<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[_] 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 0-21399
PEERLESS GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 75-2275966
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1212 EAST ARAPAHO ROAD
RICHARDSON, TEXAS 75081
(972) 497-5500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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 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 [_]
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. [_]
On February 28, 1997, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $22,694,890 (based on the average of the
reported high and low sales prices on such date as reported by NASDAQ). For
purposes of determination of the above stated amount, only directors,
executive officers and 10% or greater stockholders have been deemed
affiliates.
As of February 28, 1997, there were 4,694,982 outstanding shares of Common
Stock, $0.01 par value per share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the Annual Meeting of
Stockholders of Peerless Group, Inc. to be held during 1997 are incorporated
by reference into Part III of this Form 10-K.
<PAGE>
PART I
ITEM 1. BUSINESS
General
Peerless Group, Inc. (the "Company") designs, develops, installs and
supports integrated information systems, including proprietary computer
software and third-party software and hardware, for community banks and credit
unions. The Company was incorporated in 1989 when a group of management
executives from Electronic Data Systems Corporation ("EDS") purchased EDS's
turnkey community bank data processing systems division, which EDS had
acquired in 1980. In 1992, the Company acquired and began offering a credit
union information software system. In 1994, the Company began marketing a
check and statement imaging system that is fully integrated with
Peerless21(R), the Company's flagship banking product. In September 1996, the
Company began an outsourcing service bureau. On October 3, 1996, the Company
completed an initial public offering of its Common Stock, resulting in the
issuance of 2,440,000 shares and net proceeds to the Company of approximately
$10.1 million.
The Company was incorporated under the laws of the State of Texas in 1989
and was reincorporated under the laws of the State of Delaware in 1996.
Market
According to industry sources, total spending on technology by U.S. banks
was approximately $16 billion in 1994 and spending is projected to increase to
over $21 billion in 1998. This growth is driven by banks investing in
technology to improve their efficiency and competitiveness in an environment
where competition is generally increasing among banks and between banks and
non-bank financial service companies. While the costs of acquiring and
maintaining in-house computer systems have historically been prohibitively
high for many community banks and credit unions, in recent years such costs
have declined to an affordable level which allows these financial institutions
to purchase integrated software/hardware solutions from third party vendors
such as the Company.
The Company's target bank market is comprised of community banks with assets
ranging from $50 million to $1 billion. However, most of the Company's
community bank customers have total assets ranging from $100 million to $500
million, and the number of community banks in this size range increased
slightly between 1994 and 1995 to approximately 2,550 banks. Most of the
Company's credit union customers have total assets ranging from $5 million to
$200 million. As of December 31, 1996, the Company had 226 bank and 104 credit
union customers in 39 U.S. states. In 1996, approximately 90% of the Company's
total revenue was from community bank customers, and no customer accounted for
10% or more of the Company's total revenue.
Because the Company's existing customer base is a significant source of
recurring revenues for the Company, an increase in the level of bank merger
and acquisition activity may cause the Company to lose customers or the number
of potential customers in the Company's target market to decline.
Strategy
The Company's objective is to continue to be a leading provider of
information systems for community banks and credit unions and to expand its
offerings into other complementary products and services. In addition to
leveraging its existing customer base, the Company's strategy to achieve this
objective involves continuing to enhance its Peerless21 and PeerlessCU(TM)
software systems; continuing to develop and offer new technology, products and
services; differentiating itself from competitors through outstanding customer
service and support; and pursuing new delivery methods for its products
through means such as the Company's new outsourcing service bureau.
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Products and Services
The Company's revenues are derived primarily from license and installation
fees, hardware and equipment sales, and maintenance and service fees. License
and installation fee revenues include both license fees from the sale of the
Company's own software products and the sale of third-party software products,
and the installation of such software products. Hardware and equipment sales
relate to the hardware and equipment on which the Company's, as well as other
vendors', software products operate. Maintenance and service fees relate
primarily to the processing fees of the outsourcing service bureau operations
and revenues derived from maintenance contracts with its customers, under
which the Company provides customers with telephone support 24 hours a day, 7
days a week, and modifications and enhancements to its software products. The
following table presents the revenue composition of the Company for the three
years ending December 31, 1996:
<TABLE>
<CAPTION>
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Software license and installation fees.................. 30.9% 36.5% 37.7%
Hardware and equipment sales............................ 34.1 34.2 38.8
Maintenance and service fees............................ 32.3 27.3 21.9
Other operating revenues................................ 2.7 2.0 1.6
----- ----- -----
Total revenues........................................ 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
The Company's two core software products are Peerless21, its proprietary
information system for community banks, and PeerlessCU, its proprietary
information system for credit unions. Peerless21 and PeerlessCU provide
software solutions for substantially all areas of financial institution data
processing, customer relationship management, management decision making and
product creation and sales. The Company also offers its customers an automated
teller machine transaction processing system and telephone banking using an
interactive voice response system that are fully integrated with Peerless21
and PeerlessCU. As a part of its service offerings, the Company provides its
customers with comprehensive training and education programs for its systems
and continuing customer maintenance and support as well as disaster recovery
services.
The Company's software products run on International Business Machines
("IBM") computing platforms, which are the leading hardware platforms in the
Company's target market. According to industry sources, approximately 46% of
community banks with in-house information systems utilized IBM computing
platforms in 1995, an increase from approximately 41% in 1990. The Company is
an authorized IBM reseller and an IBM Premier Business Partner, a designation
received by less than 5% of resellers of IBM's mid-range computers.
Company customers that purchase Peerless21 or PeerlessCU information systems
typically enter into three to five-year maintenance and service agreements
with the Company at the time of installation. As part of the maintenance and
service agreements, customers automatically receive two to three product
updates each year.
In 1994, the Company began marketing a check and statement imaging system
that is fully integrated with Peerless21. According to industry sources, bank
spending for imaging technology is projected to increase from $260 million in
1995 to $425 million in 1998. The Company's check and statement imaging system
enables banks to reduce costs by scanning digital images of checks into a
bank's computer system, which can then be printed on checking account
statements, thereby eliminating the need to return checks to customers and
improving check processing speeds. During 1996, revenues from the shipment and
installation of check and statement imaging systems accounted for
approximately 22% of the Company's total revenues, compared to 17% in 1995.
Currently, approximately 8% of the Company's existing bank customers have
check and statement imaging systems, and the Company believes it has a
significant opportunity to leverage its installed base of bank customers by
continuing to sell imaging systems to existing and new customers.
In addition, the Company believes that it can further leverage its installed
customer base by providing additional products, services and upgrades to these
customers. For instance, the Company is developing object-oriented programming
tools that will enable customers to operate in a client/server environment and
is extending its current product offerings in electronic banking. The Company
believes its success at leveraging its customer base is reflected in its
compound average annual growth in total revenues of 26% between 1991 and 1996.
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According to industry sources, approximately 42% of community banks with
assets of under $500 million and approximately 33% of credit unions outsourced
their information systems requirements in 1995. The Company has recently
established an outsourcing service bureau to serve those community banks and
credit unions that choose to use a service bureau for their information
processing and check and statement imaging requirements, a market previously
unserved by the Company. In June 1996, the Company entered into its first
outsourcing contract to provide check and statement imaging services to a
community bank for three years. The Company's outsourcing service bureau
became operational in early September and utilizes the Company's existing
technology. The Company currently has five outsourcing customer contracts, two
of which are both check imaging and data processing and three of which are
check imaging only. The Company has no significant prior experience in
operating an outsourcing business, and there can be no assurance that the
Company will be successful in this business.
The Company offers disaster recovery services. These services are intended
to allow its customers to be back online after a disaster in as little as 24
hours and to satisfy U.S. financial institution regulatory obligations to
maintain and annually test a disaster recovery plan.
The market for the Company's products is characterized by technological
advances, evolving industry standards, changes in end-user requirements and
frequent new product introductions and enhancements. The Company's future
success will depend upon its ability to enhance its current products and to
develop and introduce new products that keep pace with technological
developments and emerging industry standards and address the increasingly
sophisticated needs of its customers.
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations--Outlook."
Seasonality and Cyclicality
The Company recognizes a significant portion of its revenues upon the
installation of its software. Since its customers generally do not want to
have systems installed at or near the end of the calendar year, revenues have
generally been lower during the months of December and January than in the
remainder of the year. An economic downturn in the Company's target market
could have a materially adverse effect on the Company's operating results.
Principal Suppliers
Since 1989, the Company has been a value-added remarketer of IBM products
pursuant to standard IBM remarketer agreements. These products include non-IBM
software that IBM authorizes the Company to sell. The Company does not
maintain an inventory of IBM products but purchases such products only upon
receipt of a customer order. IBM has sole discretion with respect to pricing
the products offered by the Company pursuant to this agreement.
The Company's current remarketing agreement with IBM expires February 28,
1999. Both IBM and the Company may terminate the agreement, with or without
cause, upon three months' written notice. The Company has no reason to believe
that IBM will discontinue these remarketing arrangements. The Company is an
IBM Premier Business Partner, which is the highest preferred customer level
that IBM currently offers. IBM gives this recognition to its top resellers of
mid-range computers based on business results, management of key processes and
customer satisfaction levels. According to IBM, less than 5% of resellers of
IBM's mid-range computers receive this designation.
Since 1993, the Company has been a value-added remarketer of NCR products
pursuant to an NCR value-added remarketer agreement. These products include
the hardware on which the Company's check and statement imaging and processing
systems operate. Under its agreement with NCR, the Company markets and resells
or licenses such NCR products, which it purchases from NCR at a volume-based
discount. The Company does not
4
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maintain an inventory of NCR products, but purchases such products only upon
receipt of a customer order. NCR may add new products or discontinue or change
the design of any products subject to the agreement at any time. The agreement
has no term, but either party may terminate it upon 90 days' written notice.
The Company purchases hardware and licenses software for its check and
statement imaging and processing systems from Document Solutions, Inc. ("DSI")
pursuant to a system integrator agreement. The Company provides all normal
customer support for the Company's customers, and DSI provides software
releases as necessary. The Company does not maintain an inventory of DSI
products, but purchases such products only upon receipt of a customer order.
The Company's agreement with DSI automatically renews for one year each
January 1, unless terminated upon written notice 120 days prior to the
expiration of the then-current year. During the term of the agreement and for
two years following its termination, the Company may not develop, sell or
otherwise distribute products competitive with those of DSI, so long as DSI's
products offer competitive features and are competitively priced. If
competitive products have additional features or are priced lower than DSI's,
the Company may advise DSI in writing and allow DSI 180 days to enhance the
features or reduce the price of DSI's products. If DSI cannot suitably enhance
its products or reduce its prices within 180 days, the Company may then
purchase the competing products.
The Company has in the past experienced delays in the delivery of hardware
products that are in high demand. The Company believes a prolonged
interruption or delay in the supply of computer hardware or the Company's
inability to purchase hardware at competitive prices could have a materially
adverse effect on the Company's results of operations. In addition, the
Company's results of operations could be materially and adversely affected if
a principal supplier decided to terminate its agreement to supply products to
the Company or if such a supplier decided to develop or acquire a product that
would compete with the Company's financial institution software applications
products.
Intellectual Property
The Company relies primarily on a combination of copyright and trademark
laws, trade secrets, confidentiality procedures and contractual provisions to
protect its proprietary rights. The Company seeks to protect its software,
documentation and other written materials under trade secret and copyright
laws. The Company presently has no patents or patent applications pending.
There can be no assurance that the mechanisms used by the Company to protect
its software will be adequate or that the Company's competitors will not
independently develop software products that are substantially equivalent or
superior to the Company's software products. Although the Company does not
believe that its intellectual property rights infringe on the existing rights
of third parties, there can be no assurance that third parties will not assert
infringement claims against the Company.
Backlog
The Company's backlog of license and installation fees and hardware and
equipment sales was approximately $4.7 million at December 31, 1996, compared
to approximately $5.1 million at December 31, 1995. This backlog amount
excludes revenues to be derived from long-term customer contracts for
maintenance and outsourcing activities, which are typically three to five-year
contract commitments. The Company's backlog can fluctuate significantly due to
many reasons, including, but not limited to, the sales cycle length of varying
products, product availability, the duration of the installation period, and
customer requested installation date.
Competition
The financial institution management information systems market is intensely
competitive and subject to rapid change. Competitors vary in size and in the
scope and breadth of the products and services offered. The Company believes
that the primary competitive factors in system selection are features and
functions, flexibility and ease of use, software enhancements and maintenance,
technological advantages and customer support and
5
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training. The price of the software and related services is also a significant
competitive factor which may be determinative, particularly for smaller
institutions. The Company competes with several firms that offer software
products that compete with the Company's products, as well as competing with
firms that provide data processing services to financial institutions that
desire to outsource that function. These competitors vary in size from large
to small and in geographical coverage from national to regional and local
operations.
There are a number of larger companies, including major computer hardware
manufacturers, computer software companies and outsourcing service providers
that have substantially greater financial and management resources than the
Company and the technological ability to develop products similar to those
offered by the Company. As a result, they may be able to respond more quickly
to new or emerging technologies and changes in customer requirements or to
devote greater resources to the development, promotion and sale of their
products than the Company.
The Company's principal competitors in its target market for community
banking information management systems are Jack Henry & Associates and Fiserv,
Inc. The Company also competes in this market against EDS, ALLTEL Information
Systems, Inc. and others.
The credit union market is highly fragmented, and no one firm has a dominant
market share. The Company's competitors in its target market for credit union
information management systems are EDS, Fiserv, Inc., ULTRADATA Corporation
and others.
Additionally, the Company believes that no one firm may be considered
dominant in providing outsourcing data processing services to customers in the
Company's marketplace. The Company believes that EDS, Fiserv, Inc., Bankline
Holding, Inc. and The BISYS Group, Inc. are its main outsourcing services
competitors.
The Company's principal competitors in the check-imaging industry are
BancTec Financial Systems, Advanced Financial Solutions, Inc. and IBM.
Sales and Marketing
The Company markets its products and services throughout the United States
through a direct sales force. The Company maintains separate sales forces for
its community bank and credit union products, which allows the Company's sales
representatives to concentrate on each separate customer market.
The Company markets its products and services through specific product
advertising in trade journals directed at community banks and credit unions,
its Internet home page and sales support literature. The Company also relies
on customer referrals, networking, direct mail, trade shows and contacts with
independent consultants. The sales cycle associated with the purchase of the
Company's products is typically lengthy and subject to a number of significant
risks, including customers' budgetary constraints and internal acceptance
reviews.
Employees
As of December 31, 1996, the Company had a total of 157 employees, none of
whom is represented by a labor union. The Company has not experienced any work
stoppages and considers its relations with its employees to be satisfactory.
The Company's success depends on the performance of its executive officers and
other key personnel, as well as its ability to attract and retain such
personnel. Competition in the recruiting of highly qualified technical and
other personnel in the information systems industry is intense, especially in
the regions in which the Company operates, and the Company anticipates that it
may become more difficult to attract, assimilate and retain qualified
personnel in the future.
6
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Executive Officers
Set forth below is the name, age, position, term of office and a brief
account of the business experience of each person who is an executive officer
of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Rodney L. Armstrong,
Jr. ................... 52 Chairman of the Board and Chief Executive Officer
Gary J. Austin.......... 52 President
Steven W. Tomson........ 34 Executive Vice President and Chief Operating Officer
Kim D. Owen............. 36 Vice President--Sales
Ann L. Puddister........ 36 Director of Administration and Corporate Secretary
Douglas K. Hansen....... 29 Treasurer and Controller
</TABLE>
Rodney L. Armstrong, Jr. is one of the Company's founders and has been
Chairman of the Board and Chief Executive Officer since 1989. Mr. Armstrong
was the Company's President from 1994 to June 1996. Mr. Armstrong has 23 years
of experience in the information technology and financial institution
marketplace. In 1974, he joined United Virginia Bankshares (now known as
Crestar Corporation) as Corporate Planning Officer responsible for the bank
holding company's long-range strategic planning. Between 1977 and 1989, Mr.
Armstrong held various management positions with EDS, where he started and
managed its electronic ATM and point of sale networking division and was
responsible for corporate development for its Financial and Insurance Group,
before initiating the buyout of EDS's community bank division by the Company
in 1989.
Gary J. Austin joined the Company in 1989 and has served in various
capacities since that time, including President and Chief Executive Officer of
the Company's banking systems and outsourcing subsidiaries and President of
the Company's credit union systems and disaster and recovery services
subsidiaries. Mr. Austin has served as a director of the Company since 1994
and has been its President since June 1996. Prior to joining the Company, Mr.
Austin held several positions with EDS, including Marketing Support Manager
for the banking group, Product Manager for the insurance group and Product
Manager for the Health Services Division, during the periods from 1986 through
1989. Prior to joining EDS, Mr. Austin was employed as a Regional Support
Manager by Shared Medical Systems. Mr. Austin has over 16 years of systems
operations, design, sales and management experience.
Steven W. Tomson joined the Company in 1991 as Regional Marketing Manager,
Banking. In June 1994, Mr. Tomson left the Company to work for Bermac
Communications, Inc., a telecommunications company, as an Account Manager. Mr.
Tomson returned to the Company in February 1995 and has served as President of
the Company's credit union systems subsidiary since June 1995 and as Executive
Vice President and Chief Operating Officer of the Company's banking systems
subsidiary since February 1996. Prior to joining the Company, Mr. Tomson was
employed as an Account Sales Representative by IBM.
Kim D. Owen joined the Company in 1996 as Vice President responsible for
sales. Prior to joining the Company, Mr. Owen served as Vice President of
Strategic Alliances for Syntellect, Inc., a voice processing solutions
provider, from 1995 to 1996, as Director of Strategic Alliances for Lawson
Software, Associates, a management information software company, from 1993 to
1994 and as Business Unit Executive for IBM from 1990 to 1992.
Ann L. Puddister joined the Company in 1989. Ms. Puddister has served as
Director of Administration since 1992 and Corporate Secretary since 1994.
Prior to joining the Company, Ms. Puddister worked at EDS for 10 years.
Douglas K. Hansen joined the Company in 1994 as Controller and has served as
Treasurer of the Company since May 1996. From 1989 to 1994, Mr. Hansen was
employed by Ernst & Young LLP, most recently as an Audit Manager. Mr. Hansen
is a certified public accountant.
7
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Government Regulation
As a provider of in-house software application systems and hardware, the
Company is not directly subject to Federal or state regulations specifically
applicable to financial institutions. As a provider of products to these
entities, however, the Company must take into account such regulations in
order to provide products that help its customers comply with such
regulations. The implementation of the Company's products by its customers is
reviewed from time to time by government regulators in connection with
compliance audits of the customers' operations. The Company must continually
update its products to reflect changes in applicable regulations or the
adoption of new regulations. Any such changes or new regulations could have a
materially adverse effect on the Company's business, financial condition and
results of operations. To the extent the Company provides information services
to financial institutions that desire to outsource that function, the Company
is subject to examinations by various Federal and state regulatory agencies.
ITEM 2. PROPERTIES
The Company's community banking subsidiary and credit union subsidiary are
located in three facilities in Richardson, Texas with a total of approximately
31,000 square feet. These facilities are leased pursuant to agreements which
expire beginning November 30, 1998 through June 30, 2001 and provide for a
monthly rental of approximately $22,000. The Company's check and statement
imaging and disaster recovery operations are located in a facility of 5,525
square feet in Plano, Texas. This facility is leased pursuant to an agreement
that expires on January 31, 1999 and provides for a monthly rental of
approximately $3,160. The Company believes that it can obtain suitable
additional or alternative space as needed at commercially reasonable rates.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company has been involved in litigation relating to
claims arising out of its operations in the normal course of business. As of
the date of this Form 10-K, the Company is not a party to any legal
proceeding, the adverse outcome of which would, in management's opinion, have
a materially adverse effect on the Company's results of operations or
financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock, $.01 par value, is traded on the Nasdaq National
Market under the symbol "PLSS." Prior to the Company's initial public offering
of its Common Stock on October 3, 1996, there was no market for its Common
Stock. The reported high and low sales prices for the Company's common stock
for the period October 3, 1996, through December 31, 1996 were $8.50 and
$5.875, respectively.
As of February 28, 1997, there were 172 holders of record of the Company's
Common Stock.
The Company has not since its inception paid cash dividends on its Common
Stock and intends to retain all earnings, if any, for use in the Company's
business and does not anticipate paying cash dividends in the foreseeable
future. Further, certain covenants in the Company's credit agreement prohibit
the payment of cash dividends by the Company.
8
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During 1996, the Company sold shares of Common Stock to its employees for
nominal per share cash consideration as bonuses in lieu of cash compensation.
These issuances were made in the following amounts and on the following dates
for the consideration described:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF AGGREGATE
DATE OF SALE SHARES EMPLOYEES CONSIDERATION
------------ --------- --------- -------------
<S> <C> <C> <C>
January 1, 1996............................ 2,820 28 $117.50
February 22, 1996.......................... 16,800 1 $700.00
</TABLE>
The sales of such Common Stock described in the preceding table were made
pursuant to the exemption from registration under Section 4(2) of the
Securities Act of 1933 (the "Securities Act") or are not considered sales of
securities under Section 5 of the Securities Act.
On June 17, 1996, the Company sold an aggregate of 505,710 shares of Common
Stock to Allied Investment Corporation ("AIC"), Allied Venture Partnership
("AVP") and Allied Capital Corporation II ("ACCII") for an aggregate of
$12,643 upon exercise of warrants issued by the Company to AIC, AVP and ACCII.
The sale of the Common Stock to AIC, AVP and ACCII was made pursuant to the
exemption from registration under Section 4(2) of the Securities Act.
On September 11, 1996, the Company issued 7,200 shares of its Common Stock
upon the exercise of a stock option by Allen D. Fleener, a director of the
Company. The aggregate exercise price paid by Mr. Fleener was $3,000. The
issuance of stock to Mr. Fleener was made pursuant to the exemption from
registration under Section 4(2) of the Securities Act.
Simultaneously with the consummation of the Company's initial public
offering in October 1996, the Company sold 597,360 shares of Common Stock to
the underwriters of the offering for an aggregate of $14,934 upon the exercise
of warrants issued by the Company to AIC and AVP and transferred by AIC and
AVP to the underwriters. The sale of Common Stock to such underwriters was
made pursuant to the exemption from registration under Section 4(2) of the
Securities Act.
Simultaneously with the consummation of the Company's initial public
offering in October 1996, the Company sold 72,000 shares of Common Stock to
Harrell J. Stringer for an aggregate of $77,000 upon exercise by Mr. Stringer
of stock options granted to him while he was an executive officer of the
Company. The sale of Common Stock to Mr. Stringer was made pursuant to the
exemption from registration under Section 4(2) of the Securities Act.
On November 15, 1996, the Company issued 25,000 shares of Common Stock to
Jerry L. Thomas in exchange for the outstanding capital stock of Forms
Imaging, Inc. held by him. The issuance of Common Stock to Mr. Thomas was made
pursuant to the exemption from registration under Section 4(2) of the
Securities Act.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues:
Software license and instal-
lation fees................ $ 4,164 $ 4,789 $ 4,558 $ 7,181 $ 9,987
Hardware and equipment
sales...................... 6,021 7,118 5,019 6,727 10,303
Maintenance and service
fees....................... 3,428 4,104 4,757 5,382 5,811
Other operating revenues.... 258 278 408 400 424
------- ------- ------- ------- -------
Total revenues............ 13,871 16,289 14,742 19,690 26,525
Cost of revenues:
Cost of software license and
installation fees.......... 1,949 2,441 2,173 2,617 3,719
Cost of hardware and equip-
ment sales................. 4,601 5,380 3,892 5,258 7,754
Cost of maintenance and
service fees and other op-
erating revenues........... 3,672 3,865 3,682 4,255 5,163
------- ------- ------- ------- -------
Total cost of revenues.... 10,222 11,686 9,747 12,130 16,636
------- ------- ------- ------- -------
Gross margin.................. 3,649 4,603 4,995 7,560 9,889
Operating costs and expenses:
Research and development.... 989 1,404 1,365 1,398 1,696
Selling and marketing....... 1,795 2,610 2,301 2,502 3,477
General and administrative.. 946 853 1,181 1,222 1,512
Severance charge(1)......... -- -- -- -- 341
------- ------- ------- ------- -------
Total operating costs and
expenses................. 3,730 4,867 4,847 5,122 7,026
------- ------- ------- ------- -------
Income (loss) from opera-
tions........................ (81) (264) 148 2,438 2,863
Other income (expense):
Interest expense............ (542) (494) (776) (612) (548)
Interest income............. 29 15 63 68 133
------- ------- ------- ------- -------
Total other income (ex-
pense)................... (513) (479) (713) (544) (415)
------- ------- ------- ------- -------
Income (loss) before income
taxes........................ (594) (743) (565) 1,894 2,448
Provision for income taxes.... -- -- -- 64(2) 155(2)
------- ------- ------- ------- -------
Net income (loss)............. $ (594) $ (743) $ (565) $ 1,830 $ 2,293
======= ======= ======= ======= =======
Net income (loss) per common
and common equivalent
share(3)..................... $ (0.30) $ (0.36) $ (0.32) $ 0.49 $ 0.55
======= ======= ======= ======= =======
Shares used in computing net
income (loss) per common and
common equivalent share...... 1,992 2,054 1,949 3,648 4,055
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..... $ 964 $ 1,554 $ 1,081 $ 1,394 $ 8,378
Total assets.................. 7,342 6,555 6,346 7,130 17,359
Unearned software and hardware
revenues..................... 130 890 3,660 3,096 2,006
Unearned maintenance reve-
nues......................... 3,879 4,156 4,571 5,048 5,567
Current and long-term debt due
to related parties........... 5,142 7,479 5,469 3,627 --
Stockholders' equity (defi-
cit)......................... (4,050) (7,807) (9,586) (7,729) 6,312
</TABLE>
- --------
(1) During the year ended December 31, 1996, the Company incurred a severance
charge related to the resignation of a former officer. Excluding such
severance charge, income from operations would have been $3,204,000, net
income would have been $2,634,000 and net income per common and common
equivalent share would have been $0.64.
(2) The Company's effective income tax rate was positively impacted by the
utilization of previously unbenefitted net operating loss carryforwards.
(3) For a description of the calculation of net income (loss) per common and
common equivalent share, see Note 2 of Notes to Consolidated Financial
Statements.
10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company was formed in 1989 when a group of management executives from
EDS purchased EDS's turnkey bank data processing systems division, which EDS
had acquired in 1980. In 1992, the Company acquired and began offering a
credit union information software system. In 1994, the Company began marketing
a check and statement imaging system that is fully integrated with Peerless21,
the Company's flagship banking product. In September 1996, the Company began
an outsourcing service bureau. On October 3, 1996, the Company commenced an
initial public offering of its Common Stock (the "Offering"), resulting in the
issuance of 2,440,000 shares and net proceeds of approximately $10.1 million.
The Company's total revenues are derived primarily from software license and
installation fees, hardware and equipment sales, maintenance and service fees
and, to a lesser extent, other revenues. Approximately 90% of the Company's
total revenues for 1996 are from its banking customers and, historically, a
large part of the Company's total revenues and growth have been derived from
its installed customer base.
Software license and installation fees consist of revenue recorded by the
Company on the installation of its software products, which in the case of
most of the Company's contracts, involves the use of the percentage-of-
completion method of accounting for revenues, as installation services are
performed over several months. Revenues from sales of software licenses not
involving installation are recognized upon delivery of the software to the
customer. Revenues from hardware and equipment sales are recognized upon
shipment by the manufacturer to the customer. Revenues from maintenance and
service fees are recognized ratably over the periods of the respective
contracts, which typically have terms of three to five years.
In the case of software license and installation fees, and hardware and
equipment sales, the Company generally requires significant deposits and
prepayments. Maintenance and service agreements are administered on a calendar
year basis with fees generally received in December or January. Deposits
received and amounts billed for software licenses, installation and hardware
in advance of installation or delivery, and for annual software maintenance
prior to performance of related services, are reflected as unearned until such
amounts are recognized in accordance with the Company's revenue recognition
policy. See Note 2 of Notes to Consolidated Financial Statements.
The Company expenses all software development costs as incurred until
technological feasibility has been established for the product, at which time
the costs are capitalized until the product is available for general release
to customers. The Company has expensed substantially all software development
costs since 1994.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1995
Revenues. Revenues for the year ended December 31, 1996 increased $6.8
million, or 34.7%, over the prior year. Revenues from software license and
installation fees increased $2.8 million, or 39.1%, over the prior year, and
revenues from hardware and equipment sales increased $3.6 million, or 53.2%,
over the prior year. These increases were due primarily to increases in
revenue from installations of Peerless21 and shipments and installations of
check and statement imaging systems. Installations of Peerless21 contributed
$4.7 million in software license and installation fees, as well as additional
software license fees and hardware revenues associated with the sales of
ancillary products, representing an increase of $1.6 million, or 52.2%, over
the prior year. Shipments and installations of check and statement imaging
systems contributed $2.3 million in software license and installation fees,
representing an increase of $1.0 million, or 71.3%, over the prior year, and
$3.6 million in hardware and equipment sales, representing an increase of $1.6
million, or 78.0%, over the prior year.
Gross Margin. Gross margin for the year ended December 31, 1996 declined
slightly to 37.3% of total revenues from 38.4% for the prior year. This
decrease was attributable to declines in gross margin as a percent
11
<PAGE>
of revenues for software license and installation fees as well as maintenance
and service fees, which resulted primarily from the Company hiring and
training additional employees to support revenue growth. These margin declines
were partially offset by an improvement in the gross margin percentage from
hardware and equipment sales, which increased to 24.7% for the year from 21.8%
for the prior year, which is primarily attributable to an increase in the
margins on check and statement imaging hardware.
Shifts in the mix of the sources of the Company's revenues, including
software license and installation fees and check and statement imaging and
processing sales, may cause significant fluctuations in total revenue and
gross margin. In addition, the Company manages its expenses based on
anticipated revenue levels, and a high percentage of these expenses are
relatively fixed. Therefore, variations in the amount and timing of revenue
may cause significant variations in operating results from period to period.
Further, in response to a changing competitive environment, the Company may
elect to make certain pricing, product or marketing decisions that could have
a material adverse effect on the Company's results of operations.
Research and Development. Research and development expenses for the year
ended December 31, 1996 increased $298,000, or 21.3%, over the prior year.
This increase primarily resulted from hiring additional research and
development employees to support development of new client/server products and
other modifications and enhancements to existing products. As a percentage of
total revenues, research and development expenses decreased slightly to 6.4%
for the year from 7.1% for the prior year.
Selling and Marketing. Selling and marketing expenses for the year ended
December 31, 1996 increased by $975,000, or 39.0%, over the comparable prior
year period. This increase primarily resulted from an increase in the number
of employees in sales and marketing to support increased revenues and
increased compensation levels for existing employees due to increased
production. As a percentage of total revenues, selling and marketing expenses
increased slightly to 13.1% for the year from 12.7% for the prior year.
General and Administrative. General and administrative expenses for the year
ended December 31, 1996 increased $290,000, or 23.7%, over the prior year.
This increase primarily resulted from placement agency fees and other costs
associated with the hiring of additional employees, as well as additional
insurance and legal costs associated with being a publicly reporting entity.
As a percentage of total revenues, general and administrative expenses
decreased slightly to 5.7% for the year from 6.2% for the prior year.
Severance Charge. During 1996 the Company incurred a severance charge of
$341,000 related to the resignation of a former officer ($289,000 of which
were non-cash compensation charges related to the extension of the exercise
period of certain stock options and the acceleration of vesting of restricted
stock awards).
Interest Expense. Interest expense for the year ended December 31, 1996
decreased $64,000 from the prior year. This decrease primarily resulted from
the repayment of all outstanding debt subsequent to the initial public
offering on October 3, 1996, and was slightly offset by amortization of
deferred debt costs associated with the Company's line of credit, which the
Company obtained in October 1995.
Net Income per Common and Common Equivalent Share. Net income per common and
common equivalent share for the year ended December 31, 1996, was negatively
impacted by an increase in the shares used in computing net income per common
and common equivalent share, resulting from the additional shares issued in
the Offering.
YEARS ENDED DECEMBER 31, 1995 AND 1994
Revenues. Revenues for 1995 increased $4.9 million, or 33.6%, over 1994.
This increase resulted from increases in all major product categories. The
increase in software license and installation fees was primarily due to $1.2
million from increased installations of check and statement imaging systems
and $1.1 million from increased installations of Peerless21. The increase in
hardware and equipment sales was primarily due to increased shipments of check
and statement imaging systems. The increase in maintenance and service fees
was primarily due to increased revenues from existing customers as well as new
customers.
12
<PAGE>
Gross Margin. Gross margin for 1995 increased to 38.4% of total revenues
from 33.9% for 1994. Decreases in gross margin as a percentage of revenues for
hardware and equipment sales and maintenance and service fees and other
operating revenues were more than offset by an increase in the gross margin
percentage associated with software license and installation fees as well as a
shift in revenue mix as software license and installation fees (the Company's
product category with the highest gross margin percentage) increased to 36.5%
of total revenues for 1995 from 30.9% for 1994. The software license and
installation fee margin increase is due to full amortization in 1994 of the
software purchased in connection with the organization of the Company in 1989.
Amortization of this acquired software in 1994 was approximately $598,000, or
4.1% of total revenues.
Research and Development. Research and development expenses for 1995
increased $33,000, or 2.4%, over 1994. However, as a percent of total
revenues, research and development expenses decreased to 7.1% for 1995 from
9.3% for 1994. This decrease reflects the Company's ability to spread its
research and development expenses over increased revenue.
Selling and Marketing. Selling and marketing expenses for 1995 increased by
$201,000, or 8.7%, over 1994. However, as a percent of total revenues, selling
and marketing expenses decreased to 12.7% for 1995 from 15.6% for 1994. This
decrease resulted from the Company's ability to leverage its sales and
marketing expenses over increased revenues.
General and Administrative. General and administrative expenses decreased to
6.2% of total revenues in 1995 from 8.0% in 1994. This decrease resulted
primarily from the Company achieving economies of scale in general and
administrative expenses relative to increased revenues.
Interest Expense. Interest expense for 1995 decreased $164,000, or 21.1%,
from 1994. This decrease was primarily a result of reduced long-term debt.
PROVISION FOR INCOME TAXES
The Company's provision for income taxes for the years ended December 31,
1996 and 1995 included the Alternative Minimum Tax under the Internal Revenue
Code of 1986, as amended, and state income taxes. In the fourth quarter of
1996, the Company eliminated the valuation allowance against its deferred tax
assets, resulting in the recording of a federal deferred tax benefit of
approximately $250,000. At December 31, 1996, the Company had net operating
loss carryforwards for Federal income tax purposes of approximately $190,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents at December 31, 1996 increased to
$8.4 million from $1.4 million at December 31, 1995. The Company received net
proceeds from the Offering of approximately $10.1 million, and immediately
utilized $3.1 million to repay the outstanding long-term debt due to related
parties.
The Company historically financed its growth primarily through cash flow
from operations, private placements of debt and equity securities and
borrowings. Net cash provided by operations was approximately $1.7 million,
$2.7 million and $1.9 million for the years ended December 31, 1996, 1995, and
1994, respectively. Net cash provided by operations in 1996 was primarily the
result of net income adjusted for depreciation, amortization and compensation
expense, partially offset by an increase in trade accounts receivable. Net
cash provided by operations in 1995 was primarily the result of net income
adjusted for depreciation and amortization and an increase in accounts payable
and accrued liabilities. Net cash provided by operations in 1994 was primarily
the result of an increase in the unearned software and hardware revenues
balance over 1993.
The Company generally requires its customers to make significant deposits
and prepayments on contracts to purchase software and hardware, and the
Company's maintenance and service agreements are administered on a calendar
year basis with fees generally received in December and January. The amounts
that are received in advance of performing the related services and in advance
of hardware shipment are reflected as unearned revenues until such amounts are
recognized in accordance with the Company's revenue recognition policy. See
Note 2 of Notes to Consolidated Financial Statements.
13
<PAGE>
During 1996 the Company invested $1.4 million in capital expenditures,
compared to $381,000 in 1995 and $76,000 in 1994. Approximately $700,000 of
the 1996 capital expenditures were for equipment used in the operations of the
outsourcing service bureau, which began operations in September 1996. The
majority of the remainder of the capital expenditures in 1996 were made to
purchase hardware for product development purposes. If the Company's
outsourcing service bureau business continues to grow, the Company may need to
make additional capital expenditures to purchase the necessary equipment.
The Company has a $2.5 million line of credit (the "Credit Agreement") with
State Street Bank and Trust ("State Street") that expires on February 1, 1999.
Borrowings under the Credit Agreement bear interest at State Street's prime
rate (8.25% at December 31, 1996) plus 1/2% and are secured by the assets and
stock of the Company's wholly owned subsidiaries. Amounts available under the
Credit Agreement are reduced by the value of outstanding letters of credit
issued by State Street on behalf of the Company. As of December 31, 1996, no
amounts were outstanding under the Credit Agreement, and State Street had
issued a letter of credit with a value of $600,000 on behalf of the Company.
The Credit Agreement imposes certain requirements on the Company, including
minimum annual net income, and quarterly cash flow and liquidity levels. The
Credit Agreement prohibits the Company from incurring or otherwise becoming
liable for any indebtedness for liens on any property owned by the Company,
except for certain trade and other indebtedness. The Credit Agreement also
contains other restrictive covenants, including limitations on dispositions of
material amounts of assets, capital expenditures, guarantees, mergers,
consolidations, related party transactions, alterations in the nature of the
Company's business, employee compensation, the making of any loans,
investments in other entities, entering into any guarantees and the payment of
cash dividends. See Note 3 of Notes to Consolidated Financial Statements.
The Company believes that its cash and cash equivalents at December 31,
1996, amounts available under the Credit Agreement and operating cash flows
will be sufficient to meet its anticipated capital expenditure requirements at
least through the next twelve months.
OUTLOOK
Forward-Looking Statements. This Annual Report on Form 10-K contains
forward-looking statements relating to such matters as anticipated financial
performance and business prospects. When used in this Annual Report, the words
"anticipate," "estimate," "expect," "may," "project," "believes," and "will"
and similar expressions are intended to be among the statements that identify
forward-looking statements. From time to time, the Company may also publish
forward-looking statements. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements. In order to comply
with the terms of the safe harbor, the Company notes that a variety of
factors, including those discussed in this Form 10-K, could cause the
Company's actual results and experience to differ materially from the
anticipated results or other expectations expressed in the Company's forward-
looking statements.
Revenues. The Company has historically grown its revenues primarily from its
installed base of customers. For example, the banking customers that have
utilized the Company's software products since 1990 contributed approximately
$6.7 million to total revenues in 1991. These same customers contributed
approximately $13.2 million to total revenues in 1996, or a compound annual
growth rate of 14.5%. In addition, revenue per bank customer has increased
from approximately $40,000 in 1991 to approximately $105,000 in 1996. The
Company believes the growth from its existing customer base is not only
attributable to the quality and growth of its customers and the importance its
customers place on technology, but also due to the Company's customer support
which it believes is superior in the industry. Once the Company's installed
customer base has migrated to the Company's primary software products,
Peerless21 and PeerlessCU, the Company will increasingly have to sell check
and statement imaging systems or ancillary products to its customer base or
sell its existing and new products and services to new customers in order to
maintain historical growth rates.
Check and Statement Imaging. The Company installed its first check and
statement imaging system in the fourth quarter of 1994. Revenues from the
shipment and installation of check and statement imaging systems
14
<PAGE>
have increased to $5.9 million in 1996, representing a 75.4% growth rate over
the 1995 level. As of December 31, 1996, only approximately 8% of the
Company's bank customers utilized a check and statement imaging system. The
Company expects many of its customers will implement check and statement
imaging services to its customers, whether in a turnkey or outsourcing
solution, over the next several years. However, given the significant
expenditure and commitment amount associated with check and statement imaging
solutions, the Company is unable to determine how many and when its customers
may purchase such a system. Therefore, any revenue growth from these systems
may be at a rate less than those historically experienced. In addition, given
that the Company has only been marketing these systems for slightly more than
two years, the future growth is difficult to determine.
Outsourcing Service Bureau. According to industry sources, approximately 42%
of community banks with assets of less than $500 million and 33% of credit
unions outsourced their information systems requirements in 1995. As a result,
in September 1996 when the Company began offering an outsourcing service
bureau alternative to its customers and new customers, the Company's target
market increased. As of February 28, 1997, the Company had entered into five
outsourcing contracts: two of which are both data processing and check imaging
and three of which are check imaging only. The Company will not begin
processing the two data processing and check imaging contracts until the
second quarter of 1997. For the first three and a half months of operation,
the outsourcing service bureau was slightly profitable. The Company expects to
continue to leverage its experience in both the banking and credit union
processing industries, as well as its Peerless21 and PeerlessCU products, in
order to continue to grow the outsourcing operations. Any future profitability
of these operations will depend to a significant extent on any capital and
other expenditures the Company makes to expand this aspect of its business.
