SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
- - -------
X Quarterly report pursuant to Section 13 or 15 (d) of the Securities
- - ------- Exchange Act of 1934,
For the quarterly period ended May 3, 1998 or
- - -------
Transition report pursuant to Section 13 or 15(d) of the Securities
- - ------- Exchange Act of 1934
Commission file number 0-15995
MICROAGE, INC.
(Exact name of registrant as specified in its charter)
Delaware 86-0321346
(State of incorporation) (I. R. S. Employer
Identification No.)
2400 South MicroAge Way
Tempe, AZ 85282
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (602) 366-2000
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 and
(2) has been subject to such filing requirements for the past 90 days.
Yes ~ x ~ No ~ ~
The number of shares of the registrant's Common Stock (par value $.01 per share)
outstanding at May 31, 1998 was 19,605,311.
<PAGE>
INDEX
MICROAGE, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets -- May 3, 1998 and November 2, 1997.
Consolidated statements of operations -- Quarters ended May 3,
1998 and May 4, 1997; 26 weeks ended May 3, 1998 and May 4, 1997.
Consolidated statements of cash flows -- 26 weeks ended May 3,
1998 and May 4, 1997.
Notes to consolidated financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
1
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
MICROAGE, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share data)
<TABLE>
<CAPTION>
Assets
May 3, November 2,
1998 1997
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 37,204 $ 24,029
Accounts and notes receivable, net 395,782 341,124
Inventory, net 517,459 478,532
Other 15,688 11,662
------------ ------------
Total current assets 966,133 855,347
Property and equipment, net 92,326 73,975
Intangible assets, net 69,299 43,766
Other 13,727 12,826
------------ ------------
Total assets $ 1,141,485 $ 985,914
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 837,097 $ 680,648
Accrued liabilities 24,906 22,527
Current portion of long-term obligations 3,035 2,744
Other 6,021 3,951
------------ ------------
Total current liabilities 871,059 709,870
Line of credit -- 30,650
Long-term obligations 5,474 4,537
Other long-term liabilities 8,993 1,239
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: May 3, 1998 - 19,620,539
November 2, 1997 - 18,451,653 196 184
Additional paid-in capital 174,805 148,329
Retained earnings 81,124 91,922
Treasury stock, at cost;
Shares: May 3, 1998 - 16,378
November 2, 1997 - 80,378 (166) (817)
------------ ------------
Total stockholders' equity 255,959 239,618
------------ ------------
Total liabilities and stockholders' equity $ 1,141,485 $ 985,914
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
MICROAGE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Quarter ended 26 weeks ended
-------------------------- --------------------------
May 3, May 4, May 3, May 4,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue $ 1,326,950 $ 1,101,107 $ 2,505,961 $ 1,998,527
Cost of sales 1,242,369 1,022,938 2,347,555 1,857,448
----------- ----------- ----------- -----------
Gross profit 84,581 78,169 158,406 141,079
Operating and other expenses
Operating expenses 79,652 59,612 152,713 108,885
Restructuring and other one-time charges 5,600 -- 5,600 --
----------- ----------- ----------- -----------
Total 85,252 59,612 158,313 108,885
----------- ----------- ----------- -----------
Operating income (loss) (671) 18,557 93 32,194
Other expenses - net 8,469 7,422 18,708 12,303
----------- ----------- ----------- -----------
Income (loss) before income taxes (9,140) 11,135 (18,615) 19,891
Income tax provision (benefit) (3,885) 4,568 (7,946) 8,287
----------- ----------- ----------- -----------
Net income (loss) $ (5,255) $ 6,567 $ (10,669) $ 11,604
=========== =========== =========== ===========
Net income (loss) per common and common
equivalent share:
Basic $ (0.27) $ 0.38 $ (0.54) $ 0.67
=========== =========== =========== ===========
Diluted $ (0.27) $ 0.37 $ (0.54) $ 0.64
=========== =========== =========== ===========
Weighted average common and common
equivalent shares outstanding:
Basic 19,584 17,336 19,520 17,255
=========== =========== =========== ===========
Diluted 19,584 17,876 19,520 18,061
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
MICROAGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Increase (Decrease) in Cash and Cash Equivalents
(in thousands)
<TABLE>
<CAPTION>
26 weeks ended
----------------------
May 3, May 4,
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (10,669) $ 11,604
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 17,749 11,735
Provision for losses on accounts and notes receivable 6,630 3,370
Changes in assets and liabilities, net of business acquisitions:
Accounts and notes receivable (34,106) 8,814
Inventory (29,338) (137,901)
Other current assets (3,844) (168)
Other assets (6,315) (4,398)
Accounts payable 122,054 69,291
Accrued liabilities 630 (2,894)
Other liabilities 9,193 8,353
--------- ---------
Net cash provided by (used in) operating activities 71,984 (32,194)
Cash flows from investing activities:
Purchases of property and equipment (28,232) (18,699)
--------- ---------
Net cash used in investing activities (28,232) (18,699)
Cash flows from financing activities:
Proceeds from issuance of stock - stock option and
employee stock purchase plans 2,139 2,722
Net borrowings (payments) under line of credit (30,650) 46,500
Amounts received from ESOT -- 207
Shareholder distributions - pooled companies (129) --
Net change in long-term obligations (1,937) 3,989
--------- ---------
Net cash provided by (used in) financing activities (30,577) 53,418
--------- ---------
Net increase in cash and cash equivalents 13,175 2,525
Cash and cash equivalents at beginning of period 24,029 22,261
--------- ---------
Cash and cash equivalents at end of period $ 37,204 $ 24,786
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
MICROAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of MicroAge, Inc.
