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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
X Annual report pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934 (Fee Required) For the fiscal year ended November
3, 1996 or
Transition report pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934 (No Fee Required)
For the transition period from ___________to ___________
Commission file number 0-15995
MICROAGE, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 86-0321346
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
2400 South MicroAge Way, Tempe, AZ 85282-1896
(Address of Principal Executive Offices) (Zip Code)
(602) 804-2000
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value Per Share
(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant was $328,102.550 at January 15, 1997, based on the closing market
price of the Common Stock on such date, as reported by NASDAQ.
The number of shares of the registrant's Common Stock outstanding at
January 15, 1997 was 14,772,030.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 1997 Annual Meeting of Stockholders
to be held on April 2, 1997 are incorporated by reference into Part III hereof.
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<PAGE>
PART I
ITEM 1. BUSINESS
BUSINESS OVERVIEW
MicroAge, Inc. (the "Company"), was incorporated in the State of Arizona in 1976
and reincorporated in the State of Delaware in 1987. The Company is a global
systems integrator and a full-line distributor of information technology
products and services. Information technology solutions offered by the Company
include servers, desktops, mobile computing, mass storage, connectivity,
imaging, peripherals, software, and component products from leading
manufacturers, including COMPAQ Computer Corporation ("COMPAQ"), Hewlett-Packard
Company ("Hewlett-Packard"), International Business Machines Corporation
("IBM"), Toshiba America Information Systems, Inc., Apple Computer, Inc.,
Digital Equipment Corporation ("Digital"), NEC Technologies, Inc., Microsoft
Corporation, and Novell, Inc..
Unless the context otherwise requires, as used herein, the term the "Company"
refers to MicroAge, Inc., its predecessors, and subsidiaries. The Company's
headquarters is located at 2400 South MicroAge Way, Tempe, Arizona 85282-1896,
and its telephone number is (602) 804-2000.
This document may contain "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Such forward-looking statements involve risks and
uncertainties which could cause actual results or outcomes to differ materially
from those expressed in such forward-looking statements. See "Products and
Vendors" and "Competition" in this Item and "Management's Discussion and
Analysis of Financial Condition and Results of Operation -- Results of
Operations" and "Potential Fluctuations in Operating Results" in Part II, Item 7
of this report for a discussion of important factors that could affect the
validity of any such forward-looking statements.
BUSINESS STRATEGY
The Company's dual strategic focus is to pursue profit expansion and revenue
growth. The Company's profit expansion strategy focuses on expense control,
including the improvement of the Company's internal processes and procedures,
effective asset management, and the addition and expansion of higher-margin
products and services. Revenue growth is driven primarily by sales to new
resellers, the Company's focus on large account sales, increased demand for the
Company's major vendors' products, and the addition of new product lines.
BUSINESS GROUPS
The Company implements its business strategy through four principal business
groups: MicroAge Distribution Group, MicroAge Integration Group, MicroAge
Logistics Group, and MicroAge Services Group. These business groups provide the
framework for managing the Company's expanding technology services portfolio.
Under the framework of these business groups, the Company will continue to
expand and foster the customer-focused business unit structure, which delivers
market-driven products and services to specific customer segments. In addition,
the Company provides various support services to the four business groups,
including financial services, through the MicroAge Headquarters Support Group.
<PAGE>
MicroAge Distribution Group
General. The MicroAge Distribution Group consists of the Company's MicroAge
Computer Centers and MicroAge Technologies business units. The Distribution
Group provides more than 20,000 technology hardware and software products and
value-added services (including product financing, technical support, and
distribution) to reseller customers worldwide. The customer group consists of
franchised resellers and non-franchised resellers, including value-added
resellers ("VARs") (the "Network"). The Company provides distribution and
support services to resellers so that the Company and the resellers may realize
operating efficiencies and benefit from economies of scale in product purchasing
and distribution, financing, and working capital management. See "MicroAge
Logistics Group" below for a discussion of certain of the Company's services to
resellers and end-user customers, including distribution and integration
services. See "MicroAge Services Group" and "MicroAge Headquarters Support
Group" for a discussion of other services available to resellers, including
integration and financial services.
Resellers generally operate independently, although franchisees operate under
the Company's proprietary marks. The Company generally does not require minimum
purchase levels from its reseller customers. Due in part to "open sourcing" (see
"Products and Vendors - Open Sourcing" below) and the expansion of the Company's
product offerings to include products that have previously been offered
primarily by wholesale distributors (see "Products and Vendors - Product
Strategy" below), sales tos VARs has been one of the Company's fastest growing
sales segments. The loss of any single reseller would not have a material
adverse impact on the Company.
Reseller Purchasing Terms. The Company offers resellers several financing
options, including the option of purchasing products on open credit terms of up
to 30 days, subject to credit review and approval. If the Company is successful
in achieving continued revenue growth, this reseller financing program will
place increased demands on the Company's working capital requirements to fund
the associated increase in accounts receivable. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" in Part II, Item 7 of this report. See also "MicroAge
Headquarters Support Group" for a discussion of the broad range of financial
services that the Company offers to resellers.
Network Expansion. The Company will continue to pursue Network expansion through
the recruitment of established computer resellers that can use and benefit from
the products and services offered by the Company. In addition, in order to
establish or solidify its presence in strategic markets or in response to
competitive pressures, the Company has made, and in the future may make,
acquisitions of or investments in additional reseller locations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" in Part II, Item 7 of this
report.
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MicroAge Integration Group
General. The MicroAge Integration Group consists of the Company's MicroAge
Infosystems Services ("MIS"), MicroAge Solutions, Inc.("MAS"), and Selective
Outsourcing Services business units. The Integration Group provides distributed
computing solutions to large corporations, government agencies, and educational
institutions worldwide through the global MIS network of qualified resellers
(the "MIS Network"), which includes Company-owned and affiliated branches. As of
November 3, 1996, the Company owned and operated thirteen resellers through its
MAS business unit.
Large end-user customers are generally solicited by the Company's large account
sales and service force in collaboration with MIS Network resellers. While the
MicroAge Network of resellers encompasses thousands of affiliated resellers
worldwide, MIS Network resellers must meet rigorous MIS certifications. The MIS
Network offers the advantage of the local presence of the MIS Network reseller
combined with the Company's financial and operational stability to provide
consistent pricing and services to large end-user customers. See "MicroAge
Services Group" and "MicroAge Headquarters Support Group" for a discussion of
various services available to MIS Network resellers and large end-user
customers, including integration and financial services. See also "MicroAge
Logistics Group -- Distribution Services" below for a discussion of the
Company's distribution services to resellers and end-user customers.
Selective Outsourcing Services. Selective Outsourcing Services serves as a large
end-user customer's single point-of-contact for the planning, implementation,
and support aspects of a project.
Support Services. The MIS Network provides expertise and advanced technical
support capabilities that can be accessed at the local level. Nationwide, the
MIS Network currently deploys hundreds of technicians, systems engineers,
certified network engineers, and supplier-specific certified engineers for
various applications. MIS also coordinates strategic service alliances with
industry leaders that include DecisionOne Corporation, Digital, Unisys
Corporation, and Comdisco, Inc., to support large-account business. In addition,
MIS offers expertise in Microsoft Windows NT, Lotus Notes, Cisco, Bay Networks,
and Internet- related services.
Global Services. "MIS Global" coordinates global fulfillment for international
clients through local in- country fulfillment, regional distribution through
"MIS Europe," and centralized distribution through exports from the United
States. With a global reach that extends to 29 countries, MIS Global also offers
the following services and capabilities: project planning and analysis; project
management; supplier relations management in export authorization, pricing,
warranty, and maintenance; international configuration and transportation
services; and international technical support services.
MicroAge Logistics Group
General. The MicroAge Logistics Group consists of several of the Company's
business units, including MicroAge Distribution Services, the MicroAge Quality
Integration Center, MicroAge Service Solutions, MicroAge Sourcing Services, and
MicroAge Global Support Services. The Logistics Group provides distribution and
integration services to resellers, large organizations, and technology
suppliers.
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Distribution Services. Product orders are fulfilled and shipped from
distribution centers located in Tempe, Arizona, Cincinnati, Ohio, and Sparks,
Nevada for delivery in one to three business days to a reseller or end-user
anywhere in the continental United States. In conjunction with product ordering
and shipment, the Company offers various services to end-user customers and
resellers, including expedited delivery, vendor direct shipment, deferred
shipment, and the following special services:
Back-order Management. Network resellers may elect to receive notification
of the receipt by the Company of products that were not available for
shipment within three days of order placement, rather than having the
product shipped to them automatically, thereby avoiding costly product
returns.
Multi-site Direct Shipment. Product shipments, including configured system
orders, may be specified for delivery directly to multiple end-user
customer locations from the Company's distribution centers. This allows
resellers to reduce freight expense, product handling costs, and delivery
times to end-user customers.
Complete Order Shipment. Resellers and end-user customers may elect to
defer shipment of orders until all products and services specified in the
order are fulfilled, thereby eliminating the costs associated with multiple
shipments and the storage of inventory.
Quality Integration Center. The MicroAge Quality Integration Center is an ISO
9001-certified facility that offers custom integration services, including
systems set-up; local area network integration and testing; board-level
enhancement; disk or tape drive installation; device testing; and software
loading, including complex operating systems. Each integrated system is tested
and inspected before delivery to ensure that manufacturer and customer
specifications are met. The Quality Integration Center can incorporate unique or
highly complex system testing requirements into the integration process. The
Quality Integration Center also direct-ships configured systems to end-user
customers, allowing resellers to service these customers more profitably by
reducing inventory levels, carrying costs, and freight expense, and by freeing
up technical staff.
MicroAge Service Solutions. Through MicroAge Service Solutions, the Company's
customers can select a help desk solution that provides end-users with a single
point of contact for questions or problems relating to the use of shrink-wrap
software, network operating systems, communications software, and proprietary
client application software. For large scale technical and non-technical
teleservices, MicroAge Service Solutions offers customers state-of-the-art call
center technology to conduct inbound support and outbound services, including
new product launches, surveys, and direct mail follow up.
MicroAge Sourcing Services. Through alliances with industry-leading suppliers,
the Company provides clients with one-stop sourcing for information technology
hardware and software. MicroAge Sourcing Services has relationships with more
than 500 on-demand suppliers to quickly procure products outside of the
Company's major manufacturing alliances. The Company also offers consigned
storage and redistribution of customer-owned proprietary products.
MicroAge Global Support Services. "GSS" coordinates an international network of
service providers who provide total systems support for customers worldwide.
Through this network, GSS offers centralized hardware call screening,
diagnostics, and service dispatching for personal computers, workstations,
laptops,
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terminals, options, and peripherals. The available services include the
following: on-site or mail-in depot repair, manufacturer depot warranty to
on-site warranty upgrades, out-of -warranty on-site maintenance, and time and
materials fulfillment service.
MicroAge Services Group
General. The MicroAge Services Group consists of several of the Company's
business units, including ECadvantage, Inc., MicroSource, Inc., MicroAge Data
Services, MicroAge Marketing Services, MicroAge Strategic Alliances, and
MicroAge Category Management. The MicroAge Services Group surveys customer needs
and establishes the go-to-market strategies that provide information technology
solutions ranging from mobile computing and computer telephony integration to
multimedia and software licensing.
ECadvantage. Introduced in September 1996, ECadvantage is a series of integrated
tools that allow MicroAge's resellers and large account customers to
electronically configure systems, retrieve technical specifications, generate
quotes, and place orders. ECadvantage provides access to MicroAge's extensive
product catalog, including product and technical specifications, as well as
capabilities for order management and checking on order status at any time.
MicroSource. MicroSource incorporates the MicroAge Internet Department and
MicroAge Multimedia Department. The Internet Department is a focal point for
Internet-related projects and web-hosting services. The Multimedia Department
develops custom multimedia applications for businesses.
MicroAge Data Services. MDS is designed to capture, package, and deliver product
and market information to technology manufacturers, resellers, consultants, and
end-users. MDS also manages the Company's information systems infrastructure and
provides help desk services to large organizations through MicroAge Information
Services. In addition, MDS provides resellers and certain end-user customers
with various technical services, including telephone hotline support, technical
publications, on-line technical services, training programs, product evaluation,
and on-site consultation.
MicroAge Marketing Services. Marketing Services develops, sells, and implements
high-quality marketing programs that create demand and increase sales for the
Company and its suppliers, enhance the MicroAge brand, and generate profit for
the Company.
MicroAge Strategic Alliances. This business unit develops strategic alliances
with select suppliers with the goal of identifying and executing mutually
beneficial joint efforts.
MicroAge Category Management. In an effort to maximize revenue and
profitability, the Company has implemented product/service category management
principles and practices, managing categories as strategic businesses, and
producing enhanced business results by focusing on integrating sales, marketing,
and purchasing to deliver client value.
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MicroAge Headquarters Support Group
Headquarters Support provides numerous services, including financial (described
below), administrative, human resources, and facilities services. The Company
has developed numerous financial services that are designed to improve the
ability of qualifying resellers to purchase products from the Company in a
cost-effective manner. The Company also sponsors payment programs with
commercial credit companies to facilitate reseller purchases of products from
vendors that do not offer their own payment programs; under these programs, the
Company receives payment for product sales within three to five business days
and pays the commercial credit company a fee based on a percentage of the
products sold.
The Company also offers a program to its resellers whereby the Company grants
credit and assumes collection and administration responsibilities for large
end-user customers. The continuing use of this program will provide increased
revenue and profit opportunities for the Company but will continue to increase
working capital requirements as accounts receivable for large end-user customers
increase. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" in Part II, Item 7 of
this report.
PRODUCTS AND VENDORS
Product Strategy. The Company sells a broad selection of products with a
predominant focus on the products of major microcomputer and peripheral
manufacturers. Three vendors of the Company each represented more than 10% of
total product sales for the year ended November 3, 1996. They were COMPAQ,
Hewlett-Packard, and IBM. The following table sets forth the percentage of sales
of these vendors' products for the last three fiscal years:
1994 1995 1996
----------------------------------------
COMPAQ 22% 21% 22%
Hewlett-Packard 19% 20% 20%
IBM 19% 15% 14%
Sales of these three manufacturers' products represented approximately 56% of
the Company's revenue from product sales during both fiscal 1996 and fiscal
1995. The Company's agreements with these vendors generally are renewed
periodically and permit termination by the vendor without cause, generally upon
30 to 90 days' notice, depending on the vendor. The Company believes that these
provisions are standard in the computer reseller industry. In addition, the
Company's business is dependent upon price and related terms and product
availability provided by its key vendors. Although the Company considers its
relationships with COMPAQ, Hewlett-Packard, and IBM to be good, there can be no
assurance that these relationships will continue as presently in effect or that
changes by one or more of these key vendors in their volume discount schedules
or other marketing programs would not adversely affect the Company. Termination
or nonrenewal of the Company's agreements with COMPAQ, Hewlett-Packard, or IBM
would have a material adverse effect on the Company's business.
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The Company continually evaluates its product assortment based on technological
advances, the market for information technology products, and the Network's
requirements related to technological capability, product availability, and
marketability. Over the last several years, the Company has expanded its product
offerings in response to market conditions and has established relationships
with new vendors to distribute, service, and support both high-end,
higher-priced workstation products, as well as complementary computer peripheral
products and software. These products generally carry higher profit margins than
the Company's traditional brand name products and have historically been
distributed primarily by wholesale distributors or sold directly to end-users by
manufacturers. Sales of these products generally require the extension of credit
by the Company, resulting in increased working capital requirements.
Product Supply
The computer reseller industry continues to experience product supply shortages
and customer order backlogs due to the inability of certain manufacturers to
supply certain products. In addition, certain vendors have initiated new
channels of distribution that increase competition for the available product
supply. The backlog of orders for products distributed by the Company was $401.6
million on November 3, 1996, compared to $149.6 million at October 29, 1995.
Such orders are not necessarily firm since customers may place orders with
several computer resellers and will accept products from the first computer
reseller to provide delivery. There can be no assurance that vendors will be
able to maintain an adequate supply of products to fulfill all of the Company's
customer orders on a timely basis. Although the Company has not historically
encountered such conditions, the failure to obtain adequate product supplies, if
competitors were able to obtain them, could have a material adverse effect on
the Company's results of operations.
Open Sourcing
In the past, certain of the Company's vendors required resellers to purchase
their products and services exclusively from one source. Vendors have generally
removed this requirement, resulting in "open sourcing" of their products. To
date, open sourcing has significantly contributed to the rapid growth of the
Company's sales to VARs. However, competitive pricing pressures throughout the
industry have intensified; these competitive pressures have been particularly
evident in the Company's distribution business. During 1996, 61% of total sales
were attributable to the Company's distribution business and 39% of total sales
were attributable to its systems integration business. While the Company
believes that it can effectively compete for sales of those products available
under open sourcing, there can be no assurance that open sourcing will not
adversely affect the Company's business.
Vendor Relationships
Because of its quantity purchasing capabilities, the Company generally obtains
volume discounts from its vendors, enabling it to sell products to resellers on
more favorable terms than the typical reseller could obtain on its own from such
vendors. In general, the Company's agreements have price protection provisions
to protect the Company in the event of price reductions by its vendors on
eligible products in the Company's inventory and to permit the return of
slow-moving and other products for credit (generally at cost minus a restocking
fee). Subject to product availability, the Company carries inventory at levels
that it believes will enable it to meet the anticipated needs of its resellers
and end-user customers and, to a lesser extent, to take advantage of certain
vendor discounts and promotions.
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Several major vendors sponsor payment programs with commercial credit companies
to facilitate product sales to and through the Network. Such programs generally
provide Network resellers with payment terms ranging from 30 to 60 days,
depending on the vendor. Under these programs, the Company generally receives
payment for product sales within three to five business days, thus significantly
reducing the Company's working capital requirements and credit exposure. See
"MicroAge Headquarters Support Group" for a discussion of payment programs that
the Company sponsors with commercial credit companies to facilitate reseller
purchases of products from vendors that do not offer their own payment programs.
COMPETITION
The computer reseller industry is characterized by intense competition, based
primarily on product availability, price, speed of delivery, credit
availability, ability to tailor specific solutions to customer needs, quality
and breadth of product lines, service and post-sale support, and quality of
customer training. In addition, the Company faces competition in the recruitment
and retention of resellers for the Network. The Company and Network locations
compete for sales with numerous resellers, including (i) master resellers; (ii)
direct resellers; (iii) wholesalers (resellers that do not sell to end-users);
(iv) vendors that sell directly to large purchasers; and (v) parties that
implement other sales methods, such as direct mail, computer "superstores," and
mass merchandisers. See "Products and Vendors -- Open Sourcing" for a discussion
of the competitive pressures associated with open sourcing.
EMPLOYEES
As of November 3, 1996, the Company employed approximately 2,892 persons, 569 of
whom were employed at the thirteen Company-owned reseller locations. No
employees are represented by labor unions. The Company considers its employee
relations to be good.
GOVERNMENT REGULATION
The Company is subject to a substantial number of state laws regulating
franchise operations. In general, these laws impose registration and disclosure
requirements on franchisors in the offering and sale of franchises. Also, in
certain cases, statutes and court-created doctrines apply substantive standards
to the relationship between franchisor and franchisee, including restrictions on
the Company's ability to terminate or refuse to renew a franchise agreement. The
Company is also subject to Federal Trade Commission regulations governing
disclosure requirements in the sale of franchises. The Company believes it is in
substantial compliance with all such regulations. See Note 2 of the Company's
Consolidated Financial Statements in Part II, Item 8 for additional information
regarding the Company's franchising activities.
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TRADEMARKS AND SERVICE MARKS
The Company holds various trademarks and service marks, including, among others,
MicroAge,(R) The Solution Store,(R) The Solution Center,(R) Solutions,(R)
MicroSource,(R) MicroAge 2000,(R) The Franchise Program for the 90's and
Beyond,(R) and ZDATA.(R) All trademarks and service marks are registered in the
United States, and certain trademarks and service marks are registered in
various foreign countries. The marks are not otherwise registered with any
states; however, the Company also claims common law rights to the marks based on
adoption and use. Management believes that the value of the Company's marks is
increasing with the development of its business, but that the business of the
Company as a whole is not materially dependent on such marks.
SEASONALITY
Although the Company's financial performance has not exhibited significant
seasonality in the past, the Company and the computer industry in general tend
to follow a sales pattern with peaks occurring near the end of the calendar
year, due primarily to special vendor promotions and year-end business
purchases.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding the executive
officers of the Company as of January 15, 1997:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Jeffrey D. McKeever 54 Chairman of the Board and Chief Executive Officer
Alan P. Hald 50 Vice Chairman of the Board and Secretary; and
President, MicroAge Enterprises, Inc.
Robert G. O'Malley 51 President
James R. Daniel 49 Senior Vice President, Chief Financial Officer and
Treasurer; and President, Headquarters Support Group
James G. Manton 49 Senior Vice President - Operations
Christopher J. Koziol 36 Senior Vice President - Sales and President,
Distribution Group
John S. Lewis 43 President, Integration Group; and President,
MicroAge Infosystems Services, Inc.
John H. Andrews 40 President, Logistics Group; and President, MicroAge
Logistics Services, Inc.
Jeffrey M. Swanson 42 President, MicroAge Solutions, Inc.
Raymond L. Storck 36 Vice President - Controller and Assistant Treasurer
James H. Domaz 41 Corporate Counsel and Assistant Secretary
</TABLE>
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JEFFREY D. MCKEEVER has served as Chief Executive Officer since February 1987
and as Chairman of the Board since October 1991. Mr. McKeever co-founded the
Company in August 1976 and has served as a director of the Company since October
1976. He also served as President from June 1995 to January 1996, from January
1993 to February 1993, and from February 1987 to October 1991, as Chairman of
the Board and Secretary from October 1976 to February 1987, and as Treasurer
from October 1976 to February 1983 and from February 1987 to December 1988.
ALAN P. HALD has served as Vice-Chairman of the Board since October 1991 and as
Secretary since February 1987. He co-founded the Company in August 1976 and has
served as a director of the Company since October 1976. He also served as
President from February 1993 to August 1993 and from October 1976 to February
1987, Chairman of the Board from February 1987 to October 1991 and Treasurer
from February 1983 to February 1987.
ROBERT G. O'MALLEY has served as President of the Company since November 1996
and as President, MicroAge Data Services, MCCI, since May 1995. He also served
as Vice President - Services Marketing of the Company from January 1996 to
November 1996. Prior to joining the Company, he held various positions with IBM
Corporation since January 1976, including General Manager, PC Desktop Systems
from September 1994 to February 1995; Vice President of Marketing & Brand
Management - Americas from February 1994 to September 1994; Managing Director,
Asia Pacific PC Operations from January 1992 to January 1994; Vice President,
National Distribution Division, from August 1990 to December 1991; and Director,
US Finance and Planning, from February 1988 to July 1990.
JAMES R. DANIEL has served as Senior Vice President and Chief Financial Officer
of the Company since January 1993, and as Treasurer of the Company from January
1993 until December 1994, at which time he assumed the additional position of
President, Headquarters Support Group. He reassumed the title of Treasurer in
September 1995. Prior to joining MicroAge, he served as Chief Financial Officer
and Treasurer of Dell Computer Corporation from 1991 to 1993. Prior to Dell, he
served as Chief Financial Officer and Treasurer for SCI Systems, Inc., an
electronics contract manufacturer, from 1984 to 1991. Mr. Daniel is a certified
public accountant.
JAMES G. MANTON has served as Senior Vice President - Operations of the Company
since November 1996. He also served as Group Vice President - Technical
Services, MicroAge Logistics Services, Inc. from September 1993 to November 1996
and as Vice President - Technical Services, MicroAge Logistics Services, MCCI
from January 1993 to September 1993. Mr. Manton served as Executive Vice
President from January 1987 to February 1989, at which time he left the Company
to start his own companies. He served as President of Unizone, Inc., a systems
integrator, from March 1989 to July 1993 and as Chairman of QualiTime
Strategies, Inc., a consulting firm engaged in cycle time reduction, from July
1991 to December 1992.
CHRISTOPHER J. KOZIOL has served as President, Distribution Group since November
1996, and as Senior Vice President - Sales of the Company since May 1996. He
served as President, MicroAge Infosystems Services, Inc. from October 1995 to
January 1997, as President, MicroAge Infosystems Services, MCCI, from July 1993
to October 1995, and as Vice President, Sales, MCCI, from January 1992 to July
1993. He joined the Company in September 1985 and served as Director-Regional
Support from March 1988 to December 1991.
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JOHN S. LEWIS has served as President, Integration Group of the Company and as
President, MicroAge Infosystems Services, Inc. since January 1997. Prior to
joining the Company, he served as Executive Vice President, Division Manager of
Wells Fargo Bank's Southwest Region branch network from April 1996, when Wells
Fargo acquired First Interstate Bancorp, to November 1996. He also served as
Chairman and Chief Executive Officer of First Interstate's Southwest Region and
as Chairman of the Board and Chief Executive Officer of First Interstate Bank of
Arizona from January 1995 to April 1996. Mr. Lewis joined First Interstate Bank
of Arizona in August 1990 as Executive Vice President and served in a variety of
positions, including Chief Operating Officer for the Southwest Region from April
1994 to December 1995.
JOHN H. ANDREWS has served as President, Logistics Group of the Company since
November 1996 and as President, MicroAge Logistics Services, MCCI, since July
1993. He also served as Vice President - Logistics of the Company from December
1995 to November 1996; Vice President - Operations from July 1993 to December
1995; Group Vice President, Operations from January 1993 to July 1993; Vice
President and Chief Financial Officer from June 1990 to January 1993; and as
Treasurer from June 1991 to January 1993. Mr. Andrews joined the Company in 1984
and served as Principal Accounting Officer from December 1988 to June 1990. Mr
Andrews is a certified public accountant.
JEFFREY M. SWANSON has served as President, MicroAge Solutions, Inc. since
December 1994 and served as General Manager of MCSB, Inc., a Company-owned
location in Plymouth, Minnesota from October 1991 to November 1994. Prior to
joining MicroAge, he served as Executive Vice President of AmeriData
Incorporated from 1981 to 1991.
RAYMOND L. STORCK has served as Vice President - Controller of the Company since
July 1993, and as Controller and Assistant Treasurer since October 1991. He
joined the Company in 1986 and served in positions in accounting, reporting and
analysis, including Director of Planning and Analysis from June 1990 to July
1991.
JAMES H. DOMAZ has served as Corporate Counsel and Assistant Secretary of the
Company since November 1996, as Legal Counsel from April 1996 to November 1996,
and Associate Counsel from May 1993 to April 1996. Prior to joining the Company
he served as General Counsel for C&L Distributing, Inc.
from May 1991 to May 1993.
ITEM 2. PROPERTIES
The Company's executive offices are located in Tempe, Arizona and occupy
approximately 232,428 square feet of commercial office space. The Company
operates automated distribution and logistics centers in Tempe, Arizona and
Cincinnati, Ohio, which occupy approximately 300,000 square feet each, and in
Sparks, Nevada, which occupies approximately 100,000 square feet. The Company
also maintains a 125,000 square foot Technical Services Center in Tempe,
Arizona, adjacent to a 135,000 square foot Quality Integration Center.
As of November 3, 1996, the Company operated thirteen Company-owned reseller
locations (one each in Tempe, Arizona; Plymouth, Minnesota; Chicago, Illinois;
Westminster, Colorado; Burlington, Massachusetts; Wilton, Connecticut; Novi,
Michigan; St. Louis, Missouri; New York, New York; Oklahoma City,
11
<PAGE>
Oklahoma; Tulsa, Oklahoma; Houston, Texas; and Irving, Texas), which occupy an
aggregate of approximately 146,575 square feet.
All facilities are leased. The Company believes that its properties and
equipment are well-maintained, in good operating condition, and adequate for its
present foreseeable needs.
ITEM 3. LEGAL PROCEEDINGS
On July 14 through July 19, 1994, seven class action complaints were filed in
the United States District Court for the District of Arizona against the
Company, certain of its officers and directors, and, in three of the lawsuits,
one of the underwriters of the Company's June 16, 1994 public offering of common
stock. On December 5, 1994, the Court consolidated the seven actions into a
single action. On February 16, 1995, plaintiffs filed and served an amended,
consolidated complaint against the Company, certain officers and directors of
the Company, and three of the underwriters of the Company's June 16, 1994 public
offering of common stock (the "Complaint"). The Complaint purports to be brought
on behalf of a class of purchasers of the Company's common stock during the
period April 13, 1994 through July 14, 1994. The Complaint alleges, among other
things, that the Company violated federal securities laws by making misleading
public statements and omitting material facts regarding the Company's operations
and financial results, which the plaintiffs contend to have artificially
inflated the price of the Company's common stock during the alleged class
period. The Complaint seeks unspecified compensatory damages as well as fees and
costs. On April 28, 1995, the Company filed a motion to dismiss the Complaint in
its entirety. On March 25, 1996, the court dismissed the majority of the
allegations contained in the Complaint. An agreement in principle has since been
reached to settle the litigation, subject to reducing the settlement terms to
writing and obtaining court approval thereof. The Company's contribution to the
proposed settlement, after the contributions of the Company's director's and
officer's insurers, will not be material to the Company's financial position or
results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders during the
fourth quarter of fiscal 1996.
12
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is traded in the over-the-counter market under the
symbol MICA and has been quoted on the Nasdaq National Market since July 1,
1987. The following table sets forth the quarterly high and low sale prices for
the common stock as reported by the Nasdaq National Market for the two most
recent fiscal years:
RANGE OF SALE PRICES
HIGH LOW
---- ---
FISCAL 1995
First Quarter . . . . . . . . . . . . . $12 1/2 $10 3/4
Second Quarter . . . . . . . . . . . . . $11 3/4 $ 8 5/8
Third Quarter . . . . . . . . . . . . . . $14 7/8 $ 9 13/16
Fourth Quarter . . . . . . . . . . . . . $13 1/8 $ 8 1/8
FISCAL 1996
First Quarter . . . . . . . . . . . . . . $ 9 1/2 $ 7 1/2
Second Quarter . . . . . . . . . . . . . $10 5/8 $ 9
Third Quarter . . . . . . . . . . . . . . $15 3/8 $11
Fourth Quarter . . . . . . . . . . . . . $20 $12 7/16
As of January 15, 1997, there were approximately 392 stockholders of record of
the common stock. The Company believes that as of such date there were
approximately 3,906 beneficial holders of the common stock.
The Company has never declared or paid a cash dividend on its common stock and
does not presently intend to do so. Future dividend policy will depend upon the
Company's earnings, capital requirements, financial condition and other factors
deemed relevant by the Board of Directors.
During fiscal 1996, the Company did not sell any equity securities that were not
registered under the Securities Act of 1933, as amended.
13
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data for the five fiscal year periods ended
November 3, 1996 are derived from the Company's Consolidated Financial
Statements. The selected financial data should be read in conjunction with the
Company's Consolidated Financial Statements and related notes included elsewhere
in this report. See also "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
Income Statement Data: (1)
Fiscal years ended
--------------------------------------------------------------------------
Nov. 3, Oct. 29, Oct. 30, Sept. 30, Sept. 30,
1996 1995 (2) 1994 1993 1992
--------------------------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenue $3,516,446 $2,941,100 $2,220,816 $1,509,823 $1,016,948
Gross profit 184,836 152,091 115,747 77,346 56,486
Income before income taxes 23,131 1,110 26,970 17,493 7,814
Net income 13,253 241 16,342 10,500 4,681
Net income per common share $ 0.89 $ 0.02 $ 1.22 $ 1.15 $ 0.59
Weighted average common and
common equivalent shares 14,883 14,338 13,385 9,125 7,921
Balance Sheet Data:
Nov. 3, Oct. 29, Oct. 30, Sept. 30, Sept. 30,
1996 1995 1994 1993 1992
--------------------------------------------------------------------------
(in thousands)
Working capital $110,568 $107,703 $120,556 $84,315 $44,573
Total assets 689,505 572,563 510,199 323,409 226,892
Long-term obligations 3,892 4,079 2,054 1,215 9,324
Stockholders' equity 186,123 168,453 166,159 108,152 56,866
</TABLE>
- --------------------
(1) Effective for the Company's 1994 fiscal year, the Company changed its
fiscal year end from September 30 to the Sunday nearest October 31 in each
calendar year.
(2) The fiscal year ended October 29, 1995 included $9,029,000 of restructuring
and other one-time charges. See "Managements's Discussion and Analysis of
Financial Condition and Results of Operations."
14
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth, for the indicated periods, data as percentages
of total revenue:
<TABLE>
<CAPTION>
Fiscal years ended
--------------------------------------------------------
Nov. 3, Oct. 29, Oct. 30,
1996 1995 1994
---------------- -------------- --------------
<S> <C> <C> <C>
Revenue $3,516,446 $2,941,100 $2,220,816
Cost of sales 94.7 % 94.8 % 94.8 %
---------------- -------------- --------------
Gross profit 5.3 5.2 5.2
Operating other expenses
Operating expenses 4.2 4.3 3.7
Restructuring and other one-time charges -- 0.3 --
---------------- -------------- --------------
Total 4.2 4.6 3.7
---------------- -------------- --------------
Operating income 1.0 0.6 1.5
Other expenses - net 0.4 0.5 0.3
---------------- -------------- --------------
Income before income taxes 0.7 0.0 1.2
Provision for income taxes 0.3 0.0 0.5
---------------- -------------- --------------
Net income 0.4 % 0.0 % 0.7 %
================ ============== ==============
</TABLE>
Fiscal Year Ended November 3, 1996 Versus Fiscal Year Ended October 29, 1995
Total Revenue. Total revenue during fiscal 1996 was $3.5 billion, $2.1 billion
(61%) of which was attributable to the Company's distribution business, and $1.4
billion (39%) of which was attributable to the Company's systems integration
business. The Company's distribution business is conducted through the MicroAge
Distribution Group, which provides more than 20,000 technology hardware and
software products and value-added services to reseller customers worldwide. The
Company's systems integration business is conducted through the MicroAge
Integration Group, which provides distributed computing solutions to large
corporations, government agencies, and educational institutions worldwide
through a global network of qualified resellers, which includes affiliated
branches and thirteen Company-owned resellers. See "Business -- Business Groups"
in Part 1, Item 1 for additional information about the MicroAge Distribution
Group, the MicroAge Integration Group, and the Company's other principal
business groups.
15
<PAGE>
Total revenue increased $575 million, or 20%, for the fiscal year ended November
3, 1996 as compared to the fiscal year ended October 29, 1995. This revenue
increase included a $422 million, or 25%, increase in distribution business
revenue and a $214 million, or 19%, increase in systems integration business
revenue, partially offset by a decrease in revenue due to the sale of the
Company's memory distribution business in the fourth quarter of fiscal year
1995.
The revenue increases were primarily due to sales to resellers (primarily
non-franchised resellers) added since October 29, 1995, the Company's focus on
large account sales, increased demand for the Company's major vendors' products
and the Company's addition of new product lines.
The fiscal year ended November 3, 1996 included 53 weeks, while the fiscal year
ended October 29, 1995 included 52 weeks. See Note 3 to the Company's
Consolidated Financial Statements in Part II, Item 8.
During the first three quarters of fiscal 1996, the Company's primary focus was
on improving internal processes and profitability, rather than pursuing
aggressive revenue growth. Revenue for this period grew by 14% compared to the
same period of fiscal 1995. In the fourth quarter of fiscal 1996, the Company
began to emphasize revenue growth. Revenue for the fourth quarter of fiscal 1996
was $1.0 billion, a 35% increase over the fourth quarter of fiscal 1995. The
Company intends to continue to pursue revenue growth; however, there can be no
assurances that revenue increases will be achieved. If revenue does continue to
increase, the Company's capital requirements are likely to increase.
Gross Profit Percentage. The Company's gross profit percentage was 5.3% for the
fiscal year ended November 3, 1996 and 5.2% for the fiscal year ended October
29, 1995.
Future gross profit percentages may be affected by market pressures, the
introduction of new Company programs, changes in revenue mix, the Company's
utilization of early payment discount opportunities, vendor pricing actions and
other competitive and economic factors. See "Potential Fluctuations in Operating
Results" below for information regarding industry trends that may affect future
gross profit percentages.
Operating Expense Percentage. As a percentage of revenue, operating expenses
decreased to 4.2% for the fiscal year ended November 3, 1996 compared to 4.3%
for the fiscal year ended October 29, 1995. Operating expenses increased from
$126.4 million for fiscal 1995 to $148.4 million for fiscal 1996. The increase
was primarily due to increased costs as a result of higher volumes.
Restructuring and Other One-Time Charges. The Company's consolidated statement
of income for fiscal 1995 includes $9.0 million of pre-tax charges ($5.4 million
net of taxes, or $0.38 per share) for restructuring and other one-time charges.
See "Fiscal Year Ended October 29, 1995 Versus Fiscal Year Ended October 30,
1994 -- Restructuring and Other One-Time Charges" below.
Other Expenses - Net. Other expenses - net decreased to $13.3 million for the
fiscal year ended November 3, 1996 from $15.6 million for the fiscal year ended
October 29, 1995. The decrease is primarily attributable to a decrease in net
financing costs during the year as a result of the
16
<PAGE>
Company's focus on inventory management during the 1996 fiscal year. Days cost
of sales in ending inventory decreased from 37 days at October 29, 1995 to 33
days at November 3, 1996.
Marketing Development Funds. The Company receives funds from certain vendors
which are earned through marketing programs, meeting established purchasing
objectives or meeting other objectives determined by the vendor. There can be no
assurance that these programs will be continued by the vendors. A substantial
reduction in the vendor funds available to the Company would have an adverse
effect on the Company's results of operations.
Fiscal Year Ended October 29, 1995 Versus Fiscal Year Ended October 30, 1994
Total Revenue. Total revenue increased $720 million, or 32%, to $2.9 billion for
the fiscal year ended October 29, 1995 as compared to the fiscal year ended
October 30, 1994. This revenue increase included a $320 million, or 41%,
increase in sales to large accounts and a $341 million, or 26%, increase in
sales to resellers.
These revenue increases were primarily due to sales to resellers added since
October 30, 1994, the Company's focus on large account sales, increased demand
for the Company's major vendors' products, the Company's addition of new product
lines and same location sales growth (including sales to large accounts).
The Company experienced quarterly revenue growth rates in excess of 40% (when
compared to the same quarters of the prior years) during the fiscal years ended
September 30, 1993 and October 30, 1994 as well as for the first two quarters of
fiscal 1995. Quarter over quarter revenue growth decreased to 30% and 20% for
the last two quarters of fiscal 1995.
Gross Profit Percentage. The Company's gross profit percentage was 5.2% for the
fiscal year ended October 29, 1995 and for the fiscal year ended October 30,
1994.
Operating Expense Percentage. As a percentage of revenue, operating expenses
increased to 4.3% for the fiscal year ended October 29, 1995, from 3.7% for the
fiscal year ended October 30, 1994. Operating expenses for the year increased by
$43.2 million over the prior year. If expenses had remained at the same
percentage of revenue as in the prior year, the expense increase would have been
$27.0 million. The remainder of the increase was primarily due to facilities
expansion ($3.0 million), increased depreciation as a result of automation
initiatives and facilities expansion ($5.8 million), the addition of a
Company-owned location ($6.0 million) and other personnel additions. Some of the
expense increases were made in anticipation of revenue growth at historical
rates. Revenue growth slowed in the last two quarters of fiscal year 1995 (see
"Total Revenue" above) and a decision was made to reduce expense levels during
the fourth quarter. This contributed to the restructuring charges taken during
the fourth quarter.
Restructuring and Other One-Time Charges. During the fourth quarter of fiscal
1995, the Company approved and implemented actions targeted at reducing the
Company's future cost structure and improving its profitability. These actions
included, among other things, (i) the sale of the Company's memory distribution
business, (ii) outsourcing a certain business function and (iii) a reduction in
the number of the Company's employees. The Company's consolidated statement of
income for fiscal 1995 includes $9.0 million of pretax charges ($5.4 million net
of tax benefits, or $0.38 per share) for restructuring and other one-time
charges.
17
<PAGE>
The charges for the memory distribution business sale included a loss on the
sale of fixed assets and intangible assets of $3.4 million. Also included in
these charges was $1.3 million for asset liquidations and write-offs and other
charges totaling $0.9 million. The pretax loss for the memory distribution
company in fiscal 1995 was $1.7 million. Losses incurred during fiscal 1995 on
the outsourced business function totaled $1.6 million. Most of the costs related
to this business will be eliminated, although some expenses will be incurred for
coordinating the relationship with the outsourcing company. The charges
associated with staff reductions consist primarily of severance pay for 219
associates. See Note 16 of the Company's Consolidated Financial Statements in
Part II, Item 8 for additional information regarding the 1995 restructuring
charges.
If the restructuring and other one-time charges are calculated as though all of
the actions targeted at reducing expenses and improving profitability had been
implemented on the first day of the fourth fiscal quarter, the total of these
charges would have been $10.8 million before tax, or $0.45 per share. The
Company reported a loss of $0.40 per share for its fourth fiscal quarter of
1995, including restructuring and other one-time charges. Excluding the $10.8
million in charges, the Company's fourth quarter net income would have been
$744,000, or $0.05 per share, up slightly from the $662,000, or $0.05 per share
reported for the third quarter of fiscal 1995, and net income for the year would
have been $6.7 million, or $0.47 per share.
The Company believes the restructuring charges contributed to the Company's
improved financial performance in fiscal 1996 by positively impacting the
Company's earnings and cash flows through a reduction in expenses and the sale
or outsourcing of certain parts of the business that were operating at a loss.
However, there can be no assurance that the restructuring charges will continue
to positively impact the Company's earnings and cash flows.
Other Expenses - Net. Other expenses - net increased to $15.6 million for the
fiscal year ended October 29, 1995 from $5.6 million for the fiscal year ended
October 30, 1994. The increase is primarily attributable to an increase in net
financing costs during the year.
The financing cost increase included higher expenses from the sale of
receivables under an agreement with a commercial lender ($7.2 million increase),
higher costs from flooring subsidies provided to the lenders that floor product
purchases for the Company's customers ($1.1 million increase) and higher net
interest expense due to higher average borrowings during the fiscal year ($1.6
million increase). The flooring subsidy costs represent amounts paid to finance
companies who provide payment terms to the Company's customers on sales made by
the Company to such customers.
Effective tax rate. The Company's effective tax rate increased from 39.4% for
the fiscal year ended October 30, 1994 to 78.3% for the fiscal year ended
October 29, 1995. This increase is a result of the impact of certain state taxes
not based on income and non-deductible expenses, such as meals and entertainment
and goodwill amortization, on a lower pretax income amount.
18
<PAGE>
Potential Fluctuations in Operating Results
The Company's operating results may vary significantly from quarter to quarter
depending on certain factors, including, but not limited to, demand for the
Company's information technology products and services, product availability,
competitive conditions, and general economic conditions. In particular, the
Company's operating results are sensitive to changes in the mix of product and
service revenues, product margins, inventory adjustments, and interest rates.
See "Products and Vendors" and "Competition" in Part I, Item 1 for additional
information regarding certain of these factors. Although the Company attempts to
control its expense levels, these levels are based, in part, on anticipated
revenues. Therefore, the Company may not be able to control spending in a timely
manner to compensate for any unexpected revenue shortfall. As a result,
quarterly period-to-period comparisons of the Company's financial results are
not necessarily meaningful and should not be relied upon as an indication of
future performance.
Liquidity and Capital Resources
The Company has financed its growth and cash needs to date primarily through
working capital financing facilities, bank credit lines, common stock offerings
and cash generated from operations. The primary uses of cash have been to fund
increases in inventory and accounts receivable resulting from increased sales.
If the Company is successful in achieving continued revenue growth (see
"Business Strategy" in Part I, Item 1), its working capital requirements will
continue to increase.
During the fiscal year ended November 3, 1996, the Company used $4 million of
cash for a business purchase. See Note 14 of the Company's Financial Statements
in Part II, Item 8 for information regarding non-cash investing activities. In
order to establish or solidify its presence in strategic markets or to respond
to competitive pressures, the Company may make acquisitions of, or investments
in, reseller locations. These acquisitions or investments may be made utilizing
cash, stock or a combination of cash and stock. See "Competition" in Part I,
Item 1 for information regarding competitive pressures.
For the fiscal year ended November 3, 1996, $36 million of cash was provided by
operating activities. Net cash provided by operating activities included an
increase in accounts payable of $91 million, income (before certain non-cash
charges) of $41 million and an increase in accrued liabilities of $9 million,
partially offset by an increase in accounts receivable of $78 million and an
increase in inventory of $26 million. The number of days sales in ending
accounts receivable increased from 22 days at October 29, 1995 to 25 days at
November 3, 1996. The receivable days adjusted for receivables sold under a
financing facility (see discussion below) were 42 days at November 3, 1996
compared to 36 days at October 29, 1995. The increase in receivable days was
primarily due to the continued increases in sales to large end-user customers
through the MicroAge Integration Group. The number of days cost of sales in
ending inventory decreased from 37 days at October 29, 1995 to 33 days at
November 3, 1996. The decrease in inventory days was primarily due to a focus on
controlling inventory levels; however, there can be no assurance that the
inventory level will remain as low as the 33 days reported at November 3, 1996.
For fiscal year 1996, net cash of $28 million used in investing activities
consisted of $24 million for the purchase of property and equipment and $4
million for a business purchase.
19
<PAGE>
The Company maintains a primary financing agreement (the "Agreement") with a
financing facility of $400 million. The Agreement includes two major components:
an accounts receivable facility (the "A/R Facility") and an inventory facility
(the "Inventory Facility"). The Agreement expires in August 1997, but will
remain in effect until 90 days after either party to the Agreement gives the
other party notice of termination.
Under the A/R Facility, the Company has the right to sell certain accounts
receivable from time to time, on a limited recourse basis, up to an aggregate
amount of $250 million sold at any given time. At November 3, 1996, the net
amount of sold accounts receivable was $191 million, and the effective funding
rate was LIBOR plus 2.1%.
The Inventory Facility provides for borrowings up to $150 million. Within the
Inventory Facility, the Company has a line of credit for the purchase of
inventory from selected product suppliers ("Inventory Line of Credit") of $50
million and a line of credit for general working capital requirements
("Supplemental Line of Credit") of $100 million, provided in the aggregate that
the sum under the A/R Facility and the Supplemental Line of Credit may not
exceed $350 million at any given time. Payments for products purchased under the
Inventory Line of Credit vary depending upon the product supplier, but generally
are due between 45 and 60 days from the date of the advance. No interest or
finance charges are payable on the Inventory Line of Credit if payments are made
when due. At November 3, 1996, the Company had $2 million outstanding under the
Inventory Line of Credit and had no amounts outstanding under the Supplemental
Line of Credit.
Of the $400 million of financing capacity represented by the Agreement, $207
million was unused as of November 3, 1996. Utilization of the unused $207
million is dependent upon the Company's collateral availability at the time the
funds would be needed.
Borrowings under the Agreement are secured by substantially all of the Company's
assets, and the Agreement contains certain restrictive covenants, including
working capital and tangible net worth requirements, and ratios of debt to
tangible net worth and current assets to current liabilities. At November 3,
1996, the Company was in compliance with these covenants.
The Company also maintains trade credit arrangements with its vendors and other
creditors to finance product purchases. Several major vendors maintain security
interests in their products sold to the Company.
The unavailability of a significant portion of, or the loss of, the Agreement or
trade credit from vendors would have a material adverse effect on the Company.
Although the Company has no material capital commitments, the Company expects to
make capital expenditures of approximately $20 to $25 million in the next fiscal
year.
Inflation
The Company believes that inflation has generally not had a material impact on
its operations or liquidity to date.
20
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated Financial Statements of the Company listed in the index
appearing under Item 14(a)(1) hereof are filed as part of this Annual Report on
Form 10-K and are hereby incorporated by reference in this Item 8. See also
"Index to Financial Statements" on page F-1 hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the Company's directors is incorporated herein by
reference to the information furnished under the captions "Election Of
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance
Requirements" in the Company's Proxy Statement relating to its 1997 Annual
Meeting of Stockholders (the "1997 Proxy Statement").
Information regarding executive officers of the Company is included in Part I,
Item 1 hereof, furnished under the caption "Executive Officers of the
Registrant."
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is incorporated herein by reference
to the information furnished under the captions "Executive Compensation" and
"Other Information Regarding the Board of Directors" in the 1997 Proxy
Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information regarding security ownership of certain beneficial owners and
management of the Company is incorporated herein by reference to the information
furnished under the captions "Security Ownership of Management" and "Principal
Stockholders" in the 1997 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions is
incorporated herein by reference to the information furnished under the caption
"Certain Relationships and Related Transactions" in the 1997 Proxy Statement.
21
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM
8-K
(a) The following documents are filed as part of this Annual Report on Form
10-K:
<TABLE>
<S> <C>
(1) Consolidated Financial Statements: Page No.
Report of Independent Accountants F-2
Consolidated Balance Sheets at
November 3, 1996 and October 29, 1995 F-3
Consolidated Statements of Income for
the fiscal years ended November 3, 1996,
October 29, 1995, and October 30, 1994 F-4
Consolidated Statements of Cash Flows for
the fiscal years ended November 3, 1996,
October 29, 1995, and October 30, 1994 F-5
Consolidated Statements of Stockholders' Equity
for the fiscal years ended November 3, 1996,
October 29, 1995, and October 30, 1994 F-6
Notes to Consolidated Financial Statements F-7
(2) Consolidated Financial Statement Schedules:
Schedule I - Valuation and Qualifying
Accounts and Reserves S-1
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or
notes thereto.
(3) The Exhibits which are filed with this Report or which are incorporated
herein by reference are set forth in the Exhibit Index which appears on
page E-1 hereof, which Exhibit Index is incorporated herein by
reference. E-1
</TABLE>
(b) Reports filed on Form 8-K during the quarter ended November 3, 1996:
None.
(c) See Item 14(a)(3) above.
(d) See "Index to Consolidated Financial Statements" included under Item 8 to
this Annual Report on Form 10-K.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MICROAGE, INC.
(Registrant)
By:/s/ Jeffrey D. McKeever
-------------------------------
Jeffrey D. McKeever
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Jeffrey D. McKeever Director, Chairman of the Board January 31, 1997
- ----------------------- and Chief Executive Officer
Jeffrey D. McKeever (Principal Executive Officer)
/s/ Alan P. Hald Director, Vice-Chairman of January 31, 1997
- ------------------------ the Board and Secretary
Alan P. Hald
/s/ William H. Mallender Director January 31, 1997
- ------------------------
William H. Mallender
/s/ Steven G. Mihaylo Director January 31, 1997
- ------------------------
Steven G. Mihaylo
/s/ Fred Israel Director January 31, 1997
- --------------------------
Fred Israel
/s/ Lynda M. Applegate Director January 31, 1997
- ----------------------
Lynda M. Applegate
/s/ Roy A. Herberger, Jr. Director January 31, 1997
- -------------------------
Roy A. Herberger, Jr.
/s/ James R. Daniel Senior Vice President, Chief January 31, 1997
- ------------------------- Financial Officer and Treasurer
James R. Daniel (Principal Financial Officer)
/s/ Raymond L. Storck Vice President - Controller January 31, 1997
- --------------------- and Assistant Treasurer
Raymond L. Storck (Principal Accounting Officer)
</TABLE>
23
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) AND (2), (c) AND (d)
------------------------
INDEX TO FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
EXHIBITS
------------------------
YEAR ENDED NOVEMBER 3, 1996
MICROAGE, INC. AND SUBSIDIARIES
TEMPE, ARIZONA
<PAGE>
MICROAGE, INC.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants F-2
Consolidated Balance Sheets
at November 3, 1996 and
October 29, 1995 F-3
Consolidated Statements of Income for each of the fiscal years
ended November 3, 1996, October 29, 1995
and October 30, 1994 F-4
Consolidated Statements of Cash Flows for each of the fiscal
years ended November 3, 1996, October 29, 1995
and October 30, 1994 F-5
Consolidated Statements of Stockholders' Equity for each of the
fiscal years ended November 3, 1996, October 29, 1995
and October 30, 1994 F-6
Notes to Consolidated Financial Statements F-7
Schedule I - Valuation and Qualifying Accounts
and Reserves S-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and
Stockholders of MicroAge, Inc.
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a) (1) and (2) present fairly, in all material respects,
the financial position of MicroAge, Inc. and its subsidiaries at November 3,
1996 and October 29, 1995, and the results of their operations and their cash
flows for the fiscal years ended November 3, 1996, October 29, 1995 and October
30, 1994, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Phoenix, Arizona
December 11, 1996
F-2
<PAGE>
MICROAGE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
ASSETS
November 3, October 29,
1996 1995
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 20,496 $ 13,700
Accounts and notes receivable, net 253,220 183,286
Inventory, net 325,213 297,742
Other 11,129 13,006
------------ ------------
Total current assets 610,058 507,734
Property and equipment, net 53,141 45,689
Intangible assets, net 17,499 11,201
Other 8,807 7,939
------------ ------------
Total assets $ 689,505 $ 572,563
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 471,318 $ 379,897
Accrued liabilities 22,478 13,968
Current portion of long-term obligations 2,121 2,908
Other 3,573 3,258
------------ ------------
Total current liabilities 499,490 400,031
Long-term obligations 3,892 4,079
Stockholders' equity:
Preferred stock, par value $1.00 per share; -- --
Shares authorized: 5,000,000
Issued and outstanding: none
Common stock, par value $.01 per share;
Shares authorized: 40,000,000
Issued: November 3, 1996 -- 14,679,640
October 29, 1995 -- 14,459,847 147 145
Additional paid-in capital 124,115 122,399
Retained earnings 62,792 49,539
Loan to ESOT (207) (768)
Note receivable - stock purchase agreement -- (2,000)
Treasury stock, at cost;
Shares: November 3, 1996 -- 97,028
October 29, 1995 -- 115,443 (724) (862)
------------ ------------
Total stockholders' equity 186,123 168,453
------------ ------------
Total liabilities and stockholders' equity $ 689,505 $ 572,563
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
MICROAGE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal years ended
----------------------------------------------------------
November 3, October 29, October 30,
1996 1995 1994
---------------- ---------------- ----------------
<S> <C> <C> <C>
Revenue $ 3,516,446 $ 2,941,100 $ 2,220,816
Cost of sales 3,331,610 2,789,009 2,105,069
---------------- ---------------- ----------------
Gross profit 184,836 152,091 115,747
Operating and other expenses
Operating expenses 148,388 126,400 83,226
Restructuring and other one-time charges -- 9,029 --
---------------- ---------------- ----------------
Total 148,388 135,429 83,226
---------------- ---------------- ----------------
Operating income 36,448 16,662 32,521
Other expenses - net 13,317 15,552 5,551
---------------- ---------------- ----------------
Income before income taxes 23,131 1,110 26,970
Provision for income taxes 9,878 869 10,628
---------------- ---------------- ----------------
Net income $ 13,253 $ 241 $ 16,342
================ ================ ================
Net income per common share
Primary $ 0.89 $ 0.02 $ 1.22
================ ================ ================
Fully diluted $ 0.86 $ 0.02 $ 1.22
================ ================ ================
Weighted average common and
common equivalent shares
outstanding
Primary 14,883 14,338 13,385
Fully diluted 15,397 14,342 13,385
</TABLE>
The accompanying notes are an integral part of these financial statements
F-4
<PAGE>
MICROAGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(in thousands)
<TABLE>
<CAPTION>
Fiscal years ended
-----------------------------------
November 3, October 29, October 30,
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 13,253 $ 241 $ 16,342
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization 20,337 15,439 9,280
Provision for losses on accounts and notes receivable 7,629 5,844 3,193
Non-cash restructuring and other one-time charges -- 7,410 --
Changes in assets and liabilities
net of business acquisitions:
Accounts and notes receivable (77,563) (52,790) (28,404)
Inventory (26,307) 9,280 (117,859)
Other current assets 1,877 (4,802) (7,146)
Other assets (3,668) (1,830) 2,007
Accounts payable 91,421 50,950 99,460
Accrued liabilities 8,510 1,833 5,516
Other liabilities 315 396 1,223
--------- --------- ---------
Net cash provided by (used in) operating activities 35,804 31,971 (16,388)
Cash flows from investing activities:
Purchases of property and equipment (23,991) (22,885) (17,569)
Purchases of businesses and investments
in unconsolidated companies (4,150) (6,099) (8,955)
--------- --------- ---------
Net cash used in investing activities (28,141) (28,984) (26,524)
Cash flows from financing activities:
Amounts received from ESOT 561 640 595
Proceeds from issuance of stock, net of issuance costs 1,856 1,037 40,305
Principal payments on long-term obligations (3,284) (2,038) (1,418)
--------- --------- ---------
Net cash provided by (used in) financing activities (867) (361) 39,482
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents 6,796 2,626 (3,430)
Cash and cash equivalents at beginning of period 13,700 11,074 14,504
--------- --------- ---------
Cash and cash equivalents at end of period $ 20,496 $ 13,700 $ 11,074
========= ========= =========
Supplemental disclosure to cash flows - See Note 14
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-5
<PAGE>
MICROAGE, INC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share data)
<TABLE>
<CAPTION>
For the fiscal years ended November 3, 1996, October 29, 1995 and October 30, 1994
-------------------------------------------------------------------------------------
Additional Note-stock Total
Preferred Common paid-in Retained Loan to purchase Treasury stockholders'
stock stock capital earnings ESOT agreement stock equity
-------- -------- -------- -------- -------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE at October 31, 1993 $ -- $ 80 $ 78,558 $ 32,995 $ (2,005) $ -- $ (1,344) $108,284
Issuance of 2,000,000 shares of common
stock, net of issuance costs -- 20 39,482 -- -- -- -- 39,502
Three for two stock split -- 39 -- (39) -- -- -- --
Options for 153,365
common shares exercised -- 3 800 -- -- -- -- 803
Issuance of 72,728 shares of common stock
for convertible subordinated debentures -- 1 1,999 -- -- (2,000) -- --
Contribution of 26,266 treasury shares to
employee benefit plan -- -- 200 -- -- -- 221 421
Tax benefit from employees'
stock option plans -- -- 210 -- -- -- -- 210
Loan payments from ESOT -- -- -- -- 597 -- -- 597
Net income -- -- -- 16,342 -- -- -- 16,342
-------- -------- -------- -------- -------- ---------- --------- --------
BALANCE at October 30, 1994 -- 143 121,249 49,298 (1,408) (2,000) (1,123) 166,159
Options for 192,147
common shares exercised -- 2 1,035 -- -- -- -- 1,037
Contribution of 34,991 treasury shares to
employee benefit plan -- -- 115 -- -- -- 261 376
Loan payments from ESOT -- -- -- -- 640 -- -- 640
Net income -- -- -- 241 -- -- -- 241
-------- -------- -------- -------- -------- ---------- --------- --------
BALANCE at October 29, 1995 -- 145 122,399 49,539 (768) (2,000) (862) 168,453
Options for 108,861
common shares exercised -- 1 934 -- -- -- -- 935
Contribution of 18,415 treasury shares to
employee benefit plan -- -- 5 -- -- -- 138 143
Issuance of 110,932 shares under the
employee stock purchase plan -- 1 777 -- -- -- -- 778
Cancellation of convertible subordinated
debentures due to acquisition -- -- -- -- -- 2,000 -- 2,000
Loan payments from ESOT -- -- -- -- 561 -- -- 561
Net income -- -- -- 13,253 -- -- -- 13,253
-------- -------- -------- -------- -------- ---------- --------- --------
BALANCE at November 3, 1996 $ -- $ 147 $124,115 $ 62,792 $ (207) $ -- $ (724) $186,123
======== ======== ======== ======== ======== ========== ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
MICROAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BUSINESS
- -----------------
MicroAge, Inc. ("MicroAge") is a global systems integrator and a full-line
distributor of information technology products and services. Information
technology solutions offered by the Company include servers, desktops, mobile
computing, mass storage, connectivity, imaging, peripherals, software, and
component products. Unless the context otherwise requires, references to the
"Company" include MicroAge, Inc. and its consolidated subsidiaries, which
include thirteen Company-owned resellers.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Principles of consolidation
- ---------------------------
The consolidated financial statements of the Company include the accounts of
companies more than 50% owned. Investments in affiliates owned 20% to 50% are
accounted for by the equity method. All material intercompany accounts and
transactions have been eliminated.
Disclosures about fair value of financial instruments
- -----------------------------------------------------
Financial instruments that are subject to fair value disclosure requirements are
carried in the consolidated financial statements at amounts that approximate
fair value.
Cash equivalents
- ----------------
All highly liquid debt instruments purchased with an original maturity of three
months or less are considered to be cash equivalents. The Company did not have
any cash equivalents at November 3, 1996 or October 29, 1995.
Cash overdrafts
- ---------------
Under the Company's cash management system, checks issued but not presented to
banks frequently result in overdraft balances for accounting purposes. Such
amounts, aggregating $65.0 and $38.5 million at November 3, 1996 and October 29,
1995, respectively, are included as a component of accounts payable in the
accompanying balance sheets.
Accounts and notes receivable
- -----------------------------
Accounts and notes receivable are comprised of amounts due from financing
companies, end-users, and resellers and are net of an allowance for doubtful
accounts of $7,254,000 and $12,255,000 at November 3, 1996 and October 29, 1995,
respectively.
F-7
<PAGE>
Inventory
- ---------
Inventory consisting of resale merchandise is stated at lower of cost (first-in,
first-out method) or market. International Business Machines Corporation ("IBM")
products totaling $43,231,000 and $54,083,000 included in inventory at November
3, 1996 and October 29, 1995, respectively, are subject to a reservation of the
title in IBM for the purpose of assuring that such products are sold and
delivered only to IBM-authorized personal computer dealers; such reservation
does not prohibit the Company from granting security interests to other parties.
During the fiscal year ended November 3, 1996, sales of COMPAQ Computer
Corporation, Hewlett-Packard Company and IBM products accounted for
approximately 22%, 20% and 14%, respectively, of the Company's revenue from
sales of merchandise. The sales of no other individual vendor's products
accounted for more than 10% of such revenue during the fiscal year ended
November 3, 1996.
Property and equipment
- ----------------------
Property and equipment are recorded at cost and are depreciated on the
straight-line method over their estimated useful lives. Equipment under capital
lease is recorded at the lower of fair market value or the present value of
future lease payments and is amortized on the straight-line method over the
estimated useful life or the term of the lease, whichever is less.
The following reflects the estimated lives by category of property and
equipment:
Furniture, fixtures, equipment and software 3 to 7 years
Equipment under capital lease 4 to 5 years
Leasehold improvements 3 to 5 years
Expenditures for maintenance and repairs are charged to operations in the year
in which the expense is incurred.
Intangible assets
- -----------------
Intangible assets are amortized over their economic lives ranging from three to
fifteen years using the straight-line method. The Company periodically reviews
goodwill to assess recoverability, and impairments would be recognized in
operating results if a permanent reduction in value were to occur. The excess of
cost over the fair value of net identifiable assets acquired is classified as
goodwill and is included in intangible assets. Intangible assets are net of
$5,343,000 and $4,573,000 of accumulated amortization at November 3, 1996 and
October 29, 1995, respectively.
Revenue recognition
- -------------------
Revenue from product sales is recognized at the time of shipment. Revenue
associated with service contracts is initially recorded as deferred income
(included in other liabilities) and amortized on the straight-line method over
the service period of the contract.
Marketing development funds
- ---------------------------
In general, vendors provide the Company with various incentive programs. The
funds received under these programs are determined based on the Company's
purchases and/or sales of the vendor's product. The funds are earned by the
performance of specific marketing programs or upon completion of predetermined
objectives dictated by the vendor. Once earned, the funds are applied against
product cost or operating expenses.
F-8
<PAGE>
Income taxes
- ------------
In addition to charging income for taxes paid or payable, the provision for
income taxes reflects deferred income taxes resulting from changes in temporary
differences between the tax bases of assets and liabilities and their reported
amounts in the accompanying financial statements.
Income per common share
- -----------------------
Income per common and common equivalent share is computed using the weighted
average number of common and dilutive common equivalent shares outstanding
during the period. Dilutive common equivalent shares consist of stock options
and warrants using the treasury stock method. The weighted average common and
common equivalent shares consist of the following:
<TABLE>
<CAPTION>
Fiscal years ended
---------------- ------------- --------------
November 3, October 29, October 30,
1996 1995 1994
---------------- ------------- --------------
(in thousands)
<S> <C> <C> <C>
Primary
Weighted average common shares 14,409 14,133 12,755
Stock options and warrants 474 205 630
---------------- ------------- --------------
Weighted average common and common
equivalent shares outstanding 14,883 14,338 13,385
================ ============= ==============
Fully diluted
Weighted average shares from primary
calculation 14,883 14,338 13,385
Additional stock options and warrants 514 4 -
---------------- ------------- --------------
Weighted average common and common
equivalent shares outstanding 15,397 14,342 13,385
================ ============= ==============
</TABLE>
The additional stock options and warrants in the fully diluted calculation are a
result of using the market price of the Company's stock at the end of the period
under the treasury stock method.
Franchising Activities
- ----------------------
MicroAge distributes its products and services through a network of franchised
and affiliated resellers and Company-owned locations. In fiscal 1996, 193
franchised resellers were added and 203 were eliminated due to transferring to
an affiliate agreement, closing or terminating their agreement, resulting in 779
franchised reseller locations at November 3, 1996. There were 13 Company-owned
locations at November 3, 1996. In fiscal 1996, total revenue and total cost of
sales from Company-owned locations were $403,852,000 and $360,426,000,
respectively.
F-9
<PAGE>
Postemployment Benefits
- -----------------------
During 1994, the Company adopted Financial Accounting Standards Board Statement
No. 112 ("SFAS 112"), "Employers Accounting for Postretirement Benefits." SFAS
112 established standards of financial accounting and reporting for the
estimated cost of benefits provided by an employer to current and former
employees pursuant to the terms of an employer's agreement to provide those
benefits. The adoption of this statement did not have a material impact on the
Company's operating results.
Reclassifications
- -----------------
Certain prior year amounts have been reclassified to conform with current year
financial statement presentation.
Use of Estimates
- ----------------
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
NOTE 3 - FISCAL YEAR
- --------------------
The Company's fiscal year ends on the Sunday nearest October 31 in each calendar
year. The fiscal year ended November 3, 1996 included 53 weeks. The fiscal years
ended October 29, 1995 and October 30, 1994 included 52 weeks.
NOTE 4 - PROPERTY AND EQUIPMENT
- -------------------------------
Property and equipment consist of the following: November 3, October 29,
1996 1995
------------- -------------
(in thousands)
Equipment, furniture, fixtures and software $82,528 $62,376
Equipment under capital lease 14,179 11,876
Leasehold improvements 14,071 12,581
Land 1,839 164
------------- -------------
112,617 86,997
Less: accumulated depreciation and
amortization 59,476 41,308
------------- -------------
$53,141 $45,689
============= =============
F-10
<PAGE>
NOTE 5 - LEASES
- ---------------
The following is a schedule by year of future minimum lease obligations under
noncancelable leases together with the present value of the net minimum capital
lease obligations as of November 3, 1996:
Operating Capital
leases leases
------------- -------------
Fiscal year ending in: (in thousands)
1997 $6,172 $2,557
1998 5,782 1,960
1999 5,383 1,394
2000 4,341 550
2001 3,520 410
Thereafter 10,737 68
------------- -------------
Total minimum lease obligations $35,935 6,939
=============
Less: amount representing interest 926
-------------
Present value of minimum lease obligations $6,013
=============
None of the leases contain significant restrictive provisions; however, some of
the leases contain renewal options and provisions for payment by the Company of
real estate taxes, insurance and maintenance costs. Total rent expense was (in
thousands):
Fiscal year ended:
October 30, 1994 $ 6,017
October 29, 1995 7,830
November 3, 1996 10,175
NOTE 6 - FINANCING ARRANGEMENTS
- -------------------------------
The Company maintains a primary financing agreement (the "Agreement") with a
financing facility of $400 million. The Agreement includes two major components:
an accounts receivable facility (the "A/R Facility") and an inventory facility
(the "Inventory Facility"). The Agreement expires in August 1997, but will
remain in effect until 90 days after either party to the Agreement gives the
other party notice of termination.
Under the A/R Facility, the Company has the right to sell certain accounts
receivable from time to time, on a limited recourse basis, up to an aggregate
amount of $250 million sold at any given time. At November 3, 1996, the net
amount of sold accounts receivable was $191 million, and the effective funding
rate was LIBOR plus 2.1%
The Inventory Facility provides for borrowings up to $150 million. Within the
Inventory Facility, the Company has a line of credit for the purchase of
inventory from selected product suppliers ("Inventory Line of Credit") of $50
million and a line of credit for general working capital requirements
("Supplemental Line of Credit") of $100 million, provided in the aggregate that
the sums under the A/R Facility and the Supplemental Line of Credit may not
exceed $350 million at any given time. Payments for products purchased under the
Inventory Line of Credit vary depending upon the product supplier, but generally
are due between 45 and 60 days from the date of the advance. No interest or
finance charges are payable on the Inventory Line of Credit if payments are made
when due. At November 3, 1996, the Company had $2 million outstanding under the
Inventory Line of Credit (included in accounts payable in the accompanying
Balance Sheet), and no amounts outstanding under the Supplemental Line of
Credit.
F-11
<PAGE>
Borrowings under the Agreement are secured by substantially all of the Company's
assets, and the Agreement contains certain restrictive covenants, including
working capital and tangible net worth requirements, and ratios of debt to
tangible net worth and current assets to current liabilities. At November 3,
1996, the Company was in compliance with these covenants.
The Company also maintains trade credit arrangements with its vendors and other
creditors to finance product purchases. Several major vendors maintain security
interests in their products sold to the Company.
NOTE 7 - LONG-TERM OBLIGATIONS
- ------------------------------
Long-term obligations consist of the following:
November 3, October 29,
1996 1995
------------ -------------
(in thousands)
Capital lease obligations $6,013 $5,987
Note payable resulting from business purchase -- 1,000
------------ -------------
6,013 6,987
Less: current portion 2,121 2,908
------------ -------------
$3,892 $4,079
============ =============
Following are the annual maturities of long-term obligations (in thousands):
Fiscal year ending in:
1997 $2,121
1998 1,691
1999 1,257
2000 491
2001 386
Thereafter 67
------------
$6,013
============
NOTE 8 - STOCKHOLDERS' EQUITY
- -----------------------------
Stock Split
- -----------
On December 8, 1993, the Company's Board of Directors declared a 3-for-2 stock
split effected in the form of a common stock dividend. The dividend was paid on
January 13, 1994, to stockholders of record on December 20, 1993, in the amount
of 0.5 shares of common stock for each share of common stock held by such
stockholders. All data in the accompanying financial statements and related
notes have been restated to give effect to the stock split effected in the form
of a common stock dividend.
Public offering
- ---------------
On June 16, 1994, the Company completed a public offering of 2,000,000 shares of
common stock. The proceeds from the sale, net of issuance costs, were
approximately $39,502,000.
Increase in Authorized Common Shares
- ------------------------------------
In March 1994, the Company's stockholders approved an increase in the number of
authorized common shares, par value $.01 per share, from 20,000,000 shares to
40,000,000 shares.
F-12
<PAGE>
Employee stock option and award plans
- -------------------------------------
During fiscal 1994, the Board of Directors and stockholders of the Company
approved the adoption of the MicroAge Inc. Long-Term Incentive Plan (the
"Incentive Plan") for officers and other key employees of the Company. The
Incentive Plan authorizes grants of Incentive Stock Options (ISOs),
Non-Qualified Stock Options (NQSOs), Stock Appreciation Rights, Performance
Shares, Restricted Stock, Dividend Equivalents and other Common Stock based
awards. The total number of shares of common stock available for awards under
the Incentive Plan is 1,800,000.
The Company has issued NQSOs and ISOs under the Incentive Plan at prices
representing the fair market value of the Company's common stock on the date of
the grant. The NQSOs and ISOs are granted for terms of five years and become
exercisable on a pro-rata basis on each anniversary of the grant over a
five-year period as long as the holder remains an employee of the Company. NQSOs
under the Incentive Plan were also granted in fiscal 1994 to selected employees
in exchange for the employees' irrevocable waiver of a specific amount of base
salary or bonus otherwise payable by the Company during a specific period. The
options will vest in one-third increments beginning on the January 1 which is
three years following the January 1 of the calendar year in which the
participant elects to waive compensation. No other awards have been made under
the Incentive Plan.
In addition to the Incentive Plan, stock options are available under four plans
for grant to certain officers and employees of the Company at prices
representing the fair market value of the Company's common stock on the date of
the grant. Options under these plans are granted for terms of five years and
become exercisable on a pro-rata basis on each anniversary date of the grant
over a five-year period as long as the holder remains an employee of the
Company.
Changes during fiscal 1994, 1995 and 1996 in options outstanding under the
employee stock option plans (including the Incentive Plan) were as follows:
<TABLE>
<CAPTION>
Price Range
Number ---------------------------------------
of Options From To
----------------- ----------------- -----------------
<S> <C> <C> <C>
Outstanding at October 31, 1993 949,455 $4.00 $14.59
Granted 919,547 $21.00 $31.75
Exercised (74,185) $4.00 $7.92
Canceled or expired (18,595) $4.42 $31.75
-----------------
Outstanding at October 30, 1994 1,776,222 $4.42 $31.75
Granted 162,750 $9.25 $11.13
Exercised (120,900) $4.42 $10.42
Canceled or expired (46,174) $5.33 $24.83
-----------------
Outstanding at October 29, 1995 1,771,898 $4.42 $31.75
Granted 339,000 $8.75 $14.13
Exercised (97,125) $5.33 $10.88
Canceled or expired (157,630) $5.33 $31.75
-----------------
Outstanding at November 3, 1996 1,856,143 $4.42 $31.75
=================
Exercisable at November 3, 1996 512,225 $4.42 $31.75
=================
</TABLE>
F-13
<PAGE>
Director stock plans
- --------------------
During fiscal 1989, the Board of Directors and stockholders approved a stock
option plan for those Directors who are not officers or employees of the Company
or its subsidiaries (the "Directors' Plan"). Under the Directors' Plan, options
to purchase 1,000 shares of common stock were automatically granted, immediately
following each annual meeting of stockholders, to eligible Directors. The option
price is the fair market value of the Company's common stock on the date of the
grant. Options granted pursuant to this plan are exercisable, in full, during
the period between three months from the date of grant and three years from the
date of grant, and terminate on the earlier of the expiration date or six months
after the date that an optionee ceases to be a Director of the Company for any
reason other than death or permanent disability. As of November 3, 1996, 27,000
options had been granted under this plan at prices ranging from $8.42 to $31.88
per share. There were 7,500 options exercisable as of November 3, 1996. Options
to eligible Directors may no longer be granted under the Directors' Plan.
Instead, eligible Directors are granted options under the 1995 Director Plan
(see below).
In March 1995, the Board of Directors and stockholders approved an incentive
plan for those Directors who are not officers or employees of the Company or its
subsidiaries (the "1995 Director Plan"). Under the 1995 Director Plan, on
November 1 of each year, commencing in 1995 and ending in 2004, each eligible
Director will automatically be granted (i) 1,000 shares of the Company's common
stock subject to certain restrictions and (ii) options to purchase 1,000 shares
of the Company's common stock. The options vest over three years and are subject
to certain stock price hurdles after each vesting date. As of November 3, 1996,
16,000 options had been granted under this plan at prices ranging from $8.38 to
$19.38 per share. There were 6,000 options exercisable as of November 3, 1996.
The aggregate number of shares of the Company's common stock available for
awards under the 1995 Director Plan is 80,000.
Restricted stock plan
- ---------------------
In accordance with the provisions of a restricted stock plan approved in fiscal
1982, 45,000 shares of common stock were reserved for issuance. At November 3,
1996, 39,938 shares had been awarded under the plan, and 5,062 additional shares
may be awarded under the plan.
Preferred stock purchase rights
- -------------------------------
In February 1989, as amended in November 1994, the Company's Board of Directors
adopted a Stockholder Rights Agreement (the "Rights Plan") and declared a
dividend distribution of one Right for each share of the Company's common stock
outstanding as of the close of business on March 7, 1989 and intends to issue
one Right for each share of common stock issued between March 7, 1989 and the
date of the distribution of the Rights. As amended, the Rights Plan provides
that when exercisable, each Right will entitle its holder to purchase from the
Company one one-hundredth (.01) of a share of Series C Junior Participating
Preferred stock at a price of $19.90. The Company has reserved 500,000 preferred
shares for issuance upon exercise of the Rights. Generally, the Rights become
exercisable on the earlier of the date a person or group of affiliated or
associated persons acquires or obtains the rights to acquire securities
representing fifteen percent (15%) or more of the common stock of the Company or
on the tenth day following the commencement of a tender or exchange offer which
would result in the offeror beneficially owning fifteen percent (15%) or more of
the Company's common stock without the prior consent of the Company. In the
event that an unauthorized person or group of
F-14
<PAGE>
affiliated persons becomes the beneficial owner of fifteen percent (15%) or more
of the common stock of the Company, proper provision shall be made so that each
holder of a Right will have the right to receive, upon exercise thereof and the
payment of the exercise price, that number of shares of common stock having a
market value of two times the exercise price of the Right. The Rights will
expire on February 23, 1999, unless redeemed earlier by the Company pursuant to
authorization by the Board of Directors.
Generally, in the event that the Company is involved in a merger or other
business combination transaction after the Rights become exercisable, provision
shall be made so that each holder of a Right shall have the right to receive,
upon the exercise thereof and the payment of the exercise price, that number of
shares of common stock of the acquiring company which at the time of such
transaction would have a market value of two times the exercise price of the
Right.
Associate Stock Purchase Plan
- -----------------------------
In March 1995, the Board of Directors and stockholders approved an associate
stock purchase plan (the "Associate Plan"). The Associate Plan provides a means
for the Company's employees to authorize payroll deductions up to 10% of their
earnings to be used for the periodic purchase of the Company's common stock.
Under the Associate Plan, the Company will initially sell shares to participants
at a price equal to the lesser of 85% of the fair market value of the common
stock at the beginning of a six month subscription period or 85% of the fair
market value at the end of the subscription period. The Associate Plan is
intended to qualify as an "employee stock purchase plan" under Section 423 of
the Internal Revenue Code of 1986, as amended. The maximum number of shares that
may be purchased under the Associate Plan is 500,000. The initial subscription
period began July 1, 1995.
NOTE 9 - OTHER EXPENSES - NET
- -----------------------------
Other expenses - net consists of the following:
<TABLE>
<CAPTION>
Fiscal years ended
-------------------------------------------------------------
November 3, October 29, October 30,
1996 1995 1994
----------------- ----------------- -----------------
(in thousands)
<S> <C> <C> <C>
Interest expense $ 1,286 $ 3,370 $1,263
Expenses from the sale of accounts
receivable 11,438 10,468 3,274
Other 593 1,714 1,014
----------------- ----------------- -----------------
$13,317 $15,552 $5,551
================= ================= =================
</TABLE>
NOTE 10 - INCOME TAXES
- ----------------------
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Fiscal years ended
-------------------------------------------------------------
November 3, October 29, October 30,
1996 1995 1994
----------------- ----------------- -----------------
(in thousands)
<S> <C> <C> <C>
Current
Federal $ 6,806 $ 3,905 $ 10,398
State 1,721 1,065 2,416
Deferred 1,351 (4,101) (2,186)
----------------- ----------------- -----------------
$ 9,878 $ 869 $ 10,628
================= ================= =================
</TABLE>
F-15
<PAGE>
The components of deferred income tax expense (benefit) from operations are as
follows:
<TABLE>
<CAPTION>
Fiscal years ended
-------------------------------------------------------------
November 3, October 29, October 30,
1996 1995 1994
----------------- ----------------- -----------------
(in thousands)
<S> <C> <C> <C>
Allowance for doubtful accounts $1,440 $ (2,014) $ (1,142)
Software development costs 433 247 224
Depreciation and amortization (429) (159) (163)
Restructuring reserves 358 (533) --
Inventory obsolescence reserve (300) (112) (1,382)
State deferral, net of federal benefit 168 (528) (242)
All other - net (319) (1,002) 519
----------------- ----------------- -----------------
$1,351 $ (4,101) $ (2,186)
================= ================= =================
</TABLE>
Deferred tax assets, which are recorded as a component of other assets or other
current assets, are comprised of the following:
<TABLE>
<CAPTION>
November 3, October 29,
1996 1995
---------------- ---------------
(in thousands)
<S> <C> <C>
Gross deferred tax assets:
Depreciation and amortization $ 3,682 $ 2,007
Allowance for doubtful accounts 3,265 5,208
Inventory valuation 2,729 3,067
Deferred service revenue 596 593
Restructuring reserve 234 667
Other 2,337 1,139
---------------- ---------------
Total gross deferred tax assets 12,843 12,681
---------------- ---------------
Gross deferred tax liabilities:
Software development 1,872 1,347
Other 471 171
---------------- ---------------
Total gross deferred tax liabilities 2,343 1,518
---------------- ---------------
Net deferred tax asset $10,500 $11,163
================ ===============
</TABLE>
In light of the Company's history of profitable operations, management has
concluded that it is more likely than not that the Company will ultimately
realize the full benefit of its deferred tax assets related to future deductible
items. Accordingly, the Company believes that no valuation allowance is required
for the deferred tax assets in excess of deferred tax liabilities.
F-16
<PAGE>
The effective tax rate applied to income before income taxes differs from the
expected federal statutory rate as follows:
<TABLE>
<CAPTION>
Fiscal years ended
-------------------------------------------------------------
November 3, October 29, October 30,
1996 1995 1994
----------------- ----------------- -----------------
<S> <C> <C> <C>
Federal statutory rate 35.0 % 34.0 % 35.0 %
Addition (reduction) in taxes
resulting from:
State income taxes, net of
federal tax benefit 5.6 15.7 4.6
Non-deductible meals and
entertainment 0.7 13.8 0.1
Goodwill amortization 0.2 3.6 0.2
Other 1.2 11.2 (0.5)
================= ================= =================
42.7 % 78.3 % 39.4 %
================= ================= =================
</TABLE>
During fiscal 1994, the Company adopted Financial Accounting Standards Board
Statement No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires
an asset and liability approach for financial accounting and reporting of income
taxes. Adoption of this statement did not have a material impact on the
Company's operating results.
NOTE 11 - COMMITMENTS
- ---------------------
The Company has arrangements with major vendors and certain financing companies
to develop inventory and accounts receivable financing facilities for certain
reseller customers. These arrangements include repurchase agreements that would
require the Company to repurchase inventory which might be repossessed from a
reseller by the vendor or the financing company. As of November 3, 1996, such
repurchases have been insignificant.
The Company also provides a program whereby the Company may guarantee an
addition to a reseller's credit facility with certain finance companies. As of
November 3, 1996 losses related to the guarantee program have been
insignificant, and the Company's exposure for guaranteed amounts is not
material.
NOTE 12 - EMPLOYEE BENEFIT PLAN
- -------------------------------
In July 1988, a deferred compensation plan (the "Savings Plan") became effective
for all eligible employees of the Company under the provisions of Section 401(k)
of the Internal Revenue Code. Employees are eligible to participate after one
year of service and may contribute a percentage of their salary subject to
certain limitations. Subject to certain profitability requirements, the Company
has historically matched 25% of the employee contribution up to a maximum
employee contribution of 6%, as defined in the Savings Plan. Participants are at
all times fully vested in their contributions, and the Company contributions, if
any, become fully vested to the participant after five years of employment.
In April 1989, the Company amended and restated the Savings Plan to include a
leveraged Employee Stock Ownership Plan and Trust (the "ESOT") for eligible
employees. The ESOT used proceeds of loans from the Company to purchase 312,500
shares and 157,827 shares of the Company's common stock for $2,396,000 and
$1,105,000 during the years ended September 30, 1990 and 1989, respectively.
F-17
<PAGE>
The Company's stock is held by the ESOT trustee as collateral for the loans from
the Company. The Company makes periodic contributions to the ESOT which are used
to make loan principal and interest payments. A portion of the common stock is
allocated to the accounts of participating employees annually based upon
principal and interest payments. The Company, using the shares allocated method,
recognized contribution expenses of $510,000, $675,000, and $694,000 during the
fiscal years ended November 3, 1996, October 29, 1995 and October 30, 1994,
respectively.
The loans from the Company to the ESOT are payable in quarterly installments
ending March 31,1997. Interest is payable quarterly at rates equal to 85% of
prime and prime plus 0.75%. The Company's receivable from the ESOT is recorded
as a separate reduction of the Company's stockholders' equity.
NOTE 13 - NOTE RECEIVABLE - STOCK PURCHASE AGREEMENT
- ----------------------------------------------------
During fiscal 1994, the Company exchanged 72,728 shares of common stock for a
$2,000,000 convertible subordinated debenture. During fiscal 1996, the debenture
was forgiven as partial consideration in an agreement for the purchase of
certain assets from the issuer.
NOTE 14 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
- ----------------------------------------------------------
The Company's non-cash investing and financing activities and cash payments for
interest and income taxes were as follows:
<TABLE>
<CAPTION>
Fiscal years ended
-------------------------------------------------------------
November 3, October 29, October 30,
1996 1995 1994
----------------- ----------------- -----------------
(in thousands)
<S> <C> <C> <C>
Details of acquisitions:-
Fair value of assets acquired $ 2,000 $ 1,252 $ 20,158
Liabilities assumed and
acquisition- $ -- $ 383 $ 17,549
related accruals
Cash acquired $ -- $ -- $ 354
Note forgiven $ 2,000 $ -- $ --
Purchase obligation forgiven $ 1,029 $ -- $ --
Details of other investing activities:
Note receivable exchanged for
72,728 shares of the Company's
stock (See Note 13) $ -- $ -- $ 2,000
Details of other financing activities:
Capital lease obligations executed
for equipment $ 2,303 $ 4,726 $ 2,780
Cash paid for:
Interest $ 1,286 $ 3,370 $ 1,263
Income taxes $ 4,903 $ 9,050 $ 12,449
</TABLE>
F-18
<PAGE>
NOTE 15 - LITIGATION
- --------------------
On July 14 through July 19, 1994, seven class action complaints were filed in
the United States District Court for the District of Arizona against the
Company, certain of its officers and directors, and, in three of the lawsuits,
one of the underwriters of the Company's June 16, 1994 public offering of common
stock. On December 5, 1994, the Court consolidated the seven actions into a
single action. On February 16, 1995, plaintiffs filed and served an amended,
consolidated complaint against the Company, certain officers and directors of
the Company, and three of the underwriters of the Company's June 16, 1994 public
offering of common stock ("the Complaint"). The Complaint purports to be brought
on behalf of a class of purchasers of the Company's common stock during the
period April 13, 1994 through July 14, 1994. The Complaint alleges, among other
things, that the Company violated federal securities laws by making misleading
public statements and omitting material facts regarding the Company's operations
and financial results, which the plaintiffs contend to have artificially
inflated the price of the Company's common stock during the alleged class
period. The Complaint seeks unspecified compensatory damages as well as fees and
costs. On April 28, 1995, the Company filed a motion to dismiss the Complaint in
its entirety. On March 25, 1996, the Court dismissed the majority of the
allegations contained in the Complaint. An agreement in principle has since been
reached to settle the litigation, subject to reducing the settlement terms to
writing and obtaining court approval thereof. The Company's contribution to the
proposed settlement, after the contributions of the Company's directors and
officers insurers, constitutes amounts immaterial to the Company's financial
statements.
NOTE 16 - RESTRUCTURING AND OTHER ONE-TIME CHARGES
- --------------------------------------------------
During the fourth fiscal quarter of 1995, the Company approved and implemented
actions targeted at reducing expenses and improving profitability. The Company's
consolidated statement of income for fiscal 1995 includes $9.0 million of pretax
charges ($5.4 million net of tax benefits, or $0.38 per share) for restructuring
and other one-time charges, consisting of the following (in thousands):
Charges associated with the sale of a memory distribution business $5,563
Charges associated with outsourcing business function 1,517
Charges associated with staff reductions 1,170
Other one-time charges 779
--------
Total restructuring and other one-time charges $9,029
========
The charges associated with staff reductions consist primarily of severance pay
for 219 associates. The reductions occurred in virtually all areas of the
Company and were completed by October 29, 1995. The amount of benefits paid and
charged against the restructuring liability as of October 29, 1995 was $1.0
million. All actions related to the restructuring were implemented as of October
29, 1995, and the liability for restructuring activities at October 29, 1995 was
not material.
The revenue and net operating results of the activities that will not be
continued are as follows (in millions):
1995 1994 1993
Revenue
Memory distribution business $70.5 $47.1 $0.0
Outsourced business function $3.5 $7.1 $0.3
Pretax income (loss)
Memory distribution business $(1.7) $(0.1) $0.0
Outsourced business function $(1.6) $0.0 $0.2
F-19
<PAGE>
NOTE 17 - RECENT ACCOUNTING PRONOUNCEMENTS
- ------------------------------------------
Statement of Financial Accounting Standards No. 121 - Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.
Effective for fiscal years beginning after December 15, 1995, the standard
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable intangibles to
be disposed of. This Statement requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The Company will implement
the provisions of SFAS 121 for its fiscal year ending November 2, 1997. The
Company does not believe that adoption of this Statement will have a material
impact on its financial position or results of operations.
Statement of Financial Accounting Standards No. 123 - Accounting for Stock-Based
Compensation. The accounting requirements are effective for transactions entered
into in fiscal years beginning after December 15, 1995. The disclosure
requirements are effective for fiscal years beginning after December 31, 1995.
Pro forma disclosures required for entities that elect to continue to measure
compensation cost using APB Opinion No. 25 must include the effects of all
awards granted in fiscal years that begin after December 15, 1994. This
Statement establishes financial accounting and reporting standards for
stock-based employee compensation plans. This Statement defines the fair value
based method of accounting for an employee stock option or similar equity
instrument and encourages all entities to adopt that method of accounting for
all of their employee stock compensation plans. However, it also allows an
entity to continue to measure compensation cost for those plans using the
intrinsic value based method of accounting prescribed by APB Opinion No. 25,
Accounting for Stock Issued to Employees. The Company expects to implement the
disclosure provisions of SFAS No. 123 for its fiscal year ending November 2,
1997.
NOTE 18 - SUBSEQUENT EVENT (UNAUDITED)
- --------------------------------------
On January 14, 1997, the Company completed the acquisition of a previously
franchised reseller location. Under the terms of the acquisition, to be
accounted for as a pooling of interests, the Company exchanged 640,493 common
shares for all of the outstanding shares of the acquired company. The financial
position and results of operations of the Company and the acquired company will
be combined in fiscal 1997 retroactive to November 4, 1996. In addition, all
prior periods presented will be restated to give effect to the merger. The
impact of the combination on the previously reported financial position and
results of operations of the Company will not be material.
F-20
<PAGE>
MicroAge, Inc.
Schedule I
Valuation and Qualifying Accounts and Reserves
(in thousands)
Years ended November 3, 1996, October 29, 1995 and October 30, 1994
<TABLE>
<CAPTION>
Balance at Charged to Charged to Balance at
beginning costs and other Deductions/ end
Description of period expenses accounts write-offs of period
- --------------------------------------- ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended October 30, 1994 $3,911 $3,370 -- ($448) $6,833
================ ================ ================ ================ ================
Year ended October 29, 1995 $6,833 $5,844 -- ($422) $12,255
================ ================ ================ ================ ================
Year ended November 3, 1996 $12,255 $7,629 -- ($12,630) $7,254
================ ================ ================ ================ ================
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No. *
- ----------- ----------- ----------
3.1 Restated Certificate of Incorporation of
MicroAge, Inc. (Incorporated by reference
to Exhibit 3.1 to the Quarterly Report on
Form 10-Q for MicroAge, Inc. for the
quarter ended May 1, 1994)
3.2 By-Laws of MicroAge, Inc., amended and
restated as of January 18, 1996
(Incorporated by reference to Exhibit 3.2
to the Annual Report on Form 10-K for
fiscal year ended October 29, 1995)
4.1 Specimen Common Stock Certificate
(reference is also made to Exhibits 3.1
and 3.2) (Incorporated by reference to
Exhibit 4.1 to Registration Statement No.
33-45510)
4.2 Amended and Restated Rights Agreement
dated as of September 28, 1994 between
MicroAge, Inc. and First Interstate Bank
of California (Incorporated by reference
to Exhibit 1.1 to the Form 8-A for
MicroAge, Inc. filed January 13, 1994)
4.2.1 First Amendment dated as of November 5,
1996 by and between MicroAge, Inc. and
American Stock Transfer and Trust Company
to Amended and Restated Rights Agreement
dated as of September 28, 1994 between
MicroAge, Inc. and First Interstate Bank
of California
10.1 MicroAge, Inc. Restated Executive
Supplemental Savings Plan(1) dated
September 26, 1996
10.2 MicroAge, Inc. Supplemental Executive
Retirement Plan dated as of October 1,
19921 (Incorporated by reference to
Exhibit 10.65.2 to Registration Statement
No. 33-33094)
10.2.1 First Amendment to MicroAge, Inc.
Supplemental Executive Retirement Plan
dated as of September 26, 1996(1)
- -------
* Included only in manually signed original
E - 1
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No. *
- ----------- ----------- ----------
10.3 Form of MicroAge, Inc. 1994 Management
Equity Program Award Agreement by and
between MicroAge, Inc. and certain
executives(1)(Incorporated by reference
to Exhibit 10.2 to the Annual Report on
Form 10-K for MicroAge, Inc. for the
fiscal year ended October 30, 1994)
10.3.1 Form of First Amendment dated as of
December 14, 1995 to the MicroAge, Inc.
1994 Management Equity Program Award
Agreement by and between MicroAge, Inc.
and certain executives(1)
10.4 Form of MicroAge, Inc. 1997 Management
Equity Program Award Agreement by and
between MicroAge, Inc. and certain
executives(1)
10.5 Amended and Restated Employment Agreement
dated as of November 4, 1996 by and
between Jeffrey D. McKeever and the
Company(1)
10.5.1 Amended and Restated Split-Dollar
Insurance Agreement dated as of December
14, 1994, by and between MicroAge, Inc.
and Jeffrey D. McKeever(1) (Incorporated
by reference to the Quarterly Report on
Form 10-Q for MicroAge, Inc. for the
quarter ended July 30, 1995)
10.5.2 MicroAge, Inc. 1994 Management Equity
Program Award Agreement dated as of
December 14, 1993 by and between
MicroAge, Inc. and Jeffrey D. McKeever(1)
10.5.3 First Amendment dated December 14, 1995
to the MicroAge, Inc. 1994 Management
Equity Program Award Agreement dated as
of December 14, 1993 by and between
MicroAge, Inc. and Jeffrey D. McKeever(1)
10.6 Amended and Restated Employment Agreement
dated as of November 4, 1996 by and
between Alan P. Hald and the Company(1)
- -------
* Included only in manually signed original
E - 2
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No. *
- ----------- ----------- ----------
10.6.1 Split-Dollar Insurance Agreement dated as
of January 29, 1997, by and between
MicroAge, Inc. and Alan P. Hald(1)
10.6.2 MicroAge, Inc. 1994 Management Equity
Program Award Agreement dated as of
December 14, 1993 by and between
MicroAge, Inc. and Alan P. Hald(1)
10.6.3 First Amendment dated December 14, 1995
to the MicroAge, Inc. 1994 Management
Equity Program Award Agreement dated as
of December 14, 1993 by and between
MicroAge, Inc. and Alan P. Hald(1)
10.7 Amended and Restated Employment Agreement
dated as of November 4, 1996 by and
between James R. Daniel and the
Company(1)
10.7.1 Split-Dollar Insurance Agreement dated as
of September 1, 1995 by and between James
R. Daniel and the Company(1)
(Incorporated by reference to Exhibit
10.5.2 to the Annual Report on Form 10-K
for fiscal year ended October 29, 1995)
10.7.2 MicroAge, Inc. 1994 Management Equity
Program Award Agreement dated as of
December 14, 1993 by and between
MicroAge, Inc. and James R. Daniel(1)
10.7.3 First Amendment dated December 14, 1995
to the MicroAge, Inc. 1994 Management
Equity Program Award Agreement dated as
of December 14, 1993 by and between
MicroAge, Inc. and James R. Daniel(1)
10.8 Amended and Restated Employment Agreement
dated as of November 4, 1996 by and
between Robert G. O'Malley and the
Company(1)
10.8.1 Split-Dollar Insurance Agreement dated as
of September 1, 1995 by and between
Robert G. O'Malley and the Company(1)
10.8.2 Split-Dollar Insurance Agreement dated as
of January 27, 1997 by and between Robert
G. O'Malley and the Company(1)
- -------
* Included only in manually signed original
E - 3
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No. *
- ----------- ----------- ----------
10.8.3 MicroAge, Inc. 1997 Management Equity
Program Award Agreement by and between
MicroAge, Inc. and Robert G. O'Malley(1)
10.9 Amended and Restated Employment Agreement
dated as of November 4, 1996 by and
between Christopher J. Koziol and the
Company(1)
10.9.1 Split-Dollar Insurance Agreement dated as
of September 1, 1995 by and between
Christopher J. Koziol and the Company(1)
10.9.2 MicroAge, Inc. 1994 Management Equity
Program Award Agreement dated as of
December 14, 1993 by and between
MicroAge, Inc. and Christopher J.
Koziol(1)
10.9.3 First Amendment dated December 14, 1995
to the MicroAge, Inc. 1994 Management
Equity Program Award Agreement dated as
of December 14, 1993 by and between
MicroAge, Inc. and Christopher J.
Koziol(1)
10.10 Employment Agreement dated as of
September 1, 1993 by and between Kenneth
R. Waters and the Company(1)(Incorporated
by reference to Exhibit 10.22 to the
Annual Report on Form 10-K for MicroAge,
Inc. for the fiscal year ended September
30, 1993)
10.11 Form of Employment Agreement dated as of
November 4, 1996 by and between MicroAge,
Inc. and certain executives(1)
10.12 Form of Split-Dollar Insurance Agreement
dated September 1, 1995 by and between
MicroAge, Inc. and certain executives(1)
(Incorporated by reference to Exhibit
10.9 to the Annual Report on Form 10-K
for fiscal year ended October 29, 1995)
10.13 Resolutions by the Compensation Committee
of the Board of Directors of MicroAge,
Inc. approving the fiscal year 1997 bonus
compensation formula for certain
executives(1)
- -------
* Included only in manually signed original
E - 4
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No. *
- ----------- ----------- ----------
10.14 The Amended and Restated MicroAge, Inc.
1984 Incentive Stock Option Plan(1)
(Incorporated by reference to Exhibit
10.1 to the Quarterly Report on Form 10-Q
for MicroAge, Inc. for the quarter ended
January 30, 1994)
10.15 The Amended and Restated MicroAge, Inc.
1986 Incentive Stock Option Plan(1)
(Incorporated by reference to Exhibit
10.2 to the Quarterly Report on Form 10-Q
for MicroAge, Inc. for the quarter ended
January 30, 1994)
10.16 The Amended and Restated MicroAge, Inc.
1988 Stock Option Plan(1)(Incorporated by
reference to Exhibit 10.3 to the
Quarterly Report on Form 10-Q for
MicroAge, Inc. for the quarter ended
January 30, 1994)
10.17 The Amended and Restated MicroAge, Inc.
1989 Stock Option Plan(1)(Incorporated by
reference to Exhibit 10.4 to the
Quarterly Report on Form 10-Q for
MicroAge, Inc. for the quarter ended
January 30, 1994)
10.18 MicroAge, Inc. Long-Term Incentive
Plan(1) (Incorporated by reference to
Exhibit A to the Proxy Statement for the
Annual Meeting of Stockholders of
MicroAge, Inc. held on March 23, 1994,
File No. 0-15995)
10.19 The Amended and Restated MicroAge, Inc.
Directors' Stock Option Plan(1)
(Incorporated by reference to Exhibit
10.5 to the Quarterly Report on Form 10-Q
for MicroAge, Inc. for the quarter ended
January 30, 1994)
10.19 1995 MicroAge, Inc. Director Incentive
Plan(1) (Incorporated by reference to
Appendix C to the Proxy Statement for the
Annual Meeting of Stockholders of
MicroAge, Inc. held on March 15, 1995,
File No. 0-15995)
10.21 Amended and Restated MicroAge, Inc.
Retirement Savings and Employee Stock
Ownership Plan and Trust Agreement(1)
(Incorporated by reference to Exhibit
10.14 to the Annual Report on Form 10-K
for MicroAge, Inc. for the fiscal year
ended October 30, 1994)
- -------
* Included only in manually signed original
E - 5
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No. *
- ----------- ----------- ----------
10.21.1 First Amendment to the Amended and
Restated MicroAge, Inc. Retirement
Savings and Employee Stock Ownership Plan
and Trust Agreement(1) (Incorporated by
reference to Exhibit 10.1 to the
Quarterly Report on Form 10-Q for
MicroAge, Inc. for the quarter ended
April 30, 1995)
10.21.2 Second Amendment to the Amended and
Restated MicroAge, Inc. Retirement
Savings and Employee Stock Ownership Plan
and Trust Agreement dated March 14,
1996(1) (Incorporated by reference to
Exhibit 10.1 to the Quarterly Report on
Form 10-Q for fiscal quarter ended July
28, 1996)
10.22.3 Third Amendment to the Amended and
Restated MicroAge, Inc. Retirement
Savings and Employee Stock Ownership Plan
and Trust Agreement dated October 28,
1996(1)
10.23.4 Fourth Amendment to the Amended and
Restated MicroAge, Inc. Retirement
Savings and Employee Stock Ownership Plan
and Trust Agreement dated December 4,
1996(1)
10.24 1988 MicroAge, Inc. Franchisee Stock
Option Plan (Incorporated by reference to
the Proxy Statement for the Annual
Meeting of Stockholders of MicroAge, Inc.
held February 9, 1988, File No. 0-15995)
10.25 1989 MicroAge, Inc. Franchisee Stock
Option Plan (Incorporated by reference to
the Proxy Statement for the Annual
Meeting of Stockholders of MicroAge, Inc.
held on March 1, 1989, File No. 0-15995)
10.26 MicroAge, Inc. 1995 Associate Stock
Purchase Plan1 (Incorporated by reference
to Appendix B to the Proxy Statement for
the Annual Meeting of Stockholders of
MicroAge, Inc. held on March 15, 1995,
File No. 0-15995)
10.26.1 First Amendment to the MicroAge, Inc.
1995 Associate Stock Purchase Plan(1)
(Incorporated by reference to Exhibit
99.1 to Registration Statement No.
33-58901)
- -------
* Included only in manually signed original
E - 6
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No. *
- ----------- ----------- ----------
10.26.2 Second Amendment to the MicroAge, Inc.
1995 Associate Stock Purchase Plan(1)
(Incorporated by reference to Exhibit
10.3 to the Quarterly Report on Form 10-Q
for fiscal quarter ended January 28,
1996)
10.27 Inventory Financing Agreement by and
between MicroAge Computer Centers, Inc.
and IBM Credit Corporation dated as of
July 9, 1993 (Incorporated by reference
to Exhibit 10.7 to the Quarterly Report
on Form 10-Q for MicroAge, Inc. for the
quarter ended May 1, 1994)
10.27.1 First Amendment dated January 27, 1994 to
Inventory Financing Agreement by and
between MicroAge Computer Centers, Inc.
and IBM Credit Corporation dated as of
July 9, 1993 (Incorporated by reference
to Exhibit 10.8 to the Quarterly Report
on Form 10-Q for MicroAge, Inc. for the
quarter ended May 1, 1994)
10.28 Agreement For Wholesale Financing by and
between IBM Credit Corporation and
MicroAge Computer Centers, Inc. dated
December 17, 1993 (Incorporated by
reference to Exhibit 10.9 to the
Quarterly Report on Form 10-Q for
MicroAge, Inc. for the quarter ended May
1, 1994)
10.29 Restated and Amended Purchase Agreement
dated as of August 3, 1995, by and among
MicroAge Computer Centers, Inc., et al
and Deutsche Financial Services
Corporation (Incorporated by reference to
Exhibit 10.3 to the Quarterly Report on
Form 10-Q for MicroAge, Inc. for the
quarter ended July 30, 1995)
10.29.1 Second Restated Agreement for Wholesale
Financing Agreement dated as of December
17, 1993, by MicroAge Computer Centers,
Inc. and Deutsche Financial Services
Corporation (Incorporated by reference to
Exhibit 10.3.1 to the Quarterly Report on
Form 10-Q for MicroAge, Inc. for the
quarter ended July 30, 1995)
- -------
* Included only in manually signed original
E - 7
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No. *
- ----------- ----------- ----------
10.30 Agreement For Wholesale Financing dated
as of December 17, 1993, by and between
MicroAge Computer Centers, Inc. and IBM
Credit Corporation (Incorporated by
reference to Exhibit 10.9 to the
Quarterly Report on Form 10-Q for
MicroAge, Inc. for the quarter ended May
1, 1994)
10.30.1 Amendment No. 1 to Addendum dated as of
August 3, 1995 to the Agreement For
Wholesale Financing dated as of December
17, 1993, by and between MicroAge
Computer Centers, Inc. and IBM Credit
Corporation (Incorporated by reference to
Exhibit 10.4.1 to the Quarterly Report on
Form 10-Q for MicroAge, Inc. for the
quarter ended July 30, 1995)
10.31 COMPAQ Computer Corporation Dealer
Agreement, dated April 1, 1984, by and
between COMPAQ Computer Corporation and
MicroAge Computer Stores, Inc.
(Incorporated by reference to Exhibit
10.1 to Registration Statement No.
33-14333)
10.32 COMPAQ Computer Corporation Central
Purchase Agreement, dated November 21,
1983 by and between COMPAQ Computer
Corporation and MicroAge Computer Stores,
Inc. (Incorporated by reference to
Exhibit 10.2 to Registration Statement
No. 33-14333)
10.32.1 Amendment dated June 15, 1992 to the
COMPAQ Computer Corporation Central
Purchase Agreement, dated November 21,
1983 by and between COMPAQ Computer
Corporation and MicroAge Computer Stores,
Inc. (Incorporated by reference to
Exhibit 10.8 to Quarterly Report on Form
10-Q for MicroAge, Inc. for the quarter
ended March 31, 1993)
10.33 IBM Business Partner Agreement dated
April 25, 1994 by and between
International Business Machines
Corporation and MicroAge Computer
Centers, Inc. (Incorporated by reference
to Exhibit 10.23 to the Annual Report on
Form 10-K for MicroAge, Inc. for the
fiscal year ended October 30, 1994)
- -------
* Included only in manually signed original
E - 8
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No. *
- ----------- ----------- ----------
10.34 Apple Authorized Dealer Sales Agreement,
dated as of April 1, 1989, by and between
Apple Computer, Inc. and MicroAge
Computer Stores, Inc. (Incorporated by
reference to Exhibit 10.4 to the Annual
Report on Form 10-K for MicroAge, Inc.
for the fiscal year ended September 30,
1989)
10.34.1 Amendment dated April 1, 1989 to the
Apple Authorized Dealer Sales Agreement,
dated as of April 1, 1989, by and between
Apple Computer, Inc. and MicroAge
Computer Centers, Inc. (Incorporated by
reference to Exhibit 10.4.1 to the Annual
Report on Form 10-K for MicroAge, Inc.
for the fiscal year ended September 30,
1990)
10.34.2 Letter Agreement dated September 30, 1992
to the Apple Authorized Dealer Sales
Agreement, dated as of April 1, 1989, by
and between Apple Computer, Inc. and
MicroAge Computer Centers, Inc.
(Incorporated by reference to Exhibit
10.9 to the Quarterly Report on Form 10-Q
for MicroAge, Inc. for the quarter ended
March 31, 1993)
10.34.3 Letter Agreement dated February 28, 1994
to the Apple Authorized Dealer Sales
Agreement, dated as of April 1, 1989, by
and between Apple Computer, Inc. and
MicroAge Computer Centers, Inc.
(Incorporated by reference to Exhibit
10.24.3 to the Annual Report on Form 10-K
for MicroAge, Inc. for the fiscal year
ended October 30, 1994)
10.34.4 Letter Agreement dated June 23, 1994 to
the Apple Authorized Dealer Sales
Agreement, dated as of April 1, 1989, by
and between Apple Computer, Inc. and
MicroAge Computer Centers, Inc.
(Incorporated by reference to Exhibit
10.24.4 to the Annual Report on Form 10-K
for MicroAge, Inc. for the fiscal year
ended October 30, 1994)
10.35 Hewlett-Packard Company U.S. Agreement
for Authorized Resellers effective March
1, 1995, by and between Hewlett Packard
Company and MicroAge Computer Centers,
Inc. (Incorporated by reference to
Exhibit 10.2 to the Quarterly Report on
Form 10-Q for MicroAge, Inc. for the
quarter ended April 30, 1995)
- -------
* Included only in manually signed original
E - 9
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No. *
- ----------- ----------- ----------
10.36 Form of Franchise Agreement by and
between the Company and its franchisees
effective January 1996 (Incorporated by
reference to Exhibit 10.1 to the
Quarterly Report on Form 10- Q for fiscal
quarter ended April 28, 1996)
10.37 Form of Agreement by and between the
Company and its Independent Computer
Dealers effective June 1994 (Incorporated
by reference to Exhibit 10.27 to the
Annual Report on Form 10-K for MicroAge,
Inc. for the fiscal year ended October
30, 1994)
10.38 Form of Purchase Agreement by and between
the Company and its resellers effective
January 1997
10.39 Triple Net Industrial Lease dated as of
December 21, 1993, by and between
Catellus Development Corporation and
MicroAge Computer Centers, Inc.
(Incorporated by reference to Exhibit
10.22 to the Quarterly Report on Form
10-Q for MicroAge, Inc. for the quarter
ended May 1, 1994)
10.40 Triple Net Industrial Lease dated July
28, 1993, by and between Catellus
Development Corporation and MicroAge
Computer Centers, Inc. (Incorporated by
reference to Exhibit 10.24 to the
Quarterly Report on Form 10-Q for
MicroAge, Inc. for the quarter ended May
1, 1994)
10.40.1 Amendment No. One dated December 21, 1993
to Triple Net Industrial Lease dated July
28, 1993, by and between Catellus
Development Corporation and MicroAge
Computer Centers, Inc. (Incorporated by
reference to Exhibit 10.25 to the
Quarterly Report on Form 10-Q for
MicroAge, Inc. for the quarter ended May
1, 1994)
10.41 Lease dated as of October 27, 1994 by and
between Chimiarra Investments Limited and
MicroAge Computer Centers, Inc.
(Incorporated by reference to Exhibit
10.35 to the Annual Report on Form 10-K
for MicroAge, Inc. for the fiscal year
ended October 30, 1994)
- -------
* Included only in manually signed original
E - 10
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No. *
- ----------- ----------- ----------
10.41.1 Addendum dated October 27, 1994 to lease
dated as of October 27, 1994 by and
between Chimiarra Investments Limited and
MicroAge Computer Centers, Inc.
