<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 8, 1996
REGISTRATION NO. 333-09297
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
COMPUTER GENERATED SOLUTIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
--------------
DELAWARE 7379 13-3208358
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION
INCORPORATION OR NUMBER)
ORGANIZATION)
1675 BROADWAY
NEW YORK, NEW YORK 10019
(212) 408-3800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------
PHILIP FRIEDMAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
COMPUTER GENERATED SOLUTIONS, INC.
1675 BROADWAY
NEW YORK, NEW YORK 10019
(212) 408-3800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
--------------
COPIES TO:
DENNIS J. FRIEDMAN, ESQ. GERALD S. TANENBAUM, ESQ.
CHADBOURNE & PARKE LLP CAHILL GORDON & REINDEL
30 ROCKEFELLER PLAZA 80 PINE STREET
NEW YORK, NEW YORK 10112 NEW YORK, NEW YORK 10005
(212) 408-5100 (212) 701-3000
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act of 1933 registration statement
number of the earlier effective registration statement for the same
offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS Subject to Completion
Dated November 8, 1996
Shares
[LOGO] COMPUTER GENERATED SOLUTIONS, INC.
Common Stock
(par value $0.001 per share)
All of the shares of Common Stock, par value $0.001 per share (the "Common
Stock"), offered hereby are being sold by Computer Generated Solutions, Inc., a
Delaware corporation (the "Company").
Prior to this offering (the "Offering"), there has been no public market for
the Common Stock. It is currently anticipated that the initial public offering
price of the Common Stock will be between $ and $ per share. See
"Underwriting" for information relating to the factors to be considered in
determining the initial public offering price of the Common Stock.
Immediately after the Offering, Philip Friedman, the Company's President and
Chief Executive Officer, will have the power to vote % of the outstanding
shares of Common Stock (assuming no exercise of the Underwriters' over-
allotment option). See "Description of Capital Stock."
Application has been made to have the Common Stock quoted on the Nasdaq
National Market under the symbol "CGSI."
SEE "RISK FACTORS" COMMENCING ON PAGE 6 FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- --------------------------------------------
<S> <C> <C> <C>
Per Share $ $ $
- --------------------------------------------
Total (3) $ $ $
</TABLE>
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(1) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company estimated
at $ .
(3) The Company has granted the Underwriters an option to purchase up to an
additional shares of Common Stock, on the same terms as set forth above,
solely to cover over-allotments, if any. If such option is exercised in full,
the total Price to Public, Underwriting Discount and Proceeds to Company will
be $ , $ and $ , respectively. See "Underwriting."
The shares of Common Stock being offered by this Prospectus are being offered
by the Underwriters, subject to prior sale, when, as and if delivered to and
accepted by the Underwriters, and subject to approval of certain legal matters
by Cahill Gordon & Reindel, counsel for the Underwriters. It is expected that
delivery of the shares of Common Stock will be made against payment therefor on
or about , 1996 at the offices of J.P. Morgan Securities Inc., 60 Wall
Street, New York, New York.
J.P. MORGAN & CO. OPPENHEIMER & CO., INC.
, 1996
<PAGE>
No person has been authorized to give any information or make any
representation other than those contained in this Prospectus and, if given or
made, such information or representation must not be relied upon as having been
authorized by the Company or any of the Underwriters. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, the Common
Stock in any jurisdiction to any person to whom it is unlawful to make such
offer or solicitation. Neither the delivery of this Prospectus nor any sale
made hereunder shall, under any circumstances, create any implication that
there has been no change in the affairs of the Company since the date hereof.
No action has been or will be taken in any jurisdiction by the Company or any
Underwriter that would permit a public offering of the Common Stock or
possession or distribution of this Prospectus in any jurisdiction where action
for that purpose is required, other than in the United States. Persons into
whose possession this Prospectus comes are required by the Company and the
Underwriters to inform themselves about and to observe any restrictions as to
the Offering and the distribution of this Prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary ...................... 3
Risk Factors ............................ 6
The Company ............................. 10
Use of Proceeds ......................... 11
Dividend Policy ......................... 11
Capitalization .......................... 12
Dilution ................................ 13
Selected Financial Information .......... 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ............................. 15
Business ................................ 23
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Management .............................. 33
Certain Relationships and Related Party
Transactions ........................... 37
Principal Stockholders .................. 38
Description of Capital Stock ............ 39
Shares Eligible for Future Sale ......... 42
Underwriting ............................ 43
Legal Matters ........................... 44
Experts ................................. 44
Change of Auditors....................... 44
Additional Information .................. 45
Index to Financial Statements............ F-1
</TABLE>
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION
TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
The Company intends to furnish its stockholders with annual reports containing
financial statements audited by its independent auditors and with quarterly
reports containing unaudited financial statements for each of the first three
quarters of each fiscal year.
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by and should be read in
conjunction with the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. Unless
otherwise indicated, the information contained in this Prospectus (i) gives
effect to the amendment and restatement of the Company's certificate of
incorporation and by-laws and certain other related actions regarding the
conversion of the Company from S corporation to C corporation and the
restructuring of the Company's capital stock, all of which will take place
immediately prior to the consummation of the Offering and is more fully
described below under "The Company," and (ii) assumes the Underwriters' over-
allotment option is not exercised.
THE COMPANY
Computer Generated Solutions, Inc. offers its clients a Composite Solution for
their information technology ("IT") requirements. The Composite Solution is
based on a modular approach which allows the Company to utilize its products
and services to create customized solutions for its clients. Products and
services provided by the Company range from the ACS Optima Software (as
defined) bundled with IBM AS/400 hardware and related support services, to
professional services, technical training, full service on-site and remote help
desk support and call management services. The marketing of many of the
Company's products and services is enhanced through its strategic and other
relationships with recognized leaders in the IT industry, including
International Business Machines Corporation ("IBM") and AT&T Corp. ("AT&T").
IBM and AT&T accounted for approximately 33% and 3%, respectively, of the
Company's total revenues in 1995 and approximately 37% and 4%, respectively,
for the six months ended June 30, 1996.
The Company is a leading supplier of integrated business information systems to
the apparel industry. Its solution includes its proprietary ACS Optima software
and a number of fully integrated complementary products licensed to the Company
(the "ACS Optima Software"), a comprehensive, integrated business information
system specifically designed for the apparel industry. The Company provides the
ACS Optima Software to many leading United States apparel manufacturers.
Representative examples of the Company's ACS Optima Software clients include
several divisions of Sara Lee Corporation ("Sara Lee"), Polo Ralph Lauren
Corporation ("Polo Ralph Lauren"), G-III Apparel Group Ltd. ("G-III Apparel")
and Marzotto (U.S.A.) Corporation ("Marzotto"). These clients accounted for, in
the aggregate, approximately 7% and 8% of the Company's total revenues in 1995
and for the six months ended June 30, 1996, respectively.
The Company also provides a variety of professional services, delivered on a
project basis or through staff augmentation, to address clients' systems
requirements, ranging from strategy and design through development and
implementation to maintenance and support. The Company provides these
professional services primarily to clients in the financial, entertainment and
communications industries. Representative examples of the Company's clients for
professional services include Merrill Lynch & Co., Inc. ("Merrill Lynch"), EMI
Music Publishing ("EMI Music") and NYNEX Corporation ("NYNEX"). These clients
accounted for, in the aggregate, approximately 5% and 3% of the Company's total
revenues in 1995 and for the six months ended June 30, 1996, respectively. The
Company maintains a national proprietary database consisting of technical
profiles and resumes of approximately 25,000 professionals. The Company
believes that this database, its existing technical staff and other software
tools enable it to offer its clients the technical resources necessary to meet
their IT requirements and address the challenges of creating "Year 2000"
compliant systems. Through its technical training services, the Company
provides approximately 350 comprehensive technical and end-user training
classes to its clients' personnel in many leading-edge technologies, including
Visual Basic, PowerBuilder, Visual C++ and Sybase.
The Company provides a complete range of IT outsourcing support services,
including on-site and remote help desks and integrated call management centers
staffed and managed by the Company's personnel. In providing these services,
the Company uses sophisticated tools that enable it to serve as the transparent
extension of its
3
<PAGE>
clients' technical support infrastructure. These services provide the Company's
clients with immediate access to skilled technical personnel and a cost-
effective solution to their IT outsourcing support needs. The Company's IT
outsourcing support clients include IBM, AT&T and Paine Webber Group Inc.
("Paine Webber").
All of the Company's contracts are generally cancellable by the client at any
time or, with respect to some of the Company's larger contracts, including
those with IBM, on 30 to 90 days' notice.
At June 30, 1996, the Company had over 900 employees operating through
facilities located in New York, Atlanta, Chicago, Dallas, Los Angeles, Tampa
and Rochester, MN. The Company's total revenue increased from $5.6 million in
1991 to $36.0 million in 1995.
THE OFFERING
<TABLE>
<C> <S>
COMMON STOCK OFFERED........................... shares
COMMON STOCK OUTSTANDING AFTER THE OFFERING(1). total shares of Common Stock
USE OF PROCEEDS TO THE COMPANY................. Repayment of certain
indebtedness, including
approximately $2.5 million of
indebtedness owed to Philip
Friedman, the Company's
President and Chief Executive
Officer, fund distributions to
the Company's existing
stockholders of the cumulative
amount of the Company's
undistributed earnings for the
entire period it was an S
corporation (approximately
$3.3 million at June 30, 1996)
and for general corporate
purposes, including working
capital, potential strategic
acquisitions, strategic
business partnerships and
future product enhancements.
See "Use of Proceeds."
DIVIDEND POLICY................................ The Company presently intends
to retain its earnings for
reinvestment in the Company
and, therefore, does not
anticipate paying dividends on
the Common Stock in the
foreseeable future, other than
the payment of the dividend to
the Company's existing
stockholders as described
above. See "The Company" and
"Dividend Policy."
PROPOSED NASDAQ NATIONAL MARKET SYMBOL......... "CGSI"
</TABLE>
- -------
(1)Excludes shares of Common Stock to be reserved for issuance under the
Company's 1996 Long-Term Incentive Plan. See "Management--1996 Long Term
Incentive Plan."
4
<PAGE>
SUMMARY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------ ---------------------
Dollars in thousands, except 1991 1992 1993 1994 1995 1995 1996
per share data --------- --------- --------- --------- --------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA(1)
Revenues................ $ 5,572 $12,189 $26,003 $24,710 $35,947 $15,494 $27,353
Direct costs............ 3,328 8,863 20,982 16,870 25,977 10,572 20,886
--------- --------- --------- --------- --------- --------- ---------
Income from direct
operations............. 2,244 3,326 5,021 7,840 9,970 4,922 6,467
Selling, general and
administrative
expenses............... 1,489 1,973 2,916 4,725 6,690 3,007 4,504
Compensation amounts to
S corporation
stockholders........... 592 1,232 1,950 3,041 1,502 201 380
Amortization of cost in
excess of fair value of
assets purchased....... -- -- -- 213 320 160 160
--------- --------- --------- --------- --------- --------- ---------
2,081 3,205 4,866 7,979 8,512 3,368 5,044
--------- --------- --------- --------- --------- --------- ---------
Operating income (loss). 163 121 155 (139) 1,458 1,554 1,423
Interest expense........ -- -- -- 77 473 225 295
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before
income taxes........... 163 121 155 (216) 985 1,329 1,128
Income taxes............ 21 31 39 60 33 60 61
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)....... $ 142 $ 90 $ 116 $ (276) $ 952 $ 1,269 $ 1,067
========= ========= ========= ========= ========= ========= =========
PRO FORMA (UNAUDITED)
Historical income before income taxes................................... $ 985 $ 1,128
Pro forma provision for income taxes(2)................................. 396 488
--------- ---------
Pro forma net income.................................................... $ 589 $ 640
========= =========
Pro forma net income per share(3)....................................... $ $
========= =========
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
DECEMBER 31, JUNE 30, 1996
----------------------------------------------------- -------------------------
1991 1992 1993 1994 1995 HISTORICAL AS ADJUSTED(4)
--------- --------- --------- --------- --------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital......... $ 411 $ 549 $ 953 $ 1,296 $ 1,943 $ 2,793
Total assets............ 1,577 3,092 6,454 7,727 11,653 13,182
Short-term debt,
including current
portion of capital
lease obligations...... 465 608 -- 2,272 4,088 2,926
Long-term debt,
including capital lease
obligations............ 333 476 934 2,383 2,625 2,584
Stockholders' equity.... 283 364 480 456 1,408 2,475
</TABLE>
- -------
(1)For all periods shown, the Company was treated as an S corporation for
income tax purposes. Therefore, the Company's historical statements of
operations data do not include a provision for U.S. federal income taxes.
(2)Adjusted for all periods to record a provision for income taxes as if the
Company had been a C corporation. See "The Company."
(3)Computed by dividing pro forma net income by the weighted average number of
shares of Common Stock outstanding during the periods.
(4)Adjusted to reflect the Offering and the use of a portion of the net
proceeds therefrom to repay indebtedness and to pay a distribution to the
Company's existing stockholders. See "Use of Proceeds."
5
<PAGE>
RISK FACTORS
DEPENDENCE ON COMPUTER INDUSTRY TRENDS AND MOVEMENT TOWARDS OUTSOURCING
The Company's future success is dependent upon the continuation of a number of
trends in the computer industry, including the migration by IT end-users to
multivendor and multisystem computing environments, the overall increase in the
sophistication and interdependency of computing technology and a focus by IT
managers on cost-efficient solutions. The Company believes these trends have
resulted in an increased demand for support service providers that have the
ability to deliver a broad range of IT and support services and a movement by
many clients towards outsourcing. The Company's business and growth will depend
in large part on the movement toward outsourcing IT services continuing. There
can be no assurance that these trends will continue, as organizations may elect
to perform such services in-house or that the trends, should they continue,
will not serve as an inducement to other companies to enter the Company's
market. A significant reversal of these trends could have a material adverse
effect on the Company's financial condition and results of operations. See
"Business--Industry Background."
DEPENDENCE ON SIGNIFICANT RELATIONSHIPS; ABSENCE OF LONG-TERM CONTRACTS
The Company's largest client, IBM, accounted for 33% and 37% of the Company's
revenues for 1995 and the six months ended June 30, 1996, respectively. Client
contract terms vary depending on the nature of the engagement, and there can be
no assurance that a client will renew a contract when it terminates. In
addition, the Company's contracts are generally cancellable by the client at
any time or, with respect to some of the Company's larger contracts, including
those with IBM, on 30 to 90 days' notice, and clients may unilaterally reduce
their use of the Company's services under such contracts without penalty. The
termination or significant reduction of its business relationship with any of
its significant clients would have a material adverse effect on the Company's
financial condition and results of operations. See "Business."
ABILITY TO ATTRACT AND RETAIN QUALIFIED PROJECT MANAGERS AND OTHER TECHNICAL
EXPERTS
The Company's future success will depend, in part, on its ability to hire and
retain adequately trained project and resource managers, systems analysts,
business analysts, programming staff and other technical experts who can
fulfill the increasingly sophisticated needs of its clients. The Company's on-
going need for technical expert resources arises from (i) increased demand for
the Company's services, (ii) turnover, which is generally high in the industry,
and for the Company, was approximately 27% in 1995, and (iii) client requests
for programmers trained in the newest software technologies. Competition for
highly skilled employees in the information systems and services and IT
outsourcing support services industry is intense. In particular, competition is
intense for the limited number of qualified project managers and professionals
with certain specialized skills, such as a working knowledge of certain leading
software products. The Company enters into non-competition agreements and does
not enter into employee contracts with its project managers and technical
experts. There can be no assurance that the Company will be successful in
attracting and retaining the qualified personnel it requires to continue its
growth.
EXTREMELY COMPETITIVE INDUSTRY
The industry in which the Company operates is extremely competitive, highly
fragmented and subject to rapid changes. While many companies provide
information systems and services and IT outsourcing support services,
management believes that no one company is dominant. There are numerous and
varied providers of such services, including firms specializing in call center
operations, temporary staffing and personnel placement companies, general
management consulting firms, divisions of large hardware and software companies
and niche providers of IT services, many of which compete in only certain
markets. The Company competes with and faces potential competition from a
number of companies that have significantly greater financial, technical and
marketing resources, greater name recognition and a more established client
base than the Company. In addition, many of the services offered by the Company
historically have been provided, and could in the future be provided, by the
in-house personnel of its clients. The Company believes that its ability to
compete depends, in part, on a number of factors, including the ability of the
Company to hire, retain and motivate a significant number of highly skilled
employees and the development by others of products and services that are
competitive with the Company's products and services.
6
<PAGE>
Management believes that price is not the primary factor in a client's
determination to purchase ACS Optima Software and related services but that
product functionality and methodology for implementation are the principal
competitive considerations. The Company believes that the principal competitive
factors in its professional services business include the nature of the
services offered, quality of service, responsiveness to customer needs,
business experience and technical expertise. With respect to its IT outsourcing
support services, the Company competes primarily on the basis of quality of
service and price, and the Company could be adversely affected by the price at
which others offer comparable IT outsourcing support services. Many of the
Company's larger clients purchase IT outsourcing support services primarily
from a limited number of preferred vendors. The Company has experienced and
continues to anticipate significant pricing pressure from these clients in
order to remain competitive.
Although the Company believes that it can meet its client's demands for
information systems and services and IT outsourcing support services, there can
be no assurance that the Company will continue to compete successfully with its
existing competitors or will be able to compete successfully with any new
competitors.
INTERNAL EXPANSION AND ACQUISITION RISKS
The Company's continued growth through internal expansion is dependent on the
Company's ability to generate additional revenue from existing and new clients.
The Company believes that internal expansion also will depend on the Company's
ability to obtain and develop new products and services, including those
related to the "Year 2000" problem, and there can be no assurance that the
Company will be able to obtain or develop such products or services. Part of
the Company's strategy in enhancing its professional service revenues is to
provide solutions to its customers' "Year 2000" problems through products and
services, including professional resources. There can be no assurance that any
products for "Year 2000" will be accepted by the Company's clients or that the
Company will recognize any revenues from such products or related professional
resources. See "Business--Information Systems and Services--Professional
Services."
As part of its business strategy, the Company intends to expand by acquiring IT
solutions, outsourcing support, consulting and systems integration businesses
in attractive markets or which have desirable client relationships. While the
Company from time to time evaluates acquisition opportunities, it has not
entered into any definitive agreement or understanding with respect to any
particular acquisition. The success of this strategy depends not only upon the
Company's ability to identify and acquire businesses on a cost-effective basis,
but also upon its ability to integrate acquired operations into its
organization effectively, to retain and motivate key personnel and to retain
clients of acquired firms. In addition, the Company expects to experience
competition for acquisitions, and there can be no assurance that suitable
acquisition candidates will be available, that acquisitions can be completed on
reasonable terms or that the Company will have access to adequate funds to
effect any desired acquisition.
In addition, as part of its business strategy, the Company intends to expand
internationally. The Company's success in expanding internationally will be
affected by, and any future international operations will be subject to,
certain additional risks, including general economic and political conditions
in each applicable country, the effect of any applicable foreign tax
structures, tariff and trade regulations, difficulties in obtaining local
licenses, the difficulty of managing an organization spread over various
jurisdictions and geographical regions and compliance with a variety of
changing local laws and regulations. In addition, legislation in foreign
countries may not always provide adequate protection for the Company's
proprietary intellectual property rights. International operations may also
subject the Company's operating results to the effects of fluctuations in
foreign currency exchange rates.
RISKS ASSOCIATED WITH MANAGEMENT OF A LARGE AND RAPIDLY CHANGING BUSINESS
The Company has experienced significant growth, which has placed and, if
sustained, will continue to place a substantial strain on its operational,
administrative and financial resources. The Company's ability to effectively
manage growth of its staff and facilities will require it to continue to
improve its operational, financial and other internal systems, and to train,
motivate and manage its project managers and other technical experts. If the
Company's management is unable to manage growth effectively or its employees
are unable to achieve anticipated performance levels, such occurrences could
have a material adverse effect on the Company's financial condition and results
of operations.
RELIANCE ON KEY EXECUTIVES
The Company's success depends to a significant extent upon the continued
services of its executive officers and other key management and sales
personnel, in particular Philip Friedman, the Company's President and Chief
Executive
7
<PAGE>
Officer. The Company has no employment contracts with any of its employees and
maintains key man insurance on Philip Friedman in the amount of only $500,000.
The unavailability of the continuing services of any of its executive officers
and other key management and sales personnel could have an adverse effect on
the Company's financial condition and results of operations. See "Management."
DEPENDENCE ON INTELLECTUAL PROPERTY RIGHTS
The Company's success is dependent, in part, upon its proprietary intellectual
property rights. The Company relies on contractual arrangements, such as trade
secrets and non-disclosure agreements, and copyright and trademark law to
protect its proprietary intellectual property. While the Company holds
registered copyrights with respect to certain modules of the ACS Optima
Software, generally enters into confidentiality agreements with its employees,
consultants, clients and potential clients and limits access to and
distribution of its confidential and proprietary data, there can be no
assurance that the steps taken by the Company in this regard will be adequate
to deter misappropriation of its proprietary information or that the Company
will be able to detect unauthorized use and take appropriate steps to enforce
its intellectual property rights.
The Company's business includes the development of custom software applications
in connection with specific client engagements. Ownership of such software is
generally assigned to the client. Although the Company believes that its
products and services do not infringe on the intellectual property rights of
others, there can be no assurance that such a claim will not be asserted
against the Company in the future.
RISK OF EMERGENCY INTERRUPTION OF HELP DESK AND CALL MANAGEMENT OPERATIONS
The Company's operations are dependent upon the ability to protect its help
desk and call management operations and its information databases against
damage that may be caused by fire, power failure, telecommunications failures,
unauthorized intrusion, computer viruses and other emergencies. At its
facilities, the Company has taken precautions to protect itself and its
customers from events that could interrupt delivery of the Company's services.
These precautions include off-site storage of backup data, fire protection and
physical security systems. Notwithstanding such precautions, there can be no
assurance that a fire, natural disaster, human error, equipment malfunction or
inadequacy or other event would not result in a prolonged interruption in the
Company's ability to provide services to its clients. Such an event could have
a material adverse effect on the Company's financial condition and results of
operations. In addition, at its clients' facilities, protecting help desk and
call management operations is the responsibility of its clients. While
management believes that its clients have taken precautions similar to those
taken by the Company at its facilities, there can be no assurance that this
will continue to be the case. To the extent such precautions are not taken,
this could have a material adverse effect on the Company's financial condition
and results of operations.
CONTROLLING STOCKHOLDER; ANTI-TAKEOVER PROVISIONS; PREFERRED STOCK
Upon consummation of the Offering, Philip Friedman, the Company's President and
Chief Executive Officer, and his brother Victor Friedman, the Company's
Executive Vice President (collectively, the "Principal Stockholders"), will
beneficially own % and %, respectively, of the outstanding shares of Common
Stock. As a result, Philip Friedman will be able to control the outcome of
matters requiring a stockholder vote, including electing directors, adopting or
amending certain provisions of the Company's Certificate of Incorporation (as
defined) and By-Laws (as defined) and approving or preventing certain mergers
or other similar transactions, such as a merger involving the Company or a sale
of substantially all of the Company's assets (including transactions that could
give holders of the Common Stock the opportunity to realize a premium over the
then-prevailing market price for their shares). Therefore, purchasers of Common
Stock offered hereby will become minority stockholders of the Company and will
be unable to control the management or business policies of the Company.
Moreover, subject to contractual restrictions and general fiduciary
obligations, the Company is not prohibited from engaging in transactions with
its management, the Principal Stockholders or entities in which such persons
are interested. The Certificate of Incorporation also provides for the Board of
Directors to be divided into three classes of directors serving staggered
three-year terms and certain super majority voting provisions. The Company's
Certificate of Incorporation does not provide for cumulative voting in the
election of directors and, as a result, Philip Friedman can elect all the
directors if he so chooses. Furthermore, the Company is subject to Section 203
of the Delaware General Corporation Law. The existence of these provisions,
8
<PAGE>
together with the stock ownership of the Principal Stockholders, would be
expected to have an anti-takeover effect, including possibly discouraging
takeover attempts that might result in a premium over the market price for the
shares of Common Stock. See "Description of Capital Stock" and "Principal and
Selling Stockholders."
The Company's Certificate of Incorporation authorizes the issuance of "blank
check" preferred stock ("Preferred Stock") with such designations, rights and
preferences as may be determined from time to time by the Board of Directors.
In the event of issuance, such Preferred Stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. In addition, the issuance of Preferred Stock may
adversely affect the voting and dividend rights, rights upon liquidation and
other rights of the holders of Common Stock (including the purchasers of Common
Stock in the Offering). Although the Company has no present intention to issue
any shares of such Preferred Stock, the Company retains the right to do so in
the future.
ABSENCE OF PUBLIC MARKET; DETERMINATION OF OFFERING PRICE; POSSIBLE VOLATILITY
OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common Stock.
There can be no assurance that, following the Offering, an active trading
market for the Common Stock will develop or be sustained or that the market
price of the Common Stock will not decline below the initial public offering
price. The initial public offering price will be determined by negotiations
among the Company and the Representatives (as defined) and will not necessarily
be indicative of the market price of the Common Stock after the Offering. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price. In addition, the market price of the Common
Stock could be subject to significant fluctuations in response to variations in
quarterly operating results, changes in earnings estimates by securities
analysts, general trends in the technology and emerging growth company sectors
and other factors. The securities markets have experienced significant price
and volume fluctuations from time to time in recent years that often have been
unrelated or disproportionate to the operating performance of particular
companies and which have particularly affected the market price of equity
securities of technology companies. These broad fluctuations may adversely
affect the market price of the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of substantial amounts of Common Stock in the public market after the
Offering could adversely affect the prevailing market price of the shares of
Common Stock offered hereby and the Company's ability to raise additional
capital through additional public offerings of equity securities. In addition
to the shares of Common Stock offered hereby, as of the date of this
Prospectus, there will be shares of Common Stock outstanding, all of which
are "restricted" shares (the "Restricted Shares") under the Securities Act of
1933, as amended (the "Securities Act"), and are held by the Principal
Stockholders. Beginning 180 days after the date of this Prospectus, upon the
expiration of certain lock-up agreements with the Underwriters, the Restricted
Shares will first become eligible for sale in the public market subject to
certain volume and other resale restrictions pursuant to Rule 144 under the
Securities Act. The Principal Stockholders are also entitled to certain rights
with respect to the registration under the Securities Act of shares held by
them. See "Certain Relationships and Related Party Transactions." In addition,
after the Offering, the Company intends to file a registration statement under
the Securities Act to register shares of Common Stock reserved for issuance
upon the exercise of options or awards of restricted stock that may be granted
under the 1996 Long-Term Incentive Plan. See "Management--1996 Long-Term
Incentive Plan," "Principal and Selling Stockholders" and "Shares Eligible for
Future Sale."
NO DIVIDENDS
The Company anticipates that, for the foreseeable future, all earnings, if any,
will be retained for the operation and expansion of its business and that it
will not pay dividends after the payment of the dividends to the Company's
Principal Stockholders as described under "The Company." See "Dividend Policy."
IMMEDIATE AND SUBSTANTIAL DILUTION
The purchasers of the shares of Common Stock will experience immediate dilution
after the Offering. See "Dilution." In addition, an aggregate of shares of
Common Stock are reserved for issuance under the Company's 1996 Long-Term
Incentive Plan, which shares, when and if issued, may cause additional dilution
to the purchasers of Common Stock offered hereby.
9
<PAGE>
THE COMPANY
The Company was founded in April 1984. Prior to the Offering, Philip Friedman
and his brother Victor Friedman owned 90% and 10%, respectively, of the common
stock.
Since its incorporation, the Company has been treated for federal income tax
purposes as an S corporation under Subchapter S of the Internal Revenue Code of
1986, as amended (the "Code"), and the Company's earnings have been taxed for
federal and certain state income tax purposes directly to its stockholders
rather than to the Company. See Note 13 to the financial statements of the
Company. The Company will terminate its S corporation status effective as of
the day preceding the consummation of the Offering (the "S Termination Date").
As a result, the Company will have a final S short year ending on and including
the day preceding the S Termination Date. On and after the S Termination Date,
the Company will no longer be treated as an S corporation and, accordingly,
will be fully subject to federal, state and local income taxes.
Upon consummation of the Offering, the Company plans to distribute to its
stockholders of record immediately prior to the Offering the cumulative amount
of its undistributed earnings for the entire period that it was an S
corporation (i.e., from inception through the day preceding the S Termination
Date), which earnings have been or will be taxed to such stockholders for
federal and certain state income tax purposes. As of June 30, 1996, the
cumulative balance of such undistributed S period earnings was approximately
$3.3 million. To this amount will be added, for purposes of calculating the
amount of the distribution, the earnings of the Company from June 30, 1996 to
the day prior to the S Termination Date (less any distributions made by the
Company during such period).
Should there be any adjustments to the Company's federal taxable income that
result in a shifting of income from taxable years in which the Company was an S
corporation to subsequent non-S corporation taxable years of the Company, or
vice versa, the stockholders of record immediately prior to the Offering shall
pay to the Company (in the former circumstance) or the Company shall pay to
such stockholders (in the latter circumstance), the amount of federal, state
and local income taxes, including penalties and interest, incurred by the
Company or the stockholders, as the case may be, as a result of such adjustment
to income (without regard to any tax benefit that the stockholders may realize
from an increase in the basis of their Common Stock that results from such
adjustment); provided that the stockholders' obligation to the Company cannot
exceed the amount of the income that was shifted from an S corporation year to
a non-S corporation year less the federal, state and local income taxes
incurred by the stockholders with respect to such income. To the extent that
any such amount is paid to a stockholder after the date which is one year from
the S Termination Date, such amount will be increased in an amount, if any,
necessary to reimburse such stockholder for taxes required to be paid by him as
a result of his receipt of such amount (as so increased). The cost to the
Company of any such payment could exceed the amount of the savings realized by
the Company as a result of such adjustment to income. The stockholders of
record immediately prior to the Offering will also indemnify and hold harmless
the Company from any federal and New York state income tax liabilities
(including interest and penalties) that result from the failure of the Company
to qualify as an S corporation for any year or years ending on or prior to
December 31, 1995 or for the period from January 1, 1996 through the day prior
to the S Termination Date.
Prior to the consummation of the Offering, the Company will also adopt an
amended and restated certificate of incorporation (the "Certificate of
Incorporation") and by-laws (the "By-Laws"). The Certificate of Incorporation
will provide for "blank check" Preferred Stock, a Board of Directors that will
be divided into three classes of directors serving staggered three-year terms
and certain super majority voting provisions. See "Description of Capital
Stock." Also immediately prior to the Offering, the Company will effect a
for one stock split of its existing common stock, following which the Company's
current stockholders, Philip Friedman and Victor Friedman, will exchange such
common stock on a one-for-one basis for Common Stock.
The Company is incorporated in the State of Delaware and maintains its
principal executive offices at 1675 Broadway, New York, New York 10019. The
Company's telephone number is (212) 408-3800.
10
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby are estimated to be approximately $ million (or approximately
$ million if the Underwriters' over-allotment option is exercised in full),
after deducting underwriting discounts and estimated Offering expenses and
assuming an initial offering price of $ per share.
The Company intends to use the net proceeds (i) to repay all outstanding
indebtedness (a) owed to Philip Friedman in the aggregate amount of
approximately $2.5 million, which indebtedness is payable upon demand and bears
interest at 10.0%, (b) under the Company's revolving credit facility ($2.2
million as of June 30, 1996), which indebtedness bears interest at the bank's
prime rate (8.25% at June 30, 1996) and matures in May 1997, and (c) under the
Company's term loan ($267,000 outstanding as of June 30, 1996), which
indebtedness bears interest at 1.25% per annum above such prime rate and
matures in June 1997, (ii) to distribute to its stockholders of record
immediately prior to the Offering the cumulative amount of the Company's
undistributed earnings for the entire period that it was an S corporation
(approximately $3.3 million at June 30, 1996) and (iii) for general corporate
purposes, including working capital, potential strategic acquisitions,
strategic business partnerships and future product enhancements. While the
Company from time to time evaluates acquisition opportunities, it has not
entered into any definitive agreement or understanding, and is currently not
participating in any negotiations, with respect to any particular acquisition.
The Company currently anticipates that any acquisition would be of a business
similar or complementary to the business currently conducted by the Company.
DIVIDEND POLICY
The Company has not paid any cash dividends on its common stock in the last two
years ended December 31, 1995 or in the six month period ended June 30, 1996.
The Company intends to retain its earnings for reinvestment in the Company and,
therefore, does not anticipate paying any dividends on the Common Stock in the
foreseeable future, other than the payment of the dividend to the Company's
Principal Stockholders as described under "The Company." Subject to any
restrictions in any future financing agreements, any future determination as to
the payment of dividends will be at the discretion of the Company's Board of
Directors and will depend on the Company's results of operations, financial
condition, capital requirements and other factors deemed relevant by the Board
of Directors.
11
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt, including current portion
of capital lease obligations, and capitalization of the Company as of June 30,
1996 and as adjusted to give effect to the sale by the Company of shares of
Common Stock offered hereby at an assumed initial public offering price of $
per share, the application of a portion of the estimated net proceeds therefrom
to repay indebtedness and the distribution of approximately $3.3 million of
undistributed S corporation earnings as described in "Use of Proceeds."
-------------
<TABLE>
AS OF JUNE 30, 1996
---------------------
ACTUAL(1) AS ADJUSTED
--------- -----------
<S> <C> <C>
Dollars in thousands, except share data
Short-term debt, including current portion of capital
lease obligations....................................... $2,926 $ 136
========= ===========
Long-term debt, less current portion of capital lease
obligations............................................. 438 438
--------- -----------
Subordinated debt-stockholder............................ 2,146 --
--------- -----------
Stockholders' equity:
Preferred Stock, $.001 par value, 1,000,000 shares
authorized, no shares issued and outstanding.......... -- --
Common Stock, $.001 par value, shares authorized,
shares issued and outstanding Actual and shares
issued and outstanding................................
As Adjusted(2)........................................ 1
Additional paid-in capital............................. 228
Retained earnings...................................... 2,388
Less shares held in treasury at cost............. (142)
--------- -----------
Total stockholders' equity........................... 2,475
========= ===========
Total capitalization................................. $5,059 $
========= ===========
</TABLE>
- -------
(1) After giving effect to the proposed stock split and subsequent exchange
discussed under "The Company."
(2) Issued and outstanding shares do not include shares of Common Stock re-
served for issuance under the Company's 1996 Long-Term Incentive Plan.
12
<PAGE>
DILUTION
At June 30, 1996, the net tangible adjusted book value of the Company was
approximately $ million, or $ per share of Common Stock. After giving
effect to the sale by the Company of shares of Common Stock offered
hereby (assuming an initial public offering price of $ per share and after
deducting underwriting discounts and estimated Offering expenses), the pro
forma net tangible adjusted book value of the Company at June 30, 1996 would
have been $ million, or $ per share of Common Stock. This represents an
immediate increase in net tangible book value of $ per share to existing
stockholders before the Offering, and an immediate dilution of $ per share
to the purchasers of such shares at the public offering price. The following
table illustrates the dilution in net tangible book value per share to new
investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share of the
Common Stock $
---------
Net tangible book value per share at June 30, 1996 $
---------
Increase in net tangible book value per share after
the Offering
---------
Pro forma net tangible book value per share after the
Offering
---------
Dilution per share to new investors $
=========
</TABLE>
The following table summarizes at June 30, 1996, after giving effect to the
sale by the Company of shares of Common Stock offered hereby: (i) the
number of shares of Common Stock purchased by existing stockholders from the
Company and the total consideration and average price per share paid to the
Company for such shares, (ii) the number of shares of Common Stock purchased by
new investors in the Offering from the Company and the total consideration and
the price per share paid by them for such shares and (iii) the percentage of
shares purchased from the Company by existing stockholders and the new
investors and the percentages of the consideration paid to the Company for such
shares by existing stockholders and new investors.
--------------------------------------------------
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ---------------------
AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders % $ % $
New investors
--------- --------- --------- --------- ---------
Total 100% $ 100%
========= ========= ========= =========
</TABLE>
13
<PAGE>
SELECTED FINANCIAL INFORMATION
The following selected financial information of the Company as of and for the
year ended December 31, 1995 and as of and for the six months ended June 30,
1996 are derived from the financial statements of the Company which were
audited by Ernst & Young LLP, independent auditors. The report of such auditors
with respect to such financial statements appear elsewhere in this Prospectus.
The following selected financial information of the Company as of and for the
years ended December 31, 1991, 1992, 1993 and 1994 are derived from the
financial statements of the Company which were audited by BDO Seidman, LLP,
independent auditors. The report of such auditors with respect to the financial
statements as of December 31, 1994 and for each of the two years in the period
ended December 31, 1994 appears elsewhere in this Prospectus. The selected
financial information as of and for the six months ended June 30, 1995 is
derived from unaudited financial statements which have been prepared on the
same basis as the audited financial statements, and, in management's opinion,
includes all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the information shown herein. Historical
results are not necessarily indicative of future results. The following
selected financial information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operation,"
"Capitalization" and the Company's financial statements and notes thereto
included elsewhere in this Prospectus.
--------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------------------- -------------------
Dollars in thousands, except 1991 1992 1993 1994 1995 1995 1996
per share data ------- ------- ------- ------- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DA-
TA(1)
Revenues.................... $ 5,572 $12,189 $26,003 $24,710 $35,947 $15,494 $27,353
Direct costs................ 3,328 8,863 20,982 16,870 25,977 10,572 20,886
------- ------- ------- ------- ------- ------- -------
Income from direct opera-
tions...................... 2,244 3,326 5,021 7,840 9,970 4,922 6,467
Selling, general and admin-
istrative expenses......... 1,489 1,973 2,916 4,725 6,690 3,007 4,504
Compensation amounts to S
corporation stockholders... 592 1,232 1,950 3,041 1,502 201 380
Amortization of cost in ex-
cess of fair value of as-
sets purchased............. -- -- -- 213 320 160 160
------- ------- ------- ------- ------- ------- -------
2,081 3,205 4,866 7,979 8,512 3,368 5,044
------- ------- ------- ------- ------- ------- -------
Operating income (loss)..... 163 121 155 (139) 1,458 1,554 1,423
Interest expense............ -- -- -- 77 473 225 295
------- ------- ------- ------- ------- ------- -------
Income (loss) before income
taxes...................... 163 121 155 (216) 985 1,329 1,128
Income taxes................ 21 31 39 60 33 60 61
------- ------- ------- ------- ------- ------- -------
Net income (loss)........... $ 142 $ 90 $ 116 $ (276) $ 952 $ 1,269 $ 1,067
======= ======= ======= ======= ======= ======= =======
PRO FORMA (UNAUDITED)
Historical income before income taxes........................ $ 985 $ 1,128
Pro forma provision for income taxes(2)...................... 396 488
------- -------
Pro forma net income......................................... $ 589 $ 640
======= =======
Pro forma net income per share(3)............................ $ $
======= =======
</TABLE>
--------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1996
--------------------------------------- -------------------------
1991 1992 1993 1994 1995 HISTORICAL AS ADJUSTED(4)
------- ------- ------- ------- ------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital............. $ 411 $ 549 $ 953 $ 1,296 $ 1,943 $ 2,793
Total assets................ 1,577 3,092 6,454 7,727 11,653 13,182
Short-term debt, including
current portion of capital
lease obligations.......... 465 608 -- 2,272 4,088 2,926
Long-term debt, including
capital lease obligations.. 333 476 934 2,383 2,625 2,584
Stockholders' equity........ 283 364 480 456 1,408 2,475
</TABLE>
- -------
(1) FOR ALL PERIODS SHOWN, THE COMPANY WAS TREATED AS AN S CORPORATION FOR
INCOME TAX PURPOSES. THEREFORE, THE COMPANY'S HISTORICAL STATEMENTS OF
OPERATIONS DATA DO NOT INCLUDE A PROVISION FOR U.S. FEDERAL INCOME TAXES.
(2) ADJUSTED FOR ALL PERIODS TO RECORD A PROVISION FOR INCOME TAXES AS IF THE
COMPANY HAD BEEN A C CORPORATION. SEE "THE COMPANY."
(3) COMPUTED BY DIVIDING PRO FORMA NET INCOME BY THE WEIGHTED AVERAGE NUMBER
OF SHARES OF COMMON STOCK OF THE COMPANY OUTSTANDING DURING THE PERIODS.
(4) ADJUSTED TO REFLECT THE OFFERING AND THE USE OF A PORTION OF THE NET
PROCEEDS THEREFROM TO REPAY INDEBTEDNESS AND TO PAY A DISTRIBUTION TO THE
COMPANY'S STOCKHOLDERS. SEE "USE OF PROCEEDS."
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
financial statements of the Company and related notes thereto and other
financial information included elsewhere in this Prospectus.
OVERVIEW
The Company derives its revenues by providing IT services. The Company's
information systems and services include the ACS Optima Software and IBM's
AS/400 hardware, as well as a complete range of professional services and
training. The Company's IT outsourcing support services consist of on-site and
remote help desk and integrated call management services.
Information systems and services revenues were 93.0%, 78.0%, 64.0% and 53.0% of
total revenue in 1993, 1994, 1995 and for the six months ended June 30, 1996,
respectively. Information systems and services revenues as a percentage of
total revenues decreased as a result of the growth in revenues from IT
outsourcing support services. Nevertheless, the Company achieved 19.0% growth
in information systems and services revenue dollars in 1995 principally as a
result of an acquisition consummated in 1994 and new business. In May 1994, the
Company purchased the business operations of ACS Software Products Group, which
included the ACS Optima Software package. Previously, the Company had been a
remarketer of ACS software and had received commission revenues from the sale
of ACS software. The excess of the total acquisition cost over the fair value
of net assets acquired of $959,000 is amortized on a straight-line basis over
three years. In October 1994, the Company enhanced its ability to provide
professional services to the financial community when it purchased the business
operations of Real-Time Technology, Inc. ("Real-Time"), an information
consulting company which provided professional services primarily to the
financial community. Real-Time was then owned by Victor Friedman. For the years
1993, 1994 and 1995 and the six months ended June 30, 1996, substantially all
of the Company's information systems and services revenues, other than revenues
from sales of hardware and software, were generated on a time plus materials
basis. Research and development costs associated with the ACS Optima Software
are expensed as incurred and are included in direct costs.
In 1994, the Company undertook a focused effort to increase revenues from ACS
Optima Software and services and IT outsourcing support services and decrease
revenue from hardware sales, which generally have lower margins. As a result,
total revenues decreased 5.0% in 1994 but income from direct operations
increased 56.1%. For 1995, revenues excluding hardware revenues, increased
59.0% from 1994 and hardware revenues decreased 11.0%.
The Company's IT outsourcing support services have grown significantly since
1993. In 1993, IT outsourcing support services revenue represented only 7.0% of
total revenues, compared to 47.0% for the six month period ended June 30, 1996.
Revenues from the Company's IT outsourcing support business increased 141.0% in
1995. In October 1995, the Company was awarded a contract by IBM to provide its
customers with call management support at IBM's Atlanta and Dallas facilities.
The Company has been advised by IBM that effective January 1, 1997, call
management services provided by the Company from such facilities in Dallas and
Atlanta will be provided directly by IBM. The Company expects to recognize
revenues of approximately $8.5 million for providing these services in 1996.
Outsourcing support services revenues from remote help desk and call management
services were $5.2 million, $11.0 million and $10.6 million for 1994, 1995 and
for the six months ended June 30, 1996, respectively. The Company's on-site
help desk support services, which were started in mid-1994, provided $1.9
million in revenues for 1995 and $2.2 million for the six months ended June 30,
1996. IT outsourcing support services revenues are generated on a time plus
materials basis.
The Company, with the consent of its stockholders, has elected to be taxed as
an S corporation pursuant to the Code and certain state tax laws. As such, the
Company has not been subject to federal and certain state income taxes and the
stockholders have included the Company's taxable income or loss in their
individual income tax returns. Income taxes in 1993, 1994, 1995 and the six
months ended June 30, 1996 primarily represent New York City corporate income
taxes. The New York City income tax rate is 8.85%.
RESULTS OF OPERATIONS
Six Months Ended June 30, 1996 as compared to Six Months Ended June 30, 1995
Revenues. The Company's total revenues increased 76.5% to $27.4 million for the
six months ended June 30, 1996 from $15.5 million for the six months ended June
30, 1995. Information systems and services revenues increased
15
<PAGE>
26.1% to $14.5 million for the six months ended June 30, 1996 from $11.5
million for the six months ended June 30, 1995. This was primarily due to an
increase in revenues from ACS Optima Software and related systems integration
sales of $5.2 million, from $5.3 million in the six months ended June 30, 1995
to $10.5 million in the six months ended June 30, 1996. This increase was
partially offset by a decrease in revenues from professional services of $2.5
million, from $5.2 million in the six months ended June 30, 1995 to $2.7
million in the six months ended June 30, 1996. IT outsourcing support revenues
increased 220.0% to $12.9 million for the six months ended June 30, 1996 from
$4.0 million for the six months ended June 30, 1995, principally due to the
start of the Company's call management business in October 1995. The balance of
the increase in IT outsourcing support revenues resulted from growth in
existing remote help desk services and the expansion of on-site help desk
services.
Direct Costs. Direct costs, which are comprised primarily of direct salaries,
direct benefits and related costs and resale purchases of third party hardware
and software, increased 97.6% to $20.9 million (76.4% of revenues) for the six
months ended June 30, 1996 from $10.6 million (68.2% of revenues) for the six
months ended June 30, 1995. Direct costs increased as a percentage of revenues
primarily due to (i) the significant increase in the number of employees
associated with the Company's growth in IT outsourcing support revenues and
(ii) the resale purchase of third party hardware and software, which increased
to $3.7 million for the six months ended June 30, 1996 from $700,000 for the
six months ended June 30, 1995. Direct costs which are associated with sales of
third party hardware and software are larger as a percentage of revenues than
direct costs associated with professional services or IT outsourcing support
services.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses ("SG&A") consist primarily of indirect salaries and
facility costs for administrative, selling and executive personnel, as well as
insurance costs, advertising, professional fees and other non-direct costs.
SG&A expenses increased by 49.8% to $4.5 million (16.5% of revenues) for the
six months ended June 30, 1996 from $3.0 million (19.4% of revenues) for the
six months ended June 30, 1995. The overall increase in SG&A resulted from the
Company supporting its growing infrastructure. Some of the larger increases
were selling and administrative salaries ($800,000), facility costs ($400,000)
and advertising ($150,000). SG&A decreased as a percentage of revenues because
certain SG&A costs are fixed and for the six months ended June 30, 1996 were
absorbed over a larger revenue base.
Compensation Amounts to S Corporation Stockholders. Compensation amounts to S
corporation stockholders for the six months ended June 30, 1996 and 1995
represent base salaries paid to stockholders but do not include an accrual for
year end bonuses. Compensation amounts to S corporation stockholders increased
$179,000 to $380,000, (1.4% of revenues) for the six months ended June 30, 1996
from $201,000 (1.3% of revenues) for the six months ended June 30, 1995.
Amortization of Cost in Excess of Fair Value of Assets Purchased. Amortization
of cost in excess of fair value of assets purchased was $160,000 for the six
months ended June 30, 1995 and 1996.
Operating Income. Operating income decreased 8.4% to $1.4 million (5.2% of
revenues) for the six months ended June 30, 1996 from $1.6 million (10.0% of
revenues) for the six months ended June 30, 1995. This decrease in operating
income resulted from the increase in direct costs as a percentage of revenues,
partially offset by the increase in revenues and the decrease in SG&A as a
percentage of revenues.
Interest Expense. Interest expense increased to $295,000 (1.1% of revenues) for
the six months ended June 30, 1996 from $225,000 (1.5% of revenues) for the six
months ended June 30, 1995. This increase was principally the result of
increased working capital borrowings used to finance the Company's growth.
Net Income. For the reasons stated above, net income decreased 15.9% to $1.1
million (3.9% of revenues) for the six months ended June 30, 1996 from $1.3
million (8.2% of revenues) for the six months ended June 30, 1995.
Year Ended December 31, 1995 as compared to Year Ended December 31, 1994
Revenues. The Company's total revenues increased 45.5% to $35.9 million in 1995
from $24.7 million in 1994. Information systems and services revenues increased
19.1% to $23.1 million in 1995 from $19.4 million in 1994, principally because
of revenues associated with the full year effects of the ACS acquisition which
was consummated in
16
<PAGE>
May of 1994. IT outsourcing support revenues increased 143.3% to $12.9 million
in 1995 from $5.3 million in 1994, primarily due to increased revenues realized
from existing and additional remote help desk services and the start up of call
management and on-site help desk services.
Direct Costs. Direct costs increased 54.0% to $26.0 million (72.3% of revenues)
for 1995 from $16.9 million (68.3% of revenues) for 1994. Direct costs
increased as a percentage of revenues because of the addition of a number of
technical personnel in connection with the increase in ACS Optima and IT
outsourcing support services revenue, which technical personnel needed to be
properly trained, thereby resulting in lower than normal billable production.
In addition, the increase in IT outsourcing support services revenue, which
generally realize lower margins, also contributed to the increase in direct
costs as a percentage of revenues. Finally, during the early part of 1995, the
Company completed certain professional services contracts related to AS/400
programming, which generally have higher margins.
Selling, General and Administrative Expenses. SG&A expenses increased by 41.6%
to $6.7 million (18.6% of revenues) for 1995 from $4.7 million (19.1% of
revenues) for 1994. The Company incurred an increase of approximately $1.1
million in selling and administrative salaries to support its operational
growth and approximately $900,000 of additional SG&A expense related to the
Company's move into larger facilities in New York and Atlanta, the expansion of
its Los Angeles facility and the opening of its Dallas office. SG&A decreased
as a percentage of revenues because certain SG&A costs are fixed and in 1995
were absorbed over a larger revenue base.
Compensation Amounts to S Corporation Stockholders. Compensation amounts to S
corporation stockholders for annual periods represents annual salaries and
year-end bonuses. Such compensation decreased approximately $1.5 million in
1995 to $1.5 million (4.2% of revenues) from $3.0 million (12.3% of revenues)
in 1994. A portion of each year's compensation amounts to S corporation
stockholders was subsequently loaned to the Company in the form of subordinated
debt in the amounts of $1.2 million and $300,000 in 1994 and 1995,
respectively.
Amortization of Costs in Excess of Fair Value of Assets Purchased. Amortization
of costs in excess of fair value of assets purchased, which consists of cost in
excess of fair value of assets purchased related to the acquisition of the ACS
Software Products Group, increased 50.2% to $320,000 (0.9% of revenues) for
1995 from $213,000 (0.9% of revenues) for 1994. The 1995 balance reflects a
full year of amortization.
Operating Income (Loss). Operating income increased to $1.5 million (4.1% of
revenue) for 1995 from a loss of $139,000 for 1994. The improvement in
operating income is a result of the increase in revenues discussed above,
together with the decrease in compensation amounts to S corporation
stockholder, partially offset by an increase in direct costs as a percentage of
revenues.
Interest Expense. Interest expense increased from $77,000 (0.3% of revenues) in
1994 to $473,000 (1.3% of revenues) in 1995. This increase is a result of
increased working capital borrowings used to finance the Company's growth, as
well as interest expense associated with an increase in subordinated debt to
stockholders.
Net Income (Loss). For the reasons stated above, net income increased $1.2
million to $952,000 (2.6% of revenues) for 1995 from a loss of $276,000 for
1994.
Year Ended December 31, 1994 as compared to Year Ended December 31, 1993
Revenues. The Company's total revenues decreased 5.0% to $24.7 million in 1994
from $26.0 million in 1993. Information systems and services revenues decreased
19.8% to $19.4 million in 1994 from $24.2 million in 1993 because hardware
revenues decreased by $12.7 million while other IT services revenues increased
by $7.9 million. In 1994, the Company made a focused effort to increase
revenues from ACS Optima Software and related services and IT outsourcing
support services and decrease revenue from hardware sales, which generally have
lower margins. IT outsourcing support revenues increased 194.4% to $5.3 million
for 1994 from $1.8 million for 1993 due to additional remote help desk
contracts begun in 1994.
17
<PAGE>
Direct Costs. Direct costs declined 19.6% to $16.9 million (68.3% of revenues)
for 1994 from $21.0 million (80.7% of revenues) for 1993. Direct costs as a
percentage of revenues decreased because of the decreases in revenues from
hardware sales, which have larger direct costs as a percentage of revenues than
direct costs associated with professional services or IT outsourcing support
services.
Selling, General and Administrative Expenses. SG&A expenses increased by 62.0%
to $4.7 million (19.1% of revenues) for 1994 from $2.9 million (11.2% of
revenues) for 1993. This increase was attributable to the change in product mix
discussed above and the development of an infrastructure to support increases
in IT services revenue.
Compensation Amounts to S Corporation Stockholders. Compensation amounts to S
corporation stockholders increased $1.0 million to $3.0 million (12.3% of
revenues) for 1994 from $2.0 million (7.5% of revenues) for 1993. $1.2 million
of the compensation amounts to S corporation stockholders in 1994 was
subsequently loaned to the Company in the form of subordinated debt.
Amortization of Costs in Excess of Fair Value of Assets Purchased. Amortization
of costs in excess of fair value of assets purchased began in May 1994 upon
consummation of the acquisition of ACS Software Products Group and was
$213,000.
Operating Income (Loss). Operating income decreased by $294,000 to a loss of
$139,000 for 1994 from operating income of $155,000 (0.6% of revenues) for
1993, principally because of the increase in compensation amounts to
S corporation stockholders and SG&A as percentages of revenues, together with
the decrease in total revenues, partially offset by the decrease in direct
costs as a percentage of revenues.
Interest Expense. In 1994 the Company incurred interest expense of $77,000 due
to working capital borrowings used to finance the Company's growth. The Company
incurred no interest expense in 1993.
Net Income (Loss). For the reasons stated above, net income decreased $392,000
to a net loss of $276,000 for 1994 from net income of $116,000 (0.4% of
revenues) for 1993.
18
<PAGE>
PRO FORMA STATEMENTS OF OPERATIONS DATA (UNAUDITED)
Since 1984, the Company has elected to be taxed as an S corporation pursuant to
the Code and certain state tax laws. The pro forma statements of operations
differ from the historical statements of operations as a result of an
adjustment to record a provision for income taxes on income as if the Company
had been a C corporation. As a result, the historical statements of operations
for 1995 and the six months ended June 30, 1996 are not directly comparable and
such periods will not be comparable to future periods.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1995 JUNE 30, 1996
----------------- -------------
<S> <C> <C>
Dollars in thousands, except per share data
Pro Forma Statements of Operations Data:
Revenues....................................... $35,947 $27,353
Direct costs................................... 25,977 20,886
--------- ---------
Income from direct operations.................. 9,970 6,467
Selling, general and administrative expenses... 6,690 4,504
Compensation amounts to S corporation stock-
holders....................................... 1,502 380
Amortization of costs in excess of fair value
of assets purchased........................... 320 160
--------- ---------
8,512 5,044
Operating income............................... 1,458 1,423
Interest expense............................... 473 295
--------- ---------
Income before income taxes..................... 985 1,128
Income taxes................................... 396 488
--------- ---------
Pro forma net income........................... $ 589 $ 640
========= =========
Pro forma net income per share................. $ $
========= =========
</TABLE>
19
<PAGE>
SELECTED QUARTERLY OPERATING RESULTS
The following table sets forth quarterly unaudited statements of operations
information of the Company for each of the ten quarters ended June 30, 1996 and
the percentage of the Company's revenues represented by each item. The
unaudited quarterly information has been prepared on the same basis as the
annual information presented elsewhere in this Prospectus and, in management's
opinion, includes all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the information for the
quarters presented. The operating results for any quarter are not necessarily
indicative of the results for any future period.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
QUARTERS ENDED
1994 1995 1996
-------------------------------- -------------------------------- ---------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30
Dollars in thousands ------- ------- -------- ------- ------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA
Revenues................ $ 4,739 $ 7,267 $ 5,800 $ 6,904 $ 7,142 $ 8,352 $ 9,372 $11,081 $12,436 $14,917
Direct costs............ 3,248 5,087 3,734 4,801 4,961 5,611 6,962 8,443 9,414 11,472
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from direct
operations............. 1,491 2,180 2,066 2,103 2,181 2,741 2,410 2,638 3,022 3,445
Selling, general and
administrative
expenses............... 873 1,212 1,219 1,421 1,421 1,587 1,766 1,916 1,988 2,516
Compensation amounts to
S corporation
stockholders........... 38 190 38 2,775(1) 100 100 100 1,202(1) 190 190
Amortization of cost in
excess of fair value of
assets purchased....... -- 53 80 80 80 80 80 80 80 80
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
911 1,455 1,337 4,276 1,601 1,767 1,946 3,198 2,258 2,786
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Operating income (loss) 580 725 729 (2,173) 580 974 464 (560) 764 659
Interest expense........ -- 15 15 47 118 107 122 126 147 148
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before
income taxes........... 580 710 714 (2,220) 462 867 342 (686) 617 511
Income taxes............ 19 28 29 (16) 15 45 11 (38) 35 26
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)....... $ 561 $ 682 $ 685 $(2,204) $ 447 $ 822 $ 331 $ (648) $ 582 $ 485
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
PRO FORMA
Historical income before income taxes.................... $ 462 $ 867 $ 342 $ (686) $ 617 $ 511
Pro forma provision (benefit) for income taxes (2)....... 188 354 140 (286) 267 221
------- ------- ------- ------- ------- -------
Pro forma net income..................................... $ 274 $ 513 $ 202 $ (400) $ 350 $ 290
======= ======= ======= ======= ======= =======
</TABLE>
- -------
(1)Compensation amounts to S corporation stockholders for the fourth quarter
include discretionary annual bonuses which are expensed in the fourth quarter.
Such amounts were approximately $2.7 million and $900,000 for the 1994 and 1995
periods, respectively.
(2)Adjusted for all periods to record a provision for income taxes as if the
Company had been a C corporation. See "The Company."
20
<PAGE>
-------------------------------------------------------
<TABLE>
<CAPTION>
AS A PERCENTAGE OF REVENUES
1994 1995 1996
----------------------------------- ----------------------------------- ----------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30
------- ------- -------- ------- ------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA
Revenues................ 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Direct costs............ 69 70 64 69 70 67 74 76 76 77
--- --- --- ---- --- --- --- --- --- ---
Income from direct
operations............. 31 30 36 31 30 33 26 24 24 23
Selling, general and
administrative
expenses............... 18 17 21 21 20 19 19 17 16 17
Compensation amounts to
S corporation
stockholders........... 1 2 1 40 1 1 1 11 1 1
Amortization of cost in
excess of fair value of
assets purchased....... -- 1 1 1 1 1 1 1 1 1
--- --- --- ---- --- --- --- --- --- ---
19 20 23 62 22 21 21 29 18 19
--- --- --- ---- --- --- --- --- --- ---
Operating income (loss). 12 10 13 (31) 8 12 5 (5) 6 4
Interest expense........ -- 0 0 1 2 2 1 1 1 1
--- --- --- ---- --- --- --- --- --- ---
Income (loss) before
income taxes........... 12 10 13 (32) 6 10 4 (6) 5 3
Income taxes............ 0 0 1 0 0 0 0 0 0 0
--- --- --- ---- --- --- --- --- --- ---
Net income (loss)....... 12% 10% 12% (32%) 6% 10% 4% (6%) 5% 3%
=== === === ==== === === === === === ===
PRO FORMA
Historical income before income taxes.................... 6% 10% 4% (6%) 5% 3%
Pro forma provision (benefit) for income taxes........... 3 4 1 (3) 2 1
--- --- --- --- --- ---
Pro forma net income..................................... 3% 6% 3% (3%) 3% 2%
=== === === === === ===
</TABLE>
The Company's quarterly operating results have varied and are expected to
continue to vary in the future. These fluctuations may be caused by many
factors, including, among others: the size and timing of ACS Optima Software
and hardware sales; customer order deferrals in anticipation of new ACS Optima
Software releases; variation of ACS Optima Software and hardware sales as a
percentage of total revenues; timing of introduction or enhancement of products
by the Company or its competitors; changes in the Company's operating expenses;
personnel changes and general industry and economic conditions.
LIQUIDITY AND CAPITAL RESOURCES
The Company historically has relied primarily upon cash flows from operations,
borrowings under its revolving credit facility and capital lease financings to
finance its operations and acquisitions.
Net cash provided by (used in) operating activities was $2.7 million, ($4.7
million), ($1.3 million) and $1.7 million for 1993, 1994, 1995 and the six
months ended June 30, 1996, respectively.
Net cash used in investing activities for 1993, 1994, 1995 and the six months
ended June 30, 1996 was $119,000, $874,000, $579,000 and $141,000,
respectively. Cash used in investing activities in 1994 is primarily related to
the ACS acquisition and for 1994 and all other periods includes capital
expenditures for computer equipment and furniture and fixtures.
Net cash provided by (used in) financing activities in 1993, 1994, 1995 and the
six months ended June 30, 1996 was ($124,000), $3.1 million, $1.5 million and
($1.4 million), respectively. During the six months ended June 30, 1996, the
Company repaid the balance of certain acquisition debt and a portion of its
notes payable to the bank.
The Company's revolving credit facility consists of a revolving line of credit
with Bank Leumi Trust Company of New York ("Bank Leumi") providing for
outstanding borrowings of up to 80% of eligible accounts receivable with
maximum borrowings of up to $5.5 million. Subsequent to June 30, 1996, the
revolving line of credit was increased to $7.0 million. The line of credit,
which expires in May 1997, is collateralized by a security interest in
substantially all of the assets of the Company. The line of credit bears
interest at the bank's prime rate (currently 8.25%). At June 30, 1996, the
Company had $2.2 million outstanding under the revolving credit facility.
Outstanding amounts under the revolving line of credit are also supported by a
10% compensating balance arrangement. A portion of the net proceeds from the
Offering will be used to repay amounts at such time outstanding under the
revolving credit facility. See "Use of Proceeds."
21
<PAGE>
The Company also had an outstanding balance of $267,000 at June 30, 1996 on an
$800,000 three year term loan with Bank Leumi. The term loan is payable in
equal monthly installments of approximately $22,000 and bears interest at 1.25%
per annum above the bank's prime rate. Net proceeds from the term loan were
used to fund the acquisition of ACS Software Products Group. The term loan
contains financial covenants relating to minimum tangible net worth, working
capital and a maximum debt-to-equity ratio. A portion of the net proceeds from
the Offering will be used to repay amounts outstanding under the term loan. See
"Use of Proceeds."
The Company had an outstanding balance of approximately $2.5 million at June
30, 1996, payable to Philip Friedman, the Company's President and Chief
Executive Officer, pursuant to a demand note that bears interest at 10% per
annum. A portion of the net proceeds from the Offering will be used to repay
all amounts outstanding under this demand note. See "Use of Proceeds."
Historically, cash flow from operations and borrowings under the revolving
credit facility have been sufficient to satisfy the Company's liquidity needs.
The Company believes that the net proceeds from the sale of Common Stock
offered hereby, together with anticipated cash flow from operations and
borrowings under the revolving credit facility, will be sufficient to finance
the Company's current operations through approximately the end of 1997;
however, as the Company's operations continue to expand, it may require
additional funds. In addition, while the Company presently anticipates that
capital expenditures for the foreseeable future will be consistent with those
incurred on an historical basis, as the Company's operations continue to
expand, there can be no assurance that this will be the case. To the extent
that additional funds are needed, whether to finance the Company's operations,
future acquisitions or capital expenditures, the Company may be required to
obtain additional financing through one or more offerings of equity or debt
securities, the amendment of the Company's existing revolving credit facility,
a new credit facility or any combination of the foregoing.
INFLATION
In the last three years, inflation has not had a significant impact on the
Company.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" ("SFAS 123"). SFAS 123 is effective for fiscal years
beginning after December 31, 1995 and prescribes accounting and reporting
standards for all stock-based compensation plans, including employee stock
options, restricted stock, employee stock purchase plans and stock appreciation
rights. SFAS 123 requires compensation expense to be recorded (i) using the new
fair value method or (ii) using existing accounting rules prescribed by
Accounting Principles board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25") and related interpretations with pro forma disclosure of
what net income and earnings per share would have been had the Company adopted
the new fair value method. It is the Company's intention to present such
information in accordance with APB 25 as described in (ii) above.
22
<PAGE>
BUSINESS
The Company offers its clients a Composite Solution for their IT requirements.
The Composite Solution is based on a modular approach which allows the Company
to utilize its products and services to create customized solutions for its
clients. Products and services provided by the Company range from the ACS
Optima Software bundled with IBM AS/400 hardware and related support services,
to professional services, technical training, full service on-site and remote
help desk support and call management services. The marketing of many of the
Company's products and services is enhanced through its strategic and other
relationships with recognized leaders in the IT industry, including IBM and
AT&T. IBM and AT&T accounted for approximately 33% and 3%, respectively, of the
Company's total revenues in 1995, and approximately 37% and 4%, respectively,
for the six months ended June 30, 1996.
The Company is a leading supplier of integrated business information systems to
the apparel industry. Its solution includes the ACS Optima Software, a
comprehensive, integrated business information system specifically designed for
the apparel industry. The Company provides the ACS Optima Software to many
leading United States apparel manufacturers. Representative examples of the
Company's ACS Optima Software clients include several divisions of Sara Lee,
Polo Ralph Lauren, G-III Apparel and Marzotto. These clients accounted for, in
the aggregate, approximately 7% and 8% of the Company's total revenues in 1995
and for the six months ended June 30, 1996, respectively.
The Company also provides a variety of professional services, delivered on a
project basis or through staff augmentation, to address clients' systems
requirements, ranging from strategy and design through development and
implementation to maintenance and support. The Company provides these
professional services to clients primarily in the financial, entertainment and
communications industries. Representative examples of the Company's clients for
professional services include Merrill Lynch, EMI Music and NYNEX. These clients
accounted for, in the aggregate, approximately 5% and 3% of the Company's total
revenues in 1995 and for the six months ended June 30, 1996, respectively. The
Company maintains a national proprietary database consisting of technical
profiles and resumes of approximately 25,000 professionals. The Company
believes that this database, its existing technical staff and other software
tools enable it to offer its clients the technical resources necessary to meet
their IT requirements and address the challenges of creating "Year 2000"
compliant systems. Through its technical training services, the Company
provides approximately 350 comprehensive technical and end-user training
classes to its clients' personnel in many leading-edge technologies, including
Visual Basic, PowerBuilder, Visual C++ and Sybase.
The Company provides a complete range of IT outsourcing support services,
including on-site and remote help desks and integrated call management centers
staffed and managed by the Company's personnel. In providing these services,
the Company uses sophisticated tools that enable it to serve as the transparent
extension of its clients' technical support infrastructure. These services
provide the Company's clients with immediate access to skilled technical
personnel and a cost-effective solution to their IT outsourcing support needs.
The Company's IT outsourcing support clients include IBM, AT&T and Paine
Webber.
The Company's contracts are generally cancellable by the client at any time or,
with respect to some of the Company's larger contracts, including those with
IBM, on 30 to 90 days' notice.
INDUSTRY BACKGROUND
Historically, enterprise-wide computing was conducted on proprietary host-based
systems operating on mainframes and minicomputers typically supplied by a
single vendor. These host-based systems offered centralized data processing and
helped automate tasks such as manufacturing, distribution and financial
reporting. In the 1980s, the ease-of-use and low cost of personal computers,
combined with the increased availability of powerful application software, led
to rapid growth in the number of computer users throughout organizations.
Computing environments became increasingly varied and included personal
computers and workstations from different vendors, as well as traditional
minicomputers and mainframes. This transition to distributed computing
environments, including client/server architectures, required businesses to
seek methods of improving information processing across varying computer
hardware and software configurations and to find cost effective ways to ensure
that their employees have access to expert technical support.
23
<PAGE>
Companies have found it increasingly difficult to service all of their IT needs
through in-house personnel. This is due, in part, to rapid technological change
that has resulted in information systems that are more complex and varied
requiring specialized technical expertise. In addition, as part of the trend
towards downsizing and improving return on investment in IT, many companies
have decided to outsource portions of their IT services. Additionally, many
management information systems ("MIS") departments lack the technical
management and support, training capabilities and personnel needed to address
the size and complexity of their own IT systems. As a result, in recent years,
businesses have relied increasingly on IT service firms to develop, support and
strengthen their MIS departments, to train their MIS employees and provide
technical support services, including help desks.
The IT services industry, including certain of the areas in which the Company
offers its services and products, has grown significantly, and it is estimated
that industry revenue will reach $196.0 billion by the year 2000. The Company
believes that a number of factors have caused and will continue to cause this
demand to increase, including: corporate efforts to improve operating
efficiencies by reducing costs; the acceleration of technological change; and
the rapid growth of both software applications and end-users. These factors
will require organizations to fully integrate their existing systems and
migrate to enterprise-wide systems. In addition, the Company believes that this
industry growth will further drive demand for technically trained personnel to
develop and operate such systems.
Many businesses have started to outsource IT and support services and are
turning over help desk, call management and other support services to third
parties. The Company believes that demand for the services provided by IT firms
is likely to increase due to the advantages outside consultants bring to their
clients, including an ability to train and supply personnel with the skill sets
required to utilize new and increasingly complex technology more economically
than maintaining the equivalent level of expertise in-house.
A specific challenge facing IT users is making their current systems "Year
2000" compliant. As the year 2000 approaches, businesses and governments are
beginning to recognize that their current computer systems are incapable of
accepting the millennium change and that modification will be necessary when
two-year date fields become "00" following the year 1999. Resolution of
problems relating to the "Year 2000" may require an analysis and adjustment of
millions of lines of affected software code. The systems, solutions and
personnel required to assess these problems and implement the proper changes
are expected to be a significant factor in driving the industry's high rate of
growth through the year 2000. It is estimated that the global cost of assessing
and correcting the "Year 2000" problem is in excess of $300 billion.
THE COMPOSITE SOLUTION
The Company offers its clients a Composite Solution for their IT requirements.
The Composite Solution is based on a modular approach which allows the Company
to utilize its products and services to create customized solutions for its
clients. Products and services provided by the Company range from the ACS
Optima Software bundled with IBM AS/400 hardware and related support services,
to professional services, technical training, full service on-site and remote
help desk support and call management services. The Company believes that its
Composite Solution, which enables the Company to offer its clients a single
source for an integrated IT solution, gives the Company a marketing advantage
since it provides the Company with numerous entry points to service a client's
IT requirements. The Company typically establishes its initial relationship
with a client by providing one or a limited number of its products and
services. As the relationship develops, the Company and the client often will
identify additional IT requirements which the Company is able to address with
other products and/or services from its portfolio.
STRATEGY
The Company's objective is to continue its growth and to become a leading
provider of a wide variety of information systems and services and IT
outsourcing support services. The Company's principal strategies for achieving
this objective are as follows:
Strengthen its Position as the Provider of the Composite Solution
The Company believes that its Composite Solution provides it with a go-to-
market approach that differentiates it from its competitors. The Company's
highly trained technical staff assesses a client's IT requirements and
recommends a customized Composite Solution of one or more of the products and
services offered by the Company. The Company intends to leverage initial client
relationships by providing additional services through cross-selling its
portfolio of solutions and expand its products and services to meet the
changing needs of its clients.
24
<PAGE>
Expand its Presence in the Apparel Industry
The Company intends to further penetrate the apparel industry by leveraging its
name recognition, substantial industry expertise and extensive client base. The
Company intends to maintain ACS Optima's position as the leading business
system for the apparel industry by (i) continuing to upgrade and improve the
system's features in response to the changing requirements of its apparel
clients and (ii) improving and enhancing systems consulting, integration and
outsourcing support services.
Further Penetrate AS/400 Market
The Company believes that the AS/400 market has traditionally been under
serviced by other IT companies. It is estimated that more than 350,000 AS/400s
have been sold to date, making it the most widely used IBM midrange system. The
Company has developed substantial expertise servicing and developing
applications for the AS/400 platform, primarily as a result of its long-term
relationship with IBM, as well as through its development of the ACS Optima
Software. The Company intends to continue to market its IT services primarily
to Fortune 2000 companies, especially to users of the AS/400 platform.
Management believes that the Company's experience with the AS/400 enhances its
ability to develop new relationships with potential clients whose systems run
on AS/400s or other midrange platforms.
Become A Leading Provider of "Year 2000" Solutions
The Company believes that over the next five years it will have major
opportunities to provide the solutions to rectify the problems created by the
millennium change. The Company is licensed to use and market a specialized
software tool and continually reviews and evaluates additional software tools
that are designed to address the challenges facing MIS professionals in
creating "Year 2000" compliant systems. The Company believes that its national,
proprietary database, consisting of technical profiles and resumes of
approximately 25,000 professionals and a personnel search engine, "Skills
Finders Plus," enable it to access the technical resources necessary to
implement "Year 2000" solutions.
Leverage Strategic Alliances and Other Business Relationships
The Company has formed several strategic alliances and other relationships with
recognized leaders in the IT industry.
IBM. The Company intends to leverage its successful historical relationship
with IBM to expand the products and services it currently provides to IBM
and other clients. The Company believes it can use its agreement with IBM
designating it as an IBM National Solution Provider to further enhance its
position in the apparel industry. Additionally, the Company believes that
its agreement with IBM designating it as an IBM Industry Remarketer for the
AS/400 and RS/6000 enhances its ability to provide a Composite Solution to
its clients.
AT&T. Pursuant to an agreement with AT&T, the Company currently provides
help desk services to AT&T's clients. The Company intends to introduce to
these clients and others the additional services that comprise the
Company's Composite Solution. In addition, it is the Company's strategy to
establish preferred vendor relationships with AT&T's spin-offs, Lucent
Technologies, Inc. and NCR Corp.
Others. The Company intends to use its business relationships and
agreements with Borland International, Inc. ("Borland"), Lotus Development
Corp. ("Lotus"), Microsoft Corporation ("Microsoft") and Oracle Corp.
("Oracle") to further develop core competencies in their computer products
and to use them when creating a customized Composite Solution for its
clients. In addition, the Company intends to continue to work with Siemens
Rolm Communications Inc. ("Siemens Rolm Communications"), a call center
switch technology provider, ProAmerica Systems Inc. ("ProAmerica Systems"),
a developer of call center software, and Haldeman-Powell Partners, an
architectural firm, to provide potential clients with one-stop shopping for
all services needed to set up and operate a call center.
Leverage Existing Call Management Infrastructure
In 1995, the Company opened a state-of-the-art call management/help desk
facility at the Dallas Infomart which will allow it to provide an end-to-end
solution to its clients' call management needs. The Company believes that its
ability to leverage its call management infrastructure across multiple clients
will significantly reduce the cost of processing a call and further enhance the
Company's competitiveness.
25
<PAGE>
Expand Geographically
The Company intends to grow both domestically and internationally. Over the
past two years, the Company has made a substantial investment in developing its
sales and marketing infrastructure and has opened new offices in Chicago, Los
Angeles, Atlanta and Dallas. The Company plans to expand its presence in these
major markets to enable it to provide elements of the Composite Solution to a
larger client base. The Company intends to grow internationally by (i)
expanding its relationships with U.S. based clients to provide products and
services to their international divisions, particularly in Asia and Europe,
(ii) establishing direct relationships with companies overseas, particularly
through the marketing of the ACS Optima Software to apparel companies, and
(iii) working with certain of its strategic alliance partners outside the
United States to cross-sell or bundle their services.
INFORMATION SYSTEMS AND SERVICES
As part of its information systems and services business, the Company provides
integrated solutions to the apparel, financial, entertainment and
communications industries. As part of its solution to the apparel industry, the
Company markets the ACS Optima Software, which is installed in hundreds of
United States apparel companies as well as apparel companies in Mexico and
Canada. Additionally, the Company offers a wide range of public and private
technical and end user training services.
ACS Optima Products and Services
In order to better respond to changes in fashion trends and to remain
profitable in an increasingly competitive industry, apparel manufacturers are
under increasing pressure to shorten delivery time cycles and increase
efficiency in all areas of their business. The ACS Optima Software package is a
comprehensive, integrated business information system, specifically designed
for the apparel industry. With a graphical-user-interface ("GUI") that provides
"point-and-click" ease of use and an Executive Information System ("EIS")
designed for senior management, ACS Optima Software allows apparel
manufacturers and importers to manage all phases of the production process,
from planning and design to manufacturing, inventory control, distribution and
financial reporting. The ACS Optima Software emphasizes "Quick Response" and is
specifically designed to shorten delivery cycles. The Company believes the ACS
Optima Software provides apparel clients with a complete solution that enhances
their competitive position in the marketplace.
26
<PAGE>
Described below are selected modules of the ACS Optima Core System and
additional modules to the ACS Optima Core System.
<TABLE>
<CAPTION>
ACS OPTIMA CORE SYSTEM DESCRIPTION
---------------------- ---------------------------------------------------------
<S> <C>
ORDER MANAGEMENT AND A complete order fulfillment function that summarizes
DISTRIBUTION essential statistics and helps the apparel industry
executive pinpoint areas that need attention. It provides
instant access to reports that contain an overview of
current gross profit, order patterns, receivable
allowances and inventory, shipment and manufacturing
data.
IMPORT A function which facilitates the purchasing and tracking
MANAGEMENT/PRODUCTION of imported goods. Working with estimated costs, the
system creates a purchase order and letter of credit
documentation. It also tracks goods through the
purchasing and production process and identifies possible
delays. Once merchandise is shipped, Import Management
tracks and provides the delivery status and anticipated
arrival date of the merchandise.
RAW MATERIAL/MODULE A function which helps estimate the material and other
requirements for production and initiates a procedure to
ensure that such products are available.
BILL OF MATERIAL A function which establishes requirements and then
("BOM")/FABRIC compares standard costs to actual. When goods are
ACTUAL MODULE produced in multiple locations, the BOM will identify the
most cost effective assembly method.
MATERIAL REQUIREMENTS A function which determines the earliest date on which
PLANNING production can begin based on a raw materials evaluation.
<CAPTION>
ADDITIONAL MODULES
TO THE ACS OPTIMA CORE
SYSTEM DESCRIPTION
---------------------- ---------------------------------------------------------
<S> <C>
FACTS A/P AND G/L An accounts payable and general ledger package that is
integrated into the ACS Optima Software.
EXECUTIVE INFORMATION An advanced client/server tool that summarizes and
SYSTEM displays computer-based information in a concise,
meaningful format, statistically or graphically, for the
apparel industry executive, specifically in the key
business areas of sales, manufacturing, finance and
management.
EDI/400* Communication tool which allows manufacturers to receive
and send information directly to their customers.
PKMS* A distribution center management system that gives the
apparel industry executive complete control over all
warehouse operations, including receiving, stock
locating, picking, verifying, packing, manifesting and
shipping.
IMAGE INFO* A function which takes digital pictures of merchandise
and creates and produces custom catalogs, style libraries
and inventory reports with full color imaging.
QUICK IMAGE* A function which displays pictures of a garment at the
touch of a command key. Pictures are scanned, digitized,
indexed and displayed along with other ACS Optima
screens.
SALES AUTOMATION* A lap-top based order system that is used by field
representatives to place orders and determine inventory
availability. Orders are accurately written, sized,
printed for the customer and transmitted to the apparel
company in minutes.
</TABLE>
-------
* Licensed to the Company.
27
<PAGE>
As part of a turn-key system provided by the Company, the initial contract
typically includes a combination of hardware, software, systems integration and
maintenance. Upon expiration of the initial contract, most clients purchase an
extended maintenance contract which includes yearly product upgrades and access
to the Company's ACS Optima help desk. Extended maintenance contracts provide
the Company with a steady source of recurring annual revenue.
The Company has established the "Users Advisory Board," which is comprised of
the Company's 25 largest clients utilizing the ACS Optima Software. At meetings
held twice a year, the Users Advisory Board provides the Company with valuable
input and direction relative to future product enhancement and development.
These meetings, which are led by the Company's clients, allow the Company to
anticipate and develop solutions for its clients prior to actual need.
Professional Services
Recognizing the changing IT requirements of its clients, the Company provides a
wide range of professional services to a diverse client base focusing on
companies in the financial, entertainment and communications industries,
including Merrill Lynch, EMI Music and NYNEX. The Company's professional
services are delivered on a project basis or, more often, through staff
augmentation.
The Company's professional services staff provides services to support the full
life cycle of computer systems, from strategy and design to development and
implementation and finally to maintenance and support, across a wide range of
platforms, including mainframe, midrange (AS/400), client/server and personal
computers. In addition, the Company's professional services group provides
contract programming, consulting and other computer-related professional
services primarily to large corporate clients. The Company's technical staff
performs a wide variety of tasks to identify, analyze and solve a client's data
processing and computing problems. Generally, these services are provided on-
site to clients with personnel who do not have the requisite technical skills
or to clients with specific projects requiring additional staffing that do not
justify permanent personnel increases. The scope of the work performed by the
Company ranges from specific, minor tasks of short duration to large, complex
tasks that require a large number of consultants. Furthermore, the Company has
extensive experience in providing network solutions to its existing client base
by providing hardware, software and systems integration services. The Company
has developed expertise in document imaging and voice recognition technology
and employs certified Lotus, Microsoft and Novell engineers. The Company's
business relationships with Borland, Lotus, Microsoft and Oracle enhance the
marketability of the Composite Solution and strengthen the skills of its
technical staff.
In order to become a leading provider of "Year 2000" solutions, the Company has
created a "Year 2000" Competency Center to proactively address the issues that
its clients face in resolving these problems. The Competency Center is
comprised of a select group of the Company's technical professionals who
specialize in developing "Year 2000" solutions for organizations and assist
clients in making their current systems "Year 2000" compliant. The Company has
obtained the rights to a software tool and continually reviews and evaluates
additional software tools that can assist the Company's professionals in
creating "Year 2000" compliant systems for clients. In this regard, the Company
has an agreement to market and utilize an AS/400-specific product that goes
beyond diagnosis and is able to partially correct affected software. See "Risk
Factors--Growth Through Internal Expansion and Acquisitions."
Management believes that one of the most critical challenges facing
organizations attempting to make their current systems "Year 2000" compliant is
the hiring and retaining of technical personnel who are able to rewrite the
enormous amounts of computer code in various computer languages. Through its
extensive recruitment efforts of technical personnel, management believes it is
well positioned to supply clients with large numbers of trained personnel to
address their individual "Year 2000" challenges, either on a project or staff
augmentation basis. The Company employs a number of tools to meet its clients'
staffing needs, including dedicated recruiting personnel, a national
proprietary database consisting of technical profiles and resumes of
approximately 25,000 technology professionals, dedicated resources to conduct
Internet research for qualified personnel and in addition, the Company's world
wide web site which includes the "CGS Career Center" which lists and
continually updates available positions with the Company and receives thousands
of "hits" per month.
28
<PAGE>
In addition, the Company maintains a personnel search engine, "Skills Finder
Plus," which includes search capabilities to match potential candidates with
specific project and Company requirements.
Training
The Company provides, through more than 350 course offerings, comprehensive
technical and end user training to its clients' personnel, including
programmers, system administrators, operations personnel and management. In
1995, the Company's 30 full-time and 240 adjunct instructors provided over 600
computer technology-related classes. The Company emphasizes courses covering
advanced technical skills focused on a broad range of software applications and
IT and help desk management skills rather than basic introductory skills. Among
others, the Company offers courses in Visual Basic, PowerBuilder, Visual C++
and Sybase. The Company is a certified training provider for Borland's Delphi
and Lotus Notes.
Management believes that its clients are attracted by the Company's broad range
of course offerings and highly qualified training professionals as well as its
ability to maintain and develop customized courses in leading-edge
technologies. The Company believes that because of rapid technological change
which has resulted in information systems that are more complex, companies are
increasingly relying on third-party providers of IT training.
By offering computer technology-related classes, the Company gains access to
MIS professionals and is able to introduce other components of the Composite
Solution to such professionals.
Although client courses are generally provided on-site at a client's facilities
using the client's hardware and software, the Company also makes available to
clients its New York City training facility. In order to accommodate clients
who may be interested in training only a few of their employees, the Company
also offers public classes which are prescheduled at selected times at the New
York City training facility. These classes are also available to the general
public. In addition, computer users can browse the Internet for course
offerings and make reservations for classes.
IT OUTSOURCING SUPPORT SERVICES
To capitalize on the trend towards outsourcing IT services, the Company
provides on-site and remote help desk services. In addition, the Company
provides services that facilitate the entire call management process, including
generic call receiving, inbound and outbound telemarketing, data collection and
call overflow services. In providing these services, the Company uses
sophisticated tools that enable it to act as the transparent extension of its
clients' technical support infrastructures.
Help Desk
The Company provides on-site and remote help desk services, primarily through
IBM and AT&T, to major companies that have outsourced technical support for
their internal IT systems. The Company's certified technical specialists
provide shrink-wrapped software product support for over 300 products, as well
as process engineering which includes systems design and operating system,
LAN/WAN and custom software application support.
The Company has established a strategic alliance with AT&T to be a preferred
provider of help desk support functions to its clients. The Company also
provides help desk services to IBM through facilities located in Tampa,
Chicago, Atlanta and Rochester, MN. The Company provides technical and product
remote support services directly to IBM employees and to IBM customers 24 hours
a day, seven days a week. As part of the ACS Optima solution, the Company also
provides help desk support to approximately 90 ACS Optima clients from the
Company's Atlanta facility. The Company intends to establish additional vendor
relationships, such as those with AT&T and IBM, to enable it to continue the
expansion of its client base.
The help desk facilities operated by the Company employ current technology in
PBX switches, call tracking software, telephone-computer integration,
interactive voice response and relational database management systems that are
29
<PAGE>
integrated into centrally managed LAN/WANs. The Company utilizes sophisticated
call tracking software and systems to provide efficient scheduling of personnel
to accommodate fluctuations in call volume.
The Company's help desk systems capture and download to permanent databases a
variety of information concerning each call for reporting on a daily basis to
clients, including number and duration of calls (which are important for
billing purposes), response time and results of the call. Summary data and
complete databases are made available to the client to enable it to monitor the
level of service provided by the Company, as well as to determine whether end-
users of its products are encountering recurring problems that require
modification.
Help desk services are billed primarily on a time and material basis.
Call Management
In October 1995, the Company began providing call management services in order
to capitalize on this significant market opportunity and simultaneously provide
additional services to its client base as part of its Composite Solution. The
Company provides call management services directly to its clients and through a
strategic partner.
Teleservices Resources ("TSR"), a division of AMR Corp., and the Company have
partnered to provide and operate an extensive call management system for Ryder
Truck Rental, Inc. ("Ryder"). TSR is responsible for providing basic call
management services to Ryder customers, while the Company, from its facilities
in the Dallas Infomart, provides the technical support necessary for over 5,000
Ryder dealerships to be fully integrated into Ryder's call management and
reservation system. These services include hardware and software installation
and technical support, which allow TSR to efficiently operate the call
management system and to enhance the services provided to the Ryder
dealerships.
In addition, pursuant to an agreement that expires on December 31, 1996, the
Company currently provides advanced call management services to IBM's customers
and IBM from facilities in Dallas and Atlanta. The Company has been advised by
IBM that effective January 1, 1997, the services provided by the Company
pursuant to the foregoing agreement will be provided directly by IBM. The
Company expects to recognize revenues of approximately $8.5 million for
providing these services in 1996.
The Company also has recently entered into an alliance with telephone
switchmaker Siemens Rolm Communications, a call-center switch technology
provider, ProAmerica Systems and the Dallas architectural firm of Haldeman-
Powell Partners, which specializes in the design of call-center space. This
alliance will allow the Company to provide its clients, as well as its
partners' clients, one-stop shopping for all the services needed to set up and
operate a call center. In 1996, the Company established a state-of-the-art call
management facility at the Dallas Infomart which has the technology to support
over 200 call technicians and process over 4.0 million calls per year for
multiple clients.
SALES AND MARKETING
The Company markets its information systems and services and IT outsourcing
support services through the efforts of 30 sales and marketing representatives
operating out of its New York, Los Angeles, Dallas, Atlanta and Chicago
offices. Sales and marketing representatives are highly experienced in specific
areas and are knowledgeable in other areas in which the Company offers its
information systems and services and IT outsourcing support services. Sales and
marketing efforts utilize an overall team-oriented approach with routine
interaction between representatives to effectively market all of the Company's
products and services. As part of their compensation, sales and marketing
representatives are paid commissions on sales in their area of expertise and
additional amounts for introductions that lead to sales of other products and
services that comprise the Composite Solution. Management believes that being
able to offer multiple services provides the Company with a marketing advantage
since it gives the Company numerous entry points to service a customer's
information systems and services and IT outsourcing support needs.
The Company's sales force utilizes a variety of business development and
marketing techniques, including field sales, referrals, telemarketing, the
Company's on-line newsletter, presentations, exhibitions, trade shows and
meetings with potential clients to market the Composite Solution. The Company's
sales and marketing representatives emphasize the Company's ability to offer
clients a comprehensive and cost-effective solution to their IT needs.
30
<PAGE>
The Company markets the ACS Optima Software to leading apparel manufacturers as
a comprehensive, integrated business information system specifically designed
for the apparel industry. The Company strategically markets the ACS Optima
Software to apparel companies with revenues of $20 million and higher, and the
Company uses sales of this product as an entree to provide ongoing support
services as well as AS/400 sales and services. The Company markets professional
services to a diverse client base, focusing on companies in the financial,
entertainment and communications industries with a primary focus in New York
and Los Angeles, where a large portion of such industries is located. The
Company's marketing efforts for professional services target both the decision
makers who are ultimately responsible for appropriating funds for a project and
the systems staffs that will be responsible for the project after
implementation. The Company's sales and marketing representatives promote the
Company's relationships with, among others, IBM, AT&T, Borland, Lotus,
Microsoft, Oracle and Siemens Rolm Communications and ProAmerica Systems, and
representatives of such companies sometimes join the Company's sales
representatives in making joint sales calls. In addition, the Company attempts
to use its training services to provide it with insight as to potential clients
who are likely to be in need of other IT products or services offered by the
Company.
RECRUITMENT; HUMAN RESOURCES
The Company's future success will depend, in part, on its ability to hire and
retain adequately trained project managers, resource managers, systems
analysts, business analysts, programming staff and other technical experts who
can fulfill the increasingly sophisticated needs of its clients. The Company's
on-going need for technical expert resources arise from (i) increased demand
for the Company's services, (ii) turnover, which is generally high in the
industry, and (iii) client requests for programmers trained in the newest
software technologies. The recruitment of skilled project managers and other
technical experts is a critical element in the Company's success. The Company
devotes significant resources to meeting its personnel requirements. The
Company employs recruiters based in its New York, Chicago, Atlanta, Tampa and
Los Angeles offices. The Company also maintains a national proprietary database
consisting of technical profiles and resumes of approximately 25,000 technology
professionals and uses a personnel search engine, "Skills Finder Plus." This
database includes search capabilities which match potential candidates with
specific project and Company requirements. In addition, the Company has
dedicated resources to conduct Internet research for qualified personnel. The
Company's world wide web site includes the "CGS Career Center," which lists and
continually updates available positions with the Company.
At June 30, 1996, the Company had over 900 full time employees, comprised of
project and resource managers, systems analysts, business analysts, programming
staff and other technical professionals and 30 sales and marketing personnel.
The Company's professional personnel have a variety of educational backgrounds,
including degrees in computer science, business administration, education and
engineering.
The Company's personnel keep abreast of technological advances and developments
through a combination of on-the-job exposure to relevant technology, selected
training programs, peer review and discussions and supervision by senior
personnel. The Company also keeps abreast of developments by hiring
professionals with expertise in technologies that are needed or can be utilized
by the Company and its clients.
None of the Company's employees is subject to a collective bargaining
agreement. The Company believes that its relations with its employees are good.
COMPETITION
The industry in which the Company operates is extremely competitive, highly
fragmented and subject to rapid changes. While many companies provide
information systems and services and IT outsourcing support services,
management believes that no one company is dominant. There are numerous and
varied providers of such services, including firms specializing in call center
operations, temporary staffing and personnel placement companies, general
management consulting firms, divisions of large hardware and software companies
and niche providers of IT services, many of which compete in only certain
markets. Although the Company believes that the Company's strategic alliances
and other relationships provide it with a competitive advantage, the Company
competes with and faces potential competition from a number of companies that
have significantly greater financial, technical and marketing resources,
greater name recognition and a more established client base than the Company.
In addition, many of the services offered by the Company historically have been
provided, and could in the future be provided, by the in-house personnel of its
clients. The Company believes that its ability to compete depends, in part, on
a number of factors,
31
<PAGE>
including the ability of the Company to hire, retain and motivate a significant
number of highly skilled employees and the development by others of products
and services that are competitive with the Company's products and services. The
Company competes with larger organizations and smaller competitors for highly
skilled professionals to fill full-time and project specific positions.
Management believes that price is not the primary factor in a client's
determination to purchase the ACS Optima Software and related services but that
product functionality and methodology for implementation are the principle
competitive considerations. The Company believes that the principal competitive
factors in its professional services business include the nature of the
services offered, quality of service, responsiveness to customer needs,
business experience and technical expertise.
With respect to its IT outsourcing support services, the Company competes
primarily on the basis of quality of service and price, and the Company could
be adversely affected by the price at which others offer comparable IT
outsourcing support services. Many of the Company's larger clients purchase IT
outsourcing support services primarily from a limited number of preferred
vendors. The Company has experienced and continues to anticipate significant
pricing pressure from these clients in order to remain competitive.
Although the Company believes that it can meet its clients' demands for
information systems and services and IT outsourcing support services, there can
be no assurance that the Company will continue to compete successfully with its
existing competitors or will be able to compete successfully with any new
competitors.
INTELLECTUAL PROPERTY RIGHTS
The Company's success is dependent, in part, upon its proprietary intellectual
property rights. The Company relies on contractual arrangements, such as trade
secret and non-disclosure agreements, and copyright and trademark law to
protect its proprietary intellectual property rights. While the Company holds
registered copyrights with respect to certain modules of the ACS Optima
Software, generally enters into confidentiality agreements with its employees,
consultants, clients and potential clients and limits access to and
distribution of its confidential and proprietary data, there can be no
assurance that the steps taken by the Company in this regard will be adequate
to deter misappropriation of its proprietary information or that the Company
will be able to detect unauthorized use and take appropriate steps to enforce
its intellectual property rights.
The Company's business includes the development of custom software applications
in connection with specific engagements. Ownership of such software is
generally assigned to the client. Although the Company believes that its
products and services do not infringe on the intellectual property rights of
others, there can be no assurance that such a claim will not be asserted
against the Company in the future.
FACILITIES
The Company's headquarters and principal administrative, sales and marketing
operations are located in approximately 21,000 square feet of leased space in
New York City under leases expiring in 2005. The Company occupies an aggregate
of approximately 15,000 square feet of additional space in Los Angeles,
Chicago, Dallas and Atlanta under leases expiring at various times throughout
the next three years. In addition, pursuant to contracts with its clients, the
Company currently occupies additional space which is owned or leased by its
clients in Tampa, Rochester, MN, Chicago, Dallas and Atlanta. The Company also
expects to enter into leases for additional space in Tampa and Los Angeles.
The Company leases three IBM midrange computers from IBM Credit Corp. These
leases are considered operating leases and, therefore, are not capitalized on
the Company's balance sheet. The remainder of the Company's computers and
peripheral equipment are owned or leased and treated as owned for accounting
purposes because the Company may acquire ownership at the end of the lease
agreement upon exercise of a purchase option for a nominal amount.
The Company believes that its facilities and equipment are adequate for its
current needs.
LEGAL PROCEEDINGS
The Company is not currently a party to any legal proceedings that are
expected, individually or in the aggregate, to have a material adverse effect
on the Company's financial condition or results of operations.
32
<PAGE>
MANAGEMENT
Directors and Executive Officers
The following sets forth the names and ages, as of July 30, 1996, of the
Company's directors and executive officers and the positions they hold. Within
90 days following consummation of the Offering, the Company will appoint two
independent directors to the Board of Directors and within one-year following
consummation of the Offering, the Company will appoint one additional
independent director to the Board of Directors. Such independent directors will
not be employees of the Company.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NAME AGE POSITION AND OFFICE WITH THE COMPANY
- --------------------------------------------------------------------------------
<S> <C> <C>
Philip Friedman 47 President, Chief Executive Officer and Director
Victor Fried man 41 Executive Vice President and Director
Fred B.
Schlossberg 39 Vice President Finance & Administration, Secretary and Director
Edward 47 Senior Vice President
Schroeder(1)
Jay Hakami 38 Vice President, Products and Services
Robert B.
Stratton 60 Vice President, Remote Support Services
Rhoda Cahan 53 Vice President, Training
Steven J.
Carter 41 Vice President, Call Management
</TABLE>
- -------
(1) Mr. Schroeder has agreed to serve as a director of the Company upon
completion of the Offering.
PHILIP FRIEDMAN has been President, Chief Executive Officer and a director of
the Company since April 1984. In 1995, Mr. Friedman was named New York City
Entrepreneur of the Year in the area of Technology Services by the Entrepreneur
of the Year Institute sponsored by Ernst & Young LLP, Inc. Magazine and Merrill
Lynch. He holds a Bachelor of Science degree in Finance and Economics from the
State University of Uzgorod and a Master's degree in Electronic Engineering
from Lvov Polytechnical Institute, both in the Ukraine.
VICTOR FRIEDMAN has been Executive Vice President and a director of the Company
since October 1994. From 1981 until October 1994, Mr. Friedman was the
President/CEO of Real-Time Technology, Inc., a company which he founded and
which specialized in providing professional services to the financial
community. He holds degrees in Liberal Arts and Education from the State
University of Uzgorod in the Ukraine.
FRED B. SCHLOSSBERG has been Vice President Finance & Administration, Secretary
and a director of the Company since April 1992. From June 1978 to April 1992,
he was employed by BDO Seidman, LLP where his last position was Senior Audit
Manager. Mr. Schlossberg is a Certified Public Accountant in New York State. He
holds a Bachelor of Business Administration in accounting from Bernard Baruch
College where he graduated magna cum laude.
EDWARD SCHROEDER has been Senior Vice President of the Company since June 1996.
From 1970 to June 1996, Mr. Schroeder was employed by IBM, where his last
position was Vice President, Direct Marketing. He holds a Bachelor of Science
degree in Economics from Rutgers University.
JAY HAKAMI has been Vice President, Products and Services since 1991. Mr.
Hakami began his career with the Company in 1989 as a Manager of Sales of
Products and Services. He holds a Bachelor of Arts degree in Business
Administration from the New York Institute of Technology.
ROBERT B. STRATTON has been Vice President, Remote Support Services since 1995.
Mr. Stratton has been employed by the Company since 1991 and from 1992 until
1995 was a General Manager of Remote Support Services. He holds an Associates
Degree in Liberal Arts from Pace University.