(the "Company") do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair statement of results for the periods
have been included. Certain prior year amounts have been reclassified to conform
with current year financial statement presentation. Operating results for the 26
weeks ended May 3, 1998 are not necessarily indicative of the results that may
be expected for the year ending November 1, 1998. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended November 2, 1997.
On November 14, 1997, the Company issued shares of its common stock in exchange
for all of the outstanding shares of a reseller. The merger has been accounted
for as a pooling of interests and, accordingly, the Company's consolidated
financial statements have been restated to include the accounts and operations
of the acquired company for all periods presented.
The results of operations previously reported by the separate enterprises and
the combined amounts presented in the accompanying consolidated financial
statements are summarized below (in thousands).
Quarter ended May 4, 1997:
MicroAge, Inc. Acquired Co. Combined
-------------- ------------ --------
Revenue $1,086,018 $ 15,089 $1,101,107
Net income $ 6,244 $ 323 $ 6,567
26 weeks ended May 4, 1997:
MicroAge, Inc. Acquired Co. Combined
-------------- ------------ --------
Revenue $1,976,766 $ 21,761 $1,998,527
Net income $ 11,101 $ 503 $ 11,604
5
<PAGE>
NOTE B - OTHER EXPENSES - NET
Other expenses - net consists of the following (in thousands):
Quarters ended 26 weeks ended
------------------- -------------------
May 3, May 4, May 3, May 4,
1998 1997 1998 1997
-------- -------- -------- --------
Interest expense $ 988 $ 2,316 $ 3,333 $ 2,911
Expenses from sales of
accounts receivable 4,993 4,737 10,570 9,001
Amortization expense 1,366 470 2,776 862
Other 1,122 (101) 2,029 (471)
-------- -------- -------- --------
$ 8,469 $ 7,422 $ 18,708 $ 12,303
======== ======== ======== ========
NOTE C - RESTRUCTURING AND OTHER ONE-TIME CHARGES
In February, 1998, the Company initiated a plan to restructure the Company into
two independent businesses - a distribution business operated through a
wholly-owned subsidiary, Pinacor, Inc. ("Pinacor") and an integration business
operated through a wholly-owned subsidiary, MicroAge Integration Co.
("Integration"). In connection with this plan, the Company recorded $5.6 million
of restructuring and other one-time charges ($3.2 million, or $0.16 per share,
after taxes) during the second quarter of fiscal 1998.
The restructuring and other one-time charges included $3.6 million for employee
termination benefits, $1.1 million for the closing and consolidation of
redundant locations, and $0.9 million for other costs related to the
restructuring, primarily one-time costs incurred in establishing Pinacor and
Integration as separate businesses. The charges associated with employee
termination benefits consist primarily of severance pay for approximately 250
associates. The reductions occurred in virtually all areas of the Company and
were completed by May 3, 1998. As of May 3, 1998, $1.9 million remained in
accrued liabilities representing: $0.7 million related to employee termination
benefits; $0.9 million related to facility closings; and $0.3 million primarily
related to costs of establishing Pinacor and Integration as separate businesses.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Certain statements contained in this Item may be "forward-looking statements"
within the meaning of The Private Securities Litigation Reform Act of 1995.