(Incorporated by reference to Exhibit
10.35.1 to the Annual Report on Form 10-K
for MicroAge, Inc. for the fiscal year
ended October 30, 1994)
10.41.2 Lease Amendment dated September 9, 1994
to Triple Net Industrial Leases dated
July, 16, 1985, July 28, 1993, and
December 21, 1993 by and between Catellus
Development Corporation and MicroAge
Computer Centers, Inc. (Incorporated by
reference to Exhibit 10.34.2 to the
Annual Report on Form 10-K for MicroAge,
Inc. for the fiscal year ended October
30, 1994)
10.42 Lease dated March 6, 1990 by and between
MicroAge Computer Centers, Inc. and
Petula Associates, Ltd. and The Alameda
Group, as tenants in common (Incorporated
by reference to Exhibit 10.40 to
Registration Statement No. 33- 45510)
10.42.1 First Amendment dated July 1, 1990 to
Lease dated March 6, 1990 by and between
MicroAge Computer Centers, Inc. and
Petula Associates, Ltd. and The Alameda
Group, as tenants in common (Incorporated
by reference to Exhibit 10.40.1 to
Registration Statement No. 33-45510)
10.42.2 Second Amendment dated August 10, 1993 to
Lease dated March 6, 1990 by and between
MicroAge Computer Centers, Inc. and
Petula Associates, Ltd. and The Alameda
Group, as tenants in common (Incorporated
by reference to Exhibit 10.31.2 to the
Annual Report on Form 10-K for MicroAge,
Inc. for the fiscal year ended September
30, 1993)
10.43 Lease Agreement dated April 12, 1994 by
and between Duke Realty Limited
Partnership and MicroAge Computer
Centers, Inc. (Incorporated by reference
to Exhibit 10.23 to the Quarterly Report
on Form 10-Q for MicroAge, Inc. for the
quarter ended May 1, 1994)
- -------
* Included only in manually signed original
E - 11
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No. *
- ----------- ----------- ----------
10.43.1 Lease Agreement dated November 18, 1994,
by and between Duke Realty Limited
partnership and Kenco Group, Inc.
(Incorporated by reference to Exhibit
10.2 to the Quarterly Report on Form 10-Q
for MicroAge, Inc. for the quarter ended
July 30, 1995)
10.43.2 Assignment and Assumption of Lease
Agreement dated July 18, 1994 to Lease
dated November 18, 1994, by and between
Duke Realty Limited partnership and Kenco
Group, Inc. (Incorporated by reference to
Exhibit 10.2.1 to the Quarterly Report on
Form 10-Q for MicroAge, Inc. for the
quarter ended July 30, 1995)
10.44 Triple Net Industrial Lease dated as of
July 16, 1985, by and between MicroAge
Computer Centers, Inc. Southern Pacific
Industrial Development Company
(Incorporated by reference to Exhibit
10.41 to Registration Statement No.
33-45510)
10.44.1 Amendment No. 1 dated September 18, 1985
to Triple Net Industrial Lease dated as
of July 16, 1985, by and between MicroAge
Computer Centers, Inc. and Southern
Pacific Industrial Development Company
(Incorporated by reference to Exhibit
10.41.1 to Registration Statement No.
33-45510)
10.44.2 Amendment No. 2 dated September 19, 1986
to Triple Net Industrial Lease dated as
of July 16, 1985, by and between MicroAge
Computer Centers, Inc. and Southern
Pacific Industrial Development Company
(Incorporated by reference to Exhibit
10.41.2 to Registration Statement No.
33-45510)
10.44.3 Supplemental Agreement (Amendment No. 3)
dated April 19, 1990 to Triple Net
Industrial Lease dated as of July 16,
1985, by and between MicroAge Computer
Centers, Inc. and Southern Pacific
Industrial Development Company
(Incorporated by reference to Exhibit
10.41.3 to Registration Statement No.
33-45510)
- -------
* Included only in manually signed original
E - 12
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No. *
- ----------- ----------- ----------
10.44.4 Amendment No. 4 dated July 2, 1990 to
Triple Net Industrial Lease dated as of
July 16, 1985, by and between MicroAge
Computer Centers, Inc. Catellus
Development Corporation (fka Santa Fe
Pacific Realty Corporation), successor by
merger with Southern Pacific Industrial
Development Company (Incorporated by
reference to Exhibit 10.41.3 to
Registration Statement No. 33-45510)
10.44.5 Lease Amendment dated July 28, 1993 to
Triple Net Industrial Lease dated as of
July 16, 1985, by and between MicroAge
Computer Centers, Inc. and Catellus
Development Corporation (Incorporated by
reference to Exhibit 10.41.3 to
Registration Statement No. 33-45510)
10.44.6 Lease Amendment dated December 21, 1993
to Triple Net Industrial Lease dated July
16, 1985 by and between Catellus
Development Corporation and MicroAge
Computer Centers, Inc. (Incorporated by
reference to Exhibit 10.20 to the
Quarterly Report on Form 10-Q for
MicroAge, Inc. for the quarter ended May
1, 1994)
10.45 Standard Industrial/Commercial
Single-Tenant Lease dated January 18,
1995, by and between Chamberlain Family
Trust dated September 21, 1979 dba
Chamberlain Enterprises and MicroAge
Computer Centers, Inc. (Incorporated by
reference to Exhibit 10.1 to the
Quarterly Report on Form 10-Q for
MicroAge, Inc. for the quarter ended
January 29, 1995)
10.46 Lease dated September 14, 1993 by and
between MicroAge Computer Centers, Inc.
and Amberjack, Ltd. (Incorporated by
reference to Exhibit 10.30 to the Annual
Report on Form 10- K for MicroAge, Inc.
for the fiscal year ended September 30,
1993)
10.47 Land Purchase and Sale Agreement dated
August 8, 1996 by and between CMD
Southwest Inc. and MicroAge Computer
Centers, Inc.
- -------
* Included only in manually signed original
E - 13
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No. *
- ----------- ----------- ----------
10.48 Single-Tenant Lease-Net, dated March 31,
1995, by and between Chamberlain
Development, L.L.C. and MicroAge Computer
Centers, Inc.
10.48.1 First Amendment, dated as of August 29,
1995, to the Single- Tenant Lease-Net,
dated March 31, 1995, by and between
Chamberlain Development, L.L.C. and
MicroAge Computer Centers, Inc.
10.49 Standard Industrial Lease dated September
27, 1996 by and between Dermody
Properties and MicroAge Logistics
Services, Inc.
11.1 EPS Detail Calculation (Incorporated by
reference to Footnote 2 to the Audited
Financial Statements included herein)
21 List of Subsidiaries of MicroAge, Inc.
23 Consent of Independent Accountants
27 Financial Data Schedule
99.1 Company and Purchasers Rights Agreement
dated as of April 27, 1990 by and between
MicroAge, Inc., Banstock Company Limited
and Fred Israel (Incorporated by
reference to Exhibit 28.3 to the Current
Report on Form 8-K for MicroAge, Inc.
dated May 7, 1990)
99.2 Parent Agreement dated as of April 27,
1990 by and among MicroAge, Inc.,
Olivetti Holding N.V. and Kokudo Sangyo,
Inc. (Incorporated by reference to
Exhibit 28.5 to the Current Report on
Form 8-K for MicroAge, Inc. dated May 7,
1990)
- ----------
* Included only in manually signed original
E - 14
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No. *
- ----------- ----------- ----------
99.3 Trust Agreement dated December 30, 1994
by and between MicroAge, Inc. and First
Interstate Bank of Arizona, N.A., as
Trustee on behalf of The MicroAge, Inc.
Retirement Savings and Employee Stock
Ownership Plan and Trust (Incorporated by
reference to Exhibit 99.8 to the Annual
Report on Form 10-K for MicroAge, Inc.
for the fiscal year ended October 30,
1994)
- ----------
(1) Management contract for compensatory plan or arrangement required to be
filed as an exhibit pursuant to Item 14(c) of Form 10-K.
* Included only in manually signed original
E - 15
FIRST AMENDMENT TO
AMENDED AND RESTATED RIGHTS AGREEMENT
This First Amendment (the "First Amendment") to the Amended and
Restated Rights Agreement dated as of November 5, 1996, between MicroAge, Inc.,
a Delaware corporation (the "Company"), and American Stock Transfer and Trust
Company amends that certain Amended and Restated Rights Agreement (the "Amended
and Restated Rights Agreement") dated September 28, 1994.
WHEREAS, on September 3, 1996, the Board of Directors approved the
appointment of American Stock Transfer and Trust Company (the "Rights Agent") to
serve as successor rights agent to First Interstate Bank of California; and
WHEREAS, pursuant to Section 27, the Company has decided to amend the
provisions of the Amended and Restated Rights Agreement regarding the
qualifications of successor rights agents;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Amendments to Amended and Restated Rights Agreement.
----------------------------------------------------
The Amended and Restated Rights Agreement is hereby amended as follows:
A. Section 21 of the Amended and Restated Rights Agreement is hereby
amended in its entirety to read as follows:
"Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company and to
each transfer agent of the Common Shares or Preferred Shares by
registered or certified mail, and to the holders of the Right
Certificates by first-class mail. The Company may remove the Rights
Agent or any successor Rights Agent upon 30 days' notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Shares or Preferred Shares
by registered or certified mail, and to the holders of the Right
Certificates by first-class mail. If the Rights Agent shall resign or
be removed or shall otherwise become incapable of acting, the Company
shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of 30 days after giving
notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights
Agent or by the holder of a Right Certificate (who shall, with such
notice, submit his Right Certificate for inspection by the Company),
then the registered holder of any Right Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights
Agent. After appointment, any successor Rights Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the
successor Rights Agent any property at the time held by it hereunder,
and execute and deliver any further assurance, conveyance, act or deed
necessary for the purpose. Not later than the effective date of any
such appointment the Company shall file notice thereof in writing with
the predecessor Rights Agent and each transfer agent of the Common
Shares or Preferred 1
<PAGE>
Shares, and mail a notice thereof in writing to the registered holders
of the Right Certificates. Failure to give any notice provided for in
this Section 21, however, or any defect therein, shall not affect the
legality or validity of the resignation or removal of the Rights Agent
or the appointment of the successor Rights Agent, as the case may be."
Section 2. Effectiveness.
--------------
This First Amendment will become effective as of September 3, 1996.
Section 3. Miscellaneous.
--------------
A. Full Force and Effect.
Except as expressly provided in this First Amendment, the Amended and
Restated Rights Agreement will remain unchanged and in full force and effect.
B. Counterparts.
This First Amendment may be executed in any number of
counterparts, all of which taken together will constitute One and the
same instrument, and any of the parties hereto may execute this First
Amendment by signing any such counterpart.
C. Arizona Law.
It is the intention of the parties that the laws of Arizona
will govern the validity of this First Amendment, the construction of
its terms, and the interpretation of the rights and duties of the
parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
ATTEST: MICROAGE, INC.
By:/s/ Barbara Baker /s/ Jeffrey D. McKeever
- --------------------------------- -------------------------------------
Title:___________________________ By: Jeffrey D. McKeever
Its: Chairman and Chief
Executive Officer
ATTEST: AMERICAN STOCK TRANSFER AND
TRUST COMPANY
By:/s/ Susan Silber /s/ Herbert J. Lemmer
- --------------------------------- -------------------------------------
Title:___________________________ By: Herbert J. Lemmer
---------------------------------
Its: Vice President
---------------------------------
2
MICROAGE, INC.
RESTATED
EXECUTIVE SUPPLEMENTAL SAVINGS PLAN
September 26, 1996
<PAGE>
MICROAGE, INC.
RESTATED
EXECUTIVE SUPPLEMENTAL SAVINGS PLAN
TABLE OF CONTENTS
Page
----
SECTION 1 PREAMBLE......................................................... 1
SECTION 2 DEFINITIONS...................................................... 1
SECTION 3 ELIGIBILITY...................................................... 4
SECTION 4 CONTRIBUTIONS.................................................... 6
SECTION 5 WITHDRAWALS...................................................... 8
SECTION 6 CREDITING OF CONTRIBUTIONS AND INCOME............................ 10
SECTION 7 RETIREMENT BENEFITS.............................................. 13
SECTION 8 DEATH BENEFITS................................................... 13
SECTION 9 PAYMENT OF BENEFITS ON RETIREMENT OR DEATH....................... 14
SECTION 10 PAYMENT OF BENEFITS ON TERMINATION OF SERVICE
................................................................ 15
SECTION 11 ADMINISTRATION OF THE PLAN....................................... 17
SECTION 12 ADOPTION OF PLAN BY AFFILIATES................................... 19
SECTION 13 CLAIM REVIEW PROCEDURE........................................... 19
SECTION 14 LIMITATION OF RIGHTS, CONSTRUCTION............................... 20
SECTION 15 LIMITATION ON ASSIGNMENT; PAYMENTS TO LEGALLY
INCOMPETENT DISTRIBUTEE.......................................... 21
SECTION 16 AMENDMENT, MERGER AND TERMINATION................................ 22
SECTION 17 GENERAL PROVISIONS............................................... 22
i
<PAGE>
MICROAGE, INC.
EXECUTIVE SUPPLEMENTAL SAVINGS PLAN
SECTION 1
PREAMBLE
--------
MICROAGE, INC., a corporation organized and existing under the laws
of the State of Delaware (the "Company"), previously adopted the MicroAge, Inc.
Executive Supplemental Savings Plan (the "Plan") in order to provide its key
executives with an opportunity and incentive to save for retirement and other
purposes. By this document, the Company wishes to amend and restate the Plan to
incorporate certain changes.
SECTION 2
DEFINITIONS
-----------
When a word or phrase appears in this Plan with the initial letter
capitalized, and the word or phrase does not begin a sentence, the word or
phrase shall generally be a term defined in this Section 2. The following words
and phrases used in the Plan with the initial letter capitalized shall have the
meanings set forth in this Section 2, unless a clearly different meaning is
required by the context in which the word or phrase is used:
2.1 "Account" or "Accounts" means the accounts which may be
maintained by the Plan Administrator to reflect the interest of a Participant
under the Plan which shall include the following:
(a) "Company Contribution Account" which shall reflect the
portion of a Participant's Account representing contributions made by
a Plan Sponsor to the Trust pursuant to Section 4.2, as adjusted to
reflect the rate of return on the Investment Funds in which the
Account is invested and other credits or charges called for by this
Plan.
(b) "Employee Deferral Account" which shall reflect the
portion of a Participant's Account representing deferrals by a
Participant pursuant to Section 4.1 hereof, as adjusted to reflect
the rate of return on the Investment Funds in which the Account is
invested and other credits or charges called for by this Plan.
(c) "After-Tax Rollover Contribution Account" which shall
reflect the portion of a Participant's Account representing the
amount of all After-Tax Rollover Contributions made by a Participant
pursuant to Section 4.3, as adjusted to reflect the rate of return on
the Investment Funds in which the Account is invested and other
credits or charges called for by this Plan.
1
<PAGE>
2.2 "Affiliate" means (a) a corporation which is a member of the same
controlled group of corporations (within the meaning of Section 414(b) of the
Code) as is a Plan Sponsor, (b) any other trade or business (whether or not
incorporated) controlling, controlled by, or under common control (within the
meaning of Section 414(c) of the Code) with a Plan Sponsor, and (c) any other
corporation, partnership, or other organization which is a member of an
affiliated service group (within the meaning of Section 414(m) of the Code) with
a Plan Sponsor or which is otherwise required to be aggregated with a Plan
Sponsor pursuant to Section 414(o) of the Code.
2.3 "After-Tax Rollover Contribution" means a contribution by a
Participant pursuant to Section 4.3.
2.4 "Base Salary" means the total basic compensation paid by a Plan
Sponsor to a Participant during the portion of the Plan Year in which an
election by a Participant to make Deferral Contributions pursuant to Section 4.1
is in effect.
2.5 "Beneficiary" means only the person or trust that a Participant,
in his most recent written designation filed with the Plan Administrator, shall
have designated to receive his benefit under the Plan in the event of his death;
provided that, if the Participant has failed to make a designation or if no
person designated shall be alive or if no trust shall have been established by
the Participant, and no successor Beneficiary shall have been designated and be
alive, any death benefit payable hereunder on behalf of such Participant shall
be paid to the legal representative of such deceased Participant's estate.
Changes in designations of Beneficiaries may be made upon written notice to the
Plan Administrator in any form as the Plan Administrator may prescribe and the
Plan Administrator shall immediately notify the Trustee, in writing, of any
designation or change in designation.
2.6 "Board of Directors" means the Board of Directors of the Company.
2.7 "Bonus" means the additional cash compensation paid to a
Participant by a Plan Sponsor pursuant to any incentive or bonus plan, program,
or practice of the Plan Sponsor which is subject to an election to make Deferral
Contributions pursuant to Section 4.1(b).
2.8 "Code" means the Internal Revenue Code of 1986, as amended.
2.9 "Compensation" means the sum of a Participant's Base Salary and
Bonuses plus any amounts deferred under the Management Equity Plan.
2.10 "Deferral Contributions" means contributions by a Participant
pursuant to Section 4.1 of this Plan.
2.11 "Delayed Retirement Date" means the first day of the month
subsequent to a Participant's Normal Retirement Date during which he actually
terminates service with a Plan Sponsor.
2
<PAGE>
2.12 "Distributable Amount" means the least of (i) the maximum
elective contributions that could be made to the 401(k) Plan for the Plan Year
consistent with Sections 402(g) and 401(k)(3) of the Code and the provisions of
the 401(k) Plan, (ii) the Participant's Deferral Contributions made pursuant to
Section 4.1 above during the Plan Year, or (iii) the balance of the
Participant's Employee Deferral Account.
2.13 "Effective Date" of this restated Plan with respect to the
Company and any Plan Sponsor that previously adopted this Plan means November 1,
1996. With respect to each Plan Sponsor that adopts this Plan after November 1,
1996, Effective Date means, the date designated by the adopting Plan Sponsor.
2.14 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
2.15 "401(k) Plan" means the MicroAge, Inc. Retirement Savings and
Employee Stock Ownership Plan, as the same may be amended from time to time.
2.16 "Income Fund" means one of the Investment Funds established by
the Plan Administrator, the assets of which shall be invested by the Trustee
with the objective of earning interest income without exposing the fund to
significant fluctuations in value.
2.17 "Investment Fund" means the investment fund or funds established
by the Plan Administrator pursuant to Section 6.3, into which Participants may
direct the Trustee to invest amounts credited to their Bookkeeping Accounts.
2.18 "Leadership Team" means the group consisting of officers of the
Plan Sponsors holding the positions and titles of Vice President or higher.
2.19 "Normal Retirement Age" means age 65.
2.20 "Normal Retirement Date" means the first day of the month
coinciding with or next following the date on which the Participant attains
Normal Retirement Age.
2.21 "Participant" means any individual providing services to a Plan
Sponsor who has become a Participant in the Plan for as long as his benefit
under the Plan has not been fully distributed pursuant to the provisions of the
Plan.
2.22 "Participation Agreement" means the agreement entered into by a
Plan Sponsor and a Participant as set forth in Section 3.2.
2.23 "Plan Administrator" means the Company or the committee
designated by the Company to carry out its responsibilities under the Plan as
set forth in Section 11.3.
3
<PAGE>
2.24 "Plan Sponsor" means individually (i) the Company or any
successor thereto and (ii) each organization which has adopted the Plan and
become a party to the Trust in the manner set forth in Section 12 of the Plan.
2.25 "Plan Year" has meant the calendar year. For the Plan Year
beginning January 1, 1996, the Plan Year shall be a short Plan Year beginning
January 1, 1996 and ending on October 27, 1996. Thereafter, the Plan Year shall
be the Company's fiscal year, i.e., the Plan Year shall end on the Sunday
closest to October 31.
2.26 "Plan Year Quarter" means the quarters of the Plan Year, which
for convenience, shall be deemed to begin on the first day of each Plan Year and
on each February 1, May 1 and August 1.
2.27 "Retirement" means termination of a Participant's service with a
Plan Sponsor on his Normal Retirement Date or Delayed Retirement Date.
2.28 "Trust Agreement" means that certain trust agreement established
pursuant to the Plan between the Company and the Trustee or any trust agreement
hereafter established, the provisions of which are incorporated herein by
reference.
2.29 "Trustee" means the Trustee under the Trust Agreement.
2.30 "Trust Fund" means all assets of whatsoever kind or nature held
from time to time by the Trustee pursuant to the Trust Agreement and forming a
part of this Plan, without distinction as to income and principal and without
regard to source, i.e., Plan Sponsor or Participant contributions, earnings or
forfeitures.
2.31 "Valuation Date" means the last business day of each Plan Year
and such other dates as the Plan Administrator may designate.
2.32 "Years of Service" means the years of service credited to a
Participant for purposes of determining such Participant's vested benefit under
the 401(k) Plan, all as determined under Sections 2.66 and 6.01 of the 401(k)
Plan as such provisions may be amended, superseded or replaced from time to
time. All years of service credited to a Participant under the 401(k) Plan shall
be considered in determining the Participant's Years of Service under this Plan.
SECTION 3
ELIGIBILITY
-----------
3.1 GENERAL. Participation in the Plan shall be limited to those
individuals who are members of the Leadership Team. The Company has determined
that each current member of the Leadership Team holds a key position of
management and responsibility and that the Leadership Team presently constitutes
a select group of management or highly compensated employees for
4
<PAGE>
purposes of Title I of ERISA. The Compensation Committee of the Board of
Directors shall have the full discretion and authority to exclude a member of
the Leadership Team from participation in the Plan if it concludes that such
member is not properly characterized as a management or highly compensated
employee. The Compensation Committee's decision shall be made in its discretion
and shall be final and binding for all purposes under this Plan.
3.2 PARTICIPATION AGREEMENT. Subsequent to an individual becoming
eligible to participate in the Plan, such individual shall enter into a
Participation Agreement in such form and at such time as the Plan Administrator
shall require. If the individual's initial Participation Agreement is executed
and delivered within thirty (30) days of the day on which the individual is
notified that he is eligible to participate in the Plan, the individual's
Deferral Contributions may be determined with reference to Compensation earned
on or after the first day of the first full payroll period next following
receipt of the Participation Agreement by the Plan Administrator or as of such
other uniform date (not earlier than the first day of the next full payroll
period) as may be designated by the Plan Administrator. If the individual does
not execute and deliver the Participation Agreement within the initial thirty
(30) day period, the individual's Deferral Contributions may be determined with
reference to Compensation earned on or after the first day of the first payroll
period in any later Plan Year Quarter by executing and delivering a
Participation Agreement to the Plan Administrator prior to the first day of such
quarter. The individual shall designate on the Participation Agreement the
amount of his Deferral Contributions and shall authorize the reduction of his
Compensation in an amount equal to his Deferral Contributions.
3.3 DISCONTINUANCE OF PARTICIPATION. Once an individual is designated
as a Participant, he will continue as such for all future Plan Years unless and
until the individual is no longer categorized as a member of the Leadership
Team, or the Compensation Committee specifically acts to discontinue the
individual's participation, or the Participant's participation is suspended
pursuant to Section 5.3(c) hereof. The Compensation Committee may discontinue an
individual's participation in the Plan at any time for any or no reason. If an
individual's participation is discontinued, the individual will no longer be
eligible to make Deferral Contributions. The individual will not be entitled to
receive a distribution, however, until the occurrence of one of the events
listed in Sections 5.1 through 5.3 or Sections 7.1 through 7.5, unless the
Compensation Committee, in the exercise of its discretion, directs that a
distribution be made as of an earlier dated in which case the individual's
Accounts shall be distributed on the same basis as if the individual's
employment had been terminated.
SECTION 4
CONTRIBUTIONS
-------------
4.1 PARTICIPANT CONTRIBUTIONS.
(a) DEFERRAL OF BASE SALARY. For any Plan Year, a
Participant may elect to defer a portion of the Base Salary otherwise payable to
him. Any such deferrals shall be in whole percentages or a specific dollar
amount of the Participant's Base Salary, as specified in the
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Participant's Participation Agreement. Contributions of amounts deferred shall
be made by the Plan Sponsor directly to the Trust.
(b) DEFERRAL OF BONUSES. A Participant may also elect to
defer a portion of any Bonuses which might be payable to him by a Plan Sponsor.
Any such deferrals shall be in whole percentages or a specific dollar amount of
the Participant's Bonuses, as specified in the Participant's Participation
Agreement. Contributions of amounts so deferred shall be made by the Plan
Sponsor directly to the Trust.
(c) LIMITATIONS ON DEFERRALS. The Plan Administrator may
limit the amount of a Participant's Deferral Contributions in accordance with
such uniform rules as it may adopt from time to time.
4.2 MATCHING CONTRIBUTIONS. In addition to any contributions required
to be made by a Plan Sponsor pursuant to Section 6.2(b), for each year in which
a Plan Sponsor achieves a net profit, the Plan Sponsor may make matching
contributions to the Trust on behalf of each of its Participants who has elected
to make any Deferral Contributions during the Plan Year under Section 4.1
hereof, other than Participants who terminated service with the Plan Sponsor
during the Plan Year for reasons other than death, disability or Retirement. The
matching contribution shall equal such amount as the Plan Sponsor, in its sole
and absolute discretion, determines, but the matching contribution shall not
exceed ten percent (10%) of the Plan Sponsor's before-tax income for the year.
The matching contribution shall be allocated to each eligible Participant's
Company Contribution Account as of the year-end Valuation Date in the ratio that
each such Participant's Deferral Contributions for the Plan Year bears to the
Deferral Contributions made by all of that Plan Sponsor's Participants for the
Plan Year. In the exercise of its discretion, the Plan Sponsor may choose to
disregard Deferral Contributions in excess of a ceiling (e.g., 10% of
Compensation) set from time to time by the Plan Sponsor and may further limit
allocations in its sole and absolute discretion in a uniform and
nondiscriminatory manner. In no event shall matching contributions be made in
stock or other securities of a Plan Sponsor.
4.3 AFTER-TAX ROLLOVER CONTRIBUTIONS. Each Participant may, upon the
Plan Administrator's prior approval, make after-tax contributions to the Trust.
Such contributions may be made through payroll deductions or otherwise. A
Participant's after-tax contributions, in the aggregate, shall not exceed the
distribution received by the Participant from a nonqualified deferred
compensation plan not sponsored by any Plan Sponsor and received by the
Participant within the twelve (12) month period before or after the Participant
commences employment with a Plan Sponsor.
4.4 CHANGE IN CONTRIBUTIONS. A Participant may change the amount or
percentage of contributions under Sections 4.1 or 4.3 once during each Plan Year
Quarter by written notice to the Plan Administrator, which change shall be
effective beginning with the Participant's first full payroll period beginning
in the Plan Year Quarter immediately following the Plan Administrator's receipt
of such written notice.
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4.5 SUSPENSION OF CONTRIBUTIONS.
(a) SUSPENSION. A Participant may suspend his contributions under
Sections 4.1 or 4.3 as of the first day of the first full payroll period in any
Plan Year Quarter, but in no event more than once during each Plan Year, by
giving written notice to the Plan Administrator on a form prescribed by the Plan
Administrator at least thirty (30) days prior to the date on which the
suspension shall become effective.
(b) RESUMPTION OF CONTRIBUTIONS. A Participant who has suspended his
contributions pursuant to Section 4.5(a) above and who applies to the Plan
Administrator in a timely manner shall be entitled to resume his contributions
in accordance with Section 4.3 on the first day of any Plan Year Quarter
following the expiration of at least six (6) months from the date on which the
suspension became effective. Any application shall be made in writing to the
Plan Administrator, on a form prescribed by the Plan Administrator, at least
thirty (30) days prior to the first day of the applicable Quarter.
4.6 DISTRIBUTION AND TRANSFER OF PARTICIPANT DEFERRALS.
(a) ELECTION. A Participant must elect either to have the
Distributable Amount distributed from this Plan and contributed to the 401(k)
Plan as a pre-tax contribution or to have such amount distributed to the
Participant in a single lump sum payment. Elections made pursuant to the
preceding sentence must be filed with the Plan Administrator prior to the first
day of the applicable Plan Year. Any election made pursuant to this Section
shall be irrevocable during the Plan Year covered by the election but may be
changed prior to the beginning of a new Plan Year by submitting a revised
election to the Plan Administrator in writing prior to the first day of the new
Plan Year.
(b) DETERMINATION OF 401(k) PLAN CONTRIBUTION. Not later
than thirty (30) days after the close of the Plan Year, i.e., November 30th, the
Plan Administrator shall request the administrator of the 401(k) Plan to inform
the Plan Administrator of the amount of elective contributions that each
Participant may contribute to the 401(k) Plan for the immediately preceding Plan
Year consistent with Sections 402(g) and 401(k)(3) of the Code and the
provisions of the Plan. The Plan Administrator then shall compute the
Distributable Amount for each Participant pursuant to Section 2.12 and Section
4.7(a).
(c) DISTRIBUTION. The Plan Administrator will thereafter,
but in no event later than two and one-half (2 1/2) months after the close of
the Plan Year, distribute on behalf of each Participant an amount equal to the
Distributable Amount. If the Participant has elected to transfer the
Distributable Amount to the 401(k) Plan, the Plan Administrator will make a
direct transfer of the Distributable Amount to the Trust Fund maintained
pursuant to the 401(k) Plan. If the Participant has elected to receive the
Distributable Amount, the Plan Administrator will make a single lump sum payment
to the Participant and the Plan Sponsor will include the Distributable Amount in
the Participant's gross income for the calendar years in which the Compensation
to which the Deferral Contributions are attributable was earned. Amounts
attributable to the positive or
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negative rate of return allocable to the Participant's Accounts will not be
distributed until an event described in Sections 5.1 through 5.3 or Sections 7.1
through 7.4 has occurred.
(d) TREATMENT OF MATCHING CONTRIBUTIONS. The matching
contributions, if any, due pursuant to Section 4.2 shall be reduced by the
amount of the matching contributions attributable to the Distributable Amount.
If the matching contributions have already been credited to the Participant's
Matching Contributions Account when the Distributable Amount is calculated and
distributed, the Matching Contributions Account shall be debited for the amount
of the matching contributions attributable to the Distributable Amount. The
Participant shall then be entitled to receive whatever matching contributions
may be due pursuant to the 401(k) Plan if the Distributable Amount is
transferred to the 401(k) Plan. No matching contributions shall be due if the
Participant has elected to receive a cash distribution of the Distributable
Amount.
SECTION 5
WITHDRAWALS
-----------
5.1 AFTER-TAX ROLLOVER CONTRIBUTIONS. A Participant may at any time,
upon written notice to the Plan Administrator at least thirty (30) days in
advance of the last day of any Plan Year Quarter, on a form prescribed by the
Plan Administrator, request a withdrawal of all or any portion of the lesser of
(i) the total amount of After-Tax Rollover Contributions contributed by the
Participant, or (ii) the then current balance in the Participant's After-Tax
Rollover Contribution Account. Such request for a withdrawal from the
Participant's After-Tax Rollover Contribution Account shall designate a specific
dollar amount to be withdrawn therefrom; provided, however, that no withdrawal
request shall be made for a withdrawal that is less than $500.00, unless such
withdrawal is of the entire balance of the After- Tax Rollover Contribution
Account. Upon approval of the Plan Administrator, any amount payable under this
Section 5.1 shall be paid as soon as administratively practicable after the
first day of the Plan Year Quarter following the Plan Administrator's timely
receipt of a withdrawal request. No Participant shall make more than one
withdrawal under this Section 5.1 in any Plan Year Quarter.
5.2 HARDSHIP. In the event of financial hardship, and only after a
Participant has withdrawn all amounts available to him under Section 5.1 hereof,
a Participant may make a written request to the Plan Administrator for a
hardship withdrawal from his Employee Deferral Account. For purposes of this
Section, the term "financial hardship" shall mean any extraordinary or
unforeseeable need for funds arising from events beyond the Participant's
control for the purpose of: (i) paying medical expenses described in Section
213(d) of the Code incurred by the Participant, the Participant's spouse, or any
dependent of the Participant, as defined in Section 152 of the Code; (ii)
purchasing (excluding mortgage payments) a principal residence for the
Participant; (iii) paying tuition, room and board, and related expenses for the
next 12 months of post-secondary education for the Participant, or the
Participant's spouse, children or dependents, as defined in Section 152 of the
Code; (iv) preventing the eviction of the Participant from his principal
residence or the foreclosure on the mortgage of the Participant's principal
residence; or (v) such other circumstance as is determined by the Plan
Administrator, in its sole and absolute discretion, to constitute a
8
<PAGE>
financial hardship. Any determination of the existence of financial hardship and
the amount to be withdrawn on account thereof shall be made by the Plan
Administrator. Notwithstanding the foregoing, no hardship withdrawal shall be
made which is less than $500.00, unless the distribution is of the entire
portion of the Participant's Employee Deferral Account. A request for a hardship
withdrawal must be made in writing at least thirty (30) days in advance, on a
form provided by the Plan Administrator, and must be expressed as a specific
dollar amount. The amount of a hardship withdrawal may not exceed the lesser of
(a) the amount required to meet the Participant's financial hardship or (b) the
entire balance of the Participant's Employee Deferral Account less the
difference between (i) the Participant's Deferral Contributions made during the
current Plan Year and (ii) the maximum elective contributions that could be made
to the 401(k) Plan for the current Plan Year consistent with Sections 402(g) of
the Code.
5.3 ACCELERATION OF BENEFITS.
(a) GENERAL. A Participant may elect to receive an
accelerated withdrawal by filing an election with the Plan Administrator on such
forms as may be prescribed from time to time by the Plan Administrator. If a
Participant makes such an election, except as otherwise provided below, the
Participant shall receive a single lump sum payment equal to the sum of
ninety-five percent (95%) of the Participant's "available Account balance." For
this purpose, the Participant's "available Account balance" is equal to the
Participant's Employee Deferral Account plus the Participant's vested interest
in the Participant's Company Contribution Account. For purposes of determining
the amount to be distributed, the Participant's Accounts shall be valued as of
the Valuation Date immediately preceding the date of the withdrawal. In
calculating such value, Deferral Contributions made by the Participant during
the Plan Year in which the request is made shall be disregarded as shall any
matching contributions attributable to such Deferral Contributions. The
Participant's vested interest in his Company Contribution Account shall be
determined as of the day on which the accelerated withdrawal is paid to the
Participant. The accelerated withdrawal shall be paid as soon as reasonably
possible following the filing of the election by the Participant.
(b) FORFEITURE. The Participant shall forfeit the
remaining five percent (5%) of the "available Account balance" as well as the
unvested portion of the Participant's Company Contribution Account as of the day
on which the accelerated withdrawal is distributed to the Participant. The
Deferral Contributions made by the Participant during the Plan Year in which the
accelerated withdrawal request is made and the matching contributions
attributable to such Deferral Contributions (both of which are not subject to or
available for withdrawal) shall not be forfeited.
(c) SUSPENSION OF PARTICIPATION. If a Participant elects
to receive an accelerated withdrawal, the Participant's right to participate in
the Plan shall be suspended for twelve (12) months from the date the accelerated
withdrawal is paid to the Participant. Upon expiration of the twelve (12) month
suspension period, the Participant shall be permitted to execute a new
Participation Agreement and to begin making Deferral Contributions in accordance
with Section 3.2, as of the first day of the first payroll period in any
subsequent Plan Year Quarter.
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(d) REPAYMENT OF ACCELERATED BENEFITS BY PARTICIPANT. A
Participant who receives an accelerated withdrawal under this Section 5.3 shall
be required to repay the Trustee the full amount of the payment if the Company
is or becomes subject to a pending proceeding as a debtor under the United
States Bankruptcy Code within three (3) months of the date of the Participant's
filing of the election to receive an accelerated withdrawal pursuant to Section
5.3(a).
5.4 CREDITING OF WITHDRAWALS. Withdrawals and other distributions
shall be charged pro rata to the Investment Funds in which the Account of the
Participant is invested, pursuant to his designation under Section 6.3 hereof.
SECTION 6
CREDITING OF CONTRIBUTIONS AND INCOME
-------------------------------------
6.1 TRANSFER TO TRUSTEE. All Deferral Contributions, After-Tax
Rollover Contributions and Plan Sponsor contributions shall be transmitted to
the Trustee by the Plan Sponsor as soon as reasonably practicable and shall be
credited to the Employee Deferral Account, After-Tax Rollover Contribution
Account and Company Contribution Account, respectively, of the Participant
immediately upon receipt. All payments from an Account between Valuation Dates
shall be charged against the Account as of the preceding Valuation Date. The
Accounts are bookkeeping accounts only and the Plan Administrator is not in any
way obligated to segregate assets for the benefit of any Participant.
6.2 CREDITING TO BOOKKEEPING ACCOUNTS.
(a) GENERAL. Except as otherwise provided in the Plan and
Trust, as of each Valuation Date the Plan Administrator shall adjust each
Participant's Accounts with the positive or negative rate of return on the
Investment Funds selected by the Participant pursuant to Section 6.3(b). The
rate of return will be determined by the Plan Administrator pursuant to Section
6.3(c) and will be credited or charged against the "adjusted balance" of the
Account, which will be the balance of the Account as of the preceding Valuation
Date less all withdrawals, distributions and other amounts chargeable against
the Account pursuant to any other provisions of this Plan since the prior
Valuation Date. In the exercise of its discretion, the Plan Administrator also
may direct that a portion of the Employee Deferral Contributions made since the
prior Valuation Date be considered in calculating the adjusted balance of the
Employment Deferral Account. If the Participant's Distributable Amount for a
Plan Year is transferred to the 401(k) Plan pursuant to Section 4.6, despite the
preceding sentence, the Plan Administrator, in the exercise of its discretion,
may elect to include all or any portion of the Distributable Amount in the
adjusted balance of the Participant's Accounts for purposes of making the
adjustments called for by this Section for the valuation period in which the
Distributable Amount is distributed to the 401(k) Plan. The amount representing
any positive rate of return on the Distributable Amount shall not be transferred
to the 401(k) Plan but shall remain in this Plan. In addition, the amount
representing any negative rate of return on the Distributable Amount shall not
be serve to reduce the amount transferred to the 401(k)
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<PAGE>
Plan but rather shall serve to reduce the remaining balance of the Participant's
Accounts in this Plan, provided, however, that the amount representing any
negative rate of return shall serve to reduce the amount transferred to the
401(k) Plan if the Participant's Account balance is less than the amount that
would otherwise be transferred to the 401(k) Plan. Notwithstanding any provision
hereof to the contrary, if the Participant elects to receive a distribution of
the Distributable Amount pursuant to Section 4.6(a), no adjustment shall be made
for any positive rate of return with respect to the Distributable Amount, but
any negative rate of return shall serve to reduce the Distributable Amount.
(b) INCOME FUND GUARANTEE. For each Plan Year, the Plan
Sponsors shall guarantee that the Participants' "adjusted account balance" that
is invested in the Income Fund shall earn a minimum annual rate of return equal
to ten percent (10%), or such other percentage as may be determined and
announced by the Company before the beginning of the Plan Year. For purposes of
the preceding sentence, a Participant's "adjusted account balance" shall mean
the portion of the Participant's Account that is invested in the Income Fund as
of the first day of such Plan Year (or the effective date of a Participant's
participation in the Plan, if such effective date is not the first day of the
Plan Year), plus 50% of the contributions made by the Participant pursuant to
Section 4 that are credited to the Income Fund pursuant to the Participant's
direction during the applicable Plan Year. If the earnings on the investments
that comprise the Income Fund are not adequate to assure such minimum annual
rate of return, the Plan Sponsors shall make a special contribution to the Trust
Fund in the amount of the shortfall, which contribution shall be credited to the
Income Fund and shall be allocated to the Accounts of Participants whose
Accounts are invested in the Income Fund in the same manner as investment
earnings are otherwise allocated.
6.3 INVESTMENT DIRECTION.
(a) INVESTMENT FUNDS. The Plan Administrator shall
establish one or more Investment Funds in which each Participant shall invest
amounts credited to his Account. The Investment Funds shall include an Income
Fund and such other funds as may be selected from time to time by the Plan
Administrator. The Investment Funds may be changed from time to time by the Plan
Administrator.
(b) PARTICIPANT DIRECTIONS.
(1) GENERAL. Upon becoming a Participant of the
Plan, each Participant may direct that all of the amounts attributable to his
Account be invested in a single investment fund or may direct fractional
(percentage) increments of his Account to be invested in such fund or funds as
he shall desire, on such forms and in accordance with such procedures, if any,
as may be established by the Plan Administrator. Such designation may be changed
as of the first day of any Plan Year Quarter, with respect to future
contributions and transfers among Investment Funds, by filing an election with
the Plan Administrator, on a form prescribed by the Plan Administrator, at least
thirty (30) days (or such fewer number of days as may be prescribed by the Plan
Administrator) prior to the applicable Plan Year Quarter. The designation will
continue until changed by the timely submission of a new form, which change will
be effective as of the first day of the next succeeding Plan Year Quarter.
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(2) INCOME FUND. Notwithstanding paragraph (1),
above, a Participant shall only be permitted to invest amounts credited to his
Account in, or otherwise change such direction with respect to, the Income Fund
as of the first day of each Plan Year.
(3) DEFAULT SELECTION. In the absence of any
designation, a Participant will be deemed to have directed the investment of his
Accounts in such Investment Funds as the Trustee, in its sole and absolute
discretion, shall determine. In no event may a Participant designate the
investment of his Account in stock or other securities of a Plan Sponsor.
(4) IMPACT OF ELECTION. The Participant's
selection of Investment Funds shall serve only as a measurement of the value of
the Accounts of said Participant pursuant to Section 6.2(a) and Section 6.3(c)
and the Plan Administrator and the Trustee are not required to invest a
Participant's Accounts in accordance with the Participant's selections.
(c) RATE OF RETURN. As soon as possible after each
Valuation Date, the Plan Administrator shall determine the rate of return,
positive or negative, experienced on each of the Investment Funds. The rate of
return determined by the Plan Administrator in good faith and in its discretion
pursuant to this Section shall be binding and conclusive on the Participant, the
Participant's Beneficiary and all parties claiming through them.
(d) CHARGES. The Plan Administrator may charge each
Participant's Account for the reasonable expenses of carrying out investment
instructions directly related to such Account.
SECTION 7
RETIREMENT BENEFITS
-------------------
7.1 RETIREMENT DATE. The provisions of this Section 7 apply only in
the event that a Participant remains in the service of a Plan Sponsor or an
Affiliate until reaching a Retirement date. Wherever reference is made in this
Plan to a Retirement date, it shall mean the Normal Retirement Date or Delayed
Retirement Date of a Participant, whichever is applicable.
7.2 NORMAL RETIREMENT. The Participant shall be entitled, as of his
Normal Retirement Date, to the entire value of his Accounts.
7.3 DELAYED RETIREMENT. A Participant shall be entitled, as of his
Delayed Retirement Date, to the entire value of his Accounts.
7.4 PAYMENT OF RETIREMENT BENEFIT. Any benefit payable under this
Section 7 shall be paid in accordance with Section 9 or Section 10 of the Plan,
whichever is applicable, after receipt by the Trustee from the Plan
Administrator of notice of the Retirement of the Participant.
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SECTION 8
DEATH BENEFITS
--------------
8.1 DEATH BEFORE TERMINATION OF EMPLOYMENT. Upon the death of a
Participant prior to the termination of his service with all Plan Sponsors and
Affiliates, the Beneficiary of such Participant shall be entitled to the entire
value of his Accounts.
8.2 DEATH AFTER TERMINATION OF EMPLOYMENT. Upon the death of a
Participant who, at the time of his death, has terminated his service with all
Plan Sponsors and Affiliates, the Beneficiary of such Participant shall be
entitled to receive the vested portion of the Participant's Accounts, determined
pursuant to Section 10.
8.3 ENTITLEMENT TO DEATH BENEFIT. If subsequent to the death of a
Participant, the Participant's Beneficiary dies while entitled to receive
benefits under this Plan, the successor Beneficiary of the Participant, if any,
shall be entitled to receive benefits of the Participant under this Plan.
However, if no successor Beneficiary shall have been designated and shall be
alive, the benefits shall be paid to the legal representative of the deceased
Beneficiary's estate to be paid according to the deceased Beneficiary's will, or
if the deceased Beneficiary has no will, by the laws of intestacy of the state
in which the deceased Beneficiary resided at the date of the deceased
Beneficiary's death. If the Participant is married, a designation of a person
other than the Participant's spouse as his Beneficiary with respect to more than
fifty percent (50%) of the amount allocated to the Participant's Accounts shall
not be effective without the written consent of the Participant's spouse.
Subject to the foregoing, a Beneficiary designation may be changed or revoked by
a Participant at any time provided the change or revocation is filed with the
Plan Administrator.
8.4 PAYMENT OF DEATH BENEFIT. Any benefit payable under this Section 8
shall be paid in accordance with Section 9 or Section 10 of the Plan, whichever
is applicable, after receipt by the Trustee from the Plan Administrator of
notice of the death of the Participant.
SECTION 9
PAYMENT OF BENEFITS ON RETIREMENT OR DEATH
------------------------------------------
9.1 COMMENCEMENT OF PAYMENTS. Upon the Retirement or death of a
Participant, the value of the Accounts of such Participant shall be determined
as of the Valuation Date coinciding with or next following the Participant's
Retirement date or date of death, provided, however, that the Participant or, if
applicable, his Beneficiary, may request that payment be made promptly after the
date of Retirement or death of a Participant. In such event, and upon approval
of the Plan Administrator, in its sole and absolute discretion, the Accounts of
the Participant shall be valued as of the Valuation Date next preceding the
Participant's Retirement date or date of death, increased by any After-Tax
Rollover Contributions, Deferral Contributions and Plan Sponsor contributions
made since that Valuation Date, and in that event payment shall commence or be
made no later than sixty (60) days after the Retirement date or death of the
Participant or sixty (60) days
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after the Participant or the Participant's Beneficiary, as the case may be,
files a request for distribution, whichever is later. If the Plan Administrator
does not approve prompt payment as described in the preceding sentence, then
payment to a Participant, or to the Beneficiary of a deceased Participant, shall
be made no later than sixty (60) days after the Valuation Date coinciding with
or next following the Retirement date or the death of the Participant.
Notwithstanding the foregoing, if the amount of the payment required to be made
on that date cannot be ascertained by that date, payment shall be made no later
than sixty (60) days after the earliest date on which the amount of the payment
can be ascertained under the Plan.
9.2 FORM OF PAYMENT. The payment of a Participant's benefits shall be
made either in a lump sum in cash, or in cash payments in annual, quarterly, or
monthly installments over a period certain not exceeding ten (10) years, such
method of payment to be elected by the Participant in his Participation
Agreement. If installment payments are made, the unpaid balance shall be
continued to be invested in the Trust Fund in accordance with the Participant's
direction and shall continue to share in any gain or loss attributable to the
Investment Fund or Funds.
SECTION 10
PAYMENT OF BENEFITS ON TERMINATION OF SERVICE
---------------------------------------------
10.1 TERMINATION OF SERVICE DEFINED. Transfer of a Participant from
one Plan Sponsor to another Plan Sponsor or to an Affiliate shall not be deemed
for any purpose under the Plan to be a termination of service by the
Participant. A Participant shall be deemed to have terminated service only upon
the earlier of his death, Retirement or other actual termination of service with
all Plan Sponsors and Affiliates.
10.2 TERMINATION OF SERVICE BENEFITS. In the event of the termination
of service of a Participant for reasons other than death or Retirement, the
Participant shall be entitled to that portion of his Accounts in which he is
vested, as set forth in Section 10.3 below.
10.3 VESTING OF BENEFITS.
(a) DEFERRAL CONTRIBUTIONS AND AFTER-TAX ROLLOVER
CONTRIBUTIONS. Each Participant shall at all times be fully vested in all
amounts credited to a Participant's Employee Deferral Account and After-Tax
Rollover Contribution Account, and a Participant's rights and interest therein
shall not be forfeitable for any reason. The amounts distributable to a
Participant from the Participant's Employee Deferral Account and After-Tax
Rollover Contribution Account shall equal the value in such Accounts as of the
Valuation Date coinciding with or immediately preceding the date of the
Participant's termination of service, increased by any After-Tax Rollover
Contributions and Deferral Contributions made by the Participant subsequent to
that Valuation Date.
(b) FULL VESTING. Each Participant shall be fully vested
in the amounts credited to his Company Contribution Account on and after the
first to occur of the following events:
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(1) Attainment by the Participant of the age of
sixty-five (65) years;
(2) The date of death of the Participant;
(3) Termination of the Plan; or
(4) The completion of five (5) Years of Service.
(c) VESTING SCHEDULE. If a Participant terminates service
with a Plan Sponsor at a time when the Participant is not fully vested in the
amounts credited to his Company Contribution Account, the Participant's vested
interest shall be determined in accordance with the following vesting schedule:
Years of Service Percentage Vested
---------------- -----------------
Fewer than 1 Year 0%
1 but less than 2 20%
2 but less than 3 40%
3 but less than 4 60%
4 but less than 5 80%
5 or more 100%
A Participant's vested interest in his Company Contribution Account
shall be determined as of the Valuation Date immediately preceding the first
distribution to the Participant from his Company Contribution Account following
his termination of employment.
10.4 FORM OF PAYMENT. Payment shall be made either in a lump sum in
cash, or in cash payments in annual, quarterly or monthly installments over a
period certain not exceeding ten (10) years, such method of payment to be
elected by the Participant in his Participation Agreement. If installment
payments are made, the unpaid balance shall continue to be invested in the Trust
Fund and the Participant will continue to be entitled to make investment
elections pursuant to Section 6.3(b) and to have his Accounts adjusted pursuant
to Section 6.2(a). Payment shall commence or be made as soon as practicable
after the Participant's date of termination of service, but in no event later
than one year following that date.
10.5 CHANGES IN VESTING SCHEDULE. In the event that an amendment to
this Plan directly or indirectly changes the vesting schedule set forth in
Section 10.3 of the Plan, the vested percentage for each Participant in his
benefit accumulated to the date when the amendment is adopted shall not be
reduced as a result of the amendment. In addition, any Participant with at least
three (3) Years of Service may irrevocably elect, by written notice to the Plan
Administrator within the election period hereinafter provided, to remain under
the pre- amendment vesting schedule with respect to all of his benefits accrued
both before and after the amendment. The election period shall begin no later
than the date on which the amendment is adopted and shall end no earlier than
sixty (60) days after the latest of: (i) the date on which the amendment is
adopted, (ii) the date on
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<PAGE>
which the amendment becomes effective, or (iii) the date on which the
Participant is issued written notice of the amendment by a Plan Sponsor or the
Plan Administrator.
10.6 FORFEITURES. Any portion of a Participant's Company Contribution
Account in which he is not vested as provided in Section 10.3 above shall be
forfeited in the Plan Year in which the Participant receives a distribution
under this Section 10.
SECTION 11
ADMINISTRATION OF THE PLAN
--------------------------
11.1 ADOPTION OF TRUST. The Company shall enter into a Trust Agreement
with the Trustee, which Trust Agreement shall form a part of this Plan and is
hereby incorporated herein by reference.
11.2 POWERS OF THE PLAN ADMINISTRATOR.
(a) The Plan Administrator is the named fiduciary with
respect to the administration of the Plan.
(b) The Plan Administrator shall have the power and
discretion to perform the administrative duties described in this Plan or
required for proper administration of the Plan and shall have all powers
necessary to enable it to properly carry out such duties. Without limiting the
generality of the foregoing, the Plan Administrator shall have the power and
discretion to construe and interpret this Plan, to hear and resolve claims
relating to this Plan, and to decide all questions and disputes arising under
this Plan. The Plan Administrator shall determine, in its discretion, the
service credited to the Participants, the status and rights of a Participant,
and the identity of the Beneficiary or Beneficiaries entitled to receive any
benefits payable hereunder on account of the death of a Participant. The
Compensation Committee of the Board of Directors shall have the discretion to
exclude Leadership Team members from participation in the Plan and to
discontinue a Participant's participation in the Plan.
(c) Except as is otherwise provided hereunder, the Plan
Administrator shall determine the manner and time of payment of benefits under
this Plan. All benefit disbursements by the Trustee shall be made upon the
instructions of the Plan Administrator.
(d) The decision of the Plan Administrator upon all
matters within the scope of its authority shall be binding and conclusive upon
all persons.
(e) The Plan Administrator shall file all reports and
forms lawfully required to be filed by the Plan Administrator and shall
distribute any forms, reports or statements to be distributed to Participants
and others.
16
<PAGE>
(f) The Plan Administrator shall keep itself advised with
respect to the investment of the Trust Fund and shall report to the Plan Sponsor
regarding the investment and reinvestment of the Trust Fund not less frequently
than annually.
11.3 CREATION OF COMMITTEE. The Company may appoint a committee to
perform its duties as Plan Administrator by the adoption of appropriate Board of
Directors resolutions. The committee must consist of at least two (2) members,
and they shall hold office during the pleasure of the Board of Directors. The
committee members shall serve without compensation but shall be reimbursed for
all expenses by the Company. The committee shall conduct itself in accordance
with the provisions of this Section 11. The members of the committee may resign
with thirty (30) days notice in writing to the Company and may be removed
immediately at any time by written notice from the Company.
11.4 CHAIRMAN AND SECRETARY. The committee shall elect a chairman from
among its members and shall select a secretary who is not required to be a
member of the committee and who may be authorized to execute any document or
documents on behalf of the committee. The secretary of the committee or his
designee shall record all acts and determinations of the committee and shall
preserve and retain custody of all such records, together with such other
documents as may be necessary for the administration of this Plan or as may be
required by law.
11.5 APPOINTMENT OF AGENTS. The committee may appoint such other
agents, who need not be members of the committee, as it may deem necessary for
the effective performance of its duties, whether ministerial or discretionary,
as the committee may deem expedient or appropriate. The compensation of any
agents who are not employees of the Company shall be fixed by the committee
within any limitations set by the Board of Directors.
11.6 MAJORITY VOTE AND EXECUTION OF INSTRUMENTS. In all matters,
questions and decisions, the action of the committee shall be determined by a
majority vote of its members. They may meet informally or take any ordinary
action without the necessity of meeting as a group. All instruments executed by
the committee shall be executed by a majority of its members or by any member of
the committee designated to act on its behalf.
11.7 ALLOCATION OF RESPONSIBILITIES. The committee may allocate
responsibilities among its members or designate other persons to act on its
behalf. Any allocation or designation, however, must be set forth in writing and
must be retained in the permanent records of the committee.
11.8 CONFLICT OF INTEREST. No member of the committee who is a
Participant shall take any part in any action in connection with his
participation as an individual. Such action shall be voted or decided by the
remaining members of the committee.
11.9 ACTION TAKEN BY PLAN SPONSOR. Any action to be taken by a Plan
Sponsor shall be taken by resolution adopted by its board of directors or an
executive committee thereof; provided, however, that by resolution, the board of
directors or an executive committee
17
<PAGE>
thereof may delegate to any committee of the board or any officer of the Plan
Sponsor the authority to take any actions hereunder, other than the power to
determine the basis of Plan Sponsor contributions.
11.10 FIDUCIARY AUTHORITY. All delegations of fiduciary responsibility
set forth in this document regarding the determination of benefits and the
interpretation of the terms of the Plan confer discretionary authority upon the
named fiduciary.
SECTION 12
ADOPTION OF PLAN BY AFFILIATES
------------------------------
The adoption of this Plan by any Affiliate or any corporation related
to the Company by function or operation shall not be effective without the
written consent of the Company. Any adoption shall be evidenced by certified
copies of the resolution of the foregoing board of directors indicating the
adoption and by the execution of the Trust by the adopting corporation or
Affiliate. The resolution shall define the Effective Date for the purpose of the
Plan as adopted by the corporation or Affiliate.
SECTION 13
CLAIM REVIEW PROCEDURE
----------------------
13.1 GENERAL. In the event that a Participant or Beneficiary is denied
a claim for benefits under this Plan (the "claimant"), the Plan Administrator
shall provide to the claimant written notice of the denial which shall set
forth:
(a) the specific reason or reasons for the denial;
(b) specifIc references to pertinent Plan provisions on
which the Plan Administrator based its denial;
(c) a description of any additional material or
information needed for the claimant to perfect the claim and an
explanation of why the material or information is needed;
(d) a statement that the claimant may:
(i) Request a review upon written application
to the Plan Administrator;
(ii) Review pertinent Plan documents; and
(iii) Submit issues and comments in writing;
and
18
<PAGE>
(e) That any appeal the claimant wishes to make of the
adverse determination must be in writing to the Plan Administrator
within sixty (60) days after receipt of the Plan Administrator's
notice of denial of benefits. The Plan Administrator's notice must
further advise the claimant that his failure to appeal the action to
the Plan Administrator in writing within the sixty (60) day period
will render the Plan Administrator's determination final, binding,
and conclusive.
13.2 APPEALS.
(a) If the claimant should appeal to the Plan
Administrator, he, or his duly authorized representative, may submit, in
writing, whatever issues and comments he, or his duly authorized representative,
feels are pertinent. The Plan Administrator shall re-examine all facts related
to the appeal and make a final determination as to whether the denial of
benefits is justified under the circumstances. The Plan Administrator shall
advise the claimant in writing of its decision on his appeal, the specific
reasons for the decision, and the specific Plan provisions on which the decision
is based. The notice of the decision shall be given within sixty (60) days of
the claimant's written request for review, unless special circumstances (such as
a hearing) would make the rendering of a decision within the sixty (60) day
period infeasible, but in no event shall the Plan Administrator render a
decision regarding the denial of a claim for benefits later than one hundred
twenty (120) days after its receipt of a request for review. If an extension of
time for review is required because of special circumstances, written notice of
the extension shall be furnished to the claimant prior to the date the extension
period commences.
(b) If, upon appeal, the Plan Administrator shall grant
the relief requested by the claimant, then, in addition, the Plan Administrator
shall award to the claimant reasonable fees and expenses of counsel, or any
other duly authorized representative of claimant, which shall be paid by the
Company. The determination as to whether such fees and expenses are reasonable
shall be made by the Company in its sole and absolute discretion and such
determination shall be binding and conclusive on all parties.
13.3 NOTICE OF DENIALS. The Plan Administrator's notice of denial of
benefits shall identify the address to which the claimant may forward his
appeal.
SECTION 14
LIMITATION OF RIGHTS, CONSTRUCTION
----------------------------------
14.1 LIMITATION OF RIGHTS. Neither this Plan, the Trust nor membership
in the Plan shall give any employee or other person any right except to the
extent that the right is specifically fixed under the terms of the Plan. The
establishment of the Plan shall not be construed to give any individual a right
to be continued in the service of a Plan Sponsor or as interfering with the
right of a Plan Sponsor to terminate the service of any individual at any time.
19
<PAGE>
14.2 CONSTRUCTION. The masculine gender, where appearing in the Plan,
shall include the feminine gender (and vice versa), and the singular shall
include the plural, unless the context clearly indicates to the contrary.
Headings and subheadings are for the purpose of reference only and are not to be
considered in the construction of this Plan. If any provision of this Plan is
determined to be for any reason invalid or unenforceable, the remaining
provisions shall continue in full force and effect. All of the provisions of
this Plan shall be construed and enforced in accordance with the laws of the
State of Delaware.
SECTION 15
LIMITATION ON ASSIGNMENT; PAYMENTS TO LEGALLY
---------------------------------------------
INCOMPETENT DISTRIBUTEE
-----------------------
15.1 ANTI-ALIENATION CLAUSE. No benefit which shall be payable under
the Plan to any person shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any
attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber,
charge or otherwise dispose of the same shall be void. No benefit shall in any
manner be subject to the debts, contracts, liabilities, engagements or torts of
any person, nor shall it be subject to attachment or legal process for or
against any person, except to the extent as may be required by law.
15.2 PERMITTED ARRANGEMENTS. Section 15.1 shall not preclude
arrangements for the withholding of taxes from benefit payments, arrangements
for the recovery of benefit overpayments, arrangements for the transfer of
benefit rights to another plan, or arrangements for direct deposit of benefit
payments to an account in a bank, savings and loan association or credit union
(provided that such arrangement is not part of an arrangement constituting an
assignment or alienation). Additionally, Section 15.1 shall not preclude
arrangements for the distribution of the benefits of a Participant or
Beneficiary pursuant to the terms and provisions of a "domestic relations order"
in accordance with such procedures as may be established from time to time by
the Plan Administrator.
15.2 PAYMENT TO MINOR OR INCOMPETENT. Whenever any benefit which shall
be payable under the Plan is to be paid to or for the benefit of any person who
is then a minor or determined by the Plan Administrator to be incompetent by
qualified medical advice, the Plan Administrator need not require the
appointment of a guardian or custodian, but shall be authorized to cause the
same to be paid over to the person having custody of the minor or incompetent,
or to cause the same to be paid to the minor or incompetent without the
intervention of a guardian or custodian, or to cause the same to be paid to a
legal guardian or custodian of the minor or incompetent if one has been
appointed or to cause the same to be used for the benefit of the minor or
incompetent.
20
<PAGE>
SECTION 16
AMENDMENT, MERGER AND TERMINATION
---------------------------------
16.1 AMENDMENT. The Company shall have the right at any time, by an
instrument in writing duly executed, acknowledged and delivered to the Plan
Administrator, to modify, alter or amend this Plan, in whole or in part,
prospectively or retroactively; provided, however, that the duties and
liabilities of the Plan Administrator and the Trustee hereunder shall not be
substantially increased without its written consent; and provided further that
the amendment shall not reduce any Participant's vested interest in the Plan,
calculated as of the date on which the amendment is adopted. If the Plan is
amended by the Company after it is adopted by an Affiliate, unless otherwise
expressly provided, it shall be treated as so amended by such Affiliate without
the necessity of any action on the part of the Affiliate. Any Affiliate or other
corporation adopting this Plan hereby delegates the authority to amend the Plan
to the Company. An Affiliate or other corporation that has adopted this Plan may
terminate its future participation in the Plan at any time.
16.2 MERGER OR CONSOLIDATION OF COMPANY. The Plan shall not be
automatically terminated by the Company's acquisition by or merger into any
other employer, but the Plan shall be continued after such acquisition or merger
if the successor employer elects and agrees to continue the Plan. All rights to
amend, modify, suspend, or terminate the Plan shall be transferred to the
successor employer, effective as of the date of the merger.
16.3 TERMINATION OF PLAN OR DISCONTINUANCE OF CONTRIBUTIONS. It is the
expectation of the Company that this Plan and the payment of contributions
hereunder will be continued indefinitely. However, continuance of the Plan is
not assumed as a contractual obligation of the Company, and the right is
reserved at any time to terminate this Plan or to reduce, temporarily suspend or
discontinue contributions hereunder.
16.4 LIMITATION OF COMPANY'S LIABILITY. The adoption of this Plan is
strictly a voluntary undertaking on the part of the Company and shall not be
deemed to constitute a contract between the Company and any employee or
Participant or to be consideration for, an inducement to, or a condition of the
employment of any employee. A Participant, employee, or Beneficiary shall not
have any right to retirement or other benefits except to the extent provided
herein.
SECTION 17
GENERAL PROVISIONS
------------------
17.1 STATUS OF PARTICIPANTS AS UNSECURED CREDITORS. All benefits under
the Plan shall be the unsecured obligations of the Company and each Plan
Sponsor, as applicable, and, except for those assets which will be placed in the
Trust established in connection with this Plan, no assets will be placed in
trust or otherwise segregated from the general assets of the Company or each
Plan Sponsor, as applicable, for the payment of obligations hereunder. To the
21
<PAGE>
extent that any person acquires a right to receive payments hereunder, such
right shall be no greater than the right of any unsecured general creditor of
the Company and each Plan Sponsor, as applicable.
17.2 UNIFORM ADMINISTRATION. Whenever in the administration of the
Plan any action is required by the Plan Administrator, such action shall be
uniform in nature as applied to all persons similarly situated.
17.3 HEIRS AND SUCCESSORS. All of the provisions of this Plan shall be
binding upon all persons who shall be entitled to any benefits hereunder, and
their heirs and legal representatives.
To signify its adoption of this restated Plan document, the Company
has caused this restated Plan document to be executed by a duly authorized
officer of the Company on this 26th day of September, 1996.
MicroAge, Inc.
By /s/ Jeffrey D. McKeever
----------------------------------
Its Chairman & CEO
------------------------------
22
FIRST AMENDMENT TO
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
THIS FIRST AMENDMENT TO SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (the
"Amendment"), is made and entered into as of September 26, 1996.
R E C I T A L S
- - - - - - - -
WHEREAS, MicroAge, Inc. (the "Company") has previously adopted the
Supplemental Executive Retirement Plan of MicroAge, Inc., dated October 1, 1992
(the "SERP"); and
WHEREAS, pursuant to Section 8.01 of the SERP the Compensation
Committee of the Company's Board of Directors may amend the SERP;
and
WHEREAS, pursuant to action taken by the Compensation Committee on
September 26, the SERP was amended as follows:
A M E N D M E N T
- - - - - - - - -
1. Section 2.02 of the SERP is hereby amended to read in its
entirety as follows:
2.02 "Average Compensation" means the average of a
Participant's Compensation for the highest five calendar years out of
the last fifteen calendar years ending with the calendar year in which
occurs his or her Normal Retirement Date or earlier termination of his
or her employment with the Company.
2. Section 2.08 of the SERP is hereby amended to read in its
entirety as follows:
2.08 "Compensation" means the amount paid to the Participant
which is, or in the absence of any salary or bonus deferral under any
deferred compensation plan of the Company and any contributions by the
Participant to the MicroAge, Inc. Retirement Savings and Employee Stock
Ownership Plan would be, considered "wages" under Section 3401(a) of
the Code. Notwithstanding the foregoing, the term "Compensation" shall
not include the Warrant Restitution and Founder's Bonus paid to Jeffrey
D. McKeever and Alan P. Hald pursuant to action taken by the Company's
Compensation Committee on February 22, 1995.
3. The first sentence of Section 2.14 of the SERP is hereby
amended to read in its entirety as follows:
2.14 "Other Benefits" means the sum of: (i) the annual amount
the Participant would receive as a primary benefit under the Social
Security Act as in effect on the
1
<PAGE>
date of calculation if he continued to work until his Normal Retirement
Date with wages for purposes of that Act equal to his most recent rate
of Compensation; and (ii) the Actuarial Equivalent of the amount which
would be payable to the Participant in the form of a life annuity
payable monthly commencing on the Participant's Normal Retirement Date
utilizing the sum of the amounts, if any, in (a) the Participant's
"Employer Contribution Account" in The MicroAge, Inc. Retirement
Savings and Employee Stock Ownership Plan on the date of his
termination of employment; and (b) the Participant's Company
contribution account in the MicroAge, Inc. Executive Supplemental
Savings Plan on the date of his termination of employment; provided,
however, that if any amount was previously distributed to the
Participant from the Participant's Company account or the Company
contribution account, proper adjustment shall be made to the annuity
amount to reflect the amount of such distribution.
IN WITNESS WHEREOF, the Company has adopted this First Amendment to
Supplemental Executive Retirement Plan as of the day and year first above
written.
MICROAGE, INC.
a Delaware corporation
By: /s/Jeffrey D. McKeever
----------------------
Name: Jeffrey D. McKeever
-------------------
Title: Chairman and CEO
-------------------
2
FORM OF FIRST AMENDMENT TO THE
MICROAGE 1994 MANAGEMENT EQUITY PROGRAM
AWARD AGREEMENT FOR
CERTAIN EXECUTIVES
THIS FIRST AMENDMENT to the Award Agreement dated December 14, 1993
("Award Agreement"), is entered into by MicroAge, Inc. ("Company"), and certain
executives (the "Executive") pursuant to the Management Equity Plan ("MEP")
under the MicroAge, Inc. Long- Term Incentive Plan ("Plan"), as of December 14,
1995.
WHEREAS, the Company and the Executive entered into the Award Agreement
effective December 14, 1993, to enable the Executive to acquire an option to
purchase Company stock by making salary deferrals; and
WHEREAS, the exercise price of the option to purchase Company common
stock, $.01 par value ("Common Stock"), under the Award Agreement is $24.83 per
share, after giving effect to a 3-for-2 stock split that was payable on January
13, 1994; and
WHEREAS, the closing price of the Common Stock on the Nasdaq National
Market on December 13, 1995, was $8.75 per share; and
WHEREAS, in order to provide a meaningful incentive for the Executive
under the MEP, the Compensation Committee of the Company's Board of Directors
has reduced the exercise price under the Award Agreement to the current fair
market value of the Common Stock.
NOW THEREFORE, the Executive and the Company agree as follows:
1. Paragraph 5 of the Award Agreement is hereby amended and
restated in its entirety as follows:
<PAGE>
5. NUMBER OF OPTIONS GRANTED. In exchange for electing to waive the
amount of compensation specified in the 1994-1996 Waiver Table in Paragraph 4,
above, you are hereby granted an option to purchase the number of shares of
MicroAge, Inc. Common Stock calculated pursuant to the formula below:
(1) TOTAL COMPENSATION WAIVED (1994-1996) $______
(2) $______ (TOTAL COMPENSATION WAIVED)
MULTIPLIED BY 3.5234705 (THE "LEVERAGING
FACTOR") $_______
(3) COMMON STOCK CLOSING PRICE ON DECEMBER
13, 1995 (THE "COMMON STOCK PRICE") $8.75
(4) TOTAL OPTIONS GRANTED (2) / (3) ______
2. Paragraphs 8, 9, and 10 of the Award Agreement shall be
amended by deleting the references to the number "ten" and replacing such
reference with the phrase "the Leveraging Factor."
3. This First Amendment shall be effective as December 14,
1995.
MICROAGE, INC.
By:
--------------------------------
Jeffrey D. McKeever
Chairman of the Board and
Chief Executive Officer
--------------------------------
Executive
2
MICROAGE, INC.
FORM OF 1997 MANAGEMENT EQUITY PROGRAM
AWARD AGREEMENT
(EXECUTIVE)
December 4, 1996
Dear Executive:
Pursuant to the action taken by the Board of Directors of MicroAge,
Inc. (the "Company") and the Compensation Committee of the Board of Directors,
you are hereby offered participation in the 1997 Management Equity Program (the
"1997 MEP") under the MicroAge, Inc. Long-Term Incentive Plan (the "Plan").
Under the 1997 MEP, you have the opportunity to receive options to restructure
your compensation package to some extent. Essentially, you may elect to purchase
shares of the common stock of the Company if you irrevocably elect to waive all
or a portion of your base salary and any bonuses you may receive for the 1997,
1998, and 1999 fiscal years, and later years if necessary, under the following
terms and conditions.
BEFORE YOU ELECT TO PARTICIPATE IN THE 1997 MEP, READ THIS AWARD AGREEMENT. YOU
WILL BE REQUIRED TO SIGN THIS AWARD AGREEMENT, AND YOUR SIGNATURE WILL EVIDENCE
THAT YOU HAVE READ THIS AWARD AGREEMENT, UNDERSTAND IT, AND AGREE WITH ITS TERMS
AND CONDITIONS.
TO PARTICIPATE IN THE 1997 MEP, YOU MUST COMPLETE AND SIGN THIS AWARD
AGREEMENT AND RETURN IT TO AL LYONS BY 12:00 P.M. NOON ON FRIDAY,
DECEMBER 27, 1996.
1. EFFECTIVE DATE. The effective date of your participation in the 1997
MEP is January 6, 1997.
2. 1997-1999 WAIVER. You hereby elect to waive a portion of your salary
and bonuses received for the Company's 1997, 1998, and 1999 fiscal years in the
amounts specified in the tables below (please understand that bonuses for later
years may be automatically waived, as may be necessary to make up any deficit
(see footnote 2 and Example A attached to this Award Agreement)):
<PAGE>
<TABLE>
<CAPTION>
1997-1999 WAIVER TABLE
----------------------
<S> <C> <C> <C>
============================= ============================ ============================ =============================
Fiscal Year Salary1 Bonus2 Total
- ----------------------------- ---------------------------- --------------------------- ------------------------------
1997 $ $ $
(11/4/96 - 11/2/97)
- ----------------------------- ---------------------------- --------------------------- ------------------------------
1998 $ $ $
(11/3/97 - 11/1/98)
- ----------------------------- ---------------------------- --------------------------- ------------------------------
1999 $ $ $
(11/2/98 - 10/31/99)
- ----------------------------- ---------------------------- --------------------------- ------------------------------
1997-1999 $ $ $ 3
============================= ============================ =========================== ==============================
</TABLE>
3. NUMBER OF OPTIONS GRANTED. In exchange for electing to waive the
amount of compensation specified in the 1997-1999 Waiver Table in Paragraph 2,
above, you are hereby granted an option to purchase the number of shares of
MicroAge, Inc. Common Stock calculated pursuant to the formula below (to be
completed by MicroAge):
<TABLE>
<CAPTION>
<S> <C>
(1) Total Compensation Waived (1997-1999 fiscal years): $_______________
(2) $ (Total Compensation Waived) $_______________
------------------------
Multiplied by Seven (7) (the Leverage Factor"):
(3) Common Stock Closing Price on Effective Date
(January 6, 1997) (the "Common Stock Price"): $_______________
(4) Total Options Granted (2) / (3) (rounded up):
(See Example B attached to this Award Agreement) $_______________
</TABLE>
___________________________
1 The minimum annual salary waiver amount is $8,000 (5% of your Current
Base Salary). The maximum annual salary waiver amount is $24,000 (15% of your
Current Base Salary).
2 There is no minimum annual bonus waiver amount. The maximum annual
bonus waiver amount is $40,000 (25% of your Current Base Salary). If the bonus
amount you elect to waive in any year is more than the bonus actually paid to
you for that year, the deficit amount will be added to your bonus waiver amount
for the following year. Deficit amounts will continue to be carried forward
until made up or until January 6, 2006. See Example A attached to this Award
Agreement. Note: The bonus waiver amounts are for bonuses relating to a given
fiscal year, whether or not the bonus is paid during such fiscal year. For
example, if a bonus for fiscal year 1997 is paid in December 1997 (during fiscal
year 1998), any 1997 bonus waiver amount you have included in the Waiver Table
would be deducted from your December 1997 bonus.
3 The minimum waiver amount (salary and bonuses combined) for the
three-year period (1997- 1999) is $______ (50% of your Current Base Salary). The
maximum waiver amount (salary and bonuses combined) for the three-year period
(1997-1999) is $_______ (100% of your Current Base Salary).
2
<PAGE>
(See Example B attached to this Award Agreement) $______________
4. VESTING OF OPTIONS. Your options will vest in one-third (1/3)
increments beginning on the first day of the fiscal year which is three years
following the first day of the fiscal year for each year you elect to waive base
salary and/or bonus amounts. HOWEVER, your options will not fully vest until you
have actually waived all of the compensation you agreed to waive.
FOR EXAMPLE, the options to be purchased with the compensation
you receive for fiscal year 1997 will vest in 1/3 increments beginning on
November 1, 1999 (the first day of fiscal year 2000) and will be 100% vested on
October 29, 2001 (the first day of fiscal year 2002). Correspondingly, the
options to be purchased with the waived compensation you receive for fiscal year
1998 will vest in 1/3 increments beginning on October 30, 2000 (the first day of
fiscal year 2001) and will be 100% vested on November 4, 2002 (the first day of
fiscal year 2002), and so on.
If you elect to waive a specific amount of your bonuses for
the next three fiscal years, but do not receive bonuses for the next three
fiscal years sufficient to cover the amount you agreed to waive, the bonuses you
may be otherwise entitled to receive in later years (up through January 6, 2006)
will be used to make up any shortfall on a "first-in, first-out" theory. See
Examples C and D attached to this Award Agreement.
Notwithstanding the above, your options will become fully
vested and exercisable as of January 6, 2006, unless you otherwise terminate
employment before such date.
5. EXPIRATION OF OPTIONS. Subject to Section 6 and 7 of this Award
Agreement, your options will expire, unless sooner exercised, on January 6,
2006.
6. TERMINATION OF EMPLOYMENT.
Death. Upon your death, your beneficiary will be entitled to
receive the number of options determined by multiplying the sum of your
compensation actually waived up to the date of your death by the Leverage Factor
and dividing the product by the Common Stock Price; provided, however, that only
the total compensation waived by you up to the date of your death will be
considered. All options received by your beneficiary will be fully vested and
immediately exercisable. Your beneficiary will have up to one year from the date
of your death to exercise the options. After that one year period, the options
will be cancelled. Under no circumstances will you or your beneficiary be
entitled to receive cash equal to all or any portion of the compensation you
elected to waive under the 1997 MEP.
Disability. Upon your termination of employment due to a
"Disability" (as that term is defined in the Plan) you will be entitled to
receive the number of options determined by multiplying the sum of your
compensation actually waived up to the date of your termination by the Leverage
Factor and dividing the product by the Common Stock Price; provided, however,
that only the total compensation waived by you up to the date of your
termination will be considered. All options received will be fully vested and
immediately exercisable. You will have up to one year from the date of
termination of employment to exercise the options. After that one year period,
the options will be cancelled. Under no circumstances will you be entitled to
receive cash equal to all or any portion of the compensation you elected to
waive under the 1997 MEP.
3
<PAGE>
Voluntary or Involuntary. Upon your voluntary or involuntary
termination of employment, you will be entitled to receive the number of options
determined by multiplying the sum of your compensation actually waived up to the
date of your termination by the Leverage Factor and dividing the product by the
Common Stock Price; provided, however, that only the total compensation waived
by you up to the date of termination of employment will be considered. Your
options will continue to vest under the above vesting schedule as if you
continued to be employed by the Company and continued participating in the 1997
MEP. Under no circumstances will you be entitled to receive cash equal to all or
any portion of the compensation you elected to waive under the 1997 MEP.
7. TERMINATION OF 1997 MEP. If the Committee decides to terminate the
1997 MEP, you will be entitled to receive a number of options determined by
multiplying the sum of your compensation actually waived up to the date of your
termination by the Leverage Factor and dividing the product by the Common Stock
Price; provided, however, that only the total compensation waived by you up to
the date of termination will be considered. All options received will be fully
vested and immediately exercisable. You will have up to thirty days from the
date of such termination to exercise the options. After such thirty day period,
the options will be cancelled. Under no circumstances will you be entitled to
receive cash equal to all or any portion of the compensation you elected to
waive under the 1997 MEP.
8. CHANGE OF CONTROL. Upon a "Change of Control" (as that term is
defined in the Plan), the terms of Section 13.10 and 14.2 of the Plan will apply
to all options issued under the 1997 MEP. Upon a Change of Control, you will be
entitled to receive the number of options determined by multiplying the sum of
your compensation actually waived up to the date of the Change of Control by the
Leverage Factor and dividing the product by the Common Stock Price; provided,
however, that only the total compensation waived by you up to the date of Change
of Control will be considered. All options will be fully vested and immediately
exercisable. In the event of a dissolution or liquidation of the Company or a
merger or consolidation in which the Company would not be the surviving or
resulting corporation, you will be entitled to receive the number of options
determined by multiplying the sum of your compensation actually waived up to the
date of exercise by the Leverage Factor and dividing the product by the Common
Stock Price; provided, however, that only the total compensation waived by you
up to the date of exercise will be considered. All options will be fully vested
and exercisable (a) in the case of a dissolution or liquidation, at anytime
after the Company's Board of Directors takes action authorizing the dissolution
or liquidation of the Company or (b) in the case of a merger or consolidation in
which the Company would not be the resulting or surviving corporation, upon the
Company's public announcement that a definitive agreement regarding such a
merger or consolidation has been reached. Under no circumstances will you be
entitled to receive cash equal to all or any portion of the compensation you
elected to waive under the 1997 MEP.
9. COMPANY INFORMATION. By signing this Award Agreement, you
acknowledge that you have been given, or were offered, a copy of the Company's
(i) Annual Report on Form 10-K for the fiscal year ended October 29, 1995, and
(ii) Quarterly Reports on Form 10-Q for the fiscal quarters ended January 28,
April 28, and July 28, 1996 (the "SEC Reports"), and that you were given an
opportunity to ask questions of any of the Company's executive officers
regarding the SEC Reports or any other matter regarding the Company.
10. RISK OF INVESTMENT. By signing this Award Agreement, you recognize
that your participation in the 1997 MEP is a speculative investment in that the
success or failure of your investment depends on the market value of the
Company's Common Stock over a several year period. You further recognize that
all or a portion of your investment (i.e., your salary and bonus waiver) may be
lost. You also
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acknowledge that you were given the opportunity to consult with your personal
advisor(s) regarding the 1997 MEP.
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I hereby elect to participate in the 1997 MEP under the terms and
conditions set forth above and acknowledge that I have read and understood the
terms and conditions of the 1997 MEP.
SIGNATURE____________________________
DATE_________________________________
SSN__________________________________
ACCEPTED:
MICROAGE, INC.
BY___________________________________
Jeffrey D. McKeever
ITS: Chairman of the Board and
Chief Executive Officer
6
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
dated as of November 4, 1996
by and between
MICROAGE, INC.
and
JEFFREY D. MCKEEVER
<PAGE>
TABLE OF CONTENTS
ARTICLE I - DUTIES AND TERM.................................................. 1
Section 1.1 Continued Employment....................................... 1
Section 1.2 Position and Responsibilities.............................. 1
Section 1.3 Term....................................................... 2
Section 1.4 Location................................................... 2
ARTICLE II - COMPENSATION.................................................... 3
Section 2.1 Base Salary................................................ 3
Section 2.2 Bonus Payments............................................. 3
Section 2.3 Stock Options.............................................. 3
Section 2.4 Additional Benefits........................................ 4
ARTICLE III - TERMINATION OF EMPLOYMENT...................................... 6
Section 3.1 Death or Retirement of Executive........................... 6
Section 3.2 By Executive............................................... 6
Section 3.3 By Company................................................. 6
ARTICLE IV - COMPENSATION UPON TERMINATION OF EMPLOYMENT..................... 6
Section 4.1 Upon Termination for Death or Disability................... 6
Section 4.2 Upon Termination by Company for Cause or by
Executive Without Good Reason.............................. 7
Section 4.3 Upon Termination by the Company Without Cause
or by Executive for Good Reason Prior to a
Change of Control.......................................... 8
Section 4.4 Upon Termination by the Company Without Cause
Following a Change of Control or by Executive
for Good Reason Following a Change of Control
or Pursuant to a Change of Control Resignation............. 12
Section 4.5 Certain Additional Payments by Company..................... 12
ARTICLE V - RESTRICTIVE COVENANTS............................................ 15
Section 5.1 Confidential Information and Materials..................... 15
Section 5.2 General Knowledge.......................................... 16
Section 5.3 Executive Obligations as to Confidential
Information and Materials.................................. 17
Section 5.4 Inform Subsequent Employers................................ 17
Section 5.5 Ideas and Inventions....................................... 17
Section 5.6 Inventions and Patents..................................... 18
Section 5.7 Copyrights................................................. 18
Section 5.8 Conflicting Obligations and Rights......................... 18
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Section 5.9 Non-Competition............................................ 19
Section 5.10 Non-Disparagement.......................................... 20
Section 5.11 Remedies................................................... 20
Section 5.12 Consulting Agreement....................................... 21
Section 5.13 Scope of Article........................................... 21
ARTICLE VI - COMPANY'S RIGHT OF FIRST REFUSAL................................ 21
Section 6.1 The Company's Right of First Refusal....................... 21
Section 6.2 Exceptions................................................. 22
ARTICLE VII - MISCELLANEOUS.................................................. 23
Section 7.1 Definitions................................................ 23
Section 7.2 Key Man Insurance.......................................... 28
Section 7.3 Mitigation of Damages; No Set-Off; Dispute Resolution...... 28
Section 7.4 Successors; Binding Agreement.............................. 29
Section 7.5 Modification; No Waiver.................................... 29
Section 7.6 Severability............................................... 30
Section 7.7 Notices.................................................... 30
Section 7.8 Assignment................................................. 30
Section 7.9 Entire Understanding....................................... 30
Section 7.10 Executive's Representations............................... 31
Section 7.11 Liability of Company with Respect to Insurance Policies.... 31
Section 7.12 Governing Law.............................................. 31
EXHIBIT A - SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
EXHIBIT B - SPLIT DOLLAR INSURANCE AGREEMENT
EXHIBIT C - REGISTRATION RIGHTS
EXHIBIT D - LIST OF DESIGNATED BENEFICIARIES
EXHIBIT E - EXECUTIVE'S RIGHTS
EXHIBIT F - EXECUTIVE'S EXISTING OBLIGATIONS AND CLAIMS
EXHIBIT G - CONSULTING AGREEMENT
EXHIBIT H - DISPUTE RESOLUTION PROCEDURES
- ii -
<PAGE>
AMENDED AND RESTATED
--------------------
EMPLOYMENT AGREEMENT
--------------------
Amended and Restated EMPLOYMENT AGREEMENT (this "Agreement") made and
entered into as of November 4, 1996 by and between MICROAGE, INC., a Delaware
corporation (the "Company"), and JEFFREY D. MCKEEVER ("Executive").
R E C I T A L S :
- - - - - - - - -
WHEREAS, the Company and Executive entered into an Employment Agreement
on October 1, 1992 (the "Employment Agreement"); and
WHEREAS, pursuant to Section 7.5 of the Employment Agreement, the
Employment Agreement may be amended only by a written document signed by each of
the parties thereto; and
WHEREAS, the Company and Executive desire to amend and restate the
Employment Agreement.
NOW, THEREFORE, in consideration of the premises, and for other
valuable consideration, the sufficiency of which is hereby acknowledged by each
of the parties hereto, the parties hereby agree as follows:
A G R E E M E N T :
- - - - - - - - - -
ARTICLE I
DUTIES AND TERM
1.1. Continued Employment. In consideration of their mutual covenants
and other good and valuable consideration, the receipt, adequacy and sufficiency
of which is hereby acknowledged, the Company agrees to continue Executive in its
employ, and Executive agrees to remain in the employ of the Company, upon the
terms and conditions herein provided.
1.2. Position and Responsibilities.
(a) Executive shall serve as Chairman and Chief Executive
Officer of the Company (or in a capacity and with a title of at least
substantially equivalent quality) reporting directly to the Board of Directors
of the Company (the "Board"). Executive agrees to perform services not
inconsistent with his position and involving duties of comparable scope, dignity
and importance to those of the Chairman of the Board and Chief Executive Officer
on November 4, 1996 as shall from time to time be assigned to him by the Board.
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(b) Executive further agrees to serve, if elected, as a
director of the Company and as an officer or director of any subsidiary or
affiliate of the Company. During the period of his employment hereunder, so long
as Executive owns at least 80,000 shares of the common stock, par value $.01 per
share, of the Company (the "Common Stock"), the Company agrees to use its best
efforts to cause Executive to be nominated for election and all reasonable
efforts to cause Executive to be elected as a director of the Company.
(c) During the period of his employment hereunder,
Executive shall devote substantially all of his business time, attention, skill
and efforts to the faithful performance of his duties hereunder; provided,
however, that Executive may serve or continue to serve on the board of directors
(or equivalent governing body) of, or hold other offices or positions with,
companies or organizations if they involve no conflict of interest with the
interests of the Company and may engage in customary professional activities
which in the judgment of the Board will not adversely affect the performance by
Executive of his duties hereunder. Executive has disclosed to the Board all
material business ventures in which he is currently involved, and, subject to
approval by the Board (after written notice to it), may in the future have other
business investments and participate in other business ventures which may, from
time to time, require portions of his time, but shall not interfere with his
duties hereunder. Executive shall be deemed to be in compliance with the
provisions of this Section 1.2(c) if the professional activities and business
investments and ventures in which he engages are similar in nature and time
commitment to those in which he was engaged during the twelve-month period ended
November 3, 1996.
1.3. Term. The term of Executive's employment under this Agreement
shall commence on the date first above written and shall continue, unless sooner
terminated, until October 31, 1999; provided, however, that commencing on
November 4, 1996 and on each subsequent day thereafter, the Executive's term of
employment shall automatically be extended without further action by the Company
or Executive for the 36 month period commencing on each such day.
1.4. Location. During the period of his employment under this
Agreement, Executive shall not be required, except with his prior written
consent, to relocate his principal place of employment outside Maricopa County,
Arizona. Required travel on the Company's business shall not be deemed a
relocation so long as Executive is not required to provide his services
hereunder outside of Maricopa County, Arizona, for more than fifty (50%) percent
of his working days during any consecutive six (6) month period.
ARTICLE II
COMPENSATION
For all services rendered by Executive in any capacity during his
employment under this Agreement, including, without limitation, services as a
director, officer or member of any committee of the Board of the Company or of
the board of directors of any subsidiary or affiliate of the Company, the
Company shall compensate Executive as follows:
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2.1. Base Salary. The Company shall pay to Executive an annual base
salary of not less than $600,000 (such amount, less any salary waivers under the
1994 Management Equity Program or any subsequent management equity or other
waiver program adopted by the Company is hereinafter referred to as the "Base
Salary") during the term hereof; provided, however, that in the event the
Company institutes a salary reduction program which affects all exempt employees
(as defined by standard Company policies in compliance with the Fair Labor
Standards Act) by the same percentage, then Executive's Base Salary may be
reduced by such percentage (and the term "Base Salary" as used in this Agreement
shall refer to Base Salary as so adjusted). Executive's Base Salary shall be
paid in equal semi-monthly installments. The Base Salary shall be reviewed
annually by the Board or a committee designated by the Board and the Board or
such committee may, in its discretion, increase the Base Salary.
2.2. Bonus Payments.
(a) During the period of Executive's employment under this
Agreement, the Company shall pay to Executive annually a fixed cash bonus equal
to $18,985 and, in addition, such amount as may be necessary, after payment by
the Executive of all taxes, including, without limitation, any federal or state
income taxes, on such fixed cash bonus payment, so that Executive shall have
remaining, on a grossed-up basis, the amount of $18,985 (the "Annual Fixed Cash
Bonus").
(b) Executive shall, in addition, be entitled to bonus
payments, if any shall be due, pursuant to the Executive Bonus Plan which has
been established by resolution of the Board for fiscal year 1996 (the "1996
Executive Bonus Plan"). The Company shall use all reasonable efforts to cause
the Board or a committee thereof to establish in each fiscal year during the
term hereof an executive bonus plan that is similar to the 1996 Executive Bonus
Plan in providing for incentive compensation to Executive based on a formula
related to the Company's profits during such fiscal year. Any bonus under the
1996 Executive Bonus Plan or any such subsequent plan less any bonus waivers
under the 1994 Management Equity Program or any subsequent management equity or
other waiver program adopted by the Company, is referred to herein as the
"Annual Incentive Bonus."
2.3. Stock Options. The Company shall use all reasonable efforts to
establish and maintain one or more stock option plans in which Executive shall
be entitled to participate to the same extent as other Senior Executives (as
such term is defined in Section 7.1 hereof). The terms and conditions of such
plan(s) shall be determined and administered by the Board or a committee
thereof.
2.4. Additional Benefits. Executive shall be entitled to participate in
all employee benefit and welfare programs, plans and arrangements (including,
without limitation, pension, profit-sharing, supplemental pension and other
retirement plans, insurance, hospitalization, medical and disability benefits,
travel or accident insurance plans) and to receive fringe benefits, such as club
dues and fees of professional organizations and associations, which are from
time to time available to the Company's executive personnel; provided, however,
that there shall be no
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duplication of termination or severance or disability benefits, and to the
extent that such benefits are specifically provided by the Company to Executive
under other provisions of this Agreement, the benefits available under the
foregoing plans and programs shall be reduced by any benefit amounts paid under
such other provisions. Executive shall during the period of his employment
hereunder continue to be provided with benefits at a level which shall in no
event be less in any material respect than the benefits made available to
Executive by the Company as of the date of this Agreement, provided that in no
event shall the Company have any obligation to acquire and maintain in effect
during the term of Executive's employment hereunder a long-term disability
insurance policy on Executive (except that Executive may participate in any
group disability plan in which other executive officers of the Company may
participate). Notwithstanding the foregoing, the Company may terminate or reduce
benefits under any benefit plans and programs to the extent such reductions
apply uniformly to all Senior Executives entitled to participate therein, and
Executive's benefits shall be reduced or terminated accordingly. Specifically,
without limitation, Executive shall receive the following benefits:
(a) Retirement and Death Benefits.
Not later than the date of execution of this Agreement,
(i) Executive shall be designated as a participant in, and entitled to
receive retirement benefits in accordance with, the Company's
Supplemental Executive Retirement Plan dated October 1, 1992, as
amended (the "SERP"), a copy of which is annexed as Exhibit A hereto
and which is incorporated as a part hereof; and
(ii) the Company and Executive shall execute and deliver
the agreement annexed as Exhibit B hereto, and in accordance therewith,
the Company shall implement and maintain in effect during the period of
Executive's employment hereunder a "split dollar" life insurance policy
on Executive's life issued by Northwestern Mutual Life Insurance
Company in such amount and in accordance with such terms and conditions
as are set forth in Exhibit B which is incorporated as a part hereof.
(b) Medical Expenses. Executive shall during the term of
his employment hereunder continue to be provided with medical, dental,
hospitalization and other health benefits at a level and of a kind substantially
equivalent to the benefits provided to Executive by the Company immediately
prior to the effective date of this Agreement; provided, however, that if the
Company terminates or reduces any such benefits with respect to all Senior
Executives entitled to participate therein, Executive's benefits shall be
reduced or terminated accordingly, but not below the level of medical benefits
then provided by the Company to full-time employees.
(c) Short-Term Disability Benefits. In the event of
Executive's failure substantially to perform his duties hereunder on a full-time
basis for a period not exceeding 180 consecutive days or for periods aggregating
not more than 180 days during any twelve-month period as a result of incapacity
due to physical or mental illness, the Company shall continue to pay the Base
Salary to Executive during the period of such incapacity, but only in the
amounts and
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to the extent that disability benefits payable to Executive under
Company-sponsored insurance policies are less than Executive's Base Salary.
(d) Relocation Expenses. In the event Executive's
principal place of employment is relocated by mutual consent of the parties
outside Maricopa County, Arizona, the Company shall reimburse Executive for all
usual relocation expenses incurred by Executive and his household in moving to
the new location, including, without limitation, moving expenses and rental
payments for temporary living quarters in the area of relocation for a period
not to exceed six months.
(e) Reimbursement of Business Expenses. The Company shall,
in accordance with standard Company policies, pay, or reimburse Executive for,
all reasonable travel and other expenses incurred by Executive in performing his
obligations under this Agreement.
(f) Vacations. Executive shall be entitled to 22 business
days, excluding Company holidays, of paid vacation during each year of
employment hereunder. Executive may accrue and carry forward no more than five
unused vacation days from any particular year of his employment under this
Agreement to the next, not to exceed 25 days in the aggregate. Prior to the date
hereof, Executive has accrued 98 days of unused vacation ("Previously Accrued
Vacation"), which shall not be subject to such 25-day limit. Executive shall be
entitled to ten (10) business days, excluding Company holidays, of Previously
Accrued Vacation each year hereunder, which shall be applied against and reduce
the aggregate Previously Accrued Vacation, provided that, even if Executive does
not use such ten (10) additional vacation days in any year hereunder, the
aggregate number of days of Previously Accrued Vacation shall be reduced by at
least eight (8) days for each year of employment hereunder. Prior to or
contemporaneously therewith, Executive shall in a written notice to the Company
designate as such any vacation days to be taken as Previously Accrued Vacation.
(g) Registration Rights. Executive shall have the rights
to registration under the Securities Act of 1933, as amended (the "Securities
Act"), of his shares of Common Stock as set forth in Exhibit C hereto, the
provisions of which are incorporated as a part hereof, subject to the terms and
conditions of Section 4.3(j) and Article VI hereof.
ARTICLE III
TERMINATION OF EMPLOYMENT
3.1. Death or Retirement of Executive. Executive's employment under
this Agreement shall automatically terminate upon the death or Retirement (as
defined in Section 7.1) of Executive.
3.2. By Executive. Executive shall be entitled to terminate his
employment under this Agreement by giving Notice of Termination (as defined in
Section 7.1) to the Company:
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(a) for Good Reason (as defined in Section 7.1);
(b) at any time commencing with the date six (6) months
following the date of a Change in Control (as defined in Section 7.1) and ending
with the date twelve months after the date of such Change in Control (a "Change
in Control Resignation"); and
(c) at any time without Good Reason.
3.3. By Company. The Company shall be entitled to terminate Executive's
employment under this Agreement by giving Notice of Termination to Executive:
(a) in the event of Executive's Total Disability (as
defined in Section 7.1);
(b) for Cause (as defined in Section 7.1); and
(c) at any time without Cause.
ARTICLE IV
COMPENSATION UPON TERMINATION OF EMPLOYMENT
If Executive's employment hereunder is terminated in accordance with
the provisions of Article III hereof, except for any other rights or benefits
specifically provided for herein following his period of employment, the Company
shall be obligated to provide compensation and benefits to Executive only as
follows, subject to the provisions of Section 5.11 hereof:
4.1. Upon Termination for Death or Disability. If Executive's
employment is terminated hereunder by reason of his death or Total Disability,
the Company shall:
(a) pay Executive (or his Estate (as defined in Section
4.3(k) hereof)) or beneficiaries any Base Salary which has accrued but not been
paid as of the termination date (the "Accrued Base Salary");
(b) pay Executive (or his Estate) or beneficiaries for
unused vacation days accrued as of the termination date in an amount equal to
his Base Salary multiplied by a fraction the numerator of which is the number of
accrued unused vacation days and the denominator of which is 260 (the "Accrued
Vacation Payment") plus the Previously Accrued Vacation (less days deducted in
accordance with the provisions of Section 2.4(f)) (together, the "Adjusted
Previously Accrued Vacation)";
(c) reimburse Executive (or his Estate) or beneficiaries
for expenses incurred by him prior to the date of termination which are subject
to reimbursement pursuant to this Agreement (the "Accrued Reimbursable
Expenses");
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(d) provide to Executive (or his Estate) or beneficiaries
any accrued and vested benefits required to be provided by the terms of any
Company-sponsored benefit plans or programs (the "Accrued Benefits"), together
with any benefits required to be paid or provided in the event of Executive's
death or Total Disability under applicable law;
(e) pay Executive (or his Estate) or beneficiaries any
Annual Incentive Bonus with respect to a prior fiscal year which has accrued but
has not been paid; and in addition;
(f) Executive (or his Estate) or beneficiaries shall have
the right to exercise all vested unexercised stock options and warrants
outstanding at the termination date in accordance with terms of the plans and
agreements pursuant to which such options or warrants were issued; and further
(g) in the event of Executive's death while he is employed
by the Company under this Agreement, his Designated Beneficiaries shall have the
Termination Put rights provided pursuant to and in accordance with the
provisions of Section 4.3(k) which may be exercised within 180 days of the date
of Executive's death.
4.2. Upon Termination by Company for Cause or by Executive Without Good
Reason. If Executive's employment is terminated by the Company for Cause, or if
Executive terminates his employment with the Company other than (x) upon
Executive's death or Total Disability, (y) for Good Reason, or (z) pursuant to a
Change of Control Resignation (as defined in Section 3.2(b)), the Company shall:
(a) pay Executive the Accrued Base Salary;
(b) pay Executive the Accrued Vacation Payment;
(c) pay Executive the Accrued Reimbursable Expenses;
(d) pay Executive the Accrued Benefits, together with any
benefits required to be paid or provided under applicable law;
(e) pay Executive any accrued Annual Fixed Cash Bonus and
any Annual Incentive Bonus with respect to a prior fiscal year which has accrued
but has not been paid (together, such bonus payments are referred to herein as
the "Accrued Annual Bonus Payments"); and in addition
(f) Executive shall have the right to exercise vested
options and warrants in accordance with Section 4.1(f).
4.3. Upon Termination by the Company Without Cause or by Executive for
Good Reason Prior to a Change of Control.
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If Executive's employment is terminated by the Company
without Cause or by Executive for Good Reason, the Company shall:
(a) pay Executive the Accrued Base Salary;
(b) pay Executive the Accrued Vacation Payment and the
Adjusted Previously Accrued Vacation;
(c) pay Executive the Accrued Reimbursable Expenses;
(d) pay Executive the Accrued Benefits, together with any
benefits required to be paid or provided under applicable law;
(e) pay Executive the Accrued Annual Bonus Payments;
(f) pay Executive on or prior to the thirtieth day
following the termination date a lump sum payment equal to the product of three
(3) times the sum of (1) Executive's Base Salary in effect immediately prior to
the time such termination occurs, plus (2) the average of the Annual Incentive
Bonuses paid to Executive for the three (3) fiscal years immediately preceding
the fiscal year in which the termination occurs (or if less than three, the
average of the two and if less than two, the amount of his single Annual Bonus,
if any);
(g) maintain in full force and effect, for Executive's and
his eligible beneficiaries, continued benefit, until the first to occur of (x)
his attainment of alternative employment or (y) 24 months following the
termination date of his employment hereunder the employee benefits provided
pursuant to Company-sponsored benefit plans, programs or other arrangements in
which Executive was entitled to participate as a full-time employee immediately
prior to such termination in accordance with Section 2.4 hereof, subject to the
terms and conditions of such plans and programs (the "Continued Benefits"). If
Executive's continued participation is not permitted under the general terms and
provisions of such plans, programs and arrangements, the Company shall arrange
to provide Executive with Continued Benefits substantially similar to those
which Executive would have been entitled to receive under such plans, programs
and arrangements; and in addition
(h) Executive shall have the right to exercise all vested
unexercised stock options and warrants in accordance with Section 4.1(f);
(i) the Company shall, subject to applicable law,
including, without limitation, federal or state laws proscribing impairment of
the Company's capital, and any financing agreements with lenders to which the
Company is bound, if at the termination date of his employment hereunder
Executive holds stock options or warrants for shares of the Common Stock which
are not then vested or exercisable, pay to Executive in a lump sum on or prior
to the thirtieth day following the termination date of his employment an amount
equal to the excess, if any, above the option price of each such option or
warrant of the fair market value of the shares
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subject to such options or warrants (the "Cash Option Payment"). In the event
that the Company is prohibited under applicable law or its financing agreements
from making the Cash Option Payment to Executive at such time, it shall make
payment only to the extent permitted by law or its financing agreements,
provided that the Company shall remain liable for the unpaid balance and shall
pay the same when legally permitted. For purposes of this subparagraph (i),
"fair market value" shall mean the weighted average of the last sale prices of
the Common Stock during the ten (10) trading days immediately preceding the
termination date of his employment as quoted on the Automated Quotation System
of the National Association of Securities Dealers (or any successor hereto or
any national securities exchange upon which the Common Stock may then be
traded);
(j) if during the two-year period following termination of
his employment under this Agreement, Executive exercises his demand registration
rights under Section 2.4(g) hereof in accordance with the provisions thereof,
and the Company fails to cause the registration statement to become effective
under the Securities Act within 120 days after the Company's obligation to file
the same in accordance with the provisions of paragraph (a)(i)(B) of Exhibit C
(provided that any delay is not caused directly or indirectly by any act or
omission of Executive), and the price per share at which Executive is able to
sell his shares of Common Stock in such offering is less than the fair market
value (determined in accordance with subparagraph (k) of this Section 4.3) of a
share of Common Stock on the date of his request for registration under Section
2.4(g) hereof in accordance with the provisions of Exhibit C, the Company shall
pay to Executive an amount in cash equal to the difference between the fair
market value per share as so determined and the net price per share of Common
Stock in the offering for all shares sold by Executive in the offering.
Notwithstanding the foregoing, the Company shall have the option to purchase all
of such shares of Common Stock at any time prior to the effective date of the
registration statement pursuant to which such shares are registered at the fair
market value per share determined in accordance with subparagraph (k) of this
Section 4.3 and in accordance with the provisions of Article VI; and
(k) (i) in the event of Executive's death during a period
of six (6) months from the termination date of Executive's employment hereunder,
his estate (the "Estate"), his spouse at the date of his death and his children
and trusts for the benefit of his spouse and children all as listed on Exhibit D
hereto (collectively, the Estate, such spouse and the other persons and entities
so listed being referred to herein as the "Designated Beneficiaries") shall have
the option (the "Termination Put") to sell to the Company within 180 days of the
date of Executive's death, subject to the terms and conditions of this
subparagraph (k), the shares of Common Stock owned by such Designated
Beneficiaries respectively on the date of Executive's death (or, in the case of
the Estate, the shares of Common Stock owned by Executive at the date of his
death or which may be acquired by the Estate upon exercise of outstanding
options or warrants in accordance with Section 4.1(i) hereof). No Designated
Beneficiary shall be entitled to the benefits of this subparagraph (k) unless
such Designated Beneficiary (together with the other Designated Beneficiaries)
at such time owns beneficially or of record at least 50,000 shares of the Common
Stock and delivers to the Company a written undertaking in form and substance
satisfactory to the Company agreeing to be bound by all of the terms and
conditions hereof as though a party hereto.
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(ii) The Termination Put may be exercised by any
Designated Beneficiary by a notice in writing (the "Termination Put
Notice") to the Company delivered no later than the date 180 days from
and after Executive's death indicating the number of shares of the
Common Stock to be repurchased. Within five (5) business days of
receipt of the first such Termination Put Notice by the Company, the
Company shall transmit by first class U.S. mail a copy thereof to each
person or entity named as a Designated Beneficiary on Exhibit D hereto
at the address set forth in Exhibit D for such person or entity. Such
list may be amended by Executive by written notice to the Company from
time to time, and as so amended, is referred to herein as the
"Designated Beneficiaries List". The Company shall be entitled to rely
on such Designated Beneficiaries List for all purposes of this
subparagraph (k). Within fifteen (15) business days after the date of
the Company's mailing, each Designated Beneficiary wishing to exercise
its or his Termination Put rights, shall deliver to the Company its
Termination Put Notice. Any two or more Designated Beneficiaries may
join in a Termination Put Notice.
(iii) The price at which such shares of Common
Stock shall be purchased by the Company from the Designated
Beneficiaries who have given timely notice in accordance with the
provisions hereof shall be the fair market value of the Common Stock as
of the date of the Termination Put Notice first received by the Company
from a Designated Beneficiary in connection with any one exercise of
the Termination Put. For purposes of this subparagraph (k), the "fair
market value" of the Common Stock shall be the weighted average of the
last sale price of the Common Stock during the ten (10) trading days
immediately preceding and the ten (10) trading days immediately
following the date of such Termination Put Notice, as quoted on the
Automated Quotation System of the National Association of Securities
Dealers (or any successor thereto or any national securities exchange
upon which the Common Stock may then be traded).
(iv) Each Termination Put Notice shall be
accompanied by the certificates representing the shares of Common Stock
covered by the Notice, which shall be endorsed to the order of the
Company, signature guaranteed. Each Designated Beneficiary giving a
Termination Put Notice shall represent and warrant that the shares of
Common Stock to be sold by such Designated Beneficiary are, and shall
transfer the same, free and clear of all liens, claims and
encumbrances.
(v) Payment for all shares of Common Stock to be
purchased by the Company pursuant to the Designated Beneficiaries'
exercise of the Termination Put shall be made only from and up to the
extent of the aggregate proceeds available for such purchase from up to
$5,000,000 in key man insurance maintained by the Company as provided
in this subparagraph (k), such amount to be pro rated among the
Designated Beneficiaries that have delivered a timely Termination Put
Notice in accordance with the number of shares offered for sale to the
Company by each such Designated Beneficiary respectively.
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(vi) The Company shall acquire key man life
insurance on the life of the Executive in such amount as it believes
will be reasonable to satisfy its obligations in the event the
Termination Put is exercised, but in no event will the Company be
obligated to acquire more than $5,000,000 in key man life insurance for
this purpose or shall the Company be obligated to repurchase more
shares of Common Stock from all Designated Beneficiaries than can be
acquired at the price provided for herein from the aggregate amount of
such proceeds.
Anything in this subparagraph (k) to the contrary notwithstanding, the Company's
obligation hereunder to purchase any Common Stock pursuant to the exercise of
the Termination Put shall be in compliance with, subject to and limited by the
following:
(A) applicable federal and state securities laws and
regulations;
(B) loan or financing agreements with banks or other
lenders to which the Company is a party or by which the Company is
bound and the Company's outstanding obligations under its stock option
plans for franchisees and its obligation to maintain in effect a
registration statement with respect to shares of Common Stock held by
the trustee of the Company's Employee Stock Purchase Plan;
(C) applicable federal and state laws with respect to
solvency, including, without limitation, state corporate law and/or any
state law proscribing impairment of the Company's capital;
(D) the face amount of key man life insurance purchased by
the Company pursuant to its obligation under this subparagraph (k).
The Company shall make payment in cash to the Designated Beneficiaries that have
delivered to the Company a timely Termination Put Notice in accordance with the
provisions hereof of their pro rata amounts for shares of Common Stock
surrendered to the Company pursuant to the respective Termination Put Notices,
except that if the Company is prohibited from purchasing such shares of Common
Stock because payment would constitute a violation of federal law or state
corporate or other law or its financing agreements or the other agreements
referred to above, the Company shall make payment only to the extent permitted
by law or its financing agreements or the other agreements referred to above;
provided, however, that the Company shall remain liable for the unpaid balance
and shall pay the same when legally permitted and shall purchase the maximum
amount permissible under such laws or loan or financing agreements, but, in any
event, subject to the limitations under paragraph (D) above. If the Company
shall purchase less than all shares of Common Stock tendered by a Designated
Beneficiary, the Company shall return the certificates representing the unbought
shares to the respective Designated Beneficiary. In no event shall the Company
be liable to any Designated Beneficiaries to repurchase shares of the Common
Stock over and above the aggregate amount of the key man insurance maintained
for this purpose. If upon exercise of the Termination Put on any one occasion as
described above, any amount of proceeds of the key-man life insurance remain
available for additional such purchases, any
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Designated Beneficiary may give a Termination Put Notice as provided above
within the 180-day period.
4.4. Upon Termination by the Company Without Cause Following a Change
of Control or by Executive for Good Reason Following a Change of Control or
Pursuant to a Change of Control Resignation.
If following a Change of Control, Executive's employment
is terminated by the Company Without Cause or by Executive for Good Reason or
pursuant to a Change of Control Resignation, the Company shall:
(a) make the payments and provide to Executive the
benefits under Section 4.3 other than under Section 4.3(f) hereof; and in
addition
(b) pay to Executive a lump sum payment on or prior to the
thirtieth day following the termination date of Executive's employment hereunder
in an amount equal to the lesser of (i) 300% of the sum of Executive's aggregate
total compensation under Sections 2.1 and 2.2(b) hereof for the fiscal year
immediately prior to the fiscal year in which the Change of Control occurs, and
(ii) an amount, the present value of which (determined in the manner set forth
herein) shall not exceed 299% of Executive's "Base Amount", as such term is
defined in Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code"), and the regulations promulgated thereunder (the "Regulations"). Company
and Executive agree that for purposes of making any present value calculation
under this Agreement, the Applicable Federal Rate in effect on the date this
Agreement is executed shall control as permitted by Q&A 32 of Treas. Reg. ss.
1.280G-1.
4.5. Certain Additional Payments by Company.
(a) Anything in this Agreement to the contrary
notwithstanding, if it shall be determined that any payment or distribution by
the Company to or for the benefit of Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 4.5 (a "Payment") would be subject to the excise tax imposed
by Code Section 4999, or any interest or penalties are incurred by Executive
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then Executive shall be entitled to receive, in addition to the Payment,
a payment (a "Gross-Up Payment") in an amount such that, after payment by
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any federal or state income taxes
(and any interest and penalties imposed with respect thereto) and the Excise Tax
imposed upon the Gross-Up Payment, Executive will have received the Gross-Up
Payment in an amount equal to the Excise Tax imposed upon the Payment.
(b) Subject to the provisions of Section 4.5(c), all
determinations required to be made under this subparagraph, including whether
and when a Gross-Up Payment is required
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and the amount of such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by a nationally recognized
accounting firm retained by the Company as its auditor at the time such
determinations are required (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and Executive within 15 business
days of the receipt of notice from the Company that there has been a Payment, or
such earlier time as is required by the Company. If at such time the Accounting
Firm either is serving as accountant or auditor for the individual, entity or
group effecting the Change in Control, or is retained by the Company following a
Change in Control, Executive may, in his sole discretion, appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to this
Section 4.5, shall be paid by the Company to Executive within five days of the
receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by Executive, it shall furnish
Executive with a written opinion that failure to report the Excise Tax on
Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
accounting Firm shall be binding upon the Company and Executive. As a result of
the uncertainty in the application of Code Section 4999 at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. If Executive thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for the benefit of Executive.
