The compensation, together with other matters provided for in Section 4 above, is in addition to the benefits provided for in this Section 5. 5.02. Bayman, his dependents, beneficiaries and estate shall be entitled to all payments and benefits and service credit for benefits during the Period of Employment to which executive officers of the Company, their dependents and beneficiaries are entitled as the result of the employment of such executive officers during the Period of Employment under the terms of employee plans and practices of the Company, including, without limitation, the Company's retirement program consisting of its Employees' Profit Sharing Plan, its group life insurance plan, its accidental death and dismemberment insurance, disability, medical and health and welfare plans, any key person individual life and disability policies, automobile expense reimbursement, club membership fees and dues, and other present or equivalent successor plans and practices of the Company, its subsidiaries and divisions, for which officers, their dependents and beneficiaries are eligible, and to all payments or other benefits under any such plan or practice after the Period of Employment as a result of participation in such plan or practice during the Period of Employment. 5.03. Bayman shall be eligible to participate in the Company's 1991 Stock Option Plan (which, together with any successor stock option plan or plans that may be adopted by the Company, is referred to herein as the "Option Plan"). The Company has granted Bayman stock options ("Options") at an option price equal to the fair market value of the Company's Common Shares at the date of grant. The terms and conditions of exercise of Bayman's Options shall be as is set forth in Bayman's Stock Option Agreements (the "Option Agreements") with the Company; provided, however, that in the event of a Change in Control, as defined in paragraph 18.02 below, then notwithstanding the provisions of said Option Agreements, all options (including those granted to his under the 1982 Incentive Stock Option Plan) shall immediately be 100% vested and Bayman shall have the immediate right of exercise with respect to all Options and their underlying Common Shares covered by said Option Agreements. In the event that Bayman's employment is terminated as a result of a Change in Control, as defined in paragraph 18.02 below, Bayman shall have the period of one (1) year after the date of such termination to exercise his Options or the remainder of the term of such Options, whichever is shorter, and any such exercise shall be irrevocable. 6. Effect of Death or Disability 6.01. In the event of the death of Bayman during the Period of Employment, the Period of Employment shall be deemed to have ended as of the close of business on the last day of the month in which death shall have occurred, and his legal representative shall be entitled to (i) the compensation provided for in paragraph -4- 7 4.01(a)(i) above for the month in which death shall take place at the rate being paid at the time of death, (ii) any cash bonus payable for the fiscal quarter in which the Period of Employment shall be deemed to have terminated due to death, plus the balance of any bonus due Bayman for any prior fiscal quarters in accordance with, and payable at the times set forth in, paragraph 4.01(a)(ii) above, and (iii) any benefits provided pursuant to paragraph 5.02 hereof which are payable pursuant to the terms of the applicable plan or practice. 6.02 (a) The term "Disability," as used in this Agreement, shall mean an illness or accident which prevents Bayman from performing his duties under this Agreement for a period of six (6) consecutive months. The Period of Employment shall be deemed to have ended as of the close of business on the last day of such six (6) months' period but without prejudice to any payments due Bayman in respect of disability. (b) In the event of the Disability of Bayman during the Period of Employment, Bayman shall be entitled to (i) the compensation provided for in paragraph 4.01(a)(i) above, at the rate being paid at the time of the commencement of Disability, for the period of such Disability but not in excess of six (6) months, (ii) any cash bonus payable for the fiscal quarter in which the Period of Employment shall be deemed to have terminated due to Disability, plus the balance of any bonus due Bayman for any prior fiscal quarters in accordance with, and payable at the times set forth in, paragraph 4.01(a)(ii) above, and (iii) any benefits provided pursuant to paragraph 5.02 hereof which are payable pursuant to the terms of the applicable plan or practice. (c) The amount of any payments due under this paragraph 6.02 shall be reduced by any payments to which Bayman may be paid for the same period under any disability plan of the Company or of any subsidiary or affiliate thereof. 7. Termination 7.01. GENERAL. The Company may terminate Bayman with or without cause at any time during the Period of Employment, subject to the provisions of this Section 7. 7.02. CHANGE OF CONTROL. Within one (1) year of a Change of Control of the Company, as defined in paragraph 18.02, Bayman shall have the right to terminate his employment with the Company and there shall be paid or provided to Bayman, his dependents, beneficiaries and estate, as liquidated damages or severance pay, or both, the following: (a) The compensation provided for in paragraph 4.01(a)(i) above for the month in which Termination shall have occurred at the rate being paid at the time of Termination; and an amount equal to his previous twenty four (24) months of base salary plus an amount equal to the earned incentive cash bonus referred to -5- 8 in paragraph 4.01(a)(ii) above for the two (2) previously completed fiscal years. Such amount shall be paid to Bayman in one payment, immediately upon Termination. Bayman shall also receive any cash bonus payable for the fiscal quarter in which the Period of Employment shall be deemed to have terminated due to Change of Control, plus the balance of any bonus due Bayman for any prior fiscal quarters in accordance with, and payable at the times set forth in, paragraph 4.01(a)(ii) above. (b) For two (2) years following the date of Termination, Bayman, his dependents, beneficiaries and estate, shall continue to be entitled to all benefits provided pursuant to paragraph 5.02 hereof which are payable pursuant to the terms of the applicable plan or practice, and service credit for benefits under all employee benefit plans of the Company, including, without limitation, the Company's profit sharing plan referred to in paragraph 5.02 above, upon the same basis as immediately prior to Termination and, to the extent that such benefits or service credit for benefits shall not be payable or provided under any such plans to Bayman, his dependents, beneficiaries and estate, by reason of his no longer being an employee of the Company as the result of Termination, or any such plan, program or arrangement is discontinued or the benefits thereunder are materially reduced, the Company shall itself arrange to provide benefits substantially similar to those which Bayman, his dependents and beneficiaries were entitled to receive under such plans, programs and arrangements immediately prior to termination to Bayman, his dependents, beneficiaries and estate. Any termination by the Company within the period of ninety (90) days prior to the execution of a letter of intent or a definitive agreement which could lead to a Change of Control and the closing of the transaction actually resulting in the Change of Control, as defined in paragraph 18.02, shall be deemed to be a termination under this paragraph 7.02. An election by Bayman to terminate his employment under the provisions of this paragraph 7.02 shall not be deemed a Voluntary Termination of employment by Bayman under paragraph 7.03 of this Agreement or any plan or practice of the Company. 7.03. FOR CAUSE OR VOLUNTARY TERMINATION. For the purpose of any provision of this Agreement, the termination of Bayman's employment shall be deemed to have been For Cause only if: (a) termination of his employment shall have been the result of Bayman's conviction of any of the following: (i) embezzlement; (ii) misappropriation of money or other property of the Company; or (iii) any felony; or (b) there has been a breach by Bayman during the Period of Employment of the provisions of paragraph 3.02 above, relating to devotion of full time to the affairs of the Company, Section 8 relating to Competition, Section 9 relating to Confidential Information, or Section 10 relating to -6- 9 Noninterference, and such breach results in demonstrably material injury to the Company, and with respect to any alleged breach of paragraph 3.02 hereof, Bayman shall have failed to remedy such proven breach within thirty (30) days from his receipt of written notice from the Company. If Bayman's employment is terminated by the Company For Cause, or if Bayman shall Voluntarily Terminate his employment with the Company, Bayman shall be entitled to the compensation provided for in paragraph 4.01(a)(i) through the date of such termination. Bayman shall not be entitled to any additional compensation or benefits (except for any vested benefits), and shall continue to be bound by the provisions of Section 8 of this Agreement (relating to Competition), the provisions of Section 9 of this Agreement (relating to Confidential Information), and the provisions of Section 10 (relating to Noninterference). 7.04. WITHOUT CAUSE. Subject to compliance by Bayman with the provisions of Section 8 of this Agreement (relating to Competition), the provisions of Section 9 of this Agreement (relating to Confidential Information), and the provisions of Section 10 of this Agreement (relating to Noninterference), if the Company shall terminate Bayman's employment, Without Cause, there shall be paid or provided to Bayman, his dependents, beneficiaries and estate, as liquidated damages or severance pay, or both, the compensation provided for in paragraph 4.01(a)(i) above for the month in which termination shall have occurred at the rate being paid at the time of such termination, and the amount (the "Payment Amount") per month, which shall consist of 1/24th of the total of an amount equal to his previous twenty-four (24) months of base salary plus an amount equal to the earned incentive cash bonus referred to in paragraph 4.01(a)(ii) above for the two (2) previously completed fiscal years. Such Payment Amount shall be paid to Bayman or, in case of his prior death, to his legal representative, in monthly installments at the end of each month commencing with the month next following that in which such termination shall have occurred, and continuing for a period of twenty-four (24) months. Bayman shall also receive any cash bonus payable for the fiscal quarter in which the Period of Employment shall be deemed to have terminated due to termination Without Cause, plus the balance of any bonus due Bayman for any prior fiscal quarters in accordance with, and payable at the times set forth in, paragraph 4.01(a)(ii) above, plus any benefits provided pursuant to paragraph 5.02 hereof which are payable pursuant to the terms of the applicable plan or practice. In the event the Company fails to make such payments when due, then the remaining monthly payments shall become due and payable immediately. 7.05. ARBITRATION. In the event that Bayman's employment shall be terminated by the Company during the Period of Employment or the Company shall withhold payments or provision of benefits because Bayman is alleged to be engaged in activities prohibited by Sections 8, 9 or 10 of this Agreement or for any other reason, Bayman shall have the right, in addition to all other -7- 10 rights and remedies provided by law, at his election either to seek arbitration in the metropolitan area of Cleveland, Ohio, under the rules of the American Arbitration Association by serving a notice to arbitrate upon the Company or to institute a judicial proceeding, in either case within one hundred and twenty (120) days after having received notice of termination of his employment or within such longer period as may reasonably be necessary for Bayman to take action in the event that his illness or incapacity should preclude his taking such action within such one hundred and twenty (120) day period. 8. Competition There shall be no obligation on the part of the Company to make any further payments provided for in paragraph 7.04 above if Bayman shall, during the two (2) years following termination of Bayman's employment for any reason except Change of Control as described in paragraph 7.02, engage in Competition with the Company as hereinafter defined. The word "Competition" for purposes of this Section 8 and any other provision of this Agreement shall mean taking any employment or consulting position with or control of one of the Company's top twenty-five (25) competitors as listed in the most current issue at the date of termination of Electronic Buyer's News and/or Electronic News; provided, however, that in no event shall ownership of less than 5% of the outstanding capital stock entitled to vote for the election of directors of a corporation with a class of equity securities held of record by more than 500 persons be deemed Competition with the Company within the meaning of this Section 8. 9 . Confidential Information 9.01. Except for information which is already in the public domain, or which is publicly disclosed by persons other than Bayman, or which is required by law or court order to be disclosed, or information given to Bayman by a third party not bound by any obligation of confidentiality, Bayman shall at all times during and after his employment with the Company hold in strictest confidence any and all confidential information within his knowledge and which is material to the business of the Company (whether acquired prior to or during his employment with the Company) concerning the inventions, products, processes, methods of distribution, customers, services, business, suppliers or trade secrets of the Company, except that Bayman may, in connection with the performance of his duties to the Company, divulge confidential information to the directors, officers, employees and shareholders of the Company and to the advisors, accountants, attorneys or lenders of the Company or such other individuals as deemed prudent in the course of business to carry out the responsibilities and duties of his position. Such confidential information includes, without limitation, financial information, sales information, price lists, marketing data, the identity and lists of actual and potential customers and technical information, all to the extent that such -8- 11 information is not intended by the Company for public dissemination. 9.02. Bayman also agrees that upon leaving the Company's employ he will not take with him, without the prior written consent of an officer authorized to act in the matter by the Board of Directors of the Company, any Company document, contract, internal financial or management reports, customers list, product list, price list, catalog, employee list, procedures, software, MIS data, drawing, blueprint, specification or other document of the Company, its subsidiaries, affiliates and divisions, which is of a confidential nature relating to the Company, its subsidiaries, affiliates and divisions, or, without limitation, relating to its or their methods of purchase or distribution, or any description of any trade secret, formulae or secret processes. 10. Noninterference Except for Change of Control as described in paragraph 7.02, Bayman shall not, at any time during or within two (2) years after his employment is terminated with the Company, without the prior written consent of the Company, directly or indirectly, induce or attempt to induce any key employee, key agent or other key representative or associate of the Company to terminate his or her relationship with the Company, or in any way directly or indirectly interfere with such a relationship or any relationship between the Company and any of its top fifty (50) suppliers or top two hundred fifty (250) customers, both in terms of the Company's sales volume, provided that purchasing goods from a supplier to the Company or making a sale to any of the Company's customers shall not be deemed to be interference. 11. Remedy Bayman acknowledges that Sections 8, 9 and 10 hereof were negotiated at arms length and are required for the fair and reasonable protection of the Company. Bayman and the Company further acknowledge and agree that a breach of those obligations and agreements will result in irreparable and continuing damage to the Company for which there will be no adequate remedy at law and, therefore, Bayman and the Company agree that in the event of any breach of said obligations and agreements the Company, and its successors and assigns, shall be entitled to injunctive relief and such other and further relief, including monetary damages, as is proper in the circumstances. It is further agreed that the running of the periods provided above in Sections 8 and 10, shall be tolled during any period which Bayman shall be adjudged to have been in violation of any of his obligations under such Sections. 12. Withholding Anything to the contrary notwithstanding, all payments required to be made by the Company hereunder to Bayman or his estate or beneficiaries, shall be subject to the withholding of -9- 12 such amounts, if any, relating to tax and other payroll deductions as the Company may reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, the Company may accept other provisions to the end that it has sufficient funds to pay all taxes required by law to be withheld in respect of such payments or any of them. 13. Notices All notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be sufficiently given if and when mailed in the continental United States by registered or certified mail or personally delivered to the party entitled thereto at the address stated below or to such changed address as the addressee may have given by a similar notice: To the Company: Pioneer-Standard Electronics, Inc. 4800 East 131st Street Cleveland, Ohio 44105 Attention: Secretary or Assistant Secretary To Bayman: James L. Bayman 2749 Cranlyn Road Shaker Heights, Ohio 44122 14. General Provisions 14.01. There shall be no right of set-off or counter claim, in respect any claim, debt or obligation, against payments to Bayman, his dependents, beneficiaries or estate provided for in this Agreement. 14.02. No right or interest to or in any payments shall be assignable by Bayman; provided, however, that this provision shall not preclude him from designating one or more beneficiaries to receive any amount that may be payable after his death and shall not preclude the legal representative of his estate from assigning any right hereunder to the person or persons entitled thereto under his will or, in the case of intestacy, to the person or persons entitled thereto under the laws of intestacy applicable to his estate. The term "beneficiaries" as used in this Agreement shall mean a beneficiary or beneficiaries so designated to receive any such amount or, if no beneficiary has been so designated, the legal representative of Bayman's estate. 14.03. No right, benefit or interest hereunder, shall be subject to anticipation, alienation, sale, assignment, encumbrance, charge, pledge, hypothecation, or set-off in respect of any claim, debt or obligation, or to execution, attachment, levy or similar process, or assignment by operation of law. Any attempt, voluntary -10- 13 or involuntary, to effect any action specified in the immediately preceding sentence shall, to the full extent permitted by law, be null, void and of no effect. 14.04. In the event of Bayman's death or a judicial determination of his incompetence, reference in this Agreement to Bayman shall be deemed, where appropriate, to refer to his legal representative or, where appropriate, to his beneficiary or beneficiaries. 14.05. The titles to sections in this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the title of any section. 14.06. This Agreement shall be binding upon and shall inure to the benefit of (a) Bayman and, subject to the provisions of paragraphs 14.02 and 14.03, his heirs and legal representatives, and (b) the Company and its successors as provided in Section 17 hereof. 15. Amendment or Modification; Waiver No provision of this Agreement may be amended or waived unless such amendment or waiver is authorized by the Board of Directors of the Company or any authorized committee of the Board of Directors and is agreed to in writing, signed by Bayman and by an officer of the Company thereunto duly authorized by either the Board of Directors or the Compensation Committee. Except as otherwise specifically provided in this Agreement, no waiver by either party hereto of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a subsequent breach of such condition or provision or a waiver of a similar or dissimilar provision or condition at the same or at any prior or subsequent time. 16. Severability In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions and portions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law. 17. Successors to the Company Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the Company and any successor of the Company, including, without limitation, any corporation which acquires directly or indirectly all or substantially all of the assets of the Company whether by merger, consolidation, sale or otherwise (and such successor shall -11- 14 thereafter be deemed "the Company" for the purposes of this Agreement), but shall not otherwise be assignable by the Company. 18. Operation of Agreement 18.01. This Agreement shall be effective April 3, 1995, and shall supersede the Amended and Restated Employment Agreement effective April 1, 1993 between Bayman and the Company. 18.02. For the purpose of this Agreement, the term "Change in Control" of the Company shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 as in effect on the date of this Agreement; provided that, without limitation, such a change in control shall be deemed to have occurred if and when (a) any "person" (as such term is used in Sections 13(d) and 14(d) (2) of the Securities Exchange Act of 1934) is or becomes a beneficial owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities or (b) during any period of twelve (12) consecutive months, commencing before or after the date of this Agreement, individuals who, at the beginning of such twelve (12) month period were directors of the Company for whom Bayman, as a shareholder, shall have voted, cease for any reason to constitute at least a majority of the Board of Directors of the Company. 19. Enforcement Costs The Company is aware that upon the occurrence of a Change in Control the Board of Directors or a shareholder of the Company may then cause or attempt to cause the Company to refuse to comply with its obligations under this Agreement, or may cause or attempt to cause the Company to institute, or may institute, litigation seeking to have this Agreement declared unenforceable, or may take, or attempt to take, other action to deny Bayman the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement could be frustrated. It is the intent of the Company that Bayman not be required to incur the expenses associated with the enforcement of his rights under this Agreement by litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended to Bayman hereunder, nor be bound to negotiate any settlement of his rights hereunder under threat of incurring such expenses. Accordingly, if following a Change in Control it should appear to Bayman that the Company has failed to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or other legal action designed to deny, diminish or to recover from, Bayman, or in the event the Company fails or refuses to comply with the obligations under this Agreement, the benefits intended to be -12- 15 provided to Bayman hereunder, and that Bayman has complied with all of his obligations under this Agreement, the Company irrevocably authorizes Bayman from time to time to retain counsel of his choice at the expense of the Company as provided in this Section 19, to represent Bayman in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company or any Director, officer, shareholder or other person affiliated with the Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between the Company and such counsel, the Company irrevocably consents to Bayman entering into an attorney-client relationship with such counsel, and in that connection the Company and Bayman agree that a confidential relationship shall exist between Bayman and such counsel. The reasonable fees and expenses of counsel selected from time to time by Bayman as hereinabove provided shall be paid or reimbursed to Bayman by the Company on a regular, periodic basis upon presentation by Bayman of a statement or statements prepared by such counsel in accordance with its customary practices, up to a maximum aggregate amount of $500,000. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. ATTEST: PIONEER-STANDARD ELECTRONICS, INC. /s/ Beverly M. Fisher By/s/ Preston B. Heller - ------------------------- -------------------------------- Preston B. Heller, Jr., Chairman of the Board ATTEST: /s/ Colleen M. Simon /s/ James L. Bayman - ------------------------- -------------------------------- James L. Bayman -13- EX-10.C 6 PIONEER STANDARD 10-K405 EX-10(C) 1 Exhibit 10(c) EXECUTION COPY AMENDED AND RESTATED EMPLOYMENT AGREEMENT BETWEEN PIONEER-STANDARD ELECTRONICS, INC. AND JANICE M. MARGHERET June 12, 1995 2 Table of Contents