15
<PAGE>
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........................ 17
Consolidated Balance Sheets as of December 31, 1995 and 1996............. 18
Consolidated Statements of Operations for the years ended December 31,
1994, 1995 and 1996..................................................... 19
Consolidated Statements of Stockholders' Equity (Deficit) for the years
ended December 31, 1994, 1995 and 1996.................................. 20
Consolidated Statements of Cash Flows for the years ended December 31,
1994, 1995 and 1996..................................................... 21
Notes to Consolidated Financial Statements............................... 22
</TABLE>
16
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
Peerless Group, Inc.
We have audited the accompanying consolidated balance sheets of Peerless
Group, Inc. (the Company), as of December 31, 1995 and 1996, and the related
consolidated statements of operations, cash flows, and stockholders' equity
(deficit) for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 Peerless
Group, Inc., at December 31, 1995 and 1996, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Dallas, Texas
January 17, 1997
17
<PAGE>
PEERLESS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1996
------- -------
<S> <C> <C>
ASSETS (NOTE 3)
Current assets:
Cash and cash equivalents....................... $ 1,394 $ 8,378
Trade accounts receivable....................... 4,206 5,712
Prepaid expenses and other current assets....... 90 541
Note receivable from officer (Note 9)........... 271 --
------- -------
Total current assets........................ 5,961 14,631
Computer and other equipment, at cost............. 995 2,335
Less accumulated depreciation..................... 413 589
------- -------
582 1,746
Computer software, maintenance contracts, and
other assets, net of accumulated amortization of
$1,079 and $1,482 at December 31, 1995 and 1996,
respectively..................................... 587 982
------- -------
Total assets................................ $ 7,130 $17,359
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt due to related
parties (Note 3)............................... $ 494 $ --
Accounts payable................................ 859 1,865
Accrued liabilities............................. 892 1,041
Sales tax payable............................... 370 568
Unearned software and hardware revenues......... 3,096 2,006
Unearned maintenance revenues................... 5,048 5,567
------- -------
Total current liabilities................... 10,759 11,047
Long-term debt due to related parties (Note 3).... 3,133 --
Redeemable common stock (Note 7).................. 967 --
Commitments (Notes 5 and 7)
Stockholders' equity (deficit) (Notes 3 and 7):
Preferred stock, $.01 par value:
Authorized shares--5,000
Issued shares--none
Common stock, $.01 par value:
Authorized shares--10,000
Issued shares--2,242 and 4,598 at December 31,
1995 and 1996, respectively.................. 22 46
Additional paid-in capital...................... (3,574) 7,720
Accumulated deficit............................. (3,547) (1,254)
Treasury stock, at cost--304 and 1 at December
31, 1995 and 1996, respectively................ (435) (1)
Unearned compensation........................... (195) (199)
------- -------
Total stockholders' equity (deficit)........ (7,729) 6,312
------- -------
Total liabilities and stockholders' equity
(deficit).................................. $ 7,130 $17,359
======= =======
</TABLE>
See accompanying notes.
18
<PAGE>
PEERLESS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Revenues:
Software license and installation fees........... $ 4,558 $ 7,181 $ 9,987
Hardware and equipment sales..................... 5,019 6,727 10,303
Maintenance and service fees..................... 4,757 5,382 5,811
Other operating revenues......................... 408 400 424
------- ------- -------
Total revenues................................. 14,742 19,690 26,525
Cost of revenues:
Cost of software license and installation fees... 2,173 2,617 3,719
Cost of hardware and equipment sales............. 3,892 5,258 7,754
Cost of maintenance and service fees and other
operating revenues.............................. 3,682 4,255 5,163
------- ------- -------
Total cost of revenues......................... 9,747 12,130 16,636
------- ------- -------
Gross margin....................................... 4,995 7,560 9,889
Operating costs and expenses:
Research and development......................... 1,365 1,398 1,696
Selling and marketing............................ 2,301 2,502 3,477
General and administrative....................... 1,181 1,222 1,512
Severance charge (Note 11)....................... -- -- 341
------- ------- -------
Total operating costs and expenses............. 4,847 5,122 7,026
------- ------- -------
Income from operations............................. 148 2,438 2,863
Other income (expense):
Interest expense................................. (776) (612) (548)
Interest income.................................. 63 68 133
------- ------- -------
Total other income (expense)................... (713) (544) (415)
------- ------- -------
Income (loss) before income taxes.................. (565) 1,894 2,448
Provision for income taxes......................... -- 64 155
------- ------- -------
Net income (loss).................................. $ (565) $ 1,830 $ 2,293
======= ======= =======
Net income (loss) per common and common equivalent
share............................................. $ (0.32) $ 0.49 $ 0.55
======= ======= =======
Shares used in computing net income (loss) per
common and common equivalent share................ 1,949 3,648 4,055
</TABLE>
See accompanying notes.
19
<PAGE>
PEERLESS GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK
---------------- ADDITIONAL ----------------
NUMBER OF PAID-IN ACCUMULATED NUMBER OF UNEARNED
SHARES AMOUNT CAPITAL DEFICIT SHARES AMOUNT COMPENSATION
--------- ------ ---------- ----------- --------- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1993................... 2,057 $ 20 $ (3,010) $ (4,812) 126 $ (6) $ --
Net loss............... -- -- -- (565) -- -- --
Common stock issued.... 23 -- 1 -- -- -- --
Issuance of redemption
right on common stock
(Note 7).............. -- -- (1,250) -- -- -- --
Common stock
repurchased........... -- -- 251 -- 111 (275) --
Accretion of redeemable
common stock.......... -- -- (51) -- -- -- --
Compensation expense on
options............... -- -- 111 -- -- -- --
----- ---- -------- -------- ---- ---- ------
Balance at December 31,
1994................... 2,080 20 (3,948) (5,377) 237 (281) --
Net income............. -- -- -- 1,830 -- -- --
Common stock issued,
net of unearned
compensation (Note
7).................... 162 2 291 -- -- -- (195)
Common stock
repurchased........... -- -- 141 -- 67 (154) --
Accretion of redeemable
common stock.......... -- -- (58) -- -- -- --
----- ---- -------- -------- ---- ---- ------
Balance at December 31,
1995................... 2,242 22 (3,574) (3,547) 304 (435) (195)
Net income............. -- -- -- 2,293 -- -- --
Common stock issued
upon exercise of
warrants.............. 506 5 8 -- -- -- --
Common stock issued
upon exercise of
options............... 79 1 79 -- -- -- --
Common stock issued,
net of unearned
compensation.......... 45 1 295 -- -- -- (4)
Common stock
repurchased........... -- -- -- -- 8 (9) --
Cancellation of
treasury stock upon
change-of-domicile
merger................ (311) (3) (440) -- (311) 443 --
Common stock issued
upon initial public
offering.............. 2,037 20 10,117 -- -- -- --
Accretion of redeemable
common stock.......... -- -- (44) -- -- -- --
Compensation expense on
options............... -- -- 268 -- -- -- --
Reclassification of
redeemable common
stock upon exercise of
underlying options
(Note 7).............. -- -- 1,011 -- -- -- --
----- ---- -------- -------- ---- ---- ------
Balance at December 31,
1996................... 4,598 $ 46 $ 7,720 $ (1,254) 1 $ (1) $ (199)
===== ==== ======== ======== ==== ==== ======
</TABLE>
See accompanying notes.
20
<PAGE>
PEERLESS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).................................. $ (565) $ 1,830 $ 2,293
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization.................... 1,452 523 757
Compensation expense............................. 111 54 366
Changes in operating assets and liabilities:
Trade accounts receivable...................... (1,607) (584) (1,506)
Prepaid expenses and other current assets...... (64) 34 (451)
Accounts payable and accrued liabilities....... (655) 939 812
Unearned software and hardware revenues........ 2,770 (564) (1,113)
Unearned maintenance revenues.................. 415 477 519
------- ------- -------
Net cash provided by operating activities.......... 1,857 2,709 1,677
INVESTING ACTIVITIES
Additions to computer and other equipment.......... (76) (381) (1,419)
Other.............................................. -- -- (160)
------- ------- -------
Net cash used in investing activities.............. (76) (381) (1,579)
FINANCING ACTIVITIES
Note receivable from officer....................... 31 -- 271
Proceeds from borrowings........................... 1,000 4,111 --
Payments on borrowings............................. (1,010) (5,953) (3,627)
Proceeds from exercise of options and warrants..... 1 30 94
Purchase of treasury stock......................... (276) (140) (9)
Net proceeds from initial public offering.......... -- -- 10,137
Principal payments on stock warrant notes.......... (2,000) -- --
Other.............................................. -- (63) 20
------- ------- -------
Net cash provided by (used in) financing activi-
ties.............................................. (2,254) (2,015) 6,886
------- ------- -------
Net increase (decrease) in cash and cash equiva-
lents............................................. (473) 313 6,984
Cash and cash equivalents at beginning of period... 1,554 1,081 1,394
------- ------- -------
Cash and cash equivalents at end of period......... $ 1,081 $ 1,394 $ 8,378
======= ======= =======
SUPPLEMENTAL CASH FLOWS INFORMATION
Cash paid for interest............................. $ 556 $ 737 $ 542
======= ======= =======
Cash paid for income taxes......................... $ -- $ 38 $ 265
======= ======= =======
</TABLE>
See accompanying notes.
21
<PAGE>
PEERLESS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
DESCRIPTION OF THE COMPANY
Peerless Group, Inc., formerly known as TPG Holdings, Inc. (the "Company"),
is a computer software company which develops and provides banking and credit
union software systems and services. The Company markets these systems along
with the computer equipment (hardware) to financial institutions primarily
located in the United States and provides conversion, support and maintenance
services to customers using the systems. In conjunction with the initial
public offering of its common stock on October 3, 1996 (the "Offering"), TPG
Holdings, Inc. formed a new wholly owned Delaware subsidiary, Peerless Group,
Inc., and TPG Holdings, Inc. was merged into this new corporation. The
financial statements included herein reflect the merger and resulting change
in capitalization as all share and per share amounts have been retroactively
restated to reflect the merger. In conjunction with this change in
capitalization, all treasury shares outstanding were cancelled.
The consolidated financial statements of the Company include the accounts of
the Company and all its subsidiaries. All significant intercompany
transactions and balances are eliminated.
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of money market funds and certificates of
deposit and Treasury Bills with original purchased maturities of three months
or less.
DEPRECIATION
Depreciation is provided on computer and other equipment using the straight-
line method over a five- to ten-year estimated useful life.
COMPUTER SOFTWARE AND MAINTENANCE CONTRACTS
Computer software and maintenance contracts consist of fair values assigned
to acquired software and maintenance contracts. The amounts are being
amortized over the estimated economic benefit period of five years. The
amounts amortized and charged to cost of sales were approximately $1,116,000,
$308,000 and $403,000 in 1994, 1995 and 1996, respectively.
CAPITALIZED SOFTWARE
The Company expenses all software development costs as incurred until
technological feasibility has been established for the product, at which time
the costs are capitalized until the product is available for general release
to customers.
REVENUE RECOGNITION
The Company's sources of revenue and the methods of revenue recognition are
as follows:
Software license and installation fees--Revenues from software
contracts involving installation are recognized when the installation
is performed according to contractual terms, which, in the case of
long-term contracts, involves the use of the percentage-of-completion
method of accounting. Progress towards completion is measured based
upon the percentage relationship that costs incurred to date bear to
total estimated costs to complete the installation. Revenues from
license fees not involving installation are recognized upon delivery of
the software and acceptance by the customer when no significant vendor
obligations remain.
22
<PAGE>
PEERLESS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Hardware and equipment sales--Commissions and revenues from hardware
and equipment sales are recognized upon shipment by the manufacturer.
Maintenance and service fees--Revenues from maintenance and service
contracts are recognized ratably over the periods of the respective
contracts.
UNEARNED REVENUES
Deposits received and amounts billed for software licenses, installation and
hardware in advance of installation or delivery, and for annual software
maintenance prior to performance of related services, are reflected as
unearned until such amounts are recognized in accordance with the Company's
revenue recognition policy.
FINANCIAL INSTRUMENTS AND RISK CONCENTRATION
Cash and cash equivalents, trade accounts receivable, accounts payable,
accrued liabilities and unearned revenues are stated at expected settlement
values which approximate fair value.
Trade accounts receivable potentially subject the Company to concentrations
of credit risk as the Company markets its products and services primarily to
financial institutions throughout the United States. The Company performs
periodic credit evaluations of its customers' financial condition and
generally does not require collateral; however, deposits for future services
or products are frequently required.
STOCK OPTIONS
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because, as
discussed in Note 8, the alternative fair value accounting provided for under
FASB Statement No. 123, "Accounting for Stock-Based Compensation" (SFAS 123),
requires use of option valuation models that were not developed for use in
valuing employee stock options.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
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.
NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Net income (loss) per common and common equivalent share amounts are
computed using net income (loss) available for common stockholders, which is
calculated as net income (loss) less accretion of redeemable common stock, and
the weighted average number of shares of common stock and common equivalent
shares (if dilutive) using the treasury stock method. Common stock equivalents
consist of stock options and warrants. Pursuant to the Securities and Exchange
Commission Staff Accounting Bulletins, common and common equivalent shares
issued by the Company at prices below the initial public offering price during
the twelve-month period prior to the offering have been included in the
calculation as if they were outstanding for all periods presented.
23
<PAGE>
PEERLESS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3.DEBT AND CREDIT AGREEMENTS
LINE OF CREDIT
In January 1997, the Company amended its line of credit agreement with a
bank that provides for borrowings up to $2,500,000, reduced by the value of
outstanding letters of credit issued by the bank on behalf of the Company.
Borrowings using this line of credit bear interest at the bank's prime rate
(8.25% at December 31, 1996) plus 1/2% and are collateralized by the assets of
the Company's wholly owned subsidiaries. The facility will expire on February
1, 1999. No amounts were outstanding on the line of credit at December 31,
1996, and a letter of credit in the amount of $600,000 was issued by the bank
on behalf of the Company at December 31, 1996.
The line of credit agreement contains restrictive covenants, the most
significant of which relate to minimum defined annual net income, quarterly
cash flow and the restriction on the payment of cash dividends. At December
31, 1996, the Company was in compliance with such covenants.
Under the terms of the line of credit agreement, the bank was issued a
warrant to purchase at any time on or before October 1, 2002, 115,680 shares
of the Company's common stock at a purchase price of $5.42 per share. Included
in the warrant agreement is a provision allowing the bank to put the warrant
back to the Company at any time after October 1, 1999, at a price equal to the
then-current market price of the Company's common stock. No value was assigned
to the warrant at the date of issuance and no accretion has been recorded
through December 31, 1995, as the Company determined that there is no
significant value separately assignable to the warrant and put option. In June
1996, the line of credit agreement was amended such that the provision
allowing the bank to put the warrant back to the Company was terminated.
LONG-TERM DEBT DUE TO RELATED PARTIES
The Company repaid all of its debt upon completion of the Offering. Long-
term debt payable to principal stockholders consisted of the following at
December 31, 1995 (in thousands):
<TABLE>
<S> <C>
1989 Subordinated Debentures...................................... $ 433
1993 Subordinated Debentures...................................... 2,500
Acquisition notes................................................. 694
------
3,627
Less current portion.............................................. 494
------
$3,133
======
</TABLE>
The 1989 and 1993 Subordinated Debentures bore interest at 13% and 12%,
respectively, per annum, payable monthly. The Acquisition notes consisted of
two separate notes. One of the notes was for $494,000, bore interest at 8% per
annum, payable quarterly, and was repaid in March 1996. The note for the
balance of $200,000 bore interest at 6% per annum, payable quarterly.
Under the terms of the Subordinated Debentures and the Acquisition notes,
the holders of the Subordinated Debentures (the "Holders") were originally
issued warrants to purchase up to 65% of the Company's common stock. After
giving effect to several transactions, including the repurchase of warrants
for $3,776,000 in cash and notes in prior years, which were recorded as
reductions to additional paid-in-capital, the Holders had warrants to purchase
37.5% of the outstanding common stock of the Company at December 31, 1995. In
June 1996, the Holders exercised warrants to purchase 505,710 shares of the
Company's common stock, and in October 1996, in conjunction with the Offering,
they sold warrants to the underwriters to purchase 597,360 shares of the
Company's common stock. Therefore, at December 31, 1996, the Holders owned
warrants to purchase 363,308
24
<PAGE>
PEERLESS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3.DEBT AND CREDIT AGREEMENTS (CONTINUED)
shares of the Company's common stock. The warrants are exercisable at a price
of $0.025 per share and expire four years from the date of the final payment
on the Subordinated Debentures.
4.INCOME TAXES
The Company uses the liability method in accounting for income taxes as
required by Statement of Financial Accounting Standards No. 109 "Accounting
for Income Taxes". The components of the provision for income taxes are as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1995 1996
------------
<S> <C> <C>
Current:
Federal...................................................... $ 38 $ 51
State........................................................ 26 362
----- ------
Total current.............................................. 64 413
Deferred:
Federal...................................................... -- (245)
State........................................................ -- (13)
----- ------
Total deferred............................................. -- (258)
----- ------
Total provision for income taxes........................... $ 64 $ 155
===== ======
</TABLE>
The effective income tax rate on pretax income (loss) differed from the
Federal income tax statutory rate for the following reasons (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1994 1995 1996
-------- ------- -------
<S> <C> <C> <C>
Income tax charge:
At Federal statutory rate.................... $ (192) $ 644 $ 832
Unbenefitted (utilized) net operating loss-
es.......................................... 192 (644) (832)
Federal alternative minimum tax.............. -- 38 48
Deferred federal benefit relating to the
elimination of the valuation allowance...... -- -- (245)
State income tax............................. -- 26 352
-------- ------- -------
$ -- $ 64 $ 155
======== ======= =======
</TABLE>
At December 31, 1996, the Company had net operating loss carryforwards of
approximately $190,000 which expire in 2009. Given the historical trends in
generating taxable income and the expected future earnings, in the fourth
quarter of 1996 the Company determined that it was more likely than not that
its net deferred tax assets would be realized. As a result of the Company's
judgment, the valuation allowance was eliminated and a deferred tax benefit of
approximately $250,000 was recorded.
25
<PAGE>
PEERLESS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4.INCOME TAXES (CONTINUED)
The significant components of the Company's deferred tax assets and
liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1995 1996
------ -----
<S> <C> <C>
Deferred tax assets:
Alternative minimum tax credit carryforward................ $ 38 $ 85
Net operating loss carryforwards........................... 896 65
Compensation expense on options............................ 37 103
Other...................................................... 32 24
------ -----
Total deferred tax assets................................ 1,003 277
Deferred tax liabilities:
Other...................................................... 7 19
------ -----
Total deferred tax liabilities........................... 7 19
------ -----
Deferred income tax assets, net of deferred income tax lia-
bilities.................................................... 996 258
Valuation allowance.......................................... (996) --
------ -----
$ -- $ 258
====== =====
</TABLE>
5.LEASE COMMITMENTS
Minimum noncancelable lease payments required under operating leases for the
years subsequent to December 31, 1996, are as follows (in thousands):
<TABLE>
<S> <C>
1997................................................................. $303
1998................................................................. 301
1999................................................................. 253
2000................................................................. 249
2001................................................................. 96
</TABLE>
Rental expense totaled approximately $235,000, $247,000 and $269,000 for the
years ended December 31, 1994, 1995 and 1996, respectively.
6.EMPLOYEE 401(K) PLAN
The Company has a plan which provides retirement benefits under the
provisions of Section 401(k) of the Internal Revenue Code (the "Plan") for
substantially all employees who have completed a specified term of service.
The Company's contributions equal 50% of employee contributions, up to a
maximum of 6% of eligible employee compensation, as defined. Benefits under
the Plan are limited to the assets of the Plan.
Contributions by the Company charged to expense during the years ended
December 31, 1994, 1995 and 1996, were approximately $74,000, $90,000 and
$122,000, respectively.
7.COMMON STOCK
On March 7, 1994, the Company's president, a significant stockholder,
resigned his position with the Company. Under the terms of his resignation
agreement, the Company modified the terms of the stockholder's options to
purchase 72,000 shares of the Company's common stock, resulting in
compensation expense of $111,000. In addition, the stockholder obtained a put
option which required the Company to purchase up to 96,000 shares of his
holdings of the Company's common stock on April 4, 1994, and up to 50,666
shares of his holdings of the Company's common stock on June 1 in each of the
nine years thereafter, at a price per share
26
<PAGE>
PEERLESS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7.COMMON STOCK (CONTINUED)
equal to $2.60 for shares sold during 1994, with the price per share to
increase by 6% each year thereafter. The 1994 and 1995 options for 96,000 and
50,666 shares, respectively, were exercised by the stockholder. The present
value of the total amount that may be payable under the put option was
recorded as redeemable common stock and as a reduction of additional paid-in-
capital on the balance sheet. The difference between the carrying value and
redemption amount of the common stock was accreted as a charge to
stockholders' equity (deficit) over the term of the put option. Upon
consummation of the Offering, the options underlying the put feature were
exercised, thereby eliminating the payable under the put option and the
redeemable common stock.
In July 1996, the Company adopted an employee stock purchase plan under
Section 423 of the Internal Revenue Code of 1986, as amended. Under the
employee stock purchase plan, employees may make annual purchases of the
Company's common stock at a price equal to 85% of the market value of the
common stock on certain specified dates. The Company has reserved 250,000
shares of its common stock for issuance under the employee stock purchase
plan.
During 1995 and 1996, the Company issued 102,480 and 19,620 shares,
respectively, of restricted stock to employees. The Company recorded
approximately $249,000 and $102,000, respectively, of unearned compensation
for the excess of the deemed value for accounting purposes of the common stock
issued over the proceeds received upon issuance. The unearned compensation is
charged to expense ratably over the vesting period of the common stock. During
1995 and 1996, approximately $54,000 and $98,000 were charged to operations.
8.STOCK OPTIONS
The Board of Directors and the stockholders of the Company approved the
Company's Amended and Restated Stock Option Plan (the "1990 Plan") effective
as of October 1, 1990. In February, 1997, the Board of Directors of the
Company approved the Peerless Group, Inc. 1997 Stock Option Plan (the "1997
Plan"), subject to stockholder approval. The 1997 Plan will amend and restate
the 1990 Plan. The Company will reserve 450,000 shares of common stock for
future issuances under the 1997 Plan. Options under the 1997 Plan will be
granted at prices not less than the fair value of the common stock as
determined by the Compensation Committee of the Company's Board of Directors
(the "Committee") on the date of grant. Each option to be granted under the
1997 Plan will vest as determined by the Committee, but in no case can the
option term exceed ten years from the date of the option's grant.
Historically, options awarded under the 1990 Plan have generally vested 20% on
the date of grant and 20% each year thereafter, with an exercise period of
five years from the date of grant.
A summary of the Company's stock option activity and related information for
the years ended December 31 follows:
<TABLE>
<CAPTION>
1995 1996
------------------------- -------------------------
WEIGHTED- WEIGHTED-
NUMBER OF AVERAGE NUMBER OF AVERAGE
OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE
--------- -------------- --------- --------------
<S> <C> <C> <C> <C>
Outstanding at beginning
of year.................. 298,800 $1.09 348,000 $1.76
Granted................... 118,800 2.77 164,300 7.67
Exercised................. (60,000) 0.44 (79,200) 1.01
Forfeited................. (9,600) 1.93 -- --
-------- --------
Outstanding at end of
year..................... 348,000 1.76 433,100 4.14
======== ========
Exercisable at end of
year..................... 147,600 $1.48 241,420 $2.53
Weighted-average fair
value of options granted
during the year.......... $0.97 $2.21
</TABLE>
27
<PAGE>
PEERLESS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8.STOCK OPTIONS (CONTINUED)
The total options outstanding at December 31, 1996, included 264,000 options
with exercise prices ranging from $1.25 to $2.87 and a weighted-average
remaining contractual life of 1.5 years; and 169,100 options with exercise
prices ranging from $5.42 to $8.80 and a weighted-average remaining
contractual life of 4.7 years. Exercisable options at December 31, 1996,
included 207,600 options with exercise prices ranging from $1.25 to $2.87 and
a weighted-average exercise price of $1.71; and 33,820 options with exercise
prices ranging from $5.42 to $8.80 and a weighted-average exercise price of
$7.61. Under APB 25, because the exercise price of the Company's employee
stock options equals the market price of the underlying stock on the date of
grant, no compensation expense is recognized.
Pro forma information regarding net income and net income per share is
required by SFAS 123, and has been determined as if the Company had accounted
for its employee stock options under the fair value method of SFAS 123. The
fair value for these options was estimated at the date of grant using a Black-
Scholes option pricing model with the following weighted-average assumptions
for 1995 and 1996, respectively: risk-free interest rates of 7.37% and 5.79%;
volatility factors of the expected market price of the Company's common stock
of .447 and .347; and no dividend yields. In addition, the fair value of these
options was estimated based on an expected life of one year from the vesting
date using the multiple option method.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock
options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting periods. The
Company's pro forma information follows (in thousands except for net income
per share information):
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Pro forma net income....................................... $1,789 $2,170
Pro forma net income per share............................. $ 0.48 $ 0.53
</TABLE>
The pro forma disclosures only include the effect of options granted
subsequent to December 31, 1994. Accordingly, the pro forma information does
not reflect the pro forma effect of all previous stock option grants of the
Company, and thus is not indicative of future amounts until SFAS 123 is
applied to all outstanding stock options.
9.NOTE RECEIVABLE FROM OFFICER
During 1993, the Company made a loan to an officer in the amount of
$300,000. Amounts outstanding under this loan accrue interest monthly at 12%
per annum, with principal and interest due in 1996. During 1995, interest
payments on this loan totaled approximately $34,000. In June 1996, all
principal and interest amounts outstanding were repaid by the officer.
10.OPERATIONS
The Company is dependent upon International Business Machines Corporation
("IBM") as its principal computer hardware vendor for its financial
institution applications systems. Additionally, operating systems on
28
<PAGE>
PEERLESS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10.OPERATIONS (CONTINUED)
which the Company's products function have been developed by IBM. Since its
inception in 1989, the Company has been a value-added remarketer of IBM
products pursuant to standard IBM Remarketer Agreements. The Company's current
remarketing agreement with IBM expires on February 28, 1999. Both IBM and the
Company may, with or without cause, upon three months' written notice,
terminate the agreement. The Company has no reason to believe that IBM will
discontinue the remarketing agreement. The Company believes that its
relationship with IBM is good.
11.SEVERANCE CHARGE
During the year ended December 31, 1996, the Company incurred a severance
charge of $341,000 related to the resignation of a former officer ($289,000 of
which were non-cash compensation charges related to the extension of the
exercise period of certain stock options and the acceleration of vesting of
restricted stock awards).
29
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item regarding Directors of the Company is
set forth in the Proxy Statement (the "Proxy Statement") to be delivered to
the Company's stockholders in connection with the Company's 1997 Annual
Meeting of Stockholders under the heading "Election of Directors," which
information is incorporated herein by reference. The name, age and position of
each executive officer of the Company is set forth under the heading
"Executive Officers" in Part I of this Form 10-K, which information is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information under the caption "Executive Compensation" in the Proxy
Statement is incorporated herein by reference. Information contained in the
Proxy Statement under the captions "Report on Executive Compensation" and
"Stock Performance Graph" is not incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the caption "Security Ownership of Certain Beneficial
Owners and Management" in the Company's Proxy Statement is incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the caption "Certain Transactions" in the Proxy
Statement is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this Report:
1. Financial Statements:
The following Consolidated Financial Statements of the Company and its
subsidiaries and the Reports of Independent Auditors thereon appear under
Item 8 of this Report:
--Report of Ernst & Young LLP, Independent Auditors.
--Consolidated Balance Sheets as of December 31, 1995 and 1996.
--Consolidated Statements of Operations for the years ended December 31,
1994, 1995 and 1996.
--Consolidated Statements of Stockholders' Equity (Deficit) for the years
ended December 31, 1994, 1995 and 1996.
--Consolidated Statements of Cash Flows for the years ended December 31,
1994, 1995 and 1996.
--Notes to Consolidated Financial Statements.
2. Financial Statement Schedules:
All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable and therefore have been
omitted.
30
<PAGE>
3. List of Exhibits:
Except as otherwise specifically noted, the following documents are
incorporated by reference as exhibits hereto pursuant to Rule 12b-32:
(2.2) Plan of Merger dated as of June 17, 1996 by and between Peerless
Group, Inc. (the "Company") and TPG Holdings, Inc. filed as Exhibit
2.2 to the Company's Registration Statement on Form SB-2, filed
October 3, 1996 (the "Registration Statement").
(3.1) Certificate of Incorporation of the Company filed as Exhibit 3.1 to
the Registration Statement.
(3.2) Bylaws of the Company filed as Exhibit 3.2 to the Registration
Statement.
(10.1) Investment Agreement ("Investment Agreement") dated November 27,
1989 by and among the Company, Rodney L. Armstrong, Jr., Harrell J.
Stringer, Kevin W. Marsh, Allied Investment Corporation, Allied
Venture Partnership and Allied Investment Corporation II filed as
Exhibit 10.1 to the Registration Statement.
(10.2) Amendment to Investment Agreement dated April 26, 1991 by and among
the Company, Rodney L. Armstrong, Jr., Harrell J. Stringer, Allied
Investment Corporation, Allied Venture Partnership and Allied
Investment Corporation II filed as Exhibit 10.2 to the Registration
Statement.
(10.3) Second Amendment to Investment Agreement dated March 6, 1992 by and
among the Company, Allied Investment Corporation, Allied Venture
Partnership and Allied Investment Corporation II filed as Exhibit
10.3 to the Registration Statement.
(10.4) Third Amendment to Investment Agreement dated September 30, 1992 by
and among the Company, Rodney L. Armstrong, Jr., Harrell J.
Stringer, Allied Investment Corporation and Allied Investment
Corporation II filed as Exhibit 10.4 to the Registration Statement.
(10.5) Fourth Amendment to Investment Agreement dated March 3, 1993 by and
among the Company, Rodney L. Armstrong, Jr., Harrell J. Stringer,
Allied Investment Corporation and Allied Capital Corporation II
filed as Exhibit 10.5 to the Registration Statement.
(10.6) Fifth Amendment to Investment Agreement dated September 9, 1993 by
and among the Company, Rodney L. Armstrong, Jr., Harrell J.
Stringer, Allied Investment Corporation, Allied Investment
Corporation II and Allied Venture Partnership filed as Exhibit 10.6
to the Registration Statement.
(10.7) Warrant Sale Agreement and Sixth Amendment to Investment Agreement
dated November 3, 1993 by and among the Company, Rodney L.
Armstrong, Jr., Harrell J. Stringer, Allied Investment Corporation,
Allied Capital Corporation II and Allied Venture Partnership filed
as Exhibit 10.7 to the Registration Statement.
(10.8) Seventh Amendment to Investment Agreement dated September 26, 1994
by and among the Company, Rodney L. Armstrong, Jr., Allied
Investment Corporation and Allied Capital Corporation II filed as
Exhibit 10.8 to the Registration Statement.
(10.9) Eighth Amendment to Investment Agreement dated December 20, 1994 by
and among the Company, Rodney L. Armstrong, Jr., Allied Investment
Corporation, Allied Capital Corporation II and Allied Venture
Partnership filed as Exhibit 10.9 to the Registration Statement.
(10.10) Ninth Amendment to Investment Agreement dated on or about May 15,
1995 by and among the Company, Rodney L. Armstrong, Jr., Allied
Investment Corporation, Allied Capital Corporation and Allied
Capital Corporation II filed as Exhibit 10.10 to the Registration
Statement.
(10.11) Tenth Amendment to Investment Agreement dated October 12, 1995 by
an among the Company, Rodney L. Armstrong, Jr., Allied Investment
Corporation, Allied Capital Corporation and Allied Capital
Corporation II filed as Exhibit 10.11 to the Registration
Statement.
31
<PAGE>
(10.12) Eleventh Amendment to Investment Agreement dated October 13, 1995
by and among the Company, Allied Investment Corporation, Allied
Capital Corporation and Allied Capital Corporation II filed as
Exhibit 10.12 to the Registration Statement.
(10.13) Amended and Restated Consent and Agreement dated July 12, 1996 by
and among the Company, Rodney L. Armstrong, Jr., Allied Investment
Corporation, Allied Capital Corporation, Allied Capital Corporation
II and Allied Venture Partnership filed as Exhibit 10.13 to the
Registration Statement.
(10.14) Credit Agreement dated as of October 12, 1995 by and among the
Company, Peerless Systems, Inc., Peerless Systems CU Services,
Inc., Peerless Recovery Services, Inc. and State Street Bank and
Trust Company filed as Exhibit 10.14 to the Registration Statement.
(10.15) Consent and Agreement dated as of June 17, 1996 by and among the
Company, Peerless Systems, Inc., Peerless Systems CU Services,
Inc., Peerless Recovery Services, Inc., Peerless Data Services,
Inc., Rodney L. Armstrong, Jr., Kathleen M. Armstrong and State
Street Bank and Trust Company filed as Exhibit 10.15 to the
Registration Statement.
(10.16) Warrant Agreement dated October 12, 1995 by and between the Company
and State Street Bank and Trust Company filed as Exhibit 10.16 to
the Registration Statement.
(10.17) Common Stock Purchase Warrant, dated October 12, 1995 executed by
the Company in favor of State Street Bank and Trust Company filed
as Exhibit 10.17 to the Registration Statement.
(10.18) Loan Agreement dated November 28, 1989 by and between the Company
and Electronic Data Systems Corporation filed as Exhibit 10.18 to
the Registration Statement.
(10.19) First Amendment to Loan Agreement effective May 1, 1990 by and
between the Company and Electronic Data Systems Corporation filed
as Exhibit 10.19 to the Registration Statement.
(10.20) Amended and Restated Stock Option Plan of the Company effective
October 1, 1990 filed as Exhibit 10.20 to the Registration
Statement.
(10.21) Form of Associate Agreement of the Company filed as Exhibit 10.21
to the Registration Statement.
(10.22) Promissory Note dated October 1, 1993 executed by Rodney L.
Armstrong, Jr., in favor of the Company filed as Exhibit 10.22 to
the Registration Statement.
(10.23) Security Agreement dated October 1, 1993 by and between the Company
and Rodney L. Armstrong, Jr. filed as Exhibit 10.23 to the
Registration Statement.
(10.24) Office Lease Agreement (the "1212 Arapaho Lease") dated September
21, 1992 by and between the Company and Aetna Life Insurance
Company filed as Exhibit 10.24 to the Registration Statement.
(10.25) First Amendment to the 1212 Arapaho Lease dated March 5, 1995 by
and between Peerless Systems, Inc. and Aetna Life Insurance Company
filed as Exhibit 10.25 to the Registration Statement.
(10.26) Second Amendment to the 1212 Arapaho Lease dated April 5, 1996 by
and between Peerless Systems, Inc. and Aetna Life Insurance Company
filed as Exhibit 10.26 to the Registration Statement.
(10.27) Office/Showroom/Warehouse Lease Agreement dated April 5, 1996 by
and between Peerless Systems, Inc. and Aetna Life Insurance Company
filed as Exhibit 10.27 to the Registration Statement.
(10.28) Lease Agreement (the "Plano Lease") dated August 17, 1994 by and
between Peerless Systems, Inc. and Collin Creek Business Center
Associates, Ltd. filed as Exhibit 10.28 to the Registration
Statement.
32
<PAGE>
(10.29) First Amendment to the Plano Lease dated November 27, 1995 by and
between Peerless Systems, Inc. and Collin Creek One Joint Venture
filed as Exhibit 10.29 to the Registration Statement.
(10.30) Value Added Reseller Agreement (the "VAR Agreement") dated March
29, 1993 by and between the Company and NCR Corporation filed as
Exhibit 10.30 to the Registration Statement.
(10.31) CMD Addendum to VAR Agreement dated March 23, 1993 by and between
the Company and NCR Corporation filed as Exhibit 10.31 to the
Registration Statement.
(10.32) Marketing & Sales Assistance Agreement dated November 2, 1995 by
and between International Business Machines Corporation and
Peerless Systems, Inc. filed as Exhibit 10.32 to the Registration
Statement.
(10.33) Business Partner Agreement dated February 15, 1995 by and between
Peerless Systems, Inc. and International Business Machines
Corporation filed as Exhibit 10.33 to the Registration Statement.
(10.34) System Integrator Agreement effective January 1, 1994 by and
between Peerless Systems, Inc. and Document Solutions Inc. filed as
Exhibit 10.34 to the Registration Statement.
(10.35) Resignation Agreement dated March 7, 1994 by and between Peerless
Systems, Inc. and Harrell J. Stringer filed as Exhibit 10.35 to the
Registration Statement.
(10.36) Agreement Relating to Loan and Stock Pledge dated June 28, 1996 by
and among the Company, North Dallas Bank & Trust Co. and Rodney L.
Armstrong, Jr. filed as Exhibit 10.36 to the Registration
Statement.
(10.37) Resignation Agreement dated May 14, 1996 by and among the Company,
Peerless Systems, Inc. and Michael S. Jones filed as Exhibit 10.37
to the Registration Statement.
(10.38) Consent and Agreement dated July 8, 1996 by and among the Company,
Harrell J. Stringer, Harrell J. Stringer Individual Retirement
Account, Betty Stringer and Betty Stringer Individual Retirement
Account filed as Exhibit 10.38 to the Registration Statement.
(10.39) Letter of Credit effective October 18, 1995 established in favor of
IBM Credit Corporation for the account of Peerless Systems, Inc. by
State Street Bank and Trust Company filed as Exhibit 10.39 to the
Registration Statement.
(10.40) Employee Stock Purchase Plan filed as Exhibit 10.40 to the
Registration Statement.
(10.41) Amendment Number One to Consent and Agreement dated as of June 17,
1996 by and among the Company, Peerless Systems, Inc., Peerless
Systems CU Services, Inc., Peerless Recovery Services, Inc.,
Peerless Data Services, Inc., Rodney L. Armstrong, Jr., Kathleen M.
Armstrong and State Street Bank and Trust Company filed as Exhibit
10.41 to the Registration Statement.
(10.42) First Amendment to Credit Agreement dated as of August 20, 1996 by
and among the Company, Peerless Data Services, Inc., Peerless
Systems, Inc., Peerless Systems CU Services, Inc., Peerless
Recovery Services, Inc. and State Street Bank and Trust Company
filed as Exhibit 10.42 to the Registration Statement.
(10.43) Amendment Number One to Consent and Agreement dated July 18, 1996
by and among the Company, Harrell J. Stringer, Harrell J. Stringer
Individual Retirement Account, Betty Stringer and Betty Stringer
Individual Retirement Account filed as Exhibit 10.43 to the
Registration Statement.
(10.44) First Amendment to Agreement Relating to Loan and Stock Pledge
dated September 4, 1996 by and among the Company, North Dallas Bank
& Trust Co. and Rodney L. Armstrong, Jr. filed as Exhibit 10.44 to
the Registration Statement.
(10.45) Second Amendment to Credit Agreement dated as of January 15, 1997
by and among the Company, Peerless Data Services, Inc., Peerless
Systems, Inc., Peerless Systems CU Services, Inc., Peerless
Recovery Services, Inc. and State Street Bank and Trust Company
(filed herewith).
33
<PAGE>
(10.46) First Amendment to Lease Agreement dated as of September 3, 1996 by
and between Aetna Life Insurance Company and Peerless Systems, Inc.
(filed herewith).
(10.47) Peerless Group, Inc. 1997 Stock Option Plan (filed herewith).
(10.48) Business Partner Agreement dated February 21, 1997 by and between
Peerless Systems, Inc. and International Business Machines
Corporation (filed herewith).
(11.1) Statement re computation of per share earnings (filed herewith).
(21.1) Subsidiaries of the Company filed as Exhibit 21.1 to the
Registration Statement.
(27.1) Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K:
None.
34
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Peerless Group, Inc.
By: /s/ Rodney L. Armstrong, Jr.
---------------------------------
RODNEY L. ARMSTRONG, JR.
Chairman of the Board and
Chief Executive Officer
Date: March 24, 1997
-------------------------------
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Rodney L. Armstrong, Jr. Chairman of the March 24, 1997
- ------------------------------------- Board and Chief
RODNEY L. ARMSTRONG, JR. Executive Officer
/s/ Gary J. Austin President and March 24, 1997
- ------------------------------------- Director
GARY J. AUSTIN
/s/ Allen D. Fleener Director March 24, 1997
- -------------------------------------
ALLEN D. FLEENER
s/ William F. Dunbar Director March 24, 1997
- -------------------------------------
WILLIAM F. DUNBAR
/s/ David A. O'Connor Director March 24, 1997
- -------------------------------------
DAVID A. O'CONNOR
/s/ Jane C. Walsh Director March 24, 1997
- -------------------------------------
JANE C. WALSH
/s/ Douglas K. Hansen Treasurer and March 24, 1997
- ------------------------------------- Controller
DOUGLAS K. HANSEN (Principal
Accounting Officer)
35
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S>
(2.2) Plan of Merger dated as of June 17, 1996 by and between Peerless
Group, Inc. (the "Company") and TPG Holdings, Inc. filed as Exhibit
2.2 to the Company's Registration Statement on Form SB-2, filed
October 3, 1996 (the "Registration Statement").
