PIONEER STANDARD ELECTRONICS INC (Form: 10-K, Received: 06/14/2002 13:34:51)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO

SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the fiscal year ended March 31, 2002

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from to

Commission File No. 0-5734

PIONEER-STANDARD ELECTRONICS, INC.

(Exact name of registrant as specified in its charter)


Ohio		34-0907152
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

6065 Parkland Boulevard Mayfield Heights, Ohio (Address of principal executive offices)		44124 (Zip code)

Registrant’s telephone number, including area code: (440) 720-8500

Securities Registered Pursuant to Section 12(b) of The Act: None

Securities Registered Pursuant to Section 12(g) of The Act:

Common Shares, without par value

Common Share Purchase Rights

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K Annual Report or any amendment to this Form 10-K. [ ]

The aggregate market value of voting shares of the Registrant held by non-affiliates was $372,414,924 as of May 1, 2002, computed on the basis of the last reported sale price per share ($14.16) of such shares on the NASDAQ National Market.

As of May 1, 2002, the Registrant had the following number of Common Shares outstanding: 31,844,601

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive Proxy Statement to be used in connection with its Annual Meeting of Shareholders to be held on July 30, 2002 are incorporated by reference into Part III of this Form 10-K.

Except as otherwise stated, the information contained in this Annual Report on Form 10-K is as of March 31, 2002.

TABLE OF CONTENTS


part i
	Item 1. Business
	Item 2. Properties
	Item 3. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 4A. Executive Officers of the Registrant
part ii
	Item 5. Market for Registrant’s Common Equity and Related Shareholder Matters
	Item 6. Selected Consolidated Financial and Operating Data
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 7A. Quantitative and Qualitative Disclosures about Market Risk
	Item 8. Financial Statements and Supplementary Data
	Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
part iii
	Item 10. Directors and Executive Officers of the Registrant
	Item 11. Executive Compensation
	Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
	Item 13. Certain Relationships and Related Transactions
part iv
	Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
	signatures
index to consolidated financial statements
report of independent auditors
consolidated statements of operations
consolidated balance sheets
consolidated statements of shareholders’ equity
consolidated statements of cash flows
notes to consolidated financial statements
exhibit index
Ex-10(X) Amend./Supplemental Exec. Retirement Plan
Ex-10(Y) Fourth Amend. to Five-Year Credit Agrmt
Ex-10(Z) Amend. No. 1 to Employee Employment Agrmt
Ex-10(AA) Employment Agreement
Ex-21 Subsidiaries of Pioneer-Standard
Ex-23 Consent of Independent Auditors

pioneer-standard electronics, inc.

annual report on form 10-k

year ended march 31, 2002

table of contents


		Page

	part i

Item 1	Business		1
Item 2	Properties		5
Item 3	Legal Proceedings		6
Item 4	Submission of Matters to a Vote of Security Holders		6
Item 4A	Executive Officers of the Registrant		6
	part ii

Item 5	Market for Registrant’s Common Equity and Related Shareholder Matters		9
Item 6	Selected Consolidated Financial and Operating Data		10
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations		11
Item 7A	Quantitative and Qualitative Disclosures about Market Risk		23
Item 8	Financial Statements and Supplementary Data		24
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		24
	part iii

Item 10	Directors and Executive Officers of the Registrant		25
Item 11	Executive Compensation		25
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters		25
Item 13	Certain Relationships and Related Transactions		25
	part iv

Item 14	Exhibits, Financial Statement Schedules and Reports on Form 8-K		26
signatures			27

part i

Item 1. Business

General and Significant Events

Pioneer-Standard Electronics, Inc. was organized as an Ohio corporation in 1963 and maintains its principal office at 6065 Parkland Boulevard, Mayfield Heights, Ohio 44124 (telephone number (440) 720-8500). Except as otherwise stated, the terms “Company” or “Pioneer-Standard” as used herein shall mean Pioneer-Standard Electronics, Inc. and its subsidiaries.

The Company is a broad-line distributor of electronic components and mid-range computer products for leading manufacturers, and strives to be the preferred strategic link between suppliers and customers by providing rewardable differentiated value. The Company is closely aligned with growing high-technology markets and creates and generates demand for its suppliers’ and manufacturers’ products and helps customers incorporate new technology into their businesses. The Company operates warehouse, distribution and value added centers throughout North America. In addition, the Company continues to increase its global presence through strategic investments in affiliated companies. These investments further the Company’s growth strategy by offering access to an extensive distribution network in the Asia Pacific region and Europe, and to additional markets within the United States. During Fiscal 2002, the Company made an additional investment to maintain its 20% equity interest in Magirus AG, a European computer systems distributor headquartered in Stuttgart, Germany.

As part of the Company’s strategy to be the best at technology distribution, Pioneer-Standard has made strategic investments in two start-up software companies that offer products with the potential to dramatically streamline new product introduction and reduce product development costs. During Fiscal 2001, the Company acquired Supplystream, Inc., a software company specializing in supply chain decision support tools, and invested in Aprisa, a start-up software corporation. During Fiscal 2002, the Company acquired Aprisa and consolidated both software initiatives into one subsidiary, Aprisa, Inc. Through this subsidiary, the Company has developed an innovative Web-based software solution, StraightLine, that will accelerate customers’ design time, time to production and time to market. The product was launched to the market on May 14, 2002.

In the fourth quarter of Fiscal 2002, the Company committed to a restructuring plan for certain Corporate and Industrial Electronics Division operations, which is expected to be completed by the end of Fiscal 2003. In addition, the Company announced certain adjustments to the carrying value of its inventory. Due to the prolonged economic downturn and to maintain focus on serving the broader needs for a greater number of customers, as part of the restructuring, the Company closed its Electronic Manufacturing Resources and Services Center located in southern California, as well as eliminated less profitable product lines. The inventory adjustments made were primarily to adjust the value of the Company’s inventory for obsolete and excess inventory, including inventory associated with terminated supplier and customer relationships not fully covered under the Company’s distributor agreements.

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

Description of Segments

Pioneer-Standard is structured into two businesses with different business models and growth rates as a result of their positions in the supply chain and the customers each business serves. The operations are classified into two reportable operating segments, the distribution of electronic components and the distribution of mid-range computer products, which are managed separately based on product and market differences. In addition to being less dependent on one business because of the fairly even split of sales, the combination provides Pioneer-Standard opportunities to stabilize growth and profitability.

The Company’s third reportable segment, Corporate and Other, primarily includes investments in affiliates, selected other assets and fixed assets, related depreciation and goodwill amortization, certain corporate management costs, special charges and the net assets and results of operations of the Company’s software businesses and its wholly owned subsidiary established for an Accounts Receivable Securitization financing. (For further information regarding the Accounts Receivable Securitization financing, see Note 5 to the Consolidated Financial Statements contained in Part IV hereof.) The segment presentation reflects how management allocates resources, measures performance and views the overall business.

Industrial Electronics. The Company’s Industrial Electronics Division is a broad-line distributor of semiconductors, interconnect, passive and electromechanical (“IPE”) components, power supplies and embedded computer products. Semiconductors include microprocessors, memory and programmable logic devices, and analog and digital integrated circuits. IPE products include capacitors, connectors, resistors, switches and power conditioning equipment. This segment also provides value added services associated with industrial electronic products, such as point of use inventory management, memory and logic device programming, power products integration and modification to customer specifications, and supply chain management programs. Sales of industrial electronics products constituted 44% of the Company’s total sales in Fiscal 2002, compared with 51% in 2001 and 52% in 2000.

The industrial electronics market has historically been cyclical. From calendar year 1998 to calendar year 2000, the market experienced record growth. In late calendar year 2000, the industry showed signs of an over-inventory situation which ultimately resulted in the most severe drop off in demand ever experienced by the industry. This downturn, coupled with the overall declining economy, significantly impacted the Company’s Industrial Electronics Division.

The electronic components market historically has also experienced fluctuations in product supply and demand associated with technology changes and supply capability, which occur from time to time. At times, such as in Fiscal 2002, when product supply has been high relative to demand, prices for products have declined. The Company has attempted to minimize the effect of these price fluctuations in its distribution arrangements. The Company’s gross margins are nevertheless negatively affected when an excess supply of electronic components causes a general decline in prices for those products. When there is a shortage of electronic components supply, the Company’s results of operations will depend on how much product it is able to obtain from suppliers and how quickly the Company receives shipments

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

of those products. There can be no assurance as to when the demand for the Company’s products will improve in order to mitigate the supply and demand imbalance.

Computer Systems. The Company’s Computer Systems Division is a leading distributor and reseller of mid-range computer products, computer systems, software and services. As a complement to these operations, the Company provides value added services, including systems integration and consulting services. The Company’s systems products and value added services accounted for 56% of the Company’s sales in Fiscal 2002 compared with 49% in 2001 and 48% in 2000.

The technology used in the products distributed by the Computer Systems Division has changed rapidly over the last several years, resulting in short product life cycles. In the past, these short product life cycles were a contributing factor to the accelerated industry growth as customers increased capital spending to replace systems that had become technologically obsolete in a relatively short period of time with newer and improved models. This factor, along with the Company’s ability to increase its share and product lines represented, contributed to significant revenue growth. During Fiscal 2002, as a result of the economic downturn experienced in North America, information technology spending declined and normal purchasing cycles elongated due to the economic uncertainty. This resulted in lower sales for the Computer Systems Division. A further slowdown in this market could have a substantial negative effect on the Company’s revenues and results of operations.

For financial information regarding the Company’s business segments, see Note 13 to the Consolidated Financial Statements contained in Part IV hereof.

Products Distributed and Sources of Supply

The Company distributes products supplied by more than 100 manufacturers. A majority of the Company’s revenues comes from products manufactured by relatively few suppliers. During the 2002 fiscal year, products purchased from the Company’s three largest suppliers accounted for 64% of the Company’s sales volume. The largest three suppliers, IBM, Intel Corporation and Compaq, supplied 32%, 17% and 16%, respectively, of the Company’s sales volume. The loss of any one of the top three suppliers or a combination of certain other suppliers could have a material adverse effect on the Company’s business, results of operations and financial condition unless alternative products manufactured by others are available to the Company.

Inventory

The Company must maintain certain levels of inventory in order to ensure that the lead times to its customers remain competitive. However, to minimize its inventory exposure, the majority of the products sold by the Company are purchased pursuant to distributor agreements, which generally provide for inventory return privileges by the Company upon cancellation of a distributor agreement. The distributor agreements also typically provide protection to the Company for product obsolescence and price erosion. Although the Company believes that its relationships with suppliers are good, there can be no

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

assurance that the Company’s suppliers will continue to supply products to the Company on terms acceptable to the Company.

The Company’s results of operations depend in part on successful management of the challenges of rapidly changing technology and evolving industry standards characteristic of the markets for industrial electronics and computer systems products. These challenges include predicting the nature and timing of technological changes and the direction of evolving industry standards; identifying, obtaining and successfully marketing new products as they emerge; and minimizing the risk of loss due to inventory obsolescence. Some of the Company’s competitors may be able to market products that have perceived advantages over the products distributed by the Company or that render the products distributed by the Company more difficult to market. Although the Company minimizes the effects of inventory obsolescence through its distribution arrangements, the Company may have high inventories of unsold product if a new technology renders a product distributed by the Company less desirable or obsolete. In addition, customers may be less willing, for financial or other reasons, to purchase the new products necessary to use new technologies.

Customers

The Company serves customers in many major markets of North America. The Company’s operating segments have a diverse customer base which includes original equipment manufacturers and contract manufacturers (both of which constitute the core customer base of the Industrial Electronics Division), value added resellers and commercial end-users (both of which constitute the core customer base of the Computer Systems Division). No single customer accounted for more than ten percent of the Company’s total sales or the sales of either operating segment during Fiscal 2002.

Backlog

The Company historically has not had a significant backlog of orders. There was no significant backlog at March 31, 2002.

Competition

The sale and distribution of electronic components and computer systems products are highly competitive, primarily with respect to price and product availability, but also with respect to service, variety and availability of products carried, proximity of sales locations and promptness of service. The Company also faces intense competition with respect to obtaining sources of supply for products distributed, and in developing and maintaining relationships with customers. In the case of semiconductor and computer systems products, the Company competes for customers with other distributors as well as with some of its suppliers. Many of the distributors with which the Company competes are regional or local distributors. However, several of the Company’s largest competitors have national and international distribution businesses and have greater financial and other resources, which may enable them to compete more aggressively. Also, it is possible that an increasing number of suppliers may decide to

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

distribute products directly to the customer, which would further heighten competitive pressures. Due to continuing competitive pressures, the Company’s operating margins have declined in recent years, and the Company expects continued pressure on margins in the foreseeable future.

Industry Consolidation. The electronic components distribution industry and the computer systems distribution industry have become increasingly concentrated in recent years as companies have combined or formed strategic alliances. If this trend continues, new business combinations or strategic alliances may have a competitive advantage if their potentially greater financial, technical, marketing or other resources allow them to negotiate relationships with suppliers that are more favorable than the Company’s relationships with its suppliers. If such relationships develop, these new business combinations or strategic alliances may be able to offer lower prices that could precipitate an industry-wide decline in prices. This decline could have a negative impact on the Company’s margins, and could cause a decline in the Company’s revenues or loss of market share.

Growth through Acquisitions

The Company continually reviews acquisition prospects and strategic alliances that could complement its existing lines of business, augment its volume and/or geographic coverage or provide opportunities to expand into new markets. The Company’s continued growth depends in part on its ability to find suitable acquisition candidates and to consummate strategic acquisitions. To proceed, the prospect must have an appropriate valuation based on synergies to be realized through a combination. To fund acquisition costs, the Company may issue equity securities, which could dilute the holdings of existing shareholders, or incur debt, which could result in additional leveraging. Furthermore, acquiring businesses always entails risk and uncertainties that could have a material adverse impact on the Company’s business and results of operations.

Employees

As of March 31, 2002, the Company had 2,343 employees. The Company is not a party to any collective bargaining agreements, has had no strikes or work stoppages and considers its employee relations to be excellent.

Distribution

Pioneer-Standard distributes its products principally in the United States and Canada. Non-U.S. sales are not a significant portion of the Company’s sales.

Item 2. Properties

The Company owns an 87,000 square-foot facility and a 30,000 square-foot facility, each located in Cleveland, Ohio. The larger facility houses certain corporate, accounting and information system functions, while the smaller building serves as a corporate storage facility. In addition, the Company owns a 106,000 square-foot facility, located in Twinsburg, Ohio. The Twinsburg facility houses the Company’s Industrial Electronics Distribution Center. Certain of the Company’s corporate offices are

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

located in a 60,450 square-foot facility in Mayfield Heights, Ohio, to which the Company entered into an 11-year lease in April 1999. The Company’s operations occupy a total of approximately 1,404,800 square feet, with the majority, approximately 1,263,600 square feet, devoted to product distribution facilities and sales offices. Of the approximately 1,404,800 square feet occupied, 223,000 square feet are owned and 1,181,800 square feet are occupied under operating leases. The Company’s facilities of 100,000 square feet or larger, as of March 31, 2002, are set forth in the table below.

Type of

Approximate

Leased or

Segment

Location

Facility

Square Footage

Owned

Using Facility

Solon, Ohio

Distribution

225,750

Leased

Industrial Electronics

Solon, Ohio

Distribution

224,600

Leased

Computer Systems

Solon, Ohio

Distribution

102,500

Leased

Industrial Electronics and Computer Systems

Twinsburg, Ohio

Distribution

106,000

Owned

Industrial Electronics

The Company’s major leases contain renewal options for periods of up to 15 years. For information concerning the Company’s rental obligations, see Note 4 to the Consolidated Financial Statements contained in Part IV hereof. The Company believes that its distribution and office facilities are well maintained, are suitable and provide adequate space for the operations of the Company. The office facility and storage facility located in Cleveland, Ohio, are for sale and the Company has a pending sales contract. As part of the sales contract, arrangements have been made for the Company to lease back certain space, including the storage facility, under operating leases.

Item 3. Legal Proceedings

The Company is not a party to any material pending legal proceedings other than ordinary routine litigation incidental to its respective business.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of the Company’s security holders during the last quarter of its fiscal year ended March 31, 2002.

Item 4A. Executive Officers of the Registrant

The information under this item is furnished pursuant to Instruction 3 to Item 401(b) of Regulation S-K.

The table on the following page sets forth the name, age, current position and principal occupation and employment during the past five years through May 20, 2002, of the Company’s executive officers.

There is no relationship by blood, marriage or adoption among the listed officers. Messrs. Rhein and Billick hold office until terminated as set forth in their employment agreements. All other executive officers serve until his or her successor is elected and qualified.

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

executive officers of the company


Name	Age	Current Position	Other Positions


James L. Bayman	65	Chairman of the Board of the Company since April 1, 1996.	From April 3, 1995, to March 31, 2002, Chief Executive Officer of the Company.

Arthur Rhein	56	President and Chief Executive Officer of the Company since April 1, 2002.	From 1997 to March 31, 2002, President and Chief Operating Officer. From 1993 to April 29, 1997, Senior Vice President of the Company.

Robert J. Bailey	45	Executive Vice President, Computer Systems Division since May 2002.	From March 1998 to May 2002, Senior Vice President, Marketing of the Company’s Computer Systems Division. From prior to 1997 to March 1998, Vice President of Marketing of the Computer Systems Division.

Steven M. Billick	46	Executive Vice President and Chief Financial Officer since May 2002.	From April 2000 to May 2002, Senior Vice President and Chief Financial Officer. From 1998 to April 2000, Business Consultant for Management Consulting Services. From prior to 1997 to 1998, Senior Vice President, Treasurer and Chief Financial Officer of Signature Brands, Inc.

Peter J. Coleman	47	Executive Vice President, Computer Systems Division since May 2002.	From April 1998 to May 2002, Senior Vice President, Sales of the Company’s Computer Systems Division. From prior to 1997 to 1998, Vice President of Sales of the Computer Systems Division.

Edward J. Gaio	48	Vice President and Controller of the Company since April 2001.	From January 2000 to April 2001, Controller. From 1998 to 2000, Director of Finance and Planning of the Industrial Electronics Division. From prior to 1997 to 1998, Director of Distribution and Logistics for Avery Denison Corporation.

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES


Name	Age	Current Position	Other Positions


Jean M. Miklosko	42	Vice President and Treasurer since October 24, 2000.	From 1997 to 2000, Treasurer for The Geon Company.

James L. Sage	47	Executive Vice President, Chief Information Officer since May 2002.	From May 2001 to May 2002, Senior Vice President and Chief Information Officer. From April 2000 to May 2001, Vice President and Chief Information Officer. From 1998 to April 2000, Vice President, Information Systems. From 1997 to 1998, Director of Software Development.

Richard A. Sayers II	51	Executive Vice President, Chief Human Resources Officer since May 2002.	From April 2000 to May 2002, Senior Vice President, Corporate Services. From 1998 to April 2000, Senior Vice President, Human Resources. From 1997 to 1998, Managing Director, Human Resources, for PricewaterhouseCoopers LLP.

Lawrence N. Schultz	54	Secretary of the Company since 1999.	From prior to 1997 to present, Partner of the law firm of Calfee, Halter & Griswold LLP. (1)

Kathryn K. Vanderwist	42	Vice President, General Counsel and Assistant Secretary since April 2001.	From April 2000 to April 2001, General Counsel and Assistant Secretary. From July 1999 to March 2000, Corporate Counsel. From 1998 to July 1999, Litigation Attorney for Nestle USA, Inc. From prior to 1997 to 1999, Corporate Counsel and Assistant Secretary for Signature Brands, Inc.


(1)	The law firm of Calfee, Halter & Griswold LLP serves as counsel to the Company.

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

part ii

Item 5. Market for Registrant’s Common Equity and Related Shareholder Matters

The Company’s Common Shares, without par value, are traded on the NASDAQ National Market. Common Share prices are quoted daily under the symbol “PIOS.” The high and low market prices and dividends per share for the Common Shares for each quarter during the past two years are presented in the table below:

Year Ended March 31, 2002

First

Second

Third

Fourth

Quarter

Year

Dividends declared per Common Share

$0.03

$0.12

Price range per Common Share

$9.00–$13.80

$8.87–$12.52

$7.40–$13.37

$11.22–$14.94

$7.40–$14.94

Closing price on last day of period

$12.80

$9.02

$12.70

$14.15

Year Ended March 31, 2001

First

Second

Third

Fourth

Quarter

Year

Dividends declared per Common Share

$0.03

$0.12

Price range per Common Share

$11.38–$15.88

$12.50–$16.13

$9.13–$14.50

$10.50–$14.73

$9.13–$16.13

Closing price on last day of period

$14.75

$13.56

$11.00

$12.25

As of May 1, 2002, there were 31,844,601 Common Shares (including 3,965,740 subscribed Common Shares) of Pioneer-Standard Electronics, Inc. outstanding, and there were 2,818 shareholders of record. The closing price of the Common Shares on May 1, 2002, was $14.16.

Cash dividends on Common Shares are payable quarterly upon authorization by the Board of Directors. Regular payment dates are the first day of August, November, February and May. The Company also makes quarterly distributions on its 6.75% Mandatorily Redeemable Convertible Trust Preferred Securities (the “Trust preferred securities”) to shareholders of record on the fifteenth day preceding the distribution date. Regular payment dates for these distributions are on the last day of March, June, September and December. The Company expects to pay comparable cash dividends on its Common Shares and continue to make the distributions on its Trust preferred securities in the foreseeable future. The Company maintains a Dividend Reinvestment Plan whereby cash dividends and additional monthly cash investments up to a maximum of $5,000 per month may be invested in the Company’s Common Shares at no commission cost.

On April 27, 1999, the Company adopted a Shareholder Rights Plan. For further information about the Common Share Purchase Rights Plan, see Note 10 to the Consolidated Financial Statements contained in Part IV hereof.

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

Item 6. Selected Consolidated Financial and Operating Data

The following selected consolidated financial and operating data has been derived from the audited Consolidated Financial Statements of the Company and should be read in conjunction with the Company’s Consolidated Financial Statements and the Notes thereto, and Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are included in this Annual Report on Form 10-K.



			For the year ended March 31


(Dollars in Thousands, Except Per Share Data)			2002			2001			2000			1999			1998


Income (Loss)
	Net sales		$	2,323,593		$	2,901,353		$	2,560,711		$	2,267,615		$	1,693,168
	Income (loss) before income taxes (1) (2)			(3,049	)		67,084			77,225			60,668			52,233
	Provision (benefit) for income taxes			(1,256	)		26,124			31,210			24,018			21,624
	Income (loss) before extraordinary charge (1) (2)			(7,047	)		35,046			40,145			30,809			30,497
	Extraordinary charge			—			(470	)		—			—			—
	Net income (loss) (1) (2)		$	(7,047	)	$	34,576		$	40,145		$	30,809		$	30,497
Financial Position
	Working capital		$	393,794		$	596,413		$	500,832		$	475,485		$	460,482
	Investments in affiliated companies			45,670			58,057			46,030			13,964			6,531
	Total assets			916,937			1,183,610			1,113,835			947,507			957,099
	Long-term debt			179,000			390,999			320,205			313,240			336,234
	Mandatorily redeemable convertible trust preferred securities			143,675			143,750			143,750			143,750			125,000
	Shareholders’ equity		$	340,697		$	354,257		$	324,065		$	271,503		$	244,996
	Weighted average shares outstanding
		Basic		27,040			26,793			26,409			26,351			26,205
		Diluted		27,040			36,616			36,178			35,711			26,949
Per Share Data
	Basic net income (loss) per share (1) (2)		$	(0.26	)	$	1.29		$	1.52		$	1.17		$	1.16
	Diluted net income (loss) per share (1) (2)			(0.26	)		1.11			1.27			1.03			1.14
	Cash dividends per share			0.12			0.12			0.12			0.12			0.12
	Book value per share		$	12.56		$	13.18		$	12.20		$	10.30		$	9.30
	Price range of common shares
		High	$	14.94		$	16.13		$	18.75		$	13.19		$	18.25
		Low	$	7.40		$	9.13		$	6.50		$	5.63		$	11.38
Other Comparative Data
	Sales per employee		$	944		$	1,137		$	1,042		$	883		$	770
	Gross margin percent of sales (1)			13.6	%		14.9	%		15.2	%		15.4	%		17.5	%
	Operating expense percent of sales			12.6	%		11.0	%		11.3	%		11.7	%		13.2	%
	Net income (loss) percent of sales (1) (2)			(0.3	)%		1.2	%		1.6	%		1.4	%		1.8	%
	Working capital as a percent of sales (3)			19.5	%		20.6	%		18.5	%		21.2	%		27.2	%
	Debt to total capital (4)			27.0	%		44.0	%		40.9	%		43.2	%		47.8	%
	Return on equity (1) (2) (5)			(0.3	)%		8.3	%		10.5	%		9.3	%		10.5	%
	Average number of employees			2,462			2,551			2,457			2,568			2,199


(1)	During the fourth quarter of Fiscal 2002, the Company recorded $12.4 million ($7.3 million, after tax) in special charges consisting of inventory adjustments of $8.6 million and a restructuring charge of $3.8 million.

(2)	During the fourth quarter of Fiscal 2001, the Company recognized a non-cash write-down of $14.2 million ($8.7 million, after tax) for the abandonment of certain information technology system assets.

(3)	Working capital as a percent of sales is the period ending working capital divided by the annualized rolling quarter sales.

(4)	Debt to total capital is calculated as current and long-term debt divided by current and long-term debt plus shareholders’ equity and the Trust preferred securities.

(5)	Return on equity is calculated as net income (loss) plus distributions on the Trust preferred securities divided by average shareholders’ equity and average Trust preferred securities. The 2002 and 2001 return on equity adjusted for the special charges of $12.4 million and information technology system asset write-down of $14.2 million are 1.2% and 10.1%, respectively.

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Pioneer-Standard Electronics, Inc. and its subsidiaries (the “Company” or “Pioneer-Standard”) distribute a broad range of electronic components and mid-range computer products manufactured by others. The Company is closely aligned with growing high-technology markets and creates and generates demand for its suppliers’ and manufacturers’ products and helps customers incorporate new technology into their businesses. These products are sold to original equipment manufacturers, contract manufacturers, value added resellers and commercial end-users. The Company has operations in North America and strategic investments in Europe and the Asia-Pacific region. The Company’s operations have been classified into three reportable segments, the distribution of electronic components, the distribution of mid-range computer products, both of which are managed separately based on product and market differences, and Corporate and Other. The Industrial Electronics Division is a broad-line distributor of semiconductors, interconnect, passive and electromechanical components, power supplies and embedded computer products. The Computer Systems Division is a leading distributor and reseller of mid-range computer products, computer systems, software and services. Corporate and Other primarily includes investments in affiliates, selected other assets and fixed assets, related depreciation and goodwill amortization, certain corporate management costs, special charges and the net assets and results of operations of the Company’s software businesses and its wholly owned subsidiary established for an Accounts Receivable Securitization financing.

For an understanding of the significant factors that influenced the Company’s performance during the past three fiscal years, the following discussion should be read in conjunction with the Company’s Consolidated Financial Statements, including the related notes. Reference herein to any particular year or quarter generally refers to the Company’s fiscal year periods ending March 31. Certain amounts in the prior periods have been reclassified to conform to the current period’s presentation.

OVERVIEW OF FISCAL 2002

Pioneer-Standard entered Fiscal 2002 with a conservative view due to the slowdown in the electronic components market, the uncertainty of the U.S. economy and the threat of slowdown in information technology (“IT”) spending. During the year the slowdown in the electronics market evolved into a severe downturn. The threat of a slowdown in IT spending became a reality in the second quarter of Fiscal 2002 as the economic environment further deteriorated. By managing working capital and taking aggressive actions to reduce expenses, the Company achieved break-even operating results for the year, before special charges, on a 20% sales decline. Although financial results declined, and despite the economic environment, both of the Company’s operating divisions were able to gain or maintain market share with key suppliers. In addition, the Company’s Computer Systems Division was successful in increasing its operating income and operating margin compared with Fiscal 2001.

In Fiscal 2002, the Company continued its focus on cost and expense management, successfully reduced expenses throughout the Company, and effectively managed working capital in this difficult environment. Consolidated operating expenses for the year decreased 8% to $294 million from

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

$318 million in 2001 and the Company was able to reduce inventory by 34% compared with the prior year. During the fourth quarter of 2002, the Company recorded $12.4 million in pre-tax special charges, $7.3 million after tax, or $0.27 per share. These special charges consisted of inventory adjustments made in response to the severe downturn and duration of the downturn in the electronic component markets and a restructuring charge taken to better position the Company operationally going into Fiscal 2003. Including special charges, the Company reported a net loss of $7.0 million, or $0.26 per share, for Fiscal 2002, compared with net income in Fiscal 2001 of $34.6 million, or $1.11 diluted earnings per share.

During Fiscal 2002, Pioneer-Standard announced new initiatives in the rapidly growing storage market by expanding solutions and creating a business unit dedicated to storage. The Company also acquired a software start-up corporation, Aprisa. All of these initiatives improve the Company’s future growth prospects.

CURRENT ECONOMIC ENVIRONMENT

The Company’s focus on aspects of the business that it could immediately impact during the current difficult economic environment and the initiatives it implemented within the past year well position Pioneer-Standard to capitalize on future opportunities. The Company’s vision is to achieve recognition for introducing and utilizing the most sophisticated distribution technology combined with a highly skilled workforce to improve its customers’ products and business and create superior demand for its suppliers. The Company’s focus on distinct, innovative, technology-based solutions that provide rewardable differentiated value supports Pioneer-Standard’s goal to achieve growth at more sustainable, higher levels of profitability. The Company’s balanced business as well as its new business unit, expanded services position, and increased Web-based initiatives are a winning combination that solidly position the Company relative to its competitors.

Uncertainties in Fiscal 2003 about the duration of the downturn in the electronics markets and the overall economic recovery remain. With the cost-cutting measures taken during Fiscal 2002, the Company is well positioned for the current economic environment, as well as the impending recovery. The long-term fundamentals of the industries Pioneer-Standard serves are strong. Electronic components and computer systems are increasingly pervasive. The Company is aligned with fast-growing high-technology markets that provide long-term growth opportunities. The Company is at the forefront of technology distribution and has been recognized by leading suppliers, manufacturers and industry experts for innovative products and services and working collaboratively with suppliers and customers, which demonstrates the advantage of customized solutions.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Pioneer-Standard’s discussion and analysis of its financial condition and results of operations are based upon the Company’s Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make significant estimates and judgments that affect the reported

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

amounts of assets, liabilities, revenues, and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to bad debts, inventories, investments, intangible assets, income taxes, restructuring, and contingencies and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

The policies discussed below are considered by management to be critical to an understanding of Pioneer-Standard’s Consolidated Financial Statements because their application places the most significant demands on management’s judgment, with financial reporting results relying on estimation about the effect of matters that are inherently uncertain. Specific risks for these critical accounting policies are described in the following paragraphs. For all of these policies, management cautions that future events rarely develop exactly as forecast, and the best estimates routinely require adjustment.

Revenue Recognition. Revenue from product sales is generally recognized upon shipment provided that persuasive evidence of an arrangement exists, the sales price is fixed or determinable, collectibility is reasonably assured and title and risk of loss have passed to the customer. Sales are recorded net of discounts, rebates and returns. A reserve is provided for product returns based on the Company’s historical experience. A portion of products sold are estimated to be returned due to reasons such as product failure and excess inventory stocked by the customer, which subject to certain terms and conditions, the Company will agree to accept. The Company records estimated reductions to revenues at the time of sale based on this historical experience. If future trends were to change significantly from those experienced in the past, incremental reductions to revenues may result based on this new experience.

Allowance for Doubtful Accounts. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. These allowances are based on both recent trends of certain customers estimated to be a greater credit risk as well as general trends of the entire customer pool. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. To mitigate this credit risk the Company performs periodic credit evaluations of its customers and obtains credit insurance in certain circumstances to protect its interests.

