-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HmHUH09LatoYu1QIumk+nA2/f426MAGqDCqN51ZSJ/P+EjgB8txFcbhlLv7zhc0V e73+KcW8jXCH6sXSjaFVhA== 0000950152-96-003257.txt : 19960701 0000950152-96-003257.hdr.sgml : 19960701 ACCESSION NUMBER: 0000950152-96-003257 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960628 SROS: NASD 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: 96588811 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, D.C. 20549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 1996 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 (I.R.S. employer of incorporation or organization) identification 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: Common Shares, without par value (Title of Class) Common Shares Purchase Rights (Title of Class) SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None Indicate by checkmark 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 requirement for the past 90 days. Yes X No --- --- Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Registration 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 From 10-K Annual Report or any amendment to this Form 10-K. [X] The aggregate market value of voting Shares of the Registrant held by non-affiliate was $310,547,415 as of June 1, 1996, computed on the basis of the last reported sale price per share ($15.00) of such shares on The Nasdaq National Market. Common Shares held by each officer, Director, and by each person who owns or may be deemed to own 10% or more of the outstanding Common Shares have been excluded since such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. As of June 3, 1996, the Registrant had the following number of Common Shares outstanding: 22,519,692 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 23, 1996 are incorporated by reference into Part III of this Form 10-K. Portions of the Registrant's Annual Report for the fiscal year ended March 31, 1996 are incorporated by reference into Parts II and IV 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, 1996. 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 July 25, 1995 paid on September 6, 1995 to shareholders of record on August 16, 1995. 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). 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. On November 30, 1995, the Company acquired 50% of the Common Stock of Pioneer/Technologies Group Inc., a Maryland corporation ("Technologies"). Prior to this acquisition, the Company held 50% of the Common Stock of Technologies. There have not been any material changes in the nature of the business done by the Company since April 1, 1995. Except as otherwise stated, the term "Company" as used herein shall mean Pioneer-Standard Electronics, Inc., Pioneer-Standard Canada Inc., and Pioneer-Standard of Maryland, Inc. (formerly Technologies). (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 companies, and service and other non- 2 3 manufacturing organizations. These products are classified into three broad categories: semiconductors, computer products, and passive and electromechanical components. During fiscal 1996, semiconductor products accounted for 38% of the Company's sales compared with 37% in 1995 and 41% in 1994. These products include microprocessors, memory devices, programmable logic devices, analog and digital integrated circuits and other semiconductor devices. During fiscal 1996, computer products accounted for 40% of the Company's sales compared with 38% in 1995 and 33% in 1994. These products include computers (primarily mini and personal), display terminals, disk drives, development systems and networking products. During fiscal 1996, passive and electromechanical products accounted for 20% of the Company's sales, compared with 22% in 1995 and 24% in 1994. 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 2% of sales in 1996, 3% of sales in 1995 and 2% of sales in 1994. PRODUCTS DISTRIBUTED AND SOURCES OF SUPPLY - The Company is the fourth largest of the approximately 1,500 electronics distributors serving North American markets in terms of combined sales (prior to the acquisition of the remaining 50% of Technologies, the sales of the Company and Technologies were combined for industry ranking purposes). 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 1996 fiscal year, products purchased from the Company's five largest suppliers accounted for 69% of total sales volume, with Digital Equipment Corporation (27%) and Intel Corporation (18%) being the largest two suppliers. The loss of any one 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 24,000 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, 1996. 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. 3 4 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 - As of March 31, 1996, the Company had 2,052 employees, with approximately 2,016 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) The Company distributes its products in the United States and Canada. Export sales are not a significant portion of the Company's sales. 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) -------- ------- -------- -------------- Austin, Texas 10,800 Leased September 1, 2003 Chicago, Illinois 11,300 Leased April 14, 1998 Cleveland, Ohio (2) 87,000 Owned Dallas, Texas 13,500 Leased October 31, 1999 Eden Prairie, Minnesota 12,800 Leased August 31, 1997 Fremont, California 12,000 Leased March 15, 1999 Gaithersburg, Maryland 112,000 Leased July 31, 1999 Horsham, Pennsylvania 12,800 Leased October 31, 2000 Irvine, California 14,700 Leased February 1, 1997 Lexington, Massachusetts 26,400 Owned Montreal, Canada 12,100 Leased February 28, 1999 San Jose, California 42,000 Leased June 30, 1999 Solon, Ohio 174,000 Leased December 31, 2005 Solon, Ohio 21,600 Leased December 20, 2000 Solon, Ohio 24,000 Leased February 28, 1999 Solon, Ohio 41,000 Leased March 31, 1998 Solon, Ohio 44,700 Leased May 31, 1999 Toronto, Canada 32,700 Leased May 31, 1997 Tustin, California 16,100 Leased December 1, 2001 Twinsburg, Ohio (3) 106,000 Owned Woodbury, New York 35,600 Leased September 30, 1997 - ---------------
4 5 (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, 1996, the Company was not a party to any material pending legal proceedings. The Company has entered into new Employment Agreements with James L. Bayman, Arthur Rhein and John V. Goodger, effective April 1, 1996. Ms. Janice M. Margheret has been requested to sign, but has not yet signed, her proposed new Employment Agreement, and the Company and Ms. Margheret are discussing the status of her continued employment with, or in the alternative her separation from, the Company. If Ms. Margheret signs her new Employment Agreement, which she has indicated she will not do, it will contain terms similar to those contained in the other Executive Officers' Employment Agreements. On June 21, 1996, Ms. Margheret, through her attorneys, advised the Company that she has claims against the Company and certain of its Officers and Directors based upon sex discrimination, retaliation for asserting claims of sex discrimination, violations of the American With Disabilities Act, breach of contract, tortious interference with advantageous business relations and defamation. Discussions with her attorneys are being conducted, and if a mutually satisfactory resolution is not arrived at, litigation may result. 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, 1996. 5 6 Executive Officers of the Company(1) - --------------------------------- The name, age and positions of each executive officer of the Company as of June 1, 1996 are as follows:
Name Age Position ---- --- -------- James L. Bayman 59 Chairman of the Board of the Company since April 1, 1996, 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. Arthur Rhein 50 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 60 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 41 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. William A. Papenbrock 57 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. Bayman, Rhein and Goodger have entered into new Employment Agreements with the 6 7 Company, all of which are included as Exhibits hereto. Messrs. Bayman, Rhein, and Goodger hold office until terminated as set forth in their new Employment Agreements. Mr. Papenbrock holds office until his successor is elected by the Board of Directors. See "Item 3. Legal Proceedings" for information with respect to Ms. Margheret and her employment status. 7 8 PART II ------- Item 5. Market for Registrant's Common Equity and Related Stockholder Matters - ------ --------------------------------------------------------------------- The Company's Common Shares, without par value, are traded on The Nasdaq National 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 set forth at page 34 of the Annual Report, which information is incorporated herein by reference. 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 set forth at page 23 of the Annual Report, which information is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and - ------ --------------------------------------------------------------- Results of Operations - --------------------- The information required by this Item is set forth at pages 19 through 22 of the Annual Report, which information is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data - ------ ------------------------------------------- The information required by this Item is set forth at pages 24 through 32 of the Annual Report, which information is incorporated herein by reference. 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 23, 1996 (the "1996 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 1996 Proxy Statement (except for the Compensation Committee Report and the Performance Graph). 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 1996 Proxy Statement. Item 13. Certain Relationships and Related Transactions - ------- ---------------------------------------------- The information required by this item is incorporated herein by reference to "Compensation of Executive Officers - Certain Transactions" in the 1996 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 Form 10-K: (1) FINANCIAL STATEMENTS AND SCHEDULES. The following financial statements of the Company and its subsidiaries and the report of independent accountants thereon, included in the Annual Report on pages 24 through 32 and page 34, are incorporated by reference in Item 8: Report of independent auditors Balance sheet as of March 31, 1996 and 1995 For the years ended March 31, 1996, 1995 and 1994: 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, 1996, 1995 and 1994: VIII - Valuation and Qualifying Accounts Quarterly Financial Data 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. (2) Exhibits -------- See the Index to Exhibits at page E-1 of this Form 10-K. (b) Reports on Form 8-K ------------------- A Current Report on Form 8-K was filed December 12, 1995 and a Form 8-K/A-1 with respect to such Current Report was filed on February 9, 1996. The Current Report was filed to report the Company's acquisition of Technologies. The amendment was filed to include the financial statement and pro forma financial information with respect to Technologies. 10 11 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 28, 1996 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/ James L. Bayman President and Chief Executive ) - ---------------------------------- Officer (Principal Executive ) James L. Bayman Officer) ) ) ) /s/ John V. Goodger Vice President, ) - ----------------------------------- Treasurer and Assistant Secretary ) John V. Goodger (Principal Financial and Accounting ) Officer) ) ) ) /s/ Preston B. Heller, Jr. Director ) - ------------------------------------ ) Preston B. Heller, Jr. ) ) /s/ Frederick A. Downey Director ) June 28, 1996 - --------------------------------- ) Frederick A. Downey ) ) /s/ Victor Gelb Director ) - ------------------------------------- ) Victor Gelb ) ) /s/ Gordon E. Heffern Director ) - ----------------------------------- ) Gordon E. Heffern ) ) /s/ Arthur Rhein Director ) - ------------------------------------ ) Arthur Rhein ) ) /s/ Edwin Z. Singer Director ) - ----------------------------------- ) Edwin Z. Singer ) ) /s/ Thomas C. Sullivan Director ) - ----------------------------------- ) Thomas C. Sullivan ) ) /s/ Karl E. Ware Director ) - ----------------------------------- ) Karl E. Ware )
11 12 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 November 30, 1995 by and among Pioneer-Standard Electronics, Inc., Pioneer-Standard of Maryland, Inc., the Banks identified on the signature pages thereto and National City Bank, as Agent, which is incorporated by reference from the Form 8-K dated December 13, 1995. N/A (b) 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 (c) 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 (d) 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 (e) Amendment No. 2 to Note Purchase Agreement dated as of November 30, 1995 by and between the Company and Teachers Insurance and Annuity Association of America. 10.(a) Retirement Agreement effective March 31, 1996 by and between the Company and Preston B. Heller, Jr. (b) Employment Agreement effective as of April 1, 1996 by and between the Company and James L. Bayman.
E-1 13 (c) Employment Agreement effective as of April 1, 1996 by and between the Company and Arthur Rhein. (d) Employment Agreement effective as of April 1, 1996 by and between the Company and John V. Goodger. (e) 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 (f) 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 (g) 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 (h) 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 (i) Amended 1995 Stock Option Plan for Outside Directors, which is incorporated by reference from the Company's Form S-8 Registration Statement dated June 28, 1996.
E-2 14 11. Statement regarding computation of per share earnings. 13.1 1996 Annual Report (with a manually executed report of independent public accountants) 21. Subsidiaries of the Registrant 23. Consents of Ernst & Young LLP, Independent Auditors. 27. Financial Data Schedule 99.(a) Certificate of Insurance Policy effective November 1, 1996 between Chubb Group of Insurance Companies and Pioneer-Standard Electronics, Inc. 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 are incorporated herein by reference from the Company's Annual Report on Form 10-K for the year ended March 31, 1994. N/A
E-3 15 REPORT OF INDEPENDENT AUDITORS We have audited the consolidated financial statements of Pioneer-Standard Electronics, Inc. as of March 31, 1996 and 1995 and for each of the three years in the period ended March 31, 1996 and have issued our report thereon dated May 1, 1996 included elsewhere in this Annual Report (Form 10-K). Our audits also included the consolidated financial statement schedule of Pioneer-Standard Electronics, Inc. as of March 31, 1996 and 1995 and for each of the three years in the period ended March 31, 1996, 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 1, 1996 16 PIONEER-STANDARD ELECTRONICS, INC. SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
Years ended March 31, 1996, 1995 and 1994 Balance at Charged Deductions - Balance beginning to costs net write-offs at end of Description of period and expenses Other (Net recoveries) period - ----------- --------- ------------ ----- ---------------- --------- 1996: Allowance for doubtful accounts $4,606,000 $ 940,000 $2,195,000(1) $ 759,000 $6,982,000 Inventory valuation reserve $3,416,000 $1,489,000 $5,534,000(1) $1,662,000 $8,777,000 1995: Allowance for doubtful accounts $2,869,000 $2,281,000 $ 544,000 $4,606,000 Inventory valuation reserve $2,540,000 $2,167,000 $1,291,000 $3,416,000 1994: Allowance for doubtful accounts $1,713,000 $1,808,000 $ 652,000 $2,869,000 Inventory valuation reserve $2,659,000 $1,995,000 $2,114,000 $2,540,000 (1) Amount for Pioneer Technologies Group, Inc., purchased November 30, 1995.
