10-K

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended June 30, 2009
	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 number 0-16345

SED International Holdings, Inc.
(Exact name of Company as specified in its charter)

GEORGIA	22-2715444
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification No.)
4916 North Royal Atlanta Drive, Tucker, Georgia	30084
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:
770-491-8962

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No x

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 x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o 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 or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer o	Accelerated Filer o
Non-accelerated filer o	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

          The aggregate market value of the voting stock held by non-affiliates of the registrant as of December 31, 2008 was (based upon the closing price on the NASDAQ OTC Bulletin Board of $ 1.48 per share) approximately $4.8 million.

          The number of shares outstanding of the registrant’s common stock, $.01 par value, as of September 1, 2009 was 5,086,811 shares.

DOCUMENTS INCORPORATED BY REFERENCE
None.

TABLE OF CONTENTS

		Page
	PART I
Item 1.	Business	2
Item 1A.	Risk Factors	6
Item 1B.	Unresolved Staff Comments	10
Item 2.	Properties	10
Item 3.	Legal Proceedings	11
Item 4.	Submission of Matters to a Vote of Security Holders	11
	PART II
Item 5.	Market Price of the Company’s Common Stock, Related Shareholder Matters and Issuer Purchases of Equity Securities	12
Item 6.	Selected Financial Data Five Year Financial Summary	12
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 8.	Consolidated Financial Statements and Supplementary Data	23
	Report of Independent Registered Public Accounting Firm	23
	Consolidated Balance Sheets	24
	Consolidated Statements of Operations	25
	Consolidated Statements of Shareholders’ Equity	26
	Consolidated Statements of Cash Flows	27
	Notes to Consolidated Financial Statements	28
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	40
Item 9A (T).	Controls and Procedures	40
Item 9B.	Other Information	40
	PART III
Item 10.	Directors and Executive Officers of the Company	41
Item 11.	Executive Compensation	44
Item 12.	Security Ownership of Certain Beneficial Owners and Managers	48
Item 13.	Certain Relationships and Related Transactions, and Director Independence	50
Item 14.	Principal Accounting Fees and Services	51
	PART IV
Item 15.	Exhibits and Financial Statement Schedules	52
Signatures		56

FORWARD LOOKING STATEMENT INFORMATION

          Certain statements made in this Annual Report on Form 10-K are “forward-looking statements regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our plans and objectives are based, in part, on assumptions involving judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that our assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein particularly in view of the current state of our operations, the inclusion of such information should not be regarded as a statement by us or any other person that our objectives and plans will be achieved. Factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, the factors set forth herein under the headings “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

PART I

Item 1. Business

(a) General Development of Business

          SED International Holdings, Inc., a Georgia corporation (“SED Holdings”), and its wholly-owned operating subsidiary, SED International, Inc., a Georgia corporation (“SED International”) (collectively, SED Holdings and its subsidiaries, including SED International, are referred to herein as “SED,” “Company,” “we,” “our” or “us”), were both initially incorporated in Delaware in 1986 to take over the operations of the business of Southern Electronics Distributors, Inc., a Georgia corporation engaged in the wholesale distribution of consumer electronic products. In fiscal 1999, both SED Holdings and SED International, reincorporated as Georgia corporations.

          SED is a distributor of microcomputer products, including mass storage, desktops, laptops, imaging, display, wireless products and consumer electronics throughout the United States and Latin America. SED offers an active base of over 6,500 reseller customers and a broad inventory of more than 3,500 products from approximately 170 vendors (direct and indirect), including such market leaders as Acer, Epson, Hewlett-Packard, Microsoft, Seagate and Western Digital, through a dedicated sales force. SED distributes products in the United States from its strategically located warehouses in Tucker, Georgia; Miami, Florida; City of Industry, California; and Plano, Texas. SED services Latin America through its wholly-owned subsidiaries SED International de Colombia Ltda. in Bogota, Colombia and Intermaco S.R.L. in Buenos Aires, Argentina.

          In addition to its current customers, SED offers consumer electronic products through the rent-to-own, e-commerce and retail channels. SED offers consumer electronics products from leading vendors including JVC, LG, Pure Digital, Samsung, Panasonic and Sansui, subject to distribution restrictions.

          SED also distributes wireless handsets and accessories in the United States. SED is an indirect distributor for leading wireless telephone product vendors such as Blackberry, LG Infocomm, Motorola, Nokia, Palm and Samsung. In fiscal 2009, SED’s net sales of microcomputer products, including handling revenue, generated approximately 88.2% of SED’s total net sales, consumer electronics products represented 10.5% and wireless telephone products represented the remaining 1.3%.

          In February 2003, SED approved a plan to discontinue commercial operations of its Brazilian subsidiary, SED International do Brasil Distribuidora, Ltda. Accordingly, since the third quarter of fiscal 2003, the operating results of SED International do Brasil Distribuidora, Ltda. have been classified as a discontinued operation for all periods presented in SED’s consolidated statements of operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Discontinued Operations” and Note 11 of SED’s Consolidated Financial Statements.

(b) Financial Information about Industry Segments

          As a smaller reporting company, as defined in Rule 12b-2 of the Securities Exchange Act of 1934 (the “Exchange Act”), we are not required to provide the information required by this item.

2

(c) Narrative Description of Business

Products and Vendors

          SED offers its customers a broad inventory of more than 3,500 products from approximately 170 vendors (direct and indirect), including such market leaders as Acer, Epson, Hewlett-Packard, Microsoft, Seagate and Western Digital. SED is a distributor for leading consumer electronics product vendors such as JVC, LG, Samsung, Panasonic, Pure Digital and Sansui, subject to distribution agreement restrictions. SED is an indirect distributor for leading wireless telephone handsets and accessories vendors such as Blackberry, LG Infocomm, Motorola, Nokia, Palm and Samsung. Microcomputer products, including handling revenue, accounted for $416.9 million or 88.2% of SED’s net sales for fiscal 2009 and $441.8 million or 92.3% of SED’s net sales for fiscal 2008. Approximately, $49.5 million or 10.5% of SED’s net sales for fiscal 2009 and $28.8 million or 6.0% of SED net sales for fiscal 2008 consisted of consumer electronic products. Approximately, $6.0 million or 1.3% of SED’s net sales for fiscal 2009 and $8.1 million or 1.7% of SED’s net sales for fiscal 2008 consisted of wireless telephone products. SED continually evaluates its product mix and inventory levels and maintains flexibility by adjusting its product offerings based on demand. SED’s vendors generally warrant the products distributed by SED and allow the return of defective products.

          As a distributor, SED incurs the risk that the value of its inventory will be affected by industry-wide forces. Rapid technological change is commonplace in the microcomputer, consumer electronics and wireless industries and can quickly diminish the marketability of certain inventory, whose functionality and demand decline with the appearance of new products. These changes, coupled with price reductions by vendors, may cause rapid obsolescence of inventory and corresponding valuation reductions in that inventory. Accordingly, SED seeks provisions in its vendor agreements common to industry practice which provide price protections or credits for declines in inventory value and the right to return unsold inventory. No assurance can be given, however, that SED can negotiate such provisions in each of its agreements or that such industry practice will continue.

          SED purchases goods from approximately 170 vendors (directly and indirectly) and has negotiated favorable terms from certain vendors by purchasing a substantial volume from those vendors. In fiscal 2009 and 2008, Acer accounted for 19.4% and 20.6% respectively, Hewlett-Packard accounted for 18.6% and 19.8%, respectively, and Seagate Technology accounted for 10.9% and 13.6%, respectively, of SED’s purchases.

          There can be no assurance that SED will be able to maintain its existing vendor relationships or secure additional vendors as needed. SED’s vendor relationships typically are non-exclusive and subject to annual renewal, terminable by either party on short notice, and contain restrictions that limit the countries in which SED is permitted to distribute the products. The loss of a major vendor, the deterioration of SED’s relationship with a major vendor, the loss or deterioration of vendor support for certain Company-provided product or services, the decline in demand for a particular vendor’s product, or the failure of SED to establish good relationships with major new vendors could have a material adverse effect on SED’s business, financial condition and results of operations.

          Product orders typically are processed and shipped from SED’s distribution facilities on the same day an order is received or, in the case of orders received after customary cutoff time, on the next business day. SED relies almost entirely on arrangements with independent shipping companies for the delivery of its products to United States customers. Products sold within the Latin American markets are either picked up by the customer, delivered by the Company or delivered by independent shipping companies to the customers or their agents from SED’s Colombia and Argentina facilities. Generally, SED’s inventory level of products has been adequate to permit SED to be responsive to its customers’ purchase requirements. From time to time, however, SED experiences temporary shortages of certain products as its vendors experience increased demand or manufacturing difficulties with respect to their products, resulting in smaller allocations of such products to SED.

3

Sales and Marketing

          SED’s sales are generated by a telemarketing sales force, which, on June 30, 2009 consisted of approximately 145 people in sales offices located in Tucker, Georgia; Miami, Florida; City of Industry, California; Plano, Texas; Bogota, Colombia and Buenos Aires, Argentina. Of the total number of salespersons on June 30, 2009, 85 people focused on sales to customers for export to Latin America and on sales in Colombia and Argentina. Substantially all of the export and Latin American-based sales force are fluent in Spanish. SED’s Tucker sales office maintains a separate telemarketing sales force for the sale of wireless telephone products to retailers and authorized dealer agents located throughout the United States.

          Members of the sales staff are trained through intensive in-house sales training programs, along with vendor-sponsored product seminars. This training allows sales personnel to provide customers with product information and to use their marketing expertise to answer customers’ questions about important new product features, such as compatibility and capability, while offering advice on which products meet specific performance and price criteria. SED’s sales force is able to analyze quickly SED’s extensive inventory through a sophisticated management information system and recommend the most appropriate solution for each customer, whether that customer is a full-line retailer or an industry-specific reseller.

          SED’s domestic sales force is organized in teams generally consisting of two to six people. SED believes that its sales team concept provides superior customer service because customers can contact one of several people. Moreover, the long-term nature of SED’s customer relationships is better served by teams that increase the depth of the relationship and improve the consistency of service. It has been SED’s experience that the team approach results in superior customer service and better employee morale.

          Compensation incentives are provided to SED’s salespeople, thus encouraging them to increase their product knowledge and to establish long-term relationships with existing and new customers. Customers can telephone their salespersons using a toll-free number provided by SED. Customer communication is also conducted via electronic mail and instant messaging. In addition, salespeople initiate calls to introduce SED’s existing customers to new products and to solicit orders. Salespeople also seek to develop new customer relationships by using targeted mailing lists, vendor leads and various telephone directories.

          The telemarketing salespersons are supported by a variety of marketing programs. For example, SED regularly sponsors shows for its resellers where it demonstrates new product offerings and discusses industry developments. Also, SED’s in-house marketing staff prepares catalogs and flyers that list available microcomputer, consumer electronics and wireless telephone products and routinely produces marketing materials and advertisements. In addition, the in-house marketing staff promotes products and services through SED’s Internet web page (www.sedonline.com) providing 24-hour access to on-line order entry. SED’s web page provides secured access for customers to place orders and review product specifications at times that are convenient to them. Customers also can determine on a real-time basis inventory availability, pricing, and verify the status of previously placed orders through hyperlinks to certain independent shipping companies.

          SED prides itself on being service oriented and having a number of on-going value-added services intended to benefit both SED’s vendors and reseller customers. For example, SED is committed to training its salespeople to be technically knowledgeable about the products they sell. This core competency supplements the sophisticated technical support and configuration services also provided by SED. We believe that our salesperson’s ability to listen to a reseller’s needs and recommend a cost-efficient solution strengthens the relationship between the salesperson and his or her reseller and promotes customer loyalty to SED.

          Management continually evaluates SED’s product mix and the needs of its customers in order to minimize inventory obsolescence and carrying costs. SED’s rapid delivery terms are available to all of its customers, and SED seeks to pass through its shipping and handling costs to its customers. However, SED does have many “free freight” customers and sometimes offers “free freight” to remain competitive.

          SED offers various credit terms including open account, prepay, credit card, third-party floor plan and cash on delivery (COD) to qualifying customers. SED closely monitors customers’ creditworthiness through its on-line computer system, which contains detailed information on each customer’s payment history and other relevant information. In addition, SED participates in national and international credit associations that exchange credit rating information on customers. SED reviews customer’s credit worthiness based on sales

4

trends, industry trends in geography, and other factors. SED establishes reserves for estimated credit losses in the normal course of business. In addition, we may purchase credit insurance, subject to limitations, covering certain customers to provide us further protection in the event of customer default.

Customers

          SED serves an active, nonexclusive customer base of over 6,500 customers of microcomputer, consumer electronics and wireless handset products. Customers include value-added resellers, corporate resellers, retailers and etailers. SED believes the multi-billion dollar microcomputer, consumer electronics and wireless telephone wholesale distribution industries serve customers primarily on a nonexclusive basis, which provides SED with significant growth opportunities. During fiscal 2009, no single customer accounted for more than 10% of the total net sales of SED. SED believes that most of its customers rely on distributors as their principal source of microcomputer, consumer electronics and wireless telephone products.

Competition

          The microcomputer, consumer electronics and wireless telephone distribution industries are highly competitive, both in the United States and in Latin America. Competition in these industries is typically characterized by pricing pressures, product availability and potential obsolescence, speed and accuracy of delivery, effectiveness of sales and marketing programs, credit availability, ability to tailor specific solutions to customer needs, quality of product lines and services, and availability of technical support and product information. Additionally, SED’s ability to compete favorably is principally dependent upon its ability to manage inventory and accounts receivable and to control other operating costs. Successful management of SED also requires SED to react quickly and appropriately to short and long-term trends, price its products competitively, increase its net sales and maintain economies of scale.

          SED’s competitors include regional, national and international microcomputer, consumer electronics and wireless distributors, many of which have substantially greater technical, financial and other resources than SED, as well as vendors that sell directly to resellers and large resellers that sell to other resellers. Major competitors include Ingram Micro, Inc., Tech Data Corporation, Bell Micro, D&H, ASI, Brightpoint, Inc., and Synnex Information Technologies, Inc. in the United States; and MPS Mayorista in Colombia and Util-Of S.A.C.I. in Argentina. From time to time, these competitors may be used as vendors.

Seasonality

          SED’s sales currently are not subject to material seasonal fluctuations although no assurance can be given that seasonal fluctuations will not develop, especially during the holiday season in the United States and Latin America.

Employees

          As of June 30, 2009, SED had 367 full-time employees, 145 of whom were engaged in telemarketing and sales, 128 in administration and 94 in warehouse management and shipping. Management believes SED’s relations with its employees are good and SED has never experienced a strike or work stoppage. There are no collective bargaining agreements covering any of SED’s employees.

(d) Financial Information about Foreign and Domestic Operations and Export Sales

          SED sells directly to customers in Colombia and Argentina through SED’s facilities in Bogota, Colombia and Buenos Aires, Argentina. Sales are denominated in the respective local currencies of these countries. For fiscal years 2009 and 2008, approximately 39.6% and 41.2 %, respectively, of SED’s net sales were to customers for export principally into Latin America and direct sales to customers in Colombia and Argentina. See Item 7 and Notes 9 and 11 to SED’s Consolidated Financial Statements for additional information concerning SED’s domestic and foreign operations.

5

(e) Available Information

          SED’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments are available on the U.S. Securities and Exchange Commission’s internet website at www.sec.gov.

          A copy of Form 10-K will be provided upon written request and without charge. Please send your requests to the attention of Investor Relations, SED International Holdings, Inc., 4916 North Royal Atlanta Drive, Tucker, Georgia 30084.

          The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. As noted above, the SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers such as us that file electronically with the SEC.

Item 1A. Risk Factors

          The following are certain risk factors that could affect our business, financial position and results of operations. These risk factors should be considered in connection with evaluating the forward-looking statements contained in this Annual Report on Form 10-K because these factors could cause the actual results and conditions to differ materially from those projected in the forward-looking statements. Before you trade our common stock or other securities, you should know that making such an investment involves risks, including the risks described below. The risks that have been highlighted below are not the only risks of our business. If any of the risks actually occur, our business, financial condition or results of operations could be negatively affected. In that case, the trading price of our common stock or other securities could decline, and you may lose all or part of your investment. Certain risk factors that could cause actual results to differ materially from our forward-looking statements include the following:

          Risks and Uncertainties — SED has at various times experienced a decline in net sales in the United States since fiscal 1998 and has incurred operating losses in either its domestic or certain of its foreign operations at various times during the past five fiscal years. Company management is continuing to focus on increasing sales and profit margins and reducing administrative and overhead costs. There is no assurance SED will be successful in connection with these efforts. Failure to effectively improve operating metrics could materially adversely affect SED’s profitability and financial condition.

          Numerous factors and conditions impact SED’s ability to achieve its profit goals, including, but not limited to, the following:

§

Global Economic Downturn— The current global economic downturn creates several risks relating to our financial results, operations and prospects. We may experience a rapid decline in demand for the products we sell resulting in a more competitive environment and pressure to reduce the cost of operations. The current global economic downturn may also result in changes in vendor terms and conditions, such as rebates, cash discounts and cooperative marketing efforts, which may result in further downward pressure on our gross margins. Deterioration in the financial and credit markets heightens the risk of customer bankruptcies and delay in payment. Deterioration in the credit markets in Latin America has resulted in reduced availability of credit insurance to cover customer accounts. This may result in our reducing the credit lines we provide to customers, thereby having a negative impact on our net sales. In addition, in this environment, there is a greater possibility of increased interest rates on our borrowings and greater uncertainty in the capital markets related to our cost of or access to capital to finance our business, including the ability of financial institutions to fund their commitments to us. Also, volatile foreign currency exchange rates increase our risk related to products purchased in a currency other than the currency in which those products are sold. The realization of any or all of these risks could have a significant adverse effect on our financial results.

§

Impact of Policy Changes — SED may implement or modify policies designed to offset certain costs, such as our policies concerning freight and handling fees to customers. These policies are

6

	designed to help offset specific costs that have significantly increased or that can no longer be included in the overall price of the products we sell. Given the competitive nature of the markets in which SED operates, these policies may result in customers seeking alternative sources for their IT, consumer electronics and cellular products, and therefore, could have an adverse effect on our business.
§	Continuation of distribution agreements — SED operates under formal but cancelable distribution agreements with certain of its suppliers. If these agreements were cancelled, SED would be forced to obtain its products through wholesalers. This would reduce SED’s profit margin on the affected products.
§	Availability of certain products — From time to time, due to production limitations or heavy demand, SED may only be able to purchase a limited amount of popular products from its suppliers.
§	Product margins — SED operates in a very competitive business environment. Accordingly, product margins are continually under pricing pressure. From time to time, SED receives price protection and other considerations from its vendors. While we have no reason to believe such vendor consideration will not continue, no assurance can be given that such price protection and other considerations will continue to be received in the future.
§	Vendor Credit — SED significantly relies on its suppliers for trade credit. Changes by our suppliers in their credit terms could force us to obtain less favorable financing for its purchases.
§	Vendor Terms and Conditions — SED relies on various rebates, cash discounts, and cooperative marketing programs offered by its vendors to support expenses associated with distributing and marketing the vendors’ products. Currently, the rebates and purchase discounts offered by vendors are influenced by sales volumes and are subject to change. Additionally, certain of SED’s vendors subsidize floorplan financing arrangements for the benefit of our customers. Terminations of a supply or services agreement or a significant change in vendor terms or conditions of sale could negatively affect our operating margins, revenue or the level of capital required to fund our operations.
	SED receives a significant percentage of revenues from products it purchases from relatively few manufacturers. A manufacturer may make rapid, significant and adverse changes in its sales terms and conditions, such as reducing the amount of price protection and return rights as well as reducing the level of purchase discounts and rebates they make available to us, or may merge with or acquire other significant manufacturers. SED’s gross margins could be negatively impacted if we are unable to pass through the impact of these changes to our customers or cannot develop systems to manage ongoing vendor programs. In addition, SED’s standard vendor distribution agreement permits termination without cause by either party upon 30 days notice. The loss of a relationship with any of our key vendors, a change in their strategy (such as increasing direct sales), the merging of significant manufacturers or significant changes in terms on their products may adversely affect our business.
§	Product obsolescence — SED offers a broad line of products that are subject to fast technological obsolescence, which increases the risk of inventory markdown. Through its vendor agreements, SED has certain stock return privileges, which vary from supplier to supplier. We believe that stock return programs will continue in the future, but can give no assurance about the extent to which these programs will continue.
§	Credit decisions and losses — SED maintains an experienced customer credit staff and relies on customer payment history and third party data to make customer credit decisions. Nevertheless, SED may experience customer credit losses in excess of our expectations. SED maintains credit insurance policies for certain customers located in the United States and select Latin American countries (subject to various terms and conditions). However, the terms of the credit insurance agreement require SED to maintain certain minimum standards and policies with respect to

7

	extending credit to customers. If SED does not adhere to such policies, the insurance companies may not pay claims submitted by SED.
§	Proportionate control of general and administrative costs — SED attempts to control its overhead costs to keep such costs in line with its sales volume. As sales volumes fluctuate, we must continually monitor our overhead costs and make adjustments timely and appropriately. Failure to control overhead costs could have an adverse impact on SED’s cash flows, financial position and operating results.
§	Uncertain and possibly volatile economic and political environment in Latin America — The general economic and political environment in Colombia and Argentina the countries in which SED operates in Latin America is uncertain and, at times, volatile. As a result of these conditions, SED could experience unexpected issues in its operations in these countries.
§	Need for Liquidity and Capital Resources; Fluctuations in Interest Rates— The Company’s business requires substantial capital to operate and to finance accounts receivable and product inventory that are not financed by trade creditors. The Company has historically relied upon cash generated from operations, bank credit lines and trade credit from its vendors to satisfy its capital needs and finance growth. The Company utilizes a US revolving credit facility and line of credit from a bank in Columbia to finance its business operations. As the financial markets change and new regulations come into effect, the cost of acquiring financing and the methods of financing may change. Changes in our credit rating or other market factors may increase our interest expense or other costs of capital or capital may not be available to us on acceptable terms to fund our working capital needs. The inability to obtain such capital could have a material adverse effect on the Company’s business. The Company’s credit facilities contain various financial and other covenants that may limit the Company’s ability to borrow or limit the Company’s flexibility in responding to business conditions. These financing instruments involve variable rate debt, thus exposing the Company to risk of fluctuations in interest rates. Such fluctuations in interest rates could have an adverse effect on the Company’s business. However, the Company attempts to limit its exposure to fluctuations in interest rates through an interest rate swap.
§	Availability of credit facilities — SED has operated and continues to operate, under a revolving credit facility with a US bank for many years that is subject to certain collateral limitations and contains certain covenants. No assurance can be given that SED will be able to maintain compliance with financial covenants, or obtain waivers in the event of non-compliance, in the future. Failure to maintain compliance with the financial covenants could adversely affect SED’s ability to obtain vendor credit and the overall business operations. Our principal credit facility, which expires in September 2011, is further described in Note 4 to SED’s Consolidated Financial Statements.
§	Cash flows — While not presently expected, SED’s continued operations in Latin America may require additional capital infusion (in the form of advance notes from the parent company or other debt borrowings by our subsidiaries). Our US bank credit facility restricts the future funding by us of our Latin American subsidiaries. Operating needs and regulatory matters may restrict our ability to repatriate cash flows from these subsidiaries to the United States.
§	Competition — SED operates in a highly competitive environment. The computer wholesale distribution industry is characterized by intense competition, based primarily on product availability, credit availability, price, speed of delivery, quality and depth of product lines and training, service and support. Weakness in demand in the market intensifies the competitive environment in which we operate. SED competes with a variety of regional, national and international wholesale electronic distributors, some of which have much greater financial resources than SED. We also face competition from companies entering or expanding into the logistics and product fulfillment and e-commerce supply chain services market.
§	Loss of Significant Customers — Customers do not have an obligation to make purchases from SED. In some cases, SED has made adjustments to its systems, vendor offerings, and processes, and made staffing decisions, in order to accommodate the needs of a significant customer. In the

8

	event a significant customer decides to make its purchases from another distributor, experiences a significant change in demand from its own customer base, becomes financially unstable, or is acquired by another company, SED’s receipt of revenues may be significantly affected, resulting in an adverse effect on SED’s business.
§	Dependence on Information Systems — SED is highly dependent upon its internal computer and telecommunication systems to operate its business. There can be no assurance that SED’s information systems will not fail or experience disruptions, that we will be able to attract and retain qualified personnel necessary for the operation of such systems, that we will be able to expand and improve its information systems, that SED will be able to convert to new systems efficiently, or that we will be able to integrate new programs effectively with its existing programs. Any of such problems could have an adverse effect on SED’s business.
§	Dependence on Independent Shipping Companies — SED relies on arrangements with independent shipping companies, such as Federal Express and United Parcel Service, for the delivery of its products from vendors and to customers. The failure or inability of these shipping companies to deliver products, or the unavailability of their shipping services, even temporarily, could have a material adverse effect on SED’s business. SED may also be adversely affected by an increase in freight surcharges due to rising fuel costs and added security. There can be no assurance that we will be able to pass along the full effect of an increase in these surcharges to its customers.
§	Foreign Currency Exchange Risks; Exposure to Foreign Markets — SED conducts business in countries outside of the United States, which exposes SED to fluctuations in foreign currency exchange rates. SED may enter into short-term forward exchange or option contracts to hedge this risk; nevertheless, fluctuations in foreign currency exchange rates could have an adverse effect on SED’s business. In particular, the value of our equity investment in foreign countries may fluctuate based upon changes in foreign currency exchange rates. These fluctuations, which are recorded in a cumulative translation adjustment account, may result in losses in the event a foreign subsidiary is sold or closed at a time when the foreign currency is weaker than when SED initially invested in the country.
	SED’s international operations are subject to other risks such as the imposition of governmental controls, export license requirements, restrictions on the export of certain technology, political instability, trade restrictions, tariff changes, difficulties in staffing and managing international operations, changes in the interpretation and enforcement of laws (in particular related to items such as duty and taxation), difficulties in collecting accounts receivable, longer collection periods and the impact of local economic conditions and practices. There can be no assurance that these and other factors will not have an adverse effect on SED’s business.
§	Changes in Income Tax and Other Regulatory Legislation — SED believes it operates in compliance with applicable laws and regulations. When new legislation is enacted with minimal advance notice, or when new interpretations or applications of existing laws are made, we may need to implement changes in its policies or structure. SED makes plans for its structure and operations based upon existing laws and anticipated future changes in the law.
	SED is susceptible to unanticipated changes in legislation, especially relating to income and other taxes, import/export laws, hazardous materials and electronic waste recovery legislation, and other laws related to trade, accounting, and business activities. Such changes in legislation, both domestic and international, may have a significant adverse effect on SED’s business.
§	Changes in Accounting Rules — SED prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States. These accounting principles are subject to interpretation by the Financial Accounting Standards Board, the Securities and Exchange Commission, the American Institute of Certified Public Accountants and various other bodies formed to interpret and create appropriate accounting policies. A change in these policies or a new interpretation of an existing policy could have a significant effect on our reported results and may affect our reporting of transactions before a change is announced.

9

§	Exposure to Natural Disasters, War, and Terrorism — SED’s headquarters facilities and some of its logistics centers as well as certain vendors and customers are located in areas prone to natural disasters such as floods, hurricanes, tornadoes, or earthquakes. In addition, demand for SED’s services is concentrated in major metropolitan areas. Adverse weather conditions, major electrical failures or other natural disasters in these major metropolitan areas may disrupt our business should its ability to distribute products be impacted by such an event.
	SED operates in multiple geographic markets, several of which may be susceptible to acts of war and terrorism. Our business could be adversely affected should its ability to distribute products be impacted by such events.
	SED and many of its suppliers receive parts and products from Asia and operate in many parts of the world that may be susceptible to disease or epidemic that may disrupt SED’s ability to receive or deliver products or other disruptions in operations.
§	Volatility of Common Stock Price — Because of the foregoing factors, as well as other variables affecting SED’s operating results, past financial performance should not be considered a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods. In addition, SED’s participation in a highly dynamic industry often results in significant volatility in our common stock price. Some of the factors that may affect the market price of our common stock, in addition to those discussed above, are changes in investment recommendations by securities analysts, changes in market valuations of competitors and key vendors, changes in our industry, competitive pricing pressures, our ability to obtain working capital or project financing, additions or departures of key personnel, limited “public float” in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for our common stock, sales of our common stock, our ability to execute our business plan, operating results that fall below expectations, loss of any strategic relationship, economic, political and other external factors, period-to-period fluctuations in our financial results and fluctuations in the overall stock market, but particularly in the technology sector. In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
§	Our Common Stock Has Been Thinly Traded, Liquidity Is Limited — Our common stock is now traded on the NASDAQ Over-The-Counter Bulletin Board (“OTCBB”), which provides significantly less liquidity than a securities exchange (such as the New York Stock Exchange or the Nasdaq Stock Market, Inc.). Often there is a limited volume of trading in our common stock, and on many days there has been no trading activity at all. Purchasers of shares of our common stock may find it difficult to resell their shares at prices quoted in the market or at all. If we are not able to continue to meet the requirements for the OTCBB, trading of our stock could be removed from the OTCBB and that might have an adverse impact on the market price of our common stock.
§	Experience and Continued Services of Our Senior Management — the loss of senior management or an inability to attract or retain other key individuals, could materially adversely affect us. We seek to compensate and motivate our executives, as well as other employees, through competitive salaries and other benefits, but there can be no assurance that these programs will allow us to retain key employees or hire new key employees.

Item 1B.  Unresolved Staff Comments

None.

Item 2. Properties

          SED maintains its executive offices and Atlanta sales and warehouse facility, at 4916 North Royal Atlanta Drive in Tucker, Georgia. Since 1999, SED leases its executive, administrative, sales and warehouse office from Diamond Chip Group, LLC, a Georgia limited liability company which is an affiliated entity (see Item 13). On August 6, 2009, the lease was extended through September 30, 2011. The facility consists of

10

approximately 30,000 square feet. SED has a right of first refusal to purchase the facility should it be offered for sale.

          SED maintains additional warehouse facilities in City of Industry, California; Miami, Florida; Plano, Texas; Bogota, Colombia and Buenos Aires, Argentina.

          SED leases its sales and distribution facility in Miami, Florida under a lease agreement. This facility consists of approximately 31,300 square feet. Pursuant to its terms, the lease will expire in March 2012.

          SED also leases an approximately 23,100 square foot facility in City of Industry, California. The City of Industry facility serves as a distribution and sales center for SED. Pursuant to its terms, the lease will expire in April 2010.

          SED has lease obligations for several small facilities in Buenos Aires, Argentina. These facilities consist of various spaces in the Galeria business complex and are utilized as sales offices, administrative offices and warehouses by Intermaco S.R.L., a wholly-owned subsidiary of SED. Aggregate space is approximately 5,300 square feet. The leases expire at various dates through May 2010.

          In December 1997, SED began leasing an approximately 20,000 square foot administrative center and sales office in Bogota, Colombia. The Bogota center serves as a sales office and distribution facility for SED International de Colombia Ltda., a wholly-owned subsidiary of SED. The lease will expire in October 2011.

          In July 2009, SED began leasing an approximately 25,519 square feet facility in Plano, Texas. The facility serves as a sales office and distribution center to service SED’s customers in the Midwest. The lease will expire in October 2014.

Item 3. Legal Proceedings

          On September 5, 2008, pursuant to a Settlement Agreement and General Release (the “Agreement”) the Company settled all of the lawsuits brought by Mark Diamond, son of Jean Diamond, the Chairman and CEO of the Company, against the Company, its domestic subsidiaries and certain of its directors. The Agreement covers and fully resolves all claims that have been or could have been brought in the preceding litigations and also covers all appeals and proceedings related thereto. Under the Agreement, the Company: (i) paid Mark Diamond the sum of $2.1 million, of which $325,000 was recovered from its insurance carriers; and (ii) issued 200,000 shares of restricted common stock to an irrevocable trust established by Mark Diamond on June 1, 2009. All of these lawsuits have been dismissed with prejudice.

          On February 2, 2009, the Company settled the lawsuit it filed on June 19, 2006, in the Superior Court of Fulton County, State of Georgia captioned SED International, Inc. vs. Michael Levine with no material impact to the Company (the Levine Suit).

          On February 5, 2009, pursuant to a binding arbitration proceeding between the Company and Archbrook Laguna, LLC (“Archbrook”), Archbrook was ordered by the Arbitrator to dismiss, with prejudice, SED International from the lawsuit Archbrook had filed in March 2008 in the United States District Court, District of New Jersey (the New Jersey Archbrook Laguna Suit).