(3.1) Certificate of Incorporation of the Company filed as Exhibit 3.1 to
the Registration Statement.
(3.2) Bylaws of the Company filed as Exhibit 3.2 to the Registration
Statement.
(10.1) Investment Agreement ("Investment Agreement") dated November 27, 1989
by and among the Company, Rodney L. Armstrong, Jr., Harrell J.
Stringer, Kevin W. Marsh, Allied Investment Corporation, Allied
Venture Partnership and Allied Investment Corporation II filed as
Exhibit 10.1 to the Registration Statement.
(10.2) Amendment to Investment Agreement dated April 26, 1991 by and among
the Company, Rodney L. Armstrong, Jr., Harrell J. Stringer, Allied
Investment Corporation, Allied Venture Partnership and Allied
Investment Corporation II filed as Exhibit 10.2 to the Registration
Statement.
(10.3) Second Amendment to Investment Agreement dated March 6, 1992 by and
among the Company, Allied Investment Corporation, Allied Venture
Partnership and Allied Investment Corporation II filed as Exhibit 10.3
to the Registration Statement.
(10.4) Third Amendment to Investment Agreement dated September 30, 1992 by
and among the Company, Rodney L. Armstrong, Jr., Harrell J. Stringer,
Allied Investment Corporation and Allied Investment Corporation II
filed as Exhibit 10.4 to the Registration Statement.
(10.5) Fourth Amendment to Investment Agreement dated March 3, 1993 by and
among the Company, Rodney L. Armstrong, Jr., Harrell J. Stringer,
Allied Investment Corporation and Allied Capital Corporation II filed
as Exhibit 10.5 to the Registration Statement.
(10.6) Fifth Amendment to Investment Agreement dated September 9, 1993 by and
among the Company, Rodney L. Armstrong, Jr., Harrell J. Stringer,
Allied Investment Corporation, Allied Investment Corporation II and
Allied Venture Partnership filed as Exhibit 10.6 to the Registration
Statement.
(10.7) Warrant Sale Agreement and Sixth Amendment to Investment Agreement
dated November 3, 1993 by and among the Company, Rodney L. Armstrong,
Jr., Harrell J. Stringer, Allied Investment Corporation, Allied
Capital Corporation II and Allied Venture Partnership filed as Exhibit
10.7 to the Registration Statement.
(10.8) Seventh Amendment to Investment Agreement dated September 26, 1994 by
and among the Company, Rodney L. Armstrong, Jr., Allied Investment
Corporation and Allied Capital Corporation II filed as Exhibit 10.8 to
the Registration Statement.
(10.9) Eighth Amendment to Investment Agreement dated December 20, 1994 by
and among the Company, Rodney L. Armstrong, Jr., Allied Investment
Corporation, Allied Capital Corporation II and Allied Venture
Partnership filed as Exhibit 10.9 to the Registration Statement.
(10.10) Ninth Amendment to Investment Agreement dated on or about May 15, 1995
by and among the Company, Rodney L. Armstrong, Jr., Allied Investment
Corporation, Allied Capital Corporation and Allied Capital Corporation
II filed as Exhibit 10.10 to the Registration Statement.
(10.11) Tenth Amendment to Investment Agreement dated October 12, 1995 by and
among the Company, Rodney L. Armstrong, Jr., Allied Investment
Corporation, Allied Capital Corporation and Allied Capital Corporation
II filed as Exhibit 10.11 to the Registration Statement.
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S>
(10.12) Eleventh Amendment to Investment Agreement dated October 13, 1995 by
and among the Company, Allied Investment Corporation, Allied Capital
Corporation and Allied Capital Corporation II filed as Exhibit 10.12
to the Registration Statement.
(10.13) Amended and Restated Consent and Agreement dated July 12, 1996 by and
among the Company, Rodney L. Armstrong, Jr., Allied Investment
Corporation, Allied Capital Corporation, Allied Capital Corporation II
and Allied Venture Partnership filed as Exhibit 10.13 to the
Registration Statement.
(10.14) Credit Agreement dated as of October 12, 1995 by and among the
Company, Peerless Systems, Inc., Peerless Systems CU Services, Inc.,
Peerless Recovery Services, Inc. and State Street Bank and Trust
Company filed as Exhibit 10.14 to the Registration Statement.
(10.15) Consent and Agreement dated as of June 17, 1996 by and among the
Company, Peerless Systems, Inc., Peerless Systems CU Services, Inc.,
Peerless Recovery Services, Inc., Peerless Data Services, Inc., Rodney
L. Armstrong, Jr., Kathleen M. Armstrong and State Street Bank and
Trust Company filed as Exhibit 10.15 to the Registration Statement.
(10.16) Warrant Agreement dated October 12, 1995 by and between the Company
and State Street Bank and Trust Company filed as Exhibit 10.16 to the
Registration Statement.
(10.17) Common Stock Purchase Warrant, dated October 12, 1995 executed by the
Company in favor of State Street Bank and Trust Company filed as
Exhibit 10.17 to the Registration Statement.
(10.18) Loan Agreement dated November 28, 1989 by and between the Company and
Electronic Data Systems Corporation filed as Exhibit 10.18 to the
Registration Statement.
(10.19) First Amendment to Loan Agreement effective May 1, 1990 by and between
the Company and Electronic Data Systems Corporation filed as Exhibit
10.19 to the Registration Statement.
(10.20) Amended and Restated Stock Option Plan of the Company effective
October 1, 1990 filed as Exhibit 10.20 to the Registration Statement.
(10.21) Form of Associate Agreement of the Company filed as Exhibit 10.21 to
the Registration Statement.
(10.22) Promissory Note dated October 1, 1993 executed by Rodney L. Armstrong,
Jr., in favor of the Company filed as Exhibit 10.22 to the
Registration Statement.
(10.23) Security Agreement dated October 1, 1993 by and between the Company
and Rodney L. Armstrong, Jr. filed as Exhibit 10.23 to the
Registration Statement.
(10.24) Office Lease Agreement (the "1212 Arapaho Lease") dated September 21,
1992 by and between the Company and Aetna Life Insurance Company filed
as Exhibit 10.24 to the Registration Statement.
(10.25) First Amendment to the 1212 Arapaho Lease dated March 5, 1995 by and
between Peerless Systems, Inc. and Aetna Life Insurance Company filed
as Exhibit 10.25 to the Registration Statement.
(10.26) Second Amendment to the 1212 Arapaho Lease dated April 5, 1996 by and
between Peerless Systems, Inc. and Aetna Life Insurance Company filed
as Exhibit 10.26 to the Registration Statement.
(10.27) Office/Showroom/Warehouse Lease Agreement dated April 5, 1996 by and
between Peerless Systems, Inc. and Aetna Life Insurance Company filed
as Exhibit 10.27 to the Registration Statement.
(10.28) Lease Agreement (the "Plano Lease") dated August 17, 1994 by and
between Peerless Systems, Inc. and Collin Creek Business Center
Associates, Ltd. filed as Exhibit 10.28 to the Registration Statement.
(10.29) First Amendment to the Plano Lease dated November 27, 1995 by and
between Peerless Systems, Inc. and Collin Creek One Joint Venture
filed as Exhibit 10.29 to the Registration Statement.
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S>
(10.30) Value Added Reseller Agreement (the "VAR Agreement") dated March 29,
1993 by and between the Company and NCR Corporation filed as Exhibit
10.30 to the Registration Statement.
(10.31) CMD Addendum to VAR Agreement dated March 23, 1993 by and between the
Company and NCR Corporation filed as Exhibit 10.31 to the Registration
Statement.
(10.32) Marketing & Sales Assistance Agreement dated November 2, 1995 by and
between International Business Machines Corporation and Peerless
Systems, Inc. filed as Exhibit 10.32 to the Registration Statement.
(10.33) Business Partner Agreement dated February 15, 1995 by and between
Peerless Systems, Inc. and International Business Machines Corporation
filed as Exhibit 10.33 to the Registration Statement.
(10.34) System Integrator Agreement effective January 1, 1994 by and between
Peerless Systems, Inc. and Document Solutions Inc. filed as Exhibit
10.34 to the Registration Statement.
(10.35) Resignation Agreement dated March 7, 1994 by and between Peerless
Systems, Inc. and Harrell J. Stringer filed as Exhibit 10.35 to the
Registration Statement.
(10.36) Agreement Relating to Loan and Stock Pledge dated June 28, 1996 by and
among the Company, North Dallas Bank & Trust Co. and Rodney L.
Armstrong, Jr. filed as Exhibit 10.36 to the Registration
(10.37) Resignation Agreement dated May 14, 1996 by and among the Company,
Peerless Systems, Inc. and Michael S. Jones filed as Exhibit 10.37 to
the Registration Statement.
(10.38) Consent and Agreement dated July 8, 1996 by and among the Company,
Harrell J. Stringer, Harrell J. Stringer Individual Retirement
Account, Betty Stringer and Betty Stringer Individual Retirement
Account filed as Exhibit 10.38 to the Registration Statement.
(10.39) Letter of Credit effective October 18, 1995 established in favor of
IBM Credit Corporation for the account of Peerless Systems, Inc. by
State Street Bank and Trust Company filed as Exhibit 10.39 to the
Registration Statement.
(10.40) Employee Stock Purchase Plan filed as Exhibit 10.40 to the
Registration Statement.
(10.41) Amendment Number One to Consent and Agreement dated as of June 17,
1996 by and among the Company, Peerless Systems, Inc., Peerless
Systems CU Services, Inc., Peerless Recovery Services, Inc., Peerless
Data Services, Inc., Rodney L. Armstrong, Jr., Kathleen M. Armstrong
and State Street Bank and Trust Company filed as Exhibit 10.41 to the
Registration Statement.
(10.42) First Amendment to Credit Agreement dated as of August 20, 1996 by and
among the Company, Peerless Data Services, Inc., Peerless Systems,
Inc., Peerless Systems CU Services, Inc., Peerless Recovery Services,
Inc. and State Street Bank and Trust Company filed as Exhibit 10.42 to
the Registration Statement.
(10.43) Amendment Number One to Consent and Agreement dated July 18, 1996 by
and among the Company, Harrell J. Stringer, Harrell J. Stringer
Individual Retirement Account, Betty Stringer and Betty Stringer
Individual Retirement Account filed as Exhibit 10.43 to the
Registration Statement.
(10.44) First Amendment to Agreement Relating to Loan and Stock Pledge dated
September 4, 1996 by and among the Company, North Dallas Bank & Trust
Co. and Rodney L. Armstrong, Jr. filed as Exhibit 10.44 to the
Registration Statement.
(10.45) Second Amendment to Credit Agreement dated as of January 15, 1997 by
and among the Company, Peerless Data Services, Inc., Peerless Systems,
Inc., Peerless Systems CU Services, Inc., Peerless Recovery Services,
Inc. and State Street Bank and Trust Company (filed herewith).
(10.46) First Amendment to Lease Agreement dated as of September 3, 1996 by
and between Aetna Life Insurance Company and Peerless Systems, Inc.
(filed herewith).
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S>
(10.47) Peerless Group, Inc. 1997 Stock Option Plan (filed herewith).
(10.48) Business Partner Agreement dated February 21, 1997 by and between
Peerless Systems, Inc. and International Business Machines Corporation
(filed herewith).
(11.1) Statement re computation of per share earnings (filed herewith).
(21.1) Subsidiaries of the Company filed as Exhibit 21.1 to the Registration
Statement.
(27.1) Financial Data Schedule (filed herewith).
</TABLE>
39
<PAGE>
EXHIBIT 10.45
SECOND AMENDMENT TO CREDIT AGREEMENT
------------------------------------
This Second Amendment to Credit Agreement (the "Amendment") is made and
entered into effective for all purposes and in all respects as of the 15th day
of January, 1997, by and among PEERLESS GROUP, INC., a Delaware corporation
("PGI"), as successor-in-interest to TPG Holdings, Inc., PEERLESS DATA
SERVICES, INC., a Texas corporation ("PDS"), PEERLESS SYSTEMS, INC., a Texas
corporation ("Peerless"), PEERLESS SYSTEMS CU SERVICES, INC., a Texas
corporation ("CU"), PEERLESS RECOVERY SERVICES, INC., a Nevada corporation
("PRS") (hereinafter collectively referred to as the "Companies"), and STATE
STREET BANK AND TRUST COMPANY, a Massachusetts trust company (the "Bank").
W I T N E S S E T H:
WHEREAS, TPG Holdings, Inc. ("TPG"), Peerless, CU and PRS entered into a
Credit Agreement with the Bank dated as of October 12, 1995 (as amended,
modified or restated through the date hereof, the "Credit Agreement") whereby
the Bank established a credit facility under which Peerless, CU and PRS have the
ability to borrow funds from the Bank for working capital purposes; and
WHEREAS, TPG, Peerless, CU, PRS and the Bank entered into a Consent and
Agreement dated as of June 17, 1996 (the "Consent") pursuant to which certain
terms of the Credit Agreement were modified; and
WHEREAS, PGI, PDS, Peerless, CU, PRS and the Bank entered into a First
Amendment to Credit Agreement (the "First Amendment") dated as of August 20,
1996 pursuant to which (i) PGI succeeded TPG as a party to the Original Credit
Agreement as a result of the merger of TPG with and into PGI, (ii) PDS became a
"Borrower" under the Credit Agreement along with Peerless, CU and PRS and (iii)
certain terms of the Credit Agreement were modified; and
WHEREAS, the Companies have requested that the Bank agree to (i) increase
the amount of capital expenditures which may be incurred by the Companies during
fiscal year 1997, (ii) extend the Maturity Date of the Revolving Credit and
(iii) reduce the interest rate on Revolving Credit Advances.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Companies do hereby agree with
the Bank as follows:
1. Section 2.01(a) of the Credit Agreement is hereby amended by deleting
Section 2.01(a) in its entirety and substituting therefor the following:
"(a) General Terms. Subject to the terms and conditions hereof and
-------------
provided that no Event of Default, or event which with the passage of time,
the giving of notice, or both, would constitute an Event of Default, has
occurred or is continuing, the Borrowers may, from time to time from the
date hereof up to February 1, 1999, (the "Maturity Date") borrow and re-
borrow from the Bank, and the Bank shall advance funds to the Borrowers as
requested "Revolving Credit Advances"); provided, however, that the
-------- -------
aggregate of (i) all outstanding Revolving Credit Advances, and (ii) the
face amount of all outstanding Letters of Credit shall not exceed the
maximum for the application period set forth below (the "Maximum Revolving
Credit").
<PAGE>
Outstanding Revolving
Period Credit Advances
------ ---------------
Closing Date to Maturity Date $2,500,000
2. Section 2.01(d) of the Credit Agreement is hereby amended by deleting
Section 2.01(d) in its entirety and substituting therefor the following:
"(d) Interest. Revolving Credit Advances made by the Bank shall bear
--------
interest prior to the occurrence of an Event of Default (computed on the
basis of actual number of days elapsed over a 360-day year) on the unpaid
principal balance outstanding from time to time at a fluctuating rate per
annum equal to the aggregate of (i) the Prime Rate, plus (ii) one half
percent (___%). From and after the occurrence of an Event of Default or
maturity (whether by demand, acceleration or otherwise), the unpaid
principal balance of the Revolving Credit shall bear interest at a
fluctuating rate per annum equal to the aggregate of (i) the Prime Rate,
plus (ii) five percent (5%). Interest shall be payable monthly in arrears
on the first Banking Day of each month commencing November 1, 1995. The
effective rate of interest shall change on each date on which the Prime
Rate shall change."
3. Section 5.08 of the Credit Agreement is hereby amended by deleting
Section 5.08 in its entirety and substituting therefor the following:
"The Companies will promptly advise the Bank of any change which
constitutes or, after notice or lapse of time or both, would constitute an
Event of Default as defined in Article VI of this Agreement, or a default
in the performance by the Companies under any covenant or agreement
contained in any other agreement to which any of them is a party or by
which it is bound which has not been cured within the applicable grace
period, if any. The Companies will also promptly give notice to the Bank of
each waiver, consent or amendment granted or made with respect to borrowed
money in excess of $50,000."
4. Section 5.10(f) of the Credit Agreement is hereby amended by deleting
Section 5.10(f) in its entirety and substituting therefor the following:
"(f) Indebtedness in respect of final judgments for the payment of
money not in excess of $50,000 in the aggregate at any time outstanding
(excluding sums covered by insurance) remaining unsatisfied and in effect
for any period of less than sixty (60) days or in respect of which a stay
of execution shall have been obtained pending an appeal or proceeding for
review;"
5. Section 5.15 of the Credit Agreement is hereby amended by deleting
Section 5.15 in its entirety and substituting therefor the following:
"None of the Companies or any of their Subsidiaries will enter into
any transaction with any person or entity affiliated with any other
Company, or any
<PAGE>
Subsidiary or any person who directly or indirectly through one or more
intermediaries controls or is controlled by or under common control with
any Company, except on terms no less favorable to such Company than would
be available in a bona fide arm's length transaction with a non-affiliated
person or entity, and provided that such Company shall have obtained the
Bank's prior written consent to any such transaction or series of related
transactions involving an amount of $50,000 or more. None of the Companies
shall make any payments to its employees whether in the form of salary,
incentive compensation, bonuses or other benefits except in the ordinary
course of business consistent with past practices."
6. Section 5.20(b) of the Credit Agreement is hereby amended by deleting
Section 5.20(b) in its entirety and substituting therefor the following:
"(b) The sum of (A)(i) the Companies' consolidated cash and Cash
Equivalents, plus (ii) the Companies' consolidated accounts receivable,
----
minus (B) the aggregate principal amount of all Revolving Credit Advances
and the aggregate face amount of all Letters of Credit outstanding under
the Revolving Credit shall be greater than or equal to the following
amounts on the following dates:
Date Minimum Liquidity
---- -----------------
December 31, 1996 $4,000,000
December 31, 1997 $4,000,000
December 31, 1998 $4,000,000"
7. Subsection (i) of ARTICLE VI of the Credit Agreement is hereby amended
by deleting subsection (i) in its entirety and substituting therefor the
following:
"(i) failure by any Company to make any payment of principal or
interest beyond the period of grace contained in any instrument or agreement to
which such Company is a party or by which it may be bound evidencing any
indebtedness for money borrowed in excess of $50,000 (unless such default is the
result of a good faith dispute arising under such agreement or instrument and
the other party or parties thereto have not accelerated the maturity of such
indebtedness), or default by any Company in the performance of any other
covenant or agreement contained in any such agreement or instrument referenced
in this subparagraph which results in the acceleration of the maturity of any
indebtedness of such Company to any other party;"
8. Section 5.21 of the Credit Agreement is hereby amended to allow the
Companies to make or incur consolidated Capital Expenditures, without the prior
written consent of the Bank, up to the maximum aggregate amount of Two Million
Dollars ($2,000,000) during fiscal year 1997.
9. Contemporaneously with the execution hereof, the Borrowers are
executing and delivering to the Bank an Amended and Restated Revolving Credit
Note in substantially the form attached hereto.
Except as amended hereby, the Credit Agreement and it terms and provisions
are hereby ratified and confirmed for all purposes and in all respects as of the
date hereof.
<PAGE>
This Amendment may be executed by facsimile transmission and in one or more
counterpart copies, each of which shall be an original, but all of which taken
together shall constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties have caused their authorized
representatives to execute this Amendment as of the date first written above.
PEERLESS GROUP, INC.,
as successor-in-interest to TPG Holdings, Inc.
By: /s/ GARY J. AUSTIN
---------------------------------------------
Name: Gary J. Austin
Title: President
PEERLESS DATA SERVICES, INC.
By: /s/ GARY J. AUSTIN
---------------------------------------------
Name: Gary J. Austin
Title: CEO
PEERLESS SYSTEMS, INC.
By: /s/ GARY J. AUSTIN
---------------------------------------------
Name: Gary J. Austin
Title: CEO
PEERLESS SYSTEMS CU SERVICES, INC.
By: /s/ GARY J. AUSTIN
---------------------------------------------
Name: Gary J. Austin
Title: CEO
PEERLESS RECOVERY SERVICES, INC.
By: /s/ GARY J. AUSTIN
---------------------------------------------
Name: Gary J. Austin
Title: CEO
STATE STREET BANK AND TRUST COMPANY
By: /s/ MICHAEL ST. JEAN
---------------------------------------------
Name: Michael St. Jean
Title: V.P.
<PAGE>
EXHIBIT 10.46
FIRST AMENDMENT TO LEASE AGREEMENT
----------------------------------
This First Amendment to Lease Agreement (the "First Amendment") is entered
into as of (but not necessarily on) this 3rd day of September 1996, by and
between AETNA LIFE INSURANCE COMPANY (the "Landlord") and PEERLESS SYSTEMS, INC.
(the "Tenant").
WHEREAS, Landlord and Tenant have heretofore entered into that certain
Lease Agreement dated April 5, 1996 (the "Original Lease"), covering
approximately 4,808 square feet of net rentable area (the "Original Premises")
located at 1300 E Arapaho, Suite 107 (the "Building") within Landlord's Project
commonly known as Richardson Business Center. The Original Lease hereinafter is
sometimes referred to as the "Lease"; and
WHEREAS, the Lease Term expires on June 30, 2001 (the "Expiration Date");
and
WHEREAS, Tenant desires to lease coterminous and Landlord desires to let
unto Tenant that certain 3,699 square feet of net rentable area contiguous to
the Original Premises (the "Expansion Premises") as depicted in EXHIBIT "A"
-----------
attached hereto and incorporated herein for all purposes; and
WHEREAS, Landlord and Tenant desire to amend the Lease as and upon the
terms and conditions as herein provided.
NOW THEREFORE, in consideration of the mutual covenants herein set forth
and of other good and valuable consideration received by Landlord, Landlord and
Tenant hereby agree as follows:
1. EFFECTIVE DATE. As used herein the term "Effective Date" shall be
--------------
January 1, 1997, or upon Substantial Completion of the improvements (as
hereinafter defined), whichever shall last occur; provided, however, that if
there shall be a delay in Substantial Completion of the Improvements as a result
of (i) Tenant's changes in the plans and specifications, (ii) Tenant's failure
to furnish information or approvals when required, (iii) the performance of any
work contemplated herein by a contractor or agent employed by Tenant, or (iv)
unreasonable interference by Tenant or Tenant's agents, employees or
contractors, then the Effective Date shall be accelerated by the number of days
of such delay. Upon request of either party hereto, Landlord and Tenant agree
to execute and deliver a written declaration in expressing the Effective Date
hereof.
Reference herein to "Substantial Completion" shall mean the date on which
construction and installation of the Improvements as provided in Paragraph 4 of
this First Amendment have been substantially completed, as evidenced by the
issuance in good faith of a certificate of substantial completion by Landlord's
architect and have been inspected and approved for occupancy by the appropriate
governmental authority having jurisdiction over the Project, notwithstanding the
fact that minor details of construction, mechanical adjustments or decorations
which do not materially interfere with Tenant's use and enjoyment of the
Premises remain to be performed (items normally referred to as "punch list"
items).
2. PREMISES. From and after the Effective Date, the term "Premises" (as
--------
defined in the Original Lease) shall include the Expansion Premises for all
purposes. The "Premises" shall thereafter be comprised of the Original Premises
and the Expansion Premises and shall be stipulated for all purposes to contain
8,507 square feet of net rentable area.
3. BASIC RENTAL. From and after the Effective Date, Basic Rental shall
------------
be amended to be an amount equal to $6,457.32 per month; each such monthly
installment shall be due and payable as provided in the Original Lease.
4. TENANT IMPROVEMENTS. Landlord agrees to construct, at Landlord's sole
-------------------
cost and expense, except as herein provided, those tenant improvements (the
"Improvements") within the Premises as described on the plans and
specifications, attached hereto as EXHIBIT "B" and made a part hereof for all
-----------
purposes. Unless specifically noted otherwise, the Improvements shall be
consistent with building grade standards and specifications. Any change orders
to the Improvements shall be approved in writing by both the Landlord and the
Tenant and any
<PAGE>
additional costs arising as a result of any such change order shall be paid in
cash by Tenant to Landlord with full execution of such change order.
5. Tenant agrees to look solely to the estate and interest of Landlord in
the Project for the collection of any judgment or other judicial process
requiring the payment of money by Landlord in the event of a default or breach
by Landlord with respect to this Lease, and no other assets of Landlord shall be
subject to levy of execution or other procedures for the satisfaction of
Tenant's rights.
6. All defined terms used herein shall have the meaning(s) set forth in
the Lease except as herein separately defined or specifically amended.
7. Except as hereby expressly amended, clarified, or nullified, all
terms, conditions and provisions of the Lease remain in full force and effect as
therein as forth and as so amended, clarified or nullified and are hereby
ratified as of the date hereof.
IN WITNESS WHEREOF, this First Amendment is effective as of the date and
year first above set forth.
LANDLORD: AETNA LIFE INSURANCE COMPANY
BY: ALLEGIS REALTY INVESTORS LLC,
IT'S INVESTMENT ADVISOR AND AGENT
/s/ MARK CYPERT
- --------------------------------------------
Name:
Title:
TENANT: PEERLESS SYSTEMS, INC.
/s/ GARY J. AUSTIN
- --------------------------------------------
Name:
Title: President
<PAGE>
EXHIBIT 10.47
================================================================================
* * * * *
PEERLESS GROUP, INC.
1997 STOCK OPTION PLAN
As Amended and Restated
February 18, 1997
* * * * *
================================================================================
<PAGE>
PEERLESS GROUP, INC.
1997 STOCK OPTION PLAN
================================================================================
TABLE OF CONTENTS
SECTION SUBJECT MATTER PAGE
- ------- -------------- ----
1. Purpose of the Plan.....................................1
2. Stock Subject to the Plan...............................2
3. Administration of the Plan..............................2
4. Types of Awards Under the Plan..........................4
5. Persons to Whom Options Shall be Granted................4
6. Factors to Be Considered in Granting Options............4
7. Time of Granting Options................................5
8. Terms and Conditions of Options.........................5
9. Medium and Time of Payment.............................12
10. Rights as a Shareholder................................13
11. Employment Status......................................13
12. Adjustments or Changes in Capitalization...............14
13. Investment Purpose.....................................17
14. No Obligation to Exercise Option.......................17
15. Modification, Extension, and Renewal of Options........17
16. Effective Date of the Plan.............................18
17. Termination of the Plan................................18
18. Amendment of the Plan..................................18
19. Tax Withholding........................................18
20. Indemnification of Committee...........................19
21. Application of Funds...................................19
22. Governing Law..........................................19
23. Effect on Previously Granted Options...................19
<PAGE>
PEERLESS GROUP, INC.
1997 STOCK OPTION PLAN
THIS PEERLESS GROUP, INC. 1997 STOCK OPTION PLAN (The "Plan") is made and
entered into as of the 18th day of February, 1997, by PEERLESS GROUP, INC., a
Delaware corporation (the "Company"). The Plan shall be effective on the date
it is approved by the Company's stockholders (the "Effective Date").
W I T N E S S E T H
WHEREAS, the Company established and adopted the PEERLESS SYSTEMS, INC.
STOCK OPTION PLAN, an incentive stock option plan, originally effective January
1, 1990, for the benefit of the eligible employees of the Company; and
WHEREAS, the Plan is intended to qualify under Section 422 (formerly
Section 422A) of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the Plan was amended and restated as the PEERLESS SYSTEMS, INC.
AMENDED AND RESTATED STOCK OPTION PLAN, effective as of October 1, 1990; and
WHEREAS, the Company merged with, and assumed the name Peerless Group, Inc.
on or about August 1, 1996; and
WHEREAS, the Company desires to make certain amendments and modifications
to the Plan and to acknowledge the Company's name change.
NOW, THEREFORE, effective as of February 18, 1997, and as otherwise
provided herein, the Company hereby amends and restates the Plan upon the
following terms and conditions:
1. PURPOSE OF THE PLAN. The Plan is intended to encourage ownership of
the common stock of the Company by certain officers, directors, employees and
advisors of the Company, including, without limitation, any division of the
Company, or any Subsidiary or Subsidiaries of the Company (as hereinafter
defined), in order to provide additional incentive for such persons
("Optionees") to promote the success and the business of the Company or its
Subsidiaries and to encourage them to remain in the employ of the Company or its
divisions or Subsidiaries by providing such persons opportunities to benefit
from appreciation of the common stock of the Company through the issuance of
stock options to such persons in accordance with the terms of the Plan. It is
further intended that options granted pursuant to this Plan shall constitute
either incentive stock options (the
PEERLESS GROUP, INC.
1997 STOCK OPTION PLAN
Page 1
<PAGE>
"Incentive Options") within the meaning of Section 422 of the Code, or options
which do not constitute Incentive Options (the "Nonqualified Options")
(Incentive Options and nonqualified Options shall collectively be referred to as
the "Options"), as determined by the Committee (as hereinafter defined) at the
time of issuance of such options. As used herein, the term Subsidiary or
Subsidiaries shall mean (i) any corporation (other than the employer
corporation) in an unbroken chain of corporations beginning with the Company if,
at the time of granting of the Option, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain, (ii) any limited partnership, if the Company
or any corporation described in item (i) above owns a majority of the general
partnership interests and a majority of the limited partnership interests
entitled to vote on the removal and replacement of the general partner, and
(iii) any partnership or limited liability company, if the partners or members
thereof are composed only of the Company, any corporation listed in item (i)
above or any limited partnership listed in item (ii) above.
2. STOCK SUBJECT TO THE PLAN. Subject to adjustment as provided in
Section 12 hereof, the maximum number of shares of Common Stock that may be
issued pursuant to Options granted under the Plan on and after the Effective
Date is (a) Four Hundred Fifty Thousand (450,000) shares; plus (b) shares of
Common Stock previously subject to Options which are forfeited, terminated,
settled in cash in lieu of Common Stock, or expire unexercised; plus (c) without
duplication for shares counted under the immediately preceding clause, a number
of shares of Common Stock equal to the number of shares repurchased by the
Company in the open market or otherwise and having an aggregate repurchase price
no greater than the amount of cash proceeds received by the Company from the
sale of shares of Common Stock under the Plan; plus (d) any shares of Common
Stock surrendered to the Company in payment of the exercise price of Options
issued under the Plan. Shares to be issued may be made available from
authorized but unissued Common Stock, Common Stock held by the Company in its
treasury, or Common Stock purchased by the Company on the open market or
otherwise. During the term of this Plan, the Company will at all times reserve
and keep available the number of shares of Common Stock that shall be sufficient
to satisfy the requirements of this Plan.
3. ADMINISTRATION OF THE PLAN.
(a) GENERAL. The Plan shall be administered and interpreted by an
administrative committee appointed by the Board of Directors of the Company (the
"Committee"). The Committee shall consist of not fewer than two (2) persons.
Any member of
PEERLESS GROUP, INC.
1997 STOCK OPTION PLAN
Page 2
<PAGE>
the Committee may be removed at any time, with or without cause, by resolution
of the Board. Any vacancy in the membership of the Committee may be filled by
appointment by the Board.
Membership on the Committee shall be limited to those members of the Board
who are "Non-employee Directors" as defined in Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 (the "1934 Act"), and who are "Outside
Directors" under Section 162(m) of the Code. The Committee shall select one of
its members to act as its Chairman. A majority of the Committee shall
constitute a quorum, and the act of a majority of the members of the Committee
present at a meeting at which a quorum is present shall be the act of the
Committee. The Committee may act by such meeting or take action by unanimous
written consent or by means of a meeting held by conference telephone call
pursuant to which all persons participating in the meeting can hear each other.
(b) PLAN INTERPRETATION AND ADMINISTRATION. Any interpretation,
determination or other action made or taken by the Committee with respect to the
Plan, or Options issued thereunder shall be final, binding and conclusive on all
interested parties.
The Committee shall have full authority, in its discretion, to determine
those key employees who shall participate in the Plan, and the number of shares
to be covered by options granted to each participant and any and all terms and
provisions of the Options granted hereunder. Upon issuing each Option under the
Plan, the Committee shall report to the Board of Directors the names and
information with respect to all Options granted.
The Committee may adopt such rules and regulations for the administration
of the Plan as it deems advisable and shall have full authority, in its
discretion, to amend such rules and regulations. The Committee may request
advice or assistance or employ such persons as it deems necessary for proper
administration of the Plan. No member of the Board of Directors or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Option granted pursuant to the Plan.
With respect to restrictions in the Plan that are based on the requirements
of Rule 16b-3 promulgated under the 1934 Act, Section 422 of the Code, Section
162(m) of the Code, the rules of any exchange or inter-dealer quotation system
upon which the company's securities are listed or quoted, or any other
applicable law, rule or restriction (collectively, 'Applicable Law'), to the
extent that any such restrictions are no longer required by Applicable Law, the
Committee shall have the sole discretion and authority to grant options that are
not subject to
PEERLESS GROUP, INC.
1997 STOCK OPTION PLAN
Page 3
<PAGE>
such mandated restrictions and/or to waive any such mandated restrictions with
respect to outstanding Options.
(c) CHANGES IN APPLICABLE LAW. If the Applicable Laws relating to Options
are changed, altered or amended during the term of the Plan, the Board of
Directors shall have full authority and power to alter or amend the Plan with
respect to Options to conform to such changes in Applicable Law without the
necessity of obtaining further shareholder approval thereof, unless any such
change shall require such approval.
4. TYPES OF AWARDS UNDER THE PLAN. Subject to the applicable provisions
of the Plan, awards under the Plan may be in the form of Incentive Options or
Nonqualified Options, or a combination thereof.
5. PERSONS TO WHOM OPTIONS SHALL BE GRANTED.
(a) NONQUALIFIED OPTIONS. Nonqualified Options shall be granted only to
officers, directors, employees and advisors of the Company or a Subsidiary who,
in the judgment of the Committee, are responsible for or contribute to the
management or success of the Company or a Subsidiary and who, at the time of the
granting of such Nonqualified Options, are either officers, directors, employees
or advisors of the Company or a Subsidiary. For the purposes of this Plan,
"advisor" means any person performing advisory or consulting services for the
Company or any Subsidiary, with or without compensation, to whom the Company
chooses to grant an Option in accordance with the Plan, so long as bona fide
services are rendered by such person and such services have not been rendered in
connection with the offer or sale of securities in a capital raising
transaction.
(b) INCENTIVE OPTIONS. Incentive Options shall be granted only to
employees of the Company or a Subsidiary who, in the judgment of the Committee,
are responsible for or contribute to the management or success of the Company or
a Subsidiary and who, at the time of the granting of such Incentive Option are
either an employee of the Company or a Subsidiary. Except as set forth in
Section 8(g) hereof, no person shall be granted an Incentive Option who,
immediately before such Incentive Option was granted, would own more than ten
percent (10%) of the total combined voting power or value of all classes of
capital stock of the Company (a "10% Shareholder").
(c) MAXIMUM INDIVIDUAL GRANTS. No Optionee may receive, during any fiscal
year of the Company, Options covering an aggregate of more than one hundred
thousand (100,000) shares of Common Stock.
6. FACTORS TO BE CONSIDERED IN GRANTING OPTIONS. In
PEERLESS GROUP, INC.
1997 STOCK OPTION PLAN
Page 4
<PAGE>
making any determination as to individual persons to whom Options shall be
granted and the number of shares to be covered by such Options, the Committee
shall take into account the duties and responsibilities of the respective
officers, directors, employees, or advisors, their current and potential
contributions to the success of the Company or a Subsidiary, and such other
factors as the Committee shall deem relevant for purposes of accomplishing the
intents and purpose of the Plan.
7. TIME OF GRANTING OPTIONS. The granting of an Option shall be effected
only pursuant to a written option agreement (the "Option Agreement") acceptable
in form and substance to the Committee, subject to the terms and conditions
hereof, including, without limitation, those provisions set forth in Section 8
hereof, shall have been duly executed and delivered by or on behalf of the
Company and the person to whom such Option shall be granted. No person shall
have any rights under the Plan until such time, if any, as a written Option
Agreement shall have been duly executed and delivered as set forth in this
Section 7.
8. TERMS AND CONDITIONS OF OPTIONS. All Options granted pursuant to this
Plan must be granted within ten (10) years from the date the Plan is adopted by
the Board of Directors of the Company. Each Option Agreement governing an
Option granted hereunder shall be subject to the following minimum terms and
conditions, and shall contain such other terms and conditions, not inconsistent
therewith, that the Committee shall deem appropriate:
(a) NUMBER OF SHARES. Each Option shall state the number of shares of
Common Stock covered and represented thereby.
(b) TYPE OF OPTION. Each Option shall state whether it is intended to be
an Incentive Option or a Nonqualified Option.
(c) OPTION PERIOD.
(1) General. Each Option shall state the date upon which it is
-------
granted. Each Option shall be exercisable in whole or in part during such period
as is provided under the terms of the Option, subject to any vesting period set
forth in the Option, but in no event shall an Option be exercisable either in
whole or in part after the expiration of ten (10) years from the date of grant
thereof; provided, however, if an Incentive Option is granted to a 10%
Shareholder, such Incentive Option shall not be exercisable more than five (5)
years from the date of grant thereof. If the Committee imposes conditions upon
the exercise of an Option, then subsequent to the date of grant of such Option,
the Committee may, in its sole discretion, accelerate the date on which all or
any portion of the Option may be exercised.
PEERLESS GROUP, INC.
1997 STOCK OPTION PLAN
Page 5
<PAGE>
(2) Termination of Employment. Except as otherwise provided in case of
-------------------------
Disability (as hereinafter defined), death or Change of Control (as hereinafter
defined), all Options held by an Optionee who is an employee of the Company or a
Subsidiary shall terminate and no longer be exercisable after thirty (30) days
following the date of termination of such Optionee's employment with the Company
or a Subsidiary; provided further, however, that no Option shall be exercisable
after the expiration of ten (10) years from the date it is granted, subject to
the limitation that no Incentive Option granted to a 10% Shareholder shall be
exercisable after the expiration of five (5) years from the date it is granted.
(3) Cessation of Service as Director or Advisor. Except as otherwise
-------------------------------------------
provided in case of Disability, death or Change of Control, all Options held by
an Optionee who was a director or advisor of the Company or a Subsidiary shall
terminate and no longer be exercisable after thirty (30) days following the date
such Optionee ceases to be a director or advisor of the Company or such
Subsidiary; provided further, however, that no Option shall be exercisable after
the expiration of ten (10) years from the date it is granted.
(4) Disability. If an Optionee's employment is terminated by reason of the
----------
permanent and total Disability (as hereinafter defined) of such Optionee or if
an Optionee who is a director or advisor of the Company or a Subsidiary ceases
to serve as a director or advisor by reason of the permanent and total
Disability of such Optionee, all Options held by such Optionee shall terminate
and no longer be exercisable after thirty (30) days following the date such
Optionee qualifies for long-term disability benefits under the Company's
disability plan or insurance policy, or, if no such plan or policy exists or is
applicable to Optionee, ninety (90) days following the date of termination of
the Optionee's employment or the date such Optionee ceases to be a director or
advisor of the Company or such Subsidiary, as the case may be, subject to (i)
the condition that no Option shall be exercisable after the expiration of ten
(10) years from the date it is granted and (ii) to the further condition that no
Incentive Option granted to a 10% Shareholder shall be exercisable after the
expiration of five (5) years from the date it is granted. For purposes of this
Plan, the term "Disability" means that an Optionee is qualified for long-term
disability benefits under the Company's disability plan or insurance policy; or,
if no such plan or policy is then in existence or applicable to
PEERLESS GROUP, INC.
1997 STOCK OPTION PLAN
Page 6
<PAGE>
Optionee, that the Optionee, because of ill health, physical or mental
disability or any other reason beyond his or her control, is unable to perform
his or her duties of employment for a period of ninety (90) consecutive days, as
determined in good faith by the Committee; provided that, with respect to any
-------- ----
Incentive Stock Option, "Disability" shall have the meaning given it under the
rules governing Incentive Options under the Code.
(5) Death. If an Optionee dies while in the employ of the Company or a
-----
Subsidiary, or while serving as a director or advisor of the Company or such
Subsidiary, and shall not have fully exercised Options granted pursuant to the
Plan, such Options may be exercised in whole or in part at any time within one
(1) year after the Optionee's death, by the executors or administrators of the
Optionee's estate or by any person or persons who shall have acquired the
Options directly from the Optionee by bequest or inheritance, but only to the
extent that the Optionee was entitled to exercise such Option at the date of
such Optionee's death, subject to (i) the condition that no Option shall be
exercisable after the expiration of ten (10) years from the date it is granted
and (ii) to the further condition that no Incentive Option granted to a 10%
Shareholder shall be exercisable after the expiration of five (5) years from the
date it is granted.
