-----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, TDRjEbZz4oy/aLMPrypBTXRs+jZQqHXpaR4KoPx5/cg7a9lFHQQg4OgDQa/wjvoN 0CDWF/Tipmm+8wAwbfYq5Q== 0000950152-97-003676.txt : 19970509 0000950152-97-003676.hdr.sgml : 19970509 ACCESSION NUMBER: 0000950152-97-003676 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19970508 SROS: NONE 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: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-26697 FILM NUMBER: 97598304 BUSINESS ADDRESS: STREET 1: 4800 E 131ST ST CITY: CLEVELAND STATE: OH ZIP: 44105 BUSINESS PHONE: 2165873600 S-3 1 PIONERR-STANDARD ELECTRONICS, INC. / S-3 1 As filed with the Securities and Exchange Commission on May 8, 1997 Registration No. 333- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- PIONEER-STANDARD ELECTRONICS, INC. (Exact name of Registrant as specified in its charter) OHIO 34-0907152 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4800 EAST 131ST STREET, CLEVELAND, OHIO 44105, TEL. (216) 587-3600 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) ----------------------- JAMES L. BAYMAN CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER 4800 EAST 131ST STREET CLEVELAND, OHIO 44105 (216) 587-3600 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: William A. Papenbrock Calfee, Halter & Griswold LLP 1400 McDonald Investment Center 800 Superior Avenue Cleveland, Ohio 44114-2688 (216) 622-8200 ----------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: From time to time after the effective date of the Registration Statement and after compliance with applicable state and federal laws. ----------------------- If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] 2 If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] ----------------------- CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------------------- TITLE OF SECURITIES AMOUNT TO BE PROPOSED MAXIMUM PROPOSED AMOUNT OF TO BE REGISTERED REGISTERED OFFERING PRICE PER MAXIMUM AGGREGATE REGISTRATION FEE SHARE (1) OFFERING PRICE (1) (1) - -------------------------------------------------------------------------------------------------------------------------------- Common Shares, Without Par Value (2) 220,000 $12.25 $2,695,000 $816.67 - -------------------------------------------------------------------------------------------------------------------------------- (1) Based upon the average of the high and low sales prices of the Common Shares as reported on the Nasdaq National Market on May 1, 1997; estimated solely for purposes of determining the amount of the registration fee pursuant to Rule 457(c). (2) Includes Rights to purchase Common Shares under the Company's Shareholders Rights Plan.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. 3 Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. PROSPECTUS ISSUED ______________, 1997 (SUBJECT TO COMPLETION) 220,000 COMMON SHARES WITHOUT PAR VALUE PIONEER-STANDARD ELECTRONICS, INC. ================================================================================ This Prospectus relates to up to 220,000 Common Shares, without par value (the "Common Shares"), of Pioneer-Standard Electronics, Inc., an Ohio corporation (the "Company"), and the Rights attached thereto (the "Rights"). All of the Common Shares offered hereby are to be sold from time to time by the Wachovia Bank of North Carolina, N.A., as trustee (the Trustee") of The Pioneer Stock Benefit Trust (the "Trust"), or through an agent of the Trustee. The Trust was established pursuant to the Pioneer-Standard Electronics, Inc. Share Subscription Agreement and Trust, dated as of July 2, 1996, between the Company and the Trustee (the "Agreement). See "Use of Proceeds and Plan of Distribution" and "The Selling Shareholder." The Common Shares are traded on the Nasdaq National Market ("Nasdaq") under the symbol "PIOS." The Common Shares offered hereby may be sold from time to time in one or more of certain types of transactions. See "Use of Proceeds and Plan of Distribution." The aggregate proceeds to the Trust from the sale of the Common Shares will be the selling price of the Common Shares. None of the proceeds from the sale of the Common Shares offered hereby will be used other than to pay for benefits under certain employee benefit plans and compensation arrangements of the Company listed herein (the "Benefit Plans"), which will result in a credit toward the subscription price for the Common Shares subscribed for by the Trustee under the Trust. See "Share Subscription Agreement and Trust." The Company will pay substantially all of the expenses of this offering, including commissions and discounts of agents, dealers or underwriters. Such expenses, excluding commissions and discounts, are estimated to be approximately $35,000. The Company has agreed to indemnify the Trustee against certain liabilities that may arise in connection with its performance of duties pursuant to the Trust. See "Use of Proceeds and Plan of Distribution." The Trustee, the Trust and any agents, dealers or underwriters that participate in the distribution of the Common Shares offered hereby may be deemed to be "underwriters" within the meaning of the Securities Act of 1933, as amended (the "Securities Act"), and any commissions received by them and any profit on the resale of the Common Shares purchased by them may be deemed underwriting commissions or discounts under the Securities Act. ----------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------ The Trustee may sell the Common Shares to or through underwriters, through dealers or agents or directly to purchasers. See "Use of Proceeds and Plan of Distribution." The Prospectus Supplement, or supplemental term sheet or other offering document, shall set forth the names of any underwriters, dealers or agents involved in the sale of the Common Shares in respect to which this Prospectus is being delivered, and any applicable fee, commission or discount arrangements with them. ------------------- The date of this Prospectus is ________________, 1997 4 AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"), all of which may be inspected and copied at the public reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New York 10007. Copies of such material can also be obtained from the Commission at prescribed rates through its Public Reference Section at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains a Web site at http://www.sec.gov. which contains reports, proxy statements and other information regarding registrants that file electronically with the Commission. The Company's Common Shares are traded on the Nasdaq National Market and reports, proxy statements and other information concerning the Company may be inspected at the office of the Nasdaq National Market at 1735 K Street, N.W., Washington, D.C. 20006. This Prospectus constitutes a part of the Registration Statement on Form S-3 filed by the Company with the Commission under the Securities Act. This Prospectus omits certain of the information contained in the Registration Statement in accordance with the rules and regulations of the Commission. For further information, reference is made to the Registration Statement and to the schedule and exhibits filed therewith. Statements contained in this Prospectus as to the contents of certain documents are not necessarily complete, and, with respect to each such document filed as an exhibit to the Registration Statement or otherwise filed with the Commission, reference is made to the copy of the document so filed. Each statement is qualified in its entirety by such reference. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents have been filed with the Commission pursuant to the Exchange Act and are incorporated by reference into this Prospectus and made a part hereof: 1. Annual Report on Form 10-K for the fiscal year ended March 31, 1996; 2. Quarterly Reports on Form 10-Q for the quarters ended June 30, 1996, September 30, 1996 and December 31, 1996; and 3. Current Report on Form 8-K filed with the Commission on March 11, 1997. All documents subsequently filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the offering of the Common Shares hereby, shall be deemed to be incorporated herein by reference. Any statement contained in a document incorporated or deemed incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus and the Registration Statement of which it is a part to the extent that a statement contained herein or in any other subsequently filed document which is also incorporated or deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus or such Registration Statement. The Company will provide without charge to each person to whom a copy of this Prospectus or any Prospectus Supplement is delivered, upon the written or oral request of any such person, a copy of any or all of the documents referred to above which have been or may be incorporated herein or therein by reference (other than exhibits to such documents unless such exhibits are specifically incorporated by reference into such documents). Requests for such documents should be directed to the Vice President, Treasurer and Assistant Secretary, 4800 East 131st Street, Cleveland, Ohio 44105. Telephone requests for such copies should be directed to the Vice President, Treasurer and Assistant Secretary at (216) 587-3600. 2 5 THE SELLING SHAREHOLDER Up to 220,000 Common Shares may be sold hereunder by the Trustee, as the selling shareholder, in order to satisfy the Company's obligations to contribute cash to any of the Benefit Plans. Pursuant to the Agreement, the Trustee subscribed for 5,000,000 Common Shares, which will be paid for over the 15 year term of the Trust. Under Ohio law, the 5,000,000 subscribed for Common Shares as deemed to be issued and outstanding for voting and dividend purposes (representing approximately 16.1% of issued and outstanding Common Shares). THE COMPANY The Company is engaged in the distribution of industrial and end-user electronic components and computer products. The Company distributes its products principally in the United States and Canada. The Company was organized as an Ohio corporation in 1963, and its Common Shares are traded on the Nasdaq National Market under the symbol "PIOS." The Company's executive offices are located at 4800 East 131st Street, Cleveland, Ohio 44105 and its telephone number is (216) 587-3600. DESCRIPTION OF CAPITAL STOCK The authorized capital stock of the Company consists of 80,000,000 Common Shares, without par value. The following summary description of the capital stock of the Company does not purport to be complete and is qualified in its entirety by reference to the Company's Articles of Incorporation. COMMON SHARES The holders of Common Shares are entitled to receive dividends when, as and if declared from time to time by the Board of Directors out of funds legally available therefor. The Common Shares have no preemptive rights or conversion rights and are not subject to further calls or assessments by the Trustee. There are no redemption or sinking fund provisions applicable to the Common Shares. Except for the Common Shares being sold by the Trustee in this offering, all currently outstanding Common Shares are duly authorized, validly issued, fully paid and nonassessable. The Common Shares being sold by the Trustee in this offering have been duly authorized and are validly issued and when paid for as provided by the Trust, will be fully paid and nonassessable. The holder of each Common Share, including the Trustee, is entitled to one vote on all matters submitted to shareholders generally, except shareholders have the right to cumulate their votes for the election of Directors as permitted by Ohio law. The Articles can be amended by the affirmative vote of the holders of shares representing at least two-thirds of the voting power of the Company. OTHER MATTERS Board of Directors. The Company's Code of Regulations, as amended (the "Code"), provides that the Board of Directors shall be divided into three classes of three, four and three members. The Directors of the class elected at each Annual Meeting of Shareholders hold office for a term of three years. Additionally, the Code requires that any proposal to increase or decrease the number of Directors be approved by the vote of the holders of a majority of shares entitled to vote on the proposal; provided, however, that the number of Directors of any class shall consist of not less than three Directors. Moreover, the Code provides that Directors may be removed from office by the vote of the holders of two-thirds of the voting power entitled to elect Directors in place of those removed; provided, however, that unless all the Directors of a particular class are removed, no individual Director may be removed without cause if a sufficient number of shares are cast against such removal, such number being that which, if cumulatively voted at an election for all the Directors, or all the Directors of a particular class, as the case may be, would be sufficient to elect at least one Director. The purpose of these provisions is to prevent Directors from being removed from office prior to the expiration of their respective terms, thus protecting the safeguards inherent in the classified Board structure unless dissatisfaction with the performance of one or more 3 6 Directors is widely shared by the Company's shareholders. These provisions could also have the effect of increasing the amount of time required for an acquiror to obtain control of the Company by electing a majority of the Board of Directors and may also make the removal of incumbent management more difficult and discourage or render more difficult certain mergers, tender offers, proxy contests, or other potential takeover proposals. To the extent that these provisions have the effect of giving management more bargaining power in negotiations with a potential acquiror, they could result in management using the bargaining power not only to try to negotiate a favorable price for an acquisition, but also to negotiate favorable terms for management. Business Combinations. Under the Articles, the affirmative vote of holders of not less than 80% of the outstanding shares of the Company entitled to elect Directors is required for the approval or authorization of any Business Combination (as hereinafter defined) involving the Company and an Interested Party (as hereinafter defined). This provision does not apply to Business Combinations with Interested Parties which have been approved by a majority of Continuing Directors (as hereinafter defined) or which satisfy certain provisions of the Articles relating to the consideration to be paid to the holders of Common Shares by the Interested Party. For purposes of the Articles, the term "Business Combination" means (i) any merger or consolidation involving both the Company and the Interested Party, or a subsidiary of either of them, (ii) any sale, lease, transfer or other disposition of assets of the Interested Party, (iii) adoption of a plan of liquidation or dissolution, (iv) issuance or transfer by the Company or a subsidiary to an Interested Party of any securities with a market value of $2 million or more, or (v) any recapitalization, reclassification or other transaction which would have the effect of increasing the Interested Party's voting power in the Company. The term "Interested Party" means (i) any individual, corporation, partnership or other person or entity which, together with its affiliates or associates, is a beneficial owner of 10% or more of the aggregate voting power of any class of capital stock of the Company entitled to vote generally in the election of directors, and (ii) any affiliate or associate of such individual, corporation, partnership or other person or entity. The term "Continuing Director" means any Director who is not an affiliate of an Interested Party and who was a member of the Board of Directors of the Company immediately prior to the time that the Interested Party involved in a Business Combination became an Interested Party, and any successor to a Continuing Director who is not such an affiliate and who is nominated to succeed a Continuing Director by a majority of the Continuing Directors in office at the time of such nomination. Certain Provisions of Ohio Law. As an Ohio corporation, the Company is subject to certain provisions of Ohio law which may discourage or render more difficult an unsolicited takeover of the Company. Among these are provisions that (i) prohibit certain mergers, sales of assets, issuances or purchases of securities, liquidation or dissolution, or reclassification of the then outstanding shares of an Ohio corporation involving certain holders of stock representing 10% or more of the voting power (other than present shareholders), unless such transactions are either approved by the Directors in office prior to the 10% shareholder becoming such or involve a 10% shareholder which has been such for at least three years and certain requirements related to price and form of consideration to be received by shareholders are met; and (ii) provide Ohio corporations with the right to recover profits realized under certain circumstances by persons engaged in "greenmailing" or who otherwise sell securities of a corporation within 18 months of proposing to acquire such corporation. In addition, pursuant to Section 1701.831 of the Ohio Revised Code, the purchase of certain levels of voting power of the Company (one-fifth or more but less than one-third; one-third or more but less than a majority; or a majority or more) can be made only with the prior authorization of the holders of shares representing at least a majority of the total voting power of the Company and the separate prior authorization of the holders of shares representing at least a majority of the total voting power held by shareholders other than the proposed purchaser, officers of the Company, and Directors of the Company who are also employees. Rights Plan. On April 25, 1989, the Board of Directors of the Company adopted a Shareholder Rights Plan pursuant to a Rights Agreement (the "Rights Agreement"), which is an exhibit to the Registration Statement of which this Prospectus is a part, entered into by and between the Company and a Cleveland, Ohio bank and declared a dividend distribution of one Right (as defined in the Rights Agreement) for each outstanding Common Share, which was paid to shareholders on May 10, 1989. The Rights are also issuable to all holders of Common Shares issued after May 10, 1989. The Rights are not exercisable until the earlier to occur of (i) ten days following a public announcement that a person or group of affiliated or associated persons (an "Acquiring Person") has acquired 4 7 beneficial ownership of 20% or more of the outstanding Common Shares of the Company or (ii) ten business days following the commencement of, or announcement of an intention to make a tender offer or exchange offer for 20% or more of the outstanding Common Shares of the Company (the earlier of such dates being called the "Distribution Date"). Once exercisable, each Right entitles the registered holder to purchase from the Company one Common Share at the then-current exercise price per Common Share, which currently is $11.85. In the event that the Company is acquired in a merger or other business combination transaction, or 50% or more of its consolidated assets or earning power are sold, proper provision shall be made so that each holder of a Right will thereafter have the right to receive, upon the exercise thereof at the then current exercise price of the Right, that number of Common Shares of the acquiring company which at the time of such transaction would have a market value of two times the exercise price of the Right. In the event that (i) any person becomes an Acquiring Person (unless such person first acquires 20% or more of the outstanding Common Shares by a purchase pursuant to a tender offer for all of the Common Shares for cash, which purchase increases such person's beneficial ownership to 80% or more of the outstanding Common Shares) or (ii) during such time as there is an Acquiring Person, there shall be a reclassification of securities or a recapitalization or reorganization of the Company or other transaction or series of transactions involving the Company which has the effect of increasing by more than 1% the proportionate share of the outstanding shares of any class of equity securities of the Company or any of its subsidiaries beneficially owned by the Acquiring Person, proper provision shall be made so that each holder of a Right, other than Rights beneficially owned by the Acquiring Person (which will thereafter be void), will thereafter have the right to receive upon exercise that number of Common Shares having a market value of two times the exercise price of the Right. At any time prior to the acquisition by a person or group of affiliated or associated persons of 20% or more of the outstanding Common Shares, the Board of Directors of the Company may redeem the Rights in whole, but not in part, at a price of one cent per Right (the "Redemption Price"). In addition, if a bidder who does not beneficially own more than 1% of the Common Shares (and who has not within the past year owned in excess of 1% of the Common Shares and, at a time he held such greater than 1% stake, disclosed, or caused the disclosure of, an intention which relates to or would result in the acquisition or influence of control of the Company) proposes to acquire all of the Common Shares (and all other shares of capital stock of the Company entitled to vote with the Common Shares in the election of directors or on mergers, consolidations, sales of all or substantially all of the Company's assets, liquidations, dissolutions or windings up) for cash at a price which a nationally recognized investment banker selected by such bidder states in writing is fair, and such bidder has obtained written financing commitments (or otherwise has financing) and complies with certain procedural requirements, then the Company, upon the request of the bidder, will hold a special shareholders meeting to vote on a resolution requesting the Board of Directors to accept the bidder's proposal. If a majority of the outstanding shares entitled to vote on the proposal vote in favor of such resolution, then for a period of 60 days after such meeting the Rights will be automatically redeemed at the Redemption Price immediately prior to the consummation of any tender offer for all of such shares at a price per share in cash equal to or greater than the price offered by such bidder; provided, however, that no redemption will be permitted or required after the acquisition by any person or group of affiliated or associated persons of beneficial ownership of 20% or more of the outstanding Common Shares. The Rights, which have no voting power, will expire on May 10, 1999 unless earlier redeemed by the Company as described above. Director and Officer Indemnification. The Company's Code contains provisions indemnifying Directors and officers of the Company to the fullest extent permitted by law and providing for the advancement of expenses incurred in connection with an action upon the receipt of an appropriate undertaking to repay said amount if it is determined that the individual in question is not entitled to indemnification. The Company has also entered into indemnity agreements pursuant to which it has agreed, among other things, to indemnify its Directors for settlements in derivative actions. The Company also has purchased a Director and Officer liability insurance policy (the "D & O Insurance"). General. It is possible that the division of the Board of Directors of the Company into classes provided for in the Code and the other provisions of the Code discussed above, the heightened shareholder voting requirements applicable to certain proposed business combination transactions, the provisions of Ohio law, the Rights Plan, and the change of control provisions contained in the indenture dated as of August 1, 1996 between the Company and 5 8 Star Bank, N.A. (the "Indenture") may discourage other persons from making a tender offer for or acquisitions of substantial amounts of the Company's Common Shares. The Indenture was entered into in connection with the Company's issuance of $150,000,000 aggregate principal amount of 8 1/2% Senior Notes due 2006 (the "Notes"). Upon a Change of Control (as defined in the Indenture), each holder of the Notes may request that the Company purchase the Notes at a purchase price equal to 100% of the principal amount of the Notes plus accrued and unpaid interest, if any, to the date of purchase. This could have an incidental effect of inhibiting changes in management and may also prevent temporary fluctuations in the market price of the Company's Common Shares which often result from actual or rumored takeover attempts. In addition, the indemnification provisions of the Code, certain indemnity agreements between Directors and officers of the Company and the D & O Insurance may have the effect of reducing the likelihood of derivative litigation against Directors and deterring shareholders from bringing a lawsuit against Directors for breach of their duty of care, even though such an action, if successful, might otherwise have benefited the Company and the shareholders. Transfer Agent and Registrar. The Transfer Agent and Registrar for the Common Shares is KeyCorp Shareholder Services, Inc., Cleveland, Ohio. As of May 19, 1997, the Transfer Agent and Registrar for the Common Shares will be National City Bank, Cleveland, Ohio. SHARE SUBSCRIPTION AGREEMENT AND TRUST On July 2, 1996, the Company entered into the Agreement with the Trustee, pursuant to which the Trustee subscribed for 5,000,000 Common Shares of the Company. It is contemplated at present that such Common Shares will be sold from time to time by the Trustee to generate cash for contribution to the Benefit Plans. The subscribed for Common Shares will be paid for over the 15 year term of the Trust pursuant to the terms of the Agreement. Under Ohio law, the Common Shares subscribed for under the Agreement are deemed to be issued and outstanding for voting and dividend purposes, but will not be fully paid and nonassessable until such Common Shares are sold and payment for such Common Shares is received and applied as provided in the Agreement. The Trust will terminate on March 31, 2011 or any earlier date on which the subscription is paid in full and all Common Shares have been allocated from the Trust (the "Termination Date"). The Board of Directors may terminate the Trust at any time in its sole discretion prior to the Termination Date (whether or not a transaction that if consummated would constitute a Change of Control (as defined below) is then pending) or at such time as there are no Common Shares subject to an outstanding subscription agreement. In the event of such a termination, any Common Shares held by the Trustee will be allocated to the Benefit Plans. The Trust will also terminate automatically upon the Company giving the Trustee notice of a Change of Control. In the event of a termination upon a Change of Control, the Trustee will use the proceeds from the sale of the subscribed for Common Shares to pay the subscription prices and any excess funds will be allocated to the Benefit Plans. "Change of Control" means (i) a complete dissolution or liquidation of the Company, (ii) a sale or other disposition of all or substantially all of the Company's assets, or (iii) a reorganization, merger, or consolidation ("Business Combination") unless either (A) all or substantially all of the shareholders of the Company immediately prior to the Business Combination own more than 50% of the voting securities of the entity surviving the Business Combination, or the entity which directly or indirectly controls such surviving entity, in substantially the same proportion as they owned the voting securities of the Company immediately prior thereto, or (B) the consideration (other than cash paid in lieu of fractional shares or payment upon perfection of appraisal rights) issued to shareholders of the Company in the Business Combination is solely common shares which are publicly traded on an established securities exchange in the United States. 6 9 USE OF PROCEEDS AND PLAN OF DISTRIBUTION Under the terms of the Agreement, the Company is required to deliver to the Trustee a certain annual minimum number of Common Shares. The Common Shares offered hereby represent the minimum number of shares required by the Agreement to be delivered to the Trust by the Company during the first two years of the term of the Trust. Under certain circumstances, the Company may suspend the sale of Common Shares (any period during which the sale of Common Shares is suspended, a "Blackout Period"). This Prospectus relates to the Common Shares that from time to time will be sold in the market by the Trustee over the next 15 years in order to satisfy the needs of the Benefit Plans for cash (e.g., to fund the reimbursement of employer medical and dental expenses, employee salaries, bonuses and commissions, etc.). The number of Common Shares that the Trustee will sell and the frequency of such sales will depend upon various factors, including the number of participants in each Benefit Plan, decisions made by participants in the Benefit Plans, the market price of the Common Shares, the duration of any Blackout Period, and the Company's pay cycles. The Company will pay the expenses incident to the registration, offering and sale of the Common Shares to the public, including commissions and discounts of agents, dealers or underwriters. To the extent lawfully allowable, the Company has agreed to indemnify and hold harmless the Trustee from and against any claims, demands, actions, administrative or other proceedings, causes of action, liability, loss, cost, damage or expense (including reasonable attorneys' fees), which may be asserted against the Trustee, in any way arising out of or incurred as a result of its action or failure to act in connection with the operation and administration of the Trust; provided that such indemnification will not apply to the extent that the Trustee has acted in willful or negligent violation of applicable law or its duties under the Trust or in bad faith. The Common Shares offered hereby may be sold from time to time in one or more of the following transactions: (a) to underwriters who will acquire the shares for their own account and resell them in one or more transactions, including negotiated transactions, at a fixed price or at varying prices determined at the time of sale; any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time; (b) through brokers or dealers, acting as principal or agent, in transactions (which may involve block transactions) on the Nasdaq National Market, in special offerings, exchange distributions pursuant to the rules of the applicable exchanges, or otherwise, at market prices prevailing at the time of sale, at prices related to such prevailing market prices, at negotiated prices or at fixed prices; (c) directly or through brokers or agents in private sales at negotiated prices; or (d) by pledgees, donees, transferees or other successors in interest. Underwriters participating in any offering may receive underwriting discounts and commissions and discounts or concessions may be allowed or reallowed or paid to dealers, and brokers or agents participating in such transactions may receive brokerage or agent's commissions or fees. BENEFIT PLANS The proceeds from the sale of Common Shares held by the Trust may be used to satisfy the Company's obligations to contribute cash to any of the following Benefit Plans: Group Insurance Plan (Life) Medical Plan Dental Care Plan Long Term Disability Plan Vision Plan Pioneer-Standard Electronics, Inc. Employees' Profit Sharing Retirement Plan Pioneer Technologies Group, Inc. Profit Sharing Plan Employee Bonuses and Commissions Employee Compensation 7 10 The Company may, from time to time, add, substitute or delete the Benefit Plans to which it issues shares or distributes cash. If required, such addition, substitution or deletion of Benefit Plans will be reflected in an accompanying Prospectus Supplement, supplemental term sheet or offering document. VALIDITY OF SHARES The validity of the Common Shares offered hereby will be passed upon by Calfee, Halter & Griswold LLP, 1400 McDonald Investment Center, 800 Superior Avenue, Cleveland, Ohio 44114. William A. Papenbrock, Esq., a partner of Calfee, Halter & Griswold LLP, is the Secretary of the Company and as of May 1, 1997, beneficially owned 3,687 Common Shares of the Company. EXPERTS The consolidated financial statements and schedule of the Company incorporated by reference and included in the Company's Annual Report (Form 10-K) for the year ended March 31, 1996 have been audited by Ernst & Young LLP, independent auditors, as set forth in their reports thereon incorporated by reference and included therein and incorporated herein by reference. Such consolidated financial statements and schedule have been incorporated herein by reference in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. 8 11 =============================================================================== No person has been authorized to give any information or to make any representations other than those contained or incorporated by reference in this Prospectus, in connection with the offer made by this Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Company or any underwriters, agents or dealers. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date hereof or that the information herein is correct as of any time subsequent to its date. This Prospectus does not constitute an offer to sell or a solicitation of any offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation. ________________ TABLE OF CONTENTS Page ---- AVAILABLE INFORMATION 2 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 2 THE SELLING SHAREHOLDER 3 THE COMPANY 3 DESCRIPTION OF CAPITAL STOCK 3 SHARE SUBSCRIPTION AGREEMENT AND TRUST 6 USE OF PROCEEDS AND PLAN OF DISTRIBUTION 7 BENEFIT PLANS 7 VALIDITY OF SHARES 8 EXPERTS 8 ====================================== PIONEER-STANDARD ELECTRONICS, INC. 220,000 COMMON SHARES WITHOUT PAR VALUE ------------------- P R O S P E C T U S ------------------- , 1997 ====================================== ================================================================================ 12 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION Securities and Exchange Commission filing fee......................$817 Nasdaq National Market filing fee................................$4,400 Legal fees and expenses........................................*$10,000 Accounting fees and expenses...................................*$15,000 Miscellaneous expenses..........................................*$9,783 Total.................................................*$40,000 ======= - ------------------- * Estimate ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 1701.13 of the Ohio Revised Code sets forth the conditions and limitations governing the indemnification of officers, directors and other persons. Section 1701.13 provides that a corporation shall have the power to indemnify any person who was or is a party or threatened to be made a party to any threatened, pending or contemplated action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation in a similar capacity with another corporation or other entity, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement incurred in connection therewith if he or she acted in good faith and in a manner that he or she reasonably believed to be in the best interests of the corporation and, with respect to a criminal proceeding, had no reasonable cause to believe that his or her conduct was unlawful. With respect to a suit by or in the right of the corporation, indemnity may be provided to the foregoing persons under Section 1701.13 on a basis similar to that set forth above, except that no indemnity may be provided in respect of any claim, issue or matter as to which such person has been adjudged to be liable to the corporation unless and to the extent that the Court of Common Pleas or the court in which such action, suit or proceeding was brought determines that despite the adjudication of liability but in view of all the circumstances of the case such person is entitled to indemnity for such expenses as the court deems proper. Moreover, Section 1701.13 provides for mandatory indemnification of a director, officer, employee or agent of the corporation to the extent that such person has been successful in defense of any such action, suit or proceeding and provides that a corporation shall pay the expenses of an officer or director in defending an action, suit or proceeding upon receipt of an undertaking to repay such amounts if it is ultimately determined that such person is not entitled to be indemnified. Section 1701.13 establishes provisions for determining whether a given person is entitled to indemnification, and also provides that the indemnification provided by or granted under Section 1701.13 is not exclusive of any rights to indemnity or advancement of expenses to which such person may be entitled under any by-law, agreement, vote of shareholders or disinterested directors or otherwise. Under certain circumstances provided in Article VIII of the Registrant's Code of Regulations, as amended, and subject to Section 1701.13 of the Ohio Revised Code (which sets forth the conditions and limitations governing the indemnification of officers, directors and other persons), the Registrant will indemnify any director or officer or any former director or officer of the Registrant against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement, actually and reasonably incurred by him or her by reason of the fact that he or she is or was such director or officer in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative. II-1 13 The Registrant has entered into indemnity agreements (the "Indemnity Agreements") with the current directors and executive officers of the Registrant and expects to enter into similar agreements with any director or executive officer elected or appointed in the future at the time of their election or appointment. Pursuant to the Indemnity Agreements, the Registrant will indemnify a director or executive officer of the Registrant (the "Indemnitee") if the Indemnitee is a party to or otherwise involved in any legal proceeding by reason of the fact that the Indemnitee is or was a director or executive officer of the Registrant, or is or was serving at the request of the Registrant in certain capacities with another entity, against all expenses, judgments, settlements, fines and penalties, actually and reasonably incurred by the Indemnitee, in connection with the defense or settlement of such proceeding. Indemnity is only available if the Indemnitee acted in good faith and in a manner which he or she reasonably believed to be in, or not opposed to, the best interests of the Registrant. The same coverage is provided whether or not the suit or proceeding is a derivative action. Derivative actions may be defined as actions brought by one or more shareholders of a corporation to enforce a corporate right or to prevent or remedy a wrong to the corporation in cases where the corporation, because it is controlled by the wrongdoers or for other reasons, fails or refuses to take appropriate action for its own protection. The Indemnity Agreements mandate advancement of expenses to the Indemnitee if the Indemnitee provides the Registrant with a written promise to repay the advanced amounts in the event that it is determined that the conduct of the Indemnitee has not met the applicable standard of conduct. In addition, the Indemnity Agreements provide various procedures and presumptions in favor of the Indemnitee's right to receive indemnification under the Indemnity Agreement. Under the Registrant's Director and Officer Liability Insurance Policy, each director and certain officers of the Registrant are insured against certain liabilities. ITEM 16. EXHIBITS. See Exhibit Index at page E-1 of this Registration Statement. ITEM 17. UNDERTAKINGS. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, unless the information required to be included in such post-effective amendment is contained in periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 and incorporated herein by reference; (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement, unless the information required to be included in such post-effective amendment is contained in periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 and incorporated herein by reference; or (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-2 14 (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) For purposes of determining any liability under the Securities Act of 1933, each filing of Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities and Exchange Act of 1934) that is incorporated by reference in the Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (5) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described in Item 15 above, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted against the Registrant by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. II-3 15 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Cleveland, State of Ohio, on May 8, 1997. PIONEER-STANDARD ELECTRONICS, INC. By /s/ James L. Bayman ---------------------------- James L. Bayman Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below on May 8, 1997, by the following persons in the capacities indicated: POWER OF ATTORNEY KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints James L. Bayman, Arthur Rhein, John V. Goodger, William A. Papenbrock and Edward W. Moore, and each of them, such individual's true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for such individual and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. SIGNATURES TITLE ---------- ----- /s/ James L. Bayman Chairman of the Board and - -------------------------------- Chief Executive Officer James L. Bayman (Principal Executive Officer) /s/ John V. Goodger Vice President, Treasurer and - --------------------------------- Goodger (Principal Financial and John V. Goodger Accounting Officer) /s/ Preston B. Heller, Jr. Director - --------------------------------- Preston B. Heller, Jr. /s/ Frederick A. Downey Director - --------------------------------- Frederick A. Downey /s/ Victor Gelb Director - --------------------------------- Victor Gelb II-4 16 /s/ Gordon E. Heffern Director - --------------------------------- Gordon E. Heffern /s/ Arthur Rhein Director - --------------------------------- Arthur Rhein /s/ Edwin Z. Singer Director - --------------------------------- Edwin Z. Singer /s/ Thomas C. Sullivan Director - --------------------------------- Thomas C. Sullivan /s/ Karl E. Ware Director - --------------------------------- Karl E. Ware II-5 17 PIONEER-STANDARD ELECTRONICS, INC. EXHIBIT INDEX EXHIBIT NO. DESCRIPTION ----------- ----------- 4.1 Credit Agreement dated as of August 12, 1996 by and among Pioneer-Standard Electronics, Inc., the Banks identified on the signature pages thereto and National City Bank, as Agent, which is incorporated by reference from the Form 10-Q for the quarter ended June 30, 1996 4.2 Rights Agreement dated as of April 25, 1989 by and between the Company and AmeriTrust Company National Association 4.3 Note Purchase Agreement dated as of October 31, 1990 by and between the Company and Teachers Insurance and Annuity Association of America 4.4 Amendment No. 1 to Note Purchase Agreement dated as of November 1, 1991 by and between the Company and Teachers Insurance and Annuity Association of America, which is incorporated by reference from the Company's Annual Report on Form 10-K for the year ended March 31, 1993 4.5 Amendment No. 2 to Note Purchase Agreement dated as of November 30, 1995 by and between the Company and Teachers Insurance and Annuity Association of America, which is incorporated by reference from the Company's Annual Report on Form 10-K for the year ended March 31, 1996 4.6 Amendment No. 3 to Note Purchase Agreement dated as of August 12, 1996 by and between the Company and Teachers Insurance and Annuity Association of America, which is incorporated by reference from the Company's Annual Report on Form 10-K for the year ended March 31, 1996 4.7 Form of Indenture with respect to the 8 1/2% Senior Notes due 2006, which is incorporated from the Company's Registration Statement on Form S-3 (Reg. No. 333-07665) 4.8 Form of 8 1/2% Senior Note due 2006, which is incorporated from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 4.9 Officer's Certificate containing terms relating to the 8 1/2% Senior Notes due 2006, which is incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 5.1 Opinion of Calfee, Halter & Griswold LLP 10.1 Share Subscription Agreement and Trust, dated as of July 2, 1996, between the Company and Wachovia Bank of North Carolina, N.A., as trustee, which is incorporated by reference from the Company's Registration Statement on Form S-3 (Reg. No. 333-07665) 23.1 Consent of Ernst & Young LLP 23.2 Consent of Calfee, Halter & Griswold LLP (see Exhibit 5.1) 24.1 Power of Attorney and related certified resolution E-1 EX-4.2 2 EXHIBIT 4.2 1 Exhibit 4.2 - -------------------------------------------------------------------------------- PIONEER-STANDARD ELECTRONICS, INC. and AMERITRUST COMPANY, NATIONAL ASSOCIATION Rights Agent Rights Agreement Dated as of April 25, 1989 - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
PAGE ---- Section 1. Certain Definitions..................................................................1 Section 2. Appointment of Rights Agent..........................................................7 Section 3. Issue of Right Certificates..........................................................7 Section 4. Form of Right Certificates...........................................................9 Section 5. Countersignature and Registration...................................................10 Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.............................11 Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.......................12 Section 8. Cancellation and Destruction of Right Certificates..................................14 Section 9. Availability of Common Shares.......................................................14 Section 10. Common Shares Record Date...........................................................15 Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights..................16 Section 12. Certificate of Adjusted Purchase Price or Number of Shares..........................26 Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power................27 Section 14. Fractional Rights and Fractional Shares.............................................28 Section 15. Rights of Action....................................................................30 Section 16. Agreement of Right Holders..........................................................30 Section 17. Right Certificate Holder Not Deemed a Stockholder...................................31 Section 18. Concerning the Rights Agent.........................................................31 Section 19. Merger or Consolidation or Change of Name of Rights Agent...........................32 Section 20. Duties of Rights Agent..............................................................33 Section 21. Change of Rights Agent..............................................................36
i 3 Section 22. Issuance of New Right Certificates..................................................38 Section 23. Redemption..........................................................................38 Section 24. Exchange............................................................................42 Section 25. Notice of Certain Events............................................................45 Section 26. Notices.............................................................................46 Section 27. Supplements and Amendments..........................................................47 Section 28. Successors..........................................................................47 Section 29. Benefits of this Agreement..........................................................48 Section 30. Severability........................................................................48 Section 31. Governing Law.......................................................................48 Section 32. Counterparts........................................................................48 Section 33. Descriptive Headings................................................................48 Signatures ....................................................................................49 Exhibit A Form of Right Certificate.................................................... A-1 Exhibit B Summary of Rights to Purchase Common Shares.................................. B-1