These forward-looking statements may include projections of revenue and net
income and issues that may affect revenue or net income; projections of capital
expenditures; plans for future operations; financing needs or plans; plans
relating to the Company's products and services; and assumptions relating to the
foregoing. Forward looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified. Future events
and actual results could differ materially from those set forth in, contemplated
by, or underlying the forward-looking information. Some of the important factors
that could cause the Company's actual results to differ materially from those
projected in forward-looking statements made by the Company include, but are not
limited to, the following: intense competition; narrow margins; dependence on
supplier incentive funds; product supply and dependence on key vendors;
potential fluctuations in quarterly results; risks of declines in inventory
values; no assurance of successful acquisitions or investments; the capital
intensive nature of the Company's business; dependence on information systems;
year 2000 issues; dependence on independent shipping companies; rapid
technological change; and possible volatility of stock price. Reference is made
to Exhibit 99.1 of the Company's Report on Form 10-K for the year ended November
2, 1997 for additional discussion of the foregoing factors. The Company
undertakes no obligations to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
On November 14, 1997, the Company issued shares of its common stock in exchange
for all of the outstanding shares of a reseller location. The merger has been
accounted for as a pooling of interests and, accordingly, the Company's
consolidated financial statements have been restated to include the accounts and
operations of the acquired company for all periods presented. See Note A of
Notes to Consolidated Financial Statements (Unaudited) for additional
information.
In February, 1998, the Company initiated a plan to restructure the Company into
two independent businesses - a distribution business operated through a
wholly-owned subsidiary, Pinacor, Inc. ("Pinacor") and an integration business
operated through a wholly-owned subsidiary, MicroAge Integration Co.
("Integration"). These businesses now have separate management teams, operate
autonomously in their respective marketplaces, and contract with headquarters
for a limited number of services, such as payroll processing, employee benefits
and information services. See "Restructuring and Other One-Time Charges" below.
In May, 1998, the Company announced that it had retained an investment banking
firm to help explore financial options for Pinacor designed to enhance
shareholder value.
7
<PAGE>
Results of Operations
The following table sets forth, for the indicated periods, data as percentages
of total revenue:
<TABLE>
<CAPTION>
Quarter ended
------------------------------------------------------------------------------
May 3, Feb. 1, Nov. 2, Aug. 3, May 4,
1998 1998 1997 1997 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue (in thousands) $ 1,326,950 $ 1,179,011 $ 1,331,502 $ 1,161,839 $ 1,101,107
Cost of sales 93.6% 93.7% 93.1% 92.8% 92.9%
------------ ------------ ------------ ------------ ------------
Gross profit 6.4 6.3 6.9 7.2 7.1
Operating expenses 6.0 6.2 5.3 5.6 5.4
Restructuring and other 0.4 0.0 0.0 0.0 0.0
one-time charges
------------ ------------ ------------ ------------ ------------
Operating income 0.0 0.1 1.6 1.6 1.7
Other expenses - net 0.6 0.9 0.6 0.6 0.7
------------ ------------ ------------ ------------ ------------
Income (loss) before income taxes (0.7) (0.8) 1.0 1.0 1.0
Income tax provision (benefit) (0.3) (0.3) 0.4 0.4 0.4
------------ ------------ ------------ ------------ ------------
Net income (loss) (0.4)% (0.5)% 0.6% 0.6% 0.6%
============ ============ ============ ============ ============
</TABLE>
Total Revenue. Total revenue of $1.3 billion increased $226 million, or 21%, for
the quarter ended May 3, 1998 as compared to the quarter ended May 4, 1997. This
revenue increase included a $176 million (before intercompany eliminations), or
17%, increase in Pinacor (distribution business) revenue and a $74 million, or
19%, increase in Integration revenue. The increase in revenue was attributable
to sales to resellers added since May 4, 1997, increased demand for the
Company's major suppliers' products, the Company's addition of new product
offerings, the growth of the microcomputer products industry and acquisitions of
reseller locations. This increase was partially offset by an increase in
eliminations of intercompany sales.
Total revenue increased $507 million, or 25%, for the 26 weeks ended May 3, 1998
as compared to the 26 weeks ended May 4, 1997. This revenue increase included a
$422 million (before intercompany eliminations), or 23% increase in Pinacor
revenue and a $192 million, or 27% increase in Integration revenue. This
increase was partially offset by an increase in eliminations of intercompany
sales.