(c) Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable, but in no event later than ten business days after
Executive has been informed in writing of such claim, and shall apprise the
Company of the nature of such claim and the date on which such claim is required
to be paid. Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which Executive gives such notice to the
Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies Executive in writing
prior to the expiration of such 30-day period that the Company desires to
contest such claim, Executive shall:
(i) give the Company any information reasonably
required by the Company relating to such claim,
(ii) take such action in connection with
contesting such claim as the Company shall reasonably request in
writing from time to time, including, but not limited to, accepting
legal representation with respect to such claim by an attorney
reasonably selected by the Company,
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(iii) cooperate with the Company in good faith
in order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relation to such claim; provided, however, that the Company
shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold Executive harmless for (A) any
Excise Tax or federal or state income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses, and (B) any federal,
state and local income tax imposed with respect to the payment of
amounts pursuant to clause (A) above and this clause (B), based on the
highest marginal income tax rate applicable to Executive for the tax
year such payments are includible in his taxable income. Without
limitation on the foregoing provisions of this Section 4.5(c), the
Company shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option,
either direct Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however,
that if the Company directs Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to
Executive, on an interest-free basis and shall indemnify and hold
Executive harmless from (X) any Excise Tax or federal or state income
tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with
respect to such advance, and (Y) any federal, state and local income
tax imposed with respect to the payment of amounts pursuant to clause
(X) above and this clause (Y), based on the highest marginal income tax
rate applicable to Executive for the tax year such payments are
includible in his taxable income; and further provided that any
extension of the statute of limitations relating to payment of taxes
for the taxable year of Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to
issues within respect to which a Gross-Up Payment would be payable
hereunder and Executive shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(d) If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 4.5(c), Executive becomes entitled
to receive any refund with respect to such claim, Executive shall (subject to
the Company's complying with the requirements of Section 4.5(c)) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto) and, as and when received, an
amount equal to any savings in federal and state income taxes realized by
Executive by reason of the payment to the Company of such refunds and interest
plus the amounts in this clause. If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 4.5(c), a determination is made that
Executive shall not be entitled to any refund with respect to such claim
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and the Company does not notify Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
ARTICLE V
RESTRICTIVE COVENANTS
5.1. Confidential Information and Materials. Executive hereby agrees
and acknowledges that the following ideas, information and materials in written,
oral, magnetic, photographic, optical or other form and whether now existing or
developed or created during the period of Executive's employment or engagement
with the Company (the "Confidential Information") are proprietary to the Company
and are highly sensitive in nature:
(a) Hardware. Any and all ideas, concepts, know-how,
techniques, structures, information and materials relating to the design,
development, engineering, invention, patent, patent application, manufacture or
improvement of any and all equipment, components, devices, techniques, processes
or formulas (including, without limitation, mask works, semi-conductor chips,
processors, memories, disc drives, tape heads, computer terminals, keyboards,
storage devices, printers, and optical storage media) and any and all
components, devices, techniques or circuitry incorporated in any of the above
which is or are constructed, designed, improved, altered or used by the Company
and which is or are not generally known to the public or within the industries
in which the Company competes.
(b) Software. Any and all ideas, concepts, know-how,
techniques, structures, information and materials relating to existing computer
software or firmware products and computer software or firmware in various
stages of research and development including without limitation source code,
object and load modules, requirements specifications, design specifications,
design notes, flow charts, coding sheets, annotations, documentation, technical
and engineering data, laboratory studies, benchmark test results, and the
structures, organization, designs, formulas and algorithms which reside in the
software and which are not generally known to the public or within the
industries or trades in which the Company competes.
(c) Business Procedures. Internal business procedures and
business plans, including analytical methods and procedures, licensing
techniques, manufacturing information and procedures such as formulations,
processes and equipment, technical and engineering data, vendor names, other
vendor information, purchasing information, financial information, service and
operational manuals and documentation therefor, ideas for new products and
services and other such information which relates to the way the Company
conducts its business and which is not generally known to the public.
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(d) Legal Rights. All patents, copyrights, trade secrets,
trademarks and service marks, and the like.
(e) Marketing Plans and Customers Lists. Any and all
customer and marketing information and materials, such as (i) strategic data,
including marketing and development plans, forecasts and forecast assumptions
and volumes, and future plans and potential strategies of the Company which have
been or are being discussed; (ii) financial data, price and cost objectives,
price lists, pricing policies and procedures, and estimating and quoting
policies and procedures; and (iii) customer data, including customer lists,
names of existing, past or prospective customers and their representatives, data
about or provided by prospective, existing or past customers, customer service
information and materials, data about the terms, conditions and expiration dates
of existing contracts with customers and the type, quantity and specifications
of products and services purchased, leased or licensed by customers of the
Company.
(f) Not Generally Known. Any and all information not
generally known to the public or within the industries or trades in which the
Company competes.
5.2. General Knowledge. The general skills and experience gained by
Executive during Executive's employment or engagement by the Company, and
information publicly available or generally known within the industries or
trades in which the Company competes, is not considered Confidential
Information. Following the Non-Competition Period (as defined in Section 5.9),
Executive is not restricted from working with a person or entity which has
independently developed information or materials similar to the Confidential
Information, but in such a circumstance, Executive agrees not to disclose the
fact that any similarity exists between the Confidential Information and the
independently developed information and materials, and Executive understands
that such similarity does not excuse Executive from the non-disclosure and other
obligations in this Agreement.
5.3. Executive Obligations as to Confidential Information and
Materials. During Executive's employment or engagement by the Company, Executive
will have access to the Confidential Information and will occupy a position of
trust and confidence with respect to the Confidential Information and the
Company's affairs and business. Executive agrees to take the following steps to
preserve the confidential and proprietary nature of the Confidential
Information:
(a) Non-Disclosure. During and after Executive's
Employment or engagement by the Company, Executive will not use, disclose or
otherwise permit any person or entity access to any of the Confidential
Information other than as required in the performance of Executive's duties with
the Company. Executive understands that Executive is not allowed to sell,
license, market or otherwise exploit any products or services (including
software or firmware in any form) which embody in whole or in part any
Confidential Information.
(b) Prevent Disclosure. Executive will take all reasonable
precautions to prevent disclosure of the Confidential Information to
unauthorized persons or entities.
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(c) Abide by the Company's Restrictions. Executive will
treat as confidential and proprietary any information or materials from outside
the Company which the Company is obligated to treat as confidential or
proprietary, in accordance with the Company's reasonable instructions to
Executive.
(d) Return All Materials. Upon termination of Executive's
employment or engagement by the Company for any reason whatsoever, Executive
will deliver to the Company all tangible materials embodying the Confidential
Information, including any documentation, records, listings, notes, data,
sketches, drawings, memoranda, models, accounts, reference materials, samples,
machine-readable media and equipment which in any way relate to the Confidential
Information. Of course, Executive agrees not to retain any copies of any of the
above materials.
5.4. Inform Subsequent Employers. Executive covenants and agrees that,
for a period of 24 months following termination of the Non-Competition Period,
prior to accepting subsequent employment with an employer engaged in
substantially the same line of work as the Company, Executive shall: (a) inform
any such subsequent employer in writing that this Agreement exists; and (b)
provide the Company with a copy of such writing.
5.5. Ideas and Inventions. Executive agrees to assign to the Company
all of Executive's right, title and interest in or to any and all ideas,
concepts, know-how, techniques, processes, inventions, discoveries,
developments, works of authorship, innovations and improvements ("Inventions")
conceived or made by Executive, whether alone or with others, whether patentable
or not, except those that the Executive developed entirely on Executive's own
time without using the Company's equipment, supplies, facilities, or trade
secret information and which neither (1) relate at the time of conception or
reduction to practice of the invention to the Company's business, or actual or
demonstrably anticipated research or development of the Company nor (2) result
from any work performed by the Executive for the Company. Executive agrees to
disclose all Inventions to the Company promptly, and to provide all assistance
reasonably requested by the Company in the preservation of its interests in the
Inventions (such as by executing documents, testifying, etc.), such assistance
to be provided at the Company's expense but without any additional compensation
to Executive.
5.6. Inventions and Patents. Executive agrees that from this date until
Executive leaves the Company's employment, Executive shall keep the Company
informed of any Inventions made by Executive, in whole or in part, or conceived
by Executive, alone or with others, which result from any work Executive may do
for, or at the request of, the Company, or which relate to the Company's
activities, investigations, or obligations.
(a) Assertion of Rights. Executive shall, at the expense
of the Company, assist the Company or its nominees to obtain patents for such
Inventions in any countries throughout the world. Such Inventions shall be the
property of the Company or its nominees, whether patented or not. Executive
shall and does, without charge to the Company, assign to the Company, all of
Executive's right, title, and interest in and to such Inventions, including
patents
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and patent applications and reissues thereof. Executive agrees to execute,
acknowledge, and deliver any instruments confirming the complete ownership by
the Company of such Inventions. Such assignments shall include the right to sue
for infringement.
(b) Reserved Inventions. Descriptions of all ideas,
concepts, know-how, techniques, processes, inventions, discoveries,
developments, innovations and improvements which Executive made, conceived or
acquired prior to Executive's employment by the Company and all patents and
patent applications relating thereto (collectively referred to as "Executive's
Rights") are attached hereto in Exhibit E, and Executive's Rights shall be
excluded from this Agreement. Executive represents that the absence of any
Executive's Rights in Exhibit E shall indicate that Executive owns no such
Executive's Rights at the time of signing this Agreement.
5.7. Copyrights. Executive agrees that any work prepared by Executive
during the course of Executive's employment or engagement hereunder which is
eligible for United States copy right protection or protection under the
Universal Copyright Convention, the Berne Copyright Convention and/or the Buenos
Aires Copyright Convention shall be a work made for hire. In the event any such
work is deemed not to be a work made for hire, Executive hereby assigns all
right, title and interest in and to the copyright in such work to the Company,
and agrees to provide all assistance reasonably requested by the Company in the
establishment, preservation and enforcement of its copyright in such work, such
assistance to be provided at the Company's expense but without any additional
compensation to Executive.
5.8. Conflicting Obligations and Rights. Executive agrees to inform the
Company in writing of any apparent conflict between Executive's work for the
Company and (i) any obligations Executive may have to preserve the
confidentiality of another's proprietary information or materials, or (ii) any
rights Executive claims to any patents, copyrights, trade secrets, or other
inventions, ideas or similar rights, before performing that work. Otherwise, the
Company may conclude that no such conflict exists and Executive agrees
thereafter to make no such claim against the Company. The Company shall receive
such disclosures in confidence. All such existing obligations and claims of
Executive, if any, as of the date of this Agreement are listed on Exhibit F
attached hereto.
5.9. Non-Competition.
(a) Non-competition. By execution of this Agreement,
Executive agrees that during his employment with the Company and for a period of
24 months following the date of expiration or termination of his employment
hereunder (the "Non-Competition Period") for any reason (whether such
termination shall be voluntary or involuntary), Executive will not, within the
United States (in which territory Executive acknowledges that the Company has
sold or marketed its products or services and conducted its Business, as defined
in Section 5.9(d) as of the date hereof), directly or indirectly, compete with
the Company by carrying on a business that is substantially similar to the
Business. Executive agrees that the two (2) year period referred to in the
preceding sentence shall be extended by the number of days included in any
period of time during which he is or was engaged in activities constituting a
breach of this Section 5.9.
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(b) Definition of "Compete". For the purposes of this
Section 5.9, the term "compete" shall mean with respect to the Business: (i)
managing, supervising, or otherwise participating in a management or sales
capacity; (ii) calling on, soliciting, taking away, accepting as a client or
customer, or attempting to call on, solicit, take away, or accept as a client or
customer, any individual partnership, corporation, company, association, or
other entity that was a client or customer of the Company as of immediately
prior to the date hereof; (iii) hiring, soliciting, taking away, or attempting
to hire, solicit, or take away, either on Executive's behalf or on behalf of any
other person or entity, any person serving immediately prior to the date hereof
or during the term hereof as an employee in connection with the Business; or
(iv) entering into or attempting to enter into any business substantially
similar to the Business, either alone or with any individual, partnership,
corporation, company, association, or other entity.
(c) Direct or Indirect Competition. For the purposes of
this Section 5.9, the words "directly or indirectly" as they modify the word
"compete" shall mean (i) acting as an agent, representative, consultant,
officer, director, member, independent contractor, or employee of any entity or
enterprise that is competing (as defined in Section 5.9(b) hereof) with the
Business, (ii) participating in any such competing entity or enterprise as an
owner, partner, limited partner, joint venturer, member, creditor, or
stockholder (except as a stockholder holding less than a one percent (1%)
interest in a corporation whose shares are actively traded on a regional or
national securities exchange or in the over-the-counter market), and (iii)
communicating to any such competing entity or enterprise the names or addresses
or any other information concerning any past, present, or identified prospective
client or customer of the Company or any entity having title to the goodwill of
the Company with respect to the Business.
(d) Business. For purposes of this Agreement, the term
"Business" shall mean the delivery of systems integration services and master
distribution of information technology products and services, as conducted by
the Company immediately prior to the date hereof and/or developed during the
term of this Agreement.
(e) Executive expressly agrees and acknowledges that:
(i) it will require at least 24 months for the
Company to locate, hire and train an appropriate individual to perform
the functions and duties that Executive is performing hereunder;
(ii) the Company has protected business
interests throughout the United States and that competition with and
against such business interests would be harmful to the Company;
(iii) this covenant not to compete is reasonable
as to time and geographical area and does not place any unreasonable
burden upon him;
(iv) the general public will not be harmed as a
result of enforcement of this covenant not to compete;
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(v) his personal legal counsel has reviewed this
covenant not to compete; and
(vi) he understands and hereby agrees to each
and every term and condition of this covenant not to compete
(including, without limitation, the provisions of Section 5.11).
5.10. Non-Disparagement. During the term of this Agreement and the
Non-Competition Period, neither Executive nor the Company shall disparage the
other, and neither shall disclose to any third party the conditions of
Executive's employment with the Company except as may be required (i) pursuant
to applicable law or regulations, including the rules and regulations of the
Securities and Exchange Commission, (ii) to effectuate the provisions of
employee plans or programs and insurance policies, or (iii) as may be otherwise
contemplated herein or unless such information becomes publicly available
without fault of the party making such disclosure.
5.11. Remedies. Executive expressly agrees and acknowledges that the
covenants set forth in Sections 5.1 through 5.10 are necessary for the
protection of the interests of the Company and its affiliates because of the
nature and scope of their business and his position with the Company. Further,
Executive acknowledges that any breach of such covenants would result in
irreparable damage to the Company, and that money damages will not sufficiently
compensate the Company for its injury caused thereby, and that the remedy at law
for any breach or threatened breach of any of such covenants will be inadequate
and, accordingly agrees, that the Company shall, in addition to all other
available remedies (including without limitation, seeking such damages as it can
show it has sustained by reason of such breach), be entitled to injunctive
relief or specific performance and that in addition to such money damages he may
be restrained and enjoined from any continuing breach of this covenant not to
compete without any bond or other security being required of any court.
Executive further acknowledges and agrees that if such covenants, or any of
them, are deemed to be unenforceable and/or the Executive fails to comply with
this Article V, the Company has no obligation to provide any compensation or
other benefits described in Article IV hereof. The remedies set forth in this
Section 5.11 shall be included in any award in favor of the Company under
Exhibit H hereto.
5.12. Consulting Agreement. Effective upon expiration or termination of
Executive's employment hereunder for any reason other than death or Total
Disability (if such Total Disability continues in effect), the Company may
request at its option that Executive enter into a consulting agreement
substantially in the form annexed as Exhibit G hereto, which incorporates by
reference therein the provisions of Sections 5.1 through 5.11 hereof (the
"Consulting Agreement"), for a period of two years from the date of expiration
or termination and Executive agrees to enter into such Consulting Agreement
effective as of the date of expiration or termination of his employment
hereunder. Exhibit G is incorporated as a part hereof. The Company agrees to
provide the following benefits to Executive thereunder: (i) the Company shall
pay to Executive (A) in semi-monthly installments supplementary severance and
consulting compensation at a rate equal to Executive's Base Salary in effect
immediately prior to expiration or termination of his employment
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under this Agreement and (B) the Annual Fixed Cash Bonus, and (ii) the Company
shall continue to provide to Executive health and disability insurance coverage
substantially of the type provided by the Company and in effect immediately
prior to termination of his employment under this Agreement, provided that, such
health and disability benefits will only be provided to the extent not
duplicative of benefits the Company is otherwise required to provide Executive
pursuant to Article IV of this Agreement.
5.13. Scope of Article. For purposes of this Article V, unless the
context otherwise requires, the term "Company" includes MicroAge, Inc., its
direct and indirect subsidiaries, and its affiliates.
ARTICLE VI
COMPANY'S RIGHT OF FIRST REFUSAL
6.1. The Company's Right of First Refusal. Other than as permitted in
Section 6.2, in the event that Executive (or any Designated Beneficiary) desires
to sell or transfer any shares of Common Stock, whether or not pursuant to
exercise of the registration rights under Section 2.4(g), in any transaction
during the period that commences on the expiration date hereof or other
termination date of Executive's employment hereunder and which ends twenty-four
(24) months after such termination date or expiration date, Executive (or any of
his Designated Beneficiaries, as the case may be) shall first deliver a notice
in writing (the "Notice") to the Company which shall specify (i) the number of
shares of Common Stock which the Executive or such Designated Beneficiary
desires to sell or transfer, the name(s) of the proposed purchasers or
transferees (except in the case of a request for registration pursuant to
Section 2.4(g)), (ii) the price per share (the "Transfer Price") at which the
Executive or such Designated Beneficiary proposes to sell or transfer the shares
to a third party pursuant to a bona fide offer, (iii) whether such price
represents a control premium price ("Control Premium Price") and (iv) the other
material terms upon which such sale or transfer is proposed to be made. The
Company shall have the right to purchase all (but not less than all) of such
shares at the fair market value thereof (determined as provided in Section
4.3(k) hereof) on the date of Executive's (or the Designated Beneficiary's)
Notice hereunder; provided, however, that if the Transfer Price represents a
Control Premium Price, the Company shall, if it wishes to exercise its right of
first refusal hereunder, have the right to purchase the shares at the Control
Premium Price. In the event that the shares are to be sold in a registered
offering pursuant to a demand for registration under Section 2.4(g), the
Company's right of first refusal may be exercised at any time prior to the
effective date of the registration statement under which the shares are to be
registered. Unless the Notice is given in conjunction with the exercise of
registration rights hereunder, the Company shall, by written notice given by the
Company to Executive or Designated Beneficiary within ten (10) business days
after receipt of the Notice, indicate its intention to purchase the shares
specified in the Notice, for cash at the fair market value per share as provided
above or at the Control Premium Price, as the case may be. Within 30 calendar
days after written notice of exercise by the Company, the Company shall provide
the Executive with evidence reasonably satisfactory to Executive of its ability
to finance the purchase of the shares (by a written commitment letter subject
only to customary
21
<PAGE>
representations, diligence and documentation, letter of credit or otherwise). If
the Company exercises its right of first refusal hereunder, the closing of the
purchase of the Common Stock with respect to which such right has been exercised
will take place within 60 calendar days after the Company gives notice of such
exercise, which period of time shall be extended in order to comply with
applicable laws and regulations. Upon exercise of the right of first refusal,
the Company and the Executive or Designated Beneficiary shall each be legally
obligated to consummate the purchase contemplated thereby and the Company shall
use its best efforts to secure any approvals required in connection therewith.
If the Company does not exercise its right of first refusal hereunder within the
time specified for such exercise, Executive or Designated Beneficiary shall be
free to sell the Common Stock at the Transfer Price specified in the Notice on
terms no less favorable to Executive or the Designated Beneficiary than the
terms specified in the Notice. In the event Executive or the Designated
Beneficiary does not sell the Common Stock specified in the Notice within 180
days after the date of the Notice, Executive or the Designated Beneficiary shall
not thereafter sell such Common Stock without first offering the Common Stock to
the Company pursuant to this Article VI. The Company's right of first refusal
with respect to the Executive's and the Designated Beneficiaries' shares of
Common Stock shall terminate if Executive and his Designated Beneficiaries own
beneficially and/or record less than an aggregate 50,000 shares of the Common
Stock. In any twelve month period during the term of the Company's right of
first refusal, Executive may, without regard to the Company's right of first
refusal in this Article VI, sell or transfer up to an aggregate 25,000 shares of
Common Stock pursuant to a transaction in compliance with Rule 144, provided
that Executive gives prior or contemporaneous notice to the Company in writing
of such sale or disposition.
6.2. Exceptions. Nothing in Section 6.1 shall preclude Executive from
pledging his shares of Common Stock to a financial institution pursuant to the
terms of a bona fide pledge or from transferring shares of the Common Stock by
way of gift to his spouse and/or children or trusts for their benefit, provided
that such pledgee or donee delivers to the Company a written undertaking in form
and substance satisfactory to the Company agreeing to the terms and conditions
of this Agreement as though a party hereto, and the transfer is made subject
thereto.
ARTICLE VII
MISCELLANEOUS
7.1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Accounting Firm" - as defined in Section 4.5(b);
(b) "Accrued Base Salary" - as defined in Section 4.1(a);
(c) "Accrued Benefits" - as defined in Section 4.1(d);
(d) "Accrued Annual Bonus Payments" - as defined in
Section 4.2(e);
22
<PAGE>
(e) "Accrued Reimbursable Expenses" - as defined in
Section 4.1(c);
(f) "Accrued Vacation Payment" - as defined in Section
4.1(b);
(g) "Adjusted Previously Accrued Vacation" - as defined in
Section 4.1(b).
(h) "Annual Fixed Cash Bonus" - as defined in Section
2.2(a);
(i) "Annual Incentive Bonus" - as defined in Section
2.2(b);
(j) "Base Amount" - as defined in Section 4.4(b);
(k) "Base Salary" - as defined in Section 2.1;
(l) "Board" - as defined in Section 1.2;
(m) "beneficial ownership" as defined in Section
7.1(p)(ii);
(n) "Cash Option Payment" as defined in Section 4.3(i);
(o) "Cause" shall mean the occurrence of any of the
following:
(i) Executive's gross and willful misconduct
which is injurious to the Company;
(ii) Executive's engaging in fraudulent conduct
with respect to the Company's business or in conduct of a criminal
nature that may have an adverse impact on the Company's standing and
reputation;
(iii) the continued and unjustified failure or
refusal by Executive to perform the duties required of him by this
Agreement which failure or refusal shall not be cured within fifteen
(15) days following (A) receipt by Executive of written notice from the
Board specifying the factors or events constituting such failure or
refusal, and (B) a reasonable opportunity for Executive to correct such
deficiencies;
(iv) Executive's use of drugs and/or alcohol in
violation of then current Company policy; or
(v) Executive's breach of his duties under
Section 1.2(c) hereof which shall not be cured within fifteen (15) days
after written notice thereof to Executive.
(p) "Change of Control" shall mean and shall be deemed to
have occurred if:
23
<PAGE>
(i) After the date of this Agreement, any
"person" (as such term is used in Section 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
any successor provision thereto) shall become the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act or any
successor provision thereto) directly or indirectly of securities of
the Company representing 15% or more of the combined voting power of
the Company's then outstanding securities ordinarily having the right
to vote at an election of directors; provided, however, that, for
purposes of this subparagraph, "person" shall exclude the Company, its
subsidiaries, any person acquiring such securities directly from the
Company, any employee benefit plan sponsored by the Company or from
Executive or any stockholder owning 15% or more of the combined voting
power of the Company's outstanding securities as of the date of this
Agreement; or
(ii) Any stockholder of the Company owning 15%
or more of the combined voting power of the Company's outstanding
securities as of the date of this Agreement shall become the beneficial
owner (within the meaning of Rule 13d-3 under the Exchange Act)
directly or indirectly of securities of the Company (other than through
the acquisition of securities directly from the Company or from
Executive) representing 25% or more of the combined voting power of the
Company's then outstanding securities ordinarily having the right to
vote at an election of directors; or
(iii) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least 80% of the Board; provided, however, that any
person becoming a member of the Board subsequent to the date hereof
whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least 80% of the members
then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to
the election of directors of the Company, as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act or any
successor provision thereto) shall be, for purposes of this Agreement,
considered as though such person were a member of the Incumbent Board;
or
(iv) Approval by the stockholders of the Company
and consummation of (A) a reorganization, merger, consolidation, or
sale or other disposition of all or substantially all of the assets of
the Company, in each case, with or to a corporation or other person or
entity of which persons who were the stockholders of the Company
immediately prior to such transaction do not, immediately thereafter,
own more than 60% of the combined voting power of the outstanding
voting securities entitled to vote generally in the election of
directors of the reorganized, merged, consolidated or purchasing
corporation (or, in the case of a non-corporate person or entity,
functionally equivalent voting power) and 80% of the members of the
Board of which corporation (or functional equivalent in the case of a
non-corporate person or entity) were not members of the Incumbent Board
at the time of the execution of the initial agreement providing for
24
<PAGE>
such reorganization, merger consolidation or sale, or (B) a liquidation
or dissolution of the Company.
(q) "Change of Control Resignation" - as defined in
Section 3.2(b).
(r) "Code" - as defined in Section 4.4(b).
(s) "Common Stock" - as defined in Section 1.2(b).
(t) "Confidential Information" - as defined in Section
5.1.
(u) "Consulting Agreement" - as defined in Section 5.13.
(v) "Continued Benefits" - as defined in Section 4.3(g).
(w) "Control Premium Price" - as defined in Section 6.1.
(x) "Designated Beneficiaries" - as defined in Section
4.3(k)(i).
(y) "Designated Beneficiaries List" - as defined in
Section 4.3(k)(ii).
(z) "Estate" - as defined in Section 4.3(k).
(aa) "Excise Tax" - as defined in Section 4.5(a).
(bb) "expiration" shall mean the expiration of Executive's
employment hereunder in accordance with Section 1.3.
(cc) "fair market value" - as defined in Section 4.3(i) or
4.3(k), as the case may be.
(dd) "Good Reason" shall mean the occurrence of any of the
following:
(i) The Company's failure to elect or reelect or
to appoint or reappoint Executive to offices, titles or positions
carrying comparable authority, responsibilities, dignity and importance
to that of Executive's offices and positions as of November 4, 1996
(provided that notwithstanding Executive's present title as Chairman,
failure of Executive to be elected or reelected as a director of the
Company shall not constitute "Good Reason"), or in the case of a Change
in Control, involving duties of a scope comparable to those of
Executive's most significant offices or positions held at any time
during the 90-day period immediately preceding the date such Change in
Control occurs, or failure by the Company to use its best efforts to
nominate Executive for election as a director or to use all reasonable
efforts to cause him to be elected as a director;
25
<PAGE>
(ii) Material change by the Company in
Executive's function, duties or responsibilities (including reporting
responsibilities) which would cause Executive's position with the
Company to become of less dignity, responsibility and importance than
those associated with his functions, duties or responsibilities as of
November 4, 1996, or in the case of a Change in Control, involving
duties of a scope less than that associated with Executive's most
significant position with the Company during the 90-day period
immediately preceding the date such Change in Control occurs;
(iii) Executive's Base Salary is reduced by the
Company (unless such reduction is pursuant to a salary reduction
program as described in Section 2.1 hereof) or there is a material
reduction in the benefits that are in effect for the Executive on
November 4, 1996 in accordance with Section 2.4 (unless such reduction
is pursuant to a uniform reduction in benefits for all Senior
Executives);
(iv) Except with Executive's prior written
consent, relocation of Executive's principal place of employment to a
location outside of Maricopa County, Arizona, or requiring Executive to
travel on the Company's business more than is required by Section 1.4
hereof;
(v) The failure by the Company to obtain the
assumption by operation of law or otherwise of this Agreement by any
entity which is the surviving entity in any merger or other form of
corporate reorganization involving the Company or by any entity which
acquires all or substantially all of the Company's assets; or
(vi) Other material breach of this Agreement by
the Company, which breach is not cured within fifteen (15) days after
written notice thereof is received by the Company.
(ee) "Gross-Up Payment" as defined in Section 4.5(a).
(ff) "Incumbent Board" as defined in Section 7.1(o)(iii).
(gg) "1996 Executive Bonus Plan" - as defined in Section
2.2.
(hh) "Non-Competition Period" - as defined in Section
5.9(a).
(ii) "Notice" - as defined in Section 6.1.
(jj) "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision of this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated. Each Notice of Termination shall be delivered at least thirty (30)
days prior to the effective date of termination.
26
<PAGE>
(kk) "Payment" - as defined in Section 4.5(a).
(ll) "Previously Accrued Vacation" - as defined in Section
2.4(f).
(mm) "Proprietary Information" - as defined in Section
5.1(b);
(nn) "Regulations" - as defined in Section 4.5(b).
(oo) "Retirement" shall mean normal retirement at age 65
or in accordance with the provisions of the SERP or following ten years of
service as defined in any other retirement plan established with Executive's
consent with respect to Executive.
(pp) "Securities Act" - as defined in Section 2.4(g);
(qq) "Senior Executives" shall mean the chief executive
officer and the four most highly compensated executive officers of the Company
determined in accordance with the rules and regulations of the Securities and
Exchange Commission under the Exchange Act.
(rr) "SERP" - as defined in Section 2.4(a)(i);
(ss) "termination" shall mean the termination of
Executive's employment hereunder other than upon expiration of the term of such
employment in accordance with Section 1.3.
(tt) "Termination Put" - as defined in Section 4.3(k)(i).
(uu) "Termination Put Notice" as defined in Section
4.3(k)(ii).
(vv) "Total Disability" shall mean Executive's failure
substantially to perform his duties hereunder on a full-time basis for a period
exceeding 180 consecutive days or for periods aggregating more than 180 days
during any twelve-month period as a result of incapacity due to physical or
mental illness. If there is a dispute as to whether Executive is or was
physically or mentally unable to perform his duties under this Agreement, such
dispute shall be submitted for resolution to a licensed physician agreed upon by
the Board and Executive, or if an agreement cannot be promptly reached, the
Board and Executive shall promptly select a physician, and if these physicians
cannot agree, the physicians shall promptly select a third physician whose
decision shall be binding on all parties. If such a dispute arises, Executive
shall submit to such examinations and shall provide such information as such
physicians may request, and the determination of the physicians as to
Executive's physical or mental condition shall be binding and conclusive.
Notwithstanding the foregoing, if Executive participates in any group disability
plan provided by the Company which offers long-term disability benefits, "Total
Disability" shall mean total disability as defined therein.
(ww) "Transfer Price" - as defined in Section 6.1.
27
<PAGE>
(xx) "Underpayment" - as defined in Section 4.5(b).
7.2. Key Man Insurance. The Company shall have the right, in its sole
discretion, to purchase "key man" insurance on the life of Executive in addition
to the key man insurance acquired pursuant to Section 4.3(k) hereof. The Company
shall be the owner and beneficiary of any such policy. If the Company elects to
purchase such a policy, Executive shall take such physical examinations and
supply such information as may be reasonably requested by the insurer.
7.3. Mitigation of Damages; No Set-Off; Dispute Resolution. (a)
Executive shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise, nor shall the
amount of any payment provided for in this Agreement be reduced by any
compensation earned by Executive as the result of employment by another employer
after the date of termination of his employment hereunder or otherwise. The
Company's obligation to make the payments provided for in this Agreement shall
not be affected by any set-off, counterclaim, recoupment, defense or other claim
or action which the Company may have against Executive.
(b) If there shall be any dispute between the Company and
Executive (i) in the event of any termination of Executive's employment by the
Company, whether such termination was for Cause, or (ii) in the event of any
termination of employment by Executive, whether Good Reason existed, or (iii)
otherwise arising out of this Agreement, the dispute shall be resolved in
accordance with the dispute resolution procedures set forth in Exhibit H hereto,
the provisions of which are incorporated as a part hereof, and the parties
hereto hereby agree that such dispute resolution procedures shall be the
exclusive method for resolution of disputes under this Agreement; provided,
however, that (1) either party may seek preliminary judicial relief if, in its
judgment, such action is necessary to avoid irreparable injury during the
pendency of such procedures, and (2) nothing in Exhibit H shall prevent either
party from exercising the rights of termination set forth in this Agreement. In
the event of a dispute hereunder as to whether a termination by the Company was
for Cause or by the Executive for Good Reason, until there is a resolution and
award as provided in Exhibit H, the Company shall pay all amounts, and provide
all benefits, to Executive and/or Executive's family or other beneficiaries, as
the case may be, that the Company would be required to pay or provide hereunder
as though such termination were by the Company without Cause or by Executive for
Good Reason and shall pay the reasonable legal fees and expenses of counsel for
Executive in connection with such dispute resolution; provided, however, that
the Company shall not be required to pay any disputed amounts or any legal fees
and expenses pursuant to this subparagraph (b) except upon receipt of a written
undertaking by or on behalf of Executive (and/or Executive's family or other
beneficiaries, as the case may be) to repay, without interest or penalty, as
soon as practicable after completion of the dispute resolution (A) all such
amounts to which Executive (or Executive's family or other beneficiaries, as the
case may be) is ultimately adjudged not be entitled with respect to the payment
of such disputed amount(s) and (B) in addition, in the case of legal fees and
expenses, a proportionate amount of legal fees and expenses attributable to any
of Executive's claim(s) (or any of Executive's defenses or
28
<PAGE>
counter-claims(s)), if any, which shall have been found by the dispute resolver
to have been frivolous or without merit. IT IS EXPRESSLY UNDERSTOOD THAT BY
SIGNING THIS AGREEMENT, WHICH INCORPORATES BINDING ARBITRATION, THE COMPANY AND
EXECUTIVE AGREE, EXCEPT AS SPECIFICALLY PROVIDED OTHERWISE IN SECTION 5.11 AND
THIS SECTION 7.3(b), TO WAIVE COURT OR JURY TRIAL AND TO WAIVE PUNITIVE,
STATUTORY, CONSEQUENTIAL AND ANY DAMAGES OTHER THAN COMPENSATORY DAMAGES.
7.4. Successors; Binding Agreement. This Agreement shall be binding
upon any successor to the Company and shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, beneficiaries,
designees, executors, administrators, heirs, distributees, devisees and
legatees.
7.5. Modification; No Waiver. This Agreement may not be modified or
amended except by an instrument in writing signed by the parties hereto. No term
or condition of this Agreement shall be deemed to have been waived, nor shall
there be any estoppel against the enforcement of any provision of this
Agreement, except by written instrument by the party charged with such waiver or
estoppel. No such written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall operate only as to the
specific term or condition waived and shall not constitute a waiver of such term
or condition for the future or as to any other term or condition.
7.6. Severability. The covenants and agreements contained herein are
separate and severable and the invalidity or unenforceability of any one or more
of such covenants or agreements, if not material to the employment arrangement
that is the basis for this Agreement, shall not affect the validity or
enforceability of any other covenant or agreement contained herein. If, in any
judicial proceeding, a court shall refuse to enforce one or more of the
covenants or agreements contained herein because the duration thereof is too
long, or the scope thereof is too broad, it is expressly agreed between the
parties hereto that such duration or scope shall be deemed reduced to the extent
necessary to permit the enforcement of such covenants or agreements.
7.7. Notices. All the notices and other communications required or
permitted hereunder shall be in writing and shall be delivered personally or
sent by registered or certified mail, return receipt requested, to the parties
hereto at the following addresses:
If to the Company, to it at:
MicroAge, Inc.
2400 South MicroAge Way
Tempe, Arizona 85282-1896
ATTN: Board of Directors
With a copy to:
29
<PAGE>
Matthew P. Feeney
Snell & Wilmer, L.L.P.
One Arizona Center
Phoenix, Arizona 85004-0001
If Executive, to him at:
Jeffrey D. McKeever
5660 North Saquaro Road
Paradise Valley, Arizona 85253
7.8. Assignment. This Agreement and any rights hereunder shall not be
assignable by either party without the prior written consent of the other party
except as otherwise specifically provided for herein or in the Exhibits that are
incorporated as a part hereof.
7.9. Entire Understanding. This Agreement (together with the Exhibits
incorporated as a part hereof) constitutes the entire understanding between the
parties hereto and no agreement, representation, warranty or covenant has been
made by either party except as expressly set forth herein.
7.10. Executive's Representations. Executive represents and warrants
that neither the execution and delivery of this Agreement nor the performance of
his duties hereunder violates the provisions of any other agreement to which he
is a party or by which he is bound.
7.11. Liability of Company with Respect to Insurance Policies.
Executive has selected the insurer and policy referred to in Section 2.4(a)(ii)
hereof, and the Company shall not have any liability to Executive (or his
beneficiaries) should the insurance company which issues the policy referred to
therein fail or refuse to pay (whether voluntarily or by reason of any order,
injunction or otherwise) thereunder or if any rights or elections otherwise
available to Executive thereunder are restricted or eliminated.
7.12. Governing Law. This Agreement shall be construed in accordance
with and governed for all purposes by the laws of the State of Arizona
applicable to contracts executed and wholly performed within such state.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Company:
MICROAGE, INC.
30
<PAGE>
By:/s/Jeffrey D. McKeever
----------------------------------
Name:Jeffrey D. McKeever
--------------------------------
Title:Chairman and CEO
-------------------------------
Executive:
/s/Jeffrey D. McKeever
-------------------------------------
-------------------------------------
31
<PAGE>
EXHIBIT A
---------
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
--------------------------------------
32
<PAGE>
EXHIBIT B
---------
SPLIT DOLLAR INSURANCE AGREEMENT
--------------------------------
33
<PAGE>
EXHIBIT C
---------
AMENDED AND RESTATED RIGHTS AGREEMENT
-------------------------------------
34
<PAGE>
EXHIBIT D
---------
LIST OF DESIGNATED BENEFICIARIES
--------------------------------
35
<PAGE>
EXHIBIT E
---------
EXECUTIVE'S RIGHTS
------------------
None
36
<PAGE>
EXHIBIT F
---------
EXECUTIVE'S EXISTING OBLIGATIONS AND CLAIMS
-------------------------------------------
None
37
<PAGE>
EXHIBIT G
---------
CONSULTING AGREEMENT
--------------------
38
<PAGE>
EXHIBIT H
---------
DISPUTE RESOLUTION PROCEDURES
-----------------------------
A. If a controversy should arise which is covered by Section 7.3 of
Article VII, then not later than twelve (12) months from the date of the event
which is the subject of dispute either party may serve on the other a written
notice specifying the existence of such controversy and setting forth in
reasonably specific detail the grounds thereof ("Notice of Controversy");
provided that, in any event, the other party shall have at least thirty (30)
days from and after the date of the Notice of Controversy to serve a written
notice of any counterclaim ("Notice of Counterclaim"). The Notice of
Counterclaim shall specify the claim or claims in reasonably specific detail. If
the Notice of Controversy or the Notice of Counterclaim, as the case may be, is
not served within the applicable period, the claim set forth therein will be
deemed to have been waived, abandoned and rendered unenforceable.
B. Following receipt of the Notice of Controversy (or the Notice of
Counterclaim, as the case may be), there shall be a three week period during
which the parties will make a good faith effort to resolve the dispute through
negotiation ("Period of Negotiation"). Neither party shall take any action
during the Period of Negotiation to initiate arbitration proceedings.
C. If the parties should agree during the Period of Negotiation to
mediate the dispute, then the Period of Negotiation shall be extended by an
amount of time to be agreed upon by the parties to permit such mediation. In no
event, however, may the Period of Negotiation be extended by more than five
weeks or, stated differently, in no event may the Period of Negotiation be
extended to encompass more than a total of eight weeks.
D. If the parties agree to mediate the dispute but are thereafter
unable to agree within a week on the format and procedures for the mediation,
then the effort to mediate shall cease, and the Period of Negotiation shall
terminate four weeks from the Notice of Controversy (or the Notice of
Counterclaim, as the case may be).
E. Following the termination of the Period of Negotiation, the dispute
(including the main claim and counterclaim, if any) shall be settled by
arbitration, governed by the Federal Arbitration Act, 9 U.S.C. ss. 1 et seq.
("FAA"), and judgment upon the award may be entered in any court having
jurisdiction thereof. The format and procedures of the arbitration are set forth
below (referred to below as the "Arbitration Agreement").
F. A notice of intention to arbitrate ("Notice of Arbitration") shall
be served within 45 days of the termination of the Period of Negotiation. If the
Notice of Arbitration is not served within this period, the claim set forth in
the Notice of Controversy (or the Notice of Counterclaim, as the case may be)
will be deemed to have been waived, abandoned and rendered unenforceable.
39
<PAGE>
G. The arbitration, including the Notice of Arbitration, will be
governed by the Commercial Rules of the American Arbitration Association ("AAA")
in effect on the date of the Notice of Arbitration, except that the terms of
this Arbitration Agreement shall control in the event of any difference or
conflict between such Rules and the terms of this Arbitration Agreement.
H. The arbitrator shall reach a decision on the merits on the basis of
applicable legal principles as embodied in the law of the State of Arizona. The
arbitration hearing shall take place in Phoenix, Arizona.
I. There shall be one arbitrator, regardless of the amount in
controversy. The arbitrator selected, in order to be eligible to serve, shall be
a lawyer in Phoenix, Arizona with at least fifteen (15) years specializing in
either general commercial litigation or general corporate and commercial
matters. In the event the parties cannot agree on a mutually acceptable single
arbitrator from the list submitted by the AAA, the AAA shall appoint the
arbitrator who shall meet the foregoing criteria.
J. At the time of appointment and as a condition thereto, the
arbitrator will be apprised of the time limitations and other provisions of this
Arbitration Agreement and shall indicate such dispute resolver's agreement to
the Tribunal Administrator to comply with such provisions and time limitations.
K. During the 30-day period following appointment of the arbitrator,
either party may serve on the other a request for limited numbers of documents
directly related to the dispute. Such documents will be produced within seven
days of the request.
L. Following the thirty-day period of document production, there will
be a forty-five day period during which limited depositions will be permissible.
Neither party will take more than five depositions, and no deposition will
exceed three hours of direct testimony.
M. Disputes as to discovery or prehearing matters of a procedural
nature shall be promptly submitted to the arbitrator pursuant to telephone
conference call or otherwise. The arbitrator shall make every effort to render a
ruling on such interim matters at the time of the hearing (or conference call)
or within five business days thereafter.
N. Following the period of depositions, the arbitration hearing shall
promptly commence. The arbitrator will make every effort to commence the hearing
within thirty days of the conclusion of the deposition period and, in addition,
will make every effort to conduct the hearing on consecutive business days to
conclusion.
O. An award will be rendered, at the latest, within nine months of the
date of the Notice of Arbitration and within thirty days of the close of the
arbitration hearing. The award shall set forth the grounds for the decision
(findings of fact and conclusions of law) in
40
<PAGE>
reasonably specific detail and shall also specify whether any claim (or defense
or counter-claim) of Executive is found to be frivolous or without merit and
what proportion, if any, of his legal fees and expenses which have been paid by
the Company Executive shall be required to repay to the Company in accordance
with Section 7.3(b). The award shall be final and nonappealable except as
provided in the FAA and except that a court of competent jurisdiction shall have
the power to review whether, as a matter of law, based upon the findings of fact
by the arbitrator, the award should be confirmed or should be modified or
vacated in order to correct any errors of law made by the arbitrator. Such
judicial review shall be limited to issues of law, and the parties agree that
the findings of fact made by the arbitrator shall be final and binding on the
parties and shall serve as the facts to be relied upon by the court in
determining the extent to which the award should be confirmed, modified or
vacated.
The award may only be made for compensatory damages, and if any other
damages (whether exemplary, punitive, consequential, statutory or other) are
included, the award shall be vacated and remanded, or modified or corrected, as
appropriate to promote this damage limitation; provided, however, that an award
in favor of the Company shall include the relief set forth in Section 5.11.
41
MICROAGE, INC.
1994 MANAGEMENT EQUITY PROGRAM
AWARD AGREEMENT
December 9, 1993
Dear Jeff:
Pursuant to the action taken by the Board of Directors of
MicroAge, Inc. (the "Company") and the Compensation Committee of the Board of
Directors, you are hereby offered participation in the 1994 Management Equity
Program (the "1994 MEP") under the MicroAge, Inc. Long-Term Incentive Plan (the
"Plan"). Under the 1994 MEP, you have the opportunity to receive options to
restructure your compensation package to some extent. Essentially, you may elect
to purchase shares of the common stock of the Company if you irrevocably elect
to waive (1) all or a portion of your 1993 fiscal year bonus (the "1993 Bonus"),
and (2) a portion of your base salary and any bonuses you may receive for the
1994, 1995, and 1996 calendar years, and later years if necessary, under the
following terms and conditions.
BEFORE YOU ELECT TO PARTICIPATE IN THE 1994 MEP, READ THIS AWARD AGREEMENT. YOU
WILL BE REQUIRED TO SIGN THIS AWARD AGREEMENT AND YOUR SIGNATURE WILL EVIDENCE
THAT YOU HAVE READ THIS AWARD AGREEMENT, UNDERSTAND IT, AND AGREE WITH ITS TERMS
AND CONDITIONS.
TO PARTICIPATE IN THE 1994 MEP, YOU MUST COMPLETE AND SIGN THIS AWARD AGREEMENT
AND RETURN IT TO CRAIG CANTONI BY 12:00 P.M. NOON ON TUESDAY, DECEMBER 14, 1993.
1. EFFECTIVE DATE. The effective date of your participation in
the 1994 MEP is December 14, 1993.
2. STOCKHOLDER APPROVAL. The 1994 MEP is subject to
stockholder approval of the Plan, which will be sought at the 1994 Annual
Meeting of Stockholders. If stockholder approval is not obtained at such
meeting, the 1994 MEP will be deemed to have never been implemented and the
options thereunder will be deemed to have never been granted.
3. 1993 BONUS WAIVER. You hereby elect to waive all or a
portion of your 1993 Bonus in the amount specified in the table below, subject
to the limitation described in footnote 6 below.
1993 BONUS WAIVER(1)
================================================================================
1993 Bonus Waived 1994 Salary Credit Amount(2) Bonus Credit Amount(3)
- --------------------------------------------------------------------------------
$75,000 $75,000 $0
================================================================================
- -----------------
1 You are not required to waive any of your 1993 Bonus as a condition to
participate in the 1994 MEP. Any part of your 1993 Bonus that you elect to waive
will be credited against your 1994 salary waiver amount (up to the amount of the
Salary Credit Amount) and your 1994 bonus waiver amount, in that order. This
"credit" can be carried forward beyond 1994. See Example A attached to this
Award Agreement.
2 You may insert any amount from $0 to $75,000 (15% of your Current Base
Salary).
3 Computed by subtracting the Salary Credit Amount from the 1993 Bonus
Waived.
<PAGE>
4. 1994-1996 WAIVER. You hereby elect to waive a portion of
your salary and bonuses for the 1994, 1995, and 1996 calendar years in the
amounts specified in the tables below (please understand that bonuses for later
years may be automatically waived, as may be necessary to make up any deficit
(see footnote 5)):
1994-1996 WAIVER TABLE
================================================================================
Year Salary(4) Bonus(5) Total
- --------------------------------------------------------------------------------
1994 $75,000 $125,000 $200,000(6)
- --------------------------------------------------------------------------------
1995 $75,000 $125,000 $200,000
- --------------------------------------------------------------------------------
1996 $75,000 $125,000 $200,000
- --------------------------------------------------------------------------------
1993-1996 $225,000 $375,000 $600,000(7)
========
================================================================================
5. NUMBER OF OPTIONS GRANTED. In exchange for electing to
waive the amount of compensation specified in the 1994-1996 Waiver Table in
Paragraph 4, above, you are hereby granted an option to purchase the number of
shares of MicroAge, Inc. Common Stock calculated pursuant to the formula below
(to be completed by MicroAge):
(1) Total Compensation Waived (1994-1996): $600,000
--------
(2) $600,000 (Total Compensation Waived)
Multiplied by Ten (10): $6,000,000
----------
(3) Common Stock Closing Price
Effective Date (December 14, 1993)
(the "Common Stock Price"): $24.83
------
(4) Total Options Granted (2) / (3) (rounded up): 241,611
(See Example C attached to this Award Agreement) -------
- -------------------------
4 The minimum annual salary waiver amount is $25,000 (5% of your Current
Base Salary). The maximum annual salary waiver amount is $75,000 (15% of your
Current Base Salary).
5 There is no minimum annual bonus waiver amount. The maximum annual bonus
waiver amount is $125,000 (25% of your Current Base Salary). If the bonus amount
you elect to waive in any year is more than the bonus actually paid to you for
that year (and you do not have a Bonus Credit Amount to apply to the deficit),
the deficit amount will be added to your bonus waiver amount for the following
year. Deficit amounts will continue to be carried forward until made up or until
December 14, 2002. See Example B attached to this Award Agreement.
6 The amount of your 1993 Bonus that you may waive cannot exceed this
number. See Example A attached to this Award Agreement.
7 The minimum waiver amount (salary and bonuses combined) for the
three-year period (1994-1996) is $250,000 (50% of your Current Base Salary).
-2-
<PAGE>
6. VESTING OF OPTIONS. Your options will vest in one-third
(1/3) increments beginning on the January 1 which is three years following the
January 1 of the calendar year for each year you elect to waive base salary
and/or bonus amounts. Any amount of your 1993 Bonus that you elect to waive will
be used as a credit against future waiver amounts and will be deemed to be
waived in the year that such credit is taken. HOWEVER, your options will not
fully vest until you have actually waived all of the compensation you agreed to
waive.
FOR EXAMPLE, the options to be purchased with the
compensation you waive in 1994 will vest in 1/3 increments beginning on January
1, 1997 and will be 100% vested on January 1, 1999. Correspondingly, the options
to be purchased with the compensation you waive in 1995 will vest in 1/3
increments beginning on January 1, 1998 and will be 100% vested on January 1,
2000, and so on.
If you elect to waive a specific amount of your
bonuses for the next three years, but do not receive bonuses for the next three
years sufficient to cover the amount you agreed to waive (and you do not have a
Bonus Credit Amount to apply against the deficit), the bonuses you may be
otherwise entitled to receive in later years (up through December 13, 2002) will
be used to make up any shortfall on a "first-in, first-out" theory. See Example
D attached to this Award Agreement.
Notwithstanding the above, your options will become
fully vested and exercisable as of December 14, 2002, unless you otherwise
terminate employment before such date.
7. EXPIRATION OF OPTIONS. Subject to Section 8 and 9 of this
Award Agreement, your options will expire, unless sooner exercised, on December
14, 2003.
8. TERMINATION OF EMPLOYMENT
Death. Upon your death, your beneficiary will be
entitled to receive the number of options determined by multiplying the sum of
your compensation actually waived up to the date of your death by ten and
dividing the product by the Common Stock Price; provided, however, that only the
total compensation waived by you up to the date of your death will be
considered. All options received by your beneficiary will be fully vested and
immediately exercisable. Your beneficiary will have up to one year from the date
of your death to exercise the options. After that one year period, the options
will be cancelled. Under no circumstances will you or your beneficiary be
entitled to receive cash equal to all or any portion of the compensation you
elected to waive under the 1994 MEP.
Disability. Upon your termination of employment due
to a "Disability" (as that term is defined in the Plan) you will be entitled to
receive the number of options determined by multiplying the sum of your
compensation actually waived up to the date of your termination by ten and
dividing the product by the Common Stock Price; provided, however, that only the
total compensation waived by you up to the date of your termination will be
considered. All options received will be fully vested and immediately
exercisable. You will have up to one year from the date of termination of
employment to exercise the options. After that one year period, the options will
be cancelled. Under no circumstances will you be entitled to receive cash equal
to all or any portion of the compensation you elected to waive under the 1994
MEP.
Voluntary or Involuntary. Upon your voluntary or
involuntary termination of employment, you will be entitled to receive the
number of options determined by multiplying the sum of your compensation
actually waived up to the date of your termination by ten and dividing the
product by the Common Stock Price; provided, however, that only the total
compensation waived by you up to the date of termination of employment will be
considered. Your options will continue to vest under the above vesting schedule
as if you continued to be employed by the Company and continued participating in
the 1994 MEP. Under no circumstances will you be entitled to receive cash equal
to all or any portion of the compensation you elected to waive under the 1994
MEP.
-3-
<PAGE>
9. TERMINATION OF 1994 MEP. If the Committee decides to
terminate the 1994 MEP, you will be entitled to receive a number of options
determined by multiplying the sum of your compensation actually waived up to the
date of your termination by ten and dividing the product by the Common Stock
Price; provided, however, that only the total compensation waived by you up to
the date of termination will be considered. All options received will be fully
vested and immediately exercisable. You will have up to thirty days from the
date of such termination to exercise the options. After such thirty day period,
the options will be cancelled. Under no circumstances will you be entitled to
receive cash equal to all or any portion of the compensation you elected to
waive under the 1994 MEP.
10. CHANGE OF CONTROL. Upon a "Change of Control" (as that
term is defined in the Plan), the terms of Section 13.10 and 14.2 of the Plan
will apply to all options issued under the 1994 MEP. Upon a Change of Control,
you will be entitled to receive the number of options determined by multiplying
the sum of your compensation actually waived up to the date of the Change of
Control by ten and dividing the product by the Common Stock Price; provided,
however, that only the total compensation waived by you up to the date of the
Change of Control will be considered. All options will be fully vested and
immediately exercisable. In the event of a dissolution or liquidation of the
Company or a merger or consolidation in which the Company would not be the
surviving or resulting corporation, you will be entitled to receive the number
of options determined by multiplying the sum of your compensation actually
waived up to the date of exercise by ten and dividing the product by the Common
Stock Price; provided, however, that only the total compensation waived by you
up to the date of exercise will be considered. All options will be fully vested
and exercisable (a) in the case of a dissolution or liquidation, at anytime
after the Company's Board of Directors takes action authorizing the dissolution
or liquidation of the Company or (b) in the case of a merger or consolidation in
which the Company would not be the resulting or surviving corporation, upon the
Company's public announcement that a definitive agreement regarding such a
merger or consolidation has been reached. Under no circumstances will you be
entitled to receive cash equal to all or any portion of the compensation you
elected to waive under the 1994 MEP.
11. COMPANY INFORMATION. By signing this Award Agreement, you
acknowledge that you have been given, or were offered, a copy of the Company's
Annual Report on Form 10-K for the fiscal year ended September 30, 1993 (the
"1993 10-K"), and that you were given an opportunity to ask questions of any of
the Company's executive officers (as disclosed on page 7 of the 1993 10-K)
regarding the 1993 10-K or any other matter regarding the Company.
12. RISK OF INVESTMENT. By signing this Award Agreement, you
recognize that your participation in the 1994 MEP is a speculative investment in
that the success or failure of your investment depends on the market value of
the Company's Common Stock over a several year period. You further recognize
that all or a portion of your investment (i.e., your salary and bonus waiver)
may be lost. You also acknowledge that you were given the opportunity to consult
with your personal advisor(s) regarding the 1994 MEP.
I hereby elect to participate in the 1994 MEP under the terms
and conditions set forth above and acknowledge that I have read and understood
the terms and conditions of the 1994 MEP.
ACCEPTED:
MICROAGE, INC.
SIGNATURE /s/Jeffrey D. McKeever BY /s/Jeffrey D. McKeever
-------------------------- ------------------------------------
DATE 12/14/93 ITS Chairman and CEO
-------------------------- ------------------------------------
SSN ###-##-####
--------------------------
-4-
FIRST AMENDMENT TO THE
MICROAGE 1994 MANAGEMENT EQUITY PROGRAM
AWARD AGREEMENT FOR
JEFFREY D. McKEEVER
THIS FIRST AMENDMENT to the Award Agreement dated December 14,
1993 ("Award Agreement"), is entered into by MicroAge, Inc. ("Company"), and
Jeffrey D. McKeever ("Executive") pursuant to the Management Equity Plan ("MEP")
under the MicroAge, Inc. Long- Term Incentive Plan ("Plan"), as of December 14,
1995.
WHEREAS, the Company and the Executive entered into the Award
Agreement effective December 14, 1993, to enable the Executive to acquire an
option to purchase Company stock by making salary deferrals; and
WHEREAS, the exercise price of the option to purchase Company
common stock, $.01 par value ("Common Stock"), under the Award Agreement is
$24.83 per share, after giving effect to a 3-for-2 stock split that was payable
on January 13, 1994; and
WHEREAS, the closing price of the Common Stock on the Nasdaq
National Market on December 13, 1995, was $8.75 per share; and
WHEREAS, in order to provide a meaningful incentive for the
Executive under the MEP, the Compensation Committee of the Company's Board of
Directors has reduced the exercise price under the Award Agreement to the
current fair market value of the Common Stock.
NOW THEREFORE, the Executive and the Company agree as follows:
1. Paragraph 5 of the Award Agreement is
hereby amended and restated in its entirety as follows:
<PAGE>
5. NUMBER OF OPTIONS GRANTED. In exchange for electing to
waive the amount of compensation specified in the 1994-1996 Waiver Table in
Paragraph 4, above, you are hereby granted an option to purchase the number of
shares of MicroAge, Inc. Common Stock calculated pursuant to the formula below:
(1) TOTAL COMPENSATION WAIVED (1994-1996) $600,000
(2) $600,000 (TOTAL COMPENSATION WAIVED)
MULTIPLIED BY 3.5234933 (THE "LEVERAGING
FACTOR") $2,114,096
(3) COMMON STOCK CLOSING PRICE ON DECEMBER
13, 1995 (THE "COMMON STOCK PRICE") $8.75
(4) TOTAL OPTIONS GRANTED (2) / (3) 241,611
2. Paragraphs 8, 9, and 10 of the Award
Agreement shall be amended by deleting the references to the number "ten" and
replacing such reference with the phrase "the Leveraging Factor."
3. This First Amendment shall be effective
as of December 14, 1995.
MICROAGE, INC.
By: /s/Alan P. Hald
---------------------------------------
Its: Vice Chairman and Secretary
--------------------------------------
/s/Jeffrey D. McKeever
---------------------------------------
Jeffrey D. McKeever
2
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
dated as of November 4, 1996
by and between
MICROAGE, INC.
and
Alan Hald
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I - DUTIES AND TERM.................................................. 1
Section 1.1 Continued Employment....................................... 1
Section 1.2 Position and Responsibilities.............................. 1
Section 1.3 Term....................................................... 2
Section 1.4 Location................................................... 2
ARTICLE II - COMPENSATION.................................................... 3
Section 2.1 Base Salary................................................ 3
Section 2.2 Bonus Payments............................................. 3
Section 2.3 Stock Options.............................................. 3
Section 2.4 Additional Benefits........................................ 4
ARTICLE III - TERMINATION OF EMPLOYMENT...................................... 6
Section 3.1 Death or Retirement of Executive........................... 6
Section 3.2 By Executive............................................... 6
Section 3.3 By Company................................................. 6
ARTICLE IV - COMPENSATION UPON TERMINATION OF EMPLOYMENT..................... 6
Section 4.1 Upon Termination for Death or Disability................... 6
Section 4.2 Upon Termination by Company for Cause or
by Executive Without Good Reason........................... 7
Section 4.3 Upon Termination by the Company Without
Cause or by Executive for Good Reason Prior
to a Change of Control..................................... 8
Section 4.4 Upon Termination by the Company Without
Cause or by Executive for Good Reason
Following a Change of Control or Pursuant
to a Change of Control Resignation......................... 12
Section 4.5 Certain Additional Payments by Company..................... 12
ARTICLE V - RESTRICTIVE COVENANTS............................................ 15
Section 5.1 Confidential Information and Materials..................... 15
Section 5.2 General Knowledge.......................................... 16
Section 5.3 Executive Obligations as to Confidential
Information and Materials.................................. 17
Section 5.4 Inform Subsequent Employers................................ 17
Section 5.5 Ideas and Inventions....................................... 17
Section 5.6 Inventions and Patents..................................... 18
Section 5.7 Copyrights................................................. 18
Section 5.8 Conflicting Obligations and Rights......................... 18
Section 5.9 Non-Competition............................................ 19
- ii -
<PAGE>
Section 5.10 Non-Disparagement.......................................... 20
Section 5.11 Remedies................................................... 20
Section 5.12 Consulting Agreement....................................... 21
Section 5.13 Scope of Article........................................... 21
ARTICLE VI - COMPANY'S RIGHT OF FIRST REFUSAL................................ 21
Section 6.1 The Company's Right of First Refusal....................... 21
Section 6.2 Exceptions................................................. 22
ARTICLE VII - MISCELLANEOUS.................................................. 23
Section 7.1 Definitions................................................ 23
Section 7.2 Key Man Insurance.......................................... 28
Section 7.3 Mitigation of Damages; No Set-Off; Dispute Resolution...... 28
Section 7.4 Successors; Binding Agreement.............................. 29
Section 7.5 Modification; No Waiver.................................... 29
Section 7.6 Severability............................................... 30
Section 7.7 Notices.................................................... 30
Section 7.8 Assignment................................................. 30
Section 7.9 Entire Understanding....................................... 30
Section 7.10 Executive's Representations................................ 30
Section 7.11 Liability of Company with Respect to Insurance Policies.... 31
Section 7.12 Governing Law.............................................. 31
EXHIBIT A - SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
EXHIBIT B - SPLIT DOLLAR INSURANCE AGREEMENT
EXHIBIT C - REGISTRATION RIGHTS
EXHIBIT D - LIST OF DESIGNATED BENEFICIARIES
EXHIBIT E - EXECUTIVE'S RIGHTS
EXHIBIT F - EXECUTIVE'S EXISTING OBLIGATIONS AND CLAIMS
EXHIBIT G - CONSULTING AGREEMENT
EXHIBIT H - DISPUTE RESOLUTION PROCEDURES
- ii -
<PAGE>
AMENDED AND RESTATED
--------------------
EMPLOYMENT AGREEMENT
--------------------
Amended and Restated EMPLOYMENT AGREEMENT (this "Agreement") made and
entered into as of November 4, 1996 by and between MICROAGE, INC., a Delaware
corporation (the "Company"), and ALAN HALD ("Executive").
R E C I T A L S :
- - - - - - - - -
WHEREAS, the Company and Executive entered into an Employment Agreement
on October 1, 1992 and the First Amendment to Employment Agreement dated on
October 1, 1995 (the "Employment Agreement"); and
WHEREAS, pursuant to Section 7.5 of the Employment Agreement, the
Employment Agreement may be amended only by a written document signed by each of
the parties thereto; and
WHEREAS, the Company and Executive desire to amend and restate the
Employment Agreement.
NOW, THEREFORE, in consideration of the premises, and for other
valuable consideration, the sufficiency of which is hereby acknowledged by each
of the parties hereto, the parties hereby agree as follows:
A G R E E M E N T :
- - - - - - - - - -
ARTICLE I
DUTIES AND TERM
1.1. Continued Employment. In consideration of their mutual covenants
and other good and valuable consideration, the receipt, adequacy and sufficiency
of which is hereby acknowledged, the Company agrees to continue Executive in its
employ, and Executive agrees to remain in the employ of the Company, upon the
terms and conditions herein provided.
1.2. Position and Responsibilities.
(a) Executive shall serve as President of MicroAge
Enterprises, Inc. (or in a capacity and with a title of at least substantially
equivalent quality) reporting directly to the Chief Executive Officer of the
Company. Executive agrees to perform services not inconsistent with his position
as shall from time to time be assigned to him by the Chief Executive Officer.
1
<PAGE>
(b) Executive further agrees to serve, if elected, as a
director of the Company and as an officer or director of any subsidiary or
affiliate of the Company. Executive currently serves as Vice Chairman and
Secretary of the Company, and Executive's current term as a member of the
Company's Board of Directors will expire at the 1997 Annual Meeting of
Stockholders. The Company is under no obligation to cause Executive to be
nominated for reelection to the Board or for reelection as Secretary.
(c) During the period of his employment hereunder,
Executive shall devote substantially all of his business time, attention, skill
and efforts to the faithful performance of his duties hereunder; provided,
however, that Executive may serve or continue to serve on the board of directors
(or equivalent governing body) of, or hold other offices or positions with,
companies or organizations if they involve no conflict of interest with the
interests of the Company and may engage in customary professional activities
which in the judgment of the Board will not adversely affect the performance by
Executive of his duties hereunder. Executive has disclosed to the Board all
material business ventures in which he is currently involved, and, subject to
approval by the Board (after written notice to it), may in the future have other
business investments and participate in other business ventures which may, from
time to time, require portions of his time, but shall not interfere with his
duties hereunder. Executive shall be deemed to be in compliance with the
provisions of this Section 1.2(c) if the professional activities and business
investments and ventures in which he engages are similar in nature and time
commitment to those in which he was engaged during the twelve-month period ended
November 3, 1996.
1.3. Term. The term of Executive's employment under this Agreement
shall commence on the date first above written and shall continue, unless sooner
terminated, until October 31, 1999; provided, however, that commencing on
November 4, 1996 and on each subsequent day thereafter, the Executive's term of
employment shall automatically be extended without further action by the Company
or Executive for the 36 month period commencing on each such day.
1.4. Location. During the period of his employment under this
Agreement, Executive shall not be required, except with his prior written
consent, to relocate his principal place of employment outside Maricopa County,
Arizona. Required travel on the Company's business shall not be deemed a
relocation so long as Executive is not required to provide his services
hereunder outside of Maricopa County, Arizona, for more than fifty (50%) percent
of his working days during any consecutive six (6) month period.
ARTICLE II
COMPENSATION
For all services rendered by Executive in any capacity during his
employment under this Agreement, including, without limitation, services as a
director, officer or member of any committee of the Board of the Company or of
the board of directors of any subsidiary or affiliate of the Company, the
Company shall compensate Executive as follows:
2
<PAGE>
2.1. Base Salary. The Company shall pay to Executive an annual base
salary of not less than $325,000 (such amount, less any salary waivers under the
1994 Management Equity Program or any subsequent management equity or other
waiver program adopted by the Company is hereinafter referred to as the "Base
Salary") during the term hereof; provided, however, that in the event the
Company institutes a salary reduction program which affects all exempt employees
(as defined by standard Company policies in compliance with the Fair Labor
Standards Act) by the same percentage, then Executive's Base Salary may be
reduced by such percentage (and the term "Base Salary" as used in this Agreement
shall refer to Base Salary as so adjusted). Executive's Base Salary shall be
paid in equal semi-monthly installments. The Base Salary shall be reviewed
annually by the Board or a committee designated by the Board and the Board or
such committee may, in its discretion, increase the Base Salary.
2.2. Bonus Payments.
(a) During the period of Executive's employment under this
Agreement, the Company shall pay to Executive annually a fixed cash bonus equal
to $9,249 and, in addition, such amount as may be necessary, after payment by
the Executive of all taxes, including, without limitation, any federal or state
income taxes, on such fixed cash bonus payment, so that Executive shall have
remaining, on a grossed-up basis, the amount of $9,249 (the "Annual Fixed Cash
Bonus").
(b) Executive shall, in addition, be entitled to bonus
payments, if any shall be due, pursuant to the Executive Bonus Plan which has
been established by resolution of the Board for fiscal year 1996 (the "1996
Executive Bonus Plan"). The Company shall use all reasonable efforts to cause
the Board or a committee thereof to establish in each fiscal year during the
term hereof an executive bonus plan that is similar to the 1996 Executive Bonus
Plan in providing for incentive compensation to Executive based on a formula
related to the Company's profits during such fiscal year. Any bonus under the
1996 Executive Bonus Plan or any such subsequent plan less any bonus waivers
under the 1994 Management Equity Program or any subsequent management equity or
other waiver program adopted by the Company, is referred to herein as the
"Annual Incentive Bonus."
2.3. Stock Options. The Company shall use all reasonable efforts to
establish and maintain one or more stock option plans in which Executive shall
be entitled to participate to the same extent as other Senior Executives (as
such term is defined in Section 7.1 hereof). The terms and conditions of such
plan(s) shall be determined and administered by the Board or a committee
thereof.
2.4. Additional Benefits. Executive shall be entitled to participate in
all employee benefit and welfare programs, plans and arrangements (including,
without limitation, pension, profit-sharing, supplemental pension and other
retirement plans, insurance, hospitalization, medical and disability benefits,
travel or accident insurance plans) and to receive fringe benefits, such as club
dues and fees of professional organizations and associations, which are from
time to time available to the Company's executive personnel; provided, however,
that there shall be no duplication of termination or severance or disability
benefits, and to the extent that such benefits are specifically provided by the
Company to Executive under other provisions of this Agreement, the benefits
available under the foregoing plans and programs shall be reduced by any benefit
amounts paid
3
<PAGE>
under such other provisions. Executive shall during the period of his employment
hereunder continue to be provided with benefits at a level which shall in no
event be less in any material respect than the benefits made available to
Executive by the Company as of the date of this Agreement, provided that in no
event shall the Company have any obligation to acquire and maintain in effect
during the term of Executive's employment hereunder a long-term disability
insurance policy on Executive (except that Executive may participate in any
group disability plan in which other executive officers of the Company may
participate). Notwithstanding the foregoing, the Company may terminate or reduce
benefits under any benefit plans and programs to the extent such reductions
apply uniformly to all Senior Executives entitled to participate therein, and
Executive's benefits shall be reduced or terminated accordingly. Specifically,
without limitation, Executive shall receive the following benefits:
(a) Retirement and Death Benefits.
Not later than the date of execution of this Agreement,
(i) Executive shall be designated as a participant in, and entitled to
receive retirement benefits in accordance with, the Company's
Supplemental Executive Retirement Plan dated October 1, 1992, as
amended (the "SERP"), a copy of which is annexed as Exhibit A hereto
and which is incorporated as a part hereof; and
(ii) Not later than the date of execution of this
Agreement, the Company and Executive shall execute and deliver the
agreement annexed as Exhibit B hereto, and in accordance therewith, the
Company shall implement and maintain in effect during the period of
Executive's employment hereunder a "split dollar" life insurance policy
on Executive's life issued by Northwestern Mutual Life Insurance
Company in such amount and in accordance with such terms and conditions
as are set forth in Exhibit B which is incorporated as a part hereof.
(b) Medical Expenses. Executive shall during the term of
his employment hereunder continue to be provided with medical, dental,
hospitalization and other health benefits at a level and of a kind substantially
equivalent to the benefits provided to Executive by the Company immediately
prior to the effective date of this Agreement; provided, however, that if the
Company terminates or reduces any such benefits with respect to all Senior
Executives entitled to participate therein, Executive's benefits shall be
reduced or terminated accordingly, but not below the level of medical benefits
then provided by the Company to full-time employees.
(c) Short-Term Disability Benefits. In the event of
Executive's failure substantially to perform his duties hereunder on a full-time
basis for a period not exceeding 180 consecutive days or for periods aggregating
not more than 180 days during any twelve-month period as a result of incapacity
due to physical or mental illness, the Company shall continue to pay the Base
Salary to Executive during the period of such incapacity, but only in the
amounts and to the extent that disability benefits payable to Executive under
Company-sponsored insurance policies are less than Executive's Base Salary.
4
<PAGE>
(d) Relocation Expenses. In the event Executive's
principal place of employment is relocated by mutual consent of the parties
outside Maricopa County, Arizona, the Company shall reimburse Executive for all
usual relocation expenses incurred by Executive and his household in moving to
the new location, including, without limitation, moving expenses and rental
payments for temporary living quarters in the area of relocation for a period
not to exceed six months.
(e) Reimbursement of Business Expenses. The Company shall,
in accordance with standard Company policies, pay, or reimburse Executive for,
all reasonable travel and other expenses incurred by Executive in performing his
obligations under this Agreement.
(f) Vacations. Executive shall be entitled to 22 business
days, excluding Company holidays, of paid vacation during each year of
employment hereunder. Executive may accrue and carry forward no more than five
unused vacation days from any particular year of his employment under this
Agreement to the next, not to exceed 25 days in the aggregate. Prior to the date
hereof, Executive has accrued 98 days of unused vacation ("Previously Accrued
Vacation"), which shall not be subject to such 25-day limit. Executive shall be
entitled to ten (10) business days, excluding Company holidays, of Previously
Accrued Vacation each year hereunder, which shall be applied against and reduce
the aggregate Previously Accrued Vacation, provided that, even if Executive does
not use such ten (10) additional vacation days in any year hereunder, the
aggregate number of days of Previously Accrued Vacation shall be reduced by at
least eight (8) days for each year of employment hereunder. Prior to or
contemporaneously therewith, Executive shall in a written notice to the Company
designate as such any vacation days to be taken as Previously Accrued Vacation.
(g) Registration Rights. Executive shall have the rights
to registration under the Securities Act of 1933, as amended (the "Securities
Act"), of his shares of Common Stock as set forth in Exhibit C hereto, the
provisions of which are incorporated as a part hereof, subject to the terms and
conditions of Section 4.3(j) and Article VI hereof.
ARTICLE III
TERMINATION OF EMPLOYMENT
3.1. Death or Retirement of Executive. Executive's employment under
this Agreement shall automatically terminate upon the death or Retirement (as
defined in Section 7.1) of Executive.
3.2. By Executive. Executive shall be entitled to terminate his
employment under this Agreement by giving Notice of Termination (as defined in
Section 7.1) to the Company:
(a) for Good Reason (as defined in Section 7.1);
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(b) at any time commencing with the date six (6) months
following the date of a Change in Control (as defined in Section 7.1) and ending
with the date twelve months after the date of such Change in Control (a "Change
in Control Resignation"); and
(c) at any time without Good Reason.
3.3. By Company. The Company shall be entitled to terminate Executive's
employment under this Agreement by giving Notice of Termination to Executive:
(a) in the event of Executive's Total Disability (as
defined in Section 7.1);
(b) for Cause (as defined in Section 7.1); and
(c) at any time without Cause.
ARTICLE IV
COMPENSATION UPON TERMINATION OF EMPLOYMENT
If Executive's employment hereunder is terminated in accordance with
the provisions of Article III hereof, except for any other rights or benefits
specifically provided for herein following his period of employment, the Company
shall be obligated to provide compensation and benefits to Executive only as
follows, subject to the provisions of Section 5.11 hereof:
4.1. Upon Termination for Death or Disability. If Executive's
employment is terminated hereunder by reason of his death or Total Disability,
the Company shall:
(a) pay Executive (or his Estate (as defined in Section
4.3(k) hereof)) or beneficiaries any Base Salary which has accrued but not been
paid as of the termination date (the "Accrued Base Salary");
(b) pay Executive (or his Estate) or beneficiaries for
unused vacation days accrued as of the termination date in an amount equal to
his Base Salary multiplied by a fraction the numerator of which is the number of
accrued unused vacation days and the denominator of which is 260 (the "Accrued
Vacation Payment") plus the Previously Accrued Vacation (less days deducted in
accordance with the provisions of Section 2.4(f)) (together, the "Adjusted
Previously Accrued Vacation)";
(c) reimburse Executive (or his Estate) or beneficiaries
for expenses incurred by him prior to the date of termination which are subject
to reimbursement pursuant to this Agreement (the "Accrued Reimbursable
Expenses");
(d) provide to Executive (or his Estate) or beneficiaries
any accrued and vested benefits required to be provided by the terms of any
Company-sponsored benefit plans or
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programs (the "Accrued Benefits"), together with any benefits required to be
paid or provided in the event of Executive's death or Total Disability under
applicable law;
(e) pay Executive (or his Estate) or beneficiaries any
Annual Incentive Bonus with respect to a prior fiscal year which has accrued but
has not been paid; and in addition;
(f) Executive (or his Estate) or beneficiaries shall have
the right to exercise all vested unexercised stock options and warrants
outstanding at the termination date in accordance with terms of the plans and
agreements pursuant to which such options or warrants were issued; and further
(g) in the event of Executive's death while he is employed
by the Company under this Agreement, his Designated Beneficiaries shall have the
Termination Put rights provided pursuant to and in accordance with Section
4.3(k) which may be exercised within 180 days of the date of Executive's death.
4.2. Upon Termination by Company for Cause or by Executive Without Good
Reason. If Executive's employment is terminated by the Company for Cause, or if
Executive terminates his employment with the Company other than (x) upon
Executive's death or Total Disability, (y) for Good Reason, or (z) pursuant to a
Change of Control Resignation (as defined in Section 3.2(b)), the Company shall:
(a) pay Executive the Accrued Base Salary;
(b) pay Executive the Accrued Vacation Payment;
(c) pay Executive the Accrued Reimbursable Expenses;
(d) pay Executive the Accrued Benefits, together with any
benefits required to be paid or provided under applicable law;
(e) pay Executive any accrued Annual Fixed Cash Bonus and
any Annual Incentive Bonus with respect to a prior fiscal year which has accrued
but has not been paid (together, such bonus payments are referred to herein as
the "Accrued Annual Bonus Payments"); and in addition
(f) Executive shall have the right to exercise vested
options and warrants in accordance with Section 4.1(f).
4.3. Upon Termination by the Company Without Cause or by Executive for
Good Reason Prior to a Change of Control.
If Executive's employment is terminated by the Company
without Cause or by Executive for Good Reason, the Company shall:
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(a) pay Executive the Accrued Base Salary;
(b) pay Executive the Accrued Vacation Payment and the
Adjusted Previously Accrued Vacation;
(c) pay Executive the Accrued Reimbursable Expenses;
(d) pay Executive the Accrued Benefits, together with any
benefits required to be paid or provided under applicable law;
(e) pay Executive the Accrued Annual Bonus Payments;
(f) pay Executive on or prior to the thirtieth day
following the termination date a lump sum payment equal to the product of three
(3) times the sum of (1) Executive's Base Salary in effect immediately prior to
the time such termination occurs, plus (2) the average of the Annual Bonuses
paid to Executive for the three (3) fiscal years immediately preceding the
fiscal year in which the termination occurs (or if less than three, the average
of the two and if less than two, the amount of his single Annual Bonus, if any);
(g) maintain in full force and effect, for Executive's and
his eligible beneficiaries' continued benefit, until the first to occur of (x)
his attainment of alternative employment or (y) 24 months following the
termination date of his employment hereunder the employee benefits provided
pursuant to Company-sponsored benefit plans, programs or other arrangements in
which Executive was entitled to participate as a full-time employee immediately
prior to such termination in accordance with Section 2.4 hereof, subject to the
terms and conditions of such plans and programs (the "Continued Benefits"). If
Executive's continued participation is not permitted under the general terms and
provisions of such plans, programs and arrangements, the Company shall arrange
to provide Executive with Continued Benefits substantially similar to those
which Executive would have been entitled to receive under such plans, programs
and arrangements; and in addition
(h) Executive shall have the right to exercise all vested
unexercised stock options and warrants in accordance with Section 4.1(f);
(i) the Company shall, subject to applicable law,
including, without limitation, federal or state laws proscribing impairment of
the Company's capital, and any financing agreements with lenders to which the
Company is bound, if at the termination date of his employment hereunder
Executive holds stock options or warrants for shares of the Common Stock which
are not then vested or exercisable, pay to Executive in a lump sum on or prior
to the thirtieth day following the termination date of his employment an amount
equal to the excess, if any, above the option price of each such option or
warrant of the fair market value of the shares subject to such options or
warrants (the "Cash Option Payment"). In the event that the Company is
prohibited under applicable law or its financing agreements from making the Cash
Option Payment to Executive at such time, it shall make payment only to the
extent permitted by law or its financing agreements, provided that the Company
shall remain liable for the unpaid balance and shall pay the same when
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legally permitted. For purposes of this subparagraph (i), "fair market value"
shall mean the weighted average of the last sale prices of the Common Stock
during the ten (10) trading days immediately preceding the termination date of
his employment as quoted on the Automated Quotation System of the National
Association of Securities Dealers (or any successor hereto or any national
securities exchange upon which the Common Stock may then be traded);
(j) if during the two-year period following termination of
his employment under this Agreement, Executive exercises his demand registration
rights under Section 2.4(g) hereof in accordance with the provisions thereof,
and the Company fails to cause the registration statement to become effective
under the Securities Act within 120 days after the Company's obligation to file
the same in accordance with the provisions of paragraph (a)(i)(B) of Exhibit C
(provided that any delay is not caused directly or indirectly by any act or
omission of Executive), and the price per share at which Executive is able to
sell his shares of Common Stock in such offering is less than the fair market
value (determined in accordance with subparagraph (k) of this Section 4.3) of a
share of Common Stock on the date he makes his demand under Section 2.4(g)
hereof the Company shall pay to Executive an amount in cash equal to the
difference between the fair market value per share as so determined and the net
price per share of Common Stock in the offering for all shares sold by Executive
in the offering. Notwithstanding the foregoing, the Company shall have the
option to purchase all of such shares of Common Stock at any time prior to the
effective date of the registration statement pursuant to which such shares are
registered at the fair market value per share determined in accordance with
subparagraph (k) of this Section 4.3 and in accordance with the provisions of
Article VI; and
(k) (i) in the event of Executive's death during a
period of six (6) months from the termination date of Executive's
employment hereunder, his estate (the "Estate"), his spouse at the date
of his death and his children and trusts for the benefit of his spouse
and children all as listed on Exhibit D hereto (collectively, the
Estate, such spouse and the other persons and entities so listed being
referred to herein as the "Designated Beneficiaries") shall have the
option (the "Termination Put") to sell to the Company within 180 days
of the date of Executive's death, subject to the terms and conditions
of this subparagraph (k), the shares of Common Stock owned by such
Designated Beneficiaries respectively on the date of Executive's death
(or, in the case of the Estate, the shares of Common Stock owned by
Executive at the date of his death or which may be acquired by the
Estate upon exercise of outstanding options or warrants in accordance
with Section 4.1(i) hereof). No Designated Beneficiary shall be
entitled to the benefits of this subparagraph (k) unless such
Designated Beneficiary (together with the other Designated
Beneficiaries) at such time owns beneficially or of record at least
50,000 shares of the Common Stock and delivers to the Company a written
undertaking in form and substance satisfactory to the Company agreeing
to be bound by all of the terms and conditions hereof as though a party
hereto.
(ii) The Termination Put may be exercised by any
Designated Beneficiary by a notice in writing (the "Termination Put
Notice") to the Company delivered no later than the date 180 days from
and after Executive's death indicating the number of shares of the
Common Stock to be repurchased. Within five (5) business days of
receipt of the first such Termination Put Notice by the Company, the
Company shall transmit by first class U.S. mail a copy thereof to each
person or entity named as a Designated Beneficiary
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on Exhibit D hereto at the address set forth in Exhibit D for such
person or entity. Such list may be amended by Executive by written
notice to the Company from time to time, and as so amended, is referred
to herein as the "Designated Beneficiaries List". The Company shall be
entitled to rely on such Designated Beneficiaries List for all purposes
of this subparagraph (k). Within fifteen (15) business days after the
date of the Company's mailing, each Designated Beneficiary wishing to
exercise its or his Termination Put rights, shall deliver to the
Company its Termination Put Notice. Any two or more Designated
Beneficiaries may join in a Termination Put Notice.
(iii) The price at which such shares of Common
Stock shall be purchased by the Company from the Designated
Beneficiaries who have given timely notice in accordance with the
provisions hereof shall be the fair market value of the Common Stock as
of the date of the Termination Put Notice first received by the Company
from a Designated Beneficiary in connection with any one exercise of
the Termination Put. For purposes of this subparagraph (k), the "fair
market value" of the Common Stock shall be the weighted average of the
last sale price of the Common Stock during the ten (10) trading days
immediately preceding and the ten (10) trading days immediately
following the date of such Termination Put Notice, as quoted on the
Automated Quotation System of the National Association of Securities
Dealers (or any successor thereto or any national securities exchange
upon which the Common Stock may then be traded).
(iv) Each Termination Put Notice shall be
accompanied by the certificates representing the shares of Common Stock
covered by the Notice, which shall be endorsed to the order of the
Company, signature guaranteed. Each Designated Beneficiary giving a
Termination Put Notice shall represent and warrant that the shares of
Common Stock to be sold by such Designated Beneficiary are, and shall
transfer the same, free and clear of all liens, claims and
encumbrances.
(v) Payment for all shares of Common Stock to be
purchased by the Company pursuant to the Designated Beneficiaries'
exercise of the Termination Put shall be made only from and up to the
extent of the aggregate proceeds available for such purchase from up to
$5,000,000 in key man insurance maintained by the Company as provided
in this subparagraph (k), such amount to be pro rated among the
Designated Beneficiaries that have delivered a timely Termination Put
Notice in accordance with the number of shares offered for sale to the
Company by each such Designated Beneficiary respectively.
(vi) The Company shall acquire key man life
insurance on the life of the Executive in such amount as it believes
will be reasonable to satisfy its obligations in the event the
Termination Put is exercised, but in no event will the Company be
obligated to acquire more than $5,000,000 in key man life insurance for
this purpose or shall the Company be obligated to repurchase more
shares of Common Stock from all Designated Beneficiaries than can be
acquired at the price provided for herein from the aggregate amount of
such proceeds.
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Anything in this subparagraph (k) to the contrary notwithstanding, the Company's
obligation hereunder to purchase any Common Stock pursuant to the exercise of
the Termination Put shall be in compliance with, subject to and limited by the
following:
(A) applicable federal and state securities laws and
regulations;
(B) loan or financing agreements with banks or other
lenders to which the Company is a party or by which the Company is
bound and the Company's outstanding obligations under its stock option
plans for franchisees and its obligation to maintain in effect a
registration statement with respect to shares of Common Stock held by
the trustee of the Company's Employee Stock Purchase Plan;
(C) applicable federal and state laws with respect to
solvency, including, without limitation, state corporate law and/or any
state law proscribing impairment of the Company's capital;
(D) the face amount of key man life insurance purchased by
the Company pursuant to its obligation under this subparagraph (k).
The Company shall make payment in cash to the Designated Beneficiaries that have
delivered to the Company a timely Termination Put Notice in accordance with the
provisions hereof of their pro rata amounts for shares of Common Stock
surrendered to the Company pursuant to the respective Termination Put Notices,
except that if the Company is prohibited from purchasing such shares of Common
Stock because payment would constitute a violation of federal law or state
corporate or other law or its financing agreements or the other agreements
referred to above, the Company shall make payment only to the extent permitted
by law or its financing agreements or the other agreements referred to above;
provided, however, that the Company shall remain liable for the unpaid balance
and shall pay the same when legally permitted and shall purchase the maximum
amount permissible under such laws or loan or financing agreements, but, in any
event, subject to the limitations under paragraph (D) above. If the Company
shall purchase less than all shares of Common Stock tendered by a Designated
Beneficiary, the Company shall return the certificates representing the unbought
shares to the respective Designated Beneficiary. In no event shall the Company
be liable to any Designated Beneficiaries to repurchase shares of the Common
Stock over and above the aggregate amount of the key man insurance maintained
for this purpose. If upon exercise of the Termination Put on any one occasion as
described above, any amount of proceeds of the key-man life insurance remain
available for additional such purchases, any Designated Beneficiary may give a
Termination Put Notice as provided above within the 180-day period.
4.4. Upon Termination by the Company Without Cause or by Executive for
Good Reason Following a Change of Control or Pursuant to a Change of Control
Resignation.
If following a Change of Control, Executive's employment
is terminated by the Company Without Cause or by Executive for Good Reason or
pursuant to a Change of Control Resignation, the Company shall:
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(a) make the payments and provide to Executive the
benefits under Section 4.3 other than under Section 4.3(f) hereof; and in
addition
(b) pay to Executive a lump sum payment on or prior to the
thirtieth day following the termination date of Executive's employment hereunder
in an amount equal to the lesser of (i) 300% of the sum of Executive's aggregate
total compensation under Sections 2.1 and 2.2(b) hereof for the fiscal year
immediately prior to the fiscal year in which the Change of Control occurs, and
(ii) an amount, the present value of which (determined in the manner set forth
herein) shall not exceed 299% of Executive's "Base Amount", as such term is
defined in Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code"), and the regulations promulgated thereunder (the "Regulations"). Company
and Executive agree that for purposes of making any present value calculation
under this Agreement, the Applicable Federal Rate in effect on the date this
Agreement is executed shall control as permitted by Q&A 32 of Treas. Reg. ss.
1.280G-1.
4.5. Certain Additional Payments by Company.
(a) Anything in this Agreement to the contrary
notwithstanding, if it shall be determined that any payment or distribution by
the Company to or for the benefit of Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 4.5 (a "Payment") would be subject to the excise tax imposed
by Code Section 4999, or any interest or penalties are incurred by Executive
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then Executive shall be entitled to receive, in addition to the Payment,
a payment (a "Gross-Up Payment") in an amount such that, after payment by
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any federal or state income taxes
(and any interest and penalties imposed with respect thereto) and the Excise Tax
imposed upon the Gross-Up Payment, Executive will have received the Gross-Up
Payment in an amount equal to the Excise Tax imposed upon the Payment.
(b) Subject to the provisions of Section 4.5(c), all
determinations required to be made under this subparagraph, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by a nationally recognized accounting firm retained by the Company as its
auditor at the time such determinations are required (the "Accounting Firm")
which shall provide detailed supporting calculations both to the Company and
Executive within 15 business days of the receipt of notice from the Company that
there has been a Payment, or such earlier time as is required by the Company. If
at such time the Accounting Firm either is serving as accountant or auditor for
the individual, entity or group effecting the Change in Control, or is retained
by the Company following a Change in Control, Executive may, in his sole
discretion, appoint another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 4.5, shall be paid by the Company to Executive within
five days of the receipt of the Accounting Firm's determination. If the
Accounting Firm determines that no
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Excise Tax is payable by Executive, it shall furnish Executive with a written
opinion that failure to report the Excise Tax on Executive's applicable federal
income tax return would not result in the imposition of a negligence or similar
penalty. Any determination by the accounting Firm shall be binding upon the
Company and Executive. As a result of the uncertainty in the application of Code
Section 4999 at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. If Executive thereafter is required
to make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of Executive.
(c) Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable, but in no event later than ten business days after
Executive has been informed in writing of such claim, and shall apprise the
Company of the nature of such claim and the date on which such claim is required
to be paid. Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which Executive gives such notice to the
Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies Executive in writing
prior to the expiration of such 30-day period that the Company desires to
contest such claim, Executive shall:
(i) give the Company any information reasonably
required by the Company relating to such claim,
(ii) take such action in connection with
contesting such claim as the Company shall reasonably request in
writing from time to time, including, but not limited to, accepting
legal representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good faith
in order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relation to such claim; provided, however, that the Company
shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold Executive harmless for (A) any
Excise Tax or federal or state income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses, and (B) any federal,
state and local income tax imposed with respect to the payment of
amounts pursuant to clause (A) above and this clause (B), based on the
highest marginal income tax rate applicable to Executive for the tax
year such payments are includible in his taxable income. Without
limitation on the foregoing provisions of this Section 4.5(c), the
Company shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the
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taxing authority in respect of such claim and may, at its sole option,
either direct Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however,
that if the Company directs Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to
Executive, on an interest-free basis and shall indemnify and hold
Executive harmless from (X) any Excise Tax or federal or state income
tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with
respect to such advance, and (Y) any federal, state and local income
tax imposed with respect to the payment of amounts pursuant to clause
(X) above and this clause (Y), based on the highest marginal income tax
rate applicable to Executive for the tax year such payments are
includible in his taxable income; and further provided that any
extension of the statute of limitations relating to payment of taxes
for the taxable year of Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to
issues within respect to which a Gross-Up Payment would be payable
hereunder and Executive shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(d) If, after the receipt by Executive of an
amount advanced by the Company pursuant to Section 4.5(c), Executive
becomes entitled to receive any refund with respect to such claim,
Executive shall (subject to the Company's complying with the
requirements of Section 4.5(c)) promptly pay to the Company the amount
of such refund (together with any interest paid or credited thereon
after taxes applicable thereto) and, as and when received, an amount
equal to any savings in federal and state income taxes realized by
Executive by reason of the payment to the Company of such refunds and
interest plus the amounts in this clause. If, after the receipt by
Executive of an amount advanced by the Company pursuant to Section
4.5(c), a determination is made that Executive shall not be entitled to
any refund with respect to such claim and the Company does not notify
Executive in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the
amount of Gross-Up Payment required to be paid.
ARTICLE V
RESTRICTIVE COVENANTS
5.1. Confidential Information and Materials. Executive hereby agrees
and acknowledges that the following ideas, information and materials in written,
oral, magnetic, photographic, optical or other form and whether now existing or
developed or created during the period of Executive's employment or engagement
with the Company (the "Confidential Information") are proprietary to the Company
and are highly sensitive in nature:
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(a) Hardware. Any and all ideas, concepts, know-how,
techniques, structures, information and materials relating to the design,
development, engineering, invention, patent, patent application, manufacture or
improvement of any and all equipment, components, devices, techniques, processes
or formulas (including, without limitation, mask works, semi-conductor chips,
processors, memories, disc drives, tape heads, computer terminals, keyboards,
storage devices, printers, and optical storage media) and any and all
components, devices, techniques or circuitry incorporated in any of the above
which is or are constructed, designed, improved, altered or used by the Company
and which is or are not generally known to the public or within the industries
in which the Company competes.
(b) Software. Any and all ideas, concepts, know-how,
techniques, structures, information and materials relating to existing computer
software or firmware products and computer software or firmware in various
stages of research and development including without limitation source code,
object and load modules, requirements specifications, design specifications,
design notes, flow charts, coding sheets, annotations, documentation, technical
and engineering data, laboratory studies, benchmark test results, and the
structures, organization, designs, formulas and algorithms which reside in the
software and which are not generally known to the public or within the
industries or trades in which the Company competes.
(c) Business Procedures. Internal business procedures and
business plans, including analytical methods and procedures, licensing
techniques, manufacturing information and procedures such as formulations,
processes and equipment, technical and engineering data, vendor names, other
vendor information, purchasing information, financial information, service and
operational manuals and documentation therefor, ideas for new products and
services and other such information which relates to the way the Company
conducts its business and which is not generally known to the public.
(d) Legal Rights. All patents, copyrights, trade secrets,
trademarks and service marks, and the like.
(e) Marketing Plans and Customers Lists. Any and all
customer and marketing information and materials, such as (i) strategic data,
including marketing and development plans, forecasts and forecast assumptions
and volumes, and future plans and potential strategies of the Company which have
been or are being discussed; (ii) financial data, price and cost objectives,
price lists, pricing policies and procedures, and estimating and quoting
policies and procedures; and (iii) customer data, including customer lists,
names of existing, past or prospective customers and their representatives, data
about or provided by prospective, existing or past customers, customer service
information and materials, data about the terms, conditions and expiration dates
of existing contracts with customers and the type, quantity and specifications
of products and services purchased, leased or licensed by customers of the
Company.
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(f) Not Generally Known. Any and all information not
generally known to the public or within the industries or trades in which the
Company competes.
5.2. General Knowledge. The general skills and experience gained by
Executive during Executive's employment or engagement by the Company, and
information publicly available or generally known within the industries or
trades in which the Company competes, is not considered Confidential
Information. Following the Non-Competition Period (as defined in Section 5.9),
Executive is not restricted from working with a person or entity which has
independently developed information or materials similar to the Confidential
Information, but in such a circumstance, Executive agrees not to disclose the
fact that any similarity exists between the Confidential Information and the
independently developed information and materials, and Executive understands
that such similarity does not excuse Executive from the non-disclosure and other
obligations in this Agreement.
5.3. Executive Obligations as to Confidential Information and
Materials. During Executive's employment or engagement by the Company, Executive
will have access to the Confidential Information and will occupy a position of
trust and confidence with respect to the Confidential Information and the
Company's affairs and business. Executive agrees to take the following steps to
preserve the confidential and proprietary nature of the Confidential
Information:
(a) Non-Disclosure. During and after Executive's
Employment or engagement by the Company, Executive will not use, disclose or
otherwise permit any person or entity access to any of the Confidential
Information other than as required in the performance of Executive's duties with
the Company. Executive understands that Executive is not allowed to sell,
license, market or otherwise exploit any products or services (including
software or firmware in any form) which embody in whole or in part any
Confidential Information.
(b) Prevent Disclosure. Executive will take all reasonable
precautions to prevent disclosure of the Confidential Information to
unauthorized persons or entities.
(c) Abide by the Company's Restrictions. Executive will
treat as confidential and proprietary any information or materials from outside
the Company which the Company is obligated to treat as confidential or
proprietary, in accordance with the Company's reasonable instructions to
Executive.
(d) Return All Materials. Upon termination of Executive's
employment or engagement by the Company for any reason whatsoever, Executive
will deliver to the Company all tangible materials embodying the Confidential
Information, including any documentation, records, listings, notes, data,
sketches, drawings, memoranda, models, accounts, reference materials, samples,
machine-readable media and equipment which in any way relate to the Confidential
Information. Of course, Executive agrees not to retain any copies of any of the
above materials.
5.4. Inform Subsequent Employers. Executive covenants and agrees that,
for a period of 24 months following termination of the Non-Competition Period,
prior to accepting subsequent employment with an employer engaged in
substantially the same line of work as the Company, Executive shall: (a) inform
any such subsequent employer in writing that this Agreement exists; and (b)
provide the Company with a copy of such writing.
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5.5. Ideas and Inventions. Executive agrees to assign to the Company
all of Executive's right, title and interest in or to any and all ideas,
concepts, know-how, techniques, processes, inventions, discoveries,
developments, works of authorship, innovations and improvements ("Inventions")
conceived or made by Executive, whether alone or with others, whether patentable
or not, except those that the Executive developed entirely on Executive's own
time without using the Company's equipment, supplies, facilities, or trade
secret information and which neither (1) relate at the time of conception or
reduction to practice of the invention to the Company's business, or actual or
demonstrably anticipated research or development of the Company nor (2) result
from any work performed by the Executive for the Company. Executive agrees to
disclose all Inventions to the Company promptly, and to provide all assistance
reasonably requested by the Company in the preservation of its interests in the
Inventions (such as by executing documents, testifying, etc.), such assistance
to be provided at the Company's expense but without any additional compensation
to Executive.
5.6. Inventions and Patents. Executive agrees that from this date until
Executive leaves the Company's employment, Executive shall keep the Company
informed of any Inventions made by Executive, in whole or in part, or conceived
by Executive, alone or with others, which result from any work Executive may do
for, or at the request of, the Company, or which relate to the Company's
activities, investigations, or obligations.
(a) Assertion of Rights. Executive shall, at the expense
of the Company, assist the Company or its nominees to obtain patents for such
Inventions in any countries throughout the world. Such Inventions shall be the
property of the Company or its nominees, whether patented or not. Executive
shall and does, without charge to the Company, assign to the Company, all of
Executive's right, title, and interest in and to such Inventions, including
patents and patent applications and reissues thereof. Executive agrees to
execute, acknowledge, and deliver any instruments confirming the complete
ownership by the Company of such Inventions. Such assignments shall include the
right to sue for infringement.
(b) Reserved Inventions. Descriptions of all ideas,
concepts, know-how, techniques, processes, inventions, discoveries,
developments, innovations and improvements which Executive made, conceived or
acquired prior to Executive's employment by the Company and all patents and
patent applications relating thereto (collectively referred to as "Executive's
Rights") are attached hereto in Exhibit E, and Executive's Rights shall be
excluded from this Agreement. Executive represents that the absence of any
Executive's Rights in Exhibit E shall indicate that Executive owns no such
Executive's Rights at the time of signing this Agreement.
5.7. Copyrights. Executive agrees that any work prepared by Executive
during the course of Executive's employment or engagement hereunder which is
eligible for United States copy right protection or protection under the
Universal Copyright Convention, the Berne Copyright Convention and/or the Buenos
Aires Copyright Convention shall be a work made for hire. In the event any such
work is deemed not to be a work made for hire, Executive hereby assigns all
right, title and interest in and to the copyright in such work to the Company,
and agrees to provide all assistance reasonably requested by the Company in the
establishment, preservation and enforcement
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of its copyright in such work, such assistance to be provided at the Company's
expense but without any additional compensation to Executive.
5.8. Conflicting Obligations and Rights. Executive agrees to inform the
Company in writing of any apparent conflict between Executive's work for the
Company and (i) any obligations Executive may have to preserve the
confidentiality of another's proprietary information or materials, or (ii) any
rights Executive claims to any patents, copyrights, trade secrets, or other
inventions, ideas or similar rights, before performing that work. Otherwise, the
Company may conclude that no such conflict exists and Executive agrees
thereafter to make no such claim against the Company. The Company shall receive
such disclosures in confidence. All such existing obligations and claims of
Executive, if any, as of the date of this Agreement are listed on Exhibit F
attached hereto.
5.9. Non-Competition.
(a) Non-competition. By execution of this Agreement,
Executive agrees that during his employment with the Company and for a period of
24 months following the date of expiration or termination of his employment
hereunder (the "Non-Competition Period") for any reason (whether such
termination shall be voluntary or involuntary), Executive will not, within the
United States (in which territory Executive acknowledges that the Company has
sold or marketed its products or services and conducted its Business, as defined
in Section 5.9(d) as of the date hereof), directly or indirectly, compete with
the Company by carrying on a business that is substantially similar to the
Business. Executive agrees that the two (2) year period referred to in the
preceding sentence shall be extended by the number of days included in any
period of time during which he is or was engaged in activities constituting a
breach of this Section 5.9.
(b) Definition of "Compete". For the purposes of this
Section 5.9, the term "compete" shall mean with respect to the Business: (i)
managing, supervising, or otherwise participating in a management or sales
capacity; (ii) calling on, soliciting, taking away, accepting as a client or
customer, or attempting to call on, solicit, take away, or accept as a client or
customer, any individual partnership, corporation, company, association, or
other entity that was a client or customer of the Company as of immediately
prior to the date hereof; (iii) hiring, soliciting, taking away, or attempting
to hire, solicit, or take away, either on Executive's behalf or on behalf of any
other person or entity, any person serving immediately prior to the date hereof
or during the term hereof as an employee in connection with the Business; or
(iv) entering into or attempting to enter into any business substantially
similar to the Business, either alone or with any individual, partnership,
corporation, company, association, or other entity.
(c) Direct or Indirect Competition. For the purposes of
this Section 5.9, the words "directly or indirectly" as they modify the word
"compete" shall mean (i) acting as an agent, representative, consultant,
officer, director, member, independent contractor, or employee of any entity or
enterprise that is competing (as defined in Section 5.9(b) hereof) with the
Business, (ii) participating in any such competing entity or enterprise as an
owner, partner, limited partner, joint venturer, member, creditor, or
stockholder (except as a stockholder holding less than a one percent (1%)
interest in a corporation whose shares are actively traded on a regional or
national securities exchange or in the over-the-counter market), and (iii)
communicating to any such competing entity
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or enterprise the names or addresses or any other information concerning any
past, present, or identified prospective client or customer of the Company or
any entity having title to the goodwill of the Company with respect to the
Business.
(d) Business. For purposes of this Agreement, the term
"Business" shall mean the delivery of systems integration services and master
distribution of information technology products and services, as conducted by
the Company immediately prior to the date hereof and/or developed during the
term of this Agreement.
(e) Executive expressly agrees and acknowledges that:
(i) it will require at least 24 months for the
Company to locate, hire and train an appropriate individual to perform
the functions and duties that Executive is performing hereunder;
(ii) the Company has protected business
interests throughout the United States and that competition with and
against such business interests would be harmful to the Company;
(iii) this covenant not to compete is reasonable
as to time and geographical area and does not place any unreasonable
burden upon him;
(iv) the general public will not be harmed as a
result of enforcement of this covenant not to compete;
(v) his personal legal counsel has reviewed this
covenant not to compete; and
(vi) he understands and hereby agrees to each
and every term and condition of this covenant not to compete
(including, without limitation, the provisions of Section 5.11).
5.10. Non-Disparagement. During the term of this Agreement and the
Non-Competition Period, neither the Company nor Executive shall disparage the
other, and neither shall disclose to any third party the conditions of
Executive's employment with the Company except as may be required (i) pursuant
to applicable law or regulations, including the rules and regulations of the
Securities and Exchange Commission, (ii) to effectuate the provisions of
employee plans or programs and insurance policies, or (iii) as may be otherwise
contemplated herein or unless such information becomes publicly available
without fault of the party making such disclosure.
5.11. Remedies. Executive expressly agrees and acknowledges that the
covenants set forth in Sections 5.1 through 5.10 are necessary for the
protection of the interests of the Company and its affiliates because of the
nature and scope of their business and his position with the Company. Further,
Executive acknowledges that any breach of such covenants would result in
irreparable damage to the Company, and that money damages will not sufficiently
compensate the
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Company for its injury caused thereby, and that the remedy at law for any breach
or threatened breach of any of such covenants will be inadequate and,
accordingly agrees, that the Company shall, in addition to all other available
remedies (including without limitation, seeking such damages as it can show it
has sustained by reason of such breach), be entitled to injunctive relief or
specific performance and that in addition to such money damages he may be
restrained and enjoined from any continuing breach of this covenant not to
compete without any bond or other security being required of any court.
Executive further acknowledges and agrees that if such covenants, or any of
them, are deemed to be unenforceable and/or the Executive fails to comply with
this Article V, the Company has no obligation to provide any compensation or
other benefits described in Article IV hereof. The remedies set forth in this
Section 5.11 shall be included in any award in favor of the Company under
Exhibit H hereto.
5.12. Consulting Agreement. Effective upon expiration or termination of
Executive's employment hereunder for any reason other than death or Total
Disability (if such Total Disability continues in effect), the Company may
request at its option that Executive enter into a consulting agreement
substantially in the form annexed as Exhibit G hereto, which incorporates by
reference therein the provisions of Sections 5.1 through 5.11 hereof (the
"Consulting Agreement"), for a period of two years from the date of expiration
or termination and Executive agrees to enter into such Consulting Agreement
effective as of the date of expiration or termination of his employment
hereunder. Exhibit G is incorporated as a part hereof. The Company agrees to
provide the following benefits to Executive thereunder: (i) the Company shall
pay to Executive (A) in semi-monthly installments supplementary severance and
consulting compensation at a rate equal to Executive's Base Salary in effect
immediately prior to expiration or termination of his employment under this
Agreement and (B) the Annual Fixed Cash Bonus, and (ii) the Company shall
continue to provide to Executive health and disability insurance coverage
substantially of the type provided by the Company and in effect immediately
prior to termination of his employment under this Agreement, provided that, such
health and disability benefits will only be provided to the extent not
duplicative of benefits the Company is otherwise required to provide Executive
pursuant to Article IV of this Agreement.
5.13. Scope of Article. For purposes of this Article V, unless the
context otherwise requires, the term "Company" includes MicroAge, Inc., its
direct and indirect subsidiaries, and its affiliates.
ARTICLE VI
COMPANY'S RIGHT OF FIRST REFUSAL
6.1. The Company's Right of First Refusal. Other than as permitted in
Section 6.2, in the event that Executive (or any Designated Beneficiary) desires
to sell or transfer any shares of Common Stock, whether or not pursuant to
exercise of the registration rights under Section 2.4(g), in any transaction
during the period that commences on the expiration date hereof or other
termination date of Executive's employment hereunder and which ends twenty-four
(24) months after such termination date or expiration date, Executive (or any of
his Designated Beneficiaries, as the
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case may be) shall first deliver a notice in writing (the "Notice") to the
Company which shall specify (i) the number of shares of Common Stock which the
Executive or such Designated Beneficiary desires to sell or transfer, the
name(s) of the proposed purchasers or transferees (except in the case of a
request for registration pursuant to Section 2.4(g)), (ii) the price per share
(the "Transfer Price") at which the Executive or such Designated Beneficiary
proposes to sell or transfer the shares to a third party pursuant to a bona fide
offer, (iii) whether such price represents a control premium price ("Control
Premium Price") and (iv) the other material terms upon which such sale or
transfer is proposed to be made. The Company shall have the right to purchase
all (but not less than all) of such shares at the fair market value thereof
(determined as provided in Section 4.3(k) hereof) on the date of Executive's (or
the Designated Beneficiary's) Notice hereunder; provided, however, that if the
Transfer Price represents a Control Premium Price, the Company shall, if it
wishes to exercise its right of first refusal hereunder, have the right to
purchase the shares at the Control Premium Price. In the event that the shares
are to be sold in a registered offering pursuant to a demand for registration
under Section 2.4(g), the Company's right of first refusal may be exercised at
any time prior to the effective date of the registration statement under which
the shares are to be registered. Unless the Notice is given in conjunction with
the exercise of registration rights hereunder, the Company shall, by written
notice given by the Company to Executive or Designated Beneficiary within ten
(10) business days after receipt of the Notice, indicate its intention to
purchase the shares specified in the Notice, for cash at the fair market value
per share as provided above or at the Control Premium Price, as the case may be.
Within 30 calendar days after written notice of exercise by the Company, the
Company shall provide the Executive with evidence reasonably satisfactory to
Executive of its ability to finance the purchase of the shares (by a written
commitment letter subject only to customary representations, diligence and
documentation, letter of credit or otherwise). If the Company exercises its
right of first refusal hereunder, the closing of the purchase of the Common
Stock with respect to which such right has been exercised will take place within
60 calendar days after the Company gives notice of such exercise, which period
of time shall be extended in order to comply with applicable laws and
regulations. Upon exercise of the right of first refusal, the Company and the
Executive or Designated Beneficiary shall each be legally obligated to
consummate the purchase contemplated thereby and the Company shall use its best
efforts to secure any approvals required in connection therewith. If the Company
does not exercise its right of first refusal hereunder within the time specified
for such exercise, Executive or Designated Beneficiary shall be free to sell the
Common Stock at the Transfer Price specified in the Notice on terms no less
favorable to Executive or the Designated Beneficiary than the terms specified in
the Notice. In the event Executive or the Designated Beneficiary does not sell
the Common Stock specified in the Notice within 180 days after the date of the
Notice, Executive or the Designated Beneficiary shall not thereafter sell such
Common Stock without first offering the Common Stock to the Company pursuant to
this Article VI. The Company's right of first refusal with respect to the
Executive's and the Designated Beneficiaries' shares of Common Stock shall
terminate if Executive and his Designated Beneficiaries own beneficially and/or
record less than an aggregate 50,000 shares of the Common Stock. In any twelve
month period during the term of the Company's right of first refusal, Executive
may, without regard to the Company's right of first refusal in this Article VI,
sell or transfer up to an aggregate 25,000 shares of Common Stock pursuant to a
transaction in compliance with Rule 144, provided that Executive gives prior or
contemporaneous notice to the Company in writing of such sale or disposition.
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6.2. Exceptions. Nothing in Section 6.1 shall preclude Executive from
pledging his shares of Common Stock to a financial institution pursuant to the
terms of a bona fide pledge or from transferring shares of the Common Stock by
way of gift to his spouse and/or children or trusts for their benefit, provided
that such pledgee or donee delivers to the Company a written undertaking in form
and substance satisfactory to the Company agreeing to the terms and conditions
of this Agreement as though a party hereto, and the transfer is made subject
thereto. In any twelve month period during the period of the Company's right of
first refusal, Executive may without regard to the Company's right of first
refusal in this Article VI sell or transfer up to an aggregate 25,000 shares of
Common Stock pursuant to a transaction in compliance with Rule 144, provided
that in each case Executive gives prior or contemporaneous notice to the Company
in writing of such sale or disposition.
ARTICLE VII
MISCELLANEOUS
7.1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Accounting Firm" - as defined in Section 4.5(b);
(b) "Accrued Base Salary" - as defined in Section 4.1(a);
(c) "Accrued Benefits" - as defined in Section 4.1(d);
(d) "Accrued Annual Bonus Payments" - as defined in
Section 4.2(e);
(e) "Accrued Reimbursable Expenses" - as defined in
Section 4.1(c);
(f) "Accrued Vacation Payment" - as defined in Section
4.1(b);
(g) "Adjusted Previously Accrued Vacation" - as defined in
Section 4.1(b).