Page ---- 1. Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Period of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3. Position, Duties, Responsibilities . . . . . . . . . . . . . . . . . . . . . . 1 4. Compensation, Compensation Plans, Perquisites . . . . . . . . . . . . . . . . 2 5. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 6. Effect of Death or Disability . . . . . . . . . . . . . . . . . . . . . . . . 4 7. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 8. Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 9. Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 10. Noninterference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 11. Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 12. Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 13. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 14. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 15. Amendment or Modification; Waiver . . . . . . . . . . . . . . . . . . . . . . 11 16. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 17. Successors to the Company . . . . . . . . . . . . . . . . . . . . . . . . . . 11 18. Operation of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 19. Enforcement Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3 AMENDED AND RESTATED EMPLOYMENT AGREEMENT AMENDED AND RESTATED EMPLOYMENT AGREEMENT between PIONEER-STANDARD ELECTRONICS, INC., an Ohio corporation (the "Company"), and JANICE M. MARGHERET ("Margheret"), dated June ___, 1995, to be effective April 3, 1995. W I T N E S S E T H: WHEREAS: The Company and Margheret have given consideration to an employment agreement providing for the services of Margheret as Senior Vice President; and WHEREAS: This agreement is deemed necessary at the present time to meet the need for a continued strong management without substantial change; and WHEREAS: Together with other officers of the Company, Margheret has been responsible for the success of the business of the Company; NOW, THEREFORE, it is hereby agreed by and between the Company and Margheret as follows: 1. Employment The Company hereby agrees to continue to employ Margheret, and Margheret hereby agrees to remain in the employ of the Company, for the period set forth in Section 2 below (the "Period of Employment"), in the position and with the duties and responsibilities set forth in Section 3 below, and upon the other terms and conditions hereinafter stated. 2. Period of Employment For the purposes of this Agreement, the Period of Employment, subject only to the provisions of Section 6 below (relating to Death or Disability), shall continue until termination of employment as set forth in Section 7 (relating to Termination). 3. Position, Duties, Responsibilities 3.01 (a) During the Period of Employment, Margheret shall serve as Senior Vice President of the Company reporting to the President and Chief Executive Officer of the Company and shall have the authority, power, and duties with regard to her position as may from time to time be assigned by the President and Chief Executive Officer or the Board of Directors of the Company. Her duties shall exclude the Company's affiliate, Pioneer/Technologies Group, Inc. ("Technologies"). 3.01 (b) At all times during the Period of Employment, Margheret shall hold a position of responsibility and importance and a position of scope, with the functions, duties and responsibilities attached thereto, at least equal in responsibility 4 and importance and in scope to and commensurate with her position on the date of this Agreement described in general terms in paragraph 3.01(a) above. 3.02. Throughout the Period of Employment Margheret shall devote her full time and undivided attention during normal business hours to the business and affairs of the Company, except for reasonable vacations afforded the Company's executive officers consistent with past practices and except for illness or incapacity, but nothing in this Agreement shall preclude Margheret from devoting reasonable time required for serving as a director or member of an advisory committee of any organization involving no conflict of interest with the interests of the Company, from engaging in charitable and community activities, and from managing her personal investments, provided that such activities do not materially interfere with the regular performance of her duties and responsibilities under this Agreement. 3.03. Margheret's office shall be located at the corporate offices of the Company in the Greater Cleveland Area, State of Ohio, and Margheret shall not be required to locate her office elsewhere without her prior written consent, nor shall she be required to be absent therefrom on travel status or otherwise more than a total of sixty (60) days in any calendar year nor more than fifteen (15) consecutive days at any one time. 4. Compensation, Compensation Plans, Perquisites 4.01 (a) For all services rendered by Margheret in any capacity during the Period of Employment, Margheret shall be paid as compensation: (i) A base salary, payable not less often than monthly, at the rate of no less than $15,416 per month, with such increases in such rate as shall be awarded from time to time in accordance with the Company's regular administrative practices of salary increases applicable to executives of the Company in effect on the date of this Agreement; and (ii) A cash incentive bonus equal to the product of 5/10 of 1% of the sum of the "actual operating income" of the Company plus its equity earnings in profits/losses from Technologies, multiplied by the ratio of the Company's "actual return on capital" to 22.0%, or such equivalent successor bonus plan as may be adopted by the Company with Margheret's written consent. The term "actual operating income" shall be defined as the income before income tax (state and federal income tax), interest, and the Company's equity earnings in profits/losses from Technologies. The term "actual return on capital" shall be defined as the Company's "actual operating income" divided by the sum of its interest-bearing debt, plus equity, less the Company's equity investment in Technologies (the denominator shall be calculated for each fiscal year as the average of such amounts as at the end of each of the Company's four (4) fiscal quarters). The Company shall -2- 5 calculate and pay 75% of such bonus to Margheret at the end of each of the first three (3) fiscal quarters. After April 1 and before June 16 of the next fiscal year, and after audited financial statements are available to the Company, the Company shall pay Margheret the balance of any bonus due Margheret based on the full year calculation less payments made for the first three (3) fiscal quarters, which payment shall be vested in the event of termination by reason of Death or Disability (Section 6), Change of Control, (Section 7.02), or Without Cause (Section 7.04), but shall be forfeited in the event of termination For Cause or Voluntary Termination (Section 7.03). (b) Any increase in salary or bonus or other compensation shall in no way diminish any other obligation of the Company under this Agreement, unless specifically agreed to in writing by Margheret. 4.02. During the Period of Employment Margheret shall be and continue to be a full participant in the Company's Employees' Profit Sharing Plan or any equivalent successor plan that may be adopted by the Company. 4.03. During the Period of Employment Margheret shall be entitled to perquisites, including without limitation, an office, secretarial and clerical staff, and to fringe benefits comparable to those enjoyed by the other executive officers of the Company, but in each case at least equal to those attached to her office on the date of this Agreement, as well as to reimbursement, upon proper accounting, of reasonable expenses and disbursements incurred by her in the course of her duties. 5. Employee Benefit Plans 5.01. The compensation, together with other matters provided for in Section 4 above, is in addition to the benefits provided for in this Section 5. 5.02. Margheret, her dependents, beneficiaries and estate shall be entitled to all payments and benefits and service credit for benefits during the Period of Employment to which executive officers of the Company, their dependents and beneficiaries are entitled as the result of the employment of such executive officers during the Period of Employment under the terms of employee plans and practices of the Company, including, without limitation, the Company's retirement program consisting of its Employees' Profit Sharing Plan, its group life insurance plan, its accidental death and dismemberment insurance, disability, medical and health and welfare plans, any key person individual life and disability policies, automobile expense reimbursement, club membership fees and dues, and other present or equivalent successor plans and practices of the Company, its subsidiaries and divisions, for which officers, their dependents and beneficiaries are eligible, and to all payments or other benefits under any such plan or practice after the Period of Employment as a result of -3- 6 participation in such plan or practice during the Period of Employment. 5.03. Margheret shall be eligible to participate in the Company's 1991 Stock Option Plan (which, together with any successor stock option plan or plans that may be adopted by the Company, is referred to herein as the "Option Plan"). The Company has granted Margheret stock options ("Options") at an option price equal to the fair market value of the Company's Common Shares at the date of grant. The terms and conditions of exercise of Margheret's Options shall be as is set forth in Margheret's Stock Option Agreements (the "Option Agreements") with the Company; provided, however, that in the event of a Change in Control, as defined in paragraph 18.02 below, then notwithstanding the provisions of said Option Agreements, all options (including those granted to her under the 1982 Incentive Stock Option Plan) shall immediately be 100% vested and Margheret shall have the immediate right of exercise with respect to all Options and their underlying Common Shares covered by said Option Agreements. In the event that Margheret's employment is terminated as a result of a Change in Control, as defined in paragraph 18.02 below, Margheret shall have the period of one (1) year after the date of such termination to exercise her Options or the remainder of the term of such Options, whichever is shorter, and any such exercise shall be irrevocable. 6. Effect of Death or Disability 6.01. In the event of the death of Margheret during the Period of Employment, the Period of Employment shall be deemed to have ended as of the close of business on the last day of the month in which death shall have occurred, and her legal representative shall be entitled to (i) the compensation provided for in paragraph 4.01(a)(i) above for the month in which death shall take place at the rate being paid at the time of death, (ii) any cash bonus payable for the fiscal quarter in which the Period of Employment shall be deemed to have terminated due to death, plus the balance of any bonus due Margheret for any prior fiscal quarters in accordance with, and payable at the times set forth in, paragraph 4.01(a)(ii) above, and (iii) any benefits provided pursuant to paragraph 5.02 hereof which are payable pursuant to the terms of the applicable plan or practice. 6.02 (a) The term "Disability," as used in this Agreement, shall mean an illness or accident which prevents Margheret from performing her duties under this Agreement for a period of three (3) consecutive months. The Period of Employment shall be deemed to have ended as of the close of business on the last day of such three (3) months' period but without prejudice to any payments due Margheret in respect of disability. (b) In the event of the Disability of Margheret during the Period of Employment, Margheret shall be entitled to (i) the compensation provided for in paragraph 4.01(a)(i) above, at the rate being paid at the time of the commencement of Disability, -4- 7 for the period of such Disability but not in excess of three (3) months, (ii) any cash bonus payable for the fiscal quarter in which the Period of Employment shall be deemed to have terminated due to Disability, plus the balance of any bonus due Margheret for any prior fiscal quarters in accordance with, and payable at the times set forth in, paragraph 4.01(a)(ii) above, and (iii) any benefits provided pursuant to paragraph 5.02 hereof which are payable pursuant to the terms of the applicable plan or practice. (c) The amount of any payments due under this paragraph 6.02 shall be reduced by any payments to which Margheret may be paid for the same period under any disability plan of the Company or of any subsidiary or affiliate thereof. 7. Termination 7.01. GENERAL. The Company may terminate Margheret with or without cause at any time during the Period of Employment, subject to the provisions of this Section 7. 7.02. CHANGE OF CONTROL. Within one (1) year of a Change of Control of the Company, as defined in paragraph 18.02, Margheret shall have the right to terminate her employment with the Company and there shall be paid or provided to Margheret, her dependents, beneficiaries and estate, as liquidated damages or severance pay, or both, the following: (a) The compensation provided for in paragraph 4.01(a)(i) above for the month in which Termination shall have occurred at the rate being paid at the time of Termination; and an amount equal to her previous twenty four (24) months of base salary plus an amount equal to the earned incentive cash bonus referred to in paragraph 4.01(a)(ii) above for the two (2) previously completed fiscal years. Such amount shall be paid to Margheret in one payment, immediately upon Termination. Margheret shall also receive any cash bonus payable for the fiscal quarter in which the Period of Employment shall be deemed to have terminated due to Change of Control, plus the balance of any bonus due Margheret for any prior fiscal quarters in accordance with, and payable at the times set forth in, paragraph 4.01(a)(ii) above. (b) For two (2) years following the date of Termination, Margheret, her dependents, beneficiaries and estate, shall continue to be entitled to all benefits provided pursuant to paragraph 5.02 hereof which are payable pursuant to the terms of the applicable plan or practice, and service credit for benefits under all employee benefit plans of the Company, including, without limitation, the Company's profit sharing plan referred to in paragraph 5.02 above, upon the same basis as immediately prior to Termination and, to the extent that such benefits or service credit for benefits shall not be payable or provided under any such plans to Margheret, her dependents, beneficiaries and estate, by reason of her no longer being an employee of the Company as the result of Termination, or any such plan, program or arrangement is -5- 8 discontinued or the benefits thereunder are materially reduced, the Company shall itself arrange to provide benefits substantially similar to those which Margheret, her dependents and beneficiaries were entitled to receive under such plans, programs and arrangements immediately prior to termination to Margheret, her dependents, beneficiaries and estate. Any termination by the Company within the period of ninety (90) days prior to the execution of a letter of intent or a definitive agreement which could lead to a Change of Control and the closing of the transaction actually resulting in the Change of Control, as defined in paragraph 18.02, shall be deemed to be a termination under this paragraph 7.02. An election by Margheret to terminate her employment under the provisions of this paragraph 7.02 shall not be deemed a Voluntary Termination of employment by Margheret under paragraph 7.03 of this Agreement or any plan or practice of the Company. 7.03. FOR CAUSE OR VOLUNTARY TERMINATION. For the purpose of any provision of this Agreement, the termination of Margheret's employment shall be deemed to have been For Cause only if: (a) termination of her employment shall have been the result of Margheret's conviction of any of the following: (i) embezzlement; (ii) misappropriation of money or other property of the Company; or (iii) any felony; or (b) there has been a breach by Margheret during the Period of Employment of the provisions of paragraph 3.02 above, relating to devotion of full time to the affairs of the Company, Section 8 relating to Competition, Section 9 relating to Confidential Information, or Section 10 relating to Noninterference, and such breach results in demonstrably material injury to the Company, and with respect to any alleged breach of paragraph 3.02 hereof, Margheret shall have failed to remedy such proven breach within thirty (30) days from her receipt of written notice from the Company. If Margheret's employment is terminated by the Company For Cause, or if Margheret shall Voluntarily Terminate her employment with the Company, Margheret shall be entitled to the compensation provided for in paragraph 4.01(a)(i) through the date of such termination. Margheret shall not be entitled to any additional compensation or benefits (except for any vested benefits), and shall continue to be bound by the provisions of Section 8 of this Agreement (relating to Competition), the provisions of Section 9 of this Agreement (relating to Confidential Information), and the provisions of Section 10 (relating to Noninterference). 7.04. WITHOUT CAUSE. Subject to compliance by Margheret with the provisions of Section 8 of this Agreement (relating to Competition), the provisions of Section 9 of this Agreement -6- 9 (relating to Confidential Information), and the provisions of Section 10 of this Agreement (relating to Noninterference), if the Company shall terminate Margheret's employment, Without Cause, there shall be paid or provided to Margheret, her dependents, beneficiaries and estate, as liquidated damages or severance pay, or both, the compensation provided for in paragraph 4.01(a)(i) above for the month in which termination shall have occurred at the rate being paid at the time of such termination, and the amount (the "Payment Amount") per month, which shall consist of 1/24th of the total of an amount equal to her previous twenty-four (24) months of base salary plus an amount equal to the earned incentive cash bonus referred to in paragraph 4.01(a)(ii) above for the two (2) previously completed fiscal years. Such Payment Amount shall be paid to Margheret or, in case of her prior death, to her legal representative, in monthly installments at the end of each month commencing with the month next following that in which such termination shall have occurred, and continuing for a period of twelve (12) months. Margheret shall also receive any cash bonus payable for the fiscal quarter in which the Period of Employment shall be deemed to have terminated due to termination Without Cause, plus the balance of any bonus due Margheret for any prior fiscal quarters in accordance with, and payable at the times set forth in, paragraph 4.01(a)(ii) above, plus any benefits provided pursuant to paragraph 5.02 hereof which are payable pursuant to the terms of the applicable plan or practice. In the event the Company fails to make such payments when due, then the remaining payments shall become due and payable immediately. 7.05. ARBITRATION. In the event that Margheret's employment shall be terminated by the Company during the Period of Employment or the Company shall withhold payments or provision of benefits because Margheret is alleged to be engaged in activities prohibited by Sections 8, 9 or 10 of this Agreement or for any other reason, Margheret shall have the right, in addition to all other rights and remedies provided by law, at her election either to seek arbitration in the metropolitan area of Cleveland, Ohio, under the rules of the American Arbitration Association by serving a notice to arbitrate upon the Company or to institute a judicial proceeding, in either case within one hundred and twenty (120) days after having received notice of termination of her employment or within such longer period as may reasonably be necessary for Margheret to take action in the event that her illness or incapacity should preclude her taking such action within such one hundred and twenty (120) day period. 8. Competition There shall be no obligation on the part of the Company to make any further payments provided for in paragraph 7.04 above if Margheret shall, during the one (1) year following termination of Margheret's employment for any reason except Change of Control as described in paragraph 7.02, engage in Competition with the Company as hereinafter defined. The word "Competition" for purposes of this Section 8 and any other provision of this -7- 10 Agreement shall mean taking any employment or consulting position with or control of one of the Company's top twenty-five (25) competitors as listed in the most current issue at the date of termination of Electronic Buyer's News and/or Electronic News; provided, however, that in no event shall ownership of less than 5% of the outstanding capital stock entitled to vote for the election of directors of a corporation with a class of equity securities held of record by more than 500 persons be deemed Competition with the Company within the meaning of this Section 8. 9. Confidential Information 9.01. Except for information which is already in the public domain, or which is publicly disclosed by persons other than Margheret, or which is required by law or court order to be disclosed, or information given to Margheret by a third party not bound by any obligation of confidentiality, Margheret shall at all times during and after her employment with the Company hold in strictest confidence any and all confidential information within her knowledge and which is material to the business of the Company (whether acquired prior to or during her employment with the Company) concerning the inventions, products, processes, methods of distribution, customers, services, business, suppliers or trade secrets of the Company, except that Margheret may, in connection with the performance of her duties to the Company, divulge confidential information to the directors, officers, employees and shareholders of the Company and to the advisors, accountants, attorneys or lenders of the Company or such other individuals as deemed prudent in the course of business to carry out the responsibilities and duties of her position. Such confidential information includes, without limitation, financial information, sales information, price lists, marketing data, the identity and lists of actual and potential customers and technical information, all to the extent that such information is not intended by the Company for public dissemination. 9.02. Margheret also agrees that upon leaving the Company's employ she will not take with her, without the prior written consent of an officer authorized to act in the matter by the Board of Directors of the Company, any Company document, contract, internal financial or management reports, customers list, product list, price list, catalog, employee list, procedures, software, MIS data, drawing, blueprint, specification or other document of the Company, its subsidiaries, affiliates and divisions, which is of a confidential nature relating to the Company, its subsidiaries, affiliates and divisions, or, without limitation, relating to its or their methods of purchase or distribution, or any description of any trade secret, formulae or secret processes. 10. Noninterference Except for Change of Control as described in paragraph 7.02, Margheret shall not, at any time during or within one (1) -8- 11 year after her employment is terminated with the Company, without the prior written consent of the Company, directly or indirectly, induce or attempt to induce any key employee, key agent or other key representative or associate of the Company to terminate his or her relationship with the Company, or in any way directly or indirectly interfere with such a relationship or any relationship between the Company and any of its top fifty (50) suppliers or top two hundred fifty (250) customers, both in terms of the Company's sales volume, provided that purchasing goods from a supplier to the Company or making a sale to any of the Company's customers shall not be deemed to be interference. 11. Remedy Margheret acknowledges that Sections 8, 9 and 10 hereof were negotiated at arms length and are required for the fair and reasonable protection of the Company. Margheret and the Company further acknowledge and agree that a breach of those obligations and agreements will result in irreparable and continuing damage to the Company for which there will be no adequate remedy at law and, therefore, Margheret and the Company agree that in the event of any breach of said obligations and agreements the Company, and its successors and assigns, shall be entitled to injunctive relief and such other and further relief, including monetary damages, as is proper in the circumstances. It is further agreed that the running of the periods provided above in Sections 8 and 10, shall be tolled during any period which Margheret shall be adjudged to have been in violation of any of her obligations under such Sections. 12. Withholding Anything to the contrary notwithstanding, all payments required to be made by the Company hereunder to Margheret or her estate or beneficiaries, shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Company may reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, the Company may accept other provisions to the end that it has sufficient funds to pay all taxes required by law to be withheld in respect of such payments or any of them. 13. Notices All notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be sufficiently given if and when mailed in the continental United States by registered or certified mail or personally delivered to the party entitled thereto at the address stated below or to such changed address as the addressee may have given by a similar notice: -9- 12 To the Company: Pioneer-Standard Electronics, Inc. 4800 East 131st Street Cleveland, Ohio 44105 Attention: Secretary or Assistant Secretary To Margheret: Janice M. Margheret 5633 Spring Grove Drive Solon, OH 44139 14. General Provisions 14.01. There shall be no right of set-off or counter claim, in respect any claim, debt or obligation, against payments to Margheret, her dependents, beneficiaries or estate provided for in this Agreement. 