EX-4.E 2 EXHIBIT 4(E) 1 Exhibit 4(e) EXECUTION COPY AMENDMENT NO. 2 TO NOTE PURCHASE AGREEMENT This Amendment No. 2 to Note Purchase Agreement (this "Amendment") is entered into as of November 30, 1995 by PIONEER-STANDARD ELECTRONICS, INC. (the "Company") and TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA (the "Noteholder"). PRELIMINARY STATEMENT. 1. The Company and the Noteholder have entered into a Note Purchase Agreement, dated as of October 31, 1990 (the "Original Purchase Agreement"), pursuant to which, at a closing held on November 2, 1990, the Noteholder purchased $20,000,000 in aggregate principal amount of the Company's 9.79% Senior Notes due November 1, 2000 (the "Notes"), which Original Purchase Agreement has been amended by that certain Amendment No. 1 to Note Purchase Agreement, dated as of November 1, 1991 (as so amended, the "Purchase Agreement"). The Noteholder was the sole purchaser and remains the sole record and beneficial owner of the Notes. Capitalized terms used herein and not otherwise defined herein are used with the meanings assigned thereto in the Purchase Agreement. 2. The Company now owns one hundred percent (100%) of the outstanding capital stock of Pioneer-Standard Canada Inc., a corporation organized under the laws of the Province of Ontario ("Pioneer/Canada"), and one hundred percent (100%) of Pioneer-Standard of Maryland, Inc., a Maryland corporation ("Pioneer/Maryland"). As of the date of this Amendment, Pioneer/Maryland will merge with and into Pioneer/Technologies Group, Inc., a Maryland corporation ("Pioneer/Technologies") (the "Merger"), with the survivor of the Merger, Pioneer/Technologies, becoming the wholly-owned subsidiary of the Company and changing its name to Pioneer-Standard of Maryland, Inc. The Company desires that each of Pioneer/Canada, Pioneer/Maryland and Pioneer/Technologies be designated as "Restricted Subsidiaries" under the Purchase Agreement. 3. Concurrently herewith the Company and Pioneer/Technologies have entered into that certain Credit Agreement with certain lenders, including, without limitation, National City Bank, a national banking association, as agent thereunder (the "Credit Agreement"), pursuant to which the Company and Pioneer/Technologies may borrow up to $200,000,000 in the aggregate. In addition, the Company and Pioneer/Technologies may borrow up to $40,000,000 for short-term overnight borrowing needs, the Company may enter into a $10,000,000 line of credit facility for foreign exchange purchases/sales, and Pioneer/Canada may enter into a $10,000,000 line of credit facility for foreign exchange purchases/sales (collectively, the "Short-Term Facility"). NY1-1 16887.8 1 2 4. Under Sections 9.22 and 12.1 of the Purchase Agreement, a Restricted Subsidiary must be, among other things, incorporated and organized under the laws of the United States or any jurisdiction thereof, which would prohibit Pioneer/Canada from being a Restricted Subsidiary. In addition, Section 12.1 of the Purchase Agreement prohibits Pioneer/Technologies from being a Restricted Subsidiary. 5. Under Section 9.10 of the Purchase Agreement, the Company is required to maintain Consolidated Net Worth in an amount not less than the sum of (a) $32,000,000 and (b) 50% of Cumulative Consolidated Net Income. 6. Under Sections 9.13 and 9.14 of the Purchase Agreement, the sum of Secured Debt and Restricted Subsidiary Indebtedness may not exceed 15% of Consolidated Net Worth. Under the Credit Agreement, Pioneer/Technologies is permitted to borrow up to $75,000,000. 7. Under Section 9.15 of the Purchase Agreement, the ability of the Company and each Restricted Subsidiary to merge or consolidate with any other Person is subject to certain conditions set forth therein. 8. Under Section 9.16 of the Purchase Agreement, the ability of the Company and each Restricted Subsidiary to, directly or indirectly, in a single transaction or a series of transactions, sell, lease, transfer, abandon or otherwise dispose of all or any part of their property, other than in the ordinary course of its business, is subject to certain conditions set forth therein. 9. Under Section 9.19 of the Purchase Agreement, the Company and each Restricted Subsidiary is prohibited from making Restricted Payments or Restricted Investments unless certain financial and other tests are met. 10. Under Section 9.20 of the Purchase Agreement, the Company and its Restricted Subsidiaries are prohibited from, directly or indirectly, expressly or by operation of law, creating, incurring, issuing, assuming, guaranteeing or in any manner becoming liable, contingently or otherwise, in respect of any Funded Indebtedness unless, immediately thereafter, and after giving effect thereto on a PRO FORMA basis, (i) the ratio of Consolidated Funded Indebtedness to Total Capitalization is less than or equal to 0.65 to 1.00 at any time from the Closing Date through and including December 31, 1994 and (ii) the ratio of Consolidated Funded Indebtedness to Total Capitalization is less than or equal to 0.60 to 1.00 at any time subsequent to December 31, 1994. 11. Under Section 12.1 of the Purchase Agreement, the Consolidated Net Worth of the Company does not include the amount at which the Company's investment in Pioneer/Technologies would be reflected on the balance sheet of the Company. 12. On the terms and subject to the conditions set forth in this Amendment, and as an inducement to the Noteholder to consent to the Merger and certain other actions, the Company and the Noteholder desire to amend the Purchase Agreement as set forth below. NY1-1 16887.8 2 3 NOW, THEREFORE, the Company and the Noteholder agree as follows: SECTION 1. GENERAL REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to the Noteholder as follows: Section 1.1. REPRESENTATIONS AND WARRANTIES IN PURCHASE AGREEMENT. The representations and warranties with respect to the Company contained in the Purchase Agreement are true and correct in all material respects and the Noteholder shall be entitled to rely on such representations and warranties as if they were made to the Noteholder in this Amendment as of the date hereof. Section 1.2. REPRESENTATIONS AND WARRANTIES IN CREDIT AGREEMENT. The representations and warranties with respect to the Company contained in the Credit Agreement and in any document, certificate or instrument delivered pursuant to the Credit Agreement are true and correct in all material respects and the Noteholder shall be entitled to rely on such representations and warranties as if they were made to the Noteholder in this Amendment as of the date hereof. SECTION 2. AMENDMENTS TO THE PURCHASE AGREEMENT. The Purchase Agreement is hereby amended in the following respects: Section 2.1. AMENDMENT TO SECTION 9.10 OF THE PURCHASE AGREEMENT. Section 9.10 of the Purchase Agreement is hereby amended by deleting it in its entirety and substituting the following new Section 9.10 in lieu thereof: Section 9.10 MAINTENANCE OF CONSOLIDATED NET WORTH. The Company shall at all times maintain a Consolidated Net Worth in an amount not less than the sum of (a) $120,000,000, (b) 50% of Cumulative Consolidated Net Income and (c) 100% of the net proceeds to the Company of any offering of equity securities. Section 2.2. AMENDMENT TO SECTION 9.13 OF THE PURCHASE AGREEMENT. Section 9.13 of the Purchase Agreement is hereby amended by deleting it in its entirety and substituting the following new Section 9.13 in lieu thereof: Section 9.13 LIENS. (a) Neither the Company nor any Restricted Subsidiary will create, incur or suffer to exist any Lien on property which is owned by the Company or such Restricted Subsidiary, respectively, on the date hereof and which is not presently subject to any Lien or any property which is hereafter acquired by the Company or any Restricted Subsidiary, other than (i) Permitted Liens and (ii) any lien other than Permitted Liens on such property which secures Debt ("Secured Debt"), so long as (x) the sum of the principal amount of all Secured Debt outstanding and the aggregate outstanding amount NY1-116887.8 3 4 of Restricted Subsidiary Indebtedness created, incurred or suffered to exist pursuant to Section 9.14 hereof at no time exceeds One Hundred Million Dollars ($100,000,000), (y) there does not exist at the time of incurrence or creation of any such Lien any Default or Event of Default which has not been waived pursuant to Section 13.4 hereof or cured pursuant to Section 11.4 hereof and (z) the creation, incurrence and existence of such Secured Debt does not otherwise give rise to or represent a Default or Event of Default (including, but not limited to, a Default or Event of Default under Section 9.20 hereof). (b) If any property of the Company or any Restricted Subsidiary is subjected to a Lien in violation of this Section 9.13, there shall automatically arise a Lien in favor of the holders of the Notes, or, if legally necessary to satisfy the following requirements of this paragraph, the Company will make or cause to be made provision whereby, in either case, the Notes will be secured equally and ratably with all obligations secured by such Lien, and, in any case, the Notes shall have the benefit, to the full extent that, and with such priority as, the holders may be entitled under applicable law, of an equitable Lien on such property securing (in the manner as aforesaid) the Notes and such other obligations. Such violation of this Section 9.13 shall constitute an Event of Default hereunder, whether or not any such provision is made pursuant to this Section 9.13(b). Section 2.3. AMENDMENT TO SECTION 9.14 OF THE PURCHASE AGREEMENT. Section 9.14 of the Purchase Agreement is hereby amended by deleting it in its entirety and substituting the following new Section 9.14 in lieu thereof: Section 9.14 RESTRICTED SUBSIDIARY INDEBTEDNESS. The Company will not permit any Restricted Subsidiary, directly or indirectly, expressly or by operation of law, to create, incur, assume, guarantee, in any manner become liable in respect of or suffer to exist any Restricted Subsidiary Indebtedness unless the sum of the principal amount of all Restricted Subsidiary Indebtedness outstanding and the aggregate outstanding amount of Secured Debt created, incurred or suffered to exist pursuant to Section 9.13 hereof at no time exceeds One Hundred Million Dollars ($100,000,000), and the creation, incurrence and existence of such Restricted Subsidiary Indebtedness does not otherwise give rise to or represent a Default or Event of Default. The Company will not permit Pioneer/Technologies, directly or indirectly, expressly or by operation of law, to create, incur, assume, guarantee, in any manner become liable in respect of or suffer to exist any Indebtedness unless the sum of the principal amount of all Indebtedness of Pioneer/Technologies outstanding at no time exceeds Seventy-Five Million Dollars ($75,000,000). Notwithstanding anything contained in this Section 9.14 to the contrary, the Company may permit and suffer to exist (a) any Restricted Subsidiary Guaranty of the Indebtedness of the Company incurred under the Credit Agreement, the Short-Term Facility or hereunder, (b) Indebtedness of any Restricted Subsidiary NY1-116887.8 4 5 incurred under the Short-Term Facility and (c) Indebtedness incurred by Pioneer/Technologies under the Credit Agreement. Section 2.4. AMENDMENT TO SECTION 9.15 OF THE PURCHASE AGREEMENT. Section 9.15 of the Purchase Agreement is hereby amended by deleting it in its entirety and substituting the following new Section 9.15 in lieu thereof: Section 9.15 MERGER; SALE OF ASSETS. Other than the Merger, none of the Company or any Restricted Subsidiary will enter into any merger, consolidation, reorganization or liquidation or transfer or otherwise dispose of all or a Substantial Portion of its property or business, unless approved in advance by the holders of at least 66-2/3% in aggregate unpaid principal amount of the Notes then Outstanding. Section 2.5. AMENDMENT TO SECTION 9.16 OF THE PURCHASE AGREEMENT. Section 9.16 of the Purchase Agreement is hereby amended by deleting it in its entirety and substituting the following new Section 9.16 in lieu thereof: Section 9.16 THIS SECTION INTENTIONALLY OMITTED. Section 2.6. AMENDMENT TO SECTION 9.20 OF THE PURCHASE AGREEMENT. Section 9.20 of the Purchase Agreement is hereby amended by deleting it in its entirety and substituting the following new Section 9.20 in lieu thereof: Section 9.20 LIMITATIONS ON CONSOLIDATED FUNDED INDEBTEDNESS. The Company will not permit the ratio of Consolidated Funded Indebtedness to Total Capitalization of the Company and its Restricted Subsidiaries to be greater than (i) 0.65 to 1.00 at any time from the Closing Date through and including December 31, 1994, (ii) 0.60 to 1.00 at any time subsequent to December 31, 1994 through and including March 30,1997, (iii) 0.575 to 1.00 at any time subsequent to March 30,1997 through and including March 30, 1998 and (iv) 0.55 to 1.00 at any time subsequent to March 30, 1998. Section 2.7. ADDITION OF SECTION 9.23 TO THE PURCHASE AGREEMENT. The following new Section 9.23 shall be added to the Purchase Agreement: Section 9.23 DELIVERY OF SUBSIDIARY GUARANTEES. Within 10 days after the Company forms or acquires any Subsidiary, other than Pioneer/Canada or Pioneer/Technologies, the Company shall cause such additional Subsidiary to execute and deliver to each of the Noteholders a guarantee agreement (together with such other documents as the Noteholders shall reasonably request), in form and substance satisfactory to the Noteholders, whereby such additional Subsidiary agrees that it shall be jointly and severally liable for the obligations of the Company under the Purchase Agreement; PROVIDED, HOWEVER, that the obligation to execute and deliver a guarantee agreement shall not apply in the case of any particular additional Subsidiary unless and until such Subsidiary NY1-116887.8 5 6 has received funding from the Company and/or Pioneer/Technologies in excess of $100,000 or the aggregate funding from the Company and/or Pioneer/Technologies to all Subsidiaries (other than Pioneer/Technologies and Pioneer/Canada) exceeds $500,000. Section 2.8. ADDITION OF SECTION 9.24 TO THE PURCHASE AGREEMENT. The following new Section 9.24 shall be added to the Purchase Agreement: Section 9.24 INVESTMENT AND LOAN LIMIT. None of the Company or any Restricted Subsidiary (other than Pioneer/Canada), together or individually, directly or indirectly, in any instance or in the aggregate over time may: (a) invest in any manner more than $10,800,000 in Pioneer/Canada or (b) loan more than an aggregate principal amount of $25,000,000 to Pioneer/Canada. Section 2.9. AMENDMENT TO SECTION 11.1 OF THE PURCHASE AGREEMENT. Section 11.1 of the Purchase Agreement is hereby amended by deleting paragraph (c) thereof in its entirety and substituting the following new paragraph (c) in lieu thereof: (c) the Company shall default in the due and punctual performance of or compliance with any covenant, condition or agreement to be performed or observed by it under Section 9.3(b) or Sections 9.10 through 9.20 hereof; the Company shall use the proceeds of sale of the Notes other than as described in Section 1.3 hereof; or the Company, pursuant to the provisions of the Credit Agreement, shall be required to pay to or deposit with the Agent or any Lender under the Credit Agreement an amount equal to the face amount of the Interim Letter of Credit; or Section 