RHODA CAHAN has been Vice President, Training since 1995. Ms. Cahan began her
career with the Company in 1991 as a Director of Training. She holds a Bachelor
of Arts degree in Mathematics from Brown University, a Master of Science degree
in Operations Research and Statistics from The Wharton School, University of
Pennsylvania and a APC degree in Computer Applications and Information Systems
from New York University.
STEVEN J. CARTER has been Vice President, Call Management since August 1995.
From December 1983 to August 1995 Mr. Carter was employed by IBM, where his
last position was Executive of the Strategic Business Unit of Call Management
Services.
In connection with consummation of the Offering, the Board of Directors will be
divided into three classes. The term of the Class I directors, to be comprised
initially of , expires in 1997, the term of the Class II directors, to be
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<PAGE>
comprised initially of , expires in 1998, and the term of the Class III
directors, to be comprised initially of , expires in 1999. Directors hold
office until the annual meeting of the stockholders of the Company in the year
in which the term of their class expires and until their successors have been
duly elected and qualified. At each meeting of stockholders of the Company, the
successors to the class of directors whose term expires will be elected for a
three-year term. The next annual meeting of the stockholders of the Company is
expected to be held in 1997.
Philip Friedman and Victor Friedman are brothers.
COMMITTEES OF THE BOARD OF DIRECTORS
Audit Committee. Upon consummation of the Offering, the Board of Directors will
create an Audit Committee that, among other things, will make recommendations
concerning the engagement of independent auditors, review the results and scope
of the annual audit and other services provided by the Company's independent
auditors and will review the adequacy of the Company's internal accounting
controls. The Audit Committee will consist of the two independent directors to
be appointed after consummation of the Offering and .
Compensation Committee. Upon consummation of the Offering, the Board of
Directors will create a Compensation Committee that, among other things, will
make recommendations to the full Board of Directors concerning salary and bonus
compensation and benefits for executive officers of the Company and will
administer the Company's 1996 Long-Term Incentive Plan. The Compensation
Committee will consist of one of the independent directors to be appointed
after consummation of the Offering and .
COMPENSATION OF THE BOARD OF DIRECTORS
Directors who are employees of the Company will receive no additional
compensation for their services as members of the Board of Directors or as
members of Board committees. Directors who are not employees of the Company
will be paid a quarterly fee of $ , as well as additional fees of $ for
each meeting of the Board or of a Board committee attended by such director.
The Company's directors will be reimbursed for their out-of-pocket expenses
incurred in connection with their service as directors, including travel
expenses.
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COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth compensation paid by the Company during the last
three years to the Company's Chief Executive Officer and to the four most
highly compensated executive officers (collectively, the "Named Executive
Officers"). The Company did not grant any stock options or stock awards to any
of the Named Executive Officers during such years and the dollar value of
perquisite and other personal benefits, if any, received by each of the Named
Executive Officers in each year was less than established reporting thresholds.
SUMMARY COMPENSATION TABLE
----------------------------------
<TABLE>
<CAPTION>
OTHER ANNUAL
YEAR SALARY ($) BONUS ($) COMPENSATION ($)(1)
NAME AND PRINCIPAL POSITION ---- ---------- --------- -------------------
<S> <C> <C> <C> <C>
Philip Friedman
President and Chief Executive 1995 400,000 830,000 5,000
Officer
1994 310,000 2,600,000 5,000
1993 150,000 1,800,000 5,000
Victor Friedman
Executive Vice President 1995 200,000 70,000 3,000
1994 50,000(2) 75,000 --
1993 -- -- --
Fred B. Schlossberg
Vice President Finance & 1995 135,000 25,000 5,000
Administration, Secretary 1994 115,000 30,000 4,000
1993 100,000 15,000 3,000
Jay Hakami
Vice President, Products and 1995 279,000 -- 5,000
Services 1994 193,000 -- 5,000
1993 314,000 -- 5,000
Robert B. Stratton
Vice President, Remote Support 1995 220,000 -- 1,000
Services 1994 181,000 -- --
1993 113,000 -- --
</TABLE>
- -------
(1) Consists of amounts contributed on behalf of such employees to the
Company's 401(k) plan.
(2) Victor Friedman was employed by the Company beginning in October 1994.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company has never had a Compensation Committee or other committee of the
Board of Directors performing similar functions and all matters concerning
executive compensation have been addressed by the entire Board of Directors.
Decisions concerning compensation of executive officers of the Company were
made by the Company's Board of Directors. The Board of Directors will establish
a Compensation Committee upon the consummation of the Offering.
EMPLOYMENT AGREEMENTS
The Company does not have employment contracts with any of its executive
officers or other employees.
1996 LONG-TERM INCENTIVE PLAN
The 1996 Long-Term Incentive Plan (the "Plan") will be adopted by the Company's
Board of Directors and approved by the Company's stockholders prior to the
consummation of the Offering. The Company will reserve an amount of Common
Stock equal to 10 percent of the shares of Common Stock outstanding upon
consummation of the Offering for issuance and/or use as the basis for stock
appreciation rights or other units of stock-based incentive compensation
35
<PAGE>
under the Plan. Unless sooner terminated by the Board of Directors, the Plan
will terminate on the date which is 10 years from the date of its adoption.
The Plan will be administered by the Compensation Committee of the Board of
Directors. The Committee will have the authority and discretion, subject to the
provisions of the Plan, to select persons to whom options and other awards
under the Plan will be granted, to designate the number of shares to be covered
by awards, to specify the type of consideration to be paid to the Company and
to establish all of the terms and conditions of each award.
The Plan will provide for the grant of stock options and other awards to
officers and other key employees of the Company and to its directors. Options
granted under the Plan may be incentive stock options or nonqualified stock
options. The exercise price for an incentive stock option may not be less than
the fair market value of the Company's Common Stock on the date of grant and
such options may not be exercisable by the employee (except in the event of
death or disability or certain changes in control of the Company) prior to the
completion of at least one year of employment subsequent to the grant of the
award. Options granted under the Plan shall vest on certain changes in control
of the Company (as defined in the Plan) unless the Compensation Committee
otherwise determines prior to such change in control, and in such case, the
participant will receive cash equal to the value of the option in lieu of
exercise thereof. Nonqualified stock options shall have such terms as the
Compensation Committee shall determine and that shall not be inconsistent with
the Plan. Stock options granted under the Plan may not be transferred other
than by will or the laws of descent and distribution or, in the case of
nonqualified stock options, by gift.
All awards under the Plan may be subject to substantial employment requirements
and/or performance measurements and goals. The Compensation Committee shall
establish, with respect to each performance-based award, the length of the
applicable performance period (which shall be at least two years), performance
objectives (which shall be based on revenues, operating income, net income,
return on equity or a variation or combination of the foregoing and may vary
from participant to participant) and the range of dollar values or number of
shares of Common Stock (which shall be subject to maximum limitations) that may
be earned by the participant.
401(K) SAVINGS PLAN
The Company has adopted a 401(k) savings plan (the "401(k) Plan"). All
employees of the Company are eligible to participate in the 401(k) Plan. Under
the 401(k) Plan, eligible employees are permitted to defer up to 10% of their
compensation, subject to certain limitations. Currently, the Company matches a
discretionary amount between 0% and 50% of an employee's contribution, subject
to a maximum contribution equal to 3% of such employee's annual compensation.
Salary deferral contributions are fully vested. Matching contributions are
fully vested after seven years of service; partial vesting begins after three
years of service. Participants or their beneficiaries are entitled to payment
of benefits (i) upon retirement at age 65 or early retirement at age 55, (ii)
upon death or disability or (iii) upon termination of employment, if the
participant elects to receive a distribution of his account balance prior to
one of the events listed in (i) or (ii) above. In addition, withdrawals are
available upon the participant attaining age 59.5, or for reasons of financial
hardship if certain conditions are met.
36
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In October 1994, the Company acquired substantially all of the assets and
assumed certain liabilities of Real-Time, a computer consulting firm which was
owned by Victor Friedman. The purchase price of $252,478 was paid by the
issuance of 753 shares of Company common stock to Victor Friedman.
Philip Friedman has loaned the Company in the aggregate approximately $2.5
million. This loan is payable on demand and bears interest at 10.0%. The loan
will be repaid with a portion of the net proceeds of the Offering. See "Use of
Proceeds." In addition, Philip Friedman has guaranteed certain of the Company's
obligations under the Company's revolving credit facility and term loan. These
guarantees will terminate upon consummation of the Offering.
Upon consummation of the Offering, the Company plans to distribute to its
stockholders of record immediately prior to the consummation of the Offering
the cumulative amount of its undistributed earnings for the entire period that
it was an S corporation. As of June 30, 1996, the cumulative balance of such
undistributed earnings was approximately $3.3 million. The difference between
the undistributed earnings of $3.3 million and retained earnings of
approximately $2.4 million at June 30, 1996 is principally the result of
temporary timing differences between income tax bases and financial reporting.
In addition, the Company's stockholders immediately prior to the consummation
of the Offering will be entitled to receive from the Company, in the event of
certain adjustments to the Company's federal taxable income, the amount of
federal, state and local income taxes, including penalties and interest,
incurred by them as a result of such adjustment. See "The Company."
Pursuant to a Registration Rights Agreement to be entered into immediately
prior to the consummation of the Offering, among the Company, Philip Friedman
and Victor Friedman (the "Registration Rights Agreement"), the Company will, at
the request of either Philip Friedman or Victor Friedman (the "Rights
Holders"), prepare and file, and use its best efforts to make effective,
registration statements under the Securities Act for resales of Common Stock,
including underwritten offerings. In addition, pursuant to the Registration
Rights Agreement, if the Company proposes to register its securities under the
Securities Act, then the Rights Holders have a right (subject to quantity
limitations determined by underwriters if the offering involves an
underwriting) to request that the Company register such Rights Holders' Common
Stock. All fees and expenses incurred in connection with any such registration
will be borne by the Company, except for all underwriting discounts and
commissions relating to Common Stock sold by the Rights Holders in any such
offering, which will be borne by such Rights Holders. The Company has agreed to
indemnify the Rights Holders against certain liabilities in connection with any
registration effected pursuant to the Registration Rights Agreement, including
liabilities under the Securities Act.
37
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information, regarding the beneficial
ownership of the Common Stock, prior to and after giving effect to the
Offering, by (i) the directors and four most highly compensated executive
officers of the Company, (ii) each person known by the Company to own
beneficially more than five percent of the outstanding shares of Common Stock
and (iii) all executive officers and directors as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED (1)
--------------------------------
PERCENT PERCENT
PRIOR TO AFTER
NUMBER THE OFFERING THE OFFERING
NAME(2) ------ ------------ ------------
<S> <C> <C> <C>
Philip Friedman............................... 90%
Victor Friedman............................... 10%
Fred B. Schlossberg........................... 0% *
Edward Schroeder.............................. 0% *
Jay Hakami.................................... 0% *
Robert B. Stratton............................ 0% *
All executive officers and directors as a
group (7 Persons)............................ 100%
</TABLE>
- -------
* Less than 1%
(1) The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock beneficially owned by them.
(2) Unless otherwise indicated, the business address of each director and
executive officer is c/o Computer Generated Solutions, Inc., 1675 Broadway,
New York, New York 10019.
38
<PAGE>
DESCRIPTION OF CAPITAL STOCK
After the Offering, the Company's authorized capital stock will consist of
shares of Common Stock and 1,000,000 shares of Preferred Stock, the terms and
provisions of which may be designated by the Board of Directors in the future.
The following summary of the Company's capital stock is qualified in its
entirety by reference to the Company's Certificate of Incorporation and By-
Laws, each of which is filed as an exhibit to the registration statement of
which this Prospectus is a part.
COMMON STOCK
Following the Offering, shares of Common Stock will be issued and
outstanding. See "Capitalization." Each holder of Common Stock is entitled to
one vote for each share held of record on each matter submitted to a vote of
the Company's stockholders. The Company's Principal Stockholders are entitled
to certain rights with respect to registration under the Securities Act of
shares held by them. See "Certain Relationships and Related Party
Transactions."
All of the outstanding shares of Common Stock are, and all of the shares of
Common Stock sold in the Offering will be, when issued and paid for, fully paid
and nonassessable. In the event of the liquidation or dissolution of the
Company, following any required distribution to the holders of outstanding
shares of Preferred Stock, if any, the holders of Common Stock are entitled to
share pro rata in any balance of the corporate assets available for
distribution to them. The Company may pay dividends if, when and as declared by
the Board of Directors from funds legally available therefor. Subject to the
preferential rights of the holders of any class of Preferred Stock, holders of
shares of Common Stock are entitled to receive such dividends as may be
declared by the Company's Board of Directors out of funds legally available for
such purpose. See "Dividend Policy."
Holders of Common Stock have no preemptive rights.
PREFERRED STOCK
Following the Offering, no shares of Preferred Stock will be issued and
outstanding. Preferred Stock may be issued from time to time by the Board of
Directors as shares of one or more classes or series. Subject to the provisions
of the Company's Certificate of Incorporation and limitations prescribed by
law, the Board of Directors is expressly authorized to adopt resolutions to
issue the shares, to fix the number of shares and to change the number of
shares constituting any series, and to provide for or change the voting powers,
designations, preferences and relative participating, optional or other special
rights, qualifications, limitations or restrictions thereof, including dividend
rights, sinking fund provisions, redemption prices, conversion rights and
liquidation preferences of the shares constituting any class or series of
Preferred Stock, in each case without any further action or vote by the
stockholders. The Company has no current plans to issue any shares of Preferred
Stock of any class or series.
One of the effects of undesignated Preferred Stock may be to enable the Board
of Directors to render more difficult or to discourage an attempt to obtain
control of the Company by means of a tender offer, proxy contest, merger or
otherwise, and thereby to protect the continuity of the Company's management.
In addition, the issuance of shares of Preferred Stock pursuant to the Board of
Directors' authority described above may adversely affect the rights of the
holders of Common Stock. For example, Preferred Stock issued by the Company may
rank prior to the Common Stock as to dividend rights, liquidation preference or
both, may have full or limited voting rights and may be convertible into shares
of Common Stock. The issuance of shares of Preferred Stock may discourage bids
for the Common Stock or may otherwise adversely affect the market price of the
Common Stock.
CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BY-LAWS AND DELAWARE
LAW
Certain provisions of the Company's Certificate of Incorporation and By-Laws,
as well as certain provisions of Delaware law, may have an anti-takeover effect
or may delay, defer or prevent a tender offer or takeover attempt that a
stockholder might consider in such stockholder's best interest, including those
attempts that might result in a premium over the market price for the shares of
Common Stock held by a stockholder. These provisions are in addition to the
anti-takeover effect of the substantial ownership and voting power of the
Principal Stockholders of the
39
<PAGE>
Company. In addition, the Certificate of Incorporation and By-Laws contain
certain provisions that may reduce the likelihood of a change in management or
voting control of the Company without the consent of the Board of Directors.
Delaware Anti-Takeover Law. Section 203 of the Delaware General Corporation
Law, as amended ("Section 203"), provides that, subject to certain exceptions
specified therein, a Delaware corporation shall not engage in any business
combination, including any merger or consolidation with, or any transaction
which results in the acquisition of additional shares of the corporation by, an
"interested stockholder" for a three-year period following the time at which
the stockholder became an "interested stockholder" unless (i) prior to such
time, the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
"interested stockholder," (ii) upon consummation of the transaction which
resulted in the stockholder becoming an "interested stockholder," the
"interested stockholder" owned at least 85% of the voting stock of the
corporation outstanding at the time that the transaction commenced (excluding
certain shares) or (iii) at or subsequent to such time, the business
combination is approved by the board of directors of the corporation and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock which is not owned by the "interested stockholder." Except as otherwise
specified in Section 203, an "interested stockholder" is defined to include any
person that (i) is the owner of 15% or more of the outstanding voting stock of
the corporation, (ii) is an affiliate or associate of the corporation and was
the owner of 15% or more of the outstanding voting stock of the corporation at
any time within three years immediately prior to the date on which it is sought
to be determined whether such person is an "interested stockholder" or (iii) is
an affiliate or associate of any person of the type identified in clause (ii)
above. Section 203 defines the term "business combination" to encompass a wide
variety of transactions with or caused by an "interested stockholder",
including mergers, asset sales and other transactions in which the "interested
stockholder" receives or could receive a benefit on other than a pro rata basis
with other stockholders.
The provisions of Section 203, coupled with the Board of Directors authority to
issue Preferred Stock without further stockholder action and the fact that,
after giving effect to the Offering, % of the outstanding shares of Common
Stock will be held by the Principal Stockholders, could delay or frustrate the
removal of incumbent directors or a change in control of the Company. The
provisions also could discourage, impede or prevent a merger, tender offer or
proxy contest, even if such event would be favorable to the interests of
stockholders. The Company's stockholders, by adopting an amendment to the
Certificate of Incorporation, may elect not to be governed by Section 203,
which election would be effective twelve months after such adoption. Such a
change in the Certificate of Incorporation could not be made without the
affirmative vote of shares held by Philip Friedman. Neither the Certificate of
Incorporation nor the By-Laws exclude the Company from the restrictions imposed
by Section 203. These restrictions will not apply to stockholders who were
interested stockholders prior to the date of the Offering.
Classified Board of Directors. The Certificate of Incorporation provides for
the Board of Directors to be divided into three classes of directors serving
staggered three-year terms. Each class will consist, as nearly as practical, of
one-third of the Board of Directors constituting the entire Board of Directors.
As a result, approximately one-third of the Board of Directors will be elected
each year. Holders of a majority of the outstanding shares of capital stock of
the Company entitled to vote with respect to election of directors may remove
directors only for cause. Vacancies on the Board of Directors may be filled
only by the remaining directors and not by the stockholders.
Stockholder Meetings. The Certificate of Incorporation provides that any action
required or permitted to be taken by the stockholders of the Company may be
effected only at an annual or special meeting of stockholders and prohibits
stockholder action by written consent in lieu of a meeting. The By-Laws provide
that special meetings of stockholders may be called only by the president of
the Company and must be called by such officer at the request in writing of a
majority of the Board of Directors. Stockholders are not permitted to call a
special meeting of stockholders, to require that the president call such a
special meeting or to require that the Board of Directors request the calling
of a special meeting of stockholders.
Advance Notice Provisions. The By-Laws establish an advance notice procedure
for stockholders to make nominations of candidates for elections as directors,
or to bring other business before an annual meeting of stockholders of the
Company. The By-Laws provide that only persons who are nominated by, or at the
direction of, the president of the Company or by a stockholder who has given
timely written notice to the Secretary of the
40
<PAGE>
Company prior to the meeting at which directors are to be elected, will be
eligible for election as directors of the Company. The By-Laws also provide
that at an annual meeting only such business may be conducted as has been
brought before the meeting by, or at the direction of, the president of the
Company, the Board of Directors or by a stockholder who has given timely
written notice to the Secretary of the Company of such stockholder's intention
to bring such business before such meeting. Generally, for notice of
stockholder nominations to be made at an annual meeting to be timely under the
By-Laws, such notice must be received by the Company not less than 70 days nor
more than 90 days prior to the first anniversary of the previous year's annual
meeting (or, in the case of a special meeting at which directors are to be
elected, not earlier than the 90th day before such meeting and not later than
the later of (x) the 70th day prior to such meeting and (y) the 10th day after
public announcement of the date of such meeting is first made). Under the By-
Laws, a stockholder's notice must also contain certain information specified in
the By-Laws.
Super majority Voting Provisions. The Certificate of Incorporation provides
that certain extraordinary transactions require the approval of holders of 75%
of the voting power of the outstanding capital stock of the Company entitled to
vote thereon.
Amendment of Certificate of Incorporation. The stockholders of the Company may
not amend or repeal any of the provisions summarized above under "Classified
Board of Directors," "Stockholder Meetings," "Advance Notice Provisions" or
"Super majority Voting Provisions" except upon the affirmative vote of holders
of not less than 75% of the outstanding shares of capital stock of the Company
entitled to vote thereon.
Exculpation and Indemnification. The Certificate of Incorporation provides that
no director of the Company shall be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith
or that involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which the director derived an improper personal benefit. The
effect of these provisions is to eliminate the rights of the Company and its
stockholders (through stockholders' derivative suits on behalf of the Company)
to recover monetary damages against a director for breach of fiduciary duty as
a director (including breaches resulting from grossly negligent behavior),
except in the situations described above. The Commission has taken the position
that the foregoing provisions will have no effect on claims arising under
federal securities laws.
The Company's By-Laws provide that the Company will indemnify its directors and
officers to the fullest extent permissible under Delaware law. These
indemnification provisions require the Company to indemnify such persons
against certain liabilities and expenses to which they may become subject by
reason of their service as a director or officer of the Company. The provisions
also set forth certain procedures, including the advancement of expenses, that
apply in the event of a claim for indemnification.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is The Bank of New York.
41
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no public market for the Common Stock. No
prediction can be made as to the effect, if any, that sales of shares of Common
Stock or the availability of shares of Common Stock for sale will have on the
market price prevailing from time to time. Nevertheless, sales of substantial
amounts of Common Stock in the public market after the restrictions described
below lapse could adversely affect the prevailing market price of the Common
Stock and the ability of the Company to raise equity capital in the future.
Upon completion of the Offering, the Company will have outstanding shares of
Common Stock. See "Capitalization." Of these shares, the shares ( shares
if the Underwriters' over-allotment option is exercised in full) of Common
Stock sold in the Offering will be freely tradable without restriction under
the Securities Act except for any shares purchased by "affiliates" (as defined
in the Securities Act) of the Company. The remaining shares are "restricted
securities" within the meaning of Rule 144 adopted under the Securities Act
(the "Restricted Shares"). The Restricted Shares generally may not be sold
unless they are registered under the Securities Act or are sold pursuant to an
exemption from registration, such as the exemption provided by Rule 144.
The Company and the Principal Stockholders have agreed not to offer, sell or
otherwise dispose of any shares of Common Stock or any securities convertible
into Common Stock, or register for sale under the Securities Act or request
registration of, as the case may be, any Common Stock, for a period of 180 days
after the date of this Prospectus (the "Lock-up Period") without the prior
written consent of J.P. Morgan Securities Inc. on behalf of the Underwriters.
See "Underwriting." Following the Lock-up Period, any shares owned prior to the
Offering will not be eligible for sale in the public market without
registration unless such sales meet the conditions and restrictions of Rule 144
as described below.
In general, under Rule 144, as currently in effect, any person (or persons
whose shares are aggregated), including an affiliate of the Company, who has
beneficially owned shares for a period of at least two years (as computed under
Rule 144) is entitled to sell, within any three-month period, a number of
shares that does not exceed the greater of (i) 1% of the then-outstanding
shares of Common Stock (approximately shares after giving effect to the
Offering) or (ii) the average weekly trading volume in the Common Stock during
the four calendar weeks immediately preceding the date on which the notice of
such sale on Form 144 is filed with the Commission. Sales under Rule 144 are
also subject to certain provisions relating to notice and manner of sale and
the availability of current public information about the Company. In addition,
a person (or persons whose shares are aggregated) who has not been an affiliate
of the Company at any time during the 90 days immediately preceding a sale, and
who has beneficially owned the shares for at least three years (as computed
under Rule 144), would be entitled to sell such shares under Rule 144(k)
without regard to the volume limitation, manner of sale, public information or
notice provisions of Rule 144. The foregoing summary of Rule 144 is not
intended to be a complete description thereof. In addition, the Commission has
proposed reducing the two-year and three-year periods referred to above to one
and two years, respectively.
Prior to the Offering, no Common Stock was subject to outstanding options or
warrants to purchase, or securities convertible into, Common Stock. As soon as
practicable following the consummation of the Offering, the Company intends to
file a registration statement under the Securities Act to register the shares
of Common Stock available for issuance upon exercise of options granted
pursuant to the 1996 Long Term Incentive Plan. Shares issued upon exercise of
options granted pursuant to the 1996 Long-Term Incentive Plan after the
effective date of such registration statement will be available for sale in the
open market, subject to the Lock-up Period and, for affiliates of the Company,
subject to the conditions and restrictions of Rule 144. In addition, the
Company has granted certain registration rights to Philip Friedman and Victor
Friedman. See "Certain Relationships and Related Party Transactions."
42
<PAGE>
UNDERWRITING
The Underwriters named below (the "Underwriters"), for whom J.P. Morgan
Securities Inc. and Oppenheimer & Co., Inc. are acting as representatives (the
"Representatives"), have severally agreed, subject to the terms and conditions
set forth in the underwriting agreement among the Company and the
Representatives (the "Underwriting Agreement"), to purchase from the Company,
and the Company has agreed to sell to the Underwriters, the respective number
of shares of Common Stock set forth opposite their names below:
----------
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITERS ----------------
<S> <C>
J.P. Morgan Securities Inc. ...................................
Oppenheimer & Co., Inc. .......................................
---------
Total .......................................................
=========
</TABLE>
The nature of the Underwriters' obligations under the Underwriting Agreement is
such that all of the Common Stock being offered, excluding shares covered by
the over-allotment option granted to the Underwriters, must be purchased if any
are purchased.
The Representatives have advised the Company that the several Underwriters
propose to offer the Common Stock to the public initially at the public
offering price set forth on the cover page of this Prospectus and may offer the
Common Stock to selected dealers at such price less a concession not to exceed
$ per share. The Underwriters may allow, and such dealers may reallow, a
concession to other dealers not in excess of $ per share. After the public
offering of the Common Stock, the public offering price and other selling terms
may be changed by the Representatives.
The Company has granted the Underwriters an option, exercisable within 30 days
after the date of this Prospectus, to purchase up to additional shares of
Common Stock from the Company at the same price per share to be paid by the
Underwriters for the other shares offered hereby. If the Underwriters purchase
any such additional shares pursuant to the option, each of the Underwriters
will be committed to purchase such additional shares in approximately the same
proportion as set forth in the above table. The Underwriters may exercise the
option only to cover over-allotments, if any, made in connection with the
distribution of Common Stock offered hereby.
Prior to the Offering, there has been no public market for the Common Stock.
The initial public offering price will be determined by negotiations between
the Company and the Representatives. Among the factors to be considered in
determining the initial offering price will be prevailing market conditions,
the market valuations of certain publicly traded companies, revenue and
earnings of the Company and comparable companies in recent periods, estimates
of the business potential and prospects of the Company, the experience of the
Company's management and the position of the Company in its industry.
The Representatives have informed the Company that the Underwriters will not
confirm, without customer authorization, sales to their customer accounts as to
which they have discretionary trading power.
The Company and the Principal Stockholders have agreed not to offer, sell or
otherwise dispose of any shares of Common Stock or any securities convertible
into Common Stock, or register for sale under the Securities Act or request
registration of, as the case may be, any Common Stock, for a period of 180 days
after the date of this Prospectus without the prior written consent of
J.P. Morgan Securities Inc. on behalf of the Underwriters.
43
<PAGE>
The Underwriters have represented and agreed that (i) they have not offered or
sold and, prior to the expiry of the period of six months from the closing of
the Offering, will not offer or sell, any shares of Common Stock to persons in
the United Kingdom, except persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in circumstances which
have not resulted and will not result in an offer to the public within the
meaning of the Public Offers of Securities Regulations 1995, (ii) they have
complied and will comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by them in relation to the
Offering in, from or otherwise involving the United Kingdom and (iii) they have
only issued or passed on, and will only issue and pass on, in the United
Kingdom any document received by them in connection with the Offering to a
person who is of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisement) (Exemptions) Order 1995 or is a person to
whom such document may otherwise lawfully be issued or passed on.
Application has been made to approve the shares of Common Stock for quotation
on the Nasdaq National Market under the symbol "CGSI."
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute
to payments the Underwriters may be required to make in respect thereof.
At the Company's request, the Underwriters have reserved up to shares of
Common Stock for sale at the initial public offering price to the Company's
employees and other persons having business relationships with the Company. The
number of shares of Common Stock available for sale to other members of the
public will be reduced to the extent that these persons purchase such reserved
shares. Any reserved shares not purchased will be offered by the Underwriters
on the same basis as the other shares offered hereby.
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance of the
Common Stock offered hereby will be passed upon for the Company by Chadbourne &
Parke LLP, New York, New York. Certain legal matters in connection with the
Offering will be passed upon for the Underwriters by Cahill Gordon & Reindel (a
partnership including a professional corporation), New York, New York.
EXPERTS
The financial statements (including Schedule 16(b), which is included in the
Registration Statement of which this Prospectus forms a part) of the Company at
June 30, 1996 and December 31, 1995 and for the six months ended June 30, 1996
and the year ended December 31, 1995, appearing in this Prospectus and
Registration Statement, have been audited by Ernst & Young LLP, independent
auditors, and at December 31, 1994, and for each of the two years in the period
ended December 31, 1994, by BDO Seidman, LLP, independent auditors, as set
forth in their respective reports thereon appearing elsewhere herein, and are
included in reliance upon such reports given upon the authority of such firms
as experts in accounting and auditing.
CHANGE OF AUDITORS
In November 1995, the Company, with the approval of the Board of Directors,
dismissed BDO Seidman, LLP as its independent auditors. During the period
between January 1, 1993 and the date on which BDO Seidman, LLP was dismissed,
there was no (i) disagreement between the Company and BDO Seidman, LLP on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure, which disagreement, if not resolved to the
satisfaction of BDO Seidman, LLP, would have caused BDO Seidman, LLP to make
reference to the subject matter of such disagreement in connection with its
report on the Company's financial statements or (ii) adverse opinion or a
disclaimer of opinion, or qualification or modification as to uncertainty,
audit scope or accounting principles in connection with its report on the
Company's financial statements. The Company engaged Ernst & Young LLP as its
new independent auditors in November 1995.
44
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement under the
Securities Act (the "Registration Statement") with respect to the Common Stock
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto. For
further information with respect to the Company and the Common Stock, reference
is made to the Registration Statement and the exhibits and schedules thereto.
The statements contained in this Prospectus as to the contents of any document
filed as an exhibit are of necessity brief descriptions thereof and are not
necessarily complete; each such statement is qualified in its entirety by
reference to such document. The Registration Statement, including exhibits and
schedules thereto, may be inspected without charge at the office of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and the Commission's Regional Offices at Seven World Trade Center, 13th Fl.,
New York, New York 10048 and Northwest Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60621-2511, and copies may be obtained at
prescribed rates from the public reference section of the Commission,
Washington, D.C. 20549. Such reports and other information can be reviewed
through the Commission's Electronic Data Gathering Analysis and Retrieval
System, which is publicly available through the Commission's web site
(http://www.sec.gov).
45
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Reports of Independent Auditors.......................................... F-2
Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996........ F-4
Statements of Operations for Each of the Three Years in the Period Ended
December 31, 1995 and the Six Month Period Ended June 30, 1996 and the
Unaudited Six Month Period Ended June 30, 1995.......................... F-5
Statements of Stockholders' Equity for Each of the Three Years in the Pe-
riod Ended December 31, 1995 and the Six Month Period Ended June 30,
1996.................................................................... F-6
Statements of Cash Flows for Each of the Three Years in the Period Ended
December 31, 1995 and the Six Month Period Ended June 30, 1996 and the
Unaudited Six Month Period Ended June 30, 1995.......................... F-7
Notes to Financial Statements............................................ F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors Computer Generated Solutions, Inc.
We have audited the accompanying balance sheets of Computer Generated
Solutions, Inc. (the "Company") as of June 30, 1996 and December 31, 1995, and
the related statements of operations, stockholders' equity and cash flows for
the six months ended June 30, 1996 and the year ended December 31, 1995. 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 financial statements referred to above present fairly, in
all material respects, the financial position of Computer Generated Solutions,
Inc. at June 30, 1996 and December 31, 1995, and the results of its operations
and its cash flows for the six months ended June 30, 1996 and the year ended
December 31, 1995 in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
July 12, 1996
F-2
<PAGE>
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
Computer Generated Solutions, Inc.
New York, New York
We have audited the accompanying balance sheet of Computer Generated Solutions,
Inc. (the "Company") as of December 31, 1994, and the related statements of
income, stockholders' equity and cash flows for each of the two years in the
period ended December 31, 1994. 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 financial statements referred to above present fairly, in
all material respects, the financial position of Computer Generated Solutions,
Inc. at December 31, 1994, and the results of its operations and its cash flows
for each of the two years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.
BDO Seidman, LLP
New York, New York
February 21, 1995
F-3
<PAGE>
COMPUTER GENERATED SOLUTIONS, INC.
BALANCE SHEETS
-----------------------------------
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, JUNE 30, JUNE 30,
1994 1995 1996 1996
--------- --------- --------- -----------
(NOTE 12)
(UNAUDITED)
<S> <C> <C> <C> <C>
(In Thousands, Except Share
Data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 606 $ 264 $ 432 $ 432
Accounts receivable, net of
allowances of $10 in 1994,
$60 in 1995 and $65 in 1996 5,452 9,177 10,338 10,338
Deferred income taxes -- -- -- 159
Prepaid expenses and other
current assets 126 122 146 146
--------- --------- --------- ----------
Total current assets 6,184 9,563 10,916 11,075
Fixed assets, net 369 1,259 1,431 1,431
Cost in excess of fair value
of assets purchased, net of
accumulated amortization of
$213 in 1994, $533 in 1995
and $693 in 1996 746 426 266 266
Deferred income taxes -- -- -- 192
Other assets 428 405 569 569
--------- --------- --------- ----------
Total assets $ 7,727 $ 11,653 $ 13,182 $ 13,533
========= ========= ========= ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Note payable--bank $ 1,400 $ 3,200 $ 2,200 $ 2,200
Note payable--stockholder 400 323 323 --
Accounts payable and accrued
expenses 1,293 1,995 3,271 3,271
Current portion of long-term
debt 472 472 267 267
Current portion of obligations
under capital leases -- 93 136 136
Deferred maintenance 475 542 357 357
Accrued payroll 703 817 1,178 1,178
Sales tax payable 145 178 391 391
Due to stockholders -- -- -- 5,769
--------- --------- --------- ----------
Total current liabilities 4,888 7,620 8,123 13,569
Long-term debt 605 133 -- --
Obligations under capital
leases -- 346 438 438
Subordinated debt--stockholder 1,778 2,146 2,146 --
COMMITMENTS
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par
value, no shares authorized
in 1994, 1995 and June 30,
1996, pro forma June 30,
1996, 1,000,000 shares
authorized, no shares issued
and outstanding -- -- -- --
Common stock, $.01 par value;
Voting--10,000 shares
authorized; 10,000 shares
issued 1 1 1 1
Nonvoting--5,000 shares
authorized; no shares issued -- -- -- --
Additional paid-in capital 228 228 228 228
Retained earnings (deficit) 369 1,321 2,388 (561)
--------- --------- --------- ----------
598 1,550 2,617 (332)
Less 2,464 shares held in
treasury, at cost (142) (142) (142) (142)
--------- --------- --------- ---------
Total stockholders' equity
(deficit) 456 1,408 2,475 (474)
--------- --------- --------- ----------
Total liabilities and
stockholders' equity $ 7,727 $ 11,653 $ 13,182 $ 13,533
========= ========= ========= ==========
</TABLE>
See accompanying notes.
F-4
<PAGE>
COMPUTER GENERATED SOLUTIONS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
-------------------------------------------------------
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
1993 1994 1995 1995 1996
--------- --------- --------- ---------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
(In Thousands, Except
Per Share Data)
REVENUES:
Services, software
license
and maintenance fees $ 8,514 $ 19,962 $ 31,704 $ 14,175 $ 22,906
Hardware 17,489 4,748 4,243 1,319 4,447
--------- --------- --------- --------- ---------
$ 26,003 $ 24,710 $ 35,947 $ 15,494 $ 27,353
--------- --------- --------- --------- ---------
DIRECT COSTS:
Services, software
license
and maintenance fees $ 5,186 $ 12,988 $ 22,970 $ 9,850 $ 17,169
Hardware 15,796 3,882 3,007 722 3,717
--------- --------- --------- --------- ---------
$ 20,982 $ 16,870 $ 25,977 $ 10,572 $ 20,886
--------- --------- --------- --------- ---------
Income from direct
operations 5,021 7,840 9,970 4,922 6,467
Selling, general and
administrative expenses 2,916 4,725 6,690 3,007 4,504
Compensation amounts to
S Corporation
stockholders 1,950 3,041 1,502 201 380
Amortization of cost in
excess of fair value of
assets purchased -- 213 320 160 160
--------- --------- --------- --------- ---------
4,866 7,979 8,512 3,368 5,044
--------- --------- --------- --------- ---------
Operating income (loss) 155 (139) 1,458 1,554 1,423
Interest expense -- 77 473 225 295
--------- --------- --------- --------- ---------
Income (loss) before
income taxes 155 (216) 985 1,329 1,128
Income taxes 39 60 33 60 61
--------- --------- --------- --------- ---------
Net income (loss) $ 116 $ (276) $ 952 $ 1,269 $ 1,067
========= ========= ========= ========= =========
PRO FORMA (UNAUDITED)
(NOTE 12)
Historical income before
income taxes $ 985 $ 1,128
Pro forma provision for
income taxes 396 488
---------- ----------
Pro forma net income $ 589 $ 640
========== ==========
Pro forma net income per
share $ 78.16 $ 84.93
========== ==========
Weighted average shares
outstanding 7,536 7,536
========= =========
</TABLE>
See accompanying notes.
F-5
<PAGE>
COMPUTER GENERATED SOLUTIONS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
------------------------------------------------------------------
ADDITIONAL
NUMBER PAID-IN RETAINED TREASURY
OF SHARES AMOUNT CAPITAL EARNINGS STOCK TOTAL
--------- --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
(In Thousands)
Balance at December 31,
1992 7 $ 1 $ 19 $ 529 $ (185) $ 364
Net income 116 -- 116
--------- --------- --------- --------- --------- ---------
Balance at December 31,
1993 7 1 19 645 (185) 480
Net loss (276) -- (276)
Reissued treasury stock 3 209 -- 43 252
--------- --------- --------- --------- --------- ---------
Balance at December 31,
1994 10 1 228 369 (142) 456
Net income 952 -- 952
--------- --------- --------- --------- --------- ---------
Balance at December 31,
1995 10 1 228 1,321 (142) 1,408
Net income 1,067 -- 1,067
--------- --------- --------- --------- --------- ---------
Balance at June 30, 1996 10 $ 1 $ 228 $ 2,388 $ (142) $ 2,475
========= ========= ========= ========= ========= =========
</TABLE>
See accompanying notes.
F-6
<PAGE>
COMPUTER GENERATED SOLUTIONS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
----------------------------------------------------------
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
1993 1994 1995 1995 1996
--------- --------- --------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
(In Thousands)
OPERATING ACTIVITIES
Net income (loss) $ 116 $ (276) $ 952 $ 1,269 $ 1,067
Adjustments to reconcile
net income (loss) to
net cash provided by
(used in) operating
activities:
Depreciation and
amortization 54 288 530 208 310
Bad debt expense 87 54 110 59 84
Write-off of leasehold
improvements -- 42 -- -- --
Changes in operating
assets and liabilities
(net of effects in
1994 from purchase of
ACS Software Products
Group and Real-Time
Technology Inc.):
Accounts receivable (831) (1,260) (3,835) (793) (1,245)
Prepaid expenses and
other current assets 6 (62) 4 49 (24)
Other assets (104) (173) 23 -- (164)
Accounts payable and
accrued expenses 3,185 (3,333) 702 (452) 1,276
Deferred maintenance -- 115 67 (60) (185)
Accrued payroll 126 313 114 (91) 361
Sales taxes payable 59 (360) 33 57 214
--------- --------- --------- --------- ---------
Net cash provided by
(used in) operating
activities 2,698 (4,652) (1,300) 246 1,694
INVESTING ACTIVITIES
Purchase of net assets
of ACS Software
Products Group -- (800) -- -- --
Capital expenditures (119) (74) (579) (406) (141)
--------- --------- --------- --------- ---------
Net cash used in
investing activities (119) (874) (579) (406) (141)
FINANCING ACTIVITIES
Proceeds from term loan -- 800 -- -- --
Repayment of term loan -- (133) (267) (133) (133)
Repayment of acquisition
debt -- -- (205) (205) (205)
Proceeds (repayment)
from note payable -
bank, net (300) 1,400 1,800 400 (1,000)
Proceeds of note payable
and subordinated
debt - stockholder, net 213 1,244 291 -- --
Principal payments under
capitalized lease
obligations -- -- (82) (37) (47)
Repayments of loans
payable - other (37) (190) -- (33) --
--------- --------- --------- --------- ---------
Net cash provided by
(used in) financing
activities (124) 3,121 1,537 (8) (1,385)
--------- --------- --------- --------- ---------
Increase (decrease) in
cash and cash
equivalents 2,455 (2,405) (342) (168) 168
Cash and cash
equivalents, beginning
of year 556 3,011 606 606 264
--------- --------- --------- --------- ---------
Cash and cash
equivalents, end of
year $ 3,011 $ 606 $ 264 $ 438 $ 432
========= ========= ========= ========= =========
</TABLE>
See accompanying notes.
F-7
<PAGE>
COMPUTER GENERATED SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
Unaudited with respect to June 30, 1995
1. SUMMARY OF ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Computer Generated Solutions, Inc. (the "Company" or "CGS") provides a
composite solution to the information processing needs of its clients through a
wide range of information technology and outsourcing support services. Using a
custom designed approach to satisfy each customer's particular need, the
Company provides a complete range of solutions, including its proprietary ACS
Optima software for the apparel industry, professional services ranging from
strategic consulting to system integration, technical training classes and full
service on-site and remote help desk and call management support services. The
Company's customers are in various industries located throughout the United
States.
The interim financial statements at June 30, 1995 and for the six months then
ended are unaudited; however, in the opinion of management, all adjustments,
consisting only of normal recurring accruals necessary for a fair presentation,
have been included. Results of interim periods are not necessarily indicative
of results to be expected for the entire fiscal year.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. At June 30, 1996, the
Company has substantially all its cash in two financial institutions.
CONCENTRATION OF CREDIT RISK
The Company performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral. Accounts receivable are
generally due within 60 days from the date of service. Credit losses have
historically been consistent with management's expectations.
FIXED ASSETS
Fixed assets are stated at cost and depreciation is computed over the estimated
useful lives of the assets by the straight-line method for financial reporting
and by accelerated methods for income tax purposes. Amortization on leasehold
improvements is computed by the straight-line method over the shorter of the
estimated useful lives of the assets or the term of the lease.
RECLASSIFICATIONS
Certain items in the December 31, 1993, 1994 and 1995 and June 30, 1995
financial statements have been reclassified to conform to the June 30, 1996
presentation.
DEFERRED RENT
Deferred rent represents payments made at the beginning of the lease term for
office space which is being amortized over the life of the respective lease.
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 and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
REVENUE RECOGNITION
Software License and Service Fees
The Company recognizes revenue from sales of software licenses upon delivery of
the software product to the customer because future obligations associated with
such revenue are insignificant and collection is probable.
Revenue from software installation, modifications and training services are
recognized on a percentage-of-completion method with progress-to-completion
measured based upon labor costs incurred or achievement of contract milestones.
F-8
<PAGE>
COMPUTER GENERATED SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Services and Maintenance
Fees related to professional services are recognized as revenue as time and
material costs are incurred.
Maintenance fees are recognized as revenues ratably over the term of the
maintenance contract.
Hardware and Other
Computer hardware revenues are recognized when the units are shipped. Revenue
recognition of completed units is sometimes delayed pending testing and
installation of software. In such instances, hardware revenues are recognized
when the customer has accepted the completed unit and authorizes the related
billing.
COMPENSATION AMOUNTS TO S CORPORATION STOCKHOLDERS
For the years 1993, 1994 and 1995, compensation amounts to S Corporation
stockholders consisted of annual salaries and discretionary year-end bonuses
which were charged to expense. The bonuses are determined and paid at year-end
and, accordingly, the interim six month period ended June 30, 1995 did not
include a charge for such year-end bonuses. For the six months ended June 30,
1996, the Company has recorded compensation amounts to S Corporation
stockholders to reflect the aggregate base salaries in effect during 1996.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Notes payable - bank: The carrying amounts of the Company's borrowings under
its credit and term loan agreement approximates their fair values.
Notes payable - stockholder: The carrying amounts of the Company's borrowings
under its subordinated debt agreements approximates their fair values.
Long-term debt: The carrying amounts of the Company's borrowings under its
long-term debt arrangements approximates their fair values.
RESEARCH AND SOFTWARE DEVELOPMENT COSTS
In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for Costs of Computer Software to be Sold, Leased or Otherwise
Marketed," the Company capitalizes costs incurred to develop new software
products upon determination that technological feasibility has been established
for the product, whereas costs incurred prior to the establishment of
technological feasibility are charged to expense. All research and software
development costs incurred to date have been expensed by the Company and are
included in direct costs. Research and software development costs amounted to
$423,000, $740,000, $322,000 and $408,000 for the years ended December 31, 1994
and 1995 and for the six months ended June 30, 1995 and 1996, respectively.
Research and software development costs were not material for the year ended
December 31, 1993.
2. ACQUISITIONS
ACS SOFTWARE PRODUCTS GROUP
Effective May 5, 1994, the Company acquired substantially all of the assets and
assumed certain liabilities of ACS Software Products Group ("ACS"), an apparel
manufacturing and distribution software product company, for $1,210,000. The
acquisition has been accounted for as a purchase and the assets of ACS have
been recorded at their fair value at the date of acquisition. The excess of the
total acquisition cost over the fair value of net assets acquired of $959,000
is being amortized on a straight-line basis over three years. ACS' results of
operations have been included in the statements of operations since the date of
acquisition. The purchase price consisted of $800,000 in cash and a promissory
note in the principal amount of $410,000 (see Note 5). The note bears interest
at 6.75% and provides for the payment of principal in two equal installments of
$205,000 together with accrued interest. The Company paid the last installment
on the note during the six months ended June 30, 1996.
F-9
<PAGE>
COMPUTER GENERATED SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
REAL-TIME TECHNOLOGY INC.
Effective October 1, 1994, the Company acquired substantially all of the assets
and assumed certain liabilities of Real-Time Technology Inc. ("RTT"), a
computer consulting firm, for $252,000 (approximating the fair value of net
asset acquired, which approximated book value). Funding was provided through
the issuance of 753 shares of CGS treasury stock with treasury stock credited
for $43,000 and the balance of $209,000 credited to additional paid-in capital.
The acquisition has been accounted for as a purchase and the assets of RTT have
been recorded at their fair value at the date of acquisition which approximated
cost. RTT's results of operations have been included in the statements of
operations since the date of acquisition.
The table below sets forth the pro forma (unaudited) results of operations for
the years ended December 31, 1993 and 1994 assuming consummation of the ACS and
RTT acquisitions as of January 1, 1993. The 1993 pro forma results of
operations include RTT's operations for the twelve months ended October 31,
1993 and the 1994 pro forma results of operations include RTT's operations for
the eleven months ended September 30, 1994.
<TABLE>
<CAPTION>
--------------------------
YEARS ENDED DECEMBER 31,
1993 1994
------------ ------------
<S> <C> <C>
(dollars in thousands, except per share
data)
Total revenues $ 37,390 $ 30,269
Net loss (1,061) (705)
Pro forma net loss per share (see Note
13) $ (140.79) $ (93.55)
</TABLE>
3. FIXED ASSETS
Major classes of property and equipment consist of the following:
<TABLE>
<CAPTION>
---------------------------------------------
DECEMBER 31, JUNE 30, ESTIMATED
1994 1995 1996 USEFUL LIVES
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
(dollars in thousands)
Furniture and fixtures $ 118 $ 308 $ 486 10 years
Leasehold improvements 3 261 309 Life of
lease
Computer equipment and software 630 1,282 1,378 3-5 years
--------- --------- ---------
751 1,851 2,173
Less accumulated depreciation
and amortization 382 592 742
--------- --------- ---------
$ 369 $ 1,259 $ 1,431
========= ========= =========
</TABLE>
Furniture and fixtures, leasehold improvements, computer equipment and software
include assets resulting from capitalized lease obligations totaling $521,000
and $703,000 at December 31, 1995 and June 30, 1996, respectively (see Note 7).
The accumulated depreciation attributable to assets under capital leases is
$52,000 and $84,000 at December 31, 1995 and June 30, 1996, respectively.
4. NOTE PAYABLE - BANK
In June 1996, the Company amended its revolving credit and term loan agreement
with a bank. The agreement provides for a $5,500,000 revolving line of credit
expiring in May 1997. Outstanding borrowings bear interest at the bank's prime
rate (8.25% at June 30, 1996). Subsequent to June 30, 1996, the revolving line
of credit was increased to $7,000,000.
Borrowings on the revolving line of credit, which are based on eligible
accounts receivable, and the term loan are collateralized by a security
interest in all accounts receivable, fixed assets and general intangibles and
an assignment of key man insurance on the life of one of the stockholders in
the amount of $500,000. In addition, one of the stockholders has guaranteed the
obligation. Outstanding amounts, ($2.2 million at June 30, 1996), under the
revolving line of credit are also supported by a 10% compensating balance
arrangement.
F-10
<PAGE>
COMPUTER GENERATED SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Subordinated debt - stockholder represents funds advanced to the Company by its
principal stockholder. Effective January 1, 1995, the subordinated debt bears
interest at 10% per annum and is payable on demand. In connection with the
revolving line of credit, subordinated debt - stockholder is subordinated to
the bank.
5. NOTE PAYABLE - STOCKHOLDER
Note payable - stockholder, which is payable on demand, represents advances
made to the Company by its principal stockholder, bearing interest at 10% per
annum.
6. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
-------------------------------
DECEMBER 31, JUNE 30,
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
(dollars in thousands)
Note payable--bank (a)...................... $ 668 $ 400 $ 267
Note payable (acquisition debt) (Note 2).... 409 205 --
--------- --------- ---------
Total long-term debt........................ 1,077 605 267
Less current maturities..................... 472 472 267
--------- --------- ---------
$ 605 $ 133 $ --
========= ========= =========
</TABLE>
- -------
(a) Note payable to a bank consists of a term loan of $800,000 which is payable
in 36 equal monthly installments of $22,000 with interest at 1.25% per annum
above the bank's prime rate (8.25% at June 30, 1996). The term loan contains
financial covenants relating to minimum tangible net worth, working capital and
a maximum debt-to-equity ratio. In addition, one of the stockholders has
guaranteed the obligation.
7. CAPITAL LEASES
In 1995 and 1996, the Company entered into capital lease agreements for
computer and telephone equipment, furniture and fixtures and leasehold
improvements. The agreements provide for monthly payments of approximately
$15,000 through October 2000, which include interest at rates ranging from 10%
to 10.35%.
The following is a schedule of future minimum lease payments under capital
leases, together with the present value of the net minimum lease payments:
<TABLE>
<CAPTION>
(dollars in thousands)
<S> <C>
TWELVE MONTHS ENDING JUNE 30:
1997 $ 184
1998 184
1999 184
2000 127
2001 10
---------
Total minimum lease payments................................ 689
Less amount representing interest........................... 115
---------
Present value of net minimum lease payments................. $ 574
=========
</TABLE>
F-11
<PAGE>
COMPUTER GENERATED SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
8. COMMITMENTS
LEASES
Total rent expense on real estate charged to operations for the years ended
December 31, 1993, 1994 and 1995 and for the six months ended June 30, 1995 and
1996 aggregated $274,000, $321,000, $421,000, $171,000 and $373,000,
respectively.
The minimum annual rental commitments under noncancellable operating leases as
of June 30, 1996 are as follows:
<TABLE>
<CAPTION>
(dollars in thousands)
<S> <C>
TWELVE MONTHS ENDING JUNE 30:
1997 $ 838
1998 795
1999 729
2000 682
2001 566
Thereafter 2,352
---------
Total $ 5,962
=========
</TABLE>
9. STATEMENTS OF CASH FLOWS - SUPPLEMENTAL DISCLOSURES
<TABLE>
<CAPTION>
-----------------------------------------------------
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(dollars in thousands)
CASH PAID DURING THE
PERIOD:
Income taxes $ 34 $ 47 $ 61 $ 7 $ --
Interest 16 79 488 110 175
NONCASH INVESTING AND
FINANCING ACTIVITIES:
Notes payable on
purchase of net assets
of ACS (Note 2) -- 410 -- -- --
Treasury stock issued on
purchase of net assets
of RTT (Note 2) -- 252 -- -- --
</TABLE>
The Company entered into capitalized leases for approximately $521,000 in 1995
and $182,000 in 1996.
10. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) plan in which all eligible employees can contribute a
portion of their compensation up to the maximum amount allowable pursuant to
the Internal Revenue Code. The Company contributes an amount equal to 50% of
each employee's contribution limited to 3% of an eligible employee's
compensation. The Company contributed to the plan $53,000, $102,000, $181,000,
$86,000 and $149,000 for the years ended December 31, 1993, 1994 and 1995 and
the six months ended June 30, 1995 and 1996, respectively.
11. MAJOR CUSTOMER
One customer, with several contracts in various divisions, accounted for 21%,
33% and 37% of total revenues for the years ended December 31, 1994 and 1995
and the six months ended June 30, 1996, respectively. As of December 31, 1994
and 1995 and June 30, 1996, 19%, 35% and 27%, respectively, of accounts
receivable was due from this customer. No single customer accounted for more
than 10% of revenues in 1993.
F-12
<PAGE>
COMPUTER GENERATED SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
12. PRO FORMA INFORMATION AND EVENTS CONCURRENT WITH THE IPO (UNAUDITED)
PRO FORMA ADJUSTMENTS: STATEMENTS OF OPERATIONS
The Company intends to enter into an underwriting agreement for an initial
public offering ("IPO") of its common stock. If the IPO is successful, the
Company will no longer be treated as an S Corporation and, accordingly, will be
subjected to federal and additional state income taxes. The unaudited pro forma
adjustments on the statement of operations reflect an adjustment to record a
provision for income taxes on income as if the Company had not been an S
Corporation.
PRO FORMA NET INCOME (LOSS) PER SHARE
Pro forma net income per share has been computed by dividing pro forma net
income by the weighted average number of common shares outstanding during the
periods. There were no common stock equivalents such as options, warrants,
etc., outstanding during any of the periods presented.
PRO FORMA BALANCE SHEET
Subsequent to June 30, 1996, the Company intends to declare an S Corporation
distribution to its then existing stockholders representing all of its
previously earned and undistributed S Corporation taxable earnings through
June 30, 1996. If the IPO is successful, the Company expects that the net
proceeds from the IPO will be used to pay this S Corporation distribution and
repay indebtedness owed to a stockholder under a promissory note and a
subordinated debt agreement. The pro forma balance sheet at June 30, 1996 gives
effect to these items. Amount due to stockholders on the June 30, 1996 pro
forma balance sheet consists of the following:
<TABLE>
<CAPTION>
(dollars in thousands)
<S> <C>
S Corporation distributions $ 3,300
Subordinated debt--stockholder 2,146
Note payable--stockholder 323
---------
$ 5,769
=========
</TABLE>
The pro forma balance sheet at June 30, 1996 also gives effect to a deferred
tax asset in the amount of $351,000 (see Note 13).
The estimated distribution of $3,300,000 in the pro forma presentation
represents undistributed taxable S Corporation earnings through June 30, 1996.
The difference between the undistributed earnings of $3.3 million and retained
earnings of approximately $2.4 million at June 30, 1996 is principally the
result of temporary timing differences between income tax bases and financial
reporting. In addition, the Company plans to distribute to its existing
stockholders an amount equal to the taxable earnings of the Company from June
30, 1996 to the day prior to the S termination date.
LONG-TERM INCENTIVE PLAN
Immediately prior to the consummation of the IPO, the Company will adopt the
1996 Long-Term Incentive Plan (the "Plan"). The Company will reserve an amount
of common stock equal to 10% of the outstanding shares of common stock
outstanding upon consummation of the IPO for issuance and/or use as the basis
for stock appreciation rights or other units of stock-based incentive
compensation under the Plan.
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 123. "Accounting for Stock-
Based Compensation" ("SFAS 123"). SFAS 123 is effective for fiscal years
beginning after December 15, 1995 and prescribes accounting and reporting
standards for all stock-based
F-13
<PAGE>
COMPUTER GENERATED SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
compensation plans, including employee stock options, restricted stock,
employee stock purchase plans and stock appreciation rights. SFAS 123 requires
compensation expense to be recorded (i) using the new fair value method or (ii)
using existing accounting rules prescribed by Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and
related interpretations with pro forma disclosure of what net income and
earnings per share would have been had the Company adopted the new fair value
method. It is the Company's intention to present such information in accordance
with APB 25 as described in (ii) above.
STOCK SPLIT
Immediately prior to the consummation of the IPO, the Company will effect a
stock split of its common stock. The Company has not yet determined the stock
split conversion and, accordingly, the financial statements do not give effect
to such intended stock split.
13. INCOME TAXES
The Company, with the consent of its stockholders, has elected to be taxed as
an S Corporation pursuant to the Internal Revenue Code and certain state tax
laws. As such, the Company has not been subject to federal and certain state
income taxes and the stockholders have included the corporation's taxable
income or loss in their individual income tax returns. Income taxes in 1994,
1995 and 1996 primarily represent New York City corporate income taxes. The New
York City income tax rate is approximately 9%. Deferred income taxes resulting
from temporary differences are considered immaterial and, therefore, are not
provided for at December 31, 1994 and 1995 and June 30, 1996.
The provision for pro forma income taxes (see Note 12) on pro forma income
differs from the amounts computed by applying the applicable federal statutory
rates due to the following:
<TABLE>
<CAPTION>
-------------------------
% OF PRO FORMA PROFIT
BEFORE INCOME TAXES
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1995 1996
------------ ----------
<S> <C> <C>
Federal statutory rate 34.0 % 34.0%
State and local taxes, net of federal tax
benefit 7.0 7.9
Nondeductible expenses 3.5 1.4
Utilization of tax credit (4.3) --
--------- ---------
40.2 % 43.3%
========= =========
</TABLE>
If the IPO is successful, the Company will no longer be an S Corporation. Upon
the change in status of the Company, under FASB Statement No. 109 "Accounting
for Income Taxes", there will be a deferred income tax asset which is
principally due to book amortization in excess of tax amortization related to
goodwill and the timing of the deduction for certain payments to stockholders.
Had the change in status occurred on June 30, 1996, the deferred tax asset that
would have to be recognized would be approximately $351,000.
F-14
<PAGE>
COMPUTER GENERATED SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
14. OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
--------------------------------
DECEMBER 31, JUNE 30,
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
(dollars in thousands)
Premiums receivable (a)..................... $ 310 $ 328 $ 328
Security deposits........................... 118 77 103
Deferred rent............................... -- -- 138
--------- --------- ---------
$ 428 $ 405 $ 569
========= ========= =========
</TABLE>
- -------
(a) Amount represents premiums paid on a split-dollar life insurance policy on
the principal stockholder.
F-15
<PAGE>
LOGO
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Following are the estimated expenses, other than the underwriting discounts
and commissions, to be incurred in connection with the Offering of the Common
Stock registered under this Registration Statement:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee........... $ 11,896.64
NASD filing fee............................................... 3,950.00
NASDAQ listing fee............................................ 5,000.00
Blue sky qualification fees and expenses...................... 30,000.00
Printing and engraving expenses...............................
Legal fees and expenses.......................................
Accounting fees and expenses.................................. 150,000.00
Transfer Agent and Registrar fees and expenses................
Miscellaneous................................................. 5,000.00
-----------
Total....................................................... $
===========
</TABLE>
All of the above figures, except the Securities and Exchange Commission
registration fee, NASD filing fee and the NASDAQ listing fee, are estimates.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is a Delaware corporation. Reference is made to Section
102(b)(7) of the Delaware General Corporation Law (the "DGCL"), which enables
a corporation in its original certificate of incorporation or an amendment
thereto to eliminate or limit the personal liability of a director for
violations of the director's fiduciary duty, except (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) pursuant to Section 174 of the DGCL
(providing for liability of directors for unlawful payment of dividends or
unlawful stock purchase or redemptions) or (iv) for any transactions from
which a director derived an improper personal benefit.
Reference also is made to Section 145 of the DGCL, which provides that a
corporation may indemnify any persons, including officers and directors, who
are parties to, or who are threatened to be made parties to, any threatened,
pending or completed legal action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of such corporation), by reason of the fact that such person was an
officer, director, employee or agent of such corporation or is or was serving
at the request of such corporation as director, officer, employee or agent of
another corporation or enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such
action, suit or proceeding, provided such officer, director, employee or agent
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the corporation's best interest and, for criminal proceedings, had
no reasonable cause to believe that his conduct was unlawful. A Delaware
corporation may indemnify officers and directors in an action by or in the
right of the corporation under the same conditions, except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses
that such officer or director actually and reasonably incurred.
Article of the Certificate of Incorporation of the Company (filed as
Exhibit 3.1) provides that except under certain circumstances as described
above and as set forth in Section 102(b)(7) of the DGCL, directors of the
Company shall not be personally liable to the Company or its stockholders for
monetary damages for breach
II-1
<PAGE>
of fiduciary duties as directors. Article of the By-Laws of the Company
(filed as Exhibit 3.2) provides for indemnification of the officers and
directors of the Company to the full extent permitted by applicable law. The
Underwriting Agreement, exhibit 1.1 to this Registration Statement, which will
be filed by amendment, provides for indemnification by the Underwriters of the
Company and its directors and certain officers, and by the Company of the
Underwriters, for certain liability arising under the Securities Act of 1933,
as amended.
The Company intends to enter into a director and officer insurance policy
that will provide for reimbursement or payments for losses arising from claims
against covered directors and officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following is a summary of all securities of the Company sold within the
past three years, which were not registered under the Securities Act of 1933,
as amended (the "Securities Act").
In October 1994, the Company acquired substantially all of the assets and
assumed certain liabilities of Real-Time Technology, Inc. ("Real-Time"), a
computer consulting firm which was owned by Victor Friedman, the Company's
Executive Vice President. The purchase price of $252,478 was paid by the
issuance of 753 shares of Company common stock to Real Time which were then
transferred to Victor Friedman in a simultaneous transaction.
The above described issuance of securities was made in reliance upon Section
4(2) of the Securities Act as a transaction not involving any public offering.
The Company has reason to believe that the foregoing purchaser was familiar
with or had access to information concerning the operations and financial
conditions of the Company, and such individual acquired the securities for
investment and not with a view to the distribution thereof.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS:
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.*
2.1 Asset Purchase Agreement, dated April 26, 1994, between ACS Software
Products Group and Computer Generated Solutions, Inc.
2.2 Plan and Agreement of Reorganization, dated August 26, 1994, between
Computer Generated Solutions, Inc. and Real-Time Technology, Inc.
3.1 Amended and Restated Certificate of Incorporation of the Company.*
3.2 Bylaws of the Company, as amended.*
4.1 Specimen certificate for the shares of Common Stock.*
4.2 Registration Rights Agreement.*
4.3 1996 Long-Term Incentive Plan.*
5.1 Opinion of Chadbourne & Parke LLP, counsel to the Company.*
10.1 Service Agreement , dated October 4, 1995, between International
Business Machines Corporation and Computer Generated Solutions, Inc.
10.2 Master Agreement for Professional Services, dated June 26, 1995,
between AT&T Corp. and Computer Generated Solutions, Inc.
10.3 Outsourcing Agreement, dated as of March 30, 1996, between Teleservice
Resources, Inc. and Computer Generated Solutions, Inc.
10.4 Agreement, dated September 15, 1995, between Borland International,
Inc. and Computer Generated Solutions, Inc.
10.5 Agreement, dated November 9, 1995, between Borland International, Inc.
and Computer Generated Solutions, Inc.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.6 Authorized Education Center Agreement, dated May 23, 1995, between
Lotus Development Corporation and Computer Generated Solutions, Inc.
10.7 1996 Business Partner Agreement, dated June 1, 1996, between
International Business Machines Corporation and Computer Generated
Solutions, Inc.
10.8 Revolving Credit Facility, dated July 1, 1996, as amended, between
Computer Generated Solutions, Inc. and Bank Leumi Trust Company of New
York.
10.9 Term Loan, dated June 29, 1994, as amended, between Computer Generated
Solutions, Inc. and Bank Leumi Trust Company of New York.*
11.1 Statement regarding Computation of Per Share Earnings.*
Letter from BDO Seidman, LLP regarding change in certifying
16.1 accountants.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of BDO Seidman, LLP.
23.3 Consent of Chadbourne & Parke LLP.*
23.4 Consent of Edward Schroeder.**
24.1 Powers of Attorney (included in signature page hereto).**
27.1 Financial Data Schedule.**
</TABLE>
- --------
* To be filed by amendment.
** Previously Filed.
(B) FINANCIAL STATEMENT SCHEDULE:
II--Valuation and Qualifying Accounts
All other schedules are omitted either because they are not applicable or
are not material, or the information presented therein is contained in the
Financial Statements or notes thereto.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the underwriting agreement
certificates in such denomination and registered in such names as
required by the Underwriters to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or controlling persons of the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Company pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
to be part of this Registration Statement as of the time it was
declared effective.
(ii) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at the time shall be deemed to be the initial bona fide
offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF NEW YORK, STATE OF NEW YORK, ON NOVEMBER 8, 1996.
COMPUTER GENERATED SOLUTIONS, INC.
/s/ Philip Friedman
By: _________________________________
NAME: PHILIP FRIEDMAN
TITLE: PRESIDENT AND CHIEF
EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
AND BY PHILIP FRIEDMAN AS ATTORNEY-IN-FACT FOR THE SPECIFIC PERSONS IN THE
CAPACITIES WITH COMPUTER GENERATED SOLUTIONS, INC. ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Philip Friedman President and Chief
- ------------------------------------- Executive Officer November 8,
PHILIP FRIEDMAN (Principal 1996
Executive Officer),
Director
* Executive Vice
- ------------------------------------- President, Director November 8,
VICTOR FRIEDMAN 1996
* Vice President
- ------------------------------------- Finance & November 8,
FRED B. SCHLOSSBERG Administration and 1996
Secretary
(Principal
Financial and
Accounting
Officer), Director
/s/ Philip Friedman
*By:_________________________________
PHILIP FRIEDMAN
ATTORNEY-IN-FACT
II-4
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Computer Generated Solutions, Inc.
We have audited the financial statements of Computer Generated Solutions, Inc.
as of June 30, 1996 and December 31, 1995, and for the six months ended June
30, 1996 and the year ended December 31, 1995, and have issued our report
thereon dated July 12, 1996 (included elsewhere in this Registration
Statement). Our audits also included the financial statement schedule listed in
Item 16(b) of this Registration Statement. This schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein for
the periods stated above.
ERNST & YOUNG LLP
New York, New York
July 12, 1996
S-1
<PAGE>
COMPUTER GENERATED SOLUTIONS, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(Dollars in Thousands)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- --------------------------------------------------------------------------------
ADDITIONS BALANCE
BALANCE CHARGED AT
AT BEGINNING TO COSTS AND (a) END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994
Allowances deducted from assets
to
which they apply:
Allowance for doubtful accounts.. $ 5 $ 54 $(49) $10
YEAR ENDED DECEMBER 31, 1995
Allowances deducted from assets
to
which they apply:
Allowance for doubtful ac-
counts........................ 10 110 (60) 60
SIX MONTHS ENDED JUNE 30, 1996
Allowances deducted from assets
to
which they apply:
Allowance for doubtful ac-
counts........................ 60 84 (79) 65
</TABLE>
- --------
(a) Uncollectible receivables written off.
Note: Valuation and qualifying accounts for the year ended December 31, 1993
were not material.
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.*
2.1 Asset Purchase Agreement, dated April 26, 1994, between ACS
Software Products Group and Computer Generated Solutions, Inc.
2.2 Plan and Agreement of Reorganization, dated August 26, 1994,
between Computer Generated Solutions, Inc. and Real-Time
Technology, Inc.
3.1 Amended and Restated Certificate of Incorporation of the
Company.*
3.2 Bylaws of the Company, as amended.*
4.1 Specimen certificate for the shares of Common Stock.*
4.2 Registration Rights Agreement.*
4.3 1996 Long-Term Incentive Plan.*
5.1 Opinion of Chadbourne & Parke LLP, counsel to the Company.*
10.1 Service Agreement, dated October 4, 1995, between International
Business Machines Corporation and Computer Generated Solutions,
Inc.
10.2 Master Agreement for Professional Services, dated June 26, 1995,
between AT&T Corp. and Computer Generated Solutions, Inc.
10.3 Outsourcing Agreement, dated as of March 30, 1996, between
Teleservice Resources, Inc. and Computer Generated Solutions,
Inc.
10.4 Agreement, dated as of September 15, 1995, between Borland
International, Inc. and Computer Generated Solutions, Inc.
10.5 Agreement, dated November 9, 1995, between Borland
International, Inc. and Computer Generated Solutions, Inc.
10.6 Authorized Education Center Agreement, dated May 23, 1995,
between Lotus Development Corporation and Computer Generated
Solutions, Inc.
10.7 1996 Business Partner Agreement, dated June 1, 1996, between
International Business Machines Corporation and Computer
Generated Solutions, Inc.
10.8 Revolving Credit Facility, dated July 1, 1996, as amended,
between Computer Generated Solutions, Inc. and Bank Leumi Trust
Company of New York.
10.9 Term Loan, dated June 29, 1994, as amended, between Computer
Generated Solution, Inc. and Bank Leumi Trust Company of New
York.*
11.1 Statement regarding Computation of Per Share Earnings.*
16.1 Letter from BDO Seidman, LLP regarding change in certifying
accountants.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of BDO Seidman, LLP.
23.3 Consent of Chadbourne & Parke LLP.*
23.4 Consent of Edward Schroeder.**
24.1 Powers of Attorney (included in signature page hereto).**
27.1 Financial Data Schedule.**
</TABLE>
- --------
* To be filed by amendment.
** Previously Filed.
<PAGE>
EXHIBIT 2.1
-----------
Asset Purchase Agreement, dated April 26, 1994, between ACS Software Products
Group and Computer Generated Solutions, Inc.
<PAGE>
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
AGREEMENT, made this 26th day of April, 1994, by and between ACS
---- -----
SOFTWARE PRODUCTS GROUP, a Georgia general partnership (the "Seller"), and
COMPUTER GENERATED SOLUTIONS, INC., a Delaware corporation (the "Buyer").
WHEREAS, the Seller is engaged in the development, marketing, sale and
license of software platforms and packages used in the apparel and related
industries (the "ACS Business"); and
WHEREAS, the Seller wishes to sell and assign to the Buyer, and the Buyer
wishes to purchase and assume from the Seller, for the consideration and on the
terms and conditions set forth herein, the assets that are used in connection
with, or related to, the ACS Business and the liabilities that are related to,
and arise from, the ACS Business.
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
the Seller and the Buyer agree as follows:
Section 1. Definitions. In addition to the other terms defined herein, the
-----------------------
following definitions shall apply throughout this Agreement:
1.1. Accounts Receivable. The term "Accounts Receivable" shall mean all
-------------------
accounts receivable of the Seller as of the Closing Date as set forth on the
schedule that the Seller shall deliver to the Buyer on the Closing Date.
1.2. Assumed Liabilities. The term "Assumed Liabilities" shall have the
-------------------
meaning set forth in Section 4.
13. Closing. The term "Closing" shall have the meaning set forth in Section
-------
6.1.
1.4. Closing Date. The term "Closing Date" shall have the meaning set forth in
------------
Section 6.1.
1.5. Closing Date Balance Sheet. The term "Closing Date Balance Sheet" shall
--------------------------
have the meaning set forth in Section 5.3(b).
1.6. Contracts. The term "Contracts" shall have the meaning set forth in
---------
Section 7.7.
1.7. Excluded Contracts. The term "Excluded Contracts" shall have the meaning
------------------
set forth in Section 7.7.3.
1.8. Guaranteed Contracts. The term "Guaranteed Contracts" shall have the
---------------------
meaning set forth in Section 7.7.4.
1.9. Financial Statements. The term "Financial Statements" shall mean the
--------------------
March 26, 1994 Balance Sheet and Income Statement of the ACS Business, copies of
which are attached as Exhibit A.
<PAGE>
1.10. Intangible Property. The term "Intangible Property" shall have the
-------------------
meaning set forth in Section 7.10.
1.11. Net Asset Value. The term "Net Asset Value" shall have the meaning set
----------------
forth in Section 5.3(c).
1.12. Net Receivable Value. The term "Net Receivables Value" shall have the
--------------------
meaning set forth in Section 5.4(a).
1.13. Permits. The term "Permits" shall have the meaning set forth in Section
-------
7.8.
1.14. Post-Closing Adjustment. The term "Post-Closing Adjustment" shall have
-----------------------
the meaning set forth in Section 5.3(c).
1.15. Purchased Assets. The term "Purchased Assets" shall have the meaning set
----------------
forth in Section 3.
1.16. Purchase Price. The term "Purchase Price" shall mean the amount set
--------------
forth in Section 5.1.
1.17. Real Property Leases. The term "Real Property Leases" shall have the
--------------------
meaning set forth in Section 7.6.2.
1.18. Receivables Adjustment. The term "Receivables Adjustment" shall have the
----------------------
meaning set forth in Section 5.4(c).
1.19. Tangible Personal Property. The term "Tangible Personal Property" shall
-------------------------
have the meaning set forth in Section 7.9.
SECTION 2. SALE AND PURCHASE OF THE PURCHASED ASSETS AND ASSUMPTION OF THE
--------------------------------------------------------------------------
ASSUMED LIABILITIES. At the Closing, and subject to the terms and conditions
- -------------------
of this Agreement: (a) the Seller shall sell and transfer to the Buyer, and the
Buyer shall purchase and acquire from the Seller, the Purchased Assets; and (b)
the Seller shall assign to the Buyer, and the Buyer shall assume from the
Seller, the Assumed Liabilities.
Section 3. The Purchased Assets.
------------------------------
3.1. The Purchased Assets. The "Purchased Assets" shall mean all of the assets
--------------------
that are used in connection with, or related to, the ACS Business, including
without limitation, the following:
(a) all Accounts Receivable;
(b) all prepaid expenses and deferred charges of the Seller related to the
ACS Business;
(d) all Tangible Personal Property;
(e) all Intangible Property;
- 2 -
<PAGE>
(f) all of the Seller's right, title, and interest in, under and pursuant to
the contracts, agreements, personal property leases, licenses, purchase
orders, and commitments to which the Seller is a party, whether written or
oral, and whether or not in the usual and ordinary course of business and
which are related to the ACS Business, including without limitation, the
Contracts (but excluding the Excluded Contracts);
(g) all of the Seller's right, title, and interest in, under, and pursuant to
the Real Property Leases;
(k) all Permits; and
(1) all of the records of the Seller relating solely to the ACS Business, but
excluding any records relating to the partnership, its tax returns and
related work papers of the Seller.
3.2. The Excluded Assets. Anything herein to the contrary notwithstanding, the
-------------------
Purchased Assets shall not include the Excluded Contracts, which Excluded
Contracts shall be retained by Seller.
Section 4. The Assumed Liabilities.
----------------------------------
4.1. THE ASSUMED LIABILITIES. The "Assumed Liabilities" shall mean all of the
-----------------------
liabilities of the ACS Business, as of the Closing Date, which are reflected in
the Closing Date Balance Sheet or otherwise disclosed in the Disclosure
Schedules, including without limitation, the following:
(a) all of the Seller's liabilities and obligations under and pursuant to the
contracts, agreements, personal property leases, licenses, purchase orders,
and commitments to which the Seller is a party, whether written or oral,
and whether or not in the usual and ordinary course of business and which
are related to the ACS Business, including without limitation, the
Contracts (but excluding liabilities or obligations under the Excluded
Contracts): and
(b) all of the Seller's liabilities and obligations under and pursuant to the
Real Property Leases.
4.2. Tax Liabilities Excluded. The Assumed Liabilities shall not include any
------------------------
liabilities of the Seller for income taxation that are related to, or arise
from, the Seller's conduct of the ACS Business prior to the Closing Date.
4.3. Release from Guaranteed Contact. In connection with the assignment of the
-------------------------------
Contracts, and as a condition to the obligations of the Seller hereunder, the
partners (or, as the case may be, the parent corporations of the partners) shall
be fully released from all obligations and guarantees under all of the
Guaranteed Contracts, and if required by any third party to the Guaranteed
Contracts, the Buyer shall assume such obligations and guarantees.
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<PAGE>
Section 5. Purchase Price.
-------------------------
5.1. Purchase Price. The purchase price (the "Purchase Price") of the
--------------
Purchased Assets shall be $1,200,000.00, subject to adjustment as provided in
this Section 5.
5.2. Payment of Purchase Price. At the Closing, the Purchase Price shall be
-------------------------
satisfied and paid in full by the Buyer as follows:
(a) In satisfaction of $800,000.00 of the Purchase Price, the
Buyer shall deliver to (i) the Seller's legal counsel, as
escrow agent to hold on behalf of the Seller, on signing a
certified check in the amount of $400,000.00, and (ii) to
the Seller, on Closing a certified check in the amount of
$400,000.00; and
(b) In satisfaction of the balance of the Purchase Price, the
Buyer shall make and deliver to the Seller a promissory
note in substantially the form of Exhibit B (the
"Promissory Note") in the principal amount of $400,000.00
(subject to adjustment as provided in this Section 5, which
Promissory Note shall (i) bear interest on the unpaid
principal amount at a rate per annum equal to 6.75% and
(ii) provide for the payment of the principal amount in two
equal installments of $200,000.00 each (subject to
adjustment as provided in this Section 5), together with
accrued interest, said payments to be made, respectively,
on the date which is one year and two years after the
Closing Date.
5.3. Post-Closing Adjustment. (a) Not later than forty-five (45) days
-----------------------
following the Closing, the Seller shall prepare and deliver to the Buyer a
balance sheet with respect to the ACS Business as of the Closing Date (the
"Closing Date Balance Sheet"). The Closing Date Balance Sheet shall be prepared
in accordance with generally accepted accounting principles on a basis
consistent with the Seller's past practice and financial reporting.
(b) If the Buyer objects to the Closing Date Balance Sheet, it shall give
notice of such objection to the Seller within fifteen (15) days following its
receipt thereof. If the Buyer does not object to the Closing Date Balance Sheet
within such period, the Closing Date Balance Sheet shall be final and binding
upon the Buyer and the Seller. If the Buyer objects to the Closing Date Balance
Sheet within such period and the Seller and the Buyer are unable to resolve such
objection within fifteen (15) days, then such objection shall be submitted to a
nationally recognized independent certified accounting firm jointly selected by
the Seller and the Buyer. The determination of such firm shall be final and
binding upon the Seller and the Buyer. The Seller and the Buyer shall each pay
one-half of the fees and expenses of such firm in connection with the foregoing.
(c) If the net asset value of the ACS Business ("Net Asset Value", defined to
equal the current assets plus fixed assets (at book value plus other assets
minus the liabilities of the ACS Business) as determined with reference to the
Closing Date Balance Sheet is greater than or less than $544,632.00, and such
surplus or shortfall exceeds $5,000.00, then the principal amount under the
Promissory Note shall be increased by such surplus or decreased by such
shortfall, as the case may be (and the two equal payment installments under such
Promissory Note adjusted accordingly) (such increase or decrease, the "Post
- -Closing Adjustment").
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<PAGE>
5.4. Receivables Adjustment. (a) For purposes of this Section 5.4, the term
----------------------
"Net Receivables Value" shall mean the amount of the Accounts Receivable of the
Seller, net of any and all reserve for bad debts, as reported on the Closing
Date Balance Sheet and agreed by the parties in accordance with the provisions
of Section 5.3(b) above.
(b) From and after the Closing Date and for a period of ninety (90) days, the
Buyer shall use its best efforts to collect the Accounts Receivable. During this
ninety (90) day period, subject to the provisions of Section 5.4(c) below, the
Buyer shall retain all monies collected in respect of the Accounts Receivable
and the Seller shall pay over to the Buyer, any and all monies received by or
paid to the Seller in respect of the Accounts Receivable. At the end of such
ninety (90) day period, in the event that any of the Accounts Receivable remain
outstanding and not collected by the Buyer, for a period of ninety (90) days
thereafter the Seller shall use its best efforts to collect such remaining,
outstanding Accounts Receivable and, subject to the provisions of Section 5.4(c)
below, the Seller shall pay over to the Buyer any and all monies received by or
collected by the Seller in respect of such remaining, outstanding Accounts
Receivable.
(c) In the event that the aggregate amount of all monies collected by the
Buyer and the Seller in respect of the Accounts Receivable in the 180 day
period following the Closing (provided that monies collected by the Seller in
such period are paid over to the Buyer) is greater than or less than the Net
Receivables Value reported on the Closing Date Balance Sheet, then the principal
amount under the Promissory Note shall be increased by one-half of such surplus
or decreased by one-half of such shortfall, as the case may be (and the two
equal payment installments under such Promissory Note adjusted accordingly)
(such increase or decrease, being equal to one-half of such surplus or
shortfall, the "Receivables Adjustment").
(d) Anything herein to the contrary notwithstanding, the parties understand
and agree that one-half (and not all) of such shortfall shall be recoverable by
the Buyer as an indemnifiable loss.
Section 6. The Closing.
----------------------
6.1. Time and Place. The consummation of the transactions contemplated in this
--------------
Agreement (the "Closing") shall take place at the offices of Kurt Salmon
Associates, Inc., Suite 900, 1355 Peachtree Street, Atlanta, Georgia 30309 on
May 2, 1994, at 2:00 p.m. EDT or such other date and time as the Seller and the
Buyer may agree; provided that if necessary to obtain all third party consents
as set forth in Section 7.7.2, the parties agree that the Closing shall be
extended to a date not later than May 16, 1994 (the "Closing Date"). All actions
at the Closing shall be deemed to be taken simultaneously .
6.2. Actions by the Seller at the Closing. At the Closing, the Seller shall
------------------------------------
deliver to the Buyer the following:
(a) a Bill of Sale to the Tangible Personal Property in
substantially the form of Exhibit C:
(b) such Instruments of Assignment and Transfer of all of the
Seller's right, title, and interest in the Accounts
Receivable, Intangible Property and the Permits as may be
reasonably requested by the Buyer;
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<PAGE>
(c) an Assignment and Assumption Agreement to the Contracts in substantially
the Form of Exhibit D;
(d) the schedule of the Accounts Receivable;
(e) all third party consents as set forth in Section 7.7.2;
(f) the certificate described in Section 12.2;
(g) copies of the resolutions of the Board of Managers of the Seller, certified
by the Secretary of the Seller, and copies of the resolutions of the Board
of Directors of the general partners of the Seller, certified by the
Secretary of each such general partner, approving the transactions
contemplated herein;
(h) such other documents and instruments as may be reasonably requested
by the Buyer; and
(i) the marketing agreements described in Section 12.4.
6.3. Actions by the Buyer at the Closing. At the Closing, the Buyer shall
-----------------------------------
deliver to the Seller the following:
(a) the Purchase Price in accordance with the provisions of Section 5;
(b) an Assignment and Assumption Agreement in substantially the form of
Exhibit D;
(c) the certificate of the Buyer described in Section 11.2;
(d) copies, certified by the Secretary of the Buyer, of the resolutions of the
Board of Directors of the Buyer approving the transactions contemplated
herein; and
(e) such other documents and instruments as may be reasonably requested
by the Seller.
Section 7. Representations and Warranties of the Seller. The Seller represents
-------------------------------------------------------
and warrants to the Buyer as follows:
7.1. Partnership Organization and Authority. The Seller is a Partnership duly
--------------------------------------
organized and validly existing under the laws of the State of Georgia. The
Seller is duly qualified to conduct business in Georgia and New York:. The
Seller has the requisite power and authority to carry on its business as it is
now being conducted and to execute and deliver this Agreement and to consummuate
the transactions contemplated herein. The execution and delivery of this
Agreement by KSA Information Technologies, Inc. on behalf of the Seller, and the
consummation by the Seller of the transactions contemplated herein, have been
duly and validly approved and authorized by the Board of Directors and the
general partners of the Seller.
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<PAGE>
7.2. Validity of Agreement: No Violation. This Agreement has been duly
-----------------------------------
executed and delivered by the Seller and is a valid and binding obligation of
the Seller, enforceable against the Seller, in accordance with its terms. Except
as set forth on Disclosure Schedule 7.2, the execution, delivery, and
performance of this Agreement by the Seller and the consummation of the
transactions contemplated herein, will not: (a) violate or conflict with any
provision of any law, rule, regulation, order, permit, certificate, writ,
judgment, injunction, decree, determination, award, or the decision of any
court, governmental agency or instrumentality binding upon the Seller or to
which the Seller is subject; (b) violate, conflict with, or result in the breach
of or a default under any of the Contracts or the Real Property Leases; or (c)
result in the creation, or imposition of, any lien, security interest, charge,
or encumbrance upon, or with respect to, any of the Purchased Assets.
7.3. Absence of Undisclosed Liabilities. Except as set forth on Disclosure
----------------------------------
Schedule 7.3 or in the Financial Statements and except for the Assumed
Liabilities and the Excluded Liabilities, the Seller has no liabilities or
obligations, related to the ACS Business, of any nature, whether known or
unknown, absolute, fixed, accrued, contingent, or otherwise and the Seller
knows of no basis for the assertion against the Seller of any such liability
related to the ACS Business other than liabilities or obligations incurred since
the date of the Financial Statements, in the usual and ordinary course of
business and consistent wifh past practices, none of which will have a material
adverse effect on the assets, business, or financial condition of the Seller.
7.4. Absence of Certain Changes. Except as set forth on Disclosure Schedule
--------------------------
7.4, since the date of the Financial Statements, the Seller has conducted the
ACS Business only in the usual and ordinary course consistent with past
practices and there has not been: (a) any material adverse change in the
financial condition, operations, assets, or liabilities of the Seller; (b) any
damage, destruction, or loss, whether or not covered by insurance, materially
and adversely affecting the Purchased Assets; or (c) any other event or
condition of any character that materially and adversely affects the Purchased
Assets or the ACS Business.
7.5. Taxes. The Seller has accurately prepared and timely filed with the
-----
appropriate governmental agencies all tax returns required to be filed by it
related to the ACS Business, and the Seller has paid, or made provision for the
payment of, all taxes which have become due pursuant to said returns or pursuant
to any assessment received by the Seller. All federal, state, city and foreign
income, profits, franchise, sales, use, occupation, property, excise, payroll
and other taxes due in connection with the ACS Business have been fully paid or
shall be fully paid as of the date hereof or thereafter when due.
7.6. Real Property.
-------------
7.6.1. The Seller does not own any real property, in whole or in part, and
(other than the property leased by the Seller pursuant to the Real Property
Leases) no real property is utilized in the ACS Business.
7.6.2. Set forth on Disclosure Schedule 7.6.2 is a complete list of all leases
(including all amendments and modifications thereto) of real property leased by
the Seller (the "Real Property Leases"). The Real Property Leases are in full
force and effect, are valid and enforceable in accordance with their terms, and
no condition exists or event has occurred which, with notice or lapse of time
or both, would constitute a default or a basis of force majeure or other claim
of excusable delay or nonperformance thereunder.
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<PAGE>
7.6.3. Included in the Real Property Leases are oral subleases pursuant to
which the Seller subleases office space in Atlanta, Georgia and New York, New
York from Microdynamics, Inc., the parent corporation of Microdynamics ACS
Technologies, Inc., a general partner of Seller. The Buyer shall have the right
and option (to be exercised within fifteen (15) days after Closing) to terminate
the sublease for the New York office space or, alternatively the Buyer shall
maintain in effect and continue to sublease such space from Microdynamics, Inc.
on the same terms, and for the same rentals, as are currently provided or such
other terms as the parties agree; and, the Buyer shall maintain in effect and
continue to sublease the Atlanta office space for a minimum period of ninety
(90) days, but after such ninety (90) day period, the Buyer shall have the right
and option (to be exercised within fifteen (15) days after the end of such
ninety (90) day period) to terminate the sublease for the Atlanta office space
or, alternatively, the Buyer shall maintain in effect and continue to sublease
such space from Microdynamics, Inc. on the same terms, and for the same rentals,
as are currently provided or such other terms as the parties may agree.
7.6.4. The office lease for the Los Angeles, California office of the Seller
is a tenancy at will and, to the Seller's knowledge, is cancelable by the
Seller, as tenant, on thirty (30) days notice to the landlord.
7.7. Contracts and Agreements.
7.7.1. Set forth on Disclosure Schedule 7.7.1, is a list of all contracts,
agreements, leases, purchase orders, and commitments, whether or not in the
ordinary course of business to which the Seller is a party, which are related to
the ACS Business, and which: (a) involve the performance of services or the
delivery of goods by the Seller, or any other party thereto, of an amount in
excess of $5,000.00; (b) involve the expenditure or receipt by the Seller of an
amount in excess of $5.000.00: or (c) have a remaining term of six months or
more (collectively, the "Contracts").
7.7.2. Except as set forth on Disclosure Schedule 7.7.2, all of the Contracts
are in full force and effect, are valid and enforceable in accordance with their
terms, and to the knowledge of the Seller no event of default has occurred and
no condition exists or event has occurred which, with notice or lapse of time or
both, would constitute a default or a basis of force majeure or other claim of
excusable delay or nonperformance thereunder. Except as set forth on Disclosure
Schedule 7.7.2, no consent of any party to the Contracts is required to assign
the Contracts, and the Seller's rights and obligations thereunder, to the Buyer.
7.7.3. Set forth on Disclosure Schedule 7.7.3 is a list of all contracts and
agreements which will not be assigned by the Seller to the Buyer at the Closing
and that instead will be retained by the Seller (the "Excluded Contracts").
Included within the Excluded Contracts is that certain Grid System Development
Agreement dated August 12, 1991, between VF Information Technology Services,
Inc. and the Seller (the "VF Development Agreement") (but not the Software
License Agreement and Software Service Agreement of same date). With respect to
the VF Development Agreement (but not with respect to any other Excluded
Contract), which agreement is cancelable on thirty (30) days notice, the Seller
shall pay (or cause to be paid) to the Buyer a commission in an amount equal to
fifteen percent (15%) of all amounts invoiced to VF Information Technology
Services, Inc. under that agreement in respect of work performed prior to
December 31, 1994; said commission shall be paid as and when such amounts are
received by the Seller (or by Kurt Salmon Associates, Inc., as the assignee of
the Seller).
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<PAGE>
7.7.4. Set forth on Disclosure Schedule 7.7.4 is a list of those Contracts for
which Seller's performance has been guaranteed in full or in part by the
partners of the Seller (or as the case may be, by the parent corporations of the
partners, being either Kurt Salmon Associates, Inc. or Microdynamics, Inc., or
both) (the "Guaranteed Contracts").
7.7.5. The Seller will use its best efforts to assign and transfer to the
Buyer, at or following the Closing, all the telephone numbers currently used by
the Seller in the ACS Business.
7.8. Permits. Set forth on Disclosure Schedule 7.8 is a list of all
-------
governmental licenses, permits, consents, approvals, or certificates issued to
the Seller and which are related to the ACS Business (the "Permits"). Except as
set forth on Disclosure Schedule 7.8: (a) the Permits are in full force and
effect; (b) the Seller is not in violation of any of the Permits; and (c) no
condition exists which with notice or the passage of time or both would
constitute a violation of any of the Permits.
7.9. Tangible Personal Property.
--------------------------
7.9.1. Set forth on Disclosure Schedule 7.9.1 is a list of all equipment,
furniture, fixtures, vehicles, and other items of tangible personal property
owned by the Seller and used in connection with the ACS Business (the "Tangible
Personal Property").
7.9.2. Except as set forth on Disclosure Schedule 7.9.2, and except for such
items that, individually or in the aggregate, are not material to the conduct
of the ACS Business: (a) the Seller has good title to the Tangible Personal
Property, free and clear of any liens, mortgages, pledges, or encumbrances; and
(b) all items of Tangible Personal Property are in good operating condition and
repair, reasonable wear and tear excepted, and are adequate for the uses to
which they are being put and are not in need of maintenance or repair except for
ordinary, routine maintenance repairs that are not material in nature or cost.
7.9.3. Subject to the provisions of Section 5.4, the Seller warrants
collectibility of the Accounts Receivable to the extent of the Net Receivables
Value; provided that, as set forth in Section 5.4, one-half (and not all) of any
shortfall shall be recoverable by the Buyer as an indemnifiable loss.
7.10. Intangible Property.
-------------------
7.10.1. Set forth on Disclosure Schedule 7.10.1 is a list of: (a) all software
programs and packages, all registered copyrights, service marks, trade names,
and fictitious business names used or owned by the Seller in connection with the
ACS Business (together with all trade secrets and proprietary information of the
Seller utilized in the ACS Business, the "Intangible Property"); and (b) any
applications for registration for any Intangible Property. Except for the
software of which the Seller is the licensee as set forth in Item 2 (Attachment
2) of Disclosure Schedule 7.10.1, the Seller is the sole owner of each item
shown thereon, free and clear of all liens, encumbrances, and claims. Except as
set forth on Disclosure Schedule 7.10.1, all assignments of registered
copyrights have been recorded at the United States Copyright Office and all
assignments of federally registered service marks and trademarks have been
recorded at the United States Patent and Trademark Office. Except as set forth
on Disclosure Schedule 7.10.1, all federal registrations for Intangible Property
are currently in compliance with all legal requirements (including payment of
filing, examination, maintenance fees, and
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<PAGE>
affidavits of use and incontestability), are valid and enforceable and are not
subject to any maintenance fees or taxes on actions or filings falling due
within 90 days after the Closing Date.
7.10.2. Except as set forth on Disclosure 7.10.2, the Seller has not received
any notice: (a) that any of the Intangible Property infringes upon or otberwise
conflicts with any copyright, trademark, service mark, trade name, or trade
secret of any other person; or (b) of any claim by any other person that it has
any adverse right, title, claim, or interest in and to any item of Intangible
Property.
7.10.3. With respect to the software licensed by the Seller to its customers,
there are no copies of such software escrowed with a third party or held by the
Seller pursuant to any agreement with any such customer, nor or there any such
agreements requiring the escrow of such copies.
7.10.4. As part of the Intangible Property, the Seller shall transfer to the
Buyer and the Buyer shall acquire from the Seller the "On Line Assistant"
software and related programs which are currently in development by the Seller
pursuant to contracts with Polo Ralph Lauren and Collection Clothing; provided
that, as set forth in Disclosure Schedule 7.3, in connection therewith the Buyer
shall assume and be responsible for all expense incurred to complete the
development of the "On Line Assistant" software and to fulfill all
responsibilities under such contracts.
7.11. Employees and Employee Benefits.
-------------------------------
7.11.1. Set forth on Disclosure Schedule 7.11.1 is a complete list of all
employees of the Seller who are employed in connection with the ACS Business as
of the date hereof, including employees on lease of absence. There is no
collective bargaining or union agreement in effect with respect to any of the
employees of the ACS Business.
7.11.2. Set forth on Disclosure Schedule 7.11 .2 is a complete list of all
employee benefit plans and programs to which the Seller is a party with respect
to the ACS Business (the "Plans and Programs"). The Seller shall be solely
responsible for the maintenance, termination or wind-up of all such Plans and
Programs with respect to the ACS Business, and the Buyer shall have no
liability, expense or responsibility therefor. Without limiting the generality
of the foregoing, the Seller shall arrange for a trustee-to-trustee transfer of
all funds in the Seller's 401(K) Plan to the Buyer's 401(K) Plan.
7.11.3. To the best knowledge of the Seller and except as set forth on
Disclosure Schedule 7.11.3: (a) the Seller is in substantial compliance with all
federal, state, and other applicable laws regarding the maintenance and
operation of such Plans and Programs; (b) the Purchased Assets are not subject
to any liens or other encumbrances under the Internal Revenue Code or the
Employee Retirement Income Security Act with respect to such Plans and Programs
or any other plan or program maintained by any of the Seller's affiliates; and
(c) there are no material liabilities with respect to all such employee benefit
plans and programs which are not disclosed in the Financial Statements.
7.11.4. With respect to the employees of the ACS Business who are employed in
the State of Georgia, the Seller does not have any express written contracts
with any such employees which expressly obligate the Seller to employ an
individual employee for a certain time. With respect to all such employees in
the State of Georgia, there is no written severance policy or severance plan
which expressly obligates the Seller to make severance or separation payments to
employees upon
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<PAGE>
termination of employment, nor is there any statutory requirement to pay
severance to such employees upon termination of their employment; provided that,
excluded from this representation is any severance or post-termination
obligation which may arise or may be deemed to arise by or through a claim of
Seller's past practices (including but not limited to severance paid in
connection with the closure of the Concord, California office).
7.12. Litigation. Except as set forth on Disclosure Schedule 7.12: (a) the
----------
Seller is not subject to any judgment, award, order, or decree or involved in
any governmental action or any proceeding in which relief is sought affecting
the operation of the ACS Business or which would prevent, delay, or make illegal
the transactions contemplated by this Agreement; (b) there are no actions,
claims, suits, proceedings, or investigations pending or, to the best knowledge
of the Seller, threatened, involving or affecting the ACS Business before any
court or governmental or regulatory body which individually or in the aggregate
would have a material adverse effect on the condition, financial or otherwise,
of the ACS Business; and (c) to the best knowledge of the Seller, no facts
exist which would serve as a basis under current laws or regulations, for the
institution of any actions, laws, audit investigation, claim, or procedure which
might affect materially and adversely the business or financial condition of the
ACS. Business.
Section 8. Representations and Warranties of the Buyer. The Buyer represents
------------------------------------------------------
and warrants to the Seller as follows:
8.1. Corporate Organization and Authority. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware. The Buyer has the requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
herein. The execution and delivery of this Agreement by the Buyer and the
consummation by the Buyer of the transactions contemplated herein have been duly
and validly approved and authorized by the Board of Directors of the Buyer.
8.2. Validity of Agreement; No Violation. This Agreement has been duly
-----------------------------------
executed and delivered by the Buyer and is a valid and binding obligation of the
Buyer, enforceable in accordance with its terms. The execution, delivery, and
performance of this Agreement by the Buyer and the consummation of the
transactions contemplated hereby will not violate or conflict with any provision
of any law, rule, regulation, order, permit, certificate, writ, judgment,
injunction, decree, determination, award, or other decision of any court,
governmental agency or instrumentality binding upon the Buyer or to which the
Buyer is subject.
83. Buyer's Due Diligence. The Buyer is a sophisticated legal entity and was
---------------------
advised by knowledgeable counsel and other advisors in connection with this
Agreement. Neither the Seller nor any other person has made any representation
or warranty, express or implied, regarding the accuracy of completeness of any
information, regarding the Seller, the ACS Business, the Purchased Assets, or
the Assumed Liabilities which is not expressly set forth herein. Neither the
Seller nor any other person shall have or be subject to any liability to the
Buyer or any other person resulting from the Buyer's use of or reliance on such
information. THE BUYER ACKNOWLEDGES AND AGREES THAT OTHER THAN THE
REPRESENTATIONS AND WARRANTIES EXPRESSLY MADE BY THE SELLER HEREIN, THE SELLER
MAKES NO REPRESENTATIONS OR WARRANTIES WHATSOEVER TO THE BUYER, AND THE SELLER
EXPRESSLY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES AS TO THE MERCHANTABILITY
OR FITNESS OF THE PURCHASED ASSETS FOR ANY PARTICULAR PURPOSE.