(6) Acceleration and Exercise Upon Change of Control. Notwithstanding the
------------------------------------------------
preceding provisions of this Section 8(c), if any Option granted under the Plan
provides for either (a) an incremental vesting period whereby such Option may
only be exercised in installments as each incremental vesting period is
satisfied or (b) a delayed vesting period whereby such Option may only be
exercised after the lapse of a specified period of time, such as after the
expiration of one (1) year, such vesting period shall be accelerated upon the
occurrence of a Change of Control (as hereinafter defined) of the Company, so
that such Option shall thereupon become exercisable immediately in part or in
its entirety by the holder thereof, as such holder shall elect. For the
purposes of this Plan, a "Change of Control" shall be deemed to have occurred
if:
(i) the acquisition of beneficial ownership (within the meaning of Rule
13d-3 under the Securities Exchange Act of 1934 (the "1934 Act")) of an
aggregate of 20% of the voting power of the Company's outstanding voting
securities by any person or group (as such term is used in Rule 13d-5 under
the 1934 Act) who beneficially owned less than 15% of the voting power of
the Company's outstanding voting securities on the date of this Plan, or
the acquisition of beneficial
PEERLESS GROUP, INC.
1997 STOCK OPTION PLAN
Page 7
<PAGE>
ownership of an additional 5% of the voting power of the Company's
outstanding voting securities by any person or group who beneficially owned
at least 15% of the voting power of the Company's outstanding voting
securities on the date of this Plan; provided, however, that
-------- -------
notwithstanding the foregoing, an acquisition shall not constitute a Change
of Control hereunder if the acquiror is (w) Rodney L. Armstrong, Jr. or a
corporation, partnership or limited liability company owned solely by him,
(x) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company and acting in such capacity, (y) a Subsidiary
of the Company or a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of voting securities of the Company or (z) any other person whose
acquisition of shares of voting securities is approved in advance by a
majority of the Continuing Directors (defined below).
(ii) the cessation of control (by virtue of their not constituting a
majority of directors) of the Board of Directors of the Company by
individuals (the "Continuing Directors") who either (x) at the Effective
Date were directors or (y) become directors after the Effective Date and
whose election or nomination for election by the Company's shareholders was
approved by a vote of at least two-thirds of the directors then in office
who were directors at the Effective Date or whose election or nomination
for election was previously so approved;
(iii) Following the Effective Date of this Amendment and Restatement of
the Plan, the Company is merged or consolidated with another corporation
and as a result of such merger or consolidation less than forty percent
(40%) of the outstanding voting securities of the surviving or resulting
corporation shall then be owned in the aggregate by the former shareholders
of the Company;
(iv) A tender offer or exchange offer is made and consummated for the
ownership of securities of the Company representing twenty percent (20%) or
more of the combined voting power of the Company's then outstanding voting
securities;
(v) The Company transfers more than fifty percent (50%) of its assets,
or the last of a series of transfers results in the transfer of more than
fifty percent (50%) of the assets of the Company, to another
PEERLESS GROUP, INC.
1997 STOCK OPTION PLAN
Page 8
<PAGE>
corporation that is not directly or indirectly wholly-owned by the
Company. For purposes of this subsection 8(c)(6)(v), the determination of
what constitutes more than fifty percent (50%) of the assets of the
Company shall be determined based on the sum of the values attributed to
(i) the Company's real property as determined in good faith by the
Committee, and (ii) the net book value of all other assets of the
Company, each determined as of the date of the transaction involved; or
(vi) in a Title 11 bankruptcy proceeding, the appointment of a
trustee or the conversion of a case involving the Company to a case under
Chapter 7.
In addition, upon the occurrence of a Change of Control, any Options
previously granted under the Plan, to the extent not already exercised, may be
exercised in whole or in part, either immediately or at any time during the term
of the Option, as such holder shall elect.
(d) OPTION PRICES. The purchase price or prices of the shares of the
Common Stock which shall be offered to any person under the Plan and covered by
an Option shall be not less than one hundred percent (100%) of the fair market
value of the Common Stock at the time of granting such Option or such greater
purchase price as may be determined by the Committee at the time of granting
such Option; provided, however, if an Incentive Option is granted to a 10%
Shareholder, the purchase price of the shares of Common Stock covered by such
Incentive Option shall not be less than one hundred ten percent (110%) of the
fair market value of such shares on the date such Incentive Option is granted.
During such time as the Common Stock is not listed upon an established stock
exchange, the fair market value per share shall be deemed to be the closing
sales price of the Common Stock on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") on the date the Option is granted,
as reported by NASDAQ, if the Common Stock is so quoted, and if not so quoted,
the mean between dealer "bid" and "ask" prices of the Common Stock in the New
York over-the-counter market on the date the Option is granted, as reported by
the National Association of Securities Dealers, Inc. If the Common Stock is
listed upon an established stock exchange or exchanges, such fair market value
shall be deemed to be the highest closing price of the Common Stock on such
stock exchange or exchanges on the date the Option is granted or, if no sale of
the Common Stock of the Company shall have been made on an established stock
exchange on such day, on the next preceding day on which there was a sale of
such stock. If there is no market price for the Common Stock, then the Board of
Directors and the Committee may, after taking all relevant facts into
consideration, determine the fair market value of the Common Stock.
PEERLESS GROUP, INC.
1997 STOCK OPTION PLAN
Page 9
<PAGE>
(e) EXERCISE OF OPTIONS. To the extent that a holder of an Option has a
current right to exercise, such Option may be exercised from time to time by
written notice to the Company at its principal place of business. Such notice
shall state the election to exercise the Option, the number of whole shares in
respect of which it is being exercised, shall be signed by the person or persons
so exercising the Option, and shall contain any investment representation
required by Section 8(i) hereof. Such notice shall be accompanied by payment of
the full purchase price of such shares as provided for in Section 9 hereof and
by the Option Agreement evidencing the Option. In addition, if the Option shall
be exercised, pursuant to either Section 8(c)(4) or Section 8(c)(5) hereof, by
any person or persons other than the Optionee, such notice shall also be
accompanied by appropriate proof of the right and authority of such person or
persons to exercise the Option. The Company shall deliver a certificate or
certificates representing such shares as soon as practicable after the aforesaid
notice and payment of such shares shall be received; provided that if the
Optionee has exercised an Incentive Option, the Company may at its option retain
physical possession of the certificate evidencing the shares acquired upon
exercise until the expiration of the holding periods described in Section
422(a)(1) of the Code. The certificate or certificates for the shares as to
which the Option shall have been so exercised shall be registered in the name of
the person or persons so exercising the Option. In the event the Option shall
not be exercised in full, the Secretary of the Company shall endorse or cause to
be endorsed on the Option the number of shares which has been exercised
thereunder and the number of shares that remain exercisable under the Option and
return such Option Agreement to the holder thereof.
(f) TRANSFERABILITY OF OPTIONS. Except as otherwise provided in this
Section 8(f), an Option granted pursuant to the Plan shall be exercisable only
by the Optionee or the Optionee's court appointed guardian as set forth in
Section 8(c)(4) hereof during the Optionee's lifetime. Incentive Options may
not be transferred or assigned other than by will or the laws of descent and
distribution and may be exercised during the lifetime of the Optionee only by
the Optionee or the Optionee's legally authorized representative, and each
Option Agreement in respect of an Incentive Stock Option shall so provide. The
designation by an Optionee of a beneficiary will not constitute a transfer of
the Option. The Committee may waive or modify any limitation contained in the
preceding sentences of this Section 8(f) that is not required for compliance
with Section 422 of the Code. The Committee may, in its discretion, authorize
all or a portion of a Nonqualified Option to be granted to an Optionee to be on
terms which permit transfer by such Optionee to (i) the spouse,
PEERLESS GROUP, INC.
1997 STOCK OPTION PLAN
Page 10
<PAGE>
children or grandchildren of the Participant ("Immediate Family Members"), (ii)
a trust or trusts for the exclusive benefit of such Immediate Family Members, or
(iii) a partnership in which such Immediate Family Members are the only
partners, (iv) an entity exempt from federal income tax pursuant to Section
501(c)(3) of the Code or any successor provision, or (v) a split interest trust
or pooled income fund described in Section 2522(c)(2) of the Code or any
successor provision, provided that (x) there shall be no consideration for any
-------------
such transfer, (y) the Option Agreement pursuant to which such Nonqualified
Option is granted must be approved by the Committee and must expressly provided
for transferability in a manner consistent with this Section, and (z) subsequent
transfers of transferred Nonqualified Options shall be prohibited except those
by will or the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined in the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended. Following transfer, any such
Nonqualified Option shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer, provided that for
purposes of Sections 2, 9, 11, 12, 14, 15 and 18 hereof the term "Optionee"
shall be deemed to include the transferee. The events of termination of Options
shall continue to be applied with respect to the original Optionee, following
which the Nonqualified Options shall be exercisable by the transferee only to
the extent and for the periods specified in the Option Agreement. The Committee
and the Company shall have no obligation to inform any transferee of a
Nonqualified Option of any expiration, termination, lapse or acceleration of
such Option. The Company shall have no obligation to register with any federal
or state securities commission or agency any Common Stock issuable or issued
under a Nonqualified Option that has been transferred by an Optionee under this
Section 8(f).
(g) LIMITATIONS ON 10% SHAREHOLDERS. No Incentive Option may be granted
under the Plan to any 10% Shareholder unless (i) such Incentive Option is
granted at an option price not less than one hundred ten percent (110%) of the
fair market value of the shares on the date such Incentive Option is granted and
(ii) such Incentive Option expires on a date not later than five (5) years from
the date such Incentive Option is granted.
(h) LIMITS ON VESTING OF INCENTIVE OPTIONS. An individual may be granted
one or more Incentive Options, provided that the aggregate fair market value (as
determined at the time such Incentive Option is granted) of the Common Stock
with respect to which Incentive Options are exercisable for the first time by
such individual during any calendar year shall not exceed $100,000. To the
extent the $100,000 limitation in the preceding sentence is exceeded, such
Option shall be treated as an Option which is not an Incentive Option.
PEERLESS GROUP, INC.
1997 STOCK OPTION PLAN
Page 11
<PAGE>
(i) COMPLIANCE WITH SECURITIES LAWS. The Plan and the grant and exercise
of the rights to purchase of Common Stock hereunder, and the Company's
obligations to sell and deliver shares of Common Stock upon the exercise of
rights to purchase shares, shall be subject to all applicable federal and state
laws and related rules and regulations, and to such approvals by any regulatory
or governmental agency as may, in the opinion of counsel for the Company, be
required, and shall also be subject to all applicable rules and regulations of
any stock exchange or consolidated trading system upon which the Common Stock of
the Company may then be listed. At the time of exercise of any Option, the
Company may require the Optionee to execute any documents or take any action
which may be then necessary to comply with the Securities Act of 1933, as
amended (the "1933 Act"), and the rules and regulations promulgated thereunder,
or any other applicable federal or state laws regulating the sale and issuance
of securities, and the Company may, if it deems it necessary, include provisions
in the Option Agreements to assure such compliance. The Company may, from time
to time, change its requirements with respect to enforcing compliance with
federal and state securities laws, including the request for and enforcement of
letters of investment intent, such requirements to be determined by the Company,
acting in the judgment of and through the Committee, as necessary from time to
time during the term of the Plan to assure compliance with such laws. Such
changes may be made with respect to any particular Option or Common Stock issued
upon exercise thereof.
Without limiting the generality of the foregoing, if the Common Stock
issuable upon exercise of an Option granted under the Plan is not registered
under the 1933 Act, the Company at the time of exercise will require that the
registered owner execute and deliver an investment representation agreement to
the Company in form acceptable to the Company and its counsel, and the Company
will place a legend on the certificate evidencing such Common Stock restricting
the transfer thereof, which legend shall be substantially as follows:
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAW BUT HAVE BEEN ACQUIRED FOR THE PRIVATE INVESTMENT OF
THE HOLDER HEREOF AND MAY NOT BE OFFERED, SOLD OR TRANSFERRED UNTIL EITHER
(i) A REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR SUCH APPLICABLE
STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR
(ii) THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY AND ITS COUNSEL THAT REGISTRATION UNDER SUCH SECURITIES ACT OR
SUCH APPLICABLE STATE SECURITIES
PEERLESS GROUP, INC.
1997 STOCK OPTION PLAN
Page 12
<PAGE>
LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED OFFER, SALE OR
TRANSFER."
(j) ADDITIONAL PROVISIONS. Each Option Agreement authorized under the Plan
shall contain such other provisions as the Committee shall deem advisable,
including, without limitation, restrictions upon the exercise of such Option.
Any such Option Agreement with respect to an Incentive Option shall contain such
limitations and restrictions upon the exercise of such Incentive Option as shall
be necessary in order that the Option will be an "incentive stock option" as
defined in Section 422 of the Code.
9. MEDIUM AND TIME OF PAYMENT. The purchase price of the shares of
Common Stock as to which an Option shall be exercised shall be paid in full
either (i) in cash at the time of exercise of such Option, (ii) by tendering to
the Company shares of Common Stock having a fair market value (as of the date of
receipt of such shares by the Company) equal to the purchase price for the
number of shares of Common Stock purchased, (iii) partly in cash and partly in
shares of Common Stock valued at fair market value as of the date of receipt of
such shares by the Company, (iv) by delivery (including by FAX) to the Company
or its designated agent of an executed irrevocable option exercise form together
with irrevocable instructions from the Optionee to a broker or dealer,
reasonably acceptable to the Company, to sell certain of the shares of Common
Stock purchased upon exercise of the Option or to pledge such shares as
collateral for a loan and promptly deliver to the Company the amount of sale or
loan proceeds necessary to pay such purchase price, and/or (v) in any other form
of valid consideration that is acceptable to the Committee in its sole
discretion. Cash payment for the shares of the Common Stock purchased upon
exercise of any Option shall be in the form of either a cashier's check,
certified check or money order. Personal checks may be submitted, but will not
be considered as payment for the shares of Common Stock purchased and no
certificate evidencing such shares will be issued until the personal check
clears payment through normal banking channels. If a personal check is not paid
upon presentment by the Company, then the attempted exercise of the Option will
be deemed null and void. In the event the Optionee tenders shares of Common
Stock in full or partial payment for the shares being purchased pursuant to
exercise of an Option, the shares of Common Stock so tendered shall be
accompanied by fully executed stock power(s) endorsed in favor of the Company
with the signature on such stock power(s) being guaranteed. If an Optionee
tenders shares, such Optionee shall thereupon assume sole and full
responsibility for the tax consequences, if any, to such Optionee arising
therefrom, including the possible application of Section 424(c) of the Code, or
its successor Code section, which negates nonrecognition of income with respect
to such transferred shares,
PEERLESS GROUP, INC.
1997 STOCK OPTION PLAN
Page 13
<PAGE>
if such transferred shares have not been held for the minimum statutory holding
period to qualify for preferential tax treatment.
10. RIGHTS AS A SHAREHOLDER. The holder of an Option shall have no rights
as a shareholder with respect to the shares covered by the Option until the due
exercise of the Option, and the date of issuance of one or more stock
certificates to such holder evidencing such shares. No adjustment shall be made
for dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date such stock certificate is issued, except as provided in Section 12
hereof.
11. EMPLOYMENT STATUS. No action of the Company in establishing the Plan
nor any action taken by the Company, a Subsidiary or the Committee under the
provisions hereof shall be construed as granting the Optionee the right to be
retained in the employ of the Company or such Subsidiary, or to limit or
restrict the right of the Company or such Subsidiary, as applicable, to
terminate the employment of any employee of the Company or such Subsidiary, with
or without cause.
12. ADJUSTMENTS OR CHANGES IN CAPITALIZATION.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
shareholders of the Company (the "Shareholders"), the number of shares of Common
Stock covered by the Plan, the number of shares of Common Stock covered by each
outstanding Option and the exercise price per share thereof specified in each
such Option, shall be proportionately adjusted for any increase or decrease in
the number of issued shares of Common Stock of the Company resulting from a
subdivision, exchange, or consolidation of shares or the payment of a stock
dividend (but only on the Common Stock) or any other increase or decrease in the
number of such shares effected without receipt of consideration by the Company
after the date such Option is granted, so that upon exercise of such Option, the
Optionee shall receive the same number of shares, as applicable, the Optionee
would have received had the Optionee been the holder of all shares subject to
such Optionee's outstanding Options immediately before the effective date of
such change in the number of issued shares of the Common Stock.
(b) REORGANIZATION, DISSOLUTION OR LIQUIDATION. In the event of any
merger, consolidation or share exchange pursuant to which the Company is not the
surviving or resulting corporation, there shall be substituted for each share of
Common Stock subject to the unexercised portions of such outstanding Options
that number of shares of each class of stock or other securities or that amount
of cash, property, or assets of the surviving,
PEERLESS GROUP, INC.
1997 STOCK OPTION PLAN
Page 14
<PAGE>
resulting or consolidated company which were distributed or distributable to the
Shareholders in respect to each share of Common Stock held by them, such
outstanding Options to be thereafter exercisable for such stock, securities,
cash, or property in accordance with their terms. Notwithstanding the foregoing,
however, all such Options may be canceled by the Company as of the effective
date of any such reorganization, merger, consolidation, share exchange or any
dissolution or liquidation of the Company by giving notice to each holder
thereof or his personal representative of its intention to do so and by
permitting the purchase during the thirty (30) day period next preceding such
effective date of all of the shares of Common Stock subject to such outstanding
Options. In case the Company shall, at any time while any Option under this Plan
shall be in force and remain unexpired, (i) sell all or substantially all of its
property, or (ii) dissolve, liquidate, or wind up its affairs, then each
Optionee shall be thereafter entitled to receive, in lieu of each share of
Common Stock of the Company which such Optionee would have been entitled to
receive under the Option, the same kind and amount of any securities or assets
as may be issuable, distributable, or payable upon any such sale, dissolution,
liquidation, or winding up with respect to each share of Common Stock of the
Company. If the Company shall, at any time prior to the expiration of any
Option, make any partial distribution of its assets, in the nature of a partial
liquidation, whether payable in cash or in kind (but excluding the distribution
of a cash dividend payable out of earned surplus and designated as such) then in
such event the exercise prices then in effect with respect to each Option shall
be reduced, on the payment date of such distribution, in proportion to the
percentage reduction in the tangible book value of the shares of the Company's
Common Stock (determined in accordance with generally accepted accounting
principles) resulting by reason of such distribution. In the event of any
recapitalization, reorganization, extraordinary dividend or distribution or
restructuring transaction (including any distribution of shares of stock of any
Subsidiary or other property to holders of shares of Common Stock) affecting the
Common Stock, the number of shares issuable under this Plan shall be subject to
such adjustment as the Committee may deem appropriate, and the number of shares
issuable pursuant to any Option theretofore granted (whether or not then
exercisable) and/or the exercise price per share of such Option shall be subject
to such adjustment as the Committee may deem appropriate with a view toward
preserving the value any of such Option.
(c) RECLASSIFICATION; CHANGE IN PAR VALUE. In the event of a
reclassification or change in the Common Stock of the Company as presently
constituted, which change is limited to a reclassification or change of all of
its authorized shares with par value into the same number of shares with a
different par
PEERLESS GROUP, INC.
1997 STOCK OPTION PLAN
Page 15
<PAGE>
value or without par value, the shares resulting from any change shall be deemed
to be the Common Stock within the meaning of the Plan.
(d) NOTICE OF ADJUSTMENTS. To the extent that the adjustments set forth in
the foregoing paragraphs of this Section 14 relate to the capital stock or
securities of the Company, such adjustments, if any, shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive, provided that each Incentive Option granted pursuant to this Plan
shall not be adjusted in a manner that causes the Incentive Option to fail to
continue to qualify as an "incentive stock option" within the meaning of Section
422 of the Code. The Company shall give timely notice of any adjustments made
to each holder of an Option under this Plan and such adjustments shall be
effective and binding on the Optionee.
(e) EFFECT UPON HOLDERS OF OPTIONS. Except as hereinbefore expressly
provided in this Section 12, the holder of an Option shall have no rights by
reason of any subdivision or consolidation of shares of stock of any class or
the payment of any stock dividend or any other increase or decrease in the
number of shares of stock of any class by reason of any dissolution,
liquidation, merger, reorganization, or consolidation, or spin-off of assets or
stock of another corporation, and any issue by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
not affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to such Option. Without
limiting the generality of the foregoing, no adjustment shall be made with
respect to the number or price of shares subject to any Option granted hereunder
upon the occurrence of any of the following events:
(1) The grant or exercise of any other options which may be granted or
exercised under this Plan or any other qualified or nonqualified stock
option plan or under any other employee benefit plan of the Company whether
or not such options were outstanding on the date of grant of the Option or
thereafter granted;
(2) The sale of any shares of Common Stock in any public offering of
securities by the Company, including, without limitation, shares sold upon
the exercise of any overallotment option granted to underwriters in
connection with such offering;
(3) The issuance, sale or exercise of any warrants to purchase shares of
Common Stock whether or not such warrants were outstanding on the date of
grant of the Option or thereafter issued;
PEERLESS GROUP, INC.
1997 STOCK OPTION PLAN
Page 16
<PAGE>
(4) The issuance or sale of rights, promissory notes or other securities
convertible into shares of Common Stock in accordance with the terms of
such securities (the "Convertible Securities") whether or not such
Convertible Securities were outstanding on the date of grant of the Option
or were thereafter issued or sold;
(5) The issuance or sale of Common Stock upon conversion or exchange of
any Convertible Securities, whether or not any adjustment in the purchase
price was made or required to be made upon the issuance or sale of such
Convertible Securities and whether or not such Convertible Securities were
outstanding on the date of grant of the Option or were thereafter issued or
sold; or
(6) Upon any amendment to or change in the terms of any rights or
warrants to subscribe for or purchase, or options for the purchase of,
Common Stock or Convertible Securities or in the terms of any Convertible
Securities, including, but not limited to, any extension of any expiration
date of any such right, warrant or option, any change in any exercise or
purchase price provided for in any such right, warrant or option, any
extension of any date through which any Convertible Securities are
convertible into or exchangeable for Common Stock or any change in the rate
at which any Convertible Securities are convertible into or exchangeable
for Common Stock.
(f) RIGHT OF COMPANY TO MAKE ADJUSTMENTS. The grant of an Option pursuant
to the Plan shall not affect in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations, or changes of its capital
or business structure or to merge or to consolidate or to dissolve, liquidate or
sell, or transfer all or any part of its business or assets. Options may be
granted under the Plan from time to time in substitution for similar instruments
held by employees of a corporation who become or are about to become employees
of the Company or any Subsidiary as a result of a merger or consolidation of the
employing corporation with the Company or the acquisition by the Company of
stock of the employing corporation. The terms and conditions of the substitute
Options so granted may vary from the terms and conditions set forth in this Plan
to such extent as the Committee at the time of grant may deem appropriate to
conform, in whole or in part, to the provisions of the Options in substitution
for which they are granted.
13. INVESTMENT PURPOSE. Each Option under the Plan shall be granted on
the condition that the purchase of the shares of Common Stock thereunder shall
be for investment purposes, and not
PEERLESS GROUP, INC.
1997 STOCK OPTION PLAN
Page 17
<PAGE>
with a view to resale or distribution thereof; provided, however, that in the
event the shares of stock subject to such Option are registered under the 1933
Act or in the event a resale of such shares of stock without such registration
would otherwise be permissible, such condition shall be inoperative if in the
opinion of counsel for the Company such condition is not required under the 1933
Act or any other applicable law or regulation, or rule of any governmental
agency.
14. NO OBLIGATION TO EXERCISE OPTION. The granting of an Option pursuant
to the Plan shall impose no obligation upon the Optionee to exercise such
Option.
15. MODIFICATION, EXTENSION, AND RENEWAL OF OPTIONS. Subject to the terms
and conditions and within the limitations of the Plan, the Committee and the
Board of Directors may modify, extend or renew outstanding Options granted under
the Plan, or accept the surrender of outstanding Options, if applicable, each to
the extent not theretofore exercised. Notwithstanding the foregoing, however,
no modification of an Option shall, without the consent of the Optionee,
adversely affect any rights or obligations under any Option theretofore granted
under the Plan.
16. EFFECTIVE DATE OF THE PLAN. This Amendment and Restatement of the Plan
shall become effective on the Effective Date.
17. TERMINATION OF THE PLAN. This Plan shall terminate as of the
expiration of ten (10) years from the Effective Date. Options may be granted
under this Plan at any time and from time to time prior to its termination. Any
Option outstanding under the Plan at the time of its termination shall remain in
effect until the Option shall have been exercised or shall have expired.
18. AMENDMENT OF THE PLAN. The Plan may be terminated at any time by the
Board of Directors of the Company. Subject to the limitations set forth in this
Section 18, the Board of Directors of the Company may at any time and from time
to time, without the consent of the Optionees or the Shareholders of the
Company, alter, amend, revise, suspend, or discontinue the Plan in whole or in
part; provided, however, that no amendment which requires stockholder approval
under Section 422 of the Code or in order for the Plan and Options granted under
the Plan to continue to comply with Section 162(m) of the Code, including any
successors to such Sections, shall be effective unless such amendment shall be
approved by the requisite vote of the shareholders of the Company entitled to
vote thereon. Any such amendment shall, to the extent deemed necessary or
advisable by the committee, be applicable to any outstanding Options theretofore
granted under the Plan, notwithstanding any contrary provisions contained in any
Option Agreement. In the event of
PEERLESS GROUP, INC.
1997 STOCK OPTION PLAN
Page 18
<PAGE>
any such amendment to the Plan, the holder of any Option outstanding under the
Plan shall, upon request of the Committee and as a condition to the
exercisability thereof, execute a conforming amendment in the form prescribed by
the Committee to any Option Agreement relating thereto. Unless required by law,
the termination or any modification or amendment of the Plan shall not, without
the consent of the Optionee, adversely affect such Optionee's rights under any
Option, if any, theretofore granted to such Optionee.
19. TAX WITHHOLDING. Whenever an Optionee shall recognize compensation
income as a result of the exercise of any Option granted under the Plan, such
Optionee shall remit in cash or Common Stock (which may at the discretion of the
Optionee be effected by the actual delivery of shares of Common Stock by the
Optionee or by the Company's withholding a number of shares to be issued upon
the exercise of the Option) or other securities of the Company to the Company or
a Subsidiary the minimum amount of federal income and employment tax withholding
which the Company or such Subsidiary is required to remit to the Internal
Revenue Service in accordance with the then applicable provisions of the Code.
Notwithstanding the foregoing, in the event of an assignment of a Nonqualified
Option pursuant to Section 8(f), the Optionee who assigns the Nonqualified
Option shall remain subject to withholding taxes upon exercise of the
Nonqualified Option by the transferee to the extent required by the Code or the
rules and regulations promulgated thereunder. The full amount of such
withholding shall be paid simultaneously with the award or exercise of an
Option.
20. INDEMNIFICATION OF COMMITTEE. In addition to such other rights of
indemnification as they may have as directors or as members of the Committee,
the members of the Committee shall be indemnified by the Company against all the
reasonable expenses, including, without limitation, attorneys' fees, actually
and necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any Option granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such Committee member is liable for negligence or misconduct in
the performance of his duties; provided that within sixty (60) days after
institution of any such action, suit or proceeding a Committee member shall in
writing offer the Company the opportunity, at its own expense, to pursue and
defend the same.
PEERLESS GROUP, INC.
1997 STOCK OPTION PLAN
Page 19
<PAGE>
21. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of Common Stock pursuant to Options granted hereunder will be used for
general corporate purposes.
22. GOVERNING LAW. Except to the extent governed by the applicable
provisions of the Code or Federal securities laws, this Plan shall be governed
by and construed in accordance with the laws of the State of Texas.
23. EFFECT ON PREVIOUSLY GRANTED OPTIONS. The amendments effected hereby
shall not affect any Option granted under the Peerless Systems, Inc. Amended and
Restated Option Plan.
IN WITNESS WHEREOF, this Plan is executed by the undersigned officers of
Peerless Group, Inc. each being hereunto duly empowered and authorized, on this
18th day of February, 1997.
PEERLESS GROUP, INC.
By: /s/ GARY J. AUSTIN
-------------------------------------
Gary J. Austin, President
ATTEST:
/S/ ANN L. PUDDISTER
- ------------------------------------
ANN L. PUDDISTER, Secretary
Page 20
<PAGE>
EXHIBIT 10.48
IBM BUSINESS PARTNER AGREEMENT
SOLUTION PROVIDER PROFILE
- --------------------------------------------------------------------------------
We welcome you as an IBM Business Partner-Solution Provider.
This Profile covers the details of your approval to actively market Products and
Services. As our Solution Provider, you enhance Products and Services with your
solution to provide Products and Services capable of satisfying the Customer's
requirements.
By signing below, each of us agrees to the terms of the following (collectively
called the "Agreement"):
(a) this Profile;
(b) General Terms (Z125-5478-01 12/96);
(c) the applicable Attachments referred to in this Profile; and
(d) the Exhibit.
This Agreement and its applicable transaction documents are the complete
agreement regarding this relationship, and replace any prior oral or written
communications between us. Once this Profile is signed, 1) any reproduction of
this Agreement or a transaction document made by reliable means (for example,
photocopy or facsimile) is considered an original, to the extent permissible
under applicable law, and 2) all Products you order and Services you perform
under this Agreement are subject to it. If you have not already signed an
Agreement for Exchange of Confidential Information (AECI), your signature on
this Profile includes your acceptance of the AECI.
After signing this Profile, please return a copy to the IBM address show below.
Revised Profile (yes/no): no Date received by IBM: 2-21-97
------- ----------
Agreed to: Agreed to:
PEERLESS SYSTEMS INC International Business Machines Corporation
By /s/ RODNEY L. ARMSTRONG, JR. By /s/ TERRY WEBB
------------------------------ -----------------------------
Authorized signature Authorized signature
Name (type or print): Rodney Armstrong Name (type or print): Terry Webb
Date: 2-20-97 Date: 2-21-97
IBM Business Partner address: IBM address:
1212 EAST ARAPAHO 4111 NORTHSIDE PARKWAY
RICHARDSON, TX 75081 ATLANTA, GA 30327
Page 1 of 9
<PAGE>
DETAILS OF OUR RELATIONSHIP
CONTRACT PERIOD START DATE (MONTH/YEAR): 03/97 DURATION: 24
----------- ------------
RELATIONSHIP APPROVAL/ACCEPTANCE OF ADDITIONAL TERMS:
For each approved relationship, each of us agrees to the terms of the following
by signing this Profile. Copies of the Attachments are included.
<TABLE>
<CAPTION>
APPLICABLE
APPROVED RELATIONSHIP (YES/NO) ATTACHMENT
<S> <C> <C>
Solution Provider Attachment YES Z125-5480-00 11/96
-----------
Complementary Marketing Terms Attachment YES Z125-5498-00 11/96
-----------
Remarketer Terms Attachment YES Z125-5497-00 11/96
-----------
North American Solution Provider Attachment NO Z125-5529-00 11/96
-----------
Warranty Service Attachment NO Z125-5499-00 11/96
-----------
Federal Remarketer Attachment YES Z125-5514-00 11/96
-----------
Federal Certification Attachment YES Z125-5515-00 11/96
-----------
THE FOLLOWING OFFERINGS HAVE ADDITIONAL
TERMS IN THE APPLICABLE ATTACHMENT:
1) Electronic Data Interchange NO Z125-5207-00 03/94
-----------
</TABLE>
YOU ARE APPROVED TO MARKET TO: END USERS ONLY
Additional terms which apply are listed in Schedule 1 of this Profile.
APPROVED ONLY FOR DEVELOPMENT SYSTEM (YES/NO): NO
------
You are approved to use the Products identified in this section, including their
associated Programs and peripherals, for development purposes. This section is
approval for development use and is not approval to market these Products.
Section 7 is approval for both marketing and development.
DEVELOPMENT SYSTEM PRODUCTS:
- ------------------------ ------------------------- -------------------------
- ------------------------ ------------------------- -------------------------
- ------------------------ ------------------------- -------------------------
Page 2 of 9
<PAGE>
PRODUCTS AND SERVICES APPROVAL:
The following Products are listed in the Exhibit. The terms of the Exhibit
apply to the Products listed in it. When we approve you for Products listed in
the Exhibit, you are also approved to market their associated programs and
peripherals and Product Services.
<TABLE>
<CAPTION>
APPROVED TO MARKET
UNDER REMARKETER TERMS
APPROVED TO MARKET ACQUIRE ACQUIRE NAME
UNDER COMPLEMENTARY FROM FROM OF
MARKETING TERMS IBM DISTRIBUTOR DISTRIBUTOR
(YES/NO) (6) (YES/NO) (YES/NO)
<S> <C> <C> <C> <C>
SYSTEM TYPES
1) IBM System/390 (1) (3) NO NO
-------- --------
R/390 NO
-------- ------------
P/390 NO
-------- ------------
2) IBM RS/6000 (1) (2) (7) NO NO NO
-------- -------- -------- ------------
3) IBM RS/6000 SP2 (1) (3) (4) NO NO NO
-------- -------- -------- ------------
4) IBM AS/400 (1) (7) YES YES NO
-------- -------- -------- ------------
9401 YES YES NO
-------- -------- -------- ------------
9401/150 NO NO NO
-------- -------- -------- ------------
9402 YES YES NO
-------- -------- -------- ------------
9406 YES YES NO
-------- -------- -------- ------------
5) IBM Networking Products (1) NO NO NO
-------- -------- -------- ------------
6) IBM 469X Retail Point of Sale Products (1) NO NO
-------- --------
7) IBM 4612 Point of Sale Products (1) NO NO
-------- --------
8) IBM 4614 SureOne NO
-------- ------------
IBM PERSONAL COMPUTER PRODUCTS (5)
1) IBM PC Desktop NO YES
-------- -------- ------------
2) IBM PC Server NO YES
-------- -------- ------------
3) IBM Mobile NO YES
-------- -------- ------------
ADDITIONAL PRODUCTS
1) Graphics NO NO
-------- --------
2) Finance Products Category J1 NO NO
-------- --------
3) IBM Storage Products
Category S1 Products NO NO NO
-------- -------- ------- ------------
Category S2 Products NO NO NO
-------- -------- ------- ------------
Category S3 Products NO NO NO
-------- -------- ------- ------------
Category S6 Products NO NO NO
-------- -------- ------- ------------
4) IBM 8690 Kiosk (4) NO
--------
5) IBM 389X Document Processors NO
--------
6) Multimedia NO
--------
7) IBM 763X Terminals NO
--------
8) IBM 75XX Data Collection Terminals NO
--------
9) IBM 927X Voice Response Units NO
--------
</TABLE>
(1) When we approve you to market these products you are also approved for IBM
Personal Computer and associated Products, as well as Networking Printers
from the IBM Printing Systems Company included in the IBM Personal Computer
Products Exhibit as listed in PARTNERLink. Additionally, when approved for
these Products, you may acquire IBM Printing System Company Printers, with
the exception of the Network Printers, directly from IBM.
(2) This approval authorizes you to market the IBM RS/6000 in both the United
States and Canada, subject to the terms of the IBM North American Solution
Partner Attachment.
(3) Your approval to market the IBM RS/6000 is a prerequisite for approval to
market the RS/6000 SP2. However, approval for the RS/6000 does not
constitute approval for you to market the RS/6000 SP2.
(4) Not available for Central Order. A Project Form is required.
(5) These Products have unique revenue requirements to enable direct
acquisition from IBM.
Page 3 of 9
<PAGE>
<TABLE>
<CAPTION>
APPROVED TO MARKET
UNDER REMARKETER TERMS
APPROVED TO MARKET ACQUIRE ACQUIRE NAME
UNDER COMPLEMENTARY FROM FROM OF
MARKETING TERMS IBM DISTRIBUTOR DISTRIBUTOR
(YES/NO) (6) (YES/NO) (YES/NO)
<S> <C> <C> <C> <C>
IBM PRINTING SYSTEMS COMPANY PRODUCTS
1) Impact Printers YES NO
-------- -------- --------
2) Laser Printers YES NO
-------- -------- --------
3) Network Printers (5) NO NO
-------- -------- --------
4) Printing Software YES NO
-------- -------- --------
</TABLE>
When you are approved to market, but not approved to acquire Products and
Services directly from IBM, you may acquire them from the IBM Distributor
specified in your Profile (personal computer Products may be acquired from any
IBM approved Remarketer). When you do, the terms of the Agreement relating to
your acquisition of Products and Services directly from us (for example, terms
relating to the term of Products and Services, and terms relating to the
ordering of Products and Services directly from us) are not applicable. All
other terms apply.
<TABLE>
<CAPTION>
APPROVED TO MARKET
UNDER COMPLEMENTARY
MARKETING TERMS
(YES/NO) (6)
<S> <C>
NON-IBM PRODUCTS
1) Local Vendor (LVP) Products (8) NO
--------
IBM RS/6000 CAD/CAM PROGRAMS (9)
1) APT Workstation/6000 NO
--------
2) CAMkit/6000 NO
--------
3) CATIA (10) NO
--------
4) IGES Processor/6000 NO
--------
5) Numerical Control PostProcessor Generator NO
--------
6) Product Manager NO
--------
7) PROFESSIONAL CADAM (11) NO
--------
8) Valisys (12) NO
</TABLE> --------
You are also approved for the programs (if any) listed below:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
(6) Approval for the System or Industry Product includes approval for the
programs, peripherals and other offerings associated with it. This
excludes the programs listed in the Application Programs section of this
Profile, for which specific approval is required.
(7) When marketing under the Complementary marketing Terms, a Project Form is
not required when marketing with an eligible segment solution.
(8) We will specify each LVP Product that applies to you.
(9) A Complex Operating Environment addendum must be completed.
(10) Registered trademark of Dassault Systemes.
(11) Registered trademark of Dassault Systemes of America.
(12) Registered trademark of Valisys Corporation.
Page 4 of 9
<PAGE>
<TABLE>
<CAPTION>
APPROVED TO MARKET APPROVED TO MARKET
UNDER COMPLEMENTARY UNDER REMARKETER
MARKETING TERMS TERMS
(YES/NO) (6) (YES/NO)
<S> <C> <C>
SERVICES (13) (14)
1) Product Services
- Hardware Product Services YES YES
------- -------
- Software Services YES YES
------- -------
2) System Management Services
- Systems Mgmt - Desktop & Distributed NO NO
------- -------
- Systems Mgmt - Data Center NO NO
------- -------
3) IT Environment & Infrastructure Services
- Site & Connectivity Solutions NO NO
------- -------
4) Business & Technology Solutions NO NO
------- -------
5) Business Recovery Services YES YES
------- -------
FINANCING
1) Financing YES YES
------- -------
IBM GLOBAL NETWORK SERVICES
NO
-------
</TABLE>
CERTIFIED PRODUCTS YOU ARE APPROVED TO MARKET.
- -------------------- -------------------- --------------------------
- -------------------- -------------------- --------------------------
EXCLUSIONS, IF APPLICABLE:
Although included by reference in Product and Services approval, you are not
approved for these individual Products or Services.
- -------------------- -------------------- --------------------------
- -------------------- -------------------- --------------------------
- -------------------- -------------------- --------------------------
<TABLE>
<CAPTION>
MINIMUM ANNUAL ATTAINMENT:
PRODUCT/SERVICE VOLUME/REVENUE MEASUREMENT
PERIOD DATES
<S> <C> <C>
AS/400 $1,000,000 03/01/97 to 02/28/98
---------------------- ------------------- --------------------------
---------------------- ------------------- --------------------------
---------------------- ------------------- --------------------------
---------------------- ------------------- --------------------------
</TABLE>
LOCATIONS:
- --------------------------------------------------------------------------------
| Loc. ID Location (street address, city, state, ZIP code) |
- --------------------------------------------------------------------------------
| 58727 1212 EAST ARAPAHO |
- --------------------------------------------------------------------------------
| RICHARDSON, TX 75081 |
- --------------------------------------------------------------------------------
| |
- --------------------------------------------------------------------------------
(13) You may market this Service to an End User without the requirement to have
marketed a Machine or Program to the End User.
(14) The terms for remarketing Services (other than shrink-wrap Services) are
contained in other documents which we provide to you.
Page 5 of 9
<PAGE>
YOUR COMMITMENT, IF APPLICABLE:
This section identifies by System Type (A): your Annual System Revenue
Performance commitment (B); its Applicable Discount Percentage (C); and, the
Minimum Revenue Attainment you are required to achieve during the first six
months of the annual measurement period in order to maintain the current
discount percentage (D). At your request we will review your Revenue Attainment
any time to determine if you qualify for a higher discount percentage.
After the first six months of your annual measurement period, IBM will review
your Revenue Attainment by System Type. If it is less than the amount specified
in column (D), your discount percentage will be adjusted downward one level for
the remainder of the annual measurement period.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
(A) (B) (C) (D)
System Type System Revenue Applicable Discount Six Months' Minimum
or Commitment Percentage Revenue Attainment to
System Unit Maintain Current
(as applicable) Discount Percentage
--------------------------------------------------------------------------------------
<S> <C> <C> <C>
IBM (1)
RS/6000 N/A N/A
--------------- --------------- ---------------
Federal (2) Discount for:
Machines_____ Programs_____
IBM SP/2 N/A N/A
--------------- --------------- ---------------
--------------------------------------------------------------------------------------
IBM AS/400: $3,000,000 $1,200,000
--------------- ---------------
9402 35%
---------------
9408 31%
---------------
I/O and SW 32%
---------------
--------------------------------------------------------------------------------------
IBM Point of
Sale Products N/A N/A
--------------- --------------- ---------------
--------------------------------------------------------------------------------------
</TABLE>
(1) Your System Revenue Commitment is the aggregate of such Commitment for
the U.S. and Canada.
