EXHIBIT 10(cc)
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
BETWEEN
PIONEER-STANDARD ELECTRONICS, INC.
AND
ARTHUR RHEIN
Amendment and Restatement Effective Date: April 1, 2003
Table of Contents
Page
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DEFINITIONS..................................................................... 1
TERMINATION OF PRIOR AGREEMENT.................................................. 4
EMPLOYMENT TERM................................................................. 4
POSITION, DUTIES, AND RESPONSIBILITIES.......................................... 5
SALARY, BONUS AND BENEFITS...................................................... 6
TERMINATION OF EMPLOYMENT....................................................... 7
SEVERANCE COMPENSATION.......................................................... 8
CHANGE OF CONTROL............................................................... 13
SEVERANCE PLAN.................................................................. 15
PLAN AMENDMENTS................................................................. 15
NON-COMPETITION, CONFIDENTIAL INFORMATION AND NON-INTERFERENCE.................. 15
ARBITRATION..................................................................... 17
NOTICES ........................................................................ 18
ASSIGNMENT; BINDING EFFECT...................................................... 19
INVALID PROVISIONS.............................................................. 19
ALTERNATIVE SATISFACTION OF COMPANY'S OBLIGATIONS............................... 19
ENTIRE AGREEMENT, MODIFICATION.................................................. 20
NON-EXCLUSIVITY OF RIGHTS....................................................... 20
WAIVER OF BREACH................................................................ 20
GOVERNING LAW................................................................... 20
WITHHOLDING..................................................................... 20
EXPENSES ....................................................................... 21
REPRESENTATION.................................................................. 22
SUBSIDIARIES AND AFFILIATES..................................................... 22
NO MITIGATION OR OFFSET......................................................... 22
SOLE REMEDY..................................................................... 22
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT is entered into as of
the 30th day of April, 2003, by and between PIONEER-STANDARD ELECTRONICS, INC.,
an Ohio corporation (the "Company"), and ARTHUR RHEIN ("Rhein").
W I T N E S S E T H:
WHEREAS, the Company and Rhein (collectively "the Parties") desire to
enter into this Amended and Restated Employment Agreement (the "Agreement") as
hereinafter set forth;
NOW, THEREFORE, the Company and Rhein agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following
terms shall have the meanings set forth in this Section 1 when used in this
Agreement. Certain other terms are defined in the body of this Agreement.
(a) Agreement. The term "Agreement" shall mean this
Amended and Restated Employment Agreement, as it may
be amended from time to time.
(b) Annual Incentive Plan. The term "Annual Incentive
Plan" shall mean the Pioneer-Standard Electronics,
Inc. Annual Incentive Plan or individual annual
incentive arrangement which is approved by the
Compensation Committee.
(c) Base Salary. The term "Base Salary" shall mean the
salary provided for in Section 5 or any increased
salary granted to Rhein in accordance with Section 5.
(d) Board. The term "Board" shall mean the Board of
Directors of the Company.
(e) Cause. The term "Cause" shall mean:
(i) Commission by Rhein (evidenced by a
conviction or written, voluntary and freely
given confession) of a criminal act
constituting a felony involving fraud or
moral turpitude;
(ii) Commission by Rhein of a material breach or
material default of any of Rhein's
agreements or obligations under any
provision of this Agreement, including,
without limitation, Rhein's agreements and
obligations under Subsections 4(a) through
4(e) or Section 11
of this Agreement, which is not
substantially cured within ninety (90) days
after the Board gives written notice thereof
to Rhein;
(iii) Commission by Rhein, when carrying out
Rhein's duties under this Agreement, of acts
or the omission of any act, which
constitutes willful misconduct or which
constitutes gross negligence and results in
material economic harm to the Company or has
a materially adverse effect on the Company's
operations, properties or business
relationships; or
(iv) A substantial and continued failure or
refusal by Rhein to perform under this
Agreement which Rhein shall have failed to
remedy within ninety (90) days after his
receipt of written notice from the Board.
(f) Change in Control. The term "Change in Control" shall
mean a change in control of the Company 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,
regardless of whether the Company is then subject to
such reporting requirement; 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), excluding The
Pioneer Stock Benefit Trust, any employee benefit
plan of the Company, any trust established under any
employee benefit plan of the Company, or any trustee
of any trust established under any employee benefit
plan of the Company, becomes a beneficial owner,
directly or indirectly, of securities of the Company
representing twenty percent (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.
(g) Company. The term "Company" shall mean
Pioneer-Standard Electronics, Inc., an Ohio
corporation, and its successors and assigns to the
extent permitted under this Agreement.
(h) Compensation Committee. The term "Compensation
Committee" shall mean the Compensation Committee of
the Board or its successor.
(i) Disability. The term "Disability" shall mean a
condition resulting from illness or accident which
has prevented Rhein from performing his duties under
this Agreement for a period of six (6) consecutive
months. The
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Employment Term shall be deemed to have ended as of
the close of business on a day designated by the
Company, which shall not be earlier than (x) the last
day of such period of six (6) consecutive months and
(y) the day on which the Company provides written
notice pursuant to Subsection 6(b) of this Agreement.
(j) Effective Date. The term "Effective Date" shall mean
the effective date of this amended and restated
Agreement, which shall be April 1, 2003.
(k) Employment Term. The term "Employment Term" shall
have the meaning set forth in Subsection 3(b) of this
Agreement.