(h) "Annual Fixed Cash Bonus" - as defined in Section
2.2(a);
(i) "Annual Incentive Bonus" - as defined in Section
2.2(b);
(j) "Base Amount" - as defined in Section 4.4(b);
(k) "Base Salary" - as defined in Section 2.1;
(l) "Board" - as defined in Section 1.2;
(m) "beneficial ownership" as defined in Section
7.1(p)(ii);
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(n) "Cash Option Payment" as defined in Section 4.3(i);
(o) "Cause" shall mean the occurrence of any of the
following:
(i) Executive's gross and willful misconduct
which is injurious to the Company;
(ii) Executive's engaging in fraudulent conduct
with respect to the Company's business or in conduct of a criminal
nature that may have an adverse impact on the Company's standing and
reputation;
(iii) the continued and unjustified failure or
refusal by Executive to perform the duties required of him by this
Agreement which failure or refusal shall not be cured within fifteen
(15) days following (A) receipt by Executive of written notice from the
Board specifying the factors or events constituting such failure or
refusal, and (B) a reasonable opportunity for Executive to correct such
deficiencies;
(iv) Executive's use of drugs and/or alcohol in
violation of then current Company policy; or
(v) Executive's breach of his duties under
Section 1.2(c) hereof which shall not be cured within fifteen (15) days
after written notice thereof to Executive.
(p) "Change of Control" shall mean and shall be deemed to
have occurred if:
(i) After the date of this Agreement, any
"person" (as such term is used in Section 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
any successor provision thereto) shall become the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act or any
successor provision thereto) directly or indirectly of securities of
the Company representing 15% or more of the combined voting power of
the Company's then outstanding securities ordinarily having the right
to vote at an election of directors; provided, however, that, for
purposes of this subparagraph, "person" shall exclude the Company, its
subsidiaries, any person acquiring such securities directly from the
Company, any employee benefit plan sponsored by the Company or from
Executive or any stockholder owning 15% or more of the combined voting
power of the Company's outstanding securities as of the date of this
Agreement; or
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(ii) Any stockholder of the Company owning 15%
or more of the combined voting power of the Company's outstanding
securities as of the date of this Agreement shall become the beneficial
owner (within the meaning of Rule 13d-3 under the Exchange Act)
directly or indirectly of securities of the Company (other than through
the acquisition of securities directly from the Company or from
Executive) representing 25% or more of the combined voting power of the
Company's then outstanding securities ordinarily having the right to
vote at an election of directors; or
(iii) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least 80% of the Board; provided, however, that any
person becoming a member of the Board subsequent to the date hereof
whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least 80% of the members
then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to
the election of directors of the Company, as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act or any
successor provision thereto) shall be, for purposes of this Agreement,
considered as though such person were a member of the Incumbent Board;
or
(iv) Approval by the stockholders of the Company
and consummation of (A) a reorganization, merger, consolidation, or
sale or other disposition of all or substantially all of the assets of
the Company, in each case, with or to a corporation or other person or
entity of which persons who were the stockholders of the Company
immediately prior to such transaction do not, immediately thereafter,
own more than 60% of the combined voting power of the outstanding
voting securities entitled to vote generally in the election of
directors of the reorganized, merged, consolidated or purchasing
corporation (or, in the case of a non-corporate person or entity,
functionally equivalent voting power) and 80% of the members of the
Board of which corporation (or functional equivalent in the case of a
non-corporate person or entity) were not members of the Incumbent Board
at the time of the execution of the initial agreement providing for
such reorganization, merger consolidation or sale, or (B) a liquidation
or dissolution of the Company.
(q) "Change of Control Resignation" - as defined in
Section 3.2(b).
(r) "Code" - as defined in Section 4.4(b).
(s) "Common Stock" - as defined in Section 1.2(b).
(t) "Confidential Information" - as defined in Section
5.1.
(u) "Consulting Agreement" - as defined in Section 5.13.
(v) "Continued Benefits" - as defined in Section 4.3(g).
(w) "Control Premium Price" - as defined in Section 6.1.
(x) "Designated Beneficiaries" - as defined in Section
4.3(k)(i).
(y) "Designated Beneficiaries List" - as defined in
Section 4.3(k)(ii).
(z) "Estate" - as defined in Section 4.3(k).
(aa) "Excise Tax" - as defined in Section 4.5(a).
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(bb) "expiration" shall mean the expiration of Executive's
employment hereunder in accordance with Section 1.3.
(cc) "fair market value" - as defined in Section 4.3(i) or
4.3(k), as the case may be.
(dd) "Good Reason" shall mean the occurrence of any of the
following:
(i) The Company's failure to elect or reelect or
to appoint or reappoint Executive to offices, titles or positions
carrying comparable authority, responsibilities, dignity and importance
to that of Executive's offices and positions as of November 4, 1996
(provided that notwithstanding Executive's present title as Vice
Chairman and Secretary, failure of Executive to be elected or reelected
as a director or Secretary of the Company shall not constitute "Good
Reason"), or in the case of a Change in Control, involving duties of a
scope comparable to those of Executive's most significant offices or
positions held at any time during the 90-day period immediately
preceding the date such Change in Control occurs;
(ii) Material change by the Company in
Executive's function, duties or responsibilities (including reporting
responsibilities) which would cause Executive's position with the
Company to become of less dignity, responsibility and importance than
those associated with his functions, duties or responsibilities as of
November 4, 1996 (provided that notwithstanding Executive's present
title as Vice Chairman and Secretary, failure of Executive to be
elected or reelected as a director or Secretary of the Company shall
not constitute "Good Reason"), or in the case of a Change in Control,
involving duties of a scope less than that associated with Executive's
most significant position with the Company during the 90-day period
immediately preceding the date such Change in Control occurs;
(iii) Executive's Base Salary is reduced by the
Company (unless such reduction is pursuant to a salary reduction
program as described in Section 2.1 hereof) or there is a material
reduction in the benefits that are in effect for the Executive on
November 4, 1996 in accordance with Section 2.4 (unless such reduction
is pursuant to a uniform reduction in benefits for all Senior
Executives);
(iv) Except with Executive's prior written
consent, relocation of Executive's principal place of employment to a
location outside of Maricopa County, Arizona, or requiring Executive to
travel on the Company's business more than is required by Section 1.4
hereof;
(v) The failure by the Company to obtain the
assumption by operation of law or otherwise of this Agreement by any
entity which is the surviving entity in any merger or other form of
corporate reorganization involving the Company or by any entity which
acquires all or substantially all of the Company's assets; or
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(vi) Other material breach of this Agreement by
the Company, which breach is not cured within fifteen (15) days after
written notice thereof is received by the Company.
(ee) "Gross-Up Payment" as defined in Section 4.5(a).
(ff) "Incumbent Board" as defined in Section 7.1(o)(iii).
(gg) "1996 Executive Bonus Plan" - as defined in Section
2.2.
(hh) "Non-Competition Period" - as defined in Section
5.9(a).
(ii) "Notice" - as defined in Section 6.1.
(jj) "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision of this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated. Each Notice of Termination shall be delivered at least thirty (30)
days prior to the effective date of termination.
(kk) "Payment" - as defined in Section 4.5(a).
(ll) "Previously Accrued Vacation" - as defined in Section
2.4(f).
(mm) "Proprietary Information" - as defined in Section
5.1(b);
(nn) "Regulations" - as defined in Section 4.5(b).
(oo) "Retirement" shall mean normal retirement at age 65
or in accordance with the provisions of the SERP or following ten years of
service as defined in any other retirement plan established with Executive's
consent with respect to Executive.
(pp) "Securities Act" - as defined in Section 2.4(g);
(qq) "Senior Executives" shall mean the chief executive
officer and the four most highly compensated executive officers of the Company
determined in accordance with the rules and regulations of the Securities and
Exchange Commission under the Exchange Act.
(rr) "SERP" - as defined in Section 2.4(a)(i);
(ss) "termination" shall mean the termination of
Executive's employment hereunder other than upon expiration of the term of such
employment in accordance with Section 1.3.
(tt) "Termination Put" - as defined in Section 4.3(k)(i).
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(uu) "Termination Put Notice" as defined in Section
4.3(k)(ii).
(vv) "Total Disability" shall mean Executive's failure
substantially to perform his duties hereunder on a full-time basis for a period
exceeding 180 consecutive days or for periods aggregating more than 180 days
during any twelve-month period as a result of incapacity due to physical or
mental illness. If there is a dispute as to whether Executive is or was
physically or mentally unable to perform his duties under this Agreement, such
dispute shall be submitted for resolution to a licensed physician agreed upon by
the Board and Executive, or if an agreement cannot be promptly reached, the
Board and Executive shall promptly select a physician, and if these physicians
cannot agree, the physicians shall promptly select a third physician whose
decision shall be binding on all parties. If such a dispute arises, Executive
shall submit to such examinations and shall provide such information as such
physicians may request, and the determination of the physicians as to
Executive's physical or mental condition shall be binding and conclusive.
Notwithstanding the foregoing, if Executive participates in any group disability
plan provided by the Company which offers long-term disability benefits, "Total
Disability" shall mean total disability as defined therein.
(ww) "Transfer Price" - as defined in Section 6.1.
(xx) "Underpayment" - as defined in Section 4.5(b).
7.2. Key Man Insurance. The Company shall have the right, in its sole
discretion, to purchase "key man" insurance on the life of Executive in addition
to the key man insurance acquired pursuant to Section 4.3(k) hereof. The Company
shall be the owner and beneficiary of any such policy. If the Company elects to
purchase such a policy, Executive shall take such physical examinations and
supply such information as may be reasonably requested by the insurer.
7.3. Mitigation of Damages; No Set-Off; Dispute Resolution. (a)
Executive shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise, nor shall the
amount of any payment provided for in this Agreement be reduced by any
compensation earned by Executive as the result of employment by another employer
after the date of termination of his employment hereunder or otherwise. The
Company's obligation to make the payments provided for in this Agreement shall
not be affected by any set-off, counterclaim, recoupment, defense or other claim
or action which the Company may have against Executive.
(b) If there shall be any dispute between the Company and
Executive (i) in the event of any termination of Executive's employment by the
Company, whether such termination was for Cause, or (ii) in the event of any
termination of employment by Executive, whether Good Reason existed, or (iii)
otherwise arising out of this Agreement, the dispute shall be resolved in
accordance with the dispute resolution procedures set forth in Exhibit H hereto,
the provisions of which are incorporated as a part hereof, and the parties
hereto hereby agree that such dispute resolution procedures shall be the
exclusive method for resolution of disputes under this Agreement; provided,
however, that (1) either party may seek preliminary judicial relief if,
27
<PAGE>
in its judgment, such action is necessary to avoid irreparable injury during the
pendency of such procedures, and (2) nothing in Exhibit H shall prevent either
party from exercising the rights of termination set forth in this Agreement. In
the event of a dispute hereunder as to whether a termination by the Company was
for Cause or by the Executive for Good Reason, until there is a resolution and
award as provided in Exhibit H, the Company shall pay all amounts, and provide
all benefits, to Executive and/or Executive's family or other beneficiaries, as
the case may be, that the Company would be required to pay or provide hereunder
as though such termination were by the Company without Cause or by Executive for
Good Reason and shall pay the reasonable legal fees and expenses of counsel for
Executive in connection with such dispute resolution; provided, however, that
the Company shall not be required to pay any disputed amounts or any legal fees
and expenses pursuant to this subparagraph (b) except upon receipt of a written
undertaking by or on behalf of Executive (and/or Executive's family or other
beneficiaries, as the case may be) to repay, without interest or penalty, as
soon as practicable after completion of the dispute resolution (A) all such
amounts to which Executive (or Executive's family or other beneficiaries, as the
case may be) is ultimately adjudged not be entitled with respect to the payment
of such disputed amount(s) and (B) in addition, in the case of legal fees and
expenses, a proportionate amount of legal fees and expenses attributable to any
of Executive's claim(s) (or any of Executive's defenses or counter-claims(s)),
if any, which shall have been found by the dispute resolver to have been
frivolous or without merit. IT IS EXPRESSLY UNDERSTOOD THAT BY SIGNING THIS
AGREEMENT, WHICH INCORPORATES BINDING ARBITRATION, THE COMPANY AND EXECUTIVE
AGREE, EXCEPT AS SPECIFICALLY PROVIDED OTHERWISE IN SECTION 5.11 AND THIS
SECTION 7.3(b), TO WAIVE COURT OR JURY TRIAL AND TO WAIVE PUNITIVE, STATUTORY,
CONSEQUENTIAL AND ANY DAMAGES OTHER THAN COMPENSATORY DAMAGES.
7.4. Successors; Binding Agreement. This Agreement shall be binding
upon any successor to the Company and shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, beneficiaries,
designees, executors, administrators, heirs, distributees, devisees and
legatees.
7.5. Modification; No Waiver. This Agreement may not be modified or
amended except by an instrument in writing signed by the parties hereto. No term
or condition of this Agreement shall be deemed to have been waived, nor shall
there be any estoppel against the enforcement of any provision of this
Agreement, except by written instrument by the party charged with such waiver or
estoppel. No such written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall operate only as to the
specific term or condition waived and shall not constitute a waiver of such term
or condition for the future or as to any other term or condition.
7.6. Severability. The covenants and agreements contained herein are
separate and severable and the invalidity or unenforceability of any one or more
of such covenants or agreements, if not material to the employment arrangement
that is the basis for this Agreement, shall not affect the validity or
enforceability of any other covenant or agreement contained herein. If, in any
judicial proceeding, a court shall refuse to enforce one or more of the
covenants
28
<PAGE>
or agreements contained herein because the duration thereof is too long, or the
scope thereof is too broad, it is expressly agreed between the parties hereto
that such duration or scope shall be deemed reduced to the extent necessary to
permit the enforcement of such covenants or agreements.
7.7. Notices. All the notices and other communications required or
permitted hereunder shall be in writing and shall be delivered personally or
sent by registered or certified mail, return receipt requested, to the parties
hereto at the following addresses:
If to the Company, to it at:
MicroAge, Inc.
2400 South MicroAge Way
Tempe, Arizona 85282-1896
ATTN: Chief Executive Officers
With a copy to:
Matthew P. Feeney
Snell & Wilmer L.L.P.
One Arizona Center
Phoenix, Arizona 85004-0001
If Executive, to him at:
Alan P. Hald
5350 East Calle del Medio
Phoenix, Arizona 85018
7.8. Assignment. This Agreement and any rights hereunder shall not be
assignable by either party without the prior written consent of the other party
except as otherwise specifically provided for herein or in the Exhibits that are
incorporated as a part hereof.
7.9. Entire Understanding. This Agreement (together with the Exhibits
incorporated as a part hereof) constitutes the entire understanding between the
parties hereto and no agreement, representation, warranty or covenant has been
made by either party except as expressly set forth herein.
7.10. Executive's Representations. Executive represents and warrants
that neither the execution and delivery of this Agreement nor the performance of
his duties hereunder violates the provisions of any other agreement to which he
is a party or by which he is bound.
7.11. Liability of Company with Respect to Insurance Policies.
Executive has selected the insurer and policy referred to in Section 2.4(a)(ii)
hereof, and the Company shall not have any liability to Executive (or his
beneficiaries) should the insurance company which issues
29
<PAGE>
the policy referred to therein fail or refuse to pay (whether voluntarily or by
reason of any order, injunction or otherwise) thereunder or if any rights or
elections otherwise available to Executive thereunder are restricted or
eliminated.
7.12. Governing Law. This Agreement shall be construed in accordance
with and governed for all purposes by the laws of the State of Arizona
applicable to contracts executed and wholly performed within such state.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Company:
MICROAGE, INC.
By:/s/Jeffrey D. McKeever
----------------------------------
Name:Jeffrey D. McKeever
--------------------------------
Title:Chairman and CEO
-------------------------------
Executive:
/s/Alan P. Hald
-------------------------------------
Alan P. Hald
-------------------------------------
EXHIBIT A
---------
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
--------------------------------------
<PAGE>
EXHIBIT B
---------
SPLIT DOLLAR INSURANCE AGREEMENT
--------------------------------
<PAGE>
EXHIBIT C
---------
AMENDED AND RESTATED RIGHTS AGREEMENT
-------------------------------------
<PAGE>
EXHIBIT D
---------
LIST OF DESIGNATED BENEFICIARIES
--------------------------------
<PAGE>
EXHIBIT E
---------
EXECUTIVE'S RIGHTS
------------------
None
<PAGE>
EXHIBIT F
---------
EXECUTIVE'S EXISTING OBLIGATIONS AND CLAIMS
-------------------------------------------
None
<PAGE>
EXHIBIT G
---------
CONSULTING AGREEMENT
--------------------
<PAGE>
EXHIBIT H
---------
DISPUTE RESOLUTION PROCEDURES
-----------------------------
A. If a controversy should arise which is covered by Section 7.3 of
Article VI, then not later than twelve (12) months from the date of the event
which is the subject of dispute either party may serve on the other a written
notice specifying the existence of such controversy and setting forth in
reasonably specific detail the grounds thereof ("Notice of Controversy");
provided that, in any event, the other party shall have at least thirty (30)
days from and after the date of the Notice of Controversy to serve a written
notice of any counterclaim ("Notice of Counterclaim"). The Notice of
Counterclaim shall specify the claim or claims in reasonably specific detail. If
the Notice of Controversy or the Notice of Counterclaim, as the case may be, is
not served within the applicable period, the claim set forth therein will be
deemed to have been waived, abandoned and rendered unenforceable.
B. Following receipt of the Notice of Controversy (or the Notice of
Counterclaim, as the case may be), there shall be a three week period during
which the parties will make a good faith effort to resolve the dispute through
negotiation ("Period of Negotiation"). Neither party shall take any action
during the Period of Negotiation to initiate arbitration proceedings.
C. If the parties should agree during the Period of Negotiation to
mediate the dispute, then the Period of Negotiation shall be extended by an
amount of time to be agreed upon by the parties to permit such mediation. In no
event, however, may the Period of Negotiation be extended by more than five
weeks or, stated differently, in no event may the Period of Negotiation be
extended to encompass more than a total of eight weeks.
D. If the parties agree to mediate the dispute but are thereafter
unable to agree within a week on the format and procedures for the mediation,
then the effort to mediate shall cease, and the Period of Negotiation shall
terminate four weeks from the Notice of Controversy (or the Notice of
Counterclaim, as the case may be).
E. Following the termination of the Period of Negotiation, the dispute
(including the main claim and counterclaim, if any) shall be settled by
arbitration, governed by the Federal Arbitration Act, 9 U.S.C. ss. 1 et seq.
("FAA"), and judgment upon the award may be entered in any court having
jurisdiction thereof. The format and procedures of the arbitration are set forth
below (referred to below as the "Arbitration Agreement").
F. A notice of intention to arbitrate ("Notice of Arbitration") shall
be served within 45 days of the termination of the Period of Negotiation. If the
Notice of Arbitration is not served within this period, the claim set forth in
the Notice of Controversy (or the Notice of Counterclaim, as the case may be)
will be deemed to have been waived, abandoned and rendered unenforceable.
<PAGE>
G. The arbitration, including the Notice of Arbitration, will be
governed by the Commercial Rules of the American Arbitration Association ("AAA")
in effect on the date of the Notice of Arbitration, except that the terms of
this Arbitration Agreement shall control in the event of any difference or
conflict between such Rules and the terms of this Arbitration Agreement.
H. The arbitrator shall reach a decision on the merits on the basis of
applicable legal principles as embodied in the law of the State of Arizona. The
arbitration hearing shall take place in Phoenix, Arizona.
I. There shall be one arbitrator, regardless of the amount in
controversy. The arbitrator selected, in order to be eligible to serve, shall be
a lawyer in Phoenix, Arizona with at least fifteen (15) years specializing in
either general commercial litigation or general corporate and commercial
matters. In the event the parties cannot agree on a mutually acceptable single
arbitrator from the list submitted by the AAA, the AAA shall appoint the
arbitrator who shall meet the foregoing criteria.
J. At the time of appointment and as a condition thereto, the
arbitrator will be apprised of the time limitations and other provisions of this
Arbitration Agreement and shall indicate such dispute resolver's agreement to
the Tribunal Administrator to comply with such provisions and time limitations.
K. During the 30-day period following appointment of the arbitrator,
either party may serve on the other a request for limited numbers of documents
directly related to the dispute. Such documents will be produced within seven
days of the request.
L. Following the thirty-day period of document production, there will
be a forty-five day period during which limited depositions will be permissible.
Neither party will take more than five depositions, and no deposition will
exceed three hours of direct testimony.
M. Disputes as to discovery or prehearing matters of a procedural
nature shall be promptly submitted to the arbitrator pursuant to telephone
conference call or otherwise. The arbitrator shall make every effort to render a
ruling on such interim matters at the time of the hearing (or conference call)
or within five business days thereafter.
N. Following the period of depositions, the arbitration hearing shall
promptly commence. The arbitrator will make every effort to commence the hearing
within thirty days of the conclusion of the deposition period and, in addition,
will make every effort to conduct the hearing on consecutive business days to
conclusion.
O. An award will be rendered, at the latest, within nine months of the
date of the Notice of Arbitration and within thirty days of the close of the
arbitration hearing. The award shall set forth the grounds for the decision
(findings of fact and conclusions of law) in reasonably specific detail and
shall also specify whether any claim (or defense or counter-claim) of Executive
is found to be frivolous or without merit and what proportion, if any, of his
legal fees
<PAGE>
and expenses which have been paid by the Company Executive shall be required to
repay to the Company in accordance with Section 7.3(b). The award shall be final
and nonappealable except as provided in the FAA and except that a court of
competent jurisdiction shall have the power to review whether, as a matter of
law, based upon the findings of fact by the arbitrator, the award should be
confirmed or should be modified or vacated in order to correct any errors of law
made by the arbitrator. Such judicial review shall be limited to issues of law,
and the parties agree that the findings of fact made by the arbitrator shall be
final and binding on the parties and shall serve as the facts to be relied upon
by the court in determining the extent to which the award should be confirmed,
modified or vacated.
The award may only be made for compensatory damages, and if any other
damages (whether exemplary, punitive, consequential, statutory or other) are
included, the award shall be vacated and remanded, or modified or corrected, as
appropriate to promote this damage limitation; provided, however, that an award
in favor of the Company shall include the relief set forth in Section 5.11.
SPLIT-DOLLAR INSURANCE AGREEMENT
--------------------------------
THIS AGREEMENT is made as of this 29th day of January, 1997, by and
between MICROAGE, INC., a Delaware corporation (hereinafter referred to as
"Corporation"), and ALAN P. HALD (hereinafter referred to as "Insured").
WHEREAS, Insured plans to acquire insurance on his life of under a
policy issued by Northwestern Mutual Life Insurance Company (hereinafter
referred to as "Insurer"); and
WHEREAS, Corporation wants to assist Insured by paying all premiums due
on the policy; and
WHEREAS, Insured will be the owner of the insurance policy and the
policy will be assigned to Corporation as security for the repayment of the
premiums which Corporation will pay when due on the policy;
The parties, therefore, in consideration of the mutual promises
contained herein, hereby agree as follows:
ARTICLE I
Insured plans to acquire from the Insurer a policy on the life of the
Insured in the face amount of One Million Two Hundred Eighty Six Thousand Seven
Dollars ($1,286,007) (hereinafter referred to as the "Policy"). The policy
number, face amount and plan of insurance will be recorded on Schedule A
attached to this Agreement and the Policy will then be subject to the terms of
this Agreement. During the term of this Agreement, Corporation will not exercise
nor withhold its consent to the exercise by Insured of any
<PAGE>
rights, privileges or options conferred by the terms of the Policy, except as
otherwise provided in Article V, paragraph C hereof.
ARTICLE II
All premiums due on the Policy which shall be Fifty-Six Thousand Five
Hundred Fifty Dollars and One Cent ($56,550.01) per year, shall be paid by
Corporation until the first to occur of (i) the death of the Insured, (ii)
Insured's termination of employment with Corporation, or (iii) Corporation has
paid fifteen (15) premium payments.
ARTICLE III
A. Insured shall execute and deliver a collateral assignment of the
Policy to Corporation on a form approved by Insurer, as a security interest for
the amounts paid by Corporation towards its share of the premiums to be paid on
the Policy in accordance with Article II of this Agreement. In the event of the
death of Insured pursuant to Article IV hereof, or in the event of the surrender
or acquisition of the Policy pursuant to Article V hereof, such security
interest shall be for an amount equal to the total premiums paid by the
Corporation (less any outstanding loans to Corporation pursuant to Article III,
paragraph B hereof).
B. Corporation may not borrow against the Policy's loan value, without
the prior written approval of Insured.
C. Corporation shall pay all interest with respect to loans made
pursuant to subparagraph B; provided, however, that no payment of interest shall
constitute a premium payment under this Agreement.
2
<PAGE>
D. The term "net cash surrender value" when used in this Agreement
shall mean the gross value as determined by Insurer less any outstanding loans
made to Corporation and interest then due on such loans.
ARTICLE IV
In the event of the death of Insured, the proceeds of the Policy shall
be divided into two parts and paid by Insurer as follows:
Part A - This part shall be paid to Corporation in an amount
equal to the Corporation's security interest in the
Policy as determined pursuant to Article III,
paragraph A hereof. Corporation shall supply Insurer
with any information necessary for Insurer to
determine such amount.
Part B - The balance of the death benefit shall be paid to the
beneficiary designated by the Insured.
ARTICLE V
A. The Insured may, at any time with the Corporation's prior written
consent, surrender the Policy and receive the net cash surrender value thereof.
Insured shall pay to Corporation an amount equal to Corporation's security
interest in the Policy as determined in Article III, paragraph A hereof, or may
authorize and instruct Insurer to pay such amount directly to Corporation.
B. The Insured may acquire Corporation's interest in the Policy for an
amount equal to the Corporation's security interest in the Policy as determined
in Article III, paragraph A hereof upon the Insured's termination of employment
with Corporation.
3
<PAGE>
C. Except as provided in the collateral assignment or as necessary to
protect Corporation's security interest, Insured shall be entitled to exercise
all of the rights available under the terms of the Policy, except the Insured
may not assign or borrow on the Policy as long as a collateral assignment is in
effect on the Policy.
ARTICLE VI
A. Subject to Article VI, paragraph B below, this Agreement shall
terminate upon the occurrence of any of the following:
1. Surrender or acquisition of the Policy by Insured,
pursuant to Article V of this Agreement.
2. Cessation of the corporate business.
3. Bankruptcy, receivership or dissolution of
Corporation.
4. The termination of Insured's employment with the
Corporation.
5. The death of Insured.
B. If this Agreement is terminated pursuant to Article VI, paragraph
A.2 or 3. above, Insured shall pay Corporation an amount equal to Corporation's
security interest in the Policy as determined in Article III, paragraph A
hereof. Upon receipt of such amounts, Corporation shall thereupon execute and
deliver to Insured a release of the collateral assignment of the Policy.
C. If this Agreement is terminated pursuant to Article VI, paragraph
A.4 above, Insured shall pay Corporation an amount equal to Corporation's
security interest in the Policy as determined in Article III, paragraph A above.
4
<PAGE>
D. If Insured does not remit the amounts described in paragraph B and C
above, within thirty (30) days of the event described in Article VI, paragraph
A.2, 3. or 4., then all obligations of Corporation under this Agreement shall be
terminated and Insured shall transfer the ownership of the Policy to
Corporation.
ARTICLE VII
Insurer is not a party to this Agreement and the obligations of Insurer
are those set forth in the Policy.
ARTICLE VIII
This Agreement shall be binding upon the parties hereto, their heirs,
legal representatives, successors and assigns.
ARTICLE IX
This Agreement may be altered, amended or modified only by written
instrument signed by Corporation and the Insured.
ARTICLE X
This Agreement shall be construed according to the laws of the State of
Arizona.
ARTICLE XI
Insured may add a rider to the Policy for the benefit of his
beneficiaries. Upon written request by Corporation, Insured will add a rider to
the Policy for the benefit of Corporation. The additional premium for any rider
which is added to the Policy will be paid by the party entitled to receive the
proceeds of the rider.
5
<PAGE>
ARTICLE XII
A. The party designated as the "named fiduciary" for the
Split-Dollar Plan established by this Agreement shall have the
authority to control and manage the operation and
administration of such plan; provided, however, the Insurer
shall be the fiduciary of the plan solely with regard to the
review and final decision on a claim for benefits under its
Policy as provided in Article XIII Claims Procedure, set forth
below.
B. The Fiduciary may allocate his responsibilities for the
operation and administration of the Split-Dollar Plan,
including the designation of persons to carry out fiduciary
responsibilities under any such plan. He shall effect such
allocation of his responsibilities by delivering to the
Corporation a written instrument signed by him that specifies
the nature and extent of the responsibilities allocated,
including, the persons who are designated to carry out these
fiduciary responsibilities under the Split-Dollar Plan,
together with a signed acknowledgment of their acceptance.
ARTICLE XIII
The following claims procedure shall apply to the Split-Dollar Plan:
A. The beneficiary of such Policy shall make a claim for the
benefits provided under the Policy in the manner provided in
the Policy.
B. With respect to a claim for benefits under said Policy, the
Insurer shall be the entity which reviews and makes decisions
on claim denials.
6
<PAGE>
C. If a claim is wholly or partially denied, notice of the
decision, meeting the requirements of paragraph D below, shall
be furnished to the claimant within a reasonable period of
time after the claim has been filed.
D. The Insurer shall provide to any claimant who is denied a
claim for benefits, written notice setting forth in a manner
calculated to be understood by the claimant, the following:
1. The specific reasons for the denial;
2. Specific reference to the pertinent Policy or plan
provisions on which the denial is based;
3. A description of any additional material or
information necessary for the claimant to perfect the
claim and an explanation of why such material or
information is necessary;
4. An explanation of the plan's claim review procedure,
as set forth in paragraph E and F below.
E. The purpose of the review procedure set forth in this
paragraph and in paragraph F below, is to provide a procedure
by which a claimant under the Split-Dollar Plan may have a
reasonable opportunity to appeal a denial of a claim for a
full and fair review. To accomplish that purpose, the claimant
or his duly authorized representative:
1. May request a review upon written application to the
Insurer;
2. May review pertinent plan documents or agreements;
and
3. May submit issues and comments in writing.
7
<PAGE>
A claimant (or his duly authorized representative)
shall request a review by filing a written application for
review at any time within sixty (60) days after receipt by the
claimant of written notice of the denial of his claim.
F. A decision on review of a denial of a claim shall be made in
the following manner:
1. The decision on review shall be made by the Insurer,
which may in its discretion hold a hearing on the
denied claim. The Insurer shall make its decision
promptly, unless special circumstances (such as the
need to hold a hearing) require an extension of time
for processing, in which case a decision shall be
rendered as soon as possible, but not later than one
hundred twenty (120) days after receipt of the
request for review.
2. The decision on review shall be in writing and shall
include specific reasons for the decisions, written
in a manner calculated to be understood by the
claimant, and specific references to the pertinent
Policy or plan provision on which the decision is
based.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
MICROAGE, INC., a Delaware Corporation
By /s/Jeffrey D. McKeever
----------------------------------
Its Chairman and CEO
--------------------------------
By /s/Alan P. Hald
----------------------------------
ALAN P. HALD
8
<PAGE>
SCHEDULE A
Face Amount $1,286,007
Policy Number 13929759
Plan of Insurance The Northwestern Mutual Life Insurance
Company
9
<PAGE>
COLLATERAL ASSIGNMENT FORM
Appln. No., Contract No. Date this form is signed:
or Policy No.: 13929759 January 29, 1997
Insured: ALAN P. HALD
Insurance Company: The Northwestern Mutual Life Insurance Company
The undersigned request and direct the Insurance Company to make the provisions
of this form a part of the policy.
All previous designations of payees are hereby revoked. It is hereby requested
and directed that:
BENEFICIARIES
(1) In the event of the death of the Insured, MicroAge, Inc., a Delaware
corporation, or its successors ("Corporation"), will be the direct beneficiary
of an amount equal to the premiums paid to the Insurance Company by Corporation
for the Policy. In the event of Corporation's cessation of business, bankruptcy,
receivership or dissolution, Corporation will be the direct beneficiary of an
amount equal to the premiums paid to the Insurance Company by Corporation for
the Policy.
In the event of termination of Insured's employment or the surrender or the
acquisition of the Policy, Corporation will be the direct beneficiary of the
premiums paid to the Insurance Company by Corporation for the Policy.
Any indebtedness by Corporation to the Insurance Company will be deducted first
from the share of the proceeds payable to said Corporation as direct
beneficiary.
It is understood and agreed that the Insurance Company will have the right to
rely on any statement signed by said Corporation setting forth said
Corporation's share of the premium payments referred to above, and any decision
made by Insurance Company in reliance upon such statement will be conclusive and
will fully protect the Insurance Company.
(2) KATHLEEN T. HALD if living and married to the Insured on his date of death
will be the direct beneficiary of any remaining proceeds, and if she is either
not married to Insured or living on Insured's date of death, the proceeds will
be payable to Insured's estate.
<PAGE>
The Insurance Company will be fully discharged of liability for any action taken
by the Insured and for all amounts paid to, or at the direction of, the insured
and will have no obligation as to the use of the amounts. In all dealings with
the Insured, the Insurance Company will be fully protected against the claims of
every other person. The Insurance Company will not be charged with notice of a
change of beneficiary unless written evidence of the change is received at the
Insurance Company's Home Office.
OWNERSHIP
(3) The owner of the Policy shall be the Insured. The Insured alone may exercise
all the rights and privileges specified in the Policy, except the Insured may
not assign or borrow on the Policy as long as this Collateral Assignment is in
effect. Corporation may assign or borrow against the Policy loan value only with
the prior written approval of the Insured.
MODIFICATION OF ASSIGNMENT PROVISIONS
Upon death of the Insured, the interest of any collateral assignee of
Corporation will be limited to the portion of the proceeds described in (1)
above.
MICROAGE, INC., a Delaware corporation
By /s/Jeffrey D. McKeever
----------------------------------
Officer
/s/ Alan P. Hald
----------------------------------
ALAN P. HALD
MICROAGE, INC.
1994 MANAGEMENT EQUITY PROGRAM
AWARD AGREEMENT
December 9, 1993
Dear Alan:
Pursuant to the action taken by the Board of Directors of
MicroAge, Inc. (the "Company") and the Compensation Committee of the Board of
Directors, you are hereby offered participation in the 1994 Management Equity
Program (the "1994 MEP") under the MicroAge, Inc. Long-Term Incentive Plan (the
"Plan"). Under the 1994 MEP, you have the opportunity to receive options to
restructure your compensation package to some extent. Essentially, you may elect
to purchase shares of the common stock of the Company if you irrevocably elect
to waive (1) all or a portion of your 1993 fiscal year bonus (the "1993 Bonus"),
and (2) a portion of your base salary and any bonuses you may receive for the
1994, 1995, and 1996 calendar years, and later years if necessary, under the
following terms and conditions.
BEFORE YOU ELECT TO PARTICIPATE IN THE 1994 MEP, READ THIS AWARD AGREEMENT. YOU
WILL BE REQUIRED TO SIGN THIS AWARD AGREEMENT AND YOUR SIGNATURE WILL EVIDENCE
THAT YOU HAVE READ THIS AWARD AGREEMENT, UNDERSTAND IT, AND AGREE WITH ITS TERMS
AND CONDITIONS.
TO PARTICIPATE IN THE 1994 MEP, YOU MUST COMPLETE AND SIGN THIS AWARD AGREEMENT
AND RETURN IT TO CRAIG CANTONI BY 12:00 P.M. NOON ON TUESDAY, DECEMBER 14, 1993.
1. EFFECTIVE DATE. The effective date of your participation in
the 1994 MEP is December 14, 1993.
2. STOCKHOLDER APPROVAL. The 1994 MEP is subject to
stockholder approval of the Plan, which will be sought at the 1994 Annual
Meeting of Stockholders. If stockholder approval is not obtained at such
meeting, the 1994 MEP will be deemed to have never been implemented and the
options thereunder will be deemed to have never been granted.
3. 1993 BONUS WAIVER. You hereby elect to waive all or a
portion of your 1993 Bonus in the amount specified in the table below, subject
to the limitation described in footnote 6 below. 1993 BONUS WAIVER1
1993 BONUS WAIVER(1)
================================================================================
1993 Bonus Waived 1994 Salary Credit Amount(2) Bonus Credit Amount(3)
- --------------------------------------------------------------------------------
$75,000 $75,000 $0
================================================================================
- --------
1 You are not required to waive any of your 1993 Bonus as a condition to
participate in the 1994 MEP. Any part of your 1993 Bonus that you elect to waive
will be credited against your 1994 salary waiver amount (up to the amount of the
Salary Credit Amount) and your 1994 bonus waiver amount, in that order. This
"credit" can be carried forward beyond 1994. See Example A attached to this
Award Agreement.
2 You may insert any amount from $0 to $39,000 (15% of your Current Base
Salary).
3 Computed by subtracting the Salary Credit Amount from the 1993 Bonus
Waived.
-1-
<PAGE>
4. 1994-1996 WAIVER. You hereby elect to waive a portion of
your salary and bonuses for the 1994, 1995, and 1996 calendar years in the
amounts specified in the tables below (please understand that bonuses for later
years may be automatically waived, as may be necessary to make up any deficit
(see footnote 5)):
1994-1996 WAIVER TABLE
================================================================================
Year Salary(4) Bonus(5) Total
- --------------------------------------------------------------------------------
1994 $39,000 $65,000 $104,0006
- --------------------------------------------------------------------------------
1995 $39,000 $65,000 $104,000
- --------------------------------------------------------------------------------
1996 $39,000 $65,000 $104,000
- --------------------------------------------------------------------------------
1993-1996 $156,000 $260,000 $416,000(7)
=========
================================================================================
5. NUMBER OF OPTIONS GRANTED. In exchange for electing to
waive the amount of compensation specified in the 1994-1996 Waiver Table in
Paragraph 4, above, you are hereby granted an option to purchase the number of
shares of MicroAge, Inc. Common Stock calculated pursuant to the formula below
(to be completed by MicroAge):
(1) Total Compensation Waived (1994-1996): $312,000
-------
(2) $312,000 (Total Compensation Waived)
Multiplied by Ten (10): $3,120,000
----------
(3) Common Stock Closing Price
Effective Date (December 14, 1993)
(the "Common Stock Price"): $24.83
------
(4) Total Options Granted (2) / (3) (rounded up): 125,638
-------
- --------------------
4 The minimum annual salary waiver amount is $13,000 (5% of your Current
Base Salary). The maximum annual salary waiver amount is $39,000 (15% of your
Current Base Salary).
5 There is no minimum annual bonus waiver amount. The maximum annual bonus
waiver amount is $65,000 (25% of your Current Base Salary). If the bonus amount
you elect to waive in any year is more than the bonus actually paid to you for
that year (and you do not have a Bonus Credit Amount to apply to the deficit),
the deficit amount will be added to your bonus waiver amount for the following
year. Deficit amounts will continue to be carried forward until made up or until
December 14, 2002. See Example B attached to this Award Agreement.
6 The amount of your 1993 Bonus that you may waive cannot exceed this
number. See Example A attached to this Award Agreement.
7 The minimum waiver amount (salary and bonuses combined) for the
three-year period (1994-1996) is $130,000 (50% of your Current Base Salary).
-2-
<PAGE>
(See Example C attached to this Award Agreement)
6. VESTING OF OPTIONS. Your options will vest in one-third
(1/3) increments beginning on the January 1 which is three years following the
January 1 of the calendar year for each year you elect to waive base salary
and/or bonus amounts. Any amount of your 1993 Bonus that you elect to waive will
be used as a credit against future waiver amounts and will be deemed to be
waived in the year that such credit is taken. HOWEVER, your options will not
fully vest until you have actually waived all of the compensation you agreed to
waive.
FOR EXAMPLE, the options to be purchased with the
compensation you waive in 1994 will vest in 1/3 increments beginning on January
1, 1997 and will be 100% vested on January 1, 1999. Correspondingly, the options
to be purchased with the compensation you waive in 1995 will vest in 1/3
increments beginning on January 1, 1998 and will be 100% vested on January 1,
2000, and so on.
If you elect to waive a specific amount of your
bonuses for the next three years, but do not receive bonuses for the next three
years sufficient to cover the amount you agreed to waive (and you do not have a
Bonus Credit Amount to apply against the deficit), the bonuses you may be
otherwise entitled to receive in later years (up through December 13, 2002) will
be used to make up any shortfall on a "first-in, first-out" theory. See Example
D attached to this Award Agreement.
Notwithstanding the above, your options will become
fully vested and exercisable as of December 14, 2002, unless you otherwise
terminate employment before such date.
7. EXPIRATION OF OPTIONS. Subject to Section 8 and 9 of this
Award Agreement, your options will expire, unless sooner exercised, on December
14, 2003.
8. TERMINATION OF EMPLOYMENT
Death. Upon your death, your beneficiary will be
entitled to receive the number of options determined by multiplying the sum of
your compensation actually waived up to the date of your death by ten and
dividing the product by the Common Stock Price; provided, however, that only the
total compensation waived by you up to the date of your death will be
considered. All options received by your beneficiary will be fully vested and
immediately exercisable. Your beneficiary will have up to one year from the date
of your death to exercise the options. After that one year period, the options
will be cancelled. Under no circumstances will you or your beneficiary be
entitled to receive cash equal to all or any portion of the compensation you
elected to waive under the 1994 MEP.
Disability. Upon your termination of employment due
to a "Disability" (as that term is defined in the Plan) you will be entitled to
receive the number of options determined by multiplying the sum of your
compensation actually waived up to the date of your termination by ten and
dividing the product by the Common Stock Price; provided, however, that only the
total compensation waived by you up to the date of your termination will be
considered. All options received will be fully vested and immediately
exercisable. You will have up to one year from the date of termination of
employment to exercise the options. After that one year period, the options will
be cancelled. Under no circumstances will you be entitled to receive cash equal
to all or any portion of the compensation you elected to waive under the 1994
MEP.
Voluntary or Involuntary. Upon your voluntary or
involuntary termination of employment, you will be entitled to receive the
number of options determined by multiplying the sum of your compensation
actually waived up to the date of your termination by ten and dividing the
product by the Common Stock Price; provided, however, that only the total
compensation waived by you up to the date of termination of employment will be
considered. Your options will continue to vest under the above vesting schedule
as if you continued to be employed by the Company and continued participating in
the 1994 MEP. Under no circumstances will you be entitled to receive cash equal
to all or any portion of the compensation you elected to waive under the 1994
MEP.
-3-
<PAGE>
9. TERMINATION OF 1994 MEP. If the Committee decides to
terminate the 1994 MEP, you will be entitled to receive a number of options
determined by multiplying the sum of your compensation actually waived up to the
date of your termination by ten and dividing the product by the Common Stock
Price; provided, however, that only the total compensation waived by you up to
the date of termination will be considered. All options received will be fully
vested and immediately exercisable. You will have up to thirty days from the
date of such termination to exercise the options. After such thirty day period,
the options will be cancelled. Under no circumstances will you be entitled to
receive cash equal to all or any portion of the compensation you elected to
waive under the 1994 MEP.
10. CHANGE OF CONTROL. Upon a "Change of Control" (as that
term is defined in the Plan), the terms of Section 13.10 and 14.2 of the Plan
will apply to all options issued under the 1994 MEP. Upon a Change of Control,
you will be entitled to receive the number of options determined by multiplying
the sum of your compensation actually waived up to the date of the Change of
Control by ten and dividing the product by the Common Stock Price; provided,
however, that only the total compensation waived by you up to the date of the
Change of Control will be considered. All options will be fully vested and
immediately exercisable. In the event of a dissolution or liquidation of the
Company or a merger or consolidation in which the Company would not be the
surviving or resulting corporation, you will be entitled to receive the number
of options determined by multiplying the sum of your compensation actually
waived up to the date of exercise by ten and dividing the product by the Common
Stock Price; provided, however, that only the total compensation waived by you
up to the date of exercise will be considered. All options will be fully vested
and exercisable (a) in the case of a dissolution or liquidation, at anytime
after the Company's Board of Directors takes action authorizing the dissolution
or liquidation of the Company or (b) in the case of a merger or consolidation in
which the Company would not be the resulting or surviving corporation, upon the
Company's public announcement that a definitive agreement regarding such a
merger or consolidation has been reached. Under no circumstances will you be
entitled to receive cash equal to all or any portion of the compensation you
elected to waive under the 1994 MEP.
11. COMPANY INFORMATION. By signing this Award Agreement, you
acknowledge that you have been given, or were offered, a copy of the Company's
Annual Report on Form 10-K for the fiscal year ended September 30, 1993 (the
"1993 10-K"), and that you were given an opportunity to ask questions of any of
the Company's executive officers (as disclosed on page 7 of the 1993 10-K)
regarding the 1993 10-K or any other matter regarding the Company.
12. RISK OF INVESTMENT. By signing this Award Agreement, you
recognize that your participation in the 1994 MEP is a speculative investment in
that the success or failure of your investment depends on the market value of
the Company's Common Stock over a several year period. You further recognize
that all or a portion of your investment (i.e., your salary and bonus waiver)
may be lost. You also acknowledge that you were given the opportunity to consult
with your personal advisor(s) regarding the 1994 MEP.
I hereby elect to participate in the 1994 MEP under the terms
and conditions set forth above and acknowledge that I have read and understood
the terms and conditions of the 1994 MEP.
ACCEPTED:
MICROAGE, INC.
SIGNATURE /s/Alan P. Hald BY /s/Jeffrey D. McKeever
------------------------ ----------------------
DATE 12/14/93 ITS Chairman and CEO
------------------------ -----------------------
SSN ###-##-####
------------------------
-4-
FIRST AMENDMENT TO THE
MICROAGE 1994 MANAGEMENT EQUITY PROGRAM
AWARD AGREEMENT FOR
ALAN P. HALD
THIS FIRST AMENDMENT to the Award Agreement dated December 14, 1993
("Award Agreement"), is entered into by MicroAge, Inc. ("Company"), and Alan P.
Hald ("Executive") pursuant to the Management Equity Plan ("MEP") under the
MicroAge, Inc. Long-Term Incentive Plan ("Plan"), as of December 14, 1995.
WHEREAS, the Company and the Executive entered into the Award Agreement
effective December 14, 1993, to enable the Executive to acquire an option to
purchase Company stock by making salary deferrals; and
WHEREAS, the exercise price of the option to purchase Company common
stock, $.01 par value ("Common Stock"), under the Award Agreement is $24.83 per
share, after giving effect to a 3-for-2 stock split that was payable on January
13, 1994; and
WHEREAS, the closing price of the Common Stock on the Nasdaq National
Market on December 13, 1995, was $8.75 per share; and
WHEREAS, in order to provide a meaningful incentive for the Executive
under the MEP, the Compensation Committee of the Company's Board of Directors
has reduced the exercise price under the Award Agreement to the current fair
market value of the Common Stock.
NOW THEREFORE, the Executive and the Company agree as follows:
1. Paragraph 5 of the Award Agreement is hereby amended
and restated in its entirety as follows:
1
<PAGE>
5. NUMBER OF OPTIONS GRANTED. In exchange for electing to waive
the amount of compensation specified in the 1994-1996 Waiver Table in Paragraph
4, above, you are hereby granted an option to purchase the number of shares of
MicroAge, Inc. Common Stock calculated pursuant to the formula below:
(1) TOTAL COMPENSATION WAIVED (1994-1996) $312,000
(2) $312,000 (TOTAL COMPENSATION WAIVED)
MULTIPLIED BY 3.5235 (THE "LEVERAGING
FACTOR") $1,099,332
(3) COMMON STOCK CLOSING PRICE ON DECEMBER
13, 1995 (THE "COMMON STOCK PRICE") $8.75
(4) TOTAL OPTIONS GRANTED (2) / (3) 125,638
2. Paragraphs 8, 9, and 10 of the Award Agreement shall
be amended by deleting the references to the number "ten" and replacing such
reference with the phrase "the Leveraging Factor."
3. This First Amendment shall be effective as of
December 14, 1995.
MICROAGE, INC.
By: /s/Jeffrey D. McKeever
----------------------------------
Jeffrey D. McKeever
Chairman of the Board and
Chief Executive Officer
/s/ Alan P. Hald
----------------------------------
Alan P. Hald
2
AMENDED and RESTATED
EMPLOYMENT AGREEMENT
dated as of November 4, 1996
by and between
MICROAGE, INC.
and
JAMES R. DANIEL
<PAGE>
TABLE OF CONTENTS
ARTICLE I--DUTIES AND TERM................................................... 1
1.1 Employment................................................. 1
1.2 Position and Responsibilities.............................. 1
1.3 Term....................................................... 2
1.4 Location................................................... 2
ARTICLE II--COMPENSATION..................................................... 2
2.1 Base Salary................................................ 2
2.2 Bonus Payment.............................................. 3
2.3 Stock Options.............................................. 3
2.4 Additional Benefits........................................ 3
ARTICLE III--TERMINATION OF EMPLOYMENT....................................... 4
3.1 Death or Retirement of Executive........................... 4
3.2 By Executive............................................... 4
3.3 By Company................................................. 5
ARTICLE IV--COMPENSATION UPON TERMINATION OF EMPLOYMENT...................... 5
4.1 Upon Termination for Death or Disability................... 5
4.2 Upon Termination by Company for Cause or
by Executive Without Good Reason........................... 6
4.3 Upon Termination by the Company Without
Cause or by Executive for Good Reason Prior
to a Change in Control..................................... 6
4.4 Upon Termination by the Company Without
Cause Following a Change in Control or by
Executive for Good Reason Following a Change
in Control or Pursuant to a Change in
Control Resignation........................................ 7
ARTICLE V--RESTRICTIVE COVENANTS............................................. 8
5.1 Confidential Information and Materials..................... 8
5.2 General Knowledge.......................................... 9
5.3 Executive Obligations as to Confidential
Information and Materials.................................. 9
5.4 Inform Subsequent Employers................................ 10
5.5 Ideas and Inventions....................................... 10
5.6 Inventions and Patents..................................... 10
5.7 Copyrights................................................. 11
5.8 Conflicting Obligations and Rights......................... 11
5.9 Non-Competition............................................ 11
5.10 Non-Disparagement.......................................... 13
5.11 Remedies.................................................. .13
5.12 Scope of Article........................................... 13
i
<PAGE>
ARTICLE VI--MISCELLANEOUS.................................................... 14
6.1 Definitions................................................ 14
6.2 Key Man Insurance.......................................... 18
6.3 Mitigation of Damages; No Set-Off; Dispute
Resolution................................................. 18
6.4 Successors; Binding Agreement.............................. 19
6.5 Modification; No Waiver.................................... 19
6.6 Severability............................................... 19
6.7 Notices.................................................... 20
6.8 Assignment................................................. 20
6.9 Entire Understanding....................................... 20
6.10 Executive's Representations................................ 20
6.11 Liability of Company with Respect to
Insurance Policy........................................... 20
6.12 Governing Law.............................................. 20
EXHIBIT A--SPLIT DOLLAR AGREEMENT
EXHIBIT B--EXECUTIVE'S RIGHTS
EXHIBIT C--EXECUTIVE'S EXISTING OBLIGATIONS AND CLAIMS
EXHIBIT D--DISPUTE RESOLUTION PROCEDURES
ii
<PAGE>
EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement") made and
entered into as of November 4, 1996, by and between MICROAGE, INC., a Delaware
corporation (the "Company"), and JAMES R. DANIEL ("Executive").
R E C I T A L S:
- - - - - - - -
WHEREAS, the Company and Executive entered into an Amended and Restated
Employment Agreement on October 1, 1993 and a First Amendment to the Amended and
Restated Employment Agreement on October 1, 1995 (collectively, the "Employment
Agreement"); and
WHEREAS, pursuant to Section 6.5 of the Employment Agreement, the
Employment Agreement may be amended only by a written document signed by each of
the parties thereto; and
WHEREAS, the Company and Executive desire to amend and restate the
Employment Agreement.
NOW, THEREFORE, in consideration of the premises, and for other
valuable consideration, the sufficiency of which is hereby acknowledged by each
of the parties hereto, the parties hereby agree as follows:
A G R E E M E N T:
- - - - - - - - -
ARTICLE I
DUTIES AND TERM
1.1 Employment. In consideration of their mutual covenants and other
good and valuable consideration, the receipt, adequacy and sufficiency of which
is hereby acknowledged, the Company agrees to hire Executive, and Executive
agrees to remain in the employ of the Company, upon the terms and conditions
herein provided.
1.2 Position and Responsibilities.
(a) Executive shall serve as Senior Vice President, Chief
Financial Officer and Treasurer of MicroAge, Inc. (or in a capacity and with a
title of at least substantially equivalent quality) reporting directly to the
Chief Executive Officer of the Company. Executive agrees to perform services not
inconsistent with his position as shall from time to time be assigned to him by
the Chief Executive Officer.
(b) Executive further agrees to serve, if elected, as a
director of the Company and as an officer or director of any subsidiary or
affiliate of the Company.
<PAGE>
(c) During the period of his employment hereunder, Executive
shall devote substantially all of his business time, attention, skill and
efforts to the faithful performance of his duties hereunder.
1.3 Term. The term of Executive's employment under this Agreement shall
commence on the date first above written and shall continue, unless sooner
terminated, until November 1, 1998; provided, however, that commencing on
November 4, 1996 and on each subsequent day thereafter, the Executive's term of
employment shall automatically be extended without further action by the Company
or Executive for the twenty-four (24) month period commencing on each such day.
1.4 Location. During the period of his employment under this Agreement,
Executive shall not be required, except with his prior written consent, to
relocate his principal place of employment outside Maricopa County, Arizona.
Required travel on the Company's business shall not be deemed a relocation so
long as Executive is not required to provide his services hereunder outside of
Maricopa County, Arizona, for more than fifty (50%) percent of his working days
during any consecutive six (6) month period.
ARTICLE II
COMPENSATION
For all services rendered by Executive in any capacity during his
employment under this Agreement, including, without limitation, services as a
director, officer or member of any committee of the Board of the Company or of
the board of directors of any subsidiary or affiliate of the Company, the
Company shall compensate Executive as follows:
2.1 Base Salary. The Company shall pay to Executive an annual base
salary of not less that $325,000 (such amount, less any salary waivers under the
1994 Management Equity Program or any subsequent management equity or other
waiver program adopted by the Company is hereinafter referred to as the "Base
Salary") during the term hereof; provided, however, that in the event the
Company institutes a salary reduction program which affects all exempt employees
(as defined by standard Company policies in compliance with the Fair Labor
Standards Act) by the same percentage, then Executive's Base Salary may be
reduced by such percentage (and the term "Base Salary" as used in this Agreement
shall refer to Base Salary as so adjusted). Executive's Base Salary shall be
paid in equal semi-monthly installments. The Base Salary shall be reviewed
annually by the Board or a committee designated by the Board and the Board or
such committee may, in its discretion, increase the Base Salary.
2.2 Bonus Payments.
(a) During the period of Executive's employment under this
Agreement, the Company shall pay to Executive annually a fixed cash bonus equal
to $8,938 and, in addition, such amount as may be necessary after payment by the
Executive of all taxes, including, without limitation, any federal or state
income taxes, on such fixed cash bonus payment, so that Executive shall have
remaining, on a grossed-up basis, the amount of $8,938 (the "Annual Fixed Cash
Bonus").
2
<PAGE>
(b) During the period of Executive's employment under this
Agreement, Executive shall, in addition to the Annual Fixed Cash Bonus, be
entitled to bonus payments, if any shall be due, pursuant to the Executive Bonus
Plan which has been established by resolution of the Board for fiscal year 1996
(the "1996 Executive Bonus Plan"). The Company shall use all reasonable efforts
to cause the Board or a committee thereof to establish in each fiscal year
during the term hereof an executive bonus plan that is similar to the 1996
Executive Bonus Plan in providing for incentive compensation to Executive based
on a formula related to the Company's profits during such fiscal year. Any bonus
under the 1996 Executive Bonus Plan or any such subsequent plan, less any bonus
waivers under the 1994 Management Equity Program or any subsequent management
equity or other waiver program adopted by the Company, is referred to herein as
the "Annual Incentive Bonus."
2.3 Stock Options. The Company shall use all reasonable efforts to
establish and maintain one or more stock option plans in which Executive shall
be entitled to participate to the same extent as other Senior Executives (as
such term is defined in Section 6.1 hereof). The terms and conditions of such
plan(s) shall be determined and administered by the Board or a committee
thereof.
2.4 Additional Benefits. Executive shall be entitled to participate in
all employee benefit and welfare programs, plans and arrangements (including,
without limitation, pension, profit sharing, supplemental pension and other
retirement plans, insurance, hospitalization, medical and group disability
benefits, travel or accident insurance plans) and to receive fringe benefits,
such as dues and fees of professional organizations and associations, which are
from time to time available to the Company's executive personnel; provided,
however, there shall be no duplication of termination or severance benefits, and
to the extent that such benefits are specifically provided by the Company to
Executive under other provisions of this Agreement, the benefits available under
the foregoing plans and programs shall be reduced by any benefit amounts paid
under such other provisions. Executive shall during the period of his employment
hereunder continue to be provided with benefits at a level which shall in no
event be less in any material respect than the benefits made available to
Executive by the Company as of the date of this Agreement. Notwithstanding the
foregoing, the Company may terminate or reduce benefits under any benefit plans
and programs to the extent such reductions apply uniformly to all Senior
Executives entitled to participate therein, and Executive's benefits shall be
reduced or terminated accordingly. Specifically, without limitation, Executive
shall receive the following benefits:
(a) Death Benefit. The Company and Executive have entered into
a Split Dollar Insurance Agreement, dated as of September 1, 1995, a copy of
which is attached hereto as Exhibit A.
(b) Short-Term Disability Benefits. In the event of
Executive's failure substantially to perform his duties hereunder on a full-time
basis for a period not exceeding 180 consecutive days or for periods aggregating
not more than 180 days during any twelve-month period as a result of incapacity
due to physical or mental illness, the Company shall continue to pay the Base
Salary to Executive during the period of such incapacity, but only in the
amounts and to the
3
<PAGE>
extent that disability benefits payable to Executive under Company-sponsored
insurance policies are less than Executive's Base Salary.
(c) Relocation Expenses. In the event Executive's principal
place of employment is relocated by mutual consent of the parties outside
Maricopa County, Arizona, the Company shall reimburse Executive for all usual
relocation expenses incurred by Executive and his household in moving to the new
location, including, without limitation, moving expenses and rental payments for
temporary living quarters in the area of relocation for a period not to exceed
six months.
(d) Reimbursement of Business Expenses. The Company shall, in
accordance with standard Company policies, pay, or reimburse Executive for, all
reasonable travel and other expenses incurred by Executive in performing his
obligations under this Agreement.
(e) Vacations. Executive shall be entitled to 20 business
days, excluding Company holidays, of paid vacation during each year of
employment hereunder which he shall earn in arrears (i.e., Executive shall be
entitled to no vacation days during his first year of employment). Executive may
accrue and carry forward no more than five unused vacation days from any
particular year of his employment under this Agreement to the next.
ARTICLE III
TERMINATION OF EMPLOYMENT
3.1 Death or Retirement of Executive. Executive's employment under this
Agreement shall automatically terminate upon the death or Retirement (as defined
in Section 6.1) of Executive.
3.2 By Executive. Executive shall be entitled to terminate his
employment under this Agreement by giving Notice of Termination (as defined in
Section 6.1) to the Company:
(a) for Good Reason (as defined in Section 6.1);
(b) at any time commencing with the date six (6) months
following the date of a Change in Control (as defined in Section 6.1) and ending
with the date twelve months after the date of such Change in Control (a "Change
in Control Resignation"); and
(c) at any time without Good Reason.
3.3 By Company. The Company shall be entitled to terminate Executive's
employment under this Agreement by giving Notice of Termination to Executive:
(a) in the event of Executive's Total Disability (as defined
in Section 6.1);
(b) for Cause (as defined in Section 6.1); and
(c) at any time without Cause.
4
<PAGE>
ARTICLE IV
COMPENSATION UPON TERMINATION OF EMPLOYMENT
If Executive's employment hereunder is terminated in accordance with
the provisions of Article III hereof, except for any other rights or benefits
specifically provided for herein following his period of employment, the Company
shall be obligated to provide compensation and benefits to Executive only as
follows, subject to the provisions of Section 5.11 hereof:
4.1 Upon Termination for Death or Disability. If Executive's employment
hereunder is terminated by reason of his death or Total Disability, the Company
shall:
(a) pay Executive (or his estate) or beneficiaries any Base
Salary which has accrued but not been paid as of the termination date (the
"Accrued Base Salary");
(b) pay Executive (or his estate) or beneficiaries for unused
vacation days accrued as of the termination date in an amount equal to his Base
Salary multiplied by a fraction the numerator of which is the number of accrued
unused vacation days and the denominator of which is 260 (the "Accrued Vacation
Payment");
(c) reimburse Executive (or his estate) or beneficiaries for
expenses incurred by him prior to the date of termination which are subject to
reimbursement pursuant to this Agreement (the "Accrued Reimbursable Expenses");
(d) provide to Executive (or his estate) or beneficiaries any
accrued and vested benefits required to be provided by the terms of any
Company-sponsored benefit plans or programs (the "Accrued Benefits"), together
with any benefits required to be paid or provided in the event of Executive's
death or Total Disability under applicable law;
(e) pay Executive (or his estate) or beneficiaries any Annual
Incentive Bonus with respect to a prior fiscal year which has accrued but has
not been paid; and in addition,
(f) Executive (or his estate) or beneficiaries shall have the
right to exercise all vested unexercised stock options and warrants outstanding
at the termination date in accordance with terms of the plans and agreements
pursuant to which such options or warrants were issued.
4.2 Upon Termination by Company for Cause or by Executive Without Good
Reason. If Executive's employment is terminated by the Company for Cause, or if
Executive terminates his employment with the Company other than (x) upon
Executive's death or Total Disability, (y) for Good Reason, or (z) pursuant to a
Change in Control Resignation (as defined in Section 3.2(b)), the Company shall:
(a) pay Executive the Accrued Base Salary;
5
<PAGE>
(b) pay Executive the Accrued Vacation Payment;
(c) pay Executive the Accrued Reimbursable Expenses;
(d) pay Executive the Accrued Benefits, together with any
benefits required to be paid or provided under applicable law;
(e) pay Executive any accrued Annual Fixed Cash Bonus and
Annual Incentive Bonus with respect to a prior year which has accrued but has
not been paid (together, such bonus payments are referred to herein as the
"Accrued Annual Bonus Payments"); and in addition
(f) Executive shall have the right to exercise vested options
and warrants in accordance with Section 4.1(f).
4.3 Upon Termination by the Company Without Cause or by Executive for
Good Reason Prior to a Change in Control. If Executive's employment is
terminated by the Company without Cause or by Executive for Good Reason, the
Company shall:
(a) pay Executive the Accrued Base Salary;
(b) pay Executive the Accrued Vacation Payment;
(c) pay Executive the Accrued Reimbursable Expenses;
(d) pay Executive the Accrued Benefits, together with any
benefits required to be paid or provided under applicable law;
(e) pay Executive the Accrued Annual Bonus Payments;
(f) pay Executive commencing on the thirtieth day following
the termination date twenty-four monthly payments equal to one-twelfth of the
sum of (1) Executive's Base Salary in effect immediately prior to the time such
termination occurs, plus (2) if Executive is employed with Company for more than
twelve (12) months prior to his termination by the Company without Cause or by
Executive for Good Reason prior to a Change in Control, the Annual Incentive
Bonus paid to Executive for the fiscal year (or if more than one Annual
Incentive Bonus has been paid to Executive, the average of the Annual Incentive
Bonuses paid to Executive for the two (2) fiscal years) immediately preceding
the fiscal year in which the termination occurs; provided, however, should
Executive attain alternative employment during the twenty-four month payment
period, the Company's obligations under this Section 4.3(f) will be reduced by
the amount of Executive's compensation from his new employer. For example, if
Executive were entitled to receive $27,083 per month for twenty-four (24) months
under this Section 4.3(f), and eight (8) months following his termination date
he finds alternative employment that pays him $25,000 per month, the Company
would be obligated to pay Executive seven (7) monthly payments of $27,083, and
seventeen (17) monthly payments of $2,083 under this Section 4.3(f).
6
<PAGE>
(g) maintain in full force and effect, for Executive's and his
eligible beneficiaries' continued benefit, until the first to occur of (x) his
attainment of alternative employment or (y) twenty-four (24) months following
the termination date of his employment hereunder the employee benefits provided
pursuant to Company-sponsored benefit plans, programs or other arrangements in
which Executive was entitled to participate as a full-time employee immediately
prior to such termi nation in accordance with Section 2.4 hereof, subject to the
terms and conditions of such plans and programs (the "Continued Benefits"). If
Executive's continued participation is not permitted under the general terms and
provisions of such plans, programs and arrangements, the Company shall arrange
to provide Executive with Continued Benefits substantially similar to those
which Executive would have been entitled to receive under such plans, programs
and arrangements; and in addition
(h) Executive shall have the right to exercise all vested
unexercised stock options and warrants in accordance with Section 4.1(f).
4.4 Upon Termination by the Company Without Cause Following a Change in
Control or by Executive for Good Reason Following a Change in Control or
Pursuant to a Change in Control Resignation. If following a Change in Control,
Executive's employment is terminated by the Company without Cause or by
Executive for Good Reason or pursuant to a Change in Control Resignation, the
Company shall:
(a) make the payments and provide to Executive the benefits
under Section 4.3 other than under Section 4.3(f) hereof; and in addition
(b) pay to Executive a lump sum payment on or prior to the
thirtieth day following the termination date of Executive's employment hereunder
in an amount equal to 200% of Executive's aggregate total compensation under
Sections 2.1 and 2.2 hereof for the fiscal year immediately prior to the fiscal
year in which the Change in Control occurs; provided, however, the total
payments received by Executive under this Section 4.4(b) plus (i) any payments
received by Executive under Section 4.4(a) which would be classified as
parachute payments and (ii) any payments or value received by Executive from
stock options which would be classified as parachute payments determined in
accordance with Prop. Reg. ss. 1.280G-1A-24(e) Examples (7) and (8) may not
exceed 299% of Executive's "Base Amount" as such term is defined in Section 280G
of the Internal Revenue Code of 1986, as amended ("Code") and the regulations
promulgated thereunder ("Regulations"). Company and Executive agree that for
purposes of making any present value calculation under this Agreement, the
Applicable Federal Rate in effect on the date this Agreement is executed shall
control as permitted by Q&A 32 of Treas. Reg. ss. 1.280G-1.
ARTICLE V
RESTRICTIVE COVENANTS
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5.1 Confidential Information and Materials. Executive hereby agrees and
acknowledges that the following ideas, information and materials in written,
oral, magnetic, photographic, optical or other form and whether now existing or
developed or created during the period of Executive's employment or engagement
with the Company (the "Confidential Information") are proprietary to the Company
and are highly sensitive in nature:
(a) Hardware. Any and all ideas, concepts, know-how,
techniques, structures, information and materials relating to the design,
development, engineering, invention, patent, patent application, manufacture or
improvement of any and all equipment, components, devices, techniques, processes
or formulas (including, without limitation, mask works, semi-conductor chips,
processors, memories, disc drives, tape heads, computer terminals, keyboards,
storage devices, printers, and optical storage media) and any and all
components, devices, techniques or circuitry incorporated in any of the above
which is or are constructed, designed, improved, altered or used by the Company
and which is or are not generally known to the public or within the industries
in which the Company competes.
(b) Software. Any and all ideas, concepts, know-how,
techniques, structures, information and materials relating to existing computer
software or firmware products and computer software or firmware in various
stages of research and development including without limitation source code,
object and load modules, requirements specifications, design specifications,
design notes, flow charts, coding sheets, annotations, documentation, technical
and engineering data, laboratory studies, benchmark test results, and the
structures, organization, designs, formulas and algorithms which reside in the
software and which are not generally known to the public or within the
industries or trades in which the Company competes.
(c) Business Procedures. Internal business procedures and
business plans, including analytical methods and procedures, licensing
techniques, manufacturing information and procedures such as formulations,
processes and equipment, technical and engineering data, vendor names, other
vendor information, purchasing information, financial information, service and
operational manuals and documentation therefor, ideas for new products and
services and other such information which relates to the way the Company
conducts its business and which is not generally known to the public.
(d) Legal Rights. All patents, copyrights, trade secrets,
trademarks and service marks, and the like.
(e) Marketing Plans and Customers Lists. Any and all customer
and marketing information and materials, such as (i) strategic data, including
marketing and development plans, forecasts and forecast assumptions and volumes,
and future plans and potential strategies of the Company which have been or are
being discussed; (ii) financial data, price and cost objectives, price lists,
pricing policies and procedures, and estimating and quoting policies and
procedures; and (iii) customer data, including customer lists, names of
existing, past or prospective customers and their representatives, data about or
provided by prospective, existing or past customers, customer service
information and materials, data about the terms, conditions and expiration dates
of existing contracts
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with customers and the type, quantity and specifications of products and
services purchased, leased or licensed by customers of the Company.
(f) Not Generally Known. Any and all information not generally
known to the public or within the industries or trades in which the Company
competes.
5.2 General Knowledge. The general skills and experience gained by
Executive during Executive's employment or engagement by the Company, and
information publicly available or generally known within the industries or
trades in which the Company competes, is not considered Confidential
Information. Following the Non-Competition Period (as defined in Section 5.9),
Executive is not restricted from working with a person or entity which has
independently developed information or materials similar to the Confidential
Information, but in such a circumstance, Executive agrees not to disclose the
fact that any similarity exists between the Confidential Information and the
independently developed information and materials, and Executive understands
that such similarity does not excuse Executive from the non-disclosure and other
obligations in this Agreement.
5.3 Executive Obligations as to Confidential Information and Materials.
During Executive's employment or engagement by the Company, Executive will have
access to the Confidential Information and will occupy a position of trust and
confidence with respect to the Confidential Information and the Company's
affairs and business. Executive agrees to take the following steps to preserve
the confidential and proprietary nature of the Confidential Information:
(a) Non-Disclosure. During and after Executive's Employment or
engagement by the Company, Executive will not use, disclose or otherwise permit
any person or entity access to any of the Confidential Information other than as
required in the performance of Executive's duties with the Company. Executive
understands that Executive is not allowed to sell, license, market or otherwise
exploit any products or services (including software or firmware in any form)
which embody in whole or in part any Confidential Information.
(b) Prevent Disclosure. Executive will take all reasonable
precautions to prevent disclosure of the Confidential Information to
unauthorized persons or entities.
(c) Abide by the Company's Restrictions. Executive will treat
as confidential and proprietary any information or materials from outside the
Company which the Company is obligated to treat as confidential or proprietary,
in accordance with the Company's reasonable instructions to Executive.
(d) Return All Materials. Upon termination of Executive's
employment or engagement by the Company for any reason whatsoever, Executive
will deliver to the Company all tangible materials embodying the Confidential
Information, including any documentation, records, listings, notes, data,
sketches, drawings, memoranda, models, accounts, reference materials, samples,
machine-readable media and equipment which in any way relate to the Confidential
Information. Of course, Executive agrees not to retain any copies of any of the
above materials.
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5.4 Inform Subsequent Employers. Executive covenants and agrees that,
for a period of twenty-four (24) months following termination of the
Non-Competition Period, prior to accepting subsequent employment with an
employer engaged in substantially the same line of work as the Company,
Executive shall: (a) inform any such subsequent employer in writing that this
Agreement exists; and (b) provide the Company with a copy of such writing.
5.5 Ideas and Inventions. Executive agrees to assign to the Company all
of Executive's right, title and interest in or to any and all ideas, concepts,
know-how, techniques, processes, inventions, discoveries, developments, works of
authorship, innovations and improvements ("Inventions") conceived or made by
Executive, whether alone or with others, whether patentable or not, except those
that the Executive developed entirely on Executive's own time without using the
Company's equipment, supplies, facilities, or trade secret information and which
neither (1) relate at the time of conception or reduction to practice of the
invention to the Company's business, or actual or demonstrably anticipated
research or development of the Company nor (2) result from any work performed by
the Executive for the Company. Executive agrees to disclose all Inventions to
the Company promptly, and to provide all assistance reasonably requested by the
Company in the preservation of its interests in the Inventions (such as by
executing documents, testifying, etc.), such assistance to be provided at the
Company's expense but without any additional compensation to Executive.
5.6 Inventions and Patents. Executive agrees that from this date until
Executive leaves the Company's employment, Executive shall keep the Company
informed of any Inventions made by Executive, in whole or in part, or conceived
by Executive, alone or with others, which result from any work Executive may do
for, or at the request of, the Company, or which relate to the Company's
activities, investigations, or obligations.
(a) Assertion of Rights. Executive shall, at the expense of
the Company, assist the Company or its nominees to obtain patents for such
Inventions in any countries throughout the world. Such Inventions shall be the
property of the Company or its nominees, whether patented or not. Executive
shall and does, without charge to the Company, assign to the Company, all of
Executive's right, title, and interest in and to such Inventions, including
patents and patent applications and reissues thereof. Executive agrees to
execute, acknowledge, and deliver any instruments confirming the complete
ownership by the Company of such Inventions. Such assignments shall include the
right to sue for infringement.
(b) Reserved Inventions. Descriptions of all ideas, concepts,
know-how, techniques, processes, inventions, discoveries, developments,
innovations and improvements which Executive made, conceived or acquired prior
to Executive's employment by the Company and all patents and patent applications
relating thereto (collectively referred to as "Executive's Rights") are attached
hereto in Exhibit B, and Executive's Rights shall be excluded from this
Agreement. Executive represents that the absence of any Executive's Rights in
Exhibit B shall indicate that Executive owns no such Executive's Rights at the
time of signing this Agreement.
5.7 Copyrights. Executive agrees that any work prepared by Executive
during the course of Executive's employment or engagement hereunder which is
eligible for United States copyright
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protection or protection under the Universal Copyright Convention, the Berne
Copyright Convention and/or the Buenos Aires Copyright Convention shall be a
work made for hire. In the event any such work is deemed not to be a work made
for hire, Executive hereby assigns all right, title and interest in and to the
copyright in such work to the Company, and agrees to provide all assistance
reasonably requested by the Company in the establishment, preservation and
enforcement of its copyright in such work, such assistance to be provided at the
Company's expense but without any additional compensation to Executive.
5.8 Conflicting Obligations and Rights. Executive agrees to inform the
Company in writing of any apparent conflict between Executive's work for the
Company and (i) any obligations Executive may have to preserve the
confidentiality of another's proprietary information or materials, or (ii) any
rights Executive claims to any patents, copyrights, trade secrets, or other
inventions, ideas or similar rights, before performing that work. Otherwise, the
Company may conclude that no such conflict exists and Executive agrees
thereafter to make no such claim against the Company. The Company shall receive
such disclosures in confidence. All such existing obligations and claims of
Executive, if any, as of the date of this Agreement are listed on Exhibit C
attached hereto.
5.9 Non-Competition.
(a) Non-competition. By execution of this Agreement, Executive
agrees that during his employment with the Company and for a period of
twenty-four (24) months following the date of expiration or termination of his
employment hereunder (the "Non-Competition Period") for any reason (whether such
termination shall be voluntary or involuntary), Executive will not, within the
United States (in which territory Executive acknowledges that the Company has
sold or marketed its products or services and conducted its Business, as defined
in Section 5.9(d) as of the date hereof), directly or indirectly, compete with
the Company by carrying on a business that is substantially similar to the
Business. Executive agrees that the two (2) year period referred to in the
preceding sentence shall be extended by the number of days included in any
period of time during which he is or was engaged in activities constituting a
breach of this Section 5.9.
(b) Definition of "Compete". For the purposes of this Section
5.9, the term "compete" shall mean with respect to the Business: (i) managing,
supervising, or otherwise participating in a management or sales capacity; (ii)
calling on, soliciting, taking away, accepting as a client or customer, or
attempting to call on, solicit, take away, or accept as a client or customer,
any individual partnership, corporation, company, association, or other entity
that was a client or customer of the Company as of immediately prior to the date
hereof; (iii) hiring, soliciting, taking away, or attempting to hire, solicit,
or take away, either on Executive's behalf or on behalf of any other person or
entity, any person serving immediately prior to the date hereof or during the
term hereof as an employee in connection with the Business; or (iv) entering
into or attempting to enter into any business substantially similar to the
Business, either alone or with any individual, partnership, corporation,
company, association, or other entity.
(c) Direct or Indirect Competition. For the purposes of this
Section 5.9, the words "directly or indirectly" as they modify the word
"compete" shall mean (i) acting as an agent, representative, consultant,
officer, director, member, independent contractor, or employee of any
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entity or enterprise that is competing (as defined in Section 5.9(b) hereof)
with the Business, (ii) participating in any such competing entity or enterprise
as an owner, partner, limited partner, joint venturer, member, creditor, or
stockholder (except as a stockholder holding less than a one percent (1%)
interest in a corporation whose shares are actively traded on a regional or
national securities exchange or in the over-the-counter market), and (iii)
communicating to any such competing entity or enterprise the names or addresses
or any other information concerning any past, present, or identified prospective
client or customer of the Company or any entity having title to the goodwill of
the Company with respect to the Business.
(d) Business. For purposes of this Agreement, the term
"Business" shall mean the delivery of systems integration services and master
distribution of information technology products and services, as conducted by
the Company immediately prior to the date hereof and/or developed during the
term of this Agreement.
(e) Executive expressly agrees and acknowledges that:
(i) it will require at least twenty-four (24) months
for the Company to locate, hire and train an appropriate individual to
perform the functions and duties that Executive is performing
hereunder;
(ii) the Company has protected business interests
throughout the United States and that competition with and against such
business interests would be harmful to the Company;
(iii) this covenant not to compete is reasonable as
to time and geographical area and does not place any unreasonable
burden upon him;
(iv) the general public will not be harmed as a
result of enforcement of this covenant not to compete;
(v) his personal legal counsel has reviewed this
covenant not to compete; and
(vi) he understands and hereby agrees to each and
every term and condition of this covenant not to compete (including,
without limitation, the provisions of Section 5.11).
5.10 Non-Disparagement. During the term of this Agreement and the
Non-Competition Period, neither Executive nor the Company shall disparage the
other, and neither shall disclose to any third party the conditions of
Executive's employment with the Company except as may be required (i) pursuant
to applicable law or regulations, including the rules and regulations of the
Securities and Exchange Commission, (ii) to effectuate the provisions of
employee plans or programs and insurance policies, or (iii) as may be otherwise
contemplated herein or unless such information becomes publicly available
without fault of the party making such disclosure.
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5.11 Remedies. Executive expressly agrees and acknowledges that the
covenants set forth in Section 5.1 through 5.10 are necessary for the protection
of the interests of the Company and its affiliates because of the nature and
scope of their business and his position with the Company. Further, Executive
acknowledges that any breach of such covenants would result in irreparable
damage to the Company, and that money damages will not sufficiently compensate
the Company for its injury caused thereby, and that the remedy at law for any
breach or threatened breach of any of such covenants will be inadequate and,
accordingly agrees, that the Company shall, in addition to all other available
remedies (including without limitation, seeking such damages as it can show it
has sustained by reason of such breach), be entitled to injunctive relief or
specific performance and that in addition to such money damages he may be
restrained and enjoined from any continuing breach of this covenant not to
compete without any bond or other security being required of any court.
Executive further acknowledges and agrees that if such covenants, or any of
them, are deemed to be unenforceable and/or the Executive fails to comply with
this Article V, the Company has no obligation to provide any compensation or
other benefits described in Article IV hereof. The remedies set forth in this
Section 5.11 shall be included in any award in favor of the Company under
Exhibit D hereto.
5.12 Scope of Article. For purposes of this Article V, unless the
context otherwise requires, the term "Company" includes MicroAge, Inc., its
direct and indirect subsidiaries, and its affiliates.
ARTICLE VI
MISCELLANEOUS
6.1 Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Accrued Base Salary" - as defined in Section 4.1(a);
(b) "Accrued Benefits" - as defined in Section 4.1(d);
(c) "Accrued Annual Bonus Payment" - as defined in Section 4.2(e);
(d) "Accrued Reimbursable Expenses" - as defined in Section 4.1(c);
(e) "Accrued Vacation Payment" - as defined in Section 4.1(b);
(f) "Annual Fixed Cash Bonus" - as defined in Section 2.2(a);
(g) "Annual Incentive Bonus" - as defined in Section 2.2(b);
(h) "Base Amount" - as defined in Section 4.4(b);
(i) "Base Salary" - as defined in Section 2.1;
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(j) "Board" - shall mean the Board of Directors of the Company;
(k) "Cause" shall mean the occurrence of any of the following:
(i) Executive's gross and willful misconduct which is
injurious to the Company;
(ii) Executive's engaging in fraudulent conduct with
respect to the Company's business or in conduct of a criminal nature
that may have an adverse impact on the Company's standing and
reputation;
(iii) the continued and unjustified failure or
refusal by Executive to perform the duties required of him by this
Agreement which failure or refusal shall not be cured within fifteen
(15) days following (A) receipt by Executive of written notice from the
Board specifying the factors or events constituting such failure or
refusal, and (B) a reasonable opportunity for Executive to correct such
deficiencies;
(iv) Executive's use of drugs and/or alcohol in
violation of then current Company policy; or
(v) Executive's breach of his obligation under
Section 1.2(c) hereof which shall not be cured within fifteen (15) days
after written notice thereof to Executive.
(l) "Change in Control" shall mean and shall be deemed to have
occurred if:
(i) After the date of this Agreement, any "person"
(as such term is used in Section 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any successor
provision thereto) shall become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act or any successor provision
thereto) directly or indirectly of securities of the Company
representing 15% or more of the combined voting power of the Company's
then outstanding securities ordinarily having the right to vote at an
election of directors; provided, however, that, for purposes of this
subparagraph, "person" shall exclude the Company, its subsidiaries, any
person acquiring such securities directly from the Company, any
employee benefit plan sponsored by the Company or from Executive or any
stockholder owning 15% or more of the combined voting power of the
Company's outstanding securities as of the date of this Agreement; or
(ii) Any stockholder of the Company owning 15% or
more of the combined voting power of the Company's outstanding
securities as of the date of this Agreement shall become the beneficial
owner (within the meaning of Rule 13d-3 under the Exchange Act)
directly or indirectly of securities of the Company (other than through
the acquisition of securities directly from the Company or from
Executive) representing 25% or more of the combined voting power of the
Company's then outstanding securities ordinarily having the right to
vote at an election of directors; or
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(iii) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least 80% of the Board; provided, however, that any
person becoming a member of the Board subsequent to the date hereof
whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least 80% of the members
then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to
the election of directors of the Company, as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act or any
successor provision thereto) shall be, for purposes of this Agreement,
considered as though such person were a member of the Incumbent Board;
or
(iv) Approval by the stockholders of the Company and
consummation of (A) a reorganization, merger, consolidation, or sale or
other disposition of all or substantially all of the assets of the
Company, in each case, with or to a corporation or other person or
entity of which persons who were the stockholders of the Company
immediately prior to such transaction do not, immediately thereafter,
own more than 60% of the combined voting power of the outstanding
voting securities entitled to vote generally in the election of
directors of the reorganized, merged, consolidated or purchasing
corporation (or, in the case of a non-corporate person or entity,
functionally equivalent voting power) and 80% of the members of the
Board of which corporation (or functional equivalent in the case of a
non-corporate person or entity) were not members of the Incumbent Board
at the time of the execution of the initial agreement providing for
such reorganization, merger consolidation or sale, or (B) a liquidation
or dissolution of the Company.
(m) "Change in Control Resignation" - as defined in Section
3.2(b);
(n) "Code" - as defined in Section 4.4(b);
(o) "Common Stock" - shall mean shares of the common stock,
par value $.01 per share, of the Company;
(p) "Confidential Information" - as defined in Section 5.1;
(q) "Continued Benefits" - as defined in Section 4.3(g);
(r) "Expiration" shall mean the expiration of Executive's
employment hereunder in accordance with Section 1.3;
(s) "Good Reason" shall mean the occurrence of any of the
following:
(i) The Company's failure to elect or reelect or to
appoint or reappoint Executive to offices, titles or positions carrying
comparable authority, responsibilities, dignity and importance to that
of Executive's offices and positions as of November 4, 1996 or in the
case of a Change in Control, involving duties of a scope comparable to
those of
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Executive's most significant offices or positions held at any time
during the 90 day period immediately preceding the date such Change in
Control occurs;
(ii) Material change by the Company in Executive's
function, duties or responsibilities (including report
responsibilities) which would cause Executive's position with the
Company to become of less dignity, responsibility and importance than
those associated with his functions, duties or responsibilities as of
November 4, 1996, or in the case of a Change in Control, involving
duties of a scope less than that associated with Executive's most
significant position with the Company during the 90 day period
immediately preceding the date such Change in Control occurs;
(iii) Executive's Base Salary is reduced by the
Company (unless such reduction is pursuant to a salary reduction
program as described in Section 2.1 hereof) or there is a material
reduction in the benefits that are in effect for the Executive on
November 4, 1996 in accordance with Section 2.4 (unless such reduction
is pursuant to a uniform reduction in benefits for all Senior
Executives);
(iv) Except with Executive's prior written consent,
relocation of Executive's principal place of employment to a location
outside of Maricopa County, Arizona, or requiring Executive to travel
on the Company's business more than is required by Section 1.4 hereof;
(v) The failure by the Company to obtain the
assumption by operation of law or otherwise of this Agreement by any
entity which is the surviving entity in any merger or other form of
corporate reorganization involving the Company or by any entity which
acquires all or substantially all of the Company's assets; or
(vi) Other material breach of this Agreement by the
Company, which breach is not cured within fifteen (15) days after
written notice thereof is received by the Company.
(t) "Incumbent Board" - as defined in Section 6.1(k)(iii);
(u) "1996 Executive Bonus Plan" - as defined in Section 2.2.
(v) "Non-Competition Period" - as defined in Section 5.9(a);
(w) "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision of this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated. Each Notice of Termination shall be delivered at least 30 days prior
to the effective date of termination;
(x) "Retirement" shall mean normal retirement at age 65;
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(y) "Senior Executives" shall mean the chief executive officer
and the four most highly compensated executive officers of the Company
determined in accordance with the rules and regulations of the Securities and
Exchange Commission under the Exchange Act;
(z) "Termination" shall mean the termination of Executive's
employment hereunder other than upon expiration of the term of such employment
in accordance with Section 1.3;
(aa) "Total Disability" shall mean Executive's failure
substantially to perform his duties hereunder on a full-time basis for a period
exceeding 180 consecutive days or for periods aggregating more than 180 days
during any twelve-month period as a result of incapacity due to physical or
mental illness. If there is a dispute as to whether Executive is or was
physically or mentally unable to perform his duties under this Agreement, such
dispute shall be submitted for resolution to a licensed physician agreed upon by
the Board and Executive, or if an agreement cannot be promptly reached, the
Board and Executive shall promptly select a physician, and if these physicians
cannot agree, the physicians shall promptly select a third physician whose
decision shall be binding on all parties. If such a dispute arises, Executive
shall submit to such examinations and shall provide such information as such
physician(s) may request, and the determination of the physician(s) as to
Executive's physical or mental condition shall be binding and conclusive.
Notwithstanding the foregoing, if Executive participates in any group disability
plan provided by the Company which offers long-term disability benefits, "Total
Disability" shall mean total disability as defined therein.
6.2 Key Man Insurance. The Company shall have the right, in its sole
discretion, to purchase "key man" insurance on the life of Executive. The
Company shall be the owner and beneficiary of any such policy. If the Company
elects to purchase such a policy, Executive shall take such physical
examinations and supply such information as may be reasonably requested by the
insurer.
6.3 Mitigation of Damages; No Set-Off; Dispute Resolution. (a)
Executive shall be required to mitigate the amount of any payment provided for
in this Agreement (other than payments received pursuant to Section 4.4 hereof)
by seeking other employment.
(b) If there shall be any dispute between the Company and
Executive (i) in the event of any termination of Executive's employment by the
Company, whether such termination was for Cause, or (ii) in the event of any
termination of employment by Executive, whether Good Reason existed, or (iii)
otherwise arising out of this Agreement, the dispute shall be resolved in
accordance with the dispute resolution procedures set forth in Exhibit D hereto,
the provisions of which are incorporated as a part hereof, and the parties
hereto hereby agree that such dispute resolution procedures shall be the
exclusive method for resolution of disputes under this Agreement; provided,
however, that (1) either party may seek preliminary judicial relief if, in its
judgment, such action is necessary to avoid irreparable injury during the
pendency of such procedures, and (2) nothing in Exhibit D shall prevent either
party from exercising the rights of termination set forth in this Agreement. In
the event of a dispute hereunder as to whether a termination by the Company was
for Cause or by the Executive for Good Reason, until there is a resolution and
award as provided in
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Exhibit D, the Company shall pay all amounts, and provide all benefits, to
Executive and/or Executive's family or other beneficiaries, as the case may be,
that the Company would be required to pay or provide hereunder as though such
termination were by the Company without Cause or by Executive for Good Reason
and shall pay the reasonable legal fees and expenses of counsel for Executive in
connection with such dispute resolution; provided, however, that the Company
shall not be required to pay any disputed amounts or any legal fees and expenses
pursuant to this subparagraph (b) except upon receipt of a written undertaking
by or on behalf of Executive (and/or Executive's family or other beneficiaries,
as the case may be) to repay, without interest or penalty, as soon as
practicable after completion of the dispute resolution (A) all such amounts to
which Executive (or Executive's family or other beneficiaries, as the case may
be) is ultimately adjudged not be entitled with respect to the payment of such
disputed amount(s) and (B) in addition, in the case of legal fees and expenses,
a proportionate amount of legal fees and expenses attributable to any of
Executive's claim(s) (or any of Executive's defenses or counter-claims(s)), if
any, which shall have been found by the dispute resolver to have been frivolous
or without merit. IT IS EXPRESSLY UNDERSTOOD THAT BY SIGNING THIS AGREEMENT,
WHICH INCORPORATES BINDING ARBITRATION, THE COMPANY AND EXECUTIVE AGREE, EXCEPT
AS SPECIFICALLY PROVIDED OTHERWISE IN SECTION 5.11 AND THIS SECTION 6.3(b), TO
WAIVE COURT OR JURY TRIAL AND TO WAIVE PUNITIVE, STATUTORY, CONSEQUENTIAL AND
ANY DAMAGES OTHER THAN COMPENSATORY DAMAGES.
6.4 Successors; Binding Agreement. This Agreement shall be binding upon
any successor to the Company and shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, beneficiaries,
designees, executors, administrators, heirs, distributees, devisees and
legatees.
6.5 Modification; No Waiver. This Agreement may not be modified or
amended except by an instrument in writing signed by the parties hereto. No term
or condition of this Agreement shall be deemed to have been waived, nor shall
there be any estoppel against the enforcement of any provision of this
Agreement, except by written instrument by the party charged with such waiver or
estoppel. No such written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall operate only as to the
specific term or condition waived and shall not constitute a waiver of such term
or condition for the future or as to any other term or condition.
6.6 Severability. The covenants and agreements contained herein are
separate and severable and the invalidity or unenforceability of any one or more
of such covenants or agreements, if not material to the employment arrangement
that is the basis for this Agreement, shall not affect the validity or
enforceability of any other covenant or agreement contained herein. If, in any
judicial proceeding, a court shall refuse to enforce one or more of the
covenants or agreements contained herein because the duration thereof is too
long, or the scope thereof is too broad, it is expressly agreed between the
parties hereto that such duration or scope shall be deemed reduced to the extent
necessary to permit the enforcement of such covenants or agreements.
6.7 Notices. All the notices and other communications required or
permitted hereunder shall be in writing and shall be delivered personally or
sent by registered or certified mail, return receipt requested, to the parties
hereto at the following addresses:
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If to the Company, to it at:
MicroAge, Inc.
2308 South 55th Street
Tempe, Arizona 85282
Attn: Chief Executive Officer
With a copy to:
Matthew P. Feeney
Snell & Wilmer L.L.P.
One Arizona Center
Phoenix, Arizona 85004-0001
If Executive, to him at:
James R. Daniel
3858 East Cholla Lane
Phoenix, Arizona 85028
6.8 Assignment. This Agreement and any rights hereunder shall not be
assignable by either party without the prior written consent of the other party
except as otherwise specifically provided for herein.
6.9 Entire Understanding. This Agreement (together with the Exhibit
incorporated as a part hereof) constitutes the entire understanding between the
parties hereto and no agreement, representation, warranty or covenant has been
made by either party except as expressly set forth herein.
6.10 Executive's Representations. Executive represents and warrants
that neither the execution and delivery of this Agreement nor the performance of
his duties hereunder violates the provisions of any other agreement to which he
is a party or by which he is bound.
6.11 Liability of Company with Respect to Insurance Policy. Executive
has selected the insurer and policy referred to in Section 2.4(a) hereof, and
the Company shall not have any liability to Executive (or his beneficiaries)
should the insurance company which issues the policy referred to therein fail or
refuse to pay (whether voluntarily or by reason of any order, injunction or
otherwise) thereunder or if any rights or elections otherwise available to
Executive thereunder are restricted or eliminated.
6.12 Governing Law. This Agreement shall be construed in accordance
with and governed for all purposes by the laws of the State of Arizona
applicable to contracts executed and wholly performed within such state.
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Company:
MICROAGE, INC.
By: /s/ Jeffrey D. McKeever
----------------------------------
Name: Jeffrey D. McKeever
--------------------------------
Title: Chairman and CEO
-------------------------------
Executive:
JAMES R. DANIEL
/s/ James R. Daniel
--------------------------------------
20
<PAGE>
EXHIBIT A
---------
SPLIT DOLLAR AGREEMENT
----------------------
<PAGE>
EXHIBIT B
---------
EXECUTIVE'S RIGHTS
------------------
None
<PAGE>
EXHIBIT C
---------
EXECUTIVE'S EXISTING OBLIGATIONS AND CLAIMS
-------------------------------------------
None
<PAGE>
EXHIBIT D
---------
DISPUTE RESOLUTION PROCEDURES
-----------------------------
A. If a controversy should arise which is covered by Section 6.3 of
Article VI, then not later than twelve (12) months from the date of the event
which is the subject of dispute either party may serve on the other a written
notice specifying the existence of such controversy and setting forth in
reasonably specific detail the grounds thereof ("Notice of Controversy");
provided that, in any event, the other party shall have at least thirty (30)
days from and after the date of the Notice of Controversy to serve a written
notice of any counterclaim ("Notice of Counterclaim"). The Notice of
Counterclaim shall specify the claim or claims in reasonably specific detail. If
the Notice of Controversy or the Notice of Counterclaim, as the case may be, is
not served within the applicable period, the claim set forth therein will be
deemed to have been waived, abandoned and rendered unenforceable.
B. Following receipt of the Notice of Controversy (or the Notice of
Counterclaim, as the case may be), there shall be a three week period during
which the parties will make a good faith effort to resolve the dispute through
negotiation ("Period of Negotiation"). Neither party shall take any action
during the Period of Negotiation to initiate arbitration proceedings.
C. If the parties should agree during the Period of Negotiation to
mediate the dispute, then the Period of Negotiation shall be extended by an
amount of time to be agreed upon by the parties to permit such mediation. In no
event, however, may the Period of Negotiation be extended by more than five
weeks or, stated differently, in no event may the Period of Negotiation be
extended to encompass more than a total of eight weeks.
D. If the parties agree to mediate the dispute but are thereafter
unable to agree within a week on the format and procedures for the mediation,
then the effort to mediate shall cease, and the Period of Negotiation shall
terminate four weeks from the Notice of Controversy (or the Notice of
Counterclaim, as the case may be).
E. Following the termination of the Period of Negotiation, the dispute
(including the main claim and counterclaim, if any) shall be settled by
arbitration, governed by the Federal Arbitration Act, 9 U.S.C. ss. 1 et seq.
("FAA"), and judgment upon the award may be entered in any court having
jurisdiction thereof. The format and procedures of the arbitration are set forth
below (referred to below as the "Arbitration Agreement").
F. A notice of intention to arbitrate ("Notice of Arbitration") shall
be served within 45 days of the termination of the Period of Negotiation. If the
Notice of Arbitration is not served within this period, the claim set forth in
the Notice of Controversy (or the Notice of Counterclaim, as the case may be)
will be deemed to have been waived, abandoned and rendered unenforceable.
G. The arbitration, including the Notice of Arbitration, will be
governed by the Commercial Rules of the American Arbitration Association ("AAA")
in effect on the date of the
<PAGE>
Notice of Arbitration, except that the terms of this Arbitration Agreement shall
control in the event of any difference or conflict between such Rules and the
terms of this Arbitration Agreement.
H. The arbitrator shall reach a decision on the merits on the basis of
applicable legal principles as embodied in the law of the State of Arizona. The
arbitration hearing shall take place in Phoenix, Arizona.
I. There shall be one arbitrator, regardless of the amount in
controversy. The arbitrator selected, in order to be eligible to serve, shall be
a lawyer in Phoenix, Arizona with at least 15 years specializing in either
general commercial litigation or general corporate and commercial matters. In
the event the parties cannot agree on a mutually acceptable single arbitrator
from the list submitted by the AAA, the AAA shall appoint the arbitrator who
shall meet the foregoing criteria.
J. At the time of appointment and as a condition thereto, the
arbitrator will be apprised of the time limitations and other provisions of this
Arbitration Agreement and shall indicate such dispute resolver's agreement to
the Tribunal Administrator to comply with such provisions and time limitations.
K. During the 30 day period following appointment of the arbitrator,
either party may serve on the other a request for limited numbers of documents
directly related to the dispute. Such documents will be produced within seven
(7) days of the request.
L. Following the thirty-day period of document production, there will
be a forty-five day period during which limited depositions will be permissible.
Neither party will take more than 5 depositions, and no deposition will exceed
three hours of direct testimony.
M. Disputes as to discovery or prehearing matters of a procedural
nature shall be promptly submitted to the arbitrator pursuant to telephone
conference call or otherwise. The arbitrator shall make every effort to render a
ruling on such interim matters at the time of the hearing (or conference call)
or within five business days thereafter.
N. Following the period of depositions, the arbitration hearing shall
promptly commence. The arbitrator will make every effort to commence the hearing
within thirty days of the conclusion of the deposition period and, in addition,
will make every effort to conduct the hearing on consecutive business days to
conclusion.
O. An award will be rendered, at the latest, within nine months of the
date of the Notice of Arbitration and within thirty days of the close of the
arbitration hearing. The award shall set forth the grounds for the decision
(findings of fact and conclusions of law) in reasonably specific detail and
shall also specify whether any claim (or defense or counter-claim) of Executive
is found to be frivolous or without merit and what proportion, if any, of his
legal fees and expenses which have been paid by the Company Executive shall be
required to repay to the Company in accordance with Section 6.3(b). The award
shall be final and nonappealable except as provided in the FAA and except that a
court of competent jurisdiction shall have the power to review whether, as a
matter of law, based upon the findings of fact by the arbitrator, the award
should be confirmed or should be
<PAGE>
modified or vacated in order to correct any errors of law made by the
arbitrator. Such judicial review shall be limited to issues of law, and the
parties agree that the findings of fact made by the arbitrator shall be final
and binding on the parties and shall serve as the facts to be relied upon by the
court in determining the extent to which the award should be confirmed, modified
or vacated.
The award may only be made for compensatory damages, and if any other
damages (whether exemplary, punitive, consequential, statutory or other) are
included, the award shall be vacated and remanded, or modified or corrected, as
appropriate to promote this damage limitation; provided, however, that an award
in favor of the Company shall include the relief set forth in Section 5.11.
MICROAGE, INC.
1994 MANAGEMENT EQUITY PROGRAM
AWARD AGREEMENT
December 9, 1993
Dear Jim:
Pursuant to the action taken by the Board of Directors of
MicroAge, Inc. (the "Company") and the Compensation Committee of the Board of
Directors, you are hereby offered participation in the 1994 Management Equity
Program (the "1994 MEP") under the MicroAge, Inc. Long-Term Incentive Plan (the
"Plan"). Under the 1994 MEP, you have the opportunity to receive options to
restructure your compensation package to some extent. Essentially, you may elect
to purchase shares of the common stock of the Company if you irrevocably elect
to waive (1) all or a portion of your 1993 fiscal year bonus (the "1993 Bonus"),
and (2) a portion of your base salary and any bonuses you may receive for the
1994, 1995, and 1996 calendar years, and later years if necessary, under the
following terms and conditions.
BEFORE YOU ELECT TO PARTICIPATE IN THE 1994 MEP, READ THIS AWARD AGREEMENT. YOU
WILL BE REQUIRED TO SIGN THIS AWARD AGREEMENT AND YOUR SIGNATURE WILL EVIDENCE
THAT YOU HAVE READ THIS AWARD AGREEMENT, UNDERSTAND IT, AND AGREE WITH ITS TERMS
AND CONDITIONS.
TO PARTICIPATE IN THE 1994 MEP, YOU MUST COMPLETE AND SIGN THIS AWARD AGREEMENT
AND RETURN IT TO CRAIG CANTONI BY 12:00 P.M. NOON ON TUESDAY, DECEMBER 14, 1993.
1. EFFECTIVE DATE. The effective date of your participation in
the 1994 MEP is December 14, 1993.
2. STOCKHOLDER APPROVAL. The 1994 MEP is subject to
stockholder approval of the Plan, which will be sought at the 1994 Annual
Meeting of Stockholders. If stockholder approval is not obtained at such
meeting, the 1994 MEP will be deemed to have never been implemented and the
options thereunder will be deemed to have never been granted.
3. 1993 BONUS WAIVER. You hereby elect to waive all or a
portion of your 1993 Bonus in the amount specified in the table below, subject
to the limitation described in footnote 6 below.
1993 BONUS WAIVER(1)
================================================================================
1993 Bonus Waived 1994 Salary Credit Amount(2) Bonus Credit Amount(3)
- --------------------------------------------------------------------------------
$104,000 $39,000 $65,000
================================================================================
- ------------------------
1 You are not required to waive any of your 1993 Bonus as a condition to
participate in the 1994 MEP. Any part of your 1993 Bonus that you elect to waive
will be credited against your 1994 salary waiver amount (up to the amount of the
Salary Credit Amount) and your 1994 bonus waiver amount, in that order. This
"credit" can be carried forward beyond 1994. See Example A attached to this
Award Agreement.
2 You may insert any amount from $0 to $39,000 (15% of your Current Base
Salary).
3 Computed by subtracting the Salary Credit Amount from the 1993 Bonus
Waived.
<PAGE>
4. 1994-1996 WAIVER. You hereby elect to waive a portion of
your salary and bonuses for the 1994, 1995, and 1996 calendar years in the
amounts specified in the tables below (please understand that bonuses for later
years may be automatically waived, as may be necessary to make up any deficit
(see footnote 5)):
1994-1996 WAIVER TABLE
================================================================================
Year Salary(4) Bonus(5) Total
1994 $39,000 $65,000 $104,000(6)
1995 $13,000 $65,000 $78,000
1996 $13,000 $65,000 $78,000
1993-1996 $65,000 $195,000 $260,000(7)
========
================================================================================
5. NUMBER OF OPTIONS GRANTED. In exchange for electing to
waive the amount of compensation specified in the 1994-1996 Waiver Table in
Paragraph 4, above, you are hereby granted an option to purchase the number of
shares of MicroAge, Inc. Common Stock calculated pursuant to the formula below
(to be completed by MicroAge):
(1) Total Compensation Waived (1994-1996): $260,000
-------
(2) $260,000 (Total Compensation Waived)
Multiplied by Ten (10): $2,600,000
----------
(3) Common Stock Closing Price
Effective Date (December 14, 1993)
(the "Common Stock Price"): $24.83
------
(4) Total Options Granted (2) / (3) (rounded up): 104,698
(See Example C attached to this Award Agreement) -------
- -------------------------
4 The minimum annual salary waiver amount is $13,000 (5% of your Current
Base Salary). The maximum annual salary waiver amount is $39,000 (15% of your
Current Base Salary).
5 There is no minimum annual bonus waiver amount. The maximum annual bonus
waiver amount is $65,000 (25% of your Current Base Salary). If the bonus amount
you elect to waive in any year is more than the bonus actually paid to you for
that year (and you do not have a Bonus Credit Amount to apply to the deficit),
the deficit amount will be added to your bonus waiver amount for the following
year. Deficit amounts will continue to be carried forward until made up or until
December 14, 2002. See Example B attached to this Award Agreement.
6 The amount of your 1993 Bonus that you may waive cannot exceed this
number. See Example A attached to this Award Agreement.
7 The minimum waiver amount (salary and bonuses combined) for the
three-year period (1994-1996) is $130,000 (50% of your Current Base Salary).
-2-
<PAGE>
6. VESTING OF OPTIONS. Your options will vest in one-third
(1/3) increments beginning on the January 1 which is three years following the
January 1 of the calendar year for each year you elect to waive base salary
and/or bonus amounts. Any amount of your 1993 Bonus that you elect to waive will
be used as a credit against future waiver amounts and will be deemed to be
waived in the year that such credit is taken. HOWEVER, your options will not
fully vest until you have actually waived all of the compensation you agreed to
waive.
FOR EXAMPLE, the options to be purchased with the
compensation you waive in 1994 will vest in 1/3 increments beginning on January
1, 1997 and will be 100% vested on January 1, 1999. Correspondingly, the options
to be purchased with the compensation you waive in 1995 will vest in 1/3
increments beginning on January 1, 1998 and will be 100% vested on January 1,
2000, and so on.
If you elect to waive a specific amount of your
bonuses for the next three years, but do not receive bonuses for the next three
years sufficient to cover the amount you agreed to waive (and you do not have a
Bonus Credit Amount to apply against the deficit), the bonuses you may be
otherwise entitled to receive in later years (up through December 13, 2002) will
be used to make up any shortfall on a "first-in, first-out" theory. See Example
D attached to this Award Agreement.
Notwithstanding the above, your options will become
fully vested and exercisable as of December 14, 2002, unless you otherwise
terminate employment before such date.
7. EXPIRATION OF OPTIONS. Subject to Section 8 and 9 of this
Award Agreement, your options will expire, unless sooner exercised, on December
14, 2003.
8. TERMINATION OF EMPLOYMENT
Death. Upon your death, your beneficiary will be
entitled to receive the number of options determined by multiplying the sum of
your compensation actually waived up to the date of your death by ten and
dividing the product by the Common Stock Price; provided, however, that only the
total compensation waived by you up to the date of your death will be
considered. All options received by your beneficiary will be fully vested and
immediately exercisable. Your beneficiary will have up to one year from the date
of your death to exercise the options. After that one year period, the options
will be cancelled. Under no circumstances will you or your beneficiary be
entitled to receive cash equal to all or any portion of the compensation you
elected to waive under the 1994 MEP.
Disability. Upon your termination of employment due
to a "Disability" (as that term is defined in the Plan) you will be entitled to
receive the number of options determined by multiplying the sum of your
compensation actually waived up to the date of your termination by ten and
dividing the product by the Common Stock Price; provided, however, that only the
total compensation waived by you up to the date of your termination will be
considered. All options received will be fully vested and immediately
exercisable. You will have up to one year from the date of termination of
employment to exercise the options. After that one year period, the options will
be cancelled. Under no circumstances will you be entitled to receive cash equal
to all or any portion of the compensation you elected to waive under the 1994
MEP.
Voluntary or Involuntary. Upon your voluntary or
involuntary termination of employment, you will be entitled to receive the
number of options determined by multiplying the sum of your compensation
actually waived up to the date of your termination by ten and dividing the
product by the Common Stock Price; provided, however, that only the total
compensation waived by you up to the date of termination of employment will be
considered. Your options will continue to vest under the above vesting schedule
as if you continued to be employed by the Company and continued participating in
the 1994 MEP. Under no circumstances will you be entitled to receive cash equal
to all or any portion of the compensation you elected to waive under the 1994
MEP.
-3-
<PAGE>
9. TERMINATION OF 1994 MEP. If the Committee decides to
terminate the 1994 MEP, you will be entitled to receive a number of options
determined by multiplying the sum of your compensation actually waived up to the
date of your termination by ten and dividing the product by the Common Stock
Price; provided, however, that only the total compensation waived by you up to
the date of termination will be considered. All options received will be fully
vested and immediately exercisable. You will have up to thirty days from the
date of such termination to exercise the options. After such thirty day period,
the options will be cancelled. Under no circumstances will you be entitled to
receive cash equal to all or any portion of the compensation you elected to
waive under the 1994 MEP.
10. CHANGE OF CONTROL. Upon a "Change of Control" (as that
term is defined in the Plan), the terms of Section 13.10 and 14.2 of the Plan
will apply to all options issued under the 1994 MEP. Upon a Change of Control,
you will be entitled to receive the number of options determined by multiplying
the sum of your compensation actually waived up to the date of the Change of
Control by ten and dividing the product by the Common Stock Price; provided,
however, that only the total compensation waived by you up to the date of the
Change of Control will be considered. All options will be fully vested and
immediately exercisable. In the event of a dissolution or liquidation of the
Company or a merger or consolidation in which the Company would not be the
surviving or resulting corporation, you will be entitled to receive the number
of options determined by multiplying the sum of your compensation actually
waived up to the date of exercise by ten and dividing the product by the Common
Stock Price; provided, however, that only the total compensation waived by you
up to the date of exercise will be considered. All options will be fully vested
and exercisable (a) in the case of a dissolution or liquidation, at anytime
after the Company's Board of Directors takes action authorizing the dissolution
or liquidation of the Company or (b) in the case of a merger or consolidation in
which the Company would not be the resulting or surviving corporation, upon the
Company's public announcement that a definitive agreement regarding such a
merger or consolidation has been reached. Under no circumstances will you be
entitled to receive cash equal to all or any portion of the compensation you
elected to waive under the 1994 MEP.
11. COMPANY INFORMATION. By signing this Award Agreement, you
acknowledge that you have been given, or were offered, a copy of the Company's
Annual Report on Form 10-K for the fiscal year ended September 30, 1993 (the
"1993 10-K"), and that you were given an opportunity to ask questions of any of
the Company's executive officers (as disclosed on page 7 of the 1993 10-K)
regarding the 1993 10- K or any other matter regarding the Company.
12. RISK OF INVESTMENT. By signing this Award Agreement, you
recognize that your participation in the 1994 MEP is a speculative investment in
that the success or failure of your investment depends on the market value of
the Company's Common Stock over a several year period. You further recognize
that all or a portion of your investment (i.e., your salary and bonus waiver)
may be lost. You also acknowledge that you were given the opportunity to consult
with your personal advisor(s) regarding the 1994 MEP.
I hereby elect to participate in the 1994 MEP under the terms
and conditions set forth above and acknowledge that I have read and understood
the terms and conditions of the 1994 MEP.
ACCEPTED:
MICROAGE, INC.
SIGNATURE /s/James R. Daniel BY /s/Jeffrey D. McKeever
------------------------- -------------------------
DATE 12/12/93 ITS Chairman and CEO
------------------------- ------------------------------
SSN ###-##-####
-------------------------
-4-
FIRST AMENDMENT TO THE
MICROAGE 1994 MANAGEMENT EQUITY PROGRAM
AWARD AGREEMENT FOR
JAMES R. DANIEL
THIS FIRST AMENDMENT to the Award Agreement dated December 14, 1993
("Award Agreement"), is entered into by MicroAge, Inc. ("Company"), and James R.
Daniel ("Executive") pursuant to the Management Equity Plan ("MEP") under the
MicroAge, Inc. Long-Term Incentive Plan ("Plan"), as of December 14, 1995.
