SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
For the transition period from to
Commission file number 000-23740
INNOTRAC CORPORATION
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(Exact name of registrant as specified in its charter)
GEORGIA 58-1592285
------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6655 SUGARLOAF PARKWAY DULUTH, GEORGIA 30097
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (678) 584-4000
---------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes / X / No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding At October 3, 1999
------------------------------
Common Stock at $.10 par value 11,209,995 Shares
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
INNOTRAC CORPORATION
BALANCE SHEETS
AS OF SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(IN 000S)
<TABLE>
<CAPTION>
ASSETS September 30, 1999 December 31, 1998
------ ------------------ -----------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents .................................. $ 575 $ 3,379
Accounts receivable, net ................................... 65,436 44,354
Inventories ................................................ 40,953 14,381
Deferred tax assets ........................................ 958 2,866
Prepaid expenses and other current assets .................. 856 1,436
-------- -------
Total current assets ............................. 108,778 66,416
-------- -------
Property and equipment:
Rental equipment ........................................... 5,567 6,891
Computer, machinery and transportation equipment ........... 7,595 4,949
Furniture, fixtures and leasehold improvements ............. 2,434 1,390
-------- -------
15,596 13,230
Less accumulated depreciation and amortization ............. 7,331 5,767
-------- -------
8,265 7,463
-------- -------
Other assets, net ................................................ 427 113
-------- -------
$117,470 $73,992
======== =======
LIABILITIES AND PARTNERS', MEMBERS',
AND SHAREHOLDERS' EQUITY September 30, 1999 December 31, 1998
------------------------------------ ------------------ -----------------
(Unaudited)
Current liabilities:
Current portion of long-term debt ................. $ 8 $ 68
Line of credit .................................... 13,081 15,736
Accounts payable .................................. 19,594 9,387
Distributions payable ............................. 0 70
Accrued expenses .................................. 5,266 12,336
Other ............................................. 1,125 1,966
-------- -------
Total current liabilities ............... 39,074 39,563
-------- -------
Noncurrent liabilities .................................. 64 135
-------- -------
Total liabilities ....................... 39,138 39,698
-------- -------
Partners', members' and shareholders' equity:
Common stock ...................................... 1,121 900
Additional paid-in capital ........................ 59,801 24,838
Retained earnings ................................. 17,410 8,556
-------- -------
Total shareholders' equity ............... 78,332 34,294
-------- -------
Total liabilities and shareholders' equity $117,470 $73,992
======== =======
The accompanying condensed notes to financial statements are an integral part of these balance sheets
</TABLE>
<PAGE>
Financial Statements-Continued
<TABLE>
<CAPTION>
INNOTRAC CORPORATION
INCOME STATEMENTS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
Three Months Ended September 30, Nine Months Ended September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues, net ................................. $ 51,661 $ 35,233 $ 176,477 $ 94,143
Cost of revenues .............................. 43,901 27,533 150,923 70,460
-------- -------- --------- --------
Gross Profit ................... 7,760 7,700 25,554 23,683
-------- -------- --------- --------
Operating expenses:
Selling, general and
administrative expenses ............ 3,261 3,801 8,617 12,332
Depreciation and amortization .......... 424 230 1,210 603
-------- -------- --------- --------
Total operating expenses ...... 3,685 4,031 9,827 12,935
-------- -------- --------- --------
Operating income .............................. 4,075 3,669 15,727 10,748
-------- -------- --------- --------
Other (income) expense:
Interest expense, net .................. 270 90 1,115 663
Other .................................. -- (1) (20) 20
-------- -------- --------- --------
Total other expenses .......... 270 89 1,095 683
-------- -------- --------- --------
Income before income taxes .................... 3,805 3,580 14,632 10,065
Income tax provision .......................... (1,502) (1,411) (5,778) (2,493)
-------- -------- --------- --------
Net income .................... $ 2,303 $ 2,169 $ 8,854 $ 7,572
======== ======== ========= ========
Proforma net income ........... $ 2,303 $ 2,169 $ 8,854 $ 6,098
======== ======== ========= ========
Proforma net income per share:
Basic .................................. $ 0.22 $ 0.24 $ 0.94 $ 0.78
======== ======== ========= ========
Diluted ................................ $ 0.22 $ 0.24 $ 0.92 $ 0.78
======== ======== ========= ========
Shares used for computing net income per share:
Basic .................................. 10,392 9,000 9,419 7,800
======== ======== ========= ========
Diluted ................................ 10,583 9,011 9,577 7,816
======== ======== ========= ========
The accompanying condensed notes to financial statements are an integral part of these statements.
</TABLE>
<PAGE>
Financial Statements-Continued
<TABLE>
<CAPTION>
INNOTRAC CORPORATION
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income .................................................................. $ 8,854 $ 7,572
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization ......................................... 1,210 603
Depreciation-rental equipment ......................................... 1,434 2,300
Loss on disposal of rental equipment .................................. 412 1,560
Deferred income taxes ................................................. 1,487 568
Increase in accounts receivable ....................................... (21,082) (20,862)
Increase in inventories ............................................... (26,572) (2,382)
Decrease (increase) in prepaid expenses and other assets .............. 534 (483)
Increase in accounts payable .......................................... 10,207 5,072
(Decrease) increase in accrued expenses ............................... (7,070) 1,605
Other ................................................................. (803) 668
-------- --------
Net cash used in by operating activities ........................ (31,389) (3,779)
-------- --------
Cash flows from investing activities:
Purchase of property and equipment .......................................... (3,811) (3,635)
-------- --------
Net cash used in investing activities ........................... (3,811) (3,635)
-------- --------
Cash flows from financing activities:
Net repayment under lines of credit ......................................... (2,655) (144)
Repayment of long-term debt ................................................. (63) (1,066)
Repayment of subordinated debt .............................................. 0 (3,500)
Proceeds from common stock offering, net .................................... 35,064 26,743
Proceeds from excerised stock options ....................................... 120 0
Redemption of redeemable capital stock ...................................... 0 (388)
Distributions to shareholders, members and partners ......................... (70) (10,729)
-------- --------
Net cash provided by financing activities ....................... 32,396 10,916
-------- --------
Net (decrease) increase in cash and cash equivalents ............................. (2,804) 3,502
Cash and cash equivalents, beginning of period .................................... 3,379 554
-------- --------
Cash and cash equivalents, end of period .......................................... $ 575 $ 4,056
======== ========
Supplemental cash flow disclosures:
Cash paid for interest ...................................................... $ 1,173 $ 774
======== ========
Cash paid for income taxes, net of refunds received ......................... $ 5,132 $ 1,257
======== ========
Non cash transactions:
Accreted dividends on redeemable capital stock .............................. $ 0 $ 48
======== ========
The accompanying condensed notes to financial statements are an integral part of these statements
</TABLE>
<PAGE>
Financial Statements-Continued
INNOTRAC CORPORATION
CONDENSED NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
1. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
Article 10 of Regulation S-X of the Securities and Exchange
Commission. The accompanying unaudited condensed financial
statements reflect, in the opinion of management, all adjustments
necessary to achieve a fair statement of financial position and
results for the interim periods presented. All such adjustments are
of a normal and recurring nature. It is suggested that these
condensed financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's
10-K filing and annual report.
2. On July 30, 1999, the Company completed a secondary offering of its
common stock. The Company issued 2.2 million shares at a public
offering price of $17.00 per share. The total proceeds of the
offering, net of underwriting discounts and offering expenses, were
approximately $35.1 million. Additionally, certain shareholders sold
an additional 675,000 shares in the same offering. Proceeds from the
offering were used to pay down borrowings under the Company's line
of credit facility.
3. The pro forma net income and earnings per share reflect the Company's
results on a fully taxed basis to reflect consolidation of the various
affiliated pass-through entities into a C corporation in conjunction
with the initial public offering.
4. Basic earnings per share is computed by dividing pro forma net income by
the weighted average number of common shares outstanding. Diluted
earnings per share includes the effect of the Company's stock options
(using the treasury stock method). The following table shows the
computation of the number of shares outstanding:
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic Shares 10,392 9,000 9,419 7,800
Stock Options 191 11 158 16
------ ----- ----- -----
Diluted Shares 10,583 9,011 9,577 7,816
====== ===== ===== =====
</TABLE>
<PAGE>
ITEM 2 -
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion may contain certain forward-looking statements that are
beyond the control of the Company. Actual results may differ materially from
those expressed or implied by such forward-looking statements. Factors that
could cause actual results to differ include, but are not limited to, the
reliance on a small number of major clients; risks associated with oral
contracts; risks associated with buying, warehousing and renting products to
customers; risks of entering new lines of businesses; reliance on the
telecommunications industry; ability to continue and manage growth; the impact
of the trend toward outsourcing; dependence on labor force; risks associated
with rapidly changing technology and the Company's conversion to new software;
risks associated with competition; risks associated with fluctuations in
operating and quarterly results; dependence on key personnel; risks associated
with Year 2000 compliance; compliance with government regulation; control by
management; difficulties of completing and integrating acquisitions and other
factors discussed in Innotrac's S-1 Registration Statement, Commission File No.
333-79929 that is on file with the Securities and Exchange Commission.
OVERVIEW
Innotrac provides customized, technology-based marketing support and
distribution services to large corporations that outsource these functions.
Since 1994, we have focused on the telecommunications industry because of its
high growth characteristics and increasing marketing needs. We provide marketing
support services and distribution of Caller ID units, Caller ID telephones and
other telecommunications products to BellSouth, Pacific Bell, Southwestern Bell
and US West and their customers. Recently, we began providing services to
customers of Ameritech Services Inc., Cincinnati Bell Inc. and Bell Atlantic
Corporation.
In 1991, we initiated a fulfillment program to sell or rent Caller ID
stand-alone devices to BellSouth customers. Customers paid us for these products
by check or credit card. In 1993, we began billing the charges on BellSouth
customers' telephone bills in interest-free installments. As part of that
program, we acquired Caller ID and other telecommunications equipment from third
party manufacturers, while assuming collections risk on customer payments. In
November 1998, we entered into a new contract with BellSouth pursuant to which
we continue to provide Caller ID hardware and other equipment, including corded
and cordless telephones with built-in Caller ID, to BellSouth customers. We now
bill BellSouth, rather than BellSouth customers, for these products.
Upon receipt of an order, we ship the product, track inventory levels and sales
and marketing data and maintain call center operations to handle customer
service and technical support. From time to time, rather than acquiring units
and selling or leasing them to BellSouth customers, we distribute, for a fee,
Caller ID hardware that BellSouth or other clients have purchased from various
third-party manufacturers.
Under our programs with Southwestern Bell and Pacific Bell, like our new
contract with BellSouth, we bill the respective telecommunications clients
directly for the telecommunications units that are sold to their end users. The
clients are then responsible for billing and collecting from their customers. As
a result of this change in our payment model, unit prices and our gross margin
are lower than historical levels (See "Results of Operations" "Revenue" and
"Gross Profit" below). We generally experience lower bad debt expenses, which
are included in selling, general and administrative expenses, because
telecommunications clients, rather than their end user customers, pay us for the
equipment. These lower expenses substantially offset the decline in gross
margin. The change in our payment model has had little effect on our operating
margin to date.
We have experienced significant growth in revenue in recent years. This growth
stems primarily from growth in Caller ID market penetration and Innotrac's
consultative selling with respect to product-based marketing support services.
According to industry sources, market penetration of Caller ID services in the
United States as of December 31, 1998 was approximately 30% and is expected to
reach approximately 75% by 2007. BellSouth indicates that through the end of
first quarter 1999 its Caller ID penetration was 38%. We believe that
opportunities exist, for example, in the market areas served by Pacific Bell,
where market penetration for Caller ID lags behind the national average because
regulatory issues delayed the release of Caller ID. Caller ID equipment sales
may eventually level off as the Caller ID market matures. We believe that by
distributing other telecommunications products for existing customers, growing
our telecommunications company client base and expanding customer distribution
channels through e-commerce, we will be able to offset any eventual maturity in
our Caller ID business.
<PAGE>
The following table sets forth the percentage of total net revenues derived from
services provided to each of the following clients for the years ended December
31, 1998, 1997 and 1996 and the nine months ended September 30, 1999 and 1998.
Percentages may not sum due to rounding.
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
------------------------------ ------------------
1998 1997 1996 1999 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
BellSouth ....... 59% 85% 82% 36% 67
Pacific Bell .... 25 8 5 32 18
Southwestern Bell 11 -- -- 21 7
US West ......... 2 2 2 4 2
Bell Atlantic ... -- -- -- 3 --
Ameritech ....... -- -- -- 1 --
---- ---- ---- ---- ----
Total 97% 95% 89% 97% 97%
==== ==== ==== ==== ====
</TABLE>
The decline in revenues from BellSouth customers as a percentage of total
revenues for the nine months ended September 30, 1999 results from the
diversification of our client base, increased revenue from Pacific Bell and
Southwestern Bell and the impact of the new pricing model with BellSouth.
Revenues are recognized on the accrual basis as services are provided to
customers or as units are shipped (including installment sales). Revenues are
reduced for estimated product returns and allowances, which are based on our
historical experience.
The largest component of our expenses is our cost of revenues, which includes:
* the product costs of telecommunications equipment,
* depreciation on Caller ID rental equipment,
* the costs of labor associated with marketing support services
for a particular client,
* telecommunications services costs (including call center support),
* information technology support,
* materials and freight charges and
* directly allocable facilities costs.
Most of these costs are variable in nature.
A second component of our expenses includes selling, general and administrative,
or SG&A, expenses. This expense item is comprised of (1) financial, human
resources, administrative and marketing functions that are not allocable to
specific client services and (2) bad debt expense.
Bad debt expense represents a provision for installments and rentals that will
be deemed uncollectible based on Innotrac's historical experience, as well as
billing adjustments from telecommunications providers. SG&A expenses tend to be
fixed in nature, with the exception of bad debt expense, which is related to
revenues.
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth unaudited summary operating data, expressed as a
percentage of revenues, for the three months and nine months ended September 30,
1999 and 1998, respectively. The data has been prepared on the same basis as the
annual financial statements. In the opinion of the Company's management, it
reflects all adjustments, consisting only of normal and recurring adjustments,
necessary for a fair presentation of the information for the periods presented.
Operating results for any period are not necessarily indicative of results for
any future period. The rounded percentages below are calculated using the
detailed information contained in the financial statements in order to simplify
its presentation. However, the percentages below are calculated using the
detailed information contained in the financial statements included in Item 1 of
this filing.
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
------------------ ------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cost of revenues ........................... 85.0% 78.1 85.5% 74.8%
Gross profit ............................... 15.0 21.9 14.5 25.2
Selling, general and administrative expenses 6.3 10.8 4.9 13.1
Operating income ........................... 7.9 10.4 8.9 11.4
Interest expense ........................... 0.5 0.3 0.6 0.7
Income before income taxes ................. 7.4% 10.2% 8.3% 10.7%
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1998
REVENUES. Net revenues increased 46.6% to $51.7 million for the three months
ended September 30, 1999 from $35.2 million for the three months ended September
30, 1998. The increase in revenue was primarily due to a 98.4% increase in
Caller ID units distributed to 1.2 million units, which included a 152.9%
increase in units sold over the same period in 1998. For the three months ended
September 30, 1999 the percentage of units sold was 79.4% versus 62.2% for the
same period in 1998. The percentage of units fulfilled for promotional giveaway
programs for which we are paid a fee was 20.6% versus 37.8% for the same period
in 1998, due to an increase in promotional sales programs by certain clients.
Net revenues was partially offset by a decrease in average per unit prices of
Caller ID units due to the impact of our new pricing model where we reduced unit
prices to reflect the lower credit risks as described above in the "Overview". A
dispute between BellSouth and U.S. Electronics, Inc., a third party vendor of
Caller ID equipment and caller ID telephones, has resulted in a lawsuit filed by
BellSouth against the vendor on October 22, 1999. The Company believes that the
dispute could result in a decrease in the number of Caller ID promotional
programs that the Company undertakes for BellSouth during the fourth quarter and
possibly beyond. The Company cannot estimate the impact of any such decrease in
promotional programs on its net revenues. Our reserve for returns and allowances
decreased from $3.1 million (8.8% of net revenues) for the three months ended
September 30, 1998 to $2.4 million (4.6% of net revenues) for the three months
ended September 30, 1999.
COST OF REVENUES. Cost of revenues increased 59.4% to $43.9 million for the
three months ended September 30, 1999 compared to $27.5 million for the three
months ended September 30, 1998. During the three months ended September 30,
1999, the Company opened a new call center in Pueblo, Colorado. The impact of
the new call center was an increase in cost of revenues by approximately
$900,000. Cost of revenues increased primarily due to an increase in cost of
equipment associated with the increase in units we sold and the impact of the
new call center in Pueblo, Colorado.
GROSS PROFIT. Gross profit for the three months ended September 30, 1999
increased 0.8% to $7.8 million compared to $7.7 million for the three months
ended September 30, 1998, and gross margin decreased from 21.9% of revenues to
15.0% of revenues, respectively. The decrease in gross profit and gross margin
was primarily due to the increased percentage of business derived from
Southwestern Bell, Pacific Bell and BellSouth where the Company does not assume
the bad debt risk, as described under "-Overview." Therefore it is able to
charge lower unit prices and, as a result, experiences lower gross margins. This
decline is offset by lower bad debt expense, which is included in selling,
general and administrative expenses.
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses for the three months
ended September 30, 1999 decreased 8.6% to $3.3 million or 6.3% of revenues from
$3.8 million or 10.8% of revenues for the three months ended September 30, 1998.
The Company's bad debt expense was $1.1 million (2.1% of net revenues) for the
three months ended September 30, 1999 as compared to $2.1 million (6.0% of net
revenues) for the three months ended September 30, 1998. The decrease in bad
debt expense as a percentage of revenue is due primarily to the increasing
percentage of business derived from Southwestern Bell, Pacific Bell and
BellSouth, which generally pay the Company directly for telecommunications
equipment sold to end-users. The increase in other SG&A expenses is due to
increased sales and marketing efforts and increased administrative costs to
support the Company's growth.