(l) Good Reason. The term "Good Reason" shall mean the
occurrence of any of the following:
(i) there is any reduction in Rhein's title or
position or change in his reporting
relationship;
(ii) there is a material reduction in Rhein's
duties or responsibilities;
(iii) Rhein's compensation is reduced or his
participation in any benefit plan, program
or arrangement is eliminated, or benefits
payable to Rhein under any such plan,
program or arrangement or Rhein's
perquisites are materially reduced or
restricted, except where either (A) such
reduction, restriction, elimination or other
change is both generally applicable to all
members of senior management and does not
reduce either Rhein's annual salary or
Target Annual Bonus, or (B) such reduction,
restriction, elimination or other change is
merely the result of application of a
formula measuring individual or corporate
performance or both;
(iv) there is a material breach or material
default by the Company or its successor of
any of its agreements or obligations under
any provision of this Agreement, unless such
breach or default is substantially cured
within a reasonable period of time (hereby
defined as ten (10) days for simple
non-payment of an agreed amount without any
related issues and ninety (90) days in all
other cases) after written notice advising
the Company or its successor of the acts or
omissions constituting such breach or
default has been received by the Company;
(v) there is any relocation of Rhein's principal
place of work with the Company or its
successor to a location that exceeds by
fifty (50) miles the distance from the
location of his residence at the time of
such relocation to the headquarters of the
Company as of the date of this Agreement; or
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(vi) the failure of the Company to obtain an
agreement from any successor to the Company
to assume this Agreement as contemplated by
Section 14 of this Agreement.
(m) Parties. The term "Parties" shall mean the Company
and Rhein.
(n) Pro Rata. The term "Pro Rata" shall mean, when used
with respect to the Company's Annual Incentive Plan,
a fraction, the numerator of which is the number of
days that Rhein was employed by the Company in the
applicable performance period (typically one fiscal
year of the Company) and the denominator of which
shall be the number of days in the applicable
performance period.
(o) Retirement. The term "Retirement" shall have the
definition ascribed to such term in the Company's
Supplemental Executive Retirement Plan as in effect
on the Effective Date.
(p) Severance Benefit Plan. The term "Severance Benefit
Plan" shall mean any plan, policy or arrangement
providing severance benefits for executive officers
(and any other employees) of the Company.
(q) Target Annual Bonus. The term "Target Annual Bonus"
shall mean Rhein's target annual incentive
opportunity under the Annual Incentive Plan.
2. AMENDMENT AND RESTATEMENT OF PRIOR AGREEMENT. This Agreement
amends and restates the employment agreement between the Parties dated as of
January 29, 2002 and shall be deemed effective as of 12:00 a.m. on the Effective
Date. Amendment and restatement of the employment agreement does not revoke any
right that either party to the agreement had with respect to periods prior to
the Effective Date.
3. EMPLOYMENT TERM.
(a) During the Employment Term, the Company shall employ
Rhein, and Rhein shall serve the Company, as
President and Chief Executive Officer, based on the
terms and subject to the conditions set forth herein.
(b) The Employment Term shall commence on the Effective
Date and shall end on the date immediately preceding
the third (3rd) anniversary of the Effective Date,
provided that the Employment Term may terminate prior
to the date specified above in this Subsection 3(b)
as provided in Section 6 hereof.
(c) Not later than six (6) months prior to the third
(3rd) anniversary of the Effective Date, the Company
shall commence negotiations with Rhein with respect
to the terms of his employment with the Company. If
this
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Agreement terminates without a new employment
agreement having been executed by the Company and
Rhein by the date of such termination, Rhein's
employment with the Company shall thereafter continue
at will, and, unless Rhein and the Company shall
enter into a new employment agreement not later than
sixty (60) days following the date of such
termination or shall otherwise agree, Rhein shall
have the right to terminate such employment during
the period from the sixty-first (61st) through the
one hundred twentieth (120th) day following the
expiration of the Employment Term, upon which
termination of employment he shall be entitled to
receive, notwithstanding the expiration of the
Employment Term, the severance compensation described
under Subsection 7(d) hereof. Furthermore, if the
Company and Rhein have not entered into a new
employment agreement as provided in the preceding
sentence, and if Rhein's employment shall be
terminated by the Company other than for Cause during
the one hundred twenty (120) day period following the
expiration of the Employment Term, upon such
termination of employment, Rhein shall be entitled to
receive, notwithstanding the expiration of the
Employment Term, the severance compensation described
in Subsection 7(d) hereof.
4. POSITION, DUTIES, AND RESPONSIBILITIES. At all times during
the Employment Term, Rhein shall:
(a) Hold the position of President and Chief Executive
Officer of the Company reporting to the Board;
(b) Have those duties and responsibilities, and the
authority, customarily possessed by the Chief
Executive Officer of a major corporation and such
additional duties as may be assigned to Rhein from
time to time by the Board which are consistent with
the position of Chief Executive Officer of a major
corporation;
(c) For so long as Rhein shall serve as Chief Executive
Officer of the Company, be nominated by the Board for
election as a Director at such time as the nominees
for the class of Directors of which Rhein is a member
(as of the Effective Date, Class C) are being
proposed for election at the annual meeting of
shareholders of the Company;
(d) Adhere to such reasonable written policies and
directives as may be promulgated from time to time by
the Board and which are applicable to executive
officers of the Company; and
(e) Devote Rhein's entire business time, energy, and
talent (subject to vacation time in accordance with
the Company's policy applicable to executive
officers, illness or injury) to the business, and to
the furtherance of the purposes and objectives, of
the Company, and neither directly nor
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indirectly act as an employee of or render any
business, commercial, or professional services to any
other person, firm or organization for compensation,
without the prior written approval of the Board.
Nothing in this Agreement shall preclude Rhein from devoting reasonable
periods of time to charitable and community activities or the management of
Rhein's investment assets, provided such activities do not interfere with the
performance by Rhein of Rhein's duties hereunder. Furthermore, service by Rhein
on the boards of directors of up to two (2) noncompeting companies (in addition
to affiliates of the Company) shall not be deemed to be a violation of this
Agreement, provided such service does not interfere with the performance of
Rhein's duties hereunder.