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

          No matters were submitted to a vote of SED’s shareholders during the fourth quarter of fiscal 2009.

11

PART II

Item 5. Market for the Company’s Common Stock, Related Shareholder Matters and Issuer Purchases of Equity Securities

          SED’s common stock is not listed on any stock exchange. SED’s common stock is currently quoted on the OTCBB under the symbol “SECX”. The following table sets forth the high and low close bid information for the common stock for each quarter within the last two fiscal years. The bid information reflects inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.

	Bid Price
	High		Low
Fiscal year 2009
First	$	1.67	$	1.31
Second		1.75		1.25
Third		1.75		.85
Fourth		1.21		.80
Fiscal year 2008
First	$	1.68	$	1.01
Second		1.52		1.21
Third		1.63		1.03
Fourth		1.75		1.25

          As of September 1, 2009, the closing bid price per share for SED common stock, as reported on the OTCBB was $1.28 and SED had approximately 500 shareholders of record.

          SED has never declared or paid cash dividends on its common stock. SED currently intends to retain earnings to finance its ongoing operations and it does not anticipate paying cash dividends in the foreseeable future. Future policy with respect to payment of dividends on the common stock will be determined by the Board of Directors based upon conditions then existing, including SED’s earnings and financial condition, capital requirements and other relevant factors. SED International, the earnings of which would be the primary source of any dividend payments, and SED are parties to a revolving credit agreement which contains certain financial covenants that may impact SED’s ability to pay dividends in the event SED should change its policy and choose to issue dividends. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

          Information concerning SED’s equity compensation plans required by Item 201(d) of Regulation S-K appears in Part III, Item 12 hereof and in Note 7 to SED’s Consolidated Financial Statements.

Item 6. Selected Financial Data Five Year Financial Summary

          As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this item.

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

          The following discussion should be read in conjunction with SED’s Consolidated Financial Statements and the notes thereto included elsewhere herein. Historical operating results are not necessarily indicative of trends in operating results for any future period.

Overview

          During fiscal 2009, SED’s consolidated net sales decreased approximately 1.3% when compared to fiscal 2008. This decline can be attributed to a 1.4% increase in domestic sales offset by a 5.1% decrease in Latin America and export sales from the United States after eliminations. Sales in Latin America and export sales from the United States represented 39.6% of sales in fiscal 2009 compared to 41.2% in fiscal 2008.

12

          Gross profit margin increased $536,000 to $25.9 million for fiscal 2009, compared to $25.4 million for fiscal 2008. Gross profit as a percentage of net sales was 5.5% for fiscal 2009 compared with 5.3% for fiscal 2008. The increase in gross profit margin was primarily due to higher margins on sales in Latin America due to the raising of selling prices to partially offset the devaluation in Latin American currencies. Overall, SED continues to experience pricing pressure in selling products.

          Favorable product mix changes and currency devaluation in Latin America resulted in an increase in gross profit during fiscal 2009.

          Selling, general and administrative expenses, excluding litigation settlement expense and excluding depreciation and amortization expense, increased to $23.2 million or 4.9% of net sales in 2009 compared to $22.6 million or 4.7% in fiscal 2008.

          SED had a net loss of $1.1 million in fiscal 2009, compared to a net loss of $2.0 million in fiscal 2008. Included in this net loss for fiscal 2008 was $2.1 million which was related to the Diamond settlement as described in Item 3., Legal Proceedings, above. Operating income in Latin American subsidiaries was $.9 million in fiscal 2009 and $1.5 million in fiscal 2008 while operating loss in the United States was $.5 million in fiscal 2009 and $1.5 million in fiscal 2008.

          SED experienced a decrease in net sales in fiscal 2009 compared to fiscal 2008. Company management is continuing to focus on increasing sales and profit margins and reducing administrative and overhead costs. There is no assurance SED will be successful in its efforts. Failure to improve margins and reduce overhead would adversely affect SED’s profitability and financial condition.

          Numerous factors and conditions impact SED’s ability to adequately achieve its profit goals, including, but not limited to, the following:

§	Global Economic Downturn — The current global economic downturn creates several risks relating to our financial results, operations and prospects. We may experience a rapid decline in demand for the products we sell resulting in a more competitive environment and pressure to reduce the cost of operations. The current global economic downturn may also result in changes in vendor terms and conditions, such as rebates, cash discounts and cooperative marketing efforts, which may result in further downward pressure on our gross margins. Deterioration in the financial and credit markets heightens the risk of customer bankruptcies and delay in payment. Deterioration in the credit markets in Latin America has resulted in reduced availability of credit insurance to cover customer accounts. This may result in our reducing the credit lines we provide to customers, thereby having a negative impact on our net sales. In addition, in this environment, there is a greater possibility of increased interest rates on our borrowings and greater uncertainty in the capital markets related to our cost of or access to capital to finance our business, including the ability of financial institutions to fund their commitments to us. Also, volatile foreign currency exchange rates increase our risk related to products purchased in a currency other than the currency in which those products are sold. The realization of any or all of these risks could have a significant adverse effect on our financial results.
§	Continuation of distribution agreements — SED operates under formal but cancelable distribution agreements with certain of its suppliers. If these agreements were cancelled, we would be forced to obtain its products through wholesalers. This would reduce SED’s profit margin on the affected products.
§	Availability of certain products — From time to time, due to production limitations or heavy demand, SED may only be able to purchase a limited amount of popular products from its suppliers.
§	Product margins — SED operates in a very competitive business environment. Accordingly, product margins are continually under pricing pressure. From time to time, we receive price protection and other considerations from our vendors. While SED has no reason to believe such vendor consideration will not continue, no assurance can be given that such price protection and other considerations will continue to be received in the future.

13

§	Vendor credit — SED significantly relies on its suppliers for trade credit. Changes by our suppliers in their credit terms could force us to obtain less favorable financing for its purchases.
§	Vendor Terms and Conditions — SED relies on various rebates, cash discounts, and cooperative marketing programs offered by its vendors to support expenses associated with distributing and marketing the vendors’ products. Currently, the rebates and purchase discounts offered by vendors are influenced by sales volumes and are subject to change. Additionally, certain of SED’s vendors subsidize floorplan financing arrangements for the benefit of our customers. Terminations of a supply or services agreement or a significant change in vendor terms or conditions of sale could negatively affect our operating margins, revenue or the level of capital required to fund our operations.
	SED receives a significant percentage of revenues from products it purchases from relatively few manufacturers. A manufacturer may make rapid, significant and adverse changes in its sales terms and conditions, such as reducing the amount of price protection and return rights as well as reducing the level of purchase discounts and rebates they make available to us, or may merge with or acquire other significant manufacturers. SED’s gross margins could be negatively impacted if we are unable to pass through the impact of these changes to our customers or cannot develop systems to manage ongoing vendor programs. In addition, SED’s standard vendor distribution agreement permits termination without cause by either party upon 30 days notice. The loss of a relationship with any of our key vendors, a change in their strategy (such as increasing direct sales), the merging of significant manufacturers or significant changes in terms on their products may adversely affect our business.
§	Product obsolescence — SED offers a broad line of products that are subject to fast technological obsolescence, which increases the risk of inventory markdown. Through our vendor agreements, we have certain stock return privileges, which vary from supplier to supplier. We believe stock return programs will continue in the future, but we can give no assurance as to whether these programs will continue.
§	Credit decisions and losses — SED maintains an experienced customer credit staff and relies on customer payment history and third party data to make customer credit decisions. Nevertheless, SED may experience customer credit losses in excess of its expectations. From time to time, depending on credit risk assessment and coverage costs, SED purchases credit insurance to cover receivables from customers located in the United States and in many Latin American countries (subject to certain terms and conditions). However, the terms of the credit insurance agreement require SED to maintain certain minimum standards and policies with respect to extending credit to customers. If we do not adhere to such policies, the insurance companies may not pay claims submitted by SED.
§	Proportionate control of general and administrative costs — SED attempts to control its overhead costs to keep such costs in line with its sales volume. As sales volumes fluctuate, we must continually monitor our overhead costs and make timely and appropriate adjustments.
§	Uncertain and possibly volatile economic and political environment in Latin America — The general economic and political environment in the countries in which SED operates in Latin America is uncertain and, at times, volatile. As a result of these conditions, we could experience unexpected losses from operations in these countries.
§	Availability of credit facilities — SED operates under a revolving credit facility with Wachovia Bank (now owned by Well Fargo Bank) initially entered into September 2005 and a one year line of credit with Banco de Credito of Bogotá, Colombia, first entered into in February 2009. The Wachovia Agreement was amended in March 2007 to extend its maturity to September 2011. This credit facility is subject to certain collateral limitations and certain covenants. Under the current Wachovia credit agreement, SED only has the covenants tested if minimum availability, as defined, is 10% of the formula borrowing base ($3.9 million at June 30, 2009). No assurance can be given that SED will be able to maintain compliance with financial covenants, or obtain waivers in the event of non-compliance, in the future. Failure to maintain compliance with the financial covenants could adversely affect SED’s ability to obtain vendor credit and the overall business operations. The Wachovia Credit facility is further described in Note 4 to SED’s Consolidated Financial Statements. As of June 30,

14

	2009, SED was in compliance with the requirements of the Wachovia Agreement and has no reason to believe it will not remain in compliance.
§	Cash flows — While not presently anticipated, SED’s operations in Latin America may require capital infusions in the form of loans from us or other borrowings by the subsidiary. The Wachovia facility places certain restrictions on the future funding of Latin American operations (see Note 4 to SED’s Consolidated Financial Statements).
§	Competition — SED operates in a highly competitive environment. The computer wholesale distribution industry is characterized by intense competition, based primarily on product availability, credit availability, price, speed of delivery, quality and depth of product lines and training, service and support. Weakness in demand in the market intensifies the competitive environment in which we operate. SED competes with a variety of regional, national and international wholesale electronic distributors, some of which have much greater financial resources than SED. We also face competition from companies entering or expanding into the logistics and product fulfillment and e-commerce supply chain services market.
§	Loss of Significant Customers — Customers do not have an obligation to make purchases from SED. In some cases, SED has made adjustments to its systems, vendor offerings, and processes, and made staffing decisions, in order to accommodate the needs of a significant customer. In the event a significant customer decides to make its purchases from another distributor, experiences a significant change in demand from its own customer base, becomes financially unstable, or is acquired by another company, SED’s receipt of revenues may be significantly affected, resulting in an adverse effect on SED’s business.
§	Foreign Currency Exchange Risks; Exposure to Foreign Markets — SED conducts business in countries outside of the United States, which exposes SED to fluctuations in foreign currency exchange rates. SED may enter into short-term forward exchange or option contracts to hedge this risk; nevertheless, fluctuations in foreign currency exchange rates could have an adverse effect on SED’s business. In particular, the value of our equity investment in foreign countries may fluctuate based upon changes in foreign currency exchange rates. These fluctuations, which are recorded in a cumulative translation adjustment account, may result in losses in the event a foreign subsidiary is sold or closed at a time when the foreign currency is weaker than when SED initially invested in the country.

          All United States domestic purchases and sales are denominated in United States dollars. For SED’s operations in Colombia and Argentina, in-country transactions are conducted in the respective local currencies of these two nations while import purchases are generally denominated in United States dollars.

15

Results of Continuing Operations

          The following table sets forth for the years presented, the percentage of net sales represented by certain line items from SED’s consolidated statements of operations:

	Year Ended June 30,
	2009			2008
Net sales		100.00	%		100.00	%
Cost of sales, including buying and occupancy expense		94.51	%		94.69	%
Gross profit		5.49	%		5.31	%
Operating expenses:
Selling, general and administrative expense, excluding litigation settlement expense		4.90	%		4.71	%
Litigation settlement expense		—			.44	%
Depreciation and amortization expense		.10	%		.10	%
Foreign currency transaction loss		.40	%		.05	%
Total operating expenses		5.40	%		5.30	%
Operating income		.09	%		.01	%
Interest (income) expense:
Interest income		(.02	)%		(.03	)%
Interest expense		.26	%		.37	%
Interest, net		.24	%		.34	%
Loss before income taxes		(.15	)%		(.33	)%
Income tax expense		.08	%		.08	%
Net loss		(.23	)%		(.41	)%

Fiscal 2009 Compared To Fiscal 2008

          Revenues. Net sales decreased 1.3%, or $6.2 million, to $472.5 million in fiscal 2009 as compared to $478.7 million in fiscal 2008. Microcomputer product sales, excluding handling revenue decreased 5.7% to $415.9 million in fiscal 2009 compared to $440.9 million in fiscal 2008. This was primarily due to a decrease in laptop computers, consumables, hard drives and related computer product sales. Consumer electronics sales increased 72.2% to $49.5 million in fiscal 2009 compared to $28.8 million in fiscal 2008. This was primarily due to an increase in television sales and electronics sales from e-commerce. Wireless revenues for fiscal 2009 decreased 26.1% to $6.0 million compared to $8.1 million for fiscal 2008.

16

          Information concerning SED’s domestic and international sales is summarized below:

	Year Ended June 30,						Change
	2009			2008			Amount			Percent
	(Amounts in millions except percentage amounts)
United States
Domestic	$	285.4		$	281.5		$	3.9			1.4	%
Export		86.8			97.7			(10.9	)		(11.2	)%
Latin America		103.2			103.5			(.3	)		(.3	)%
Elimination		(2.9	)		(4.0	)		1.1			27.5	%
Consolidated	$	472.5		$	478.7		$	(6.2	)		(1.3	)%

          Domestic revenues were $285.4 million and $281.5 million in fiscal 2009 and fiscal 2008, respectively. The increase was due to an increase in computer sales. Export revenues, net of eliminations, were $83.9 million and $93.7 million in fiscal 2009 and fiscal 2008, respectively. The decrease was due to a decrease in sales of computer products, printers and consumable printer products due to declining economic conditions. Latin America sales as measured in local currencies increased 12.3%, due to an increase in sales of computer products, printers and consumable printer products as compared to a decrease of .3% as measured in U.S. dollars. After translation into U.S. dollars, Latin America sales were $103.2 million and $103.5 million in fiscal 2009 and fiscal 2008, respectively.

          Sales of microcomputer products, including handling revenue, represented approximately 88.2% of net sales for fiscal 2009 compared to 92.3% for fiscal 2008. Sales of consumer electronics products accounted for approximately 10.5% of net sales for fiscal 2009 compared to 6.0% for fiscal 2008. Sales of wireless telephone products accounted for approximately 1.3% of net sales for fiscal 2009 compared to 1.7% for fiscal 2008.

          Gross Profit Margins. Gross profit margin increased $536,000 to $25.9 million for fiscal 2009, compared to $25.4 million for fiscal 2008. Gross profit as a percentage of net sales was 5.5% for fiscal 2009 compared with 5.3% for fiscal 2008. The increase in gross profit margin was primarily due to higher margins on sales in Latin America due to the raising of selling prices to partially offset the devaluation in Latin American currencies. Overall, SED continues to experience pricing pressure in selling products.

          Selling, General and Administrative Expenses. Selling, general and administrative expenses, excluding litigation settlement expense, depreciation and amortization expense and foreign currency transaction losses, for fiscal 2009 increased 2.7% to $23.2 million, compared to $22.6 million for fiscal 2008. The increase was primarily due to several factors including (i) a net increase of approximately $530,000 for professional fees and settlement cost related to (a) negotiations with a group of shareholders, (b) the Levine Suit, and (c) the New Jersey Archbrook Laguna Suit; (ii) an increase of approximately $400,000 in Board of Directors cost related to an expanded board and increased compensation; (iii) a decrease of approximately $100,000 in building security cost and rents; (iv) an increase of approximately $150,000 in Latin America employee expenses mostly related to mandated government salary increases, a decrease of $280,000 in employee expenses related to a one time expense in the prior year for a departed executive and a decrease of approximately $65,000 mostly related to company staffing reductions.

          Depreciation and Amortization. Depreciation and amortization was $474,000 and $473,000 for fiscal 2009 and 2008, respectively.

          Foreign Currency Transaction. SED has significant U.S. Dollar denominated liabilities recorded in its Latin American subsidiaries. The devaluation of the Columbian and Argentine currencies vs. the U.S. Dollar resulted in a foreign currency transaction loss totaling $1.9 million for fiscal 2009 as compared to a loss of $257,000 for fiscal 2008.

          Interest Income. Interest income was $115,000 for fiscal year 2009 and $123,000 for fiscal 2008. This is related to bank interest and customer past due interest earned in the Company’s Latin American subsidiaries.

17

          Interest Expense. Interest expense was $1.3 million and $1.7 million for fiscal 2009 and 2008, respectively. This change resulted primarily from declining interest rates and lower average loan balances.

          Provision for Income Taxes. Income tax expense was $378,000 for fiscal 2009 as compared to an income tax expense of $397,000 for fiscal 2008. The provision is primarily related to income generated by SED’s Latin American subsidiaries. The provision for income taxes differs from the amount which would result from applying the statutory Federal income tax rate due to the taxes imposed on the foreign subsidiaries as well as the fact that SED is not fully valuing a tax asset and benefit of the net operating loss carry forward. At June 30, 2009, SED has a total net operating loss carried forward for U.S. federal tax purposes of approximately $ 63.7 million and state tax purposes of approximately $53.4 million; expiring at various dates through 2029. At June 30, 2009 and 2008, SED has recorded valuation allowances principally for all deferred tax assets, except for those relating to Intermaco S.R.L. (Intermaco) and SED International de Colombia Ltda. (SED Colombia), as it is not considered more likely than not that these assets will be realized.

Discontinued Operations

          In February 2003, SED resolved to discontinue commercial operations of its Brazilian subsidiary, SED International do Brasil Distribuidora, Ltda. (the “Brazil Operation”). SED International do Brasil Distribuidora Ltda. has various litigations related to additional income taxes and social taxes allegedly due from the fiscal years 1998 through 2004. These legal claims were filed during the years 2002 and 2003. The legal claims range from $3,000 to $219,000 each or $522,000 in the aggregate. After recording this cost, SED maintains an accrued liability of $270,000 at June 30, 2009 and 2008 to cover potential losses related to these claims.

Off-Balance Sheet Arrangements

          An off-balance sheet arrangement is any contractual arrangement involving an unconsolidated entity under which a company has (a) made guarantees, (b) a retained or a contingent interest in transferred assets, (c) any obligation under certain derivative instruments or (d) any obligation under a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk, or credit risk support to SED, or engages in leasing, hedging, or research and development services within SED.

          SED does not have any off-balance sheet financing arrangements or unconsolidated special purpose entities.

Liquidity and Capital Resources

          Overview. At June 30, 2009, SED had cash and cash equivalents totaling $3.6 million and working capital of approximately $18.0 million. At June 30, 2009, SED’s availability under the credit facilities was approximately $13.3 million, after deducting $1.8 million in reserves for outstanding Letters of Credit. SED’s principal source of liquidity is its cash, cash equivalents, trade receivables, inventories and amounts available for use under its revolving credit facility with Wachovia Bank, National Association and Banco de Credito. SED’s accounts receivable and inventories collateralize SED’s borrowings. The Wachovia credit facility provides SED with a $50.0 million line of credit through September 2011. During February 2009, SED Colombia signed a $2.5 million unsecured, one-year line of credit with Banco de Credito. SED is using the line to reduce the effect of local currency devaluation by converting the loan to USD and taking advantage of vendor early pay cash discounts with certain vendors. Historically, SED has financed its liquidity needs largely through internally generated funds, borrowings under the Wachovia credit facility, subsidiary bank credit agreements, and vendor lines of credit. As of June 30, 2009, SED was in compliance with the requirements of the Wachovia credit facility agreement and has no reason to believe that it will not remain in compliance.

          While SED had historically derived a material portion of its operating income and cash flows from its foreign subsidiaries, management believes if the deteriorating economic conditions in Latin America and the devaluation of certain Latin American currencies continue there may be a negative effect on net income and the foreign subsidiaries’ ability to generate cash flows from operations. Domestic banking agreements and international monetary restrictions may also limit SED’s ability to transfer cash between its foreign and domestic subsidiaries.

18

          Operating Activities. Cash used by operating activities was approximately $6.4 million for fiscal year ended June 30, 2009 as compared to cash provided by operating activities of approximately $6.7 million provided for the fiscal year ended June 30, 2008. Changes in operating assets and liabilities during fiscal 2009 are as follows.

          Net trade receivables were $50.1 million at June 30, 2009 and $44.8 million at June 30, 2008. The increase in trade receivables is a result of increased sales in June 2009 as compared to June 2008. Average days sales outstanding at June 30, 2009 were approximately 36.0 days as compared to 35.4 days at June 30, 2008.

          Net inventories increased $2.4 million to $38.5 million at June 30, 2009 from $36.1 million at June 30, 2008. SED continues to monitor and adjust inventory levels according to current and projected sales volumes.

          Other current assets decreased to $5.7 million at June 30, 2009 from $7.6 million at June 30, 2008. This decrease was due to conversion of tax receivables in Latin America to savings bonds.

          Trade accounts payable increased by approximately $1.4 million to $47.4 million at June 30, 2009 compared to $46.0 million at June 30, 2008 due to a net increase in inventories.

          Accrued and other current liabilities decreased to $7.7 million at June 30, 2009 compared to $8.9 million at June 30, 2008.

          As disclosed under Item 3. “Legal Proceedings”, SED paid $1.8 million, net of $300,000 recovered from insurance, in August 2008, to settle the Diamond cases against SED. We did not breach any loan covenants as a result of this settlement payment.

          SED’s cash flows in fiscal 2009 were negatively affected by the changes in exchange rates in the Latin American countries in which SED does business. The exchange rate changes had the effect of using approximately $1.9 million in cash for the year ended June 30, 2009 as compared to using $300,000 in fiscal 2008.

          Financing Activities. Net borrowings under the credit facilities increased by approximately $6.3 million to $25.1 million at June 30, 2009 compared to $18.8 million at June 30, 2008.

          Borrowings under the Wachovia Agreement accrue interest based upon a variety of interest rate options depending upon the computation of availability as defined therein. The interest rates range from LIBOR, plus a margin ranging from 1.25% to 2.00%, and the prime rate. SED is also subject to a commitment fee of .25% on the unused portion of the facility. Interest is payable monthly. Borrowings under the Wachovia Agreement are collateralized by substantially all domestic assets of SED and 65% of each of SED’s shares in its foreign subsidiaries, respectively.

          The Wachovia Agreement contains certain covenants which, among other things, require that SED maintain availability of $5.0 million or more during the term of the Agreement to make advances to SED’s Latin American subsidiaries. SED’s advances to its Latin American subsidiaries are restricted. The Wachovia Agreement also contains a covenant which requires that if SED’s availability is less than 10% of the formula borrowing base ($3.9 million at June 30, 2009) at any time during the term of the Agreement, then maintenance of a minimum fixed charge coverage ratio, as defined, is required. The Wachovia Agreement also restricts SED’s ability to distribute dividends.

          During February, 2009, SED Colombia signed a one-year $2.5 million unsecured line of credit with Banco de Credito that bears interest at a fixed rate of 13.7% per annum. SED is using the line to reduce the effect of devaluation by converting the loan to US Dollars and taking vendor early pay cash discounts with certain vendors.

          Available borrowings under these credit facilities at June 30, 2009 were $13.3 million under the Wachovia Agreement, excluding $1.8 million in reserves for our outstanding letters of credit, and $2.5 million under the Banco de Credito line of credit. Under both facilities the average borrowings, maximum borrowings and weighted average interest rate for fiscal 2009 were $22.1 million, $32.7 million and 5.3%, respectively. The

19

weighted average interest rate on outstanding borrowings under the credit facilities was 4.5% at June 30, 2009. Average borrowings, maximum borrowings and weighted average interest rate for fiscal June 30, 2008 were $24.1 million, $34.7 million and 6.2%, respectively.

          The carrying value of all bank debt at June 30, 2009 approximates its fair value based on the variable market rates of interest on such bank debt.

          On January 26, 2007, the Company entered into a three-year interest rate swap contract to reduce the impact of the fluctuations in the interest rates on $5.0 million notional amount of the revolving credit facility under the Wachovia Agreement. The contract effectively converted the variable rate to a fixed rate of 5.20%. On March 5, 2008, the three-year swap agreement was further amended to a notional amount of $15.0 million with a fixed rate of 4.54%. On March 26, 2009, the swap agreement was amended to provide for an extension to January 26, 2013 and an interest rate modification to 2.95%. The fixed rates cited do not include Wachovia’s markup of 1.5% as of June 30, 2009.

          The Company utilizes derivative financial instruments to reduce interest rate risk. The interest rate swap agreement is accounted for in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”), which establishes accounting and reporting standards for derivative instruments and hedging activities. As required by SFAS No. 133, the Company recognizes all derivatives as either assets or liabilities on its balance sheet and measures those instruments at fair value. The Company has designated its interest rate swap agreement as a cash flow hedge. Accordingly, the gains and losses associated with changes in the fair value of the interest rate swap are reported in other comprehensive income (loss) as the hedge is highly effective in achieving offsetting changes in the fair value of cash flows of the asset or liability hedged. The fair value, not in the Company’s favor, of the interest rate swap was $345,000 and $320,000 at June 30, 2009 and 2008, respectively, and is included in accrued expenses. The Company does not hold or issue derivative financial instruments for trading purposes.

          There have been no material changes to obligations and/or commitments since the end of the last fiscal year. Purchase orders or contracts for the purchase of inventories and other goods and services are not included in our estimates because SED is not able to determine the aggregate amount of such purchase orders or contracts that are binding obligations. Our purchase orders are based on its current distribution needs and are fulfilled by its vendors within short time horizons. As of June 30, 2009, SED did not have any significant agreements for the purchase of inventories or other goods specifying minimum quantities or set prices that exceeded its expected requirements.

          The current global economic downturn creates several risks relating to our financial results, operations and prospects. We may experience a rapid decline in demand for the products we sell resulting in a more competitive environment and pressure to reduce the cost of operations. The benefits from cost reductions may take longer to fully realize and may not fully mitigate the impact of the reduced demand. The current global economic downturn may also result in changes in vendor terms and conditions, such as rebates, cash discounts and cooperative marketing efforts, which may result in further downward pressure on our gross margins. Deterioration in the financial and credit markets heightens the risk of customer bankruptcies and delay in payment. Deterioration in the credit markets in Latin America and the United States have resulted in reduced availability of credit insurance to cover customer accounts. This may result in our reducing the credit lines we provide to customers, thereby having a negative impact on our net sales. Also, volatile foreign currency exchange rates increase our risk related to products purchased in a currency other than the currency in which those products are sold. The realization of any or all of these risks could have a significant adverse effect on our future financial results.

          Historically, SED has financed its liquidity needs largely through internally generated funds, borrowings under the Wachovia credit facility, subsidiary bank credit agreements, and vendor lines of credit. There can be no assurance that all of the aforementioned sources of capital will be available to SED when needed. For example, SED’s creditors may tighten their lending standards and SED may find it necessary to tighten credit availability standards to its customers due to the general weakening of the economic environment. However, SED believes that funds generated from operations, together with its Wachovia credit facility, subsidiary bank credit agreements, vendor credit lines, and current cash and cash equivalents will be sufficient to support its working capital and liquidity requirements for at least the next 12 months.

20

Critical Accounting Policies and Estimates

Allowance for Doubtful Accounts

          An allowance for uncollectible accounts has been established based on collection experience and an assessment of the collectability of specific accounts. Management evaluates the collectability of accounts receivable based on a combination of factors. Initially, management estimates an allowance for doubtful accounts as a percentage of accounts receivable based on historical collections experience. This initial estimate is periodically adjusted when management becomes aware of a specific customer’s inability to meet its financial obligations (e.g., bankruptcy filing) or as a result of changes in the overall aging of accounts receivable. The overall determination of the allowance also considers credit insurance coverage and deductibles, which SED has maintained from time to time. SED maintains credit insurance, which protects us from credit losses exceeding certain deductibles for certain domestic sales and certain export shipments from the United States. SED maintains credit insurance in many Latin American countries (subject to certain terms and conditions). We maintain a policy of writing off the accounts receivable deemed to be uncollectable against the allowance for doubtful accounts in our fourth fiscal quarter.

Inventories — Slow Moving, Obsolescence, and Lower of Cost or Market

          Certain SED vendors allow for either return of goods within a specified period (usually 45-90 days) or for credits related to price protection. However, for other vendor relationships and inventories, SED is not protected by vendors from the risk of inventory loss. Therefore, in determining the net realizable value of inventories, management identifies slow moving or obsolete inventories that (1) are not protected by vendor agreements from risk of loss, and (2) are not eligible for return under various vendor return programs. Based upon these factors, management estimates the net realizable value of inventories and records any necessary adjustments as a charge to cost of sales. If inventory return privileges were discontinued in the future, or if vendors were unable to honor the provisions of certain contract, which protect SED from inventory losses, including price protections, the risk of loss associated with obsolete, slow moving or impaired inventories would increase. SED’s reserve for obsolete and slow moving inventories was approximately $705,000 at June 30, 2009 or 1.8% of gross inventories.

Revenue Recognition

          Revenue is recognized once four criteria are met: (1) SED must have persuasive evidence that an arrangement exists; (2) delivery must occur, which generally happens at the point of shipment (this includes the transfer of both title and risk of loss, provided that no significant obligations remain); (3) the price must be fixed or determinable; and (4) collectability must be reasonably assured. Shipping revenue is included in net sales while the related costs, including shipping and handling costs, are included in the cost of products sold. SED allows its customers to return product for exchange or credit subject to certain limitations. A provision for such returns is recorded based upon historical experience.

Financial Instruments

          SED’s principal financial instruments consist of cash, accounts receivable, accounts payable and revolving credit facilities. The carrying value of these financial instruments approximate fair value based upon the short-term nature of the instruments, and the variable rates on credit facilities.

          The functional currency for SED’s international subsidiaries is the local currency for the country in which the subsidiaries own their primary assets. The translation of the applicable currencies into U.S. dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period. Any related translation adjustments are recorded directly to stockholders’ equity as a component of accumulated other comprehensive loss. It is SED’s policy not to enter into derivative contracts for speculative trading purposes.

          SED’s revolving credit facility is currently a variable rate facility. SED has into an interest rate swap contract to reduce the impact of the fluctuations in the interest rate on $15.0 million notional amount of the obligation under its revolving credit facility with Wachovia, which expires on January 26, 2013.

21

Inflation and Price Levels

          Inflation has not had a significant impact on SED’s overall business because of the typically decreasing costs of products sold by SED and the fact that we also receive vendor price protection for a significant portion of its inventory. In the event a vendor or competitor reduces its prices for goods purchased by SED prior to SED’s sale of such goods, we generally has been able either to receive a credit from the vendor for the price differential or to return the goods to the vendor for credit.

          The Latin American countries in which SED operates have experienced high rates of inflation and hyperinflation from time to time in the past. At this time, management believes that inflation may have a material impact on SED’s Latin American business operations in the immediate future.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

          As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this item.

22

Item 8. Consolidated Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
SED International Holdings, Inc.

We have audited the consolidated balance sheets of SED International Holdings, Inc. and Subsidiaries as of June 30, 2009 and 2008, and the related consolidated statements of operations, shareholders’ equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of SED International Holdings, Inc. and Subsidiaries as of June 30, 2009 and 2008, and their results of operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ J.H. Cohn LLP

Roseland, New Jersey
September 24, 2009

23

SED INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	June 30,
	2009			2008
ASSETS
Current assets:
Cash and cash equivalents	$	3,570,000		$	4,086,000
Trade accounts receivable, less allowance for doubtful accounts of $584,000 (2009) and $753,000 (2008)		50,128,000			44,839,000
Inventories, net		38,532,000			36,116,000
Deferred tax assets, net		286,000			260,000
Other current assets		5,653,000			7,615,000
Total current assets		98,169,000			92,916,000
Property and equipment, net		720,000			1,044,000
Total assets	$	98,889,000		$	93,960,000
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	47,417,000		$	45,986,000
Accrued and other current liabilities		7,670,000			8,865,000
Revolving credit facility		25,093,000			18,837,000
Total liabilities		80,180,000			73,688,000
Commitments and contingencies
Shareholders’ equity:
Preferred stock, $1.00 par value; 129,500 shares authorized, none issued		—			—
Common stock, $.01 par value; 100,000,000 shares authorized, 6,781,302 (2009) and 6,278,347 (2008) shares issued, 5,086,811 (2009) and 4,583,856 (2008) shares outstanding		68,000			63,000
Additional paid-in capital		69,525,000			68,681,000
Accumulated deficit		(33,531,000	)		(32,443,000	)
Accumulated other comprehensive loss		(4,266,000	)		(2,942,000	)
Treasury stock, 1,694,491 shares, at cost		(13,087,000	)		(13,087,000	)
Total shareholders’ equity		18,709,000			20,272,000
Total liabilities and shareholders’ equity	$	98,889,000		$	93,960,000

See notes to consolidated financial statements.