WHEREAS, the Company and the Executive entered into the Award Agreement
effective December 14, 1993, to enable the Executive to acquire an option to
purchase Company stock by making salary deferrals; and
WHEREAS, the exercise price of the option to purchase Company common
stock, $.01 par value ("Common Stock"), under the Award Agreement is $24.83 per
share, after giving effect to a 3-for-2 stock split that was payable on January
13, 1994; and
WHEREAS, the closing price of the Common Stock on the Nasdaq National
Market on December 13, 1995, was $8.75 per share; and
WHEREAS, in order to provide a meaningful incentive for the Executive
under the MEP, the Compensation Committee of the Company's Board of Directors
has reduced the exercise price under the Award Agreement to the current fair
market value of the Common Stock.
NOW THEREFORE, the Executive and the Company agree as follows:
1. Paragraph 5 of the Award Agreement is hereby amended
and restated in its entirety as follows:
<PAGE>
5. NUMBER OF OPTIONS GRANTED. In exchange for electing to waive
the amount of compensation specified in the 1994-1996 Waiver Table in Paragraph
4, above, you are hereby granted an option to purchase the number of shares of
MicroAge, Inc. Common Stock calculated pursuant to the formula below:
(1) TOTAL COMPENSATION WAIVED (1994-1996) $260,000
(2) $260,000 (TOTAL COMPENSATION WAIVED)
MULTIPLIED BY 3.5234903 (THE "LEVERAGING
FACTOR") $916,107
(3) COMMON STOCK CLOSING PRICE ON DECEMBER
13, 1995 (THE "COMMON STOCK PRICE") $8.75
(4) TOTAL OPTIONS GRANTED (2) / (3) 104,698
2. Paragraphs 8, 9, and 10 of the Award Agreement shall
be amended by deleting the references to the number "ten" and replacing such
reference with the phrase "the Leveraging Factor."
3. This First Amendment shall be effective as December
14, 1995.
MICROAGE, INC.
By: /s/Jeffrey D. McKeever
----------------------------------
Jeffrey D. McKeever
Chairman of the Board and
Chief Executive Officer
/s/James R. Daniel
----------------------------------
James R. Daniel
2
AMENDED and RESTATED
EMPLOYMENT AGREEMENT
dated as of November 4, 1996
by and between
MICROAGE, INC.
and
ROBERT G. O'MALLEY
<PAGE>
TABLE OF CONTENTS
ARTICLE I--DUTIES AND TERM................................................... 1
1.1 Employment................................................. 1
1.2 Position and Responsibilities.............................. 1
1.3 Term....................................................... 2
1.4 Location................................................... 2
ARTICLE II--COMPENSATION..................................................... 2
2.1 Base Salary................................................ 2
2.2 Bonus Payment.............................................. 3
2.3 Stock Options.............................................. 3
2.4 Additional Benefits........................................ 3
ARTICLE III--TERMINATION OF EMPLOYMENT....................................... 4
3.1 Death or Retirement of Executive........................... 4
3.2 By Executive............................................... 4
3.3 By Company................................................. 5
ARTICLE IV--COMPENSATION UPON TERMINATION OF EMPLOYMENT...................... 5
4.1 Upon Termination for Death or Disability................... 5
4.2 Upon Termination by Company for Cause or
by Executive Without Good Reason........................... 6
4.3 Upon Termination by the Company Without
Cause or by Executive for Good Reason
Prior to a Change in Control............................... 6
4.4 Upon Termination by the Company Without
Cause Following a Change in Control or by
Executive for Good Reason Following a
Change in Control or Pursuant to a Change
in Control Resignation..................................... 7
ARTICLE V--RESTRICTIVE COVENANTS............................................. 8
5.1 Confidential Information and Materials..................... 8
5.2 General Knowledge.......................................... 9
5.3 Executive Obligations as to Confidential
Information and Materials.................................. 9
5.4 Inform Subsequent Employers................................ 10
5.5 Ideas and Inventions....................................... 10
5.6 Inventions and Patents..................................... 10
5.7 Copyrights................................................. 11
5.8 Conflicting Obligations and Rights......................... 11
5.9 Non-Competition............................................ 11
5.10 Non-Disparagement.......................................... 13
5.11 Remedies................................................... 13
5.12 Scope of Article........................................... 13
i
<PAGE>
ARTICLE VI--MISCELLANEOUS.................................................... 14
6.1 Definitions................................................ 14
6.2 Key Man Insurance.......................................... 18
6.3 Mitigation of Damages; No Set-Off; Dispute
Resolution................................................. 18
6.4 Successors; Binding Agreement.............................. 19
6.5 Modification; No Waiver.................................... 19
6.6 Severability............................................... 19
6.7 Notices.................................................... 20
6.8 Assignment................................................. 20
6.9 Entire Understanding....................................... 20
6.10 Executive's Representations................................ 20
6.11 Liability of Company with Respect to
Insurance Policy........................................... 20
6.12 Governing Law.............................................. 20
EXHIBIT A--SPLIT DOLLAR AGREEMENT
EXHIBIT B--EXECUTIVE'S RIGHTS
EXHIBIT C--EXECUTIVE'S EXISTING OBLIGATIONS AND CLAIMS
EXHIBIT D--DISPUTE RESOLUTION PROCEDURES
ii
<PAGE>
EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement") made and
entered into as of November 4, 1996, by and between MICROAGE, INC., a Delaware
corporation (the "Company"), and ROBERT G. O'MALLEY ("Executive").
R E C I T A L S:
- - - - - - - -
WHEREAS, the Company and Executive entered into an Employment Agreement
on September 1, 1995 (the "Employment Agreement"); and
WHEREAS, pursuant to Section 6.5 of the Employment Agreement, the
Employment Agreement may be amended only by a written document signed by each of
the parties thereto; and
WHEREAS, the Company and Executive desire to amend and restate the
Employment Agreement.
NOW, THEREFORE, in consideration of the premises, and for other
valuable consideration, the sufficiency of which is hereby acknowledged by each
of the parties hereto, the parties hereby agree as follows:
A G R E E M E N T:
- - - - - - - - -
ARTICLE I
DUTIES AND TERM
1.1 Employment. In consideration of their mutual covenants and other
good and valuable consideration, the receipt, adequacy and sufficiency of which
is hereby acknowledged, the Company agrees to hire Executive, and Executive
agrees to remain in the employ of the Company, upon the terms and conditions
herein provided.
1.2 Position and Responsibilities.
(a) Executive shall serve as President of MicroAge, Inc. (or
in a capacity and with a title of at least substantially equivalent quality)
reporting directly to the Chief Executive Officer of the Company. Executive
agrees to perform services not inconsistent with his position as shall from time
to time be assigned to him by the Chief Executive Officer.
(b) Executive further agrees to serve, if elected, as a
director of the Company and as an officer or director of any subsidiary or
affiliate of the Company.
<PAGE>
(c) During the period of his employment hereunder, Executive
shall devote substantially all of his business time, attention, skill and
efforts to the faithful performance of his duties hereunder.
1.3 Term. The term of Executive's employment under this Agreement shall
commence on the date first above written and shall continue, unless sooner
terminated, until November 1, 1998; provided, however, that commencing on
November 4, 1996 and on each subsequent day thereafter, the Executive's term of
employment shall automatically be extended without further action by the Company
or Executive for the twenty-four (24) month period commencing on each such day.
1.4 Location. During the period of his employment under this Agreement,
Executive shall not be required, except with his prior written consent, to
relocate his principal place of employment outside Maricopa County, Arizona.
Required travel on the Company's business shall not be deemed a relocation so
long as Executive is not required to provide his services hereunder outside of
Maricopa County, Arizona, for more than fifty (50%) percent of his working days
during any consecutive six (6) month period.
ARTICLE II
COMPENSATION
For all services rendered by Executive in any capacity during his
employment under this Agreement, including, without limitation, services as a
director, officer or member of any committee of the Board of the Company or of
the board of directors of any subsidiary or affiliate of the Company, the
Company shall compensate Executive as follows:
2.1 Base Salary. The Company shall pay to Executive an annual base
salary of not less that $340,000 (such amount, less any salary waivers under the
1994 Management Equity Program or any subsequent management equity or other
waiver program adopted by the Company is hereinafter referred to as the "Base
Salary") during the term hereof; provided, however, that in the event the
Company institutes a salary reduction program which affects all exempt employees
(as defined by standard Company policies in compliance with the Fair Labor
Standards Act) by the same percentage, then Executive's Base Salary may be
reduced by such percentage (and the term "Base Salary" as used in this Agreement
shall refer to Base Salary as so adjusted). Executive's Base Salary shall be
paid in equal semi-monthly installments. The Base Salary shall be reviewed
annually by the Board or a committee designated by the Board and the Board or
such committee may, in its discretion, increase the Base Salary.
2.2 Bonus Payments.
(a) During the period of Executive's employment under this
Agreement, the Company shall pay to Executive annually a fixed cash bonus equal
to $ and, in addition, such amount as may be necessary after payment by the
Executive of all taxes, including, without limitation, any federal or state
income taxes, on such fixed cash bonus payment, so that Executive shall have
remaining, on a grossed-up basis, the amount of $ (the "Annual Fixed Cash
Bonus").
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(b) During the period of Executive's employment under this
Agreement, Executive shall, in addition to the Annual Fixed Cash Bonus, be
entitled to bonus payments, if any shall be due, pursuant to the Executive Bonus
Plan which has been established by resolution of the Board for fiscal year 1996
(the "1996 Executive Bonus Plan"). The Company shall use all reasonable efforts
to cause the Board or a committee thereof to establish in each fiscal year
during the term hereof an executive bonus plan that is similar to the 1996
Executive Bonus Plan in providing for incentive compensation to Executive based
on a formula related to the Company's profits during such fiscal year. Any bonus
under the 1996 Executive Bonus Plan or any such subsequent plan, less any bonus
waivers under the 1994 Management Equity Program or any subsequent management
equity or other waiver program adopted by the Company, is referred to herein as
the "Annual Incentive Bonus."
2.3 Stock Options. The Company shall use all reasonable efforts to
establish and maintain one or more stock option plans in which Executive shall
be entitled to participate to the same extent as other Senior Executives (as
such term is defined in Section 6.1 hereof). The terms and conditions of such
plan(s) shall be determined and administered by the Board or a committee
thereof.
2.4 Additional Benefits. Executive shall be entitled to participate in
all employee benefit and welfare programs, plans and arrangements (including,
without limitation, pension, profit sharing, supplemental pension and other
retirement plans, insurance, hospitalization, medical and group disability
benefits, travel or accident insurance plans) and to receive fringe benefits,
such as dues and fees of professional organizations and associations, which are
from time to time available to the Company's executive personnel; provided,
however, there shall be no duplication of termination or severance benefits, and
to the extent that such benefits are specifically provided by the Company to
Executive under other provisions of this Agreement, the benefits available under
the foregoing plans and programs shall be reduced by any benefit amounts paid
under such other provisions. Executive shall during the period of his employment
hereunder continue to be provided with benefits at a level which shall in no
event be less in any material respect than the benefits made available to
Executive by the Company as of the date of this Agreement. Notwithstanding the
foregoing, the Company may terminate or reduce benefits under any benefit plans
and programs to the extent such reductions apply uniformly to all Senior
Executives entitled to participate therein, and Executive's benefits shall be
reduced or terminated accordingly. Specifically, without limitation, Executive
shall receive the following benefits:
(a) Death Benefit. The Company and Executive have entered into
a Split Dollar Insurance Agreement, dated as of September 1, 1995, a copy which
is attached hereto as Exhibit A.
(b) Short-Term Disability Benefits. In the event of
Executive's failure substantially to perform his duties hereunder on a full-time
basis for a period not exceeding 180 consecutive days or for periods aggregating
not more than 180 days during any twelve-month period as a result of incapacity
due to physical or mental illness, the Company shall continue to pay the Base
Salary to Executive during the period of such incapacity, but only in the
amounts and to the
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extent that disability benefits payable to Executive under Company-sponsored
insurance policies are less than Executive's Base Salary.
(c) Relocation Expenses. In the event Executive's principal
place of employment is relocated by mutual consent of the parties outside
Maricopa County, Arizona, the Company shall reimburse Executive for all usual
relocation expenses incurred by Executive and his household in moving to the new
location, including, without limitation, moving expenses and rental payments for
temporary living quarters in the area of relocation for a period not to exceed
six months.
(d) Reimbursement of Business Expenses. The Company shall, in
accordance with standard Company policies, pay, or reimburse Executive for, all
reasonable travel and other expenses incurred by Executive in performing his
obligations under this Agreement.
(e) Vacations. Executive shall be entitled to 20 business
days, excluding Company holidays, of paid vacation during each year of
employment hereunder which he shall earn in arrears (i.e., Executive shall be
entitled to no vacation days during his first year of employment). Executive may
accrue and carry forward no more than five unused vacation days from any
particular year of his employment under this Agreement to the next.
ARTICLE III
TERMINATION OF EMPLOYMENT
3.1 Death or Retirement of Executive. Executive's employment under this
Agreement shall automatically terminate upon the death or Retirement (as defined
in Section 6.1) of Executive.
3.2 By Executive. Executive shall be entitled to terminate his
employment under this Agreement by giving Notice of Termination (as defined in
Section 6.1) to the Company:
(a) for Good Reason (as defined in Section 6.1);
(b) at any time commencing with the date six (6) months
following the date of a Change in Control (as defined in Section 6.1) and ending
with the date twelve months after the date of such Change in Control (a "Change
in Control Resignation"); and
(c) at any time without Good Reason.
3.3 By Company. The Company shall be entitled to terminate Executive's
employment under this Agreement by giving Notice of Termination to Executive:
I in the event of Executive's Total Disability (as defined in Section
6.1);
(a) for Cause (as defined in Section 6.1); and
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(b) at any time without Cause.
ARTICLE IV
COMPENSATION UPON TERMINATION OF EMPLOYMENT
If Executive's employment hereunder is terminated in accordance with
the provisions of Article III hereof, except for any other rights or benefits
specifically provided for herein following his period of employment, the Company
shall be obligated to provide compensation and benefits to Executive only as
follows, subject to the provisions of Section 5.11 hereof:
4.1 Upon Termination for Death or Disability. If Executive's employment
hereunder is terminated by reason of his death or Total Disability, the Company
shall:
(a) pay Executive (or his estate) or beneficiaries any Base Salary which has
accrued but not been paid as of the termination date (the "Accrued Base
Salary");
(b) pay Executive (or his estate) or beneficiaries for unused
vacation days accrued as of the termination date in an amount equal to his Base
Salary multiplied by a fraction the numerator of which is the number of accrued
unused vacation days and the denominator of which is 360 (the "Accrued Vacation
Payment");
(c) reimburse Executive (or his estate) or beneficiaries for
expenses incurred by him prior to the date of termination which are subject to
reimbursement pursuant to this Agreement (the "Accrued Reimbursable Expenses");
(d) provide to Executive (or his estate) or beneficiaries any
accrued and vested benefits required to be provided by the terms of any
Company-sponsored benefit plans or programs (the "Accrued Benefits"), together
with any benefits required to be paid or provided in the event of Executive's
death or Total Disability under applicable law;
(e) pay Executive (or his estate) or beneficiaries any Annual
Incentive Bonus with respect to a prior fiscal year which has accrued but has
not been paid; and in addition,
(f) Executive (or his estate) or beneficiaries shall have the
right to exercise all vested unexercised stock options and warrants outstanding
at the termination date in accordance with terms of the plans and agreements
pursuant to which such options or warrants were issued.
4.2 Upon Termination by Company for Cause or by Executive Without Good
Reason. If Executive's employment is terminated by the Company for Cause, or if
Executive terminates his employment with the Company other than (x) upon
Executive's death or Total Disability, (y) for Good Reason, or (z) pursuant to a
Change in Control Resignation (as defined in Section 3.2(b)), the Company shall:
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(a) pay Executive the Accrued Base Salary;
(b) pay Executive the Accrued Vacation Payment;
(c) pay Executive the Accrued Reimbursable Expenses;
(d) pay Executive the Accrued Benefits, together with any
benefits required to be paid or provided under applicable law;
(e) pay Executive any accrued Annual Fixed Cash Bonus and
Annual Incentive Bonus with respect to a prior year which has accrued but has
not been paid (together, such bonus payments are referred to herein as the
"Accrued Annual Bonus Payments"); and in addition
(f) Executive shall have the right to exercise vested options
and warrants in accordance with Section 4.1(f).
4.3 Upon Termination by the Company Without Cause or by Executive for
Good Reason Prior to a Change in Control. If Executive's employment is
terminated by the Company without Cause or by Executive for Good Reason, the
Company shall:
(a) pay Executive the Accrued Base Salary;
(b) pay Executive the Accrued Vacation Payment;
(c) pay Executive the Accrued Reimbursable Expenses;
(d) pay Executive the Accrued Benefits, together with any
benefits required to be paid or provided under applicable law;
(e) pay Executive the Accrued Annual Bonus Payments;
(f) pay Executive commencing on the thirtieth day following
the termination date twenty-four monthly payments equal to one-twelfth of the
sum of (1) Executive's Base Salary in effect immediately prior to the time such
termination occurs, plus (2) if Executive is employed with Company for more than
twelve (12) months prior to his termination by the Company without Cause or by
Executive for Good Reason prior to a Change in Control, the Annual Incentive
Bonus paid to Executive for the fiscal year (or if more than one Annual
Incentive Bonus has been paid to Executive, the average of the Annual Incentive
Bonuses paid to Executive for the two (2) fiscal years) immediately preceding
the fiscal year in which the termination occurs; provided, however, should
Executive attain alternative employment during the twenty-four month payment
period, the Company's obligations under this Section 4.3(f) will be reduced by
the amount of Executive's compensation from his new employer. For example, if
Executive were entitled to receive $____ per month for twenty-four (24) months
under this Section 4.3(f), and eight (8) months following his termination date
he finds alternative employment that pays him $____ per month, the Company
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would be obligated to pay Executive seven (7) monthly payments of $ , and
seventeen (17) monthly payments of $____ under this Section 4.3(f).
(g) maintain in full force and effect, for Executive's and his
eligible beneficiaries' continued benefit, until the first to occur of (x) his
attainment of alternative employment or (y) twenty-four (24) months following
the termination date of his employment hereunder the employee benefits provided
pursuant to Company-sponsored benefit plans, programs or other arrangements in
which Executive was entitled to participate as a full-time employee immediately
prior to such termination in accordance with Section 2.4 hereof, subject to the
terms and conditions of such plans and programs (the "Continued Benefits"). If
Executive's continued participation is not permitted under the general terms and
provisions of such plans, programs and arrangements, the Company shall arrange
to provide Executive with Continued Benefits substantially similar to those
which Executive would have been entitled to receive under such plans, programs
and arrangements; and in addition
(h) Executive shall have the right to exercise all vested
unexercised stock options and warrants in accordance with Section 4.1(f).
4.4 Upon Termination by the Company Without Cause Following a Change in
Control or by Executive for Good Reason Following a Change in Control or
Pursuant to a Change in Control Resignation. If following a Change in Control,
Executive's employment is terminated by the Company without Cause or by
Executive for Good Reason or pursuant to a Change in Control Resignation, the
Company shall:
(a) make the payments and provide to Executive the benefits
under Section 4.3 other than under Section 4.3(f) hereof; and in addition
(b) pay to Executive a lump sum payment on or prior to the
thirtieth day following the termination date of Executive's employment hereunder
in an amount equal to 200% of Executive's aggregate total compensation under
Sections 2.1 and 2.2 hereof for the fiscal year immediately prior to the fiscal
year in which the Change in Control occurs; provided, however, the total
payments received by Executive under this Section 4.4(b) plus (i) any payments
received by Executive under Section 4.4(a) which would be classified as
parachute payments and (ii) any payments or value received by Executive from
stock options which would be classified as parachute payments determined in
accordance with Prop. Reg. ss. 1.280G-1A-24(e) Examples (7) and (8) may not
exceed 299% of Executive's "Base Amount" as such term is defined in Section 280G
of the Internal Revenue Code of 1986, as amended ("Code") and the regulations
promulgated thereunder ("Regulations"). Company and Executive agree that for
purposes of making any present value calculation under this Agreement, the
Applicable Federal Rate in effect on the date this Agreement is executed shall
control as permitted by Q&A 32 of Treas. Reg. ss. 1.280G-1.
ARTICLE V
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RESTRICTIVE COVENANTS
5.1 Confidential Information and Materials. Executive hereby agrees and
acknowledges that the following ideas, information and materials in written,
oral, magnetic, photographic, optical or other form and whether now existing or
developed or created during the period of Executive's employment or engagement
with the Company (the "Confidential Information") are proprietary to the Company
and are highly sensitive in nature:
(a) Hardware. Any and all ideas, concepts, know-how,
techniques, structures, information and materials relating to the design,
development, engineering, invention, patent, patent application, manufacture or
improvement of any and all equipment, components, devices, techniques, processes
or formulas (including, without limitation, mask works, semi-conductor chips,
processors, memories, disc drives, tape heads, computer terminals, keyboards,
storage devices, printers, and optical storage media) and any and all
components, devices, techniques or circuitry incorporated in any of the above
which is or are constructed, designed, improved, altered or used by the Company
and which is or are not generally known to the public or within the industries
in which the Company competes.
(b) Software. Any and all ideas, concepts, know-how,
techniques, structures, information and materials relating to existing computer
software or firmware products and computer software or firmware in various
stages of research and development including without limitation source code,
object and load modules, requirements specifications, design specifications,
design notes, flow charts, coding sheets, annotations, documentation, technical
and engineering data, laboratory studies, benchmark test results, and the
structures, organization, designs, formulas and algorithms which reside in the
software and which are not generally known to the public or within the
industries or trades in which the Company competes.
(c) Business Procedures. Internal business procedures and
business plans, including analytical methods and procedures, licensing
techniques, manufacturing information and procedures such as formulations,
processes and equipment, technical and engineering data, vendor names, other
vendor information, purchasing information, financial information, service and
operational manuals and documentation therefor, ideas for new products and
services and other such information which relates to the way the Company
conducts its business and which is not generally known to the public.
(d) Legal Rights. All patents, copyrights, trade secrets,
trademarks and service marks, and the like.
(e) Marketing Plans and Customers Lists. Any and all customer
and marketing information and materials, such as (i) strategic data, including
marketing and development plans, forecasts and forecast assumptions and volumes,
and future plans and potential strategies of the Company which have been or are
being discussed; (ii) financial data, price and cost objectives, price lists,
pricing policies and procedures, and estimating and quoting policies and
procedures; and (iii) customer data, including customer lists, names of
existing, past or prospective customers and their representatives, data about or
provided by prospective, existing or past customers, customer service
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information and materials, data about the terms, conditions and expiration dates
of existing contracts with customers and the type, quantity and specifications
of products and services purchased, leased or licensed by customers of the
Company.
(f) Not Generally Known. Any and all information not generally
known to the public or within the industries or trades in which the Company
competes.
5.2 General Knowledge. The general skills and experience gained by
Executive during Executive's employment or engagement by the Company, and
information publicly available or generally known within the industries or
trades in which the Company competes, is not considered Confidential
Information. Following the Non-Competition Period (as defined in Section 5.9),
Executive is not restricted from working with a person or entity which has
independently developed information or materials similar to the Confidential
Information, but in such a circumstance, Executive agrees not to disclose the
fact that any similarity exists between the Confidential Information and the
independently developed information and materials, and Executive understands
that such similarity does not excuse Executive from the non-disclosure and other
obligations in this Agreement.
5.3 Executive Obligations as to Confidential Information and Materials.
During Executive's employment or engagement by the Company, Executive will have
access to the Confidential Information and will occupy a position of trust and
confidence with respect to the Confidential Information and the Company's
affairs and business. Executive agrees to take the following steps to preserve
the confidential and proprietary nature of the Confidential Information:
(a) Non-Disclosure. During and after Executive's Employment or
engagement by the Company, Executive will not use, disclose or otherwise permit
any person or entity access to any of the Confidential Information other than as
required in the performance of Executive's duties with the Company. Executive
understands that Executive is not allowed to sell, license, market or otherwise
exploit any products or services (including software or firmware in any form)
which embody in whole or in part any Confidential Information.
(b) Prevent Disclosure. Executive will take all reasonable
precautions to prevent disclosure of the Confidential Information to
unauthorized persons or entities.
(c) Abide by the Company's Restrictions. Executive will treat
as confidential and proprietary any information or materials from outside the
Company which the Company is obligated to treat as confidential or proprietary,
in accordance with the Company's reasonable instructions to Executive.
(d) Return All Materials. Upon termination of Executive's
employment or engagement by the Company for any reason whatsoever, Executive
will deliver to the Company all tangible materials embodying the Confidential
Information, including any documentation, records, listings, notes, data,
sketches, drawings, memoranda, models, accounts, reference materials, samples,
machine-readable media and equipment which in any way relate to the Confidential
Information. Of course, Executive agrees not to retain any copies of any of the
above materials.
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5.4 Inform Subsequent Employers. Executive covenants and agrees that,
for a period of twenty-four (24) months following termination of the
Non-Competition Period, prior to accepting subsequent employment with an
employer engaged in substantially the same line of work as the Company,
Executive shall: (a) inform any such subsequent employer in writing that this
Agreement exists; and (b) provide the Company with a copy of such writing.
5.5 Ideas and Inventions. Executive agrees to assign to the Company all
of Executive's right, title and interest in or to any and all ideas, concepts,
know-how, techniques, processes, inventions, discoveries, developments, works of
authorship, innovations and improvements ("Inventions") conceived or made by
Executive, whether alone or with others, whether patentable or not, except those
that the Executive developed entirely on Executive's own time without using the
Company's equipment, supplies, facilities, or trade secret information and which
neither (1) relate at the time of conception or reduction to practice of the
invention to the Company's business, or actual or demonstrably anticipated
research or development of the Company nor (2) result from any work performed by
the Executive for the Company. Executive agrees to disclose all Inventions to
the Company promptly, and to provide all assistance reasonably requested by the
Company in the preservation of its interests in the Inventions (such as by
executing documents, testifying, etc.), such assistance to be provided at the
Company's expense but without any additional compensation to Executive.
5.6 Inventions and Patents. Executive agrees that from this date until
Executive leaves the Company's employment, Executive shall keep the Company
informed of any Inventions made by Executive, in whole or in part, or conceived
by Executive, alone or with others, which result from any work Executive may do
for, or at the request of, the Company, or which relate to the Company's
activities, investigations, or obligations.
(a) Assertion of Rights. Executive shall, at the expense of
the Company, assist the Company or its nominees to obtain patents for such
Inventions in any countries throughout the world. Such Inventions shall be the
property of the Company or its nominees, whether patented or not. Executive
shall and does, without charge to the Company, assign to the Company, all of
Executive's right, title, and interest in and to such Inventions, including
patents and patent applications and reissues thereof. Executive agrees to
execute, acknowledge, and deliver any instruments confirming the complete
ownership by the Company of such Inventions. Such assignments shall include the
right to sue for infringement.
(b) Reserved Inventions. Descriptions of all ideas, concepts,
know-how, techniques, processes, inventions, discoveries, developments,
innovations and improvements which Executive made, conceived or acquired prior
to Executive's employment by the Company and all patents and patent applications
relating thereto (collectively referred to as "Executive's Rights") are attached
hereto in Exhibit B, and Executive's Rights shall be excluded from this
Agreement. Executive represents that the absence of any Executive's Rights in
Exhibit B shall indicate that Executive owns no such Executive's Rights at the
time of signing this Agreement.
5.7 Copyrights. Executive agrees that any work prepared by Executive
during the course of Executive's employment or engagement hereunder which is
eligible for United States copyright
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protection or protection under the Universal Copyright Convention, the Berne
Copyright Convention and/or the Buenos Aires Copyright Convention shall be a
work made for hire. In the event any such work is deemed not to be a work made
for hire, Executive hereby assigns all right, title and interest in and to the
copyright in such work to the Company, and agrees to provide all assistance
reasonably requested by the Company in the establishment, preservation and
enforcement of its copyright in such work, such assistance to be provided at the
Company's expense but without any additional compensation to Executive.
5.8 Conflicting Obligations and Rights. Executive agrees to inform the
Company in writing of any apparent conflict between Executive's work for the
Company and (i) any obligations Executive may have to preserve the
confidentiality of another's proprietary information or materials, or (ii) any
rights Executive claims to any patents, copyrights, trade secrets, or other
inventions, ideas or similar rights, before performing that work. Otherwise, the
Company may conclude that no such conflict exists and Executive agrees
thereafter to make no such claim against the Company. The Company shall receive
such disclosures in confidence. All such existing obligations and claims of
Executive, if any, as of the date of this Agreement are listed on Exhibit C
attached hereto.
5.9 Non-Competition.
(a) Non-competition. By execution of this Agreement, Executive
agrees that during his employment with the Company and for a period of
twenty-four (24) months following the date of expiration or termination of his
employment hereunder (the "Non-Competition Period") for any reason (whether such
termination shall be voluntary or involuntary), Executive will not, within the
United States (in which territory Executive acknowledges that the Company has
sold or marketed its products or services and conducted its Business, as defined
in Section 5.9(d) as of the date hereof), directly or indirectly, compete with
the Company by carrying on a business that is substantially similar to the
Business. Executive agrees that the two (2) year period referred to in the
preceding sentence shall be extended by the number of days included in any
period of time during which he is or was engaged in activities constituting a
breach of this Section 5.9.
(b) Definition of "Compete". For the purposes of this Section
5.9, the term "compete" shall mean with respect to the Business: (i) managing,
supervising, or otherwise participating in a management or sales capacity; (ii)
calling on, soliciting, taking away, accepting as a client or customer, or
attempting to call on, solicit, take away, or accept as a client or customer,
any individual partnership, corporation, company, association, or other entity
that was a client or customer of the Company as of immediately prior to the date
hereof; (iii) hiring, soliciting, taking away, or attempting to hire, solicit,
or take away, either on Executive's behalf or on behalf of any other person or
entity, any person serving immediately prior to the date hereof or during the
term hereof as an employee in connection with the Business; or (iv) entering
into or attempting to enter into any business substantially similar to the
Business, either alone or with any individual, partnership, corporation,
company, association, or other entity.
(c) Direct or Indirect Competition. For the purposes of this
Section 5.9, the words "directly or indirectly" as they modify the word
"compete" shall mean (i) acting as an agent, representative, consultant,
officer, director, member, independent contractor, or employee of any
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entity or enterprise that is competing (as defined in Section 5.9(b) hereof)
with the Business, (ii) participating in any such competing entity or enterprise
as an owner, partner, limited partner, joint venturer, member, creditor, or
stockholder (except as a stockholder holding less than a one percent (1%)
interest in a corporation whose shares are actively traded on a regional or
national securities exchange or in the over-the-counter market), and (iii)
communicating to any such competing entity or enterprise the names or addresses
or any other information concerning any past, present, or identified prospective
client or customer of the Company or any entity having title to the goodwill of
the Company with respect to the Business.
(d) Business. For purposes of this Agreement, the term
"Business" shall mean the delivery of systems integration services and master
distribution of information technology products and services, as conducted by
the Company immediately prior to the date hereof and/or developed during the
term of this Agreement.
(e) Executive expressly agrees and acknowledges that:
(i) it will require at least twenty-four (24) months
for the Company to locate, hire and train an appropriate individual to
perform the functions and duties that Executive is performing
hereunder;
(ii) the Company has protected business interests
throughout the United States and that competition with and against such
business interests would be harmful to the Company;
(iii) this covenant not to compete is reasonable as
to time and geographical area and does not place any unreasonable
burden upon him;
(iv) the general public will not be harmed as a
result of enforcement of this covenant not to compete;
(v) his personal legal counsel has reviewed this
covenant not to compete; and
(vi) he understands and hereby agrees to each and
every term and condition of this covenant not to compete (including,
without limitation, the provisions of Section 5.11).
5.10 Non-Disparagement. During the term of this Agreement and the
Non-Competition Period, neither Executive nor the Company shall disparage the
other, and neither shall disclose to any third party the conditions of
Executive's employment with the Company except as may be required (i) pursuant
to applicable law or regulations, including the rules and regulations of the
Securities and Exchange Commission, (ii) to effectuate the provisions of
employee plans or programs and insurance policies, or (iii) as may be otherwise
contemplated herein or unless such information becomes publicly available
without fault of the party making such disclosure.
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5.11 Remedies. Executive expressly agrees and acknowledges that the
covenants set forth in Sections 5.1 through 5.10 are necessary for the
protection of the interests of the Company and its affiliates because of the
nature and scope of their business and his position with the Company. Further,
Executive acknowledges that any breach of such covenants would result in
irreparable damage to the Company, and that money damages will not sufficiently
compensate the Company for its injury caused thereby, and that the remedy at law
for any breach or threatened breach of any of such covenants will be inadequate
and, accordingly agrees, that the Company shall, in addition to all other
available remedies (including without limitation, seeking such damages as it can
show it has sustained by reason of such breach), be entitled to injunctive
relief or specific performance and that in addition to such money damages he may
be restrained and enjoined from any continuing breach of this covenant not to
compete without any bond or other security being required of any court.
Executive further acknowledges and agrees that if such covenants, or any of
them, are deemed to be unenforceable and/or the Executive fails to comply with
this Article V, the Company has no obligation to provide any compensation or
other benefits described in Article IV hereof. The remedies set forth in this
Section 5.11 shall be included in any award in favor of the Company under
Exhibit D hereto.
5.12 Scope of Article. For purposes of this Article V, unless the
context otherwise requires, the term "Company" includes MicroAge, Inc., its
direct and indirect subsidiaries, and its affiliates.
ARTICLE VI
MISCELLANEOUS
6.1 Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Accrued Base Salary" - as defined in Section 4.1(a);
(b) "Accrued Benefits" - as defined in Section 4.1(d);
(c) "Accrued Annual Bonus Payment" - as defined in Section 4.2(e);
(d) "Accrued Reimbursable Expenses" - as defined in Section 4.1(c);
(e) "Accrued Vacation Payment" - as defined in Section 4.1(b);
(f) "Annual Fixed Cash Bonus" - as defined in Section 2.2(a);
(g) "Annual Incentive Bonus" - as defined in Section 2.2(b);
(h) "Base Amount" - as defined in Section 4.4(b);
(i) "Base Salary" - as defined in Section 2.1;
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(j) "Board" - shall mean the Board of Directors of the Company;
(k) "Cause" shall mean the occurrence of any of the following:
(i) Executive's gross and willful misconduct which is
injurious to the Company;
(ii) Executive's engaging in fraudulent conduct with
respect to the Company's business or in conduct of a criminal nature
that may have an adverse impact on the Company's standing and
reputation;
(iii) the continued and unjustified failure or
refusal by Executive to perform the duties required of him by this
Agreement which failure or refusal shall not be cured within fifteen
(15) days following (A) receipt by Executive of written notice from the
Board specifying the factors or events constituting such failure or
refusal, and (B) a reasonable opportunity for Executive to correct such
deficiencies;
(iv) Executive's use of drugs and/or alcohol in
violation of then current Company policy; or
(v) Executive's breach of his obligation under
Section 1.2(c) hereof which shall not be cured within fifteen (15) days
after written notice thereof to Executive.
(l) "Change in Control" shall mean and shall be deemed to have
occurred if:
(i) After the date of this Agreement, any "person"
(as such term is used in Section 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any successor
provision thereto) shall become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act or any successor provision
thereto) directly or indirectly of securities of the Company
representing 15% or more of the combined voting power of the Company's
then outstanding securities ordinarily having the right to vote at an
election of directors; provided, however, that, for purposes of this
subparagraph, "person" shall exclude the Company, its subsidiaries, any
person acquiring such securities directly from the Company, any
employee benefit plan sponsored by the Company or from Executive or any
stockholder owning 15% or more of the combined voting power of the
Company's outstanding securities as of the date of this Agreement; or
(ii) Any stockholder of the Company owning 15% or
more of the combined voting power of the Company's outstanding
securities as of the date of this Agreement shall become the beneficial
owner (within the meaning of Rule 13d-3 under the Exchange Act)
directly or indirectly of securities of the Company (other than through
the acquisition of securities directly from the Company or from
Executive) representing 25% or more of the combined voting power of the
Company's then outstanding securities ordinarily having the right to
vote at an election of directors; or
14
<PAGE>
(iii) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least 80% of the Board; provided, however, that any
person becoming a member of the Board subsequent to the date hereof
whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least 80% of the members
then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to
the election of directors of the Company, as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act or any
successor provision thereto) shall be, for purposes of this Agreement,
considered as though such person were a member of the Incumbent Board;
or
(iv) Approval by the stockholders of the Company and
consummation of (A) a reorganization, merger, consolidation, or sale or
other disposition of all or substantially all of the assets of the
Company, in each case, with or to a corporation or other person or
entity of which persons who were the stockholders of the Company
immediately prior to such transaction do not, immediately thereafter,
own more than 60% of the combined voting power of the outstanding
voting securities entitled to vote generally in the election of
directors of the reorganized, merged, consolidated or purchasing
corporation (or, in the case of a non-corporate person or entity,
functionally equivalent voting power) and 80% of the members of the
Board of which corporation (or functional equivalent in the case of a
non-corporate person or entity) were not members of the Incumbent Board
at the time of the execution of the initial agreement providing for
such reorganization, merger consolidation or sale, or (B) a liquidation
or dissolution of the Company.
(m) "Change in Control Resignation" - as defined in Section
3.2(b);
(n) "Code" - as defined in Section 4.4(b);
(o) "Common Stock" - shall mean shares of the common stock,
par value $.01 per share, of the Company;
(p) "Confidential Information" - as defined in Section 5.1;
(q) "Continued Benefits" - as defined in Section 4.3(g);
(r) "Expiration" shall mean the expiration of Executive's
employment hereunder in accordance with Section 1.3;
(s) "Good Reason" shall mean the occurrence of any of the
following:
(i) The Company's failure to elect or reelect or to
appoint or reappoint Executive to offices, titles or positions carrying
comparable authority, responsibilities, dignity and importance to that
of Executive's offices and positions as of November 4, 1996 or in the
case of a Change in Control, involving duties of a scope comparable to
those of
15
<PAGE>
Executive's most significant offices or positions held at any time
during the 90 day period immediately preceding the date such Change in
Control occurs;
(ii) Material change by the Company in Executive's
function, duties or responsibilities (including report
responsibilities) which would cause Executive's position with the
Company to become of less dignity, responsibility and importance than
those associated with his functions, duties or responsibilities as of
November 4, 1996, or in the case of a Change in Control, involving
duties of a scope less than that associated with Executive's most
significant position with the Company during the 90 day period
immediately preceding the date such Change in Control occurs;
(iii) Executive's Base Salary is reduced by the
Company (unless such reduction is pursuant to a salary reduction
program as described in Section 2.1 hereof) or there is a material
reduction in the benefits that are in effect for the Executive on
November 4, 1996 in accordance with Section 2.4 (unless such reduction
is pursuant to a uniform reduction in benefits for all Senior
Executives);
(iv) Except with Executive's prior written consent,
relocation of Executive's principal place of employment to a location
outside of Maricopa County, Arizona, or requiring Executive to travel
on the Company's business more than is required by Section 1.4 hereof;
(v) The failure by the Company to obtain the
assumption by operation of law or otherwise of this Agreement by any
entity which is the surviving entity in any merger or other form of
corporate reorganization involving the Company or by any entity which
acquires all or substantially all of the Company's assets; or
(vi) Other material breach of this Agreement by the
Company, which breach is not cured within fifteen (15) days after
written notice thereof is received by the Company.
(t) "Incumbent Board" - as defined in Section 6.1(k)(iii);
(u) "1996 Executive Bonus Plan" - as defined in Section 2.2.
(v) "Non-Competition Period" - as defined in Section 5.9(a);
(w) "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision of this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated. Each Notice of Termination shall be delivered at least 30 days prior
to the effective date of termination;
(x) "Retirement" shall mean normal retirement at age 65;
16
<PAGE>
(y) "Senior Executives" shall mean the chief executive officer
and the four most highly compensated executive officers of the Company
determined in accordance with the rules and regulations of the Securities and
Exchange Commission under the Exchange Act;
(z) "Termination" shall mean the termination of Executive's
employment hereunder other than upon expiration of the term of such employment
in accordance with Section 1.3;
(aa) "Total Disability" shall mean Executive's failure
substantially to perform his duties hereunder on a full-time basis for a period
exceeding 180 consecutive days or for periods aggregating more than 180 days
during any twelve-month period as a result of incapacity due to physical or
mental illness. If there is a dispute as to whether Executive is or was
physically or mentally unable to perform his duties under this Agreement, such
dispute shall be submitted for resolution to a licensed physician agreed upon by
the Board and Executive, or if an agreement cannot be promptly reached, the
Board and Executive shall promptly select a physician, and if these physicians
cannot agree, the physicians shall promptly select a third physician whose
decision shall be binding on all parties. If such a dispute arises, Executive
shall submit to such examinations and shall provide such information as such
physician(s) may request, and the determination of the physician(s) as to
Executive's physical or mental condition shall be binding and conclusive.
Notwithstanding the foregoing, if Executive participates in any group disability
plan provided by the Company which offers long-term disability benefits, "Total
Disability" shall mean total disability as defined therein.
6.2 Key Man Insurance. The Company shall have the right, in its sole
discretion, to purchase "key man" insurance on the life of Executive. The
Company shall be the owner and beneficiary of any such policy. If the Company
elects to purchase such a policy, Executive shall take such physical
examinations and supply such information as may be reasonably requested by the
insurer.
6.3 Mitigation of Damages; No Set-Off; Dispute Resolution. (a)
Executive shall be required to mitigate the amount of any payment provided for
in this Agreement (other than payments received pursuant to Section 4.4 hereof)
by seeking other employment.
(b) If there shall be any dispute between the Company and
Executive (i) in the event of any termination of Executive's employment by the
Company, whether such termination was for Cause, or (ii) in the event of any
termination of employment by Executive, whether Good Reason existed, or (iii)
otherwise arising out of this Agreement, the dispute shall be resolved in
accordance with the dispute resolution procedures set forth in Exhibit D hereto,
the provisions of which are incorporated as a part hereof, and the parties
hereto hereby agree that such dispute resolution procedures shall be the
exclusive method for resolution of disputes under this Agreement; provided
however, that (1) either party may seek preliminary judicial relief if, in its
judgment, such action is necessary to avoid irreparable injury during the
pendency of such procedures, and (2) nothing in Exhibit D shall prevent either
party from exercising the rights of termination set forth in this Agreement. In
the event of a dispute hereunder as to whether a termination by the Company was
for Cause or by the Executive for Good Reason, until there is a resolution and
award as provided in
17
<PAGE>
Exhibit D, the Company shall pay all amounts, and provide all benefits, to
Executive and/or Executive's family or other beneficiaries, as the case may be,
that the Company would be required to pay or provide hereunder as though such
termination were by the Company without Cause or by Executive for Good Reason
and shall pay the reasonable legal fees and expenses of counsel for Executive in
connection with such dispute resolution; provided, however, that the Company
shall not be required to pay any disputed amounts or any legal fees and expenses
pursuant to this subparagraph (b) except upon receipt of a written undertaking
by or on behalf of Executive (and/or Executive's family or other beneficiaries,
as the case may be) to repay, without interest or penalty, as soon as
practicable after completion of the dispute resolution (A) all such amounts to
which Executive (or Executive's family or other beneficiaries, as the case may
be) is ultimately adjudged not be entitled with respect to the payment of such
disputed amount(s) and (B) in addition, in the case of legal fees and expenses,
a proportionate amount of legal fees and expenses attributable to any of
Executive's claim(s) (or any of Executive's defenses or counter-claims(s)), if
any, which shall have been found by the dispute resolver to have been frivolous
or without merit. IT IS EXPRESSLY UNDERSTOOD THAT BY SIGNING THIS AGREEMENT,
WHICH INCORPORATES BINDING ARBITRATION, THE COMPANY AND EXECUTIVE AGREE, EXCEPT
AS SPECIFICALLY PROVIDED OTHERWISE IN SECTION 5.11 AND THIS SECTION 6.3(b), TO
WAIVE COURT OR JURY TRIAL AND TO WAIVE PUNITIVE, STATUTORY, CONSEQUENTIAL AND
ANY DAMAGES OTHER THAN COMPENSATORY DAMAGES.
6.4 Successors; Binding Agreement. This Agreement shall be binding upon
any successor to the Company and shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, beneficiaries,
designees, executors, administrators, heirs, distributees, devisees and
legatees.
6.5 Modification; No Waiver. This Agreement may not be modified or
amended except by an instrument in writing signed by the parties hereto. No term
or condition of this Agreement shall be deemed to have been waived, nor shall
there be any estoppel against the enforcement of any provision of this
Agreement, except by written instrument by the party charged with such waiver or
estoppel. No such written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall operate only as to the
specific term or condition waived and shall not constitute a waiver of such term
or condition for the future or as to any other term or condition.
6.6 Severability. The covenants and agreements contained herein are
separate and severable and the invalidity or unenforceability of any one or more
of such covenants or agreements, if not material to the employment arrangement
that is the basis for this Agreement, shall not affect the validity or
enforceability of any other covenant or agreement contained herein. If, in any
judicial proceeding, a court shall refuse to enforce one or more of the
covenants or agreements contained herein because the duration thereof is too
long, or the scope thereof is too broad, it is expressly agreed between the
parties hereto that such duration or scope shall be deemed reduced to the extent
necessary to permit the enforcement of such covenants or agreements.
6.7 Notices. All the notices and other communications required or
permitted hereunder shall be in writing and shall be delivered personally or
sent by registered or certified mail, return receipt requested, to the parties
hereto at the following addresses:
18
<PAGE>
If to the Company, to it at:
MicroAge, Inc.
2308 South 55th Street
Tempe, Arizona 85282
Attn: Chief Executive Officer
With a copy to:
Matthew P. Feeney
Snell & Wilmer L.L.P.
One Arizona Center
Phoenix, Arizona 85004-0001
If Executive, to him at:
Robert O'Malley
6211 East Huntress Drive
Paradise Valley, Arizona 85253
6.8 Assignment. This Agreement and any rights hereunder shall not be
assignable by either party without the prior written consent of the other party
except as otherwise specifically provided for herein.
6.9 Entire Understanding. This Agreement (together with the Exhibit
incorporated as a part hereof) constitutes the entire understanding between the
parties hereto and no agreement, representation, warranty or covenant has been
made by either party except as expressly set forth herein.
6.10 Executive's Representations. Executive represents and warrants
that neither the execution and delivery of this Agreement nor the performance of
his duties hereunder violates the provisions of any other agreement to which he
is a party or by which he is bound.
6.11 Liability of Company with Respect to Insurance Policy. Executive
has selected the insurer and policy referred to in Section 2.4(a) hereof, and
the Company shall not have any liability to Executive (or his beneficiaries)
should the insurance company which issues the policy referred to therein fail or
refuse to pay (whether voluntarily or by reason of any order, injunction or
otherwise) thereunder or if any rights or elections otherwise available to
Executive thereunder are restricted or eliminated.
6.12 Governing Law. This Agreement shall be construed in accordance
with and governed for all purposes by the laws of the State of Arizona
applicable to contracts executed and wholly performed within such state.
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Company:
MICROAGE, INC.
By: /s/ Jeffrey D. McKeever
----------------------------------
Name: Jeffrey D. McKeever
--------------------------------
Title: Chairman and CEO
-------------------------------
Executive:
ROBERT G. O'MALLEY
/s/ Robert G. O'Malley
------------------------------------
20
<PAGE>
EXHIBIT A
---------
SPLIT DOLLAR AGREEMENT
----------------------
<PAGE>
EXHIBIT B
---------
EXECUTIVE'S RIGHTS
------------------
None
<PAGE>
EXHIBIT C
---------
EXECUTIVE'S EXISTING OBLIGATIONS AND CLAIMS
-------------------------------------------
None
<PAGE>
EXHIBIT D
---------
DISPUTE RESOLUTION PROCEDURES
-----------------------------
A. If a controversy should arise which is covered by Section 6.3 of
Article VI, then not later than twelve (12) months from the date of the event
which is the subject of dispute either party may serve on the other a written
notice specifying the existence of such controversy and setting forth in
reasonably specific detail the grounds thereof ("Notice of Controversy");
provided that, in any event, the other party shall have at least thirty (30)
days from and after the date of the Notice of Controversy to serve a written
notice of any counterclaim ("Notice of Counterclaim"). The Notice of
Counterclaim shall specify the claim or claims in reasonably specific detail. If
the Notice of Controversy or the Notice of Counterclaim, as the case may be, is
not served within the applicable period, the claim set forth therein will be
deemed to have been waived, abandoned and rendered unenforceable.
B. Following receipt of the Notice of Controversy (or the Notice of
Counterclaim, as the case may be), there shall be a three week period during
which the parties will make a good faith effort to resolve the dispute through
negotiation ("Period of Negotiation"). Neither party shall take any action
during the Period of Negotiation to initiate arbitration proceedings.
C. If the parties should agree during the Period of Negotiation to
mediate the dispute, then the Period of Negotiation shall be extended by an
amount of time to be agreed upon by the parties to permit such mediation. In no
event, however, may the Period of Negotiation be extended by more than five
weeks or, stated differently, in no event may the Period of Negotiation be
extended to encompass more than a total of eight weeks.
D. If the parties agree to mediate the dispute but are thereafter
unable to agree within a week on the format and procedures for the mediation,
then the effort to mediate shall cease, and the Period of Negotiation shall
terminate four weeks from the Notice of Controversy (or the Notice of
Counterclaim, as the case may be).
E. Following the termination of the Period of Negotiation, the dispute
(including the main claim and counterclaim, if any) shall be settled by
arbitration, governed by the Federal Arbitration Act, 9 U.S.C. ss. 1 et seq.
("FAA"), and judgment upon the award may be entered in any court having
jurisdiction thereof. The format and procedures of the arbitration are set forth
below (referred to below as the "Arbitration Agreement").
F. A notice of intention to arbitrate ("Notice of Arbitration") shall
be served within 45 days of the termination of the Period of Negotiation. If the
Notice of Arbitration is not served within this period, the claim set forth in
the Notice of Controversy (or the Notice of Counterclaim, as the case may be)
will be deemed to have been waived, abandoned and rendered unenforceable.
G. The arbitration, including the Notice of Arbitration, will be
governed by the Commercial Rules of the American Arbitration Association ("AAA")
in effect on the date of the
<PAGE>
Notice of Arbitration, except that the terms of this Arbitration Agreement shall
control in the event of any difference or conflict between such Rules and the
terms of this Arbitration Agreement.
H. The arbitrator shall reach a decision on the merits on the basis of
applicable legal principles as embodied in the law of the State of Arizona. The
arbitration hearing shall take place in Phoenix, Arizona.
I. There shall be one arbitrator, regardless of the amount in
controversy. The arbitrator selected, in order to be eligible to serve, shall be
a lawyer in Phoenix, Arizona with at least 15 years specializing in either
general commercial litigation or general corporate and commercial matters. In
the event the parties cannot agree on a mutually acceptable single arbitrator
from the list submitted by the AAA, the AAA shall appoint the arbitrator who
shall meet the foregoing criteria.
J. At the time of appointment and as a condition thereto, the
arbitrator will be apprised of the time limitations and other provisions of this
Arbitration Agreement and shall indicate such dispute resolver's agreement to
the Tribunal Administrator to comply with such provisions and time limitations.
K. During the 30 day period following appointment of the arbitrator,
either party may serve on the other a request for limited numbers of documents
directly related to the dispute. Such documents will be produced within seven
(7) days of the request.
L. Following the thirty-day period of document production, there will
be a forty-five day period during which limited depositions will be permissible.
Neither party will take more than 5 depositions, and no deposition will exceed
three hours of direct testimony.
M. Disputes as to discovery or prehearing matters of a procedural
nature shall be promptly submitted to the arbitrator pursuant to telephone
conference call or otherwise. The arbitrator shall make every effort to render a
ruling on such interim matters at the time of the hearing (or conference call)
or within five business days thereafter.
N. Following the period of depositions, the arbitration hearing shall
promptly commence. The arbitrator will make every effort to commence the hearing
within thirty days of the conclusion of the deposition period and, in addition,
will make every effort to conduct the hearing on consecutive business days to
conclusion.
O. An award will be rendered, at the latest, within nine months of the
date of the Notice of Arbitration and within thirty days of the close of the
arbitration hearing. The award shall set forth the grounds for the decision
(findings of fact and conclusions of law) in reasonably specific detail and
shall also specify whether any claim (or defense or counter-claim) of Executive
is found to be frivolous or without merit and what proportion, if any, of his
legal fees and expenses which have been paid by the Company Executive shall be
required to repay to the Company in accordance with Section 6.3(b). The award
shall be final and nonappealable except as provided in the FAA and except that a
court of competent jurisdiction shall have the power to review whether, as a
matter of law, based upon the findings of fact by the arbitrator, the award
should be confirmed or should be
<PAGE>
modified or vacated in order to correct any errors of law made by the
arbitrator. Such judicial review shall be limited to issues of law, and the
parties agree that the findings of fact made by the arbitrator shall be final
and binding on the parties and shall serve as the facts to be relied upon by the
court in determining the extent to which the award should be confirmed, modified
or vacated.
The award may only be made for compensatory damages, and if any other
damages (whether exemplary, punitive, consequential, statutory or other) are
included, the award shall be vacated and remanded, or modified or corrected, as
appropriate to promote this damage limitation; provided, however, that an award
in favor of the Company shall include the relief set forth in Section 5.11.
SPLIT-DOLLAR INSURANCE AGREEMENT
--------------------------------
THIS AGREEMENT is made as of this 1st day of September, 1995, by and
between MICROAGE, INC., a Delaware corporation (hereinafter referred to as
"Corporation"), and ROBERT G. O'MALLEY (hereinafter referred to as "Insured").
WHEREAS, Insured plans to acquire insurance on his life of under a
policy issued by Northwestern Mutual Life Insurance Company (hereinafter
referred to as "Insurer"); and
WHEREAS, Corporation wants to assist Insured by paying all premiums due
on the policy; and
WHEREAS, Insured will be the owner of the insurance policy and the
policy will be assigned to Corporation as security for the repayment of the
premiums which Corporation will pay when due on the policy;
The parties, therefore, in consideration of the mutual promises
contained herein, hereby agree as follows:
ARTICLE I
Insured plans to acquire from the Insurer a policy on the life of the
Insured in the face amount of Seven Hundred Fifty Thousand Dollars ($750,000)
(hereinafter referred to as the "Policy"). The policy number, face amount and
plan of insurance will be recorded on Schedule A attached to this Agreement and
the Policy will then be subject to the terms of this Agreement. During the term
of this Agreement, Corporation will not exercise nor
<PAGE>
withhold its consent to the exercise by Insured of any rights, privileges or
options conferred by the terms of the Policy, except as otherwise provided in
Article V, paragraph C hereof.
ARTICLE II
All premiums due on the Policy which shall be Fifteen Thousand Six
Hundred Twenty-Eight Dollars and Ninety-Eight Cents ($15,628.98) per year, shall
be paid by Corporation until the first to occur of (i) the death of the Insured,
(ii) Insured's termination of employment with Corporation, or (iii) Corporation
has paid fifteen (15) premium payments.
ARTICLE III
A. Insured shall execute and deliver a collateral assignment of the
Policy to Corporation on a form approved by Insurer, as a security interest for
the amounts paid by Corporation towards its share of the premiums to be paid on
the Policy in accordance with Article II of this Agreement. In the event of the
death of Insured pursuant to Article IV hereof, or in the event of the surrender
or acquisition of the Policy pursuant to Article V hereof, such security
interest shall be for an amount equal to the total premiums paid by the
Corporation (less any outstanding loans to Corporation pursuant to Article III,
paragraph B hereof).
B. Corporation may not borrow against the Policy's loan value, without
the prior written approval of Insured.
2
<PAGE>
C. Corporation shall pay all interest with respect to loans made
pursuant to subparagraph B; provided, however, that no payment of interest shall
constitute a premium payment under this Agreement.
D. The term "net cash surrender value" when used in this Agreement
shall mean the gross value as determined by Insurer less any outstanding loans
made to Corporation and interest then due on such loans.
ARTICLE IV
In the event of the death of Insured, the proceeds of the Policy shall
be divided into two parts and paid by Insurer as follows:
Part A - This part shall be paid to Corporation in an amount equal
to the Corporation's security interest in the Policy as
determined pursuant to Article III, paragraph A hereof.
Corporation shall supply Insurer with any information
necessary for Insurer to determine such amount.
Part B - The balance of the death benefit shall be paid to the
beneficiary designated by the Insured.
. . .
. . .
. . .
3
<PAGE>
ARTICLE V
A. The Insured may, at any time, with the Corporation's prior written
consent, surrender the Policy and receive the net cash surrender value thereof.
Insured shall pay to Corporation an amount equal to Corporation's security
interest in the Policy as determined in Article III, paragraph A hereof, or may
authorize and instruct Insurer to pay such amount directly to Corporation.
B. The Insured may acquire Corporation's interest in the Policy for an
amount equal to the Corporation's security interest in the Policy as determined
in Article III, paragraph A hereof upon the Insured's termination of employment
with Corporation.
C. Except as provided in the collateral assignment or as necessary to
protect Corporation's security interest, Insured shall be entitled to exercise
all of the rights available under the terms of the Policy, except the Insured
may not assign or borrow on the Policy as long as a collateral assignment is in
effect on the Policy.
ARTICLE VI
A. Subject to Article VI, paragraph B below, this Agreement shall
terminate upon the occurrence of any of the following:
1. Surrender or acquisition of the Policy by Insured,
pursuant to Article V of this Agreement.
2. Cessation of the corporate business.
3. Bankruptcy, receivership or dissolution of
Corporation. . . .
4
<PAGE>
4. The termination of Insured's employment with the
Corporation.
5. The death of Insured.
B. If this Agreement is terminated pursuant to Article VI, paragraph
A.2 or 3. above, Insured shall pay Corporation an amount equal to Corporation's
security interest in the Policy as determined in Article III, paragraph A
hereof. Upon receipt of such amounts, Corporation shall thereupon execute and
deliver to Insured a release of the collateral assignment of the Policy.
C. If this Agreement is terminated pursuant to Article VI, paragraph
A.4 above, Insured shall pay Corporation an amount equal to Corporation's
security interest in the Policy as determined in Article III, paragraph A above.
D. If Insured does not remit the amounts described in paragraph B and C
above, within thirty (30) days of the event described in Article VI, paragraph
A.2, 3. or 4., then all obligations of Corporation under this Agreement shall be
terminated and Insured shall transfer the ownership of the Policy to
Corporation.
ARTICLE VII
Insurer is not a party to this Agreement and the obligations of Insurer
are those set forth in the Policy.
ARTICLE VIII
This Agreement shall be binding upon the parties hereto, their heirs,
legal representatives, successors and assigns.
5
<PAGE>
ARTICLE IX
This Agreement may be altered, amended or modified only by written
instrument signed by Corporation and the Insured.
ARTICLE X
This Agreement shall be construed according to the laws of the State of
Arizona.
ARTICLE XI
Insured may add a rider to the Policy for the benefit of his
beneficiaries. Upon written request by Corporation, Insured will add a rider to
the Policy for the benefit of Corporation. The additional premium for any rider
which is added to the Policy will be paid by the party entitled to receive the
proceeds of the rider.
ARTICLE XII
A. The party designated as the "named fiduciary" for the
Split-Dollar Plan established by this Agreement shall have the
authority to control and manage the operation and
administration of such plan; provided, however, the Insurer
shall be the fiduciary of the plan solely with regard to the
review and final decision on a claim for benefits under its
Policy as provided in Article XIII Claims Procedure, set forth
below.
B. The Fiduciary may allocate his responsibilities for the
operation and administration of the Split-Dollar Plan,
including the designation of persons
6
<PAGE>
to carry out fiduciary responsibilities under any such plan.
He shall effect such allocation of his responsibilities by
delivering to the Corporation a written instrument signed by
him that specifies the nature and extent of the
responsibilities allocated, including, the persons who are
designated to carry out these fiduciary responsibilities under
the Split-Dollar Plan, together with a signed acknowledgement
of their acceptance.
ARTICLE XIII
The following claims procedure shall apply to the Split-Dollar Plan:
A. The beneficiary of such Policy shall make a claim for the
benefits provided under the Policy in the manner provided in
the Policy.
B. With respect to a claim for benefits under said Policy, the
Insurer shall be the entity which reviews and makes decisions
on claim denials.
C. If a claim is wholly or partially denied, notice of the
decision, meeting the requirements of paragraph D below, shall
be furnished to the claimant within a reasonable period of
time after the claim has been filed.
D. The Insurer shall provide to any claimant who is denied a
claim for benefits, written notice setting forth in a manner
calculated to be understood by the claimant, the following:
1. The specific reasons for the denial;
2. Specific reference to the pertinent Policy or plan
provisions on which the denial is based;
7
<PAGE>
3. A description of any additional material or
information necessary for the claimant to perfect the
claim and an explanation of why such material or
information is necessary;
4. An explanation of the plan's claim review procedure,
as set forth in paragraph E and F below.
E. The purpose of the review procedure set forth in this
paragraph and in paragraph F below, is to provide a procedure
by which a claimant under the Split-Dollar Plan may have a
reasonable opportunity to appeal a denial of a claim for a
full and fair review. To accomplish that purpose, the claimant
or his duly authorized representative:
1. May request a review upon written application to the
Insurer;
2. May review pertinent plan documents or agreements;
and
3. May submit issues and comments in writing.
A claimant (or his duly authorized representative)
shall request a review by filing a written application for
review at any time within sixty (60) days after receipt by the
claimant of written notice of the denial of his claim.
F. A decision on review of a denial of a claim shall be made in
the following manner:
1. The decision on review shall be made by the Insurer,
which may in its discretion hold a hearing on the
denied claim. The Insurer shall make its decision
promptly, unless special circumstances (such as the
need to hold a hearing) require an extension of time
for processing, in which case a decision shall be
rendered as soon as possible, but
8
<PAGE>
not later than one hundred twenty (120) days after
receipt of the request for review.
2. The decision on review shall be in writing and shall
include specific reasons for the decisions, written
in a manner calculated to be understood by the
claimant, and specific references to the pertinent
Policy or plan provision on which the decision is
based.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
MICROAGE, INC., a Delaware Corporation
By /s/ James R. Daniel
---------------------
Its Senior V.P. and CFO
--------------------
By: /s/ Robert G. O'Malley
-----------------------
ROBERT G. O'MALLEY
9
<PAGE>
SCHEDULE A
Face Amount $750,000
Policy Number 13453221
Plan of Insurance The Northwestern Mutual Life Insurance
Company
10
<PAGE>
COLLATERAL ASSIGNMENT FORM
Appln. No., Contract No. Date this form is signed:
or Policy No.: 13453221 September 1, 1995
Insured: ROBERT G. O'MALLEY
Insurance Company: The Northwestern Mutual Life Insurance Company
The undersigned request and direct the Insurance Company to make the provisions
of this form a part of the policy.
All previous designations of payees are hereby revoked. It is hereby requested
and directed that:
BENEFICIARIES
(1) In the event of the death of the Insured, MicroAge, Inc., a Delaware
corporation, or its successors ("Corporation"), will be the direct beneficiary
of an amount equal to the premiums paid to the Insurance Company by Corporation
for the Policy. In the event of Corporation's cessation of business, bankruptcy,
receivership or dissolution, Corporation will be the direct beneficiary of an
amount equal to the premiums paid to the Insurance Company by Corporation for
the Policy.
In the event of termination of Insured's employment, or the surrender or the
acquisition of the Policy, Corporation will be the direct beneficiary of the
premiums paid to the Insurance Company by Corporation for the Policy.
Any indebtedness by Corporation to the Insurance Company will be deducted first
from the share of the proceeds payable to said Corporation as direct
beneficiary.
It is understood and agreed that the Insurance Company will have the right to
rely on any statement signed by said Corporation setting forth said
Corporation's share of the premium payments referred to above, and any decision
made by Insurance Company in reliance upon such statement will be conclusive and
will fully protect the Insurance Company.
(2) BARBARA O'MALLEY if living and married to the Insured on her date of death
will be the direct beneficiary of any remaining proceeds, and if she is either
not married to Insured or living on Insured's date of death, the proceeds will
be payable to Insured's estate.
<PAGE>
The Insurance Company will be fully discharged of liability for any action taken
by the Insured and for all amounts paid to, or at the direction of, the insured
and will have no obligation as to the use of the amounts. In all dealings with
the Insured, the Insurance Company will be fully protected against the claims of
every other person. The Insurance Company will not be charged with notice of a
change of beneficiary unless written evidence of the change is received at the
Insurance Company's Home Office.
OWNERSHIP
(3) The owner of the Policy shall be the Insured. The Insured alone may exercise
all the rights and privileges specified in the Policy, except the Insured may
not assign or borrow on the Policy as long as this Collateral Assignment is in
effect. Corporation may assign or borrow against the Policy loan value only with
the prior written approval of the Insured.
MODIFICATION OF ASSIGNMENT PROVISIONS
Upon death of the Insured, the interest of any collateral assignee of
Corporation will be limited to the portion of the proceeds described in (1)
above.
MICROAGE, INC., a Delaware corporation
By/s/ James R. Daniel
-----------------------------------------
Officer
/s/ Robert G. O'Malley
-------------------------------------------
ROBERT G. O'MALLEY
SPLIT-DOLLAR INSURANCE AGREEMENT
--------------------------------
THIS AGREEMENT is made as of this 27th day of January, 1997, by and
between MICROAGE, INC., a Delaware corporation (hereinafter referred to as
"Corporation"), and ROBERT G. O'MALLEY (hereinafter referred to as "Insured").
WHEREAS, Insured plans to acquire insurance on his life of under a
policy issued by Northwestern Mutual Life Insurance Company (hereinafter
referred to as "Insurer"); and
WHEREAS, Corporation wants to assist Insured by paying all premiums due
on the policy; and
WHEREAS, Insured will be the owner of the insurance policy and the
policy will be assigned to Corporation as security for the repayment of the
premiums which Corporation will pay when due on the policy;
The parties, therefore, in consideration of the mutual promises
contained herein, hereby agree as follows:
ARTICLE I
Insured plans to acquire from the Insurer a policy on the life of the
Insured in the face amount of Two Hundred Fifty Thousand Dollars ($250,000)
(hereinafter referred to as the "Policy"). The policy number, face amount and
plan of insurance will be recorded on Schedule A attached to this Agreement and
the Policy will then be subject to the terms of this Agreement. During the term
of this Agreement, Corporation will not exercise nor
<PAGE>
withhold its consent to the exercise by Insured of any rights, privileges or
options conferred by the terms of the Policy, except as otherwise provided in
Article V, paragraph C hereof.
ARTICLE II
All premiums due on the Policy which shall be Ten Thousand Five Hundred
Dollars ($10,500) per year, shall be paid by Corporation until the first to
occur of (i) the death of the Insured, (ii) Insured's termination of employment
with Corporation, or (iii) Corporation has paid thirteen (13) premium payments.
ARTICLE III
A. Insured shall execute and deliver a collateral assignment of the
Policy to Corporation on a form approved by Insurer, as a security interest for
the amounts paid by Corporation towards its share of the premiums to be paid on
the Policy in accordance with Article II of this Agreement. In the event of the
death of Insured pursuant to Article IV hereof, or in the event of the surrender
or acquisition of the Policy pursuant to Article V hereof, such security
interest shall be for an amount equal to the total premiums paid by the
Corporation (less any outstanding loans to Corporation pursuant to Article III,
paragraph B hereof).
B. Corporation may not borrow against the Policy's loan value, without
the prior written approval of Insured.
C. Corporation shall pay all interest with respect to loans made
pursuant to subparagraph B; provided, however, that no payment of interest shall
constitute a premium payment under this Agreement.
2
<PAGE>
D. The term "net cash surrender value" when used in this Agreement
shall mean the gross value as determined by Insurer less any outstanding loans
made to Corporation and interest then due on such loans.
ARTICLE IV
In the event of the death of Insured, the proceeds of the Policy shall
be divided into two parts and paid by Insurer as follows:
Part A - This part shall be paid to Corporation in an amount equal to
the Corporation's security interest in the Policy as
determined pursuant to Article III, paragraph A hereof.
Corporation shall supply Insurer with any information
necessary for Insurer to determine such amount.
Part B - The balance of the death benefit shall be paid to the
beneficiary designated by the Insured.
ARTICLE V
A. The Insured may, at any time with the Corporation's prior written
consent, surrender the Policy and receive the net cash surrender value thereof.
Insured shall pay to Corporation an amount equal to Corporation's security
interest in the Policy as determined in Article III, paragraph A hereof, or may
authorize and instruct Insurer to pay such amount directly to Corporation.
B. The Insured may acquire Corporation's interest in the Policy for an
amount equal to the Corporation's security interest in the Policy as determined
in Article III, paragraph A hereof upon the Insured's termination of employment
with Corporation.
C. Except as provided in the collateral assignment or as necessary to
protect Corporation's security interest, Insured shall be entitled to exercise
all of the rights
3
<PAGE>
available under the terms of the Policy, except the Insured may not assign or
borrow on the Policy as long as a collateral assignment is in effect on the
Policy.
ARTICLE VI
A. Subject to Article VI, paragraph B below, this Agreement shall
terminate upon the occurrence of any of the following:
1. Surrender or acquisition of the Policy by Insured, pursuant
to Article V of this Agreement.
2. Cessation of the corporate business.
3. Bankruptcy, receivership or dissolution of Corporation.
4. The termination of Insured's employment with the
Corporation.
5. The death of Insured.
B. If this Agreement is terminated pursuant to Article VI, paragraph
A.2 or 3. above, Insured shall pay Corporation an amount equal to Corporation's
security interest in the Policy as determined in Article III, paragraph A
hereof. Upon receipt of such amounts, Corporation shall thereupon execute and
deliver to Insured a release of the collateral assignment of the Policy.
C. If this Agreement is terminated pursuant to Article VI, paragraph
A.4 above, Insured shall pay Corporation an amount equal to Corporation's
security interest in the Policy as determined in Article III, paragraph A above.
D. If Insured does not remit the amounts described in paragraph B and C
above, within thirty (30) days of the event described in Article VI, paragraph
A.2, 3. or 4., then all obligations of Corporation under this Agreement shall be
terminated and Insured shall transfer the ownership of the Policy to
Corporation.
4
<PAGE>
ARTICLE VII
Insurer is not a party to this Agreement and the obligations of Insurer
are those set forth in the Policy.
ARTICLE VIII
This Agreement shall be binding upon the parties hereto, their heirs,
legal representatives, successors and assigns.
ARTICLE IX
This Agreement may be altered, amended or modified only by written
instrument signed by Corporation and the Insured.
ARTICLE X
This Agreement shall be construed according to the laws of the State of
Arizona.
ARTICLE XI
Insured may add a rider to the Policy for the benefit of his
beneficiaries. Upon written request by Corporation, Insured will add a rider to
the Policy for the benefit of Corporation. The additional premium for any rider
which is added to the Policy will be paid by the party entitled to receive the
proceeds of the rider.
ARTICLE XII
A. The party designated as the "named fiduciary" for the
Split-Dollar Plan established by this Agreement shall have the
authority to control and manage the operation and
administration of such plan; provided, however, the Insurer
shall be the fiduciary of the plan solely with regard to the
review
5
<PAGE>
and final decision on a claim for benefits under its Policy as
provided in Article XIII Claims Procedure, set forth below.
B. The Fiduciary may allocate his responsibilities for the
operation and administration of the Split-Dollar Plan,
including the designation of persons to carry out fiduciary
responsibilities under any such plan. He shall effect such
allocation of his responsibilities by delivering to the
Corporation a written instrument signed by him that specifies
the nature and extent of the responsibilities allocated,
including, the persons who are designated to carry out these
fiduciary responsibilities under the Split-Dollar Plan,
together with a signed acknowledgment of their acceptance.
ARTICLE XIII
The following claims procedure shall apply to the Split-Dollar Plan:
A. The beneficiary of such Policy shall make a claim for the
benefits provided under the Policy in the manner provided in
the Policy.
B. With respect to a claim for benefits under said Policy, the
Insurer shall be the entity which reviews and makes decisions
on claim denials.
C. If a claim is wholly or partially denied, notice of the
decision, meeting the requirements of paragraph D below, shall
be furnished to the claimant within a reasonable period of
time after the claim has been filed.
D. The Insurer shall provide to any claimant who is denied a
claim for benefits, written notice setting forth in a manner
calculated to be understood by the claimant, the following:
1. The specific reasons for the denial;
6
<PAGE>
2. Specific reference to the pertinent Policy or plan
provisions on which the denial is based;
3. A description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is
necessary;
4. An explanation of the plan's claim review procedure, as set
forth in paragraph E and F below.
E. The purpose of the review procedure set forth in this
paragraph and in paragraph F below, is to provide a procedure
by which a claimant under the Split-Dollar Plan may have a
reasonable opportunity to appeal a denial of a claim for a
full and fair review. To accomplish that purpose, the claimant
or his duly authorized representative:
1. May request a review upon written application to the
Insurer;
2. May review pertinent plan documents or agreements; and
3. May submit issues and comments in writing.
A claimant (or his duly authorized representative)
shall request a review by filing a written application for
review at any time within sixty (60) days after receipt by the
claimant of written notice of the denial of his claim.
F. A decision on review of a denial of a claim shall be made in
the following manner:
1. The decision on review shall be made by the Insurer, which
may in its discretion hold a hearing on the denied claim.
The Insurer shall make its decision promptly, unless
special circumstances (such as the need
7
<PAGE>
to hold a hearing) require an extension of time for
processing, in which case a decision shall be rendered as
soon as possible, but not later than one hundred twenty
(120) days after receipt of the request for review.
2. The decision on review shall be in writing and shall
include specific reasons for the decisions, written in a
manner calculated to be understood by the claimant, and
specific references to the pertinent Policy or plan
provision on which the decision is based.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
MICROAGE, INC., a Delaware Corporation
By /s/ James R. Daniel
------------------------------------
Its Senior V.P. and C.F.O.
------------------------------------
By /s/ Robert G. O'Malley
------------------------------------
ROBERT G. O'MALLEY
9
<PAGE>
SCHEDULE A
Face Amount $250,000
Policy Number 14016898
Plan of Insurance The Northwestern Mutual Life Insurance
Company
10
<PAGE>
COLLATERAL ASSIGNMENT FORM
Appln. No., Contract No. Date this form is signed:
or Policy No.: 14016898 January 27, 1997
Insured: ROBERT G. O'MALLEY
Insurance Company: The Northwestern Mutual Life Insurance Company
The undersigned request and direct the Insurance Company to make the provisions
of this form a part of the policy.
All previous designations of payees are hereby revoked. It is hereby requested
and directed that:
BENEFICIARIES
(1) In the event of the death of the Insured, MicroAge, Inc., a Delaware
corporation, or its successors ("Corporation"), will be the direct beneficiary
of an amount equal to the premiums paid to the Insurance Company by Corporation
for the Policy. In the event of Corporation's cessation of business, bankruptcy,
receivership or dissolution, Corporation will be the direct beneficiary of an
amount equal to the premiums paid to the Insurance Company by Corporation for
the Policy.
In the event of termination of Insured's employment or the surrender or the
acquisition of the Policy, Corporation will be the direct beneficiary of the
premiums paid to the Insurance Company by Corporation for the Policy.
Any indebtedness by Corporation to the Insurance Company will be deducted first
from the share of the proceeds payable to said Corporation as direct
beneficiary.
It is understood and agreed that the Insurance Company will have the right to
rely on any statement signed by said Corporation setting forth said
Corporation's share of the premium payments referred to above, and any decision
made by Insurance Company in reliance upon such statement will be conclusive and
will fully protect the Insurance Company.
(2) BARBARA A. O'MALLEY if living and married to the Insured on his date of
death will be the direct beneficiary of any remaining proceeds, and if he is
either not married to Insured or living on Insured's date of death, the proceeds
will be payable to Insured's estate.
<PAGE>
The Insurance Company will be fully discharged of liability for any action taken
by the Insured and for all amounts paid to, or at the direction of, the insured
and will have no obligation as to the use of the amounts. In all dealings with
the Insured, the Insurance Company will be fully protected against the claims of
every other person. The Insurance Company will not be charged with notice of a
change of beneficiary unless written evidence of the change is received at the
Insurance Company's Home Office.
OWNERSHIP
(3) The owner of the Policy shall be the Insured. The Insured alone may exercise
all the rights and privileges specified in the Policy, except the Insured may
not assign or borrow on the Policy as long as this Collateral Assignment is in
effect. Corporation may assign or borrow against the Policy loan value only with
the prior written approval of the Insured.
MODIFICATION OF ASSIGNMENT PROVISIONS
Upon death of the Insured, the interest of any collateral assignee of
Corporation will be limited to the portion of the proceeds described in (1)
above.
MICROAGE, INC., a Delaware corporation
By /s/ James R. Daniel
--------------------------------------
Officer
/s/ Robert G. O'Malley
--------------------------------------
ROBERT G. O'MALLEY
MICROAGE, INC.
1997 MANAGEMENT EQUITY PROGRAM
AWARD AGREEMENT
(ROBERT G. O'MALLEY)
October 11, 1996
Dear Bob:
Pursuant to the action taken by the Board of Directors of MicroAge,
Inc. (the "Company") and the Compensation Committee of the Board of Directors,
you are hereby offered participation in the 1997 Management Equity Program (the
"1997 MEP") under the MicroAge, Inc. Long-Term Incentive Plan (the "Plan").
Under the 1997 MEP, you have the opportunity to receive options to restructure
your compensation package to some extent. Essentially, you may elect to purchase
shares of the common stock of the Company if you irrevocably elect to waive all
or a portion of your base salary and any bonuses you may receive for the 1997,
1998, and 1999 fiscal years, and later years if necessary, under the following
terms and conditions.
BEFORE YOU ELECT TO PARTICIPATE IN THE 1997 MEP, READ THIS AWARD AGREEMENT. YOU
WILL BE REQUIRED TO SIGN THIS AWARD AGREEMENT, AND YOUR SIGNATURE WILL EVIDENCE
THAT YOU HAVE READ THIS AWARD AGREEMENT, UNDERSTAND IT, AND AGREE WITH ITS TERMS
AND CONDITIONS.
TO PARTICIPATE IN THE 1997 MEP, YOU MUST COMPLETE AND SIGN THIS AWARD
AGREEMENT AND RETURN IT TO AL LYONS BY 12:00 P.M. NOON ON FRIDAY, OCTOBER
25, 1996.
1. EFFECTIVE DATE. The effective date of your participation in the 1997
MEP is November 4, 1996.
2. 1997-1999 WAIVER. You hereby elect to waive a portion of your salary
and bonuses received for the Company's 1997, 1998, and 1999 fiscal years in the
amounts specified in the tables below (please understand that bonuses for later
years may be automatically waived, as may be necessary to make up any deficit
(see footnote 2 and Example A attached to this Award Agreement)):
<PAGE>
1997-1999 WAIVER TABLE
----------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
============================= ============================= =========================== ===============================
Fiscal Year Salary1 Bonus2 Total
- ----------------------------- ----------------------------- --------------------------- -------------------------------
1997 $40,000 $70,000 $110,000
(11/4/96 - 11/2/97)
- ----------------------------- ----------------------------- --------------------------- -------------------------------
1998 $40,000 $70,000 $110,000
(11/3/97 - 11/1/98)
- ----------------------------- ----------------------------- --------------------------- -------------------------------
1999 $40,000 $80,000 $120,000
(11/2/98 - 10/31/99)
- ----------------------------- ----------------------------- --------------------------- -------------------------------
1997-1999 $120,000 $220,000 $340,000 3
============================= ============================= =========================== ===============================
</TABLE>
1. NUMBER OF OPTIONS GRANTED. In exchange for electing to waive the
amount of compensation specified in the 1997-1999 Waiver Table in Paragraph 2,
above, you are hereby granted an option to purchase the number of shares of
MicroAge, Inc. Common Stock calculated pursuant to the formula below (to be
completed by MicroAge):
<TABLE>
<CAPTION>
<S> <C>
(1) Total Compensation Waived (1997-1999 fiscal years): $ 340,000
--------
(2) $ 340,000 (Total Compensation Waived)
------------------------
Multiplied by Seven (7) (the Leverage Factor"): $ 2,380,000
----------
(3) Common Stock Closing Price on Effective Date
(October 25, 1996) (the "Common Stock Price"): $ 17.625
-------
(4) Total Options Granted (2) , (3) (rounded up):
(See Example B attached to this Award Agreement) $ 135,035
--------- --------
</TABLE>
1. VESTING OF OPTIONS. Your options will vest in one-third (1/3)
increments beginning on the first day of the fiscal year which is three years
following the first day of the fiscal year for each year you elect to waive base
salary and/or bonus amounts. HOWEVER, your options will not fully vest until you
have actually waived all of the compensation you agreed to waive.
- -------------------
(1) The minimum annual salary waiver amount is $17,000 (5% of your
Current Base Salary). The maximum annual salary waiver amount is $51,000 (15% of
your Current Base Salary).
(2) There is no minimum annual bonus waiver amount. The maximum annual
bonus waiver amount is $85,000 (25% of your Current Base Salary). If the bonus
amount you elect to waive in any year is more than the bonus actually paid to
you for that year, the deficit amount will be added to your bonus waiver amount
for the following year. Deficit amounts will continue to be carried forward
until made up or until October 25, 2005. See Example A attached to this Award
Agreement. Note: The bonus waiver amounts are for bonuses relating to a given
fiscal year, whether or not the bonus is paid during such fiscal year. For
example, if a bonus for fiscal year 1997 is paid in December 1997 (during fiscal
year 1998), any 1997 bonus waiver amount you have included in the Waiver Table
would be deducted from your December 1997 bonus.
(3) The minimum waiver amount (salary and bonuses combined) for the
three-year period (1997-1999) is $170,000 (50% of your Current Base Salary). The
maximum waiver amount (salary and bonuses combined) for the three-year period
(1997-1999) is $340,000 (100% of your Current Base Salary).
<PAGE>
FOR EXAMPLE, the options to be purchased with the compensation
you receive for fiscal year 1997 will vest in 1/3 increments beginning on
November 1, 1999 (the first day of fiscal year 2000) and will be 100% vested on
October 29, 2001 (the first day of fiscal year 2002). Correspondingly, the
options to be purchased with the waived compensation you receive for fiscal year
1998 will vest in 1/3 increments beginning on October 30, 2000 (the first day of
fiscal year 2001) and will be 100% vested on November 4, 2002 (the first day of
fiscal year 2002), and so on.
If you elect to waive a specific amount of your bonuses for
the next three fiscal years, but do not receive bonuses for the next three
fiscal years sufficient to cover the amount you agreed to waive, the bonuses you
may be otherwise entitled to receive in later years (up through October 25,
2005) will be used to make up any shortfall on a "first-in, first-out" theory.
See Examples C and D attached to this Award Agreement.
Notwithstanding the above, your options will become fully
vested and exercisable as of October 25, 2005, unless you otherwise terminate
employment before such date.
1. EXPIRATION OF OPTIONS. Subject to Section 6 and 7 of this Award
Agreement, your options will expire, unless sooner exercised, on October 25,
2006.
1. TERMINATION OF EMPLOYMENT.
Death. Upon your death, your beneficiary will be entitled to
receive the number of options determined by multiplying the sum of your
compensation actually waived up to the date of your death by the Leverage Factor
and dividing the product by the Common Stock Price; provided, however, that only
the total compensation waived by you up to the date of your death will be
considered. All options received by your beneficiary will be fully vested and
immediately exercisable. Your beneficiary will have up to one year from the date
of your death to exercise the options. After that one year period, the options
will be cancelled. Under no circumstances will you or your beneficiary be
entitled to receive cash equal to all or any portion of the compensation you
elected to waive under the 1997 MEP.
Disability. Upon your termination of employment due to a
"Disability" (as that term is defined in the Plan) you will be entitled to
receive the number of options determined by multiplying the sum of your
compensation actually waived up to the date of your termination by the Leverage
Factor and dividing the product by the Common Stock Price; provided, however,
that only the total compensation waived by you up to the date of your
termination will be considered. All options received will be fully vested and
immediately exercisable. You will have up to one year from the date of
termination of employment to exercise the options. After that one year period,
the options will be cancelled. Under no circumstances will you be entitled to
receive cash equal to all or any portion of the compensation you elected to
waive under the 1997 MEP.
Voluntary or Involuntary. Upon your voluntary or involuntary
termination of employment, you will be entitled to receive the number of options
determined by multiplying the sum of your compensation actually waived up to the
date of your termination by the Leverage Factor and dividing the product by the
Common Stock Price; provided, however, that only the total compensation waived
by you up to the date of termination of employment will be considered. Your
options will continue to vest under the above vesting schedule as if you
continued to be employed by the Company and continued participating in the 1997
MEP. Under no circumstances will you be entitled to receive cash equal to all or
any portion of the compensation you elected to waive under the 1997 MEP.
1. TERMINATION OF 1997 MEP. If the Committee decides to terminate the
1997 MEP, you will be entitled to receive a number of options determined by
multiplying the sum of your compensation actually waived up to the date of your
termination by the Leverage Factor and dividing the product by the Common Stock
Price; provided, however, that only the total compensation waived by you up to
the date of termination will be considered. All options received will be fully
vested and immediately exercisable. You will have up to thirty days from the
date of such termination to exercise the options. After
<PAGE>
such thirty day period, the options will be cancelled. Under no circumstances
will you be entitled to receive cash equal to all or any portion of the
compensation you elected to waive under the 1997 MEP.
1. CHANGE OF CONTROL. Upon a "Change of Control" (as that term is
defined in the Plan), the terms of Section 13.10 and 14.2 of the Plan will apply
to all options issued under the 1997 MEP. Upon a Change of Control, you will be
entitled to receive the number of options determined by multiplying the sum of
your compensation actually waived up to the date of the Change of Control by the
Leverage Factor and dividing the product by the Common Stock Price; provided,
however, that only the total compensation waived by you up to the date of Change
of Control will be considered. All options will be fully vested and immediately
exercisable. In the event of a dissolution or liquidation of the Company or a
merger or consolidation in which the Company would not be the surviving or
resulting corporation, you will be entitled to receive the number of options
determined by multiplying the sum of your compensation actually waived up to the
date of exercise by the Leverage Factor and dividing the product by the Common
Stock Price; provided, however, that only the total compensation waived by you
up to the date of exercise will be considered. All options will be fully vested
and exercisable (a) in the case of a dissolution or liquidation, at anytime
after the Company's Board of Directors takes action authorizing the dissolution
or liquidation of the Company or (b) in the case of a merger or consolidation in
which the Company would not be the resulting or surviving corporation, upon the
Company's public announcement that a definitive agreement regarding such a
merger or consolidation has been reached. Under no circumstances will you be
entitled to receive cash equal to all or any portion of the compensation you
elected to waive under the 1997 MEP.
1. COMPANY INFORMATION. By signing this Award Agreement, you
acknowledge that you have been given, or were offered, a copy of the Company's
(i) Annual Report on Form 10-K for the fiscal year ended October 29, 1995, and
(ii) Quarterly Reports on Form 10-Q for the fiscal quarters ended January 28,
April 28, and July 28, 1996 (the "SEC Reports"), and that you were given an
opportunity to ask questions of any of the Company's executive officers
regarding the SEC Reports or any other matter regarding the Company.
1. RISK OF INVESTMENT. By signing this Award Agreement, you recognize
that your participation in the 1997 MEP is a speculative investment in that the
success or failure of your investment depends on the market value of the
Company's Common Stock over a several year period. You further recognize that
all or a portion of your investment (i.e., your salary and bonus waiver) may be
lost. You also acknowledge that you were given the opportunity to consult with
your personal advisor(s) regarding the 1997 MEP.
I hereby elect to participate in the 1997 MEP under the terms and
conditions set forth above and acknowledge that I have read and understood the
terms and conditions of the 1997 MEP.
ACCEPTED:
MICROAGE, INC.
SIGNATURE /s/ R. G. O'Malley BY /s/Jeffrey D. McKeever
------------------------- --------------------------
DATE 10/24/96 ITS Chairman and CEO
------------------------- -------------------------
SSN ###-##-####
-------------------------
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
dated as of November 4, 1996
by and between
MICROAGE, INC.
and
CHRISTOPHER J. KOZIOL
<PAGE>
TABLE OF CONTENTS
ARTICLE I--DUTIES AND TERM................................................... 1
1.1 Employment................................................. 1
1.2 Position and Responsibilities.............................. 1
1.3 Term....................................................... 2
1.4 Location................................................... 2
ARTICLE II--COMPENSATION..................................................... 2
2.1 Base Salary................................................ 2
2.2 Bonus Payment.............................................. 3
2.3 Stock Options.............................................. 3
2.4 Additional Benefits........................................ 3
ARTICLE III--TERMINATION OF EMPLOYMENT....................................... 4
3.1 Death or Retirement of Executive........................... 4
3.2 By Executive............................................... 4
3.3 By Company................................................. 4
ARTICLE IV--COMPENSATION UPON TERMINATION OF EMPLOYMENT...................... 5
4.1 Upon Termination for Death or Disability................... 5
4.2 Upon Termination by Company for Cause or by Executive
Without Good Reason........................................ 5
4.3 Upon Termination by the Company Without Cause or by
Executive for Good Reason.................................. 6
4.4 Upon Termination by the Company Without Cause Following
a Change of Control or byExecutive for Good Reason
Following a Change of Control............................... 7
ARTICLE V--RESTRICTIVE COVENANTS............................................. 7
5.1 Confidential Information and Materials..................... 7
5.2 General Knowledge.......................................... 9
5.3 Executive Obligations as to Confidential Information and
Materials.................................................. 9
5.4 Inform Subsequent Employers................................. 9
5.5 Ideas and Inventions....................................... 10
5.6 Inventions and Patents..................................... 10
5.7 Copyrights................................................. 10
5.8 Conflicting Obligations and Rights......................... 11
5.9 Non-Competition............................................ 11
5.10 Non-Disparagement.......................................... 12
5.11 Remedies................................................... 13
5.12 Scope of Article........................................... 13
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ARTICLE VI--MISCELLANEOUS.................................................... 13
6.1 Definitions................................................ 13
6.2 Key Man Insurance.......................................... 17
6.3 Mitigation of Damages; Set-Off; Dispute Resolution......... 17
6.4 Successors; Binding Agreement.............................. 18
6.5 Modification; No Waiver.................................... 18
6.6 Severability............................................... 18
6.7 Notices.................................................... 18
6.8 Assignment................................................. 19
6.9 Entire Understanding....................................... 19
6.10 Executive's Representations................................ 19
6.11 Liability of Company with Respect to Insurance Policy...... 19
6.12 Governing Law.............................................. 19
EXHIBIT A--SPLIT DOLLAR AGREEMENT
EXHIBIT B--EXECUTIVE'S RIGHTS
EXHIBIT C--EXECUTIVE'S EXISTING OBLIGATIONS AND CLAIMS
EXHIBIT D--DISPUTE RESOLUTION PROCEDURES
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AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement") made and
entered into as of November 4, 1996, by and between MICROAGE, INC., a Delaware
corporation (the "Company"), and CHRISTOPHER J. KOZIOL ("Executive").
R E C I T A L S
- - - - - - - -
WHEREAS, the Company and Executive entered into an Employment Agreement
on July 1, 1994 and a First Amendment to the Employment Agreement on October 1,
1995 (collectively, the "Employment Agreement"); and
WHEREAS, pursuant to Section 6.5 of the Employment Agreement, the
Employment Agreement may be amended only by a written document signed by each of
the parties thereto; and
WHEREAS, the Company and Executive desire to amend and restate the
Employment Agreement.
NOW, THEREFORE, in consideration of the premises, and for other
valuable consideration, the sufficiency of which is hereby acknowledged by each
of the parties hereto, the parties hereby agree as follows:
A G R E E M E N T:
- - - - - - - - -
ARTICLE I
DUTIES AND TERM
1.1 Employment. In consideration of their mutual covenants and other
good and valuable consideration, the receipt, adequacy and sufficiency of which
is hereby acknowledged, the Company agrees to hire Executive, and Executive
agrees to remain in the employ of the Company, upon the terms and conditions
herein provided.
1.2 Position and Responsibilities.
(a) Executive shall serve as President, Distribution Group and
Senior Vice President-Sales of MicroAge, Inc. (or in a capacity and with a title
of at least substantially equivalent quality). Executive agrees to perform
services not inconsistent with his position as shall from time to time be
assigned to him by the Chief Executive Officer or President of the Company.
(b) Executive further agrees to serve, if elected, as a
director of the Company and as an officer or director of any subsidiary or
affiliate of the Company.
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(c) During the period of his employment hereunder, Executive
shall devote substantially all of his business time, attention, skill and
efforts to the faithful performance of his duties hereunder.
1.3 Term. The term of Executive's employment under this Agreement shall
commence on the date first above written and shall continue, unless sooner
terminated, until November 2, 1997; provided, however, that commencing on
November 4, 1996 and on each subsequent day thereafter, the Executive's term of
employment shall automatically be extended without further action by the Company
or Executive for the twelve (12) month period commencing on each such day.
1.4 Location. During the period of his employment under this Agreement,
Executive shall not be required, except with his prior written consent, to
relocate his principal place of employment outside Maricopa County, Arizona.
Required travel on the Company's business shall not be deemed a relocation so
long as Executive is not required to provide his services hereunder outside of
Maricopa County, Arizona, for more than fifty (50%) percent of his working days
during any consecutive six (6) month period.
ARTICLE II
COMPENSATION
For all services rendered by Executive in any capacity during his
employment under this Agreement, including, without limitation, services as a
director, officer or member of any committee of the Board of the Company or of
the board of directors of any subsidiary or affiliate of the Company, the
Company shall compensate Executive as follows:
2.1 Base Salary. The Company shall pay to Executive an annual base
salary of not less that $210,000 (such amount, less any salary waivers under the
1994 Management Equity Program or any subsequent management equity or other
waiver program adopted by the Company is hereinafter referred to as the "Base
Salary") during the term hereof; provided, however, that in the event the
Company institutes a salary reduction program which affects all exempt employees
(as defined by standard Company policies in compliance with the Fair Labor
Standards Act) by the same percentage, then Executive's Base Salary may be
reduced by such percentage (and the term "Base Salary" as used in this Agreement
shall refer to Base Salary as so adjusted). Executive's Base Salary shall be
paid in equal semi-monthly installments. The Base Salary shall be reviewed
annually by the Board or a committee designated by the Board and the Board or
such committee may, in its discretion, increase the Base Salary.
2.2 Bonus Payment. During the period of Executive's employment under
this Agreement, Executive shall be entitled to bonus payments, if any shall be
due, pursuant to the Executive Bonus Plan which has been established by
resolution of the Board for fiscal year 1996 (the "1996 Executive Bonus Plan").
The Company shall use all reasonable efforts to cause
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the Board or a committee thereof to establish in each fiscal year during the
term hereof an executive bonus plan that is similar to the 1996 Executive Bonus
Plan in providing for incentive compensation to Executive based on a formula
related to the Company's profits during such fiscal year. Any bonus under the
1996 Executive Bonus Plan or any such subsequent plan, less any bonus waivers
under the 1994 Management Equity Program or any subsequent management equity or
other waiver program adopted by the Company, is referred to herein as the
"Annual Incentive Bonus".
2.3 Stock Options. The Company shall use all reasonable efforts to
establish and maintain one or more stock option plans in which Executive shall
be entitled to participate to the same extent as other Designated Members of the
Executive Council (as such term is defined in Section 6.1 hereof). The terms and
conditions of such plan(s) shall be determined and administered by the Board or
a committee thereof.
2.4 Additional Benefits. Executive shall be entitled to participate in
all employee benefit and welfare programs, plans and arrangements (including,
without limitation, pension, profit sharing, supplemental pension and other
retirement plans, insurance, hospitalization, medical and group disability
benefits, travel or accident insurance plans) and to receive fringe benefits,
such as dues and fees of professional organizations and associations, which are
from time to time available to the Company's executive personnel; provided,
however, there shall be no duplication of termination or severance benefits, and
to the extent that such benefits are specifically provided by the Company to
Executive under other provisions of this Agreement, the benefits available under
the foregoing plans and programs shall be reduced by any benefit amounts paid
under such other provisions. Executive shall during the period of his employment
hereunder continue to be provided with benefits at a level which shall in no
event be less in any material respect than the benefits made available to
Executive by the Company as of the date of this Agreement. Notwithstanding the
foregoing, the Company may terminate or reduce benefits under any benefit plans
and programs to the extent such reductions apply uniformly to Designated Members
of the Executive Council entitled to participate therein, and Executive's
benefits shall be reduced or terminated accordingly. Specifically, without
limitation, Executive shall receive the following benefits:
(a) Death Benefit. The Company and Executive have entered into
a Split Dollar Insurance Agreement, dated as of September 1, 1995, a copy of
which is attached hereto as Exhibit A.
(b) Short-Term Disability Benefits. In the event of
Executive's failure substantially to perform his duties hereunder on a full-time
basis for a period not exceeding 180 consecutive days or for periods aggregating
not more than 180 days during any twelve-month period as a result of incapacity
due to physical or mental illness, the Company shall continue to pay the Base
Salary to Executive during the period of such incapacity, but only in the
amounts and to the extent that disability benefits payable to Executive under
Company-sponsored insurance policies are less than Executive's Base Salary.
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(c) Relocation Expenses. In the event Executive's principal
place of employment is relocated by mutual consent of the parties outside
Maricopa County, Arizona, the Company shall reimburse Executive for all usual
relocation expenses incurred by Executive and his household in moving to the new
location, including, without limitation, moving expenses and rental payments for
temporary living quarters in the area of relocation for a period not to exceed
six months.
(d) Reimbursement of Business Expenses. The Company shall, in
accordance with standard Company policies, pay, or reimburse Executive for, all
reasonable travel and other expenses incurred by Executive in performing his
obligations under this Agreement.
(e) Vacations. Executive shall be entitled to 20 business
days, excluding Company holidays, of paid vacation during each year of
employment hereunder which he shall earn in arrears (i.e., Executive shall be
entitled to no vacation days during his first year of employment). Executive may
accrue and carry forward no more than five unused vacation days from any
particular year of his employment under this Agreement to the next.
ARTICLE III
TERMINATION OF EMPLOYMENT
3.1 Death or Retirement of Executive. Executive's employment under this
Agreement shall automatically terminate upon the death or Retirement (as defined
in Section 6.1) of Executive.
3.2 By Executive. Executive shall be entitled to terminate his
employment under this Agreement by giving Notice of Termination (as defined in
Section 6.1) to the Company:
(a) for Good Reason (as defined in Section 6.1);
(b) at any time without Good Reason.
3.3 By Company. The Company shall be entitled to terminate Executive's
employment under this Agreement by giving Notice of Termination to Executive:
(a) in the event of Executive's Total Disability (as defined
in Section 6.1);
(b) for Cause (as defined in Section 6.1); and
(c) at any time without Cause.
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ARTICLE IV
COMPENSATION UPON TERMINATION OF EMPLOYMENT
If Executive's employment hereunder is terminated in accordance with
the provisions of Article III hereof, except for any other rights or benefits
specifically provided for herein following his period of employment, the Company
shall be obligated to provide compensation and benefits to Executive only as
follows, subject to the provisions of Section 5.11 hereof:
4.1 Upon Termination for Death or Disability. If Executive's employment
hereunder is terminated by reason of his death or Total Disability, the Company
shall:
(a) pay Executive (or his estate) or beneficiaries any Base
Salary which has accrued but not been paid as of the termination date (the
"Accrued Base Salary");
(b) pay Executive (or his estate) or beneficiaries for unused
vacation days accrued as of the termination date in an amount equal to his Base
Salary multiplied by a fraction the numerator of which is the number of accrued
unused vacation days and the denominator of which is 260 (the "Accrued Vacation
Payment");
(c) reimburse Executive (or his estate) or beneficiaries for
expenses incurred by him prior to the date of termination which are subject to
reimbursement pursuant to this Agreement (the "Accrued Reimbursable Expenses");
(d) provide to Executive (or his estate) or beneficiaries any
accrued and vested benefits required to be provided by the terms of any
Company-sponsored benefit plans or programs (the "Accrued Benefits"), together
with any benefits required to be paid or provided in the event of Executive's
death or Total Disability under applicable law;
(e) pay Executive (or his estate) or beneficiaries any Annual
Incentive Bonus with respect to a prior fiscal year which has accrued but has
not been paid; and in addition,
(f) Executive (or his estate) or beneficiaries shall have the
right to exercise all vested unexercised stock options and warrants outstanding
at the termination date in accordance with terms of the plans and agreements
pursuant to which such options or warrants were issued.
4.2 Upon Termination by Company for Cause or by Executive Without Good
Reason. If Executive's employment is terminated by the Company for Cause, or if
Executive terminates his employment with the Company other than (x) upon
Executive's death or Total Disability or (y) for Good Reason, the Company shall:
(a) pay Executive the Accrued Base Salary;
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(b) pay Executive the Accrued Vacation Payment;
(c) pay Executive the Accrued Reimbursable Expenses;
(d) pay Executive the Accrued Benefits, together with any
benefits required to be paid or provided under applicable law;
(e) pay Executive any accrued Annual Incentive Bonus with
respect to a prior year which has accrued but has not been paid; and in addition
(f) Executive shall have the right to exercise vested options
and warrants in accordance with Section 4.1(f).
4.3 Upon Termination by the Company Without Cause or by Executive for
Good Reason. If Executive's employment is terminated by the Company without
Cause or by Executive for Good Reason, the Company shall:
(a) pay Executive the Accrued Base Salary;
(b) pay Executive the Accrued Vacation Payment;
(c) pay Executive the Accrued Reimbursable Expenses;
(d) pay Executive the Accrued Benefits, together with any
benefits required to be paid or provided under applicable law;
(e) pay Executive any Annual Incentive Bonus with respect to a
prior year which has accrued but has not been paid;
(f) pay Executive commencing on the thirtieth day following
the termination date twelve monthly payments equal to one-twelfth of the sum of
(1) Executive's Base Salary in effect immediately prior to the time such
termination occurs, plus (2) the average of the Annual Incentive Bonuses paid to
Executive for the two (2) fiscal years immediately preceding the fiscal year in
which the termination occurs (or if less than two, the amount of his single
Annual Incentive Bonus, if any). For purposes of this subsection (f), no Annual
Incentive Bonus received under the Company's Executive Bonus Plan prior to the
1993 Executive Bonus Plan shall be considered. Should Executive attain
alternative employment during the twelve (12) month payment period, the
Company's obligations under this Section 4.3(f) will be reduced by the amount of
Executive's compensation from his new employer. For example, if Executive were
entitled to receive $17,500 per month for twelve (12) months under this Section
4.3(f), and if, at the beginning of the seventh (7th) month following his
termination date, he finds alternative employment that pays him $15,000 per
month, the Company would be obligated to pay Executive six (6) monthly payments
of $17,500, and six (6) monthly payments of $2,500 under this Section 4.3(f);
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(g) maintain in full force and effect, for Executive's and his
eligible beneficiaries' continued benefit, until the first to occur of (x) his
attainment of alternative employment or (y) 12 months following the termination
date of his employment hereunder the employee benefits provided pursuant to
Company-sponsored benefit plans, programs or other arrangements in which
Executive was entitled to participate as a full-time employee immediately prior
to such termination in accordance with Section 2.4 hereof, subject to the terms
and conditions of such plans and programs (the "Continued Benefits"). If
Executive's continued participation is not permitted under the general terms and
provisions of such plans, programs and arrangements, the Company shall arrange
to provide Executive with Continued Benefits substantially similar to those
which Executive would have been entitled to receive under such plans, programs
and arrangements; and in addition
(h) Executive shall have the right to exercise vested options
and warrants in accordance with Section 4.1(f).
4.4 Upon Termination by the Company Without Cause Following a Change of
Control or by Executive for Good Reason Following a Change of Control. If
following a Change of Control, Executive's employment is terminated by the
Company Without Cause or by Executive for Good Reason, the Company shall:
(a) Make the payments and provide to Executive the benefits
under Section 4.3 other than under Section 4.3(f) hereof; and in addition
(b) Pay to Executive a lump sum payment on or prior to the
thirtieth day following the termination date of Executive's employment hereunder
in an amount equal to one hundred fifty percent (150%) of the sum of (1)
Executive's Base Salary in effect for the fiscal year immediately prior to the
fiscal year in which the Change of Control occurs, plus (2) the average of the
Annual Incentive Bonuses paid to Executive for the two (2) fiscal years
immediately preceding the fiscal year in which the Change of Control occurs (or
if less than two, the amount of his/her single Annual Incentive Bonus, if any).
For purposes of this subsection (b), no Annual Incentive Bonus received under
the Company's Executive Bonus Plan prior to the 1996 Executive Bonus Plan shall
be considered.
ARTICLE V
RESTRICTIVE COVENANTS
5.1 Confidential Information and Materials. Executive hereby agrees and
acknowledges that the following ideas, information and materials in written,
oral, magnetic, photographic, optical or other form and whether now existing or
developed or created during the period of Executive's employment or engagement
with the Company (the "Confidential Information") are proprietary to the Company
and are highly sensitive in nature:
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(a) Hardware. Any and all ideas, concepts, know-how,
techniques, structures, information and materials relating to the design,
development, engineering, invention, patent, patent application, manufacture or
improvement of any and all equipment, components, devices, techniques, processes
or formulas (including, without limitation, mask works, semi-conductor chips,
processors, memories, disc drives, tape heads, computer terminals, keyboards,
storage devices, printers, and optical storage media) and any and all
components, devices, techniques or circuitry incorporated in any of the above
which is or are constructed, designed, improved, altered or used by the Company
and which is or are not generally known to the public or within the industries
in which the Company competes.
(b) Software. Any and all ideas, concepts, know-how,
techniques, structures, information and materials relating to existing computer
software or firmware products and computer software or firmware in various
stages of research and development including without limitation source code,
object and load modules, requirements specifications, design specifications,
design notes, flow charts, coding sheets, annotations, documentation, technical
and engineering data, laboratory studies, benchmark test results, and the
structures, organization, designs, formulas and algorithms which reside in the
software and which are not generally known to the public or within the
industries or trades in which the Company competes.
(c) Business Procedures. Internal business procedures and
business plans, including analytical methods and procedures, licensing
techniques, manufacturing information and procedures such as formulations,
processes and equipment, technical and engineering data, vendor names, other
vendor information, purchasing information, financial information, service and
operational manuals and documentation therefor, ideas for new products and
services and other such information which relates to the way the Company
conducts its business and which is not generally known to the public.
(d) Legal Rights. All patents, copyrights, trade secrets,
trademarks and service marks, and the like.
(e) Marketing Plans and Customers Lists. Any and all customer
and marketing information and materials, such as (i) strategic data, including
marketing and development plans, forecasts and forecast assumptions and volumes,
and future plans and potential strategies of the Company which have been or are
being discussed; (ii) financial data, price and cost objectives, price lists,
pricing policies and procedures, and estimating and quoting policies and
procedures; and (iii) customer data, including customer lists, names of
existing, past or prospective customers and their representatives, data about or
provided by prospective, existing or past customers, customer service
information and materials, data about the terms, conditions and expiration dates
of existing contracts with customers and the type, quantity and specifications
of products and services purchased, leased or licensed by customers of the
Company.
(f) Not Generally Known. Any and all information not generally
known to the public or within the industries or trades in which the Company
competes.
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5.2 General Knowledge. The general skills and experience gained by
Executive during Executive's employment or engagement by the Company, and
information publicly available or generally known within the industries or
trades in which the Company competes, is not considered Confidential
Information. Following the Non-Competition Period (as defined in Section 5.9),
Executive is not restricted from working with a person or entity which has
independently developed information or materials similar to the Confidential
Information, but in such a circumstance, Executive agrees not to disclose the
fact that any similarity exists between the Confidential Information and the
independently developed information and materials, and Executive understands
that such similarity does not excuse Executive from the non-disclosure and other
obligations in this Agreement.
5.3 Executive Obligations as to Confidential Information and Materials.
During Executive's employment or engagement by the Company, Executive will have
access to the Confidential Information and will occupy a position of trust and
confidence with respect to the Confidential Information and the Company's
affairs and business. Executive agrees to take the following steps to preserve
the confidential and proprietary nature of the Confidential Information:
(a) Non-Disclosure. During and after Executive's Employment or
engagement by the Company, Executive will not use, disclose or otherwise permit
any person or entity access to any of the Confidential Information other than as
required in the performance of Executive's duties with the Company. Executive
understands that Executive is not allowed to sell, license, market or otherwise
exploit any products or services (including software or firmware in any form)
which embody in whole or in part any Confidential Information.
(b) Prevent Disclosure. Executive will take all reasonable
precautions to prevent disclosure of the Confidential Information to
unauthorized persons or entities.
(c) Abide by the Company's Restrictions. Executive will treat
as confidential and proprietary any information or materials from outside the
Company which the Company is obligated to treat as confidential or proprietary,
in accordance with the Company's reasonable instructions to Executive.
(d) Return All Materials. Upon termination of Executive's
employment or engagement by the Company for any reason whatsoever, Executive
will deliver to the Company all tangible materials embodying the Confidential
Information, including any documentation, records, listings, notes, data,
sketches, drawings, memoranda, models, accounts, reference materials, samples,
machine-readable media and equipment which in any way relate to the Confidential
Information. Of course, Executive agrees not to retain any copies of any of the
above materials.
5.4 Inform Subsequent Employers. Executive covenants and agrees that,
for a period of 12 months following termination of the Non-Competition Period,
prior to accepting subsequent employment with an employer engaged in
substantially the same line of work as the Company,
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Executive shall: (a) inform any such subsequent employer in writing that this
Agreement exists; and (b) provide the Company with a copy of such writing.
5.5 Ideas and Inventions. Executive agrees to assign to the Company all
of Executive's right, title and interest in or to any and all ideas, concepts,
know-how, techniques, processes, inventions, discoveries, developments, works of
authorship, innovations and improvements ("Inventions") conceived or made by
Executive, whether alone or with others, whether patentable or not, except those
that the Executive developed entirely on Executive's own time without using the
Company's equipment, supplies, facilities, or trade secret information and which
neither (1) relate at the time of conception or reduction to practice of the
invention to the Company's business, or actual or demonstrably anticipated
research or development of the Company nor (2) result from any work performed by
the Executive for the Company. Executive agrees to disclose all Inventions to
the Company promptly, and to provide all assistance reasonably requested by the
Company in the preservation of its interests in the Inventions (such as by
executing documents, testifying, etc.), such assistance to be provided at the
Company's expense but without any additional compensation to Executive.
5.6 Inventions and Patents. Executive agrees that from this date until
Executive leaves the Company's employment, Executive shall keep the Company
informed of any Inventions made by Executive, in whole or in part, or conceived
by Executive, alone or with others, which result from any work Executive may do
for, or at the request of, the Company, or which relate to the Company's
activities, investigations, or obligations.
(a) Assertion of Rights. Executive shall, at the expense of
the Company, assist the Company or its nominees to obtain patents for such
Inventions in any countries throughout the world. Such Inventions shall be the
property of the Company or its nominees, whether patented or not. Executive
shall and does, without charge to the Company, assign to the Company, all of
Executive's right, title, and interest in and to such Inventions, including
patents and patent applications and reissues thereof. Executive agrees to
execute, acknowledge, and deliver any instruments confirming the complete
ownership by the Company of such Inventions. Such assignments shall include the
right to sue for infringement.
(b) Reserved Inventions. Descriptions of all ideas, concepts,
know-how, techniques, processes, inventions, discoveries, developments,
innovations and improvements which Executive made, conceived or acquired prior
to Executive's employment by the Company and all patents and patent applications
relating thereto (collectively referred to as "Executive's Rights") are attached
hereto in Exhibit B, and Executive's Rights shall be excluded from this
Agreement. Executive represents that the absence of any Executive's Rights in
Exhibit B, shall indicate that Executive owns no such Executive's Rights at the
time of signing this Agreement.