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<PAGE>
Section 9. Pre-Closing Covenants of the Seller.
----------------------------------------------
9.1. Access. Prior to the Closing, the Seller shall provide the Buyer with
------
reasonable access to the Purchased Assets and to the Seller's employees, books
and records, compensation and employee benefit plan documents, and such other
information relating to the Seller and its business as the Buyer may reasonably
request. The Seller shall provide the Buyer with, or allow the Buyer to make,
copies, at Buyer's expense, of any requested materials.
9.2. Conduct of Business.
-------------------
9.2.1. Affirmative Covenants. Prior to the Closing, except as may be agreed
----------------------
to in writing by the Seller and the Buyer, the Seller shall: (a) conduct the ACS
Business, in all material respects, according to its ordinary and usual course
of business and consistent with past practice; (b) maintain in effect and fully
perform all of its obligations under the Contracts and the Real Property Leases
in accordance with the terms thereof; (c) give prompt written notice to the
Buyer of any notice received by the Seller of any default or breach or alleged
default or breach under any of the Contracts or the Real Property Leases and of
any claim or threat to commence any action, suit, proceeding, or investigation
against the Seller; (d) maintain the Tangible Personal Property and the Leased
Real Property in good condition and working order; (e) protect and maintain in
effect the Intangible Property; (f) comply, in all material respects, with all
laws applicable to it in the conduct of the ACS Business; (g) preserve its
business organization and use its reasonable efforts to retain the services of
its present officers, employees, and agents; and (h) use its best efforts to
cause all conditions to the consummation of the transactions contemplated hereby
to be satisfied.
9.2.2. Negative Covenants. Prior to the Closing, except as may be agreed in
------------------
writing by the Seller and the Buyer, the Seller shall not: (a) increase in any
manner the compensation payable to any of its directors, officers, or
employees; (b) change or agree to change any bonus, profit-sharing, pension,
retirement, deferred compensation, employment or other plan, agreement, trust,
fund or arrangement for the benefit of any of its directors, officers, or
employees, except as may be required by law; (c) establish, or agree to
establish, pay or agree to pay any pension, profit-sharing, bonus, incentive,
deferred compensation, stock purchase, stock option, stock appreciation right,
group insurance, severance pay, retirement or other benefits not required by an
existing employee benefit; (d) make or commit to make any capital expenditures
in excess of $5,000.00; (e) enter into or agree to enter into any lease,
contract, commitment, transaction or understanding of any kind, or to amend or
agree to amend any of the Contracts or the Real Property Leases; (f) create,
incur, or assume any liability or obligation; (g) assume, guarantee, endorse or
otherwise become liable for the obligations of any other person or entity; (h)
make any loans, advances or capital contributions to, or investments in, any
other person or entity; (i) cause or suffer any of its property to become
encumbered by any security interest, mortgage or encumbrance; or (j) waive any
right or settle any claim in excess of $5.000.00.
9.3. Consents of Third Parties. The Seller shall use its best efforts to
-------------------------
obtain any consents of third parties and regulatory approvals required for the
consummation by the Seller of this Agreement and the transactions contemplated
hereby on terms and conditions satisfactory to the Buyer.
9.4. Cooperation. The Seller shall cooperate with the Buyer to effect the
------------
consummation of the transactions contemplated herein on the Closing Date.
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<PAGE>
9.5. Supplement to Disclosure Schedules. The Seller shall, from time to time
---------------------------------
prior to or at the Closing, by notice to the Buyer, supplement or amend any
Disclosure Schedule, including without limitation, one or more supplements or
amendments thereto, to correct any matter which would constitute a breach of any
representation or warranty set forth herein. Such supplemental or amended
Disclosure Schedule shall not be deemed to cure any breach of such
representation or warranty for the purposes of Section 16 hereof. If, however,
the Closing occurs, such supplemental or amended Disclosure Schedule shall be
effective to cure and correct for all purposes any breach of any representation
or warranty that would have existed by reason of the Seller not having made such
supplement or amendment.
Section 10. Pre-Closing Covenants of the Buyer.
----------------------------------------------
10.1. Cooperation. The Buyer shall cooperate with the Seller to effect the
-----------
consummation of the transactions contemplated herein on the Closing Date.
Section 11. Conditions Precedent to the Obligations of the Seller. The
------------------------------------------------------------------
obligations of the Seller hereunder are subject to the fulfillment of each of
the following conditions prior to or at the Closing, any one of which may be
waived in whole or in part by the Seller.
11.1. Performance of Obligations. The Buyer shall have performed, or complied
---------------------------
with, in all respects all of its agreements and covenants hereunder.
11.2. Representations and Warranties. The representations and warranties of
------------------------------
the Buyer made herein shall be deemed to have been made again at and as of the
Closing Date and shall then be true, and Buyer shall deliver to the Seller a
Certificate of an officer of the Buyer, dated as of the Closing Date, certifying
to that effect.
11.3. Consents of Third Parties. The Seller and the Buyer shall have received
--------------------------
the consent of third parties to the assignment of the Contracts, and the
assumption by the Buyer of the Seller's rights and obligations thereunder, in
each case where the failure to obtain such consent would have a material adverse
effect on the ACS Business.
11.4. Release from Guaranteed Contracts. The partners (or as the case may be,
----------------------------------
the parent corporations of the partners) shall have been fully released from all
guarantees and obligations under the Guaranteed Contracts.
Section 12. Conditions Precedent to the Obligations of the Buyer. The
----------------------------------------------------------------
obligations of the Buyer hereunder are subject to the fulfillment of each of the
following conditions prior to or at the Closing, any one of which may be waived
in whole or in part by the Buyer:
12.1. Performance of Obligations. The Seller shall have performed, or complied
--------------------------
with, in all respects all of its agreements and covenants hereunder.
12.2. Representations and Warranties. The representations and warranties of
------------------------------
the Seller made herein shall be deemed to have been made again at and as of the
Closing Date and shall then be true, and Seller shall deliver to the Buyer a
Certificate of an officer of the Seller, dated as of the Closing Date,
certifying to that effect.
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<PAGE>
12.3. Consents of Third Parties. The Seller and the Buyer shall have received
-------------------------
the consent of the third parties to the assignment of the Contracts, and the
assumption by the Buyer of the Seller's rights and obligations thereunder, in
each case where the failure to obtain such consent would have a material adverse
effect on the ACS Business.
12.4. Marketing Agreements. The Buyer shall have entered into one or more
--------------------
agreements with Kurt Salmon Associates, Inc. pursuant to which Buyer, as the new
owner of the ACS Business, for; a period of three (3) years from Closing shall
have a non-exclusive right to market (i) DCMS/R/ and DCMS/R/ Jr. and (ii) Next
Generation Software (if, and as and when developed by Kurt Salmon Associates,
Inc.); such agreement(s) shall be on substantially the same terms as the
existing agreement between the Seller and Kurt Salmon Associates, Inc. regarding
DCMS/R/ and DCMS/R/ Jr.
Section 13. The Seller's Confidential Information.
-------------------------------------------------
13.1. Terms of this Agreement. The Seller and the Buyer hereby agree that the
------------------------
terms of this Agreement shall be held by them in the strictest of confidence,
and that neither the Seller nor the Buyer, shall, at any time, without the
consent of the other, provide or disclose to others any copies of this Agreement
or any of the provisions hereof or any material information with respect to the
transactions contemplated herein.
13.2. The Seller's Confidential Information.
-------------------------------------
13.2.1. For purposes of this Agreement, the term "Seller's Confidential
Information" shall mean: (a) all data or information, whether in written or
unwritten form, or in a form produced or stored by any magnetic, electrical, or
mechanical means or process, that is disclosed divulged, delivered, or otherwise
made available to the Buyer by the Seller; and (b) all summaries, notes,
abstracts, or other compilations or derivations (whether in written or unwritten
form, or in a form produced or stored by any magnetic, electrical, or mechanical
means or process) of the data or information described in (a) above.
Notwithstanding the foregoing, the term "Seller's Confidential Information"
shall not include any data or information that is: (a) previously known to
the Buyer; (b) generally known or readily available from public or trade
sources; (c) obtained by the Buyer from a third party; or (d) independently
developed or discovered by the Buyer.
13.2.2. The Buyer hereby agrees that prior to the Closing it shall use the
Seller's Confidential Information solely in connection with, and in furtherance
of, the consummation of the transactions contemplated in this Agreement and for
no other purpose whatsoever.
13.2.3. The Buyer hereby agrees that prior to the Closing and at all times
following the termination of this Agreement, it shall not disclose or divulge
the Seller's Confidential Information to any individual or entity other than to
employees of the Buyer on a need-to-know basis. The Seller hereby further agrees
that it and all such employees shall hold, maintain, and treat the Seller's
Confidential Information in the strictest confidence.
13.2.4. The Buyer hereby agrees that prior to the Closing and at all times
following the termination of this Agreement, it shall not copy or reproduce, in
whole or in part, or permit any other individual or entity, to copy or
reproduce, in whole or in part, any of the Seller's Confidential Information
without the prior written consent of the Seller.
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<PAGE>
13.2.5. The Buyer hereby agrees that prior to the Closing and at all times
following the termination of this Agreement, it shall use its best efforts to:
(a) maintain and protect the confidential and proprietary nature of the Seller's
Confidential Information; (b) prevent the unauthorized or improper use of the
Seller's Confidential Information; (c) prevent the unauthorized disclosure of
the Seller's Confidential Information; and (d) prevent the unauthorized copying
or reproduction of the Seller's Confidential Information.
13.2.6. Upon the termination of this Agreement as provided in Section 16, the
Buyer shall immediately: (a) return to the Seller all of the Seller's
Confidential Information including without limitation, all copies, abstracts,
or extracts thereof; (b) destroy all analyses, compilations, studies, or other
documents based upon or including the Seller's Confidential Information; (c)
cease using the Seller's Confidential Information for any purpose whatsoever;
and (d) deliver to the Seller a certificate of an authorized officer of the
Buyer certifying the foregoing.
13.3. The Buyer's Confidential Information.
-----------------------------------
13.3.1. For purposes of this Agreement, the term "Buyer's Confidential
Information" shall mean: (a) all data or information, whether in written or
unwritten form, or in a form produced or stored by any magnetic, electrical, or
mechanical means or process, that is disclosed, divulged, delivered, or
otherwise made available to the Seller by the Buyer hereunder; and (b) all
summaries, notes, abstracts, or other compilations or derivations (whether in
written or unwritten form, or in a form produced or stored by any magnetic,
electical, or mechanical means or process) of the data or information described
in (a) above. Notwithstanding the foregoing, the term "Buyer's Confidential
Information" shall not include any data or information that is: (a) previously
known to the Seller; (b) generally known or readily available from public or
trade sources; (c) obtained by the Seller from a third party; or (d)
independently developed or discovered by the Seller.
13.3.2. The Seller hereby agrees to use the Buyer's Confidential Information
solely in connection with, and in furtherance of, the consummation of the
transactions contemplated in this Agreement and for no other purpose whatsoever.
13.3.3. The Seller hereby agrees that prior to the Closing and at all times
thereafter, it shall not disclose or divulge the Buyer's Confidential
Information to any individual or entity other than to employees of the Seller on
a need-to-know basis. The Seller hereby further agrees that it and all such
employees shall hold, maintain, and treat the Buyer's Confidential Information
in the strictest confidence.
13.3.4. The Seller hereby agrees that prior to the Closing and at all times
thereafter, it shall not copy or reproduce, in whole or in part, or permit any
other individual or entity, to copy or reproduce, in whole or in part, any of
the Buyer's Confidential Information without the prior written consent of the
Buyer.
13.3.5. The Seller hereby agrees that prior to the Closing and at all times
thereafter, it shall use its best efforts to: (a) maintain and protect the
confidential and proprietary nature of the Buyer's Confidential Information;
(b) prevent the unauthorized or improper use of the Buyer's Confidential
Information; (c) prevent the unauthorized disclosure of the Buyer's Confidential
Information; and (d) prevent the unauthorized copying or reproduction of the
Buyer's Confidential Information.
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<PAGE>
13.3.6. Upon the termination of this Agreement as provided in Section 16, the
Seller shall immediately: (a) return to the Buyer all of the Buyer's
Confidential Information, including without limitation, all copies, abstracts,
or extracts thereof; (b) destroy all analyses, compilations, studies, or other
documents based upon or including the Buyer's Confidential Information; (c)
cease using the Buyer's Confidential Information for any purpose whatsoever; and
(d) deliver to the Buyer a certificate of an authorized officer of the Seller
certifying the foregoing.
13.4. Survival of Common Law and Statutory Rights. Nothing in this Agreement
-------------------------------------------
shall be deemed to limit, in any manner, any of the Seller's or the Buyer's
common law or statutory rights with respect to the Seller's Confidential
Information and the Buyer's Confidential Information, as the case may be.
13.5. Equitable Remedies. The parties acknowledge and agree that in the event
------------------
of a default or breach of or threatened default or breach by either party of the
provisions of this Section 13, the other party shall sustain irreparable injury
and damages, the amount and extent of which cannot be measured in money and for
which there does not and shall not exist any adequate remedy at law.
Accordingly, each of the parties hereby agrees that in the event of a default or
breach or of a threatened default or breach by either party of the provisions of
this Section 13, the other party shall be entitled to immediate injunctive
relief and to specific performance and that in any legal action or proceeding
for injunctive relief and specific performance the party against whom such
action or proceeding is instituted shall be deemed to have hereby been waived,
and shall not assert in such action or proceeding, the defense or claim that the
party instituting such action or proceeding has an adequate remedy at law or
that an adequate remedy at law exists. The foregoing shall not, however, be
deemed to limit or restrict the remedies at law or in equity of either party for
any default or breach or any threatened default or breach of the provisions of
this Section 13.
Section 14. Post-Closing and Other Matters.
------------------------------------------
14.1. Use of ACS Name. As soon as may be practicable after the Closing, the
---------------
Seller shall take all action necessary to amend its Certificate of Partnership
and related documents to change the name of the Seller to delete the words
"ACS". Thereafter, the Seller shall not conduct any business as "ACS" or "ACS
Software Products Group".
14.2. Allocation of Purchase Price. The Seller and the Buyer shall allocate
----------------------------
the Purchase Price among the Purchased Assets and the Assumed
Liabilities as set forth on Exhibit E. As soon as may be practicable
after the Closing, the Seller and the Buyer shall amend Exhibit E to
reflect any adjustments to the Purchase Price made pursuant to Section
5. As soon as practicable after the Closing and prior to filing any tax
return which includes information related to the transactions
contemplated in this Agreement, the Seller and the Buyer shall prepare
mutually acceptable IRS Forms 8594 which they shall use to report the
transactions contemplated in this Agreement to the Internal Revenue
Service and to all other taxing authorities.
14.3. Additional Documents. From and after the Closing Date, each of the
--------------------
parties shall, at the request of the other, prepare, execute, and deliver to the
other such additional documents and instruments and take such action as the
other may deem reasonably necessary to further evidence or effect any of the
transactions contemplated herein. All costs and expenses reasonably and
necessarily incurred by either party in connection with the preparation of any
such other documents and instruments or the taking of any such other action
shall be borne and paid by the party requesting the same.
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<PAGE>
Section 15. Indemnification.
---------------------------
15.1. Survival. Each of the covenants, agreements, indemnities and
--------
representations and warranties of the Seller and the Buyer herein shall survive
the Closing until 5:00 p.m. Eastern Time on that date which is twelve months
after the Closing Date (the "Survival Period") at which time, such covenants,
agreements, indemnities, representations and warranties shall expire and
terminate.
15.2. Indemnification by the Seller. Subject to the provisions of Sections
-----------------------------
15.3, 15.5, and 15.6, the Seller shall indemnify and hold harmless the Buyer
against and in respect of all losses, costs, and expenses suffered or incurred
by the Buyer as a result of: (a) the breach by the Seller of any representation
and warranty made by the Seller to the Buyer in Section 7 hereof; (b) the
nonfulfillment by the Seller of any agreement or covenant of the Seller
contained herein; and (c) the failure of the Seller to discharge, when due, the
liabilities and obligations of the Seller that are not assumed by the Buyer
herein.
15.3. Limitations on Indemnification by the Seller. Notwithstanding the
--------------------------------------------
provisions of Section 15.2, the Seller shall indemnify the Buyer for the Buyer's
indemnifiable losses up to a maximum amount of $200,000.00; and the Seller shall
have no liability to indemnify the Buyer hereunder for indemnifiable losses to
the extent such losses exceed $200,000.00.
15.4. Indemnification by the Buyer. Subject to the provisions of Sections 15.5
----------------------------
and 15.6, the Buyer shall indemnify and hold harmless the Seller against and in
respect of all losses, costs, and expenses suffered or incurred by the Seller as
a result of: (a) the breach by the Buyer of any representation and warranty made
by the Buyer to the Seller in Section 8 hereof; (b) the nonfulfillment by the
Buyer of any agreement or covenant of the Buyer contained herein; (c) the
failure of the Buyer to discharge, when due, the Assumed Liabilities; and (d)
the operations by the Buyer after the Closing of the ACS Business.
15.5. Procedures for Indemnification.
------------------------------
15.5.1. If a party hereto (the "Claiming Party") seeks indemnification from
the other party (the "Indemnitor") for indemnifiable losses, the Claiming Party
shall give notice to the Indemnitor of such loss (the "Notice of Loss"). If,
within thirty days after the date on which the Indemnitor receives the Notice of
Loss, the Indemnitor has not delivered to the Claiming Party a notice of
objecting to all or any portion of the claimed loss and setting forth the amount
of such claimed loss objected to and the reasons for such objection, the
Claiming Party shall be entitled to indemnification for such loss and the
Indemnitor shall promptly pay such loss. If, within thirty days after the date
on which the Indemnitor receives a Notice of Loss, the Indemnitor delivers to
the Claiming Party an objection to all or any portion of the claimed loss,
setting forth the amount of such loss objected to and the reasons for such
objections, the Claiming Party shall be entitled to reimbursement for the
portion of such loss not objected to by the Indemnitor and the Indemnitor shall
promptly pay such amount. The Claiming Party shall be entitled to
indemnification for the portion of such claimed loss to which the Indemnitor
objected to upon the earlier of: (a) the Indemnitor's and the Claiming Party's
written agreement with respect to the indemnification of such loss; or (b) a
final judgment or award of a court of competent jurisdiction with respect to
such loss.
15.5.2. Notwithstanding any other provisions of this Agreement, neither the
Seller nor the Buyer shall be entitled to indemnification hereunder with respect
to any claim, obligation,
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<PAGE>
or liability asserted against them by any third party unless they shall have
notified the other party of the assertion of the same and afforded such party
an opportunity to participate in the defense or settlement thereof.
l5.5.3. Notwithstanding any other provisions of this Agreement, neither the
Seller or the Buyer shall have any claim for indemnification hereunder unless
such claim is asserted, as provided herein, against the other within the
Survival Period (in which event the party's right to indemnification for such
matters shall continue until liability is finally determined).
15.5.4. The Buyer shall obtain payment of all indemnified losses to which the
Buyer is entitled hereunder, and otherwise satisfy all claims for
indemnification hereunder, solely and exclusively by way of set-off against and
reduction in payment of amounts due under the Promissory Note otherwise payable
by the Buyer to the Seller, at such times and as and when payments become due
and payable under the Promissory Note.
15.6. Computation of Losses. In determining the amount of any indemnifiable
---------------------
Loss hereunder, the aggregate amount of any insurance proceeds received by or
benefiting the indemnified party in connection with the facts giving rise to the
right to indemnification shall be deducted from the amount to be paid by the
indemnifying party. If, with respect to any indemnifiable loss paid by an
indemnifying party, the indemnified party subsequently receives insurance
proceeds, the indemnified party shall, as soon as may be practicable, pay to the
indemnifying party an amount equal to such insurance proceeds.
Section 16. Termination.
------------------------
16.1. Procedure for Termination. This Agreement may be terminated at any time
--------------------------
on or before the Closing Date as follows:
(a) by the mutual agreement of the Seller and the Buyer;
(b) by the Seller: (i) if the Seller reasonably determines that the
transactions contemplated hereby cannot be consummated because
of any nonfulfillment of any condition set forth in Section 10
hereof which cannot be cured or rectified on or before the
Closing and such nonfulfilled conditions has a material adverse
effect on the Seller; or (ii) if the Buyer breaches any
representation or warranty made by the Buyer in this Agreement
and such breach has a material adverse effect on the Seller;
and
(c) by the Buyer: (i) if the Buyer reasonably determines that the
transactions contemplated hereby cannot be consummated because
of any nonfulfillment of any condition set forth in Section 11
hereof which cannot be cured or rectified on or before the
Closing Date and such non fulfilled conditions has a material
adverse effect on the ACS Business. and/or the Buyer; or (ii)
if the Seller breaches any representation or warranty made by
the Seller in this Agreement and such breach has a material
adverse effect on the ACS Business and/or the Buyer.
- 18 -
<PAGE>
16.2. Effect of Termination. If this Agreement is terminated as provided in
-----------------------
Section 16.1, the obligations of the parties hereunder shall terminate;
provided however, that if this Agreement is terminated by a party as a result of
the other party's willful failure to comply with its agreements or covenants
hereunder, the party that terminated this Agreement shall have the right to
pursue all legal and equitable remedies available to it. The provisions of
Section 13 shall survive any termination of this Agreement
Section 17. Bulk Transfer Laws, Expenses, and Taxes.
------------------------------------------------
17.1. Bulk Transfer Laws. The Seller and the Buyer hereby waive compliance
------------------
with the provisions of any applicable Bulk Transfer Laws, or any other similar
laws. The Seller agrees to pay and to indemnify the Buyer against all claims
made by the creditors of the Seller, other than the Assumed Liabilities to which
this sale is subject.
17.2. Costs and Expenses. All costs and expenses incurred by or on behalf of
-------------------
the Seller and the Buyer, including, without limitation, all fees and expenses
of agents, representatives, counsel, and accountants employed in connection with
the authorization, preparation, execution, and performance of this Agreement or
other matters relating thereto shall be borne solely by the party that incurred
the same and the other party shall have no liability with respect thereof.
17.3 Transfer Taxes. All sales, use, and transfer taxes and recording, filing,
---------------
title, and registration fees or other charges imposed upon or incurred in
connection with or as a result of the transfer of the Purchased Assets to the
Buyer and the consummation of the transactions contemplated herein shall be
borne and paid by the Seller.
17.4. UTILITIES AND OTHER CHARGES. All charges for electricity, water, gas,
----------------------------
and other utilities and for telephone services related to the Purchased Assets
as of or for the calendar month in which the closing occurs shall be prorated as
of the Closing Date. All payments under the Contracts and the Real Property
Leases as of or for the calendar month in which the Closing occurs shall be
prorated as of the Closing Date.
Section 18. Miscellaneous.
-------------------------
18.1. Entire Agreement. This Agreement, together with the Disclosure Schedules
----------------
and the Exhibits hereto, constitutes the entire agreement between the parties
with respect to the matters set forth herein and supersedes all prior
agreements, arrangements, and understandings between the parties with respect to
the same.
18.2. Modification. No provision of this Agreement, including the provisions
------------
of this Section, may be modified, deleted, or amended in any manner except by an
agreement in writing executed by the Seller and the Buyer.
18.3. Notices. All notices, requests, consents, and other communications to,
--------
upon, or between the parties shall be in writing and shall be deemed to have
been given, delivered, or made when personally delivered or when sent or mailed
by certified mail, postage prepaid and return receipt requested to the parties
at the address set forth below or to such other address as any party may specify
by notice to the other party:
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<PAGE>
If to the Seller:
ACS Software Products Group
Suite 900
1355 Peachtree Street
Atlanta, Georgia 30309
Attn: President
If to the Buyer:
Computer Generated Solutions, Inc.
1250 Broadway
New York, New York 10001
Attn: President
18.4. Severability. The invalidity or unenforceability of any provision of
------------
this Agreement shall not affect the validity or enforceability of any other
provision.
18.5. No Assignment. Neither this Agreement nor any interest herein may be
-------------
assigned by either party without the consent of the other party.
18.6. Benefit. This Agreement shall be binding on and inure to the respective
-------
benefit of the Buyer and the Seller and their respective successors and assigns.
18.7. Construction. This Agreement shall be construed and enforced in
------------
accordance with the laws of the State of Georgia, other than its rules with
respect to choice of laws.
18.8. Counterparts. This Agreement may be executed in more than one
-------------
counterpart, each of which shall be deemed an original.
18.9. Headings. The underlined headings provided herein are for convenience
--------
only and shall not affect the interpretation of this Agreement.
IN WITNESS WHEREOF, the Seller and the Buyer have duly executed this Agreement
as of the date first above written.
ACS SOFTWARE PRODUCTS GROUP
By: KSA INFORMATION TECHNOLOGIES,
INC., its (General Partner
By: /s/ David A. Cole
----------------------
Name: David A. Cole
--------------------
Title: Vice President
--------------------
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
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<PAGE>
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
COMPUTER GENERATED SOLUTIONS, INC.
By: /s/ Phil Friedman
-------------------------
Name: Phil Friedman
-----------------------
Title: President
----------------------
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<PAGE>
EXHIBIT 2.2
-----------
Plan and Agreement of Reorganization, dated August 26, 1994, between Computer
Generated Solutions, Inc. and Real-Time Technology, Inc.
<PAGE>
EXHIBIT 2.2
PLAN AND AGREEMENT OF REORGANIZATION between Computer Generated
Solutions, Inc. (a Delaware corporation) and Real Time
Technology, Inc. (a New York corporation).
______________
For the Acquisition of all of the assets of Real Time Technology, Inc. in
exchange for stock of Computer Generated Solutions, Inc.
PLAN AND AGREEMENT OF REORGANIZATION, dated August 26, 1994, between COMPUTER
GENERATED SOLUTIONS, INC., a Delaware corporation (hereinafter called CGS), and
REAL-TIME TECHNOLOGY, INC., a New York corporation (hereinafter called RTT).
1. CGS desires to acquire, and RTT desires to transfer to CGS, all the assets,
properties, business, and good will of RTT in exchange for the issue and
delivery by CGS to RTT of shares of Voting Common Stock, par value $.01 per
share of CGS, said shares of Voting Common Stock of CGS to be in turn
distributed to the stockholders of RTT in exchange for their stock in RTT, all
upon the terms and conditions hereinafter set forth and for the purpose of
carrying out a tax-free reorganization within the meaning of the Internal
Revenue Code of 1986, as amended.
2. RTT desires to provide for the winding up and settling of its affairs in
voluntary dissolution and for the distribution to
1
<PAGE>
its stockholders of such shares of Common Stock, par value $.01 per share, of
CGS, as hereinafter provided, in complete liquidation and complete cancellation
or redemption of its stock.
3. RTT hereby represents and warrants to CGS as follows:
(a) RTT is a corporation duly organized and existing and in good standing
under the laws of the State of New York, and it is entitled to own or lease its
properties and to carry on its business at and in the place where such
properties are now owned, leased, or operated or such business is now conducted.
(b) The authorized capital stock of RTT consists of 200 shares of Common
Stock, no par value per share (hereinafter called Common Stock of RTT), of which
10 shares have been validly issued and are now outstanding.
(c) RTT does not have any subsidiaries.
(d) Annexed hereto as Exhibit A are balance sheets of RTT as of December 31,
1989, December 31, 1990, December 31, 1991, December 31, 1992, December 31,
1993, June 30, 1994 and related statements of income for the five years ended
December 31, 1993, and the six months ended June 30, 1994 as reviewed by
independent public accountants. RTT will provide a balance sheet and related
statement of income and expense for the nine months ended September 30, 1994,
certified by independent public accountants. All such statements are correct and
complete and present fairly the financial condition of
2
<PAGE>
RTT as of the respective dates of said balance sheets and the results of
operations of RTT for the periods indicated in said statements of income in
conformity with generally accepted accounting principles applied on a consistent
basis.
(e) At June 30, 1994, RTT had no liabilities, absolute or contingent, which
are not shown or provided for on the balance sheets of RTT as of June 30, 1994
(Exhibit A, annexed hereto).
(f) Since June 30, 1994 there has been no material change in the condition,
financial or otherwise, of RTT as shown in the balance sheet of RTT as of June
30, 1994 (Exhibit A annexed hereto), other than changes occurring in the
ordinary course of business, which changes have not materially adversely
affected its business, properties, or financial condition.
(g) The accounts receivable of RTT shown on said balance sheet of RTT as of
June 30, 1994 (Exhibit A annexed hereto), or thereafter acquired by it prior to
the date hereof, have been collected or are collectible in amounts not less than
96 percent of book amounts thereof.
(h) The amounts set up as provisions for taxes on the balance sheet of RTT as
of June 30, 1994 (Exhibit A annexed hereto), are sufficient for the payment of
all accrued and unpaid federal, state, county, and local
3
<PAGE>
taxes of RTT, whether or not disputed, for the fiscal year ended on said date
and for all fiscal years prior thereto. All deficiencies proposed as a result of
examinations of Federal income tax returns by the Internal Revenue Service for
past fiscal years through the fiscal year ended December 31, 1993, of RTT have
been paid and settled.
(i) Annexed hereto as Exhibit B is a brief description of all real properties
leased to RTT, and of the equipment it owns located at such leased premises. RTT
owns outright all the equipment in the premises referred to in said Exhibit B,
all other assets and properties used in its business, and all assets and
properties reflected in the balance sheet of RTT, as of June 30, 1994 (Exhibit A
annexed hereto), or acquired by it after said date, other than such assets or
properties sold or otherwise disposed of in the ordinary course of business
subsequent to said date, in each case free and clear of all mortgages, liens,
charges, or encumbrances of any nature whatsoever, except as stated in said
Exhibit B.
(j) Annexed hereto as Exhibit C is a list and brief description of all
patents, patent applications, and trade-mark registrations owned by or
registered in the name of RTT or in which it has any rights, and in each case a
brief description of the nature of such rights.
4
<PAGE>
RTT is not a licensor in respect of any patents, trademarks, trade names,
copyrights, or applications therefor. RTT owns, or possesses adequate licenses
or other rights to use, all patents,-trade-marks, trade names, and copyrights
necessary to conduct its business as now operated by it and has not received any
notice of conflict with the asserted rights of others.
(k) Annexed hereto as Exhibit D is a list and brief description of all
policies of fire, liability, and other forms of insurance held by RTT. Such
policies are in amounts deemed by the management of RTT to be sufficient, and
valid policies in such amounts will be outstanding and duly in force to the
Closing Date, at which time such policies will be assigned to CGS in accordance
herewith.
(l) Annexed hereto as Exhibit E is a list of certain contracts to which RTT is
a party. Except only as listed in said Exhibit, RTT is not a party to any
written or oral (1) contract not made in the ordinary course of business; (2)
employment contract which is not terminable without cost or other liability to
RTT, or any successor, upon notice of 30 days or less; (3) contract with any
labor union; (4) bonus, pension, profit sharing, retirement, stock purchase,
hospitalization, insurance or similar plan providing employee benefits; (5)
lease with respect to any property, real or personal, whether as lessor or
lessee; (6) continuinq contract for the future
5
<PAGE>
purchase of materials, supplies or equipment in excess of the requirements of
the business of RTT now booked or for normal operating inventories; or (7)
contract continuing over a period of more than one year from its date. RTT has
in all material respects performed all obligations required to be performed by
it to date and is not in default in any material respect under any agreement,
lease or other document to which it is a party.
(m) There are no actions, suits or proceedings pending, or, to the knowledge
of RTT, threatened against or affecting RTT. RTT is not in default with respect
to any judgment, order, writ, injunction, decree, or similar command of any
court or of any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality, domestic or foreign,
affecting it.
(n) To the best of the knowledge, information, and belief of its officers, RTT
has complied with all laws, regulations, and orders applicable to its business.
(o) Since June 30, 1994 RTT has not (1) issued any stock, bonds or other
corporate securities; (2) incurred any obligation or liability (absolute or
contingent) except current liabilities incurred, and obligations under contracts
entered into, in the ordinary course of business; (3) discharged or satisfied
any lien or encumbrance or paid any obligation or liability (absolute
6
<PAGE>
or contingent) other than current liabilities shown on the balance sheet of RTT
as of June 30, 1994 (Exhibit A hereto), and current liabilities incurred since
that date in the ordinary course of business; (4) declared or made any payment
or distribution to stockholders, or purchased or redeemed any shares of its
capital stock; (5) mortgaged, pledged, or subjected to lien, charge, or any
other encumbrance, any of its assets, tangible or intangible; (6) sold or
transferred any of its tangible assets or cancelled any debts or claims, except
in each case in the ordinary course of business; (7) sold, assigned, or
transferred any patents, trademarks, trade names, copyrights, or other
intangible assets; (8) suffered any extraordinary losses or waived any rights of
substantial value; or (9) entered into any transaction other than in the
ordinary course of business.
(p) The Board of Directors of RTT has duly approved this Plan and Agreement of
Reorganization and the transactions contemplated herein, subject to the approval
thereof by the stockholders of RTT as required under the laws of the State of
New York, and has authorized the execution and delivery hereof by RTT.
4. CGS represents and warrants to RTT as follows:
(a) CGS is a corporation duly organized and existing and in good standing
under the laws of the State of Delaware.
7
<PAGE>
(b) The authorized capital stock of CGS consists of 10,000 shares of Voting
Common Stock, par value $.01 per share (hereinafter called Voting Common Stock
of CGS), of which 6,783 shares have been validly issued and are now outstanding
and 5,000 shares of Nonvoting Common Stock, none of which are issued.
(c) Annexed hereto as exhibit F is a balance sheet of CGS as of June 30, 1994,
and statements of income and surplus for the six months then ended, reviewed by
B.D.O. Siedman & Co., independent certified public accountants. Such statements
are correct and complete and present fairly the financial condition of CGS as of
June 30, 1994, and the results of operations of CGS for the six months then
ended. All said financial statements have been prepared in conformity with
generally accepted accounting principles.
(d) There has been no material change in the condition, financial or
otherwise, of CGS as shown in the balance sheet of CGS as of June 30, 1994
(Exhibit F annexed hereto), other than changes occurring in the ordinary course
of business, which changes have not materially adversely affected its business,
properties, or financial condition.
(e) The shares of Common Stock of CGS deliverable pursuant hereto, when issued
and delivered as herein provided: will be validly issued and outstanding shares
8
<PAGE>
of Common Stock of CGS, fully paid and non-assessable.
(f) The Board of Directors of CGS has approved this Plan and Agreement of
Reorganization and the transactions contemplated herein and has authorized the
execution and delivery hereof by CGS.
NOW, THEREFORE, in consideration of the premises and of the respective
representations and warranties hereinabove set forth, and of the covenants and
agreements herein contained, CGS and RTT hereby agree as follows:
1. (a) On the terms and subject to the conditions herein set forth, RTT hereby
agrees to convey, transfer, assign and deliver to CGS, and CGS agrees to acquire
and accept as hereinafter provided, all the assets, properties, business and
good will of RTT of every kind and description, wherever located, including
without limitation, all property, tangible or intangible, real, personal, or
mixed, accounts receivable, bank accounts, cash and securities, claims and
rights under contracts of RTT, rights to use its corporate name and all other
names or slogans used by RTT in connection with its business or products and all
books and records of RTT relating to its business, all as the same shall exist
at the time of closing referred to in Section 4 hereof (hereinafter called the
Closing Date). The assets and property to be conveyed, transferred, assigned and
delivered to CGS on the Closing Date as herein provided shall, without
9
<PAGE>
limitation, include all assets and properties of RTT shown on the balance sheet
of RTT as of June 30, 1994 (Exhibit A annexed hereto), and all assets and
property thereafter acquired by RTT prior to the Closing Date, except such
assets and property of RTT as: (1) may have been disposed of prior to the
Closing Date in the ordinary course of business; (2) may have been otherwise
disposed of prior to the Closing Date at the request or with the consent in
writing of CGS; or (3) are listed on Exhibit A-1 annexed hereto.
(b) Subject to the conditions herein set forth, from and after the Closing
Date, CGS shall assume and agrees to pay, perform, and discharge all those
debts, obligations, contracts and liabilities of RTT as set forth on Exhibit G,
all as the same shall exist at the Closing Date, and all debts, obligations, and
liabilities of RTT arising thereafter in connection with the distribution to the
stockholders of RTT of the shares of Common Stock of CGS to be issued and
delivered to RTT hereunder and in connection with the liquidation and
dissolution of RTT; provided, however, that CGS shall assume the obligation of
RTT to distribute to its stockholders such shares of Common Stock of CGS. All
other contingent or absolute liabilities of RTT, including but not limited to
those listed below, shall remain the liability of RTT and shall not be assumed
by
10
<PAGE>
CGS:
(i) All liability of RTT for federal, state, county, and local taxes
for any period prior or subsequent to the closing date;
(ii) All taxes (federal, state, county, and local), expenses and costs
of RTT incident to or arising out of this agreement (including legal and
accounting fees);
(iii) All liabilities under any leases, labor union agreements or
other contracts to which RTT is a party except those specifically
assumed by CGS; and
(iv) All liabilities of any kind connected with RTT's operation.
(c) The conveyance, transfer, assignment, and delivery of the assets and
property of RTT to CGS, as herein provided, shall be effected by deeds, bills of
sale, endorsements, assignments, drafts, checks, and other instruments of
transfer and conveyance in such form as CGS shall reasonably request.
(d) RTT agrees that it will, at any time and from time to time after the
Closing Date, upon request of CGS, do, execute, acknowledge, and deliver, or
will cause to be done, executed, acknowledged, and delivered, all such further
acts, deeds, assignments, transfers, conveyances, powers of attorney, and
assurances as may be required for
11
<PAGE>
the better assigning, transferring, granting, conveying, assuring, and
confirming to CGS, or to its successors and assigns, or for aiding and assisting
in collecting and reducing to possession, any or all of the assets or property
to be assigned to CGS as provided herein and any or all obligations of RTT
hereunder.
2. On the terms and subject to the conditions herein set forth, CGS will issue
and deliver to RTT on the Closing Date definitive stock certificates, in such
authorized denominations and registered in the name of RTT or its nominee or
such other names as RTT shall specify in writing, aggregating 753 shares of
Common Stock of CGS.
3. From and after the date hereof, RTT shall afford to the officers and
accredited representatives of CGS free access to the offices, properties and
records of RTT in order that CGS may have full opportunity to make such
investigation as it shall desire of the affairs of RTT.
4. The closing under this Plan and Agreement of Reorganization shall take
place at 10:00 o'clock A.M., Eastern Daylight Time, on October 1, 1994, at the
law offices of Ira Z. Kevelson, 635 Madison Avenue, New York, NY 10022, or at
such other time and place as the parties hereto shall agree upon.
5. (a) To the extent that the assignment of any contract, license, lease,
commitment, sales order, or
12
<PAGE>
purchase order to be assigned to CGS as provided herein shall require the
consent of the other party thereto, this Plan and Agreement of Reorganization
shall not constitute an agreement to assign the same if an attempted assignment
would constitute a breach thereof. RTT agrees that it will use its best efforts
to obtain the consent of the other parties to all such contracts, licenses,
leases commitments, sales orders, or purchase orders of RTT to the assignment
thereof to CGS. If such consent is not obtained, RTT will cooperate with CGS in
any reasonable arrangement designed to provide for CGS the benefits under any
such contracts, licenses, leases, commitments, sales orders, or purchase orders,
including enforcement, at the cost and for the benefit of CGS, of any and all
rights of RTT against the party thereto arising out of the breach or
cancellation by such other party or otherwise.
(b) RTT agrees that CGS shall have the right and authority to collect, for
account of CGS, all receivables and other items which shall be transferred to
CGS as provided herein, and to endorse with the name of RTT any checks received
on account of any such receivables or other items. RTT agrees that it will
transfer and deliver to CGS any cash or other property that RTT may receive in
respect of such receivables or other items.
6. (a) RTT will call a meeting of its
13
<PAGE>
stockholders to be held on September 1, 1994, for the purpose of authorizing (1)
the conveyance, assignment, transfer, and delivery of all the assets,
properties, business, and good will of RTT to CGS upon the terms and conditions
provided herein; and (2) the voluntary dissolution of RTT.
(b) RTT agrees that, promptly upon receipt by it of the stock certificates for
the shares of Common Stock of CGS to be received by RTT as provided in Section 2
hereof, and in any event on or before December 31, 1994, RTT will distribute all
such shares to its stockholders in complete winding up and liquidation of RTT,
and that it will not otherwise dispose of any of such shares.
(c) From and after the Closing Date, RTT will not engage in any business or
other activity except as required to complete the liquidation and dissolution of
RTT as provided herein.
7, The obligations of CGS hereunder are, at the option of CGS, subject to the
conditions that, on or before the Closing Date:
(a) At the meeting of the stockholders of RTT provided for in Section 6 (a)
hereof, the holders of at least a majority of the outstanding shares of RTT
entitled to vote thereat shall have voted in favor of the matter specified in
clause (l) of said Section 6 (a) and the holders of at least two-thirds of such
outstanding
14
<PAGE>
shares shall have voted in favor of the matter specified in clause (2) of said
Section 6 (a).
(b) All actions, proceedings, instruments and documents required to carry out
this Plan and Agreement of Reorganization, or incidental thereto, and all other
related legal matters, shall have been approved by counsel for CGS.
(c) CGS shall have received an opinion of counsel for RTT, dated the Closing
Date, in form and substance satisfactory to CGS, to the effect that (1) RTT is a
corporation duly organized and existing and in good standing under the laws of
the State of New York and is entitled to own or lease its properties and to
carry on its business at and in the places where such properties are now owned,
leased, or operated or such business is now conducted; (2) RTT has full power
and authority to convey, assign, transfer, and deliver its assets, properties,
business, and good will to CGS as herein provided; (3) all corporate and other
proceedings required to be taken by or on the part of RTT to authorize it to
carry out this Plan and Agreement or Reorganization and so to convey, assign,
transfer, and deliver its assets, properties, business, and good will have been
duly and properly taken; and (4) the vote of the stockholders of RTT taken at
the meeting provided for in Section 6 (a) hereof operates (except for directors'
15
<PAGE>
action), so far as RTT is concerned, to authorize the conveyance, transfer,
assignment and delivery of all the assets, properties,business and good will of
RTT to CGS in exchange for shares of Common Stock of CGS upon the terms and
conditions provided herein and to bind all stockholders of RTT thereto.
(d) RTT shall have furnished to CGS legal opinions or other evidence, in form
and substance satisfactory to CGS, covering the good and marketable title of RTT
in its properties, free and clear of all mortgages, liens, charges or
encumbrances of any nature whatsoever, except as stated in Exhibit B annexed
hereto.
(e) CGS shall not have discovered any material error, misstatement, or
omission in the representations and warranties made by RTT herein, and all the
terms and conditions of this Plan and Agreement of Reorganization to be complied
with and performed by RTT on or before the Closing Date shall have been complied
with and performed.
(f) The representations and warranties made by RTT herein shall be correct, on
and as of the Closing Date, with the same force and effect (except as to
transactions contemplated herein and to changes occurring in the ordinary course
of business after the date hereof and not materially adversely affecting the
business, properties or financial condition of RTT,) as though such
representations and warranties had been made on and as of
16
<PAGE>
the Closing Date, and RTT shall have delivered to CGS a certificate, signed by a
duly authorized officer of RTT, to such effect and also as to the compliance by
RTT, as of the Closing Date with the terms and conditions hereof.
8. The obligations of RTT hereunder are, at the option of RTT, subject to the
conditions that, on or before the Closing Date:
(a) All actions, proceedings, instruments and documents required to carry out
this Plan and Agreement of Reorganization, or incidental thereto, shall have
been approved by counsel for RTT.
(b) RTT shall have received an opinion of counsel for CGS, dated the Closing
Date, in form and substance satisfactory to RTT, to the effect that (1) CGS is a
corporation duly organized and existing and in good standing under the laws of
the State of Delaware; (2) all corporate and other proceedings required to be
taken by or on the part of CGS to authorize it to carry out this Plan and
Agreement of Reorganization and to issue and deliver the shares of Common Stock
of CGS deliverable pursuant hereto as provided herein have been duly and
properly taken; and (3) said shares of Common Stock of CGS will, on delivery
thereof to RTT in accordance with the terms hereof, be duly and validly issued,
fully paid and non-assessable.
17
<PAGE>
(c) RTT shall not have discovered any material error, misstatement or omission
in the representations and warranties made by CGS herein, and all the terms and
conditions of this Plan and Agreement of Reorganization to be complied with and
performed by CGS on or before the Closing Date shall have been complied with and
performed.
(d) RTT shall have obtained an opinion from counsel for CGS to the effect that
the exchange by RTT of its assets, properties, business and good will for shares
of Common Stock of CGS and the assumption of the obligations and liabilities of
RTT by CGS, all in the manner and by the circumstances in which or under which
the same shall be carried out pursuant hereto, will result in a reorganization
within the meaning of the Internal Revenue Code of 1986 as amended and will not
result in taxable income to RTT; and that stockholders of RTT who shall receive
shares of Common Stock of CGS in exchange for their stock in RTT on the
liquidation of RTT pursuant to such reorganization will not have any taxable
gain or deductible loss.
(e) The representations and warranties made by CGS herein shall be correct, on
and as of the Closing Date, with the same force and effect (except as to
transactions contemplated herein and to changes occurring in the ordinary course
of business after the date hereof and not materially adversely affecting the
business, properties
18
<PAGE>
or financial condition of CGS) as though such representations and warranties had
been made on and as of the Closing Date, and CGS shall have delivered to RTT a
certificate, signed by a duly authorized officer of CGS, as of the Closing Date
with the terms and conditions hereof.
9. CGS and RTT agree that the representations and warranties contained herein
or made hereunder shall expire with the closing hereunder, such closing to be
conclusive evidence that each party is fully satisfied with the facts
constituting the basis of the representations and warranties of the other party.
10. RTT agrees that, between the date hereof and the Closing Date, it will
not, except with the prior written consent of CGs, declare or pay any dividends.
11. CGS agrees that, between the date hereof and the Closing Date, it will
not, except with the prior written consent of RTT, (1) declare or pay any
dividends, or (2) authorize or make any split-up of its capital stock.
12. If the transactions contemplated hereby shall not be consummated, each
party hereto shall pay its own expenses incident to preparation for carrying
this Plan and Agreement of Reorganization into effect and consummating said
transactions.
13. CGS hereby waives compliance by RTT with the
19
<PAGE>
provisions of any applicable bulk sales law.
14. This Plan and Agreement of Reorganization shall not be assignable by
either party, except with the written consent of the other. Nothing in this Plan
or Agreement of Reorganization, expressed or implied, is intended to confer upon
any person, other than the parties hereto and their successors and assigns, any
rights or remedies under or by reason of this Plan and Agreement of
Reorganization.
15. Any notice, request, instruction or other document to be given hereunder
by either party hereto to the other shall be in writing and delivered personally
or sent by registered mail, postage prepaid, if to CGS, addressed to CGS at 1250
Broadway, New York, NY, and if to RTT, addressed to RTT, One Penn Plaza, New
York, NY.
16. This instrument contains the entire agreement between the parties hereto
with respect to the transactions contemplated herein.
20
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Plan and Agreement of
Reorganization to be duly executed as of the day and year first above written.
Attest: COMPUTER GENERATED SOLUTIONS, INC.
/s/ /s/ Philip Friedman
_________________________ By ___________________________________
Secretary
Philip Friedman, President
Attest:
REAL TIME TECHNOLOGY, INC.
_________________________ /s/ Victor Friedman
Secretary By ___________________________________
Victor Friedman, President
21
<PAGE>
*EXHIBIT 10.1
-------------
Service Agreement dated October 4, 1995 between International Business
Machines Corporation and Computer Generated Solutions, Inc.
* Confidential treatment is being requested with respect to portions of
this exhibit
<PAGE>
Service Agreement Between
International Business Machines Corporation
and
Computer Generated Solutions, Inc.
October 04, 1995
Contact: Nancy Hiatt [ARTWORK] 303-924-5396
IBM Integrated Procurement Solutions
6300 Diagonal Highway
P.O. Box 1900
Boulder, Colorado 80301-9191
Department: PRB1
Building: 001H
Service Agreement Number 2165
<PAGE>
<TABLE>
<CAPTION>
Contents
<S> <C>
1.0 SERVICE AGREEMENT............................... 1
1.1 Statement of Work............................... 1
1.2 Definitions..................................... 1
1.3 Subcontracting.................................. 2
1.4 Delegations and Assignments..................... 2
1.5 Payment and Records............................. 2
1.6 Confidential Information........................ 3
1.7 Information Asset Security Requirements 3
1.8 IBM Furnished Materials......................... 4
1.9 Rights In Data.................................. 4
1.10 Invention Rights............................... 5
1.11 Contractor's Employees......................... 5
1.12 IBM Regulations & Policies..................... 6
1.13 Former IBM Employees.......................... 7
1.14 Insurance...................................... 7
1.14.1 General Requirements......................... 7
1.14.2 Minimum Limits of Coverage................... 7
1.15 Contractor Safety on Premise................... 7
1.16 Indemnification................................ 8
1.17 Environment................................... 9
1.18 Compliance with Laws........................... 9
1.19 Trademark ..................................... 10
1.20 Monthly Report................................. 10
1.21 Electronic Data Interchange/Electronic
Funds Transfer...................................... 10
1.22 Utilization of Minority Owned Businesses........ 11
1.23 Taxes.......................................... 11
1.24 Gifts and Gratuities........................... 11
1.25 Representations And Warranties................. 11
1.26 Quality And Acceptance ........................ 12
1.27 Cost Reduction................................. 13
1.28 General Provisions............................. 13
1.29 Notices........................................ 14
1.30 Modifications.................................. 14
1.31 Authority...................................... 14
1.32 Rate Schedule.................................. 14
1.33 Delivery Schedule ............................. 14
1.34 Term.......................................... 14
1.35 Termination and Cancellation.................. 14
1.36 Entire Agreement............................... 15
1.37 Order of Precedence............................ 15
2.0 SIGNATURES ..................................... 17
3.0 ATTACHMENT A: STATEMENT OF WORK................ 19
3.1 Project Description............................. 19
3.2 Manpower........................................ 19
3.3 Work Schedules.................................. 20
3.4 Skill Requirements.............................. 20
3.5 Job Descriptions................................ 21
3.6 Training....................................... 25
3.7 Transitional Training........................... 25
3.8 Measurements.................................... 25
3.9 Acceptance Criteria............................. 26
3.10 IBM Responsibilities........................... 26
3.11 Contractor Responsibilities.................... 27
3.12 Rate Schedule.................................. 27
3.13 Glossary of Terms............................. 29
4.0 TRAVEL EXPENSE GUIDELINES....................... 31
4.1.1 Expense Account Details..................... 31
4.1.2 Receipts.................................... 31
4.1.3 Transportation.............................. 31
4.1.4 Lodging and Meals .......................... 31
4.1.5 Personal Expenses........................... 32
</TABLE>
<PAGE>
1.0 SERVICE AGREEMENT
This is a service agreement numbered 2165, made by and between International
Business Machines Corporation (IBM), a corporation of the state of New York,
having an office at 6300 Diagonal Highway, Boulder, Colorado 80301-9191,
(hereinafter referred to as IBM), and Computer Generated Solutions, Inc., a
corporation of the state of Delaware, having an office at 1675 Broadway, 31st
Floor, New York, NY 10019 (hereinafter referred to as Contractor).
1.1 STATEMENT OF WORK
Contractor shall provide IBM with call center and associated services as
specified in the Statement of Work attachment(s) and in purchase orders issued
by IBM and accepted by the Contractor.
The Statement of Work shall be more fully described in the alphabetical
attachments beginning with "A," appended to and made part of this Agreement.
All Deliverables shall be performed in accordance with the terms and conditions
of this Agreement and with the terms and conditions on the front and back of
purchase orders issued from time to time by IBM and accepted by Contractor. Such
purchase orders shall constitute the only authorization for Contractor to take
any action or to expend any money for services hereunder. IBM will pay only the
amount specified in purchase orders for such work. Contractor's services may
include collaboration with and assistance to IBM personnel or others retained by
IBM. In the event of any conflict between the terms and conditions of this
Agreement and those of purchase orders issued hereunder, the terms and
conditions of this Agreement shall prevail.
IBM shall appoint a coordinator for each purchase order issued by IBM under this
Agreement. This coordinator shall be responsible for maintaining technical
liaison with Contractor's on-site supervisor and for determining for IBM the
adequacy, acceptability, and fitness of the services performed by Contractor
under such purchase orders.
When work is done on IBM's premises, Contractor shall at all times provide on
such IBM premises supervisory personnel acceptable to IBM to supervise
Contractor's employees. Contractor shall notify IBM of the name of the
supervisor responsible for the work. The supervisor shall have authority to act
as agent for Contractor in Contractor's absence.
1.2 DEFINITIONS
1. "Deliverables" means all the items, material, or services prepared or
performed for or submitted to IBM under this Agreement.
2. "Confidential Information" means oral or written information which relates to
the past, present, or future research, development, or business activities of
IBM or its direct or indirect subsidiaries whether or not identified as IBM
Confidential Information, including the names, addresses, phone numbers, and
requirements of IBM's contractors, customers, and prospective customers. The
contents of any reports prepared by Contractor hereunder shall be treated as
Confidential Information.
No obligation of confidentiality applies to any information that the
Contractor: (a) already possesses without obligation of confidentiality; (b)
develops independently; or (c) rightfully receives without obligation of
confidentiality from a third party. No obligation of confidentiality applies
to information that is, or becomes, publicly available without breach of this
Agreement.
3. "Invention" means any idea, design, concept, technique, invention, discovery,
or improvement, whether or not patentable, made solely or jointly by
Contractor or Contractor's employees with one or more employees of IBM during
the term of this Agreement and in the performance of services hereunder,
provided that either the conception or first actual reduction to practice
occurs during the term of this Agreement and in the performance of services
hereunder.
4. "Preexisting Materials" means any materials included in the Deliverables
necessary for effective utilization thereof but which were developed outside
the scope of work encompassed by this Agreement.
<PAGE>
5. The term "Subsidiary" means a corporation, company, or other entity more than
fifty percent (50%) of whose outstanding shares or securities (representing
the right to vote for the election of directors or other managing authority)
are; or which does not have outstanding shares or securities, as may be the
case in a partnership, joint venture, or unincorporated association, but more
than fifty percent (50%) of whose ownership interest (representing the right
to make the decisions for such corporation, company, or other entity) is; now
or hereafter, owned or controlled, directly or indirectly, by a party hereto,
but such corporation, company, or other entity shall be deemed to be a
Subsidiary only so long as such ownership or control exists.
6. "Subcontractor On Premise" (SCOP) is defined as employees of another company
specializing in selling services and providing personnel for short term
projects. SCOPs typically are integrated with the IBM work force, possess
skills similar to IBM employees, receive technical direction from IBM
management and personnel management from their parent company, and are
subcontracted for time and workload.
7. "Vendors On Premise" (VOP) is defined as employees of another company who
have been selected by that company to accomplish a defined scope of work. The
work performed will normally require at least four or more contractor
personnel for an initial period of at least six months. Work direction and
technical information required shall be provided by the contractor
supervisor. The contractor supervisor shall be responsible to provide
supervision and control over the work of the contractor's personnel. Office
space provided by IBM shall minimize casual commingling between IBM
employees and the contractor personnel.
1.3 SUBCONTRACTING
Contractor shall not subcontract the work to be performed under this Agreement
without IBM's consent in writing, but Contractor may purchase goods it normally
purchases to perform the work.
1.4 DELEGATIONS AND ASSIGNMENTS
Contractor shall not delegate any duties under this Agreement without IBM's
prior written consent. Contractor shall inform IBM prior to any assignments of
rights to moneys due or to become due under this Agreement.
1.5 PAYMENT AND RECORDS
1. IBM will pay Contractor for services under this Agreement in accordance with
the Statement of Work and as specified on the purchase orders issued
hereunder by IBM.
2. Invoices are to be sent to IBM Corporation, National Accounts Payable
Services, P.O. Box 9001, Endicott, NY 13761-9001. The purchase order number
and the terms of payment shall be stated on the invoices.
3. The date used for calculation of terms of payment shall be the date IBM
receives an acceptable invoice.
4. Contractor shall maintain complete and accurate accounting records in a form
according to sound accounting practices to substantiate Contractor's charges.
Such records shall include payroll records, job cards, attendance cards, and
job summaries. Contractor shall retain such records for one (1) year from the
date of final payment hereunder.
5. IBM shall have access to such records for purposes of audit during normal
business hours during the term of this Agreement and during the respective
periods in which Contractor is required to maintain such records as herein
provided.
6. No overtime or premium rate will be paid without the prior approval of the
IBM Purchasing Contract Administrator/Buyer.
<PAGE>
- --------------------------------------------------
1.6 CONFIDENTIAL INFORMATION
Contractor and its employees will have access to IBM Confidential Information
and the following terms shall govern all disclosures of Confidential Information
to Contractor and its employees regardless of whether such Confidential
Information is removed from IBM's premises.
1. Contractor shall hold all Confidential Information in confidence for IBM and
shall not use Confidential Information or disclose it by publication or
otherwise to any other person during the term of this Agreement and for a
period of two (2) years thereafter other than those persons whose services
Contractor requires and who have a need to know such Confidential
Information for purposes of carrying out the terms of this Agreement and
who agree in writing to be bound by and to comply with the provisions of
this Section.
2. Upon termination or expiration of this Agreement, Contractor shall return to
IBM all written or descriptive matter including but not limited to
drawings, blueprints, descriptions, or other papers, documents, tapes, or
any other media which contain any Confidential Information. In the event of
a loss at any time of any item containing Confidential Information,
Contractor shall promptly notify IBM in writing.
3. Contractor shall not make any copies of any writings, documents, or other
media containing Confidential Information provided by IBM. If copies of
such writings, documents, or other media are necessary for performing
services under this Agreement, they will be provided by IBM upon
Contractor's written request.
4. Contractor shall secure all writings, documents, and other media containing
Confidential Information in locked files at all times when not in use to
prevent its loss or unauthorized disclosure and segregate Confidential
Information at all times from the material of others. IBM agrees to pay
all reasonable costs incurred in accomplishing the foregoing. All such
costs must be agreed to in writing by IBM prior to any expenditure by
Contractor.
5. Contractor will not disclose any information Contractor's company deems
Confidential or proprietary without an IBM Agreement for Exchange of
Confidential Information (AECI) that both parties have signed.
- --------------------------------------------------
1.7 INFORMATION ASSET SECURITY REQUIREMENTS
IBM information asset equipment utilized by the Contractor is intended for the
exclusive use of supporting IBM business requirements as defined in this
Agreement.
The Contractor will adhere to the following requirements for the purpose of
protecting IBM information assets:
1. Computing installations and support facilities are to be administered as
areas of restricted physical access when information classified IBM
Confidential or higher is stored on-line.
2. Access to IBM's information assets are to be restricted to authorized
individuals only. The Contractor must communicate the names and telephone
number of those authorized individuals to IBM. The Contractor will maintain
a list of users, including the name and IBM user ID.
3. Access passwords to IBM networks and IBM application systems are considered
IBM Confidential data.
4. Access passwords to IBM networks and IBM application systems will be issued
by IBM to the Contractor. An access password must not be used by any
individual other than the individual to whom the access password was issued.
5. The Contractor shall notify IBM when Contractor personnel changes result in
a required discontinuance of access to IBM networks or application systems.
6. The Contractor shall immediately notify IBM of any suspected compromise of
IBM password confidentiality.
7. The Contractor shall ensure that IBM equipment is connected only to IBM via
an authorized IBM network or other approved connection.
8. The Contractor shall ensure that IBM terminals in use are attended while in
use to protect against unauthorized access.
9. The Contractor shall notify IBM when invoking a backup telecommunications
link via dial-up over a public telecommunications
<PAGE>
network. Use of dial-up telecommunications over a public network is
restricted to those instances when direct line link is unavailable or when
IBM specifically instructs the Contractor to use dial up telecommunications.
10. Screen access is controlled by IBM. If access is achieved by the Contractor
that is not related to this Agreement, the Contractor will advise IBM
immediately.
- --------------------------------------------------
1.8 IBM FURNISHED MATERIALS
Unless otherwise agreed in writing, Contractor will supply all materials,
equipment, tools, and facilities required to perform this Agreement. All
materials, equipment, and tools furnished to Contractor by IBM or
specifically paid for by IBM ("Materials"), and any replacement thereof, or any
materials affixed or attached thereto, shall be and remain the property of,
with the right of possession in, IBM. Contractor shall use the Materials
only in performing work for IBM and not otherwise. Contractor shall, at its
expense, maintain all Materials in good condition and repair, replacing any
such Materials if necessary. While in Contractor's custody or control, all
Materials shall be kept and insured by the Contractor at its expense against
loss and/or damage in an amount equal to their replacement cost and shall be
subject to removal at IBM's written request, in which event Contractor at
its expense shall prepare such Materials for shipment and shall deliver them to
IBM in the same condition as originally received by Contractor. Contractor
shall promptly notify IBM of the location of any Materials not located at
Contractor's address as specified in this Agreement. Contractor shall maintain
accountability and property control records of all Materials in accordance
uith sound commercial practice. IBM reserves the right to review such records
and to take its own inventory as often as IBM deems necessary. Contractor
agrees to count and provide written confirmation of receipts from IBM of any
IBM furnished Materials. Upon completion or termination of this Agreement,
Contractor shall obtain from IBM shipping instructions or other authorization
instructions prior to returning any Materials to IBM.
- --------------------------------------------------
1.9 RIGHTS IN DATA
1. All of the "Deliverables" except preexisting materials shall belong
exclusively to IBM and shall be deemed to be works made for hire.
2. To the extent that any of the Deliverables may not, by operation of law,
be works made for hire, Contractor hereby assigns to IBM the ownership
of all rights in such part of the Deliverables and IBM shall have the
right to obtain and to hold in its own name copyrights, registrations, and
whatever protection which may be available in the Deliverables. Contractor
agrees to give IBM or its designees all assistance reasonably required to
perfect such rights.
3. To the extent that any preexisting materials of Contractor are contained
in the Deliverables, Contractor hereby grants to IBM an irrevocable,
non-exclusive, worldwide, royalty-free license to: use, execute,
reproduce, display, perform, distribute (internally or externally) copies
of, and prepare derivative works based upon such preexisting materials
and derivative works thereof; and, authorize others to do any, some, or
all of the foregoing. Contractor shall obtain IBM's prior written
approval before incorporating any of Contractor's preexisting materials in
the Deliverables.
4. Should Contractor and IBM mutually agree that there is a requirement to
include in the Deliverables the materials of a third party, Contractor
agrees to obtain all necessary rights and or licenses from such third
party at Contractor's expense. The terms and conditions of such rights and
licenses are subject to IBM's approval and must, at a minimum, enable IBM
to l) use, execute, reproduce, display, perform, distribute (internally and
externally) copies of, and prepare derivative works based upon, such
materials of a third party and derivative works thereof; 2) authorize
others to do any, some or all of the foregoing. Upon IBM's request,
Contractor shall deliver to IBM a complete copy of every agreement, license,
or other arrangement from which Contractor derives authority to grant IBM
rights and licenses granted under this Agreement. Contractor shall obtain
IBM's prior written approval before incorporating the materials of a third
party in the Deliverables.
<PAGE>
5. No license or right is granted to Contractor either expressly or by
implication, estoppel, or otherwise to publish, reproduce, prepare
derivative works of, distribute copies of, publicly display or perform any
of the Deliverables except preexisting materials of Contractor, either
during or after the term of this Agreement.
6. The Contractor shall satisfactorily complete and return to IBM, when
required, a Vendor Certificate of Originality, as specified in Exhibit 1 of
this Agreement. This pertains to all programming software work at the
completion of such software work or earlier if so requested by IBM. The
acceptance of the properly completed certificate is a condition of final
payment by IBM for the finished material.
- --------------------------------------------------
1.10 INVENTION RIGHTS
1. Contractor shall promptly make a complete written disclosure to IBM of
each Invention, specifically pointing out the features or concepts which
Contractor believes to be new or different.
2. Contractor hereby assigns to IBM, its successors, and assigns, any
Invention together with the right to seek protection by obtaining patent
rights therein, and to claim all rights of priority thereunder, and the
same shall become and remain IBM's property whether or not such protection
is sought.
3. Contractor shall, upon IBM's request and at IBM's expense, cause patent
applications to be filed on any Invention, through solicitors designated by
IBM and forthwith assign all such applications to IBM, its successors and
assigns. Contractor shall give IBM and its solicitors all reasonable
assistance in connection with the preparation and prosecution of any such
patent applications and shall cause to be executed all such assignments and
other instruments and documents as IBM may consider necessary or appropriate
to carry out the intent of this Section.
4. To the extent that IBM has the right to do so, IBM hereby grants to
Contractor an irrevocable, nonexclusive, nontransferable, and fully paid-up
license throughout the world under any Inventions assigned to IBM pursuant
to this Section and under any patents throughout the world issuing thereon
including reissues, extensions, divisions, and continuations thereof;
provided, however, that such license is not applicable to any Inventions,
patent applications, or patents related to appearance designs.
5. Nothing contained in this Agreement shall be deemed to grant either directly
or by implication, estoppel, or otherwise, any license under any patents or
patent applications arising out of any other inventions of either party.
- --------------------------------------------------
1.11 CONTRACTOR'S EMPLOYEES
1. Contractor shall have an appropriate agreement with each of its employees or
others whose services Contractor may secure to perform hereunder,
sufficient to enable it to comply with all of the terms of this Agreement
including this section.
2. Contractor agrees to take appropriate preventive steps before the assignment
of any of its employees to perform work under this Agreement that it
reasonably believes will ensure that its employees and its subcontractors'
employees at any level will not engage in inappropriate conduct while on
IBM premises. Inappropriate conduct shall include but is not limited to:
being under the influence of or affected by alcohol, illegal drugs, or
controlled substances; the manufacture, use, distribution, sale/or
possession of alcohol, illegal drugs, or any other controlled substance
except for approved medical purposes; the possession of a weapon of any
sort; or harassment, threats/or violent behavior. Violation of this
provision may result in termination of this Agreement and any other remedy
available to IBM at law or in equity.
3. Contractor agrees to distribute the following notice concerning sexual
harassment to any of its employees who are assigned to work on IBM premises:
"IBM is committed to providing a work environment free from sexual
harassment. Sexual harassment is unwelcome sexual conduct which has the
purpose or effect of unreasonably interfering with an individual's work
performance or which creates an offensive or hostile work environment.
If you believe that you have been the victim of sexual harassment while
working on IBM premises, you are
<PAGE>
encouraged to report such incidents directly to your employer and
directly to IBM by calling IBM Corporate Security at 8/251-4885 or
(914) 765-4885 between 8:30 a.m. and 5:00 p.m. Eastern time. If you are
calling long distance from outside IBM, you may call this number
collect. All complaints to IBM of such conduct will be investigated
promptly and dealt with appropriately."
4. IBM shall have access to the documentation necessary to verify compliance
with Contractor's commitment in this entire section.
5. IBM may, at its sole discretion, request that Contractor remove any specified
employees of Contractor from IBM's premises and that they not be reassigned
to any IBM premises under this Agreement. No reason is required of IBM for
such request. Contractor hereby agrees to take action immediately to remove
such specified employees and to ensure that such reassignment does not occur.
6. Personnel supplied by Contractor shall be deemed employees of Contractor and
shall not for any purpose be considered employees or agents of IBM.
Contractor assumes full responsibility for the actions of such personnel
while performing services pursuant to any purchase order issued hereunder
and shall be solely responsible for their supervision, daily direction and
control, payment of salary (including withholding of income taxes and social
security), worker's compensation, disability benefits, and the like.
7. Except as specified in attachment A: Statement of Work, Section 3.6, all
training of Contractor's employees shall be conducted by the Contractor. In
the event that IBM conducts such training of Contractor's employees,
Contractor shall reimburse IBM for such training at a price not less than the
Training Specialist bill rate specified in Section 3.12.
8. Contractor shall not conduct non-production meetings, hold perspective
employee interviews, or terminate employees on IBM premises.
9. In the event of cancellation, termination or expiration of this Agreement,
Contractor shall not prohibit its employees assigned to work under this
Agreement from seeking immediate employment with IBM or another third party
employer. The management and teamleader positions are excluded from this
provision.
- --------------------------------------------------
1.12 IBM REGULATIONS & POLICIES
Contractor personnel are not eligible to use or to participate in the following:
IBM Credit Union
IBM Club recreational or social activities
Voluntary education programs
IBM Suggestion Program
Any IBM awards program
Cashier
Contractor personnel shall not make personal use of:
IBM tools, test equipment, etc.
IBM bulletin boards
Telephones
Copiers
Internal computing systems
Contractor personnel shall:
Wear badges at all times and comply with all IBM security procedures
Not remove any IBM property nor take any work off IBM premises
Comply with Confidential Information Section of this Agreement
While working at IBM, contractor personnel shall observe the following rules:
No liquor or drug abuse
No fighting, horseplay, etc.
No dishonesty
No firearms, knives, or other weapons
No foul language
No gambling
No promiscuous conduct
No solicitation
No ethnic or racial or sexual jokes or slurs
No sexual harassment
No threats
No misuse of IBM assets including copiers, systems, or facsimiles
<PAGE>
- --------------------------------------------------------------------------------
1.13 Former IBM Employees
1. Contractor shall inform IBM Purchasing when Contractor plans to assign a
former IBM employee to perform work under this Agreement whether or not on
IBM premises. IBM reserves the right to approve or to disapprove the
assignment.
2. Nothing contained in this Agreement shall be construed as granting to
Contractor or any employee of Contractor rights under any IBM employee
benefit plan.
- --------------------------------------------------------------------------------
1.14 Insurance
1.14.1 General Requirements
Supplier shall, at its own expense, provide and keep in full force and effect
during the term of the Agreement at least the following kinds and minimum
amounts of insurance covering its services in the state(s) in which the work is
to be performed.
1. Worker's Compensation Insurance and Employer's Liability Insurance.
2. Commercial General Liability Insurance including personal and advertising
injury with the following extensions of coverage:
2.1. "Premises Operations"
2.2. "Products and Completed Operations" for two years following expiration
or termination of the Agreement.+
2.3. "Contractual Liability" for the liability assumed by Supplier under the
Section entitled "Indemnification"
General Liability Insurance requirements for sole proprietors operating as
IBM suppliers will be satisfied by procuring a Business Owners Policy with a
$1,000,000 limit of liability.
3. Comprehensive Automobile Liability Insurance for personal injury and property
damage for owned and non-owned, and hired vehicles used by Supplier while
performing service in connection with the Agreement.
4. Supplier shall provide IBM with a Certificate of Insurance upon request
evidencing the insurance specified in this Section.
5. Insurance coverage must include the following requirements:
5.1. IBM named as Certificate holder.
5.2. Minimum of 30 days notice of any changes or cancellations to policy
5.3. IBM named as an additional insured under 2 and 3 above.
+Note: Products and Completed Operations Coverage not required of suppliers
who are not at all involved in the manufacturing or sales process related to
products (i.e.: consultants, maintenance).
1.14.2 Minimum Limits of Coverage
COVERAGE MINIMUM LIMITS
- --------------------------------------------------------------------------------
Worker's Compensation ... Statutory requirements of the state of which the
work is to be done.
Employer's Liability ... Not less than $100,000
Commercial General Liability++
A. Bodily Injury ... $1,000,000 each occurrence
B. Property Damage ... $1,000,000 each occurrence
$1,000,000 combined single limit acceptable for A&B.
++Includes Premises Operations, Products and
Completed Operations, and Contractual Liability.
Comprehensive Automobile Liability
(owned, non-owned and hired)
A. Bodily Injury ... $250,000 each person
... $500,000 each occurrence
B. Property Damage ... $200,000 each occurrence
- --------------------------------------------------------------------------------
1.15 Contractor Safety on Premise
1. At their own expense, Contractor or its Subcontractors of any tier entering
IBM's premises shall comply with the Occupational Safety and Health Act of
1970, as amended, and all regulations and standards.
2. Contractor shall notify IBM promptly in writing if a charge of non-compliance
with the Occupational Safety and Health Act of 1970, as amended, has been
filed against the Contractor
<PAGE>
in connection with any services being performed hereunder on IBM owned or
leased premises.
3. For Contractor's projected to work 500 hours or more at an IBM location
providing construction or manufacturing type services, Contractor must
provide evidence of a satisfactory safety program to IBM consisting of the
following elements and performance standards at IBM's request:
. Contractor's OSHA Accident/Illness Frequency Rate number, no greater than
industry average for SIC code (annually).
. Contractor's SIC Code.
. Contractor's OSHA 200 Log (copy) if contract extends beyond one year.
. Contractor's OSHA Lost Workday Frequency Rate (Preferably below 1.5).
. Contractor's Workers Compensation Experience Modification Rate (EMR) (Rate
no greater than 1.0, without evidence of Contractor's progress toward this
level).
. Contractor's Safety Officer responsible for administering Safety and Health
programs.
. Copy of Contractor's Safety Program that addresses all aspects of the work
to be performed for IBM such as Protective Equipment, HAZCOM, Lockout
Tagout, Electrical Safety Work Practices, Confined Space, Accident
Reporting, and General Office Safety.
. Copy of Contractor's training programs for those tasks requiring specific
safety related training.
4. General Contractors must ensure that any subcontractors they bring on IBM
premises must also meet the above criteria.
5. IBM shall monitor and evaluate Contractor's performance under this section.
Any non-compliance may result in termination of this Agreement. Past and
present performance under this section will be considered in the awarding of
future business.
- --------------------------------------------------------------------------------
1.16 Indemnification
Contractor will at its expense, indemnify, defend and save IBM harmless against
any claims (including costs of litigation and attorneys' fees, loss, damage,
penalty, fine, or expense whatsoever) resulting from:
1. a breach or alleged breach of Contractor's warranties or representations
under this Agreement;
2. Contractor's failure to comply with any governmental law, statute, ordinance,
administrative order, rule, or regulation;
3. Contractor's or Subcontractor's failure to comply with the Occupational
Safety and Health Act of 1970, as amended, and all regulations and standards;
4. for personal injury or death to persons and damage to property (including
IBM's property) arising out of or in connection with or resulting from
operations under this Agreement to the extent that such injuries, deaths, or
damage are caused by the Contractor or any of its Subcontractors or by anyone
directly or indirectly employed by any of them;
5. any alleged or actual infringement by any Deliverable, or any preexisting or
third party materials from which any Deliverables are prepared, of a patent,
copyright, trademark, trade secret, or other intellectual property right,
privacy or similar right of any third party, in any country in the world.
Contractor shall notify IBM if Contractor is or becomes aware of any right of,
or protection accorded to, a third party as set forth above that might affect
Contractor's ability to provide goods under this Agreement or limit IBM's
freedom to use or sell such goods anywhere in the world. IBM shall provide
notice to Contractor of any such proceeding or claim of which it becomes aware.
IBM may actively participate in any such proceedings at its own expense.
Contractor shall have no liability for required compliance by Contractor with
written specifications furnished by IBM if such infringement cannot be avoided
by the Contractor in complying with such specifications.
<PAGE>
- --------------------------------------------------------------------------------
1.17 Environment
1. Contractor certifies that it is currently in compliance and that it shall
comply with all federal, state, and local laws, rules, orders, and
regulations relating to the protection of the environment and related
matters. Contractor acknowledges that any chemical, material, or waste that
may be used or generated in its processes is solely its responsibility to
properly handle, use, store, treat, and dispose of in accordance with the
applicable environmental laws and regulations.
2. Contractor agrees to provide IBM promptly, upon request, with any and all
relevant information concerning its compliance with applicable environmental
laws and regulations, including copies of required permits, EPA ID Numbers,
waste manifest documents, and other appropriate federal, state, and local
authority required documentation. Contractor also agrees, upon reasonable
notice and during normal office hours, to permit IBM to inspect its premises
and to audit its relevant records for the purpose of determining Contractor's
compliance with all applicable environmental laws and regulations.
3. In the event that IBM specifications require the Contractor to use materials
or chemicals that are not commonly used by the Contractor, before commencing
work on the process, Contractor will represent in writing to IBM that it has
the necessary expertise to use, control, and dispose of any such materials or
wastes generated in the process, if any, in accordance with all appropriate
and applicable environmental laws and regulations.
- --------------------------------------------------------------------------------
1.18 Compliance with Laws
1. General
Contractor shall, at its own expense, comply with all governmental laws and
regulations relating to its duties, obligations, and performance under this
Agreement, including without limitation, Executive Order 11246 (as amended)
of the President of the United States on Equal Employment Opportunity and the
Rules and Regulations issued pursuant thereto, all environmental laws,
ordinances, codes, rules, regulations, license and permit provisions,
guidelines and directives, the Immigration Reform and Control Act of 1986,
the Foreign Corrupt Practices Act, and the import and export laws and
regulations of the United States Customs Services, the United States
Department of Commerce and Department of State, and shall procure all
licenses and pay all fees and other charges required thereby.
Contractor shall notify IBM promptly, in writing, if a charge of non-
compliance with the Occupational Safety and Health Act of 1970 has been filed
against the Contractor in connection with services being performed hereunder
on IBM owned or leased premises.
2. Leased Employees and Management Services Organization
Contractor shall provide IBM any information about Contractor's personnel
that IBM is required by law to obtain, including information on "leased
employees" and "management services organization" as these terms are used in
Secs. 414(m), (n) and (o) of the Internal Revenue Code.
3. Former DOD Employees
Contractor warrants that no individual who is a former officer or employee of
the Department of Defense (DOD) who: left DOD service on or after April 16,
1987; and served in a civilian position for which the rate of pay is equal to
or greater than the minimum rate of pay for GS-13; or served in the Armed
Forces in a pay grade of 04 or higher; shall be employed or compensated for
services rendered under this Agreement within two (2) years after leaving
service in DOD without the specific written approval of IBM. If Contractor
requests such approval, Contractor agrees to provide IBM with any information
needed to comply with 10 USC 2397 (b) and (c).
4. DTC ITAR
Contractor warrants that it is not the subject of an indictment or conviction
of the criminal statutes enumerated in 22 CFR Part 120.24, or is ineligible
to contract with, or to receive a license or other approval to import defense
articles or defense services from, or to receive an export license or other
approval from any agency of the U.S. Government. Contractor must notify IBM
immediately if it becomes the subject of an indictment or conviction of the
criminal statutes enumerated in 22 CFR Part 120.24.
<PAGE>
5. Contractor agrees that neither Contractor nor any of its agents or employees
will export or re-export any information of IBM or any process, product, or
service that is produced as a result of the use of such information to any
country specified in such Export Regulations as a prohibited destination
without first obtaining U.S. Government approval by application through IBM.
Upon request, IBM will advise Contractor of the countries then specified in
such regulations as prohibited destinations.
6. Boycotts
Contractor shall comply with Part 769 of the U.S. Export Regulations
concerning Restrictive Trade Practices or Boycotts.
Contractor may not alter or add any statements to IBM documentation
including, but not limited to IBM commercial invoices, IBM manifests,
carrier air waybills, ocean bills of lading, certificates of origin,
insurance certificates, consul documentation, or any other documentation.
Contractor may not provide any information whether positive or negative
concerning IBM's past, present, or future business:
6.1. With or in a boycotted country;
6.2. With any business concern organized under the laws of a boycotted
country;
6.3. With any national or resident of a boycotted country; or
6.4. With "Black List" organizations or persons.
Contractor will advise IBM of all boycott related requests that Contractor
receives in connection with any IBM shipment, including but not limited to
requests Contractor is required to report to the U.S. Department of Commerce
in accordance with U.S. regulations.
- --------------------------------------------------------------------------------
1.19 Trademark
Nothing in this Agreement grants either party any rights to use the other
party's trademarks or trade names, directly or indirectly, in connection with
any product, service, promotion, or publication without the prior written
approval of the trademark owner.
- --------------------------------------------------------------------------------
1.20 Monthly Report
Contractor with employees working on IBM premises shall submit a monthly report
due by the fifth (5th) of each month listing the employee names, IBM purchase
order numbers, and the rates of each of the Contractor's employees for the
previous month. This report shall be submitted to the procurement administrator
of this Agreement.
- --------------------------------------------------------------------------------
1.21 Electronic Data Interchange / Electronic Funds Transfer
When business documents are transmitted electronically the following terms and
conditions apply:
1. Transmission - Each party may electronically transmit and receive documents
through the assistance of a network in accordance with mutually agreed upon
standards. Each party shall be responsible for all network charges. If both
parties use the IBM Information Network, the sender will be responsible for
the transmission costs.
2. Receipt - A document is received when it arrives at the receiving party's
mailbox. Upon receipt of any document, the receiving party shall promptly
send an acceptance which will conclusively establish receipt and content of a
document. If any document is received in an unintelligible or garbled form,
the receiving party shall promptly notify the originating party (if
identifiable from the received document) in a reasonable manner. In the
absence of such a notice, the originating party's records of the contents of
such document shall prevail.
3. Signature and Enforceability - Each party shall adopt as its signature an
electronic identification consisting of symbols or codes (User ID) that shall
be affixed to or contained in each document. Each party will maintain
security procedures to prevent unauthorized use or disclosure of its User ID.
Any document containing, or to which there is affixed, a User ID shall be
considered: (a) a "writing" or "in writing"; (b) to have been "signed"; (c)
an "original" when printed from electronic files or records established and
maintained in the normal course of business; and (d) "admissible" to the same
extent and under
<PAGE>
the same conditions as other business records originated and maintained in
documentary form.
4. Confidential Information - The parties agree that all information
transmitted shall comply with the Confidential Information Section of this
Agreement.
5. Electronic Funds Transfer - By completing this Section, Contractor
authorizes IBM to initiate electronic credit entries to the account listed
below. Contractor agrees that such transactions will be governed by the
National Automated Clearing House Association rules. This authority is to
remain in effect until IBM has received written notification of termination
in such time and such manner as to afford IBM a reasonable opportunity to act
on it.
------------------------------------------------------------
Financial Institution:
------------------------------------------------------------
City, State
------------------------------------------------------------
Account Number: (max 17)
------------------------------------------------------------
Bank Routing/Transit Code: (max 9)
6. Limitation of Remedies - Neither party shall be liable to the other for
any special, incidental, exemplary, or consequential damages arising from or
as a result of: (l) any delay, omission, or error in the electronic
transmission or receipt of any documents; or (2) any delay, omission, or
error of an electronic credit entry by IBM even if the other party has been
advised of the possibility of such damages. In addition, neither party shall
be liable for any damages claimed by the other party based on any third party
claim. In no event will either party be liable for any damages caused by the
other party's failure to maintain security procedures to prevent the
unauthorized use or disclosure of its User ID.
- --------------------------------------------------------------------------------
1.22 Utilization of Minority Owned Businesses
l. In support of the services and products being provided herein, Contractor
shall, when subcontract/purchasing opportunities exist, attempt to utilize
minority owned suppliers to fulfill requirements of this contract.
2. Upon IBM request, Contractor shall provide reports to include the name and
address of the minority owned suppliers utilized, description of services or
products provided, dollar value of services or products, and a summary of
efforts to utilize minority owned businesses.
3. A minority-owned business is defined as 51% or more owned and controlled by
members of the following minority groups: Black Americans, Hispanic
Americans, American Indians, native Hawaiians, Asian-Indian Americans, Asian-
Pacific Americans, American Eskimos or Aleuts. The minority-owned supplier
must certify their status.
- --------------------------------------------------------------------------------
1.23 Taxes
1. Contractor is responsible for all federal and state payroll taxes such as
social security and unemployment taxes.
2. Contractor agrees to pay any taxes imposed by law related to the service
provided hereunder unless otherwise agreed to in writing by IBM.
- --------------------------------------------------------------------------------
1.24 Gifts and Gratuities
Contractor shall not make or offer a gratuity or gift of any kind to IBM
employees or their families that could be viewed as relating to an actual or
potential business relationship with IBM. Gifts include entertainment, personal
services, favors, discounts, and other preferential treatment of any kind. IBM
will interpret any such action as an improper attempt to influence IBM employees
which will jeopardize IBM's relationship with the Contractor.
- --------------------------------------------------------------------------------
1.25 Representations And Warranties
l. Contractor represents and warrants the originality of the Deliverables and
that no portion of the Deliverables or their use or distribution violates or
is protected by any copyright or other rights of any third party except as
provided in the fourth paragraph of the "Rights In Data" section of this
Agreement.
2. Contractor represents and warrants that it is under no obligation or
restriction nor will it assume any such obligation or restriction which would
in any way interfere or be inconsistent
<PAGE>
with or present a conflict of interest concerning the services to be
furnished by Contractor under this Agreement.
3. Contractor represents and warrants that all Deliverables shall be free of any
computer code, programming instruction, or set of instructions that are
intentionally constructed with the ability to damage, interfere with, or
otherwise adversely affect computer programs, data files, or hardware.
4. In providing services under this Agreement, Contractor understands that IBM
does not wish to receive from Contractor any information which may be
considered confidential or proprietary to Contractor or to any third party.
Contractor represents and warrants that any information disclosed by
Contractor to IBM is not confidential or proprietary to Contractor or to any
third party.
5. Contractor represents and warrants that all Deliverables shall be free from
defects in design, materials, and workmanship for a period of one year
unless longer warranties are required in the Statement of Work in which case
the longer periods of time shall prevail.
6. Contractor represents and warrants that Contractor maintains comprehensive
general and vehicular liability insurance for claims for damages because of
bodily injury or death and property damage caused by or arising out of acts
or omissions of its employees.
Contractor further represents and warrants that Contractor maintains
sufficient contractual liability insurance to cover the liabilities assumed
by Contractor under this Agreement. In no event shall any insurance be
cancelled, be allowed to lapse or be materially modified without prior
written notice to IBM.
7. Contractor represents and warrants that in all dealings leading to the
execution of this Agreement, Contractor has been represented solely by its
own bona fide employees or agents and that it has not paid or agreed to pay
any other person any commission, percentage, brokerage, or contingent fee.
Contractor also warrants that it has not made and will not make any gifts,
loans, or grant other consideration to any employee of IBM, directly or
indirectly, in connection with this Agreement or otherwise. The falsity or
breach of either such warranty shall constitute a default under this
Agreement.
8. Contractor represents and warrants that the price of the products or
services purchased under this Agreement does not exceed the price charged by
Contractor to any other customer purchasing the same products or services in
like or smaller quantities, and under similar conditions of purchase.
9. Contractor represents and warrants that Contractor will not in any way,
directly or indirectly, at any time during the term of this Agreement or any
renewal thereof, or within two (2) years after its termination or expiration,
solicit, divert, take away, or attempt to solicit, divert or take away from
IBM any customers or prospective customers of IBM who were served by
Contractor during the term of this Agreement, or whose names and/or
addresses became known to Contractor in any manner during the term of this
Agreement. Contractor also represents and warrants that it will not, during
the term of this Agreement or within two (2) years thereafter, attempt or
seek to cause any of the customers of IBM to refrain from patronizing IBM and
will not assist any other persons to do so.
- --------------------------------------------------------------------------------
1.26 Quality And Acceptance
1. Contractor shall establish a quality improvement plan that demonstrates
continuous quality improvement on the products and or services provided to
IBM. Contractor must conform to the Malcolm Baldrige National Quality Award
criteria, the ISO 9000 Standards, or an equivalent documented quality
improvement process. IBM may audit Contractor's quality improvement plan for
conformance to this requirement.
2. Contractor shall notify IBM in writing at the earliest possible time of any
factor, event, or anticipated event that may affect Contractor's ability to
meet the requirements of any Statement of Work, including changes in the
assignment of key employees, strikes, or unavailability of critical
resources. The issuance of such notice shall not excuse the Contractor from
any default of performance obligation.
3. IBM shall have the right to conduct progress reviews at Contractor's place of
business to verify that Contractor's performance is in accordance with the
standards, specifications,
<PAGE>
and other requirements of the Statement of Work. Contractor shall take all
actions necessary to correct any deficiencies identified by IBM during such
reviews. Contractor's failure to correct such identified deficiencies or to
obtain IBM's agreement on a plan to correct such deficiencies within ten (10)
work days after receipt of such notice and to diligently proceed in
accordance with such plan shall be grounds for termination of the Statement
of Work by IBM in accordance with the Termination Section of this Agreement.
4. IBM shall have the right to evaluate and to test each Deliverable in
accordance with the completion and acceptance criteria specified in the
Statement of Work. IBM shall provide Contractor with written notification of
its acceptance or rejection of the Deliverable. In the case of rejection or
partial or conditional acceptance, such notification shall state the reasons
for IBM's determination. Contractor shall correct any deficiencies preventing
final acceptance at no additional charge to IBM and obtain IBM's agreement on
a plan to correct such deficiencies within ten (10) work days after receipt
of such notification. Contractor's failure to correct such deficiencies or to
obtain IBM's agreement on such a plan and to proceed diligently in accordance
with such plan shall be grounds for termination by IBM of the Statement of
Work in accordance with the Termination Section of this Agreement.
- --------------------------------------------------------------------------------
1.27 Cost Reduction
Contractor shall implement methods of improved productivity designed to
facilitate cost reductions resulting in price reductions to IBM of at least 3%
annually during the term of the Agreement. In the event that market conditions
permit Contractor to reduce its costs further, Contractor shall provide
additional cost reductions to IBM. In the event that market conditions beyond
Contractor's control offset some or all of the agreed upon annual price
reductions, Contractor shall notify IBM in writing, detailing the market
conditions. If IBM agrees that such market conditions exist, IBM and Contractor
shall negotiate in good faith to reach a mutually agreeable price reduction.
- --------------------------------------------------------------------------------
1.28 General Provisions
1. The rights and obligations of Sections titled Payment and Records,
Confidential Information, Rights in Data, Invention Rights, Compliance with
Laws, IBM Trademarks, and Warranties shall survive and continue after any
expiration or termination of this Agreement and shall bind the parties and
their legal representatives, successors, heirs, and assigns.
2. This Agreement does not imply any commitment to purchase products or
services by either party.
3. IBM may at any time have others provide like or similar services provided by
the Contractor as specified in the Statement of Work or purchase orders or
may elect to accomplish like or similar work itself.
4. Contractor shall not disclose the existence of this Agreement or any of its
terms and conditions or the fact that Contractor has furnished or contracted
to furnish IBM services under this Agreement without the prior written
consent of IBM.
5. Neither party shall be responsible for failure to fulfill its obligations
under this Agreement due to fire, flood, war or other such cause beyond its
control and without its fault or negligence (excluding labor disputes)
provided it promptly notifies the other party.
6. The laws of the State of New York govern this Agreement.
7. Both parties agree to waive their right to a trial by jury in any dispute
arising out of this Agreement.
8. No delay or failure by either party to act in the event of a breach or
default hereunder shall be construed as a waiver of that or any subsequent
breach or default of any provision of this Agreement.
9. The prevailing party in any legal action hereunder shall be entitled to
reimbursement by the other party of its expenses including, without
limitation, reasonable attorney's fees.
10. Any terms of this Agreement which by their nature extend beyond their
expiration or termination shall remain in effect until fulfilled and shall
bind the parties and their legal representatives, successors, heirs, and
assigns.
<PAGE>
11. The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
- --------------------------------------------------------------------------------
1.29 Notices
Unless otherwise provided in this Agreement, all notices required or permitted
hereunder shall be in writing and shall be given by personal service or sent by
registered, certified or express mail, reputable overnight courier service or
facsimile with receipt confirmed:
International Business
Machines Corporation
P.O. Box 1900
Dept. PRB1 / Bld. 001H
Boulder, CO 80301-9191
Attention: Nancy Hiatt
- --------------------------------------------------------------------------------
1.30 Modifications
Except as specifically provided herein, this Agreement may not be amended or
modified except by a formal amendment signed by both parties.
- --------------------------------------------------------------------------------
1.31 Authority
Wherever the word "IBM" appears in this Agreement with respect to authorization
for such items as Subcontracting; Delegations; Modifications; Termination and
Cancellation, the word is deemed to mean and only mean IBM's Purchasing
Department. No other person or department of IBM so authorized to act. Claims by
Contractor for adjustments, increases, and increments to price or for added
costs resulting from the foregoing items will not be allowed unless the said
authorization shall have been duly granted in writing prior to implementation by
IBM's Purchasing Department.
- --------------------------------------------------------------------------------
1.32 Rate Schedule
The rates for all Deliverables and associated services committed by IBM under
this Agreement shall be as specified in the Statement of Work and on the
purchase orders issued by IBM and accepted by the Contractor.
- --------------------------------------------------------------------------------
1.33 Delivery Schedule
Deliverables shall be completed and delivered in accordance with the Statement
of Work and purchase orders issued hereunder.
Time is of the essence in Contractor's furnishing Deliverables to IBM.
Contractor shall apply best efforts in providing Deliverables to IBM. If
Contractor fails to provide the Deliverables on time, IBM may purchase elsewhere
and may, unless Contractor's delay was due to unforeseeable causes beyond its
control and without its fault or negligence, charge Contractor with all losses
incurred.
- --------------------------------------------------------------------------------
1.34 Term
This Agreement dated October 04, 1995 shall become effective the date both
parties have signed this Agreement and shall expire on October 31, 1997.
- --------------------------------------------------------------------------------
1.35 Termination and Cancellation
1. Either party may terminate this Agreement for convenience upon sixty (60)
days prior written notice to the other party.
2. Either party may terminate this Agreement in the event of a material breach
of this Agreement by the other party provided the party in breach is given
written notice and fails to cure such breach within thirty (30) days.
Contractor shall, upon receipt of notice to terminate, stop all work being
performed and cancel subcontracts associated therewith. Any outstanding
purchase orders shall terminate upon termination of this Agreement. IBM's
sole liability for termination of each purchase order outstanding as of the
date of termination shall be to pay at rates specified in the purchase
orders for satisfactory work performed under the purchase orders as of the
date of termination and for expenses or other direct charges incurred by
Contractor from which Contractor cannot decommit itself. Any such amount
shall not exceed the amount specified for the work in such terminated
purchase orders.
<PAGE>
3. Purchase orders issued by IBM under this Agreement and accepted by Contractor
may be cancelled by IBM, in each case without further liability thereunder,
as follows:
Purchase orders, or portions thereof, covering services of Contractor's
personnel to be performed on or off IBM premises, may be cancelled on twenty-
four (24) hours written notice.
Purchase orders issued under a Government contract may be cancelled at any
time upon written notice.
In the event of cancellation, termination, or expiration of any purchase
order issued hereunder, all work in process thereunder in Contractor's
possession shall be forwarded to IBM, and IBM shall make payment at the
specified rates for satisfactory services performed to the effective date of
cancellation, termination, or expiration of such purchase order.
- --------------------------------------------------------------------------------
1.36 Entire Agreement
The foregoing terms and conditions, together with the referenced Attachments,
are the complete and exclusive expression of the agreement between the parties,
superseding any prior agreements, written or oral, relating to the subject
matter of this Agreement notwithstanding anything contained in any document
issued by Contractor.
- --------------------------------------------------------------------------------
1.37 Order of Precedence
In the event of any inconsistency or conflict in the provisions of these
documents, the order of precedence shall be:
1. The foregoing terms and conditions;
2. Attachments referenced herein.
3. Purchase orders
4. Purchase order attachments
<PAGE>
- --------------
2.0 Signatures
In witness whereof, the parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives.
International Business Computer Generated Solutions, Inc.
Machines Corporation
By: /s/ Philip Friedman
---------------------------
/s/ G. H. Tamura 10/5/95
Title: President
---------------------------
G. H. Tamura Date: 10/6/95
Location Procurement Manager ---------------------------
<PAGE>
- -----------------------------------
3.0 Attachment A: Statement of Work
- --------------------------------------------------------------------------------
3.1 Project Description
When an IBM customer requires assistance, they place a request call through the
Call Management Centers (CMCs). That call is taken by a Customer Service
Representative (CSR) employee and entered into the appropriate system for
assignment. These calls are taken for a variety of customers on a variety of
customized applications.
The Contractor Customer Service Representative (CSR) works directly with IBM's
customers, IBM's Customer Service Engineers (CE) and IBM's internal support
organizations. It is expected that the CSR will be courteous and professional at
all times. They must be able to communicate clearly and effectively by phone
while being complete, accurate and timely in gathering required information. In
addition, they must provide navigational and informational services to customers
who require additional service or information within the IBM support network.
They are expected to search various databases, make appropriate updates, and
maintain those databases within a specified criteria. In addition, each CSR is
expected to adhere to the quality processes currently in place which measures
timeliness, accuracy, and professionalism. See Section 3.9 for acceptance
criteria.
It is the goal of the CSR team to become a single point of value for each call
received. That value may include, but is not limited to, information sharing,
information gathering, product entitlement and call navigation. We anticipate
the role of this function will continue to expand as more business opportunities
are identified. It is vital that the Contractor be flexible in meeting the
requirements of these future opportunities.
Contractor agrees that, by October 30, 1995, Contractor shall have hired at
least 90% of the supplemental employees currently employed by IBM in each of
the Atlanta and Dallas Call Management Centers for the positions listed in
Section 3.2 of this Statement of Work. The failure of Contractor to comply with
this paragraph shall permit IBM to immediately cancel this Agreement at
IBM's sole discretion and with no liability on the part of IBM.
- --------------------------------------------------------------------------------
3.2 Manpower
The estimated number of personnel required to perform each task is listed below,
however, the number of personnel may change with the written concurrence of the
IBM Coordinator and Contractor Supervisor. Job descriptions are provided in
Section 3.5.
<PAGE>
<TABLE>
<CAPTION>
Table 1. Estimated Headcount
JOB DESCRIPTION ATLANTA DALLAS
<S> <C> <C>
Customer Service Representative **** ****
SESA Coordinator ****
Senior Customer Service Representative **** ****
Training Specialist **** ****
Team Leader **** ****
Receptionist **** ****
Graphics Coordinator **** ****
Operational Support Manager **** ****
</TABLE>
- --------------------------------------------------------------------------------
3.3 Work Schedules
The following identifies the work schedules:
. The CMC's operate 24 hours per day, 7 days per week
. Holiday work will be required
. Overtime may be required
- --------------------------------------------------------------------------------
3.4 Skill Requirements
The following list outlines the general skills required to perform all job
descriptions listed in this section:
. Very good verbal communication skills which are clear, understandable and
precise
. Be professional and courteous at all times
. Above average typing skills
. Good listening skills
. Above average reading comprehension skills
. Learn and follow procedures
. Strong customer service skills and temperament which includes diffusing
upset customers.
. Administrative and organizational skills
. Multiplexing skills
. Knowledge of OS/2
. Freelance skills for graphics person
. Computer navigation skills
. Telephone handling skills
**** Confidential treatment is being requested for these portions of this
agreement.
