-----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, FmloyE9yudVy0ptVT7v1ftoxQo82lVi6MTDH+v1cQUwNKeVidaSf0s/jQNjSpfz6 NHpc1OZd/HolCr4WxAE0+g== 0000950152-96-000394.txt : 19960410 0000950152-96-000394.hdr.sgml : 19960410 ACCESSION NUMBER: 0000950152-96-000394 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951130 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960209 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIONEER STANDARD ELECTRONICS INC CENTRAL INDEX KEY: 0000078749 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 340907152 STATE OF INCORPORATION: OH FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-05734 FILM NUMBER: 96514451 BUSINESS ADDRESS: STREET 1: 4800 E 131ST ST CITY: CLEVELAND STATE: OH ZIP: 44105 BUSINESS PHONE: 2165873600 8-K/A 1 PIONEER STANDARD 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________ FORM 8-K/A-1 CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report: November 30, 1995 -------------------- (Date of earliest event reported) PIONEER-STANDARD ELECTRONICS, INC. ------------------------------------------------------ (Exact name of Registrant as specified in its charter) Ohio 0-5734 34-0907152 - ---------------------------- ------------- ---------------------- (State or other jurisdiction (Commission (I.R.S. employer of incorporation) file number) 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 ---------------- 2 The undersigned Registrant hereby amends the following items, financial statements, exhibits or other portions of its Current Report on Form 8-K dated November 30, 1995 as set forth in the pages attached hereto: "Item 2. Acquisition or Disposition of Assets" is hereby amended and restated to correct a minor typographical error. "Item 7. Financial Statements, Pro Forma Financial Information and Exhibits" is hereby amended and restated to include pro forma financial information required in connection with the acquisition of Pioneer/Technologies Group, Inc. by the Registrant and to include an Exhibit. Item 2. Acquisition or Disposition of Assets. - --------------------------------------------- On November 30, 1995, Pioneer-Standard Electronics, Inc. (the "Company") acquired 50% of the Common Stock (the "Stock") of Pioneer/Technologies Group Inc., a Maryland corporation ("Technologies"). Prior to this acquisition, the Company owned of record 50% of the Common Stock of Technologies. The acquisition was accomplished pursuant to a Plan and Agreement of Merger, dated November 30, 1995, by and among the Company, Technologies, Pioneer-Standard of Maryland, Inc., a wholly-owned subsidiary of the Company, the shareholders of Technologies (the "Shareholders") and Bruce S. Tucker as Shareholders Representative (the "Merger Agreement"), pursuant to which Pioneer-Standard of Maryland, Inc., was merged with and into Technologies. A copy of the Merger Agreement is filed as an Exhibit hereto. In connection with the purchase of the Stock, Technologies entered into Noncompetition Agreements with each of Bruce S. Tucker and Jay S. Ross, former employees of Technologies. These Agreements provide that each individual will not, for a period of two years, directly or indirectly compete with Technologies. Copies of the Noncompetition Agreements are filed as Exhibits hereto. As consideration for the Stock, the Company assumed certain liabilities, including approximately $30 million of bank debt, of Technologies and, subject to claims which may be made under the Escrow Agreement described below, will pay the Shareholders $50 million in cash. The obligation of the Company to pay the Shareholders the cash purchase price is secured by a Letter of Credit. On January 4, 1996 the Shareholders are entitled to receive $48 million in cash, after surrendering the Letter of Credit. At that time, two million dollars will be deposited with NationsBank, N.A. as Escrow Agent to secure certain indemnification provisions of the Merger Agreement. A copy of the Escrow Agreement is filed as an Exhibit hereto. The purchase price for the Stock was determined through arm's length negotiations among the parties. The consideration to be paid by the Company was