Gross Profit Percentage. The Company's gross profit percentage was 6.4% for the
quarter ended May 3, 1998 and 7.1% for the quarter ended May 4, 1997. The gross
profit percentage was 6.3% for the 26 weeks ended May 3, 1998 as compared to
7.1% for the 26 weeks ended May 4, 1997.
The decrease in the Company's gross profit percentage was due to several
factors. In Pinacor, the Company's distribution business, gross margins on sales
to reseller customers decreased due to increased competitive pressures. In
addition, supplier incentive funds were lower as a percentage of total Pinacor
revenue and net freight expense increased as a percentage of revenue. The
freight expense increase as a percentage of revenue was primarily due to a
decrease in the average selling price per pound of product shipped. In
Integration, margins on product sales to end-user customers decreased due to
competitive pricing pressures. The decrease in Integration product margins was
partially offset by an increase in service revenue, which has higher gross
margins than product revenue.
8
<PAGE>
Operating Expenses. As a percentage of revenue, operating expenses were 6.0% for
the quarter ended May 3, 1998 compared to 5.4% for the quarter ended May 4,
1997. Operating expenses increased $20 million to $80 million for the quarter
ended May 3, 1998, as compared to the quarter ended May 4, 1997. Operating
expenses increased from $109 million, or 5.5% of revenue, for the 26 weeks ended
May 4, 1997 to $153 million, or 6.1% of revenue, for the 26 weeks ended May 3,
1998. The increase in operating expenses was primarily in Integration, and was
attributable to acquisitions of reseller locations (which generally have higher
gross margin and operating expense percentages than the Company's other
businesses), the costs associated with assimilating these acquisitions, start-up
costs of several new locations, and the build-up of infrastructure associated
with Integration's increasing levels of service revenue.
Restructuring and Other One-time Charges. In connection with the restructuring
plan discussed above, the Company recorded a $5.6 million charge ($3.2 million,
or $0.16 per share, after taxes) for the second quarter of fiscal 1998. The
restructuring and other one-time charges included $3.6 million for employee
termination benefits, $1.1 million for the closing and consolidation of
redundant locations and $0.9 million for other costs related to the
restructuring, primarily one-time costs incurred in establishing Pinacor and
Integration as separate businesses. The charges associated with employee
termination benefits consist primarily of severance pay for approximately 250
associates. The reductions occurred in virtually all areas of the Company and
were substantially completed by May 3, 1998.
Other Expenses - Net. Other expenses - net increased to $8.5 million for the
quarter ended May 3, 1998 from $7.4 million for the quarter ended May 4, 1997.
Other expenses - net increased to $18.7 million for the 26 weeks ended May 3,
1998 from $12.3 million for the 26 weeks ended May 4, 1997. This increase was
primarily due to increases in average daily borrowings to support higher
inventory and accounts receivable levels and to increased amortization expense
associated with goodwill from acquisitions.
Supplier Incentive Funds
The Company receives funds from certain suppliers which are earned through
marketing programs or meeting purchasing or other objectives established by the
supplier. A large portion of the incentives are passed on to the Company's
customers. However, a portion of the incentives positively impact the Company's
income. There can be no assurance that these programs will be continued by the
suppliers. A substantial reduction in the supplier funds available to the
Company would have an adverse effect on the Company's results of operations.
9
<PAGE>
Potential Fluctuations in Quarterly 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, the amount of supplier
incentive funds received by the Company, the results of acquired businesses,
product availability, competitive conditions, new product introductions, changes
in customer order patterns 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.
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. In addition, 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
supplier promotions and year-end business purchases.
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, its working
capital requirements are likely to increase.
The Company has acquired or invested in, and intends to acquire or invest in,
resellers to increase core service competencies, expand the Company's geographic
coverage in key market areas, and strengthen the Company's direct relationships
with end-user customers. Acquisitions or investments may be made utilizing cash,
stock, or a combination of cash and stock.
Cash provided by operating activities was $72 million for the 26 weeks ended May
3, 1998 as compared to cash used of $32 million for the 26 weeks ended May 4,
1997. The increase was primarily due to a change in cash provided by inventory
and accounts payable. During the 26 weeks ended May 3, 1998, $93 million was
provided by changes in inventory and accounts payable compared to $69 million
used by changes in inventory and accounts payable during the 26 weeks ended May
4, 1997. This was partially offset by a change in cash used by accounts
receivable. During the 26 weeks ended May 3, 1998, $34 million of cash was used
by changes in accounts receivable compared to $9 million provided by changes in
accounts receivable during the 26 weeks ended May 4, 1997.