5.7 Copyrights. Executive agrees that any work prepared by Executive
during the course of Executive's employment or engagement hereunder which is
eligible for United States copyright protection or protection under the
Universal Copyright Convention, the Berne Copyright Convention and/or the Buenos
Aires Copyright Convention shall be a work made for hire. In the
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event any such work is deemed not to be a work made for hire, Executive hereby
assigns all right, title and interest in and to the copyright in such work to
the Company, and agrees to provide all assistance reasonably requested by the
Company in the establishment, preservation and enforcement of its copyright in
such work, such assistance to be provided at the Company's expense but without
any additional compensation to Executive.
5.8 Conflicting Obligations and Rights. Executive agrees to inform the
Company in writing of any apparent conflict between Executive's work for the
Company and (i) any obligations Executive may have to preserve the
confidentiality of another's proprietary information or materials, or (ii) any
rights Executive claims to any patents, copyrights, trade secrets, or other
inventions, ideas or similar rights, before performing that work. Otherwise, the
Company may conclude that no such conflict exists and Executive agrees
thereafter to make no such claim against the Company. The Company shall receive
such disclosures in confidence. All such existing obligations and claims of
Executive, if any, as of the date of this Agreement are listed on Exhibit C
attached hereto.
5.9 Non-Competition.
(a) Non-competition. By execution of this Agreement, Executive
agrees that during his employment with the Company and for a period of 12 months
following the date of expiration or termination of his employment hereunder (the
"Non-Competition Period") for any reason (whether such termination shall be
voluntary or involuntary), Executive will not, within the United States (in
which territory Executive acknowledges that the Company has sold or marketed its
products or services and conducted its Business, as defined in Section 5.9(d) as
of the date hereof), directly or indirectly, compete with the Company by
carrying on a business that is substantially similar to the Business. Executive
agrees that the 12 month period referred to in the preceding sentence shall be
extended by the number of days included in any period of time during which he is
or was engaged in activities constituting a breach of this Section 5.9.
(b) Definition of "Compete". For the purposes of this Section
5.9, the term "compete" shall mean with respect to the Business: (i) managing,
supervising, or otherwise participating in a management or sales capacity; (ii)
calling on, soliciting, taking away, accepting as a client or customer, or
attempting to call on, solicit, take away, or accept as a client or customer,
any individual partnership, corporation, company, association, or other entity
that was a client or customer of the Company as of immediately prior to the date
hereof; (iii) hiring, soliciting, taking away, or attempting to hire, solicit,
or take away, either on Executive's behalf or on behalf of any other person or
entity, any person serving immediately prior to the date hereof or during the
term hereof as an employee in connection with the Business; or (iv) entering
into or attempting to enter into any business substantially similar to the
Business, either alone or with any individual, partnership, corporation,
company, association, or other entity.
(c) Direct or Indirect Competition. For the purposes of this
Section 5.9, the words "directly or indirectly" as they modify the word
"compete" shall mean (i) acting as an agent, representative, consultant,
officer, director, member, independent contractor, or employee
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of any entity or enterprise that is competing (as defined in Section 5.9(b)
hereof) with the Business, (ii) participating in any such competing entity or
enterprise as an owner, partner, limited partner, joint venturer, member,
creditor, or stockholder (except as a stockholder holding less than a one
percent (1%) interest in a corporation whose shares are actively traded on a
regional or national securities exchange or in the over-the-counter market), and
(iii) communicating to any such competing entity or enterprise the names or
addresses or any other information concerning any past, present, or identified
prospective client or customer of the Company or any entity having title to the
goodwill of the Company with respect to the Business.
(d) Business. For purposes of this Agreement, the term
"Business" shall mean the delivery of systems integration services and master
distribution of information technology product services, as conducted by the
Company immediately prior to the date hereof and/or developed during the term of
this Agreement.
(e) Executive expressly agrees and acknowledges that:
(i) it will require at least twelve (12) months for
the Company to locate, hire and train an appropriate individual to
perform the functions and duties that Executive is performing
hereunder;
(ii) the Company has protected business interests
throughout the United States and that competition with and against such
business interests would be harmful to the Company;
(iii) this covenant not to compete is reasonable as
to time and geographical area and does not place any unreasonable
burden upon him;
(iv) the general public will not be harmed as a
result of enforcement of this covenant not to compete;
(v) his personal legal counsel has reviewed this
covenant not to compete; and
(vi) he understands and hereby agrees to each and
every term and condition of this covenant not to compete (including,
without limitation, the provisions of Section 5.11).
5.10 Non-Disparagement. During the term of this Agreement and the
Non-Competition Period, neither Executive nor the Company shall disparage the
other, and neither shall disclose to any third party the conditions of
Executive's employment with the Company except as may be required (i) pursuant
to applicable law or regulations, including the rules and regulations of the
Securities and Exchange Commission, (ii) to effectuate the provisions of
employee plans or programs and insurance policies, or (iii) as may be otherwise
contemplated herein or unless such information becomes publicly available
without fault of the party making such disclosure.
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5.11 Remedies. Executive expressly agrees and acknowledges that the
covenants set forth in Sections 5.1 through Section 5.10 are necessary for the
protection of the interests of the Company and its affiliates because of the
nature and scope of their business and his position with the Company. Further,
Executive acknowledges that any breach of such covenants would result in
irreparable damage to the Company, and that money damages will not sufficiently
compensate the Company for its injury caused thereby, and that the remedy at law
for any breach or threatened breach of any of such covenants will be inadequate
and, accordingly agrees, that the Company shall, in addition to all other
available remedies (including without limitation, seeking such damages as it can
show it has sustained by reason of such breach), be entitled to injunctive
relief or specific performance and that in addition to such money damages he may
be restrained and enjoined from any continuing breach of this covenant not to
compete without any bond or other security being required of any court.
Executive further acknowledges and agrees that if such covenants, or any of
them, are deemed to be unenforceable and/or the Executive fails to comply with
this Article V, the Company has no obligation to provide any compensation or
other benefits described in Article IV hereof. The remedies set forth in this
Section 5.11 shall be included in any award in favor of the Company under
Exhibit D hereto.
5.12 Scope of Article. For purposes of this Article V, unless the
context otherwise requires, the term "Company" includes MicroAge, Inc., its
direct and indirect subsidiaries, and its affiliates.
ARTICLE VI
MISCELLANEOUS
6.1 Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Accrued Base Salary" - as defined in Section 4.1(a);
(b) "Accrued Benefits" - as defined in Section 4.1(d);
(c) "Accrued Reimbursable Expenses" - as defined in Section
4.1(c);
(d) "Accrued Vacation Payment" - as defined in Section 4.1(b);
(e) "Annual Incentive Bonus" - as defined in Section 2.2;
(f) "Base Salary" - as defined in Section 2.1;
(g) "Board" - shall mean the Board of Directors of the
Company;
(h) "Cause" shall mean the occurrence of any of the following:
13
<PAGE>
(i) Executive's gross and willful misconduct which is
injurious to the Company;
(ii) Executive's engaging in fraudulent conduct with
respect to the Company's business or in conduct of a criminal nature
that may have an adverse impact on the Company's standing and
reputation;
(iii) the continued and unjustified failure or
refusal by Executive to perform the duties required of him by this
Agreement which failure or refusal shall not be cured within fifteen
(15) days following (A) receipt by Executive of written notice from the
Board specifying the factors or events constituting such failure or
refusal, and (B) a reasonable opportunity for Executive to correct such
deficiencies;
(iv) Executive's use of drugs and/or alcohol in
violation of then current Company policy; or
(v) Executive's breach of his obligation under
Section 1.2(c) hereof which shall not be cured within fifteen (15) days
after written notice thereof to Executive.
(i) "Change of Control" shall mean and shall be deemed to have
occurred if:
(i) After the date of this Agreement, any "person"
(as such term is used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any successor
provision thereto) shall become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act or any successor provision
thereto) directly or indirectly of securities of the Company
representing 15 percent or more of the combined voting power of the
Company's then outstanding securities ordinarily having the right to
vote at an election of directors; provided, however, that, for purposes
of this subparagraph, "person" shall exclude the Company, its
subsidiaries, any person acquiring such securities directly from the
Company, any employee benefit plan sponsored by the Company or from
Executive or any stockholder owning 15% or more of the combined voting
power of the Company's outstanding securities as of the date of this
Agreement; or
(ii) Any stockholder of the Company owning 15 percent
or more of the combined voting power of the Company's outstanding
securities as of the date of this Agreement shall become the beneficial
owner (within the meaning of Rule 13d-3 under the Exchange Act)
directly or indirectly of securities of the Company (other than through
the acquisition of securities directly from the Company or from
Executive) representing 25 percent or more of the combined voting power
of the Company's then outstanding securities ordinarily having the
right to vote at an election of directors; or
(iii) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least 80 percent of the Board,
14
<PAGE>
provided, however, that any person becoming a member of the Board
subsequent to the date hereof whose election, or nomination for
election by the Company's stockholders, was approved by a vote of at
least 80 percent of the members then comprising the Incumbent Board
(other than an election or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened
election contest relating to the election of directors of the Company,
as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act or any successor provision thereto) shall be,
for purposes of this Agreement, considered as though such person were a
member of the Incumbent Board; or
(iv) Approval by the stockholders of the Company and
consummation of (A) a reorganization, merger, consolidation, or sale or
other disposition of all or substantially all of the assets of the
Company, in each case, with or to a corporation or other person or
entity of which persons who were the stockholders of the Company
immediately prior to such transaction do not, immediately thereafter,
own more than 60 percent of the combined voting power of the
outstanding voting securities entitled to vote generally in the
election of directors of the reorganized, merged, consolidated or
purchasing corporation (or in the case of a non-corporate person or
entity, functionally equivalent voting power) and 80 percent of the
members of the Board of which corporation (or functional equivalent in
the case of a non-corporate person or entity) were not members of the
Incumbent Board at the time of the execution of the initial agreement
providing for such reorganization, merger, consolidation or sale, or
(B) a liquidation or dissolution of the Company.
(j) "Confidential Information" - as defined in Section 5.1;
(k) "Continued Benefits" - as defined in Section 4.3(g);
(l) "Designated Members of the Executive Council" - shall mean
the members of the Company's Executive Council other than the Chief Executive
Officer, President, Vice Chairman of the Board and the Chief Financial Officer;
(m) "Expiration" shall mean the expiration of Executive's
employment hereunder in accordance with Section 1.3;
(n) "Good Reason" shall mean the occurrence of any of the
following:
(i) Material change by the Company in Executive's
function, duties or responsibilities which would cause Executive's
position with the Company to become of less dignity, responsibility and
importance than those associated with his functions, duties or
responsibilities as of November 4, 1996;
(ii) Executive's Base Salary is reduced by the
Company (unless such reduction is pursuant to a salary reduction
program as described in Section 2.1 hereof) or
15
<PAGE>
there is a material reduction in the benefits that are in effect for
the Executive on November 4, 1996 in accordance with Section 2.4
(unless such reduction is pursuant to a uniform reduction in benefits
for all Designated Members of the Executive Council);
(iii) Except with Executive's prior written consent,
relocation of Executive's principal place of employment to a location
outside of Maricopa County, Arizona, or requiring Executive to travel
on the Company's business more than is required by Section 1.4 hereof;
or
(iv) Other material breach of this Agreement by the
Company, which breach is not cured within fifteen (15) days after
written notice thereof is received by the Company.
(o) "1996 Executive Bonus Plan" - as defined in Section 2.2.
(p) "Non-Competition Period" - as defined in Section 5.9(a);
(q) "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision of this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated. Each Notice of Termination shall be delivered at least thirty (30)
days prior to the effective date of termination;
(r) "Retirement" shall mean normal retirement at age 65;
(s) "Termination" shall mean the termination of Executive's
employment hereunder other than upon expiration of the term of such employment
in accordance with Section 1.3;
(t) "Total Disability" shall mean Executive's failure
substantially to perform his duties hereunder on a full-time basis for a period
exceeding 180 consecutive days or for periods aggregating more than 180 days
during any twelve-month period as a result of incapacity due to physical or
mental illness. If there is a dispute as to whether Executive is or was
physically or mentally unable to perform his duties under this Agreement, such
dispute shall be submitted for resolution to a licensed physician agreed upon by
the Board and Executive, or if an agreement cannot be promptly reached, the
Board and Executive shall promptly select a physician, and if these physicians
cannot agree, the physicians shall promptly select a third physician whose
decision shall be binding on all parties. If such a dispute arises, Executive
shall submit to such examinations and shall provide such information as such
physician(s) may request, and the determination of the physician(s) as to
Executive's physical or mental condition shall be binding and conclusive.
Notwithstanding the foregoing, if Executive participates in any group disability
plan provided by the Company which offers long-term disability benefits, "Total
Disability" shall mean total disability as defined therein.
16
<PAGE>
6.2 Key Man Insurance. The Company shall have the right, in its sole
discretion, to purchase "key man" insurance on the life of Executive. The
Company shall be the owner and beneficiary of any such policy. If the Company
elects to purchase such a policy, Executive shall take such physical
examinations and supply such information as may be reasonably requested by the
insurer.
6.3 Mitigation of Damages; Set-Off; Dispute Resolution.
(a) Executive shall be required to mitigate the amount of any
payment provided for in this Agreement (other than payments received pursuant to
Section 4.4 hereof) by seeking other employment.
(b) If there shall be any dispute between the Company and
Executive (i) in the event of any termination of Executive's employment by the
Company, whether such termination was for Cause, or (ii) in the event of any
termination of employment by Executive, whether Good Reason existed, or (iii)
otherwise arising out of this Agreement, the dispute shall be resolved in
accordance with the dispute resolution procedures set forth in Exhibit D hereto,
the provisions of which are incorporated as a part hereof, and the parties
hereto hereby agree that such dispute resolution procedures shall be the
exclusive method for resolution of disputes under this Agreement; provided,
however, that (1) either party may seek preliminary judicial relief if, in its
judgment, such action is necessary to avoid irreparable injury during the
pendency of such procedures, and (2) nothing in Exhibit D shall prevent either
party from exercising the rights of termination set forth in this Agreement. In
the event of a dispute hereunder as to whether a termination by the Company was
for Cause or by the Executive for Good Reason, until there is a resolution and
award as provided in Exhibit D, the Company shall pay all amounts, and provide
all benefits, to Executive and/or Executive's family or other beneficiaries, as
the case may be, that the Company would be required to pay or provide hereunder
as though such termination were by the Company without Cause or by Executive for
Good Reason and shall pay the reasonable legal fees and expenses of counsel for
Executive in connection with such dispute resolution; provided, however, that
the Company shall not be required to pay any disputed amounts or any legal fees
and expenses pursuant to this subparagraph (b) except upon receipt of a written
undertaking by or on behalf of Executive (and/or Executive's family or other
beneficiaries, as the case may be) to repay, without interest or penalty, as
soon as practicable after completion of the dispute resolution (A) all such
amounts to which Executive (or Executive's family or other beneficiaries, as the
case may be) is ultimately adjudged not be entitled with respect to the payment
of such disputed amount(s) and (B) in addition, in the case of legal fees and
expenses, a proportionate amount of legal fees and expenses attributable to any
of Executive's claim(s) (or any of Executive's defenses or counter-claims(s)),
if any, which shall have been found by the dispute resolver to have been
frivolous or without merit. IT IS EXPRESSLY UNDERSTOOD THAT BY SIGNING THIS
AGREEMENT, WHICH INCORPORATES BINDING ARBITRATION, THE COMPANY AND EXECUTIVE
AGREE, EXCEPT AS SPECIFICALLY PROVIDED OTHERWISE IN SECTION 5.11 AND THIS
SECTION 6.3(b), TO WAIVE COURT OR JURY TRIAL AND TO WAIVE PUNITIVE, STATUTORY,
CONSEQUENTIAL AND ANY DAMAGES, OTHER THAN COMPENSATORY DAMAGES.
17
<PAGE>
6.4 Successors; Binding Agreement. This Agreement shall be binding upon
any successor to the Company and shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, beneficiaries,
designees, executors, administrators, heirs, distributees, devisees and
legatees.
6.5 Modification; No Waiver. This Agreement may not be modified or
amended except by an instrument in writing signed by the parties hereto. No term
or condition of this Agreement shall be deemed to have been waived, nor shall
there be any estoppel against the enforcement of any provision of this
Agreement, except by written instrument by the party charged with such waiver or
estoppel. No such written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall operate only as to the
specific term or condition waived and shall not constitute a waiver of such term
or condition for the future or as to any other term or condition.
6.6 Severability. The covenants and agreements contained herein are
separate and severable and the invalidity or unenforceability of any one or more
of such covenants or agreements, if not material to the employment arrangement
that is the basis for this Agreement, shall not affect the validity or
enforceability of any other covenant or agreement contained herein. If, in any
judicial proceeding, a court shall refuse to enforce one or more of the
covenants or agreements contained herein because the duration thereof is too
long, or the scope thereof is too broad, it is expressly agreed between the
parties hereto that such duration or scope shall be deemed reduced to the extent
necessary to permit the enforcement of such covenants or agreements.
6.7 Notices. All the notices and other communications required or
permitted hereunder shall be in writing and shall be delivered personally or
sent by registered or certified mail, return receipt requested, to the parties
hereto at the following addresses:
If to the Company, to it at:
MicroAge, Inc.
2400 South MicroAge Way
Tempe, Arizona 85282-1896
Attn: Chief Executive Officer
18
<PAGE>
With a copy to:
Matthew P. Feeney
Snell & Wilmer L.L.P.
One Arizona Center
Phoenix, Arizona 85004-0001
If Executive, to him at:
Christopher J. Koziol
9654 East Ironwood Drive
Scottsdale, Arizona 85258
6.8 Assignment. This Agreement and any rights hereunder shall not be
assignable by either party without the prior written consent of the other party
except as otherwise specifically provided for herein.
6.9 Entire Understanding. This Agreement (together with the Exhibit
incorporated as a part hereof) constitutes the entire understanding between the
parties hereto and no agreement, representation, warranty or covenant has been
made by either party except as expressly set forth herein.
6.10 Executive's Representations. Executive represents and warrants
that neither the execution and delivery of this Agreement nor the performance of
his duties hereunder violates the provisions of any other agreement to which he
is a party or by which he is bound.
6.11 Liability of Company with Respect to Insurance Policy. Executive
has selected the insurer and policy referred to in Section 2.4(a) hereof, and
the Company shall not have any liability to Executive (or his beneficiaries)
should the insurance company which issues the policy referred to therein fail or
refuse to pay (whether voluntarily or by reason of any order, injunction or
otherwise) thereunder or if any rights or elections otherwise available to
Executive thereunder are restricted or eliminated.
6.12 Governing Law. This Agreement shall be construed in accordance
with and governed for all purposes by the laws of the State of Arizona
applicable to contracts executed and wholly performed within such state.
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Company:
MICROAGE, INC.
By:/s/ Jeffrey D. McKeever
-----------------------------------------
Name: Jeffrey D. McKeever
---------------------------------------
Title: Chairman and CEO
--------------------------------------
Executive:
CHRISTOPHER J. KOZIOL
/s/ Christopher J. Koziol
-------------------------------------------
20
<PAGE>
EXHIBIT A
SPLIT DOLLAR AGREEMENT
----------------------
<PAGE>
EXHIBIT B
EXECUTIVE'S RIGHTS
------------------
None
<PAGE>
EXHIBIT C
EXECUTIVE'S EXISTING OBLIGATIONS AND CLAIMS
-------------------------------------------
None
<PAGE>
EXHIBIT D
DISPUTE RESOLUTION PROCEDURES
-----------------------------
A. If a controversy should arise which is covered by Section 6.3 of
Article VI, then not later than twelve (12) months from the date of the event
which is the subject of dispute either party may serve on the other a written
notice specifying the existence of such controversy and setting forth in
reasonably specific detail the grounds thereof ("Notice of Controversy");
provided that, in any event, the other party shall have at least thirty (30)
days from and after the date of the Notice of Controversy to serve a written
notice of any counterclaim ("Notice of Counterclaim"). The Notice of
Counterclaim shall specify the claim or claims in reasonably specific detail. If
the Notice of Controversy or the Notice of Counterclaim, as the case may be, is
not served within the applicable period, the claim set forth therein will be
deemed to have been waived, abandoned and rendered unenforceable.
B. Following receipt of the Notice of Controversy (or the Notice of
Counterclaim, as the case may be), there shall be a three week period during
which the parties will make a good faith effort to resolve the dispute through
negotiation ("Period of Negotiation"). Neither party shall take any action
during the Period of Negotiation to initiate arbitration proceedings.
C. If the parties should agree during the Period of Negotiation to
mediate the dispute, then the Period of Negotiation shall be extended by an
amount of time to be agreed upon by the parties to permit such mediation. In no
event, however, may the Period of Negotiation be extended by more than five
weeks or, stated differently, in no event may the Period of Negotiation be
extended to encompass more than a total of eight weeks.
D. If the parties agree to mediate the dispute but are thereafter
unable to agree within a week on the format and procedures for the mediation,
then the effort to mediate shall cease, and the Period of Negotiation shall
terminate four weeks from the Notice of Controversy (or the Notice of
Counterclaim, as the case may be).
E. Following the termination of the Period of Negotiation, the dispute
(including the main claim and counterclaim, if any) shall be settled by
arbitration, governed by the Federal Arbitration Act, 9 U.S.C. ss. 1 et seq.
("FAA"), and judgment upon the award may be entered in any court having
jurisdiction thereof. The format and procedures of the arbitration are set forth
below (referred to below as the "Arbitration Agreement").
F. A notice of intention to arbitrate ("Notice of Arbitration") shall
be served within 45 days of the termination of the Period of Negotiation. If the
Notice of Arbitration is not served within this period, the claim set forth in
the Notice of Controversy (or the Notice of Counterclaim, as the case may be)
will be deemed to have been waived, abandoned and rendered unenforceable.
<PAGE>
G. The arbitration, including the Notice of Arbitration, will be
governed by the Commercial Rules of the American Arbitration Association ("AAA")
in effect on the date of the Notice of Arbitration, except that the terms of
this Arbitration Agreement shall control in the event of any difference or
conflict between such Rules and the terms of this Arbitration Agreement.
H. The arbitrator shall reach a decision on the merits on the basis of
applicable legal principles as embodied in the law of the State of Arizona. The
arbitration hearing shall take place in Phoenix, Arizona.
I. There shall be one arbitrator, regardless of the amount in
controversy. The arbitrator selected, in order to be eligible to serve, shall be
a lawyer in Phoenix, Arizona with at least 15 years specializing in either
general commercial litigation or general corporate and commercial matters. In
the event the parties cannot agree on a mutually acceptable single arbitrator
from the list submitted by the AAA, the AAA shall appoint the arbitrator who
shall meet the foregoing criteria.
J. At the time of appointment and as a condition thereto, the
arbitrator will be apprised of the time limitations and other provisions of this
Arbitration Agreement and shall indicate such dispute resolver's agreement to
the Tribunal Administrator to comply with such provisions and time limitations.
K. During the 30 day period following appointment of the arbitrator,
either party may serve on the other a request for limited numbers of documents
directly related to the dispute. Such documents will be produced within seven
days of the request.
L. Following the thirty-day period of document production, there will
be a forty-five day period during which limited depositions will be permissible.
Neither party will take more than 5 depositions, and no deposition will exceed
three hours of direct testimony.
M. Disputes as to discovery or prehearing matters of a procedural
nature shall be promptly submitted to the arbitrator pursuant to telephone
conference call or otherwise. The arbitrator shall make every effort to render a
ruling on such interim matters at the time of the hearing (or conference call)
or within five business days thereafter.
N. Following the period of depositions, the arbitration hearing shall
promptly commence. The arbitrator will make every effort to commence the hearing
within thirty days of the conclusion of the deposition period and, in addition,
will make every effort to conduct the hearing on consecutive business days to
conclusion.
O. An award will be rendered, at the latest, within nine months of the
date of the Notice of Arbitration and within thirty days of the close of the
arbitration hearing. The award shall set forth the grounds for the decision
(findings of fact and conclusions of law) in reasonably specific detail and
shall also specify whether any claim (or defense or counter-claim) of Executive
is found to be frivolous or without merit and what proportion, if any, of his
legal fees
D-2
<PAGE>
and expenses which have been paid by the Company Executive shall be required to
repay to the Company in accordance with Section 6.3(b). The award shall be final
and nonappealable except as provided in the FAA and except that a court of
competent jurisdiction shall have the power to review whether, as a matter of
law, based upon the findings of fact by the arbitrator, the award should be
confirmed or should be modified or vacated in order to correct any errors of law
made by the arbitrator. Such judicial review shall be limited to issues of law,
and the parties agree that the findings of fact made by the arbitrator shall be
final and binding on the parties and shall serve as the facts to be relied upon
by the court in determining the extent to which the award should be confirmed,
modified or vacated.
The award may only be made for compensatory damages, and if any other
damages (whether exemplary, punitive, consequential, statutory or other) are
included, the award shall be vacated and remanded, or modified or corrected, as
appropriate to promote this damage limitation; provided, however, that an award
in favor of the Company shall include the relief set forth in Section 5.11.
D-3
SPLIT-DOLLAR INSURANCE AGREEMENT
--------------------------------
THIS AGREEMENT is made as of this 1st day of September, 1995, by and
between MICROAGE, INC., a Delaware corporation (hereinafter referred to as
"Corporation"), and CHRISTOPHER J. KOZIOL (hereinafter referred to as
"Insured").
WHEREAS, Insured plans to acquire insurance on his life of under a
policy issued by Northwestern Mutual Life Insurance Company (hereinafter
referred to as "Insurer"); and
WHEREAS, Corporation wants to assist Insured by paying all premiums due
on the policy; and
WHEREAS, Insured will be the owner of the insurance policy and the
policy will be assigned to Corporation as security for the repayment of the
premiums which Corporation will pay when due on the policy;
The parties, therefore, in consideration of the mutual promises
contained herein, hereby agree as follows:
ARTICLE I
Insured plans to acquire from the Insurer a policy on the life of the
Insured in the face amount of Seven Hundred Fifty Thousand Dollars ($750,000)
(hereinafter referred to as the "Policy"). The policy number, face amount and
plan of insurance will be recorded on Schedule A attached to this Agreement and
the Policy will then be subject to the terms of this
<PAGE>
Agreement. During the term of this Agreement, Corporation will not exercise nor
withhold its consent to the exercise by Insured of any rights, privileges or
options conferred by the terms of the Policy, except as otherwise provided in
Article V, paragraph C hereof.
ARTICLE II
All premiums due on the Policy which shall be Fifteen Thousand Three
Hundred Eighty-Two Dollars and Fifty-Seven Cents ($15,382.57) per year, shall be
paid by Corporation until the first to occur of (i) the death of the Insured,
(ii) Insured's termination of employment with Corporation, or (iii) Corporation
has paid twenty (20) premium payments.
ARTICLE III
A. Insured shall execute and deliver a collateral assignment of the
Policy to Corporation on a form approved by Insurer, as a security interest for
the amounts paid by Corporation towards its share of the premiums to be paid on
the Policy in accordance with Article II of this Agreement. In the event of the
death of Insured pursuant to Article IV hereof, or in the event of the surrender
or acquisition of the Policy pursuant to Article V hereof, such security
interest shall be for an amount equal to the total premiums paid by the
Corporation (less any outstanding loans to Corporation pursuant to Article III,
paragraph B hereof).
B. Corporation may not borrow against the Policy's loan value, without
the prior written approval of Insured.
2
<PAGE>
C. Corporation shall pay all interest with respect to loans made
pursuant to subparagraph B; provided, however, that no payment of interest shall
constitute a premium payment under this Agreement.
D. The term "net cash surrender value" when used in this Agreement
shall mean the gross value as determined by Insurer less any outstanding loans
made to Corporation and interest then due on such loans.
ARTICLE IV
In the event of the death of Insured, the proceeds of the Policy shall
be divided into two parts and paid by Insurer as follows:
Part A - This part shall be paid to Corporation in an amount
equal to the Corporation's security interest in the
Policy as determined pursuant to Article III,
paragraph A hereof. Corporation shall supply Insurer
with any information necessary for Insurer to
determine such amount.
Part B - The balance of the death benefit shall be paid to
the beneficiary designated by the Insured.
. . .
. . .
. . .
3
<PAGE>
ARTICLE V
A. The Insured may, at any time, with the Corporation's prior written
consent, surrender the Policy and receive the net cash surrender value thereof.
Insured shall pay to Corporation an amount equal to Corporation's security
interest in the Policy as determined in Article III, paragraph A hereof, or may
authorize and instruct Insurer to pay such amount directly to Corporation.
B. The Insured may acquire Corporation's interest in the Policy for an
amount equal to the Corporation's security interest in the Policy as determined
in Article III, paragraph A hereof upon the Insured's termination of employment
with Corporation.
C. Except as provided in the collateral assignment or as necessary to
protect Corporation's security interest, Insured shall be entitled to exercise
all of the rights available under the terms of the Policy, except the Insured
may not assign or borrow on the Policy as long as a collateral assignment is in
effect on the Policy.
ARTICLE VI
A. Subject to Article VI, paragraph B below, this Agreement shall
terminate upon the occurrence of any of the following:
1. Surrender or acquisition of the Policy by Insured,
pursuant to Article V of this Agreement.
2. Cessation of the corporate business.
3. Bankruptcy, receivership or dissolution of
Corporation.
. . .
4
<PAGE>
4. The termination of Insured's employment with the
Corporation.
5. The death of Insured.
B. If this Agreement is terminated pursuant to Article VI, paragraph
A.2 or 3. above, Insured shall pay Corporation an amount equal to Corporation's
security interest in the Policy as determined in Article III, paragraph A
hereof. Upon receipt of such amounts, Corporation shall thereupon execute and
deliver to Insured a release of the collateral assignment of the Policy.
C. If this Agreement is terminated pursuant to Article VI, paragraph
A.4 above, Insured shall pay Corporation an amount equal to Corporation's
security interest in the Policy as determined in Article III, paragraph A above.
D. If Insured does not remit the amounts described in paragraph B and C
above, within thirty (30) days of the event described in Article VI, paragraph
A.2, 3. or 4., then all obligations of Corporation under this Agreement shall be
terminated and Insured shall transfer the ownership of the Policy to
Corporation.
ARTICLE VII
Insurer is not a party to this Agreement and the obligations of Insurer
are those set forth in the Policy.
ARTICLE VIII
This Agreement shall be binding upon the parties hereto, their heirs,
legal representatives, successors and assigns.
5
<PAGE>
ARTICLE IX
This Agreement may be altered, amended or modified only by written
instrument signed by Corporation and the Insured.
ARTICLE X
This Agreement shall be construed according to the laws of the State of
Arizona.
ARTICLE XI
Insured may add a rider to the Policy for the benefit of his
beneficiaries. Upon written request by Corporation, Insured will add a rider to
the Policy for the benefit of Corporation. The additional premium for any rider
which is added to the Policy will be paid by the party entitled to receive the
proceeds of the rider.
ARTICLE XII
A. The party designated as the "named fiduciary" for the
Split-Dollar Plan established by this Agreement shall have the
authority to control and manage the operation and
administration of such plan; provided, however, the Insurer
shall be the fiduciary of the plan solely with regard to the
review and final decision on a claim for benefits under its
Policy as provided in Article XIII Claims Procedure, set forth
below.
B. The Fiduciary may allocate his responsibilities for the
operation and administration of the Split-Dollar Plan,
including the designation of persons to
6
<PAGE>
carry out fiduciary responsibilities under any such plan. He
shall effect such allocation of his responsibilities by
delivering to the Corporation a written instrument signed by
him that specifies the nature and extent of the
responsibilities allocated, including, the persons who are
designated to carry out these fiduciary responsibilities under
the Split-Dollar Plan, together with a signed acknowledgement
of their acceptance.
ARTICLE XIII
The following claims procedure shall apply to the Split-Dollar Plan:
A. The beneficiary of such Policy shall make a claim for the
benefits provided under the Policy in the manner provided in
the Policy.
B. With respect to a claim for benefits under said Policy, the
Insurer shall be the entity which reviews and makes decisions
on claim denials.
C. If a claim is wholly or partially denied, notice of the
decision, meeting the requirements of paragraph D below, shall
be furnished to the claimant within a reasonable period of
time after the claim has been filed.
D. The Insurer shall provide to any claimant who is denied a
claim for benefits, written notice setting forth in a manner
calculated to be understood by the claimant, the following:
1. The specific reasons for the denial;
7
<PAGE>
2. Specific reference to the pertinent Policy or plan
provisions on which the denial is based;
3. A description of any additional material or
information necessary for the claimant to perfect the
claim and an explanation of why such material or
information is necessary;
4. An explanation of the plan's claim review procedure,
as set forth in paragraph E and F below.
E. The purpose of the review procedure set forth in this
paragraph and in paragraph F below, is to provide a procedure
by which a claimant under the Split-Dollar Plan may have a
reasonable opportunity to appeal a denial of a claim for a
full and fair review. To accomplish that purpose, the claimant
or his duly authorized representative:
1. May request a review upon written application to the
Insurer;
2. May review pertinent plan documents or agreements;
and
3. May submit issues and comments in writing.
A claimant (or his duly authorized representative)
shall request a review by filing a written application for
review at any time within sixty (60) days after receipt by the
claimant of written notice of the denial of his claim.
F. A decision on review of a denial of a claim shall be made in
the following manner:
1. The decision on review shall be made by the Insurer,
which may in its discretion hold a hearing on the
denied claim. The Insurer shall make
8
<PAGE>
its decision promptly, unless special circumstances
(such as the need to hold a hearing) require an
extension of time for processing, in which case a
decision shall be rendered as soon as possible, but
not later than one hundred twenty (120) days after
receipt of the request for review.
2. The decision on review shall be in writing and shall
include specific reasons for the decisions, written
in a manner calculated to be understood by the
claimant, and specific references to the pertinent
Policy or plan provision on which the decision is
based.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
MICROAGE, INC., a Delaware Corporation
By /s/ James R. Daniel
----------------------------------
Its Senior VP and CFO
-------------------------------
By /s/ Christopher J. Koziol
----------------------------------
CHRISTOPHER J. KOZIOL
9
<PAGE>
SCHEDULE A
Face Amount $750,000
Policy Number 1354488
Plan of Insurance The Northwestern Mutual Life Insurance Company
10
<PAGE>
COLLATERAL ASSIGNMENT FORM
Appln. No., Contract No. Date this form is signed:
or Policy No.:13454488 September 1 1995
Insured: CHRISTOPHER J. KOZIOL
Insurance Company: The Northwestern Mutual Life Insurance Company
The undersigned request and direct the Insurance Company to make the provisions
of this form a part of the policy.
All previous designations of payees are hereby revoked. It is hereby requested
and directed that:
BENEFICIARIES
(1) In the event of the death of the Insured, MicroAge, Inc., a Delaware
corporation, or its successors ("Corporation"), will be the direct beneficiary
of an amount equal to the premiums paid to the Insurance Company by Corporation
for the Policy. In the event of Corporation's cessation of business, bankruptcy,
receivership or dissolution, Corporation will be the direct beneficiary of an
amount equal to the premiums paid to the Insurance Company by Corporation for
the Policy.
In the event of termination of Insured's employment, or the surrender or the
acquisition of the Policy, Corporation will be the direct beneficiary of the
premiums paid to the Insurance Company by Corporation for the Policy.
Any indebtedness by Corporation to the Insurance Company will be deducted first
from the share of the proceeds payable to said Corporation as direct
beneficiary.
It is understood and agreed that the Insurance Company will have the right to
rely on any statement signed by said Corporation setting forth said
Corporation's share of the premium payments referred to above, and any decision
made by Insurance Company in reliance upon such statement will be conclusive and
will fully protect the Insurance Company.
(2) JAIME KOZIOL if living and married to the Insured on her date of death will
be the direct beneficiary of any remaining proceeds, and if she is either not
married to Insured or living on Insured's date of death, the proceeds will be
payable to Insured's estate.
<PAGE>
The Insurance Company will be fully discharged of liability for any action taken
by the Insured and for all amounts paid to, or at the direction of, the insured
and will have no obligation as to the use of the amounts. In all dealings with
the Insured, the Insurance Company will be fully protected against the claims of
every other person. The Insurance Company will not be charged with notice of a
change of beneficiary unless written evidence of the change is received at the
Insurance Company's Home Office.
OWNERSHIP
(3) The owner of the Policy shall be the Insured. The Insured alone may exercise
all the rights and privileges specified in the Policy, except the Insured may
not assign or borrow on the Policy as long as this Collateral Assignment is in
effect. Corporation may assign or borrow against the Policy loan value only with
the prior written approval of the Insured.
MODIFICATION OF ASSIGNMENT PROVISIONS
Upon death of the Insured, the interest of any collateral assignee of
Corporation will be limited to the portion of the proceeds described in (1)
above.
MICROAGE, INC., a Delaware corporation
By /s/ James R. Daniel
---------------------
Officer
/s/ Christopher J. Koziol
-------------------------
CHRISTOPHER J. KOZIOL
MICROAGE, INC.
1994 MANAGEMENT EQUITY PROGRAM
AWARD AGREEMENT
December 9, 1993
Dear Chris:
Pursuant to the action taken by the Board of Directors of
MicroAge, Inc. (the "Company") and the Compensation Committee of the Board of
Directors, you are hereby offered participation in the 1994 Management Equity
Program (the "1994 MEP") under the MicroAge, Inc. Long-Term Incentive Plan (the
"Plan"). Under the 1994 MEP, you have the opportunity to receive options to
restructure your compensation package to some extent. Essentially, you may elect
to purchase shares of the common stock of the Company if you irrevocably elect
to waive (1) all or a portion of your 1993 fiscal year bonus (the "1993 Bonus"),
and (2) a portion of your base salary and any bonuses you may receive for the
1994, 1995, and 1996 calendar years, and later years if necessary, under the
following terms and conditions.
BEFORE YOU ELECT TO PARTICIPATE IN THE 1994 MEP, READ THIS AWARD AGREEMENT. YOU
WILL BE REQUIRED TO SIGN THIS AWARD AGREEMENT AND YOUR SIGNATURE WILL EVIDENCE
THAT YOU HAVE READ THIS AWARD AGREEMENT, UNDERSTAND IT, AND AGREE WITH ITS TERMS
AND CONDITIONS.
TO PARTICIPATE IN THE 1994 MEP, YOU MUST COMPLETE AND SIGN THIS AWARD AGREEMENT
AND RETURN IT TO CRAIG CANTONI BY 12:00 P.M. NOON ON TUESDAY, DECEMBER 14, 1993.
1. EFFECTIVE DATE. The effective date of your participation in
the 1994 MEP is December 14, 1993.
2. STOCKHOLDER APPROVAL. The 1994 MEP is subject to
stockholder approval of the Plan, which will be sought at the 1994 Annual
Meeting of Stockholders. If stockholder approval is not obtained at such
meeting, the 1994 MEP will be deemed to have never been implemented and the
options thereunder will be deemed to have never been granted.
3. 1993 BONUS WAIVER. You hereby elect to waive all or a
portion of your 1993 Bonus in the amount specified in the table below, subject
to the limitation described in footnote 6 below.
1993 BONUS WAIVER(1)
================================================================================
1993 Bonus Waived 1994 Salary Credit Amount(2) Bonus Credit Amount(3)
- --------------------------------------------------------------------------------
$49,500 $19,500 $30,000
================================================================================
- --------
1 You are not required to waive any of your 1993 Bonus as a condition to
participate in the 1994 MEP. Any part of your 1993 Bonus that you elect to waive
will be credited against your 1994 salary waiver amount (up to the amount of the
Salary Credit Amount) and your 1994 bonus waiver amount, in that order. This
"credit" can be carried forward beyond 1994. See Example A attached to this
Award Agreement.
2 You may insert any amount from $0 to $19,500 (15% of your Current Base
Salary).
3 Computed by subtracting the Salary Credit Amount from the 1993 Bonus
Waived.
<PAGE>
4. 1994-1996 WAIVER. You hereby elect to waive a portion of
your salary and bonuses for the 1994, 1995, and 1996 calendar years in the
amounts specified in the tables below (please understand that bonuses for later
years may be automatically waived, as may be necessary to make up any deficit
(see footnote 5)):
1994-1996 WAIVER TABLE
================================================================================
Year Salary(4) Bonus(5) Total
- --------------------------------------------------------------------------------
1994 $19,500 $30,000 $49,500(6)
- --------------------------------------------------------------------------------
1995 $7,000 $25,000 $32,000
- --------------------------------------------------------------------------------
1996 $7,000 $20,000 $27,000
- --------------------------------------------------------------------------------
1993-1996 $33,500 $75,000 $108,500(7)
========
================================================================================
5. NUMBER OF OPTIONS GRANTED. In exchange for electing to
waive the amount of compensation specified in the 1994-1996 Waiver Table in
Paragraph 4, above, you are hereby granted an option to purchase the number of
shares of MicroAge, Inc. Common Stock calculated pursuant to the formula below
(to be completed by MicroAge):
(1) Total Compensation Waived (1994-1996): $108,500
-------
(2) $108,500 (Total Compensation Waived)
Multiplied by Ten (10): $1,085,000
----------
(3) Common Stock Closing Price
Effective Date (December 14, 1993)
(the "Common Stock Price"): $24.83
------
(4) Total Options Granted (2) / (3) (rounded up): 43,692
(See Example C attached to this Award Agreement) ------
- ---------------------------
4 The minimum annual salary waiver amount is $6,500 (5% of your Current
Base Salary). The maximum annual salary waiver amount is $19,500 (15% of your
Current Base Salary).
5 There is no minimum annual bonus waiver amount. The maximum annual bonus
waiver amount is $32,500 (25% of your Current Base Salary). If the bonus amount
you elect to waive in any year is more than the bonus actually paid to you for
that year (and you do not have a Bonus Credit Amount to apply to the deficit),
the deficit amount will be added to your bonus waiver amount for the following
year. Deficit amounts will continue to be carried forward until made up or until
December 14, 2002. See Example B attached to this Award Agreement.
6 The amount of your 1993 Bonus that you may waive cannot exceed this
number. See Example A attached to this Award Agreement.
7 The minimum waiver amount (salary and bonuses combined) for the
three-year period (1994-1996) is $65,000 (50% of your Current Base Salary).
-2-
<PAGE>
6. VESTING OF OPTIONS. Your options will vest in one-third
(1/3) increments beginning on the January 1 which is three years following the
January 1 of the calendar year for each year you elect to waive base salary
and/or bonus amounts. Any amount of your 1993 Bonus that you elect to waive will
be used as a credit against future waiver amounts and will be deemed to be
waived in the year that such credit is taken. HOWEVER, your options will not
fully vest until you have actually waived all of the compensation you agreed to
waive.
FOR EXAMPLE, the options to be purchased with the
compensation you waive in 1994 will vest in 1/3 increments beginning on January
1, 1997 and will be 100% vested on January 1, 1999. Correspondingly, the options
to be purchased with the compensation you waive in 1995 will vest in 1/3
increments beginning on January 1, 1998 and will be 100% vested on January 1,
2000, and so on.
If you elect to waive a specific amount of your
bonuses for the next three years, but do not receive bonuses for the next three
years sufficient to cover the amount you agreed to waive (and you do not have a
Bonus Credit Amount to apply against the deficit), the bonuses you may be
otherwise entitled to receive in later years (up through December 13, 2002) will
be used to make up any shortfall on a "first-in, first-out" theory. See Example
D attached to this Award Agreement.
Notwithstanding the above, your options will become
fully vested and exercisable as of December 14, 2002, unless you otherwise
terminate employment before such date.
7. EXPIRATION OF OPTIONS. Subject to Section 8 and 9 of this
Award Agreement, your options will expire, unless sooner exercised, on December
14, 2003.
8. TERMINATION OF EMPLOYMENT
Death. Upon your death, your beneficiary will be
entitled to receive the number of options determined by multiplying the sum of
your compensation actually waived up to the date of your death by ten and
dividing the product by the Common Stock Price; provided, however, that only the
total compensation waived by you up to the date of your death will be
considered. All options received by your beneficiary will be fully vested and
immediately exercisable. Your beneficiary will have up to one year from the date
of your death to exercise the options. After that one year period, the options
will be cancelled. Under no circumstances will you or your beneficiary be
entitled to receive cash equal to all or any portion of the compensation you
elected to waive under the 1994 MEP.
Disability. Upon your termination of employment due
to a "Disability" (as that term is defined in the Plan) you will be entitled to
receive the number of options determined by multiplying the sum of your
compensation actually waived up to the date of your termination by ten and
dividing the product by the Common Stock Price; provided, however, that only the
total compensation waived by you up to the date of your termination will be
considered. All options received will be fully vested and immediately
exercisable. You will have up to one year from the date of termination of
employment to exercise the options. After that one year period, the options will
be cancelled. Under no circumstances will you be entitled to receive cash equal
to all or any portion of the compensation you elected to waive under the 1994
MEP.
Voluntary or Involuntary. Upon your voluntary or
involuntary termination of employment, you will be entitled to receive the
number of options determined by multiplying the sum of your compensation
actually waived up to the date of your termination by ten and dividing the
product by the Common Stock Price; provided, however, that only the total
compensation waived by you up to the date of termination of employment will be
considered. Your options will continue to vest under the above vesting schedule
as if you continued to be employed by the Company and continued participating in
the 1994 MEP. Under no
-3-
<PAGE>
circumstances will you be entitled to receive cash equal to all or any portion
of the compensation you elected to waive under the 1994 MEP.
9. TERMINATION OF 1994 MEP. If the Committee decides to
terminate the 1994 MEP, you will be entitled to receive a number of options
determined by multiplying the sum of your compensation actually waived up to the
date of your termination by ten and dividing the product by the Common Stock
Price; provided, however, that only the total compensation waived by you up to
the date of termination will be considered. All options received will be fully
vested and immediately exercisable. You will have up to thirty days from the
date of such termination to exercise the options. After such thirty day period,
the options will be cancelled. Under no circumstances will you be entitled to
receive cash equal to all or any portion of the compensation you elected to
waive under the 1994 MEP.
10. CHANGE OF CONTROL. Upon a "Change of Control" (as that
term is defined in the Plan), the terms of Section 13.10 and 14.2 of the Plan
will apply to all options issued under the 1994 MEP. Upon a Change of Control,
you will be entitled to receive the number of options determined by multiplying
the sum of your compensation actually waived up to the date of the Change of
Control by ten and dividing the product by the Common Stock Price; provided,
however, that only the total compensation waived by you up to the date of the
Change of Control will be considered. All options will be fully vested and
immediately exercisable. In the event of a dissolution or liquidation of the
Company or a merger or consolidation in which the Company would not be the
surviving or resulting corporation, you will be entitled to receive the number
of options determined by multiplying the sum of your compensation actually
waived up to the date of exercise by ten and dividing the product by the Common
Stock Price; provided, however, that only the total compensation waived by you
up to the date of exercise will be considered. All options will be fully vested
and exercisable (a) in the case of a dissolution or liquidation, at anytime
after the Company's Board of Directors takes action authorizing the dissolution
or liquidation of the Company or (b) in the case of a merger or consolidation in
which the Company would not be the resulting or surviving corporation, upon the
Company's public announcement that a definitive agreement regarding such a
merger or consolidation has been reached. Under no circumstances will you be
entitled to receive cash equal to all or any portion of the compensation you
elected to waive under the 1994 MEP.
11. COMPANY INFORMATION. By signing this Award Agreement, you
acknowledge that you have been given, or were offered, a copy of the Company's
Annual Report on Form 10-K for the fiscal year ended September 30, 1993 (the
"1993 10-K"), and that you were given an opportunity to ask questions of any of
the Company's executive officers (as disclosed on page 7 of the 1993 10-K)
regarding the 1993 10- K or any other matter regarding the Company.
12. RISK OF INVESTMENT. By signing this Award Agreement, you
recognize that your participation in the 1994 MEP is a speculative investment in
that the success or failure of your investment depends on the market value of
the Company's Common Stock over a several year period. You further recognize
that all or a portion of your investment (i.e., your salary and bonus waiver)
may be lost. You also acknowledge that you were given the opportunity to consult
with your personal advisor(s) regarding the 1994 MEP.
I hereby elect to participate in the 1994 MEP under the terms
and conditions set forth above and acknowledge that I have read and understood
the terms and conditions of the 1994 MEP.
ACCEPTED:
MICROAGE, INC.
SIGNATURE /s/Christopher J. Koziol BY /s/Jeffrey D. McKeever
------------------------ ------------------------------------
DATE 12/14/93 ITS Chairman and CEO
------------------------ ------------------------------------
SSN ###-##-####
------------------------
-4-
FIRST AMENDMENT TO THE
MICROAGE 1994 MANAGEMENT EQUITY PROGRAM
AWARD AGREEMENT FOR
CHRISTOPHER J. KOZIOL
THIS FIRST AMENDMENT to the Award Agreement dated December 14, 1993
("Award Agreement"), is entered into by MicroAge, Inc. ("Company"), and
Christopher J. Koziol ("Executive") pursuant to the Management Equity Plan
("MEP") under the MicroAge, Inc. Long- Term Incentive Plan ("Plan"), as of
December 14, 1995.
WHEREAS, the Company and the Executive entered into the Award Agreement
effective December 14, 1993, to enable the Executive to acquire an option to
purchase Company stock by making salary deferrals; and
WHEREAS, the exercise price of the option to purchase Company common
stock, $.01 par value ("Common Stock"), under the Award Agreement is $24.83 per
share, after giving effect to a 3-for-2 stock split that was payable on January
13, 1994; and
WHEREAS, the closing price of the Common Stock on the Nasdaq National
Market on December 13, 1995, was $8.75 per share; and
WHEREAS, in order to provide a meaningful incentive for the Executive
under the MEP, the Compensation Committee of the Company's Board of Directors
has reduced the exercise price under the Award Agreement to the current fair
market value of the Common Stock.
NOW THEREFORE, the Executive and the Company agree as follows:
1. Paragraph 5 of the Award Agreement is hereby amended
and restated in its entirety as follows:
1
<PAGE>
5. NUMBER OF OPTIONS GRANTED. In exchange for electing to waive
the amount of compensation specified in the 1994-1996 Waiver Table in Paragraph
4, above, you are hereby granted an option to purchase the number of shares of
MicroAge, Inc. Common Stock calculated pursuant to the formula below:
(1) TOTAL COMPENSATION WAIVED (1994-1996) $108,500
(2) $108,500 (TOTAL COMPENSATION WAIVED)
MULTIPLIED BY 3.5235483 (THE "LEVERAGING
FACTOR") $382,305
(3) COMMON STOCK CLOSING PRICE ON DECEMBER
13, 1995 (THE "COMMON STOCK PRICE") $8.75
(4) TOTAL OPTIONS GRANTED (2) / (3) 43,692
2. Paragraphs 8, 9, and 10 of the Award Agreement shall
be amended by deleting the references to the number "ten" and replacing such
reference with the phrase "the Leveraging Factor."
3. This First Amendment shall be effective as December
14, 1995.
MICROAGE, INC.
By: /s/Jeffrey D. McKeever
----------------------------------
Jeffrey D. McKeever
Chairman of the Board and
Chief Executive Officer
/s/Christopher J. Koziol
----------------------------------
Christopher J. Koziol
2
FORM OF EMPLOYMENT AGREEMENT
dated as of November 4, 1996
by and between
MICROAGE, INC.
and
EXECUTIVE
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ARTICLE I--DUTIES AND TERM....................................................................... 1
1.1 Employment..................................................................... 1
1.2 Position and Responsibilities.................................................. 1
1.3 Term........................................................................... 2
1.4 Location....................................................................... 2
ARTICLE II--COMPENSATION......................................................................... 2
2.1 Base Salary.................................................................... 2
2.2 Bonus Payment.................................................................. 2
2.3 Stock Options.................................................................. 3
2.4 Additional Benefits............................................................ 3
ARTICLE III--TERMINATION OF EMPLOYMENT........................................................... 4
3.1 Death or Retirement of Executive............................................... 4
3.2 By Executive................................................................... 4
3.3 By Company..................................................................... 4
ARTICLE IV--COMPENSATION UPON TERMINATION OF EMPLOYMENT.......................................... 5
4.1 Upon Termination for Death or Disability....................................... 5
4.2 Upon Termination by Company for Cause or by Executive Without Good
Reason......................................................................... 5
4.3 Upon Termination by the Company Without Cause or by Executive for Good
Reason......................................................................... 6
4.4 Upon Termination by the Company Without Cause Following a Change
of Control or by Executive for Good Reason Following a Change of Control....... 7
ARTICLE V--RESTRICTIVE COVENANTS................................................................. 7
5.1 Confidential Information and Materials......................................... 7
5.2 General Knowledge.............................................................. 8
5.3 Executive Obligations as to Confidential Information and Materials............. 9
5.4 Inform Subsequent Employers.................................................... 9
5.5 Ideas and Inventions........................................................... 9
5.6 Inventions and Patents......................................................... 10
5.7 Copyrights..................................................................... 10
5.8 Conflicting Obligations and Rights............................................. 10
5.9 Non-Competition................................................................ 11
5.10 Non-Disparagement.............................................................. 12
5.11 Remedies....................................................................... 12
5.12 Scope of Article............................................................... 13
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ARTICLE VI--MISCELLANEOUS........................................................................ 13
6.1 Definitions.................................................................... 13
6.2 Key Man Insurance.............................................................. 16
6.3 Mitigation of Damages; Set-Off; Dispute Resolution............................. 17
6.4 Successors; Binding Agreement.................................................. 17
6.5 Modification; No Waiver........................................................ 18
6.6 Severability................................................................... 18
6.7 Notices........................................................................ 18
6.8 Assignment..................................................................... 19
6.9 Entire Understanding........................................................... 19
6.10 Executive's Representations.................................................... 19
6.11 Liability of Company with Respect to Insurance Policy.......................... 19
6.12 Governing Law.................................................................. 19
</TABLE>
EXHIBIT A--SPLIT DOLLAR AGREEMENT
EXHIBIT B--EXECUTIVE'S RIGHTS
EXHIBIT C--EXECUTIVE'S EXISTING OBLIGATIONS AND CLAIMS
EXHIBIT D--DISPUTE RESOLUTION PROCEDURES
ii
<PAGE>
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement") made and
entered into as of ________________, by and between MICROAGE, INC., a Delaware
corporation (the "Company"), and _____________ ("Executive").
R E C I T A L S:
- - - - - - - -
WHEREAS, the Company and Executive desire to enter into an Employment
Agreement.
NOW, THEREFORE, in consideration of the premises, and for other
valuable consideration, the sufficiency of which is hereby acknowledged by each
of the parties hereto, the parties hereby agree as follows:
A G R E E M E N T:
ARTICLE I
DUTIES AND TERM
1.1 Employment. In consideration of their mutual covenants and other
good and valuable consideration, the receipt, adequacy, and sufficiency of which
is hereby acknowledged, the Company agrees to hire Executive, and Executive
agrees to remain in the employ of the Company, upon the terms and conditions
herein provided.
1.2 Position and Responsibilities.
(a) Executive shall serve as __________________ of MicroAge,
Inc. (or in a capacity and with a title of at least substantially equivalent
quality). Executive agrees to perform services not inconsistent with his
position as shall from time to time be assigned to him by the Chief Executive
Officer or President of the Company.
(b) Executive further agrees to serve, if elected, as a
director of the Company and as an officer or director of any subsidiary or
affiliate of the Company.
(c) During the period of his employment hereunder, Executive
shall devote substantially all of his business time, attention, skill and
efforts to the faithful performance of his duties hereunder.
1.3 Term. The term of Executive's employment under this Agreement shall
commence on the date first above written and shall continue, unless sooner
terminated, until November 2, 1997;
<PAGE>
provided, however, that commencing on November 4, 1996 and on each subsequent
day thereafter, the Executive's term of employment shall automatically be
extended without further action by the Company or Executive for the twelve (12)
month period commencing on each such day.
1.4 Location. During the period of his employment under this Agreement,
Executive shall not be required, except with his prior written consent, to
relocate his principal place of employment outside Maricopa County, Arizona.
Required travel on the Company's business shall not be deemed a relocation so
long as Executive is not required to provide his services hereunder outside of
Maricopa County, Arizona, for more than fifty (50%) percent of his working days
during any consecutive six (6) month period.
ARTICLE II
COMPENSATION
For all services rendered by Executive in any capacity during his
employment under this Agreement, including, without limitation, services as a
director, officer or member of any committee of the Board of the Company or of
the board of directors of any subsidiary or affiliate of the Company, the
Company shall compensate Executive as follows:
2.1 Base Salary. The Company shall pay to Executive an annual base
salary of not less than $_______ (such amount, less any salary waivers under the
1994 Management Equity Program or any subsequent management equity or other
waiver program adopted by the Company is hereinafter referred to as the "Base
Salary") during the term hereof; provided, however, that in the event the
Company institutes a salary reduction program which affects all exempt employees
(as defined by standard Company policies in compliance with the Fair Labor
Standards Act) by the same percentage, then Executive's Base Salary may be
reduced by such percentage (and the term "Base Salary" as used in this Agreement
shall refer to Base Salary as so adjusted). Executive's Base Salary shall be
paid in equal semi-monthly installments. The Base Salary shall be reviewed
annually by the Board or a committee designated by the Board and the Board or
such committee may, in its discretion, increase the Base Salary.
2.2 Bonus Payment. During the period of Executive's employment under
this Agreement, Executive shall be entitled to bonus payments, if any shall be
due, pursuant to the Executive Bonus Plan which has been established by
resolution of the Board for fiscal year 1997 (the "1997 Executive Bonus Plan").
The Company shall use all reasonable efforts to cause the Board or a committee
thereof to establish in each fiscal year during the term hereof an executive
bonus plan that is similar to the 1997 Executive Bonus Plan in providing for
incentive compensation to Executive based on a formula related to the Company's
profits during such fiscal year. Any bonus under the 1997 Executive Bonus Plan
or any such subsequent plan, less any bonus waivers under the 1997 Management
Equity Program or any subsequent management equity or other waiver program
adopted by the Company, is referred to herein as the "Annual Incentive Bonus."
2
<PAGE>
2.3 Stock Options. The Company shall use all reasonable efforts to
establish and maintain one or more stock option plans in which Executive shall
be entitled to participate to the same extent as other Designated Members of the
Executive Council (as such term is defined in Section 6.1 hereof). The terms and
conditions of such plan(s) shall be determined and administered by the Board or
a committee thereof.
2.4 Additional Benefits. Executive shall be entitled to participate in
all employee benefit and welfare programs, plans and arrangements (including,
without limitation, pension, profit sharing, supplemental pension and other
retirement plans, insurance, hospitalization, medical and group disability
benefits, travel or accident insurance plans) and to receive fringe benefits,
such as dues and fees of professional organizations and associations, which are
from time to time available to the Company's executive personnel; provided,
however, there shall be no duplication of termination or severance benefits, and
to the extent that such benefits are specifically provided by the Company to
Executive under other provisions of this Agreement, the benefits available under
the foregoing plans and programs shall be reduced by any benefit amounts paid
under such other provisions. Executive shall during the period of his employment
hereunder continue to be provided with benefits at a level which shall in no
event be less in any material respect than the benefits made available to
Executive by the Company as of the date of this Agreement. Notwithstanding the
foregoing, the Company may terminate or reduce benefits under any benefit plans
and programs to the extent such reductions apply uniformly to Designated Members
of the Executive Council entitled to participate therein, and Executive's
benefits shall be reduced or terminated accordingly. Specifically, without
limitation, Executive shall receive the following benefits:
(a) Death Benefit. Within thirty (30) days of the date of
execution of this Agreement, the Company and Executive shall enter into a Split
Dollar Agreement.
(b) Short-Term Disability Benefits. In the event of
Executive's failure substantially to perform his duties hereunder on a full-time
basis for a period not exceeding 180 consecutive days or for periods aggregating
not more than 180 days during any twelve-month period as a result of incapacity
due to physical or mental illness, the Company shall continue to pay the Base
Salary to Executive during the period of such incapacity, but only in the
amounts and to the extent that disability benefits payable to Executive under
Company-sponsored insurance policies are less than Executive's Base Salary.
(c) Relocation Expenses. In the event Executive's principal
place of employment is relocated by mutual consent of the parties outside
Maricopa County, Arizona, the Company shall reimburse Executive for all usual
relocation expenses incurred by Executive and his household in moving to the new
location, including, without limitation, moving expenses and rental payments for
temporary living quarters in the area of relocation for a period not to exceed
six (6) months.
(d) Reimbursement of Business Expenses. The Company shall, in
accordance with standard Company policies, pay, or reimburse Executive for, all
reasonable travel and other expenses incurred by Executive in performing his
obligations under this Agreement.
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(e) Vacations. Executive shall be entitled to 20 business
days, excluding Company holidays, of paid vacation during each year of
employment hereunder which he shall earn in arrears (i.e., Executive shall be
entitled to no vacation days during his first year of employment). Executive may
accrue and carry forward no more than five unused vacation days from any
particular year of his employment under this Agreement to the next.
ARTICLE III
TERMINATION OF EMPLOYMENT
3.1 Death or Retirement of Executive. Executive's employment under this
Agreement shall automatically terminate upon the death or Retirement (as defined
in Section 6.1) of Executive.
3.2 By Executive. Executive shall be entitled to terminate his
employment under this Agreement by giving Notice of Termination (as defined in
Section 6.1) to the Company:
(a) for Good Reason (as defined in Section 6.1);
(b) at any time without Good Reason.
3.3 By Company. The Company shall be entitled to terminate Executive's
employment under this Agreement by giving Notice of Termination to Executive:
(a) in the event of Executive's Total Disability (as
defined in Section 6.1);
(b) for Cause (as defined in Section 6.1); and
(c) at any time without Cause.
ARTICLE IV
COMPENSATION UPON TERMINATION OF EMPLOYMENT
If Executive's employment hereunder is terminated in accordance with
the provisions of Article III hereof, except for any other rights or benefits
specifically provided for herein following his period of employment, the Company
shall be obligated to provide compensation and benefits to Executive only as
follows, subject to the provisions of Section 5.11 hereof:
4.1 Upon Termination for Death or Disability. If Executive's employment
hereunder is terminated by reason of his death or Total Disability, the Company
shall:
(a) pay Executive (or his estate) or beneficiaries any Base
Salary which has accrued but not been paid as of the termination date (the
"Accrued Base Salary");
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(b) pay Executive (or his estate) or beneficiaries for unused
vacation days accrued as of the termination date in an amount equal to his Base
Salary multiplied by a fraction the numerator of which is the number of accrued
unused vacation days and the denominator of which is 260 (the "Accrued Vacation
Payment");
(c) reimburse Executive (or his estate) or beneficiaries for
expenses incurred by him prior to the date of termination which are subject to
reimbursement pursuant to this Agreement (the "Accrued Reimbursable Expenses");
(d) provide to Executive (or his estate) or beneficiaries any
accrued and vested benefits required to be provided by the terms of any
Company-sponsored benefit plans or programs (the "Accrued Benefits"), together
with any benefits required to be paid or provided in the event of Executive's
death or Total Disability under applicable law;
(e) pay Executive (or his estate) or beneficiaries any Annual
Incentive Bonus with respect to a prior fiscal year which has accrued but has
not been paid; and in addition,
(f) Executive (or his estate) or beneficiaries shall have the
right to exercise all vested unexercised stock options and warrants outstanding
at the termination date in accordance with terms of the plans and agreements
pursuant to which such options or warrants were issued.
4.2 Upon Termination by Company for Cause or by Executive Without Good
Reason. If Executive's employment is terminated by the Company for Cause, or if
Executive terminates his employment with the Company other than (x) upon
Executive's death or Total Disability or (y) for Good Reason, the Company shall:
(a) pay Executive the Accrued Base Salary;
(b) pay Executive the Accrued Vacation Payment;
(c) pay Executive the Accrued Reimbursable Expenses;
(d) pay Executive the Accrued Benefits, together with any
benefits required to be paid or provided under applicable law;
(e) pay Executive any accrued Annual Incentive Bonus with
respect to a prior year which has accrued but has not been paid; and in addition
(f) Executive shall have the right to exercise vested
options and warrants in accordance with Section 4.1(f).
4.3 Upon Termination by the Company Without Cause or by Executive for
Good Reason. If Executive's employment is terminated by the Company without
Cause or by Executive for Good Reason, the Company shall:
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(a) pay Executive the Accrued Base Salary;
(b) pay Executive the Accrued Vacation Payment;
(c) pay Executive the Accrued Reimbursable Expenses;
(d) pay Executive the Accrued Benefits, together with any
benefits required to be paid or provided under applicable law;
(e) pay Executive any Annual Incentive Bonus with respect
to a prior year which has accrued but has not been paid;
(f) pay Executive commencing on the thirtieth day
following the termination date twelve monthly payments equal to one-twelfth of
the sum of (1) Executive's Base Salary in effect immediately prior to the time
such termination occurs, plus (2) the average of the Annual Incentive Bonuses
paid to Executive for the two (2) fiscal years immediately preceding the fiscal
year in which the termination occurs (or if less than two, the amount of his
single Annual Incentive Bonus, if any). For purposes of this subsection (f), no
Annual Incentive Bonus received under the Company's Executive Bonus Plan prior
to the 1997 Executive Bonus Plan shall be considered. Should Executive attain
alternative employment during the twelve (12) month payment period, the
Company's obligations under this Section 4.3(f) will be reduced by the amount of
Executive's compensation from his new employer. For example, if Executive were
entitled to receive $19,583 per month for twelve (12) months under this Section
4.3(f), and if, at the beginning of the seventh (7th) month following his
termination date, he finds alternative employment that pays him $15,000 per
month, the Company would be obligated to pay Executive six (6) monthly payments
of $19,583, and six (6) monthly payments of $4,583 under this Section 4.3(f);
(g) maintain in full force and effect, for Executive's
and his eligible beneficiaries' continued benefit, until the first to occur of
(x) his attainment of alternative employment or (y) 12 months following the
termination date of his employment hereunder the employee benefits provided
pursuant to Company-sponsored benefit plans, programs or other arrangements in
which Executive was entitled to participate as a full-time employee immediately
prior to such termination in accordance with Section 2.4 hereof, subject to the
terms and conditions of such plans and programs (the "Continued Benefits"). If
Executive's continued participation is not permitted under the general terms and
provisions of such plans, programs and arrangements, the Company shall arrange
to provide Executive with Continued Benefits substantially similar to those
which Executive would have been entitled to receive under such plans, programs
and arrangements; and in addition
(h) Executive shall have the right to exercise vested
options and warrants in accordance with Section 4.1(f).
4.4 Upon Termination by the Company Without Cause Following a Change of
Control or by Executive for Good Reason Following a Change of Control. If
following a Change of Control,
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Executive's employment is terminated by the Company Without Cause or by
Executive for Good Reason, the Company shall:
(a) Make the payments and provide to Executive the
benefits under Section 4.3 other than under Section 4.3(f) hereof; and in
addition
(b) Pay to Executive a lump sum payment on or prior to
the thirtieth day following the termination date of Executive's employment
hereunder in an amount equal to one hundred fifty percent (150%) of the sum of
(1) Executive's Base Salary in effect for the fiscal year immediately prior to
the fiscal year in which the Change of Control occurs, plus (2) the average of
the Annual Incentive Bonuses paid to Executive for the two (2) fiscal years
immediately preceding the fiscal year in which the Change of Control occurs (or
if less than two, the amount of his single Annual Incentive Bonus, if any). For
purposes of this subsection (b), no Annual Incentive Bonus received under the
Company's Executive Bonus Plan prior to the 1997 Executive Bonus Plan shall be
considered.
ARTICLE V
RESTRICTIVE COVENANTS
5.1 Confidential Information and Materials. Executive hereby agrees and
acknowledges that the following ideas, information and materials in written,
oral, magnetic, photographic, optical or other form and whether now existing or
developed or created during the period of Executive's employment or engagement
with the Company (the "Confidential Information") are proprietary to the Company
and are highly sensitive in nature:
(a) Hardware. Any and all ideas, concepts, know-how,
techniques, structures, information and materials relating to the design,
development, engineering, invention, patent, patent application, manufacture or
improvement of any and all equipment, components, devices, techniques, processes
or formulas (including, without limitation, mask works, semi-conductor chips,
processors, memories, disc drives, tape heads, computer terminals, keyboards,
storage devices, printers, and optical storage media) and any and all
components, devices, techniques or circuitry incorporated in any of the above
which is or are constructed, designed, improved, altered or used by the Company
and which is or are not generally known to the public or within the industries
in which the Company competes.
(b) Software. Any and all ideas, concepts, know-how,
techniques, structures, information and materials relating to existing computer
software or firmware products and computer software or firmware in various
stages of research and development including without limitation source code,
object and load modules, requirements specifications, design specifications,
design notes, flow charts, coding sheets, annotations, documentation, technical
and engineering data, laboratory studies, benchmark test results, and the
structures, organization, designs, formulas and algorithms which reside in the
software and which are not generally known to the public or within the
industries or trades in which the Company competes.
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(c) Business Procedures. Internal business procedures and
business plans, including analytical methods and procedures, licensing
techniques, manufacturing information and procedures such as formulations,
processes and equipment, technical and engineering data, vendor names, other
vendor information, purchasing information, financial information, service and
operational manuals and documentation therefor, ideas for new products and
services and other such information which relates to the way the Company
conducts its business and which is not generally known to the public.
(d) Legal Rights. All patents, copyrights, trade secrets,
trademarks and service marks, and the like.
(e) Marketing Plans and Customers Lists. Any and all
customer and marketing information and materials, such as (i) strategic data,
including marketing and development plans, forecasts and forecast assumptions
and volumes, and future plans and potential strategies of the Company which have
been or are being discussed; (ii) financial data, price and cost objectives,
price lists, pricing policies and procedures, and estimating and quoting
policies and procedures; and (iii) customer data, including customer lists,
names of existing, past or prospective customers and their representatives, data
about or provided by prospective, existing or past customers, customer service
information and materials, data about the terms, conditions and expiration dates
of existing contracts with customers and the type, quantity and specifications
of products and services purchased, leased or licensed by customers of the
Company.
(f) Not Generally Known. Any and all information not
generally known to the public or within the industries or trades in which the
Company competes.
5.2 General Knowledge. The general skills and experience gained by
Executive during Executive's employment or engagement by the Company, and
information publicly available or generally known within the industries or
trades in which the Company competes, is not considered Confidential
Information. Following the Non-Competition Period (as defined in Section 5.9),
Executive is not restricted from working with a person or entity which has
independently developed information or materials similar to the Confidential
Information, but in such a circumstance, Executive agrees not to disclose the
fact that any similarity exists between the Confidential Information and the
independently developed information and materials, and Executive understands
that such similarity does not excuse Executive from the non-disclosure and other
obligations in this Agreement.
5.3 Executive Obligations as to Confidential Information and Materials.
During Executive's employment or engagement by the Company, Executive will have
access to the Confidential Information and will occupy a position of trust and
confidence with respect to the Confidential Information and the Company's
affairs and business. Executive agrees to take the following steps to preserve
the confidential and proprietary nature of the Confidential Information:
(a) Non-Disclosure. During and after Executive's
Employment or engagement by the Company, Executive will not use, disclose or
otherwise permit any person or entity access to any of the Confidential
Information other than as required in the performance of Executive's duties
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with the Company. Executive understands that Executive is not allowed to sell,
license, market or otherwise exploit any products or services (including
software or firmware in any form) which embody in whole or in part any
Confidential Information.
(b) Prevent Disclosure. Executive will take all
reasonable precautions to prevent disclosure of the Confidential Information to
unauthorized persons or entities.
(c) Abide by the Company's Restrictions. Executive will
treat as confidential and proprietary any information or materials from outside
the Company which the Company is obligated to treat as confidential or
proprietary, in accordance with the Company's reasonable instructions to
Executive.
(d) Return All Materials. Upon termination of Executive's
employment or engagement by the Company for any reason whatsoever, Executive
will deliver to the Company all tangible materials embodying the Confidential
Information, including any documentation, records, listings, notes, data,
sketches, drawings, memoranda, models, accounts, reference materials, samples,
machine-readable media and equipment which in any way relate to the Confidential
Information. Of course, Executive agrees not to retain any copies of any of the
above materials.
5.4 Inform Subsequent Employers. Executive covenants and agrees that,
for a period of 12 months following termination of the Non-Competition Period,
prior to accepting subsequent employment with an employer engaged in
substantially the same line of work as the Company, Executive shall: (a) inform
any such subsequent employer in writing that this Agreement exists; and (b)
provide the Company with a copy of such writing.
5.5 Ideas and Inventions. Executive agrees to assign to the Company all
of Executive's right, title and interest in or to any and all ideas, concepts,
know-how, techniques, processes, inventions, discoveries, developments, works of
authorship, innovations and improvements ("Inventions") conceived or made by
Executive, whether alone or with others, whether patentable or not, except those
that the Executive developed entirely on Executive's own time without using the
Company's equipment, supplies, facilities, or trade secret information and which
neither (1) relate at the time of conception or reduction to practice of the
invention to the Company's business, or actual or demonstrably anticipated
research or development of the Company nor (2) result from any work performed by
the Executive for the Company. Executive agrees to disclose all Inventions to
the Company promptly, and to provide all assistance reasonably requested by the
Company in the preservation of its interests in the Inventions (such as by
executing documents, testifying, etc.), such assistance to be provided at the
Company's expense but without any additional compensation to Executive.
5.6 Inventions and Patents. Executive agrees that from this date until
Executive leaves the Company's employment, Executive shall keep the Company
informed of any Inventions made by Executive, in whole or in part, or conceived
by Executive, alone or with others, which result from any work Executive may do
for, or at the request of, the Company, or which relate to the Company's
activities, investigations, or obligations.
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(a) Assertion of Rights. Executive shall, at the expense
of the Company, assist the Company or its nominees to obtain patents for such
Inventions in any countries throughout the world. Such Inventions shall be the
property of the Company or its nominees, whether patented or not. Executive
shall and does, without charge to the Company, assign to the Company, all of
Executive's right, title, and interest in and to such Inventions, including
patents and patent applications and reissues thereof. Executive agrees to
execute, acknowledge, and deliver any instruments confirming the complete
ownership by the Company of such Inventions. Such assignments shall include the
right to sue for infringement.
(b) Reserved Inventions. Descriptions of all ideas,
concepts, know-how, techniques, processes, inventions, discoveries,
developments, innovations and improvements which Executive made, conceived or
acquired prior to Executive's employment by the Company and all patents and
patent applications relating thereto (collectively referred to as "Executive's
Rights") are attached hereto in Exhibit B, and Executive's Rights shall be
excluded from this Agreement. Executive represents that the absence of any
Executive's Rights in Exhibit B, shall indicate that Executive owns no such
Executive's Rights at the time of signing this Agreement.
5.7 Copyrights. Executive agrees that any work prepared by Executive
during the course of Executive's employment or engagement hereunder which is
eligible for United States copyright protection or protection under the
Universal Copyright Convention, the Berne Copyright Convention and/or the Buenos
Aires Copyright Convention shall be a work made for hire. In the event any such
work is deemed not to be a work made for hire, Executive hereby assigns all
right, title and interest in and to the copyright in such work to the Company,
and agrees to provide all assistance reasonably requested by the Company in the
establishment, preservation and enforcement of its copyright in such work, such
assistance to be provided at the Company's expense but without any additional
compensation to Executive.
5.8 Conflicting Obligations and Rights. Executive agrees to inform the
Company in writing of any apparent conflict between Executive's work for the
Company and (i) any obligations Executive may have to preserve the
confidentiality of another's proprietary information or materials, or (ii) any
rights Executive claims to any patents, copyrights, trade secrets, or other
inventions, ideas or similar rights, before performing that work. Otherwise, the
Company may conclude that no such conflict exists and Executive agrees
thereafter to make no such claim against the Company. The Company shall receive
such disclosures in confidence. All such existing obligations and claims of
Executive, if any, as of the date of this Agreement are listed on Exhibit C
attached hereto.
5.9 Non-Competition.
(a) Non-competition. By execution of this Agreement,
Executive agrees that during his employment with the Company and for a period of
twelve (12) months following the date of expiration or termination of his
employment hereunder (the "Non-Competition Period") for any reason (whether such
termination shall be voluntary or involuntary), Executive will not, within the
United States (in which territory Executive acknowledges that the Company has
sold or marketed its products or services and conducted its Business, as defined
in Section 5.9(d) as of the date hereof),
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directly or indirectly, compete with the Company by carrying on a business that
is substantially similar to the Business. Executive agrees that the 12 month
period referred to in the preceding sentence shall be extended by the number of
days included in any period of time during which he is or was engaged in
activities constituting a breach of this Section 5.9.
(b) Definition of "Compete". For the purposes of this
Section 5.9, the term "compete" shall mean with respect to the Business: (i)
managing, supervising, or otherwise participating in a management or sales
capacity; (ii) calling on, soliciting, taking away, accepting as a client or
customer, or attempting to call on, solicit, take away, or accept as a client or
customer, any individual partnership, corporation, company, association, or
other entity that was a client or customer of the Company as of immediately
prior to the date hereof; (iii) hiring, soliciting, taking away, or attempting
to hire, solicit, or take away, either on Executive's behalf or on behalf of any
other person or entity, any person serving immediately prior to the date hereof
or during the term hereof as an employee in connection with the Business; or
(iv) entering into or attempting to enter into any business substantially
similar to the Business, either alone or with any individual, partnership,
corporation, company, association, or other entity.
(c) Direct or Indirect Competition. For the purposes of
this Section 5.9, the words "directly or indirectly" as they modify the word
"compete" shall mean (i) acting as an agent, representative, consultant,
officer, director, member, independent contractor, or employee of any entity or
enterprise that is competing (as defined in Section 5.9(b) hereof) with the
Business, (ii) participating in any such competing entity or enterprise as an
owner, partner, limited partner, joint venturer, member, creditor, or
stockholder (except as a stockholder holding less than a one percent (1%)
interest in a corporation whose shares are actively traded on a regional or
national securities exchange or in the over-the-counter market), and (iii)
communicating to any such competing entity or enterprise the names or addresses
or any other information concerning any past, present, or identified prospective
client or customer of the Company or any entity having title to the goodwill of
the Company with respect to the Business.
(d) Business. For purposes of this Agreement, the term
"Business" shall mean the delivery of systems integration services and master
distribution of information technology product services, as conducted by the
Company immediately prior to the date hereof and/or developed during the term of
this Agreement.
(e) Executive expressly agrees and acknowledges that:
(i) it will require at least twelve (12) months for
the Company to locate, hire and train an appropriate individual to
perform the functions and duties that Executive is performing
hereunder;
(ii) the Company has protected business interests
throughout the United States and that competition with and against such
business interests would be harmful to the Company;
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(iii) this covenant not to compete is reasonable as
to time and geographical area and does not place any unreasonable
burden upon him;
(iv) the general public will not be harmed as a
result of enforcement of this covenant not to compete;
(v) his personal legal counsel has reviewed this
covenant not to compete; and
(vi) he understands and hereby agrees to each and
every term and condition of this covenant not to compete (including,
without limitation, the provisions of Section 5.11).
5.10 Non-Disparagement. During the term of this Agreement and the
Non-Competition Period, neither Executive nor the Company shall disparage the
other, and neither shall disclose to any third party the conditions of
Executive's employment with the Company except as may be required (i) pursuant
to applicable law or regulations, including the rules and regulations of the
Securities and Exchange Commission, (ii) to effectuate the provisions of
employee plans or programs and insurance policies, or (iii) as may be otherwise
contemplated herein or unless such information becomes publicly available
without fault of the party making such disclosure.
5.11 Remedies. Executive expressly agrees and acknowledges that the
covenants set forth in Sections 5.1 through Section 5.10 are necessary for the
protection of the interests of the Company and its affiliates because of the
nature and scope of their business and his position with the Company. Further,
Executive acknowledges that any breach of such covenants would result in
irreparable damage to the Company, and that money damages will not sufficiently
compensate the Company for its injury caused thereby, and that the remedy at law
for any breach or threatened breach of any of such covenants will be inadequate
and, accordingly agrees, that the Company shall, in addition to all other
available remedies (including without limitation, seeking such damages as it can
show it has sustained by reason of such breach), be entitled to injunctive
relief or specific performance and that in addition to such money damages he may
be restrained and enjoined from any continuing breach of this covenant not to
compete without any bond or other security being required of any court.
Executive further acknowledges and agrees that if such covenants, or any of
them, are deemed to be unenforceable and/or the Executive fails to comply with
this Article V, the Company has no obligation to provide any compensation or
other benefits described in Article IV hereof. The remedies set forth in this
Section 5.11 shall be included in any award in favor of the Company under
Exhibit D hereto.
5.12 Scope of Article. For purposes of this Article V, unless the
context otherwise requires, the term "Company" includes MicroAge, Inc., its
direct and indirect subsidiaries, and its affiliates.
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ARTICLE VI
MISCELLANEOUS
6.1 Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Accrued Base Salary" - as defined in Section 4.1(a);
(b) "Accrued Benefits" - as defined in Section 4.1(d);
(c) "Accrued Reimbursable Expenses" - as defined in
Section 4.1(c);
(d) "Accrued Vacation Payment" - as defined in Section
4.1(b);
(e) "Annual Incentive Bonus" - as defined in Section 2.2;
(f) "Base Salary" - as defined in Section 2.1;
(g) "Board" - shall mean the Board of Directors of the
Company;
(h) "Cause" shall mean the occurrence of any of the
following:
(i) Executive's gross and willful misconduct which is
injurious to the Company;
(ii) Executive's engaging in fraudulent conduct with
respect to the Company's business or in conduct of a criminal nature
that may have an adverse impact on the Company's standing and
reputation;
(iii) the continued and unjustified failure or
refusal by Executive to perform the duties required of him by this
Agreement which failure or refusal shall not be cured within fifteen
(15) days following (A) receipt by Executive of written notice from the
Board specifying the factors or events constituting such failure or
refusal, and (B) a reasonable opportunity for Executive to correct such
deficiencies;
(iv) Executive's use of drugs and/or alcohol in
violation of then current Company policy; or
(v) Executive's breach of his obligation under
Section 1.2(c) hereof which shall not be cured within fifteen (15) days
after written notice thereof to Executive.
(i) "Change of Control" shall mean and shall be deemed to
have occurred if:
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(i) After the date of this Agreement, any "person"
(as such term is used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any successor
provision thereto) shall become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act or any successor provision
thereto) directly or indirectly of securities of the Company
representing 15 percent or more of the combined voting power of the
Company's then outstanding securities ordinarily having the right to
vote at an election of directors; provided, however, that, for purposes
of this subparagraph, "person" shall exclude the Company, its
subsidiaries, any person acquiring such securities directly from the
Company, any employee benefit plan sponsored by the Company or from
Executive or any stockholder owning 15% or more of the combined voting
power of the Company's outstanding securities as of the date of this
Agreement; or
(ii) Any stockholder of the Company owning 15 percent
or more of the combined voting power of the Company's outstanding
securities as of the date of this Agreement shall become the beneficial
owner (within the meaning of Rule 13d-3 under the Exchange Act)
directly or indirectly of securities of the Company (other than through
the acquisition of securities directly from the Company or from
Executive) representing 25 percent or more of the combined voting power
of the Company's then outstanding securities ordinarily having the
right to vote at an election of directors; or
(iii) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least 80 percent of the Board, provided, however, that
any person becoming a member of the Board subsequent to the date hereof
whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least 80 percent of the
members then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to
the election of directors of the Company, as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act or any
successor provision thereto) shall be, for purposes of this Agreement,
considered as though such person were a member of the Incumbent Board;
or
(iv) Approval by the stockholders of the Company and
consummation of (A) a reorganization, merger, consolidation, or sale or
other disposition of all or substantially all of the assets of the
Company, in each case, with or to a corporation or other person or
entity of which persons who were the stockholders of the Company
immediately prior to such transaction do not, immediately thereafter,
own more than 60 percent of the combined voting power of the
outstanding voting securities entitled to vote generally in the
election of directors of the reorganized, merged, consolidated or
purchasing corporation (or in the case of a non-corporate person or
entity, functionally equivalent voting power) and 80 percent of the
members of the Board of which corporation (or functional equivalent in
the case of a non-corporate person or entity) were not members of the
Incumbent Board at the time of the execution of the initial agreement
providing for such reorganization, merger, consolidation or sale, or
(B) a liquidation or dissolution of the Company.
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(j) "Confidential Information" - as defined in Section
5.1;
(k) "Continued Benefits" - as defined in Section 4.3(g);
(l) "Designated Members of the Executive Council" - shall
mean the members of the Company's Executive Council other than the Chief
Executive Officer, President, Vice Chairman of the Board and the Chief Financial
Officer;
(m) "Expiration" shall mean the expiration of Executive's
employment hereunder in accordance with Section 1.3;
(n) "Good Reason" shall mean the occurrence of any of the
following:
(i) Material change by the Company in Executive's
function, duties or responsibilities which would cause Executive's
position with the Company to become of less dignity, responsibility and
importance than those associated with his functions, duties or
responsibilities January 6, 1997;
(ii) Executive's Base Salary is reduced by the
Company (unless such reduction is pursuant to a salary reduction
program as described in Section 2.1 hereof) or there is a material
reduction in the benefits that are in effect for the Executive on
January 6, 1997 in accordance with Section 2.4 (unless such reduction
is pursuant to a uniform reduction in benefits for all Designated
Members of the Executive Council);
(iii) Except with Executive's prior written consent,
relocation of Executive's principal place of employment to a location
outside of Maricopa County, Arizona, or requiring Executive to travel
on the Company's business more than is required by Section 1.4 hereof;
or
(iv) Other material breach of this Agreement by the
Company, which breach is not cured within fifteen (15) days after
written notice thereof is received by the Company.
(o) "1997 Executive Bonus Plan" - as defined in Section
2.2.
(p) "Non-Competition Period" - as defined in Section
5.9(a);
(q) "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision of this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated. Each Notice of Termination shall be delivered at least thirty (30)
days prior to the effective date of termination;
(r) "Retirement" shall mean normal retirement at age 65;
15
<PAGE>
(s) "Termination" shall mean the termination of
Executive's employment hereunder other than upon expiration of the term of such
employment in accordance with Section 1.3;
(t) "Total Disability" shall mean Executive's failure
substantially to perform his duties hereunder on a full-time basis for a period
exceeding 180 consecutive days or for periods aggregating more than 180 days
during any twelve-month period as a result of incapacity due to physical or
mental illness. If there is a dispute as to whether Executive is or was
physically or mentally unable to perform his duties under this Agreement, such
dispute shall be submitted for resolution to a licensed physician agreed upon by
the Board and Executive, or if an agreement cannot be promptly reached, the
Board and Executive shall promptly select a physician, and if these physicians
cannot agree, the physicians shall promptly select a third physician whose
decision shall be binding on all parties. If such a dispute arises, Executive
shall submit to such examinations and shall provide such information as such
physician(s) may request, and the determination of the physician(s) as to
Executive's physical or mental condition shall be binding and conclusive.
Notwithstanding the foregoing, if Executive participates in any group disability
plan provided by the Company which offers long-term disability benefits, "Total
Disability" shall mean total disability as defined therein.
6.2 Key Man Insurance. The Company shall have the right, in its sole
discretion, to purchase "key man" insurance on the life of Executive. The
Company shall be the owner and beneficiary of any such policy. If the Company
elects to purchase such a policy, Executive shall take such physical
examinations and supply such information as may be reasonably requested by the
insurer.
6.3 Mitigation of Damages; Set-Off; Dispute Resolution.
(a) Executive shall be required to mitigate the amount of
any payment provided for in this Agreement (other than payments received
pursuant to Section 4.4 hereof) by seeking other employment.
(b) If there shall be any dispute between the Company and
Executive (i) in the event of any termination of Executive's employment by the
Company, whether such termination was for Cause, or (ii) in the event of any
termination of employment by Executive, whether Good Reason existed, or (iii)
otherwise arising out of this Agreement, the dispute shall be resolved in
accordance with the dispute resolution procedures set forth in Exhibit D hereto,
the provisions of which are incorporated as a part hereof, and the parties
hereto hereby agree that such dispute resolution procedures shall be the
exclusive method for resolution of disputes under this Agreement; provided,
however, that (1) either party may seek preliminary judicial relief if, in its
judgment, such action is necessary to avoid irreparable injury during the
pendency of such procedures, and (2) nothing in Exhibit D shall prevent either
party from exercising the rights of termination set forth in this Agreement. In
the event of a dispute hereunder as to whether a termination by the Company was
for Cause or by the Executive for Good Reason, until there is a resolution and
award as provided in Exhibit D, the Company shall pay all amounts, and provide
all benefits, to Executive and/or Executive's family or other beneficiaries, as
the case may be, that the Company would be required to
16
<PAGE>
pay or provide hereunder as though such termination were by the Company without
Cause or by Executive for Good Reason and shall pay the reasonable legal fees
and expenses of counsel for Executive in connection with such dispute
resolution; provided, however, that the Company shall not be required to pay any
disputed amounts or any legal fees and expenses pursuant to this subparagraph
(b) except upon receipt of a written undertaking by or on behalf of Executive
(and/or Executive's family or other beneficiaries, as the case may be) to repay,
without interest or penalty, as soon as practicable after completion of the
dispute resolution (A) all such amounts to which Executive (or Executive's
family or other beneficiaries, as the case may be) is ultimately adjudged not be
entitled with respect to the payment of such disputed amount(s) and (B) in
addition, in the case of legal fees and expenses, a proportionate amount of
legal fees and expenses attributable to any of Executive's claim(s) (or any of
Executive's defenses or counter-claims(s)), if any, which shall have been found
by the dispute resolver to have been frivolous or without merit. IT IS EXPRESSLY
UNDERSTOOD THAT BY SIGNING THIS AGREEMENT, WHICH INCORPORATES BINDING
ARBITRATION, THE COMPANY AND EXECUTIVE AGREE, EXCEPT AS SPECIFICALLY PROVIDED
OTHERWISE IN SECTION 5.11 AND THIS SECTION 6.3(b), TO WAIVE COURT OR JURY TRIAL
AND TO WAIVE PUNITIVE, STATUTORY, CONSEQUENTIAL AND ANY DAMAGES, OTHER THAN
COMPENSATORY DAMAGES.
6.4 Successors; Binding Agreement. This Agreement shall be binding upon
any successor to the Company and shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, beneficiaries,
designees, executors, administrators, heirs, distributees, devisees and
legatees.
6.5 Modification; No Waiver. This Agreement may not be modified or
amended except by an instrument in writing signed by the parties hereto. No term
or condition of this Agreement shall be deemed to have been waived, nor shall
there be any estoppel against the enforcement of any provision of this
Agreement, except by written instrument by the party charged with such waiver or
estoppel. No such written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall operate only as to the
specific term or condition waived and shall not constitute a waiver of such term
or condition for the future or as to any other term or condition.
6.6 Severability. The covenants and agreements contained herein are
separate and severable and the invalidity or unenforceability of any one or more
of such covenants or agreements, if not material to the employment arrangement
that is the basis for this Agreement, shall not affect the validity or
enforceability of any other covenant or agreement contained herein. If, in any
judicial proceeding, a court shall refuse to enforce one or more of the
covenants or agreements contained herein because the duration thereof is too
long, or the scope thereof is too broad, it is expressly agreed between the
parties hereto that such duration or scope shall be deemed reduced to the extent
necessary to permit the enforcement of such covenants or agreements.
6.7 Notices. All the notices and other communications required or
permitted hereunder shall be in writing and shall be delivered personally or
sent by registered or certified mail, return receipt requested, to the parties
hereto at the following addresses:
17
<PAGE>
If to the Company, to it at:
MicroAge, Inc.
2400 South MicroAge Way
Tempe, Arizona 85282-1896
Attn: Chief Executive Officer
With a copy to:
Matthew P. Feeney
Snell & Wilmer L.L.P.
One Arizona Center
Phoenix, Arizona 85004-0001
If Executive, to him at:
----------------------------
----------------------------
----------------------------
6.8 Assignment. This Agreement and any rights hereunder shall not be
assignable by either party without the prior written consent of the other party
except as otherwise specifically provided for herein.
6.9 Entire Understanding. This Agreement (together with the Exhibit
incorporated as a part hereof) constitutes the entire understanding between the
parties hereto and no agreement, representation, warranty or covenant has been
made by either party except as expressly set forth herein.
6.10 Executive's Representations. Executive represents and warrants
that neither the execution and delivery of this Agreement nor the performance of
his duties hereunder violates the provisions of any other agreement to which he
is a party or by which he is bound.
6.11 Liability of Company with Respect to Insurance Policy. Executive
has selected the insurer and policy referred to in Section 2.4(a) hereof, and
the Company shall not have any liability to Executive (or his beneficiaries)
should the insurance company which issues the policy referred to therein fail or
refuse to pay (whether voluntarily or by reason of any order, injunction or
otherwise) thereunder or if any rights or elections otherwise available to
Executive thereunder are restricted or eliminated.
6.12 Governing Law. This Agreement shall be construed in accordance
with and governed for all purposes by the laws of the State of Arizona
applicable to contracts executed and wholly performed within such state.
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Company:
MICROAGE, INC.
By:
---------------------------------------
Jeffrey D. McKeever
Chairman of the Board and
Chief Executive Officer
Executive:
------------------------------------------
19
<PAGE>
EXHIBIT A
SPLIT DOLLAR AGREEMENT
----------------------
<PAGE>
EXHIBIT B
EXECUTIVE'S RIGHTS
------------------
None
<PAGE>
EXHIBIT C
EXECUTIVE'S EXISTING OBLIGATIONS AND CLAIMS
-------------------------------------------
None
<PAGE>
EXHIBIT D
DISPUTE RESOLUTION PROCEDURES
-----------------------------
A. If a controversy should arise which is covered by Section 6.3 of
Article VI, then not later than twelve (12) months from the date of the event
which is the subject of dispute either party may serve on the other a written
notice specifying the existence of such controversy and setting forth in
reasonably specific detail the grounds thereof ("Notice of Controversy");
provided that, in any event, the other party shall have at least thirty (30)
days from and after the date of the Notice of Controversy to serve a written
notice of any counterclaim ("Notice of Counterclaim"). The Notice of
Counterclaim shall specify the claim or claims in reasonably specific detail. If
the Notice of Controversy or the Notice of Counterclaim, as the case may be, is
not served within the applicable period, the claim set forth therein will be
deemed to have been waived, abandoned and rendered unenforceable.
B. Following receipt of the Notice of Controversy (or the Notice of
Counterclaim, as the case may be), there shall be a three week period during
which the parties will make a good faith effort to resolve the dispute through
negotiation ("Period of Negotiation"). Neither party shall take any action
during the Period of Negotiation to initiate arbitration proceedings.
C. If the parties should agree during the Period of Negotiation to
mediate the dispute, then the Period of Negotiation shall be extended by an
amount of time to be agreed upon by the parties to permit such mediation. In no
event, however, may the Period of Negotiation be extended by more than five
weeks or, stated differently, in no event may the Period of Negotiation be
extended to encompass more than a total of eight weeks.
D. If the parties agree to mediate the dispute but are thereafter
unable to agree within a week on the format and procedures for the mediation,
then the effort to mediate shall cease, and the Period of Negotiation shall
terminate four weeks from the Notice of Controversy (or the Notice of
Counterclaim, as the case may be).
E. Following the termination of the Period of Negotiation, the dispute
(including the main claim and counterclaim, if any) shall be settled by
arbitration, governed by the Federal Arbitration Act, 9 U.S.C. ss. 1 et seq.
("FAA"), and judgment upon the award may be entered in any court having
jurisdiction thereof. The format and procedures of the arbitration are set forth
below (referred to below as the "Arbitration Agreement").
F. A notice of intention to arbitrate ("Notice of Arbitration") shall
be served within 45 days of the termination of the Period of Negotiation. If the
Notice of Arbitration is not served within this period, the claim set forth in
the Notice of Controversy (or the Notice of Counterclaim, as the case may be)
will be deemed to have been waived, abandoned and rendered unenforceable.
G. The arbitration, including the Notice of Arbitration, will be
governed by the Commercial Rules of the American Arbitration Association ("AAA")
in effect on the date of the
<PAGE>
Notice of Arbitration, except that the terms of this Arbitration Agreement shall
control in the event of any difference or conflict between such Rules and the
terms of this Arbitration Agreement.
H. The arbitrator shall reach a decision on the merits on the basis of
applicable legal principles as embodied in the law of the State of Arizona. The
arbitration hearing shall take place in Phoenix, Arizona.
I. There shall be one arbitrator, regardless of the amount in
controversy. The arbitrator selected, in order to be eligible to serve, shall be
a lawyer in Phoenix, Arizona with at least 15 years specializing in either
general commercial litigation or general corporate and commercial matters. In
the event the parties cannot agree on a mutually acceptable single arbitrator
from the list submitted by the AAA, the AAA shall appoint the arbitrator who
shall meet the foregoing criteria.
J. At the time of appointment and as a condition thereto, the
arbitrator will be apprised of the time limitations and other provisions of this
Arbitration Agreement and shall indicate such dispute resolver's agreement to
the Tribunal Administrator to comply with such provisions and time limitations.
K. During the 30 day period following appointment of the arbitrator,
either party may serve on the other a request for limited numbers of documents
directly related to the dispute. Such documents will be produced within seven
days of the request.
L. Following the thirty-day period of document production, there will
be a forty-five day period during which limited depositions will be permissible.
Neither party will take more than 5 depositions, and no deposition will exceed
three hours of direct testimony.
M. Disputes as to discovery or prehearing matters of a procedural
nature shall be promptly submitted to the arbitrator pursuant to telephone
conference call or otherwise. The arbitrator shall make every effort to render a
ruling on such interim matters at the time of the hearing (or conference call)
or within five business days thereafter.
N. Following the period of depositions, the arbitration hearing shall
promptly commence. The arbitrator will make every effort to commence the hearing
within thirty days of the conclusion of the deposition period and, in addition,
will make every effort to conduct the hearing on consecutive business days to
conclusion.
O. An award will be rendered, at the latest, within nine months of the
date of the Notice of Arbitration and within thirty days of the close of the
arbitration hearing. The award shall set forth the grounds for the decision
(findings of fact and conclusions of law) in reasonably specific detail and
shall also specify whether any claim (or defense or counter-claim) of Executive
is found to be frivolous or without merit and what proportion, if any, of his
legal fees and expenses which have been paid by the Company Executive shall be
required to repay to the Company in accordance with Section 6.3(b). The award
shall be final and nonappealable except as provided in the FAA and except that a
court of competent jurisdiction shall have the power to review whether, as a
matter of law,
D-2
<PAGE>
based upon the findings of fact by the arbitrator, the award should be confirmed
or should be modified or vacated in order to correct any errors of law made by
the arbitrator. Such judicial review shall be limited to issues of law, and the
parties agree that the findings of fact made by the arbitrator shall be final
and binding on the parties and shall serve as the facts to be relied upon by the
court in determining the extent to which the award should be confirmed, modified
or vacated.
The award may only be made for compensatory damages, and if any other
damages (whether exemplary, punitive, consequential, statutory or other) are
included, the award shall be vacated and remanded, or modified or corrected, as
appropriate to promote this damage limitation; provided, however, that an award
in favor of the Company shall include the relief set forth in Section 5.11.
D-3
PROPOSED RESOLUTIONS OF
THE COMPENSATION COMMITTEE OF MICROAGE, INC.
TO APPROVE FISCAL YEAR 1997 BONUS COMPENSATION FORMULA
FOR CERTAIN EXECUTIVE OFFICERS
DECEMBER 4, 1996
WHEREAS, Jeffrey D. McKeever, Robert G. O'Malley, James R. Daniel, and
James G. Manton are Executives of the Company (the "Executives"); and
WHEREAS, the Company desires to retain the Executives in the employ of
the Company and affiliated companies and to encourage their incentive and
personal interest in the success of the Company and to reward exceptional effort
and performance.
NOW, THEREFORE, BE IT RESOLVED, that if each Executive is employed by
the Company for the entire Fiscal Year 1997 in the same position held by such
Executive on December 4, 1996, or in a substantially equivalent line function,
then, (a) in the event that the Company's Fiscal Year 1997 Plan Earnings (the
"Plan") are less than FIFTY PERCENT (50%) achieved, such Executive would be
awarded no bonus, and (b) in the event that the Plan is greater than FIFTY
PERCENT (50%) achieved, such Executive would be awarded a bonus equal to ONE
PERCENT (1%) of such Executive's Fiscal Year 1997 base salary (such Executive's
"Base Salary") for each whole percentage point that the Company's Fiscal Year
1997 earnings exceed FIFTY PERCENT (50%) of Plan (e.g., (i) if the Plan is
SEVENTY-FIVE PERCENT (75%) achieved, such Executive would be awarded a bonus
that would be TWENTY-FIVE PERCENT (25%) of such Executive's Base Salary and (ii)
if the Plan is ONE HUNDRED AND FIFTY PERCENT (150%) achieved, such Executive
would be awarded a bonus that would be ONE HUNDRED PERCENT (100%) of such
Executive's Base Salary); provided, however, that the Compensation Committee, in
its sole discretion, and considering such factors as the Compensation Committee
deems appropriate, including, without limitation, such Executive's contributions
to the Company's Fiscal Year 1997 financial performance, may reduce or increase
such Executive's bonus, as calculated pursuant to clause (b), in such amount as
the Compensation Committee deems appropriate.
******
<PAGE>
PROPOSED RESOLUTIONS OF
THE COMPENSATION COMMITTEE OF MICROAGE, INC.
TO APPROVE FISCAL YEAR 1997 BONUS COMPENSATION FORMULA
FOR CERTAIN EXECUTIVE OFFICERS
DECEMBER 4, 1996
WHEREAS, Alan P. Hald, John S. Lewis, Christopher J. Koziol, and John
H. Andrews are Executives of the Company (the "Executives"); and
WHEREAS, the Company desires to retain the Executives in the employ of
the Company and affiliated companies and to encourage their incentive and
personal interest in the success of the Company and to reward exceptional effort
and performance.
NOW THEREFORE, BE IT RESOLVED, that if each Executive is employed by
the Company for the entire Fiscal Year 1997 (or, in the case of Mr. Lewis, from
January 6, 1997 through the end of Fiscal Year 1997) in the same position held
by such Executive on December 4, 1996 (or, in the case of Mr. Lewis, on January
6, 1997), or in a substantially equivalent line function, then, in the event
that the Company's Fiscal Year 1997 Plan Earnings (the "Plan") are less than
FIFTY PERCENT (50%) achieved, such Executive would be awarded no bonus (whether
a MicroAge Bonus or a Business Group Bonus, as such terms are hereinafter
defined); and further
RESOLVED, that if each Executive is employed by the Company for the
entire Fiscal Year 1997 (or, in the case of Mr. Lewis, from January 6, 1997) in
the same position held by such Executive on December 4, 1996 (or, in the case of
Mr. Lewis, on January 6, 1997) or in a substantially equivalent line function,
then, in the event that the Plan is greater than FIFTY PERCENT (50%) achieved,
such Executive would be awarded a bonus (the "MicroAge Bonus") equal to ONE-HALF
PERCENT (1/2%) of such Executive's Fiscal Year 1997 base salary, or in the case
of Mr. Lewis, 10/12 of Mr. Lewis' Fiscal Year 1997 base salary (such Executive's
"Base Salary") for each whole percentage point that the Company's Fiscal Year
1997 earnings exceed FIFTY PERCENT (50%) of Plan (e.g., (i) if the Plan is
EIGHTY PERCENT (80%) achieved, such Executive would be awarded a MicroAge Bonus
that would be FIFTEEN PERCENT (15%) of such Executive's Base Salary and (ii) if
the Plan is ONE HUNDRED AND FIFTY PERCENT (150%) achieved, such Executive would
be awarded a MicroAge Bonus that would be FIFTY PERCENT (50%) of such
Executive's Base Salary); provided, however, that the Compensation Committee, in
its sole discretion, and considering such factors as the Compensation Committee
deems appropriate, including, without limitation, such Executive's contributions
to the Company's Fiscal Year financial performance, may reduce or increase such
Executive's MicroAge Bonus, as calculated pursuant to clause (b) of this
Resolution, in such amount as the Compensation Committee deems appropriate; and
<PAGE>
FUTHER RESOLVED, that if each Executive is employed by the Company for
the entire Fiscal Year 1997 (or, in the case of Mr. Lewis, from January 6, 1997)
in the same position held by such Executive on December 4, 1996 (or, in the case
of Mr. Lewis, on January 6, 1997), or in a substantially equivalent line
function, then, (a) in the event that the Target Goal of Income Before Taxes and
Extraordinary Items of such Executive's Business Group (such Executive's
"Business Group Goal") is less than FIFTY PERCENT (50%) achieved, such Executive
would be awarded no Business Group Bonus (as hereinafter defined), and (b) in
the event such Executive's Business Group Goal is greater than FIFTY PERCENT
(50%) achieved, such Executive would be awarded a bonus (the "Business Group
Bonus") equal to ONE-HALF PERCENT (1/2%) of such Executive's Base Salary for
each whole percentage point that exceeds FIFTY PERCENT (50%) of such Executive's
Business Group Goal (e.g., (i) if such Executive's Business Group Goal is EIGHTY
PERCENT (80%) achieved, such Executive would be awarded a Business Group Bonus
that would be FIFTEEN PERCENT (15%) of such Executive's Base Salary and (ii) if
such Executive's Business Group Goal is ONE HUNDRED AND FIFTY PERCENT (150%)
achieved, such Executive would be awarded a Business Group Bonus that would be
FIFTY PERCENT (50%) of such Executive's Base Salary; provided, however, that the
Compensation Committee, in its sole discretion, and considering such factors as
the Compensation Committee deems appropriate, including, without limitation,
such Executive's contributions to such Executive's Business Group Goal, may
reduce or increase such Executive's Business Group Bonus, as calculated pursuant
to clause (b), in such amount as the Compensation Committee deems appropriate;
and
FURTHER RESOLVED, that the Executives' Business Group Bonuses will be
tied to the following Business Groups: Alan P. Hald (MicroAge Enterprises,
Inc.); John S. Lewis (Integration Group); Christopher J. Koziol (Distribution
Group); and John H. Andrews (Logistics Group).
THIRD AMENDMENT
TO THE
MICROAGE, INC.
RETIREMENT SAVINGS AND EMPLOYEE STOCK OWNERSHIP
PLAN AND TRUST
The MicroAge, Inc. Retirement Savings and Employee Stock Ownership Plan
and Trust (the "Plan"), as amended and restated by a document effective as of
January 1, 1995 and as further amended by the First Amendment dated May 10, 1995
and the Second Amendment dated March 14, 1996, is hereby further amended as
follows:
1. All of the changes made to the Plan by this Third Amendment are
effective as of October 28, 1996.
2. A new Section 2.26A is added to Article 2. The new Section 2.26A
shall read as follows:
2.26A Executive Supplemental Savings Plan or ESSP. The term
"Executive Supplemental Savings Plan" or "ESSP" means the MicroAge,
Inc. Executive Supplemental Savings Plan, as it may be amended from
time to time.
3. A new Section 2.37A is added to Article 2. The new Section 2.37A
shall read as follows:
2.37A Leadership Team. The term "Leadership Team" means the
group of officers of the Employer who hold the positions and titles of
Vice President and above.
4. Section 4.02 is hereby amended by adding the following paragraph (e)
to the end thereof:
(e) Special Rules for Leadership Team Members. No Participant
who is a member of the Leadership Team shall be allowed to make
Elective Deferrals directly to this Plan. Following the end of each
Plan Year, however, Elective Deferrals may be made on behalf of such
Participants by a direct transfer to the Trustee from the trustee of
the ESSP. The amount of Elective Deferrals transferred to this Plan
from the ESSP on behalf of each such Participant shall not exceed the
lesser of (i) the dollar limitation imposed by Section 402(g)
1
<PAGE>
of the Code for such year or (ii) the maximum amount that may be
transferred to this Plan without causing this Plan to violate the ADP
limitations described in Section 4.02(c) for the Plan Year.
(i) For purposes of determining the amount referred to in
clause (ii) of the preceding sentence, the Advisory
Committee shall first calculate the ADP test referred
to in Section 4.02(c) on the assumption that each
Leadership Team member who also is a Participant in
this Plan elected to make no Elective Deferrals.
(ii) If, but only if, the calculation made pursuant to the
preceding subparagraph (i) reveals that the Elective
Deferrals of those Highly Compensated Employees who
are not Leadership Team members are less than the
maximum amount of Elective Deferrals that could be
made by all Highly Compensated Employees (including
Leadership Team members who are Participants in this
Plan), Elective Deferrals shall then be transferred
to this Plan from the ESSP on behalf of each
Leadership Team member who is a Participant and who
has elected to have such transfer made.
(iii) The amount transferred to this Plan from the ESSP on
behalf of each electing Participant who also is a
Leadership Team member shall equal the lesser of (A)
the amount available for transfer pursuant the ESSP
for the relevant Plan Year or (B) an amount equal to
the Participant's Compensation for the Plan Year
multiplied by the "maximum ADP" for the group
consisting of Leadership Team members who also are
Participants in this Plan (calculated in accordance
with the principles set forth in Section
4.02(c)(iii)(B)). For purposes of the preceding
sentence, the "maximum ADP" is the highest ADP that
could be contributed by Leadership Team members who
also are Participants in the Plan without requiring
the return of any Excess Contributions pursuant to
Section 4.02(d). In making this determination, the
Advisory Committee may increase the maximum ADP of
the remaining Leadership Team members if others will
not be transferring the maximum amount permitted.
(iv) Prior to the first day of each Plan Year each
Participant who also is a Leadership Team member
shall file an irrevocable, written election with the
Advisory Committee and the Plan Administrator of the
ESSP to either (a) transfer the amount calculated
pursuant to subparagraph (iii) to this Plan or (b) to
receive a cash distribution of said amount from the
ESSP. Such election shall continue to apply from year
to year unless and until the Participant changes the
election by filing a new election. A new election
shall only be effective with respect to Plan Years
beginning after the day on which
2
<PAGE>
such election is received by the Advisory Committee
and the Plan Administrator of the ESSP.
(v) As soon as possible following the end of each Plan
Year, the Advisory Committee will calculate the
amount that may be transferred to this Plan from the
ESSP and shall notify the Plan Administrator of the
ESSP. Such transfers shall be accomplished no later
that two and one-half (2 1/2) months following the
end of the Plan Year and the amounts transferred
shall be treated as Elective Deferrals for the
preceding Plan Year for all purposes (including, but
not limited to, Section 4.03).
5. Section 2.46 of the Plan is amended in its entirety to read as
follows:
2.46 Plan Year. The term "Plan Year" shall mean the twelve
(12) consecutive month period ending June 30; however, a "short Plan
Year" will begin July 1, 1995 and end on October 29, 1995 (the last day
of the company's fiscal year). After such short Plan Year, the Plan
Year will end each year on the same day as the Company's fiscal year,
i.e., the Sunday closest to October 31. The Plan Year shall constitute
the Plan's "limitation year" for the purpose of measuring maximum
allocations to participants under the Plan.
6. Except as otherwise amended above, the Plan, as amended by the First
and Second Amendments, shall continue in full force and effect.
To signify its adoption of this Third Amendment, MicroAge, Inc. has
caused this Third Amendment to be executed by its duly authorized officer on
this26th day ofSeptember, 1996.
MicroAge, Inc.
By: /s/ Jeffrey D. McKeever
-----------------------------------
Its: Chairman and CEO
-----------------------------------
3
FOURTH AMENDMENT
TO THE
MICROAGE, INC.