financed under a Credit Agreement, dated November 29, 1995, by and among the Company, Pioneer-Standard of Maryland, Inc., certain Banks and 2 3 National City Bank, as Agent (the "Credit Agreement"). The principal amount advanced and to be paid on January 4, 1996 under the Credit Agreement is subject to an interest rate of various floating rate options. It is anticipated that some portion of the loans under the Credit Agreement will be refinanced with a combination of equity and fixed rate debt, given favorable market conditions. Technologies distributes electronic components and computer products and provides technical support through 11 locations in the southeast and northwest regions of the United States. Other than the Noncompetition Agreements set forth above, and the fact that, prior to this transaction, the Company owned 50% of the Common Stock of Technologies, there are no material relationships between Technologies and the Company or any of their affiliates, directors or officers, except that James L. Bayman and Preston B. Heller, directors of the Company, also serve as directors of Technologies. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. - --------------------------------------------------------------------------- (a) Financial Statements of Businesses Acquired. ------------------------------------------- 1. Audited Financial Statements of Pioneer/Technologies Group, Inc. (1) Report of Independent Auditors Balance sheets at March 31, 1995 and 1994 Statements of Income and Retained Earnings for the years ended March 31, 1995, 1994 and 1993 Statements of Cash Flows for the years ended March 31, 1995, 1994 and 1993 Notes to Financial Statements 2. Unaudited Condensed Financial Statements of Pioneer/ Technologies Group, Inc. (2) Balance Sheets at September 30, 1995 and March 31, 1995 Statements of Income and Retained Earnings for the three and six month periods ending September 30, 1995 and 1994 Statements of Cash Flows for the three and six month periods ended September 30, 1995 and 1994 Notes to Financial Statements (b) Pro Forma Financial Information. ------------------------------- Pioneer-Standard Electronics, Inc. and Subsidiaries and Pioneer/Technologies Group, Inc. -- Pro Forma Condensed Combined Financial Statements (Unaudited) Pro Forma Condensed Consolidated Balance Sheet of Pioneer-Standard Electronics, Inc. and Subsidiaries and 3 4 Pioneer/Technologies Group, Inc. for the Six Months Ended September 30, 1995 (Unaudited) Pro Forma Condensed Consolidated Statement of Income of Pioneer-Standard Electronics, Inc. and Subsidiaries and Pioneer/Technologies Group, Inc. for the Fiscal Year Ended March 31, 1995 (Unaudited) Pro Forma Consolidated Statement of Income of Pioneer-Standard Electronics, Inc. and Subsidiaries and Pioneer/Technologies Group, Inc. for the Six Months Ended September 30, 1995 (Unaudited) Notes to Unaudited Pro Forma Combined Consolidated Financial Statements
Exhibit No. Description Page No. - ---------- ----------- --------- 2.1 Plan and Agreement of Merger, dated * November 30, 1995 by, and among Pioneer-Standard Electronics, Inc., Pioneer-Standard of Maryland, Inc., Pioneer/Technologies Group Inc., the Shareholders identified on the Signature Pages and Bruce S. Tucker, as Shareholders Representative (without Schedules).** 4.1 Credit Agreement, dated as of November 29, 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. 4.2 Amendment No. 2 to Note Purchase 13 Agreement, as of November 30, 1995, by Pioneer-Standard Electronics, Inc. and Teachers Insurance and Annuity Association of America. 99.1 Escrow Agreement, dated as of November 30, 1995, by and among * Pioneer-Standard Electronics, Inc., certain stockholders of Pioneer/Technologies Group Inc., Bruce S. Tucker as Shareholders Representative and NationsBank, N.A. 99.2 Noncompetition Agreement, dated as of November 30, 1995, by * and between Pioneer-Standard of Maryland, Inc. f/k/a Pioneer/Technologies Group Inc. and Bruce S. Tucker.
4 5 99.3 Noncompetition Agreement, dated as of November 30, 1995, by * and between Pioneer-Standard of Maryland, Inc. f/k/a Pioneer/Technologies Group Inc. and Jay S. Ross.