14.02. No right or interest to or in any payments shall be assignable by Margheret; provided, however, that this provision shall not preclude her from designating one or more beneficiaries to receive any amount that may be payable after her death and shall not preclude the legal representative of her estate from assigning any right hereunder to the person or persons entitled thereto under her will or, in the case of intestacy, to the person or persons entitled thereto under the laws of intestacy applicable to her estate. The term "beneficiaries" as used in this Agreement shall mean a beneficiary or beneficiaries so designated to receive any such amount or, if no beneficiary has been so designated, the legal representative of Margheret's estate. 14.03. No right, benefit or interest hereunder, shall be subject to anticipation, alienation, sale, assignment, encumbrance, charge, pledge, hypothecation, or set-off in respect of any claim, debt or obligation, or to execution, attachment, levy or similar process, or assignment by operation of law. Any attempt, voluntary or involuntary, to effect any action specified in the immediately preceding sentence shall, to the full extent permitted by law, be null, void and of no effect. 14.04. In the event of Margheret's death or a judicial determination of her incompetence, reference in this Agreement to Margheret shall be deemed, where appropriate, to refer to her legal representative or, where appropriate, to her beneficiary or beneficiaries. 14.05. The titles to sections in this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the title of any section. 14.06. This Agreement shall be binding upon and shall inure to the benefit of (a) Margheret and, subject to the -10- 13 provisions of paragraphs 14.02 and 14.03, her heirs and legal representatives, and (b) the Company and its successors as provided in Section 17 hereof. 15. Amendment or Modification; Waiver No provision of this Agreement may be amended or waived unless such amendment or waiver is authorized by the Board of Directors of the Company or any authorized committee of the Board of Directors and is agreed to in writing, signed by Margheret and by an officer of the Company thereunto duly authorized by either the Board of Directors or the Compensation Committee. Except as otherwise specifically provided in this Agreement, no waiver by either party hereto of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a subsequent breach of such condition or provision or a waiver of a similar or dissimilar provision or condition at the same or at any prior or subsequent time. 16. Severability In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions and portions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law. 17. Successors to the Company Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the Company and any successor of the Company, including, without limitation, any corporation which acquires directly or indirectly all or substantially all of the assets of the Company whether by merger, consolidation, sale or otherwise (and such successor shall thereafter be deemed "the Company" for the purposes of this Agreement), but shall not otherwise be assignable by the Company. 18. Operation of Agreement 18.01. This Agreement shall be effective April 3, 1995, and shall supersede the Employment Agreement effective April 1, 1993 between Margheret and the Company. 18.02. For the purpose of this Agreement, the term "Change in Control" of the Company shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 as in effect on the date of this Agreement; provided that, without limitation, such a change in control shall be deemed to have occurred if and when (a) any -11- 14 "person" (as such term is used in Sections 13(d) and 14(d) (2) of the Securities Exchange Act of 1934) is or becomes a beneficial owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities or (b) during any period of twelve (12) consecutive months, commencing before or after the date of this Agreement, individuals who, at the beginning of such twelve (12) month period were directors of the Company for whom Margheret, as a shareholder, shall have voted, cease for any reason to constitute at least a majority of the Board of Directors of the Company. 19. Enforcement Costs The Company is aware that upon the occurrence of a Change in Control the Board of Directors or a shareholder of the Company may then cause or attempt to cause the Company to refuse to comply with its obligations under this Agreement, or may cause or attempt to cause the Company to institute, or may institute, litigation seeking to have this Agreement declared unenforceable, or may take, or attempt to take, other action to deny Margheret the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement could be frustrated. It is the intent of the Company that Margheret not be required to incur the expenses associated with the enforcement of her rights under this Agreement by litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended to Margheret hereunder, nor be bound to negotiate any settlement of her rights hereunder under threat of incurring such expenses. Accordingly, if following a Change in Control it should appear to Margheret that the Company has failed to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or other legal action designed to deny, diminish or to recover from, Margheret, or in the event the Company fails or refuses to comply with the obligations under this Agreement, the benefits intended to be provided to Margheret hereunder, and that Margheret has complied with all of her obligations under this Agreement, the Company irrevocably authorizes Margheret from time to time to retain counsel of her choice at the expense of the Company as provided in this Section 19, to represent Margheret in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company or any Director, officer, shareholder or other person affiliated with the Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between the Company and such counsel, the Company irrevocably consents to Margheret entering into an attorney-client relationship with such counsel, and in that connection the Company and Margheret agree that a confidential relationship shall exist between Margheret and such counsel. The reasonable fees and expenses of counsel selected from time to time -12- 15 by Margheret as hereinabove provided shall be paid or reimbursed to Margheret by the Company on a regular, periodic basis upon presentation by Margheret of a statement or statements prepared by such counsel in accordance with its customary practices, up to a maximum aggregate amount of $500,000. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. ATTEST: PIONEER-STANDARD ELECTRONICS, INC. /s/ Colleen M. Simon By/s/ James L. Bayman - -------------------------- -------------------------------- James L. Bayman, Chief Executive Officer and President ATTEST: /s/ Beverly M. Fisher /s/ Janice M. Margheret - -------------------------- -------------------------------- Janice M. Margheret -13- EX-10.D 7 PIONEER STANDARD 10-K405 EX-10(D) 1 Exhibit 10(d) EXECUTION COPY AMENDED AND RESTATED EMPLOYMENT AGREEMENT BETWEEN PIONEER-STANDARD ELECTRONICS, INC. AND ARTHUR RHEIN June 12, 1995 2 Table of Contents -----------------
Page ---- 1. Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Period of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3. Position, Duties, Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4. Compensation, Compensation Plans, Perquisites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 5. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 6. Effect of Death or Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 7. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 8. Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 9. Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 10. Noninterference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 11. Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 12. Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 13. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 14. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 15. Amendment or Modification; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 16. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 17. Successors to the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 18. Operation of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 19. Enforcement Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3 AMENDED AND RESTATED EMPLOYMENT AGREEMENT AMENDED AND RESTATED EMPLOYMENT AGREEMENT between PIONEER-STANDARD ELECTRONICS, INC., an Ohio corporation (the "Company"), and ARTHUR RHEIN ("Rhein"), dated June ___, 1995, to be effective April 3, 1995. W I T N E S S E T H: WHEREAS: The Company and Rhein have given consideration to an employment agreement providing for the services of Rhein as Senior Vice President; and WHEREAS: This agreement is deemed necessary at the present time to meet the need for a continued strong management without substantial change; and WHEREAS: Together with other officers of the Company, Rhein has been responsible for the success of the business of the Company; NOW, THEREFORE, it is hereby agreed by and between the Company and Rhein as follows: 1 . Employment The Company hereby agrees to continue to employ Rhein, and Rhein hereby agrees to remain in the employ of the Company, for the period set forth in Section 2 below (the "Period of Employment"), in the position and with the duties and responsibilities set forth in Section 3 below, and upon the other terms and conditions hereinafter stated. 2 . Period of Employment For the purposes of this Agreement, the Period of Employment, subject only to the provisions of Section 6 below (relating to Death or Disability), shall continue until termination of employment as set forth in Section 7 (relating to Termination). 3 . Position, Duties, Responsibilities 3.01 (a) During the Period of Employment, Rhein shall serve as Senior Vice President of the Company reporting to the President and Chief Executive Officer of the Company and shall have the authority, power, and duties with regard to his position as may from time to time be assigned by the President and Chief Executive Officer or the Board of Directors of the Company. His duties shall exclude the Company's affiliate, Pioneer/Technologies Group, Inc. ("Technologies"). 3.01 (b) At all times during the Period of Employment, Rhein shall hold a position of responsibility and importance and a position of scope, with the functions, duties and responsibilities attached thereto, at least equal in responsibility and importance 4 and in scope to and commensurate with his position on the date of this Agreement described in general terms in paragraph 3.01(a) above. 3.02. Throughout the Period of Employment Rhein shall devote his full time and undivided attention during normal business hours to the business and affairs of the Company, except for reasonable vacations afforded the Company's executive officers consistent with past practices and except for illness or incapacity, but nothing in this Agreement shall preclude Rhein from devoting reasonable time required for serving as a director or member of an advisory committee of any organization involving no conflict of interest with the interests of the Company, from engaging in charitable and community activities, and from managing his personal investments, provided that such activities do not materially interfere with the regular performance of his duties and responsibilities under this Agreement. 3.03. Rhein's office shall be located at the corporate offices of the Company in the Greater Cleveland Area, State of Ohio, and Rhein shall not be required to locate his office elsewhere without his prior written consent, nor shall he be required to be absent therefrom on travel status or otherwise more than a total of sixty (60) days in any calendar year nor more than fifteen (15) consecutive days at any one time. 4 . Compensation, Compensation Plans, Perquisites 4.01 (a) For all services rendered by Rhein in any capacity during the Period of Employment, including without limitation, services as an executive officer, director or member of any committee of the Company or of any subsidiary, division or affiliate thereof, Rhein shall be paid as compensation: (i) A base salary, payable not less often than monthly, at the rate of no less than $16,666 per month, with such increases in such rate as shall be awarded from time to time in accordance with the Company's regular administrative practices of salary increases applicable to executives of the Company in effect on the date of this Agreement; and (ii) A cash incentive bonus equal to the product of 65/100 of 1% of the sum of the "actual operating income" of the Company plus its equity earnings in profits/losses from Technologies, multiplied by the ratio of the Company's "actual return on capital" to 22.0%, or such equivalent successor bonus plan as may be adopted by the Company with Rhein's written consent. The term "actual operating income" shall be defined as the income before income tax (state and federal income tax), interest, and the Company's equity earnings in profits/losses from Technologies. The term "actual return on capital" shall be defined as the Company's "actual operating income" divided by the sum of its interest-bearing debt, plus equity, less the Company's equity investment in Technologies (the denominator shall be calculated for each fiscal -2- 5 year as the average of such amounts as at the end of each of the Company's four (4) fiscal quarters). The Company shall calculate and pay 75% of such bonus to Rhein at the end of each of the first three (3) fiscal quarters. After April 1 and before June 16 of the next fiscal year, and after audited financial statements are available to the Company, the Company shall pay Rhein the balance of any bonus due Rhein based on the full year calculation less payments made for the first three (3) fiscal quarters, which payment shall be vested in the event of termination by reason of Death or Disability (Section 6), Change of Control, (Section 7.02), or Without Cause (Section 7.04), but shall be forfeited in the event of termination For Cause or Voluntary Termination (Section 7.03). (b) Any increase in salary or bonus or other compensation shall in no way diminish any other obligation of the Company under this Agreement, unless specifically agreed to in writing by Rhein. 4.02. During the Period of Employment Rhein shall be and continue to be a full participant in the Company's Employees' Profit Sharing Plan or any equivalent successor plan that may be adopted by the Company. 4.03. During the Period of Employment Rhein shall be entitled to perquisites, including without limitation, an office, secretarial and clerical staff, and to fringe benefits comparable to those enjoyed by the other executive officers of the Company, but in each case at least equal to those attached to his office on the date of this Agreement, as well as to reimbursement, upon proper accounting, of reasonable expenses and disbursements incurred by him in the course of his duties. 5 . Employee Benefit Plans 5.01. The compensation, together with other matters provided for in Section 4 above, is in addition to the benefits provided for in this Section 5. 5.02. Rhein, his dependents, beneficiaries and estate shall be entitled to all payments and benefits and service credit for benefits during the Period of Employment to which executive officers of the Company, their dependents and beneficiaries are entitled as the result of the employment of such executive officers during the Period of Employment under the terms of employee plans and practices of the Company, including, without limitation, the Company's retirement program consisting of its Employees' Profit Sharing Plan, its group life insurance plan, its accidental death and dismemberment insurance, disability, medical and health and welfare plans, any key person individual life and disability policies, automobile expense reimbursement, club membership fees and dues, and other present or equivalent successor plans and practices of the Company, its subsidiaries and divisions, for which officers, their dependents and beneficiaries are eligible, and to -3- 6 all payments or other benefits under any such plan or practice after the Period of Employment as a result of participation in such plan or practice during the Period of Employment. 5.03. Rhein shall be eligible to participate in the Company's 1991 Stock Option Plan (which, together with any successor stock option plan or plans that may be adopted by the Company, is referred to herein as the "Option Plan"). The Company has granted Rhein stock options ("Options") at an option price equal to the fair market value of the Company's Common Shares at the date of grant. The terms and conditions of exercise of Rhein's Options shall be as is set forth in Rhein's Stock Option Agreements (the "Option Agreements") with the Company; provided, however, that in the event of a Change in Control, as defined in paragraph 18.02 below, then notwithstanding the provisions of said Option Agreements, all options (including those granted to his under the 1982 Incentive Stock Option Plan) shall immediately be 100% vested and Rhein shall have the immediate right of exercise with respect to all Options and their underlying Common Shares covered by said Option Agreements. In the event that Rhein's employment is terminated as a result of a Change in Control, as defined in paragraph 18.02 below, Rhein shall have the period of one (1) year after the date of such termination to exercise his Options or the remainder of the term of such Options, whichever is shorter, and any such exercise shall be irrevocable. 6 . Effect of Death or Disability 6.01. In the event of the death of Rhein during the Period of Employment, the Period of Employment shall be deemed to have ended as of the close of business on the last day of the month in which death shall have occurred, and his legal representative shall be entitled to (i) the compensation provided for in paragraph 4.01(a)(i) above for the month in which death shall take place at the rate being paid at the time of death, (ii) any cash bonus payable for the fiscal quarter in which the Period of Employment shall be deemed to have terminated due to death, plus the balance of any bonus due Rhein for any prior fiscal quarters in accordance with, and payable at the times set forth in, paragraph 4.01(a)(ii) above, and (iii) any benefits provided pursuant to paragraph 5.02 hereof which are payable pursuant to the terms of the applicable plan or practice. 6.02 (a) The term "Disability," as used in this Agreement, shall mean an illness or accident which prevents Rhein from performing his duties under this Agreement for a period of three (3) consecutive months. The Period of Employment shall be deemed to have ended as of the close of business on the last day of such three (3) months' period but without prejudice to any payments due Rhein in respect of disability. (b) In the event of the Disability of Rhein during the Period of Employment, Rhein shall be entitled to (i) the compensation provided for in paragraph 4.01(a)(i) above, at the -4- 7 rate being paid at the time of the commencement of Disability, for the period of such Disability but not in excess of three (3) months, (ii) any cash bonus payable for the fiscal quarter in which the Period of Employment shall be deemed to have terminated due to Disability, plus the balance of any bonus due Rhein for any prior fiscal quarters in accordance with, and payable at the times set forth in, paragraph 4.01(a)(ii) above, and (iii) any benefits provided pursuant to paragraph 5.02 hereof which are payable pursuant to the terms of the applicable plan or practice. (c) The amount of any payments due under this paragraph 6.02 shall be reduced by any payments to which Rhein may be paid for the same period under any disability plan of the Company or of any subsidiary or affiliate thereof. 7. Termination 7.01. GENERAL. The Company may terminate Rhein with or without cause at any time during the Period of Employment, subject to the provisions of this Section 7. 7.02. CHANGE OF CONTROL. Within one (1) year of a Change of Control of the Company, as defined in paragraph 18.02, Rhein shall have the right to terminate his employment with the Company and there shall be paid or provided to Rhein, his dependents, beneficiaries and estate, as liquidated damages or severance pay, or both, the following: (a) The compensation provided for in paragraph 4.01(a)(i) above for the month in which Termination shall have occurred at the rate being paid at the time of Termination; and an amount equal to his previous twenty four (24) months of base salary plus an amount equal to the earned incentive cash bonus referred to in paragraph 4.01(a)(ii) above for the two (2) previously completed fiscal years. Such amount shall be paid to Rhein in one payment, immediately upon Termination. Rhein shall also receive any cash bonus payable for the fiscal quarter in which the Period of Employment shall be deemed to have terminated due to Change of Control, plus the balance of any bonus due Rhein for any prior fiscal quarters in accordance with, and payable at the times set forth in, paragraph 4.01(a)(ii) above. (b) For two (2) years following the date of Termination, Rhein, his dependents, beneficiaries and estate, shall continue to be entitled to all benefits provided pursuant to paragraph 5.02 hereof which are payable pursuant to the terms of the applicable plan or practice, and service credit for benefits under all employee benefit plans of the Company, including, without limitation, the Company's profit sharing plan referred to in paragraph 5.02 above, upon the same basis as immediately prior to Termination and, to the extent that such benefits or service credit for benefits shall not be payable or provided under any such plans to Rhein, his dependents, beneficiaries and estate, by reason of his no longer being an employee of the Company as the result of -5- 8 Termination, or any such plan, program or arrangement is discontinued or the benefits thereunder are materially reduced, the Company shall itself arrange to provide benefits substantially similar to those which Rhein, his dependents and beneficiaries were entitled to receive under such plans, programs and arrangements immediately prior to termination to Rhein, his dependents, beneficiaries and estate. Any termination by the Company within the period of ninety (90) days prior to the execution of a letter of intent or a definitive agreement which could lead to a Change of Control and the closing of the transaction actually resulting in the Change of Control, as defined in paragraph 18.02, shall be deemed to be a termination under this paragraph 7.02. An election by Rhein to terminate his employment under the provisions of this paragraph 7.02 shall not be deemed a Voluntary Termination of employment by Rhein under paragraph 7.03 of this Agreement or any plan or practice of the Company. 7.03. FOR CAUSE OR VOLUNTARY TERMINATION. For the purpose of any provision of this Agreement, the termination of Rhein's employment shall be deemed to have been For Cause only if: (a) termination of his employment shall have been the result of Rhein's conviction of any of the following: (i) embezzlement; (ii) misappropriation of money or other property of the Company; or (iii) any felony; or (b) there has been a breach by Rhein during the Period of Employment of the provisions of paragraph 3.02 above, relating to devotion of full time to the affairs of the Company, Section 8 relating to Competition, Section 9 relating to Confidential Information, or Section 10 relating to Noninterference, and such breach results in demonstrably material injury to the Company, and with respect to any alleged breach of paragraph 3.02 hereof, Rhein shall have failed to remedy such proven breach within thirty (30) days from his receipt of written notice from the Company. If Rhein's employment is terminated by the Company For Cause, or if Rhein shall Voluntarily Terminate his employment with the Company, Rhein shall be entitled to the compensation provided for in paragraph 4.01(a)(i) through the date of such termination. Rhein shall not be entitled to any additional compensation or benefits (except for any vested benefits), and shall continue to be bound by the provisions of Section 8 of this Agreement (relating to Competition), the provisions of Section 9 of this Agreement (relating to Confidential Information), and the provisions of Section 10 (relating to Noninterference). 7.04. WITHOUT CAUSE. Subject to compliance by Rhein with the provisions of Section 8 of this Agreement (relating to Competition), the provisions of Section 9 of this Agreement (relating to Confidential Information), and the provisions of -6- 9 Section 10 of this Agreement (relating to Noninterference), if the Company shall terminate Rhein's employment, Without Cause, there shall be paid or provided to Rhein, his dependents, beneficiaries and estate, as liquidated damages or severance pay, or both, the compensation provided for in paragraph 4.01(a)(i) above for the month in which termination shall have occurred at the rate being paid at the time of such termination, and the amount (the "Payment Amount") per month, which shall consist of 1/24th of the total of an amount equal to his previous twenty-four (24) months of base salary plus an amount equal to the earned incentive cash bonus referred to in paragraph 4.01(a)(ii) above for the two (2) previously completed fiscal years. Such Payment Amount shall be paid to Rhein or, in case of his prior death, to his legal representative, in monthly installments at the end of each month commencing with the month next following that in which such termination shall have occurred, and continuing for a period of twelve (12) months. Rhein shall also receive any cash bonus payable for the fiscal quarter in which the Period of Employment shall be deemed to have terminated due to termination Without Cause, plus the balance of any bonus due Rhein for any prior fiscal quarters in accordance with, and payable at the times set forth in, paragraph 4.01(a)(ii) above, plus any benefits provided pursuant to paragraph 5.02 hereof which are payable pursuant to the terms of the applicable plan or practice. In the event the Company fails to make such payments when due, then the remaining payments shall become due and payable immediately. 