INCOME TAXES. Our effective tax rates for the three months ended September 30,
1999 and 1998 were 39.5% and 39.4%, respectively.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED 1998
REVENUES. Net revenues increased 87.5% to $176.5 million for the nine months
ended September 30, 1999 from $94.1 million for the nine months ended September
30,1998. Consistent with the quarter's results, the increase in revenue was due
primarily to increased Caller ID volume. Total Caller ID units sold and
fulfilled during the nine months ended September 30, 1999 increased 134.2% to
4.9 million units from 2.1 million units for the nine months ended September 30,
1998. The percentage of units sold was 58.1% versus 56.1% for the nine months
ended September 30, 1999 and 1998, respectively. The percentage of units
fulfilled for promotional giveaway programs for which we are paid a fee was
41.9% versus 43.9% for the same period in 1998, due to an increase in
promotional sales programs by certain clients. The increase in unit volume was
partially offset by a decrease in the average per unit price of Caller ID units
due to the impact of the new pricing model where we have reduced our unit prices
to reflect the lower credit risk as described above in the "Overview". The
Company's reserve for returns and allowances decreased from $8.6 million (9.2%
of net revenues) for the nine months ended September 30, 1998 to $6.5 million
(3.7% of net revenues) for the nine months ended September 30, 1999.
COST OF REVENUES. Cost of revenues increased 114.2% to $150.9 million for the
nine months ended September 30, 1999 compared to $70.5 million for the nine
months ended September 30, 1998. During the three months ended September 30,
1999, the Company opened a new call center in Pueblo, Colorado. The impact of
the new call center was an increase in cost of revenues by approximately
$900,000. This increase was due to increased unit volume described above plus
the opening of the new call center in Pueblo, Colorado.
GROSS PROFIT. Gross profit for the nine months ended September 30, 1999
increased 7.9% to $25.6 million or 14.5% of revenues as compared to $23.7
million or 25.2% of revenues for the nine months ended September 30, 1998. The
increase in gross profit was due primarily to the increase in revenue. Gross
margins declined for several reasons. First, for strategic reasons, in the first
quarter the Company conducted a promotional program that resulted in $11.0
million in revenues and $11.0 million in cost of sales. The Company chose to
conduct the program in order to strengthen its relationship with the client. In
addition, gross margins were impacted by the increased percentage of business
derived from Southwestern Bell, Pacific Bell and BellSouth where the Company
does not assume the bad debt risk, as described under "-Overview." Therefore it
is able to charge lower unit prices and as a result, experiences lower gross
margins. This decline is offset by lower bad debt expense, which is included in
selling, general and administrative expenses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses for the nine months
ended September 30, 1999 were $8.6 million or 4.9% of revenues compared to $12.3
million or 13.1% of revenues for the nine months ended September 30, 1998. The
Company's bad debt expense was $2.2 million (1.3% of net revenues) for the nine
months ended September 30, 1999 as compared to $7.0 million (7.4% of net
revenues) for the nine months ended September 30, 1998. Consistent with the
results for the quarter, the decrease in bad debt expense as a percentage of
revenue is due primarily to the increasing percentage of business derived from
Southwestern Bell, Pacific Bell and BellSouth, which generally pay the Company
directly for telecommunications equipment sold to end-users. The increase in
other selling, general and administrative expenses is due to increased sales and
marketing efforts and increased administrative costs to support the Company's
growth.
<PAGE>
INCOME TAXES. Our effective tax rates for the nine months ended September 30,
1999 and 1998 were 39.5% and 24.8%, respectively. The effective tax rates are
lower than statutory rates for the nine months ended September 30, 1998 due to
the amount of income attributable to the pass-through entities involved in the
combination of Innotrac and related pass-through entites at the same time as
consummation of our initial public offering in May 1998. We expect our effective
tax rate in future periods to approximate the level for the nine months ended
September 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
We fund our operations and capital expenditures primarily through cash flow from
operations, borrowings from banks, and, from time to time, offerings of equity
and debt. We had cash and cash equivalents of approximately $575,000 at
September 30, 1999. We maintain a $40.0 million revolving line of credit with a
bank, maturing in June 2002, which was increased from $35.0 million in April
1999. Borrowings under the line of credit bear interest at our option at the
bank's base rate, as adjusted from time to time, or LIBOR, subject to adjustment
in certain circumstances at the lender's option, plus up to 200 basis points. At
September 30, 1999, the interest rate on the line of credit was 6.25%, and the
weighted average interest rate for the nine months ended September 30, 1999 was
6.09%. At September 30, 1999, $13.1 million was outstanding under the line of
credit. In June, we entered into a lease for a new call center and distribution
facility. As a result of that lease, rental expense will increase approximately
$550,000 a year through 2004 beginning with the current quarter.
During the nine months ended September 30, 1999, the Company used $31.4 million
in cash flow from operating activities compared to the use of $3.8 million in
cash flow from operating activities in the same period in 1998. The decrease in
cash flow from operating activities in 1998 was due to higher working capital
requirements resulting from increases in accounts receivable (principally
receivables from Pacific Bell, Southwestern Bell and BellSouth) due to the
increased sales volume and similar increases in inventory, offset by increased
payables during the first nine months of 1999 as compared to the same period in
1998.
During the nine months ended September 30, 1999, net cash used in investing
activities was $3.8 million in 1999 as compared to $3.6 million in 1998. This
decrease was primarily due to a decrease in the number of purchases of Caller ID
units for rent plus reductions in the level of expenditures associated with the
Company's computer and software additions to handle growth in business.
During the nine months ended September 30, 1999, the net cash provided by
financing activities was $32.4 million compared to $10.9 million in the same
period in 1998. This increase was primarily due to a public offering completed
in July 1999 of 2.2 million shares (the "July Offering") of common stock for net
proceeds of approximately $35.1 million. The increased equity supported working
capital requirements resulting from increases in accounts receivable due to the
increased sales volume and similar increases in inventory during the first nine
months of 1999 as compared to the same period in 1998. The proceeds of this
offering was principally used to reduce borrowings outstanding under our line of
credit facility.
We estimate that our cash and financing needs through 1999 will be met by cash
flows from operations, proceeds from the July Offering, and our line of credit
facility. However, any increase in the Company's growth rate, shortfalls in
anticipated revenues, increases in anticipated expenses, or significant
acquisitions could have a material adverse effect on the Company's liquidity and
capital resources. Any of these might require the Company to raise additional
capital from public or private equity or debt sources in order to finance
operating losses, anticipated growth and contemplated capital expenditures. If
such sources of financing are insufficient or unavailable, the Company will be
required to modify its growth and operating plans in accordance with the extent
of available funding. The Company may need to raise additional funds in order to
take advantage of unanticipated opportunities. These opportunities could include
acquisitions of complementary businesses or the development of new products, or
otherwise respond to unanticipated competitive pressures. There can be no
assurance that the Company will be able to raise any such capital on terms
acceptable to the Company or at all.
<PAGE>
YEAR 2000 COMPLIANCE
The efficient operation of our business is dependent in part on our computer
software programs and operating systems. These programs and systems are used in
inventory management, pricing, sales, shipping and financial reporting, as well
as in various administrative functions. Management believes that our information
technology, or IT, systems, and other non-IT systems are either Year 2000
compliant or substantially compliant. The cost of the upgrades is expected to be
approximately $120,000, approximately $110,000 of which has been incurred
through October 1999. We do not anticipate additional material expenditures for
Year 2000 compliance issues.
Our Year 2000 compliance efforts for both IT and non-IT systems include three
major phases: (1) inventory all systems, assess whether there are any Year 2000
issues and develop a compliance plan for all systems; (2) remediate any Year
2000 problems and (3) test systems subsequent to remediation. The chart below
shows the estimated completion status of each of these phases expressed as a
percentage of completion as of September 30, 1999:
<TABLE>
<CAPTION>
PHASE: I II III
------ - -- ---
<S> <C> <C> <C>
IT Systems................................. 100% 99% 95%
Non-IT Systems............................. 100% 100% 100%
</TABLE>
While the remediation phase and the testing phase are substantially complete, we
intend to continue to test for any potential unidentified Year 2000 issues of
which we may not be currently aware through the remainder of 1999.
We are in the process of obtaining documentation from our suppliers, clients,
financial institutions and others as to the status of their Year 2000 compliance
programs and the possibility of any interface difficulties relating to Year 2000
compliance that may affect us. We have obtained documentation from most of the
entities we have contacted and, to date, no significant concerns have been
identified. However, there is a risk that Year 2000-related operating problems
or expenses will arise with our computer systems and software or in connection
with our interface with the computer systems and software of our suppliers,
clients, financial institutions and others. Because these third-party systems or
software may not be Year 2000 compliant, we are in the process of developing
contingency plans to address Year 2000 failures of these entities with which we
interface. Our contingency plans are being developed to address issues like: (1)
the inability to receive customer order information electronically from our
major clients and (2) the inability of one or more of the manufacturers of the
Caller ID products we sell to produce products due to that company's Year 2000
failure. If the first scenario were to happen, we would be required to receive
and enter this information manually into our order processing system, which
could increase our labor costs. If the second scenario were to occur, we would
be required to find alternate vendors and potentially incur additional costs to
do so. We could be required to incur unanticipated expenses to remedy any
problems, which could have a material adverse effect on our business, results of
operations and financial condition.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board ("FASB") has issued Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities, which must be
adopted by the year 2000. In June 1999, the FASB issued Statement No. 137,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - DEFERRAL OF THE
EFFECTIVE DATE OF FASB STATEMENT NO. 133, which amends Statement 133 to be
effective for all fiscal quarters of all fiscal years beginning after June 15,
2000 (that is, January 1, 2001 for companies with calendar-year fiscal year).
This statement establishes accounting and reporting standards for derivative
instruments--including certain derivative instruments embedded in other
contracts--and for hedging activities. Adoption of this statement is not
expected to have a material impact on our financial statements.
In March 1998, the American Institute of Certified Public Accountants issued a
new Statement of Position, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. This statement requires capitalization
of certain costs of internal-use software. Innotrac adopted this statement in
January 1999, and it did not have a material impact on the financial statements.
<PAGE>
Item 3 - Quantitative and Qualitative Disclosure About Market Risks
We believe our exposure to market risks is immaterial. We hold no market risk
sensitive instruments for trading purposes. At present, we do not employ any
derivative financial instruments, other financial instruments or derivative
commodity instruments to hedge any market risks and we do not currently plan to
employ them in the future. To the extent that we have borrowings outstanding
under our credit facility, we have market risk relating to the amounts of our
borrowings because interest rates under the credit facility are variable. Our
exposure is immaterial due to the short-term nature of these borrowings.
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.18 Master Agreement for Products and Services between the
Company and SBC Operations, Inc. effective July 1, 1999.
27. Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K - There were no Form 8-K filings.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INNOTRAC CORPORATION
(Registrant)
Date: November 9, 1999 By: /s/ Scott D. Dorfman
Scott D. Dorfman
President and Chief
Executive Officer and Chairman
of the Board
Date: November 9, 1999 By: /s/ John H. Nichols III
John H. Nichols III
Senior Vice President,
Chief Financial Officer
and Secretary (Principal
Financial Officer)
EXHIBIT 10.18
CONFIDENTIAL TREATMENT
Portions of this Exhibit (Exhibit 10.18) have been omitted pursuant to a request
for confidential treatment filed with the Securities and Exchange Commission
(the "Commission"). The omitted portions, which are designated by asterisks
(* * *), were filed separately with the Commission.
Master Agreement
for
Products and Services
between
SBC Operations, Inc.
[GRAPHIC OMITTED][GRAPHIC OMITTED]
and
Innotrac Corporation
[GRAPHIC OMITTED][GRAPHIC OMITTED]
Agreement Number:
99006677
PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees of SBC
Operations, Inc., and Affiliates and Innotrac Corporation only and is not
for general distribution within those companies or for distribution
outside those companies except by written agreement.
<PAGE>
Agreement Number 99006677
<TABLE>
TABLE OF CONTENTS
SECTION TITLE PAGE
- --------------------------------------------------------------------------------------------
<S> <S> <C>
Article A Preamble a-1
Article B General Provisions b-1
Article C Products N/A
Article D Services d-1
Signature Page 1 page
Exhibit A Executive Orders and Associated Regulations 3 pages
Exhibit B Prime Supplier MBE/WBE/DVBE 4 pages
Participation Plan
Exhibit B-1 Southwestern Bell Telephone MBE/WBE/DVBE 2 pages
Quarterly Results Report
Exhibit B-2 Pacific Bell MBE/WBE/DVBE 2 pages
Quarterly Results Report
Exhibit B-3 Southern New England Telecommunications 2 pages
MBE/WBE/DVBE Quarterly Results Report
Exhibit C Electronic Data Interchange (EDI) 3 pages
Exhibit D Sample Schedule 3 pages
Exhibit E Pricing Agreement 3 pages
Exhibit F Worker Agreement 3 pages
</TABLE>
Table of Contents - Page i
<PAGE>
Agreement Number 99006677
Article A
Preamble
Table of Contents - Article A
A-1. Background...................................................a-1
A-2. Term.........................................................a-2
A-3. Scope of Agreement...........................................a-2
Table of Contents - Page ii
<PAGE>
Agreement Number 99006677
Master Agreement
for
Products and Services
ARTICLE A
PREAMBLE
This agreement ("Agreement"), effective July 1, 1999 ("effective date"), is
between Innotrac Corporation, a Georgia corporation ("Supplier") and SBC
Operations, Inc., a Delaware corporation ("Buyer").
Buyer and Supplier, intending to be legally bound, agree as follows:
A-1. Background
Buyer offers various services to its customers including Caller ID service
(which enables a customer to receive a display of the calling party's name and
telephone number when receiving an incoming call) and Custom Calling Services
(such as three-way calling, call waiting, etc.). In the support of these
services, Buyer also offers equipment to its customers; this equipment includes,
but is not limited to, various telephone sets and adjunct devices (collectively:
customer premise equipment ("CPE")).
Supplier offers various products and/or services that could support Buyer in
offering various products and/or services to Buyer's customers. These products
and/or services include such things as CPE, fulfillment services (including
customer service support), and/or sales agency programs (to help facilitate the
sale of various products and/or services to Buyer's customers).
This Agreement sets forth the terms and conditions under which Supplier will
provide products to Buyer or Buyer's customers and/or services to Buyer or
Buyer's customers.
This Agreement is organized as follows:
a. This section, Article A, provides background information and basic terms
that apply to all business conducted under this Agreement.
b. Article B contains general provisions that apply to all business
conducted under this Agreement.
c. Article C contains specific provisions that apply to goods, i.e., CPE.
In cases where Supplier is not providing goods as either a manufacturer or the
agent of a manufacturer, the provisions of Article C will not apply. As such, if
Buyer does not anticipate obtaining products from Supplier under this Agreement,
Article C may be omitted.
Article A - Page a-1
<PAGE>
Agreement Number 99006677
d. Article D contains specific provisions that apply to services, e.g.,
fulfillment services or sales agency campaigns. In cases where Supplier is not
providing services directly to Buyer or Buyer's customers, the provisions of
Article D will not apply. As such, if Buyer does not anticipate obtaining
services directly from Supplier under this Agreement, Article D may be omitted.
A-2. Term
The term of this Agreement shall commence on the effective date and, unless
sooner canceled or terminated as provided herein, shall remain in full force and
effect for an initial term of five (5) years following the effective date and
thereafter until canceled or terminated as provided herein.
A-3. Scope of Agreement
Subject to the Terms and Conditions of this Agreement including all Articles,
Exhibits and separately executed schedules (A Sample Schedule is provided at
Exhibit D) ("Schedules"), Supplier shall provide to Buyer or Buyer's customers
such goods, including CPE ("Products"), and services to Buyer or Buyer's
customers, including fulfillment services and sales agency campaigns
("Services"), as described herein, as are ordered by Buyer ("Orders"), and such
other Products and Services as the parties may agree to include hereunder,
during the term of this Agreement.
Article A - Page a-2
<PAGE>
Agreement Number 99006677
<TABLE>
<CAPTION>
Article B
General Provisions
Table of Contents - Article B
<S> <C> <C>
B-1. Account Managers...........................................................................b-1
B-2. Affiliate..................................................................................b-1
B-3. Amendments and Waivers.....................................................................b-1
B-4. Assignment.................................................................................b-2
B-5. Buyer's Remorse............................................................................b-2
B-6. Cancellation and Termination...............................................................b-2
B-7. Changes and Suspensions....................................................................b-4
B-8. Complaints - Executive.....................................................................b-4
B-9. Compliance With Laws.......................................................................b-4
B-10. Conflict of Interest.......................................................................b-5
B-11. Construction and Interpretation............................................................b-5
B-12. Customer Contact...........................................................................b-6
B-13. Dispute Resolution.........................................................................b-6
B-14. Electronic Data Interchange ("EDI")........................................................b-7
B-15. Entire Agreement...........................................................................b-7
B-16. Ethical Relationships......................................................................b-8
B-17. Force Majeure..............................................................................b-8
B-18. Fraud -Slamming & Cramming.................................................................b-9
B-19. Governing Law..............................................................................b-9
B-20. Headings...................................................................................b-9
B-21. Independent Contractor.....................................................................b-9
B-22. Information -Buyer's......................................................................b-11
B-23. Information -Customer.....................................................................b-11
B-24. Information -Supplier's...................................................................b-13
B-25. Insurance.................................................................................b-14
B-26. Intellectual Property.....................................................................b-15
B-27. Invoicing & Payment.......................................................................b-15
B-28. Liability.................................................................................b-17
B-29. MBE/WBE/DVBE..............................................................................b-17
B-30. MBE/WBE/DVBE Participation Plans and Reports..............................................b-19
B-31. Most Favored Customer.....................................................................b-19
B-32. Nonexclusive Agreement....................................................................b-20
B-33. Non-Intervention..........................................................................b-20
B-34. No Third Party Beneficiaries..............................................................b-20
B-35. Notices...................................................................................b-20
B-36. Order of Precedence.......................................................................b-22
B-37. Publicity.................................................................................b-22
</TABLE>
Table of Contents - Page iii
<PAGE>
Agreement Number 99006677
<TABLE>
<CAPTION>
<S> <S> <C>
B-38. Records and Audits........................................................................b-22
B-39. Releases Void.............................................................................b-23
B-40. Remedies Cumulative.......................................................................b-23
B-41. Severability..............................................................................b-23
B-42. Subcontracting............................................................................b-24
B-43. Survival..................................................................................b-24
B-44. Time......................................................................................b-24
B-45. Work Done By Others.......................................................................b-24
</TABLE>
Table of Contents - Page iv
<PAGE>
Agreement Number 99006677
Master Agreement
for
Products and Services
ARTICLE B
GENERAL PROVISIONS
Article B contains general provisions that apply to all business conducted under
this Agreement.