Inventories. Inventories are stated at the lower of cost (first-in, first-out basis) or market, net of related reserves. The Company’s inventory is constantly monitored to ensure appropriate valuation. Adjustments of inventories to market value are based upon contractual provisions governing price protection, stock rotation (right of return status), and technical obsolescence, as well as turnover and assumptions about future demand and market conditions. If assumptions about future demand change and/or actual market conditions are less favorable than those projected by management, additional adjustments to inventory valuations may be required. Because of the large number of transactions and the complexity of managing the process around price protections and stock rotations, estimates are

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

made regarding adjustments to the cost of inventories. Actual amounts could be different from those estimated.

Investments. The Company holds marketable equity securities that are carried at fair value. Impairment of investment securities results in a charge to operations when a market decline below cost is deemed other than temporary. Management regularly reviews each investment security for impairment based on criteria that include the extent to which cost exceeds market value, the duration of the market decline and the financial condition of and specific prospects of the issuer. Pioneer-Standard also evaluates available information such as published financial reports and market research and analyzes cyclical trends within the industry segments in which the various companies operate to determine whether market declines should be considered other than temporary.

Deferred Taxes. The carrying value of the Company’s deferred tax assets is dependent upon the Company’s ability to generate sufficient future taxable income in certain tax jurisdictions. Should the Company determine that it would not be able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be expensed in the period such determination was made. The Company presently records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. While the Company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event that the Company were to determine that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount (including the valuation allowance), an adjustment to the deferred tax asset would increase income in the period such determination was made.

Contingencies. The Company is the subject of various threatened or pending legal actions and contingencies in the normal course of conducting its business. The Company provides for costs related to these matters when a loss is probable and the amount can be reasonably estimated. The Company assesses the likelihood of adverse judgments or outcomes to these matters, as well as the range of potential losses. A determination of the reserves required, if any, is made after careful analysis. The required reserves may change in the future due to new developments.

Restructuring and Other Special Charges. The Company has recorded a reserve in connection with restructuring its business. This reserve principally includes estimates related to employee separation costs, the consolidation of facilities, contractual obligations, and the valuation of inventories. Actual amounts could be different from those estimated.

Intangible and Long-Lived Assets. In assessing the recoverability of the Company’s goodwill and other long-lived assets, significant assumptions regarding the estimated future cash flows and other factors to determine the fair value of the respective assets must be made, as well as the related estimated useful lives. If these estimates or their related assumptions change in the future as a result of changes in strategy and/or market conditions, the Company may be required to record impairment charges for these assets.

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

RECENTLY ISSUED ACCOUNTING STANDARDS

In July 2001, the Financial Accounting Standards Board (the “FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations,” and SFAS No. 142, “Goodwill and Other Intangible Assets.” In October 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” The Company will account for all current and future business combinations under SFAS No. 141. The Company adopted SFAS Nos. 142 and 144 effective April 1, 2002, as required. A discussion of these new standards is included in Note 1 to the Consolidated Financial Statements.

RESULTS OF OPERATIONS



			Fiscal Year Ended March 31



(Dollars in Thousands)			2002				2001				2000


Net Sales
	Industrial Electronics		$	1,029,271	44.3	%	$	1,469,515	50.7	%	$	1,341,222	52.4	%
	Computer Systems			1,294,322	55.7	%		1,431,838	49.3	%		1,219,489	47.6	%

		Consolidated Net Sales		2,323,593	100.0	%		2,901,353	100.0	%		2,560,711	100.0	%
Cost of Goods Sold				2,007,618	86.4	%		2,468,571	85.1	%		2,170,684	84.8	%

		Gross Margin		315,975	13.6	%		432,782	14.9	%		390,027	15.2	%
Operating Expenses				293,903	12.6	%		318,400	11.0	%		289,631	11.3	%
Restructuring Charge				3,796	0.2	%		—	—			—	—
Write-down of IT System Assets				—	—			14,200	0.5	%		—	—

		Operating Income	$	18,276	0.8	%	$	100,182	3.5	%	$	100,396	3.9	%

The following table identifies the Company’s Operating Income and Operating Income margins by segment:



(Dollars in Thousands)		2002					2001					2000


Industrial Electronics		$	(3,582	)	(0.4	)%	$	85,921		5.9	%	$	72,254		5.4	%
Computer Systems			47,783		3.7	%		46,531		3.3	%		45,088		3.7	%
Corporate and Other			(25,925	)	(1.1	)%		(32,270	)	(1.1	)%		(16,946	)	(0.7	)%

	Consolidated Operating Income	$	18,276		0.8	%	$	100,182		3.5	%	$	100,396		3.9	%

Fiscal 2002 consolidated net sales decreased approximately $600 million or 20% from consolidated net sales in 2001 as a result of the sales volume decline in the markets served by the Company’s Industrial Electronics Division (“IED”) and the Computer Systems Division (“CSD”). More than 75% of the decline in consolidated net sales for the year was attributable to IED as a result of the downturn in the electronic components market.

Fiscal 2002 IED net sales decreased 30% from Fiscal 2001 compared with an increase in sales of 10% in 2001 over 2000. The 2002 decline in IED sales was a result of significant volume declines and lower average selling prices and can be attributed to the most severe downturn ever experienced in the

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

electronic component industry, caused by excess inventory throughout the supply chain and the lower level of end-user demand in the markets the Company serves. Sales increased in 2001 as a result of record growth in the electronic components markets fueled by the strong end-user demand in the communications and Internet markets, which began in Fiscal 2000. The increase was offset by a dramatic reduction in sales growth in the last half of 2001, caused by the beginning of an industry-wide market slowdown. Looking forward, the Company is confident the markets will return, but with the lack of visibility regarding the timing of any meaningful recovery, the Company is anticipating another difficult year.

Fiscal 2002 CSD net sales decreased 10% from 2001 and increased 17% in 2001 compared with 2000. The weak U.S. economy, manifested by a slowdown in information technology spending, has been the primary factor in the 2002 decrease in net sales compared with 2001. The increase in 2001 sales compared with 2000 was the result of strong demand for mid-range servers, storage products and software throughout 2001. Even though the challenging sales environment is expected to continue, CSD will continue to benefit from the broad diversification of the customers it serves, as well as its concentration in the mid-to-large-sized customer segment.

Gross Margin

Consolidated gross margin decreased to 13.6% for 2002 from 14.9% in 2001. A portion of this decrease, 0.4%, is due to an inventory adjustment associated with the closing of an IED business line as part of the fourth quarter restructuring, discussed below, combined with other inventory adjustments for obsolete and excess inventory, including inventory associated with terminated supplier and customer relationships. The decrease excluding the effect of the inventory adjustments is attributable to the shift in the divisional sales mix and reduced sales volume along with lower average selling prices affecting IED. Management anticipates that the reduction in gross margins is temporary and margins will recover when the market returns to normal levels.

Consolidated gross margin for 2001 was 14.9% compared with 15.2% in 2000. Despite the pricing pressures experienced in the fourth quarter of Fiscal 2001, IED had an overall increase in gross margin for 2001 primarily attributable to higher average selling prices and long lead times experienced during the first eight months of the fiscal year as a result of the demand for certain products. This gross margin improvement was more than offset by the sales mix caused by a higher proportion of the Computer System Division’s sales of relatively lower-margin products.

Operating Costs

Warehouse, selling and administrative expenses decreased $24.5 million, or 8.0%, in Fiscal 2002 from $318.4 million in Fiscal 2001. The decrease in operating expense can primarily be attributed to the expense reduction initiatives implemented in the fourth quarter of Fiscal 2001 and in the third quarter of Fiscal 2002 in order to improve operating margins in this difficult sales environment. However, due to the significant volume declines in sales, operating costs as a percentage of sales increased to 12.6% for Fiscal

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

2002, up from 11.0% for the prior year. The overall dollar decrease in operating expenses can be specifically attributed to lower compensation and benefits due to personnel reductions and lower incentives associated with current financial performance, combined with the reduction in discretionary spending demonstrated through decreased advertising and promotion expense, travel and entertainment expense, communications expense and contract labor. The overall decrease in operating expenses was slightly offset by an increase in bad debt expense and additional expenses related to the Company’s start-up software businesses. The Company’s bad debt expense increased $8.4 million from Fiscal 2001. This increase is the result of additional reserve requirements at IED and CSD for accounts that filed for Chapter 11 bankruptcy protection as a result of the economic downturn, an increase to the reserve for accounts denied credit insurance, and the prolonged weakness in the technology marketplace.

The improvement in operating expenses as a percentage of sales when comparing 2001 and 2000 is the result of leveraging expenses on higher sales volume, coupled with the effects of implementing cost control initiatives. The overall dollar increase in operating expenses between Fiscal 2001 and Fiscal 2000 was the result of higher compensation and fringes attributable to favorable operating results, an increase in outside services, repairs and maintenance expense and bad debt expense, offset by a decrease in contract labor costs.

Special Charges

Beginning in the fourth quarter of Fiscal 2001 and continuing through Fiscal 2002, the Company took a number of significant actions, including reductions in its workforce, salary freezes and furloughs, cutbacks in discretionary spending, deferral of non-strategic projects, and other cost containment and cost reduction actions, to mitigate, in part, the impact of significantly reduced revenues. Due to the duration of the severe downturn in the electronic components market, during the fourth quarter of Fiscal 2002, management committed to a restructuring plan for certain Corporate and IED operations. As a result of this action, the Company recognized a restructuring charge and other special charges totaling approximately $12.4 million, pre-tax, of which $8.6 million is included in “Cost of Goods Sold” in the 2002 Consolidated Statement of Operations and $3.8 million is classified in the Fiscal 2002 Consolidated Statement of Operations as “Restructuring Charge.” The restructuring charge includes $1.9 million related to qualifying exit costs for one service center and eleven regional office facilities and $1.9 million related to severance and other employee benefits to be paid to approximately 100 personnel. The Company estimates annual pre-tax cost savings beginning in Fiscal 2003 of approximately $8.2 million. These estimates of future costs and benefits are subject to change during the execution of the restructuring plan. As of March 31, 2002, no payments had been made for any of these expenses. In addition to costs associated with personnel reductions and the consolidation of certain facilities, the special charges included provisions related to inventory valuation adjustments for excess and obsolete inventory primarily associated with the Company’s decision, as part of the restructuring plan, to close its Electronics Manufacturing Resources and Services facility and to terminate certain supplier and customer relationships.

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

In the fourth quarter of 2001, the Company recognized a $14.2 million pre-tax charge for a non-cash write-down for the abandonment of certain IT system assets.

Corporate and Other

The operating loss for the Corporate and Other segment was $25.9 million for Fiscal 2002 compared with $32.3 million in Fiscal 2001, an improvement of $6.3 million. The improvement is primarily the result of the $14.2 million write-down of IT system assets recognized in the prior year, that did not recur in Fiscal 2002. This improvement was offset by an increase in expenses between years predominantly associated with operating losses recognized for the Company’s software businesses and the Corporate portion of the restructuring charge, as well as an increase in other professional expenses.

The operating loss for Corporate and Other increased in Fiscal 2001 from Fiscal 2000 due to the $14.2 million write-down of IT system assets during the fourth quarter and an overall increase in compensation attributable to increased head count and normal inflationary increases.

Other (Income) Expense, Interest Expense and Income Taxes


(Dollars in Thousands)	2002			2001			2000


Other Income	$	(721	)	$	(480	)	$	(1,058	)
Gain on Sale of Assets		—			—		$	(1,845	)
Interest Expense	$	22,046		$	33,578		$	26,074
Effective Tax Rate		(41.2	)%		38.9	%		40.4	%

Other income in 2002 primarily consisted of $1.8 million of equity and dividend income earned from the Company’s investments in affiliates, combined with $0.7 million of foreign currency exchange gains and other income. This income was offset by $1.8 million of other expense consisting of an investment write-off of $0.8 million and a charge of $1.0 million recognized when the Company reclassified $1.0 million from the “Accumulated other comprehensive income (loss)” section of equity into earnings to realize the deferred loss from a previously effective interest rate hedge, which became ineffective during the year. Other income in 2001 consisted of foreign currency exchange losses of $0.5 million offset by $0.9 million of equity and dividend income earned from investments in affiliates, while other income in 2000 consisted of foreign currency gains of $0.7 million and dividend income of $0.4 million. In addition, in Fiscal 2000, the Company recognized a pre-tax gain of $1.8 million related to the sale and disposal of assets no longer required in the business.

Interest expense decreased $11.5 million in 2002 compared with 2001. This decrease resulted from reduced levels of debt, lower interest rates resulting from the Accounts Receivable Securitization financing the Company completed in October 2001, and favorable overall market interest rates.

The increased interest expense in 2001 over 2000 is primarily attributable to higher average levels of outstanding borrowings on the Company’s revolving credit agreement, as well as an increase in the effective borrowing rates. Average outstanding borrowings increased in order to fund working capital

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

needs and capital expenditures needed to support the ongoing growth of the business. In addition, interest expense increased in 2001 due to a 1.0% increase in the interest rate on the Company’s public debt.

The effective tax rate for 2002 was 41.2% compared with 38.9% in 2001 and was primarily the result of the utilization of previously reserved tax loss carryforwards. When comparing 2001 to 2000, the effective tax rate decrease was due to the change in the valuation allowance associated with the operating loss carryforwards from the Company’s Canadian subsidiary.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operating activities was $209.8 million in Fiscal 2002 compared with $17.6 million in Fiscal 2001. The increase can primarily be attributed to the reduction in inventories combined with the decline in accounts receivable, offset by a decrease in accounts payable. In Fiscal 2002, $193.1 million of cash provided by operations related to cash provided for working capital items. Overall, current assets, including cash and cash equivalents, decreased by $241.6 million and current liabilities decreased $39.0 million, resulting in a net working capital decrease of $202.6 million in 2002 compared with 2001. These results are attributable to the fact that the Company is working capital intensive and, therefore, generates cash during periods of contraction and utilizes cash during periods of expansion. The decrease generated in cash provided by operating activities when comparing Fiscal 2001 with Fiscal 2000 is the result of the strong sales environment in 2001 and thus the trends seen when comparing these years is opposite of the trends seen in Fiscal 2002, as explained by the Company’s utilization of working capital.

The decrease in current assets in Fiscal 2002 is a result of lower levels of business activity and the decrease in accounts receivable and inventory. The inventory decrease of $136.2 million is attributed to management’s continued efforts to reduce the high levels of inventory on hand, which had been created from the backlogs that were experienced during the peak sales periods in Fiscal 2001. Accounts receivable decreased due to reduced sales during March 2002 compared with sales in March 2001, combined with an increased allowance in doubtful accounts to respond to higher levels of credit risk resulting from the current economic environment.

The decrease in current liabilities is primarily due to a decrease in accounts payable attributable to reduced purchases of inventory as a result of lower sales in the fiscal year combined with the focus on managing down inventory levels. The Company’s current ratio was 2.7 to 1 and 3.2 to 1 at March 31, 2002 and 2001, respectively. Working capital as a percentage of sales at March 31, 2002 was 19.5% compared with 20.6% at March 31, 2001. In the first half of Fiscal 2002, the Company wrote off its $0.8 million investment in a privately-held Internet based start-up company, which ceased business operations. This investment was unrelated to the Company’s other software businesses and was not critical to the Company’s eBusiness strategy. Its discontinuation will not have a material impact on those initiatives.

For the three years ended March 31, 2002, net cash used for investing activities was $12.4 million, $49.3 million and $47.2 million, respectively. This cash was used for capital expenditures of $7.4 million, $22.2 million and $36.0 million in 2002, 2001 and 2000, respectively. In addition, the Company used cash in 2002 to make an additional investment of $1.0 million to maintain its 20% interest in an equity

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

investee, Magirus AG, a German computer systems distributor. The original Magirus investment was acquired in 2001 for $9.6 million. During 2001, the Company acquired a majority interest in Supplystream, Inc., a software company specializing in supply chain decision support tools, acquired the remaining 49% interest of Dickens Services Group and invested $2.5 million in Aprisa, a start-up software corporation, of which it subsequently acquired the majority interest in 2002. In addition, during 2001 and 2000, the Company increased its existing investments in World Peace Industrial Co., Ltd. (“WPI”) and Eurodis Electron PLC (“Eurodis”), as well as invested in two other investments within the United States in 2000.

These investments further the Company’s growth strategy by offering access to an extensive distribution network in the Asia-Pacific region and Europe and to markets within the United States. The Company does not currently attempt to reduce or eliminate the inherent market risks or the foreign currency risk associated with its investments. As of March 31, 2002, the value of the Company’s investment in Eurodis had decreased $2.5 million, net of tax, below the Company’s cost in the investment. Based on an evaluation of information available on Eurodis, as well as an analysis of the cyclical trends in the industry segment in which that company operates, management has determined that the decline is temporary and as such, changes in market value have been included in “Accumulated other comprehensive income (loss)” in the equity section of the accompanying Consolidated Balance Sheets.

On September 15, 2000, the Company entered into a five-year Revolving Credit Agreement (the “Revolver”) and a 364-day Credit Agreement, with a group of commercial banks. Subject to certain conditions and prior to maturity, the 364-day agreement was convertible by the Company to a two-year term loan. These agreements provided the Company with the ability to borrow, on an unsecured basis, up to $275 million and $100 million, respectively, limited to certain borrowing base calculations. As of September 14, 2001, there were no borrowings outstanding on the $100 million 364-day Credit Agreement, which expired unused. The Revolver can be extended for a one-year period and increased by $50 million with the consent of the bank group.

In October 2001, the Company completed a three-year Accounts Receivable Securitization financing (the “Asset Securitization”) that provides for borrowings up to $150 million, limited to certain borrowing base calculations, and is secured by certain trade accounts receivable. Under the terms of the agreement, the Company transfers receivables to a wholly owned consolidated subsidiary that in turn utilizes the receivables to secure the borrowings, which are funded through a vehicle that issues commercial paper in the short-term market. This subsidiary has been classified as Corporate and Other for segment presentation purposes. The yield on the commercial paper is considered a financing cost and included in “Interest expense” in the accompanying Consolidated Statement of Operations. With the completion of the Asset Securitization and subsequent amendments to the Revolver that provide the Company with, among other provisions, the ability to increase its Asset Securitization agreement to $200 million in the future, the Company’s available borrowings on the Revolver were reduced from $275 million to $150 million.

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

Subsequent to March 31, 2002, the Company further amended the Revolver to modify the covenant requirements and redefine covenant calculations so that the recognition of the non-cash inventory adjustments in the fourth quarter of Fiscal 2002 did not cause a violation of covenants under the Revolver. These modifications were effective as of March 31, 2002. In addition, the amendment reduced the Company’s ability to borrow, on an unsecured basis, from $150 million to $100 million, effective May 6, 2002. As of May 6, 2002, the Company has the ability to borrow, before borrowing base limitations, a total of $250 million between the Revolver and the Asset Securitization (the “Facilities”).

During 2001, in connection with obtaining the Revolver and 364-day Credit Agreement, the Company repaid, prior to its maturity date, the amount outstanding under the previously existing revolving credit facility and recognized an extraordinary charge for early extinguishment of debt. The extraordinary charge of $0.5 million, net of $0.3 million tax benefit, was the result of expensing financing fees associated with the former credit facility.

The Company is exposed to interest rate risk primarily from the Revolver’s various floating-rate pricing mechanisms and the Asset Securitization’s variable short-term market interest rates. The interest rate exposure is managed by an interest rate swap used to fix the interest on a portion of the Revolver debt and borrowing mainly from the Asset Securitization with its lower market rates. During Fiscal 2002, total interest-bearing debt decreased by $212.0 million. The decrease primarily represents the repayment of borrowings against the Revolver with cash generated from working capital and borrowings from the Asset Securitization. The lower borrowing level can be primarily attributed to lower working capital needs. The ratio of debt to total capital was 27% at March 31, 2002 compared with 44% one year ago. The Company fully anticipates that borrowings on the Facilities will increase when the electronic components market recovers and working capital needs increase.

In addition to the Facilities, the Company has $150 million principal amount of 9.5% Senior Notes (the “Notes”) due August 2006 and $143.7 million of 6.75% Mandatorily Redeemable Convertible Trust Preferred Securities. In December 2000, the interest rate on the Notes increased from 8.5% to 9.5% to comply with the terms of the Notes. In March and April 1998, the Company’s wholly owned subsidiary, the Pioneer-Standard Financial Trust (the “Pioneer-Standard Trust”), issued a total of $143.7 million of 6.75% mandatorily redeemable convertible trust preferred equity securities (the “Trust preferred securities”). The sole asset of the Pioneer-Standard Trust is $148.2 million aggregate principal amount of 6.75% Junior Convertible Subordinated Debentures due March 31, 2028. The Company has executed a guarantee providing a full and unconditional guarantee of the Pioneer-Standard Trust’s obligations under the Trust preferred securities. A portion of the Company’s cash flow from operations is dedicated to servicing these aggregate obligations and is not available for other purposes. However, the Company may cause the Pioneer-Standard Trust to delay payment of these servicing obligations for 20 consecutive quarters. During such deferral periods, distributions, to which holders of the Trust preferred securities are entitled, will compound quarterly, and the Company may not declare or pay any dividends on its Common Shares. The Company does not currently anticipate suspending these obligations. In June 2001, 4,761 shares of the Trust preferred securities were converted at an exercise price of $15.75 increasing equity by $0.1 million. After March 31, 2002, the Trust preferred securities are redeemable, at

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

the option of the Company, for a redemption price of 104.05% of par reduced annually by .675% to a minimum $50 per Trust preferred security. The Company does not currently anticipate redeeming these Trust preferred securities.

A summary of the contractual obligations of the Company follows. As noted, the Company has no borrowings outstanding on its Revolver. The Facilities’ borrowings are limited by borrowing base calculations and compliance with stated financial and non-financial covenants. At March 31, 2002, the Company had a total of $18.4 million available under these Facilities, based on the limitations previously described. There are no unfavorable credit rating triggers in any of the Company’s financing agreements.



								Payments Due by Fiscal Period


(Dollars in Thousands)		2003		2004		2005		2006		2007		Thereafter		Total


Contractual Obligations
Asset Securitization			—		—	$	29,000		—		—		—	$	29,000
Revolver			—		—		—		—		—		—		—
9.5% Senior Notes			—		—		—		—	$	150,000		—	$	150,000
Capital Lease Obligations		$	59		—		—		—		—		—	$	59
Operating Lease Obligations		$	9,494	$	8,202	$	6,828	$	5,153	$	3,611	$	25,910	$	59,198

	Total contractual cash obligations	$	9,553	$	8,202	$	35,828	$	5,153	$	153,611	$	25,910	$	238,257

Capital expenditures were $7.4 million in 2002 and primarily reflected ongoing initiatives designed to improve efficiencies through computer enhancement of operating systems and improvements to facilities. Management estimates that capital expenditures will be approximately $10.0 million in Fiscal 2003.

The Company anticipates that funds from current operations, the Facilities and access to capital markets will provide adequate funds to finance capital spending and working capital needs and to service its obligations and other commitments arising during the foreseeable future. The Company does not maintain any off-balance sheet financings.

RISK CONTROL AND EFFECTS OF FOREIGN CURRENCY AND INFLATION

The Company extends credit based on customers’ financial conditions and, generally, collateral is not required. The Company obtains credit insurance in certain circumstances to protect its interests. Credit losses are provided for in the Consolidated Financial Statements when collections are in doubt.

The Company operates internationally and enters into transactions denominated in foreign currencies. As a result, the Company is subject to the variability that arises from exchange rate movements. The Company reduces its exposure to foreign currency risk through hedging. The effects of foreign currency on operating results have had an immaterial impact on the Company’s results of operations for the three years ended March 31, 2002.

The Company believes that inflation has had a nominal effect on its results of operations in 2002, 2001 and 2000 and does not expect inflation to be a significant factor in 2003.

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

FORWARD-LOOKING INFORMATION

Portions of this report contain current management expectations, which may constitute forward-looking information. When used in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere throughout this Annual Report on Form 10-K, the words “believes,” “anticipates,” “plans,” “expects” and similar expressions are intended to identify forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect management’s current opinions and are subject to certain risks and uncertainties that could cause actual results to differ materially from those stated or implied.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Risks and uncertainties include, but are not limited to: competition, dependence on the computer and semiconductor markets, softening in the computer network and platform market, fluctuations in semiconductor supply and demand, rapidly changing technology and inventory obsolescence, dependence on key suppliers, effects of industry consolidation, risks and uncertainties involving acquisitions, instability in world financial markets, downward pressure on gross margins, the ability to meet financing obligations based on the impact of previously described factors and uneven patterns of quarterly sales.

The Company experiences a disproportionate percentage of quarterly sales in the last week or last day of the fiscal quarters. This uneven sales pattern makes the prediction of revenues, earnings and working capital for each financial period particularly difficult and increases the risk of unanticipated variations in quarterly results and financial condition. The Company believes that this pattern of sales has developed industry-wide as a result of customer demand. Although the Company is unable to predict whether this uneven sales pattern will continue over the long term, the Company anticipates that this trend will remain the same in the foreseeable future.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

The Company has assets, liabilities and cash flows in foreign currencies, primarily the Canadian dollar and the Euro, creating foreign exchange risk. Systems are in place for continuous measurement and evaluation of foreign exchange exposures so that timely action can be taken when considered desirable. Reducing exposure to foreign currency fluctuations is an integral part of the Company’s risk management program. Financial instruments in the form of forward exchange contracts are employed as one of the methods to reduce such risk. The Company held one forward foreign exchange contract in the amount of $2.5 million, with a maturity of 30 days, at March 31, 2002 and 2001. The foreign exchange contracts have had an immaterial impact on the Company’s results of operations for the three years ended March 31, 2002.

The Company’s primary interest rate risk exposure results from the Revolver’s various floating rate pricing mechanisms and the Asset Securitization’s variable short-term market interest rates. This interest

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

rate exposure is managed by an interest rate swap to fix the interest on a portion of the Revolver debt and borrowing mainly from the Asset Securitization with its lower market rates. The Company has entered into interest rate swap agreements for purposes of serving as a hedge of the Company’s variable rate Revolver borrowings. The effect of the swaps is to establish fixed rates on the variable rate debt and to reduce exposure to interest rate fluctuations. At March 31, 2002, the Company had one interest rate swap with a notional amount of $25 million. At March 31, 2001, the Company held two interest rate swaps, each with notional amounts of $25 million. Pursuant to these agreements, the Company paid interest at a weighted-average fixed rate of 5.34% and 5.25% at March 31, 2002 and 2001, respectively. The weighted-average LIBOR rates applicable to these agreements were 1.91% and 5.10% at March 31, 2002 and 2001, respectively.

In December 2001, one $25 million swap expired. The remaining interest rate swap is not currently effectively hedging any interest rate risk, resulting in increased exposure to fluctuating market rates. In Fiscal 2002, a charge of $1.0 million was recognized when the Company reclassified $1.0 million from the “Accumulated other comprehensive income (loss)” section of equity into earnings to realize the deferred loss from the previously effective interest rate hedge, which became ineffective during the year. The swap agreements had an immaterial impact on the Company’s results of operations for the fiscal years ended 2001 and 2000. If interest rates were to increase 100 basis points (1.0%) from March 31, 2002 and 2001 rates, and assuming no changes in debt at March 31, 2002 and 2001 levels, the additional annualized net expense would be approximately $0.2 million or $.01 per share and $1.2 million or $.03 per diluted share, respectively.

The Company is exposed to credit loss in the event of nonperformance by the other party to the derivative financial instruments. The Company limits this exposure by entering into agreements with high-quality financial institutions that are expected to satisfy fully their obligations under the contracts. No collateral is held in relationship to the derivative instruments and the Company does not hold or issue derivative financial instruments for trading purposes.

Item 8. Financial Statements and Supplementary Data

The information required by this item is set forth beginning at page 29 of this Annual Report on Form 10-K.


Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

part iii

Item 10. Directors and Executive Officers of the Registrant

Information required by this Item as to the Directors of the Company appearing under the caption “Election of Directors” in the Company’s Proxy Statement to be used in connection with the Company’s 2002 Annual Meeting of Shareholders to be held on July 30, 2002, (the “2002 Proxy Statement”) is incorporated herein by reference. Information with respect to compliance with Section 16(a) of the Securities Exchange Act of 1934 by the Company’s Directors, executive officers, and holders of more than five percent of the Company’s equity securities will be set forth in the 2002 Proxy Statement under the heading “Section 16 (a) Beneficial Ownership Reporting Compliance.” Information required by this Item as to the executive officers of the Company is included as Item 4A in Part I of this Annual Report on Form 10-K as permitted by Instruction 3 to Item 401(b) of Regulation S-K.

Item 11. Executive Compensation

The information required by this Item is set forth in the Company’s 2002 Proxy Statement under the captions, “Compensation of Executive Officers,” “Information Regarding Meetings and Committees of the Board of Directors and Compensation of Directors,” “Supplemental Executive Retirement Plan,” “Employment Agreements,” “Compensation Committee Report on Executive Compensation,” and “Shareholder Return Performance Presentation,” which information is incorporated herein by reference.


Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

The information required by this Item is set forth in the Company’s 2002 Proxy Statement under the caption “Share Ownership,” and “Equity Compensation Plan Information” which information is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

Not applicable.

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

part iv

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) The following documents are filed as part of this Annual Report on Form 10-K:

(1) and (2) Financial Statements and Financial Statement Schedules. The following Consolidated Financial Statements of the Company and its subsidiaries, the Financial Statement Schedule and the Report of Independent Auditors thereon, are included in this Annual Report on Form 10-K beginning on page 29:

Report of Independent Auditors

Consolidated Statements of Operations for the years ended March 31, 2002, 2001 and 2000

Consolidated Balance Sheets as of March 31, 2002 and 2001

Consolidated Statements of Shareholders’ Equity for the years ended March 31, 2002, 2001 and 2000

Consolidated Statements of Cash Flows for the years ended March 31, 2002, 2001 and 2000

Notes to Consolidated Financial Statements

Quarterly financial data (Unaudited)

Schedule II — Valuation and Qualifying Accounts for the years ended March 31, 2002, 2001 and 2000

All other schedules have been omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the Consolidated Financial Statements or the notes thereto.


	(3) Listing of Exhibits
	See the Index to Exhibits beginning at page 55 of this Annual Report on Form 10-K.

(b) Reports on Form 8-K

The Company did not file any reports on Form 8-K during the fourth quarter of Fiscal 2002.

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Pioneer-Standard Electronics, Inc. has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Cleveland, State of Ohio, on June 14, 2002.

PIONEER-STANDARD ELECTRONICS, INC.

/s/ ARTHUR RHEIN

Arthur Rhein

President, Chief Executive Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities as of June 14, 2002.


Signature		Title



/s/ ARTHUR RHEIN Arthur Rhein		President, Chief Executive Officer and Director (Principal Executive Officer)

/s/ STEVEN M. BILLICK Steven M. Billick		Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

/s/ JAMES L. BAYMAN James L. Bayman		Chairman of the Board and Director

/s/ CHARLES F. CHRIST Charles F. Christ		Director

/s/ THOMAS A. COMMES Thomas A. Commes		Director

/s/ KEITH M. KOLERUS Keith M. Kolerus		Director

/s/ ROBERT A. LAUER Robert A. Lauer		Director

/s/ ROBERT G. MCCREARY, III Robert G. McCreary, III		Director

/s/ THOMAS C. SULLIVAN Thomas C. Sullivan		Director

/s/ KARL E. WARE Karl E. Ware		Director

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

pioneer-standard electronics, inc.

annual report on form 10-k

year ended march 31, 2002

index to consolidated financial statements


	Page


Report of Independent Auditors		29

Consolidated Statements of Operations for the years ended March 31, 2002, 2001 and 2000		30

Consolidated Balance Sheets as of March 31, 2002 and 2001		31

Consolidated Statements of Shareholders’ Equity for the years ended March 31, 2002, 2001 and 2000		32

Consolidated Statements of Cash Flows for the years ended March 31, 2002, 2001 and 2000		33

Notes to Consolidated Financial Statements		34

Quarterly Financial Data (Unaudited)		53

Schedule II — Valuation and Qualifying Accounts for the years ended March 31, 2002, 2001 and 2000		54

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

report of independent auditors

Shareholders and the Board of Directors of

Pioneer-Standard Electronics, Inc. and Subsidiaries

We have audited the accompanying Consolidated Balance Sheets of Pioneer-Standard Electronics, Inc. and Subsidiaries as of March 31, 2002 and 2001, and the related Consolidated Statements of Operations, Shareholders’ Equity and Cash Flows for each of the three years in the period ended March 31, 2002. Our audits also included the financial statement schedule listed in the index at Item 14(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Pioneer-Standard Electronics, Inc. and Subsidiaries at March 31, 2002 and 2001, and the consolidated results of their operations and their cash flows for each of the three years in the period ended March 31, 2002, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 1 to the Consolidated Financial Statements, in Fiscal 2002 the Company changed its method of accounting for derivative instruments and hedging activities.