5. SALARY, BONUS AND BENEFITS. For services rendered by Rhein on
behalf of the Company during the Employment Term, the following salary, bonus
and benefits shall be provided to Rhein by the Company during such Employment
Term:
(a) The Company shall pay to Rhein, in equal
installments, according to the Company's then current
practice for paying its executive officers in effect
from time to time during the Employment Term, an
annual Base Salary at the initial rate of Six Hundred
Twenty-five Thousand Dollars ($625,000.00). This
salary shall be subject to annual review, at the
beginning of each fiscal year of the Company
commencing with Fiscal Year 2004, by the Compensation
Committee or the Board and may be increased, but not
decreased, to the extent, if any, that the
Compensation Committee, or the Board, may determine.
(b) Rhein shall participate in the Annual Incentive Plan.
Rhein's Target Annual Bonus will be one hundred
percent (100%) of his annual Base Salary, with a
range of zero percent (0%) to two hundred fifty
percent (250%) of his annual Base Salary.
(c) Rhein shall be eligible for participation in such
other benefit plans, including, but not limited to,
the Company's Retirement Plan, Severance Benefit
Plan, 2000 Stock Incentive Plan, Supplemental
Executive Retirement Plan, Benefit Equalization Plan,
Short-Term and Long Term Disability Plans, Group Term
Life Insurance Plan, Medical Plan, and Dental Plan,
as the Company may adopt from time to time and in
which the Company's executive officers, or employees
in general, are eligible to participate. This
Subsection 5(c) shall not be deemed to prevent
participation in any special plan or arrangement
providing special benefits to Rhein which are not
available to other employees. Such participation
shall be subject to the terms and conditions set
forth in the applicable plan documents. As is more
fully set forth in Section 9 hereof, Rhein shall not
be entitled to duplicative payments under this
Agreement and any Severance Benefit Plan.
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(d) Without limiting the generality of Subsection 5(c)
above, as soon as reasonably possible following the
Effective Date, and thereafter throughout the
Employment Term, Rhein shall be provided with life
insurance protection, at the Company's expense, in an
aggregate amount of not less than two hundred percent
(200%) of his earnings from the Company as reported
on IRS Form W-2 for the preceding calendar year.
(e) Without limiting the generality of Subsection 5(c)
above, Rhein shall be entitled to an automobile
allowance in accordance with the Company's automobile
policy for its executive officers (but not less than
Twelve Thousand Dollars ($12,000.00) per year), an
allowance for estate, financial and tax planning of
Ten Thousand Dollars ($10,000.00) per year, and
reimbursement for reasonable club dues and membership
fees consistent with the Company's past practice.
(f) Without limiting the generality of Subsection 5(c)
above, Rhein shall be entitled to director's and
officer's liability insurance coverage with respect
to claims against Rhein arising in connection with
his activities performed on behalf of or in
connection with his service as an officer or Director
of the Company or any affiliate.
6. TERMINATION OF EMPLOYMENT. As indicated in Subsection 3(b),
the Employment Term may terminate prior to the date specified therein as
follows:
(a) Death. Rhein's employment hereunder will terminate
without further notice upon the death of Rhein.
(b) Disability. The Company may terminate Rhein's
employment hereunder effective immediately upon
giving written notice of such termination for
"Disability."
(c) Termination for Cause. The Company may terminate
Rhein's employment hereunder effective immediately
upon giving written notice of such termination for
"Cause." In order for Rhein's termination to be
deemed to be for Cause, the Company shall, within
sixty (60) days following the later of the event
constituting Cause or the Company's actual knowledge
thereof, give written notice to Rhein on or before
the date of termination of employment for Cause
stating that the Company is terminating Rhein's
employment with the Company and specifying in detail
the reasons for such termination. If Rhein does not
object to such notice by notifying the Company in
writing within ten (10) business days following the
date of Rhein's receipt of the Company's notice of
termination, Rhein shall be deemed to have agreed
that such termination was for Cause. If the Company
fails to give such timely notice of termination for
Cause, its right to terminate Rhein's employment for
Cause with respect to such event shall be permanently
waived. Non-
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notification by the Company with respect to a
specific event constituting Cause does not preclude
the Company from filing a notice with respect to a
subsequent event constituting Cause.
(d) Termination Not for Cause. The Company may terminate
Rhein's employment hereunder without Cause at any
time upon thirty (30) days written notice.
(e) Resignation for Good Reason. Rhein may terminate his
employment hereunder effective immediately upon
giving written notice of such termination for "Good
Reason." In order for Rhein's termination to be
deemed to be for Good Reason, Rhein shall, within
sixty (60) days following the later of the event
constituting Good Reason or his actual knowledge
thereof, give written notice to the Company on or
before the date of termination of employment for Good
Reason stating that Rhein is terminating employment
with the Company and specifying in detail the reasons
for such termination. If the Company does not object
to such notice by notifying Rhein in writing within
ten (10) business days following the date of the
Company's receipt of Rhein's notice of termination,
the Company shall be deemed to have agreed that such
termination was for Good Reason. If Rhein fails to
give such timely notice of termination for Good
Reason, his right to resign for Good Reason with
respect to such event shall be permanently waived.
Non-notification by Rhein with respect to a specific
event constituting Good Reason does not preclude
Rhein from filing a notice with respect to a
subsequent event constituting Good Reason.
(f) Resignation Not for Good Reason. Rhein may terminate
his employment hereunder without Good Reason at any
time upon thirty (30) days written notice.
(g) Retirement. Rhein may terminate his employment due to
his Retirement.