2.10. AMENDMENT TO SECTION 12.1 OF THE PURCHASE AGREEMENT. Section 12.1 of the Purchase Agreement is hereby amended by deleting the definition of "Consolidated Net Worth" in its entirety and substituting the following new definition in lieu thereof: The term "Consolidated Net Worth" shall mean, as of the date of determination thereof, the sum of the amount of common stock, the aggregate liquidation preference of any preferred stock, capital surplus and retained earnings accounts, less treasury stock, which would appear on a consolidated balance sheet of the Company and its Restricted Subsidiaries as of the date of determination in accordance with generally accepted accounting principles, less all Minority Interests. Section 2.11. AMENDMENT TO SECTION 12.1 OF THE PURCHASE AGREEMENT. Section 12.1 of the Purchase Agreement is hereby amended by deleting the definition of "Cumulative Consolidated Net Income" in its entirely and substituting the following new definition in lieu thereof: The term "Cumulative Consolidated Net Income" shall mean, as of the date of determination thereof, an amount equal to the sum of the Consolidated Net Income for (i) each complete Fiscal Year for which financial statements have been delivered or are required to have been delivered pursuant to NY1-116887.8 6 7 Section 10.1(a) hereof and which commenced after September 30, 1995 and ended prior to such date of determination (treating each such complete Fiscal Year as a separate accounting period for such purpose) and (ii) each complete Fiscal Quarter for which financial statements have been delivered or are required to have been delivered pursuant to Section 10.1(b) hereof and which commenced after the end of the last such complete Fiscal Year and ended prior to such date of determination (treating each such complete Fiscal Quarter as a separate accounting period for such purpose), but without subtraction of the amount of any Consolidated Net Loss for any such Fiscal Year or Fiscal Quarter. Section 2.12. AMENDMENT TO SECTION 12.1 OF THE PURCHASE AGREEMENT. Section 12.1 of the Purchase Agreement is hereby amended by deleting the definition of "Current Liabilities" in its entirely and substituting the following new definition in lieu thereof: The term "Current Liabilities" of any Person, at any date of determination, shall mean all amounts which, in accordance with generally accepted accounting principles, would be included as current liabilities on a balance sheet of such Person at such date, but shall under any circumstances include all Indebtedness payable on demand or maturing within one year after such date without any option on the part of the obligor to extend or renew beyond such year; provided, however, notwithstanding the foregoing, in no event shall Current Liabilities include the outstanding principal amount of loans made pursuant to the Credit Agreement (excluding the Short-Term Facility) unless and until the earlier to occur of (a) the Facility Termination Date and (b) a default pursuant to the terms of the Credit Agreement. Section 2.13. AMENDMENT TO SECTION 12.1 OF THE PURCHASE AGREEMENT. Section 12.1 of the Purchase Agreement is hereby amended by deleting the definition of "Funded Indebtedness" in its entirety and substituting the following new definition in lieu thereof: The term "Funded Indebtedness" of any Person, shall mean, as of the date of any determination thereof, all Indebtedness of such Person having a final maturity of one or more than one year from the date of creation thereof (other than that portion of the principal of such Funded Indebtedness due within one year from such date of determination, but including, however, any Indebtedness of such Person having a final maturity, duration or payment date within one year from such date which, pursuant to the terms of a revolving credit or similar agreement or otherwise may be renewed or extended at the option of such Person for more than one year from such date, whether or not theretofore renewed or extended); provided, however, that Funded Indebtedness shall include all Indebtedness incurred pursuant to the Credit Agreement (including, without limitation, any letters of credit referred to therein). NY1-116887.8 7 8 Section 2.14. AMENDMENT TO SECTION 12.1 OF THE PURCHASE AGREEMENT. Section 12.1 of the Purchase Agreement is hereby amended by deleting the definition of "Indebtedness" in its entirety and substituting the following new definition in lieu thereof: The term "Indebtedness", with respect to any Person, shall mean and include the aggregate amount of, without duplication: (a) all obligations of such Person for borrowed money; (b) all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments; (c) all Capitalized Lease Obligations of such Person; (d) all obligations or liabilities of others secured by a Lien on any Asset owned by such Person, irrespective or whether such obligation or liability is assumed, to the extent of the lesser of such obligation or liability or the fair market value of such Asset; (e) all obligations of such Person to pay the deferred purchase price of Assets or services, exclusive of trade and other payable which, by their terms, are due and payable within ninety (90) calendar days of the creation thereof and are not overdue or are being properly and expeditiously contested in good faith by appropriate proceedings, so long as appropriate reserves have been established and the use by such Person of any Assets involved has not been materially interfered with; (f) any liability (whether contingent or not) in respect of unfunded vested accrued benefits under any Pension Plan which is subject to Title IV of ERISA; (g) all liabilities of such Person in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other Financial institutions (whether or not representing obligations for borrowed money); and (h) any Guaranty of Indebtedness described in any of clauses (a) through (g) above, including reimbursement obligations in respect of letters of credit; provided, however, that Indebtedness shall not include any Guaranty (i) by the Company of Indebtedness of a Restricted Subsidiary or (ii) by a Restricted Subsidiary of Indebtedness of another Restricted Subsidiary; and provided, further, that, for purposes of any determination of Consolidated Funded Indebtedness and Section 9.20 hereof, no Guaranty shall be treated as Indebtedness if the obligation guaranteed thereby is Indebtedness; and, provided, further, that Indebtedness shall not include any Guaranty by the Company or a Restricted Subsidiary of the Indebtedness of another Person if (i) treating such Guaranty as Indebtedness would result in a violation of Section 9.20 hereof at the time the Company or such Restricted Subsidiary becomes liable therefor, (ii) the Company elects (and evidences such election by prompt written notice thereof to each holder of a Note) to treat such Guaranty as a Restricted Investment and (iii) treated as a Restricted Investment, the incurrence of such Guaranty can be effected in compliance with Section 9.19 hereof. Section 2.15. AMENDMENT TO SECTION 12.1 OF THE PURCHASE AGREEMENT. Section 12.1 of the Purchase Agreement is hereby amended by deleting the definition of "Restricted Investment" in its entirety and substituting the following new definition in lieu thereof: NY1-116887.8 8 9 The term "Restricted Investment" shall mean any Investment (other than an Investment in, to or in favor of any Person which is, or after the making of which, will be, a Restricted Subsidiary) paid for with cash or other property (other than equity securities of the Company) other than: (a) any certificate of deposit with a final maturity of one year or less issued by any bank or trust company having capital and surplus at the end of its most recently ended fiscal year in excess of $100,000,000; (b) commercial paper of any corporation incorporated in the United States of America maturing not more than 270 days from the date of issuance thereof and rated "A-1" or better by Standard & Poor's Ratings Services ("S&P") or "P-1" or better by Moody's Investors Service, Inc. ("Moody's"); provided, however, that any such commercial paper that is rated by both such rating agencies shall be rated "A-1" or better by S&P and "P-1" or better by Moody's; (c) any direct obligation of the United States of America or obligation of any instrumentality or agency thereof the payment of the principal of and interest on which is unconditionally guaranteed by the United States of America; PROVIDED, HOWEVER, that any such obligation shall have a final maturity date not more than two years after the acquisition thereof; (d) the Investment by the Company or any Restricted Subsidiary of the Company in Pioneer/Technologies; (e) any Indebtedness or other security of the Company or a Restricted Subsidiary which is purchased, repurchased, redeemed, prepaid or acquired or reacquired in any other manner by the Company or a Restricted Subsidiary, so long as such Indebtedness or other security is retired or cancelled promptly after its acquisition by the Company or such Restricted Subsidiary; and (f) any Investment by the Company or a Restricted Subsidiary the making of which constitutes a Restricted Payment. Section 2.16. AMENDMENT TO SECTION 12.1 OF THE PURCHASE AGREEMENT. Section 12.1 of the Purchase Agreement is hereby amended by deleting the definition of "Restricted Subsidiary" in its entirety and substituting the following new definition in lieu thereof: NY1-116887.8 9 10 The term "Restricted Subsidiary" shall mean (i) any Subsidiary of the Company hereafter designated by action of the Board of Directors of the Company as a Restricted Subsidiary pursuant to Section 9.22 hereof and (ii) any Subsidiary of the Company which executes and delivers to each of the Noteholders a guaranty agreement pursuant to Section 9.23 hereof; provided, however, that no corporation may be designated a Restricted Subsidiary unless: (a) such corporation is organized under the laws of the United States, Canada or any jurisdiction of the foregoing; (b) such corporation conducts substantially all of its business and owns substantially all of its property within the United States or Canada; (c) a majority of the shares of each class of the capital stock of such Subsidiary is owned by the Company directly or indirectly through another Restricted Subsidiary; (d) such corporation has not previously been designated as a Restricted Subsidiary hereunder and had such designation rescinded; and (e) the requirements of Section 9.22(a) have been complied with or are complied with concurrently with such designation; provided, further, that the designation of a Restricted Subsidiary may be rescinded by action of the Board of Directors of the Company pursuant to Section 9.22(c) hereof. Section 2.17. AMENDMENT TO SECTION 12.1 OF THE PURCHASE AGREEMENT. The following definitions are added to Section 12.1 of the Purchase Agreement, to be inserted therein in the appropriate alphabetical order: The term "Agent" shall have the meaning set forth in Article I of the Credit Agreement. The term "Credit Agreement" shall mean that certain Credit Agreement among the Company, Pioneer/Technologies and certain lenders, including, without limitation, National City Bank, a national banking association, as agent thereunder, pursuant to which the Company and Pioneer/Technologies may borrow up to $200,000,000 in the aggregate. The term "Facility Termination Date" shall have the meaning set forth in Article I of the Credit Agreement. NY1-116887.8 10 11 The term "Interim Letter of Credit" shall have the meaning set forth in Article I of the Credit Agreement. The term "Lender" shall have the meaning set forth in Article I of the Credit Agreement. The term "Merger" shall mean the merger whereby Pioneer/Maryland will acquire Pioneer/Technologies via a reverse cash-out merger with Pioneer/Technologies being the survivor and immediately changing its name to Pioneer-Standard of Maryland, Inc. The term "Merger Agreement" shall mean that certain Plan and Agreement of Merger among the Company, Pioneer/Maryland, Pioneer/Technologies, the shareholders identified on the signature pages thereof and Bruce S. Tucker, as shareholder representative, pursuant to which the Merger will occur. The term "Pioneer/Canada" shall mean Pioneer-Standard Canada Inc., a corporation organized under the laws of the Province of Ontario. The term "Pioneer/Maryland" shall mean Pioneer-Standard of Maryland, Inc., a Maryland corporation. The term "Restricted Subsidiary Guaranty" shall mean any Guaranty by a Restricted Subsidiary of the Indebtedness of (a) the Company or (b) another Restricted Subsidiary. The term "Substantial Portion" shall have the meaning set forth in Article I of the Credit Agreement. The terms "Maryland Guarantee" and "Canada Guarantee" shall mean the guaranty agreements executed and delivered by Pioneer-Standard of Maryland, Inc., as successor in interest to Pioneer/Technologies, and Pioneer/Canada, respectively, in each case in favor of the Noteholders. SECTION 3. CONDITIONS TO EFFECTIVENESS OF THIS AMENDMENT. This Amendment shall not be effective unless and until the following conditions shall have been satisfied or waived: Section 3.1 OPINIONS OF COUNSEL FOR THE COMPANY. The Noteholder and its special counsel shall have received from each of (a) Calfee, Halter & Griswold, Cleveland, Ohio, special United States counsel for the Company and (b) Blake, Cassels & Graydon, special Canada counsel for the Company, an opinion, dated the date hereof, in form and substance satisfactory to the Noteholder and its special counsel, collectively relating to the Merger, the due authorization, execution and delivery by the Company, Pioneer/Technologies and Pioneer/Canada of this Amendment, the Maryland Guarantee and the Canada Guarantee, NY1-116887.8 11 12 respectively, and the enforceability against the Company, Pioneer/Technologies and Pioneer/Canada of this Amendment, the Maryland Guarantee and the Canada Guarantee, respectively, in accordance with their respective terms. Section 3.2. CREDIT AGREEMENT. The Credit Agreement and all other documents, certificates or instruments delivered pursuant thereto shall have been reduced to writing and furnished to the Noteholder and its special counsel, and the Credit Agreement and such other documents, certificates and instruments shall be in form and substance satisfactory to the Noteholder and its special counsel. The Noteholder shall have received an Officer's Certificate of the Company certifying that attached thereto are true, correct and complete copies of a fully executed Credit Agreement and such other documents, certificates and instruments, that such documents are the only agreements between such parties relating to the transactions contemplated by the Credit Agreement, that each such document is in full force and effect without any term or condition thereof having been amended, modified or waived, that there is no default thereunder and that each of the conditions set forth in Section 3.1 of the Credit Agreement have been satisfied (without any thereof having been waived). Section 3.3. MERGER AGREEMENT. The Merger Agreement and all other documents, certificates or instruments delivered pursuant thereto shall have been reduced to writing and furnished to the Noteholder and its special counsel, and the Merger Agreement and such other documents, certificates and instruments shall be in form and substance satisfactory to the Noteholder and its special counsel. The Noteholder shall have received an Officer's Certificate of the Company certifying that attached thereto are true, correct and complete copies of the fully executed Merger Agreement and such other documents, certificates and instruments, that such documents are the only agreements between such parties relating to the transactions contemplated by the Merger Agreement or the business or assets of the Company, that each such document is in full force and effect without any term or condition thereof having been amended, modified or waived, that there is no default thereunder and that all conditions precedent to the effectiveness of the Merger set forth in the Merger Agreement shall have been satisfied (without any thereof having been waived). The Merger shall have been consummated and the Company shall own 100% of the stock of Pioneer/Technologies. Section 3.4 THE GUARANTEES. The Maryland Guarantee and the Canada Guarantee each shall have been duly executed and delivered and shall constitute the legal, valid and binding obligations of the obligor thereunder, enforceable in accordance with its terms. SECTION 4. MISCELLANEOUS. Section 4.1. CROSS-REFERENCES. References in this Amendment to any Section (or "Section") are, unless otherwise specified, to such Section (or "Section ") of this Amendment. Section 4.2. INSTRUMENT PURSUANT TO PURCHASE AGREEMENT. This Amendment is executed pursuant to Section 13.4 of the Purchase Agreement and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with all of the terms and provisions of the Purchase Agreement. Except as expressly amended hereby, all of the NY1-116887.8 12 13 representations, warranties, terms, covenants and conditions of the Purchase Agreement and the Notes shall remain unamended and unwaived. The amendments set forth herein shall be limited precisely as provided for herein to the provisions expressly amended herein and shall not be deemed to be a waiver of, amendment of, consent to or modification of any other term or provision of the Purchase Agreement or the Notes or of any term or provision of any other document or of any transaction or further action on the part of the Company which would require the consent of any Noteholder under the Purchase Agreement. Section 4.3. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Section 4.4. COUNTERPARTS. This Amendment may be executed simultaneously in two or more counterparts, each of which shall be deemed to be an original but all of which shall constitute together but one and the same instrument. Section 4.5. GOVERNING LAW. This Amendment shall be governed by and construed in accordance with the law of the State of New York. NY1-116887.8 13 14 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers duly authorized thereunto as of the date and year first above written. PIONEER-STANDARD ELECTRONICS, INC. By: /s/ John V. Goodger ------------------------------ Name: John V. Goodger Title: VICE PRESIDENT, TREASURER TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA By: /s/ Lauren S. Archibald ------------------------------- Name: Lauren S. Archibald Title: Managing Director - Private Placements NY1-116887.7 14 EX-10.A 3 EXHIBIT 10(A) 1 Exhibit 10(a) RETIREMENT AGREEMENT This Agreement is entered into between Pioneer-Standard Electronics, Inc., an Ohio corporation (the "Company"), and Preston B. Heller, Jr. ("Heller"), on February 28, 1996, to be effective immediately. WITNESSETH: WHEREAS: The Company and Heller have given serious consideration over the past twelve (12) months to a succession program for the offices of Chief Executive Officer and Chairman of the Board; and WHEREAS: The Company and Heller entered into an Amended and Restated Employment Agreement, dated June 12, 1995, to be effective April 3, 1995, pursuant to which Heller was employed by the Company and agreed to serve as Chairman of the Board of Directors; and WHEREAS: The Company and Heller have agreed to continue the process of management succession and Heller has confirmed his agreement to retire from the Company and cease all activities on behalf of the Company in its day-to-day business operations; and WHEREAS: This Agreement is deemed necessary to memorialize the understandings between the Company and Heller with respect to certain mutual obligations agreed upon during the course of discussions between Heller and the Compensation Committee of the Board of Directors; NOW THEREFORE, it is hereby agreed by and between the Company and Heller as follows: 1. EMPLOYMENT Heller hereby terminates his employment with the Company as an employee of the Company in any capacity, and he hereby also resigns as Chairman of the Board of Directors and as a member of the Executive Committee of the Board of Directors effective 9:00 a.m., March 31, 1996. The Company and Heller further agree that the Amended and Restated Employment Agreement, dated June 12, 1995, to be effective April 3, 1995, hereby is terminated in its entirety and shall be of no further force and effect. 2. OFFICE Heller agrees that he shall vacate his office at the Company's headquarters at 4800 East 131st Street, Garfield Heights, Ohio, no later than April 30, 1996, so as to provide Heller with ample time to arrange for a personal office and secretarial services etc. at another location, which shall be at Heller's sole expense. 2 3. FINANCIAL COMMUNITY Heller agrees that subsequent to the date hereof he shall not, without the express approval and permission of the Chief Executive Officer of the Company, contact or otherwise discuss with financial analysts or other members of the financial community any business affairs of the Company during the period of time while he is receiving monthly payments under this Agreement or while he is a member of the Board of Directors of the Company. In addition, during the same time period, Heller shall not discuss, either on a solicited or unsolicited basis, with any vendor, customer, competitor, existing or former employee or other third party, any matters which directly or indirectly relate to a possible "sale", merger, or other disposition of the Company. Finally, during the same time period, and with recognition of his responsibilities as a director in possession of confidential business information, Heller shall not discuss any such information with any third party, including specifically former employees of Pioneer/Technologies Group, Inc. 4. SEVERANCE AND MEDICAL In recognition of Heller's outstanding past services to the Company, but subject to compliance by Heller with his continuing obligations under this Agreement, Heller shall receive a severance payment totalling $1,200,000 to be paid in twenty four (24) equal monthly installments commencing April 30, 1996 and terminating March 31, 1998, all subject to normal federal, state, and local withholding for income, payroll, or other taxes. In addition, Heller will continue to participate and be entitled to the benefits of the Company's medical plan during such twenty four (24) month period and subsequent thereto shall be entitled to purchase whatever COBRA benefits are provided by law, and Heller shall also be entitled to acquire his split dollar insurance policies for an amount equal to the cash surrender value thereof. Heller shall not participate in any other employee benefit plans of the Company, except to the extent of his vested benefits thereunder or otherwise as provided by law. 5. OUTSIDE DIRECTORS STOCK OPTION PLAN In recognition of the fact that Heller shall no longer be an employee of the Company, it is acknowledged that Heller shall be entitled to participate in the 1995 Stock Option Plan for Outside Directors. However, Heller has voluntarily agreed to waive receipt of any directors fees paid to other non-employee members of the Board of Directors during the two (2) year period referred in Section 4 above. 6. PRESS RELEASE The Company and Heller hereby agree to issue the press release which they have approved in the form attached hereto as Exhibit A. 2 3 7. COMPETITION Heller shall not, during the two (2) years commencing March 1, 1996, engage in Competition with the Company as hereinafter defined. The word "Competition" for purposes of this Section 7 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 then most current issue 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 7. 8. CONFIDENTIAL INFORMATION ------------------------ 8.01 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 after the date hereof hold in strictest confidence any and all confidential information within his knowledge and which is material to the business of the Company (whether acquired during or after 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 as a director of the Company, divulge confidential information to the directors and officers of the Company and to the accountants and attorneys of the Company as deemed prudent to carry out his responsibilities and duties as a director of the Company. 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. 8.02 Heller also agrees that after the date hereof and upon leaving the Company's offices he will not take with him, without the prior written consent of the Chief Executive Officer 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 or its subsidiaries, which is of a confidential nature and has not been provided to all other directors of the Company in the ordinary course. 9. NONINTERFERENCE --------------- Heller shall not, at any time during or within two (2) years after March 1, 1996, without the prior written consent of the Company, directly or indirectly, 3 4 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. 10. REMEDY Heller acknowledges that Sections 7, 8, and 9 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 7 and 9, shall be tolled during any period which Heller shall be adjudged to have been in violation of any of his obligations under such Sections. 11. 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 12. GENERAL PROVISIONS 12.01 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 4 5 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 in writing by Heller to receive any such amount or, if no beneficiary has been so designated, the legal representative of Heller's estate. 12.02 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. 12.03 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. 12.04 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. 12.05 This Agreement shall be binding upon and shall inure to the benefit of (a) Heller and, subject to the provisions of paragraphs 12.01 and 12.02, his heirs and legal representatives, and (b) the Company and its successors as provided in Section 15 hereof. 13. 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. 5 6 14. 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. 15. 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. 16. OPERATION OF AGREEMENT This Agreement shall be effective February 28, 1996, and shall supersede the Amended and Restated Employment Agreement, dated June 12, 1995, effective April 3, 1995, between Heller and the Company. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. ATTEST: PIONEER-STANDARD ELECTRONICS, INC. By /S/ JAMES L. BAYMAN - ------------------------ ------------------------------- James L. Bayman, Chief Executive Officer and President ATTEST: /S/ PRESTON B. HELLER, JR. - ------------------------- ----------------------------- Preston B. Heller, Jr. 6 EX-10.B 4 EXHIBIT 10(B) 1 Exhibit 10(b) EMPLOYMENT AGREEMENT BETWEEN PIONEER-STANDARD ELECTRONICS, INC. AND JAMES L. BAYMAN May 7, 1996 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....................................................... 8 9. Confidential Information.......................................... 8 10. Noninterference .................................................. 9 11. Remedy ........................................................... 9 12. Withholding....................................................... 9 13. Notices........................................................... 10 14. General Provisions................................................ 10 15. Amendment or Modification; Waiver................................. 11 16. Severability...................................................... 11 17. Successors to the Company......................................... 11 18. Operation of Agreement............................................ 12 19. Enforcement Costs................................................. 12
3 EMPLOYMENT AGREEMENT -------------------- EMPLOYMENT AGREEMENT between PIONEER-STANDARD ELECTRONICS, INC., an Ohio corporation (the "Company"), and JAMES L. BAYMAN ("Bayman"), dated May 7, 1996, effective April 1, 1996. 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 for a one-year period from the effective date hereof and thereafter subject to (i) termination of this Agreement by the Company effective as of any anniversary of the effective date hereof or (ii) until the earlier termination of employment as set forth in Section 7 (relating to Termination). 3. POSITION, DUTIES, RESPONSIBILITIES ---------------------------------- 3.01. 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 and the strategic direction of the Company's operations. He shall at all times during such period have the authority, power and duties 4 of the person charged with the general management of the business and affairs of the areas assigned to him with authority to manage and 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. 3.02. It is further contemplated that at all times during the Period of Employment Bayman shall serve and continue to serve 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, which may choose to either accept or reject such resignation. 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 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, 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 $25,000 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 8/10 of 1% of the sum of the "actual operating income" of the Company, multiplied by the ratio of the Company's "actual return on capital" to 20.4%, (the "Bonus Plan") or such successor -2- 5 bonus plan as may be adopted by the Company, provided that the Bonus Plan formula shall not be changed without Bayman's written consent. The term "actual operating income" shall be defined as the income before income tax (state and federal income tax) and interest expense. 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 (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). All amounts used to calculate the cash incentive bonus shall reflect the operations of the Company and its consolidated subsidiaries and shall be calculated in conformity with generally accepted accounting principles. The Company shall calculate the bonus for each fiscal year on a quarterly basis and shall pay Bayman the bonus amount based on such quarterly calculation 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 calculation of the bonus for the fiscal year 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. 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 -3- 6 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 him under the 1982 Incentive Stock Option Plan and the 1991 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 4.01(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 -4- 7 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. The termination of this Agreement by the Company pursuant to Section 2(i) hereof shall be deemed to be a termination of employment Without Cause as set forth in Section 7.04 hereof. 