_______________ (1) These financial statements were previously filed in connection with the Company's Annual Report on Form 10-K for the year ended March 31, 1995, which financial statements are incorporated herein by reference. (2) These Financial Statements were previously filed in connection with the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1995, which Financial Statements are incorporated herein by reference. * Previously filed. ** The Registrant agrees by this filing to supplementally furnish a copy of the schedules of this Agreement to the Commission upon request. 5 6 SIGNATURES ---------- Pursuant to the requirements 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. By: /s/ John V. Goodger ----------------------------- John V. Goodger, Vice President, Treasurer and Assistant Secretary Date: February 9, 1996 431/15154NGA.451 6 7 PIONEER-STANDARD ELECTRONICS, INC. UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS BASIS OF PRESENTATION Pioneer-Standard Electronics, Inc. ("Pioneer") acquired the remaining interest in the 50 percent owned affiliate, Pioneer/Technologies Group, Inc. ("Technologies") in a $50 million cash transaction on November 30, 1995. The transaction was funded with revolving bank credit borrowings. The unaudited pro forma combined statements of income for the year ended March 31, 1995 and the six months ended September 30, 1995 present the pro forma results of operations of Pioneer as if the acquisition of Technologies had occurred on April 1, 1994 and April 1, 1995, respectively. The pro forma condensed combined balance sheet is presented on a pro forma basis as if the acquisition and related revolving bank credit borrowings had occurred on September 30, 1995. The unaudited pro forma condensed combined statements of income for the year ended March 31, 1995 and the six months ended September 30, 1995, are not necessarily indicative of the results of operations that my have actually occurred had the acquisition taken place at April 1, 1994 and April 1, 1995, or of the future results of Pioneer. 8 PIONEER-STANDARD ELECTRONICS, INC. PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) SEPTEMBER 30, 1995 (IN THOUSANDS)
Pro Forma Pro Forma Pioneer Technologies Adjustments Combined ------- ------------ ----------- -------- ASSETS Current Assets Cash $ 18,845 $ 10 $ 18,855 Accounts receivable - net 128,127 42,829 $ (312) (A) 170,644 Merchandise inventory 137,352 58,685 196,037 Prepaid expenses 2,667 630 3,297 Deferred income taxes 5,708 1,075 6,783 Shareholder notes receivable -- 14 (14) (A) -- ----------- ------------ ------------- ----------- Total current assets 292,699 103,243 (326) (A) 395,616 Investment in 50%-owned company 17,872 -- {(76,272) (B)} -- {58,400 (A)} Other assets 1,142 378 (192) (A) 1,328 Goodwill 4,542 -- 40,526 (B) 45,068 Property and equipment, at cost 62,466 11,360 73,826 Accumulated depreciation 24,775 6,046 30,821 ----------- ------------ ------------ ----------- Net 37,691 5,314 -- 43,005 ----------- ------------ ------------ ----------- $ 353,946 $ 108,935 $ 22,136 $ 485,017 ========== ============ ============ ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Notes payable to banks $ 17,000 $ -- $ 17,000 Accounts payable 89,082 26,779 115,861 Accrued liabilities 22,260 2,693 24,953 Long-term debt due within one year 2,873 -- 2,873 ----------- ------------ ------------ ----------- Total current liabilities 131,215 29,472 160,687 Long-term debt 80,313 43,717 $ 57,882 (A) 181,912 Deferred income taxes 2,268 -- 2,268 Shareholder's equity Common stock 6,653 10 (10) (B) 6,653 Capital in excess of stated value 16,884 90 (90) (B) 16,884 Retained earnings 116,121 35,646 (35,646) (B) 116,121 Foreign currency translation adjustment 492 -- 492 ----------- ------------ ------------ ----------- 140,150 35,746 (35,746) 140,150 ----------- ------------ ------------ ----------- $ 353,946 $ 108,935 $ 22,136 $ 485,017 ========== ============ ============ ===========
See accompanying notes. 9 PIONEER-STANDARD ELECTRONICS, INC. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) FOR THE YEAR ENDED MARCH 31, 1995 (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Pro Forma Pro Forma Pioneer Technologies Adjustments Combined ------- ------------ ----------- -------- DR (CR) Net sales $ 832,152 $ 368,100 $ 1,200,252 Cost and expenses: Cost of goods sold 677,171 316,212 993,383 Warehouse, selling and $ {(4,400) (C)} administrative expense 111,302 41,736 { 1,013 (D)} 149,651 ----------- ------------ ------------ -------------- Operating profit 43,679 10,152 (3,387) 57,218 Interest expense 3,966 2,016 3,600 (E) 9,582 Equity in earnings of 50%-owned company 2,500 -- 2,500 (F) -- ----------- ------------ ------------ -------------- Income before income taxes 42,213 8,136 (2,713) 47,636 Provision for income taxes 17,204 3,135 (444) (G) 19,895 ----------- ------------ ------------ -------------- Net income $ 25,009 $ 5,001 $ (2,269) $ 27,741 =========== ============ ============= ============ Average shares outstanding 22,886,877 22,886,877 Shares outstanding at end of period 22,374,219 22,374,219 Earning per share $1.09 $1.21 Dividends per share $.075 $.075