7. SEVERANCE COMPENSATION. If Rhein's employment terminates, the
following severance provisions will apply:
(a) Death. If Rhein's employment is terminated by his
death, his estate or his beneficiaries, as the case
may be, shall be entitled to the following:
(i) Base Salary through the end of the month of
his death;
(ii) Pro Rata award under the Annual Incentive
Plan for the year of his death, payable when
such awards are payable to other officers;
(iii) All of Rhein's then outstanding stock
options, whether or not then exercisable,
shall become exercisable in full, and then
outstanding
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stock options which were granted to Rhein
after the Effective Date shall not terminate
prior to the end of their respective terms;
(iv) Restrictions on Rhein's restricted stock
shall lapse;
(v) Director's and officer's liability insurance
coverage as described in Subsection 5(f) for
the two (2) year period following the date
of his death; and
(vi) Such other benefits shall be payable as
shall be provided under the relevant plans
and arrangements of the Company.
(b) Disability. If Rhein's employment is terminated due
to his Disability, he shall be entitled to the
following:
(i) Base Salary through the end of the month of
the termination of his employment;
(ii) Pro Rata award under the Annual Incentive
Plan for the year of his termination of
employment, payable when such awards are
payable to other officers;
(iii) All of Rhein's then outstanding stock
options, whether or not then exercisable,
shall become exercisable in full, and then
outstanding stock options which were granted
to Rhein after the Effective Date shall not
terminate prior to the end of their
respective terms;
(iv) Restrictions on Rhein's restricted stock
shall lapse;
(v) Director's and officer's liability insurance
coverage as described in Subsection 5(f)
until the later of the date on which Rhein
attains age sixty-five (65) or the date
which is two (2) years from the date of such
termination of employment;
(vi) Such other benefits shall be payable as
shall be provided under the relevant plans
and arrangements of the Company; and
(vii) Rhein's life insurance provided under
Subsection 5(d) and medical insurance
coverage substantially equivalent to the
coverage to Rhein, his spouse and dependents
provided under the Company's Medical Plan at
the time of such termination due to Rhein's
Disability shall continue in effect until
Rhein attains age sixty-five (65).
(c) Retirement. If Rhein's employment is terminated due
to his Retirement, he shall be entitled to the
following:
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(i) Base Salary through the end of the month of
the termination of his employment;
(ii) Pro Rata award under the Annual Incentive
Plan for the year of his termination of
employment, payable when such awards are
payable to other officers;
(iii) All of Rhein's then outstanding stock
options, whether or not then exercisable,
shall become exercisable in full, and then
outstanding stock options which were granted
to Rhein after the Effective Date shall not
terminate prior to the end of their
respective terms;
(iv) Director's and officer's liability insurance
coverage as described in Subsection 5(f)
until the later of the date on which Rhein
attains age sixty-five (65) or the date
which is two (2) years from the date of his
termination of employment;
(v) Such other benefits shall be payable as
shall be provided under the relevant plans
and arrangements of the Company; and
(vi) Rhein's life insurance provided under
Subsection 5(d) and medical insurance
coverage substantially equivalent to the
coverage to Rhein, his spouse and his
dependents provided under the Company's
Medical Plan at the time of such Retirement
shall continue in effect until Rhein attains
age sixty-five (65).
If Rhein dies under the conditions described in
Subsection 7(a) at a time when he could have retired
and satisfied the requirements for Retirement under
this Subsection 7(c), or if Rhein's termination of
employment qualifies as both a Retirement and another
type of termination described in Subsection 7(b),
7(d), 7(e) or 8(a), the following provisions of this
Subsection 7(c) shall explain the interaction of this
Subsection 7(c) and such other Subsection. If Rhein
shall die as provided in Subsection 7(a) at a time
when he could have retired and satisfied the
requirements for Retirement, Subsection 7(a)
generally will apply rather than this Subsection 7(c)
but, in addition, medical insurance coverage
substantially equivalent to the coverage Rhein's
spouse and his dependents were provided under the
Company's Medical Plan at the time of Rhein's death
shall continue in effect until Rhein would have
attained age sixty-five (65). If Rhein's termination
of employment occurs at a time when Rhein could have
retired and satisfied the requirements for Retirement
under this Subsection 7(c) and also is a type of
termination described in Subsection 7(b)
(Disability), 7(d) (Protected Termination), or 8(a)
(termination under certain circumstances in
connection with a Change in Control), the provisions
of such Subsection 7(b), 7(d), or 8(a), as
applicable, generally
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will apply rather than this Subsection 7(c);
provided, however, that the Company intends that the
following beneficial provisions of this Subsection
7(c) will apply in such case if more favorable to
Rhein, his spouse, dependents or beneficiaries, as
the case may be, than the corresponding benefits
provided under such Subsection 7(b), 7(d) or 8(a), as
applicable: (A) upon such termination of employment,
all of Rhein's then outstanding stock options,
whether or not then exercisable, shall become
exercisable in full, and then outstanding stock
options which were granted to Rhein after the
Effective Date shall not terminate prior to the end
of their respective terms; and (B) Rhein's life
insurance provided under Subsection 5(d) and medical
insurance coverage substantially equivalent to the
coverage to Rhein, his spouse and his dependents
provided under the Company's Medical Plan at the time
of such termination of employment shall continue in
effect until Rhein attains age sixty-five (65). If
Rhein's termination of employment occurs at a time
when Rhein could have retired and satisfied the
requirements for Retirement under this Subsection
7(c) and also is a type of termination described in
Subsection 7(e) (Unprotected Termination), (x) the
provisions of such Subsection 7(e) shall apply if
such termination is a termination of Rhein's
employment by the Company for Cause and (y) the
provisions of this Subsection 7(c) shall apply if
such termination is a termination of employment by
Rhein other than for Good Reason.