The number of days cost of sales in ending inventory increased from 35 days at
November 2, 1997 to 38 days at May 3, 1998. The number of days' cost of sales in
ending accounts payable increased from 49 days at November 2, 1997 to 61 days at
May 3, 1998. The number of days' sales in ending accounts receivable was 27 days
at May 3, 1998 compared to 22 days at November 2, 1997. The receivables days
adjusted for sold receivables were 43 days and 41 days at May 3, 1998 and
November 2, 1997, respectively.
10
<PAGE>
Cash used in investing activities increased from $19 million during the 26 weeks
ended May 4, 1997 to $28 million during the 26 weeks ended May 3, 1998 due to
increased purchases of property and equipment as a result of increased spending
for electronic commerce initiatives and capacity expansion in systems and
facilities.
Cash used in financing activities was $31 million during the 26 weeks ended May
3, 1998 compared to cash provided of $53 million during the 26 weeks ended May
3, 1997, primarily due to a change in net borrowings under the Company's line of
credit between the periods.
The Company maintains three financing agreements (the "Agreements") with
financing facilities totaling $800 million. The Agreements include an accounts
receivable facility (the "A/R Facility") and inventory financing facilities (the
"Inventory Facilities").
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 $350 million sold at any given time. At May 3, 1998, the net amount of
sold accounts receivable was $233 million.
The Inventory Facilities provide for borrowings up to $450 million. Within the
Inventory Facilities, the Company has lines of credit for the purchase of
inventory from selected product suppliers ("Inventory Lines of Credit") of $300
million and a line of credit for general working capital requirements
("Supplemental Line of Credit") of $150 million. Payments for products purchased
under the Inventory Lines of Credit vary depending upon the product supplier,
but generally are due between 45 and 60 days from the date of the advance.
Amounts borrowed under the Supplemental Line of Credit may remain outstanding
until the expiration date of the Agreements (August 2000). No interest or
finance charges are payable on the Inventory Lines of Credit if payments are
made when due. At May 3, 1998, the Company had $224 million outstanding under
the Inventory Lines of Credit (included in accounts payable in the accompanying
Balance Sheets), and nothing outstanding under the Supplemental Line of Credit.
Of the $800 million of financing capacity represented by the Agreements, $343
million was unused as of May 3, 1998. Utilization of the unused portion is
dependent upon the Company's collateral availability at the time the funds would
be needed. There can be no assurance that the Company will be able to borrow
adequate amounts on terms acceptable to the Company.
Borrowings under the Agreements are secured by substantially all of the
Company's assets, and the Agreements contain certain restrictive covenants,
including tangible net worth requirements and ratios of debt to tangible net
worth and current assets to current liabilities. At May 3, 1998, the Company was
in compliance with these covenants.
In addition to the financing facilities discussed above, the Company maintains
an accounts receivable purchase agreement (the "Purchase Agreement") with a
commercial credit corporation (the "Buyer") whereby the Buyer agrees to
purchase, from time to time at its option, on a limited recourse basis, certain
accounts receivable of the Company. Under the terms of the Purchase Agreement,
no finance charges are assessed if the accounts are settled within forty days.
At May 3, 1998, the net amount of sold accounts receivable under the Purchase
Agreement was $13.4 million.
The Company also maintains trade credit arrangements with its suppliers and
other creditors to finance product purchases. A few major suppliers maintain
security interests in their products sold to the Company.
11
<PAGE>
The unavailability of a significant portion of, or the loss of, the Agreements
or trade credit from suppliers 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 $5 to $10 million during the third
quarter of fiscal 1998.
Inflation
The Company believes that inflation has generally not had a material impact on
its operations.
12
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Annual Meeting of Stockholders was held on April 1, 1998.
(b)(1) The following individuals were elected to the Board of
Directors as Class III Directors for three-year terms expiring
at the Company's Annual Meeting in 2001: Roy A. Herberger, Jr.
and Cyrus F. Freidheim, Jr.