<PAGE>
- --------------------------------------------------------------------------------
3.5 Job Descriptions
The following job descriptions serve only as guide as to the types of
responsibilities within each job category. They are subject to change
at any time by the IBM Coordinator.
1. Customer Service Representative (CSR)
Position Concept: As the initial customer contact for IBM service, the CSR's
professional communications and ultimate decision making responsibility
directly impact IBM customers' degree of service delivery satisfaction.
Effective communication of service offerings and efficient execution of the
call process facilitates the request for service. The CSR must extract
pertinent call information from the customer to ensure the service request is
handled timely and properly. Service delivery concerns are proactively
communicated to appropriate escalation levels. CSRs utilize the NSS system
to record information and assign calls to the appropriate service
representative or organization. They must remain knowledgeable of new service
offerings and call procedures. In addition, the CSR may be required to
research customer entitlement, navigate informational requests, take
Hardware/Software service calls, and/or track Finders M/A information.
Responsibilities
. Receive customer request for Hardware and Software service. Be thoroughly
knowledgeable of current service offerings, billable information, and
entitlement process. Question customer to obtain product service and
entitlement options to properly assign provider of service and determine
urgency of request. Take personal ownership of each call received and
aggressively seek to improve customer satisfaction.
. Utilize resource materials in directing customer inquiries that are not
service related. Inform appropriate contact of information changes. Be
thoroughly knowledgeable of resource materials and give assistance when
required. Escalate unresolved inquiries to resolution.
. Navigate informational and procedural calls as required.
. Be thoroughly knowledgeable and assist with backup procedures when
required.
. Maintain a working knowledge of special operating procedures used to
interface with internal organizations relating to critical customers.
. Be thoroughly knowledgeable of special operating procedures to interface
with external providers of service (Customized Operational Service, Multi
Vendor Support (MVS), etc.). Ensure special operating procedures are
understood and adhered to.
. Recognize customer complaints that need to be escalated. Demonstrate
quality communication skills and exhibit high level of professionalism and
extreme sensitivity to customer satisfaction. Follow appropriate
procedures and use good judgement in reporting complaints.
. Identify any National Service Support (NSS), Computer Aided Dispatch
(CAD) or OASIS discrepancies or omissions (i.e. prescreens, alias) and
notify appropriate resource.
. Use courtesy, tact and discretion in all communications with customers,
vendors and IBM personnel. Exhibit a high level of professionalism and
utilize good judgement to inform manager of potential problems.
. Maintain knowledge and operation of all CSR equipment. Utilize basic
problem determination and follow reporting procedures.
. Follow internal IBM phone guidelines pertaining to professionalism, hold
and knowledge.
. Perform entitlement on service contracts when required.
. Input Finders requests when notified by the field.
2. SESA Coordinator
<PAGE>
Position Concept: Is responsible for making follow-up survey calls to
customers concerning their satisfaction with a specific process. The
coordinator will extract all pertinent information through a database provided
and complete a preset number of surveys per day. That preset number is
described in Section 3.8, Measurements.
Responsibilities
. Obtains pertinent information from required databases.
. Makes outgoing calls to customer contacts provided by IBM internal
databases
. Demonstrates courtesy, tact and discretion in communications, so as to
present a favorable company image
. Input customer comments and survey results so that they match the opinions
of the customer
. Make internal phone audits and record results as required
. Escalate customer complaints using established processes
3. Senior Customer Service Representative
Position Concept: Provide leadership to CSRs and be focal person for
operational questions. Maintain expert knowledge of customer service duties
and review/monitor to ensure procedures are followed. Aggressively monitor
NSS in order to recognize and handle potential service delivery concerns.
Take a pro-active role in identifying and resolving customer satisfaction
inhibitors. Implement a strategy with other seniors and team leaders to
maintain balanced workload for customer hold times. Offer first level of
escalation to CSRs for customer complaint situations. Evaluate training.
Maintain expert knowledge of all CSR responsibilities. Prepare regular and
special reports for IBM. Maintain expert knowledge of backup system
procedures. Perform CSR duties as required.
Responsibilities
. Become an expert resource for CSRs and assist in interpreting current
service offerings, billable information and entitlement process.
Administer training as required. Enhance customer satisfaction through
personal ownership of identified problems and aggressively seek
resolution. Escalate when appropriate.
. Monitor/review receive call activity and pro-actively identify potential
customer situations.
. Become an expert in call management criteria, measurement objectives, and
special programs. Identify problems when objectives will not be met and
make recommendations to the management team.
. Maintain an expert knowledge of resource materials utilized to direct
customers' inquiries that are not service related. Act as a resource and
focal escalation point for unresolved inquiries and updating resource
materials. Responsible for timely follow-up and extreme responsiveness to
customer inquiries.
. Maintain expert knowledge of system backup procedures and initiate when
required. Ensure each CSR has backup and that current backup materials are
readily available. Resolve CSR difficulty in obtaining system backup and
escalate if necessary.
. Maintain expert knowledge in and ensure that special operating procedures
are followed to interface with external providers of service. Provide CSR
training and assistance when necessary.
. Review, maintain, and ensure an accurate database using branch office
input. Ensure database integrity and update procedures are followed.
Responsible to coordinate database activity. Recommend solutions to
database problems and implement.
. Handle customer complaints effectively and recognize need for escalation.
Follow appropriate procedures and exercise good judgement in escalation
and resolving complaints. Maintain records.
<PAGE>
. Demonstrate courtesy, tact, and discretion in all communications with
customers, vendors, and IBM personnel. Exhibit a high level of
professionalism at all times. Utilize good judgement informing management
of potential problems. Set example and give guidance to CSCs as required.
. Provide work direction and support to CSRs for the implementation of
special programs and for the short-term solution of temporary workload
imbalances. Maintain CSR lunch schedules and track vacation. Ensure CSR
coverage.
4. Training Specialist
Position Concept: Provides training of suppliers personnel.
Responsibilities
. Provide training and assistance as required. Update training materials and
conduct training seminars for CSR when needed. Evaluate training and make
recommendations to management and assist with training difficulties.
. Maintain thorough knowledge of and be able to operate all CSR workstations
and ACD agent equipment. Follow correct problem determination and
reporting procedures. Utilize good judgement when following the correct
escalation procedures.
5. Team Leader
Position Concept: Serves as a "functional" leader in an environment where
employee to management ratios make it difficult to prioritize and balance
workload and maintain a high level of operational efficiency.
Responsibilities
. Operates complex office systems to prepare correspondence, foils, and
documents.
. With minimal management assistance, coordinate flow and prioritize "team"
workload.
. Balances workload; ensuring coverage and a high level of operational
efficiency.
. Drives team quality measurements.
. Monitors services support activity and exposures.
. Develops and implements internal customer satisfaction plans and
programs.
. Ensures team self-assessment audits are conducted and based on outcomes
recommends corrective action plan to management.
. Coordinates meetings, training and other workload inhibitors.
. Maintains a high level of systems expertise for required business area.
. Assumes additional responsibilities as required.
6. Receptionist
Position concept - Answers the "must answer" line in the Call
Management Center while controlling entry to the branch office and
receiving visitors.
Responsibilities
. Greets, ascertains pertinent information, and registers visitors. Helps
identify, locate and contact persons to be visited. Gives internal
and external directions. Ensures that no one is detained in the
reception area beyond a reasonable length of time.
. Answers the "must answer" line in the Call Management Center. Pages person
to be contacted when appropriate or navigates the call to the requested
function. Ensures callers are greeted professionally, given the proper
information and not left on hold longer than the IBM standard.
. Collects and distributes mail from/to the CMC personnel.
<PAGE>
. Ensures only authorized persons are permitted into the facility and
ensures escorts are provided when necessary. Reports security concerns to
appropriate Contractor/IBM management.
. Handles special situations such as outside solicitations, providing
information about employees, etc., in accordance with company policies and
practices.
. Demonstrate courtesy, tact and discretion in communications, so as to
present a favorable company and site image.
. As required, initiates and maintains appropriate files and reports.
. Perform other administrative tasks such as typing, filing, scheduling
conference rooms, conference rooms, ordering supplies, updating the
organizational chart and updating calendars.
. Back-up branch secretary when required.
. Work requests will be received from IBM personnel.
. Perform other duties as assigned.
7. Graphics Coordinator
Position Concept: Is responsible for creating and updating quality process
and presentation charts on a timely basis. Primarily uses Lotus Freelance as
the software on a PS/2 type machine. Will operate equipment associated
with producing high-quality charts such as printers and plotters.
Responsibilities
. Operates basic graphics equipment and programs.
. Tracks due dates on process charts.
. Updates and distributes process charts monthly.
. Provides assistance for other presentation charts.
. Performs other duties, as assigned.
. Maintains softcopies of all charts created.
. Ensures equipment used is maintained and usable.
. Work requests will be received from IBM personnel.
8. Operational Support Manager (OSM)
Position Concept: Is the first line manager responsible for resource
planning and operational support in the CMC.
Responsibilities
. Interprets IBM's policies, practices and procedures for territory.
. Maintains effective performance planning, counseling, evaluation and
development programs to properly evaluate employee performance and to
enhance career growth.
. Analyze performance of functions within areas of responsibility. Makes
recommendations for operational enhancements and implements action as
appropriate.
. Works closely with IBM as an interface to ensure high levels of
performance, productivity and customer satisfaction.
. Determines manpower requirements and develops plans for area of
responsibility.
. Analyzes financial performance and recommends a course of action to IBM.
Maintains control of direct expense involved with operation of assigned
area.
<PAGE>
. Organizes and conducts frequent department meetings. Makes presentations
on areas of responsibility in branch meetings.
. Responsible for records retention management and compliance and
security for all pertinent documents.
. Assumes additional responsibilities as required.
- --------------------------------------------------------------------------------
3.6 Training
1. Initial process training for contract initiation will be provided by IBM.
Any new product training deemed necessary by IBM will be provided by IBM.
The Contractor's training specialist will then assume responsibility for on-
going training and orientation of new and replacement personnel at the
training rate.
2. Contractor shall have sufficient personnel trained to ensure that quality of
service is met throughout the term of this Agreement. IBM shall pay for this
training only if conducted during the employee's first thirty (30) days of
work under this Agreement and at the Customer Service Trainee rate
specified in Section 3.12. This payment shall not exceed a percentage of the
total productive time billed. This percentage shall be determined by IBM
and the Contractor after the initial training of personnel under this
Agreement.
- --------------------------------------------------------------------------------
3.7 Transitional Training
In the event of cancellation or at the expiration of this Agreement, Contractor
agrees to provide a minimum of fifteen (15) days transitional training to a
supplier to be specified by IBM if other than Contractor. Said training shall
be conducted by an adequate number of Contractor employees to ensure continuity
of service at a competent level of performance. IBM shall pay for such training
at the rates specified in the Statement of Work for the job descriptions of the
employees providing such training. Contractor shall ensure that it continues to
meet all performance and quality requirements specified in the Statement of Work
throughout such training period.
- --------------------------------------------------------------------------------
3.8 Measurements
Specific measurements will be developed by the supplier and IBM to
gauge performance and quality requirements. Overall areas measured will
include but are not limited to:
. Qualification of staff
. Adherence to CMC training modules provided to Contractor as may be
modified/updated from time to time by IBM
. Customer satisfaction
. Quality control
- Call Hold time less than 10 seconds on average
- SESA calls greater than 99.7%
- Accuracy in taking calls greater than 99.0%
- Under 2% abandonment rate
- Minimal CMCALERTS and Customer Situation Information System (CSIS)
incidents (actual formula to be determined)
<PAGE>
- Average 32 complete SESA surveys per day per headcount
- Failure to meet any of the measurements identified in this Section, as
modified, shall be deemed material breach of this Agreement. However,
Contractor shall have one hundred and twenty (120) days from the date
hereof to meet those measurements that are currently not being met by the
CMC's before this provision will take effect with respect to
measurements.
- --------------------------------------------------------------------------------
3.9 Acceptance Criteria
Initial acceptance will depend on evaluation of the vendor's ability to meet the
scope defined in this document. Key criteria that will be reviewed includes but
not limited to:
. Cost
. Quality
. Management
- --------------------------------------------------------------------------------
3.10 IBM Responsibilities
IBM is responsible for the following:
. Existing CMC Processes and Procedures
. IBM Site Safety, Security and personnel conduct policies
. Hardware/Software/Tools as described below (IBM Business use only)
. Office facilities in Dallas and Atlanta Call Management Centers
. Personal shared workstation and required software
. Phone, headset, and phone system
. Access to required systems/tools
- NSS
- OASIS
- RETAIN
- VM
- HONE
- IS
- AUTOQUALITY if used
- P&Q REVIEW if used
- PRMS
- CSIS
. Access to any additional required equipment
. Badge access to assigned location
Note: The Contractor shall follow the practices, procedures and priorities of
IBM in the use of IBM equipment, systems, and tools.
<PAGE>
- --------------------------------------------------------------------------------
3.11 Contractor Responsibilities
The Contractor is responsible for the following:
. Answer customer requests in a timely, professional, and accurate manner
. Monitor quality using the Autoquality System or an equivalent system.
. Perform entitlement on service requests
. Ensure operating processes and procedures are accurately followed
. Assist in updating these processes and procedures as required
. Update customer database records
. Ensure skill requirements are met, maintained and updated
. Provide effective management of personnel and workload
. Train any additional personnel required after initial training
. Support and adhere to ISO9000 registration when complete and all other CMC
quality programs (Contractor personnel will talk to ISO9000 auditors
when asked)
. Evaluate work performance and increase or decrease to allow for efficiencies
or increased workload at IBM's approval
. Contractor shall supply for IBM's review and approval, transition and
implementation plans to meet targets
. Contractor management is expected to have regular status meetings
and provide written reports regularly
. Adhere to IBM Site Safety, Security and personnel conduct policies
. Define process which manages new requirements from IBM
. Monthly Quality updates and action plans
- --------------------------------------------------------------------------------
3.12 Rate Schedule
<PAGE>
Table 2. Rate Schedule - Atlanta
<TABLE>
<CAPTION>
Job Description $/HR $/HR
Pay Rate Bill Rate
<S> <C> <C>
Customer Service Rep. **** ****
SESA Coordinator **** ****
Customer Service Trainee* **** ****
Senior Customer Service Rep. **** ****
Training Specialist **** ****
Team Leader **** ****
Receptionist **** ****
Graphics Coordinator **** ****
Operations Support Manager **** ****
</TABLE>
Table 3. Rate Schedule - Dallas
<TABLE>
<CAPTION>
Job Description $/HR $/HR
Pay Rate Bill Rate
<S> <C> <C>
Customer Service Rep. **** ****
SESA Coord. **** ****
Customer Service Trainee* **** ****
Senior Customer Service Rep. **** ****
Training Specialist **** ****
Team Leader **** ****
Receptionist **** ****
Graphics Coordinator **** ****
Operations Support Manager **** ****
</TABLE>
. Notes
-- *CSR Trainee rate is based upon a **** reduction from the regular
rate. This rate shall apply for the first thirty days of employment.
-- IBM shall pay overtime at a rate of **** of the regular pay rate.
-- Pay rate plus **** percent uplift equals the bill
rate.
-- It is IBM's intent to reimburse for "productive" hours worked. Contractor
should plan on invoicing IBM for actual hours worked at the call center
location. Vacation/sick and other time away from the job should be absorbed
in overhead.
**** Confidential treatment is being requested for these portions of this
agreement.
<PAGE>
-- Contractor will submit invoices bi-weekly (occurring every two (2)
weeks).
-- IBM shall pay shift premium at a rate of **** for 2nd shift and a rate of
**** for 3rd shift. 2nd Shift rates will be paid to employees with start
times between 12:00PM and 10:00PM and 3rd shift rates will be paid to
employees with start times between 10:00PM and 4:00AM. There will be no
weekend premiums paid.
-- IBM shall pay Holiday pay at a rate of **** of the regular pay. Those
holidays include the nationally recognized days associated with New Years,
Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas.
The above rates shall be fixed for the first twelve (12) month period and may be
revised annually on the anniversary of the effective date of this Agreement.
Any rate increases shall not exceed **** percent over the rates for the
preceding twelve (12) month period.
- --------------------------------------------------------------------------------
3.13 Glossary of Terms
AUTOQUALITY System used in recording live customer calls for monitoring
purposes
CMC (Call Management Center)- The two Centers located
in Dallas and Atlanta
CMCALERT Vehicle our internal customers use to communicate problems to
the CMC.
CSIS (Customer Situation Information System) - Customer
complaint system
ENTITLEMENT The process of ensuring customers are entitled to receive
warranty or maintenance service from IBM.
FASTTRAK Vehicle the CMC uses to communicate problems to the field.
FINDERS Maintenance program in which field representatives
call the CMC when they find a machine does not have a maintenance
agreement.
HONE (Hands-On Network Environment) - Repository of
IBM marketing information.
IS (Information Systems) Systems that store pertinent
customer account information such as inventories.
ISO9000 ISO standards which identify the requirements for
an effective quality management system.
QRT (Quality Response Time) - The measurement of hold
times within the CMC
NSS (National Service System) - System used to receive
and assign service calls
OASIS (Order and Service Information System ) System used to
Attachment A: Statement of Work 29
**** Confidential treatment is being requested for these portions of this
agreement.
<PAGE>
Service Agreement Number 2165
receive assign customer calls.
P&Q REVIEW System used to track results in the monitoring process
RECEIVE CALL The process of receiving a request from a customer.
RETAIN (Remote Technical Assistance Network) - IBM's
world-wide database storing customer problem records.
TRAILER CALL The process used to measure external customer's
satisfaction with the way their call was handled.
VM (Virtual Machine) - IBM mainframe operating system.
<PAGE>
- -----------------------------
4.0 Travel Expense Guidelines
IBM shall reimburse you in accordance with the following guidelines for
reasonable & actual travel and living expenses authorized in advance by IBM in
writing and incurred solely in connection with services furnished under this
Agreement. Your employees should exercise reasonable cost effectiveness when
incurring these expenses.
4.1.1 Expense Account Details
1. Expense accounts are to be submitted to you by your employees immediately
upon return from a business trip. Actual daily expenses must be reported to
you under the applicable expense category. All reimbursable expenses for a
given period are to be included on one expense account.
2. When reporting expenses, the following information is required:
A. dates of departure and return for each trip;
B. travel departure point and destination,
C. name of the IBM employee who authorized the trip;
D. business reason for the travel;
E. people met and business conducted;
F. a statement that no reimbursement is due whenever expenses are not
claimed for any workday your employee is on travel status; and
G. explanation of out-of-the-ordinary amounts claimed; e.g., name(s) of
individual(s) attending a luncheon if they have not paid for their own
portion and claimed it individually.
4.1.2 Receipts
1. An itemized receipt (copy acceptable with original retained by you) must
substantiate lodging costs, airline travel, rental car and all other
expenditures of twenty-five dollars ($25.00) or more. The receipt must show
the amount, date, place and nature of the expense. The receipts must be
attached to, and submitted with, the expense account. Reimbursement for
airline travel requires a copy of the actual airline passenger coupon
receipt.
2. Reimbursement for car rental requires a copy of the actual car rental
agreement.
4.1.3 Transportation
1. Only the most economical airline accommodations, e.g., economy, coach,
tourist, excursion, discount and shuttle flights are to be used. Other
airline accommodations, e.g., first and business class air fare WILL NOT be
reimbursed unless specifically approved by IBM in advance. Travel should be
planned to take advantage of any possible discount fares. Air travel will be
reimbursed only for that portion thereof which is directly related to the
services being performed under this Agreement.
2. Rail or bus travel will be reimbursed for regular coach class. Such travel is
not to exceed one day. Any additional days actually used in making the trip
will be considered nonreimbursable, personal business.
3. Ground transportation will be reimbursed for taxi, bus or car rental. Actual
tolls and parking fees incurred will be reimbursed.
4. Use of personal automobiles to fulfill approved travel obligations under this
Agreement (not applicable to normal commutation) shall be reimbursed at
the rate of twenty-seven-and-a-half ($.275) cents per mile, for the most
direct, practical route to the business destination. Your employees have the
responsibility to maintain a "Weekly Mileage Log" which will be submitted as
an attachment to your invoice. If more than one person travels in the same
automobile, only your employee responsible for the automobile will be
reimbursed.
5. IBM will not reimburse you for normal commutation expenses.
4.1.4 Lodging and Meals
1. IBM will reimburse reasonable and actual lodging and meal expenses incurred
while traveling on approved business. Commercial type accommodations and
rates are to be requested at all times.
2. When guaranteed reservations have been made and plans change, the
reservation should be
Travel Expense Guidelines 31
<PAGE>
Service Agreement Number 2165
canceled in time to avoid being charged for the room.
3. Room expense, including tax, is to be entered on the expense account by day,
and the hotel bill is to be attached to the expense account. Charges on the
hotel bill for other than lodging are to be entered by day under their proper
classifications.
4. IBM will reimburse reasonable and actual meal expense. When possible each
individual is to pay for his/her own meal.
5. Should an occasion arise where one person pays for more than his/her own
meal, the name(s) of the person(s) are to be written on the expense account
and the explanation noted as to the business reason for the expense.
Alcoholic beverage expenses are not reimbursable.
4.1.5 Personal Expenses
1. IBM will not reimburse personal expenses. If expenses of a personal nature,
including hotel shop purchases, laundry, valet, non-business telephone
calls, movie charges, health club use, alcoholic beverages, sundry items, are
charged against the room, the amount so charged is to be deducted from the
invoice presented to IBM.
2. Business telephone calls made in IBM's behalf by your employees while
traveling on approved IBM business will be reimbursed. If your employees
are at an IBM location, business calls should be made at that location,
utilizing IBM tie-lines and WATS lines, when possible. When your
employees charge business calls to their home telephone numbers or personal
telephone credit cards, the detailed telephone company bill is to be attached
to the expense account if the aggregate total is twenty-five dollars
($25.00) or more.
3. IBM will reimburse reasonable and actual gratuities disbursed for business
purposes by your employees while traveling on approved IBM business.
<PAGE>
Amendment to Service Agreement Between
International Business Machines Corporation
and
Computer Generated Solutions, Inc.
February 06, 1996
Contact: Nancy Hiatt @ 303-924-5396
IBM Integrated Procurement Solutions
6300 Diagonal Highway
P. O. Box 1900
Boulder, Colorado 80301-9191
Department: PRB1
Building: 001H
Service Agreement Number 2165
<PAGE>
Service Agreement Number 2165
- --------------------------------------------------------------------------------
Amendment # 01
This document shall constitute a formal amendment to Service Agreement Number
2165 dated October 04, 1995.
Section 3.0 Statement of Work
Amend Sections 3.5 "Job Descriptions" and 3.12 "Rate Schedule" to read per the
enclosed revised Statement of Work.
Except as hereby amended, all other terms and conditions of this Agreement shall
remain in full force and effect as written.
If you agree with the above modifications, this document shall constitute an
Amendment to Agreement Number 2139. Please indicate your agreement by signing
both copies of this document and returning one copy to IBM Corp., 6300 Diagonal
Hwy., Boulder, CO 80301, Attention Nancy Hiatt, Dept. PRB1, Bld. 001H.
In witness whereof, the parties hereto have caused this Agreement to be executed
by their respective duly authorized representatives.
International Business Computer Generated Solutions, Inc.
Machines Corporation
By:
-----------------------
/s/ G. H. Tamura 2/6/96 Title:
-----------------------
G. H. Tamura Date:
Location Procurement Manager -----------------------
<PAGE>
Service Agreement Number 2165
- -----------------------------------
3.0 Attachment A: Statement of Work
- --------------------------------------------------------------------------------
3.1 Project Description
When an IBM customer requires assistance, they place a request call through
the Call Management Centers (CMCs). That call is taken by a Customer Service
Representative (CSR) employee and entered into the appropriate system for
assignment. These calls are taken for a variety of customers on a variety of
customized applications.
The Contractor Customer Service Representative (CSR) works directly with IBM's
customers, IBM's Customer Service Engineers (CE) and IBM's internal support
organizations. It is expected that the CSR will be courteous and professional
at all times. They must be able to communicate clearly and effectively by phone
while being complete, accurate and timely in gathering required information. In
addition, they must provide navigational and informational services to
customers who require additional service or information within the IBM support
network. They are expected to search various databases, make appropriate
updates, and maintain those databases within a specified criteria. In addition,
each CSR is expected to adhere to the quality processes currently in place which
measure timeliness, accuracy, and professionalism. See Section 3.9 for
acceptance criteria.
It is the goal of the CSR team to become a single point of value for each call
received. That value may include, but is not limited to, information sharing,
information gathering, product entitlement and call navigation. We anticipate
the role of this function will continue to expand as more business opportunities
are identified. It is vital that the Contractor be flexible in meeting the
requirements of these future opportunities.
Contractor agrees that, by October 30, 1995, Contractor shall have hired at
least 90% of the supplemental employees currently employed by IBM in each of
the Atlanta and Dallas Call Management Centers for the positions listed in
Section 3.2 of this Statement of Work. The failure of Contractor to comply
with this paragraph shall permit IBM to immediately cancel this Agreement
at IBM's sole discretion and with no liability on the part of IBM.
- --------------------------------------------------------------------------------
3.2 Manpower
The estimated number of personnel required to perform each task is listed below,
however, the number of personnel may change with the written concurrence of the
IBM Coordinator and Contractor Supervisor. Job descriptions are provided in
Section 3.5.
<PAGE>
Service Agreement Number 2165
Table 1. Estimated Headcount
<TABLE>
<CAPTION>
Job Description Atlanta Dallas
<S> <C> <C>
Customer Service Representative **** ****
SESA Coordinator ****
Senior Customer Service Representative **** ****
Training Specialist **** ****
Team Leader **** ****
Receptionist **** ****
Graphics Coordinator **** ****
Operational Support Manager **** ****
</TABLE>
- --------------------------------------------------------------------------------
3.3 Work Schedules
The following identifies the work schedules:
. The CMC's operate 24 hours per day, 7 days per week
. Holiday work will be required
. Overtime may be required
- --------------------------------------------------------------------------------
3.4 Skill Requirements
The following list outlines the general skills required to perform all job
descriptions listed in this section:
. Very good verbal communication skills which are clear, understandable and
precise
. Be professional and courteous at all times
. Above average typing skills
. Good listening skills
. Above average reading comprehension skills
. Learn and follow procedures
. Strong customer service skills and temperament which includes diffusing
upset customers.
. Administrative and organizational skills
. Multiplexing skills
. Knowledge of OS/2
. Freelance skills for graphics person
. Computer navigation skills
. Telephone handling skills
20 Amendment #01
**** Confidential treatment is being requested for these portions of this
agreement.
<PAGE>
Service Agreement Number 2165
- --------------------------------------------------------------------------------
3.5 Job Descriptions
The following job descriptions serve only as guide as to the types of
responsibilities within each job category. They are subject to change at any
time by the IBM Coordinator.
1. Customer Service Representative (CSR)
Position Concept: As the initial customer contact for IBM service, the CSR's
professional communications and ultimate decision making responsibility
directly impact IBM customers' degree of service delivery satisfaction.
Effective communication of service offerings and efficient execution of the
call process facilitates the request for service. The CSR must extract
pertinent call information from the customer to ensure the service request is
handled timely and properly. Service delivery concerns are proactively
communicated to appropriate escalation levels. CSRs utilize the applicable
system to record information and assign calls to the appropriate service
representative or organization. They must remain knowledgeable of new service
offerings and call procedures. In addition, the CSR may be required to
research customer entitlement, navigate informational requests, take
Hardware/Software service calls, and all other service offerings.
Responsibilities
. Receive customer request for service. Be thoroughly knowledgeable of current
service offerings, billable information, and entitlement process. Question
customer to obtain product service and entitlement options to properly assign
provider of service and determine urgency of request. Take personal ownership
of each call received and aggressively seek to improve customer satisfaction.
. Utilize resource materials in directing customer inquiries that are not
service related. Inform appropriate contact of information changes. Be
thoroughly knowledgeable of resource materials and give assistance when
required. Escalate unresolved inquiries.
. Navigate informational and procedural calls as required.
. Be thoroughly knowledgeable and assist with backup procedures when
required.
. Maintain a working knowledge of special operating procedures relating to
critical customers.
. Be thoroughly knowledgeable of special operating procedures to interface with
external providers of service (Customized Operational Service, Multi Vendor
Support (MVS), etc.). Ensure special operating procedures are understood and
adhered to.
. Recognize customer complaints that need to be escalated. Demonstrate quality
communication skills and exhibit high level of professionalism and extreme
sensitivity to customer satisfaction. Follow appropriate procedures and use
good judgement in reporting complaints.
. Identify any data base discrepancies or omissions (i.e., prescreens, alias)
and notify appropriate resource (i.e., NSS, CAD, OASIS, RETAIN).
. Use courtesy, tact and discretion in all communications with customers,
vendors and IBM personnel. Utilize good judgment to inform manager of
potential problems.
. Maintain knowledge and operation of all CSR equipment. Utilize basic
problem determination and follow reporting procedures
. Follow internal IBM telephone etiquette guidelines.
. Perform entitlement on service contracts when required.
. Input Finders requests when notified by the field.
2. Commercialization Coordinator
Position Concept: As the initial customer contact for Call Management
Services, the CSR's professional communications and ultimate decision making
responsibility directly impact IBM's customers' degree of
Attachment A: Statement of Work 21
<PAGE>
Service Agreement Number 2165
service delivery satisfaction. Effective communication of service offerings
and efficient execution of the call process facilitate the request for
service. The CSR must extract pertinent call information from the customer to
ensure the service request is handled timely and properly. Service delivery
concerns are proactively communicated to appropriate escalation levels. CSRs
utilize the applicable system to record information and assign calls to the
appropriate service representative or organization. They must remain
knowledgeable of new service offerings and call procedures.
Responsibilities
. Receive customer request for service. Be thoroughly knowledgeable of current
service offerings, billable information, and entitlement process. Question
customer to obtain product service and determine urgency of request. Take
personal ownership of each call received and aggressively seek to improve
customer satisfaction.
. Utilize resource materials in directing customer inquires that are not
service related. Inform appropriate contact of information changes. Be
thoroughly knowledgeable of resource materials and give assistance when
required. Escalate unresolved inquires.
. Navigate informational and procedural calls as required.
. Be thoroughly knowledgeable and assist with backup procedures when required.
. Maintain a working knowledge of special operating procedures relating to
critical customers.
. Recognize customer complaints that need to be escalated. Demonstrate quality
communications skills and exhibit high level of professionalism and extreme
sensitivity to customer satisfaction. Follow appropriate procedures and use
good judgment in reporting complaints.
. Identify any data base discrepancies or omissions (i.e., prescreens, alias)
and notify appropriate resource (i.e., EUS, RETAIN, CLARIFY, MAAS).
. Monitor on a daily basis group activity and ensure the efficient utilization
of personnel.
. Ensure that activity is centered on the handling of incoming service request
during periods of greatest need as indicated by ACD information.
. Provide training to trainees, associates and less experienced CSRs.
. Support management in the implementation and operation of existing and new
procedures.
. Prepare special reports at management direction.
. Make recommendations to enhance operations.
. Use courtesy, tact and discretion in all communications with customers,
vendors and IBM personnel. Utilize good judgment to inform manager of
potential problems.
. Maintain knowledge and operation of all CSR equipment. Utilize basic problem
determination and follow reporting procedures.
. Follow internal IBM telephone etiquette guidelines.
3. SESA Coordinator
Position Concept: Is responsible for making follow-up survey calls to
customers concerning their satisfaction with a specific process. The
coordinator will extract all pertinent information through a database
provided and complete a preset number of surveys per day. That preset number
is described in Section 3.8, Measurements.
Responsibilities
. Obtains pertinent information from required databases.
. Makes outgoing calls to customer contacts provided by IBM internal databases
22 Amendment #01
<PAGE>
Service Agreement Number 2165
. Demonstrates courtesy, tact and discretion in communications, so as to
present a favorable company image
. Input customer comments and survey results so that they match the opinions
of the customer
. Make internal phone audits and record results as required
. Escalate customer complaints using established processes
4. Finders Customer Service Coordinator
Position Concept: To provide maintenance and inventory assistance to
Technology Service Support (TSS), Customer Service Representatives (CSR), and
Availability Service Customer Engineers (CE). The coordinator will research
inventory databases and communicate billing information to CEs, TSSs, and
CSRs. Coordinators will maintain a close relationship with all Customer
Support Offices (CSO). Accuracy and professionalism are vital to the success
of the Finders program. The Finders coordinator will ensure proper inventory
corrections and maintenance updates occur in a timely and effective manner.
Coordinators will escalate all CSR, CE, and field manager concerns to the
appropriate senior, team leader, or manager.
Responsibilities
. Receive CSR and CE requests to research and correct customer inventory and
maintenance discrepancies.
. Search databases, i.e., ISI, SPIF, HONE, VM, and NSS for contact and
billing information.
. Process Finders requests for inventory discrepancies and updates, and
forward to appropriate maintenance processing departments.
. Notify CE and CSR when request is complete.
. Using BILLMAPS and CETRACK, track and ensure all Finders logs are updated
and closed in a timely and accurate manner.
. Provide status of logs to CSR, CE, or field manager upon request.
. Escalate to appropriate CSR when log closure objectives are not met.
. Provide assistance with:
-- M/A Rates
-- Billing Rates
-- Billable Activity (B/A) Codes
-- Hourly Service Document and Hourly Service Invoice information.
. Handle incoming Call Entitlement Team (CET) calls and warm transfer when
needed.
. Maintain knowledge of all databases and processes used in Finders.
. Navigate informational and procedural call as required.
. Use courtesy, tact, and discretion in all communications with customers,
vendors, and IBM personnel. Exhibit a high level of professionalism and
use good judgment to inform manager of potential problems.
5. Senior Customer Service Representative
Position Concept: Provide leadership to CSRs and be focal person for
operational questions. Maintain expert knowledge of customer service duties
and review/monitor to ensure procedures are followed. Aggressively monitor
NSS in order to recognize and handle potential service delivery concerns.
Take a pro-active role in identifying and resolving customer satisfaction
inhibitors. Implement a strategy with other seniors and team leaders to
maintain balanced workload for customer hold times. Offer first level
Attachment A: Statement of Work 23
<PAGE>
Service Agreement Number 2165
of escalation to CSRs for customer complaint situations. Evaluate training.
Maintain expert knowledge of all CSR responsibilities. Prepare regular and
special reports for IBM. Maintain expert knowledge of backup system
procedures. Perform CSR duties as required.
Responsibilities
. Become an expert resource for CSRs and assist in interpreting current
service offerings, billable information and entitlement process. Administer
training as required. Enhance customer satisfaction through personal
ownership of identified problems and aggressively seek resolution. Escalate
when appropriate.
. Monitor/review receive call activity and pro-actively identify potential
customer situations.
. Become an expert in call management criteria, measurement objectives, and
special programs. Identify problems when objectives will not be met and
make recommendations to the management team.
. Maintain an expert knowledge of resource materials utilized to direct
customers' inquiries that are not service related. Act as a resource and
focal escalation point for unresolved inquiries and updating resource
materials. Responsible for timely follow-up and extreme responsiveness to
customer inquiries.
. Maintain expert knowledge of system backup procedures and initiate when
required. Ensure each CSR has backup and that current backup materials are
readily available. Resolve CSR difficulty in obtaining system backup and
escalate if necessary.
. Maintain expert knowledge in and ensure that special operating procedures
are followed to interface with external providers of service. Provide CSR
training and assistance when necessary.
. Review, maintain, and ensure an accurate database using branch office
input. Ensure database integrity and update procedures are followed.
Responsible to coordinate database activity. Recommend solutions to
database problems and implement.
. Handle customer complaints effectively and recognize need for escalation.
Follow appropriate procedures and exercise good judgement in escalation and
resolving complaints. Maintain records.
. Demonstrate courtesy, tact, and discretion in all communications with
customers, vendors, and IBM personnel. Exhibit a high level of
professionalism at all times. Utilize good judgement informing management
of potential problems. Set example and give guidance to CSCs as required.
. Provide work direction and support to CSRs for the implementation of
special programs and for the short-term solution of temporary workload
imbalances. Maintain CSR lunch schedules and track vacation. Ensure CSR
coverage.
6. Training Specialist
Position Concept: Provides training of suppliers personnel.
Responsibilities
. Provide training and assistance as required. Update training materials and
conduct training seminars for CSR when needed. Evaluate training and make
recommendations to management and assist with training difficulties.
. Maintain thorough knowledge of and be able to operate all CSR workstations
and ACD agent equipment. Follow correct problem determination and
reporting procedures. Utilize good judgement when following the correct
escalation procedures.
7. Team Leader
Position Concept: Serves as a "functional" leader in an environment where
employee to management ratios make it difficult to prioritize and balance
workload and maintain a high level of operational efficiency.
Responsibilities
24 Amendment #01
<PAGE>
Service Agreement Number 2165
. Operates complex office systems to prepare correspondence, foils, and
documents.
. With minimal management assistance, coordinate flow and prioritize "team"
workload.
. Balances workload; ensuring coverage and a high level of operational
efficiency.
. Drives team quality measurements.
. Monitors services support activity and exposures.
. Develops and implements internal customer satisfaction plans and programs.
. Ensures team self-assessment audits are conducted and based on outcomes
recommends corrective action plan to management.
. Coordinates meetings, training and other workload inhibitors.
. Maintains a high level of systems expertise for required business area.
. Assumes additional responsibilities as required.
8. Receptionist
Position concept - Answers the "must answer" line in the Call Management
Center while controlling entry to the branch office and receiving visitors.
Responsibilities
. Greets, ascertains pertinent information, and registers visitors. Helps
identify, locate and contact persons to be visited. Gives internal and
external directions. Ensures that no one is detained in the reception area
beyond a reasonable length of time.
. Answers the "must answer" line in the Call Management Center. Pages person
to be contacted when appropriate or navigates the call to the requested
function. Ensures callers are greeted professionally, given the proper
information and not left on hold longer than the IBM standard.
. Collects and distributes mail from/to the CMC personnel.
. Ensures only authorized persons are permitted into the facility and
ensures escorts are provided when necessary. Reports security concerns to
appropriate Contractor/IBM management.
. Handles special situations such as outside solicitations, providing
information about employees, etc., in accordance with company policies and
practices.
. Demonstrate courtesy, tact and discretion in communications, so as to
present a favorable company and site image.
. As required, initiates and maintains appropriate files and reports.
. Perform other administrative tasks such as typing, filing, scheduling
conference rooms, conference rooms, ordering supplies, updating the
organizational chart and updating calendars.
. Back-up branch secretary when required.
. Work requests will be received from IBM personnel
. Perform other duties as assigned.
9. Graphics Coordinator
Position Concept: Is responsible for creating and updating quality process
and presentation charts on a timely basis. Primarily uses Lotus Freelance as
the software on a PS/2 type machine. Will operate equipment associated with
producing high-quality charts such as printers and plotters.
Responsibilities
. Operates basic graphics equipment and programs.
Attachment A: Statement of Work 25
<PAGE>
Service Agreement Number 2165
. Tracks due dates on process charts.
. Updates and distributes process charts monthly.
. Provides assistance for other presentation charts.
. Performs other duties, as assigned.
. Maintains softcopies of all charts created.
. Ensures equipment used is maintained and usable.
. Work requests will be received from IBM personnel
10. Operational Support Manager (OSM)
Position Concept: Is the first line manager responsible for resource
planning and operational support in the CMC.
Responsibilities
. Interprets IBM's policies, practices and procedures for territory.
. Maintains effective performance planning, counseling, evaluation and
development programs to properly evaluate employee performance and to enhance
career growth.
. Analyze performance of functions within areas of responsibility. Makes
recommendations for operational enhancements and implements action as
appropriate.
. Works closely with IBM as an interface to ensure high levels of performance,
productivity and customer satisfaction.
. Determines manpower requirements and develops plans for area of
responsibility.
. Analyzes financial performance and recommends a course of action to IBM.
Maintains control of direct expense involved with operation of assigned area.
. Organizes and conducts frequent department meetings. Makes presentations on
areas of responsibility in branch meetings.
. Responsible for records retention management and compliance and security for
all pertinent documents.
. Assumes additional responsibilities as required.
- --------------------------------------------------------------------------------
3.6 Training
1. Initial process training for contract initiation will be provided by IBM. Any
new product training deemed necessary by IBM will be provided by IBM. The
Contractor's training specialist will then assume responsibility for on-going
training and orientation of new and replacement personnel at the training
rate.
2. Contractor shall have sufficient personnel trained to ensure that quality of
service is met throughout the term of this Agreement. IBM shall pay for this
training only if conducted during the employee's first thirty (30) days of
work under this Agreement and at the Customer Service Trainee rate specified
in Section 3.12. This payment shall not exceed a percentage of the total
productive time billed. This percentage shall be determined by IBM and the
Contractor after the initial training of personnel under this Agreement.
26 Amendment #01
<PAGE>
Service Agreement Number 2165
- --------------------------------------------------------------------------------
3.7 Transitional Training
In the event of cancellation or at the expiration of this Agreement, Contractor
agrees to provide a minimum of fifteen (15) days transitional training to a
supplier to be specified by IBM if other than Contractor. Said training shall be
conducted by an adequate number of Contractor employees to ensure continuity of
service at a competent level of performance. IBM shall pay for such training at
the rates specified in the Statement of Work for the job descriptions of the
employees providing such training. Contractor shall ensure that it continues to
meet all performance and quality requirements specified in the Statement of
Work throughout such training period.
- --------------------------------------------------------------------------------
3.8 Measurements
Specific measurements will be developed by the supplier and IBM to gauge
performance and quality requirements. Overall areas measured will included but
are not limited to:
. Qualification of staff
. Adherence to CMC training modules provided to Contractor as may be
modified/updated from time to time by IBM
. Customer satisfaction
. Quality control
-- Call Hold time less than 10 seconds on average
-- SESA calls greater than 99.7%
-- Accuracy in taking calls greater than 99.0%
-- Under 2% abandonment rate
-- Minimal CMCALERTS and Customer Situation Information System (CSIS)
incidents (actual formula to be determined)
-- Average 32 complete SESA surveys per day per headcount
-- Failure to meet any of the measurements identified in this Section, as
modified, shall be deemed material breach of this Agreement. However,
Contractor shall have one hundred and twenty (120) days from the date
hereof to meet those measurements that are currently not being met by the
CMC's before this provision will take effect with respect to measurements.
- --------------------------------------------------------------------------------
3.9 Acceptance Criteria
Initial acceptance will depend on evaluation of the vendor's ability to meet
the scope defined in this document. Key criteria that will be reviewed includes
but not limited to:
. Cost
. Quality
. Management
Attachment A: Statement of Work 27
<PAGE>
Service Agreement Number 2165
- --------------------------------------------------------------------------------
3.10 IBM Responsibilities
IBM is responsible for the following:
. Existing CMC Processes and Procedures
. IBM Site Safety, Security and personnel conduct policies
. Hardware/Software/Tools as described below (IBM Business use only)
. Office facilities in Dallas and Atlanta Call Management Centers
. Personal shared workstation and required software
. Phone, headset, and phone system
. Access to required systems/tools
-- NSS
-- OASIS
-- RETAIN
-- VM
-- HONE
-- IS
-- AUTOQUALITY if used
-- P&Q REVIEW if used
-- PRMS
-- CSIS
. Access to any additional required equipment
. Badge access to assigned location
Note: The Contractor shall follow the practices, procedures and priorities of
IBM in the use of IBM equipment, systems, and tools.
- --------------------------------------------------------------------------------
3.11 Contractor Responsibilities
The Contractor is responsible for the following:
. Answer customer requests in a timely, professional, and accurate manner
. Monitor quality using the Autoquality System or an equivalent system.
. Perform entitlement on service requests
. Ensure operating processes and procedures are accurately followed
. Assist in updating these processes and procedures as required
. Update customer database records
. Ensure skill requirements are met, maintained and updated
. Provide effective management of personnel and workload
. Train any additional personnel required after initial training
. Support and adhere to ISO9000 registration when complete and all other CMC
quality programs (Contractor personnel will talk to ISO9000 auditors when
asked)
28 Amendment #01
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Service Agreement Number 2165
. Evaluate work performance and increase or decrease to allow for efficiencies
or increased workload at IBM's approval
. Contractor shall supply for IBM's review and approval, transition and
implementation plans to meet targets
. Contractor management is expected to have regular status meetings and provide
written reports regularly
. Adhere to IBM Site Safety, Security and personnel conduct policies
. Define process which manages new requirements from IBM
. Monthly Quality updates and action plans
- --------------------------------------------------------------------------------
3.12 RATE SCHEDULE
- --------------------------------------------------------------------------------
Table 2. Rate Schedule - Atlanta
- --------------------------------------------------------------------------------
JOB DESCRIPTION $/HR $/HR
PAY RATE BILL RATE
- --------------------------------------------------------------------------------
Customer Service Rep. **** ****
Commercialization **** ****
Customer Service Trainee* **** ****
Finders **** ****
Senior Customer Service Rep. **** ****
Training Specialist **** ****
Team Leader **** ****
Receptionist **** ****
Graphics Coordinator **** ****
Operations Support Manager **** ****
- --------------------------------------------------------------------------------
Attachment A: Statement of Work 29
**** Confidential treatment is being requested for these portions of this
agreement.
<PAGE>
SERVICE AGREEMENT NUMBER 2165
- --------------------------------------------------------------------------------
Table 3. Rate Schedule - Dallas
- --------------------------------------------------------------------------------
JOB DESCRIPTION $/HR $/HR
PAY RATE BILL RATE
- --------------------------------------------------------------------------------
Customer Service Rep. **** ****
SESA Coord. **** ****
Customer Service Trainee* **** ****
Finders **** ****
Senior Customer Service Rep. **** ****
Training Specialist **** ****
Team Leader **** ****
Receptionist **** ****
Graphics Coordinator **** ****
Operations Support Manager **** ****
- --------------------------------------------------------------------------------
. Notes
- -- *CSR Trainee rate is based upon a **** reduction from the regular
rate. This rate shall apply for the first thirty days of employment.
- -- IBM shall pay overtime at a rate of **** of the regular pay rate.
- -- Pay rate plus **** percent uplift equals the bill rate.
- -- It is IBM's intent to reimburse for "productive" hours worked. Contractor
should plan on invoicing IBM for actual hours worked at the call center
location. Vacation/sick and other time away from the job should be absorbed
in overhead.
- -- Contractor will submit invoices bi-monthly (occurring twice a month).
- -- IBM shall pay shift premium at a rate of **** for 2nd shift and a rate of
**** for 3rd shift. 2nd Shift rates will be paid to employees with start
times between 12:00PM and 10:00 PM and 3rd shift rates will be paid to
employees with start times between 10:00PM and 4:00AM. There will be no
weekend premiums paid.
- -- IBM shall pay Holiday pay at a rate of **** of the regular pay. Those
holidays include the nationally recognized days associated with New Years,
Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas.
- -- Overtime will be reimbursed at a maximum of **** of Total Regular number of
hours authorized per billing cycle.
- -- No other overtime or premium rate will be paid without the prior approval of
the IBM Contract Manager.
The above rates shall be fixed for the first twelve (12) month period and may be
revised annually on the anniversary of the effective date of this Agreement. Any
rate increases shall not exceed **** over the rates for the preceding twelve
(12) month period.
30 Amendment #01
**** Confidential treatment is being requested for these portions of this
agreement.
<PAGE>
Service Agreement Number 2165
- --------------------------------------------------------------------------------
3.13 Glossary of Terms
AUTOQUALITY System used in recording live customer calls for monitoring purposes
CMC (Call Management Center)- The two Centers located in Dallas and Atlanta
CMCALERT Vehicle our internal customers use to communicate problems to the CMC.
CSIS (Customer Situation Information System) - Customer complaint system
ENTITLEMENT The process of ensuring customers are entitled to receive
warranty or maintenance service from IBM.
FASTTRAK Vehicle the CMC uses to communicate problems to the field
FINDERS Maintenance program in which field representatives call the CMC when
they find a machine does not have a maintenance agreement.
HONE (Hands-On Network Environment) - Repository of IBM marketing information.
IS (Information Systems) Systems that store pertinent customer account
information such as inventories.
ISO9000 ISO standards which identify the requirements for an effective
quality management system.
QRT (Quality Response Time) - The measurement of hold times within the CMC
NSS (National Service System) - System used to receive and assign service
calls
OASIS (Order and Service Information System) System used to receive assign
customer calls.
P&Q REVIEW System used to track results in the monitoring process
RECEIVE CALL The process of receiving a request from a customer.
RETAIN (Remote Technical Assistance Network) - IBM's world-wide database
storing customer problem records.
TRAILER CALL The process used to measure external customer's satisfaction
with the way their call was handled.
VM (Virtual Machine) - IBM mainframe operating system.
Attachment A: Statement of Work 31
<PAGE>
Service Agreement Number 2165
32 Amendment #01
<PAGE>
Amendment to Service Agreement Between
International Business Machines Corporation
and
Computer Generated Solutions, Inc.
April 02, 1996
Contact: Nancy Hiatt Tel. 303-924-5396
IBM Integrated Procurement Solutions
6300 Diagonal Highway
P.O. Box 1900
Boulder, Colorado 80301-9191
Department: PRB1
Building: 001H
Service Agreement Number 2165
<PAGE>
- --------------------------------------------------------------------------------
Amendment # 02
This document shall constitute a formal amendment to Service Agreement Number
2165 dated October 04, 1995.
Add Attachment B Statement of Work
Add Attachment B as an additional Statement of Work per the enclosed document to
be performed under this Service Agreement.
Except as hereby amended, all other terms and conditions of this Agreement shall
remain in full force and effect as written.
If you agree with the above modifications, this document shall constitute an
Amendment to Agreement Number 2165. Please indicate your agreement by signing
both copies of this document and returning one copy to IBM Corp., 6300 Diagonal
Hwy., Boulder, CO 80301, Attention: Nancy Hiatt, Dept. PRB1, Bld. 001H.
In Witness whereof the parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives.
International Business Computer Generated Solutions, Inc.
Machines Corporation
By: /s/
--------------------------
/s/ G. H. Tamura 4/2/96 Title: President
--------------------------
G. H. Tamura Date: 4/11/96
Location Procurement Manager --------------------------
1
<PAGE>
Attachment B Statement of Work
March 11, 1996
Contact: Nancy Hiatt Tel. 303-924-5396
IBM Integrated Procurement Solutions
6300 Diagonal Highway
P.O. Box 1900
Boulder, Colorado 80301-9191
Department: PRB1
Building: 001H
Service Agreement Number 2165
<PAGE>
- --------
Contents
1.0 Term ..................................... 1
1.1 Project Description ...................... 1
1.2 Responsibilities As An IBM Subcontractor.. 1
1.3 Coordinators/Supervisors ................. 1
1.4 Work Schedules ........................... 2
1.5 IBM Workstation Support Locations ........ 2
1.5.1 "C" Programmer Support Group,
Atlanta ................................. 2
1.5.2 Advanced Workstation Support Center,
Chicago.................................. 2
1.5.3 Desktop Support Center, Atlanta ..... 3
1.5.4 Network Support Center, Atlanta ..... 3
1.5.5 EUS Center, Tampa ................... 5
1.6 IBM Large Computing Support Location...... 5
1.6.1 MVS Support Group, Atlanta .......... 5
1.7 Graphics Coordinator ..................... 5
1.8 Training ................................. 6
1.9 Transitional Training .................... 6
1.10 Measurements ............................ 6
1.10.1 Basic Understanding ................ 7
1.10.2 Minimum Customer Satisfaction Level. 7
1.10.3 Quality Measurements/Reporting ..... 7
1.11 Acceptance Criteria...................... 7
1.12 IBM Responsibilities..................... 7
1.13 CGS Responsibilities..................... 8
1.14 Rate Schedule............................ 9
1.15 Glossary of Terms........................ 12
Contents ii
<PAGE>
- --------------------------------------------------------------------------------
1.0 Term
The term of this Statement of Work dated March 11, 1996 is effective from
January 1, 1996 through December 31, 1996.
- --------------------------------------------------------------------------------
1.1 Project Description
Helpdesk Services (HDS) is an IBM Workstation Support services capability, which
provides helpdesk support for many hardware and software products, both IBM and
non-IBM (specifics by location follow). CGS employees must be able to provide
support for all of these environments.
The number of CGS employees performing tasks may change with the concurrence of
both parties. This number can fluctuate based on the number of customers being
supported and the cost of support from CGS as compared to alternate sources. CGS
will periodically be asked to supply additional employees (either full time or
part time) to meet these needs. When requesting additional CGS employees IBM
will identify specific product skills which the CGS employees must possess
before being assigned to work in IBM.
- --------------------------------------------------------------------------------
1.2 Responsibilities As An IBM Subcontractor
CGS employees shall be responsible for:
. Answering requests for service received via telephone from customers and
providing the required information/resolution of customer issues. The requests
will involve questions and/or problems related to the use, configuration, or
installation of the supported products. The questions must be answered in a
complete, accurate, and timely fashion.
. Demonstrating sufficient technical knowledge of the supported products listed
to provide problem determination for the customer and usage assistance to
customers, and to obtain information as needed from the product vendor.
. Demonstrating tact, sound business judgement, and good communication skills
when dealing with customers, with IBM employees, and with product
vendors.
. Demonstrating effective telephone communication skills.
. Provide efficient use and successful completion of customer requests using the
call management system to handle call activity and to record symptom/fix
information.
. Utilizing call handling/routing processes and procedures established between
IBM and CGS.
. Training of CGS employees on additional products to assist IBM when workload
peaks occur or when other responsibilities listed above are not being pursued.
. Recognizing when a customer situation warrants the intervention of an IBM
manager and reporting the situation immediately.
. Maintaining an acceptable business appearance and conduct.
. Providing technical representatives capable of delivering prompt, quality
solutions as described in the "IBM Helpdesk Services Locations" section.
- --------------------------------------------------------------------------------
1.3 Coordinators/Supervisors
IBM and CGS shall appoint Site Coordinators. Each party shall inform the other
of the name(s) of the coordinators appointed at the date of contract execution.
CGS shall appoint a Site Coordinator, who shall supervise and direct the work of
CGS employees and shall handle all personnel issues. This supervisor will
interface with the IBM Site Coordinator(s) and will be the focal point for all
on-site CGS interaction. This CGS Site Coordinator will be provided at no
additional charge.
The CGS Site Coordinator is expected to attend regularly scheduled technical
meetings and reviews.
The CGS Site Coordinator is expected to review CGS employee contributions on a
regular basis to ensure CGS employees are achieving the quality/productivity
goals as described later in the "Quality Assurance" section. The CGS Site
Coordinator will receive reports on a regular basis, detailing call activity for
all CGS employees.
The CGS Site Coordinator is expected to actively assist the IBM Site
Coordinator in improving overall HDS services.
1
<PAGE>
- --------------------------------------------------------------------------------
1.4 Work Schedules
The IBM Support Centers provide customer assistance 24 hours per day, 7 days
per week. CGS must be able to fulfill all shift requirements.
Exact work hours will be determined by the IBM Site Coordinator in conjunction
with CGS. CGS will be asked to supply part time employees to work 3-5 hours
during "peak" workload times. Job descriptions are provided in Section 1.13.
Since IBM Support Centers operate on a 24 hours per day, 7 days per week
schedule, employees, including some number of CGS employees, will be required to
work on IBM designated Holidays.
- --------------------------------------------------------------------------------
1.5 IBM Workstation Support Locations
The following are the current IBM locations where CGS employees are required to
provide telephone assistance to remotely diagnose customer problems/questions
and communicate a correct response:
1.5.1 "C" Programmer Support
Group, Atlanta
"C" Programmer
Design, develop and test programming tools written with "C". Requires strong "C"
level programming skills. Prepare high level component designs from general
requirement statements and provide component design documentation. Requires
minimal supervision and is capable of designing drivers to test integrated
modules.
Senior "C" Programmer - same as above, plus:
. Provide technical direction a group of "C" programmers
. Provide informal and/or formal training in areas of expertise
. Provide debugging, PD and system assistance to application developers
. Provide consulting and programming services on operating systems software and
other areas of expertise, including database internals and system utilities
1.5.2 Advanced Workstation Support
Center, Chicago
CGS employees will have all necessary skills, knowledge and expertise to provide
support on:
. RISC/6000 Hardware Problem Determination Provide prompt, quality support for
hardware and usage problems related to the RISC/6000 operating environment.
Responders require one to two years experience on the RISC/6000 hardware
platform, support experience, strong interpersonal skills, attention to
detail, demonstrated call leadership, ability to follow center procedures,
team player, and potential to qualify as an AIX/UNIX support rep.
. MULTIVENDOR SUPPORT - Provide remote hardware and software support for UNIX
platforms. Responders require two to three years experience as a UNIX
Administrator, knowledge of SUN, HIP, and SCO, ability to apply
administrative knowledge in a variety of environments, attention to detail,
strong interpersonal skills.
. RISC/6000 CUSTOMER CALL SCREENING - Provide hardware and software RISC/6000
and AIX call screening and problem resolution. Responders require two to three
years with the RISC/AIX platform as an administrator or equivalent experience.
Strong communication skills, attention to detail, ability to follow center
procedures, customer orientation, sensitive to escalation process, and a team
player.
. PNID/PARTS NUMBER SERVICE - Provide remote parts number identification
services to IBM customers. Responders require strong organizational and
communication skills, operational knowledge of a PC, be a team player and
customer focused.
2
<PAGE>
1.5.3 Desktop Support Center, Atlanta
Desktop Support Representative
CGS employees will have all necessary skills, knowledge and expertise including
A + Certification to:
provide assistance on and have a good working knowledge of PC, PS/2 Point of
Sale terminals, and/or associated workstation equipment.
Senior Desktop Support Representative - same as above, plus:
. Provide strong computer skills specific to the product supported
. Provide strong problem determination skills
. Capable of training and assisting Desktop representatives
. Provide excellent customer service techniques
. Possess excellent oral and written communications skills
Desktop Support Center Team Leader - This position is limited to one (l) team
leader per twenty-five (25) employees within the Desktop Support Center. The
team leader is expected to respond to customer/ce calls 50% of the time as
describe in the position above, plus:
. Schedule assigned resources to workload and alert IBM when available skills
and/or resources will not satisfy a known engagement
. Provide overall work direction to a team of technical resources sufficient to
satisfy assigned service level objectives
. Identify and respond to critical changes within assigned mission (technical,
distribution of workload, etc.) with action plans for IBM review and
implementation
. Demonstrate ability to serve as escalation point for all critical customer
calls
System Installation Technician Position Concept: Travel to various customer
locations to install computer systems and disconnect existing equipment.
Responsibilities
. Travel to customer locations based on a provided schedule
. Unpack hardware systems and install according to procedures. Back up data from
existing system. Load data to new system. Diagnose any system problem
discovered during process. Disconnect existing system. Pack specified items
for return.
. Accurately complete online electronic form with the required information for
the new system and the disconnected system.
. Perform customer training on the new system.
. Communicate any problems/discrepancies to Project Manager(s).
. Utilize good judgement when handling any unusual situations.
. Submit accurate labor and expense data on a timely basis.
1.5.4 Network Support Center,
Atlanta
The Network Support Center is comprised of four groups; LAN SERVICES Support,
IDNX, LAN/WAN Connectivity, and Wireless/Cellular Helpdesk. The LAN Services
environment is separated into three (3) skill requirements: l. Remote LAN
Monitoring & Administration; 2. LAN Software - level II to perform Network
Operating System (NOS) single product certification required and must be
assigned workload in one of the following: Netware, Microsoft NT, Banyan, OS/2
Lanserver, etc.; and 3. LAN Software - Level II multiple NOS product
certification and assigned workload. A Team Leader may be named and is limited
to one (l) per twenty-five (25) employees within the Network Support Center. The
team leader is expected to respond to customer/ce calls 50% of the time. Other
duties are described in the job description.
1.5.4.1 LAN SERVICES SUPPORT
CGS employees will have all necessary skills, knowledge and expertise to:
. Provide remote support to IBM internal Lan installations in a LAN
Administration support role. Must be able to troubleshoot over the phone all
hardware/software problems associated with IBM Lanserver and OS/2 related
3
<PAGE>
problems. Requires in-depth knowledge of IBM Lanserver and OS/2.
. Provide remote telephone support to customer's to isolate LAN failures to the
failing component. Interface with other IBM resources on LAN related issues
and OEM vendor conference calls as a technical resource for the customer.
. Provide direct dial in support for servers, includes monitoring critical
resources, error and event logs, tuning, down loading software code, backing
up critical files and operating system configurations, adding/ deleting users,
resetting passwords, creating print servers, etc.
. Products Supported:
- - Servers: file, print, gateway, domain, MAU's, LAM's, CAU'S connectivity, token
ring and ETHERNET topologies, LAN operating systems (OS/2 LANServer, NOVELL,
etc.), IBM and OEM LAN adapter cards.
. Environments supported:
- - Hardware, software, configuration, tuning, multi-vendor product connectivity.
. Certifications:
- - Novell CNE, Banyan, Windows NT, OS/2 Operating system, Netware, LAN
Network Manager, etc. Environment will require assigned workload in
either single product or multiple product certified skills.
- - Billing Rates:
- - Bill Rates are based on each of the three (3) skill groups and on length of
time in skill group based on entry, 3 months, and 6 months. CGS employees
currently in these skill groups as of March 8, 1996 will remain at
their present bill rate. A listing is to be provided to IPS with the employees
name and bill rate as of March 8. All subsequent CGS employees will be at
the rates listed in the Rate Schedule of this document.
1.5.4.2 IDNX SUPPORT CENTER
CGS employees will provide direct support to IBM end users customers, and other
IBM organizations, on workstations and remotely diagnosing event and error logs,
to resolve hardware problems with voice and data equipment, working with TELCO
and other equipment supplier vendors identified by IBM. Requires an in-depth
knowledge of multiplexors, data communications devices, and switches.
. Products supported:
- IDNX
- ADNX
- STM
. Environment Supported:
- Wide area high bandwidth, PBX/CBX, Channel banks, echo cancellors, T-l/T-3,
LWX Lan adapter, voice, data, video, image, frame relay, all speeds of data
transmission.
1.5.4.3 LAN/WAN CONNECTIVITY
SUPPORT CENTER
CGS will isolate all network failures to a failing component, invoke and
coordinate IBM resources, as required, participate in OEM vendor and TELCO
conference calls as a technical resource for the customer. Interface with
product and software engineering on defects and quality issues.
. Products Supported:
- - All IBM communication type products (modems, controllers, adapters, CPU's,
etc.), over 200 in number. OEM communication type products.
. Environment Supported:
- - Hardware, software, configuration, TELCO carriers, OEM vendors.
1.5.4.4 WIRELESS/CELLULAR
HELPDESK
Wireless/Cellular Helpdesk Representative
CGS employees will provide support to IBM end user customers that have
contracted for cellular helpdesk services. Strong technical knowledge and/or
experience in the cellular/wireless industry
4
<PAGE>
to accurately and quickly perform problem determination and resolution. Must
have thorough knowledge of a11 PC Laptops (IMB and OEM). Must be "Modem
literate" pertaining to all types, capabilities, and standards, compression and
error protocols, and completed range of asynchronous terminology. Familiar with
CDPD for purpose of installation assistance, trouble-shooting, including some
knowledge of TCP/IP concepts and protocols.
Senior Wireless/Cellular Helpdesk Representative - same as above, plus:
. In-depth knowledge of all laptops, modems, cellular protocols
. Able to train and assist Cellular/wireless helpdesk representative
. In-depth knowledge of TCP/IP protocols and networks
. Be escalation point for difficult technical problems
1.5.4.5 NETWORK TEAM LEADER
Network Support Center Team Leader -This position is limited to one (l) team
leader per twenty-five (25) employees within the Network Support Center. The
team leader is expected to respond to customer/ce calls 50% of the time as
described in the position above plus:
. Schedule assigned resources to workload and alert IBM when available skills
and/or resources will not satisfy a known engagement
. Provide overall work direction to a team of technical resources sufficient to
satisfy assigned service level objectives
. Identify and respond to critical changes within assigned mission (technical,
distribution of workload, etc.) with action plans for IBMS review and
implementation
. Demonstrate ability to serve as escalation point for all critical customer
calls
1.5.5 EUS Center, Tampa
End User Support (EUS) supports over 250 IBM and non-IBM and commercially
available, cross industry, PC software applications and PC hardware products:
this includes DOS, OS/2, and Apple Macintosh operating systems.
EUS also provides support on custom software/hardware. A custom product is an
application developed by an IBM end user or its vendor to meet unique needs.
CGS employees must have the capability to learn and support products that IBM
is or may be supporting and have the ability to learn new custom products which
IBM may elect to support in the future.
Certifications include Microsoft Certified Professional, OS/2 Certified
Engineer/Instructor, Microsoft Windows 95 Certification, Certified Novell
Engineer. Additional acceptable certifications require prior written approval of
both IBM Procurement and the IBM Site Coordinator.
- --------------------------------------------------------------------------------
1.6 IBM Large Computing
Support Location
The following are the current IBM locations where contract employees are
required to provide telephone assistance to remotely diagnose customer
problems/questions and communicate a correct response:
1.6.1 MVS Support Group, Atlanta
Provide remote systems support to MVS customers worldwide. Requires an in-depth
knowledge of MVS internals, sub-systems, and program products.
- --------------------------------------------------------------------------------
1.7 Graphics Coordinator
Position Concept: Is responsible for creating and updating quality process and
presentation charts on a timely basis. Primarily uses Lotus Freelance as the
software on a PS/2 type machine. Will operate equipment associated with
producing high-quality charts such as printers and plotters.
5
<PAGE>
Responsibilities
. Operates basic graphics equipment and programs.
. Tracks due dates on process charts.
. Updates and distributes process charts monthly.
. Provides assistance for other presentation charts.
. Performs other duties, as assigned.
. Maintains soft copies of all charts created.
. Ensures equipment used is maintained and usable.
- --------------------------------------------------------------------------------
1.8 Training
Training provided by CGS to its employees supporting IBM will fall into one of
three categories new employee, continuing. or new support.
"New employee" training is a combination of technical and process education.
CGS is responsible for the "new employee" technical education required for CGS
employees prior to being assigned to IBM. This training must ensure that new CGS
employees have sufficient technical knowledge of the supported products to
provide reliable problem determination and usage assistance to customers, and to
provide an efficient interface with the product vendor.
CGS is responsible for providing IBM with a detailed outline of their "new
employee" technical training plan, and the criteria used to certify completion
of the training plan for each employee. All CGS employees are expected to
complete this certification process prior to being assigned to work supporting
IBM. IBM will not be responsible for any charges associated . with this
training.
CGS employees will be expected to maintain currency on new versions and new
releases of supported products. This training is described as "continuing"
training. Time spent on "continuing" training activities is on-going for uniform
improvement of technical skills.
"New support" training applies to time spent on education required to provide
new or improved support to customers. IBM will provide for "new support"
training for CGS Site Coordinators. This type of training may occasionally
involve certification tests or exams. IBM will pay all costs associated with
the training of site coordinators (unless special provisions are made in
advance). CGS is expected to provide this training, testing and certification
to its employees and to pay for the cost of the certification tests or exams.
When a certified CGS employee leaves, CGS will be responsible to provide an
equivalent skill replacement or be responsible for associated certification
training expense.
IBM will provide "new employee" process education on specific items which are
considered to be unique to IBM. This education will be conducted once for the
CGS Site Coordinator (or their designated representative). Thereafter, the CGS
Site Coordinator is responsible for the "new employee" process education for all
other CGS employees.
The IBM Site Coordinator shall coordinate all IBM activities in support of the
"new employee" process training.
- --------------------------------------------------------------------------------
1.9 Transitional Training
In the event of cancellation or at the expiration of this Agreement, CGS agrees
to provide a minimum of fifteen (15) days transitional training to a supplier
to be specified by IBM if other than CGS. Said training shall be conducted by an
adequate number of CGS employees to ensure continuity of service at a competent
level of performance. IBM shall pay for such training at the rates specified
in the Statement of Work for the job descriptions of the employees providing
such training. CGS shall ensure that it continues to meet all performance and
quality requirements specified in the Statement of Work throughout such training
period.
- --------------------------------------------------------------------------------
1.10 Measurements
CGS shall be responsible for Customer satisfaction survey results for calls
responded to by CGS employees. The surveys will be conducted under IBM's
authorization on a random basis. The sample should include a minimum of 5% to 8%
of IBM end users whose problems have been resolved. Customer satisfaction
results are a key indicator of service and will be shared between IBM and CGS
6
<PAGE>
on a weekly basis. Improvement plans, as required, will be jointly developed
and implemented.
1.10.1 Basic Understanding
CGS will provide employees who can meet or exceed a minimum customer
satisfaction level (see detail below) for all sites where it provides services
to IBM. CGS will track these levels and replace any employees not meeting the
minimum customer satisfaction level within two weeks. If a CGS employee leaves
or is dismissed, CGS will be fully responsible for all regular hourly
reimbursement (equivalent hours at IBM site, not to be greater than 90 days)
associated with training a replacement.
1.10.2 Minimum Customer
Satisfaction Level
CGS employees must maintain an average of 95% minimum customer satisfaction
level based on IBM's customer satisfaction survey. The satisfaction
level is to be measured quarterly using a rolling three month average.
Should any CGS employee not maintain an average of 95% minimum customer
satisfaction level, CGS will notify IBM that the situation will be corrected
within two weeks. CGS will be liable for up to three month's regular hourly
reimbursement to train any necessary replacement(s).
1.10.3 Quality
Measurements/Reporting
IBM will provide the CGS Site Coordinator with reports and/or information
detailing CGS's performance against the quality goals. This information will be
supplied on a weekly and/or monthly basis. The CGS Site Coordinator is expected
to work with the IBM Site Coordinator to ensure attainment of quality goals.
CGS employees will participate and demonstrate commitment to quality improvement
programs such as IBM Business Management Measurements (BMM) and ISO 9000
assessments/certification.
Specific measurements will be developed by IBM and CGS to gauge performance and
quality requirements. Overall areas measured will include but are not limited
to:
. Qualification of staff
- Calls per day per rep
. Adherence to procedures
. Customer satisfaction
. Quality control
- Problem Duration
- Call Response time/Call Abandon Rate
- First Call Resolution
- Minimal Customer Situation Information System (CSIS) incidents
(actual formula to be determined)
- --------------------------------------------------------------------------------
1.11 Acceptance Criteria
Initial acceptance will depend on evaluation of the vendor's ability to meet the
scope defined in this document. Key criteria that will be reviewed includes but
not limited to:
. Cost
. Quality
. Management
- --------------------------------------------------------------------------------
1.12 IBM Responsibilities
IBM is responsible for the following:
. Existing Processes and Procedures
. IBM Site Safety, Security and personnel
conduct policies
. Hardware/Software/Tools as described below (IBM Business use only) IBM
will provide and maintain ownership of IBM PC'S or PS/2'S, printers, as well
as any IBM and OEM software/hardware and all related technical manuals it
deems necessary. Maintenance of the equipment will be performed by IBM.
. Office facilities
. Personal shared workstation and required software
. Phone, headset, and phone system
. Access to required systems/tools
- RETAIN
- KBS
- VM
- EUS ON-LINE
7
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. Access to any additional required equipment
. Badge access to assigned location
Note: The supplier shall follow the practices, procedures and priorities of
IBM in the use of IBM equipment, systems, and tools.
- --------------------------------------------------------------------------------
1.13 CGS Responsibilities
CGS is responsible for the following:
. Answer customer requests in a timely,
professional, and accurate manner
. Monitor call quality using a remote call
monitoring system
. Ensure operating processes and procedures
are accurately followed
. Assist in updating these processes and
procedures as required
. Update customer database records
. Ensure skill requirements are met, maintained
and updated
. Provide effective management of personnel and
workload
. Train any additional personnel required after
initial training
. Support and adhere to ISO 9000 registration
when complete and all other quality programs
(CGS personnel will talk to ISO 9000 auditors
if asked)
. Evaluate work performance and increase or
decrease to allow for efficiencies or increased
workload at IBM's approval
. CGS shall supply for IBM's review and
approval, transition and implementation plans
to meet targets
. CGS management is expected to have regularly
scheduled status meetings and provide written
reports to the IBM Site Coordinator monthly.
. Adhere to IBM Site Safety, Security and
personnel conduct policies
. Define process which manages new
requirements from IBM
. Monthly Quality updates and action plans
. Perform configuration and setup of hardware
and installation of software packages for the
equipment assigned to them.
8
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- --------------------------------------------------------------------------------
1.14 Rate Schedule
- --------------------------------------------------------------------------------
Table 1. Rate Schedule
- --------------------------------------------------------------------------------
Job Description - "C" Programmer - $/HR $/HR
Atlanta Pay Rate Bill Rate
- --------------------------------------------------------------------------------
Programmer **** ****
Senior "C" Programmer **** ****
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Table 2. Rate Schedule
- --------------------------------------------------------------------------------
Job Description - Atlanta Desktop $/HR $/HR
Pay Rate Bill Rate
- --------------------------------------------------------------------------------
Desktop Support Representative **** ****
Senior Desktop Support Represen- **** ****
tative
Desktop Support Team Leader **** ****
System Installation Technician **** ****
- --------------------------------------------------------------------------------
**** Confidential treatment is being requested for these portions of this
agreement.
9
<PAGE>
- --------------------------------------------------------------------------------
Table 3. Rate Schedule
- --------------------------------------------------------------------------------
Job Description - Atlanta Network $/HR $/HR
Support Pay Rate Bill Rate
- --------------------------------------------------------------------------------
LAN Monitoring & Administration - **** ****
Entry
LAN Monitoring & Administration - **** ****
3 months in position
LAN Monitoring & Administration - **** ****
6 months in position
LAN Software- Single NOS Product **** ****
Certification Assigned - Entry
LAN Software- Single NOS Product **** ****
Certification Assigned - 3 Months
LAN Software - Single NOS Product **** ****
Certification Assigned - 6 Months
LAN Software - Multi-NOS Product **** ****
Certification Assigned - Entry
LAN Software - Multi-NOS Product **** ****
Certification Assigned - 3 Months
LAN Software- Multi-NOS Product **** ****
Certification Assigned - 6 Months
IDNX Remote Support Represen- **** ****
tative
LAN/WAN Connectivity Support **** ****
Representative
Wireless/Cellular Support Represen- **** ****
tative
Senior Wireless/Cellular Support **** ****
Representative
Network Support Team Leader **** ****
- --------------------------------------------------------------------------------
**** Confidential treatment is being requested for these portions of this
agreement.
10
<PAGE>
- --------------------------------------------------------------------------------
Table 4. Rate Schedule
- --------------------------------------------------------------------------------
Job Description- Chicago Advanced $/HR $/HR
Workstation Support Pay Rate Bill Rate
- --------------------------------------------------------------------------------
RISC/6000 Hardware PD **** ****
Multivendor Support Representative **** ****
- - UNIX
RISC/6000 Call Screening - **** ****
RISC/AIX
PNID/Parts Number Service **** ****
- --------------------------------------------------------------------------------
Table 5. Rate Schedule
- --------------------------------------------------------------------------------
Job Description - Tampa EUS $/HR $/HR
Pay Rate Bill Rate
- --------------------------------------------------------------------------------
SW Application Support Represen- **** ****
tative up to 3 years IBM experience
SW Application Support Represen- **** ****
tative with IBM approved certif-
ication or 3 years IBM experience
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Table 6. Rate Schedule
- --------------------------------------------------------------------------------
Job Description - MVS Support Rep- $/HR $/HR
resentative Pay Rate Bill Rate
- --------------------------------------------------------------------------------
MVS Support Representative **** ****
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Table 7. Rate Schedule
- --------------------------------------------------------------------------------
Job Description - Graphics Coordi- $/HR $/HR
nator Pay Rate Bill Rate
- --------------------------------------------------------------------------------
Graphics Coordinator **** ****
- --------------------------------------------------------------------------------
. Notes
-- IBM shall pay overtime at a rate of ****%
of the regular pay rate.
-- IBM will not pay shift premium
-- IBM will not pay overtime for CGS
managers/CGS Site Coordinator
-- Pay rate times uplift equals the bill rate
**** Confidential treatment is being requested for these portions of this
agreement.
11
<PAGE>
-- It is IBM's intent to reimburse for "productive" hours worked. Supplier
should plan on invoicing IBM for actual hours worked at the support center
location. Vacation/sick and other time away from the job should be absorbed
in overhead.
-- CGS will not use an employee assigned to an IBM location for any outside
consulting work without receiving advanced authorization, in writing, from
IBM.
- --------------------------------------------------------------------------------
1.15 Glossary of Terms
. "Technical Representative" is a person who is skilled in the use of a product
and is considered to be of an advisory capacity on the product.
. "Help Desk" Services (HDS) are a bundle of separate services available
through IBM's Workstation Technical Support organization to provide a
comprehensive array of services that uniquely address a customer's needs in
today's complex mixed vendor computer processing environments.
. "OEM" is the original equipment manufacturer (e.g. Compaq, Apple, etc.).
. "Problem" is a singular request for assistance on a specific product. Requests
for assistance on multiple products, or different problems with the same
product will be considered to be multiple problems. If an initial answer does
not resolve the problem, subsequent calls may be placed under the original
problem number. A problem may involve multiple conversations or actions: the
initial request, off-line research, a callback. and closure.
. "NOS" is a Network Operating System such as OS/2 LANServer, BANYAN,
MICROSOFT NT, etc.
. "Supported Product" is an eligible software/hardware product which is on a
current Workstation Technical Support supported product list. Supported
implies trained personnel are ready and available to handle calls on the
product.
. "Workstation" is a machine of an eligible type and at least one eligible
program listed on the supported product list.
. "CSIS" (Customer Situation Information System) is IBM's customer complaint
system for tracking, monitoring, and ensuring satisfactory resolution.
. "Entitlement" is the process of ensuring customers are entitled to receive
warranty/maintenance service or helpdesk services from IBM.
. "Retain" (Remote Technical Assistance Network) is IBM's world-wide database
storing customer problem records.
. "VM" (Virtual Machine) is the IBM mainframe operating system.
. "Trailer Call" is the process used to measure a customer's level of
satisfaction with the way their call was handled.
. "ISO 9000" are internationally recognized industry standards which identify
the requirements for an effective quality management system.
<PAGE>
* EXHIBIT 10.2
------------
Master Agreement for Professional Services dated June 26, 1995, between
AT&T Corp. and Computer Generated Solutions, Inc.
* Confidential Treatment is being requested with respect to portions of
this exhibit
<PAGE>
MASTER AGREEMENT FOR
--------------------
PROFESSIONAL SERVICES
---------------------
THIS MASTER AGREEMENT FOR PROFESSIONAL SERVICES ("Agreement") is made and
entered into as of the 26th day of June, 1995, by and between AT&T Corp., a
corporation of the State of New York with offices at 55 Corporate Drive,
Bridgewater, NJ 08807 (hereinafter referred to as "CUSTOMER"), and Computer
Generated Solutions, Inc., a corporation of the State OF Delaware with offices
at 1675 Broadway, 31st Floor, New York, New York 10019 (hereinafter referred to
as "CONSULTANT").
W I T N E S S E T H
- - - - - - - - - -
That, for and in consideration of the mutual promises and
covenants hereinafter contained, the parties hereto agree as
follows:
ARTICLE 1
---------
GENERAL DESCRIPTION OF OBJECTIVES
---------------------------------
AND SCOPE OF SERVICES
---------------------
1.1 CONSULTANT agrees to provide to CUSTOMER technical assistance and
assistance in design, programming, training, consulting, project management, use
of expertise and related services as are described on such CONSULTANT Schedules
as are executed from time to time by both parties to this Agreement (the
"Schedules"). Such services shall be provided in accordance with the provisions
of this Agreement and within guidelines established by CUSTOMER. There
shall be two types of Schedules, one a time and materials Schedule substantially
in the form of annexed hereto as Exhibit 1 and made a part hereof ("T&M
------- -
Schedule"), the other a fixed price Schedule substantially in the form annexed
hereto as Exhibit 2 and made a part hereof ("Fixed Price Schedule"). Each
------- -
Schedule shall be consecutively numbered to facilitate identification.
1.1.1 Each such Schedule, when executed by an authorized representative
of both parties, shall constitute a separate
<PAGE>
agreement and except for any provisions herein which are specifically
excluded or modified in such Schedule, each such Schedule shall
incorporate therein all of the terms and conditions of this Agreement.
Each T&M Schedule will contain the names of the CONSULTANT employees
performing services covered by that Schedule, their job classification,
the daily rate of payment applicable to each listed CONSULTANT employee
(the "Daily Rate"), the work location of each CONSULTANT employee, the
name of CUSTOMER's Project Manager and such additional information,
terms and conditions as the parties may agree upon. Each Fixed Price
Schedule will contain the fixed price of the work effort, the names of
CONSULTANT's and CUSTOMER's Project Managers and such additional
information, terms and conditions as the parties may agree upon. In the
event of any conflict between the terms and conditions of this
Agreement and the terms and conditions of any Schedule, the terms and
conditions of such Schedule shall govern.
1.2 The scope of CONSULTANT's work effort must be coordinated with appropriate
personnel designated by CUSTOMER and shall at all times be subject to the
parameters established by CUSTOMER from time to time.
1.3 CONSULTANT agrees that CUSTOMER'S parent company or any subsidiary and/or
affiliated company of CUSTOMER may execute Schedules in accordance with the
provisions of this Agreement. In such event, the applicable subsidiary or
company of CUSTOMER executing any Schedule shall be considered to be the
"CUSTOMER" as that term is used in this Agreement.
1.4 Unless otherwise mutually agreed to by the parties in writing, CONSULTANT
and CUSTOMER agree not to hire or to solicit the employment of any personnel of
the other party directly or indirectly associated with CONSULTANT'S work effort
under any Schedule during the term of such Schedule and for a period of twelve
(12) consecutive months thereafter.
1.5 This Agreement shall commence on the date first above written and shall
continue in full force and effect thereafter
2
<PAGE>
unless and until terminated in accordance with the provisions of this Agreement.
ARTICLE 2
--------
STATEMENT OF WORK
-----------------
2.1 A statement of scope of work (the "Statement") shall be attached to each
Schedule as an Attachment A and shall be incorporated therein and made a part
------------
thereof. Any statement attached to a T&M Schedule will contain a description of,
and the schedule for, the tasks to be performed by CONSULTANT, the documentation
if any, to be produced by CONSULTANT, the maximum dollar amount (the "Maximum
Dollar Amount") billable under such T&M Schedule, and such additional
information as the parties may wish to include. Any Statement attached to a
Fixed Price Schedule will contain a full and complete description of the tasks
to be performed by CONSULTANT, a description of the deliverables to be produced
by CONSULTANT, a listing of the documentation to be provided by CONSULTANT, the
schedule for completion of each of the foregoing (including, but not limited to,
milestone dates and PERT charts), a schedule of payments and such additional
information as the parties may wish to include.
2.1.1 Each Schedule referred to herein shall be deemed to include any
such Statement.
ARTICLE 3
-------
ORGANIZATION OF EMPLOYEES
-------------------------
SUPPLIED BY CONTRACTOR
----------------------
3.1 CONSULTANT will appoint for each T&M Schedule, at no charge to CUSTOMER, a
qualified member of its staff who will operate as the main interface between
CUSTOMER and CONSULTANT, who will ensure that CONSULTANT personnel coordinate
and interface with CUSTOMER personnel in a manner satisfactory to CUSTOMER, and
who will assist CUSTOMER in resolving any problems.
3.2 In order to establish a close working relationship with CUSTOMER on fixed
price work efforts and to ensure that CONSULTANT personnel coordinate and
interface with such CUSTOMER personnel as may be designated by CUSTOMER,
CONSULTANT agrees to
3
<PAGE>
appoint a qualified member of its staff, at no charge to CUSTOMER, to function
as CONSULTANT's Project Manager for each Fixed Price Schedule. The CONSULTANT
Project Manager will be charged with the responsibility of coordinating
CONSULTANT's fixed price work effort with appropriate CUSTOMER personnel and of
ensuring that CONSULTANT's resources are available to perform the tasks set
forth on the applicable Fixed Price Schedule. The CONSULTANT Project Manager
will also prepare the monthly status reports required under the terms of Article
5 hereof.
3.3 In the event that any CONSULTANT employee performing services under any
Schedule is found to be unacceptable to CUSTOMER for any cause, including, but
not limited to, demonstration that he or she is not qualified to perform,
CUSTOMER shall have the right to notify CONSULTANT of such fact (without waiving
any other rights or remedies it may have hereunder) and CONSULTANT shall
immediately remove said employee from performing services under that Schedule
and, if requested by CUSTOMER, provide a qualified replacement.
3.3.1 In the event that any anticipated or actual delays in meeting
CUSTOMER's deadlines or scheduled completion dates for work being
performed under any Schedule are caused by the unacceptable performance
of any CONSULTANT employee, CONSULTANT shall provide additional
temporary personnel, as requested by CUSTOMER and at no charge to
CUSTOMER, in order to complete the assignment involved in a timely
manner.
3.4 CONSULTANT agrees to ensure the continuity of CONSULTANT employees assigned
to perform services under any Schedule. Any reassignment by CONSULTANT of those
of its employees assigned to perform services under any Schedule must be with
CUSTOMER's prior written consent and with one (1) month's prior written
notice to CUSTOMER. In the event CONSULTANT reassigns any of its employees
assigned to perform services under any Schedule, CONSULTANT will promptly
provide a replacement acceptable to CUSTOMER. In no event may CONSULTANT remove
or replace personnel provided hereunder for the purpose of reassignment to
another customer or elsewhere within CUSTOMER, unless otherwise agreed to in
writing by CUSTOMER.
4
<PAGE>
3.5 There will be no charge to CUSTOMER for any replacement provided in
accordance with Sections 3.3 and/or 3.4 hereof for a reasonable period of time
(to be agreed upon between CUSTOMER and CONSULTANT) while the replacement
employee acquires the necessary orientation and education to make a productive
contribution substantially equal to that of the employee replaced.
3.6 CONSULTANT, in performance of this Agreement, is acting as an independent
contractor. Personnel supplied by CONSULTANT hereunder are not CUSTOMER's
personnel or agents, and CONSULTANT assumes full responsibility for their acts.
CONSULTANT shall be solely responsible for the payment of compensation of
CONSULTANT employees assigned to perform services hereunder, and such employees
shall be informed that they are not entitled to the provision of any CUSTOMER
employee benefits. CUSTOMER shall not be responsible for payment of workers'
compensation, disability benefits, unemployment insurance and for withholding
income taxes and social security for any CONSULTANT employee, but such
responsibility shall be that of CONSULTANT.
3.6.1 In the event that the Internal Revenue Service, any state or local
government agency or any other applicable entity determines that the
personnel provided by CONSULTANT under any Schedule are employees of
CUSTOMER for the purpose of withholding tax liability, CONSULTANT agrees
to indemnify CUSTOMER against and release CUSTOMER from all liabilities,
costs, and expenses (including, but not limited to, attorneys' fees)
associated with the defense of such claim.
ARTICLE 4
---------
ORGANIZATION OF PERSONNEL
-------------------------
SUPPLIED BY CUSTOMER
--------------------
4.1 CUSTOMER shall designate an appropriate CUSTOMER representative as
CUSTOMER's Project Manager for each Schedule. The CUSTOMER's Project Manager
will be charged with the responsibility of acting as CONSULTANT's principal
point of interface with CUSTOMER for the services covered by the Schedule
involved, and, in the case of any T&M Schedule, will direct,
5
<PAGE>
define, and schedule the tasks to be performed by CONSULTANT employees
contemplated by the applicable Statement.
ARTICLE 5
---------
STATUS REPORTS; STATUS MEETINGS
-------------------------------
5.1 Unless otherwise agreed to by CUSTOMER, in writing, CONSULTANT shall submit
to CUSTOMER's designated Project Manager every month during the term of each
Statement (commencing thirty (30) days from the commencement date of such
Statement) written status reports fully describing CONSULTANT's activities and
accomplishments during the preceding month, in order to timely report
CONSULTANT's continuous involvement in the tasks contemplated by the applicable
Statement and in order to direct timely corrective action as necessary. The
status reports will include, but will not necessarily be limited to, the
following:
5.1.1 Current status of CONSULTANT activities together with an
explanatory narrative when appropriate.
5.1.2 Indication of the progress of the work being performed by
CONSULTANT, as that progress relates to the Statement involved.
5.1.3 Resources used since the date of the last report, as well as a
cumulative total to date.
5.1.4 Identification of actual and anticipated problem areas, the impact
on CONSULTANT's work effort of said problem areas, and present action
being taken (or suggested alternative action steps to be taken) in order
to reduce the impact of such problems.
5.2 If CUSTOMER so requests, CONSULTANT shall hold status meetings with
CUSTOMER management in order to review the status of CONSULTANT activities.
6
<PAGE>
ARTICLE 6
---------
FEES AND EXPENSES; RECORDS; TAXES
---------------------------------
6.1 CONSULTANT agrees to invoice CUSTOMER, monthly in arrears as of the 15th
day of each month (or as otherwise mutually agreed to by the parties in
writing), for the technical assistance and assistance in design, programming,
consulting, training, project management, use of expertise and related services
provided to CUSTOMER by CONSULTANT personnel under any T&M Schedule in
accordance with the Daily Rate set forth opposite each CONSULTANT employee
listed on that Schedule. Such Daily Rate shall be in no event more than
CONSULTANT's standard published rate for an employee in that job classification.
CONSULTANT agrees to invoice CUSTOMER for any fixed price work effort in
accordance with the schedule of payments set forth on the Statement attached to
the applicable Fixed Price Schedule.
6.1.1 For work performed pursuant to any T&M Schedule, the normal work
week shall be five (5) days, eight (8) hours per day, excluding one (1)
hour for meals. Such days and hours shall be as requested by CUSTOMER
from time to time. In the event that less than an eight (8) hour day is
worked by a CONSULTANT employee on any given day, the amount payable by
CUSTOMER for that day will be determined by applying a fraction whose
numerator is the actual number of hours worked by such CONSULTANT
employee and whose denominator is eight (8) to the appropriate Daily
Rate for that employee. Any hours worked by a CONSULTANT employee under
any T&M Schedule in excess of eight (8) in any one day, or any days
worked by a CONSULTANT employee under any T&M Schedule in excess of five
(5) days in any one week, shall be at no additional expense to CUSTOMER
unless prior written approval is obtained from the applicable Project
Manager, in which case the amount payable for each such hour shall be
l/8 of the applicable Daily Rate.
6.1.2 For work performed pursuant to any T&M Schedule, CONSULTANT will
submit authorized time sheets to CUSTOMER each week showing the number
of hours worked by CONSULTANT employees.
7
<PAGE>
6.2 In addition to the charges invoiced in accordance with Section 6.1 hereof,
CONSULTANT shall invoice CUSTOMER, monthly in arrears as of the 15th day of each
month (or as otherwise mutually agreed to by the parties in writing), for
expenses incurred as a result of performing services in accordance with any
Schedule. Such expenses shall be limited to the following:
6.2.1 Reasonable out-of-pocket expenses necessarily and actually incurred
by CONSULTANT in the performance of its services hereunder, provided that:
(i) CUSTOMER has given its prior written consent for any such expenses;
(ii) the expenses have been detailed on a form acceptable to CUSTOMER and
submitted to the appropriate CUSTOMER Project Manager for review and
approval; and (iii) if requested by CUSTOMER, CONSULTANT submits
supporting documentation in addition to the approved expense form. It is
understood that CUSTOMER shall not reimburse CONSULTANT unless otherwise
specified in the Exhibit for commutation expenses under any circumstances
or for travel and living expenses incurred by any CONSULTANT employee in
performing services at a CUSTOMER facility located in the same
metropolitan area as that of employee's home base. It is also understood
that any air transportation reimbursable hereunder shall be coach-economy
and that entertainment by or on behalf of CONSULTANT shall be at no cost
to CUSTOMER.
6.3 CONSULTANT will submit the charges and/or expenses to be invoiced for
services performed under any Schedule to the CUSTOMER's Project Manager for that
Schedule for review and approval prior to actual invoicing. The charges and/or
expenses invoiced in accordance with this Article 6, except for any amounts
disputed by CUSTOMER, shall be payable by CUSTOMER within thirty (30) days of
CUSTOMER's receipt of each invoice. Any disputed charges and/or expenses shall
not affect payment of non-disputed charges and/or expenses, in accordance with
the terms of this Agreement. Consultant agrees to send duplicate copies of each
invoice to AT&T Solutions, 55 Corporate Drive, Bridgewater, New Jersey 08807,
ATTN: Financial Manager.
8
<PAGE>
6.4 Notwithstanding anything to the contrary contained herein, CUSTOMER shall
not be liable for any charges and/or expenses under any T&M Schedule in excess
of the Maximum Dollar Amount specified on such T&M Schedule. In the event that
CONSULTANT'S charges and/or expenses billable under any T&M Schedule approach
the Maximum Dollar Amount, CONSULTANT shall immediately notify CUSTOMER of such
fact, in writing, and if CUSTOMER agrees, at its discretion, in writing, a new
Maximum Dollar Amount shall be applicable to such T&M Schedule.
6.5 CONSULTANT shall maintain complete and accurate accounting records, in a
form in accordance with generally accepted accounting principles, to
substantiate CONSULTANT's charges and expenses hereunder. Such records shall
include, but not be limited to, payroll records, attendance cards and job
summaries, and CONSULTANT shall retain such records for a period of one (1) year
from the date of final payment under any Schedule.
6.5.1 CUSTOMER shall have access to the records described in Section 6.5
for purposes of audit during normal business hours during the period in
which CONSULTANT is required by the terms of Section 6.5 hereof to
maintain such records.
6.6 The charges set forth herein do not include and CUSTOMER will pay, as
hereinafter stated, all sales or use taxes lawfully levied against or upon the
services provided hereunder, or arisinq out of this Agreement.
ARTICLE 7
---------
VERIFICATION OF ACCEPTABILITY
-----------------------------
7.1 Each and every deliverable contemplated by any Schedule shall be subject to
a verification of acceptability by CUSTOMER for the purpose of demonstrating
that the deliverable satisfies the criteria for verification of acceptability
mutually agreed to by CUSTOMER and CONSULTANT for said deliverable, a copy of
which shall be attached to the applicable Schedule and made a part thereof
9
<PAGE>
7.2 The criteria for verification of acceptability for each deliverable
contemplated by any Schedule shall be jointly developed and mutually agreed to
in writing by CUSTOMER and CONSULTANT at least thirty (30) days in advance of
the date identified in the Schedule for production of the deliverable involved.
7.2.1 In the event the parties are unable to jointly develop and
mutually agree to the criteria for verification of acceptability of
software deliverables, then at a minimum, verification of acceptability
of such software deliverable shall be based on the conformance of the
software deliverables to the functional specifications for same.
7.2.2 In the event the parties are unable to jointly develop and
mutually agree to the criteria for verification of acceptability of
requirements definition deliverables, design deliverables or other non-
software deliverables, then, at a minimum, verification of acceptability
of such deliverables shall be based, in the case of design deliverables,
on the conformance of the design deliverable to the applicable statement
of business requirements and, in the case of requirements definition
deliverables and other non-software deliverables, on CUSTOMER's
satisfaction or non-satisfaction with the deliverable.
7.3 The verification of acceptability for any deliverable pursuant to any
Schedule shall commence on the date CONSULTANT notifies CUSTOMER's Project
Manager, in writing, that the deliverable involved has been satisfactorily
completed, in CONSULTANT's opinion, and is ready for verification of
acceptability by CUSTOMER. Such commencement date shall be a date no later than
ten (10) calendar days after the date on which the deliverable is to be
produced, as specified on the applicable Statement (or such other date as may be
mutually agreed to by both parties in writing). Verification of acceptability
shall continue for the period of time specified in the criteria for verification
of acceptability or, if no such time period has been
10
<PAGE>
agreed upon by the parties, for a period of thirty (30) consecutive days.
7.4 In the event that any deliverable contemplated by any Schedule does not
conform to the criteria for verification of acceptability for same within the
verification of acceptability period described in Section 7.3 hereof, CUSTOMER
shall notify CONSULTANT in writing of such fact. CUSTOMER shall cooperate with
CONSULTANT in identifying in what respects the deliverable has failed to conform
to the criteria. CONSULTANT shall, at no cost to CUSTOMER, promptly correct any
deficiencies which prevent such deliverable from conforming to the criteria.
Upon completion of the corrective action by CONSULTANT, and at no additional
cost to CUSTOMER, the verification of acceptability will be repeated until the
deliverable has successfully conformed to the criteria for verification of
acceptability.
7.5 If the deliverable contemplated by any Schedule does not conform to the
criteria for verification of acceptability within thirty (30) days after the
initial verification of acceptability period described in 7.3, CUSTOMER may (i)
immediately terminate the applicable schedule without waiving any other rights
or remedies it may have hereunder and CONSULTANT shall immediately reimburse
CUSTOMER any amounts paid; or (ii) require CONSULTANT to continue to attempt to
correct the differences, reserving the right to terminate as aforesaid at
anytime.
7.6 When any deliverable has successfully conformed to or satisfied the
criteria for verification of acceptability for same, CUSTOMER shall promptly
notify CONSULTANT of such fact in writing.
ARTICLE 8
---------
PATENT AND COPYRIGHT INFRINGEMENT
---------------------------------
8.1 CONTSULTANT agrees to defend and/or handle at its own cost and expense any
claim or action against CUSTOMER, its parent company, and its or their
subsidiaries and/or affiliated companies, for actual or alleged infringement of
any patent, copyright or other property right (including, but not limited to,
misappropriation of trade secrets) based on any software,
11
<PAGE>
program, service and/or other materials furnished to CUSTOMER by CONSULTANT
pursuant to the terms of this Agreement or the use thereof bv CUSTOMER.
8.1.1 CONSULTANT shall have the sole right to conduct the defense of any
such claim or action and all negotiations for its settlement or
compromise, unless otherwise mutually agreed to in writing by the
parties hereto.
8.2 CONSULTANT further agrees to indemnify and hold CUSTOMER, its parent
company, and its or their subsidiaries and/or affiliated companies, harmless
from and against any and all liabilities, losses, damages, costs and expenses
(including, but not limited to, attorneys' fees) associated with any such claim
or action.
8.3 CONSULTANT agrees to give to CUSTOMER, in reasonable detail, prompt
written notice of any threat, warning, or notice of any such claim or action
against CONSULTANT which could have an adverse impact on CUSTOMER's use of said
software, program, service and/or materials.
8.4 In addition to CUSTOMER'S other rights and CONSULTANT'S obligations
pursuant to Sections 8.1, 8.2 and 8.3 hereof CONSULTANT agrees, should
CUSTOMER'S use of any service, software, program, and/or other material
furnished to CUSTOMER by CONSULTANT be enjoined by any court, to promptly
obtain, at no expense to CUSTOMER, the right to continue to use the items so
enjoined or, at no expense to CUSTOMER, provide CUSTOMER promptly with
substitute items (which supply of such items will not violate any third party's
rights), that are qualitatively and functionally at least the equal of the
enjoined products and satisfy CUSTOMER's needs to the same extent as the
enjoined product.