(d) Protected Termination. If Rhein's employment is
terminated by the Company other than due to his
Disability or for Cause or is terminated by Rhein for
Good Reason, he shall be entitled to the following:
(i) Base Salary through the date of his
termination of his employment;
(ii) Pro Rata award under the Annual Incentive
Plan for the year of his termination of
employment, payable when such awards are
payable to other officers;
(iii) Payment of his annual Base Salary and Target
Annual Bonus as follows:
(A) For the one year period from the
date of such termination of
employment, the Company shall (x)
continue to pay Rhein's annual Base
Salary at the times specified in
Subsection 5(a) and (y) pay Rhein,
in equal monthly amounts, an amount
equal to Rhein's Target Annual Bonus
for the year of his termination of
employment; and
(B) Within thirty (30) days following
the date which is one year from the
date of such termination of
employment, the Company shall pay
Rhein, in a single sum, an amount
equal
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to the sum of (x) his annual Base
Salary plus (y) his Target Annual
Bonus for the year of his
termination of employment.
(iv) For the period of two (2) years from the
date of such termination of employment (such
two (2) year period is hereinafter referred
to as the "Payment Term"), such other
benefits shall be payable as shall be
provided under the relevant plans and
arrangements of the Company;
(v) Director's and officer's liability insurance
coverage as described in Subsection 5(f)
until the later of the date on which Rhein
attains age sixty-five (65) or the date
which is two (2) years from the date of his
termination of employment;
(vi) Rhein's life insurance shall continue in
effect throughout the Payment Term;
(vii) Throughout the Payment Term, Rhein shall be
entitled to an automobile allowance in
accordance with the Company's automobile
policy for its executive officers (but not
less than Twelve Thousand Dollars
($12,000.00) per year), an allowance for
estate, financial and tax planning of Ten
Thousand Dollars ($10,000.00) per year, and
reimbursement for reasonable club dues and
membership fees consistent with the
Company's past practice; and
(vii) Throughout the Payment Term, Rhein shall
enjoy continued participation in all of the
benefit plans of the Company in which he was
a participant at the time of his termination
of employment.
(e) Unprotected Termination. If Rhein's employment
hereunder terminates due to Rhein's termination by
the Company for Cause or termination by Rhein other
than for Good Reason or Retirement, then no further
compensation or benefits will be provided to Rhein by
the Company under this Agreement following the date
of such termination of employment other than payment
of compensation earned to the date of termination of
employment but not yet paid. As more fully and
generally provided in Section 18 hereof, this
Subsection 7(e) shall not be interpreted to deny
Rhein any benefits to which he may be entitled under
any plan or arrangement of the Company applicable to
Rhein. Likewise, this Subsection 7(e) shall not be
interpreted to entitle Rhein to a bonus under the
Annual Incentive Plan following Rhein's termination
of employment except as provided in the Annual
Incentive Plan.
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(f) Forfeiture. Notwithstanding anything contained in
this Agreement to the contrary, other than Section 18
hereof, if Rhein breaches any of Rhein's obligations
under Section 11 hereof, and such breach is not
substantially cured within ninety (90) days after the
Board gives written notice thereof to Rhein, no
further severance payments or other benefits will be
payable to Rhein under this Section 7.
8. CHANGE IN CONTROL.
(a) In General. If the Company shall terminate Rhein's
employment other than for Disability or Cause or if
Rhein shall terminate his employment, and such
termination shall occur in connection with a Change
in Control as described in Subsection 8(b) hereof,
there shall be paid to Rhein, within thirty (30) days
following such termination of employment, a single
sum payment equal to the sum of the Base Salary and
Target Annual Bonus payments provided for in
Subsection 7(d)(iii), except that the amount of such
payment shall be three (3) times the sum of Rhein's
annual Base Salary and Target Annual Bonus for the
year of his termination of employment. Such single
sum payment shall be in lieu of such payments of Base
Salary and Target Annual Bonus provided for in
Subsection 7(d)(iii). The other payments and benefits
provided for in Subsection 7(d) shall be provided as
set forth in Subsection 7(d), except that, for such
purpose, the Payment Term shall be deemed to be a
three (3) year period from the date of Rhein's
termination of employment. In addition, all of
Rhein's then outstanding stock options, whether or
not then exercisable, shall become exercisable in
full and then outstanding stock options which were
granted to Rhein after the Effective Date shall not
terminate prior to the end of their respective terms
and restrictions on Rhein's restricted stock shall
lapse.
(b) In Connection with a Change in Control. For purposes
of this Agreement, Rhein's termination of employment
shall be considered "in connection with" a Change in
Control as defined in Section 1 either:
(i) if such termination of employment is by the
Company other than for Disability or for
Cause or such termination of employment is
by Rhein for any reason and, in any such
case, occurs within the one (1) year period
commencing on a Change in Control; or
(ii) if such termination of employment is by the
Company other than for Disability or for
Cause or such termination of employment is
by Rhein for Good Reason and, in any such
case, occurs within the period commencing on
the commencement date of a tender offer for
the Company's Common Shares, the execution
of a letter of intent or the execution of a
definitive agreement which, in each case,
could reasonably be expected to lead to a
Change in Control
13
as defined in Section 1 hereof, and ending
on either (A) the date of the Change in
Control resulting from such tender offer or
the consummation of the transaction
contemplated by such letter of intent or
such definitive agreement, as the case may
be, or (B) the date as of which the Board
determines in good faith that such tender
offer has been withdrawn or has reached a
final conclusion not resulting in a Change
in Control or the transaction contemplated
by such letter of intent or such definitive
agreement is not to be consummated or if
consummated, will not lead to a Change in
Control, as the case may be.