24

SED INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended June 30,
	2009			2008
Net sales	$	472,478,000		$	478,690,000
Cost of sales		446,534,000			453,282,000
Gross profit		25,944,000			25,408,000
Selling, general and administrative expenses, excluding litigation settlement expense and depreciation and amortization expense		23,151,000			22,552,000
Litigation settlement expense		—			2,075,000
Depreciation and amortization expense		474,000			473,000
Foreign currency transactions loss		1,894,000			257,000
Operating income		425,000			51,000
Interest income		(115,000	)		(123,000	)
Interest expense		1,250,000			1,741,000
Loss income before income taxes		(710,000	)		(1,567,000	)
Income tax expense		378,000			397,000
Net loss	$	(1,088,000	)	$	(1,964,000	)
Basic and diluted loss per common share	$	(.27	)	$	(.51	)
Weighted average number of common shares outstanding:
Basic and diluted		4,020,000			3,879,000

See notes to consolidated financial statements.

25

SED INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

	Common Stock						Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Treasury Stock					Total Shareholders’ Equity
	Shares			Par Value												Shares		Cost
BALANCE JUNE 30, 2007		5,573,347		$	56,000		$	68,531,000		$	(30,479,000	)	$	(2,862,000	)		1,694,491	$	(13,087,000	)	$	22,159,000
Stock awards issued		762,500			8,000			(8,000	)
Stock awards forfeited		(57,500	)		(1,000	)		1,000
Stock-based compensation								157,000														157,000
Net loss											(1,964,000	)										(1,964,000	)
Foreign currency translation adjustments														240,000								240,000
Changes in fair value of interest rate swap contract														(320,000	)							(320,000	)
Comprehensive loss																						(2,044,000	)
BALANCE JUNE 30, 2008		6,278,347			63,000			68,681,000			(32,443,000	)		(2,942,000	)		1,694,491		(13,087,000	)		20,272,000
Stock awards issued		177,975			2,000			(5,000	)													(3,000	)
Stock cancelled		(20	)
Stock-based compensation								463,000														463,000
Stock issued for services and litigation settlement		325,000			3,000			386,000														389,000
Net loss											(1,088,000	)										(1,088,000	)
Foreign currency translation adjustments														(1,416,000	)							(1,416,000	)
Changes in fair value and related amortization of interest rate swap contract														92,000								92,000
Comprehensive loss																						(2,412,000	)
BALANCE JUNE 30, 2009		6,781,302		$	68,000		$	69,525,000		$	(33,531,000	)	$	(4,266,000	)		1,694,491	$	(13,087,000	)	$	18,709,000

See notes to consolidated financial statements.

26

SED INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended June 30,
	2009			2008
Operating activities:
Net loss	$	(1,088,000	)	$	(1,964,000	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		474,000			473,000
Deferred tax assets		(26,000	)		(237,000	)
Stock compensation		463,000			157,000
Provision for losses on trade accounts receivable		398,000			419,000
Changes in operating assets and liabilities:
Trade accounts receivable		(6,961,000	)		(3,053,000	)
Inventories, net		(3,784,000	)		5,820,000
Other current assets		1,372,000			(2,606,000	)
Trade accounts payable		3,232,000			5,388,000
Accrued and other current liabilities		(480,000	)		2,288,000
Net cash (used in) provided by operating activities		(6,400,000	)		6,685,000
Investing activities: Purchase of equipment		(157,000	)		(409,000	)
Financing activities: Net borrowings (repayments) under revolving credit facility		6,256,000			(5,707,000	)
Effect of exchange rate changes on cash and cash equivalents		(215,000	)		161,000
(Decrease) increase in cash and cash equivalents		(516,000	)		730,000
Cash and cash equivalents:
Beginning of year		4,086,000			3,356,000
End of year	$	3,570,000		$	4,086,000
Supplemental Disclosures of Cash Flow Information — cash paid during the year for:
Interest paid	$	1,187,000		$	1,643,000
Income taxes	$	643,000		$	1,283,000

See notes to consolidated financial statements.

27

SED INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended June 30, 2009 and 2008

1. Description of Business

          SED International Holdings, Inc., the parent company incorporated in Georgia, and its wholly-owned operating subsidiary, SED International, Inc., a Georgia corporation, are engaged in the wholesale distribution of microcomputer products, including mass storage, imaging, display, consumer electronics and wireless products throughout the United States and Latin America. SED International Holdings, Inc. services Latin America through its wholly-owned subsidiaries SED International de Colombia Ltda. (“SED Colombia”) in Bogotá, Colombia and Intermaco S.R.L. (“Intermaco”) in Buenos Aires, Argentina.

2. Summary of Significant Accounting Policies

          Principles of Consolidation — The consolidated financial statements include the accounts of SED International Holdings, Inc. and its wholly-owned subsidiaries, SED International, Inc. (formerly Southern Electronics Distributors, Inc.), SED International do Brasil, Ltda. (formerly SED Magna Distribuidora Ltda.), SED Magna (Miami), Inc., SED Colombia and Intermaco, (collectively the “Company”). All intercompany accounts and transactions have been eliminated in consolidation. The operations of SED International do Brasil, Ltda. were discontinued during the third quarter of fiscal 2003. See Note 11.

          Revenue Recognition — Revenue is recognized once four criteria are met: (1) SED must have persuasive evidence that an arrangement exists; (2) delivery must occur, which generally happens at the point of shipment (this includes the transfer of both title and risk of loss, provided that no significant obligations remain); (3) the price must be fixed or determinable; and (4) collectability must be reasonably assured. Shipping revenue is included in net sales while the related costs, including shipping and handling costs, are included in the cost of sales. SED allows its customers to return product for exchange or credit subject to certain limitations. A provision for such returns is recorded based upon historical experience.

          Concentrations of Credit Risk — Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents and trade accounts receivable. The Company places its cash and cash equivalents with high credit quality financial institutions. At times, such amounts exceed the current insured amount under the Federal Deposit Insurance Corporation. At June 30, 2009 approximately $3.3 million of SED’s cash and cash equivalents were not available for Federal Deposit Insurance. The funds held in Latin American banks, which represent 57% of the Company’s cash and cash equivalents at June 30, 2009, are generally not available for use domestically without withholding taxes. The Company has no single customer that represents a significant portion of total net sales or accounts receivable and we generally do not require collateral from our customers.

          Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, and those differences could be significant.

          Cash Equivalents — Cash equivalents are short-term investments purchased with a maturity of three months or less.

          Accounts Receivable — Accounts receivable are carried at the amount owed by customers less an allowance for doubtful accounts.

           Allowance for Doubtful Accounts — An allowance for uncollectible accounts has been established based on collection experience and an assessment of the collectability of specific accounts. Management evaluates the collectability of accounts receivable based on a combination of factors. Initially, management

28

estimates an allowance for doubtful accounts as a percentage of accounts receivable based on historical collections experience. This initial estimate is periodically adjusted when management becomes aware of a specific customer’s inability to meet its financial obligations (e.g., bankruptcy filing) or as a result of changes in the overall aging of accounts receivable. The overall determination of the allowance also considers credit insurance coverage and deductibles, which SED has maintained from time to time. SED maintains credit insurance, which provides protection from credit losses exceeding certain deductibles for certain domestic sales and certain export shipments from the United States. SED maintains credit insurance in many Latin American countries (subject to certain terms and conditions). SED maintains a policy of writing off the accounts receivable deemed to be uncollectable against the allowance for doubtful accounts in the fourth fiscal quarter.

          Inventories — Inventories consist of finished goods and are stated at the lower of cost (first-in, first-out method) or market and include in-transit inventory of $5,525,000 at June 30, 2009 and $4,626,000 at June 30, 2008. Certain SED vendors allow for either return of goods within a specified period (usually 45 - - 90 days) or for credits related to price protection. However, for certain other vendors and inventories, the Company is not protected from the risk of inventory loss. Therefore, in determining the net realizable value of inventories, the Company identifies slow moving or obsolete inventories that (1) are not protected by our vendor agreements from risk of loss, and (2) are not eligible for return under various vendor return programs. Based upon these factors, the Company estimates the net realizable value of inventories and records any necessary adjustments as a charge to cost of sales. If inventory return privileges were discontinued in the future, or if vendors were unable to honor the provisions of certain contract, which protect SED from inventory losses, including price protections, the risk of loss associated with obsolete, slow moving or impaired inventories would increase. The reserve for obsolete and slow moving inventories was approximately $705,000 at June 30, 2009 and $697,000 at June 30, 2008 or 1.8% and 1.9% of gross inventories, respectively.

          Property and Equipment — Property and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation is computed principally by the straight-line method over the estimated useful lives of the related asset, which generally range from three to seven years. Leasehold improvements are amortized ratably over the lesser of the useful lives of the improvements or the related lease terms.

          Foreign Currency Translation — The assets and liabilities of foreign operations are translated at the exchange rates in effect at the balance sheet date, with related translation gains or losses reported as a separate component of shareholders’ equity, net of any deferred income taxes. As of June 30, 2009 and 2008, the amount of deferred income taxes recorded against cumulative translation losses is zero, because the related deferred tax asset has been offset in full by a valuation allowance. The results of foreign operations are translated at the average exchange rates for the year. Gains or losses resulting from foreign currency transactions are included in the consolidated statement of operations.

          Income Taxes — Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes. Deferred tax assets relate primarily to differences in the financial reporting basis and the tax basis of reserves, translation losses and depreciation of fixed assets, in addition to net operating loss and tax credit carry-forwards. Deferred tax liabilities relate to U.S. taxes on unremitted foreign earnings. As the likelihood of the full realization of the net operating losses, reserves and translation losses is uncertain, the Company has provided a valuation allowance for the future tax benefits that are not expected to be utilized. FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), which became effective on July 1, 2007, prescribed the minimum threshold a tax position is required to meet before being recognized in the consolidated financial statements and provided guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, transition and disclosures. See Note 5, Income Taxes, for additional discussion.

          Loss Per Common Share (EPS) — Basic loss per common share is computed on the basis of the weighted average number of shares of common stock outstanding during that period. Diluted earnings per common share is computed on the basis of the weighted-average number of common shares plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method.

29

Potentially dilutive common shares represent additional common shares assumed to be issued. For the fiscal years 2009 and 2008, options for approximately 504,000 common shares were excluded from the diluted EPS calculation due to their anti-dilutive effect. Also excluded from the diluted EPS calculation, due to their anti-dilutive effect, for fiscal years 2009 and 2008 were approximately 883,000 and 705,000 shares of unvested restricted stock.

          Share-Based Compensation — The Company accounts for share-based compensation under the provisions of Statement of Financial Accounting Standards No. 123(R), Share-Based Payment. The Company recognizes compensation expense on a straight-line basis over the requisite service period for the entire award.

          Comprehensive (Loss) Income — Comprehensive (loss) income is defined as the change in equity (net assets) of a business enterprise during a period from transactions or other events and circumstances from non-owner sources, and is comprised of net (loss) income and other comprehensive (loss) income. SED’s other comprehensive (loss) income is comprised of changes in SED’s foreign currency translation adjustments and changes in fair value of an interest rate swap contract, including income taxes attributable to those changes. Accumulated other comprehensive loss included in shareholders’ equity totaled $4,266,000 and $2,942,000 and consisted of $4,038,000 and $2,622,000 of net foreign currency translation adjustments and $228,000 and $320,000 of fair value liability of an interest rate swap contract at June 30, 2009 and 2008, respectively.

          Reclassifications — Certain reclassifications have been made to in the June 30, 2008 Consolidated Financial Statements to conform with the June 30, 2009 presentation.

          Subsequent Events — In May 2009, the FASB issued Statement of Financial Accounting Standards No. 165, “Subsequent Events” (“SFAS No. 165”). SFAS No. 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, SFAS No. 165 sets forth: (i) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and (iii) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. The requirements of SFAS No. 165 are applied on a prospective basis to interim or annual financial periods ending after June 15, 2009. The adoption of SFAS No. 165 did not have a material effect on our consolidated financial statements.

          In preparing these condensed consolidated financial statements, we have evaluated events and transactions for potential recognition or disclosure through the issuance of the consolidated financial statements on September 24, 2009.

          Recent Accounting Pronouncements — In December 2007, the FASB issued SFAS No. 141 (Revised), “Business Combinations” (“SFAS No. 141R”) and SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements” (“SFAS No. 160”). SFAS No. 141(R) and SFAS No. 160 revise the method of accounting for a number of aspects of business combinations and non-controlling interests, including acquisition costs, contingencies (including contingent assets, contingent liabilities and contingent purchase price), the impacts of partial and step-acquisitions (including the valuation of net assets attributable to non-acquired minority interests), and post acquisition exit activities of acquired businesses. SFAS No. 141(R) and SFAS No. 160 will be effective for the Company during our fiscal year beginning July 1, 2009.

          In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133” (“SFAS No. 161”). SFAS No. 161 requires enhanced disclosures about an entity’s derivative and hedging activities and thereby seeks to improve the transparency of financial reporting. Under SFAS No. 161, entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial

30

performance, and cash flows. SFAS No. 161 became effective for the Company on January 1, 2009. Early application is encouraged. SFAS No. 161 also encourages, but does not require, comparative disclosures for earlier periods at initial adoption. The adoption of SFAS No. 161 did not have a material impact on the disclosures in the Company’s consolidated financial statements.

          In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162” “SFAS No. 168”. SFAS No. 168 establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. SFAS No. 168 is effective for the Company’s interim reporting period ending on September 30, 2009. The Company does not expect SFAS No. 168 to have a material impact on our consolidated financial statements.

3. Property and Equipment

          Property and equipment are comprised of the following:

	June 30,
	2009			2008
Furniture and equipment	$	9,490,000		$	9,513,000
Leasehold improvements		2,394,000			2,359,000
Other		187,000			196,000
		12,071,000			12,068,000
Less accumulated depreciation and amortization		(11,351,000	)		(11,024,000	)
	$	720,000		$	1,044,000

          Depreciation and amortization expense for property and equipment totaled $474,000 and $473,000 for the years ended June 30, 2009 and 2008, respectively.

4. Credit Facilities

          On March 1, 2007, SED signed a three-year extension of a credit facility with Wachovia Bank, National Association (the “Wachovia Agreement”) which extended the maturity to September 21, 2011. The Wachovia Agreement was originally entered into on September 21, 2005 with a term of three years. On January 10, 2008, SED elected to increase the Wachovia line of credit to $50.0 million. The Wachovia Agreement provides for revolving borrowings based on SED’s eligible accounts receivable and inventories as defined therein. Wachovia Bank was recently acquired by Wells Fargo Bank but the Company does not anticipate any negative effects due to the acquisition.

          Borrowings under the Wachovia Agreement accrue interest based upon a variety of interest rate options depending upon the computation of availability as defined therein. The per annum interest rates available are LIBOR, plus a margin ranging from 1.25% to 2.00%, and the prime rate. SED is required to pay a commitment fee of ..25% on the unused portion of the facility and interest is payable monthly. Borrowings under the Wachovia Agreement are collateralized by substantially all domestic assets of SED and 65% of SED’s shares in its foreign subsidiaries.

          The Wachovia Agreement contains certain covenants which, among other things, require that SED maintain unused availability of $5.0 million or more during the term of the Wachovia Agreement before SED is permitted to make advances to SED’s Latin American subsidiaries. SED’s advances to its Latin American subsidiaries are restricted. The Wachovia Agreement also contains a covenant which requires that if SED’s unused availability is less than 10% of the formula borrowing base ($3.9 million at June 30, 2009) at any time during the extension term of the Agreement, then maintenance of a minimum fixed charge coverage ratio is required. The Wachovia Agreement also restricts SED’s ability to distribute cash dividends. As of June 30, 2009, SED determined that it was in compliance with the Wachovia Agreement.

31

          During February, 2009, SED Colombia signed a one-year $2.5 million unsecured line of credit with Banco de Credito that bears interest at a fixed rate of 13.7% per annum. SED is using the line to reduce the effect of devaluation by converting the loan to U S dollars and taking vendor early pay cash discounts with certain vendors.

          Available borrowings under these credit facilities at June 30, 2009 were $13.3 million under the Wachovia Agreement, after deducting $1.8 million in reserves for outstanding letters of credit, and $2.5 million under the Banco de Credito line of credit. Average borrowings, maximum borrowings and weighted average interest rate for fiscal 2009 were $22.1 million, $32.7 million and 5.3%, respectively. The weighted average interest rate on outstanding borrowings under the credit facilities was 4.5% at June 30, 2009. Average borrowings, maximum borrowings and weighted average interest rate for fiscal June 30, 2008 were $24.1 million, $34.7 million and 6.2%, respectively.

          The carrying value of all bank debt at June 30, 2009 approximates its fair value based on the variable market rates of interest on such bank debt.

          On January 26, 2007, the Company entered into a three-year interest rate swap contract to reduce the impact of the fluctuations in the interest rates on $5.0 million notional amount of the revolving credit facility under the Wachovia Agreement. The contract effectively converted the variable rate to a fixed rate of 5.20%. On March 5, 2008, the three-year swap agreement was amended to a notional amount of $15.0 million with a fixed rate of 4.54%. On March 26, 2009, the swap agreement was further amended to provide for an extension to January 26, 2013 and an interest rate modification to 2.95%. The fixed rates cited do not include Wachovia’s markup of 1.5% as of June 30, 2009.

          The Company utilizes derivative financial instruments to reduce interest rate risk. The interest rate swap agreement is accounted for in accordance with Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”), which establishes accounting and reporting standards for derivative instruments and hedging activities. As required by SFAS No. 133, the Company recognizes all derivatives as either assets or liabilities in the balance sheet and measures those instruments at fair value. The Company has designated its interest rate swap agreement as a cash flow hedge. Accordingly, the gains and losses associated with changes in the fair value of the interest rate swap are reported in other comprehensive income (loss) as the hedge is highly effective in achieving offsetting changes in the fair value of cash flows of the asset or liability hedged. The fair value, not in the Company’s favor, of the interest rate swap was $345,000 at June 30, 2009 and $320,000 at June 30, 2008 and is included in accrued expenses. The Company does not hold or issue derivative financial instruments for trading purposes.

          As of June 30, 2009, approximately $400,000 in pre-tax losses related to cash flow hedges that are currently deferred in Accumulated Other Comprehensive Loss are expected to be reclassified to expense through January 26, 2010. Approximately $200,000 was reclassified to expense during fiscal 2009.

32

5. Income Taxes

          Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effects of significant items comprising the Company’s deferred tax assets are as follows:

	June 30,
	2009			2008
Deferred tax assets:
U.S. federal and state operating loss carry-forwards	$	23,785,000		$	22,801,000
Foreign currency translation adjustments		1,533,000			996,000
Depreciation and amortization		216,000			169,000
Allowance for accounts receivable		165,000			223,000
Inventories		380,000			373,000
Allowance for sales returns		20,000			13,000
Employee benefits and compensation		15,000			16,000
Reserves and accruals		381,000			1,191,000
Sales and city tax		213,000			185,000
Share-based compensation		286,000			110,000
Available tax credits		322,000			328,000
Interest rate swap		129,000			121,000
Other		3,000			11,000
Net deferred tax assets		27,448,000			26,537,000
Valuation allowance		(23,900,000	)		(23,181,000	)
		3,548,000			3,356,000
Deferred tax liabilities:
Unremitted foreign earnings		(3,262,000	)		(3,096,000	)
Deferred tax assets, net	$	286,000		$	260,000

          The net deferred tax assets at June 30, 2009 and June 30, 2008 all are related to SED Colombia and Intermaco and were classified as current assets and liabilities on the balance sheet. At June 30, 2009, the Company has total net operating loss carry-forwards for federal and state income tax purposes in the United States of approximately $63.7 million and $53.4 million, respectively, expiring at various dates through 2029. In addition, as of June 30, 2009 the Company has alternative minimum tax credit carry-forwards of approximately $322,000, which carry over until they are used. At June 30, 2009 and 2008, the Company has recorded a valuation allowance for principally all deferred tax assets only to the extent not offset by deferred tax liaibilities, except for those relating to Intermaco and SED Colombia, as there is no assurance that these assets will be realized.

          The components of loss before income taxes consist of the following:

	Year Ended June 30,
	2009			2008
United States	$	(1,603,000	)	$	(3,113,000	)
Foreign		993,000			1,546,000
Total	$	(610,000	)	$	(1,567,000	)

33

          Components of income tax expense (benefit) are as follows:

	Year Ended June 30,
	2009			2008
Current:
State	$	23,000		$	22,000
Foreign		381,000			612,000
		404,000			634,000
Deferred:
Foreign		(26,000	)		(237,000	)
	$	378,000		$	397,000

          The Company’s income taxes payable at June 30, 2009 and 2008 were $191,000 and $339,000, respectively, and are included in accrued and other current liabilities on the consolidated balance sheets. Prepaid income taxes of $433,000 and $494,000 were included in other current assets on the consolidated balance sheets as of June 30, 2009 and 2008, respectively.

          The Company’s effective tax rates for net loss differ from statutory rates as follows:

	Year Ended June 30,
	2009			2008
Statutory federal (benefit) rates		(34.0	)%		(34.0	)%
State income taxes net of federal income tax expense (benefit)		11.7			(3.6	)
Non-deductible items		10.0			0.8
US tax on foreign earnings		30.5			25.4
Valuation allowance		30.8			12.3
Adjustment to unused net operating losses		—			34.9
Foreign taxes (less than) in excess of federal statutory rate		2.5			(9.6	)
Other		1.7			(0.8	)
Total		53.2	%		25.4	%

          The valuation allowance increased during fiscal 2009 and 2008 by $719,000 and $223,000, respectively.

          Effective July 1, 2007, the beginning of fiscal year 2008, the Company adopted the provisions of Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes,” and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition requirements.

          The adoption of FIN 48 resulted in no change to the Company’s consolidated accumulated deficit as of July 1, 2007. As of the adoption date and as of June 30, 2009 and 2008, the Company had no unrecognized tax benefits. There are no tax positions where it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease in the next twelve months from June 30, 2009.

          The Company recognizes penalties and interest accrued related to unrecognized tax benefits in income tax expense. There have been no income tax related penalties or interest assessed or recorded.

          The Company conducts business principally in North and South America. As a result, one or more of its subsidiaries files income tax returns in the U.S. federal, various state, local and foreign tax jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities, including such major jurisdictions as the United States, Argentina and Colombia. The

34

Company is no longer subject to income tax examinations for tax years before June 30, 2006 in the U.S., and for tax years before December 31, 2008 in Colombia, but remains subject to examination in Argentina for tax years ending June 30, 2004 and later.

6. Lease Obligations

          SED International, Inc. leases its main office facility under an operating lease expiring in September 2011 with an affiliated entity (see Item 13). Rent expense for this facility for the fiscal years ended June 30, 2009 and 2008 was $328,000 and $321,000, respectively. The Company leases additional distribution center and sales office space and office equipment under other operating leases expiring through April 2012. Rent expense under all operating leases for the years ended June 30, 2009 and 2008 was $1,205,000 and $1,165,000, respectively.

          As of June 30, 2009, future minimum rental commitments under non-cancelable operating leases are:

Year Ending June 30,
2010	$	799,000
2011		538,000
2012		482,000
2013		294,000
2014		122,000
2015 and thereafter		41,000
	$	2,276,000

7. Shareholders’ Equity

          Stock Option Plans — The Company maintains four stock option plans, one which is currently active and under which 801,841 shares of common stock have been reserved at June 30, 2009 for future incentive and nonqualified stock option grants as well as stock awards to directors, officers and key employees. Incentive stock options must be granted at not less than the fair market value of the common stock at the date of grant and expire 10 years from the date of grant. Nonqualified stock options may be granted at a price of not less than 85% of the fair market value of the common stock at the date of grant and expire 20 years from the date of grant. Options granted under the plans are exercisable in installments ranging from 20% to 50% per year. Upon the occurrence of a “change of control” (as defined in the Company’s stock option plans), all outstanding options become immediately exercisable. There was no compensation cost charged against income for these stock option plans for fiscal 2009 and 2008 as all stock options were fully vested prior to fiscal 2008. No income tax benefit was recognized in the income statement for stock-based compensation arrangements as we have large net operating loss carry forwards with full valuation allowances. None of the expense related to stock-based compensation arrangements for stock option plans was capitalized during fiscal 2009 and 2008.

          Stock option activity, including options issued to non-employee directors, and related information under these plans is as follows:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at June 30, 2008		503,909			$2.50
Forfeited or expired		(250	)		$5.88
Outstanding at June 30, 2009		503,659			$2.50		2.4		$43,000
Vested and expected to vest at June 30, 2009		503,659			$2.50		2.4		$43,000
Exercisable at June 30, 2009		503,084			$2.49		2.4		$43,000
Available for grant at June 30, 2009		801,841

          There were no options exercised during fiscal year 2009 and 2008.

35

          Restricted Stock — The Company’s stock option plan established in 1999 (the “1999 Plan”) also permits the grant of restricted stock awards. No restricted stock awards were granted or forfeited under the 1999 Plan during fiscal 2009 or 2008. Also, no restricted stock awards were outstanding under the 1999 Plan at June 30, 2009. SED established the 2007 Restricted Stock Plan (the “2007 Plan”) during fiscal 2008. A total of 750,000 shares of the Company’s authorized and unissued shares of common stock were reserved for grants under the 2007 Plan. Generally, the awards are subject to forfeiture prior to vesting and begin vesting in equal amounts on the second, third and fourth anniversaries of the grant date; provided, however, that at the time of vesting the holder is an employee of the Company. During fiscal 2008, the Company issued 762,500 restricted shares under the 2007 Plan of which 57,500 shares were forfeited, leaving 705,000 shares outstanding at June 30, 2008. The value of the 2007 Plan awards issued in fiscal 2009 and 2008 was determined using the market price of the Company’s common stock on the grant date. The total compensation cost of the restricted stock awards over the four year vesting period is expected to be $940,000, net of $62,000 estimated forfeitures. The compensation cost of the restricted stock issued in fiscal 2008 is being amortized and expensed over a vesting period of four years. During 2009, 10,000 shares were granted to an employee using the market price of the Company’s common stock on the grant date of $.85. There were no restricted shares forfeited by employees during fiscal 2009. At June 30, 2009, 715,000 shares of restricted stock were outstanding under the 2007 Plan and the related unrecognized compensation cost was $552,000 which SED expects to be recognized ratably over the next 28 months.

          On July 1, 2008, the Company issued 22,857 shares of restricted common stock to each of its then five non-employee directors in accordance with the Company’s Board compensation plan. On January 1, 2009, the Company issued 26,845 shares of restricted common stock to each of its two newly elected non-employee directors in accordance with the Company’s Board compensation plan. Each of the non-employee directors entered into a restricted stock agreement with respect to his respective shares of restricted common stock (the “Restricted Stock Agreement”). The value of the director’s restricted stock awards was determined using the market price of the Company’s common stock on the grant date of $1.75 for the July 1, 2008 shares and $1.49 for the January 1, 2009 shares. The shares issued to the non-employee directors will be subject to forfeiture prior to vesting and vest in equal amounts on the first and second anniversary dates of the issuance date. At June 30, 2009, 167,975 shares were outstanding and un-vested under the non-employee director’s Restricted Stock Agreement. The total compensation cost of the restricted common stock over the two year vesting periods is expected to be $280,000 with zero estimated forfeiture. The unrecognized compensation cost was $160,000 at June 30, 2009 which SED expects to be recognized over the next 18 months.

          Effective January, 2009, non-employee Board of Director’s base compensation was set at a per annum rate of $60,000 of which 50% shall be paid by an annual award of restricted shares of Common Stock. The independent directors shall only be entitled to the stock portion of their compensation after serving on the Board for the full calendar year. The Company charged a pro-rata portion of the director stock compensation amounting to $105,000, representing $15,000 per director, to expense during fiscal 2009. The number of shares to be issued to the directors will be determined on January 1, 2010 based upon the market price of the Company’s Common Stock as of that date. An assumption has been made that all seven independent directors will be eligible for the stock compensation.

          On July 1, 2008, the Company issued 125,000 shares of restricted common stock at a value of $117,000 to a vendor, an accredited investor, for services which vested immediately.

36

          Restricted stock activity is as follows:

	Year Ended June 30,
	2009			2008
Shares of restricted stock-beginning of year		705,000			—
Issued		302,975			762,500
Vested		(125,000	)		—
Forfeited		—			(57,500	)
Shares of restricted stock-end of year		882,975			705,000

          Share-based compensation expense recognized during fiscal years ended June 30, 2009 and 2008 totaled approximately $463,000 and $157,000, respectively. At June 30, 2009, there was $817,000 of unrecognized compensation cost related to un-vested stock awards compensation arrangements which SED expects to be recognized over the next 28 months. At June 30, 2008, there was $783,000 of unrecognized compensation cost related to un-vested stock awards compensation arrangements to be recognized over 40 months.

          The value of restricted stock awards is determined using the market price of the Company’s common stock on the grant date and is amortized over a vesting period of four years. During fiscal 2009, the weighted average grant-date fair value of shares issued was $1.34 and vested was $.93. The weighted average grant-date fair value of shares outstanding at the end of fiscal 2009 was $1.46. The weighted average grant-date fair value of shares issued and forfeited during fiscal 2008 and outstanding at the end of fiscal 2008 was $1.42.

8. Employee Benefit Plan

          SED International, Inc. maintains the SED International, Inc. 401(k) Plan, a voluntary retirement benefit program. All employees of SED International, Inc. who have attained the age of 21 are eligible to participate after completing one year of service. Employees are immediately vested in their own contributions. SED International may provide matching contributions for its employees at the discretion of the Board of Directors. Vesting in matching contributions, if any, is ratable over 7 years based on years of continuous service. There were no matching contributions for fiscal years 2009 and 2008.

37

9. Segment Information

          The Company operates in one business segment as a wholesale distributor of microcomputer, consumer electronics and wireless telephone products. The Company operates and manages in two geographic regions, the United States and Latin America.

          Financial information for continuing operations by geographic region is as follows:

	United States			Latin America			Eliminations			Consolidated
Fiscal 2009
Net sales to unaffiliated customers	$	372,195,000		$	103,195,000		$	(2,912,000	)	$	472,478,000
Gross profit	$	17,192,000		$	8,752,000					$	25,944,000
Operating (loss) income	$	(506,000	)	$	931,000					$	425,000
Interest income	$			$	(115,000	)				$	(115,000	)
Interest expense	$	1,197,000		$	53,000					$	1,250,000
Income tax expense	$	23,000		$	355,000					$	378,000
Net (loss) income	$	(1,726,000	)	$	638,000					$	(1,088,000	)
Total assets at year-end	$	83,872,000		$	27,561,000		$	(12,544,000	)	$	98,889,000
Fiscal 2008
Net sales to unaffiliated customers	$	379,204,000		$	103,510,000		$	(4,024,000	)	$	478,690,000
Gross profit	$	18,028,000		$	7,380,000					$	25,408,000
Operating (loss) income	$	(1,498,000	)	$	1,549,000					$	51,000
Interest income	$			$	(123,000	)				$	(123,000	)
Interest expense	$	1,615,000		$	126,000					$	1,741,000
Income tax expense	$	22,000		$	375,000					$	397,000
Net (loss) income	$	(3,135,000	)	$	1,171,000					$	(1,964,000	)
Total assets at year-end	$	78,417,000		$	27,997,000		$	(12,454,000	)	$	93,960,000

          Sales of products between the Company’s geographic regions are made at market prices and are eliminated in consolidation. All corporate overhead is included in the results of U.S. operations.

          Net sales by product category for continuing operations is as follows:

Year Ended June 30,	Microcomputer Products	Consumer Electronics Products	Wireless Telephone Products	Handling Revenue	Total
2009	$415,923,000	$49,539,000	$6,021,000	$995,000	$472,478,000
2008	$440,869,000	$28,776,000	$8,144,000	$901,000	$478,690,000

          Approximately 39.6% and 41.2% in the fiscal years ended June 30, 2009 and 2008, respectively, consisted of sales to customers for export principally into Latin America and direct sales to customers in Colombia and Argentina.

10. Significant Vendors

          During the year ended June 30, 2009, the Company purchased approximately 48.9% (19.4%, 18.6%, 10.9%) of its product from three vendors. During the year ended June 30, 2008, the Company purchased approximately 54.0% (20.6%, 19.8%, 13.6%) of its product from two vendors.