ARTICLE 9
---------
CONFIDENTIAL INFORMATION
------------------------
9.1 Confidential information shall mean any information obtained by CONSULTANT
from, or disclosed to CONSULTANT by, CUSTOMER, its parent company, its or their
subsidiaries and/or
12
<PAGE>
affiliated companies, and/or any of their clients, which relates to the past,
present or future business activities of said entities, and/or their clients,
including, but not limited to, any information relating to pricing, methods,
processes, financial data, lists, technical data, apparatus, statistics,
programs, specifications, documentation, research, development or related
information, and the results from the provision of the services performed by
CONSULTANT under this Agreement. CONSULTANT shall hold such confidential
information in trust and confidence for CUSTOMER and shall not reproduce,
disclose to any person, firm or enterprise, or use for its own benefit, any such
confidential information. Upon the completion and/or termination of any
Schedule, or sooner if so requested by CUSTOMER, CONSULTANT shall deliver to
CUSTOMER all items, including, but not limited to, drawings, blueprints,
descriptions, test data or other papers or documents, which may contain any such
confidential information.
9.2 Unless otherwise specified in any Schedule, title to all materials,
products and/or deliverables, including, but not limited to, reports, designs,
programs, specifications, documentation, manuals, visual aids, and any other
materials developed and/or prepared for CUSTOMER by CONSULTANT under any
Schedule (whether or not such Schedule is completed), and all interest therein
shall vest in CUSTOMER and shall be deemed to be a work made for hire and made
in the course of the services rendered hereunder. To the extent that title to
any such works may not, by operation of law, vest in CUSTOMER or such works may
not be considered works made for hire, all rights, title and interest therein
are hereby irrevocably assigned to CUSTOMER. All such materials shall belong
exclusively to CUSTOMER, with CUSTOMER having the right to obtain and to hold in
its own name, copyrights, resistrations or such other protection as may be
appropriate to the subject matter, and any extensions and renewals thereof.
CONSULTANT agrees to give CUSTOMER and any person designated by CUSTOMER,
reasonable assistance, at CUSTOMER's expense, required to perfect the rights
defined in this Section 9.2. Unless otherwise requested by CUSTOMER, upon the
completion of the services to be performed under each Schedule or upon the
earlier termination of such Schedule, CONSULTANT shall immediately turn over to
CUSTOMER all materials
13
<PAGE>
and deliverables developed pursuant to such Schedule, including, but not limited
to, working papers, narrative descriptions; reports and data.
ARTICLE 10
----------
WARRANTIES
----------
10.1 CONSULTANT warrants and represents that each of its employees assigned to
perform services under any Schedule shall have the proper skill, training and
background so as to be able to perform in a competent and professional manner
and that all work will be performed in accordance with the Schedules.
10.2 Unless otherwise specified in any Schedule, all materials, deliverables
and products developed under each Schedule by CONSULTANT, whether or not such
Schedule is completed, are the property of CUSTOMER. CONSULTANT warrants that
CUSTOMER shall receive free, good and clear title to all materials, deliveries
and products developed under this Agreement.
10.3 CONSULTANT warrants and represents that each and every software
deliverable contemplated by a Fixed Price Schedule shall conform to the
specifications for same as mutually agreed to in writing by CUSTOMER and
CONSULTANT.
10.4 CONSULTANT warrants and represents that for that period of time specified
in the applicable Schedule from the date CUSTOMER notifies CONSULTANT of the
fact that a deliverable has successfully conformed to the criteria for
verification of acceptability for same, in accordance with Section 7.5 hereof
CONSULTANT will, at no charge to CUSTOMER, furnish such materials and services
as shall be necessary to correct any defects in the operation of the version of
the software deliverable or other products in CUSTOMER's possession and to
maintain them in good working order in accordance with the specifications for
same. Unless otherwise stated in the Schedule, the warranty period shall be one
hundred twenty (120) consecutive calendar days.
14
<PAGE>
ARTICLE 11
----------
INDEMNIFICATION; INSURANCE
--------------------------
11.1 CONSULTANT shall be liable for and shall defend, indemnify and hold
CUSTOMER harmless against any claims, losses, damage or expenses (including
reasonable attorney's fees) in connection with or arising out of the acts or
omissions of CONSULTANT, its officers, employees, agents and representatives.
11.2 CONSULTANT shall procure and maintain for itself and its employees all
insurance coverage's as required by Federal or State law, including workers'
compensation insurance. CONSULTANT also agrees to maintain comprehensive general
liability coverage with limits of $3,000,000 and $500,000 automobile liability
coverage. CONSULTANT shall furnish to CUSTOMER a certificate of insurance
evidencing such coverage and naming CUSTOMER and all parent companies of
CUSTOMER as additional insured. Said certificate wlll include a provision
whereby thirty (30) days notice must be received by the Vendor Manager, AT&T
Solutions, 55 Corporate Drive, Bridgewater, New Jersey 08807 prior to
cancellation or a material change in coverage by either CONSULTANT or Insurer.
11.3 CONSULTANT shall procure and maintain for itself Employers' Liability
Insurance coverage including bodily injury coverage, with a minimum of $100,000
for each person. CONSULTANT will provide CUSTOMER a certificate of insurance
evidencing such coverage which will include a provision whereby thirty (30) days
notice must be received by the Vendor Manager, AT&T Solutions, 55 Corporate
Drive, Bridgewater, New Jersey 08807, prior to cancellation or a material change
in coverage by either CONSULTANT or Insurer.
ARTICLE 12
----------
EXCUSABLE DELAYS (FORCE MAJEURE)
--------------------------------
12.1 In no event shall either party be liable to the other for any delay or
failure to perform hereunder, which delay or failure to perform is due to causes
beyond the control of said party including, but not limited to, acts of God;
acts of the public enemy; acts of the United States of America, or any State,
territory or political division of the United States of America, or of
15
<PAGE>
the District of Columbia; fires; floods; epidemics; quarantine restrictions;
strikes; and freight embargoes.
12.2 In every case the delay or failure to perform must be beyond the control
and without the fault or negligence of the party claiming excusable delay, and
the party claiming excusable delay must promptly notify the other party of such
delay.
12.3 Performance times under this Agreement or under any Schedule shall be
considered extended for a period of time equivalent to the time lost because of
any delay which is excusable under this Article 12; provided, however, that if
any such delay continues for a period of more than sixty (60) calendar days, the
party not claiming excusable delay shall have the option of terminating this
Agreement or the applicable Schedule, upon notice to the party claiming
excusable delay.
ARTICLE 13
----------
MATERIAL BREACH; TERMINATION
----------------------------
13.1 In the event of any material breach of, or material misrepresentation
relating to, any Schedule by either party, the other party may terminate said
Schedule by giving thirty (30) days' prior written notice thereof and/or pursue
any other remedies and rights at law or in equity; provided, however, that such
Schedule will not terminate at the end of said thirty (30) days' notice period
if the party in breach has cured the misrepresentation or breach of which it has
been notified prior to the expiration of said thirty (30) days.
13.2 IN NO EVENT SHALL EITHER PARTY BE LIABLE, ONE TO THE OTHER, FOR INDIRECT,
SPECIAL, OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE
FURNISHING, PERFORMANCE, OR USE OF THE SERVICES OR MATERIALS PROVIDED FOR IN
THIS AGREEMENT, EXCEPT TO THE EXTENT SUCH DAMAGES ARE INCLUDED IN AN AWARD
AGAINST CUSTOMER RESULTING FROM A CLAIM FOR WHICH CUSTOMER IS INDEMNIFIED
HEREUNDER AND EXCEPT FOR PERSONAL INJURY OR DEATH, OR DAMAGE TO REAL PROPERTY.
ARTICLE 14
----------
TERMINATION FOR CONVENIENCE
---------------------------
14.1 Notwithstanding any other provision(s) of this Agreement to the contrary,
Customer may terminate this Agreement or any Schedule(s) hereunder for its
convenience by giving Consultant two (2) weeks' prior written notice of its
election to terminate said Agreement or Schedule. In such case, Customer agrees
to pay Consultant for all costs incurred by Consultant up to the effective date
of termination at the agreed upon rates and expenses set forth herein.
16
<PAGE>
ARTICLE 15
----------
CUSTOMER SECURITY REGULATIONS/WORK POLICY
-----------------------------------------
15.1 CONSULTANT and each employee of CONSULTANT performing services covered by
any Schedule will safeguard the confidential information of CUSTOMER to which
he/she has access. Without limiting the generality of the foregoing, neither
CONSULTANT nor any employee or other personnel provided by CONSULTANT will
trespass into, destroy, modify, or disclose any confidential information of
CUSTOMER except as otherwise provided herein. Without limiting any of
CUSTOMER'S rights or remedies hereunder, all of which are specifically
reserved, any unauthorized trespass into, destruction, modification, or
disclosure of confidential information by or caused by CONSULTANT or any
employee or other personnel provided by CONSULTANT will be grounds for
immediate termination of Services and, where appropriate, referral to law
enforcement agencies for criminal prosecution.
15.2 CONSULTANT'S personnel will comply with CUSTOMER'S security regulations
particular to each work location, including, but not limited to, CUSTOMER'S
internal security department's fingerprinting and photographing screening
process. CONSULTANT'S personnel, when deemed appropriate by CUSTOMER, will be
issued visitor identification cards. Each such card will be surrendered by
CONSULTANT'S personnel upon demand by CUSTOMER or upon termination of this
Agreement.
15.3 Unless otherwise agreed to by the parties, CONSULTANT'S personnel will
observe the working hours, working rules, and holiday schedules of CUSTOMER
while working on CUSTOMER'S premises. In addition, the vacation time for
CONSULTANT'S personnel will be scheduled so as not to interfere with the
deadlines or scheduled completion date for any work being performed under any
Schedule.
ARTICLE 16
----------
ASSIGNMENT
----------
16.1 This Agreement shall be binding upon the parties' respective successors
and permitted assigns.
16.2 Neither party may assign this Agreement and/or any of its rights and/or
obligations hereunder without the prior written consent of the other party, and
any such attempted assignment shall be void, except that CUSTOMER may assign
this Agreement, and/or any of its rights and/or obligations hereunder, upon
written notice to CONSULTANT, to its parent company, or to any of its or their
subsidiaries or affiliated companies, without the consent of CONSULTANT.
Furthermore, no work to be performed by CONSULTANT hereunder shall be
17
<PAGE>
subcontracted to or performed on behalf of CONSULTANT by any third party, except
upon written permission by CUSTOMER.
ARTICLE 17
----------
NOTICES
-------
17.1 All notices and other official communications under this Agreement shall
be in writing and shall be sufficiently given if delivered personally or mailed
by first class mail, proper postage prepaid, to AT&T Solutions, 55 Corporate
Drive, Bridgewater, New Jersey, 08807, Attention: Vendor Manager and to Computer
Generated Solutions,Inc., 1675 Broadway, 31st Floor, New York, New York, 10019
Attention:Lori Ozzello, or to such other address or addressee as either party
may from time to time designate to the other by written notice.
17.2 Any such notice or other official communication shall be deemed to be
given as of the date it is personally delivered or when placed in the mails in
the manner specified.
ARTICLE 18
----------
GOVERNING LAW
-------------
18.1 The validity of this Agreement, the construction and enforcement of its
terms, and the interpretation of the rights and duties of the parties shall be
governed by the laws of the State of New York.
ARTICLE 19
----------
MODIFICATION, AMENDMENT, SUPPLEMENT OR WAIVER
---------------------------------------------
19.1 No modification, amendment, supplement to or waiver of this Agreement or
any Schedule hereunder, or any of their provisions shall be binding upon the
parties hereto unless made in writing and duly signed by both parties.
19.2 A failure or delay of either party to this Agreement to enforce at any
time any of the provisions hereof, or to exercise any option which is herein
provided, or to require at any time performance of any of the provisions hereto
shall in no way be construed to be a waiver of such provisions of this
Agreement.
ARTICLE 20
----------
COMPLETE AGREEMENT
------------------
20.1 This Agreement, together with all Schedules, Exhibits and Attachments
hereto constitutes the entire agreement between the parties and supersedes all
prior agreements, promises, proposals, representations, understandings and
18
<PAGE>
negotiations, whether written or oral, between the parties respecting the
subject matter hereof.
ARTICLE 21
----------
SEVERABILITY
------------
21.1 In the event any one or more of the provisions of this agreement shall for
any reason be held to be invalid, illegal or unenforceable, the remaining
provisions of this Agreement shall be unimpaired and the invalid, illegal or
unenforceable provisions shall be replaced by a mutually acceptable provision
which, being valid, legal and enforceable, comes closest to the intention of the
parties underlying the invalid, illegal, or unenforceable provision.
ARTICLE 22
----------
ADVERTISING OR PUBLICITY
------------------------
22.1 Neither party shall use the name or symbol of the other in publicity
releases or advertising without securing the prior written consent of the other.
ARTICLE 23
----------
EXHIBITS; ATTACHMENTS
---------------------
23.1 The terms and conditions of any and all Exhibits and Attachments to this
Agreement are incorporated herein by this reference and shall constitute part of
this Agreement as if fully set forth herein.
ARTICLE 24
----------
HEADINGS
--------
24.1 The headings in this Agreement are for purposes of reference only and
shall not in any way limit or affect the meaning or interpretation of any of
the terms hereof.
ARTICLE 25
----------
FAVORABLE PROVISIONS
--------------------
25.1 CONSULTANT warrants that all of the provisions of this Agreement are
comparable to or better than the equivalent provisions being offered by
CONSULTANT to any of its present commercial customers. If CONSULTANT offers more
favorable provisions to commercial customers during the terms of their contract
periods under this Agreement, such provisions shall be made available
19
<PAGE>
to CUSTOMER. CONSULTANT'S obligations pursuant to this Article 25 may be limited
by applicable law.
ARTICLE 26
----------
COMPLIANCE WITH LAWS
--------------------
26.1 CONSULTANT warrants that it will comply with all applicable US, state and
local laws and regulations in its performance of its obligations hereunder.
IN WITNESS WHEREOF, the parties hereto, each acting under due and proper
authority, have executed this Agreement as of the date first above written.
AT&T Corp. Computer Generated Solutions, Inc.
By: /s/ Joseph S. Defazio By: /s/ Fred Schlossberg
------------------------- ------------------------
Name: JOSEPH S. DEFAZIO Name: FRED SCHLOSSBERG
----------------------- ----------------------
(Print or Type) (Print or Type)
Title: Manager Title: V.P. - Finance
---------------------- ---------------------
20
<PAGE>
This Schedule, dated as of _____________, 19__, is issued pursuant to, and
incorporates herein, the Master Agreement for Professional Services dated as
of _____________, 19__, ("Agreement"), by and between At&T Corp. ("Customer"),
and Computer Generated Solutions, Inc. ("Consultant"). Any term not otherwise
defined herein shall have the meaning ascribed to it in the Agreement.
55 Corporate Drive 1675 Broadway
- ----------------------------- -----------------------------
(CUSTOMER Location) (CONSULTANT Location)
Bridgewater, NJ 08807 New York, NY 10019
- ----------------------------- -----------------------------
Joseph DeFazio Computer Generated Solutions, Inc.
- ----------------------------- -----------------------------
(CUSTOMER Project Manager) (Consultant Project Manager)
<TABLE>
<CAPTION>
Name of Hourly Commencement Scheduled Right to Hire
Consultant Rate Date Completion Date Status
- ---------- ---- ---- --------------- ------
<S> <C> <C> <C> <C>
1. **** ****/hr. May 15, 1995 Sept. 15, 1995 Avail after 8 mos.
2. **** ****/hr. June 11, 1995 Dec. 11, 1995 N/A
3. **** ****/hr. June 11, 1995 Dec. 11, 1995 Avail. after 6 mos.
4. **** ****/hr. June 11, 1995 Dec. 11, 1995 N/A
5. **** ****/hr. June 27, 1995 Dec. 27, 1995 N/A
6. **** ****/hr. June 26, 1995 Dec. 26, 1995 N/A
7. **** ****/hr. N/A
8. **** ****/hr. July 5, 1995 Jan. 5, 1996 N/A
9. **** ****/hr. July 12, 1995 Oct. 12, 1995 N/A
10. **** ****/hr. July 13, 1995 Nov. 13, 1995 After 7 consec. mos.
11. **** ****/hr. July 18, 1995 Oct. 18, 1995 N/A
</TABLE>
Maximum Dollar Amount
- ---------------------
$500,000 /s/JS 8/4/95 ER
CProfSve.Agr
**** Confidential treatment is being requested for these portions of this
agreement.
21
<PAGE>
A.1 If authorized by Customer, reasonable out-of-pocket complimentary
overnight business related travel expenses will be reimbursed such as flights,
hotels, meal per diem of $35.00 per day, taxis, car rentals, tolls, and mileage.
Automobile driving mileage may also be reimbursed at a rate of $0.26 for round
trip mileage greater than 100 miles from the Consultant's home base to the
Customer facility.
A.2 Customer agrees to pay the sum of $35.00 per day to **** for travel related
expenses from the Commencement Date of Service until August 31, 1995.
IN WITNESS WHEREOF, the parties hereto, each acting with proper authority, have
executed this Schedule No.___ as of the day, month, and year first above
written.
Computer Generated Solutions, Inc. AT&T Corp.
By: /s/ Fred Schlossberg By: /s/ Joseph S. Defazio
------------------------ -------------------------
Name: FRED SCHLOSSBERG Name: JOSEPH S. DEFAZIO
---------------------- -----------------------
(Print or Type) (Print or Type)
Title: V.P. - Finance Title: Manager
--------------------- ----------------------
**** Confidential treatment is being requested for these portions of this
agreement.
22
<PAGE>
EXHIBIT 2
---------
FIXED PRICE SCHEDULE
This Schedule, dated as of ______________, 19__, is issued pursuant to, and
incorporates herein, the Master Agreement for Professional Services dated as of
_______________, 19__, ("Agreement"), by and between AT&T Corp. ("Customer"),
and Computer Generated Solutions, Inc. ("Consultant"). Any term not otherwise
defined herein shall have the meaning ascribed to it in the Agreement.
--------
(Number)
Fixed Price Scheduled Start Date
- ----------- --------------------
Warranty Period Scheduled Completion Date
- --------------- -------------------------
CUSTOMER Project Manager CONTRACTOR Project Manager
- ------------------------ --------------------------
See Attachment A for a full and complete description of the tasks to be
------------
performed, a description of the deliverables to be produced, a listing of the
documentation to be provided, the schedule for completion of each of the
foregoing (including, but not limited to, milestone dates and PERT charts) and
a schedule of payments.
Computer Generated Solutions, Inc. AT&T Corp.
By: By:
------------------------ -------------------------
Name: Name:
---------------------- -----------------------
(type or print) (type or print)
Title: Title:
--------------------- ----------------------
23
<PAGE>
* EXHIBIT 10.3
------------
Outsourcing Agreement dated as of March 30, 1996, between Teleservice
Resources, Inc. and Computer Generated Solutions, Inc.
* Confidential treatment is being requested with respect to portions of
this exhibit
<PAGE>
OUTSOURCING AGREEMENT between TELESERVICE RESOURCES, INC. and
COMPUTER GENERATED SOLUTIONS
THIS OUTSOURCING AGREEMENT (this "Agreement") is effective March 30, 1996 (the
"Effective Date"), by and between TeleService Resources, Inc. ("TSR"), a
Delaware corporation having its principal address at 4201 Cambridge Rd., Fort
Worth, TX 76155, and Computer Generated Solutions ("CGS"), a Delaware
corporation (also generically referred to herein as "Party" or "Parties") having
its principal address at 1950 Stemmons Freeway, Suite 3049, Dallas, TX 75207.
1. PURPOSE.
This Agreement sets forth the terms and conditions under which CGS agrees to
assume responsibility for answering, diagnosing and solving RyderFIRST support
problems including, but not limited to, hardware, software and processes
attached as Exhibit A, which TSR agrees to outsource to CGS. During the term of
---------
this Agreement, CGS shall be TSR's non-exclusive provider of, and TSR shall
purchase from CGS, the services as defined herein, all in accordance with the
terms and conditions of this Agreement.
2. DEFINITIONS.
2.1 TSR.
----
The term "TSR" shall mean and include TeleService Resources, Inc. and any
Successor. "Affiliate" shall mean, with respect to any entity, any other entity
directly or indirectly controlling, controlled by, or under common control with
such first entity. "Control" (including, with correlative meaning, the terms
"controlling" and "controlled by" shall mean, with respect to any entity, the
possession, directly or indirectly, of the power to direct the management and
policies of such entity.
2.2 Customer.
---------
The term "Customer" shall mean RyderFIRST, Ryder employees and dealers and
other persons or entities who are under contract by Ryder, Inc.
2.3 AMRDS.
------
The term "AMRDS" shall mean and include AMR Distribution Systems, Inc., a
division of AMR Services and their employees who will provide the warehouse,
shipping, refurbishment and repair of RyderFIRST equipment.
2.4 CGS.
----
The term "CGS" shall mean and include Computer Generated Solutions, Inc.
provider of Telephone Technical Help Desk support and maintenance.
3. TERM AND TERMINATION.
3.1 Term.
-----
The term of this Agreement will commence on the Effective Date and will end
on March 30, 1999, or such anniversary thereof to which the term of this
Agreement has been extended or earlier upon termination in accordance with the
provisions of this Agreement. TSR may, at its option, extend this Agreement for
successive terms of one (l) year(s) each, by providing CGS with notice of
extension, at
- --------------------------------------------------------------------------------
1
<PAGE>
least sixty days (60) days in advance of the anniversary date of the Agreement.
Upon termination of the Agreement, TSR will have no future liability except for
Services rendered or Equipment delivered by CGS prior to the termination date.
3.2 Termination for Cause.
----------------------
Should CGS fail to perform its material obligations under this Agreement, TSR
shall give CGS written notice of such failure. CGS shall have fifteen (15) days
from receipt of said notice to correct this failure at no cost to TSR. Should
CGS fail to correct its performance within the fifteen (15) day period, TSR
shall have the right to immediately terminate this Agreement or a portion of
this Agreement by giving CGS written notice of termination. In the event of
termination for breach, TSR reserves all remedies available at law and in
equity.
3.3 Termination without Cause.
--------------------------
TSR may terminate this Agreement at any time by providing CGS at least sixty
(60) days notice of such termination. CGS has the right to terminate this
Agreement at any time by providing TSR at least ninety (90) days notice of such
terms.
3.4 Post Termination Events.
------------------------
Upon termination of the Agreement, CGS shall cease performing Services on
behalf of TSR. All reports required to be provided by CGS shall be provided at
the usual interval; however, all reports are required to be provided to TSR no
later than thirty (30) after termination of Agreement. CGS shall immediately
cease use of all TSR/Ryder Owned Equipment and Ryder Licensed Software. TSR has
the right, with or without notice, to enter upon CGS's premises, de-install
the TSR/RyderFIRST Owned Equipment and TSR/RyderFIRST Licensed Software and
remove it from the premises.
4. PROJECT OVERVIEW.
The project is separated into two sections: 1) call handling and 2) warehouse
refurbishment and repair. These two sections are delineated in Exhibit A.
----------
5. PRODUCTS, SERVICES AND CGS RESPONSIBILITIES.
5.1 Seamless Integration.
---------------------
CGS shall perform the Services specified in this Agreement at the performance
levels set forth in Exhibit B.
---------
5.2 Represent Ryder's/TSR's Interests.
----------------------------------
CGS agrees that at all times CGS and its employees shall act on behalf of the
best interests of Ryder and TSR by consistently demonstrating the highest
quality of professionalism, courtesy, customer service and demeanor. In the
event that Ryder and/or TSR, at any time and in its sole reasonably discretion,
deems an employee designated by CGS to be unsuitable, Ryder and/or TSR shall
advise CGS of such determination, and CGS and TSR shall develop a plan to
provide a suitable replacement employee acceptable to TSR to perform the
Services hereunder.
5.3 Employee Training.
------------------
Ryder will conduct the initial training on the RyderFIRST application. All
subsequent training CGS shall develop and conduct a program to train its
employees and supervisors on an ongoing basis to perform the Services, with
emphasis on high quality customer service and skilled resolution to problem
calls. Recurrent and refresher training courses shall be delivered periodically
to CGS's employees as
- --------------------------------------------------------------------------------
2
<PAGE>
well as initial training. All such training and development costs shall be
borne wholly by CGS. All such training shall include and adhere to the content,
methods and procedures submitted by Ryder for providing such Service.
5.4 Quality Control.
----------------
CGS agrees that a high level of quality is integral to the Services performed
by CGS on behalf of Ryder. CGS agrees to institute quality control procedures
such as, but not be limited to, employee training (as referenced in Section 5.3
above), program results, customer feedback, call monitoring, and adherence to
Ryder procedures.
5.5 Call Monitoring.
----------------
CGS agrees to monitor its employees calls to determine if employees are
performing the Services as required herein. CGS agrees to monitor a minimum of
200 calls per week. CGS agrees that Ryder or TSR or their agent may, at its
option, participate in CGS's call monitoring.
5.6 Establish Priorities.
---------------------
CGS shall establish the priorities of problems that it is encountering in the
performance of this Agreement and provide a list of priorities with proposed
resolutions to TSR Client Services Manager on a monthly basis, as needed.
5.7 Provide Reports.
----------------
CGS agrees to provide Ryder/TSR the reports required in Exhibit A in the time
---------
frame required thereunder. Additional reports will be provided by CGS from
time to time as reasonably requested by Ryder/TSR. (There may be costs
associated with custom report development or analytical research.)
5.8 Interfaces.
-----------
CGS agrees, at its sole cost and expense, to build all interfaces required to
connect CGS's equipment and systems with Ryder/TSR's systems. CGS shall comply
with TSR's security practices in developing and connecting the equipment and
systems.
5.9 Maintain Equipment and Interfaces.
-----------------------------------
CGS agrees to maintain the equipment required in Exhibit A and interfaces (as
---------
provided in Section 5.8 above) in good working order.
5.10 Maintain Software.
------------------
CGS agrees to maintain all software required in Exhibit A at the same release
---------
level as Ryder's software release.
5.11 Disaster Recovery.
------------------
CGS agrees to maintain a disaster recovery plan acceptable to Ryder/TSR.
5.12 Ryder/TSR Information.
----------------------
CGS agrees that any information that it obtains from TSR or Ryder is
protected under the confidentiality provisions of this Agreement and shall be
used solely for the performance of the Services under this Agreement. (Please
see Attachment D.)
- --------------------------------------------------------------------------------
3
<PAGE>
5.13 Ryder's Equipment.
------------------
Ryder is supplying CGS with certain Ryder-owned Equipment and Ryder-Licensed
Software for CGS's use on CGS's premises in connection with the Services to be
provided under this Agreement. CGS acknowledges and agrees that it shall not use
such Ryder-Owned Equipment or Ryder-Licensed Software for any purpose other than
for the fulfillment of its obligations under this Agreement. CGS agrees to
provide Ryder or Ryder's third party service provider access to Ryder-Owned
Equipment and Ryder-Licensed Software located on CGS's premises for regular
maintenance or repairs and for upgrades, updates and fixes. CGS shall be liable
for any loss or damage to the Ryder-Owned Equipment and Ryder-Licensed Software
located on CGS's premises. CGS shall not be liable for any loss or damage caused
solely by Ryder or its third party service provider. Further CGS agrees that it
shall not attach any other equipment nor load any other Software to Ryder-Owned
Equipment without the express written consent of Ryder/TSR.
6. PERFORMANCE STANDARD, REMEDY AND INCENTIVE.
6.1 Performance Standard.
---------------------
CGS agrees to meet or exceed each of the applicable service levels and
performance obligations set forth.
6.2 Verification of Service Levels.
-------------------------------
CGS shall provide TSR with a [daily/monthly] performance report, documenting
CGS's performance relative to the Service Levels. In addition, CGS will provide
TSR with such documentation and other information as may be reasonably
requested by TSR from time to time to verify CGS's compliance with the Service
Levels.
6.3 Review of Service Levels.
-------------------------
The parties will review during every month the Service Levels and the actual
compliance of the CGS's Services in compliance herewith. If three or more of the
performance measurements specified in Exhibit B are not met in any given month,
---------
CGS will be liable for the credits they are responsible for as specified in
Exhibit B. (For example: If answer time, abandon rate and shipping time are
- ---------
missed in a given month, CGS will be responsible for two thirds of the 1%
credit due to Ryder.) In reverse if AMRDS performs at all levels for the quarter
they will receive one third of the performance bonus. (This holds true for the
penalites and bonuses from Dealer Satisfaction measurement as shown in Exhibit
B.)
7. SECURITY.
CGS agrees that it will comply with all United States governmental rules and
shall monitor its employees activities to ensure compliance with rules and
regulations.
8. SERVICE LOCATIONS.
As of the Effective Date, CGS shall provide the Services to TSR at CGS's
location on 1950 Stemmons Freeway, Suite 3049, Dallas, TX 75207.
9. WARRANTY.
CGS warrants that it will provide the Services in accordance with the highest
professional duty of care and skill.
- --------------------------------------------------------------------------------
4
<PAGE>
9.1 Equipment and Software.
-----------------------
CGS warrants that the CGS owned equipment and licensed software shall meet
the standards contained in this agreement.
9.2 Personnel.
----------
CGS warrants that each of its employees assigned to perform services under
this Agreement shall have the proper skill, training and background to be able
to perform such Services in a competent and professional manner at the level
required in this Agreement.
9.3 CGS Viability.
--------------
CGS warrants that it has the financial capacity to perform and continue to
perform its obligations under this Agreement, that no legal proceedings have
been threatened or brought against CGS that could threaten performance of this
Agreement and that entering into this Agreement is nor prohibited by any
contract or order by any court of competent jurisdiction.
10. PAYMENT.
For the Services rendered under the terms of this Agreement, TSR agrees to
pay CGS the amount set forth on Exhibit C at intervals agreed to in Exhibit C.
--------- ---------
Invoices must be received by TSR by the third business day of the following
month. All payment terms are net thirty (30) days upon receipt of invoice. The
amount set forth in Exhibit C is exclusive of all costs, expenses and taxes
---------
required to be paid by TSR. Any other costs or expenses shall be borne by CGS.
11. INSURANCE.
11.1 Policies.
---------
CGS shall, at its own cost and expense, procure and maintain in full force
and effect during the term of this Agreement, policies of insurance, of the
types and in the amounts necessary to ensure that CGS is able to sustain claims,
damages and other business liability without impacting its ability to provide
the Services thereunder and to protect Ryder/TSR from any claim, damage or
liability resulting from CGS's acts or omissions. Such insurance will include
the replacement of all Ryder/TSR assets within CGS's possession. CGS will obtain
such insurance with responsible insurance carriers duly qualified in those
states (locations) where Services are to be performed covering the operations of
CGS, pursuant to this Agreement.
11.2 Certificates.
-------------
CGS shall provide TSR with certificates of insurance as evidence of the
above coverage, including all special requirements specifically noted above and
shall provide TSR with certificates of insurance evidencing renewal or
substitution of such insurance thirty (30) days prior to the effective date of
such renewal or substitution.
11.3 Service.
--------
Provisions of this Section as to Service of insurance shall not be
construed as limiting in any way the extent to which CGS may be held
responsible for payment for damages to persons or property resulting from its
activities or the activities of any person(s) for which CGS is otherwise
responsible.
- --------------------------------------------------------------------------------
5
<PAGE>
12. LIABILITY AND INDEMNIFICATION.
CGS agrees to indemnify, defend and hold TSR/Ryder, its officers,
directors, agents and employees harmless from and against any and all
liabilities, damages, losses, expenses, claims, demands, suits, fines, penalties
(whether civil or criminal) or judgments, including reasonable attorney fees,
costs and expenses incidental thereto, which may be suffered by, accrued
against, charged to or recoverable from TSR/Ryder, its officers, directors,
agents or employees, by reason of liability, loss, expense, claim, demand, suit,
fine, judgment or damage, including, but not limited to bodily injuries or
physical destruction of property, arising out of or in connection with the
performance of the obligations of CGS under this Agreement. Notwithstanding the
foregoing, in no event shall either party be liable for indirect, incidental or
consequential damages except when such damages are caused by the gross
negligence or willful misconduct of the other party, its officers, directors
agents, employees or subcontractors. In no event shall TSR be liable to CGS for
any amounts in excess of what has been paid by TSR to CGS under this Agreement.
Additionally, CGS's total liability must not exceed what has been paid to CGS in
a given year by TSR.
13. SUBCONTRACTING.
CGS shall not, directly or indirectly, assign, subcontract, transfer or
otherwise dispose of, in whole or in part, any of its interests, rights or
obligations under this Agreement. TSR may assign any and all of its rights and
obligations under this Agreement to (i) any affiliate of AMR Corporation, or
(ii) any company that succeeds to, or that is an affiliate of any company (or
affiliated group of companies) that succeeds to substantially all of TSR's
assets.
14. BANKRUPTCY.
If CGS becomes insolvent, takes any step leading to its cessation as a
going concern, fails to pay its debts as they become due, or ceases business
operations for longer than five (5) business days for reasons other than a
strike or natural disaster, then TSR may immediately terminate this
Agreement on notice to CGS unless CGS immediately gives the Insecure Party
adequate assurance of the future performance of this Agreement. If bankruptcy
proceedings are commenced with respect to CGS, and if this Agreement has not
otherwise terminated, then TSR may suspend all further performance of this
Agreement until CGS assumes this Agreement and provides adequate assurance of
performance thereof or rejects this Agreement pursuant to Section 365 of the
Bankruptcy Code or any similar or successor provision. Any such suspension of
further performance by TSR pending CGS's assumption or rejection will not be a
breach of this Agreement, and will not affect TSR's right to pursue or enforce
any of its rights under this Agreement or otherwise.
15. NON-DISCLOSURE OF INFORMATION.
CGS, on behalf of itself and its employees, acknowledges that much, if not all,
of the material and information related to TSR or Ryder which has or will come
into CGS's possession or knowledge in connection with the performance of the
Agreement consist of confidential and proprietary data of TSR or Ryder
(collectively, "Confidential Information"), disclosure of which or use by third
parties would be damaging to TSR or Ryder. CGS, on behalf of itself and its
employees, agrees to hold such Confidential Information in strictest confidence
and agrees not to release such information to any employee of CGS unless such
employee has a need for such knowledge. CGS, on behalf of itself and its
employees, further agrees not to make use of Confidential Information for its
own benefit or for the benefit of any third parties, but only for the
performance of this Agreement, and not to release or
- --------------------------------------------------------------------------------
6
<PAGE>
disclose it to any other party either during the term of this Agreement or after
the termination of this Agreement. In the event of any breach of this
confidentiality obligation, CGS acknowledges that TSR or Ryder would have no
adequate remedy at law, since the harm caused by such a breach would not be
easily measured and compensated for in the form of damages. Accordingly, CGS
waives its right to contest the availability or appropriateness as a from of
remedy any equitable relief sought by TSR or Ryder but does not hereby waive its
right to contest the question of whether a breach has occurred. CGS further
waives the requirement of any bond being posted as security for such equitable
relief. (See Attachment D).
16. RIGHT TO AUDIT.
TSR shall have the right from time to time to audit CGS's books and
records related to this Agreement and the Services it is providing to TSR. Such
audit shall be performed at CGS's offices and CGS agrees to provide such
auditors any assistance they may reasonably require.
17. MOST FAVORED CUSTOMER.
If at any time during the term of this Agreement CGS enters into an
agreement with any other customer, purchasing substantially similar Services
under substantially similar material circumstances, terms and conditions, at
terms more favorable than those provided in this Agreement, CGS shall, within
thirty (30) days of its acceptance of the new agreement with the other
customer, notify TSR of such agreement. Within thirty (30) days of receipt
of CGS's notice, TSR may give written notice to CGS that this Agreement is to
be amended to provide TSR with the same terms provided to the other customer.
Such amendment shall be made retroactive to the effective date of the other
customer's agreement.
18. GENERAL PROVISIONS.
18.1 Notices.
--------
Except as otherwise expressly specified herein, all notices, requests, or
other communications required thereunder shall be in writing and shall be deemed
to have been given or made if delivered personally or mailed, by certified or
registered mail, postage prepaid, return receipt requested or by commercial
courier service which maintains a record of delivery, or by fax followed by
written confirmation in the form of a duplicate notice, to the Parties at their
respective addresses first set forth below, or at such other addresses as shall
be specified in writing by either of the parties to the other in accordance
with the terms and conditions of this Section 18.1. Notices, requests, or
------------
communications shall be deemed effective upon personal delivery, or three (3)
days following deposit in the mail in accordance with this Section 18.1.
------------
18.2 Captions.
---------
The captions appearing in this Agreement have been inserted as a matter
of convenience and in no way define, limit or enlarge the scope of this
Agreement or any of the Sections thereto.
18.3 Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of Texas and the federal laws of the United States of America.
CGS hereby consents and submits to the jurisdiction of the courts in the State
of Texas or the United States District Court for the Northern District of Texas
in all questions and controversies arising out of this Agreement.
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7
<PAGE>
18.4 Severability.
-------------
In the event that any one or more of the provisions of this Agreement is
determined by a court of competent jurisdiction to be invalid, unenforceable or
illegal, such invalidity, unenforceability or illegality shall not affect any
other provisions of this Agreement, and the Agreement shall be construed as if
the challenged provision had never been contained herein. The parties further
agree that in the event such provision is an essential part of this Agreement,
they will immediately begin negotiations for a suitable replacement provision.
18.5 Advertising.
------------
CGS shall not use Ryder's name or refer to TSR or any of its affiliates,
directly or indirectly, in any advertisement, news release or professional or
trade publication without receiving prior written approval from TSR and Ryder.
18.6 Non-Exclusivity.
----------------
TSR understands and agrees that this is a non-exclusive agreement and that
CGS may provide similar services to other third parties. CGS understands and
agrees that this agreement is a nonexclusive and that TSR may obtain the same
services from third parties or continue to operate the same services internally.
18.7 Survival.
---------
Sections 3.4, 5.13. 12, 15, 16 and 18.7 shall survive the termination or
expiration of this Agreement.
18.8 No Waiver.
----------
The failure of either party at any time to require performance by the
other party of any provision of this Agreement shall in no way affect that
party's right to enforce such provisions, nor shall the waiver by either party
of any breach of any provision of this Agreement be taken or held to be a
waiver at any further breach of the same provision.
18.9 Force Majeure.
--------------
Neither Party shall be liable for delays or any failure to perform under
this Agreement due to causes beyond its reasonable control. Such delays include,
but are not limited to, fire, explosion, flood or other natural catastrophe,
governmental legislation, acts, orders, or regulation, strikes or labor
difficulties, to the extent not occasioned by the fault or negligence of the
delayed Party. Any such excuse for delay shall last only as long as the event
remains beyond the reasonable control of the delayed Party. However, the
delayed Party shall use its best efforts to minimize the delays caused by any
such event beyond its reasonable control. The delayed Party must notify the
other Party promptly upon the occurrence of any such event, or performance by
the delayed Party will not be considered excused pursuant to this Article, and
inform the other Party of its plans to resume performance.
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8
<PAGE>
18.10 Entire Agreement.
-----------------
The following Exhibits and Attachments, including all subparts thereof,
are attached to this Agreement and are made a part of this Agreement for all
purposes.
Exhibit A RyderFIRST Support Service Requirements
Exhibit B Performance Standards and Remedies
Exhibit C Pricing Schedule
Exhibit D Cost Reduction Initiatives
Exhibit E Reporting Requirements
Exhibit F Training Requirements
Attachment A Uninterruped Telecommunication Service Plan
Attachment B Telephone Performance Response Reports
Attachment C Telecommunications Trouble Shooting, Problem Resolution,
Escalation, and Testing and Trouble Reporting Procedures
Attachment D Non-Disclosure Non-Compete Agreement
This Agreement constitutes the entire agreement between the parties and
supersedes any and all previous representation, understandings, discussions or
agreements between TSR and CGS as to the subject matter hereof. This Agreement
may only be amended by an instrument in writing signed by TSR and CGS. TSR and
CGS each acknowledge that it has had the opportunity to review this Agreement
with its legal counsel.
Executed on the dates set forth below to be effective as of the date first
above written by the undersigned authorized representatives of TSR and CGS.
TELESERVICE RESOURCES COMPUTER GENERATED SOLUTIONS
By: /s/ Lauri L. Curtis By: /s/ Steve Carter
--------------------- -----------------------
Name: Lauri L. Curtis Name: Steve Carter
Group President
TeleService Resources Title: Vice President
Data Management Services
Date: 4-18-96 Date: 6/3/96
------------------- ------------------
Address for Notice: Address for Notice:
TeleService Resources Computer Generated Solutions, Inc.
Mark Spaulding Steve Carter
Vice President Sales, Vice President
Marketing & Client Services 1950 Stemmons Freeway, Suite 3049
4201 Cambridge Rd. Dallas, TX 75207
Fort Worth, TX 76155 Fax: 214-746-5372
Fax: 817-354-8144
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9
<PAGE>
EXHIBIT A
---------
RYDERFIRST SUPPORT SERVICE REQUIREMENTS
---------------------------------------
General Work Flow Overview:
- --------------------------
The following information is provided for reference purposes only. Ryder has a
network of over 4600 independent dealerships which are the principle
distribution network for Consumer Truck Rental. Each dealership has a
RyderFIRST system composed of a monitor, keyboard, CPU, card swipe, and printer.
Approximatelv 400 dealers have additional workstations. The smallest dealers
utilize line splitters (approximately 1000). The dealers contact the RyderFIRST
support organization when they have an operational issue related to the
RyderFIRST application or hardware.
Hardware Maintenance:
- ---------------------
3,500 of the RyderFIRST PC's are currently covered by an IBM service contract.
The RyderFIRST Support organization dispatches IBM via the ECCO system for
hardware problems with these units. The other 1700 systems that are not covered
by a maintenance agreement are maintained on a depot unit swap basis. This
involves shipping a replacement component and retrieving the failed component.
Failed components are repaired, refurbished and warehoused for redistribution.
New Dealer Installation Support:
- -------------------------------
As new dealers are scheduled for start-up, RyderFIRST hardware and starter kits
are shipped by the AMRDS warehouse facility to the dealer location. The CGS
Technical Helpdesk technician facilitates the new dealer opening process via
telephone. As dealers are closed, systems are either 1) shipped back to the
warehouse for refurbishing, reformatting, and testing by AMRDS or 2) cleaned,
by Ryder and reused at a new dealer within the district. Currently most units
are shipped back to the warehouse for refurbishment, reformatting and testing.
Software is loaded and tested before shipping to a new dealer. All units are
tracked by CGS and AMRDS.
I. Technical Helpdesk Services:
CGS will provide the following services:
A. Scope of Support
CGS will provide complete customer service and Technical Helpdesk
support to all RyderFIRST System users. Support must be provided
Monday through Saturday 7 am to 8 p.m. EST and Sunday 8 am to 3 p.m.
EST, 52 weeks a year, excluding Christmas, New Years, and Thanksgiving
day. The Service includes:
. After hours messaging system that allows the caller to leave their
name and number. Messages for caller will include the standard
hours of coverage and a contact number for emergency situations.
. RyderFIRST application information/guidance to dealers. RyderFIRST
application support involves the functions listed below. Support
technicians are required to be proficient in each of these
functions.
F2 - Train
- Dealer Train
- Practice Exercises
- Transfer CBT Scores
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10
<PAGE>
F4 - Rental
- Quote/Reservations
- Open Agreement
- Close Agreement
- Transfers
- Out-of-Service
- Moving Supplies Only
- Notepad Retrieval
- TSR & I (Repair Order)
F5 - Status
- Inventory Grid Status
- Inventory Detail
- Reservation Status
- Quote Status
- Market Team Inventory
F6 - Options
- Message
- Reports
- Customer/Prospect
- Dealer
F11 - Local Rates
. Problem resolution specialist to resolve complex support issues.
. Check and credit card authorization processes support. CGS is
responsible for notifying and working with TSR Client Services Manager
and the application, BUYPASS, to resolve any issues relating to these
processes. Ensure customer account data, and dealer information is
correct in Buypass software. Ensure all dealers are functioning
correctly to ensure timely updates to dealers.
. On-going system monitoring, via the "Watchdog" PC to identify and
resolve event in which the dealer's communications have been
interrupted, including wrong or disconnected dealer phone numbers, and
identifying and eliminating inactive dealers. Ryder must pre-approve
the inactive status of any dealer prior to file or data elimination.
. In cases of hardware failure for components on an IBM service
contract, CGS will dispatch IBM via the ECCO system. If IBM does not
respond and close the trouble ticket within twenty four (24) hours,
CGS will follow up and escalate the problem with IBM. CGS will monitor
the status of the ECCO call to ensure proper support. CGS will further
support the IBM technician by being available to discuss the problem
with an IBM technician on site. CGS will track the call through to
completion and properly report the trouble found and resolution. TSR
will provide CGS with the initial IBM contacts.
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11
<PAGE>
. Remote access data interrogation. There are multiple files on the RyderFIRST
system which may become corrupted or otherwise require support. The RyderFIRST
support will include reviewing and manipulating these files through remote
access using PC Anywhere. PKZipping utilities will be used to capture and
release dealer information (Using CHECKSUM and PKZIP routines). Provide the
proper replacement files. Each CGS technician must have the requisite
knowledge and access of the required systems to remotely access a dealer's PC.
. TSR in conjunction with CGS must have and maintain at all times during this
Agreement, a recovery plan in the event OF telecommunication service
interruption. The current plan is attached hereto as Attachment A.
-------------
Uninterrupted Telecommunication Service Plan, and will include, among others
things, diverse call routing.
Each technician must have access to both the RyderFIRST application and the
problem management system as well as on-site access to a terminal with access to
the IBM ECCO service notification system.
. Telecommunication trouble shooting, problem resolution, testing and problem
escalation. (See Attachment C for details)
B. CGS Personnel
CGS will provide personnel trained and competent to perform the services
set forth herein. Helpdesk technicians will consistently demonstrate the
following Service qualities:
. Dealer Friendliness and Professional Courtesy
. Flexibility
. Possess Appropriate Documentation
. Exercise Proper Security Measures (multiple levels)
. Reliability
. Problem Indexing Capabilities
C. Event Tracking and Reports
. CGS will utilize a state-of-the-art call tracking, call management and
problem resolution tracking system which meets the reporting
requirements as described in the reporting section of this Agreement.
In addition, this system must provide adequate statistics for per call
billing as detailed herein.
Helpdesk Software System Timeline Date
----------------------------------------------------------
CGS will:
Identify and select the software package 4/5/96
Demonstrate System to Ryder 3/12/96
Complete Training 7/5/96
Start Pilot Call Program 7/8/96
Full RyderFIRST Call Support 8/1/96
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12
<PAGE>
The initial reports required from the call and problem tracking system include:
. RyderFIRST Exception Report - This report lists all support occurrences
relating to any one of several identified critical problem types (i.e.,
dealer system down). Must be provided to Ryder daily.
. RyderFIRST Daily Call Status Report - Provides the detail information on
every support call. Must be provided to Ryder daily.
. RyderFIRST Incident Analysis by System Area - Provides a breakdown of all
calls for a set time period for each system area. The system areas, such as
Instructional or Hardware, will be provided at a future date. Run monthly
and quarterly.
. RyderFIRST Instructional Incidents by Environment. (There are 20 Systems
environments in the US). Provides a listing of the number of instructional
calls per environment for a set time period. Details on each application
area (Quotes/Reservations, Inventory Status) and average calls per dealer
are also provided. Run monthly and quarterly.
. RyderFIRST Instructional Incidents by Dealer - Provides a listing of the
number of instructional calls per dealer for a time period. Detail on each
application area (Quotes/Reservations, Inventory Status) and the percentage
of total environment calls that dealer represents are also provided. The
capability must exist to sort this report by environment, then by dealer or
simply by dealer and run monthly and quarterly.
. Call reporting listing abandoned calls, duration of calls, answer speed,
total calls and outbound vs. inbound calls.
The reports listed above shall be transmitted electronically to Ryder and
printed at the headquarters facility.
D. Software Change Request Support
CGS will provide the following Service in support of RyderFIRST software:
RyderFIRST application problems that are determined to require changes to the
software, will be controlled through a formal process between TSR and Ryder.
This process will be initiated through completion of a Ryder MIS Work Request
(MIS 104 form). Changes to the application software will only be made when work
request forms are completed and approved by appropriate TSR and Ryder
representatives.
Work requests will be numerically controlled to facilitate the tracking of
software change activity. Ryder will issue TSR a block of numbers for work
request assignment. All work requests must contain a unique number which will be
assigned sequentially from the block of numbers provided.
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13
<PAGE>
Approved work requests will be entered into the Ryder Truck Rental Work Request
System for control of application software development. The Ryder Work Request
System will produce weekly reports detailing the status of application software
changes. Copies will be provided to CGS on a weekly basis.
Software Change Process
- ----------------------
The process of initiating, approving, and controlling software changes is as
follows:
I. RyderFIRST support personnel at CGS prepare MIS-104 work request form.
2. The TSR Client Services Manager assigns a unique 5 digit number per block
of numbers provided. These blocks will be provided by Ryder. Document
description of software problem.
3. Provide reference to problem number.
4. Escalate Work Request to TSR's Client Services Manager. Provide a 3.5
floppy Disk containing the related software and data. (Obtained from
Dealer system).
5. Work request sent to Ryder for review approval, and prioritization.
FAX copy of form to:
MIS Department
Ryder Truck Rental, Inc.
FAX-(305) 470-7909
Attn.: Rita Alvarez
Work Request Priority Meeting
- ------------------------------
TSR and appropriate Ryder personnel will hold regular conference call meetings
to establish the priorities of current and future software changes to the
RyderFIRST application. At a minimum, these meetings will be held monthly. TSR
will provide CGS uith a tentative schedule for these meetings on a quarterly
basis.
II. NEW DEALER INSTALLATION SUPPORT
CGS will be ready to provide the following new dealer installation support
by June 1, 1996. Ryder estimates that 980 new dealers will be opened in
1996. After receiving the RyderFIRST System hardware from the warehouse,
new dealers are called by a CGS technician and walked through the dealer
startup process. This process includes the following items:
1. CGS receives order for RyderFIRST system hardware, site survey, and site
survey addendum (if multi station) from Ryder Dealer Administration. Then
CGS notifies the AMRDS warehouse to ship RyderFIRST system hardware.
2. CGS receives letter of agency from Dealer Development Manager (Ryder Field
Representative) authorizing CGS to make changes in dealer's phone line.
3. CGS is advised of telephone information on the day the RyderFIRST System
hardware is ordered.
4. The dealer's merchant ID number is provided to CGS by Dealer
Administration.
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14
<PAGE>
5. CGS follows up with dealer to verify receipt of equipment and to set
appointment for install process.
6. CGS walks dealer through install process.
7. CGS runs diagnostics for dealer's printer and modem.
8. CGS communicates weekly with Dealer Administration, providing an update on
all dealers that are in the process of being opened.
9. CGS continues to follow up with Area Center and dealer to verify that start
up files are sent.
10. CGS checks for download completion and addresses any incomplete downloads
with the district.
11. CGS notifies the Area Center when the download is complete and the dealer is
ready to automate.
A database of all automated dealers must be maintained. This database must
minimally include the following fields.
Consumer Environment# Dealer # Dealer Name
Address Contact Name Time Zone
Phone # Workstation (Type of Equip. to order)
ID's of each component Hours of Operation by Day
Comments (3 - 80 char lines) Open Date
American Express # Telecredit # Buypass #
III. Warehousing and Logistics
AMRDS will be ready to provide the following warehousing and logistics
support by June 1, 1996. AMRDS is responsible for providing complete
inventory warehousing and maintenance of the hardware components utilized
by the RyderFIRST system. These components are detailed in the schedule
below. A detailed, full-featured relational database (on tape) of Ryder
dealers and all hardware components, including when components were received
or returned to the warehouse, by district and dealer, is required. This
database must also include a history of the current and two prior dealer
locations of the component including when the unit was received by the
warehouse or distributed to a dealer. TSR will provide periodic and ad hoc
reporting monthly 3 days prior to month end.
A. Inventory
. AMRDS will provide secured warehousing space for all RyderFIRST
components in inventory. Any cost associated with this service should be
included in the hardware swap and shipping charges.
. The number of components in inventory will decrease as dealers are opened
and rise as additional equipment is purchased.
The following listing represents the installed inventory as of the effective
date of this Agreement. AMRDS will maintain the inventory tracking and account,
at the serial number level, to Ryder as required herein.
Component Svc. Estimated
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15
<PAGE>
Type Description Quantity Plan Purchase
- ------------------------------------------------------------------------
CPU IBM - PS/2 Model 35 - 80 MB HD 3500 IBM 1991-92
386 Chip
CPU IBM - Model 30 - Client -W/O 500 IBM 1992
W/486 Chip Upgrade
CPU IBM - PS/2 Model 35 - 80 MB HD 1000 SWAP 1994
386 Chip
CPU IBM - 486 ValuePoint -33 MHZ 415 SWAP 1994
120 MB HD
CPU IBM - 486 Series 330 - 50 MHz 300 SWAP 1995
270 MB HD
CPU Total 5,715
PRINTER IBM - Propriter II 18 IBM 1990-91
PRINTER IBM - Proprieter III 3574 IBM 1992
PRINTER OKIDATA - model 184 1000 SWAMP 1992
PRINTER OKIDATA - model 184 336 SWAMP 1994
PRINTER OKIDATA - model 184 300 SWAMP 1995
PRINTER OKIDATA - model 520 101 SWAMP 1995
Printer Total 5,329
MONITOR IMB- model 8512 4000 IBM 1991-92
MONITOR Leading Edge 1015 SWAMP 1992
MONITOR CTX - model 5468 400 SWAMP 1994
MONITOR CTX - model 5468 300 SWAMP 1995
MONITOR Total 5,715
Line Splitters Command Communications 1200 SWAMP 1992
ComShare 750
Line Splitters Command Communications 1300 SWAMP 1994
ComShare 750
Ryder provided spare inventory levels by component are listed below:
Component Consigned Inventory
Type Count
- -----------------------------
CPU's 256 Line Splinters ________
Monitors 253 keyboards ________
Printers 183 Card Swipes ________
In addition to the equipment listed above a certain number of accessory items
must be inventoried. Accessory items include keyboards, printer ribbons,
diskettes, and card swipes. for those components under an IBM maintenance
agreement the RyderFIRST Support facility dispatches IBM via the ECCO system. An
additional 1700 systems are maintained on a swap maintenance program. For these
units the support facility must initiate the shipment of a replacement component
and retrieve the damaged component. Failed components are repaired and
redistributed by AMRDS.
B. NEW DEALER HARDWARE SHIPPING
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16
<PAGE>
The new dealer hardware shipping should include the following:
. Gathering the components from inventory. Prepare and ship fully integrated and
operational Systems, including at a minimum, one CPU, one printer, one
monitor, and one starter kit.
. Four boxes (new components will not require a box).
. Packing the components (including packing material) in the box and labeling
the boxes.
. Shipping. Shipping cost for new dealer openings should be based on UPS ground
----------
rates. Package dimensions and weights are provided for each component.
-----
. Calling the dealer back within 10 days TO VERIFY RECEIPT OF THE SHIPMENT.
Component Box Size WEIGHT (WITH CONTENTS)
-----------------------------------------------------------------------
CPU 18.5' X 20" X 9"H 35 lbs
Monitor 18.5" X 20" X 16.5H 35 lbs
Printer 16.5" X 20" X 9"H 25 lbs
Starter Kit 16.5" X 20" X 9"H 14 lbs
CLOSED DEALER HARDWARE RETURN SHIPPING
As dealers are closed, systems are either 1) shipped back to the warehouse for
refurbishing, reformatting, and testing or 2) cleaned via remote access and
reused at a new dealer within the district. Currently most units are shipped
back to the warehouse for refurbishment, reformatting and testing. Software is
loaded and tested before shipping to a new dealer.
. The closed dealers hardware return shipping cost should include the expense of
shipping three boxes to the closed dealer's site or the dealers Dealer
Development Manager, at Ryder's option.
. These boxes will be shipped UPS ground.
. Foam inserts are installed in the boxes prior to shipping to facilitate
packing by Ryder district personnel.
. The three boxes shipped are described below.
Component Box Size Weight (with contents)
------------------------------------------------------------------------
CPU 18.5" X 20" X 9'M Empty
Monitor 18.5" X 20" X 16.5H Empty
Printer 16.5" X 20" X 9"H Empty
The closed dealers hardware return shipping cost also includes the expense of
shipping the components from the closed dealer to the AMRDS warehouse facility.
The pertinent information is provided below:
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17
<PAGE>
Component Box Size Weight (with contents)
------------------------------------------------------------------------
CPU 18.5" X 20" X 9"H 35 lbs
Monitor 18.5" X 20" X 16.5H 35 lbs
Printer 16.5" X 20" X 9"H 25 lbs
CGS and AMRDS are responsible for tracking assets being returned from closed
dealers. AMRDS will be responsible for replacing assets lost in the shipping
process.
D. Closed Dealer Hardware Refurbishment and Restocking
The Closed Dealer Hardware Refurbishment and Restocking cost includes costs
incurred to perform/provide the following services:
. Maintain a repair database which tracks each component, its characteristics,
the date it was refurbished, and all repairs made to the component.
. Insure that all system parts are attached and secure in component.
. Run the appropriate diagnostic procedures including anti-virus, F disk, and
testing of Ryder 16/CID card, Card swipe, Modern Test (Loopback and Dial Out),
and BIOS.
. Thoroughly clean component cover removing stickers and writing, etc.
. Thoroughly clean the interior of the component, removing all dust.
. Reassemble component.
. Attach color coded connection dots on component.
. Run IBM system diagnostics on memory, keyboard, disk drive, parallel port,
serial port, disk drive (test cylinder, seek test, write, read, compare, head
select, error detection and correction), monitor (video graphics, character
set, display attributes, 40 x 25 display, 80 x 25 display, 80 x 30 display,
132 x 25 display, vertical display, color graphics, horizontal display, 640 x
200 graphics, 640 x 350 2-color graphics, 640 x 350 16 of 64, 640 x 480
graphics - checkerboard display, video - page 1 to 8).
. Format Disk.
. Load DOS.
. Load RyderFIRST Software are and data files Just prior to shipping.
. Verify software version.
. Maintain RyderFIRST master.
. Power down and up system and leave on for 24 hours.
. Return system/component to inventory.
E. NEW DEALER STARTER KITS
. Approximately 1,000 dealers are expected to open in 1996.
. As new dealers are opened the RyderFIRST hardware and starter kits are
shipped from the warehouse facility to the dealer.
. The starter kits include keyboard, card swipe, line splitter, two
printer ribbons, 10 pre-labeled backup diskettes and a diagnostic
diskette.
. Ryder furnishes all components of the starter kit with the exception of
the printer ribbons and backup diskettes.
- --------------------------------------------------------------------------------
18
<PAGE>
. The cost per dealer for starter kits must include the cost of assembly
(packaging) of the starter kits and the shipping box as well as the cost of
the printer ribbons and backup diskettes.
. The starter kit box is 16.5 "X 20" X 9"H.
F. Proprietary Board Assembly and Installation
. Ryder will procure new hardware from time to time. It is estimated 100-200
new Systems will be purchased in 1996.
. AMRDS is responsible for installing ID tags and miscellaneous stickers, as
appropriate, on each new component purchased by Ryder and consigned to
AMRDS for the RyderFIRST System.
. AMRDS is not currently responsible for building a Ryder Proprietary Board
which contains an internal modem and electronics for the card swipe. Ryder
may request AMRDS to supply the proprietary board at a future time.
. AMRDS is responsible for the installation of a Ryder Proprietary board on
each new CPU purchased.
. After the Ryder Proprietary board is installed, the component is placed in
available inventory.
G. AMRDS Hardware Requirements
. AMRDS must provide an automated asset tracking/cost allocation system for
the warehouse facility.
. AMRDS must provide a PC/LAN capable of efficiently loading updated
software after refurbishment or at the time new hardware is placed in
service.
IV. Hardware Maintenance
AMRDS will be ready to provide the following hardware maintenance support
by June 1, 1996. The swap maintenance process involves replacing defective
components at dealerships. Swaps generally occur on a component, not an
entire system. The functions required in the swap process are described
below.
. CGS Telephone support technician makes decision to swap defective component
and notifies AMRDS warehouse.
. For all orders received by 6:00 p.m. Dallas time, AMRDS warehouse will ship
replacement component(s) OVERNIGHT to dealer.
---------
. Dealer installs replacement component and packages defective component for
return shipping back to AMRDS warehouse.
. AMRDS warehouse arranges for pickup of defective component by UPS ground
for return to warehouse.
. AMRDS warehouse is responsible for tracking of defective components during
the return shipping process and for follow-up if delivery is delayed.
. Upon arrival at the AMRDS warehouse, the defective component is diagnosed
by a AMRDS technician to identify problem.
- --------------------------------------------------------------------------------
19
<PAGE>
. The following approved options are listed in order of preference:
a) In-house AMRDS technician repairs component.
b) Outside technician repairs component
c) Component is surplused for salvage (decision requires Ryder
approval).
. The component is returned to inventory (unless surplused for
salvage).
. In addition to component swaps relating to maintenance, AMRDS is also
responsible for shipping replacement components when hardware is
stolen from the dealer's premises. The same process is used as for
swap maintenance but the request for asset write off, as if the asset
were being surplused, must be submitted to Ryder.
The hardware which is maintained under the swap maintenance program
is listed below.
Component Yr
Type Description Vol. Maint Purch
---------------------------------------------------------------------
CPU IBM - PS/2 Model 35 - 80 MB HD 1000 SWAP 1992
386 Chip
CPU IBM - 486 ValuePoint 33 MHZ 415 SWAP 1994
120 MB HD
CPU IBM - 486 Series 330 - 50 MHZ 300 SWAP 1995
270 MB HD
CPU Total 1,715
PRINTER OKIDATA - model 184 1,000 SWAP 1992
PRINTER OKIDATA - model 184 336 SWAP 1994
PRINTER OKIDATA - model 184 300 SWAP 1995
PRINTER OKIDATA - model 520 101 SWAP 1995
Printer Total 1,737
MONITOR Leading Edge 1015 SWAP 1992
MONITOR CTX - model 5468 400 SWAP 1994
MONITOR CTX - model 5468 300 SWAP 1995
MONITOR Total 1,715
Line Splitters Command Communications 1200 SWAP 1992
ComShare 750
Line Splitters Command Communications 1300 SWAP 1994
ComShare 750
V. Support Volume/Scheduling Statistics
. Estimating an average of 7,800 inbound calls per month (93,600/year)
for 1996. These call volumes may vary by as much as 10 to 20% of
projected levels.
. The average inbound support call lasts 3 minutes.
. Estimating an average of 4,600 outbound calls per month,
(55,200/year) for 1996. These are typically follow-up calls to
dealers for resolution of RyderFIRST support inquiries.
. The average outbound support call lasts 3 minutes.
- --------------------------------------------------------------------------------
20
<PAGE>
. Consumer truck rental's business activity is extremely seasonal with the first
and fourth quarters being the slowest and the second and the third quarters
being the busiest. Our business also fluctuates by time of the month, business
at the end of the month, and day of the week. Saturday is the busiest. Support
call volume is somewhat related to business activity.
. Inbound support call volumes vary by time of day. The busiest time period is
4-6 pm, followed by 10 am - 1 pm.
. Inbound support call volumes vary by day of week. The busiest day is Monday
followed in order of decreasing activity by Thursday, Friday, Tuesday,
Wednesday, Saturday, and Sunday. A typical Monday will have 400 calls, Friday
and Tuesday 300 calls and Saturday 200 calls.
. Inbound support call volumes vary by time of month. The last week of the month
is the busiest. The middle two weeks are the least busy.
. Support call volumes increase significantly for the 1 - 2 month period
following a software release to the RyderFIRST system or if a business change
occurs which requires a change in procedure.
. The following historical call volumes are provided for forecasting use. Notice
that as the system matures and stabilizes, the call volumes are reduced.
Additionally, continuous dealer training on the part of Ryder will also reduce
relative call volumes.
<TABLE>
<CAPTION>
Year Type Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
- --------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
94 Inbound 7962 7835 8246 9358 8837 10624 9651 11871 8747 8898 7824 6687
94 Outbound 4527 4588 4670 3988 3903 5745 5791 10003 6761 7440 6640 6293
95 Inbound 7590 9940 7797 6414 8518 *8500 *9000 *9000 *8000 *7800 *7800 *7500
95 Outbound 7828 8602 7719 5442 7237 *5100 *5400 *5400 *4800 *4700 *4700 *4500
*Projected call volumes
</TABLE>
- -------------------------------------------------------------------------------
21
<PAGE>
EXHIBIT B
---------
PERFORMANCE STANDARDS AND REMEDIES
----------------------------------
CGS agrees to provide the Services thereunder in accord with the following
performance standards:
I. Dealer Satisfaction: This area is where Ryder requires superior
performance. Each second and third quarter Ryder conducts comprehensive dealer
satisfaction surveys. The question measured is: "How satisfied are you with
the assistance you received from the Ryder First Help Line?" The results are
based on an average of very satisfied and somewhat satisfied on a quarterly
basis. The standard will be **** average of very satisfied and somewhat
satisfied. If CGS performs at a **** for the quarterly measure there will
be a **** bonus paid to CGS. If CGS performs at **** or above, CGS will be
paid a **** bonus for the quarter. If the average is **** for the
quarter, CGS will pay to Ryder ****. If the team performs at below **** CGS
will pay Ryder **** for the quarter. (Ryder warrants that performance on
this question has not fallen below **** for a quarter since before the second
quarter of 1993.) The first dealer satisfaction measurement for purposes of
this section will be second quarter 1997.
II. Other Performance Standards
<TABLE>
<CAPTION>
Performance Responsible Measurement Measurement % Level
Standard Organization period
- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Answer Time CGS All Calls in 20 Monthly 80%
Sec
Abandoned Call CGS Abandoned Calls/ Monthly less than 5%
Rate(1) Total Calls
Refurbish Cycle AMRDS 5 Business Days Monthly 95%
Shipping Time AMRDS Orders Received Monthly 90%
Hardware Failures by 6:00 p.m.
Shipped Same Day
Shipping Time CGS By 6:00 p.m. Next Monthly 90%
for New Dealer Business Day
New Dealer CGS Schedule Monthly 95%
Install Installation
Within 7 Days
New Dealer CGS Within 10 Days Monthly 90%
Follow-up of Shipment
</TABLE>
(1) Abandon Call Definition: An abandoned call is defined as one in which the
caller stays on the line for more than 15 seconds but hangs up before a
technician answers.
If three or more of the above standards are not met in a given month TSR will
provide Ryder with a 1% reduction in the monthly bill. CGS will be responsible
for their measurements that were missed in relationship to the total missed.
For example: if answer time, abandoned call and refurbishment cycle were missed
CGS would be responsible for two thirds of the 1% credit. If all standards are
met for the quarter, Ryder will pay TSR 1% of the quarterly billing as a bonus.
CGS will receive **** of this bonus. These reductions and bonus provisions
will commence on October 1, 1996
III. Complete Shipments: Any incomplete shipment will result in a subsequent
overnight delivery of the missing part(s) at TSR's expense. Out of stock
situations are exempt.
- --------------------------------------------------------------------------------
22
**** Confidential treatment is being requested for these portions of this
agreement.
<PAGE>
IV. Close Ticket Time: All calls will be handled, escalated or closed within
one hour of the call.
V. Additional Measurements to Consider:*
Reporting Accuracy Rate
Problem Resolution Accuracy Rate
* These will be reviewed at quarterly quality reviews.
- --------------------------------------------------------------------------------
23
<PAGE>
Exhibit C
---------
CGS Pricing Schedule
--------------------
Service Functions Unit Price
- ----------------- ----------
Inbound RyderFIRST Telephone Support ****/call
New Dealer Telephone Startup ****/dealer
Initial Installation ****
Includes:
Database Design
Programming Design
Training
Testing
System Design, set up, scripting, training and testing
Transmission set up, training and testing
Telephone support, installation, testing and training
CGS agrees to invoice TSR monthly for services performed under this contract, by
the third business day of the following month. TSR agrees to pay CGS net thirty
(30) days after the receipt of invoice.
- --------------------------------------------------------------------------------
24
**** Confidential treatment is being requested for these portions of this
agreement.
<PAGE>
Exhibit D
---------
Cost Reduction Initiatives
--------------------------
At the quarterly quality reviews TSR and CGS will identify and agree on a
minimum of one cost reduction initiative for the next quarter. The fist
quality review will be held in January 1997.
- --------------------------------------------------------------------------------
25
<PAGE>
Exhibit E
---------
Reporting Requirements
----------------------
These requirements will be mutually established during the implementation
process and reviewed quarterly.
- --------------------------------------------------------------------------------
26
<PAGE>
Exhibit F
---------
Training Requirements
---------------------
Support Training
. Ryder will provide RyderFIRST application training to supervisors and
Technicians at startup. Subsequent to startup all RyerFIRST application
training for CGS personnel will be the responsibility of CGS.
. TSR will make available to CGS training and documentation for any changes to
the RyderFIRST application. (Ryder currently does two software releases per
year.)
. CGS will provide on-going and refresher training as required.
- --------------------------------------------------------------------------------
27
<PAGE>
Attachment A
- ----------
Uninterrupted Telecommunications Service Plan
Basic Coverage
- --------------
. The CGS Help Desk is located at the Informart, a building designed to house
only computer related vendors. It has a reliable electrical wiring network
design, backup power systems and twenty four hour security to ensure quality
technical support reliability.
. The CGS Help Desk PC Workstations, Server and Rolm Phone switch are all
connected to an interrupt power supply (UPS) located in the CGS suite. The
UPS will protect against power surges and either Partial or total power loss.
. The Help Desk is also protected from viruses by limiting outside access to
only two pcs used for pc to pc support. These pcs are only connected to the
outside world and nothing else. All of the Help Desk pcs have key locks to
restrict loading of software or backing up data files by anyone except
management or assigned system administrators.
Plan A Support
- --------------
For bad weather such as snow or ice storms CGS will have the support team stay
overnight at a hotel close to the Infomart.
Plan B Support
- --------------
In case of fire, phone switch failure etc. totally disabling the Help Desk site,
the agents and 800 number will be switched to the closest TSR facility. TSR
will provide space, phones and Pcs for use by CGS help desk staff to support
the RyderFIRST applications.
Plan C Support
- --------------
In case all of the DFW area is unable to provide support to the RyderFIRST
system the 800 number will be transferred to the CGS Atlanta site and trained
CGS employees will take over both inbound and outbound dealer support calls.
- -------------------------------------------------------------------------------
28
<PAGE>
Attachment B
------------
TELEPHONE PERFORMANCE RESPONSE REPORTS
a) Daily, Weekly, and Monthly Report on the following split information:
Date
Time, half hour Interval (Daily Only)
Average speed of answer
Average abandon time
Number of ACD calls
Number abandoned calls
Maximum delay
Average talk time
Average after call
% ACD
Number of outgoing calls
Average out time
Number of agents staffing the split
% ACD time
% Answered
Daily Weekly and Monthly Summary Totals (of Applicable items)
b) Daily, Weekly and Monthly Reports on the following trunk information:
Date
Time - half hour intervals only (Daily Only)
Number of calls carded (incoming)
Number of calls abandoned (incoming)
Number of calls answered (incoming)
Average hold time
Total C.C.S
c) Daily total number of calls answered and/or abandoned by time interval
Time intervals in five (5) second increments up to forty five(45)
seconds
Number answered
Number abandoned
Total Answered/abandoned
d) TSR network vendor calls (Currently MCI) and Weekly Blockage Report. It is
understood that this report is provided to TSR by MCI. TSR will provide
Ryder with this report after receiving it from MCI.
- -------------------------------------------------------------------------------
29
<PAGE>
ATTACHMENT C
------------
TELECOMMUNICATIONS TROUBLE SHOOTING, PROBLEM RESOLUTION ESCALATION,
------------------------------------------------------------------
AND TESTING AND TROUBLE REPORTING PROCEDURES
---------------------------------------------
Once it has been determined that a telecommunications problem is not caused by
the communication software or the modems, at either end of the transmission
path, the following steps should be taken:
1. Report the trouble by opening a trouble ticket to the local exchange
telephone company (LEC) responsible for the line in question.
2. If the trouble is related to a dealer workstation originating calls and
said workstation is identified In the database as making Toll or long
distance calls to the District's DCM, also report the trouble to the MCI
National Account Service Center (N.A.S.C).
3. Local Exchange Telephone Companies will typically commit to clearing the
problem by close of business day. TSR will follow up every four hours
after the due time and date. If by close of business the following day
the problem has not been resolved for a dealer location, TSR will
escalate to LEC's supervisory level and will notify Ryder's Support
organization.
4. In accordance with MCI's trouble reporting procedures, an MCI
representative will call back when there is a resolution to the trouble
reported. Depending upon the priority placed on the trouble, MCI will
status the customer every two to four hours.
5. Before MCI closes its trouble ticket, CGS will request from MCI any and
all repair action taken by MCI in order to resolve the customer's
reported trouble.
Network Trouble Reporting
I. To report trouble on your MCI Ryder Net lines call MCI's National Account
Service center (NASC) 1-800-695-1220.
2. Trouble conditions which are suspected to be RyderNet related should also
be reported to Ryder's Rental System Support Group.
3. System, Inc. - CGS will provide the following information to the MCI
representative:
A. Company name
B. Call back telephone number
C. Telephone number experiencing trouble
D. Trouble symptoms
E. Previous occurrence of similar trouble, if any
F. End user's name and comments
GT Time the calls were made
- --------------------------------------------------------------------------------
30
<PAGE>
4. MCI's. N.A.S.C. will generate a trouble ticket to track the progress of the
repair. They will inform TSR of the repair trouble ticket number. Retain
this ticket number for future reference should any questions arise during
the life of the trouble.
5. Should it be necessary to speak with a supervisor concerning any
difficulties with MCI RyderNet Service, contact the Floor Supervisor at the
N.A.S.C., 1-800-695-1220. For further assistance, a contact list can be
obtained from MCI.
Network trouble conditions other than MCI should be handled through normal Local
Exchange Company (LEC) reporting procedures. These procedures are developed and
provided by Ryder System, Inc., and may change from time to time.
Note: All References to MCI in this section could be substituted by Ryder with
a New Network vendor of choice. In the event that the long distance vendor
changes, CGS will be supplied with complete flow procedures.
- -------------------------------------------------------------------------------
31
<PAGE>
[LOGO]
TeleService Resources
TELESERVICE RESOURCES
NON DISCLOSURE AND NONCOMPETE AGREEMENT
This agreement is made as of the 1st of March, 1996, by and between TeleService
Resources (TSR)(the "Providing Party") and Computer Generated Solutions, Inc.
(CGS) (the "Receiving Party").
In connection with discussions between TSR and CGS, it will be necessary for CGS
to review certain documentation and information considered proprietary by TSR.
In view of TSR's desire that such documentation and information be maintained in
confidence, it is hereby agreed that for a period of five (5) years commencing
on the date of this Agreement, CGS shall not disclose or otherwise make
available to a third party any proprietary information and documentation
received from TSR that is identified as confidential ("Confidential
Information"). All Confidential Information transmitted hereunder shall be and
remain the property of TSR, and all such Information and any copies thereof
shall be promptly returned to TSR upon request or destroyed at TSR's option.
Confidential Information shall mean any non-public, confidential proprietary
information, services to be rendered or transactions contemplated hereby,
including without limitation, pricing and material terms and conditions of
services offered, intellectual property, enabling software, programming, except
that Confidential Information does not include any information that:
(i) is required by law to be disclosed
(ii) was available to the Receiving Party prior to its disclosure by
the Providing Party
(iii) was known or becomes generally available to the public or to
competitors of the parties hereto other than as a result of
disclosure by the Receiving Party
Furthermore, in the event that TSR and CGS enter into program-specific
Agreements whereby CGS will provide help desk call handling services to TSR,
those services will be provided for TSR's client programs. CGS agrees not to
pursue independent business relations with any of TSR's clients for which it
provides services for a minimum period of two (2) years from the end date of the
program-specific Agreement(s)
<PAGE>
/s/ Steve Carter Date: 3/1/96
- --------------------- ------------
Steve Carter, Vice President
CMC Division
Computer Generated Solutions, INc.
/s/ L.L. Curtis Date: 3/1/96
- -------------------------------- ------------
Lauri Curtis, Group President
TeleService Resources/Data Management Services
<PAGE>
*EXHIBIT 10.4
------------
AGREEMENT DATED AS OF SEPTEMBER 15, 1995 BETWEEN BORLAND INTERNATIONAL,
INC. AND COMPUTER GENERATED SOLUTIONS, INC.
* Confidential treatment is being requested with respect to portions of
this exhibit
<PAGE>
BORLAND No-Nonsense VAR Agreement
- --------------------------------------------------------------------------------
This Agreement is between Borland International, Inc., 100 Borland Way,
Scotts Valley, CA 95066 ("Borland"), and Computer Generated Solutions,
Inc., 1675 Broadway, 31st Floor, New York, New York 11019 ("VAR").
1. Definitions
"Products" means Borland's computer software programs listed in Attachment A,
including any related documentation ("Documentation"). "Territory" means the
country or countries listed in Attachment A.
2. License
a. Borland hereby appoints VAR as a member of Borland's Premier VAR Program
(described in Attachment C) and appoints VAR as an authorized Value Added
Reseller of the Products in the Territory. Borland hereby grants to VAR a
limited, nonexclusive, nontransferable license to distribute and sublicense the
Products in the Territory, solely as embedded in or bundled with the value-added
software and/or application development services described in Attachment A, and
not as standalone products.
b. Borland also hereby grants to VAR a limited, nonexclusive, nontransferable
license to use Borland's trademarks and trade names solely to the extent
reasonably necessary for, the marketing, distribution and support of the
Products, and in accordance with guidelines for the protection of such marks and
names as may be provided by Borland to VAR from time to time.
3. VAR Obligations
a. The license granted above is contingent upon VAR's payment of the annual
Premier VAR Program enrollment fee, VAR's commitment to the Annual Net Software
Revenue Performance Level set forth in Attachment B. and VAR's employment of at
least two persons who are trained and certified in the use and installation of
the Products .
b. Upon execution of this Agreement, and from time to time within 30 days of
Borland's request, VAR agrees to provide Borland with a business plan with
respect to the future activities of VAR related to this Agreement.
c. VAR agrees to provide Borland with monthly sales, pipeline and forecast
reports.
4. Payment and Reports
a. VAR will pay Borland the applicable License Fees as set forth on Attachment B
and the Premier VAR Program fees set forth on Attachment C. Borland may change
the list price of the Products at any time without notice. Borland may change
the Premier VAR Program fees annually upon renewal.
b. Products are delivered FOB Borland's point of shipment. VAR is responsible
for paying all taxes, duties, shipping and other such fees relating to the
Products, except taxes on Borland's net income.
c. Within fifteen (15) days of the end of each calendar month, VAR shall report
to Borland (i) the number of copies of each Product distributed during such
month, (ii) the incremental number of users licensed by VAR during the month,
and (iii) the amount payable to Borland, along with payment in such amounts.
d. All other payments are due within thirty (30) days after the date of
Borland's invoice.
e. Late payments will be subject to interest at 1.5% per month, or the maximum
rate allowable by law, if less. Borland reserves the right to change VAR's
credit or payment terms if VAR does not pay in full and on time.
5. Borland Obligations
a. Borland will accept orders from VAR for Products, provided each such order
includes (i) the number of each Product ordered; (ii) the appropriate pricing
and payments terms per the VAR Discount detailed in Attachment B; (iii) the
bill-to and ship-to address; (iv) a reference to this Agreement; and (v) and
other information reasonable requested by Borland.
b. Borland will supply marketing materials for the Products as ordered by VAR in
quantity based upon Borland's then-current standard charges for these materials.
c. Borland will work with VAR to establish product training for VAR's technical,
sales and support staff at the then-current time and rate schedule provided by
Borland or a designated third party.
6. Upgrades and Support
a. Provided VAR has paid all applicable Premier VAR Program fees as set forth in
Attachment C, VAR will be entitled to receive Upgrades to those Products which
may become commercially available from Borland during the term of this
Agreement. An "Upgrade" is a revised version of a Product with the identical
name and with a version number change immediately to either the right or
<PAGE>
BORLAND No-Nonsense VAR Agreement
- --------------------------------------------------------------------------------
left of the decimal. An Upgrade does not include a version of a Product for a
different operating system or environment.
b. VAR is also entitled to obtain the support and other services from Borland as
a member of the Premier VAR Program as described in Attachment C. VAR, and not
Borland, is responsible for providing VAR's customers with Upgrades and support.
Borland's support programs are subject to change from time to time without
notice.
7. Proprietary Rights
Borland or its licensers have and will keep title, copyright, trademarks and all
other proprietary rights in the Products. VAR has no right to use, examine, re-
create, sublicense, or transfer the source code for the Products, which is
Borland's trade secret. VAR agrees not to attempt to reverse engineer,
decompile, disassemble, or otherwise attempt to derive source code from the
Products or to knowingly allow others to do so during or after the term of the
Agreement. Unless agreed to in writing by Borland, VAR agrees not to remove or
destroy any proprietary or confidential legends or markings placed upon or
contained in the Products, or otherwise to modify or alter the Products.
8. Limited Warranty
Borland warrants the physical media provided to VAR (but not any media
distributed by VAR) to be free of physical defects in materials and workmanship
for a period of 90 days after it is first delivered to VAR, and will replace any
defective media if notified within the warranty period. THE FOREGOING WARRANTY
IS IN LIEU OF ALL OTHER WARRANTIES TO VAR OR ANY THIRD PARTY, EXPRESS OR
IMPLIED, RELATED TO THE PRODUCTS OR ANY SERVICES BORLAND MAY PROVIDE, INCLUDING
WITHOUT LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, OR ARISING BY STATUTE, LAW OR TRADE DEALING OR USAGE.
Without limiting the foregoing, Borland does not warrant that any Product is
error-free, or that any errors can or will be corrected. VAR agrees that it will
not make any warranty or other representation of any kind to sublicensees or
others on Borland's behalf.
9. Limitation of Liability
In any event, neither Borland nor VAR will be liable to the other or any third
party for incidental, special or consequential damages for any reason (including
loss of data or other business or property damage), even if foreseeable, and
neither party's liability will exceed the applicable fees paid or payable by VAR
to Borland. VAR will require each sublicensee to accept similar warranty and
liability limits.
10. Infringement Indemnity
a. Borland will defend VAR against any claims by third parties of infringement
of United States copyrights arising from VAR's use, as permitted herein, of any
Product as furnished by Borland and pay any damages awarded. Borland's
obligations are contingent upon VAR notifying Borland promptly of any notice of
any actual or threatened claim or suit; giving Borland the exclusive right to
control the defense and settlement of such claim or suit; and giving Borland
VAR's full cooperation for the defense of same. Following notice of a claim or a
threatened claim, Borland may, in its discretion and at its option, procure for
VAR the right to continue using any Product or may replace or modify any Product
to make it non-infringing. If Borland determines that none of these alternatives
is practical, Borland may refund the license fees paid by VAR hereunder for the
affected Products (less a charge for depreciation on a three year, straightline
basis) and accept the return of the affected Products.
b. Borland will have no liability for any claim of infringement of any third
party right that is caused by VAR's use of any Product with non-Borland
software, products or data if such claim would have been avoided by exclusive
use of the Product; modification of the Product by anyone other than Borland if
such claim would have been avoided by use of the unmodified Product; or by use
of other than the most current release of the Product.
c. Paragraphs (a) and (b) of this Section state Borland entire liability to VAR
for actual or claimed infringement of intellectual or proprietary rights.
11. Term
a. The term of this Agreement shall be one year and it shall be effective on the
date set forth below. The Agreement shall automatically renew for not more than
two consecutive one year terms unless 30 days' advance written notice is
provided by either party. Either party may terminate this Agreement on 30 days'
written notice if the other party breaches any material term of this Agreement
and fails to remedy such breach within such 30-day notice period. Either party
may terminate this Agreement in the event the other party becomes involved in
any voluntary or involuntary bankruptcy or other insolvency proceedings, ceases
to be actively engaged in business, makes an assignment for the benefit of its
creditors, or becomes financially incapable of fulfilling its obligations under
this Agreement.
b. Upon termination, VAR shall cease distributing and sublicensing the Products,
shall destroy or return all originals and copies of the Products, including
<PAGE>
BORLAND No-Nonsense VAR Agreement
- --------------------------------------------------------------------------------
documentation and related materials, and all other reproductions and parts
thereof. VAR may retain full-use copies of the Products for which it has
purchased an internal use license from Borland.
12. Audit Rights
Upon 15 days' written notice, Borland shall have the right, at all reasonable
times during normal business hours, to inspect the VAR's sites to determine
whether the Products are being used and protected in accordance with the terms
of this Agreement. In addition, upon such notice, Borland shall have the right,
during normal business hours, to conduct an audit of VAR's records to determine
the propriety of royalty reports submitted by VAR and related license fee
records. Borland shall bear the expense of such audit; however, in the event any
such audit reveals that VAR has understated the amount of fees which VAR is
obligated to pay Borland under this Agreement by more than five percent (5%),
VAR shall pay, in addition to any fees contractually due, all reasonable third
party fees associated with such audit. Audit rights shall terminate one year
subsequent to the termination or expiration of this Agreement.
13. Confidentiality
"Confidential Information" means non-public business, product, financial and
technical information which is disclosed in writing and marked as confidential,
or disclosed in any other manner and later identified in writing as
confidential. Neither party will use or disclose the Confidential Information of
the other except as specifically authorized by the other in writing. Each party
will protect the Confidential Information of the other by using the same degree
of care, but no less than a reasonable degree of care, to prevent the
unauthorized use, dissemination or publication of the Confidential Information
as such party uses to protect its own confidential information of a like nature.
14. Assignment
This Agreement shall be binding upon and inure to the benefit of each of the
parties hereto and, except as otherwise provided herein, their respective legal
successors and permitted assigns, provided however that VAR shall not assign,
voluntarily or involuntarily or by operation of law or otherwise, any part of
this Agreement without the prior written consent of Borland.
15. General
a. This is the full and final agreement between VAR and Borland on this subject,
and supersedes any earlier promises, representations or agreements.
b. This Agreement may only be changed if VAR and Borland's authorized
representative do so in writing.
c. No inconsistent, additional, or preprinted terms on VAR's purchase order or
other business form will apply.
d. Borland reserves the right at any time without liability to change or
discontinue any of its products, services or programs.
e. VAR and Borland are independent contractors and neither is an agent, partner,
franchisee, joint venturer or employee of the other.
f. Waivers not given in writing may be revoked at any time without liability.
g. Invalid provisions do not affect the enforceability of others.
h. Borland is entitled to injunctive relief for violations of Borland's
copyrights, trade secrets or other proprietary rights.
i. Use, duplication, or disclosure by the U.S. Government of the Products shall
be subject to the restricted rights applicable to commercial computer software
(under DFARS 252.227-7013 or FAR 52.227-19, as applicable).
j. Distribution of the Products is subject to U.S. export control laws. VAR may
not in any event export the Products to any country under U.S. Commerce
Department restriction.
k. Borland reserves all rights not granted specifically in this Agreement. All
notices shall be in writing and in English and may be sent by telecopy, courier,
or mail, return receipt requested, sent to the attention of the Legal Department
at the addresses set forth below, and shall be deemed effective upon receipt.
l. This Agreement will be construed, interpreted and governed by the substantive
laws of the State of California. Any legal action arising out of or related to
this Agreement shall be brought only in a state or federal court of competent
jurisdiction located in the Counties of Santa Cruz or Santa Clara, California.
<PAGE>
BORLAND No-Nonsense VAR Agreement
- --------------------------------------------------------------------------------
BORLAND INTERNATIONAL INC.
Signed: /s/ Frank A. Vaculin
--------------------------
Name: Frank A. Vaculin Reviewed
---------------------------- By
Legal
Title: V.P. - Sales Dept.
--------------------------- /s/ LW
EFFECTIVE DATE: 9/15/95
------------------
VAR: Computer Generated Solutions, Inc.
Signed: /s/ Victor Friedman
--------------------------
Name: Victor Friedman
----------------------------
Title: Executive Vice-President
---------------------------
<PAGE>
BORLAND No-Nonsense VAR Agreement
- --------------------------------------------------------------------------------
ATTACHMENT A
I. PRODUCTS (U.S. English language version):
Platform
--------
Delphi Client/Server Windows
Delphi Client/Server Bundle Windows
ReportSmith SQL Windows
II. VALUE ADDED PRODUCTS AND/OR SERVICES
The license granted in Section 2 of the Agreement is contingent upon VAR
providing to the end user the following Value Added software and/or application
services with each Product distributed: Delphi Full Project Life Cycle
Implementation Support, Training, and Supplemental Staffing. Such Value Added
services and/or products must be of equal value to the Products sold with such
services and/or products to each customer.
lll. TERRITORY
With respect to this Agreement the term Territory shall mean the United States,
Canada, and the country or countries listed below:
IV. APPROVED AGENTS AND RESELLERS
Subject to all the terms of this Agreement, The VAR's agents and resellers below
are approved by Borland to distribute the Products with the value-added software
or services described above.
- -------------------------- --------------------------
- -------------------------- --------------------------
4
<PAGE>
BORLAND No-Nonsense VAR Agreement
- --------------------------------------------------------------------------------
Attachment B
I. LICENSE FEES
a. Products. VAR shall pay Borland a per copy license fee for each Product
--------
purchased under this Agreement based on a **** discount off of the then-
current suggested list price of the Product on the date VAR places each
order.
b. Upgrades. For each Product Upgrade purchased pursuant to this
---------
Agreement as a replacement for a prior version of such Product, VAR
shall pay Borland a per copy license fee based on a **** discount off
of the then-current Upgrade price of the Product on the date VAR places
each order.
c. International Uplifts.
----------------------
The license fee for each translated Product shall be **** of the license
fees for Products and Upgrades set forth in (a) and (b) above.
The license fee for each International English version of the Products
shall be **** of the license fees for Products and Upgrades set forth in
(a) and (b) above.
The license fee for each U.S. English language version of the Products
distributed by VAR outside the United States shall be **** of the license
fees for Products and Upgrades set forth in (a) and (b) above.
II. BORLAND ASSIST SUPPORT PROGRAMS.
VAR may accept customer purchase orders for the Borland Assist Support
Programs from VAR's customers as value-added to the Products. VAR shall
pay to Borland the price set forth in the Borland Assist Price List for
each such order.
III. PREMIER VAR ANNUAL NET SOFTWARE REVENUE OBJECTIVE
VAR agrees to maintain an Annual Net Software Revenue Performance level of
at least **** in order to participate in the Premier VAR Program as
defined under this Agreement.
IV. REBATE SCHEDULE
Each calendar quarter during the term of this Agreement, VAR is eligible
to receive a Rebate based on VAR's "Purchases to Date" (defined below)
during the one-year term of this Agreement, according to the following
schedule:
Rebate Level Purchases to Date Rebate Percentage
- ------------ ----------------- -----------------
I **** ****
II **** ****
III **** ****
IV **** ****
V **** ****
5
**** Confidential treatment is being requested for these portions of this
agreement.
<PAGE>
BORLAND No-Nonsense VAR Agreement
- --------------------------------------------------------------------------------
Purchases to Date are used to determine the Rebate percentage. To determine the
amount of Rebate, multiply the Rebate Percentage by actual "Net Revenues"
(defined below) during the quarter.
Example: If at the end of a quarter VAR's Purchases to Date are $250,500 (****),
and VAR's Net Revenues during such quarter were $50,000, VAR's Rebate for such
quarter would be calculated by multiplying $50,000 by ****, for a total Rebate
of **** for such quarter.
"Net Revenues" means the total of actual shipments of full Products that Borland
makes to VAR during a calendar quarter, calculated at the discount off the then-
current suggested list price set forth in Paragraph I above and net of return
authorizations issued, taxes, shipping and other charges and credits. Net
Revenues does not include Upgrades.
"Purchases to Date" means the sum of (i) Net Shipments to date under each one-
year term of this Agreement plus any order(s) placed by VAR during the quarter
which have not yet been shipped by Borland, provided such orders are for
Products currently available for shipment by Borland and scheduled for immediate
shipment, and provided such orders are not being held because VAR is on credit
hold; (ii) any Upgrades ordered to date under this Agreement, less returns; and
(iii) any orders placed by VAR for Borland Assist under Paragraph II above.
REBATE TERMS AND CONDITIONS.
Rebates will be awarded within approximately 30 days after the end of each
calendar quarter. Borland will calculate Rebates based on the reports received
electronically each month from VAR. Borland will award the Rebate as a reduction
against the current balance due Borland from VAR. If no balance is due at the
time of the award, VAR may elect to receive the Rebate in the form of a cash
payment or as a credit against future payments for Product to Borland. In the
event VAR believes any Rebate is incorrect, VAR must notify Borland of such
claim in writing in detail, within 5 days of receipt of such award. In the event
Borland does not receive such notice, the Rebate will be deemed accepted by VAR.
In the event VAR disputes any Rebate award, VAR's management and Borland's will
meet to attempt to resolve the dispute, but the final award of any Rebate will
be determined in Borland's sole discretion. In no event will any disputed Rebate
be deducted from payments due to Borland unless and until such Rebate award has
been agreed to in writing by VAR and Borland. No Rebate will be credited or
paid if VAR is on credit hold, but only for so long as such credit hold is in
place.
If VAR and Borland terminate this Agreement prior to the end of any calendar
quarter, Borland will credit any Rebate earned toward any outstanding balance
due Borland unless there is no balance, in which case Borland will award the
Rebate in cash.
6
**** Confidential treatment is being requested for these portions of this
agreement.
<PAGE>
BORLAND No-Nonsense VAR Agreement
- --------------------------------------------------------------------------------
ATTACHMENT C
PREMIER VAR PROGRAM
I. DELPHI CLIENT/SERVER ANNUAL PROGRAM ENROLLMENT FEE: **** per Year, ordered
separately by purchase order.
II. PROGRAM DELIVERABLES
Software (for VAR's internal use only)
- --------------------------------------
. 2 Copies of Delphi Client Server (Full Use) with Documentation
. 2 Copies of ReportSmith SQL (Full Use) with Documentation
. Right to Copy up to ten (10) copies of DELPHI Client/Server and
ReportSmith SQL to be used for internal education and demonstration
purposes only.
. Additional copies: Delphi: **** ea. ReportSmith SQL: **** ea
Documentation: DELPHI - **** set ReportSmith SQL - **** set
Software Upgrades (for VAR's internal use only)
- -----------------------------------------------
. Included with Annual Premier Program Enrollment Fee
Borland Assist Telephone Support
- --------------------------------
The program includes consultative and Client/Server connectivity support for
Delphi, Local InterBase Server and ReportSmith SQL.
PRIORITY SUPPORT DELIVERABLES ARE:
. 2 Named Contact(s)
. **** for each Additional Contact
. Immediate Call Response
. Unlimited Priority Access to a Senior Support Engineer via a Toll
Free number.
. Borland KnowledgeBase CD
Borland Assist Telephone Support hours are Monday through Friday, 6 a.m. -
5 p.m. PST, not including holidays.
7
**** Confidential treatment is being requested for these portions of this
agreement.
<PAGE>
- --------------------------------------------------
MICROSOFT SOLUTION PROVIDER AGREEMENT
This Agreement (the "Agreement") is between Microsoft Corporation ("MS"), a
Washington corporation, located at One Microsoft Way, Redmond, WA 98052, and
you, the Microsoft Solution Provider ("SP"). DO NOT ALTER OR AMEND THIS
AGREEMENT IN ANY MANNER; such alterations, without MS written accceptance,
will void this Agreement.
1. PURPOSE
SP desires to provide a comprehensive computer solution to certain of its
customers, which may include computer hardware, software, product support, and
training. MS desires to supply software, service, and/or support to SP to enable
SP to provide its customers with the solutions above.
2. APPOINTMENT
MS hereby appoints SP as a non-exclusive Microsoft SP in the U.S., excluding
U.S. territories, for the services and training listed in this Agreement.
3. TERM AND TERMINATION
This Agreement shall take effect on date of SP's signature below ("Effective
Date"), and unless terminated earlier as provided herein, shall continue for one
year, terminating on the last day of the month the Agreement was signed in that
following year. Either party shall have the right to terminate this Agreement at
any time, without cause, on the giving of thirty (30) days prior written notice.
Neither party shall be responsible to the other for any costs or damages
resulting from the termination of this Agreement. Upon expiration or termination
of this Agreement, SP shall immediately cease use of all training licenses,
internal use licenses, MS trademark, and MS Solution Provider Logo, and cease to
represent itself as an MS Solution Provider.
4. PAYMENT TERMS
Fee for this appointment is One Thousand Five Hundred Dollars ($1,500).
5. SP OBLIGATIONS
(A) TRADEMARKS
The appropriate trademark symbol (either "TM" [standard Trademark] or "(R)"
[standard Registered] in a superscript following the Product name) shall be used
whenever a MS product name is mentioned in any advertisement, brochure, or
material circulated by SP. The appropriate trademark symbol must be used at
least once for each MS product in each publication, in conjunction with the
first reference to such MS product.
(B) REPORTING
Quarterly sales and service reports, in a format to be prescribed by MS, shall
be completed and forwarded to: Attn.: Microsoft Solution Provider Group--
Reporting, Microsoft Corporation, One Microsoft Way, Redmond, WA 98052-6399.
Format and further information will be provided to SP by MS.
(C) MEMBERSHIP APPLICATION
SP represents and warrants that all the information it supplied on its
Membership Application is in all material respects true and correct to the best
of its knowledge and belief, and undertakes that it will continue to be so
during the term of this Agreement. Should there be any changes in such
information during the course of this Agreement, SP shall promptly inform MS in
writing of such changes.
(D) SERVICE ESTIMATE
SP's best estimate is that more than 25% of its revenues are generated from
provision of technical services to its customers. This estimate shall not
include those services, support, training, etc. provided to any of SP's
affiliates, subsidiaries, branches, divisions, or other related third parties.
6. SP PROGRAM FEATURES
(A) LOGO USAGE
SP shall have the right to use the MICROSOFT SP LOGO provided that (i) SP
insures that all services it provides as a Microsoft SP are consistent with the
quality of skills acquired by those employees of the SP who have obtained the
appropriate training from MS or its affiliates; (ii) SP continues to employ a
sufficient number of people who are Microsoft Certified Professional personnel;
(iii) SP complies with guidelines for use of the MICROSOFT SP LOGO as prescribed
by MS from time to time; and (iv) SP is in full compliance with the terms and
conditions of this Agreement. In the event that any of the above provisions are
not met, SP will cease immediately from use of the MICROSOFT SP LOGO.