/S/ ERNST AND YOUNG LLP

Cleveland, Ohio

May 6, 2002

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

consolidated statements of operations



			Year Ended March 31


(Dollars In Thousands, Except Share and Per Share Data)			2002			2001			2000


Net Sales			$	2,323,593		$	2,901,353		$	2,560,711
Cost of goods sold				2,007,618			2,468,571			2,170,684

	Gross margin			315,975			432,782			390,027
Operating Expenses
	Warehouse, selling and administrative expenses			293,903			318,400			289,631
	Restructuring charge			3,796			—			—
	Write-down of information technology system assets			—			14,200			—

		Operating Income		18,276			100,182			100,396
Other (Income) Expense
	Other income			(721	)		(480	)		(1,058	)
	Gain on sale of assets			—			—			(1,845	)
	Interest expense			22,046			33,578			26,074

Income (Loss) Before Income Taxes				(3,049	)		67,084			77,225
	Provision (benefit) for income taxes			(1,256	)		26,124			31,210

				(1,793	)		40,960			46,015
	Minority interest income			(450	)		—			—
	Distributions on mandatorily redeemable convertible trust preferred securities, net of tax			5,704			5,914			5,870

Income (Loss) Before Extraordinary Charge			$	(7,047	)	$	35,046		$	40,145
	Extraordinary charge for early extinguishment of debt, net of $0.3 million tax benefit			—			(470	)		—

Net Income (Loss)			$	(7,047	)	$	34,576		$	40,145

Per Share Data:
Income (Loss) Before Extraordinary Charge — Basic			$	(0.26	)	$	1.31		$	1.52
	Extraordinary charge			—			(0.02	)		—

Net Income (Loss) — Basic			$	(0.26	)	$	1.29		$	1.52

Income (Loss) Before Extraordinary Charge — Diluted			$	(0.26	)	$	1.12		$	1.27
	Extraordinary charge			—			(0.01	)		—

Net Income (Loss) – Diluted			$	(0.26	)	$	1.11		$	1.27

Weighted Average Shares Outstanding:
	Basic			27,040,171			26,793,457			26,409,156
	Diluted			27,040,171			36,615,950			36,178,307

See accompanying Notes to Consolidated Financial Statements.

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

consolidated balance sheets



				March 31


(Dollars In Thousands)				2002			2001


ASSETS
Current Assets
	Cash and cash equivalents			$	23,452		$	41,812
	Accounts receivable, net of allowance of $8,037 in 2002 and $3,752 in 2001				315,292			410,261
	Inventories, net				267,160			403,327
	Deferred income taxes				16,493			8,660
	Prepaid expenses				1,870			1,778

		*Total current assets*			624,267			865,838
Investments and Other Assets
	Goodwill & intangible assets, net				155,564			155,036
	Investments in affiliated companies				45,670			58,057
	Other assets				10,831			10,834
Property and Equipment, at cost
	Land				572			572
	Buildings				9,033			9,024
	Furniture and equipment				111,080			109,606
	Software				61,189			56,761
	Leasehold improvements				24,926			22,199

					206,800			198,162
	Less accumulated depreciation and amortization				126,195			104,317

		*Property and equipment, net*			80,605			93,845

			*Total Assets*	$	916,937		$	1,183,610

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
	Accounts payable			$	201,116		$	236,227
	Accrued salaries, wages, commissions and benefits				9,489			15,625
	Other accrued liabilities				19,809			17,384
	Current maturities of long-term debt				59			189

		*Total current liabilities*			230,473			269,425
Long-Term Debt					179,000			390,999
Deferred Income Taxes					17,812			22,489
Other Long-Term Liabilities					5,280			2,690
Mandatorily Redeemable Convertible Trust Preferred Securities					143,675			143,750
SHAREHOLDERS’ EQUITY
	Serial preferred shares, without par value; authorized 5,000,000; issued and outstanding — none				—			—
	Common shares, without par value, at $0.30 stated value: authorized 80,000,000 shares; 31,781,671 and 31,668,411 shares outstanding in 2002 and 2001, respectively, including 3,965,740 and 4,056,202, subscribed-for shares, in 2002 and 2001, respectively				9,452			9,419
	Capital in excess of stated value				133,932			125,595
	Retained earnings				259,876			270,246
	Unearned employee benefits				(56,115	)		(49,688	)
	Unearned compensation on restricted stock				(3,289	)		(5,280	)
	Accumulated other comprehensive income (loss)				(3,159	)		3,965

		*Total shareholders’ equity*			340,697			354,257

		*Total Liabilities and Shareholders’ Equity*		$	916,937		$	1,183,610

See accompanying Notes to Consolidated Financial Statements.

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

consolidated statements of shareholders’ equity


				Stated			Capital in									Unearned			Accumulated
				value of			excess of						Unearned			compensation			other
	Common			Common			stated			Retained			employee			on restricted			comprehensive
(Dollars in Thousands)	shares			shares			value			earnings			benefits			stock			income (loss)			Total


Balance at March 31, 1999		31,135		$	9,258		$	93,324		$	202,056		$	(31,369	)		—			$ (1,766	)	$	271,503
Net income		—			—			—			40,145			—			—			—			40,145
Unrealized translation adjustment		—			—			—			—			—			—			833			833
Unrealized gain on securities, net of $7.1 million tax		—			—			—			—			—			—			11,026			11,026

*Total comprehensive income*		—			—			—			—			—			—			*$11,859*		$	*52,004*

Shares transferred from trust		(724	)		(217	)		(9,553	)		—			9,770			—			—			—
Value change in subscribed-for shares		—			—			42,286			—			(42,286	)		—			—			—
Cash dividends ($0.12 per share)		—			—			—			(3,233	)		—			—			—			(3,233	)
Shares issued upon exercise of stock options		215			65			1,186			—			—			—			—			1,251
Tax benefit related to exercise of stock options		—			—			296			—			—			—			—			296
Restricted stock awards		724			217			9,553			—			—			$ (9,770	)		—			—
Amortization on unearned compensation		—			—			—			—			—			2,244			—			2,244

Balance at March 31, 2000		31,350			9,323			137,092			238,968			(63,885	)		(7,526	)		10,093			324,065
Net income		—			—			—			34,576			—			—			—			34,576
Unrealized translation adjustment		—			—			—			—			—			—			(1,940	)		(1,940	)
Unrealized loss on securities, net of $2.6 million tax benefit		—			—			—			—			—			—			(4,188	)		(4,188	)

*Total comprehensive income*		—			—			—			—			—			—			*$ (6,128*	)	$	*28,448*

Value change in subscribed-for shares		—			—			(14,197	)		—			14,197			—			—			—
Cash dividends ($0.12 per share)		—			—			—			(3,298	)		—			—			—			(3,298	)
Shares issued upon exercise of stock options		318			96			2,422			—			—			—			—			2,518
Tax benefit related to exercise of stock options		—			—			278			—			—			—			—			278
Amortization on unearned compensation		—			—			—			—			—			2,246			—			2,246

Balance at March 31, 2001		31,668			9,419			125,595			270,246			(49,688	)		(5,280	)		3,965			354,257
Net loss		—			—			—			(7,047	)		—			—			—			(7,047	)
Cumulative effect of change in accounting for derivatives and hedging, net of $0.1 million tax benefit		—			—			—			—			—			—			(218	)		(218	)
Current period cash flow hedging activity, net of $0.6 million tax benefit		—			—			—			—			—			—			(889	)		(889	)
Reclassification of hedging activity into earnings, net of $0.7 million tax		—			—			—			—			—			—			1,107			1,107
Unrealized translation adjustment		—			—			—			—			—			—			(1,188	)		(1,188	)
Unrealized loss on securities, net of $3.8 million tax benefit		—			—			—			—			—			—			(5,936	)		(5,936	)

*Total comprehensive loss*		—			—			—			—			—			—			*$ (7,124*	)	$	*(14,171*	)

Shares transferred from trust		—			—			(149	)		—			1,268			—			—			1,119
Value change in subscribed-for shares		—			—			7,695			—			(7,695	)		—			—			—
Cash dividends ($0.12 per share)		—			—			—			(3,323	)		—			—			—			(3,323	)
Shares issued upon exercise of stock options		109			32			543			—			—			—			—			575
Tax benefit related to exercise of stock options		—			—			174			—			—			—			—			174
Converted Trust preferred securities		5			1			74			—			—			—			—			75
Amortization on unearned compensation		—			—			—			—			—			1,991			—			1,991

Balance at March 31, 2002		31,782		$	9,452		$	133,932		$	259,876		$	(56,115	)		$ (3,289	)		$ (3,159	)	$	340,697

See accompanying Notes to Consolidated Financial Statements.

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

consolidated statements of cash flows



					Year Ended March 31


(Dollars in Thousands)					2002			2001			2000


Cash Flows From Operating Activities:
	Net income (loss)				$	(7,047	)	$	34,576		$	40,145
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
			Extraordinary charge, net of tax			—			470			—
			Write-down of information technology system assets			—			14,200			—
			Write-off of investment in affiliate			750			—			—
			Depreciation			13,309			14,187			14,661
			Amortization			15,663			12,857			11,682
			Gain on sale of assets			—			—			(1,845	)
			Deferred income taxes			(8,713	)		2,185			1,229
			Changes in working capital, excluding effect of acquisitions
				Accounts receivable		94,853			(5,568	)		(83,010	)
				Inventory		136,065			(52,978	)		(32,640	)
				Accounts payable		(35,028	)		(8,109	)		81,552
				Accrued salaries and wages		(5,051	)		(3,780	)		6,573
				Other accrued liabilities		587			9,445			(6,231	)
				Other working capital		1,660			240			(43	)
			Other			2,791			(116	)		(270	)

				Total adjustments		216,886			(16,967	)		(8,342	)

			Net cash provided by operating activities			209,839			17,609			31,803
Cash Flows From Investing Activities:
	Additions to property and equipment					(7,389	)		(22,153	)		(36,030	)
	Acquisitions of businesses					(4,074	)		(11,172	)		—
	Investments in affiliates					(951	)		(16,021	)		(13,908	)
	Proceeds from sale of assets					—			—			2,712

			Net cash used for investing activities			(12,414	)		(49,346	)		(47,226	)
Cash Flows From Financing Activities:
	(Payments) borrowings on notes payable					(137	)		(26,086	)		16,412
	Revolving credit borrowings					664,950			1,311,350			1,065,000
	Revolving credit payments					(905,890	)		(1,240,410	)		(1,055,000	)
	Accounts receivable securitization financing borrowings					248,290			—			—
	Accounts receivable securitization financing payments					(219,290	)		—			—
	Principal payments under long-term obligations					(189	)		(3,009	)		(3,087	)
	Debt financing costs paid					(666	)		(1,463	)		—
	Issuance of common shares under company stock option plan					575			2,518			1,251
	Dividends paid					(3,323	)		(3,298	)		(3,233	)

			Net cash provided by (used for) financing activities			(215,680	)		39,602			21,343
Effect of Exchange Rate Changes on Cash						(105	)		(306	)		(565	)

Net Increase (Decrease) in Cash						(18,360	)		7,559			5,355
Cash at Beginning of Year						41,812			34,253			28,898

Cash at End of Year					$	23,452		$	41,812		$	34,253

Supplemental Disclosures of Cash Flow Information:
		Cash payments for interest			$	22,975		$	32,973		$	26,013
		Cash payments for income taxes			$	2,392		$	25,493		$	27,636
		Distributions on convertible trust preferred securities			$	9,703		$	9,703		$	9,703
		Change in value of available-for-sale securities, net of tax			$	(5,936	)	$	(4,188	)	$	11,026

See accompanying Notes to Consolidated Financial Statements.

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

notes to consolidated financial statements

Note 1. Operations and Summary of Significant Accounting Policies

Operations

Pioneer-Standard Electronics, Inc. and its subsidiaries (the “Company” or “Pioneer-Standard”) distribute a broad range of electronic components and mid-range computer products manufactured by others. These products are sold to original equipment manufacturers, contract manufacturers, value added resellers and commercial end-users. The Company has operations in North America and strategic investments in Europe and the Asia-Pacific region.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries. Investments in affiliated companies in which the Company does not have control, but has the ability to exercise significant influence over operating and financial policies are accounted for using the equity method. Other investments are accounted for using the cost method. All significant inter-company transactions and accounts have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates.

Revenue Recognition

Revenue from product sales is generally recognized upon shipment provided that persuasive evidence of an arrangement exists, the sales price is fixed or determinable, collectibility is reasonably assured and title and risk of loss have passed to the customer. Sales are recorded net of discounts, rebates and returns. The Company provides for product returns and bad debts. Shipping and handling fees billed to customers are recognized as revenue and the related costs are recognized in “Cost of Goods Sold” in the accompanying Consolidated Statements of Operations.

Advertising and Promotion Cost

All costs associated with advertising and promoting products are expensed in the year incurred and amounted to $1.9 million, $4.4 million and $2.7 million in 2002, 2001 and 2000, respectively.

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

Income Taxes

Income tax expense includes U.S. and foreign income taxes and is based on reported income before income taxes. Deferred income taxes reflect the effect of temporary differences between assets and liabilities that are recognized for financial reporting purposes and the amounts that are recognized for income tax purposes. These deferred taxes are measured by applying currently enacted tax laws. Valuation allowances are recognized to reduce the deferred tax assets to the amount that is more likely than not to be realized.

Foreign Currency

The functional currency of the Company’s foreign subsidiaries is the applicable local currency. For those foreign operations, the assets and liabilities are translated into U.S. dollars at the exchange rates in effect at the balance sheet dates. Income statement accounts are translated at the monthly average exchange rates prevailing during the year. The gains or losses resulting from these translations are recorded as a separate component of “Accumulated other comprehensive income (loss)” in Shareholders’ Equity. Gains or losses resulting from realized foreign currency transactions are included in net income (loss).

Cash and cash equivalents

The Company considers all highly liquid investments purchased with an original maturity or remaining maturity of three months or less to be cash equivalents.

Fair Value of Financial Instruments

Carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and notes payable approximate fair value because of their short-term maturities. The fair values of the Company’s public debt financial instruments were determined using quoted market prices. Other financial instruments held by the Company are investments in affiliated companies, interest rate swap agreements and forward foreign currency exchange contracts. The Company does not hold or issue financial instruments or derivative financial instruments for trading purposes.

Investments in Affiliated Companies

The Company enters into certain investments for the promotion of business and strategic objectives, and typically does not attempt to reduce or eliminate the inherent market risks on these investments. The Company has investments in affiliates accounted for using the equity method and equity and debt securities accounted for using the cost method. For those investments accounted for under the equity method, the Company’s proportionate share of income or losses from affiliated companies is recorded in “Other (Income) Expense” on the Consolidated Statements of Operations.

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

The Company’s convertible debt securities and marketable equity securities are classified as “available-for-sale” as of the balance sheet dates and are carried at fair value, with unrealized gains and losses, net of tax, recorded in “Accumulated other comprehensive income (loss)” included in the Shareholders’ Equity section of the Consolidated Balance Sheets. Non-marketable equity securities are carried at cost, as there are no quoted market prices available for these securities.

As a matter of policy, management continually monitors the change in the value of its investments and regularly reviews each investment security for impairment based on criteria that include the extent to which cost exceeds market value, the duration of the market decline and the financial condition of and specific prospects of the issuer. In determining whether or not impairment exists, the Company evaluates available information such as published financial reports and market research and analyzes cyclical trends within the industry segments in which the various companies operate. Impairment of investment securities would result in a non-cash, pre-tax charge to “Other (Income) Expense” in the accompanying Consolidated Statement of Operations if a market decline below cost is deemed other than temporary.

Derivatives

The Company’s primary objective for holding derivative financial instruments is to manage risks associated with fluctuations in foreign currency and interest rates. The Company’s derivative instruments are recorded at fair value and are included in “Other Assets” and “Other Accrued Liabilities” in the accompanying March 31, 2002 Consolidated Balance Sheet. The fair value of these derivative contracts was obtained through independent brokers. The Company’s accounting policies for these instruments are based on whether they meet the Company’s criteria for designation as hedging transactions, either as cash flow or fair value hedges. The criteria for designating a derivative as a hedge include the instrument’s effectiveness in risk reduction and one-to-one matching of the derivative instrument to its underlying transaction. If the derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded in “Accumulated other comprehensive income (loss)” in the Shareholders’ Equity section of the Consolidated Balance Sheet and are recognized in the Statement of Operations when the hedged item affects earnings. Ineffective portions of changes in the fair value of cash flow hedges are recognized in earnings. Gains and losses on derivatives that are not designated as hedges for accounting purposes are recognized currently in earnings, and generally offset changes in the values of assets and liabilities. The Company does not currently hold any non-derivative instruments designated as hedges or any derivatives designated as fair value hedges as defined by Statement of Financial Accounting Standard (“SFAS”) No. 133.

Foreign Currency Exchange Contracts

The Company uses forward foreign currency exchange contracts to partially reduce risks related to transactions denominated in foreign currencies. These contracts are used to hedge short-term firm commitments and transactions denominated in currencies other than the subsidiaries’ functional currency. These contracts are not designated as hedging instruments. The gains and losses from changes in

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

the market value of these contracts are recognized in “Other (Income) Expense” and offset the foreign exchange gains and losses on the underlying transactions. At March 31, 2002 and 2001, the Company held one thirty-day forward foreign currency exchange contract, denominated in Canadian dollars, in the notional amount of $2.5 million. Fair value equals the notional amount as these contracts were entered into on the last day of each fiscal year.

Interest Rate Swaps

The Company uses interest rate swap agreements to partially reduce risks related to floating-rate financing agreements, which are subject to changes in the market rate of interest. These are designated as cash flow hedges. Prior to December 2001, the Company held two interest rate swaps, each with notional amounts of $25 million. The terms of the interest rate swap agreements require the Company to receive a variable interest rate and pay a fixed interest rate. Cash flows related to these interest rate swap agreements are included in “Interest expense” over the term of the agreements. During December 2001, one of these swaps expired. The remaining term of the outstanding interest rate swap agreement extends through December 2003. The Company’s interest rate swap agreements and its variable rate financing are predominantly based upon three-month LIBOR. Prior to the third quarter of Fiscal 2002, both interest rate swaps qualified as fully effective cash flow hedges against the Company’s floating interest rate risk and hedge effectiveness was measured by offsetting the change in fair value of the long-term debt with the change in fair value of the interest rate swap. During the third quarter, the Company reclassified $1.0 million from “Accumulated other comprehensive income (loss)” into earnings to realize the deferred loss from the remaining previously effective interest rate hedge, which became ineffective during the quarter. This swap is not expected to be an effective hedge through the expiration of the swap agreement.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of accounts receivable and derivatives. Concentration of credit risk on accounts receivable is mitigated by the Company’s large number of customers and their dispersion across many different industries and geographies. The Company extends credit based on customers’ financial conditions and generally, collateral is not required . To further reduce credit risk associated with accounts receivable, the Company also performs periodic credit evaluations of its customers and obtains credit insurance in certain circumstances to protect its interests. The Company enters into derivative contracts with high-quality financial institutions. No collateral is held in relationship to the derivative instruments.

Inventories

Inventories are stated at the lower of cost (first-in, first-out basis) or market, net of related reserves. The Company’s inventory is constantly monitored to ensure appropriate valuation. Adjustments of inventories to market value are based upon contractual provisions governing price protection, stock rotation

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

(right of return status), and technological obsolescence, as well as turnover and assumptions about future demand and market conditions. Reserves for slow-moving and obsolete inventory were $19.9 million and $7.9 million at March 31, 2002, and 2001, respectively.

Goodwill and Intangible Assets

Goodwill represents the excess purchase price paid over the fair value assigned to the net assets of acquired companies. The amortization of goodwill is provided on a straight-line basis over periods of 15 to 40 years. Intangible asset values are provided by third-party valuations and include technology, a finite life intangible asset. The amortization of finite life intangible assets is provided on a straight-line basis over a period of five years. Accumulated amortization of goodwill and intangible assets was $19.6 million and $15.0 million as of March 31, 2002 and 2001, respectively. Management regularly evaluates its accounting for goodwill and intangible assets, considering such factors as historical and future profitability, and believes that the assets are recoverable and the amortization periods remain appropriate. On April 1, 2002, the Company adopted SFAS No. 142 relating to goodwill acquired prior to June 30, 2001, as required. Beginning in Fiscal 2003, goodwill will no longer be amortized and the Company will begin testing goodwill for impairment in accordance with SFAS No. 142.

Long-Lived Assets

Property and equipment are recorded at cost. Major renewals and improvements are capitalized, as are interest costs on capital projects. Minor replacements, maintenance, repairs and reengineering costs are expensed as incurred. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is recognized in income.

Depreciation and amortization are provided in amounts sufficient to amortize the cost of the assets, including assets recorded under capital leases, over their estimated useful lives using the straight-line method. The estimated useful lives for depreciation and amortization are as follows: buildings – 10 to 40 years; furniture – 7 to 10 years; equipment – 3 to 10 years; software – 3 to 10 years; and leasehold improvements over the applicable lease periods. Internal use software costs are expensed or capitalized depending on the project stage. Amounts capitalized are amortized over the estimated useful lives of the software, ranging from 3 to 10 years, beginning with the project’s completion. Total depreciation and amortization expense on property and equipment was $22.2 million, $20.2 million and $20.0 million during 2002, 2001 and 2000, respectively.

The Company evaluates the recoverability of its long-lived assets and related goodwill whenever changes in circumstances or events may indicate that the carrying amounts may not be recoverable. An impairment loss is recognized in the event the net book value of the assets exceed the future undiscounted cash flows attributable to such assets.

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

Stock-Based Compensation

The Company measures compensation expense for its stock-based employee compensation plans using the intrinsic value method.

Earnings Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of Common Shares outstanding. Diluted earnings (loss) per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period. Securities or other contracts to issue common shares are included in the per share calculations where the effect of their inclusion would be dilutive.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as Net Income (Loss) plus the aggregate change in Shareholders’ Equity, excluding changes in ownership interests, referred to as accumulated other comprehensive income (loss). At March 31, 2002 and 2001, “Accumulated other comprehensive income (loss)” included in the Shareholders’ Equity section of the accompanying Consolidated Balance Sheets consisted of foreign currency translation losses of $4.1 million and $2.9 million, respectively, and unrealized losses and gains on securities of $0.9 million and $6.8 million, respectively.

New Accounting Standards

On April 1, 2001, Pioneer-Standard adopted SFAS No . 133, “Accounting for Derivative Instruments and Hedging Activities” as amended by SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities.” SFAS No. 133 and 138 establish accounting and reporting standards for derivative instruments and for hedging activities. They require companies to recognize all derivatives on the balance sheet as assets and liabilities, measured at fair value. The adoption of SFAS No. 133 resulted in a charge to “Accumulated other comprehensive income (loss)” of $0.2 million, net of $0.1 million tax benefit for a change in accounting relating to the Company’s derivative instruments.

In July 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141, “Business Combinations.” SFAS No. 141 requires all business combinations completed after June 30, 2001 to be accounted for under the purchase method. SFAS No. 141 also establishes, for all business combinations made after June 30, 2001, specific criteria for the recognition of intangible assets separately from goodwill. The Company adopted this Statement effective with its acquisition of Aprisa in December 2001. The intangible assets acquired were accounted for under SFAS No. 142, “Goodwill and Other Intangible Assets,” issued by the FASB in July 2001, effective for all acquisitions after June 30, 2001.

In September 2000, the Emerging Issues Task Force (“EITF”) reached a consensus on Issue No. 00-10, “Accounting for Shipping and Handling Fees and Costs,” which requires shipping and handling amounts billed to a customer to be classified as revenue. In addition, the EITF’s preference is to classify shipping and handling costs as “cost of sales.” In the fourth quarter of Fiscal 2001, the Company

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

changed its method of reporting to comply with EITF Issue No. 00-10. As a result of this implementation, the Company reclassified these amounts from “Operating Expenses,” where they had previously been shown “net,” into the appropriate revenue and cost of goods sold captions. All prior periods were reclassified for consistency.

Accounting Standards Not Yet Adopted

In July 2001, the FASB issued SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 addresses the accounting for goodwill and other intangible assets after an acquisition. Goodwill and other intangibles that have indefinite lives will no longer be amortized, but will be subject to annual impairment tests. All other intangible assets will continue to be amortized over their estimated useful lives, which is no longer limited to 40 years. The Company adopted certain provisions of this Statement with its acquisition of Aprisa in December 2001 and adopted the remaining provisions of this Statement effective April 1, 2002, as required. At that time, amortization of existing goodwill ceased on the unamortized portion associated with acquisitions and certain investments accounted for under the equity method. This is expected to have a favorable annual impact of approximately $3.0 million, after tax, beginning in Fiscal 2003.

SFAS No. 142 also requires a new methodology for the testing of impairment of goodwill and other intangibles that have indefinite lives. During Fiscal 2003, the Company will begin testing goodwill for impairment under the new rules, applying a fair-value-based test. The transition adjustment, if any, resulting from the adoption of the new approach to impairment testing as required by SFAS No. 142 will be reported as a cumulative effect of a change in accounting principle. At this time, the Company has not determined what impact, if any, the change in the required approach to impairment testing will have on either its financial position or results of operations. The Company expects to complete its evaluation of goodwill by the end of the second quarter of Fiscal 2003 and will restate its first quarter of Fiscal 2003 results to include this one-time charge related to the change in accounting principle.

In October 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 addresses the financial accounting and reporting for the impairment or disposal of long-lived assets. This Statement supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.” This Statement is effective for fiscal years beginning after December 15, 2001, with early adoption encouraged. The Company adopted this Statement effective April 1, 2002, as required. The adoption of this Statement did not result in an adjustment to the Company’s financial statements.

Reclassifications

Certain amounts in the prior periods’ Consolidated Financial Statements have been reclassified to conform to the current period’s presentation.

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

Note 2. Special Charges

During the fourth quarter of Fiscal 2002, management committed to a restructuring plan for certain Corporate and Industrial Electronics Division operations. As a result of this action, the Company recognized a restructuring charge and other special charges totaling approximately $12.4 million, pre-tax, of which $8.6 million is included in “Cost of Goods Sold” in the 2002 Consolidated Statement of Operations and $3.8 million is classified in the Fiscal 2002 Consolidated Statement of Operations as “Restructuring Charge.” The restructuring charge includes $1.9 million related to qualifying exit costs for one service center and eleven regional office facilities and $1.9 million related to severance and other employee benefits to be paid to approximately 100 personnel. As of March 31, 2002, no payments had been made for any of these expenses. In addition to costs associated with personnel reductions and the consolidation of certain facilities, the special charges included provisions related to inventory valuation adjustments for excess and obsolete inventory primarily associated with the Company’s decision, as part of the restructuring plan, to close its Electronics Manufacturing Resources and Services facility and to terminate certain supplier and customer relationships.

The Company capitalized approximately $34.2 million in Fiscal 1998 and 1999 in connection with the acquisition and installation of an enterprise-wide information technology (“IT”) system scheduled for completion and implementation during 2001. Amounts representing approximately $11.5 million of these expenditures were operational in Fiscal 1999. In the fourth quarter of Fiscal 2001, an additional $8.5 million of these expenditures became operational in conjunction with the completion of the financial software system implementation. In addition, the Company concluded a review of IT system assets during the fourth quarter of 2001 and determined that the remaining $14.2 million of work-in-process components would not be integrated and were thus abandoned. These assets were charged to expense in the fourth quarter of 2001.

Note 3. Acquisitions and Investments in Affiliated Companies

In December 2001, the Company formed a subsidiary, Aprisa Holdings, Inc. (“AHI”), in which Pioneer-Standard holds a majority interest. AHI was formed to consolidate Pioneer-Standard’s software businesses, and is classified in Corporate and Other for segment presentation purposes. AHI has two wholly owned subsidiaries, Aprisa, Inc. (“Aprisa”) and Supplystream, Inc. In December 2001, Pioneer acquired Aprisa, a software start-up corporation, in which Pioneer-Standard previously held a $2.5 million cost investment acquired in 2001. The purchase price, which included cash, investments previously made in Aprisa and AHI stock, was approximately $7.6 million. The results of operations of Aprisa have been included in the accompanying Consolidated Statement of Operations from the date of acquisition. The preliminary purchase price allocation resulted in goodwill and intangible assets of approximately $5.2 million, which is included in “Goodwill and Intangible Assets” in the accompanying Consolidated Balance Sheet.

In 2001, the Company acquired a majority interest in Supplystream, Inc., a software company specializing in supply chain decision support tools. In addition, the Company acquired the remaining

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

49% interest of Dickens Services Group, an affiliate of Dickens Data Systems acquired in 1998. The combined purchase price for these acquisitions was $8.7 million. These acquisitions were accounted for as purchase transactions and, accordingly, the assets and liabilities of the acquired entities were recorded at their estimated fair value at the date of acquisition. The Consolidated Statements of Operations include these companies from their respective dates of acquisition. The cost in excess of the net assets acquired is included in “Goodwill and Intangible Assets” in the accompanying Consolidated Balance Sheets and is being amortized on a straight-line basis over 40 years and 15 years, respectively.

The Company holds publicly traded equity securities in World Peace Industrial Co. Ltd. (“WPI”), an Asian distributor of electronics headquartered in Taipei, Taiwan; and Eurodis Electron PLC (“Eurodis”), a European distributor of electronic components headquartered in London, England. The Company increased its investments in these entities in total during Fiscal 2001 by $6.4 million. Both investments are accounted for under the cost method.

As of March 31, 2002, the market value of the Company’s investment in Eurodis was below cost. Following the Company’s policy as set forth in Note 1 to the Consolidated Financial Statements, management has determined that the decline is temporary and as such, changes in market value have been included in “Accumulated other comprehensive income (loss)” in the Shareholders’ Equity section of the accompanying Consolidated Balance Sheets.

During 2002, the Company wrote off an $0.8 million investment in a privately-held Internet based start-up company, which ceased business operations.

In May 2000, the Company acquired an equity interest in Magirus AG, a privately-owned European computer systems distributor headquartered in Stuttgart, Germany. The purchase price for this equity interest was $9.6 million. This investment is accounted for under the equity method. In January 2002, the Company invested an additional $1.0 million in Magirus AG to maintain its 20% equity interest.

At March 31, 2002 and 2001, Investments in Affiliated Companies consisted of the following:


(Dollars in Thousands)			2002		2001


Available-for-sale securities
	Equity securities — at market
		Eurodis ($16.7 million cost at March 31, 2002 and 2001)	$	12,604	$	13,650
		WPI ($11.8 million cost at March 31, 2002 and 2001)		17,501		26,186
	Aprisa			—		2,500
Other equity investments				15,565		15,721

			$	45,670	$	58,057

Note 4. Lease Commitments

The Company leases certain office and warehouse facilities and equipment under non-cancelable operating leases, which expire at various dates through 2010. Certain facilities and equipment leases contain renewal options for periods up to 15 years. Future minimum lease payments for operating leases at March 31, 2002 are: $9.5 million in 2003; $8.2 million in 2004; $6.8 million in 2005; $5.2 million in 2006; $3.6 million in 2007; and $25.9 million thereafter.

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

Rental expense for all operating leases amounted to $13.2 million, $12.4 million and $11.7 million for 2002, 2001 and 2000, respectively.