11. Discontinued Operations

          In February 2003, the Company resolved to discontinue commercial operations of its Brazilian subsidiary, SED International do Brasil Distribuidora, Ltda. Accordingly, the operating results of SED International do Brasil Distribuidora, Ltda. (the “Brazil Operation”) have been classified as a discontinued operation for all periods presented in the Company’s consolidated statements of operations. Additionally, the Company has reported all of SED International do Brasil Distribuidora, Ltda. assets at their estimated net realizable values in the Company’s consolidated balance sheets as of June 30, 2008 and 2007. As of

38

June 30, 2008 and 2007, the assets of SED International do Brasil Distribuidora, Ltda. had no net realizable value.

          SED International do Brasil Distribuidora Ltda. has various litigations related to additional income taxes and social taxes allegedly due from the fiscal years 1998 through 2004. These legal claims were filed during the years 2002 and 2003. The legal claims range from $3,000 to $219,000 each or $522,000 in the aggregate. After recording this cost, SED maintains an accrued liability of $270,000 at June 30, 2009 and 2008 to cover potential losses related to these claims.

12. Fair Value of Financial Instruments

          Effective July 1, 2008, the Company adopted the provisions of SFAS No. 157 “Fair Value Measurements” (“SFAS No. 157”) which applies to financial assets and liabilities that are being measured and reported on a fair value basis and expands disclosures about fair value measurements. SFAS No. 157 establishes a fair value hierarchy that prioritized the inputs to valuation techniques used to measure fair value. The three levels of the fair-value hierarchy include: Level 1 – quoted market prices in active markets for identical assets and liabilities; Level 2 – inputs other than quoted market prices included in Level 1 above that are observable for the asset or liability, either directly or indirectly; and, Level 3 – unobservable inputs for the asset or liability. The implementation of SFAS No. 157 for financial assets and financial liabilities, effective July 1, 2008, did not have a material impact on our consolidated financial position and results of operations. We have not applied the provisions of SFAS No. 157 to non-financial assets and liabilities, such as our property and equipment, which is measured at fair value for impairment assessment. We will apply the provisions of SFAS No. 157 to these assets and liabilities, beginning July 1, 2009, in accordance with Financial Accounting Standards Board Staff Position No. 157-2, “Effective Date of FASB Statement No. 157”.

          The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short maturity of these items. The carrying amount of debt outstanding pursuant to revolving debt and similar bank credit agreements approximates fair value as interest rates on these instruments approximate current market rates.

          We are exposed to market risks from changes in interest rates, which may affect our operating results and financial position. We reduce our risks from interest rate fluctuations through the use of an interest rate swap (see Note 4.). This derivative financial instrument is used to manage risk and is not used for trading or speculative purposes. We endeavor to utilize the best available information in measuring the fair value of the interest rate swap. The interest rate swap is classified in its entirety based on the lowest level of input that is significant to the fair value measurement. We have determined that our interest rate swap is a Level 2 liability in the fair value hierarchy as it is valued using a valuation model that has inputs other than quoted market prices that are both observable and unobservable. The fair value, not in the Company’s favor, of the interest rate swap was $345,000 at June 30, 2009.

13. Legal Proceedings

          On September 5, 2008, pursuant to a Settlement Agreement and General Release (the “Agreement”) the Company settled all of the lawsuits brought by Mark Diamond, son of Jean Diamond, the Chairman and CEO of the Company, against the Company, its domestic subsidiaries and certain of its directors. The Agreement covers and fully resolves all claims that have been or could have been brought in the preceding litigations and also covers all appeals and proceedings related thereto. Under the Agreement, the Company (i) paid Mark Diamond the sum of $2.1 million, of which $325,000 was recovered from its insurance carriers; and (ii) on June 1, 2009, issued 200,000 shares of restricted common stock to an irrevocable trust established by Mark Diamond for the benefit of his children. All of these lawsuits have been dismissed with prejudice.

          On February 2, 2009, the Company settled the lawsuit it filed on June 19, 2006, in the Superior Court of Fulton County, State of Georgia captioned SED International, Inc. vs. Michael Levine with no material impact to the Company.

39

          On February 5, 2009, pursuant to a binding arbitration proceeding between the Company and Archbrook Laguna, LLC (“Archbrook”), Archbrook was ordered by the Arbitrator to dismiss, with prejudice, SED International from the lawsuit Archbrook had filed in March 2008 in the United States District Court, District of New Jersey.

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

          None.

Item 9A (T). Controls and Procedures.

     (a) Evaluation of Disclosure Controls and Procedures
          Our management, with the participation of our chief executive officer and chief financial officer, carried out an evaluation of the effectiveness of our “disclosure controls and procedures” (as defined in the Exchange Act Rules 13a-15(e) and 15-d-15(e)) as of the end of the period covered by this report (the “Evaluation Date”). Based upon that evaluation, our chief executive officer and chief financial officer concluded that as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

          Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

     (b) Management’s Report on Internal Control over Financial Reporting
          Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our management assessed the effectiveness of our internal control over financial reporting as of June 30, 2009. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Our management has concluded that, as of June 30, 2009, our internal control over financial reporting is effective based on these criteria. This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Our internal control over financial reporting was not subject to audit by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.

     (c) Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during the quarter ended June 30, 2009 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information
          None.

40

PART III

Item 10. Directors, Executive Officers and Corporate Governance

DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

                The following table sets forth the names, ages and principal positions of the Company’s directors and executive officers as of September 23, 2009.

Name	Age	Position with the Company
Jean Diamond*	67	Chairman of Board, Chief Executive Officer
Jonathan Elster*	37	President and COO
Barry Diamond*	67	Vice President – Product Management & Wireless
Mark DiVito	50	Vice President of Operations
Lyle Dickler	40	CFO, Vice President of Finance
Stewart I Aaron (2)(4)	69	Director
Melvyn I Cohen (1)	69	Director
Arthur Goldberg (1) (3)	70	Director
Stephen Greenspan (3)(4)(5)	68	Director
J. K. Hage, III (3)(4)	58	Director
Samuel Kidston (1)(2)	34	Director
Joseph Segal (2)	66	Director

*Named Executive Officers
(1)	Member of the Audit Committee.
(2)	Member of the Compensation Committee.
(3)	Member of the Legal Affairs Committee
(4)	Member of the Nominating and Corporate Governance Committee
(5)	Lead independent Director

                The principal occupation and business experience for at least the last five years for each director and executive officer is set forth below.

Stewart I. Aaron has been a director of the Company since November 1994. Mr. Aaron currently serves as the President of, LABS, Inc.; a silk plant manufacturer based in Atlanta, Georgia, and has held that position over the last 20 plus years. Additionally, he also currently serves as the President of Stewart Aaron and Associates, Inc, a real estate development company. 

Melvyn I. Cohen has been a director of the Company since November 1999. Mr. Cohen has been the sole member of M. Cohen and Company LLC, a certified public accounting firm in the State of New Jersey, since December 1994. Mr. Cohen has been a member of the American Institute of Certified Public Accountants and a member of the New Jersey Society of Certified Public Accountants since 1968. Mr. Cohen has been a Certified Public Accountant for over 35 years.

Barry Diamond has been Vice-President of the Company since 1987. Mr. Diamond currently serves as Vice-President of Product Management and responsible for the management of the Wireless business within the Company. Mr. Diamond has been in the Wireless and Electronics Business for over thirty years. Mr. Diamond was Vice-President of Purchasing for All Brands/Brands Mart from 1970-1980. Mr. Diamond was President of Great Sounds of New York, a consumer electronics business, from 1980-1987. Barry Diamond is Jean Diamond’s brother-in-law.

Jean A. Diamond was appointed to the Board in January of 2003, and was appointed Chairman of the Board of the Company on July 2, 2003. Mrs. Diamond was appointed Chief Executive Officer of the

41

Company on June 21, 2005. Mrs. Diamond is a co-founder of the Company and has been an integral part of the Company since its inception. She also serves as Chief Executive Officer, with operational responsibilities in SED International, Inc., a Georgia corporation and a wholly-owned subsidiary of the Company (“SED International”).

Lyle Dickler joined the Company in June 2005 as Corporate Controller and assumed the positions as Secretary and Treasurer effective August 11, 2005. Mr. Dickler was appointed Vice President of Finance on July 1, 2006 and Chief Financial Officer on May 13, 2008. Prior to joining the Company Mr. Dickler served from May 2003 to June 2005 as Controller for Okabashi Brands, Inc. From 2001 to 2003 Mr. Dickler served as Controller for PAI Industries, Inc.

Mark DiVito joined the Company in September 1996 as Director of Corporate Security. In July 1998, he was appointed to the position of Director of Human Resources. Mr. DiVito was appointed Vice-President of Human Resources in August 1999 and in January 2005 he was appointed Vice-President of Operations.

Jonathan Elster has been with the Company since 1995. Mr. Elster has been serving as our President and Chief Operating Officer since his promotion in June 2, 2009. Elster began his career with the Company as a sales representative in 1995. He has served as a Sales Manager from 1997 to 1999 and as Vice President-Sales from 1999 to 2000. In 2000, Mr. Elster was promoted to Senior Vice-President of Sales and Marketing and in 2004, Executive Vice President. He is responsible for sales and marketing operations of the Company. Jonathan Elster is Jean Diamond’s son-in-law.

Arthur Goldberg has been a director of the Company since May 2008. He is currently the Chief Financial Officer of Clear Skies Solar, Inc. (OTCBB: CSKH). Prior to that he served as interim CFO of Milestone Scientific, Inc. (OTCBB: MLSS) from August 2007 to January 2008. From July 2006 to June 2007, Mr. Goldberg served as CAO and CFO of St. Luke’s School, a non-sectarian college prep school. From December 2005 to July 2006, Mr. Goldberg was a private accounting and business consultant. From February 1999 to November 2005, Mr. Goldberg was a partner in the firm of Tatum CFO Partners LLP, serving as an interim CFO for both public and private companies. Prior to 1999, Mr. Goldberg held several senior executive positions, including CFO and COO of a number of public companies. Mr. Goldberg received his B.B.A. from the City College of New York, his M.B.A. from the University of Chicago and his J.D. and LL.M. from New York University School of Law. Mr. Goldberg is also a Certified Public Accountant.

Stephen Greenspan has been a director of the Company since May 2008. He was the Founder, Chairman, President and Chief Executive Officer of K&G Men’s Center, Inc. a formerly publicly traded men’s apparel retailer. Mr. Greenspan retired in 2002 and presently sits on the board of Floor and Décor Outlets of America, Inc., and works with a number of charities both personally as well as through his family foundation and charitable trust.

J.K. Hage III joined the Board in January 2009. He is the Managing partner of the law firm of Hage & Hage LLC., where he has practiced law since 1978. Mr. Hage is a founder of the Griffiss Institute, a nonprofit organization dedicated to research, training and services in information security. From November 2004 to May 2006, he served as its General Counsel and from February 2003 to November 2004, he served as its first Executive Director. Mr. Hage earned a B.A. from Hamilton College and a J.D. from Albany Law School and is admitted to both the, New York and the Alaska Bars. Mr. Hage sits on the Nomination and Corporate Governance and the Legal Affairs Committees.

Samuel A. Kidston joined the Board in January 2009. He is the founder and Chief Investment Officer of North & Webster, LLC, an investment management and advisory firm and sits on the board of Sport-Haley, Inc. Prior to founding North & Webster, LLC, Mr. Kidston served as an equity analyst at BlackRock, Inc., from December 2001 to March 2006. Mr. Kidston earned a B.A. from Wesleyan University and received his Charter as an Investment Analyst from the CFA Institute. Mr. Kidston sits on the Audit and Compensation Committees.

42

Joseph Segal was appointed to the Board in September 2005. Since 1998, Mr. Segal has served as managing partner in Cornerstone Capital Partners, LLC, a real estate investment firm operating in Georgia and Florida. Mr. Segal previously served as Chairman of the Board and Chief Operating Officer of Phoenix Communications, a commercial printing and publishing firm, until December 1997.

Board Committees

          The Board has the following standing committees: Audit (the “Audit Committee”), Compensation (the “Compensation Committee”), Nominating and Corporate Governance (the “Nominating and Governance Committee”) and Legal Affairs (the “Legal Affairs Committee”).

Audit Committee

          The members of the Audit Committee are Messrs. Cohen, Goldberg and Kidston. The Audit Committee met seven times in fiscal 2009, with all members attending all meetings. The Audit Committee reviews and reports to the Board on our internal accounting and financial controls and on the accounting principles and auditing practices and procedures to be employed in preparing and reviewing our consolidated financial statements. The Audit Committee is also responsible for engaging and overseeing our independent public auditors, the scope of the audit to be undertaken by such auditors and the pre-approval of any audit and permitted non-audit services provided by such auditors. A copy of the Audit Committee charter is posted on the Company’s website at www.sedonline.com.

Audit Committee Financial Expert

          The Board has determined that Arthur Goldberg qualifies as the Company’s “audit committee financial expert,” as that term is defined in Item 407(d)(5) of Regulation S-K, and “independent” under Nasdaq’s listing standards and Section 10A(m)(3) of the Exchange Act.

Section 16(a) Beneficial Ownership Reporting Compliance

          Section 16(a) of the Exchange Act requires our officers and directors, and persons who own more than ten percent of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than ten-percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. Based solely on review of the copies of such forms furnished to us, or written representations that no Forms 5 were required, we believe that all Section 16(a) filing requirements applicable to our officers, directors and greater than ten-percent stockholders were complied with during the fiscal year ended June 30, 2009.

Code of Ethics

          We have adopted a Code of Ethics that applies to our principal executive officer, principal financial officer and other persons performing similar functions, as well as all of our other employees and directors. The Code of Ethics is posted on our Web site at www.sedonline.com.

43

EXECUTIVE COMPENSATION

Item 11. Executive Compensation

Summary of Compensation

          The following table sets forth certain information with respect to compensation for the fiscal year ended June 30, 2009 earned by or paid to the Company’s Chief Executive Officer (principal executive officer), and two other most highly compensated executive officers whose total salary exceeded $100,000 in fiscal 2009 (the “Named Executive Officers”):

Name and Principal Position	Fiscal Year	Salary $	Cash Bonus $		Stock Awards $	All Other Compensation $ (2)	Total $
Jean A. Diamond	2009	316,135	—		44,375	25,200	385,710
Chairman of the Board	2008	288,317	—		29,584	22,216	340,117
and Chief Executive Officer	2007	281,285	—		—	19,880	301,165
Jonathan Elster	2009	261,108	—		35,500	14,502	311,110
President and Chief Operating	2008	259,990	15,240	(1)	23,667	16,494	315,151
Officer	2007	259,990	16,650		—	16,406	293,046
Barry Diamond	2009	208,644	5,500		35,500	3,250	252,894
Vice President of Wireless	2008	199,992	3,250		23,667	15,327	242,236
and Purchasing	2007	199,996	—		—	11,417	211,413

(1)	This amount was paid in fiscal 2009.
(2)	Auto expense reimbursement or auto use benefit
(3)	Reflects the value of the restricted stock that was charged to income in the reported period as reported on the Company’s financial statements. For a description of the assumptions made in the valuation, see the Share-Based Compensation section under Note 2, and the Restricted Stock section under Note 7, to the Company’s Financial Statements included with this Annual Report on Form 10-K.

          The primary objective of the Company’s executive compensation program is to attract and retain qualified, energetic managers who are enthusiastic about the Company’s mission and culture. A further objective of the compensation program is to provide incentives and reward each manager for their contribution. In addition, the Company strives to promote an ownership mentality among key leadership and the Board of Directors.

          It is the Company’s intention to set total executive cash compensation sufficiently high to attract and retain a strong motivated leadership team, but not so high that it creates a negative perception with the Company’s shareholders. Each executive’s current and prior compensation is considered in setting future compensation. In addition, the Company reviews the compensation practices of other companies. To some extent, the Company’s compensation plan is based on the market and the companies we compete against for executive management. The elements of the Company’s plan (e.g., base salary, bonus and stock options) are similar to the elements used by many companies. The exact base pay, stock option grant, and bonus amounts are chosen in an attempt to balance the Company’s competing objectives of fairness to all stakeholders and attracting/retaining executive managers.

44

Agreements with Certain Executive Officers

          The Company has employment agreements with Jean Diamond, Jonathan Elster and Barry Diamond.

          The employment agreement with Jean Diamond has a five-year term currently expiring on July 1, 2014. Her agreement, as amended to date, (i) provides for an annual base salary of $316,000 (as of July 1, 2008), increases annually in an amount equal to the greater of five percent of her then current salary or the percentage increase in the Consumer Price Index for the month of June relative to the same prior year period, (ii) provides for an automobile allowance, and (iii) does not provide for an annual bonus. The agreement also provides that if a Change of Control (as hereinafter defined) occurs during her employment term and her employment is terminated (i) by the Company, or by her upon the occurrence of certain events, or (b) by her in her sole discretion concurrently with, or within 30 days of, the date of the occurrence of the Change of Control, she will be entitled to a cash payment in an amount equal to all annual salary and other benefits owing to her for the period from the date of termination through the remainder of the term of her employment under the agreement. However, in no event shall the amount of any such cash payment be less than the aggregate of her then annual salary plus the value of all other benefits payable to her on an annualized basis under her employment agreement, as amended. A Change of Control is deemed to have occurred when, during the term of Ms. Diamond’s employment pursuant to her employment agreement, (i) any individual, entity, group or association becomes the beneficial owner of securities of the Company representing 30% or more of the combined voting power of the Company’s or SED International’s then-outstanding securities entitled to vote generally in the election of directors; (ii) a change in a majority of directors of the Board and such new directors were not appointed, approved or nominated by the Board; (iii) all or substantially all of the assets of the Company or SED International are sold, conveyed, transferred or otherwise disposed of, in one or more transactions, without the approval of the Board or the board of directors of SED International, as the case may be.

          The employment agreement with Jonathan Elster, effective as of July 1, 2004, originally for a term of five years, has been extended through July 1, 2010. Mr. Elster’s annual compensation includes an annual base salary of $261,700 plus an annual bonus in an amount equal to three percent (3%) of the Company’s Pre-tax Adjusted Annual Income. The Company’s “Pretax Adjusted Annual Income” means with respect to a given fiscal year (a) the sum of earnings before taxes as reported on its audited consolidated statement of operations for such fiscal year, excluding extraordinary non-operational costs and profits. He is also entitled to participate in all of the Company’s employee benefit programs available to management executives, including health and long-term disability insurance. The Company may terminate Mr. Elster’s employment for “good cause,” as defined in his employment agreement. In addition, upon termination of his employment, Mr. Elster has agreed not to solicit customers of the Company for a period of a one (1) year from the date of termination.

          The employment agreement with Barry Diamond, effective November 20, 2008, is for a term of two years. Mr. Diamond’s annual compensation includes an annual base salary of $215,000. He is also entitled to participate in all of the Company’s employee benefit programs available to management executives, including health and long-term disability insurance. The Company may terminate Mr. Diamond’s employment for “good cause,” as defined in his employment agreement. In addition, upon termination of his employment, Mr. Diamond has agreed not to solicit customers of the Company for a period of a one (1) year from the date of termination.

45

Outstanding Equity Awards

          The following table sets forth certain information with respect to outstanding equity awards at June 30, 2009 with respect to the Named Executive Officers.

Outstanding Equity Awards at Fiscal Year-End

	Option Awards				Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable (1)		Option Exercise Price ($)	Option Expiration Date	Number of Shares or Units of Stock that have not vested (#) (2)	Market Value of Shares or Units of Stock that have not vested ($)(3)
Jean Diamond		50,000	1.96	10/15/2011	125,000	137,500
Total		50,000
Jonathan Elster		62,500	1.96	10/15/2011	100,000	110,000
Total		62,500
Barry Diamond		40,000	1.96	10/15/2011	100,000	110,000
		50,000	0.44	1/15/2013
Total		90,000

(1)	Represents stock option grants at fair market value on the date of grant.
(2)	The restricted shares of common stock are subject to forfeiture prior to vesting and begin vesting in equal amounts on the second, third and fourth anniversaries of the grant date pursuant to the provisions of a restricted stock agreement.
(3)	Based on the closing price per share of $1.10 as reported on the OTCBB on June 30, 2009.

Director Compensation

Beginning in January 2009, our “independent” directors receive the following compensation:

• An annual fee of $60,000 of which 50% shall be paid in quarterly installments of cash and 50% shall be paid by an annual award of restricted shares of common stock which shall immediately vest upon issuance;

• The Chairman of the Audit Committee is paid an additional annual fee of $20,000 and each committee member is paid an additional annual fee of $5,000 for their services on the committee;

• The Chairman of the Compensation Committee is paid an additional annual fee of $5,000 and each committee member is paid an additional annual fee of $2,000 for their services on the committee;

• The Chairman of the Legal Affairs Committee is paid an additional annual fee of $5,000 and each committee member receives an additional annual fee of $2,000 for their services on the committee;

• The Chairman of the Nominating and Corporate Governance Committee is paid an annual fee of $5,000 and each committee member receives an additional annual fee of $2,000 for their services on the committee;

• The Lead Independent Director is paid an additional $5,000 per year.

46

          The following table sets forth the compensation paid to our independent directors for the fiscal year ended June 30, 2009.

DIRECTOR COMPENSATION

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($) (1)	Total ($)
Stewart I. Aaron	51,540	35,000	86,540
Melvyn I Cohen	59,540	35,000	94,540
Joe Segal	46,790	35,000	81,790
Art Goldberg	51,540	35,000	86,540
Steve Greenspan	46,540	35,000	81,540
J. K. Hage, III	18,154	25,000	43,154
Samuel Kidston	19,654	25,000	44,654

(1) Reflects the value of the restricted stock that was charged to income in the reported period as included in the Company’s financial statements. For a description of the assumption made in the valuation of restricted stock, see the Share-Based Compensation under Note 2, and the Restricted Stock Section under Note 7, to the Company’s Financial Statements included with this Annual Report on Form 10-K.

47

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

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS

          The following table sets forth certain information as of September 23, 2009 regarding the beneficial ownership of our common stock by (i) the Named Executive Officers, (ii) the Company’s directors, (iii) each person we know to beneficially own more than 5% of our outstanding common stock, and (iv) all directors and executive officers of the Company as a group. All shares of our common stock shown in the table reflect sole voting and investment power except as otherwise noted.

Name of Beneficial Owner	Amount and Nature of Beneficial Ownership		Percent of Class
Stewart I. Aaron	57,857	(1)	1.13
Melvyn I. Cohen	105,857	(2)	2.05
Barry Diamond	198,255	(3)	3.83
Jean Diamond	650,426	(4)	12.66
Jonathan Elster	166,000	(5)	3.22
Arthur Goldberg	24,857	(6)	*
Stephen Greenspan	22,857	(6)	*
J. K. Hage, III	140,045	(7)	2.75
Samuel Kidston	377,496	(8)	7.42
Joseph Segal	22,857	(6)	*
All current directors and executive officers as a group (12) persons	1,446,007	(9)	35.64
5% Shareholders:
FMR Corp.	480,000	(10)	9.44
Allen R. Earl	458,402	(11)	9.01

*	Represents less than one percent of our outstanding common stock.
(1)	The shares include 35,000 options 22,857 restricted shares of common stock granted on July 1, 2008, which are subject to vesting and forfeiture over a two year period pursuant to the provisions of a restricted stock agreement, for Mr. Aaron.
(2)	The shares indicated include 80,000 options and 22,857 restricted shares of common stock granted on July 1, 2008, which are subject to vesting and forfeiture over a two year period pursuant to the provisions of a restricted stock agreement, for Mr. Cohen.
(3)	The shares include 90,000 options and 100,000 restricted shares of common stock granted on October 23, 2007 which are subject to vesting and forfeiture over a four year period pursuant to the provisions of a restricted stock agreement, for Mr. Diamond.
(4)	The shares indicated include 50,000 options 125,000 restricted shares of common stock granted on October 23, 2007 which are subject to vesting and forfeiture over a four year period pursuant to the provisions of a restricted stock agreement, for Mrs. Diamond. The shares include 271,426 shares held by a trust for the benefit of Ms. Diamond.
(5)	The shares include 62,500 options and 100,000 restricted shares of common stock granted on October 23, 2007 which are subject to vesting and forfeiture over a four year period pursuant to the provisions of a restricted stock agreement, for Mr. Elster.
(6)	The shares include 22,857 restricted shares of common stock granted on July 1, 2008 which are subject to vesting and forfeiture over a two year period pursuant to the provisions of a restricted stock agreement, for Messrs. Goldberg, Greenspan and Segal.
(7)	The shares include 26,845 restricted shares of common stock granted January 1, 2009, which are subject to vesting and forfeiture over a two year period pursuant to the provisions of a restricted stock agreement, for Mr. Hage.
(8)	The shares include 344,383 shares of common stock owned in the aggregate by North & Webster Value Opportunities Fund, LP, North & Webster Fund II, LP and North & Webster, LLC (collectively, the “North & Webster Entities”). North & Webster, LLC is the general partner of

48

	both of North & Webster Value Opportunities Fund, LP and North & Webster Fund II, LP. Mr. Kidston is a Managing Member of North & Webster, LLC and disclaims beneficial ownership of the shares of common stock beneficially owned by the North & Webster Entities except to the extent of his pecuniary interest therein. The principal business address of Mr. Kidston is c/o North & Webster, LLC, 10 Tower Office Park, Suite 420, Woburn, MA 01801. The shares include 26,845 restricted shares of common stock granted January 1, 2009 which are subject to vesting and forfeiture over a two year period pursuant to the provision of a restricted stock agreement for Mr. Kidston.
(9)	Includes 348,000 shares underlying outstanding options and 574,285 restricted shares of common stock granted on October 23, 2007 and May 13, 2008 and 114,285 restricted shares granted on July 1, 2008, which are subject to vesting and forfeiture over a four year period pursuant to the provisions of a restricted stock agreement.
(10)	All of the shares indicated are deemed beneficially owned by Fidelity Management & Research Company, a wholly-owned subsidiary of FMR Corp., as a result of its serving as investment adviser to Fidelity Low-Priced Stock Fund, the owner of the 480,000 shares. FMR Corp.’s address is 82 Devonshire Street, Boston, Massachusetts 02109.
(11)	All of the shares indicated are deemed beneficially owned by Allyn R. Earl. Mr. Earl’s address is 38 Dwight Avenue, Clinton, New York 13323-1600

          The business address and telephone number of each of Jean Diamond, Jonathan Elster, Barry Diamond, Mark DiVito, Lyle Dickler, Stewart I. Aaron, Melvyn I. Cohen, Arthur Goldberg, Stephen Greenspan and Joseph Segal are c/o SED International Holdings, Inc., 4916 North Royal Atlanta Drive, Tucker, Georgia 30084 and (770) 491-8962.

Equity Compensation Plans

          The Company has granted stock options under four Plans (the “1991 Plan”, the “1995 Directors Plan”, the “1997 Plan”, and the “1999 Plan”), which are utilized to promote the long-term financial interest of the Company. The Compensation Committee of the Board administers the stock option plans. In the aggregate, the Plans authorize the grant of up to 2,441,500 shares of common stock to directors, officers and key employees. The shareholders approved all of the Plans, with the exception of the “1999 Plan” or awards.

          The “1999 Plan”, established on July 20, 1999 for a term of ten years authorizes the Company to grant up to 1,200,000 shares of its common stock to employees, Directors and Consultants of the Company and is intended to be a “board-based plan” in that, at all times not more than fifty percent (50%) of the optionees and recipients of the plan shall be officers or affiliates. Under the plan, the Company may grant both nonqualified options and restricted stock awards and have an option or award price of the fair market value of the Company’s common stock on the date of grant. Unless otherwise specified by the Compensation Committee, options and restricted awards vest ratably over a four-year period. All grants expire no later than 10 years from the date of grant. No stock options or awards were granted in fiscal 2009.

49

          The following table sets forth certain information as of June 30, 2009, relating to all of our equity compensation plans:

Equity Compensation Plans Information

Plan Category	Number of Securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a) (c)
Equity compensation plans approved by security holders	282,075		$	2.08
Equity compensation plans not approved by security holders	221,584		$	3.03	801,841
Total	503,659		$	2.50	801,841

          In July 2009 the 1999 Plan expired and the remaining 801,841 shares that were available for future grants under the plan were no longer reserved for grants thereunder.

          On October 23, 2007, the Board of Directors of the Company adopted the SED International Holdings, Inc. 2007 Restricted Stock Plan (the “Stock Plan”) for the purposes of attracting and retaining the personnel necessary for the Company’s success. The Stock Plan covers employees and others who perform services for the Company including directors and consultants. A total of 750,000 shares of the Company’s authorized and unissued shares of common stock were reserved for grants under the Stock Plan. The Stock Plan is administered by the Company’s Board and/or Compensation Committee. As of June 30, 2009, 715,000 shares were outstanding under the Stock Plan. No shares had vested under the Stock Plan as of June 30, 2009.

Item 13. Certain Relationships and Related Transactions and Director Independence

Transactions with Related Parties

Lease of Headquarters

          On August 6, 2009, the Board of Directors of the Company unanimously approved a two-year extension of SED’s existing headquarter lease with the Diamond Chip Group LLC which extended the lease term through September 30, 2011. Under the terms of the extension, beginning on October 2, 2009 through the end of the extended term of September 30, 2001, the Company’s annual rental rate was reduced by approximately $40,000 per year from approximately $328,000 to $288,000 and the Company will continue to occupy the premises under the same existing lease terms and conditions.

          The members of the Diamond Chip Group LLC include the Marital Trust for the benefit of Jean A. Diamond and Jean A. Diamond, who own respectively 37.5% and 62.5% of the outstanding interests in the LLC. Jean Diamond is Chairman of the Board and Chief Executive Officer of the Company.

Director Independence

          The Board has determined that Messrs. Aaron, Cohen, Goldberg, Greenspan, Hage Kidston and Segal are independent as that term is defined in the listing standards of the NASDAQ. Messrs. Cohen, Goldberg and Kidston are the sole members of the Audit Committee, and Messrs. Aaron, Segal and Kidston are the sole members of the Compensation Committee and are independent for such purposes. Messrs. Goldberg, Greenspan and Hage are the sole members of the Legal Affairs Committee. Messrs. Aaron, Greenspan and Hage are the sole members of the Nomination and Governance Committee. Messrs. Greenspan also serves as the Company’s Lead Independent Director.

50

Item 14. Principal Accounting Fees and Services.

INDEPENDENT PUBLIC ACCOUNTANTS

          The firm of J. H. Cohn LLP has served as the Company’s independent registered public accounting firm since 2005.

Audit and Non-Audit Fees

          The following table presents fees for professional audit services rendered by J. H. Cohn LLP for the audit of the Company’s annual financial statements for the fiscal years ended June 30, 2009 and 2008, respectively.

	2009		2008
Audit Fees
J. H. Cohn LLP (1)	$	210,000	$	266,000

(1)     J. H. Cohn LLP fees for fiscal 2009 are estimated.

          J. H. Cohn LLP fees for fiscal 2009 and 2008 include audit of the Company’s Annual financial statements and review of financial statements included in the Company’s Form 10-Q quarterly reports. J. H. Cohn LLP neither billed us any fees nor provided any services other than the audit services and fees included above.

          The Audit Committee’s current practice is to pre-approve all audit services and all non-audit services to be provided to the Company by its independent auditor.

51

PART IV

Item 15. Exhibits and Financial Statement Schedules

          (a) The following documents are filed as part of this Report:

          1. Financial Statements. The following financial statements and the report of SED’s independent auditor thereon, are filed herewith.

• Report of Independent Registered Public Accounting Firm (J.H Cohn, LLP-2009 and 2008)

• Consolidated Balance Sheets at June 30, 2009 and 2008

• Consolidated Statements of Operations for the years ended June 30, 2009 and 2008

• Consolidated Statements of Shareholders’ Equity for the years ended June 30, 2009 and 2008

• Consolidated Statements of Cash Flows for the years ended June 2009 and 2008

• Notes to Consolidated Financial Statements

          2. Financial Statement Schedules.

Schedules are omitted because the information required is not applicable or the required information is shown in the consolidated financial statements or notes thereto.