MICROSOFT/R/
SOLUTION PROVIDER
<PAGE>
* EXHIBIT 10.5
------------
Agreement dated November 9, 1995, between Borland International, Inc.
and Computer Generated Solutions, Inc.
* Confidential Treatment is being requested with respect to portions of
this exhibit
<PAGE>
[LETTERHEAD OF COMPUTER GENERATED SOLUTIONS, INC.]
AGREEMENT
-------
This Agreement is between Borland International, Inc., 100 Borland Way,
Scotts Valley, CA 95066 ("Borland"), and Computer Generated Solutions, Inc.,
1675 Broadway, New York, NY 10019 ("CGS").
1. PURPOSE.
-------
This Agreement is intended to establish a relationship between Borland
and CGS in order for CGS, as an independent contractor, to provide to Borland
services relating to delivering technical support to Borland's customers.
2. CGS SERVICES.
------------
a. Borland hereby appoints CGS as an independent contractor to service
Borland's present and future business needs as described in paragraph 1 of this
Agreement. Borland retains CGS to provide only those services which are agreed
to by the parties in a separate written Attachment to this Agreement which is
signed by both parties.
b. Borland also hereby grants to CGS a limited nonexclusive license to
use Borland's trademarks and trade names solely to the extent reasonably
necessary for the performance of
<PAGE>
such services, and in accordance with guidelines for the protection of such
marks and names as may be provided by Borland to CGS from time to time.
3. CGS OBLIGATIONS.
---------------
a. CGS agrees to provide Borland with those services described in any
Attachment to this Agreement.
b. Following the execution of this Agreement, and from time to time
within thirty (30) days of Borland's written request, CGS agrees to provide
Borland with a business plan with respect to future services of CGS related to
this Agreement.
4. PAYMENT.
-------
a. Borland will pay CGS the applicable fees as set forth on any
Attachment to this Agreement.
b. All payments described in any Attachment are due within thirty (30)
days after the receipt of CGS's invoice, and any documentation requested by
Borland sufficient to substantiate such invoice.
2
<PAGE>
5. BORLAND OBLIGATIONS.
-------------------
a. Borland aqrees to perform such functions as described in any
Attachment to this Agreement.
b. Borland will supply to CGS such documentation for as CGS reasonably
needs in order to perform the services agreed to.
c. As deemed necessary by Borland, Borland will provide training to CGS
employees engaged in performance of the services under this Agreement.
6. BORLAND'S SERVICE NEEDS.
-----------------------
Provided Borland has paid all applicable fees as set forth in all
Attachments, Borland will be entitled to receive the support and other services
described in the Attachments.
7. PROPRIETARY RIGHTS.
------------------
Borland or its licensors have and will keep title, copyright, trademarks
and all other proprietary rights in its products. CGS has no right to use,
examine, re-create, sublicense, or transfer the source code for Borland's
products, which is Borland's trade secret. CGS agrees not to attempt to reverse
engineer, decompile, disassemble, or otherwise attempt to derive
3
<PAGE>
the source code from Borland's products or to knowingly allow others to do so
during or after the term of the Agreement. Unless agreed to in writing by
Borland, CGS agrees not to remove or destroy any proprietary or confidential
legends or markings placed upon or contained in Borland's products, or otherwise
to modify or alter the products.
8. LIMITATION OF LIABILITY.
-----------------------
In any event, neither Borland nor CGS will be liable to the other or
any third party for incidental, special or consequential damages for any reason
(including loss of data or other business or property damage), even if
foreseeable, and neither party's liability will exceed the applicable fees paid
or payable to CGS by Borland.
9. TERM.
----
a. The term of this Agreement shall be one year and it shall be
effective on the date set forth below. The Agreement shall automatically renew
for not more than two consecutive one year terms unless thirty (30) days'
advance notice is provided by either party. Either party may terminate this
Agreement on thirty (30) days' notice if the other party breaches any material
term of this Agreement and fails to remedy such breach within such thirty (30)
day notice period. Either party may terminate this Agreement in the event the
other party becomes involved in any voluntary or
4
<PAGE>
involuntary bankruptcy or other insolvency proceedings, ceases to be actively
engaged in business, makes an assignment for the benefit of its creditors, or
becomes financially incapable of fulfilling its obligations under this
Agreement. After the initial one year term, either party may terminate this
Agreement on thirty (30) days' notice.
b. Upon termination, CGS shall destroy or return all originals and
copies of Borland's products, including documentation and related materials, and
all other reproductions and parts thereof.
10. CONFIDENTIALITY.
---------------
"Confidential Information" means non-public business, product,
financial and technical information which is disclosed in writing and marked as
confidential or disclosed in any other manner and later identified in writing as
confidential, or disclosed in any other manner and later identified in writing
as confidential. Neither party will use or disclose the Confidential Information
of the other except as specifically authorized by the other in writing. Each
party will protect the Confidential Information of the other by using the same
degree of care, but not less than a reasonable degree of care, to prevent the
unauthorized use, dissemination or publication of the confidential information
as such party uses to protect its own confidential information of a like
nature.
5
<PAGE>
11. GENERAL.
-------
a. This is the full and final agreement between Borland and CGS on this
subject and supersedes any earlier promises, representations or agreements.
b. This Agreement may only be changed if Borland's and CGS's authorized
representatives do so in writing.
c. No inconsistent, additional, or preprinted terms on Borland's
purchase order or other business form will apply.
d. Borland and CGS are independent contractors and neither is an agent,
partner, franchisee, joint venturer or employee of the other.
e. Waivers not given in writing may be revoked at any time without
liability.
f. Invalid provisions of this Agreement do not affect the
enforceability of others.
g. Borland is entitled to seek injunctive relief for violations of
Borland's copyrights, trade secrets or other proprietary rights.
6
<PAGE>
h. All notices under this agreement shall be in writing and shall be
sent by telecopy, courier, or certified mail return receipt requested, to the
attention of the appropriate party, at the address as set forth on the first
page of this Agreement and shall be deemed effective upon receipt.
i. This Agreement will be construed and governed by the substantive
laws of the State of California.
This agreement shall be effective on November 9, 1995.
BORLAND INTERNATIONAL, INC.
Signed: /s/ Eric Ornas
-----------------------------
Name: ERIC ORNAS
-------------------------------
Title: Director, Technical Support
------------------------------
COMPUTER GENERATED SOLUTIONS, INC.
Reviewed
By Signed: /s/ Victor Friedman
Legal -----------------------------
Dept. Name: VICTOR FRIEDMAN
/s/ -------------------------------
Title: Executive Vice-President
------------------------------
<PAGE>
Attachment A to Agreement between
Borland International, Inc. ("Borland")
and Computer Generated Solutions, Inc. ("CGS")
Effective November 9, 1995
----------------------------------------------
End-User ("Help Desk") Support Services
---------------------------------------
1. HELP DESK SERVICES.
------------------
a. CGS will provide Borland's customers ("Customers") with
technical support for Borland's software products. These services will be
provided by CGS employees from Borland's offices located in Scotts Valley,
California, during Monday through Friday, for a minimum of forty (40) hours per
week between the hours of 6:00 a.m. to 5:00 p.m., Pacific Time.
b. CGS will initially employ and provide to Borland up to six (6)
qualified help desk support analysts whose responsibilities include the day to
day technical support of Customers, including answering questions and providing
solutions to problems for Borland software products.
c. To ensure CGS's effective delivery of help desk services,
Borland will:
(1) Assign a designated contact person, prior to the start of the
services, to whom all CGS communications may be addressed and who has the
authority to act on Borland's behalf for
<PAGE>
all aspects of the services CGS is performing. The designated contact will:
(a) Assist in establishing a transition project plan for the
implementation of the services;
(b) Arrange training for CGS employees, if needed; and
(c) Provide assistance as needed to the help desk personnel
for those instances that require management intervention
and action.
(2) Provide to CGS operational guidelines for the successful
implementation of the help desk services.
(3) Provide to CGS product information and data that may be
required for the successful implementation of the help desk services.
d. Borland may during the term of the Agreement request CGS to
provide additional employees for the help desk services, which CGS will on a
best efforts basis attempt to provide.
2. Fees.
----
a. Borland will pay CGS at the rate of **** per hour for each
hour of service provided by a CGS employee.
**** Confidential treatment is being requested for these portions of this
agreement.
2
<PAGE>
b. During the first five (5) weeks following the start of CGS's
employees assignment at Borland, CGS will discount by **** its fees for those
employees which require technical training by Borland.
3. Non-Hiring of CGS Employees.
---------------------------
a. Borland agrees that it cannot hire a CGS employee, unless and
until that employee has completed at least twelve (12) consecutive months of
help desk services and Borland has given CGS thirty (30) days' advance notice of
its intention to solicit for employment that CGS employee. Thereafter, Borland
may hire such CGS employee provided that Borland pays to CGS a fee of 15% of the
employee's annual compensation to be paid by Borland if the employee is hired by
Borland after the completion of twelve (12) months but before the completion of
eighteen (18) months of help desk services, or 10% of the employee's annual
compensation to be paid by Borland if the employee is hired by Borland after the
completion of eighteen (18) months of help desk services. These fees are to be
paid by Borland within thirty (30) days after the employee is hired by Borland.
b. Notwithstanding paragraph 3.a. above, but provided that
Borland has timely remitted payment of the applicable percentage fee described
in paragraph 3.a., if Borland offers CGS the opportunity to replace the hired
employee with a new CGS
**** Confidential treatment is being requested for these portions of this
agreement.
3
<PAGE>
employee within sixty (60) days after Borland's hiring and CGS replaces the
hired employee, then Borland shall pay to CGS a flat fee of $2,500.00. If
Borland has already paid the percentage fee described in paragraph 3.a. above,
Borland shall receive a credit against that employee's future billable time,
less the $2,500.00 flat fee.
c. Notwithstanding paragraphs 3.a. and 3.b. above, Borland
cannot, at any time, hire more than 50% of the number of CGS employees who have
been assigned to Borland for help desk services.
d. Upon thirty (30) days' notice, Borland or CGS may terminate
the services of any CGS employee at any time during this Agreement.
e. Notwithstanding paragraph 3.d. above, CGS agrees that it will
not reassign its employees to other projects without Borland's written consent,
and Borland agrees that it will not unreasonably withhold such consent.
4
<PAGE>
This Attachment shall be effective on November 9, 1995.
BORLAND INTERNATIONAL, INC.
Reviewed Signed: /s/ Eric Ornas
By -----------------------------
Legal Name: ERIC ORNAS
Dept. -------------------------------
/s/ Title: Director, Technical Support
------------------------------
COMPUTER GENERATED SOLUTIONS, INC>
Signed: /s/ Victor Friedman
-----------------------------
Name: VICTOR FRIEDMAN
-------------------------------
Title: Executive Vice-President
------------------------------
5
<PAGE>
*EXHIBIT 10.6
------------
Authorized Education Center Agreement dated May 23, 1995, between
Lotus Development Corporation and Computer Generated Solutions, Inc.
* Confidential treatment is being requested with respect to portions of
this exhibit
<PAGE>
To: Jennifer Davis
cc:
From: Jennifer Davis
Date: 10/19/95 11:48:21 AM
Subject: BP new renewal fee for LAEC
IMPORTANT REMINDER
- ------------------
Business Partner Program Annual Membership Renewal
Last June, when Lotus began shipping the quarterly Business Partner Connection
CDs to all Business Partners, we announced that an annual membership fee would
be required for partners to maintain membership in the program.
As you know, one of the requirements of the LAEC Program is membership to the
Business Partner Connection. During the last renewal cycle, the LAEC Program
provided a complimentary one year's membership for the Business Partner
Connection to LAECs. Effective with the July 1, 1995 LAEC renewals, LAECs are
responsible for renewing this service. To simplify the process, the renewal
fees for both the LAEC Program and The Business Partner Program will be due at
the same time and submitted to the LAEC Program, where LAEC Program staff will
ensure the Business Partner Program membership renewal is processed.
The new amount that should be submitted is ****.
The new rate reflects the **** annual per site renewal for the LAEC Program (no
change) and the **** subscription fee for the Business Partner Connection. The
**** subscription rate was recently increased from **** by the Business Partner
group to help fund some of the new program benefits including LNN.
As a LAEC you will continue to receive the following program benefits:
- Lotus Notes Software for Licensed use in classroom)
- Product marketing support and collateral
- Educational Referrals
- Educational Helpline
- Lotus Fax Support
- Worldwide Scheduling database
- Courseware discounts
- Cooperative marketing programs
- MAP
- Lotus Education Marketing Material
- LAEC LiNK (part of Lotus Connects)
- Partnering opportunities
- Assigned Account Managers
Furthermore, as a Lotus Business Partner you will continue to receive the
following:
- Business Partner Connection (quarterly Info Library and Toolkit CDs)
- FirstLook prerelease software (including R4 prerelease)
- Inside Edge CDs - Notes applications to help you run your business
- Lotus Vision, skill enhancement videotapes and local seminars
- Developer consulting assistance
- Lotus software for internal use
- Marketing toolkits
- Solution Symposia and local seminars
- Partner Pavilions, PR support and special advertising supplements
- Listing in Lotus Business Partner Catalog (product packaging, Notes
guide and WWW)
**** Confidential treatment is being requested for these portions of this
agreement.
<PAGE>
LOTUS AUTHORIZED EDUCATION CENTER AGREEMENT
Lotus Development Corporation Training Company Name and Address:
Lotus Education Group American Systems Technology, Inc. ___
400 River Park Drive 1050 Wilshire Drive Suite 191 _______
North Reading, MA 01864 Troy, MI 48084_______________________
Telephone: 800-346-6409 Telephone: 810-643-0140X23___________
FAX: 617-693-8636 Fax: 810-643-8210____________________
Attention: Manager, Lotus Attn: Laura Kelly____________________
Education - LAEC Program
Effective Date: ___________________
- --------------------------------------------------------------------------------
The Lotus Authorized Education Center Agreement between Lotus Development
Corporation ("Lotus") and the training company identified above ("LAEC")
consists of this cover page and the following:
AUTHORIZED SITE SCHEDULE - contains the fees for the LAEC Program
and lists the names and addresses of
LAEC's training locations which have
been authorized by Lotus ("Authorized
Sites")
AUTHORIZED COURSE SCHEDULE - lists the Lotus-authorized courses
available to LAEC under this Agreement
("Authorized Courses") and the current
prices
STANDARD TERMS AND CONDITIONS - Contains Lotus' standard terms and
conditions applicable to the LAEC
program
The signatures below are those of authorized representatives of the parties and
constitute each party's acceptance of this Agreement as set forth in the
attached Schedules and Standard Terms and Conditions.
LAEC LOTUS DEVELOPMENT CORPORATION
- -----------------------------------
(print full corporate name)
By:________________________________ By:__________________________________
Name:______________________________ Name:________________________________
Title:_____________________________ Title:_______________________________
<PAGE>
LOTUS AUTHORIZED EDUCATION CENTER AGREEMENT
AUTHORIZED SITE SCHEDULE
1. Initiation Fees.
---------------
One Authorized Site: ****(U.S.)
Each Additional Authorized Site: ****(U.S.)
The Initiation Fee covers a period of one (1) year from the Effective Date (the
"Initial Term") and is payable upon execution of this Agreement. The Initial
Term may extent beyond one year for renewal purposes as described below. The
Initiation Fee for Authorized Sites added during the term will be prorated to
the effective date of LAEC's primary Site. If Lotus does not receive an
executed original of this Agreement and all applicable fees within 30 days of
the LAEC's receipt of the Agreement, LAEC will not be accepted into the LAEC
Program.
2. Annual Renewal Fees.
-------------------
Each Authorized Site: ****(U.S.)
After the Initial Term, this Agreement may be renewed for additional one (1)
year renewal terms upon LEAC's submission and Lotus' acceptance of a Renewal
Application and payment of the Annual Renewal Fee and other fees by LAEC. The
Renewal Date will be the beginning of the calendar quarter immediately following
this Agreement's anniversary date. If Lotus does not receive the Renewal
Application and all fees within thirty (30) days of the Renewal Date, this
Agreement will automatically and immediately terminate. The annual Renewal Fee
is subject to change on 30 days' prior notice.
3. Authorized Sites.
----------------
Please list the names and addresses of LAEC's Authorized Sites (include the
address indicated at the top of the previous page, if appropriate). All
Authorized Sites must be approved by Lotus in advance. (Attach additional
sheet if necessary.)
1050 Wilshire Drive Suite 191__________ ___________________________________
Troy, MI 48084_________________________ ___________________________________
_______________________________________ ___________________________________
_______________________________________ ___________________________________
_______________________________________ ___________________________________
_______________________________________ ___________________________________
_______________________________________ ___________________________________
_______________________________________ ___________________________________
_______________________________________ ___________________________________
_______________________________________ ___________________________________
_______________________________________ ___________________________________
_______________________________________ ___________________________________
**** Confidential treatment is being requested for these portions of this
agreement.
<PAGE>
Confidential treatment
is being requested.
LOTUS AUTHORIZED EDUCATION CENTER AGREEMENT
AUTHORIZED COURSE SCHEDULE
Course Title Duration LAEC Courseware Kit Price
in US Dollars
Basic Notes Concepts 1 day ****
Basic Notes Concepts for Macintosh 1 day ****
Notes Technical User 1 day ****
Notes Application Development I 2 days ****
Notes Application Development II 3 days ****
Notes System Administration I 3 days ****
Notes System Administration II 2 days ****
cc:Mail System Administration I 2 days ****
cc:Mail System Administration II 2 days ****
Notes API 2 days ****
Lotus Forms Development 3 days ****
Introduction to Lotus Notes VIP 2 days ****
LotusScript Fundamentals 3 days ****
Prices, class duration and course names are subject to change. Lotus will
provide 30 days prior notice of any price increases.
**** Confidential treatment is being requested for these portions of this
agreement.
<PAGE>
LOTUS AUTHORIZED EDUCATION CENTER AGREEMENT
STANDARD TERMS AND CONDITIONS
1. Authorization.
(a) Lotus appoints LAEC as a non-exclusive Lotus Authorized Education Center
only at the locations listed on the Authorized Site Schedule to this Agreement
("Authorized Sites"), for the term and upon the conditions set forth herein.
This appointment is limited to providing training to individual users of the
Lotus software products ("Lotus Products") which are the subjects of the Lotus-
authorized courses listed on the Course Schedule to this Agreement ("Authorized
Courses"). Training shall be provided only with respect to versions of the Lotus
products that have been released to the public and are currently being supported
by Lotus.
(b) Except as expressly provided herein, this appointment gives LAEC the right
to distribute single units of Authorized Course materials ("Courseware Kits") to
individual users only and does not include any right to distribute Courseware
Kits to other training centers or to sublicense or otherwise distribute or use
Lotus software products or related information. Courseware Kits must be
purchased from Lotus at Lotus' LAEC standard prices and terms. The Authorized
Course Schedule contains Lotus' current price list for Courseware Kits.
2. Undertakings of Lotus. Lotus agrees to provide the items and/or services
described below.
(a) Referrals. Lotus will provide to its field sales personnel a listing of all
----------
Lotus Authorized Education Centers to enable such personnel to refer Lotus
Authorized Education Centers to Lotus' customers, distributors and/or dealers.
In addition, Lotus will maintain a toll free number to refer customers to a
Lotus Authorized Education Center in the customer's geographic area.
(b) Training Software. Lotus will provide LAEC with installation diskettes (or
-----------------
other appropriate media) for Lotus Products. LAEC will also receive
commercially-available upgrades to Lotus Products released during the Term of
this Agreement. Lotus will supply LAEC with copies of documentation for LAEC's
Authorized Sites.
Lotus hereby grants LAEC a limited right to install one copy of the Lotus
Product on (i) computers located at an Authorized Site solely for the purpose of
training individual users taking Authorized Courses and (ii) computers of LAEC's
customers solely for the purpose of training such customer's employees taking
Authorized Courses. These copies of Lotus Products may only be installed on
computers that are designated specifically for (i) education and training, (ii)
LAEC's direct communication with Lotus or (iii) administrative tasks of LAEC
related to the foregoing. Such copies may not be installed on any other
computers or used for general business purposes or any other purpose. LAEC must
delete all copies of Lotus Product installed on customer training computers upon
conclusion of the Authorized Course. Notwithstanding the foregoing, LAEC may use
the Lotus Products obtained under the Lotus Business Partner Program in
accordance with the terms of that program or may purchase additional copies of
Lotus Products for such other uses. LAEC shall maintain and promptly provide to
Lotus accurate written records of all installations of Lotus Products by LAEC
pursuant to this section, including Authorized Site location, computer serial
number (if applicable), and the name and version of each Lotus Product
installed. A breach by LAEC of this Section 2(b) shall be deemed to be a
material breach of this Agreement.
(c) Training Seminars. From, time to time, Lotus will offer training seminars at
-----------------
Lotus field sales offfices and will make such seminars available to a limited
number of designated LAEC employees at no charge, provided that space is
available. LAEC employees attending such seminars will not be permitted to
solicit training business directly or indirectly from other attendees.
(d) Product Support. Lotus will make available direct telephone access to Lotus
----------------
customer support personnel by a designated employee of LAEC for an additional
charge.
4. Undertakings of LAEC. LAEC assumes the following obligations:
(a) Courses. LAEC shall offer training with respect to the Lotus Products to
-------
members of the general public on an individual and/or group basis. LAEC shall
train a minimum number of students per month per Authorized Site as set forth in
its LAEC Program Application. LAEC shall offer Authorized Courses only at
Authorized Sites or at a customer site only for such customer's employees. LAEC
must offer courses on the most recent public releases of the Lotus Products, and
all courses must be listed in all appropriate LAEC brochures and class
schedules. LAEC will be responsible for training course administration,
including, without limitation, registration and billing, and will supply Lotus
in advance with a copy of its standard policies for training classes.
LAEC must purchase a Courseware Kit from Lotus for each student. In order to
maintain consistent, high-quality standards which customers associate with Lotus
Authorized Education Centers, LAEC agrees that it will only use Courseware Kits
to teach Authorized Courses. Notwithstanding the foregoing, LAEC may create and
use supplementary course materials or custom course materials, but such
materials shall not replace Courseware Kits or other materials supplied by Lotus
for use with the Authorized Courses. In the event LAEC teaches its own courses,
LAEC must clearly differentiate between its curriculum and Authorized Courses in
its program and marketing materials and must inform customers that LAEC's
courses are not authorized by Lotus.
(b) Facilities. Each Authorized Site must comfortably accommodate at least ten
-----------
(10) trainees. LAEC must provide each trainee with (i) a personal computer or
terminal (with a copy of the Lotus Product which is the subject of the
Authorized Course installed thereon), (ii) a student workbook for the Authorized
Course, and (iii) the Lotus course completion certificate if such trainee
completes the Authorized Course. LAEC must maintain one (1) copy of the
documentation for each Lotus Product at each training location.
(c) Instructors. All classes for Authorized Courses must be taught by
------------
instructors who have been certified as Lotus Certified Instructors ("LCIs"). The
cost of all certification training shall be borne by LAEC. LAEC shall at all
times during the term of this Agreement retain at least one LCI as an employee
of LAEC. The student-to-LCI ratio for each class must at all times be less than
or equal to 12-to-1.
<PAGE>
LOTUS AUTHORIZED EDUCATION CENTER AGREEMENT
STANDARD TERMS AND CONDITIONS
(d) Promotion. LAEC will use its best efforts to promote Authorized Courses
----------
through advertising and training seminars. In any such advertising, LAEC may use
the logo materials provided by Lotus and shall observe the obligations
concerning the use of Lotus trademarks and logos set forth in Section 5 hereof
and in guidelines provided to LAEC. In the event that Lotus provides the LAEC
with product brochures, LAEC shall prominently display such brochures.
(e) Marketing Materials. LAEC shall maintain on its premises in a prominent
--------------------
position the plaque provided by Lotus designating LAEC as a Lotus Authorized
Education Center . At the request of Lotus, LAEC will distribute to each trainee
copies of marketing materials provided free of charge by Lotus.
(f) Reports, Audit. LAEC must obtain electronic course evaluations from each
--------------
trainee, using the evaluation form provided by Lotus, and will provide
electronic copies of such completed course evaluations to Lotus upon completion
of the course. Additionally, LAEC shall electronically submit to Lotus (i) a
"rolling" ninety (90) day training schedule each month and (ii) quarterly
reports regarding LAEC's training activity (as further described in the LAEC
Program materials). Lotus shall be entitled to conduct unannounced audits of
LAEC's training sites. Such audits may include, but will not necessarily be
limited to, classes, facilities, location of Lotus Products installation
records, competency of the training staff and other matters related to LAEC's
obligations under this Agreement.
(g) Compliance. LAEC will at all times comply with the LAEC Program terms as
-----------
established by Lotus, which terms will be communicated to LAEC and which are
incorporated herein by reference. Lotus may change the Program terms at any time
and will notify LAEC of all such changes. LAEC will conduct its activities in an
ethical manner and in compliance with all applicable laws.
(h) Communications. LAEC must establish a Lotus Notes server to communicate
---------------
with Lotus and will communicate with Lotus via Lotus Notes whenever possible.
LAEC is responsible for installing appropriate hardware and software to
communicate electronically with Lotus and for all LAEC data transmission
charges.
(i) Services to Lotus. LAEC will admit Lotus employees and employees of Lotus
------------------
customers designated in advance by Lotus to its courses, provided space is
available, at a tuition rate equal to no more than forty percent (40%) off of
LAEC's current suggested retail tuition rates for such courses. Additionally,
LAEC acknowledges that Lotus may from time to time offer to its customers and/or
business partners training certificates or other special promotions providing
opportunities to attend training courses at reduced tuition rates. LAEC agrees
to provide such training at such reduced rates, so long as the rate offered to
such customers is no more than forty percent (40%) off of LAEC's current
suggested retail tuition rates. All discounted training offered to Lotus
customers or business partners shall be billed directly to the customer or
business partner, unless Lotus notifies LAEC to bill Lotus.
5. COPYRIGHTS AND TRADEMARKS.
(a) During the term of this Agreement, Lotus authorizes LAEC to use the
designation "Lotus Authorized Education Center," the trademark "Lotus," and the
Lotus logo solely in connection with LAEC's performance under this Agreement and
exclusively in connection with Authorized Courses. LAEC shall follow the
instructions of Lotus, as given from time to time, with respect to trademark
usage. Except as expressly provided in Section 2(b) and this Section 5(a),
nothing in this Agreement confers upon LAEC any interest in or licenses under
any of Lotus' patents, trademarks, logos, copyrights, trade names or
designations.
(b) In the event LAEC becomes aware of unauthorized copying of Lotus products or
courseware, whether by employees of LAEC, customers or students, it must
immediately notify Lotus and take all reasonable measures to halt such
unauthorized copying.
(c) A violation by LAEC of any Lotus copyright or other intellectual property
right shall be suffficient grounds for immediate termination of this Agreement
by Lotus.
6. Confidentiality.
(a) For five (5) years from and after the Effective Date of this Agreement, LAEC
shall hold in confidence all confidential and/or proprietary information
disclosed to LAEC by Lotus. The foregoing obligation shall not apply to
information that (i) is publicly known at the time of its disclosure to LAEC,
(ii) is lawfully received by LAEC from a third party not bound in a confidential
relationship to Lotus, (iii) is published or otherwise made known to the public
by Lotus, (iv) was already known to LAEC at the time of disclosure by Lotus, (v)
was generated independently by LAEC before its receipt from Lotus, or (vi) is
required to be disclosed pursuant to a valid court order or subpoena, provided
that LAEC gives Lotus prompt notice of any such court order or subpoena.
(b) LAEC shall not reveal the terms of this Agreement to any third party
without the prior written consent of Lotus, except that LAEC may disclose this
Agreement to its accountants and attorneys or as may be required by law.
(c) LAEC acknowledges and agrees that any breach of this Section 6 would cause
irreparable harm to Lotus, and that Lotus shall be entitled to specific
performance or injunctive relief to enforce this Section 6 without having to
post a bond.
(d) The provisions of this Section 6 shall survive the expiration or earlier
termination of this Agreement.
7. TERMINATION.
(a) Except as otherwise provided in this Agreement, either party may terminate
this Agreement (i) for any reason upon thirty (30) days prior written notice to
the other party, (ii) fourteen (14) days after written notice of a material
breach of this Agreement if such breach is not cured to the other party's
reasonable satisfaction within such period, or (iii) immediately if the material
breach is not curable.
(b) Lotus may terminate this Agreement immediately upon written notice to LAEC
if LAEC ceases conducting business in the ordinary course, becomes insolvent,
makes a general assignment for the benefit of creditors, suffers or permits the
appointment of a receiver for its business or assets, or files or
<PAGE>
LOTUS AUTHORIZED EDUCATION CENTER AGREEMENT
STANDARD TERMS AND CONDITIONS
has filed against it a petition under the U.S. Bankruptcy Code or any other law
relating to insolvency or the protection of the rights of creditors.
(c) Upon any expiration or termination of this Agreement, LAEC shall return to
Lotus all materials supplied to LAEC by Lotus including, without limitation, all
copies of Lotus Products, training materials, plaques, logo materials, stickers
and any other materials furnished by Lotus hereunder.
8. Indemnity. LAEC shall indemnify, defend and hold Lotus harmless from and
against all liabilities, claims or demands (including reasonable attorneys'
fees) arising out of or in connection with LAEC's performance of this Agreement.
9. No Warranty. LOTUS MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO ANY SOFTWARE, COURSEWARE OR
OTHER MATERIALS OR SERVICES SUPPLIED BY LOTUS HEREUNDER.
10. Limitation of Liability. IN NO EVENT SHALL LOTUS BE LIABLE FOR ANY
INCIDENTAL OR CONSEQUENTIAL DAMAGES, EVEN IF IT HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES, AND LOTUS' LIABILITY TO LAEC SHALL IN ALL EVENTS BE
LIMITED TO REFUND OF THE FEES PAID BY LAEC TO LOTUS HEREUNDER.
11. Notices. All notices provided for in this Agreement shall be given in
writing and shall be effective (i) when served by personal delivery, (ii) three
days after deposit, postage prepaid, in the United States mail addressed to the
parties at their respective addresses set forth herein or (iii) two days after
deposit with an overnight courier addressed to the parties at their respective
addresses set forth herein, or to such other address or addresses as either
party may later specify by written notice to the other.
12. Relationship of the Parties. The parties hereto are independent
contractors and neither party is an employee, agent, partner or joint venturer,
of the other. Neither party shall have the right to bind the other to any
agreement with a third party or to incur any obligation or liability on behalf
of the other party, and neither party shall represent that it has the power to
do so.
13. Miscellaneous. The services to be provided by LAEC are personal in nature.
Neither this Agreement nor any interest herein may be assigned in whole or in
part by LAEC without the prior written consent of Lotus. This Agreement
constitutes the entire agreement of the parties with respect, to the subject
matter hereof and supersedes all prior negotiations, communications,
understandings, and agreements, written or oral. Any additional or conflicting
terms contained in any purchase order, invoice, acknowledgment or other similar
document will be of no effect. This Agreement may only be amended, supplemented
or modified in a writing duly executed and delivered by each party. This
Agreement is binding upon the parties, their successors and permitted assigns.
If any provisions of this Agreement shall be held by a court of competent
jurisdiction to be contrary to law or public policy, the remaining provisions
shall remain in full force and effect. No term or provision hereof shall be
deemed waived and no breach consented to or excused, unless such waiver, consent
or excuse shall be in writing and signed by the waiving or consenting party. No
consent, waiver or excuse shall constitute a consent to, waiver of, or excuse of
any different or subsequent breach, whether or not of the same kind as the
original breach. This Agreement shall be governed by and construed in accordance
within the laws (excluding the conflict of laws rules) of The Commonwealth of
Massachusetts. The provisions of Sections 6 through 10 will survive termination
or expiration of this Agreement in accordance with their respective terms.
<PAGE>
*EXHIBIT 10.7
------------
1996 Business Partner Agreement dated June 1, 1996, between
International Business Machines Corporation and Computer Generated
Solutions, Inc.
* Confidential treatment is being requested with respect to portions of
this exhibit
<PAGE>
IBM
1996
BUSINESS PARTNER
AGREEMENT
INDUSTRY REMARKETER EXHIBIT
<PAGE>
[Letterhead of International Business Machines Corporation]
June 24, 1996
Mr. Phillip Friedman
Computer Generated Solutions, Inc.
1675 Broadway
New York, NY 10019
Dear Mr. Friedman:
Based on your performance during your current contract period, IBM is offering
you a new contract for the period, July 1, 1996 through June 30, 1997.
Your current IBM Credit Corporation approved line of credit remains in effect
unless otherwise notified by IBM or IBM Credit Corporation. All IBM Credit
Corporation financial relationships are subject to change.
You are also required to maintain a satisfactory payment trend and record.
Please review the enclosed Agreement documents and sign the NSP Signature Page.
This document can be returned to me via fax at 1-800-426-9880.
To allow for sufficient processing time, return your contract to us by June 27,
1996. Your ability to place orders may be interrupted if contracts are received
after this date.
Upon acceptance, an executed copy will be returned for your file.
If you have any questions, you can contact me or your IBM Marketing
Representative, Bob Torres.
Sincerely,
/s/ Cindy Clark
Cindy Clark
Customer Contracts Representative
<PAGE>
IBM BUSINESS PARTNER AGREEMENT IBM
LOGO BUSINESS
National Solution Provider Signature Page PARTNER
- --------------------------------------------------------------------------------
As our National Solution Provider, we approve you as our NSP/Application
Specialist. We may also approve you as our Industry Remarketer. We approve you
for the same Products as an Application Specialist that we approve you for as an
Industry Remarketer, and both of us agree that you will perform as an Industry
Remarketer unless you unilaterally decide not to do so and advise us of this by
presenting us with a Remarketer Statement of Election. If we decide to
authorize you to perform Marketing Activities as an NSP/Application Specialist,
we will use a Prospect (or Project) Form, or allow you to use our central order
facility. For each relationship, copies of the applicable documents are
included. Please make sure you have them and notify us if any are missing.
Authorized Relationship Approved
yes NSP/Application Specialist
- ---
As our NSP/Application Specialist, for Prospects who acquire Products from us,
you agree to perform Marketing Activities according to the terms of the
following (collectively called the "NSP/Application Specialist Agreement"):
1) the NSP/Application Specialist and AS Profile (Z125-4906-12 12/95); 2) the
Marketing Assistant General Terms (Z125-5111-03 12/95); 3) the NSP/Application
Specialist and AS Attachment (Z125-5123-02 12/95); and 4) the NSP/Application
Specialist Central Order Attachment (Z125-5125-01 11/94). The NSP/Application
Specialist Agreement and its applicable Transaction Documents are the complete
agreement regarding this relationship.
Authorized Relationship Approved (yes/no)
yes Industry Remarketer
- ---
As our Industry Remarketer, you agree to market our Products with your
value-added enhancement, at the prices and terms you set, according to the terms
of the following (collectively called the "Industry Remarketer Agreement"): 1)
the Industry Remarketer Profile (Z125-4804-23 12/95); 2) the Remarketer General
Terms (Z125-4800-08 11/95); and 3) the Industry Remarketer Attachment
(Z125-4805-09 07/95). The Industry Remarketer Agreement and its applicable
Transaction Documents are the complete agreement regarding this relationship.
By signing below, each of us agrees to the terms of this Signature Page, the
NSP/Application Specialist Agreement, and the Industry Remarketer Agreement (if
approved), which replace any prior oral or written communications between us.
Any reproduction of this page or the included documents made by reliable means
(for example, photocopy or facsimile) is considered an original.
Agreed to: (IBM Business Partner name) Agreed to:
COMPUTER GENERATED SOLUTIONS, INC. International Business Machines
NEW YORK, NY 10019 Corporation
By /s/ Jay Hakami By
------------------------------------ ----------------------------------
Authorized signature Authorized signature
Name (type or print): Jay Hakami Name (type or print):
Date: 6/25/96 Date:
IBM Business Partner address: IBM Office address:
COMPUTER GENERATED SOLUTIONS, INC. 4111 Northside Parkway
1675 BROADWAY Atlanta, GA 30327
NEW YORK, NY 10019
- --------------------------------------------------------------------------------
After signing, please return a copy of this page and the Profiles to the local
"IBM Office address" shown above.
Note: Since you must sign this page, you need not sign the Profiles.
- --------------------------------------------------------------------------------
Z125-5122-01 11/94 (MKA02) Page 1 of 1
<PAGE>
Industry Remarketer Profile
- --------------------------------------------------------------------------------
We welcome you as an IBM Business Partner.
This Profile covers the details of your authorization to market our Products
with your value-added enhancements to End Users. Like you, we are committed to
providing the highest quality Products to the Customer. As our industry
remarketer, please let us know if you have any questions or problems with our
Products.
By signing below, each of us agrees to the terms of the following (collectively
called the "Agreement"):
(a) this Profile;
(b) Remarketer General Terms (Z125-4800-08 11/95); and
(c) the applicable Attachments referred to in this Profile.
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 and 2) all Products you order
and Services you perform under this Agreement are subject to it.
Revised Profile (yes/no): no Date received by IBM:
---- ------------------
Agreed to: (IBM Business Partner name) Agreed to:
COMPUTER GENERATED SOLUTIONS, INC. International Business Machines
Corporation
By JAY HAKAMI By
----------------------------------- -------------------------------------
Authorized signature Authorized signature
Name (type or print): /s/ Jay Hakami Name (type or print):
Date: 6/25/96 Date:
IBM Business Partner address: IBM Office address:
COMPUTER GENERATED SOLUTIONS, INC. 4111 Northside Parkway
1675 BROADWAY Atlanta, GA 30327
NEW YORK, NY 10019
- --------------------------------------------------------------------------------
Industry Remarketers-Mid Range are required to sign this Profile,
only if it is being revised. After signing, please return a copy to the
"IBM Office address" shown above.
Page 1 of 17
<PAGE>
1. Contract-Period Start Date (month/year): 06/96 Duration (months): 12
------- ----
The start date is always the first day of a month. The start date does
not change with a revised Profile.
2. Relationship Approval/Acceptance of Additional Terms:
For each approved relationship, each of us agrees to the terms of the
applicable Attachment by signing this Profile. Copies of those Attachments
are included. Please make sure you have them (and the Remarketer General
Terms) and notify us if any are missing.
Approved
Authorized Relationship (yes/no) Attachment
1) Industry Remarketer yes Z125-4805-09 07/95
----
2) K-12 Education Remarketer no Z125-5177-02 02/95
----
The following Offerings have additional
terms in the applicable Attachment:
1) Electronic Data Interchange no Z125-5207-00 03/94
----
2) Marketing Programs for Use
on non-IBM Machines no Z125-5241-00 07/94
----
3) IBM RISC System/6000 - North American no Z125-5308-01 02/95
----
4) IBM PC Server System/390 no Z125-5338-00 05/95
----
3. Name and Address of Your Aggregator, if applicable:
You may receive Dealer Exhibit Products through this Aggregator. By selecting
this Aggregator, you agree that it (and not we) will provide the functions
identified in the Remarketer General Terms as the Aggregator's
responsibility.
None Selected
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Page 2 of 17
<PAGE>
4. Name and Address of Your K-12 Education Systems Integrators for K-12
Education Products:
If you are a K-12 Education Remarketer, you may acquire K-12 Education
Products on the Dealer Exhibit from either the Primary or Secondary K-12
Education Systems Integrator named below. If a particular configuration
involving K-12 Education Products also requires other Products on the Dealer
Exhibit, you may acquire such other Products 1) from either of these
Integrators provided such other Products are ordered in conjunction with the
K-12 Education Products, or 2) separately through your Aggregator. By
selecting these Integrators, you agree that they (and not we) will provide
the functions identified in the Remarketer General Terms as an Aggregator's
responsibility.
Primary K-12 Education Systems Integrator:
NOT APPLICABLE
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Secondary K-12 Education Systems Integrator:
NOT APPLICABLE
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
5. 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 3 of 17
<PAGE>
The following Products are listed in the Dealer Exhibit, the Software Remarketer
Exhibit, or the Industry Remarketer Exhibit, unless otherwise noted. The terms
of an Exhibit apply to the Products listed in it. Approval to market the
Products includes approval for you to acquire them for development purposes.
Certain Products may not be available to you directly from IBM. Such Products
may be sourced from an IBM Authorized Distributor.
Approved to Market Approved to Market
to End Users to End Users
as an IR-MR (1) as an IR-PC (2)
System Types (yes/no) (yes/no)
1) IBM System/390 no N/A
----
2) IBM RISC System/6000 (3) no N/A
----
3) IBM Scalable POWERparallel no N/A
----
Systems 9076 SP2 (4)
4) IBM AS/400 yes N/A
----
5) IBM Networking Products yes N/A
----
System Units
1) IBM PC (5) N/A no
----
2) Item 1 above as workstations (6)(7) yes N/A
----
3) IBM PC Server (5) N/A no
----
except IBM PC Server System/390
4) Item 3 above as workstations (6)(7) yes N/A
----
5) IBM PC ServerSystem/390 N/A no
----
6) ThinkPad (5) N/A no
----
7) Item 6 above as workstations (7) yes N/A
----
8) IBM Retail POS Products no N/A
----
Models 468x and 469x (except 4694)
9) IBM 4694 Retail POS Products no N/A
----
10) IBM 465x Restaurant POS Products no N/A
----
11) K-12 Education System Units (8) N/A no
----
Product Categories
1) Graphics no N/A
----
2) Finance Products Category Jl no N/A
----
3) K-12 Education Programs (8) N/A no
----
4) IBM Storage Products no
----
Category S1 products yes N/A
----
Category S2 Products (10) yes N/A
----
Category S3 Products (10) no N/A
----
Category S4 Products yes N/A
----
5) IBM Entry System License Programs (11) N/A no
----
Products and Offerings
1) Printers from the IBM Printing
Systems Company (7)(12) yes N/A
----
(1) "IR-PC" means you are an industry remarketer of mid-range computer
Products. When we approve you for Products listed in the Industry
Remarketer Exhibit, you are also approved for their associated Programs and
peripherals listed in the Industry Remarketer, Software Remarketer and
Dealer Exhibits. When we approve you to market personal computer Products,
you are also approved for their associated Programs and peripherals listed
in the Dealer and Software Remarketer Exhibits.
(2) "IR-MR" means you are an industry remarketer of personal-computer Products.
When we approve you for Products listed in the Dealer Exhibit, you are also
approved for their associated Programs and peripherals listed in the
Dealer, Software Remarketer and Industry Remarketer Exhibits.
(3) This approval authorizes you to market the IBM RISC System/6000 in the
United States and Canada, subject to terms of the IBM RISC System/6000
North American Remarketer Attachment.
(4) Your approval to market the IBM RISC System/6000 is a prerequisite for
approval to market the SP2. However, approval for the IBM RISC System/6000
does not constitute approval for you to market the SP2.
(5) May be available from an Aggregator.
(6) May only be used, in conjunction with your value-added enhancement, as 1)
peripherals to system types, 2) peripherals to Point of Sale (POS)
systems, or 3) controllers for POS systems.
(7) You are approved to market these Products only if you have been approved
to market a System Type as an IR-MR.
(8) Available only from a K-12 Education Systems Integrator.
(9) Category F and J2 Products in the Industry Remarketer Exhibit are not
available to IR-PC's.
(10) You are also approved for Category S1 Products.
(11) These Products are listed in IBMLink.
(12) See Section 10 "Additional Terms."
Page 4 of 17
<PAGE>
Products.
- ------------------------- ------------------------- -------------------------
- ------------------------- ------------------------- -------------------------
- ------------------------- ------------------------- -------------------------
7. Authorized Locations:
Total number of Authorized Locations listed in this Profile: 1
-----
Authorized Location
Loc. ID Loc. Type (a) (street address, city, state, ZIP code)
- ------- ------------- ---------------------------------------
63818 IRMR 1675 BROADWAY
NEW YORK, NY 10019
- ------------------------------------------------------------------------
Minimum Renewal Criteria (4)
------------------------------------------------------------
Product Name Volumes/Revenue/Other
------------------ ---------------------
AS/400, Networking $1,000,000
------------------ ---------------------
------------------ ---------------------
------------------ ---------------------
Minimum Number of Trained Personnel
------------------------------------------------------------
Product/Course Name Mgmt Sales Prog Support Service
------------------- ---- ----- ------------ -------
------------------- ---- ----- ------------ -------
------------------- ---- ----- ------------ -------
------------------- ---- ----- ------------ -------
------------------- ---- ----- ------------ -------
------------------- ---- ----- ------------ -------
------------------- ---- ----- ------------ -------
------------------- ---- ----- ------------ -------
Certification (2) (3)
------------------------------------------------------------
04 59 67 68 69 79 256 332 347
--- --- --- --- --- --- --- --- ---
N N N N N N N N N
--- --- --- --- --- --- --- --- ---
--- --- --- --- --- --- --- --- ---
--- --- --- --- --- --- --- --- ---
(1) A location type of "IR--MR" means an industry remarketer of mid-range
computer Products; "IR--PC" means an industry remarketer of personal
computer Products.
(2) As an IR--PC, the location must be certified for you to market certain
Products or (when also approved as an IBM Premier Personal Computer
Servicer) to service certain Products. A "Y" means certified; an "N" (or
anything other than a "Y") means not certified.
As an IR--MR, certification does not apply (regardless of whether anything
is entered under the certification groups).
The group to which each Product is assigned is specified in the Dealer and
Software Remarketer Exhibits.
(3) As a K-12 Education Remarketer, you agree to notify us in writing if (at
any time) any of your locations no longer satisfies our certification
requirements.
(4) If you are assigned a MRC for the IBM RISC System/6000, your MRC includes
sales made in the U.S. and Canada.
CERTIFICATION GROUPS:
04 = IBM Premier Personal Computer 79 = IBM VoiceType
Servicer (a) 256 = K-12 Education Products
59 = IBM THINKable Products 332 = IBM Premier Personal Computer
67 = NetWare (b) -- Basic Servicer -- Fixed Fee (a)
68 = NetWare -- Gold 347 = IBM PC Server System/390
69 = NetWare -- Platinum
(a) While certified, you may not assign Warranty Service responsibility for any
Machines.
(b) Registered trademark of Novell, Inc.
Z125-4804-23 12/95 (MKA02) Page 5 of 17
<PAGE>
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------
Loc. ID Loc. Type(a) Authorized Location (street address, city, state, ZIP code)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Minimum Renewal Criteria
-------------------------------------------------------------------------
Product Name Volume/Revenue/Other
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Minimum Number of Trained Personnel
-------------------------------------------------------------------------
Product/Course Name Mgmt Sales Prog Support Service
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Certification (2) (3)
-------------------------------------------------------------------------
04 59 67 68 69 79 256 332 347
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------
Loc. ID Loc. Type(a) Authorized Location (street address, city, state, ZIP code)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Minimum Renewal Criteria
-------------------------------------------------------------------------
Product Name Volumes/Revenue/Other
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Minimum Number of Trained Personnel
-------------------------------------------------------------------------
Product/Course Name Mgmt Sales Prog Support Service
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Certification (2) (3)
-------------------------------------------------------------------------
04 59 67 68 69 79 256 332 347
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
</TABLE>
Page 6 of 17
<PAGE>
A) This section identifies by System Type (1), your ......... (2); its
Applicable Discount Percentage (3); and, the Minimum Revenue Attainment you
are required to achieve at the mid-point of your Contract Period, in order to
maintain the current discount percentage (4). At your request we will review
your Revenue Attainment, any time during the contract period to determine if you
qualify for a higher discount percentage.
At the mid-point of your contract period, IBM will review your Revenue
Attainment by System Type. If it is less than the amount specified in column
(4), your discount percentage will be adjusted downward one level for the
remainder of the contract period.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
(1) (2) (3) (4)
System Type System Revenue Applicable Discount Six Months' (1) Minimum
or Commitment Percentage Revenue Attainment to
System Unit Maintain Current
(as applicable) Discount Percentage
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
IBM RISC
System/6000 (2) N/A N/A N/A
------- ------- -------
Federal (3) Discount for:
Machines N/A Programs N/A
----- -----
IBM SP/2 N/A N/A N/A
------- ------- -------
- ---------------------------------------------------------------------------------------
IBM AS/400: **** ****
------------ ------------
9402 ****
-------
9404 ****
-------
9406 ****
-------
I/O and SW ****
-------
- ---------------------------------------------------------------------------------------
IBM Point of
Sale Products N/A N/A N/A
------- ------- -------
- ---------------------------------------------------------------------------------------
</TABLE>
(1) 12 Months if you have a 24-month contract
(2) 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.
(3) The Products eligible for the Federal discount are identified in the
Industry Remarketer Federal Discount Schedule F.
B) This applies only to those Products listed in the Industry Remarketer
Exhibit which require a quantity commitment.
Product Committed Quantity of
Category Products by Category
N/A
----------------------- ------------------------
----------------------- ------------------------
----------------------- ------------------------
----------------------- ------------------------
----------------------- ------------------------
----------------------- ------------------------
----------------------- ------------------------
----------------------- ------------------------
----------------------- ------------------------
----------------------- ------------------------
**** Confidential treatment is being requested for these portions of this
agreement.
Page 7 of 17
<PAGE>
9.
You assign to us, or an IBM Premier Personal Computer Servicer, Warranty
Service responsibility for the following Dealer Exhibit Machines.
Type/Model Type/Model Type/Model Type/Model
----------------- ------------------ ------------------ -----------------
----------------- ------------------ ------------------ -----------------
----------------- ------------------ ------------------ -----------------
----------------- ------------------ ------------------ -----------------
----------------- ------------------ ------------------ -----------------
Unless you are assigning to us, please specify the name of the IBM Premier
Personal Computer Servicer:
10. Additional Terms: The following terms apply to the IBM Printing Systems
Company.
1) End User Support
We will provide End User support. Your End User satisfaction
responsibilities are limited to the responsibilities specified below. You
agree to:
1. select Products that best meet the End User's needs;
2. inform the End User of how to obtain ongoing support;
3. assist us, when requested, in ensuring End User satisfaction, and
4. provide us within 10 days of installation of a product the following
information:
a. End User name and address;
b. Machine type/model and serial number; installation date and
location; and
c. date of sale.
2) Demonstration Products
For use as demonstration Products, we may make IBM Printing Systems
Company Products available to you at lower charges.
You agree to:
1. use a demonstration Product primarily in support of your Product-
marketing activities;
2. not resell, lease, or transfer a demonstration Product for 6 months
after its Date of Installation, without prior written consent; and
3. pay an adjustment charge if you use a demonstration Product other than
as described above. The charge is the difference between what you paid
and the full charge for the Product.
You may not combine this offering with any other discount or allowance. We
may limit the quantity of demonstration Products you acquire.
Page 8 of 17
<PAGE>
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.
ACS OPTIMA
ACS Optima for the apparel industry to operate on the IBM AS/400 to include at a
minimum: graphical user interface for easy PC navigation with point and click
technology; executive information system for senior management graphic
Presentation; quick image for viewing a sketch and a screen on-line
simultaneously; EDI/400 for integration with the Prememos EDI translator; order
management/distribution for complete order fulfillment emphasizing customer
service; sales automation for up-to-the minute information to to remote
salespeople; PKMS for automation of the DC with electronic pick tickets,
manifesting, UCC labeling and ASN with links to ACS Optima; import management
for tracking from PO generation to receipt of goods; product management for
overseeing the production of domestic, 807 and contractor WIP/PO operations
IPCS shop floor system for factory control, Piece rate payroll, Plant loading
and scheduling; accounts receivable for cash flow monitoring, returns and
allowances with ties to other credit checking in order management accounts
payable and general ledger.
********************************************************************************
JD EDWARDS FINANCIAL SOLUTION
The JDE Financial Solution for use on the IBM AS/400 (9402 only) to include at a
minimum: Worldcase/Foundation Environment*, general ledger and FASTR.
(*Worldcase/Foundation Environment includes JDE address book, electronic mail,
menu manager, dream writer, security officer, documentation system, next number,
user defined category codes, data directory, world writer and unattended night
operations.)
********************************************************************************
Page 9 of 17
<PAGE>
Value-Added Enhancement Descriptions (Continued)
JD EDWARDS DISTRIBUTION SOLUTION
The JDE Distribution Solution for use on the IBM AS/400 will include at a
minimum: Worldcase/Foundation Environment*, general ledger, inventory
management, and purchase order processing. (*Worldcase/Foundation Environment
includes JDE address book, electronic mail, menu manager, dream writer, security
officer, documentation system, next number, user defined category codes, data
directory, world writer, and unattended night operations.)
********************************************************************************
JD EDWARDS MANUFACTURING SOLUTION
The JDE Manufacturing Solution for use on the IBM AS/400 will include at a
minimum: Worldcase/Foundation Environment*, general ledger, inventory
management, and product data management. (*Worldcase/Foundation Environment
includes JDE address book, electronic mail, menu manager, dream writer, security
officer, documentation system, next number, user defined category codes, data
directory, world writer, and unattended night operations.)
********************************************************************************
JD EDWARDS CONSTRUCTION SOLUTION
The JDE Construction Solution for use on the IBM AS/400 will as IO include at
a minimum: Worldcase/Foundation Environment*, general ledger, accounts
receivable, accounts payable, and property management. (*Worldcase/Foundation
Environment includes JDE address book, electronic mail, menu manager, dream
writer, security officer, documentation system, next number, user defined
category codes, data directory, world writer, and unattended night operations.)
********************************************************************************
JD EDWARDS PROPERTY MANAGEMENT SOLUTION
The JDE Property Management Solution for use on the IBM AS/400 (9402 only) will
include at a minimum: Worldcase/Foundation Environment*, general ledger,
accounts receivable, accounts payable, and property management.
(*Worldcase/Foundation Environment includes JDE address book, electronic mail,
menu manager, dream writer, security officer, documentation system, next number,
user defined category codes, data directory, world writer, and unattended night
operations.)
********************************************************************************
JD EDWARDS HUMAN RESOURCES MANAGEMENT SOLUTION
The JDE Human Resources Management Solution for use on the IBM AS/400 (9402
only) will include at a minimum: Worldcase/Foundation Environment* and human
resources. (*Worldcase/Foundation Environment includes JDE address book,
electronic mail, menu manager, dream writer, security officer, documentation
system, next number, user defined category codes, data directory, world writer,
and unattended night operations.)
********************************************************************************
Page 10 of 17
<PAGE>
JD EDWARDS PAYROLL SOLUTION
The JDE Payroll Solution for use on the IBM AS/400 (9402 only) will include at a
minimum: Worldcase/Foundation Environment* and payroll.
(*Worldcase/Foundation Environment includes JDE address book, electronic mail,
menu manager, dream writer, security officer, documentation system, next number,
user defined category codes, data directory, world writer, and unattended night
operations.)
********************************************************************************
FACTS VALUE ADD
The FACTS Value Add for operation on the IBM AS/400 (9402 only) to include at a
minimum: accounts payable integrates with FACTS general ledger, provides multi-
company support, allows single or batch invoice entry, provides bank
reconciliation, has automatic or manual check production capabilities, selects
payments by vendor, due date or discount date, integrates multiple bank
accounts, allows for on-account payments, creates vendor master using user-
defined fields, allows recurring entries and multiple distributions, provides
vendor history with user-selected options, creates cash requirement project
report; general ledger integrates with FACTS accounts payable, integrates with
sales, accounts receivable, finished goods, and raw material inventory, allows
multi-company and multi-division within a company, has account and sub-account
structure, provides flexible, user defined accounting periods, allows multiple
open periods and recurring vouchers, provides on-line review of general ledger
account's current, YTD, and future (regular and recurring) postings in summary
and detail, contains a flexible, user-defined report writer for financial
reports.
********************************************************************************
PKMS
PKMS for operation on the IBM AS/400 in the wholesale distribution and retail
industries to include at a minimum: work order download capability;
receive/stock locate for creating put-away label to help track inventory within
DC, cross doccks pre-packs for faster throughput, automatically directs priority
SKU's to active pick sites or special processing, provides receipt verification
against ASN for better DC planning and shipment reconciliation at host; Pick for
batching picktickets into "waves," eliminating manual selection and sorting,
prints Picktickets in best picking sequence for improved productivity,
identifies and Processes "hot" picks and rush orders immediately, pre-cubes
orders and prints carton-level Picktickets to support pick/pack operations;
pack/verify verifies picking accuracy via bar code scanning which reduces
chargebacks and improves sales, Performs weight verification of cartons to
doublecheck picking accuracy, creates UCC-128 shipping labels and carton content
info for EDI ASN, eliminates effort and errors associated with keypunch
invoicing; ship/manifest ensures shipping integrity of order, identifies best
shipment routing based on freight charges and customer requirements,
automatically generates shipment documents
Page 11 of 17
<PAGE>
Value-Added Enhancement Descriptions (Continued)
including shipment manifest and bills of lading, processes shipping zone and
rate tables to automatically derive shipping charges for certain carriers; bulk
storage tracks and manages inventory in all areas of DC including bulk storage
and active pick sites, handles suggested put-away in bulk and directed
replenishment from bulk to active, keeps system up-to-date with real time
updates using RF devices.
********************************************************************************
PREMENOS
Premenos, an EDI translator for cross industry to operate on the IBM AS/400
(9402 only) to include at a minimum: mapping functions with conditional mapping,
code conversion, logical operations and interfacting with other applications;
communication functions for sessions with public and private networks, and
direct connections to trading partners; audit and reporting functions for access
of trail activity and reports from EDI/E tracking files and data base for
compliance checking; routing functions; support.
********************************************************************************
AS/400 NEW PLACEMENT VALUE ADD
The implementation of the IBM AS/400 9402 models 200 and 20S New Account
Solution installed at an enterprise location to include at a minimum:
An end user enterprise is defined as "any legal entity (such as a corporation)
and the subsidiaries it owns by more than 50%." A new account is defined as an
end user enterprise in the United States or Puerto Rico that meets the following
criterion:
- - Prior year revenue of less than $15 million or less than 150 employees
(revenue and employee size will be verified by/with Dun and Bradstreet)
- - No AS/400, S/36, S/38, RISC/6000 or ES/9000 installed or on order.
Final net invoiced, Industry Remarketer billed IBM hardware, software and
services to the end user must be equal to or greater than the published (single
unit) IBM retail price of the IBM content of the AS/400 9402 2XX system solution
sold to the same end user in the same transaction. The single unit price
includes additional memory, DASD, IBM software, but excludes displays and
printers. The net invoice can include all your "Industry Remarketer billed
services," which shall mean any of the following provided directly by you to
your end user:
- - Consulting services
- - System analysis and design services
- - Application solution development services
- - Integration services
- - End user training services
This VAE does not restrict your flexibility in pricing these products
Page 12 of 17
<PAGE>
to your end user as you, in your sole discretion, deem appropriate.
You are responsible for maintaining all necessary records to substantiate
compliance with this VAE requirement and agree to make such records available
to IBM upon request for purposes of auditing your compliance with this VAE
requirement. IBM may use an independent auditor for this audit.
S/3X TO AS/400 MIGRATION
Computer Generated Solutions System/3x to AS/400 Migration Value Add is for the
purpose of migrating currently installed IBM System/3X end user applications to
the IBM AS/400, model 9402 only, and will include at a minimum:
- - Hardware and software component selection configuration and
ordering
- - Hardware and software installation
- - Migration of end-user application programs to S/3X mode or AS/400 native based
on customer requirement
- - Systems Integration (if applicable)
- - AS/400 operational training plus ongoing application and systems support
In addition, Computer Generated Solutions will make available release/version
updates and provide ongoing technical support service for hardware, software,
and application programs.
Computer Generated Solutions will report end user sales via end user reporting
to IBM. This report must specify the serial number of the IBM System/3X which
was replaced and certify that it was specifically replaced by the AS/400.
********************************************************************************
COMPETITIVE CONVERSION VALUE ADD
The Computer Generated Solutions Conversion Value Add for the Purpose of
migrating currently installed Computer Generated Solutions end user applications
to the IBM AS/400, only from non-IBM systems.
The Conversion Value Add will include at a minimum:
- The conversion assistance from the currently installed system
- System sizing of files and libraries
- Hardware and software configurations
- IBM AS/400 Operation and programming education
- Conversion of presently installed application programs to the IBM AS/400
In addition, Computer Generated Solutions will make available release/version
updates and provide ongoing technical support service for hardware, software
and application programs.
Computer Generated Solutions will report end user IBM AS/400 sales via end user
reporting to IBM.
Page 13 of 17
<PAGE>
Value-Added Enhancement Descriptions (Continued)
********************************************************************************
AS/400 Local Area Network - Client Server
Local Area Network - Client Server Value Add for use on the IBM AS/400 9402
only will include at a minimum:
- - Network design and component selection
- - The network must be designed using Ethernet, Token Ring, or wireless
connection
- It must support OS/2, Windows, MacIntosh or Unix clients
- The network must be implemented using APPC/APPN or TCP/IP protocols.
(LocalTalk may be used in a MacIntosh client environment.)
- - Installation of three or more AS/400 enabled nodes.
- - End user training and support
- - Implementation of at least two (2) of the following, or with exception
approval, a functionally equivalent product offering:
- Client Access/400 (for OS/2 and Windows clients)
- MacIntosh Connections (for MacIntosh clients)
- DAL Client and DAL Server (for MacIntosh clients)
- Connection Program/400 for Unix environments
- Adstar Distributed Storage Manager/400 (ADSM/400)
- LAN Server/400
- LAN Resources Extension Services/400 (LANRES/400)
- Manageware/400
- TCP/IP File Server Support/400
The initial installation of the Value Add must consist of a minimum of three (3)
nodes. In a situation where an end user has one LAN node installed, a minimum of
two additional nodes must be added to the existing network prior to the
implementation of the Value Add. The LAN-C/S Value Add must be the primary
justification for the acquisition of AS/400 products.
********************************************************************************
HUB VALUE ADDED ENHANCEMENT (NETWORK INTEGRATOR)
The Network Integrator Value Added enhancement for use on IBM Network Systems
in a LAN or LAN/WAN environment will include at a minimum:
- - The remarketer's network implementation to include one or more of the
following requisite IBM networking systems products:
- IBM 8250 Intelligent Hub
- IBM 8260 Intelligent Switching Hub
- IBM 8244 FDDI Concentrator
- Ethernet Stackable Hub
- IBM 8271 EtherStreamer Switch
- IBM 8282 ATM Workgroup Concentrator
- IBM 8282 ATM LAN Switch
AND
- - Logical Network Design
Page 14 of 17
<PAGE>
- - Define the network configuration
-- gather and analyze network data to define capacity and networking product
requirements
- - Define LAN topology as required (Token Ring, Ethernet, ATM or FDDI)
- - Define the TCP/IP requirements as required to support the installation of Hub
Management Modules and their SNMP agents to allow communications to the
appropriate Hub Management Platform
- - Physical network design
- Design hub networks that conform to the architectural guidelines of
Ethernet, Token Ring, ATM or FDDI utilizing the appropriate combination of
modules and hubs to meet customer requirements
- Configure networking hardware and software products; install and test to
meet customer requirements
- Establish connections and test network transport facilities
- - Product optimization and performance
- Collect network data and analyze traffic flows, congestion points and
networking product performance
- - End user support
- Provide on-site or remote access to network product configuration changes,
network information and problem determination
- Provide networking products, hardware upgrades and software upgrades and
fixes to keep the installed network products operational.
********************************************************************************
ROUTER VALUE ADDED ENHANCEMENT (6611)
The Network Integrator Value Added Enhancement for use on IBM Networking systems
in a LAN or LAN/WAN environment will include at a minimum:
- - The remarketer's network implementation to include one or more of the
following requisite IBM networking systems products:
-- IBM 6611 Network Processor
-- IBM 2210 Nways Multiprotocol Router
-- TRM Routexpander/2 with IBM Wide Area Connector
AND
- - Requirements - understand the customer's current and future network
requirements in the following areas:
-- Transport Protocols (TCP/IP APPN, SNA, IPX, Netbios, Appletalk, (DECNet,
Vines, XNS)
-- Bridging and filtering
-- Perfomance - traffic volumes and response time
-- LAN Technologies and WAN services from carriers
Page 15 of 17
<PAGE>
-- Applications and equipment interoperation
-- Education
- - Logical Network Design - Define:
-- Network configuration, including addressing schemes and every router node
-- Comprehensive network verification tests
- - Physical Network Design - Define:
-- Hardware node configurations
-- LAN technologies
-- Wiring and cabling topology
-- Reliability and backup facilities
-- Network interfaces: LAN and WAN (modems, DSU/CSUs)
-- WAN services from carriers (Frame Relay, Pt to Pt, X.25)
- - Operation and Support Process Design - Define:
-- Problem isolation, diagnosis, determination, and fix processes
-- Software configuration change process
-- Network Management processes, including status and performance. (For large
networks, includes NV/6000 with AIX R&B Mgr/6000 or equivalent.)
- - Installation
-- Monitor hardware installation
-- Install and configure software
-- Test fully
-- Analyze and tune network performance (according to network size)
- - Support - Provide:
-- Onside and/or remote problem determination
-- Hardware and software upgrades and fixes
-- Guidance for other operation and support processes
-- Guidance for hardware configuration changes and expansion
********************************************************************************
AS/400 CLIENT/SERVER (NETWORKING)
Looking at the proposed AS/400 sale and other sales by the reseller to the same
end user in the past six months, the sum of all (1) net invoices IR billed
services (as defined below) and (2) list price of authorized IB products and
services (as defined below) must be equal to or greater than 40% of the list
price of the relevant base AS/400.
- -- "Base AS/400" means without additional memory, disk drives, displays,
adapters or operating system.
This Value Added Enhancement does not restrict flexibility in pricing these
products by the business partner.
Implementation of this Value Added Enhancement must include network design and
component selection, installation, end user training, and
Page 16 of 17
<PAGE>
end user support.
- - "Industry Remarketer Billed Services" shall mean the following products and
services provided directly by the IR to their end user:
-- Consulting services
-- Systems analysis and design services
-- Application/solution development services
-- Integration services
-- End user training services
-- Third-party software (non-IBM) or your software, none of which is
acquired or purchased from IBM.
- - "Authorized IBM products and services" shall mean the following
IBM products and services sold by the IR to their end user:
-- IBM software (non-operating system)
-- IBM Support Family of Services
-- IBM 82XX Hub products
-- IBM 6611 Network Processor
-- IBM 2210 Nways Multiprotocol Router
-- IBM Communications Adapter cards
********************************************************************************
Page 17 of 17
<PAGE>
PLEASE RETAIN THESE DOCUMENTS FOR YOUR USE/REFERENCE.
THANK YOU.
<PAGE>
IBM Business Partner Agreement [LOGO] IBM Business Partner
NSP/Application Specialist and AS Profile
- --------------------------------------------------------------------------------
We welcome you as an IBM Business Partner. Based on your knowledge of our
Products, and your skill and experience in providing solutions that use our
Products, we have chosen you to perform Marketing Activities for us.
We are committed to providing our customers with the highest quality Products.
As our National Solution Provider/Application Specialist (NSP/AS) or Application
Specialist (AS), we look to you to help us fulfill this commitment. You are
responsible for establishing and maintaining customer satisfaction with all your
activities. This includes promoting customer satisfaction with all the Products.
Your activities should reflect positively on your firm, us, and the IBM Business
Partner Programs. You should not use your relationship with us to take unfair
advantage of other solution providers. In conducting your activities, you
should strive for results that are judged by those involved to be fair and
mutually beneficial.
By signing below, each of us agrees to the terms of the following (collectively
called the "Agreement"):
(a) this Profile;
(b) Marketing Assistant General Terms (Z125-5111-03 12/95); and
(c) the applicable Attachments referred to in this Profile.
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, any reproduction of
this Agreement or a Transaction Document made by reliable means (for example,
photocopy or facsimile) is considered an original.
Revised Profile (yes/no): no
---------------
<TABLE>
<CAPTION>
Agreed to: (IBM Business Partner name) Agreed to:
<S> <C>
COMPUTER GENERATED SOLUTIONS, INC. International Business Machines Corporation
By /s/ Jay Hakami By
------------------------------------------- -------------------------------------------
Authorized signature Authorized signature
Name (type or print): JAY HAKAMI Name (type or print):
Date: 6/25/96 Date:
IBM Business Partner number: IBM Office address:
IBM Business Partner address: 4111 Northside Parkway
COMPUTER GENERATED SOLUTIONS, INC. Atlanta, GA 30327
1675 BROADWAY
NEW YORK, NY 10019
</TABLE>
- --------------------------------------------------------------------------------
After signing, please return a copy of this Profile to the local "IBM Office
address" shown above.
- --------------------------------------------------------------------------------
Page 1 of 7
<PAGE>
1. Contract-Period Start Date (month/year): 07/96 End Date: June 30, 1997
------- ----------------
The start date is always the first day of a month and may not be earlier than
the month we sign this Profile. The start date does not change with a revised
Profile. The end date is December 31 of the current year. However, if you are
a National Solution Provider and also our industry remarketer, the end date
in your IR Profile prevails over this end date.
2. Relationship Approval/Acceptance of Additional Terms:
For each approved relationship, each of us agrees to the terms of the
applicable Attachment by signing this Profile. Copies of those Attachments
are included. Please make sure you have them (and the Marketing Assistant
General Terms) and notify us if any are missing.
Approved
Authorized Relationship (yes/no) Attachment
1) Application Specialist (AS) no Z125-5123-02 12/95
------
2) National Solution Provider/AS (NSP/AS) (1) yes Z125-5125-01 11/94
------ Z125-5123-02 12/95
3) NSP/AS Segment Solution Pilot (2) no Z125-5424-00 01/96
------
3. Approval of your Title:
As an Application Specialist, you are authorized to use the title of "IBM
Authorized Application Specialist." As a National Solution Provider, you are
authorized to use the title of "IBM Authorized National Solution Provider."
4. Confidential Information Disclosure:
You may have access to our confidential information and must sign the IBM
Agreement for Exchange of Confidential Information (Z125-4322).
Has the agreement been signed? (yes/no) yes
-------
If the answer above is no, a copy of the agreement is included. Please sign
it and return a copy to us (or notify us if it is missing).
5. Internal-Use Percent: 10%
This is the percent upon which we base your internal-use acquisition of a
Product.
(1) See Section 7 for approved segment solution. You must sign the National
Solution Provider Signature Page (Z125-5122). Note: Since you must sign
the Signature Page you need not sign this Profile.
(2) See Section 7 for approved and eligible segment solution.
Page 2 of 7
<PAGE>
<TABLE>
<CAPTION>
AS AS NSP/AS
Approved Approved Approved
to Market to Market to Market
Products Programs Products
(yes/no) (yes/no) (yes/no)
(3) (4) System Products
<S> <C> <C> <C>
N/A no yes 1) IBM AS/400 9402 System Units (5)
----- -----
N/A no yes 2) 18M AS/400 9404 System Units (5)
----- -----
N/A no yes 3) IBM AS/400 9406 System Units (5)
----- -----
no no no 4) IBM System/390 (6)
----- ----- -----
N/A no no 5) IBM RISC System/6000 (includes Power Personal) (5)
----- -----
N/A no no 6) IBM 9076 POWERparallel Systems SP2
----- -----
N/A no no 7) IBM PS/2 (programs only)
----- -----
N/A N/A no 8) IBM 8690 Kiosk (6)
-----
Industry Products
N/A no no 1) IBM PS/2 Store Controllers
----- -----
N/A no yes 2) IBM 6611 Network Processors/
----- -----
IBM 2210 Nways Multiprotocol Router
N/A no yes 3) IBM 317X Interconnect Controllers
----- -----
N/A no no 4) IBM 389X Document Processors
----- -----
N/A no no 5) IBM 465X Restaurant POS Systems
----- -----
N/A no no 6) IBM 468X POS Terminal
----- -----
N/A no no 7) IBM 47XX Branch Automation Systems
----- -----
N/A no no 8) IBM 5086 Graphics Processor
----- -----
N/A no no 9) Multimedia
----- -----
no no no 10)IBM 763X Terminals
----- ----- -----
</TABLE>
(3) You are approved to market the programs, peripherals, and other offerings
associated with the System or Industry Product. This excludes the programs
listed under the Application Programs section of this Profile, for which
specific approval is required. You are not approved to market the System or
Industry Product, unless you are also approved as an Application Specialist
for the System or Industry Product.
(4) Approval for the System or Industry Product includes approval for the
programs, peripherals, and other offerings associated with it. This
excludes the programs listed under the Application Programs section of this
Profile, for which specific approval is required.
(5) Prospect Form not required when marketing with an eligible segment
solution.
(6) Not available for Central Order. A Prospect Form is required.
Page 3 of 7
<PAGE>
PRODUCT APPROVAL (CONTINUED)
APPROVED
TO MARKET
(yes/no) Non-IBM Products
no 1) Local Vendor Program (LVP) Products (7)
-----
Service Offerings
no 1) Business Recovery Services
-----
yes 2) Project Support Services (8)
-----
yes 3) Customized Operational Services
-----
yes 4) IBM Support Family Services (excluding PS)
-----
no 5) IBM PS Support Family Services
-----
Other Offerings
Available to an NSPIAS only.
no 1) IBM 38XX Printers
-----
no 2) IBM 75XX Data Collection Terminal
-----
no 3) IBM 927X Voice Response Units
-----
yes 4) IBM Printers (Twinax) from the IBM Printing Systems Co.
-----
IBM 4028 Model AS1
IBM 4230 Models 101, 102, 111, 1S2, 10Y, and 10Z
IBM 4224 Models 1E3 and 1C2
IBM 4234 Models 008, 012, 00Y, and 01Z
IBM 6252 Models T08, T12, TOZ, and T1Z
IBM 6262 Models T12, T14, and T22
yes 5) IBM Printers (ASCII) from the IBM Printing Systems Co.
-----
IBM 4224 Models 301, 302, 3C2, and 3E3
IBM 4234 Models 009, and 013
IBM 6252 Models AP2, AP8, AS2, and AS8
IBM 6262 Models A12, A14, and A22
yes 6) IBM Printers (Coax) from the IBM Printing Systems Co.
-----
IBM 4028 Model NS1
IBM 4224 Models 2C2 and 2E3
IBM 4230 Models 201 and 202
IBM 4234 Models 007 and 011
IBM 6252 Models 014, 022, D12, D14, and D22
yes 7) IBM Printers (Non-IBM Attachments) from the IBM Printing Systems
----- Co.
IBM 6252 Models P08 and P12
IBM 6262 Models P12, P14, and P22
yes 8) IBM Printers (Other) from the IBM Printing Systems Co.
-----
IBM 3816 Models 01D and 01S (requires Coax approval)
(7) We will specify each LVP Product that applies to you.
(8) Project Support Services include Consulting Services, Hourly Services,
Custom Services, and Systems Integration Services. Project Support Services
offered by ISSC, EduQuest, and Education and Training are excluded. An
Integrated Services Offering (ISO) is a packaged offering which includes
one or more of the Services identified above. We will specify each ISO that
applies to you, if any.
(9) IBM BESTeam participants only.
Page 4 of 7
<PAGE>
APPROVED
TO MARKET
(yes/no) Other Offerings
Available to an NSP/AS only.
yes 9) General Storage (10)
-----
IBM 7131 SCSI Multi-Storage Tower
IBM 7134 High Density SCSI Disk subsystem
IBM 7137 Disk Array Subsystem
IBM 7202 RISC System/6000 Expansion Rack
IBM 7203 Portable Disk Drive
IBM 7204 External Disk Drive
IBM 7206 External 4MM Tape Drive
IBM 7207 1/4-lnch Cartridge Tape Drive
IBM 7208 8MM Tape
IBM 7210 CD-ROM Drive
IBM 7331 8MM Tape Library
IBM 7332 4MM Tape Autoloader
IBM 9334 SCSI Expansion Unit
IBM 9348 Magnetic Tape Drive
IBM 9427 8MM Tape Library
yes 10) High-End Tape (10)
-----
IBM 3490 Tape Subsystems
IBM 3494 Tape Library Dataserver
IBM 3590 Tape Subsystem
no 11) High-End UNIX Disk (10)
-----
IBM 7135 RADiant Array
yes 12) Optical Library (10)
-----
IBM 3995 Optical Library Dataserver
(10) You are also authorized to perform marketing activities for the System
Product features required to attach the storage Product.
Page 5 of 7
<PAGE>
Product Approval (Continued)
Application Programs
Approved
to Market
(yes/no) IBM RISC System/6000 CAD/CAM Programs (11)
no 1) APT Workstation/6000
-----
no 2) CAMkit/6000
-----
no 3) CATIA (12)
-----
no 4) IGES Processor/6000
-----
no 5) Numerical Control PostProcessor Generator
-----
no 6) Product Manager
-----
no 7) PROFESSIONAL CADAM (13)
-----
no 8) Valisys (14)
-----
You are also approved for the programs (if any) listed below:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(11) A Complex Operating Environment addendum must be completed.
(12) Registered trademark of Dassault Systems.
(13) Registered trademark of Dassault Systems of America.
(14) Registered trademark of Valisys Corporation.
Page 6 of 7
<PAGE>
If you are
approved segment solutions.
If you are also authorized in Section 2 under the NSP/AS Segment Solution Pilot,
your approved and eligible segment solution for this Pilot is specified below.
(Please note that a segment solution can be approved, but not eligible under
this Pilot.) If you have an approved Value Added Enhancement (VAE), to be
eligible under this Pilot it must be an industry-specific or cross-industry
application software VAE as defined in the VAE Criteria document in the
BPLIBRARY in IBMLink under the INFOLink category.
See Industry Remarketer Profile, Value Added Enhancement section.
Page 7 of 7
<PAGE>
Remarketer General Terms
- -------------------------------------------------------------------------------
Table of Contents
Section Title Page
1. Definitions.............................................. 2
2. Agreement Structure...................................... 3
3. Our Relationship......................................... 4
4. Marketing Funds and Promotional Offerings................ 5
5. Status Change............................................ 5
6. Export of Products....................................... 6
7. Federal Reporting Requirements........................... 6
8. Ordering and Delivery.................................... 6
9. Inventory Adjustments.................................... 7
10. Prices and Price Changes................................. 7
11. Invoicing, Payment, and Taxes............................ 8
12. Title.................................................... 8
13. Risk of Loss............................................. 9
14. Engineering Changes...................................... 9
15. Licensed Internal Code................................... 9
16. Programs.................................................10
17. Installation and Warranty................................10
18. Warranty Service.........................................11
19. Marketing of IBM Maintenance Services....................12
20. Patents and Copyrights...................................12
21. Liability................................................13
22. Trademarks...............................................13
23. No Property Rights.......................................13
24. Changes to the Agreement Terms...........................14
25. Ending the Agreement.....................................14
26. Waiver of Noncompliance..................................14
27. Electronic Communications................................15
28. Geographic Scope.........................................15
29. Governing Law............................................15
Page l of 15
<PAGE>
==== BUSINESS PARTNER AGREEMENT
Remarketer General Terms
- -------------------------------------------------------------------------------
1. Definitions
Aggregator is our remarketer who we authorize to acquire Products from
us to supply to its Customers who are also our remarketers. In addition,
we may authorize a remarketer to supply our Products to others (for
example, our industry remarketers). An Aggregator is responsible for
ordering, delivery, invoicing, payment, taxes, price reductions, and
inventory adjustments. In your Profile, we specify 1) the identity of
your "Aggregator," if any, or 2) if we approve you as an "Aggregator."
Authorized Location is a site, controlled and operated by you, at which
we authorize you to perform your responsibilities under this Agreement.
We may specify in your Profile certain requirements to which you must
adhere at each Authorized Location (such as, minimum renewal criteria
and minimum number of trained personnel).
Customer is either an End User, or a reseller who does not market to
other resellers. We specify in your Profile if we authorize you to
provide Products to End Users, resellers, or both.
Customer-set-up Machine is an IBM Machine that you (or your Customer)
set up according to our instructions.
End User is anyone, unaffiliated with you (except if you are a qualified
educational institution), who acquires Products for its own use and not
for resale.
Machine is an IBM or non-IBM machine, its features, conversions,
upgrades, elements, accessories, cables, or any combination of them
(provided by us or your Aggregator) that we approve you to provide to
your Customers.
Product is a Machine, Program, or Service.
Program is an IBM or non-IBM licensed program (provided by us or your
Aggregator) that we approve you to provide to your Customers. The term
"Program" does not include Licensed Internal Code.
Service is assistance (for example, Product maintenance) that we approve
you to perform or market. The term "Service" includes use of a resource
(such as a network) that we approve you to provide to your Customers.
Page 2 of 15
<PAGE>
The Remarketer General Terms apply to all our remarketers.
Profiles
We specify the details of our relationship (for example, the type of
remarketer you are) in a document called a "Profile." Each of us agrees
to the terms of the Profile, the Remarketer General Terms, and the
applicable Attachments referred to in the Profile, (collectively called
the Agreement), by signing the Profile.
Attachments
We describe additional terms that apply to our relationship in documents
called "Attachments." For example, we describe the additional terms that
apply specifically to dealers in an Attachment. Several Attachments may
apply to you. We specify in your Profile the Attachments that apply.
Transaction Documents
We will provide to you the appropriate "Transaction Documents" that
confirm the details of your order or provide additional information
about our relationship. The following are examples of Transaction
Documents, with examples of the information they may contain:
1. invoices (item, quantity, price, and amount due);
2. addenda (trial period and trial Products); and
3. exhibits (eligible Products, warranty information, and other Product-
specific information). We may change the terms of an exhibit on
written notice.
Conflicting Terms
If there is a conflict among the terms in the various documents, those
of an Attachment prevail over those of the Remarketer General Terms. The
terms of a Profile prevail over those of both of these documents. The
terms of a Transaction Document prevail over those of all the
documents.
Our Acceptance of Your Order
A Product becomes subject to this Agreement when we accept your order
by:
1. sending you a Transaction Document; or
2. providing the Product to you.
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;
2. accepting the Product described in the Transaction Document;
3. providing the Product to your Customer; or
4. making any payment for the Product.
Page 3 of 15
<PAGE>
Mutual Responsibilities
Each of us agrees that under this Agreement:
1. the Products we approve you to market are complex in nature and require
that you provide high quality support, both before and after the sale, to
ensure Customer satisfaction;
2. we offer a money-back guarantee to End Users for certain Products. You
agree to inform the Customer of the terms of this guarantee before the
applicable sale. For any such Product, you agree to 1) accept its return
within 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 transportation charges for return of the Product to us and will
give you an appropriate credit;
3. you are an independent contractor. Neither of us is a legal representative
or 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
you are not our employee or franchisee;
4. each is free to enter into similar agreements with others, to market
competitive Products, and to conduct its business in whatever way it
chooses, provided there is no conflict with this Agreement. We may increase
or decrease the number of our remarketers, the types of distribution
channels, and the number of participants in such channels;
5. each is free to establish its own prices and terms and neither of us will
discuss its customer prices and terms in the presence of the other;
6. all information exchanged is nonconfidential. If either of us requires the
exchange of confidential information, it will be made under a signed
confidentiality agreement;
7. we will provide you with access to our information systems only in
support of your authorized marketing activities. Programs associated with
these systems are subject to the terms of their applicable license
agreements, except that you may not transfer them;
8. neither of us will bring a legal action against the other more than two
years after the cause of action arose; and
9. you may acquire an insignificant number of Products for your own internal
use.
Your Other Responsibilities
You agree not to do any of the following:
1. assign, or otherwise transfer, this Agreement or your rights under it,
delegate your obligations, or appoint another reseller (including a related
company) or agent to represent you or to market our Products, without our
prior written consent. Any attempt to do so is void;
2. assume or create any obligations on our behalf, or make any representations
or warranties about us or our Products, other than those we authorize; or
3. conduct your business in a way (for example, failure to maintain the
highest quality professionalism in all your dealings with Customers) that
adversely affects our reputation or goodwill.
You agree to:
1. sell only to End Users, unless otherwise specified in this Agreement;
2. be responsible for Customer satisfaction with our Products and all your
related activities, and participate in Customer-satisfaction programs as we
determine. For example, if we request, you agree to provide us with the
names and addresses of all End Users who have acquired our Products from
you;
3. actively and diligently promote our Products;
4. ensure that your compensation or incentive plans for your employees who
market our Products are not unfair to us in comparison with your plans for
competitive products you market;
Page 4 of 15
<PAGE>
6. maintain trained personnel and comply with any certification requirements;
7. provide us with relevant financial information about your business
enterprise on request;
8. furnish sales receipts to your Customers before or upon delivery of
Products. You agree to specify on the sales receipt your Customer's name
and address, the Machine type/model and serial number, installed location,
date of sale, any non-IBM alterations or attachments made, and the Warranty
Service provider;
9. provide us with any Customer documents we require, within 10 days of the
applicable transaction (for example, End User signing of our license or
maintenance agreement);
10. provide us with sales and inventory information for our Products on
request;
11. retain records by location of each Product transaction (for example, a sale
or credit) for five years and of each warranty claim for three years.
Records must include (as applicable) Machine type/model and serial number,
Authorized Location to which distributed, and Customer name and address;
12. assist us in tracing and locating Products;
13. provide us with sufficient, free, and safe access to your facilities, at a
mutually-convenient time, for us to fulfill our obligations. If you become
aware of any unsafe conditions or hazardous materials to which our
personnel would be exposed at any of your facilities, you agree to notify
us promptly; and
14. comply with all laws and regulations (such as those governing consumer
transactions).
Our Review of Your Compliance with this Agreement
We may periodically review your performance under this Agreement. You agree to
provide us with relevant records on request. We have the right to reproduce
them, retain the copies, and audit your compliance with this Agreement on your
premises during your normal business hours. We may use an independent auditor
for this.
4. Marketing Funds and Promotional Offerings
You agree to use any marketing funds and promotional offerings according to
our guidelines. For Products you provide to resellers, you agree to
administer and disburse these funds or offerings in a proportional and
equitable manner. You also agree to keep records of such funds or offerings
for three years.
We may withhold or recover marketing funds and promotional offerings if you
breach any of the terms of this Agreement. Upon notice of termination, any
marketing funds and promotional offerings will no longer be available for
use by, or accrual to, you.
5. 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, closing or relocation of
an Authorized Location, or any change to information supplied in your
application). Such change or failure to give notice may result in
termination of this Agreement.
Page 5 of 15
<PAGE>
You are not authorized to actively market Products outside the geographic
scope of this Agreement, and you agree not to use anyone else to do so.
If a Customer acquires a Product for export, our responsibilities under
this Agreement no longer apply to that Product. You agree to use your best
efforts to ensure that your Customer complies with United States export
laws and regulations, and any import requirements of the destination
country. Before the sale of a 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. attainment of your minimum renewal criteria;
2. attainment of your committed quantities;
3. qualification for applicable promotional offerings and marketing funds;
and
4. qualification for any lower prices.
We may also reduce future supply allocations to you by the number of
exported Products.
The license agreement of certain Programs state the country in which the
license is valid. Such Programs may not be exported.
7. Federal Reporting Requirements
To comply with Federal law, you agree not to employ or compensate any
individuals to perform activities under this Agreement (without our prior
written approval) who were, within the last two years:
1. members of the armed forces in a pay grade of 0-4 or higher; or
2. civilians employed by the Department of Defense with a pay rate equal
to, or greater than, the minimum rate for a qrade GS-13.
You agree to provide us with any information that we need to comply with
this law.
8. Ordering and Delivery
You may order Products either from us or your Aggregator. We accept orders
for withdrawn Products subject to their availability.
On our request, you agree to make reasonable efforts to use our automated
order-entry system. You agree to pay all expenses associated with it.
We will mutually agree to a location to which we ship Products. We will use
reasonable efforts to meet your requested delivery dates for Products you
order from us. We select the method of transportation and pay associated
charges for Products we ship.
You agree to notify us within 20 days of receipt, of any discrepancies
between our shipping manifest and the Products received from us. We will
work with you to reconcile any differences.
Page 6 of 15
<PAGE>
You may cancel an order for a Product before we ship it. We may charge you
a cancellation charge. We determine this charge by multiplying the amount
we charge you for the Product by the cancellation-charge percent. We will
inform you in writing of that percent. The cancellation charge does not
apply to a Product if 1) we postpone its shipment for more than 15 days
from its estimated shipment date and 2) you cancel your order before
shipment.
We may not be able to honor a cancellation request received less than 10
business days before the Product's estimated shipment date. If you return
such Product, our inventory-adjustment terms apply.
Delayed Shipment of a Product
Circumstances may arise where we delay the shipment of a Product due to our
inability to meet the original estimated shipment date. If this delay
causes the estimated shipment date to be after the end of your contract
period, the terms of this Agreement apply to that Product. It will be
treated as if you had acquired it during the contract period.
9. Inventory Adjustments
For purposes of rebalancing your inventory, we will inform you in writing
which Products you may return to us for credit, their inventory-adjustment
categories, and any terms associated with these categories. We will issue a
credit to you when we accept the returned Product. You may use the credit
only after we issue it.
We may charge you a handling charge for returned Products. We determine
this charge by multiplying the inventory-adjustment credit amount for the
Product by the handling-charge percent. We will inform you in writing of
that percent. You agree to pay shipping charges for Products you return.
They must be in our original, undamaged packages (unopened for Machines),
and without any non-IBM labels.
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. However, we do not require the shipping container to be
unopened for some of these Products (for example, Selected Academic
Solutions), as we determine.
Returned Products must be unused and in new condition. You agree to ensure
that the Products are free of any legal obligations or restrictions that
prevent their return. We accept them only from locations to which we ship
Products.
We will reject any returned Product that does not comply with these terms
and send it back to you at your expense.
10. Prices and Price Changes
We will specify the prices for each Product and inform you of any changes.
Price increases do not apply to you if we receive your order before the
effective date of the increase. You receive the benefit of a price decrease
for Products we ship on or after the effective date.
Price-Reduction Credits
If we decrease the price for a Product, you may be eligible to receive a
price-reduction credit for eligible Products in your inventory. We will
specify the Product's price-reduction credit category and associated terms
in writing, and will inform you periodically of any changes. You may use
the credit only after we issue it.
Page 7 of 15
<PAGE>
Depending on the circumstances, additional charges may apply. For example,
if we perform a Service for you, we charge an additional amount. We will
notify you in advance if these charges apply.
Fee Payments
When you perform certain activities, such as those we may specify in
exhibits, we will pay you a fee.
11. Invoicing, Payment, and Taxes
Payment in full is due upon receipt of our invoice. You agree to pay as we
specify in the invoice. 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 subsidiaries.
You agree to pay amounts equal to any applicable taxes resulting from any
transaction under this Agreement. This does not include taxes based on our
net income. You are responsible for personal property taxes for each
Product from the date we ship it to you or the End User.
You agree to provide us with valid reseller-exemption documentation for
each applicable taxing jurisdiction to which we ship Products. Otherwise,
we will charge you all applicable state and local taxes or duties. You
agree to notify us promptly if this documentation is revoked or modified.
You are liable for any claims or assessments that result from any taxing
jurisdiction refusing to recognize your exemption.
Failure to Pay Any Amounts Due
If your account becomes delinquent, you agree that we may do one or more of
the following:
1. impose a finance charge, up to the maximum permitted by law, on the
delinquent portion of the balance due;
2. require cash payment on or before delivery of any Products;
3. repossess any Products. If we do so, you agree to pay all expenses
associated with repossession and collection, including reasonable
attorney's fees. You agree to make the Products available to us at a
site that is mutually convenient;
4. terminate this Agreement; or
5. pursue any other remedy available at law.
In addition, if your account with any of our subsidiaries becomes
delinquent, we may invoke any of these options allowable by law.
12. Title
As an Aggregator, when you order a Machine from us, we do not transfer
title to you. As any other remarketer, when you order a Machine, we
transfer title to you when the Machine is shipped by us or your Aggregator.
Any prior transfer of title to a Machine to you is void from its inception
when 1) it is accepted as a returned Machine, or 2) the End User finances
it through the IBM Credit Corporation.
We do not transfer title to Programs.
Page 8 of 15
<PAGE>
We reserve a purchase money security interest in a Machine, and 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.
For a feature, conversion, or upgrade involving the removal of parts that
become our property, we reserve the security interest until we receive the
amounts due and the removed parts. You agree to sign an appropriate document
(for example, a "UCC-1") to permit us to perfect our purchase money security
interest.
End User Lease Financing
If an End User obtains a lease for a Machine for legitimate financing
purposes, you may transfer title to the Machine to the lessor. You may
finance End Users' Product acquisitions.
13. Risk of Loss
We bear the risk of loss for a Product until its initial delivery from us.
14. Engineering Changes
You agree to allow us to install, at a mutually-convenient location,
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 or your Customers' locations for Machines for which we provide
Warranty Service; and
2. your location for other Machines. Alternatively, we will provide you
with the parts (at no charge) and instructions to do the installation
yourself. We will reimburse you for your labor at a rate we specify.
15. Licensed Internal Code
Certain Machines we specify (called "Specific Machines") use Licensed
Internal Code (called "Code"). The IBM Corporation owns copyrights in Code
and owns all copies of Code, including all copies made from them.
We will identify each Specific Machine in writing. 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 aqreement that we will
provide to you.
Your Responsibilities
You agree to inform your Customer, and record on the sales receipt, that the
Machine you provide is a Specific Machine using Licensed Internal Code. You
agree to 1) provide the applicable license agreement to your Customer before
the sale and 2) ensure that the agreement is signed before a sale to an End
User.
Page 9 of 15
<PAGE>
For certain Programs, we require End Users to sign our license agreements. You
agree to ensure those signatures are obtained and the appropriate supplements
are issued before those Programs are provided. All other Programs (called
"Program Packages") are licensed under the terms of the agreements provided with
them.
When you make authorized copies of Programs, you agree to reproduce the
copyright notice and any other legend of ownership on the copies. When we
provide you with service materials for Programs, you agree to copy and
distribute those materials to End Users.
You agree to refund the amount paid for:
1. an IBM Program Package returned to you because the End User does not accept
the terms of the license (for example, by not opening the media envelope or
not using the Program). However, if such Program is packaged together with
other Programs or Machines as a solution, all components must be returned. In
this case, you agree to refund the amount paid for all the components; and
2. any defective IBM Program returned to you under the terms of its warranty.
In either case, you may return the IBM Product to us, at our expense, for
credit.
17. Installation and Warranty
For a Machine to function properly, it must be installed in a suitable physical
environment. For a machine we install, we will ensure that it is in good
working order and meets the criteria specified in its Official Published
Specifications before we consider it installed. We provide instructions to
enable the setup of Customer-set-up Machines. We are not responsible for the
installation of Programs or non-IBM Machines.
With each IBM Machine we ship, we include a copy of our statement of limited
warranty. We will provide a copy to you. You agree to make it available to the
End User for review before the sale. We provide non-IBM Products on an "AS IS"
basis. However, non-IBM manufacturers, suppliers, or publishers may provide
their own warranties to you.
Date of Installation
We calculate the expiration of an IBM Machine's warranty period from the
Machine's Date of Installation.
The Date of Installation for a Machine we are responsible for instaliing is the
business day after the day 1) we install it or 2) we make it available for
installation, if you (or the End User) defer installation. Otherwise (for
example, if others install it or break its warranty seal), it is the day we
deliver the Machine to you (or the End User).
The Date of Installation for a Customer-set-up Machine:
1. that we ship to the End User (or to you for your own use), is the fifth
business day after the day the Machine is received;
2. that you ship, is the earlier of 1) the second business day after the End
User receives the Machine or 2) the day you or your Customer place the
Machine in use; or
3. is the same as the Date of Installation for a Machine that we install, if
the Customer-set-up Machine is being installed with, and attached to, it.
If we authorize you to install Programs on a Machine at an Authorized Location
(and therefore you set up the Machine), we do not consider this as the Date of
Installation, as long as you promptly ship the Machine to the End User.
You (or your Customer, if other than an End User) must record the Machine's Date
of Installation on the End User's sales receipt. You must also notify us upon
our request.
Page 10 of 15
<PAGE>
18. Warranty Service
sp p4 We will inform you in writing who is responsible for providing Warranty
Service for Machines. We do so by specifying the Warranty Service category for
each Machine.
When We Are Responsible for Servicing Machines
When we are responsible for providing Warranty Service, we do so for the IBM
Machine during its warranty period at no charge to keep it in, or restore it to,
good working order. In this case, you are not authorized to perform Warranty
Service. You agree to convey all (or the remaining portion) of our warranty to
your Customer.
WHEN YOU ARE RESPONSIBLE FOR SERVICING MACHINES
When you are responsible for providing Warranty Service, you agree to do the
following according to the Service support guidelines we provide:
1. maintain Warranty Service capability;
2. ensure that it is performed only by personnel trained to our standards and
consistent with our service terms and statement of limited warranty;
3. provide it even for Machines that the End User did not acquire from you
(unless you have assigned all units of such Machine type); and
4. submit only valid warranty-reimbursement requests to us that are within the
specified time limits.
We will:
1. train you to provide Warranty Service. We provide training, at no charge,
for the minimum number of your Service personnel that we require.
Additional training may be provided for a fee;
2. provide you with necessary technical information, and
3. pay you for Warranty Service performed and exchange (or reimburse you
for) parts.
Maintenance Parts
We sell maintenance parts for use in providing Warranty Service and for
maintaining Machines. You may sell such parts to others for use in maintaining
Machines.
Assignment of Warranty Service Responsibility
You may assiqn Warranty Service responsibility to us or anyone else authorized
by us to provide it.
You agree to:
1. ensure that the assignee accepts Warranty Service responsibility for each
Machine assigned to it;
2. provide a copy of the sales receipt to the assignee;
3. notify your Customer of the assignment; and
4 remain responsible for your Customer's satisfaction with that Service.
If you assign Warranty Service responsibility for all units of a Machine type to
us or an IBM Premier Personal Computer Servicer, you are no longer required to
be Warranty Service capable for that Machine type.
When you accept Warranty Service responsibility from another of our remarketers,
you may not reassign that responsibility and are responsible for Customer
satisfaction with that Service.
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For non-IBM Products that we do not warrant any other non-IBM equipment that a
Customer may reasonably believe is warranted by us, you agree to inform your
Customer in writing, before the sale, that we do not warrant them. You also
agree to inform your Customer 1) that, the Products or equipment are non-IBM, 2)
of the applicable warranty (if any), and 3) of the procedure to obtain any
warranty service.
19. Marketing of IBM Services for a Fee
When you have marketed a Machine you are approved to market, to an End User, you
may market our Services on eligible machines in that account and receive a fee
from us for marketing the Services on those machines. We may specify additional
terms in a relationship Attachment (for example, an Industry Remarketer
Attachment). We provide Services to the End User under the terms of our
applicable agreement, signed by the End User. You agree to provide us with any
required documents signed by you or the End User, as applicable, and inform the
End User of our service procedures.
We will not pay you the fee if the machine is already under our Service or if
the Service had been terminated on the machine within the prior six months at
the same account.
Services may be marketed on eligible non-IBM machines regardless of whether you
marketed a Machine in that account.
20. Patents and Copyrights
For purposes of this section only, the term "Product" includes Licensed Internal
Code and excludes Services.