Note 5. Financing Arrangements

Long-term debt at March 31, 2002 and 2001, consisted of the following:


(Dollars in Thousands)		2002			2001


Revolving Credit Agreement			—		$	240,940
Accounts Receivable Securitization financing		$	29,000			—
Senior Notes, due August 2006			150,000			150,000
Other			59			248

			179,059			391,188
Less current maturities of long-term debt			59			189

		$	179,000		$	390,999

Revolving Credit Agreement — Weighted average stated interest rate			—			6.45	%
Accounts Receivable Securitization financing – Weighted average stated interest rate			1.86	%		—
Interest rate swap agreements
	Notional amounts	$	25,000		$	50,000
	Fair market value — net payable	$	(728	)	$	(358	)
	Weighted average LIBOR rates applicable to interest rate swaps		1.91	%		5.10	%
	Weighted average effective interest rate paid under interest rate swap agreements		5.34	%		5.25	%

Prior to September 2000, the Company had a revolving credit facility with various banks providing for up to an aggregate amount of $260 million of unsecured borrowings on a revolving credit basis.

In October 2001, the Company completed a three-year Accounts Receivable Securitization financing (the “Asset Securitization”) that provides for borrowings up to $150 million, limited to certain borrowing base calculations, and is secured by certain trade accounts receivable. Under the terms of the agreement, the Company transfers receivables to a wholly owned consolidated subsidiary that in turn utilizes the receivables to secure the borrowings, which are funded through a vehicle that issues commercial paper in the short-term market. This subsidiary has been classified as Corporate and Other for segment presentation purposes. The yield on the commercial paper, which is the commercial paper rate plus program fees, is considered a financing cost and included in “Interest expense” in the

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

accompanying Consolidated Statement of Operations. With the completion of the Asset Securitization and subsequent amendments to the Revolver that provide the Company with, among other provisions, the ability to increase its Asset Securitization agreement to $200 million in the future, the Company’s available borrowings on the Revolver were reduced from $275 million to $150 million. At March 31, 2002, the Company had a total of $18.4 million available under the Revolver and Asset Securitization (the “Facilities”), based on the limitations previously described.

There is a facility fee on the Revolver based on the level of debt to EBITDA and there is no pre-payment penalty. The Revolver contains standard pricing terms and conditions for companies with similar credit ratings, including limitations on other borrowings and capital, investment expenditures and the maintenance of certain financial ratios, among other restrictions. The Asset Securitization also has a facility fee based on a percentage of the weighted average daily commitment and the Company is subject to certain non-financial covenants. The Company was in compliance with the covenants in all of its agreements as of March 31, 2002. The fair values of the Facilities approximated carrying value at March 31, 2002 and 2001.

The Company has $150 million principal amount of 9.5% Senior Notes (the “Notes”) due August 2006. Interest is payable semi-annually. In December 2000, the interest rate on the Notes increased from 8.5% to 9.5% to comply with the terms of the Notes. The indenture under which the Notes were issued limits the creation of liens, sale and leaseback transactions, consolidations, mergers and transfers of all or substantially all of the Company’s assets, and indebtedness of the Company’s restricted subsidiaries. The Notes are subject to mandatory repurchase by the Company at the option of the holders in the event of a change in control of the Company. The fair value of the Notes was $141.0 million and $146.7 million at March 31, 2002 and 2001, respectively.

Aggregate maturities of long-term debt are: $0.1 million in 2003; zero in 2004; $29 million in 2005; zero in 2006 and $150 million in 2007.

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

Note 6. Income Taxes

Significant components of the Provision (benefit) for income taxes for the years ended March 31 are as follows:


(Dollars in Thousands)			2002			2001		2000


Current
	Federal		$	6,963		$	21,098	$	26,302
	State			494			2,841		3,679

		Total current		7,457			23,939		29,981
Deferred				(8,713	)		2,185		1,229

*Provision (benefit) for income taxes*			$	(1,256	)	$	26,124	$	31,210

A reconciliation of the federal statutory rate to the Company’s effective income tax rate for the years ended March 31 follows:


	2002			2001			2000


Statutory rate		(35.0	)%		35.0	%		35.0	%
Provision (benefit) for state taxes		(4.4	)		3.0			3.1
Change in valuation allowance		(5.1	)		(0.4	)		1.1
Non-deductible goodwill		4.2			0.8			0.5
Other		(0.9	)		0.5			0.7

*Effective rate*		(41.2	)%		38.9	%		40.4	%

Deferred tax assets and liabilities as of March 31, 2002 and 2001 are presented below:


(Dollars in Thousands)		2002			2001


Deferred tax assets:
	Capitalized inventory costs	$	1,780		$	2,753
	Accrued expenses		3,590			1,795
	Allowance for doubtful accounts		2,614			1,175
	Inventory valuation reserve		6,795			2,615
	Restructuring reserve		1,111			—
	Foreign		998			1,836
	Capital loss carryforward and other		791			322

			17,679			10,496
Less valuation allowance			(1,186	)		(1,836	)

Total net deferred tax assets			16,493			8,660
Deferred tax liabilities:
	Depreciation expense		726			787
	Software amortization		9,049			10,936
	Goodwill amortization		6,963			5,169
	Available-for-sale securities		696			4,493
	Other		378			1,104

Total deferred tax liabilities			17,812			22,489

*Net deferred tax liabilities*		$	1,319		$	13,829

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

At March 31, 2002, the Company had $0.8 million of capital loss carryforwards that expire, if unused, on March 31, 2007. In 2002, the Company fully utilized $1.9 million of foreign operating loss carryforwards available as of March 31, 2001.

Note 7. Employee Retirement Plans

The Company maintains various profit-sharing and thrift plans for all employees meeting certain service requirements. Generally, the plans allow eligible employees to contribute a portion of their compensation, with the Company matching a percentage thereof. The Company may also make contributions each year for the benefit of all eligible employees under the plans. Total profit sharing and Company matching contributions were $2.2 million, $4.9 million and $4.9 million for 2002, 2001 and 2000, respectively.

Pioneer-Standard also has a Supplemental Executive Retirement Plan (the “SERP”), implemented during Fiscal 2001, which is a non-qualified plan designed to provide retirement benefits and life insurance for certain officers. Retirement benefits are based on compensation and length of service. The benefits under the SERP are provided from a combination of the benefits to which the officers are entitled under Pioneer-Standard’s profit-sharing and thrift plans and from life insurance policies that are owned by certain officers who have assigned the corporate interest (Pioneer-Standard’s share of the premiums paid) in the policies to the Company. The Company’s cash surrender value of the policies was $1.3 million and $0.5 million at March 31, 2002 and 2001, respectively, and is included in “Other Assets” in the accompanying Consolidated Balance Sheets. The accrued and unfunded liability for the SERP was $1.2 million and $0.6 million at March 31, 2002 and 2001, respectively, and is included in “Other Long-Term Liabilities” in the accompanying Consolidated Balance Sheets.

Note 8. Contingencies

The Company is the subject of various threatened or pending legal actions and contingencies in the normal course of conducting its business. The Company provides for costs related to these matters when a loss is probable and the amount can be reasonably estimated. The effect of the outcome of these matters on the Company’s future results of operations and liquidity cannot be predicted because any such effect depends on future results of operations and the amount or timing of the resolution of such matters. While it is not possible to predict with certainty, management believes that the ultimate resolution of such matters will not have a material adverse effect on the consolidated financial position or results of operations of the Company.

Note 9. Mandatorily Redeemable Convertible Trust Preferred Securities

In March and April 1998, Pioneer-Standard Financial Trust (the “Pioneer-Standard Trust”) issued $143.7 million of 6.75% Mandatorily Redeemable Convertible Trust Preferred Securities (the “Trust preferred securities”). The Pioneer-Standard Trust, a statutory business trust, is a wholly owned consolidated subsidiary of the Company, with its sole asset being $148.2 million aggregate principal

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

amount of 6.75% Junior Convertible Subordinated Debentures due March 31, 2028 of Pioneer-Standard Electronics, Inc. (the “Trust Debentures”).

The Trust preferred securities are non-voting (except in limited circumstances), pay quarterly distributions at an annual rate of 6.75%, carry a liquidation value of $50 per share and are convertible into the Company’s Common Shares at any time prior to the close of business on March 31, 2028, at the option of the holder. The Trust preferred securities are convertible into Common Shares at the rate of 3.1746 Common Shares for each Trust preferred security (equivalent to a conversion price of $15.75 per Common Share). The Company has executed a guarantee with regard to the Trust preferred securities. The guarantee, when taken together with the Company’s obligations under the Trust Debentures, the indenture pursuant to which the Trust Debentures were issued and the applicable trust document, provide a full and unconditional guarantee of the Pioneer-Standard Trust’s obligations under the Trust preferred securities. The Company may cause the Pioneer-Standard Trust to delay payment of distributions on the Trust preferred securities for 20 consecutive quarters. During such deferral periods, distributions, to which holders of the Trust preferred securities are entitled, will compound quarterly, and the Company may not declare or pay any dividends on its Common Shares.

After March 31, 2002, the Trust preferred securities are redeemable, at the option of the Company, for a redemption price of 104.05% of par reduced annually by .675% to a minimum of $50 per Trust preferred security. The Trust preferred securities are subject to mandatory redemption on March 31, 2028, at a redemption price of $50 per Trust preferred security. In June 2001, 4,761 shares of the Trust preferred securities were converted at an exercise price of $15.75 increasing equity by $0.1 million. At March 31, 2002 and 2001, the fair market value of the Trust preferred securities was $121.5 million and $127.9 million, respectively.

Note 10. Shareholders’ Equity

Capital Stock

Holders of Common Shares are entitled to one vote for each share held of record on all matters to be submitted to a vote of the shareholders. At March 31, 2002 and 2001, there were no shares of Preferred Stock outstanding.

Subscribed-for Shares

The Company has a Share Subscription Agreement and Trust (the “Trust”) with Wachovia Bank of North Carolina, N.A., as Trustee, whereby the Trustee subscribed for 5,000,000 Common Shares of the Company, which will be paid for over the 15-year term of the Trust. The proceeds from the sale or direct use of the Common Shares over the life of the Trust are used to fund Company obligations under various compensation and benefit plans. For financial reporting purposes, the Trust is consolidated with the Company. The shares subscribed for by the Trust are recorded in the contra equity account, “Unearned employee benefits,” and adjusted to market value at each reporting period, with an offsetting adjustment to “Capital in excess of stated value.” There were 943,798 shares released from the Trust

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

prior to Fiscal 2001. In Fiscal 2002, 90,462 shares were transferred from the trust to fund a portion of the Company’s 2001 profit sharing.

The following details the fair market value of the 3,965,740 and 4,056,202 Common Shares subscribed for by the Trust, reflected in Shareholders’ Equity at March 31:


(In Thousands, Except Share and Per Share Data)	2002			2001


Common Shares at stated value (3,965,740 @ $0.30 in 2002 and 4,056,202 @ $0.30 in 2001)	$	1,190		$	1,217
Capital in excess of stated value (3,965,740 shares in 2002 and 4,056,202 shares in 2001)		54,925			48,471
Unearned employee benefits (3,965,740 shares @ $14.15 in 2002 and 4,056,202 shares @ $12.25 in 2001)		(56,115	)		(49,688	)

Net effect on shareholders’ equity	$	—		$	—

Restricted Stock

During 2000, restricted stock awards for 723,798 shares of the Company’s Common Shares were granted at a market value of $13.50 per share to certain officers under the 1999 Restricted Stock Plan. All eligible shares under this plan have been granted and, subject to certain terms and conditions, vest over a three-year period commencing upon termination of employment. Unvested shares are restricted as to disposition and subject to forfeiture under certain circumstances. The cost of these awards, determined as the market value of the shares at the date of grant, is being amortized over the restriction periods. In Fiscal 2002, 2001 and 2000, $2.0 million, $2.2 million and $2.2 million, respectively, was charged to expense for these restricted stock awards. There were 74,820 and 37,410 shares vested as of March 31, 2002 and 2001, respectively.

Shareholder Rights Plan

On April 27, 1999, the Company’s Board of Directors approved a new Shareholder Rights Plan, which became effective upon expiration of the existing plan on May 10, 1999. A dividend of one Right per Common Share was distributed to shareholders of record as of May 10, 1999. Each Right, upon the occurrence of certain events, entitles the holder to buy from the Company one-tenth of a Common Share at a price of $4.00, or $40.00 per whole share, subject to adjustment. The Rights may be exercised only if a person or group acquires 20% or more of the Company’s Common Shares, or announces a tender offer for at least 20% of the Company’s Common Shares. Each Right will entitle its holder (other than such acquiring person or members of such acquiring group) to purchase, at the Right’s then-current exercise price, a number of the Company’s Common Shares having a market value of twice the Right’s then-exercise price. The Rights trade with the Company’s Common Shares until the Rights become exercisable.

If the Company is acquired in a merger or other business combination transaction, each Right will entitle its holder to purchase, at the Right’s then-exercise price, a number of the acquiring company’s common shares (or other securities) having a market value at the time of twice the Right’s then-current

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

exercise price. Prior to the acquisition by a person or group of beneficial ownership of 20% or more of the Company’s Common Shares, the Rights are redeemable for $.001 per Right at the option of the Company’s Board of Directors. The Rights will expire May 10, 2009.

Note 11. Earnings (Loss) Per Share

The following table sets forth the computation of basic and diluted earnings (loss) per share:



			For the year ended March 31


(In Thousands, Except Per Share Data)			2002			2001		2000


Weighted average number of shares
	Basic			27,040			26,793		26,409
		Common Shares issuable upon conversion of Trust preferred securities		—			9,127		9,127
		Common equivalent shares		—			696		642

	Diluted			27,040			36,616		36,178

Net income (loss) on which basic earnings (loss) per share is calculated			$	(7,047	)	$	34,576	$	40,145
		Distributions on Trust preferred securities		—			5,914		5,870

Net income (loss) on which diluted earnings (loss) per share is calculated			$	(7,047	)		40,490		46,015

Earnings (loss) per share
	Basic		$	(0.26	)	$	1.29	$	1.52
	Diluted		$	(0.26	)	$	1.11	$	1.27

For the year ended March 31, 2002, 9,123,396 Common Shares issuable upon conversion of the Trust preferred securities and 3,861,534 stock options that could potentially dilute earnings per share in the future were not included in the computation of diluted earnings per share because to do so would have been antidilutive. For the years ended March 31, 2001 and March 31, 2000, 1,167,000 and 281,500 stock options, respectively, that could potentially dilute earnings per share in the future were not included in the computation of diluted earnings per share because to do so would have been antidilutive. Due to the application of the treasury stock method, shares subscribed for by the Trust, which is more fully described in Note 10 to the Consolidated Financial Statements, have no effect on earnings per share until they are released from the Trust.

Note 12. Stock Options

The Company has stock option plans, which provide for the granting of options to employees and directors to purchase its Common Shares. These plans provide for nonqualified and incentive stock options. Stock options are granted to employees at an exercise price equal to the fair market value of the Company’s Common Shares at the date of grant. Options expire 10 years from the date of grant. Vesting periods are established by the Compensation Committee of the Board of Directors and vary.

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

The following tables summarize option activity under the Plans during 2002, 2001 and 2000:



	2002					2001					2000


	No. of			Wtd.		No. of			Wtd.		No. of			Wtd.
	Shares			Avg.		Shares			Avg.		Shares			Avg.
	Under			Exercise		Under			Exercise		Under			Exercise
	Option			Price		Option			Price		Option			Price


Balance at April 1		3,137,821			$11.54		2,658,101			$10.20		2,761,211			$ 9.91
Options granted		947,500			12.91		981,500			13.78		142,500			9.39
Options exercised		(108,499	)		6.25		(318,655	)		7.91		(215,010	)		5.81
Options cancelled/expired		(18,354	)		11.63		—			—		—			—
Options forfeited		(96,934	)		12.39		(183,125	)		10.37		(30,600	)		10.89

Balance at March 31		3,861,534			$12.00		3,137,821			$11.54		2,658,101			$10.20

Exercisable at March 31		2,020,508			$11.36		1,448,692			$10.66		1,394,398			$10.18

Available for Grant at March 31		1,076,211					1,926,777					620,152

March 31, 2002

Options Outstanding

Options Exercisable

Wtd. Avg.

Wtd.

Remaining

Wtd.

Number

Avg.

Contractual

Number

Avg.

Exercise

Life

Exercise

Exercise Price Range

Options

Price

(in years)

Options

Price

$ 5.50 - $ 8.00

236,836

$ 6.20

1.7

227,836

$ 6.21

$ 8.00 - $10.50

582,166

$ 8.75

6.8

399,766

$ 8.75

$10.50 - $13.00

1,019,232

$12.18

4.9

827,834

$12.18

$13.00 - $15.50

2,023,300

$13.53

8.3

565,072

$14.11

3,861,534

2,020,508

The Company does not recognize expense for stock options granted under its stock option plans because options are granted at exercise prices equal to the fair market value of the Company’s stock at the date of grant, and does not recognize the options in the financial statements until they are exercised. The proforma amounts that are disclosed in the table below reflect the portion of the estimated fair value of awards that was earned for the years ended March 31, 2002, 2001 and 2000. Because the proforma expense determined under the fair value method relates only to stock options that were granted as of March 31, 2002, 2001 and 2000, the impact of applying the fair value method is not indicative of future amounts. Additional grants in future years are anticipated, which will increase the proforma compensation expense and thus reduce and increase future proforma net income (loss), respectively.



	2002						2001				2000


	As			Pro			As		Pro		As		Pro
(In Thousands, Except Per Share Data)	Reported			Forma			Reported		Forma		Reported		Forma


Net income (loss)	$	(7,047	)	$	(10,568	)	$	34,576	$	31,387	$	40,145	$	38,557
Diluted earnings (loss) per share	$	(0.26	)	$	(0.39	)	$	1.11	$	1.02	$	1.27	$	1.23

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

The fair market value of stock option grants is estimated using the Black-Scholes option-pricing model with the following assumptions:



	2002			2001			2000


Dividend yield		1.0	%		1.0	%		1.0	%
Expected volatility		48.6	%		45.7	%		46.6	%
Risk-free interest rate		5.28	%		4.80	%		6.25	%
Expected life		8 years			8 years			7.5 years
Weighted average fair value of options granted		$7.04			$7.12			$5.05

Note 13. Business Segment Information

The Company’s operations have been classified into two operating segments, the distribution of electronic components and the distribution of mid-range computer products, which are managed separately based on product and market differences. The Industrial Electronics Division is a broad-line distributor of semiconductors, interconnect, passive and electromechanical components, power supplies and embedded computer products. The Computer Systems Division is a leading distributor and reseller of mid-range computer products, computer systems, software and services. The Company’s third reportable segment, Corporate and Other, primarily includes investments in affiliates, selected other assets and fixed assets, related depreciation and goodwill amortization, certain corporate management costs, special charges and the net assets and results of operations of the Company’s software businesses and its wholly owned subsidiary established for the Asset Securitization. The segment presentation reflects how management allocates resources, measures performance and views the overall business.

The Company evaluates performance and allocates resources based on return on capital and profitable growth. Specifically, the Company measures segment profit or loss based on operating profit. The accounting policies of the reportable segments are the same as those described in the Summary of Significant Accounting Policies. Geographic sales are reported by shipping origin.



			Year Ended March 31


(Dollars In Thousands)			2002			2001			2000


Net Sales
	Industrial Electronics		$	1,029,271		$	1,469,515		$	1,341,222
	Computer Systems			1,294,322			1,431,838			1,219,489

		Total Net Sales	$	2,323,593		$	2,901,353		$	2,560,711

Operating Income
	Industrial Electronics		$	(3,582	)	$	85,921		$	72,254
	Computer Systems			47,783			46,531			45,088
	Corporate & Other			(25,925	)		(32,270	)		(16,946	)

		Operating Income	$	18,276		$	100,182		$	100,396

(continued)

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

Note 13. — continued



			Year Ended March 31


(Dollars In Thousands)			2002			2001			2000


Reconciliation to Income (Loss) Before Income Taxes
	Other (income) expense			(721	)		(480	)		(1,058	)
	Gain on sale of assets			—			—			(1,845	)
	Interest expense			22,046			33,578			26,074

		Income (Loss) before Income Taxes	$	(3,049	)	$	67,084		$	77,225

Identifiable Assets
	Industrial Electronics		$	374,680		$	559,842		$	521,701
	Computer Systems			465,027			531,289			535,874
	Corporate & Other			77,230			92,479			56,260

		Total Assets	$	916,937		$	1,183,610		$	1,113,835

Capital Expenditures
	Industrial Electronics		$	1,542		$	12,687		$	14,154
	Computer Systems			1,970			8,612			21,626
	Corporate & Other			3,877			854			250

		Total Capital Expenditures	$	7,389		$	22,153		$	36,030

Depreciation and Amortization Expense
	Industrial Electronics		$	11,247		$	10,235		$	9,191
	Computer Systems			10,197			9,686			10,774
	Corporate & Other			7,528			7,123			6,378

		Total Depreciation and Amortization	$	28,972		$	27,044		$	26,343

Geographic Areas
	*Net Sales*
		United States	$	2,212,798		$	2,779,377		$	2,391,305
		Foreign		110,795			121,976			169,406

		Total Net Sales	$	2,323,593		$	2,901,353		$	2,560,711

	*Long-Lived Assets*
		United States	$	136,351		$	161,721		$	160,001
		Foreign		755			1,015			730

		Total Long-Lived Assets	$	137,106		$	162,736		$	160,731

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

QUARTERLY FINANCIAL DATA (UNAUDITED)



		Year Ended March 31, 2002


									Fourth
		First		Second			Third		Quarter
(Dollars in Thousands, Except Per Share Data)		Quarter		Quarter			Quarter		(a)			Year


Net sales		$	595,394		$589,117		$	633,709		$505,373		$	2,323,593
Gross margin			85,579		80,593			81,726		68,077			315,975
Net income (loss)		$	1,696		$ (4,699	)	$	2,233		$ (6,277	)	$	(7,047	)
Net income (loss) per share:
	Basic	$	0.06		$ (0.17	)	$	0.08		$ (0.23	)	$	(0.26	)
	Diluted	$	0.06		$ (0.17	)	$	0.08		$ (0.23	)	$	(0.26	)



		Year Ended March 31, 2001


		First		Second			Third		Fourth
(Dollars in Thousands, Except Per Share Data)		Quarter		Quarter (b)			Quarter		Quarter (c)		Year


Net sales		$	677,857		$ 717,439		$	781,297		$ 724,760	$	2,901,353
Gross margin			101,864		108,230			116,195		106,493		432,782
Income before extraordinary charge			10,221		11,715			13,044		66		35,046
Extraordinary charge			—		(470	)		—		—		(470	)

Net income		$	10,221		$ 11,245		$	13,044		$ 66	$	34,576

Net income per share:
	Basic	$	0.38		$ 0.42		$	0.49		$ 0.00	$	1.29
	Diluted	$	0.32		$ 0.35		$	0.40		$ 0.00	$	1.11


(a)	Included in the results of the fourth quarter of Fiscal 2002 are special charges of $12.4 million ($7.3 million, after tax or $0.27 per share) consisting of inventory adjustments and a restructuring charge.

(b)	Included in the results of the second quarter of Fiscal 2001 was an extraordinary charge from early extinguishment of debt of $0.5 million, net of tax benefit of $0.3 million ($.01 per share – diluted).

(c)	During the fourth quarter of Fiscal 2001, the Company recognized a non-cash write-down of $14.2 million for the abandonment of certain information technology system assets. The charge after tax was $8.7 million or $0.24 per diluted share.

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

pioneer-standard electronics, inc.

schedule ii — valuation and qualifying accounts

years ended march 31, 2002, 2001 and 2000



(Dollars in Thousands)
	Balance at		Charged to		Deductions-			Balance at
	Beginning		Cost and		Net			End of
Description	of Period		Expenses		Write-Offs			Period


2002
Allowance for doubtful accounts		$3,752		$19,549		$(15,264	)		$ 8,037
Inventory valuation reserve		$7,856		$17,694		$ (5,613	)		$19,937

2001
Allowance for doubtful accounts		$ 5,681		$ 11,118		$ (13,047	)		$ 3,752
Inventory valuation reserve		$ 6,770		$ 7,876		$ (6,790	)		$ 7,856

2000
Allowance for doubtful accounts		$ 6,035		$ 3,269		$ (3,623	)		$ 5,681
Inventory valuation reserve		$ 5,397		$ 3,786		$ (2,413	)		$ 6,770

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

exhibit index


Exhibit No.			Description

	3(a	)	Amended Articles of Incorporation of Pioneer-Standard Electronics, Inc., which is incorporated by reference to Exhibit 2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, as amended on March 18, 1998 (File No. 0-5734).
	(b	)	Amended Code of Regulations, as amended, of Pioneer-Standard Electronics, Inc., which is incorporated by reference to Exhibit 3(b) to the Company’s Annual Report on Form 10-K for the year ended March 31, 1997 (File No. 0-5734).
	4(a	)	Rights Agreement, dated as of April 27, 1999, by and between the Company and National City Bank, which is incorporated herein by reference to Exhibit 1 to the Company’s Registration Statement on Form 8-A (File No. 0-5734).
	(b	)	Indenture, dated as of August 1, 1996, by and between the Company and Star Bank, N.A., as Trustee, which is incorporated herein by reference to Exhibit 4(g) to the Company’s Annual Report on Form 10-K for the year ended March 31, 1997 (File No. 0-5734).
	(c	)	Share Subscription Agreement and Trust, effective July 2, 1996, by and between the Company and Wachovia Bank of North Carolina, N.A., which is incorporated herein by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-3 (Reg. No. 333-07665).
	(d	)	Certificate of Trust of Pioneer-Standard Financial Trust, dated March 23, 1998, which is incorporated herein by reference to Exhibit 4(l) to the Company’s Annual Report on Form 10-K for the year ended March 31, 1998 (File No. 0-5734).
	(e	)	Amended and Restated Trust Agreement among Pioneer-Standard Electronics, Inc., as Depositor, Wilmington Trust Company, as Property Trustee and Delaware Trustee, and the Administrative Trustees named therein, dated as of March 23, 1998, which is incorporated herein by reference to Exhibit 4(m) to the Company’s Annual Report on Form 10-K for the year ended March 31, 1998 (File No. 0-5734).
	(f	)	Junior Subordinated Indenture, dated March 23, 1998, between the Company and Wilmington Trust, as trustee, which is incorporated herein by reference to Exhibit 4(n) to the Company’s Annual Report on Form 10-K for the year ended March 31, 1998 (File No. 0-5734).
	(g	)	First Supplemental Indenture, dated March 23, 1998, between the Company and Wilmington Trust, as trustee, which is incorporated herein by reference to Exhibit 4(o) to the Company’s Annual Report on Form 10-K for the year ended March 31, 1998 (File No. 0-5734).
	(h	)	Form of 6 3/4% Convertible Preferred Securities (Included in Exhibit 4(m)), which is incorporated herein by reference to Exhibit 4(p) to the Company’s Annual Report on Form 10-K for the year ended March 31, 1998 (File No. 0-5734).
	(i	)	Form of Series A 6 3/4% Junior Convertible Subordinated Debentures (Included in Exhibit 4(o)), which is incorporated herein by reference to Exhibit 4(q) to the Company’s Annual Report on Form 10-K for the year ended March 31, 1998 (File No. 0-5734).
	(j	)	Guarantee Agreement, dated March 23, 1998, between the Company and Wilmington Trust, as guarantee trustee, which is incorporated herein by reference to Exhibit 4(r) to the Company’s Annual Report on Form 10-K for the year ended March 31, 1998 (File No. 0-5734).

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES


Exhibit No.			Description

	*10(a	)	Amended and Restated Employment Agreement, dated April 27, 1999, by and between the Company and John V. Goodger, which is incorporated herein by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 (File No. 0-5734).
	*(b	)	The Company’s 1982 Incentive Stock Option Plan, as amended, which is incorporated by reference to Exhibit 3(e) to the Company’s Annual Report on Form 10-K for the year ended March 31, 1997 (File No. 0-5734).
	*(c	)	The Company’s Amended and Restated 1991 Stock Option Plan, which is incorporated herein by reference to Exhibit 4.1 to the Company’s Form S-8 Registration Statement (Reg. No. 33-53329).
	*(d	)	The Company’s Amended 1995 Stock Option Plan for Outside Directors, which is incorporated herein by reference to Exhibit 99.1 to the Company’s Form S-8 Registration Statement (Reg. No. 333-07143).
	*(e	)	Pioneer-Standard Electronics, Inc. 1999 Stock Option Plan for Outside Directors, which is incorporated herein by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 (File No. 0-5734).
	*(f	)	Pioneer-Standard Electronics, Inc. 1999 Restricted Stock Plan, which is incorporated herein by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 (File No. 0-5734).
	*(g	)	Pioneer-Standard Electronics, Inc. Supplemental Executive Retirement Plan, which is incorporated herein by reference to Exhibit 10(o) to the Company’s Annual Report on Form 10-K for the year ended March 31, 2000 (File No. 0-5734).
	*(h	)	Pioneer-Standard Electronics, Inc. Benefit Equalization Plan, which is incorporated herein by reference to Exhibit 10(p) to the Company’s Annual Report on Form 10-K for the year ended March 31, 2000 (File No. 0-5734).
	*(i	)	Form of Option Agreement between Pioneer-Standard Electronics, Inc. and the optionees under the Pioneer-Standard Electronics, Inc. 1999 Stock Option Plan for Outside Directors, which is incorporated herein by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 (File No. 0-5734).
	*(j	)	Amended and Restated Employment agreement, effective April 1, 2000, between Pioneer-Standard Electronics, Inc. and James L. Bayman, which is incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 (File No. 0-5734).
	*(k	)	Amended and Restated Employment agreement, effective April 1, 2000, between Pioneer-Standard Electronics, Inc. and Arthur Rhein, which is incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 (File No. 0-5734).
	*(l	)	Employment agreement, effective April 24, 2000, between Pioneer-Standard Electronics, Inc. and Steven M. Billick, which is incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 (File No. 0-5734).

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES


Exhibit No.			Description

	(m	)	Five-Year Credit Agreement, dated as of September 15, 2000, among Pioneer-Standard Electronics, Inc., the Foreign Subsidiary Borrowers, the Lenders, and Bank One, Michigan as Agent, Banc One Capital Markets, Inc. as Lead Arranger and Sole Book Runner, KeyBank National Association as Syndication Agent, and ABN AMRO Bank, N.V., as Documentation Agent, which is incorporated herein by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 (File No. 0-5734).
	(n	)	364-Day Credit Agreement, dated as of September 15, 2000, among Pioneer-Standard Electronics, Inc., the Lenders, Bank One, Michigan as Agent, Banc One Capital Markets, Inc. as Lead Arranger and Sole Book Runner, KeyBank National Association, as Syndication Agent, and ABN AMRO Bank, N.V., as Documentation Agent, which is incorporated herein by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 (File No. 0-5734).
	*(o	)	Pioneer-Standard Electronics, Inc. Senior Executive Disability Plan, effective April 1, 2000, which is incorporated herein by reference to Exhibit 10(v) to the Company’s Annual Report on Form 10-K for the year ended March 31, 2001 (File No. 0-5734).
	*(p	)	Non-Competition Agreement, dated as of February 25, 2000, between Pioneer-Standard Electronics, Inc. and Robert J. Bailey, which is incorporated herein by reference to Exhibit 10(w) to the Company’s Annual Report on Form 10-K for the year ended March 31, 2001 (File No. 0-5734).
	*(q	)	Change of Control Agreement, dated as of February 25, 2000, between Pioneer-Standard Electronics, Inc. and Robert J. Bailey, which is incorporated herein by reference to Exhibit 10(x) to the Company’s Annual Report on Form 10-K for the year ended March 31, 2001 (File No. 0-5734).
	*(r	)	Non-Competition Agreement, dated as of February 25, 2000, between Pioneer-Standard Electronics, Inc. and Peter J. Coleman, which is incorporated herein by reference to Exhibit 10(y) to the Company’s Annual Report on Form 10-K for the year ended March 31, 2001 (File No. 0-5734).
	*(s	)	Change of Control Agreement, dated as of February 25, 2000, between Pioneer-Standard Electronics, Inc. and Peter J. Coleman, which is incorporated herein by reference to Exhibit 10(z) to the Company’s Annual Report on Form 10-K for the year ended March 31, 2001 (File No. 0-5734).
	(t	)	Receivables Purchase Agreement, dated as of October 19, 2001, among Pioneer-Standard Electronics Funding Corporation, as the Seller, Pioneer-Standard Electronics, Inc., as the Servicer, Falcon Asset Securitization Corporation and Three Rivers Funding Corporation, as Conduits, Bank One, NA and Mellon Bank, N.A., as Managing Agents and the Committed purchasers from time to time parties hereto and Bank One, NA as Collateral Agent, which is incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001 (File No. 0-5734).
	(u	)	Receivables Sales Agreement, dated as of October 19, 2001, among Pioneer-Standard Electronics, Inc., Pioneer-Standard Minnesota, Inc., Pioneer-Standard Illinois, Inc. and Pioneer-Standard Electronics, Ltd., as Originators and Pioneer-Standard Funding Corporation, as Buyer, which is incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001 (File No. 0-5734).