B-1. Account Managers
Supplier will establish account team managers who will be available to Buyer via
dedicated telephone number and pager.
B-2. Affiliate
a. Supplier agrees that an Affiliate may issue Schedules or place Orders
with Supplier which incorporate the terms and conditions of this Agreement, and
that the term "Buyer" shall be deemed to refer to an Affiliate when an Affiliate
places an Order with Supplier incorporating the terms and conditions of this
Agreement. An Affiliate will be responsible for its own obligations, including
but not limited to, all charges incurred in connection with such Order and by
placing such Order an Affiliate agrees to be bound by the terms and conditions
of this Agreement and shall comply therewith. The parties agree that nothing in
this Agreement will be construed as requiring Buyer to indemnify Supplier, or to
otherwise be responsible, for any acts or omissions of an Affiliate, nor shall
anything in this Agreement be construed as requiring an Affiliate to indemnify
Supplier, or to otherwise be responsible, for the acts or omissions of Buyer.
b. The parties agree that the term "Affiliate" includes:(i) a company,
whether incorporated or not, which owns, directly or indirectly, a majority
interest in either party (a "parent company"), and (ii) a company, whether
incorporated or not, in which a 5% or greater interest is owned, either directly
or indirectly, by: (a) a party to this Agreement, or (b) a parent of a party to
this Agreement.
B-3. Amendments and Waivers
This Agreement may be amended or modified only by a written instrument signed by
the authorized representatives of both parties. No course of dealing or failure
of either party to strictly enforce any term, right or condition of this
Agreement shall be construed as a general waiver or relinquishment of such term,
right or condition. Waiver by either party of any default shall not be deemed a
waiver of any other default.
Article B - Page b-1
<PAGE>
Agreement Number 99006677
B-4. Assignment
Except as otherwise provided by law, neither party hereto may assign,
subcontract or otherwise transfer its rights or obligations under this Agreement
except with the prior written consent of the other party hereto, which consent
will not be unreasonably withheld; provided, however: Buyer will have the right
to assign this Agreement to any present or future affiliate, subsidiary or
parent corporation of Buyer, without securing the consent of Supplier and may
grant to any such assignee the same rights and privileges Buyer enjoys
hereunder; and Supplier will have the right to assign this Agreement to its
successor in the event of a merger, acquisition or sale of all its assets,
without securing the consent of Buyer and may grant to any such assignee the
same rights and privileges Supplier enjoys hereunder. Any attempted assignment
not assented to in the manner prescribed herein, except an assignment confined
solely to money due or to become due, will be void. It is expressly agreed that
any assignment of money will be void if: (a) Supplier fails to give Buyer at
least thirty (30) days prior written notice thereof, or (b) such assignment
imposes or attempts to impose upon Buyer additional costs or obligations in
addition to the payment of such money, or (c) denies, alters or attempts to
alter any of Buyer's rights. Without limiting the generality of the foregoing
provisions, in whole or in part, Supplier may assign its right to receive money
due or to become due to subcontractors to whom it subcontracts in accordance
with the "Subcontracting" clause of this Agreement.
B-5. Buyer's Remorse
Buyer's customers will have the right, at their discretion, to return the
Product(s) to Supplier or Supplier's approved subcontractor within thirty (30)
days of receipt of the Product(s) ("buyer's remorse").
B-6. Cancellation and Termination
a. Cancellation of Agreement and/or Schedules and/or Orders for Default
If Supplier is in default of any of its material obligations under this
Agreement or applicable Schedules or Orders and such default continues for ten
(10) days after written notice thereof is given by Buyer, or such longer period
of time, not to exceed thirty (30) days, as specified by Buyer when such default
is of a nature that it can not be reasonably cured within such ten (10) day
period, then in addition to all other rights and remedies, at law or in equity,
Buyer may cancel this Agreement and/or any Schedules and/or Orders, and/or
reject any Products which may be affected by such default, without any
obligation or liability on the part of Buyer whatsoever.
b. Termination of Agreement for Convenience
Article B - Page b-2
<PAGE>
Agreement Number 99006677
(i) Either Supplier or Buyer may terminate this Agreement for the
convenience of the party terminating the Agreement upon sixty (60) days prior
written notice to the other setting forth the effective date of such
termination; provided, however, that no such termination shall be effective
prior to the expiration of the initial term of this Agreement.
(ii) During the initial term of this Agreement, either Supplier or
Buyer may terminate this Agreement for the convenience of the party terminating
the Agreement in whole or in part at any time upon at least one hundred twenty
(120) days prior written notice to the other setting forth the effective date of
such termination.
c. Termination of Schedules and/or Orders for Convenience
Buyer may at any time terminate for the convenience of Buyer any Schedule and/or
Order in whole or in part upon written notice to Supplier; such termination to
be effective upon receipt of such written notice by Supplier.
d. Termination Charges
In the event Buyer terminates this Agreement or any Schedule and/or Order as
provided above, Supplier shall be entitled to reasonable termination charges
consisting of its actual and direct costs incurred to provide the Products
and/or Services ordered by Buyer but no more than a percentage of the work
performed or Products delivered prior to termination, minus salvage or resale
value of the work terminated. If requested, Supplier agrees to substantiate such
costs with proof satisfactory to Buyer. In no event shall the termination
charges on any Schedule or Order hereunder exceed the Schedule or Order price.
No termination charges shall apply to Products not specially manufactured for
Buyer pursuant to any Schedule or Order which is terminated at least sixty (60)
days prior to the required delivery date. Buyer shall not be responsible for any
work performed nor for any costs incurred by Supplier, Supplier's Suppliers, or
Supplier's subcontractors after Supplier has received the Notice of Termination.
After the receipt of Buyer's payment for any such terminated services, Supplier
shall deliver the physical embodiments, if any, of such Services which have been
completed up to the date of Buyer's termination. The foregoing termination
charges state the entire liability of Buyer for termination for the convenience
of Buyer by Buyer of any Schedule or Order hereunder.
e. Partial Cancellation and Termination of Schedules and/or Orders
Where a provision of this Agreement or the applicable Laws and Regulations
permit Buyer to cancel or terminate a Schedule or an Order, such cancellation or
termination may, at Buyer's option, be either complete or partial. In the case
of a partial cancellation or termination Buyer may, at its option, accept a
portion of the Products or Services covered by a Schedule or an Order and pay
Supplier for such Products or Services at the unit prices set forth in such
Schedule or Order. The right to cancel a Schedule or an Order shall also include
the right to cancel any other related Schedule or Order.
Article B - Page b-3
<PAGE>
Agreement Number 99006677
f. The cancellation or termination of this Agreement shall not affect the
obligations of either party to the other party pursuant to any Schedule or Order
previously executed hereunder, and the terms and conditions of this Agreement
shall continue to apply to such Schedule or Order as if this Agreement had not
been terminated or canceled.
B-7. Changes and Suspensions
a. Buyer may, prior to Supplier's complete delivery of the Products or
Services under any Schedule or Order, make changes within the general scope of
such Schedule or Order, including changes to quantities, drawings, designs or
specifications. In addition, Buyer may, by notice to Supplier, suspend, in whole
or in part, the delivery of Products and the performance of Services. If Buyer
directs any such change or suspension, the parties shall agree upon any
necessary adjustments in prices and/or dates and Buyer shall issue a revised
Schedule or Order reflecting such adjustments.
b. Supplier may not, without Buyer's prior written consent, make any
changes whatsoever with respect to the Products or Services specified in any
Schedule or Order.
B-8. Complaints - Executive
Executive customer complaints are complaints received by Buyer's corporate
executives (district level or above). Executive customer complaints include
complaints received indirectly through the regulatory complaint process.
Supplier shall respond to each executive customer complaint within twenty-four
(24) hours of receipt. Additionally, Supplier shall provide to Buyer an analysis
of the root cause of these complaints as well as a recovery plan outline.
B-9. Compliance With Laws
Supplier shall comply with the provisions of the Fair Labor Standards Act, the
Occupational Safety and Health Act and all other applicable federal, state,
county and local laws, ordinances, regulations and codes, including, but not
limited to, the procurement of permits, certificates, approvals, inspections and
licenses when needed, in the performance of this Agreement. Supplier further
agrees during the term hereof to comply with all applicable Executive and
Federal regulations as set forth in Exhibit A ("Executive Orders and Associated
Regulations"); where applicable, and as used in Exhibit A, "Contractor" shall
mean Supplier. Supplier shall defend, indemnify and hold Buyer harmless from and
against any actual loss, damage, liability or expenses (including reasonable
attorneys' fees and court costs) that may be sustained by reason of Supplier's
failure to comply herewith.
Article B - Page b-4
<PAGE>
Agreement Number 99006677
B-10. Conflict of Interest
a. This Agreement is intended to secure to Buyer Supplier's assistance and
cooperation and shall operate to preclude Supplier from selling Products or
performing Services for others during the term of this Agreement which, in
Buyer's reasonable judgment, would aid others in directly competing with Buyer
and thus result in a conflict of interest with the contractual relationship
represented by this Agreement. In the event that Supplier undertakes such
Product sales or Service performance, Supplier shall promptly notify Buyer in
writing, and Buyer may, at its option, terminate this Agreement immediately. It
is agreed that Supplier may otherwise sell Products to, or perform Services for,
others during the term of this Agreement.
b. Supplier represents and agrees that it does not provide interexchange
telecommunications service and will not provide such service during the term of
this Agreement. Supplier further represents that it is not a reseller of
telecommunications service. Should Supplier or an affiliate begin to provide
interexchange service or become a reseller of telecommunications service during
the term of this Agreement. In the event that Supplier undertakes such Product
sales or Service performance, Supplier shall promptly notify Buyer in writing
and Supplier will be provided an opportunity to terminate such service in order
to enjoy the benefits of this Agreement, and, by failing to do so, Buyer shall
be entitled to terminate this Agreement immediately.
c. Supplier represents and warrants that no officer, director, employee or
agent of Buyer has been or will be employed, retained or paid a fee, or
otherwise has received or will receive any personal compensation or
consideration, by or from Supplier or any of Supplier's officers, directors,
employees or agents in connection with the obtaining, arranging or negotiation
of this Agreement or other documents or agreements entered into or executed in
connection herewith.
B-11. Construction and Interpretation
The language in all parts of this Agreement shall in all cases be construed
simply, as a whole and in accordance with its fair meaning and not strictly for
or against any party. The parties hereto acknowledge and agree that this
Agreement has been prepared jointly by the parties and has been the subject of
arm's length and careful negotiation, that each party has been given the
opportunity to independently review this Agreement with legal counsel and other
consultants, and that each party has the requisite experience and sophistication
to understand, interpret and agree to the particular language of the provisions
hereof. Accordingly, in the event an ambiguity arises in the interpretation or
application of this Agreement, the ambiguity shall not be interpreted or
construed against either party.
Article B - Page b-5
<PAGE>
Agreement Number 99006677
B-12. Customer Contact
a. Contact by Supplier of Buyer's customers in any form, including but not
limited to face-to-face contact, telephone contact, e-mail contact and written
contact (individually and collectively: "contact"), shall be only as set forth
in this Agreement.
b. Prior to Supplier, or Supplier's subcontractor, if any, initiating
contact (outbound calling only) with Buyer's customers pursuant to this
Agreement, Supplier must submit a script, creative media or recital, as
applicable, that specifically states what will be said during the contact with
Buyer's customer. Written approval of the script, creative media or recital,
which will not be unreasonably withheld, must be obtained prior to the customer
contact being initiated (outbound calling only).
c. Supplier, or Supplier's subcontractor, if any, shall not change or
otherwise deviate from the approved script, creative media or recital without
the prior written approval of Buyer.
d. Supplier shall ensure that all employees and the employees of
sub-contractors, if any, who have any direct contact with Buyer's customers
under this Agreement complete and sign the Worker Agreement (Exhibit F) prior to
such contact under this Agreement.
e. Except as specifically authorized by this Agreement, Supplier shall not
contact Buyer's customers directly for the purpose of selling Products or
Services similar to those covered under this Agreement. Unless otherwise agreed
to by Buyer in writing, all such sales will be covered under this Agreement as
if made by Buyer and the file containing the details of the sale will be sent to
Buyer and processed accordingly.
f. Failure on the part of Supplier, or Supplier's subcontractors, if any,
to comply with this provision will be considered a material breach of this
Agreement and Buyer may, in addition to remedies available under this Agreement
and in-law, immediately cancel this Agreement and/or the governing Schedule for
default.
B-13. Dispute Resolution
a. The parties will attempt in good faith to promptly resolve any
controversy or claim arising out of or relating to this Agreement through
negotiations between key representatives of the parties before resorting to
other remedies available to them.
b. If a controversy or claim should arise that is not settled as specified
in paragraph a. above, representatives of each party who are authorized and
empowered to resolve the controversy or claim will meet at a location designated
by Buyer, at least once, and attempt to resolve the matter. Either party may
request this meeting and the parties agree to meet within fourteen (14) days of
such request or as mutually agreed.
Article B - Page b-6
<PAGE>
Agreement Number 99006677
c. If more than one meeting is held between the representatives of each
party, the meetings shall be held in rotation at the offices of Supplier and
Buyer.
d. Unless the parties otherwise agree, if the matter has not been resolved
within twenty-one (21) days of the first meeting, the representatives shall
refer the matter to senior executives who shall have full authority to settle
the dispute. The senior executives will meet for negotiations within fourteen
(14) days of the end of the twenty-one (21) day period referred to above, at a
site designated by Buyer. Three (3) business days prior to this scheduled
meeting, the parties shall exchange memoranda stating the issue(s) in dispute
and their positions, summarizing the negotiations which have taken place, and
attaching relevant documents.
e. If more than one meeting is held between the senior executives, the
meetings shall be held in rotation at the offices of Supplier and Buyer.
f. If the matter has not been resolved within thirty (30) days of the first
meeting of the senior executives (which period may be extended by mutual
agreement), the parties will attempt in good faith to resolve the controversy or
claim in accordance with the American Arbitration Association's rules for
Mediation of Business Disputes.
B-14. Electronic Data Interchange ("EDI")
Each party hereto may electronically transmit or receive Orders,
acknowledgments, invoicing, payment or other documents ("Data") mutually agreed
to by the parties, pursuant to Exhibit C ("EDI") of this Agreement. The parties
agree that Data mechanically stored by either party in the course of business
shall constitute acceptable documentation of the contents of the Data
electronically transmitted by the originating party.
B-15. Entire Agreement
a. Acceptance of this Agreement, and all resulting Schedules and Orders
including EDI Orders executed in accordance with the "Electronic Data
Interchange" clause of this Agreement, with respect to the subject matter to
purchase by acknowledgment, shipment or other performance will be unqualified,
unconditional and subject and expressly limited to the terms and conditions of
this Agreement. All previous offers by Supplier are hereby rejected and Buyer
will not be bound by terms additional to or different from those contained
herein that may appear in Supplier's quotation, acknowledgment, invoice or in
any other communication from Supplier, unless such terms are expressly agreed to
in a written instrument signed by Buyer. Acceptance of Products or Services,
payment or any inaction by Buyer will not constitute Buyer's consent to or
acceptance of any such additional or different terms, nor will estimates
furnished by Buyer constitute commitments. The provisions of this Agreement
supersede all prior oral and written quotations, communications, agreements and
understandings of the parties, if any, with respect to the subject matter
hereof.
Article B - Page b-7
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Agreement Number 99006677
b. The terms contained in this Agreement and any Schedules or Orders
including EDI Orders executed in accordance with the "Electronic Data
Interchange" clause of this Agreement, including all exhibits and subordinate
documents attached to or referenced in this Agreement or any Schedules or
Orders, will constitute the entire agreement between Supplier and Buyer with
regard to the subject matter hereof and supersede all prior oral and written
communications, agreements and understandings of the parties, if any, with
respect hereto.
B-16. Ethical Relationships
Supplier understands that Buyer has a corporate policy prohibiting receipt of
money, loans, gifts and entertainment. Acceptance of an occasional and customary
meal, refreshment, or other hospitality generally is not prohibited. This policy
extends to Buyer's employees and their immediate families.
B-17. Force Majeure
a. Neither party shall be deemed in default of this Agreement or any
Schedule or Order to the extent that any delay or failure in the performance of
its obligations results from any Force Majeure. A Force Majeure condition is
understood to exist when any cause occurs that is beyond the reasonable control
of the affected party and without its fault or negligence, such as acts of God,
acts of civil or military authority, embargoes, epidemics, war, riots,
insurrections, fires, explosions, earthquakes, floods, unusually severe weather
conditions, strikes, or failure or malfunction of computer equipment, software
or communication circuits.
b. If any Force Majeure condition occurs, Supplier shall give immediate
notice to Buyer and Buyer may, subject to the further provisions of this
sub-paragraph, elect to either: (i) terminate the affected Schedule(s) or
Order(s) or any part thereof, (ii) suspend the affected Order(s) or any part
thereof for the duration of the Force Majeure condition, with the option to
obtain elsewhere Services to be furnished under such Schedule(s) or Order(s) and
deduct from any commitment under such Schedule(s) or Order(s) the quantity of
the Services obtained or for which commitments have been made elsewhere, or
(iii) resume performance under such Schedule(s) or Order(s) once the Force
Majeure condition ceases, with an option in Buyer to extend any affected
delivery or performance date up to the length of time the Force Majeure
condition endured, provided, however, that Supplier shall be entitled to provide
like replacement Products or Services which are of comparable quality and at a
cost not to exceed that provided in the affected Schedule(s) or Order(s). Unless
Buyer gives written notice within thirty (30) days after being notified of the
Force Majeure condition, option (ii) shall be deemed selected.
Article B - Page b-8
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Agreement Number 99006677
B-18. Fraud - Slamming & Cramming
a. Supplier agrees to take necessary steps to ensure employees or
subcontractors are not involved in fraudulent practices, including, but not
limited to, cramming or slamming.
(i) cramming occurs when charges for products or services a customer
has not ordered or may not have ever received appear on their bill.