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 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 -5- 8 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 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 -6- 9 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, (i) 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 (ii) the amount (the "Payment Amount") per month equal to 1/24th of (A) the total of his previous twenty-four (24) months of base salary PLUS (B) 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 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 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 -7- 10 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 information is not intended by the Company for public dissemination. -8- 11 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 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 -9- 12 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 of 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 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. -10- 13 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 the Compensation Committee 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 thereafter be deemed "the Company" for the purposes of this Agreement), but shall not otherwise be assignable by the Company. -11- 14 18. OPERATION OF AGREEMENT ---------------------- 18.01. This Agreement is effective April 1, 1996, and shall supersede any prior employment agreement, including the Amended and Restated Employment Agreement dated June 12, 1995, which was effective April 3, 1995, between Bayman and the Company, which shall be deemed to be terminated and null and void except for any vested rights to receive compensation under Section 4.01(a)(ii) thereof. 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 -12- 15 the obligations under this Agreement, the benefits intended to be 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. By /S/ VIC GELB - ------------------------------- --------------------------------- Vic Gelb Chairman of the Compensation Committee ATTEST: /S/ JAMES L. BAYMAN - ------------------------------- --------------------------------- James L. Bayman -13- EX-10.C 5 EXHIBIT 10(C) 1 Exhibit 10(c) EMPLOYMENT AGREEMENT BETWEEN PIONEER-STANDARD ELECTRONICS, INC. AND ARTHUR RHEIN May 7, 1996 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 ............................................... 9 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 EMPLOYMENT AGREEMENT -------------------- EMPLOYMENT AGREEMENT between PIONEER-STANDARD ELECTRONICS, INC., an Ohio corporation (the "Company"), and ARTHUR RHEIN ("Rhein"), dated May 7, 1996, effective April 1, 1996. 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 for a one-year period from the effective date hereof and thereafter on a year-to-year basis subject to (i) termination of this Agreement by the Company effective as of any anniversary of the effective date hereof or (ii) until the earlier termination of employment as set forth in Section 7 (relating to Termination). 3. POSITION, DUTIES, RESPONSIBILITIES ---------------------------------- 3.01. During the Period of Employment, Rhein shall serve as Senior Vice President of the Company reporting to the 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 Chief Executive Officer or the Board of Directors of the Company. 3.02. It is further contemplated that at all times during the Period of Employment Rhein shall serve and continue to serve as a member of its Board of Directors. In the event that Rhein's 4 employment is terminated for any reason as provided in paragraph 7 below, Rhein agrees that he shall immediately submit his written resignation as a member of the Board of Directors of the Company, which may choose to either accept or reject such resignation. 3.03. 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 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. 3.04. Rhein's office shall be located at the corporate offices of the Company, 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 $19,166 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, multiplied by the ratio of the Company's "actual return on capital" to 20.4%, (the "Bonus Plan") or such successor bonus plan as may be adopted by the Company, provided that the Bonus Plan formula shall not be changed without Rhein's written consent. The term "actual operating income" shall be defined as the income before income tax (state and federal income tax) and interest expense. 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 (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 -2- 5 quarters). All amounts used to calculate the cash incentive bonus shall reflect the operations of the Company and its consolidated subsidiaries and shall be calculated in conformity with generally accepted accounting principles. The Company shall calculate the bonus for each fiscal year on a quarterly basis and at the end of each of the first three (3) fiscal quarters shall pay Rhein the bonus amount based on such quarterly calculation. 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 calculation of the bonus for the fiscal year 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 -3- 6 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. 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 him under the 1982 Incentive Stock Option Plan and the 1991 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. -4- 7 (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 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. The termination of this Agreement by the Company pursuant to Section 2(i) hereof shall be deemed to be a termination of employment Without Cause as set forth in Section 7.04 hereof. 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 -5- 8 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 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 -6- 9 (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 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, (i) 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 (ii) the amount (the "Payment Amount") per month equal to 1/24th of the total of (A) his previous twenty-four (24) months of base salary PLUS (B) 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 -7- 10 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 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. -8- 11 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, 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 of 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 the Compensation Committee 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 is effective April 1, 1996, and shall supersede any prior employment agreement, including the Amended and Restated Employment Agreement dated June 12, 1995, which was effective April 3, 1995, between Rhein and the Company, which shall be deemed to be terminated and null and void except for any vested rights to receive compensation under Section 4.01(a)(ii) thereof. 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 -11- 14 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 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 -12- 15 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 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. By /S/ JAMES L. BAYMAN - ---------------------------------- ----------------------------------- James L. Bayman, Chief Executive Officer and President ATTEST: /S/ ARTHUR RHEIN - ---------------------------------- ----------------------------------- Arthur Rhein -13- EX-10.D 6 EXHIBIT 10(D) 1 Exhibit 10(d) EMPLOYMENT AGREEMENT BETWEEN PIONEER-STANDARD ELECTRONICS, INC. AND JOHN V. GOODGER May 7, 1996 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 EMPLOYMENT AGREEMENT -------------------- EMPLOYMENT AGREEMENT between PIONEER-STANDARD ELECTRONICS, INC., an Ohio corporation (the "Company"), and JOHN V. GOODGER ("Goodger"), dated May 7, 1996, effective April 1, 1996. 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 for a one-year period from the effective date hereof and thereafter on a year-to-year basis subject to (i) termination of this Agreement by the Company effective as of any anniversary of the effective date hereof or (ii) until the earlier termination of employment as set forth in Section 7 (relating to Termination). 3. POSITION, DUTIES, RESPONSIBILITIES ---------------------------------- 3.01. During the Period of Employment, Goodger shall serve as Vice President, Treasurer and Assistant Secretary of the Company reporting to the 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 Chief Executive Officer or the Board of Directors of the Company. 3.02. Throughout the Period of Employment Goodger shall devote his full time and undivided attention during normal business 4 hours to the business and affairs of the Company, except for reasonable vacations afforded the Company's executive officers 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, 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 $12,500 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, multiplied by the ratio of the Company's "actual return on capital" to 20.4%, (the "Bonus Plan") or such successor bonus plan as may be adopted by the Company, provided that the Bonus Plan formula shall not be changed without Goodger's written consent. The term "actual operating income" shall be defined as the income before income tax (state and federal income tax) and interest expense. 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 (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). All amounts used to calculate the cash incentive bonus shall reflect the operations of the Company and its consolidated subsidiaries and shall be calculated in conformity with generally accepted accounting principles. The Company shall calculate the bonus for each fiscal year on a quarterly basis and at the end of each of the first three (3) fiscal quarters shall pay Goodger the bonus amount based on such quarterly calculation. After April 1 and before June 16 of the next fiscal year, and after audited financial statements are available to the Company, the Company -2- 5 shall pay Goodger the balance of any bonus due Goodger based on the calculation of the bonus for the fiscal year 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 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 -3- 6 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 and the 1991 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, 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 -4- 7 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. The termination of this Agreement by the Company pursuant to Section 2(i) hereof shall be deemed to be a termination of employment Without Cause as set forth in Section 7.04 hereof. 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 discontinued or the benefits thereunder are materially reduced, the -5- 8 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 Section 10 of this Agreement (relating to Noninterference), if the -6- 9 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, (i) 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 (ii) the amount (the "Payment Amount") per month equal to 1/24th of (A) the total of his previous twenty-four (24) months of base salary PLUS (B) 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 of the Company's top twenty-five (25) competitors as listed in the -7- 10 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 of 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 the Compensation Committee 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 1, 1996, and shall supersede any prior employment agreement, including the Amended and Restated Employment Agreement dated June 12, 1995, which was effective April 3, 1995, between Goodger and the Company, which shall be deemed to be terminated and null and void except for any vested rights to receive compensation under Section 4.01(a)(ii) thereof. 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 -11- 14 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 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 -12- 15 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, 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. By /S/ JAMES L. BAYMAN - -------------------------------- -------------------------------------- James L. Bayman, Chief Executive Officer and President ATTEST: /S/ JOHN V. GOODGER - -------------------------------- -------------------------------------- John V. Goodger -13- EX-10.I 7 EXHIBIT 10(I) 1 EXHIBIT 10(I) AMENDMENT TO PIONEER-STANDARD ELECTRONICS, INC. 1995 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS The following shall be inserted after the second paragraph of Section 7: The Plan shall not be amended more than once every six (6) months, other than to comport with changes in the Internal Revenue Code, the Employee Retirement Income Security Act, or the rules thereunder. With respect to Rule 16b-3 of the Securities Exchange Act of 1934, as amended, or any successor to such Rule, (i) the Plan is intended to comply with all applicable conditions of Rule 16b-3; (ii) all transactions are subject to the conditions and requirements of Rule 16b-3, regardless of whether the conditions are expressly set forth in the Plan; and (iii) any provision of the Plan or action by plan administrators that is contrary to any condition or requirement of Rule 16b-3 shall not apply to any Director participating in the Plan. * * * [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.] EX-11 8 EXHIBIT 11 1 Exhibit 11 CALCULATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE Years Ended March 31, 1996, 1995 and 1994
Weighted average common shares and common share equivalents outstanding 23,127,486 22,886,877 22,677,034 Net income $25,252,000 $25,009,000 $19,676,000 ========== ========== ========== Earnings per share $1.09 $1.09 $.87
EX-13.1 9 EXHIBIT 13.1 1 Exhibit 13.1 MANAGEMENT'S DISCUSSION ANDANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OPERATIONS Sales Fiscal 1996 was the tenth consecutive year of record sales and the 24th year in the 25 years we have been public that sales increased. The year's sales were $1,105.3 million, up 33 percent from $832.2 million in 1995. The Company's sales excluding the newly acquired affiliate increased 17 percent and, including the four month contribution of the affiliate, sales increased 33 percent. Subsequent to the acquisition on November 30, 1995, the former affiliate was renamed Pioneer-Standard of Maryland, Inc., and is operated as a wholly-owned subsidiary. Pro Forma Effects of Acquisition On November 30, 1995, we acquired the remaining interest in our 50-percent owned affiliate for $50 million in cash. The following unaudited pro forma information presents a summary of consolidated results of operations for the Company and Pioneer-Standard of Maryland as if the acquisition had occurred at the beginning of fiscal 1995 and fiscal 1996, with pro forma adjustments to give effect to amortization of goodwill, interest expense on acquisition debt and certain other adjustments, together with related income tax effects. Included in the 1996 results is an after-tax non-recurring discontinuance charge of $2,450,000 ($.11 per share) recorded by Pioneer-Standard of Maryland to conform to the Company's methods of accounting.