(b)(2) The following individuals' terms continued after the Annual
Meeting as Class II Directors. Their terms will expire at the
Company's Annual Meeting in 2000: Jeffrey D. McKeever and
Steven G. Mihaylo.
(b)(3) The following individuals' terms continued after the Annual
Meeting as Class I Directors. Their terms will expire at the
Company's Annual Meeting in 1999: William H. Mallender and
Lynda M. Applegate.
(c) The matters submitted for vote at the Annual Meeting were as
follows:
(c)(1) Election of Class III Directors for three-year terms expiring
at the Company's Annual Meeting in 2001. See Item 4(b)(1)
above. The shares were voted as follows:
Nominee Number of Shares
------- ----------------
Roy A. Herberger, Jr. For 17,450,512
Withheld 383,423
Abstentions -0-
Broker Non-votes -0-
Cyrus F. Freidheim, Jr. For 17,452,559
Withheld 380,626
Abstentions -0-
Broker Non-votes -0-
<PAGE>
(c)(2) Approval of MicroAge, Inc. 1997 Long-Term Incentive Plan. The
shares were voted as follows:
For 7,374,804
Against 5,968,167
Abstentions 414,384
Broker Non-votes 4,085,580
(c)(3) Approval of MicroAge, Inc. 1995 Director Incentive Plan, as
amended. The shares were voted as follows:
For 10,695,805
Against 2,748,006
Abstentions 426,334
Broker Non-votes 3,972,790
(d) None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 MicroAge, Inc. 1995 Director Incentive Plan, as Amended,
effective as of April 1, 1998
10.2 MicroAge, Inc. 1997 Long-Term Incentive Plan, effective as of
September 25, 1997, as approved by the Company's shareholders
on April 1, 1998
10.3 Seventh Amendment to the MicroAge, Inc. Retirement Savings and
Employee Stock Ownership Plan and Trust, dated April 2, 1998.
10.4 Eighth Amendment to the MicroAge, Inc. Retirement Savings and
Employee Stock Ownership Plan and Trust, dated April 2, 1998.
10.5 Non-Qualified Stock Option Agreement between Jeffrey D.
McKeever and MCCI Holding Company, effective as of May 2, 1998
10.6 Amendment to Restated and Amended Purchase Agreement by and
between MicroAge Computer Centers, Inc., MicroAge Solutions,
Inc., MCSA, Inc., MCSZ, Inc., MCSJ, Inc., MCSP, Inc., MCSQ,
Inc., MCST, Inc., MCSR, Inc., MCSS, Inc., MicroAge Logistics
Services, Inc., Complete Distribution, Inc., MicroAge
Infosystems Services, Inc., Advanced Systems Consultants,
Inc., PCClearance, Inc., Image Choice, Inc. and MCSY, Inc.
(individually and collectively, "Seller") and Deutsche
Financial Services Corporation ("Purchaser"), dated as of the
31st day of October, 1997.
<PAGE>
10.7 Amendment to Restated and Amended Purchase Agreement by and
between MicroAge Computer Centers, Inc., MicroAge Solutions,
Inc., MCSA, Inc., MCSZ, Inc., MCSJ, Inc., MCSP, Inc., MCSQ,
Inc., MCST, Inc., MCSR, Inc., MCSS, Inc., MicroAge Logistics
Services, Inc., Complete Distribution, Inc., MicroAge
Infosystems Services, Inc., Advanced Systems Consultants,
Inc., PCClearance, Inc., Image Choice, Inc. and MCSY, Inc.
(individually and collectively, "Seller") and Deutsche
Financial Services Corporation ("Purchaser"), dated as of the
28th day of January, 1998.
10.8 Amendment to Restated and Amended Purchase Agreement by and
between MicroAge Computer Centers, Inc., MicroAge Solutions,
Inc., MCSA, Inc., MCSZ, Inc., MCSJ, Inc., MCSP, Inc., MCSQ,
Inc., MCST, Inc., MCSR, Inc., MCSS, Inc., MicroAge Logistics
Services, Inc., Complete Distribution, Inc., MicroAge
Infosystems Services, Inc., Advanced Systems Consultants,
Inc., PCClearance, Inc., Image Choice, Inc. and MCSY, Inc.
(individually and collectively, "Seller") and Deutsche
Financial Services Corporation ("Purchaser"), dated as of the
5th day of February, 1998.