Your Applicable Discount Percentage is based on the aggregate of your
System Revenue Commitment for the U.S. and Canada.
The Six Month Minimum Revenue Attainment review includes the aggregate
of your Attainment in the U.S. and Canada.
(2) The Products eligible for the Federal discount are identified in the
industry Remarketer Federal Discount Schedule F.
ASSIGNMENT OF WARRANTY SERVICE RESPONSIBILITY, IF APPLICABLE:
You assign to us, or an IBM Premier Personal Computer Servicer, Warranty Service
responsibility for the following Machines.
<TABLE>
<CAPTION>
TYPE/MODEL TYPE/MODEL TYPE/MODEL TYPE/MODEL
<S> <C> <C> <C>
- ------------ ------------ ------------ ---------------------------
- ------------ ------------ ------------ ---------------------------
- ------------ ------------ ------------ ---------------------------
- ------------ ------------ ------------ ---------------------------
</TABLE>
Unless you are assigning to us, please specify the name of the IBM Premier
Personal Computer Servicer:
- --------------------------------------------
Page 6 of 9
<PAGE>
VALUE ADDED ENHANCEMENT DESCRIPTIONS:
The following is a description of each of your value added enhancements,
including an indication of the relationship (Complementary or Remarketer) to
which it pertains.
YOUR APPROVED VALUE ADDED ENHANCEMENTS ARE LISTED IN THE ATTACHMENTS.
Page 7 of 9
<PAGE>
IBM BUSINESS PARTNER AGREEMENT
SOLUTION PROVIDER PROFILE
- --------------------------------------------------------------------------------
SCHEDULE 1
(UNITED STATES)
PRODUCTS, SERVICES AND OFFERINGS ATTACHMENTS
The following Products, Services and Offerings have additional terms in the
specific Attachments listed below and are applicable only in the United States.
PRODUCT AND OFFERING ATTACHMENT APPROVED
(YES/NO)
- --------------------------------------------------------------------------------
Page 8 of 9
<PAGE>
11. VALUE-ADDED ENHANCEMENT DESCRIPTIONS:
The following is a description of each of your value-added enhancements. If
we list certain Programs as your complete value-added enhancements, this
section is approval for you to market those Products as your value-added
enhancements to End Users.
01. INFORM SYSTEM
PEERLESS SYSTEMS, INC.'S "INFORM SYSTEM" TO OPERATE ON THE IBM AS/400 S/36
OR S/36-5363 WILL INCLUDE AT A MINIMUM: ON-LINE CENTRAL INFORMATION FILE
(CIF); DEMAND DEPOSIT ACCOUNTING; MONEY MARKETS; SUPER NOWS; BULK FILING;
SAVINGS; CERTIFICATES OF DEPOSITS; IRAS; PROOF OF DEPOSIT; SAFE DEPOSIT BOX
RENTAL; STOCKHOLDER ACCOUNTING; INSTALLMENT LOANS; MORTGAGE LOANS;
COMMERCIAL LOANS; LOAN PRICING; ASSET/LIABILITY MANAGEMENT ACCOUNT
ANALYSIS; AUTOMATIC FUNDS TRANSFER; AUTOMATED CLEARING HOUSE; AND AUDIT
CONFIRMATION.
02. PEERLESS 21
PEERLESS SYSTEMS, INC.'S "PEERLESS 21" TO OPERATE ON THE IBM AS/400 OR S/38
WILL INCLUDE AT A MINIMUM: ON-LINE CENTRAL INFORMATION FILE (CIF); DEMAND
DEPOSIT ACCOUNTING; MONEY MARKETS; SUPER NOWS; BULK FILING; SAVINGS;
CERTIFICATES OF DEPOSIT; IRAS; PROOF OF DEPOSIT; SAFE DEPOSIT BOX RENTAL;
STOCKHOLDER ACCOUNTING; INSTALLMENT LOANS; MORTGAGE LOANS; COMMERCIAL
LOANS; LOAN PRICING; ASSET/LIABILITY MANAGEMENT ACCOUNT ANALYSIS; AUTOMATIC
FUNDS TRANSFER; AUTOMATED CLEARING HOUSE; AND AUDIT CONFIRMATION.
03. INFORM 21
PEERLESS SYSTEMS, INC.'S "INFORM 21" TO OPERATE ON THE AS/400 WILL INCLUDE
AT A MINIMUM: ON-LINE CENTRAL INFORMATION FILE (CIF); DEMAND DEPOSIT
ACCOUNTING; MONEY MARKETS; SUPER NOWS; BULK FILING; SAVINGS; CERTIFICATES
OF DEPOSIT; IRAS; PROOF OF DEPOSIT; SAFE DEPOSIT BOX RENTAL; STOCKHOLDER
ACCOUNTING; INSTALLMENT LOANS; MORTGAGE LOANS; COMMERCIAL LOANS; LOAN
PRICING; ASSET/LIABILITY MANAGEMENT; ACCOUNT ANALYSIS; AUTOMATIC FUND
TRANSFER; AUTOMATED CLEARING HOUSE; AUDIT CONFIRMATION AND INTEGRATED
GENERAL LEDGER.
04. PROOF OF DEPOSIT (POD)
PEERLESS SYSTEMS', "PROOF OF DEPOSIT" (POD) SYSTEM FOR COMMUNITY BANKS, TO
OPERATE ON THE IBM AS/400 MODELS 9402/9404 ONLY, WILL INCLUDE AT A MINIMUM:
PROOF OF DEPOSIT TO INCLUDE ON LINE CAPTURE OF DEMAND DEPOSIT ACCOUNTING
(DDA) TRANSACTIONS, ON-LINE REJECT REENTRY, FINE SORTING OF ON-US ITEMS,
ITEM PULLS, BULK FILING, AND FEDERAL RESERVE AND OTHER BANK(S) "CASH
LETTER" PROCESSING.
07. PEERLESS CU
PEERLESS SYSTEMS', "ALLEGRO21", CREDIT UNION SYSTEM FOR CREDIT UNION TO
OPERATE ON THE IBM AS/400 9402/9404 WILL INCLUDE AT A MINIMUM: SHARE
ACCOUNTING; LOANS TO INCLUDE AUTO, INSTALLMENT AND SIGNATURE; SHARE DRAFTS;
CERTIFICATE OF DEPOSIT; PAYROLL; AUTOMATIC FUNDS TRANSFER; SUBSIDIARY
SHARES AND GENERAL LEDGER.
Page 9 of 9
<PAGE>
IBM BUSINESS PARTNER AGREEMENT
GENERAL TERMS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Section Title Page
1. Definitions.......................................... 2
2. Agreement Structure and Contract Duration............ 3
3. Our Relationship..................................... 4
4. Status Change........................................ 5
5. Confidential Information............................. 5
6. Marketing Funds and Promotional Offerings............ 6
7. Production Status.................................... 6
8. Patents and Copyrights............................... 6
9. Liability............................................ 7
10. Trademarks........................................... 7
11. Changes to the Agreement Terms....................... 8
12. Internal Use Products................................ 8
13. Demonstration, Development and Evaluation Products... 8
14. Electronic Communications............................ 9
15. Geographic Scope..................................... 9
16. Governing Law........................................ 9
Page 1 of 9
<PAGE>
IBM BUSINESS PARTNER AGREEMENT
GENERAL TERMS
- --------------------------------------------------------------------------------
1. DEFINITIONS
Business Partner is a business entity which is approved by us to market
Products and Services under this Agreement.
CUSTOMER is either an End User or a Remarketer. We specify in your Profile
if we approve you to market to End users or Remarketers, or both.
END USER is anyone, who is not part of the Enterprise of which you are a
part, who uses Services or Acquires Products for its own use and not for
resale.
ENTERPRISE is any legal entity (such as a corporation) and the subsidiaries
it owns by more than 50 percent. An Enterprise also includes other entities
as IBM and the Enterprise agree in writing.
LICENSED INTERNAL CODE is called "Code". Certain Machines we specify (called
"Specific Machines") use Code. International Business Machines Corporation
or one of its subsidiaries owns copyrights in Code or has the right to
license Code. IBM or a third party owns all copies of Code, including all
copies made from them.
MACHINE is a machine, its features, conversions, upgrades, elements,
accessories, or any combination of them. The term "Machine" incudes an IBM
Machine and any non-IBM Machine (including other equipment) that we approve
you to market.
PRODUCT is a Machine or Program, that we approve you to market, as we
specify in your Profile.
PROGRAM is an IBM Program or a non-IBM Program provided us by, under its
applicable license terms, that we approve you to market.
RELATED COMPANY is any corporation, company or other business entity:
1. more than 50 percent of whose voting shares are owned or controlled
indirectly, by either of us, or
2. which owns or controls, directly or indirectly, more than 50 percent of
the voting shares of either of us, or
3. more than 50 percent of whose voting shares are under common ownership
or control directly or indirectly with the voting shares of either of
us.
However, any such corporation, company or other business entity is
considered to be a Related Company only so long as such ownership or control
exists. "Voting shares" are outstanding shares or securities representing
the right to vote for the election of directors or other managing authority.
REMARKETER is a business entity which acquires Products and Services, as
applicable, for the purpose of marketing.
SERVICE is performance of a task, provision of advice and counsel,
assistance, or use of a resource (such as a network and associated enhanced
communication and support) that we approve you to market.
Page 2 of 9
<PAGE>
2. AGREEMENT STRUCTURE AND CONTRACT DURATION
PROFILES
We specify the details of our relationship (for example, the type of
Business Partner you are) in a document called a "Profile." Each of us
agrees to the terms of the Profile, the General Terms, the applicable
Attachments referred to in the Profile, and the Exhibit (collectively called
the "Agreement") by signing the Profile.
GENERAL TERMS
The General Terms apply to all of our Business Partners.
ATTACHMENTS
We describe, in a document entitled an "Attachment", additional terms that
apply. Attachments may include, for example, terms that apply to the method
of Product distribution (Remarketer Terms Attachment or Complementary
Marketing Terms Attachment) and terms that apply to the type of Business
Partner you are, for example, the terms that apply to a Distributor
relationship as described in the Distributor Attachment. We specify in your
Profile the Attachments that apply.
EXHIBITS
We describe in an Exhibit, specific information about Products and Services,
for example, the Products and Services you may market, and warranty
information about the Products.
TRANSACTION DOCUMENTS
We will provide to you the appropriate "transaction documents." The
following are examples of transaction documents, with examples of the
information and responsibilities they may contain:
1. invoices (item, quantity, price, payment terms and amount due); and
2. order acknowledgments (confirmation of Products and quantities ordered).
CONFLICTING TERMS
If there is a conflict among the terms in the various documents, the terms
of:
1. a transaction document prevail over those of all the documents;
2. an Exhibit prevail over the terms of the Profile, Attachments and the
General Terms;
3. a Profile prevail over the terms of an Attachment and the General Terms;
and
4. an Attachment prevail over the terms of the General Terms.
If there is an order of precedence within a type of document, such order
will be stated in the document (for example, the terms of the Distributor
Attachment prevail over the terms of the Remarketer Terms Attachment, and
will be so stated in the Distributor Attachment).
OUR ACCEPTANCE OF YOUR ORDER
Products and Services become subject to this Agreement when we accept your
order by:
1. sending you a transaction document; or
2. providing the Products or Services.
Page 3 of 9
<PAGE>
ACCEPTANCE OF THE TERMS IN A TRANSACTION DOCUMENT
You accept the terms in a transaction document by doing any of the
following:
1. signing it
(those requiring a signature must be signed);
2. accepting the Product or Services;
3. providing the Product or Services to your Customer; or
4. making any payment for the Product or Services.
CONTRACT DURATION
We specify the contract start date and the duration in your Profile. Unless
we specify otherwise in writing, the Agreement will be renewed automatically
for subsequent two-year periods. Each of us is responsible to provide the
other with three months written notice if this Agreement will not be
renewed.
3. OUR RELATIONSHIP
RESPONSIBILITIES
Each of us agrees that:
1. you are an independent contractor, and this Agreement is non-exclusive.
Neither of us is a legal representative or legal agent of the other.
Neither of us is legally a partner of the other (for example, neither of
us is responsible for debts incurred by the other), and neither of us is
an employee or franchise of the other, nor does this Agreement create a
joint venture between us;
2. each of us is responsible for our own expenses regarding fulfillment of
our responsibilities and obligations under the terms of this Agreement;
3. neither of us will disclose the terms of this Agreement, unless both of
us agree in writing to do so, or unless required by law;
4. neither of us will assume or create any obligations on behalf of the
other or make any representations or warranties about the other, other
than those authorized;
5. any terms of this Agreement, which by their nature extend beyond the
date this Agreement ends, remain in effect until fulfilled and apply to
respective successors and assignees;
6. we may withdraw Product or Service from marketing at any time;
7. we will allow the other a reasonable opportunity to comply before it
claims the other has not met its obligations, unless we specify
otherwise in the Agreement;
8. neither of us will bring a legal action against the other more than two
years after the cause of action arose, unless otherwise provided by
local law without the possibility of contractual waiver;
9. failure by either of us to insist on strict performance or to exercise a
right when entitled does not prevent either of us from doing so at a
later time, either in relation to that default or any subsequent one;
10. neither of us is responsible for failure to fulfill obligations
due to causes beyond the reasonable control of either of us;
11. IBM reserves the right to assign, in whole or in part, this Agreement
and any orders hereunder, to any other IBM Related Company;
12. IBM does not guarantee the results of any of its marketing plans; and
13. each of us will comply with all applicable laws and regulations (such a
those governing consumer transactions).
Page 4 of 9
<PAGE>
OTHER RESPONSIBILITIES
You agree:
1. to be responsible for customer satisfaction for all your activities, and
to participate in customer satisfaction programs as we determine;
2. that your rights under this Agreement are not property rights and,
therefore, you can not transfer them to anyone else or encumber them in
any way. For example, you can not sell your approval to market our
Products or Services or your rights to use our Trademarks;
3. to maintain the criteria we specified when we approved you;
4. to achieve and maintain the certification requirements for the Products
and Services you are approved to market, as we specify in your Profile;
5. not to assign or otherwise transfer this Agreement, your rights under
it, or any of its approvals, or delegate any duties, unless expressly
permitted to do so under this Agreement. Otherwise, any attempt to do so
is void;
6. to conduct business activities with us (including placing orders) which
we specify in the operations guide, using our automated electronic
system if available. You agree to pay all your expense associated with
it such as your equipment and communication costs;
7. that when we provide you with access to our information systems, it is
only in support of your marketing activities. Programs we provide to you
for your use with our information systems, which are in support of your
marketing activities, are subject to the terms of their applicable
license agreements, except you may not transfer them;
8. to promptly provide us with IBM documents we may require from you or the
End User (for example, our license agreement signed by the End User)
when applicable; and
9. to comply with the highest ethical principles in performing under the
Agreement. You will not offer or make payments or gifts (monetary or
otherwise) to anyone for the purpose of wrongfully influencing decisions
in favor of IBM, directly or indirectly. IBM may terminate this
Agreement immediately in case of 1) a breach of this clause or 2) when
IBM reasonably believes such a breach has occurred.
OUR REVIEW OF YOUR COMPLIANCE WITH THIS AGREEMENT
We may periodically review your compliance with this Agreement. You agree to
provide us with relevant records on request. We may reproduce and retain
copies of these records. We, or an independent auditor, may conduct a review
of your compliance with this Agreement on your premises during your normal
business house.
If, during our review of your compliance with this Agreement, we find you
have materially breached the terms of this relationship, in addition to our
rights under law and the terms of this Agreement, for transactions that are
the subject of the breach, you agree to refund the amount equal to the
discount (or fee, if applicable) we gave you for the products or Services or
we may offset any amounts due to you from us.
4. STATUS CHANGE
You agree to give us prompt written notice (unless precluded by law or
regulation) of any change or anticipated change in your financial condition,
business structure, or operating environment (for example, a material change
in equity ownership or management or any substantive change to information
supplied in your application). Upon notification of such change, (or in the
event of failure to give notice of such change) IBM may, at its sole
discretion, immediately terminate this Agreement.
Page 5 of 9
<PAGE>
5. CONFIDENTIAL INFORMATION
This section comprises a Supplement to the IBM Agreement for Exchange of
Confidential Information. "Confidential Information" means:
1. all information IBM marks or otherwise states to be confidential;
2. any of the following prepared or provided by IBM:
a. sales leads,
b. information regarding Prospects,
c. unannounced information about Products and Services,
d. business plans, or
e. market intelligence;
f. any of the following written information you provide to us on our
request and which you mark as confidential:
1) reporting data,
2) financial data, or
3) the business plan.
All other information exchanged between us is nonconfidential, unless
disclosed under a separate Supplement to the IBM Agreement for Exchange of
Confidential Information.
6. MARKETING FUNDS AND PROMOTIONAL OFFERINGS
We may provide marketing funds and promotional offerings to you. If we do,
you agree to use them according to our guidelines and to maintain records of
your activities regarding the use of such funds and offerings for three
years. We may withdraw or recover marketing funds and promotional offerings
from you if you breach any terms of the Agreement. Upon notification of
termination of the Agreement, marketing funds and promotional offerings will
no longer be available for use by you, unless we specify otherwise in
writing.
7. PRODUCTION STATUS
Each IBM Machine is manufactured from new parts, or new and used parts. In
some cases, the IBM Machine may not be new and may have been previously
installed. You agree to inform your Customer of these terms in writing (for
example, in your proposal or brochure).
8. PATENTS AND COPYRIGHTS
For the purpose of this section only, the terms Product includes Licensed
Internal Code (if applicable).
If a third party claims that a Product we provide under this Agreement
infringes that party's patents or copyrights, we will defend you against
that claim at our expense and pay all costs, damages, and attorneys' fees
that a court finally awards, provided that you:
1. promptly notify us in writing of the claim; and
2. allow us to control, and cooperate with us in, the defense and any
related settlement negotiations.
If you maintain an inventory, and such a claim is made or appears likely to
be made about a Product in your inventory, you agree to permit us either to
enable you to continue to market and use the Product, or to modify or
replace it. If we determine that none of these alternatives is reasonably
available, you agree to return the Product to us on our written request. We
will then give you a
Page 6 of 9
<PAGE>
credit, as we determine, which will be either 1) the price you paid us for
the Product (less any price-reduction credit), or 2) the depreciated price.
This is our entire obligation to you regarding any claim of infringement.
CLAIMS FOR WHICH WE ARE NOT RESPONSIBLE
We have no obligation regarding any claim based on any of the following:
1. anything you provide which is incorporated into a Product;
2. your modification of a Product, or a Program's use in other than its
specified operating environment;
3. the combination, operation, or use of a Product with any Products not
provided by us as a system, or the combination, operation, or use of a
Product with any product, data, or apparatus that we did not provide; or
4. infringement by a non-IBM Product alone, as opposed to its combination
with Products we provide to you as a system.
9. LIABILITY
Circumstances may arise where, because of a default or other liability, one
of us is entitled to recover damages from the other. In each such instance,
regardless of the basis on which damages can be claimed, the following terms
apply as your exclusive remedy and our exclusive liability.
OUR LIABILITY
We are responsible only for:
1. payments referred to in the "Patents and Copyrights" section above;
2. bodily injury (including death), an damage to real property and tangible
personal property caused by our Products; and
3. the amount of any other actual loss or damage, up to the greater of
$100,000 or the charges (if recurring, 12 months' charges apply) for the
Product that is the subject of the claim.
ITEMS FOR WHICH WE ARE NOT LIABLE
Under no circumstances (except as require by law) are we liable for any of
the following:
1. third-party claims against you for losses or damages (other than those
under the first two items above in the subsection entitled 'Our
Liability');
2. loss of, or damage to, your records or data; or
3. special, incidental, or indirect damages, or for any economic
consequential damages (including lost profits or savings) even if we are
informed of their possibility.
YOUR LIABILITY
In addition to damages for which you are liable under law and the terms of
this Agreement, you will indemnify us for claims made against us by others
(particularly regarding statement, representations, or warranties not
authorized by us) arising our of your conduct under this Agreement or as a
result of your relations with anyone else.
10. TRADEMARKS
We will notify you in written guidelines of the IBM Business Partner title
and emblem which you are authorized to use. You may not modify the emblem in
any way. You may use our Trademarks (which include the title, emblem, IBM
trade marks and service marks) only:
Page 7 of 9
<PAGE>
1. within the geographic scope of this Agreement;
2. in association with Products and Services we approve you to market; and
3. as described in the written guidelines provided to you.
The royalty normally associated with non-exclusive use of the Trademarks
will be waived, since the use of this asset is in conjunction with marketing
activities for Products and Services.
You agree to promptly modify any advertising or promotional materials that
do not comply with our guidelines. If you receive any complaints about your
use of a Trademark, you agree to promptly notify us. When this Agreement
ends, you agree to promptly stop using our Trademarks. If you did not, you
agree to pay any expenses and fees we incur in getting you to stop.
You agree not to register or use any mark that is confusingly similar to any
of our Trademarks.
Our Trademarks, and any goodwill resulting from your use of them, belong to
us.
11. CHANGES TO THE AGREEMENT TERMS
We may change the terms of this Agreement by giving you one month's written
notice.
We may, however, change the following terms without advance notice:
1. those we specify in this Agreement as not requiring advance notice;
2. those of the Exhibit unless otherwise limited by this Agreement; and
3. those relating to safety and security.
Otherwise, for any other change to be valid, both of us must agree in
writing. Changes are not retroactive. Additional or different terms in an
order or other communication from you are void.
12. INTERNAL USE PRODUCTS
You may acquire Products you are approved to market for your internal use
within your Business Partner operations. Except for personal computer
Products, you are required to advise us when you order Products for your
internal use.
We will specify in your Exhibit the discount or price, as applicable, at
which you may acquire the Products for internal use. Except for personal
computer Products, such Products do not count toward 1) your minimum annual
attainment 2) toward determination of your discount or price, as applicable
or 3) for determining our marketing or promotional funds.
Any value added enhancement or systems integration services otherwise
required by your relationship is not applicable when you acquire Products
for internal use. You must retain such Products for a minimum of 12 months,
unless we specify otherwise in the Exhibit.
13. DEMONSTRATION, DEVELOPMENT AND EVALUATION PRODUCTS
You may acquire Products you are approved to market for demonstration,
development and evaluation purposes, unless we specify otherwise in the
Exhibit. Such Products must be used primarily in support of your Product
marketing activities.
We will specify in your Exhibit the Products we make available to you for
such purposes, the applicable discount or price, and the maximum quantity of
such Products you may acquire and the period they are to be retained. The
maximum number of input/output devices you may acquire is the number
supported by the system to which they attach.
If you acquired the maximum quantity of Machines, you may still acquire a
field upgrade, if available.
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We may decrease the discount we provide for such Products on one month's
written notice.
You may make these Products available to a Customer for the purpose of
demonstration and evaluation. Such Products may be provided to an End User
for no more than three months. For a Program, you agree to ensure the
Customer has been advised of the requirement to accept the terms of a
license agreement before using the Program.
14. ELECTRONIC COMMUNICATIONS
Each of us may communicate with the other by electronic means, and such
communication is acceptable as a signed writing to the extent permissible
under applicable law. Both of us agree that for all electronic
communications, an identification code (called a "user ID") contained in an
electronic documents is legally sufficient to verify the sender's identity
and the document's authenticity.
15. GEOGRAPHIC SCOPE
All the rights and obligations of both of us are valid only in the United
States and Puerto Rico.
16. GOVERNING LAW
The laws of the State of New York govern this Agreement.
The "United Nations Convention on Contracts for the International Sale of
Goods" does not apply.
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IBM BUSINESS PARTNER AGREEMENT
SOLUTION PROVIDER ATTACHMENT
- --------------------------------------------------------------------------------
These terms prevail over and are in addition to or modify the Remarketer Terms
Attachment and the Complementary Marketing Terms Attachment.
1. MARKETING APPROVAL
You may be approved as a Solution Provider under a remarketer relationship
or under a complementary marketing relationship, or both. If we approve you
to market the same Products and Services under both remarketer and
complementary marketing terms, all transactions will be under remarketer
terms. You may unilaterally elect not to participate under remarketer terms
for a specific transaction or business segment by providing us a signed IBM
Business Partner Statement of Election. If you meet the marketing approval
requirements of the complementary marketing terms, you may participate under
those terms.
We may specify the specific industry codes to which you may market Products
and Services. If we do so, you agree to comply.
2. VALUE ADDED ENHANCEMENT
For Products we specify in the Exhibit, you are required to have a solution
which is a value added enhancement that we approve and specify on your
Profile and which significantly adds to the Product's function and
capability.
You agree to market Products and Services only with your approved value
added enhancement as part of an integrated solution for End Users. Certain
Products we specify do not require a value added enhancement.
In the event we withdraw approval of your value added enhancement, we also
withdraw your approval as an IBM Business Partner for that value added
enhancement.
We may, at any time, modify the criteria for approval of your value added
enhancement. You are responsible to modify your value added enhancement to
meet these criteria.
You agree to market Products, including processor upgrades requiring a
processor serial number change, to only End Users for whom your value added
enhancement is their primary reason for acquiring the Products, and who
intend the on-going use of such enhancement. A sale to an End User without a
value added enhancement, when required, is a material breach of the
Agreement.
However, your value added enhancement is not required to be the End User's
primary reason for acquiring upgrades to systems you previously installed
with your enhancement and where your enhancement is still in productive use.
Upgrades include processor upgrades (non-serial number change), peripherals
and programs.
Unless we specify otherwise in writing, you may market upgrades to only
those End Users where you have installed your value added enhancement, and
who intend on-going use of that value added enhancement.
3. YOUR RESPONSIBILITIES TO IBM
You agree:
1. to develop a mutually acceptable business plan with us, if we require
one. Such plan will document each of our marketing plans as they apply to
our relationship. We will review the plan, at a minimum, once a year;
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2. that, unless precluded by applicable law, one of the requirements for you
to retain this relationship is that you achieve minimum annual attainment
we specify in your Profile;
3. to order Products and Services, as we specify in the operations guide;
4. to maintain trained personnel, as we specify in your Profile or Exhibit,
as applicable;
5. to provide us, on our request, relevant financial information about your
business so we may, for example, use this information in our
consideration to extend credit terms to you;
6. to have access to the Products you are approved to market for 1)
demonstration purposes, 2) providing support your End Users and 3)
supporting your value added enhancement; and
7. to maintain the capability to demonstrate Products we approve you to
market.
4. YOUR RESPONSIBILITIES TO END USERS
When you market Products and Services under complementary marketing terms,
items 10 and 11 do not apply and items 2 and 5 only apply when you use our
central order facility.
You agree to:
1. assist the End User to achieve productive use of your solution and the
Products and Services you marketed;
2. configure Products we approve you to market. On your request, we may
assist you;
3. identify and select the required technology based upon the End User's
requirements, and confirm that the Product configuration is fully capable
of the satisfactory performance of your solution;
4. not make representations that IBM is responsible for the Products'
configuration and their ability to satisfy the End User's requirements;
5. advise the End User of Product installation requirements;
6. develop a plan, agreed to by the End User, for installation and post-
installation support for the offering you market. For Products and
Services we approve you to market, such support includes your being the
primary contact for Product and Services information, technical advice
and operational advice associated with the offering.
However, you may delegate these support responsibilities for Products and
any other associated products to another IBM Business Partner who is
approved to market such Products. If you do, you retain customer
satisfaction responsibility. Alternatively, such support responsibilities
will be provided by IBM if you market the applicable IBM Services to the
End User. If you do, we assume customer satisfaction responsibility for
such support;
7. assist the End User in Product problem determination and resolution,
unless this responsibility is delegated as specified in item 6 above;
8. give written notice to the End User of any modification you make to a
Product and the name of the warranty service provider and advise that
such modification may void the warranty for the Product;
9. support the End User in planning fulfillment of Product training and
education requirements, including informing the End User of educational
offerings, as applicable;
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10. inform the End User that the sales receipt (or other documentation such
as Proof of Entitlement, if it is required) will be necessary for proof
of warranty entitlement or for Program upgrades; and
11. provide warranty information to the End User.
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IBM BUSINESS PARTNER AGREEMENT
COMPLEMENTARY MARKETING TERMS ATTACHMENT
- --------------------------------------------------------------------------------
1. OUR RELATIONSHIP
As our IBM Business Partner under the complementary marketing terms, you
market to End Users the Products and Services we approve you to market on
our behalf at prices and terms established by IBM. We manage the Product
ordering process from ordering to delivery. We pay you a fee as we specify
in your Exhibit.
2. MARKETING APPROVAL
You may market Products and Services to an End User as specified 1) in a
Project Form we provide to or, when we approve in writing, one we receive
from you, or 2) in the non-exclusive territory we specify in a Territory
Supplement.
You may market Products and Services to an End User for a period of three
months unless we specify otherwise in a Project Form, or as long as the End
User is specified in your Territory Supplement.
If you are a Solution Provider, you may market Products and Services to an
End User without our approval of a Project Form if you submit the End User's
order directly to our central order facility. However, for a specific End
User opportunity, you may not use our central order facility if you 1) have a
Project Form in effect of 2) have submitted one to us an we have not
responded.
In addition, if you are a Solution Provider, you may market Products and
Service to an End User without our approval of a Project Form when 1) the
Machine is an AS/400 or RS/6000 (excluding POWERparallel Systems SP2), and 2)
we specify in your Profile that the value added enhancement you market is
eligible. You agree that, if we accept fee requests from other Solution
Providers for the same opportunity, we may split the fee between you and
them.
We may withdraw, in writing, our approval for you to market to an End User or
remove an End User from your territory for any of the following reasons and
if we do, you agree to stop your marketing activities with the End User:
1. we decide not to accept the order (for example, if the End User's credit
is inadequate);
2. the End User cancels the order;
3. the End User makes a firm commitment to another vendor for the Products
and Services;
4. you or the End User requests termination of the approval; or
5. we determine, during our periodic reviews, that your sales progress with
the opportunity is not satisfactory.
3. YOUR RESPONSIBILITIES TO IBM
You agree to:
1. actively market Products and Services;
2. upon our request, participate in configuration and system assurance
reviews;
3. distinguish to the End User between those activities you perform on your
own behalf and those you perform on IBM's behalf;
4. advise us of the Product's planned installation dates and dependencies;
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5. as required, prepare IBM documents, provide them to the End User and, if
applicable, secure the End User's signature on such documents, and
promptly provide them to us; and
6. assist us on our request in the collection of the accounts receivable for
Products and Services for which you earned a fee.
4. YOUR RESPONSIBILITIES TO END USERS
You agree to provide support to your End User for 1) the period specified on
the Project Form or your Territory Supplement, 2) for one year if you used
our central order facility, or 3) for six moths if the value added
enhancement you market is eligible.
5. FEES AND COMPENSATION
You earn your fee on the date of our invoice to the End User. We will pay you
within one month after you earn your fee and we receive your request,
formatted as we specify in the operations guide. If we do not received your
request within four months from when you earn your fee, no payment will be
made.
You agree to reimburse us the applicable fees we paid to you, if for any
reason the Product you marketed is returned to us or a Service is terminated
within three months of the date the payment from the End User was due us. The
reimbursement may be prorated if the Product or Service is on a recurring
charge basis.
We periodically reconcile amounts we paid you to amounts you actually earned.
We may deduct amounts due us from future payments we make to you, or ask you
to pay amounts due us. Each of use agrees to promptly pay the other any
amounts due.
In addition to any other rights under law or this Agreement, we may recover
fees paid to you for an amount equal to our loss or damage we suffer as a
result of your breach of the terms of the Agreement.
If any authority requires us to include in our invoice to you, a duty, tax
levy or fee, which they impose, excluding those based on our net income, upon
any transaction under this Agreement, then you agree to pay that amount s
specified in the invoice.
6. MARKETING OF SERVICES
If you marketed a Product to an End User under this Agreement, or if you are
approved in your Profile to market a Service, you may as we specify in the
Exhibit, either market Services, or provide a qualified lead to us so that we
may market Services to the End User on any machine or program and receive a
fee from us. We provide Services to the End User under the terms of our
applicable agreement, signed by the End User.
You will receive a fee for a lead when it 1) is submitted on the form we
provide to you, 2) is for an opportunity which is not know to us, and 3)
results in the End User ordering the Service from us within six months from
the date we received the lead.
Alternatively, you will receive a fee for marketing when 1) you identify the
opportunity and perform the marketing activities, 2) you provide us with the
order and any required documents signed by the End user, and 3) if a standard
Statement of Work is used, there are no changes and no marketing assistance
from us is required.
You may market Services on eligible non-IBM Products regardless of whether
you marketed a Machine or Program to the End User.
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We will not pay you a fee if 1) the Machine or Program is already under
applicable Service, 2) we have an agreement with the End User to place the
Machine or Program under the applicable Service, or 3) if the service is
terminated by the End User within the last six months.
7. MARKETING OF FINANCING
If we approve you on your Profile, you may market our Financing Services for
Products and Services and any associated products and services you market to
the End User. If you market our Financing Services, we will pay you a fee as
we specify in your Territory Supplement or the Exhibit.
We provide financing Services to the End User under the terms of our
applicable agreements signed by the End User. You agree, that for the items
that will be financed, 1) you will promptly provide us any required documents
including invoices, with serial numbers, if applicable, 2) the supplier will
transfer clear title to us, and 3) you will not transfer to us any
obligations under your agreements and with End User.
We will pay you or the supplier when the End User has initiated financing and
acknowledged acceptance of the items being financed.
8. ENDING THE AGREEMENT
Either of us may terminate this Agreement, with or without cause, on three
months' written notice. If, under applicable law, a longer period is
mandatory, then the notice period is the minimum notice period allowable.
If we terminate for cause (such as our not meeting your minimum annual
attainment), we may, at our discretion, allow you a reasonable opportunity to
cure. If you fail to do so, the date of termination is that specified in the
notice.
However, if either party breaches a material term of the Agreement, the other
party may terminate the Agreement on written notice. Examples of such breach
by you are: if you do not maintain customer satisfaction; if you repudiate
this Agreement; or if you make any material misrepresentations to us. You
agree that our only obligation is to provide the notice called for in this
section an we are not liable for any claims or losses if we do so.
At the end of this Agreement, each of us agrees to immediately settle any
accounts with the other. We may offset any amounts due you against amounts
due us or any of our Related Companies as allowable under applicable law.
You agree that if we permit you to perform certain activities after this
Agreement ends, you will do so under the terms of this Agreement.
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IBM BUSINESS PARTNER AGREEMENT - COMPLEMENTARY MARKETING
PROJECT FORM
- --------------------------------------------------------------------------------
These terms prevail over and are in addition to those of the IBM Business
Partner Agreement - Complementary Marketing Terms Attachment.
1. IBM TERRITORY REPRESENTATIVE NAME/TELEPHONE: IBM OFFICE NUMBER:
2. IBM BUSINESS PARTNER RELATIONSHIP: ( ) Solution Provider* ( ) Product Agent
( ) Systems Integrator*
3. END USER INFORMATION
Name and address (including department): Contact name/telephone #:
IBM Customer number: Application:
4. PRODUCTS AND SERVICES (attach a separate page if required)
Name Quantity:
5. SYSTEM TO WHICH PRODUCT ATTACHES**
Name:
6. PROJECT FORM STATUS (to be completed by IBM):
( ) Accepted
( ) Pended - We may approve multiple Business Partners until the End User's
requirements are defined.
( ) Not approved or withdrawn - Your request for approval to market to this
End User is not approved or a previous approval is withdrawn effective
___________ (mm/dd/yy):
7. OTHER INFORMATION (TO BE COMPLETED BY IBM)
Marketing Period Duration (months): *** Extension (months):
Extension (months)
Extension (months):
Support Period duration: ( ) 3 months ( ) 6 months ( ) 12 months
( ) none - IBM has support responsibility.
* If the Business Partner is also approved under our remarketer terms for this
Product, the Business Partner must have submitted a Statement of Election
that applies to this Opportunity.
** Must be completed only if the fee for the Product marketed is determined by
the System to which it attaches.
*** Begins on the date of our signature.
- --------------------------------------------------------------------------------
IBM Business Partner name: (IBM Country Organization Name)
By By
----------------------------------- ----------------------------------
Authorized signature Authorized signature
Name: Name:
Date: Date:
IBM Business Partner no.: Reference Agreement number:
IBM Business Partner contact
name/telephone #/fax #:
IBM address:
IBM Business Partner address:
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IBM BUSINESS PARTNER AGREEMENT
REMARKETER TERMS ATTACHMENT
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Section
Title Page
1. Our Relationship........................................... 2
2. Ordering and Delivery...................................... 2
3. Inventory Adjustments...................................... 3
4. Price, Invoicing, Payment and Taxes........................ 4
5. Licensed Internal Code..................................... 5
6. Programs................................................... 6
7. Export..................................................... 7
8. Title...................................................... 7
9. Risk of Loss............................................... 7
10. Installation and Warranty.................................. 7
11. Warranty Service........................................... 8
12. Marketing of Services for a Fee............................ 8
13. Marketing of Financing..................................... 9
14. Engineering Changes........................................ 9
15. Ending the Agreement....................................... 10
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IBM BUSINESS PARTNER AGREEMENT
REMARKETER TERMS ATTACHMENT
- --------------------------------------------------------------------------------
1. OUR RELATIONSHIP
As our IBM Partner, you market to your Customers the Products and Services
(including shrink-wrap Services) we provide to you. These terms apply to a
Business Partner whose method of distribution is under our remarketer terms,
and includes Distributors, Resellers, Solution Providers, and Systems
Integrators.
RESPONSIBILITIES
Each of us agrees:
1. we offer a money-back guarantee to End Users for certain Products. You
agree to inform the End User of the terms of this guarantee before the
applicable sale. For any such Product, you agree to 1) accept its return
in the time frame we specify, 2) refund the full amount paid to you for
it, and 3) dispose of it (including all its components) as we specify. We
will pay a transportation charge for return of the Product to us and will
give you an appropriate credit.
2. each of us is free to set its own prices and terms; and
3. neither of us will discuss its Customer prices and terms in the presence
of the other.
OTHER RESPONSIBILITIES
You agree:
1. to refund the amount paid for a Product or Service returned to you if
such return is provided for in its warranty or license. You may return
the Product to us for credit at our expense, as we specify in the
operations guide;
2. to provide us with sufficient, free and safe access to your facilities,
at a mutually convenient time, for us to fulfill our obligations;
3. to retain records, as we specify in the operations guide, of each Product
and Service transaction (for example, a sale or credit) for three years;
4. to provide us with marketing, sales, installation reporting and inventory
information for our Products and Services, as we specify in the
operations guide;
5. that, when you are approved to market to Remarketers, to market Products
and Services which require certification, only to Remarketers who are
certified to market them;
6. to comply with all terms regarding Program upgrades;
7. to provide a dated sales receipt (or its equivalent, such as an invoice)
as we specify in the operations guide, to your Customers, before or upon
delivery of Products and Services; and
8. to report to us any suspected Product defects or safety problems, and to
assist us in tracing and locating Products.
2. ORDERING AND DELIVERY
You may order Products and Services from us as we specify in the operations
guide. You agree to order them in sufficient time to count toward your
minimum annual attainment, if applicable.
We will agree to a location to which we will ship. We may establish criteria
for you to maintain at such location (for example, certain physical
characteristics, such as a loading dock), as we specify in the operations
guide.
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Upon becoming aware of any discrepancy between our shipping manifest and the
Products and Services received from us, you agree to notify us immediately.
We will work with you to reconcile any differences.
Although we do not warrant delivery dates, we will use reasonable efforts to
meet your requested delivery dates.
We select the method of transportation and pay associated charges for
Products and Services we ship.
We may not be able to honor your request for modification or cancellation of
an order. We may apply a cancellation charge for orders you cancel within 10
business days before the order is scheduled to be shipped. The Exhibit will
specify if a cancellation charge applies and where we will specify the
charge.
If we are unable to stop shipment of an order you cancel, and you return
such Product to us after shipment, our inventory adjustment terms apply.
3. INVENTORY ADJUSTMENTS
We will specify in your Exhibit the Products and Services to which this
section applies.
Products and Services you return to us for credit must have been acquired
directly from us. You must request and receive approval from us to return
the Products and Services.
Products and Services must be received by us within one month of our
approving their return, unless we specify otherwise to you in writing. We
will issue a credit to you when we accept the returned Products and
Services.
Certain Products may be acquired only as Machines and Programs packaged
together as a solution. These Products must be returned with all their
components intact.
For certain Products and Services you return, a handling charge applies. We
will specify the handling charge percentage in the Exhibit. We determine
your total handling charge by multiplying the inventory adjustment credit
amount for the Products and Services by the handling charge percent.
You agree to pay transportation and associated charges for Products and
Services you return.
Unless we specify otherwise, returned Products and Services must be in their
unopened and undamaged packages.
You agree to ensure the returned Products and Services are free of any legal
obligations or restrictions that prevent their return. We accept them only
from locations within the country to which we ship Products and Services.
We will reject any returned Products and Services that do not comply with
these terms.