1996 1995 Net sales $1,325,047,000 $1,200,252,000 Net income $ 24,704,000 $ 27,741,000 Earnings per share $1.07 $1.21
Product Line Sales The Company distributes a broad range of electronics components and computer products manufactured by others. These products are classified into three broad categories: semiconductors, computer system products and passive electromechanical components. All three of our major product categories added to sales growth this past year. Semiconductor products accounted for 38 percent of sales, compared to 37 percent and 41 percent in 1995 and 1994, respectively. Computer systems products comprised 40 percent of sales compared with 38 percent in 1995 and 33 percent in 1994. Passive and electromechanical products were 20 percent of sales, versus 22 percent in 1995 and 24 percent in 1994. Miscellaneous products accounted for 2 percent in 1996, 3 percent in 1995 and 2 percent in 1994. Gross Margins The 1996 gross margin was 18.3 percent compared to 18.6 percent in 1995 and 19.8 percent in 1994. Product line shifts have been a factor in the change between gross margin percents. The difference in gross margin per-
Sales Per Employee (Thousands of Dollars) 1992 387 1993 457 1994 579 1995 686 1996 671
Inventory Turnover Rate (Based on End of Quarter Rates) 1991 1992 1993 1994 1995 1996 Pioneer-Standard Industry
PIONEER-STANDARD ELECTRONICS, INC. 19 2 cent between 1995 and 1994 is attributable to increased sales volume of microprocessors. While microprocessors earn a relatively low gross profit margin, they are marketed through an efficient low cost sales channel. Typically, semiconductor products have the highest gross margin of the three product lines, but the addition of microprocessor sales in the semiconductor category ranks semiconductors behind passives. Computer system products have the lowest gross margin and had the highest line item value in 1996 while passives had the lowest. The gross margin percent of the semiconductor products was below the other two categories in 1995 and 1994 primarily due to the effect of the increased microprocessor sales noted above. Operating Efficiencies Warehouse, selling and administrative expenses in 1996 were 13.6 percent of sales, compared with 13.4 percent in 1995, and 14.4 percent in 1994. The slightly increased rate of operating expenses as a percent of sales in 1996 is in part a reflection of the Company's investment in various programs to foster growth and improve value added offerings and customer service and satisfaction. The improvements since 1994 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 $51.9 million, up 19 percent from the $43.7 million in 1995, which was 39 percent greater than the $31.4 million of 1994. Operating profit amounted to 4.7 percent of net sales in 1996 compared with 5.2 percent in 1995 and 5.4 percent in 1994. On a weighted basis after giving effect to the acquisition, sales per employee were $671,000. Sales per employee have reflected an average annual efficiency gain of approximately 12 percent over the past five years. Turns on annual average inventory were 5.4 in 1996, versus 6.5 in 1995 and 6.1 in 1994. Pioneer's inventory turn has ranked at the top of the industry's averages. Interest Expense Interest expense totaled $8.1 million in 1996, $4.0 million in 1995 and $2.7 million in 1994. Total interest-bearing debt increased by $122.0 million during 1996 due principally to the additional indebtedness associated with funding the $50 million cash acquisition of the affiliate and assumption of its debt, which was refinanced. In addition, the increased interest expense in 1996 reflects working capital needs stemming from increased sales volume and increased capital expenditures. Interest expense in fiscal 1995 also increased over the prior year amount. Total interest bearing debt in 1995 increased by $38.9 million from 1994 primarily due to the working capital needs arising from increased sales volume coupled with the cash investment in the Canadian business and to an increased level of capital expenditures.
Interest Expense as a Percent to Sales (Percent) 1992 1.2 1993 .8 1994 .5 1995 .5 1996 .7
Net Income (Millions of Dollars) 1992 5.3 1993 12.9 1994 19.7 1995 25.0 1996 25.3
20 PIONEER-STANDARD ELECTRONICS, INC. 3 Equity Interest The equity interest in the net income of our former 50%-owned affiliate resulted in a loss of $173 thousand during 1996, versus net income of $2.5 million in 1995 and $3.0 million in 1994. The amounts above include Pioneer's 50 percent share of the affiliate's net income, and in 1996 include the 50 percent share for only the first eight months prior to the acquisition on November 30, 1995. The $173 thousand loss includes Pioneer's 50 percent share of non-recurring discontinuance costs of $1.2 million after tax, or 5 cents per share. Notwithstanding this one-time charge, effects of the acquisition were approximately neutral to earnings in the final four months of the year, and it is expected to have a positive effect on earnings in fiscal 1997. Pioneer-Standard of Maryland's sales for fiscal 1996 were $350.6 million, compared to $368.1 million in 1995 and $422.0 million in 1994. Lower 1996 net sales again reflected reduced microprocessor sales which earn a relatively low gross profit margin. However, the subsidiary's traditional business sales volume without including microprocessors actually increased over the prior year. In both 1996 and 1995 microprocessor sales were reduced from a substantial build up in 1993 and 1994. Taxes The effective tax rate was 42.1 percent in 1996, compared to 40.8 percent in 1995 and 37.9 percent in 1994. The 1996 and 1995 tax rate increases were due to decreases in the equity income amounts of Pioneer-Standard of Maryland relative to the Company's total net income, coupled with higher effective state tax rates and the unrecognized tax benefit associated with the operating losses of the Canadian subsidiary. Net Income Despite the impact of non-recurring acquisition discontinuance costs and other factors outlined above, fiscal 1996 net income moved up one percent to a new record high of $25.3 million, compared to $25.0 million in 1995 which was up 27 percent from $19.7 million in 1994. Earnings per share of $1.09 in 1996 matched the year ago record of $1.09, compared with 87 cents per share in 1994. Per share amounts have been adjusted to reflect a 3-for-2 split of the Company's common shares effective September 6, 1995. Risk Control 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 instruments for trading or speculative purposes. We extend credit based on customers' financial conditions, and generally collateral is not required. Credit losses are provided for in the financial statements when collections are in doubt. Inflation has had little effect on our operations.
Cash Dividends Paid Per Share (Dollars) 1992 .047 1993 .049 1994 .058 1995 .075 1996 .106
Interest Bearing Debt Percent of Equity Plus Debt (Percent) 1992 46 1993 22 1994 21 1995 34 1996 56
Return on Average Shareholders' Equity (Percent) 1992 9.7 1993 18.2 1994 21.1 1995 21.8 1996 18.2
PIONEER-STANDARD ELECTRONICS, INC. 21 4 CAPITAL AND LIQUIDITY On November 30, 1995, we acquired the remaining interest in our 50-percent owned affiliate for $50 million in cash and assumed its $30 million bank debt, which was subsequently refinanced. Intangible assets of $38.4 million arising from the transaction are being amortized over 40 years. We maintain a strong financial position and excellent liquidity. Current assets at fiscal 1996 year-end were $466.5 million, 1.9 times current liabilities. On July 25, 1995, we declared 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 cash 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. This marks the 8th consecutive year of a dividend increase and the 21st increase in the 25 years we have been publicly traded. We continued investing in programs to stimulate and support future growth. Capital expenditures were $21.0 million in 1996, $11.3 million in 1995, and $7.6 million in 1994. The increased spending in 1996 and 1995 is largely related to ongoing initiatives designed to improve efficiencies through computer enhancement of operating processes as well as investments in value added and warehousing operations, and this will be true as well in 1997. Plans call for approximately $23.0 million of capital expenditures in 1997. The increase in 1996 and planned increase in spending during 1997, in part, reflect investments in our continuing business process redesign efforts. In addition, amounts expended will enable our technology toolset migration to a new, state-of-the art software platform to support growth and flexibility requirements. In order to finance the purchase of the balance of Technologies and to meet near-term cash needs, we entered into a new credit agreement dated November 29, 1995, with five banks providing up to an aggregate of $200.0 million of unsecured borrowings on a revolving credit basis for two years. As of March 31, 1996, borrowings outstanding of $152.0 million resulted in $48.0 million of this total commitment available for use. In addition to the revolving credit line, unsecured short-term lines of credit are available whereby a maximum of $40.0 million may be borrowed to meet short-term fluctuations in cash needs. At March 31, 1996, borrowings pursuant to these short-term lines totaled $21.0 million leaving $19.0 million available for use. The debt to capitalization ratio was 56 percent at March 31, 1996. The Copmany believes that cash generated from operations and amounts avaliable under its lines of credit are presently sufficient to fund its working capital and capital expenditure requirements. It is anticipated that some portion of the outstanding bank borrowings will be refinanced with fixed rate debt, equity, or a combination thereof given favorable market conditions. However, there can be no assurance that any part of the borrowings will be refinanced. 22 PIONEER-STANDARD ELECTRONICS, INC. 5 FINANCIAL REVIEW Summary of Operations/Fiscal Years ended March 31
(Dollars in thousands except per share amounts) - ----------------------------------------------------------------------------------------------------------------------- For the Year 1996 1995 1994 1993 1992 --------------------------------------------------------------------- Combined Sales (Pioneer-Standard Electronics, Inc. and Pioneer-Standard of Maryland, Inc.) $ 1,325,047 $ 1,200,252 $ 1,002,758 $ 714,021 $ 552,294 Pioneer-Standard Electronics, Inc. Net Sales 1,105,281 832,152 580,757 430,013 362,386 Interest Expense 8,136 3,966 2,687 3,581 4,505 Income Before Income Taxes and Equity in Earnings of Pioneer/Technologies Group, Inc. 43,812 39,713 28,702 17,480 7,888 Equity in Earnings (Loss) of Pioneer/Technologies Group, Inc. (173) 2,500 3,001 2,505 654 Income Taxes 18,387 17,204 12,027 7,072 3,215 Net Income 25,252 25,009 19,676 12,913 5,327 - ----------------------------------------------------------------------------------------------------------------------- Year-End Position Accounts Receivable 189,296 133,987 81,155 62,347 50,004 Inventory 238,370 123,008 85,754 67,101 60,983 Working Capital 224,840 131,438 85,132 70,781 69,325 Net Property and Equipment 48,679 30,929 25,572 23,159 23,579 Total Assets 559,110 327,415 220,039 171,860 150,871 Long-Term Debt 164,447 56,318 22,272 21,328 44,717 Shareholders' Equity 150,693 126,415 102,740 84,117 57,455 Weighted Average Shares Outstanding 23,127,486 22,886,877 22,677,034 20,674,152 18,460,401 Average Number of Employees 1,647 1,213 1,003 940 937 - ----------------------------------------------------------------------------------------------------------------------- Per Share Data Net Income Per Share 1.09 1.09 .87 .63 .29 Cash Dividends Paid Per Share .106 .075 .058 .049 .047 Shareholders' Equity Per Share 6.70 5.65 4.61 3.82 3.11 Price Range of Common Shares High 19.25 13.17 12.55 8.89 5.26 Low 10.75 9.17 5.33 3.11 2.97 - ----------------------------------------------------------------------------------------------------------------------- Measurement Data Gross Margin Percent of Sales 18.3 18.6 19.8 21.7 21.4 Income from Operations Percent of Sales 2.3 3.0 3.4 3.0 1.5 Net Income Percent of Average Shareholders' Equity 18.2 21.8 21.1 18.2 9.7 Sales Per Employee 671 686 579 457 387 Accounts Receivable Days Outstanding at Year-End 45 47 43 45 47 Turns on Annual Average Inventory 5.4 6.5 6.1 5.3 4.8 Interest Bearing Debt Percent of Equity Plus Debt 55.5 34.4 21.0 22.3 46.4 - -----------------------------------------------------------------------------------------------------------------------
The Company acquired the remaining 50% of the common stock of Pioneer/Technologies Group, Inc. on November 30, 1995. The consolidated statements include the operating results of Technologies from the date of acquisition. Prior to the acquisition, the Company accounted for its investment in Technologies under the equity method of accounting. See Note 1 to the financial statements for stock split details. PIONEER-STANDARD ELECTRONICS, INC. 23 6 CONSOLIDATED BALANCE SHEETS