RETIREMENT SAVINGS AND
EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST
The MicroAge, Inc. Retirement Savings and Employee Stock
Ownership Plan and Trust (the "Plan"), as amended and restated by a document
effective as of January 1, 1995 and amended by the First Amendment dated May 10,
1995, the Second Amendment dated March 14, 1996, and the Third Amendment dated
November 4, 1996, is hereby further amended as follows:
1. All of the changes made to the Plan by this Fourth Amendment are
effective for distributions made on or after the date of execution.
2. This Fourth Amendment replaces Section 6.11(b) of the Plan. The new
Section 6.11(b) shall read as follows:
(b) No withdrawal of Elective Deferrals shall be made prior to
the Participant's disability, retirement, or severance of employment,
except where the Participant evidences a financial hardship.
Withdrawals shall be limited solely to Elective Deferrals for all Plan
Years without regard to earnings on such Elective Deferrals and without
regard to Qualified Matching Contribution and Qualified Nonelective
Contributions. Notwithstanding the preceding sentence, if a
Participant's December 31, 1988 account attributable to Elective
Deferrals (the "frozen amount") suffers a loss subsequent to December
31, 1988 that brings the value of the account below the frozen amount,
then the Qualified Matching Contributions, and Qualified Nonelective
Contributions and earnings may be withdrawn due to financial hardship
to the extent necessary to reach the frozen amount. All requests for a
hardship withdrawal shall be made to the "Hardship Withdrawal
Committee". The "Hardship Withdrawal Committee" shall consist of the
Employer's Chief Financial Officer, its principal Human Resources
executive and a third member who shall be selected by the previously
named members.
Amounts may be withdrawn pursuant to this Section 6.11(b) only if the
Participant experiences an immediate and heavy financial need and the
withdrawal is necessary to satisfy the financial need.
1
<PAGE>
(i) Immediate and Heavy Financial Need. The Hardship
Withdrawal Committee shall determine whether the Participant
has an immediate and heavy financial need based on all of the
relevant facts and circumstances. Generally, for example, the
need to pay funeral expenses of a spouse or lineal ascendant
or descendant of the Participant would constitute an
"immediate and heavy financial need", but the need for funds
for a totally discretionary expenditure (such as the purchase
of a boat) would not. The following expenses or circumstances
will be deemed to give rise to an immediate and heavy
financial need for purposes of this Section 6.11(b) regardless
of whether the general standards set out above are satisfied:
(A) Medical expenses described in Code Section
213(d) necessary to obtain medical care for
the Participant, his spouse or dependents;
or
(B) Purchase (excluding mortgage payments) of a
principal residence for the Participant; or
(C) Payment of the next twelve (12) months'
tuition, room and board, and
education-related expenses for a
post-secondary education for the
Participant, his spouse or dependents; or
(D) Prevention of the eviction from or
foreclosure on the Participant's principal
residence; or
(E) Any other circumstance or expense designated
by the Commissioner of Internal Revenue as a
deemed immediate and heavy financial need in
any published revenue ruling, notice or
other document of general applicability.
(ii) Necessary to Satisfy an Immediate and Heavy
Financial Need. The withdrawal request will be considered to
be necessary to satisfy an immediate and heavy financial need
of a Participant only if the need may not be satisfied from
other resources that are reasonably available to the
Participant, and the withdrawal does not exceed the amount
needed to satisfy the need. The Hardship Withdrawal Committee
shall consider all relevant facts and circumstances in
determining whether a hardship withdrawal is necessary in
order to satisfy an immediate and heavy financial need.
Generally, a withdrawal shall be considered necessary if the
Participant represents to the Hardship Withdrawal Committee
that the need cannot be relieved through reimbursement or
compensation by insurance or otherwise, by the reasonable
liquidation of the Participant's assets (to the extent that
such liquidation would not itself cause an immediate and heavy
financial need), by
2
<PAGE>
cessation of elective pre-tax contributions or after-tax
contributions under this or any other plan sponsored by the
Employer, or by other distributions or nontaxable loans under
this or any other plan sponsored by the Employer. A
distribution will be deemed to be necessary to satisfy an
immediate and heavy financial need of a Participant if all of
the following requirements are satisfied, regardless of
whether the general standards set forth above are met:
(A) The amount requested for distribution is not
in excess of the amount of the immediate and
heavy financial need of the Participant;
(B) The Participant has obtained all
distributions, other than hardship
distributions, and all nontaxable loans
currently available under all plans
maintained by the Employer;
(C) All plans sponsored by the Employer provide
that the Participant's contributions
(whether made on a pre-tax of after-tax
basis) will be suspended for at least twelve
(12) months after receipt of the
distribution; and
(D) All plans sponsored by the Employer provide
that the Participant may not make elective
pre-tax contributions for the calendar year
immediately following the calendar year in
which the distribution for the hardship
withdrawal is made in excess of the
applicable limit in effect for such year
under Code Section 402(g) less the amount of
the Participant's pre-tax elective
contributions for the calendar year in which
the hardship withdrawal is made.
If the Hardship Withdrawal Committee determines that a
Participant's request for a hardship withdrawal meets the requirements
set forth in this Section 6.11(b), then the Hardship Withdrawal
Committee shall direct the Trustee to pay such amounts to the
Participant upon receipt from the Participant of such written request
or form as may be required by the Hardship Withdrawal Committee. In
determining the amount of the withdrawal, the Hardship Withdrawal
Committee may include the amount of any taxes and penalties which the
Participant must pay with respect to the distribution. The Hardship
Withdrawal Committee may rely upon any representations made by the
Participant concerning the Participant's intended use of funds
distributed to the Participant pursuant to this Section 6.11(b) and the
urgency of any intended expenses or any other matters relevant to the
Hardship Withdrawal Committee's determinations of the Participant's
request.
3
<PAGE>
3. Except as otherwise amended above, the Plan, as amended by the
previous three amendments, shall continue in full force and effect.
To signify its adoption of this Fourth Amendment, MicroAge, Inc. has
caused this Fourth Amendment to be executed by its duly authorized officer on
this 4th day of December, 1996.
MICROAGE, INC.
By:/s/ Jeffrey D. McKeever
---------------------------------
Jeffrey D. McKeever
Its: Chairman of the Board and
Chief Executive Officer
4
FORM OF PURCHASING AGREEMENT
TERMS & CONDITIONS
1. Agreement to Purchase. MICROAGE COMPUTER CENTERS, INC. (the "Company")
distributes and sells to authorized customers, computer hardware and related
products (collectively the "Products") supplied by various vendors ("Vendors").
The "Purchaser" (identified on the Application and below) agrees to purchase and
resell the Products in accordance with the terms and conditions of this
Agreement and the Company's general policies and procedures as outlined in the
Price Guide and the Business Builder Resource Guide (collectively the "BBRG"),
subject to, and contingent upon, availability of the Product and receipt by the
Company of Vendor authorization if required.
2. Business Location and Name. The Company shall ship all Products to the
address designated by the Purchaser. The Purchaser shall notify the Company of
any change in Purchaser's business location or business name. Until a Vendor
which requires authorization provides the Company with approval to do so, the
Company shall not be obligated to ship to the new location or business name.
3. Product Ordering and Shipment Terms and Conditions. The Company's general
policies and procedures as outlined in the BBRG shall contain the terms and
conditions by which the Products shall be ordered and shipped. The Company shall
have the right to allocate its available products among its customers in such
manner as the Company deems equitable. The Purchaser shall comply with the terms
of this Agreement, the general policies and procedures as outlined in the BBRG,
and the standards and specifications established by its Vendors, as each may be
modified from time to time.
4. Product Cost. The purchase price for the Products and other terms and
conditions of sale shall be as set forth in the applicable BBRG. The Purchaser
shall make payment to the Company as outlined in the BBRG. The Company may
grant, modify, or revoke credit in the Company's sole discretion. Also, in its
sole discretion, the Company may modify the purchase price for the Products or
the time or manner of payment and/or invoicing procedures in accordance with
policies and procedures announced periodically or as contained in the general
policies and procedures as outlined in the BBRG. Delinquent payments shall be
subject to a service charge, of the lesser of one and one-half percent (1-1/2%)
or the highest applicable legal rate allowed, on the delinquent amount due per
month, until paid. Should the Purchaser become delinquent in any payment due the
Company or its affiliates, the Company may in its sole discretion (with or
without notice) suspend acceptance of orders from, or shipments to, the
Purchaser.
5. Independent Businessperson. The parties agree that each of them is an
independent business and that their only relationship is by virtue of this
Agreement. Neither party is liable or responsible for each other's debts or
obligations. The Company and the Purchaser agree that neither of them will hold
itself out to be the agent, partner, franchisee, joint venturer, employer or
related party of the other.
6. Indemnification. The Purchaser shall indemnify and hold harmless the Company
from all fines, suits, proceedings, claims, demands or action of any kind or
nature, or from any third party whomsoever, arising or growing out of, or
otherwise connected with, the Purchaser's business.
7. Price Guide. The BBRG may be published in one or more media, including
printed and electronic. The Company reserves the right to change the policies
and procedures outlined in the BBRG, which changes shall be effective when
notice shall have been sent to the Purchaser. The master copy of the BBRG
maintained by the Company at its principal office shall be controlling in the
event of a dispute relative to the content of any provision therein.
8. Purchaser Criteria. The Purchaser acknowledges and represents that: (i) its
execution of this Agreement does not violate the terms of any other
dealer/distributor agreement it is a party to; (ii) at no time during
discussions concerning this Agreement did the Company induce the Purchaser to
terminate or impair any existing contract it may have; and (iii) the Purchaser
represents that it possesses any authorization required by the Vendors for the
sale of the Products. The Purchaser shall maintain said Vendor authorization(s)
in good standing during the terms of this Agreement.
9. Proprietary Markets and Trademarks. The Purchaser acknowledges that the
Company's trademarks, including without limitation, MICROAGE and ecAdvantage,
are the Company's sole and exclusive property, and that the Purchaser is
specifically prohibited from using the Company's trademarks in any manner or for
any purpose.
10. Mutual Right to Terminate. Either party may terminate this Agreement at any
time, with or without cause, and in its sole and absolute discretion, upon
thirty (30) days' prior written notice to the other party. This Agreement shall
terminate immediately upon the expiration or termination of the master vendor
agreement between the Company and the Vendor(s).
<PAGE>
Upon any termination or expiration of the Agreement, each party shall pay to the
other all amounts or accounts payable then owed and unpaid between the parties,
if any, within fifteen (15) calendar days of the effective date of such
termination or expiration.
11. Assignment. The Purchaser may not sell, transfer or assign this Agreement,
in whole or in part, or any of the rights hereunder unless the Purchaser obtains
the Company's prior written consent.
12. Confidentiality. The Purchaser shall maintain the confidentiality of all
elements of the distribution system, the Agreement, the BBRG and the Company's
methods of doing business.
13. Miscellaneous Provisions.
13.1 Applicable manufacturer's warranties are passed through to the
Purchaser's end users. THE COMPANY HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
NON-INFRINGEMENT AND IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE. TO THE GREATEST EXTENT ALLOWABLE UNDER LAW, THE COMPANY
SHALL NOT BE LIABLE TO THE PURCHASER OR ANY THIRD PARTY FOR CONSEQUENTIAL,
INDIRECT, SPECIAL, OR INCIDENTAL DAMAGES, INCLUDING, WITHOUT LIMITATION, LOSS OF
DATA, TIME OR PROFITS EVEN IF THE COMPANY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES.
13.2 This Agreement may be modified only upon execution of a written
agreement executed by the parties. No waiver of any condition or covenant
contained in this Agreement, or failure to exercise a right or remedy of the
Company or the Purchaser, shall be considered to imply or constitute a further
waiver by the waiving party of the same or any other condition, covenant, right
or remedy.
13.3 The validity and construction of this Agreement shall be governed by the
internal laws of the State of Arizona. The 1980 U.N. Convention on Contracts for
the International Sale of Goods is specifically rejected and does not apply to
any transaction under this Agreement. If any of the terms of this Agreement are
inconsistent with the applicable state statutes, then state statutes will
supersede such terms. If a claim is asserted in any legal proceeding, the
Purchaser and the Company agree to irrevocably submit to the jurisdiction of the
Superior Court of the State of Arizona and the Federal District Court for the
District of Arizona, and irrevocably agree that venue for any action or
proceeding shall be in Maricopa County, Arizona. Both parties waive any
objection to the jurisdiction of these courts or to venue in Maricopa County,
Arizona. In the event an action is brought to enforce this Agreement, the
prevailing party shall be entitled to its costs and reasonable attorneys' fees.
13.4 All notices required to be given under this Agreement shall be given in
writing, by certified mail, return receipt requested, at the address of the
parties contained in the Program Application, or to such other addresses as the
Company or the Purchaser may designate in writing from time to time, and shall
be effectively given five (5) business days after deposit in the United States
mail, postage prepaid.
13.5 These terms and conditions contain the entire agreement between the
parties and supersede any and all prior agreements, if any, between the parties
concerning the subject matter hereof. The Purchaser agrees and understands that
the Company shall not be liable or obligated for any verbal representations
made. The Company does not authorize and will not be bound by any representation
of any nature other than those expressed in this Agreement.
13.6 The undersigned certifies that the Federal Taxpayer Identification
Number provided on the Application is correct and that the Purchaser is not
subject to back-up withholding.
13.7 The statements provided in this Application and in the attached
documents are true and complete to the best of the Purchaser's knowledge. The
Company may contact any person or business outlined in this Application for the
purpose of verifying the discreet information submitted; and the Purchaser
agrees to authorize any such person or business to release any information to
the Company which may be required to effect such verification. The individual
signing this Agreement represents that the Purchaser (if applicable) is a valid
corporation in good standing. By signing this Agreement, the Company and the
Purchaser agree that a facsimile of the signed Agreement may be construed and
accepted as valid, enforceable and binding on the parties hereto.
PURCHASER
(Complete name of corporation, partnership or sole proprietorship)
<PAGE>
By
(Signature of Corporate Officer, Partner or Owner)
Print Name
Title
Date
MICROAGE COMPUTER CENTERS, INC.
By
Title
Date
LAND PURCHASE AND SALE AGREEMENT
SELLER:
CMD SOUTHWEST INC.
PURCHASER:
MICROAGE COMPUTER CENTERS, INC.
(Option Land Parcel)
<PAGE>
07/26/86
PURCHASE AND SALE AGREEMENT
This AGREEMENT is made on the 8th day of August, 1996, between CMD
SOUTHWEST INC., an Arizona corporation ("Seller"), and MICROAGE COMPUTER
CENTERS, INC., a Delaware corporation ("Purchaser").
The parties hereto hereby agree as follows:
1. Purchase and Sale. Seller hereby agrees to sell to Purchaser, and
Purchaser hereby agrees to purchase from Seller, that certain real property
described on Exhibit A attached hereto and made a part hereof ("Property"), for
a total purchase price equal to the product of (a) Five and 00/100 dollars
($5.00), and (b) the number of Net Square Feet (as hereinafter defined) of the
Property ("Purchase Price"), subject and according to the terms and conditions
set forth in this Agreement.
2. Earnest Money Deposit. Simultaneously with the execution and
delivery of this Agreement by Seller and Purchaser, (a) Seller and Purchaser
shall each execute and deliver to each other and Chicago Title Insurance Company
("Escrow Agent") a written escrow agreement between Seller, Purchaser and Escrow
Agent identical in form and substance to Exhibit B hereto ("Earnest Money Escrow
Agreement"), and (b) Purchaser shall deliver to Escrow Agent an amount equal to
Fifty Thousand and 00/100 Dollars ($50,000.00) ("Earnest Money Deposit"). The
Earnest Money Deposit, together with any interest thereon, shall be invested,
maintained and disbursed pursuant to the terms of the Earnest Money Escrow
Agreement and this Agreement.
3. Title. Seller shall deliver to Purchaser within fifteen (15) days of
the latest of each of the dates set forth after the signatures of each of the
parties hereto ("Effective Date") a commitment for an ALTA Form B Owner's Title
Insurance Policy ("Title Commitment") for the Property issued by Chicago Title
Insurance Company ("Title Insurer") in the amount of the Purchase Price covering
title to the Property and showing Seller as owner of the Property in fee simple.
4. Survey. Seller shall deliver to Purchaser within twenty (20) days of
the Effective Date an updated survey of the Property prepared in accordance with
the 1992 "Minimum Standard Detail Requirements for Land Title Surveys" jointly
established and adopted by ALTA and ACSM meeting the accuracy standards of an
Urban Survey ("Survey") prepared and certified by a surveyor licensed by the
State of Arizona and certified to Purchaser and Title Insurer which sets forth
the legal description of the Property and depicts the Property and all
improvements, encroachments, easements, building lines and other similar
restrictions of record. The Survey shall include the net square feet of the
Property ("Net Square Feet"), defined as the gross square feet of the Property,
including fractional square feet, less the number of square feet falling within
any public right of ways on the Property.
<PAGE>
5. Environmental Report. Seller shall deliver to Purchaser within
twenty (20) days of the Effective Date an updated "Phase I" environmental report
("Environmental Report") prepared by an engineer licensed by the State of
Arizona setting forth a description of the environmental condition of the
Property.
6. Representations and Warranties.
(a) Representations and Warranties of Seller. In
order to induce Purchaser to execute, deliver and perform the
obligations of Purchaser hereunder, Seller hereby makes the
representations and warranties set forth in this Section 6(a) to
Purchaser on and as of the Effective Date.
(i) Seller has full capacity, right,
power and authority to execute, deliver and perform its
obligations under this Agreement, and all required action and
approvals therefor have been duly taken and obtained.
(ii) The individuals signing this
Agreement on behalf of Seller are duly authorized to sign the
same on behalf of Seller and to bind Seller thereto.
(iii) Seller has not received any
written notice of any pending condemnation actions against the
Property.
(iv) Seller has not received any
written notice of any violation of applicable laws regulating
the use, storage, handling or disposal of substances (A)
designated as a "hazardous substance" pursuant to Section 311
of the Clean Water Act or listed pursuant to Section 307 of
the Clean Water Act,(B) defined as a "hazardous waste"
pursuant to Section 1004 of the Resource Conservation and
Recovery Act, (C) defined as a "hazardous substance" pursuant
to Section 101 of the Comprehensive Environmental Response,
Compensation, and Liability Act, or (D) subject to regulations
as a hazardous chemical substance pursuant to Section 6 of the
Toxic Substances Control Act.
(b) Representations and Warranties of Purchaser. In
order to induce Seller to execute, deliver and perform the obligations
of Seller hereunder, Purchaser hereby makes the representations and
warranties set forth in this Section 6(b) to Seller on and as of the
Effective Date.
(i) Purchaser has full capacity,
right, power and authority to execute, deliver and perform its
obligations under this Agreement, and all required action and
approvals therefor have been duly taken and obtained.
(ii) The individuals signing this
Agreement on behalf of Purchaser are duly authorized to sign
the same on behalf of Purchaser and to bind Purchaser thereto.
<PAGE>
(c) Survival. All of the representations and
warranties contained in this Section 6 shall survive the Closing (as
hereinafter defined) for a period of six months.
7. General Covenants. During the period beginning on the Effective Date
and ending on the Closing Date or the earlier termination of this Agreement
according to the terms hereof, Seller will comply with each of the covenants set
forth in this Section 7 without cost or expense to Purchaser.
(a) Liens and Encumbrances. Seller will not convey
any interest in the Property to any person or entity, or intentionally
encumber the Property, without the prior written consent of Purchaser.
(b) Alterations. Seller will not make any
improvements to the Property, without the prior written consent of
Purchaser.
8. Conditions Precedent. The obligation of Purchaser to close the
transaction contemplated under this Agreement is, unless waived in writing by
Purchaser, subject to Purchaser's determination, in Purchasers sole and absolute
discretion, that the Property is desirable for Purchasers intended purpose on or
before the date which is forty five (45) days after the Effective Date
("Contingency Period"). Purchaser may, at its option, elect to terminate this
Agreement by delivering written notice to Seller prior to the expiration of the
Contingency Period, in which event the Earnest Money Deposit, together with all
interest thereon shall forthwith be returned to Purchaser), all obligations of
the parties under this Agreement shall cease and this Agreement shall be of no
further force and effect. If Purchaser fails to deliver to Seller any written
notice of such election to terminate prior to the expiration of the Contingency
Period, Purchaser shall be deemed to have accepted the condition of the Property
and to have waived any condition precedent to Closing.
9. Closing.
(a) Closing Place. The consummation of the purchase
and sale of the Property subject and according to the terms of this
Agreement ("Closing") shall occur at the office of Title Insurer.
(b) Closing Date. The Closing shall occur on the date
which is thirty (30) days after the expiration of the Contingency
Period, or on any other date prior to such date which is agreed upon by
Seller and Purchaser in writing ("Closing Date").
(c) Delivery of Documents. On the Closing Date,
Seller and Purchaser shall deliver the following documents and other
items to the following parties:
(i) Seller Documents. Seller shall
deliver or cause to be delivered to Purchaser the items set
forth in this subsection (i).
<PAGE>
(A) Deed. A special warranty
deed to the Property in the form and substance shown
on Exhibit "G" attached hereto and made a part
hereof, duly executed by Seller.
(B) Non-Foreign
Certifications. A certificate duly executed by Seller
setting forth the address and federal tax
identification number of Seller and certifying that
Seller is a ("United States Person") and not a
"foreign person" in accordance with and for the
purpose of the provisions of Sections 7701 and 1445
(as may be amended) of the Internal Revenue Code of
1986, as amended, and any regulations promulgated
thereunder.
(C) Title Policy. A title
policy or commitment to issue a title policy in the
amount of the Purchase Price, covering title to the
Property on the Closing Date, showing Purchaser as
the sole owner of the Real Property in fee simple,
subject only to the matters disclosed on the Title
Commitment.
(D) Resolution. A certified
corporate resolution passes by the Board of Directors
of Seller authorizing the transaction contemplated in
this Agreement and confirming the authority of the
person executing this Agreement on behalf of Seller.
(ii) Purchaser Documents. Purchaser
shall deliver or cause to be delivered to Seller the items set
forth in this subsection (ii):
(A) Cash. An amount by
federally insured wire transfer or by certified check
drawn on a bank acceptable to Seller equal to the
Purchase Price, less the Earnest Money Deposit, as
adjusted pursuant to Section 9(e) and Section 14
hereof ("Cash Payment").
(iii) Seller and Purchaser
Documents. Seller and Purchaser shall each deliver or cause to
be delivered to the Escrow Agent the items set forth in this
subsection (iii):
(A) Title Documents. ALTA
statements and transfer tax declarations in forms
required by the Title Insurer with respect to the
sale of the Property according to the terms of this
Agreement.
(B) Direction. Joint written
direction to the Escrow Agent to disburse to Seller
the entire amount of the Earnest Money Deposit,
together with all interest which has accrued thereon.
<PAGE>
(d) Deed and Money Escrow. At the option of Seller,
the sale and purchase of the Property shall be closed through a deed
and money escrow with Escrow Agent or Title Insurer ("Closing Escrow")
in accordance with the general provisions in the usual form of deed and
money escrow agreement then in use by Escrow Agent or Title Insurer
("Closing Escrow Agreement") with such special provisions inserted in
the Closing Escrow Agreement as may be required to conform with this
Agreement. Upon the creation of the Closing Escrow Agreement, anything
herein to the contrary notwithstanding, payment of the Purchase Price
and delivery of all documents to be delivered hereunder shall be made
through the Closing Escrow and in accordance with the terms of the
Closing Escrow Agreement. The parties agree to create the Closing
Escrow at least approximately 10 days prior to the Closing Date and to
direct Escrow Agent to transfer the Earnest Money Deposit, together
with all interest thereon, to the Closing Escrow for return to
Purchaser only in accordance with the terms of this Agreement. One half
of the costs of the Closing Escrow shall be paid by Seller and one half
of the costs of the Closing Escrow shall be paid by Purchaser.
(e) Real Estate Taxes.
(i) Definitions. The following terms
shall have the following respective meanings for the
purpose of this Section 9(e):
(A) Base Year Tax Amount. The
term "Base Year Tax Amount" means the amount of the
real estate taxes for the Base Year.
(B) Base Year. The term "Base
Year" means the calendar year most recently before
the Closing Year for which the final real estate
taxes have been determined by the real estate taxing
authority.
(C) Adjustment Days. The term
"Adjustment Days" means the number of days during the
period beginning on and including January 1 of the
calendar year in which the Closing occurs and ending
on and including the date of the Closing.
(D) Adjustment Amount. The
term "Adjustment Amount" means the amount of the real
estate taxes paid on or before the date of the
Closing for the Base Year and any calendar year after
the Base Year.
(E) Closing Year. The term
"Closing Year" means the calendar year in which the
Closing occurs.
<PAGE>
(F) Closing Year Tax Amount.
The term "Closing Year Tax Amount" means the amount
of the real estate taxes paid or payable for the
Closing Year.
(G) Tax Proration Amount. The
term "Tax Proration Amount" means the amount
determined by the application of the following
formula:
Base Year Tax Amount x (365 + Adjustment Days) - Adjustment Amount
------------------------------------------------------------------
365
(H) Real Estate Taxes. All
references to real estate taxes for a particular
calendar year means the real estate taxes for the
Real Property assessed for such calendar year and
payable in the next succeeding calendar year.
(ii) Purchaser Credit. General real
estate taxes with respect to the Property shall be prorated
and there shall be a credit at the Closing in favor of
Purchaser against the Purchase Price in an amount equal to the
Tax Proration Amount. All prorations with respect to Real
Estate Taxes shall be final.
(f) Closing Charges. Seller shall pay all charges for
title insurance furnished pursuant to Section 3 hereof, the Survey
furnished pursuant to Section 4 hereof, the Environmental Report
pursuant to Section 5 hereof, subject to the provisions of Section 8,
and the release of all mortgages currently encumbering the Property.
Purchaser shall pay for all title insurance in addition to that to be
furnished by Seller under Section 3 hereof, all surveys in addition to
that to be furnished by Seller under Section 4 hereof, any stamp or
transfer taxes imposed by any state, county or other governmental
agency on transfer of title, and all recordation and title insurance
charges incurred in connection with any mortgage loans obtained by
Purchaser. The parties shall each be solely responsible for the fees
and disbursements of their respective counsel and other professional
advisers.
10. Default.
(a) Default by Seller. In the event that Seller fails
to consummate the transactions contemplated by and according to the
terms of this Agreement for any reason other than the termination of
this Agreement pursuant to the terms hereof or the default by Purchaser
under this Agreement, Purchaser shall have the right, as its sole and
exclusive remedies hereunder, to either (i) terminate this Agreement in
its entirety by written notice to Seller within 5 days after the
Closing Date, in which event the Earnest Money Deposit, together with
all interest thereon, shall forthwith be returned to Purchaser, all
obligations of the parties hereto shall thereupon cease and this
Agreement shall thereafter be of no
<PAGE>
further force and effect, or (ii) seek specific performance of the
obligations of Seller under this Agreement.
(b) Default by Purchaser. In the event that Purchaser
fails to consummate the transactions contemplated by and according to
the terms of this Agreement for any reason other than the termination
of this Agreement pursuant to the terms hereof or the default by Seller
under this Agreement, Seller shall have the right, as its sole and
exclusive remedy hereunder, to retain the Earnest Money Deposit,
together with all interest earned thereon, as liquidated damages, it
being acknowledged that actual damages to Seller would be difficult or
impossible to ascertain.
11. Brokerage.
(a) Seller Brokerage. Seller hereby represents to
Purchaser that Seller has not dealt with any broker or finder in
respect to the transaction contemplated by this Agreement other than CB
Commercial Real Estate ("Broker"). Seller hereby agrees to indemnify
Purchaser for any claim for brokerage commission or finder's fee
asserted by a person, firm or corporation claiming to have been engaged
by Seller with respect thereto.
(b) Purchaser Brokerage. Purchaser hereby represents
and warrants to Seller that Purchaser has not dealt with any broker or
finder in respect to the transaction contemplated by this Agreement
other than Broker. Purchaser hereby agrees to indemnify Seller for any
claim for brokerage commission or finder's fee asserted by a person,
firm or corporation other than Broker claiming to have been engaged by
Purchaser with respect thereto. Seller will pay all commissions due to
Broker with respect to the transactions contemplated by this Agreement
pursuant to separate agreement and hereby agrees to indemnify Purchaser
for any claim for a brokerage commission or finder's fee asserted by
Broker.
12. Condemnation. If, after the Effective Date and prior to the Closing
Date, any material portion of the Property is taken by exercise of the power of
eminent domain, Purchaser may, within 10 days after such taking, elect to (a)
terminate this Agreement, in which event the Earnest Money Deposit, together
with all interest thereon, shall be returned to Purchaser, all obligations of
the parties under this Agreement shall cease, and this Agreement shall have no
further force and effect, or (b) close the transaction contemplated by this
Agreement as scheduled (except that if the Closing Date is less than 10 days
following such taking, the Closing Date shall be delayed until Purchaser makes
such election), in which event all monies that are paid as a result of such
condemnation prior to the Closing Date shall be paid to Seller and applied to
the Purchase Price to the extent of the Purchase Price at the Closing, and any
monies that are paid as a result of such condemnation after the Closing Date
shall be paid to Purchaser.
13. Notices. Any notice, request, demand, instruction or other document
to be given or served hereunder or under any document or instrument executed
pursuant hereto shall be in
<PAGE>
writing and shall be delivered personally or by cable or telex, or sent by a
nationally-recognized overnight delivery service, or sent by United States
registered or certified mail, return receipt requested, postage prepaid and
addressed to the parties at their respective addresses set forth below, and the
same shall be effective upon receipt. A party may change its address for receipt
of notices by service of a notice of such change in accordance herewith. All
notices by cable or telex shall be subsequently confirmed by U.S. certified or
registered mail.
If to Seller: CMD Southwest Inc.
9785 Maroon Circle, Suite 350
Englewood, CO 80112
Attn: Vice President
with a copy to: CMD Corporation
227 West Monroe Street
Suite 3900
Chicago, Illinois 60606
Attention: General Counsel
If to Purchaser: MicroAge Computer Centers
2400 South MicroAge Way
Tempe, AZ 85282-1896
Attn: Vice President Administration
14. Nomination of Buyer. At any time prior to the Closing Date,
Purchaser may nominate and assign this Agreement or any of its rights hereunder
to any person, partnership, corporation, trust or other entity, in which case
such assignee shall be fully substituted as Purchaser herein. Upon written
assumption by Assignee of this Agreement and all of its obligations contained
herein, such assignment shall relieve Purchaser of further obligations under
this Agreement with the exception of Purchaser's indemnification as defined in
to Section 6 of this Agreement. Such Assignment shall be made by delivering to
Seller and Escrow Agent written instructions signed by Purchaser assigning
Purchaser's interest herein.
15. Entire Agreement, Amendments and Waivers. This Agreement contains
the entire agreement and understanding of the parties in respect to the subject
matter hereof, and the same may not be amended, modified or discharged nor may
any of its terms be waived except by an instrument in writing signed by the
party to be bound thereby.
16. No Third Party Benefits. This Agreement is for the sole and
exclusive benefit of the parties hereto and their respective successors and
assigns, and no third party is intended to or shall have any rights hereunder.
17. Governing Laws. This Agreement shall be governed by and construed
in accordance with the laws of the State of Arizona.
18. Time. Time is of the essence of each and every term of this
Agreement.
<PAGE>
19. Interpretation.
(a) The headings and captions herein are inserted for
convenient reference only and the same shall not limit or construe the
paragraphs or sections to which they apply or otherwise affect the
interpretation hereof.
(b) The terms "hereby," "hereof," "hereto," "herein,"
"hereunder" and any similar terms shall refer to this Agreement, and
the term "hereafter" shall mean after, and the term "heretofore" shall
mean before, the Effective Date.
(c) Words of the masculine, feminine or neuter gender
shall mean and include the correlative words of other genders, and
words importing the singular number shall mean and include the plural
number and vice versa.
(d) Words importing persons shall include firms,
associations, partnerships (including limited partnerships), trusts,
corporations and other legal entities, including public bodies, as well
as natural persons.
(e) The terms "include," "including" and similar
terms shall be construed as if followed by the phrase "without being
limited to."
(f) This Agreement and any document or instrument
executed pursuant hereto may be executed in any number of counterparts
each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
(g) Whenever under the terms of this Agreement the
time for performance of a covenant or condition falls upon a Saturday,
Sunday or holiday, such time for performance shall be extended to the
next business day. Otherwise all references herein to "days" shall mean
calendar days.
SELLER:
CMD SOUTHWEST INC.,
an Arizona corporation
By:\s\ D. Scott Gibler
------------------------------
D. Scott Gibler
Its: Vice President
Dated: August 8, 1996
---------------------------
<PAGE>
PURCHASER:
MICROAGE COMPUTER CENTERS, INC.
By: Alan R. Lyons
-----------------------------------------
Its: V.P. Human Resources and Administration
----------------------------------------
Dated: August 5, 1996
--------------------------------------
<PAGE>
EXHIBIT A
REAL PROPERTY
Lots 29, 30 and 31 and the West 100.0 feet
of Lot 24, except the North 67.49 feet thereof, of BROADWAY
INDUSTRIAL PARK UNIT FOUR, a subdivision recorded in book 210
of Maps, Page 48, records of Maricopa County, Arizona; said
parcel containing an area of 380,929 square feet (+/-) or
8.7449 acres, more or less.
<PAGE>
EXHIBIT B
EARNEST MONEY ESCROW AGREEMENT
<PAGE>
DEED
When recorded, return to:
CMD Corporation
227 West Monroe Street, Suite 3900
Chicago, Illinois 60606
Attention: General Counsel
SPECIAL WARRANTY DEED
---------------------
For the consideration of Ten Dollars ($10.00) and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, CMD SOUTHWEST, INC., an Arizona corporation ("Grantor"), hereby
conveys to MICROAGE COMPUTER CENTERS, INC., a Delaware corporation ("Grantee"),
the following real property situated in Maricopa County, Arizona, together with
all rights and privileges appurtenant thereto:
Lots 29, 30 and 31 and the West 100.0 feet
of Lot 24, except the North 67.49 feet thereof, of BROADWAY
INDUSTRAIL PARK UNIT FOUR, a subdivsion recorded in book 210
of Maps, Page 48, records of Maicopa County, Arizona; said
parcel containing an area of 380,929 square feet (+/-) or
8.7449 acres, more or less
SUBJECT only to covenants, conditions and restrictions of record;
private, public and utility easements and roads and highways, if any; special
taxes or assessments for improvements not yet completed; general taxes not yet
due and payable and those matters identified in Exhibit A attached hereto.
TO HAVE AND TO HOLD the same unto Grantee and Grantee's successors and
assigns forever.
SUBJECT to the foregoing, the Grantor hereby binds itself and its
successors to warrant and defend the title against all acts of Grantor and none
other.
Executed by Grantor as of the day of , 1996.
------- -----------------
CMD SOUTHWEST INC.
By:
--------------------------------
Its:
--------------------------------
<PAGE>
STATE OF ARIZONA )
) SS:
COUNTY OF MARICOPA )
The foregoing instrument was acknowledged before me this ______ day of
__________________ , 1996, by __________________________________, the
___________________ of CMD SOUTHWEST INC., an Arizona corporation, on behalf of
the corporation.
--------------------------------
Notary Public
My Commission Expires:
- ---------------------------
<PAGE>
EXHIBIT A
SUBJECT TO:
1. All plans and specifications for any improvement or alteration
to the Property, including, but not limited to, the construction of a
building or an addition to any existing building on the Property,
landscaping, any exterior signs and color schemes for exterior
painting, but specifically excluding any interior improvements or
alterations which do not affect the exterior portions of the buildings
or the parking and landscaping areas on the Property, shall be
submitted to Grantor at 9785 Maroon Circle; Suite 350, Englewood, CO
80112, or to such other address for Grantor as shown on a duly recorded
notice of change of address, for Grantor's prior written approval,
which approval shall not be unreasonably withheld. Grantor's approval
shall be for the purpose of assuring aesthetic harmony of the proposed
improvements with other improvements, whether proposed or existing,
within the Broadway Business Park, and such approval shall not be a
warranty that the improvements comply with applicable governmental
regulations are structurally sound or are otherwise free from defects.
If Grantor fails to give a written response to submitted plans and
specifications within thirty (30) days after the same have been mailed
or hand-delivered to Grantor at Grantor's address of record as provided
above, the improvement or alterations shall be deemed approved. During
the course of construction of any improvement or alteration, Grantor
shall be entitled to enter upon the Property to inspect the improvement
or alteration in order to insure compliance by Grantee with the terms
of these Restrictions. Notwithstanding anything contained herein to the
contrary, as long as the City of Tempe maintains a Design Review Board
whose purpose is, among other things, to assure the aesthetic harmony
of proposed improvements with other improvements, Grantee shall not be
required to submit plans and specifications for any improvement or
alteration to the property, provided, however, all such improvements or
alterations shall comply with all applicable governmental requirements
including the City of Tempe Design Review Board.
2. Grantee shall maintain the existing landscaping in a neat and
orderly manner and shall keep areas not currently landscaped free of
weeds.
3. No metal-clad buildings or metal-clad alterations, additions
or improvements to existing buildings on the Property shall be
permitted.
4. Outside storage of all goods, waste products and other
materials of any kind whatsoever, shall be substantially screened from
street view by a concrete block wall, which shall be stuccoed and
painted to match the existing building.
5. These restrictions shall be deemed covenants running with the
land and are binding on Grantee and Grantee's successors and assigns
for the benefit of Grantor's property located within the Broadway
Business Park. These Restrictions shall be deemed
<PAGE>
terminated and forever thereafter of no force or effect whatsoever
fifty (50) years following the date of recordation of this Deed, or at
such time as Grantor no longer owns any property within the Broadway
Business Park, whichever first occurs.
6. Grantor shall be entitled to enforce these Restrictions by
appropriate court proceeding, including the seeking and obtaining of
injunctive relief. Grantee agrees to pay all costs of enforcement,
including reasonable attorneys' fees.
7. Grantor shall have the right, but not the obligation, to take
such action as may be necessary to secure compliance with or to correct
non-compliance with the terms of these Restrictions, and any amounts
expended by Grantor in connection therewith shall be repaid to Grantor
by Grantee immediately upon demand therefor, together with interest
thereon from the date of expenditure by Grantor until paid at a rate
equal to 2 percentage points added to the prime interest rate as
published by the Wall Street Journal, as it varies from time to time.
In the event that The Wall Street Journal ceases either to exist or
announce a prime interest rate, the aforementioned interest shall be
calculated by adding 2 percentage points to the prime interest rate of
the lending institution in Maricopa County, Arizona that, at the time
such calculation is made, has the greatest asset value.
8. Notwithstanding anything contained herein to the contrary,
prior to exercising any of Grantor's rights to enforce any of these
Restrictions or to secure Grantee's compliance with or to correct
non-compliance with the terms of these Restrictions, Grantor shall send
to Grantee at the Property a written notice informing Grantee of the
breach of these Restrictions and permitting Grantee a sixty day period
in which to cure such breach (or if such breach cannot be cured within
said sixty day period despite Grantee's diligent and continuous efforts
to do so, said sixty day period shall be extended for so long as
Grantee is diligently and continuously pursuing such cure but in no
event longer than an additional sixty days).
SINGLE-TENANT LEASE-NET
1. Basic Provisions ("Basic Provisions")
1.1 Parties: This Lease ("Lease"), dated for reference purposes only,
March 31, 1995, is made by and between Chamberlain Development, L.L.C., an
Arizona limited liability company ("Lessor") and MicroAge Computer Centers,
Inc., a Delaware corporation and subsidiary of MicroAge, Inc. ("Lessee"),
(collectively the "Parties," or individually a "Party").
1.2 Premises: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease, and commonly
known by the street address of 3015 S. Priest, Tempe, located in the County of
Maricopa, State of Arizona, and generally described as a 100,000 square foot two
story office building ("Premises"). (See Paragraph 2 for further provisions.)
1.3 Term: Ten (10) Years and Zero (0) months ("Original Term")
commencing December 1, 1995 ("Commencement Date") and ending November 30, 2005
("Expiration Date"). (See Paragraph 3 for further provisions.)
1.4 Early Possession: ("Early Possession Date") (See Paragraphs 3.2 and
3.3 for further provisions.)
1.5 Base Rent: $58,580.00 per month ("Base Rent"), plus applicable
sales tax, payable on the first day of each month commencing December 1, 1995
(See Paragraph 4 for further provisions.) There are provisions in this Lease for
the Base Rent to be adjusted.
1.6 Base Rent Paid Upon Execution: $61,479.71 ($58,580.00 plus
applicable sales tax in the amount of $2,899.71) for the Period of December
1995.
1.7 Security Deposit: None ("Security Deposit"). (See Paragraph 5 for
further provisions.)
1.8 Permitted Use: General offices including sales, service, and
support of computer products. (See Paragraph 6 for further provisions.)
1.9 Insuring Party: Lessee is the "Insuring Party" unless otherwise
stated herein. (See Paragraph 8 for further provisions.)
1.10 Real Estate Brokers: The following real estate brokers
(collectively, the "Brokers") and brokerage relationships exist in this
transaction and are consented to by the Parties: CB Commercial represents both
Lessor and Lessee. (See Paragraph 15 for further provisions.)
1.11 Guarantor. The obligations of the Lessee under this Lease are to
be guaranteed by: None ("Guarantor"). (See Paragraph 37 for further provisions.)
1.12 Addenda. Attached hereto is an Addendum or Addenda consisting of
Paragraphs 49 through 64 and Exhibits A and B, all of which constitute a part of
this Lease.
2. Premises.
2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of square footage set forth in this Lease, or
that may have been used in calculating rental, is an approximation which Lessor
and Lessee agree is reasonable and the rental based thereon is not subject to
revision whether or not the actual square footage is more or less.
2.2 Condition. Lessor shall deliver the Premises to Lessee clean and
free of debris on the Commencement Date and warrants to Lessee that the existing
roof, plumbing, fire sprinkler system, lighting, air conditioning, heating, and
loading doors, if any, in the Premises, other than those constructed by Lessee,
shall be in good operating condition on the Commencement Date and for a period
of one year thereafter, except the roof shall be warranted for a period of two
years from the Commencement Date. If a noncompliance with said warranty exists,
Lessor shall, except as otherwise provided in this Lease, promptly after receipt
of written notice from Lessee setting forth with specificity the nature and
extent of such non-compliance, rectify same at Lessor's expense.
2.3 Compliance with Covenant, Restrictions and Building Code. Lessor
warrants to Lessee that the improvements on the Premises comply with all
applicable covenants or restrictions of record and applicable building codes,
regulations and ordinances in effect on the Commencement Date. Said warranty
does not apply to the use to which Lessee will put the Premises or to any
Alterations or Utility Installations (as defined in Paragraph 7.3 (a)) made or
to be made by Lessee. If the Premises do not comply with said warranty, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from the Lessee setting forth with specificity the nature and
extent of such non-compliance, rectify the same at Lessor's expense. If Lessee
does not give Lessor written notice of a non-compliance with this warranty
within six (6) months following the Commencement Date, correction of that
non-compliance shall be the obligation of Lessee at Lessee's sole cost and
expense.
2.4 Acceptance of Premises. Lessee hereby acknowledges: that neither
Lessor, nor and of Lessor's agents, has made any oral or written representations
or warranties with respect to the said matters other than as set forth in this
Lease.
2.5 Lessee Prior Owner/Occupant. The warranties made by Lessor in this
Paragraph 2 shall be of no force or effect if immediately prior to the date set
forth in Paragraph 1.1 Lessee was the owner or occupant of the Premises. In such
event, Lessee shall at Lessee's sole cost and expense, correct any
non-compliance of the Premises with said warranties.
3. Term
3.1 Term. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.
3.2 Early possession. If Lessee totally or partially occupies the
Premises prior to the Commencement Date other than pursuant to Paragraph 53
herein, the obligation to pay Base Rent shall be prorated for the period of such
early possession. All other terms of this Lease, (including but not limited to
the obligations to pay real Property Taxes and insurance premiums and to
maintain the Premises) shall be in effect during such period. Any such early
possession shall not affect nor advance the Expiration Date of the Original
Term.
3.3 Delay In Possession. If for any reason Lessor cannot deliver
possession of the Premises to Lessee as agreed herein by the Early Possession
Date, if one is specified in Paragraph 1.4, or, if no Early Possession date is
specified, by the Commencement Date, Lessor shall not be subject to any
liability therefor, nor shall such failure affect the validity of this Lease, or
the obligations of Lessee hereunder, or extend the term hereof, but in such
case, Lessee shall not, except as otherwise provided herein, be obligated to pay
rent or perform any other obligation of Lessee under the terms of this Lease
until Lessor delivers possession of the Premises to Lessee. If possession of the
Premises is delayed more than thirty (30) days other than pursuant to Paragraph
51 or 53, Lessor shall be liable to Lessee for a penalty of $2,000.00 for each
day of delay. If possession of the Premises is not delivered to Lessee within
sixty (60) days after the Commencement Date, Lessee may, at its option, by
notice in writing to Lessor, cancel this Lease, in which event the Parties shall
be discharged from all obligations hereunder. Except is may be otherwise
provided, and regardless of when the term actually commences, if possession is
not tendered to Lessee when required by this Lease and Lessee does not terminate
this Lease, as aforesaid, the period free of the obligation to pay Base Rent, if
any, that Lessee would otherwise have enjoyed shall run from the date of
delivery of possession and continue for a period equal to what Lessee would
otherwise have enjoyed under the terms hereof, but minus any days of delay
caused by the acts, changes or omissions of Lessee.
4. Rent.
4.1 Base Rent. Lessee shall cause payment of Base Rent and other rent
or charges, as the same may be adjusted from time to time, to be received by
Lessor in lawful money of the United States, without offset or deduction, on or
before the day on which it is due under the terms of this Lease. Base Rent and
all other rent and charges for any period during the term hereof which is for
less than one (1) full calendar month shall be prorated based upon the actual
number of days of the calendar month involved. Payment of Base Rent and other
charges shall be made to Lessor at its address stated herein or to such other
persons or at such other addresses as Lessor may from time to time designate in
writing to Lessee.
5. Security Deposit. Lessee shall deposit with Lessor upon execution
hereof the Security Deposit set forth in Paragraph 1.7 as security for Lessee's
faithful performance of Lessee's obligations under this Lease. If Lessee fails
to pay Base Rent or other rent or charges due hereunder, or otherwise Defaults
under this Lease (as defined in Paragraph 13.1), Lessor may use, apply or retain
all or any portion of said Security Deposit for the payment of any amount due
Lessor or to reimburse or compensate Lessor for any liability, cost, expense,
loss or damage (including attorneys' fees) which Lessor may suffer or incur by
reason thereof. If Lessor uses or applies all or any portion of said security
Deposit, Lessee shall within ten (10) days after written request therefor
deposit moneys with Lessor sufficient to restore said Security Deposit to the
full amount required by this Lease. Any time the Base Rent increases during the
term of this lease, Lessee shall, upon written request from Lessor, deposit
additional moneys with Lessor sufficient
<PAGE>
to maintain the same ratio between the Security Deposit and the Base Rent as
those amounts are specified in the Basic Provisions. Lessor shall not be
required to keep all or any part of the Security Deposit separate from its
general accounts. Lessor shall, at the expiration or earlier termination of the
term hereof and after Lessee has vacated the Premises, return to Lessee (or, at
Lessor's option, to the last assignee, if any of Lessee's interest herein), that
portion of the Security Deposit not used or applied by Lessor. Unless otherwise
expressly agreed in writing by Lessor, no part of the Security Deposit shall be
considered to be held in trust, to bear interest or other increment for its use,
or to be prepayment for any moneys to be paid by Lessee under this Lease.
6. Use
6.1 Use. Lessee shall use and occupy the Premises only for the purposes
set forth in Paragraph 1.8, or any other use which is comparable thereto, and
for no other purpose. Lessee shall not use or permit the use of the Premises in
a manner that creates waste or a nuisance, or that disturbs owners and/or
occupants of, or causes damage to, neighboring premises or properties.
6.2 Hazardous Substances.
(a) Reportable Uses Require Consent. The term "Hazardous
Substance" as used in this Lease shall mean any product, substance, chemical,
material or waste whose presence, nature, quantity and/or intensity of
existence, use, manufacture, disposal, transportation spill, release or effect,
either by itself or in combination with other materials expected to be on the
Premises, is either: (i) potentially injurious to the public health, safety or
welfare, the environment or the Premises, (ii) regulated or monitored by any
governmental authority, or (iii) a basis for liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substance shall include, but not be limited to, hydrocarbons,
petroleum, gasoline, crude oil or any products, by-products or fractions
thereof. Lessee shall not engage in any activity in, on or about the Premises
which constitutes a Reportable Use (as hereinafter defined) of Hazardous
Substances without the express prior written consent of Lessor and compliance in
a timely manner (at Lessee's sole cost and expense) with all Applicable Law (as
defined in Paragraph 6.3). "Reportable Use" shall mean (i) the installation or
use of any above or below ground storage tank, (ii) the generation, possession,
storage, use, transportation, or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice, registration or
business plan is required to be filed with, any governmental authority.
Reportable Use shall also include Lessee's being responsible for the presence
in, on or about the Premises of a Hazardous Substance with respect to which any
Applicable Law requires that a notice be given to persons entering or occupying
the Premises or neighboring properties. Notwithstanding the foregoing, Lessee
may, without Lessor's prior consent, but in compliance with all Applicable Law,
use any ordinary and customary materials reasonably required to be used by
Lessee in the normal course of Lessee's business permitted on the Premises, so
long as such use is not a Reportable Use and does not expose the Premises or
neighboring properties to any meaningful risk of contamination or damage or
expose Lessor to an any liability therefor. In addition, Lessor may (but without
any obligation to do so) condition its consent to the use or presence of, any
Hazardous substance, activity or storage tank by Lessee upon Lessee's giving
Lessor such additional assurances as Lessor, in its reasonable discretion, deems
necessary to protect itself, the public, the Premises and the environment
against damage, contamination or injury and/or liability therefrom to therefor,
including, but not limited to, the installation (and removal on or before Lease
expiration or earlier termination) of reasonably necessary protective
modifications to the Premises (such as concrete encasements) and/or the deposit
of an additional Security Deposit under Paragraph 5 hereof.
(b) Duty to Inform Lessor. If Lessee knows, or has reasonable
cause to believe, that a Hazardous Substance, or a condition involving or
resulting from same has come to be located in, on, under or about the Premises,
other than as previously consented to by Lessor, Lessee shall immediately give
written notice of such fact to Lessor. Lessee shall also immediately give Lessor
a copy of any statement, report, notice, registration, application, permit.
business plan, license, claim, action or proceeding given to, or received from,
any governmental authority or private party, or persons entering or occupying
the Premises, concerning the presence, spill, release, discharge of, or exposure
to, any Hazardous Substance or contamination in, on, or about the Premises,
including but not limited to all such documents as may be involved in any
Reportable Uses involving the Premises.
(c) Indemnification. Lessee shall indemnify, protect, defend
and hold Lessor, its agents, employees, lenders and ground lessor, if any, and
the Premises, harmless from and against any and all loss of rents and/or
damages, liabilities, judgements, costs, claims, liens, expenses, penalties,
permits and attorney's and consultant's fees arising out of or involving any
Hazardous Substance or storage tank brought onto the Premises by or for Lessee
or under Lessee's control. Lessee's obligations under this Paragraph 6 shall
include, but not be limited to, the effects of any contamination or injury to
person, property or the environment created or suffered by Lessee, and the cost
of investigation (including consultant's and attorney's fees and testing),
removal, remediation, restoration and/or abatement thereof, or of any
contamination therein involved, and shall survive the expiration or earlier
termination of this Lease. No termination, cancellation or release agreement
entered into by Lessor and Lessee shall release Lessee for its obligations under
this Lease with respect to Hazardous Substances or storage tanks, unless
specifically so agreed by Lessor in writing at the time of such agreement.
* ("Environmental Condition")
(d) Landlord hereby represents that, to the best of its
knowledge, no Environmental Condition (as defined above presently exists or has
existed prior to the Lease Commencement Date on, under, or within the Building
(a "Pre-Existing Condition'). Landlord shall indemnify, protect, defend (by
counsel reasonably acceptable to Tenant) and hold harmless Tenant and its
directors, officers, employees, shareholders, lenders, agents, contractors and
each of their respective successors and assigns, from and against any and all
claims, judgments, causes of action, damages, penalties, fines, taxes, costs,
liabilities, losses and expenses arising at any time during or after the term of
the lease as a result of any Pre-Existing Condition. Landlord's obligations
pursuant to the foregoing indemnity shall survive the termination of this Lease.
Landlord shall indemnify, protect, defend (by counsel reasonably acceptable to
Tenant) and hold harmless Tenant and its directors, officer, employees,
shareholders, lenders, agents, contractors, and each of their respective
successor and assigns, from and against any and all orders, penalties, fines,
administrative action, or other proceedings (collectively, a "Compliance
Obligation") commenced by any governmental agency including, without limitation,
the United State Environmental Protection Agency as a result of the Pre-Existing
Condition. Landlord's obligations pursuant to the foregoing indemnity shall
survive the termination of this Lease. The phrase "Environmental Condition"
shall mean any adverse condition relating to any Hazardous Substance or the
environment, including surface water, groundwater, drinking water supply, land,
surface or subsurface strata or the ambient air and includes air, land and water
pollutants, noise, vibration, light and odors."
6.3 Lessee's Compliance with Law. Except as otherwise provided in this
Lease, Lessee, shall, at Lessee's sole cost and expense, fully, diligently and
in a timely manner, comply with all "Applicable Law," which term is used in this
Lease to include all laws, rates, regulations, ordinances, directives,
covenants, easements and restrictions of record, permits, the requirements of
any applicable fire insurance underwriter or rating bureau, and the
recommendations of Lessor's engineers and/or consultants, relating in any manner
to the Premises (including but not limited to matters pertaining to (i)
industrial hygiene, (ii) environmental conditions on, in under or about the
Premises, including soil and groundwater conditions, and (iii) the use,
generation, manufacture, production, installation, maintenance, removal,
transportation, storage, spill or release of any Hazardous Substance or storage
tank), now in effect or which may hereafter come into effect, and whether or not
reflecting a change in policy from any previously existing policy. Lessee shall,
within five (5) days after receipt of Lessor's written request, provide Lessor
with copies of all documents and information, including, but not limited to,
permits, registrations, manifests, applications, reports and certificates,
evidencing Lessee's compliance with any Applicable Law specified by Lessor, and
shall immediately upon receipt, notify Lessor in writing (with copies of any
documents involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving failure by Lessee or the
Premises to comply with any Applicable Law.
6.4 Inspection; Compliance. Lessor and Lessor's Lender(s) (as defined
in Paragraph 8.3(a)) shall have the right to enter the Premises at any time, in
the case of an emergency, and otherwise at reasonable times and after reasonable
notice, for the purpose of inspecting the condition of the Premises and for
verifying compliance by Lessee with this Lease and all Applicable Laws (as
defined in Paragraph 6.3), and to employ experts and/or consultants in
connection therewith and/or to advise Lessor with respect to Lessee's
activities, including but not limited to the installation, operation, use,
monitoring, maintenance, or removal of any Hazardous Substance or storage tank
on or from the Premises. The costs and expenses of any such inspections shall be
paid by the party requesting same, unless a Default or Breach of this Lease,
violation of Applicable Law, or a contamination, caused or materially
contributed to by Lessee is found to exist or be imminent, or unless the
inspection is requested or ordered by a governmental authority as the result of
any such existing or imminent violation or contamination. In any such case,
Lessee shall upon request reimburse Lessor or Lessor's Lender, as the case may
be, for the costs and expenses of such inspections.
7. Maintenance; Repairs; Utility Installations; Trade Fixtures and
Alterations. (See Paragraph 56 for additional requirements)
<PAGE>
7.1 Lessee's Obligations.
(a) Subject to the Provisions of Paragraphs 2.2 (Lessor's
warranty as to condition), 2.3 (Lessor's warranty as to compliance with
covenants, etc.), 7.2 (Lessor's obligations to repair), 9 (damage and
destruction), and 14 (condemnation), Lessee shall, at Lessee's sole cost and
expense and at all times, keep the Premises and every part thereof in good
order, condition and repair, structural and non-structural (whether or not such
portion of the Premises requiring repair, or the means of repairing the same,
are reasonably or readily accessible to Lessee, and whether or not the need for
such repairs occurs as a result of Lessee's use, the elements or the age of such
portion of the Premises), including, without limiting the generality of the
foregoing, all equipment or facilities serving the Premises, such as plumbing,
heating, air conditioning, ventilating, electrical, lighting facilities,
boilers, fired or unfired pressure vessels, fire sprinkler and/or standpipe and
hose or other automatic fire extinguishing system, including fire alarm and/or
smoke detection systems and equipment, fire hydrants, fixtures, walls (interior
and exterior), foundations, ceilings, roofs, floors, windows, doors, plate
glass, skylights, landscaping, driveways, parking lots, fences, retaining walls,
signs, sidewalks and parkways located in, on, about, or adjacent to the
Premises. Lessee shall not cause or permit any Hazardous Substance to be spilled
or released in, on, under, or about the Premises (including through the plumbing
or sanitary sewer system) and shall promptly, at Lessee's expense, take all
investigatory and/or remedial action reasonably recommended, whether or not
formally ordered or required, for the cleanup of any contamination of, and for
the maintenance, security and/or monitoring of, the Premises, the elements
surrounding same, or neighboring properties, that was caused of materially
contributed to by Lessee, or pertaining to or involving any Hazardous Substance
and/or storage tank brought onto the Premises by or for Lessee or under its
control. Lessee, in keeping the Premises in good order, condition and repair,
shall exercise and perform good maintenance practices. Lessee's obligations
shall include restorations, replacements or renewals when necessary to keep the
Premises and all improvements thereon or a part thereof in good order, condition
and state of repair. If Lessee occupies the Premises for ten (10) years or more,
Lessor may require Lessee to repaint the exterior of the buildings on the
Premises as reasonably required, but not more frequently than once every ten
(10) years.
(b) Lessee shall, at Lessee's sole cost and expense, procure
and maintain contracts, with copies to Lessor, in customary form and substance
for, and with contractors specializing and experienced in, the inspection,
maintenance and service of the following equipment and improvements, if any,
located on the Premises: (i) heating, air conditioning and ventilation
equipment, (ii) boiler, fired or unfired pressure vessels, (iii) fire sprinkler
and/or standpipe and hose or other automatic fire extinguishing systems,
including fire alarm and/or smoke detection, (iv) landscaping and irrigation
systems, (v) roof covering and drain maintenance and (vi) asphalt and parking
lot maintenance.
7.2 Lessor's Obligations. Except for the warranties and agreements of
Lessor contained in Paragraphs 2.2 (relating to condition of the Premises), 2.3
(relating to compliance with covenants, restrictions and building code), 9
(relating to destruction of the Premises) and 14 (relating to condemnation of
the Premises), it is intended by the Parties hereto that Lessor have no
obligation, in any manner whatsoever, to repair and maintain the Premises, the
improvements located thereon, or the equipment therein, whether structural or
non structural, all of which obligations are intended to be that of the Lessee
under Paragraph 7.1 hereof. It is the intention of the Parties that the terms of
this Lease govern the respective obligations of the Parties as to maintenance
and repair of the Premises. Lessee and Lessor expressly waive the benefit of any
statute now or hereafter in effect to the extent it is inconsistent with the
terms of this Lease with the respect to, or which affords Lessee the right to
make repairs at the expense of Lessor or to terminate this Lease by reason of,
any needed repairs.
7.3 Utility Installations; Trade Fixtures; Alterations.
(a) Definitions; Consent Required. The term "Utility
Installations" is used in this Lease to refer to all carpeting, window
coverings, air lines, power panels, electrical distribution, security, fire
protection systems, communication systems, lighting fixtures, heating,
ventilating, and air conditioning equipment, plumbing, and fencing in, on or
about the Premises. The term "Trade Fixtures" shall mean Lessee's machinery and
equipment that can be removed without doing material damage to the Premises. The
term "Alterations" shall mean any modification of the improvements on the
Premises from that which are provided by Lessor under the terms of this Lease,
other than Utility Installations or Trade Fixtures, whether by addition or
deletion. "Lessee Owned Alterations and/or Utility Installations" are defined as
Alterations and/or Utility Installations made by Lessee that are not yet owned
by Lessor as defined in Paragraph 7.4(a). Lessee shall not make any Alterations
or Utility Installations in, on under or about the Premises without Lessor's
prior written consent. Lessee may, however, make non-structural Utility
Installations to the interior of the Premises (excluding the roof, as long as
they are not visible from the outside, do not involve puncturing, relocating or
removing the roof or any existing walls, and the cumulative cost thereof during
the term of this Lease as extended does not exceed $25,000.
(b) Consent. Any Alterations or Utility Installations that
Lessee shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with proposed detailed plans. All consents
given by Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific
consent, shall be deemed conditioned upon; (i) Lessee's acquiring all applicable
permits required by governmental authorities, (ii) the furnishing of copies of
such permits together with a copy of the plans and specifications for the
Alteration or Utility Installation to Lessor and (iii) the compliance by Lessee
with all conditions of said permits in a prompt and expeditious manner. Any
Alterations or Utility Installations by Lessee during the term of this Lease
shall be done in a good and workmanlike manner, with good and sufficient
materials, and in compliance with all Applicable Law. Lessee shall promptly upon
completion thereof furnish Lessor with as-built plans and specifications
therefor.
(c) Indemnification. Lessee shall pay, when due, all claims
for labor or materials furnished or alleged to have been furnished to or for
Lessee at or for use on the Premises, which claims are or may be secured by any
mechanics' or materialmen's lien against the Premises or any interest therein.
Lessee shall give Lessor not Less than ten (10) days' notice prior to the
commencement of any work in, on or about the Premises, and Lessor shall have the
right to post notices of non-responsibility in or on the Premises as provided by
law. If Lessee shall, in good faith, contest the validity of any such lien,
claim or demand, then Lessee shall, at its sole expense defend and protect
itself, Lessor and the Premises against the same and shall pay and satisfy any
such adverse judgment that may be rendered thereon before the enforcement
thereof against the Lessor or the Premises. If Lessor shall require, Lessee
shall furnish to Lessor a surety bond satisfactory to Lessor in an amount equal
to one and one-half times the amount of such contested lien claim or demand,
indemnifying Lessor against liability for the same, as required by law for the
holding of the Premises free from the effect of such lien or claim. In addition,
Lessor may require Lessee to pay Lessor's attorney's fees and costs in
participating in such action if Lessor shall decide it is to its best interest
to do so. Lessor may require Lessee to pay Lessor's attorney's fees and costs in
participating in such action if Lessor shall decide it is to its best interest
to do so.
7.4 Ownership; Removal; Surrender; and Restoration.
(a) Removal. Unless otherwise agreed in writing, Lessor may
require that any or all Lessee Owned Alterations or Utility Installations be
removed by the expiration or earlier termination of this Lease, notwithstanding
their installation may have been consented to by Lessor. Lessor may require the
removal at any time of all or any part of any Lessee Owned Alterations or
Utility Installations made without the required consent of Lessor.
(b) Surrender/Restoration. Lessee shall surrender the Premises
by the end of the last day of the Lease term or any earlier termination date,
with all of the improvements, parts and surfaces thereof clean and free of
debris and in good operating order, condition and state of repair, ordinary wear
and tear excepted. "Ordinary wear and tear" shall not include any damage or
deterioration that would have been prevented by good maintenance practice or by
Lessee performing all of its obligations under this Lease. Except as otherwise
agreed or specified in writing by Lessor, the Premises, as surrendered, shall
include the Utility Installations. The obligation of Lessee shall include the
repair of any damage occasioned by the installation, maintenance or removal of
Lessee's Trade Fixtures, furnishings, equipment, and Alterations and/or Utility
Installations, as well as the removal of any storage tank installed by or for
Lessee, and the removal, replacement, or remediation of any soil, material or
ground water contaminated by Lessee, all as may then be required by Applicable
Law and/or good practice. Lessee's Trade Fixtures shall remain the property of
Lessee and shall be removed by Lessee subject to its obligation to repair and
restore the Premises per this Lease.
8. Insurance Indemnity.
8.1 Payment For Insurance. Regardless of whether the Lessor or Lessee
is the Insuring Party, Lessee shall pay for all insurance required under this
Paragraph 8 except to the extent of the cost attributable to liability insurance
carried by Lessor in excess of $1,000,000 per occurrence. Payment shall be made
by Lessee to Lessor within ten (10) days following receipt of an invoice for any
amount due.
8.2 Liability Insurance.
(a) Carried by Lessee. Lessee shall obtain and keep in force
during the term of this Lease a Commercial General Liability policy of insurance
protecting Lessee and Lessor (as an additional insured) against claims for
bodily injury, personal injury and property damage based upon, involving or
arising out of the ownership, use, occupancy or maintenance of the Premises and
all areas appurtenant thereto. Such insurance shall be on an occurrence basis
providing single limit coverage
<PAGE>
in an amount not less than $1,000,000 per occurrence with an "Additional
Insured-Managers or Lessors of Premises" Endorsement and contain the "Amendment
of the Pollution Exclusion" for damage caused by heat, smoke or fumes from a
hostile fire. The policy shall not contain any intra-insured exclusions as
between insured persons or organizations, but shall include overage for
liability assumed under this Lease as an "insured contract" for the performance
of Lessee's indemnity obligations under this Lease. The limits of said insurance
required by this Lease or as carried by Lessee shall not, however, limit the
liability of Lessee nor relieve Lessee of any obligation hereunder. All
insurance to be carried by Lessee shall be primary to and not contributory with
any similar insurance carried by Lessor, whose insurance shall be considered
excess insurance only.
(b) Carried By Lessor. In the event Lessor is the Insuring
Party, Lessor shall also maintain liability insurance described in Paragraph
8.2(a), above, in addition to, and not lieu of the insurance required to be
maintained by Lessee. Lessee shall not be named as an additional insured
therein.
8.3 Property Insurance-Building, lmprovements and Rental Value.
(a) Building and Improvements. The Insuring Party shall obtain
and keep in force during the term of this Lease a policy or policies in the name
of Lessor, with loss payable to Lessor and to the holders of any Mortgages,
deeds of trust or ground leases on the Premises ("Lender(s)"), insuring loss or
damage to the Premises. The amount of such insurance shall be equal to the full
replacement cost of the Premises, as the same shall exist from time to time, or
the amount required by Lenders, but in no event more than the commercially
reasonable and available insurable value thereof if, by reason of the unique
nature of age of the improvements involved, such latter amount is less than full
replacement cost. If Lessor is the Insuring Party, however, Lessee Owned
Alterations and Utility Installations shall be insured by Lessee under Paragraph
8.4 rather than by Lessor. If the coverage is available and commercially
appropriate, such policy or policies shall insure against all risks of direct
physical loss or damage (except the perils of flood and/or earthquake unless
required by a Lender), including coverage for any additional costs resulting
from debris removal and reasonable amounts of coverage for enforcement of any
ordinance or law regulating the reconstruction or replacement of any undamaged
sections of the Premises required to be demolished or removed by reason of the
enforcement of any building, zoning, safety or land use laws as the result of a
covered cause of loss. Said policy or policies shall also contain an agreed
valuation provision in lien of any coinsurance clause, waiver of subrogation,
and inflation guard protection causing an increase in the annual property
insurance coverage amount by a factor of not less than the adjusted U.S.
Department of Labor Consumer Price Index for All Urban Consumers for the city
nearest to where the Premises are located. If such insurance coverage has a
deductible clause, the deductible amount shall not exceed $1,000 per occurrence,
and Lessee shall be liable for such deductible amount in the event of an Insured
Loss, as defined in Paragraph 9. 1 (c).
(b) Rental Value. The Insuring Party shall, in addition,
obtain and keep in force during the term of this Lease a policy or policies in
the name of Lessor, with loss payable to Lessor and Lender(s), insuring the loss
of the full rental and other charges payable by Lessee to Lessor under this
Lease for (1) year (including all real estate taxes, insurance costs, and any
scheduled rental increases). Said insurance shall provide that in the event the
Lease is terminated by reason of an repairs or replacement of the Premises, to
provide for one full year's loss of rental revenues front the date of any such
loss. Said insurance shall contain an agreed valuation provision in lieu of any
coinsurance clause, and the amount of coverage shall be adjusted annually to
reflect the projected rental income, property taxes, insurance premium costs and
other expenses, if any, otherwise payable by Lessee, for the next twelve (12)
month period. Lessee shall be liable for any deductible amount in the event of
such loss.
(c) Adjacent Premises. If the Premises are part of a larger
building, or if the Premises are part of a group of buildings owned by Lessor
which are adjacent to the Premises, the Lessee shall pay for any increase in the
premiums for the Property insurance of such building or buildings if said
increase is caused by Lessee's acts, omissions, use or occupancy of the
Premises.
(d) Tenant's Improvements. If the Lessor is the Insuring
Party, The Lessor shall not be required to insure Lessee Owned Alterations and
Utility Installations unless the item in question has become the property of
Lessor under the terms of this Lease. If Lessee is the Insuring Party, the
policy carried by Lessee under this Paragraph 8.3 shall insure Lessee Owned
Alterations and Utility Installations.
8.4 Lessee's Property Insurance. Subject to the requirements of
Paragraph 8.5, Lessee at its cost shall either by separate policy or, at
Lessor's option, by endorsement to a policy already carried, maintain insurance
coverage on all of Lessee's personal property, Lessee Owned Alterations and
Utility Installations in, on, or about the Premises similar in coverage to that
carried by the Insuring Party under Paragraph 8.3. Such insurance shall be full
replacement cost coverage with a deductible of not to exceed $1,000 per
occurrence. The proceeds from any such insurance shall be used by Lessee for the
replacement of personal property or the restoration of Lessee Owned Alterations
and Utility Installations. Lessee shall be the Insuring Party with respect to
the insurance required by the insurance required by this Paragraph 8.4 and shall
provide Lessor with written evidence that such insurance is in force.
8.5 Insurance Policies. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises are
located, and maintaining during the policy term a "General Policyholders Rating"
of at least B+, V, or such other rating as may be required by a Lender having a
lien on the Premises, as set forth in the most current issue of "Best's
Insurance Guide." Lessee shall not do or permit to be done anything which shall
invalidate the insurance policies referred to in this Paragraph 8. If Lessee is
the Insuring Party, Lessee shall cause to be delivered to Lessor certified
copies of policies of such insurance or certificates evidencing the existence
and amounts of such insurance with the insureds and loss payable clauses as
required by this Lease. No such policy shall be cancelable or subject to
modification except after thirty (30) days prior written notice to Lessor.
Lessee shall at least thirty (30) days prior to the expiration of such policies,
furnish Lessor with evidence of renewals or "insurance binders" evidencing
renewal thereof, or Lessor may order such insurance and charge the cost thereof
to Lessee, which amount shall be payable by Lessee to Lessor upon demand. If the
Insuring Party shall fail to procure and maintain the insurance required to be
carried by the Insuring Party under this Paragraph 8, the other Party may, but
shall not be required to, procure and maintain the same, but at Lessee's
expense.
8.6 Waiver of Subrogation. Without affecting any other rights or
remedies, Lessee and Lessor ("Waiving Party") each hereby release and relieve
the other, and waive their entire right to recover damages (whether in contract
or in tort) against the other, for loss of or damage to the Waiving Party's
property arising out of or incident to the perils required to be insured against
under Paragraph 8. The effect of such releases and waivers of the right to
recover damages shall not be limited by the amount of insurance carried or
required, or by any deductibles applicable thereto.
8.7 Indemnity. Except for Lessor's acts, omissions, negligence and/or
default or breach of express warranties, Lessee shall indemnify, protect, defend
and hold harmless the Premises, Lessor and its agents, Lessor's master or ground
lessor, partners and Lenders, from and against any and all claims, loss of rents
and/or damages, costs, liens, judgments, penalties, permits, attorney's and
consultant fee's, expenses and/or liabilities arising out of, involving, or in
dealing with, the occupancy of the Premises by Lessee, the conduct of Lessees
business, any act, omission or neglect of Lessee, its agents, contractors or
employees and out of any Default or Breach by Lessee in the performance in a
timely manner of any obligation on Lessee's part to be performed under this
Lease. The foregoing shall include, but not be limited to, the defense or
pursuit of any claim or any action or proceeding involved therein, and whether
or not (in the case of claims made against Lessor) litigated and/or reduced to
judgment, and whether well founded or not. In case any action or proceeding be
brought against Lessor by reason of any of the foregoing matters, Lessee upon
notice from Lessor shall defend the same at Lessee's expense by counsel
reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in such
defense. Lessor need not have first paid any such claim in order to be so
indemnified.
8.8 Exemption of Lessor from Liability. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, except for the roof, whether such damage or
injury is caused by or results from fire, steam, electricity, gas, water or
rain, or from the breakage, leakage, obstruction or other defects of pipes, fire
sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures,
or from any other cause, whether the said injury or damage results for
conditions arising upon the Premises or upon other portions of the building of
which the Premises are a part, or from other sources or places and regardless of
whether the cause of such damage or injury or the means of repairing the same is
accessible or not. Lessor shall not be liable for any damages arising from any
act or neglect of any other tenant of Lessor. Notwithstanding Lessor's
negligence or breach of this Lease and Lessor's responsibility for the roof,
Lessor shall under no circumstances be liable for injury to Lessee's business or
for any loss of income or profit therefrom.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall mean damage or destruction
to the improvements on the Premises, other than Lessee Owned Alterations and
Utility Installations, the repair cost of which damage or destruction is less
than 50% of the then replacement Cost of the Premises immediately prior to such
damage or destruction, excluding from such calculation the value of the land and
Lessee Owned Alterations and Utility Installations.
(b) "Premises Total Destruction" shall mean damage or
destruction to the premises, other than Lessee Owned Alterations and Utility
Installations the repair
<PAGE>
cost of which damage or destruction is 50% or more of the then Replacement Cost
of the Premises immediately prior to such damage or destruction, excluding from
such calculation the value of the land and Lessee Owned Alterations and Utility
Installations.
(c) "Insured Loss" shall mean damage or destruction to
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a), irrespective of any deductible amounts
or coverage limits involved.
(d) "Replacement Cost" shall mean the cost to repair or
rebuild the improvements owned by Lessor at the time of the occurrence to their
condition existing immediately prior thereto, including demolition, debris
removal and upgrading required by the operation of applicable building codes,
ordinances or laws, and without deduction for depreciation.
(e) "Hazardous Substance Condition" shall mean the occurrence
or discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in on or under the Premises.
9.2 Partial Damage-Insured Loss. If a Premises Partial Damage that is
an Insured Loss occurs, than Lessor shall, at Lessor's expense, repair such
damage (but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect; provided; however, that Lessee shall, at Lessor's
election, make the repair of any damage or destruction the total cost to repair
of which is $10,000 or less, and, in such event, Lessor shall make the insurance
proceeds available to Lessee on a reasonable basis for that purpose.
Notwithstanding the foregoing, if the required insurance was not in force or the
insurance proceeds are not sufficient to effect such repair, the Insuring Party
shall promptly contribute the shortage in proceeds (except as to the deductible
which is Lessee's responsibility) as and when required to complete said repairs.
In the event, however, the shortage in proceeds was due to the fact that, by
reason of the unique nature of the improvements, full replacement cost insurance
coverage was not commercially reasonable and available, Lessor shall have no
obligation to pay for the shortage in insurance proceeds or to fully restore the
unique aspects of the Premises unless Lessee provides Lessor with the funds to
cover same, or adequate assurance thereof, within ten (10) days following
receipt of written notice of such shortage and request therefor. If Lessor
receives said funds or adequate assurance thereof within said ten (10) day
period, the party responsible for making the repairs shall complete them as soon
as reasonably possible and this Lease shall remain in full force and effect. If
Lessor does not receive such funds or assurance within said period, Lessor may
nevertheless elect by written notice to Lessee within ten (10) days thereafter
to make such restoration and repair as is commercially reasonable with Lessor
paying any shortage in proceeds, in which case this Lease shall remain in full
force and effect. If in such case Lessor does not so elect then this Lease shall
terminate sixty (60) days following the occurrence of the damage or destruction.
Unless otherwise agreed, Lessee shall in no event have any right to
reimbursement from Lessor for any funds contributed by Lessee to repair any such
damage or destruction. Premises Partial damage due to flood or earthquake shall
be subject to Paragraph 9.3 rather than Paragraph 9.2, notwithstanding that
there may be some insurance coverage, but the net proceeds of any such insurance
shall be made available for the repairs if made by either party.
9.3 Partial Damage-Uninsured Loss. If a Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense and
this Lease shall continue in full force and effect, but subject to Lessor's
rights under Paragraph 13), Lessor may at Lessor's option, either: (i) repair
such damage as soon as reasonably possible at Lessor's expense, in which event
this Lease shall continue in full force and effect, or (ii) give written notice
to Lessee within thirty (30) days after receipt by Lessor of knowledge of the
occurrence of such damage of Lessor's desire to terminate this Lease as of the
date sixty (60) days following the giving of such notice. In the event Lessor
elects to give such notice of Lessor's intention to terminate this Lease, Lessee
shall have the right within ten (10) days after the receipt of such notice to
give written notice to Lessor of Lessee's commitment to pay for the repair of
such damage totally at Lessee's expense and without reimbursement from Lessor.
Lessee shall provide Lessor with the required funds or satisfactory assurance
thereof within thirty (30) days following Lessee's said commitment. In such
event this Lease shall continue in full force and effect, and Lessor shall
proceed to make such repairs as soon as reasonably possible and the required
funds are available. If Lessee does not give such notice and provide the funds
or assurance thereof within the times specified above, this Lease shall
terminate as of the date specified in Lessor's notice of termination.
9.4 Total Destruction. Notwithstanding any other provision thereof, if
a Premises Total Destruction occurs (including any distinction required by any
authorized public authority), this Lease shall terminate (60) days following the
date of such Premises Total Destruction, whether or not the damage or
destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee. In the event, however, that the damage or distinction was caused by
Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in Paragraph 8.6. Rent will abate beginning on the
date of destruction.
9.5 Damage Near End of Term. If at any time during the last six (6)
months of the term of this Lease there is a damage for which the cost to repair
exceeds one (1) month's Base Rent, whether or not an insured Loss, Lessor may,
at Lessor's option, terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by, within twenty (20) days following the occurrence of the damage, or
before the expiration of the time provided in such option for its exercise,
whichever is earlier ("Exercise Period"), (i) exercising such option and (ii)
providing Lessor with any shortage in insurance proceeds (or adequate assurance
thereof) needed to make the repairs. If Lessee duly exercises such option during
said Exercise Period and provides Lessor with funds for adequate assurance
thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor's
expense repair such damage as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option and
provide such funds or assurance during said Exercise Period, then Lessor may at
Lessor's option terminate this Lease as of the expiration of said sixty (60) day
period following the occurrence of such damage by giving written notice to
Lessee of' Lessor's election to do so within ten (10) days after the expiration
of the Exercise Period, notwithstanding any term or provision in the grant of
option to the contrary.
9.6 Abatement of Rent; Lessee's Remedies.
(a) in the event of damage described in Paragraph 9.2 (Partial
Damage-insured), whether or not Lessor or Lessee repairs or restores the
Premises, the Base Rent, Real Property Taxes, insurance premiums, and other
charges, if any, payable by Lessee hereunder for the period during which such
damage, its repair or the restoration continues (not to exceed the period for
which rental value insurance is required tinder Paragraph 8.3(b)), shall be
abated in Proportion to the degree to which Lessee's use of the Premises is
impaired. Except for abatement of Base Rent, Real Property Taxes, insurance
premiums, and other charges, if any, as aforesaid, all other obligations of
Lessee hereunder shall be performed by Lessee, and Lessee shall have no claim
against Lessor for any damage suffered by reason of any such repair or
restoration.
(b) If Lessor shall be obligated to repair or restore the
Premises under the provisions of this Paragraph 9 and shall not promptly
commence and diligently pursue to completion in a substantial and meaningful
way, the repair or restoration of the Premises within ninety (90) days after
such obligation shall accrue, Lessee may, at any time prior to the commencement
of such repair or restoration, give written notice to Lessor Find to any lenders
of which Lessee has actual notice of Lessee's election to terminate this Lease
on a date not less than sixty (60) days following the giving of such notice. If
Lessee gives such notice to Lessor and such lenders and repair or restoration is
not commenced and diligently pursued to completion within thirty (30) days after
receipt of such notice, this Lease shall terminate as of the date specified in
said notice. If Lessor or lender commences and diligently pursues to completion
the repair or restoration of tire Premises within thirty (30) days after receipt
of such notice, this Lease shall continue in full force and effect. "Commence"
as used in this Paragraph shall mean either the unconditional authorization of
the preparation of the required plans, or the beginning of the actual work on
the Premises, whichever first occurs.
9.7 Hazardous Substance Conditions. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefor (in which case lessee
shall make the investigation and remediation thereof required by Applicable Law
and this Lease shall continue in full force and effect, but subject to Lessor's
rights under Paragraph 13), Lessor may at Lessor's option either (i) investigate
and remediate such Hazardous Substance Condition, if required, as soon as
reasonable possible at Lessor's expense, in which event this Lease shall
continue in full force and effect, or (ii) if the estimated cost to investigate
and remediate such condition exceeds twelve (12) times the then monthly Base
Rent or $100,000, whichever is greater, give written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the occurrence of such
Hazardous Substance Condition of Lessor's desire to terminate this Lease as of
the date sixty (60) days following the giving of such notice. In the event
Lessor elects to give such notice of Lessor's intention to terminate this Lease,
Lessee shall have the right within ten (10) days after the receipt of such
notice to give written notice to Lessor of lessee's commitment to pay for the
investigation and remediation of such Hazardous Substance Condition totally at
Lessee's expense and without reimbursement from Lessor except to the extent of
an amount equal to twelve (12) times the then monthly Base Rent or $100,000,
whichever is greater. Lessee shall provide Lessor with the funds required of
Lessee or satisfactory assurance thereof within thirty (30) days following
Lessee's said commitment. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such investigation and remediation
as soon as reasonably possible and the required funds are available. If Lessee
does not give such notice and provide the required funds or assurance thereof
within the times specified above, this Lease shall terminate as of the date
specified in Lessor's notice of termination. If a Hazardous Substance Condition
<PAGE>
occurs for which Lessee is not legally responsible, there shall be abatement of
Lessee's obligations under this Lease to the same extent as provided in
Paragraph 9.6(a) for a period of not to exceed twelve months. At Lessee's
option, the Lessor should remedy as soon as practical any Hazardous Condition
which would negatively impact Lessee's interests or present a health risk to
occupants of the Premises, otherwise Lessee will have the option to terminate
the lease.
9.8 Termination - Advance Payments. Upon termination of this Lease
pursuant to this Paragraph 9, an equitable adjustment shall be made concerning
advance Base Rent and any other advance payments made by Lessee to Lessor.
Lessor shall, in addition, return to Lessee so much of Lessee's Security Deposit
as has not been, or is not then required to be, used by Lessor under the terms
of this Lease.
9.9 Waive Statutes. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
with respect to the termination of this Lease and hereby waive the provisions of
any present or future statute to the extent inconsistent herewith.
10. Real Property Taxes.
10.1 (a) Payment of Taxes. Lessee shall pay the Real Property
Taxes, as defined in Paragraph 10.2, applicable to the Premises during the term
of this Lease. Subject to Paragraph 10.l(b), all such payments shall be made at
least ten (10) days prior to the delinquency date of the applicable installment.
Lessee shall promptly furnish Lessor with satisfactory evidence that such taxes
have been paid. If any such taxes to be paid by Lessee shall cover any period of
time prior to or after the expiration or earlier termination of the term hereof,
Lessee's share of such taxes shall be equitably prorated to cover only the
period of time within the tax fiscal year this Lease is in effect, and Lessor
shall reimburse Lessee for any overpayment after such proration. If Lessee shall
fail to pay any Real Property Taxes required by this Lease to be paid by Lessee,
Lessor shall have the right to pay the same, and Lessee shall reimburse Lessor
therefor upon demand. See Paragraph for additional requirements,
(b) Advance Payment. In order to insure payment when due and
before delinquency of any or all Real Property Taxes, Lessor reserves the right,
at Lessor's option, to estimate the current Real Property Taxes applicable to
the Premises, and to require such current year's Real Property Taxes to be paid
in advance to Lessor by Lessee, either: (i) in a lump sum amount equal to the
installment due, at least twenty (20) days prior to the applicable delinquency
date, or (ii) monthly in advance with the payment of the Base Rent. If Lessor
elects to require payment monthly in advance, the monthly payment shall be that
equal monthly amount which, over the number of months remaining before the month
in which the applicable tax installment would become delinquent (and without
interest thereon), would provide a fund large enough to fully discharge before
delinquency the estimated installment of taxes to be paid. When the actual
amount of the applicable tax bill is known, the amount of such equal monthly
advance payment shall be adjusted as required to provide the fund needed to pay
the applicable taxes before delinquency. If the amounts paid to Lessor by Lessee
under the provisions of this Paragraph are insufficient to discharge the
obligations of Lessee to pay such Real Property Taxes as the same become due,
Lessee shall pay to Lessor, upon Lessor's demand, such additional sums as are
necessary to pay such obligations. All moneys paid to Lessor under this
Paragraph may be intermingled with other moneys of Lessor and shall not bear
interest. In the event of a Breach by Lessee in the performance of the
obligations of Lessee under this Lease, then any balance of funds paid to Lessor
under the provisions of this Paragraph may, subject to proration as provided in
Paragraph 10.1 (a), at the option of Lessor, be treated as an additional
Security Deposit under Paragraph 5.
10.2 Definition of "Real Property Taxes". As used herein, the term
"Real Property Taxes" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax, (other than inheritance,
personal, income or estate taxes) imposed upon the Premises by any authority
having the direct or indirect power to tax, including any city, state or federal
government, or any school, agricultural, sanitary, fire, street, drainage or
other improvement district thereof, or levied against any legal or equitable
interest of Lessor in the Premises or in the real property of which the Premises
are a part. Lessor's right to rent or other income therefrom, and/or Lessor's
business of leasing the Premises, and any charge or assessment of any kind
whatsoever resulting front the Premises inclusion in any property owners
association. The term "Real Property Taxes" shall also include any tax, fee,
levy, assessment or charge, or any increase therein, imposed by reason of events
occurring, or changes in applicable law taking effect, during the term of this
Lease, including but not limited to a change in the ownership of the Premises or
in the improvements thereon, the execution of this Lease, or any modification,
amendment or transfer thereof, and whether or not contemplated by the Parties.
10.3 Joint Assessment. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property Taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Lessor from the respective valuations
assigned in the assessor's work sheets or such other information as may be
reasonably available. Lessor's reasonable determination thereof, in good faith,
shall be conclusive.
10.4 Personal Property Taxes. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations. Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or elsewhere. When possible, Lessee shall
cause its Trade Fixtures. furnishings, equipment and all other personal property
to be assessed and billed separately from the real property of Lessor. If any of
Lessee's said personal property shall be assessed with the Lessor's real
property. Lessee shall pay Lessor the taxes attributable to Lessee within ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Lessee's property or, at Lessor's option, as provided in Paragraph
10.1(b).
11. Utilities. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered with other Premises.
12. Assignment and Subletting.
12.1 Lessor's Consent Not Required. Lessor's consent is not required if
Lessee assigns this lease to MicroAge, Inc. or to any of its subsidiaries.
12.2 Lessor's Consent Required.
(a) Lessee shall not voluntarily or by operation of law
assign, transfer, mortgage or otherwise transfer or encumber (collectively
"assignment") or sublet all or any part of Lessee's interest in this Lease or in
the Premises without Lessor's prior written consent given under and subject to
the terms of Paragraph 36.
(b) struck
(c) The involvement of Lessee or its assets in any
transactions, or series of transactions (by the way of merger, sale,
acquisition, financing, refinancing, transfer, leveraged buyout or otherwise),
whether or not a formal assignment or hypothecation of this Lease or Lessee's
assets occurs, which results or will result in a reduction of the Net Worth of
Lessee, as hereinafter defined, by an amount equal to or greater than
twenty-five percent (25%) of such Net Worth of Lessee as it was represented to
Lessor at the time of the execution by Lessor of this Lease or at the time of
the most recent assignment to which Lessor has consented, or as it exists
immediately prior to said transactions constituting such reduction, at whichever
time said Net Worth of Lessee was or is greater, shall he considered an
assignment of this Lease by Lessee to which Lessor may reasonably withhold its
consent. "Net Worth of Lessee" for purposes of this Lease shall be the net worth
of Lessee (excluding any guarantors) established under generally accepted
accounting principles consistently applied.
(d) An assignment or subletting of Lessee's interest in this
Lease without Lessor's specific prior written consent shall, at Lessor's option,
be a Default curable after notice per Paragraph 13.1(c), or a noncurable Breach
without the necessity of any notice and grace period. If Lessor elects to treat
such unconsented to assignment or subletting as a noncurable Breach, Lessor
shall have the right to either: (i) terminate this Lease, or (ii) upon thirty
(30) days written notice ("Lessor's Notice"), increase the monthly Base Rent to
fair market value or one hundred ten percent (110%) of the Base Rent then in
effect, whichever is greater. Pending determination of the new fair market
value. if disputed by Lessee, Lessee shall pay the amount set forth in Lessor's
Notice, with any overpayment credited against the next installment(s) of Base
Rent coming due, and any underpayment for the period retroactively to the
effective date of the adjustment being due and payable immediately upon the
determination thereof, Further, in the event of such Breach and market value
adjustment. (i) the purchase price of any option to purchase the Premises held
by Lessee shall be subject to similar adjustment to the then fair market value
(without the Lease being considered an encumbrance or any deduction or
depreciation or obsolescence, and considering the Premises at its highest and
best use and in good condition), or one hundred ten percent (110%) of the price
previously in effect, whichever is greater, (ii) any index-oriented rental or
price adjustment formulas contained in this Lease shall be adjusted to require
that the base index be determined with reference to the index applicable to the
time of such adjustment, and (iii) any fixed rental adjustments scheduled during
the remainder of the Lease term shall be increased in the same ratio as the new
market rental bears to the Base Rent in effect immediately prior to the market
value adjustment.
12.3 Terms and Conditions Applicable to Assignment and Subletting.
<PAGE>
(a) Regardless of Lessor's consent, any assignment or
subletting shall not (i) be effective without the express written assumption by
such assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, or (iii) alter the primary
liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval of
an assignment. Neither a delay in the approval of disapproval of such assignment
nor the acceptance of any rent or performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting
shall not constitute a consent to any subsequent assignment or subletting by
Lessee or to any subsequent or successive assignment or subletting by the
sublessee. However, Lessor my consent to subsequent subletting and assignments
of the sublease of the sublease or any amendments or modifications thereto
without notifying Lessee or anyone else liable on the Lease or sublease and
without obtaining their consent, and such action shall not relieve such persons
from liability under this Lease or sublease.
(d) In the event of any Default or Breach of Lessee's
obligations under this Lease, Lessor may proceed directly against Lessee, any
Guarantors or any one else responsible for the performance of the Lessee's
obligations under this Lease, including the sublessee, without first exhausting
Lessor's remedies against any other person or entity responsible therefor to
Lessor, or any security held by Lessor or Lessee.
(e) Each request for consent to an assignment or subletting
shall be in writing, accompanied by information relevant to Lessor's
determination as to the financial and operational responsibility and
appropriateness of the proposed assignee or sublessee, including but not limited
to the intended use and/or required modification of the Premises, if any. Lessee
agrees to provide Lessor with such other or additional information and/or
documentation as may be reasonably requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease, be deemed,
for the benefit of Lessor, to have assumed and agreed to conform and comply with
each and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.
(g) The occurrence of a transaction described in Paragraph
12.1(c) shall give Lessor the right (but not the obligation) to require that the
Security Deposit be increased to an amount equal to six (6) times the then
monthly Base Rent, and Lessor may make the actual receipt by Lessor of the
amount required to establish such Security Deposit Ft condition to Lessor's
consent to such transaction.
12.4 Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of
Lessee's interest in all rentals and income arising from any sublease of all or
a portion of the Premises heretofore or hereafter made by Lessee, and Lessor may
collect such rent and income and apply same toward Lessee's obligations under
this Lease; provided, however, that until a Breach (as defined in Paragraph 13.
1) shall occur in the performance of Lessee's obligations under this Lease.
Lessee may, except as otherwise provided in this Lease, receive, collect and
enjoy tire rents accruing under such sublease. Lessor shall not, by reason of
this or any other assignment of such sublease to Lessor, nor by reason of the
collection of the rents from a sublessee, be deemed liable to the sublessee for
any failure of Lessee to perform and comply with any of Lessee's obligations to
such sublessee under such sublease. Lessee hereby irrevocably authorizes and
directs any such sublessee, upon receipt of a written notice from Lessor stating
that a Breach exists in the performance of Lessee's obligations under this
Lease, to pay to Lessor the rents and other charges due and to become due under
the sublease. Sublessee shall rely upon any such statement and request from
Lessor and shall pay such rents and other charges to Lessor without any
obligation or right to inquire as to whether such Breach exists and not
withstanding any notice from or claim from Lessee to the contrary. Lessee shall
have no right or claim against said sublessee, or, until the Breach has been
cured, against Lessor, for any such rents and other charges so paid by said
sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of
its obligations under this Lease, Lessor, at its option and without any
obligation to do so, may require any sublessee to attorn to Lessor, in which
event Lessor shall undertake the obligations of the sublessor under such
sublease from the time of the exercise of said option to the expiration of such
sublease; provided, however, Lessor shall not be liable for any prepaid rents or
security deposit paid by such sublessee to such sublessor or for any other prior
Defaults or Breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor
under a sublease shall also require the consent of Lessor herein.
(d) No sublessee shall further assign or sublet all or any
part of the Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or
Breach by Lessee to the sublessee, who shall have the right to cure the Default
of Lessee within the grace period, if any, specified in such notice. The
sublessee shall have a right of reimbursement and offset from and against Lessee
for any such Defaults cured by the sublessee.
13. Default; Breach; Remedies.
13.1 Default, Breach. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in said
notice as rent due and payable to cure said Default. A "Default" is defined as a
failure by the Lessee to observe, comply with or perform any of the terms,
covenants, conditions or rules applicable to Lessee under this Lease. A "Breach"
is defined as the occurrence of any one or more of the following Defaults, and,
where a grace period for cure after notice is specified herein, the failure by
Lessee to cure such Default prior to the expiration of the applicable grace
period, and shall entitle Lessor to pursue the remedies set forth in Paragraphs
13.2 and/or 13.3:
(a) Except as expressly otherwise provided in this Lease, the
failure by Lessee to make any payment of Base Rent or any other monetary payment
required to be made by Lessee hereunder, whether to Lessor or to a third party
within 10 days of receipt of written notice of nonpayment, as and when due. the
failure by Lessee to provide Lessor with reasonable evidence of insurance or
surety bond required under this Lease, or the failure of Lessee to fulfill any
obligation under this Lease which endangers or threatens life or property, where
such failure continues for a period of three (3) business days following written
notice thereof by or on behalf of Lessor to Lessee.
(b) Except as expressly otherwise provided in this Lease, the
failure to provide Lessor with reasonable written evidence (in duty executed
original form, if applicable) of (i) compliance with applicable law per
Paragraph 6.3, (ii) the inspection, maintenance and service contracts required
under Paragraph 7. I (b), (iii) the recision of an unauthorized assignment or
subletting per Paragraph 12.1(b), (iv) a Tenancy Statement per Paragraphs 16 or
37, (v) the subordination or non-subordination of this Lease per Paragraph 30,
(vi) the guaranty of the performance of Lessee's obligations under this Lease if
required under Paragraphs 1.11 and 37, and (vii) the execution of any document
requested under Paragraph 42 (easements).
(c) A Default by Lessee as to the terms, covenants, conditions
or provisions of this Lease, or of the rules adopted under Paragraph 40 hereof,
that are to be observed, complied with or performed by Lessee, other than those
described in subparagraphs (a), (b) or (c) above, where such Default continues
for a period of thirty (30) days after written notice thereof by or on behalf of
Lessor to Lessee; provided, however, that if the nature of Lessee's Default is
such that more than thirty (30 days are reasonably required for its cure, then
it shall not be deemed to be a Breach of this Lease by Lessee if Lessee
commences such cure within said thirty (30) day period and thereafter diligently
prosecutes such cure to completion.
(d) The occurrence of any of the following events: (i) The
making by Lessee of any general arrangement or assignment for the benefit of
creditors; (ii) Lessee's becoming a "debtor" as defined in 11 U.S.C. S 101 or
any successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days; (iii) the appointment of a
trustee or receiver to take possession of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where possession
is not restored to Lessee within thirty (30) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in the Lease, where such seizure
is not discharged within thirty (30) days; provided, however, in the event that
any provision of this subparagraph (e) is contrary to any applicable law, such
provision shall be of no force or effect, and not affect the validity of the
remaining provisions.
(e) The discovery by Lessor that any financial statement given
to Lessor by Lessee or any Guarantor of Lessee's obligations hereunder was
materially false.
(f) If the performance of Lessee's obligations under this
Lease is guaranteed: (i) the death of a guarantor, (ii) the termination of a
guarantor's
<PAGE>
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (iii) a guarantor's becoming insolvent or the subject of a
bankruptcy filing , (iv) a guarantor's refusal to honor the guaranty, or (v) a
guarantor's breach of its guaranty obligation on an anticipatory breach basis,
and Lessee's failure, within sixty (60) days following written notice by or on
behalf of Lessor to Lessee of any such event, to provide Lessor with written
alternative assurance or security, which, when coupled with the then existing
resources of Lessee, equals or exceeds the combined financial resources of
Lessee and the guarantors that existed at the time of execution of this Lease.
13.2 Remedies. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may at its option
(but without obligation to do so), perform such duty or obligation on Lessee's
behalf, including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals. The costs
and expenses of any such performance by Lessor shall be due and payable by
Lessee to Lessor upon invoice therefore. If any check given to Lessor by Lessee
shall not be honored by the bank upon which it is drawn, Lessor, at its option,
may require All future payments to be made under this Lease by Lessee to be made
only by cashier's check. In the event of a Breach of this Lease by Lessee, as
defined in Paragraph 13. 1, with or without further notice or demand. and
without limiting Lessor in the exercise of any right or remedy which Lessor may
have by reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by
any lawful means, in which case this Lease and the term hereof shall terminate
and Lessee shall immediately surrender possession of' the Premises to Lessor. In
such event Lessor shall be entitled to recover from Lessee: (i) the worth at the
time of the award of the unpaid rent which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that could have been reasonably
avoided; (iii) the worth at the time of award of the amount by which the unpaid
rent for the balance of term after the time of award exceeds the amount of such
rental loss that could be reasonably avoided; and (iv) any other amount
necessary to compensate Lessor for all the detriment proximately caused by the
Lessee's failure to perform its obligations under this Lease or which in the
ordinary course of things would be likely to result therefrom, including but not
limited to the cost of recovering possession of the Premises. expenses of
reletting, including necessary renovation and alteration of the Premises,
reasonable attorneys' fees, and that portion of the leasing commission paid by
Lessor applicable to the unexpired term of this Lease. The worth at the time of
award of the amount referred to in provision (iii) of the prior sentence shall
be computed by discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus one percent. Efforts by
Lessor to mitigate damages caused by Lessee's Default or Breach of this Lease
shall not waive Lessor's right to recover damages under this Paragraph. If
termination of this Lease is obtained through the provisional remedy of unlawful
detainer, Lessor shall have the right to recover in such proceeding the unpaid
rent and damages as are recoverable therein, or Lessor may reserve therein the
right to recover all or any part thereof in a separate suit for such rent and/or
damages. If a notice and grace period required under subparagraphs 13. l(b), (c)
or (d) was not previously given, a notice to pay rent or quit, or perform or
quit, a- the case may be, given to Lessee under any statute authorizing the
forfeiture of lease-q for unlawful detainer shall also constitute the applicable
notice for grace period purposes required by subparagraphs 13.1(b), (c) or (d).
In such case, the applicable grace period under subparagraphs 1 3. 1 (b), (c) or
(d) and under the unlawful detainer statue shall run concurrently after the one
such statutory notice, and the failure of Lessee to cure the Default within the
greater of the two such grace periods shall constitute both an unlawful detainer
and a Breach of this Lease entitling Lessor to the remedies provided for in this
Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in
effect (in California under California Civil Code Section 1951.4) after Lessee's
Breach and abandonment and recover the rent as it becomes due, provided Lessee
has the right to sublet or assign, subject only to reasonable limitations. See
Paragraphs 12 and 36 for the limitations on assignment and subletting which
limitations Lessee and Lessor agree are reasonable. Acts of maintenance or
preservation, efforts to relet the Premises, or the appointment of a receiver to
protect the Lessor's interest under the Lease, shall not constitute a
termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to
Lessor under the laws or judicial decisions of the state wherein the Premises
are located.
(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters occurring
or accruing during the term hereof or by reason of Lessee's occupancy of the
Premises.
13.3 Inducement Recapture In Event Of Breach. Any agreement by Lessor
for free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "Inducement Provisions", shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to he performed and observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach of this Lease by Lessee, as defined in Paragraph 13.1 any such
Inducement Provision shall automatically he deemed deleted from this Lease and
of no future force or effect, and any rent, other charge, bonus, inducement or
consideration theretofore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor.
and recoverable by Lessor as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph shall not be deemed a wavier by Lessor of the provisions of this
Paragraph unless specifically so stated in writing b), Lessor at the time of
such acceptance.
13.4 Late Charges, Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Lessor by terms of any ground lease, mortgage or trust deed covering [he
Premises. Accordingly, if any installment of rent or any other sum due from
Lessee shall not be received by Lessor or Lessor's designee on the first day of
each month then, without any requirement for notice to Lessee. Lessee shall pay
to Lessor a late charge equal to six percent (6%) of such overdue amount. The
parties hereby agree that such late charge represents a fair and reasonable
estimate of the costs Lessor will incur by reason of late payment by Lessee.
Acceptance of such late charge by Lessor shall in no event constitute a waiver
of Lessee's Default or Breach with respect to such overdue amount, not prevent
Lessor from exercising any of the other rights and remedies granted hereunder,
In the event that a late charge is payable hereunder, whether or not collected,
for three (3) consecutive installments of Base Rent, then notwithstanding
Paragraph 4.1 or any other provision of this Lease to the contrary, Base Rent
shall, at Lessor's option, become due and payable quarterly in advance.
13.5 Breach by Lessor. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph 13.3, a
reasonable time shall in no event be less than thirty (30) days after receipt by
Lessor, and by the holders of any ground lease, mortgage or deed of trust
covering the Premises whose name and address shall have been famished Lessee in
writing for such purpose, of written notice specifying wherein such obligation
of Lessor has not been performed: provided, however, that if the nature of
Lessor's obligation is such that more than thirty (30) days after such notice
are reasonably required for its performance, then Lessor shall not be in breach
of this Lease if performance is commenced within such thirty (30) day period and
thereafter diligently pursued to completion. If Lessor fails to take action to
correct the breach within thirty (30) days, then Lessee shall have the option to
terminate the lease or correct the breach at Landlord's expense. The expiration
or termination of this Lease by Lessee shall not relieve Lessor from liability
under any indemnity provision of this Lease as to matters occurring or occurring
during the term hereof.
14. Condemnation. If the Premises or any portion thereof are taken under
the power of eminent domain or sold under the threat of the exercise of said
power (all of which are herein called "condemnation"), this Lease shall
terminate as to the part so taken as of the date the condemning authority takes
title or possession, whichever first occurs. If more than ten percent (10%) of
the floor area of the Premises, or more than twenty-five percent (25%) of the
land area not occupied by any building, is taken by condemnation, Lessee may, at
Lessee's option, to be exercised in writing within ten (10) days after Lessor
shall have given Lessee, written notice of such taking (or in the absence of
such notice, within thirty (30) days after the condemning authority shall have
taken possession) terminate this Lease as of the date the condemning authority
takes such possession. If Lessee does not terminate this Lease in accordance
with the foregoing, this Lease shall remain in full force and effect as to the
portion of the Premises remaining, except that the Base Rent shall be reduced in
the same proportion as the rentable floor area of the Premises taken bears to
the total rentable floor area of the building located on the Premises. No
reduction of Base Rent shall occur if the only portion of the Premises taken is
land on which there is no building. Any award for the taking of all or any part
of the Premises under the power of eminent domain or any payment made under
threat of the exercise of such power shall be the property of Lessor, whether
such award shall be made as compensation for diminution in value of the
leasehold or for the taking of the fee, or as severance damages; provided,
however, that Lessee shall he entitled to any compensation, separately awarded
to Lessee for Lessee's relocation expenses and/or loss of Lessee's Trade
Fixtures and/or Utility Installations. In the event that this Lease is not
terminated by reason of such condemnation, Lessor shall to the extent of its net
severance damages received, over and above the legal and other expenses incurred
by Lessor in the condemnation matter, repair any damage to the Premises caused
by such condemnation, except to the extent that Lessee has been reimbursed
therefor
<PAGE>
by the condemning authority. Lessee shall be responsible for the payment of any
amount in excess of such net severance damages required to complete such repair.
15. Broker's Fee.
15.1 The Brokers named in Paragraph 1.10 are the procuring causes of
this Lease.
15.2 Upon execution of this Lease by both Parties, Lessor shall pay to
said Brokers jointly, or in such separate shares as they may mutually designate
in writing, a fee as set forth in a separate written agreement between Lessor
and said Brokers (or in the event there is no separate written agreement between
Lessor and said Brokers, the sum of (by separate agree.) for brokerage services
rendered by said Brokers to Lessor in this transaction.
15.3 Unless Lessor and Brokers have otherwise agreed in writing, Lessor
further agrees that: (a) if Lessee exercises any Option (as defined in Paragraph
39. 1) or any Option subsequently granted which is substantially similar to an
Option granted to Lessee in this Lease, or lb) if Lessee acquires any rights to
the Premises or other premises described in this Lease which are substantially
similar to what Lessee would have acquired had an Option herein granted to
Lessee been exercised, or (c) if Lessee remains in possession of the Premises,
with the consent of Lessor, after (he expiration of term of this Lease after
having failed to exercise an Option, or (d) if said Brokers are the procuring
cause of another lease or sale entered into between the Parties pertaining to
the Premises and/or any adjacent property in which Lessor has an interest, or
(e) if Base Rent is increased, whether by agreement or operation of an
escalation clause herein, then as to any of said transactions, Lessor shall pay
said Brokers a fee in accordance with the schedule of said Brokers in effect at
the time of the execution of this Lease.
15.4 Any buyer or transferee of Lessor's interest in this Lease,
whether such transfer is by agreement or by operation of law, shall be deemed to
have assumed Lessor's obligation under this Paragraph 15. Each Broker shall be a
third party beneficiary of the provisions of this Paragraph 15 to the extent of
its interest in any commission arising from this Lease and may enforce that
right directly against Lessor and its successors.
15.5 Lessee and Lessor each represent and warrant to the other that it
has had no dealings with any person, firm, broker or tender (other than the
Brokers, if any named in Paragraph 1. 10) in connection with the negotiation of
this Lease and/or the consummation of the transaction contemplated hereby, and
that no broker or other person, firm, or entity other than said named Brokers is
entitled to any commission or Finder's fee in connection with said transaction.
Lessee and Lessor do each hereby agree to indemnify, protect, defend and hold
the other harmless from and against liability for compensation or charges which
may be claimed by any such unnamed broker, finder or other similar party by
reason of any dealings or actions of the indemnifying Party, including any
costs, expenses, attorneys' fees reasonably incurred with respect thereto.
15.6 Lessor and Lessee hereby consent to and approve all agency
relationships, including any dual agencies, indicated in Paragraph 1.10.
16. Tenancy Statement.
16.1 Each Party (as "Responding Party') shall within ten (10) days from
the other Party (the "Requesting Party") execute, acknowledge and deliver to the
Requesting Party a statement in writing in form similar to the then most current
'Tenancy Statement" form published by the American Industrial Real Estate
Association , plus such additional information, confirmation and/or statements
as may be reasonably requested by the Requesting Party.
16.2 If Lessor desire to finance, refinance, or sell the Premise, any
part thereof, or the building of which the Premises are a part, Lessee and all
Guarantors of Lessee's performance hereunder shall deliver to any potential
lender or purchaser designated by Lessor such financial statements of Lessee and
such Guarantors as may be reasonably required by such lender or purchaser and
are reasonably available by Lessee, including but not limited to Lessee's
financial statements for the past three (3) years. All such financial statements
shall be received by Lessor and such tender or purchaser in confidence and shall
be used only for the purposes herein set forth.
17. Lessor's Liability. The term "Lessor" as used herein shall mean the
owner or owners at the time in question of the fee title to the Premises, or, if
this is a sublease. of the lessee's interest in the prior lease. In the event of
a transfer of Lessor's title or interest in the Premises or in this Lease,
Lessor shall deliver to the transferee or assignee (in cash or by credit) any
unused Security Deposit held by Lessor at the time of such transfer or
assignment. Except as provided in Paragraph 15, upon such transfer or assignment
and delivery of the Security Deposit, as aforesaid, the prior Lessor shall be
relieved of all liability with respect to the obligations and/or covenants under
this Lease thereafter to be performed by the Lessor. Subject to the foregoing,
the obligations and/or covenants in this Lease to be performed by the Lessor
shall be binding only upon the Lessor as hereinafter defined.
18. Severability. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of another provision hereof.
19. Interest On Past-Due Obligations. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within thirty (30)
days following the date of which it was due, shall bear interest from the
thirty-first (31st) day after it was due at the rate of 12% per annum, but not
exceeding the maximum rate allowed by law, in addition to the late charge
provided for in Paragraph 13.4.
20. Time of Essence. Time is of the essence with respect to the performance
of all obligations to be performed or observed by the Parties under this Lease.
*and except under the indemnity provisions of this Lease
21. Rent Defined. All monetary obligations of Lessee to Lessor under the
terms of this Lease are deemed to be rent.
22. No Prior or Other Agreements; Broker Disclaimer. This Lease contains
all agreements between the Parties with respect to any matter mentioned herein,
and no other prior or contemporaneous agreement or understanding shall be
effective. Lessor and Lessee each represents and warrants to the Brokers that is
has made, and is relying solely upon, its owner investigation as to the nature,
quality, character and financial responsibility of the other Party to this Lease
and as to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party.
23. Notices.
23.1 All notices required or permitted by this Lease shall be in
writing and may be delivered in person (by hand or by messenger or courier
service) or may be sent by certified or registered mail or U.S. Postal Service
Express Mail. with postage prepaid, return receipt requested and shall be deemed
sufficiently given if served in a manner specified in this Paragraph 21. The
addressees noted adjacent to Party's signature on this Lease shall be that
Party's address for delivery or mailing of notice purposes. Either Party may by
written notice to the other specify a different address for notice purposes,
except that upon Lessee's taking possession of the Premises, tile Premises shall
constitute Lessee's address for the purpose of mailing or delivering notices to
Lessee. Reasonably a copy of all notices required or permitted to lie given to
Lessor hereunder shall be concurrently transmitted to such party or parties at
such Addresses as Lessor may from time to time hereafter designate by written
notice to Lessee.
23.2 Any notice sent by registered or certified mail, return receipt
requested, shall be deemed given on the date of delivery shown on the receipt
card, Notices delivered by United State Express Mail or overnight courier that
guarantees next day delivery shall be deemed given twenty-four (24) hours after
delivery of the same to the United States Postal Service or courier.