4. PRICE, INVOICING, PAYMENT AND TAXES
PRICE AND DISCOUNT
The price, and discount if we specify one, for each Product and Service will
be made available to you in a communication which we provide to you in
published form or through our electronic information systems or a
combination of both. Unless we specify otherwise, discounts do not apply to
Program upgrades, accessories, or field-installed Machine features,
conversions, or upgrades.
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The price for each Product and Service is the lower of the price in effect
on the date we receive your order, or the date we ship a product or "shrink-
wrap" Service, or the start date of a Service, if it is within six months of
the date we receive your order.
PRICE AND DISCOUNT CHANGES
We may change prices and increase discounts at any time. We may decrease
discounts on one month's written notice.
Price increases for Products and Services included in a project do not apply
to you for up to two years from the start date of a project (we will protect
the price that was in effect at the time we received the first order for the
project) if you documented the project to us and we approved and accepted
such documentation. We will specify additional details, if any, to you in
writing.
We will specify in your Exhibit if the following credit terms do not apply
to Products and Services we approve you to market.
If we decrease the price or increase the discount for a Product or Service,
you will be eligible to receive a price decrease credit or a discount
increase credit for those you acquired directly from us that are in your
inventory, or in transit, or if the Product's date of installation or
Service start date has not occurred. However, Products acquired from us
under a special offering (for example, a promotional price or a special
incentive) may not be eligible for a full credit. You must certify your
inventory to us in writing within one month of the effective date of the
change. The credit is the difference between the rice you paid, after any
adjustments, and the new price.
The following terms apply to Programs licensed on a recurring-charge basis:
We may increase a recurring charge for a Program by giving you three months'
written notice. An increase applies on the first day of the invoice or
charging period on or after the effective date we specify in the notice.
INVOICING, PAYMENT AND TAXES
Amounts are due upon receipt of invoice and payable as specified in a
transaction document. You agree to pay accordingly, including any late
payment fee. Details of any late payment fee will be provided upon request
at the time of order and will be included in the notice.
You may use a credit only after we issue it.
If any authority requires us to include in our invoice to you a duty, tax,
levy, or fee which they impose, excluding those based on our net income,
upon any transaction under this Agreement, then you agree to pay that
amount.
RESELLER TAX EXEMPTION
You agree to provide us with your valid reseller exemption documentation for
each applicable taxing jurisdiction to which we ship Products. If we do not
receive such documentation, we will charge you applicable taxes and duties.
You agree to notify us promptly if this documentation is rescinded or
modified. You are liable for any claims or assessments that result from any
taxing jurisdiction refusing to recognize your exemption.
PURCHASE MONEY SECURITY INTEREST
You grant us a purchase money security interest in your proceeds from the
sale of, and your accounts receivable for, a Product, until we receive the
amounts due. You agree to sign an appropriate document (for example, a "UCC-
1") to permit us to perfect our purchase money security interest.
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FAILURE TO PAY ANY AMOUNTS DUE
If you fail to pay any amounts due in the required period of time, you agree
that we may do one or more of the following, unless precluded by law:
1. impose a finance charge, as we specify to you in writing, up to the
maximum permitted by law, on the portion which was not paid during the
required period;
2. require payment on or before delivery of Products and Services;
3. repossess any Products and Services for which you have not paid. If we do
so, you agree to pay all expenses associated with repossession and
collection, including reasonable attorneys' fees. You agree to make the
Products and Services available to us at a site that is mutually
convenient;
4. not accept your order until any amounts due are paid;
5. terminate this Agreement; or
6. pursue any other remedy available at law.
We may offset any amounts due you, or designated for your use (for example,
marketing funds or promotional offerings), against amounts due us or any of
our Related Companies.
In addition, if your account with any of our Related Companies becomes
delinquent, we may invoke any of these options when allowable by applicable
law.
5. LICENSED INTERNAL CODE
We will identify each Specific Machine in the Exhibit. We grant the rightful
possessor of a Specific Machine a license to use the Code (or any
replacement we provide) on, or in conjunction with, only the Specific
Machine, designated by serial number, for which the code is provided. We
license the code to only one rightful possessor at a time. You agree that
you are bound by the terms of the separate license agreement that we will
provide to you.
YOUR RESPONSIBILITIES
You agree to inform your End User, and record on the sales receipt, that the
Machine you provide is a Specific Machine using Licensed Internal Code. You
agree to provide the applicable license agreement to our End User before the
sale is finalized.
6. PROGRAMS
You agree to ensure the End User has signed the license agreement for a
Program requiring a signature, as we specify in the Exhibit, before such
Program is provided to the End User, and to provide any required
documentation to us. All other Programs are licensed under the terms of the
agreement provided with them. You agree, where applicable, to provide the
Program license to the End User before such Program is provided to the End
User.
We will designate in the Exhibit if 1) we will ship the media and
documentation to you or, if you request and we agree, to the End User, 2) you
may copy and redistribute the media and documentation to the End User, of 3)
you must copy and redistribute the media and documentation to the End User.
If we ship the media and documentation, we may charge you. We will specify
such charge to you in writing. If you copy and redistribute, you must be
licensed to use the Program from which you make the copies. A Program license
you acquired for use under the Demonstration, Development and Evaluation
Products terms fulfill this requirement.
Programs licensed to you on a recurring-charge basis are licensed for the
period indicated in our invoice. You may market such Programs only on the
same basis as licensed to you. You may not charge an End User a one-time
charge for a Program you license from us on a recurring-charge basis.
However, you may charge the End user whatever amount you wish for the
recurring-charge.
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PROGRAM SERVICES
Program Services are described in the Program's license agreement. You are
responsible to provide your Customers, who are licensed for a Program, the
Program Services we make available to you.
If the End User agrees in writing, you may:
1. delegate this responsibility to another IBM Business Partner who is
approved to market the Product, or
2. provide an enhanced version of this support through the applicable IBM
Service you market to the End User.
If you delegate your support responsibilities to another IBM Business
Partner, you retain customer satisfaction responsibility. However, if you
market our applicable Services to the End User, we assume customer
satisfaction responsibility for such support.
7. EXPORT
You may actively market Products and Services only within the geographic
scope specified in this Agreement. You may not market outside this scope,
and you agree not to use anyone else to do so.
If a Customer acquires a Product for export, our responsibilities, if any,
under this Agreement no longer apply to that Product unless the Product's
warranty or license terms otherwise. You agree to use your best efforts to
ensure that your Customer complies with all export laws and regulations,
including those of the United States and the country specified in the
Governing Law Section of this Agreement, and any laws and regulations,
including those of the United States and the country specified in the
Governing Law Section of this Agreement, and any laws and regulations of the
country in which the Product is imported or exported. Before your sale of
such Product, you agree to prepare a support plan for it and obtain your
Customer's agreement to that plan. Within one month of sale, you agree to
provide us with the Customer's name and address, Machine type/model and
serial number, date of sale, and destination country.
We exclude these Products from:
1. any of your attainment toward your objectives; and
2. qualification for applicable promotional offerings and marketing funds.
We may also reduce future supply allocations to you by the number of
exported Products.
8. TITLE
When you order a Machine, we transfer title to you when we ship the Machine.
Any prior transfer to you of title to a Machine reverts back to IBM when it
is accepted by us as a returned Machine.
We do not transfer a Program's title.
9. RISK OF LOSS
We bear the risk of loss of, or damage to, a Product or Service until its
initial delivery from us to you or, if you request and we agree, delivery
from us to your Customer. thereafter, you assume the risk.
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<PAGE>
10. INSTALLATION AND WARRANTY
We will ensure that Machines we install are in good working order and
conform to their specifications. We provide instructions to enable the set-
up of Customer-Set-Up Machines. We are not responsible for the installation
of Programs or non-IBM Machines. We do, however, preload Programs onto
certain Machines. We provide a copy of our applicable warranty statement to
you. You agree to provide it to the End User for Review before the sale is
finalized, unless we specify otherwise.
We calculate the expiration date of an IBM Machine's warranty period from
the Machine's Date of Installation. Warranty terms for Programs are
described in the Programs' license terms.
We provide non-IBM Products WITHOUT WARRANTIES OF ANY KIND, unless we
specify otherwise. However, non-IBM manufacturers, suppliers, or publishers
may provide their own warranties to you.
For non-IBM Products we approve you to market, you agree to inform your
Customer in writing 1) that the Products are non-IBM, 2) that manufacturer
or supplier who is responsible for warranty (if any), and 3) of the
procedure to obtain any warranty service.
DATE OF INSTALLATION FOR A MACHINE WE ARE RESPONSIBLE TO INSTALL
The Date of Installation for a Machine we are responsible to install is the
business day after the day 1) we install it or, 2) it is made available for
installation, if you (or the End User) defer installation. Otherwise (for
example, if others install or break its warranty seal), it is the day we
deliver the Machine to you (or the End User). In such event, we reserve the
right to inspect the Machine to ensure its qualification for warranty
entitlement.
THE DATE OF INSTALLATION FOR A CUSTOMER-SET-UP MACHINE
The Date of Installation for a Customer-Set-Up Machine is the date the
Machine is installed which you or your Remarketer, if applicable, record on
the End User's sales receipt. You must also notify us of this date upon our
request.
INSTALLATION OF MACHINE FEATURES, CONVERSIONS, AND UPGRADES
We sell features, conversions and upgrades for installation on Machines,
and, in certain instances, only for installation on a designated, serial
numbered Machine. Many of these transactions involve the removal of parts
and their return to us. As applicable, you represent that you have the
permission from the owner and any lien holders to 1) install features,
conversions and upgrades and 2) transfer the ownership and possession of
removed parts (which become our property) to us. You further represent that
all removed parts are genuine, and unaltered, and in good working order. A
part that replaces a removed part will assume the warranty and maintenance
Service status of the replaced part. You agree to allow us to install the
feature, conversion, or upgrade within 30 days of its delivery. Otherwise,
we may terminate the transaction and you must return the feature,
conversion, or upgrade to us at your expense.
11. WARRANTY SERVICE
We will specify in the Exhibit whether you or we are responsible to provide
Warranty Service for a Machine.
When we are responsible for providing Warranty Service for Machines, you are
not authorized to provide such Service, unless we specify otherwise in the
Exhibit.
When you are responsible for providing Warranty Service, you agree to do so
according to the terms we specify in the Warranty Service Attachment.
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<PAGE>
12. MARKETING OF SERVICES FOR A FEE
If you marketed a Product to an End User under this Agreement, or if you are
approved in your Profile to market a Service, you may, as we specify in the
Exhibit, 1) market Services, or 2) provide a qualified lead to us so that we
may market Services, to the End user on any machine or program, and receive
a fee from us. We provide Services to the End User under the terms of our
applicable agreement, signed by the End User.
You will receive a fee for a lead when it 1) is submitted on the form we
provide to you, 2) is for an opportunity which is not known to us, and 3)
results in the End User ordering the Service from us within six months from
the date we received the lead from you.
Alternatively, you will receive a fee for marketing when 1) you identify the
opportunity and perform the marketing activities, 2) you provide us with the
order and any required documents signed by the End User, and 3) if a
standard Statement of Work is used, there are no changes and no marketing
assistance from us is required.
You may market Services on eligible non-IBM Products regardless of whether
you marketed a Machine or Program to the End User.
We will not pay you the fee if the machine or program is already under the
applicable Service or if there is agreement to place the Machine or Program
under the applicable Service or if the Service was terminated by the End
User within the last six months.
If the Service is terminated within three months of the date payment from
the End User was due us, you agree to reimburse us for any payments we made
to you associated with it. the reimbursement may be prorated if the Service
is on a recurring charge basis.
We periodically reconcile amounts we paid you to amounts you actually
earned. We may deduct amounts due us from future payments we make to you, or
ask you to pay amounts due us. Each of us agrees to promptly pay the other
any amounts due.
13. MARKETING OF FINANCING
If we approve you on your Profile, you may market our Financing Services for
Products and Services and any associated products and services you market to
the End User. If you market our Financing Services, we will pay you a fee as
we specify to you in your Exhibit.
We provide Financing Services to the End User under the terms of our
applicable agreements signed by the End User. You agree that, for the items
that will be financed 1) you will promptly provide us any required documents
including invoices, the serial numbers, if applicable, 2) the supplier will
transfer clear title to us, and 3) you will not transfer to us any
obligations under your agreements with the End User.
We will pay you or the supplier when the End User has initiated financing
and acknowledged acceptance of the items being financed.
14. ENGINEERING CHANGES
You agree to allow us to install mandatory engineering changes (such as
those required for safety) on all Machines in your inventory, and to use
your best efforts to enable us to install such engineering changes on your
Customers' Machines. Mandatory engineering changes are installed at our
expense and any removed parts become our property.
During the warranty period, we manage and install engineering changes at:
1. your and your Customer's location for Machines for which we provide
Warranty Service; and
2. your location for other Machines.
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<PAGE>
Alternatively, we may provide you with the parts (at no charge) and
instructions to do the installation yourself. We will reimburse you for your
labor as we specify.
15. ENDING THE AGREEMENT
Either of us may terminate this Agreement, with or without cause, on three
months' written notice. If, under applicable law, a longer period is
mandatory, then the notice period is the minimum notice period allowable.
If we terminate for cause (such as you not meeting your minimum annual
attainment), we may, at our discretion, allow you a reasonable opportunity
to cure. If you fail to do so, the date of termination is that specified in
the notice.
However, if either party breaches a material term of the Agreement, the
other Party may terminate the Agreement on written notice. Examples of such
breach by you are: if you do not maintain customer satisfaction; if you do
not comply with the terms of a transaction document; if you repudiate this
Agreement; or if you make any material misrepresentations to us. You agree
that our only obligation is to provide the notice called for in this section
and we are not liable for any claims or losses if we do so.
At the end of this Agreement, you agree to:
1. pay for or return to us, at our discretion, any Products or shrink-wrap
Services for which you have not paid; and
2. allow us, at our discretion, to acquire any that are in your possession
or control, at the price you paid us, less any credits issued to you.
Products and shrink-wrap Services to be returned must be in their unopened
and undamaged packages and in your inventory (or in transit from us) on the
date this Agreement ends. We will inspect them, and reserve the right of
rejection. You agree to pay all the shipping charges.
At the end of this Agreement, each of us agrees to immediately settle any
accounts with the other. When allowable by applicable law, we may offset any
amounts due you against amounts due us or any of our Related Companies.
You agree that if we permit you to perform certain activities after this
Agreement ends, you will do so under the terms of this Agreement.
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<PAGE>
IBM BUSINESS PARTNER AGREEMENT
FEDERAL REMARKETER ATTACHMENT
- --------------------------------------------------------------------------------
These terms are in addition to or modify the Remarketer Terms Attachment,
Remarketer Terms Attachment for Workstation Software and the Transaction
Remarketer Terms. they apply only when you market Products and Services to a
Federal End User.
1. FEDERAL END USER
"Federal End User" includes federal government agencies or any other entity
listed in GSA Order ADM 4800.2D, including those entities listed in Appendices
A, B, and C of the Order, and any successor Order which may be published by the
GSA in the Federal Register. The term Federal End User also incudes federal
governmental cost reimbursement prime contractors and management and operating
contractors that receive proper authorization under FAR Part 51 from federal
agencies to make federal purchases or acquisitions where licenses granted and
title to equipment vest in the federal government.
2. TITLE
You may propose an integrated solution through a higher-tier federal contractor
in fulfillment of a specific government procurement where title to the Machine
passes directly to the federal government. In no event shall you permit
transfer of title for any Machine purchased under this Agreement to other than
the federal government. Under no circumstances may you assign any of your
responsibilities under this Agreement to the Federal End User.
3. BUY AMERICAN ACT/TRADE AGREEMENTS ACT (BBA/TAA)
We make no representation or certification regarding the domestic or foreign
origin of products we provide.
4. EXPORT OF PRODUCTS
When the federal government purchases Products and Services for its own use
outside the United States, (i.e., an embassy or military installation) they do
count 1) toward your minimum annual attainment 2) toward determination of your
discount or price, as applicable, or 3) for determining your marketing or
promotional funds. Your future supply allocations will not be affected. If for
such Products, the warranty will be voided unless the equipment is returned to
the United States for service. Title to the products must reside with the
United States government, and the government must be responsible for the program
licenses.
5. GSA PRICE PROTECTION
IBM will provide price protection to GSA Schedule holders. There schedule
holders must have an appropriate GSA contract addendum provided by the IBM
Government Industry Federal Business Partner Program Manager, before being
eligible for the rice protection terms set our in that addendum.
6. ENDING THE AGREEMENT (FOR FEDERAL CONTRACT OBLIGATIONS, EXCLUDING GSA)
If we terminate this Agreement without cause, we will permit you to continue to
market under the terms of this Agreement through the date on which this
Agreement would otherwise have ended had we not terminated it. You agree to
promptly withdraw any bids that include Products and Services which were
anticipated to have been obtained under this Agreement, unless we agree to terms
and conditions under the Federal Systems Integrator (FSI) Program (or similar or
successor program) for the bid as offered.
Page 1 of 1
<PAGE>
IBM BUSINESS PARTNER AGREEMENT
FEDERAL CERTIFICATION ATTACHMENT
- --------------------------------------------------------------------------------
These terms are in addition to or modify the Complementary Marketing Terms
Attachment, the Sales Agent Attachment and the Transaction Complementary Terms
Attachment. This Federal Certification contains a summary of certain Federal
laws and regulations that apply when we market to the Federal government. Copies
of these laws and regulations may be obtained from us at your request. It is
important that you understand your responsibilities under them, since the
Federal government has a number of remedies (such a levying fines and denying
Federal procurement awards) when a violation occurs. Please contact us if you
have any questions regarding this certification.
1. DEFINITIONS
FEDERAL PROSPECT - is the Federal government; Federal government owned or
affiliated (or sponsored) corporation; organization involved in Federal
procurement activities that are approved to procure using our GSA schedule
Contract; and Federal prime contractors and subcontractors who are engaged in a
specific Federal procurement opportunity.
LOBBYING - is any communication you have with the Federal government to
influence the award of a Federal contract to us.
MONEY, GRATUITY, OR OTHER THINGS OF VALUE - is anything of monetary value (for
example, a gift, a favor, entertainment, or vendor promotional training).
PROCUREMENT OFFICIAL - is a civilian or military employee of a Federal agency
(including the agency's contractors, subcontractors, or consultants) who
participates substantially in the Federal procurement process.
PROPRIETARY INFORMATION - is a competitor's information (including extracts),
marked "Proprietary," which has been submitted to the Federal government by the
competitor. It includes information contained in a bid or proposal (such as
pricing data).
SOURCE SELECTION INFORMATION IS THE FOLLOWING FEDERAL GOVERNMENT INFORMATION
(INCLUDING EXTRACTS):
1. documents marked "source Selection Information";
2. source selection plans;
3. source selection board, panel, or advisory reports;
4. bid prices or costs;
5. technical evaluation plans;
6. evaluation of proposals;
7. competitive range determination; and
8. rankings of bids, proposals, or competitors.
2. FEDERAL LAWS AND REGULATIONS
CONFLICT OF INTEREST
Certain conflict of interest laws and regulations limit our ability to do
business with the Federal government if we have an unfair competitive advantage
because of a conflict of interest. We may have an unfair competitive advantage
if you (or anyone who you engage to assist you in performing marketing for us):
1. have worked, or are working, with the Federal government on a Federal
procurement opportunity for which you will provide marketing for us;
2. have worked, or are working, with an anticipated or known bidder who will
compete at any contract level as a prime or subcontractor on a Federal
procurement opportunity for which you provide marketing for us; or
3. have had, or have, access to Proprietary or Source Selection Information
concerning a Federal procurement opportunity for which you will provide
marketing for us. If any of the above applies,
Page 1 of 4
<PAGE>
please check "possible Conflict of Interest," and provide us with a
nonconfidential description of each situation in the space provided below.
Otherwise, check "None." In either instance, you agree to update this
information in writing immediately when you become aware of "Possible
Conflicts of Interests" not already reported in this certification.
None
-----
Possible Conflict of Interest
-----
To be eligible for a Federal procurement award of over $200,000, we must provide
the Federal government with a conflict of interest certification concerning
anyone who will provide marketing for us on that procurement. We must certify
that we have informed them about these conflict of interest laws and
regulations. You may have to provide us with certifications (in addition to
this certification) or other information to assist us in complying with this
requirement. We will let you know, in advance, when such information is needed
for a Federal procurement.
PROCUREMENT INTEGRITY
The Procurement Integrity Act and regulations (collectively called the "PI")
prohibit certain activities during the Federal government procurement process.
the PI also may require certification from you and us.
The PI prohibits you and us from engaging (directly or indirectly) in the
following conduct during the course of a Federal government procurement:
1. discussing future employment or business opportunities with a Procurement
Official;
2. offering or giving Money, Grautities, or Other Things of Value to a
Procurement Official. This prohibition doe snot apply to situations where 1)
the fair market value is paid by the recipient agency or, if other than
money, is $10 or less per event or presentation or 2) the item is secured
under Federal government contract; and
3. soliciting, obtaining, or disclosing any Proprietary or Source Selection
information without written Federal government approval from the head of the
Federal agency or a designee.
In addition, for two years after leaving Federal government employment, a former
Procurement Official may not assist a winning contractor in negotiating or
performing any contract related to a procurement on which such former
Procurement Official worked while employed by the Federal government. This
prohibition applies whether the former Procurement Official is your
representative or ours.
When we are 1) selected for Federal prime contract awards, and modifications and
extensions over $100,000, or 2) responding to a sealed bid solicitation over
$100,000, we must provide a PI certification specifying that:
1. we are not aware of any actual or suspected PI violation related to the
specific Federal procurement. If we are aware of such a violation, however,
it must be disclosed; and
2. anyone who is substantially involved in the procurement on our behalf is
familiar, and will comply with the PI. You agree to obtain procurement-
integrity certifications from your employees and others who will assist you
in performing marketing for us.
BYRD AMENDMENT
Under the Byrd Amendment, we must report certain marketing activities that
constitute Lobbying to the applicable Federal agency or the Congress. This
reporting requirement applies to all Federal procurements over $100,000.
The following are not considered Lobbying, and do not have to be reported:
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<PAGE>
1. communications with a Federal agency that are required (for example, by
Federal law or regulation) to receive a Federal procurement award.
2. certain marketing performed by you prior to formal solicitation by a Federal
agency. These include all pre-Request for Proposal discussions regarding the
qualities, characteristics, application, adaptation, and terms of sales or
service of our products; and
3. professional and technical services provided after a solicitation has been
issued. Such services, however, must be directly related to the preparation,
submission, or negotiation of the Federal contract.
You agree that you will not lobby on behalf of IBM within the meaning of the
Lobbying Disclosure Act of 1995.
3. YOUR RESPONSIBILITIES
You agree to:
1. obtain Worker's Compensation and Employer's Liability Insurance;
2. Comply with, and assist us in complying with, and applicable Federal laws
and regulations, including the Federal regulations listed in this
Attachment. You agree to notify us in writing immediately if you believe
that you, or anyone assisting you to perform marketing, may have violated
any of them;
3. provide us with the certifications and related information we request; and
4. provide the Letter of Information for Federal Government Customers to your
End User.
Any questions you have concerning this certification, or your responsibilities
under it, should be directed to IBM U.S. Federal Contracts Relations Department.
Page 3 of 4
<PAGE>
LIST OF APPLICABLE FEDERAL REGULATIONS
FEDERAL ACQUISITION REGULATIONS (FAR)
52.203-1 Officials Not to Benefit
52.203-3 Gratuities
52.203-5 Covenant Against Contingent Fees
52.203-6 Restrictions on Subcontractor Sales to the Government
52.203-7 Anti-Kickback Procedures
52.203-8 Requirement for Certificate of Procurement Integrity
52.203-9 Requirement for Certificate of Procurement Integrity -
Modification
52.203-10 Price or Fee adjustment for Illegal or Improper Activity
52.203-11 Certification and Disclosure Regarding Payments to
Influence Certain Federal Transactions
52.203-12 Limitation on Payments to Influence Certain Federal
Transactions
52.204-2 Security Requirements
52.209-5 Certification Regarding Debarment, Suspension, Proposed
Debarment and Other Responsibility Matters
52.209-6 Protecting the Government's Interest when Subcontracting
with Contractors Debarred, suspended, or Proposed for
Debarment
52.209-7 Organizational Conflicts of Interest Certificate -
Marketing Consultants
52.212-13 Stop-Work Order
52.215-1 Examination of Records by Comptroller General
52.222-1 Notice to the Government of Labor Disputes
52.222-21 Certification of Nonsegregated Facilities
52.222-22 Previous Contracts and Compliance Reports
52.222-26 Equal Opportunity
52.222-35 Affirmative Action for special Disabled and Vietnam Era
Veterans
52.222-36 Affirmative Action for Handicapped Workers
52.222-37 Employment Reports on Special Disabled Veterans and
Veterans of the Vietnam Era
52.223-1 Clean Air and Water Certification
52.223-2 Clean Air and Water
52.227-2 Notice and Assistance Regarding Patent and Copyright
Infringement
52.228-5 Insurance - Work on a Government Installation
52.233-3 Protest After Award
52.246-23 Limitation of Liability
52.249-1 Termination for Convenience of the Government (Fixed Price
(Short Form)
52.249-2 Termination for Convenience of the Government (Fixed Price)
GENERAL SERVICES ADMINISTRATION REGULATIONS (GSAR)
552.215-70 Examination of Records by GSA
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<PAGE>
IBM BUSINESS PARTNER EXHIBIT
IBM BUSINESS PARTNER AGREEMENT
Exhibit No.: BPEX-01
Effective Date: January 1, 1997
GENERAL INFORMATION
This Exhibit is designed to provide you with the Product information related to
your IBM Business Partner relationship only. There are individual sections by
Product family. We will provide you with those sections applicable to your
Product Approval(s) along with your other Agreement documents. If you need
additional information, these documents are available via IBMLink, or from your
IBM representative.
Products included in this Exhibit are available for marketing in conjunction
with your Value-Added Enhancement unless otherwise specified.
Products included in this Exhibit may be available to Distributors. These
available Products may be acquired at the discount indicated in this Exhibit, or
they may be acquired at the discount specified in Distributor Schedule A.
Products for which there is a discount specified in Distributor Schedule A are
identified by an "A" in the DIST column in this Exhibit.
INTERNAL USE OF PRODUCTS
- ------------------------
Unless otherwise specified in this Exhibit, you may acquire Products included in
this Exhibit which you are approved to market for internal use within your
Business Partner operations.
1. Internal use products are available to Business Partners approved under:
. Remarketer terms at the same discount as Products acquired for resale.
. Complementary (Fee Based) terms at a 30% discount.
2. One license of each eligible licensed program authorized for your approved
processor category may be acquired for each internal use processor.
DEVELOPMENT AND DEMONSTRATION PRODUCTS
- --------------------------------------
IBM Business Partners may obtain the quantity of Development/Demonstration
System Products identified in this Exhibit for the Products they are approved to
market. The indicated quantities may be acquired during each 12-month period,
beginning on the date you are approved to market the product.
<TABLE>
<CAPTION>
PRODUCT QUANTITY
<S> <C>
RS/6000 Processors 5
POWERparallel Processors 5
AS/400 Processor 2
Point of Sale Products* 10
Network Integration Products** 5
System/390 Processors 1
Storage Systems Products 10
Finance Industry Processors 1
Printing Company Printers*** 2
</TABLE>
* May acquire the quantities indicated for each machine type you are approved
to market.
** In addition to approved Network Integration Solution Partners, Network
Integration Products are available to IBM RS./6000, AS/400, System/390, and
Point of Sale Business Partners for development, demonstration, or internal
use installation.
*** This is limited to a maximum of two of any model of a Products you are
approved to market.
IBM Licensed Programs are available for Development and Demonstration System
installation at a 100% discount, unless otherwise noted. One copy of each
authorized Licensed Program is available for each Development and Demonstration
System. Process or Media charges associated with IBM Licensed Programs are not
eligible for a discount.
Page 1 of 9
<PAGE>
Business Partner Exhibit
REMARKETER TERMS
INVENTORY RETURNS - INVENTORY ADJUSTMENT CATEGORY (IAC)
- -------------------------------------------------------
Inventory Adjustment Categories are specified in the Inventory Adjustment
Category column in the attached Product Tables.
When a Product is indicated as returnable (IAC 2, 3, 4), the machine type/model
and its associated field installable features and model conversions ordered from
IBM as MES orders are eligible for return.
CATEGORY 1
Products indicated as IAC 1 are not eligible for return.
CATEGORY 2
Handling charge: 5% handling charge.
Maximum returns: Number of units (within IAC 2) IBM shipped to you in the
preceding 4 month period, minus any returns. Products being
returned must have been shipped to you by IBM during that
preceding 4-month period.
Open box returns: None allowed.
CATEGORY 3
Handling charge: - No handling charge for up to 5% of the prior calendar
quarter's net billings within IAC 3.
- 3% handling charge for an additional 5% of the prior
calendar quarter's net billings IAC 3.
Maximum returns: 10% of prior calendar quarter's net billings.
Open box returns: Up to 1% of returns.
CATEGORY 4
Handling charge: No handling charge.
Maximum returns: 15% of prior calendar quarter's net billings within IAC 4
Open box returns: Up to 1% of returns.
RETURN OF WITHDRAWN PRODUCTS:
Products eligible for return and announced as withdrawn from marketing by IBM:
- must be returned by the return date specified in the withdrawal
announcement; or
- if there is no return date specified in the announcement, the request for
return must be received by IBM within 60 days of the withdrawal
announcement date.
RETURN OF PRODUCTS IDENTIFIED AS DEFECTIVE ON ARRIVAL (DOA):
You may return Products identified by us as Defective on Arrival (DOA) if a
reasonable repair attempt was made (you requested IBM to repair). Such returns
will not count in your allowable return percentages.
EXCLUSIONS:
- Products ordered for Demonstration/Development System use.
- Non-Preloaded IBM Mid-Range Licensed Programs.
ADDITIONAL INVENTORY ADJUSTMENT TERMS:
IBM Licensed Programs shipped from IBM as PRE-LOADED on a processor may be
returned under the Inventory Adjustment provisions when the processor is also
returned. The PRE-LOADED Licensed Program is subject to the same Inventory
Adjustment provisions as the processor on which it was shipped.
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<PAGE>
Business Partner Exhibit
Returns will be deducted from all attainment.
All returns that exceed the stated limits will be returned to the Business
Partner at their expense.
Returns can be made once each calendar month.
PRICE DECREASE AND DISCOUNT INCREASE CREDITS
- --------------------------------------------
Unless stated otherwise, Products included in this Exhibit are eligible for Full
Inventory Price Decrease and Discount Increase Protection.
Price Decrease and Discount Increase Credits apply to machine type/models;
associated filed installable features, and model conversions shipped from IBM as
MES orders.
You may be required to report your inventory to us in order to receive a Price
Decrease or Discount Increase Credit. We will specify in our announcement
letter when, and in what format, reporting will be required.
You may only use these Credits after they are issued and only towards amounts
then or thereafter due IBM.
IBM LICENSED PROGRAMS
- ---------------------
Permission to Copy: IBM authorized remarketers are required to copy and
redistribute IBM Licensed Programs that are included in this Exhibit unless
otherwise noted.
For specified Programs that we do not authorize you to copy and redistribute,
you are not required to maintain a development system license. We will ship
such Programs to you, or your End User, upon receipt of the required information
and documents. We will distribute any defect correction information, and
subsequent Program releases, to you or your End User.
Programs we have specified may be marketed without your Value-Added Enhancement
for use on non-IBM machines to any End User.
Only IBM Licensed Programs acquired for development system installation are
eligible for the IBM testing period.
Upgrades Charges: For IBM Licensed Programs included in this exhibit, upgrades
are available at the same discount as the installed Licensed Program for which
the upgrade is being ordered unless otherwise specified in the Eligible Product
Category.
Upgrades for purposes of this section are defined as Group to Group and any
other field installable features available for the license.
Version to Version upgrades to a Licensed Program are available, and are
identified in this exhibit as available for a discount, they are eligible for
the same discount as an initial license order for the upgraded-to program.
Programs licensed under a Monthly License Charge (MLC) are not eligible for a
discount, but may be eligible for a fee. Details are indicated in individual
Program announcements. When your relationship terminates with an End User, or
if you delegate your support responsibilities for a recurring charge program to
IBM, the associated MLC fees will be discontinued.
For IBM Licensed Programs available with a Primary License Charge (PLC) and
Annual License Charge (ALC), discounts, if any, apply only to the Primary
License Charge. Annual License Charges may have unique IBM Remarketer pricing
available.
Process or media charges associated with IBM Licensed Programs are not eligible
for a discount.
Higher education Software Consortium (HESC): Industry Remarketers approved for
the AS/400 and RS/6000 are eligible for the following HESC terms.
When you are authorized for IBM Licensed Programs listed in this exhibit, that
are also listed as eligible for the HESC, you may be able to acquire them under
the HESC provisions when the licenses are placed with an HESC qualifying End
User. Eligible programs are identified in the HESC column of this Exhibit with
the corresponding HESC group designation.
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<PAGE>
Business Partner Exhibit
DISCOUNT PROVISIONS
- -------------------
When a maximum discount is indicated for a specific product, the total of all
available discounts may not exceed the stated maximum discount.
Field installed features and model conversions for Products included in this
Exhibit may qualify for a discount, otherwise, the IBM Single Unit Price
applies.
When model conversions are available at a discount, the discount will be the
same as the MES discount of the converted-to model, unless otherwise noted.
Certain Products included in this Exhibit may be eligible for additional
discount incentives which are in addition to the remarketing discount. IBM may
change or withdraw additional discount incentive programs at any time.
END USER INSTALLATION REPORTING
- -------------------------------
END USER INSTALLATION INFORMATION MUST BE REPORTED TO IBM WITHIN 10 DAYS OF THE
DATE OF INSTALLATION FOR ALL PRODUCTS INCLUDED IN THIS EXHIBIT.
WARRANTY SERVICE INFORMATION
- ----------------------------
Machines included in this Exhibit are Warranty Service Category A Machines
unless specified otherwise in the Product Table. IBM does not authorize you to
perform warranty Service for Category A Machines.
See Warranty Service Attachment for Warranty Service Category B Machines.
CANCELLATION CHARGES.
- ---------------------
Refer to the Business Partner Operations Guide to determine applicable
cancellation charges.
BUSINESS PARTNER PROJECT DISCOUNT GUIDELINES
- --------------------------------------------
IBM Business Partners may be eligible for the IBM Project Discount in addition
to their base discount identified in their Profile and this exhibit. The
Project Discount is applicable to all products included in this Exhibit,
excluding IBM Printing Systems Co. printers. IBM Solution Provider -
Remarketers, System-Integrator Remarketers, and IBM Distributors approved to
sell IBM networking products may be eligible for a Networking Products Project
Discount in addition to their base discount.
IBM PROJECT DISCOUNT
- --------------------
A Project is defined as an engagement by an IBM remarketer with a single End
User Customer which results in IBM revenue from the remarketer of at least one
million dollars for that specific End User engagement spanning a period of up to
two years.
The Project Discount may be 1%, 3%, or 5% based on the total amount of IBM
revenue (based on net billed amounts) realized for products ordered directly
from IBM for one "project." However, for any given Product, the sum of the
remarketer's base discount and the Project Discount may not exceed 39%
(excluding discount cap exceptions listed below). Eligible Products will be
price protected for the term of the project, not to exceed two years from the
start date of the project, at the IBM net price available to the remarketer at
the date the first order is received by IBM for the first order for the project.
* Discount Cap Exceptions
- The maximum Project Discount is 40% for Federal End Users.
- System/390 Products do not have a maximum Project Discount.
- The following Category A1 Products have a 38% maximum Project Discount for
both commercial and Federal End Users:
5696-041 Professional CADAM View
5696-138 Professional CADAM Drawing Mark-up Facility
5696-706 Professional CADAM Variational Design System
5696-885 Professional CADAM Graphics Enabler
5696-938 Professional CADAM MCX Translater
5697-258 Professional CADAM Hybrid Raster
5756-091 Professional CADAM 3D Surface Design
5756-092 Professional CADAM Manufacturing System
5756-093 Professional CADAM Machining Center
5756-094 Professional CADAM Interactive Design
Page 4 of 9
<PAGE>
Business Partner Exhibit
5756-095 Professional CADAM Access IUEing System
5756-096 Professional CADAM Interactive Solids Design
5756-295 Professional CADAM CADEX: Intelligent Data Integrator
5756-296 Professional CADAM MCAE Interfaces
5756-297 Professional CADAM AEC Schematics
5626-CCD CATIA/CADAM Drafting
5626-IUE CATIA/CADAM IUE
5626-MCX CATIA/CADAM MCX Translator
5626-RAS CATIA/CADAM Hybrid Raster
5626-MU2 CATIA/CADAM 2D Markup and Annotation
* Project Discount Schedule
- 1% when IBM project revenues are equal to or greater than $1.0M, but less
than $2.5M.
- 3% when IBM project revenues are equal to or greater than $2.5M, but less
than $5.0M.
- 5% when IBM revenues are equal to or greater than $5.0M
All Current Discount Maximums indicated in this exhibit continue to apply.
Please refer to IBM announcement letter 595-035 dated May 9, 1995, for
additional details.
IBM CREDIT FOR SELECTION NETWORKING PRODUCTS OFFERING
Effective October 1, 1996, if you are authorized to sell IBM networking
products, you can receive a credit for selected networking products that are
installed at end-user locations during a calendar year quarter. The selected
products that are eligible for credit are included in the business Partner
Exhibit (Z125-5505) Category D.
The credits will be based on the IBM total Billed Value of the eligible machine
type and features installed during the quarter. The following table will be
used to determine the credit percent to which you are entitled.
IBM Billed Value of Credit
Quarterly Sales Percent
$250,000 to $499,999 2%
$500,000 to $1,499,999 3%
$1,500,000 to$2,999,999 4%
$3,000,000 to $5,999,999 5%
$6,000,000 and over 6%
You can combine this offering with the base remarketing discount specified in
the IBM Business Partner Exhibit.
Eligible products acquired under a project discount or special bid discount and
sold during the quarter will be included in the total Billed Value of Quarterly
Sales to determine eligible credit percent; however, they will not be included
in the calculation of your quarterly credit. Those products that were in your
inventory as of October 1, 1996 will be included.
This offering cannot be combined with any other discount, credit, rebate, or
bonus on the eligible products.
At the end of each quarter, the remarketer must complete the designated Credit
Certification Form to qualify for the credit. this offering will be effective
for products installed in fourth quarter 1996 and for each quarter thereafter
until such time that IBM elects to modify or withdraw this offer.
IBM reserves the right to modify or withdraw this offering at any time.
Additional details are available in IBM Announcement, 596-158, dated 10/29/1996.
FEDERAL REMARKETING
- -------------------
Federal End User Definition
The following definition of "end user" applies when marketing to Federal
Government accounts:
1. "Federal End User" includes federal government agencies or any other entity
listed in GSA Order ADM 4800.2D, including those entities listed in
Appendices A, B, and C of the Order, and any successor Order which may be
published by the GSA in the Federal Register. the term Federal End User
also
Page 5 of 9
<PAGE>
Business Partner Exhibit
includes federal government cost reimbursement prime contractors and
management and operating contractors that receive proper authorization
under FAR Part 51 from federal agencies to make federal purchases or
acquisitions where licenses granted and title to equipment vest in the
federal government.
2. The IR may propose an integrated solution through a higher-tier federal
contractor in fulfillment of a specific government procurement where title
to the IBM equipment passes directly to the federal government. In no event
shall the IR permit transfer of title for any IBM equipment purchased under
this Agreement to other than the Federal government. Under no circumstances
may the IR assign any of its responsibilities under the IR Agreement to the
Federal End User.
Additional Terms for Federal Sales
1. Addition to Remarketer General Terms (Z135-4800), Section 25, Ending the
Agreement.
For federal contract (excluding GSA Schedule contract) obligations only.
In the event IBM terminates this Agreement without cause, we will permit
you to continue to provide Products under the terms of this Agreement
through the date on which this Agreement would otherwise have ended had it
not been terminated by IBM. The industry remarketer agrees to promptly
withdraw any bids that include IBM products and services which were
anticipated to have been obtained under this Agreement, unless IBM and the
industry remarketer are able to agree to terms and conditions under the
Federal Systems Integrator (FSI) Program (or similar or successor program)
for the bid as offered.
2. Buy American Act/Trade Agreements Act (BAA/TAA).
IBM makes no representation or certification regarding the domestic or
foreign origin of products provided by IBM.
Page 6 of 9
<PAGE>
Business Partner Exhibit
COMPLEMENTARY TERMS
The terms of this Exhibit are in addition to those of the IBM Business Partner
Agreement and apply to Business Partners approved under the Complementary
Marketing Terms Attachment or the Systems Integrator Attachment.
We specify a fixed dollar fee (Fee Opportunity) or a percent (Fee Percent) for
each Product. A description of each fee follows:
BASE AMOUNT COMPENSATION
The fee-based Solution Provider will determine the End User's discount percent
(up to the maximum percent identified as the fee opportunity for the Product in
the product table) which determines the amount invoiced to the Customer. The
compensation received by the fee-based Solution Provider is the difference
between the fee opportunity percent less the percentage discount provided to the
customer (exclusive of taxes). The Product price to the customer cannot be more
than the Product's list price as set by IBM at time of installation.