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES


Exhibit No.			Description

	(v	)	Amendment No. 1 to Receivables Purchase Agreement, dated as of January 29, 2002, by and among Pioneer-Standard Funding Corporation, as Seller, Pioneer-Standard Electronics, Inc. as Servicer, Falcon Asset Securitization Corporation and Three Rivers Funding Corporation, as Conduits, certain Committed Purchasers, Bank One, NA and Mellon Bank, N.A. as Managing Agents, and Bank One, as Collateral Agent, which is incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001 (File No. 0-5734).
	(w	)	Third Amendment to Five-Year Credit Agreement, dated as of January 29, 2002, by and among Pioneer-Standard Electronics, Inc., the Foreign Subsidiary Borrowers, the various lenders and Bank One, Michigan as Agent, which is incorporated herein by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001 (File No. 0-5734).
	*(x	)	Amendment to the Pioneer-Standard Electronics, Inc. Supplemental Executive Retirement Plan dated January 29, 2002.
	(y	)	Fourth Amendment to Five-Year Credit Agreement, dated as of May 6, 2002, by and among Pioneer-Standard Electronics, Inc., the Foreign Subsidiary Borrowers, the various lenders and Bank One, Michigan as LC Issuer and Agent.
	*(z	)	Amended and Restated Employment agreement, effective April 1, 2002, between Pioneer-Standard Electronics, Inc. and James L. Bayman.
	*(aa	)	Employment agreement, effective April 1, 2002, between Pioneer-Standard Electronics, Inc. and Arthur Rhein.
	21		Subsidiaries of the Registrant.
	23		Consent of Ernst & Young LLP, Independent Auditors.
	99(a	)	Certificate of Insurance Policy, effective November 1, 1997, between Chubb Group of Insurance Companies and Pioneer-Standard Electronics, Inc., which is incorporated herein by reference to Exhibit 99(a) to the Company’s Annual Report on Form 10-K for the year ended March 31, 1998 (File No. 0-5734).
	99(b	)	Forms of Amended and Restated Indemnification Agreement entered into by and between the Company and each of its Directors and Executive Officers, which are incorporated herein by reference to Exhibit 99(b) to the Company’s Annual Report on Form 10-K for the year ended March 31, 1994 (File No. 0-5734).

* Denotes a management contract or compensatory plan or arrangement.

PIONEER-STANDARD ELECTRONICS, INC. AND SUBSIDIARIES

EXHIBIT 10(x)

PIONEER-STANDARD ELECTRONICS, INC.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

Effective Date:   April 27, 1999

Amendment and
Restatement Date: January 29, 2002

                                TABLE OF CONTENTS
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ARTICLE                                                               Page No.
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ARTICLE 1         NAME AND PURPOSE.........................................1-1
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ARTICLE 2         DEFINITIONS..............................................2-1
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ARTICLE 3         ELIGIBILITY AND PARTICIPATION............................3-1
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ARTICLE 4         ACCRUED ANNUAL RETIREMENT BENEFIT........................4-1
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ARTICLE 5         ELIGIBILITY FOR RETIREMENT AND RELATED BENEFITS..........5-1
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ARTICLE 6         FORMS OF RETIREMENT BENEFITS.............................6-1
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ARTICLE 7         AMOUNT OF RETIREMENT BENEFITS............................7-1
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ARTICLE 8         DEATH BENEFITS...........................................8-1
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ARTICLE 9         RIGHTS OF PARTICIPANTS AND BENEFICIARIES.................9-1
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ARTICLE 10        TRUST...................................................10-1
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ARTICLE 11        CLAIMS PROCEDURE........................................11-1
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ARTICLE 12        ADMINISTRATION..........................................12-1
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ARTICLE 13        AMENDMENT AND TERMINATION...............................13-1
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ARTICLE 14        PARTICIPATING COMPANIES.................................14-1
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ARTICLE 15        MISCELLANEOUS PROVISIONS................................15-1
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PIONEER-STANDARD ELECTRONICS, INC.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

This Amendment and Restatement is hereby adopted by Pioneer-Standard Electronics, Inc., a corporation organized and existing under and by virtue of the laws of the State of Ohio (hereinafter referred to as the "Company").

W I T N E S S E T H:

WHEREAS, the Company adopted the Pioneer-Standard Electronics, Inc. Supplemental Executive Retirement Plan (hereinafter referred to as the "Plan"), effective April 27, 1999, in order to provide unfunded deferred compensation to certain management and highly compensated employees; and

WHEREAS, the Company desires that the Plan be modified in order to conform the vesting provisions of the Plan to other tax qualified and nonqualified deferred compensation plans of the Company, to clarify certain matters, to enhance the death benefit and to reflect certain other desired changes;

NOW, THEREFORE, it is agreed that this Plan be amended and restated, generally effective the 29th day of January, 2002, as follows:

ARTICLE 1

NAME AND PURPOSE

1.1. NAME. The name of this Plan shall continue to be the PIONEER-STANDARD ELECTRONICS, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN.

1.2. PURPOSE. This Plan was established and is hereby continued to provide unfunded deferred compensation to certain management and highly compensated Employees of the Participating Companies under certain conditions specified herein.

1.3. RESTATEMENT DATE. The provisions of the Plan as amended and restated herein are effective January 29, 2002.

1.4. PLAN FOR A SELECT GROUP. This Plan shall only cover Employees of the Participating Companies who are members of a "select group of management or highly compensated employees" within the meaning of Sections 201(2), 301(a)(3), 401(a)(1) and 4021(b)(6) of ERISA. The Company shall have the authority to take any and all actions necessary or desirable in order that this Plan shall satisfy the requirements set forth in ERISA and regulations thereunder applicable to plans maintained for employees who are members of a select group of management or highly compensated employees. Moreover, this Plan at all times shall be administered in such a manner, and benefits hereunder shall be so limited, notwithstanding any contrary provision of this Plan, in order that this Plan shall constitute such a plan.

1.5. NOT A FUNDED PLAN. It is the intention and purpose of the Company that this Plan shall be deemed to be "unfunded" for tax purposes as well as being such a plan as would properly be described as "unfunded" for purposes of Title I of ERISA. This Plan shall be

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administered in such a manner, notwithstanding any contrary provision of this Plan, in order that it will be so deemed and would be so described.

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ARTICLE 2

DEFINITIONS

Unless the context otherwise indicates, the following words used herein shall have the following meanings wherever used in this instrument:

2.1. ACCRUED ANNUAL RETIREMENT BENEFIT. The words "Accrued Annual Retirement Benefit" shall mean an amount determined in accordance with the provisions of Article 4 hereof. A Participant's Accrued Annual Retirement Benefit is the annual amount of benefit which the Participant would receive if:

(a) his Benefit Commencement Date is on or after his Normal Retirement Date;

(b) he receives his benefit in the Life Annuity Form (Form 1) described in Section 6.3; and

(c) he has completed at least five (5) years of Continuous Service or his Vested Percentage is one hundred percent (100%) for some other reason described in Section 2.43.

2.2. ACTUARIAL EQUIVALENT. The words "Actuarial Equivalent" shall mean the benefit having the same value as the benefit which the Actuarial Equivalent replaces. The determination of an Actuarial Equivalent shall be based on the following:

(a) one of the following mortality tables, as applicable:

(i) with respect to forms of benefits other than single sum payments, the UP-1984 Mortality Table; in determinations where it is necessary to determine factors in conjunction with a joint Beneficiary, such Beneficiary's Age is set back three (3) years prior to factor determination; or

(ii) with respect to single sum payments, the 1983 Group Annuity Mortality Table (50% male/50% female blend) or such successor table as shall be prescribed from time to time by the Secretary of the Treasury under Section 417(e)(3)(A)(ii)(I) of the Code; and

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(b) one of the following rates of interest, as applicable:

(i) with respect to forms of benefits other than single sum payments, seven and one-half percent (7.5%); or

(ii) with respect to single sum payments, the GATT Interest Rate for the month of November immediately preceding the Plan Year that contains the date of payment of the single sum.

For purposes of this Section, the words "GATT Interest Rate" shall mean, for any month, the "applicable interest rate," as such term is defined by
Section 417(e)(3) of the Code, for such month of November; i.e., generally, the annual interest rate on 30-year Treasury securities (or such successor interest rate as specified by the Commissioner of the Internal Revenue Service) for that month as specified by such Commissioner.

2.3. ADMINISTRATOR. The word "Administrator" shall mean the person or persons, corporation or partnership designated as Administrator under Article 12 hereof.

2.4. ADOPTION DATE. The words "Adoption Date" shall mean the date as of which any Participating Company shall have adopted the Plan.

2.5. AFFILIATED COMPANY. The words "Affiliated Company" generally shall mean any corporation or business organization that, directly or indirectly, through one or more intermediaries controls, is controlled by, or is under common control with the Company, and particularly shall mean any corporation of which eighty percent (80%) of the voting stock is directly or indirectly owned by the Company.

2.6. AGE. The word "Age" shall mean a Participant's or Beneficiary's actual attained age; provided, however, that, throughout the two (2) year period commencing on a Change of Control, the Participant's or Beneficiary's Age shall be deemed to be what his actual age will be at the end of such period.

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2.7. ANNUAL INCENTIVE COMPENSATION PLAN. The words "Annual Incentive Compensation Plan" shall mean an arrangement used to provide annual incentive compensation to Employees of the Participating Companies, whether set forth in a plan, contained in individual employment agreements or otherwise.

2.8. APPEALS COMMITTEE. The words "Appeals Committee" shall mean the Appeals Committee established pursuant to Article 11 hereof.

2.9. BENEFICIARY. The word "Beneficiary" shall mean any Surviving Spouse or other person who receives or is eligible to receive payment of any benefit under the terms of this Plan on the death of a Participant or former Participant.

2.10. BENEFIT COMMENCEMENT DATE. The words "Benefit Commencement Date" shall mean:

(a) the first day of the first period for which an amount is payable as an annuity; or

(b) in the case of a benefit not payable in the form of an annuity, the first date as of which benefits are to be paid pursuant to the terms of this Plan.

2.11. BENEFIT EQUALIZATION PLAN. The words "Benefit Equalization Plan" shall mean the Pioneer-Standard Electronics, Inc. Benefit Equalization Plan.

2.12. BOARD. The word "Board" shall mean the Board of Directors of the Company.

2.13. BREACH OF THE RESTRICTIVE COVENANTS. The words "Breach of the Restrictive Covenants" shall mean, during a Participant's employment with the Company or any Affiliated Company or thereafter, during the term of any written agreement between the Company or Affiliated Company and the Participant dealing with noncompetition, nonsolicitation, noninterference, confidentiality or similar matters, the breach of such agreement

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by the Participant as reasonably determined by the Compensation Committee in good faith, but only if such breach is not remedied within thirty (30) days following actual written notification of such breach by the Compensation Committee to the Participant.

2.14. CAUSE. The word "Cause" shall mean for purposes of this Plan:

(a) a Participant's Termination of Employment shall have been the result of his conviction of any of the following: (i) embezzlement; (ii) misappropriation of money or other property of the Company or any Affiliated Company; or (iii) any felony;

(b) a Breach of the Restrictive Covenants; or

(c) a Participant's failure, during his employment with the Company or any Affiliated Company, to devote his full time and undivided attention during normal business hours to the business and affairs of the Company or any Affiliated Company, except for reasonable vacations and for illness or incapacity; provided, however, that the Participant may, with the consent of the Company, serve as a director or member of an advisory committee of any organization involving no conflict of interest with the interests of the Company, engage in charitable and community activities, and manage his personal affairs, provided that such activities do not materially interfere with the regular performance of his duties and responsibilities of employment.

2.15. CHANGE OF CONTROL. The words "Change of Control" shall mean the occurrence of any of the following events:

(a) all or substantially all of the assets of the Company are sold or transferred to another corporation or entity, or the Company is merged, consolidated or reorganized with or into another corporation or entity, with the result that upon conclusion of the transaction less than fifty-one percent (51%) of the outstanding securities entitled to vote generally in the election of Directors ("Voting Stock") or other capital interests of the acquiring corporation or entity are owned, directly or indirectly, by the holders of Voting Stock of the Company generally prior to the transaction;

(b) there is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Securities Exchange Act of 1934 ("Exchange Act") disclosing that any person (as the term "person" is used in Section

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13(d)(3) or Section 14(d)(2) of the Exchange Act), excluding The Pioneer Stock Benefit Trust, any employee benefit plan of any Participating Company or Affiliated Company, any trust established under any employee benefit plan of any Participating Company or any Affiliated Company, or any trustee of any trust established under any employee benefit plan of any Participating Company or any Affiliated Company, has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing twenty percent (20%) or more of the combined voting power of the then-outstanding Voting Stock of the Company;

(c) the Company shall file a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Item 1 of Form 8-K thereunder or Item 6(e) of Schedule 14A thereunder (or any successor schedule, form or report or item therein) that a change in control of the Company has or may have occurred or will or may occur in the future pursuant to any then-existing contract or transaction; or

(d) the individuals who, at the beginning of any period of two
(2) consecutive calendar years, constituted the Directors of the Company cease for any reason to constitute at least a majority thereof unless the nomination for election by the Company's shareholders of each new Director of the Company was approved by a vote of at least two-thirds (2/3) of the Directors of the Company still in office who were Directors of the Company at the beginning of any such period.

2.16. CODE. The word "Code" shall mean the Internal Revenue Code of 1986, as amended, and any regulations or other pronouncements promulgated thereunder. Whenever a reference is made herein to a specific Code Section, such reference shall be deemed to include any successor Code Section having the same or a similar purpose.

2.17. COMPANY. The word "Company" shall mean Pioneer-Standard Electronics, Inc. and any successor corporation or business organization which shall assume the duties and obligations of Pioneer-Standard Electronics, Inc. under this Plan.

2.18. COMPENSATION COMMITTEE. The words "Compensation Committee" shall mean the Compensation Committee of the Board or any successor thereto.

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2.19. CONTINUOUS SERVICE. The words "Continuous Service" shall mean for any Participant any period during which he is or was employed by any Participating Company or Affiliated Company, including any periods of Disability. Each such period shall be measured from the Participant's date of hire (which date shall be considered to be the first day during which the Participant performs any service for any Participating Company or Affiliated Company for which the Participant is directly or indirectly compensated) until the date of Termination of Employment which follows such date of hire.

In addition, if any Participant has a Termination of Employment and is rehired within twelve (12) months of:

(a) the date of his Termination of Employment; or

(b) if earlier, the first day of any period of leave of absence, layoff or Military Service after the end of which the Employee did not return to work for a Participating Company or an Affiliated Company prior to his Termination of Employment;

such Participant's Continuous Service shall include the period of severance measured from his Termination of Employment until his subsequent date of rehire. Two or more such periods that contain fractions of a year (computed in months and days) shall be aggregated on the basis of twelve (12) months constituting a year and thirty (30) days constituting a month.

If a Participant shall be entitled to Continuous Service for a period of Disability, such entitlement shall cease on the first to occur of:

(i) cessation of the Participant's Disability;

(ii) cessation of the Participant's entitlement to benefits under the Participating Company's long term disability plan; or

(iii) the Participant's commencement of benefits under this Plan.

In the event that a business organization shall be or shall have been acquired by or merged into a Participating Company, the date of hire of each Participant who is or was an

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employee of such business organization on the date of acquisition shall be deemed to have been the most recent date he was hired by such business organization unless another date is designated by the Compensation Committee.

Finally, throughout the two (2) year period commencing on a Change of Control, a Participant's Continuous Service shall be deemed to be what his actual Continuous Service is projected to be at the end of such period calculated on the assumption that there will be no break in such service during such period.

2.20. COVERED COMPENSATION. The words "Covered Compensation" shall mean, with respect to any Participant, the sum of (a) plus (b) below where:

(a) equals his salary from any Participating Company; and

(b) equals amounts payable to him under any Annual Incentive Compensation Plan;

and where (a) and (b) are payable to such Participant for services rendered to a Participating Company while a Participant or prior thereto; provided, however, that to the extent the Compensation Committee considers it appropriate, compensation or remuneration payable to a Participant for services rendered to an Affiliated Company shall be taken into account in determining his Covered Compensation. A Participant's Covered Compensation will not be reduced by any of the following:

(i) amounts which are excluded from taxable income under Code Sections 125, 132(f)(4), 402(e)(3) and 402(h); and

(ii) amounts which are excluded from taxable income because they are deferred by the Participant under the Benefit Equalization Plan or another similar plan.

Covered Compensation shall, however, not include fringe or special benefits or perquisites, or matching or employer contributions under any benefit plan of any Participating Company or Affiliated Company.

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Finally, a Participant's Covered Compensation with respect to a Fiscal Year shall be that Covered Compensation which is earned for such Fiscal Year, without regard to when such Covered Compensation is actually paid to the Participant.

2.21. DIRECTOR. The word "Director" shall mean a member of the Board.

2.22. DISABILITY. The word "Disability" shall mean, with respect to any Participant, a medically determinable physical or mental impairment which qualifies the Participant to receive benefits under the Participating Company's long term disability plan, or which would qualify the Participant to receive benefits under the Participating Company's long term disability plan had he been covered by said plan; except that no Participant shall be deemed to have a Disability if such disability:

(a) was contracted, suffered or incurred while the Participant was engaged in, or resulted from his having engaged in a criminal act or enterprise;

(b) resulted from the Participant's addiction, habituation or use of alcohol, narcotics or hallucinogens; provided, however, that where such Participant is determined to be a qualified individual with a disability within the meaning of the Americans With Disabilities Act (42 United States Code Section 12101 et seq.) with respect to such disability, the exclusion contained in this Subsection (b) shall be limited to such Participant's engaging in the illegal use of drugs or alcohol within the meaning of 42 United States Code Section 12114; or

A determination of Disability shall be made by the Administrator with the advice of competent medical authority.

2.23. EARLY RETIREMENT DATE. The words "Early Retirement Date" shall mean the date on which a Participant attains the later of Age fifty-five (55) or seven (7) years of Continuous Service, provided that such date shall not be later than the Participant's Normal Retirement Date. Therefore, if the date on which a Participant attains the later of Age fifty-five

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(55) or seven (7) years of Continuous Service would be later than his Normal Retirement Date, his Early Retirement Date and his Normal Retirement Date shall be the same day.

2.24. EFFECTIVE DATE. The words "Effective Date" shall mean the date this Plan became effective, which date is April 27, 1999.

2.25. EMPLOYEE. The word "Employee" shall mean any common-law employee of any Participating Company or Affiliated Company, whether or not an officer or Director, but excluding any person serving only in the capacity of a Director.

2.26. ERISA. The acronym "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any regulations or other pronouncements promulgated thereunder. Whenever a reference is made herein to a specific ERISA Section, such reference shall be deemed to include any successor ERISA Section having the same or a similar purpose.

2.27. FINAL AVERAGE ANNUAL EARNINGS. The words "Final Average Annual Earnings" shall mean the quotient of (a) divided by (b), where:

(a) equals the total amount of a Participant's Covered Compensation for each of the three (3) Fiscal Years for which the Participant's Covered Compensation was highest out of the five (5) consecutive Fiscal Years ending with the Fiscal Year in which the earlier of his date of Termination of Employment or the date he ceased to be a Senior Executive occurs; and

(b) equals three (3);

provided, however, that if a Participant has less than three (3) full Fiscal Years of such employment, his Final Average Annual Earnings shall mean the total amount of his Covered Compensation for each full calendar month of such employment, divided by the number of full calendar months of such employment and multiplied by twelve (12). The Final Average

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Earnings of a Participant who becomes disabled shall be calculated as of the date of the determination of his Disability.

2.28. FISCAL YEAR. The words "Fiscal Year" shall mean the twelve (12) month period ending on March 31 in each calendar year.

2.29. MILITARY SERVICE. The words "Military Service" shall mean duty in the Armed Forces of the United States, whether voluntary or involuntary, provided that the Employee serves not more than one voluntary enlistment or tour of duty and further provided that such voluntary enlistment or tour of duty does not follow involuntary duty. To the extent required by law, this Plan shall be administered in compliance with the Uniformed Services Employment and Reemployment Rights Act of 1994.

2.30. NORMAL RETIREMENT DATE. The words "Normal Retirement Date" shall mean the date on which a Participant attains Age sixty-five (65).

2.31. PARTICIPANT. The word "Participant" shall mean any eligible Senior Executive who has performed all the acts required by this Plan to become a Participant, who has become a Participant in accordance with Article 3 hereof, and who remains a Participant hereunder. A Participant shall cease to be a Participant and shall become a former Participant, upon the earliest of his Termination of Employment, the date he ceases to be designated by the Compensation Committee as eligible to participate, the date he ceases to be employed by a Participating Company or the date he ceases to accrue benefits under this Plan. However, the word "Participant" may also include, where the context indicates, any former Participant in this Plan.

2.32. PARTICIPATING COMPANY. The words "Participating Company" shall mean the Company and any Affiliated Company which is or shall become a Participating Company in

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the Plan pursuant to Article 14 hereof but only for periods while it is a Participating Company herein.

2.33. PLAN. The word "Plan" shall mean the Pioneer-Standard Electronics, Inc. Supplemental Executive Retirement Plan as set forth herein, effective as of the Restatement Date, and as it may be later amended.

2.34. PLAN YEAR. The words "Plan Year" shall mean the twelve (12) month period ending on December 31 in each calendar year; provided, however, that the first Plan Year was April 27, 1999 through December 31, 1999.

2.35. RETIREMENT. The word "Retirement" shall mean a Termination of Employment of a Participant, whether voluntary or involuntary, on or after his Early Retirement Date or his Normal Retirement Date, for a reason other than:

(a) his death; or

(b) for Cause.

2.36. RETIREMENT PLAN. The words "Retirement Plan" shall mean The Retirement Plan of Pioneer-Standard Electronics, Inc., the Retirement Plan of Pioneer-Standard Electronics, Inc., II or any replacement plan or successor plan thereto.

2.37. SENIOR EXECUTIVE. The words "Senior Executive" shall mean any executive Employee who is a member of a select group of management or highly compensated employees of any Participating Company within the meaning of Sections 201(2), 301(a)(3), 401(a)(1) and 4021(b)(6) of ERISA. A Participant who incurs a Disability at a time when he is a Senior Executive shall be deemed to continue to be a Senior Executive during the period of his Disability but only for such time as he is credited with Continuous Service. A Participant shall automatically cease to be a Senior Executive on his date of Termination of Employment.

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2.38. SUPPLEMENT. The word "Supplement" shall mean a portion of this Plan, designated as such, which is adopted pursuant to Article 14 hereof and which contains provisions applicable only to a specified group of Senior Executives, former Senior Executives or others.

2.39. SURVIVING SPOUSE. The words "Surviving Spouse" shall mean the individual to whom a Participant or former Participant is married on the date of the Participant's or former Participant's death provided such death is prior to the Participant's or former Participant's Benefit Commencement Date.

2.40. TERMINATION DATE. The words "Termination Date" shall mean the date as of which any Participating Company ceases to participate in the Plan.

2.41. TERMINATION OF EMPLOYMENT. The words "Termination of Employment" shall mean for any Employee the occurrence of any one of the following events:

(a) he is discharged by a Participating Company or any Affiliated Company unless he is subsequently reemployed and given pay back to his date of discharge;

(b) he voluntarily terminates employment with a Participating Company or any Affiliated Company;

(d) he fails to return to work at the end of any leave of absence authorized by a Participating Company or any Affiliated Company, or within ninety (90) days following such Employee's release from Military Service or within any other period following Military Service in which his right to reemployment with a Participating Company or any Affiliated Company is guaranteed by law; or

(e) he fails to return to work after the cessation of disability income payments under any sick leave, short term or long term disability program of a Participating Company or any Affiliated Company.

2.42. TRUST. The word "Trust" shall mean any trust that may be established pursuant to Article 10 hereof.

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2.43. VESTED PERCENTAGE. The words "Vested Percentage" shall mean for any Participant a percentage determined on the basis of his number of years of Continuous Service in accordance with the following table:

Years of Continuous Service                 Vested Percentage
---------------------------                 -----------------

Less than 1 year                                   0%
1 but less than 2 years                           20%
2 but less than 3 years                           40%
3 but less than 4 years                           60%
4 but less than 5 years                           80%
5 or more years                                  100%

Notwithstanding the foregoing, the Vested Percentage of a Participant shall become one hundred percent (100%) upon the first to occur of the following events:

(a) the Participant's attainment of his Early Retirement Date, or Normal Retirement Date, while he is an Employee;

(b) the Participant's death while he is an Employee;

(d) the effective date of the termination of the Plan; or

(e) the date of a Change of Control.

However, notwithstanding any contrary provision of this Plan, regardless of a Participant's Vested Percentage, his benefits hereunder shall at all times until paid be forfeitable for Cause or Breach of the Restrictive Covenants.

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ARTICLE 3

ELIGIBILITY AND PARTICIPATION

3.1. ELIGIBILITY. The Compensation Committee may, from time to time, in its discretion, designate one or more Senior Executives as eligible to participate in this Plan; provided, however, that neither James L. Bayman nor John V. Goodger shall be eligible to participate in this Plan.

3.2. PARTICIPATION. Each Senior Executive who has satisfied the eligibility requirements, set forth in Section 3.1 hereof, shall become a Participant on or as of the date of his designation as a Senior Executive eligible to participate in the Plan, or as soon thereafter as he reasonably can be enrolled in the Plan, provided that he complies with appropriate administrative requirements for enrollment of Participants, and shall remain a Participant until the earlier of (a) the date of his Termination of Employment or (b) the cessation of his Participant status pursuant to Section 3.3 hereof.

3.3. CESSATION OF PARTICIPATION INITIATED BY THE COMPENSATION COMMITTEE. In the event that the Compensation Committee determines, in its sole discretion, that a Participant is not, or may not be, a member of a "select group of management or highly compensated employees" within the meaning of Sections 201(2), 301(a)(3), 401(a)(1) and 4021(b)(6) of ERISA, then the Compensation Committee may, in its sole discretion, terminate such Participant's participation in this Plan. In the event of such termination of participation:

(a) such Participant shall cease to accrue benefits hereunder; and

(b) the Compensation Committee shall direct that such actions shall be taken which, in its sole discretion, most closely adhere to the terms of this Plan while not putting at risk its status as a plan maintained for a "select group of management or highly compensated employees" as referred to above.

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ARTICLE 4

ACCRUED ANNUAL RETIREMENT BENEFIT

4.1. AMOUNT OF ACCRUED ANNUAL RETIREMENT BENEFIT. A Participant's Accrued Annual Retirement Benefit shall equal the remainder of (a) minus (b), where:

(a) equals the product of (i) multiplied by (ii), below, where:

(i) equals 3.3334% of his Final Average Annual Earnings; and

(ii) equals his full years of Continuous Service,

provided that such product does not exceed 50% of his Final Average Annual Earnings; and

(b) equals the sum of the Actuarial Equivalent of (i), (ii),
(iii), and (iv), below, where:

(i) equals the amounts contributed with respect to the Participant by a Participating Company or an Affiliated Company under the Retirement Plan, or any other tax qualified retirement plan maintained by any Participating Company or Affiliated Company, as profit sharing contributions, matching contributions, or similar employer contributions;

(ii) equals the amounts deemed contributed with respect to the Participant by a Participating Company or an Affiliated Company under the Benefit Equalization Plan, or any other nonqualified deferred compensation plan maintained by any Participating Company or Affiliated Company, as deemed profit sharing contributions, matching contributions, or similar employer contributions;

(iii) equals the employer funded or financed accrued benefit of the Participant under any tax qualified or nonqualified defined benefit plan maintained by any Participating Company or Affiliated Company; and

(iv) equals fifty percent (50%) of the Participant's Social Security retirement benefit payable at the earliest age at which an unreduced retirement benefit is payable to the Participant.

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ARTICLE 5

ELIGIBILITY FOR RETIREMENT AND RELATED BENEFITS

5.1. NORMAL OR LATE RETIREMENT. A Participant who continues in the employ of a Participating Company or an Affiliated Company until his Normal Retirement Date shall be eligible to retire on or after such date and to receive a retirement benefit hereunder, in such form as is provided in Article 6 hereof, and in the amount provided in Article 7 hereof. The Benefit Commencement Date for a Participant who retires from the employ of a Participating Company or an Affiliated Company on or after his Normal Retirement Date shall be the date which is thirty (30) days following his date of Retirement.

5.2. EARLY RETIREMENT. A Participant who continues in the employ of a Participating Company or an Affiliated Company until his Early Retirement Date shall be eligible to retire on or after such date and to receive a retirement benefit hereunder, in such form as is provided in Article 6 hereof, and in the amount provided in Article 7 hereof. The Benefit Commencement Date for a Participant who retires on or after his Early Retirement Date and prior to his Normal Retirement Date shall, in the absence of an election of an earlier date pursuant to Section 5.7 hereof, be his Normal Retirement Date.

5.3. VESTED DEFERRED RETIREMENT. A Participant who continues in the employ of a Participating Company or an Affiliated Company until he has completed at least one (1) year of Continuous Service, or whose Vested Percentage is otherwise greater than zero (0), but whose Termination of Employment occurs prior to his Early Retirement Date shall be eligible to receive a vested deferred retirement benefit hereunder, in such form as is provided in Article 6 hereof, and in the amount provided in Article 7 hereof. The Benefit Commencement Date for a former Participant eligible to receive a vested deferred retirement benefit shall be his Normal Retirement

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Date, or if he has completed seven (7) or more years of Continuous Service, such earlier date, if any, as he may elect pursuant to Section 5.7 hereof.

5.4. WITHDRAWAL RIGHT WHILE STILL EMPLOYED FOLLOWING CHANGE OF CONTROL. During the two (2) year period commencing on a Change of Control, a Participant may elect, in lieu of all other benefits hereunder, and while continuing to be an Employee, to withdraw an amount determined as provided in Article 7 hereof. The Benefit Commencement Date for a Participant who elects a withdrawal pursuant to this Section 5.4 shall be the date which is thirty (30) days following the date of his election. The amount payable pursuant to this Section 5.4 shall be payable in the Single Sum Form described in Section 6.3 hereof, and in the amount provided in Section 7.4 hereof which provides for a penalty of ten percent (10%) in addition to appropriate actuarial reductions. Upon such withdrawal, the Participant's Accrued Annual Retirement Benefit shall be canceled and the Participant (as a further penalty) shall no longer be eligible to participate in the Plan.

5.5. APPLICATION. Each Participant who is eligible for a retirement benefit or a withdrawal pursuant to this Article shall apply therefor, in writing, on such form or forms as the Administrator shall prescribe in accordance with the provisions of Article 6 hereof.

5.6. FORFEITURE DUE TO CAUSE OR BREACH OF THE RESTRICTIVE COVENANTS. Notwithstanding the foregoing provisions of this Article 5 to the contrary, upon the Termination of Employment of a Participant for Cause, such Participant shall forfeit his Accrued Annual Retirement Benefit and he shall thenceforth be ineligible to participate in this Plan, and in no event shall he be entitled to the receipt of any other benefit hereunder. Furthermore, upon any finding that a Participant or former Participant has committed an act of Cause or a Breach of the Restrictive Covenants, such Participant shall forfeit his Accrued Annual Retirement Benefit and

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any future payments under the Plan shall be canceled. Amounts previously paid shall not be recoverable. In the event of a disagreement between the Participant and the Compensation Committee as to whether a Participant's Termination of Employment was for Cause, or whether there has been a Breach of the Restrictive Covenants, then, notwithstanding any contrary provision of this Plan, payment of benefits hereunder shall be delayed pending resolution of such disagreement pursuant to the Plan's claims procedure.