If a third party claims that a Product we provide under this Agreement infringes
that party's patent or copyright, we will defend you against that claim at our
expense and pay all costs, damages, and attorney's 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 such a claim is made or appears likely to be made, about a Product in your
inventory, you agree to permit us to either 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 an appropriate 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. your modification of a Product, or a Program's use in other than its
specified operating environment;
2. the combination, operation, or use of a Product with any product, data, or
apparatus that we did not provide, or
3. infringement by a non-IBM Product alone, as opposed to its combination as
part of a system of Products that we provide.
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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.
Our Liability
We are responsible for:
1. payments referred to in our patent and copyright terms described above;
2. bodily injury (including death), and 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 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);
2. Loss of, or damage to, your records or data; or
3. economic consequential damages (including lost profits or savings) or
incidental damages, 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 by others made against us
(particularly regarding statements, representations, or warranties not
authorized by us) arising out of your conduct under this Agreement or as a
result of your relations with anyone else.
22. Trademarks
We will provide you with advertising guidelines for our logos, trade and
service marks, trade names, emblems, and titles (collectively called
"Trademarks"). We will notify you in writing of the title you are authorized to
use. You may also use the IBM Business Partner emblem associated with that
title. You may use the Trademarks only as described in the guidelines and only
in association with the Products we approve you to market.
On our request, you agree to change or stop using any advertising or promotional
material that does not comply (as we determine) with our guidelines or this
Agreement. When this Agreement ends, you agree to promptly stop using our
Trademarks. If you do not, you agree to pay any expenses and fees that we incur
in getting you to stop.
You agree that any goodwill attaching to our Trademarks as a result of your use
of them belongs to us. You agree not to register or use any mark that is
confusingly similar to any of our Trademarks.
23. No Property Rights
Your rights under this Agreement are not property rights and, Therefore, you
cannot transfer them to anyone else or encumber them in any way. For example,
you may not sell your authorization to market our Products or your right to use
our Trademarks.
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In order to maintain flexibility in our relationships, we may change the terms
of this Agreement by giving you one month's written notice. However, these
changes are not retroactive. They apply as of the effective date we specify in
the notice. If you do not accept a change, you must inform us in writing before
its effective date. If you do so, any future change will not apply to you.
However, if you sign a revised profile, then all prior changes become effective.
Otherwise, for a change to be valid, both of us must sign it. Additional or
different terms in any order or written communication from you are void.
25. Ending the Agreement
This Agreement ends when terminated or when the contract period ends.
You may terminate this Agreement, with or without cause, on one month's written
notice.
We may terminate this Agreement, with or without cause, on three months' written
notice. If the termination is for cause, 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, certain acts or omissions are so serious
as to warrant immediate termination. If you repudiate this Agreement, materially
breach any of its terms, or make any material, misrepresentation to us, we may
terminate this Agreement at any time, on written notice. Examples of a material
breach are violation of our status-change terms, violation of our trademark
terms, submission of a false warranty claim, unauthorized sale to a reseller,
and failure to maintain Customer satisfaction. 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 for which you have
not paid; and
2. allow us, at our discretion, to repurchase any other Products in your
possession or control at the price you paid us, less any credits issued to
you.
Products to be returned must be unused, in new condition, and in your inventory
(or in transit from us) on the day this Agreement ends. We will inspect the
Products and reserve the right to reject them. You agree to pay all shipping
charges. Products returned to you under our money-back guarantee terms may be
used and we pay their shipping charges.
At the end of this Agreement, you must immediately pay us all amounts due. We
may offset any amounts due you against amounts due us or any of our
subsidiaries. Any terms of this Agreement, which by their nature extend beyond
the day this Agreement ends, remain in effect until fulfilled, and apply to
respective successors and assignees.
We may permit you to continue to provide Products after this Agreement ends. If
we do so, you agree to provide those Products under the terms of this Agreement.
26 Waiver of Noncompliance
Failure by either of us to insist on strict performance or to exercise a right
when entitled, does not prevent us from doing so at a later time, either in
relation to that default or any subsequent one.
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Each of us may communicate with the other by electronic means. Therefore, you
agree to utilize electronic communications with us, if and as we specify. In
such case, both of us agree to the following for all electronic communications:
1. an identification code (called a "USERID") contained in an electronic
document is legally sufficient to verify the sender's identity and the
document's authenticity;
2. an electronic document that contains a USERID is a signed writing; and
3. an electronic document, or any computer printout of it, is an original when
maintained in the normal course of business.
ELECTRONIC DATA INTERCHANGE
We may provide Electronic Data Interchange (called "EDI") Options to you.
Electronic invoicing and electronic payment are examples of these Options. When
using EDI Options, each of us agrees:
1. when a bank is involved, to pay our respective bank charges and to promptly
notify the other of any changes to the bank payment process; and
2. to promptly notify the other of any changes to the technology, process, or
information upon which the EDI transactions are based.
We will specify respective responsibilities for the EDI Option you choose.
28. Geographic Scope
All your rights and all our obligations are valid only in the United States and
Puerto Rico.
29. Governing Law
The laws of the State of New York govern this Agreement.
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Industry Remarketer Attachment
1. Value-Added Enhancement
You agree to market Products only with your value-added enhancement that we
approve as part of an integrated solution for End Users. Certain Products we
specify to you may not require a value-added enhancement. However, you may
provide up to 25% of the personal computer system units, including associated
features and options, in each transaction without such enhancement. If we
withdraw approval of any such enhancement, we also withdraw your authorization
as our industry remarketer with regard to that specific enhancement. You are
responsible for your enhancement, (and we are not).
You agree to market Products only to End Users for whom your enhancement is the
primary reason for acquiring Products (a sale without a required value-added
enhancement is an additional example of a material breach). Unless we specify
otherwise in writing, you will market only to such End Users who intend ongoing
use of that enhancement as a significant part of their business operations. Your
enhancement is not required to be the primary reason for acquiring upgrades to
systems you have installed with your enhancement and where your enhancement is
still in productive use. Upgrades include peripherals, programs and processor
upgrades. However, your enhancement must be the primary reason for a processor
upgrade requiring a processor serial number change. You agree to assist the End
Users to achieve productive use of Products promptly after acquisition.
If we inform you in writing of a specific industry code, you agree to market
only to End Users within that code. We may provide certain installation planning
assistance. We provide Product support to you (and not to End Users).
You agree to:
1. provide facilities to demonstrate your enhancement;
2. verify the operation, and explain the functions and expected performance,
of the Products and your enhancement to End Users;
3. provide support (such as documentation and technical assistance) for the
Products, your enhancement and other products it requires; and
4. select, develope, procure, integrate, and install all elements of your
enhancement and any updates to it.
2. Use of Agents
To assist you in the successful installation, and your ongoing End User support
requirements for the Products you are approved to market as an Industry
Remarketer-Mid-Range, you may contract for the necessary skills with IBM
Authorized Business Partners, who may perform such activities directly for your
End User. However, you are responsible for your End User's satisfaction with
such installation and support activities. You agree to indemnify IBM from any
liability for the activities performed by such parties. Additionally, you may
select IBM to perform such activities. In that event, IBM assumes customer
satisfaction responsibilities for its activities
We may allow you to use an agent to represent you for other activities. If so we
will provide written guidelines to you.
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3. Marketinq of Products
You agree to:
1. select Products that best meet the End Users' needs;
2. order Products in sufficient time to be shipped during the contract period
for them to count toward your minimum renewal criteria or any Commitment;
3. receive Products (listed in the Industry Remarketer Exhibit) only at
Authorized Locations or ship-to locations (including End Users'
locations);
4. inform the End Users, upon their request, of applicable courses that we
provide and how to enroll in them:
5. assist the End Users with the installation of Products; and
6. if you are approved as an industry remarketer of mid-range computer
Products, notify us within 10 days of the installation of Products.
For Products listed in the Dealer Exhibit, you also agree to:
1. market, support (including setup and test), and service them only at
Authorized locations, or at End Users' locations; and
2. receive and place them (and their maintenance parts) in inventory only at
Authorized Locations or ship-to locations (and not at End Users'
locations). Maintenance parts are only available for Machines listed in
the Dealer Exhibit.
For Products listed in the Dealer Exhibit which we announce as withdrawn from
marketing, you may market them to resellers and to End Users without your
value-added enhancement. However, you may not market withdrawn certified
Products to resellers.
When you market withdrawn Products to resellers you agree to:
1. distribute Products fairly;
2. require your resellers to retain the necessary records (such as sales and
credit receipts);
3. identify the resellers to us; and
4. notify the resellers in writing that such Products are made available for
marketing only in the United States and Puerto Rico.
4. Association with an Aggregator
If you acquire IBM Personal System Products from an Aggregator, your
Aggregator is authorized to set up and test those Products for you on your
request. If the setup includes preloaded IBM Programs, you must ensure that
the End User has agreed to the terms of the applicable license agreement
prior to the preload.
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If we authorize you as an industry remarketer of mid-range computer Products, we
allow you to acquire certain of those Products which you are approved to market,
for your own internal use within your remarketing operations only and not for
any other use including End User productive use, even if such use is managed
within your business enterprise. Your value-added enhancement is not required
for such acquisitions. The Industry Remarketer Exhibit includes further details.
You may acquire Products for your internal use at your discount level at the
time we ship the Products. You agree not to remarket such Products for 24 months
from their Date of Installation. These Products do not count toward your minimum
renewal criteria or any Commitment.
6. Prices and Price Changes for Industry Remarketer Exhibit Products
The following terms apply for Products listed in the Industry Remarketer
Exhibit.
A price decrease is effective on the date specified in our notice to you. We
apply the associated discount to the decreased single-unit price for Products
not yet shipped, provided you accept any related changes in terms. Otherwise,
you may select 1) the decreased price without discount or 2) the discounted
price available to you before the decrease.
Prices increases do not apply to you if we receive your order prior to the
effective date of the increase and if we ship your order within six months of
the date we receive it.
We may increase a recurring charge at any time. However, the effective date of
the increase may not be less than 90 days from the date of our notice to you,
and will be effective on the first day of the applicable invoice period
specified in the notice.
Discounts
We provide a discount schedule for Products listed in the Industry Remarketer
Exhibit. Some discount schedules have deeper discounts available when you agree
to acquire, as applicable, 1) a specific quantity of Products from a specific
Product Category, or 2) a minimum revenue amount as specified in the Exhibit. We
call this your "Commitment". If you change your Commitment, you may subject
to a higher or lower discount, as applicable. The discount applies only to
Products acquired after the effective date of your Commitment change.
To determine your discounted price, we apply the applicable discount to the
Products lowest single-unit price in effect between the date we receive your
order and our date of shipment, if such shipment is within six months of our
receipt of your order. For Products shipped beyond the six months period, the
discount is applied to the single-unit price in effect on our date of shipment.
Unless we specify otherwise, discounts do not apply to Program upgrades,
accessories, or field-installed Machine features, conversions, or upgrades.
If during our review of your compliance with this Agreement, we find you have
materially breached the terms of our relationship, in addition to our rights
under law and the terms of this Agreement, for the applicable transactions, you
will refund the discount you received from us and reimburse us for all
administrative expenses associated with our compliance review activity.
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If you alter, defer, or cancel an order for Products and we incur expenses to
re-work the Products, we will invoice you for the actual expenses incurred. For
orders cancelled after shipment, the re-work charge is in addition to the
inventory adjustment handling charge specified in the Industry Remarketer
Exhibit.
8. Installation of Machine Features, Conversions, and Upgrades
For Machines listed in the Industry Remarketer Exhibit, we may require that
Machine features, conversions, and upgrades be installed only on designated,
serial-numbered Machines. You represent that you have the permission of the
owner (if you are not the owner of the Machine) and any lien holders to 1)
install features, conversions, and upgrades and 2) transfer removed parts to us.
Some of these transactions (called "Net-Priced" transactions) include associated
replacement parts. We provide these parts on an exchange basis. All removed
parts in a Net-Priced transaction become our property. Replacement parts assume
the service status of the parts they replace. For a Net-Priced transaction, you
or your Customer must allow us to install it within 30 days of its delivery and
to recover the removed parts. Otherwise, we may terminate the transaction, and
the feature, conversion, or upgrade must be returned to us at your expense.
9. IBM Industry Remarketer Exhibit Programs
You agree to have one license for each Program you provide to End Users, that is
listed in the Industry Remarketer Exhibit. A Program which we provide to you at
no charge and which is licensed for use with a Development System fulfills this
requirement. You are responsible for copying and distributing the Programs you
provide to End Users. On our request, you agree to also distribute
documentation.
You agree to:
1. ensure that, when required, the applicable license agreement is signed by the
End User and the completed supplement is issued (with a copy sent to us)
before you copy and distribute the Program. Failure to provide us with the
signed agreements promptly after they are signed is a material breach of this
Agreement and cause for its immediate termination;
2. promptly notify us if you become aware of any violation (or threatened
violation) of the license terms, and give us reasonable assistance in
enforcing our rights;
3. promptly notify us if the End User provides you with any required notices
under the license;
4. provide the End User with all Program Services we make available to you; and
5. copy and distribute to the End User any defect-correction information and
subsequent Program releases we provide.
COPYING AIX PROGRAMS CONTAINING THIRD-PARTY CODE
If you are approved to market IBM RISC System/6000 AIX Programs containing
third-party code, you may neither 1) delegate your right to copy these Programs
nor 2) make copies that contain modifications you created from the use of
UNIX(R) or OSF1(R) source code.
We do not grant you any rights to any trademarks of AT&T Technologies, Inc.,
UNIX System Laboratories, Inc., or any of their affiliates.
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You agree to:
1. maintain accurate records of the number of copies made;
2. provide us quarterly statements of the number of copies made in that
calendar quarter; and
3. annually, upon request, make all relevant records available for audit by
us, AT&T Technologies, Inc., UNIX System Laboratories, Inc., and Open
Software Foundation, Inc.(R).
PAYMENT
The following are the bases on which we may require the amount payable for a
Program to be paid:
1. one-time;
2. recurring (for example, a monthly license charge); or
3. a combination of both (for example, an initial charge and an annual
license charge).
We will specify the amount and basis for the particular Program.
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.
(R) UNIX is a registered trademark of UNIX System Laboratories, Inc.
(R) OSF/1 and Open Software Foundation are registered trademarks of Open
Software Foundation, Inc.
10. DEVELOPMENT SYSTEMS
We may allow you to acquire Products for use primarily in developing, testing,
supporting, or demonstrating your value-added enhancement. We call these
"Development System" Products. We may also approve you to acquire Products
under these terms, for the exclusive use of development, support and testing
your value-added enhancement. Such Products may not be used for demonstration
purposes.
If you have a Development System Product that is a Machine for which there is
a field upgrade available, and you have acquired the maximum number of
Development System Products vou may acquire for the contract period, you may
acquire the field upgrade (but not a replacement Machine) as a Development
System Product.
You agree not to resell, lease, or transfer a Development System Product for
12 months from the Date of Installation of the Product (or its Machine
upgrade).
For a Development System Product listed in the Industry Remarketer Exhibit
(other than Programs), we will specify either a Development System price or a
Development System discount.
We make Programs, and their upgrades if applicable, available to you at a 100
percent discount, for use on an authorized Development System. Certain
Programs may require your payment of a fee. We will specify such Programs and
their fee. You agree not to resell, lease or transfer Programs you acquire
under these terms.
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<PAGE>
System price.
We will specify, in the applicable Exhibit, the maximum quantity of each
Development System Product that you may acquire. If you are an industry
remarketer of mid-range computer Products, you must have a Development System
for each system type that you are approved to market.
We will provide applicable Warranty and Program Services for Development
System Products listed in the Industry Remarketer EXhibit. You are responsible
for these Services for Development System Products listed in the Dealer
Exhibit.
Development System Products do not count toward your minimum renewal criteria
or any Commitment. If you use a Development System Product in a manner that
does not comply with these terms, we may charge you the difference between
what you paid and the full price.
You may not combine this offering with any other discount or allowance.
11. Preload of Programs
For certain Machines specified in the applicable Exhibit, we will, on your
request, preload Programs you select onto those on-order Machines.
We will:
1. send you a utility program and a kit containing blank tapes and
instructions so you can provide us with tapes containing the programs
selected for preload;
2. make production copies of the tapes you send us, use those copies to
load the Machine, and verify that the process is successfully
completed;
3. verify that the Machine is successfully delivered in a preloaded
condition; and
4. retain the tapes for at least three months following the shipment of
the last Machine for Which preloading is ordered. You may request a
shorter retention period in writing. At the end of that period, we
will erase the programs from all tapes in our possession.
You agree to:
1. have a license for each IBM Program for which you order preloading;
2. ensure that the applicable license agreement is signed by the End
User and the completed supplement is issued (with a copy sent to us).
You must do this before we ship the Machine;
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<PAGE>
a. make as many copies as we may need to support the preload process, and
b. reproduce, in each copy, only those copyright notices that appear within the
program;
4. provide us with programs and documentation according to the instructions that
(accompany the kit we send to you. You agree to return the entire kit and
utility program;
5. provide us with tapes at least four weeks before the scheduled shipment of
the Machine for which you require preloading;
6. not send us any information that is confidential or proprietary to anyone;
and
7. pay any applicable charges for preloading. Any discount that applies to the
machine also applies to preload charges.
12. Trial Products
We may offer certain Products as "Trial Products." If you are approved for a
Trial Product, you may provide it to End Users for evaluation purposes, or (if
we agree) you may use it as part of a Development System. you may either return
or retain a Trial Product. If you do not wish to retain it, you must notify us
in writing before the end of the trial period. Otherwise, we will consider the
Product to be retained.
We will list in an Addendum the specifics of a trial, such as trial period,
Trial Products, and, if applicable, the End User. We reserve the right to
withdraw a trial at any time.
If the End User is participating in the trial, you agree to ensure that we
receive the applicable agreement signed by you and the End User. You agree to
provide the End User with the necessary details of the trial.
We do not transfer title to Trial Products during the trial period. We will
service and support them, and bear the risk of loss (except for theft or
vandalism).
You agree:
1. to inform us of each Trial Product's location;
2. that the Product may not be moved to another location or altered, without
our prior written approval. However, you may attach a non-lBM product or
device to an IBM Machine without notice. You may not make any alteration or
attachment that creates a safety hazard or renders maintenance of the
Machine impractical;
3. to return, at the end of the trial period, all Products (including any
copies of Programs) not retained. The Products should be returned unaltered
and in the same condition as when delivered to you. Alternatively, for
Programs, you may destroy all copies; and
4. to furnish all labor for unpacking and packing.
If you retain a Trial Product, payment is due on the business day following the
last day of the trial period. For a Machine, we transfer title to you and no
longer bear the risk of loss as of that day. However, the warranty period begins
on the Date of Installation.
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13. Trade-In Machines
We may specify certain Machines as eligible for trade-in. We will list in an
Addendum such items as the Machine you agree to purchase (called the
"Replacement Machine") and the Machine you agree to return to us (called the
"Replaced Machine"). When we accept a Replaced Machine, we give you credit
towards the purchase from us of other, eligible Machines. You agree to ensure
that the same End User who was using the Replaced Machine, acquires the
Replacement Machine. A Trial Machine may qualify as a Replacement Machine.
For the Replaced Machine,
you agree to:
1. restore an IBM Machine to its unaltered condition;
2. have it in operating condition on the day before it is available for pickup;
3. furnish all labor for packing; and
4. ensure that title to it is free of any legal obligations or restrictions on
the day it is picked up, unless the IBM Credit Corporation owns both the
Replacement and Replaced Machines.
For the Replaced Machine, we will:
1. arrange for its pickup at your or the End User's location;
2. bear the risk of loss after it is picked up; and
3. pay normal transportation charges.
The credit we give is in addition to any other discount for which the
Replacement Machine may be eligible. The Replacement Machine counts toward your
Commitment, unless the Replaced Machine was previously counted toward that
Commitment. You agree to pay the full amount due for the Replacement Machine.
You may not reduce your payment in anticipation of receiving the credit.
If both Machines in a trade-in are used as part of a Development System, the
Replaced Machine is not subject to Development System adjustment charges.
14. Marketing of IBM Services for a Fee
We approve you to market, and will pay you a fee, for eligible Services you
market 1) as our industry remarketer to End Users, or 2) as our managing
industry remarketer, to resellers. You, or if you are a managing industry
remarketer, your reseller, may market Services on any eligible machine in an
account when 1) the End User to which the Service is marketed acquired your IBM
approved value-added enhancement from you, or if you are a managing industry
remarketer, from your reseller, and the enhancement is installed on one or more
Machines you are approved to market, regardless of who marketed the Machine to
the End User, or 2) you, or if you are a managing industry remarketer, your
reseller, marketed a Machine to the End User under an IBM Business Partner
relationship which did not require an IBM approved value-added enhancement.
Services may be marketed on eligible non-IBM machines regardless of whether an
IBM approved value- added enhancement is installed on a Machine in the
account.
We specify the eligible Services, and the percentages used to determine your
fee, in an Exhibit.
We will not pay you the fee if the machine is already under the Service or if
the Service had been terminated on the machine within the prior six months at
the same account.
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Industry Remarketer Exhibit
IBM Business Partner Agreement
Exhibit No.: RMKT-l8
Effective Date: June l, 1996
Page
General Information 2
Eligible Product Table 8
IBM RISC System/6000
Annual System Revenue Performance Discount Schedule 9
RISC System/6000 Machines 9
RISC System/6000 Licensed Programs 10
Value-Added Enhancement Qualifying Licensed Programs 12
I B M AS/400
Annual System Revenue Performance Discount Schedule 13
AS/400 Machines 13
AS/400 Licensed Programs 14
System 35/38 Licensed Programs 17
AS/400 Advanced 36 Licensed Programs 17
Client Series Software 18
Additional AS/400 Licensed Programs 19
IBM Point of Sale Products
Annual System Revenue Performance Discount Schedule 20
Point of Sale Machines 20
Point of Sale Licensed Programs 21
IBM Network Integration Products 22
IBM System/390
Machines 24
IBM Customer Agreement Licensed Programs 26
IBM Finance Industry Licensed Programs 29
Complementary Products
Displays, Storage Media 29
Graphics Products, Finance Industry Products 30
Miscellaneous Products 30
IBM Printers, Uninterruptible Power Systems 31
RISC System/6000 Licensed Programs 32
AS/400 Licensed Programs . 33
Network Integration, Data Collection Licensed Programs 33
IBM Storage Products 35
IBM Service Offerings 37
<PAGE>
General Information
Eligible Products
IBM Authorized Industry Remarketer, you are approved to market selected
Product types. When you are approved for a Processor or Category, you are also
approved for its associated peripherals and programs, unless otherwise noted.
Selected Products require unique approval for authority to market. Please
refer to the Eligible Product Table for details.
Price Reduction and Discount Increase Credits
Unless otherwise stated, the Price Reduction Credit (PRC) and Discount
Increase Category 5 applies to all eligible Products listed in this Exhibit.
Category 5: Price Reduction and Discount Increase Credit--Applies to machine
type/models and associated field installable features and model conversions
shipped from IBM as MES orders.
For a product to qualify for the Price Reduction and Discount Increase Credit,
the following criteria must be met:
. The Product's Date of Installation must not have occurred as of the
effective date of the price decrease.
. The Product was not ordered for use in a Development system.
. You must certify your inventory position to IBM in writing within 30 days of
the effective date of the price or discount change.
IBM will determine the amount of the Credit by first establishing the total
amount you paid for the Product, less any previously granted credit for price
decreases or discount increases. From this number, IBM will subtract the
amount which would be payable after the price decrease or discount increase as
determined by your selection under the provisions of section 5 of the Industry
Remarketer Attachment (Z125-4805). The result is your Price Reduction Credit.
Price Reduction Credit Categories 1, 2, and 3 are stated in the Dealer Exhibit
and do not apply to Products listed in this Exhibit.
IBM LIcense Programs are not eligible for Price Reduction credits.
Products ordered for use in a Development System do not qualify for Price
Reduction Credits.
Adjustments to discounts based on Annual System Revenue Performance, revenue,
or volume attainment levels do not qualify for discount incentive protection.
Inventory Adjustment Categories
A) Hardware
The Inventory Adjustment Category for each product is identified in the "IAC"
column of the Eligible Product Categories.
Category 5: 3-Month Look Back.
. As a Category 5 Product, only machine type/models may be returned.
Category 6: 4-Month look back.
. As a Category c Product, machine type/models and associated field
installable features and model conversions shipped from IBM as MES orders may
be returned.
Category 7: 4-Month look back.
. As a Category 7 Product, only machine type/models may be returned.
Category 10: Prior Calendar Quarter
. As a Category 10 Product, machine type/models and associated field
installable features and model conversions shipped from IBM as MES orders may
be returned. You may return up to 5% of the prior quarter's net billings for a
product category free of Inventory Adjustment Charges, and an additional 5% of
the prior quarter's net billings subject to a 3% handling charge. This limits
your investor adjustment returns to a total of 10% of your prior quarter's net
billings for a product category for Category 10 designated products.
Aggregation across product categories to determine net billing is not allowed.
Category 10 Products must be returned within 60 days of IBM's announcement of
a Product's withdrawal from marketing. Rework charges do not apply to a
Product returned as an inventory adjustment after shipment from IBM. Rework
charges continue to apply for any charges incurred as a result of late
cancellations, alterations, or reschedules that occur prior to the Product
shipping.
In a given calendar month, the maximum number of units of a Product you may
return to IBM is equal to the number of units of such Product shipped to you
by IBM during the applicable Look Back Period, less any returns of the Product
during that period. The Product being returned must have been shipped to you
during the Look Back Period.
The amount of credit will be determined by IBM. The amount will be based on the
amount you paid for the Product, including Adjustment Charges, less any amount
paid you by IBM for any Price Reduction Credit applicable to the Product.
The number of units or the associated revenue amount of the returned product
will be subtracted from your attainment during the Contract Period in which it
is returned.
<PAGE>
IBM License Programs shipped from IBM as PRE-LOADED on a processor may be
returned under the Inventory Adjustment Provisions when the associated
processor is also returned. The PRE-LOADED License Program is subject to the
same Inventory Adjustment provisions as the processor on which it was shipped.
C) Inventory Adjustment Provision Exclusions
The following are NOT eligible for return under the Inventory Adjustment
provisions:
- -Products ordered for Development System use
- -any Product which has had its Date of Installation
- -non Pre-loaded IBM Licensed Programs.
Inventory Adjustment Categories 1, 2, and 3 are stated in the Dealer Exhibit
and do not apply to Products listed in this Exhibit.
D) Inventory Adjustment Handling Charge
With the exception of Inventory Adjustment Category (IAC) 10 Products, all
Hardware and pre-loaded IBM Licensed Programs are subject to a 5% handling
charge.
For IAC 10 Products, returns up to 5% of the prior calendar quarter's net
billing for all IAC 10 Products are not assessed a handling charge. IAC 10
returns that exceed 5% of the prior calendar quarter's net billing (for all
IAC 10 Products) are assessed a 3% handling charge on the portion of the
return in excess of the 5%.
Cancellation Charges: = 0%
Re-work Charges
Although Cancellation Charges are currently set at 0%, unless otherwise noted,
Products and MESs included in this Exhibit are subject to re-work charges. The
charges are Product specific and may be applicable when orders are altered,
deferred or cancelled. Re-work charges are not eligible for a discount.
Licensed Internal Code
Products which contain Licensed Internal Code (LIC) are indicated with a "Y"
in the "LIC" column of the Eligible Product Categories.
Remarketing to IBM
At our request, you may provide us new Products for resale to our customers.
With each such transaction, we will notify you of any additional terms that
apply.
Warranty Service Information
Warranty Service Category A
Machines included in this Exhibit are Warranty Service Category A machines
unless specified otherwise in the Eligible Product Category. IBM does not
authorize you to perform warranty service for Category A machines.
You will convey all, or the remaining portion of, the IBM Warranty Period for
a Category A machine to the End User of the machine. You may only do so
consistent with the terms and conditions of the applicable IBM Statement of
Limited Warranty and Section 18 of the IBM Business Partner Agreement,
Remarketer General Terms. For Machines included in this Exhibit, you must
ensure that the End User understands and agrees to all applicable terms and
conditions.
Warranty Service Category B
Selected machines included in this exhibit are Warranty Service Category B
machines, and as such, remarketers may be authorized to perform Warranty
Service on them. Those products which are Warranty Service Category B are
indicated in the Eligible Product Category.
Customer Carry in Repair (CCR) Customer Carry in Exchange (CCE)
The following provisions apply to Machines on the Dealer Exhibit identified as
CCR, CCR/CCE or CCE and for which you have IBM's approval to Market.
Warranty service which you provide for a machine must be consistent with the
terms and conditions of the Agreement and the applicable IBM Statement of
Limited Warranty. After you provide such service, IBM will, for selected
Machines, reimburse you for labor and/or credit you for selected IBM parts, or
exchange of such parts used by you. The selected Machines and the
Reimbursement Schedules and selected parts are specified in the IBM Service
Support Guide in effect at the time of such activity.
You agree to and will:
1. Provide warranty service under the terms of the applicable IBM Statement of
Limited Warranty and its Warranty Exhibit, if any;
2. Validate all warranty claims presented to you;
3. Maintain the capability to provide warranty service according to the
requirements and procedures specified in the IBM Service Support Guide; and
4. Submit a Waranty Reimbursement Request, if applicable, to claim (a)
reimbursement for labor and/or b) credit for IBM parts or exchange of such
parts, used by you in providing authorized warranty service for a Machine, all
as specified in the IBM Service Support Guide.
<PAGE>
IBM will:
1. Provide for each Machine, at no fee, either service training in a classroom
or self-education materials for that purpose. IBM will provide classroom
training at an IBM designated location. IBM will provide classroom training or
self-eduction materials for the applicable minimum Number of Trained Personnel
for each Authorized Location. IBM will specify the minimum Number in the
applicable Addendum;
2. Provide, as part of service training, selected service materials;
3. Make available to you, for a fee, additional a) service training for
service personnel, b) copies of service materials, and c) service materials
not provided under the provisions of items (1) and (2) of this paragraph;
4. Sell you maintenance parts for your use in providing warranty service. The
purchase prices of such parts will be as specified in the IBM Service Support
Guide in effect at time of shipment of the parts;
5. Provide you with applicable warranty service and technical information for
Machines as available; and/or
6. For selected machines, honor your valid claims for a) reimbursement for
labor and/or b) IBM parts credits, or exchange of such parts, for parts used by
you in providing authorized warranty service, all as specified in the IBM
Service Support Guide.
IBM On-Site Repair (IOR)/IBM On-Site Exchange (IOE)
The following provisions apply to Machines on the Dealer Exhibit identified as
IOR or IOE and for which you have IBM's approval to market
You may choose to assign the responsibility for warranty service to IBM,
another remarketer/Authorized Personal System Servicer (Assignee). The
Assignee must be authorized by IBM to provide warranty service for the
Machine. The Assignee must agree with you to accept the responsibility to
provide warranty service for each assigned Machine. You may choose to assign
the responsibility for warranty service for all units of a machine type to IBM
or an Authorized Personal System Servicer by specifying that choice in the
Addendum or the Profile. Alternatively, you may, at the time of sale to the
End User, choose to assign the responsibility for warranty service for an
individual Machine to either IBM or an Assignee.
You must specify on the sales receipt for each assigned machine you market,
the name and location of the party responsible for providing warranty service.
If you fail to indicate an Assignee name or location on the sales receipt, or
indicate an unauthorized name or location, you will be responsible for
warranty service for that Machine.
If you have specified either IBM or an Assignee on a sales receipt, you must
provide IBM or the Assignee, as applicable, with a copy of the sales receipt.
Such sales receipt must specify the End User's name, the machine type/model
and serial number, the date of sale, the date of delivery, and the Machine's
installed-at location.
Your assignment of responsibility for warranty service does not relieve you of
your responsibility for End User satisfaction. The responsibility for warranty
service reverts to you, if the End User is not satisfied with the warranty
service provided by your Assignee or if the Assignee loses its authorization
to provide such warranty service. You may subsequently reassign such
responsibility consistent with the provisions of this subsection. In such
event, you are responsible to provide the End User and the new Assignee with
written notice of the change.
????? assigned warranty service for all units of a machine type to IBM or an
Authorized Personal System Servicer in the Profile, you will not be required
to maintain the capability of providing warranty service for that machine
type.
If you, as an Assignee, agree with another Dealer of Industry Remarketer
(Assignor) to be responsible to provide warranty service for an assigned
Machine marketed by the Assignor the provisions of this Section applicable to
an Assignee apply to you. As an Assignee, you accept such responsibility for
each Machine for which your name is specified on the End User's sales receipt.
You may not reassign such responsibility. If, at a later date, the Assignor
loses its IBM authorization for the Machine, you will have the additional
responsibility for End User satisfaction.
Maximum 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 Conversion Discount Provisions
Field installed features and model conversions for products included in this
Exhibit may qualify for a discount percent and are so noted in the applicable
Eligible product Categories. Field installed features and model conversion for
those products that are not specifically identified as being eligible for a
discount percent are available at the IBM Single Unit Price. 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.
IBM Licensed Programs
Permission to Copy: The Industry Remarketer is granted permission to copy IBM
Licensed Programs available under the terms of the IBM Customer Agreement and
the IBM License Agreement for Programs and Licensed Internal Code that are
included in this Exhibit unless otherwise noted.
Only IBM Licensed Programs acquired for development system installation are
eligible for the IBM testing period.
Upgrade Charges: For IBM Licensed Programs included in this exhibit, you may
order upgrades, where available, for your Development System and your end
user's systems. 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.
Licensed Program Upgrade orders are included in the calculation of Minimum
Renewal Criteria as well as Annual System Revenue Performance unless
otherwise noted in the Eligible Category.
<PAGE>
Upgrades for purposes of this section are defined as Group to Group and any
other field installable features available for the license.
When Version to Version upgrades to a licensed program are available, and are
indentified 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.
Products installed under the Monthly License Charge option are excluded from
any Upgrade Discounts.
Process charges associated with IBM Licensed Programs are not eligible for a
discount. 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.
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 industry Remarketer
pricing available.
DEVELOPMENT SYSTEM PRODUCTS
- ---------------------------
Unless otherwise specified in this Exhibit or by IBM in writing, Industry
Remarketers may obtain the quantity of Development System Products identified
below for the Products they are approved to market within an Approved
Processor Category for use in their Development System. If an Industry
Remarketer has a Development System Product that is a Machine for which there
is a field upgrade available and the remarketer has acquired the maximum
quantity specified below, the remarketer may acquire the field upgrade (but
not a replacement machine) as a Development System Product. The maximum number
of products in other Categories that may be obtained for Development System
use is the maximum specified by IBM that may be attached to each Development
System type. Exceptions are noted in the Exhibit. The indicated quantities may
be acquired during each 12-month contract period.
PRODUCT QUANTITY
RISC System/6000 Processors 5
Power Parallel Processor 5
AS/400 processors 2
System/390 Processors 1
Finance Industry Processors 1
Network Integration Products* 5
Point of Sale Products* 10
Storage Systems Products** 10
Remarketers may be acquire the quantities indicated for each MACHINE TYPE they
are approved to market in these categories.
Remarketers authorized for the Storage Remarketer relationship may acquire up
to 10 of the products they are approved to market.
IBM Licensed Programs are available for Development System installation at a
100% discount. One copy of each authorized licensed program is available for
each Development System. Process or media charges associated with IBM LIcensed
Programs are not eligible for a discount.
INTERNAL USE OF PRODUCTS
- ------------------------
Unless otherwise specified in this Exhibit or by IBM in writing, you may
obtain Products from this Exhibit for internal use within your firm. The
amount and types of Products that can be purchased will be governed by the
following:
1. Internal use products are available to remarketers at the same discount as
products acquired for resale.
2. The Remarketer Value-Added Enhancement need not be installed with the
internal machines.
3. One license of each eligible licensed program authorized for the Remarketer
approved mid-range processor category may be acquired.
4. Products must be retained for 24 months.
5. The IBM stated maximums of eligible I/O per system Type/Model may be
acquired.
6. Internal use Products are only to be used in the industry Remarketer
business.
7. Remarketer may only acquire, for internal use, Products that are listed in
the IR Exhibit.
8. Products acquired for internal use do not count in determining any contract
period attainment.
ADDITIONAL DISCOUNT INCENTIVES
- ------------------------------
Certain products included in this Exhibit may be eligible for additional
discount incentives as defined by IBM. These additional discount incentives
are in addition to the remarketing discount specified in this Exhibit.
However, they may not, when combined, exceed any maximum discounts specified
in this Exhibit.
may change or withdraw additional discount incentive programs at any time.
INSTALLATION REQUIREMENTS
- -------------------------
<PAGE>
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
Categories.
End User Installation Reporting
END USER INSTALLATION INFORMATION MUST BE REPORTED TO IBM FOR ALL PRODUCTS
INCLUDED IN THIS EXHIBIT AS DESCRIBED IN SECTION 3 OF THE INDUSTRY REMARKETER
ATTACHMENT TO THE IBM BUSINESS PARTNER AGREEMENT.
Managing Industry Remarketer Product Availability
All Products included in the RISC System/6000 and AS/400 sections of this
Exhibit, as well as associated Products included in the Complementary Products
section, are available to Managing Industry Remarketers at the discounts
indicated in this Exhibit, unless otherwise noted. Products that are available
at the discounts specified in MIR Schedule "A" rather than the discounts in
this Exhibit are identified by an "A" in the MIR columns of this Exhibit.
<TABLE>
<C> <S>
Legend
MIR Where indicated with an "A" in this column, the Product is available at
the discount specified in the MIR Schedule A.
LIC Products indicated with a "Y" in the LIC column require a License for
Internal Code
PRC Price Reduction Credit Category
IAC Inventory Adjustment Category
INST Installation Requirement
IBI Installation by IBM
CSU Customer Set Up
VAE Value-Added Enhancement
CERT Certification Required
NA Products indicated with a "Y" in the NA column are eligible for export
between the United States and Canada under the terms and conditions
announced by IBM.
</TABLE>
Remarketer Project Discount Guidelines
Industry Remarketers, System-Integrator Remarketers and Managing Industry
Remarketers 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. In addition,
Industry Remarketers, System-Integrator Remarketers, and Managing Industry
Remarketers approved to sell IBM networking products may be eligible for a
Networking Products Project Discount in addition to their base discount.
1. 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 that 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 amount) 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 38%.
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.
. 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 project revenues are equal to or greater than $5.0M.
All Current Discount Maximums indicated in this exhibit continue to apply.
The project discount is applicable for qualifying engagements for end user
installations in OTHER than Federal Government Accounts.
Please refer to IBM announcement letter 595-035 dated May 9, 1995, for
additional details.
<PAGE>
2. IBM
Industry Remarketers, Systems-Integrator Remarketers, and Managing Industry
Remarketers, approved to sell IBM networking products may be eligible for the
IBM Project Discount for Networking Products in addition to their base
discount.
A Project is defined as an engagement by one of IBM's remarketers with a single
end user to develop, re-engineer, or migrate a well-defined business solution
which results in IBM networking product revenue from that remarketer of $500K
or more over a period of up to two years.
The Project Discount for Networking Products may be 3%, 5%, or 7%, based on the
total amount of IBM revenue for networking products ordered directly from IBM
for one project. For any given product, the sum of the remarketer's base
discount and the earned Project Discount for Networking Products may not exceed
45%.
Networking Products Project Discount Schedule
. 3% when IBM project revenues are equal to or greater than $500K, but less
than 1.0M or
. 5% when IBM project revenues are equal to or greater than $1.0M, but less
than $2.0M, or
. 7% when IBM project revenues are equal to or greater than $2.0M
Only IBM networking products ordered directly from IBM, which are remarketed
for a project, count toward the Total IBM Networking Project Revenue. Products
ordered through IBM Direct or IBM PC Direct on behalf of the end user, and
products ordered from other remarketers, are excluded. THe project discount
applies only to networking products included in the Industry Remarketer Exhibit
Categories D, D1, and G2 (excluding the IBM 3174). The remarketer may aggregate
IBM networking product revenue for adapter cards and 82xx LAN hubs not included
in the Industry Remarketer Exhibit towards the revenue levels. However, these
aggregation products are not eligible for the additional project discount.
The Networking Products Project Discount is applicable for qualifying
engagements for end user installations OTHER than Federal Government Accounts.
All Current Discount Maximums indicated in this exhibit continue to apply.
Net prices for the specific project will be maintained from the time IBM
receives the first order through the term of the project, not to exceed two
years, unless the additional project discount is changed at the half-way
review. IBM Single-Unit Purchase Price reductions that occur during the project
period will be available to the remarketer.
Remarketers submitting a project discount request for IBM products can also
utilize the IBM Networking Products Project Discount if the IBM networking
revenue content exceeds the revenue levels described in this announcement. IBM
Networking project revenue will aggregate towards the achievement of the total
IBM product project revenue levels as described in Remarketer Announcement 595-
035, dated May 9, 1995. If the project revenue IBM receives from the remarketer
meets the IBM networking project revenue levels, the remarketer should submit
two Project Discount Forms.
Please refer to IBM announcement letter, 595-097, dated October 10, 1995, for
additional details.
IBM Printing Systems Company Printers
- -------------------------------------
IBM Printing Systems Company Printers are automatically available to Industry
Remarketers for marketing under the terms, conditions and discounts specified
in the IBM Printing Systems Company Remarketer (PCR) Exhibit (Z125-5066).
Please refer to the PCR Exhibit for specific details.
The printers from the IBM Printing Systems Company may be marketed to end users
without the standard Value-Added Enhancement requirement.
<PAGE>
Eligible Product Table: Categories by Processor Type
<TABLE>
<CAPTION>
SYSTEM
SYSTEM TYPES UNITS ELIGIBLE PRODUCT CATEGORIES
NETWORK
PRODUCT RISC SYSTEM IBM POS GRAPHICS INTEGRATION STORAGE
CATEGORIES 6000* AS/400 PRODUCTS SYSTEM/390 PS/2 PRODUCTS PRODUCTS PRODUCTS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Primary A B C E D
C1 E1
Complementary
Products:
Displays G1 G1 G2 G2
G2 G2
H2 S1 S5 H1 S1 H1 S1*** S1 S4
Storage Products H3 S2 H2 S2 H2 S2 S2 S5
S3 S4 S3
S4
Graphics
Products 11 11 11
Finance Ind. J1* J1* J1* J1*
Products
K1 K1 K1 K1
Miscellaneous K2 K2 K2 K2
K5 K5 K5
Printers K4 K4 K4 K4 K4
IBM Licensed A B C E2 F N/A D1 SS
Program D1 B1 C2 F Q M
Categories: F F O N
M N Y O
O O SS
P P
SS X
X
Y
</TABLE>
Miscellaneous IBM Licensed Program Categories:
<TABLE>
<C> <S> <C>
?? Value-Added Enhancement Qualifying Licensed Programs -A1
* Selected IBM Products may required unique approvals
*** 9348 only
</TABLE>
<PAGE>
IBM RISC SYSTEM/6000
Products included in this section are available to IBM Authorized Industry
Remarketers approved for the IBM RISC System/6000. Category A Products are
eligible for the discounts identified in the RISC System/6000 Discount Schedule
below. Individual remarketer's specific discounts are identified in their
Industry Remarketer Profile. RISC System/6000 Industry Remarketers may so
acquire Products from the Complementary Products section of this Exhibit in
Categories D1, F, G1, G2, H2, H3, I1, J1, J2, K1, K , K4, K5, M, O, P, S1, S2,
S3, S4, S5, SS, X, and Y. Products acquired from this section, as well as
Products acquired from the Complementary Products section, aggregate toward the
RISC System/6000 Annual System Revenue Performance unless otherwise noted.
<TABLE>
<S> <C> <C>
Hardware Development
Annual System Revenue Performance Remarketing Discount Discount
Entry (less than $500K) 25% 50%
$500,000 - 999,999 30% 50%
$1,000,000 - 1,499,999 31% 50%
$1,500,000 - 2,499,999 32% 50%
$2,500,000 - 4,999,999 34% 50%
$5,000,000 - 9,999,999 35% 50%
$10,000,000 - 14,999,999 36% 50%
$15,000,000 and over 37% 50%
</TABLE>
Category A
Machines(/1/)
MES orders for machines included in this Category are available at a 35%
discount.
<TABLE>
<CAPTION>
MACHINE
TYPE DESCRIPTION NA MIR LIC IAC INST NOTES
<C> <C> <C> <C> <C> <C> <C> <S>
* 7013 models J01 and
6094(8) Spaceball 3-D Input Device (Model 030) Y A N 6 CSU J30 are CSU.
MES features and model
7006 RISC System/6000 Graphic Workstation Y A Y 10 CSU conversions remain IBI.
**The 0562 and 0463 are
NOT eligible for Price
7009 RISC System/6000 Compact Server Y A Y 10 CSU Reduction
Protection and are not
eligible for return to
7011 POWERstation/POWERsvr Y A Y 10 CSU IBM. The 7231
is not eligible for
7012 POWERstation/POWERsvr Y A Y 10 CSU return to IBM.
7013* POWERstation/POWERsvr Y A Y 10 IBI
(1) You are authorized
to initially install
7015(11) POWER/SERVER Y A Y 6 IBI your programs and
related IBM Licensed
Programs, at your
7016 POWERstation N A Y 6 IBI authorized
location, on RISC
System/6000 processors
7024 RISC System/6000 Server Y A Y 10 CSU subject to the
provisions of Section
17 on the IBM Business
7025 RISC System/6000 Server Y A Y 10 CSU Partner
Agreement, Remarketer
7030 RISC System/6000 Graphic Workstation Y A Y 10 CSU General Terms.
7237** RISC System/6000 Graphic Accelerator Y A N -- IBI
(8) These Products are
available for marketing
7247 ThinkPad Power Series 820 N A N 10 CSU without the
standard value-added
7248(8) RISC System/6000 43P PowerPC Workstation Y A N 10 CSU enhancement requirement.
7249 ThinkPad Power Series 850 N A N 10 CSU
(9) Individual
authorization is
7250 Power GXT1000 Graphic Accelerator Y A Y 6 IBI required for IBM RISC
System/6000
remarketers to be
7318 Serial Communications Network Server Y A Y 6 CSU eligible to market the
IBM PowerParallel
System Type 9076. This
7319 Fiber Channel Switch/Adapter Y A Y 6 IBI Product is
not eligible for the
7596(10) IBM Cross-Platform Server N -- Y c IBI Project Discount.
0463(6)** Software Customization/Factory N -- N -- CSU
(10)The 7596 is
available at a single
Installation Option Remarketing Discount
of 20% for both new
machines and field
0562(6)** Prestoserve N A N -- CSU installed
features and model
9076(9) IBM PowerParallel System 2 (SP2) Y A Y 6 IBI conversions.
Scalable Parallel Processor
(11)The 7015 Model ROO
System Rack is available
in
Category S5.
</TABLE>
Note:
<TABLE>
<C> <C> <S>
Software Customization for
(6) 0463-001 AIX/6000
Prestoserve Factory
0463-002 Installation Option
CCS Software Package
0463-SW1 Solutions
0562-004 Prestoserve for AIX/6000
</TABLE>
<PAGE>
IBM RISC System/6000 (Continued)
Category A (Continued)
IBM Licensed Programs
<TABLE>
<CAPTION>
PROGRAM
NUMBER PROGRAM DESCRIPTION NA MIR NOTES
<C> <S> <C> <C> <C>
AIXwindows
5601-257(4) Environment/6000 Y A * Maximum Remarketing Discounts:
AIX Personal Computer
5601-263* Simulator/6000 Y A 5601-263 Processor Categories D5 & E5 = 30%
5601-457(7) AIX XStation Manager Y A 5765-083 = 20%
AIX Optimization
5621-013 Subroutine Library/6000 N A 5621-027 = 10%
5621-027* Resource License Manager N A
Permission to copy is
NOT granted for the
following Licensed
Programs:
DB2 Client Application
5622-129 Enabler/2 N A 5696-623
IBM NetView FTP Client
5622-242 for AIX Y -- 5696-624
IBM Intelligent Miner
5648-127 for AIX N A 5696-735
IBM Software Upgrade
Protection Plan for AIX
5692-ADV and UNIX Y A 5696-925
IBM Realtime Interface
5696-038 Co-Processor AIX N A 5765-083
5696-523(7) SDE Integrator/6000 N A 5765-421
5696-524(7) SDE WorkBench/6000 Y A 5765-423
5696-551(7) FORTRAN POWERbench Y A 5765-448
AIX Performance
5696-623(7) Toolbox/6000 Y A 5765-496
AIX Performance
5696-624(7) Aide/6000 Y A 5756-526
AIX HIPPI Driver
5696-658(7) Group/6000 Y A 5765-598
AIX File Storage
5696-708(7) Facility/6000 Y A 5765-599
AIX Ultimedia
5696-709 Services/6000 Y A 5765-628
5696-733(7) C+ + POWERbench V2 N A 5765-651
AIX Distributed
5696-735 SMIT/6000 Y A 5799-QQP
5696-761(7) COBOL POWERbench/6000 Y A
5696-868 IBM AIX X.25 V1.1 Y A + These IBM RISC System/6000 AIX Programs are
IBM InfoCrafter for AIX
5696-893(7) V2 Y -- subject to unique terms and conditions. Please
IBM InfoExplorer
5696-898 Licensed Extension V1 Y -- refer to the Industry Remarketer Attachment
5696-899(7) IBM Performance Aide V2 Y A (Z125-4805), Section 8, for details.
IBM Performance Toolbox
5696-900(7) V2 Y A
IBM Distributed SMIT for
5696-902(7) AIX V2.1 Y A (3) Aggregation toward Annual System Revenue
IBM AIX Windows Display
5696-904 PostScript V1.1 Y A Performance does not apply.
IBM Multimedia Services
5696-906(7) V2.1 for AIX Y A
PEX and PHIGS V4.1 for
5696-907(7) AIX Y A (4) When ordered for installation on an IBM 9076,
IBM Hypertext
Information Base
5696-919 Libraries V1 Y -- this Product receives the same discount as the
5696-923(7) AIX HACMP/6000 Y A IBM 9076 processor.
5696-925 MultiView Mascot N A
5696-926 IBM AIXlink/X.25 V1.1 Y A (7) When Version to Version upgrades to a licensed
5696-933(7) HACMP for AIX V4 Y A program are available, they are eligible for the
OpenGL and GL 3.2, V4.1
5696-939(7) for AIX Y A same discount as an initial license order for the
IBM SNA Application
5696-943 Access for AIX Y A upgraded-to program.
IBM SNA Client Access
5696-944 for AIX Y A
5697-021(7) IBM Netware for AIX Y A
5697-024(3) IBM Lan Server for AIX Y A
IBM Wireless Network
5697-204 Access Server N A
Multimedia Server for
5697-213 AIX Y --
AIXwindows Interface
5756-027(7) Composer/6000 N A
5756-030+(4) AIX For RISC System/6000 Y A
5765-001(7) IBM AIX Direct Talk/6000 Y A
Numerical Control Post
Processor Generator
5765-003 Library/6000 N --
AIX X-Windows 3270
5765-001(7) Emulator/6000 Y A
5765-012 AIX APL 2/6000 Y A
AIX XL Fortran Runtime
5765-019(7) Environment/6000 Y A
IBM AIX Consumer
Transaction
5765-022 Definition/6000 N A
5765-042(7) IBM AIX ESSL/6000 Y A
IGES Processor for AIX
5765-083* and UNIX N A
5765-091(7) AIX Host Link/6000 N A
AIX Communications
5765-092(7) System/6000 N A
5765-093(7) AIX Tools/6000 N A
AIX Communications
5765-094 Protocol Programs/6000 N A
AIX Data Collection
5765-096 Device Support/6000 N A
AIX Entry Communications
5765-097(7) System/6000 N A
5765-145(4) IBM Loadleveler Y A
</TABLE>
For Processor Group Information refer to Exhibit IBM RISC System/6000 Machines
(Z125-8309).
<PAGE>
Category A (Continued)
IBM Licensed Programs
<TABLE>
<C> <S> <C> <C> <C>
Program Number Program Description NA MIR Notes
AIX XL Fortran * Maximum Remarketing Discount:
5765-176(7) Compiler/6000 Y A 5765-526=30%
** Standard Remarketing Discount:
5765-186 C Set + + for AIX/6000 Y A 5765-496=30%
(3) Aggregation toward Annual
AIX 5086 Connectivity System Revenue Performance does
5765-195 Enabler/6000 V1 N A not apply.
(4) When ordered for installation
on an IBM 9076, this Product
receives the same discount as IBM
5765-198 IBM AIX Query/6000 N A 9076 processor.
(5) Single Remarketer Discount
5765-207(7) IBM CMVC for AIX Systems Y A for 5799-QQP=20%.
5765-217 DB2 Client Application N A (7) When version to Version
Enabler/DOS upgrades to a licensed program
are available, they are eligible
for the same discount as an
initial license order for the
upgraded-to program.
5765-218 DB2 Client Application N A
Enabler/6000
AIX XL Pascal
5765-245 Compiler/6000 Y A
5765-247 IBM AIX SNA Server/6000
V2 N A
AIX 5080 Emulation Y A
5765-249 Program/6000
5765-261 IBM AIX SNA Gateway/6000
V2 N A
5765-266(7) IBM AIX CallPath Y A
Server/6000
IBM AIX Async Terminal
Server-Accelerator/6000
5765-268 for Ethernet Y A
5765-273 IBM Printing Systems
Manager for AIX N A
AIX Parallel System Y --
5765-296 Support Program V1
5765-315(7) Wabi for AIX V2 Y A
5765-326 IBM Visualizer Query for N A
AIX/6000
DB2 Parallel Edition for
5765-328 AIX/6000 Y --
5765-382 IBM AIX NetBIOS and IPX
and SPX Support/6000 Y A
IBM Parallel OSL for Y A
5765-392 9076/SP2 and SP1 Systems
5765-393(7) IBM AIX Version 4.1 Y A
5765-398(7) IBM 3270 Host Connection N A
for AIX
5765-400(7) IBM UIM/X for AIX Y A
5765-418 IBM Data Encryption Y
Standard Library
Routines A
5765-419 Desktop SNA for AIX Y A
5765-421(7) IBM C Set + + for AIX Y A
5765-422(3,7) IBM Parallel ESSL for Y A
AIX V4
5765-423 IBM C for AIX Y A
5765-435 IBM NetView FTP Server
for AIX Y --
IBM Recoverable Virtual Y A
5765-444 Shared Disk for AIX
5765-448 C Set + + for Solaris
Operating System N A
5765-449 IBM MERVA for AIX N --
IBM Automatically
Programmed Tool for AIX
5765-496**(7) (APt/WS) N A
5765-505(7) Print Services Facility
for AIX V2 N A
5765-509(7) Soft5080 for AIX V3 Y A
5765-526*(7) IBM XL FORTRAN Runtime
Environment for AIX Y A
5765-528(7) Soft 5080 for AIX V4 Y A
AIX Parallel System
5765-529 Support Program V2 Y --
5765-541 IBM Printing Systems
Manager GUI for AIX N A
5765-542 IBM Soft 5080 for AIX V2 N A
5765-543(3,7) Parallel Environemnt for
AIX V2 Y A
5765-544(3,7) IBM PVME for AIX V2 Y A
5765-550(7) IBM NetBIOS and IPX/SPX Y A
5765-551 AIX HIPPI/6000 Y A
5765-552 Starworks for AIX V2 N A
5765-560(7) 5086 Connectivity
Enabler for AIX V2 Y A
5765-582 SNA Server for AIX V3.1 Y A
IGES Doctor for AIX and
5765-588 UNIX N A
5765-598(3) IBM NWAYS Campus
Manager-ATM for HP-UX V1 N A
IBM NWAYs Campus Manager N A
5765-599(3) Suite for HP-UX V1
5765-603 ESCON Channel
Connectivity Y A
5765-604 Block Multiplexer Y A
Channel
Netscape Commerce Server
5765-624 V1 N A
5765-628(3) IBM NWAYS Campus
Manager-LAN for HP-UX V1 N A
IBM Internet Connection N A
5765-638 Server for AIX
5765-645 IBM Parallel ESSL for
AIX V3 N A
5765-651 Windows NT Y A
IBM Communications
5765-652 Server for AIX V4 N A
5765-653(7) Solaris V2 Desktop
Operating System Y A
IBM Performance Toolbox N A
5765-654 for AIX V2
5765-655 AIX V4 N A
5765-659 Open GL and GL 3.2 for N A
AIX
5765-660 PEX and PHIGS for AIX N A
5765-591 IBM Soft 5080
Hostconnect for AIX N A
IBM AIX Speech Y A
5777-WCN Client/6000
5777-WCP IBM Speech Client/2 Y A
5777-WCQ IBM AIX Speech Server/2 Y A
7596 Distributed
5799-QQP(5) Resource Broker PS0156 N N
</TABLE>
Note: For Processor Group Information refer to Exhibit IBM RISC System/6000
Machines (Z125-8309).
<PAGE>
IBM RISC SYSTEM/6000 (CONTINUED)
Category A1
Value-Added Enhancement Qualifying Licensed Programs
The following IBM Licensed Programs are available to RISC System/6000 Industry
Remarketers who have been approved for products as their Approved Value-Added
Enhancement. These Products are eligible for the discounts specified in this
subsection and are aggregated toward the RISC System/6000 Annual System revenue
Performance.
These products are available to MIRs when their IRA is approved for the
Products as their VAE.
IBM Licensed Programs
<TABLE>
<S> <C> <C> <C> <C>
Program Remarketing
Number Program Description Discount MIR Notes
Professional CADAM: If a Program is offered under a Primary
License Charge/Annual License Charge, the
5696-041* View 38% -- indicated discount applies only to the Primary
5696-138* Drawing Mark-Up Facility 38% -- License Charge.
5696-706* Variational Design System 38% -- Note: The 100% Development Discount is
5696-885* Graphics Enabler 38% -- applicable to the OTC only.
5696-938* MCX Translator 38% --
* Permission to copy is not granted for this
5697-166(1) Total Info and Plan Sys FM 35% A program.
5697-258* Hybrid Raster 38% --
(1) When Version to Version upgrades to a
5756-091* 3D Surface Design 38% -- licensed program are available, they are
5756-092* Manufacturing System 38% -- eligible for the same discount as an initial
5756-093* Machining Center 38% -- license order for the upgraded-to program.
5756-094* Interactive Design 38% --
5756-095* Access IUE 38% --
5756-096* Interactive Solids Design 38% --
5756-295* CADEX: Intelligent Data Integrator 38% --
5756-296* MCAE Interfaces 38% --
5756-297* AEC Schematics 38% --
5765-020 Numerical Control Post Processor 38% --
Generator/6000
5765-068 CAMkit/6000 38% --
5765-474* IBM 3D Interaction Accelerator 30% --
CATIA:
5626-CCD* CADAM Drafting 38% --
5626-IUE* CADAM IUE 38% --
5626-MU2* CATIA/CADAM 2D Mark and Annotation 38% --
5626-MCX* CATIA/CADAM MCX Translator 38% --
5626-RAS* CATIA/CADAM Hybrid Raster 38% --
IBM Architecture & Engineering Series:
5696-054(1) Graphics Application 35% A
5696-055(1) Rendering Application 35% A
5696-057(1) HVAC Application 35% A
5696-060(1) Structural Application 35% A
5696-061(1) Piping Application 35% A
5765-227 Loadleveler to SUNOS SparCstation Systems 38% --
5765-228 Loadleveler for Silicon Graphics, IRIX 38% --
5765-287 Loadleveler for HP-UX Systems 38% --
</TABLE>
Note: For Processor Group Information refer to Exhibit IBM RISC SYstem/6000
Machines (Z125-8309).
<PAGE>
IBM AS/400
Products included in this section are available to IBM Authorized Industry
Remarketers approved for the IBM AS/400. Category B Products are eligible for
the discounts identified in the AS/400 Discount Schedule below. Individual
remarketer's specific discounts are identified in their Industry Remarketer
Profile. AS/400 Industry Remarketers may also acquire Products from the
Complementary Products section of this Exhibit in Categories F, G1, G2, G3,
H1, H2, J1, J2, K1, K2, K4, K5, N, O, P, S1, S2, S4, ??? X. Products acquired
from this section, as well as those acquired from the Complementary Products
section, aggregate toward the Annual Revenue Performance unless otherwise
noted.
<TABLE>
<CAPTION>
HARDWARE
REMARKETING DISCOUNT DEVELOPMENT DISCOUNT
ANNUAL SYSTEM REVENUE
PERFORMANCE 9401 9402 9404 9406 I/O & SW ALL PRODUCTS(1)
<S> <C> <C> <C> <C> <C> <C>
Entry (Less than $1,000,000) 15% 31% 29% 27% 28% 50%
$1,000,000 - 2,999,999 15% 33% 31% 29% 30% 50%
$3,000,000 and over 15% 35% 33% 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.
NOTES
<TABLE> * The 9402 Model 200,
<CAPTION> Model 400, and Model
MACHINE 40S are CSU. The 9402
TYPE DESCRIPTION MES MIR LIC IAC INST Models 236 and 436 are
<C> <S> <C> <C> <C> <C> <C> available at a 22%
9401 AS/400 Portable One 29% -- Y 6 CSU discount for new ma-
9402* System Unit 29% A Y 6 IBI* chine orders and a 29%
9404 System Unit 29% A Y 6 IBI discount for MES or-
9406(3) System Unit 29% A Y 6 IBI ders. The 9402 Model
5299** Terminal 30% A N 5 CSU 236 is available for
Multiconnector Model marketing without the
003 standard Value-Added
9331 Diskette Unit 30% A N 7 IBI Enhancement require-
9337(2) Disk Array Subsystem 30% A Y 7 IBI ment.
9480 AS/400 Wireless LAN 30% A N 6 CSU
Access Points
2482 AS/400 Wireless 30% A Y 6 CSU
Portable Transaction
Computer (PTC)
2483 AS/400 Integrated 30% A Y 6 CSU
Laser PTC
2484 AS/400 Industrial PTC 30% A Y 6 CSU
2486 AS/400 Wireless Data 30% A N 7 CSU
Collection Portable
Transaction Computer
</TABLE>
** 5299 Development Sys-
tem Products avail-
able via Special Bid
Note: 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 Section 17 of the IBM Business Partner Agreement, Remarketer
General Terms.
(1) 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.
<TABLE>
<CAPTION>
PROCESSOR DISCOUNT %
<C> <S>
9401 P03 Remarketers may acquire up to ten 9401 Model P03's for
Development System use each contract period.
9406 F60, F70, F80, F90, F95, F97 35%
9406 310, 320, 530, 53S 35%
</TABLE>
(2) The 9337 is available at a 40% remarketing discount and 50% development
discount. 9337 Models 040 (See Sales Manual) and 140 do not contain LIC.
Industry Remarketers authorized for the 9406 may market the 9337 without
the standard Value-Added Enhancement requirement.
(3) Maximum Remarketing discount for the 9406 Model 53S = 27%.
<PAGE>
IBM AS/400 (Continued)
Licensed Programs
Version to Version upgrades to a licensed program are available, they are
eligible for the same discount as an initial license order for the upgraded-to
program.
<TABLE>
<CAPTION>
PROGRAM
NUMBER PROGRAM DESCRIPTION MIR NOTES
<C> <S> <C> <C>
5620-WCL** Win400 for Clipper A ** Permission to
copy is
not granted for
these licensed
programs.
5620-WIN** Win400 Full Product A
5636-PUB AS/400 CD-ROM Collection Kit A
5716-AF1 Advanced Function Printing Utilities for OS/400 A
5716-BR1 Backup Recovery and Media Services for OS/400 A
5716-CB1 Integrated Language Environment COBOL for OS/400 A
5716-CF1 Point-of-Sale Communications Utility for OS/400 A
Application Development ToolSet Client Server
5716-CL1 for OS/400 A
5716-CM1 Communications Utilities for OS/400 A
5716-CP2 CallPath for OS/400 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 A
5716-DB1 System/38 Utilities for OS/400 A
5716-DCT Language Dictionaries for OS/400 A
5716-DFH CICS for OS/400 A
DataPropagator Relational Capture and Apply for
5716-DP1 OS/400 A
5716-DS1 Business Graphics Utility for OS/400 A
5716-ES1 System View OMEGAMON Services/400 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 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 A
5716-QU1 Query for OS/400 A
5716-RG1 Integrated Language Environment RPG for OS/400 A
5716-SM1 SystemView System Manager for OS/400 A
5716-SS1 Operating System/400 V3R6 A
5716-STK SOMobjects Developer ToolKit for OS/400 A
DB2 Query Manager and SQL Development Kit for
5716-ST1 OS/400 A
5716-SV1 ADSTAR Distributed Storage Manager for OS/400 A
5716-UB1 Ultimedia Business Conferencing for OS/400 A
5716-US1 Client Access Ultimedia Tools for OS/400 A
5716-VG1 VisualGen Host Services for OS/400 A
5716-WP1 OfficeVision for Os/400 A
5716-XA1 Client Access A
5716-XZ1 LAN Server for OS/400 A
5733-CSM** BrioQuery Designer--Macintosh V3 A
5733-CSN** BrioQuery Explorer--Macintosh V3 A
5733-CLP** BrioQuery Navigator--Macintosh V3 A
5733-CSQ** BrioQuery Designer--Windows V3 A
5733-CSV** BrioQuery Explorer--Windows V3 A
5733-CSW** BrioQuery Navigator--Windows V3 A
5733-CS8** DAL Server A
5733-080 IBM Application Dictionary/400 A
IBM Distributed Computing Environment Base
5733-167 Services/400 A
IBM Report/Data Archive & Retrieval System for
5733-218 OS/400 -
IBM Image Plus Workfolder Appl Facility V3 for
5733-228 OS/400 A
</TABLE>
NOTE: For Processor Group Information, refer to the Exhibit - IBM AS/400
Machines (Z125-4125).
<PAGE>
IBM AS/400 (Continued)
Category B (Continued)
IBM Licensed Programs (Continued)
<TABLE>
<CAPTION>
M
PROGRAM I
NUMBER PROGRAM DESCRIPTION R NOTES
<S> <C> <C> <C>
5763- Advanced Function Printing Utilities/400 A
AF1
5763-BA1 AS/400 Basic A
5763-BR1 Backup Recovery and Media Services/400 A
5763-CB1 Integrated Language Environment COBOL/400 A
5763-CD1 CoOperative Development Environment/400 A
5763-CF1 Point-of-Sale Communications Utility/400 A
5763-CL1 Application Development ToolSet Client Server/400 A
5763-CM1 Communications Utilities/400 A
5763-CP2 CallPath/400 A
5763-CR1 Cryptographic Support/400 A
5763-CX2 Integrated Language Environment C/400 A
5763-DB1 AS/400 System/38 Utilities A
5763-DCT Language Dictionaries/400 A
5763-DFH CICS/400 A
5763-DM1 SystemView Information Warehouse DataHub Support/400 A
5763-DP1 DataPropagator Relational Capture and Apply/400 A
5763-DS1 AS/400 Business Graphics Utility A
5763-ES1 SystemView OMEGAMOM Services/400 A
5763-FNT Advanced Function Printing Fonts/400 A
5763-FN1 Advanced Function Printing DBCS Fonts/400 A
5763-FS1 OSI File Services/400 A
5763-MC1 RM/COBOL-85 for the AS/400 A
5763-MG1 System Managed System Services/400 A
5763-MQ1 Message Queue Manager/400 A
5763-MS1 OSI Message Services/400 A
5763-MW1 SystemView ManageWare/400 A
5763-OS1 OSI Communications Subsystem/400
5763-PD1 Application Program Driver/400 A
5763-PL1 AS/400 PL/I A
5763-PS1 AS/400 Pascal A
5763-PT1 Performance Tools/400 A
5763-PW1 Application Development ToolSet/400 A
5763-QU1 Query/400 A
5763-RG1 Integrated Language Environment RPG/400 A
5763-SM1 SystemView System Manager/400 A
5763-SS1 Operating System/400 V3 A
5763-ST1 DB2/400 Query Manager and SQL Development Kit A
5763-SV1 ADSTAR Distributed Storage Manager/400 A
5763-UB1 Ultimedia Business Conferencing/400 A
5763-UM1 Ultimedia Mail/400 A
5763-US1 Client Access/400 Ultimedia Tools A
5763-VG1 VisualGen Host Services for OS/400 A
5763-VR1 AS/400 VRPG Client/2 A
5763-WP1 Office Vision/400 A
5763-XA1 Client Access/400 Family A
5763-XZ1 LAN Server/400 A
5798-JS2 Job Scheduler for OS/400 A
5798-RYF IBM Window Tool/400 A
5798-RYY RadioPac/400 A
5798-RYZ PagerPac/400 A
5798-RZJ JustMail/400 V3
5798-RZK Neural Network Utility/400 A
5798-RZT Facsimile Support/400 A
5798-RZW KnowledgeTool Runtime/400 A
5798-RZX KnowledgeTool Development/400 A
5798-TAA TCP/IP File Server Support/400 A
5798-TAQ JustMail for OS/400 A
5798-TBA Neural Network Utility for OS/400 A
5798-TBC PagerPac for OS/400 A
5798-TBD RadioPac for OS/400 A
5798-TBE UNIX Connection Program for OS/400 A
5798-TBF Distributed Computing Environment Base Services for OS/400 A
5798-TBG Netview FTP for OS/400 A
5798-TAT KnowledgeTool Runtime for OS/400 A
5798-TAW KnowledgeTool Development TookKit for OS/400 A
5798-TAY Facsimile Support for OS/400 A
5798-TAZ TCP/IP File Server Support for OS/400 A
</TABLE>
Note: For Processor Group Information, refer to the Exhibit--IBM AS/400
Machines (Z125-4125).
<PAGE>
IBM AS/400 (Continued)
Category B (Continued)
IBM Licensed Programs (Continued)
<TABLE>
<CAPTION>
M
PROGRAM I
NUMBER PROGRAM DESCRIPTION R NOTES
<S> <C> <C> <C>
5799-DHP SuperC Compare Utility/400 A
5799-DNP System C/400 PRPQ A
5799-JS3 Job Scheduler for OS/400 PRPQ V2 A
5799-XCR Preinstall Planning Manuals --
5799-XDH IBM Security ToolKit for OS/400 V2 R3 A
5799-XDJ IBM Security ToolKit for OS/400 V3 R1 A
5799-XDK IBM Security ToolKit for OS/400 V3 R6 A
</TABLE>
Note: For Processor Group Information, refer to the Exhibit--IBM AS/400
Machines (Z125-4125).
<PAGE>
IBM AS/400 (Continued)
Category B (Continued)
IBM Licensed Programs (Continued)
<TABLE>
<CAPTION>
M
PROGRAM I
NUMBER PROGRAM DESCRIPTION R NOTES
<S> <C> <C> <C>
IBM System 36/38 Licensed Programs
S/36 Financial Transaction Processing --
5668-883 System
5710-CAT S/36 Computer Assisted Training 1.2 --
5714-MG1 S/38 Migration Aid --
5727-BR1 S/36 Business Report Applic. Devel. System --
5727-MG1 S/36 Migration Aid --
5796-PZK S/36 RM/COBOL Compiler & Runtime --
5798-RPH S/36 Fixed Asset Acctg. and Control System --
5798-RPT S/36 Strategic Profit Model II --
5798-RPX S/36 Retrieval/36 --
5798-RRW S/36 Electronic Spreadsheet --
5799-BKP S/38 File Support Utilities for PC & XT --
5799-BTZ S/38 IBM System/38 Transfer Facility --
5799-CGJ S/36 IPDS Graphics/Text Merge PRPQ --
5799-CGK S/36 IPDS Advanced Functions PRPQ --
5799-EYY S/36 Consolidated Software Package --
S/36 Response Time Measurement Facility --
5799-PAZ 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-PK2 OfficePac 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
5727-DEM 3278 Device Emulation A
5727-DSU Development Support Utility (DSU) A
5727-DWT DisplayWrite/36 A
5727-FOR FORTRAN IV A
5727-LAN LAN Communications A
5727-PCS PC Support/36 A
BasePac/36 (includes SSP, UTL, RPG, QRY, A
5727-PK1 and PCS)
</TABLE>
Note: For Processor Group Information, refer to the Exhibit--IBM AS/400
Machines (Z125-4125).
<PAGE>
IBM AS/400 (Continued)
Category B (Continued)
IBM Licensed Programs (Continued)
<TABLE>
<S> <C> <C> <C>
Program Number Program Description MIR Notes
AS/400 Advanced 36 Licensed Programs (Continued)
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>
IBM AS/400 (Continued)
Category B1
The following IBM Licensed Programs are available to AS/400 Industry
Remarketers at the discounts specified below. These programs are aggregated
toward the AS/400 Annual System Revenue Performance.
IBM Licensed Programs
<TABLE>
<CAPTION>
M
PROGRAM REMARKETING I
NUMBER PROGRAM DESCRIPTION DISCOUNT R NOTES
<S> <C> <C> <C> <C>
5620- Real Vision Imaging Software 25% A * Permission to copy is
ABL*** not granted for these
programs.
5621-047 IWPM/2 25% -- ** This product is a no-
5621-211 IWPM/DOS for Windows 25% -- charge PRPQ and is
5622-055 IBM Current--OfficeVision/400 35% -- NOT available for a
5696-006 Workgroup 25% A discount. Permission
5696-024 AS/400 Intro to Data Communications 25% A to copy is not
AS/400 System Using the System/36 granted for this
Environment program.
5696-025 AS/400 System for the Experienced A *** One development copy
System/38 Implementer 25% of 5620-ABL is
5696-026 AS/400 Control Language Programming 25% A available directly
5696-027 Workshop 25% A from Real Vision,
5696-029 AS/400 Interactive Program Design 25% A Inc. The 100%
5696-030 RPG/400 Interactive Programming 25% A development discount
5696-034 Workshop 25% A through IBM does not
5696-431 AS/400 Relational Data Base Design and -- apply. Permission to
Coding 25% copy is not granted
COBOL 400 Interactive Programming for this program.
Workshop
IBM Personalized Learning Series--
OfficeVision/400 Implementation
5733-056 Manage/400 Course for AS/400 25% A
5733-072 IDM Medical RecordPlus/400 V2 35% A
5733-129 Discover Education OfficeVision/400 25% --
Support
5733-130 Discover Education OfficeVision/400
Support Additional Topics 25% --
5733-131 Discover Education AS/400 25% --
Implementation Series
5733-132 Discover Education OfficeVision/400 25% --
Support Series
5733-133 Discover Education AS/400 Education 25% --
Library
5733-141 IBM Discover Education RPG/400 25% --
Programming
5733-143 Getting Started with PC Support/400 25% --
5733-144 IBM Discover Education PC Support/400 25% --
5733-174 Discover Education Using Query/400 25% --
5733-175 Discover Education AS/400 Basic CL 25% --
Programming
5733-176 Discover Education AS/400 Basic 25% --
Education Series
5733-177 Discover Education AS/400 -- --
Implementation Series
5733-178 Discover Education OfficeVision/400 25% --
Support Series
5733-179 Discover Education AS/400 Education 25% --
Library
5733-180 Discover Education AS/400 Facilities 25% --
Implementation
5733-181 Discover Education AS/400 Application
Design and Development Tools 25% --
5733-182 Discover Education OfficeVision/400 25% --
Support
5733-183 Discover Education OfficeVision/400
Support--Additional Topics 25% --
5733-184 Discover Education Using Query/400 25% --
5733-185 Discover Education AS/400 Basic CL 25% --
Programming
5733-188 Discover Education AS/400
Implementation for Entry Systems 25% --
5733-204 Personalized Learning Series
Structured Query Language/400 25% --
Programming Workshop
5733-205 Personalized Learning Series OS/400
Structure, Tailoring, and Basic 25% --
Tuning
5733-206 Personalized Learning Series AS/400
System Administration and Control 25% --
5733-207 Personalized Learning Series AS/400
System Operator Workshop 25% --
5733-208 Personalized Learning Series AS/400
Advanced System Operator Workshop 25% --
5733-210 Discover/Education AS/400 Overview 15% --
5733-219 Discover Education AS/400
Implementation and Operations 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* Guidelines V3 30% A
5798-RYX IBM Application Program Driver/400 35% --
V2R2
5799-XBK** Optical Library Data Server -- --
Support/400
5799-XAY** C/400 Library PRPQ -- --
</TABLE>
Note: For Processor Group Information, refer to the Exhibit--IBM AS/400
Machines (Z125-4125).
<PAGE>
IBM Point of Sale Products
Products included in this section are available to IBM Authorized Industry
Remarketers approved for the IBM Point of Sale Products. Category C Products
are eligible for the discounts identified in the Point of Sale Products
Discount Schedule below: Individual remarketer's specific discounts are
identified in their Industry Remarketer Profile. Industry Remarketers may also
acquire Products from the Complementary Products section of this Exhibit in
Category K4. Products acquired from this section, as well as Products acquired
from the Complementary Products section, aggregate toward the Point of Sale
Products Annual System Revenue Performance unless otherwise noted.
Enhanced Discount Opportunity for IBM Point of Sale Products
An additional 5% discount is available to authorized remarketers for the 4693,
4694, and 4695 Products when the end-user enterprise meets any of the following
qualifications:
. It is replacing non-IBM cash registers, POS, or PC Cash Drawers.
. It is a first-time user of IBM POS.
. It is ordering IBM POS after a hiatus of at least 24 months.
An additional 10% discount is available on the IBM 4690 Operating System, 4690
applications, and all related PRPQs on the Industry Remarketer Exhibit when the
software is being installed with Products eligible for this program.
An additional 5% discount is available on IBM FoodService Application/DOS, IBM
Retail Application/DOS, and the Retail Data Base Facility when these programs
are being installed with qualifying hardware products eligible for this
program.
This program for additional discount cannot be combined with the project
discount, or any other discounts, credits, rebates, or bonuses.
When ordering Products eligible for the additional discount, the end user must
be identified when the order is placed.
Products eligible for a 5% enhanced discount are indicated by (1).
Products eligible for a 10% enhanced discount are indicated by (2).
Category C
For Machines in this Section:
. MES orders are available at the same discounts as the Base Machine.
. Remarketers may acquire up to a maximum of six of each type they are approved
to market for Development System Use.
. Warranty Service Category B applies. Refer to the General Information section
for details.
<TABLE>
<CAPTION>
ANNUAL SYSTEM REVENUE HARDWARE DEVELOPMENT
PERFORMANCE REMARKETING DISCOUNT DISCOUNT
<S> <C> <C>
Entry (less than $500K) 29% 50%
$500,000 - 1,999,999 31% 50%
$2,000,000 - 4,999,999 33% 50%
$5,000,000 and over 35% 50%
</TABLE>
Machines
<TABLE>
<CAPTION>
MACHINE
TYPE DESCRIPTION MIR LIC IAC INST NOTES
<S> <C> <C> <C> <C> <C> <C>
(1) Products eligible for a 5% enhanced
4693(1) Point of Sale Terminal -- N 6 CSU discount.
4694(1) Point of Sale Terminal A N 6 CSU
4695(1) Point of Sale Terminal A N 6 CSU
4678 Complementary Retail & Distribution Products
--Model A0X A N 6 CSU
Telxon WS-4680/4690 Wireless Store System
--Models C0X -- N 6 CSU
</TABLE>
<PAGE>
IBM (CONTINUED)
IBM Licensed Programs
<TABLE>
<S> <C> <C>
Program
Number Program Description Notes
5601-152(2) IBM 4680 Store Management Applications Permission to copy is NOT granted for the following
Licensed Programs:
5669-031 IBM 4680 General Sales Application V1, R1 5799-DXY
5669-032 IBM 4680 Supermarket Application V1, R2 5799-PHG
5669-212(2) IBM 4680 Chain Drug Sales Application 5799-PLG
5696-192(2) IBM 4680 Basic Version 3 (1) Products eligible for a 5% enhanced discount.
5696-314 IBM Retail Workbench/2
5696-536(2) IBM 4680 Supermarket Application V2 (2) Products eligible for a 10% enhanced discount
5696-538(2) IBM 4690 Operating System V1
5696-546(2) IBM 4680 General Sales Application V2 * These products are not eligible for a discount.
5764-064 TCP/IP
5799-CRC(2) 4680 Specialty Store Application
5799-DAP 4680 Full Menu Restaurant Application
5799-DCB(2) Coupon Processing Enhancements
5799-DWR* IBM 4680 Application Debugger
5799-DXY* IBM 4684 SAA Source Code
5799-PHG* 4680 OS Tape Backup Feature
5799-PLG 4680 Remote Operator LAN Support
5799-PNH(2) 4680 Supermarket Electronic Mktg. Support
5799-QAQ(1) StorePlace RDBF for AIX P85276
5799-QCJ(1) IBM Food Service Application/DOS
5799-QJD StorePlace Distributed Data Services for OS/2 RPQ P85421
5799-QKH(1) StorePlace RDBF for OS/2 P85430
5799-QRL(1) StorePlace RDBF for OS/400 P85482
5799-QRN(2) IBM 4690 Touch Screen Terminal Support for 4690 OS P85492
5799-QRP(2) IBM 4690 Touch Screen Terminal Support for 4690 DOS P85491
5799-QRQ(2) IBM 4690 Enhanced Remote Operator P85489
5799-QRR(2) IBM 4680 Enhanced Remote Operator P85490
5799-QTJ(2) 4680-4690 SA Full Screen P85496
5799-QWA(2) OEM Optical Drive Support P85504
</TABLE>
Category C1
Machines
For Machines in this section, MES orders are eligible for the same discounts as
the base Products.
<TABLE>
<C> <C> <C> <C> <C> <C> <C> <S>
Hardware
Machine Remarketing Development
Type Description Discount Discount LIC IAC INST Notes
2470 Wireless Data Collection Ethernet LAN 32% 50% N 6 CSU
Access Point
2472 Wireless Data Collection Portable 32% 50% N 6 CSU
Transaction Computer (PTC)
2473 Wireless Data Collection Integrated PTC 32% 50% N 6 CSU
2476 Wireless Data Collection Integrated PTC 15% 50% N 6 CSU
</TABLE>
Category C2
IBM Licensed Programs
<TABLE>
<C> <C> <C> <S>
Program Program Remarketing
Number Description Discount Notes
5696-539(1) IBM Retail Application/DOS 50% (1) Products eligible for a 5% enhanced
5699-FPR(2) IBM Advanced Payment System for Chain Drug Sales 35% discount.
5799-FRN(2) IBM Advanced Payment System for Stand Beside Environment 35%
5799-QPD(2) IBM Advanced Payment System for Supermarket 35% (2) Products eligible for a 10%
5799-QNR(2) IBM Advanced Payment System for General Sales 35% enhanced discount.
</TABLE>
<PAGE>
IBM Network Integration Products
Products included in this section are available to IBM Authorized Industry
Remarketers approved as IBM Network Integration Remarketers. These Products are
eligible for the discounts identified in the Network Integration Discount
Schedules below. Network Integration Industry Remarketers may also acquire
Products from the Complementary Products section of this Exhibit in categories
G2, K1, K2, M, N, O, and SS.
Category D
Machines
MES orders for Machines included in this Category are eligible for the same
discounts as the base Products.
Notes
<TABLE>
<C> <C> <C> <C> <C> <C> <C> <S>
Machine Remarketing Development
Type Description Discount Discount MIR LIC IAC INST
2210 NWAYS Multiprotocol 26% 50% A N 10 CSU
Router
2217 NWAYS Multiprotocol 25% 50% -- N 10 CSU
Concentrator
2218 NWAYS Frame Relay 25% 50% -- N 5 CSU
Access Device
(FRAD)
6611 Network Processor
--Model 12X 30% 50% A N 10 CSU
--Model 14X, 17X 38% 50% A N 10 CSU
8250 Multiprotocol 38% 50% A N 10 CSU
Intelligent Hub
8251 Campus LAN Switch 28% 28% -- N 10 CSU
RPQ 8Q1615
8260* Multiprotocol 38% 50% A N 10 CSU
Intelligent
Switching Hub
8281 ATM LAN Bridge 38% 50% A N 10 CSU
8282 TURBOWAYS 38% 50% A N 10 CSU
Concentrator
8285** High Speed Inverse 35% 50% A N 10 CSU
Multiplexor
9741 NWAYS ATM Workgroup 38% 50% A N 10 CSU
Switch
</TABLE>
* Model
upgrades are
IBI.
** The 8285
Model 00P
receives a
10%
remarketing
and
development
discount.
Note: These Products may also be available under unique Project Discount terms
and conditions. For additional details, see the Remarketer Project Discount
Guidelines located in the General Information section of this Exhibit.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Program Program Remarking
Number Description Discount NA MIR Notes
* Not available for
copy/redistribution and
may only be ordered pre-
loaded on the IBM 6611
5648-016*(1) Multiprotocol Network Program 30% N Y Network Processor.
Network Management Family
(1)When Version to
Version upgrades to a
licensed program are
available, they are
eligible for the same
discount as an initial
license order for the
5621-107 AIX Net View Service Point 35% Y A upgrade-to-program.
5696-905(1) NetView Entry for AIX V3 35% Y A
5696-728 NetView for Sun Solaris 35% Y A
5696-731(1) NetView for AIX V3 35% Y A
5765-215 NetView DM Agent for HP-UX 35% Y A
5765-233 SNA Manager/6000 35% Y A
5765-234 SysMon for SUN Solaris 35% Y A
5765-235 SysMon for HP-UX 35% Y A
5765-236 SysMon for Unix for NCR 35% Y A
5765-251 LAN Network Manager for AIX 35% Y A
5765-264 LAN NetView Mgmt Utilities/6000 35% Y A
5765-265(1) Trouble Ticket V3 35% Y A
5765-292 Rmonitor For AIX 35% Y A
5765-306 NetView DMA for SunOS 35% Y A
5765-307 NetView DMA for Solaris 35% Y A
5765-308 NetView DMA for Unix System V 35% Y A
5765-343(1) IBM AIX Router & Bridge Manager/6000 35% N A
5765-368 Nways Multiprotocol Routing Network Services 35% Y A
5765-410(1) Systems Monitor for AIX V2 35% Y A
</TABLE>
<PAGE>
IBM System/390
Products included in this section are available to IBM Authorized Industry
Remarketers approved for the IBM System/390. These Products are eligible for
the discounts identified in the System/390 Discount Schedules below. System/390
Industry Remarketers may also acquire Products from the Complementary Products
section of this Exhibit in Categories F, G2, G3, H1, , J1, J2, K1, K2, K4,
K5, O, S2, and Y.
Category E
Machines (1)
MES orders for Machines included in this Category are available at the same
discounts as the base machine.
<TABLE>
<CAPTION>
MACHINE REMARKETING DEVELOPMENT
TYPE DESCRIPTION DISCOUNT DISCOUNT LIC IAC INST NOTES
<C> <C> <C> <C> <C> <C> <C> <S>
9221 Processor: (2)(3) (2) (2) Y 5 IBI
9672 System/390 Parallel Enterprise Servers(2) (2) (2) Y 5 IBI
--R1 and R2 Models
--Models R53 and R63
</TABLE>
Note
(1) On your request, we will pre-load programs onto your on-order IBM
System/390.
(2) The IBM 9221 and 9672 processors, including all model conversions, are
available for remarketing and development system installation at a
remarketer price rather than a discount off an IBM single unit price. Please
contact your IBM marketing representative for pricing information.
(3) 9221 features, when ordered as part of the original machine configuration
or as MES orders, are eligible for a 55% remarketing and 60% development
discount off of the IBM Single Unit List Price for the features.
<PAGE>
IBM System/390 (Continued)
Category E1
Machines
MES orders for Machines included in this Category are available at the same
discounts as the Base Machine unless otherwise indicated.
<TABLE>
<C> <S> <C> <C> <C> <C> <C> <C>
Remarketing Development
Machine Type Description Discount Discount LIC IAC INST Notes
3390 DASD * MES orders for
- Models A9X, B9X(1) 60% 60% N 5 IBI these machines
are not eligible for
a discount.
3990* Storage Controller-
Model 006** 76% 76% Y 5 IBI
9032 ESCON Director 30% 50% N 5 IBI 3390-A94 contains LIC
9034 ESCON Converter 30% 50% N 5 IBI
9035 ESCON Converter 30% 50% N 5 IBI
9341* Storage Controller 25% 50% Y 5 IBI ** 3990-006 MES
9343* Storage Controller 25% 50% Y 5 IBI orders are
9345* DASD 25% 50% Y 5 IBI eligible for 25%
9391 RAMAC Array Rack Remarketing and
-Model A10 66% 66% Y 5 IBI Development discount.
9392 RAMAC Array Drawer
-Model B13 61% 61% Y 5 IBI
-Model B23 71% 71% Y 5 IBI
9394(2) RAMAC Array Controller
-Models 001, 002, 003 72% 72% Y 5 IBI
9395 RAMAC Drawer Array
-Model B13 61% 61% Y 5 IBI
-Model B23 66% 66% Y 5 IBI
9674(3) Computing Facility
Models C02, C03 - - Y 5 IBI
</TABLE>
Note:
(1) 3390 Models A9X, B9X receive a 40% discount for both development and
remarketing MES orders.
(2) Both Remarketing and Development MES orders are eligible for 40% discount.
(3) The IBM 9674 is available for remarketing and development system
installation at a remarketer price rather than a discounted IBM single unit
price. Please contact your IBM marketing representative for pricing
information.
<PAGE>
IBM SYSTEM/390 (CONTINUED)
CATEGORY E2
IBM CUSTOMER AGREEMENT LICENSED PROGRAMS
DISCOUNT AND FEE PERCENTS FOR GRADUATED CHARGE LICENSED PROGRAMS
<TABLE>
<S> <C> <C> <C> <C>
Processor Group GOTC Discount GMLC Fee MSU PSLC Fee
10-18 40% 40% N/A N/A
20-29 35% 35% N/A N/A
30-38 30% 30-% 3-8 30%
40 25% 25% 9-15 25%
50 20% 20% 16-21 20%
</TABLE>
IBM System/390 software which does not have Graduated One-Time Charge (GOTC),
Graduated Monthly license Charge (GLMC), or Parallel Sysplex License Charge
(PSLC) pricing is available at a 30% discount or fee.
The above discount structure applies to GOTC pricing, while the fee structure
applies to GMLC and PSLC pricing. The fee for PSLC is determined by the
processors' MSU rating, where MSU is Millions of Service Units.
The processor group may be determined by referring to the Exhibit for IBM
System/370 and System/390 Machines (Z125-3901). The processor MSU rating may be
determined by referring to the Exhibit for Parallel Sysplex License Charges
(Z125-5206). Both exhibits are available from your IBM representative.
In the following list of eligible Licensed Programs, charge type NG indicates
programs which do not have graduated pricing and charge type G indicates
programs which have graduated pricing.