(c) Section 280G Protection. Rhein shall be entitled to a
cash payment (the "Excise Tax Gross-Up Payment")
equal to the amount of excise taxes which Rhein is
required to pay pursuant to Section 4999 of the
Internal Revenue Code of 1986, as amended ("Code"),
as a result of any "parachute payments" as defined in
Section 280G(b)(2) of the Code made by or on behalf
of the Company or any successor thereto, under this
Agreement or otherwise, resulting in an "excess
parachute payment" as defined in Section 280G(b)(1)
of the Code. In addition to the foregoing, the Excise
Tax Gross-Up Payment due to Rhein under this Section
8 shall be increased by the aggregate of the amount
of federal, state and local income, excise and
penalty taxes, and any interest on any of the
foregoing, for which Rhein will be liable on account
of the Excise Tax Gross-Up Payment to be made under
this Section 8, such that Rhein will receive the
Excise Tax Gross-Up Payment net of all income, excise
and penalty taxes, and any interest on any of the
foregoing, imposed on Rhein on account of the receipt
of the Excise Tax Gross-Up Payment. The computation
of the Excise Tax Gross-Up Payment shall be
determined, at the expense of the Company or its
successor, by an independent accounting, actuarial or
consulting firm selected by the Company or its
successor. Such Excise Tax Gross-Up Payment shall be
made by the Company or its successor at such time as
the Company or its successor shall determine, in its
sole discretion, but in no event later than the date
five (5) business days before the due date, without
regard to any extension, for filing Rhein's federal
income tax return for the calendar year for which it
is determined that excise taxes are payable under
Section 4999 of the Code. Notwithstanding the
foregoing, there shall be no duplication of payments
by the Company or its successor under this Section 8
in respect of excise taxes under Section 4999 of the
Code to the extent the Company or its successor is
making payments in respect of such excise taxes under
any other arrangement with Rhein. In the event that
Rhein is ultimately assessed with excise taxes under
Section 4999 of the Code which exceed the amount of
excise taxes used in computing Rhein's payment under
this Section 8, the Company or its successor shall
indemnify Rhein for such additional excise taxes plus
any additional excise taxes, income taxes,
14
interest and penalties resulting from the additional
excise taxes and the indemnity hereunder.
9. SEVERANCE PLAN. It is the intention of the Parties that this
Agreement provide special benefits to Rhein. If benefits shall be payable
pursuant to this Agreement due to a cause compensable under the Company's
Severance Benefit Plan, benefits pursuant to this Agreement shall be in lieu of,
and not duplicative of, corresponding benefits under the Company's Severance
Benefit Plan.
10. PLAN AMENDMENTS. To the extent any provisions of this
Agreement modify the terms of any existing plan, policy or arrangement affecting
the compensation or benefits of Rhein, as appropriate, (a) such modification as
set forth herein shall be deemed an amendment to such plan, policy or
arrangement as to Rhein, and both the Company and Rhein hereby consent to such
amendment, (b) the Company will appropriately modify such plan, policy or
arrangement to correspond to this Agreement with respect to Rhein, or (c) the
Company will provide an "Alternative Benefit," as defined in Section 16 hereof,
to or on behalf of Rhein in accordance with the provisions of such Section 16.
11. NON-COMPETITION, CONFIDENTIAL INFORMATION AND
NON-INTERFERENCE.
(a) Non-Competition. In consideration of this Agreement,
Rhein agrees that, during the Employment Term and the
longer of (i) the Payment Term or (ii) the two (2)
year period following Rhein's termination of
employment, Rhein shall not (except in the case of an
involuntary termination of employment not for Cause
or a voluntary termination of employment, either of
which occurs within one (1) year after a Change in
Control) become an officer, director, joint venturer,
employee, consultant or five percent (5%) shareholder
(directly or indirectly) of, or promote or assist
(financially or otherwise), any entity which directly
competes with any business of the Company or any of
its affiliates in which the Company or such
affiliate(s) are engaged as of the date of such
termination of employment and which constitutes, on a
consolidated basis, at least one percent (1%) of the
Company's revenues. Rhein understands that the
foregoing restrictions may limit his ability to
engage in certain business pursuits during the period
provided for herein, but acknowledges that he will
receive sufficiently higher remuneration and other
benefits from the Company hereunder than he would
otherwise receive to justify such restriction. Rhein
acknowledges that he understands the effect of the
provisions of this Subsection 11(a), and that he has
had reasonable time to consider the effect of these
provisions, and that he was encouraged to and had an
opportunity to consult an attorney with respect to
these provisions.
(b) Confidential Information. 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
15
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
(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 or proprietary
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, or when required to do so
by legal process, by any governmental agency having
supervisory authority over the business of the
Company or by any administrative or legislative body
(including a committee thereof) that requires Rhein
to divulge, disclose or make accessible such
information. In the event that Rhein is so ordered,
Rhein shall so advise the Company in order to allow
the Company to object to or otherwise resist such
order. 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.
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, any Company document,
contract, internal financial or management reports,
customer 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.
(c) Noninterference. Rhein agrees that, during the
Employment Term and the longer of (i) the Payment
Term or (ii) two (2) years after Rhein's termination
of employment, Rhein shall not (except in the case of
an involuntary termination of employment not for
Cause or a voluntary termination of employment,
either of which occurs within one (1) year after a
Change in Control), without the prior written consent
of the Company, directly or indirectly, induce or
attempt to induce any employee, agent, consultant or
other representative or associate of the Company to
terminate his or her employment, representation or
other relationship with the Company, or in any way
directly or indirectly interfere with any
relationship between the Company and its suppliers or
customers.