See accompanying notes. 10 PIONEER-STANDARD ELECTRONICS, INC. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1995 (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Pro Forma Pro Forma Pioneer Technologies Adjustments Combined DR (CR) Net sales $ 459,637 $ 160,396 $ 620,033 Cost and expenses: 370,671 133,532 504,203 Cost of goods sold Warehouse, selling and $ {(1,900) (C)} administrative expense 63,838 22,280 { 507 (D)} 84,725 ----------- ------------ ---------------- -------------- Operating profit 25,128 4,584 (1,393) 31,105 Interest expense 2,965 1,313 1,800 (E) 6,078 Equity in earnings of 50%-owned company 909 -- 909 (F) -- ----------- ------------ ------------ -------------- Income before income taxes 23,072 3,271 (1,316) 25,027 Provision for income taxes 9,551 1,454 (73) (G) 10,932 ----------- ------------ ------------ -------------- Net income $ 13,521 $ 1,817 $ (1,243) $ 14,095 =========== ============ ============ ============ Average shares outstanding 23,178,946 23,178,946 Shares outstanding at end of period 22,451,135 22,451,135 Earning per share $.58 $.61 Dividends per share $.047 $.047
See accompanying notes. 11 PIONEER-STANDARD ELECTRONICS, INC. NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS) The following is a summary of the adjustments to the pro forma condensed consolidated balance sheet at September 30, 1995 to record the Technologies acquisition and related goodwill:
Debit Credit ----- ------ (A) Investment in 50%-owned company $58,400 Long-term debt $57,882 Account receivable 312 Shareholder notes receivable 14 Other assets 192 To record the acquisition, bank borrowings and collection of amounts due from Technologies' shareholders. (B) Common stock $ 10 Capital in excess of stated value 90 Retained earnings 35,646 Goodwill 40,526 Investment in 50%-owned company $76,272 To eliminate the investment in and equity accounts of Technologies and record related goodwill (to be amortized over 40 years).
The following is a summary of the adjustments included in the pro forma condensed consolidated statements of income:
For the For the Six Year Ended Months Ended March 31, 1995 September 30, 1995 -------------- ------------------ (C) Adjustment to record reduction of net expenses primarily attributable to compensation and benefit $ (4,400) $ (1,900) related expenses of terminated employees (D) Adjustment to record amortization of goodwill over a 40 year period. 1,013 507
12
For the For the Six Year Ended Months Ended March 31, 1995 September 30, 1995 -------------- ------------------ (E) Adjustment to reflect the increase in interest expense associated with additional debt incurred in connection with the acquisition. $ 3,600 $ 1,800 (F) Adjustment to eliminate equity in earnings of 50%-owned company. (2,500) (909) (G) Adjustment to income taxes based on consolidated pro forma income. (444) (75)
EX-4.2 2 EXHIBIT 4.2 1 Exhibit 4.2 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"). 2 4. Under Section Section 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 Section 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 cerain 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. 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 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 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 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 Section Section 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 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). 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: 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: 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 Subsidiaty 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. 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, 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 are, unless otherwise specified, to such 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 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. 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 J. Looga ------------------- Name: John J. Looga Title: Vice President, Treasurer TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA By: /S/ Loren S. Archibald ----------------------- Name: Loren S. Archibald Title: Managing Director - Private Placements 14 -----END PRIVACY-ENHANCED MESSAGE-----