24. Waivers. No waiver by either Lessor or Lessee of the Default or Breach
of any term, covenant or condition hereto by Lessor or Lessee, shall be deemed a
waiver of any other term, covenant or condition hereof, or of any subsequent
Default or Breach by Lessee or Lessor of the same or of any other term, covenant
or condition hereof. Lessor's or Lessee's consent to, or approval of, any act
shall not be deemed to render unnecessary the obtaining of such consent to, or
approval of, any subsequent or similar act or be construed as the basis of an
estoppel to enforce the provision or provisions of this Lease requiring such
consent. Regardless of Lessor's knowledge of a Default or Breach at the time of
accepting rent, the acceptance of rent by Lessor shall not be a waiver of any
preceding Default or Breach by Lessee of any provision hereof, other than the
failure of Lessee to pay the particular rent so accepted. Any payment given
Lessor or Lessee by the other party may be accepted on account of moneys or
damages due,
<PAGE>
notwithstanding any qualifying statements or conditions made by the other party
in connection therewith, which such statement and/or conditions shall be of no
force or effect whatsoever unless specifically agreed to in writing by the other
party at or before the time of deposit such payment.
25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
26. No Right To holdover. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. Covenants and Conditions. All provisions of this Lease to be observed
or performed by Lessee are both covenants and conditions.
29. Binding Effect; Choice of Law. This Lease shall be binding upon the
parties, their personal representatives, successor and assigns and be governed
by the Laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
30. Subordination; Attornment; Non-Disturbance.
30.1 Subordination. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "Security Device"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default and
allow such Lender thirty (30) days following receipt of such notice the cure of
said default before invoking any remedies Lessee may have by reason thereof. If
any Lender shall elect to have this Lease and/or any Option granted hereby
superior to the lien of its Security Device and shall give written notice
thereof to Lessee, this Lease and such Options shall be deemed prior to such
Security Device, notwithstanding the relative dates of the documentation or
recordation thereof.
30.2 Attornment. Subject to the non-disturbance provision of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one month's rent.
30.3 Non-Disturbance. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving assurance (a "Non-disturbance Agreement") from the
Lender that Lessee's possession and this Lease, including any options to extend
the term hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorn to the record owner of the Premises. Any successor to the Lessor,
whether by voluntary or involuntary means is bound to the terms of the lease.
30.4 Self-Executing. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents; provided,
however, that, upon written request from Lessor or a Lender in connection with a
sale, Financing or refinancing of the Premises, Lessee and Lessor shall execute
such further writings as may be reasonably required to separately document any
such subordination or non-subordination, attornment and/or non-disturbance
agreement as provided herein.
31. Attorney's Fees. If any Party or Broker brings an action or proceeding
to enforce the terms hereof or declare rights hereunder, the Prevailing Party
(as hereafter defined) or Broker in Any such proceeding, action, or appeal
thereon, shall he entitled to reasonable attorney's fees. Such fees may be
awarded in the same suit or recovered in a separate suit, whether or not such
action or proceeding is pursued to decision or judgment. The term "Prevailing
Party" shall include, without limitation, a Party or Broker who substantially
obtains or defeats the relief sought, as the case may be, whether by compromise,
settlement, judgment, or the abandonment by the other Party or Broker of its
claim or defense. The attorney's fee award shall not be computed in accordance
with.any court fee schedule, but shall be such as to full), reimburse all
attorney's fees reasonably incurred. Lessor shall be entitled to attorney's
fees, costs and expenses incurred in the preparation and service of notice of
Default and consultations in connection therewith, whether or not a legal action
is subsequently commenced in connection with such Default or resulting Breach.
32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of
emergency, and otherwise at reasonable times upon reasonable notice for the
purpose of showing the same to prospective purchasers, lenders, or lessees, and
making such alterations, repairs, improvements or additions to the Premises or
to the building of they are a part, as Lessor may reasonably deem necessary.
Lessor may at any time place on or about the Premises or building any ordinary
"For Sale" signs and Lessor may at any time during the last one hundred twenty
(120) days of the term hereof place on or about the Premises any ordinary "For
Lease" signs. All such activities of Lessor shall be without abatement of rent
or liability to Lessee.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily, any auction upon the Premises without first having obtained
Lessor's prior written consent. Notwithstanding anything to the contrary in this
Lease, Lessor shall not be obligated to exercise any standard of reasonableness
in determining whether to grant such consent.
34. Signs. Lessee shall not place any signs upon the Premises, except that
Lessee may, with Lessor's prior written consent, install (but not on the roof)
such signs as are reasonably required to advertise Lessee's own business. The
installation of any sign on the Premises by or for Lessee shall be subject to
the provisions of Paragraph 7 (Maintenance, Repairs, Utility Installations,
Trade Fixtures and Alterations). The Lessor is prohibited from erecting, placing
or allowing signs on the Premises other than those referred to in Paragraph 32.
35. Termination; Merger. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises, provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies.
36. Consents.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise provided
herein, wherever in this Lease the consent of a Party is required to an act by
or for the other Party, such consent shall not be unreasonably withheld or
delayed. Lessor's actual reasonable costs and expenses (including but not
limited to architects', attorneys', engineers' or other consultants' fees)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including but not
limited to consents to an assignment, a subletting or the presence or use of a
Hazardous Substance, practice or storage tank, shall be paid by Lessee to Lessor
upon receipt of an invoice and supporting documentation therefor. Subject to
Paragraph 12.2(e) (applicable to assignment or subletting), Lessor may, as a
condition to considering any such request by Lessee, require that Lessee deposit
with Lessor an amount of money ( in addition to the Security Deposit held under
Paragraph 5), reasonably calculated by Lessor to represent the cost Lessor will
incur in considering and responding to Lessee's re-quest. Except as otherwise
provided, any unused portion of said deposit shall be refunded to Lessee without
interest. Lessor's consent to any act, assignment of this Lease or subletting of
the Premises by Lessee shall not constitute an acknowledgement that no Default
or Breach by Lessee of this Lease exists, nor shall such consent be deemed a
waiver of any then existing Default or Breach, except as may be otherwise
specifically stated in writing by Lessor at the time of such consent.
<PAGE>
(b) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify herein any
particular condition to Lessor's consent shall not preclude the imposition by
Lessor at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.
37. Guarantor.
37.1 If there are to be any Guarantors of this Lease per Paragraph
1.11, the form of the guaranty to be executed by each such Guarantor shall be
the form most recently published by the American industrial Re-a] Estate
Association and each said Guarantor shall have the same obligations as Lessee
under this Lease, including but not limited to the obligation to provide the
Tenancy Statement and information called for by Paragraph 16.
37.2 It shall constitute a Default of the Lessee under this Lease of
any such Guarantor fails or refuses, upon reasonable request by Lessor to give:
(a) evidence of the due execution of the guaranty called for by this Lease,
including the authority of the Guarantor (and of the party signing on
Guarantor's behalf to obligate such Guarantor on said guaranty, and including in
the case of a corporate Guarantor, a certified copy of a resolution of its board
of directors authorizing the making of such guaranty, together with a
certificate of incumbency showing the signature of the persons authorized to
sign on its behalf, (b) current financial statements of Guarantor as may from
time to time be requested by Lessor, (c) a Tenancy Statement, or (d) written
confirmation that the guaranty is still in effect.
38. Quiet Possession. Upon payment by Lessee of the rent for the Premises
and the observance and performance of all of the covenants, conditions, and
provisions on Lessee's part to be observed and performed under this Lease,
Lessee shall have quiet possession of the Premises for the entire term hereof
subject to all of the provisions of this Lease.
39. Options.
39.1 Definition. As used in this Paragraph 39 the word "Option" has the
following meaning: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renew any lease that Lessee has on other property of
Lessor; (b) the right of first refusal to lease the Premises or the right of
first offer to lease the Premises or the right of first refusal to lease other
property of Lessor or the right of first offer to lease other property of
Lessor; (c) the right to purchase the Premises, or the right of first refusal to
purchase the Premises, or the right of first offer to purchase the Premises, or
the right to purchase other property of Lessor, or the right of First refusal to
purchase other property of Lessor, or the right of first offer to purchase other
property of Lessor.
39.2 Options Personal to Original Lessee. Each Option granted to Lessee
in this Lease is personal to the original Lessee named in Paragraph 1. I hereof,
and cannot be voluntarily or involuntarily assigned or exercised by any person
or entity other than said original Lessee while the original Lessee is in hill
and actual possession of the Premises and without the intention of thereafter
assigning or subletting. The Options, if any, herein granted to Lessee are not
assignable, either as a part of an assignment of this Lease or separately or
apart therefrom, and no Option may be separated from this Lease in any manner,
by reservation or otherwise.
39.3 Multiple Options. In the event that Lessee has any multiple
Options to extend or renew this Lease, a later option cannot be exercised unless
the prior Options to extend or renew this Lease have been validly exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to tile contrary; (i)
during the period commencing with (he giving of any notice of Default under
Paragraph 13.1 and continuing until the noticed Default is cured, or (ii) during
the period of time any monetary obligation due Lessor from Lessee is unpaid
(without regard to whether notice thereof is given Lessee), or (iii) during the
time Lessee is in material Breach of this Lease, or (iv) in the event that
Lessor has given to Lessee three (3) or more notices of Default under Paragraph
1 3. 1, whether or not the Defaults are cured, during the twelve (I 2) month
period immediately preceding the exercise of the Option.
(b) The period of time within which an Option may be exercised
Shall not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option
shall terminate and be of no further force or effect, notwithstanding Lessee's
due and timely exercise of the Option, if, after such exercise and during the
term of this Lease (i) Lessee fails to pay to Lessor a monetary obligation of
Lessee for a period of thirty (30) days after such obligation becomes due and
after Lessor gives notice thereof to Lessee), or (ii) Lessor gives to Lessee
three or more notices of Default under Paragraph 13.1 during any twelve month
period, whether or not the Defaults are cured, or (iii) if Lessee commits a
material Breach of this Lease.
40. Multiple Buildings. If the Premises are part of a group of buildings
controlled by Lessor, Lessee agrees that it will abide by, keep and observe all
reasonable rules and regulations which Lessor may make from time to time for the
management, safety, care, and cleanliness of' the grounds, the parking and
unloading of vehicles and the preservation of good order, as well as for the
convenience of other occupants or tenants of such other buildings and their
invitees, and that Lessee will pay its fair share of common expenses incurred in
connection therewith.
41. Security Measures. Lessee hereby acknowledges that the rental payable
to Lessor hereunder does not include (he cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. Reservations. Lessor reserves to itself the right, from time to time,
to grant, without the consent or joinder of Lessee, such easements, rights, and
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps and
restrictions do not interfere with the use of the Premises by Lessee. Lessee
agrees to sign any documents reasonably requested by Lessor top effectuate any
such easement rights, dedication, map or restrictions.
43. Performance Under Protest. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money is
asserted shall survive the right to make payment "under protest" and such
payment shall not be regarded as a voluntary payment and there shall survive the
right on the part of said Party to institute suit for recovery of such sum. If
it shall be adjudged that there was no legal obligation on the part of said
Party to pay such sum or any part thereof, said Party shall be entitled to
recover such sum or so much thereof as it was not legally required to pay under
the provisions of this Lease.
44. Authority. If either Party hereto is a corporation, trust, or general
or limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. Conflict. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions,
46. Offer. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to lease to Lessee.
This Lease is not intended to be binding until executed by all Parties hereto.
47. Amendments. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification. The parties shall amend
this Lease from time to time to reflect any adjustment that are made to the Base
Rent or other rent payable under this Lease. As long as they do not materially
change Lessee's obligations
<PAGE>
or rights hereunder or Lessee's use of the Premises, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional, insurance company, or pension plan Lender in
connection with (lie obtaining of normal financing or refinancing of the
property of which the Premises are a part.
48. Multiple Parties. Except as otherwise expressly provided herein, if
more than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH
TERM AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW
THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT
THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY
REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH
RESPECT TO THE PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION
TO YOUR ATTORNEY FOR HIS APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO
EVALUATE THE CONDITION OF THE PROPERTY AS TO THE POSSIBLE PRESENCE OF ASBESTOS,
STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE
BROKER(S) OR THEIR AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL
EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES. THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS
TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY IS
LOCATED IN A STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE
PROPERTY IS LOCATED SHOULD BE CONSULTED.
The parties hereto have executed this Lease at the place oil the dates specified
above to their respective signatures.
Executed at______________________________
on_______________________________________
by LESSOR:
By: James M. Chamberlain
Name Printed: James M. Chamberlain
Title:___________________________________
Address:_________________________________
Tel. No._________________________________
Fax No.__________________________________
Executed at 2400 S. MicroAge Way
on 5/12/95
by LESSEE:
By: Alan R. Lyons
Name Printed: Alan R. Lyons
Title: V.P., Administration
Address: 2400 S. MicroAge Way, Tempe, AZ 85282
Tel. No. 602-968-3168
Fax No. 602-929-2444
ADDENDUM TO STANDARD INDUSTRIAL LEASE/COMMERCIAL
SINGLE-TENANT LEASE - NET
49. PREMISES.
The Premises shall include the real property described in Exhibit "A" attached
hereto, containing approximately 369,559 square feet, together with an office
building (the "Building) to be erected thereon by Lessor. The Building shall be
erected in accordance with the plans and specifications prepared substantially
in conformity with the site plan, floor plan, and List of Components in Exhibit
"B" attached hereto (the "Approved Plans and Specifications") (subject to
possible minor deviations therefrom), as they may be modified as hereinafter
provided.
50. TERM.
The term of this Lease (the "Term") shall be for ten (10) years (plus the
partial month at the beginning of the Term if the Term Commencement Date is a
day other than the first day of a calendar month), unless this Lease is sooner
terminated as hereinafter provided. The Term shall commence on the date the
Improvements are deemed completed in accordance with Paragraph 52 (the "Term
Commencement Date"). Notwithstanding the foregoing, if Lessee takes possession
of or begins to use the Premises or any part thereof prior to the Term
Commencement Date (as defined herein), the Term of this Lease shall commence on
the date such possession or use begins. Upon the Commencement of the Term,
Lessor and Lessee shall execute an amendment to this Lease specifying the
commencement date and expiration date of the Term.
51. CONSTRUCTION OF THE IMPROVEMENTS:
As soon as practicably possible, Lessor shall apply for all building permits and
other governmental permits and approvals necessary for the improvements
described in the Approved Plans and Specifications (the "Improvements").
Thereafter, Lessor at its sole expense shall proceed diligently with the
construction and completion of the Improvements in accordance with the Approved
Plans and Specifications and all applicable governmental permits and approvals
and all applicable laws, ordinances, regulations and court orders. Lessor shall
complete the Improvements and they shall be ready for occupancy by Lessee not
later than November 1, 1995, as such date may be extended by Force Majeure. The
term "Force Majeure' as used herein shall include, but not be limited to, acts
of God, acts of any civil or military authority, acts of war or the public
enemy, legislation, acts or orders of any courts, acts or failures to act of
regulatory agencies or administrative bodies having jurisdiction with respect to
the performance of this Agreement, insurrections, riots, strikes, boycotts or
other labor disturbances, breakdown of necessary equipment or facilities,
derailments, fire, flood, windstorm, explosion, delay or inability to obtain
water, power, fuel or other materials, any present or future laws or regulations
enacted. adopted, instituted or sponsored by any government or governmental
<PAGE>
corporation, agency or bureau and any other cause not within the reasonable
control of the party claiming such Force Majeure and which by the exercise of
due diligence could not reasonably have been avoided by such party: provided,
however, that nothing herein shall require any party to settle any labor dispute
or strike in which it may be involved. Lessor shall notify Lessee in writing of
any Force Majeure event within fifteen (15) days after it occurs.
Lessor hereby agrees to hold Lessee harmless from and against any liens filed in
connection with the Improvements (other than liens caused by Lessee), including
without limitation liens filed in connection with any repair or reconstruction
of the Premises by Lessor. Lessor shall reimburse Lessee upon demand for any
costs and expenses incurred in connection with any such lien, including without
limitation attorneys' fees.
52. COMPLETION AND DELIVERY.
The Improvements shall be deemed completed when:
(a) All work of construction has been substantially completed in
accordance with the Approved Plans and Specifications, subject to normal minor
so-called "Punch-list Items" (defined below) agreed to after an inspection by
Lessor and Lessee, with a maximum aggregate value of $25,000.00, exclusive of
landscaping, which may be completed after the Commencement Date.
(b) The architect or engineer in charge of construction of the
Improvements has prepared, certified by his signature and delivered to Lessor
and Lessee a written statement certifying that the Improvements have been
completed in accordance with the Approved Plans and Specifications, the working
drawings and any properly authorized construction changes, and certifying the
date of such completion: and
(c) A temporary or permanent certificate of occupancy for the Building
has been delivered to Lessee.
Notwithstanding the foregoing, if issuance of a certificate of occupancy is
delayed by reason of Lessee's work, the Term of this Lease shall commence upon
substantial completion of Lessor's work, as provided in subparagraphs (a) and
(b) above, and the certificate of occupancy shall be obtained thereafter upon
completion of Lessee's work.
Lessor shall diligently complete any Punch-List Items as soon as reasonably
possible. "Punch-List Items," as used herein, shall refer to minor,
non-structural repairs and/or minor, non-structural replacement of work not
installed (i) in a workmanlike manner and/or (ii) in accordance with the
Approved Plans and Specifications. "Minor, non-structural repairs and
replacements" mean repairs and replacements that do not interfere with the
occupancy of the Building and Premises or use of the Building and Premises for
their intended purposes.
If Lessor's work shall not be completed within thirty (30) days after the
scheduled completion date of December 1, 1995, as such date may change pursuant
to Paragraph 51, 53, 54 or otherwise herein, Lessor shall be subject to a
penalty of $2,000.00 per day for each day of delay. Failure to complete the work
as aforesaid shall not affect the validity of this Lease nor Lessee's
obligations hereunder, but the Term of this Lease shall not commence until
Lessor has completed such work except as provided in 3.3 above.
53. LESSEE'S WORK.
Lessee, at its own cost and subject to all of the terms of this Lease (other
than the obligation to pay the Net Rent and other charges hereunder prior to the
commencement of the Term), may perform work in the Building concurrently with
Lessor's work, to fit the Building for Lessee's occupancy, provided Lessee's
work does not interfere with Lessor's work; Lessee's work may be performed
through Lessor's contractor or, if no labor discord would be caused thereby,
through Lessee's own contractor. Lessee shall not allow any liens or
encumbrances of any kind to lie attached to or placed upon the Premises as a
result of Lessee's work and in the event such liens or encumbrances are
discovered, Lessee agrees to promptly satisfy and remove same, Lessee hereby
agrees to hold Lessor harmless from and against any liens caused by Lessee, and
Lessee shall reimburse Lessor upon demand for any costs and expenses incurred in
connection with any such lien, including without limitation attorneys' fees. Any
action by Lessee to take full or partial occupancy to fit the Building for
Lessee's occupancy pursuant to this Paragraph 53 shall not advance the
Commencement Date from what would otherwise apply pursuant to this lease.
54. LESSEE REQUESTED CONSTRUCTION CHANGES.
Lessee may, at any time, by a written request signed by one of Lessee's Change
Representatives and delivered or mailed in accordance with this Lease to one of
Lessor's Change Representatives at Lessor's address for notices, make any change
in the work within the general scope of construction contemplated by the
Approved Plans and Specifications, including, but not limited to changes:
(a) in the plans, specifications or working drawings, including without
limitation the Approved Plans and Specifications; provided, however, that no
such request shall result in any major structural change to the Building or
change the 'footprint' of the Building as depicted in the Approved Plans and
Specifications; or
(b) in the method or manner of performance of the work.
Lessee requested construction changes will be transmitted to Lessor only by
means of written requests ("Construction Change Requests") given in accordance
with this Section. "Lessee's Change Representatives" will be those two (2)
persons designated by Lessee to Lessor in writing who will be the only
representatives of Lessee authorized to request construction changes. Until such
designation is received by Lessor, Lessor may send requests for construction
changes to Lessee's address for notices without reference to any Lessee Change
Representative, and Lessee may not make any Construction Change Requests.
Upon receipt of any Construction Change Request issued pursuant to this Section,
Lessor shall immediately proceed in accordance with the directions contained in
the Requested Construction Change Request. Lessor shall have the right to (i)
require Lessee to pay, in addition to any other payments due under this lease,
all of the increase in construction costs caused by the change as such changes
are completed or (ii) increase the annual rent payable under this Lease by One
Hundred Ten and No/100 Dollars ($110.00) for every One Thousand and No/100
Dollars ($1,000.00) of increases in construction costs caused by the change;
provided, however, that such costs payable by Lessee for the Construction Change
Request or as increased rent shall be limited to Lessor's actual, reasonable
direct costs for labor and materials (excluding any and all overhead and
administration costs and any profit margin in excess of ten percent (10%) of
such direct costs).
If Lessee shall have requested a construction change and Lessor elects to
increase the annual rent, then within thirty (30) days after the Term
Commencement Date, Lessor and Lessee shall execute an amendment to this lease
setting forth the rent payable under this Lease, as adjusted pursuant to this
Section. Lessee shall not be required to pay Lessor any increases in rent
pursuant to this Section until such an amendment has been executed or any
arbitration of the increase in rent has been concluded, but Lessee shall
thereupon promptly pay any past due rent to Lessor.
Except as provided in this Section, no order, statement, or conduct of Lessee's
Change Representatives, or of any manager, inspector, engineer, architect,
employee representative, or consultant of Lessee, shall be treated as a change
order under this Section.
<PAGE>
The time period specified above for the completion of the Improvements shall be
extended by delays caused by Construction Change Requests.
55. LESSOR REQUESTED CONSTRUCTION CHANGES.
Lessor may, at any time, by a written request ("Lessor Change Request") signed
by one of Lessor's Change Representatives which expressly refers to this
paragraph and which is delivered or mailed in accordance with this Lease to
Lessee's Change Representatives at Lessee's address for notices, request any
reasonable change in the work within the general scope of the construction
necessary to comply with law, to obtain required governmental permits or
approvals, or to complete the Improvements in accordance with the Approved Plans
and Specifications, including changes:
(a) in the plans, specifications or working drawings, including,
without limitation the Approved Plans and Specifications; provided, however,
that no such request shall result in any major structural change to the Building
or change the "footprint" of the Building as depicted in the Approved Plans and
Specifications; and
(b) in the method or manner of performance of the work or type of
materials provided, however that no such change will degrade the quality of the
Building and provided, further that no change in materials may be requested
unless the change is necessary because of any inability to obtain the material
or the new materials is necessary to comply with law or to obtain required
governments[ permits or approvals.
"Lessor's Change Representatives" will be those two (2) persons designated by
Lessor to Lessee in writing who will be the only representatives of Lessor
Authorized to make Lessor Change Requests. Until such designation is received by
Lessee, Lessee may send Construction Change Requests to Lessor's address for
notices without reference to any Lessor Change Representative, and Lessor may
not make any Lessor Change Requests. Lessor Change Requests will be transmitted
to Lessee by means of a written request describing in hill the requested change,
plus the reasons, effects and results of the change as compared to the original
and/or existing working drawings or plans pertaining to the requested change.
The Lessor Change Request will include drawings, documents, specifications, and
all pertinent data relating to the requested change.
Upon receipt of any Lessor Change Request, Lessee shall immediately begin
analysis of the Lessor Change Request. Lessee will unilaterally have the option
to:
(a) Accept the Lessor Change Request by issuing a Construction Change
Request referencing the specific Lessor Change Request.
(b) Enter into fact-finding or negotiations with Lessor pertaining to
Lessor Change Request.
(c) Reject the Lessor Change Request in writing and require the Lessor
to perform the work in accordance with the Approved Plan and Specifications at
no delay to Lessee in Building occupancy.
Should Lessee not act within ten (10) business days after submittal of any
Lessor Change Request, the requested change will be considered to be rejected by
Lessee. Under no condition will the Lessor begin work on any Lessor Change
Request until after receipt of a fully executed Construction Change Request from
Lessee.
Except as provided in this Section, no order, statement or conduct of Lessor's
Change Representatives or of any manager, inspector, engineer, architect or
other employee representative, or consultant of Lessor shall be treated as a
change request under this Section.
56. RENTAL ADJUSTMENTS
Notwithstanding anything to the contrary contained in the Lease, the Base Rent
commencing with the 61st month shall be increased to 115% of the Base Rent in
the immediately preceding month. For example, if there are no changes in the
Base Rent pursuant to Paragraph 54 or otherwise such that the Base Rent in the
60th months is $58,580.00, the Base Rent in the 61st month shall be increased to
$67,367.00 plus applicable sales tax.
57. TENANT IMPROVEMENTS.
The Lessor agrees to provide $500,000.00 (inclusive of profit and overhead of
10% and sales tax) as an estimated budget for proposed tenant improvements. In
the event that Lessee's tenant improvements are less than $500,000.00, Lessee
shall be entitled to a reduction in rent equal to 10% per annum of the
difference between the actual cost and this allowance.
58. MOVING ALLOWANCE.
Notwithstanding the tenant improvement allowance, Lessor agrees to provide
Lessee with a $100,000 credit for costs associated with moving into the
building. Such amount to be credited against the Base Rent beginning in the
first month and continuing until such credit has been fully used.
59. BUILDING SIGNAGE.
Lessee shall have the right to provide and pay for its own sign on the building,
subject to City of Tempe sign code regulations.
60. ADDITIONAL, MAINTENANCE REQUIREMENTS:
Lessee shall maintain a contract with a fire sprinkler maintenance company that
provides quarterly inspections of the fire sprinklers on the Premises. Lessee
shall provide a copy of the contract and copies of the quarterly inspection
reports to Lessor.
This Building will have a limited roof warranty of ten (10) years from the
roofing material supplier. Lessee shall maintain a contract with a roof
maintenance company that provides for two (2) yearly inspections, the sealing of
all roof protrusions, and any necessary repairs, including without limitation
caulking or adhesive work. Lessee shall provide copies of the contract and
copies of all inspection reports to Lessor.
Lessee shall keep all roof drains and scuppers free of debris and shall promptly
notify the roof warranty company and/or roof maintenance company of all
additional protrusions made by Lessee.
61. PROPERTY TAXES:
Lessee will receive a bill in October of each year for the year's property taxes
to be paid to Lessor in two installments. This bill will include sales tax on
the property taxes as required by the State and City.
Lessor and/or Lessee shall have (he option to appeal tax valuations each year.
In the event that the Full Cash Value is reduced by the tax appeal service for
the next year, Lessee
<PAGE>
shall reimburse Lessor the fee paid to the tax service tip to the amount of the
savings.
EXAMPLE:
Property tax before appeal: $10,000.00
Property tax after appeal: $ 9,000.00
----------
Tax savings: $ 1,000.00
Tax service fee: $ 350.00
----------
Total tax savings for Lessee: $ 650.00
62. BROKERS' COMMISSIONS.
Section 15 of the Lease (including Paragraphs 15.1 through 15.6, inclusive) is
hereby stricken in its entirety. Lessor agrees to pay a brokers' commission to
CB Commercial, Kit Tiedemann (the "Broker") for brokerage services in connection
with this Lease. Lessor and Lessee hereby represent and warrant to one another
that, except for the Broker named above, neither has dealt with any person in
such a manner to give rise to a valid claim for a brokerage commission in
connection with this Lease. If any person other than the Broker named above
shall assert a claim to a fee, commission or other compensation on account of
alleged employment as a broker, finder, or intermediary in connection with this
transaction, the party hereto under whom the broker, finder, or intermediary is
claiming shall indemnify and hold harmless the other party against and from any
such claim and all costs, expenses and liabilities incurred in connection with
such claim or any action or proceeding brought thereon (including, but without
limitation, counsel and witness fees and court costs in defending against such
claim).
63. RENEWAL OPTION.
Lessee shall have the Option to extend the Expiration Date of this Lease for
sixty (60) months by giving notice to Lessor six (6) months prior to the
Expiration Date. In such event, the Base Rent shall be increased to 115% of the
Base Rent in the immediately preceding period. All other terms of this Lease
shall remain the same.
64. TERMINATION OPTION.
Lessee shall have the Option effective after the sixtieth (60th) month of the
Lease to cancel this Lease by providing notice to Lessor at least six (6) months
prior to the effective date of cancellation accompanied by a payment to Lessor
equal to one-half of the remaining unpaid rent. As an example, if the Base Rent
in the sixty-first (61st) month is $67,367.00 and Lessee provides Notice of
Cancellation during the sixty-first (61st) month effective with the
sixty-seventh (67th) month, the remaining rent on the effective date would be
$3,570,451.00 and the payment amount would be $1,785,225.50.
EXHIBIT "A"
LEGAL DESCRIPTION
Lots 25, 26, 27 and 28, and the West 100.00 feet of the North 67.49 feet of Lot
24, BROADWAY INDUSTRIAL PARK UNIT 4, a subdivision recorded in Book 210 of Maps,
Page 49, records of Maricopa County, Arizona;
EXCLUDING the South 20 feet of said Lot 25, except including the West 100 feet
thereof;
CONTAINING an area of 369,559 square feet (+/-) or 8.4839 acres, more or less.
FIRST AMENDMENT
That certain Lease dated March 31, 1995, by and between Chamberlain
Development, L.L.C., an Arizona limited liability company, as Lessor, and
MicroAge Computer Centers, Inc., a Delaware corporation and subsidiary of
MicroAge, Inc., as Lessee, is hereby amended as follows:
1. Paragraph 1.5 shall be amended such that the Base Rent shall be
increased from $58,580.00 to $65,050.00.
2. Paragraph 57 shall be amended such that the Tenant Improvement allowance
shall be increased to $1,000,000.00 (inclusive of the amount of additional
commission due to Broker on the Lease pursuant to this First Amendment). In the
event that Lessee's tenant improvements are more than $500,000 but less than
$1,000,000, Lessee shall be entitled to a reduction in rent equal to 15.5% per
annum of the difference between the actual cost and $1,000,000). In the event
that Lessee's tenant improvements are less than $500,000, Base Rent shall be
calculated as provided in the original Lease.
For example:
(a) If Tenant's requested tenant improvements are $950,000, the
additional commission due Broker will be $31,597.13, the total tenant
improvements will be $981,597.13 and the revised Base Rent will be
$64,812.18.
(b) If Tenant's actual Tenant Improvements are $450,000.00, the
revised Base Rent will be $58,163.00.
All other terms and conditions remain unchanged.
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment as of August
29, 1995.
CHAMBERLAIN DEVELOPMENT, L.L.C. MICROAGE COMPUTER CENTERS, INC.
By: /s/ James M. Chamberlain By: /s/ Alan R. Lyons
- ------------------------------ -------------------------------
James M. Chamberlain, Member Printed Name: Alan R. Lyons
Its: Vice President
By: /s/ Patsy L. Chamberlain
- ------------------------------
Patsy L. Chamberlain, Member
DERMODY
P R O P E R T I E S
STANDARD INDUSTRIAL LEASE For Landlord Use Only:
(NET-NET-NET) Building #: 228CD
L/A: BPE
Lease Preparation Date: September 27, 1996
Landlord: Dermody Properties, a Nevada corporation, located at 1200 Financial
Boulevard, P. O. Box 7098, Reno, Nevada 89510
Tenant: MicroAge Logistics Services, Inc., a Delaware corporation
Trade Name (dba): MicroAge
1. LEASE TERMS
1.01 Premises: The Premises referred to in this Lease contain
approximately 100,648 square feet as shown on Exhibit "A" attached. The address
of the Leased Premises is: 1430 East Greg Street, Units 103 and 104, Sparks,
Nevada 89431.
1.02 Project: The Project in which the Premises are located consist of
approximately 201,295 square feet as shown in Exhibit A.
1.03 Tenant's Notice Address: Tenant's Notice Address is the address of
the Leased Premises as defined in Section 1.01 unless otherwise specified here:
2400 S. MicroAge Way, Attn: V.P. Administration, Tempe, AZ 85282.
1.04 Landlord's Notice Address: P. O. Box 7098, Reno, Nevada 89510
1.05 Tenant's Permitted Use: Computer warehousing, configuration, and
product clearance, general office, and call center operations, in compliance
with all applicable laws, rules, and regulations and this Lease.
1.06 Lease Term: The Lease Term is for five (5) years and one (1) month
and commences on December 1, 1996, and expires December 31, 2001.
1.07 Base Monthly Rent: Shall be paid in lawful money of the United
States of America based on the following schedule:
Month 1, December 1, 1996 - December 31, 1996:
Free of Base Monthly Rent; however, Tenant shall be required to pay
"Additional Rent" pursuant to Article 5. herein;
Months 2 - 13,January 1,1997 - December 31, 1997:
TWENTY-TWO THOUSAND, FIVE HUNDRED TWENTY FIVE AND NO/100 DOLLARS
($22,525.00) per month;
Months 14 - 19, January 1, 1998 - June 30, 1998:
TWENTY-THREE THOUSAND, THREE HUNDRED SEVENTY FIVE AND NO/100 DOLLARS
($23,375.00) per month;
Months 20 - 25, July 1, 1998 - December 31, 1998:
TWENTY-SEVEN THOUSAND, SIX HUNDRED SEVENTY-EIGHT AND 20/100 DOLLARS
($27,678.20) per month;
Months 26 - 43, January 1, 1999 - June 30, 2000:
TWENTY-EIGHT THOUSAND, SIX HUNDRED EIGHTY-FOUR AND 68/100 DOLLARS
($28,684.68) per month; and
Months 44 - 61, July 1, 2000 - December 21, 2001:
TWENTY-NINE THOUSAND SIX HUNDRED NINETY-ONE AND 16/100 DOLLARS
($29,691.16) per month.
1.08 Security Deposit: --$0-- in lawful money of the United States of
America.
1.09 Proportionate Share: Tenant's Proportionate Share is 50% based
upon the total square footage of the Project and the square --- footage of the
Premises.
1.11 Tenant is entitled to common vehicle parking spaces subject to the
provisions of Section 8 of the Lease.
1.12 Tenant Improvements: Tenant Improvements to be performed in the
Premises, if any, will be performed in accordance with the terms and provisions
entitled "Landlord's Work" contained in Exhibit "B" attached if applicable.
Thereafter during the Lease Term, Landlord will be under no obligation to alter,
change, decorate or improve the Premises.
1.13 Guaranty: Tenant's obligations under this Lease shall be
guaranteed by MicroAge Computer Centers, Inc., a Delaware corporation, pursuant
to the Guaranty attached hereto as Exhibit "E" and made a part hereof.
2. DEMISE AND POSSESSION
2.01 Landlord leases to Tenant and Tenant leases from Landlord the
Premises described in 1.01. By entering the Premises, Tenant acknowledges that
it has examined the Premises and accepts the Premises in their present condition
subject to any additional work Landlord has agreed to do as stated on Exhibit B
if applicable. Landlord expressly reserves its right to lease any other space
available in the Project to whom ever it wishes, further Tenant hereby
acknowledges that it did not rely on any other tenant remaining a tenant in the
Project as a consideration for entering into this Lease.
2.02 If for any reason Landlord cannot deliver possession of the
Premises on the date the Lease commences, Landlord shall not be subject to any
liability nor shall the validity of this Lease be affected. If Tenant has not
caused such delay there shall be a proportionate reduction of the Base Monthly
Rent covering the period between the commencement of the Lease Term and the date
when Landlord can deliver possession. However, Tenant, unless it is the cause of
the delay, has the right to cancel this Lease by written notification if
possession of the Premises is not delivered within ninety (90) days of the date
the Lease Term commences. Landlord may terminate this Lease by giving written
notice to Tenant if possession of the Premises is not delivered within ninety
(90) days of the date the lease is to commence.
3. BASE MONTHLY RENT
3.01 Base Monthly Rent: Commencing January 1, 1997, Tenant will pay,
without deduction or offset (except as set forth in Section 30.01), prior notice
or demand, Base Monthly Rent at the place designated by Landlord. However, the
first month's rent is due and payable upon execution of this Lease. In the
event, that the Term of this Lease commences or ends on a day other than the
first day of a calendar month, a prorated amount of Base Monthly Rent shall be
due upon execution and it will be calculated using a thirty (30) day month. In
the event this Lease is to commence upon a date not ascertained on execution,
both parties agree to complete and execute a Commencement Date Certificate in
the form of Exhibit "F" within ten (10) days of the Commencement Date, if
applicable.
-1-
<PAGE>
3.02 See Section 1.07 herein for Rent Schedule.
3.03 Any installment of rent or any other charge payable which is not
paid within ten (10) days after it becomes due will be considered past due and
Tenant will pay to Landlord as Additional Rent a late charge equal to the
product of the variable Prime Rate "Prime", plus six percent (6%) per annum as
charged by Bank of America, Nevada; times the amount of such installment amount
due, or eighteen percent (18%) per annum of such installment or the sum of
twenty-five dollars ($25.00), whichever is greater, for each month or fractional
month transpiring from the date due until paid. Notwithstanding the foregoing,
no late charge for the first three (3) delinquent payments of rent or any other
charge payable under this Lease shall be assessed unless such delinquent payment
is not made within ten (10) days of written notice from Landlord to Tenant of
the delinquency. A twenty-five dollar ($25.00) handling charge will be paid by
Tenant to Landlord for each returned check and, thereafter, Tenant will pay all
future payments of rent or other charges due by money order or cashier's check.
In the event a late charge is assessed for three (3) consecutive rental periods,
whether or not it is collected, the rent shall without further notice become due
and payable quarterly in advance notwithstanding any provision of this Lease to
the contrary. If Tenant shall be served with a demand for the payment of past
due rent, any payments tendered thereafter to cure any default by Tenant shall
be made only by cashier's check or equivalent.
3.04 The amount of the Base Monthly Rent includes projected
construction of Tenant's improvements as indicated on Exhibit "B" attached. In
the event that Tenant requests Landlord to construct additional improvements
and/or final construction costs exceed original estimates, such costs or
expenses upon itemized notice by Landlord, shall be paid by Tenant to Landlord,
or Landlord may increase the Base Monthly Rent according to the terms and
conditions outlined on Exhibit "B", or elsewhere in this Lease.
4. COMMON AREAS
4.01 Definitions: "Common Areas": "Common Area" is defined as all areas
and facilities outside the Premises and within the exterior boundary line of the
Project that are provided and designated by Landlord for the non-exclusive use
of Landlord, Tenant and other lessees of the Project and their respective
employees, agents, customers and invitees. Common Areas include, but are not
limited to: all parking areas, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways, driveways, corridors, landscaped areas
and any restrooms used in common by lessees.
4.02 Tenant, its employees, agents, customers and invitees have the
non-exclusive right (in common with other Tenants, Landlord, and any other
person granted use by Landlord) to use of the Common Areas. Tenant agrees to
abide by and conform to, and to cause its employees, contractors, and agents to
abide by and conform to all rules and regulations established by Landlord
subject to provisions of paragraph 24. Tenant agrees to cause its customers and
invitees to abide by and conform to all rules and regulations established by
Landlord subject to the provisions of paragraph 24 with respect to the Premises
and to utilize its best efforts to cause its customers and invitees to abide by
and conform to all rules and regulations established by Landlord subject to the
provisions of paragraph 24. with respect to the Project.
4.03 Landlord has the right, in its sole discretion, from time to time,
to: 1) make changes to the Common Areas, including without limitation, changes
in the location, size, shape and number of driveways, entrances, parking spaces,
parking areas, ingress, egress, direction of driveways, entrances, corridors
parking areas and walkways; 2) close temporarily any of the Common Areas for
maintenance purposes so long as reasonable access to the Premises remains
available; 3) add additional buildings and improvements to the Common Areas; 4)
use the Common Areas while engaged in making additional improvements, repairs or
alterations to the Project or any portion thereof; do and perform any other acts
or make any other changes in, to or with respect to the Common Areas and Project
as Landlord may, in the exercise of sound business judgement, deem to be
appropriate. Notwithstanding the foregoing, (1) at no time will parking spaces
located within the Project and available for use by Tenant and Tenant's
employees, contractors, agents, customers, and invitees be less than the total
number of parking spaces within the Project multiplied by Tenant's Proportionate
Share percentage specified in Section 1.09 above, and (2) any acts by or
authorized by Landlord specified in this Section 4.03 shall not materially and
unreasonably interfere with the conduct of Tenant's business from the Premises,
except in the case of emergency.
5. ADDITIONAL RENT
5.01 All charges payable by Tenant other than Base Monthly Rent are
called "Additional Rent". Unless this lease provides otherwise, Additional Rent
is to be paid with the next monthly installment of Base Monthly Rent and is
subject to the provisions of 3.03. The term "rent" whenever used in this Lease
means Base Monthly Rent and Additional Rent.
5.02 Operating Costs
A. "Operating Costs" are all costs and expenses of ownership,
operation, maintenance, management, repair and insurance incurred by Landlord
for the Project including, but not limited to the following: all supplies,
materials, labor and equipment, used in or related to the operation and
maintenance of the Common Areas; all utilities, including but not limited to:
water, electricity, gas, heating, lighting, sewer, waste disposal related to the
maintenance or operation of the Common Areas; all air-conditioning and
ventilating costs related to the maintenance or operation of the Project; all
Landlord's costs in managing, maintaining, repairing, operating and insuring the
Project, including, for example, clerical, supervisory, and janitorial staff;
all maintenance, management and service agreements, including but not limited
to, janitorial, security, trash removal related to the maintenance or operation
of the Project; all legal and accounting costs and fees for licenses and permits
related to the ownership and operation of the Project; all insurance premiums
and costs of fire, casualty, and liability coverage, rent abatement and
earthquake insurance and any other type of insurance related to the Entire
Project, including any deductible for a loss attributable to the Premises; all
operation, maintenance and repair costs to the Common Areas, including but not
limited to, sidewalks, walkways, parkways, parking areas, loading and unloading
areas, trash areas, roadways, driveways, corridors, and landscaped area,
including for example, costs of resurfacing and restriping parking areas; all
maintenance and repair costs of building exteriors (including painting, asphalt
repair and replacement, and roof maintenance, repair and replacement), restrooms
used in common by Tenants and signs and directories of the Project; amortization
(along with reasonable financing charges) of capital improvements made to the
Common Areas which may be required by any government authority or which will
improve the operating efficiency of the Project; a reasonable reserve for
repairs and replacement; a five percent (5%) fee for Landlord's supervision of
the Common Areas (five percent (5%) of the total above mentioned costs and
expenses incurred in a calendar year). Operating Costs will not include (1)
depreciation of the Project, (2) lease, mortgage, or similar payments made by
Landlord, (3) Real Project Taxes, or (4) late charges specified in Section 3.03
above.
B. Tenant shall pay to Landlord Tenant's Proportionate Share of the
Operating Costs as indicated in 1.09. If there is a change in the square footage
of either the Project or the Premises during the term of this Lease the
Proportionate Share of the Tenant shall be
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adjusted accordingly. Such payment shall be paid by Tenant with and in addition
to the monthly payment of Base Monthly Rent. Tenant shall, if Landlord so
elects, pay to Landlord on a monthly basis, in advance, the amount which
Landlord reasonably estimates to be Tenant's Proportionate Share of the
Operating Costs. In the event of such election by Landlord, Landlord shall
periodically determine Tenant's share of the actual Operating Costs, and in the
event that the amount which Tenant has paid to Landlord on account of the
estimated Operating Costs is less than his share of such actual Operating Costs,
Tenant shall pay such difference to Landlord on the next rent payment date. In
the event that Tenant has paid to Landlord more than his share of such actual
Operating Costs, the amount of such difference shall be credited against
Tenant's payments of Operating Costs next due or if such period is at the end of
the Lease term the amount of any overpayment shall be promptly refunded to
Tenant.
C. Failure by Landlord to provide Tenant with a statement by April
1st of each year shall not constitute a waiver by Landlord of its right to
collect Tenant's share of Operating Costs or estimates for a particular calendar
year, Landlord's right to charge Tenant for such expenses in subsequent years is
not waived. Upon reasonable written notice to Landlord, Tenant shall have the
right to audit Landlord's books and records with respect to Additional Rent at
Landlord's offices at Tenant's sole cost and expense, and not more frequently
than annually.
5.03 Taxes
A. "Real Project Taxes" are: (i) any fee, license fee, license tax,
business license fee, commercial rental tax, levy, charge, assessment, penalty
or tax imposed by any taxing authority against the Project; (ii) any tax or fee
on Landlord's right to receive, or the receipt of, rent or income from the
Project or against Landlord's business of leasing the Project, (iii) any tax or
charge for fire protection, streets, sidewalks, road maintenance, refuse or
other services provided to the Project by any governmental agency; (iv) any tax
imposed upon this transaction, or based upon a re-assessment of the Project due
to a change in ownership or transfer of all of part or Landlord's interest in
the Project; (v) any charge or fee replacing, substituting for, or in addition
to any tax previously included within the definition of real property tax; and
(vi) the Landlord's cost of any tax protest relating to any of the above. Real
Project Taxes do not, however, include Landlord's federal or state income,
franchise, inheritance or estate taxes.
B. Tenant shall pay to Landlord Tenant's Proportionate Share of the
Real Project Taxes as indicated in 1.09 for Real Project Taxes which accrue
during the Lease term. Such payment shall be paid by Tenant annually upon being
invoiced for such taxes in addition to the monthly payment of Base Monthly Rent.
Tenant shall, if Landlord so elects, pay to Landlord on a monthly basis, in
advance, the amount which Landlord reasonably estimates to be Tenant's
Proportionate Share of the Real Project Taxes. In the event of such election by
Landlord, Landlord shall periodically determine Tenant's share of the actual
Real Project Taxes, and in the event that the amount which Tenant has paid to
Landlord on account of the Real Project Taxes is less than his share of such
actual Real Project Taxes, Tenant shall pay such difference to Landlord on the
next rent payment date. In the event that Tenant has paid to Landlord more than
his share of such actual Real Project Taxes, the amount of such difference shall
be credited against Tenant's payment of Real Project Taxes next due. If the
Lease term is expired then Landlord shall promptly refund any overpayment to
Tenant. Landlord shall exercise commercially reasonable efforts to reduce Real
Project Taxes as determined by Landlord in Landlord's sole and absolute
discretion.
C. Personal Property Taxes: Tenant will pay all taxes charged against
trade fixtures, furnishing, equipment or any other personal property belonging
to Tenant. Tenant will have personal property taxes billed separately from the
Project. If any of Tenant's personal property is taxed with the Project, Tenant
will pay Landlord the taxes for the personal property upon demand by Landlord.
5.04 Based on Tenant's Proportionate Share defined in 1.09, Tenant
agrees to pay as Additional Rent to Landlord its share of any parking charges,
utility surcharges, occupancy taxes, or any other costs directly resulting from
the statutes or regulations, or interpretations thereof, enacted by any
governmental authority in connection with the use or occupancy of the Project or
the parking facilities serving the Project, or any part thereof.
5.05 Landlord by completing this paragraph may elect to have Tenant pay
a monthly estimate of the Additional Rent due from Tenant of 5(cent) per square
foot, i.e, FIVE THOUSAND, THIRTY-TWO AND 40/100 DOLLARS ($5,032.40) per month.
Landlord shall make adjustments to this estimate based upon actual costs and
projected future costs. Landlord shall periodically determine the balance
between actual Additional Rent and Additional Rent paid by Tenant and make
adjustments in accordance with 5.02 and 5.03 above.
7. USE OF PREMISES: QUIET CONDUCT
7.01 The Premises may be used and occupied only for Tenant's Permitted
Use as shown in 1.05 and for no other purpose, without obtaining Landlord's
prior written consent. Tenant will comply with all laws, ordinances, orders and
regulations affecting Tenant's use and occupancy of the Premises. Tenant will
not perform any act or carry on any practices that may injure the Project or the
Premises or be a nuisance or menace, or disturb the quiet enjoyment of other
lessees in the Project including but not limited to equipment which causes
vibration in excess of commercially reasonable standards or is otherwise
damaging to the Premises, or any portion or component thereof, or any other
tenant, use or storage of chemicals other than minimal amounts in the ordinary
course of business and in full compliance with all "Environmental Laws" (as
defined in Section 7.02 below), or heat or noise which is not properly
insulated. Tenant will not cause, maintain or permit any outside storage on or
about the Premises. In addition, Tenant will not allow any condition or thing to
remain on or about the Premises which diminishes the appearance or aesthetic
qualities of the Premises and/or the Project or the surrounding property. The
keeping of a dog or other animal on or about the Premises is expressly
prohibited.
7.02 As used in this section, the term "Hazardous Waste" means:
A. Those substances defined as "hazardous substances", "hazardous
materials", "toxic substances", "regulated substances", or "solid waste" in the
Toxic Substance Control Act, 15 U.S.C. ss. 2601 et. seq., as now existing or
hereafter amended ("TSCA"), the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, 42 U.S.C. ss. 9601 et. seq., as now
existing or hereafter amended ("CERCLA"), the Resource, Conservation and
Recovery Act of 1976, 42 U.S.C. Section 6901 et. seq., as now existing or
hereafter amended ("RCRA"), the Federal Hazardous Substances Act, 15 U.S.C. ss.
1261 et. seq., as now existing or hereafter amended ("FHSA"), the Occupational
Safety and Health Act of 1970, 29 U.S.C. ss. 651 et. seq., as now existing or
hereafter amended ("OSHA"), the Hazardous Materials Transportation Act, 49
U.S.C. ss. 1801 et. seq., as now existing or hereafter amended ("HMTA"), and the
rules and regulations now in effect or promulgated hereafter pursuant to each
law referenced above;
B. Those substances defined as "hazardous waste", "hazardous
material", or "regulated substances" in Nev. Rev. Stat. ch 459, 1989 Nev. Stat.
ch. 598 and 1989 Nev. Stat. ch 363, or in the regulations now existing or
hereafter promulgated pursuant thereto or in the Uniform Fire Code, 1988
edition;
C. Those substances listed in the United States Department of
Transportation table (49 CFR ss. 172.101 and amendments thereto) or by the
Environmental Protection Agency (or any successor agency) as hazardous
substances (40 CFR Part 302 and amendments thereto); and
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D. Such other substances, mixtures, materials and waste which are
regulated under applicable local, state or federal laws, rules, or regulations,
or which are classified as hazardous or toxic under federal, state or local
laws, rules, or regulations (all laws, rules and regulations referenced in
paragraphs (a), (b), (c) and (d) are collectively referred to as "Environmental
Laws").
7.03 Tenant's Covenants. Tenant does not intend to and Tenant will not,
nor will Tenant allow any of Tenant's employees, contractors, agents, visitors,
customers, or invitees during the term of this Lease to manufacture, process,
store, distribute, use, discharge or dispose of any Hazardous Waste in, under or
on the Project, the Common Areas, or any property adjacent thereto, nor will
Tenant allow any other person (including partnerships, corporations and joint
ventures), during the term of this Lease to manufacture, process, store,
distribute, use, discharge or dispose of any hazardous waste in, under, or on
the Premises, except for minimal amounts of Hazardous Waste in the ordinary
course of business and in full compliance with all Environmental Laws.
A. Tenant shall notify Landlord promptly in the event of any spill or
release of Hazardous Waste into, on, or onto the Project regardless of the
source of spill or release, whenever Tenant knows or suspects that such a
release occurred.
B. Tenant will not be involved in operations at or near the Project
which could lead to the imposition on the Tenant or the Landlord of liability or
the creation of a lien on the Project, under the Environmental Laws.
C. Tenant shall, upon twenty-four (24) hour prior notice by Landlord,
permit Landlord or Landlord's agent access to the Project to conduct an
environmental site assessment with respect to the Project.
7.04. Tenant's Indemnity. Tenant for itself and its successors and
assigns undertakes to protect, indemnify, save and defend (by counsel reasonably
acceptable to Landlord) Landlord, its agents, employees, directors, officers,
shareholders, affiliates, consultants, independent contractors, lenders,
partners, and their respective successors and assigns (collectively the
"Indemnitees") harmless from any and all claims, judgments, causes of action,
liabilities, losses, damages, penalties, fines, taxes, costs, and expenses,
including reasonable attorneys' fees, claims, suits and judgments that Landlord
or any other Indemnitee, whether as Landlord or otherwise, may suffer either
during or after the term of this Lease as a result of, or with respect to:
A. The violation affecting the Project by Tenant or Tenant's agents,
employees, invitees, licensees or contractors of any Environmental Law,
including the assertion of any lien thereunder and any suit brought or judgment
rendered regardless of whether the action was commenced by a citizen (as
authorized under the Environmental Laws) or by a government agency;
B. To the extent caused by Tenant or Tenant's agents, employees,
invitees, licensees or contractors, any spill or release of or the presence of
any Hazardous Waste affecting the Project whether or not the same originates or
emanates from the Project or any contiguous real estate, including any loss of
value of the Project as a result of a spill or release of or the presence of any
Hazardous Waste;
C. To the extent caused by Tenant or Tenant's agents, employees,
invitees, licensees or contractors, any other matter affecting the Project
within the jurisdiction of the United States Environmental Protection Agency,
the Nevada State Environmental Commission, the Nevada Department of Conservation
and Natural Resources, or the Nevada Department of Commerce, including costs of
investigations, remedial action, or other response costs whether such costs are
incurred by the United States Government, the State of Nevada, or any
Indemnitee;
D. To the extent caused by Tenant or Tenant's agents, employees,
invitees, licensees or contractors, liability for clean-up costs, fines, damages
or penalties incurred pursuant to the provisions of any applicable Environmental
Law; and
E. To the extent caused by Tenant or Tenant's agents, employees,
invitees, licensees or contractors, liability for personal injury or property
damage arising under any statutory or common-law tort theory, including, without
limitation, damages assessed for the maintenance of a public or private
nuisance, or for the carrying of an abnormally dangerous activity, and response
costs.
Landlord shall promptly provide notice of any claims for which Tenant
is to indemnify Landlord hereunder, and Landlord and Tenant shall reasonably
cooperate in the defense of the claims. Tenant's obligations under this Article
7. shall survive the termination of this Lease.
7.05 Remedial Acts. In the event of any spill or release of or the
presence of any Hazardous Waste affecting the Project, caused by Tenant, its
employees, agents, invitees, licensees, or contractors, whether or not the same
originates or emanates from the Project or any contiguous real estate, and/or if
Tenant shall fail to comply with any of the requirements of any Environmental
Law, Landlord may, upon ten (10) business days notice to Tenant (except in the
case of emergency, for which no notice is required), at its election, but
without obligation so to do, give such notices and/or cause such work to be
performed at the Project and/or take any and all other actions as Landlord shall
deem necessary or advisable in order to remedy said spill or release of
Hazardous Waste or cure said failure of compliance and any amounts paid as a
result thereof, together with interest at the rate equal to the product of the
variable Prime Rate "Prime", plus six percent (6%) per annum as charged by Bank
of America, Nevada; times the amount of such installment amount due, or eighteen
percent (18%) per annum of such installment or the sum of twenty-five dollars
($25.00), whichever is greater, for each month or fractional month transpiring
from the date due until paid.
7.06 Settlement. Landlord upon giving Tenant ten (10) business days
prior notice, shall have the right in good faith to pay, settle or compromise,
or litigate any claim, demand, loss, liability, cost, charge, suit, order,
judgment or adjudication under the belief that it is liable therefor, whether
liable or not, without the consent or approval of Tenant unless Tenant within
said ten (10) business day period shall protest in writing and simultaneously
with such protest deposit with Landlord collateral satisfactory to Landlord
sufficient to pay and satisfy any penalty and/or interest which may accrue as a
result of such protest and any judgment or judgments as may result, together
with attorney's fees and expenses, including, but not limited to, environmental
consultants.
7.07 Landlord's Representations and Indemnity. Landlord shall comply
with all Environmental Laws and shall utilize its reasonable best efforts to
promptly notify Tenant of the violation of any Environmental Law or presence of
any Hazardous Waste in violation of any Environmental Law on the Premises
whenever Landlord knows or suspects of any such violation. Landlord represents
and warrants to Tenant that, as of the date of this Lease, Landlord has received
no written notice from any governmental or administrative entity having
jurisdiction over the Premises notifying Landlord that Hazardous Waste is
present on, in, or under the Premises in violation of any Environmental Law.
Landlord shall indemnify, protect, defend (by counsel reasonably acceptable to
Tenant) and hold harmless Tenant and its partners, directors, officers,
employees, shareholders, lenders, agents, contractors, and each of their
respective successors and assigns, from and against any and all claims,
judgments, causes of action, damages, penalties, fines, taxes, costs,
liabilities, losses and expenses arising at any time during or after the term of
this Lease as a result of (i) a breach of the representation as is set forth in
the immediately preceding sentence of this Section 7.07, or (ii) was authorized
by Landlord or caused by the acts or omissions of Landlord, its employees,
agents, contractors, or predecessors, and was not initially caused by Tenant, or
Tenant's employees, agents, invitees, customers, licensees, or contractors.
Tenant shall promptly provide notice of any claims for which Landlord is to
indemnify Tenant hereunder and Tenant and Landlord shall reasonably cooperate in
the defense of the claims. Landlord's obligations pursuant to the foregoing
indemnity shall survive the termination of this Lease.
8. PARKING
8.01 Tenant and Tenant's customers, suppliers, employees, and invitees
have the non-exclusive right to park in common with other lessees in the parking
facilities as designated by Landlord and as otherwise set forth in this Lease.
Tenant agrees not to overburden the parking facilities and agrees to cooperate
with Landlord and other lessees in the use of the parking facilities. Landlord
reserves the right to, on an equitable basis, assign specific spaces without
charge to Tenant, make changes in the parking layout from time to time, and to
establish reasonable time limits on parking.
9. UTILITIES
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9.01 Tenant will be responsible for and shall pay for all water, gas,
heat, light, power, sewer, electricity, or other services metered, chargeable to
or provided to the Premises separate from and in addition to the costs outlined
in Section 5.02 dealing with the utility costs for Common Area Maintenance.
Landlord reserves the right to install separate meters for any such utility.
9.02 Landlord will not be liable or deemed in default to Tenant nor
will there be any abatement of rent for any interruption or reduction of
utilities or services not caused by any act of Landlord or any act reasonably
beyond Landlord's control. Tenant agrees to comply with energy conservation
programs implemented by Landlord by reason of enacted laws or ordinances.
9.03 Tenant will contract and pay for all telephone and such other
services for the Premises subject to the provisions of 10.03.
10. ALTERATIONS, MECHANIC'S LIENS
10.01 Except for nonstructural changes, alterations, or additions which
do not decrease the value of the Premises, Tenant will not make any alterations
to the Premises without Landlord's prior written consent. Landlord's consent
shall be contingent upon Tenant providing Landlord with the following items or
information, all subject to Landlord's approval which approval shall not be
unreasonably withheld in accordance with the provisions of this Article 10: (i)
Tenant's contractor, (ii) certificates of insurance by Tenant's contractor for
commercial general liability insurance with limits not less than $2,000,000
General Aggregate,$1,000,000 Products/Complete Operations Aggregate,$1,000,000
Personal & Advertising Injury, $1,000,000 Each Occurrence, $50,000 Fire Damage,
$5,000 Medical Expense, $1,000,000 Auto Liability (Combined Single Limit,
including Hired/Non-Owned Auto Liability), Workers Compensation, including
Employer's Liability, as required by state statute endorsed to show Landlord as
an additional insured and for worker's compensation as required and (iii)
detailed plans and specifications for such work. Tenant agrees that it will have
its contractor execute a waiver of mechanic's lien and that Tenant will remove
any mechanic's lien placed against the Project or provide a bond or other
collateral in an amount and on such terms as are acceptable to Landlord in
Landlord's reasonable discretion (it being agreed that Landlord may require
removal of and Tenant shall immediately remove any such liens if so required by
Landlord's lenders or otherwise to finance or refinance the Project or Premises)
within ten (10) days of receipt of notice of lien. In addition, before
alterations may begin, valid building permits or other permits or licenses
required must be furnished to Landlord, and, once the alterations begin, Tenant
will diligently and continuously pursue their completion. At Landlord's option,
any alterations may become part of the realty and belong to Landlord. As a
further condition to giving such consent, Landlord may require Tenant to provide
Landlord, at Tenant's sole cost and expense, a payment and performance bond in
form acceptable to Landlord, in a principal amount not less than one and
one-half times the estimated costs of such alterations, to ensure Landlord
against any liability for mechanic's and materialmen's liens and to ensure
completion of work. Tenant, at Landlord's option, shall at Tenant's expense
remove all alterations and repair all damage to the Premises.
10.02 Notwithstanding anything in 10.01, Tenant may, with written
consent of Landlord, install trade fixtures, equipment, and machinery in
conformance with the ordinances of the applicable city and county, and they may
be removed upon termination of its Lease provided the Premises are not damaged
by their removal.
10.03 Any private telephone systems and/or other related
telecommunications equipment and lines must be installed within Tenant's
Premises and, if requested in writing by Landlord, upon termination of this
Lease removed and the Premises restored to the same condition as before such
installation.
10.04 Tenant will pay all costs for alterations and will keep the
Premises, the Project and the underlying property free from any liens arising
out of work performed for, materials furnished to or obligation incurred by
Tenant or otherwise provide a bond or other collateral in an amount and on such
terms as are acceptable to Landlord in Landlord's reasonable discretion (it
being agreed that Landlord may require removal of and Tenant shall remove any
such liens if so required by Landlord's lenders or otherwise to finance or
refinance the Project or Premises).
10.05 Landlord will have the right to construct or permit construction
of tenant improvements in or about the Project for existing and new Tenants and
to alter any public areas in and around the Project. Notwithstanding anything
which may be contained in this Lease, Tenant understands this right of Landlord
and agrees that such construction will not be deemed to constitute a breach of
this Lease by Landlord and Tenant waives any such claim which it might have
arising from such construction. Landlord agrees to conduct or permit such
construction so that such construction shall not materially and unreasonably
interfere with Tenant's ability to conduct its business on the Premises to the
extent reasonably possible.
11. FIRE INSURANCE: HAZARDS AND LIABILITY INSURANCE
11.01 Except as expressly provided as Tenant's Permitted Use, or as
otherwise consented to by Landlord in writing, Tenant shall not do or permit
anything to be done within or about the Premises which Tenant knows or
reasonably believes will increase the existing rate of insurance on the Project
and shall, at its sole cost and expense, comply with any requirements,
pertaining to the Premises, of any insurance organization insuring the Project
and Project-related apparatus. Upon prompt notice of such increase, Tenant
agrees to pay to Landlord, as Additional Rent, any increases in premiums on
policies resulting from Tenant's Permitted Use or other use consented to by
Landlord which increases Landlord's premiums or requires extended coverage by
Landlord to insure the Premises. Landlord agrees to provide Tenant with a
reasonable opportunity to cure such condition.
11.02 Tenant, at all times during the term of this Lease and at
Tenant's sole expense, will maintain a policy of standard fire and extended
coverage insurance with "all risk" coverage on all Tenant's improvements and
alterations in or about the Premises and on all personal property and equipment
to the extent of at least ninety percent (90%) of their full replacement value.
The proceeds from this policy will be used by Tenant for the replacement of
personal property and equipment and the restoration of Tenant's improvements
and/or alterations. This policy will contain an express waiver, in favor of
Landlord, of any right of subrogation by the insurer.
11.03 Tenant, at all times during the term on this Lease and at
Tenant's sole expense, will maintain a policy of commercial general liability
coverage with limits of not less than $2,000,000 combined single limit for
bodily injury and property damage insuring against all liability of Tenant and
its authorized representatives arising out of or in connection with Tenant's use
or occupancy of the Premises.
11.04 All insurance will name Landlord and/or Landlord's designated
partners and affiliates as an additional insured and will include an express
waiver of subrogation by the insurer in favor of Landlord and Tenant and will
release Landlord from any claims for damage to any person, to the Premises, and
to the Project, and to Tenant's personal property, equipment, improvements and
alterations in or on the Premises of the Project, caused by or resulting from
risks which are to be insured against by Tenant under this Lease. All insurance
required to be provided by Tenant under this Lease will (a) be issued by an
insurance company authorized to do business in the state in which the Premises
are located and which has and maintains a rating of A/X in the Best's Insurance
Reports or the equivalent, (b) be primary and noncontributing with any insurance
carried by Landlord, and (c) contain an endorsement requiring at least thirty
(30) days prior written notice of cancellation to Landlord before cancellation
or change in coverage, scope or limit of any policy. Tenant will deliver a
certificate of insurance or a copy of the policy to Landlord within thirty (30)
days of execution of this Lease and will provide evidence of renewed insurance
coverage at each anniversary, and prior to the expiration of any current
policies; however, in no event will Tenant be allowed to occupy the Premises
before providing adequate and acceptable proof of insurance as stated above.
Tenant's failure to provide evidence of this coverage to Landlord within ten
(10) business days of notice from Landlord, may, in Landlord's sole discretion,
constitute a default under this Lease.
12. INDEMNIFICATION AND WAIVER OF CLAIMS
12.01 Except as caused by the negligence or intentional misconduct of
Landlord, its employees, agents, visitors, invitees, licenses, or contractors,
Tenant waives all claims against Landlord for damage to any property in or about
the Premises and for injury to any persons, including death resulting therefrom,
regardless of cause or time of occurrence. Tenant will defend (with counsel
reasonably acceptable to Landlord), indemnify and hold Landlord harmless from
and against any and all claims, actions, proceedings, expenses, damages and
liabilities, including attorney's fees, arising out of, connected with, or
resulting from any use of the Premises by Tenant, its employees, agents,
visitors
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or licensees, including, without limitation, any failure of Tenant to comply
fully with all of the terms and conditions of this Lease except for any damage
or injury which is the result of the negligence or intentional misconduct or
omission by Landlord, its employees, agents, visitors, licensees or contractors.
Landlord shall give Tenant prompt notice of any claim for which Tenant is to
indemnify, defend, and hold harmless Landlord hereunder and Landlord shall
reasonably cooperate with Tenant.
13. REPAIRS
13.01 Tenant shall, at its sole expense, keep and maintain the Premises
and every part thereof (excepting common use equipment, which Landlord agrees to
repair or replace pursuant to Section 5.02 unless damages are due to the neglect
or intentional acts of Tenant or its agents, employees, visitors, or licensees),
including interior windows, skylights, doors, plate glass, any store fronts and
the interior of the Premises, in good and sanitary order, condition and repair.
Tenant will, also, at its sole cost keep and maintain all utilities, fixtures,
plumbing and mechanical equipment used by Tenant in good order and repair and
furnish all expendables (light bulbs, paper goods, soaps, etc.) used in the
Premises. The standard for comparison and need of repair will be the condition
of the Premises at the time of commencement of this Lease and all repairs will
be made by a licensed and bonded contractor approved by Landlord.
13.02 Except as specified in 13.01, Tenant will not make repairs to the
Premises at the cost of Landlord whether by deductions of rent or otherwise, or
vacate the Premises or terminate the Lease if repairs are not made. If during
the Term, any alteration, addition or change to the Premises is required by
legal authorities, Tenant, at its sole expense, shall promptly make the same.
Landlord reserves the right to make any such repairs not made or maintained in
good condition by Tenant and Tenant shall reimburse Landlord for all such costs
upon demand.
13.03 If repairs deemed necessary by Landlord or any government
authority are not made by Tenant within the prescribed time frame as reasonably
requested in writing, Tenant shall be in default of this Lease.
13.04 Tenant shall, at its own expense, within thirty days of lease
commencement, contract with a vendor acceptable to Landlord for the maintenance
service of the HVAC which will be furnished to the Landlord upon request. If
Tenant fails to obtain and maintain such a maintenance service contract Landlord
shall have the right to obtain such a maintenance service contract at the
expense of Tenant.
14. AUCTIONS, SIGNS, AND LANDSCAPING
14.01 Tenant will not conduct or permit to be conducted any sale by
auction on the Premises. Landlord will have the right to control landscaping and
approve the placement, size, and quality of signs pursuant to Exhibit "G", "Sign
Criteria". Tenant will not make alterations or additions to the landscaping and
will not place any signs nor allow the placement of any signs, which are visible
from the outside, on or about any building of the Project, nor in any landscape
area, without the prior written consent of Landlord, which consent shall not be
unreasonably withheld or delayed. Any signs not in conformity with this Lease or
in accordance with the provisions of Exhibit "G" may be removed by Landlord at
Tenant's expense.
15. ENTRY BY LANDLORD
15.01 Tenant will permit Landlord and Landlord's agents to enter the
Premises at all reasonable times and upon reasonable notice (except in the case
of emergency) for the purpose of inspecting the same, or for the purpose of
maintaining the Project, or for the purpose of making repairs, alterations or
additions to any portion of the Project, including the erection and maintenance
of such scaffolding, canopies, fences and props as may be required, or for the
purpose of posting notices of nonresponsibility for alterations, additions or
repairs , or for the purpose of showing the Premises to prospective tenants
during the last six months of the Lease Term, or placing upon the Project any
usual or ordinary "for sale" signs, without any rebate of rents and without any
liability to Tenant for any loss of occupation or quiet enjoyment of the
Premises thereby occasioned. Tenant will permit Landlord at any time within
sixty (60) days prior to the expiration of this Lease, to place upon the
Premises any usual or ordinary "to let" or "to lease" signs. Landlord retains
the right to charge Tenant for restoring any altered doors to their condition
prior to the installation of the new or additional locks.
16. ABANDONMENT
16.01 Tenant will not vacate or abandon the Premises, which shall be
deemed to occur any time during the Lease Term if Tenant does not conduct
business for a period of fifteen (15) consecutive days and/or leaves the
Premises unoccupied for any period of time. If Tenant abandons, vacates or
surrenders the Premises, or is dispossessed by process of law, or otherwise, any
personal property belonging to Tenant left in or about the Premises will, at the
option of Landlord be deemed abandoned and may be disposed of by Landlord in the
manner provided for by the laws of the state in which the Premises are located.
17. DESTRUCTION
17.01 In the case of destruction of more than fifty percent (50%) of
the Premises, or any portion thereof substantially interfering with Tenant's use
of the Premises, whether by fire or other casualty, not caused by the fault or
negligence of Tenant, its agents, employees, servants, contractors, subtenants,
licensees, customers or business invitees, this Lease shall terminate except as
herein provided. If Landlord notifies Tenant in writing within forty-five (45)
days of such destruction of Landlord's election to repair said damage, and if
Landlord proceeds to and does repair such damage within One Hundred Eighty (180)
days of such damage, this Lease shall not terminate, but shall continue in full
force and effect, except that Tenant shall be entitled to a reduction in the
minimum rent in an amount equal to that proportion of the minimum rent which the
number of square feet of floor space in the unusable portion bears to the total
number of square feet of floor space in the Premises. Said reduction shall be
prorated so that the rent shall only be reduced for those days any given area is
actually unusable. The time of completion of repair of such damage shall be
extended for, delays caused by labor disputes, civil commotion, war, warlike
operations, invasion, rebellion, hostilities, military or usurped power,
sabotage, governmental regulations or control, fire or other casualty, inability
to obtain any materials or services, acts of God and other causes beyond
Landlord's control. If this Lease is terminated pursuant to this Section 17 and
if Tenant is not in default hereunder, Rent shall be prorated as of the date of
termination, any security deposited with Landlord shall be returned to Tenant,
less any reasonable offsets and all rights and obligations hereunder shall cease
and terminate.
17.02. Notwithstanding the foregoing provisions, in the event the
Premises, or any portion thereof, shall be damaged by fire or other casualty
caused by the fault or negligence of Tenant, its agents, employees, servants,
contractors, subtenants, licensees, customers or business invitees, then,
without prejudice to any other rights and remedies of Landlord, this Lease shall
not terminate, the damage shall be repaired at Tenant's cost, and there shall be
no apportionment or abatement of any rent.
17.03. In the event of any damage not limited to, or not including, the
Premises, such that the building of which the Premises is a part is damaged to
the extent of twenty-five (25%) percent or more of the cost of replacement, or
the buildings (taken in the aggregate) of the Project owned by Landlord shall be
damaged to the extent of more than twenty-five (25%) of the aggregate cost of
replacement, Landlord may elect to terminate this Lease upon giving notice of
such election in writing to Tenant within ninety (90) days after the occurrence
of the event causing the damage.
17.04. The provisions of this Section 17 with respect to Landlord shall
be limited to such repair as is necessary to place the Premises in the condition
specified for Landlord's work by Exhibit B (if applicable) and when placed in
such condition the Leased Property shall be deemed restored and rendered
tenantable promptly following which time Tenant, at Tenant's expense shall
perform Tenant's work required by Exhibit B (if applicable) unless such
destruction was caused by the negligence or intentional misconduct of Landlord,
or Landlord's employees, agents, visitors, contractors, invitees, or licenses,
and Tenant shall also repair or replace its stock in trade, fixtures, furniture,
furnishings, floor coverings and equipment, and if Tenant has closed, Tenant
shall promptly reopen for business.
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17.05. All insurance proceeds payable under any fire, and/or rental
insurance shall be payable solely to Landlord and Tenant shall have no interest
therein. Tenant shall in no case be entitled to compensation for damages on
account of any annoyance or inconvenience in making repairs under any provision
of this Lease. Except to the extent provided for in this Section 17, neither the
rent payable by Tenant nor any of Tenant's other obligations under any provision
of this Lease shall be affected by any damage to or destruction of the Premises
or any portion thereof by any cause whatsoever.
18. ASSIGNMENT, SUBLETTING AND TRANSFERS OF OWNERSHIP
18.01 Except for a "Permitted Assignment," as defined in Section 18.02
below, Tenant will not, without Landlord's prior written consent, assign,
sublease sell, mortgage, encumber, convey or otherwise transfer all or any part
of Tenant's leasehold estate, or permit the Premises to be occupied by anyone
other than Tenant and Tenant's employees or sublet the Premises or any portion
thereof (collectively called "Transfer"). Tenant must supply Landlord with any
and all documents deemed necessary by Landlord to evaluate any proposed Transfer
and with respect to a Permitted Assignment at least sixty (60) days in advance
of Tenant's proposed Transfer date or the date of a Permitted Assignment.
18.02 Except for a "Permitted Assignment," as defined hereinbelow,
Landlord need not consent to any Transfer for reasons including, but not limited
to, whether or not: (a) in the reasonable judgment of Landlord the transferee is
of a character or is engaged in a business which is not in keeping with the
standard of Landlord for the Project; (b) in the reasonable judgment of Landlord
any purpose for which the transferee intends to use the Premises is not in
keeping with the standards of Landlord for the Project; provided in no event may
any purpose for which transferee intends to use the Premises be in violation of
this Lease; (c) the portion of the Premises subject to the transfer is not
regular in shape with appropriate means of entering and exiting, including
adherence to any local, county or other governmental codes, or is not otherwise
suitable for the normal purposes associated with such a Transfer; or (d) Tenant
is in default under this Lease or any other Lease with Landlord. Notwithstanding
the foregoing provisions of this Section 18.02, and provided that Tenant
complies with all other provisions of this Article 18, Landlord hereby consents
to the assignment of the Lease to MicroAge, Inc., a Delaware corporation, or any
wholly-owned subsidiary corporation of MicroAge, Inc. (a "Permitted
Assignment"). No Permitted Assignment shall release or otherwise affect Tenant's
or any guarantor's obligations under this Lease, or constitute an express or
implied consent to any other Transfer of all or any part of Tenant's leasehold
estate, or the occupation by anyone other than Tenant or Tenant's employees.
18.03 In the event Landlord consents to a Transfer or in the event of a
Permitted Assignment, Tenant will pay Landlord fifty percent (50%) of the
excess, if any, of the rent and other charges reserved in the Transfer or
Permitted Assignment over the allocable portion of the rent and other charges
hereunder for that portion of the Premises subject to the Transfer or Permitted
Assignment. For the purpose of this section, the rent reserved in the Transfer
will be deemed to include any lump sum payment or other consideration given to
Tenant in consideration for the Transfer or Permitted Assignment. Tenant will
pay or cause the transferee to pay to Landlord this additional rent together
with the monthly installments of rent due.
18.04 Any consent to any Transfer which may be given by Landlord, or
any Permitted Assignment, or the acceptance of any rent, charges or other
consideration by Landlord from Tenant or any third party, will not constitute a
waiver by Landlord of the provisions of this Lease or a release of Tenant from
the full performance by it of the covenants stated herein; and any consent given
by Landlord to any Transfer, or any Permitted Assignment, will not relieve
Tenant (or any transferee of Tenant) from the above requirements for obtaining
the written consent of Landlord to any subsequent Transfer.
18.05 If a default under this Lease should occur while the Premises or
any part of the Premises are Transferred, assigned, sublet or otherwise
transferred (including, without limitation, a Permitted Assignment), Landlord,
in addition to any other remedies provided for within this Lease or by law, may
at its option collect directly from the transferee all rent or other
consideration becoming due to Tenant under the Transfer or Permitted Assignment
and apply these monies against any sums due to Landlord by Tenant; and Tenant
authorizes and directs any transferee to make payments of rent or other
consideration direct to Landlord upon receipt of notice from Landlord. No direct
collection by Landlord from any transferee should be construed to constitute a
novation or a release of Tenant or any guarantor of Tenant from the further
performance of its obligations in connection with this Lease.
18.06 If Tenant is a corporation or a partnership, the issuances of any
additional stock or equity interest and/or the transfer, assignment or
hypothecation of any stock or interest in such corporation or partnership in the
aggregate in excess of Twenty-five percent (25%) of such interests, as the same
may be constituted as of the date of this Lease, whether directly or indirectly,
shall be deemed to be a Transfer within the meaning of this Section 18.
Notwithstanding the foregoing, Tenant may issue additional stock and/or
transfer, assign, or hypothecate all or any portion of Tenant's stock, as the
same may be constituted as of the date of this Lease, whether directly or
indirectly, to MicroAge, Inc. or any wholly owned subsidiary of MicroAge, Inc.
and the same shall not constitute a Transfer within the meaning of this Article
18. In the event of any such stock issuance or transfer, the same shall not
constitute consent by Landlord to any further stock issuance or transfer, nor
shall it affect this Lease or any of Tenant's or any guarantor's obligations
hereunder.
18.07 In the event Tenant requests Landlord's consent to an Assignment,
Sub-Let or Transfer of Tenant's interest in the leased Premises or in the case
of a Permitted Assignment, Tenant agrees to pay Landlord all reasonable
attorney's fees incurred by Landlord for any legal services for document review
of any and all documents deemed necessary by Landlord and Tenant to Assign,
Sub-let or Transfer Tenant's interest in the leased Premises.
19. BREACH BY TENANT
19.01 Tenant will be in breach of this Lease if at any time during the
term of this Lease (and regardless of the pendency of any bankruptcy,
reorganization, receivership, insolvency or other proceedings in law, in equity
or before any administrative tribunal which have or might have the effect of
preventing Tenant from complying with the terms of this Lease):
A. Tenant fails to make payment of any installment of Base Monthly
Rent, Additional Rent, or of any other sum herein specified to be paid by Tenant
within ten (10) days of the date such sum was due under this Lease; and after
three (3) days following notice from Landlord of such breach; or
B. Tenant fails to observe or perform any of its other covenants,
agreements or obligations hereunder, and such failure is not cured within ten
(10) business days after Landlord's written notice to Tenant of such failure;
provided, however, that if the nature of Tenant's obligation is such that more
than ten (10) business days are required for performance, then Tenant will not
be in breach if Tenant commences performance within such 10 business day period
and thereafter diligently prosecutes the same to completion; or
C. Tenant, Tenant's assignee, subtenant, guarantor, or occupant of
the Premises becomes insolvent, makes a transfer in fraud of its creditors,
makes a transfer for the benefit of its creditors, is the subject of a
bankruptcy petition, is adjudged bankrupt or insolvent in proceedings filed
against Tenant, a receiver, trustee, or custodian is appointed for all or
substantially all of Tenant's assets, fails to pay its debts as they become due,
convenes a meeting of all or a portion of its creditors, or performs any acts of
bankruptcy or insolvency, including the selling of its assets to pay creditors;
or
D. Tenant has abandoned the Premises as defined in paragraph 16
above.
20. REMEDIES OF LANDLORD
20.01 Nothing contained herein shall constitute a waiver of Landlord's
right to recover damages by reason of Landlord's efforts to mitigate the damage
to it by Tenant's default; nor shall anything in this Section adversely affect
Landlord's right, as in this Lease elsewhere provided, to indemnification
against liability for injury or damages to persons or property occurring prior
to a termination of this Lease.
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20.02 All cure periods provided herein shall run concurrently with any
periods provided by law.
20.03 In the event of default, as designated herein above, in addition
to any other rights or remedies provided for herein or at law or in equity,
Landlord, at its sole option, shall have the following rights:
A. The right to declare the term of this Lease ended and reenter the
Premises and take possession thereof, and to terminate all of the rights of
Tenant in and to the Premises.
B. The right, without declaring the term of this Lease ended, to
reenter the Premises and to occupy the same, or any portion there of, for and on
account of the Tenant as hereinafter provided, and Tenant shall be liable for
and pay to Landlord on demand all such expenses as Landlord may have paid,
assumed or incurred in recovering possession of the Premises, including
reasonable costs, expenses, attorney's fees and expenditures placing the same in
good order, or preparing or altering the same for reletting, and all other
reasonable expenses, commissions and charges paid by the Landlord in connection
with reletting the Premises. Any such reletting may be for the remainder of the
term of this Lease or for a longer or shorter period. Such reletting shall be
for such rent and on such other terms and conditions as Landlord, in its sole
discretion, deems appropriate. Landlord may execute any lease made pursuant to
the terms hereof either in the Landlord's own name or in the name of Tenant or
assume Tenant's interest in any existing subleases to any tenant of the
Premises, as Landlord may see fit, and Tenant shall have no right or authority
whatsoever to collect any rent from such tenants, subtenants, of the Premises.
In any case, and whether or not the Premises or any part thereof is relet,
Tenant, until the end of the Lease term shall be liable to Landlord for an
amount equal to the amount due as Rent hereunder, less net proceeds, if any of
any reletting effected for the account of Tenant. Landlord reserves the right to
bring such actions for the recovery of any deficits remaining unpaid by the
Tenant to the Landlord hereunder as Landlord may deem advisable from time to
time without being obligated to await the end of the term of the Lease.
Commencement of maintenance of one or more actions by the Landlord in this
connection shall not bar the Landlord from bringing any subsequent actions for
further accruals. In no event shall Tenant be entitled to any excess rent
received by Landlord over and above that which Tenant is obligated to pay
hereunder; or
C. The right, even though it may have relet all or any portion of the
Premises in accordance with the provisions of subsection B. above, to thereafter
at any time elect to terminate this Lease for such previous default on the part
of the Tenant, and to terminate all the rights of Tenant in and to the Premises.
20.04 Pursuant to the rights of re-entry provided above, Landlord may
remove all persons from the Premises and may, but shall not be obligated to,
remove all property therefrom, and may, but shall not be obligated to, enforce
any rights Landlord may have against said property or store the same in any
public or private warehouse or elsewhere at the cost and for the account of
Tenant or the owner or owners thereof. Tenant agrees to hold Landlord free and
harmless from any liability whatsoever for the removal and/or storage of any
such property, whether of Tenant or any third party whomsoever. Such action by
the Landlord shall not be deemed to have terminated this Lease.
20.05 If Tenant breaches this Lease and abandons the Premises before
the end of the term, or if its right of possession is terminated by Landlord
because of Tenant's breach of this Lease, then this Lease may be terminated by
Landlord at its option. On such Termination Landlord may recover from Tenant, in
addition to the remedies permitted at law:
A. The worth, at the time of the award, of the unpaid Base Monthly
Rents and Additional Rents which had been earned at the time this Lease is
terminated.
B. The worth, at the time of the award, of the amount by which the
unpaid Base Monthly Rents and Additional Rents which would have been earned
after the date of termination of this Lease until the time of award exceeds the
amount of the loss of rents that Tenant proves could be reasonably avoided;
C. The worth, at the time of the award, of the amount by which the
unpaid Base Monthly Rent and Additional Rents for the balance of the Lease Term
after the time of award exceeds the amount of such rental loss for such period
as the Tenant proves could have been reasonably avoided; and
D. Any other amount, and court costs, necessary to compensate
Landlord for all detriment proximately caused by Tenant's breach of its
obligations under this Lease, or which in the ordinary course of events would be
likely to result therefrom. The detriment proximately caused by Tenant's breach
will include, without limitation, (i) reasonable expenses for cleaning,
repairing or restoring the Premises, (ii) reasonable expenses for altering,
remodeling or otherwise improving the Premises for the purpose of reletting the
Premises, (iii) reasonable brokers' fees and commissions, and advertising costs
for the purpose of reletting the Premises, and such other expenses as may be
required by a new tenant, , (iv) costs of carrying the Premises such as taxes,
insurance premiums, utilities and security precautions, (v) expenses of retaking
possession of the Premises, (vi) reasonable attorney's fees and court costs,
(vii) any unearned brokerage commissions paid in connection with this Lease,
(viii) reimbursement of any previously waived Base Rent, Additional Rent, free
rent or reduced rental rate, and (ix) any concession made or paid by Landlord to
the benefit of Tenant in consideration of this Lease including, but not limited
to, any moving allowances, contributions or payments by Landlord for tenant
improvements or build-out allowances or assumptions by Landlord of any of the
Tenant's previous lease obligations.
20.06 In any action brought by either party to enforce any of its
rights under or arising from this Lease, the prevailing party shall be entitled
to receive its costs and legal expenses including reasonable attorneys' fees,
whether or not such action is prosecuted to judgment.
20.07 The waiver by either party of any breach or default of the other
party hereunder shall not be a waiver of any preceding or subsequent breach of
the same or any other term. Acceptance of any Rent payment shall not be
construed to be a waiver of the Landlord of any preceding breach of the Tenant.
20.08 All past due amounts owed by Tenant or Landlord under the terms
of this Lease shall bear interest at twelve percent (12%) per annum unless
otherwise stated.
21. SURRENDER OF LEASE NOT MERGER
21.01 The voluntary or other surrender of this Lease by Tenant, or
mutual cancellation thereof, will not work a merger and will, at the option of
Landlord, terminate all or any existing transfers, or may, at the option of
Landlord, operate as an assignment to it of any or all of such transfers.
22. ATTORNEYS FEES/COLLECTION CHARGES
22.01 In the event of any legal action or proceeding between the
parties hereto, reasonable attorneys' fees and expenses of the prevailing party
in any such action or proceeding will be added to the judgment therein. Should
Landlord be named as defendant in any suit brought against Tenant in connection
with or arising out of Tenant's occupancy hereunder and not caused by Landlord's
negligence or intentional misconduct, Tenant will pay to Landlord its costs and
expenses incurred in such suit, including reasonable attorney's fees. Landlord
shall promptly notify Tenant of any claim or expense for which Tenant is to
indemnify Landlord pursuant to the preceding sentence and Landlord shall
reasonably cooperate with Tenant. Tenant's obligations hereunder shall survive
the termination of this Lease.
22.02 If Landlord utilizes the services of any attorney at law for the
purpose of collecting any rent due and unpaid by Tenant after receipt of five
(5) days written notice to Tenant of such nonpayment of rent or in connection
with any other breach of this Lease by Tenant, Tenant agrees to pay Landlord
reasonable attorneys' fees as determined by Landlord for such services,
regardless of the fact that no legal action may be commenced or filed by
Landlord
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23. CONDEMNATION
23.01 If fifty percent (50%) or more of the square footage of the
Premises or in the event any portion of the Premises substantially interfering
with Tenant's use thereof is taken for any public or quasi-public purpose by any
lawful government power or authority, by exercise of the right of appropriation,
reverse condemnation, condemnation or eminent domain, or sold to prevent such
taking, and if the remaining portion of the Premises will be reasonably adequate
for the operation of Tenant's business after Landlord completes such repairs or
alterations as Landlord elects to make, either Tenant or the Landlord may at its
option terminate this Lease by notifying the other party hereto of such election
in writing within twenty (20) days after such taking. Tenant will not because of
such taking assert any claim against the Landlord or the taking authority for
any compensation because of such taking, and Landlord will be entitled to
receive the entire amount of any award without deduction for any estate of
interest of Tenant. If less than twenty-five percent (25%) of the Premises is
taken or if the taking does not substantially interfere with Tenant's use of the
Premises, Landlord at its option may terminate this Lease. If Landlord does not
so elect, Landlord will promptly proceed to restore the Premises to
substantially its same condition prior to such partial taking, allowing for any
reasonable effects of such taking, and a proportionate allowance based on the
loss of square footage will be made to Tenant for the rent corresponding to the
time during which, and to the part of the Premises, which, Tenant is deprived on
account of such taking and restoration.
24. RULES AND REGULATIONS
24.01 Tenant will faithfully observe and comply with any reasonable
Rules and Regulations promulgated by Landlord for the Project and Landlord
reserves the right to modify and amend them as it deems necessary. Landlord will
not be responsible to Tenant for the nonperformance by any other Tenant or
occupant of the Project of any of said Rules and Regulations.
24.02 In the event that Tenant fails to cure any violations of such
Rules and Regulations following ten (10) business days written notice by
Landlord, such failure to cure shall be deemed a material breach of this Lease
by Tenant.
25. ESTOPPEL CERTIFICATE
25.01 Tenant will execute and deliver to Landlord, within ten (10)
business days of Landlord's written demand, a statement in writing certifying
that this Lease is in full force and effect, and that the Base Monthly Rent and
Additional Rent payable hereunder is unmodified and in full force and effect
(or, if modified, stating the nature of such modification) and the date to which
rent and other charges are paid, if any, and acknowledging that there are not,
to Tenant's knowledge, any uncured defaults on the part of Landlord hereunder or
specifying such defaults if they are claimed and such other matters as Landlord
may reasonably request and which do not diminish Tenant's rights under this
Lease. Any such statement may be conclusively relied upon by any prospective
purchaser or encumbrancer of the Premises. Tenant's failure to deliver such
statement within such time shall be conclusive upon Tenant that (1) this Lease
is in full force and effect, without modification except as may be represented
by Landlord; (2) to Tenant's knowledge there are no uncured defaults in
Landlord's performance, and (3) not more than one (1) month's rents has been
paid in advance.
26. SALE BY LANDLORD
26.01 Provided that any successor agrees in writing to be bound as
Landlord under this Lease, in the event of a sale or conveyance by Landlord of
the Project the same shall operate to release Landlord from any liability upon
any of the covenants or conditions, expressed or implied, herein contained in
favor of Tenant which accrue or occur, or for which Landlord may become
obligated, subsequent to such sale or transfer, and in such event Tenant agrees
to look solely to the responsibility of the successor in interest of Landlord in
and to this Lease. This Lease will not be affected by any such sale, and,
provided that any successor agrees in writing to be bound as Landlord under this
Lease, Tenant agrees to attorn to the purchaser or assignee.
27. NOTICES
27.01 All notices, statements, demands, requests, consents, approvals,
authorizations, offers, agreements, appointments, or designations under this
Lease by either party to the other will be in writing and will be considered
sufficiently given and served upon the other party (1) five (5) days after
mailing by certified or registered mail, return receipt requested, postage
prepaid, (2) upon personal delivery by any legitimate third party, or (3) upon
receipt from a national overnight delivery service for next day delivery, and
addressed as indicated in Sections 1.03 and 1.04.
28. WAIVER
28.01 The failure of either party to insist in any one or more cases
upon the strict performance of any term, covenant or condition of the Lease will
not be construed as a waiver of a subsequent breach of the same or any other
covenant, term or condition; nor shall any delay or omission by the other party
to seek a remedy for any breach of this Lease be deemed a waiver by such party
of its remedies or rights with respect to such a breach.
29. HOLDOVER
29.01 If Tenant remains in the Premises after the Lease Expiration Date
with the consent of the Landlord, and has not given prior written notice to
Landlord, such continuance of possession by Tenant will be deemed to be a
month-to-month tenancy at the sufferance of Landlord terminable on thirty (30)
day notice at any time by either party. All provisions of this Lease, except
those pertaining to term and rent, will apply to the month-to-month tenancy.
Tenant will pay a new Base Monthly Rent in an amount equal to 125% of the Base
Monthly Rent payable for the last full calendar month during the regular term of
this Lease (including any exercised option term(s)) for the first (1st) sixty
(60) days after the Lease Expiration Date, and 150% of the Base Monthly Rent
payable for the last full calendar month during the regular term of this Lease
(including any exercised option term(s)) thereafter.
30. DEFAULT OF LANDLORD/LIMITATION OF LIABILITY
30.01 Landlord Default; Tenant Set-Off Rights: In the event of any
default by Landlord hereunder, Tenant agrees to give notice of such default, by
registered mail, to Landlord at Landlord's Notice Address as stated in 1.04 and
to offer Landlord ten (10) business days to cure such default; provided,
however, that if the nature of Landlord's obligation is such that more than ten
(10) business days are required for performance, then Landlord will not be in
breach if Landlord commences performance within such ten (10) business day
period and thereafter diligently prosecutes the same to completion.
Notwithstanding any of the other provisions of this Lease, Tenant shall have the
right to set off up to a maximum cumulative amount during the term of this Lease
of Ten Thousand Dollars ($10,000) of Tenant's expenses incurred as a result of
the failure by Landlord to cure any default of Landlord in accordance with the
provisions of this Section 30.01. Prior to Tenant's performing on Landlord's
behalf the obligations hereunder and exercising Tenant's set-off rights, Tenant
shall provide Landlord with an additional ten (10) business day notice of the
exercise of such rights and, if Landlord objects in writing to such exercise
within the foregoing ten (10) business day period, the parties agree to submit
the issue to binding arbitration in Reno, Nevada, in accordance with the rules
of the American Arbitration Association then in effect. The costs of the
arbitration shall be borne equally by Landlord and Tenant. In the event Tenant
has provided Landlord with the required notices specified above, and Landlord
has not timely commenced actions and diligently prosecutes to cure the default
or notified Tenant of Landlord's objection or difference of opinion as to the
nature of Landlord's default within the time period specified above, then, and
only then, may Tenant perform such obligations on Landlord's behalf and at
Landlord's cost, and set off against the next payment(s) of rent due under this
Lease, up to a maximum cumulative amount of Ten Thousand Dollars ($10,000)
during the term of this Lease of such amount in accordance with the provisions
of this Section 30.01. Tenant shall provide Landlord with appropriate
substantiation of the costs incurred by Tenant and any work performed by Tenant
shall be performed by a licensed contractor subject to the requirements of
Section 10.01 above.
30.02 Limitation of Liability. In the event of any actual or alleged
failure, breach or default hereunder by Landlord, Tenant's sole and exclusive
remedy will be against Landlord's interest in the Project, and Landlord, its
directors, officers, employees and any partner of Landlord will not be sued, be
subject to service or process, or have a judgement obtained against him in
connection with any alleged breach
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or default, and no writ of execution will be levied against the assets of any
partner, shareholder or officer of Landlord. The covenants and agreements are
enforceable by Landlord and also by any partner, shareholder or officer of
Landlord.
31. SUBORDINATION
31.01 Without the necessity of any additional document being executed
by Tenant for the purpose of effecting a subordination, and at the election of
Landlord or any mortgagee with a lien on the Project or any ground lessor with
respect to the Project, this Lease will be subject and subordinate at all times
to (a) all ground leases or underlying leases which may now exist or hereafter
be executed affecting the Project, and (b) the lien of any mortgage or deed of
trust which may now exist or hereafter be executed in any amount for which the
Project, ground leases or underlying leases, or Landlord's interest or estate in
any of said items is specified as security. In the event that any ground lease
or underlying lease terminates for any reason or any mortgage or deed of trust
is foreclosed or a conveyance in lieu of foreclosure is made for any reason,
Tenant will, notwithstanding any subordination, attorn to and become the Tenant
of the successor in interest to Landlord, at the option of such successor in
interest, provided that such successor-in-interest agrees in writing to be bound
as Landlord under this Lease. Tenant covenants and agrees to execute and deliver
to Landlord any document or instrument reasonably requested by Landlord or its
ground lessor, mortgagee or beneficiary under a deed of trust evidencing such
subordination of this Lease with respect to any such ground lease or underlying
leases or the lien of any such mortgage or deed of trust. Tenant hereby
irrevocably appoints Landlord as attorney-in-fact of Tenant to execute, deliver
and record any such document in the name and on behalf of Tenant, in the event
Tenant has failed to execute and deliver such document or instrument within ten
(10) business days of Landlord's request to Tenant and provision of the
requested form of document or instrument to Tenant consistent with the terms of
Article 31.
32. DEPOSIT AGREEMENT
32.01 Landlord and Tenant hereby agree that Landlord will be entitled
to immediately endorse and cash Tenant's good faith rent and the Security
Deposit check(s) accompanying this Lease. It is further agreed and understood
that such action will not guarantee acceptance of this Lease by Landlord, but,
in the event Landlord does not accept this Lease, such deposits will be promptly
refunded in full to Tenant. This Lease will be effective only after Tenant has
received a copy fully executed by both Landlord and Tenant.
33. GOVERNING LAW
33.01 This Lease is governed by and construed in accordance with the
laws of the State of Nevada, and venue of any suit will be in the county where
the Premises are located unless the Premises are not located in Nevada in which
case the venue will be Washoe County in the State of Nevada.
34. NEGOTIATED TERMS
34.01 This Lease is the result of the negotiations of the parties and
has been agreed to by both Landlord and Tenant after prolonged discussion.
35. SEVERABILITY
35.01 If any provision of this Lease is found to be unenforceable, all
other provisions shall remain in full force and effect.
36. BROKERS
36.01 Tenant warrants that it has had no dealings with any broker or
agent in connection with this Lease, except Kit Tiedemann, CB Commercial, and
covenants to pay, hold harmless and indemnify Landlord from and against any and
all cost, expense or liability for any compensation, commissions and charges
claimed by any broker or agent, other than any identified above, with respect to
this Lease or its negotiation.
37. QUIET POSSESSION
37.01 Tenant, upon paying the rentals and other payments herein
required from Tenant, and upon Tenant's performance of all of the terms,
covenants and conditions of this Lease on its part to be kept and performed, may
quietly have, hold and enjoy the Premises during the Term of this Lease without
disturbance from Landlord or from any other person claiming through Landlord.
38. MISCELLANEOUS PROVISIONS
38.01 Whenever the singular number is used in this Lease and when
required by the context, the same will include the plural, and the masculine
gender will include the feminine and neuter genders, and the word "person" will
include corporation, firm, partnership, or association. If there is more than
one Tenant, the obligations imposed upon Tenant under this Lease will be joint
and several.
38.02 The headings or titles to paragraphs of this Lease are not a part
of this Lease and will have no effect upon the construction or interpretation of
any part of this Lease.
38.03 This instrument contains all of the agreements and conditions
made between the parties to this Lease. Tenant acknowledges that neither
Landlord nor Landlord's agents have made any representation or warranty as to
the suitability of the Premises to the conduct of Tenant's business. Any
agreements, warranties or representations not expressly contained herein will in
no way bind either Landlord or Tenant, and Landlord and Tenant expressly waive
all claims for damages by reason of any statement, representation, warranty,
promise or agreement, if any, not contained in this Lease.
38.04 Time is of the essence of each term and provision of this Lease.
38.05 Except as otherwise expressly stated, each payment required to be
made by Tenant is in addition to and not in substitution for other payments to
be made by Tenant.
38.06 Subject to Article 18, the terms and provisions of this Lease are
binding upon and inure to the benefit of the heirs, executors, administrators,
successors and assigns of Landlord and Tenant.
38.07 All covenants and agreements to be performed by Tenant under any
of the terms of this Lease will be performed by Tenant at Tenant's sole cost and
expense and without any abatement of rent (except as set forth in Section
30.01).
38.08 In consideration of the parties' respective covenants and
agreements hereunder, each party hereby covenants and agrees not to disclose any
terms, covenants or conditions of this Lease to any other party without the
prior written consent of the other party except (1) as otherwise represented in
the normal course of business for financing and in other business purposes, (2)
as required by law or court order, or (3) as required by either party's
independent auditors.
38.09 Tenant agrees it will provide to Landlord such financial
information as Landlord may reasonably request for the purpose of obtaining
construction and/or permanent financing for the Premises. Landlord agrees that
such financial information shall be subject to the Confidentiality Agreement in
the form attached hereto as Exhibit H.
38.10 If either party (the "Requesting Party") shall request the
consent of the other party (the "Non-requesting Party") and the Non-requesting
Party shall fail or refuse to give such consent, the Requesting Party shall not
be entitled to any damages for any withholding by the Non-requesting Party of
its consent; the Requesting Party's sole remedy shall be an action for specific
performance or injunction, and such remedy shall be available only in those
cases where the Non-requesting
-10-
<PAGE>
Party has expressly agreed in writing not to unreasonably withhold its consent
or where as a matter of law the Non-requesting Party may not unreasonably
withhold its consent.
38.11 Whenever a day is appointed herein on which, or a period of time
is appointed in which, either party is required to do or complete any act,
matter or thing, the time for the doing or completion thereof shall be extended
by a period of time equal to the number of days on or during which such party is
prevented from, or is reasonably interfered with, the doing or completion of
such act, matter or thing because of labor disputes, civil commotion, war,
warlike operation, sabotage, governmental regulations or control, fire or other
casualty, inability to obtain materials, or to obtain fuel or energy, weather or
other acts of God, or other causes beyond such party's reasonable control
(financial inability excepted); provided, however, that nothing contained herein
shall excuse Tenant from the prompt payment of any Rent or charge required of
Tenant hereunder.
38.12 No slot machine or other gambling game shall be permitted on the
Premises without the prior written consent of Landlord. The Premises shall not
be used for any "adult bookstore" or "adult motion picture theater" as said
terms are defined in NRS 278.0221, or any similar use, notwithstanding any local
zoning codes or ordinances or any other provisions of law to the contrary
permitting such use.
39. CHANGE ORDERS. In the event Tenant requests and\or approves changes in the
scope the work being provided by or through Landlord Tenant agrees to pay all
the direct and indirect costs of additional work at the time it gives such
approval. In the event that the aggregate cost of additional work provided under
this Lease is ten thousand dollars ($10,000.00) or more, or in excess of two
months rent, whichever is less, then Landlord may accept payment of one half of
the cost of additional work at the time of approval of said change order by the
Tenant, and payment of the balance to be paid at the time the additional work is
substantially completed.
40. SPECIAL PROVISIONS
40.01 Special provisions of this Lease number 41 through 44 and
Exhibits "A" (description of premises showing square footage), "B" ("Landlord's
Work" - tenant improvements), "C" (Tenant Questionnaire), "D" (Rules and
Regulations), "E" (Guaranty), "F" ("Commencement Date Certificate"), "G" ("Sign
Criteria"), and "H" ("Confidentiality Agreement"), are attached hereto and made
a part hereof.
41. OPTION TO EXTEND
41.01 Tenant is hereby granted one (1) option (the "Option") to extend
the Lease Term for an additional term of five (5) years (the "Extension"),
beginning on January 1, 2002, and expiring on December 31, 2006 (unless
terminated sooner pursuant to any other terms or provisions of the Lease), on
all of the same terms and conditions as set forth in the Lease, but at an
adjusted rent as set forth in Section 41.02 below (and without any additional
option to extend the Lease Term after the expiration of the Extension). The
Option may be exercised by Tenant only by delivery of written notice to
Landlord, which notice must be received by Landlord at least one hundred twenty
(120) days before the expiration of the original Lease Term set forth in Section
1.06 above. If Tenant fails to timely deliver such written notice, or if this
Lease is terminated pursuant to any other terms or provisions of this Lease
prior to the expiration of the original Lease Term, the Option shall lapse, and
Tenant shall have no right to extend the Lease Term. The Option shall be
exercisable by Tenant on the express conditions that (i) at the time of delivery
of Tenant's notice of its election to exercise the Option, and at all times
prior to the commencement of the Extension, Tenant shall not be in default under
this Lease, (ii) Tenant has not previously been in default (whether or not any
such default has been timely cured) under this Lease on more than three (3)
occasions during the Lease Term, and (iii) Tenant has not assigned this Lease
nor sublet all or any part of the Premises, it being understood that the Option
is personal to the original named Tenant under this Lease. In the event of any
such assignment or sublease, the Option shall lapse and shall be null and void
and of no further force or effect.
41.02 The rental during this Option period shall be at the "then
current market rate". In no event, however, shall the rental during the Option
period be less than the Base Rent due during the previous lease term.
42. FIRST RIGHT OF REFUSAL. At any time during the initial Lease term, Tenant
shall have the right of first refusal to lease the adjacent 35,560 square-foot
unit in the Premises. Should Landlord receive a bonafide offer from a third
party to lease this adjacent space, Landlord will notify Tenant, and Tenant
shall then have five (5) business days after receipt of notice from Landlord to
accept or reject the adjacent space on the same terms as Landlord's proposal
from a Third Party. If Tenant does not accept the same material terms and
provisions by written notice to Landlord within five (5) days of receipt of such
notice, then Landlord shall be free to enter into a lease with the Third Party.
In the event Tenant elects not to take the adjacent space at that time and
Landlord enters into a Lease with the Third Party for the adjacent space, Tenant
shall have a continuing option to expand into this space as follows. At any time
following the 18th month of the Third Party's lease, Tenant may provide Landlord
with not less than six (6) month's written notice of its intent to expand into
the adjacent space. Upon exercising this option, Tenant shall be responsible to
pay the costs of moving the Third Party tenant to another facility in the
Reno/Sparks, Nevada area. In no event, however, shall Tenant be liable to pay
more than $35,560.00 in moving costs to the Third Party tenant.
43. OPTION TO MOVE TO A LARGER FACILITY. After the 48th month of the initial
Lease Term, provided Tenant is not in default of this lease, Tenant shall have
the option to move to a larger facility owned by Landlord provided Tenant gives
Landlord a minimum of one hundred eighty (180) days prior written notice of its
desire to do so; that the larger space is a minimum of 35% larger than the space
covered in this Lease (i.e., a minimum of 135,875 square feet), and that
Landlord has such larger space available for lease. In the event Landlord does
not have such larger space available for lease, either in Tenant's existing
building or within Landlord's portfolio, Landlord and Tenant shall enter into a
build-to-suit contract for a new facility. Each of the above expansions shall
constitute a new five-year lease term on all of the Tenant's space at the then
current market rates. The present lease would automatically terminate upon
commencement of the new lease for the larger facility.
44. OPTION TO TERMINATE. In the event Landlord is unable to accommodate Tenant's
expansion space requirements pursuant to Article 43 herein, Tenant shall have
the option to terminate the lease. Upon exercising this option to terminate,
Tenant shall pay to Landlord a cancellation fee equal to two (2) month's base
monthly rent at their then current rate.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the day and year indicated by Landlord's execution date as written below.
Individuals signing on behalf of a Tenant warrant that they have the
authority to bind their principals. In the event that Tenant is a corporation,
Tenant shall deliver to Landlord, concurrently with the execution and delivery
of this Lease, a certified copy of corporate resolutions adopted by Tenant
authorizing said corporation to enter into and perform the Lease and authorizing
the execution and delivery of the Lease on behalf of the corporation by the
parties executing and delivering this Lease. THIS LEASE, WHETHER OR NOT EXECUTED
BY TENANT, IS SUBJECT TO ACCEPTANCE AND EXECUTION BY LANDLORD, ACTING ITSELF OR
BY ITS AGENT ACTING THROUGH ITS PRESIDENT, VICE PRESIDENT, OR ITS DIRECTOR OF
LEASING AND MARKETING.
<TABLE>
<CAPTION>
<S> <C>
Landlord: Dermody Properties, a Nevada corporation Tenant: MicroAge Logistics Services, Inc.
By: /s/ Michael C. Dermody By: /s/ Alan R. Lyons
------------------------------------- ----------------------------------
Michael C. Dermody Alan R. Lyons
Its: President Its: V.P. Administration
Date: 11/1/96 Date: 11/1/96
(Execution date) (Execution date)
</TABLE>
-11-
EXHIBIT 21
MICROAGE, INC.
ANNUAL REPORT ON FORM 10-K
SUBSIDIARIES OF THE REGISTRANT
I. MicroAge Computer Centers, Inc., a Delaware corporation
Subsidiaries:
A. MCSA, Inc., a Delaware corporation
B. MCSZ, Inc., a Delaware corporation
C. 153000 Canada Limited, a Canadian corporation
II. MicroAge Solutions, Inc., a Delaware corporation
Subsidiaries:
A. MCSJ, Inc., a Delaware corporation
B. MCSP, Inc., a Delaware corporation
C. MCSQ, Inc., a Delaware corporation
D. MCSR, Inc., a Delaware corporation
E. MCSS, Inc., a Delaware corporation
F. MCST, Inc., a Delaware corporation
G. MCSY, Inc., a Delaware corporation
III. BMUS Corporation, a Delaware corporation
IV. ECadvantage, Inc., a Delaware corporation
V. FirstSource Distribution, Inc., a Delaware corporation
VI. Flynnco Inc., an Arizona corporation
A. Advanced Systems Consultants, Inc., an Arizona corporation
VII. Intracom Marketing, Inc., a Delaware corporation
VIII. MicroAge Administration, Inc., a Delaware corporation
IX. MicroAge Infosystems Services Europe, Ltd., a United Kingdom corporation
X. MicroAge Enterprises, Inc., a Delaware corporation
A. Image Choice, Inc. , a Delaware corporation
XI. MicroAge Europe Limited, a United Kingdom corporation
XII. MicroAge Federal, Inc., a Delaware corporation
XIII. MicroAge Infinity, Inc., a Delaware corporation
XIV. MicroAge Infosystems Services, Inc., a Delaware corporation
XV. MicroAge International, Inc., a Delaware corporation
XVI. MicroAge Integration Management, Inc., a Delaware corporation
XVII. MicroAge Logistics Services, Inc., a Delaware corporation
XVIII. MicroAge Paymaster, Inc., a Delaware corporation
XIX. MicroAge Resellers, Inc., a Delaware corporation
XX. MicroAge Systems, Inc., a Delaware corporation
XXI. MicroAge Technologies, Inc. a Delaware corporation
XXII. MicroAge Ventures, Inc. a Delaware corporation
XXIII. MicroSource Technologies, Inc., a Delaware corporation
<PAGE>
XXIV. ConnectWorks, Inc. a Delaware corporation
Subsidiaries:
A. PhoenixWorks, Inc. a Delaware corporation
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-18967, No. 33-26351, No. 33-26565, No. 33-33370,
No. 33-51978, No. 33-58899, No. 33-58901 and No. 33-81040). We also consent to
the incorporation by reference in the Prospectus constituting part of the
Registration Statements on Form S-3 (No. 33-35674) and Form S-2 (No. 33-38764
and No. 33-33094) of MicroAge, Inc. of our report dated December 11, 1996
appearing on page F-2 of this Form 10-K.
PRICE WATERHOUSE LLP
Phoenix, Arizona
January 30, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial
information extracted from the Consolidated
Balance Sheets as of November 3, 1996 and October
29, 1995 and the Consolidated Statements of Income
for the fiscal years ended November 3, 1996,
October 29, 1995, and October 30, 1994 contained
in the Form 10-K and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-03-1996
<PERIOD-START> OCT-30-1995
<PERIOD-END> NOV-03-1996
<EXCHANGE-RATE> 1
<CASH> 20,496
<SECURITIES> 0
<RECEIVABLES> 260,474
<ALLOWANCES> (7,254)
<INVENTORY> 325,213
<CURRENT-ASSETS> 610,058
<PP&E> 112,617
<DEPRECIATION> (59,476)
<TOTAL-ASSETS> 689,505
<CURRENT-LIABILITIES> 499,490
<BONDS> 0
0
0
<COMMON> 147
<OTHER-SE> 185,976
<TOTAL-LIABILITY-AND-EQUITY> 689,505
<SALES> 3,516,446
<TOTAL-REVENUES> 3,516,446
<CGS> 3,331,610
<TOTAL-COSTS> 3,331,610
<OTHER-EXPENSES> 148,388
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,286
<INCOME-PRETAX> 23,131
<INCOME-TAX> 9,878
<INCOME-CONTINUING> 13,253
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,253
<EPS-PRIMARY> 0.89
<EPS-DILUTED> 0.86
</TABLE>