7.05. ARBITRATION. In the event that Rhein's employment shall be terminated by the Company during the Period of Employment or the Company shall withhold payments or provision of benefits because Rhein is alleged to be engaged in activities prohibited by Sections 8, 9 or 10 of this Agreement or for any other reason, Rhein shall have the right, in addition to all other rights and remedies provided by law, at his election either to seek arbitration in the metropolitan area of Cleveland, Ohio, under the rules of the American Arbitration Association by serving a notice to arbitrate upon the Company or to institute a judicial proceeding, in either case within one hundred and twenty (120) days after having received notice of termination of his employment or within such longer period as may reasonably be necessary for Rhein to take action in the event that his illness or incapacity should preclude his taking such action within such one hundred and twenty (120) day period. 8. Competition There shall be no obligation on the part of the Company to make any further payments provided for in paragraph 7.04 above if Rhein shall, during the one (1) year following termination of Rhein's employment for any reason except Change of Control as described in paragraph 7.02, engage in Competition with the Company as hereinafter defined. The word "Competition" for purposes of this Section 8 and any other provision of this Agreement shall mean taking any employment or consulting position with or control of one -7- 10 of the Company's top twenty-five (25) competitors as listed in the most current issue at the date of termination of Electronic Buyer's News and/or Electronic News; provided, however, that in no event shall ownership of less than 5% of the outstanding capital stock entitled to vote for the election of directors of a corporation with a class of equity securities held of record by more than 500 persons be deemed Competition with the Company within the meaning of this Section 8. 9 . Confidential Information 9.01. Except for information which is already in the public domain, or which is publicly disclosed by persons other than Rhein, or which is required by law or court order to be disclosed, or information given to Rhein by a third party not bound by any obligation of confidentiality, Rhein shall at all times during and after his employment with the Company hold in strictest confidence any and all confidential information within his knowledge and which is material to the business of the Company (whether acquired prior to or during his employment with the Company) concerning the inventions, products, processes, methods of distribution, customers, services, business, suppliers or trade secrets of the Company, except that Rhein may, in connection with the performance of his duties to the Company, divulge confidential information to the directors, officers, employees and shareholders of the Company and to the advisors, accountants, attorneys or lenders of the Company or such other individuals as deemed prudent in the course of business to carry out the responsibilities and duties of his position. Such confidential information includes, without limitation, financial information, sales information, price lists, marketing data, the identity and lists of actual and potential customers and technical information, all to the extent that such information is not intended by the Company for public dissemination. 9.02. Rhein also agrees that upon leaving the Company's employ he will not take with him, without the prior written consent of an officer authorized to act in the matter by the Board of Directors of the Company, any Company document, contract, internal financial or management reports, customers list, product list, price list, catalog, employee list, procedures, software, MIS data, drawing, blueprint, specification or other document of the Company, its subsidiaries, affiliates and divisions, which is of a confidential nature relating to the Company, its subsidiaries, affiliates and divisions, or, without limitation, relating to its or their methods of purchase or distribution, or any description of any trade secret, formulae or secret processes. 10. Noninterference Except for Change of Control as described in paragraph 7.02, Rhein shall not, at any time during or within one (1) year after his employment is terminated with the Company, without the prior written consent of the Company, directly or indirectly, -8- 11 induce or attempt to induce any key employee, key agent or other key representative or associate of the Company to terminate his or her relationship with the Company, or in any way directly or indirectly interfere with such a relationship or any relationship between the Company and any of its top fifty (50) suppliers or top two hundred fifty (250) customers, both in terms of the Company's sales volume, provided that purchasing goods from a supplier to the Company or making a sale to any of the Company's customers shall not be deemed to be interference. 11. Remedy Rhein acknowledges that Sections 8, 9 and 10 hereof were negotiated at arms length and are required for the fair and reasonable protection of the Company. Rhein and the Company further acknowledge and agree that a breach of those obligations and agreements will result in irreparable and continuing damage to the Company for which there will be no adequate remedy at law and, therefore, Rhein and the Company agree that in the event of any breach of said obligations and agreements the Company, and its successors and assigns, shall be entitled to injunctive relief and such other and further relief, including monetary damages, as is proper in the circumstances. It is further agreed that the running of the periods provided above in Sections 8 and 10, shall be tolled during any period which Rhein shall be adjudged to have been in violation of any of his obligations under such Sections. 12. Withholding Anything to the contrary notwithstanding, all payments required to be made by the Company hereunder to Rhein or his estate or beneficiaries, shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Company may reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, the Company may accept other provisions to the end that it has sufficient funds to pay all taxes required by law to be withheld in respect of such payments or any of them. 13. Notices All notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be sufficiently given if and when mailed in the continental United States by registered or certified mail or personally delivered to the party entitled thereto at the address stated below or to such changed address as the addressee may have given by a similar notice: -9- 12 To the Company: Pioneer-Standard Electronics, Inc. 4800 East 131st Street Cleveland, Ohio 44105 Attention: Secretary or Assistant Secretary To Rhein: Arthur Rhein 40 Stonehill Lane Moreland Hills, Ohio 44022 14. General Provisions 14.01. There shall be no right of set-off or counter claim, in respect any claim, debt or obligation, against payments to Rhein, his dependents, beneficiaries or estate provided for in this Agreement. 14.02. No right or interest to or in any payments shall be assignable by Rhein; provided, however, that this provision shall not preclude him from designating one or more beneficiaries to receive any amount that may be payable after his death and shall not preclude the legal representative of his estate from assigning any right hereunder to the person or persons entitled thereto under his will or, in the case of intestacy, to the person or persons entitled thereto under the laws of intestacy applicable to his estate. The term "beneficiaries" as used in this Agreement shall mean a beneficiary or beneficiaries so designated to receive any such amount or, if no beneficiary has been so designated, the legal representative of Rhein's estate. 14.03. No right, benefit or interest hereunder, shall be subject to anticipation, alienation, sale, assignment, encumbrance, charge, pledge, hypothecation, or set-off in respect of any claim, debt or obligation, or to execution, attachment, levy or similar process, or assignment by operation of law. Any attempt, voluntary or involuntary, to effect any action specified in the immediately preceding sentence shall, to the full extent permitted by law, be null, void and of no effect. 14.04. In the event of Rhein's death or a judicial determination of his incompetence, reference in this Agreement to Rhein shall be deemed, where appropriate, to refer to his legal representative or, where appropriate, to his beneficiary or beneficiaries. 14.05. The titles to sections in this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the title of any section. 14.06. This Agreement shall be binding upon and shall inure to the benefit of (a) Rhein and, subject to the provisions of -10- 13 paragraphs 14.02 and 14.03, his heirs and legal representatives, and (b) the Company and its successors as provided in Section 17 hereof. 15. Amendment or Modification; Waiver No provision of this Agreement may be amended or waived unless such amendment or waiver is authorized by the Board of Directors of the Company or any authorized committee of the Board of Directors and is agreed to in writing, signed by Rhein and by an officer of the Company thereunto duly authorized by either the Board of Directors or the Compensation Committee. Except as otherwise specifically provided in this Agreement, no waiver by either party hereto of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a subsequent breach of such condition or provision or a waiver of a similar or dissimilar provision or condition at the same or at any prior or subsequent time. 16. Severability In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions and portions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law. 17. Successors to the Company Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the Company and any successor of the Company, including, without limitation, any corporation which acquires directly or indirectly all or substantially all of the assets of the Company whether by merger, consolidation, sale or otherwise (and such successor shall thereafter be deemed "the Company" for the purposes of this Agreement), but shall not otherwise be assignable by the Company. 18. Operation of Agreement 18.01. This Agreement shall be effective April 3, 1995, and shall supersede the Employment Agreement effective April 1, 1993 between Rhein and the Company. 18.02. For the purpose of this Agreement, the term "Change in Control" of the Company shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 as in effect on the date of this Agreement; provided that, without limitation, such a change in control shall be deemed to have occurred if and when (a) any -11- 14 "person" (as such term is used in Sections 13(d) and 14(d) (2) of the Securities Exchange Act of 1934) is or becomes a beneficial owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities or (b) during any period of twelve (12) consecutive months, commencing before or after the date of this Agreement, individuals who, at the beginning of such twelve (12) month period were directors of the Company for whom Rhein, as a shareholder, shall have voted, cease for any reason to constitute at least a majority of the Board of Directors of the Company. 19. Enforcement Costs The Company is aware that upon the occurrence of a Change in Control the Board of Directors or a shareholder of the Company may then cause or attempt to cause the Company to refuse to comply with its obligations under this Agreement, or may cause or attempt to cause the Company to institute, or may institute, litigation seeking to have this Agreement declared unenforceable, or may take, or attempt to take, other action to deny Rhein the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement could be frustrated. It is the intent of the Company that Rhein not be required to incur the expenses associated with the enforcement of his rights under this Agreement by litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended to Rhein hereunder, nor be bound to negotiate any settlement of his rights hereunder under threat of incurring such expenses. Accordingly, if following a Change in Control it should appear to Rhein that the Company has failed to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or other legal action designed to deny, diminish or to recover from, Rhein, or in the event the Company fails or refuses to comply with the obligations under this Agreement, the benefits intended to be provided to Rhein hereunder, and that Rhein has complied with all of his obligations under this Agreement, the Company irrevocably authorizes Rhein from time to time to retain counsel of his choice at the expense of the Company as provided in this Section 19, to represent Rhein in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company or any Director, officer, shareholder or other person affiliated with the Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between the Company and such counsel, the Company irrevocably consents to Rhein entering into an attorney-client relationship with such counsel, and in that connection the Company and Rhein agree that a confidential relationship shall exist between Rhein and such counsel. The reasonable fees and expenses of counsel selected from time to time by Rhein as hereinabove provided shall be paid or reimbursed to Rhein by the Company on a regular, periodic basis -12- 15 upon presentation by Rhein of a statement or statements prepared by such counsel in accordance with its customary practices, up to a maximum aggregate amount of $500,000. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. ATTEST: PIONEER-STANDARD ELECTRONICS, INC. /s/ Colleen M. Simon By/s/ James L. Bayman - ---------------------------- -------------------------------- James L. Bayman, Chief Executive Officer and President ATTEST: /s/ Nelle Wolff /s/ Arthur Rhein - ---------------------------- -------------------------------- Arthur Rhein -13- EX-10.E 8 PIONEER STANDARD 10-K405 EX-10(E) 1 Exhibit 10(e) EXECUTION COPY AMENDED AND RESTATED EMPLOYMENT AGREEMENT BETWEEN PIONEER-STANDARD ELECTRONICS, INC. AND JOHN V. GOODGER June 12, 1995 2 Table of Contents
Page ---- 1. Employment . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Period of Employment . . . . . . . . . . . . . . . . . . . . . 1 3. Position, Duties, Responsibilities . . . . . . . . . . . . . . 1 4. Compensation, Compensation Plans, Perquisites . . . . . . . . 2 5. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . 3 6. Effect of Death or Disability . . . . . . . . . . . . . . . . 4 7. Termination . . . . . . . . . . . . . . . . . . . . . . . . . 5 8. Competition . . . . . . . . . . . . . . . . . . . . . . . . . 7 9. Confidential Information . . . . . . . . . . . . . . . . . . . 8 10. Noninterference . . . . . . . . . . . . . . . . . . . . . . . 8 11. Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 12. Withholding . . . . . . . . . . . . . . . . . . . . . . . . . 9 13. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 14. General Provisions . . . . . . . . . . . . . . . . . . . . . . 10 15. Amendment or Modification; Waiver . . . . . . . . . . . . . . 11 16. Severability . . . . . . . . . . . . . . . . . . . . . . . . . 11 17. Successors to the Company . . . . . . . . . . . . . . . . . . 11 18. Operation of Agreement . . . . . . . . . . . . . . . . . . . . 11 19. Enforcement Costs . . . . . . . . . . . . . . . . . . . . . . 12
3 AMENDED AND RESTATED EMPLOYMENT AGREEMENT AMENDED AND RESTATED EMPLOYMENT AGREEMENT between PIONEER-STANDARD ELECTRONICS, INC., an Ohio corporation (the "Company"), and JOHN V. GOODGER ("Goodger"), dated June ___, 1995, effective April 3, 1995. W I T N E S S E T H: WHEREAS: The Company and Goodger have given consideration to an employment agreement providing for the services of Goodger as Vice President, Treasurer and Assistant Secretary; and WHEREAS: This agreement is deemed necessary at the present time to meet the need for a continued strong management without substantial change; and WHEREAS: Together with other officers of the Company, Goodger has been responsible for the success of the business of the Company; NOW, THEREFORE, it is hereby agreed by and between the Company and Goodger as follows: 1. Employment The Company hereby agrees to continue to employ Goodger, and Goodger hereby agrees to remain in the employ of the Company, for the period set forth in Section 2 below (the "Period of Employment"), in the position and with the duties and responsibilities set forth in Section 3 below, and upon the other terms and conditions hereinafter stated. 2 . Period of Employment For the purposes of this Agreement, the Period of Employment, subject only to the provisions of Section 6 below (relating to Death or Disability), shall continue until termination of employment as set forth in Section 7 (relating to Termination). 3 . Position, Duties, Responsibilities 3.01 (a) During the Period of Employment, Goodger shall serve as Vice President, Treasurer and Assistant Secretary of the Company reporting to the Chief Executive Officer and President of the Company and shall have the authority, power, and duties with regard to his position as may from time to time be assigned by the Chief Executive Officer and President or the Board of Directors of the Company. His duties shall exclude the Company's affiliate, Pioneer/ Technologies Group, Inc. ("Technologies"). 3.01 (b) At all times during the Period of Employment, Goodger shall hold a position of responsibility and importance and a position of scope, with the functions, duties and 4 responsibilities attached thereto, at least equal in responsibility and importance and in scope to and commensurate with his position on the date of this Agreement described in general terms in paragraph 3.01(a) above. 3.02. Throughout the Period of Employment Goodger shall devote his full time and undivided attention during normal business hours to the business and affairs of the Company, except for reasonable vacations afforded the Company's executive officers consistent with past practices and except for illness or incapacity, but nothing in this Agreement shall preclude Goodger from devoting reasonable time required for serving as a director or member of an advisory committee of any organization involving no conflict of interest with the interests of the Company, from engaging in charitable and community activities, and from managing his personal investments, provided that such activities do not materially interfere with the regular performance of his duties and responsibilities under this Agreement. 3.03. Goodger's office shall be located at the corporate offices of the Company in the Greater Cleveland Area, State of Ohio, and Goodger shall not be required to locate his office elsewhere without his prior written consent, nor shall he be required to be absent therefrom on travel status or otherwise more than a total of sixty (60) days in any calendar year nor more than fifteen (15) consecutive days at any one time. 4. Compensation, Compensation Plans, Perquisites 4.01 (a) For all services rendered by Goodger in any capacity during the Period of Employment, Goodger shall be paid as compensation: (i) A base salary, payable not less often than monthly, at the rate of no less than $10,833 per month, with such increases in such rate as shall be awarded from time to time in accordance with the Company's regular administrative practices of salary increases applicable to executives of the Company in effect on the date of this Agreement; and (ii) A cash incentive bonus equal to the product of 15/100 of 1% of the sum of the "actual operating income" of the Company plus its equity earnings in profits/losses from Technologies, multiplied by the ratio of the Company's "actual return on capital" to 22.0%, or such equivalent successor bonus plan as may be adopted by the Company with Goodger's written consent. The term "actual operating income" shall be defined as the income before income tax (state and federal income tax), interest, and the Company's equity earnings in profits/losses from Technologies. The term "actual return on capital" shall be defined as the Company's "actual operating income" divided by the sum of its interest-bearing debt, plus equity, less the Company's equity investment in Technologies (the denominator shall be calculated for each fiscal year as the average of such amounts as at the end of -2- 5 each of the Company's four (4) fiscal quarters). The Company shall calculate and pay 75% of such bonus to Goodger at the end of each of the first three (3) fiscal quarters. After April 1 and before June 16 of the next fiscal year, and after audited financial statements are available to the Company, the Company shall pay Goodger the balance of any bonus due Goodger based on the full year calculation less payments made for the first three (3) fiscal quarters, which payment shall be vested in the event of termination by reason of Death or Disability (Section 6), Change of Control, (Section 7.02), or Without Cause (Section 7.04), but shall be forfeited in the event of termination For Cause or Voluntary Termination (Section 7.03). (b) Any increase in salary or bonus or other compensation shall in no way diminish any other obligation of the Company under this Agreement, unless specifically agreed to in writing by Goodger. 4.02. During the Period of Employment Goodger shall be and continue to be a full participant in the Company's Employees' Profit Sharing Plan or any equivalent successor plan that may be adopted by the Company. 4.03. During the Period of Employment Goodger shall be entitled to perquisites, including without limitation, an office, secretarial and clerical staff, and to fringe benefits comparable to those enjoyed by the other executive officers of the Company, but in each case at least equal to those attached to his office on the date of this Agreement, as well as to reimbursement, upon proper accounting, of reasonable expenses and disbursements incurred by him in the course of his duties. 5. Employee Benefit Plans 5.01. The compensation, together with other matters provided for in Section 4 above, is in addition to the benefits provided for in this Section 5. 5.02. Goodger, his dependents, beneficiaries and estate shall be entitled to all payments and benefits and service credit for benefits during the Period of Employment to which executive officers of the Company, their dependents and beneficiaries are entitled as the result of the employment of such executive officers during the Period of Employment under the terms of employee plans and practices of the Company, including, without limitation, the Company's retirement program consisting of its Employees' Profit Sharing Plan, its group life insurance plan, its accidental death and dismemberment insurance, disability, medical and health and welfare plans, any key person individual life and disability policies, automobile expense reimbursement, club membership fees and dues, and other present or equivalent successor plans and practices of the Company, its subsidiaries and divisions, for which officers, their dependents and beneficiaries are eligible, and to all payments or other benefits under any such plan or practice -3- 6 after the Period of Employment as a result of participation in such plan or practice during the Period of Employment. 5.03. Goodger shall be eligible to participate in the Company's 1991 Stock Option Plan (which, together with any successor stock option plan or plans that may be adopted by the Company, is referred to herein as the "Option Plan"). The Company has granted Goodger stock options ("Options") at an option price equal to the fair market value of the Company's Common Shares at the date of grant. The terms and conditions of exercise of Goodger's Options shall be as is set forth in Goodger's Stock Option Agreements (the "Option Agreements") with the Company; provided, however, that in the event of a Change in Control, as defined in paragraph 18.02 below, then notwithstanding the provisions of said Option Agreements, all options (including those granted to him under the 1982 Incentive Stock Option Plan) shall immediately be 100% vested and Goodger shall have the immediate right of exercise with respect to all Options and their underlying Common Shares covered by said Option Agreements. In the event that Goodger's employment is terminated as a result of a Change in Control, as defined in paragraph 18.02 below, Goodger shall have the period of one (1) year after the date of such termination to exercise his Options or the remainder of the term of such Options, whichever is shorter, and any such exercise shall be irrevocable. 6. Effect of Death or Disability 6.01. In the event of the death of Goodger during the Period of Employment, the Period of Employment shall be deemed to have ended as of the close of business on the last day of the month in which death shall have occurred, and his legal representative shall be entitled to (i) the compensation provided for in paragraph 4.01(a)(i) above for the month in which death shall take place at the rate being paid at the time of death, (ii) any cash bonus payable for the fiscal quarter in which the Period of Employment shall be deemed to have terminated due to death, plus the balance of any bonus due Goodger for any prior fiscal quarters in accordance with, and payable at the times set forth in, paragraph 4.01(a)(ii) above, and (iii) any benefits provided pursuant to paragraph 5.02 hereof which are payable pursuant to the terms of the applicable plan or practice. 