5.7. ELECTION OF EARLIER BENEFIT COMMENCEMENT DATE. Any Participant who has at least seven (7) years of Continuous Service and who either:

(a) retires from the employ of a Participating Company or an Affiliated Company on or after his Early Retirement Date and prior to his Normal Retirement Date; or

(b) has a Termination of Employment prior to his Early Retirement Date;

may elect in writing a Benefit Commencement Date earlier than the normal applicable Benefit Commencement Date, provided that such earlier Benefit Commencement Date shall not be a date prior to the later of his date of Retirement or his Early Retirement Date. Any election of an earlier Benefit Commencement Date shall be made by the Participant at least thirteen (13) months prior to such earlier Benefit Commencement Date. Such election shall be on a form prescribed for the purpose by the Administrator and signed by the Participant. Such election shall be deemed to be made when it shall have been received by the Administrator or its representative. A Participant who is electing an earlier Benefit Commencement Date may at any time at least thirteen
(13) months prior to such earlier Benefit Commencement Date:

(i) revoke an election previously made under this Section by written notice duly filed with the Administrator or its designated representative, in which event the Benefit Commencement Date shall be deemed to be the normal Benefit Commencement Date provided in Sections 5.2 or 5.3 hereof, as applicable; or

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(ii) change his election by written notice and designation duly made and filed with the Administrator or its designated representative pursuant to this Section, provided that such notice is received by the Administrator or its designated representative at least thirteen (13) months prior to the Benefit Commencement Date specified in such notice and designation.

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ARTICLE 6

FORMS OF RETIREMENT BENEFITS

6.1. NORMAL FORMS. The normal form of retirement benefits payable to a Participant who is eligible therefor pursuant to Article 5 hereof shall be:

(a) the Life Annuity Form (Form 1) described in Section 6.3 hereof if the Participant is not married on his Benefit Commencement Date; or

(b) the Spouse's Annuity Form (Form 2) described in Section 6.3 hereof if the Participant is married on his Benefit Commencement Date.

A Participant shall, prior to his Benefit Commencement Date, submit to the Administrator satisfactory evidence of his Age and, if he is married, satisfactory evidence of his marriage and the Age of his spouse.

6.2. ELECTION OF OTHER FORMS. Subject to certain restrictions described herein, in lieu of receiving his retirement benefits in accordance with the normal form set forth in Section 6.1 hereof, a Participant or former Participant who is eligible to receive retirement benefits pursuant to Article 5 hereof may elect, in writing, to receive his retirement benefits on the basis of any other form of retirement benefits described in Section 6.3 hereof. Any election of another form of retirement benefits shall be made by a Participant at least thirteen (13) months prior to his Benefit Commencement Date. Any such election may be revoked and made again any number of times as long as such revocation and new election is made at least thirteen (13) months prior to his Benefit Commencement Date.

Such election shall be on a form prescribed for the purpose by the Administrator and shall be signed by the Participant. Such election shall be deemed to be made when it shall have been received by the Administrator or its designated representative. Satisfactory proof of

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the Age of the Participant's spouse will be required prior to the payment of retirement benefits under Form 2, if applicable, or Form 3.

6.3. FORMS. The forms of retirement benefits payable under this Plan are as follows:

FORM 1. LIFE ANNUITY FORM. A Participant who receives payment of his retirement benefits under the Life Annuity Form shall receive an annuity commencing on his Benefit Commencement Date and providing annual retirement benefit payments during his life. No retirement benefits shall be payable after the death of the Participant.

FORM 2. SPOUSE'S ANNUITY FORM. A Participant who receives payment of his retirement benefits under the Spouse's Annuity Form shall receive an annuity commencing on his Benefit Commencement Date and providing annual retirement benefit payments during his life, with the provision that after his death fifty percent (50%) of his annual benefit shall continue during the life of and shall be paid to the person who was his spouse on his Benefit Commencement Date.

FORM 3. JOINT AND SURVIVOR FORM. A Participant who receives payment of his retirement benefits under the Joint and Survivor Form shall receive an annuity commencing on his Benefit Commencement Date and providing annual retirement benefit payments during his life, with the provision that after his death one hundred percent (100%) of his annual retirement benefit shall continue during the life of and shall be paid to the person who was his spouse on his Benefit Commencement Date.

FORM 4. SINGLE SUM FORM. A Participant who receives payment of his retirement benefits under the Single Sum Form shall receive a single sum payment on his Benefit

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Commencement Date in lieu of payments under Forms 1, 2, or 3. Notwithstanding the foregoing, the Single Sum Form is available only:

(a) to a Participant during the two (2) year period following a Change of Control, whether due to a withdrawal pursuant to
Section 5.4 or otherwise;

(b) to a Participant in payment of a distribution pursuant to
Section 13.2 hereof upon termination of the Plan;

(d) to a Participant:

(i) if the benefit is being paid due to his Retirement on or after his attainment of his Early Retirement Date; and

(ii) provided such payment is not made earlier than six (6) months after his Termination of Employment.

The Single Sum Form shall not be payable to any Participant whose benefit is payable due to his Vested Deferred Retirement pursuant to Section 5.3 hereof, regardless of when payable.

6.4. TERMS AND CONDITIONS OF FORMS. The forms of retirement benefits described in Section 6.3 hereof shall be subject to the following conditions:

(a) Except for payment of the Single Sum Form, retirement benefits (after the first payment which is payable as of the Benefit Commencement Date) shall be paid annually as of the first day of the Plan Year.

(b) Retirement benefits which are payable during the life of a Participant or spouse of a Participant shall commence as of the date specified in this Plan, if such person is then living, and shall end with the payment made as of the first day of the Plan Year during which such person shall die.

(c) Regardless of the form of retirement benefits under which a Participant was going to receive payment, if a Participant shall die prior to his Benefit Commencement Date, no retirement benefits shall be payable to the spouse of the Participant under this Article 6. Instead, benefits, if any, shall be payable under Article 8.

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(d) If any Participant shall die after the commencement of retirement benefit payments pursuant to a form described in
Section 6.3 hereof, his spouse shall receive such payment or series of payments, if any, provided for under the form of retirement benefits, commencing as of the first day of the Plan Year next following the Plan Year during which the Participant shall have died.

(e) If any Participant was to have received retirement benefits under Form 2 or Form 3 and his spouse shall die prior to his Benefit Commencement Date, then the Participant shall receive his retirement benefits under Form 1 unless, prior to his Benefit Commencement Date, he remarries.

(f) If any Participant is receiving retirement benefits under Form 2 or Form 3 and his spouse shall die after his Benefit Commencement Date, but prior to the death of the Participant, such Participant shall continue to receive the annual retirement benefits payable under such form and no retirement benefits shall be paid after the death of the Participant even though he shall remarry prior to his death.

6.5. REVOCATION OR MODIFICATION OF ELECTED FORMS. Any Participant may at any time at least thirteen (13) months before his Benefit Commencement Date:

(a) revoke an election previously made under Section 6.2 hereof by written notice duly filed with the Administrator or its designated representative in which event the Participant shall be treated the same as though his optional election had not been filed; or

(b) change his election from one to another of the forms described in Section 6.3 hereof by written notice and designation duly made and filed with the Administrator or its designated representative pursuant to Section 6.2 hereof.

6.6. CONSENT NOT REQUIRED. No consent shall be required of a person in order to elect another form of retirement benefits or to revoke such an election.

6.7. CORRECTION OF AMOUNTS PAYABLE. Anything contained in this Article 6 to the contrary notwithstanding, if, after the Retirement or other Termination of Employment of a Participant, the amount of retirement benefit which would have been payable to him under this Plan is subject to any deduction, change, offset or correction, then the amount payable to such

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Participant and his spouse shall be adjusted to reflect any such deduction, change, offset or correction.

6.8. TIMING OF PAYMENTS. Payments under this Plan generally shall be made as of the times specified elsewhere in this Plan. Notwithstanding the foregoing provision of this Section and such other provisions to the contrary, the requirement that a distribution commence on or before a particular date shall not apply if the amount of payment required to be made on such date cannot be ascertained by such date or the Administrator is unable to locate the Participant after making reasonable efforts to do so, provided that, within sixty (60) days after such amount can be ascertained or the Participant is located, a payment is made retroactive to such date. This Section is not intended to permit a Participant, former Participant or Beneficiary to elect to defer payment beyond the dates otherwise provided therefor in this Plan.

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ARTICLE 7

AMOUNT OF RETIREMENT BENEFITS

7.1. ANNUAL AMOUNT PAYABLE UNDER FORM 1 AS A NORMAL OR LATE RETIREMENT BENEFIT. The annual retirement benefit payable to a Participant who is eligible for a normal or late retirement benefit pursuant to Section 5.1 hereof and whose retirement benefit commences on or after his Normal Retirement Date and is payable under Form 1 described in Section 6.3 hereof shall be equal to his Accrued Annual Retirement Benefit. There shall be no actuarial increase of such benefit merely because such benefit shall commence after the Participant's Normal Retirement Date.

7.2. ANNUAL AMOUNT PAYABLE UNDER FORM 1 AS AN EARLY RETIREMENT OR VESTED DEFERRED RETIREMENT BENEFIT. The annual retirement benefit payable to a Participant who is eligible for an early retirement or deferred vested retirement benefit pursuant to Section 5.2 or 5.3 hereof and whose retirement benefit is payable under Form 1 described in Section 6.3 hereof shall be equal to (a) reduced by (b) where:

(a) is equal to such Participant's Accrued Annual Retirement Benefit, multiplied by his Vested Percentage; and

(b) is equal to the applicable one from among (i), (ii) or (iii) below, where:

(i) equals zero (0), i.e. there is no reduction, if his Termination of Employment occurs on or after the later of his Early Retirement Date or his attainment of Age sixty (60);

(ii) equals one-half of one percent (0.5%) of the amount determined under Subsection (a) above for each month prior to his attainment of Age sixty (60) that his retirement benefits commence if his Termination of Employment occurs prior to his attainment of Age sixty
(60) but he has attained his Early Retirement Date at the time of such Termination of Employment and such Termination of

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Employment does not occur within the two (2) year period commencing on a Change of Control; or

(iii) equals one-half of one percent (0.5%) of the amount determined under Subsection (a) above for each month prior to his Normal Retirement Date that his retirement benefits commence if his Termination of Employment occurs prior to his attainment of his Early Retirement Date, and such Termination of Employment does not occur within the two (2) year period commencing on a Change of Control.

7.3. AMOUNT PAYABLE UNDER OTHER FORMS. The retirement benefit payable to a Participant, who is eligible therefor pursuant to Article 5 hereof (other than Section 5.4 hereof) and whose retirement benefit is payable under a form of retirement benefits described in Article 6 hereof other than Form 1, shall be an adjusted amount so that his retirement benefit is the Actuarial Equivalent of the retirement benefit which he would have received under Section 7.1 or 7.2 hereof, whichever is applicable, if his retirement benefit were payable under Form 1.

7.4. AMOUNT PAYABLE IN CONNECTION WITH A CHANGE OF CONTROL. Notwithstanding the foregoing provisions of this Article 7 concerning the calculation of the amount of benefits payable under this Plan, the following special rules shall apply in the event of a Change of Control:

(a) ADDITIONAL AGE AND CONTINUOUS SERVICE. As provided in the definition of the words "Age" and "Continuous Service", if a Participant has a Termination of Employment or requests a withdrawal pursuant to Section 5.4 hereof at any time during the two (2) year period commencing on a Change of Control, the Age of a Participant or Beneficiary and the Continuous Service of a Participant shall be determined, for all Plan purposes, as of the last day of such two (2) year period.

(b) CALCULATION OF FORM 1 RETIREMENT BENEFIT. The annual retirement benefit payable to a Participant who becomes eligible for an early retirement or deferred vested retirement benefit pursuant to Section 5.2 or 5.3 hereof due to his Termination of Employment during the two (2) year period following a Change of Control and whose

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retirement benefit is payable under Form 1 described in
Section 6.3 hereof shall be equal to (i) reduced by (ii) where:

(i) is equal to such Participant's Accrued Annual Retirement Benefit (multiplied by his Vested Percentage which is in all events one hundred percent (100%) due to the Change of Control); and

(ii) is equal to the applicable one from among (A) or (B) below where:

(A) equals zero (0), i.e. there is no reduction, if his benefit commences on or after his attainment of Age sixty (60); and

(B) equals the appropriate actuarial reduction such that the benefit is the Actuarial Equivalent of the retirement benefit which would have commenced at age sixty (60) (as provided in (A) above) if his benefit commences prior to his attainment of Age sixty (60).

(c) CALCULATION OF OTHER FORMS OF RETIREMENT BENEFIT. The retirement benefit payable to a Participant, who is eligible for an early or deferred vested retirement benefit pursuant to Section 5.2 or 5.3 hereof due to his Termination of Employment during the two (2) year period following a Change of Control and whose retirement benefit is payable under a form of retirement benefit described in Article 6 hereof other than Form 1, shall be an adjusted amount so that his retirement benefit is the Actuarial Equivalent of the retirement benefit which he would have received under
Section 7.4 (b) hereof if his retirement benefit were payable under Form 1.

(d) CALCULATION OF WITHDRAWAL UNDER SECTION 5.4. The retirement benefit payable to a Participant, who is eligible for and elects during the two (2) year period following a Change of Control to make a Single Sum Form withdrawal described in
Section 5.4 hereof, shall be equal to (i) reduced by (ii) where:

(i) equals the Single Sum Form amount which would have been determined under Section 7.4(c) above if the Participant had a Termination of Employment on the date of his withdrawal election and were paid his retirement benefit in the Single Sum form at the time his withdrawal payment is made;

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(ii) equals ten percent (10%) of the amount determined under 7.4(d)(i) above.

7.5. REHIRED PARTICIPANTS. If a former Participant who has received or is entitled to a retirement benefit pursuant to this Plan shall become reemployed by a Participating Company or an Affiliated Company, such Participant shall immediately become a Participant again on the date he is reemployed and shall have reinstated for purposes of this Plan, in lieu of the previously determined retirement benefits, the Continuous Service and Accrued Annual Retirement Benefit which he had at the time he retired or terminated his employment. If any such Participant shall have already received or been receiving retirement benefits hereunder, such retirement benefits shall cease and the retirement benefits to which he shall be entitled on his subsequent Termination of Employment, whether before or after his Normal Retirement Date, shall be actuarially reduced for the amount of benefits he shall have received prior to his reemployment.

7.6. NONDUPLICATION OF BENEFITS FOLLOWING A CHANGE OF CONTROL. In the event of a Change of Control, the Plan provides for certain deemed increases to the Age and Continuous Service of a Participant for purposes of this Plan. The employment agreement or other agreement of the Participant also may provide for guaranteed continuing participation in this Plan for a period of time following a Change of Control or a related event such as a termination of employment occurring in a window period following a Change of Control. Unless otherwise specifically provided in such employment agreement or other agreement, it is not intended that the Participant receive both the deemed increase in Age and Continuous Service under this Plan and the guaranteed participation under this Plan to the extent receiving both essentially would be a duplication of benefit accrual for the same period and/or deemed period of time. The intention is that, in such case, for any period for which the Participant

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receives credit for deemed increases in Age and Continuous Service with respect to any benefit hereunder, the Participant shall not also receive duplicative credit, for the same period, for increases in Age and Continuous Service with respect to his guaranteed continuing participation in the Plan.

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ARTICLE 8

DEATH BENEFITS

8.1. DEATH ON OR AFTER BENEFIT COMMENCEMENT DATE. In the event of the death of a Participant or former Participant on or after his Benefit Commencement Date, there shall be paid to his Beneficiary, if any, the death benefit, if any, provided under the form of retirement benefits under which such Participant was receiving retirement benefits.

8.2. DEATH PRIOR TO BENEFIT COMMENCEMENT DATE. In the event of the death of a Participant while he is an Employee, or a former Participant who is no longer an Employee and whose Vested Percentage is greater than zero (0), and whose Benefit Commencement Date has not occurred, the Beneficiary designated by the Participant in a manner determined by the Administrator, if any, shall be entitled to receive a death benefit pursuant to this Section which shall be paid as soon as reasonably practicable, but not later than sixty (60) days following the death of the Participant. If the Participant has not designated a Beneficiary, such benefit shall be paid to the Surviving Spouse of the Participant, or in the absence of such a Surviving Spouse, to the estate of the Participant.

The death benefit shall be payable in the Single Sum Form described in
Section 6.3 hereof in an amount which is the Actuarial Equivalent of the value of the benefit which the Participant would have received if he had a Termination of Employment on the earlier to occur of the actual date of his Termination of Employment or the day before his date of death and had elected to receive his retirement benefit commencing on the later to occur of:

(a) the day before his date of death; or

(b) the earliest day on which he could have received a retirement benefit under this Plan if he had terminated his employment on the

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earlier to occur of the actual date of his Termination of Employment or the day before his date of death.

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ARTICLE 9

RIGHTS OF PARTICIPANTS AND BENEFICIARIES

9.1. CREDITOR STATUS OF PARTICIPANT AND BENEFICIARY. This Plan constitutes the unfunded, unsecured promise of the Participating Companies to make benefit payments to each Participant and Beneficiary in the future and shall be a liability solely against the general assets of the Participating Companies. The Participating Companies shall not be required to segregate, set aside or escrow any amounts for the benefit of any Participant or Beneficiary. Each Participant and Beneficiary shall have the status of a general unsecured creditor of the Participating Companies and may look only to the Participating Companies and their general assets for payment of benefits under this Plan.

9.2. RIGHTS WITH RESPECT TO A TRUST. Any Trust, and any assets held thereby to assist the Participating Companies in meeting their obligations under this Plan, shall in no way be deemed to contravene the provisions of Section 9.1 hereof.

9.3. INVESTMENTS. In its sole discretion, the Company may acquire (or direct the Participating Companies to acquire) insurance policies, annuities or other financial vehicles for the purpose of providing future assets of the Participating Companies to meet their anticipated liabilities under this Plan. Such policies, annuities or other investments shall at all times be and remain unrestricted general property and assets of the Participating Companies or property of a Trust. Participants and Beneficiaries shall have no rights, other than as general creditors, with respect to such policies, annuities or other acquired assets.

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ARTICLE 10

TRUST

10.1. ESTABLISHMENT OF TRUST. Notwithstanding any other provision or interpretation of this Plan, the Company may establish a Trust in which to hold cash, insurance policies or other assets to be used to make, or reimburse the Participating Companies for, payments to the Participants or Beneficiaries of all or part of the benefits under this Plan. Any Trust assets shall at all times remain subject to the claims of general creditors of the Participating Companies in the event of their insolvency as more fully described in the Trust.

10.2. OBLIGATIONS OF THE COMPANY. Notwithstanding the fact that a Trust may be established under Section 10.1 hereof, the Company shall remain liable for paying the benefits under this Plan. However, any payment of benefits to a Participant or a Beneficiary made by such a Trust shall satisfy the Company's obligation to make such payment to such person.

10.3. TRUST TERMS. A Trust established under Section 10.1 hereof may be revocable by the Company; provided, however, that such a Trust may become irrevocable in accordance with its terms in the event of a Change of Control. Such a Trust may contain such other terms and conditions as the Company may determine to be necessary or desirable. The Company may terminate or amend a Trust established under Section 10.1 hereof at any time, and in any manner it deems necessary or desirable, subject to the preceding sentence and the terms of any agreement under which any such Trust is established or maintained.

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ARTICLE 11

CLAIMS PROCEDURE

11.1. CLAIM FOR BENEFITS. Any claim for benefits under this Plan shall be made in writing to the Administrator in such a manner as the Administrator shall reasonably prescribe. Such claim may be made by the Participant or Beneficiary claiming a benefit hereunder or by an authorized representative described in and subject to the rules contained in Section 11.2 hereof. The Administrator shall process each such claim and determine entitlement to benefits within thirty (30) days following its receipt of a completed application for benefits unless special circumstances require an extension of time for processing the claim. If such an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial thirty (30) day period. In no event shall such extension exceed a period of thirty (30) days from the end of such initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date as of which the Administrator expects to render the final decision.

If such a claim is wholly or partially denied by the Administrator, the Administrator shall notify the claimant of the denial of the claim in writing, delivered in person or mailed by first class mail to the claimant's last known address. Such notice of denial shall contain:

(a) the specific reason or reasons for denial of the claim;

(b) a reference to the relevant Plan provisions upon which the denial is based;

(c) a description of any additional material or information necessary for the claimant to perfect the claim, together with an explanation of why such material or information is necessary; and

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(d) an explanation of this Plan's claim review procedure including applicable time limits and the claimant's right to bring a civil action under Section 502(a) of ERISA following an adverse benefit determination on appeal.

If no such notice is provided, and if the claim has not been granted within the time specified above for approval of the claim, the claim shall be deemed denied and subject to review as described below. The interpretations, determinations and decisions of the Administrator shall be final and binding upon all persons with respect to any right, benefit and privilege hereunder, subject to the review procedures set forth in this Article 11.

11.2. AUTHORIZED REPRESENTATIVE. The claimant may designate an authorized representative to act on his behalf in pursuing a benefit claim or appeal of an adverse benefit determination. The Administrator and Appeals Committee may demand reasonable evidence that the representative has been duly authorized by the claimant including evidence as to the scope of the representation and whether notices due the claimant under these claims procedures are to be given to the claimant, the representative or both. Depending on the extent of authorization given to the representative hereunder, references to the claimant in these claims procedures may be deemed to refer to or include the authorized representative.

11.3. REQUEST FOR REVIEW OF A DENIAL OF A CLAIM FOR BENEFITS. Any claimant whose claim for benefits under this Plan has been denied or deemed denied, in whole or in part, by the Administrator may upon written notice delivered to the Appeals Committee request a review by the Appeals Committee of such denial of his claim for benefits. Such claimant shall have sixty (60) days from the date the claim is deemed denied, or sixty (60) days from receipt of the notice denying the claim, as the case may be, in which to request such a review. The claimant's notice must specify the relief requested and the reason such claimant believes the denial should be reversed.

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11.4. APPEALS PROCEDURE. The Appeals Committee is hereby authorized to review the facts and relevant documents, including this Plan, to interpret this Plan and other relevant documents and to render a decision on the appeal of the claimant. Such review may be made by written briefs submitted by the claimant and the Administrator or at a hearing, or by both, as shall be deemed necessary by the Appeals Committee. If no hearing is to be held, the claimant and the Administrator shall have thirty (30) days following the filing of the request for review to submit written comments, documents, records and other information relating to the claim. During this period, the claimant shall be provided, on request and free of charge, reasonable access to, and copies of, all documentation, records, and other information relevant to the claimant's claim for benefits. Whether a document, record or other information is relevant to a claim for benefits shall be determined pursuant to appropriate regulations under
Section 503 of ERISA. The claimant and the Administrator may submit additional comments, etc., after the close of the thirty (30) day period only at the request or with the consent of the Appeals Committee. Alternatively, upon receipt of a request for review, the Appeals Committee may schedule a hearing to be held (subject to reasonable scheduling conflicts) not less than thirty (30) nor more than forty-five (45) days from the receipt of such request. The date and time of such hearing shall be designated by the Appeals Committee upon not less than fifteen (15) days' notice to the claimant and the Administrator unless both of them accept shorter notice. The notice shall specify that such claimant must indicate in writing, at least five (5) days in advance of the time established for such hearing, his intention to appear at the appointed time and place, or the hearing will automatically be canceled. The reply shall specify any other persons who will accompany him to the hearing, or appear in his place, or such other persons will not be admitted to the hearing. The Appeals Committee may limit attendance at the hearing. The Appeals

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Committee shall make every effort to schedule the hearing on a day and at a time which is convenient to both the claimant and the Administrator. The hearing will be scheduled at the Company's headquarters unless the Appeals Committee determines that another location would be more appropriate. The claimant shall be provided, on request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant's claim for benefits in preparation for the hearing. Whether a document, record or other information is relevant to a claim for benefits shall be determined pursuant to appropriate regulations under Section 503 of ERISA. The claimant and the Administrator may subject written comments, documents, records and other information relating to the claim prior to or during the hearing. The claimant and the Administrator may submit additional comments, etc., after the hearing only at the request or with the consent of the Committee.

11.5. DECISION UPON REVIEW OF DENIAL OF CLAIM FOR BENEFITS. After the review has been completed, the Appeals Committee shall render a decision in writing, a copy of which shall be sent to both the claimant and the Administrator. In making its decision the Appeals Committee shall have full power, authority, and discretion to determine any and all questions of fact, resolve all questions of interpretation of this instrument or related documents which may arise under any of the provisions of this Plan or such documents as to which no other provision for determination is made hereunder, and exercise all other powers and discretions necessary to be exercised under the terms of this Plan which it is herein given or for which no contrary provision is made and to determine the right to benefits of, and the amount of benefits, if any, payable to, any person in accordance with the provisions of this Plan. Further, in making its decision, the Appeals Committee shall take into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such

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information was submitted or considered in the initial benefit determination. Subject to extension by agreement of the claimant and the Administrator or where due to delay beyond the control of the Administrator or the Appeals Committee, the Appeals Committee shall render a decision on the claim review not more than sixty (60) days after the receipt of the claimant's request for review, unless a hearing is scheduled, in which case the sixty (60) day period shall be extended to thirty (30) days after the date scheduled for the hearing. Such decision shall be written in a manner calculated to be understood by the claimant, and shall:

(a) set forth the specific reason or reasons for the adverse determination;

(b) contain references to the specific Plan provisions on which the benefit determination was based; and

(c) contain a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant's claim for benefits. Whether a document, record or other information is relevant to a claim for benefits shall be determined pursuant to appropriate regulations under Section 503 of ERISA.

The decision on review shall be furnished to the claimant within the appropriate time described above. If the decision on review is not furnished within such time, the claim shall be deemed denied on review at the end of such period. There shall be no further appeal from a decision rendered by the Appeals Committee. The decision of the Appeals Committee shall be final and binding in all respects on the Administrator, the Participating Companies and the claimant. Except as otherwise provided by law, the review procedures of this Article 11 shall be the claimant's sole and exclusive remedy and shall be in lieu of all actions at law, in equity, pursuant to arbitration or otherwise. If the law provides that the claimant shall be permitted to bring a legal action alleging a claim for benefits hereunder, no such legal action may be commenced by any Participant or other person against the Company or any Participating Company, the Plan, the

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Administrator or any other person or any employee of any of the foregoing, or the Board, the Compensation Committee or the Appeals Committee (or any member of any of them) in connection with any claim hereunder until such Participant or other person has pursued such claim under this claims procedure through the review process described in this Article 11. Thereafter, no such legal action may be commenced by such Participant or other person more than one hundred eighty (180) days after the Appeals Committee's final decision has been rendered or deemed rendered with respect to such claim.

11.6. ESTABLISHMENT OF APPEALS COMMITTEE. The Board shall appoint the members of an Appeals Committee which shall consist of three (3) or more members. The members of the Appeals Committee shall remain in office at the will of the Board, and the Board, from time to time, may remove any of said members with or without cause. A member of the Appeals Committee may resign upon written notice to the remaining member or members of the Appeals Committee and to the Board, respectively. The fact that a person is a Participant or a former Participant or a prospective Participant shall not disqualify him from acting as a member of the Appeals Committee, nor shall any member of the Appeals Committee be disqualified from acting on any question because of his interest therein, except that no member of the Appeals Committee may act on any claim which such member has brought as a Participant, former Participant or Beneficiary under this Plan. In case of the death, resignation or removal of any member of the Appeals Committee, the remaining members shall act until a successor-member shall be appointed by the Board. At the Administrator's request, the Secretary of the Company shall notify the Administrator in writing of the names of the original members of the Appeals Committee, of any and all changes in the membership of the Appeals Committee, of the member designated as Chairman, and the member designated as Secretary,

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and of any changes in either office. Until notified of a change, the Administrator shall be protected in assuming that there has been no change in the membership of the Appeals Committee or the designation of Chairman or of Secretary since the last notification was filed with it. The Administrator shall be under no obligation at any time to inquire into the membership of the Appeals Committee or its officers. All communications to the Appeals Committee shall be addressed to its Secretary at the address of the Company. Unless the Board shall appoint others as the Appeals Committee, the three (3) Board members with the longest period of active service on the Board shall constitute such Committee.

11.7. OPERATIONS AND POWERS OF APPEALS COMMITTEE. On all matters and questions, a decision of a majority of the members of the Appeals Committee shall govern and control. Meetings may be held in person or by electronic means. In lieu of a meeting, decisions may be made by unanimous written consent. The Appeals Committee shall appoint one of its members to act as its Chairman and another member to act as Secretary. The terms of office of these members shall be determined by the Appeals Committee, and either or both the Secretary and Chairman may be removed by the other members of the Appeals Committee for any reason which such other members may deem just and proper. The Secretary shall do all things directed by the Appeals Committee. Although the Appeals Committee shall act by decision of a majority of its members as above provided, nevertheless in the absence of written notice to the contrary, every person may deal with the Secretary and consider his acts as having been authorized by the Appeals Committee. Any notice served or demand made on the Secretary shall be deemed to have been served or made upon the Appeals Committee.

In addition to the powers specifically granted to the Appeals Committee elsewhere in this Article 11, the Committee shall have full administrative power to carry out its

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responsibilities under this Plan. Without limiting the generality of the foregoing, the Appeals Committee shall have full power to determine all administrative matters concerning the handling of appeals including the holding of hearings and all rules attendant thereto, and all of its decisions on such matters shall be final and not appealable. However, the Appeals Committee shall exercise its power with relative uniformity and in a generally nondiscriminatory manner in conformity with Section 503 of ERISA and applicable lawful regulations thereunder.

11.8. SPECIAL PROVISIONS RELATING TO DISABILITY. In the event of a claim which involves determination of whether a Participant suffers from a Disability, then, to the extent provided by applicable regulations under Section 503 of ERISA, the foregoing claims procedures shall be modified to conform to the special provisions contained in such regulations applicable to disability benefits. Without limiting the generality of the foregoing, to the extent applicable because a determination is needed beyond the question of whether the Participant is entitled to benefits under a Participating Company's long term disability benefit plan, such special provisions shall include:

(a) the special provisions contained in Regulation Section 2560.503-1(g)(v) and 2560.503-1(j)(5) regarding internal rules, guidelines, protocols and similar criteria;

(b) the special provisions referred to in Regulation Section 2560.503-1(h)(4) dealing with Appeals Committee membership, use of health care professionals and medical or vocational experts and extending the claimant's appeal period to one hundred and eighty (180) days; and

(c) the special provisions referred to in Regulation Section 2560.503-1(i)(3) accelerating the time for the Appeals Committee's decision.

11.9. SPECIAL PROVISIONS RELATING TO CHANGE OF CONTROL. In the event of a Change of Control, then notwithstanding the contrary provisions of this Article, for the two (2) year period following such Change of Control, the three
(3) individuals having the greatest

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Accrued Annual Retirement Benefits under this Plan shall assume the responsibilities of the Appeals Committee set forth in this Article. If one or more of them shall not be able to serve or to continue to serve, the individual or individuals, as applicable, having the next largest Accrued Annual Retirement Benefits under this Plan will serve in such person's or persons' place. If at any time during such two (2) year period fewer than three (3) individuals have Accrued Annual Retirement Benefits under this Plan, such individual or individuals shall perform the duties of the Appeals Committee. If only one (1) individual has Accrued Annual Retirement Benefits under this Plan, the Appeals Committee shall not consist of such individual but shall consist of such individual as he and the Company shall agree. If he and the Company shall fail to agree on a single individual, the Appeals Committee shall consist of three
(3) individuals, one appointed by the Company, one appointed by the individual claiming benefits hereunder, and a third selected by the other two (2).

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ARTICLE 12

ADMINISTRATION

12.1. APPOINTMENT OF ADMINISTRATOR. The Board shall appoint the Administrator which shall be any person(s), corporation or partnership (including the Company itself) as said Board shall deem desirable in its sole discretion. The Administrator may be removed or resign upon thirty (30) days' written notice or such lesser period of notice as is mutually agreeable. Unless the Board appoints another Administrator, the Compensation Committee shall be the Administrator.