16
(d) Remedy. Rhein understands, acknowledges and agrees
that Subsections 11(a), 11(b) and 11(c) hereof were
negotiated at arms length and are required for the
fair and reasonable protection of the Company.
Nevertheless, if any aspect of these restrictions is
found to be unreasonable or otherwise unenforceable
by a court of competent jurisdiction, the Company and
Rhein intend for such restrictions to be modified by
such court so as to be reasonable and enforceable
and, as so modified by the court, to be fully
enforced. 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 (without bond or security),
including immediate injunctive relief restraining any
threatened or further breach without the necessity of
proof of actual damage, 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 in Subsections 11(a)
and 11(c) hereof 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. ARBITRATION. The following arbitration rules shall apply to
this Agreement:
(a) In the event that Rhein's employment shall be
terminated by the Company during the Employment Term
or the Company shall withhold payments or provision
of benefits because Rhein is alleged to be engaged in
activities prohibited by Section 11 hereof 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
Commercial Arbitration 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.
(b) Without limiting the generality of Subsection 12(a),
this Subsection 12(b) shall apply to termination
asserted to be for "Cause" or for "Good Reason." In
the event that (i) the Company terminates Rhein's
employment for Cause and Rhein submits a written
objection to the Company within the ten (10) days
specified in Subsection 6(c) hereof, or (ii) Rhein
resigns his employment for Good Reason and the
Company submits a written objection to Rhein within
the ten (10) days specified in Subsection 6(e)
hereof, the Company and Rhein each shall have thirty
(30) days after the date of such written objection to
demand of the American
17
Arbitration Association in writing (with a copy to
the other Party) that arbitration be commenced to
determine whether Cause or Good Reason, as the case
may be, existed with respect to such termination or
resignation. The Parties shall have thirty (30) days
from the date of such written request to select such
third party arbitrator. Upon the expiration of such
thirty (30) day period, the Parties shall have an
additional thirty (30) days in which to present to
such third party arbitrator such arguments, evidence
or other material (oral or written) as may be
permitted and in accordance with such procedures as
may be established by such third party arbitrator.
The thirty party arbitrator shall furnish a written
summary of his findings to the Parties not later than
thirty (30) days following the last day on which the
parties were entitled to present arguments, evidence
or other material to the third party arbitrator.
During the period of resolution of a dispute under this Subsection
12(b), Rhein shall receive no compensation by the Company (other than payment by
the Company of premiums due before or during such period on any insurance
coverage applicable to Rhein hereunder) and Rhein shall have no duties for the
Company. If the arbitrator determines that the Company did not have Cause to
terminate Rhein's employment or that Rhein had Good Reason to resign his
employment, as the case may be, the Company shall promptly pay Rhein in a lump
sum any compensation to which Rhein would have been entitled, for the period
commencing with the date of Rhein's termination or resignation and ending on the
date of such determination, had his employment not been terminated or had he not
resigned.
13. NOTICES. For purposes of this Agreement, all communications
provided for herein shall be in writing and shall be deemed to have been duly
given when hand delivered or mailed by United States registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
(a) If the notice is to the Company:
Pioneer-Standard Electronics, Inc.
6065 Parkland Boulevard
Mayfield Heights, OH 44124
Attention: Secretary or Assistant Secretary
(b) If the notice is to Rhein:
Arthur Rhein
40 Stonehill Lane
Moreland Hills, Ohio 44022
18
with a copy to:
Elliot M. Kaufman, Esq.
Elliot M. Kaufman Co., LPA
1392 SOM Center Road
Cleveland, Ohio 44124
or to such other address as either party may have furnished to the other in
writing and in accordance herewith; except that notices of change of address
shall be effective only upon receipt.
14. ASSIGNMENT; BINDING EFFECT. This Agreement shall be binding
upon and inure to the benefit of the parties to this Agreement and their
respective successors, heirs (in the case of Rhein) and permitted assigns. No
rights or obligations of the Company under this Agreement may be assigned or
transferred by the Company except that such rights or obligations may be
assigned or transferred in connection with the sale or transfer of all or
substantially all of the assets of the Company, provided that the assignee or
transferee is the successor to all or substantially all of the assets of the
Company and such assignee or transferee expressly assumes the liabilities,
obligations and duties of the Company, as contained in this Agreement, either
contractually or as a matter of law. The Company further agrees that, in the
event of a sale or transfer of assets as described in the preceding sentence, it
shall be a condition precedent to the consummation of any such transaction that
the assignee or transferee expressly assumes the liabilities, obligations and
duties of the Company hereunder. No rights or obligations of Rhein under this
Agreement may be assigned or transferred by Rhein other than Rhein's rights to
compensation and benefits, which may be transferred only by will or operation of
law, except as provided in this Section 14.
Rhein shall be entitled, to the extent permitted under any applicable
law, to select and change a beneficiary or beneficiaries to receive any
compensation or benefits payable hereunder following Rhein's death by giving the
Company written notice thereof. In the absence of such a selection, any
compensation or benefit payable under this Agreement following the death of
Rhein shall be payable to Rhein's spouse, or if such spouse shall not survive
Rhein, to Rhein's estate. In the event of Rhein's death or a judicial
determination of Rhein's incompetence, reference in this Agreement to Rhein
shall be deemed, where appropriate, to refer to Rhein's beneficiary, estate or
other legal representative.
15. INVALID PROVISIONS. Any provision of this Agreement that is
prohibited or unenforceable shall be ineffective to the extent, but only to the
extent, of such prohibition or unenforceability without invalidating the
remaining portions hereof and such remaining portions of this Agreement shall
continue to be in full force and effect. In the event that any provision of this
Agreement shall be determined to be invalid or unenforceable, the Parties will
negotiate in good faith to replace such provision with another provision that
will be valid or enforceable and that is as close as practicable to the
provisions held invalid or unenforceable.