4 RIGHTS AGREEMENT ---------------- Agreement, dated as of April 25, 1989, between Pioneer-Standard Electronics, Inc., an Ohio corporation (the "Company"), and AmeriTrust Company, National Association (the "Rights Agent"). The Board of Directors of the Company has authorized and declared a dividend of one common share purchase right (a "Right") for each Common Share (as hereinafter defined) of the Company outstanding on May 10, 1989 (the "Record Date"), each Right representing the right to purchase one Common Share, upon the terms and subject to the conditions herein set forth, and has further authorized and directed the issuance of one Right with respect to each Common Share that shall become outstanding between the Record Date and the earliest of the Distribution Date, the Redemption Date and the Final Expiration Date (as such terms are hereinafter defined), including, without limitation, Common Shares issued upon exercise of employee stock options and the Company's 9% Subordinated Convertible Debentures Due 1998, but excluding Common Shares issued upon exercise of any Right. Accordingly, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following terms have the meanings indicated: (a) "Acquiring Person" shall mean any Person (as such term is hereinafter defined) who or which, together with all Affiliates and Associates (as such terms are hereinafter defined) of such Person, shall be the Beneficial Owner (as such term is hereinafter defined) of 5 twenty percent (20%) or more of the Common Shares of the Company then outstanding, but shall not include the Company, any Subsidiary (as such term is hereinafter defined) of the Company, any employee benefit plan of the Company or any Subsidiary of the Company, or any entity holding Common Shares for or pursuant to the terms of any such plan. Notwithstanding the foregoing, no Person shall become an "Acquiring Person" as the result of an acquisition of Common Shares by the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to twenty percent (20%) or more of the Common Shares of the Company then outstanding; PROVIDED, HOWEVER, that if a Person shall become the Beneficial Owner of twenty percent (20%) or more of the Common Shares of the Company then outstanding by reason of share purchases by the Company and shall, after such share purchases by the Company, become the Beneficial Owner of any additional Common Shares of the Company, then such Person shall be deemed to be an "Acquiring Person". (b) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on the date of this Agreement. (c) A Person shall be deemed the "Beneficial Owner" of and shall be deemed to "beneficially own" any securities: (i) which such Person or any of such Person's Affiliates or Associates beneficially owns, directly or indirectly; (ii) which such Person or any of such Person's Affiliates or Associates has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (other than 2 6 customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), or upon the exercise of conversion rights, exchange rights, rights (other than these Rights), warrants or options, or otherwise; PROVIDED, HOWEVER that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange; or (B) the right to vote pursuant to any agreement, arrangement or understanding; PROVIDED, HOWEVER, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security if the agreement, arrangement or understanding to vote such security (1) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations promulgated under the Exchange Act and (2) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person's Affiliates or Associates has any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities) for the purpose of acquiring, holding, voting (except to the extent contemplated by the proviso to Section l(c)(ii)(B)) or disposing of any securities of the Company. Notwithstanding anything in this definition of Beneficial Ownership to the contrary, the phrase "then outstanding," when used with reference to a Person's 3 7 Beneficial Ownership of securities of the Company, shall mean the number of such securities then issued and outstanding together with the number of such securities not then actually issued and outstanding which such Person would be deemed to own beneficially hereunder. (d) "Business Day" shall mean any day other than a Saturday, a Sunday, or a day on which banking institutions in Cleveland are authorized or obligated by law or executive order to close. (e) "Close of business" on any given date shall mean 5:00 P.M., Cleveland time, on such date; PROVIDED, HOWEVER, that if such date is not a Business Day it shall mean 5:00 P.M., Cleveland time, on the next succeeding Business Day. (f) "Common Shares" when used with reference to the Company shall mean the Common Shares, without par value, of the Company. "Common Shares" when used with reference to any Person other than the Company shall mean the capital stock (or equity interest) with the greatest voting power of such other Person or, if such other Person is a Subsidiary of another Person, the Person or Persons which ultimately control such first-mentioned Person. (g) "Distribution Date" shall have the meaning set forth in Section 3 hereof. (h) "Final Expiration Date" shall have the meaning set forth in Section 7 hereof. (i) An "Offer" shall mean a written proposal delivered to the Company by any Person who both beneficially owns one percent (1%) or less of the outstanding Common Shares as of the date such proposal is delivered and who has not within one (1) year prior to the delivery of such written proposal beneficially owned in excess of one percent (1%) of the then outstanding Common Shares of the Company and (at a time when such Person beneficially 4 8 owned such greater than one percent (1%) stake) disclosed, or caused the disclosure of, any intention which relates to or would result in the acquisition, or influence of control, of the Company (an "Offeror"), and which proposal: (i) provides for the acquisition of all of the outstanding shares of each class or series of Voting Stock (as hereinafter defined) held by any Person other than the Offeror and its Affiliates for cash, with all shares of any particular class or series of Voting Stock to be acquired at the same price; (ii) is accompanied by a written opinion of a nationally recognized investment banking firm, which opinion is addressed to the holders of shares of Voting Stock other than the Offeror and its Affiliates and states that the price to be paid to the holders (other than the Offeror and its affiliates) of each individual class or series of Voting Stock pursuant to the Offer is fair to such holders; (iii) states that the Offeror has obtained written financing commitments from recognized financing sources, and/or has on hand cash or cash equivalents, for the full amount of all financing necessary to consummate the Offer; and (iv) requests the Company to call a special meeting of the holders of Voting Stock for the purpose of voting on a resolution requesting the Board of Directors to redeem the Rights in connection with such Offer (but solely in connection with such Offer) and contains a written agreement of the Offeror to pay (or share with any other Offeror) at least one-half (1/2) of the Company's costs of such special meeting (exclusive of the Company's costs of preparing and mailing proxy material for its own solicitation) and to accept the time frame for such meeting specified by the Company. 5 9 (j) "Person" shall mean any individual, firm, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity. (k) "Redemption Date" shall have the meaning set forth in Section 7 hereof. (1) "Shares Acquisition Date" shall mean the first date of public announcement by the Company or an Acquiring Person that an Acquiring Person has become such. (m) "Subsidiary" of any Person shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person. (n) "Voting Stock" shall mean (i) the Common Shares of the Company and (ii) any other shares of capital stock of the Company entitled to vote generally in the election of directors or entitled to vote together with the Common Shares in respect of any merger, consolidation, sale of all or substantially all of the Company's assets, liquidation, dissolution or winding up. Whenever any provision of this Agreement requires a determination of whether a number of shares of Voting Stock comprising a specified percentage of such Voting Stock has been voted, tendered, acquired, sold or otherwise disposed of, or a determination of whether a Person has offered or proposed to acquire a number of shares of Voting Stock comprising such specified percentage, the number of shares of Voting Stock comprising such specified percentage of Voting Stock shall in every such case be deemed to be the number of shares of Voting Stock comprising the specified percentage of the Company's entire voting power then entitled to vote generally in the election of directors or then entitled to vote together with the Common Shares in respect of any merger, consolidation, sale of all or substantially all of the Company's assets, liquidation, dissolution or winding up. 6 10 Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the Rights Agent to act as agent for the Company and the holders of the Rights (who, in accordance with Section 3 hereof, shall prior to the Distribution Date also be the holders of the Common Shares) in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-Rights Agents as it may deem necessary or desirable. Section 3. ISSUE OF RIGHT CERTIFICATES. (a) Until the earlier of (i) the tenth (10th) day after the Shares Acquisition Date or (ii) the tenth (10th) business day (or such later date as may be determined by action of the Board of Directors prior to such time as any Person becomes an Acquiring Person) after the date of the commencement by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company or any entity holding Common Shares for or pursuant to the terms of any such plan) of, or of the first public announcement of the intention of any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company or any entity holding Common Shares for or pursuant to the terms of any such plan) to commence, a tender or exchange offer the consummation of which would result in any Person becoming the Beneficial Owner of Common Shares aggregating twenty percent (20%) or more of the then outstanding Common Shares (including any such date which is after the date of this Agreement and prior to the issuance of the Rights; the earlier of such dates being herein referred to as the "Distribution Date"), (x) the Rights will be evidenced (subject to the provisions of Section 3(b) hereof) by the certificates for Common Shares registered in the names of the holders thereof (which certificates shall also be deemed to be Right Certificates and not by separate Right Certificates, and (y) the right to receive Right Certificates 7 11 will be transferable only in connection with the transfer of Common Shares. As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign, and the Company will send or cause to be sent (and the Rights Agent will, if requested, send) by first-class, insured, postage-prepaid mail, to each record holder of Common Shares as of the close of business on the Distribution Date, at the address of such holder shown on the records of the Company, a Right Certificate, in substantially the form of Exhibit A hereto (a "Right Certificate"), evidencing one (1) Right for each Common Share so held. As of the Distribution Date, the Rights will be evidenced solely by such Right Certificates. (b) On the Record Date, or as soon as practicable thereafter, the Company will cause the Rights Agent to send a copy of a Summary of Rights to Purchase Common Shares, in substantially the form of Exhibit B hereto (the "Summary of Rights"), by first-class, postage-prepaid mail, to each record holder of Common Shares as of the close of business on the Record Date, at the address of such holder shown on the records of the Company. With respect to certificates for Common Shares outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by such certificates registered in the names of the holders thereof together with a copy of the Summary of Rights attached thereto. Until the Distribution Date (or the earlier of the Redemption Date or the Final Expiration Date), the surrender for transfer of any certificate for Common Shares outstanding on the Record Date, with or without a copy of the Summary of Rights attached thereto, shall also constitute the transfer of the Rights associated with the Common Shares represented thereby. (c) Certificates for Common Shares which become outstanding (including, without limitation, reacquired Common Shares referred to in the last sentence of this paragraph (c)) after the Record Date but prior to the earliest of the Distribution Date, the Redemption Date 8 12 or the Final Expiration Date shall have impressed on, printed on, written on or otherwise affixed to them the following legend: This certificate also evidences and entitles the holder hereof to certain rights as set forth in a Rights Agreement between Pioneer-Standard Electronics, Inc. and AmeriTrust Company, National Association, dated as of April 25, 1989 (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of Pioneer-Standard Electronics, Inc. at 4800 East 131st Street, Cleveland, Ohio 44105. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. Pioneer-Standard Electronics, Inc. will mail to the holder of this certificate a copy of the Rights Agreement without charge within five (5) days after receipt of a written request therefor. As described in the Rights Agreement, Rights issued to any Person who becomes an Acquiring Person (as defined in the Rights Agreement) shall become null and void. With respect to such certificates containing the foregoing legend, until the Distribution Date, the Rights associated with the Common Shares represented by such certificates shall be evidenced by such certificates alone, and the surrender for transfer of any such certificate shall also constitute the transfer of the Rights associated with the Common Shares represented thereby. In the event that the Company purchases or acquires any Common Shares after the Record Date but prior to the Distribution Date, any Rights associated with such Common Shares shall be deemed canceled and retired so that the Company shall not be entitled to exercise any Rights associated with the Common Shares which are no longer outstanding. Section 4. FORM OF RIGHT CERTIFICATES. The Right Certificates (and the forms of election to purchase Common Shares and of assignment to be printed on the reverse thereof) shall be substantially the same as Exhibit A hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be 9 13 required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage. Subject to the provisions of Section 22 hereof, the Right Certificates shall entitle the holders thereof to purchase such number of Common Shares as shall be set forth therein at the price per Common Share set forth therein (the "Purchase Price"), but the number of such Common Shares and the Purchase Price shall be subject to adjustment as provided herein. Section 5. COUNTERSIGNATURE AND REGISTRATION. The Right Certificates shall be executed on behalf of the Company by its Chairman of the Board, its President, or any of its Vice Presidents, either manually or by facsimile signature, shall have affixed thereto the Company's seal or a facsimile thereof, and shall be attested by the Secretary, Treasurer, or an Assistant Secretary of the Company, either manually or by facsimile signature. The Right Certificates shall be manually countersigned by the Rights Agent and shall not be valid for any purpose unless countersigned. In case any officer of the Company who shall have signed any of the Right Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Right Certificates had not ceased to be such officer of the Company; and any Right Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Right Certificate, shall be a proper officer of the Company to sign such Right Certificate, although at the date of the execution of this Rights Agreement any such person was not such an officer. 10 14 Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its principal office, books for registration and transfer of the Right Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Right Certificates, the number of Rights evidenced on its face by each of the Right Certificates and the date of each of the Right Certificates. Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES. Subject to the provisions of Section 14 hereof, at any time after the close of business on the Distribution Date, and at or prior to the close of business on the earlier of the Redemption Date or the Final Expiration Date, any Right Certificate or Right Certificates (other than Right Certificates representing Rights that have become void pursuant to Section 11(a)(ii) hereof or that have been exchanged pursuant to Section 24 hereof) may be transferred, split up, combined or exchanged for another Right Certificate or Right Certificates, entitling the registered holder to purchase a like number of Common Shares as the Right Certificate or Right Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Right Certificate or Right Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Right Certificate or Right Certificates to be transferred, split up, combined or exchanged at the principal office of the Rights Agent. Thereupon the Rights Agent shall countersign and deliver to the person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Right Certificates. 11 15 Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Company's request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the Company will make and deliver a new Right Certificate of like tenor to the Rights Agent for delivery to the registered holder in lieu of the Right Certificate so lost, stolen, destroyed or mutilated. Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS. (a) The registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein) in whole or in part at any time after the Distribution Date upon surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at the principal office of the Rights Agent, together with payment of the Purchase Price for each Common Share as to which the Rights are exercised, at or prior to the earliest of (i) the close of business on May 10, 1999 (the "Final Expiration Date"), (ii) the time at which the Rights are redeemed as provided in Section 23 hereof (the "Redemption Date"), or (iii) the time at which such Rights are exchanged as provided in Section 24 hereof. (b) The Purchase Price for each Common Share pursuant to the exercise of a Right shall initially be $40.00, shall be subject to adjustment from time to time as provided in Sections 11 and 13 hereof and shall be payable in lawful money of the United States of America in accordance with paragraph (c) below. 12 16 (c) Upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase duly executed, accompanied by payment of the Purchase Price for the Common Shares to be purchased and an amount equal to any applicable transfer tax required to be paid by the holder of such Right Certificate in accordance with Section 9 hereof by certified check, cashier's check or money order payable to the order of the Company, the Rights Agent shall thereupon promptly (i) (A) requisition from any transfer agent of the Common Shares certificates for the number of Common Shares to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests, or (B) requisition from the depositary agent depositary receipts representing such number of Common Shares as are to be purchased (in which case certificates for the Common Shares represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company hereby directs the depositary agent to comply with such request, (ii) when appropriate, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional shares in accordance with Section 14 hereof, (iii) after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder and (iv) when appropriate, after receipt, deliver such cash to or upon the order of the registered holder of such Right Certificate. (d) In case the registered holder of any Right Certificate shall exercise less than all the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Right Certificate or to his duly authorized assigns, subject to the provisions of Section 14 hereof. 13 17 (e) The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued Common Shares or any Common Shares held in its treasury, the number of Common Shares that will be sufficient to permit the exercise in full of all outstanding Rights in accordance with this Section 7. Section 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All Right Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Rights Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Right Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all canceled Right Certificates to the Company, or shall, at the written request of the Company, destroy such canceled Right Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. Section 9. AVAILABILITY OF COMMON SHARES. The Company covenants and agrees that it will take all such action as may be necessary to ensure that all Common Shares delivered upon exercise of Rights shall, at the time of delivery of the certificates for such Common Shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable shares. The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Right Certificates or of any Common Shares upon the exercise of 14 18 Rights. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Right Certificates to a person other than, or the issuance or delivery of certificates or depositary receipts for the Common Shares in a name other than that of, the registered holder of the Right Certificate evidencing Rights surrendered for exercise or to issue or to deliver any certificates or depositary receipts for Common Shares upon the exercise of any Rights until any such tax shall have been paid (any such tax being payable by the holder of such Right Certificate at the time of surrender) or until it has been established to the Company's reasonable satisfaction that no such tax is due. Section 10. COMMON SHARES RECORD DATE. Each person in whose name any certificate for Common Shares is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the Common Shares represented thereby on, and such certificate shall be dated, the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable transfer taxes) was made; PROVIDED, HOWEVER, that if the date of such surrender and payment is a date upon which the Common Shares transfer books of the Company are closed, such person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding Business Day on which the Common Shares transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Right Certificate shall not be entitled to any rights of a holder of Common Shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein. 15 19 Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER OF RIGHTS. The Purchase Price, the number of Common Shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. (a) (i) In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Common Shares payable in Common Shares, (B) subdivide the outstanding Common Shares, (C) combine the outstanding Common Shares into a smaller number of Common Shares or (D) issue any shares of its capital stock in a reclassification of the Common Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a), the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of capital stock issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of capital stock which, if such Right had been exercised immediately prior to such date and at a time when the Common Shares transfer books of the Company were open, he would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification; PROVIDED, HOWEVER, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. (ii) Subject to Section 24 of this Agreement, in the event (A) any Person shall become an Acquiring Person (other than through an acquisition described in 16 20 subparagraph (iii) of this paragraph (a)) or (B) during such time as there is an Acquiring Person, there shall be any reclassification of securities (including any reverse stock split), or recapitalization or reorganization of the Company or other transaction or series of transactions involving the Company which has the effect, directly or indirectly, of increasing by more than one percent (1%) the proportionate share of the outstanding shares of any class of equity securities of the Company or any of its Subsidiaries beneficially owned by any Acquiring Person or any Affiliate or Associate thereof, each holder of a Right shall thereafter have a right to receive, upon exercise thereof such number of Common Shares of the Company as shall equal the result obtained by (x) multiplying the then current Purchase Price by the then number of Common Shares for which a Right is then exercisable and dividing that product by (y) fifty percent (50%) of the then current per share market price of the Company's Common Shares (determined pursuant to Section 11(d) hereof) on the date of the occurrence of the earlier of the events described in clauses (A) and (B) above. In the event that any Person shall become an Acquiring Person and the Rights shall then be outstanding, the Company shall not take any action which would eliminate or diminish the benefits intended to be afforded by the Rights. Notwithstanding the foregoing and in accordance with the authority granted under Section 1701.16(B) of the Ohio Revised Code, from and after the occurrence of the earlier of the events described in clauses (A) and (B) above, any Rights that are or were acquired or beneficially owned by any Acquiring Person (or any Associate or Affiliate of such Acquiring Person) shall be null and void and any holder of such Rights shall thereafter have no right to exercise such Rights under any provision of 17 21 this Agreement. No Right Certificate shall be issued pursuant to Section 3 that represents Rights beneficially owned by an Acquiring Person whose Rights would be null and void pursuant to the preceding sentence or any Associate or Affiliate thereof; no Right Certificate shall be issued at any time upon the transfer of any Rights to an Acquiring Person whose Rights would be null and void pursuant to the preceding sentence or any Associate or Affiliate thereof or to any nominee of such Acquiring Person, Associate or Affiliate; and any Right Certificate delivered to the Rights Agent for transfer to an Acquiring Person whose Rights would be null and void pursuant to the preceding sentence shall be canceled. (iii)The right to buy Common Shares of the Company pursuant to subparagraph (ii)(A) of this paragraph (a) shall not arise as a result of any Person becoming an Acquiring Person through a purchase of Common Shares pursuant to a tender offer made in the manner prescribed by Section 14(d) of the Exchange Act and the rules and regulations promulgated thereunder; PROVIDED, HOWEVER, that (A) such tender offer shall provide for the acquisition of all of the outstanding Common Shares held by any Person other than such Person and its Affiliates for cash and (B) such purchase shall cause such Person, together with all Affiliates and Associates of such Person, to be the Beneficial Owner of eighty percent (80%) or more of the Common Shares then outstanding. (iv) If, on the date the Rights first become exercisable for Common Shares pursuant to Section 11(a)(ii) (the "Adjustment Date"), the Company does not have sufficient authorized, unissued and unreserved Common Shares available under applicable law to permit the exercise in full of all Rights that are exercisable on the 18 22 Adjustment Date for the number of Common Shares per Right provided in Section 11(a)(ii), then, notwithstanding any other provision of this Agreement, to the extent necessary and permitted by applicable law, each Right shall thereafter represent the right to receive upon exercise thereof at the then current Purchase Price (or Adjusted Purchase Price (as defined herein) if so specified herein) in accordance with the terms of this Agreement: (x) Common Shares; and (y) the Adjusted Number of Common Shares upon exercise at the Adjusted Purchase Price (as such terms are defined herein); and/or (z) any combination of the above; PROVIDED, HOWEVER, that the Company shall issue only Common Shares which are available for such purpose under applicable law upon exercise of the Rights under this Section 11 until the Company has first issued all authorized, unissued and unreserved Common Shares; PROVIDED FURTHER, once the Company has first issued all authorized, unissued and unreserved Common Shares, the Company shall take, to the extent permitted by applicable law, all such action as may be necessary in the best judgment of the Board of Directors to provide under clauses (x), (y) and (z) above such combination of Common Shares and/or adjustments in Purchase Price as equals as nearly as possible the economic benefits and as nearly as practicable the voting rights that would otherwise have been delivered had Common Shares been deliverable upon the exercise of Rights under Section 11(a)(ii) hereof. (b) In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Common Shares entitling them (for a period expiring within forty-five (45) calendar days after such record date) to subscribe for or purchase Common Shares 19 23 or securities convertible into Common Shares at a price per Common Share (or having a conversion price per share, if a security convertible into Common Shares) less than the then current per share market price of the Common Shares (as defined in Section 11(d)) on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of Common Shares outstanding on such record date plus the number of Common Shares which the aggregate offering price of the total number of Common Shares so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price and the denominator of which shall be the number of Common Shares outstanding on such record date plus the number of additional Common Shares to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible); PROVIDED, HOWEVER, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent. Common Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. 20 24 (c) In case the Company shall fix a record date for the making of a distribution to all holders of the Common Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness or assets (other than a regular quarterly cash dividend or a dividend payable in Common Shares) or subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the then current per share market price of the Common Shares on such record date, less the fair market value (as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent) of the portion of the assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to one Common Share and the denominator of which shall be such current per share market price of the Common Shares; PROVIDED, HOWEVER, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company to be issued upon exercise of one Right. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (d) (i) For the purpose of any computation hereunder, the current per share market price" of any security (a "Security" for the purpose of this Section 11(d)(i)) on any date shall be deemed to be the average of the daily closing prices per share of such Security for the thirty (30) consecutive Trading Days (as such term is hereinafter defined) immediately prior 21 25 to such date; PROVIDED, HOWEVER, that in the event that the current per share market price of the Security is determined during a period following the announcement by the issuer of such Security of (A) a dividend or distribution on such Security payable in shares of such Security or securities convertible into such shares, or (B) any subdivision, combination or reclassification of such Security and prior to the expiration of thirty (30) Trading Days after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the current per share market price shall be appropriately adjusted to reflect the current market price per share equivalent of such Security. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Security is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Security is listed or admitted to trading or, if the Security is not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then in use, or, if on any such date the Security is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Security selected by the Board of Directors of the Company. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the Security is listed or admitted to trading is open for the 22 26 transaction of business or, if the Security is not listed or admitted to trading on any national securities exchange, a Business Day. (ii) For the purpose of any computation hereunder, the "current per share market price" of the Common Shares shall be determined in accordance with the method set forth in Section 11(d)(i). If the Common Shares are not publicly held or so listed or traded, "current per share market price" shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent. (e) No adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the Purchase Price; PROVIDED, HOWEVER, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest one one-hundredth of a Common Share or one one-hundredth of any other share or security as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three (3) years from the date of the transaction which requires such adjustment or (ii) the date of the expiration of the right to exercise any Rights. (f) If as a result of an adjustment made pursuant to Section 11(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than Common Shares, thereafter the number of such other shares so receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the 23 27 Common Shares contained in Section 11(a) through (c), inclusive, and the provisions of Sections 7, 9, 10 and 13 with respect to the Common Shares shall apply on like terms to any such other shares. (g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of Common Shares purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. (h) Unless the Company shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of Common Shares obtained by (i) multiplying (x) the number of Common Shares covered by a Right immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price. (i) The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in substitution for any adjustment in the number of Common Shares purchasable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of Common Shares for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one one-hundredth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect 24 28 immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Right Certificates have been issued, shall be at least ten (10) days later than the date of the public announcement. If Right Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Right Certificates on such record date Right Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Right Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Right Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Right Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein and shall be registered in the names of the holders of record of Right Certificates on the record date specified in the public announcement. (j) Irrespective of any adjustment or change in the Purchase Price or the number of Common Shares issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the Purchase Price and the number of Common Shares which were expressed in the initial Right Certificates issued hereunder. (k) Before taking any action that would cause an adjustment reducing the Purchase Price below one one-hundredth of the then par value, if any, of the Common Shares issuable upon exercise of the Rights, the Company shall take any corporate action which may, in 25 29 the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable Common Shares at such adjusted Purchase Price. (l) In any case in which this Section 11 shall require that an. adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuing to the holder of any Right exercised after such record date of the Common Shares and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the Common Shares and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; PROVIDED, HOWEVER, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment. (m) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it in its sole discretion shall determine to be advisable in order that any consolidation or subdivision of the Common Shares, issuance wholly for cash of any Common Shares at less than the current market price, issuance wholly for cash of Common Shares or securities which by their terms are convertible into or exchangeable for Common Shares, dividends on Common Shares payable in Common Shares or issuance of rights, options or warrants referred to hereinabove in Section 11(b), hereafter made by the Company to holders of its Common Shares shall not be taxable to such stockholders. Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES. Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the Company shall promptly (a) prepare a certificate setting forth such adjustment, and a brief statement of the facts 26 30 accounting for such adjustment, (b) file with the Rights Agent and with any transfer agent for the Common Shares a copy of such certificate and (c) mail a brief summary thereof to each holder of a Right Certificate in accordance with Section 25 hereof. Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING POWER. In the event, directly or indirectly, (a) the Company shall consolidate with, or merge with and into, any other Person, (b) any Person shall consolidate with the Company, or merge with and into the Company and the Company shall be the continuing or surviving corporation of such merger and, in connection with such merger, all or part of the Common Shares shall be changed into or exchanged for stock or other securities of any other Person (or the Company) or cash or any other property, or (c) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one or more transactions, assets or earning power aggregating fifty percent (50%) or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person other than the Company or one or more of its wholly-owned Subsidiaries, then, and in each such case, proper provision shall be made so that (i) each holder of a Right (except as otherwise provided herein) shall thereafter have the right to receive, upon the exercise thereof at a price equal to the then current Purchase Price multiplied by the number of Common Shares for which a Right is then exercisable, in accordance with the terms of this Agreement and in lieu of Common Shares, such number of Common Shares of such other Person (including the Company as successor thereto or as the surviving corporation) as shall equal the result obtained by (A) multiplying the then current Purchase Price by the number of Common Shares for which a Right is then exercisable and dividing that product by (B) fifty percent (50%) of the then current per share market price of the Common Shares of such other Person (determined pursuant to Section 11(d) hereof) on the date of consummation of such 27 31 consolidation, merger, sale or transfer; (ii) the issuer of such Common Shares shall thereafter be liable for, and shall assume, by virtue of such consolidation, merger, sale or transfer, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such issuer; and (iv) such issuer shall take such steps (including, but not limited to, the reservation of a sufficient number of its Common Shares in accordance with Section 9 hereof) in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to the Common Shares thereafter deliverable upon the exercise of the Rights. The Company shall not consummate any such consolidation, merger, sale or transfer unless prior thereto the Company and such issuer shall have executed and delivered to the Rights Agent a supplemental agreement so providing. The Company shall not enter into any transaction of the kind referred to in this Section 13 if at the time of such transaction there are any rights, warrants, instruments or securities outstanding or any agreements or arrangements which, as a result of the consummation of such transaction, would eliminate or substantially diminish the benefits intended to be afforded by the Rights. The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers. Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES. (a) The Company shall not be required to issue fractions of Rights or to distribute Right Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For the purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional 28 32 Rights would have been otherwise issuable. The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors of the Company. If on any such date no such market maker is making a market in the Rights, the fair value of the Rights on such date as determined in good faith by the Board of Directors of the Company shall be used. (b) The Company shall not be required to issue fractions of Common Shares upon exercise of the Rights or to distribute certificates which evidence fractional Common Shares. In lieu of fractional Common Shares, the Company shall pay to the registered holders of Right Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one Common Share. For the purposes of this Section 14(b), the current market value of a Common Share shall be the closing price of a Common Share (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of such exercise. 29 33 (c) The holder of a Right by the acceptance of the Right expressly waives his right to receive any fractional Rights or any fractional shares upon exercise of a Right (except as provided above). Section 15. RIGHTS OF ACTION. All rights of action in respect of this Agreement, excepting the rights of action given to the Rights Agent under Section 18 hereof, are vested in the respective registered holders of the Right Certificates (and, prior to the Distribution Date, the registered holders of the Common Shares); and any registered holder of any Right Certificate (or, prior to the Distribution Date, of the Common Shares), without the consent of the Rights Agent or of the holder of any other Right Certificate (or, prior to the Distribution Date, of the Common Shares), may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Right Certificate in the manner provided in such Right Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement, and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of the obligations of any Person subject to, this Agreement. Section 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that: (a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the Common Shares; 30 34 (b) after the Distribution Date, the Right Certificates are transferable only on the registry books of the Rights Agent if surrendered at the principal office of the Rights Agent, duly endorsed or accompanied by a proper instrument of transfer; and (c) the Company and the Rights Agent may deem and treat the person in whose name the Right Certificate (or, prior to the Distribution Date, the associated Common Shares certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificates or the associated Common Shares certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary. Section 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No holder, as such, of any Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the Common Shares or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Right Certificate shall have been exercised in accordance with the provisions hereof. Section 18. CONCERNING THE RIGHTS AGENT. The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered fby it hereunder in accordance 31 35 with its then existing fee schedule at the time services are rendered and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense, incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability in the premises. The Rights Agent shall be protected and shall incur no liability for, or in respect of any action taken, suffered or omitted by it in connection with, its administration of this Agreement in reliance upon any Right Certificate or certificate for the Common Shares or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper person or persons, or otherwise upon the advice of counsel as set forth in Section 20 hereof. Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT. Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the stock transfer or corporate trust business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties 32 36 hereto, provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Right Certificates, by their acceptance thereof, shall be bound: (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete 33 37 authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board, the President, any Vice President, the Treasurer or the Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. (c) The Rights Agent shall be liable hereunder to the Company and any other Person only for its own negligence, bad faith or willful misconduct. (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights becoming null 34 38 and void pursuant to Section 11(a)(ii) hereof) or any adjustment in the terms of the Rights (including the manner, method or amount thereof) provided for in Section 3, 11, 13, 23 or 24, or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after actual notice that such change or adjustment is required); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Common Shares to be issued pursuant to this Agreement or any Right Certificate or as to whether any Common Shares will, when issued, be validly authorized and issued, fully paid and nonassessable. (f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the Chairman of the Board, the President, any Vice President, the Secretary or the Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered by it in good faith in accordance with instructions of any such officer or for any delay in acting while waiting for those instructions. (h) The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it 35 39 were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof. Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty (30) days' notice in writing mailed to the Company and to any transfer agent of the Common Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail; PROVIDED, HOWEVER, that such resignation and discharge shall not take effect until a new Rights Agent may be appointed and qualified to serve as such. The Company may remove the Rights Agent or any successor Rights Agent upon thirty (30) days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to any transfer agent of the Common Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (who shall, with such notice, submit his Right Certificate for inspection by the Company), then the registered holder of any 36 40 Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be a corporation organized and doing business under the laws of the United States or of the States of Ohio or New York (or of any other state of the United States so long as such corporation is authorized to do business as a banking institution in the States of Ohio or New York), in good standing, having an office in the States of Ohio or New York which is authorized under such laws to exercise corporate trust or stock transfer powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50 million. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment the Company shall file notice thereof in writing with the predecessor Rights Agent and transfer agent of the Common Shares, and mail a notice thereof in writing to the registered holders of the Right Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. Section 22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Purchase Price and the number or kind or 37 41 class of shares or other securities or property purchasable under the Right Certificates made in accordance with the provisions of this Agreement. Section 23. REDEMPTION. (a) The Rights may be redeemed by action of the Board of Directors pursuant to paragraph (b) of this Section 23 or by stockholder action pursuant to paragraph (c) of this Section 23 and shall not be redeemed in any other manner. (b) The Board of Directors of the Company may, at its option, at any time prior to such time as any Person becomes an Acquiring Person, redeem all but not less than all the then outstanding Rights at a redemption price of one cent ($.01) per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the "Redemption Price"). The redemption of the Rights by the Board of Directors may be made effective at such time on such basis and with such conditions as the Board of Directors in its sole discretion may establish. (c) (i) In the event the Company receives an Offer from any Offeror, the Board of Directors of the Company shall call a special meeting of stockholders (the "Special Meeting") for the purpose of voting on a precatory resolution requesting the Board of Directors to redeem the Rights in connection with such Offer (but only in connection with such offer), as such Offer may be amended or revised by the offeror from time to time to increas the price per share in cash to be paid to holders of shares of Voting Stock (the "Resolution"). The Special Meeting shall be held on a date selected by the Board of Directors, which date shall be not less than ninety (90) and not more than one hundred twenty (120) days after the later of (A) the date such Offer is received by the Company (the "Offer Date") and (B) the date of any meeting of stockholders already scheduled as of the Offer Date; PROVIDED, HOWEVER, that if (x) such other meeting shall have been called pursuant to this Section 23(b) for the purpose of voting on a 38 42 precatory resolution with respect to another Offer and (y) the Offer Date shall be not later than fifteen (15) days after the date such other Offer was received by the Company, then both the Resolution and such other resolution shall be voted on at such meeting and such meeting shall be deemed to be the Special Meeting. The Board of Directors shall set a date for determining the stockholders of record entitled to notice of and to vote at the Special Meeting in accordance with the Company's Articles of Incorporation and Code of Regulations and with applicable law. At the Offeror's request, the Company shall include in any proxy soliciting material prepared by it in connection with the Special Meeting proxy soliciting material submitted by the Offeror; PROVIDED, HOWEVER, that the Offeror shall by written agreement with the Company contained in or delivered with such request have indemnified the Company against any and all liabilities resulting from any misstatements, misleading statements and omissions contained in the Offeror's proxy soliciting material and have agreed to pay the Company's incremental costs incurred as a result of including such material in the Company's proxy soliciting material. Notwithstanding the foregoing, no Special Meeting called pursuant to this Section 23(b) shall be held from and after such time as any Person becomes an Acquiring Person, and any Special Meeting scheduled prior to such time and not theretofore held shall be canceled. Notwithstanding the foregoing, no Special Meeting called pursuant to this Section 23(b) shall limit the applicability of Section 1701.831 of the Ohio Revised Code (nor shall anything herein be construed to limit the applicability of any section herein by virtue of the applicability of Section 1701.831 of the Ohio Revised Code). (ii) If at the Special Meeting the Resolution receives the affirmative vote of a majority of the shares of Voting Stock outstanding as of the record date of the Special Meeting, then all of the Rights shall be redeemed by such stockholder action at the Redemption Price, 39 43 effective immediately prior to the consummation of any tender offer (provided that such tender offer is consummated prior to sixty (60) days after the date of the Special Meeting) pursuant to which any Person offers to purchase all of the shares of Voting Stock held by Persons other than such Person and its Affiliates at a price per share in cash equal to or greater than the price contained in the Resolution approved at the Special Meeting; PROVIDED, HOWEVER, that the Rights shall not be redeemed at any time from and after such time as any Person becomes an Acquiring Person. (iii) Nothing contained in this paragraph (c) shall be deemed to be in derogation of the obligation of the Board of Directors of the Company to exercise its fiduciary duty. Without limiting the foregoing, nothing contained herein shall be construed to suggest or imply that the Board of Directors shall not be entitled to reject any Offer, or to recommend that holders of shares of Voting Stock reject any tender offer, or to take any other action (including, without limitation, the commencement, prosecution, defense or settlement of any litigation and the submission of additional or alternative Offers or other proposals to the Special Meeting) with respect to any Offer or any tender offer that the Board of Directors believes is necessary or appropriate in the exercise of such fiduciary duty. (iv) Nothing in this paragraph (c) shall be construed as limiting or prohibiting the Company or any Offeror from proposing or engaging, at any time, in any acquisition, disposition or other transfer of any securities of the Company, any merger or consolidation involving the Company, any sale or other transfer of assets of the Company, any liquidation, dissolution or winding-up of the Company, or any other business combination or other transaction, or any other action by the Company or such Offeror in accordance with applicable law; PROVIDED, HOWEVER, that the holders of Rights shall have the rights set forth in this 40 44 Agreement with respect to any such acquisition, disposition, transfer, merger, consolidation, sale, liquidation, dissolution, winding-up, business combination, transaction or action. (d) Immediately upon the action of the Board of Directors of the Company ordering the redemption of the Rights pursuant to paragraph (b) of this Section 23, or upon the effectiveness of the redemption of the Rights pursuant to paragraph (c) of this Section 23, and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price. The Company shall promptly give public notice of any such redemption; PROVIDED, HOWEVER, that the failure to give, or any defect in, any such notice shall not affect the validity of such redemption. Within ten (10) days after such action of the Board of Directors ordering the redemption of the Rights pursuant to paragraph (b) or the effectiveness of the redemption of the Rights pursuant to paragraph (c), as the case may be, the Company shall mail a notice of redemption to all the holders of the then outstanding Rights at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Shares. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. Neither the Company nor any of its Affiliates or Associates may redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 23 or in Section 24 hereof, and other than in connection with the purchase of Common Shares prior to the Distribution Date. Section 24. EXCHANGE. (a) The Board of Directors of the Company may, at its option, at any time after any Person becomes an Acquiring Person, in redemption in lieu of 41 45 exercise thereof exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 11(a)(ii) hereof) for Common Shares at an exchange ratio of one Common Share per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors shall not be empowered to effect such exchange at any time after any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any such Subsidiary, or any entity holding Common Shares for or pursuant to the terms of any such plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of fifty percent (50%) or more of the Common Shares then outstanding. (b) Immediately upon the action of the Board of Directors of the Company ordering the exchange of any Rights pursuant to subsection (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of Common Shares equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public notice of any such exchange; PROVIDED, HOWEVER, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the Common Shares for Rights will be effected and, in the event of any partial 42 46 exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 11(a)(ii) hereof) held by each holder of Rights. (c) In any exchange pursuant to this Section 24, the Company, at its option, may substitute other then authorized capital stock for Common Shares exchangeable for Rights, provided that the combination of Common Shares and capital stock so delivered shall equal as nearly as practical the voting rights and economic benefits that would have been delivered had sufficient Common Shares been available. (d) In the event that there shall not be sufficient Common Shares issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 24, to the extent permitted by law the Company shall take all such action as may be necessary to authorize additional Common Shares for issuance upon exchange of the Rights and, failing such additional action, shall not exercise the exchange of Rights except to the extent that Common Shares are so available. (e) The Company shall not be required to issue fractions of Common Shares or to distribute certificates which evidence fractional Common Shares. In lieu of such fractional Common Shares, the Company shall pay to the registered holders of the Right Certificates with regard to which such fractional Common Shares would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole Common Share. For the purposes of this paragraph (e), the current market value of a whole Common Share shall be the closing price of a Common Share (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of exchange pursuant to this Section 24. 43 47 Section 25. NOTICE OF CERTAIN EVENTS. (a) In case the Company shall propose (i) to pay any dividend payable in stock of any class to the holders of its Common Shares or to make any other distribution to the holders of its Common Shares (other than a regular quarterly cash dividend), (ii) to offer to the holders of its Common Shares rights or warrants to subscribe for or to purchase any additional Common Shares or shares of stock of any class or any other securities, rights or options, (iii) to effect any reclassification of its Common Shares (other than a reclassification involving only the subdivision of outstanding Common Shares), (iv) to effect any consolidation or merger into or with, or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one or more transactions, of fifty percent (50%) or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to, any other Person, (v) to effect the liquidation, dissolution or winding up of the Company, or (vi) to declare or pay any dividend on the Common Shares payable in Common Shares or to effect a subdivision, combination or consolidation of the Common Shares (by reclassification or otherwise than by payment of dividends in Common Shares), then, in each such case, the Company shall give to each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, or distribution of rights or warrants,, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the Common Shares, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least ten (10) days prior to the record date for determining holders of the Common Shares for purposes of such action, and in the case of any such other action, at least ten 44 48 (10) days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the Common Shares, whichever shall be the earlier. (b) In case any of the events set forth in Section 11(a)(ii) hereof shall occur, then the Company shall as soon as practicable thereafter give to each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of the occurrence of such event, which notice shall describe such event and the consequences of such event to holders of Rights under Section 11(a)(ii) hereof. Section 26. NOTICES. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows: Pioneer-Standard Electronics, Inc. 4800 East 131st Street Cleveland, OH 44105 Attention: Treasurer Subject to the provisions of Section 21 hereof, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Right Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as-follows: AmeriTrust Company, National Association 2073 East Ninth Street Cleveland, OH 44101 Attention: Corporate Trust Department Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Right Certificate shall be sufficiently given or made if sent by 45 49 first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company. Section 27. SUPPLEMENTS AND AMENDMENTS. The Company may from time to time supplement or amend this Agreement without the approval of any holders of Right Certificates in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, or to make any other provisions with respect to the Rights which the Company may deem necessary or desirable, any such supplement or amendment to be evidenced by a writing signed by the Company and the Rights Agent; PROVIDED, HOWEVER, that from and after such time as any Person becomes an Acquiring Person, this Agreement shall not be amended in any manner which would adversely affect the interests of the holders of Rights. Without limiting the foregoing, the Company may at any time prior to such time as any Person becomes an Acquiring Person amend this Agreement to lower the thresholds set forth in Sections l(a) and 3(a) hereof from twenty percent (20%) to not less than the greater of (i) any percentage greater than the largest percentage of the outstanding Common Shares then known by the Company to be beneficially owned by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any Subsidiary of the Company, or any entity holding Common Shares for or pursuant to the terms of any such plan) and (ii) ten percent (10%). Section 28. SUCCESSORS. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 29. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company, the Rights Agent and the 46 50 registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Shares) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Shares). Section 30. SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Section 31. GOVERNING LAW. This Agreement and each Right Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Ohio and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State. Section 32. COUNTERPARTS. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Section 33. DESCRIPTIVE HEADINGS. Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. 47 51 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and attested, all as of the day and year first above written. PIONEER-STANDARD ELECTRONICS, INC. Attest: By /s/ Lawrence R. Cowin, Jr. By /s/ James L. Bayman ---------------------------- ---------------------------- Title: Vice President Title: President Finance and Administration, Treasurer and Assistant Secretary AMERITRUST COMPANY, Attest: NATIONAL ASSOCIATION By /s/ Neal J. Gerstenschlager By /s/ Donald J. Sprenger ---------------------------- ---------------------------- Title: Senior Trust Title: Vice President Officer and Assistant Secretary 48 52 EXHIBIT A Form of Right Certificate Certificate No. R- ______ Rights NOT EXERCISABLE AFTER MAY 10, 1999 OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT ONE CENT ($.01) PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. Right Certificate Pioneer-Standard Electronics, Inc. This certifies that _____________________ or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement, dated as of April 25, 1989 (the "Rights Agreement"), between Pioneer-Standard Electronics, Inc., an Ohio corporation (the "Company"), and AmeriTrust Company, National Association (the "Rights Agent"), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior to 5:00 P.M., Cleveland time, on May 10, 1999 at the principal office of the Rights Agent, or at the office of its successor as Rights Agent, one fully paid non-assessable Common Share, without par value (the "Common Shares"), of the Company, at a purchase price of $40.00 per Common Share (the "Purchase Price"), upon presentation and surrender of this Right Certificate with the Form of Election to Purchase duly executed. The number of Rights evidenced by this Right Certificate (and the number of Common Shares which may be purchased upon exercise hereof) set forth above, and the Purchase Price set forth above, are the number and Purchase Price as of May 10, 1989, based on the Common Shares as constituted at such date. As provided in the Rights Agreement, the Purchase Price and the number of Common Shares which may be purchased upon the exercise of the Rights evidenced by this Right Certificate are subject to modification and adjustment upon the happening of certain events. A-1 53 This Right Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Right Certificates. Copies of the Rights Agreement are on file at the principal executive offices of the Company and the above-mentioned offices of the Rights Agent. This Right Certificate, with or without other Right Certificates, upon surrender at the principal office of the Rights Agent, may be exchanged for another Right Certificate or Right Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of Common Shares as the Rights evidenced by the Right Certificate or Right Certificates surrendered shall have entitled such holder to purchase. If this Right Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Right Certificate or Right Certificates for the number of whole Rights not exercised. Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate (i) may be redeemed by the Company at a redemption price of one cent ($.01) per Right or (ii) may be exchanged in whole or in part for Common Shares. No fractional Common Shares will be issued upon the exercise of any Right or Rights evidenced hereby, but in lieu thereof a cash payment will be made, as provided in the Rights Agreement. No holder of this Right Certificate shall be entitled to vote or receive dividends or be deemed for any purpose the holder of the Common Shares or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Right Certificate shall have been exercised as provided in the Rights Agreement. This Right Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. A-2 54 WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of May 10, 1989. ATTEST: PIONEER-STANDARD ELECTRONICS, INC. By - ------------------------------ ------------------------------- Countersigned: [Rights Agent] By --------------------------- Authorized Signature A-3 55 Form of Reverse Side of Right Certificate FORM OF ASSIGNMENT ------------------ (To be executed by the registered holder if such holder desires to transfer the Right Certificate.) FOR VALUE RECEIVED ___________________________________________ hereby sells, assigns and transfers unto ______________________________________ _______________________________________________________________________________ (Please print name and address of transferee) ______________________________________________________________________________ this Right Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint ____________________ Attorney, to transfer the within Right Certificate on the books of the within-named Company, with full power of substitution. Dated: _________, 19__ ----------------------------------------- Signature Signature Guaranteed: Signatures must be guaranteed by a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States. - -------------------------------------------------------------------------------- The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement). ----------------------------------------- Signature - -------------------------------------------------------------------------------- A-4 56 Form of Reverse Side of Right Certificate -- continued FORM OF ELECTION TO PURCHASE ---------------------------- (To be executed if holder desires to exercise the Right Certificate.) To Pioneer-Standard Electronics, Inc. The undersigned hereby irrevocably elects to exercise ____________________________________________ Rights represented by this Right Certificate to purchase the Common Shares issuable upon the exercise of such Rights and requests that certificates for such Common Shares be issued in the name of: Please insert social security or other identifying number - -------------------------------------------------------------------------------- (Please print name and address) - -------------------------------------------------------------------------------- If such number of Rights shall not be all the Rights evidenced by this Right Certificate, a new Right Certificate for the balance remaining of such Rights shall be registered in the name of and delivered to: ______________________________________________________________________________ (Please print name and address of transferee) - ------------------------------------------------------------------------------ Dated: ___________, 19__ ------------------------------------ Signature Signature Guaranteed: Signatures must be guaranteed by a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States. A-5 57 Form of Reverse Side of Right Certificate -- continued - -------------------------------------------------------------------------------- The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement). -------------------------------- Signature - -------------------------------------------------------------------------------- NOTICE ------ The signature in the foregoing Forms of Assignment and Election must conform to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever. In the event the certification set forth above in the Form of Assignment or the Form of Election to Purchase, as the case may be, is not completed, the Company and the Rights Agent will deem the beneficial owner of the Rights evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement) and such Assignment or Election to Purchase will not be honored. A-6 58 Exhibit B --------- SUMMARY OF RIGHTS TO PURCHASE COMMON SHARES On April 25, 1989, the Board of Directors of Pioneer-Standard Electronics, Inc. (the "Company") declared a dividend of one common share purchase right (a "Right") for each outstanding Common Share, without par value (the "Common Shares"), of the Company. The dividend is payable on May 10, 1989 to the stockholders of record on May 10, 1989 (the "Record Date"). Each Right entitles the registered holder to purchase from the Company one Common Share of the Company at a price of $40.00 per Common Share (the "Purchase Price"), subject to adjustment. The description and terms of the Rights are set forth in a Rights Agreement (the "Rights Agreement") between the Company and AmeriTrust Company National Association, as Rights Agent (the "Rights Agent"). Until the earlier to occur of (i) ten (10) days following a public announcement that a person or group of affiliated or associated persons (an "Acquiring Person") have acquired beneficial ownership of twenty percent (20%) or more of the outstanding Common Shares or (ii) ten (10) business days (or such later date as may be determined by action of the Board of Directors prior to such time as any Person becomes an Acquiring Person) following the commencement of, or announcement of an intention to make, a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person or group of twenty percent (20%) or more of such outstanding Common Shares (the earlier of such dates being called the "Distribution Date"), the Rights will be evidenced, with respect to any of the Common Share certificates outstanding as of the Record Date, by such Common Share certificate with a copy of this Summary of Rights attached thereto. The Rights Agreement provides that, until the Distribution Date, the Rights will be transferred with and only with the Common Shares. Until the Distribution Date (or earlier redemption or expiration of the Rights), new Common Share certificates issued after the Record Date, upon transfer or new issuance of Common Shares will contain a notation incorporating the Rights Agreement by reference. Until the Distribution Date (or earlier redemption or expiration of the Rights), the surrender for transfer of any certificates for Common Shares, outstanding as of the Record Date, even without such notation or a copy of this Summary of Rights being attached thereto, will also constitute the transfer of the Rights associated with the Common Shares represented by such certificate. As soon as practicable following the Distribution Date, separate certificates evidencing the Rights ("Right Certificates") will be mailed to holders of record of the Common Shares as of the close of business on the Distribution Date and such separate Right Certificates alone will evidence the Rights. B-1 59 The Rights are not exercisable until the Distribution Date. The Rights will expire on May 10, 1999 (the "Final Expiration Date"), unless the Final Expiration Date is extended or unless the Rights are earlier redeemed by the Company, in each case, as described below The Purchase Price payable, and the number of Common Shares or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Common Shares, (ii) upon the grant to holders of the Common Shares of certain rights or warrants to subscribe for or purchase Common Shares at a price, or securities convertible into Common Shares with a conversion price less than the then current market price of the Common Shares, or (iii) upon the distribution to holders of the Common Shares of evidences of indebtedness or assets (excluding regular periodic cash dividends paid out of earnings or retained earnings or dividends payable in Common Shares) or of subscription rights or warrants (other than those referred to above). In the event that the Company is acquired in a merger or other business combination transaction or fifty percent (50%) or more of its consolidated assets or earning power are sold, proper provision will be made so that each holder of a Right will thereafter have the right to receive, upon the exercise thereof at the then current exercise price of the Right, that number of shares of common stock of the acquiring company which at the time of such transaction will have a market value of two (2) times the exercise price of the Right. In the event that (i) any person becomes an Acquiring Person (unless such person first acquires twenty percent (20%) or more of the outstanding Common Shares by a purchase pursuant to a tender offer for all of the Common Shares for cash, which purchase increases such person's beneficial ownership to eighty percent (80%) or more of the outstanding Common Shares) or (ii) during such time as there is an Acquiring Person, there shall be a reclassification of securities or a recapitalization or reorganization of the Company or other transaction or series of transactions involving the Company which has the effect of increasing by more than one percent (1%) the proportionate share of the outstanding shares of any class of equity securities of the Company or any of its subsidiaries beneficially owned by the Acquiring Person, proper provision shall be made so that each holder of a Right, other than Rights beneficially owned by the Acquiring Person (which will thereafter be null and void), will thereafter have the right to receive upon exercise that number of Common Shares having a market value of two (2) times the exercise price of the Right. At any time after the acquisition by a person or group of affiliated or associated persons of beneficial ownership of twenty percent (20%) or more of the outstanding Common Shares and prior to the acquisition by such person or group of fifty percent (50%) or more of the outstanding Common Shares, the Board of Directors of the Company may exchange the Rights (other than Rights owned by such person or group which have become void), in whole or in part, at an exchange ratio of one Common Share (or of a share of a class of then authorized capital stock having equivalent rights, preferences and privileges), per Right (subject to adjustment). B-2 60 With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments require an adjustment of at least one percent (1%) in such Purchase Price. No fractional Common Shares will be issued and in lieu thereof, an adjustment in cash will be made based on the market price of the Common Shares on the last trading day prior to the date of exercise. At any time prior to the acquisition by a person or group of affiliated or associated persons of beneficial ownership of twenty percent (20%) or more of the outstanding Common Shares, the Board of Directors of the Company may redeem the Rights in whole, but not in part, at a price of one cent ($.01) per Right (the "Redemption Price"). The redemption of the rights may be made effective at such time on such basis and with such conditions as the Board of Directors in its sole discretion may establish. In addition, if a bidder who does not beneficially own more than one percent (1%) of the Common Shares (and who has not within the past year owned in excess of one percent (I%) of the Common Shares and, at a time he held such greater than one percent (1%) stake, disclosed, or caused the disclosure of, an intention which relates to or would result in the acquisition or influence of control of the Company) proposes to acquire all of the Common Shares (and all other shares of capital stock of the Company entitled to vote with the Common Shares in the election of directors or on mergers, consolidations, sales of all or substantially all of the Company's assets, liquidations, dissolutions or windings up) for cash at a price which a nationally recognized investment banker selected by such bidder states in writing is fair, and such bidder has obtained written financing commitments (or otherwise has financing) and complies with certain procedural requirements, then the Company, upon the request of the bidder, will hold a special stockholders meeting to vote on a resolution requesting the Board of Directors to accept the bidder's proposal. If a majority of the outstanding shares entitled to vote on the proposal vote in favor of such resolution, then for a period of sixty (60) days after such meeting the Rights will be automatically redeemed at the Redemption Price immediately prior to the consummation of any tender offer for all of such shares at a price per share in cash equal to or greater than the price offered by such bidder; PROVIDED, HOWEVER, that no redemption will be permitted or required after the acquisition by any person or group of affiliated or associated persons of beneficial ownership of twenty percent (20%) or more of the outstanding Common Shares. Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price. The terms of the Rights may be amended by the Board of Directors of the Company without the consent of the holders of the Rights, including an amendment to lower the threshold for exercisability of the Rights from twenty percent (20%) to not less than the greater of (i) any percentage greater than the largest percentage of the outstanding Common Shares then known to the Company to be beneficially owned by any person or group of affiliated or associated persons and (ii) ten percent (10%), except that from and after such time as any person becomes an Acquiring Person no such amendment may adversely affect the interests of the holders of the Rights. B-3 61 Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends. A copy of the Rights Agreement has been filed with the Securities and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated April 27, 1989. A copy of the Rights Agreement is available free of charge from the Company. This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, which is hereby incorporated herein by reference. B-4 EX-4.3 3 EXHIBIT 4.3 1 Exhibit 4.3 CONFORMED COPY =============================================================================== PIONEER-STANDARD ELECTRONICS, INC. $20,000,000 IN AGGREGATE PRINCIPAL AMOUNT OF 9.79% SENIOR NOTES DUE NOVEMBER 1, 2000 - -------------------------------------------------------------------------------- NOTE PURCHASE AGREEMENT - -------------------------------------------------------------------------------- DATED AS OF OCTOBER 31, 1990 ================================================================================ 2
TABLE OF CONTENTS ----------------- PAGE ---- SECTION 1. THE NOTES..............................................................................................1 Section 1.1 Authorization of Notes .....................................................................1 Section 1.2 Purchase and Sale of Notes .................................................................1 Section 1.3 Use of Proceeds ............................................................................2 SECTION 2. GENERAL REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................................2 Section 2.1 Capital Stock; Subsidiaries ................................................................2 Section 2.2 Organization and Authority. ................................................................3 Section 2.3 Financial Statements and Other Information; Financial Condition ............................3 Section 2.4 Business ...................................................................................5 Section 2.5 No Material Adverse Change .................................................................5 Section 2.6 Franchises, Licenses, Registrations, etc. ..................................................5 Section 2.7 Title to Properties; Leases ................................................................5 Section 2.8 Compliance with Other Instruments, etc. ....................................................6 Section 2.9 No Materially Adverse Contracts, etc. ......................................................6 Section 2.10 Compliance with Law ........................................................................6 Section 2.11 Compliance with ERISA ......................................................................7 Section 2.12 Compliance with Environmental Laws .........................................................7 Section 2.13 Pending Litigation, etc. ...................................................................8 Section 2.14 Taxes ......................................................................................8 Section 2.15 Holding Company Act; Investment Company Act ................................................9 Section 2.16 No Foreign Assets Control Regulations Violation. ...........................................9 Section 2.17 No Margin Regulation Violation .............................................................9 Section 2.18 Corporate Proceedings ......................................................................9 Section 2.19 No Event of Default .......................................................................10 Section 2.20 Governmental Consents, etc. ...............................................................10 Section 2.21 Full Disclosure. ..........................................................................10 Section 2.22 Validity of Agreement and Notes ...........................................................10 SECTION 3. SECURITIES ACT; ERISA REPRESENTATIONS.................................................................11 Section 3.1 Offerees ..................................................................................11 Section 3.2 Investment Intent, etc. ...................................................................11 Section 3.3 ERISA Representation ......................................................................12 SECTION 4. CONDITIONS OF OBLIGATION TO PURCHASE NOTES............................................................12 Section 4.1 Opinion of Special Counsel for You ........................................................12 Section 4.2 Opinion of Counsel for the Company ........................................................13 Section 4.3 Performance of Obligations ................................................................13 Section 4.4 Representations True, etc. ................................................................13 Section 4.5 Legality ..................................................................................13 Section 4.6 Assignment of Private Placement Number ....................................................13
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Page ---- Section 4.7 Proceedings, Instruments, etc..............................................................13 SECTION 5. EXPENSES..............................................................................................14 SECTION 6. CERTAIN SPECIAL RIGHTS ...............................................................................14 Section 6.1 Home Office Payment .......................................................................14 Section 6.2 Delivery Expenses .........................................................................15 Section 6.3 Issuance Taxes ............................................................................15 Section 6.4 Substitution of Purchaser .................................................................15 SECTION 7. NOTE PREPAYMENTS......................................................................................16 Section 7.1 Required Prepayments.......................................................................16 Section 7.2 Optional Prepayments.......................................................................16 Section 7.3 Notice of Prepayment.......................................................................16 Section 7.4 Partial Prepayment Pro Rata................................................................16 SECTION 8. REGISTRATION, EXCHANGE AND REPLACEMENT OF NOTES.......................................................17 Section 8.1 Registration.............................................................................. 17 Section 8.2 Exchange...................................................................................17 Section 8.3 Replacement................................................................................17 SECTION 9. CERTAIN COVENANTS OF THE COMPANY......................................................................17 Section 9.1 Maintenance of Office......................................................................17 Section 9.2 Corporate Existence........................................................................18 Section 9.3 General Maintenance of Properties and Business, etc........................................18 Section 9.4 Notice of Certain Events and Conditions....................................................19 Section 9.5 Inspection.................................................................................19 Section 9.6 Compliance with Law, etc...................................................................19 Section 9.7 Payment of Taxes and Claims................................................................19 Section 9.8 ERISA......................................................................................20 Section 9.9 Transactions with Affiliates...............................................................20 Section 9.10 Maintenance of Consolidated Net Worth......................................................20 Section 9.11 Current Ratio..............................................................................20 Section 9.12 Fixed Charge Coverage......................................................................20 Section 9.13 Liens......................................................................................20 Section 9.14 Restricted Subsidiary Indebtedness.........................................................21 Section 9.15 Merger, Consolidation......................................................................21 Section 9.16 Transfer and Sale of Assets................................................................22 Section 9.17 Short-Term Indebtedness....................................................................22 Section 9.18 Repurchase of Notes........................................................................22 Section 9.19 Limitations on Restricted Payments and Restricted Investments..............................22 Section 9.20 Limitations on Consolidated Funded Indebtedness............................................23 Section 9.21 Tax Consolidation..........................................................................23 Section 9.22 Restricted Subsidiaries....................................................................24
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Page ---- SECTION 10. INFORMATION TO BE FURNISHED HOLDERS OF NOTES.........................................................25 Section 10.1 Financial Statements of the Company........................................................25 Section 10.2 Other Information..........................................................................26 Section 10.3 Pioneer/Technologies.......................................................................28 Section 10.4 Officer's Certificates.....................................................................28 Section 10.5 Accountants' Certificates..................................................................28 SECTION 11. DEFAULTS AND REMEDIES................................................................................29 Section 11.1 Events of Default; Acceleration of Notes...................................................29 Section 11.2 Default Remedies...........................................................................31 Section 11.3 Notice of Default..........................................................................32 Section 11.4 Annulment of Acceleration of Notes.........................................................32 SECTION 12. INTERPRETATION OF AGREEMENT AND NOTES................................................................33 Section 12.1 Definitions................................................................................33 Section 12.2 Directly or Indirectly.....................................................................47 Section 12.3 Accounting Terms...........................................................................48 Section 12.4 Governing Law..............................................................................48 Section 12.5 Headings...................................................................................48 Section 12.6 Independence of Covenants..................................................................48 SECTION 13. MISCELLANEOUS........................................................................................48 Section 13.1 Notices....................................................................................48 Section 13.2 Survival...................................................................................48 Section 13.3 Successors and Assigns.....................................................................48 Section 13.4 Amendment and Waiver.......................................................................49 Section 13.5 Counterparts...............................................................................50 Section 13.6 Reproduction of Documents................................................................. 50 Section 13.7 Confidentiality............................................................................50 SIGNATURES.......................................................................................................51 SCHEDULE I Name and Address of Purchaser SCHEDULE 2.5 Material Adverse Changes SCHEDULE 4.1 Opinion of Special Counsel for the Purchaser SCHEDULE 4.2 Opinion of Special Counsel for the Company SCHEDULE 12.1 Existing Liens EXHIBIT A Form of Note EXHIBIT B Consents EXHIBIT C Permitted Affiliate Transactions