          3. Exhibits Incorporated by Reference or Filed with this Report.

Exhibit Number		Description
3.1	Articles of Incorporation of the Company. (1)
3.2	Amendment to Articles of Incorporation. (2)
*3.3	Amendment to Articles of Incorporation dated January 21, 2009.
3.4	Bylaws of the Company. (3)
3.5	Article 1, Section 1.2 of the Bylaws of SED International Holdings, Inc., as amended on September 18, 2007. (4)
*3.6	Article 1, Section 11 of the Bylaws of SED International Holdings, Inc., as amended on January 21, 2009.
**10.10	Form of Southern Electronics Corporation 1991 Stock Option Plan, together with related forms of Incentive Stock Option Agreement and Non-Qualified Stock Option Agreement. (5)
**10.11	First Amendment dated July 17, 1992 to Southern Electronics Corporation 1991 Stock Option Plan. (6)
**10.12	Second Amendment dated August 30, 1996 to Southern Electronics Corporation 1991 Stock Option Plan. (7)
**10.14	Employment Agreement dated November 20, 2008, between the Company, SED International Holdings, Inc. and Barry Diamond. (8)
**10.23	Form of Non-Qualified Stock Option Agreement for Directors. (9)
**10.24	1995 Formula Stock Option Plan, together with related form of Non-Qualified Stock Option Agreement. (10)
**10.26	Third Amendment dated September 12, 1996 to the Southern Electronics Corporation 1999 Stock Option Plan. (11)
**10.32	1999 Stock Option Plan dated July 20, 1999, together with related forms of Stock Option Agreement and Restriction Agreement. (12)
**10.38	Form of Indemnification Agreement entered into with each of the directors of the Company and the Company. (13)

52

Exhibit Number		Description
**10.39	Form of Indemnification Agreement entered into with each of the officers of the Company and the Company. (13)
10.40	Form of Lease Agreement dated as of April 1, 1999 between Diamond Chip Group, L.L.C. and SED International. (14)
**10.42	Amended and Restated Employment Agreement between SED International Holdings, Inc. and Jean Diamond dated January 15, 2008. (15)
**10.43	Amended and Restated Employment Agreement between SED International, Inc. and Jonathan Elster dated November 20, 2008. (16)
10.58	First Amendment of Lease for 4916 N. Royal Atlanta Drive, Tucker GA 30084 dated September 19, 2005. (17)
10.59	Lease Agreement Extension for 4916 N. Royal Atlanta Drive, Tucker, GA 30084, dated March 20, 2006. (17)
10.60	Loan and Security Agreement between SED International, Inc. and Wachovia Bank National Association, dated September 21, 2005. (17)
*10.61	Lease agreement dated June 10, 2009 between Dexus Industrial SPE Financial Portfolio, LLC and SED International, Inc.
10.62	Seventh Addendum to Lease Dated March 13, 2007 for 1729 NW 84th Avenue, Doral, Florida 33126. (18)
10.63	Third Amendment to Wachovia Loan and Security Agreement dated March 1, 2007. (19)
**10.64	2007 Restricted Stock Plan. (20)
**10.65	Final Form of Restricted Stock Agreement, dated as of October 23, 2007, between the Company and each of Barry Diamond, Jean Diamond, Lyle Dickler, Mark DiVito, Jonathan Elster and Charles Marsh. (21)
10.66	Fourth Amendment to Wachovia Loan and Security Agreement dated August 23, 2007. (22)
10.67	Fifth Amendment to Wachovia Loan and Security Agreement dated January, 21, 2008. (22)
10.68	Sixth Amendment to Wachovia Loan and Security Agreement dated July 1, 2008. (22)
10.69	Settlement Agreement and General Release entered into on September 5, 2008. (22)
10.70	Employment Agreement dated August 10, 2009 between SED International Holdings, Inc. and Lyle Dickler (23)
10.71	Employment Agreement dated August 10, 2009 between SED International Holdings, Inc. and Mark DiVito (23)
*10.72	Second Amendment of Lease for 4916 North Royal Atlanta Drive, Tucker, GA 30084, dated August 6, 2009.
*10.73	Amendment to Wachovia Loan and Security Agreement dated September 9, 2009.
21	Subsidiaries of the Company. (24)
*24	Power of Attorney (see signature page to this Form 10-K).
*31.1	Rule 13a-14(a)/15d-14(a) Certification by Principal Executive Officer.
*31.2	Rule 13a-14(a)/15d-14(a) Certification by Principal Financial Officer.
*32.1	Section 1350 Certification by Principal Executive Officer.
*32.2	Section 1350 Certification by Principal Financial Officer.

*	Filed Herewith
**	Denotes compensatory plan, compensation arrangement or management contract.

1)	Incorporated herein by reference to Exhibit 3.1 from the Company’s 1999 Form 10-K.
2)	Incorporated herein by reference to Exhibit 3.2 from the Registrant’s Revised Definitive Proxy Soliciting Materials filed March 26, 2002 (SEC File No. 000-16345).

53

3)	Incorporated herein by reference to Exhibit 3.3 from the Company’s 1999 Form 10-K.
4)	Incorporated herein by reference to Exhibit 3.4 from the Company’s Current Report on Form 8-K filed on September 19, 2007.
5)	Incorporated herein by reference to Exhibit 10.10 from Company’s Definitive Supplemental Proxy Statement dated October 18, 1991 (SEC File No. 0-16345).
6)	Incorporated herein by reference to Exhibit 10.11 from Company’s 1992 Form 10-K (SEC File No. 0-16345).
7)	Incorporated herein by reference to Exhibit 10.12 from Company’s Proxy Statement pertaining to Company’s 1995 Annual Meeting of Stockholders dated October 1, 1995 (SEC File No. 0-16345).
8)	Filed as an exhibit to the Company’s current report on form 8-K filed on November 24, 2008 and incorporated herein by reference.
9)	Incorporated herein by reference to Exhibit 10.23 from Company’s 1995 Form 10-K (SEC File No. 0-16345).
10)	Incorporated herein by reference to Exhibit 10.24 from Company’s Proxy Statement pertaining to Company’s 1995 Annual Meeting of Stockholders dated October 1, 1995 (SEC File No. 0-16345).
11)	Incorporated herein by reference to Exhibit 10.26 from Company’s Proxy Statement pertaining to Company’s 1996 Annual Meeting of Stockholders dated October 1, 1996 (SEC File No. 0-16345).
12)	Incorporated herein by reference to Exhibit 10.32 from Company’s 1999 Form 10-K.
13)	Incorporated herein by reference to Exhibits 10.38 and 10.39 from Company’s 1999 Form10-K.
14)	Incorporated herein by reference to Exhibit 10.40 from Amendment No. 1 to the Company’s Annual Report on Form 10-K/A for the fiscal year ended June 30, 1999 (SEC File No. 0-16345).
15)	Filed as an exhibit to the Company’s Current Report on Form 8-K filed on January 18, 2008.
16)	Filed as an exhibit to the Company’s Current Report on Form 8-K filed on February 21, 2008.
17)	Incorporated herein by reference to Exhibits 10.58, 10.59 and 10.60 from the Registrant’s (SEC File No. 000-16345) 2006 Form 10-K.
18)	Incorporated by reference to Exhibit 10.62 from the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007 (SED File No. 000-16345)
19)	Incorporated by reference to Exhibit 10.63 from the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007 (SED File No. 000-16345)
20)	Filed as an exhibit to the Company’s Current Report on Form 8-K filed on October 29, 2007 and incorporated herein by reference.
21)	Filed as an exhibit to the Company’s Current Report on Form 8-K filed on October 29, 2007 and incorporated herein by reference.

54

22)	Incorporated by reference to Exhibits 10.66, 10.67, 10.68 and 10.69 from the Company’s 2008 Form 10-K (SEC File No. 0-16345).
23)	Filed as exhibit to the Company’s Current Report on Form 8-K filed on August 14, 2009 and incorporated herein by reference
24)	Incorporated herein by reference to Exhibit 21 from the Registrant’s (SEC File No. 000-16345) 2006 Form 10-K.

55

SIGNATURES

          Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SED INTERNATIONAL HOLDINGS, INC.
By:	/s/ LYLE DICKLER
	Lyle Dickler, Chief Financial Officer (principal financial and accounting officer)

Date: September 24, 2009

          KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears below constitutes and appoints Jean Diamond, and Lyle Dickler, and any of them, as his true and lawful attorneys-in-fact, each acting alone, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to the Annual Report on Form 10-K of SED International Holdings, Inc., and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission and other appropriate agencies, granting unto said attorneys-in-fact, and any of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys- in-fact, or any of them, or their substitutes, each acting alone, may lawfully do or cause to be done by virtue hereof.

          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 Company and in the capacities indicated on this September 24, 2009.

/s/ JEAN DIAMOND	Chairman of the Board Chief Executive Officer and Director (Principal Executive Officer)
Jean Diamond
/s/ LYLE DICKLER	Chief Financial Officer (Principal Financial and Accounting Officer)
Lyle Dickler
/s/ STEWART I. AARON	Director
Stewart I. Aaron
/s/ MELVYN I. COHEN	Director
Melvyn I. Cohen
/s/ JOSEPH SEGAL	Director
Joseph Segal
/s/ ARTHUR L. GOLDBERG	Director
Arthur L. Goldberg
/s/ STEPHEN H. GREENSPAN	Director
Stephen H. Greenspan

56

/s/ J. K. HAGE III	Director
J. K. Hage III
/s/ SAMUEL KIDSTON	Director
Samuel Kidston

57

EX-3.3

Exhibit 3.3

APPENDIX A
ARTICLES OF AMENDMENT OF THE ARTICLES OF INCORPORATION

OF

SED INTERNATIONAL HOLDINGS, INC.
(Pursuant to Georgia Business Corporation Code Section 14-2-1006)

          SED INTERNATIONAL HOLDINGS, INC. (hereinafter called the “corporation”), a corporation organized and existing under and by virtue of the Georgia Business Corporation Code, does hereby certify:

          1.       The name of the corporation is SED INTERNATIONAL HOLDINGS, INC.

          2.       Articles VI and VIII of the Articles of Incorporation of the corporation are hereby amended and as amended read as follows:

VI.

DIRECTORS

          The number of directors on the board of directors of the corporation shall be such as may be determined from time to time by the shareholders or by the board of directors, at any meeting called for the purpose or by written consent, but in no event shall the number be less than the minimum authorized under the Georgia Business Corporation Code. Directors shall be elected at each annual meeting of shareholders to hold office for a term expiring at the next annual meeting following the election and until a successor shall have been duly elected and qualified. During the interval between annual meetings of shareholders, any vacancy occurring in the board of directors caused by resignation, removal, death or other incapacity, and any newly created directorships resulting from an increase in the number of directors may be filled by a majority vote of the directors then in office, whether or not a quorum. Each director chosen to fill a vacancy shall hold office for the unexpired term in respect of which such vacancy occurred. Notwithstanding anything to the contrary in the Articles of Incorporation of the corporation, shareholders may, at any meeting called for the purpose or by unanimous written consent of the shareholders in lieu of a meeting, remove any director from office, but only for cause, and may elect his successor. Nothing herein shall have the effect of shortening the term of any incumbent director as of the date of the filing of this amendment.

          Notwithstanding any other provisions of the Articles of Incorporation or the Bylaws (and notwithstanding the fact that a lesser percentage for separate class votes for certain actions may be permitted by law, by the Articles of Incorporation or by the Bylaws), the affirmative vote of the holders of not less than 80% of the votes entitled to be cast by the holders of all then outstanding shares of voting stock, voting together as a single class, will be required to amend or repeal any provision of the Articles of Incorporation or the Bylaws to the extent that such action is inconsistent with the purpose of this Article VI; provided, however, that the provisions of this paragraph shall not apply to amendments to the Bylaws or Articles of Incorporation that are recommended by not less than 75% of the members of the board of directors.

VIII.

ACTION BY WRITTEN CONSENT OF SHAREHOLDERS

          Any action required or permitted to be taken at a shareholders meeting may be taken without a meeting of the shareholders only if the action is evidenced by one or more written consents describing the action taken, signed by the holders of not less than 66 2/3% of the shares that would he entitled to vote at a meeting of shareholders. No written consent signed under this provision shall be valid unless the consenting shareholder has been furnished the same material that, under the Georgia Business Corporation Code, would have been required to be sent to shareholders in a notice of a meeting at which the proposed action would have been submitted to the shareholders for action, or it contains an express waiver of the rights to receive such material.

          Notwithstanding any other provisions of the Articles of Incorporation or the Bylaws (and notwithstanding the fact that a lesser percentage for separate class votes for certain actions may be permitted by law, by the Articles of Incorporation or by the Bylaws), the affirmative vote of the holders of not less than 80% of the votes entitled to be cast by the holders of all then outstanding shares of voting stock, voting together as a single class, will be required to amend or repeal any provision of the Articles of Incorporation or the Bylaws to the extent that such action is inconsistent with the purpose of this Article VIII; provided, however, that the provisions of this paragraph shall not apply to amendments to the Bylaws or Articles of Incorporation that are recommended by not less than 75% of the members of the board of directors.

          3.       The amendments have been duly approved by the shareholders in accordance with the provisions of Code Section 14-2-1003.

Executed on this     day of                          , 2009.

     Title of authorized officer

EX-3.6

Exhibit 3.6

APPENDIX B

New Article 1, Section 1.11 of the Bylaws

          SECTION 1.11. Action by Shareholders Without a Meetings. Unless otherwise provided in the articles of incorporation, any action required or permitted to be taken at a shareholders meeting may be taken without a meeting of the shareholders only if the action is evidenced by one or more written consents describing the action taken, signed by the holders of not less than 66 2/3% of the shares that would he entitled to vote at a meeting of shareholders. No written consent signed under this provision shall be valid unless the consenting shareholder has been furnished the same material that, under the Georgia Business Corporation Code, would have been required to be sent to shareholders in a notice of a meeting at which the proposed action would have been submitted to the shareholders for action, or it contains an express waiver of the rights to receive such material.

EX-10.61

Exhibit 10.61

LEASE

DEXUS INDUSTRIAL SPE FINANCED PORTFOLIO, LLC,

a Delaware limited liability company

Landlord,

and

SED INTERNATIONAL, INC.,

a Georgia corporation

Tenant

10/31/01 CALWEST TX MTIN
REVISED 6/9/2009
1800 10^th Street, Suite 100
DA-3031401 v4 0942826-00401

1.	USE AND RESTRICTIONS ON USE	1
2.	TERM	5
3.	RENT	7
4.	RENT ADJUSTMENTS	8
5.	SECURITY DEPOSIT	15
6.	ALTERATIONS	16
7.	REPAIR	18
8.	LIENS	21
9.	ASSIGNMENT AND SUBLETTING	22
10.	INDEMNIFICATION	27
11.	INSURANCE	30
12.	WAIVER OF SUBROGATION	32
13.	SERVICES AND UTILITIES	32
14.	HOLDING OVER	33
15.	SUBORDINATION	34
16.	RULES AND REGULATIONS	35
17.	REENTRY BY LANDLORD	35
18.	DEFAULT	37
19.	REMEDIES	39
20.	TENANT’S BANKRUPTCY OR INSOLVENCY	50
21.	QUIET ENJOYMENT	52
22.	CASUALTY	53
23.	EMINENT DOMAIN	56
24.	SALE BY LANDLORD	58
25.	ESTOPPEL CERTIFICATES	58
26.	SURRENDER OF PREMISES	59
27.	NOTICES	62
28.	TAXES PAYABLE BY TENANT	62
29.	RELOCATION OF TENANT	63
30.	DEFINED TERMS AND HEADINGS	64
31.	TENANT’S AUTHORITY	65
32.	FINANCIAL STATEMENTS AND CREDIT REPORTS	66
33.	COMMISSIONS	67
34.	TIME AND APPLICABLE LAW	67
35.	SUCCESSORS AND ASSIGNS	67
36.	ENTIRE AGREEMENT	68
37.	EXAMINATION NOT OPTION	68
38.	RECORDATION	68
39.	LIMITATION OF LANDLORD’S LIABILITY	69
40.	RIGHT OF FIRST OFFER	20

EXHIBIT A – FLOOR PLAN DEPICTING THE PREMISES

EXHIBIT A-1 – SITE PLAN

EXHIBIT B – INITIAL ALTERATIONS

EXHIBIT C – COMMENCEMENT DATE MEMORANDUM

EXHIBIT D – RULES AND REGULATIONS

EXHIBIT E – ADDITIONAL SURRENDER CONDITIONS

EXHIBIT F – RENEWAL OPTION

EXHIBIT G – RIGHT OF FIRST OFFER

10/31/01 CALWEST TX MTIN
REVISED 6/9/2009
1800 10^th Street, Suite 100
DA-3031401 v4 0942826-00401 SIGNATURE PAGE

MULTI-TENANT INDUSTRIAL NET LEASE

REFERENCE PAGES

BUILDING:	1800 10th Street, Plano, Texas 75074
LANDLORD:	DEXUS Industrial SPE Financed Portfolio, LLC, a
	Delaware limited liability company
LANDLORD’S ADDRESS:	c/o RREEF Management Company
	1406 Hasley Way, Suite 110
	Carrollton, Texas 75007
WIRE INSTRUCTIONS AND/OR ADDRESS FOR	DEXUS Industrial SPE Financed Portfolio, LLC
RENT PAYMENT:	Dept# 6724
	Los Angeles, CA 90084-6724
LEASE REFERENCE DATE:	June 10, 2009
TENANT:	SED International, Inc., a Georgia corporation
TENANT’S NOTICE ADDRESS:	4916 North Royal Atlanta Drive
	Tucker, GA 30084
PREMISES ADDRESS:	1800 10th Street, Suite Number 100,
	Plano, Texas 75074
PREMISES RENTABLE AREA:	Approximately 25,519 sq. ft. (for outline of Premises see Exhibit A)
USE:	Distribution center for computers and electronic equipment
COMMENCEMENT DATE:	July 1, 2009
TERM OF LEASE:	Approximately five (5) years, four (4) months and zero(0) days beginning on the Commencement Date and ending on the Termination Date, subject to Renewal Option
TERMINATION DATE:	October 31, 2014

10/31/01 CALWEST TX MTIN
REVISED 6/9/2009
1800 10^th Street, Suite 100
DA-3031401 v4 0942826-00401 SIGNATURE PAGE

ANNUAL RENT and MONTHLY INSTALLMENT OF RENT (Article 3):
Period		Rentable Square Footage	Annual Rent Per Square Foot	Annual Rent	Monthly Installment of Rent
from	through
7/1/2009	10/31/2009	25,519	$0.00	$0.00	$0.00
11/1/2009	6/30/2010	25,519	$4.25	$108,455.75	$9,037.98
7/1/2010	6/30/2011	25,519	$4.38	$111.773.22	$9,314.44
7/1/2011	6/30/2012	25,519	$4.51	$115,090.69	$9,590.89
7/1/2012	6/30/2013	25,519	$4.64	$118,408.16	$9,837.65
7/1/2013	10/31/2014	25,519	$4.78	$121,980.82	$10,165.07

NITIAL ESTIMATED MONTHLY INSTALLMENT OF RENT ADJUSTMENTS (Article 4):	$3,041.13 (Taxes $1,595.00; CAM $1,276.00; Insurance $170.13)
TENANT’S PROPORTIONATE SHARE:	25.52% (Building totals approximately 100,000 sq. ft.; Premises totals approximately 25,519 sq. ft.)
SECURITY DEPOSIT:	$10,165.07
ASSIGNMENT/SUBLETTING FEE:	$1,500.00
REAL ESTATE BROKER DUE COMMISSION:	Robert Lynn Company; Peloton Real Estate Partners
TENANT’S SIC CODE:	5045
AMORTIZATION RATE:	12%

The Reference Pages information is incorporated into and made a part of the Lease. In the event of any conflict between any Reference Pages information and the Lease, the Lease shall control. This Lease includes Exhibits A through E, all of which are made a part of this Lease.

LANDLORD:			TENANT:
DEXUS INDUSTRIAL SPE FINANCED			SED INTERNATIONAL, INC., a Georgia
PORTFOLIO, LLC, a Delaware limited liability company			corporation
By:	RREEF Management Company, a Delaware		By:
	corporation			Name: Mark DiVito
				Title: Vice President of Operations
	By:
		Name: Cynthia Prendergast	Dated: ________________, 2009
		Title: Vice President, District Manager
Dated: ________________, 2009

10/31/01 CALWEST TX MTIN
REVISED 6/9/2009
1800 10^th Street, Suite 100
DA-3031401 v4 0942826-00401 SIGNATURE PAGE

LEASE

          By this Lease Landlord leases to Tenant and Tenant leases from Landlord the Premises in the Building as set forth and described on the Reference Pages. The Premises are depicted on the floor plan attached hereto as Exhibit A, and the Building is depicted on the site plan attached hereto as Exhibit A-1. The Reference Pages, including all terms defined thereon, are incorporated as part of this Lease.

1.       USE AND RESTRICTIONS ON USE.

          1.1          The Premises are to be used solely for the purposes set forth on the Reference Pages. Tenant shall not do or permit anything to be done in or about the Premises which will in any way obstruct or interfere with the rights of other tenants or occupants of the Building or injure, annoy, or disturb them, or allow the Premises to be used for any improper, immoral, unlawful, or objectionable purpose, or commit any waste. Tenant shall not do, permit or suffer in, on, or about the Premises the sale of any alcoholic liquor without the written consent of Landlord first obtained. Tenant shall comply with all governmental laws, ordinances and regulations applicable to the use of the Premises and its occupancy and shall promptly comply with all governmental orders and directions for the correction, prevention and abatement of any violations in the Building or appurtenant land, caused or permitted by, or resulting from the specific use by, Tenant, in or upon, or in connection with, the Premises, all at Tenant’s sole expense. Tenant shall not do or permit anything to be done on or about the Premises or bring or keep anything into the Premises which will in any way increase the rate of, invalidate or prevent the procuring of any insurance protecting against loss or damage to the Building or any of its contents by fire or other casualty or against liability for damage to property or injury to persons in or about the Building or any part thereof.

          1.2          Tenant shall not, and shall not direct, suffer or permit any of its agents, contractors, employees, licensees or invitees (collectively, the “Tenant Entities”) to at any time handle, use, manufacture, store or dispose of in or about the Premises or the Building any (collectively “Hazardous Materials”) flammables, explosives, radioactive materials, hazardous wastes or materials, toxic wastes or materials, or other similar substances, petroleum products or derivatives or any substance subject to regulation by or under any federal, state and local laws and ordinances relating to the protection of the environment or the keeping, use or disposition of environmentally hazardous materials, substances, or wastes, presently in effect or hereafter adopted, all amendments to any of them, and all rules and regulations issued pursuant to any of such laws or ordinances (collectively “Environmental Laws”), nor shall Tenant suffer or permit any Hazardous Materials to be used in any manner not fully in compliance with all Environmental Laws, in the Premises or the Building and appurtenant land or allow the environment to become contaminated with any Hazardous Materials. Notwithstanding the foregoing, Tenant may handle, store, use or dispose of products containing small quantities of Hazardous Materials (such as aerosol cans containing insecticides, toner for copiers, paints, paint remover and the like) to the extent customary and necessary for the use of the Premises shown on the Reference Pages; provided that Tenant shall always handle, store, use, and dispose of any such Hazardous Materials in a safe and lawful manner and never allow such Hazardous Materials to contaminate the Premises, Building and appurtenant land or the environment. Tenant is permitted to use acid batteries as is necessary for the use of the Premises as shown on the Reference Pages; provided that Tenant shall use appropriate measures reasonably acceptable to Landlord to protect the flooring of the Premises as well as implement a spill prevention plan reasonably acceptable to Landlord. TENANT SHALL PROTECT, DEFEND, INDEMNIFY AND HOLD EACH AND ALL OF THE LANDLORD ENTITIES (AS DEFINED IN ARTICLE 30) HARMLESS FROM AND AGAINST ANY AND ALL LOSS, CLAIMS, LIABILITY (INCLUDING, WITHOUT LIMITATION, ANY STRICT LIABILITY) OR COSTS (INCLUDING COURT COSTS AND ATTORNEY’S FEES) INCURRED BY REASON OF ANY ACTUAL OR ASSERTED FAILURE OF TENANT TO FULLY COMPLY WITH ALL APPLICABLE ENVIRONMENTAL LAWS, OR THE PRESENCE, HANDLING, USE OR DISPOSITION IN OR FROM THE PREMISES OF ANY HAZARDOUS MATERIALS BY TENANT OR ANY TENANT ENTITY (EVEN THOUGH PERMISSIBLE UNDER ALL APPLICABLE ENVIRONMENTAL LAWS OR THE PROVISIONS OF THIS LEASE), OR BY REASON OF ANY ACTUAL OR ASSERTED FAILURE OF TENANT TO KEEP, OBSERVE, OR PERFORM ANY PROVISION OF THIS SECTION 1.2.

          1.3          Tenant and the Tenant Entities will be entitled to the non-exclusive use of the common areas of the Building as they exist from time to time during the Term, including the parking facilities, subject to Landlord’s rules and regulations regarding such use. However, in no event will Tenant or the Tenant Entities park more

10/31/01 CALWEST TX MTIN
REVISED 6/9/2009
1800 10^th Street, Suite 100
DA-3031401 v4 0942826-00401 -1-

vehicles in the parking facilities than Tenant’s Proportionate Share of the total parking spaces available for common use. The foregoing shall not be deemed to provide Tenant with an exclusive right to any parking spaces or any guaranty of the availability of any particular parking spaces or any specific number of parking spaces.

2.       TERM.

          2.1          The Term of this Lease shall begin on the Commencement Date as shown on the Reference Pages and shall terminate on the Termination Date as shown on the Reference Pages, unless sooner terminated by the provisions of this Lease. Landlord shall tender possession of the Premises with all the work, if any, to be performed by Landlord pursuant to Exhibit B to this Lease substantially completed.

          2.2          Tenant agrees that in the event of the inability of Landlord to deliver possession of the Premises on the Commencement Date for any reason, Landlord shall not be liable for any damage resulting from such inability, but Tenant shall not be liable for any rent until the time when Landlord can, after notice to Tenant, deliver possession of the Premises to Tenant. No such failure to give possession on the Commencement Date shall affect the other obligations of Tenant under this Lease, except that if Landlord is unable to deliver possession of the Premises within one hundred twenty (120) days after the Commencement Date (other than as a result of strikes, shortages of materials, holdover tenancies or similar matters beyond the reasonable control of Landlord and Tenant is notified by Landlord in writing as to such delay), Tenant shall have the option to terminate this Lease unless said delay is as a result of: (i) Tenant’s failure to agree to plans and specifications and/or construction cost estimates or bids; (ii) Tenant’s request for materials, finishes or installations other than Landlord’s standard except those, if any, that Landlord shall have expressly agreed to furnish without extension of time agreed by Landlord; (iii) Tenant’s change in any plans or specifications; or, (iv) performance or completion by a party employed by Tenant (each of the foregoing, a “Tenant Delay”). If any delay is the result of a Tenant Delay, the Commencement Date and the payment of rent under this Lease shall be accelerated by the number of days of such Tenant Delay.

          2.3          In the event Landlord permits Tenant, or any agent, employee or contractor of Tenant, to enter, use or occupy the Premises prior to the Commencement Date, such entry, use or occupancy shall be subject to all the provisions of this Lease other than the payment of rent, including, without limitation, Tenant’s compliance with the insurance requirements of Article 11. Said early possession shall not advance the Termination Date.

          2.4          Tenant shall have the renewal option provided for on Exhibit F to the Lease attached hereto and incorporated herein.

3.       RENT.

          3.1          Tenant agrees to pay to Landlord the Annual Rent in effect from time to time by paying the Monthly Installment of Rent then in effect on or before the first day of each full calendar month during the Term, except that the first full month’s rent shall be paid upon the execution of this Lease. The Monthly Installment of Rent in effect at any time shall be one-twelfth (1/12) of the Annual Rent in effect at such time. Rent for any period during the Term which is less than a full month shall be a prorated portion of the Monthly Installment of Rent based upon the number of days in such month. Said rent shall be paid to Landlord, without deduction or offset and without notice or demand, at the Rent Payment Address, as set forth on the Reference Pages, or to such other person or at such other place as Landlord may from time to time designate in writing. Unless specified in this Lease to the contrary, all amounts and sums payable by Tenant to Landlord pursuant to this Lease shall be deemed additional rent.

          3.2          Tenant recognizes that late payment of any rent or other sum due under this Lease will result in administrative expense to Landlord, the extent of which additional expense is extremely difficult and economically impractical to ascertain. Tenant therefore agrees that if rent or any other sum is not paid when due and payable pursuant to this Lease, a late charge shall be imposed in an amount equal to the greater of: (i) Fifty Dollars ($50.00), or (ii) six percent (6%) of the unpaid rent or other payment. The amount of the late charge to be paid by Tenant shall be reassessed and added to Tenant’s obligation for each successive month until paid. The provisions of this Section 3.2 in no way relieve Tenant of the obligation to pay rent or other payments on or before the date on which

10/31/01 CALWEST TX MTIN
REVISED 6/9/2009
1800 10^th Street, Suite 100
DA-3031401 v4 0942826-00401 -2-

they are due, nor do the terms of this Section 3.2 in any way affect Landlord’s remedies pursuant to Article 19 of this Lease in the event said rent or other payment is unpaid after date due.

4.       RENT ADJUSTMENTS.

          4.1         For the purpose of this Article 4, the following terms are defined as follows:

                        4.1.1          Lease Year: Each calendar year.

                        4.1.2          Expenses: All costs of operation, maintenance, repair and management of the Building (including the amount of any credits which Landlord may grant to particular tenants of the Building in lieu of providing any standard services or paying any standard costs described in this Section 4.1.2 for similar tenants), as determined in accordance with generally accepted accounting principles, including the following costs by way of illustration, but not limitation: water and sewer charges; insurance charges of or relating to all insurance policies and endorsements deemed by Landlord to be reasonably necessary or desirable and relating in any manner to the protection, preservation, or operation of the Building or any part thereof; utility costs, including, but not limited to, the cost of heat, light, power, steam, gas; waste disposal; the cost of janitorial services; the cost of security and alarm services (including any central station signaling system); costs of cleaning, repairing, replacing and maintaining the common areas, including parking and landscaping, window cleaning costs; labor costs; costs and expenses of managing the Building including management and/or administrative fees; air conditioning maintenance costs; elevator maintenance fees and supplies; material costs; equipment costs including the cost of maintenance, repair and service agreements and rental and leasing costs; purchase costs of equipment; current rental and leasing costs of items which would be capital items if purchased; tool costs; licenses, permits and inspection fees; wages and salaries; employee benefits and payroll taxes; accounting and legal fees; any sales, use or service taxes incurred in connection therewith. In addition, Landlord shall be entitled to recover, as additional rent (which, along with any other capital expenditures constituting Expenses, Landlord may either include in Expenses or cause to be billed to Tenant along with Expenses and Taxes but as a separate item), Tenant’s Proportionate Share of: (i) an allocable portion of the cost of capital improvement items which are reasonably calculated to reduce operating expenses; (ii) the cost of fire sprinklers and suppression systems and other life safety systems; and (iii) other capital expenses which are required under any governmental laws, regulations or ordinances which were not applicable to the Building at the time it was constructed; but the costs described in this sentence shall be amortized over the reasonable life of such expenditures in accordance with such reasonable life and amortization schedules as shall be determined by Landlord in accordance with generally accepted accounting principles, with interest on the unamortized amount at one percent (1%) in excess of the Wall Street Journal prime lending rate announced from time to time. Expenses shall not include depreciation or amortization of the Building or equipment in the Building except as provided herein, loan principal payments, costs of alterations of tenants’ premises, leasing commissions, interest expenses on long-term borrowings or advertising costs.

                        4.1.3          Taxes: Real estate taxes and any other taxes, charges and assessments which are levied with respect to the Building or the land appurtenant to the Building, or with respect to any improvements, fixtures and equipment or other property of Landlord, real or personal, located in the Building and used in connection with the operation of the Building and said land, any payments to any ground lessor in reimbursement of tax payments made by such lessor; and all fees, expenses and costs incurred by Landlord in investigating, protesting, contesting or in any way seeking to reduce or avoid increase in any assessments, levies or the tax rate pertaining to any Taxes to be paid by Landlord in any Lease Year. Taxes shall not include any corporate franchise, or estate, inheritance or net income tax, or tax imposed upon any transfer by Landlord of its interest in this Lease or the Building or any taxes to be paid by Tenant pursuant to Article 28.