FEE COMPENSATION
If we specify a fee percent (used to determine the fee paid to you) for each
Product, we apply it to the Product's one-time or recurring charge is invoiced
to the Customer (exclusive of taxes), unless specified otherwise. For a
recurring charge, we apply the fee percent to 1) 12 times the monthly charge or
2) the sum of the initial charge and the annual charge. Additional fees may be
paid on other opportunities as outlined in this Exhibit.
IBM NET REVIEW
IBM NET REVENUE IS DETERMINED, WHERE APPLICABLE, BY:
1. the net purchase price or net one-time charge for an eligible Product;
2. the net revenue to IBM under a Product trade-in or asset exchange
transaction;
3. for a recurring charge Product, an amount equal to 12 times the net monthly
charge; or
4. the sum of the net initial license charge and net first annual license
charge amounts, for a licensed program to which such charges apply.
CONDITIONS WHERE THERE IS NO COMPENSATION
Compensation for the following items will not be included in any clement of this
plan, unless we specify otherwise.
. Placements of Products and other IBM offerings for which the IBM branch
office responsible for the Customer receives no revenue.
. Placement of Products acquired directly from IBM which are not ordered
through the IBM Advanced Administration System (AAS).
. The fee-based Solution Provider is performing as an IBM subcontractor for a
Customer and the subcontractor tasks duplicate any of the Marketing
Activities for the Customer.
. Placements of Products by other IBM Complementary Business Partners or IBM
Remarketers.
. Temporary installations: IBM machines or programs installed at one customer
location, for the purposes of testing or demonstration, that the customer
intends to move to another location within a short period of time.
. Products sold by IBM under a special bid contract approved by the IBM
Federal Integrator Channel Department.
. Products acquired for use outside of the United States and Puerto Rico,
unless stated otherwise in this Exhibit.
. Products acquired from non-IBM authorized sources.
. Products acquired for resale.
. Products sold without the IBM logo.
. Products acquired by IBM subsidiaries or IBM employees.
. Publications, supplies, cables, or accessories.
. The amount on an IBM services invoice for services that you perform as a
subcontractor.
. Taxes, separately itemized or invoiced.
Page 7 of 9
<PAGE>
Business Partner Exhibit
LEGEND
- ------
ASRP Annual System Revenue Performance.
CERT Certification required "Y" (yes) and "N" (no).
DIST Where indicated with an "A" in this column, the Product is available at
the discount specified in the Distributor Schedule A.
FEE FEE Opportunity.
HESC Products eligible for the Higher Education Software Consortium (HESC)
are identified by their HESC group designation.
IAC Inventory Adjustment Category
INST Products included in this Exhibit are identified as Installation by IBM
(IBI) or Customer Set Up (CSU) in the"INST" column of the Eligible
Product Tables.
CSU Customer Set Up
IBI Installation by IBM
LIC Product requires a License for Internal Code "Y" (yes) or "N" (no).
NA Using "Y" to denote yes and "N" to denote no, Products indicated with a
"Y" in the NA (North America) column may be acquired in either Canada or
the United States and marketed in either Canada or the United States.
PRC Price Reduction Credit Category.
VAE Value-Added Enhancement required "Y" (yes) or "N" (no).
Page 8 of 9
<PAGE>
Business Partner Exhibit
ELIGIBLE PRODUCT TABLE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
SYSTEM OR PRODUCT TYPES
- -------------------------------------------------------------------------------------------------------------
NETWORK
IBM POS INTEGRATION STORAGE
PRODUCT CATEGORIES RS/6000 AS/400 PRODUCTS PRODUCTS SYSTEM/390 PRODUCTS
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Primary A B C C1 D E E1
- -------------------------------------------------------------------------------------------------------------
ASSOCIATED PRODUCTS
HARDWARE:
Displays G1 G2 G1 G2 G2 G2
------------------------------------------------------------------------------------
Storage Media H2 H1 H2 H1 H2
------------------------------------------------------------------------------------
Miscellaneous K K1 K2 K3 K4 K K1 K2 K3 K5 K K K1 K2 K1 K2 K5
K5
- -------------------------------------------------------------------------------------------------------------
Finance Industry
Products J1 J1 J1
- -------------------------------------------------------------------------------------------------------------
Storage Products S1 S2 S3 S5 S6 S1 S2 S3 S6 S1* S2 S1 S2 S3 S5 S6
- -------------------------------------------------------------------------------------------------------------
IBM Printing Co.
Printers P1 P2 P3 P4 P1 P2 P3 P4 P1 P2 P3 P4 P1 P2 P3 P4 P1 P2 P3 P4
- -------------------------------------------------------------------------------------------------------------
IBM Licensed Program A A1 D1 F M B B1 F N C D1 M N E2 F SS
Categories 0 R SS X Y 0 R SS X C2 O SS Y 0 Y
- -------------------------------------------------------------------------------------------------------------
IBM Service Offerings Yes Yes Yes Yes Yes Yes
- -------------------------------------------------------------------------------------------------------------
IGN
- -------------------------------------------------------------------------------------------------------------
Note:
* 9348 only
- -------------------------------------------------------------------------------------------------------------
</TABLE>
BUSINESS PARTNER EXHIBIT PRODUCT TABLES
DOCUMENT NAME DESCRIPTION
5505 Business Partner Exhibit General Terms
RISC RS/6000 BP Product Table
AS400 AS/400 BP Product Table
POS Point-of-Sale BP Product Table
NETW Network Integration BP Product Table
S390 System/390BP Product Table
ASSOC Associated Products BP Product Table
FIN Finance Industry BP Product Table
STOR Storage Products BP Product Table
PRINT Printing Systems Company BP Product Table
FEE Fee Based Only Products BP Product Table
SVC Services Offerings BP Product Table
IGN Global Network Complementary Marketer Table
BUSINESS PARTNER PROFILE
APPROVED PRODUCT RELATED EXHIBIT DOCUMENTS
RS/6000: Z1255505; RISC, ASSOC, FIN, STOR, SVC, PRINT, FEE.
AS/400: Z1255505; AS400, ASSOC, FIN, STOR, SVC, PRINT, FEE.
Point-of-Sale: Z1255505; POS, ASSOC, SVC, PRINT, FEE
Network Int: Z1255505; NETW, ASSOC, STOR, SVC, PRINT, FEE.
System/390 Z1255505; S390, ASSOC, FIN, STOR, SVC, PRINT, FEE.
Storage: Z1255505; ASSOC, STOR, SVC, FEE.
Printer Rmkt: Z1255505; PRINT, SVC, PRINT, FEE.
IGN: Z1255505; IGN
Page 9 of 9
<PAGE>
Business Partner Exhibit
IBM AS/400 PRODUCT TABLE
Products included in this Product Table are available to IBM Business Partners
approved for the IBM AS/400. Category B Products are eligible for the discounts
or fees identified in the AS/400 Discount Schedule below. Individual Business
Partners' specific discounts are identified in their Profiles. AS/400 Business
Partners may also acquire Products from the Associated Products Product Table of
this Exhibit in Categories F, G1, G2, G3, H1, H2, J1, J2, K1, K2, K3, K5, N, O,
P, S1, S2, SS, and X. Products acquired from these tables, as well as those
acquired from the Associated Products tables, aggregate toward the Annual
Revenue Performance unless otherwise noted.
<TABLE>
<CAPTION>
HARDWARE DEMO/DEV
REMARKETING DISCOUNT DISCOUNT
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ANNUAL SYSTEM REVENUE PERFORMANCE 9401 9402 9406 I/O & SW ALL PRODUCTS/(3)/
- --------------------------------------------------------------------------------------
Entry (Less than $1,000,000) 15% 31% 27% 28% 50%
- --------------------------------------------------------------------------------------
$1,000,000 - 2,999,999 15% 33% 29% 30% 50%
- --------------------------------------------------------------------------------------
$3,000,000 and over 15% 35% 31% 32% 50%
- --------------------------------------------------------------------------------------
</TABLE>
CATEGORY B
MACHINES
MES orders for Machines included in this Category are available at the
Remarketing Discount indicated below and at the same Development Discount as the
base machine on which it will be installed, unless otherwise noted. You are
authorized to initially install your programs and related IBM Licensed Programs
on the AS/400, at your authorized location, subject to the provisions of the IBM
Business Partner Agreement, Remarketer Terms, Attachment.
<TABLE>
<CAPTION>
D I
M I L I N
MACHINE FEE E S I A S
TYPE DESCRIPTION OPTY FEE S T C C T NOTES
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
9401 AS/400 Portable One Model P03 17% 4% 29% A Y 2 CSU (1) The 9402 Models 236 and 436 are
available at a 22% discount for new
9402/(1,5)/ System Unit 20% 5% 29% A Y 2 CSU machine orders and a 29% discount for
MES orders. The 9402 Models 236 and
9404/(6)/ System Unit 18% 4% 29% A Y 2 IBI 436 are available for marketing
without the standard Value-Added
9406/(2,7)/ System Unit 16% 3% 29% A Y 2 IBI Enhancement requirement.
5299 Terminal Multiconnector Model (2) Maximum Remarketing discount for 9406
003 10% 5% 30% A N 2 CSU Model 53S new machine order = 27%
9331 Diskette Unit 11% 4% 30% A N 2 IBI
2480 AS/400 Wireless LAN Access
Points 10% 6% 30% A N 2 CSU
2482 AS/400 Wireless Portable
Transaction Computer 10% 6% 30% A Y 2 CSU
2483 AS/400 Integrated Laser PTC 10% 6% 30% A Y 2 CSU
2484 AS/400 Industrial PTC 10% 6% 30% A Y 2 CSU
2486 AS/400 Wireless Data
Collection PTC 10% 6% 30% A N 2 CSU
2488 AS/400 Pen-Based Computer 10% 4% 30% A N 2 CSU
2489 Rugged Notebook Computer 10% 4% (4) A N 2 CSU
3890/(11)/ Document Processor Model XP1 10% 4% 8% - N 2 IBI
3897/(11)/ Image Capture System Model 001 10% 4% 8% - N 2 IBI
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE:
(3) Development System Discounts for AS/400 Processors (any models not
listed are available at a 50% Development Discount). The Development
System Discount for a model conversion will be the same as the discount
percent associated with the converted-to model. Exception approval is
required for eligibility to order 9406 Models 320, 53S, and 530 as
development systems.
9401 P03 = Up to ten 9401 P03's may be acquired for Demo/Dev
System use each contract period. 9402 4SS, 4SE, 4SG, 4SL, 40E,
40G, 40L = 0% 9406 F60, F70, F80, F90, F95, F97, 310, 320, 530,
53S = 35% 5299 Development System Products available via Special
Bid. 9401-150 Available only for Development System
installation. Standard AS/400 discounts and quantities apply.
(4) Field installed features are ordered using special ordering vehicle
2489-ZZZ, which receives the same discount as 2489 new machine orders.
(5) For 9402 Model 2xx MES orders, the maximum fee opportunity is 15% and
the fee percentage is 5%.
(6) For 9404 Model 2xx and 3xx MES orders, the maximum fee opportunity is
15% and the fee percentage is 4%.
(7) For 9406 Model 2xx and 3xx MES orders, the maximum fee opportunity is
15% and the fee percentage is 3%.
(11) Maximum discount = 8%.
- --------------------------------------------------------------------------------
Page 1 of 8
<PAGE>
Business Partner Exhibit
IBM AS/400 PRODUCT TABLE (CONTINUED)
CATEGORY B (CONTINUED)
IBM LICENSED PROGRAMS
Version to version upgrades are eligible for the same discount as an initial
license order for the upgraded-to Program.
Complementary Marketing fee percentages are as follows: Central Order = 12%
TBO Order = 10%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
H D
E I
PROGRAM S S
NUMBER/(9)/ PROGRAM DESCRIPTION C T NOTES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5620-WCL Win400 for Clipper - A (8) Permission to copy is not granted for
5620-WIN/(8)/ Win400 Full Product - A these licensed programs.
5622-055 Current OV/400 Workgroup Program - A (9) For Processor Group Information, refer
5622-969 ImagePlus Workstation Program V2 - A to the Exhibit - IBM AS/400 Machines
(Z125-4125).
5636-PUB AS/400 CD-ROM Collection Kit - A
Designated AS/400 software can be
5716-AF1 Advanced Function Printing Utilities for OS/400 - A distributed automatically from IBM
5716-BR1 Backup Recovery and Media Services for OS/400 IC A Software Manufacturing Solutions (SMS)
directly to your end users for a fee.
5716-CB1 Integrated Language Environment COBOL for OS/400 - A Orders can be placed by selecting the
5716-CF1 Point-of-Sale Communications Utility for OS/400 - A "IR/IRA End User Distribution" option
in the configurator. Charges for the
service will be calculated and added
to the configuration.
5716-CL1 Application Development ToolSet Client Server
for OS/400 IC A Additionally, all 5763 and 5716
5716-CL3 Application Development ToolSet Client Server - A programs ordered and shipped on the
5716-CM1 Communications Utilities for OS/400 - A 5755-AS3 and 5755-AS4 System Program
Orders (SPOs) are eligible for this
5716-CP2 CallPath for OS/400 - A automatic distribution by IBM.
5716-CP3 CallPath for AS/400 V3 - A
5716-CR1 Cryptographic Support for OS/400 - A
5716-CX2 Integrated Language Environment C for OS/400 - A
5716-CX4 VisualAge C++ for OS/400 IC A
5716-CX5 VisualAge for C++ for AS/400 - A
5716-DB1 System/38 Utilities for OS/400 - A
5716-DCT Language Dictionaries for OS/400 - A
5716-DFH CICS for OS/400 IC A
5716-DP1 DataPropagator Relational Capture and Apply for
OS/400 - A
5716-DS1 Business Graphics Utility for OS/400 - A
5716-ES1 SystemView OMEGAMON Services/400 IC A
5716-FNT Advanced Function Printing Fonts for OS/400 - A
5716-FN1 Advanced Function Printing DBCS Fonts for OS/400 - A
5716-FS1 OSI File Services for OS/400 - A
5716-JS1 Job Scheduler for OS/400 - A
5716-MG1 SystemView Managed System Services for OS/400 - A
5716-MQ1 MQSeries for OS/400 IC A
5716-MS1 OSI Message Services for OS/400 - A
5716-MW1 ManageWare for OS/400 - A
5716-OS1 OSI Communication Subsystem for OS/400 - A
5716-PD1 Application Program Driver for OS/400 - A
5716-PT1 Performance Tools for OS/400 - A
5716-PW1 Application Development Toolset for OS/400 IC A
5716-QU1 Query for OS/400 IC A
5716-RD1 Report/Data Archive and Retrieval System - A
5716-RG1 Integrated Language Environment RPG for OS/400 - A
5716-SM1 SystemView System manager for OS/400 IC A
5716-SS1 Operating System/400 V3R6 IC A
5716-ST1 DB2 Query Manager and SQL Development Kit for
OS/400 IC A
5716-SV1 ADSTAR Distributed Storage Manager for OS/400 IC A
</TABLE>
Page 2 of 8
<PAGE>
Business Partner Exhibit
IBM AS/400 PRODUCT TABLE (CONTINUED)
CATEGORY B (CONTINUED)
IBM LICENSED PROGRAMS (CONTINUED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
H D
E I
PROGRAM S S
NUMBER/(9)/ PROGRAM DESCRIPTION C T NOTES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5716-UB1 Ultimedia Business Conferencing for OS/400 IC A
5716-US1 Client Access Ultimedia Tools for OS/400 IC A
5716-VG1 VisualGen Host Services for OS/400 - A
5716-WP1 OfficeVision for OS/400 IC A
- ------------------------------------------------------------------------------------------------------------------------------------
5716-XA1 Client Access IC A (8) Permission to copy is not granted for
these licensed programs.
5716-XZ1 LAN Server for OS/400 IC A
(9) For Processor Group Information, refer
5733-A01/(8)/ Medical RecordsPlus/400 V3 - A to the Exhibit - IBM AS/400 Machines
5733-A06 IBM Network Station manager for AS/400 V3R2 - A (Z125-4125).
5733-A07 IBM Network Station Manager for AS/400 V3R7 - A
5733-A08 IBM Network Station Browser for AS/400 - A (10) Designated AS/400 software can be
5733-A09 IBM Network Station Support for Java for AS/400 - A distributed automatically from IBM
5733-CLP/(8)/ BrioQuery Navigator - Macintosh V3 - A Software Manufacturing Solutions (SMS)
5733-CSM/(8)/ BrioQuery Designer - Macintosh V3 - A directly to your end users for a fee.
5733-CSN/(8)/ BrioQuery Explorer - Macintosh V3 - A Orders can be placed by selecting the
5733-CSQ/(8)/ BrioQuery Designer - Windows V3 - A "IR/IRA End User Distribution" option
5733-CSV/(8)/ BrioQuery Explorer - Windows V3 - A in the configurator. Charges for the
5733-CSW/(8)/ BrioQuery Navigator - Windows V3 - A service will be calculated and added to
the configuration.
5733-CS8/(8)/ DAL Server - A
5733-IM1 IBM Intelligent Miner for AS/400 V1 - A Additionally, all 5763 and 5716
5733-080 IBM Application Dictionary/400 IC A programs ordered and shipped on the
5755-AS3 and 5755-AS4 System Program
5733-167 IBM Distributed Computing Environment Base Orders (SPOs) are eligible for this
Services/400 - A automatic distribution by IBM.
5733-218 IBM Report/Data Archive & Retrieval System for
OS/400 - -
5733-228 IBM Image Plus Workfolder Appl Facility V3 for
OS/400 - A
5763-AF1 Advanced Function Printing Utilities/400 IC A
5763-BR1 AS/400 Basic IC A
5763-BR1 Backup Recovery and Media Services/400 IC A
5763-CB1 Integrated Language Environment (COBOL/400 IC A
5763-CD1 CoOperative Development Environment/400 IC A
5763-CF1 Point-of-Sale Communications Utility/400 IC A
5763-CL1 Application Development ToolSet Client IC A
Server/400
5763-CM1 Communications Utilities/400 IC A
5763-CP2 CallPath/400 V2 IC A
5763-CP3 CallPath for OS/400 V3 - A
5763-CR1 Cryptographic Support/400 IC A
5763-CX2 Integrated Language Environment C/400 IC A
5763-DB1 AS/400 System/38 Utilities IC A
5763-DCT Language Dictionaries/400 IC A
5763-DFH CICS/400 IC A
5763-DM1 SystemView Information Warehouse DataHub
Support/400 - A
5763-DP1 DataPropagator Relational Capture and Apply/400 IC A
5763-DS1 AS/400 Business Graphics Utility IC A
</TABLE>
Page 3 of 8
<PAGE>
Business Partner Exhibit
IBM AS/400 PRODUCT TABLE (CONTINUED)
CATEGORY B (CONTINUED)
IBM LICENSED PROGRAMS (CONTINUED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
H D
E I
PROGRAM S S
NUMBER/(9)/ PROGRAM DESCRIPTION C T NOTES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5763-ES1 SystemView OMEGAMOM Services/400 IC A
5763-FNT Advanced Function Printing Fonts/400 IC A
5763-FN1 Advanced Function Printing DBCS Fonts/400 IC A
5763-FS1 OSI File Services/400 IC A
5763-JS1 Job Scheduler for OS/400 V3 - A
5763-MG1 System Managed System Services/400 IC A
5763-MQ1 Message Queue Manager/400 IC A
5763-MQ2 MQSeries for OS/400 - A
5763-MS1 OSI Message Services/400 IC A
5763-MW1 SystemView ManageWare/400 IC A
5763-OS1 OSI Communications Subsystem/400 IC A
5763-PD1 Application Program Driver/400 IC A
5763-PL1 AS/400 PL/I IC A
- ------------------------------------------------------------------------------------------------------------------------------------
5763-PS1 AS/400 Pascal IC A (8) Permission to copy is not granted for
these licensed programs.
5763-PT1 Performance Tools/400 IC A
(9) For Processor Group Information, refer
5763-PW1 Application Development ToolSet/400 IC A to the Exhibit - IBM AS/400 Machines
(Z125-4125).
5763-QU1 Query/400 IC A (10) Designated AS/400 software can be
distributed automatically from IBM
5763-RD1 Report/Data Archive and Retrieval System - A Software Manufacturing Solutions (SMS)
(R/DARS) directly to your end users for a fee.
5763-RG1 Integrated Language Environment RPG/400 IC A Orders can be placed by selecting the
"IR/IRA End User Distribution" option in
5763-SM1 SystemView System Manager/400 IC A the configurator. Charges for the
service will be calculated and added to
the configuration.
5763-SS1 Operating System/400 V3 IC A Additionally, all 5763 and 5716 programs
ordered and shipped on the 5755-AS3 and
5763-ST1 DB2/400 Query Manager and SQL Development Kit IC A 5755-AS4 System Program Orders (SPOs)
are eligible for this automatic
5763-SV1 ADSTAR Distributed Storage Manager/400 IC A distribution by IBM.
5763-UB1 Ultimedia Business Conferencing/400 IC A
5763-UM1 Ultimedia Mail/400 IC A
5763-US1 Client Access/400 Ultimedia Tools IC A
5763-VG1 VisualGen Host Services for OS/400 - A
5763-VR1 AS/400 VRPG Client/2 IC A
5763-WP1 Office Vision/400 IC A
5763-XA1 Client Access/400 Family IC A
5763-XZ1 LAN Server/400 IC A
5798-AF2 AFP PrintSuite for OS/400 V2 - A
5798-AF3 AFP PrintSuite for AS/400 V3 - A
5798-JS2 Job Scheduler for OS/400 - A
5798-RYF IBM Window Tool/400 - A
5798-RYY RadioPac/400 IC A
5798-RYZ PagerPac/400 IC A
</TABLE>
Page 4 of 8
<PAGE>
Business Partner Exhibit
IBM AS/400 PRODUCT TABLE (CONTINUED)
CATEGORY B (CONTINUED)
IBM LICENSED PROGRAMS (CONTINUED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
H D
E I
PROGRAM S S
NUMBER/(9)/ PROGRAM DESCRIPTION C T NOTES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5798-RZJ/(10)/ JustMail/400 V3 IC A
5798-RZK/(10)/ Neural Network Utility/400 IC A
5798-RZT/(10)/ Facsimile Support/400 IC A
5798-RZW/(10)/ KnowledgeTool Runtime/400 IC A
5798-RZX/(10)/ KnowledgeTool Development/400 IC A
5798-TAA TCP/IP File Server Support/400 IC A
5798-TAQ/(10)/ JustMail for OS/400 - A
5798-TBA/(10)/ Neural Network Utility for OS/400 - A
5798-TBC PagerPac for OS/400 IC A
5798-TBD RadioPac for OS/400 IC A
5798-TBE UNIX Connection Program for OS/400 IC A
5798-TBF Distributed Computing Environment Base Services
for OS/400 IC A
5798-TBG Netview FTP for OS/400 - A
5798-TBK Early Planning Package - A
5798-TBL SOMobjects Developer Toolkit for AS/400 IC A
5798-TBU CISC to RISC Upgrade Kit - A
5798-TAT/(10)/ KnowledgeTool Runtime for OS/400 - A
5798-TAW/(10)/ KnowledgeTool Development ToolKit for OS/400 - A
5798-TAY/(10)/ Facsimile Support for OS/400 IC A
5798-TAZ TCP/IP File Server Support for OS/400 IC A
5799-DHP SuperC Compare Utility/400 - A
5799-DNP System C/400 PRPQ - A
5799-FR1 V3 Fortran/400 Run-Time Support - A
5799-JS3 Job Scheduler for OS/400 PRPQ V2 - A
5799-PAC AS/400 Performance Analyzer - A
- -------------------------------------------------------------------------------------
5799-XBW Optical Library DataServer Support/400 - A (8) Permission to copy is not granted for
these licensed programs.
5799-XCR Preinstall Planning Manuals - -
5799-XDH IBM Security ToolKit for OS/400 V2 R3 - A (9) For Processor Group Information, refer
5799-XDJ IBM Security ToolKit for OS/400 V3 R1 - A to the Exhibit - IBM AS/400 Machines
5799-XDK IBM Security ToolKit for OS/400 V3 R6 - A (Z125-4125).
5799-XDL V3 Preinstall Planning Manual - A
(10) Designated AS/400 software can be
IBM SYSTEM 36/38 LICENSED PROGRAMS distributed automatically from IBM
Software Manufacturing Solutions (SMS)
5668-883 S/36 Financial Transaction Processing System - - directly to your end users for a fee.
5710-CAT S/36 Computer Assisted Training 1.2 - - Orders can be placed by selecting the
5714-MG1/(10)/ S/38 Migration Aid - - "IR/IRA End User Distribution" option
5727-BR1 S/36 Business Report Applic. Devel. System - - in the configurator. Charges for the
5727-MG1/(10)/ S/36 Migration Aid IC - service will be calculated and added to
the configuration.
5796-PZK S/36 RM/COBOL Compiler & Runtime - -
5798-RPH S/36 Fixed Asset Acctg. and Control System - - Additionally, all 5763 and 5716
5798-RPT S/36 Strategic Profit Model II - - programs ordered and shipped on the
5798-RPX S/36 Retrieval/36 - - 5755-AS3 and 5755-AS4 System Program
5798-RRW S/36 Electronic Spreadsheet - - Orders (SPOs) are eligible for this
automatic distribution by IBM.
5799-BKP S/38 File Support Utilities for PC & XT - -
5799-BTZ S/38 IBM System/38 Transfer Facility - -
</TABLE>
Page 5 of 8
<PAGE>
Business Partner Exhibit
IBM AS/400 PRODUCT TABLE (CONTINUED)
CATEGORY B (CONTINUED)
IBM LICENSED PROGRAMS (CONTINUED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
H D
E I
PROGRAM S S
NUMBER/(9)/ PROGRAM DESCRIPTION C T NOTES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5799-CGJ S/36 IPDS Graphics/Text Merge PRPQ - -
5799-CGK S/36 IPDS Advanced Functions PRPQ - -
5799-EYY S/36 Consolidated Software Package - -
5799-PAZ S/36 Response Time Measurement Facility PRPQ - -
5799-WYL S/36 APPC Multiple LU Support PRPQ - -
AS/400 ADVANCED 36 LICENSED PROGRAMS
5716-ASM Assembler and Macro Processor - A
5716-BAS BASIC - A
5716-BGU Business Graphics Utility - A
5716-CBL COBOL - A
5716-DCN DW/36 Language Dictionaries - A
5716-DEM 3278 Device Emulation - A
5716-DSU Development Support Utilities - A
5716-DWT DisplayWrite/36 - A
5716-FOR FORTRAN - A
5716-PK1 BasePac - A
5716-QRY Query/36 - A
5716-RPG RPG II - A
5716-SSP System Support Program - A
5716-UTL Utilities - A
5716-PCS Personal Computer Support/36 - A
5716-PSV Personal Services/36 - A
5727-ASM Assembler and Macro Processor - A
5727-BAS BASIC - A
5727-BGU Business Graphics Utilities (BGU) - A
5727-CBL COBOL Compiler and Library - A
5727-DCT DisplayWrite/36 Language Dictionary - A
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 6 of 8
<PAGE>
Business Partner Exhibit
IBM AS/400 PRODUCT TABLE (CONTINUED)
CATEGORY B (CONTINUED)
IBM LICENSED PROGRAMS (CONTINUED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
H D
E I
PROGRAM S S
NUMBER/(9)/ PROGRAM DESCRIPTION C T NOTES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AS/400 ADVANCED 36 LICENSED PROGRAMS (CONTINUED)
5727-DEM 3278 Device Emulation - A
5727-DSU Development Support Utility - A
5727-DWT DisplayWrite/36 - A
5727-FOR FORTRAN IV - A
5727-LAN LAN Communications - A
5727-PCS PC Support/36 - A
5727-PK1 BasePac/36 (includes SSP, UTL, RPG, QRY, and - A
PCS)
5727-PK2 OfficePac/36 (includes DWT, DCT, and PSV) - A
5727-PSV Personal Services/36 - A
5727-QRY Query/36 - A
5727-RPG RPG II - A
5727-SSP System Support Program (SSP) - A
5727-UTL Utilities - A
5799-FQQ Response Time Measurement Facility - A
5799-FQR Distributed System Node Executive (DSNX/ND) - A
5799-FQP IPDS Advanced Function Printing - A
5799-QFP Response Time Measurement Facility PRPQ - A
5799-QFQ DSNX-ND (Distributed System Node Executive) PRPQ - A
5799-QFR X.25 Synchronous Autodial PRPQ - A
5799-QHK IPDS Advanced Function Printing PRPQ - A
CLIENT SERIES SOFTWARE
5733-CSB SNA*ps 5250 GC - A
5733-CSC SNA*ps Gateway - A
5733-CS5 SNA*ps Emulator - A
5733-CS7 DAL Server - A
5733-CS9 DAL Client - A
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 7 of 8
<PAGE>
Business Partner Exhibit
IBM AS/400 PRODUCT TABLE (CONTINUED)
CATEGORY B1
IBM LICENSED PROGRAMS
The following IBM Licensed Programs are available to AS/400 Business Partners at
the discounts specified below. These Programs are aggregated toward the AS/400
Annual System Revenue Performance.
Complementary Marketing fee percentages are as follows: Central Order = 12%
TBO Order = 10%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
H D
E I
Program S Rmkt S
Number/(1)/ Program Description C Disc T Notes
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
5620-ABL/(2)/ Real Vision Imaging Software - 25% A (1) For Processor Group Information, refer
5621-211 IWPM/DOS for Windows - 25% - to the Exhibit - IBM AS/400 Machines
5622-055 IBM Current - OfficeVision/400 Workgroup IC 35% - (Z125-4125).
5639-A36 AS/400 Availability and Recovery Management - 25% -
5639-A37 AS/400 Work management and Basic Tuning - 25% - (2) One development copy of 5620-ABL is
5639-A38 AS/400 Security Planning and Implementation - 25% - available directly from Real Vision,
5639-A48 AS/400 Training Library - 25% - Inc. The 100% development discount
5696-006/(5)/ AS/400 Intro to Data Communications - 25% A through IBM does not apply. Permission
5696-024 AS/400 System Using the System/36 Environment - 25% A to copy is not granted for this
5696-025 AS/400 System for the Experienced System/38 Implementer - 25% A program. This program is not available
5696-026 AS/400 Control language Programming Workshop - 25% A for trial offerings and is not
5686-027 AS/400 Interactive Program Design - 25% A warranted by IBM.
5696-029 RPG/400 Interactive Programming Workshop - 25% A
5696-030 AS/400 Relational Data Base Design and Coding - 25% A (3) Permission to copy is not granted for
5696-034 COBOL 400 Interactive Programming Workshop - 25% A these programs.
5696-431 IBM Personalized Learning Series - OfficeVision/400
Implementation - 25% - (4) This product is a no-charge PRPQ and is
5733-056 Manage/400 Course for AS/400 - 25% A NOT available for a discount.
5733-072 IBM Medical RecordsPlus/400 V2 - 35% - Permission to copy is not granted for
5733-129 Discover Education OfficeVision/400 Support - 25% - this program.
5733-130 Discover Education OfficeVision/400 Support Additional
Topics - 25% - 5) Designated AS/400 software can be
5733-131 Discover Education AS/400 Implementation Series - 25% - distributed automatically from IBM
5733-132 Discover Education OfficeVision/400 Support Series - 25% - Software Manufacturing Solutions (SMS)
5733-133 Discover Education AS/400 Education Library - 25% - directly to your end users for a fee.
5733-141 IBM Discover Education RPG/400 Programming IC 25% - Orders can be placed by selecting the
5733-143 Getting Started with PC Support/400 - 25% - "IR/IRA End User Distribution" option
5733-144 IBM Discover Education PC Support/400 - 25% - in the configurator. Charges for the
5733-174 Discover Education Using Query/400 - 25% - service will be calculated and added to
5733-175 Discover Education AS/400 Basic CL Programming - 25% - the configuration.
5733-176 Discover Education AS/400 Basic Education Series IC 25% -
5733-177 Discover Education AS/400 Implementation Series IC 25% - Additionally, all 5763 and 5716
5733-178 Discover Education OfficeVision/400 Support Series IC 25% - programs ordered and shipped on the
5733-179 Discover Education AS/400 Education Library IC 25% - 5755-AS3 and 5755-AS4 System Program
5733-180 Discover Education AS/400 Facilities and Implementation IC 25% - Orders (SPOs) are eligible for this
5733-181 Discover Education As/400 Application Design and Dev automatic distribution by IBM.
Tools IC 25% -
5733-182 Discover Education OfficeVision/400 Support IC 25% -
5733-183 Discover Education OfficeVision/400 Support -- Addl
Topics IC 25% -
5733-184 Discover Education Using Query/400 IC 25% -
5733-185 Discover Education AS/400 Basic CL Programming IC 25% -
5733-188 Discover Education AS/400 Implementation for Entry
Systems IC 25% -
5733-204 Personalized Learning Series Structured Query
Language/400 Prog Wrkshp - 25% -
5733-205 Personalized Learning Series OS/400 Structure,
Tailoring, & Basic Tuning - 25% -
5733-206 Personalized Learning Series AS/400 Sys Admin and
Control - 25% -
5733-207 Personalized Learning Series AS/400 Sys Operator
Workshop - 25% -
5733-208 Personalized Learning Series AS/400 Adv Sys Operator
Workshop - 25% -
5733-210 Discover/Education AS/400 Overview IC 15% -
5733-219 Discover Education AS/400 Implementation and Ops Series - 25% -
5733-220 Discover Education COBOL/400 and SQL/400 Programming
Series - 25% -
5733-221 Discover Education RPG/400 and SQL/400 Programming
Series - 25% -
5733-222 Discover Education AS/400 Library - 25% -
5733 CLS/(3)/ Guidelines V3 - 30% A
5798-RYX IBM Application Program Driver/400 V2R2 - 35% -
5799-XBK/(4)/ Optical Library Data Server Support/400 - - -
5799-XAY/(4)/ C/400 Library PRPQ - - -
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 8 of 8
<PAGE>
Business Partner Exhibit
IBM ASSOCIATION PRODUCTS PRODUCT TABLE
IBM Associated Products are available to IBM Business Partners as indicated in
the Eligible Product Tables in this Exhibit. Revenue for these Products
aggregates toward the associated Annual System Revenue Performance unless
otherwise indicated.
DISPLAYS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
D I
Demo/ I L I N
Fee Rmkt Dev S I A S
Category Eligible Products Opty Fee Disc Disc T C C T Notes
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
G1 7526/(1)/Data Collection N/A 6% 33% 50% A N 2 CSU (1) MES Orders for the 7526
Terminal are not eligible for a
discount.
Revenue for these
Products does not
aggregate toward RS/6000
or AS/400 Annual System
Revenue Performance.
- -------------------------------------------------------------------------------------------------------------------------------
G2 3172/(1)/ Display Station 10% 5% 30% 50% A Y 2 IBI Revenue for these Products
Controller does not aggregate toward
- Model 003 RS/6000 Annual System
Revenue Performance.
10% 5% 55% 55% - Y 2 CSU
3174/(1,2)/ Display 10% 5% 60% 60% - Y 2 CSU (1) MES orders for the 3172
Station Controller and 3174 are eligible
- Models 12R, 64R for the same discount as
- All other models the base machine.
(2) 3174 Models 11R, 21H &
21L are IBI. The 3174
Model 95R and 90R are
available via the Dealer
Exhibit.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
STORAGE MEDIA
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
D I
Demo/ I L I N
Fee Rmkt Dev S I A S
Category Eligible Products Opty Fee Disc Disc T C C T Notes
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
H1 9336-025/(1)/ Disk Unit 20% 4% 25% 25% N - N 2 IBI (1) MES orders for the
Storage Unit 9336-
025 are eligible
for the same
discount as the
base machine.
- -------------------------------------------------------------------------------------------------------------------------------
H2 3490/(1)/ Map Tape N - N 2 IBI (1) These 3490 models
are not eligible
- Models A1X, A2X 20% 4% 40% 50% for an MES
- Models B2X, B4X 20% 4% 40% 50% discount.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 1 of 5
<PAGE>
Business Partner Exhibit
IBM ASSOCIATION PRODUCTS PRODUCT TABLE (CONTINUED)
MISCELLANEOUS PRODUCTS
MES orders for Machines in this table are not eligible for a discount unless
otherwise indicated.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
D I
Demo/ I L I N
Machine Fee Fed Rmkt Dev N S I A S
Category Type Eligible Products Opty Fee Disc Disc Disc A T C C T Notes
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
K 4610/(1,2)/ SureMark Point of Sale Printer N/A 6% N/A 35% 50% N A N 2 CSU (1) Available for
4612/(2)/ SurePoint Mobile Computer N/A 6% N/A 35% 50% N A N 2 CSU marketing
without the
standard
Value-Added
Enhancement
requirement.
(2) Revenue for
this Product
aggregates
toward ASRP
only for
Point of Sale
remarketer.
- ------------------------------------------------------------------------------------------------------------------------------------
K1 9309 Rack Enclosure N/A 2% 25% 15% 50% N - N 2 IBI
Expansion Unit
- ------------------------------------------------------------------------------------------------------------------------------------
K2 3299 Multiplexer 10% 5% 47% 40% 50% N - N 2 CSU (1) 6299 MES
5308/(2)/ ASCII to 5250 Connection 10% 5% 30% 30% 50% N - N 2 CSU orders are
6299/(1)/ HUB for Midrange Systems 10% 4% 40% 40% 50% N - N 2 CSU eligible for
a 40%
remarketing
discount and
a 50%
development
discount.
(2) 5308 MES
orders are
eligible for
the same
discount as
the base
machine.
- ------------------------------------------------------------------------------------------------------------------------------------
K3 7852 Exeternal V.34 Data/Fax 10% 4% 30% 30% 50% N - N 4 CSU
Modem Model 400
- ------------------------------------------------------------------------------------------------------------------------------------
K4 9291/(1)/ Single VoiceServer 10% 4% 30% 30% 50% Y A - 2 IBI (1) MES orders
9295/(1)/ Multiple VoiceServer 10% 4% 30% 30% 50% Y A - 2 IBI for machines
in this table
are eligible
for the same
discount as
the Base
Machine
unless
otherwise
indicated.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
IBM UNINTERRUPTIBLE POWER SYSTEMS (UPS)
MES orders for Machines in this table are not eligible for a discount unless
otherwise indicated.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
D I
DEMO/ I L I N
MACHINE FEE RMKT DEV S I A S
CATEGORY TYPE DESCRIPTION OPTY FEE DISC DISC T C C T NOTES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
K5 9910/(1)/ Uninterruptible Power Systems A N - - Revenue for this Product does not
aggregate toward Annual System
Revenue Performance.
Models:
- Bxx/(2)/ 10% 4% 21% 0% (1) This Product is not eligible
- Exx/(2)/ 10% 4% 21% 0% for Price Decrease and
- Uxx/(2)/ 10% 4% 21% 0% Discount increase Protection,
-B30, B50, B89, U33 10% 4% 15% 0% and is not eligible for return
EP5, EP8, E80 10% 4% 15% 0% to IBM.
- EX3 10% 4% 20% 0%
(2) Except for models specifically
listed at a different discount.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 2 of 5
<PAGE>
IBM ASSOCIATION PRODUCTS PRODUCT TABLE (CONTINUED)
CATEGORY M
IBM RS/6000 LICENSED PROGRAMS
Complementary Marketing fee percentages are as follows: Central Order = 12%
TBO Order = 10%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
C H D
E E I
Program R S Rmkt N S
Number Program Description T C Disc A T Notes
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5601-260 IBM AIX 3270 Host Connection Program/6000 N IG 30% Y A (2) Permission to copy is
5696-108 IBM AIX Infocrafter/6000 N IG 30% Y A not granted for these
5696-236 Netware for AIX/6000 from IBM N - 30% Y A programs.