(ii) slamming is the unauthorized and illegal changing of a customer's
telecommunications service provider without the customer's knowledge or
permission. It can affect local and long-distance service provider choices.
b. In addition to all other remedies available under this Agreement and
in-law, Buyer reserves the right to require the immediate termination of any
subcontractor Supplier retains who does not follow these anti-fraud provisions.
B-19. Governing Law
a. THIS AGREEMENT AND PERFORMANCE HEREUNDER SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF MISSOURI EXCLUSIVE OF ITS CHOICE OF LAWS PROVISIONS, UNLESS AN
AFFILIATE ISSUES A SCHEDULE OR PLACES AN ORDER UNDER THIS AGREEMENT, IN WHICH
CASE THE GOVERNING LAW FOR SUCH SCHEDULE OR ORDER SHALL BE THE LAW OF THE STATE
IN WHICH SUCH AFFILIATE HAS ITS PRINCIPAL PLACE OF BUSINESS.
b. IF A DISPUTE ARISES AND THE MATERIAL FACTS AFFECT SCHEDULES AND/OR
ORDERS SUBMITTED BY MORE THAN ONE COMPANY, THE GOVERNING LAW SHALL BE MISSOURI
B-20. Headings
Article, Exhibit, clause, section, or paragraph headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
B-21. Independent Contractor
Supplier hereby represents and warrants to Buyer that:
a. Supplier is engaged in an independent business and will perform all
obligations under this Agreement as an independent contractor and not as the
agent or employee of Buyer;
Article B - Page b-9
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Agreement Number 99006677
b. Supplier's personnel performing under this Agreement shall be
considered solely the employee personnel of Supplier and not employees or agents
of Buyer;
c. Supplier has and retains the right to exercise full control of and
supervision over the performance and full control over the employment,
direction, assignment, compensation, and discharge of all personnel performing
under this Agreement;
d. Supplier is solely responsible for all matters relating to the
payment of compensation, including payment of premium pay for overtime, of all
Supplier's personnel who perform under this Agreement. Supplier will pay all
employee compensation and related taxes and benefits from its own accounts,
without regard to any dispute concerning Buyer's liability for payment to
Supplier under any invoice related to any performance under this Agreement by
Supplier;
e. Supplier is solely responsible for all matters relating to compliance
with all employer obligations to withhold employee taxes, pay employee and
employer taxes, and file payroll tax returns and information returns under
local, state, and federal income tax laws, unemployment compensation insurance
and state disability insurance tax laws, and social security and Medicare tax
laws, and all other payroll tax laws or similar laws (all collectively
hereinafter referred to as "payroll tax obligations") with respect to all
Supplier personnel performing under this Agreement. If any federal, state, or
local authority, including but not limited to any taxing authority, may claim
that Buyer or any subsidiary of Buyer is or may be liable on account of any
payroll, payroll tax, or benefit plan obligations, including the payment of
interest or penalties, with respect to any such Supplier personnel, then
Supplier shall:
(i) cooperate fully in Buyer's defense of such claim;
(ii) disclose its income tax returns, payroll tax returns, information
returns and transmittals, and associated payment deposits records, canceled
checks and instruments, and other such documents reasonably necessary to enable
Buyer to perfect its defense of such claims;
(iii) execute and deliver such powers of attorney or other consents as
may be necessary to enable Buyer to obtain copies of such returns and other
documents from the taxing and other authorities that are appropriate or helpful
in order to prove compliance with tax and other legal requirements; and
(iv) indemnify and hold Buyer harmless from any cost, loss, damage or
expense, including taxes as well as any interest or penalties.
f. Supplier is and will respond as the employer of all Supplier personnel,
exclusive of Buyer, for purposes of any federal, state, or local taxes, benefits
and unemployment insurance law. Supplier will indemnify and hold Buyer harmless
from any claim that Buyer's reserve account should be taxed to provide
unemployment compensation to any Supplier personnel or former Supplier personnel
based upon performance provided to Buyer under this Agreement;
Article B - Page b-10
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Agreement Number 99006677
g. If any of Supplier's personnel make a claim for employee benefits under
any Buyer employee benefit plan or for workers' compensation against Buyer, then
Supplier will indemnify and hold harmless Buyer from any such claim, including
any and all costs and expenses, including interest and penalties;
h. Supplier's employee benefit plans and self-employed benefit plans will
credit Supplier's personnel for all time worked on Buyer assignments and all
compensation earned on Buyer assignments for plan participation purposes,
vesting purposes, and benefit accrual purposes, on the same basis as they credit
time worked on other assignments; and
i. Supplier will be responsible for its own acts and those of
Supplier's personnel during the performance of Supplier's obligations under this
Agreement.
B-22. Information - Buyer's
a. For the purposes of this clause, "Information - Buyer's," "Information"
includes, but is not limited to: all proposals, research, records, reports,
recommendations, manuals, findings, evaluations, forms, reviews, information, or
other material or data originated or prepared by Supplier in the performance
hereunder. Except as otherwise provided herein, title to all Information shall
be in Buyer. Except as otherwise provided herein, no licenses or rights to any
Information are granted to Supplier hereunder.
b. All copies of such Information, in written, graphic or other tangible
form, shall be returned to Buyer at Buyer's request. Unless such information was
previously known to Supplier free of any obligation to keep it confidential, or
has been or is subsequently made public by Buyer or a third party, it shall be
kept confidential by Supplier, shall be used only in performing under this
Agreement, and may not be used for other purposes except such terms as may be
agreed upon between Supplier and Buyer in writing. Upon the cancellation or
termination of this Agreement, Supplier shall promptly deliver to Buyer all
information furnished to Supplier by Buyer in connection with performance under
this Agreement.
B-23. Information - Customer
a. For the purposes of this clause, "Information - Customer," "Customer
Information" includes, but is not limited to: customer name, address, phone
number, information concerning a customer's calling patterns, unlisted customer
Article B - Page b-11
<PAGE>
Agreement Number 99006677
numbers, aggregate customer data with individual identifying information
deleted, and "customer proprietary network information" which includes
information available to Buyer by virtue of the Buyer's relationship with its
customers as a provider of telecommunications service and may include: the
quantity, technical configuration, location, type, destination, amount of use of
telecommunications service subscribed to, and information contained on the
telephone bills of Buyer's customers pertaining to telephone exchange service or
telephone toll service received by a customer of Buyer. Except as provided
herein, title to all Customer Information shall be in Buyer. Except as otherwise
provided herein, no license or rights to any Customer Information are granted to
Supplier hereunder.
b. Supplier acknowledges that Customer Information received may be subject
to certain privacy laws and regulations and requirements of Buyer. Such Customer
Information is to be considered private, sensitive and confidential.
Accordingly, with respect to Customer Information, Supplier agrees to comply
with all applicable "customer proprietary network information" restrictions of
the Telecommunications Act (47 U.S.C. Section 222) and, for Buyer's customers
residing in California, the Constitution of California (Article I, Section 1),
the California Public Utilities Code (Sections 2891 - 2894), and General Order
107-B of the California Public Utilities Commission. Accordingly, Supplier will:
(i) not use any "customer proprietary network information" to market
or otherwise sell Products to Buyer's customers.
(ii) make no disclosure of Customer Information to any party other
than Buyer, except to the extent necessary for the performance of Services for
Buyer;
(iii) not incorporate any Customer Information into any database other
than in a database maintained exclusively for the storage of Buyer's Customer
Information;
(iv) not incorporate any data from any of Supplier's other customers,
including other Affiliates of Buyer, into Buyer's customer database;
(v) make no use whatsoever of any Customer Information for any purpose
except to comply with the terms of this Agreement;
(vi) make no sale, license o lease of Customer Information to any
other party;
(vii) restrict access to Customer Information to only those employees
of Supplier that require access in order to perform Services under this
Agreement;
Article B - Page b-12
<PAGE>
Agreement Number 99006677
(viii) implement and comply with a data security plan, approved in
advance in writing by Buyer, and other procedures as may be agreed by Buyer and
Supplier relative to the security of Customer Information at all times in
performing Services hereunder;
(ix) prohibit access or use of Customer Information by any of
Supplier's other customers, Supplier's affiliates, or third parties except as
may be agreed otherwise by Buyer; and
(x) promptly return all Customer Information to Buyer upon termination
or cancellation of this Agreement or applicable Schedule, unless expressly
agreed or instructed otherwise by Buyer.
b. Should any Customer Information stored on Supplier's premises be
rendered unusable or unfit, Supplier shall at no charge to Buyer, reconstruct
the information to its condition immediately prior to the time the information
was rendered unusable or unfit. Any of Buyer's information including Customer
Information returned to Buyer by Supplier, upon termination or cancellation of
this Agreement or Schedule must be returned in a medium that is rendered fit for
use by Buyer (e.g., Buyer may instruct Supplier to download Customer Information
on a magnetic tape).
B-24. Information - Supplier's
a. Except as otherwise provided in this Agreement under "Information -
Buyer's," for the purposes of this clause, "Information - Supplier's,"
"Information" includes, but is not limited to: any specifications, drawings,
sketches, models, samples, tools, computer or other apparatus programs,
technical or business information or data, field trials results and/or reports,
written, oral or otherwise furnished to Buyer under this Agreement or in
contemplation of this Agreement. Except as otherwise provided herein, title to
all Information shall be in Supplier.
b. No Information furnished by Supplier to Buyer hereunder or in
contemplation hereof shall be considered to be confidential or proprietary
unless it is conspicuously marked as such. If Supplier provides Buyer with any
proprietary or confidential Information which is conspicuously marked as such,
Buyer shall use the same degree of care to prevent its disclosure to others as
Buyer uses with respect to its own proprietary or confidential Information.
Notwithstanding the preceding sentences, no installation, operations, repair or
maintenance Information of Supplier which pertains to the Product or Services
which are the subject of this Agreement shall be considered to be proprietary or
confidential, and Buyer may disclose such Information to others for the purpose
of installing, operating, repairing, and maintaining the Product for which it
was initially furnished.
Article B - Page b-13
<PAGE>
Agreement Number 99006677
B-25. Insurance
a. With respect to performance hereunder, and in addition to Supplier's
obligation to indemnify, Supplier agrees to maintain, at all times during the
term of this Agreement, the following minimum insurance coverage and limits and
any additional insurance and/or bonds required by law:
(i) For work performed in the United States of America, Workers'
Compensation insurance with benefits afforded under the laws of the state in
which the Services are to be performed and Employers Liability insurance with
minimum limits of $100,000 for Bodily Injury-each accident, $500,000 for Bodily
Injury by disease-policy limits, and $100,000 for Bodily Injury by disease-each
employee.
(ii) Commercial General Liability insurance with minimum limits of
$2,000,000 General Aggregate limit, with a $1,000,000 each occurrence sub-limit
for all bodily injury or property damage incurred in any one occurrence and
$1,000,000 each occurrence sub-limit for Personal Injury and Advertising, and
$2,000,000 Products/Completed Operations Aggregate limit, with a $1,000,000 each
occurrence sub-limit for Products/Completed Operations. Fire Legal Liability
insurance with minimum sub-limits of $300,000 are required for lease agreements.
Buyer will be named as an Additional Insured on the Commercial General Liability
policy.
(iii) If use of a motor vehicle is required, Automobile Liability
insurance with minimum limits of $1,000,000 combined single limits per
occurrence for bodily injury and property damage, which coverage shall extend to
all owned, hired and non-owed vehicles.
b. Buyer requires that companies affording insurance coverage have a B+ VII
or better rating, as rated in the A.M. Best Key rating Guide for Property and
Casualty Insurance companies, or a BBB or better rating, as rated in the
Standard and Poor's rating list.
c. A certificate of insurance stating the types of insurance and policy
limits provided the Supplier must be received prior to commencement of any work.
If a certificate is not received, Supplier hereby authorizes Buyer, and Buyer
may, but is not required to, obtain insurance on behalf of Supplier as specified
herein. Buyer will either invoice Supplier for the costs incurred to so acquire
insurance or will reduce by an applicable amount any amount owed to Supplier.
d. The cancellation clause on the certificate of insurance will be amended
to read as follows:
Article B - Page b-14
<PAGE>
Agreement Number 99006677
"SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELED OR MATERIALLY
CHANGED, THE ISSUING COMPANY WILL MAIL THIRTY (30) DAYS WRITTEN NOTICE
TO THE CERTIFICATE HOLDER."
e. Supplier shall require all subcontractors who perform under this
Agreement to maintain the same insurance as listed above.
B-26. Intellectual Property
Except as expressly provided herein, nothing contained in this Agreement shall
be construed as conferring by implication, estoppel, or otherwise, any license
or right, under any patent, trademark, service mark, tradename, copyright, or
other proprietary right of Buyer and/or Supplier.
B-27. Invoicing & Payment
a. Buyer shall pay Supplier according to the rates and charges stated in
Exhibit E ("Pricing Agreement") of this Agreement or the applicable Schedule
executed in accordance with this Agreement (A Sample Schedule is provided at
Exhibit D). Supplier shall render an invoice in duplicate or by EDI, as
appropriate, not later than the fifteenth (15th) day of the month for
performance under each Schedule during the preceding month and for all Orders
shipped in the preceding month. The invoice shall specify in detail, as
applicable: (i) quantities of each Ordered item, (ii) applicable rates and
charges of each Ordered item, (iii) applicable shipping and handling charges,
(iv) item model numbers, (v) applicable sales or use taxes, (vi) discounts, and
(vii) total amount due. Supplier's invoice to Buyer will reflect deductions for
Product returns as follows:
<TABLE>
<CAPTION>
Reason for Return Product Credit Shipping & Handling
to Buyer Credit to Buyer
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
(i) Undeliverable, wrong address provided by
Buyer (Product returned) * * * * * *
- ------------------------------------------------------------------------------------------------
(ii) Undeliverable, sent to wrong address, return
to sender (Product returned) * * * * * *
- ------------------------------------------------------------------------------------------------
(iii) Undeliverable, customer refused shipment or
did not order Product * * * * * *
- ------------------------------------------------------------------------------------------------
(iv) Undeliverable, three attempts * * * * * *
- ------------------------------------------------------------------------------------------------
</TABLE>
Article B - Page b-15
<PAGE>
Agreement Number 99006677
<TABLE>
<CAPTION>
<S> <C> <C>
(v) Undeliverable, damaged * * * * * *
- ------------------------------------------------------------------------------------------------
(vi) Unit shipped by Seller did not match order
(wrong Product) * * * * * *
- ------------------------------------------------------------------------------------------------
(vii) Product not received & not returned * * * * * *
- ------------------------------------------------------------------------------------------------
(viii) Buyer's remorse * * *
- ------------------------------------------------------------------------------------------------
(ix) Wrong quantity - shipping error by Supplier * * * * * *
- ------------------------------------------------------------------------------------------------
(x) Wrong quantity - order error by Buyer * * * * * *
- ------------------------------------------------------------------------------------------------
(xi) Mis-delivered - wrong address provided by * * * * * *
Buyer (Product not returned)
- ------------------------------------------------------------------------------------------------
</TABLE>
b. Buyer shall pay Supplier within thirty (30) days of the date of receipt
of the invoice, provided, however, payment for shortages, non-conforming
Products or Services, and portions of any invoice in dispute, may be withheld by
Buyer until such problem has been resolved. If Buyer disputes any invoice
rendered or if Supplier disputes any amount paid, the parties shall use their
best efforts to resolve such dispute expeditiously.
c. For accrual accounting purposes, Supplier will provide to Buyer not
later than the second (2nd) workday of each month an estimated invoice amount.
This estimate shall separately indicate the amount due Buyer for credits, if
any.
c. Unless specifically approved in advance by Buyer, Supplier will be
responsible for all charges related to expedited shipments.
d. Supplier shall not be entitled to any other compensation of any kind
whatsoever unless such compensation is approved in advance in writing by Buyer.
Invoices received by Buyer more than one (1) year after the delivery of Products
or performance of Services are untimely and Buyer shall have no obligation to
pay such invoices.
e. All claims for moneys due or to become due from Buyer will be subject to
deduction by Buyer for any setoff or counterclaim for moneys due or become due
from Supplier, whether under this Agreement or otherwise. Any amount due Buyer
that is not so applied against Supplier's invoices for any reason shall be paid
to Buyer by Supplier within thirty (30) days after demand by Buyer.
Article B - Page b-16
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Agreement Number 99006677
f. Supplier agrees to submit timely and accurate invoices to Buyer.
Invoices provided under this Agreement will be managed by Supplier to a standard
that ensures no more than two (2) invoice errors occur during any calendar
month. Invoice errors include, but are not limited to: invoices that are
submitted late, invoices that are incomplete, and each instance where an invoice
contains inaccurate prices, quantities, or terms.
B-28. Liability
a. Supplier shall indemnify, defend and hold harmless Buyer (including its
agents, employees, officers, and directors) from and against any and all
liability, actual loss, damage, court cost, reasonable attorneys' fees or other
reasonable expense of any kind which arise out of any claim, demand, suit for
damages, injunction or other relief, including, but not limited to: (i) injury
to or death of any person, (ii) physical damage to any property, (iii) public
charges and penalties, or (iv) any lien, directly caused by, resulting from or
attributable to the Products or Services or the willful acts or omissions of
Supplier (including any of Supplier's agents or subcontractors but excepting the
active negligence or willful misconduct of Buyer or its employees) in furnishing
the Products or Services hereunder. This indemnity shall survive the delivery,
inspection and acceptance of the Products or Services hereunder.
b. Supplier agrees to defend Buyer, at no cost or expense to Buyer,
against any such liability, claim, demand, suit or legal proceeding. Buyer
agrees to notify Supplier within a reasonable time of any written claims or
demands against Buyer for which Supplier is responsible under this clause.
c. Supplier agrees not to implead or bring any action against Buyer or
Buyer's employees based on any claim by any person for personal injury or death
that occurs in the course or scope of employment of such person by Supplier and
that arises out of the Product or Services furnished under this Agreement.
d. Except with respect to obligations under the clauses entitled "Customer
Contact," "Information" (all "Information" clauses), "Infringement," and
"Liquidated Damages," neither party shall be liable to the other for any
special, indirect, incidental or consequential damages, including loss of
profit.