6.02 (a) The term "Disability," as used in this Agreement, shall mean an illness or accident which prevents Goodger from performing his duties under this Agreement for a period of three (3) consecutive months. The Period of Employment shall be deemed to have ended as of the close of business on the last day of such three (3) months' period but without prejudice to any payments due Goodger in respect of disability. (b) In the event of the Disability of Goodger during the Period of Employment, Goodger shall be entitled to (i) the compensation provided for in paragraph 4.01(a)(i) above, at the rate being paid at the time of the commencement of Disability, -4- 7 for the period of such Disability but not in excess of three (3) months, (ii) any cash bonus payable for the fiscal quarter in which the Period of Employment shall be deemed to have terminated due to Disability, plus the balance of any bonus due Goodger for any prior fiscal quarters in accordance with, and payable at the times set forth in, paragraph 4.01(a)(ii) above, and (iii) any benefits provided pursuant to paragraph 5.02 hereof which are payable pursuant to the terms of the applicable plan or practice. (c) The amount of any payments due under this paragraph 6.02 shall be reduced by any payments to which Goodger may be paid for the same period under any disability plan of the Company or of any subsidiary or affiliate thereof. 7. Termination 7.01. GENERAL. The Company may terminate Goodger with or without cause at any time during the Period of Employment, subject to the provisions of this Section 7. 7.02. CHANGE OF CONTROL. Within one (1) year of a Change of Control of the Company, as defined in paragraph 18.02, Goodger shall have the right to terminate his employment with the Company and there shall be paid or provided to Goodger, his dependents, beneficiaries and estate, as liquidated damages or severance pay, or both, the following: (a) The compensation provided for in paragraph 4.01(a)(i) above for the month in which Termination shall have occurred at the rate being paid at the time of Termination; and an amount equal to his previous twenty four (24) months of base salary plus an amount equal to the earned incentive cash bonus referred to in paragraph 4.01(a)(ii) above for the two (2) previously completed fiscal years. Such amount shall be paid to Goodger in one payment, immediately upon Termination. Goodger shall also receive any cash bonus payable for the fiscal quarter in which the Period of Employment shall be deemed to have terminated due to Change of Control, plus the balance of any bonus due Goodger for any prior fiscal quarters in accordance with, and payable at the times set forth in, paragraph 4.01(a)(ii) above. (b) For two (2) years following the date of Termination, Goodger, his dependents, beneficiaries and estate, shall continue to be entitled to all benefits provided pursuant to paragraph 5.02 hereof which are payable pursuant to the terms of the applicable plan or practice, and service credit for benefits under all employee benefit plans of the Company, including, without limitation, the Company's profit sharing plan referred to in paragraph 5.02 above, upon the same basis as immediately prior to Termination and, to the extent that such benefits or service credit for benefits shall not be payable or provided under any such plans to Goodger, his dependents, beneficiaries and estate, by reason of his no longer being an employee of the Company as the result of Termination, or any such plan, program or arrangement is -5- 8 discontinued or the benefits thereunder are materially reduced, the Company shall itself arrange to provide benefits substantially similar to those which Goodger, his dependents and beneficiaries were entitled to receive under such plans, programs and arrangements immediately prior to termination to Goodger, his dependents, beneficiaries and estate. Any termination by the Company within the period of ninety (90) days prior to the execution of a letter of intent or a definitive agreement which could lead to a Change of Control and the closing of the transaction actually resulting in the Change of Control, as defined in paragraph 18.02, shall be deemed to be a termination under this paragraph 7.02. An election by Goodger to terminate his employment under the provisions of this paragraph 7.02 shall not be deemed a Voluntary Termination of employment by Goodger under paragraph 7.03 of this Agreement or any plan or practice of the Company. 7.03. FOR CAUSE OR VOLUNTARY TERMINATION. For the purpose of any provision of this Agreement, the termination of Goodger's employment shall be deemed to have been For Cause only if: (a) termination of his employment shall have been the result of Goodger's conviction of any of the following: (i) embezzlement; (ii) misappropriation of money or other property of the Company; or (iii) any felony; or (b) there has been a breach by Goodger during the Period of Employment of the provisions of paragraph 3.02 above, relating to devotion of full time to the affairs of the Company, Section 8 relating to Competition, Section 9 relating to Confidential Information, or Section 10 relating to Noninterference, and such breach results in demonstrably material injury to the Company, and with respect to any alleged breach of paragraph 3.02 hereof, Goodger shall have failed to remedy such proven breach within thirty (30) days from his receipt of written notice from the Company. If Goodger's employment is terminated by the Company For Cause, or if Goodger shall Voluntarily Terminate his employment with the Company, Goodger shall be entitled to the compensation provided for in paragraph 4.01(a)(i) through the date of such termination. Goodger shall not be entitled to any additional compensation or benefits (except for any vested benefits), and shall continue to be bound by the provisions of Section 8 of this Agreement (relating to Competition), the provisions of Section 9 of this Agreement (relating to Confidential Information), and the provisions of Section 10 (relating to Noninterference). 7.04. WITHOUT CAUSE. Subject to compliance by Goodger with the provisions of Section 8 of this Agreement (relating to Competition), the provisions of Section 9 of this Agreement (relating to Confidential Information), and the provisions of -6- 9 Section 10 of this Agreement (relating to Noninterference), if the Company shall terminate Goodger's employment, Without Cause, there shall be paid or provided to Goodger, his dependents, beneficiaries and estate, as liquidated damages or severance pay, or both, the compensation provided for in paragraph 4.01(a)(i) above for the month in which termination shall have occurred at the rate being paid at the time of such termination, and the amount (the "Payment Amount") per month, which shall consist of 1/24th of the total of an amount equal to his previous twenty-four (24) months of base salary plus an amount equal to the earned incentive cash bonus referred to in paragraph 4.01(a)(ii) above for the two (2) previously completed fiscal years. Such Payment Amount shall be paid to Goodger or, in case of his prior death, to his legal representative, in monthly installments at the end of each month commencing with the month next following that in which such termination shall have occurred, and continuing for a period of six (6) months. Goodger shall also receive any cash bonus payable for the fiscal quarter in which the Period of Employment shall be deemed to have terminated due to termination Without Cause, plus the balance of any bonus due Goodger for any prior fiscal quarters in accordance with, and payable at the times set forth in, paragraph 4.01(a)(ii) above, plus any benefits provided pursuant to paragraph 5.02 hereof which are payable pursuant to the terms of the applicable plan or practice. In the event the Company fails to make such payments when due, then the remaining payments shall become due and payable immediately. 7.05. ARBITRATION. In the event that Goodger's employment shall be terminated by the Company during the Period of Employment or the Company shall withhold payments or provision of benefits because Goodger is alleged to be engaged in activities prohibited by Sections 8, 9 or 10 of this Agreement or for any other reason, Goodger shall have the right, in addition to all other rights and remedies provided by law, at his election either to seek arbitration in the metropolitan area of Cleveland, Ohio, under the rules of the American Arbitration Association by serving a notice to arbitrate upon the Company or to institute a judicial proceeding, in either case within one hundred and twenty (120) days after having received notice of termination of his employment or within such longer period as may reasonably be necessary for Goodger to take action in the event that his illness or incapacity should preclude his taking such action within such one hundred and twenty (120) day period. 8. Competition There shall be no obligation on the part of the Company to make any further payments provided for in paragraph 7.04 above if Goodger shall, during the six (6) months following termination of Goodger's employment for any reason except Change of Control as described in paragraph 7.02, engage in Competition with the Company as hereinafter defined. The word "Competition" for purposes of this Section 8 and any other provision of this Agreement shall mean taking any employment or consulting position with or control of one -7- 10 of the Company's top twenty-five (25) competitors as listed in the most current issue at the date of termination of Electronic Buyer's News and/or Electronic News; provided, however, that in no event shall ownership of less than 5% of the outstanding capital stock entitled to vote for the election of directors of a corporation with a class of equity securities held of record by more than 500 persons be deemed Competition with the Company within the meaning of this Section 8. 9. Confidential Information 9.01. Except for information which is already in the public domain, or which is publicly disclosed by persons other than Goodger, or which is required by law or court order to be disclosed, or information given to Goodger by a third party not bound by any obligation of confidentiality, Goodger shall at all times during and after his employment with the Company hold in strictest confidence any and all confidential information within his knowledge and which is material to the business of the Company (whether acquired prior to or during his employment with the Company) concerning the inventions, products, processes, methods of distribution, customers, services, business, suppliers or trade secrets of the Company, except that Goodger may, in connection with the performance of his duties to the Company, divulge confidential information to the directors, officers, employees and shareholders of the Company and to the advisors, accountants, attorneys or lenders of the Company or such other individuals as deemed prudent in the course of business to carry out the responsibilities and duties of his position. Such confidential information includes, without limitation, financial information, sales information, price lists, marketing data, the identity and lists of actual and potential customers and technical information, all to the extent that such information is not intended by the Company for public dissemination. 9.02. Goodger also agrees that upon leaving the Company's employ he will not take with him, without the prior written consent of an officer authorized to act in the matter by the Board of Directors of the Company, any Company document, contract, internal financial or management reports, customers list, product list, price list, catalog, employee list, procedures, software, MIS data, drawing, blueprint, specification or other document of the Company, its subsidiaries, affiliates and divisions, which is of a confidential nature relating to the Company, its subsidiaries, affiliates and divisions, or, without limitation, relating to its or their methods of purchase or distribution, or any description of any trade secret, formulae or secret processes. 10. Noninterference Except for Change of Control as described in paragraph 7.02, Goodger shall not, at any time during or within six (6) months after his employment is terminated with the Company, without -8- 11 the prior written consent of the Company, directly or indirectly, induce or attempt to induce any key employee, key agent or other key representative or associate of the Company to terminate his or her relationship with the Company, or in any way directly or indirectly interfere with such a relationship or any relationship between the Company and any of its top fifty (50) suppliers or top two hundred fifty (250) customers, both in terms of the Company's sales volume, provided that purchasing goods from a supplier to the Company or making a sale to any of the Company's customers shall not be deemed to be interference. 11. Remedy Goodger acknowledges that Sections 8, 9 and 10 hereof were negotiated at arms length and are required for the fair and reasonable protection of the Company. Goodger and the Company further acknowledge and agree that a breach of those obligations and agreements will result in irreparable and continuing damage to the Company for which there will be no adequate remedy at law and, therefore, Goodger and the Company agree that in the event of any breach of said obligations and agreements the Company, and its successors and assigns, shall be entitled to injunctive relief and such other and further relief, including monetary damages, as is proper in the circumstances. It is further agreed that the running of the periods provided above in Sections 8 and 10, shall be tolled during any period which Goodger shall be adjudged to have been in violation of any of his obligations under such Sections. 12. Withholding Anything to the contrary notwithstanding, all payments required to be made by the Company hereunder to Goodger or his estate or beneficiaries, shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Company may reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, the Company may accept other provisions to the end that it has sufficient funds to pay all taxes required by law to be withheld in respect of such payments or any of them. 13. Notices All notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be sufficiently given if and when mailed in the continental United States by registered or certified mail or personally delivered to the party entitled thereto at the address stated below or to such changed address as the addressee may have given by a similar notice: -9- 12 To the Company: Pioneer-Standard Electronics, Inc. 4800 East 131st Street Cleveland, Ohio 44105 Attention: Secretary or Chief Executive Officer and President To Goodger: John V. Goodger 104 Manor Brook Drive Chagrin Falls, Ohio 44022 14. General Provisions 14.01. There shall be no right of set-off or counter claim, in respect any claim, debt or obligation, against payments to Goodger, his dependents, beneficiaries or estate provided for in this Agreement. 14.02. No right or interest to or in any payments shall be assignable by Goodger; provided, however, that this provision shall not preclude him from designating one or more beneficiaries to receive any amount that may be payable after his death and shall not preclude the legal representative of his estate from assigning any right hereunder to the person or persons entitled thereto under his will or, in the case of intestacy, to the person or persons entitled thereto under the laws of intestacy applicable to his estate. The term "beneficiaries" as used in this Agreement shall mean a beneficiary or beneficiaries so designated to receive any such amount or, if no beneficiary has been so designated, the legal representative of Goodger's estate. 14.03. No right, benefit or interest hereunder, shall be subject to anticipation, alienation, sale, assignment, encumbrance, charge, pledge, hypothecation, or set-off in respect of any claim, debt or obligation, or to execution, attachment, levy or similar process, or assignment by operation of law. Any attempt, voluntary or involuntary, to effect any action specified in the immediately preceding sentence shall, to the full extent permitted by law, be null, void and of no effect. 14.04. In the event of Goodger's death or a judicial determination of his incompetence, reference in this Agreement to Goodger shall be deemed, where appropriate, to refer to his legal representative or, where appropriate, to his beneficiary or beneficiaries. 14.05. The titles to sections in this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the title of any section. 14.06. This Agreement shall be binding upon and shall inure to the benefit of (a) Goodger and, subject to the provisions of paragraphs 14.02 and 14.03, his heirs and legal representatives, -10- 13 and (b) the Company and its successors as provided in Section 17 hereof. 15. Amendment or Modification; Waiver No provision of this Agreement may be amended or waived unless such amendment or waiver is authorized by the Board of Directors of the Company or any authorized committee of the Board of Directors and is agreed to in writing, signed by Goodger and by an officer of the Company thereunto duly authorized by either the Board of Directors or the Compensation Committee. Except as otherwise specifically provided in this Agreement, no waiver by either party hereto of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a subsequent breach of such condition or provision or a waiver of a similar or dissimilar provision or condition at the same or at any prior or subsequent time. 16. Severability In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions and portions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law. 17. Successors to the Company Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the Company and any successor of the Company, including, without limitation, any corporation which acquires directly or indirectly all or substantially all of the assets of the Company whether by merger, consolidation, sale or otherwise (and such successor shall thereafter be deemed "the Company" for the purposes of this Agreement), but shall not otherwise be assignable by the Company. 18. Operation of Agreement 18.01. This Agreement is effective as of April 3, 1995, and supersedes the Amended and Restated Employment Agreement effective April 1, 1994, between Goodger and the Company. 18.02. For the purpose of this Agreement, the term "Change in Control" of the Company shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 as in effect on the date of this Agreement; provided that, without limitation, such a change in control shall be deemed to have occurred if and when (a) any "person" (as such term is used in Sections 13(d) and 14(d) (2) of -11- 14 the Securities Exchange Act of 1934) is or becomes a beneficial owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities or (b) during any period of twelve (12) consecutive months, commencing before or after the date of this Agreement, individuals who, at the beginning of such twelve (12) month period were directors of the Company for whom Goodger, as a shareholder, shall have voted, cease for any reason to constitute at least a majority of the Board of Directors of the Company. 19. Enforcement Costs The Company is aware that upon the occurrence of a Change in Control the Board of Directors or a shareholder of the Company may then cause or attempt to cause the Company to refuse to comply with its obligations under this Agreement, or may cause or attempt to cause the Company to institute, or may institute, litigation seeking to have this Agreement declared unenforceable, or may take, or attempt to take, other action to deny Goodger the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement could be frustrated. It is the intent of the Company that Goodger not be required to incur the expenses associated with the enforcement of his rights under this Agreement by litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended to Goodger hereunder, nor be bound to negotiate any settlement of his rights hereunder under threat of incurring such expenses. Accordingly, if following a Change in Control it should appear to Goodger that the Company has failed to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or other legal action designed to deny, diminish or to recover from, Goodger, or in the event the Company fails or refuses to comply with the obligations under this Agreement, the benefits intended to be provided to Goodger hereunder, and that Goodger has complied with all of his obligations under this Agreement, the Company irrevocably authorizes Goodger from time to time to retain counsel of his choice at the expense of the Company as provided in this Section 19, to represent Goodger in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company or any Director, officer, shareholder or other person affiliated with the Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between the Company and such counsel, the Company irrevocably consents to Goodger entering into an attorney-client relationship with such counsel, and in that connection the Company and Goodger agree that a confidential relationship shall exist between Goodger and such counsel. The reasonable fees and expenses of counsel selected from time to time by Goodger as hereinabove provided shall be paid or reimbursed to Goodger by the Company on a regular, -12- 15 periodic basis upon presentation by Goodger of a statement or statements prepared by such counsel in accordance with its customary practices, up to a maximum aggregate amount of $500,000. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. ATTEST: PIONEER-STANDARD ELECTRONICS, INC. /s/ Colleen M. Simon By/s/ James L. Bayman - --------------------------- ----------------------------------------- James L. Bayman, Chief Executive Officer and President ATTEST: /s/ Beverly M. Fisher /s/ John V. Goodger - --------------------------- ----------------------------------------- John V. Goodger -13- EX-11 9 PIONEER STANDARD 10-K405 EX-11 1 Exhibit 11 PIONEER-STANDARD ELECTRONICS, INC. CALCULATION OF EARNINGS PER SHARE Years Ended March 31, 1995, 1994, and 1993
1995 1994 1993 ---- ---- ---- Primary Weighted Average Common Shares and Common Share Equivalents outstanding 15,257,918 15,118,023 13,782,768 Net income $25,009,000 $19,676,000 $12,913,000 =========== =========== =========== Earnings per share $1.64 $1.30 $.94 Fully diluted Weighted average Common Shares and Common Share equivalents outstanding 15,289,765 15,168,888 13,831,527 Assumed conversion of 9% convertible debentures -- -- 1,134,976 ----------- ----------- ----------- Total 15,289,765 15,168,888 14,966,503 =========== =========== =========== Net income $25,009,000 $19,676,000 $12,913,000 Add 9% convertible debenture interest, net of federal income tax effect -- -- 399,000 Total net income as adjusted $25,009,000 $19,676,000 $13,312,000 =========== =========== =========== Earnings per share $1.64 $1.30 $.89 ===== ===== ====
EX-24 10 PIONEER STANDARD 10-K405 EX-24 1 Exhibit 24 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of Pioneer-Standard Electronics, Inc. of our report dated May 5, 1995 included in the 1995 Annual Report to Shareholders of Pioneer-Standard Electronics, Inc. We also consent to the incorporation by reference in the Registration Statements (Form S-8 No. 33-46008 and Form S-8 No. 33-53329) pertaining to the 1991 Incentive Stock Option Plan of Pioneer-Standard Electronics, Inc. and in the related Prospectuses and in the Registration Statement (Form S-8 No. 33-18790) pertaining to the 1982 Incentive Stock Option Plan of Pioneer-Standard Electronics, Inc. and in the related Prospectus of our reports dated May 5, 1995 with respect to the consolidated financial statements and schedule of Pioneer-Standard Electronics, Inc. included in this Annual Report (Form 10-K) for the year ended March 31, 1995. ERNST & YOUNG LLP Cleveland, Ohio June 20, 1995 2 Exhibit 24 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 33-46008 and Form S-8 No. 33-53329) pertaining to the 1991 Incentive Stock Option Plan of Pioneer-Standing Electronics, Inc. and (Form S-8 No. 33-18790) pertaining to the 1982 Incentive Stock Option Plan of Pioneer-Standard Electronics, Inc., of our report dated April 28, 1995 with respect to the financial statements and schedule of Pioneer Technologies Group, Inc. included in this Annual Report (Form 10-K) for the year ended March 31, 1995. ERNST & YOUNG LLP Washington, DC June 20, 1995 EX-27 11 EXHIBIT 27
5 1,000 12-MOS MAR-31-1995 MAR-31-1995 9,598 0 138,593 4,606 123,008 273,924 55,396 24,467 327,415 142,486 56,318 6,630 0 0 119,785 327,415 832,152 832,152 677,171 677,171 111,302 0 3,966 42,213 17,204 25,009 0 0 0 25,009 1.64 1.64
EX-99.A 12 PIONEER STANDARD EX-99(A) 1 EXHIBIT 99(a) ACORD. CERTIFICATE OF INSURANCE ISSUE DATE (MM/DD/YY) 6/07/95 PRODUCER Alexander & Alexander Inc 1660 West 2nd Street Ste 650, Skylight Office Tower Cleveland, OH 44113 INSURED Pioneer Standard Electronics 4800 East 131st Street Cleveland OH 44105 THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. COMPANIES AFFORDING COVERAGE COMPANY LETTER A Federal Insurance Company COMPANY LETTER B COMPANY LETTER C [STAMPED - OHIO INSURANCE FRAUD WARNING ANY PERSON, WHO WITH INTENT TO DEFRAUD COMPANY OR KNOWING THAT HE IS FACILITATING A LETTER D FRAUD AGAINST AN INSURER, SUBMITS AN APPLICATION OR FILES A CLAIM CONTAINING COMPANY A FALSE OR DECEPTIVE STATEMENT IS GUILTY LETTER E OF INSURANCE FRAUD] - ------------------------------------------------------------------------------- COVERAGES THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED, NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS.