          4.2         Notwithstanding anything contained herein to the contrary, it is understood and agreed that for purposes of calculating Tenant’s Proportionate Share of Expenses (excluding Non-Controllable Expenses, as hereinafter defined) in any Lease Year in the initial Term of this Lease (excluding the first full Lease Year and as prorated for any period less than a calendar year), the amount of Tenant’s Proportionate Share of Expenses (excluding Non-Controllable Expenses) shall not exceed the actual amount of Tenant’s Proportionate Share of Expenses (excluding Non-Controllable Expenses) incurred by Landlord in the previous calendar year plus six percent (6%) of Tenant’s Proportionate Share of Expenses (excluding Non-Controllable Expenses) incurred by

10/31/01 CALWEST TX MTIN
REVISED 6/9/2009
1800 10^th Street, Suite 100
DA-3031401 v4 0942826-00401 -3-

Landlord in the previous calendar year (as prorated for any period less than a calendar year and adjusted for any increase in Tenant’s Proportionate Share) as calculated by Landlord. As used herein, the term “Non-Controllable Expenses” shall mean insurance premiums, utility charges, governmentally mandated charges (including sales tax), management fees, the cost of snow or ice removal and security services. Tenant’s liability for Non-Controllable Expenses and Taxes in any given Lease Year shall not be similarly limited, and therefore, Tenant shall remain liable for the full amount of Tenant’s Proportionate Share of the increase in Non-Controllable Expenses and Taxes in any Lease Year over the amount of such expenses incurred by Landlord in the previous calendar year.

          4.3          The annual determination of Expenses shall be made by Landlord and shall be binding upon Landlord and Tenant, subject to the provisions of this Section 4.3. During the Term, Tenant may review, at Tenant’s sole cost and expense, the books and records supporting such determination in an office of Landlord, or Landlord’s agent, during normal business hours, upon giving Landlord five (5) days advance written notice within sixty (60) days after receipt of such determination, but in no event more often than once in any one (1) year period, subject to execution of a confidentiality agreement acceptable to Landlord, and provided that if Tenant utilizes an independent accountant to perform such review it shall be one of national standing which is reasonably acceptable to Landlord, is not compensated on a contingency basis and is also subject to such confidentiality agreement. If Tenant fails to object to Landlord’s determination of Expenses within ninety (90) days after receipt, or if any such objection fails to state with specificity the reason for the objection, Tenant shall be deemed to have approved such determination and shall have no further right to object to or contest such determination. In the event that during all or any portion of any Lease Year or Base Year, the Building is not fully rented and occupied Landlord shall make an appropriate adjustment in occupancy-related Expenses for such year for the purpose of avoiding distortion of the amount of such Expenses to be attributed to Tenant by reason of variation in total occupancy of the Building, by employing consistent and sound accounting and management principles to determine Expenses that would have been paid or incurred by Landlord had the Building been at least ninety-five percent (95%) rented and occupied, and the amount so determined shall be deemed to have been Expenses for such Lease Year.

          4.4          Prior to the actual determination thereof for a Lease Year, Landlord may from time to time estimate Tenant’s liability for Expenses and/or Taxes under Section 4.2, Article 6 and Article 28 for the Lease Year or portion thereof. Landlord will give Tenant written notification of the amount of such estimate and Tenant agrees that it will pay, by increase of its Monthly Installments of Rent due in such Lease Year, additional rent in the amount of such estimate. Any such increased rate of Monthly Installments of Rent pursuant to this Section 4.4 shall remain in effect until further written notification to Tenant pursuant hereto.

          4.5          When the above mentioned actual determination of Tenant’s liability for Expenses and/or Taxes is made for any Lease Year and when Tenant is so notified in writing, then:

                         4.5.1          If the total additional rent Tenant actually paid pursuant to Section 4.3 on account of Expenses and/or Taxes for the Lease Year is less than Tenant’s liability for Expenses and/or Taxes, then Tenant shall pay such deficiency to Landlord as additional rent in one lump sum within thirty (30) days of receipt of Landlord’s bill therefor; and

                        4.5.2          If the total additional rent Tenant actually paid pursuant to Section 4.3 on account of Expenses and/or Taxes for the Lease Year is more than Tenant’s liability for Expenses and/or Taxes, then Landlord shall credit the difference against the then next due payments to be made by Tenant under this Article 4, or, if the Lease has terminated, refund the difference in cash.

          4.6          If the Commencement Date is other than January 1 or if the Termination Date is other than December 31, Tenant’s liability for Expenses and Taxes for the Lease Year in which said Date occurs shall be prorated based upon a three hundred sixty-five (365) day year.

5.       SECURITY DEPOSIT. Tenant shall deposit the Security Deposit with Landlord upon the execution of this Lease. Said sum shall be held by Landlord as security for the faithful performance by Tenant of all the terms, covenants and conditions of this Lease to be kept and performed by Tenant and not as an advance rental deposit or as a measure of Landlord’s damage in case of Tenant’s default. If Tenant defaults with respect to any provision of this Lease, Landlord may use any part of the Security Deposit for the payment of any rent or any other sum in

10/31/01 CALWEST TX MTIN
REVISED 6/9/2009
1800 10^th Street, Suite 100
DA-3031401 v4 0942826-00401 -4-

default, or for the payment of any amount which Landlord may spend or become obligated to spend by reason of Tenant’s default, or to compensate Landlord for any other loss or damage which Landlord may suffer by reason of Tenant’s default. If any portion is so used, Tenant shall within five (5) days after written demand therefor, deposit with Landlord an amount sufficient to restore the Security Deposit to its original amount and Tenant’s failure to do so shall be a material breach of this Lease. Except to such extent, if any, as shall be required by law, Landlord shall not be required to keep the Security Deposit separate from its general funds, and Tenant shall not be entitled to interest on such deposit. If Tenant shall fully and faithfully perform every provision of this Lease to be performed by it, the Security Deposit or any balance thereof shall be returned to Tenant at such time after termination of this Lease when Landlord shall have determined that all of Tenant’s obligations under this Lease have been fulfilled.

6.       ALTERATIONS.

          6.1          Except for those, if any, specifically provided for in Exhibit B to this Lease, Tenant shall not make or suffer to be made any alterations, additions, or improvements, including, but not limited to, the attachment of any fixtures or equipment in, on, or to the Premises or any part thereof or the making of any improvements as required by Article 7, without the prior written consent of Landlord. When applying for such consent, Tenant shall, if requested by Landlord, furnish complete plans and specifications for such alterations, additions and improvements. Landlord’s consent shall not be unreasonably withheld with respect to alterations which (i) are not structural in nature, (ii) are not visible from the exterior of the Building, and (iii) do not affect or require modification of the Building’s electrical, mechanical, plumbing, HVAC or other systems.

          6.2          In the event Landlord consents to the making of any such alteration, addition or improvement by Tenant, the same shall be made by using either Landlord’s contractor or a contractor reasonably approved by Landlord, in either event at Tenant’s sole cost and expense. If Tenant shall employ any contractor other than Landlord’s contractor and such other contractor or any subcontractor of such other contractor shall employ any non-union labor or supplier, Tenant shall be responsible for and hold Landlord harmless from any and all delays, damages and extra costs suffered by Landlord as a result of any dispute with any labor unions concerning the wage, hours, terms or conditions of the employment of any such labor.

          6.3          All alterations, additions or improvements proposed by Tenant shall be constructed in accordance with all government laws, ordinances, rules and regulations, using Building standard materials where applicable, and Tenant shall, prior to construction, provide the additional insurance required under Article 11 in such case, and also all such assurances to Landlord as Landlord shall reasonably require to assure payment of the costs thereof, including but not limited to, notices of non-responsibility, waivers of lien, surety company performance bonds and funded construction escrows and to protect Landlord and the Building and appurtenant land against any loss from any mechanic’s, materialmen’s or other liens. Tenant shall pay in addition to any sums due pursuant to Article 4 any increase in real estate taxes attributable to any such alteration, addition or improvement for so long, during the Term, as such increase is ascertainable; at Landlord’s election said sums shall be paid in the same way as sums due under Article 4. Landlord may, as a condition to its consent to any particular alterations or improvements, require Tenant to deposit with Landlord the amount reasonably estimated by Landlord as sufficient to cover the cost of removing such alterations or improvements and restoring the Premises, to the extent required under Section 26.2.

7.       REPAIR.

          7.1          Landlord shall have no obligation to alter, remodel, improve, repair, decorate or paint the Premises, except as specified in Exhibit B if attached to this Lease and except that Landlord shall repair and maintain the structural portions of the roof, foundation and walls of the Building. By taking possession of the Premises, Tenant accepts them as being in good order, condition and repair and in the condition in which Landlord is obligated to deliver them, except as set forth in the punch list to be delivered pursuant to Section 2.1. It is hereby understood and agreed that no representations respecting the condition of the Premises or the Building have been made by Landlord to Tenant, except as specifically set forth in this Lease. Landlord shall not be liable for any failure to make any repairs or to perform any maintenance unless such failure shall persist for an unreasonable time after written notice of the need of such repairs or maintenance is given to Landlord by Tenant.

10/31/01 CALWEST TX MTIN
REVISED 6/9/2009
1800 10^th Street, Suite 100
DA-3031401 v4 0942826-00401 -5-

          7.2          Tenant shall at its own cost and expense keep and maintain all parts of the Premises and such portion of the Building and improvements as are within the exclusive control of Tenant in good condition, promptly making all necessary repairs and replacements, whether ordinary or extraordinary, with materials and workmanship of the same character, kind and quality as the original (including, but not limited to, repair and replacement of all fixtures installed by Tenant, water heaters serving the Premises, windows, glass and plate glass, doors, exterior stairs, skylights, any special office entries, interior walls and finish work, floors and floor coverings, heating and air conditioning systems serving the Premises, electrical systems and fixtures, sprinkler systems, dock boards, truck doors, dock bumpers, plumbing work and fixtures, and performance of regular removal of trash and debris). Tenant as part of its obligations hereunder shall keep the Premises in a clean and sanitary condition. Tenant will, as far as possible keep all such parts of the Premises from deterioration due to ordinary wear and from falling temporarily out of repair, and upon termination of this Lease in any way Tenant will yield up the Premises to Landlord in good condition and repair, loss by fire or other casualty excepted (but not excepting any damage to glass). Tenant shall, at its own cost and expense, repair any damage to the Premises or the Building resulting from and/or caused in whole or in part by the negligence or misconduct of Tenant, its agents, employees, contractors, invitees, or any other person entering upon the Premises as a result of Tenant’s business activities or caused by Tenant’s default hereunder.

          7.3          Except as provided in Article 22, there shall be no abatement of rent and no liability of Landlord by reason of any injury to or interference with Tenant’s business arising from the making of any repairs, alterations or improvements in or to any portion of the Building or the Premises or to fixtures, appurtenances and equipment in the Building. Except to the extent, if any, prohibited by law, Tenant waives the right to make repairs at Landlord’s expense under any law, statute or ordinance now or hereafter in effect.

          7.4          Tenant shall, at its own cost and expense, enter into a regularly scheduled preventive maintenance/service contract with a maintenance contractor approved by Landlord for servicing all heating and air conditioning systems and equipment serving the Premises (and a copy thereof shall be furnished to Landlord). The service contract must become effective within thirty (30) days of the date Tenant takes possession of the Premises. Should Tenant fail to do so, Landlord may, upon notice to Tenant, enter into such a maintenance/ service contract on behalf of Tenant or perform the work and in either case, charge Tenant the cost thereof along with a reasonable amount for Landlord’s overhead.

8.       LIENS. Tenant shall keep the Premises, the Building and appurtenant land and Tenant’s leasehold interest in the Premises free from any liens arising out of any services, work or materials performed, furnished, or contracted for by Tenant, or obligations incurred by Tenant. In the event that Tenant fails, within ten (10) days following the imposition of any such lien, to either cause the same to be released of record or provide Landlord with insurance against the same issued by a major title insurance company or such other protection against the same as Landlord shall accept (such failure to constitute an Event of Default), Landlord shall have the right to cause the same to be released by such means as it shall deem proper, including payment of the claim giving rise to such lien. All such sums paid by Landlord and all expenses incurred by it in connection therewith shall be payable to it by Tenant within five (5) days of Landlord’s demand.

9.       ASSIGNMENT AND SUBLETTING.

          9.1          Tenant shall not have the right to assign or pledge this Lease or to sublet the whole or any part of the Premises whether voluntarily or by operation of law, or permit the use or occupancy of the Premises by anyone other than Tenant, and shall not make, suffer or permit such assignment, subleasing or occupancy without the prior written consent of Landlord, such consent not to be unreasonably withheld, and said restrictions shall be binding upon any and all assignees of the Lease and subtenants of the Premises. In the event Tenant desires to sublet, or permit such occupancy of, the Premises, or any portion thereof, or assign this Lease, Tenant shall give written notice thereof to Landlord at least sixty (60) days but no more than one hundred twenty (120) days prior to the proposed commencement date of such subletting or assignment, which notice shall set forth the name of the proposed subtenant or assignee, the relevant terms of any sublease or assignment and copies of financial reports and other relevant financial information of the proposed subtenant or assignee.

10/31/01 CALWEST TX MTIN
REVISED 6/9/2009
1800 10^th Street, Suite 100
DA-3031401 v4 0942826-00401 -6-

          9.2          Notwithstanding any assignment or subletting, permitted or otherwise, Tenant shall at all times remain directly, primarily and fully responsible and liable for the payment of the rent specified in this Lease and for compliance with all of its other obligations under the terms, provisions and covenants of this Lease. Upon the occurrence of an Event of Default, if the Premises or any part of them are then assigned or sublet, Landlord, in addition to any other remedies provided in this Lease or provided by law, may, at its option, collect directly from such assignee or subtenant all rents due and becoming due to Tenant under such assignment or sublease and apply such rent against any sums due to Landlord from Tenant under this Lease, and no such collection shall be construed to constitute a novation or release of Tenant from the further performance of Tenant’s obligations under this Lease.

          9.3          In addition to Landlord’s right to approve of any subtenant or assignee, Landlord shall have the option, in its sole discretion, in the event of any proposed subletting or assignment, to terminate this Lease, or in the case of a proposed subletting of less than the entire Premises, to recapture the portion of the Premises to be sublet, as of the date the subletting or assignment is to be effective. The option shall be exercised, if at all, by Landlord giving Tenant written notice within thirty (30) days following Landlord’s receipt of Tenant’s written notice as required above. However, if Tenant notifies Landlord, within five (5) days after receipt of Landlord’s termination notice, that Tenant is rescinding its proposed assignment or sublease, the termination notice shall be void and the Lease shall continue in full force and effect. If this Lease shall be terminated with respect to the entire Premises pursuant to this Section, the Term of this Lease shall end on the date stated in Tenant’s notice as the effective date of the sublease or assignment as if that date had been originally fixed in this Lease for the expiration of the Term. If Landlord recaptures under this Section only a portion of the Premises, the rent to be paid from time to time during the unexpired Term shall abate proportionately based on the proportion by which the approximate square footage of the remaining portion of the Premises shall be less than that of the Premises as of the date immediately prior to such recapture. Tenant shall, at Tenant’s own cost and expense, discharge in full any outstanding commission obligation which may be due and owing as a result of any proposed assignment or subletting, whether or not the Premises are recaptured pursuant to this Section 9.3 and rented by Landlord to the proposed tenant or any other tenant.

          9.4          In the event that Tenant sells, sublets, assigns or transfers this Lease, Tenant shall pay to Landlord as additional rent an amount equal to one hundred percent (100%) of any Increased Rent (as defined below), less the Costs Component (as defined below), when and as such Increased Rent is received by Tenant. As used in this Section, “Increased Rent” shall mean the excess of (i) all rent and other consideration which Tenant is entitled to receive by reason of any sale, sublease, assignment or other transfer of this Lease, over (ii) the rent otherwise payable by Tenant under this Lease at such time. For purposes of the foregoing, any consideration received by Tenant in form other than cash shall be valued at its fair market value as determined by Landlord in good faith. The “Costs Component” is that amount which, if paid monthly, would fully amortize on a straight-line basis, over the entire period for which Tenant is to receive Increased Rent, the reasonable costs incurred by Tenant for leasing commissions and tenant improvements in connection with such sublease, assignment or other transfer.

          9.5          Notwithstanding any other provision hereof, it shall be considered reasonable for Landlord to withhold its consent to any assignment of this Lease or sublease of any portion of the Premises if at the time of either Tenant’s notice of the proposed assignment or sublease or the proposed commencement date thereof, there shall exist any uncured default of Tenant or matter which will become a default of Tenant with passage of time unless cured, or if the proposed assignee or sublessee is an entity: (i) with which Landlord is already in negotiation; (ii) is already an occupant of the Building unless Landlord is unable to provide the amount of space required by such occupant; (iii) is a governmental agency; (iv) is incompatible with the character of occupancy of the Building; (v) with which the payment for the sublease or assignment is determined in whole or in part based upon its net income or profits; or (vi) would subject the Premises to a use which would: (a) involve increased personnel or wear upon the Building; (b) violate any exclusive right granted to another tenant of the Building; (c) require any addition to or modification of the Premises or the Building in order to comply with building code or other governmental requirements; or, (d) involve a violation of Section 1.2. Tenant expressly agrees that for the purposes of any statutory or other requirement of reasonableness on the part of Landlord, Landlord’s refusal to consent to any assignment or sublease for any of the reasons described in this Section 9.5, shall be conclusively deemed to be reasonable.

          9.6          Upon any request to assign or sublet, Tenant will pay to Landlord the Assignment/Subletting Fee plus, on demand, a sum equal to all of Landlord’s costs, including reasonable attorneys’ fees, incurred in

10/31/01 CALWEST TX MTIN
REVISED 6/9/2009
1800 10^th Street, Suite 100
DA-3031401 v4 0942826-00401 -7-

investigating and considering any proposed or purported assignment or pledge of this Lease or sublease of any of the Premises, regardless of whether Landlord shall consent to, refuse consent, or determine that Landlord’s consent is not required for, such assignment, pledge or sublease. Any purported sale, assignment, mortgage, transfer of this Lease or subletting which does not comply with the provisions of this Article 9 shall be void.

          9.7          If Tenant is a corporation, limited liability company, partnership or trust, any transfer or transfers of or change or changes within any twelve (12) month period in the number of the outstanding voting shares of the corporation or limited liability company, the general partnership interests in the partnership or the identity of the persons or entities controlling the activities of such partnership or trust resulting in the persons or entities owning or controlling a majority of such shares, partnership interests or activities of such partnership or trust at the beginning of such period no longer having such ownership or control shall be regarded as equivalent to an assignment of this Lease to the persons or entities acquiring such ownership or control and shall be subject to all the provisions of this Article 9 to the same extent and for all intents and purposes as though such is an assignment.

10.      INDEMNIFICATION. NONE OF THE LANDLORD ENTITIES SHALL BE LIABLE AND TENANT HEREBY WAIVES ALL CLAIMS AGAINST THEM FOR ANY DAMAGE TO ANY PROPERTY OR ANY INJURY TO ANY PERSON IN OR ABOUT THE PREMISES OR THE BUILDING BY OR FROM ANY CAUSE WHATSOEVER (INCLUDING WITHOUT LIMITING THE FOREGOING, RAIN OR WATER LEAKAGE OF ANY CHARACTER FROM THE ROOF, WINDOWS, WALLS, BASEMENT, PIPES, PLUMBING WORKS OR APPLIANCES, THE BUILDING NOT BEING IN GOOD CONDITION OR REPAIR, GAS, FIRE, OIL, ELECTRICITY OR THEFT), EXCEPT TO THE EXTENT CAUSED BY OR ARISING FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LANDLORD OR ITS AGENTS, EMPLOYEES OR CONTRACTORS. TENANT SHALL PROTECT, DEFEND, INDEMNIFY AND HOLD THE LANDLORD ENTITIES HARMLESS FROM AND AGAINST ANY AND ALL LOSS, CLAIMS, LIABILITY OR COSTS (INCLUDING COURT COSTS AND ATTORNEYS’ FEES) INCURRED BY REASON OF (I) ANY DAMAGE TO ANY PROPERTY (INCLUDING BUT NOT LIMITED TO PROPERTY OF ANY LANDLORD ENTITY) OR ANY INJURY (INCLUDING BUT NOT LIMITED TO DEATH) TO ANY PERSON OCCURRING IN, ON OR ABOUT THE PREMISES OR THE BUILDING TO THE EXTENT THAT SUCH INJURY OR DAMAGE SHALL BE CAUSED BY OR ARISE FROM ANY ACTUAL OR ALLEGED ACT, NEGLECT, FAULT, OR OMISSION BY OR OF TENANT OR ANY TENANT ENTITY TO MEET ANY STANDARDS IMPOSED BY ANY DUTY WITH RESPECT TO THE INJURY OR DAMAGE; (II) THE CONDUCT OR MANAGEMENT OF ANY WORK OR THING WHATSOEVER DONE BY THE TENANT IN OR ABOUT THE PREMISES OR FROM TRANSACTIONS OF THE TENANT CONCERNING THE PREMISES; (III) TENANT’S FAILURE TO COMPLY WITH ANY AND ALL GOVERNMENTAL LAWS, ORDINANCES AND REGULATIONS APPLICABLE TO THE CONDITION OR USE OF THE PREMISES OR ITS OCCUPANCY; OR (IV) ANY BREACH OR DEFAULT ON THE PART OF TENANT IN THE PERFORMANCE OF ANY COVENANT OR AGREEMENT ON THE PART OF THE TENANT TO BE PERFORMED PURSUANT TO THIS LEASE; THIS INDEMNITY SHALL BE EFFECTIVE EVEN WHEN LANDLORD OR ITS AGENTS, EMPLOYEES OR CONTRACTORS ARE JOINTLY, COMPARATIVELY, CONTRIBUTIVELY, OR CONCURRENTLY NEGLIGENT WITH TENANT; PROVIDED, HOWEVER, THAT IN SUCH SITUATIONS TENANT SHALL HAVE NO OBLIGATION TO INDEMNIFY LANDLORD FOR LANDLORD’S OR ITS AGENTS’, EMPLOYEES’ OR CONTRACTORS’ GROSS NEGLIGENCE. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, IN THE EVENT ANY ACT OR OMISSION OF TENANT OR ANY TENANT ENTITY RESULTS IN A LOSS, CLAIM, CAUSE OF ACTION, OR SUIT THAT IS BASED UPON THE STRICT LIABILITY OF LANDLORD, ANY LANDLORD ENTITY OR LANDLORD’S CONTRACTORS, THEN TENANT SHALL PROTECT, DEFEND, INDEMNIFY AND HOLD THE LANDLORD ENTITIES HARMLESS FROM AND AGAINST ANY AND ALL LOSS, CLAIMS, LIABILITY OR COSTS (INCLUDING COURT COSTS AND ATTORNEYS’ FEES) INCURRED BY REASON OF SUCH ACT OR OMISSION OF TENANT OR TENANT ENTITY. THE PROVISIONS OF THIS ARTICLE SHALL SURVIVE THE TERMINATION OF THIS LEASE WITH RESPECT TO ANY CLAIMS OR LIABILITY ACCRUING PRIOR TO SUCH TERMINATION.

10/31/01 CALWEST TX MTIN
REVISED 6/9/2009
1800 10^th Street, Suite 100
DA-3031401 v4 0942826-00401 -8-

11.      INSURANCE.

          11.1          Tenant shall keep in force throughout the Term: (i) a Commercial General Liability insurance policy or policies to protect the Landlord Entities against any liability to the public or to any invitee of Tenant or a Landlord Entity incidental to the use of or resulting from any accident occurring in or upon the Premises with a limit of not less than $1,000,000 per occurrence and not less than $2,000,000 in the annual aggregate, or such larger amount as Landlord may prudently require from time to time, covering bodily injury and property damage liability and $1,000,000 products/completed operations aggregate; (ii) Business Auto Liability covering owned, non-owned and hired vehicles with a limit of not less than $1,000,000 per accident; (iii) insurance protecting against liability under Worker’s Compensation Laws with limits at least as required by statute; (iv) Employers Liability with limits of $1,000,000 each accident, $1,000,000 disease policy limit, $1,000,000 disease—each employee; (v) All Risk or Special Form coverage protecting Tenant against loss of or damage to Tenant’s alterations, additions, improvements, carpeting, floor coverings, panelings, decorations, fixtures, inventory and other business personal property situated in or about the Premises to the full replacement value of the property so insured, (vi) Business Interruption Insurance for 100% of the 12 months actual loss sustained, and (vii) Excess Liability in the amount of $2,000,000.

          11.2          The aforesaid policies shall (i) be provided at Tenant’s expense; (ii) name the Landlord Entities as additional insureds (General Liability) and loss payee (Property—Special Form); (ii) be issued by an insurance company with a minimum Best’s rating of “A:VII” during the Term; and (iv) provide that said insurance shall not be canceled unless thirty (30) days prior written notice (ten days for non-payment of premium) shall have been given to Landlord; a certificate of Liability insurance on ACORD Form 25 and a certificate of Property insurance on ACORD Form 27 shall be delivered to Landlord by Tenant upon the Commencement Date and at least thirty (30) days prior to each renewal of said insurance.

          11.3          Whenever Tenant shall undertake any alterations, additions or improvements in, to or about the Premises (“Work”) the aforesaid insurance protection must extend to and include injuries to persons and damage to property arising in connection with such Work, without limitation including liability under any applicable structural work act, and such other insurance as Landlord shall require; and the policies of or certificates evidencing such insurance must be delivered to Landlord prior to the commencement of any such Work.

12.      WAIVER OF SUBROGATION. So long as their respective insurers so permit, Tenant and Landlord hereby mutually waive their respective rights of recovery against each other for any loss insured by fire, extended coverage, All Risks or other insurance now or hereafter existing for the benefit of the respective party but only to the extent of the net insurance proceeds payable under such policies. Each party shall obtain any special endorsements required by their insurer to evidence compliance with the aforementioned waiver.

13.      SERVICES AND UTILITIES. Tenant shall pay for all water, gas, heat, light, power, telephone, sewer, sprinkler system charges and other utilities and services used on or from the Premises, together with any taxes, penalties, and surcharges or the like pertaining thereto and any maintenance charges for utilities. Tenant shall furnish all electric light bulbs, tubes and ballasts, battery packs for emergency lighting and fire extinguishers. If any such services are not separately metered to Tenant, Tenant shall pay such proportion of all charges jointly metered with other premises as determined by Landlord, in its sole discretion, to be reasonable. Any such charges paid by Landlord and assessed against Tenant shall be immediately payable to Landlord on demand and shall be additional rent hereunder. Tenant will contract directly with a utility provider to service the Premises with electrical service; however Tenant will not, without the written consent of Landlord, contract with a utility provider to service the Premises with any other utility, including, but not limited to, telecommunications, water, sewer or gas, which is not previously providing such service to other tenants in the Building. Landlord shall in no event be liable for any interruption or failure of utility services on or to the Premises.

14.      HOLDING OVER. Tenant shall pay Landlord for each day Tenant retains possession of the Premises or part of them after termination of this Lease by lapse of time or otherwise at the rate (“Holdover Rate”) which shall be One Hundred Fifty Percent (150%) of the greater of (i) the amount of the Annual Rent for the last period prior to the date of such termination plus all Rent Adjustments under Article 4; and (ii) the then market rental value of the Premises as determined by Landlord assuming a new lease of the Premises of the then usual duration and other terms, in either case, prorated on a daily basis, and also pay all damages sustained by Landlord by reason of such

10/31/01 CALWEST TX MTIN
REVISED 6/9/2009
1800 10^th Street, Suite 100
DA-3031401 v4 0942826-00401 -9-

retention. If Landlord gives notice to Tenant of Landlord’s election to such effect, such holding over shall constitute renewal of this Lease for a period from month to month or one (1) year, whichever shall be specified in such notice, in either case at the Holdover Rate, but if the Landlord does not so elect, no such renewal shall result notwithstanding acceptance by Landlord of any sums due hereunder after such termination; and instead, a tenancy at sufferance at the Holdover Rate shall be deemed to have been created. In any event, no provision of this Article 14 shall be deemed to waive Landlord’s right of reentry or any other right under this Lease or at law.

15.      SUBORDINATION. Without the necessity of any additional document being executed by Tenant for the purpose of effecting a subordination, this Lease shall be subject and subordinate at all times to ground or underlying leases and to the lien of any mortgages or deeds of trust now or hereafter placed on, against or affecting the Building, Landlord’s interest or estate in the Building, or any ground or underlying lease; provided, however, that if the lessor, mortgagee, trustee, or holder of any such mortgage or deed of trust elects to have Tenant’s interest in this Lease be superior to any such instrument, then, by notice to Tenant, this Lease shall be deemed superior, whether this Lease was executed before or after said instrument. Notwithstanding the foregoing, Tenant covenants and agrees to execute and deliver within ten (10) days of Landlord’s request such further instruments evidencing such subordination or superiority of this Lease as may be required by Landlord.

16.      RULES AND REGULATIONS. Tenant shall faithfully observe and comply with all the rules and regulations as set forth in Exhibit D to this Lease and all reasonable and non-discriminatory modifications of and additions to them from time to time put into effect by Landlord. Landlord shall not be responsible to Tenant for the non-performance by any other tenant or occupant of the Building of any such rules and regulations.

17.      REENTRY BY LANDLORD.

          17.1          Landlord reserves and shall at all times have the right to re-enter the Premises to inspect the same, to show said Premises to prospective purchasers, mortgagees or tenants, and to alter, improve or repair the Premises and any portion of the Building, without abatement of rent, and may for that purpose erect, use and maintain scaffolding, pipes, conduits and other necessary structures and open any wall, ceiling or floor in and through the Building and Premises where reasonably required by the character of the work to be performed, provided entrance to the Premises shall not be blocked thereby, and further provided that the business of Tenant shall not be interfered with unreasonably. Landlord shall have the right at any time to change the arrangement and/or locations of entrances, or passageways, doors and doorways, and corridors, windows, elevators, stairs, toilets or other public parts of the Building and to change the name, number or designation by which the Building is commonly known. In the event that Landlord damages any portion of any wall or wall covering, ceiling, or floor or floor covering within the Premises, Landlord shall repair or replace the damaged portion to match the original as nearly as commercially reasonable but shall not be required to repair or replace more than the portion actually damaged. Tenant hereby waives any claim for damages for any injury or inconvenience to or interference with Tenant’s business, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned by any action of Landlord authorized by this Article 17.

          17.2          For each of the aforesaid purposes, Landlord shall at all times have and retain a key with which to unlock all of the doors in the Premises, excluding Tenant’s vaults and safes or special security areas (designated in advance), and Landlord shall have the right to use any and all means which Landlord may deem proper to open said doors in an emergency to obtain entry to any portion of the Premises. As to any portion to which access cannot be had by means of a key or keys in Landlord’s possession, Landlord is authorized to gain access by such means as Landlord shall elect and the cost of repairing any damage occurring in doing so shall be borne by Tenant and paid to Landlord within five (5) days of Landlord’s demand. Notwithstanding anything to the contrary in this Section 17.2, Landlord shall notify Tenant of Landlord’s entry as soon as is reasonably possible.

18.      DEFAULT.

          18.1          Except as otherwise provided in Article 20, the following events shall be deemed to be Events of Default under this Lease:

10/31/01 CALWEST TX MTIN
REVISED 6/9/2009
1800 10^th Street, Suite 100
DA-3031401 v4 0942826-00401 -10-

                         18.1.1     Tenant shall fail to pay when due any sum of money becoming due to be paid to Landlord under this Lease, whether such sum be any installment of the rent reserved by this Lease, any other amount treated as additional rent under this Lease, or any other payment or reimbursement to Landlord required by this Lease, whether or not treated as additional rent under this Lease, and such failure shall continue for a period of five (5) days after written notice that such payment was not made when due, but if any such notice shall be given, for the twelve (12) month period commencing with the date of such notice, the failure to pay within five (5) days after due any additional sum of money becoming due to be paid to Landlord under this Lease during such period shall be an Event of Default, without notice.

                         18.1.2     Tenant shall fail to comply with any term, provision or covenant of this Lease which is not provided for in another Section of this Article and shall not cure such failure within twenty (20) days (forthwith, if the failure involves a hazardous condition) after written notice of such failure to Tenant provided, however, that such failure shall not be an event of default if such failure could not reasonably be cured during such twenty (20) day period, Tenant has commenced the cure within such twenty (20) day period and thereafter is diligently pursuing such cure to completion, but the total aggregate cure period shall not exceed ninety (90) days.

                         18.1.3     Tenant shall fail to vacate the Premises immediately upon termination of this Lease, by lapse of time or otherwise, or upon termination of Tenant’s right to possession only.

                         18.1.4     Tenant shall become insolvent, admit in writing its inability to pay its debts generally as they become due, file a petition in bankruptcy or a petition to take advantage of any insolvency statute, make an assignment for the benefit of creditors, make a transfer in fraud of creditors, apply for or consent to the appointment of a receiver of itself or of the whole or any substantial part of its property, or file a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws, as now in effect or hereafter amended, or any other applicable law or statute of the United States or any state thereof.