B-29. MBE/WBE/DVBE
a. For Schedules or Orders under this Agreement by Pacific Bell, Pacific
Bell Directory, Pacific Bell Wireless, Pacific Bell Information Services, SBC
Long Distance, and any other entity operating principally in California
(collectively "California Affiliates"), Minority and Women Business Enterprises
(MBEs/WBEs) are defined as businesses which satisfy the requirements of
subparagraph b. below and are certified as MBEs/WBEs by the California Public
Utilities Commission Clearinghouse ("CPUC-certified").
Article B - Page b-17
<PAGE>
Agreement Number 99006677
For Schedules or Orders under this Agreement by any entity that is not a
California Affiliate, MBEs/WBEs are defined as businesses which satisfy the
requirements of subparagraph b. below and are either CPUC-certified or are
certified as MBEs/WBEs by a certifying agency recognized by Buyer.
b. MBEs/WBEs must be at least fifty-one percent (51%) owned by a minority
individual or group or by one or more women (for publicly-held businesses, at
least fifty-one percent (51%) of the stock must be owned by one or more of those
individuals), and the MBEs/WBEs' management and daily business operations must
be controlled by one or more of those individuals, and these individuals must be
either U.S. citizens or legal aliens with permanent residence status. For the
purpose of this definition, minority group members include male or female Asian
Americans, Black Americans, Filipino Americans, Hispanic Americans, Native
Americans (i.e., American Indians, Eskimos, Aleuts and Native Hawaiians),
Polynesian Americans, and multi-ethnic (i.e., any combination of MBEs and WBEs
where no one specific group has a fifty-one percent (51%) ownership and control
of the business, but when aggregated, the ownership and control combination
meets or exceeds the fifty-one percent (51%) rule). "Control" in this context
means exercising the power to make policy decisions. "Operate" in this context
means actively involved in the day-to-day management of the business and not
merely acting as officers or directors.
c. For Schedules or Orders under this Agreement by California Affiliates,
Disabled Veteran Business Enterprises (DVBEs) are defined as business concerns
that satisfy the requirements of subparagraph d. below and are certified as
DVBEs by the California State Office of Small and Minority Business (OSMB). The
DVBE must be a resident of the State of California, and must satisfy the
requirements of subparagraph d. below.
For Schedules or Orders under this Agreement by any entity that is not a
California Affiliate, DVBEs are defined as any business concern that satisfies
the requirements of subparagraph d. below and is either a defined DVBE for
Schedules or Orders by California Affiliates, or is certified as a DVBE by a
certifying agency recognized by Buyer.
d. The DVBE must be: (i) a sole proprietorship at least fifty-one percent
(51%) owned by one or more disabled veterans; or (ii) a publicly-owned business
in which at least fifty-one percent (51%) of the stock is owned by one or more
disabled veterans; or (iii) a subsidiary which is wholly owned by a parent
corporation, but only if at least fifty-one percent (51%) of the voting stock of
the parent corporation is owned by one or more disabled veterans; or (iv) a
joint venture in which at least fifty-one percent (51%) of the joint venture's
management and control and earnings are held by one or more disabled veterans.
Article B - Page b-18
<PAGE>
Agreement Number 99006677
In each case, the management and control of the daily business operations must
be by one or more disabled veterans. A disabled veteran is a veteran of the
military, naval or air service of the United States with a service-connected
disability of ten percent (10%) or more. "Management and control" in this
context means exercising the power to make policy decisions and actively
involved in the day-to-day management of the business and not merely acting as
officers or directors.
e. Supplier agrees that falsification or misrepresentation of, or
failure to report a disqualifying change in, the MBE/WBE/DVBE status of Supplier
or any subcontractor used by Supplier, or Supplier's failure to comply in good
faith with any MBE/WBE/DVBE use goals established by Supplier, or Supplier's
failure to cooperate in any investigation conducted by Buyer, or by Buyer's
agent, to determine Supplier's compliance with this section, will constitute a
material default of this Agreement.
B-30. MBE/WBE/DVBE Participation Plans and Reports
a. Supplier commits to goals for the participation of MBE/WBE/DVBE firms
(as defined in the "MBE/WBE/DVBE" clause) as follows: TBD% annual MBE
---
participation; TBD% annual WBE participation; and TBD% annual DVBE
--- ---
participation. These goals apply to all annual expenditures by any entity
pursuant to this Agreement with Supplier.
b. Attached hereto and incorporated herein as Exhibit B is Supplier's
completed Prime Supplier MBE/WBE/DVBE Participation Plan ("Participation Plan")
outlining its MBE/WBE/DVBE goals and specific and detailed plans to achieve
those goals. Supplier will submit an updated Participation Plan annually by the
first week in January. Supplier will submit MBE/WBE/DVBE Quarterly Results
Reports ("Results Reports") by the end of the first week following the close of
each quarter, using the form(s) attached hereto and incorporated herein as
Exhibits B-1, B-2 and B-3, as applicable. Participation Plans and Results
Reports will be submitted to the Prime Supplier Results Manager at the address
listed on the forms attached hereto.
B-31. Most Favored Customer
a. Supplier represents and warrants that all prices, benefits, warranties
and other terms and conditions contained herein and in Schedules and Orders
issued pursuant hereto are and will continue to be during the term of this
Agreement for the same Products or Services, in similar quantity and under
similar terms and conditions without subsidy, at least as favorable as those
currently being and which will be offered by Supplier to any of its similarly
situated customers.
b. Supplier shall review and certify its compliance with this clause to
Buyer annually. Should such annual review indicate that Buyer has not received
the treatment to which Buyer is entitled, Supplier shall provide Buyer with
Product or Service credits sufficient to fully compensate Buyer for differences.
Article B - Page b-19
<PAGE>
Agreement Number 99006677
c. Additionally, Supplier and Buyer agree to work together to improve the
quality and price of Products and/or Services provided under this Agreement to
their mutual benefit.
B-32. Nonexclusive Agreement
This Agreement is a nonexclusive agreement. It is expressly understood and
agreed that this Agreement does not grant Supplier an exclusive privilege to
provide to Buyer any or all Products or Services of the type described in this
Agreement nor requires the purchase of any Products or Services from Supplier by
Buyer. It is, therefore, understood that Buyer may contract with other
manufactures and suppliers for the procurement or trial of comparable Products
or Services and that Buyer may itself perform the Services described herein.
B-33. Non-Intervention
In connection with the provision of Products or Services by Supplier to Buyer,
Supplier agrees that Supplier, either directly or indirectly, shall not
intentionally attempt to influence any regulatory, legislative, or judicial body
so as to prevent or delay the offering of products or services by Buyer which
use the Products or Services supplied by Supplier.
B-34. No Third Party Beneficiaries
This Agreement is for the benefit of Buyer and Supplier and not for any other
person.
B-35. Notices
Except as otherwise provided in this Agreement, or applicable Schedule or Order,
all notices or other communications hereunder are deemed given when made in
writing and delivered: (a) in person, (b) to an agent, such as an overnight or
similar delivery service, or (c) via e-mail, and addressed as follows:
For Supplier:
To: Larry Hanger, Vice President
6655 Sugarloaf Parkway
Duluth, Georgia 30097-4916
e-mail: [email protected]
For Buyer, as appropriate:
Article B - Page b-20
<PAGE>
Agreement Number 99006677
For all matters
To: * * *
SBC Operations, Inc., General Contracting
2600 Camino Ramon, Room 2E250
San Ramon, California 94583
e-mail: * * *
For matters pertaining to Product approval:
To: * * *
Southwestern Bell Consumer Marketing
530 McCullough, Room 7-K-01
San Antonio, Texas 78215
e-mail: * * *
For Orders pertaining to Southwestern Bell Telephone Company:
To: * * *
Southwestern Bell Consumer Marketing
530 McCullough, Room 7-P-05
San Antonio, Texas 78215
e-mail: * * *
For Orders pertaining to Pacific Bell and/or Nevada Bell:
To: * * *
Pacific Bell Consumer Marketing
2410 Camino Ramon, Suite 100
San Ramon, California 94583
e-mail: * * *
For Orders pertaining to Southern New England Telecommunications Corp.:
To: * * *
SNET
127 Washington Avenue
North Haven, Connecticut 06473
e-mail: * * *
and
Article B - page 21
<PAGE>
Agreement Number 99006677
* * *
SNET
269B Lambert Road
Orange, Connecticut 06477
e-mail: * * *
The name and/or address to which notices or communications may be given by
either party may be changed by written notice given by such party to the other
pursuant to this section.
B-36. Order of Precedence
a. In the event of a conflict or inconsistency between this Agreement and
any Schedule, the Schedule shall control. Except for such Schedule, the terms of
this Agreement shall not be deemed waived, amended or modified.
b. In the event of a conflict or inconsistency between this Agreement and
any Order, the Order shall control. Except for such Order, the terms of this
Agreement shall not be deemed waived, amended or modified.
c. In the event of a conflict or inconsistency between any Schedule and any
Order, the Order shall control. Except for such Order, the terms of the Schedule
shall not be deemed waived, amended or modified.
B-37. Publicity
Supplier shall not use Buyer's name or any language, pictures or symbols which
could, in Buyer's judgment, imply Buyer's identity or endorsement by Buyer or
any of its employees in any: (i) written, electronic or oral advertising or
presentation or (ii) brochure, newsletter, book, electronic database or other
written material of whatever nature, without Buyer's prior written consent
(hereafter the terms (i) and (ii) in this clause shall be collectively referred
to as "publicity matters"). Supplier will submit to Buyer for written approval,
prior to publication, all publicity matters that mention or display Buyer's name
and/or marks or contain language from which a connection to said name and/or
marks may be inferred or implied.
B-38. Records and Audits
a. Supplier agrees that it will:
(i) Maintain complete and accurate records of all amounts billable to
and payments made by Buyer hereunder in accordance with generally accepted
accounting principles and practices, uniformly and consistently applied in a
format that will permit audit;
Article B - Page b-22
<PAGE>
Agreement Number 99006677
(ii) Retain such records and reasonable billing detail for a period of
not less than three (3) years from the date of final payment for Products or
Services (six (6) years for Southern New England Telecommunications Corp.);
(iii) Provide reasonable supporting documentation to Buyer concerning
any disputed invoice amount within thirty (30) calendar days after receipt of
written notification of such dispute; and
(iv) Maintain complete and accurate records of performance relative to
all Service levels as specified in Article D ("Services"), if applicable, and
retain such records for a period of not less than three (3) years.
b. Buyer and Buyer's agent shall have reasonable access to Supplier's
premises during normal business hours and at such other times as may be agreed
upon by the parties in order to audit Supplier's performance of its obligations
under this Agreement. This will include as applicable, but not be limited to,
third party monitoring of contact with Buyer's customers, auditing of charges
invoiced to Buyer, auditing of Supplier's compliance with Worker Agreement
(Exhibit F) requirements, and assistance from Supplier's personnel and
sufficient working space to enable Buyer to perform Quality Assurance
Examinations and/or Process Surveillance and/or Inspection of Products and/or a
review of Supplier's total quality program. Should Buyer request an audit,
Supplier agrees to make available any pertinent records and files to Buyer.
B-39. Releases Void
Neither party shall require waivers or releases of any personal rights from
representatives of the other in connection with visits to its premises and no
such releases or waivers shall be pleaded by either party in any action or
proceeding.
B-40. Remedies Cumulative
Any rights of cancellation, termination, or other remedies prescribed in this
Agreement are cumulative and are not exclusive of any other remedies to which
the injured party may be entitled, including but not limited to, the remedies of
specific performance and cover; however, neither party shall retain the benefit
of inconsistent remedies.
B-41. Severability
If any provision or any part of provision of this Agreement shall be invalid or
unenforceable, such invalidity or non-enforceability shall not invalidate or
render unenforceable any other portion of this Agreement. The entire Agreement
will be construed as if it did not contain the particular invalid or
Article B - Page b-23
<PAGE>
Agreement Number 99006677
unenforceable provision(s) and the rights and obligations of the Supplier and
Buyer will be construed and enforced accordingly.
B-42. Subcontracting
a. Subcontracting by Supplier for Products and Services
(i) Supplier shall subcontract for Products and Services under this
Agreement only with subcontractors who have been approved by Buyer in writing.
(ii) Supplier will be responsible for payment to such subcontractor for
Services provided under this Agreement; except as required under Article D
("Services"), Supplier will not be responsible for the performance of such
subcontractor.
b. Supplier Providing Services as a Subcontractor
Supplier may provide Services to Buyer or Buyer's customers as a subcontractor
for other vendors operating under separate contracts with Buyer. In such cases,
Supplier agrees that the terms and conditions of this Agreement apply and
Supplier will be responsible to Buyer for their own performance.
c. Supplier shall not restrict or limit the ability of any subcontractor
retained in accordance with this Agreement to provide Products or Services for
Buyer or Buyer's customers either directly or as a subcontractor for other
vendors.
B-43. Survival
Buyer's and Supplier's obligations under this Agreement which by their nature
would continue beyond the completion of performance, cancellation, or
termination hereof, including, by way of illustration only and not limitation,
those in the clauses entitled "Compliance With Laws," "Information,"
"Infringement," "Liability," "Publicity," "Releases Void," "Severability," and
"Warranty", will survive the completion of performance, cancellation, or
termination of this Agreement.
B-44. Time
Unless otherwise noted, it is mutually agreed that all references to "local
time" refer to the time-zone(s) where Buyer and the affected customers of Buyer
reside.
B-45. Work Done By Others
If any part of the Products or Services provided under this Agreement are
dependent upon work done by others, Supplier shall inspect and promptly report
to Buyer any defect that renders such other work unsuitable for Supplier's
Article B - page b-24
<PAGE>
Agreement Number 99006677
proper performance. Supplier's silence shall constitute approval of such other
work as it is fit, proper and suitable for Supplier's performance.
Article B - page b-25
<PAGE>
Agreement Number 99006677
Article D
Services
<TABLE>
<CAPTION>
Table of Contents - Article D
<S> <C>
D-1. Acceptance or Rejection -Services..........................................................d-1
D-2. Buyer's Remorse -Services..................................................................d-1
D-3. Call Center................................................................................d-2
D-4. Customer Credit............................................................................d-3
D-5. Defective Products.........................................................................d-4
D-6. Documentation -Sales Aids..................................................................d-4
D-7. F.O.B......................................................................................d-5
D-8. Fulfillment Pricing........................................................................d-5
D-9. Liquidated Damages -Services...............................................................d-5
D-10. Orders.....................................................................................d-6
D-11. Packaging, Labeling & Shipment.............................................................d-6
D-12. Reports....................................................................................d-7
D-13. Representation.............................................................................d-7
D-14. Sales by Supplier..........................................................................d-7
D-15. Warranty -Services.........................................................................d-8
</TABLE>
Table of Contents - Page vi
<PAGE>
Agreement Number 99006677
Master Agreement
for
Products and Services
Article D
Services
Article D contains provisions that apply to all Services provided under this
Agreement, including fulfillment services and sales agency campaigns.
Fulfillment services encompass the full range of Services pertaining to
providing Products to Buyer's customers. These Services include, but are not
limited to: customer service and call center operation, Product shipment,
after-sale support, buyer's remorse, and reporting. Sales agency campaigns are
where Supplier is actively engaged in selling Products and/or Services to
Buyer's customers through various programs that may include: coupons or
redemption certificates, direct-mail ("DM") pieces, direct-mail, direct-response
("DMDR") pieces, out-bound telemarketing ("OTM"), and in-bound telemarketing
("ITM"). Sales agency campaigns may include fulfillment services.
D-1. Acceptance or Rejection - Services
a. Services performed by Supplier shall be deemed to be accepted by Buyer
when Services are performed satisfactorily with promptness and diligence in a
professional manner by qualified personnel in accordance with this Agreement and
applicable Schedule. Payments, including progress payments, if any, shall not be
construed as acceptance of Services performed up to the time of such payments.
Buyer shall notify Supplier of any Services considered to be unsatisfactory
within a reasonable period of time.
b. If, prior to acceptance by Buyer, any of the Services are found to not
be in strict conformance to this Agreement and the applicable Schedule and/or
Order, in addition to the rights delineated under "Cancellation and
Termination," Buyer shall have the right: (i) to reject the Services or (ii)
require the performance or re-performance of such Services.
D-2. Buyer's Remorse - Services
a. When notified of Buyer's customer's decision to return the Product(s)
due to buyer's remorse in accordance with the "Buyer's Remorse" clause of this
Agreement, Supplier will send to Buyer's customer within two (2) business days a
pre-paid, pre-printed shipping label along with the return authorization number
and shipping instructions at no charge to Buyer or Buyer's customer.
Article D - Page d-1
<PAGE>
b. Supplier agrees to issue notification daily to Buyer for each Product
returned due to buyer's remorse reflecting: (i) name and telephone number of
Buyer's customer, (ii) product returned, (iii) date received, and (iv) reason
for return. The notification will be forwarded to the address provided in the
"Notices" clause of this Agreement or as mutually agreed upon by the parties.
c. In accordance with the "Invoicing & Payment" clause of this Agreement,
Supplier agrees to credit Buyer the purchase price exclusive of the initial
shipping & handling charge, as delineated in the applicable Schedule, for all
Products returned under buyer's remorse.
D-3. Call Center
a. Supplier agrees to operate a call center to provide after-sale support
and telemarketing Services as applicable.
b. Unless changes are negotiated and included in a separately executed Schedule
(Exhibit D), Supplier's hours of operation for the call center will be * * * to
* * * local time * * * and * * * local time * * * excluding the following
holidays: * * *.
c. Supplier's in-bound call center will be staffed with trained
representatives who are courteous and professional and provide service to
Buyer's customers that includes, as a minimum, the following:
(i) a live contact in either English and Spanish within twenty (20)
seconds for at least eighty percent (80%) of all calls as measured on a daily
basis and within sufficient time for all calls to maintain an abandon rate of
less than five percent (5%); and
(ii) resolve Buyer's customer concerns in one call without the need to
refer the caller elsewhere. Calls received that do not pertain to Products or
Services provided by Supplier are to be referred to the appropriate party by way
of an on-line transfer where Supplier's representative remains on the line until
a live contact is reached.
d. For outbound telemarketing, the parties agree as follows:
(i) Supplier's call center will be staffed with trained
representatives who are courteous and professional; and
(ii) caller identification ("Caller ID") information will be provided
on all outbound calls. The Caller ID information displayed must contain a
telephone number at which Supplier may receive telephone calls if Supplier
Article D - Page d-2
<PAGE>
leaves a message on a telephone answering device or uses an ADAD that plays a
recorded message when a connection is completed to a telephone number,
irrespective of whether a message is left or an ADAD is used.