CO POLICY EFFECTIVE POLICY EXPIRATION LTR TYPE OF INSURANCE POLICY NUMBER DATE (MM/DD/YY) DATE (MM/DD/YY) LIMITS - ------------------------------------------------------------------------------------------------------------------------------------ GENERAL LIABILITY GENERAL AGGREGATE $ COMMERCIAL GENERAL LIABILITY PRODUCTS-COMP/OP AGG. $ CLAIMS MADE OCCUR. PERSONAL & ADV. INJURY $ OWNER'S & CONTRACTOR'S PROT. EACH OCCURRENCE $ FIRE DAMAGE (Any one fire) $ MED. EXPENSE (Any one person) $ - ------------------------------------------------------------------------------------------------------------------------------------ AUTOMOBILE LIABILITY COMBINED SINGLE ANY AUTO LIMIT $ ALL ALLOWED AUTOS BODILY INJURY (Per person) $ SCHEDULED AUTOS HIRED AUTOS BODILY INJURY (Per accident) $ NON-OWNED AUTOS GARAGE LIABILITY PROPERTY DAMAGE $ - ------------------------------------------------------------------------------------------------------------------------------------ EXCESS LIABILITY UMBRELLA FORM EACH OCCURRENCE $ OTHER THAN UMBRELLA FORM AGGREGATE $ - ------------------------------------------------------------------------------------------------------------------------------------ WORKER'S COMPENSATION STATUTORY LIMITS AND EACH ACCIDENT $ EMPLOYER'S LIABILITY DISEASE-POLICY LIMIT $ DISEASE-EACH EMPLOYEE $ - ------------------------------------------------------------------------------------------------------------------------------------ A OTHER 8102-64-55G 11/01/95 11/01/96 Executive Risk $15,000,000 Ea. Loss D & O Liability $15,000,000 Each Policy Year - ------------------------------------------------------------------------------------------------------------------------------------ DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES/SPECIAL ITEMS Deductible - $500,000. Insured Organization - ------------------------------------------------------------------------------------------------------------------------------------ CERTIFICATE HOLDER CANCELLATION SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, THE ISSUING COMPANY WILL ENDEAVOR TO MAIL 30 DAYS WRITTEN SAMPLE NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE LEFT, BUT FAILURE TO MAIL SUCH NOTICE SHALL IMPOSE NO OBLIGATION OR LIABILITY OF ANY KIND UPON THE COMPANY, ITS AGENTS OR REPRESENTATIVES. ------------------------------------------------------- AUTHORIZED REPRESENTATIVE /s/ Ralph E. Hodges ------------------------------------------------------- ALEXANDER & ALEXANDER OF OHIO, INC. ACORD 25-S (7/90) (C)ACCORD CORPORATION 1990 - ------------------------------------------------------------------------------------------------------------------------------------
40 - 18 EX-99.C 13 PIONEER STANDARD EX-99(C) 1 EXHIBIT 99(c) DIVIDEND INFORMATION AND PRICE RANGE OF COMMONSHARES
- -------------------------------------------------------------------------------------------------------------- Fiscal Year First Second Third Fourth Ending March 31 Quarter Quarter Quarter Quarter Year - -------------------------------------------------------------------------------------------------------------- 1995 High $ 18.67 $ 19.00 $ 19.75 $ 19.75 $ 19.75 Low 14.50 13.75 14.25 16.00 13.75 Dividends paid .023 .03 .03 .03 .113 - -------------------------------------------------------------------------------------------------------------- 1994 High $ 11.83 $ 16.00 $ 16.50 $ 18.83 $ 18.83 Low 8.00 11.17 12.50 12.33 8.00 Dividends paid .02 .02 .023 .023 .087 - --------------------------------------------------------------------------------------------------------------
As of April 5, 1995 there were 14,916,146 Common Shares of Pioneer-Standard Electronics, Inc. outstanding, and there were 540 shareholders of record. The market price of Pioneer-Standard Electronics, Inc. Common Shares at the close of business May 5, 1995 was $20.63. See Note 3 for information regarding dividend restrictions. EX-99.D 14 PIONEER STANDARD EX-99(D) 1 EXHIBIT 99(d) FINANCIAL REVIEW Summary of Operations/Fiscal Years ended March 31
(Dollars in thousands except per share amounts) =============================================================================================================================== For the Year 1995 1994 1993 1992 1991 ----------------------------------------------------------------------- Combined Sales (Pioneer-Standard Electronics, Inc. and Pioneer Technologies Group, Inc.) $ 1,200,252 $ 1,002,758 $ 714,021 $ 552,294 $ 501,834 Pioneer-Standard Electronics, Inc. Net Sales 832,152 580,757 430,013 362,386 345,064 Interest Expense 3,966 2,687 3,581 4,505 4,748 Income from Continuing Operations before Income Taxes and Equity in Earnings of Pioneer Technologies Group, Inc. 39,713 28,702 17,480 7,888 12,673 Equity in Earnings of Pioneer Technologies Group, Inc. 2,500 3,001 2,505 654 703 Income Taxes 17,204 12,027 7,072 3,215 5,084 Income from Continuing Operations 25,009 19,676 12,913 5,327 8,292 Net Income* 25,009 19,676 12,913 5,327 8,292 - ------------------------------------------------------------------------------------------------------------------------------- Year-End Position Accounts Receivable 133,987 81,155 62,347 50,004 51,378 Inventory 123,008 85,754 67,101 60,983 56,981 Working Capital 131,438 85,132 70,781 69,325 66,553 Net Property and Equipment 30,929 25,572 23,159 23,579 22,534 Total Assets* 327,415 220,039 171,860 150,871 146,348 Long-Term Debt* 56,318 22,272 21,328 44,717 44,306 Shareholders' Equity* 126,415 102,740 84,117 57,455 52,855 Weighted Average Shares Outstanding 15,257,918 15,118,023 13,782,768 12,306,934 12,183,877 Average Number of Employees 1,213 1,003 940 937 917 - ------------------------------------------------------------------------------------------------------------------------------- Per Share Data Income Per Share from Continuing Operations 1.64 1.30 .94 .43 .68 Net Income Per Share* 1.64 1.30 .94 .43 .68 Cash Dividends Paid Per Share* .113 .087 .073 .071 .067 Shareholders' Equity Per Share* 8.48 6.91 5.73 4.67 4.30 Price Range of Common Shares* High 19.75 18.83 13.33 7.89 6.89 Low 13.75 8.00 4.67 4.45 3.22 - ------------------------------------------------------------------------------------------------------------------------------- Measurement Data Gross Margin Percent of Sales 18.6 19.8 21.7 21.4 22.5 Income from Continuing Operations Percent of Sales 3.0 3.4 3.0 1.5 2.4 Net Income Percent of Average Shareholders' Equity 21.8 21.1 18.2 9.7 17.0 Sales Per Employee 686 579 457 387 376 Accounts Receivable Days Outstanding at Year-End 47 43 45 47 50 Turns on Annual Average Inventory 6.5 6.1 5.3 4.8 4.7 Interest Bearing Debt Percent of Equity Plus Debt* 34.4 21.0 22.3 46.4 45.9 - -------------------------------------------------------------------------------------------------------------------------------
Notes: *All data are for continuing operations unless marked with an asterisk. 1 Price range covers the period when the stock was first publicly traded, January 7, 1971 through March 31, 1972. EX-99.E 15 PIONEER STANDARD EX-99(E) 1 EXHIBIT 99(e) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION PIONEER-STANDARD SALES UP 43 PERCENT Fiscal 1995 was the ninth consecutive year of record Pioneer-Standard sales and the 23rd year in the 24 years we have been public that sales increased. The year's sales were $832.2 million, up 43 percent from $580.8 million in 1994. The Company's traditional sales increased 36 percent and including the ten-month contribution of the newly acquired Canadian electronics distribution unit, Zentronics, sales increased 43 percent. All three of our major product categories added to sales growth this past year. Semiconductor products accounted for 37 percent of sales, compared to 41 percent and 37 percent in 1994 and 1993, respectively. Computer systems products comprised 38 percent of sales compared with 33 percent in 1994 and 39 percent in 1993. Passive and electromechanical products were 22 percent of sales, versus 24 percent in 1994 and 21 percent in 1993. Miscellaneous products accounted for 3 percent in 1995, 2 percent in 1994 and 3 percent in 1993. The 1995 gross margin was 18.6 percent compared to 19.8 percent in 1994 and 21.7 percent in 1993. A principal reason for the reduced gross margin percent in 1995 and 1994 was a change in product mix, particularly with respect to the increase in sales volume of microprocessors over the past two years. While microprocessors earn a relatively low gross profit margin, they are marketed through an efficient low cost sales channel. Computer system products had the highest line item value in 1995 and passive and electromechanical products had the lowest, with the gross margin percent of passives being the higher of these two products. The gross margin percent of the semiconductor products was below the other two categories the past two years primarily due to the effect of the increased microprocessor sales noted above. OPERATING EFFICIENCIES CONTRIBUTE As was the case in the prior year, our operating expenses in 1995 increased less rapidly than sales--a direct result of operating efficiencies. Warehouse, selling and administrative expenses in 1995 were 13.4 percent of sales, down from 14.4 percent of 1994, and 16.8 percent of 1993. The improvements in the past three years reflect to some extent the leveraging of expenses on greater sales volume, and to a larger extent the many efficiencies realized through FutureStart, our total quality management initiative. In addition, operating expenses in all three years included outlays for geographic expansion of sales operations. The resulting operating profit amounted to $43.7 million, 39 percent ahead of the $31.4 million of fiscal 1994, which was 49 percent greater than the $21.1 million of 1993. Operating profit amounted to 5.2 percent of net sales in 1995 compared with 5.4 percent in 1994 and 4.9 percent in 1993. Sales per employee rose to a record $686,000, up from $579,000 in 1994 and $457,000 in 1993. Turns on annual average inventory were 6.5, versus 6.1 in 1994 and 5.3 in 1993. Interest expense totaled $4.0 million in 1995, $2.7 million in 1994 and $3.6 million in 1993. Total inter- 2 est-bearing debt in-creased by $38.9 million during 1995 primarily due to the working capital needs arising from in-creased sales volume coupled with the cash investment in the Zentronics business and to an increased level of capital expenditures. Our equity interest in the net income of our 50%-owned affiliate, Pioneer Technologies, was $2.5 million in fiscal 1995. This compares to $3.0 million in 1994 and $2.5 million in 1993. Pioneer Technologies' sales for fiscal 1995 were $368.1 million, compared to $422.0 million in 1994 and $284.0 million in 1993. Lower 1995 net sales reflected a reduced volume of microprocessor sales which earn a relatively low gross profit margin. Reduced sales, combined with increased operating expenses, impacted current year net income. Notwithstanding lower microprocessor sales volume during 1995, a significant portion of the affiliate's total sales involved highly concentrated sales of certain microprocessors in large quantities which might not be sustainable in future periods and the effect of which could result in a significant impact on the net income of the affiliate. In 1994 and 1993, microprocessor sales were a major factor in the affiliate's growth, representing a significant portion of its sales increase. The effective tax rate was 40.8 percent in 1995 compared with 37.9 percent in 1994. This increase is due to a decrease in the net income of Pioneer Technologies relative to the Company's total net income in 1995 coupled with higher effective state tax rates and the unrecognized tax benefit associated with the operating loss of the Canadian subsidiary. The increase in the effective tax rate from 35.4 percent in 1993 to 37.9 percent in 1994 was primarily due to a 1.0 percent increase in the statutory rate and the accrual of taxes on the unremitted earnings of our affiliate. Primarily due to the factors outlined above, fiscal 1995 net income was a record $25.0 million, up 27 percent from $19.7 million in 1994 which was, in turn, 52 percent above the $12.9 million in 1993. Earnings per share were a record $1.64 compared with $1.30 per share in 1994 and 89 cents fully diluted in 1993. Systems are in place providing for continuous measurement and evaluation of foreign exchange exposures so that timely action can be taken when considered desirable. Reducing exposure to foreign currency fluctuations is an integral part of the Company's risk management program. Financial instruments in the form of forward exchange contracts are employed as one of the methods to reduce such risk. The Company does not enter into financial instuments for trading or speculative purposes. We extend credit based on customers' financial condition, and generally collateral is not required. Credit losses are provided for in the financial statements when collectibility is in doubt. Inflation has had little effect on our operations. CAPITAL AND LIQUIDITY On June 1, 1994, we acquired, for $10.1 million, certain assets of the Zentronics Division of Westburne Industrial Enterprises Ltd. ("Westburne"), a Canadian corporation, and assumed certain of Westburne's liabilities. We maintain a strong financial position and excellent liquidity. Current assets at fiscal 1995 year-end were $273.9 million, 1.9 times current liabilities. Of signifi- 3 cance, sales have increased 160 percent in the past five years compared with only a 104 percent increase in working capital requirements. On August 1, 1994, we effected a three-for-two split of common shares in the form of a 50 percent share dividend. Also at that time, reflecting sales and earnings progress, the quarterly dividend rate was increased from 3.5 cents per share to 4.5 cents per share on a pre-split basis, 3 cents per share on a post-split basis, for a 29 percent increase. In addition to this increase, the fiscal 1996 first quarter dividend paid May 1, 1995 was increased by 17 percent to a 3.5 cents per share quarterly dividend rate. This marks the 7th consecutive year of a dividend increase and the 20th increase in the 24 years we have been publicly traded. We continued investing in programs to stimulate and support future growth. Capital expenditures were $11.3 million in 1995, $7.6 million in 1994 and $4.2 million in 1993. The increased spending in 1995 is largely related to ongoing initiatives designed to improve efficiencies through computer enhancement of operating processes. Plans call for approximately $20.0 million of capital expenditures in 1996. The planned increase in spending during 1996 is largely attributable to results of our continuing business process redesign efforts. Amounts expended will enable our technology toolset migration to a new, state-of-the art software platform to support growth and flexibility requirements. In addition, a portion of prior year expenditures as well as those planned for 1996 also relate to ongoing initiatives designed to improve efficiencies through computer enhancement of operating processes as well as meeting normal expansion needs of the business. In addition to excellent liquidity, we believe our credit facilities are sufficient to finance growth. In February 1995, we increased our revolving credit agreement to $65.0 million in total. As of March 31, 1995, $24.0 million of this total commitment was available for use. In addition to the revolving credit line, unsecured short-term lines of credit are available whereby a maximum of $20.0 million may be borrowed. At March 31, 1995, borrowings pursuant to these short-term lines totaled $7.0 million. Considering the available credit lines and funds derived from current operations plus the financing flexibility provided by the conservative debt to capitalization ratio of 34 percent, Pioneer-Standard believes that it has the alternative resources available to finance its growth needs. EX-99.F 16 PIONEER STANDARD EX-99(F) 1 Exhibit 99(f) PIONEER-STANDARD ELECTRONICS, INC. FINANCIAL STATEMENTS AND SCHEDULE PIONEER TECHNOLOGIES GROUP, INC. FINANCIAL STATEMENTS AND SCHEDULE 2 REPORT OF INDEPENDENT AUDITORS Shareholders and the Board of Directors Pioneer-Standard Electronics, Inc. We have audited the accompanying consolidated balance sheets of Pioneer-Standard Electronics, Inc. as of March 31, 1995 and 1994 and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended March 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Pioneer-Standard Electronics, Inc. at March 31, 1995 and 1994 and the consolidated results of its operations and its cash flows for each of the three years in the period ended March 31, 1995, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Cleveland, Ohio May 5, 1995 3 CONSOLIDATED BALANCE SHEETS March 31, 1995 and 1994
============================================================================================================= ASSETS 1995 1994 ============================================================================================================= CURRENT ASSETS: Cash $ 9,598,000 $ 5,954,000 Accounts receivable, less allowance for doubtful accounts (1995-$4,606,000, 1994-$2,869,000) 133,987,000 81,155,000 Merchandise inventory 123,008,000 85,754,000 Prepaid expenses 1,623,000 919,000 Deferred income taxes 5,708,000 4,391,000 - ------------------------------------------------------------------------------------------------------------- Total current assets 273,924,000 178,173,000 INVESTMENT AND OTHER ASSETS: Investment in 50%-owned company 16,963,000 14,463,000 Other assets 5,599,000 1,831,000 PROPERTY AND EQUIPMENT, AT COST: Land 1,070,000 1,070,000 Buildings 12,984,000 12,706,000 Furniture and equipment 39,166,000 30,165,000 Leasehold improvements 2,176,000 1,876,000 - ------------------------------------------------------------------------------------------------------------- 55,396,000 45,817,000 Less accumulated depreciation and amortization 24,467,000 20,245,000 - ------------------------------------------------------------------------------------------------------------- Net property and equipment 30,929,000 25,572,000 - ------------------------------------------------------------------------------------------------------------- $ 327,415,000 $ 220,039,000 ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable to banks $ 7,000,000 $ 2,000,000 Accounts payable 106,905,000 68,585,000 Income taxes 3,946,000 3,088,000 Accrued salaries, wages and commissions 8,593,000 6,835,000 Other accrued liabilities 13,086,000 9,477,000 Long-term debt due within one year 2,956,000 3,056,000 - ------------------------------------------------------------------------------------------------------------- Total current liabilities 142,486,000 93,041,000 LONG-TERM DEBT 56,318,000 22,272,000 DEFERRED INCOME TAXES 2,196,000 1,986,000 SHAREHOLDERS' EQUITY: Common shares, without par value, $.44 stated value: authorized 40,000,000 shares (20,000,000 shares in 1994); outstanding 14,916,146 shares in 1995 and 14,869,359 shares in 1994 6,630,000 6,609,000 Capital in excess of stated value 16,318,000 15,806,000 Retained earnings 103,646,000 80,325,000 Foreign currency translation adjustment (179,000) -- - ------------------------------------------------------------------------------------------------------------- Total shareholders' equity 126,415,000 102,740,000 - ------------------------------------------------------------------------------------------------------------- $ 327,415,000 $ 220,039,000 ============== ==============
See accompanying notes to consolidated finacial statements. 4 CONSOLIDATED STATEMENTS OF INCOME Years ended March 31, 1995, 1994 and 1993
- ------------------------------------------------------------------------------------------------------------- 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------- NET SALES $ 832,152,000 $ 580,757,000 $ 430,013,000 Operating costs and expenses: Cost of goods sold 677,171,000 465,614,000 336,589,000 Warehouse, selling and administrative expenses 111,302,000 83,754,000 72,363,000 - ------------------------------------------------------------------------------------------------------------- 788,473,000 549,368,000 408,952,000 - ------------------------------------------------------------------------------------------------------------- Operating profit 43,679,000 31,389,000 21,061,000 Equity in earnings of 50%-owned company 2,500,000 3,001,000 2,505,000 Interest expense (3,966,000) (2,687,000) (3,581,000) - ------------------------------------------------------------------------------------------------------------- Income from operations before income taxes 42,213,000 31,703,000 19,985,000 Provision for income taxes: Federal Current 14,517,000 9,946,000 6,267,000 Deferred (1,107,000) (574,000) (811,000) - ------------------------------------------------------------------------------------------------------------- 13,410,000 9,372,000 5,456,000 State 3,794,000 2,655,000 1,616,000 - ------------------------------------------------------------------------------------------------------------- 17,204,000 12,027,000 7,072,000 - ------------------------------------------------------------------------------------------------------------- NET INCOME $ 25,009,000 $ 19,676,000 $ 12,913,000 ============================================================================================================= INCOME PER COMMON SHARE: Primary $ 1.64 $ 1.30 $ .94 Fully diluted .89 =============================================================================================================