iii 5 PIONEER-STANDARD ELECTRONICS, INC. 4800 East 131st Street Cleveland, Ohio 44105 -------------------------------------- NOTE PURCHASE AGREEMENT -------------------------------------- As of October 31, 1990 Teachers Insurance and Annuity Association of America 730 Third Avenue New York, New York 10017 Attention: Securities Division Dear Sirs: The undersigned Pioneer-Standard Electronics, Inc., an Ohio corporation (the "Company"), hereby agrees with you as follows: SECTION 1. THE NOTES SECTION 1.1 AUTHORIZATION OF NOTES. The Company has authorized the issuance and sale of $20,000,000 in aggregate principal amount of its 9.79% Senior Notes due November 1, 2000, to be dated (except as otherwise set forth in Section Section 8.2 and 8.3 hereof) the date of original issuance thereof and to be substantially in the form of Exhibit A hereof. Such Notes, together with all Notes (in the form of Exhibit A hereof) issued in exchange or replacement for, or on the registration or transfer of, such Notes pursuant to the provisions of this Agreement, are hereinafter called the "Notes." Each Note shall bear interest from the date thereof until such Note shall become due and payable in accordance with the terms thereof and hereof (whether at maturity, by acceleration or otherwise) at the rate of 9.79% per annum, payable semiannually on each May 1 and November 1 (each an "Interest Payment Date"), commencing May 1, 1991, and shall have a stated maturity of November 1, 2000. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. Any overdue portion of the principal amount of any Note and premium, if any, and (to the extent permitted by applicable law) on any overdue installment of interest shall bear interest at a rate equal to 11.79% per annum. SECTION 1.2 PURCHASE AND SALE OF NOTES. The Company agrees to sell to you, and upon and subject to the terms and conditions hereof and in reliance upon the representations and warranties of the Company contained herein, you agree to purchase from the Company, Notes in the aggregate principal amount of $20,000,000 at a purchase price equal to 100% of such 6 principal amount (the "Purchase Price"). The Notes are to be sold and delivered at one closing to be held on November 2, 1990 at 10:00 A.M., New York City time, or such other date and time (but not later than November 15, 1990) as shall be agreed upon by you and the Company (such date and time being hereinafter called the "Closing Date"), at the offices of Orrick, Herrington & Sutcliffe, 599 Lexington Avenue, 29th Floor, New York, New York 10022. On the Closing Date, the Company will deliver to you a single Note in the form of Exhibit A hereof, dated the Closing Date, in the principal amount of $20,000,000 and registered in your name, or in the name of such nominee as you shall have designated by notice to the Company at least one Business Day prior to the Closing Date. The delivery of such Note to you shall be made against payment by wire transfer of immediately available funds in the amount of the Purchase Price to the Company's account no. 10005-5974 in Ameritrust Company National Association, 900 Euclid Avenue, Cleveland, Ohio 44101, ABA no. 041000687. SECTION 1.3 USE OF PROCEEDS. The proceeds of the sale of the Notes (net of expenses and costs) will be promptly applied by the Company to repay outstanding Debt of the Company under the Credit Agreement dated as of October 14, 1988 among Ameritrust Company National Association, National City Bank, Bank One, Dayton, N.A., Ameritrust Company National Association, as Agent, and the Company (the "Existing Loan Agreement"). SECTION 2. GENERAL REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to you as follows: SECTION 2.1 CAPITAL STOCK; SUBSIDIARIES. (a) The authorized capital stock of the Company consists of: 20,000,000 Common Shares, without par value ($1.00 stated value per share) (the "Common Shares"), of which 5,411,632 shares were issued and outstanding on September 30, 1990. All such outstanding Common Shares have been validly issued and are fully paid and nonassessable shares and free of preemptive rights. Except for (i) the Company's incentive stock option plan described in Note No. 7 to the Company financial statements (the "1990 Financial Statements") set forth in the Company's Annual Report to Shareholders for the Fiscal Year ended March 31, 1990 (the "1990 Report"), (ii.) the Common Share Purchase Rights and (iii) the 9% Subordinated Convertible Debentures due 1998 issued pursuant to an Indenture dated as of August 1, 1983 between the Company and BancOhio National Bank, as Trustee (the "Debentures"), there are not outstanding, nor has the Company agreed to grant or to issue, any options, warrants or similar rights to others to acquire or receive any of its authorized but unissued shares of capital stock. No shares of the Company's capital stock are held on the date hereof in the treasury of the Company. There are no voting trusts or other agreements or understandings with respect to the voting of the capital stock of the Company. The Company's Common Shares constitute its only class of Voting Stock. The Company is not subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retain any shares of its capital stock. (b) The Company does not own a majority of the Voting Stock of any corporation. The Company owns 50% of the Voting Stock of Pioneer/Technologies Group, Inc., 2 7 a Maryland corporation ("Pioneer/Technologies"). All of the outstanding shares of capital stock of Pioneer/Technologies held by the Company have been validly issued and are fully paid and nonassessable and are owned beneficially and of record by the Company, free and clear of any Liens other than Permitted Liens. Although the Company is represented on the Board of Directors of Pioneer/Technologies (by two directors of a Board of four directors), it has no right to designate and has not heretofore designated a majority of the members of such Board and does not have the right to exercise and has not heretofore exercised active control over the management of the corporate affairs or business of Pioneer/Technologies. The Company is not obligated to make any Investment in any corporation. (c) Since March 31, 1990, the Company's business dealings with Pioneer/Technologies have consisted solely of Permitted Affiliate Transactions and the Company has no contractual obligation to engage in any business dealings with Pioneer/Technologies other than Permitted Affiliate Transactions. SECTION 2.2 ORGANIZATION AND AUTHORITY. The Company: (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of Ohio; (b) has all requisite power and authority (corporate and other) and all necessary franchises, licenses, permits and rights to own and operate its properties, to conduct its business as currently conducted and, so far as the Company can now reasonably foresee, as currently proposed to be conducted, and to enter into this Agreement, to offer, issue, sell and deliver the Notes and to perform its obligations under this Agreement and the Notes; and (c) has duly qualified to do business as a foreign corporation and is in good standing in every jurisdiction in which the properties owned (or held under lease) by it or the nature of its activities makes such qualification necessary and where the failure to do so would materially adversely affect the business, earnings, prospects, properties or condition (financial or other) of the Company. The Company is not presently in good standing in the State of Illinois because of its failure to file an Annual Return on a timely basis. The Company has filed the delinquent Annual Return and has been advised by the office of the Secretary of State of Illinois that it will be restored to good standing on or about November 10, 1990. The Company does not believe that the failure to file the Annual Return on a timely basis or the lapse in good standing in the State of Illinois will have a material adverse effect on the business, earnings, prospects, properties or condition (financial or other) of the Company. SECTION 2.3 FINANCIAL STATEMENTS AND OTHER INFORMATION; FINANCIAL CONDITION. (a) the Company's Annual Reports to the SEC on Form 10-K for the Fiscal Year ended March 31, 1990 (the "Form 10-K") and the Fiscal Years ended March 31, 1988 and 1989, containing (i) balance sheets of the Company as at March 31, 1987, 1988, 1989 and 1990 and statements of income, cash flows and shareholders' equity of the Company for its Fiscal Years ended March 31, 1986, 1987, 1988, 1989 and 1990, together in each case with the auditor's report thereon of Ernst & Young, independent certified public accountants (or its predecessor firm, Arthur Young & Company) and (ii) consolidated balance sheets of Pioneer/Technologies 3 8 and its Subsidiaries as at March 31, 1987, 1988, 1989 and 1990 and consolidated statements of income, cash flows and shareholders' equity of Pioneer/Technologies and its Subsidiaries for its Fiscal Years ended March 31, 1986, 1987, 1988, 1989 and 1990, together in each case with the auditor's report thereon of Ernst & Young (or Arthur Young & Company); (b) the 1990 Report (the 1990 Report together with the Form 10-K, the "1990 Disclosure Documents"); (c) the Company's Quarterly Report to the SEC on Form 10-Q for the Fiscal Quarter ended June 30, 1990 (the "Form 10-Q"; together with the 1990 Disclosure Documents, referred to herein as the "Company Disclosure Documents", the Company Disclosure Documents constituting all of the reports and other documents, other than the Company's Proxy Statement for its 1990 Annual Meeting, required to be filed by the Company with the SEC pursuant to the Exchange Act from March 31, 1990 through the Closing Date), containing unaudited balance sheets as at June 30, 1989 and 1990 and unaudited statements of income, cash flows and shareholders' equity for the Fiscal Quarters then ended; (d) the Company's Annual Reports to Shareholders for the Fiscal Years ended March 31, 1981, 1982, 1983, 1984, 1985, 1986, 1987, 1988 and 1989, each containing balance sheets of the Company as at the end of such Fiscal Year and the preceding Fiscal Year and statements of income, cash flows (or changes in financial position) and shareholders' equity of the Company for the three Fiscal Years then ended, together in each case with the auditor's report thereon of Arthur Young & Company (or Ernst & Young); and (e) the Company's Quarterly Reports to the SEC on Form 10-Q for the Fiscal Quarters ended June 30, September 30 and December 31, 1989, each containing unaudited balance sheets of the Company as at the end of such Fiscal Quarter and the same Fiscal Quarter in the preceding Fiscal Year, and statements of income, cash flows and shareholders' equity of the Company for the Fiscal Quarter then ended and for the Fiscal Quarter ended a year earlier (the Company financial statements contained in the Company Disclosure Documents and the Company financial statements described in clause (d) and this clause (e) are hereinafter referred to as the "Company Financial Statements", the consolidated financial statements of Pioneer/Technologies and its Subsidiaries contained in the Form 10-K are hereinafter referred to as the "Pioneer/Technologies Financial Statements" and the Company Financial Statements and the Pioneer/Technologies Financial Statements are hereinafter collectively referred to as the "Financial Statements"). The Financial Statements and all other financial statements contained in any document referred to above, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the respective periods covered thereby. The Financial Statements are correct and complete copies thereof and fairly present in accordance with generally accepted accounting principles the financial position of the Company or the consolidated financial position of Pioneer/Technologies and its Subsidiaries, as the case may be, as of the respective dates of the balance sheets included therein and the results of operations of the Company or the consolidated results of operations of Pioneer/Technologies and its Subsidiaries, for the respective periods covered by the statements of income, shareholders' equity and cash flows (or changes in financial position) included therein. The Company has no material obligation or liability of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether due or not due) which, either individually or in the aggregate, would be material to the Company that is not reflected in the Financial Statements, other than liabilities incurred since March 31, 1990 in the ordinary course of business and which in the aggregate have no material adverse effect on the financial condition of the Company or on the conduct of its business. The Company does not know of any basis for the assertion against the Company of any liability or obligation of any 4 9 nature whatsoever that is not fully reflected in the Financial Statements which, either individually or in the aggregate, would be material to the Company. SECTION 2.4 BUSINESS. The Company Disclosure Documents contain accurate descriptions of the general nature of the business of the Company, as presently conducted and as presently proposed to be conducted, and the major properties owned or leased by the Company on the respective dates of the Disclosure Documents. The Company is not presently engaged in any line of business not disclosed in the Company Disclosure Documents or reflected in the Financial Statements and does not own or lease any significant properties not disclosed in the Company Disclosure Documents and reflected in the Financial Statements. SECTION 2.5 NO MATERIAL ADVERSE CHANGE. Except as disclosed in Schedule 2.5 hereto, since March 31, 1990, there has been no material adverse change in the business, earnings, prospects, properties or condition (financial or other) of the Company, and no event has occurred and no condition exists (other than general economic, political and international trends) that will have (so far as the Company can now reasonably foresee) a material adverse effect on the business, earnings, prospects, properties or condition (financial or other) of the Company. Since March 31, 1990, the Company has not directly or indirectly declared, ordered, paid, made or set apart any sum or property for any Restricted Payment or agreed to do so except as disclosed in the Company Financial Statements or the Company Disclosure Documents. SECTION 2.6 FRANCHISES, LICENSES, REGISTRATIONS, ETC. The Company owns or possesses, and holds free from restrictions which materially interfere with their use by the Company, or known conflicts with the rights of others, all franchises, licenses, registrations, permits, rights of way, easements, consents, copyrights, trademarks, service marks, trade names and patents, and all rights with respect to the foregoing, necessary for the conduct of its businesses as now conducted and, so far as the Company can now reasonably foresee, as currently proposed to be conducted, and is in full compliance with the terms and conditions, if any, of all such franchises, licenses, registrations, permits, rights of way, easements, consents, copyrights, trademarks, service marks, trade names and patents, and the terms and conditions of any agreements relating thereto, the non-compliance with which would, individually or in the aggregate, materially adversely affect the business, earnings, prospects, properties or condition (financial or other) of the Company. SECTION 2.7 TITLE TO PROPERTIES; LEASES. The Company has good and marketable fee simple title to its real properties and a valid and indefeasible interest in all other Assets, reflected on the balance sheet as at March 31, 1990 of the Company as well as to the properties acquired by the Company since said date in the ordinary course of business, subject only to Permitted Liens. The Company has the right to, and does, enjoy peaceful and undisturbed possession under all material leases under which it is leasing property. All leases under which the Company is leasing property are valid, subsisting and in full force and effect, subject only to Permitted Liens, and the Company is not in default under any such lease default under which would, individually or in the aggregate, materially adversely affect the business, earnings, prospects, properties or condition (financial or other) of the Company, nor does the Company have any knowledge that any other party to any such lease is in default under any such lease default under which would, 5 10 individually or in the aggregate, materially adversely affect the business, earnings, prospects, properties or condition (financial or other) of the Company. SECTION 2.8 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. The Company is not (a) in violation of any term of its Articles of Incorporation or Code of Regulations or (b) in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in, and is not otherwise in default under, (i) any evidence of Indebtedness or any instrument or agreement under or pursuant to which any evidence of Indebtedness has been issued, or (ii) any other instrument or agreement to which it is a party or by which it is bound or any of its properties is affected, the default or defaults under which other instrument or agreement would, individually or in the aggregate, have a material adverse effect on the business, earnings, prospects, properties or condition (financial or other) of the Company and the Company does not know of any default under any such other instrument or agreement. The Company has not defaulted in, or failed to make at the time contemplated, payment of any dividends or any mandatory redemption payments of any preferred stock or any principal of, or premium or interest on, any Indebtedness. Neither the execution, delivery or performance of this Agreement nor the offer, issuance, sale, delivery or performance of the Notes does or will (A) conflict with or violate the Articles of Incorporation or Code of Regulations of the Company, (B) conflict with or result in a breach of any of the terms, conditions or provisions of, or constitute a default under, or result in the creation of any Lien on any of the properties or Assets of the Company pursuant to the terms of, any evidence of Indebtedness, or any instrument or agreement under or pursuant to which any evidence of Indebtedness has been issued, or any other instrument or agreement referred to in this Section 2.8 to which the Company is a party or by which it is bound, or (C) require any consent of or other action by any trustee or any creditor of, any lessor to or any investor in the Company, except for such consents or other actions as are disclosed in Exhibit B hereto and which shall have been obtained or completed on or prior to the Closing Date. SECTION 2.9 NO MATERIALLY ADVERSE CONTRACTS, ETC. The Company is not a party to or bound by nor is any of its properties affected by) any contract or agreement, or subject to any order, writ, injunction or decree or other action of any court or any governmental department, commission, bureau, board or other administrative agency or official, or any charter or other corporate or contractual restriction, which materially adversely affects, or in the future will (so far as the Company can now reasonably foresee) materially adversely affect the business, earnings, prospects, properties or condition (financial or other) of the Company. SECTION 2.10 COMPLIANCE WITH LAW. The Company is not in violation of any laws, ordinances or governmental rules or regulations to which it is subject the violation of which would, individually or in the aggregate, materially adversely affect the business, earnings, prospects, properties or condition (financial or other) of the Company. Neither the execution, delivery or performance of this Agreement nor the offer, issuance, sale or delivery of the Notes does or will cause the Company to be in violation of any law or any order, rule or regulation of any federal, state, county, municipal or other governmental or public authority or agency having jurisdiction over the Company or over any of its properties, or the award of any arbitrator. 6 11 SECTION 2.11 COMPLIANCE WITH ERISA. (a) As used in this Section 2.11, the terms "employee benefit plan" and "party in interest" shall have the respective meanings assigned thereto in Section 3 of ERISA and the term "prohibited transaction" shall have the meanings assigned thereto in Section 4975 of the Code and Section 406 of ERISA. (b) To the best of the Company's knowledge, neither the Company nor any of the Company's ERISA Affiliates has, with respect to any employee benefit plan established or maintained, or to which any contributions have been made, by the Company or any of its ERISA Affiliates (including any such plan also maintained by one or more other employers) for the benefit of their employees or any trust created thereunder (collectively, the "Plans" and, individually, a "Plan"), engaged in a prohibited transaction that could subject the Company to a tax or penalty. (c) Based on your representation in Section 3.3 hereof, the Company represents that the execution and delivery of this Agreement and the security documents and the offer, issuance, sale and delivery of the Notes and the consummation of the transactions contemplated hereby and thereby will not involve or result in any non-exempt prohibited transaction. (d) Each Plan is in substantial compliance with ERISA. None of the Plans is a "defined benefit plan" (within the meaning of Section (3)(35) of ERISA) established or maintained, or to which any contributions have been made, by the Company or any of its ERISA Affiliates for the benefit of its employees or former employees, (a "Pension Plan"). Neither the Company nor any of its ERISA Affiliates is obligated, nor has at any time within the last six years been obligated, to make any contributions to any "Multiemployer Plan" (within the meaning of Section 4001(a)(3) of ERISA). SECTION 2.12 COMPLIANCE WITH ENVIRONMENTAL LAWS. (a) The Company is, and will continue to be, in compliance with all applicable federal, state and local environmental laws, regulations and ordinances governing its respective business, products, properties or Assets with respect to all discharges into the ground and surface water, emissions into the ambient air and generation, accumulation, storage, treatment, transportation, labeling or disposal of waste materials or process by-products, the non-compliance with which would, individually or in the aggregate, materially adversely affect the business, earnings, prospects, properties or condition (financial or other) of the Company, and the Company is not liable for any penalties, fines or forfeitures for failure to comply with any of the foregoing. All licenses, permits or registrations required for the business of the Company, as presently conducted and proposed to be conducted, under any federal, state or local environmental laws, regulations or ordinances have been obtained or made and the Company is in compliance therewith except for such licenses, permits or registrations, the failure of which to obtain or to comply with would, individually or in the aggregate, materially adversely affect the business, earnings, prospects, properties or condition (financial or other) of the Company. (b) No release, emission or discharge into the environment of hazardous substances, as defined under the Comprehensive Environmental Response, Compensation and Liability Act, as amended, or hazardous waste, as defined under the Resource Conservation and 7 12 Recovery Act, or air pollutants as defined under the Clean Air Act, or pollutants, as defined under the Clean Water Act, has occurred or is presently occurring on or from any property owned or leased by the Company in excess of federal, state or local permitted releases or reportable quantities, or other concentrations, standards or limitations under the foregoing laws or any state or local law governing the protection of health and the environment or under any other federal, state or local laws or-regulations (then or now applicable, as the case may be) except for such releases, emissions or discharges which, individually or in the aggregate, would materially adversely affect the business, earnings, prospects, properties or condition (financial or other) of the Company. (c) The Company has never, except in accordance with applicable laws or regulations, (A) owned, occupied or operated a site or structure on or in which any hazardous substance was or is stored, transported or disposed of, (B) transported or arranged for the transportation of any hazardous substance or (C) caused or been held legally responsible for any release or threatened release of any hazardous substance, or received notification from any federal, state or other governmental authority of any release or threatened release, or that it may be required to pay any costs or expenses incurred or to be incurred in connection with any efforts to mitigate the environmental impact of any release or threatened release, of any hazardous substance from any site or structure owned, occupied or operated by the Company which, individually or in the aggregate, would materially adversely affect the business, earnings, prospects, properties or condition (financial or other) of the Company. SECTION 2.13 PENDING LITIGATION, ETC. There is no action at law, suit in equity or other proceeding or investigation (whether or not purportedly on behalf of the Company in any court or by or before any other governmental or public authority or agency or any arbitrator or arbitration panel, pending or threatened against or affecting the Company or any of its properties, that either individually or in the aggregate, (a) could materially adversely affect the business, earnings, prospects, properties or condition (financial or other) of the Company or (b) could question the validity of this Agreement or the Notes. The Company is in compliance with respect to any order, writ, injunction, judgment or decree to which it is subject of any court or other governmental or public authority or agency or arbitrator or arbitration panel, the-failure to comply with which, individually or in the aggregate, could materially adversely affect the business, earnings, prospects, properties or condition (financial or other) of the Company. SECTION 2.14 TAXES. All federal, state and other tax returns of the Company required by law to be filed have been duly filed, and all federal, state and other taxes, assessments, fees and other governmental charges upon the Company or upon any of the properties, incomes or Assets of the Company that are due and payable have been paid other than those being contested in good faith by appropriate proceedings and for which adequate reserves have been established. No extensions of the time for the assessment of deficiencies have been granted by the Company. Except for Permitted Liens, there are no Liens on any properties or Assets of the Company imposed or arising as a result of the delinquent payment or the non-payment of any tax, assessment fee or other governmental charge for which payment is past due. Federal income tax returns for the Company have been audited by the Internal Revenue Service or the applicable statutes of limitations with respect to such obligations have expired for the Fiscal Year ended 8 13 March 31, 1987 and all prior Fiscal Years. The charges, accruals and reserves, if any, on the books of the Company in respect of federal, state and local corporate franchise and income taxes for all fiscal periods to date are adequate, and the Company does not know of any additional unpaid assessments for such periods or of any factual basis therefor. There are no applicable taxes, fees or other governmental charges payable by the Company in connection with the execution and delivery of this Agreement or the offer, issuance, sale or delivery of the Notes by the Company. SECTION 2.15 HOLDING COMPANY ACT; INVESTMENT COMPANY ACT. (a) The Company is not a "public utility company" or a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935, as amended, or a "public utility" within the meaning of the Federal Power Act, as amended. (b) The Company is not an "investment company" or an "affiliated person" of an "investment company" or a company "controlled" by an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended. The Company is not an "investment adviser" or an "affiliated person" of an "investment adviser" as such terms are defined in the Investment Advisers Act of 1940, as amended. SECTION 2.16 NO FOREIGN ASSETS CONTROL REGULATIONS VIOLATION. None of the transactions contemplated by this Agreement nor the application of any part of the proceeds of the sale of the Notes will result in a violation of any of the foreign assets control regulations of the United States Treasury Department, 31 C.F.R., Subtitle B, Chapter V, as amended (including, without limitation, the Foreign Assets Control Regulations, the Transaction Control Regulations, the Cuban Assets Control Regulations, the Foreign Funds Control Regulations, the Iranian Assets Control Regulations, the Nicaraguan Trade Control Regulations, the South African Transactions Regulations, the Libyan Sanctions Regulations and the Soviet Gold Coin Regulations contained in said Chapter V) or Presidential Executive Orders 12724 and 12725 prohibiting transactions with Iraq and Kuwait, respectively, or any ruling issued thereunder or any enabling legislation or Presidential Executive Order granting authority therefor, nor will the proceeds of the Notes be used by the Company in a manner that would violate any thereof. SECTION 2.17 NO MARGIN REGULATION VIOLATION. None of the transactions contemplated by this Agreement nor the application of any part of the proceeds from the sale of the Notes will violate or result in a violation of Section 7 of the Exchange Act or any regulations issued pursuant thereto, including, without limitation, Regulation G (12 C.F.R., Part 207), as amended, Regulation T (12 C.F.R., Part 220), as amended, and Regulation X (12 C.F.R., Part 224), as amended, of the Board of Governors of the Federal Reserve System. Less than 25% of the book value of the Assets of the Company is attributable to "margin securities" (as defined in said Regulation G). SECTION 2.18 CORPORATE PROCEEDINGS. The Company has taken all corporate action necessary to be taken by it to authorize the execution and delivery of this Agreement, the offer, 9 14 issuance, sale and delivery of the Notes and the performance of all obligations to be performed by it hereunder and thereunder. SECTION 2.19 NO EVENT OF DEFAULT. No event has occurred and is continuing, and no condition exists, that, if the Notes had been issued and were outstanding on the date hereof, would constitute a Default or an Event of Default. SECTION 2.20 GOVERNMENTAL CONSENTS, ETC. No consent of, approval or authorization by, filing or registration with or notice to any governmental or public authority or agency is required for the offer, issuance, sale or delivery of the Notes or the execution, delivery or performance of this Agreement. SECTION 2.21 FULL DISCLOSURE. Other than with respect to Pioneer/Technologies, neither this Agreement, the Company Disclosure Documents or any report or financial statement referred to in Section 2.3 hereof, nor any certificate, report, other writing or statement furnished or made to you by or on behalf of the Company in connection with the negotiation of this Agreement and the sale of the Notes contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading. The Company is not aware of any untrue statement of a material fact or omission to state a material fact necessary to make the statements contained herein or therein not misleading, contained in or relative to the information relating to Pioneer/Technologies, its business, properties, financial condition and results of operations contained in this Agreement, the Company Disclosure Documents, any report or financial statement referred to in Section 2.3 hereof, or any certificate, report, other writing or statement furnished or made to you by or on behalf of the Company in connection with the negotiation of this Agreement and the sale of the Notes. The Company obtains information about Pioneer/Technologies through (i) representation on its Board of Directors, (ii) receipt of monthly financial reports and (iii) regular business dealings. There is no fact known to the Company that has not been disclosed to you in writing that (a) materially adversely affects, or in the future may (so far as the Company can now reasonably foresee) materially adversely affect the business, earnings, prospects, properties or condition (financial or other) of the Company or (b) adversely affects or in the future may (so far as the Company can now reasonably foresee) materially adversely affect the ability of the Company to perform its obligations under this Agreement and the Notes. SECTION 2.22 VALIDITY OF AGREEMENT AND NOTES. This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. Upon receipt by the Company of payment for the Notes as provided in this Agreement, the Notes will have been duly issued and will constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms subject to (a) applicable bankruptcy, insolvency, avoidance, reorganization, moratorium or similar laws affecting the rights of creditors generally, and (b) general principles of equity (regardless of whether considered in a proceeding in equity or at law). 10 15 SECTION 3. SECURITIES ACT; ERISA REPRESENTATIONS SECTION 3.1 OFFEREES. The Company represents that it has not, eitheR directly or through any agent, offered any of the Notes or any similar securities for sale to, or solicited any offers to buy any thereof from, or otherwise approached or negotiated in respect thereof with, any Person or Persons other than you and not more than three other Institutional Investors, each of whom was offered the right to purchase Notes at private sale for investment. The Company agrees that it will not, and that it will use its best efforts to cause any agent on behalf of it to not, sell or offer any of the Notes or any similar securities to, or solicit offers to buy any thereof from, or otherwise approach or negotiate in respect thereof with, any other Person or Persons whomsoever, or take any other action, so as to bring the issuance and sale of the Notes within the provisions of Section 5 of the Securities Act or the provisions of any state securities law requiring registration of securities, notification of the issuance and sale thereof or confirmation of the availability of any exemption from registration thereof. SECTION 3.2 INVESTMENT INTENT, ETC. (a) ThiS Agreement is made with you in reliance upon your representation to the Company, which by your acceptance hereof you confirm, that you are purchasing the Notes to be purchased by you hereunder for your own account for investment and not with a view to the distribution thereof, and that you have no present intention of distributing any of the same; PROVIDED, HOWEVER, that the disposition of your property in compliance with applicable federal and state securities laws shall be at all times within your own control, and that your right to sell or otherwise dispose of all or any part of the Notes purchased by you pursuant to an effective registration statement (which you acknowledge that the Company has no obligation to file for your benefit) under the Securities Act or under an exemption from such registration available under the Securities Act (including, but not limited to, the exemption provided by Rule 144A) shall not be prejudiced. (b) You agree (and each subsequent holder of a Note, by its acceptance of such Note, agrees) that, upon the registration of the transfer of any Note by you (or such holder),pursuant to Section 3.1 hereof, other than in connection with the sale of a Note pursuant to registration under the Securities Act, written notice will be provided by the transferor to the Company at the time of such registration of transfer that such transfer is exempt from the registration provisions of the Securities Act and that the transferee is (i) a Qualified Institutional Buyer under Rule 144A, or (ii) an Institutional Investor, or (iii) neither a Qualified Institutional Buyer nor an Institutional Investor, and, if the transferee is neither a Qualified Institutional Buyer nor an Institutional Investor, such notice will be accompanied by an opinion of counsel (which may be counsel employed by the transferor) to the effect that such transfer is exempt from registration under the Securities Act; PROVIDED, HOWEVER, that notwithstanding the foregoing provisions of this sentence, in the case of any transfer of a Note by a transferor which is neither a Qualified Institutional Buyer nor an Institutional Investor to a transferee which is neither a Qualified Institutional Buyer nor an Institutional Investor, the Company shall have no obligation to register such transfer or to treat it as valid for any purpose unless and until the Company shall have received from the transferor written notice in form and substance reasonably satisfactory to it describing the manner and circumstances of the proposed transfer in reasonable detail and identifying the basis for the claimed exemption from the registration requirements of the 11 16 Securities Act, accompanied by an opinion of counsel reasonably acceptable to the Company confirming the availability of such exemption in the circumstances. The Company and you each acknowledge that the Notes are securities (as defined in the Securities Act and the Exchange Act). (c) Each Note at any time issued hereunder shall be endorsed with the following legend (unless and until it is demonstrated to the reasonable satisfaction of the Company that a Note may be issued or reissued without such legend without violating applicable securities law): THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND THE RULES AND REGULATIONS THEREUNDER. IN ORDER TO TRANSFER THIS NOTE THE HOLDER MAY BE REQUIRED TO PROVIDE PRIOR NOTICE OF SUCH TRANSFER TO PIONEER-STANDARD ELECTRONICS, INC. (THE "COMPANY") AND TO SATISFY CERTAIN OTHER CONDITIONS INTENDED TO ASSURE COMPLIANCE WITH APPLICABLE SECURITIES LAWS, AS PROVIDED IN THE NOTE PURCHASE AGREEMENT DATED AS OF OCTOBER 31, 1990, A COPY OF WHICH MAY BE EXAMINED AT THE PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY. PROVIDED, however, that the Note or Notes received by you on the Closing Date, and each Note issued upon registration of transfer, exchange or replacement thereof, need only be endorsed with the first sentence of the above legend, unless a Note is to be registered in the name of a holder which is not a Qualified Institutional Buyer or an Institutional Investor. SECTION 3.3 ERISA REPRESENTATION. You represent that no parT of the funds to be used by you to pay the purchase price of the Notes to be purchased by you hereunder constitutes assets allocated to any separate account maintained by you in which any employee benefit plan (or its related trust) has any interest. As used in this Section 3.3, the terms "employee benefit plan" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA. SECTION 4. CONDITIONS OF OBLIGATION TO PURCHASE NOTES. Your obligation to purchase and pay for the Notes to be purchased by you hereunder on the Closing Date shall be subject to the satisfaction, prior to or concurrently with such purchase and payment, of the following conditions: SECTION 4.1 OPINION OF SPECIAL COUNSEL FOR YOU. You shall have received from Orrick, Herrington & Sutcliffe, New York, New York, who are acting as special counsel for you in connection with the transactions contemplated by this Agreement, an opinion, dated the Closing Date, in form and substance satisfactory to you, to the effect specified in Schedule 4.1 hereof. 12 17 SECTION 4.2 OPINION OF COUNSEL FOR THE COMPANY. You and your special counsel shall have received from Calfee, Halter & Griswold, Cleveland, Ohio, special counsel for the Company, an opinion, dated the Closing Date, in form and substance satisfactory to you and your special counsel, to the effect specified in Schedule 4.2 hereof. The Company hereby covenants and agrees to instruct such counsel to prepare and deliver to you pursuant to this Section 4.2 its opinion referred to above and hereby waives, to the limited extent necessary to permit the preparation and delivery of such opinions and your reliance thereon, any attorney-client privilege, right of confidentiality or conflict of interest which might otherwise render such preparation and delivery improper or unethical or such reliance unwarranted; PROVIDED, HOWEVER, that such waiver shall not include work product, communications, and other documents or information used or conduct with respect to any such preparation or delivery. SECTION 4.3 PERFORMANCE OF OBLIGATIONS. The CompanY shall have performed all of its obligations to be performed hereunder prior to or on the Closing Date, and you shall have received an Officer's Certificate from the Company, dated the Closing Date, to that effect. SECTION 4.4 REPRESENTATIONS TRUE, ETC. The representations and warranties of the Company contained in Sections 2 and 3 hereof shall be true in all material respects on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date. There shall exist on the Closing Date no event or condition which would constitute a Default or an Event of Default if the Notes had been outstanding at all times from and after the date hereof. You shall have received an Officer's Certificate from the Company, dated the Closing Date, to the effect of the foregoing sentences. SECTION 4.5 LEGALITY. In the opinion of you and your legal counsel, thE Notes shall qualify as a legal investment for you under all applicable laws of any jurisdiction to which you are subject (without reference to any so-called "basket clause" of any such law or any clause that imposes limitations on particular investments, whether in the aggregate or individually), and the Company shall have delivered to you any evidence thereof which you or your special counsel may reasonably request; PROVIDED, HOWEVER, that the Company's legal counsel shall not opine or be responsible with respect to such qualification. SECTION 4.6 ASSIGNMENT OF PRIVATE PLACEMENT NUMBER. A private placement number shall have been applied for and assigned to the Notes by the CUSIP Service Bureau of Standard & Poor's Corporation. SECTION 4.7 PROCEEDINGS, INSTRUMENTS, ETC. AlL proceedings and actions taken on or prior to the Closing Date in connection with the transactions contemplated by this Agreement, and all instruments incident thereto, shall be in form and substance reasonably satisfactory to you and your special counsel, and you and your special counsel shall have received copies of all documents that you or they may reasonably request in connection with such proceedings, actions and transactions (including, without limitation, copies of court documents, certifications and evidence of the correctness of the representations and warranties contained herein and certifications and evidence of the compliance with the terms and the fulfillment of the conditions of this Agreement, in form and substance satisfactory to you and your special counsel). 13 18 SECTION 5. EXPENSES. Whether or not the Notes shall be sold or this Agreement shall be terminated, the Company will pay, and will save you harmless against liability for, all costs and expenses relating to this Agreement and the Notes, and to any modification, amendment, alteration or enforcement of this Agreement or the Notes (whether or not the same shall have come into effect), including, without limitation: (a) the reasonable cost of preparing and reproducing this Agreement and the Notes, and every instrument of modification, amendment or alteration; (b) the reasonable fees and disbursements of (i) special counsel for you, which fees and disbursements will be paid on the Closing Date to the extent reflected by an invoice delivered to the Company on the Closing Date and promptly upon receipt of any invoice delivered to the Company after the Closing Date; (ii) special local counsel, if any, for you; and (iii) all counsel for the Company; (c) your reasonable out-of-pocket expenses; (d) the reasonable cost of delivering to your home office, insured to your satisfaction, the Notes purchased by you on the Closing Date; (e) all costs and expenses (including, without limitation, legal fees and disbursements) relating to any modifications, amendments, waivers or consents involving the provisions hereof or of the Notes, or relating to the enforcement of this Agreement or the Notes; (f) the broker's or finder's fees of any Person claiming to have been engaged by the Company in connection with the sale of the Notes, it being represented and warranted by the Company that any such person acted solely as agent for the Company and not as agent for you; PROVIDED, HOWEVER, that the Company's agreement, representation and warranty contained in this paragraph (f) is based on your representation, which you hereby confirm, that you have not engaged any broker or finder in connection with your purchase of the Notes; and (g) all reasonable expenses in connection with obtaining a private placement number as contemplated by Section 4.6 hereof. The obligations of the Company under this Section 5 shall survive the payment of the Notes and the termination of this Agreement. SECTION 6. CERTAIN SPECIAL RIGHTS. SECTION 6.1 HOME OFFICE PAYMENT. Notwithstanding any provision to the contrary in this Agreement or the Notes, the Company will punctually pay in immediately available funds all amounts due and payable to you with respect to any Notes held by you or your nominee (without the necessity for any presentation or surrender thereof or any notation of such payment thereon) in the manner and at the address for such purpose specified below your name in Schedule I 14 19 hereof, or at any other address as you may from time to time direct in writing; PROVIDED, HOWEVER, that the payment information set forth with respect to you in Schedule I hereof shall be deemed notice sufficient to permit payment in accordance with this Section 6.1. You agree that, as promptly as practicable after the payment or prepayment in whole of any Note held by you or your nominee and receipt by you of a written request from the Company to surrender such Note to the Company for cancellation, you will surrender such Note at the office of the Company maintained pursuant to Section 9.1 hereof. You agree that if you sell, assign or transfer any Note, you will, prior to any such sale, assignment or transfer, make a proper notation thereon of the amount of principal paid thereon as of the date of such sale, assignment or transfer. SECTION 6.2 DELIVERY EXPENSES. If you shall surrender any Note to the Company pursuant to this Agreement, or if the Company shall issue any new Note pursuant to this Agreement, the Company will pay all costs and expenses of delivery of the surrendered Note and any Note or Notes issued in exchange or replacement for, or on registration of transfer of, the surrendered Note or any such new Note, as the case may be, in each case insured to your satisfaction. The obligations of the Company under this Section 6.2 shall survive the payment of the Notes and the termination of this Agreement. SECTION 6.3 ISSUANCE TAXES. The Company will pay all taxes iN connection with the execution and delivery of this Agreement, the issuance and sale of the Notes by the Company and any modification of this Agreement or the Notes (other than taxes otherwise related to income and intangible or other property or similar taxes on investment or holding) and will save you and any subsequent holder of Notes harmless, without limitation as to time, against any and all liabilities (including, without limitation, any interest or penalty for nonpayment or delay in payment, or any income taxes paid by you in connection with any reimbursement by the Company for the payment by any other Person of any such taxes) with respect to all such taxes (other than taxes otherwise related to income and intangible or other property or similar taxes on investment or holding). The obligations of the Company under this Section 6.3 shall survive the payment of the Notes and the termination of this Agreement. SECTION 6.4. SUBSTITUTION OF PURCHASER. You shall have the right to substitute Reserve Management, Inc. ("RMI"), your wholly-owned Subsidiary, as the purchaser of the Notes, by written notice delivered to the Company, which notice shall be signed by both TIAA and RMI, shall contain RMI's agreement to be bound by this Agreement and shall contain a confirmation by RMI of the accuracy with respect to it of the representations set forth in Sections 3.2 and 3.3 hereof. The Company agrees that, upon receipt of such notice, wherever the word "you" is used in this Agreement in reference to TIAA, such word thereafter shall be deemed to refer to RMI instead of to TIAA. The Company also agrees that if TIAA, at any time, acquires the Notes from RMI, then (i) whenever the word "you" is used in this Agreement and all other documents related to this Agreement, such word shall thereafter be deemed to refer to TIAA instead of RMI and (ii) RMI shall be released from any subsequent obligations under this Agreement, without the need for any further document or written release to be executed and delivered. 15 20 SECTION 7. NOTE PREPAYMENTS. SECTION 7.1 REQUIRED PREPAYMENTS. The Company will, without notice, prepay, without premium: (i) $2,860,000 in aggregate principal amount of the Notes on November 1, 1994 and on each November 1 thereafter to and including November 1, 1999 and (ii) $2,840,000 in aggregate principal amount of the Notes on November 1, 2000 together, in each case, with interest accrued on the amount to be prepaid to the date of prepayment. Notwithstanding anything contained in this Section 7.1, on the maturity date of the Notes, the outstanding principal amount of the Notes, together with accrued interest thereon shall be due and payable. SECTION 7.2 OPTIONAL PREPAYMENTS. In addition to the prepayments required by Section 7.1 hereof, upon the terms and subject to the conditions hereinafter set forth, the Company, at its option, upon notice as provided in Section 7.3 hereof, may prepay the Notes in whole, but not in part, at any time, at a prepayment price equal to the aggregate principal amount so to be prepaid, together with interest accrued on the amount to be prepaid through and including the date fixed for prepayment, plus a premium equal to the Make-Whole Amount. SECTION 7.3 NOTICE OF PREPAYMENT*. Notice of any prepayment of Notes pursuant to Section 7.2 hereof shall be given to each holder of Notes not less than 30 or more than 60 days before the date fixed for prepayment (the "Optional Prepayment Date") and shall be accompanied by an Officer's Certificate certifying: (a) the Optional Prepayment Date, (b) the aggregate principal amount of the Notes to be prepaid on such Optional Prepayment Date, (c) the aggregate principal amount of Notes, and the principal amount of each Note, held by such holder to be prepaid, (d) the aggregate amount of accrued interest applicable to such prepayment, and (e) the aggregate amount of the premium that the Company would be required to pay if such prepayment were made on the date notice is being given under this Section 7.3. Any notice of prepayment pursuant to Section 7.2 hereof having been so given, the aggregate principal amount of Notes specified in such notice, together with the premium, if any, and accrued interest thereon, shall become due and payable on such Optional Prepayment Date. Additional notice shall be given promptly upon calculation by the Company of the Make-Whole Amount, if any, that the Company will be required to pay in connection with such prepayment, but in no event less than three days prior to the Optional Prepayment Date, and shall be accompanied by an Officer's Certificate certifying the aggregate amount that the Company is required to pay in connection with such prepayment and certifying that such amount was calculated in accordance with the provisions of Section 7.2 hereof, the definition of the term "Make-Whole Amount" in Section 12.1 hereof and the other defined terms used in such definition. SECTION 7.4 PARTIAL PREPAYMENT PRO RATA. The aggregate principal amount of each partial prepayment of Notes pursuant to Section 7.1 hereof shall be allocated among the holders of Notes then outstanding in proportion, as nearly as practicable, to the respective unpaid principal amount of Notes then held thereby, with adjustments, to the extent practicable, to compensate for any prior prepayments not made in exactly such proportion. - -------------------------- * Timing of notices issue to be resolved. 16 21 SECTION 8. REGISTRATION, EXCHANGE AND REPLACEMENT OF NOTES. SECTION 8.1 REGISTRATION. The Notes issuable under this Agreement shall be registered Notes. The Company will keep, at its office required to be maintained pursuant to Section 9.1 hereof, books for the registration and registration of transfer of Notes. Prior to presentation of any Note for registration of transfer, the Company shall treat the Person in whose name such Note is registered as the owner and holder of such Note for all purposes whatsoever, whether or not such Note shall be overdue, and the Company shall not be affected by notice to the contrary. The provisions for the registration of transfer of any Note pursuant to this Section 8.1 are subject to the provisions of Section 3.2 hereof. SECTION 8.2 EXCHANGE. The holder of any Note, at its option, may iN Person or by duly authorized attorney surrender the same for exchange at the office of the Company maintained pursuant to Section 9.1 hereof and promptly thereafter and at the Company's expense, except as provided below, receive in exchange therefor a new Note or Notes, as the case may be, each in the denomination requested by such holder, dated the date to which interest shall have been paid on the Note so surrendered or, if no interest shall have yet been so paid, dated the date of the Note so surrendered and registered in the name of such Person or Persons as shall have been designated in writing by such holder or its attorney, for the same principal amount as the then unpaid principal amount of the Note so surrendered. Subject to Section 9.1 hereof, the Company may require payment of a sum sufficient to cover any stamp or other tax or governmental charge imposed in respect of any transfer involved in such exchange. SECTION 8.3 REPLACEMENT. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note and (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it; PROVIDED, HOWEVER, that if the holder of such Note is the original purchaser of the Notes or any other Institutional Investor, its own agreement of indemnity shall be deemed to be satisfactory; or (b) in the case of mutilation, upon surrender thereof, the Company, at its expense, will execute and deliver in lieu thereof a new Note executed in the same manner as the Note being replaced, in the same principal amount as the unpaid principal amount of such Note and dated the date to which interest shall have been paid on such Note or, if no interest shall have yet been so paid, dated the date of such Note. SECTION 9. CERTAIN COVENANTS OF THE COMPANY. The Company covenants and agrees that so long as any Notes shall remain outstanding: SECTION 9.1 MAINTENANCE OF OFFICE. The Company will maintain at its office located at its address shown at the head of this Agreement an office where notices, presentations and demands in respect of this Agreement and the Notes may be given to and made upon it; PROVIDED, HOWEVER, that it may, upon 15 Business Days' prior written notice to the holders of the Notes, move such office to any other location within the continental boundaries of the United States. The Company hereby agrees that it will pay or contest in good faith by appropriate proceedings which will not delay the proposed transfer, and will save any holder of a Note harmless against 17 22 liability for, any stamp or other tax or governmental charge imposed in respect of any transfer of a Note made at a time when the books for the registration and registration of transfer of Notes are maintained at an office outside the State of Ohio, to the extent that such tax or charge exceeds the amount that would have been payable had said books been maintained in the State of Ohio; and said obligation of the Company shall survive the payment or prepayment of the Notes and the termination of this Agreement. SECTION 9.2 CORPORATE EXISTENCE. The Company and its Restricted Subsidiaries each will take and fulfill, or cause to be taken and fulfilled, all actions and conditions necessary to preserve and keep in full force and effect its existence, rights and privileges as a corporation and will not liquidate or dissolve, and it will take and fulfill, or cause to be taken and fulfilled, all actions and conditions necessary to qualify, and to preserve and keep in full force and effect its qualification, to do business as a foreign corporation in each jurisdiction in which the conduct of its business or the ownership or leasing of its properties requires such qualification and where the failure to do so would materially adversely affect the business, earnings, prospects, properties or condition (financial or other) of the Company and its Restricted Subsidiaries; PROVIDED, HOWEVER, that this Section 9.2 shall not be deemed to prohibit any transaction permitted by Section 9.15 hereof. SECTION 9.3 GENERAL MAINTENANCE OF PROPERTIES AND BUSINESS, ETC. The Company and its Restricted Subsidiaries each will: (a) maintain its property in good condition (other than obsolete property) and make all reasonable and necessary renewals, replacements, additions, betterments and improvements thereof and thereto, so that the business carried on in connection therewith may be conducted properly at all times; (b) maintain or cause to be maintained, with financially sound insurers of nationally recognized stature and responsibility, insurance with respect to its property and business of such a nature, with such terms and in such amounts, as are generally maintained with respect to similar properties and a similar business, and, in any event, will maintain insurance on all its property of a character usually insured by corporations engaged in the same or a similar business similarly situated against loss or damage of the kinds and in the amounts customarily insured against and for by such corporations, and carry or cause to be carried, with such insurers in customary amounts, such other insurance, including public liability insurance, as is usually carried by corporations engaged in the same or a similar business similarly situated; (c) keep proper books of record and accounts in which entries will be made of its business transactions in accordance with and to the extent required by generally accepted accounting principles; and (d) set aside on its books from its earnings for each fiscal year, in amounts deemed adequate in the reasonable opinion of the Company, all proper accruals and reserves that, in accordance with generally accepted accounting principles, are required to be set aside from such earnings in connection with its business, including reserves for depreciation, obsolescence and/or amortization and accruals for taxes based on or measured by income or profits and for all other taxes. 18 23 SECTION 9.4 NOTICE OF CERTAIN EVENTS AND CONDITIONS. The Company will give prompt written notice to each holder of an outstanding Note of any event of default (or any event which with notice or lapse of time or both would constitute an event of default) under any evidence of Debt (including the Notes but not including Debt owing to trade creditors of the Company being paid in accordance with the Company's normal practices) in an aggregate amount of $250,000 or more of the Company or under any indenture, mortgage or other agreement or instrument relating to any such evidence of Debt (including this Agreement) or under any lease or preferred stock for or in respect of which the Company may be liable. SECTION 9.5 INSPECTION. The Company and its Subsidiaries each will permit any holder of a Note by its representatives, agents or attorneys, (i) to examine all books of account, records, reports and other papers of the Company and its Subsidiaries, (ii) to make copies and take extracts from any thereof, (iii) to discuss the affairs, finances and accounts of the Company and its Subsidiaries with their respective officers and, upon prior notice to the Company, independent certified public accountants (and by this provision the Company hereby authorizes said accountants to discuss with any such holder the finances and accounts of the Company and its Subsidiaries) and (iv) to visit and inspect, from to time, at reasonable times during normal business hours the properties of the Company. Each such inspection shall be at the expense of the Person making the inspection, unless such inspection shall be made during the continuance of a Default or an Event of Default (in which event, the expense of such inspection shall be borne by the Company). Notwithstanding the foregoing sentence, it is understood and agreed by the Company that all expenses in connection with any such inspection incurred by the Company, any officers and employees thereof and the independent certified public accountants therefor shall be expenses payable by the Company and shall not be expenses of the Person making the inspection. SECTION 9.6 COMPLIANCE WITH LAW, ETC. Neither the Company nor any Restricted Subsidiary will (i) violate any laws, ordinances, governmental rules or regulations to which it is or may become subject or (ii) fail to obtain or maintain any patents, trademarks, service marks, trade names, copyrights, design patents, licenses, permits, franchises or other governmental authorizations necessary to the ownership of its property or to the conduct of the business if such violation or failure would, individually or in the aggregate, materially adversely affect the business, earnings, prospects, properties or condition (financial or other) of the Company or such Restricted Subsidiary. SECTION 9.7 PAYMENT OF TAXES AND CLAIMS. The Company and its Restricted Subsidiaries each will pay and discharge promptly when due: (a) all taxes, assessments and governmental charges and levies imposed upon it, its income or profits or any of its properties, before the same shall become delinquent; and (b) all lawful claims of materialmen, mechanics, carriers, warehousemen, landlords and other similar Persons for labor, materials, supplies and rentals that, if unpaid, might by law become a Lien upon any of its property; 19 24 PROVIDED, HOWEVER, that, with respect to this Section 9.7, none of the foregoing need be paid while the same is being contested in good faith by appropriate proceedings diligently conducted so long as adequate reserves shall have been established in accordance with generally accepted accounting principles with respect thereto, title of the Company or its Restricted Subsidiary, as the case may be, to the particular property shall not be divested thereby and its right to use the particular property shall not be materially and adversely affected thereby. SECTION 9.8 ERISA. (a) Each of the Company, its Restricted SubsidiarieS and their respective ERISA Affiliates will administer any and all Plans in substantial compliance with all applicable requirements of the Code, ERISA and the rules and regulations adopted thereunder, in each case as in effect at the time, until such Plans are terminated, and the liabilities thereof discharged, in accordance with applicable law. (b) None of the Company, its Restricted Subsidiaries or any of their respective ERISA Affiliates will have any accumulated funding deficiency with respect to any Pension Plan which is individually or which are in the aggregate in excess of $250,000. SECTION 9.9 TRANSACTIONS WITH AFFILIATES. Neither the Company nor any Restricted Subsidiary will enter into any transaction (including, without limitation, the purchase, sale or exchange of any property, the rendering of any services or the payment of management fees) with any Affiliate, except in the ordinary course of, and pursuant to the reasonable requirements of, the business of the Company and its Restricted Subsidiaries, and in good faith and upon commercially reasonable terms that are no less favorable to the Company or such Restricted Subsidiary than would be obtained in a comparable arm's-length transaction with a Person other than an Affiliate; PROVIDED, HOWEVER, that the Company may engage in any Permitted Affiliate Transaction. 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) $32,000,000 and (b) 50% of Cumulative Consolidated Net Income. SECTION 9.11 CURRENT RATIO. The Company shall at all times maintain a ratio of Consolidated Current Assets to Consolidated Current Liabilities of at least 1.75 to 1.00. SECTION 9.12 FIXED CHARGE COVERAGE. The Company shall at all times maintain a ratio of (a) the sum of Consolidated EBIT plus Operating Lease Rentals to (b) the sum of Consolidated Interest Expense plus Operating Lease Rentals, in each instance for the four most recent Fiscal Quarters for which financial statements are required to have been delivered pursuant to Section 10.1 hereof of not less than 1.50 to 1.00. 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 20 25 outstanding and the aggregate outstanding amount of Restricted Subsidiary Indebtedness created, incurred or suffered to exist pursuant to Section 9.14 hereof at no time exceeds 15% of Consolidated Net Worth, (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 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, issue, 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 15% of Consolidated Net Worth 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. SECTION 9.15 MERGER; CONSOLIDATION. (a) Neither the Company nor any Restricted Subsidiary will merge into or consolidate with any other Person or permit any other Person to merge into or consolidate with it unless (i) the corporation which survives such merger or results from such consolidation (the "surviving corporation") shall be organized under the laws of the United States of America or a jurisdiction thereof; (ii) if the Company is a party to such merger or consolidation, the Company shall be the surviving corporation or the due and punctual payment of the principal of and premium, if any, and interest on all of the Notes, according to their tenor, and the due and punctual performance and observance of all the covenants in this Agreement to be performed or observed by the Company, shall be expressly assumed in writing by the surviving corporation by an instrument reasonably satisfactory in form and substance to the holders of at least a majority in aggregate unpaid principal amount of the Notes then outstanding; (iii) before and immediately after the consummation of the transaction, and after giving effect thereto, (x) no Default or Event of Default shall exist and (y) the Company shall be permitted under Section 9.20 hereof to incur an additional $1.00 of Funded Indebtedness; and (iv) an opinion of counsel (reasonably satisfactory in form and substance to the holders of at least a majority of the aggregate unpaid principal amount of the Notes then outstanding) is delivered to you upon consummation of the transaction to the effect that the conditions to the transaction contained in this Section 9.15 have been satisfied and, if the Company is a party to such transaction, to 21 26 the effect that this Agreement, the Notes and the instrument referred to in the foregoing subclause (ii) are legal, valid and binding obligations of the surviving corporation, enforceable against the surviving corporation in accordance with their respective terms. (b) any Restricted Subsidiary may merge into or consolidate with (i) the Company, if the Company is the surviving corporation, or (ii) any wholly-owned Restricted Subsidiary. SECTION 9.16 TRANSFER AND SALE OF ASSETS. The Company will not, and will not permit or suffer any 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 its property, other than in the ordinary course of its business (each such sale, lease, transfer, abandonment or other disposition of property by the Company or a Restricted Subsidiary other than in the ordinary course of business being hereinafter referred to as a "Sale"), unless: (a) at the time of such Sale, no Default or Event of Default exists, such Sale complies with the requirements of paragraph (b) of this Section 9.16 and no Default or Event of Default (under any provision hereof other than this Section 9.16) will exist immediately after the consummation of such Sale and after giving effect thereto; and (b) (i) without regard to or inclusion of Sales subject to clause (ii) of this Section 9.16(b), the sum of the value of the property disposed of in such Sale and the value of the property disposed of in all other Sales consummated during the preceding twelve months (based in each case on the fair market value at the time of each Sale) shall not exceed 10% of Consolidated Tangible Assets at the end of the Fiscal Quarter immediately preceding the commencement of such twelve-month period or (ii) such Sale is by a Restricted Subsidiary to the Company or to a wholly-owned Restricted Subsidiary. SECTION 9.17 SHORT-TERM INDEBTEDNESS. For at least 60 consecutive days during each period of twelve consecutive calendar months occurring after the Closing Date, the aggregate outstanding amount of Short-Term Indebtedness of the Company and its Restricted Subsidiaries, determined on a consolidated basis in accordance with generally accepted accounting principles, shall not exceed the principal amount of additional Funded Indebtedness which could have been incurred by the Company and its Restricted Subsidiaries in compliance with Section 9.20 hereof. SECTION 9.18 REPURCHASE OF NOTES. Neither the Company nor any Affiliate will, directly or indirectly, repurchase or make any offer to repurchase any Notes unless the Company or such Affiliate has offered to repurchase all Notes from all holders of Notes upon the same terms. If the Company repurchases any Notes, such Notes shall thereafter be canceled and no Notes shall be issued in substitution therefor. SECTION 9.19 LIMITATIONS ON RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS. (a) The Company shall not make or permit any Restricted Subsidiary to make any Restricted Payment or Restricted Investment unless, immediately thereafter and after giving effect to such Restricted Payment or Restricted Investment, no Default or no Event of Default would exist and the sum of the aggregate amount of all Restricted Payments and Restricted Investments made 22 27 subsequent to March 31, 1990 through the date of such Restricted Payment or Restricted Investment shall be less than or equal to the sum of (i) $7,000,000 plus 50% of Consolidated Net Income, if any (or, less 100% of Consolidated Net Loss, if any) during the period from March 31, 1990 to the date of such Restricted Payment or Restricted Investment, treated as a single accounting period, plus (ii) 100% of the aggregate net cash proceeds of sales of any Common Shares from the Closing Date to such Restricted Payment or Restricted PROVIDED, HOWEVER, that net cash proceeds of sales of any Common Shares shall not include any reduction in the principal amount of outstanding Indebtedness attributable to the conversion of such Indebtedness to Common Shares, plus (iii) 100% of the principal amount of any Debentures which have been repurchased or redeemed by the Company and are applied to satisfy the sinking fund obligations with respect to the Debentures, from time to time, at such times as such sinking fund obligations arise and are satisfied, but only to the extent that the repurchase or redemption of Debentures was not a mandatory redemption or prepayment of Debentures and constituted a Restricted Payment at the time it was made. (b) No Restricted Payment in the nature of a dividend or distribution on capital stock of the Company shall be declared with a payment date more than 60 days subsequent to the date of declaration thereof. SECTION 9.20 LIMITATIONS ON CONSOLIDATED FUNDED INDEBTEDNESS. The Company will not, directly or indirectly, expressly or by operation of law, create, incur, issue, assume, guarantee or in any manner become liable and will not permit any Restricted Subsidiary to become 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. SECTION 9.21 TAX CONSOLIDATION.. The Company will not file or consent to the filing of a consolidated income tax return with any Person other than a Restricted Subsidiary unless there is at the time in effect a tax-sharing agreement or other similar agreement between the Company and such Person that provides for the indemnification of the Company and each Restricted Subsidiary included in such by such Person consolidated return against paying a portion of the tax liability with respect to such consolidated return that is larger than the tax that it would have paid on an unconsolidated basis. 23 28 SECTION 9.22 RESTRICTED SUBSIDIARIES. The Company will not: (a) designate any corporation as a Restricted Subsidiary (and any such designation shall be without effect hereunder unless it complies in all respects with this Section 9.22(a)) unless: (i) the Board of Directors of the Company shall have duly adopted a resolution approving such designation; (ii) such corporation satisfies the requirements of paragraphs (a), (b), (c) and (d) of the definition of "Restricted Subsidiary" in Section 12.1 hereof; (iii) no Default or Event of Default shall exist prior to, as a result of or immediately after giving effect to such designation; (iv) immediately after such designation and including such newly-designated Restricted Subsidiary in such determination, the Company shall be able to incur an additional $1.00 of Indebtedness under Section 9.20 hereof; and (v) the Company shall promptly, and in any event within seven (7) Business Days of such designation, give written notice to each Noteholder which is not an Institutional Investor or a holder of at least 5% in principal amount of the Notes at the time outstanding of the fact of such designation, the name, jurisdiction of incorporation, principal business address and business of such newly-designated Restricted Subsidiary, certifications as to and computations showing compliance with the requirements of this Section 9.22(a); (b) while any corporation remains designated a Restricted Subsidiary, permit such Restricted Subsidiary to merge into or consolidate with another Person, permit another Person to merge into or consolidate with it or sell, lease or otherwise dispose of all or substantially all of its assets other than as permitted by Sections 9.15 and 9.16 hereof; or (c) rescind the designation of any corporation as a Restricted Subsidiary (and any such rescission shall be without effect hereunder unless it complies in all respects with this Section 9.21(c)) unless: (i) the Board of Directors of the Company has duly adopted a resolution approving such rescission; (ii) no Default or Event of Default shall exist prior to, as a result of, or immediately after giving effect to such rescission; (iii) immediately after such rescission, the Company shall be permitted to incur at least $1.00 of additional Indebtedness without violating Section 9.20 hereof and make a Restricted Payment of at least $1.00 without violating Section 9.19 hereof; 24 29 (iv) treating such rescission as a Sale of all of the Assets of such Restricted Subsidiary, such rescission can be effected without violating Section 9.16 hereof; and (v) a written notice of such rescission containing computations showing compliance with this Section 9.22(c) is promptly, and in any case within seven (7) Business Days of such rescission, sent by the Company to each Noteholder which is not an Institutional Investor or a holder of at least 5% in principal amount of the Notes at the time outstanding; PROVIDED, HOWEVER, that, for the purposes of this Section 9.22, any computation of Consolidated Assets, Consolidated Current Assets, Consolidated Current Liabilities, Consolidated EBIT, Consolidated Funded Indebtedness, Consolidated Indebtedness, Consolidated Interest Expense, Consolidated Net Income (or Net Loss), Consolidated Net Worth, Consolidated Shareholders' Equity, Consolidated Tangible Assets and Cumulative Consolidated Net Income in connection with the determination of the absence of a Default or Event of Default after giving effect to the designation of a corporation as a Restricted Subsidiary or the rescission of any such designation shall be made on a pro-forma basis, including the Assets, Investments, Debts (including Indebtedness) and other relevant financial indicia of such corporation in any such computation for any relevant period in the case of any such designation and eliminating the Assets, Investments, Debts (including Indebtedness) and other relevant financial indicia of such corporation in any such computation for any relevant period in the case of any such rescission. SECTION 10. INFORMATION TO BE FURNISHED HOLDERS OF NOTES. SECTION 10.1 FINANCIAL STATEMENTS OF THE COMPANY. The Company covenants that it will deliver to each holder of a Note two copies of the following: (a) as soon as practicable and, in any case, within 90 days after the close of each Fiscal Year, the consolidated and consolidating financial statements of the Company and its Restricted Subsidiaries, consisting of the consolidated and consolidating balance sheets of the Company and its Restricted Subsidiaries as of the end of such Fiscal Year and the consolidated and consolidating statements of income, changes in stockholders' equity and cash flows of the Company and its Restricted Subsidiaries for such Fiscal Year, setting forth in each case, in comparative form, the figures for the preceding Fiscal Year, all in reasonable detail, such consolidated financial statements to be accompanied by an unqualified opinion thereon (other than with respect to qualification related solely to any Default or Event of Default rescinded or annulled pursuant to Section 11.4 hereof) of Ernst & Young or another firm of independent auditors of nationally recognized standing, which opinion shall state that (i) the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as were considered necessary in the circumstances, and (ii) such financial statements present fairly in all material respects the financial position of the Company and its Restricted Subsidiaries at such date and the results of operations and cash flows thereof for Such period and have been prepared in conformity with generally accepted 25 30 accounting principles consistently applied (except as otherwise disclosed therein with respect to changes in application in which such accountants concur); PROVIDED, HOWEVER, that, so long as the Company shall not and shall not be required to prepare its financial statements on a consolidated basis in accordance with generally accepted accounting principles, the requirements of this Section 10.1(a) shall be satisfied by the delivery of unconsolidated, Company-only financial statements; PROVIDED, FURTHER, that so long as the Company shall be required to file reports with the SEC pursuant to the Exchange Act, the delivery of its Annual Report on Form 10-K shall satisfy the requirements of this Section 10.1(a) with regard to consolidated financial statements to the extent that the consolidated financial statements of the Company and its Restricted Subsidiaries are audited and the opinion with respect thereto is unqualified; (b) as soon as practicable and, in any case, within 45 days after the end of each of the first three Fiscal Quarters in each Fiscal Year, the consolidated and consolidating financial statements of the Company and its Restricted Subsidiaries, setting forth the unaudited consolidated and consolidating balance sheets of the Company and its Restricted Subsidiaries as of the end of such Fiscal Quarter and the unaudited consolidated and consolidating statements of income, changes in stockholders' equity and cash flows of the Company and its Restricted Subsidiaries for such Fiscal Quarter and for the Fiscal Year to date, setting forth in each case in comparative form, the figures for the corresponding periods of the preceding Fiscal Year, all in reasonable detail and prepared and certified by the Chief Financial Officer or the Treasurer of the Company as complete and correct, as having been prepared in accordance with generally accepted accounting principles consistently applied (except as otherwise disclosed therein) and as presenting fairly the financial position of the Company and its Restricted Subsidiaries and results of operations and cash flows thereof subject, in each case, to changes resulting from year-end audit adjustments; PROVIDED, HOWEVER, that, so long as the Company shall not and shall not be required to prepare its financial statements on a consolidated basis in accordance with generally accepted accounting principles, the requirements of this Section 10.1(b) shall be satisfied by the delivery of unconsolidated, Company-only financial statements; PROVIDED, FURTHER, that so long as the Company shall be required to file reports with the SEC pursuant to the Exchange Act, the delivery of it Quarterly Report on Form 10-Q shall satisfy the requirements of this Section 10.1(b) with respect to consolidated financial statements; SECTION 10.2 OTHER INFORMATION. The Company will deliver to each Institutional Investor which is a holder of a Note and to each other holder of at least 5% in principal amount of the Notes at the time outstanding the following: (a) promptly after the submission thereof to the Company, copies of any detailed reports (including the auditors' comment letter to management, if any such letter is prepared) submitted to the Company by its independent auditors in connection with each annual or interim audit of the accounts of the Company made by such accountants; (b) promptly upon distribution thereof, copies of all financials or other statements (including proxy statements) and reports as the Company or any Restricted Subsidiary shall send to any class of its shareholders (other than the Company or any other Restricted Subsidiary), any of its bank lenders or any holder of any of its Indebtedness; 26 31 (c) promptly after filing thereof, copies of all regular and periodic reports and registration statements which the Company may file with the SEC or any governmental agency substituted therefor and, promptly upon written request therefor, copies of any financial statements which the Company may file annually with any state regulatory agency or agencies; (d) promptly and, in any event, within 30 days thereafter, notice of the institution of any suit, action or proceeding against the Company or any Restricted Subsidiary which could, in the reasonable judgment of the Company, have a materially adverse effect on the business, earnings prospects, properties or condition (financial or other) of the Company and its Restricted Subsidiaries on a consolidated basis; (e) promptly upon any Responsible Officer of the Company obtaining knowledge of any condition or event which constitutes or which, after notice or lapse of time or both, would constitute an Event of Default, an Officer's Certificate of the Company specifying the nature and period of existence thereof, what action the Company has taken or is taking or proposes to take with respect thereto, and an estimate of the time necessary to cure such condition or event; (f) promptly upon becoming aware of the occurrence of any (i) ERISA Termination Event or (ii) prohibited transaction (other than one for which a statutory or administrative class exemption is available or a private exemption has been obtained) in connection with any Plan, a written notice specifying the nature thereof, what action the Company is taking or proposes to take with respect thereto, and, when known, any action taken by the Internal Revenue Service, the United States Department of Labor or the PBGC with respect thereto; (g) promptly upon the formation or the acquisition thereof, notice of the formation or acquisition, as the case may be, of any new Subsidiary; (h) together with each set of financial statements delivered pursuant to Section 10.1(a) hereof, comparable financial statements of Pioneer/Technologies (which shall be consolidated financial statements of Pioneer/Technologies and its Subsidiaries if Pioneer/Technologies is required to prepare consolidated financial statements in accordance with generally accepted accounting principles and which shall be audited and accompanied by an auditor's report thereon of independent certified public accountants substantially the same as that required by Section 10.1(a) hereof; (i) if at any time the Company ceases to be subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act, promptly upon the written request of any holder of a Note, (i)(x) a brief statement of the nature of the business of the Company and its Subsidiaries and the products and services they offer and (y) the Company's most recent balance sheet and profit and loss and retained earnings statements, together with similar financial statements for its two preceding fiscal years (in each case audited by an independent certified public accountant to the extent reasonably available); the most recent balance sheet to be as of a date less than sixteen months prior to the date of such request and the profit and loss and retained earnings statements to be for the twelve months preceding the date of 27 32 such balance sheet and, if such balance sheet is not as of a date less than six months before the date of such request, it shall be accompanied by additional statements of profit and loss and retained earnings for a period from the date of such balance sheet to a date less than six months before the date of such request, or (ii) such other information as shall then be required to permit a resale of Notes by such holder pursuant to Rule 144A (or any superseding rule providing an exemption from registration under the Securities Act for resales to qualified institutional buyers); PROVIDED, HOWEVER, that, if such request shall so indicate, the statement and financial statements or other information shall be delivered to any named prospective purchaser of a Note as well as to the requesting Noteholder, so long as the request states that such Noteholder reasonably believes such prospective purchaser to be a Qualified Institutional Buyer; and (j) promptly upon request therefor, such other data, filings and information as any holder of a Note may from time to time reasonably request. SECTION 10.3 PIONEER/TECHNOLOGIES. Promptly upon request therefor, the Company will deliver to each Institutional Investor which is a holder of a Note and to each other holder of at least 5% in principal amount of the Notes at the time outstanding, any information pertaining to Pioneer/Technologies as any such holder may reasonably request; PROVIDED, HOWEVER, that the Company shall not be obligated to deliver any such information which it does not possess or which, after using its best efforts, it is unable to obtain. SECTION 10.4 OFFICER'S CERTIFICATES. Each set of financial statements delivered pursuant to subsection (a) or (b) of Section 10.1 hereof shall be accompanied by a certificate, signed by the President, the Chief Financial Officer or the Treasurer of the Company, in such capacity, stating, in the opinion of such officer and to the best of his knowledge and belief, that, upon the date of such certificate or at any time since the beginning of the period covered by such financial statements, there was no Default or Event of Default with respect to any of the provisions of this Agreement or the Notes; PROVIDED, HOWEVER, that, if any such Default or Event of Default, as the case may be, shall have occurred, such certificate shall so specify and shall state whether such Default or Event of Default has been cured or is continuing and, if continuing, what steps the Company has taken or is taking or proposes to take to cure such Default or Event of Default and an estimate of the time necessary to cure such Default or Event of Default. Each set of financial statements delivered pursuant to subsection (b) of Section 10.1 hereof shall be accompanied by a certificate, signed by the President, the Chief Financial Officer or the Treasurer of the Company setting forth in reasonable detail the calculations made during such period and as of the end of such period in determining compliance with the provisions of Sections 9.10, 9.11, 9.12, 9.13, 9.14, 9.15, 9.16, 9.17, 9.19 and 9.20 hereof. SECTION 10.5 ACCOUNTANTS' CERTIFICATES. Each set of financial statements delivered pursuant to subsection (a) of Section 10.1 hereof shall be accompanied by a report of the independent auditors who shall have reported on such financial statements stating that such accountants have read this Agreement insofar as is necessary for such report and that, in making the examination necessary to express an opinion on such financial statements, such accountants have obtained no actual knowledge of any condition or event pertaining to accounting matters, or the consolidated 28 33 financial position of the Company and its Subsidiaries, that then constitutes an Event of Default, or, if any Event of Default then exists, specifying the nature and period of existence thereof. SECTION 11. DEFAULTS AND REMEDIES SECTION 11.1 EVENTS OF DEFAULT; ACCELERATION OF NOTES. If any of the following conditions or events ("Events of Default") shall occur and be continuing: (a) any payment or prepayment of principal of or premium on any Note shall not be made when the same becomes due and payable, whether at maturity, at a date fixed for prepayment, upon acceleration or otherwise; or (b) any payment of interest on any Note shall not be made when the same becomes due and payable and such default shall continue for five days following the date on which such payment was due and payable; or (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 or shall use the proceeds of sale of the Notes other than as described in Section 1.3 hereof; or (d) the Company shall default in the due and punctual performance of or compliance with any other covenant, condition or agreement to be performed or observed by it under any provision hereof (other than as provided for in paragraphs (a), (b) and (c) of this Section 11.1) and any such failure shall continue unremedied for 30 days after the date on which a Responsible Officer of the Company or any holder of a Note obtains knowledge of such default; or (e) any representation or warranty of the Company or any Subsidiary contained in this Agreement or in any certificate or other written statement or agreement furnished or made in connection herewith or pursuant hereto shall prove to have been false or inaccurate in any material respect on the date as of which such representation or warranty was made; or (f) the Company, or any Restricted Subsidiary shall, in respect of any of its Indebtedness (excluding the Notes) (i) fail to pay any amount of Indebtedness, when due, whether at maturity, at a date fixed for payment, upon acceleration or otherwise, or (ii) default in the performance or observance of any other provision contained in any instrument or agreement evidencing such Indebtedness (which default shall not have been waived and any grace period with respect to which shall have expired), if in either (i) (except with respect to a payment due at maturity) or (ii) hereinabove, the effect of such default is to cause or permit the holder of such Indebtedness or a trustee or agent to cause, such Indebtedness to become or be declared due and payable prior to its scheduled maturity; or (g) a final judgment or judgments entered by a court or courts of competent jurisdiction for the payment of money in excess of $250,000 in the aggregate shall be rendered 29 34 against the Company or any Subsidiary and shall remain in force undischarged and unstayed for a period of more than 60 days; or (h) the Company or any Subsidiary shall (i) commence a voluntary case under any chapter of the Federal Bankruptcy Code, or shall consent to (or fail to controvert in a timely manner) the commencement of an involuntary case against it under said Code; (ii) institute proceedings for liquidation, rehabilitation, readjustment or composition (or for any related or similar purpose) under any law (other than the Federal Bankruptcy Code) relating to financially distressed debtors, their creditors or property, or shall consent to (or fail to controvert in a timely manner) the institution of any such proceedings against it; (iii) make an assignment for benefit or creditors or enter into any arrangement for the adjustment or composition of all or a substantial portion of the Company's or such Subsidiary's debts or claims; (iv) apply for or consent to the appointment of, or the taking possession by, a receiver, liquidator, assignee, trustee, custodian or sequestrator (or other similar official) of itself or of all or a substantial portion of its property; or (v) take corporate action for the purpose or with the effect of authorizing, acknowledging or confirming the taking or existence of any action or condition specified in clause (i), (ii), (iii) or (iv) above; or (i) a court or other governmental authority or agency having jurisdiction in the premises shall enter a decree or order (i) for the appointment of a receiver, liquidator, assignee, trustee, custodian or sequestrator (or other similar official) of the Company or any Subsidiary or of any part of their respective properties, or for the winding-up or liquidation of their respective affairs, and such decree or order shall remain in force undischarged and unstayed for a period of more than 60 days, or (ii) for the sequestration or attachment of any material part of the property of the Company or any Subsidiary without its unconditional return to the possession of the Company or such Subsidiary, or its unconditional release from such sequestration or attachment, within 60 days thereafter; or (j) a court having jurisdiction in the premises shall enter an order for relief in any involuntary case commenced against the Company or any Subsidiary under the Federal Bankruptcy Code, and such order shall remain in force undischarged and unstayed for a period of more than 60 days; or (k) a court or other governmental authority or agency having jurisdiction in the premises shall enter a decree or order approving or acknowledging as properly filed or commences against the Company or any Subsidiary a petition or proceedings for liquidation, rehabilitation, readjustment or composition (or for any related or similar purpose) under any law (other than the Federal Bankruptcy Code) relating to financially distressed debtors, their creditors or property, and any such decree or order shall remain in force undischarged and unstayed for a period of more than 60 days; or (l) the Company or any Subsidiary shall be insolvent (within the meaning of any applicable law), or shall be unable, or shall admit in writing its inability, to pay its Indebtedness as they come due; or 30 35 (m) (i) any Pension Plan (other than a Multiemployer Plan) shall incur an "accumulated funding deficiency," (within the meaning of Section 412(a) of the Code), with respect to any plan year, which, individually or aggregated with accumulated funding deficiencies of other Pension Plans, is in excess of $250,000, or (ii) any waiver of such standard shall be sought or granted under Section 412(d) of the Code, or (iii) any Plan shall be, have been or be likely (in the reasonable judgment of the holders of at least a majority in aggregate unpaid principal amount of the Notes then outstanding) to be terminated or the subject of termination proceedings under ERISA, or (iv) the Company shall incur or be likely to incur a liability to or on account of a Plan under Section 4062, 4063, 4064, or 4201 of ERISA, and there shall result from any such event or events described in clauses (i)-(iv) of this Section 11.1(m) either a liability or a material risk of incurring a liability to the PBGC or a Plan, which could have a material adverse effect on the business, earnings, prospects, properties or condition (financial or other) of the Company and its Subsidiaries; then: (x) upon the occurrence and during the continuance of any of the Events of Default set forth in clauses (h) through (k), inclusive, of this Section 11.1, the unpaid principal amount of the Notes shall automatically become due and payable, together with interest accrued thereon, without presentment, demand, protest or any notice, all of which are expressly hereby waived; and (y) upon the occurrence and during the continuance of any of the Events of Default set forth in subsections (a) or (b) of this Section 11.l, any holder of Notes may at any time at the holder's option, by written notice or notices to the Company, declare the Notes held by such holder or holders, as the case may be, to be due and payable, whereupon the same shall mature and become due and payable, together with interest accrued thereon, plus a premium equal to the Make-Whole Amount, without presentment, demand, protest or any other notice, all of which are expressly hereby waived; and (z) upon the occurrence and during the continuance of any of the Events of Default set forth in subsections (a) through (g) inclusive, (1) or (m), of this Section 11.1 any holder or holders of at least a majority of the principal amount of the Notes then outstanding may, by written notice or notices to the Company, declare all of the Notes then outstanding, to be due and payable, whereupon the same shall mature and become due and payable, together with interest accrued thereon, plus a premium equal to the Make-Whole Amount, without presentment, demand, protest or any other notice, all which are hereby waived. SECTION 11.2 DEFAULT REMEDIES. If an Event of Default shalL occur and be continuing, the holder of any Note then outstanding may exercise any right, power or remedy permitted to it by law, either by suit in equity or by action at law, or both, whether for specific performance of any covenant or agreement contained in this Agreement or in such Note or for an injunction against a violation of any of the terms of this Agreement or such Note or in aid of the exercise of any power granted in this Agreement or in such Note, or may proceed to enforce payment of such Note or to enforce any other legal or equitable right of the holder of such Note. No remedy 31 36 herein conferred upon any holder of a Note is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law, in equity, by statute or otherwise. No course of dealing on the part of any holder of any Note, or any delay or failure on the part of any holder of any Note to exercise any right or power, shall operate as a waiver of such right or power or otherwise prejudice the rights, powers and remedies of such holder or of any other holder. No failure to insist upon strict compliance with any covenant, term, condition or other provision of this Agreement or the Notes shall constitute a waiver by any holder of any of the Notes of any such covenant, term, condition or other provision or of any Default or Event of Default in connection therewith. To the extent effective under applicable law, the Company hereby agrees to waive, and does hereby absolutely and irrevocably waive and relinquish, the benefit and advantage of any valuation, stay, appraisement, extension or redemption laws now existing or that may hereafter exist that, but for this provision, might be applicable to any sale made under any judgment, order or decree of any court, or otherwise, based on the Notes or on any claim for interest on the Notes. If an Event of Default shall occur, and be continuing, the Company will pay to the holders of the Notes, to the extent not prohibited by applicable law, promptly upon the receipt by the Company of a written request for the payment thereof such further amount as shall be sufficient to cover the reasonable costs and expenses of collection and of the taking of remedial actions and the maintenance of enforcement proceedings, including, without limitation, reasonable attorneys' fees and disbursements. All sums payable by the Company under the Notes or this Agreement shall be paid without counterclaim, setoff, deduction or defense and without abatement, suspension, deferment, diminution or reduction; PROVIDED, HOWEVER, that this sentence shall not constitute a waiver of any rights or claims which the Company may have against any holder of a Note, but only the waiver of the right to assert or raise such right or claim by way of counterclaim, setoff, deduction or defense against or with respect to any amount payable with respect to such Note or this Agreement. SECTION 11.3 NOTICE OF DEFAULT. If the holder of any Note or oF any other evidence of Indebtedness of the Company shall give any notice or take any other action with respect to an alleged default, the Company shall forthwith give written notice thereof to all holders of Notes then outstanding describing the notice or action and the nature of the alleged default. SECTION 11.4 ANNULMENT OF ACCELERATION OF NOTES. If notice is delivered pursuant to clause (y) of Section 11.1 hereof by any holder of Notes, then such holder may, in respect of the Notes held by such holder, by written instrument filed with the Company, rescind and annul such declaration and the consequences thereof or of such Event of Default pursuant to this Agreement (and such Event of Default shall, for the purposes of this Agreement, be deemed not to have occurred and such declaration to have no further effect under this Agreement), and, if notice is delivered pursuant to clause (z) of Section 11.1 hereof by any holder or holders of Notes, then the holders of 66-2/3% of the aggregate unpaid principal amount of Notes then outstanding may, in respect of all of the Notes, by written instrument filed with the Company, rescind and annul such declaration and the consequences thereof or of such Event of Default pursuant to this Agreement; PROVIDED, HOWEVER, that at the time of any such annulment and rescission: 32 37 (a) no final judgment or decree shall have been entered for payment or any monies due pursuant to the Notes or this Agreement; (b) all arrears of principal, premium and interest upon all the Notes and all other sums payable under the Notes and this Agreement (including, promptly upon the receipt by the Company of a written request for the payment thereof, reasonable costs and expenses of the holders incurred in connection with such notice under Section 11.1 hereof or annulment under this Section 11.4, but excluding any principal or interest on the Notes that shall have become due and payable by reason of such notice under Section 11.1 hereof or happening of such Event of Default) shall have been duly paid; and (c) each and every other Default hereunder and Event of Default shall have been duly waived or cured; and, PROVIDED FURTHER, that no such rescission and annulment shall extend to or affect any subsequent Default or Event of Default or impair any right or power consequent thereon. SECTION 12. INTERPRETATION OF AGREEMENT AND NOTES. SECTION 12.1 DEFINITIONS. Except as the context shall otherwise require, the following terms shall have the following meanings for all purposes of this Agreement (the definitions to be applicable to both the singular and the plural form of the terms defined, where either such form is used in this Agreement): The term "AFFILIATE", with respect to any Person (hereinafter "such Person"), shall mean any other Person (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such Person, (ii) which beneficially owns or holds 10% or more of the shares of any class of the Voting Stock of such Person or (iii) 10% or more of the shares of any class of Voting Stock of which is beneficially owned or held of record by such Person or any Subsidiary of such Person. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of Voting Stock, by contract or otherwise. The term "AFFILIATE," when used herein without reference to any Person, shall mean an Affiliate of the Company. The term "ASSETS", with respect to any Person, shall mean, as of the date of any determination thereof, all assets of such Person (less depreciation, depletion, obsolescence, amortization and all other reserves properly established in accordance with generally accepted accounting principles). The term "BUSINESS DAY" shall mean any day on which commercial banks are not authorized or required to close in New York City. The term "CAPITAL LEASE" shall mean any lease or other agreement for the use of property which is required to be capitalized on a balance sheet of the lessee or other user of property in accordance with generally accepted accounting principles. 33 38 The term "CAPITALIZED LEASE OBLIGATIONS" shall mean the aggregate amount which, in accordance with generally accepted accounting principles, is required to be reported as a liability on the balance sheet of any Person at such time in respect of such Person's interest as lessee under a Capital Lease. The term "CLOSING DATE" shall have the meaning assigned thereto in Section 1.2 hereof. The term "CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time. The term "COMMON SHARE PURCHASE RIGHTS" shall mean the Common Share Purchase Rights deemed issued under the Company's Common Share Purchase Rights Plan described in Note 6 of the Notes to Financial Statements in the Form 10-K. The term "COMMON SHARES" shall have the meaning set forth in Section 2.1(a) hereof. The term "COMPANY" shall mean Pioneer-Standard Electronics, Inc., a Ohio corporation, and its successors and assigns. The term "COMPANY DISCLOSURE DOCUMENTS" shall have the meaning set forth in Section 2.3 hereof. The term "COMPANY FINANCIAL STATEMENTS" shall have the meaning set forth in Section 2.3 hereof. The term "CONSOLIDATED ASSETS" shall mean, as of the date of determination thereof, the aggregate of all Assets of the Company and its Restricted Subsidiaries (valued at depreciated cost) determined on a consolidated basis, after eliminating all items required to be eliminated in accordance with generally accepted accounting principles, including, without limitation, such eliminations regarding offsetting debits and credits between the Company and its Restricted Subsidiaries and all eliminations appropriate in respect of Minority Interests; PROVIDED, HOWEVER, that the Company's investment in Pioneer/Technologies shall not be included in Consolidated Assets. The term "CONSOLIDATED CURRENT ASSETS" with respect to the Company and its Restricted Subsidiaries, shall mean as of the date of any determination thereof, the aggregate of the Current Assets of the Company and its Restricted Subsidiaries determined on a consolidated basis after eliminating all items required to be eliminated in accordance with generally accepted accounting principles applied on a consistent basis, including, without limitation, such eliminations regarding offsetting debits and credits between the Company and its Restricted Subsidiaries and all eliminations appropriate in respect of Minority Interests. The term "CONSOLIDATED CURRENT LIABILITIES" with respect to the Company and its Restricted Subsidiaries, shall mean as of the date of any determination thereof, the Current Liabilities of the Company and its Restricted Subsidiaries determined on a consolidated basis after eliminating all items required to be eliminated in accordance with generally accepted 34 39 accounting principles applied on a consistent basis, including, without limitation, such eliminations regarding offsetting debits and credits between the Company and its Restricted Subsidiaries and all eliminations appropriate in respect of Minority Interests. The term "CONSOLIDATED EBIT" of any Person shall mean, as of the date of determination thereof, (i) Consolidated Net Income of such Person for such period, plus (ii) Consolidated Interest Expense of such Person for such period, plus (iii) provisions for federal, state and local income taxes of such Person for such period, in each case, for the period of the four most recent Fiscal Quarters for which financial statements are required to have been delivered pursuant to Section 10.1 hereof prior to the date of determination thereof. The term "CONSOLIDATED FUNDED INDEBTEDNESS" of the Company and its Restricted Subsidiaries, shall mean as of any date of determination thereof, the aggregate of all Funded Indebtedness of the Company and its Restricted Subsidiaries determined on a consolidated basis after eliminating all items required to be eliminated in accordance with generally accepted accounting principles applied on a consistent basis, including, without limitation, such eliminations regarding offsetting debits and credits between the Company and its Restricted Subsidiaries and all eliminations appropriate in respect of Minority Interests; PROVIDED, HOWEVER, that, notwithstanding generally accepted accounting principles or the foregoing, Consolidated Funded Indebtedness shall include any Funded Indebtedness of the Company owing to any Restricted Subsidiary. The term "CONSOLIDATED INDEBTEDNESS", with respect to the Company and its Restricted Subsidiaries shall mean, on any date of determination thereof the aggregate of all Indebtedness of the Company and its Restricted Subsidiaries determined on a consolidated basis after eliminating all items required to be eliminated in accordance with generally accepted accounting principles, including, without limitation, such eliminations regarding offsetting debits and credits between the Company and its Restricted Subsidiaries and all eliminations appropriate in respect of Minority Interests. The term "CONSOLIDATED INTEREST EXPENSE" shall mean, for any period, without duplication, the aggregate of all interest paid or accrued by the Company and its Restricted Subsidiaries during such period for Indebtedness of the Company or its Restricted Subsidiaries owed to any Person other than the Company or any Restricted Subsidiary, on a consolidated basis, including, without limitation, interest payable with respect to the Notes and the interest portion of Capital Lease payments, all as determined in accordance with generally accepted accounting principles and all eliminations appropriate in respect of Minority Interests; PROVIDED, HOWEVER, that, notwithstanding generally accepted accounting principles or the foregoing, Consolidated Interest Expense shall include any interest with respect to any Indebtedness of the Company owing to a Restricted Subsidiary which has accrued or been paid by the Company. The term "CONSOLIDATED NET INCOME (OR NET LOSS)" shall mean, for any period, the consolidated net income (or net loss) of the Company and its Restricted Subsidiaries for such period determined in accordance with generally accepted accounting principles applied on a consistent basis, after eliminating all items to be eliminated in accordance with generally 35 40 accepted accounting principles, including, without limitation, such eliminations regarding offsetting debits and credits between the Company and its Restricted Subsidiaries, but, in any event, excluding: (a) any gains or losses on the sale or other disposition (other than a sale or other disposition in the ordinary course of business) of investments or fixed or capital Assets, and any taxes on such excluded gains and any tax deductions or credits on account of any such excluded losses; (b) all items properly classified as extraordinary in accordance with generally accepted accounting principles; (c) net earnings and losses of any Restricted Subsidiary accrued prior to the date it became a Restricted Subsidiary; (d) net earnings and losses of any Person (other than the Company or a Restricted Subsidiary), substantially all the Assets of which have been acquired by the Company or any Restricted Subsidiary in any manner, realized by such other Person prior to the date of such acquisition; (e) net earnings and losses of any Person (other than the Company or a Restricted Subsidiary) which shall have been merged into or consolidated with the Company or any Restricted Subsidiary prior to the date of such merger or consolidation; (f) net earnings of any Person (other than the Company or a Restricted Subsidiary) in which the Company or any Restricted Subsidiary has an ownership interest (including Pioneer/Technologies), except to the extent such net earnings shall have actually been received by the Company or such Restricted Subsidiary in the form of cash distributions; (g) earnings resulting from any reappraisal, revaluation or write-up of Assets subsequent to March 31, 1990; (h) any gain after applicable taxes arising from the acquisition of any capital stock or other securities of the Company or any Restricted Subsidiary; and (i) earnings resulting from the elimination of all or a portion of any reserve established prior to the accounting period for which Consolidated Net Income (or Net Loss) is being determined; PROVIDED, HOWEVER, that earnings in any such period resulting from the elimination of all or a portion of one or more reserves established prior to such period with respect to transactions in the ordinary course of business need not be excluded to the extent that they do not in the aggregate exceed 5% of Consolidated Net Income for such period. 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 36 41 date of determination in accordance with generally accepted accounting principles, less all Minority Interests and less the amount at which the Company's investment in Pioneer/Technologies would be reflected on such balance sheet. The term "CONSOLIDATED SHAREHOLDERS' EQUITY" shall mean, as of the date of determination thereof, the total stockholders' equity of the Company and its Restricted Subsidiaries determined on a consolidated basis after eliminating all items required to be eliminated in accordance with generally accepted accounting principles applied on a consistent basis, including, without limitation, such eliminations regarding offsetting debits and credits between the Company and its Restricted Subsidiaries, less the amount at which the Company's investment in Pioneer/Technologies would be reflected on such balance sheet. The term "CONSOLIDATED TANGIBLE ASSETS", with respect to the Company and its Restricted Subsidiaries, shall mean, as of the date of determination thereof, the aggregate of all Assets of the Company and its Restricted Subsidiaries determined on a consolidated basis, after excluding Minority Interests and after eliminating all items required to be eliminated in accordance with generally accepted accounting principles applied on a consistent basis, including, without limitation, such eliminations regarding offsetting debits and credits between the Company and its Restricted Subsidiaries, valued at book value (established in accordance with generally accepted accounting principles), except (a) goodwill (whether representing the excess of cost over book value of Assets acquired or otherwise), patents, trade names, trademarks, copyrights, franchises, research and development expense, organization expense, unamortized debt discount and expense, deferred Assets other than prepaid insurance, prepaid taxes and deferred taxes, the excess of cost of shares acquired over book value of related Assets and such other Assets as are properly classified as "intangible assets" in accordance with generally accepted accounting principles, (b) treasury stock of the Company and its Restricted Subsidiaries, (c) cash set apart or held in any sinking fund or similar or analogous fund for the purpose of redeeming or otherwise retiring stock of the Company and its Restricted Subsidiaries and (d) any write-up of the book value of any Assets of the Company and its Restricted Subsidiaries (resulting from appraisal or otherwise) subsequent to March 31, 1990. 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 Section 10.1(a) hereof and which commenced after March 31, 1990 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. 36 42 The term "CURRENT ASSETS" 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 assets on a balance sheet of such Person at such date. 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. The term "DEBT," with respect to any Person, shall mean all items (other than capital stock, capital surplus, retained earnings and deferred credits), which in accordance with generally accepted accounting principles would be included in determining total liabilities as shown on the liability side of a balance sheet as at the date on which Indebtedness is to be determined. The term "DEBT" shall also include, whether or not so reflected, (i) indebtedness, obligations and liabilities secured by any Lien on property of such Person whether or not the indebtedness secured thereby shall have been assumed by such Person, (ii) all obligations in respect of Capital Leases (other than any obligations not required under generally accepted accounting principles to be capitalized on the books of such Person) and (iii) all Guaranties. The term "DEFAULT" shall mean an event or condition which, with the passage of time or the giving of notice, or both, would become an Event of Default. The term "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. The term "ERISA AFFILIATE" shall mean any Person which is under "common control" with the Company within the meaning of Section 4001 of ERISA. The term "ERISA TERMINATION EVENT" shall mean (i) a "reportable event" (as described in Section 4043 of ERISA) and the regulations issued thereunder (other than a "reportable event" not subject to the provision for 30-day notice to the PBGC under such regulations), (ii) the withdrawal of the Company or any of its ERISA Affiliates from a Plan during a plan year in which it was a "substantial employer" (as defined in Section 4001(a)(2) of ERISA), (iii) the providing of a notice of intent to terminate a Plan pursuant to Section 4041(a)(2) of ERISA or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, (iv) the institution of proceedings to terminate a Plan by the PBGC, or (v) any other event or condition which might reasonably constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. The term "EVENT OF DEFAULT" shall have the meaning assigned thereto in Section 11.1 hereof. The term "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended from time to time. 38 43 The term "EXISTING LOAN AGREEMENT" shall have the meaning set forth in Section 1.3 hereof. The term "FINANCIAL STATEMENTS" shall have the meaning set forth in Section 2.3 hereof. The term "FISCAL QUARTER" shall mean each of the four consecutive quarterly periods collectively forming a Fiscal Year. The term "FISCAL YEAR" shall mean any period of four consecutive Fiscal Quarters ending on March 31 of each year. The term "FORM 10-K" shall have the meaning set forth in Section 2.3 hereof. The term "FORM 10-Q" shall have the meaning set forth in Section 2.3 hereof. 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). The term "GUARANTY", with respect to any Person, shall mean any obligations (other than the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any Indebtedness, dividend or other obligation or investment of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including obligations incurred through an agreement, contingent or otherwise, by such Person (a) to purchase such Indebtedness, obligation or investment or any property or Assets constituting security therefor, (b) to advance or supply funds (i) for the purchase or payment of such Indebtedness, obligation or investment or (ii) to maintain working capital or equity capital, or otherwise to advance or make available funds for the purchase or payment of such Indebtedness, obligation or investment, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of such Indebtedness, obligation or investment of the ability of the primary obligor to make payment of such indebtedness, obligation or investment or (d) otherwise to assure the owner of such Indebtedness, obligation or investment against loss in respect thereof. The terms "HEREOF", "HEREIN", "HEREUNDER" and other words of similar import shall be construed to refer to this Agreement as a whole and not to any particular Section or other subdivision. The term "HOLDER", with respect to any Note, shall mean the Person on whose name such Note is registered. 39 44 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 of 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 payables 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; and (g) 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 Restricted Subsidiary or (ii) by a Restricted Subsidiary of Indebtedness of another Restricted 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 and including it in Consolidated Funded Indebtedness would result in a violation of Section 9.20 hereof at the time the Company or such Restricted 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. The term "INSTITUTIONAL INVESTOR" shall mean any one or more of the following Persons: (a) any bank, savings institution, trust company or national banking association; acting for its own account or in a fiduciary capacity; (b) any charitable foundation; (c) any insurance company or fraternal benefit association; (d) any pension, retirement or profit-sharing trust or fund; or (e) any public employees' pension or retirement system or any other governmental agency supervising the investment of public funds; PROVIDED, HOWEVER, that such Person shall have a capital, surplus and undivided profits or net worth of not less than $25,000,000. The term "INTEREST PAYMENT DATE" shall have the meaning set forth in Section 1.1 hereof. The term "INVESTMENT" shall mean (a) any direct or indirect purchase or other acquisition of stock or other securities of any Person, (b) any loan, advance or capital contribution to any Person or (c) a Guaranty in favor of any Person if the Company elects to treat such Guaranty as an Investment pursuant to the third proviso to the definition of Indebtedness in this Section 12.1. 40 45 The term "LIEN" shall mean any interest in property securing an obligation owed to, or a claim by, any Person other than the owner of the property (but excluding any rights of set-off that a bank may have), whether such interest shall be based on the common law, statute or contract, whether or not such interest shall be recorded or perfected and whether or not such interest shall be contingent upon the occurrence of some future event or events or the existence of some future circumstance or circumstances, and including the lien or security interest arising from a mortgage, encumbrance, pledge, adverse claim or charge, conditional sale or trust receipt, or from a lease, consignment or bailment for security purposes. The term "LIEN" shall also include reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting property. For the purposes of this Agreement, a Person shall be deemed to be the owner of any property that such Person shall have acquired or shall hold subject to a conditional sale agreement or other arrangement (including a leasing arrangement) pursuant to which title to the property shall have been retained by or vested in some other Person for security purposes. The term "MAKE-WHOLE AMOUNT" shall mean an amount, determined as of the date of any optional prepayment pursuant to Section 7.2 hereof or any acceleration pursuant to Section 11.1 hereof in respect of each Note to be prepaid or each Note being accelerated, equal to the greater of (a) zero and (b) the difference between (x) the sum of the present values, as at the date of such prepayment or acceleration, of the amount of each remaining scheduled payment of interest on and principal of such Note which will not be required to be made as a result of such prepayment (each such amount discounted separately at the Treasury Rate, determined as at the date five Business Days before the date of such prepayment or acceleration, compounded semi-annually from the date such amount would be due), minus (y) the principal amount of such Note. The term "MINORITY INTERESTS" shall mean any shares of stock of any class of a Restricted Subsidiary (other than directors' qualifying shares required by law) that are not owned by the Company and/or one or more Restricted Subsidiaries. Minority Interests shall be valued by valuing Minority Interests constituting preferred stock at the voluntary or involuntary liquidation value of such preferred stock, whichever is greater, and by valuing Minority Interests constituting common stock at the book value of capital and surplus applicable thereto adjusted, if necessary, to reflect any changes from the book value of such common stock required by the foregoing method of valuing Minority Interests in preferred stock. The term "MULTIEMPLOYER PLAN" shall mean any Pension Plan that is a "Multiemployer Plan" (as defined in Section 4001(a)(3) of ERISA). The term "NOTEHOLDER", with respect to any Note, shall mean the Person in whose name such Note is registered. The term "NOTES" shall have the meaning set forth in Section 1.1 hereof. The term "OFFICER'S CERTIFICATE" shall mean a certificate executed on behalf of the Company by the Chairman of the Board of Directors, the President, any Vice President, the Chief Financial Officer or the Treasurer of the Company. 41 46 The term "OPERATING LEASE" shall mean any lease which is not a Capital Lease. The term "OPERATING LEASE RENTALS" shall mean, as of any date of determination, without duplication, rentals accrued or paid by the Company and its Restricted Subsidiaries on Operating Leases on a consolidated basis for the four Fiscal Quarters immediately preceding the date of determination for which financial statements have been delivered or are required to have been delivered pursuant to Section 10.1 hereof. The term "OPTIONAL PREPAYMENT DATE" shall have the meaning set forth in Section 7.3 hereof. The term "OUTSTANDING", with respect to the Notes, shall mean, as of the date of determination, all Notes theretofore delivered pursuant to this Agreement, except Notes theretofore canceled or delivered for cancellation and Notes in exchange or replacement for which other Notes have been delivered pursuant to this Agreement; PROVIDED, HOWEVER, that, in determining whether the unpaid principal amount of Notes outstanding have given any notice or taken any action hereunder, Notes held or owned, directly or indirectly, by the Company, any Subsidiary or any other Affiliate shall be disregarded and deemed not to be outstanding. The term "PBGC" shall mean the Pension Benefit Guaranty Corporation or any successor thereof. The term "PENSION PLAN" shall have the meaning set forth in Section 2.11(d) hereof. The term "PERMITTED AFFILIATE TRANSACTION" shall mean any transaction between the Company and Pioneer/Technologies described in Exhibit C hereto which does not, individually or together with other similar transactions, have a material adverse effect on the business, earnings, prospects, properties or condition (financial or other) of the Company. The term "PERMITTED LIENS" shall mean: (a) Liens securing taxes, assessments, governmental charges or levies or the claims of carriers, warehousemen, materialmen, mechanics and other like Persons not yet due, or being properly and expeditiously contested in good faith by appropriate proceedings so long as any appropriate reserves have been established and the use by the Company or a Restricted Subsidiary of the property subject to the contested Lien has not been materially interfered with, PROVIDED, HOWEVER, that the payment thereof shall not be required by Section 9.7 hereof; and, PROVIDED FURTHER, that this clause (a) shall not be deemed to permit any Liens which may be imposed pursuant to Section 4068 of ERISA; (b) Liens of or resulting from any judgment or award, the time for the appeal or petition for rehearing of which shall not have expired, or in respect of which the Company shall at any time in good faith by prosecuting an appeal or proceeding for a review and in respect of which a stay of execution pending such appeal or proceeding for review shall have been secured; 42 47 (c) Liens incidental to the normal conduct of business or the ownership of properties and Assets (including warehousemen's and statutory landlords' Liens), Liens, deposits or pledges securing the performance of bids, tenders or trade contracts, and Liens securing statutory obligations or surety or appeal bonds in connection with proceedings in which the Company or a Restricted Subsidiary is a party; PROVIDED, however, that (i) any such Lien shall not be created in connection with and shall not secure Indebtedness, (ii) any obligation secured by any such Lien shall not be overdue or, if overdue, shall be contested in good faith by appropriate actions or proceedings and adequate book reserves shall have been established in accordance with generally accepted accounting principles; and (iii) all such Liens, pledges and deposits shall not in the aggregate materially impair the use or value of the properties of the Company and its Restricted Subsidiaries in the operation of the business of the Company and its Restricted Subsidiaries; and, PROVIDED FURTHER, that this clause (c) shall not be deemed to permit any Liens which may be imposed pursuant to Section 4068 of ERISA; (d) minor survey exceptions and minor encumbrances, easements or reservations, or rights of others for rights-of-way, utilities and other similar purposes, or zoning or other restrictions as to the use of real properties, which are necessary for the conduct of the activities of the Company and its Restricted Subsidiaries or which customarily exist on properties of corporations engaged in similar activities and similarly situated and which do not in any event materially impair the use of any of such properties in the operation of the business of the Company and its Restricted Subsidiaries; (e) leases made, or existing on property acquired, by the Company and its Restricted Subsidiaries in the ordinary course of their businesses, PROVIDED, HOWEVER, that, in the case of any Capital Lease, the Indebtedness represented thereby shall have been incurred in compliance with Section 9.20 hereof; (f) Liens originally created to secure payment of a portion of the purchase price relating to any real property or equipment or any interest therein, which the Company (or, in the case of any Capital Lease, the owner) shall acquire after the date hereof, but, with respect to any such Lien, which property, equipment or interest shall not be acquired more than 60 days prior to the date of the creation of such Lien; PROVIDED, HOWEVER, that (i) no such Lien shall attach to any other Asset at the time owned by the Company, (ii) the outstanding principal amount of Indebtedness secured by any such Lien shall not exceed 85% of the fair market value of property to which such Lien attaches, (iii) any Indebtedness secured by any such Lien shall have been incurred in compliance with Section 9.20 hereof and (iv) the aggregate amount of Indebtedness secured by any such Liens shall not at any time exceed $3,000,000; (g) Liens in replacement, extension or renewal of any Liens described in the preceding clause (f) upon or in the same property theretofore subject thereto; (h) Liens existing on the date hereof and set forth on Schedule 12.1 hereof, but not any Liens resulting from any renewal or extension of the Indebtedness secured thereby; (i) Liens or pledges or deposits made in the usual course of business to secure payment of workmen's compensation, unemployment insurance or social security obligations; 43 48 (j) Liens created with respect to any consignment, lease, land contract or other title retention agreement or arrangement; and (k) Liens created with respect to the Stock Purchase Agreement dated July 24, 1986 among the Company and the other shareholders of Pioneer/Technologies. The term "PERSON" shall mean any individual, corporation, partnership, joint venture, association, joint stock company, trust, estate, unincorporated organization or government (or any agency or political subdivision thereof). The term "PIONEER/TECHNOLOGIES" shall mean Pioneer/Technologies Group, Inc., a Maryland corporation. The term "PIONEER/TECHNOLOGIES FINANCIAL STATEMENTS" shall have the meaning set forth in Section 2.3 hereof. The term "PLAN" shall have the meaning set forth in Section 2.11(d) hereof. The term "PURCHASE PRICE" shall have the meaning set forth in Section 1.2 hereof. The term "QUALIFIED INSTITUTIONAL BUYER" shall have the meaning assigned thereto in Rule 144A. The term "RESPONSIBLE OFFICER", with respect to the Company shall mean the President, the Chief Financial Officer, the Chairman, any other Vice President, the Treasurer or the Secretary thereof. 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: (i) 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; (ii) 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 Corporation ("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; (iii) 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; 44 49 PROVIDED, HOWEVER, that any such obligation shall have a final maturity date not more than two years after the acquisition thereof; (iv) the Investment by the Company in Pioneer/ Technologies prior to the date hereof in the aggregate amount of $55,000; (v) 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 canceled promptly after its acquisition by the Company or such Restricted Subsidiary; and (vi) any Investment by the Company or a Restricted Subsidiary the making of which constitutes a Restricted Payment. The term "RESTRICTED PAYMENT" shall mean (a) any dividend or other distribution, direct or indirect, in respect of any shares of the capital stock of the Company; or (b) any purchase, redemption, prepayment, retirement or other acquisition or reacquisition of (i) any shares of capital stock of the Company, now or hereafter outstanding, (ii) any warrants, rights or options evidencing a right to purchase or acquire any such shares (except in exchange for other shares of capital stock or warrants, rights or options evidencing a right to purchase or acquire any such shares), or (iii) any Indebtedness of the Company which is subordinated or junior in right of payment to the Notes (including the Debentures); PROVIDED, HOWEVER, that no dividend or other distribution, purchase, redemption, prepayment, retirement or other acquisition shall constitute a Restricted Payment to the extent that it consists of or is paid for with an equity security of the Company or is effected by the conversion of any security into an equity security of the Company; and, PROVIDED, FURTHER, that no mandatory redemption or prepayment of Debentures shall constitute a Restricted Payment if (x) the redemption or prepayment price is paid in cash representing the proceeds of a contemporaneous issuance of Indebtedness which is unsecured and is subordinated or junior in right of payment to the Notes, or (y) it is made in cash at the time required by the Indenture under which the Debentures were issued in satisfaction of the sinking fund requirements of said Indenture. The amount of any Restricted Payment in property shall be deemed to be the greater of its fair value (as determined by the Board of Directors of the Company) or its net book value. The term "RESTRICTED SUBSIDIARY" shall mean 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; PROVIDED, HOWEVER, that no corporation may be designated a Restricted Subsidiary unless: (a) such corporation is organized under the laws of the United States or any jurisdiction thereof; (b) such corporation conducts substantially all of its business and owns substantially all of its property within the United States; 45 50 (c) a majority of the shares of each class of the capital stock of such Subsidiary are 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 Pioneer/Technologies shall not be designated a Restricted Subsidiary hereunder; and, 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. The term "RESTRICTED SUBSIDIARY INDEBTEDNESS" shall mean any Indebtedness created, incurred, issued, assumed or guaranteed by a Restricted Subsidiary. The term "RMI" shall have the meaning set forth in Section 6.4 hereof. The term "RULE 144A" shall mean Rule 144A under the Securities Act, as presently in effect and as hereafter amended from time to time, or any superseding or substituted rule adopted by the SEC from time to time. The term "SALE" shall have the meaning set forth in Section 9.16 hereof. The term "SEC" shall mean the Securities and Exchange Commission and any successor organization. The term "SEC REPORTS" shall have the meaning set forth in Section 2.3 hereof. The term "SECURED DEBT" shall have the meaning set forth in Section 9.13(a) hereof. The term "SECURITIES ACT" shall mean the Securities Act of 1933, as amended from time to time. The term "SHORT-TERM INDEBTEDNESS" of any Person shall mean and include all Indebtedness of such Person which does not constitute Funded Indebtedness. The term "SUBSIDIARY" shall mean any corporation other than Pioneer/Technologies (a) which is organized under the laws of any jurisdiction of the United States of America, (b) which conducts substantially all of its business and has substantially all of its Assets within the United States of America and (c) of which more than 50% (by number of votes) of its Voting Stock is owned by the Company and/or one or more Subsidiaries wholly-owned by the Company. 46 51 The term "THIS AGREEMENT" shall mean this Note Purchase Agreement (including the annexed Exhibits and Schedules), as it may from time to time be amended, supplemented or modified in accordance with its terms. The term "TIAA" shall mean Teachers Insurance and Annuity Association of America. The term "TOTAL CAPITALIZATION" shall mean the sum of (i) Consolidated Funded Indebtedness, plus (ii) Consolidated Shareholders' Equity. The term "TREASURY RATE", as of the date of any determination thereof in connection with the determination of the Make-Whole Amount, shall mean the sum of (i) 50 basis points and (ii) the rate per annum equal to the arithmetic average of the two most recent weekly average yields on issues of United States Treasury securities adjusted to a constant maturity equal to the Weighted Average Life to Maturity of the Notes (determined, if necessary, by interpolating such yields on United States Treasury Securities adjusted to the particular constant maturities greater than (but nearest to) and less than (but nearest to) the Weighted Average Life to Maturity of the Notes), as published by the Federal Reserve Board for release on the first Business Day of the week in which such determination is made in its Statistical Release H.15(519) under the heading "Treasury Constant Maturities", such weekly average yields to be for the two calendar weeks ending on the two Wednesdays immediately preceding the date of such release or, if such average is not published for such periods, of such reasonably comparable index as may be designated for such periods by the holder or holders of at least a majority in, aggregate unpaid principal amount of the Notes then outstanding. The term "VOTING STOCK", with respect to a corporation, shall mean the stock of such corporation the holders of which are ordinarily, in the absence of contingencies, entitled to elect members of the Board of Directors (or other governing body) of such corporation. The term "WEIGHTED AVERAGE LIFE TO MATURITY" of any borrowed funds or preferred stock, as of the date of the determination thereof, shall mean the number of years obtained by dividing the then Remaining Dollar-Years of such borrowed funds or preferred stock by the then outstanding principal amount thereof (in the case of such borrowed funds) or the aggregate redemption price of all outstanding shares thereof. The term "REMAINING DOLLAR-YEARS" of any borrowed funds or preferred stock shall mean the amount obtained by (a) multiplying the amount of each then remaining sinking fund, serial maturity or other required repayment or redemption price, including repayment at final maturity, by the number of years (calculated to the nearest one-twelfth) which will elapse between the time in question and the date of the repayment or redemption and (b) totaling all of the products obtained in (a). SECTION 12.2 DIRECTLY OR INDIRECTLY. Any provision iN this Agreement referring to action to be taken by any Person, or that such Person is prohibited from taking, shall be applicable whether such action is taken directly or indirectly by such Person. 47 52 SECTION 12.3 ACCOUNTING TERMS. All accounting terms used herein that are not otherwise expressly defined shall have the respective meanings given to them in accordance with generally accepted accounting principles at the particular time. SECTION 12.4 GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. SECTION 12.5 HEADINGS. The headings of the Sections and other subdivisions of this Agreement have been inserted for convenience of reference only, and shall not be deemed to constitute a part hereof. SECTION 12.6 INDEPENDENCE OF COVENANTS. Each covenant made by the Company herein is independent of each other covenant so made. The fact that the operation of any such covenant permits a particular action to be taken or condition to exist does not mean that such action or condition is not prohibited, restricted or conditioned by the operation of the provisions of any other covenant herein. SECTION 13. MISCELLANEOUS. SECTION 13.1 NOTICES. (a) All communications under this Agreement or the Notes shall be in writing and shall be delivered or mailed (i) if to you, to you at your address set forth in Schedule I hereof, marked for attention as there indicated, or at such other address as you may have furnished to the Company in writing, (ii) if to any other holder of Notes, to it at its address listed in the books for the registration and registration of transfer of Notes, required to be maintained by the Company pursuant to Section 9.1 hereof, or at such other address as such holder shall have furnished to the Company in writing, and (iii) if to the Company, to it at its address shown at the head of this Agreement, or at such other address as it shall have furnished in writing to you and all other holders of the Notes at the time outstanding. (b) Any written communication so addressed and mailed by certified mail, return receipt requested, shall be deemed to have been given when so mailed. All other written communications shall be deemed to have been given upon receipt thereof. SECTION 13.2 SURVIVAL. All representations, warranties and covenants made by the Company herein or by the Company or any Subsidiary in any certificate or other instrument delivered under or in connection with this Agreement shall be considered to have been relied upon by you and shall survive the delivery to you of the Notes regardless of any investigation made by you or on your behalf. All statements in any such certificate or other instrument shall constitute representations and warranties of the Company hereunder. SECTION 13.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the parties hereto and their respective successors and assigns, and shall inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns permitted hereunder; PROVIDED, HOWEVER, that you shall not have any obligation to purchase Notes of any Person other than Pioneer-Standard Electronics, Inc., an Ohio corporation. Whether or not expressly so stated 48 53 and subject to the restrictions set forth herein, the provisions of Sections 5 through 13 of this Agreement are intended to be for your benefit and for the benefit of all holders from tide to time of the Notes, and shall be enforceable by you and any other such holder whether or not an express assignment to such holder of rights under this Agreement shall have been made by you or your successors or assigns; PROVIDED, HOWEVER, that the provisions of Section 5 and Sections 6.2, 6.3 and 9.1 hereof and the provisions of Section 9.5 hereof relating to the payment of expenses shall also be for the benefit of, and shall be enforceable by, any Person who shall no longer be a holder of any Note but who shall have incurred any expense or been subjected to any liability for which reimbursement or payment by the Company is provided therein while, or on the basis of being, such a holder. SECTION 13.4 AMENDMENT AND WAIVER. (a) This Agreement and the Notes may be amended or supplemented, and the observance of any term hereof or thereof may be waived, with the written consent of the Company and (i) on or prior to the Closing Date, you, and (ii) after the Closing Date, the holders of at least a 66-2/3% in aggregate unpaid principal amount of the Notes then outstanding; PROVIDED, HOWEVER, that no such amendment, supplement or waiver shall, without the written consent of the holders of all the Notes then outstanding, (x) change, with respect to the Notes, the amount or time of any required prepayment or payment of principal or premium or the rate or time of payment of interest, or change the funds in which any prepayment or payment on the Notes is required to be made; (y) amend or supplement, or (subject to Section 11.4 hereof) waive any Default or Event of Default arising by reason of the failure of the Company to comply with, any provision of Section 7; or (z) reduce the percentage of the aggregate principal amount of Notes required for any amendment, consent or waiver hereunder. Any amendment or waiver effected in accordance with this Section 13.4 shall be binding upon each holder of any Note at the time outstanding, each future holder of any Note and the Company. Notwithstanding any other provision of this Agreement, no consent to any such amendment or supplement by any holder of a Note and no such waiver by any holder of a Note shall have any effect for the purposes of this Section 13.4 if such consent or waiver was obtained in connection with or in anticipation of the purchase by the Company, any Affiliate of the Company or any other Person of any portion of the Notes held by such Noteholder, unless the holder of each Note at the time outstanding has executed a consent or waiver, as the case may be, to substantially the same effect as the consent or waiver obtained from such Noteholder. (b) Except as provided or contemplated in Section 11.4 hereof, the Company will not solicit, request or negotiate for or with respect to any proposed waiver or amendment of any of the provisions of this Agreement or the Notes unless each holder of the Notes (irrespective of the amount of Notes then owned by it) shall be informed thereof by the Company and shall be afforded the opportunity of considering the same and shall be supplied by the Company with sufficient information to enable it to make an informed decision with respect thereto. Executed or true and correct copies of any waiver effected pursuant to the provisions of this Section 13.4 shall be delivered by the Company to each holder of outstanding Notes forthwith following the date on which the same shall have been executed and delivered by the holder or holders of the requisite percentage of outstanding Notes. The Company will not, directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, to any holder of the Notes as consideration for or as an inducement to the entering into 49 54 by any holder of the Notes of any waiver or amendment of any of the terms and provisions of this Agreement unless such renumeration is concurrently paid, on the same terms ratably to the holders of all of the Notes then outstanding. SECTION 13.5 COUNTERPARTS. This Agreement may be executed and delivered to you simultaneously in two or more counterparts, each of which shall be deemed an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 13.6 REPRODUCTION OF DOCUMENTS. This Agreement and all documents relating hereto (other than the Notes), including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by you at the closing of your purchase of the Notes, and (c) financial statements, certificates and other information heretofore or hereafter furnished to you,-may be reproduced by you by any photographic or other similar process and you may destroy any original document so reproduced. The Company agrees and stipulates that, to the extent permitted by applicable law and court or agency rules, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by you in the regular course of business) and that any enlargement, facsimile or further reproduction of such reproduction shall be admissible in evidence to the same extent. SECTION 13.7 CONFIDENTIALITY. You agree to use your best efforts (and each subsequent holder of any Note, by accepting assignment of such Note, agrees to use its best efforts) to keep confidential from all Persons other than your (or its) counsel, accountants, financial advisors, employees, consultants and agents all information obtained by you (or such subsequent holder) pursuant to this Agreement and designated or marked in writing by the Company as confidential; PROVIDED, HOWEVER, that you (or any such subsequent holder) may disclose any such information (a) as has become generally available to the public (through no action on your or its part); (b) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or federal regulatory body having or claiming to have jurisdiction over you (or such subsequent holder) or to the National Association of Insurance Commissioners or similar organizations or their successors; (c) as may be required in response to any summons or subpoena or in connection with any litigation; (d) in order to comply with any law, regulation or rule applicable to you (or such subsequent holder); (e) to a prospective transferee which is an Institutional Investor or Qualified Institutional Buyer in connection with any contemplated transfer of any Note held by you (or any such subsequent holder) and to which transfer of a Note would be permitted by Section 3.2 hereof; (f) to any other Noteholder; and (g) otherwise as may be reasonably necessary to the enforcement of your rights (or the rights of such subsequent holder) with respect to the Notes or under this Agreement. 50 55 If the foregoing is satisfactory to you, please sign the form of acceptance on the enclosed counterparts hereof and return the same to the Company, whereupon this letter, as so accepted, shall become a binding contract between you and each of the undersigned. Very truly yours, PIONEER-STANDARD ELECTRONICS, INC. By: /s/ JOHN GOODGER ---------------------------------- Title: Vice President The foregoing Agreement is hereby accepted. TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA By: /s/ BARBARA J. PAIGE ------------------------- Title: Investment Officer 51 56 SCHEDULE I PURCHASER OF THE 9.79% SENIOR NOTES DUE NOVEMBER 1, 2000 OF PIONEER-STANDARD ELECTRONICS, INC.