(iii) Buyer may request and Supplier agrees to provide an audio
recording of all customer contacts for a period of not less than one (1) year
from the date of the contact(s).
e. In accordance with the "Customer Contact" clause of this Agreement,
Supplier agrees that all call center representatives will complete and sign the
Worker Agreement (Exhibit F) prior to initiating calls to, or receiving calls
from, Buyer's customers.
f. The parties agree that Buyer will be allowed to monitor Supplier's call
center for the purpose of evaluating Supplier's performance under this
Agreement. Supplier agrees to provide Buyer with telephone numbers and access
codes necessary to enable Buyer to so monitor calls.
g. For after-sale support of Products fulfilled by Supplier:
(i) Supplier shall provide Buyer's customers a toll-free telephone
number to call for the call center. This ongoing support via telephone will be
available to Buyer's customers from Supplier at no charge;
(ii) this support will include all technical, operational, warranty
and post-warranty questions and problems; and
(iii) call center representatives will have successfully completed
product-specific training.
D-4. Customer Credit
Supplier will credit Buyer's customers for Product returns as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------|---------------------|------------------------------
| |
Reason for Return | Product Credit to | Shipping & Handling Credit
| Customer | to Customer
| |
- -------------------------------------------------------|---------------------|------------------------------
<S> | <C> | <C>
(i) Undeliverable, wrong address provided by | |
Buyer (Product returned) | * * * | * * *
- -------------------------------------------------------|---------------------|------------------------------
| |
(ii) Undeliverable, sent to wrong address, return | |
to sender (Product returned) | * * * | * * *
- -------------------------------------------------------|---------------------|------------------------------
</TABLE>
Article D - Page d-3
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------|---------------------|------------------------------
<S> <C> | <C> | <C>
(iii) Undeliverable, customer refused shipment | |
| * * * | * * *
- -------------------------------------------------------|---------------------|------------------------------
(iv) Undeliverable, customer did not order Product | * * * | * * *
- -------------------------------------------------------|---------------------|------------------------------
(v) Undeliverable, three attempts | * * * | * * *
- -------------------------------------------------------| --------------------|------------------------------
(vi) Undeliverable, damaged | * * * | * * *
- -------------------------------------------------------|---------------------|------------------------------
(vii) Wrong Product shipped | * * * | * * *
- -------------------------------------------------------|---------------------|------------------------------
(viii) Product not received & not returned | * * * | * * *
- -------------------------------------------------------|---------------------|------------------------------
(ix) Buyer's remorse | * * * | * * *
- -------------------------------------------------------|---------------------|------------------------------
(x) Wrong quantity - shipping error by Supplier | * * * | * * *
| |
- -------------------------------------------------------|---------------------|------------------------------
(xi) Wrong quantity - order error by Buyer | * * * | * * *
| |
- -------------------------------------------------------|---------------------|------------------------------
(xii) Mis-delivered - wrong address provided by | |
Buyer (Product not returned) | * * * | * * *
- -------------------------------------------------------|---------------------|------------------------------
</TABLE>
D-5. Defective Products
a. Buyer's customers may contact Supplier concerning any questions that may
arise concerning repair, and if required, return of the Product.
b. When the return of a defective Product, or Product suspected of being
defective, by Buyer's customer is authorized within the warranty period,
Supplier will send to Buyer's customer within one (1) business day a pre-paid,
pre-printed shipping label along with shipping instructions to Buyer's customer
at no charge to Buyer or Buyer's customer.
D-6. Documentation - Sales Aids
Supplier agrees to provide a reasonable quantity of sales aids for Buyer's
service representatives at no additional charge. Sales aids for new or revised
Products will be provided for Buyer's service representatives at least thirty
(30) days, or as mutually agreed in writing, prior to introduction of the new or
revised Product(s). Provision of additional sales brochures will be agreed upon
separately by the parties.
Article D - Page d-4
<PAGE>
D-7. F.O.B.
The Products Ordered hereunder will be shipped F.O.B. destination to the "ship
to" address provided by Buyer; Supplier is responsible for replacement of
Products lost or damaged in shipment. Supplier will promptly notify Buyer in the
event the Product is not delivered for whatever reason to Buyer's customer.
D-8. Fulfillment Pricing
When the parties mutually agree, fulfillment Services may be separately priced.
When the parties so agree, a Pricing Agreement (Exhibit E) will be executed. It
is agreed that such pricing will be the maximum price Supplier will charge for
fulfillment Services related to Supplier providing Products to Buyer's
customers.
D-9. Liquidated Damages - Services
Supplier recognizes the importance of meeting standards as specified in this
Agreement and agrees to the following liquidated damage clause:
a. Upon discovery of information indicating a reasonable certainty that
standards will not be met, Supplier shall notify Buyer and provide information
relating to the estimated deficiency. The parties shall work jointly toward
development of a plan to resolve the deficiency and accommodate the
circumstances. If the parties reach agreement on resolving the deficiency and
Supplier fails to so resolve the deficiency, Buyer may: (i) cancel such Schedule
or Order, or (ii) exercise its right to recover liquidated damages specified
hereunder, or (iii) make additional accommodations subject however to
cancellation if the deficiency is not resolved, whereupon Buyer may exercise its
reserved right to recover liquidated damages. If the parties fail to reach
agreement on resolving the deficiency, Buyer may exercise its right to recover
liquidated damages specified hereunder.
b. In the event Buyer exercises its right to recover liquidated damages,
Supplier shall pay to Buyer as liquidated damages and not as a penalty:
(i) for any Product that is not shipped within the standards of the
"Packaging, Labeling & Shipment" clause of this Agreement, an amount equal to
* * * for each day of delay from the original Order date;
(ii) for any month in which Supplier's call center drops below
standards, either responsiveness or abandon rate, an amount equal to * * * for
each Product ordered during that month for each percentage point the call center
responsiveness and/or abandon rate (cumulative percentage if both responsiveness
and abandon rate are below standards) drops below standards for the first
* * * percentage points, * * * or each percentage point for the second * * *
percentage points, * * * for each percentage point for the next * * * percentage
points, and etc.;
and
Article D - Page d-5
<PAGE>
(iii) an amount equal to * * * for each invoice error in excess of
standards during any month. When Products and Services are Ordered under this
Agreement, the standards relative to liquidated damages for invoice errors will
cumulatively apply to Products and Services but will not be duplicative.
c. In amplification of the "Force Majeure" clause of this Agreement, it is
agreed and understood that Seller will not be subject to liquidated damages when
the cause of the deficiency is beyond the reasonable control of Supplier and
without its fault or negligence, such as: in the case of delayed Product
shipments when the cause of the delay is due to the equipment manufacturer's
delay in making Product available for shipment; in the case of call center
standards when Products supplied by the equipment manufacturer have an
excessively high defect rate and it can be shown that the deficiency is
attributable to the correspondingly high volume of incoming calls; or in the
case of call center standards when the volume of incoming calls exceeds mutually
agreed upon written projections by greater than ten percent (10%).
d. At Buyer's option, such amount shall be paid to Buyer in cash or in the
form of a credit on a going-forward basis exercisable by Buyer as a setoff
against any sums which may be or become owing from Buyer to Supplier.
D-10. Orders
a. Buyer and Supplier agree that Orders will be sent via electronic data
interchange ("EDI") in accordance with Exhibit C (EDI) or, if EDI is not
operational, by facsimile transmission.
b. The Orders will specify: (i) a description of the Product, inclusive of
any numerical/alphabetical identification, (ii) the price, (iii) the address to
which the Product is to be shipped, and (iv) the name and telephone number of
Buyer's customer.
D-11. Packaging, Labeling & Shipment
When Products are made available for shipment by the equipment manufacturer,
Supplier agrees to provide fulfillment Services that include, as a minimum, the
following:
a. Package, mark and label the Products in a standard format as agreed to
by the parties. Furnish adequate protective packaging at no additional charge;
b. Attach a complete shipping label with each shipment;
Article D - Page d-6
<PAGE>
c. Ship Orders to Buyer's customers that are made available by Buyer for
receipt by Supplier through EDI, or received by Supplier via facsimile
transmission, not later than the next business day;
d. Ship Orders complete to Buyer's customers. Supplier will ship Orders
using a method that ensures delivery of Product within three (3) business days
following shipment of Order; and
e. Ship to the destination designated in the Order.
D-12. Reports
a. At the beginning of each month, Supplier agrees to provide a report to
Buyer, distinguishing between Buyer and each Affiliate, providing the following
information for the previous month:
(i) shipment report by product delineating on-time shipments and late
shipments with length of the delay and reason.
(ii) return rate by product and reasons for returns.
(iii) call center report by language summarizing call volume, response
time (percent answered within twenty seconds and average time to respond),
abandon rate, and reasons for calls.
b. Supplier agrees to provide additional reports as may be periodically and
reasonably requested by Buyer.
D-13. Representation
Supplier may refer to itself during the term of this Agreement as an "Authorized
Representative of Buyer" solely in connection with the Services set forth in
this Agreement. Immediately upon cancellation or termination of this Agreement
or governing Schedule, Supplier shall cease representing itself as a "Authorized
Representative of Buyer."
D-14. Sales by Supplier
When Buyer's customers contact Supplier's call center and request reasonable
quantities of additional Products or Services covered under this Agreement from
Supplier, either of their own initiative or in response to an approved offer by
Supplier, Supplier may endeavor to complete the sale. If Supplier is does not
complete the sale, Supplier is to refer Buyer's customer to the appropriate
Buyer's Service Center. If Supplier does complete the sale, the sale is covered
under this Agreement as if made by Buyer and the file containing the details of
Article D - Page d-7
<PAGE>
the sale will be sent to Buyer via a mutually acceptable means, such as reverse
EDI, and included by Supplier on the monthly invoice to Buyer. Supplier may not
sell Products or Services not covered under this Agreement to Buyer's customers
who contact Supplier's call center.
D-15. Warranty - Services
Supplier warrants to Buyer that any Services provided hereunder will be
performed in a first-class, workmanlike manner, with the care, skill and
diligence, and in accordance with the applicable standards currently recognized
in Supplier's profession or industry. If Supplier fails to meet applicable
professional standards, Supplier will, without additional compensation, correct
or revise any errors or deficiencies in the Services furnished hereunder.
Article D - Page 8
<PAGE>
Agreement Number 99006677
Signature Page
IN WITNESS HEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized representatives.
Innotrac Corporation
Signature: /s/ Scott Dorfman
Printed Name: Scott Dorfman
Title: President
Date: ______________________________________________
SBC Operations, Inc.
Signature: * * *
Printed Name: * * *
Title: * * *
Date: ______________________________________________
Signature Page
<PAGE>
Agreement Number 99006677
Exhibit A
Executive Orders and Associated Regulations
Work under this contract may be subject to the provisions of certain Executive
Orders, federal laws, state laws, and associated regulations governing
performance of this contract including, but not limited to: Executive Order
11246, Executive Order 11625, Executive Order 11701, and Executive Order 12138,
Section 503 of the Rehabilitation Act of 1973 as amended and the Vietnam Era
Veteran's Readjustment Assistance Act of 1974. To the extent that such Executive
Orders, federal laws, state laws, and associated regulations apply to the work
under this contract, and only to that extent, Contractor agrees to comply with
the provisions of all such Executive Orders, federal laws, state laws, and
associated regulations, as now in force or as may be amended in the future,
including, but not limited to the following:
1. EQUAL EMPLOYMENT OPPORTUNITY DUTIES AND
PROVISIONS OF GOVERNMENT CONTRACTORS
In accordance with 41 C.F.R. Section 60-1.4(a), the parties incorporate herein
by this reference the regulations and contract clauses required by that section,
including but not limited to, Contractor's agreement that it will not
discriminate against any employee or applicant for employment because of race,
color, religion, sex, or national origin. The Contractor will take affirmative
action to ensure that applicants are employed, and that employees are treated
during employment, without regard to their race, color, religion, sex, or
national origin.
2. AGREEMENT OF NON SEGREGATED FACILITIES
In accordance with 41 C.F.R. Section 60-1.8, Contractor agrees that it does not
and will not maintain or provide for its employees any facilities segregated on
the basis of race, color, religion, sex, or national origin at any of its
establishments, and that it does not and will not permit its employees to
perform their services at any location, under its control, where such segregated
facilities are maintained. The term "facilities" as used herein means waiting
rooms, work areas, restaurants and other eating areas, time clocks, rest rooms,
wash rooms, locker rooms and other storage or dressing areas, parking lots,
drinking fountains, recreation or entertainment areas, transportation, and
housing facilities provided for employees; provided, that separate or
single-user restroom and necessary dressing or sleeping areas shall be provided
to assure privacy between the sexes.
Exhibit A - Page 1
<PAGE>
3. AGREEMENT OF AFFIRMATIVE ACTION PROGRAM
Contractor agrees that it has developed and is maintaining an Affirmative Action
Plan as required by 41 C.F.R. Section 60-1.4(b).
4. AGREEMENT OF FILING
Contractor agrees that it will file, per current instructions, complete and
accurate reports on Standard Form 100 (EE0-1), or such other forms as may be
required under 41 C.F.R. Section 60-1.7(a).
5. AFFIRMATIVE ACTION FOR HANDICAPPED PERSONS AND
DISABLED VETERANS, VETERANS OF THE VIETNAM ERA
In accordance with 41 C.F.R. Section 60-250.20, and 41 C.F.R. Section 60-741.20,
the parties incorporate herein by this reference the regulations and contract
clauses required by those provisions to be made a part of government contracts
and subcontracts.
6. UTILIZATION OF SMALL, SMALL DISADVANTAGED AND
WOMEN-OWNED SMALL BUSINESS CONCERNS
As prescribed in 48 C.F.R., Ch. 1, 19.708(a):
a. It is the policy of the United States that small business concerns,
small business concerns owned and controlled by socially and economically
disadvantaged individuals and small business concerns owned and controlled by
women shall have the maximum practicable opportunity to participate in
performing contracts let by any Federal agency, including contracts and
sub-contracts for systems, assemblies, components, and related services for
major systems. It is further the policy of the United States that its prime
contractors establish procedures to ensure the timely payment amounts due
pursuant to the terms of the subcontracts with small business concerns, small
business concerns owned and controlled by socially and economically
disadvantaged individuals and small business concerns owned and controlled by
women.
b. The Contractor hereby agrees to carry out this policy in the awarding of
subcontracts to the fullest extent consistent with efficient contract
performance. The Contractor further agrees to cooperate in any studies or
surveys as may be conducted by the United States Small Business Administration
or the awarding agency of the United States as may be necessary to determine the
extent of the Contractor's compliance with this clause.
c. As used in this contract, the term small business concern shall mean a
small business as defined pursuant to section 3 of the Small Business Act and
relevant regulations promulgated pursuant thereto. The term small business
concern owned and controlled by socially and economically disadvantaged
Exhibit A - Page 2
<PAGE>
individuals shall mean a small business concern: (1) which is at least 51
percent unconditionally owned by one or more socially and economically
disadvantaged individuals, or, in the case of any publicly owned business, at
least 51 percent of the stock of which is unconditionally owned by one or more
socially and economically disadvantaged individuals; and (2) whose management
and daily business operations are controlled by one or more such individuals.
This term also means small business concern that is at least 51 percent
unconditionally owned by an economically disadvantaged Indian tribe or Native
Hawaiian Organization, or a publicly owned business having at least 51 percent
of its stock unconditionally owned by one of these entities which has its
management and daily business controlled by members of an economically
disadvantaged Indian tribe or Native Hawaiian Organization, and which meets the
requirements of 13 CRF part 124. The Contractor shall presume that socially and
economically disadvantaged individuals include Black Americans, Hispanic
Americans, Native Americans, Asian-Pacific Americans, Subcontinent Asian
Americans, and other minorities, or any other individual found to be
disadvantaged by the Administration pursuant to section 8(a) of the Small
business Act. The Contractor shall presume that socially and economically
disadvantaged entities also include Indian Tribes and Native Hawaiian
Organizations.
d. The term "small business concern owned and controlled by women" shall
mean a small business concern: (1) which is at least 51 percent owned by one or
more women, or, in the case of any publicly owned business, at least 51 percent
of the stock of which is owned by one or more women; and (2) whose management
and daily business operations are controlled by one or more women; and
e. Contractors acting in good faith may rely on written representations by
their sub-contractors regarding their status as a small business concern, a
small business concern owned and controlled by socially and economically
disadvantage individuals or a small business concern owned and controlled by
women.
7. SMALL, SMALL DISADVANTAGED AND WOMEN-OWNED
SMALL BUSINESS SUB-CONTRACTING PLAN
The sub-contractor will adopt a plan similar to the plan required by 48 CFR Ch.
1 at 52.219-9.
Exhibit A - Page 3
<PAGE>
Exhibit B
Prime Supplier MBE/WBE/DVBE Participation Plan
- --------------------------------------------------------------------------------
| PRIME SUPPLIER |
| MBE/WBE/DVBE PARTICIPATION PLAN |
- --------------------------------------------------------------------------------
PRIME SUPPLIER NAME:__________________________________________________________
ADDRESS:______________________________________________________________________
TELEPHONE NUMBER:_____________________________________________________________
DESCRIBE GOODS OR SERVICES BEING PROVIDED UNDER THIS AGREEMENT:
==============================================================================
- ------------------------------------------------------------------------------
DESCRIBE YOUR M/WBE-DVBE OR SUPPLIER DIVERSITY PROGRAM AND THE PERSONNEL
DEDICATED TO THAT PROGRAM:
===============================================================================
- -------------------------------------------------------------------------------
THE FOLLOWING, TOGETHER WITH ANY ATTACHMENTS IS SUBMITTED AS AN MBE/WBE/DVBE
PARTICIPATION PLAN.
1. GOALS
A. WHAT ARE YOUR MBE/WBE/DVBE PARTICIPATION GOALS?
o MINORITY BUSINESS ENTERPRISES (MBEs)
-------------%
Exhibit B - Page 1
<PAGE>
o WOMEN BUSINESS ENTERPRISES (WBEs)
-------------%
o DISABLED VETERANS BUSINESS
-------------%
ENTERPRISES (DVBEs)
B. WHAT IS THE ESTIMATED ANNUAL VALUE OF THIS CONTRACT WITH
PACIFIC BELL? ______________
SOUTHWESTERN BELL TELEPHONE COMPANY ("SWBT")? ______________
OTHER SBC AFFILIATE? ______________
Note: Indicate dollar award(s) as it applies to this
contract (i.e., Pacific Bell, SWBT and/or Affiliate).