12.2. POWERS AND DUTIES OF THE ADMINISTRATOR. Except as expressly otherwise set forth herein, the Administrator shall have the authority and responsibility granted or imposed on an "administrator" by ERISA. The Administrator shall determine any and all questions of fact, resolve all questions of interpretation of this Plan and related documents which may arise under any of the provisions of this Plan or such documents as to which no other provision for determination is made hereunder, and exercise all other powers and discretions necessary to be exercised under the terms of this Plan which it is herein given or for which no contrary provision is made. The Administrator shall have full power and discretion to interpret this Plan and related documents, to resolve ambiguities, inconsistencies and omissions, to determine any question of fact, and to determine the rights and benefits, if any, of any Participant or other claimant, in accordance with the provisions of this Plan. Subject to the provisions of any claims procedure hereunder, the Administrator's decision with respect to any matter shall be final and binding on all parties concerned, and neither the Administrator nor any of its directors, officers, employees or delegates nor, where applicable, the directors, officers or employees of any delegate, shall be liable in that regard except for gross abuse of the discretion given it and them under the terms of

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this Plan. All determinations of the Administrator shall be made in a uniform, consistent and nondiscriminatory manner with respect to all Participants and Beneficiaries in similar circumstances. The Administrator, from time to time, may designate one or more persons or agents to carry out any or all of its duties hereunder.

12.3. ENGAGEMENT OF ADVISORS. The Administrator may employ actuaries, attorneys, accountants, brokers, employee benefit consultants, and other specialists to render advice concerning any responsibility the Administrator, Appeals Committee or Compensation Committee has under this Plan. Such persons may also be advisors to any Participating Company.

12.4. PAYMENT OF COSTS AND EXPENSES. The costs and expenses incurred in the administration of this Plan shall be paid in either of the following manners as determined by the Company in its sole discretion:

(a) the expenses may be paid directly by one or more of the Participating Companies; or

(b) the expenses may be paid out of the Trust, if any (subject to any restriction contained in such Trust or required by law).

Such costs and expenses include those incident to the performance of the responsibilities of the Administrator, Appeals Committee or Compensation Committee, including but not limited to, claims administration fees and costs, fees of accountants, legal counsel and other specialists, bonding expenses, and other costs of administering this Plan. Notwithstanding the foregoing, in no event will any person serving in the capacity of Administrator, Appeals Committee member or Compensation Committee member who is a full-time employee of a Participating Company be entitled to any compensation for such services.

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ARTICLE 13

AMENDMENT AND TERMINATION

13.1. POWER TO AMEND OR TERMINATE. Except as otherwise provided herein following a Change of Control, this Plan may be amended by the Company at any time, or from time to time, and may be terminated by the Company at any time, but no such amendment, modification or termination shall reduce the Accrued Annual Retirement Benefit or Vested Percentage of any Participant, determined as of the date of such amendment, modification or termination. Such amendment or termination shall be in writing, executed by two or more officers of the Company whose actions are authorized or ratified by the Board. This Plan may not be amended (but may be terminated) during the two (2) year period following a Change of Control except that amendments may be made as required by law.

13.2. EFFECTS OF PLAN TERMINATION. If this Plan is terminated, then, on and after the effective date of such termination, all accruals hereunder shall cease. Thereafter, the Vested Percentage of each Participant shall become one hundred percent (100%) and the Actuarial Equivalent of each Participant's Accrued Annual Retirement Benefit shall be distributed to such Participant in the Single Sum Form described in Section 6.3 hereof as soon as reasonably possible but not later than ninety (90) days after the date of such termination.

13.3. NO LIABILITY FOR PLAN AMENDMENT OR TERMINATION. Neither the Company, nor any other Participating Company, nor any officer, Employee or director thereof shall have any liability as a result of the amendment or termination of this Plan. Without limiting the generality of the foregoing, the Company shall have no liability for terminating this Plan notwithstanding the fact that a Participant may have expected to have future accruals hereunder had this Plan remained in effect.

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ARTICLE 14

PARTICIPATING COMPANIES

14.1. LIST OF PARTICIPATING COMPANIES. The Participating Companies as of the Effective Date are as follows:

Participating Companies                 Adoption Date        Termination Date
-----------------------                 -------------        ----------------

Pioneer-Standard Electronics, Inc.      April 27, 1999
Pioneer-Standard of Maryland, Inc.      April 27, 1999
Pioneer-Standard Illinois, Inc.         April 27, 1999
Pioneer-Standard Minnesota, Inc.        April 27, 1999
Pioneer-Standard Electronics, Ltd.      April 27, 1999
Dickens Data Systems, Inc.              April 27, 1999
Aprisa, Inc.                            April 1, 2002

14.2. DESIGNATION OF PARTICIPATING COMPANIES. An Affiliated Company may become a Participating Company under this Plan at any time. Such an Affiliated Company, if organized under the laws of the United States of America or any State, shall become a Participating Company, without the need for amendment hereof, upon attaining such Affiliated Company status unless otherwise provided by the Compensation Committee. Alternatively, such an Affiliated Company may become a Participating Company by an amendment to Section 14.1 hereof which specifies the name of the Affiliated Company, its Adoption Date and other pertinent information.

14.3. ADOPTION OF SUPPLEMENTS. The Company may determine that special provisions shall be applicable to some or all of the Senior Executives of a Participating Company, either in addition to or in lieu of certain provisions of this Plan. In such event, the Company shall adopt a Supplement with respect to the Participating Company which employs such individuals which Supplement shall specify by name or otherwise the Senior Executives of the Participating Company covered thereby and the special provisions applicable to such Senior

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Executives. Any Supplement shall be deemed to be a part of this Plan solely with respect to the Senior Executives specified therein.

14.4. AMENDMENT OF SUPPLEMENTS. The Company, from time to time, may amend, modify or terminate any Supplement; provided, however, that no such action shall operate so as to deprive any Senior Executive who was covered by such Supplement of any vested rights to which he is entitled under this Plan or the Supplement.

14.5. TERMINATION OF PARTICIPATION OF PARTICIPATING COMPANY. A Participating Company whose status as an Affiliated Company terminates shall no longer be deemed a Participating Company as of the date of the termination of such Affiliated Company status. Alternatively, the Company may terminate this Plan with respect to Participants employed by any Participating Company by an amendment to Section 14.1 hereof which specifies the name of the Participating Company, and its Termination Date, and other pertinent information. Distribution of the benefits of Participants employed by said Participating Company shall thereupon be made in the manner provided in Article 13 hereof.

14.6. DELEGATION OF AUTHORITY. The Company is hereby fully empowered to act on behalf of itself and the other Participating Companies as it may deem appropriate in maintaining the Plan. Without limiting the generality of the foregoing, such actions include obtaining and retaining relevant tax advantages for the Plan. Furthermore, the adoption by the Company of any amendment to the Plan or the termination thereof, will constitute and

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represent, without any further action on the part of any Participating Company, the approval, adoption, ratification or confirmation by each Participating Company of any such amendment or termination. In addition, the appointment of or removal by the Company of any member of the Appeals Committee, any Administrator or other person under the Plan shall constitute and represent, without any further action on the part of any Participating Company, the appointment or removal by each Participating Company of such person.

14.7. AMENDMENT RESTRICTIONS AND PROCEDURES. Amendments authorized by this Article 14, including those adding or removing a Participating Company, shall be subject to the provisions of Article 13 hereof dealing with amendment and termination of the Plan, as applicable.

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ARTICLE 15

MISCELLANEOUS PROVISIONS

15.1. NON-ALIENATION. No benefits under this Plan shall be subject in any manner to be anticipated, alienated, sold, transferred, assigned, pledged, encumbered, attached, garnished or charged in any manner (either at law or in equity), and any attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber, attach, garnish or charge the same shall be void; nor shall any such benefits in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of the person entitled to such benefits as are herein provided for him.

15.2. TAX WITHHOLDING. The Company or any other Participating Company may withhold from a Participant's compensation or any payment made by it under this Plan such amount or amounts as may be required for purposes of complying with the tax withholding or other provisions of the Code or the Social Security Act or any state or local income or employment tax act or for purposes of paying any estate, inheritance or other tax attributable to any amounts payable hereunder.

15.3. INCAPACITY. If the Administrator determines that any Participant or other person entitled to payments under this Plan is incompetent by reason of physical or mental disability and is consequently unable to give a valid receipt for payments made hereunder, or is a minor, the Administrator may order the payments becoming due to such person to be made to another person for his benefit, without responsibility on the part of the Administrator to follow the application of amounts so paid. Payments made pursuant to this Section shall completely discharge the Administrator, the Company and the other Participating Companies and the Appeals Committee with respect to such payments.

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15.4. ADMINISTRATIVE FORMS. All applications, elections and designations in connection with this Plan made by a Participant or other person shall become effective only when duly executed on forms provided by the Administrator and filed with the Administrator.

15.5. INDEPENDENCE OF PLAN. Except as otherwise expressly provided herein, this Plan shall be independent of, and in addition to, any other benefit agreement or plan of a Participating Company or any rights that may exist from time to time thereunder.

15.6. NO EMPLOYMENT RIGHTS CREATED. This Plan shall not be deemed to constitute a contract of employment between the Company or any other Participating Company and any Participant, nor confer upon any Participant the right to be retained in the service of the Company or any other Participating Company for any period of time, nor shall any provision hereof restrict the right of any Company to discharge or otherwise deal with any Participant.

15.7. RESPONSIBILITY FOR LEGAL EFFECT. Neither the Company, nor any other Participating Company, nor the Administrator or the Compensation Committee or Appeals Committee, nor any officer, member, delegate or agent of any of them, makes any representations or warranties, express or implied, or assumes any responsibility concerning the legal, tax, or other implications or effects of this Plan. Without limiting the generality of the foregoing, no Participating Company shall have any liability for the tax liability which a Participant may incur resulting from participation in this Plan or the payment of benefits hereunder.

15.8. LIMITATION OF DUTIES. The Company, the Participating Companies, the Compensation Committee, the Administrator, the Appeals Committee, and their respective officers, members, employees and agents shall have no duty or responsibility under this Plan other than the duties and responsibilities expressly assigned to them herein or delegated to them

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pursuant hereto. None of them shall have any duty or responsibility with respect to the duties or responsibilities assigned or delegated to another of them.

15.9. LIMITATION OF SPONSOR LIABILITY. Any right or authority exercisable by the Company, pursuant to any provision of this Plan, shall be exercised in the Company's capacity as sponsor of this Plan, or on behalf of the Company in such capacity, and not in a fiduciary capacity, and may be exercised without the approval or consent of any person in a fiduciary capacity. Neither the Company, nor any of its respective officers, members, employees, agents and delegates, shall have any liability to any party for its exercise of any such right or authority.

15.10. SUCCESSORS. The terms and conditions of this Plan shall inure to the benefit of and bind the Company, the other Participating Companies, the Participants, their Beneficiaries, and the successors and personal representatives of the Participants and their Beneficiaries.

15.11. CONTROLLING LAW. This Plan shall be construed in accordance with the laws of the State of Ohio to the extent not preempted by laws of the United States.

15.12. HEADINGS AND TITLES. The Section headings and titles of Articles used in this Plan are for convenience of reference only and shall not be considered in construing this Plan.

15.13. GENERAL RULES OF CONSTRUCTION. The masculine gender shall include the feminine and neuter, and vice versa, as the context shall require. The singular number shall include the plural, and vice versa, as the context shall require. The present tense of a verb shall include the past and future tenses, and vice versa, as the context may require.

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15.14. EXECUTION IN COUNTERPARTS. This Plan may be executed in any number of counterparts each of which shall be deemed an original and said counterparts shall constitute but one and the same instrument and may be sufficiently evidenced by any one counterpart.

15.15. SEVERABILITY. In the event that any provision or term of this Plan, or any agreement or instrument required by the Administrator hereunder, is determined by a judicial, quasi-judicial or administrative body to be void or not enforceable for any reason, all other provisions or terms of this Plan or such agreement or instrument shall remain in full force and effect and shall be enforceable as if such void or nonenforceable provision or term had never been a part of this Plan, or such agreement or instrument except as to the extent the Administrator determines such result would have been contrary to the intent of the Company in establishing and maintaining this Plan.

15.16. INDEMNIFICATION. The Participating Companies shall jointly and severally indemnify, defend, and hold harmless any Employee, officer or director of any Participating Company for all acts taken or omitted in carrying out the responsibilities of the Company, Participating Company, Compensation Committee, Administrator or Appeals Committee under the terms of this Plan or other responsibilities imposed upon such individual by law. This indemnification for all such acts taken or omitted is intentionally broad, but shall not provide indemnification for any civil penalty that may be imposed by law, nor shall it provide indemnification for embezzlement or diversion of Plan funds for the benefit of any such individual. The Participating Companies shall jointly and severally indemnify any such individual for expenses of defending an action by a Participant, dependent, service provider, government entity or other person, including all legal fees and other costs of such defense. The Participating Companies shall also reimburse any such an individual for any monetary recovery

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in a successful action against such individual in any federal or state court or arbitration. In addition, if a claim is settled out of court with the concurrence of the Company, the Participating Companies shall jointly and severally indemnify any such individual for any monetary liability under any such settlement, and the expenses thereof. Such indemnification will not be provided to any person who is not a present or former Employee or director of a Participating Company nor shall it be provided for any claim by a Participating Company against any such individual.

15.17. PAPERLESS ADMINISTRATION. If this Plan requires that an action shall be in writing, then, to the extent permitted and effective pursuant to law, and approved by the Administrator, such action may be taken in person, telephonically or electronically in lieu of such written action.

IN WITNESS WHEREOF, PIONEER-STANDARD ELECTRONICS, INC., the Company, by its appropriate officers duly authorized, has caused this amended and restated Plan to be executed and adopted the 30th day of April, 2002, generally effective as of the 29th day of January, 2002.

PIONEER-STANDARD ELECTRONICS, INC.

("Company")

By  /s/ Arthur Rhein
    ------------------------

And /s/ Richard A. Sayers II
    ------------------------


        15-5

EXHIBIT 10(y)

FOURTH AMENDMENT TO FIVE-YEAR CREDIT AGREEMENT

THIS FOURTH AMENDMENT TO FIVE-YEAR CREDIT AGREEMENT, dated as of May 6, 2002 (this "Amendment"), is among Pioneer-Standard Electronics, Inc., an Ohio corporation (the "Borrower"), the Foreign Subsidiary Borrowers party hereto (if any), the Lenders party hereto and Bank One, Michigan, a Michigan banking corporation having its principal office in Detroit, Michigan, as LC Issuer and as Agent.

RECITAL

The Borrower, the Foreign Subsidiary Borrowers and Lenders party thereto, the LC Issuer and the Agent are parties to a Five-Year Credit Agreement dated as of September 15, 2000, as amended by a First Amendment to Five-Year Credit Agreement dated as of November 14, 2000, a Second Amendment to Five-Year Credit Agreement dated as of March 23, 2001 and a Third Amendment to Five-Year Credit Agreement dated as of January 29, 2002 (the "Five-Year Credit Agreement"). The Borrower desires to amend the Five-Year Credit Agreement and the Agent, the LC Issuer and the Lenders are willing to do so in accordance with the terms hereof.

TERMS

In consideration of the premises and of the mutual agreements herein contained, the parties agree as follows:

ARTICLE 1.
AMENDMENTS

The Five-Year Credit Agreement is amended as follows:

1.1 The definition of Consolidated EBITDA in Article I is amended, effective as of March 31, 2002, by adding the following to the end thereof:

, PLUS (e) to the extent deducted in determining such Consolidated Net Income, a one time charge not to exceed $8,600,000 due to the write-down of obsolete inventory in the fiscal quarter ended March 31, 2002.

1.2 Section 2.6(ii) is amended, effective as of the date hereof, by adding the following to the end thereof: "Notwithstanding anything herein to the contrary, as of May 6, 2002 the Aggregate Commitment shall be further reduced to $100,000,000, such reduction to be pro rata among the Lenders."

ARTICLE 2.
REPRESENTATIONS

The Borrower represents and warrants to the Agent, the LC Issuer and the Lenders that:

2.1 The execution, delivery and performance of this Amendment are within its powers, have been duly authorized by the Borrower and are not in contravention of any Requirement of Law. This

Amendment is the legal, valid and binding obligations of the Borrower, enforceable against it in accordance with the terms thereof.

2.2 After giving effect to the amendments and waiver herein contained, the representations and warranties contained in the Five-Year Credit Agreement and the representations and warranties contained in the other Loan Documents are true on and as of the date hereof with the same force and effect as if made on and as of the date hereof, except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall have been true and correct on and as of such earlier date, and no Default or Unmatured Default exists or has occurred and is continuing on the date hereof.

ARTICLE 3.
CONDITIONS PRECEDENT.

The amendments in Article 1 of this Amendment shall be effective as of the date specified in each such amendment when (a) this Amendment shall be executed by the Borrower, the Required Lenders, the LC Agent and the Agent and
(b) the Borrower shall have delivered to the Agent an executed copy of an amendment to the Agreement for Inventory Purchases in form and substance satisfactory to the Agent on or before May 15, 2002, which amendment shall make all covenants in the Agreement for Inventory Purchases, including defined terms used therein, no more restrictive than the covenants in the Five-Year Credit Agreement after giving effect to this Amendment.

ARTICLE 4.
MISCELLANEOUS.

4.1 The Borrower shall pay to the Agent, for the pro rata benefit of the Lenders signing this Amendment on or before 2:00 p.m., Detroit time, on the date hereof, a non-refundable fee equal to 12.5 basis points on each such Lender's Commitment (after giving effect to the reduction in the aggregate commitment pursuant to this Amendment), such fee to be paid on or within two Business Days of the date hereof.

4.2 References in the Five-Year Credit Agreement or in any other Loan Document to the Five-Year Credit Agreement shall be deemed to be references to the Five-Year Credit Agreement as amended hereby and as further amended from time to time.

4.3 Except as expressly amended hereby, the Borrower agrees that the Loan Documents are ratified and confirmed and shall remain in full force and effect and that it has no set off, counterclaim, defense or other claim or dispute with respect to any of the foregoing. The terms used but not defined herein shall have the respective meanings ascribed thereto in the Five-Year Credit Agreement.

4.4 This Amendment may be signed upon any number of counterparts with the same effect as if the signatures thereto and hereto were upon the same instrument, and telecopied signatures shall be enforceable as originals.

IN WITNESS WHEREOF, the parties signing this Amendment have caused this Amendment to be executed and delivered as of the day and year first above written.

PIONEER-STANDARD ELECTRONICS, INC.

By:      /s/ Jean M. Miklosko
    -----------------------------------------
             Jean M. Miklosko

Title:   Vice President & Treasurer
       -------------------------------------

BANK ONE, MICHIGAN,
as Administrative Agent and as a Lender

By:      /s/ Glenn A Currin
    -----------------------------------------
             Glenn A. Currin

Title:   Director
       --------------------------------------

KEYBANK NATIONAL ASSOCIATION,
as Syndication Agent and as a Lender

By:      /s/ Jeff Kalinowski
    -----------------------------------------
             Jeff Kalinowski

Title:   Vice President
       --------------------------------------

ABN AMRO BANK N.V.,
as Documentation Agent and as a Lender

By:      /s/ Lynn R. Schade
    -----------------------------------------
             Lynn R. Schade

Title:   Group Vice President
       --------------------------------------

By:      /s/ Jana Dombrowski
    -----------------------------------------
             Jana Dombrowski

Title:   Vice President
       --------------------------------------

FIRSTAR BANK,
as Managing Agent and as Lender

By:      /s/ John D. Barrett
    -----------------------------------------
             John D. Barrett

Title:   Senior Vice President
       --------------------------------------

THE BANK OF TOKYO-MITSUBISHI, LTD.,
as a Co-Agent and as a Lender

By:      /s/ Shinichiro Munechika
    -----------------------------------------
             Shinichiro Munechika

Title:   Deputy General Manager
       --------------------------------------

JP MORGAN CHASE BANK,
as a Co-Agent and as a Lender

By:      /s/ Henry W. Centa
    -----------------------------------------

Title:   Vice President
       --------------------------------------

COMERICA BANK,
as a Co-Agent and as a Lender

By:      /s/ Jeffrey J. Judge
    -----------------------------------------
             Jeffrey J. Judge

Title:   Vice President
       --------------------------------------

HARRIS TRUST AND SAVINGS BANK,
as a Co-Agent and as a Lender

By:      /s/ Sarah U. Johnston
    -----------------------------------------
             Sarah U. Johnston

Title:   Vice President
       --------------------------------------

MELLON BANK, N.A.,
as a Co-Agent and as a Lender

By:      /s/ Mark F. Johnston
    -----------------------------------------
             Mark F. Johnston

Title:   Vice President
       --------------------------------------

NATIONAL CITY BANK,
as a Co-Agent and as a Lender

By:      /s/ Patrick M. Pastore
    -----------------------------------------
             Patrick M. Pastore

Title:   Senior Vice President
       --------------------------------------

FIFTH THIRD BANK, NORTHEASTERN OHIO

By:      /s/ Roy C. Lanctot
    -----------------------------------------
             Roy C. Lanctot

Title:   Vice President
       --------------------------------------

FIRSTMERIT BANK, N.A.

By:      /s/ Edward Yannayon
    -----------------------------------------
             Edward Yannayon

Title:   Senior Vice President
       --------------------------------------

MIZUHO CORPORATE BANK LTD.
(Formerly FUJI BANK LTD.)

By:      /s/ Nobuoki Koike
    -----------------------------------------
             Nobuoki Koike

Title:   Senior Vice President
       --------------------------------------

BW CAPITAL MARKETS, INC.

By:      /s/ Richard P. Urfer
    -----------------------------------------
             Richard P. Urfer

Title:   President
       --------------------------------------


By:      /s/ Philip G. Waldrop
    -----------------------------------------
             Philip G. Waldrop

Title:   Vice President
       --------------------------------------

Exhibit 10(z)

AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT

AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT between PIONEER-STANDARD ELECTRONICS, INC., an Ohio corporation (the "Company"), and JAMES L. BAYMAN ("Bayman"), dated January 29, 2002, effective April 1, 2002.

W I T N E S S E T H:

WHEREAS, the Company and Bayman are parties to that certain Employment Agreement dated April 26, 2000, effective April 1, 2000 (the "Agreement");

WHEREAS, the Agreement contains certain provisions regarding, inter alia, the nature of Bayman's commitments, duties and responsibilities during the Period of Transition (as such term is defined in the Agreement);

WHEREAS, the Company and Bayman desire to amend the Agreement to reflect an increase in Bayman's commitments, duties and responsibilities during the Period of Transition and the compensation payable to him by the Company as a result of such increase, and to make certain other modifications in connection therewith.

NOW, THEREFORE, the parties hereby agree that the Agreement is hereby amended as follows effective April 1, 2002:

1. The last sentence of Section 3.04 is hereby deleted, and the following is hereby inserted in lieu thereof:

"Throughout the first year of the Period of Transition, Bayman shall retain his present office location at the corporate offices of the Company. For the remainder of the Period of Transition, Bayman shall be provided with an appropriate office which shall be mutually acceptable to Bayman and his successor as Chief Executive Officer."

2. Section 3.05 is hereby deleted, and the following is hereby inserted in lieu thereof:

"3.05 PERIOD OF TRANSITION. The following shall apply to the Period of Transition:

(a) EMPLOYMENT DUTIES AND RESPONSIBILITIES. Throughout the Period of Transition, Bayman shall serve in an advisory capacity to the Chief Executive Officer and shall perform such tasks as shall be reasonably requested of him from time to time by the Chief Executive Officer. In addition, during the first year of the Period of Transition, Bayman shall be regularly available as requested by the Chief Executive Officer to assist in evaluating industry and market conditions, evaluating corporate opportunities, assisting in any related merger, acquisition

and consolidation activities, developing strategic plans, and undertaking similar corporate development activities.

(b) BOARD MEMBERSHIP. Bayman shall make himself available to serve as a nominee for election by the shareholders of the Company as a Director of the Company and, if elected, agrees that at all times during the Period of Transition, Bayman shall make himself available to serve and continue to serve as a member of its Board of Directors.

(c) BOARD CHAIRMANSHIP. Bayman shall stand for election as a Class B Director of the Company at the Annual Meeting of Shareholders of the Company to be held in 2002, and, assuming that he is so elected, agrees to continue to serve, at the discretion of the Board of Directors, as Chairman of the Board of Directors through March 31, 2003.

(d) AVAILABILITY. During the first year of the Period of Transition, as requested by the Chief Executive Officer, Bayman shall devote his full time and undivided attention during normal business hours to the business and affairs of the Company, except for reasonable vacations afforded the Company's executive officers and except for illness or incapacity. Thereafter, Bayman shall devote no more than five (5) days per month during normal business hours to the business affairs of the Company as requested from time to time by the Chief Executive Officer, except for illness or incapacity. Notwithstanding the foregoing, nothing in this Agreement shall preclude Bayman at any time from devoting reasonable time required for serving as a director or member of an advisory committee of any organization involving no conflict of interest with the interests of the Company, from engaging in charitable and community activities, and from managing his personal affairs, provided that such activities do not materially interfere with the regular performance of his duties and responsibilities under this Agreement."

3. Section 4.01(b) is hereby amended by adding the following:

"Notwithstanding the foregoing, for all services rendered by Bayman in any capacity during the first year of the Period of Transition, Bayman shall be paid as compensation (x) a base salary, payable not less often than monthly, at a rate of $450,000 per year and (y) a cash bonus, payable as a single sum on March 31, 2003, of $200,000. Such bonus shall be treated for purposes of this Agreement as an earned incentive bonus under the Annual Incentive Plan for the Company's fiscal year ending March 31, 2003."

4. The reference to Section 8(a) in Section 8.01 is hereby changed to a reference to Section 8.01.

5. Except as amended by the foregoing, the provisions of the Agreement are ratified and confirmed in all respects.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1 to the Agreement as of the date first above written.

ATTEST:                             PIONEER-STANDARD ELECTRONICS, INC.


 /s/ Lawrence N. Schultz            By  /s/ Arthur Rhein
---------------------------            --------------------------------------
                                       Arthur Rhein
                                       President and Chief Operating Officer

ATTEST:

/s/ Lawrence N. Schultz                /s/ James L. Bayman
---------------------------            --------------------------------------
                                       James L. Bayman

Exhibit 10(aa)

EMPLOYMENT AGREEMENT

BETWEEN

PIONEER-STANDARD ELECTRONICS, INC.

AND

ARTHUR RHEIN

Effective April 1, 2002

TABLE OF CONTENTS
PAGE

Employment....................................................................1

Period of Employment..........................................................1

Position, Duties, Responsibilities............................................2

Compensation and Perquisites..................................................3

Employee Benefit Plans........................................................3

Effect of Death or Disability.................................................4

Termination...................................................................5

         General..............................................................5

         Change in Control....................................................5

         For Cause or Voluntary Termination Without a Good Reason.............7

         Without Cause or Voluntary Termination for a Good Reason.............8

         Arbitration..........................................................9

Non-Competition, Confidential Information and Non-Interference................9

Withholding..................................................................11

Notices......................................................................11

General Provisions...........................................................11

Amendment or Modification; Waiver............................................13

Severability.................................................................13

Successors to the Company....................................................13

Operation of Agreement.......................................................13

Enforcement Costs............................................................15

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT between PIONEER-STANDARD ELECTRONICS, INC., an Ohio corporation (the "Company"), and ARTHUR RHEIN ("Rhein"), dated January 29, 2002, effective April 1, 2002.

W I T N E S S E T H:

WHEREAS: Rhein currently serves the Company as its President and Chief Operating Officer pursuant to an Employment Agreement, dated as of April 26, 2000, between Rhein and the Company (the "2000 Agreement");

WHEREAS: It is desired that Rhein be promoted to the position of Chief Executive Officer of the Company as of April 1, 2002 and that he continue to serve as the Company's President;

WHEREAS: In view of such change in title and the increased duties and responsibilities to be assumed by Rhein in connection therewith, the Company and Rhein desire to replace the 2000 Agreement with a new Employment Agreement in order to reflect the terms and conditions of Rhein's employment as Chief Executive Officer and President;

WHEREAS: A new Employment Agreement containing such modified terms is deemed necessary at the present time to meet the need for a continued strong management;

WHEREAS: Together with other officers of the Company, Rhein has been responsible for the success of the business of the Company.

NOW, THEREFORE, it is hereby agreed by and between the Company and Rhein as follows:

1. EMPLOYMENT

The Company hereby agrees to continue to employ Rhein, and Rhein hereby agrees to remain in the employ of the Company, for the period set forth in Section 2 hereof (the "Period of Employment"), in the position and with the duties and responsibilities set forth in
Section 3 hereof, and upon the other terms and conditions hereinafter stated.

2. PERIOD OF EMPLOYMENT

For purposes of this Agreement, the Period of Employment, subject only to the provisions of Section 6 hereof, shall continue for a one-year period from the effective date hereof and thereafter on a year-to-year basis (i) subject to termination of this Agreement by the Company effective as of the next anniversary of the effective date hereof following written notice of termination, which notice must be given to Rhein no

later than February 1 of the Company's then current fiscal year, or
(ii) until the earlier termination of Rhein's employment as set forth in Section 7 hereof.

3. POSITION, DUTIES, RESPONSIBILITIES

3.01 CHIEF EXECUTIVE OFFICER AND PRESIDENT. During the Period of Employment, Rhein shall serve as Chief Executive Officer and President of the Company and shall have the responsibility for all of the operations of the Company including the authority, power and duties with regard to his position as may from time to time be assigned by the Board of Directors of the Company. Rhein's duties will include the supervision and direction of the corporate professional staff and the strategic direction of the Company's operations. He shall at all times during such period have the authority, power and duties of the person charged with the general management of the business and affairs of the areas assigned to him with authority to manage and direct all operations and affairs of those areas and to employ and discharge all employees thereof, reporting and being responsible only to the Board of Directors of the Company.

3.02 BOARD MEMBERSHIP. It is further contemplated that at all times during the Period of Employment Rhein shall serve and continue to serve as a member of its Board of Directors. In the event that Rhein's employment is terminated for any reason as provided in Section 7 hereof, Rhein agrees that he shall immediately submit his written resignation as a member of the Board of Directors of the Company, which may choose to either accept or reject such resignation.

3.03 ATTENTION TO DUTIES. Throughout the Period of Employment, Rhein shall devote his full time and undivided attention during normal business hours to the business and affairs of the Company, except for reasonable vacations afforded the Company's executive officers and except for illness or incapacity, but nothing in this Agreement shall preclude Rhein from devoting reasonable time required for serving as a director or member of an advisory committee of any organization involving no conflict of interest with the interests of the Company, from engaging in charitable and community activities, and from managing his personal affairs, provided that such activities do not materially interfere with the regular performance of his duties and responsibilities under this Agreement.

3.04 OFFICE. Throughout the Period of Employment, Rhein's office shall be located at the corporate offices of the Company, and Rhein shall not be required to locate his office elsewhere without his prior written consent, nor shall he be required to be absent therefrom on travel status or otherwise more than a total of sixty (60) days in any calendar year nor more than fifteen (15) consecutive days at any one time.

4. COMPENSATION AND PERQUISITES

4.01 COMPENSATION.

(a) For all services rendered by Rhein in any capacity during the Period of Employment, including, without limitation, services as an executive officer, director or member of any committee of the Company or of any subsidiary, division or affiliate thereof, Rhein shall be entitled as compensation to the following:

(i) A base salary, payable not less often than monthly, at the rate of $52,083.34 per month, with such increases in such rate as may be awarded from time to time by the Board of Directors of the Company or the Compensation Committee, as applicable;

(ii) Participation in the Company's 2000 Annual Incentive Plan or its successor (the "Annual Incentive Plan") in accordance with the provisions of such plan as in effect as of the date of this Agreement and as may be amended from time to time, provided, that such Annual Incentive Plan, including any Performance Goals and Participation Percentage applicable to Rhein thereunder, shall provide Rhein with a target annual incentive bonus of at least 100% of his base compensation; provided further, that for the Company's fiscal year ending March 31, 2003, such bonus shall not be less than $312,500 (payable under this Agreement if not payable under the Annual Incentive Plan) and shall not exceed $700,000; provided finally, that no amendment or supplement to the Annual Incentive Plan applicable to Rhein may be effected without his prior written consent.