16. ALTERNATIVE SATISFACTION OF COMPANY'S OBLIGATIONS. In the
event this Agreement provides for payments or benefits to or on behalf of Rhein
which cannot be
19
provided under the Company's benefit plans, policies or arrangements either
because such plans, policies or arrangements no longer exist or no longer
provide such benefits or because provision of such benefits to Rhein would
adversely affect the tax qualified or tax advantaged status of such plans,
policies or arrangements for Rhein or other participants therein, the Company
may provide Rhein with an "Alternative Benefit," as defined in this Section 16,
in lieu thereof. The Alternative Benefit is a benefit or payment which places
Rhein and Rhein's dependents or beneficiaries, as the case may be, in at least
as good of an economic position as if the benefit promised by this Agreement (a)
were provided exactly as called for by this Agreement, and (b) had the favorable
economic, tax and legal characteristics customary for plans, policies or
arrangements of that type. Furthermore, if such adverse consequence would affect
Rhein or Rhein's dependents, Rhein shall have the right to require that the
Company provide such an Alternative Benefit.
17. ENTIRE AGREEMENT, MODIFICATION. Subject to the provisions of
Section 18 hereof, this Agreement contains the entire agreement between the
Parties with respect to the employment of Rhein by the Company and supersedes
all prior and contemporaneous agreements, representations, and understandings of
the Parties, whether oral or written. No modification, amendment, or waiver of
any of the provisions of this Agreement shall be effective unless in writing,
specifically referring hereto, and signed by both Parties.
18. NON-EXCLUSIVITY OF RIGHTS. Notwithstanding the foregoing
provisions of Section 17, nothing in this Agreement shall prevent or limit
Rhein's continuing or future participation in any benefit, bonus, incentive or
other plan, program, policy or practice provided by the Company for its
executive officers, nor shall anything herein limit or otherwise affect such
rights as Rhein has or may have under any stock option, restricted stock or
other agreements with the Company or any of its subsidiaries. Amounts which
Rhein or Rhein's dependents or beneficiaries, as the case may be, are otherwise
entitled to receive under any such plan, policy, practice or program shall not
be reduced by this Agreement except as provided in Section 9 hereof with respect
to payments under the Severance Benefit Plan if cash payments are made
hereunder.
19. WAIVER OF BREACH. The failure at any time to enforce any of
the provisions of this Agreement or to require performance by the other party of
any of the provisions of this Agreement shall in no way be construed to be a
waiver of such provisions or to affect either the validity of this Agreement or
any part of this Agreement or the right of either party thereafter to enforce
each and every provision of this Agreement in accordance with the terms of this
Agreement.
20. GOVERNING LAW. This Agreement has been made in, and shall be
governed and construed in accordance with the laws of, the State of Ohio. The
Parties agree that this Agreement is not an "employee benefit plan" or part of
an "employee benefit plan" which is subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
21. WITHHOLDING. The Company may withhold from any amounts payable
under this Agreement such federal, state or local taxes or other amounts as
shall be required to be
20
withheld pursuant to any applicable law or regulation. Where withholding applies
to Common Shares, the Company shall make cashless withholding available to Rhein
if permissible by law.
22. EXPENSES.
(a) Expenses of Agreement. The Company shall pay or
reimburse reasonable attorney fees and expenses
incurred by Rhein, not to exceed Fifteen Thousand
Dollars ($15,000.00), in connection with the
preparation and negotiation of this Agreement.
(b) Enforcement Costs. The Company is aware that upon the
occurrence of a Change in Control the Board 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, 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 22, to represent
Rhein in connection with the initiation or defense of
any litigation or other legal action, whether by or
against the Company or any Director, officer,
shareholder or other person affiliated with the
Company, in any jurisdiction. Notwithstanding any
existing or prior attorney-client relationship
between the Company and such counsel, the Company
irrevocably consents to Rhein entering into an
attorney-client relationship with such counsel, and
in that connection the Company and Rhein agree that a
confidential relationship shall exist between Rhein
and such counsel. The reasonable fees and expenses of
counsel selected from time to time by Rhein as herein
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.
21
23. REPRESENTATION. The Company represents and warrants that it is
fully authorized and empowered to enter into this Agreement and that the
performance of its obligations under this Agreement will not violate any
agreement between it and any other person, firm or organization.
24. SUBSIDIARIES AND AFFILIATES. Notwithstanding any contrary
provision of this Agreement, to the extent it does not adversely affect Rhein,
the Company may provide the compensation and benefits to which Rhein is entitled
hereunder through one or more subsidiaries or affiliates.
25. NO MITIGATION OR OFFSET. In the event of any termination of
employment, Rhein shall be under no obligation to seek other employment. Amounts
due Rhein under this Agreement shall not be offset by any remuneration
attributable to any subsequent employment he may obtain.
26. SOLE REMEDY. The Parties agree that the remedies of each
against the other for breach of this Agreement shall be limited to enforcement
of this Agreement and recovery of the amounts and remedies provided for herein.
The Parties, however, further agree that such limitation shall not prevent
either Party from proceeding against the other to recover for a claim other than
under this Agreement.
IN WITNESS WHEREOF, the Company and Rhein have executed this Agreement
as of the day and year first above written.
PIONEER-STANDARD ELECTRONICS, INC.
(the "Company")
By: /s/ Charles F. Christ
--------------------------------------
Charles F. Christ
Chairman of the Compensation Committee
ARTHUR RHEIN
("Rhein")
/s/ Arthur Rhein
--------------------------------------
Arthur Rhein
22