Principal Amount of Name And Address Of Purchaser Notes To Be Purchased ----------------------------- ---------------------- TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA $20,000,000 (1) In the case of all payments on account of the Notes: to TIAA, by crediting (in the form of bank wire transfer of immediately available funds) its Account No. 121-85-001 in Morgan Guaranty Trust Company of New York, 23 Wall Street, New York, New York 10015; with telephone advice of payment to Treasury Services--TIAA at (212) 916-4000. (2) Address for notices in respect of payment: 730 Third Avenue New York, New York 10017 Attention: Treasury Services (3) Address for all other communications: 730 Third Avenue New York, New York 10017 Attention: Securities Division
I-1 57 SCHEDULE 2.5 MATERIAL ADVERSE CHANGES NONE. 2.5-1 58 SCHEDULE 4.1 [LETTERHEAD OF ORRICK, HERRINGTON & SUTCLIFFE] November 2, 1990 Teachers Insurance and Annuity Association of America 730 Third Avenue New York, New York 10017 Re: $20,000,000 in Aggregate Principal Amount of 9.79% Senior Notes due November 1, 2000 of Pioneer-Standard Electronics, Inc. Ladies and Gentlemen: We have acted as special counsel in connection with your purchase today of $20,000,000 in aggregate principal amount of 9.79% Senior Notes due November 1, 2000 (the "Notes") of Pioneer-Standard Electronics, Inc., an Ohio corporation (the "Company"), pursuant to the Note Purchase Agreement dated as of October 31, 1990 between the Company and you (the "Note Purchase Agreement"). All capitalized terms used herein without definition have the meanings assigned thereto in the Note Purchase Agreement. We have examined a fully executed original of the Note Purchase Agreement. We also have examined the executed Note being issued and delivered on the date hereof. In addition, we have examined originals (or copies certified or otherwise identified to our satisfaction) of such other instruments, certificates, records and documents as we have deemed necessary or appropriate for the purpose of rendering this opinion. Based upon such examination and subject to the limitations and qualifications set forth below, we are of the opinion that: 1. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Ohio. 2. The Note Purchase Agreement and the execution, delivery and performance thereof have been duly authorized by all necessary corporate action on the 59 part of the Company. The Note Purchase Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. 3. The Notes and the offer, issuance, sale, delivery and performance thereof have been duly authorized by all necessary corporate action on the part of the Company. The Notes have been duly executed, issued and delivered by the Company and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms. 4. On the basis of the representations contained in Sections 3.1 and 3.2 of the Note Purchase Agreement, it is not necessary, in connection with the issuance and delivery of the Notes to you under the circumstances contemplated by the Note Purchase Agreement, to register the Notes under the Securities Act or to qualify an indenture with respect thereto under the Trust Indenture Act of 1939, as amended. With your permission, we have assumed the following: (a) the genuineness of all signatures and the authenticity of all documents submitted to us as originals; (b) the conformity to the original documents of all documents submitted to us as copies; (c) the truth, accuracy, and completeness of the information, factual matters, representations, and warranties contained in the records, documents, instruments and certificates we have reviewed; and (d) except as specifically covered in the opinion set forth above, the due authorization, execution, and delivery on behalf of the respective parties thereto of documents referred to herein and the legal, valid, and binding effect thereof on such parties. Our opinion that any agreement, instrument or document is legal, valid, binding or enforceable against any Person in accordance with its terms is qualified as to: (a) limitations imposed by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws affecting the enforcement of creditor's rights generally, including, without limitation, laws relating to fraudulent transfers or conveyances, preferences and equitable subordination; (b) as a general matter, of law, the unenforceability under certain circumstances of provisions imposing penalties, forfeiture, late payment charges or an increase in interest rate upon delinquency in payment or the occurrence of any Event of Default; and (c) general principles of equity, regardless of whether enforceability is considered in a proceeding in equity or at law. We are not opining on law other than the law of the State of New York and the federal law of the United States of America. In giving the opinions set forth in paragraphs 1, 2 and 3 above, we have relied solely upon the opinion of Calfee, Halter & Griswold, counsel for the Company, dated the date hereof and delivered to you pursuant to Section 4.2 of the Note Purchase 2 60 Agreement, as to matters pertaining to the laws of the State of Ohio. We have made no independent examination of such matters. We further advise you that we have reviewed the opinion of Calfee, Halter & Griswold, referred to above, and we believe such opinion is satisfactory in form and scope and you and we are justified in relying thereon. This opinion letter is solely for the benefit of the party to whom it is addressed and may not be relied upon, used, circulated, quoted or referred to, nor copies hereof delivered to, any other person (other than a subsequent holder of a Note) without our prior written approval. We disclaim any obligation to update this opinion letter for events occurring after the date hereof. Very truly yours, /s/ Orrick, Herrington & Sutcliffe 3 61 SCHEDULE 4.2 [LETTERHEAD OF CALFEE, HALTER & GRISWOLD] November 2, 1990 Teachers Insurance and Annuity Association of America 730 Third Avenue New York, New York 10017 Re: Pioneer-Standard Electronics, Inc.--Sale of 9.79% ------------------------------------------------- Senior Notes due November 1, 2000 --------------------------------- Gentlemen: This opinion is furnished to you pursuant to and in satisfaction of Section 4.2 of that certain Note Purchase Agreement, dated as of October 31, 1990 (the "Note Purchase Agreement"), by and between Pioneer-Standard Electronics, Inc., an Ohio corporation ("Borrower"), and Teachers Insurance and Annuity Association of America, a New York corporation (the "Purchaser"). We have acted as counsel to Borrower in connection with the negotiation of the Note Purchase Agreement and we are delivering this opinion to you in connection with the initial distribution of sale proceeds to the Borrower thereunder. Capitalized terms not otherwise defined herein shall have the meaning given them in the Note Purchase Agreement. We have examined originals or copies, certified or otherwise, identified to our satisfaction, of the following documents and corporate records in connection with this opinion: (1) The Note Purchase Agreement; 2) The Note; 3) A copy of the Articles of Incorporation of Borrower and all amendments thereto, certified as true, complete and accurate by the office of the Ohio Secretary of State as of October 4, 1990; 4) A Good Standing Certificate from the Secretary of State of Ohio, dated October 2, 1990, certifying Borrower's status as a corporation in good standing under the laws of the State of Ohio; 62 Teachers Insurance and Annuity Association of America November 2, 1990 Page 2 (5) Good Standing Certificates or their equivalent (the "Foreign Jurisdiction Certificates") from: (i) the Secretary of State of Michigan, dated October 9, 1990; (ii) the Secretary of the Commonwealth of Pennsylvania, dated October 10, 1990; (iii) the Secretary of State of Minnesota, dated October 9, 1990; (iv) the Secretary of State of Texas, dated October 8, 1990, and the Comptroller of Public Accounts of Texas dated October 26, 1990; (v) the Secretary of State of Indiana, dated October 10, 1990; (vi) the Secretary of the Commonwealth of Massachusetts, dated October 9, 1990; (vii) the Secretary of State of Connecticut, dated October 10, 1990; (viii) the Department of the State of New York, dated October 5, 1990; (ix) the Secretary of State of New Jersey, dated October 10, 1990; (x) the Secretary of State of Wisconsin, dated October 9, 1990; (xi) the Secretary of State of Missouri dated October 9, 1990; (xii) the Secretary of State of Oklahoma dated October 9, 1990; and (xiii) the Secretary of State of California dated November 1, 1990; (6) The Board of Governors of the Federal Reserve System List of Marginable OTC Stocks as of November 13, 1989, as supplemented by (i) the Supplement to List of Marginable OTC Stocks February 12, 1990, (ii) the Supplement to List of Marginable OTC Stocks May 14, 1990 and (iii) the Supplement to List of Marginable OTC Stocks August 13, 1990; (7) An Officer's Certificate from John V. Goodger, Vice President, Treasurer and Assistant Secretary of the Borrower, as to (i) the true, complete and correct nature of the Code of Regulations as of the date hereof, (ii) the true, complete and correct nature as of the date hereof of the resolutions adopted by the Board of Directors of Borrower on October 30, 1990, authorizing the Borrower's execution and delivery of and performance under the Note Purchase Agreement, the Note, and such certificates and documents as may be related to the Note Purchase Agreement or the Note, and (iii) certain other factual matters, a copy of which certificate is attached to this opinion as Exhibit A and incorporated herein by reference (the "Officer's Certificate"). The opinions hereinafter expressed are premised upon the following assumptions: (i) all materials, records and documents examined by us in connection with the preparation of this opinion letter are complete, authentic and accurate and, to the extent represented by certified or photostatic copies, conform to their respective originals, (ii) all signatures contained in such materials, records and documents are genuine signatures of the parties purporting to have signed 63 Teachers Insurance and Annuity Association of America November 2, 1990 Page 3 the same, (iii) all natural parties signing said documents and records had, at the time of such signing, full legal capacity to sign and deliver said materials, records and documents, and (iv) no action has been taken which amends, revokes or otherwise affects any of the materials, records or documents which we have examined. Further, any opinion hereinafter expressed that an agreement, instrument or document is a valid and binding obligation of Borrower or is enforceable in accordance with its terms is premised upon the assumption that (a) the Note Purchase Agreement is a legal, valid, and binding obligation of the Purchaser, and (b) the Purchaser has actually advanced moneys to Borrower pursuant to the Purchaser's purchase of the Note pursuant to the terms of the Note Purchase Agreement. We have relied upon the foregoing Foreign Jurisdiction Certificates and have not conducted an independent review or investigation of the matters set forth therein. Any opinion hereinafter set forth relative to the Borrower's good standing status is based solely upon such certificates as of the date thereof. Except for our review of the Material Contracts (as defined and set forth in the Officer's certificate) and as further described in the following sentence, we have not conducted an independent review or investigation of the matters contained in said Officer's Certificate, and except to the extent otherwise expressed herein, render no opinion in respect to such matters. Insofar as this opinion relates to our knowledge of factual matters set forth in the Officer's Certificate or other factual matters, information with respect to which is in the possession of Borrower or other entities, we have made inquiries of and relied upon representations from one or more officers or employees of Borrower with respect to such matters and nothing has come to our attention leading us to question, or giving us reasonable grounds to question, the accuracy of such information. In addition, we are not aware of any Indebtedness of Borrower for borrowed money other than Indebtedness disclosed in the officer's Certificate. In rendering our opinion, we have not conducted any investigation into the types of businesses and activities in which Borrower engages or the manner in which it conducts its business as would enable us to render any opinion (and, accordingly, we express no opinion) as to the applicability to the Borrower of any law or regulation of Ohio or any other governmental authority not of general applicability to business corporations. We have no present, actual knowledge that any of the foregoing assumptions are not, as of the date hereof, accurate or complete. We assume no obligation to advise you of any changes in fact or law, or of anything coming to our attention bearing on the accuracy or completeness of any assumption, whether or not material, which may be brought to our attention subsequent to the date hereof. 64 Teachers Insurance and Annuity Association of America November 2, 1990 Page 4 Based solely upon and subject to: (i) the foregoing; (ii) the qualifications set forth below; and (iii) our review of such matters of law and other documents and corporate records as we have deemed necessary in connection with this opinion, we are of the opinion that: 1. Borrower is incorporated, validly existing and in good standing as an Ohio corporation, and has all requisite corporate power and authority under its Articles of Incorporation and Code of Regulations to own its properties and to carry on its business as it is, to the best of our knowledge, presently being conducted. 2. Based solely upon the Foreign Jurisdiction Certificates referenced above, Borrower is duly qualified to do business as a foreign corporation in those states designated in the Officer's Certificate as Foreign Jurisdictions other than the State of Illinois; it being understood we are rendering no opinion with respect to the due qualification of Borrower to do business as a foreign corporation in any other jurisdiction. 3. Borrower has full corporate power and authority to offer, issue, sell, execute, deliver and perform its obligations under the Note, and to execute, deliver and perform its obligations under the Note Purchase Agreement. 4. Without independent investigation and based solely upon the Officer's Certificate, and except as disclosed in said Certificate, we are not aware of any litigation or proceedings pending or threatened against or affecting Borrower, at law or in equity, or before any government agency or authority, or any arbitrator or arbitration panel, which, if successful, would result in any material, adverse change in the condition, financial or otherwise, of Borrower or which in any manner draws into question the validity or enforceability of the Note Purchase Agreement or the Note. 5. The execution and delivery of the Note Purchase Agreement and the offer, issuance, sale, execution and delivery of the Note and compliance with the terms of the Note Purchase Agreement and the Note by the Borrower, will not violate (i) the provisions of any presently applicable Ohio or Federal statute, (ii) any existing provision of the Borrower's Articles of Incorporation or Code of Regulations, or (iii) to the best of our knowledge, any judgment, injunction, order or decree of any court, governmental authority, arbitrator or arbitration panel applicable to the Borrower. 6. Neither the execution and delivery of the Note Purchase Agreement, the offer, issuance, sale, execution and delivery of the Note, nor the Borrower's compliance with the terms of the Note Purchase Agreement or the Note, will violate or constitute a default under any of the Material Contracts set forth in the Officer's Certificate. 65 Teachers Insurance and Annuity Association of America November 2, 1990 Page 5 7. The Note Purchase Agreement and the Note have been duly executed and delivered by duly authorized officers of the Borrower and are valid and binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms. The performance of the Note Purchase Agreement and the Note has been duly authorized by all necessary corporate action on the part of the Borrower. 8. On the basis, in part, of the representations contained in Section 3.2 and Section 3.3 of the Note Purchase Agreement, no prior consent of, approval, authorization, qualification, designation, or declaration by, filing or registration with or notice to any federal or Ohio governmental or public authority or agency is required for the valid offer, issuance, sale or delivery of the Note or the execution, delivery or performance of the Note Purchase Agreement by the Borrower. 9. On the basis, in part, of the representations contained in Section 3.1 and Section 3.2 of the Note Purchase Agreement, it is not necessary, in connection with the issuance and delivery of the Note to the Purchaser under the circumstances contemplated by the Note Purchase Agreement, to register the Note under the Securities Act or to qualify an indenture with respect thereto under the Trust Indenture Act of 1939, as amended. 10. Based solely upon the information set forth in the Officer's Certificate, the application of the proceeds from the sale of the Note will not violate or result in a violation of Section 7 of the Exchange Act or any regulations issued pursuant thereto, including, without limitation, Regulation G (12 C.F.R., Part 207), as amended, or Regulation X (12 C.F.R., Part 224), as amended, or Regulation T (12 C.F.R., Part 224), as amended, of the Board of Governors of the Federal Reserve System; PROVIDED, HOWEVER, that with respect to the Pioneer-Standard Debentures (as defined in the Officer's Certificate), we have assumed without opinion that such proceeds will not be used to retire "purpose credit" (as defined in Regulation G, 12 C.F.R., Part 207) secured directly or indirectly by such Pioneer-Standard Debentures. 11. To the best of our knowledge, the Borrower is not a "public utility company" or a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935, as amended, or a "public utility" within the meaning of the Federal Power Act, as amended. 12. The Borrower is not an "investment company" or an "affiliated person" of an "investment company" or a company "controlled" by an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended. The Borrower is not an 66 Teachers Insurance and Annuity Association of America November 2, 1990 Page 6 "investment adviser" or an "affiliated person" of an "investment adviser" as such terms are defined in the Investment Advisers Act of 1940, as amended. The foregoing opinions are subject, however, to the further qualifications that: (a) Any opinion set forth above that an instrument or agreement is a valid and binding obligation of Borrower or is enforceable in accordance with its terms, is subject to (i) general principles of equity (regardless of whether considered in a proceeding in equity or at law), (ii) any bankruptcy, moratorium, fraudulent conveyance, preferential transfer, avoidance, insolvency or other law relating to or affecting the enforcement of creditors' rights, and (iii) the Purchaser's obligation to act reasonably, in good faith and with fairness in exercising rights and remedies under the Note Purchase Agreement and the Note. (b) Certain of the remedial provisions in the Note Purchase Agreement and the Note may be limited or rendered unenforceable under the laws of Ohio. By way of example and without limitation, such provisions include (i) any provision purporting to allow the collection of attorneys fees; (ii) any waiver of statutory, constitutional or equitable rights; (iii) any provision which purports to waive any requirement of diligent performance or otherwise purports to establish standards of care, reasonableness or diligence with respect to the Purchaser in the exercise of its rights and remedies or the satisfaction of its duties to Borrower to the extent that such remedies are not specifically provided for under the Uniform Commercial Code as now or hereafter in effect in Ohio. (c) We express no opinion as to the binding effect, validity or enforceability of any provision in the Note Purchase Agreement or the Note which (i) provides that delays of the Purchaser will not operate as a waiver, or (ii) attempts to modify or waive any requirements of commercial reasonableness or notice arising under applicable laws. (d) The opinions herein expressed are limited to matters of Ohio and Federal law; except to the extent hereinafter specified, we express no opinion as to the effect of any applicable law of any other jurisdiction. Further, we note that the Note Purchase Agreement and the Note are stated to be governed by the laws of the State of New York. To the extent the laws of the State of New York govern the matters as to which the opinions expressed herein are rendered, you may rely upon our opinions as opinions with respect to the laws of the State of New York to the extent such laws are construed and applied with the same effect as the laws of the State of Ohio. We express no opinion as to whether the laws of the State of New York are construed or applied with the same effect as the laws of the State of Ohio. 67 Teachers Insurance and Annuity Association of America November 2, 1990 Page 7 The opinion expressed above is intended solely for your use in the above-described transaction and may not be reproduced, filed publicly or relied upon by any other persons for any purpose without the express written consent of the undersigned, except that you may furnish copies thereof: (a) to your independent auditors and attorneys; (b) to any state or federal authority having regulatory jurisdiction over you; (c) pursuant to order or legal process of any court or governmental agency; (d) in connection with any legal action to which you are party arising out of the transactions contemplated by the Note Purchase Agreement; and (e) to any Noteholder or proposed assignee of any Note. Respectfully submitted, /s/ Calfee, Halter & Griswold CALFEE, HALTER & GRISWOLD 68 EXHIBIT A TO OPINION OF CALFEE, HALTER & GRISWOLD Officer's Certificate --------------------- To: Calfee, Halter & Griswold The undersigned, being the duly elected and acting Vice President, Treasurer and Assistant Secretary of Pioneer-Standard Electronics, Inc. ("Borrower") does hereby certify, in his capacity as an officer of Borrower and on behalf of Borrower, that he has monitored all legal proceedings against Borrower and that, as of the date hereof: 1. The following is a true, correct and complete list of the only foreign jurisdictions (the "Foreign Jurisdictions") in which Borrower currently wherein Borrower presently (i) owns or leases substantial real property significant to continued business operations, (ii) maintains sales offices or sales agents authorized to bind the Borrower to any purchase or sales contracts, or (iii) maintains warehouses or otherwise maintains inventory (other than with respect to consignments of inventory) for purpose of sale or other distribution: a) Illinois h) Connecticut b) Michigan i) New York c) Pennsylvania j) New Jersey d) Minnesota k) Wisconsin e) Texas 1) Missouri f) Indiana m) Oklahoma g) Massachusetts n) California 2. Set forth on Schedule I hereto is a true, correct and complete list of each contract, lease or commitment to which Borrower is a party which, in the event of a default by Borrower thereunder, could reasonably be expected to result in a material adverse effect on the condition (financial or otherwise), business, or operations, of Borrower (all of such contracts, leases and commitments being collectively referred to herein as the "Material Contracts"). 3. To the best of my knowledge, except as set forth on Schedule I hereto, there is no litigation or proceeding pending or threatened by or against Borrower, at law or in equity, or before any government agency or authority, or any arbitrator or arbitration panel, which, if successful would result in any material adverse change in the condition (financial or otherwise), of Borrower or which in any manner draws into question the validity or enforceability of the Note Purchase Agreement or the Note. 69 4. Set forth on Schedule I hereto is a true, correct and complete list of all equity securities, stocks, securities convertible into stock or other equity securities, warrants or rights to subscribe to or purchase stock or equity securities, and securities issued by any investment company presently owned or held by the Borrower. 5. To the best of my knowledge, the execution and delivery of the Note Purchase Agreement and the offer, issuance, sale, execution and delivery of the Note and compliance with the terms of the Note Purchase Agreement and the Note by Borrower will not violate any judgment, injunction, order or decree of any court, governmental authority, arbitrator or arbitration panel applicable to Borrower. 6. The proceeds of the sale of the Note will be applied by Borrower in accordance with Section 1.3 of the Note, Purchase Agreement. 7. Attached hereto as Exhibit 1 is a true, complete and correct copy of resolutions duly adopted by the Board of Directors of Borrower on October 30, 1990. Such resolutions are still in full force and effect and have not in any manner whatsoever been amended or modified. 8. Attached hereto as Exhibit 2 is a true, complete and correct copy of the Code of Regulations of Borrower. Such Code of Regulations is still in full force and effect and has not in any manner whatsoever been amended or modified. 9. The offer and sale of the Note was not made by means of any general solicitation; there has been no advertising in connection with the offer and sale of the Note; Borrower has not offered for sale or sold any other securities in a transaction which would be integrated with the offer and sale of the Note. 10. Set forth on Schedule I hereto is a true, correct and complete list of all of Borrower's Indebtedness for borrowed money. All capitalized terms not otherwise defined or referenced in this certificate are used herein as defined in the Opinion of Calfee, Halter & Griswold to which this certificate is attached. The undersigned acknowledges and agrees that Calfee, Halter & Griswold intends to, and may, rely on this Certificate and the matters contained herein, in rendering opinions in connection with the transactions contemplated by the Note Purchase Agreement, dated as of October 31, 1990, between Teachers Insurance and Annuity Association of America and Borrower. 70 IN WITNESS WHEREOF, I have executed this Certificate as of this 2nd day of November, 1990. PIONEER-STANDARD ELECTRONICS, INC. By: ------------------------------ John V. Goodger Vice President, Treasurer and Assistant Secretary 71 SCHEDULE I TO OFFICER'S CERTIFICATE LIST OF MATERIAL CONTRACTS; MATERIAL LITIGATION; SECURITIES ------------------------------- (a) Material Contract: ------------------ 1. The Note Purchase Agreement and the Note. 2. Credit Agreement dated as of October 14, 1988, among Borrower, Ameritrust National Association ("Ameritrust"), National City Bank, Bank One, Dayton, NA and Ameritrust, as agent. 3. Loan Agreement Relating to the Pioneer-Standard Electronics, Inc. Facility dated as of December 1, 1979, between County of Montgomery, Ohio and Borrower. 4. Open-End Mortgage and Security Agreement dated as of December 1, 1979, between County of Montgomery, Ohio and Borrower. 5. Indenture dated as of August 1, 1983, between Borrower and BancOhio National Bank, as Trustee. 6. Stock Purchase Agreement dated as of July 24, 1986, among Borrower, Pioneer/Technologies Group, INC. ("Technologies"), and certain individual shareholders of Technologies. 7. Mortgage dated March 27, 1980, between The Harvey Group, Inc. ("Harvey"), and The Equitable Life Assurance Society of the United States ("Equitable"). 8. Assumption and Modification Agreement dated December 10, 1982, among Harvey, Equitable and Pioneer-Standard Electronics, Inc. 9. Rights Agreement dated as of April 25, 1989, between Pioneer-Standard Electronics, Inc. and Ameritrust Company, National Association, as Rights Agent. (b) Material Litigation Or Proceedings: ---------------------------------- 1. Litigation disclosed in the Financial Statements. 2. MTI Systems Corp. ("MTI"), a subsidiary of Arrow Electronics Inc., has filed suit against two employees of Borrower for alleged theft of trade secrets and confidential business information. The lawsuit is currently in the discovery stage. Borrower has suspended the two employees without pay. MTI has not named 72 Borrower in the lawsuit, but several of Borrower's employees have been deposed by MTI. It is possible that MTI might attempt to name Borrower in the lawsuit. (c) Securities, Stock, Etc.: ----------------------- 1. Borrower owns 50,000 shares of the capital stock of Pioneer/Technologies Group, Inc., a Maryland corporation. 2. Borrower has purchased certain of the Pioneer-Standard Electronics, Inc. 9% Subordinated Convertible Debentures, Due 1998 (the "Pioneer-Standard Debentures") for an aggregate purchase price of $2,109,885 and having an aggregate par value of $2,378,000. Such Pioneer-Standard Debentures have been purchased for and are being held for use in meeting Borrower's sinking fund obligations under the Indenture executed by Borrower in connection with the issuance of the Pioneer-Standard Debentures. (d) Indebtedness for Borrowed Money: ------------------------------- 1. Indebtedness incurred by the Borrower under or in connection with the Material Contracts listed above. 2. Capitalized Lease Obligations of the Borrower. 3. Indebtedness of the Borrower of the type described in subsection (e) of the definition of Indebtedness set forth in the Note Purchase Agreement. 4. Indebtedness of the Borrower incurred under or in connection with various life insurance policies of the Borrower in an aggregate amount of One Hundred Seventy Thousand Four Hundred Sixty-Nine Dollars ($170,469). 5. Indebtedness of the Borrower incurred under or in connection with a short-term credit line with Ameritrust Company National Association in an aggregate amount of Two Million Dollars ($2,000,000). 6. Operating lease obligations of the Borrower. 7. Indebtedness of the Borrower incurred in connection with the Liens set forth in Schedule 12.1 to the Note Purchase Agreement. 73 EXHIBIT 1 BOARD OF DIRECTORS RESOLUTIONS ------------------------------ OF PIONEER-STANDARD ELECTRONICS, INC. ------------------------------------- WHEREAS, the officers of the Company have negotiated with Teachers Insurance and Annuity Association of America (the "Purchaser") the terms of a note purchase agreement (the "Note Purchase Agreement") providing for the offer, issuance and sale of the Company's corporate notes to the Purchaser; and WHEREAS, copies of drafts of such Note Purchase Agreement bearing a draft date of about October 22, 1990, have been reviewed by each member of the Board of Directors; NOW, THEREFORE, it is hereby: RESOLVED, that any officer of the Company be and hereby is authorized and empowered (either alone or in conjunction with any one or more of the other officers of the Company) to take, from time to time, all or any part of the following action on or in behalf of the Company: (1) to negotiate, execute and deliver to Purchaser a Note Purchase Agreement (the "Note Purchase Agreement") providing for the sale by the Company to Purchaser of up to $20,000,000 of 9.79% Senior Notes due November 1, 2000 (the "Notes"), and (ii) other documents to be substantially in the form of those presented to the Board of Directors of the Company, which such additional, modified of revised terms as may be acceptable to such officer of the Company as conclusively witnessed by his execution thereof, (2) to offer, issue, sell, negotiate, execute and deliver a Note or Notes in an aggregate principal amount not to exceed $20,000,000; and (3) to carry out, perform in accordance with, modify, amend or terminate any arrangements, instruments or agreements at any time existing between the Company and the Purchaser. All capital terms used in these resolutions and not otherwise defined herein are used herein with the meaning ascribed thereto by the Note Purchase Agreement. FURTHER RESOLVED, that any arrangements, agreements, security agreements, guaranties, or other instruments or documents executed pursuant to these resolutions, by any officer of the Company, or by an employee of the Company acting pursuant to delegation of authority, may be attested by such person under the corporate seal of the Company and may contain such terms and provisions as such person shall, in his sole discretion, determine; and FURTHER RESOLVED, that any officer of the Company be and hereby is authorized and empowered (either alone or in conjunction with any one of the other officers of the Company), on behalf of the Company and in its name, to execute and deliver to Purchaser a written waiver of the Company's right, in the event of a default under any mortgage, deed of trust, security agreement or similar document, now or at any time or times hereafter executed by the Company and delivered to Purchaser, to a notice and hearing prior to the exercise by Purchaser of its rights to repossess any Collateral without judicial process or replevy, attach or levy upon the Collateral without prior notice and hearing; and 74 RESOLVED FINALLY, that the proper officers of the Company are each hereby authorized and directed to take or cause to be taken any and all such additional actions, in the name and on behalf of the Company or otherwise, as in any such officer's judgment is necessary, desirable or appropriate in order to consummate the transactions contemplated by or to otherwise effect the purposes or intent of the foregoing resolutions. 75 PIONEER-STANDARD ELECTRONICS, INC. AMENDED CODE OF REGULATIONS ARTICLE I - MEETINGS OF SHAREHOLDERS ------------------------------------ Annual Meetings --------------- SECTION 1. The annual meeting of the shareholders of the Corporation shall be held in the principal office of the Corporation or at such other place within or without the State of Ohio as the Directors shall determine, at such date and time during the month of June or July of each year as shall be designated by the Board of Directors. If no other date is designated by the Board of Directors, the annual meeting shall be held at 2:00 p.m. on the last Thursday in June of each year, or if such date shall fall upon a legal holiday, the annual meeting shall be held upon the next succeeding day which is not a legal holiday, at the same hour. Upon due notice, there may also be considered and acted upon at an annual meeting any matter which could properly be considered and acted upon at a special meeting. Special Meetings ---------------- SECTION 2. Special meetings of the shareholders shall be called by the Chairman of the Board; the President; the Secretary; pursuant to a resolution of the Board of Directors; or upon the written request of two (2) Directors, and shall be held at such times and places, within or outside of the State of Ohio, as shall be specified in the call thereof. Notice Of Meetings ------------------ SECTION 3. A written notice of each annual and special meeting, stating the time, place and purposes thereof, shall be given to each shareholder of record entitled to notice of the meeting in writing by personal delivery or by mail not less than seven (7) days, and not more than sixty (60) days before any such meeting, by or at the direction of the President, Chairman of the Board or Secretary, directed to the last known address of each such shareholder aforesaid as it appears on the records of the Corporation. All notices with respect to any shares to which persons are jointly entitled may be given to that one of such persons who is named first upon the books of the Corporation, and notice so given shall be sufficient notice to all other persons jointly entitled to said shares. Notice may be waived in writing by any shareholder either before or after such meeting, and shall be waived by the attendance of any shareholder at any such meeting without protesting, prior to or at the commencement of the meeting, the lack of proper notice. 76 Quorum ------ SECTION 4. Except as otherwise provided by law, the Articles of Incorporation, or these Regulations, a quorum at all meetings of shareholders shall consist of the holders of record of a majority of shares entitled to vote thereat, present in person or by proxy. Adjournment ----------- SECTION 5. If less than a quorum shall be in attendance at the time for which any meeting of the shareholders shall have been called, the meeting may be adjourned from time to time by a majority of, the voting shares present in person or by proxy and entitled to vote, without any notice other than by announcement at the meeting of the time and place to which it adjourned, until a quorum shall attend. At any adjourned meeting at which a quorum shall attend, any business may be transacted which might have been transacted if the meeting had been held as originally called. Proxies ------- SECTION 6. Any person entitled to attend a shareholders' meeting, to vote thereat, or to execute consents, waivers, or releases, may be represented at such meeting or an adjourned meeting thereof and vote thereat, and execute consents, waivers and releases, and exercise any of his other rights by proxy or proxies appointed by a writing signed by such person, providing the writing has been filed with the Secretary prior to the action to be taken. ARTICLE II - DIRECTORS ---------------------- Number, Classification, Term of Office --------------------------------------- SECTION 1. The Board of Directors shall be divided into three classes to be known as Class A, Class B and Class C. The number of Directors in each class may be fixed or changed at any meeting of shareholders called to elect Directors, at which a quorum is present, by the vote of the holders of a majority of the shares represented at the meeting and entitled to vote on the proposal, but no class shall consist of less than three Directors. Unless and until otherwise so fixed or changed, there shall be three (3) Class A Directors, four (4) Class B Directors and three (3) Class C Directors. One class of Directors shall be elected each year and the Directors in each class shall hold office for a term of three years and until their respective successors are elected and qualified. In case of any increase in the authorized number of Directors of any class, any additional Directors provided for and elected to such class shall hold office for a term which shall coincide with the full term or the remainder of the term, as the case may be, of such class. 