5696-237 Encina Structured File Server for AIX/6000 N IJ 40% Y A
5696-238 Encina Peer to Peer Executive for AIX/6000 N IJ 40% Y A (3) Available for marketing
5696-239 Encina Monitor for AIX/6000 N IJ 40% Y A without the standard
5695-240 Encina Server for AIX/6000 N IJ 40% Y A Value-Added Enhancement
5696-347 Encina Peer to Peer Gateway for AIX/6000 N IJ 40% Y A requirement:
5696-930 Encina PPC Gateway with SyncPoint Level 2 Support N IJ 40% Y -
5696-931 Encina PPC Executive with SyncPoint Level 2 Support N IJ 40% Y - 5765-337 5765-342
5697-078 ADSTAR Distributed Storage Mgr for AIX N - 30% N - 5765-338 5765-347
5697-ADE/(2)/ TME 10 Application Development Environment Y - 35% N A 5765-339 5765-348
5697-AEF/(2)/ TME 10 Application Extension Facility Y - 35% N A 5765-340 5765-606
5697-ASA TME 10 Module for R3 N - 35% N A 5765-341 5765-607
5697-BKP TME 10 ADSM N - 35% N A
5697-EAA/(2)/ TME 10 Enterprise Console additional event adapters Y - 35% N A
5697-EAS/(2)/ TME 10 Enterprise Console Y - 35% N A
5697-EIF/(2)/ TME 10 Event Integration Facility Y - 35% N A
5697-EMN TME 10 Distributed Monitoring N - 35% N A
5697-FRA/(2)/ TME 10 Framework Y - 35% N A
5697-INV/(2)/ TME 10 Job Scheduling Y - 35% N A
5697-JSC TME 10 Job Scheduling N - 35% N A
5697-NET/(2)/ TME 10 Net Commander N - 35% N A
5697-NVW TME 10 NetView N - 35% N A
5697-PAD/(2)/ TME 10 Tivoli/Plus for ADSM Y - 35% N A
5697-PBO/(2)/ TME 10 Tivoli/Plus for BoKS Y - 35% N A
5697-PCY Tivoli/Plus for Challenger N - 35% N A
5697-PLE/(2)/ TME 10 Tivoli/Plus for NetWorker Y - 35% N A
5697-PME/(2)/ TME 10 Tivoli/Plus for SeOS Y - 35% N A
5697-PMN TME 10 Performance Management N - 35% N A
5697-PPE/(2)/ TME 10 Tivoli/Plus for ServiceCenter Y - 35% N A
5697-PPL Tivoli/Plus for AutoSys N - 35% N A
5697-PRE/(2)/ TME 10 Tivoli/Plus for AR System Y - 35% N A
5697-PRT/(2)/ TME 10 Print Management Y - 35% N A
5697-PUN/(2)/ TME 10 TivoliPlus for Maestro Y - 35% N A
5697-RCL TME 10 Remote Control N - 35% N A
5697-RPT TME 10 Performance Reporter N - 35% N A
5697-SWD TME 10 Software Distribution N - 35% N A
5697-UAD TME 10 User Administration N - 35% N A
5765-117 AIX DCE Base Services/6000 N IJ 40% Y A
5765-118 AIX DCE Security Server/6000 N IJ 40% Y A
5765-119 AIX DCE Cell Directory/6000 N IJ 40% Y A
5765-120 DCE Global Directory Server/6000 N IJ 40% Y -
5765-121 AIX DCE Enhanced Distributed File System/600 N IJ 40% Y A
5765-148 IBM AIX CICS/6000 N IJ 40% Y A
5765-152 IBM AIX Client for CICS/6000 N IJ 40% Y A
5765-191 IBM ProductManager for AIX/Prod Change Mgr N IJ 25% N A
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 3 of 5
<PAGE>
Business Partner Exhibit
CATEGORY M (CONTINUED)
IBM RS/6000 LICENSED PROGRAMS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
C H D
E E I
Program R S Rmkt N S
Number Program Description T C Disc A T Notes
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C>
5765-192 IBM ProductManager for AIX/Prod Structure Mgr N IJ 25% N A (1) Version to version
5765-193 IBM ProductManager for AIX/Appl Svcs Mgr N IJ 25% N A upgrades are eligible for
5765-232 CDE Threads/6000 N IJ 40% Y - the same discount as an
5765-259 CDE Global Directory Client/6000 N IJ 40% Y - initial license order for
5765-263 IBM ProductManager for AIX Doc Control Mgr N - 25% N A the upgraded-to-program.
5765-316 Legato NetWorker for RS/6000 N - 30% N A
5765-377/(3)/ IBM ProductManager for Solaris 2.X Oper Sys Prod Change Mgr N - 25% N A (2) Permission to copy is not
5765-338/(3)/ IBM ProductManager for Solaris 2.X Oper Sys Prod Structure N - 25% N A granted for these
Mgr programs.
5765-339/(3)/ IBM ProductManager for Solaris 2.X Oper Sys Appl Svcs Mgr N - 25% N A
5765-340/(3)/ IBM Product Mgr for HP-UX Oper Sys Prod Change Mgr N - 25% N A (3) Available for marketing
5765-341/(3)/ IBM Product Mgr for HP-UX Oper Sys Appl Svcs Mgr N - 25% N A without the standard
5765-342/(3)/ IBM Product Mgr for HP-UX Oper Sys Prod Structure Mgr N - 25% N A Value-Added Enhancement
5765-347/(3)/ IBM ProductManager for Solaris 2.X Oper Sys Doc Control Mgr N - 25% N A requirement:
5765-348/(3)/ IBM Product Mgr for HP-UX Oper Sys Doc Control Mgr N - 25% N A
5765-381 IBM Job Scheduler for AIX N - 30% Y - 5765-337 5765-342
5765-441 IBM AIX ProductManager for Oracle7 Prod Structure Mgr N - 25% N A 5765-338 5765-347
5765-442 IBM AIX Product/Manager for Oracle7 Prod Change Mgr N - 25% N A 5765-339 5765-348
5765-443 IBM AIX ProductManager for Oracle7 Doc Control Mgr N - 25% N A 5765-340 5765-606
5765-456 DCE Mgr for AIX N IJ 40% Y - 5765-341 5765-607
5765-457 DCE NFS to DFS Auth Gateway for AIX N IJ 40% Y -
5765-458 Encina Monitor for AIX N IJ 40% Y -
5765-527/(1)/ SystemView for AIX N IH 35% Y A
5765-532 Getting Started with DCE for Appl Developers N IJ 40% Y A
5765-533/(1)/ DCE Security Services N IJ 40% Y A
5765-534/(1)/ DCE Cell Director Services N IJ 40% Y A
5765-537/(1)/ DCE Enhanced Distributed File Systems N IJ 40% Y A
5765-538 DCE User Data Masking Encryption Facility N IJ 40% Y A
5765-540/(1)/ DCE NFS to DFS Authenticating Gateway N IJ 40% Y A
5765-605/(2)/ IBM Product Mgr for AIX Operating System N - 25% N A
5765-606/(2,3)/ IBM Product Mgr for HP-UX Operating System N - 25% N A
5765-607/(2,3)/ IBM Product Mgr for Sun Polaris 2.X Operating System N - 25% N N
5765-633/(2)/ IBM CICS for SINIX N - 40% N A
5765-639 IBM Directory and Security Server for AIX N - 40% N -
5799-FBC NSL UniTree AIX/6000 N - 25% N -
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CATEGORY N
IBM AS/400 LICENSED PROGRAMS
Complementary Marketing fee percentages are as follows: Central Order = 12%
TBO Order = 10%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
D
I
Program Rmkt S
Number Program Description Disc T Notes
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5696-032/(1)/ AS/400 Networking 25% A (1) Group to Group Upgrade Charges for these
5730-082/(1)/ NetView File Transfer Program V1 25% A Programs are NOT eligible for a Discount.
5733-196/(3)/ NetView FTP V3 25% A
5799-FNH/(2)/ IBM Calmonth/400 30% - (2) Permission to copy is not granted for
5799-FNP Appl Blend for OS/400 30% - this program.
(3) Aggregation toward Annual System Revenue
Performance does not apply.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 4 of 5
<PAGE>
Business Partner Exhibit
CATEGORY O
IBM NETWORK INTEGRATION LICENSED PROGRAMS
Complementary Marketing fee percentages are as follows: Central Order = 12%
TBO Order = 10%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
D
I
Program Rmkt S
Number Program Description Disc T Notes
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5621-425/(1)/ IBM 3172 Interconnect Controller Program 30% A (1) Version to Version upgrades are
5696-865 IBM 3172 SNA Communications Program 30% A eligible for the same discount as
5697-196 IBM 3172 IP Channel Communications Program V1 20% - an initial license order for the
5697-259 IBM 3172 HPR Channel Connectivity Program 20% - upgraded-to-program.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CATEGORY R
IBM DATA COLLECTION LICENSED PROGRAMS
Complementary Marketing fee percentages are as follows: Central Order = 12% TBO
Order = 10%
<TABLE>
<CAPTION>
Program Rmkt
Number Program Description Disc Notes
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
5756-144/(1,2)/ Data Collection Control/2 40% Revenue for these Programs does not aggregate
toward RS/6000 or AS/400 Annual System Revenue
5756-145/(2)/ Data Collection for Distributed Performance.
Automation Edition 40%
(1) Version to Version upgrades are eligible for
5756-146/(2)/ 7527 Extended Terminal Services 40% the same discount as an initial license order
for the upgraded-to-program.
5799-PZH/(2)/ AIX Data Collector/6000 (Buildtime) 40%
(2) Permission to copy is NOT granted for these
5799-PYX/(2)/ AIX Data Collector/6000 (Runtime) 40% Programs.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CATEGORY X
IBM LICENSED PROGRAMS AVAILABLE TO BOTH RS/6000 AND AS/400 SOLUTION PROVIDERS
Complementary Marketing fee percentages are as follows: Central Order = 12%
TBO Order = 10%
<TABLE>
<CAPTION>
D
I
Program Rmkt N S
Number Program Description Disc A T Notes
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5621-159 SwitchServer/2 32% N A (1) Version to Version upgrades are
eligible for the same discount as an
5798-RZB/(1)/ ConnectionProgram/400 30% Y - initial license order for the
upgraded-to-program.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CATEGORY Y
IBM LICENSED PROGRAMS AVAILABLE TO IBM SOLUTION PROVIDERS APPROVED FOR
CATEGORIES A, D, AND E.
Complementary Marketing fee percentages are as follows: Central Order = 12%
TBO Order = 10%
<TABLE>
<CAPTION>
D
I
Program Rmkt S
Number Program Description Disc T Notes
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5648-129 IBM Client Input Output/Sockets 30%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 5 of 5
<PAGE>
Business Partner Exhibit
IBM STORAGE PRODUCTS TABLE
These products are available to IBM Business Partners approved for IBM Storage
Products. When approved for Category S2 or S3 as a Storage Remarketer in the
Business Partner Profile, you are also approved for Products in Categories S1,
S5, and SS.
When Products included in a Category will attach to multiple system types, only
those models which will attach to your approved processor type are available to
you.
When approved for these Storage Products, you are also approved for associated
RS/6000 and AS/400 features required to attach these Storage Products to RS/6000
or AS/400 processors at the discount associated with those processor features in
their respective tables.
Revenue for these Products aggregates toward Annual System Revenue Performance
(ASRP) unless otherwise indicated.
Storage Products are eligible for export between the United States and Canada
only when they are exported in conjunction with the installation of an RS/6000
system.
MES Orders for machines in this Product Table are eligible for the same discount
as the base machine unless otherwise indicated.
CATEGORY S1
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
C D I
DEMO/ V E I L I N
MACHINE FEE RMKT DEV N A R S I A S
TYPE DESCRIPTION OPTY FEE DISC DISC A E T T C C T
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3490 Mag Tape -
Models Cxx, #01,
E11 20% 4% 35% 50% Y N N A N 3 IBI
3570 Magstar MP
Magnetic Tape
Subsystem 20% 4% 35% 50% N N N A Y 3 CSU
3995 Optical Library 25% 20% 25% 50% Y N N A Y 2 IBI
7027 High Capacity
Storage Drawer 18% 4% 35% 50% N N N A N 3 IBI
7131 SCSI
Multi-Storage
Tower 11% 4% 35% 50% Y N N A N 3 CSU
7137/(1)/ Disk Array
Subsystem 11% 4% 35% 50% Y N N A Y 3 IBI
7202 RS/6000
Expansion Rack 10% 4% 35% 50% N N N A N 3 IBI
7203 Portable Disk
Drive 18% 4% 35% 50% Y N N A N 3 CSU
7204 External Disk
Drive 18% 4% 35% 50% Y N N A N 3 CSU
7206 External 4mm
Tape Drive 11% 4% 35% 50% Y N N A N 3 CSU
7207 1/4" Cartridge
Tape Drive 18% 4% 35% 50% Y N N A N 3 CSU
7208/(2)/ 8mm Tape Drive 11% 4% 35% 50% Y N N A N 3 CSU
7209 Optical Disk
Drive 11% 4% 35% 50% N N N A N 3 CSU
7210 CD-ROM Drive 18% 4% 35% 50% Y N N A Y 3 CSU
7331 8mm Tape Library 11% 4% 35% 50% Y N N A N 3 CSU
7332 4mm DDS-2 Tape
Autoloader 11% 4% 35% 50% N N N A N 3 CSU
7336 4mm Tape Library 11% 4% 35% 50% N N N A Y 3 CSU
9337 Disk Array
Subsystem 11% 3% 35% 50% N N N A Y 3 IBI
9348 Magnetic Tape
Unit 11% 4% 35% 50% N N N A N 3 IBI
9427 8mm Tape
Cartridge Library 10% 4% 35% 50% N N N A N 3 IBI
- ------------------------------------------------------------------------------------------------------------------------------------
NOTE:
(1) 7137 Models 413, 414, and 415 are CSU.
(2) 7208 Models 012 and 234 are IBI.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CATEGORY S2
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
C D I
DEMO/ V E I L I N
MACHINE FEE RMKT DEV N A R S I A S
TYPE DESCRIPTION OPTY FEE DISC DISC A E T T C C T
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3494 Tape Library
Dataserver 20% 4% 30% 50% Y Y N A Y 2 IBI
3590 High Performance
Tape Subsystem 20% 4% 30% 50% Y Y N A Y 2 IBI
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 1 of 3
<PAGE>
Business Partner Exhibit
IBM STORAGE PRODUCTS TABLE (CONTINUED)
CATEGORY S3
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
C D I
DEMO/ V E I L I N
MACHINE FEE RMKT DEV N A R S I A S
TYPE DESCRIPTION OPTY FEE DISC DISC A E T T C C T
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7133/(1)/ SSA Disk 11% 4% 35% 50% Y N N A Y 3 IBI
Subsystem
7135 RAIDiant Array 11% 4% 35% 50% Y N N A Y 3 IBI
- ------------------------------------------------------------------------------------------------------------------------------------
NOTE:
(1) 7133 Models 010 and 500 contain IBM Licensed Internal Code.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CATEGORY S5
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
C D I
DEMO/ V E I L I N
MACHINE FEE RMKT DEV N A R S I A S
TYPE DESCRIPTION OPTY FEE DISC DISC A E T T C C T
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7015/(5) System Rack Model R00 19% 4% 35% 50% Y N N A N 2 CSU
- ------------------------------------------------------------------------------------------------------------------------------------
NOTE:
(1) The 7015 Model R00 is available for marketing without a Value-Added Enhancement when sold as an expansion rack to support
additional external IBM Storage Products on RS/6000 processors.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CATEGORY S6
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
C D I
DEMO/ V E I L I N
MACHINE FEE RMKT DEV N A R S I A S
TYPE DESCRIPTION OPTY FEE DISC DISC A E T T C C T
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3466 Network Storage Manager 11% 4% 35% 50% N N Y - Y 3 IBI
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 2 of 3
<PAGE>
Business Partner Exhibit
IBM STORAGE PRODUCTS TABLE (CONTINUED)
CATEGORY SS
Storage Remarketers authorized for Storage Product Categories S2, S3, or S4 are
eligible to sell licensed programs listed in this section.
Complimentary Marketing fee percentages are as follows: Central Order = 12%
TBO order = 10%
Remarketers are no longer required to obtain a development license for ADSM for
AIX (5765-564). Remarketers are not required to copy and distribute this license
program to their end users.
<TABLE>
<CAPTION>
H D
E I
PROGRAM S RMKT N S
NUMBER PROGRAM DESCRIPTION C DISC A T NOTES
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
5716-SV2/(1)(2)/ ADSTAR Distributed Storage Manager for AS/400 V3 IC 35% N -
5763-SV2 ADSTAR Distributed Storage Manager for AS/400 V2 IC 30% N A
5765-564 ADSTAR Distributed Storage Manager for AIX IH 30% Y A
5799-QZG IBM Backup Restore Interface for ORACLE for SAP
R3 V2 P94053 - 30% N A
- -----------------------------------------------------------------------------------------------------------------------------------
NOTE:
(1) Designated AS/400 software can be distributed automatically from IBM Software Manufacturing Solutions (SMS) directly to your
end users for a fee. Orders can be placed by selecting the "IR/IRA End User Distribution" option in the configurator. Charges
for the service will be calculated and added to the configuration.
Additionally, all 5763 and 5716 programs ordered and shipped on the 5755-AS3 and 5755-AS4 System Program Orders (SPOs) are
eligible for this automatic distribution by IBM.
(2) Version to version upgrades are eligible for the same discount as an initial license order for the upgraded-to program.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 3 of 3
<PAGE>
PRINTING SYSTEMS PRODUCT TABLE
These Products are available to IBM Business Partners approved to market IBM
Printing Systems Products. These Products are eligible upon certification by
Category for the discounts identified in the Printing Systems Discount Schedule
below.
When certified for these Printing Systems Products, you also have access to
associated Licensed Programs listed in the Product Table when those Licensed
Programs are required to attach these Printing Systems Products to a processor.
Unless otherwise approved by IBM for a different discount, the discounts stated
apply.
MES orders for Machines in this schedule are eligible for the same discount as
the base Machine unless otherwise indicated.
Unless otherwise noted, Inventory Adjustment Category (IAC) 2 applies to all
Machines in this schedule.
Machines in this schedule obtained for internal use must be retained for at
least six months from their Date of Installation.
CATEGORY P1 (DEPARTMENTAL)
- --------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
MACHINE REMARKETING DEMONSTRATION
TYPE DESCRIPTION DISCOUNT DISCOUNT NOTES
- ------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
3112-001 Page Printer 30% 50% (1) New machine orders are no
longer accepted. MES orders
3116-001 Page Printer 30% 50% may be available, subject to
3116-002 Page Printer 30% 50% Product availability.
3116-003 Page Printer 30% 50%
(2) New machine orders are not
3130-01S Base Simplex Printer 30% 50% accepted for withdrawn
3130-02D Duplex Printer 30% 50% models. However, MES
3130-02S High Capacity Simplex Printer 30% 50% orders may be available at the
3130-03S Simplex Printer 30% 50% indicated discount, subject to
Product availability.
3912/(1)/ Page Printer 40% 50%
3916/(1)/ Page Printer 40% 50%
3930-02D LIC Page Printer 30PPM Duplex 30% 50%
3930-02S LIC Page Printer 30PPM Simplex 30% 50%
3930-03D LIC Page Printer 30PPM Duplex 35% 50%
3930-03S LIC Page Printer 30PPM Simplex 35% 50%
4028/(1)/ Laser Printer 50% 50%
4224/(2)/ Matrix Printer 30% 50%
4224-1E3 600 CPS Twinax Printer 30% 50%
4224-1C2 400 CPS W/Exp Storage Color Printer 30% 50%
4224-301 200 CPS ASCII Printer 35% 50%
4224-302 400 CPS ASCII Printer 35% 50%
4224-3C2 400 CPS ASCII Color Printer 30% 50%
4224-3E3 600 CPS ASCII Printer 35% 50%
4230-101 375 CPS SCS Twinax Printer 30% 50%
4230-102 480 CPS IPDS Twinax Printer 30% 50%
4230-1l1 375 CPS IPDS Twinax Printer 30% 50%
4230-1S2 480 CPS SCS Twinax Printer 30% 50%
4230-201 375 CPS SCS Coax Printer 30% 50%
4230-202 480 CPS IPDS Coax Printer 30% 50%
4230-2l1 375 CPS IPDS Coax Printer 30% 50%
4230-2S2 480 CPS SCS Coax Printer 30% 50%
4230-4l3 600 CPS IPDS Twinax Printer 30% 50%
4230-4S3 600 CPS SCS Twinax Printer 30% 50%
4230-5l3 600 CPS IPDS Coax Printer 30% 50%
4230-5S3 600 CPS SCS Coax Printer 30% 50%
4232-302 600 CPS Serial/Parallel Printer 35% 50%
4234/(1)/ Dot Band Printer 30% 50%
4247-001 Serial Matrix Printer 40% 50%
4247-A00 Serial Matrix ASCII Printer 40% 50%
</TABLE>
Page 1 of 3
<PAGE>
PRINTING SYSTEMS PRODUCT TABLE (CONTINUED)
CATEGORY P1 (DEPARTMENTAL) (CONTINUED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
MACHINE REMARKETING DEMONSTRATION
TYPE DESCRIPTION DISCOUNT DISCOUNT NOTES
- ------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
6252-AP2 1200 LPM ASCII Parallel Printer 30% 50% (2) New machine orders are not
6252-AP8 800 LPM ASCII Parallel Printer 30% 50% accepted for withdrawn
6252-AS2 1200 LPM ASCII Serial/Parallel Printer 30% 50% models. However, MES
6252-AS8 800 LPM ASCII Serial/Parallel Printer 30% 50% orders may be available at the
6252-D08 800 LPM Coax Printer 30% 50% indicated discount, subject to
6252-D12 1200 LPM Coax Printer 30% 50% Product availability.
6252-P08 800 LPM Non-IBM Attach Printer 35% 50%
6252-P12 1200 LPM Non-IBM Attach Printer 35% 50%
6252-T08 800 LPM Twinax Printer 30% 50%
6252-T12 1200 LPM Twinax Printer 30% 50%
6262/(2)/ Line Printer 15% 50%
6262-022 2200 LPM Channel Printer 15% 50%
6262-A22 2200 LPM ASCII Printer 15% 50%
6262-D22 2200 LPM Coax Printer 15% 50%
6262-P22 2200 LPM Non-IBM Attach Printer 15% 50%
6262-T22 2200 LPM Twinax Printer 15% 50%
6400-04P 475 LPM Line Matrix Pedestal Printer 40% 50%
6400-004 475 LPM Line Matrix Printer 40% 50%
6400-008 800 LPM Line Matrix Printer 40% 50%
6400-012 1200 LPM Line Matrix Printer 40% 50%
6408/(2)/ Line Matrix Printer 30% 50%
6408-A00 Line Matrix ASCII Printer 35% 50%
6412/(2)/ Line Matrix Printer 45% 50%
6412-A00 Line Matrix ASCII Printer 45% 50%
6412-CT0 Line Matrix Coax/Twinax Printer 45% 50%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
CATEGORY P2 (NETWORK)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
MACHINE REMARKETING DEMONSTRATION
TYPE DESCRIPTION DISCOUNT DISCOUNT NOTES
- ------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
4303-001 Network Printer (LV) 28% 45%
4303-002 Network Printer (HV) 28% 45%
4312-001 Network Printer (LV) 30% 50%
4312-002 Network Printer (HV) 30% 50%
4312-003 Network Printer (LV) 30% 50%
4317-001 Network Printer (LV) 28% 50%
4317-002 Network Printer (HV) 28% 50%
4324-001 Network Printer (LV) 30% 45%
4324-002 Network Printer (HV) 30% 45%
4324-003 Network Printer (LV) 30% 45%
4324-004 Network Printer (HV) 30% 45%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
CATEGORY P3 (PRODUCTION)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MACHINE REMARKETING DEMONSTRATION
TYPE DESCRIPTION DISCOUNT DISCOUNT NOTES
- --------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
3935-001 LIC Advanced Function Printer 25% 50%
3160-001 Advanced Function Printer 15% 25%
3160-002 InfoPrint 60 15% 25%
- --------------------------------------------------------------------------------
</TABLE>
Page 2 of 3
<PAGE>
PRINTING SYSTEMS PRODUCT TABLE (CONTINUED)
CATEGORY 4 (SOFTWARE)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
MACHINE REMARKETING DEMONSTRATION
TYPE DESCRIPTION DISCOUNT DISCOUNT NOTES
- --------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
5622-551 PSF/2 30% 100% (1) One demonstration product
5622-416 AFP Workbench 30% 100% per each IBM authorized
Printer Remarketer Firm
5648-113 Font Collection 15% 100% certified to sell software.
5686-141 PSF/VM 30% 0%
5696-040 PSF/VSE OTC Only 30% 0%
5686-190 PPFA/370 MLC Via Special Bid 30% 0%
5688-191 OGL/370 30% 0%
5695-040 PSF/MVS 30% 0%
5716-SS1 PSF/400/OW/400 28% 100%
5716-AF1 AFP Utilities/400 28% 100%
5763-FNT IBM AFP Fonts/400 28% 100%
5763-SS1 PSF/400/0S/400 28% 100%
5763-AF1 AFP Utilities/400 28% 100%
5765-505 PSF/6000 25% 100%
5765-594 AFP Toolbox for Multiple Operating Systems 30% 100%
5798-AF2 AFP Print Suite (V3R2) 28% 100%
5798-AF3 AFP Print Suite (V3R7) 28% 100%
5801-AAR APS Connect 30% 100%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 3 of 3
<PAGE>
PRODUCTS AVAILABLE UNDER COMPLEMENTARY MARKETING TERMS
The following Products are available to IBM Business Partners through the
Business Partner Exhibit for marketing under the terms of the Complementary
Marketing Terms Attachment. These Products are not available for remarketing
via the Business Partner Exhibit.
Maximum
Base Fee Fee
Amount Opportunity Percent
OPTICAL MULTIPLEXOR
9729 90% 10% 5%
INDUSTRIAL COMPUTERS
7588-001 N/A N/A 6%
MULTIMEDIA SYSTEMS
8690 Kiosk N/A N/A 4%
Internally-listed RPQ. Call
1-800-4AKIOSK (1-800-425-4675)
for information and approval to order.
IBM PERSONAL COMPUTER COMPANY TERMINALS
3151, 3164, 3472, 3476, 3481, 3482, 3483 90% 10% 4%
3486, 3487, 3488, 3489.
PRINTERS
InfoPrint 4000 Printers 95% 5% 3%
SYSTEM/390 MACHINES
IBM 9021 Processors N/A N/A 1%
IBM 9021 Processors N/A N/A 2%
IBM 9033 ESCON Director N/A N/A 2%
IBM 9037 Sysplex Timer N/A N/A 2%
OTHER IBM MACHINES not included in the
above categories or listed elsewhere in
the Business Partner Exhibit. 90% 10% 4%
Solution
Provider
PRODUCT OFFERING Fee Percent
IBM Licensed Programs not listed in
the Business Partner Exhibit. 12%
IBM Credit Corporation Financing /(1)(3)/ 1%
IBM Credit Corporation Used Machines /(2)(3)/ 4%
Products ordered through IBM Direct: N/A
- IBM System/390 Entry Server Offering 3%
(1) IBM Credit fee is paid based on the total amount financed for all new
financing and financing of used equipment from IBM Credit inventory.
Excluded from the fee payment will be rollovers, base lease extensions
(BLEXs), end of lease renewals, and other refinancing, as well as end of
lease sales. The fee for used equipment leases will be based on Monthly
Lease Accounts Receivable (MLAR) or the sum of the lease payments over the
projected life of the lease.
It is the responsibility of IBM Business Partners to introduce IBM's
financing offerings, qualify customer interest in financing, and provide
leads to IBM Credit Financial Marketing Advisors (FMAs).
(2) IBM Credit fee is based upon the invoiced amount, the Monthly Lease
Accounts Receivable (MLAR), or the sum of the lease payments over the
projected life of the lease, whichever is applicable, of the used IBM
machines (which must include an IBM AS/400 System Unit, RS/6000 system or
IBM 9336/9337 DASD) from IBM Credit inventory.
(3) Marketing Assistant must submit Fee Payment Request Form to be eligible for
payment except when the Product covered is new and it is under IBM Credit
financing.
N/A = Not applicable
Page 1 of 1
<PAGE>
IBM SERVICES OFFERINGS TABLE
Service offerings that Business Partners may be authorized to sell for a fee or
discount are listed in the following format.
SERVICES
1. Product Services
A. Hardware Product Services
. Maintenance
B. Software Services
. AS/400 Services
. RS/6000 Services
. Network Services
. Personal Systems Services
. S/390 Services
. Multi-Platform Services
2. System Management Services
A. Systems Mgmt - Desktop & Distributed
B. Systems Mgmt - Data Center
3. IT Environment & Infrastructure Services
A. Site & Operational Services
. Customized Operational Services
. Uninterruptible Power Systems (UPS)
4. Business & Technology Solutions
5. Backup and Recovery
A. Business Recovery Services
6. Other Services
A. Customer Services Contracts
- --------------------------------------------------------------------------------
1. PRODUCT SERVICES (1) (3) (5) (6) (7)
A. HARDWARE PRODUCT SERVICES
MAINTENANCE SERVICES (4)
Lead Pass Closed Contract Remarketing
Fee Fee Discount DIST (8)
MMMC N/A 20% N/A A
CSO N/A 20% N/A A
MRSO N/A 20% N/A A
ESSR (2) N/A N/A 30% -
CSOR(2) NA/ N/A 30% -
Hardware Product Services Legend
MMMC - Minimum Monthly Maintenance Charge
CSO - Corporate Service Option
MRSO - Mid-Range System Option
ESSR - Entry systems Service for Remarketers
CSOR - Corporate Service Option for Remarketers
Page 1 of 6
<PAGE>
B. SOFTWARE SERVICES
AS/400 SERVICES
Category 1 -- (Software Services - Lead Fee Eligible Only)
Lead Pass Closed Contract Remarketing
Fee Fee Discount DIST (8)
5% N/A N/A --
9251-A01 OS/400 Integration for Novell Network Installation
9251-A02 AS/400 PTF Installation for Integration of Novell Networks
9252-A02 AS/400 System Transition Service
Feature Codes 4008-4013
9252-A03 AS/400 System Transition Project Management
Feature Codes 4017-4021
9256-A04 IBM Business Critical for AS/400
Category 2 -- (Software Services - Lead/Closed/Discount Eligible)
Lead Pass Closed Contract Remarketing
Fee Fee Discount DIST (8)
5% 15% 20% --
9250-A01 SmoothStart for AS/400
Feature Code 1000
9250-A02 SmoothStart for AS/400 Advanced 36
Feature Code 1001
9250-A04 SmoothStart for Internet Connection for AS/400 - WEB
Feature Code 1010
SmoothStart for Internet Connection for AS/400 - POP
Feature Code 1011
SmoothStart for Internet Connection for AS/400 - FTP
Feature Code 1012
9250-A05 SmoothStart for AS/400 Operating System
9250-A06 SmoothStart for Real Vision Imaging Software
9251-A09 AS/400 Gopher Internet Installation Services
9251-A01 AS/400 System Transition Upgrade Assistant
Feature Codes 4001-4005
9252-A04 AS/400 SysMig
9252-A05 AS/400 Gig/Mig
9253-A01 PM/400 -- Annual
9253-A02 PM/400 -- Monthly
9253-A03 PM/400 -- Interim
9254-A01 AS/400 Alert
9255-A01 AS/400 Consult Line
9255-A02 AS/400 VitalSign Premium
9255-A03 Planning for Internet Connection for AS/400
9256-A01 AS/400 Support Line Premium
9256-A02 AS/400 Support Line Standard
9256-A03 IBM Customer Technical Advocate for AS/400
9257-A01 AS/400 BRMS Installation
9258-A01 AS/400 Security Review
Category 3 -- (Software Services - Lead/Closed Fee Eligible Only)
Lead Pass Closed Contract Remarketing
Fee Fee Discount DIST (8)
5% 15% N/A N/A
9256-A05 AS/400 SSA
Page 2 of 6
<PAGE>
RS/6000 SERVICES
Category 1 -- (Software Services - Lead Fee Eligible Only)
Lead Pass Closed Contract Remarketing
Fee Fee Discount DIST (8)
5% N/A N/A --
9250-R11 SP Planning Service
9250-R12 SP Implementation Service
9250-R02 SmoothStart for SystemView for AIX
9250-R03 SmoothStart for AIX Connections
9250-R04 SmoothStart for Communications Server for AIX
9256-R06 IBM Business Critical for AIX
9250-R10 SmoothStart for HACMP
Category 2 -- (Software Services - Lead/Closed/Discount Eligible)
Lead Pass Closed Contract Remarketing
Fee Fee Discount DIST (8)
5% 15% 20% --
9250-R06 SmoothStart for Database Server for AIX
9250-R08 SmoothStart for Internet Connection Server for AIX
9250-R09 SmoothStart for RISC System/6000
9250-R10 SmoothStart for VisualInfo for AIX
9252-R01 AIX Upgrade and Migration Services
Feature Code 6001 3.1.5 > 3.2.5 Migration Only
Feature Code 6002 3.2.X > 3.2.5 Migration Only
Feature Code 6003 3.2 > 4.X Standalone Upgrade
Feature Code 6004 3.2 > 4.X Networked Upgrade
Feature Code 6005 3.2 > 4.X Upgrade and Migration
Feature Code 6006 3.2 > 4.X Migration Only
9253-R01 Performance Analyzer for AIX Systems
9253-R02 AIX Performance HealthCheck
9253-R03 PM/6000--Annual
9253-R04 PM/6000--Monthly
9253-R05 PM/6000--Quarterly
9254-R01 AIX Alert
9254-R02 AIX Technical Library
9255-R01 AIX Consult Line
9256-R01 AIX Support Line Premium - RISC System/6000
9256-R02 AIX Support Line Standard - RISC System/6000
9256-R05 IBM Customer Technical Advocate for AIX
9257-R01 AIX Backup and Recovery Service (SysBack)
NETWORK SERVICES
Lead Pass Closed Contract Remarketing
Fee Fee Discount DIST (8)
Category 1 5% N/A N/A --
(Software Services - Lead Fee Eligible Only)
9250-N01 SmoothStart for 8235-I40 DIALS Switch
Category 2 5% 15% 20% --
(Software Services - Lead/Closed/Discount Eligible)
9255-N01 Network Consult Line
9256-N01 Network Support Line
Page 3 of 6
<PAGE>
PERSONAL SYSTEMS SERVICES
Lead Pass Closed Contract Remarketing
Fee Fee Discount DIST (8)
Category 1 5% N/A N/A -
(Software Services - Lead Fee Eligible Only)
9256-P02 IBM Business Critical for PS
Category 2 5% 15% 20% -
(Software Services - Lead/Closed/Discount Eligible)
9250-P01 SmoothStart for OS/2 Warp Server
9250-P02 SmoothStart for Database Server for OS/2
9250-P03 SmoothStart for Internet Connection Server for OS/2
9252-P01 Migration for VisualInfo for AIX OS/2 V1 to V2
9255-P01 PS Consult Line
9256-P02 PS Standard (PS)
9256-PO1 IBM Customer Technical Advocate for PS
9256-P03 PS Premium (PS)
9256-P04 IBM Business Critical for PS
S/390 SERVICES
Lead Pass Closed Contract Remarketing
Fee Fee Discount DIST (8)
Category 3 5% 15% N/A -
(Software Services - Lead/Closed Eligible)
9250-E01 SmoothStart for Internet Connection for MVS
9254-E01 S/390 Alert
9255-E01 S/390 Consult Line
9256-E01 S/390 Support Line
9256-E02 S/390 Forum
MULTI-PLATFORM SERVICES
Lead Pass Closed Contract Remarketing
Fee Fee Discount DIST (8)
Category 1 5% N/A N/A -
(Software Services - Lead Fee Eligible Only)
9250-M01 SmoothStart for CICS/Transaction Server
9250-M02 SmoothStart for MQSeries
9251-M03 IBM ADSM Services and Training
Category 2 5% 15% 20% -
(Software Services - Lead/Closed/Discount Eligible)
9254-M02 Advanced Digital Delivery
9250-M03 SmoothStart for Lotus Notes
9255-M01 Image Technology Services
<PAGE>
2. SYSTEMS MANAGEMENT SERVICES (1,3,5)
A. SYSTEMS MGMT - DESKTOP & DISTRIBUTED
B. SYSTEMS MGMT - DATA CENTER
For offering details please contact your IBM representative.
3. IT ENVIRONMENT & INFRASTRUCTURE SERVICES
A. SITE & OPERATIONAL SERVICES
Lead Pass Closed Contract Remarketing
Fee Fee Discount DIST (8)
CUSTOMIZED OPERATIONAL SERVICES (3,9)
Connectivity Services N/A 8 N/A --
- Consult/Design
- Installation
- Cabling
Installation Management 8 15 20 --
Relocation 8 15 20 --
Site Readiness N/A 15 20 --
UNINTERRUPTIBLE POWER SYSTEMS (UPS) (1,3,5)
LT 3KVA N/A 20% 21% A
3 to 14.9KVA N/A 15% 15% A
GT 14.9KVA N/A 10% upon --
request
4. BUSINESS & TECHNOLOGY SOLUTIONS (1,3,5)
For offering details please contact your IBM representative.
5. BACKUP AND RECOVERY (1,3,5)
A. BUSINESS RECOVERY SERVICES
Lead Pass Closed Contract Remarketing
Fee Fee Discount DIST (8)
New N/A 15% N/A A
Renewal N/A 15% N/A A
Anniversary N/A 10% N/A A
One Time N/A 10% N/A --
6. OTHER SERVICES (1,3,5)
A. CUSTOM SERVICES CONTRACTS
Lead Pass Closed Contract Remarketing
Fee Fee Discount DIST (8)
Best Est. hourly 5% N/A N/A --
Fixed Price 5% N/A N/A --
Page 5 of 6
<PAGE>
NOTES:
(1) The fee percent is applied to the service's one-time or recurring charge
that IBM invoices the end user. For a recurring charge, we apply the
percent to 12 times the monthly charge.
(2) Eligible machines are listed in the Exhibit for Corporate Service Option
for Remarketers (Z125-5437) and the Remarketer Exhibit for Entry Systems
Service (Z125-4254), as applicable.
Table of Quarterly Payments for CSOR and ESSR, based upon the amount of
adjusted charges invoiced during the quarter:
Payment Adjusted
Percent Charges Invoiced
0% $ 0 - 74,999
2% 75,000 - 149,999
4% 150,000 - 299,999
8% 300,000 or greater
Table of Semiannual Payments for Cluster Credit User ESSR:
Minimum Quantity of Qualifying Machines: 100
Quantity of Cluster Credit
Qualifying Machines Percent
100 - 499 10%
500 - 999 15%
1,000 or more 20%
(3) Business Partners must submit a Fee Payment Request Form, or appropriate
maintenance service marketing (MSM) documentation, to be eligible for
payment.
(4) Fees will not be paid if the same Service associated with the same machine
was terminated by the customer within the prior six months.
(5) The Fee percent is applied to the charge for services only, excluding
services offered by ISSC, EduQuest, and Education and Training.
(6) Business Partners are not eligible for fee payments and discount for
marketing/remarketing maintenance services on equipment within IBM, IBM
wholly own subsidiaries, or IBM joint ventures.
(7) Business partners can receive fees for marketing maintenance services on
machines they place in an account with their Value-Added Enhancement (if
applicable); however, note (6) still applies.
(8) When identified with an "A" in this column, the service is available to
Distributors at the discount or fee specified in the Distributor Schedule
A. When identified with a "--" in this column, the service is available to
Distributors at the discount or fee specified in this exhibit.
(9) The Fee Percent is applied to the charge for services only, excluding
services offered by ISSC and Education and Training. Also excluded are
charges for IBM or non-IBM hardware and software, services you perform as a
subcontractor to IBM, and moving company charges.
KEY
SP = Solution Provider
R = Reseller
SI = Systems Integrator
Dist = Distributor
<PAGE>
EXHIBIT 11.1
PEERLESS GROUP, INC.
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE INFOMATION)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1994 1995 1996
----- ---- ----
<S> <C> <C> <C>
EARNINGS (LOSS)
Net income (loss)................................. $ (565) $1,830 $2,293
Less accretion to redemption value relating to
redeemable common stock ......................... (51) (58) (44)
------ ------ ------
Adjusted net income (loss)........................ $ (616) $1,772 $2,249
====== ====== ======
SHARES
Weighted average common shares outstanding (1) ... 1,949 1,976 2,745
Common shares issued on assumed exercise of stock
options and warrants ........................... - 1,799 1,530
Less shares assumed repurchased .................. - (127) (220)
------ ------ ------
Weighted average common and common equivalent
shares ........................................ 1,949 3,648 4,055
====== ====== ======
Earnings (loss) per common and common equivalent
share........................................... $(0.32) $0.49 $0.55
====== ====== ======
</TABLE>
- -------------------
(1) Includes, for all periods presented, shares of the Company's common stock
and options and warrants to purchase shares of the Company's common stock
which have been issued within one year of the initial public offering date,
in accordance with Staff Accounting Bulletin No. 83.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 DEC-31-1996
<CASH> 1,394 8,378
<SECURITIES> 0 0
<RECEIVABLES> 4,206 5,712
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 5,961 14,631
<PP&E> 995 2,335
<DEPRECIATION> 413 589
<TOTAL-ASSETS> 7,130 17,359
<CURRENT-LIABILITIES> 10,759 11,047
<BONDS> 0 0
0 0
0 0
<COMMON> 22 46
<OTHER-SE> (7,751) 6,266
<TOTAL-LIABILITY-AND-EQUITY> 7,130 17,359
<SALES> 13,908 20,290
<TOTAL-REVENUES> 19,690 26,525
<CGS> 7,875 11,473
<TOTAL-COSTS> 12,130 16,636
<OTHER-EXPENSES> 5,122 7,026
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 612 548
<INCOME-PRETAX> 1,894 2,448
<INCOME-TAX> 64 155
<INCOME-CONTINUING> 1,830 2,293
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,830 2,293
<EPS-PRIMARY> 0.49 0.55
<EPS-DILUTED> 0.49 0.55
</TABLE>