March 31, 1996 and 1995 - ---------------------------------------------------------------------------------------------- ASSETS 1996 1995 - ---------------------------------------------------------------------------------------------- CURRENT ASSETS: Cash $ 24,440,000 $ 9,598,000 Accounts receivable, less allowance for doubtful accounts (1996-$6,982,000, 1995-$4,606,000,) 189,296,000 133,987,000 Merchandise inventory 238,370,000 123,008,000 Prepaid expenses 2,922,000 1,623,000 Deferred income taxes 11,454,000 5,708,000 - ---------------------------------------------------------------------------------------------- Total current assets 466,482,000 273,924,000 INVESTMENT AND OTHER ASSETS: Investment in 50%-owned company -- 16,963,000 Intangible assets 42,446,000 4,456,000 Other assets 1,503,000 1,143,000 PROPERTY AND EQUIPMENT, AT COST: Land 1,070,000 1,070,000 Buildings 13,768,000 12,984,000 Furniture and equipment 62,276,000 39,166,000 Leasehold improvements 6,910,000 2,176,000 - ---------------------------------------------------------------------------------------------- 84,024,000 55,396,000 Less accumulated depreciation and amortization 35,345,000 24,467,000 - ---------------------------------------------------------------------------------------------- Net property and equipment 48,679,000 30,929,000 - ---------------------------------------------------------------------------------------------- $559,110,000 $ 327,415,000 ============ ============= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable to banks $ 21,000,000 $ 7,000,000 Accounts payable 184,946,000 106,905,000 Income taxes 1,654,000 3,946,000 Accrued salaries, wages and commissions 13,017,000 8,593,000 Other accrued liabilities 18,154,000 13,086,000 Long-term debt due within one year 2,871,000 2,956,000 - ---------------------------------------------------------------------------------------------- Total current liabilities 241,642,000 142,486,000 LONG-TERM DEBT 164,447,000 56,318,000 DEFERRED INCOME TAXES 2,328,000 2,196,000 SHAREHOLDERS' EQUITY: Common shares, without par value, $.30 stated value: authorized 40,000,000 shares in 1996 and 1995; outstanding 22,498,510 shares in 1996 and 22,374,219 shares in 1995 6,667,000 6,630,000 Capital in excess of stated value 17,221,000 16,318,000 Retained earnings 126,506,000 103,646,000 Foreign currency translation adjustment 299,000 (179,000) - ---------------------------------------------------------------------------------------------- Total shareholders' equity 150,693,000 126,415,000 - ---------------------------------------------------------------------------------------------- $559,110,000 $ 327,415,000 ============ =============
See accompanying notes to consolidated financial statements. 24 PIONEER-STANDARD ELECTRONICS, INC. 7 CONSOLIDATED STATEMENTS OF INCOME
Years ended March 31, 1996, 1995 and 1994 - ---------------------------------------------------------------------------------------------------- 1996 1995 1994 - ---------------------------------------------------------------------------------------------------- NET SALES $ 1,105,281,000 $ 832,152,000 $ 580,757,000 Operating costs and expenses: Cost of goods sold 902,629,000 677,171,000 465,614,000 Warehouse, selling and administrative expenses 150,704,000 111,302,000 83,754,000 - ---------------------------------------------------------------------------------------------------- 1,053,333,000 788,473,000 549,368,000 - ---------------------------------------------------------------------------------------------------- Operating profit 51,948,000 43,679,000 31,389,000 Equity in earnings (loss) of 50%-owned company (173,000) 2,500,000 3,001,000 Interest expense (8,136,000) (3,966,000) (2,687,000) - ---------------------------------------------------------------------------------------------------- Income from operations before income taxes 43,639,000 42,213,000 31,703,000 Provision for income taxes: Federal Current 16,779,000 14,517,000 9,946,000 Deferred (2,304,000) (1,107,000) (574,000) - ---------------------------------------------------------------------------------------------------- 14,475,000 13,410,000 9,372,000 State 3,912,000 3,794,000 2,655,000 - ---------------------------------------------------------------------------------------------------- 18,387,000 17,204,000 12,027,000 - ---------------------------------------------------------------------------------------------------- NET INCOME $ 25,252,000 $ 25,009,000 $ 19,676,000 ==================================================================================================== INCOME PER COMMON SHARE: Primary and fully diluted $ 1.09 $ 1.09 $ .87 ====================================================================================================
See accompanying notes to consolidated financial statements. PIONEER-STANDARD ELECTRONICS, INC. 25 8 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended March 31, 1996, 1995 and 1994 - ---------------------------------------------------------------------------------------------------------------------------- Foreign Stated value Capital in currency of common excess of Retained translation shares stated value earnings adjustment Total - ---------------------------------------------------------------------------------------------------------------------------- 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 ($.058 per share) (1,274,000) (1,274,000) Shares issued upon exercise of stock options 95,000 719,000 814,000 Tax benefit related to exercise of stock options 21,000 21,000 Shares retired (15,000) (599,000) (614,000) - ---------------------------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 1994 6,609,000 15,806,000 80,325,000 102,740,000 Net income 25,009,000 25,009,000 Cash dividends ($.075 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 $(179,000) (179,000) - ---------------------------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 1995 6,630,000 16,318,000 103,646,000 (179,000) 126,415,000 Net income 25,252,000 25,252,000 Cash dividends ($.106 per share) (2,392,000) (2,392,000) Shares issued upon exercise of stock options 37,000 693,000 730,000 Tax benefit related to exercise of stock options 214,000 214,000 Cash in lieu of fractional shares for stock split (4,000) (4,000) Foreign currency translation adjustment 478,000 478,000 - ---------------------------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 1996 $ 6,667,000 $ 17,221,000 $ 126,506,000 $ 299,000 $ 150,693,000 ============================================================================================================================
See accompanying notes to consolidated financial statements. 26 PIONEER-STANDARD ELECTRONICS, INC. 9 CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended March 31, 1996, 1995 and 1994 - -------------------------------------------------------------------------------------------------------- 1996 1995 1994 - -------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 25,252,000 $ 25,009,000 $ 19,676,000 Adjustments to reconcile net income to net cash (used) provided by operating activities: Depreciation and amortization 8,998,000 6,230,000 5,264,000 Undistributed (earnings) loss of affiliate 173,000 (2,500,000) (3,001,000) Increase in operating working capital (31,898,000) (38,566,000) (11,635,000) Increase in intangible assets (5,155,000) (1,488,000) -- (Increase) decrease in other assets 67,000 (225,000) (199,000) Deferred taxes (2,304,000) (1,115,000) (574,000) - -------------------------------------------------------------------------------------------------------- Total adjustments (30,119,000) (37,664,000) (10,145,000) - -------------------------------------------------------------------------------------------------------- Net cash (used) provided by operating activities (4,867,000) (12,655,000) 9,531,000 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment (21,004,000) (11,326,000) (7,626,000) Acquisition of businesses, net of cash acquired (49,883,000) (10,068,000) -- - -------------------------------------------------------------------------------------------------------- Net cash used in investing activities (70,887,000) (21,394,000) (7,626,000) CASH FLOWS FROM FINANCING ACTIVITIES: Increase (decrease) in short-term financing 14,000,000 5,000,000 (500,000) Increase in revolving credit borrowings 81,000,000 37,000,000 4,000,000 Principal payments under long-term debt obligations (2,956,000) (3,056,000) (262,000) Issuance of common shares under stock option plans 730,000 409,000 200,000 Tax benefit related to exercise of stock options 214,000 124,000 21,000 Dividends paid (2,392,000) (1,688,000) (1,274,000) Cash in lieu of fractional shares for stock split (4,000) -- -- - -------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 90,592,000 37,789,000 2,185,000 EFFECT OF EXCHANGE RATE CHANGES ON CASH 4,000 (96,000) -- - -------------------------------------------------------------------------------------------------------- NET INCREASE IN CASH 14,842,000 3,644,000 4,090,000 CASH AT BEGINNING OF YEAR 9,598,000 5,954,000 1,864,000 - -------------------------------------------------------------------------------------------------------- CASH AT END OF YEAR $ 24,440,000 $ 9,598,000 $ 5,954,000 ========================================================================================================
See accompanying notes to consolidated financial statements. PIONEER-STANDARD ELECTRONICS, INC. 27 10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES 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 companies, and service and other non-manufacturing organizations. The Company has operations in the United States and Canada. The Company maintains the following accounting policies: PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions have been eliminated. As discussed in Note 2, the Company acquired the remaining 50% of the common stock of Pioneer/Technologies Group, Inc. ("Technologies") on November 30, 1995. The consolidated statements include the operating results of Technologies from the date of acquisition. Prior to the acquisition, the Company accounted for its investment in Technologies under the equity method of accounting. Certain amounts in the prior years' financial statements have been reclassified to conform to the current year presentation. 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 $8,777,000 in 1996 and $3,416,000 in 1995. INTANGIBLE ASSETS--Intangible 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. Intangible assets are periodically reviewed for impairment based on an assessment of future operations to ensure they are appropriately valued. PROPERTY AND EQUIPMENT--Property and equipment are recorded at cost. The Company capitalizes costs associated with software developed for its own use. Depreciation and amortization is computed 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. STOCK SPLIT--On July 25, 1995, 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 September 6, 1995 to shareholders of record August 16, 1995. 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 23,127,486 in 1996, 22,886,877 in 1995 and 22,677,034 in 1994. Common share equivalents consists of shares issuable upon exercise of stock options computed by using the treasury stock method. USE OF ESTIMATES--The financial statements are prepared in conformity with generally accepted accounting principles and accordingly, include management's best estimates and judgments where applicable. Actual results could differ from those estimates. ACCOUNTING CHANGES--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. In 1995, the Financial Accounting Standards Board issued Statement No. 121, "Accounting for the 28 PIONEER-STANDARD ELECTRONICS, INC. 11 Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (FAS 121), and Statement No. 123, "Accounting for Stock-Based Compensation" (FAS 123). FAS 121 requires that, under certain circumstances, long-lived assets be reviewed for impairment and any applicable impairment loss be recognized. FAS 123 allows accounting for employee stock options under either the fair value or the intrinsic value method. The Company plans to continue to use the intrinsic value method. These statements, which must be adopted by the Company no later than the first quarter of fiscal 1997, are not expected to have a material effect on the financial statements. 2. ACQUISITIONS On November 30, 1995, the Company acquired the remaining 50% of the common stock of Pioneer/Technologies Group, Inc. for $50,000,000 in cash. The Company refinanced all of Technologies' bank debt approximating $30,000,000. The acquisition was accounted for by using the purchase method of accounting and the operating results of Technologies have been included in the consolidated financial statements since the date of acquisition. The cost in excess of the net assets of the business acquired is included in intangible assets and is being amortized over 40 years. Prior to the acquisition, the Company accounted for its investment in Technologies under the equity method of accounting. The following unaudited pro forma information presents a summary of consolidated results of operations for the Company and Technologies as if the acquisition had occurred at the beginning of fiscal 1995 and fiscal 1996, with pro forma adjustments to give effect to amortization of goodwill, interest expense on acquisition debt and certain other adjustments, together with related income tax effects. Included in the 1996 results is an after-tax non-recurring discontinuance charge of $2,450,000 ($.11 per share) recorded by Technologies to conform to the Company's methods of accounting.