2 77 Annual Meetings --------------- SECTION 2. The Board of Directors shall meet immediately following the adjournment of the annual meeting of shareholders at the place of the annual shareholders' meeting or at such time and place as may be designated in writing by a majority of all the Directors, for the purpose of electing officers or otherwise, and no notice of such meeting need be given to the Directors in order legally to constitute the meeting; provided, that a majority of the whole Board shall be present. Meetings -------- SECTION 3. Meetings of the Board of Directors may be called by the Chairman of the Board, the President (or in his absence by a Vice President) or any two (2) Directors on written notice to each Director, given by personal delivery or by mail, cablegram or telegram, at least two (2) days before the time of such meeting. Notice of any such meeting may be waived by any Director, however, before or after the meeting by writing and shall be deemed to be waived by any Director who shall attend such meeting in person without protesting, prior to or at the commencement of the meeting, the lack of proper notice. Any meeting of the Board of Directors shall be a legal meeting without notice having been given, if attended by all the members of the Board. Quorum ------ SECTION 4. At all meetings of the Board of Directors, a majority of the whole authorized number of Directors shall constitute a quorum for the transaction of business, except that a majority of the Directors then in office shall constitute a quorum for purposes of filling a vacancy in the Board. Telephone Conferences --------------------- SECTION 5. Meetings of the Board of Directors or any committee thereof may be held through any communications equipment, if all persons participating can hear each other, and participation in such a meeting shall constitute presence at such meeting. Resignation ----------- SECTION 6. Any Director may resign at any time by delivering a signed written notice thereof to the Secretary of the Corporation, which resignation shall take effect at the time of said delivery or at such other time as may be specified in said notice. 3 78 Removal ------- SECTION 7. All the Directors or all the Directors of a particular class or any individual Director may be removed from office, with or without cause, by the vote of the holders of two-thirds of the voting power entitled to elect Directors in place of those to be removed; provided, that unless all the Directors or all the Directors of a particular class are to be removed, no Director shall be removed without cause if the number of shares voted against his removal would be sufficient to elect at least one Director if cumulatively voted at an election of all the Directors, or all the Directors of a particular class, as the case may be. Vacancies --------- SECTION 8. Vacancies in the Board of Directors, whether caused by the death or resignation or removal of a Director, or by an increase in the authorized number of Directors, or otherwise, may be filled for the unexpired term by a vote of a majority of the remaining Directors, though less than a majority of the whole authorized number of Directors. Board Committees ---------------- SECTION 9. (a) The Board of Directors may from time to time appoint certain of its members (but not less than three (3)) to act as a Committee or Committees of Directors, and, subject to the provisions of this Section, may delegate to any such Committee any of the authority of the Board, however conferred, other than that of filling vacancies among the Directors or in any Committee of Directors. The Board of Directors may likewise appoint one or more Directors as alternate members of any such Committee, who may take the place of any absent member or members at any meeting of such Committee. Each such member and each such alternate shall serve in such capacity at the pleasure of the Board of Directors. (b) In particular, the Board of Directors may create an Executive Committee in accordance with the provisions of this Section, if created, the Executive Committee shall possess and may exercise all of the powers of the Board in the management and control of the business of the Corporation during the intervals between meetings of the Board subject to provisions of this Section. The chairman of the Executive Committee shall be determined by the Board of Directors from time to time. All action taken by the Executive Committee shall be reported in writing to the Board of Directors at its first meeting thereafter. (c) Each such Committee shall serve at the pleasure of the Board of Directors, shall act only in the intervals between meetings of the Board and shall be subject to the control and direction of the Board. Each Committee shall keep regular minutes of its proceedings and shall report the same to the Board when required. (d) An act or authorization of any act by any such Committee within the authority delegated to it shall be effective for all purposes as the act or authorization of the Board of Directors. In every case the affirmative vote of a majority of its members at a meeting, or the 4 79 written consent of all of the members of any such Committee without a meeting, shall be necessary for the taking or approval of any action. (e) Each such Committee may prescribe such rules as it shall determine for calling and holding meetings and its method of procedure, subject to the provisions of this Section and any rules prescribed by the Board of Directors. Compensation ------------ SECTION 10. The compensation of the Directors shall be such as the Board of Directors may from time to time determine. On resolution of the Board of Directors, a fixed sum for expenses of attendance may be allowed for attendance at each meeting. Members of the Executive Committee or other Committee of the Board may be allowed such compensation and such expenses for attending committee meetings as the Board of Directors may determine. ARTICLE III - OFFICERS ---------------------- Composition ----------- SECTION 1. The officers of the Corporation shall include a Chairman of the Board (who shall be a Director), a President, one or more Vice Presidents (including a Financial Vice President), a Secretary, a Treasurer, and such other officers as the Board of Directors may determine to be necessary or appropriate, including, but not limited tog a Vice Chairman of the Board, a Controller, one or more Executive Vice Presidents, one or more Assistant Secretaries, and one or more Assistant Treasurers. The Board of Directors may also appoint such other subordinate officers, employees and agents as it shall deem necessary, who shall have such authority and shall perform such duties as from time to time shall be prescribed by the Board. Election and Term of Office --------------------------- SECTION 2. The said officers shall be elected by the Board of Directors by a majority ballot and shall hold office for one (1) year and until their respective successors are elected and qualified, but shall be subject to the power of removal hereinafter provided. Removal ------- SECTION 3. Any officer elected or appointed by the Board of Directors may be removed at any time either with or without cause by the affirmative vote of two-thirds of the Board of Directors. Any other officer or employee of the Corporation may be removed at any time by vote of the Board of Directors, or by any committee or superior officer upon whom such power of removal may be conferred by the Board of Directors. 5 80 Compensation ------------ SECTION 4. The compensation of the officers of the Corporation shall be fixed from time to time by the Board of Directors. Bond ---- SECTION 5. All or any of said officers shall, if the Board of Directors so determines, furnish bonds for the faithful performance of their duties in such amount or amounts as the Board of Directors may require, upon terms, provisions and conditions and with surety or sureties to the satisfaction of the said Board. ARTICLE IV - DUTIES OF OFFICERS ------------------------------- The Chairman of the Board ------------------------- SECTION 1. The Chairman of the Board shall preside at all meetings of the Board of Directors. The Chairman of the Board or the President shall sign the minutes of the shareholders' and Directors' meetings. The Chairman of the Board shall perform the duties and exercise the powers of the President in case of the President's disability or absence from the office of the Corporation. The Chairman of the Board shall have such other powers and duties as may be prescribed by the Board of Directors. The President ------------- SECTION 2. The President shall exercise, subject to the control of. the Board of Directors, general supervision over the affairs of the Corporation and shall perform generally, subject to the control of the Board, all duties customarily incident to the office and such other duties as may be assigned to him from time to time by the Board of Directors. He shall see that all orders and resolutions of the Board are carried into effect, subject, however, to the right of the Board to delegate to any officer or officers of the Corporation specific powers, other than those that may be by law conferred upon the President. He shall sign all the certificates of stock, bonds, contracts, notes, mortgages and other documents authorized by the Board of Directors and execute for or in the name of the Corporation all endorsements, assignments, transfers, share powers or other instruments of transfer of securities except in cases where the execution thereof shall be expressly delegated by the Board or these Regulations or by law to some other officer or agent of the Corporation. In case of the disability or absence from office of the Chairman of the Board, the President shall also perform the duties and exercise the powers of that office. The President or Chairman of the Board shall sign the records of the shareholders' and Directors' meetings. 6 81 Chief Executive and Chief Operating Officers -------------------------------------------- SECTION 3. The Board of Directors may designate one or more persons as either Chief Executive Officer or Chief Operating Officer or both and may specify the duties, authority and responsibilities of each of said officers. Vice Presidents --------------- SECTION 4. The Vice President (or if there be more than one, the Vice President designated by the Board of Directors) shall perform the duties and exercise the powers of the President in case of his disability or absence from the office of the Corporation and in case of the disability or absence from the office of the Corporation of the Chairman of the Board. The signature of the Corporation by any Vice President to any deed, contract or other instrument in writing, purporting to be the act of the Corporation, shall be taken, received and accepted as the authorized and binding act of the Corporation and with like effect as if made by the President. The Financial Vice President shall be the Chief Financial Officer of the Corporation. Any Vice President shall have such further powers, and perform such further duties, as may be from time to time granted or imposed by the Board of Directors. Secretary --------- SECTION 5. The Secretary shall attend all meetings of the Board and all meetings of the shareholders held at the office of the Corporation, shall keep minutes of all of the proceedings thereof, and shall record all votes and the minutes of all of the proceedings in a book to be kept for that purpose. He shall perform like duties for committees of the Corporation when so required. He shall give, or cause to be given, notice of all meetings of the shareholders and of the Board of Directors, and shall attest the seal of the Corporation when required. The Secretary shall have custody of the seal of the Corporation, and either he or the Treasurer shall attest the seal and see that it is affixed to all authorized documents requiring a seal ` The Secretary or the Treasurer shall sign all certificates of shares in the Corporation and execute for or in the name of the Corporation all endorsements, assignments, transfers, share powers or other instruments of transfer of securities. The Secretary shall perform such other duties usually incident to the office of Secretary, and such further duties as shall from time to time be prescribed by the Board of Directors, Chairman of the Board or President. At any meeting of the shareholders or Board of Directors at which the Secretary is not present, a secretary pro tempore may be appointed. Assistant Secretary ------------------- SECTION 6. In case of the Secretary's sickness, disability or temporary absence from the office of the Corporation, one or more Assistant Secretaries, if any, shall perform his duties. The Assistant Secretary or Secretaries, if any, shall perform such further duties as from time to time may be prescribed by the Board of Directors, Chairman of the Board, President or Secretary. 7 82 Treasurer --------- SECTION 7. The Treasurer shall, subject to the direction of the Board of Directors, have custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation. He shall deposit all moneys and other valuable effects in the name of and to the credit of the Corporation, in such depositories as may be designated by the Board of Directors. The Treasurer or the Secretary shall attest the seal of the Corporation and see that it is affixed to all authorized documents requiring a seal. The Treasurer or Secretary shall sign all certificates for shares in the Corporation and execute for or in the name of the Corporation all endorsements, assignments, transfers, share powers or other instruments of transfer of securities. The Treasurer shall perform such other duties usually incident to the office of Treasurer and such other duties as may be prescribed by the Board of Directors, Chairman of the Board or President. Assistant Treasurer ------------------- SECTION 8. In case of the Treasurer's sickness, disability or temporary absence from the office of the Corporation, one or more Assistant Treasurers, if any, shall perform his duties. The Assistant Treasurer or Treasurers, if any, shall perform such further duties as from time to time shall be prescribed by the Board of Directors, Chairman of the Board, President or Treasurer. Controller ---------- SECTION 9. The Controller, if one is elected, shall be the Chief Accounting Officer of the Corporation, and shall have such duties and responsibilities as are normally incident to that office. ARTICLE V - SEAL ---------------- SECTION 1. The Seal of the Corporation shall be circular, with the words and figures "SEAL, PIONEER-STANDARD ELECTRONICS, INC., OHIO," or words and figures of similar import inscribed thereon. ARTICLE VI - SHARES ------------------- CERTIFICATES ------------ SECTION 1. Certificates evidencing the ownership of shares of the Corporation shall be issued to those entitled to them by transfer or otherwise. Each certificate for shares shall bear a distinguishing number, the signature of the President and of the Secretary or the Treasurer, and such recitals as may be required by law. The certificates for shares shall be of such tenor and design as the Board of Directors from time to time may adopt. 8 83 Transfers --------- SECTION 2. The shares may be transferred on the books of the Corporation by the registered holders thereof, or by their attorneys legally constituted in writing or their legal representatives, by surrender of the certificate or certificates therefor for cancellation and a written assignment of the shares evidenced thereby. The Board of Directors may, from time to time, appoint such Transfer Agents or Registrars of shares as it may deem advisable, and may define their powers and duties. The Board of Directors shall have authority to make such other rules and regulations as it deems expedient concerning the issuance, registration and transfer of certificates for shares. Substituted Certificates ------------------------ SECTION 3. The Board of Directors may order a new certificate or certificates for shares to be issued in place of any certificate or certificates alleged to have been lost, stolen or destroyed, but in every such case the owner of the lost, stolen or destroyed certificate or certificates shall first make an affirmation of that fact and cause to be given to the Corporation, if so requested, a bond, with surety or sureties satisfactory to the Corporation in such sum as said Board of Directors may in its discretion deem sufficient, as indemnity against any loss or liability that the Corporation may incur by reason of the issuance of such new certificates; provided, the Board of Directors may, in its discretion, refuse to issue such new certificate save upon the order of some court having jurisdiction in such matters. Closing of Transfer Books ------------------------- SECTION 4. The share transfer books of the Corporation may be closed by order of the Board of Directors for a period not exceeding sixty (60) days prior to any meeting of the shareholders, and for a period not exceeding sixty (60) days prior to the payment of any dividend. The times during which the books may be closed shall, from time to time, be fixed by the Board of Directors. ARTICLE VII - NOTICES --------------------- Notice By Mail -------------- SECTION 1. Whenever, under the provisions of these Regulations, notice is permitted to be given to any shareholder or Director by mail, it may be given by depositing the same in the post office or letter box, in a postpaid sealed wrapper, addressed to the shareholder or Director, at such address as appears on the books of the Corporation; and such notice shall be deemed to be given at the time when the same shall be thus deposited in the mail. 9 84 Notice by Telegraph -------------------- SECTION 2. Whenever, under the provisions of these Regulations, notice is permitted to be given to any Director by telegraph, it may be given by a prepaid telegram addressed to such Director at such address as appears on the books of the Corporation, or in default of other address, at his place of residence or usual place of business, last known to the Corporation, and such notice shall be deemed to be given at the time such telegram shall be delivered to the telegraph company for transmittal. ARTICLE VIII - INDEMNIFICATION ------------------------------ SECTION 1. Each person who is or was a Director, Officer, Employee or Agent of the Corporation, or is or was serving at the request of the Corporation as a Director, Officer, Employee, Trustee or Agent of another corporation, domestic or foreign, non-profit or -for profit, partnership, joint venture, trust or other enterprise, shall be indemnified by the Corporation as follows: (a) If such person was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, other than an action by or in the right of the Corporation, by reason of his being or having been such Director, Officer, Trustee, Agent or Employee, such person shall be indemnified against expenses, including attorney's fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, he had no reasonable cause to believe his conduct was unlawful; provided the termination of any action, suit or proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contenders or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and with respect to any criminal action or proceeding, shall also not create a presumption that the person had reasonable cause to believe that his conduct was unlawful; or (b) If such person was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of his having been such Director, Officer. Trustee, Agent or Employee, such person shall be indemnified against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification shall be made in respect of either (i) any claim, issue or matter to which such person is adjudged to be liable for negligence or misconduct in the performance of his duty to the Corporation unless, and only to the extent that, the Court of Common Pleas or the court in which such action or suit was brought determines upon 10 85 application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the Court of Common Pleas or such other court shall deem proper or (ii) any action or suit involving a Director in which the only liability asserted against such director is pursuant to Section 1701.95 of the Ohio Revised Code. SECTION 2. To the extent that such a Director, Officer, Trustee, Agent or Employee has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Paragraph (a) or (b) of Section I of this Article, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses, including attorney's fees, actually and reasonably incurred by him in connection with the action, suit or proceeding. SECTION 3. In all cases in which the Director, Officer, Trustee, Agent or Employee may be entitled to indemnification under Paragraphs (a) or (b) of Section 1 of this Article, any indemnification, unless ordered by a court, shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the Director, Officer, Trustee, Employee or Agent is proper in the circumstances because he has met the standards of conduct set forth in Paragraph (a) or (b) of Section 1 of this Article, whichever is applicable. Such determination shall be made as follows: (a) By a majority vote of a quorum of the Corporation's Directors who were not and are not parties to or threatened with any such action, suit or proceeding; or (b) If such a quorum is not obtainable or if a majority of a quorum of disinterested Directors so directs, in a written opinion by independent legal counsel other than an attorney or a firm having associated with it an attorney who has been retained by or who has performed services for the Corporation or any person to be' indemnified within the past five (5) years; or (c) By the shareholders; or (d) By the Court of Common Pleas or the court in which such action, suit or proceeding was brought. Any determination made by the disinterested Directors under Paragraph (a) or by independent legal counsel under Paragraph (b) of Section 3 of this Article shall be promptly communicated to the person who threatened or brought the action or suit by or in the right of the Corporation, if the expenses for which indemnification has been sought were incurred in an action or suit by or in the right of the Corporation. SECTION 4. In the case of an action, suit or proceeding involving a Director, unless the only liability asserted against such Director in a proceeding referred to in paragraphs (a) or (b) of Section I of this Article is pursuant to Section 1701.95 of the Ohio Revised Code, the Corporation shall pay expenses, including attorney's fees, incurred by a Director in defending such an action, suit or proceeding as they are incurred in advance of the final disposition of such action, suit or proceeding, upon receipt of an undertaking by or on behalf of the Director in 11 86 which such Director agrees to both (i) repay such amount if it is proven by clear and convincing evidence in a court of competent jurisdiction that his action or failure to act involved an act or omission undertaken with deliberate intent to cause injury to the Corporation or undertaken with reckless disregard to the best interests of the Corporation, and (ii) reasonably cooperate with the Corporation concerning the action, suit or proceeding. SECTION 5. The Corporation may pay expenses, including attorney's fees incurred in defending any action, suit or proceeding referred to in Paragraph (a) or (b) of Section 1 of this Article as they are incurred in advance of the final disposition of such action, suit or proceeding, as authorized by the Directors in the specific case upon receipt of an undertaking by or on behalf of the Trustee, Director, Officer, Employee or Agent to repay such amount if it ultimately is determined that he is not entitled to be indemnified by the Corporation as authorized in this Article. SECTION 6. The rights of indemnification herein authorized shall be severable, shall not be deemed exclusive of, and shall be in addition to, any other rights granted to those seeking indemnification under the Articles of Incorporation or any agreement, vote of shareholders or disinterested Directors, or otherwise, both as to actions in the official capacity of the person seeking indemnity, and as to actions in another capacity while holding such office and shall continue as to a person who has ceased to be a Director, Officer, Trustee, Agent or Employee and shall inure to the benefit of the heirs, executors and administrators of such a person. SECTION 7. The Corporation may purchase and maintain insurance or furnish similar protection, including but not limited to, trust funds, letters of credit or self-insurance, on behalf of or for any person who is or was a Director, Officer, Employee or Agent of the Corporation, or is or was serving at the request of the Corporation as a Director, Officer, Trustee, Employee or Agent of another corporation, domestic or foreign, nonprofit or for profit, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under this Article. Insurance may be purchased from or maintained with a person in which the Corporation has a financial interest. SECTION 8. The Corporation's authority to indemnify persons pursuant to paragraphs (a) and (b) of Section 1 of this Article does not limit the payment of expenses as they are incurred, indemnification, insurance or other protection that may be provided pursuant to Sections 5, 6, and 7 of this Article; paragraphs (a) and (b) of Section 1 of this Article do not create any obligation to repay or return payments made by the Corporation pursuant to Sections 5, 6, or 7 or this Article. SECTION 9. As used in this Article, references to "Corporation" include all constituent corporations in a consolidation or merger and the new or surviving corporation, so that any person who is or was a Director, Officer, Employee or Agent of such a constituent corporation, or is or was serving at the request of such constituent corporation as a Director, 12 87 Officer, Trustee, Employee or Agent of another corporation, domestic or foreign, nonprofit or for profit, partnership, joint venture, trust or other enterprise shall stand in the same position under this Article with respect to the new or surviving corporation as he would if he had served the new or surviving corporation in the same capacity. SECTION 10. The provisions of this Article shall apply to actions, suits and proceedings, whether civil (including, but not limited to, actions by or in the right of the Corporation), criminal, administrative or investigative, commenced or threatened after the adoption of this Article, whether arising from acts or omissions to act occurring before or after its adoption. SECTION 11. Notwithstanding the foregoing, the Corporation shall, to the extent permitted by the Ohio Revised Code, as amended from time to time, indemnify and reimburse all persons whom it may indemnify and reimburse pursuant thereto. The indemnification provided for in this Article shall not be deemed exclusive of any other rights to which those entitled to receive indemnification or reimbursement hereunder may be entitled under the Articles of the Corporation, agreement, vote of shareholders or disinterested directors or otherwise. ARTICLE IX - FISCAL YEAR ------------------------ The fiscal year of the Corporation shall be determined by the Directors of the Corporation. ARTICLE X - AMENDMENTS ---------------------- These Regulations may be amended or repealed or new Regulations adopted at any meeting of shareholders by the affirmative vote of the holders of record of shares entitling them to exercise two-thirds of the voting power of the Corporation on such proposal, or may be adopted without a meeting by the written consent of the holders of shares entitling them to exercise two-thirds of the voting power on such proposal; provided, however, that if the Regulations are amended or new Regulations are adopted at any meeting of shareholders, notice of the proposed new Regulations, or the proposed amendment or repeal, shall be included in the notice of such meeting, or if the Regulations are amended or new Regulations are adopted without a meeting of the shareholders, the Secretary of the Corporation shall mail a copy of the amendment or the new Regulations to each shareholder who would have been entitled to vote thereon and did not participate in the adoption thereof. 13 88 SCHEDULE 12.1 EXISTING LIENS 1. See the attached UCC-11 Lien Search Summary dated October 12, 1990 and attached hereto as Attachment A. The aggregate Indebtedness represented by all of the liens listed in Attachment A does not exceed One Million Four Hundred Thousand Dollars ($1,400,000). 2. Mortgage and security interest of the County of Montgomery, Ohio, dated December 1, 1979, relating to the Two Million Two Hundred Thousand Dollar ($2,200,000) Industrial Development First Mortgage Revenue Bonds (Pioneer-Standard Electronics, Inc. Project). The outstanding principal balance as of October 31, 1990, is One Million Two Hundred Thousand Dollars ($1,200,000). 3. Mortgage and security interest of The Equitable Life Assurance Company, dated March 27, 1980, securing indebtedness in the original principal amount of Five Hundred Thousand Dollars ($500,000). The outstanding principal balance as of October 31, 1990, is approximately Three Hundred Eighty-Four Thousand Three Hundred Sixty-Two and 48/100 Dollars ($384,362.48). 12.1-1 89 Private Placement Number: 723877 A# 3 EXHIBIT A [Form of Note] PIONEER-STANDARD ELECTRONICS, INC. 9.79% SENIOR NOTE DUE NOVEMBER 1, 2000 R- ____________________, _____ $ New York, New York PIONEER-STANDARD ELECTRONICS, INC. (the "Company"), an Ohio corporation, for value received, hereby promises to pay to ______________________________ or registered assigns, the principal sum of _________________________________________ on November 1, 2000; and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the unpaid principal balance thereof from the date of this Note at the rate of 9.79% per annum, semiannually on each May 1 and November 1, commencing May 1, 1991, until the principal amount hereof shall become due and payable, and to pay, on demand, interest on any overdue principal, including any overdue prepayment of principal and premium, if any, and (to the extent permitted by applicable law) on any overdue installment of interest, at the rate of 11.79% per annum. Payment of principal, premium, if any, and interest shall be made to the registered holder hereof in such coin or currency of the United States of America as at that time of payment shall be legal tender for the payment of public and private debts, at the office of the Company at 4800 East 131st Street, Cleveland, Ohio 44105, or at such other location designated under Section 9.1 of the Purchase Agreement referred to below, in each case subject to the right of the registered holder hereof under said Purchase Agreement to receive direct payment in immediately available funds. This Note is one of the 9.79% Senior Notes due November 1, 2000 of the Company issued in an aggregate principal amount limited to $20,000,000 pursuant to the Purchase Agreement dated as of October 1 1990, between the Company and the original purchaser of tire Notes (the "Purchase Agreement") and is entitled to the benefits thereof. As and to the extent provided in the Purchase Agreement this Note is, in certain cases, subject to required prepayment, in whole or in part without premium, and in other cases, to optional prepayment, in whole with premium. The Company agrees to make required prepayments on account of said Notes in accordance with the provisions of the Purchase Agreement. A-1 90 Under certain circumstances, as specified in the Purchase Agreement, the principal of and accrued interest on this Note may be declared due and payable in the manner and with the effect provided in the Purchase Agreement. This Note has not been registered under the Securities Act of 1933, as amended, or the laws of any state and may be transferred in whole or in part only pursuant to an effective registration under such Act or under an exemption from such registration available under such Act. Subject to the foregoing, transfers of this Note shall be registered upon registration books maintained for such purpose by or on behalf of the Company as provided in the Purchase Agreement. Prior to presentation of this Note for registration of transfer, the Company shall treat the person in whose name this Note is registered as the owner and holder of this Note for the purpose of receiving all payments of principal and interest hereon and for all other purposes whatsoever, whether or not this Note shall be overdue, and the Company shall not be affected by notice to the contrary. The Company agrees to perform and observe duly and punctually each of the covenants and agreements set forth in the Purchase Agreement. All such covenants and agreements are incorporated by reference in this Note, and this Note shall be interpreted and construed as if all such covenants and agreements were set forth in full in this Note at this place. All capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement. This Note shall be governed by and construed in accordance with the law of the State of New York. IN WITNESS WHEREOF, PIONEER-STANDARD ELECTRONICS, INC. has caused this Note to be duly executed on its behalf by its officer thereunto duly authorized. PIONEER-STANDARD ELECTRONICS, INC. By: ------------------------- Title: A-2 91 EXHIBIT B CONSENTS NONE. B-1 92 EXHIBIT C PERMITTED AFFILIATE TRANSACTIONS 1. Any rights, duties or obligations of the Company under that certain Stock Purchase Agreement dated as of July 24, 1986, among the Company, Pioneer/Technologies and certain individual shareholders of Pioneer/Technologies. 2. The "computer system sharing" arrangement between the Company and Pioneer/Technologies set forth in that certain Agreement, dated April 4, 1984 between the Company and Pioneer/Technologies (f/k/a Pioneer Washington Electronics, Inc.) pursuant to such Agreement the Company has agreed to allow Pioneer/Technologies access to the Company's computer system. 3. The "inventory swap" arrangement between the Company and Pioneer/Technologies pursuant to which each party may purchase the other party's products (other than certain excluded products) at such other party's cost plus a service charge of $4.00 per line item purchased. 4. Any business referrals between the Company and Pioneer/Technologies regarding their respective customers. The Company and Pioneer/Technologies generally refer potential customers to one another based upon vendor considerations, product service considerations, inventory location considerations, demand for products, and customer convenience. C-1 EX-5.1 4 EXHIBIT 5.1 1 EXHIBIT 5.1 [CALFEE, HALTER & GRISWOLD LLP LETTERHEAD] May 8, 1997 Pioneer-Standard Electronics, Inc. 4800 East 131st Street Cleveland, Ohio 44105 In connection with the filing by Pioneer-Standard Electronics, Inc., an Ohio corporation (the "Company"), with the Securities and Exchange Commission under the provisions of the Securities Act of 1933, as amended, of a Registration Statement on Form S-3 with respect to up to 220,000 of the Company's Common Shares, without par value (the "Common Shares"), to be sold by Wachovia Bank of North Carolina, N.A. as trustee (the "Trustee") of The Pioneer Stock Benefit Trust (the "Trust") established by the Share Subscription Agreement and Trust, dated July 2, 1996, between the Company and the Trustee (the "Agreement"), we have examined the following: (i) the Amended Articles of Incorporation and the Amended Code of Regulations of the Company, each as currently in effect; (ii) the form of Registration Statement on Form S-3 (including Exhibits thereto) referred to above and to be filed with the Securities and Exchange Commission (the "Registration Statement"); (iii) the Agreement; and (iv) such other documents as we deemed it necessary to examine as a basis for the opinions hereinafter expressed. Based upon the foregoing, we are of the opinion that the Common Shares to be sold by the Trustee are duly authorized and validly issued and, when payment for such shares is received as provided in the Agreement, will be fully paid and nonassessable. We are attorneys licensed to practice law in the State of Ohio. The opinions expressed herein are limited solely to the federal law of the United States of America and the laws of the State of Ohio. We express no opinion as to the effect or applicability of the laws of any other jurisdiction. This opinion is delivered to you solely in connection with the filing of the Registration Statement with respect to the Common Shares, and this letter and the opinions stated herein may not be relied upon for any other purpose or by any persons other than the Directors and executive officers of the Company. We consent to the filing of this opinion with the Registration Statement and to the use of our name therein under the caption "Validity of Shares." Respectfully submitted, CALFEE, HALTER & GRISWOLD LLP EX-23.1 5 EXHIBIT 23.1 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" in the Registration Statement (Form S-3) and related Prospectus of Pioneer-Standard Electronics, Inc. for the registration of 220,000 Common Shares and to the incorporation by reference therein of our reports dated May 1, 1996, with respect to the consolidated financial statements and schedule of Pioneer-Standard Electronics, Inc. incorporated by reference and included in its Annual Report (Form 10-K) for the year ended March 31, 1996, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP ERNST & YOUNG LLP Cleveland, Ohio May 8, 1997 EX-24.1 6 EXHIBIT 24.1 1 EXHIBIT 24.1 PIONEER-STANDARD ELECTRONICS, INC. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that Pioneer-Standard Electronics, Inc. hereby constitutes and appoints James L. Bayman, Arthur Rhein, John V. Goodger, William A. Papenbrock or Edward W. Moore, or any one or more of them, its attorneys-in-fact and agents, each with full power of substitution and resubstitution for it in any and all capacities to sign any or all amendments or post-effective amendments to this Registration Statement and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each of such attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary in connection with such matters and hereby ratifying and confirming all that each of such attorneys-in-fact and agents or his substitute or substitutes may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, this Power of Attorney has been signed at Cleveland, Ohio this 7th day of May, 1997. PIONEER-STANDARD ELECTRONICS, INC. By /s/ John V. Goodger ------------------------ John V. Goodger, Vice President, Treasurer and Assistant Secretary 2 EXHIBIT 24.1 (CONTINUED) PIONEER-STANDARD ELECTRONICS, INC. CERTIFIED RESOLUTION I, John V. Goodger, Assistant Secretary of Pioneer-Standard Electronics, Inc., an Ohio corporation (the "Company"), do hereby certify that the following is a true copy of a resolution adopted by the Board of Directors on November 5, 1996 and that the same has not been changed and remains in full force and effect. RESOLVED FURTHER: That James L. Bayman, John V. Goodger, Arthur Rhein, William A. Papenbrock and Edward W. Moore, be, and each of them hereby is appointed as the attorney of the Company with full power of substitution and resubstitution for and in the name, place and stead of the Company to sign, attest and file a Registration Statement on Form S-3 or any other appropriate form that may be used from time to time, with respect to the Shares issued in connection with the Trust and any and all amendments, post-effective amendments and exhibits to such Registration Statement and any and all applications or other documents to be filed with the Securities and Exchange Commission and any and all applicable applications or other documents in connection with inclusion on the National Association of Securities Dealers Automated Quotation System of the Shares or any and all applications or other documents to be filed with any governmental or private agency or official relative to the issuance of said Shares, with full power and authority to do and perform any and all acts and things whatsoever requisite and necessary to be done in the premises, hereby ratifying and approving the acts of such attorneys or any such substitute or substitutes and, without implying limitation, including in the above the authority to do the foregoing things on behalf of the Company in the name of any duly authorized officer of the Company; and the Chief Executive Officer of the Company or any Vice President be, and they hereby are authorized for and on behalf of the Company to execute a Power of Attorney evidencing the foregoing appointments. /s/ John V. Goodger ------------------------------- John V. Goodger, Assistant Secretary Dated: May 7, 1997 -----END PRIVACY-ENHANCED MESSAGE-----