C. WHAT ARE THE DOLLAR AMOUNTS OF YOUR PROJECTED
MBE/WBE/DVBE PURCHASES?
o MINORITY BUSINESS ENTERPRISES (MBEs)
-------------
o WOMEN BUSINESS ENTERPRISES (WBEs) _____________
o DISABLED VETERANS BUSINESS
-------------
ENTERPRISES (DVBEs)
*SEE MBE/WBE/DVBE CANCELLATION CLAUSE IN AGREEMENT FOR DEFINITIONS OF MBE,
WBE, AND DVBE
2. LIST THE PRINCIPAL GOODS AND/OR SERVICES TO BE SUBCONTRACTED TO
MBE/WBE/DVBEs OR DELIVERED THROUGH MBE/WBE/DVBE VALUE ADDED RESELLERS.
==============================================================================
- ------------------------------------------------------------------------------
Exhibit B - Page 2
<PAGE>
DETAILED PLAN FOR USE OF MBEs/WBEs/DVBEs AS
-------------------------------------------
SUBCONTRACTORS, DISTRIBUTORS, VALUE ADDED RESELLERS
---------------------------------------------------
<TABLE>
<CAPTION>
For every product and service you intend to use, provide the following information:
(attach additional sheets if necessary)
- ------------------------------------------------------------------------------------------------------------------------
Company name | Classification | Products/Services | $ Value | Date to Begin
| (MBE/WBE/DVBE) | to be provided | |
- -------------------------------------|---------------------|---------------------|---------------------|----------------
<S> <C> <S> <C> <C>
- -------------------------------------|---------------------|---------------------|---------------------|----------------
| | | |
- -------------------------------------|---------------------|---------------------|---------------------|----------------
| | | |
- -------------------------------------|---------------------|---------------------|---------------------|----------------
| | | |
- -------------------------------------|---------------------|---------------------|---------------------|----------------
| | | |
- -------------------------------------|---------------------|---------------------|---------------------|----------------
| | | |
- -------------------------------------|---------------------|---------------------|---------------------|----------------
| | | |
- -------------------------------------|---------------------|---------------------|---------------------|----------------
</TABLE>
3. SELLER AGREES THAT IT WILL MAINTAIN ALL NECESSARY DOCUMENTS AND
RECORDS TO SUPPORT ITS EFFORTS TO ACHIEVE ITS MBE/WBE/DVBE
PARTICIPATION GOAL(S). SELLER ALSO ACKNOWLEDGES THAT IT IS
RESPONSIBLE FOR IDENTIFYING, SOLICITING AND QUALIFYING
MBE/WBE/DVBE SUBCONTRACTORS, DISTRIBUTORS AND VALUE ADDED
RESELLERS.
Article B - Page 3
<PAGE>
4. THE FOLLOWING INDIVIDUAL, ACTING IN THE CAPACITY OF MBE/WBE/DVBE
COORDINATOR FOR SELLER, WILL:
o ADMINISTER THE MBE/WBE/DVBE PARTICIPATION PLAN,
o SUBMIT MBE/WBE/DVBE QUARTERLY RESULTS REPORTS,
o SUBMIT AN UPDATED MBE/WBE/DVBE PARTICIPATION PLAN
ANNUALLY BY THE FIRST WEEK IN JANUARY TO THE PRIME
SUPPLIER RESULTS MANAGER AT THE ADDRESS LISTED BELOW, AND
o COOPERATE IN ANY STUDIES OR SURVEYS AS MAY BE REQUIRED IN
ORDER TO DETERMINE THE EXTENT OF COMPLIANCE BY THE SELLER
WITH THE PARTICIPATION PLAN.
NAME: (PRINTED) _______________________________________________
TITLE:_________________________________________________________
TELEPHONE NUMBER:______________________________________________
AUTHORIZED SIGNATURE:__________________________________________
DATE:__________________________________________________________
SUBMISSION ADDRESS FOR ANNUAL UPDATES:
SUPPLIER DIVERSITY MANAGER
PRIME SUPPLIER PROGRAM MANAGER
2600 CAMINO RAMON, ROOM 1E050
SAN RAMON, CALIFORNIA 94583 FAX # (925) 867-4414
Exhibit B - Page 4
<PAGE>
Agreement Number 99006677
B-1
SOUTHWESTERN BELL TELEPHONE COMPANY
MBE/WBE/DVBE QUARTERLY RESULTS REPORT
NOTE: Subcontracting & Value Added Reseller Results should reflect ONLY
MBE/WBE/DVBE dollars directly traceable to SOUTHWESTERN BELL TELEPHONE
COMPANY purchases DURING THE REPORT QUARTER. (If reporting results for
Pacific Bell and/or Nevada Bell, Complete Exhibit B-2) (If reporting
results for Southern New England Telecommunications, Complete Exhibit
B-3).
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. REPORTING COMPANY: 2. CONTRACT/ 3. REPORT QUARTER:
WORK ORDER This report reflects the use of Minority Business Enterprise/
Name:____________________________ NUMBER: Woman Business Enterprise/Disabled Veterans Enterprise
Address:____________________________ participation for period
City, State, Zip:___________________ ________________ ____________________through
Telephone:_________________________ (If available) ___________________________
(Please indicate dates)
- ------------------------------------------------------------------------------------------------------------------------------------
PARTICIPATION GOAL | PARTICIPATION ACHIEVEMENT
- -----------------------------------------------------------------------------------------------------------------------------------
4. | 5. Actual for Quarter
| MBE WBE DVBE
ANNUAL GOAL | Subcontracting Dollars $ $ $
-----------
| ----------------------------------
Percent of Total MBE WBE DVBE | Value Added Reseller
SWBT Purchases % % % | Dollars $ $ $
---------------------------------- | ----------------------------------
| Total Purchase
| Dollars $
| ----------------------------------
|
| Percent of Total
| Purchases % % %
| ----------------------------------
|
- -----------------------------------------------------------------------------------------------------------------------------------
VALUE ADDED RESELLER* RESULTS
- -----------------------------------------------------------------------------------------------------------------------------------
*Supplier who purchases products/services from an original equipment
manufacturer or other prime supplier for resale and provides enhancements or
added value to the basic product. (Attach additional sheets if necessary)
6.
TOTAL DOLLARS:
|===============================================
Name: | ETHNIC/GENDER: | MOKA TEXAS TOTAL SWBT
| |===============================================
- -----------------------------------------------------------------------------------|-------------|-----------------|---------------
Address:___________________________________________________________|
City, State, Zip: ___________________________________________________________|
Telephone: ____________________________________________________________|
Goods or Services: ___________________________________________________________
TOTAL DOLLARS:
|===============================================
Name: | ETHNIC/GENDER: | MOKA TEXAS TOTAL SWBT
| |===============================================
- -----------------------------------------------------------------------------------|-------------|-----------------|---------------
Address:___________________________________________________________|
City, State, Zip: ___________________________________________________________|
Telephone: ____________________________________________________________|
Goods or Services: ___________________________________________________________
</TABLE>
Exhibit B-1 -- Page 1
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <S> <C> <C> <C>
7. REPORTING COMPANY Name:
-----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
SOUTHWESTERN BELL TELEPHONE COMPANY SUBCONTRACTING RESULTS
- -----------------------------------------------------------------------------------------------------------------------------------
8. MBE/WBE/DVBE SUBCONTRACTOR(S)
(ATTACH ADDITIONAL SHEETS IF NECESSARY)
---------------------------------------------------------------
TOTAL DOLLARS:
========================================
Name: | ETHNIC/GENDER: | RC(S): | MOKA TEXAS TOTAL SWBT
| | (If available) ========================================
| | | | |
---------------------------------------------------------------------|----------------|--------------|------------|-----------
Address:_____________________________________________________|________________|______________|____________|___________
City, State, Zip: _____________________________________________|________________|______________|____________|___________
Telephone:_____________________________________________________|________________|______________|____________|___________
Goods or Services:______________________________________________|________________|______________|____________|___________
TOTAL DOLLARS:
========================================
Name: | ETHNIC/GENDER: | RC(S): | MOKA TEXAS TOTAL SWBT
| | (If available) ========================================
| | | | |
---------------------------------------------------------------------|----------------|--------------|------------|-----------
Address:_____________________________________________________|________________|______________|____________|___________
City, State, Zip: _____________________________________________|________________|______________|____________|___________
Telephone:_____________________________________________________|________________|______________|____________|___________
Goods or Services:______________________________________________|________________|______________|____________|___________
TOTAL DOLLARS:
========================================
Name: | ETHNIC/GENDER: | RC(S): | MOKA TEXAS TOTAL SWBT
| | (If available) ========================================
| | | | |
---------------------------------------------------------------------|----------------|--------------|------------|-----------
Address:_____________________________________________________|________________|______________|____________|___________
City, State, Zip: _____________________________________________|________________|______________|____________|___________
Telephone:_____________________________________________________|________________|______________|____________|___________
Goods or Services:______________________________________________|________________|______________|____________|___________
===================================================================================================================================
9. CONTACT: (Print or Type)
I HEREBY
CERTIFY THAT THE ABOVE INFORMATION IS TRUE AND CORRECT.
Name: _________________________________________ SIGNATURE:__________________________________
Title: _________________________________________ DATE:__________________________________
Address:_________________________________________
City, State, Zip:_________________________________________ TELEPHONE # :
=============================
- -----------------------------------------------------------------------------------------------------------------------------------
10. THIS SUMMARY REPORT SHOULD BE MAILED TO:
SUPPLIER DIVERSITY PROGRAM
PRIME SUPPLIER PROGRAM MANAGER
2600 CAMINO RAMON, ROOM 1E050
SAN RAMON, CALIFORNIA 94583 FAX # (925) 867-4414
NOTE: QUESTIONS AND/OR REQUESTS FOR ASSISTANCE MAY BE REFERRED TO THE PRIME SUPPLIER PROGRAM MANAGER AT (925) 823-7048.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit B-1 -- Page 2
<PAGE>
PACIFIC BELL & NEVADA BELL
MBE/WBE/DVBE QUARTERLY RESULTS REPORT
NOTE: SUBCONTRACTING & VALUE ADDED RESELLER RESULTS SHOULD REFLECT ONLY
MBE/WBE/DVBE DOLLARS DIRECTLY TRACEABLE TO PACIFIC BELL OR NEVADA BELL
PURCHASES DURING THE REPORT QUARTER. IF REPORTING RESULTS FOR BOTH
PACIFIC BELL AND NEVADA BELL, COMPLETE SEPARATE EXHIBIT B-2S.
(IF REPORTING FOR SOUTHWESTERN BELL TELEPHONE COMPANY, COMPLETE EXHIBIT B-1)
(IF REPORTING FOR SOUTHERN NEW ENGLAND TELECOMMUNICATIONS, COMPLETE EXHIBIT B-3)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. REPORTING COMPANY: |2. CONTRACT/ |3. REPORT QUARTER:
| WORK ORDER | This report reflects the utilization of Minority Business Enterprise/
Name:__________________ | NUMBER: | Woman Business Enterprise/Disabled Veterans Enterprise
Address:__________________ | | participation for period
City, State, Zip:__________________ | _____________ | _____________________
through Telephone:__________________ | (If available) |
_____________________________
| | (Please indicate dates)
- -----------------------------------------------------------------------------------------------------------------------------------
PARTICIPATION GOAL PARTICIPATION ACHIEVEMENT
- -----------------------------------------------------------------------------------------------------------------------------------
4. |5. ACTUAL FOR QUARTER
| MBE WBE DVBE
ANNUAL GOAL | Subcontracting Dollars $ $ $
----------- |
| ------------------------------
Percent of Total MBE WBE DVBE | Value Added Reseller
Pacific Bell Purchases % % % | Dollars $ $ $
----------------------------------- | ------------------------------
Nevada Bell Purchases % % % | Total Purchase
----------------------------------- |
| Dollars $
| ------------------------------
Note: submit results for Pacific Bell or Nevada |
Bell. Use separate Exhibit B2s if reporting | Percent of Total
results from both Pacific Bell and Nevada Bell. | Purchases % % %
| ------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
VALUE ADDED RESELLER* RESULTS
- -----------------------------------------------------------------------------------------------------------------------------------
*SUPPLIER WHO PURCHASES PRODUCTS/SERVICES FROM AN ORIGINAL EQUIPMENT
MANUFACTURER OR OTHER PRIME SUPPLIER FOR RESALE AND PROVIDES
ENHANCEMENTS OR ADDED VALUE TO THE BASIC PRODUCT. (ATTACH ADDITIONAL
SHEETS IF NECESSARY)
6.
| ETHNIC/GENDER: | TOTAL DOLLARS:
| |
Name:__________________________________________________________________________________________________________________
Address:__________________________________________________________________________________________________________________
City, State, Zip:_________________________________________________________________________________________________________________
Telephone: ________________________________________________________________________________________________________________
Goods or Services: ________________________________________________________________________________________________________________
| ETHNIC/GENDER: | TOTAL DOLLARS:
| |
Name:__________________________________________________________________________________________________________________
Address:__________________________________________________________________________________________________________________
City, State, Zip:_________________________________________________________________________________________________________________
Telephone: ________________________________________________________________________________________________________________
Goods or Services: ________________________________________________________________________________________________________________
</TABLE>
Exhibit B-2 -- Page 1
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <S> <C> <C> <C>
7. REPORTING COMPANY Name:_______________________________________________
- -----------------------------------------------------------------------------------------------------------------------------------
PACIFIC BELL/NEVADA BELL SUBCONTRACTING RESULTS
- -----------------------------------------------------------------------------------------------------------------------------------
8. MBE/WBE/DVBE SUBCONTRACTOR(S)
(ATTACH ADDITIONAL SHEETS IF NECESSARY)
| ETHNIC/GENDER:| ARC(S): | TOTAL DOLLARS:
| | (If available) |
Name:__________________________________________________________|__________________|___________________
Address:__________________________________________________________|__________________|___________________
City, State, Zip:__________________________________________________________|__________________|___________________
Telephone:__________________________________________________________|__________________|___________________
Goods or Services: ________________________________________________________\__________________|___________________
| ETHNIC/GENDER:| ARC(S): | TOTAL DOLLARS:
| | (If available) |
Name:__________________________________________________________|__________________|___________________
Address:__________________________________________________________|__________________|___________________
City, State, Zip:__________________________________________________________|__________________|___________________
Telephone:__________________________________________________________|__________________|___________________
Goods or Services: ________________________________________________________\__________________|___________________
| ETHNIC/GENDER:| ARC(S): | TOTAL DOLLARS:
| | (If available) |
Name:__________________________________________________________|__________________|___________________
Address:__________________________________________________________|__________________|___________________
City, State, Zip:__________________________________________________________|__________________|___________________
Telephone:__________________________________________________________|__________________|___________________
Goods or Services: ________________________________________________________\__________________|___________________
9. CONTACT: (Print or Type)
I HEREBY
CERTIFY THAT THE ABOVE INFORMATION IS TRUE AND CORRECT.
Name:___________________________________ SIGNATURE:_____________________________________
Title:__________________________________ DATE: _________________________________________
Address:__________________________________
City, State, Zip:__________________________________ TELEPHONE # :
==========================
- -----------------------------------------------------------------------------------------------------------------------------------
10. THIS SUMMARY REPORT SHOULD BE MAILED TO:
SUPPLIER DIVERSITY PROGRAM
PRIME SUPPLIER PROGRAM MANAGER
2600 CAMINO RAMON, ROOM 1E050
SAN RAMON, CALIFORNIA 94583 FAX # (925) 867-4414
NOTE: QUESTIONS AND/OR REQUESTS FOR ASSISTANCE MAY BE REFERRED TO THE PRIME SUPPLIER PROGRAM MANAGER AT (925) 823-7048.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit B-2 -- Page 2
<PAGE>
Exhibit B-3
SOUTHERN NEW ENGLAND TELECOMMUNICATIONS
MBE/WBE/DVBE QUARTERLY RESULTS REPORT
NOTE: SUBCONTRACTING & VALUE ADDED RESELLER RESULTS SHOULD REFLECT ONLY
MBE/WBE/DVBE DOLLARS DIRECTLY TRACEABLE TO SOUTHERN NEW ENGLAND
TELECOMMUNICATIONS PURCHASES DURING THE REPORT QUARTER.