- ----------------------------------------------------- 1996 1995 - ----------------------------------------------------- Net sales $1,325,047,000 $1,200,252,000 Net income $ 24,704,000 $ 27,741,000 Earnings per share $ 1.07 $ 1.21
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. 3. NOTES PAYABLE AND LONG-TERM DEBT SHORT-TERM: The Company has unsecured short-term lines of credit aggregating $40,000,000 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. Borrowings against these lines and related weighted average interest rates, at March 31, 1996, 1995 and 1994, are as follows:
- ----------------------------------------------------- 1996 1995 1994 - ----------------------------------------------------- Borrowings $21,000,000 $7,000,000 $2,000,000 Weighted average interest rate 6.08% 6.69% 5.75%
Long-Term: Long-term debt at March 31, 1996 and 1995 consisted of the following:
- ----------------------------------------------------- 1996 1995 - ----------------------------------------------------- Revolving credit $ 152,000,000 $ 41,000,000 9.79% Senior Notes 14,280,000 17,140,000 Obligations under capital leases 1,038,000 1,134,000 ------------- ------------ 167,318,000 59,274,000 ------------- ------------ Less amounts due within one year 2,871,000 2,956,000 ------------- ------------ $ 164,447,000 $ 56,318,000 ============= ============
The Company entered into a new credit agreement dated November 29, 1995 with five banks providing for up to an aggregate of $200,000,000 of unsecured borrowings on a revolving credit basis for two years. Interest rates on borrowings are based on various floating rate alternative pricing mechanisms. There is a commitment fee on the unborrowed amount and there is no prepayment penalty. 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 the credit agreement and Senior Note Purchase Agreement provide for, among other things, restrictions regarding the payment of cash dividends and purchase of the Company's Common Shares, 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, 1996 under the most restrictive covenants are $17,965,000. Aggregate maturities of long-term debt for the next five fiscal years are: 1997--$2,871,000; 1998--$154,873,000; 1999--$2,874,000; 2000--$2,876,000 and 2001--$2,858,000. PIONEER-STANDARD ELECTRONICS, INC. 29 12 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 $1,668,000 and $2,181,000 at March 31, 1996 and 1995, less accumulated amortization of $619,000 and $1,034,000 at March 31, 1996 and 1995, respectively. Future minimum lease payments under capital leases and operating leases at March 31, 1996 are as follows:
Capital Operating Leases Leases - ----------------------------------------------------- 1997 $ 132,000 $ 5,075,000 1998 132,000 4,474,000 1999 132,000 3,982,000 2000 132,000 1,711,000 2001 132,000 628,000 Thereafter 2,178,000 1,845,000 - ----------------------------------------------------- Total minimum lease payments 2,838,000 $17,715,000 =========== Less amount representing interest 1,800,000 ----------- Present value of minimum lease payments $ 1,038,000 ===========
Rental expense for operating leases was $4,230,000, $2,897,000 and $2,166,000 for 1996, 1995 and 1994, respectively. 5. INCOME TAXES The following is a reconciliation of the Company's effective income tax rate to the statutory rate:
Liability Method - ---------------------------------------------------- 1996 1995 1994 - ---------------------------------------------------- Statutory rate 35.0% 35.0% 35.0% Equity in undistributed (earnings) loss of 50%-owned company .1 (1.6) (2.6) Provision for state taxes 5.8 5.8 5.4 Foreign losses with unrecognized tax benefits .6 1.1 -- Other items .6 .5 .1 ---------------------- Effective rate 42.1% 40.8% 37.9% ======================
Deferred tax assets and liabilities as of March 31, 1996 and 1995 are presented below:
- ----------------------------------------------------- 1996 1995 - ----------------------------------------------------- Deferred tax assets: Capitalized inventory costs $1,842,000 $1,391,000 Accrued expenses 3,322,000 1,674,000 Allowance for doubtful accounts 2,433,000 1,581,000 Inventory valuation reserve 2,807,000 639,000 Foreign losses 691,000 450,000 Other 1,050,000 423,000 ---------- ---------- Deferred tax assets 12,145,000 6,158,000 Less valuation allowance (691,000) (450,000) ---------- ---------- Total deferred tax assets 11,454,000 5,708,000 ---------- ---------- Deferred tax liabilities: Depreciation expense 1,325,000 1,335,000 Other 1,003,000 861,000 ---------- ---------- Total deferred tax liabilities 2,328,000 2,196,000 ---------- ---------- Net deferred tax assets $9,126,000 $3,512,000 ========== ==========
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 $11.85 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 30 PIONEER-STANDARD ELECTRONICS, INC. 13 the Company's Common Shares, the Rights are redeemable for $.003 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 employees and directors to purchase its Common Shares. These plans provide for nonqualified or incentive stock options. A stock option plan for non-employee directors was approved by shareholders on July 25, 1995 for the granting of a maximum of 75,000 Common Shares. The options under the Company's plans 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. Transactions involving the stock option plans are summarized as follows:
- ----------------------------------------------------- Number Average Option Price of Shares Per Share - ----------------------------------------------------- Outstanding at March 31, 1993 654,919 $ 2.93 Exercised (318,262) $ 2.56 Granted 675,000 $ 6.11 Forfeited (2,250) $ 6.11 - ----------------------------- Outstanding at March 31, 1994 1,009,407 $ 5.17 Exercised (70,332) $ 5.82 Granted 646,950 $12.06 Forfeited (4,275) $11.33 - ----------------------------- Outstanding at March 31, 1995 1,581,750 $ 7.95 Exercised (124,442) $ 5.87 Granted 274,000 $14.99 Forfeited (110,734) $10.53 - ----------------------------- Outstanding at March 31, 1996 1,620,574 $ 9.12 ============================= Exercisable at March 31, 1996 603,200 $ 6.84 ============================= Available for grant at March 31, 1996 565,107 =============================
8. FINANCIAL INSTRUMENT SAND 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, 1996 there is one contract outstanding for the forward purchase of U.S. dollars against Canadian dollars in a notional amount of $1,000,000, which also approximates fair value at March 31, 1996. The contract matured on April 30, 1996 and was utilized to hedge U.S. dollar transactions of the Canadian subsidiary. On June 1, 1995 the Company entered into a five year interest rate swap agreement for a notional amount of $20,000,000 to reduce the impact of increases in interest rates on its outstanding floating rate debt. Under the agreement, the Company will pay interest at a fixed rate of 6.05% and will receive interest payments on the same notional amount at a floating rate based on 3 month LIBOR (London Interbank Offered Rate). This swap agreement has the effect of converting the floating rate of interest into a fixed rate of 6.05% on $20,000,000 of floating rate bank credit borrowings oustanding. The carrying amounts and estimated fair values of the Company's other financial instruments are as follows:
1996 - ----------------------------------------------------- Carrying Fair Amount Value - ----------------------------------------------------- Cash $ 24,440,000 $ 24,440,000 Notes payable to banks 21,000,000 21,000,000 Long-term debt: 9.79% Senior Notes 14,280,000 15,107,000 Revolving credit borrowings 152,000,000 152,000,000 Gain on interest rate swap -- 75,000
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
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. The fair value of the interest rate swap is the amount at which it could be settled, based on market estimates. PIONEER-STANDARD ELECTRONICS, INC. 31 14 9 OPERATING WORKING CAPITAL CHANGES AND SUPPLEMENTAL INFORMATION FOR THE STATEMENTS OF CASH FLOWS
THE COMPONENTS OF THE CHANGES IN OPERATING WORKING CAPITAL WERE: - -------------------------------------------------------------------------------------- 1996 1995 1994 - -------------------------------------------------------------------------------------- Accounts receivable $(18,456,000) $(47,595,000) $(18,808,000) Merchandise inventory (57,702,000) (32,049,000) (18,653,000) Prepaid expenses (894,000) (682,000) (146,000) Accounts payable 41,911,000 35,879,000 22,566,000 Income taxes (3,107,000) 858,000 (31,000) Accrued salaries, wages and commissions 2,156,000 1,480,000 2,073,000 Other accrued liabilities 4,194,000 3,543,000 1,364,000 -------------------------------------------- Increase in operating working capital $(31,898,000) $(38,566,000) $(11,635,000) ============================================
SUPPLEMENTAL CASH FLOW INFORMATION: - ------------------------------------------------------------------------------------------------------ 1996 1995 1994 - ------------------------------------------------------------------------------------------------------ Cash paid or received during the year for: Interest $ 7,824,000 $ 4,255,000 $ 2,623,000 Income taxes 21,195,000 17,064,000 12,659,000 =========================================== Non-cash investing and financing activities: Common shares retired -- -- 614,000 =========================================== Non-cash assets and liabilities of business acquired: Working capital $ 57,817,000 $ 7,684,000 $ -- Intangible assets 33,208,000 2,174,000 -- Other assets 5,648,000 210,000 -- Long-term debt assumed (30,000,000) -- -- Investment in 50%-owned company at date of acquisition (16,790,000) -- -- ===========================================
10 EMPLOYEE RETIREMENT PLAN The Company maintains various profit-sharing and thrift plans for all employees meeting certain service requirements. Generally, the plans allow eligible employees to contribute a portion of their compensation, with the Company matching a percentage thereof. The Company may also make contributions each year for the benefit of all eligible employees under the plans. Total profit sharing and Company matching contributions were $2,622,000, $2,129,000 and $1,899,000 for 1996, 1995 and 1994, respectively. 32 PIONEER-STANDARD ELECTRONICS, INC. 15 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, 1996 and 1995 and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended March 31, 1996. 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, 1996 and 1995 and the consolidated results of its operations and its cash flows for each of the three years in the period ended March 31, 1996, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Cleveland, Ohio May 1, 1996 PIONEER-STANDARD ELECTRONICS, INC. 33 16 QUARTERLY FINANCIAL DATA
(unaudited) - ------------------------------------------------------------------------------------------------------------- Fiscal Year First Second Third Fourth Ending March 31 Quarter Quarter Quarter Quarter Year - ------------------------------------------------------------------------------------------------------------- 1996 Net sales $ 224,724,000 $ 234,913,000 $ 263,940,000 $ 381,704,000 $ 1,105,281,000 Gross profit 43,610,000 45,356,000 47,550,000 66,136,000 202,652,000 Net income 6,816,000 6,705,000 4,089,000 7,642,000 25,252,000 Net income per share .29 .29 .18 .33 1.09 - ------------------------------------------------------------------------------------------------------------- 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 .26 .25 .27 .32 1.09 - -------------------------------------------------------------------------------------------------------------
The Company acquired the remaining 50% of the common stock of Pioneer/Technologies Group, Inc. on November 30, 1995. The consolidated statements include the operating results of Technologies from the date of acquisition. Prior to the acquisition, the Company accounted for its investment in Technologies under the equity method of accounting. DIVIDEND INFORMATION AND PRICE RANGE OF COMMON SHARES
- ------------------------------------------------------------------------------------------------------------- Fiscal Year First Second Third Fourth Ending March 31 Quarter Quarter Quarter Quarter Year - ------------------------------------------------------------------------------------------------------------- 1996 High $ 17.83 $ 19.25 $ 17.75 $ 15.75 $ 19.25 Low 11.67 14.67 12.75 10.75 10.75 Dividends paid .023 .023 .03 .03 .106 - ------------------------------------------------------------------------------------------------------------- 1995 High $ 12.45 $ 12.67 $ 13.17 $ 13.17 $ 13.17 Low 9.67 9.17 9.50 10.67 9.17 Dividends paid .015 .02 .02 .02 .075 - -------------------------------------------------------------------------------------------------------------
As of May 1, 1996 there were 22,502,443 Common Shares of Pioneer-Standard Electronics, Inc. outstanding, and there were 2,401 shareholders of record. The market price of Pioneer-Standard Electronics, Inc. Common Shares at the close of business May 1, 1996 was $15.75. See Note 3 for information regarding dividend restrictions. 34 PIONEER-STANDARD ELECTRONICS, INC. EX-21 10 EXHIBIT 21 1 Exhibit 21 Subsidiaries ------------ Pioneer-Standard of Maryland, Inc. Pioneer-Standard Canada Inc. Pioneer-Standard FSC, Inc. EX-23 11 EXHIBIT 23 1 Exhibit 23 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 1, 1996 included in the 1996 Annual Report to Shareholders of Pioneer-Standard Electronics, Inc. We also consent to the incorporation by reference in the Registration Statement (Form S-8) pertaining to the 1995 Stock Option Plan for Outside Directors of Pioneer-Standard Electronics, Inc. and in the related Prospectus, and 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 1, 1996 with respect to the consolidated financial statements and schedule of Pioneer-Standard Electronics, Inc. incorporated by reference and included in this Annual Report (Form 10-K) for the year ended March 31, 1996. ERNST & YOUNG LLP Cleveland, Ohio June 27, 1996 EX-27 12 EXHIBIT 27
5 1,000 12-MOS MAR-31-1996 MAR-31-1996 24,440 0 196,278 6,982 238,370 466,482 84,024 35,345 559,110 241,642 164,447 6,657 0 0 144,036 559,110 1,105,281 1,105,281 902,629 902,629 150,704 0 8,136 43,639 18,387 25,252 0 0 0 25,252 1.09 1.09
EX-99.A 13 EXHIBIT 99(A) 1 Exhibit 99(a) ACORD CERTIFICATE OF INSURANCE CSR ISSUE DATE (MM/DD/YY) 06/25/96 PRODUCER THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND Alexander & Alexander, Inc CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE 1660 W. 2nd Street, Ste. 650 DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE Skylight Office Tower POLICIES BELOW. Cleveland, OH 44113-1454 COMPANIES AFFORDING COVERAGE 216-621-8100 COMPANY LETTER A FEDERAL INSURANCE COMPANY OHIO INSURANCE FRAUD WARNING INSURED LETTER B ANY PERSON, WHO WITH INTENT TO DEFRAUD OR KNOWING THAT HE IS PIONEER STANDARD ELECTRONICS COMPANY FACILITATING A FRAUD AGAINST AN 4800 EAST 131ST STREET LETTER C INSURER, SUBMITS AN APPLICATION CLEVELAND, OH OR FILES A CLAIM CONTAINING A 44105 COMPANY FALSE OR DECEPTIVE STATEMENT IS LETTER D GUILTY OF INSURANCE FRAUD. COMPANY LETTER E - ------------------------------------------------------------------------------------------------------------------------------------ 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 OWNED AUTOS BODILY INJURY $ (Per person) / / SCHEDULED AUTOS / / HIRED AUTOS BODILY INJURY (Per accident) $ / / NON-OWNED AUTOS / / GARAGE LIABILITY / / PROPERTY DAMAGE $ - ------------------------------------------------------------------------------------------------------------------------------------ EXCESS LIABILITY EACH OCCURRENCE $ / / UMBRELLA FORM AGGREGATE $ / / OTHER THAN UMBRELLA FORM - ----------------------------------------------------------------------------------------------------------------------------------- WORKER'S COMPENSATION / / STATUTORY LIMITS EACH ACCIDENT $ AND DISEASE -- POLICY LIMIT $ EMPLOYERS' LIABILITY DISEASE -- EACH EMPLOYEE $ - ----------------------------------------------------------------------------------------------------------------------------------- OTHER A EXECUTIVE RISK 8102-64-55G 11/01/95 11/01/96 $15,000,000 Ea. Loss D & O LIABILITY $15,000,000 Each Policy year. - ----------------------------------------------------------------------------------------------------------------------------------- DESCRIPTION OF OPERATIONS / LOCATIONS / VEHICLES / SPECIAL ITEMS DEDUCTIBLES - $500,000. INSURED ORGANIZATION - ------------------------------------------------------------------------------------------------------------------------------------ CERTIFICATE HOLDER CANCELLATION CALFEE, HALTER & GRISWOLD SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE SUZANNE Y. PARK, ESQ EXPIRATION DATE THEREOF, THE ISSUING COMPANY WILL ENDEAVOR TO 1400 MCDONALD INV. CTR. MAIL 30 DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE 800 SUPERIOR AVENUE LEFT, BUT FAILURE TO MAIL SUCH NOTICE SHALL IMPOSE NO OBLIGATION OR CLEVELAND OH 44114-2688 LIABILITY OF ANY KIND UPON THE COMPANY, ITS AGENTS OR REPRESENTATIVES. AUTHORIZED REPRESENTATIVE /s/ Mary Benko ACORD 25-S (7/90) ALEXANDER & ALEXANDER OF OHIO, INC. ACORD CORPORATION 1990
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