(b) Any increase in salary, incentive compensation or other form of compensation shall in no way diminish any other obligation of the Company under this Agreement, unless specifically agreed to in writing by Rhein.

4.02 PERQUISITES. During the Period of Employment, Rhein shall be entitled to perquisites, including without limitation, an office, secretarial staff and clerical staff, and to fringe benefits comparable to those enjoyed by the other elected executive officers of the Company, as well as to reimbursement, upon proper accounting, of reasonable business expenses and disbursements incurred by him in the course of his duties.

5. EMPLOYEE BENEFIT PLANS

5.01 BENEFIT PLANS. Rhein, his dependents, beneficiaries and estate shall be entitled to all payments and benefits and service credit for benefits during the Period of Employment to which executive officers of the Company, their dependents and beneficiaries are entitled as the result of the employment of such executive officers

during the Period of Employment under the terms of employee plans and practices of the Company, including, without limitation, the Company's Retirement Plan, its Benefit Equalization Plan, its Supplemental Executive Retirement Plan, its group life insurance plan, its accidental death and dismemberment insurance, its disability, medical and health and welfare plans, any key person individual life and disability policies, automobile expense reimbursement, club membership fees and dues, and other present or equivalent successor plans and practices of the Company, its subsidiaries and divisions, for which other executive officers, their dependents and beneficiaries are eligible, and to all payments or other benefits under any such plan or practice after the Period of Employment as a result of participation in such plan or practice during the Period of Employment.

5.02 STOCK PLANS. Rhein shall be eligible to participate in the Company's 1991 Stock Option Plan and 2000 Stock Incentive Plan (which, together with any successor stock option plan or plans as may be in effect from time to time, are referred to herein as the "Option Plan"); provided, however, that the grant of any stock options under any Option Plan shall be at the sole discretion of the Compensation Committee of the Board of Directors of the Company. The Company has granted Rhein stock options at an option price equal to the fair market value of the Company's Common Shares at the date of grant. The terms and conditions of exercise of options shall be as is set forth in Rhein's Stock Option Agreements (the "Option Agreements") with the Company; provided, however, that in the event of a Change in Control as defined in Section 15.02 hereof, then notwithstanding the provisions of said Option Agreements, all options (including those granted to him under the 1982 Incentive Stock Option Plan, the 1991 Stock Option Plan, the 2000 Stock Incentive Plan or any successor stock option plan or plans) shall immediately be 100% vested and Rhein shall have the immediate right of exercise with respect to all options and the underlying Common Shares covered by said Option Agreements. In the event that Rhein is discharged or resigns his employment during the one (1) year period following a Change in Control as defined in Section 15.02 hereof, Rhein shall have the period of one (1) year after the date of such termination or resignation (or such longer period as may be specified in the Option Agreement) or the remainder of the term of such options, whichever is shorter, to exercise his options, and any such exercise shall be irrevocable.

6. EFFECT OF DEATH OR DISABILITY

6.01 DEATH. In the event of the death of Rhein during the Period of Employment, the Period of Employment shall be deemed to have ended as of the close of business on the last day of the month in which death shall have occurred, and his legal representative shall be entitled to
(i) the compensation provided for in Section 4.01(a)(i) hereof for the month in which death shall take place at the rate being paid at the time of death, (ii) an incentive cash bonus amount equal to his earned incentive cash bonus under the Annual Incentive Plan (or, if applicable, any predecessor annual incentive plan or arrangement) for the immediately preceding fiscal year, pro rated through the last date of the Period of Employment, and (iii) any benefits provided pursuant to Section 5.01 hereof which are payable pursuant to the terms of the applicable plan or practice.

6.02 DISABILITY.

(a) The term "Disability," as used in this Agreement, shall mean an illness or accident which prevents Rhein from performing his duties under this Agreement for a period of six (6) consecutive months. The Period of Employment shall be deemed to have ended as of the close of business on the last day of such six (6) month period but without prejudice to any payments due Rhein during such six (6) month period or pursuant to any disability plan or disability insurance policy.

(b) In the event of the Disability of Rhein during the Period of Employment, Rhein shall be entitled to (i) the compensation provided for in Section 4.01(a)(i) hereof at the rate being paid at the time of the commencement of Disability, for the period of such Disability but not in excess of six (6) months, (ii) an incentive cash bonus equal to his earned incentive cash bonus under the Annual Incentive Plan (or, if applicable, any predecessor annual incentive plan or arrangement) for the immediately preceding fiscal year, pro rated through the last date of the Period of Employment, and (iii) any benefits provided pursuant to Section 5.01 hereof which are payable pursuant to the terms of the applicable plan or practice, except that Rhein shall not be subject to the payment cap provided for by the Company's short-term disability plan.

(c) The amount of any payments due under this Section 6.02 shall be reduced by any payments which Rhein may be paid for the same period under any disability plan of the Company or of any subsidiary or affiliate thereof.

7. TERMINATION

7.01 GENERAL. The Company may terminate Rhein's employment with or without Cause, and Rhein may voluntarily terminate his employment, at any time during the Period of Employment, subject to the provisions of this Section 7. The termination of this Agreement by the Company pursuant to Section 2(i) hereof shall be deemed to be a termination of employment without Cause as set forth in Section 7.04 hereof. In the event that this Agreement is to be terminated pursuant to Section 2(i) hereof, upon receipt of the notice of termination Rhein shall have the option of either leaving the Company at any time prior to the March 31 effective date of the termination of this Agreement or continuing his employment until such effective date, and in either event Rhein shall be entitled to receive all of the payments and benefits as provided in
Section 7.04 hereof; provided, however, that in the event Rhein elects to continue his employment with the Company subsequent to the March 31 effective date of the termination of this Agreement, for a period of three (3) months thereafter Rhein shall have the right to terminate his employment with the Company and any such termination shall be deemed to be a termination of employment without Cause as set forth above.

7.02 CHANGE IN CONTROL. If, during the one (1) year period following a Change in Control of the Company as defined in Section 15.02 hereof, Rhein is discharged or

voluntarily resigns his employment, there shall be paid or provided to Rhein, his dependents, beneficiaries and estate, as liquidated damages or severance pay, or both, the following:

(a) (i) The compensation provided for in Section 4.01(a)(i) hereof for the month in which termination shall have occurred at the rate being paid at the time of termination; plus

(ii) An incentive cash bonus calculated based upon his earned incentive cash bonus under the Annual Incentive Plan for the immediately preceding fiscal year, pro rated for the then current fiscal year through his date of termination; plus

(iii) An amount equal to the product of thirty-six (36) times his monthly base salary at the rate being paid at the time of termination; plus

(iv) An amount equal to his earned incentive cash bonus under the Annual Incentive Plan (or, if applicable, any predecessor annual incentive plan or arrangement) for the three (3) previously completed fiscal years.

Such amounts shall be paid to Rhein in one payment immediately upon his termination of employment.

(b) For the three (3) year period following the date of his termination of employment, Rhein, his dependents, beneficiaries and estate, shall continue to be entitled to all benefits provided pursuant to Section 5.01 hereof which are payable pursuant to the terms of the applicable plan or practice, and service credit for benefits under all employee benefit plans of the Company, including, without limitation, the Company's Retirement Plan, Supplemental Executive Retirement Plan and Benefit Equalization Plan referred to in Section 5.01 hereof, upon the same basis as immediately prior to termination and, to the extent that such benefits or service credit for benefits shall not be payable or provided under any such plans to Rhein, his dependents, beneficiaries and estate, by reason of his no longer being an employee of the Company as the result of termination, or any such plan, program or arrangement is discontinued or the benefits thereunder are materially reduced, the Company shall provide Rhein, his dependents, beneficiaries and estate, as appropriate, a benefit or payment which places Rhein, his dependents, beneficiaries and estate in at least as good of an economic position (taking into account the favorable economic, tax and legal characteristics customary for such plans, policies or arrangements) as if the benefit which such persons were entitled to receive under such plans, programs and arrangements immediately prior to termination had been paid.

Any termination of Rhein's employment which either is (x) a termination by the Company other than for Cause or (y) a voluntary resignation by Rhein after the occurrence of an event which would constitute Good Reason under Section 15.03 hereof, which termination or resignation occurs within the period commencing on the commencement date of a tender offer for the Company's Common Shares, the execution of a letter of intent or the execution of a definitive agreement which, in each case, could reasonably be expected to lead to a Change in Control as defined in Section 15.02 hereof, and ending on either (A) the date of the Change in Control resulting from such tender offer or the consummation of the transaction contemplated by such letter of intent or such definitive agreement, as the case may be, or (B) the date as of which the Board of Directors determines in good faith that such tender offer has been withdrawn or has reached a final conclusion not resulting in a Change in Control or the transaction contemplated by such letter of intent or such definitive agreement is not to be consummated or if consummated, will not lead to a Change in Control, as the case may be, shall be deemed to be a termination under this Section 7.02.

An election by Rhein to terminate his employment under the provisions of this Section 7.02 shall not be deemed a voluntary termination of employment by Rhein under Section 7.03 hereof. Further, an election by Rhein to terminate his employment under the provisions of subsection (y) of this Section 7.02 shall not be deemed to be a voluntary termination of employment for a Good Reason under Section 7.04 hereof.

7.03 FOR CAUSE OR VOLUNTARY TERMINATION WITHOUT A GOOD REASON. For the purpose of any provision of this Agreement, the termination of Rhein's employment shall be deemed to have been for Cause only if:

(a) termination of his employment shall have been the result of Rhein's conviction of any of the following offenses, provided that such offense results in material economic harm to the Company or has a materially adverse effect on the Company's operations, property or business relationships: (i) misappropriation of money or other property of the Company or (ii) any felony;

(b) there has been a breach by Rhein during the Period of Employment of the provisions of Section 3.03 hereof relating to devotion of full time to the affairs of the Company or any provision of Section 8 hereof, and such breach results in demonstrable significant injury to the Company, and with respect to any alleged breach of Section 3.03 hereof, Rhein shall have failed to remedy such breach within thirty (30) days after his receipt of written notice from the Company; or

(c) there has been a substantial and continued failure or refusal to perform under this Agreement which Rhein shall have failed to remedy within thirty (30) days after his receipt of written notice from the Company.

If Rhein's employment is terminated by the Company for Cause, or if Rhein shall voluntarily terminate his employment with the Company without a Good Reason as defined in Section 15.03 hereof, Rhein shall be entitled to the compensation provided for

in Section 4.01(a)(i) hereof through the date of such termination. Rhein shall not be entitled to any additional compensation or benefits (except for any vested benefits), and shall continue to be bound by the provisions of Section 8 hereof.

7.04 WITHOUT CAUSE OR VOLUNTARY TERMINATION FOR A GOOD REASON. Subject to compliance by Rhein with the provisions of Section 8 hereof, if the Company shall terminate Rhein's employment without Cause or if Rhein shall voluntarily terminate his employment for a Good Reason as defined in Section 15.03 hereof, there shall be paid or provided to Rhein, his dependents, beneficiaries and estate, as liquidated damages or severance pay, or both, (i) the compensation provided for in Section 4.01(a)(i) for the month in which termination shall have occurred at the rate being paid at the time of such termination; (ii) an incentive cash bonus calculated based upon his earned incentive cash bonus under the Annual Incentive Plan for the immediately preceding fiscal year, pro rated for the then current fiscal year through his date of termination; and (iii) the amount (the "Payment Amount") per month equal to 1/24th of (A) twenty-four (24) times his monthly base salary at the rate being paid at the time of termination PLUS (B) an amount equal to his earned incentive cash bonus under the Annual Incentive Plan (or, if applicable, any predecessor annual incentive plan or arrangement) for the two (2) previously completed fiscal years. Such Payment Amount shall be paid to Rhein or, in case of his prior death, to his legal representative or estate, in monthly installments at the end of each month commencing with the month next following that in which such termination shall have occurred, and continuing for a period of twenty-four (24) months. Rhein, his dependents, beneficiaries and estate shall also receive, for the twenty-four (24) month period following such termination, all benefits provided pursuant to Section 5.01 hereof which are payable pursuant to the terms of the applicable plan or practice, and service credit for benefits under all employee benefit plans of the Company, including, without limitation, the Company's Retirement Plan, Benefit Equalization Plan and Supplemental Executive Retirement Plan referred to in Section 5.01 hereof, upon the same basis as immediately prior to termination and, to the extent that such benefits or service credit for benefits shall not be payable or provided under any such plans to Rhein, his dependents, beneficiaries and estate, by reason of his no longer being an employee of the Company as the result of termination, or any such plan, program or arrangement is discontinued or the benefits thereunder are materially reduced, the Company shall provide Rhein, his dependents, beneficiaries and estate, as appropriate, a benefit or payment which places Rhein, his dependents, beneficiaries and estate in at least as good of an economic position (taking into account the favorable economic, tax and legal characteristics customary for such plans, policies or arrangements) as if the benefit to which such persons were entitled to receive under such plans, programs and arrangements immediately prior to termination had been paid. In the event the Company fails to make such payments when due, then the remaining payments shall become due and payable immediately. Rhein shall be under no obligation to seek other employment, but without otherwise limiting the purposes or effect of this Section 7.04, any amounts payable to Rhein pursuant to Section 7.04(iii) hereof shall be reduced by any amounts which Rhein actually receives from another employer during the twenty-four (24) month period following the date of his termination without Cause, and any benefits payable to Rhein or his dependents pursuant to this Section 7.04 by reason of any "welfare benefit

plan" of the Company (as the term "welfare benefit plan" is defined in
Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended) or perquisites shall be reduced to the extent comparable benefits or perquisites (or the cash equivalent thereof) are actually received by Rhein or his dependents from another employer during such period. Notwithstanding any provision in this Section 7.04 to the contrary, all obligations of the Company and Rhein's right to any payment or benefit under this Section 7.04 shall cease upon Rhein's breach of any provision of Section 8 hereof.

7.05 ARBITRATION. In the event that Rhein's employment shall be terminated by the Company during the Period of Employment or the Company shall withhold payments or provision of benefits because Rhein is alleged to be engaged in activities prohibited by Section 8 hereof or for any other reason, Rhein shall have the right, in addition to all other rights and remedies provided by law, at his election either to seek arbitration in the metropolitan area of Cleveland, Ohio, under the Commercial Arbitration Rules of the American Arbitration Association by serving a notice to arbitrate upon the Company or to institute a judicial proceeding, in either case within one hundred and twenty (120) days after having received notice of termination of his employment.

8. NON-COMPETITION, CONFIDENTIAL INFORMATION AND NON-INTERFERENCE

8.01 NON-COMPETITION. During the Period of Employment and the two (2) year period following the termination of his employment (except in the case of a voluntary or involuntary termination of employment within one
(1) year after a Change in Control), Rhein shall not become an officer, director, joint venturer, employee, consultant or five percent (5%) shareholder (directly or indirectly), or promote or assist (financially or otherwise), any entity which competes with any business in which the Company or any of its affiliates are engaged as of the date of such termination of employment. Rhein understands that the foregoing restrictions may limit his ability to engage in certain business pursuits during the period provided for herein, but acknowledges that he will receive sufficiently higher remuneration and other benefits from the Company hereunder than he would otherwise receive to justify such restriction. Rhein acknowledges that he understands the effect of the provisions of this Section 8.01, and that he has had reasonable time to consider the effect of these provisions, and that he was encouraged to and had an opportunity to consult an attorney with respect to these provisions.

8.02 CONFIDENTIAL INFORMATION. Except for information which is already in the public domain, or which is publicly disclosed by persons other than Rhein, or which is required by law or court order to be disclosed, or information given to Rhein by a third party not bound by any obligation of confidentiality, Rhein shall at all times during and after his employment with the Company hold in strictest confidence any and all confidential information within his knowledge and which is material to the business of the Company (whether acquired prior to or during his employment with the Company) concerning the inventions, products, processes, methods of distribution, customers, services, business, suppliers or trade secrets of the Company, except that Rhein may, in connection with the performance of his duties to the Company, divulge confidential information to the directors, officers, employees and shareholders of the Company and to the advisors,

accountants, attorneys or lenders of the Company or such other individuals as deemed prudent in the course of business to carry out the responsibilities and duties of his position, or as required by law. Such confidential information includes, without limitation, financial information, sales information, price lists, marketing data, the identity and lists of actual and potential customers and technical information, all to the extent that such information is not intended by the Company for public dissemination.

Rhein also agrees that upon leaving the Company's employ he will not take with him, without the prior written consent of an officer authorized to act in the matter by the Board of Directors of the Company, any Company document, contract, internal financial or management reports, customer list, product list, price list, catalog, employee list, procedures, software, MIS data, drawing, blueprint, specification or other document of the Company, its subsidiaries, affiliates and divisions, which is of a confidential nature relating to the Company, its subsidiaries, affiliates and divisions, or, without limitation, relating to its or their methods of purchase or distribution, or any description of any trade secret, formulae or secret processes.

8.03. NONINTERFERENCE. Rhein shall not, at any time during the Period of Employment or within the two (2) year period after his employment is terminated with the Company (except in the case of a voluntary or involuntary termination of employment within one (1) year after a Change in Control), without the prior written consent of the Company, directly or indirectly, induce or attempt to induce any employee, agent or other representative or associate of the Company to terminate his or her employment, representation or other relationship with the Company, or in any way directly or indirectly interfere with any relationship between the Company and its suppliers or customers.

8.04. REMEDY. Rhein acknowledges that Sections 8.01, 8.02 and 8.03 hereof were negotiated at arms length and are required for the fair and reasonable protection of the Company. Nevertheless, if any aspect of these restrictions is found to be unreasonable or otherwise unenforceable by a court of competent jurisdiction, the Company and Rhein intend for such restrictions to be modified by such court so as to be reasonable and enforceable and, as so modified by the court, to be fully enforced. Rhein and the Company further acknowledge and agree that a breach of those obligations and agreements will result in irreparable and continuing damage to the Company for which there will be no adequate remedy at law and, therefore, Rhein and the Company agree that in the event of any breach of said obligations and agreements the Company, and its successors and assigns, shall be entitled to injunctive relief and such other and further relief, including monetary damages, as is proper in the circumstances. It is further agreed that the running of the periods provided in Sections 8.01 and 8.03 hereof shall be tolled during any period which Rhein shall be adjudged to have been in violation of any of his obligations under such Sections.

9. WITHHOLDING

Anything to the contrary notwithstanding, all payments required to be made by the Company hereunder to Rhein or his estate or beneficiaries, shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Company may reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, the Company may accept other provisions to the end that it has sufficient funds to pay all taxes required by law to be withheld in respect of such payments or any of them.

10. NOTICES

All notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be sufficiently given if and when mailed in the continental United States by registered or certified mail or personally delivered to the party entitled thereto at the address stated herein or to such changed address as the addressee may have given by a similar notice:

                  To the Company:    Pioneer-Standard Electronics, Inc.
                                     6065 Parkland Boulevard
                                     Mayfield Heights, Ohio 44124
                                     Attention: Secretary or
                                                Assistant Secretary

                  To Rhein:          Arthur Rhein
                                     40 Stonehill Lane
                                     Moreland Hills, Ohio 44022

11.      GENERAL PROVISIONS

11.01 NO SET-OFF OR COUNTER CLAIM. There shall be no right of set-off or counter claim, in respect of any claim, debt or obligation, against payments to Rhein, his dependents, beneficiaries or estate provided for in this Agreement.

11.02 BENEFICIARY. No right or interest to or in any payments shall be assignable by Rhein; provided, however, that this provision shall not preclude him from designating one or more beneficiaries to receive any amount that may be payable after his death and shall not preclude the legal representative of his estate from assigning any right hereunder to the person or persons entitled thereto under his will or, in the case of intestacy, to the person or persons entitled thereto under the laws of intestacy applicable to his estate. The term "beneficiaries" as used in this Agreement shall mean a beneficiary or beneficiaries so designated to receive any such amount or, if no beneficiary has been so designated, the legal representative of Rhein's estate.

11.03 ASSIGNMENT. No right, benefit or interest hereunder, shall be subject to anticipation, alienation, sale, assignment, encumbrance, charge, pledge, hypothecation, or

set-off in respect of any claim, debt or obligation, or to execution, attachment, levy or similar process, or assignment by operation of law. Any attempt, voluntary or involuntary, to effect any action specified in the immediately preceding sentence shall, to the full extent permitted by law, be null, void and of no effect.

11.04 LEGAL REPRESENTATIVE. In the event of Rhein's death or a judicial determination of his incompetence, reference in this Agreement to Rhein shall be deemed, where appropriate, to refer to his legal representative or, where appropriate, to his beneficiary or beneficiaries.

11.05 HEADINGS. The titles to sections in this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the title of any section.

11.06 BINDING EFFECT. This Agreement shall be binding upon and shall inure to the benefit of (a) Rhein and, subject to the provisions of Sections 11.02 and 11.03 hereof, his heirs and legal representatives, and (b) the Company and its successors as provided in Section 14 hereof.

11.07 EXCISE TAX GROSS UP. Rhein shall be entitled to a cash payment (the "Excise Tax Gross-Up Payment") equal to the amount of excise taxes which Rhein is required to pay pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended ("Code"), as a result of any parachute payments as defined in Section 280G(b)(2)made by or on behalf of the Company or any successor thereto, under this Agreement or otherwise, resulting in an "excess parachute payment" as defined in Section 280G(b)(1) of the Code. In addition to the foregoing, the Excise Tax Gross-Up Payment due to Rhein under this Section 11.07 shall be increased by the aggregate of the amount of federal, state and local income and excise taxes for which Rhein will be liable on account of the Excise Tax Gross-Up Payment to be made under this Section 11.07, such that Rhein will receive the Excise Tax Gross-Up Payment net of all income and excise taxes imposed on Rhein on account of the receipt of the Excise Tax Gross-Up Payment. The computation of the Excise Tax Gross-Up Payment shall be determined, at the expense of the Company, by an independent accounting, actuarial or consulting firm selected by the Company. Such Excise Tax Gross-Up Payment shall be made at such time as the Company shall determine, in its sole discretion, but in no event later than the date five (5) business days before the due date, without regard to any extension, for filing Rhein's federal income tax return for the calendar year for which it is determined that excise taxes are payable under Section 4999 of the Code. Notwithstanding the foregoing, there shall be no duplication of payments by the Company under this
Section 11.07 in respect of excise taxes under Section 4999 of the Code to the extent the Company is making payments in respect of such excise taxes under any other arrangement with Rhein. In the event that Rhein is ultimately assessed with excise taxes under Section 4999 of the Code which exceed the amount of excise taxes used in computing Rhein's payment under this Section 11.07, the Company or its successor shall indemnify Rhein for such additional excise taxes plus any additional excise taxes, income taxes, interest and penalties resulting from the additional excise taxes and the indemnity hereunder.

12. AMENDMENT OR MODIFICATION; WAIVER

No provision of this Agreement may be amended or waived unless such amendment or waiver is authorized by the Board of Directors of the Company or the Compensation Committee thereof and is agreed to in writing, signed by Rhein and by an officer of the Company thereunto duly authorized by either the Board of Directors or the Compensation Committee. Except as otherwise specifically provided in this Agreement, no waiver by either party hereto of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a subsequent breach of such condition or provision or a waiver of a similar or dissimilar provision or condition at the same or at any prior or subsequent time.

13. SEVERABILITY

In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions and portions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.

14. SUCCESSORS TO THE COMPANY

Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the Company and any successor of the Company, including, without limitation, any corporation which acquires directly or indirectly all or substantially all of the assets or capital stock of the Company whether by merger, consolidation, sale or otherwise (and such successor shall thereafter be deemed the Company for the purposes of this Agreement), but shall not otherwise be assignable by the Company.

15. OPERATION OF AGREEMENT

15.01 EFFECTIVE DATE. This Agreement is effective April 1, 2002, and shall supersede any prior employment arrangement or agreement, including the 2000 Agreement, which shall be deemed to be terminated and null and void. Notwithstanding the immediately preceding sentence to the contrary, it is the intention of the parties that this Agreement shall not result in the cancellation or diminution of any rights, interests or obligations of either party accrued under the 2000 Agreement prior to April 1, 2002.

15.02 CHANGE IN CONTROL. For purposes of this Agreement, the term "Change in Control" of the Company shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 as in effect on the date of this Agreement; provided that, without limitation, such a change in control shall be deemed to have occurred if and when (a) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934), excluding The Pioneer Stock Benefit

Trust, any employee benefit plan of the Company, any trust established under any employee benefit plan of the Company, or any trustee of any trust established under any employee benefit plan of the Company, becomes a beneficial owner, directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the combined voting power of the Company's then outstanding securities, or (b) during any period of twelve (12) consecutive months, commencing before or after the date of this Agreement, individuals who, at the beginning of such twelve (12) month period were directors of the Company for whom Rhein, as a shareholder, shall have voted, cease for any reason to constitute at least a majority of the Board of Directors of the Company. In addition, a "Change in Control" shall be deemed to have occurred if, at any time during the one (1) year period following the first day on which Rhein shall hold the title of Chief Executive Officer of the Company, such title shall be revoked or his duties or obligations shall be materially inconsistent with the duties or obligations of the Chief Executive Officer of the Company, unless such revocation or assignation is due to Rhein's Disability, death, termination of employment by the Company for Cause or voluntary termination by Rhein without a Good Reason.

15.03 GOOD REASON. For the purpose of this Agreement, "Good Reason" shall mean the occurrence of: (a) any reduction in Rhein's position, authority or title; (b) any material reduction in Rhein's responsibilities or duties for the Company; (c) any material adverse change or reduction in the aggregate perquisites, benefits and payments to which Rhein is entitled pursuant to Sections 4.02 and 5.01 hereof;
(d) any change in Rhein's reporting relationship; (e) any relocation of Rhein's principal place of work with the Company to a location that exceeds by fifty (50) miles the distance from the location of his residence at the time of such relocation of Rhein's principal place of work with the Company to 6065 Parkland Boulevard, Mayfield Heights, Ohio; or (f) the material breach or material default by the Company of any of its agreements or obligations under any provision of this Agreement, unless such breach or default is substantially cured within a reasonable period of time (hereby defined as thirty (30) days) after written notice advising the Company of the acts or omissions constituting such breach or default is actually received by the Company. As used in Section 15.03(c), an "adverse change or material reduction" in the aggregate perquisites, benefits and payments to which Rhein is entitled pursuant to Sections 4.02 and 5.01 shall be deemed to result from any reduction or any series of reductions which, in the aggregate, exceeds five percent (5%) of the value of such perquisites, benefits and payments determined as of the date of this Agreement. If Rhein claims the existence of a Good Reason, he shall give written notice to the Company of the event constituting Good Reason not later than ninety (90) days following the later to occur of the occurrence of the event (e.g., the actual reduction in compensation, the scheduled date of relocation or the date of the breach) constituting Good Reason or his actual knowledge thereof. If the event which Rhein claims to be a Good Reason is not cured within thirty (30) days following the date of such notice, Rhein must resign within ten (10) days following the thirty (30) day cure period in order to invoke his right to resign for Good Reason. If no such timely resignation occurs or no such timely written notices are given, Rhein's right to resign for Good Reason with respect to such event shall be permanently waived.

16. ENFORCEMENT COSTS

The Company is aware that upon the occurrence of a Change in Control the Board of Directors or a shareholder of the Company may then cause or attempt to cause the Company to refuse to comply with its obligations under this Agreement, or may cause or attempt to cause the Company to institute, or may institute, litigation seeking to have this Agreement declared unenforceable, or may take, or attempt to take, other action to deny Rhein the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement could be frustrated. It is the intent of the Company that Rhein not be required to incur the expenses associated with the enforcement of his rights under this Agreement by litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended to Rhein hereunder, nor be bound to negotiate any settlement of his rights hereunder under threat of incurring such expenses. Accordingly, if following a Change in Control it should appear to Rhein that the Company has failed to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or other legal action designed to deny, diminish or to recover from, Rhein, the benefits intended to be provided to Rhein hereunder, and that Rhein has complied with all of his obligations under this Agreement, the Company irrevocably authorizes Rhein from time to time to retain counsel of his choice at the expense of the Company as provided in this Section 16, to represent Rhein in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company or any Director, officer, shareholder or other person affiliated with the Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between the Company and such counsel, the Company irrevocably consents to Rhein entering into an attorney-client relationship with such counsel, and in that connection the Company and Rhein agree that a confidential relationship shall exist between Rhein and such counsel. The reasonable fees and expenses of counsel selected from time to time by Rhein as herein provided shall be paid or reimbursed to Rhein by the Company on a regular, periodic basis upon presentation by Rhein of a statement or statements prepared by such counsel in accordance with its customary practices, up to a maximum aggregate amount of $500,000.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

ATTEST:                             PIONEER-STANDARD ELECTRONICS, INC.


/s/ Lawrence N. Schultz             By /s/ James L. Bayman
-----------------------------         ------------------------------------------
                                      James L. Bayman, Chairman of the Board and
                                      Chief Executive Officer

ATTEST:

/s/ Lawrence N. Schultz               /s/ Arthur Rhein
-----------------------------         ------------------------------------------
                                      Arthur Rhein

EXHIBIT 21

SUBSIDIARIES OF PIONEER-STANDARD ELECTRONICS, INC.

                                             STATE OR JURISDICTION OF
SUBSIDIARIES OF THE COMPANY                  ORGANIZATION OR INCORPORATION
---------------------------                  -----------------------------

Pioneer-Standard Canada Inc.                         Ontario
Pioneer-Standard FSC, Inc.                           Virgin Islands of the United States
Pioneer-Standard Illinois, Inc.                      Delaware
Pioneer-Standard Minnesota, Inc.                     Delaware
Pioneer-Standard Electronics, Ltd.                   Delaware
Pioneer-Standard Financial Trust                     Delaware
The Dickens Services Group, a
  Pioneer-Standard Company, LLC                      Delaware
Supplystream, Inc.                                   New York
Pioneer-Standard Electronics GmbH                    Germany
Aprisa, Inc.                                         Delaware
Aprisa Holdings Inc.                                 Delaware
Pioneer-Standard Funding Corporation                 Delaware

EXHIBIT 23

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statements (Forms S-3 and Forms S-8) listed below and the related prospectuses of Pioneer-Standard Electronics, Inc. and Subsidiaries of our report dated May 6, 2002 with respect to the consolidated financial statements and schedule of Pioneer-Standard Electronics, Inc. and Subsidiaries included in this Annual Report (Form 10-K) for the year ended March 31, 2002.

- Registration of 220,000 Common Shares (Form S-3 No. 333-26697)

- Registration of 1,000,000 Common Shares (Form S-3 No. 333-74225)

- Registration of 2,875,000 Trust Preferred Securities (Form S-3 No. 333-57359)

- 2000 Stock Option Plan for Outside Directors and 2000 Stock Incentive Plan, as amended, of Pioneer-Standard Electronics, Inc.
(Form S-8 No. 333-64164)

- 1995 Stock Option Plan for Outside Directors of Pioneer-Standard Electronics, Inc. (Form S-8 No. 333-07143)

- 1991 Incentive Stock Option Plan of Pioneer-Standard Electronics, Inc. (Forms S-8 No. 33-46008 and 33-53329)

- 1982 Incentive Stock Option Plan of Pioneer-Standard Electronics, Inc. (Form S-8 No. 33-18790)

- The Retirement Plan of Pioneer-Standard Electronics, Inc. (Form S-8 No. 333-40750).

                                                           /s/ ERNST & YOUNG LLP

Cleveland, Ohio
June 13, 2002


	(1) and (2) Financial Statements and Financial Statement Schedules. The following Consolidated Financial Statements of the Company and its subsidiaries, the Financial Statement Schedule and the Report of Independent Auditors thereon, are included in this Annual Report on Form 10-K beginning on page 29:


	PIONEER-STANDARD ELECTRONICS, INC.

	/s/ ARTHUR RHEIN
	Arthur Rhein
	President, Chief Executive Officer and Director


*	Denotes a management contract or compensatory plan or arrangement.