See accompanying notes to consolidated financial statements. 5 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Years ended March 31, 1995, 1994 and 1993
- ------------------------------------------------------------------------------------------------------------------------------ Foreign Stated value Capital in currency of common excess of Retained translation shares stated value earnings adjustment Total - ------------------------------------------------------------------------------------------------------------------------------ BALANCE AT MARCH 31, 1992 $ 5,471,000 $ 1,984,000 $ 50,000,000 $ 57,455,000 Net income 12,913,000 12,913,000 Cash dividends ($.073 per share) (990,000) (990,000) Shares issued upon conversion of debentures 1,026,000 13,280,000 14,306,000 Shares issued upon exercise of stock options 32,000 344,000 376,000 Tax benefit related to exercise of stock options 57,000 57,000 - ------------------------------------------------------------------------------------------------------------------------------ BALANCE AT MARCH 31, 1993 6,529,000 15,665,000 61,923,000 84,117,000 Net income 19,676,000 19,676,000 Cash dividends ($.087 per share) (1,274,000) (1,274,000) Shares issued upon exercise of stock options 95,000 719,000 814,000 Tax benefit related to exercise of stock options 21,000 21,000 Shares retired (15,000) (599,000) (614,000) - ------------------------------------------------------------------------------------------------------------------------------ BALANCE AT MARCH 31, 1994 6,609,000 15,806,000 80,325,000 102,740,000 Net income 25,009,000 25,009,000 Cash dividends ($.113 per share) (1,688,000) (1,688,000) Shares issued upon exercise of stock options 21,000 388,000 409,000 Tax benefit related to exercise of stock options 124,000 124,000 Foreign currency translation adjustment $ (179,000) (179,000) - ------------------------------------------------------------------------------------------------------------------------------ BALANCE AT MARCH 31, 1995 $ 6,630,000 $ 16,318,000 $ 103,646,000 $ (179,000) $ 126,415,000 ==============================================================================================================================
See accompanying notes to consolidated financial statements. 6 CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended March 31, 1995, 1994 and 1993
- -------------------------------------------------------------------------------------------------------------- 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 25,009,000 $ 19,676,000 $ 12,913,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,230,000 5,264,000 4,646,000 Undistributed earnings of affiliate (2,500,000) (3,001,000) (2,505,000) (Increase) decrease in operating working capital (38,566,000) (11,635,000) 1,532,000 (Increase) decrease in other assets (1,713,000) (199,000) 140,000 Deferred taxes (1,115,000) (574,000) (622,000) - ------------------------------------------------------------------------------------------------------------- Total adjustments (37,664,000) (10,145,000) 3,191,000 - ------------------------------------------------------------------------------------------------------------- Net cash (used) provided by operating activities (12,655,000) 9,531,000 16,104,000 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment (11,326,000) (7,626,000) (4,160,000) Acquisition of business (10,068,000) -- -- - ------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (21,394,000) (7,626,000) (4,160,000) CASH FLOWS FROM FINANCING ACTIVITIES: Increase (decrease) in short-term financing 5,000,000 (500,000) -- Borrowings under revolving credit 65,000,000 25,000,000 8,000,000 Repayment under revolving credit (28,000,000) (21,000,000) (17,000,000) Purchase of subordinated debt -- -- (916,000) Principal payments under long-term debt obligations (3,056,000) (262,000) (1,494,000) Issuance of common shares under stock option plans 409,000 200,000 376,000 Tax benefit related to exercise of stock options 124,000 21,000 57,000 Dividends paid (1,688,000) (1,274,000) (990,000) - ------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 37,789,000 2,185,000 (11,967,000) EFFECT OF EXCHANGE RATE CHANGES ON CASH (96,000) -- -- - ------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH 3,644,000 4,090,000 (23,000) CASH AT BEGINNING OF YEAR 5,954,000 1,864,000 1,887,000 - ------------------------------------------------------------------------------------------------------------- CASH AT END OF YEAR $ 9,598,000 $ 5,954,000 $ 1,864,000 =============================================================================================================
See accompanying notes to consolidated financial statements. 7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1 ACCOUNTING POLICIES The Company is a distributor of electronic components and computer products and maintains the following accounting policies: PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include the accounts of the Company and its wholly-owned Canadian subsidiary. The Company's 50% ownership investment in Pioneer Technologies Group, Inc. is accounted for by the equity method. All significant intercompany transactions have been eliminated. CASH EQUIVALENTS--The Company considers highly liquid instruments with a maturity of ninety days or less at date of purchase to be cash equivalents. MERCHANDISE INVENTORY--Inventory is stated at the lower of cost (first-in, first-out basis) or market. The Company's inventory is constantly monitored for obsolescence. This review considers such factors as turnover, technical obsolescence, right of return status to suppliers and price protection offered by suppliers. Reserves for slow-moving and obsolete inventory at March 31, were $3,416,000 in 1995 and $2,540,000 in 1994. OTHER ASSETS--Other assets include the excess of cost over value assigned to net assets of purchased businesses, which is being amortized on the straight-line method over 40 years; cash surrender value of life insurance; security deposits; and certain deferred charges. PROPERTY AND EQUIPMENT--The Company capitalizes costs associated with software developed for its own use. Depreciation and amortization is com puted using principally the straight-line method. Accelerated methods are used for tax reporting purposes. FOREIGN CURRENCY--The assets and liabilities of foreign operations are translated into U.S. dollars at the exchange rates in effect at the balance sheet date whereas income statement accounts are translated at the weighted average exchange rates for the year. The gains or losses resulting from these translations are recorded in a separate component of shareholders' equity. Gains or losses resulting from realized foreign currency transactions are included in net income. INCOME TAXES--Effective April 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Adoption of this statement was not material to the financial results. STOCK SPLIT--On June 23, 1994, the Board of Directors declared a three-for-two stock split effected in the form of a 50% share dividend of the Company's Common Shares payable August 1, 1994 to shareholders of record July 6, 1994. All share and per share data have been restated for all periods presented to reflect the stock split. COMMON SHARES AND NET INCOME PER COMMON SHARE--Net income per common share is computed using the weighted average common shares and common share equivalents outstanding during the year of 15,257,918 in 1995, 15,118,023 in 1994 and 13,782,768 in 1993. Common share equivalents consists of shares issuable upon exercise of stock options computed by using the treasury stock method. In 1993, fully diluted net income per common share was computed on the same basis as above with the assumption that all of the 9% Subordinated Convertible Debentures (which were called in fiscal 1993) were converted into common shares and that the related interest expense, net of income taxes, was added to net income. The number of shares used for this computation was 14,966,503 in 1993. 2 ACQUISITIONS On June 1, 1994, the Company acquired certain of the assets of the Zentronics Division of Westburne Industrial Enterprises Ltd. ("Westburne"), a Canadian corporation, and assumed certain of Westburne's liabilities for a purchase price of approximately $10,068,000. The transaction has been accounted for by the purchase method of accounting and the pro forma effects are not material. Operating results are included in the consolidated financial statements from the date of acquisition. 8 3 FINANCING AND LONG-TERM DEBT SHORT-TERM: The Company has unsecured short-term lines of credit aggregating $20,000,000 available for use. The unsecured lines, which may be withdrawn at the option of the lenders, permit the Company to borrow at varying interest rates. There were $7,000,000 of borrowings against these lines at March 31, 1995 with a weighted average interest rate of 6.69%. Such borrowings at March 31, 1994 were $2,000,000 with a weighted average interest rate of 5.75%. LONG-TERM: Long-term debt at March 31, 1995 and 1994 consisted of the following:
- ----------------------------------------------------- 1995 1994 - ----------------------------------------------------- Revolving credit $ 41,000,000 $ 4,000,000 9.79% Senior Notes 17,140,000 20,000,000 Obligations under capital leases 1,134,000 1,328,000 -------------------------- 59,274,000 25,328,000 -------------------------- Less amounts due within one year 2,956,000 3,056,000 -------------------------- $ 56,318,000 $ 22,272,000 ==========================
The Company's revolving credit agreement was amended in February 1995, increasing the committed line to $65,000,000. Terms of the agreement provide for up to an aggregate of $65,000,000 of unsecured borrowings on a revolving credit basis until January 1, 1998 after which time any outstanding borrowings are convertible into a four-year term loan amortized in equal quarterly installments. The agreement contains a provision whereby annually, upon consent of the parties, the maturity date may be extended for one additional year resulting in a remaining three-year revolving credit and four-year term loan facility. At the choice of the Company, interest on borrowings is payable at a floating prime rate or at other floating rate options (certificate of deposit, LIBOR, or banker's acceptance) plus 3/4%. There is a commitment fee of 1/4% on the unborrowed amount. Annual principal payments of $2,860,000 on the 9.79% Senior Notes are due each November 1 and continue through November 1, 2000 when the last payment of $2,840,000 is due. Interest is payable semi-annually. The terms of both the revolving credit agreement and Senior Note Purchase Agreement provide for, among other things, restrictions regarding the payment of cash dividends, limitations on other borrowings and capital expenditures, minimum working capital requirements and the maintenance of certain financial ratios. Unrestricted retained earnings available for dividends at March 31, 1995 under the most restrictive covenants are $7,248,000. The Company's 9% Subordinated Convertible Debentures were retired during fiscal 1993 with the issuance of 2,307,676 common shares, plus cash of $916,000. Aggregate maturities of long-term debt for the next five fiscal years are: 1996--$2,956,000; 1997--$2,871,000; 1998--$5,435,000; 1999--$13,124,000 and 2000--$13,126,000. 4 LEASE COMMITMENTS The Company is committed under lease agreements, which contain renewal options for periods up to twenty years, for certain facilities and equipment expiring at various dates to the year 2017. Amounts for capitalized leases are included in property and equipment at cost of $2,181,000 and $2,773,000 at March 31, 1995 and 1994, less accumulated amortization of $1,034,000 and $1,418,000 at March 31, 1995 and 1994, respectively. Future minimum lease payments under capital leases and operating leases at March 31, 1995 are as follows:
Capital Operating Leases Leases - ----------------------------------------------------- 1996 $ 218,000 $2,134,000 1997 132,000 1,629,000 1998 132,000 1,275,000 1999 132,000 984,000 2000 132,000 183,000 Thereafter 2,310,000 -- - ----------------------------------------------------- Total minimum lease payments 3,056,000 $6,205,000 ========== Less amount representing interest 1,922,000 ----------- Present value of minimum lease payments $ 1,134,000 ===========
Rental expense for operating leases was $2,897,000, $2,166,000 and $1,979,000 for 1995, 1994 and 1993, respectively. 9 5 INCOME TAXES The following is a reconciliation of the Company's effective income tax rate to the statutory rate:
Liability Deferred Method Method - ---------------------------------------------- -------- 1995 1994 1993 - ---------------------------------------------- -------- Statutory rate 35.0% 35.0% 34.0% Equity in undistributed earnings of 50%-owned company (1.6) (2.6) (4.3) Provision for state taxes 5.8 5.4 5.3 Foreign losses with unrecognized tax benefits 1.1 -- -- Other items .5 .1 .4 ------------- ---- Effective rate 40.8% 37.9% 35.4% ============= ====
Deferred tax assets and liabilities as of March 31, 1995 and 1994 are presented below:
- ----------------------------------------------------------------- 1995 1994 - ----------------------------------------------------------------- Deferred tax assets: Capitalized inventory costs $1,391,000 $1,373,000 Accrued expenses 1,674,000 1,105,000 Allowance for doubtful accounts 1,581,000 1,024,000 Inventory valuation reserve 639,000 445,000 Foreign losses 450,000 -- Other 423,000 444,000 ---------- ---------- Deferred tax assets 6,158,000 4,391,000 Less valuation allowance (450,000) -- ---------- ---------- Total deferred tax assets 5,708,000 4,391,000 ---------- ---------- Deferred tax liabilities: Depreciation expense 1,335,000 1,310,000 Other 861,000 676,000 ---------- ---------- Total deferred tax liabilities 2,196,000 1,986,000 ---------- ---------- Net deferred tax assets $3,512,000 $2,405,000 ========== ==========
The components of the provision for deferred income taxes for 1993 were as follows:
- ----------------------------------------------------- 1993 - ----------------------------------------------------- Depreciation and amortization $ 57,000 Inventory valuation reserve (156,000) Allowance for doubtful accounts (166,000) Costs capitalized in inventory (235,000) State tax (123,000) Other (188,000) --------- Deferred tax $(811,000) =========
6 COMMON SHARE PURCHASE RIGHTS PLAN The Company maintains a Common Share Purchase Rights Plan whereby, until the occurrences of certain events, each share of the Company's outstanding common shares represents ownership of one right (Right). The Rights may only be exercised if a person or group acquires twenty percent (20%) or more of the Company's Common Shares, or announces a tender offer for at least twenty percent (20%) of the Company's Common Shares. The exercise price of each Right is $17.78 per Common Share subject to adjustment in certain events. The Rights trade with the Company's Common Shares until the Rights become exercisable. If the Company is acquired in a merger or other business combination transaction, each Right will entitle its holder to purchase, at the Right's then-exercise price, a number of the acquiring company's common shares (or other securities) having a market value at the time of twice the Right's then-current exercise price. In addition, if a person or group acquires twenty percent (20%) or more of the Company's Common Shares or certain specified transactions occur while a person or group beneficially owns twenty percent (20%) or more of such Common Shares, each Right will entitle its holder (other than such person or members of such group) to purchase, at the Right's then-current exercise price, a number of the Company's Common Shares having a market value of twice the Right's then-exercise price. Prior to the acquisition by a person or group of beneficial ownership of twenty percent (20%) or more of the Company's Common Shares, the Rights are redeemable for $.004 per Right at the option of the Board of Directors. The Rights will expire May 10, 1999. 7 STOCK OPTIONS The Company has stock option plans which provide for the granting of options to purchase its Common Shares. These plans provide for non-qualified or incentive stock options. The options are priced at 100% of fair market value at date of grant and expire ten years from date of grant. No charges are made against income in accounting for stock options. Any tax benefits arising from the exercise of options are recognized when realized and credited to capital in excess of stated value. 10 Transactions involving the stock option plans are summarized as follows:
- ----------------------------------------------------- Number Average Option Price of Shares Per Share - ----------------------------------------------------- Outstanding at March 31, 1994 672,938 $ 7.76 Exercised (46,888) $ 8.73 Granted 431,300 $18.09 Forfeited (2,850) $17.00 - ----------------------------- Outstanding at March 31, 1995 1,054,500 $11.92 ============================= Exercisable at March 31, 1995 319,450 $ 7.42 ============================= Available for grant at March 31, 1995 435,550 =============================
8 FINANCIAL INSTRUMENTS AND ESTIMATED FAIR VALUES The Company uses forward exchange contracts to reduce exposure to foreign currency fluctuations. Gains or losses on forward contracts which hedge its net investment in its Canadian subsidiary are accrued in shareholders' equity. Gains or losses resulting from contracts which hedge specific transactions are in-cluded in net income offsetting the net income effect of the transaction creating the risk. As of March 31, 1995 there is one contract outstanding for the forward sale of U.S. dollars against Canadian dollars in a notional amount of $1,200,000, which also approximates fair value at March 31, 1995. The contract matured on April 28, 1995 and was utilized to hedge U.S. dollar transactions of the Canadian subsidiary. The carrying amounts and estimated fair values of the Company's other financial instruments are as follows:
1995 - ----------------------------------------------------- Carrying Fair Amount Value - ----------------------------------------------------- Cash $ 9,598,000 $ 9,598,000 Notes payable to banks 7,000,000 7,000,000 Long-term debt: 9.79% Senior Notes 17,140,000 17,916,000 Revolving credit borrowings 41,000,000 41,000,000 1994 - ----------------------------------------------------- Carrying Fair Amount Value - ----------------------------------------------------- Cash $ 5,954,000 $ 5,954,000 Notes payable to banks 2,000,000 2,000,000 Long-term debt: 9.79% Senior Notes 20,000,000 22,569,000 Revolving credit borrowings 4,000,000 4,000,000
The carrying amount of cash, notes payable to banks and revolving credit borrowings approximates fair value. The fair value of the Senior Notes is estimated using rates currently available for securities with similar terms and remaining maturities. 9 PIONEER TECHNOLOGIES GROUP, INC. Pioneer-Standard Electronics, Inc. owns 50% of the common stock of Pioneer Technologies Group, Inc. Included in the Company's retained earnings are undistributed earnings of Pioneer Technologies Group, Inc. in the amount of $16,908,000 at March 31, 1995, $14,408,000 at March 31, 1994 and $11,407,000 at March 31, 1993. In accordance with accounting principles in effect at the time, the Company has not provided deferred income taxes on $11,407,000 of undistributed earnings of Pioneer Technologies Group, Inc. No dividends have been paid by Pioneer Technologies Group, Inc. from date of incorporation in 1964 to March 31, 1995. Pioneer-Standard Electronics, Inc. and Pioneer Technologies Group, Inc., have an agreement which provides, among other things, that they have the right to buy each others products at cost of the product plus handling. In addition, Pioneer Technologies Group, Inc. utilizes the Company's data processing system for processing certain accounting and operating information for which it is charged a monthly fee. The agreement between the two companies also provides that Pioneer-Standard Electronics, Inc. may not sell, assign, give, transfer, exchange, or otherwise dispose of its share ownership without allowing Pioneer Technologies Group, Inc. the first option to purchase the shares at the then current book value. If Pioneer Technologies Group, Inc. does not exercise this option, then shareholders representing the other 50% of the common stock of Pioneer Technologies Group, Inc. have the right and option to purchase all the shares at the then current book value. In the event of a "change in control," as defined, of Pioneer-Standard Electronics, Inc., or upon the occurrence of certain events, Pioneer Technologies Group, Inc. has the right to purchase all shares of its stock owned by Pioneer-Standard Electronics, Inc. at the then current book value. If Pioneer Technologies Group, Inc. does not exercise the right, the remaining shareholders representing the other 50% of the common shares of Pioneer Technologies Group, Inc. have the right and option to purchase all the shares at the then current book value. Comparative financial information of Pioneer Technologies Group, Inc. at March 31, 1995, 1994 and 1993 and for the years then ended is summarized as follows: 11