<TABLE>
<CAPTION>
PROGRAM
TYPE NUMBER PROGRAM DESCRIPTION
<C> <C> <S>
NG 5622-005 SAA ImagePlus Object
Distribution Manager/2
G 5622-267 DataPropagator Relational
V1 HP-UX Support
G 5645-001 OS/390
5648-020 ADSTAR Distributed
Storage Manager
5648-031 Workstation Interactive
Test Tool V2
NG 5648-038 Software License Monitor
NG 5648-039 LAN File Services/ESA
G 5648-048 Report Management and
Distribution System V2
G 5648-061 Query Management Facility
V3
G 5648-063 ACF/NCP V7R3 for MVS and
VM
NG 5648-077 NTuneMON V1R2 for MVS/XA,
MVS/ESA, VM/ESA
G 5648-078 VisualGen Host Services
V1.1
NG 5648-089 NTuneNCP V1 R1
G 5648-092 Application System
Version 4
G 5648-099 Data Interfile Transfer,
Testing and Ops Utility
G 5648-109 VisualLift for MVS, VSE,
and VM
G 5648-129 Client Input
Output/Sockets
NG 5654-007 Automated Network
Operations for VM V1
G 5654-009 Advanced Comm
Function/System Support
V4
G 5654-010 VTAM V4 for VM/ESA and
VSE/ESA
G 5654-011 NetView Performance
Monitor V2
NG 5654-015 TIF VM/ESA
G 5654-025 APPC Application Suite -
VM
NG 5654-026 VM/ESA SDO V2.1
Modification Level 0
G 5654-029 DITTO ESA for VM
NG 5654-260 Environmental Record
Edit/Print V3
G 5655-HAL TCP/IPV3 R1 for MVS
G 5655-OPT DFSMS Optimizer for
MVS/ESA
G 5655-002 Application Support
Facility (ACF) V3
G 5655-018 CICS/ESA V4
G 5655-030 COBOL Productivity Suite
MVS/ESA
NG 5655-038 IMS/ESA Message Requeuer
V2
NG 5655-039 MERVA/ESA V3 MVS/CICS
NG 5655-040 MERVA/ESA V3 MVS/IMS
G 5655-041 ACF/SSP MVS V4
G 5655-042 ISPF V4 R1 for MVS
G 5655-043 NetView Performance
Monitor V2
G 5655-044 NETVIEW MultiSystem
Manager MVS/ESA
G 5655-047 DATABASE 2 PM for MVS V3
NG 5655-056 BTLS 3494/95 Tape Lib
Dataserver DFSMS/MVS
?? 5655-057 BTLS 3494/95 Tape Lib
Dataserver MVS/DFP V3
?? 5655-064 OE DCE AS MVS/ESA V1
NG 5655-065 BatchPipes/MVS
NG 5655-067 Rediscovery/MVS
</TABLE>
<TABLE>
<CAPTION>
PROGRAM
TYPE NUMBER PROGRAM DESCRIPTION
<C> <C> <S>
G 5655-068 MVS/ESA SP JES2 V5
G 5655-069 MVS/ESA SP JES3 V5
NG 5655-071 Library Server for MVS/ESA
NG 5655-072 Object Server for MVS/ESA
G 5655-076 DataPropagator Relational Capture/MVS
G 5655-084 Resource Management Facility V5
NG 5655-085 IMS/ESA HDCX
G 5655-086 REXX for CICS/ESA V1 Development System
G 5655-087 REXX for CICS/ESA V1 Runtime
G 5655-091 APPC Application Suite - MVS
G 5655-102 DB2 PM for MVS V4
G 5655-103 DITTO ESA for MVS
NG 5655-104 S/390 OpenSystems Adopter Support Facility
NG 5655-109 IMS/ESA DEDB Fast Recovery
G 5655-131 C/C+ + For MVS/ESA V3
NG 5655-257 Device Support FAC MVS/XA
NG 5656-092 VSE/Online Test Executive Program SCP
NG 5656-260 VES/Environmental Record Edit/Print V3
G 5658-995 Inspect for C/370 & PL/I
G 5660-29 COBOL II Compiter Facility
G 5664-191 VMMAP
G 5664-280 ACF/VTAM V2 - OS/VS2 (MVS)
NG 5664-281 VM/SP PC File Transfer
G 5664-289 ACF/SSP V3 for VM/SP, XA
G 5664-307 Print Management Facility
G 5664-322 Information/Management V3 VM
G 5664-323 Information/System V3 VM
G 5664-325 DFSORT/CMS
G 5664-327 CMS Servers/Requestors
G 5664-336 GDOM-REXX
G 5665-XA3 MVS/DFP
G 5665-264 MVS/BDT V2
NG 5665-279 Basic Telecom Access MTHD/SP
G 5665-289 ACF/VTAM for MVS/XA
G 5665-290 DISOSS V3 MVS
NG 5665-301 VPSS/XA
NG 5665-311 3270PC File Transfer Program
NG 5665-314 Advanced Communication Function TCAM
G 5665-327 DFDSS
NG 5665-333 NetView Performance Monitor MVS
G 5665-338 ACF/SSA V3 for MVS
G 5665-343 MVS CBIPO Drivers
</TABLE>
<PAGE>
IBM SYSTEM/390 (CONTINUED)
Category E2 (Continued)
IBM Customer Agreement Licensed Programs (Continued)
<TABLE>
<C> <C> <C> <C> <C> <S>
Program Program
Type Number Program Description Type Number Program Description
NG 5665-345 SNA Application Monitor G 5684-137 VM Batch Facility V2
NG 5665-348 IMSADF II V2 NG 5684-141 PSF/VM V2
LAN Resource
G 5665-356 GDDM/MVS NG 5684-142 Extension/VM
G 5665-366 SDF II MVS VI G 5684-143 SearchMaster/370 VM
Host Management
G 5665-393 INFOREM III Base G 5684-157 Facility/VM
G 5665-394 INFOREM III Allocation G 5684-160 CallUp V1 R3
G 5665-396 TSO/E Servers/Requestors G 5684-164 EC Forms VM V2
NG 5665-397 Service Level Reporter V3 G 5684-168 IBM GDDM/VD V3
G 5665-408 IMS/ESA DB Manager V3
G 5665-409 IMS/ESA Trans Manager V3 G 5685-DB2 Database 2 MVS V3
SNA Network Super
G 5665-461 Repositor Manager/MVS G 5685-003 Function
G 5665-468 System Display & Search Facility NG 5685-005 SNA Interconnection V1
Expert System
NG 5665-948 BASIC/MVS NG 5685-006 Environment V3 (MVS)
Expert System
NG 5685-007 Consultation/MVS
G 5666-270 DISOSS/370 for VSE V3 G 5685-010 KnowledgeTool V2 R1
G 5666-280 ACF//VTAM V2 - DOS/VSE G 5685-012 IMS/ESA Database Manager
IMS/ESA Transaction
G 5666-318 PS/CICS-VSE VI G 5685-013 Manager
G 5666-322 ACF/SSP V3 VSE G 5685-014 OSI/CS MVS/XA/ESA
G 5666-325 IPDT VSE G 5685-016 NetView DM for MVS
G 5666-328 GDDM/VSE G 5685-025 TSO/E V2
G 5666-363 ACF/VTAM V3 for VSE G 5685-029 RMF V4
NG 5685-035 SNA Interconnect V2
G 5668-717 VS PASCAL Library G 5685-036 DataInterchange/MVS R3
NG 5668-719 X 25 NPSI V2 NG 5685-037 3890 XP MVS Support R2
Network Design &
G 5668-723 GDDM - IVU VI NG 5685-045 Analysis V2
Open Systems
NG 5668-738 ACF/NCP 3745 & 3720 V2 G 5685-046 Interconnection
NG 5668-739 MPSX/370 V2 G 5685-051 ICFS/MVS
NG 5668-753 Controller Resource Manager V2 G 5685-083 CICS/ESA V3
G 5668-757 Numerical Control Post Processor G 5685-085 ACF/VTAM for MVS/ESA V3
G 5668-767 VS PASCAL Compiler & Library G 5685-088 FASTService for MVS
G 5668-801 GDDM Interactive MAP Definition V2 G 5685-093 IMA SYS U/B Tools V2
Graphics Resource
G 5668-802 GDDM -- GKS G 5685-098 Monitor
Display/Write/370
G 5668-805 VS Fortran V2 Library G 5685-101 MVS/CICS
G 5668-806 VS Fortran V2 Comp/Lib/Debug G 5685-105 geoManager
G 5668-808 APPL Prototype Environment G 5685-106 OfficeVision/MVS Series
G 5668-812 GDDM-PGF V2 G 5685-107 DispalyWrite/370 MVS/TSO
5668-813 CSP/AD V3 G 5685-108 NetView FTP V2 For MVS
5668-814 CSP/AE V3 G 5685-111 NetView V2 MVS/ESA
Automated Operations
NG 5668-854 ACF/NCP for 3725 V4 G 5685-151 Control/MVS R4
NG 5668-864 Fortran Language Conversion Program
CICS VSAM Recovery/VSE
G 5668-865 Data Communication Service G 5686-011 (CICSVR/VSE)
G 5668-896 Application Prototype Environment G 5686-013 NetView FTP V1 for VSE
G 5668-909 OS PL/I V2 Compiler, Library, & ITF NG 5686-018 CICS/Distributed Data
Management (CICS/DDM) V1
DisplayWrite/370 Under
G 5668-910 OS PL/I V2 Compiler & Library G 5686-022 VS/CICS
G 5668-911 OS PL/I V2 Library G 5686-026 CICS/VSE V2 R2
NG 5668-948 Batch Terminal Simulator G 5686-028 VSE/SP Unique Code V5
VSE/Advanced Functions
G 5668-949 SMP/E for OS/VS2 (VMS) & OS/VS1 G 5686-032 V5
NG 5668-951 Non-SNA Interconnection G 5686-033 VSE/POWER V5
G 5668-958 VS COBOL II Compiler/Library/Debug V1 G 5686-034 VSE/Fast Copy V2
NG 5668-963 Network Routing Facility G 5686-036 VSE/ICCF V3
G 5668-978 Graphics Access Method/SP G 5686-037 VSE/VSAM V2
G 5668-985 Host Command Facility V2 NG 5686-040 PSF/VSE V2
NG 5668-989 4700 Finance Communication System Host Support G 5686-041 VSE/DSNX V2 R1
G 5668-996 BASIC G 5686-048 CallPath CICS/VSE
</TABLE>
<TABLE>
<C> <C> <C> <C> <C> <S>
Program Program
Type Number Program Description Type Number Program Description
G 5686-055 NetView for VSE V2
G 5684-001 NetView Performance Monitor/VM G 5686-057 GDDM/VSE V3
G 5684-017 NetView DM R1 G 5686-058 REXX/VSE V1 R1
NG 5684-025 SGML Translator DCF Edition G 5686-064 ACF/SSP for VSE V4
G 5684-026 BookManager Build -- VM G 5686-065 VTAM V4 for VSE/ESA
VSE/ESA Central
NG 5684-042 ICKDSF/VM G 5686-066 Functions V6
G 5684-043 ISPF V3 for VM G 5686-067 LE for VSE V1
G 5684-048 NetView FTP V1 for VM G 5686-068 COBOL for VSE V1
G 5684-057 Communications System/Vm G 5686-069 PL/I for VSE V1
G 5684-059 Host Link/VM G 5686-072 Alert for VSE
G 5684-062 BookManager Read-VM NG 5686-073 ADSM for VSE/ESA V1.2
NG 5684-073 VMPRF G 5686-075 ASF For VSE V3
G 5684-084 OfficeVision/VM G 5686-079 Alert for CICS-VSE
G 5684-091 DisplayWrite/370 VM G 5686-094 VSE/ESA V2
G 5684-095 ACF/VTAM V3R4 VM/ESA
G 5684-096 RSCS V3 G 5688-008 ESCON Manager V1
Publishing System
G 5684-112 VM/ESA NG 5688-015 BookMaster
Bar Code/Optical
G 5684-113 Display Management System/CMS V2 NG 5688-021 Character Recognition
G 5684-123 ISPF/PDF V3/VM G 5688-022 VS COBOL II R4
G 5684-130 VMPAF G 5688-023 VS COBOL II C/L V1
Numerical Control
G 5684-134 DFSORT/CMS V2 G 5688-029 Toolkit
G 5684-136 SQL Master G 5688-030 NCPG-XL
NG 5688-035 NPSI V3
G 5688-047 IGES Processor V2 R3
</TABLE>
<PAGE>
IBM SYSTEM/390 (CONTINUED)
Category E2 (Continued)
Customer Agreement Licensed Programs (Continued)
<TABLE>
<CAPTION>
PROGRAM PROGRAM
<S> <C>
TYPE NUMBER PROGRAM DESCRIPTION TYPE NUMBER PROGRAM DESCRIPTION
G 5688-052 DITTO VSE/VM V32 NG 5695-169 NetView AutoBridge/MVS
G 5688-087 VS Fortran V2 Comp/Lib G 5695-171 Information/Management V6
G 5688-092 Industry Std Plotting CMDS G 5695-176 IMS/ESA V5
G 5688-093 GDDM/Graphics V2 G 5695-178 SystemView Automated Operations Network/MVS
G 5688-103 SQL/DS V3
NG 5688-113 GDDM OS/2 Link G 5696-234 High Level Assembler for MVS, VM & VSE
CICS Transaction Affinities Utility MVS/ESA
G 5688-121 TPNS V3 R4 NG 5696-582 V1 R1
G 5688-132 CSFI NG 5696-583 NetView Remote Operations for AS/400
G 5688-137 Optimization Sub Library G 5696-703 DataRefresher V1
G 5688-139 Target System Control Facility R2 G 5696-705 DataPropagator V2
G 5688-150 CSP/370 Runtime Services G 5696-737 CSF/MVS & VM V3
NG 5688-153 ImagePlus HPTS Key Entry G 5696-822 SOMobjects for MVS
NG 5688-154 HPTS Data Prep Workstation
NG 5688-155 ImagePlus HPTS Balancing Application NG 5697-119 Hardware Configuration Manager
NG 5688-156 HPTS Work in Progress
NG 5688-157 HPTS Statement Application NG 5706-028 4753 MVS Support Program
G 5688-168 DP Accounting Manager/MVS V1 G 5706-254 QMF/MVS V3
G 5688-169 GDQF G 5706-255 QMF/VM V3
G 5688-187 C/370 Complier V2 NG 5706-288 HPTS Application Library
G 5688-188 C/370 Library V2
G 5688-194 IBM Code/370 NG 5734-F11 Check Processing Control System
NG 5688-195 CSP/2RS V1 G 5734-LM5 PL/I Optimizing Transient Library
G 5688-197 SAA AD/Cycle COBOL/370
G 5688-198 Language Environment MVS & VM G 5735-FAL TCP/IP V2/VM
NG 5688-205 CSP/2AD V1 NG 5735-RC3 ACF/TCAM V2
G 5688-206 CSP/370RS V2 NG 5735-XXB Emulation program
G 5688-216 SAA AD/Cycle C/370 NG 5735-XX7 Network Terminal Option/NTO
G 5688-218 CSP/370AD V4
G 5688-224 Publishing System BrowseMaster V2 G 5740-RG1 OL/VS RPG II
G 5688-226 ESSL S/370 G 5740-SM1 Data Facility Sort (DFSORT)
G 5688-228 APL2 NG 5740-XC5 Development Management System/CICS/VS V1 R5
G 5688-229 APL2 Application Environment NG 5740-XXF DB/DC Data Dictionary OS/VS
NG 5688-231 ACF/NCP V6 G 5740-XXH Resource Access Control Facility
G 5688-235 PL/I for MVS & VM V1 R1 NG 5740-XY5 Programmed Cryptographic Facility
5690-VSE VSE/ESA V2 G 5746-CB1 DOS/VS COBOL Compiler & Library V1
G 5746-RC5 BTAM-ES for DOS/VSE V1
G 5695-DB2 Database 2 V4 G 5746-RG1 DOS/VS RPG II V1
G 5695-DF1 DFSMS/MVS G 5746-SM2 DOS/VS Sort Merge V2
G 5695-007 OPC/ESA V1 G 5746-SM3 DFSORT/VSE V3
G 5695-010 CICSVR MVS/ESA V2 G 5746-XC5 VSE/OCCF V1
G 5695-013 IBM Complier for REXX/370 NG 5746-XE7 VSE/ACLR V1
G 5695-014 IBM Library for REXX/370 NG 5746-XXT SDF/CICS (DOS/VSE) V1
G 5695-015 Office Facsimile Application/MVS G 5746-XX1 DL/1 DOS/VS V1
G 5695-036 NetView Access Services V2 for MVS
G 5695-039 RACF V2 R1 for MVS NG 5747-DS1 Stand Alone Device Support Facility
NG 5695-040 PSF/MVS
G 5695-041 SAA Image Plus FAF VMS/ESA G 5748-AP1 VS APL R4
G 5695-042 SAA Image Plus ODM MVS/ESA G 5748-XE4 VM/Directory Maintenance V1 R5
NG 5695-044 FFST/MVS NG 5748-XXE Document Library Facility R1
G 5695-045 BookManager Build/MVS G 5748-XX9 Document Composition Facility R4 Enhanced
G 5695-046 BookManager Read/MVS
G 5695-047 JES2 MVS/ESA V4.3 NG 5750-ACD VSE/Enterprise Systems Architecture V1 R4
G 5695-048 JES3 MVS/ESA V4.3 NG
G 5695-056 SAA AD/CYCLE Dictionary Services/MVS V1
G 5695-057 Automated Operations Expert/MVS G 5756-051 NetView V2 for VM/ESA
NG 5695-061 CICS Application Migration Aid
COBOL & CICS/VS Command Level Conversion
G 5695-070 Search Manager/370 CICS MVS NG 5785-ABJ Aid
NG 5785-BAC JES/328X Print Facility V2
</TABLE>
<TABLE>
<CAPTION>
PROGRAM PROGRAM
<S> <C>
TYPE NUMBER PROGRAM DESCRIPTION TYPE NUMBER PROGRAM DESCRIPTION
G 5695-072 Object Index Application
5787- MQSeries for
G 5695-076 DataInterchange/MVS CICS G ECX VSE/ESA V1
5787- DISOSS Library
G 5695-077 DB2 Automated Utility Generator V2 NG EDJ Service Extended V3
5787- MVS Migration
G 5695-080 IBM IA Facility MVS/ESA NG MVS System
NG 5695-081 CICSPlex SM/ESA
5796- VM Real Time
G 5695-083 CallPath Coordinator G PNA Monitor
G 5695-086 DFRMM
5798- Fortran Utilities
G 5695-089 CallPath CICS/MVS G DFH For VM/370
5798-
G 5695-100 MVS/DITTO V2 G DLL DBEDIT VM/SP-CMS
5798-
G 5695-101 EDPM/MVS G DMY VM/FSF
Realtime
5798- Monitor/System
NG 5695-105 SAA AD/Cycle FastRef/2 NG DWD Facility
5798- COBOL Report Writer
G 5695-117 ACF/VTAM V4 MVS/ESA NG DYR R4
5798- COBOL Report Writer
NG 5695-123 LANRES/MVS NG DZX Library
5798-
NG 5695-129 CustomPac Utility G FAP DBRAD/VM
5798- PROFS Retention
5695-137 MQ Series for MVS/ESA V1.1.3 G FBB Management
5695-166 DataHub Support/MVS
5799- OV Enhanced
5695-167 GDDM REXX/MVS V3 NG FFC Calendar
5799- RODM Tool
5695-168 NQS/MVS V1 NG FFJ Support/MVS V2
</TABLE>
<PAGE>
IBM Financed Industry Licensed Programs
Category F
IBM Finance Industry Licensed Programs
<TABLE>
<CAPTION>
Program Remarketing Development
Number Program Description Discount Discount Notes
<C> <C> <C> <C> <S>
5622-122* MERVA/2 V3 MLC MLC *Permission to copy is
not
5622-127* MERVA Premium Support/2 MLC MLC granted for this
program.
5622-128* MERVA Branch/2 MLC MLC
</TABLE>
IBM Complementary Products
IBM Complementary Products are available to IBM Authorized Industry Remarketers
as indicated in the Eligible Product Table in the General Information Section
of this Exhibit. Revenue for these Products aggregates toward the associated
Annual System Revenue Performance unless otherwise indicated.
Displays
MES orders for Machines in this section are not eligible for a discount unless
otherwise indicated.
<TABLE>
<C> <C> <C> <C> <C> <C> <C> <C> <S>
Remarketing Development
Category Eligible Products Discount Discount MIR LIC IAC INST Notes
G1 7526 Data Collection 33% 50% A N 6 CSU Revenue for these
Terminal A N 6 CSU Products does not
7527 Data Collection aggregate toward RISC
Terminal System/6000 or AS/400
Annual System Revenue
Performance.
G2 3172* Display Station 30% 50% -- Y 5 IBI Revenue for these
Controller Model 003 Products does not
aggregate toward RISC
System/6000 Annual
System
3174** Display -- Y 5 CSU Revenue Performance.
Station
Controller
--Model 12R, 64R 55% 55%
--All other models 60% 60%
Exclusion: *MES orders for the 3172
The 3174 Model 95R and 3174 are eligible
and 90R for the same discount as
which are available the base machine.
via the
Dealer Exhibit
**3174 Models 11R, 21H &
21L are IBI.
</TABLE>
Storage Media
MES orders for Machines in this section are eligible for the same discount as
the Base Machine unless otherwise indicated.
<TABLE>
<C> <C> <C> <C> <C> <C> <C> <C> <S> <C>
Remarketing Development
Category Eligible Products Discount Discount NA MIR LIC IAC INST Notes
H1 9336-025 Disk Unit 25% 25% N -- N 7 IBI
Storage Unit
H2 3490* Mag Tape N -- N 5 IBI * These 3490 models are not
eligible for an MES discount.
-- Models A1X, A2X 40% 50%
-- Models B2X, B4X 40% 50%
H3 9291 Single 30% 50% Y -- -- 6 IBI
VoiceServer
9295 Multiple 30% 30% Y -- -- 6 IBI
VoiceServer
</TABLE>
<PAGE>
IBM COMPLEMENTARY PRODUCTS (CONTINUED)
GRAPHICS PRODUCTS
MES orders for Machines in this section are eligible for a 10% Remarketing
Discount and 50% Development Discount.
<TABLE>
<CAPTION>
MACHINE REMARKETING DEVELOPMENT
CATEGORY TYPE ELIGIBLE PRODUCTS DISCOUNT DISCOUNT LIC IAC INST NOTES
-------- ------- ------------------ ----------- ----------- --- --- ---- ------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <S>
I1 5086 Graphics Processor 35% 50% N 5 CSU A maximum of four 5086
machines for Development
System use.
</TABLE>
FINANCE INDUSTRY PRODUCTS
MES orders for Machines in this section are not eligible for a discount unless
otherwise indicated.
<TABLE>
<CAPTION>
MACHINE REMARKETING DEVELOPMENT
CATEGORY TYPE ELIGIBLE PRODUCTS DISCOUNT DISCOUNT MIR LIC IAC INST NOTES
-------- ------- ------------------------------ ----------- ----------- --- --- --- ---- -----------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <S>
J1 4707 Monochrome Display 33% 50% -- N 6 CSU * 6527 Color Display is
not eligible for
return to IBM or for
Price Reduction
Protection.
4712 Transaction Printer 33% -- N 6 CSU
4722 Document Printer 33% -- N 6 CSU
4770 IJ Transaction Printer 25% -- N 6 CSU
4772 Universal Finance Printer 33% -- N 6 CSU
4777 Magnetic Stripe Devices 33% -- N 6 CSU
4778 Pin Pad Magnetic Stripe Reader 33% -- N 6 CSU
6527* Color Display 25% 50% -- N -- CSU
</TABLE>
- --------
Note: Unique approvals may be required to market these products.
MISCELLANEOUS PRODUCTS
MES orders for Machines in this section are not eligible for a discount unless
otherwise indicated.
<TABLE>
<CAPTION>
MACHINE REMARKETING DEVELOPMENT
CATEGORY TYPE ELIGIBLE PRODUCTS DISCOUNT DISCOUNT LIC IAC INST NOTES
-------- ------- ----------------------------- ----------- ----------- --- --- ---- ---------------------
<C> <C> <C> <C> <C> <C> <C> <C> <S>
K1 9309 Rack Enclosure Expansion Unit 15% 50% N 5 IBI * 6299 MES orders are
eligible for a 40%
remarketing
discount and a 50%
development
discount.
K2 3299 Multiplexer HUB for 40% 50% N 5 CSU
6299* Midrange Systems 40% 50% N 5 CSU
</TABLE>
<PAGE>
IBM Printers
MES orders for Machines in this Category are not eligible for a discount unless
otherwise indicated.
<TABLE>
<CAPTION>
Machine Remarketing Development
Category Type Description Discount Discount LIC IAC INST Notes
<C> <C> <C> <C> <C> <C> <C> <C> <S>
K4 4037 SE Page Printer 12% * N 5 CSU Revenue for these
Products does not
aggregate toward AS/400
Annual System Revenue
Performance.
*Development System
Products available via
Special Bid
</TABLE>
IBM Uninterruptible Power Systems
MES orders for Machines in this category are not eligible for a discount unless
otherwise indicated.
<TABLE>
<CAPTION>
Machine Remarketing Development
Category Type Description Discount Discount MIR LIC IAC INST Notes
<C> <C> <C> <C> <C> <C> <C> <C> <C> <S>
K5 9910* Uninterruptible A N -- -- Revenue for these Products
Power Systems does not aggregate toward
Annual System Revenue
Performance.
Models: * This Product is not
eligible for Price
-- Bxx(1) 21% * Reduction Protection, is not
eligible for
-- Exx(1) 21% ** contract period price
protection, and is
-- Uxx(1) 21% ** not eligible for return to
IBM.
-- B30, B50, B89, U33 15% ** **This Product is not
available at a
-- EP5, EP8, E80, 15% ** discount for Development
System
purposes.
-- EX3 20% **
</TABLE>
Note: (1) Except for models specifically listed at a different discount.
<PAGE>
IBM COMPLEMENTARY PRODUCTS (CONTINUED)
CATEGORY M
IBM RISC SYSTEM/6000 LICENSED PROGRAMS
<TABLE>
<CAPTION>
REMARKETING
PROGRAM PROGRAM DESCRIPTION DISCOUNT NA MIR
NUMBER --------------------------------------------- ----------- --- ---
<C> <S> <C> <C> <C>
5601-260 IBM AIX 3270 Host Connection Program/6000 30% Y A
5696-108 IBM AIX Infocrafter/6000 30% Y A
5696-236 Netware for AIX/6000 from IBM 30% Y A
5696-237 Encina Structured File Server for AIX/6000 40% Y A
5696-238 Encina Peer to Peer Executive for AIX/6000 40% Y A
5696-239 Encina Monitor for AIX/6000 40% Y A
5696-240 Encina Server for AIX/6000 40% Y A
5696-347 Encina Peer to Peer Gateway for AIX/6000 40% Y A
Encina PPC Gateway with SyncPoint Level 2
5696-930 Support 40% Y --
Encina PPC Executive with SnycPoint Level 2
5696-931 Support 40% Y --
5697-195* Encina Monitor Suite 40% Y --
5765-117 AIX DCE Base Services/6000 40% Y A
5765-118 AIX DCE Security Server/6000 40% Y A
5765-119 AIX DCE Cell Directory/6000 40% Y A
5765-120 DCE Global Directory Server/6000 40% Y --
5765-121 AIX DCE Enhanced Distributed File System/600 40% Y A
5765-148 IBM AIX CICS/6000 40% Y A
5765-152 IBM AIX Client for CICS/6000 40% Y A
IBM ProductManager for AIX - Product Change
5765-191 Manager 25% N A
IBM ProductManager for AIX - Product
5765-192 Structure Manager 25% N A
IBM ProductManager for AIX - Application
5765-193 Services Manager 25% N A
5765-232 CDE Threads/6000 40% Y --
5765-259 CDE Global Directory Client/6000 40% Y --
IBM ProductManager for AIX Document Control
5765-263 Manager 25% N A
5765-316 Legato NetWorker for RISC System/6000 30% N A
IBM ProductManager for Solaris 2.X Operating
5765-337 System Product Change Manager 25% N A
IBM ProductManager for Solaris 2.X Operating
5765-338 System Product Structure Manager 25% N A
IBM ProductManager for Solaris 2.X Operating
5765-339 System Application Services Manager 25% N A
IBM Product Manager for HP-UX Operating
5765-340 System Product Change Manager 25% N A
IBM Product Manager for HP-UX Operating
5765-341 System Application Services Manager 25% N A
IBM Product Manager for HP-UX Operating
5765-342 System Product Structure Manager 25% N A
IBM ProductManager for Solaris 2.X Operating
5765-347 System Document Control Manager 25% N A
IBM Product Manager for HP-UX Operating
5765-348 System Document Control Manager 25% N A
5765-381 IBM Job Scheduler for AIX 30% Y --
5765-427* CICS SM for AIX V1 40% Y --
IBM AIX Product Manager for Oracle7
5765-440 Application Services Manager 25% N A
IBM AIX ProductManager for Oracle7 Product
5765-441 Structure Manager 25% N A
IBM AIX ProductManager for Oracle7 Product
5765-442 Change Manager 25% N A
IBM AIX ProductManager for Oracle7 Document
5765-443 Control Manager 25% N A
5765-456 DCE Manager for AIX 40% Y --
5765-457 DCE NFS to DFS Auth Gateway for AIX 40% Y --
5765-458 Encina Monitor for AIX 40% Y --
5765-527* Systemview for AIX 35% Y A
Getting Started with DCE for Application
5765-532 Developers 40% Y A
5765-533* DCE Security Services 40% Y A
5765-534* DCE Cell Directory Services 40% Y A
5765-537* DCE Enhanced Distributed File Systems 40% Y A
5765-538 DCE User Data Masking Encryption Facility 40% Y A
5765-540* DCE NFS to DFS Authenticating Gateway 40% Y A
5765-553* CICS for AIX V2 40% Y --
5765-554* Encina Client 40% Y --
5765-555* Encina PPC Executive 40% Y --
5765-556* Encina SFS 40% Y --
5765-557* Encina PPC Gateway 40% Y --
5765-558* Encina Server 40% Y --
5765-559* Encina Monitor 40% Y --
5765-605** IBM Product Manager for AIX Operating System 25% N A
5765-606** IBM ProductManager for HP-UX Operating System 25% N A
IBM Product Manager for Sun Polaris 2.X
5765-607** Operating System 25% N A
5765-633** IBM CICS for SINIX 40% N A
5799-FBC NSL UniTree AIX/6000 25% N --
</TABLE>
Note:
* When version-to-version upgrades are available, they are eligible for the
same discount as an initial license order for the upgraded-to-program.
** Permission to copy is not granted for these programs.
<PAGE>
IBM COMPLEMENTARY PRODUCTS (CONTINUED)
CATEGORY N
IBM AS/400 LICENSED PROGRAMS
<TABLE>
<CAPTION>
PROGRAM PROGRAM REMARKETING
NUMBER DESCRIPTION DISCOUNT MIR NOTES
- ----------- -------------------------------- ----------- --- ---------------------------------
<S> <C> <C> <C> <C>
5696-032* AS/400 Networking 25% A * Group to Group Upgrade Charges
for these Programs are NOT
eligible for a Discount
5730-082* NetView File Transfer Program V1 25% A ** Permission to copy is not
granted for this program.
5733-196*** NetView FTP V3 25% A *** Aggregation toward Annual
System Revenue Performance
does not apply.
5787-EDA MQSeries for OS/400 28% A
5799-FNH** IBM Calmonth/400 30% --
5799-FNP Application Blend for OS/400 30% --
</TABLE>
CATEGORY O
IBM NETWORK INTEGRATION LICENSED PROGRAMS
<TABLE>
<CAPTION>
PROGRAM PROGRAM REMARKETING
NUMBER DESCRIPTION DISCOUNT NOTES
- ----------- --------------------------------------------- ----------- ---------------------------------
<S> <C> <C> <C>
5621-425(1) IBM 3172 Interconnect Controller Program 30% (1) When Version to Version
upgrades to a licensed
program are available, they
are eligible for the same
discount as an initial
license order for the
upgraded-to program
5696-865 IBM 3172 SNA Communications Program 30%
5697-196 IBM 3172 IP Channel Communications Program V1 20%
5697-259 IBM 3172 HPR Channel Connectivity Program 20%
</TABLE>
CATEGORY P
IBM DATA COLLECTION LICENSED PROGRAMS
<TABLE>
<CAPTION>
PROGRAM PROGRAM REMARKETING
NUMBER DESCRIPTION DISCOUNT NOTES
- ------------ -------------------------------------------------- ----------- ---------------------------------
<S> <C> <C> <C>
5756-144*(1) Data Collection Control/2 40% Revenue for these Programs does
not aggregate toward RISC
System/6000 or AS/400 Annual
System Revenue Performance.
5756-145* Data Collection for Distributed Automation Edition
5756-146* 7527 Extended Terminal Services * Permission to copy is NOT
granted for these Programs.
5799-PZH* AIX Data Collector/6000 (Buildtime) (1) When Version to Version
upgrades to a licensed
program are available, they
are eligible for the same
discount as an initial
license order for the
upgraded-to program.
5799-PYX* AIX Data Collector/6000 (Runtime)
</TABLE>
<PAGE>
IBM COMPLEMENTARY PRODUCTS (CONTINUED)
CATEGORY Q
Miscellaneous IBM Licensed Programs
<TABLE>
<CAPTION>
PROGRAM REMARKETING
NUMBER PROGRAM DESCRIPTION DISCOUNT NOTES
<C> <S> <C> <C>
5621-326 ImagePlus VisualInfo Client for OS/2 35%
5622-213 Object Server OS/2 35%
5655-036 Library Server for OS/2 Base 35%
</TABLE>
CATEGORY X
IBM Licensed Programs available to both RISC System/6000 and AS/400 Remarketers
<TABLE>
<CAPTION>
PROGRAM REMARKETING
NUMBER PROGRAM DESCRIPTION DISCOUNT NA MIR NOTES
<C> <S> <C> <C> <C> <C>
5621-159 SwitchServer/2 32% N A (1) When Version to Version upgrades to a
5622-275(1) CallPath Server/2 32% N A licensed program are available, they are
CallPath Developer's
5622-276(1) ToolKit 32% N A eligible for the same discount as an initial
5798-RZB(1) Connection Program/400 30% Y -- license order for the upgraded-to program.
</TABLE>
CATEGORY Y
IBM Licensed Programs available to IBM Authorized Industry Remarketers approved
for Processor Categories A and E.
<TABLE>
<CAPTION>
PROGRAM REMARKETING
NUMBER PROGRAM DESCRIPTION DISCOUNT MIR NOTES
<C> <S> <C> <C> <C>
5648-129 IBM Client Input Output/Sockets 30%
</TABLE>
<PAGE>
IBM STORAGE PRODUCTS
These products are available to IBM Authorized Remarketers as indicated in the
Eligible Product Table in the General Information Section of this Exhibit. When
approved for Category S2 and S3 as a Storage Remarketer in the Industry
Remarketer 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
RISC System/6000 and AS/400 features required to attach these Storage Products
to RISC System/6000 or AS/400 processors at the discount associated with those
processor features.
Revenue for these Products aggregates toward Annual System Revenues 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 a RISC
System/6000 system.
CATEGORY S1.
MES Orders for machines in this section are eligible for the same discount as
the base machine unless otherwise indicated.
<TABLE>
<CAPTION>
MACHINE RMKT DEV
TYPE DESCRIPTION DISC DISC NA VAE CERT MIR LIC IAC INST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9490 Mag Tape Y N N A N 10 IBI
-Models CXX 35% 50%
-Models E01, E11 35% 50%
High Capacity
7027 Storage Drawer 35% 50% N N N A N 10 IBI
7131 SCSI Multi-Storage Tower 35% 50% Y N N A Y 10 CSU
High Density SCSI
7134 Disk Subsystem 35% 50% Y N N A Y 10 IBI
7137(/1/) Disk Array Subsystem 35% 50% Y N N A Y 10 IBI
RISC System/6000
7202 Expansion Rack 35% 50% N N N A N 10 IBI
7203 Portable Disk Drive 35% 50% Y N N A N 10 CSU
7204 External Disk Drive 35% 50% Y N N A N 10 CSU
7206 External 4mm Tape Drive 35% 50% Y N N A N 10 CSU
7207 1/4" Catridge Tape Drive 35% 50% Y N N A N 10 CSU
7208(/2/) 8mm Tape Drive 35% 50% Y N N A N 10 CSU
7210 CD-ROM Drive 35% 50% Y N N A N 10 CSU
7231 8mm Tape Library 35% 50% Y N N A N 10 CSU
9332 4mm Tape Library 35% 50% N N N A N 10 CSU
9348 Magnetic Tape Unit 35% 50% N N N A N 10 IBI
9427 8mm Tape Cartridge Library 35% 50% N N N A N 10 IBI
</TABLE>
NOTE:
(1) 7137 Models 412, 413, and 414 are CSU.
(2) 7208 Models 012 and 234 are IBI.
CATEGORY S2
MES orders for machines in this section are eligible for the same discount as
the base machine unless otherwise indicated.
<TABLE>
<CAPTION>
MACHINE RMKT DEV
TYPE DESCRIPTION DISC DISC NA VAE CERT MIR LIC IAC INST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3494 Tape Library Dataserver 30% 50% Y Y N A Y 6 IBI
3590 High Performance Tape Subsystem 30% 50% Y Y N A N 6 IBI
</TABLE>
CATEGORY S3
MES orders for machines in this section are eligible for the same discount as
the base machine unless otherwise indicated.
<TABLE>
<CAPTION>
MACHINE RMKT DEV
TYPE DESCRIPTION DISC DISC NA VAE CERT MIR LIC IAC INST
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7133 SSA Disk Subsystem 35% 50% Y N N A Y 10 IBI
7135 RAIDiant Array 35% 50% Y N N A Y 10 IBI
</TABLE>
<PAGE>
IBM STORAGE PRODUCTS (CONTINUED)
Category S4
MES orders for machines in this section are eligible for the same discount as
the base machine unless otherwise indicated.
<TABLE>
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Machine Rmkt Dev
Type Description Disc Disc NA VAE CERT MIR LIC IAC INST
3995 Optical library 25% 50% Y N N A N 6 IBI
</TABLE>
Category
MES orders for machines in this section are eligible for the same discount as
the base machine unless otherwise indicated.
<TABLE>
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Machine Rmkt Dev
Type Description Disc Disc NA VAE CERT MIR LIC IAC INST
7015* System Rack Model ROO 35% 50% Y N N A N 6 CSU
</TABLE>
Note:
* The 7015 Model ROO is available for marketing without a Value-Added
Enhancement when sold as an expansion rack to support additional external IBM
storage products on RISC System/6000 processors.
Category S5
Storage Remarketers authorized for storage product categories S2, S3, or S4 are
eligible to sell licensed programs listed in this section.
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
licensed program to their end users.
<TABLE>
<C> <C> <C> <C> <C> <S>
Program Program Remarketing
Number Description Discount NA MIR Notes
5765-564 ADSTAR Distributed Storage Manager for AIX 20% Y A
5765-637 IBM Network Tape Access and Central System 30% Y A
(NetTape) for AIX
5765-543 IBM NetTape Tape Library Connection 30% Y A
</TABLE>
<PAGE>
The service offerings listed below are available to IBM Authorized Industry
Remarketers. Where appropriate, the applicable fee or discount is listed with
the offering. The additional contract requirements that apply when a Remarketer
acquires these savings at a discount for remarketing are contained in the
attachments listed in the Signature Page for Services Attachments Remarketers
(Z125-4238).
<TABLE>
<CAPTION>
INDUSTRY
INDUSTRY REMARKETER
SERVICE OFFERING MIR REMARKETER FEE PERCENT(1)
---------------- --- ------------ --------------
<S> <C> <C> <C>
Maintenance
Maintenance Service A N/A 20%
Corporate Service Option
(CSO) A N/A 20%
Mid-Range System Option
(MSRO) A N/A 20%
Corporate Service Option
for Remarketers (CSOR) -- 30%(2) N/A
Entry Systems Service for
Remarketers (ESSR) -- 30%(2) N/A
Continuing Support
Support Family Services
AS/400 -- 20% 20%
AIX -- 20% 20%
Business Recovery Serv-
ices (Monthly Charge) -- 30% 15%
Business Recovery Serv-
ices (One-time Charge) -- 30% 10%
Customized Operational;
Services
ESCON Migration Services -- 20% 20%
SiteManager -- 20% 20%
Project Support(3) -- 20% 20%
Customized Operational
Services (4)
Customized Operational
Services Equipment -- 10% 20%
Air Conditioners and
Chillers -- 30% 20%
Surge Suppressors
Uninterruptible Power
Supplies (UPS) --
Less than 3KVA -- 21% 20%
3 to 18 KVA -- 15% 20%
Greater than 18 KVA -- Upon request 20%
Liebert DataPAd** -- 25% 20%
Systems Integration -- N/A 6%
Application Design & De-
velopment -- N/A 6%
Other Services (Examples) -- 20% 20%
LAN Doctor Services
SmoothStart
SoftInstall
</TABLE>
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):
<TABLE>
<CAPTION>
PAYMENT ADJUSTED
PERCENT CHARGES INVOICED
------- ------------------
<S> <C>
0% $0-74,999
2% 75,000-149,999
4% 150,00-299,999
8% 300,000 or greater
</TABLE>
<PAGE>
Notes: (Continued)
(2) (Continued)
Table of Semiannual Payments for Cluster Credit Under ESSR:
Minimum Quantity of Qualifying Machines: 100
<TABLE>
<CAPTION>
QUANTITY OF
QUALIFYING CLUSTER CREDIT
MACHINES PERCENT
------------- --------------
<S> <C>
100-499 10%
500-999 15%
1,000 or more 20%
</TABLE>
(3) Fees are paid on the total contract amount, including non-IBM products, but
excluding services which the Remarketer performs as a subcontractor. Services
offered by ISSC, EduQuest, and Education and Training are excluded.
(4) The fee percent or discount is applied to the Service's charge, excluding
moving company charges.
**Company, product, or service name may be a trademark or service mark of
others.
<PAGE>
Dealer Exhibit
Overview
The Dealer Exhibit consists of Terms and Conditions specific to the Products
and a listing of those Products, organized into sections by Product type. In
order to provide you with the most current Product information, we will update
the Product listing electronically. You may access it on PartnerLink through the
Library function.
The following is an overview of the pricing and product information.
Part Number - This is the IBM number used for identifying the Product.
Description - This briefly identifies the Product. It may also include other
significant information regarding the Product. The channels to which the
Products are available are noted in this section.
Installation - The installation requirements, if any, for the Product will be
reflected in the Installation (INST) column as a Customer Set Up (CSU) or IBM
Installation (IBM).
Support Categories - This area will include Certified Product Category (CRT
PRD), Price Reduction (PRC RED) and Inventory Adjustment Category (INV ADJ)
information as applicable for a Product.
Warranty - If applicable, the Warranty Type (TYPE) and the Warranty Period
(MOS) will be reflected in this area.
<PAGE>
DEALER EXHIBIT TERMS
of
IBM Business Partner Agreement - Remarketer
You may order Products listed in this Dealer Exhibit for which you are approved
and, if applicable, certified by IBM to remarket.
TERMS AND CONDITIONS
This document is the Dealer Exhibit referenced in the IBM Business Partner
Agreement for Remarketers.
Prices, Charges and Package Quantity are available on PartnerLink. We will
provide you with written notice of price changes. The electronic file will be
updated as changes are announced.
SCHEDULE PRICE
In order to acquire IBM Products directly from IBM, you must:
1. Provide IBM a single consolidated forecast representing all of your
Authorized Locations:
2. Accept shipments from IBM only at your Authorized or Designated Locations;
3. Distribute Products to your Authorized Locations approved for such Products;
4. Invoice such locations (as required) and pay on a consolidated basis; and
5. Demonstrate the ability to acquire and market $20 million worth of IBM
Personal Computers, Features and Options, Visual Products, and/or Networking
Systems Division (NSD) Products in each calendar year; or to acquire and
market IBM Features and Options, Visual Products and/or Networking Systems
Division (NSD) Products in each calendar year you must demonstrate the
ability to acquire $2 million worth of these products.
Schedule Price Effective Date
If IBM determines that you are qualified, the Price Schedule will apply to
Products purchased by you that are shipped immediately following the date you
are approved. It is your responsibility to order and accept shipment of IBM
Products directly from the IBM Personal Computer Company in the revenue amounts
stated above. Your attainment of the revenue amounts stated above will be
determined by totaling the actual price paid by you to IBM for purchases of the
Products listed above and subtracting the amount of any inventory returns
through March 31 of the next calendar year. To ensure attainment compliance,
you must forecast adequate unit volumes and order from your forecast
confirmation/allocation.
IBM reserves the right to modify the revenue amounts and the list of eligible
Products. In the event of announcement of additional qualifying Products, such
Products that are acquired by you will be counted towards your attainment.
Failure to meet Revenue Requirements
IBM reserves the right to review your attainment during the year to ensure that
your purchases and sales are sufficient to maintain your eligibility to purchase
IBM Products directly from IBM. Remarketers whose purchases and sales become
insufficient to maintain eligibility will be given 90 days notification that
they will no longer qualify to acquire Products directly from IBM.
FIXED FUNCTION DISPLAYS
All IBM remarketers may continue to purchase Fixed Function Displays directly
from IBM under the following current pricing structure.
Transaction Price
Price based on a single order of package quantity or multiples of package
quantity with a single shipment to a single Authorized Location.
Packaging Quantity (PQ)
The quantity of specific Products that are always shipped as a packaging entity.
The PQ is billed at the Transaction Price.
Accommodation Price
Price based on a single order, with a single shipment to a single location, when
the criteria for the Transaction Price is not achieved.
IBM PLA PROGRAMS
Price Level 1 and Level 2 License Charges
Level 1 license charges apply when the prior month's net billing for a single
Customer Number is less than $10,000. Net billing is defined as the total value
of invoices for eligible PLA programs/publications you acquired from IBM less
any credits for returns of such Products and other billing adjustments during
the prior month.
Level 2 license charges apply to a Customer Number when the prior month's net
billing for that Customer Number is $10,000 or more for eligible PLA
programs/publications. Billing CANNOT be aggregated across Customer Numbers for
purposes of qualification for Level 2 License Charges.
SINGLE UNIT PRICE/ONE TIME LICENSE CHARGE
Single Unit Price (SUP) and One Time License Charge (OTLC) reflect the prices or
license charges for single units of Product acquired from IBM and are subject to
change without notice. These prices and license charges are for informational
purposes only and shall not limit in any way your ability to set your own
prices, charges and terms and conditions for Products.
PRICE REDUCTION CREDIT CATEGORIES
Full Inventory Reduction Credit - Reporting Required:
Category 1 - Machines
Category 8 - Options by IBM
Full Inventory Reduction Credit - No Reporting Required:
Category 2 - Machines Only
Category 9 - Options by IBM
The Price Reduction Credit will be determined by multiplying your Adjusted
Inventory Count of the Product by the Product Credit. The Adjusted Inventory
Count is the sum of a) your on-hand inventory of the Product, b) the quantity of
the Product in transit from IBM to, but not received by you and c) the quantity
of the Product you returned to IBM which has not yet been accepted by IBM, all
as of the close of business on the day immediately prior to the effective date
of the Price decrease. The Product Credit is an amount IBM will specify on the
day IBM announces the Price decrease.
In order to qualify for Category 1 and Category 8 Price Reduction Credit, you
must:
1. provide a report of your on-hand inventory of the Product in a format and
schedule as we specify;
2. provide such report for the Product, a minimum of two calendar months,
immediately preceding the effective date of the price decrease;
3. complete and return to IBM, a report certifying your Adjusted Inventory
Count for such Products; if applicable. IBM will specify the format and
dates of the report. IBM will issue the Price Reduction Credit based on this
report; and
4. provide access, during normal business hours, to IBM or an IBM selected
third party, to your Authorized and Designated Locations so that IBM can
audit records applicable to the Product and perform applicable inventory
counts.
You may only use the Price Reduction Credit against monies then or thereafter
due IBM.
Category 2 - Machines Only - Full Inventory Reduction Credit
<PAGE>
[ M I S S I N G L I N E ]
Product accepted by IBM, all as of the close of business on the day prior to the
effective date of the Price decrease. IBM reserves the right to adjust the
Shipment Count based on its records. The Product Credit is an amount IBM will
specify on the day of the Price decrease.
Category 3 - Selected PLA Programs Only - PLA Reduction Credit with Look-back
The Price Reduction Credit will be determined by multiplying the Shipment Count
by the Product Credit. The Shipment Count is the quantity of the PLA program
shipped to you by IBM less any returns of the PLA program accepted by IBM, both
during the two-month period immediately preceding the effective date of the
Price decrease. IBM reserves the right to adjust the Shipment Count based on
its records. The PLA Program Credit is an amount IBM will specify on the day of
the Price decrease.
INVENTORY ADJUSTMENT CATEGORIES
General
You must accompany each shipment of returned Products and Programs with an "IBM
Returns Authorization Form."
IBM will not grant authorization to return a Product that is not listed in the
Schedule of Returnable Products List on the day IBM receives the request for
return.
Note: Accessories and publications are not eligible for Price Protection or
Inventory Adjustment. These items do not appear in the Dealer Exhibit.
For Products for which Reporting is Required, each month you must report to IBM
your inventory of Products as of the last calendar day of the preceding month.
You must use a form provided by IBM.
Category 1 - Machines - Reporting Required
Category 2 - Machines Only - No Reporting Required
Category 1 and 2 - Returns Limitations
You may return a maximum of 5% of the prior calendar quarter's net billings
without incurring a handling charge. You may return an additional 5% of the
prior calendar quarter's net billings, which are subject to the Handling Charge.
The maximum amount of inventory adjustment returns for Category 1 and 2
Products may not exceed 10% of the prior calendar quarter's net billings.
Category 3 - Selected PLA Programs - No Reporting Required
Category 8 - Options by IBM - Reporting Required
Category 9 - Options by IBM - No Reporting Required
Category 8 and 9 - Returns Limitations
You may return to IBM up to 15% of the prior calendar quarter's net billings of
Options by IBM. You have the option of returning up to 5% of the prior calendar
quarter's net billings of these Products to IBM on a monthly basis, up to a
maximum of 15% per quarter.
Returns of Withdrawn Products
For all Inventory Categories, you may return withdrawn Products within the date
published in the Product Withdrawal letter.
Handling Charges - Inventory Adjustment Category 1 (For Machines Only) and
Category 2
Handling Charge Percent: 3%
Unless specified in your profile, the handling charge %, as noted in this
exhibit will apply.
Inventory Adjustment Category - 3
Handling Charge Percent: 0%
Inventory Adjustment Category - 8 and 9
Handling Charge Percent: 0%
DEVELOPMENT SYSTEMS
This subsection applies only to Industry Remarketers and can be found on the IR
profile.
Products included in this exhibit are available for Development System
installation only under the terms and conditions of the Industry Remarketer
Profile (Z125-4804).
Unless otherwise specified in this Exhibit, the maximum number of Development
System Products which an Industry Remarketer may obtain as part of his
Development System is as follows:
System Units maximum of 10
excluding
Aptiva Products)
Licensed Programs one copy of each
Unless otherwise specified, the Industry Remarketer price is the lowest price or
charge available.
WARRANTY SERVICE CATEGORY
Category A - warranty service for Category A is performed by IBM. You are not
authorized to perform warranty service on these machines.
Category B - you are responsible for performing warranty service for machines on
this Exhibit. You may assign warranty service for machines on this Exhibit to
IBM or an IBM Premier Personal Computer Servicer. All machines on this Exhibit,
unless otherwise noted, are Category B Machines.
WARRANTY SERVICE
Warranty service which you provide for a Machine must be consistent with the IBM
Statement of Limited Warranty, the IBM Service Support Guide in effect at the
time of such activity, and the terms and conditions of this Agreement.
You agree to and will:
1. provide warranty service under the terms of the applicable IBM Statement of
Limited Warranty and its applicable Exhibit, if any;
2. validate all warranty claims presented to you;
3. maintain the capability to provide warranty service according to the
requirements and procedures specified in the IBM Service Support Guide; and
4. submit a valid Warranty Reimbursement Request, if applicable, to claim a)
reimbursement for labor and/or b) credit for IBM parts or exchange of such
parts, used by you in providing authorized warranty service for a Machine,
all as specified in the IBM Service Support Guide;
5. fulfill your responsibilities as an IBM Premier Personal Computer Servicer,
if applicable.
IBM will:
1. provide classroom training or self-eduction materials, at no fee for the
Minimum Number of Trained Personnel, as specified in the applicable Addendum
for each Authorized Location. If classroom training is provided, it will be
held at an IBM designated location
2. provide selected service materials as part of service training;
3. for a fee, make available to you additional: a) service training packages,
b) service publications or materials, c) service materials not provided
under the provisions of items (1) and (2) of this section;
4. sell you maintenance parts for your use in providing warranty service. The
purchase prices of such parts will be as specified in the IBM Service
Support Guide in effect at time of shipment of the parts;
5. provide you with applicable warranty service and technical information for
Machines as available; and/or
6. for selected Machine, honor your valid claims for a) reimbursement for labor
and/or b) IBM parts credits, or exchange of such parts, for parts used by
you in providing authorized warranty service, all as specified in the IBM
Service Support Guide;
7. if you are an IBM Premier Personal Computer Servicer and register product
through the IBM Electronic Data Interchange Program, IBM will pay you a
warranty service fee for each product registered, all as specified in the
IBM Service Support Guide.
WARRANTY SERVICE ASSIGNMENT
You may assign the responsibility for warranty service to IBM, another
Remarketer/IBM Premier Personal Computer Servicer (Assignee). The Assignee must
be authorized by IBM to provide warranty service for the Machine. The Assignee
must agree with you to accept the responsibility to provide warranty service for
each assigned Machine. You may choose to assign the responsibility for warranty
service for all IBM Machines you sell or specific IBM Machines to IBM or an IBM
Premier Personal Computer Servicer by specifying that choice in the Addendum of
the Profile. Alternatively, you may, at the time of sale to the End User, choose
to assign the responsibility for warranty service for an individual Machine to
either IBM or an Assignee.
You must specify on the sales receipt for each assigned Machine you market, the
name and the location of the party responsible for providing warranty service.
If you fail to indicate an Assignee name and location on the sales receipt, or
indicate an unauthorized name or location, you will be responsible for warranty
service for that Machine.
If you have specified either IBM or an Assignee on a sales receipt, you must
provide IBM or the Assignee, as applicable, with a copy of
<PAGE>
installed-at location.
Your assignment of responsibility for warranty service does not relieve you of
your responsibility for End User satisfaction. The responsibility for warranty
service reverts to you, if the End User is not satisfied with the warranty
service provided by your Assignee or if the Assignee [ ] its authorization to
provide such warranty service. You may [ ] reassign such responsibility
consistent with the provisions of this subsection. In such event, you are
responsible to provide the End User and the new Assignee with written notice of
the change.
If you assigned warranty service for all units of a machine type to IBM or an
IBM Premier Personal Computer in the Profile, you will not be required to
maintain the capability of providing warranty service for that machine type.
If you, as an Assignee, agree with another IBM Remarketer (Assignor) to be
responsible to provide warranty service for an assigned Machine marketed by the
Assignor the provisions of this Section applicable to an Assignee apply to you.
As an Assignee, you accept such responsibility for each Machine for which your
name is specified on the End User's sales receipt. You may not reassign such
responsibility. If, at a later date, the Assignor loses its IBM authorization
for the Machine, you will have the additional responsibility for End User
satisfaction.
[ M I S S I N G C O P Y ]
the Ordering and Delivery Section of the IBM Business Partner Agreement,
Remarketer General Terms.
Cancellation Charge Percent: 0%
Product ordered by you in PartnerLink and cancelled by you the same day will not
be assessed a cancellation charge.
Cancellations and deferrals made within fifteen (15) business days (date to
date) of the assigned schedule date, will incur the cancellation charge in
effect. Requests to improve a ship date are not subject to this charge.
LATE PAYMENT FEES
Late payment fees for Campus Computer Resellers are waived.
EFFECTIVE DATE
This Dealer Exhibit is effective May 8, 1995. The Dealer Exhibit is subject to
change upon written notice to you by IBM.
The Dealer Exhibit will be updated by IBM regularly to reflect announcements of
additional products, withdrawals and changes. Changes to the Terms and
Conditions section will be released as required.
<PAGE>
IBM Printing Systems Remarketer Exhibit
IBM Business Partner Agreement
Exhibit No.: PPR-16
Effective Date: March 13,1996
PAGE
IBM Printers from IBM Printing Systems & SUP16.
General Information 2
Machines 3
Service Offerings 5
<PAGE>
The products included in this exhibit are available to IBM Printer Remarketers
who are approved to market such products.
Discounts
- ---------
The discounts specified in this exhibit are applicable to the base type/model
as well as field installable features and model ordered as MES orders unless
indicated otherwise.
Inventory Adjustments
- ---------------------
The products in this exhibit have a six month look back period.
Machines and field installable features may be returned under these Inventory
Adjustment provisions.
The maximum number of units that you may return to IBM is the units shipped to
you by IBM during the previous six calender months.
The amount of the credit will be determined by IBM. The amount will be based on
the amount you paid for the product, less any amount paid you by IBM for any
Price Reduction Credit applicable to the product.
Inventory Adjustments are subject to 5% handling charge.
Price Reduction Credits
- ---------------------------
The products in this exhibit and field installable features are eligible for six
months Price Protection.
To qualify for the Price Reduction Credit, product must have been shipped from
IBM during the six-month period immediate preceding the effective date of a
price decrease and must not have been sold as of the effective date of price
decrease. You must certify in writing and provide IBM with copies of IBM
invoices or equivalent documentation, including any credit invoices, for the
affected products. IBM will then determine the credit by calculating the
difference between the two prices.
Installation Requirements/Warranty Service
- ----------------------------------------------------
IBM will advise you of the Installation Requirements and Warranty Service
provisions applicable to the Products included in this Exhibit.
Demonstration Products
- ----------------------
You may obtain 12 demonstration machines during a contract period with maximum
number of two of any model of product you approved to market.
Internal Use of Products
- ------------------------
You may acquire these products for your own internal use at the Base Discount.
Trial Machines
- --------------
Trial period is 30 days. Maximum number of trials at any given term is three.
Billing occurs one day following the trial period. Rework fee applies to trial
returns.
<PAGE>
Discount Discount
3912-AS0 40% 50%
3912-AS1 40% 50%
3916-AS0 40% 50%
AS1 40% 50%
4028-AS1 50% 50%
4230-101 30% 50%
4230-102 30% 50%
4230-111 30% 50%
4230-1S2 30% 50%
4230-10Y 25% 50%
4230-10Z 25% 50%
4224-1E3 30% 50%
4224-1C2 30% 50%
4234-008 30% 50%
4234-012 30% 50%
4234-OOY 30% 50%
4234-01Z 30% 50%
6252-T08 30% 50%
6252-T12 30% 50%
6252-TOZ 25% 50%
6252-TlZ 25% 50%
6262-T12 15% 50%
6262-T14 15% 50%
6262-T22 15% 50%
CATEGORY B (ASCII)
- ------------------
Type-Model Base Demonstration
Discount Discount
0-03D 35% 50%
3930-03S 35% 50%
4224-301 35% 50%
4224-302 35% 50%
4224-3C2 30% 50%
4224-3E3 35% 50%
4232-302 35% 50%
4234-009 30% 50%
4234-013 30% 50%
4247-A00 40% 50%
4247-ZZZ 40% 50%
6252-AP2 30% 50%
6252-AP8 30% 50%
6252-AS2 30% 50%
6252-AS8 30% 50%
6262-A12 15% 50%
6262-A14 15% 50%
6262-A22 15% 50%
6408-A00 35% 50%
6412-A00 45% 50%
Z125-5066-16 03/13/96 Page 3 of 5
<PAGE>
Discount Discount
3912-NS0 40% 50%
3912-NSl 40% 50%
3916-NS0 40% 50%
-NSl 40% 50%
4028-NS1 50% 50%
4224-2C2 30% 50%
4224-2E3 30% 50%
4230-201 30% 50%
4230-202 30% 50%
4230-211 30% 50%
4230-2S2 30% 50%
4234-007 30% 50%
4234-011 30% 50%
6252-D08 30% 50%
6252-Dl2 30% 50%
6262-014 15% 50%
6262-022 15% 50%
6262-D12 15% 50%
6262-D14 15% 50%
6262-D22 15% 50%
CATEGORY D (NON-IBM ATTACH.)
---------------------------
Type-Model Base Demonstration
Discount Discount
6252-P08 35% 50%
6252-Pl2 35% 50%
2-P12 15% 50%
2-P14 15% 50%
6262-P22 15% 50%
CATEGORY E
- ----------
Type-Model Base Demonstration
Discount Discount
3130-01S 30% 50%
3130-02D 30% 50%
3130-02S 30% 50%
3130-03S 30% 50%
3112-001 30% 50%
3116-001 30% 50%
3116-002 30% 50%
3116-003 30% 50%
3930-02D 30% 50%
3930-02S 30% 50%
4230-4S3 30% 50%
4230-413 30% 50%
4230-5S3 30% 50%
4230-513 30% 50%
6400-004 40% 50%
6400-008 40% 50%
6400-012 40% 50%
8-CT0 30% 50%
08-CTA 30% 50%
6412-CT0 45% 50%
6412-CTA 45% 50%
Z125-5066-16 03/13/96 Page 4 of 5
<PAGE>
Type-Model Base Demonstration
Discount Discount
3935001 25% 50%
3160-001 15% 25%
CATEGORY G
- ----------
Type-Model Base Demonstration*
Discount Discount
5763-FNT 15% 100%
5763-SS1 30% 100%
5763-AF1 30% 100%
5622-551 30% 100%
5622-416 30% 100%
5765-505 30% 100%
5648-113 0% 100%
* One demonstration product per each IBM authorized Printer
Remarketer Firm certified to sell software.
IBM Service Offerings
- ---------------------
The Service Offering listed below is available to IBM Printing Systems
Remarketers for those IBM Printers from IBM Printing Systems they are authorized
to market.
Service Offering
- ----------------
. Maintenance Service Marketing (MSM)
Fee
- ---
. 20% of initial annual maintenance charge when machine is covered by an annual
maintenance charge.
. 100% of initial monthly maintenance charge when machine is covered by a
monthly maintenance charge.
Z125-5066-16 03/13/96
Page 5 of 5
<PAGE>
These terms are in addition to those of the Industry Remarketer Exhibit and
prevail over them. We may change these terms by giving you written notice. These
discount schedules apply to specific Products as identified in the IBM Industry
Remarketer Exhibit (Z125-4096). RISC System/6000 Products identified within this
Schedule are available to you at the discounts described below. All maximum
discounts identified in the Industry Remarketer Exhibit remain applicable.
1. Industry Remarketer Federal Discount Schedules
A. RISC System/6000 Products
Annual System Hardware Software
Revenue Performance Discount Discount
Entry (Less than $500,000) 28% 25%
$500,000 - $999,999 33% 30%
$1,000,000 - $1,499,999 34% 31%
$1,500,000 - $2,499.999 35% 32%
$2,500,000 - $4,999,999 37% 34%
$5,000,000 - $9,999,999 38% 35%
$10,000,000 - $14,999,999 39% 36%
$15,000,000 and over 40% 37%
1) Unless otherwise stated. Products in Category A in the IR Exhibit (Z125-4096)
are eligible for the discounts listed above. Field installed features and model
conversions for hardware Products are eligible for a 38% discount.
2) Some Products listed in the Network Integration Products section of this
Schedule may also be eligible RISC System/6000 Products. These Products may be
acquired by IBM Authorized Industry Remarketers approved to remarket RISC
System/6000 Products at the discount listed in the Network Integration Products
section.
3) Unless otherwise stated, all additional Products eligible to IBM Authorized
Industry Remarketers approved to remarket RISC System/6000 Products are
available at the discounts listed in the Industry Remarketer Exhibit. Federal
discount exceptions are listed in Subsection C "Discount Exceptions" of this
schedule.
<TABLE>
<CAPTION>
B. Network Integration Products
Machine Type Description Discount
<S> <C> <C>
Category D 6611 Network Processor- Model 12x 35%
8260 Multiprotocol Intelligent Switching Hub 40%
9741 High Speed Inverse Multiplexor 47%
2210 Nways Multiprotocol Router 28%
2217 Nways Multiprotocol Concentrator 32%
Category D1 5648-016 Multiprotocol Network Program 35%
5696-731 NetView for AIX 45%
5696-905 NetView Entry for AIX 45%
Category K1 9309 Rack Enclosure Expansion Unit 25%
Category K2 3299 Multiplexor Hub 47%
</TABLE>
1) Products specifically listed above are eligible for discounts
listed above when sold to Federal End Users.
2) Unless otherwise stated, all additional Products eligible to IBM Authorized
Industry Remarketers approved to remarket Network Integration Products are
available at the
<PAGE>
[MISSING TEXT]
C. Discount Exceptions
The following RISC System/6000 and Network Integration Products are available to
eligible IBM Authorized Industry Remarketers at the discounts stated below.
IR Exhibit Category A Products available at a 45% discount:
5696-709 5696-761 5696-906 5697-024
5765-176 5765-207 5765-245 5765-366
5765-421 5765-423 5765-448
IR Exhibit Category A Products available at a 26% discount:
5765-083
IR Exhibit Category M Products available at a 45% discount:
5696-237 5696-238 5696-239 5696-240
5696-347 5697-078 5765-148 5765-152
5765-527 5765-533 5765-534 5765-537
5765-540
IR Exhibit Category SS Products available at a 45% discount:
5765-564
2. Federal End User Definition
The following definition of "end user" applies when marketing to Federal
Government accounts:
A. "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 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.
B. 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.
3. Additional Terms for Federal Sales
A. Addition to Remarketer General Terms (Z125-4800), 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.
B. 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>
Business Partner Agreement
Marketing Assistant General Terms
- --------------------------------------------------------------------------------
Table of Contents
Section Title Page
l. Definitions............................. 2
2. Agreement Structure..................... 3
3. Our Relationship........................ 3
4. Confidential Information................ 4
5. Demonstration and Internal-Use Products. 5
6. Federal Reporting Requirements.......... 5
7. Trademarks.............................. 5
8. No Property Rights...................... 6
9. Limitation of Liability................. 6
10. Changes to the Agreement Terms.......... 6
11. Ending the Agreement.................... 6
12. Electronic Communications............... 7
13. Geographic Scope........................ 7
14. Governing Law........................... 7
<PAGE>
1. Marketing Assistant General Terms
Definitions
Marketing Activities is your performance of sales activities, and (as
applicable) installation and support activities, for a Product, as we
specify in the applicable Attachment. This includes establishing and
maintaining a business relationship with a Prospect, becoming knowledgeable
of its requirements, and satisfying those requirements with a solution. A
solution is comprised of Products, and may include other complementary
products.
Marketing Assistant is a term we apply to a business partner relationship
(authorized under this Agreement) in which we compensate you for the
authorized Marketing Activities you perform that result in a Prospect's
acquisition of a Product from us (and not from a remarketer). For example,
Application Specialists are Marketing Assistants.
Product is any of the following, IBM or non-lBM, that we authorize you to
market:
1. a machine, its features, conversions, or upgrades, or any combination of
them;
2. a program; or
3. a service.
Prospect is a potential customer for a Product acquired from us (and not
from a remarketer) for 1) the customer's own use and not for remarketing and
2) installation in the United States or Puerto Rico. Your business
enterprise is not a Prospect. The following Prospects are excluded, unless
we specify otherwise in the applicable Attachment or Profile:
1. "Federal Prospects" which means the Federal government, Federal
government owned or affiliated (or sponsored) corporations or other
organizations, organizations involved in Federal procurement activities
that are authorized to procure using our GSA Schedule Contract, and
Federal prime contractors and subcontractors who are engaged in a
specific Federal procurement opportunity;
2. "K-12 Educational Institutions." A K-12 Educational Institution is a
pre-kindergarten through 12th grade, special education, or post-
secondary vocational or technical school; and
3. Prospects in a territory assigned to a Segment Specialist. (A Segment
Specialist is a type of Marketing Assistant who performs Marketing
Activities for Prospects in its territory.)
Page 2 of 7
<PAGE>
Profile
We specify the details of our relationship (for example, the contract
period) in a document called a "Profile." Each of us agrees to the terms of
the Profile, the Marketing Assistant General Terms, and the applicable
Attachments referred to in the Profile, (collectively called the
"Agreement"), by signing the Profile.
Attachments
Each of our relationships requires terms in addition to those we specify in
the Marketing Assistant General Terms. We provide the additional terms in
documents called "Attachments." Several Attachments may apply to you. We
specify in your Profile the Attachments that apply.
Transaction Documents
We will provide to you the appropriate "Transaction Documents" that confirm
the details of a specific relationship between us. The following are
examples of Transaction Documents, with examples of the information they may
contain:
1. forms (Prospect identification);
2. supplements (territory and objectives); and
3. exhibits (compensation plan).
Conflicting Terms
If there is a conflict among the terms in the various documents, those of an
Attachment prevail over those of the Marketing Assistant General Terms. The
terms of the Profile prevail over those of both of these documents. The
terms of a Transaction Document prevail over those of all the documents.
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;
2. engaging in authorized Marketing Activities; or
3. accepting payment for such activities.
3. Our Relationship
Mutual Responsibilities
Each of us agrees that under this Agreement:
1. you are an independent contractor and are solely responsible for the
prices and terms of your own products and services. If you act on your
behalf (and not ours) for Prospects, you agree to perform those
activities under your own, separate agreement. You agree to ensure that
Prospects understand that those activities are not on our behalf;
2. neither of us is legally a partner of the other (for example, neither
of us is responsible for debts incurred by the other), and you are not
our employee;
3. neither of us will bring a legal action more than two years after the
cause of action arose: and
4. each of us is free to enter into similar agreements with others.
Page 3 of 7
<PAGE>
Our Responsibilities
We will:
1. at our discretion, help you identify a Prospect, and meet with you and
the Prospect;
2. provide facilities, if available, for you to demonstrate Products;
3. manage the Product ordering process from scheduling to delivery;
4. specify the compensation plan in the applicable Transaction Document:
5. compensate you;
6. offer you selected Products (for example, "Demonstration Products")
under special terms; and
7. offer you selected education courses and marketing tools, and provide
you with access to selected information systems (such as tools for
configuring Products or on-line demonstrations), only in support of your
authorized Marketing Activities. Programs associated with these systems
are subject to the terms of their applicable license agreements, except
that you may not transfer them. We may charge you for such education
courses and marketing tools, and access to our systems.
Your Responsibilities
You agree to:
1. perform the Marketing Activities specified in the applicable
Attachment and, in doing so, give preference to the marketing of
Products over those of others;
2. be responsible for Customer satisfaction with our Products and all
your related activities, and participate in Customer-satisfaction
programs as we determine;
3. maintain a sufficient number of employees adequately trained on
Products;
4. comply with our business conduct and security guidelines, and
procedural information that we make available to you;
5. not assume or create any obligations on our behalf, or make any
representations or warranties about us or the Products, other than
those we have authorized;
6. not assign this Agreement or your rights under it without our prior
written consent. Any attempt to do so is void; and
7. give us prompt written notice of any substantive change to your
business structure or operating environment (for example, a material
change in equity ownership or management, or any change to information
supplied in your application). Such change may result in immediate
termination of this Agreement.
4. Confidential Information
This section is a Supplement to the IBM Agreement for Exchange of
Confidential Information, which both of us must sign. The following is
confidential information:
1. any item we mark as confidential;
2. information we give you about Prospects, unannounced Products or
business plans; and
3. any market-intelligence information we give you.
You may use such confidential information solely in the performance of
your responsibilities under this Agreement.
All other information exchanged between us is nonconfidential, unless
disclosed under a separate Supplement.
Page 4 of 7
<PAGE>
We may make Demonstration and internal-use Products, which you acquire under
your IBM Customer Agreement, available to you under special terms. If you have a
Demonstration Product that is a machine for which there is an upgrade available,
you may acquire the upgrade (but not a replacement machine) as a Demonstration
Product. If you are also our approved remarketer and you acquire Products for
development use, you may not acquire the same Products for demonstration use.
We may also limit the quantity of Demonstration Products you may acquire.
You may acquire internal-use Products (not available to K-12 Marketing
Assistants) after the first year of your relationship with us as an IBM Business
Partner. Internal-use Products are not limited to those we approve you to market
in your Profile. Your total acquisition of such Products may not exceed a
certain dollar amount, which we determine prior to the beginning of each year.
We determine this amount by applying the percent we specify, in your Profile, to
the total IBM revenue for which you received credit during the prior year. You
may not transfer or defer acquisitions to a subsequent period.
You agree to:
1. use an internal-use Product for your own use;
2. use a Demonstration Product primarily in support of your Marketing
Activities. You may also use it to develop and test application programs
for use with Products;
3. not resell, lease, or transfer such Products for 12 months after their
First Day of Charge, without our prior written consent. If the Product is
an upgrade to a machine, the 12-month period for the machine begins on the
First Day of Charge for the upgrade, and
4. pay an adjustment charge if you use such Products other than as described
above. The charge is the difference between what you paid and the full
charge for the Product.
The license for each program acquired as a Demonstration Product terminates at
the end of this Agreement, unless you keep the program. If you do so, you may be
required to pay the full license charge. If this Agreement ends, internal-use
Products you have ordered with a ship date prior to the day this Agreement
ends, remain eligible for the discount.
You may not combine these offerings with any other discount or allowance.
6. Federal Reporting Requirements
To comply with Federal law, you agree not to employ or compensate any
individuals to perform activities under this Agreement (without our prior
written approval) who were, within the last two years:
1. members of the armed forces in a pay grade of 0-4 or higher; or
2. civilians employed by the Department of Defense with a pay rate equal to, or
greater than, the minimum rate for a grade GS-13.
You agree to provide us with any information that we need to comply with this
law.
7. Trademarks
We will provide you with advertising guidelines for our logos, trade and service
marks, trade names, emblems, and titles (collectively called "Trademarks"). We
will specify, in your Profile, the title you are authorized to use. You may also
use the IBM Business Partner emblem associated with that title. You may use the
Trademarks only as described in the guidelines and only in association with the
Products we authorize you to market.
On our request, you agree to change or stop using any advertising or promotional
material that does not comply (as we determine) with our guidelines or this
Agreement. When this
<PAGE>
You agree that any goodwill attaching to our Trademarks as a result of your use
of them belongs to us. You agree not to register or use any mark that is
confusingly similar to any of our Trademarks.
8. No Property Rights
Your rights under this Agreement are not property rights and cannot be
transferred to anyone else. For example, you may not sell your authorization to
market the Products or your right to use our Trademarks.
9. Limitation of Liability
Circumstances may arise where, because of a default on our part or other
liability, you are entitled to recover damages from us. In each such instance,
regardless of the basis on which you are entitled to claim damages from us, we
are liable only for:
1. bodily injury (including death), and damage to real property and tangible
personal property; and
2. the amount of any other actual loss or damage, up to $100,000.
This limit also applies to any of our subcontractors and program developers. It
is the maximum for which we are collectively responsible.
Items for Which We are Not Liable
Under no circumstances are we liable for either of the following:
1. third-party claims against you for losses or damages (other than those under
the first item listed above); or
2. economic consequential damages (including lost profits or savings) or
incidental damages, even if we are informed of their possibility.
10. Changes to the Agreement Terms
In order to maintain flexibility in our relationship, we may change the terms of
this Agreement by giving you one month's written notice. We may change the
Exhibit on written notice. However, changes are not retroactive. They apply as
of the effective date we specify in the notice.
Otherwise, for a change to be valid, both of us must sign it. Additional or
different terms in any order or written communication from you are void.
11. Ending the Agreement
This Agreement ends when terminated or when the contract period ends and is not
renewed. When it does, all authorizations to perform Marketing Activities under
it will also end. However, if a wind-up period applies, these authorizations
will terminate at the end of the wind-up period.
When the Agreement ends, each of us agrees to promptly settle all our accounts,
including any outstanding advances. We may offset any amounts due you against
amounts due us or
<PAGE>
[MISSING TEXT]
Expiration
If we do not renew our relationship, upon expiration of the contract period, we
will give you a three-month wind-up period during which you will conclude your
existing Marketing Activities in an orderly manner. You agree to perform those
activities, for those transactions we approve, under the terms of this
Agreement.
Termination
You may terminate this Agreement, with or without cause, on one month's written
notice.
We may terminate this Agreement, with or without cause, on three months' written
notice. If the termination is for cause, 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.
Certain acts or omissions are so serious as to warrant immediate termination. If
you repudiate this Agreement, materially breach any of its terms or make any
material misrepresentation to us, we may terminate this Agreement at any time,
on written notice. Examples of a material breach are your failure to give us
prompt written notice of any substantive change to your business structure or
operating environment, and violation of our trademark terms. 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.
No wind-up period applies upon termination.
12. Electronic Communications
Each of us may communicate with the other by electronic means. When we do so,
you agree to utilize electronic communications as we specify. Both of us agree
to the following for all electronic communications:
1. an identification code (called a "USERID") contained in an electronic
document is legally sufficient to verify the sender's identity and the
document's authenticity;
2. an electronic document that contains a USERID is a signed writing; and
3. an electronic document, or any computer printout of it, is an original when
maintained in the normal course of business.
13. Geographic Scope
All your rights and all our obligations are valid only in the United States
and Puerto Rico.
14. Governing Law
Since we are a New York corporation, the laws of the State of New York
govern this Agreement.
<PAGE>
NSP/Application Specialist and AS Attachment
These terms are in addition to those of the Marketing Assistant General
Terms. They apply to NSP/Application Specialists, Application Specialists,
and Federal Specialists.
1. Authorization
We specify, in your Profile, the Products for which you may perform
Marketing Activities. We will inform you if we add or withdraw Products. You
may also perform Marketing Activities for our programs, peripherals, and
other offerings associated with these Products. For example, if you are
authorized to perform Marketing Activities for an IBM AS/400, you may
perform Marketing Activities for any Product (unless we specify otherwise)
which attaches to it, even if the Product will be attached to a non-lBM
machine.
We authorize you to perform Marketing Activities with a Transaction Document
called a "Prospect Form." Alternatively, we may authorize you to perform
Marketing Activities for a project with a Transaction Document called a
"Project Form." A project has additional terms associated with it.
2. Identification of Prospects
Either of us may identify a Prospect. You do so by providing a completed
Prospect Form to our office responsible for the Prospect. For Federal
Specialists, a Prospect Form becomes effective when we accept it. For all
others, a Prospect Form becomes effective one month from the date we receive
it, unless we notify you earlier that it is accepted or rejected. Prospects
may include K-12 educational institutions.
A Prospect is no longer yours if:
1. we request it for any of the following reasons--
a. the Prospect is unsuitable (for example, due to inadequate credit);
b. the Prospect cancels the order; or
c. the Prospect has made a firm commitment to another vendor for the
solution.
2. you or the Prospect requests it.
When either of the above occurs, we will discuss it with you and the
Prospect (as appropriate) and notify you of any changes. Upon our
notification, you agree to stop performing Marketing Activities for that
Prospect.
3. Marketing Activities
You agree to perform Marketing Activities for a Prospect until the
later of the end of the Marketing or Support Period.
A "Marketing Period" is the time frame we specify (a minimum of three
months) during which you perform Marketing Activities. A "Support Period" is
a time frame we specify (a minimum of three months), beginning on a
Product's First Day of Charge, during which you continue to perform
Marketing Activities. The "First Day Of Charge" is the date that payment for
a Product is due us under our applicable agreement with a customer.
<PAGE>
3. advise us of planned installation dates and any dependencies;
4. advise the Prospect regarding installation responsibilities, and assist in
developing and implementing related plans (including education) and progress
reviews;
be the primary contact for Product information, and technical and operational
advice associated with the solution delivered. Such advice may include systems
management, capacity planning, problem solving, and use of our support and
service resources; and
6. on our request--
a. provide us with any customer-signed documents we require,
b. participate in configuration and systems assurance reviews,
c. assist in problem identification and resolution, and
d. assist in collection activities for customer payments due us.
Compensation
We will compensate you within one month after the end of the month in which you
earn your compensation. You earn your compensation on the First Day of Charge
for a Product acquired by a Prospect, including those Products associated with
the original sale and installed during the Support Period. If you do not receive
your payment, you must request it in writing within 12 months after the First
Day of Charge for the affected Product. If you fail to do so, no payment will be
made.
We determine your eligibility for, and the amounts of, all payments. You agree
to provide your IBM Business Partner number with all orders for which you are
requesting payment.
We specify a fixed dollar fee or a percent (used to determine the fee) for each
Product. If we specify a percent, we apply it to the Product's one-time or
recurring charge, as invoiced to the customer. For a recurring charge, we apply
the percent to 1) 12 times the monthly charge or 2) the sum of the initial
charge and the annual charge.
If a customer does not accept a Product, does not pay for it, or returns it, you
agree to reimburse us for any payments we made to you associated with it. If a
customer does not retain a Product with a recurring charge for at least 12
months, we will prorate the payment to you.
We periodically reconcile amounts we paid you to amounts you actually earned. We
will deduct amounts due us from future payments or ask you to pay. Each of us
agrees to promptly pay the other any amounts due.
<PAGE>
NSP/Application Specialist and AS Attachment
These terms are in addition to those of the Marketing Assistant General Terms.
They apply to NSP/Application Specialists, Application Specialists, and Federal
Specialists.
1. Authorization
We specify, in your Profile, the Products for which you may perform Marketing
Activities. We will inform you if we add or withdraw Products. You may also
perform Marketing Activities for our programs, peripherals, and other offerings
associated with these Products. For example, if you are authorized to
perform Marketing Activities for an IBM AS/400, you may perform Marketing
Activities for any Product (unless we specify otherwise) which attaches to it,
even if the Product will be attached to a non-lBM machine.
We authorize you to perform Marketing Activities with a Transaction Document
called a "Prospect Form." Alternatively, we may authorize you to perform
Marketing Activities for a project with a Transaction Document called a "Project
Form." A project has additional terms associated with it.
2. Identification of Prospects
Either of us may identify a Prospect. You do so by providing a completed
Prospect Form to our office responsible for the Prospect. For Federal
Specialists, a Prospect Form becomes effective when we accept it. For all
others, a Prospect Form becomes effective one month from the date we receive it,
unless we notify you earlier that it is accepted or rejected. Prospects may
include K-12 educational institutions.
A Prospect is no longer yours if:
1. we request it for any of the following reasons--
a. the Prospect is unsuitable (for example, due to inadequate credit);
b. the Prospect cancels the order; or
c. the Prospect has made a firm commitment to another vendor for the
solution.
2. you or the Prospect requests it.
When either of the above occurs, we will discuss it with you and the Prospect
(as appropriate) and notify you of any changes. Upon our notification, you agree
to stop performing Marketing Activities for that Prospect.
3. Marketing Activities
You agree to perform Marketing Activities for a Prospect until the later of
the end of the Marketing or Support Period.
A "Marketing Period" is the time frame we specify (a minimum of three months)
during which you perform Marketing Activities. A "Support Period" is a time
frame we specify (a minimum of three months), beginning on a Product's First
Day of Charge, during which you continue to perform Marketing Activities. The
"First Day of Charge" is the date that payment for a Product is due us under
our applicable agreement with a customer.
<PAGE>
2. submit orders (if applicable) and any order changes;
3. advise us of planned installation dates and any dependencies;
4. advise the Prospect regarding installation responsibilities, and assist
in developing and implementing related plans (including education) and
progress reviews;
5. be the primary contact for Product information, and technical and
operational advice associated with the solution delivered. Such advice may
include systems management, capacity planning, problem solving, and use of
our support and service resources: and
6. on our request--
a. provide us with any customer-signed documents we require,
b. participate in configuration and systems assurance reviews,
c. assist in problem identification and resolution, and
d. assist in collection activities for customer payments due us.
4. Compensation
We will compensate you within one month after the end of the month in which you
earn your compensation. You earn your compensation on the First Day of Charge
for a Product acquired by a Prospect, including those Products associated with
the original sale and installed during the Support Period. If you do not
receive your payment, you must request it in writing within 12 months after the
First Day of Charge for the affected Product. If you fail to do so, no payment
will be made.
We determine your eligibility for, and the amounts of, all payments. You agree
to provide your IBM Business Partner number with all orders for which you are
requesting payment.
We specify a fixed dollar fee or a percent (used to determine the fee) for each
Product. If we specify a percent, we apply it to the Product's one-time or
recurring charge, as invoiced to the customer. For a recurring charge, we apply
the percent to 1) 12 times the monthly charge or 2) the sum of the initial
charge and the annual charge.
If a customer does not accept a Product, does not pay for it, or returns it,
you agree to reimburse us for any payments we made to you associated with it. If
a customer does not retain a Product with a recurring charge for at least 12
months, we will prorate the payment to you.
We periodically reconcile amounts we paid you to amounts you actually earned. We
will deduct amounts due us from future payments or ask you to pay. Each of us
agrees to promptly pay the other any amounts due.
<PAGE>
NSP/APPLICATION SPECIALIST AND AS EXHIBIT
IBM Business Partner Agreement - Marketing Assistant
Exhibit No.: NSPAS-67
May 1, 1996
Table of Contents
Section Page
- ------- ----
1.0 COMPENSATION PLAN 2
1.1 General 2
1.1.1 Base Amount Compensation 2
1.1.2 Fee Compensation 2
1.1.3 Assisted Sales Provisions 2-3
1.1.4 Conditions Where There Is No Compensation 3
2.0 Base Amount/Fee Table 4-5
3.0 Fee Table 6-7
Page 1 of 7
<PAGE>
The terms of this Exhibit are in addition to those of the IBM Business Partner
Agreement - Marketing Assistant and only to Marketing Assistants approved as
Application Specialists (AS) or National Solution Provider/Application
Specialists (NSP/AS).
1.1 GENERAL
-------
The compensation plan for the NSP/AS is comprised of several elements which
include base amount compensation, fee compensation based on the Product charge
as invoiced to the customer, and other compensation terms.
The compensation plan for the AS includes fee compensation based on the product
charge as invoiced to the customer and other compensation terms.
1.1.1 BASE AMOUNT COMPENSATION
The NSP/AS will determine the Prospect's discount percent for the Product (up to
the maximum percent identified as the maximum fee opportunity for the Product in
the Base Amount Table) which determines the amount invoiced to the Prospect. The
compensation to the NSP/AS is the difference between the Product price invoiced
to the Prospect (exclusive of taxes and not more than the list price) and the
base amount of the Product (listed in the Base Amount Fee Table below). The
Product price to the Prospect cannot be more than the Product's list price at
time of installation.
1.1.2 FEE COMPENSATION
If we specify a fee percent (used to determine the fee) for each Product, we
apply it to the Product's one-time or recurring charge as invoiced to the
customer, unless specified otherwise. For a recurring charge, we apply the
percent to 1) 12 times the monthly charge or 2) the sum of the initial charge
and the annual charge.
The NSP/AS and AS are eligible for fees on selected IBM licensed programs (such
as System Programs and Application Programs) and other offerings such as IBM
maintenance, IBM Credit, Local Vendor Program (LVP) fees, and services
offerings.
1.1.3 ASSISTED SALES PROVISIONS
Assisted Sales Provisions apply only to Application Specialists (and not to
National Solution Providers). Assisted Sales Provisions cover those situations
where a relationship exists between Prospects in different IBM branch offices
(for example, the Prospects are within the same enterprise or related under an
IBM Agreement, for example, an Affiliated End User.) Products are marketed in
one location (Central Branch Office or CBO) and installed in other locations
(Territory Branch Office or TBO). Marketing Assistants performing Marketing
Activities at either the CBO or TBO are eligible only for fees when approved in
advance by IBM. Payments will vary based on the type of Product installed, the
classification of the Prospect, and/or the amount of remote support required.
Assisted Sales Provisions cover IBM Selected National Accounts, Selected
Government Accounts, Affiliated End Users, Extended Enterprises (non-IBM
remarketer), Communications Terminal and Controller Installations, Remote
Systems Installations, and Direct Reporting Accounts.
When a Prospect is identified as a TBO installation of a Selected National
Account, Selected Government Account, Affiliated End User or Extended
Enterprise, the fee percent is applied to 75% of the Product's one-time or
recurring charge. At the CBO, the fee percent is applied to 25% of the Product's
one-time or recurring charge.
Page 2 of 7
<PAGE>
When a Prospect is approved as a Remote Systems Installation, the fee percent is
applied to either 25% or 75% of the Product's one-time or recurring charge as
determined by IBM. Where there is no TBO Support required, the Marketing
Assistant at the CBO is eligible for 75%, and the Marketing Assistant at the TBO
is eligible for 25%. Where there is local support required, the Marketing
Assistant at the CBO is eligible for 25%, and the Marketing assistant at the TBO
is eligible for 75%.
1.1.4 CONDITIONS WHERE THERE IS NO COMPENSATION
Compensation to the NSP/AS or AS for Product(s) is applicable only when the
Business Partner is responsible for the Marketing Activities for the Product(s).
Compensation for the following items will not be included in any element of this
plan, unless we specify otherwise.
. Placements of Products and other IBM offerings for which the IBM branch
office responsible for the Prospect receives no revenue (this does not apply
to Products sourced from IBM PC Direct).
. Placement of Products acquired directly from IBM which are not ordered
through the IBM Advanced Administration System (AAS).
. The NSP/AS or AS is performing as an IBM subcontractor for a Prospect and the
subcontractor tasks duplicate any of the Marketing Activities for the
Prospect.
. Placements of Products by other IBM Marketing Assistants 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.
. IBM PCs (this does not apply to Products sourced from IBM PC Direct);
. Products acquired for use outside of the United States and Puerto Rico.
. 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 which you perform as a
subcontractor.
. Taxes, separately itemized or invoiced.
Page 3 of 7
<PAGE>
The following table lists the products, associated base amounts (stated as a
percentage of the applicable list price of the product), and the maximum fee
opportunity available for the NSP/AS. it also lists the products and
(associated fee percentages (stated as a percentage of the product charge as
invoiced to the customer) for the, NSP/AS and AS. An MES has the same base
amount, maximum fee opportunity, and fee as the machine on which it is
installed, unless otherwise specified in the table.
An AS is eligible for fees on large scale computing systems-and other machines
only when the machines are connected directly or by communication lines to a
large scale computing system the as is approved to market.
An NSP/AS is eligible for fees on system units and other machines only when the
machines are connected directly or by communication lines to a system unit the
NSP/AS is approved to market.
BASE AMOUNT/FEE TABLE
----------------------
<TABLE>
<CAPTION>
N S P/AS AS
------------------------------ ----------
Maximum
Base Fee Fee Fee
Product Name Amount Opportunity Percentage Percentage
- ---------------------------------------------------------------------------------------------------------------------------
Application Business Systems (Division 54} (Machines)
- -----------------------------------------------------
<S> <C> <C> <C> <C>
IBM AS/400 System Units
9402 80% 20% 5% N/A
9402 Model 2XX MES 85% 15% 5% N/A
9404 82% 18% 4% N/A
9404 Model 2XXt3XX MES 85% 15% 4% N/A
9406 84% 16% 3% N/A
9406 Model 2XX/3XX MES 85% 15% 3% N/A
Other Machines 83% 17% 4% N/A
(For example: 5159, 5209, 5259)
RISC System/6000 (Division 75) (Machines)
- -----------------------------------------
IBM 7006, 7009 82% 18% 4% N/A
IBM 7011, 7012 84% 16% 5% N/A
IBM 7013, 7015 81% 19% 4% N/A
IBM 7025, 7247, 7248, 7249 82% 18% 4% N/A
IBM 9076 N/A N/A 3% N/A
Other Machines 82% 18% 4% N/A
(For example: 7010, 7027, 7030, 7235, 7250)
System/390 (Division 26) (Machines)
- -----------------------------------
IBM 9021 Processors N/A N/A 1% 1%
IBM 9121 Processors N/A N/A 2% 2%
IBM 9221 Processors N/A N/A 3% 3%
IBM 9672-R Parallel Enterprise Server N/A N/A 3% 3%
Other Machines N/A N/A 2% 2%
(For example- 9032, 9033, 9034, 9035, 9309)
Application Solution (Division 45) (Machines)
- ---------------------------------------------
IBM 3890 N/A N/A 5% 5%
IBM 4683, 4693, 4694, 4965 N/A N/A 6% 6%
IBM 7632, 7633 90% 10% 2% 2%
Other Machines N/A N/A 6% 6%
(For example: 4702, 4707, 4717, 4718, 4753, 4754, 4755,
4777, 4778, 6527, 7520, 7524, 7526, 7527)
</TABLE>
Page 4 of 7
<PAGE>
<TABLE>
<CAPTION>
Maximum
Base Fee Fee Fee
Product Name Amount Opportunity Percentage Percentage
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Industry Products (AP) (Division 56) (Machines)
- -----------------------------------------------
IBM 4712,4722,4772 N/A N/A 6% 6%
Micro Electronics (Division 29) (Machines)
- ------------------------------------------
IBM 4770 N/A N/A 6% 6%
Networking Hardware (Division 49) (Machines)
- --------------------------------------------
IBM 3745, 3746 89% 11% 3% 3%
IBM 6611 Network Processor/IBM 84% 16% 5% 5%
2210 Nways Multiprotocol Router
Other Machines 90% 10% 5% 5%
(For example: 3172, 3174, 3299, 5299, 5394, 5494, 8250,
8260, 8285)
IBM Printing Systems Company (Division 92) (Machines)
- -----------------------------------------------------
IBM Printers - 3816, 4224, 4232, 6252 84% 16% 4% 4%
IBM Printers - 3912, 3916, 3930, 3935, 4028, 4230,
4234, 6408 89% 11% 3% 3%
Other Machines
(For example: 3828, 3829, 3835, 3900, 4245, 6262)
Storage Systems (Division 35) (Machines)
- ----------------------------------------
IBM 3390, 3990 84% 16% 4% 4%
IBM 3490, 3494, 3495, 3590, 3591 80% 20% 4% 4%
IBM 3995 80% 20% 5% 5%
IBM 7204, 7207, 7210, 9333, 9334 82% 18% 4% 4%
IBM 9336 80% 20% 4% 4%
IBM 9337 68% 32% 4% 4%
IBM 9345 89% 11% 3% 3%
Other Machines 89% 11% 4% 4%
(For example: 7131, 7133, 7134, 7135, 7137, 7206,
7208, 7332, 7336, 9331, 9332, 9341, 9343, 9348,
9391, 9392, 9394, 9395)
Multimedia Systems (Division 32)
- --------------------------------
__90 Kiosk N/A N/A 4% N/A
I-listed RPQ. Call 1-800-4AKIOSK (1-800-425-4675) for information and approval to order.
IBM Personal Computer Company Terminals (Division 44)
- -----------------------------------------------------
3151, 3164, 3472, 3476, 3481, 3482, 3483, 3486, 3487,
3488, 3489 90% 10% 4% 4%
Other IBM Machines Not Included in Above Categories
- ---------------------------------------------------
90% 10% 4% 4%
</TABLE>
Page 5 of 7
<PAGE>
The following table lists the Products and associated fee percentages applied to
the Product charge (as invoiced to the customer).
FEE TABLE
---------
<TABLE>
<CAPTION>
NSP/AS
PRODUCT OFFERING Central Order TBO Order AS
- ---------------- ------------------------- ------
<S> <C> <C> <C>
IBM Licensed Programs 12% 10% 10%
IBM Project Support Services(2)(7)(8)
Customized Operational Services 20% 20% 20%
Customized Operational Services Equipment 20% 20% 20%
Air Conditioners and Chillers
Surge Suppressors
Uninterruptible Power Supplies(UPS)
Liebert DataPad
Systems Integration 6% 6% 6%
Application Design & Development 6% 6% 6%
Other Services 20% 20% 20%
(Examples: LAN Doctor Services, Soft Install)
IBM Authorized Local Vendor Program(1)(3) 40% 40% 30%
IBM Maintenance Services(4)(7)(8) 20% 20% 20%
IBM Continuing Support Services(2)(7)(8)
Support Family Services 20% 20% 20%
Business Recovery Services N/A N/A N/A
Monthly-Charge Offering (9) 15% 15% 15%
One-time Charge Consulting Services 10% 10% 10%
One-time Charge Business Capacity Svcs 10% 10% 10%
Customized Operational Services 20% 20% 20%
ESCON Manager, SiteManager
IBM Credit Corporation Financing(5)(7) 1% 1% 1%
IBM Credit Corporation Used Machines(6)(7) 4% 4% N/A
Products ordered through IBM Direct N/A N/A N/A
IBM System/390 Entry Server Offering 3% 3% 3%
</TABLE>
(1) Fee percentage is applied to the dollar amount we Invoice the vendor for
the fee due us.
(2) Fees are paid on the total contract amount, including non-IBM products, but
excluding services which you perform as a subcontractor and moving company
charges.
(3) Marketing Assistant is eligible for fees that IBM earns for Activity
Categories 1 through 5 as defined In the IBM Authorized Local Vendor
Program (LVP). However, the Marketing Assistant will not be compensated for
performing LVP activities for its own products. LVP products are not listed
in this Exhibit. Information on these products will be provided by the IBM
office identified on the Territory Supplement for the territory in which
the Marketing Assistant will market the products.
(4) Includes maintenance acquired under payment and service options such as
Extended Maintenance Option (EMO) and Mid-Range System Option (MRSO) and
Corporate Service Option (CSO).
(5) 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 Receivabee (MLAR) or the sum or the lease payments over the
projected life of the lease. It is the responsibility of IBM Marketing
Assistants to introduce IBM 's financing offerings qualify customer
Interest in financing, and provide leads to IBM Credit Financial
Marketing Advisors (FMAs).
(6) IBM Credit fee is paid 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, IBM RISC
System/6000 system, or IBM 9336/9337 DASD) from IBM Credit inventory.
(7) 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.
Page 6 of 7
<PAGE>
EXHIBIT 10.8
------------
Revolving Credit Facility, as amended, dated July 1, 1996 between Computer
Generated Solutions, Inc. and Bank Leumi Trust Company of New York.
<PAGE>
[LOGO BANK LEUMI]
PROMISSORY NOTE (GRID)
New York, N.Y. July 1, 1996
$7,000,000.00
For Value Received, We promise to pay to the order of BANK LEUMI TRUST
COMPANY OF NEW YORK (the "Bank"), at its offices at 579 Fifth Avenue, New York,
New York, the principal sum of Seven Million and 00/100 Dollars or, if less, the
aggregate unpaid principal sum of all loans made by the Bank, in its sole
discretion, to the maker of this Note from time to time. The principal sum of
each such loan shall be payable (strike out whichever is not applicable):
on demand., if payment not demanded, no later than 5/2/97.
Each loan shall bear interest (from the date of such loan) at a rate per
annum which shall be equal to 0% per annum above the rate of interest designated
by the Bank, and in effect from time to time, as its "Reference Rate", adjusted
when said Reference Rate changes. (The maker acknowledges that the Reference
Rate may not necessarily represent the lowest rate of interest charged by the
Bank to customers.)
The Bank is hereby authorized to enter on the schedule attached hereto the
amount of each loan and each payment of principal thereon, without any further
authorization on the part of the maker or any endorser or guarantor of this
Note, but the Bank's failure to make such entry shall not limit or otherwise
affect the obligations of the maker or any endorser or guarantor of this Note.
The maker and each endorser and guarantor of this Note acknowledge and
agree that the use of this form of Note is for their convenience, and there is
no obligation on the part of the Bank to make loans to the maker whatsoever.
Interest shall be computed on the basis of a 360-day year and shall be
payable at the end of each month and at maturity, but the foregoing provision
shall not be deemed to change the maturity of this Note if payable on demand.
The charging of interest on the basis of a 360-day year results in the payment
of more interest than would be required if interest were charged on the basis
of the actual number of days in the year. In no event shall interest exceed the
maximum legal rate permitted for the maker.
Each maker or endorser authorizes (but shall not require) the Bank to debit
any account maintained by the maker or endorser with the Bank, at any date on
which the payment of principal of or interest on any of the Liabilities (as
hereinafter defined) is due, in an amount equal to any unpaid portion of such
payment. If the time for payment of principal of or interest on any of the
Liabilities or any other money payable hereunder or with respect to any of the
Liabilities becomes due on a day on which the Bank's offices are closed (as
required or permitted by law or otherwise), such payment shall be made on the
next succeeding business day, and such extension shall be included in computing
interest in connection with such payment. All payments by any maker or endorser
of this Note on account of principal, interest or fees hereunder shall be made
in lawful money of the United States of America, in immediately available funds.
All Property (as hereinafter defined) held by the Bank shall be subject to
a security interest in favor of the Bank or holder hereof as security for any
and all Liabilities. The term "Property" shall mean the balance of every deposit
account of the maker with the Bank or any of the Bank's nominees or agents and
all other obligations of the Bank or any of its nominees or agents to the maker,
whether now existing or hereafter arising, and all other personal property of
the maker (including without limitation all money, accounts, general
intangibles, goods, instruments, documents and chattel paper) which, or evidence
of which, are now or at any time in the future shall come into the possession or
under the control of or be in transit to the Bank or any of its nominees or
agents for any purpose, whether or not accepted for the purposes for which it
was delivered. The term "Liabilities" shall mean the indebtedness evidenced by
this Note and all other indebtedness, liabilities and obligations of any kind of
the maker (or any partnership or other group of which the maker is a member) to
(a) the Bank, (b) any group of which the Bank is a member, or (c) any other
person if the Bank has a participation or other interest in such indebtedness,
liabilities or obligations, whether (i) for the Bank's own account or as agent
for others, (ii) acquired directly or indirectly by the Bank from the maker or
others, (iii) absolute or contingent, joint or several, secured or unsecured,
liquidated or unliquidated, due or not due, contractual or tortious, now
existing or hereafter arising, or (iv) incurred by the maker as principal,
surety, endorser, guarantor or otherwise, and including without limitation all
expenses, including attorneys' fees, incurred by the Bank in connection with any
such indebtedness, liabilities or obligations or any of the Property (including
any sale or other disposition of the Property).
Upon the happening, with respect to any maker, endorser or guarantor of
this Note or any assets of any such maker, endorser or guarantor, of any of the
following events: death; the issuance of a warrant of attachment whether valid
or not; dissolution (if a corporation or partnership); the making of a mortgage
or pledge; the commencement of a foreclosure proceeding; default in the payment
of principal or interest on this Note or in the payment of any other obligation
of any said maker, endorser or guarantor held by the Bank or holder hereof;
default in the payment of principal of or interest on any indebtedness for
borrowed money owed to the Bank or any other person or entity (including any
such indebtedness in the nature of a lease) or default in the performance or
observance of the terms of any instrument pursuant to which such indebtedness
was created or is secured, the effect of which default is to cause or permit any
holder of any such indebtedness to cause the same to become due prior to its
stated maturity (and whether or not such default is waived by the holder
thereof); a change in the financial condition or affairs of any of them which in
the opinion of the Bank or subsequent holder hereof materially reduces his,
their or its ability to pay all of his, their or its obligations; the suspension
of business; the filing of a petition in bankruptcy whether voluntary or
involuntary; the filing of an application, whether voluntary or involuntary, for
reorganization or any arrangement or readjustment of indebtedness; the
appointment or the filing of an application for the appointment of any receiver,
trustee, liquidator or any committee; an assignment for the benefit of
creditors; the calling of a meeting of creditors; the offering of a composition
or extension to creditors; the sending of notice of an intended bulk sale; the
entry of judgments; or the issuance of a warrant of distraint or assertion of a
lien for unpaid taxes, this Note, if not then due or payable on demand, shall
become due and payable immediately without demand or notice and all other debts
or obligations of the makers and endorsers hereof to the Bank or holder hereof,
whether due or not due and whether direct or contingent and howsoever evidenced,
shall, at the option of the Bank or holder hereof, also become due and payable
immediately without demand or notice. After this Note becomes due, at stated
maturity or on acceleration, any unpaid balance hereof shall bear interest from
the date it becomes due until paid at a rate per annum 3% above the rate borne
by this Note when it becomes due or, if such rate shall not be lawful with
respect to the undersigned, then at the highest lawful rate. The liability of
any party to commercial paper held by the Bank or holder hereof, other than the
makers and endorsers hereof, shall remain unaffected hereby and such parties
shall remain liable thereon in accordance with the original tenor thereof. Each
maker and endorser agrees that if an attorney is retained to enforce or collect
this Note or any other obligations by reason of non-payment of this Note when
due or made due hereunder, a reasonable attorneys' fee shall be paid in
addition, which fees shall be computed as follows: 15% of the principal,
interest and all other sums due and owing to the payee or holder or the
reasonable value of the attorneys' services, whichever is greater.
This Note shall be governed by the laws of the State of New York and shall
be binding upon the maker and each endorser and the maker's and each endorser's
heirs, administrators, successors and assigns. The maker and each endorser
hereby irrevocably consent to the jurisdiction of any New York State or Federal
court located in New York City over any action or proceeding arising out of any
dispute between the maker and each endorser and the Bank, and the maker further
irrevocably consents to the service of process in any such action or proceeding
by the mailing of a copy of such process to the maker at the address set forth
below. In the event of litigation between the Bank and the maker over any matter
connected with this Note or resulting from transactions hereunder, the right to
a trial by jury is hereby waived by the Bank and the maker. A waiver by the
Bank, in one or more instances, of any of the terms and provisions of this Note
shall be in writing, shall apply to the particular instance or instances and at
the particular time or times only, and shall not be deemed to be a continuing
waiver.
Computer Generated Solutions, Inc.
--------------------------------------
--------------------------------------
VALUE RECEIVED 1675 Broadway
--------------------------------------
(ADDRESS)
FORM NO. 763 (10/86) New York, NY 10019
--------------------------------------
<PAGE>
EXHIBIT 16.1
To: Securities and Exchange Commission
We audited the financial statements of Computer Generated Solutions, Inc.
(the "Company") at December 31, 1994, and for each of the two years in the
period ended December 31, 1994. In this regard, we agree with the statements
made by the Company in the Company's Registration Statement on Form S-1 dated
the date hereof under the caption "Change of Auditors."
BDO Seidman, LLP
New York, NY
November 8, 1996
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
Computer Generated Solutions, Inc.
New York, New York
We consent to the reference to our firm under the captions "Experts" and
"Selected Financial Information" and to the use of our reports dated July 12,
1996, in Amendment No. 2 to the Registration Statement (Form S-1) and related
Prospectus of Computer Generated Solutions, Inc. for the registration of
shares of its common stock.
ERNST & YOUNG LLP
New York, New York
November 8, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Computer Generated Solutions, Inc.
New York, New York
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated February 21, 1995, relating to the
financial statements of Computer Generated Solutions, Inc. which is contained
in that Prospectus, and our report dated February 21, 1995, relating to the
schedule which is contained in Part II of the Registration Statement.
We also consent to the reference to us under the captions "Selected
Financial Information" and "Experts" in the Prospectus.
BDO Seidman, LLP
New York, New York
November 8, 1996