IF REPORTING RESULTS FOR Southwestern Bell Telephone Company, complete
Exhibit B-1)
(IF REPORTING FOR both Pacific Bell and/or Nevada Bell, complete Exhibit B-2)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. REPORTING COMPANY: |2. CONTRACT/ |3. REPORT QUARTER:
| WORK ORDER | This report reflects the utilization of Minority Business Enterprise/
Name:__________________ | NUMBER: | Woman Business Enterprise/Disabled Veterans Enterprise
Address:__________________ | | participation for period
City, State, Zip:__________________ | _____________ | _____________________
through Telephone:__________________ | (If available) |
_____________________________
| | (Please indicate dates)
- -----------------------------------------------------------------------------------------------------------------------------------
PARTICIPATION GOAL PARTICIPATION ACHIEVEMENT
- -----------------------------------------------------------------------------------------------------------------------------------
4. |5. ACTUAL FOR QUARTER
| MBE WBE DVBE
ANNUAL GOAL | Subcontracting Dollars $ $ $
----------- |
| ------------------------------
Percent of Total MBE WBE DVBE | Value Added Reseller
SNET Purchases % % % | Dollars $ $ $
----------------------------------- | ------------------------------
Nevada Bell Purchases % % % | Total Purchase
----------------------------------- |
| Dollars $
| ------------------------------
|
| Percent of Total
| Purchases % % %
| ------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
VALUE ADDED RESELLER* RESULTS
- -----------------------------------------------------------------------------------------------------------------------------------
*SUPPLIER WHO PURCHASES PRODUCTS/SERVICES FROM AN ORIGINAL EQUIPMENT
MANUFACTURER OR OTHER PRIME SUPPLIER FOR RESALE AND PROVIDES
ENHANCEMENTS OR ADDED VALUE TO THE BASIC PRODUCT. (ATTACH ADDITIONAL
SHEETS IF NECESSARY)
6.
| ETHNIC/GENDER: | TOTAL DOLLARS:
| |
Name:__________________________________________________________________________________________________________________
Address:__________________________________________________________________________________________________________________
City, State, Zip:_________________________________________________________________________________________________________________
Telephone: ________________________________________________________________________________________________________________
Goods or Services: ________________________________________________________________________________________________________________
| ETHNIC/GENDER: | TOTAL DOLLARS:
| |
Name:__________________________________________________________________________________________________________________
Address:__________________________________________________________________________________________________________________
City, State, Zip:_________________________________________________________________________________________________________________
Telephone: ________________________________________________________________________________________________________________
Goods or Services: ________________________________________________________________________________________________________________
</TABLE>
Exhibit B-3 -- Page 1
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <S> <C> <C> <C>
7. REPORTING COMPANY Name:_______________________________________________
- -----------------------------------------------------------------------------------------------------------------------------------
SOUTHERN NEW ENGLAND TELECOMMUNICATIONS SUBCONTRACTING RESULTS
- -----------------------------------------------------------------------------------------------------------------------------------
8. MBE/WBE/DVBE SUBCONTRACTOR(S)
(ATTACH ADDITIONAL SHEETS IF NECESSARY)
| ETHNIC/GENDER:| ARC(S): | TOTAL DOLLARS:
| | (If available) |
Name:__________________________________________________________|__________________|___________________
Address:__________________________________________________________|__________________|___________________
City, State, Zip:__________________________________________________________|__________________|___________________
Telephone:__________________________________________________________|__________________|___________________
Goods or Services: ________________________________________________________\__________________|___________________
| ETHNIC/GENDER:| ARC(S): | TOTAL DOLLARS:
| | (If available) |
Name:__________________________________________________________|__________________|___________________
Address:__________________________________________________________|__________________|___________________
City, State, Zip:__________________________________________________________|__________________|___________________
Telephone:__________________________________________________________|__________________|___________________
Goods or Services: ________________________________________________________\__________________|___________________
| ETHNIC/GENDER:| ARC(S): | TOTAL DOLLARS:
| | (If available) |
Name:__________________________________________________________|__________________|___________________
Address:__________________________________________________________|__________________|___________________
City, State, Zip:__________________________________________________________|__________________|___________________
Telephone:__________________________________________________________|__________________|___________________
Goods or Services: ________________________________________________________\__________________|___________________
9. CONTACT: (Print or Type)
I HEREBY
CERTIFY THAT THE ABOVE INFORMATION IS TRUE AND CORRECT.
Name:___________________________________ SIGNATURE:_____________________________________
Title:__________________________________ DATE: _________________________________________
Address:__________________________________
City, State, Zip:__________________________________ TELEPHONE # :
==========================
- -----------------------------------------------------------------------------------------------------------------------------------
10. THIS SUMMARY REPORT SHOULD BE MAILED TO:
SUPPLIER DIVERSITY PROGRAM
PRIME SUPPLIER PROGRAM MANAGER
2600 CAMINO RAMON, ROOM 1E050
SAN RAMON, CALIFORNIA 94583 FAX # (925) 867-4414
NOTE: QUESTIONS AND/OR REQUESTS FOR ASSISTANCE MAY BE REFERRED TO THE PRIME SUPPLIER PROGRAM MANAGER AT (925) 823-7048.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit B-3 -- Page 2
<PAGE>
Agreement Number 99006677
Exhibit C
Electronic Data Interchange (EDI)
1. DEFINITIONS
"Data" _____________________ Orders, acknowledgments,
invoices, payments and other data electronically
transmitted by either party to the other as
authorized hereunder, including but not limited to
the transaction sets described herein. Each party
shall transmit Data in complete format.
2. SCOPE
a. This Exhibit shall apply to Data electronically transmitted by
either party to the other.
b. The parties agree that: (i) hard copies of Data or other
non-electronically transmitted Data may be used during testing periods or in the
event of a power or equipment failure, and (ii) Data mechanically stored by
either party in the course of business shall constitute acceptable documentation
of the contents of the Data electronically transmitted by the originating party.
3. GARBLED TRANSMISSIONS
If any Data is received in an unintelligible, electronically unreadable, or
garbled form, the receiving party shall promptly notify the originating party
(if identifiable from the received Data) in a reasonable manner. In the absence
of such notice, the originating party's record of the contents of such Data
shall control.
4. METHOD OF EXCHANGE
a. Exchange of Data will be made by direct electronic or computer
systems communication between Buyer and Supplier or by indirect communications
using a Value-Added Network ("VAN") to translate, forward or store such Data.
The parties agree to execute the exchange of Data in a mutually acceptable
media.
b. Either party may choose to contract with one or more VANs to carry
and/or translate and/or transmit Data between the parties hereto, provided the
VAN selected conforms to the standards set forth in this Exhibit. Either party
may modify its election to use, not use or change a VAN used to translate,
forward or store Data covered by this Exhibit upon 30 days prior written notice
to the other party.
Exhibit C - Page 1
<PAGE>
c. Each party shall be responsible for the costs of any VAN with which
it contracts, unless prior written agreement is received by the other party..
5. PROPER RECEIPT
a. Data shall not be deemed to have been properly received, and no Data
shall give rise to any obligation hereunder, until accessible to the receiving
party at such party's receipt computer either directly or through such party's
designated VAN. Each party's receipt computer may be changed upon reasonable
written notice.
b. Upon proper receipt of any Data, the receiving party shall transmit
a functional acknowledgment to the sending party in the form and within the time
agreed upon by both parties. Such functional acknowledgment shall constitute
conclusive evidence that Data has been properly received.
c. If acceptance of Data is required, any such Data which has been
properly received shall not give rise to any obligation unless and until the
party initially transmitting such Data has properly received in return an
acceptance document.
6. SIGNATURES
Each party will incorporate into each EDI transmission it sends an electronic
identification consisting of symbol(s) or code(s) ("Signature"). Each party
agrees that any predetermined Signature of such party included in or affixed to
any EDI transmission shall be sufficient to verify such party originated,
"signed" and "executed" such transmission. No party shall disclose to any
unauthorized person the Signatures of the parties hereto.
7. STATUTE OF FRAUDS
a. The parties hereto expressly agree that all Data transmitted
pursuant to this Exhibit shall be deemed to be a "writing" or "in writing" for
purposes of the applicable Uniform Commercial Code (UCC). Any such Data
containing or having affixed to it a Signature shall be deemed for all purposes:
(i) to have been "signed" and "executed" and (ii) to constitute an "original"
when printed from electronic files or records established and maintained in the
normal course of business.
b. The parties further agree that: (i) the provisions of the UCC 2-201
(Statute of Frauds) shall not apply to these electronic transactions, (ii) these
electronic transactions shall be deemed to satisfy the legal formalities
regarding that the agreements be in writing, and (iii) computer maintained
records when produced in hard copy form shall constitute business records, and
shall be admissible as evidence to the same extent as other generally recognized
business records.
Exhibit C - Page 2
<PAGE>
8. SYSTEM OPERATION - SOFTWARE
a. Each party shall, at its own expense, provide and maintain the
equipment, software systems, services and testing necessary to effectively and
reliably transmit and receive Data.
b. The type and version of software each party will implement and
maintain on their respective receipt computer to transmit and receive Data shall
be set forth by mutual agreement. Either party may elect to update said software
with a more current version, as may be deemed necessary from time to time, upon
30 day prior written notice to the other party.
9. SYSTEM SECURITY - CONFIDENTIALITY
a. Each party, at its own expense, shall implement and use security
procedures which are reasonably sufficient to ensure that all Data is authorized
and to protect records and Data from improper or unauthorized access. Neither
party shall disclose to third parties the identity, nature or content of any
such security devices without the express written consent of the other party.
b. Information contained in any Data transmission or otherwise
exchanged between the parties shall be considered confidential.
c. Each party shall ensure that each agreement entered into with
selected VANs includes provisions to protect all records and Data from improper
or unauthorized access, and designate all transmissions through said VAN as
confidential in nature.
10. TRANSACTIONS - STANDARDS
The parties agree to electronically exchange Data to the maximum extent
practical. Parties agree to transmit said Data using the form and method
outlined in applicable EDI industry standard publications or using mutually
acceptable alternatives.
Exhibit C - Page 3
<PAGE>
Agreement Number 99006677
Exhibit D
Sample Schedule
1. Effective Date
This Schedule is effective upon signature by both parties. The Products and/or
Services being provided to Buyer by Seller under this Schedule will start on or
about: __________________, and end on or about: _____________________.
2. Description of Products and/or Services
3. Deliverables and Associated Materials and Services to be
Provided by Seller
Seller, or their approved subcontractor, will:
4. Materials and Services to be Provided by Buyer
Buyer will:
5. Schedule of Rates and Charges
For Products, Exhibit E "Pricing Agreement" as may be modified by the parties,
applies.
Exhibit D - Page 1
<PAGE>
6. Location of Services
7. Approved Subcontractors, if any
8. Account Manager
This does not supersede the Notices provision in the Agreement, but for
day-to-day operational matters contact:
Supplier Buyer
Name:
Telephone Number:
Pager Number:
- ------------------------------------------------------------------------------
9. Special Terms or Conditions
The following special terms and conditions apply to this Schedule:
Exhibit D - Page 2
<PAGE>
10. Acceptance
IN WITNESS WHEREOF, the parties have caused this Schedule to be
executed by their respective duly authorized representatives.
Supplier, Inc.
Signature: ___________________________________
Printed Name: ___________________________________
Title: ___________________________________
Date: ___________________________________
SBC Operations, Inc.
Signature: ___________________________________
Printed Name: ___________________________________
Title: ___________________________________
Date: ___________________________________
Exhibit D - Page 3
<PAGE>
Agreement Number 99006677
Exhibit E
Pricing Agreement
1. Effective Date
The effective date of this Pricing Agreement is:
upon signature by both parties
-------------------------------
2. Product Price - N/A
3. Fulfillment Price
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Description Fulfillment Price
Each
- ------------------------------------------------------------------------------------------- ----------------------
<S> <C>
Fulfillment of Caller ID adjunct units for Pacific Bell customers * * *
- ------------------------------------------------------------------------------------------- ----------------------
Fulfillment of Caller ID telephone units for Pacific Bell customers * * *
- ------------------------------------------------------------------------------------------- ----------------------
Shipping for Caller ID adjunct and telephone units for Pacific Bell customers * * *
- ------------------------------------------------------------------------------------------- ----------------------
Inventory carrying fee for Caller ID adjunct and telephone units for Pacific
Bell customers - applicable only to product inventory that is purchased by
Innotrac at the request of Pacific Bell
and Innotrac assumes product return risk * * *
- ------------------------------------------------------------------------------------------- -----------------------
Shipping & handling for Caller ID adjunct units for Southwestern Bell customers * * *
- ------------------------------------------------------------------------------------------- -----------------------
Shipping & handling for Caller ID telephone units for Southwestern Bell customers * * *
- ------------------------------------------------------------------------------------------- -----------------------
</TABLE>
Exhibit E -- Page 1
<PAGE>
4. SPECIAL TERMS OR CONDITIONS.
The following special terms and conditions apply to this Pricing Agreement:
1. Southwestern Bell is conducting a trial whereby the Buyer's Remorse period
has been increased to sixty (60) days. Buyer agrees that prospective
customers will, during the initial sales contact, only be advised regarding
their rights to return Product(s) they purchase within thirty (30) days of
receipt of the Product(s) and the second thirty (30) day buyer's remorse
period will be treated as "silent." Negotiations concerning the trial
including timeframe and pricing are on-going.
2. Pacific Bell will be conducting a trial whereby their customers will
receive a pre-paid Product return label with their Product. Negotiations
concerning the trial including timeframe and pricing are on-going.
3. Implementation of Article D, section D-5b is pending further negotiation.
Until such time as the parties agree, the requirements for sending a
pre-paid return label for warranty repair or replacement are held in
abeyance.
5. PREVIOUS PRICING AGREEMENTS
This Pricing Agreement cancels and supercedes all previously executed Pricing
Agreements between the parties.
Signature Page follows
Exhibit E - Page 2
<PAGE>
6. Acceptance
IN WITNESS WHEREOF, the parties have caused this Pricing Agreement to
be executed by their respective duly authorized representatives.
Innotrac Corporation
Signature: ______________________________________________
Printed Name: Scott Dorfman
Title: President
Date: ______________________________________________
SBC Operations, Inc.
Signature: * * *
Printed Name: * * *
Title: * * *
Date: ______________________________________________
Exhibit E -- Page 3
<PAGE>
Exhibit F
Worker Agreement
1. This Agreement is between SBC and the individual named below ("Worker") who
will provide services for the benefit of SBC under the terms and conditions of
the agreement named below between SBC and Worker's employer ("Supplier") as an
employee or independent contractor of Supplier. This Agreement covers Worker's
services to be provided for the benefit of SBC.
2. Worker acknowledges and agrees that Worker's opportunity to work for the
benefit of SBC and receive payment for the same are contingent on Worker's
acceptance and compliance with the provisions of this Agreement.
3. Worker understands that during the course of Worker's work with SBC, Worker
may have access to "Information" that belongs to SBC, its customers, or other
parties and may be subject to laws regarding secrecy of communications and that
unauthorized disclosure of such Information may be harmful or prejudicial to the
interest of SBC. Such "Information" may be in written, graphic or other tangible
form. The term "Information" includes, but is not limited to: all proposals,
research, records, reports, recommendations, manuals, findings, evaluations,
forms, reviews, information, or other material or data originated or prepared by
Supplier in the performance under the agreement named below between SBC and
Supplier. Additionally, the term "Information" includes customer information
that includes, but is not limited to: customer name, address, phone number,
information concerning a customer's calling patterns, unlisted customer numbers,
aggregate customer data with individual identifying information deleted, and
"customer proprietary network information" which includes information available
to SBC by virtue of the SBC's relationship with it's customers as a provider of
telecommunications service and may include: the quantity, technical
configuration, location, type, destination, amount of use of telecommunications
service subscribed to, and information contained on the telephone bills of SBC's
customers pertaining to telephone exchange service or telephone toll service
received by a customer of SBC. Worker acknowledges and agrees:
a. That all such Information remains the exclusive property of SBC and
Worker agrees to return all copies of such Information to SBC at SBC's request;
b. That unless such Information was previously known to Worker free of any
obligation to keep it confidential, or has been or is subsequently made public
by SBC or a third party, it shall be kept confidential by Worker, shall be used
only in performing under the agreement named below between SBC and Supplier, and
may not be used for other purposes except such terms as may be agreed upon
between SBC and Supplier in writing;
Exhibit F - Page 1
<PAGE>
c. Not to disclose, copy, publish, or in any way use, directly or
indirectly, such Information for Worker's purposes or the purposes of others,
unless such disclosure or use is required for the performance of services for
SBC under this Agreement or unless such disclosure or use is expressly
authorized in writing by SBC;
d. To keep such Information in a secure environment to prevent the
inadvertent disclosure of such Information to others; and
e. Upon the cancellation or termination of this Agreement to promptly
deliver to Supplier all Information furnished to Worker in connection with the
performance of Services under this Agreement.
4. Worker understands that during the course of Worker's engagement with SBC,
Worker may have contact with SBC's customer(s). Worker acknowledges and agrees:
a. That contact by Worker of SBC's customer(s) shall be solely for the
purpose of performing under the agreement named below between SBC and Supplier;
b. That prior to Worker initiating contact (outbound calling only) in any
form with SBC's customer(s) pursuant to this Agreement, Worker must be in
receipt of a script, creative media or recital, as applicable, approved by SBC,
that details specifically what will be communicated during the contact with
SBC's customer(s);
c. That during contact (outbound calling only) with SBC's customer(s),
Worker will not change or otherwise deviate from the approved script, creative
media or recital without the prior written approval of SBC; and
d. Not to use any "customer proprietary network information" as defined in
paragraph 3 of this Agreement to market or otherwise sell equipment to SBC's
customers. This equipment includes, but is not limited to, various telephone
sets and adjunct devices.
5. Worker agrees to not engage in any fraudulent practices, including, but
not limited to, cramming or slamming.
a. cramming occurs when charges for products or services a customer hasn't
ordered or may not have ever received appear on their bill.
b. slamming is the unauthorized and illegal changing of a consumer's or
business' telecommunications service provider without his or her knowledge or
permission. It can affect local and long-distance service provider choices.
Exhibit F -- Page 2
<PAGE>
6. This Agreement shall be effective as of the date executed below, and shall
remain in effect notwithstanding Worker's termination of employment with
Supplier or termination of Worker's engagement with SBC.
7. The interpretation of this Agreement shall be governed by the laws of the
State of Missouri.
8. In the event that a court of competent jurisdiction rules that any portion of
this Agreement is invalid or unenforceable, then the remaining portions shall
remain in full force and effect.
Worker: ___________________________________ Date: ___________
Signature
-----------------------------------
Print Name
Name of Supplier: Innotrac Corporation
--------------------------------
Number of agreement between SBC and Supplier:
99006677
- ------------------
Effective Date of such agreement: _____________________
Exhibit F -- Page 3
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001051114
<NAME> INNOTRAC CORPORATION
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 575,000
<SECURITIES> 0
<RECEIVABLES> 67,514,000
<ALLOWANCES> 2,078,000
<INVENTORY> 40,953,000
<CURRENT-ASSETS> 108,778,000
<PP&E> 15,596,000
<DEPRECIATION> 7,331,000
<TOTAL-ASSETS> 117,470,000
<CURRENT-LIABILITIES> 39,074,000
<BONDS> 0
0
0
<COMMON> 60,922,000
<OTHER-SE> 17,410,000
<TOTAL-LIABILITY-AND-EQUITY> 117,470,000
<SALES> 176,477,000
<TOTAL-REVENUES> 176,477,000
<CGS> 0
<TOTAL-COSTS> 150,923,000
<OTHER-EXPENSES> 9,827,000
<LOSS-PROVISION> 3,493,000
<INTEREST-EXPENSE> 1,115,000
<INCOME-PRETAX> 14,632,000
<INCOME-TAX> 5,778,000
<INCOME-CONTINUING> 8,854,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,854,000
<EPS-BASIC> 0.94
<EPS-DILUTED> 0.92
</TABLE>