                         18.1.5     A court of competent jurisdiction shall enter an order, judgment or decree adjudicating Tenant bankrupt, or appointing a receiver of Tenant, or of the whole or any substantial part of its property, without the consent of Tenant, or approving a petition filed against Tenant seeking reorganization or arrangement of Tenant under the bankruptcy laws of the United States, as now in effect or hereafter amended, or any state thereof, and such order, judgment or decree shall not be vacated or set aside or stayed within sixty (60) days from the date of entry thereof.

19.     REMEDIES.

          19.1        Except as otherwise provided in Article 20, upon the occurrence of any of the Events of Default described or referred to in Article 18, Landlord shall have the option to pursue any one or more of the following remedies without any notice or demand whatsoever, concurrently or consecutively and not alternatively:

                         19.1.1     Landlord may, at its election, terminate this Lease or terminate Tenant’s right to possession only, without terminating the Lease.

                         19.1.2     Upon any termination of this Lease, whether by lapse of time or otherwise, or upon any termination of Tenant’s right to possession without termination of the Lease, Tenant shall surrender possession and vacate the Premises immediately, and deliver possession thereof to Landlord, and Tenant hereby grants to Landlord full and free license to enter into and upon the Premises in such event and to repossess Landlord of the Premises as of Landlord’s former estate and to expel or remove Tenant and any others who may be occupying or be within the Premises and to remove Tenant’s signs and other evidence of tenancy and all other property of Tenant therefrom without being deemed in any manner guilty of trespass, eviction or forcible entry or detainer, and without incurring any liability for any damage resulting therefrom, Tenant waiving any right to claim damages for such re-entry and expulsion, and without relinquishing Landlord’s right to rent or any other right given to Landlord under this Lease or by operation of law.

                         19.1.3     Upon any termination of this Lease, whether by lapse of time or otherwise, Landlord shall be entitled to recover as damages, all rent, including any amounts treated as additional rent under this Lease,

10/31/01 CALWEST TX MTIN
REVISED 6/9/2009
1800 10^th Street, Suite 100
DA-3031401 v4 0942826-00401 -11-

and other sums due and payable by Tenant on the date of termination, plus as liquidated damages and not as a penalty, an amount equal to the sum of: (i) an amount equal to the then present value of the rent reserved in this Lease for the residue of the stated Term of this Lease including any amounts treated as additional rent under this Lease and all other sums provided in this Lease to be paid by Tenant, minus the fair rental value of the Premises for such residue; (ii) the value of the time and expense necessary to obtain a replacement tenant or tenants, and the estimated expenses described in Section 19.1.4 relating to recovery of the Premises, preparation for reletting and for reletting itself; and (iii) the cost of performing any other covenants which would have otherwise been performed by Tenant.

                         19.1.4     Upon any termination of Tenant’s right to possession only without termination of the Lease:

                                        19.1.4.1  Neither such termination of Tenant’s right to possession nor Landlord’s taking and holding possession thereof as provided in Section 19.1.2 shall terminate the Lease or release Tenant, in whole or in part, from any obligation, including Tenant’s obligation to pay the rent, including any amounts treated as additional rent, under this Lease for the full Term, and if Landlord so elects Tenant shall continue to pay to Landlord the entire amount of the rent as and when it becomes due, including any amounts treated as additional rent under this Lease, for the remainder of the Term plus any other sums provided in this Lease to be paid by Tenant for the remainder of the Term.

                                        19.1.4.2  Landlord shall use commercially reasonable efforts to relet the Premises or portions thereof to the extent required by applicable law. Landlord and Tenant agree that nevertheless Landlord shall at most be required to use only the same efforts Landlord then uses to lease premises in the Building generally and that in any case that Landlord shall not be required to give any preference or priority to the showing or leasing of the Premises or portions thereof over any other space that Landlord may be leasing or have available and may place a suitable prospective tenant in any such other space regardless of when such other space becomes available and that Landlord shall have the right to relet the Premises for a greater or lesser term than that remaining under this Lease, the right to relet only a portion of the Premises, or a portion of the Premises or the entire Premises as a part of a larger area, and the right to change the character or use of the Premises. In connection with or in preparation for any reletting, Landlord may, but shall not be required to, make repairs, alterations and additions in or to the Premises and redecorate the same to the extent Landlord deems necessary or desirable, and Tenant shall pay the cost thereof, together with Landlord’s expenses of reletting, including, without limitation, any commission incurred by Landlord, within five (5) days of Landlord’s demand. Landlord shall not be required to observe any instruction given by Tenant about any reletting or accept any tenant offered by Tenant unless such offered tenant has a credit-worthiness acceptable to Landlord and leases the entire Premises upon terms and conditions including a rate of rent (after giving effect to all expenditures by Landlord for tenant improvements, broker’s commissions and other leasing costs) all no less favorable to Landlord than as called for in this Lease, nor shall Landlord be required to make or permit any assignment or sublease for more than the current term or which Landlord would not be required to permit under the provisions of Article 9.

                                        19.1.4.3  Until such time as Landlord shall elect to terminate the Lease and shall thereupon be entitled to recover the amounts specified in such case in Section 19.1.3, Tenant shall pay to Landlord upon demand the full amount of all rent, including any amounts treated as additional rent under this Lease and other sums reserved in this Lease for the remaining Term, together with the costs of repairs, alterations, additions, redecorating and Landlord’s expenses of reletting and the collection of the rent accruing therefrom (including reasonable attorneys’ fees and broker’s commissions), as the same shall then be due or become due from time to time, less only such consideration as Landlord may have received from any reletting of the Premises; and Tenant agrees that Landlord may file suits from time to time to recover any sums falling due under this Article 19 as they become due. Any proceeds of reletting by Landlord in excess of the amount then owed by Tenant to Landlord from time to time shall be credited against Tenant’s future obligations under this Lease but shall not otherwise be refunded to Tenant or inure to Tenant’s benefit.

          19.2        Upon the occurrence of an Event of Default, Landlord may (but shall not be obligated to) cure such default at Tenant’s sole expense. Without limiting the generality of the foregoing, Landlord may, at Landlord’s option, enter into and upon the Premises if Landlord determines in its sole discretion that Tenant is not acting within

10/31/01 CALWEST TX MTIN
REVISED 6/9/2009
1800 10^th Street, Suite 100
DA-3031401 v4 0942826-00401 -12-

a commercially reasonable time to maintain, repair or replace anything for which Tenant is responsible under this Lease or to otherwise effect compliance with its obligations under this Lease and correct the same, without being deemed in any manner guilty of trespass, eviction or forcible entry and detainer and without incurring any liability for any damage or interruption of Tenant’s business resulting therefrom and Tenant agrees to reimburse Landlord within five (5) days of Landlord’s demand as additional rent, for any expenses which Landlord may incur in thus effecting compliance with Tenant’s obligations under this Lease, plus interest from the date of expenditure by Landlord at the Wall Street Journal prime rate.

          19.3        Tenant understands and agrees that in entering into this Lease, Landlord is relying upon receipt of all the Annual and Monthly Installments of Rent to become due with respect to all the Premises originally leased hereunder over the full Initial Term of this Lease for amortization, including interest at the Amortization Rate. For purposes hereof, the “Concession Amount” shall be defined as the aggregate of all amounts (i) forgone or expended by Landlord as free rent under the lease, (ii) under Exhibit B hereof for construction allowances (excluding therefrom any amounts expended by Landlord for Landlord’s Work, as defined in Exhibit B), and (iii) for brokers’ commissions payable by reason of this Lease (each of subsections (i), (ii) and (iii) being hereinafter referred to as a “Concession”). Accordingly, Tenant agrees that if this Lease or Tenant’s right to possession of the Premises leased hereunder shall be terminated as of any date (“Default Termination Date”) prior to the expiration of the full Initial Term hereof by reason of a default of Tenant, there shall be due and owing to Landlord as of the day prior to the Default Termination Date, as rent in addition to all other amounts owed by Tenant as of such Date, the amount (“Unamortized Amount”) of the Concession Amount determined as set forth below; provided, however, that in the event that such amounts are recovered by Landlord pursuant to any other provision of this Article 19, Landlord agrees that it shall not attempt to recover such amounts pursuant to this Section 19.3. For the purposes hereof, the “Unamortized Amount” shall be calculated by dividing (i) the Concession Amount plus interest accruing at the Amortization Rate and amortizing fully over the period commencing on the Commencement Date and ending on the last day of the Initial Term of this Lease, computed on the basis of a 365 day year, by (ii) the total number of days in the Initial Term of this Lease, then multiplying such quotient by (iii) the number of days in the period commencing on the Termination Date and ending on the last day of the Initial Term of this Lease. The foregoing provisions shall also apply to and upon any reduction of space in the Premises, as though such reduction were a termination for Tenant’s default, except that (i) the Unamortized Amount shall be reduced by any amounts paid by Tenant to Landlord to effectuate such reduction and (ii) the manner of application shall be that the Unamortized Amount shall first be determined as though for a full termination as of the Effective Date of the elimination of the portion, but then the amount so determined shall be multiplied by the fraction of which the numerator is the rentable square footage of the eliminated portion and the denominator is the rentable square footage of the Premises originally leased hereunder; and the amount thus obtained shall be the Unamortized Amount.

          19.4        If, on account of any breach or default by Tenant in Tenant’s obligations under the terms and conditions of this Lease, it shall become necessary or appropriate for Landlord to employ or consult with an attorney or collection agency concerning or to enforce or defend any of Landlord’s rights or remedies arising under this Lease or to collect any sums due from Tenant, Tenant agrees to pay all costs and fees so incurred by Landlord, including, without limitation, reasonable attorneys’ fees and costs. Tenant expressly waives any right to: (i) trial by jury; and (ii) service of any notice required by any present or future law or ordinance applicable to landlords or tenants but not required by the terms of this Lease.

          19.5        Pursuit of any of the foregoing remedies shall not preclude pursuit of any of the other remedies provided in this Lease or any other remedies provided by law (all such remedies being cumulative), nor shall pursuit of any remedy provided in this Lease constitute a forfeiture or waiver of any rent due to Landlord under this Lease or of any damages accruing to Landlord by reason of the violation of any of the terms, provisions and covenants contained in this Lease.

          19.6        No act or thing done by Landlord or its agents during the Term shall be deemed a termination of this Lease or an acceptance of the surrender of the Premises, and no agreement to terminate this Lease or accept a surrender of said Premises shall be valid, unless in writing signed by Landlord. No waiver by Landlord of any violation or breach of any of the terms, provisions and covenants contained in this Lease shall be deemed or construed to constitute a waiver of any other violation or breach of any of the terms, provisions and covenants contained in this Lease. Landlord’s acceptance of the payment of rental or other payments after the occurrence of an

10/31/01 CALWEST TX MTIN
REVISED 6/9/2009
1800 10^th Street, Suite 100
DA-3031401 v4 0942826-00401 -13-

Event of Default shall not be construed as a waiver of such Default, unless Landlord so notifies Tenant in writing. Forbearance by Landlord in enforcing one or more of the remedies provided in this Lease upon an Event of Default shall not be deemed or construed to constitute a waiver of such Default or of Landlord’s right to enforce any such remedies with respect to such Default or any subsequent Default.

          19.7        To secure the payment of all rentals and other sums of money becoming due from Tenant under this Lease, Landlord shall have and Tenant grants to Landlord a first lien upon the leasehold interest of Tenant under this Lease, which lien may be enforced in equity, and a continuing security interest upon all goods, wares, equipment, fixtures, furniture, inventory, accounts, contract rights, chattel paper and other personal property of Tenant situated on the Premises, and such property shall not be removed therefrom without the consent of Landlord until all arrearages in rent as well as any and all other sums of money then due to Landlord under this Lease shall first have been paid and discharged. Upon the occurrence of an Event of Default, Landlord shall have, in addition to any other remedies provided in this Lease or by law, all rights and remedies under the Uniform Commercial Code, including without limitation the right to sell the property described in this Section 19.7 at public or private sale upon five (5) days’ notice to Tenant. Tenant shall execute all such financing statements and other instruments as shall be deemed necessary or desirable in Landlord’s discretion to perfect the security interest hereby created.

          19.8        Any and all property which may be removed from the Premises by Landlord pursuant to the authority of this Lease or of law, to which Tenant is or may be entitled, may be handled, removed and/or stored, as the case may be, by or at the direction of Landlord but at the risk, cost and expense of Tenant, and Landlord shall in no event be responsible for the value, preservation or safekeeping thereof. Tenant shall pay to Landlord, upon demand, any and all expenses incurred in such removal and all storage charges against such property so long as the same shall be in Landlord’s possession or under Landlord’s control. Any such property of Tenant not retaken by Tenant from storage within thirty (30) days after removal from the Premises shall, at Landlord’s option, be deemed conveyed by Tenant to Landlord under this Lease as by a bill of sale without further payment or credit by Landlord to Tenant.

          19.9        If more than one (1) Event of Default occurs during the Term or any renewal thereof, Tenant’s renewal options, expansion options and rights of first offer and/or refusal, if any are provided for in this Lease, shall be null and void.

20.     TENANT’S BANKRUPTCY OR INSOLVENCY.

          20.1        If at any time and for so long as Tenant shall be subjected to the provisions of the United States Bankruptcy Code or other law of the United States or any state thereof for the protection of debtors as in effect at such time (each a “Debtor’s Law”):

                         20.1.1  Tenant, Tenant as debtor-in-possession, and any trustee or receiver of Tenant’s assets (each a “Tenant’s Representative”) shall have no greater right to assume or assign this Lease or any interest in this Lease, or to sublease any of the Premises than accorded to Tenant in Article 9, except to the extent Landlord shall be required to permit such assumption, assignment or sublease by the provisions of such Debtor’s Law. Without limitation of the generality of the foregoing, any right of any Tenant’s Representative to assume or assign this Lease or to sublease any of the Premises shall be subject to the conditions that:

                                     20.1.1.1  Such Debtor’s Law shall provide to Tenant’s Representative a right of assumption of this Lease which Tenant’s Representative shall have timely exercised and Tenant’s Representative shall have fully cured any default of Tenant under this Lease.

                                     20.1.1.2  Tenant’s Representative or the proposed assignee, as the case shall be, shall have deposited with Landlord as security for the timely payment of rent an amount equal to the larger of: (i) three (3) months’ rent and other monetary charges accruing under this Lease; and (ii) any sum specified in Article 5; and shall have provided Landlord with adequate other assurance of the future performance of the obligations of the Tenant under this Lease. Without limitation, such assurances shall include, at least, in the case of assumption of this Lease, demonstration to the satisfaction of the Landlord that Tenant’s Representative has and will continue to have sufficient unencumbered assets after the payment of all secured obligations and administrative

10/31/01 CALWEST TX MTIN
REVISED 6/9/2009
1800 10^th Street, Suite 100
DA-3031401 v4 0942826-00401 -14-

expenses to assure Landlord that Tenant’s Representative will have sufficient funds to fulfill the obligations of Tenant under this Lease; and, in the case of assignment, submission of current financial statements of the proposed assignee, audited by an independent certified public accountant reasonably acceptable to Landlord and showing a net worth and working capital in amounts determined by Landlord to be sufficient to assure the future performance by such assignee of all of the Tenant’s obligations under this Lease.

                                     20.1.1.3  The assumption or any contemplated assignment of this Lease or subleasing any part of the Premises, as shall be the case, will not breach any provision in any other lease, mortgage, financing agreement or other agreement by which Landlord is bound.

                                     20.1.1.4  Landlord shall have, or would have had absent the Debtor’s Law, no right under Article 9 to refuse consent to the proposed assignment or sublease by reason of the identity or nature of the proposed assignee or sublessee or the proposed use of the Premises concerned.

21.     QUIET ENJOYMENT. Landlord represents and warrants that it has full right and authority to enter into this Lease and that Tenant, while paying the rental and performing its other covenants and agreements contained in this Lease, shall peaceably and quietly have, hold and enjoy the Premises for the Term without hindrance or molestation from Landlord subject to the terms and provisions of this Lease. Landlord shall not be liable for any interference or disturbance by other tenants or third persons, nor shall Tenant be released from any of the obligations of this Lease because of such interference or disturbance.

22.     CASUALTY.

          22.1        In the event the Premises or the Building are damaged by fire or other cause and in Landlord’s reasonable estimation such damage can be materially restored within one hundred eighty (180) days, Landlord shall forthwith repair the same and this Lease shall remain in full force and effect, except that Tenant shall be entitled to a proportionate abatement in rent from the date of such damage. Such abatement of rent shall be made pro rata in accordance with the extent to which the damage and the making of such repairs shall interfere with the use and occupancy by Tenant of the Premises from time to time. Within forty-five (45) days from the date of such damage, Landlord shall notify Tenant, in writing, of Landlord’s reasonable estimation of the length of time within which material restoration can be made, and Landlord’s determination shall be binding on Tenant. For purposes of this Lease, the Building or Premises shall be deemed “materially restored” if they are in such condition as would not prevent or materially interfere with Tenant’s use of the Premises for the purpose for which it was being used immediately before such damage.

          22.2        If such repairs cannot, in Landlord’s reasonable estimation, be made within one hundred eighty (180) days, Landlord and Tenant shall each have the option of giving the other, at any time within ninety (90) days after such damage, notice terminating this Lease as of the date of such damage. In the event of the giving of such notice, this Lease shall expire and all interest of the Tenant in the Premises shall terminate as of the date of such damage as if such date had been originally fixed in this Lease for the expiration of the Term. In the event that neither Landlord nor Tenant exercises its option to terminate this Lease, then Landlord shall repair or restore such damage, this Lease continuing in full force and effect, and the rent hereunder shall be proportionately abated as provided in Section 22.1.

          22.3        Landlord shall not be required to repair or replace any damage or loss by or from fire or other cause to any panelings, decorations, partitions, additions, railings, ceilings, floor coverings, office fixtures or any other property or improvements installed on the Premises by, or belonging to, Tenant. Any insurance which may be carried by Landlord or Tenant against loss or damage to the Building or Premises shall be for the sole benefit of the party carrying such insurance and under its sole control.

          22.4        In the event that Landlord should fail to complete such repairs and material restoration within sixty (60) days after the date estimated by Landlord therefor as extended by this Section 22.4, Tenant may at its option and as its sole remedy terminate this Lease by delivering written notice to Landlord, within fifteen (15) days after the expiration of said period of time, whereupon the Lease shall end on the date of such notice or such later date fixed in such notice as if the date of such notice was the date originally fixed in this Lease for the expiration of

10/31/01 CALWEST TX MTIN
REVISED 6/9/2009
1800 10^th Street, Suite 100
DA-3031401 v4 0942826-00401 -15-

the Term; provided, however, that if construction is delayed because of changes, deletions or additions in construction requested by Tenant, strikes, lockouts, casualties, Acts of God, war, material or labor shortages, government regulation or control or other causes beyond the reasonable control of Landlord, the period for restoration, repair or rebuilding shall be extended for the amount of time Landlord is so delayed.

          22.5        Notwithstanding anything to the contrary contained in this Article: (i) Landlord shall not have any obligation whatsoever to repair, reconstruct, or restore the Premises when the damages resulting from any casualty covered by the provisions of this Article 22 occur during the last twelve (12) months of the Term or any extension thereof, but if Landlord determines not to repair such damages Landlord shall notify Tenant and if such damages shall render any material portion of the Premises untenantable Tenant shall have the right to terminate this Lease by notice to Landlord within fifteen (15) days after receipt of Landlord’s notice; and (ii) in the event the holder of any indebtedness secured by a mortgage or deed of trust covering the Premises or Building requires that any insurance proceeds be applied to such indebtedness, then Landlord shall have the right to terminate this Lease by delivering written notice of termination to Tenant within fifteen (15) days after such requirement is made by any such holder, whereupon this Lease shall end on the date of such damage as if the date of such damage were the date originally fixed in this Lease for the expiration of the Term.

          22.6        In the event of any damage or destruction to the Building or Premises by any peril covered by the provisions of this Article 22, it shall be Tenant’s responsibility to properly secure the Premises and upon notice from Landlord to remove forthwith, at its sole cost and expense, such portion of all of the property belonging to Tenant or its licensees from such portion or all of the Building or Premises as Landlord shall request.

23.     EMINENT DOMAIN. If all or any substantial part of the Premises shall be taken or appropriated by any public or quasi-public authority under the power of eminent domain, or conveyance in lieu of such appropriation, either party to this Lease shall have the right, at its option, of giving the other, at any time within thirty (30) days after such taking, notice terminating this Lease, except that Tenant may only terminate this Lease by reason of taking or appropriation, if such taking or appropriation shall be so substantial as to materially interfere with Tenant’s use and occupancy of the Premises. If neither party to this Lease shall so elect to terminate this Lease, the rental thereafter to be paid shall be adjusted on a fair and equitable basis under the circumstances. In addition to the rights of Landlord above, if any substantial part of the Building shall be taken or appropriated by any public or quasi-public authority under the power of eminent domain or conveyance in lieu thereof, and regardless of whether the Premises or any part thereof are so taken or appropriated, Landlord shall have the right, at its sole option, to terminate this Lease. Landlord shall be entitled to any and all income, rent, award, or any interest whatsoever in or upon any such sum, which may be paid or made in connection with any such public or quasi-public use or purpose, and Tenant hereby assigns to Landlord any interest it may have in or claim to all or any part of such sums, other than any separate award which may be made with respect to Tenant’s trade fixtures and moving expenses; Tenant shall make no claim for the value of any unexpired Term.

24.     SALE BY LANDLORD. In event of a sale or conveyance by Landlord of the Building, the same shall operate to release Landlord from any future liability upon any of the covenants or conditions, expressed or implied, contained in this Lease in favor of Tenant, and in such event Tenant agrees to look solely to the responsibility of the successor in interest of Landlord in and to this Lease. Except as set forth in this Article 24, this Lease shall not be affected by any such sale and Tenant agrees to attorn to the purchaser or assignee. If any security has been given by Tenant to secure the faithful performance of any of the covenants of this Lease, Landlord shall transfer or deliver said security, as such, to Landlord’s successor in interest and thereupon Landlord shall be discharged from any further liability with regard to said security.

25.     ESTOPPEL CERTIFICATES. Within ten (10) days following any written request which Landlord may make from time to time, Tenant shall execute and deliver to Landlord or mortgagee or prospective mortgagee a sworn statement certifying: (i) the date of commencement of this Lease; (ii) the fact that this Lease is unmodified and in full force and effect (or, if there have been modifications to this Lease, that this Lease is in full force and effect, as modified, and stating the date and nature of such modifications); (iii) the date to which the rent and other sums payable under this Lease have been paid; (iv) the fact that there are no current defaults under this Lease by either Landlord or Tenant except as specified in Tenant’s statement; and (v) such other matters as may be requested by Landlord. Landlord and Tenant intend that any statement delivered pursuant to this Article 25 may be relied

10/31/01 CALWEST TX MTIN
REVISED 6/9/2009
1800 10^th Street, Suite 100
DA-3031401 v4 0942826-00401 -16-

upon by any mortgagee, beneficiary or purchaser, and Tenant shall be liable for all loss, cost or expense resulting from the failure of any sale or funding of any loan caused by any material misstatement contained in such estoppel certificate. Tenant irrevocably agrees that if Tenant fails to execute and deliver such certificate within such ten (10) day period Landlord or Landlord’s beneficiary or agent may execute and deliver such certificate on Tenant’s behalf, and that such certificate shall be fully binding on Tenant.

26.     SURRENDER OF PREMISES.

          26.1        Tenant shall arrange to meet Landlord for two (2) joint inspections of the Premises as set forth in Exhibit E, the first to occur at least thirty (30) days (but no more than sixty (60) days) before the last day of the Term, and the second to occur not later than forty-eight (48) hours after Tenant has vacated the Premises as set forth in Exhibit E attached hereto and incorporated herein. In the event of Tenant’s failure to arrange such joint inspections and/or participate in either such inspection, Landlord’s inspection at or after Tenant’s vacating the Premises shall be conclusively deemed correct for purposes of determining Tenant’s responsibility for repairs and restoration.

          26.2        All alterations, additions, and improvements in, on, or to the Premises made or installed by or for Tenant, including carpeting (collectively, “Alterations”), shall be and remain the property of Tenant during the Term. Upon the expiration or sooner termination of the Term, all Alterations shall become a part of the realty and shall belong to Landlord without compensation, and title shall pass to Landlord under this Lease as by a bill of sale. At the end of the Term or any renewal of the Term or other sooner termination of this Lease, Tenant will peaceably deliver up to Landlord possession of the Premises, together with all Alterations by whomsoever made, in the same conditions received or first installed, broom clean and free of all debris, excepting only ordinary wear and tear and damage by fire or other casualty. Notwithstanding the foregoing, if Landlord elects by notice given to Tenant at least ten (10) days prior to expiration of the Term, Tenant shall, at Tenant’s sole cost, remove any Alterations, including carpeting, so designated by Landlord’s notice, and repair any damage caused by such removal. Tenant must, at Tenant’s sole cost, remove upon termination of this Lease, any and all of Tenant’s furniture, furnishings, movable partitions of less than full height from floor to ceiling and other trade fixtures and personal property (collectively, “Personalty”). Personalty not so removed shall be deemed abandoned by the Tenant and title to the same shall thereupon pass to Landlord under this Lease as by a bill of sale, but Tenant shall remain responsible for the cost of removal and disposal of such Personalty, as well as any damage caused by such removal. In lieu of requiring Tenant to remove Alterations and Personalty and repair the Premises as aforesaid, Landlord may, by written notice to Tenant delivered at least thirty (30) days before the Termination Date, require Tenant to pay to Landlord, as additional rent hereunder, the cost of such removal and repair in an amount reasonably estimated by Landlord.

          26.3        All obligations of Tenant under this Lease not fully performed as of the expiration or earlier termination of the Term shall survive the expiration or earlier termination of the Term Upon the expiration or earlier termination of the Term, Tenant shall pay to Landlord the amount, as estimated by Landlord, necessary to repair and restore the Premises as provided in this Lease and/or to discharge Tenant’s obligation for unpaid amounts due or to become due to Landlord. All such amounts shall be used and held by Landlord for payment of such obligations of Tenant, with Tenant being liable for any additional costs upon demand by Landlord, or with any excess to be returned to Tenant after all such obligations have been determined and satisfied. Any otherwise unused Security Deposit shall be credited against the amount payable by Tenant under this Lease.

27.     NOTICES. Any notice or document required or permitted to be delivered under this Lease shall be addressed to the intended recipient, by fully prepaid registered or certified United States Mail return receipt requested, or by reputable independent contract delivery service furnishing a written record of attempted or actual delivery, and shall be deemed to be delivered when tendered for delivery to the addressee at its address set forth on the Reference Pages, or at such other address as it has then last specified by written notice delivered in accordance with this Article 27, or if to Tenant at either its aforesaid address or its last known registered office or home of a general partner or individual owner, whether or not actually accepted or received by the addressee. Any such notice or document may also be personally delivered if a receipt is signed by and received from, the individual, if any, named in Tenant’s Notice Address.

10/31/01 CALWEST TX MTIN
REVISED 6/9/2009
1800 10^th Street, Suite 100
DA-3031401 v4 0942826-00401 -17-

28.      TAXES PAYABLE BY TENANT. In addition to rent and other charges to be paid by Tenant under this Lease, Tenant shall reimburse to Landlord, upon demand, any and all taxes payable by Landlord (other than net income taxes) whether or not now customary or within the contemplation of the parties to this Lease: (i) upon, allocable to, or measured by or on the gross or net rent payable under this Lease, including without limitation any gross income tax or excise tax levied by the State, any political subdivision thereof, or the Federal Government with respect to the receipt of such rent; (ii) upon or with respect to the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy of the Premises or any portion thereof, including any sales, use or service tax imposed as a result thereof; (iii) upon or measured by the Tenant’s gross receipts or payroll or the value of Tenant’s equipment, furniture, fixtures and other personal property of Tenant or leasehold improvements, alterations or additions located in the Premises; or (iv) upon this transaction or any document to which Tenant is a party creating or transferring any interest of Tenant in this Lease or the Premises. In addition to the foregoing, Tenant agrees to pay, before delinquency, any and all taxes levied or assessed against Tenant and which become payable during the term hereof upon Tenant’s equipment, furniture, fixtures and other personal property of Tenant located in the Premises.

29.      RELOCATION OF TENANT. Landlord, at its sole expense, on at least sixty (60) days prior written notice, may require Tenant to move from the Premises to other space of comparable size and decor in order to permit Landlord to consolidate the space leased to Tenant with other adjoining space leased or to be leased to another tenant. In the event of any such relocation, Landlord will pay all expenses of preparing and decorating the new premises so that they will be substantially similar to the Premises from which Tenant is moving, and Landlord will also pay the expense of moving Tenant’s furniture and equipment to the relocated premises. In such event this Lease and each and all of the terms and covenants and conditions hereof shall remain in full force and effect and thereupon be deemed applicable to such new space except that revised Reference Pages and a revised Exhibit A shall become part of this Lease and shall reflect the location of the new premises.

30.      DEFINED TERMS AND HEADINGS. The Article headings shown in this Lease are for convenience of reference and shall in no way define, increase, limit or describe the scope or intent of any provision of this Lease. Any indemnification or insurance of Landlord shall apply to and inure to the benefit of all the following “Landlord Entities”, being Landlord, Landlord’s investment manager, and the trustees, boards of directors, officers, general partners, beneficiaries, stockholders, employees and agents of each of them. Any option granted to Landlord shall also include or be exercisable by Landlord’s trustee, beneficiary, agents and employees, as the case may be. In any case where this Lease is signed by more than one person, the obligations under this Lease shall be joint and several. The terms “Tenant” and “Landlord” or any pronoun used in place thereof shall indicate and include the masculine or feminine, the singular or plural number, individuals, firms or corporations, and their and each of their respective successors, executors, administrators and permitted assigns, according to the context hereof. The term “rentable area” shall mean the rentable area of the Premises or the Building as calculated by the Landlord on the basis of the plans and specifications of the Building including a proportionate share of any common areas. Tenant hereby accepts and agrees to be bound by the figures for the rentable square footage of the Premises and Tenant’s Proportionate Share shown on the Reference Pages; however, Landlord may adjust either or both figures if there is manifest error, addition or subtraction to the Building or any business park or complex of which the Building is a part, remeasurement or other circumstance reasonably justifying adjustment. The term “Building” refers to the structure in which the Premises are located and the common areas (parking lots, sidewalks, landscaping, etc.) appurtenant thereto. If the Building is part of a larger complex of structures, the term “Building” may include the entire complex, where appropriate (such as shared Expenses or Taxes) and subject to Landlord’s reasonable discretion.

31.      TENANT’S AUTHORITY. If Tenant signs as a corporation, partnership, trust or other legal entity each of the persons executing this Lease on behalf of Tenant represents and warrants that Tenant has been and is qualified to do business in the state in which the Building is located, that the entity has full right and authority to enter into this Lease, and that all persons signing on behalf of the entity were authorized to do so by appropriate actions. Tenant agrees to deliver to Landlord, simultaneously with the delivery of this Lease, a corporate resolution, proof of due authorization by partners, opinion of counsel or other appropriate documentation reasonably acceptable to Landlord evidencing the due authorization of Tenant to enter into this Lease. Tenant hereby represents and warrants that neither Tenant, nor any persons or entities holding any legal or beneficial interest whatsoever in Tenant, are (i) the target of any sanctions program that is established by Executive Order of the President or published by the

10/31/01 CALWEST TX MTIN
REVISED 6/9/2009
1800 10^th Street, Suite 100
DA-3031401 v4 0942826-00401 -18-

Office of Foreign Assets Control, U.S. Department of the Treasury (“OFAC”); (ii) designated by the President or OFAC pursuant to the Trading with the Enemy Act, 50 U.S.C. App. § 5, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701-06, the Patriot Act, Public Law 107-56, Executive Order 13224 (September 23, 2001) or any Executive Order of the President issued pursuant to such statutes; or (iii) named on the following list that is published by OFAC: “List of Specially Designated Nationals and Blocked Persons.” If the foregoing representation is untrue at any time during the Term, an Event of Default will be deemed to have occurred, without the necessity of notice to Tenant.

32.      FINANCIAL STATEMENTS AND CREDIT REPORTS. At Landlord’s request, Tenant shall deliver to Landlord a copy, certified by an officer of Tenant as being a true and correct copy, of Tenant’s most recent audited financial statement, or, if unaudited, certified by Tenant’s chief financial officer as being true, complete and correct in all material respects. Tenant hereby authorizes Landlord to obtain one or more credit reports on Tenant at any time, and shall execute such further authorizations as Landlord may reasonably require in order to obtain a credit report.