- ---------------------------------------------------------------------------------------------------------------- 1995 1994 1993 - ---------------------------------------------------------------------------------------------------------------- Net sales $ 368,100,000 $422,001,000 $ 284,008,000 Gross profit 51,888,000 49,409,000 44,854,000 Net income 5,001,000 6,002,000 5,010,000 ================================================ Total current assets $ 85,085,000 $ 92,445,000 $ 74,964,000 Net fixed and other assets 5,873,000 6,148,000 4,077,000 ------------------------------------------------ Total assets $ 90,958,000 $ 98,593,000 $ 79,041,000 ================================================ Total current liabilities $ 38,881,000 $ 48,967,000 $ 24,242,000 Total long-term liabilities 18,148,000 20,698,000 31,873,000 Total shareholders' equity 33,929,000 28,928,000 22,926,000 ------------------------------------------------ Total liabilities and shareholders' equity $ 90,958,000 $ 98,593,000 $ 79,041,000 ================================================
10 OPERATING WORKING CAPITAL CHANGES AND SUPPLEMENTAL INFORMATION FOR THE STATEMENTS OF CASH FLOWS THE COMPONENTS OF THE CHANGES IN OPERATING WORKING CAPITAL WERE:
- ---------------------------------------------------------------------------------------------------------------- 1995 1994 1993 - ---------------------------------------------------------------------------------------------------------------- Accounts receivable $ (47,595,000) $(18,808,000) $ (12,343,000) Merchandise inventory (32,049,000) (18,653,000) (6,118,000) Prepaid expenses (682,000) (146,000) 12,000 Accounts payable 35,879,000 22,566,000 12,934,000 Income taxes 858,000 (31,000) 2,778,000 Accrued salaries, wages and commissions 1,480,000 2,073,000 1,551,000 Other accrued liabilities 3,543,000 1,364,000 2,718,000 ------------------------------------------------ (Increase) decrease in operating working capital $ (38,566,000) $(11,635,000) $ 1,532,000 ================================================ SUPPLEMENTAL CASH FLOW INFORMATION: - ---------------------------------------------------------------------------------------------------------------- 1995 1994 1993 - ---------------------------------------------------------------------------------------------------------------- Cash paid or received during the year for: Interest paid $ 4,255,000 $ 2,623,000 $ 3,488,000 Income taxes paid 17,064,000 12,659,000 4,768,000 ================================================ Non-cash investing and financing activities: Common shares issued upon conversion of subordinated debentures $ -- $ -- $ 14,306,000 Common shares retired -- 614,000 -- ================================================ Non-cash assets and liabilities of business acquired: Working capital $ 7,684,000 $ -- $ -- Other assets 2,384,000 -- -- ================================================
11 EMPLOYEE RETIREMENT PLAN The Company maintains a defined contribution profit-sharing and thrift plan which qualifies under Section 401(k) of the Internal Revenue Code for all employees meeting certain service requirements. The plan allows eligible employees to contribute up to 10% of their compensation, with the Company matching 50% of up to 4% of compensation. The Company may also make contributions dependent on profits each year for the benefit of all eligible employees under the plan. Total profit sharing and Company matching contributions were $2,129,000, $1,899,000 and $1,218,000 for 1995, 1994 and 1993, respectively. 12 REPORT OF INDEPENDENT AUDITORS We have audited the consolidated financial statements of Pioneer-Standard Electronics, Inc. as of March 31, 1995 and 1994 and for each of the three years in the period ended March 31, 1995 and have issued our report thereon dated May 5, 1995 included elsewhere in this Annual Report on Form 10-K. Our audits also included the consolidated financial statement schedule of Pioneer-Standard Electronics, Inc. as of March 31, 1995 and 1994 and for each of the three years in the period ended March 31, 1995, listed in item 14(a) of this Annual Report (Form 10-K). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. ERNST & YOUNG LLP Cleveland, Ohio May 5, 1995 13 PIONEER-STANDARD ELECTRONICS, INC. SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS Years ended March 31, 1995, 1994 and 1993
Balance at Charged Deductions - Balance beginning to costs net write-offs at end of of period and expenses (Net recoveries) period ---------- ------------ ---------------- --------- Description - ----------- 1995: Allowance for $2,869,000 $2,281,000 $ 544,000 $4,606,000 doubtful accounts Inventory valuation $2,540,000 $2,167,000 $1,291,000 $3,416,000 reserve 1994: Allowance for $1,713,000 $1,808,000 $ 652,000 $2,869,000 doubtful accounts Inventory valuation $2,659,000 $1,995,000 $2,114,000 $2,540,000 reserve 1993: Allowance for $1,226,000 $1,672,000 $1,185,000 $1,713,000 doubtful accounts Inventory valuation $2,190,000 $1,738,000 $1,269,000 $2,659,000 reserve
14 QUARTERLY FINANCIAL DATA (unaudited)
- ------------------------------------------------------------------------------------------------------------- Fiscal Year First Second Third Fourth Ending March 31 Quarter Quarter Quarter Quarter Year - ------------------------------------------------------------------------------------------------------------- 1995 Net sales $ 183,832,000 $ 194,423,000 $ 212,433,000 $ 241,464,000 $ 832,152,000 Gross profit 35,155,000 37,433,000 38,592,000 43,801,000 154,981,000 Net income 5,965,000 5,649,000 6,130,000 7,265,000 25,009,000 Net income per share .39 .37 .40 .48 1.64 - ------------------------------------------------------------------------------------------------------------- 1994 Net sales $ 134,509,000 $ 137,278,000 $ 149,814,000 $ 159,156,000 $ 580,757,000 Gross profit 27,360,000 28,075,000 29,007,000 30,701,000 115,143,000 Net income 4,469,000 4,790,000 4,887,000 5,530,000 19,676,000 Net income per share .30 .31 .32 .37 1.30 - -------------------------------------------------------------------------------------------------------------
15 FINANCIAL STATEMENTS PIONEER TECHNOLOGIES GROUP, INC. March 31, 1995 and 1994, and years ended March 31, 1995, 1994 and 1993 with Report of Independent Auditors 16 Pioneer Technologies Group, Inc. Financial Statements March 31, 1995 and 1994, and years ended March 31, 1995, 1994 and 1993 CONTENTS Report of Independent Auditors.........................................................................1 Audited Financial Statements Balance Sheets.......................................................................................2-3 Statements of Income and Retained Earnings.............................................................4 Statements of Cash Flows...............................................................................5 Notes to Financial Statements.......................................................................6-12
17 [LETTERHEAD] ERNST & YOUNG LLP Report of Independent Auditors The Board of Directors Pioneer Technologies Group, Inc. We have audited the accompanying balance sheets of Pioneer Technologies Group, Inc. as of March 31, 1995 and 1994, and the related statements of income and retained earnings and cash flows for each of the three years in the period ended March 31, 1995. Our audits also included the financial statement schedule of Pioneer Technologies Group, Inc., listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Pioneer Technologies Group, Inc. at March 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 1995, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in Note 8 to the financial statements, the Company changed its method of accounting for income taxes in 1994. ERNST & YOUNG LLP Washington, DC April 28, 1995 1 18 Pioneer Technologies Group, Inc. Balance Sheets (Dollars in thousands)
MARCH 31 1995 1994 ------- -------- ASSETS Current Assets: Cash and cash equivalents $ 9 $ 8 Receivables: Trade accounts, less allowance for doubtful accounts of $1,535 in 1995 and $2,682 in 1994 (Note 3) 35,700 28,873 Other (Note 2) 678 340 Merchandise inventory, less allowance for inventory obsolescence of $1,926 in 1995 and $2,156 in 1994 (Note 3) 46,895 60,690 Prepaid expenses 494 405 Deferred income taxes (Note 8) 1,246 2,077 Shareholder notes receivable (Note 2) 63 52 ------- ------- Total Current Assets 85,085 92,445 ------- ------- Other Assets: Property and equipment, at cost: Furniture and office equipment 7,254 6,786 Demonstration equipment 538 965 Leasehold improvements 2,905 2,650 ------- ------- 10,697 10,401 Less accumulated depreciation and amortization 5,289 4,746 ------- ------- Net property and equipment 5,408 5,655 Shareholder notes receivable (Note 2) 193 231 Other assets 272 262 ------- ------- Total Other Assets 5,873 6,148 ------- ------- $90,958 $98,593 ======= =======
The accompanying footnotes are an integral part of these statements. 2 19
MARCH 31 1995 1994 ------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable: Trade $34,081 $43,736 Affiliate (Note 2) 630 336 Accrued employee compensation 2,762 2,897 Other accrued liabilities 1,185 1,554 Income taxes payable 223 444 ------- ------- Total current liabilities 38,881 48,967 Long-term Debt (Note 3) 18,148 20,698 ------- ------- Total Liabilities 57,029 69,665 ------- ------- Commitments and Contingencies (Note 7) Shareholders' Equity (Note 4): Common stock, $.10 par value; 100,000 shares authorized, issued and outstanding 10 10 Capital in excess of par value 90 90 Retained earnings 33,829 28,828 ------- ------- Total Shareholders' Equity 33,929 28,928 ------- ------- $90,958 $98,593 ======= =======
3 20 Pioneer Technologies Group, Inc. Statements of Income and Retained Earnings (Dollars in thousands, except per common share amounts)
YEAR ENDED MARCH 31 1995 1994 1993 -------- -------- -------- Net sales $368,100 $422,001 $284,008 -------- -------- -------- Operating costs and expenses: Cost of goods sold 316,212 372,592 239,154 Selling and administrative 41,736 38,256 34,965 -------- -------- -------- 357,948 410,848 274,119 -------- -------- -------- Operating profit 10,152 11,153 9,889 Interest expense 2,016 1,171 1,253 -------- -------- -------- Income before income taxes and other items 8,136 9,982 8,636 Provision for income taxes (Note 8) 3,135 3,980 3,626 -------- -------- -------- Net income 5,001 6,002 5,010 Retained earnings, beginning of year 28,828 22,826 17,816 -------- -------- -------- Retained earnings, end of year $ 33,829 $ 28,828 $ 22,826 -------- -------- -------- Net income per common share $ 50.01 $ 60.02 $ 50.10 -------- -------- --------
The accompanying footnotes are an integral part of these statements. 4 21 Pioneer Technologies Group, Inc. Statements of Cash Flows (Dollars in thousands)
YEAR ENDED MARCH 31 1995 1994 1993 -------- -------- -------- OPERATING ACTIVITIES Net income $ 5,001 $ 6,002 $ 5,010 Adjustments to reconcile net income to net cash provided by (used in) operations: Depreciation and amortization 1,455 1,149 985 Decrease (increase) deferred income taxes 761 (365) (345) Provision for losses on receivables and inventory 544 1,950 2,511 (Increase) decrease in accounts and notes receivable (6,299) 1,192 (7,443) Decrease (increase) in merchandise inventory 12,414 (19,629) (9,403) (Increase) decrease in prepaid expenses (89) (295) 250 Increase in other assets (10) (58) (9) (Decrease) increase in accounts payable (9,363) 23,858 (1,266) (Decrease) increase in accrued liabilities (504) 721 1,289 Decrease in income taxes payable (151) (123) (201) -------- -------- -------- Net cash provided by (used in) operating activities 3,759 14,402 (8,622) INVESTING ACTIVITIES Net additions to property and equipment (1,208) (3,226) (702) FINANCING ACTIVITIES Net (payments) borrowings under line of credit agreements (2,550) (11,175) 6,841 -------- -------- -------- Net increase (decrease) in cash and cash equivalents 1 1 (2,483) Cash and cash equivalents at beginning of year 8 7 2,490 -------- -------- -------- Cash and cash equivalents at end of year $ 9 $ 8 $ 7 ======== ======== ========
The accompanying footnotes are an integral part of these statements. 5 22 Pioneer Technologies Group, Inc. Notes to Financial Statements March 31, 1995, 1994 and 1993 (Dollars in thousands) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on hand, deposits at financial institutions and overnight repurchase agreements. Cash disbursements for interest and income taxes were as follows:
1995 1994 1993 ------ ------ ------ Interest $1,629 $1,171 $1,363 Income taxes $2,525 $4,468 $4,172
MERCHANDISE INVENTORY Inventory is valued at the lower of cost (first-in, first-out) or market. ALLOWANCES FOR DOUBTFUL ACCOUNTS AND OBSOLETE INVENTORY The Company estimates losses for doubtful accounts and inventory obsolescence based on periodic evaluations by management. The Company sells computer equipment and electronic components to companies in diversified industries primarily located in the Mid-Atlantic/Southeast and West regions of the United States. Net sales to one customer were eleven percent in 1995 and seventeen percent in 1994. Management performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. Accounts receivable are generally due within thirty days. 6 23 Pioneer Technologies Group, Inc. Notes to Financial Statements (continued) (Dollars in thousands) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) DEPRECIATION AND AMORTIZATION Depreciation of furniture, office equipment and computer equipment is determined by using the straight-line method over estimated useful lives of seven, five and three years, respectively. Depreciation of demonstration equipment is determined by using accelerated methods over an estimated useful life of five years. Amortization of leasehold improvements is determined by using the straight-line method over the life of the related lease. INCOME TAXES Effective April 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Under Statement No. 109, the liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Prior to the adoption of Statement No. 109, income tax expense was determined using the deferred method. Deferred tax expense was based on items of income and expense that were reported in different years in the financial statements and tax returns and were measured at the tax rate in effect in the year the difference originated. RECLASSIFICATIONS Certain balance sheet amounts in the 1994 financial statements have been reclassified to conform to the 1995 presentation. 2. RELATED PARTY TRANSACTIONS Pioneer-Standard Electronics, Inc. (Pioneer-Standard) owns 50% of the outstanding common stock of the Company. The companies have an agreement which provides, among other things, that they have the right to acquire each other's products at cost. Such transactions are recorded as intercompany transfers of inventory. Net transfers of inventory from Pioneer-Standard to the Company were $6,654 in 1995, $2,488 in 1994, and $2,539 in 1993. The Company utilizes Pioneer-Standard's data processing facilities for processing certain accounting and operating information. Amounts charged to operations were $1,794 in each of the years presented. 7 24 2. RELATED PARTY TRANSACTIONS (CONTINUED) The Company has various notes receivable and advances to certain shareholders, officers and employees of the Company as follows:
1995 1994 ---- ---- Subscription notes receivable from shareholders, payable in ten consecutive annual installments, with final payment due November 1999, interest at 9% per annum. $256 $283 Other receivables 195 177 ---- ---- $451 $460 ==== ====
3. LONG-TERM DEBT The Company has revolving lines of credit from three banks aggregating $50,000 which are secured by accounts receivable and inventory. The expiration date for the revolving lines of credit is October 31, 1997. Interest is payable under either short-term fixed or variable rates of interest based on LIBOR, the prime rate, money market rates or certificates of deposit rates at the Company's option. The terms of the revolving lines of credit agreements provide for the maintenance of certain financial ratios and also effectively restrict the payment of any retained earnings as dividends. 4. COMMON STOCK Under a stock purchase agreement among Pioneer-Standard and the Other Shareholders of the Company, as defined in the agreement, the Other Shareholders have the first right and option to purchase any shares offered for sale by other members of that group at book value. If the Other Shareholders do not exercise this option, the Company is obligated to purchase the shares at book value. Should the Company acquire any shares, Pioneer-Standard is required to sell a like number of shares to the Company at book value. 8 25 Pioneer Technologies Group, Inc. Notes to Financial Statements (continued) (Dollars in thousands) 4. COMMON STOCK (CONTINUED) In the event of a change in control, as defined, of Pioneer-Standard, or upon the occurrence of certain events, the Company has the right to purchase all shares of its stock owned by Pioneer-Standard at the current book value. If the Company does not exercise the right, the Other Shareholders have the right and option to purchase all the shares at the current book value. 5. PENSION PLANS The Company has a qualified defined contribution profit-sharing plan covering all full-time employees and a non-qualified defined contribution plan covering certain officers of the Company. Company contributions to the profit-sharing plan are a combination of mandatory matching of employee contributions (up to a maximum of 2% of the first 4% contributed by the employee) and an amount awarded solely at the discretion of the Company's Board of Directors. The Company's contributions to these plans totaled $635 in 1995, $567 in 1994 and $468 in 1993, of which $223 in 1995, $268 in 1994 and $219 in 1993 were discretionary. 6. BONUSES Certain executives of the Company receive bonuses ranging from 1/2% to 2% of income before income taxes. Bonuses for certain other members of management are based on agreements approved by management. Total bonus expense was $999 in 1995, $1,464 in 1994 and $1,239 in 1993. 7. COMMITMENTS AND CONTINGENCIES The Company leases warehouse, office space and equipment under noncancellable operating leases. The minimum future rental commitments (excluding renewal options) under lease agreements aggregate $2,216 in 1996, $2,052 in 1997, $1,894 in 1998, $1,917 in 1999, $570 in 2000 and $22 thereafter. The Company is liable under certain leases for increases in rental payments based on the annual increase in the consumer price index and in the lessors' operating expenses. Rental expense was $2,434 in 1995, $2,165 in 1994 and $2,296 in 1993. 9 26 Pioneer Technologies Group, Inc. Notes to Financial Statements (continued) (Dollars in thousands) 8. INCOME TAXES Effective April 1, 1993, the Company changed its method of accounting for income taxes from the deferred method to the liability method required by Statement No. 109, "Accounting for Income Taxes." The effect of adopting Statement No. 109 was not material and prior years' financial statements have not been restated. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets are as follows:
1995 1994 ------ ------ Deferred tax assets: Accounts receivable $ 559 $1,017 Inventory 953 766 Other 78 414 ------ ------ 1,590 2,197 ------ ------ Deferred tax liabilities: Prepaid assets 196 -- Tax over book depreciation 148 120 ------ ------ 344 120 ------ ------ Net deferred tax assets $1,246 $2,077 ====== ======
27 Pioneer Technologies Group, Inc. Notes to Financial Statements (continued) (Dollars in thousands) 8. INCOME TAXES (CONTINUED) Significant components of the provision for income taxes are as follows for the years ended March 31:
DEFERRED LIABILITY METHOD METHOD -------------------------- -------- 1995 1994 1993 ------ ------ ------ Current: Federal $1,864 $3,476 $3,286 State 510 869 685 ------ ------ ------ 2,374 4,345 3,971 ------ ------ ------ Deferred: Federal 628 (292) (279) State 133 (73) (66) ------ ------ ------ 761 (365) (345) ------ ------ ------ $3,135 $3,980 $3,626 ====== ====== ======
The components of the provision for deferred income taxes for the year ended March 31, 1993 is as follows:
1993 ----- Allowance for doubtful accounts $(428) Allowance for inventory obsolescence 213 Capitalized inventory costs (112) Depreciation and amortization (46) Other 28 ----- $(345) =====
11 28 Pioneer Technologies Group, Inc. Notes to Financial Statements (continued) (Dollars in thousands) 8. INCOME TAXES (CONTINUED) The difference between the provision for income taxes and the amount determined by applying the federal statutory rate follows:
DEFERRED LIABILITY METHOD METHOD --------------------------- ------ 1995 1994 1993 ------ ------ ------ Federal statutory amount $2,766 $3,394 $2,936 State taxes, net of federal benefit 425 525 409 Nondeductible entertainment 147 48 34 Other (203) 13 247 ------ ------ ------ Provision for income taxes $3,135 $3,980 $3,626 ====== ====== ======
12 29 PIONEER TECHNOLOGIES GROUP, INC. SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS Years ended March 31, 1995, 1994 and 1993
Balance at Charged to Deductions-net Balance at beginning costs and Write-offs end of period Description of period expenses (Net recoveries) ------------- - ----------- ---------- ---------- ---------------- 1995: Allowance for doubtful accounts $2,682,000 $ (838,000) $ 309,000 $1,535,000 Inventory valuation reserve $2,156,000 $1,382,000 $1,612,000 $1,926,000 1994: Allowance for doubtful accounts $2,250,000 $ 561,000 $ 129,000 $2,682,000 Inventory valuation reserve $1,463,000 $1,389,000 $ 696,000 $2,156,000 1993: Allowance for doubtful accounts $ 886,000 $1,356,000 $ (8,000) $2,250,000 Inventory valuation reserve $1,060,000 $1,154,000 $ 751,000 $1,463,000
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