33.      COMMISSIONS. Each of the parties represents and warrants to the other that it has not dealt with any broker or finder in connection with this Lease, except as described on the Reference Pages.

34.      TIME AND APPLICABLE LAW. Time is of the essence of this Lease and all of its provisions. This Lease shall in all respects be governed by the laws of the state in which the Building is located.

35.      SUCCESSORS AND ASSIGNS. Subject to the provisions of Article 9, the terms, covenants and conditions contained in this Lease shall be binding upon and inure to the benefit of the heirs, successors, executors, administrators and assigns of the parties to this Lease.

36.      ENTIRE AGREEMENT. This Lease, together with its exhibits, contains all agreements of the parties to this Lease and supersedes any previous negotiations. There have been no representations made by the Landlord or any of its representatives or understandings made between the parties other than those set forth in this Lease and its exhibits. This Lease may not be modified except by a written instrument duly executed by the parties to this Lease.

37.      EXAMINATION NOT OPTION. Submission of this Lease shall not be deemed to be a reservation of the Premises. Landlord shall not be bound by this Lease until it has received a copy of this Lease duly executed by Tenant and has delivered to Tenant a copy of this Lease duly executed by Landlord, and until such delivery Landlord reserves the right to exhibit and lease the Premises to other prospective tenants. Notwithstanding anything contained in this Lease to the contrary, Landlord may withhold delivery of possession of the Premises from Tenant until such time as Tenant has paid to Landlord any security deposit required by Article 5, the first month’s rent as set forth in Article 3 and any sum owed pursuant to this Lease.

38.      RECORDATION. Tenant shall not record or register this Lease or a short form memorandum hereof without the prior written consent of Landlord, and then shall pay all charges and taxes incident such recording or registration.

39.      LIMITATION OF LANDLORD’S LIABILITY. Redress for any claim against Landlord under this Lease shall be limited to and enforceable only against and to the extent of Landlord’s interest in the Building. The obligations of Landlord under this Lease are not intended to be and shall not be personally binding on, nor shall any resort be had to the private properties of, any of its or its investment manager’s trustees, directors, officers, partners, beneficiaries, members, stockholders, employees, or agents, and in no case shall Landlord be liable to Tenant hereunder for any lost profits, damage to business, or any form of special, indirect or consequential damages.

40.      RIGHT OF FIRST OFFER. Tenant shall have the right of first offer provided for on Exhibit G attached hereto and incorporated herein.

10/31/01 CALWEST TX MTIN
REVISED 6/9/2009
1800 10^th Street, Suite 100
DA-3031401 v4 0942826-00401 -19-

LANDLORD:			TENANT:
DEXUS INDUSTRIAL SPE FINANCED			SED INTERNATIONAL, INC., a Georgia
PORTFOLIO, LLC, a Delaware limited liability			corporation
company
			By:
By:	RREEF Management Company, a Delaware			Name: Mark DiVito
	corporation			Title: Vice President of Operations
	By:		Dated: ______________, 2009
		Name: Cynthia Prendergast
		Title: Vice President, District Manager
Dated:_____________, 2009

10/31/01 CALWEST TX MTIN
REVISED 6/9/2009
1800 10^th Street, Suite 100
DA-3031401 v4 0942826-00401 -20-

EXHIBIT A – FLOOR PLAN DEPICTING THE PREMISES
attached to and made a part of Lease bearing the
Lease Reference Date of June 10, 2009 between
DEXUS INDUSTRIAL SPE FINANCED PORTFOLIO, LLC, a Delaware limited liability company, as Landlord
and SED INTERNATIONAL, INC., a Georgia corporation, as Tenant

Exhibit A is intended only to show the general layout of the Premises as of the beginning of the Term of this Lease. It does not in any way supersede any of Landlord’s rights set forth in Article 17 with respect to arrangements and/or locations of public parts of the Building and changes in such arrangements and/or locations. It is not to be scaled; any measurements or distances shown should be taken as approximate.

10/31/01 CALWEST TX MTIN	A-1
REVISED 6/9/2009
1800 10th Street, Suite 100
DA-3031401 v4 0942826-00401		INITIAL HERE

EXHIBIT A-1 – SITE PLAN
attached to and made a part of Lease bearing the
Lease Reference Date of June 10, 2009 between
DEXUS INDUSTRIAL SPE FINANCED PORTFOLIO, LLC, a Delaware limited liability company, as Landlord
and SED INTERNATIONAL, INC., a Georgia corporation, as Tenant

Exhibit A-1 is intended only to show the general location of the Premises as of the beginning of the Term of this Lease. It does not in any way supersede any of Landlord’s rights set forth in Article 17 with respect to arrangements and/or locations of public parts of the Building and changes in such arrangements and/or locations. It is not to be scaled; any measurements or distances shown should be taken as approximate.

10/31/01 CALWEST TX MTIN	A-1-1
REVISED 6/9/2009
1800 10th Street, Suite 100
DA-3031401 v4 0942826-00401		INITIAL HERE

EXHIBIT B – INITIAL ALTERATIONS
attached to and made a part of Lease bearing the
Lease Reference Date of June 10, 2009 between
DEXUS INDUSTRIAL SPE FINANCED PORTFOLIO, LLC, a Delaware limited liability company, as Landlord
and SED INTERNATIONAL, INC., a Georgia corporation, as Tenant

Tenant shall take the Premises in its “as-is” condition, except for certain improvements to the Premises (the “Leasehold Improvements”) which shall be completed in accordance with the terms of this Exhibit B.

Landlord shall deliver all heating and air conditioning systems and equipment serving the Premises in good working order.

Tenant agrees to submit to Landlord a list of Leasehold Improvements and other costs associated with the occupancy and use by Tenant for Landlord’s approval. The plans and specifications including all changes required by Landlord shall be referred to herein as the “Approved Plans”. Both Landlord and Tenant agree that this Lease shall be executed subject to satisfactory approval of the Approved Plans by Landlord and Tenant within five (5) business days from signature of this Lease.

Tenant shall complete the Leasehold Improvements by using either Landlord’s contractor or a contractor reasonably approved by Landlord to install or construct the Leasehold Improvements in accordance with the Approved Plans. Landlord agrees to provide Tenant an allowance equal to $2.00 per square foot ($51,038.00) (the “Improvement Allowance”), which allowance is to be used solely for the completion of the Leasehold Improvements and satisfaction of any architectural fees per the Approved Plans and specifications. The Improvement Allowance may also be used by Tenant for cabling, wiring, signage and moving costs. Use of the Improvement Allowance is expressly conditioned upon completion of all the Leasehold Improvements in accordance with the Approved Plans. Tenant shall be liable for any additional costs over the Improvement Allowance to complete the Leasehold Improvements in accordance with the Approved Plans. Any amount of the Improvement Allowance not used by Tenant shall be forfeited. Landlord shall reimburse Tenant for the Leasehold Improvements up to the amount of the Improvement Allowance within forty-five (45) days of Tenant’s submission to Landlord of invoices satisfactory to Landlord aggregating the amount of the request and paid by Tenant in connection with the Leasehold Improvements together with documentation satisfactory to Landlord evidencing completion of the Leasehold Improvements, including, without limitation, appropriate lien waivers.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

10/31/01 CALWEST TX MTIN	B-1
REVISED 6/9/2009
1800 10th Street, Suite 100
DA-3031401 v4 0942826-00401		INITIAL HERE

EXHIBIT C – COMMENCEMENT DATE MEMORANDUM
attached to and made a part of Lease bearing the
Lease Reference Date of June 10, 2009 between
DEXUS INDUSTRIAL SPE FINANCED PORTFOLIO, LLC, a Delaware limited liability company, as Landlord
and SED INTERNATIONAL, INC., a Georgia corporation, as Tenant

COMMENCEMENT DATE MEMORANDUM

[INTENTIONALLY DELETED]

10/31/01 CALWEST TX MTIN	C-1
REVISED 6/9/2009
1800 10th Street, Suite 100
DA-3031401 v4 0942826-00401		INITIAL HERE

EXHIBIT D – RULES AND REGULATIONS
attached to and made a part of Lease bearing the
Lease Reference Date of June 10, 2009 between
DEXUS INDUSTRIAL SPE FINANCED PORTFOLIO, LLC, a Delaware limited liability company, as Landlord
and SED INTERNATIONAL, INC., a Georgia corporation, as Tenant

1.	No sign, placard, picture, advertisement, name or notice (collectively referred to as “Signs”) shall be installed or displayed on any part of the outside of the Building without the prior written consent of the Landlord which consent shall be in Landlord’s sole discretion. All approved Signs shall be printed, painted, affixed or inscribed at Tenant’s expense by a person or vendor approved by Landlord and shall be removed by Tenant at Tenant’s expense upon vacating the Premises. Landlord shall have the right to remove any Sign installed or displayed in violation of this rule at Tenant’s expense and without notice.
2.	If Landlord objects in writing to any curtains, blinds, shades or screens attached to or hung in or used in connection with any window or door of the Premises or Building, Tenant shall immediately discontinue such use. No awning shall be permitted on any part of the Premises. Tenant shall not place anything or allow anything to be placed against or near any glass partitions or doors or windows which may appear unsightly, in the opinion of Landlord, from outside the Premises.
3.	Tenant shall not alter any lock or other access device or install a new or additional lock or access device or bolt on any door of its Premises without the prior written consent of Landlord. Tenant, upon the termination of its tenancy, shall deliver to Landlord the keys or other means of access to all doors.
4.	If Tenant requires telephone, data, burglar alarm or similar service, the cost of purchasing, installing and maintaining such service shall be borne solely by Tenant. No boring or cutting for wires will be allowed without the prior written consent of Landlord. Landlord shall direct electricians as to where and how telephone, data, and electrical wires are to be introduced or installed. The location of burglar alarms, telephones, call boxes or other office equipment affixed to the Premises shall be subject to the prior written approval of Landlord.
5.	Tenant shall not place a load upon any floor of its Premises, including mezzanine area, if any, which exceeds the load per square foot that such floor was designed to carry and that is allowed by law. Heavy objects shall stand on such platforms as determined by Landlord to be necessary to properly distribute the weight. Landlord will not be responsible for loss of or damage to any such equipment or other property from any cause, and all damage done to the Building by maintaining or moving such equipment or other property shall be repaired at the expense of Tenant.
6.	Tenant shall not install any radio or television antenna, satellite dish, loudspeaker or other device on the roof or exterior walls of the Building without Landlord’s prior written consent which consent shall be in Landlord’s sole discretion.
7.	Tenant shall not mark, drive nails, screw or drill into the partitions, woodwork, plaster or drywall (except for pictures and general office uses) or in any way deface the Premises or any part thereof. Tenant shall not affix any floor covering to the floor of the Premises or paint or seal any floors in any manner except as approved by Landlord. Tenant shall repair any damage resulting from noncompliance with this rule.
8.	No cooking shall be done or permitted on the Premises, except that Underwriters’ Laboratory approved microwave ovens or equipment for brewing coffee, tea, hot chocolate and similar beverages shall be permitted, provided that such equipment and use is in accordance with all applicable federal, state and city laws, codes, ordinances, rules and regulations.
9.	Tenant shall not use any hand trucks except those equipped with the rubber tires and side guards, and may use such other material-handling equipment as Landlord may approve. Tenant shall not bring any other

10/31/01 CALWEST TX MTIN	D-1
REVISED 6/9/2009
1800 10th Street, Suite 100
DA-3031401 v4 0942826-00401		INITIAL HERE

	vehicles of any kind into the Building. Forklifts which operate on asphalt areas shall only use tires that do not damage the asphalt.
10.	Tenant shall not use the name of the Building or any photograph or other likeness of the Building in connection with or in promoting or advertising Tenant’s business except that Tenant may include the Building name in Tenant’s address. Landlord shall have the right, exercisable without notice and without liability to any tenant, to change the name and address of the Building.
11.	All trash and refuse shall be contained in suitable receptacles at locations approved by Landlord. Tenant shall not place in the trash receptacles any personal trash or material that cannot be disposed of in the ordinary and customary manner of removing such trash without violation of any law or ordinance governing such disposal.
12.	Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any governing authority.
13.	Tenant assumes all responsibility for securing and protecting its Premises and its contents including keeping doors locked and other means of entry to the Premises closed.
14.	Tenant shall not use any method of heating or air conditioning other than that supplied by Landlord without Landlord’s prior written consent.
15.	No person shall go on the roof without Landlord’s permission, with the exception of the heating and air conditioning systems and equipment maintenance contractor.
16.	Tenant shall not permit any animals, other than seeing-eye dogs, to be brought or kept in or about the Premises or any common area of the property.
17.	Tenant shall not permit any motor vehicles to be washed or mechanical work or maintenance of motor vehicles to be performed on any portion of the Premises or parking lot.
18.	These Rules and Regulations are in addition to, and shall not be construed to in any way modify or amend, in whole or in part, the terms, covenants, agreements and conditions of any lease of any premises in the Building. Landlord may waive any one or more of these Rules and Regulations for the benefit of any tenant or tenants, and any such waiver by Landlord shall not be construed as a waiver of such Rules and Regulations for any or all tenants.
19.	Landlord reserves the right to make such other and reasonable rules and regulations as in its judgment may from time to time be needed for safety and security, for care and cleanliness of the Building and for the preservation of good order in and about the Building. Tenant agrees to abide by all such rules and regulations herein stated and any additional rules and regulations which are adopted. Tenant shall be responsible for the observance of all of the foregoing rules by Tenant’s employees, agents, clients, customers, invitees and guests.
20.	Any toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown into them. The expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the tenant who, or whose employees or invitees, shall have caused it.
21.	Tenant shall not permit smoking or carrying of lighted cigarettes or cigars in areas reasonably designated by Landlord or any applicable governmental agencies as non-smoking areas.

10/31/01 CALWEST TX MTIN	D-2
REVISED 6/9/2009
1800 10th Street, Suite 100
DA-3031401 v4 0942826-00401		INITIAL HERE

22.	Any directory of the Building or project of which the Building is a part (“Project Area”), if provided, will be exclusively for the display of the name and location of tenants only and Landlord reserves the right to charge for the use thereof and to exclude any other names.
23.	Canvassing, soliciting, distribution of handbills or any other written material in the Building or Project Area is prohibited and each tenant shall cooperate to prevent the same. No tenant shall solicit business from other tenants or permit the sale of any goods or merchandise in the Building or Project Area without the written consent of Landlord.
24.	Any equipment belonging to Tenant which causes noise or vibration that may be transmitted to the structure of the Building or to any space therein to such a degree as to be objectionable to Landlord or to any tenants in the Building shall be placed and maintained by Tenant, at Tenant’s expense, on vibration eliminators or other devices sufficient to eliminate the noise or vibration.
25.	Driveways, sidewalks, halls, passages, exits, entrances and stairways (“Access Areas”) shall not be obstructed by tenants or used by tenants for any purpose other than for ingress to and egress from their respective premises. Access areas are not for the use of the general public and Landlord shall in all cases retain the right to control and prevent access thereto by all persons whose presence, in the judgment of Landlord, shall be prejudicial to the safety, character, reputation and interests of the Building or its tenants.
26.	Landlord reserves the right to designate the use of parking areas and spaces. Tenant shall not park in visitor, reserved, or unauthorized parking areas. Tenant and Tenant’s guests shall park between designated parking lines only and shall not park motor vehicles in those areas designated by Landlord for loading and unloading. Vehicles in violation of the above shall be subject to being towed at the vehicle owner’s expense. Vehicles parked overnight without prior written consent of the Landlord shall be deemed abandoned and shall be subject to being towed at vehicle owner’s expense. Tenant will from time to time, upon the request of Landlord, supply Landlord with a list of license plate numbers of vehicles owned or operated by its employees or agents.
27.	No trucks, tractors or similar vehicles can be parked anywhere other than in Tenant’s own truck dock area. Tractor-trailers which must be unhooked or parked with dolly wheels beyond the concrete loading areas must use steel plates or wood blocks under the dolly wheels to prevent damage to the asphalt paving surfaces. No parking or storing of such trailers will be permitted in the parking areas or on streets adjacent thereto.
28.	During periods of loading and unloading, Tenant shall not unreasonably interfere with traffic flow and loading and unloading areas of other tenants. All products, materials or goods must be stored within the Tenant’s Premises and not in any exterior areas, including, but not limited to, exterior dock platforms, against the exterior of the Building, parking areas and driveway areas. Tenant agrees to keep the exterior of the Premises clean and free of nails, wood, pallets, packing materials, barrels and any other debris produced from their operation.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

10/31/01 CALWEST TX MTIN	D-3
REVISED 6/9/2009
1800 10th Street, Suite 100
DA-3031401 v4 0942826-00401		INITIAL HERE

EXHIBIT E – ADDITIONAL SURRENDER CONDITIONS
attached to and made a part of Lease bearing the
Lease Reference Date of June 10, 2009 between
DEXUS INDUSTRIAL SPE FINANCED PORTFOLIO, LLC, a Delaware limited liability company, as Landlord
and SED INTERNATIONAL, INC., a Georgia corporation, as Tenant

          Prior to vacating the Premises, it must be left in good, clean condition with all systems in good working order. The items that will be inspected by Landlord are listed below, but are not limited to the following:

1.	Service and repair all heating and air conditioning equipment, exhaust fans and hot water heater. Provide Landlord’s office with a copy of the inspection and service report provided by the mechanical contractor.
2.	All lights in the office and warehouse must be working. Relamp and/or reballast the fixtures as necessary.
3.	Overhead doors must be serviced and repaired.
4.	All exterior metal doors, including hardware should be serviced or replaced as necessary.
5.	Repair all damaged sheetrock in the office area and in the warehouse along the demising walls.
6.	Office and warehouse floors should be left in good, clean condition.
7.	Fire sprinkler system (if available) must have a current year inspection.
8.	Any exterior signage must be removed; repair and repaint the fascia as necessary.
9.	All data cabling must be removed and any damage caused by such removal shall be repaired as necessary.

          If the Tenant elects not to do any of the above, please note that the Landlord will have the necessary repairs made and deduct the expenses from the Security Deposit.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

10/31/01 CALWEST TX MTIN	E-1
REVISED 6/9/2009
1800 10th Street, Suite 100
DA-3031401 v4 0942826-00401		INITIAL HERE

EXHIBIT F – RENEWAL OPTION
attached to and made a part of Lease bearing the
Lease Reference Date of June 10, 2009 between
DEXUS INDUSTRIAL SPE FINANCED PORTFOLIO, LLC, a Delaware limited liability company, as Landlord
and SED INTERNATIONAL, INC., a Georgia corporation, as Tenant

          Tenant shall, provided the Lease is in full force and effect and Tenant is not in default under any of the terms and conditions of the Lease at the time of notification or commencement, have one (1) option to renew this Lease for a term of five (5) years, for the portion of the Premises being leased by Tenant as of the date the renewal term is to commence, on the same terms and conditions set forth in the Lease, except as modified by the terms, covenants and conditions as set forth below:

          a. If Tenant elects to exercise said option, then Tenant shall provide Landlord with written notice no earlier than twelve (12) months prior to the expiration of the initial term of this Lease but no later than eight (8) months prior to the expiration of the initial term of this Lease. If Tenant fails to timely provide such notice, Tenant shall have no further or additional right to extend or renew the term of the Lease.

          b. The Annual Rent and Monthly Installment of Rent in effect at the expiration of the then current term of the Lease shall be adjusted to reflect the current fair market rental for comparable space in the Building and in other similar buildings in the same rental market as of the date the renewal term is to commence, as established by mutual agreement of Tenant and Landlord. Tenant and Landlord hereby agree to negotiate with each other in good faith to establish a mutually agreeable fair market rental rate within sixty (60) days after Landlord’s receipt of Tenant’s written request therefor. If the parties are unable to mutually agree on a fair market value rental rate after good faith negotiations within the period required by the immediately preceding sentence, then Tenant shall have no further or additional right to extend the term of the Lease.

          c. This option is not transferable; the parties hereto acknowledge and agree that they intend that the aforesaid option to renew this Lease shall be “personal” to Tenant as set forth above and that in no event will any assignee or sublessee have any rights to exercise the aforesaid option to renew.

          d. Upon exercise of the renewal option Tenant shall have no further right to extend the term of the Lease.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

10/31/01 CALWEST TX MTIN	F-1
REVISED 6/9/2009
1800 10th Street, Suite 100
DA-3031401 v4 0942826-00401		INITIAL HERE

EXHIBIT G – RIGHT OF FIRST OFFER
attached to and made a part of Lease bearing the
Lease Reference Date of June 10, 2009 between
DEXUS INDUSTRIAL SPE FINANCED PORTFOLIO, LLC, a Delaware limited liability company, as Landlord
and SED INTERNATIONAL, INC., a Georgia corporation, as Tenant

          Provided Tenant is not then in default under the terms, covenants and conditions of the Lease, and subject to the rights of any other prior tenants in the Building, Tenant shall have the one-time right to lease any space in the Building (the “Expansion Premises”) at such time as the Expansion Premises is vacated by the prior tenant. In such event, Landlord shall give written notice to Tenant of the availability of the Expansion Premises and the monetary terms and conditions on which Landlord intends to offer it to the public and Tenant shall have a period of ten (10) days in which to exercise Tenant’s right to lease the entire Expansion Premises pursuant to the terms and conditions contained herein and in Landlord’s notice, failing which Landlord may lease the Expansion Premises to any third party on whatever basis Landlord desires, and Tenant shall have no further rights with respect to the Expansion Premises or any other space in the Building. If Tenant exercises the expansion option hereunder, (i) Tenant shall have no further rights with respect to any other space in the Building, and, (ii) effective as of the date Landlord delivers the Expansion Premises, the Expansion Premises shall automatically be included within the Premises and subject to all the terms and conditions of the Lease, except as set forth in Landlord’s notice and as follows:

a.	Tenant’s Proportionate Share shall be recalculated, using the total square footage of the Premises, as increased by the Expansion Premises.
b.	Landlord shall have no obligation to improve the Expansion Premises or grant Tenant any improvement allowance thereon; provided, that the Landlord shall provide the Expansion Premises to Tenant in the same condition as Tenant is obligated to surrender the Premises to Landlord upon the expiration or earlier termination of this Lease, as specified in Exhibit E above.
c.	If requested by Landlord, Tenant shall, prior to the beginning of the term for the Expansion Premises, execute a written memorandum confirming the inclusion of the Expansion Premises and the Annual Rent for the Expansion Premises.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

10/31/01 CALWEST TX MTIN	G-1
REVISED 6/9/2009
1800 10th Street, Suite 100
DA-3031401 v4 0942826-00401		INITIAL HERE

EX-10.72

Exhibit 10.72

SECOND AMENDMENT TO LEASE AGREEMENT

          SECOND AMENDMENT TO LEASE AGREEMENT dated as of this 6 day of August, 2009 by Diamond Chip Group, L.L.C., a limited liability company organized under the laws of the state of Georgia (“Landlord”) and SED International, Inc., a corporation organized under the laws of the state of Georgia (“Tenant”). Collectively, the Landlord and Tenant are referred to hereinafter as the “Parties”.

WITNESSETH:

          WHEREAS, Landlord and Tenant entered into that certain lease agreement, dated April 1, 1999, as amended on September 19, 2005 (the “Lease”) for the use and occupancy of the Premises located at 4916 North Royal Atlanta Drive, Tucker, Georgia 30084;

          WHEREAS, the Term of the Lease will expire at midnight on September 30, 2009 unless the Parties to extend the Term;

          WHEREAS, the Parties wish to extend the Term of the Lease for an additional two (2) year period beginning on October 1, 2009 and ending at midnight September 30, 2011, reduce the Base Annual Rent by $43,000 per annum during such extension period and make certain modifications to the Lease;

          NOW, THEREFORE, in consideration of the sum of ten dollars ($10.00) paid by Tenant to Landlord, the receipt and sufficiency of which are hereby acknowledged and for other good and valuable consideration, the Parties hereto agree as follows:

          1.     Capitalized terms. Capitalized terms used but not defined herein shall have the same meaning ascribed to them in the Lease.

          2.     Term. Section 1.01 of the Lease is hereby amended and as amended shall read as follows:

1.01. Term. The “Term” of this Lease begins on the Lease Date specified above and ends at midnight on September 30, 2011.

          3.     Base Rent. Section 3.01(b) of the Lease is hereby amended to read as follows:

(b) The Base Annual Rent during each Lease Year beginning on October 1, 2009 through the end of the Term shall be $287,895.00, which amount shall not be subject to Consumer Price Index or other adjustment. ‘Base Annual Rent” means the minimum rent due during each Lease Year of the Term.

          4.     Landlord’s Rights on Default. The last sentence of Section 9.02(h) of the Lease is hereby amended to read:

“Tenant agrees that that Landlord shall not be liable for any damages resulting to Tenant from effecting compliance with Tenant’s obligations under this section except where caused by the Landlord’s negligence or willful misconduct.”

          5.     Notices and Services. Sections 12.09(a) and (a)(i) of the Lease is hereby amended to read as follows:

12.09. Notices and Services.

(a) All notices, requests, demands and other communications permitted or required hereunder shall be in writing and shall be deemed to have been duly given: (i) on the date of delivery, if delivered personally, by facsimile or electronic mail; (ii) the next business day, if delivered by overnight courier; and (iii), on the third calendar day subsequent to the postmark date thereof, if mailed, by United States certified or registered mail, postage prepaid, to the party to which the same is directed at the following addresses, or at such

1

other addresses as shall be given in writing by the parties to one another:

(i)	If to Tenant, at:	SED International, Inc.
		4916 North Royal Atlanta Drive
		Tucker, Georgia 30084
		Attention: Chief Executive Officer
		Facsimile: (770) 243-1196
		Email: bgay@SEDintl.com
	With a copy to:	Morse Zelnick Rose & Lander, LLP
		405 Park Avenue, Suite 1401
		New York, New York 10022
		Attention: Stephen A. Zelnick, Esq.
		Facsimile: (212) 838-9190
		Email: szelnick@mzrl.com

          5.     Section 12.25, Extension Options, is hereby deleted in its entirely and be replaced with “[INTENTIONALLY OMITTED]”.

          6.     Other Provisions of the Lease. Except as otherwise provided herein, all other provisions of the Lease shall remain in full force and effect and Tenant’s use and occupancy of the Premises shall continue on the terms described therein for the Term of the Lease, as amended hereby.

          IN WITNESS WHEREOF, the Parties have duly executed and delivered this Second Amendment to Lease Agreement as of the day and year first indicated above.

DIAMOND CHIP GROUP L.L.C.	SED INTERNATIONAL, INC.
BY:	By:
Manager	Chief Executive Officer

2

EX-10.73

Exhibit 10.73

September ___, 2009

SED International, Inc.
4916 North Royal Atlanta Drive
Tucker, Georgia 30084
Attention: CEO and CFO

          Re:          Amendment to Loan Agreement (as defined below)

Ladies and Gentlemen:

          Reference is made to that certain Loan and Security Agreement dated September 21, 2005 (as at any time amended, restated, supplemented or otherwise modified, the “Loan Agreement”) among SED International Holdings, Inc., a Georgia corporation (“Holdings”); SED International, Inc., a Georgia corporation (“SED”; together with Holdings, collectively, “Borrowers” and each individually, a “Borrower”); certain financial institutions party from time to time to the Loan Agreement as lenders (collectively, “Lenders”); and Wachovia Bank, National Association, a national banking association, in its capacity as agent for Lenders (together with its successors in such capacity, “Agent”). Capitalized terms used herein, unless otherwise defined herein, shall have the meaning ascribed to such terms in the Loan Agreement.

          The parties hereto desire to amend the Loan Agreement as hereinafter set forth.

          NOW, THEREFORE, for TEN DOLLARS ($10.00) in hand paid and other good and valuable consideration, the receipt and sufficiency of which are hereby severally acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:

          1.     Amendment to Loan Agreement. The Loan Agreement is hereby amended by deleting the definition of “Financial Covenant Trigger Amount” contained in Section 1 of the Loan Agreement and by substituting the following new definition in lieu thereof:

        1.54 “Financial Covenant Trigger Amount” shall mean, on any date of determination, an amount equal to the greater of (a) $3,500,000, and (b) an amount equal to ten percent (10%) of the Borrowing Base on such date.

          2.     Ratification and Reaffirmation. Each Borrower hereby ratifies and reaffirms the Indebtedness, each of the Financing Agreements to which such Borrower is a party and all of such Borrower’s covenants, duties, indebtedness and liabilities under the Financing Agreements.

          3.     Acknowledgments and Stipulations. Each Borrower hereby acknowledges and stipulates that the Loan Agreement and the other Financing Agreements executed by such Borrower are legal, valid and binding obligations of such Borrower that are enforceable against such Borrower in accordance with the terms thereof, except as the enforceability thereof may be limited by bankruptcy, insolvency or other similar laws of general application affecting the enforcement of creditors’ rights; all of the Indebtedness is owing and payable without defense, offset or counterclaim (and to the extent there exists any such defense, offset or counterclaim on the date hereof, the same is hereby waived by such Borrower); and the security interests and liens granted by such Borrower in favor of Agent pursuant to the

SED International, Inc.
September ___, 2009
Page 2

Loan Agreement and the other Security Documents are duly perfected, first priority security interests and liens.

          4.     Representations and Warranties. To induce Agent to enter into this letter amendment, each Borrower represents and warrants to Agent that no default or Event of Default exists on the date hereof; the execution, delivery and performance of this letter amendment have been duly authorized by all requisite action on the part of such Borrower and this letter amendment has been duly executed and delivered by such Borrower; and except as may have been disclosed in writing by such Borrower to Agent prior to the date hereof, all of the representations and warranties made by such Borrower in the Loan Agreement are true and correct on and as of the date hereof.

          5.     No Novation, etc. Except as otherwise expressly provided in this letter amendment, nothing herein shall be deemed to amend or modify any provision of the Loan Agreement or any of the other Financing Agreements, each of which shall remain in full force and effect. This letter amendment is not intended to be, nor shall it be construed to create, a novation or accord and satisfaction, and the Loan Agreement as herein modified shall continue in full force and effect.

          6.     Miscellaneous. Upon Agent’s receipt from each Borrower of a counterpart hereof duly executed on behalf of such Borrower, this letter amendment shall constitute an agreement among the parties hereto with respect to the amendment contained herein. This letter amendment shall be governed by and construed in accordance with the internal laws of the State of Georgia and shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. This letter amendment may be executed in any number of counterparts and by different parties to this letter amendment on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement. Any manually executed signature delivered by a party by facsimile or other electronic transmission shall be deemed to be an original signature hereto. To the fullest extent permitted by applicable law, each of the parties hereto each hereby waives the right to trial by jury in any action, suit, counterclaim or proceeding arising out of or related to this letter amendment.

[Remainder of page intentionally left blank; Signatures begin on following page.]

          IN WITNESS WHEREOF, the parties hereto have caused this letter amendment to be duly executed and delivered by their respective duly authorized officers on the date first written above.

WACHOVIA BANK,

NATIONAL ASSOCIATION,

as Agent and sole Lender

By: 

Name: 

Title: 

Accepted and agreed to:

BORROWERS:

SED INTERNATIONAL HOLDINGS, INC.

By: 

Name: 

Title: 

SED INTERNATIONAL, INC.

By: 

Name: 

Title: 

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Jean Diamond, certify that:
1.	I have reviewed this annual report on Form 10-K of SED International Holdings, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:
		a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
		b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
		c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
		d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
		a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
		b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 24, 2009

Jean Diamond

Chief Executive Officer

(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Lyle Dickler, certify that:
1.	I have reviewed this annual report on Form 10-K of SED International Holdings, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:
		a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
		b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
		c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
		d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
		a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
		b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 24, 2009

Lyle Dickler

Chief Financial Officer

(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

          In connection with the Annual Report of SED International Holdings, Inc. (the “Company”) on Form 10-K for the fiscal year ended June 30, 2009 as filed with the Securities and Exchange Commission (“SEC”) on the date hereof (the “Report”), I, Jean Diamond, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

          (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

          (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

     A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.

Dated: September 24, 2009

/s/ Jean Diamond

Jean Diamond

Chief Executive Officer

(Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Annual Report of SED International Holdings, Inc. (the “Company”) on Form 10-K for the fiscal year ended June 30, 2009 as filed with the Securities and Exchange Commission (“SEC”) on the date hereof (the “Report”), I, Lyle Dickler, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

          (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

          (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

     A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.

Dated: September 24, 2009

/s/ Lyle Dickler

Lyle Dickler

Chief Financial Officer

(Principal Financial Officer)