10.9 Amendment to Restated and Amended Purchase Agreement by and
between MicroAge Computer Centers, Inc., MicroAge Solutions,
Inc., MCSA, Inc., MCSZ, Inc., MCSJ, Inc., MCSP, Inc., MCSQ,
Inc., MCST, Inc., MCSR, Inc., MCSS, Inc., MicroAge Logistics
Services, Inc., Complete Distribution, Inc., MicroAge
Infosystems Services, Inc., Advanced Systems Consultants,
Inc., PCClearance, Inc., Image Choice, Inc. and MCSY, Inc.
(individually and collectively, "Seller") and Deutsche
Financial Services Corporation ("Purchaser"), dated as of the
30th day of April, 1998.
10.10 Amendment to Second Restated Agreement for Wholesale Financing
by and between MicroAge Computer Centers, Inc., MicroAge
Logistics Services, Inc. and Deutsche Financial Services
Corporation, dated as of the 31st day of March, 1997.
10.11 Amendment to Second Restated Agreement for Wholesale Financing
by and between MicroAge Computer Centers, Inc., MicroAge
Logistics Services, Inc. and Deutsche Financial Services
Corporation, dated as of the 31st day of October, 1997.
10.12 Amendment to Second Restated Agreement for Wholesale Financing
by and between MicroAge Computer Centers, Inc., MicroAge
Logistics Services, Inc. and Deutsche Financial Services
Corporation, dated as of the 28th day of January, 1998.
<PAGE>
10.13 Amendment to Second Restated Agreement for Wholesale Financing
by and between MicroAge Computer Centers, Inc., MicroAge
Logistics Services, Inc. and Deutsche Financial Services
Corporation, dated as of the 5th day of February, 1998.
10.14 Amendment to Second Restated Agreement for Wholesale Financing
by and between MicroAge Computer Centers, Inc., MicroAge
Logistics Services, Inc., Pinacor, Inc., and Deutsche
Financial Services Corporation, dated as of the 30th day of
April, 1998.
10.15 Amendment #2 to Agreement for Wholesale Financing by and
between MicroAge Computer Centers, Inc., MicroAge Logistics
Services, Inc. and IBM Credit Corporation, dated as of August
25, 1997.
10.16 Amendment #3 to Agreement for Wholesale Financing by and
between MicroAge Computer Centers, Inc., MicroAge Logistics
Services, Inc. and IBM Credit Corporation, dated as of March
13, 1998.
10.17 Amendment #4 to Agreement for Wholesale Financing by and
between MicroAge Computer Centers, Inc., MicroAge Logistics
Services, Inc., Pinacor, Inc., and IBM Credit Corporation,
dated as of April 30, 1998.
(b) The Company did not file any Reports on Form 8-K during the
quarter ended May 3, 1998.
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- - ----------- -----------
10.1 MicroAge, Inc. 1995 Director Incentive Plan, as Amended,
effective as of April 1, 1998
10.2 MicroAge, Inc. 1997 Long-Term Incentive Plan, effective as of
September 25, 1997, as approved by the Company's shareholders
on April 1, 1998.
10.3 Seventh Amendment to the MicroAge, Inc. Retirement Savings and
Employee Stock Ownership Plan and Trust, dated April 2, 1998.
10.4 Eighth Amendment to the MicroAge, Inc. Retirement Savings and
Employee Stock Ownership Plan and Trust, dated April 2, 1998.
10.5 Non-Qualified Stock Option Agreement between Jeffrey D.
McKeever and MCCI Holding Company, effective as of May 2,
1998(1).
10.6 Amendment to Restated and Amended Purchase Agreement by and
between MicroAge Computer Centers, Inc., MicroAge Solutions,
Inc., MCSA, Inc., MCSZ, Inc., MCSJ, Inc., MCSP, Inc., MCSQ,
Inc., MCST, Inc., MCSR, Inc., MCSS, Inc., MicroAge Logistics
Services, Inc., Complete Distribution, Inc., MicroAge
Infosystems Services, Inc., Advanced Systems Consultants,
Inc., PCClearance, Inc., Image Choice, Inc. and MCSY, Inc.
(individually and collectively, "Seller") and Deutsche
Financial Services Corporation ("Purchaser"), dated as of the
31st day of October, 1997.
10.7 Amendment to Restated and Amended Purchase Agreement by and
between MicroAge Computer Centers, Inc., MicroAge Solutions,
Inc., MCSA, Inc., MCSZ, Inc., MCSJ, Inc., MCSP, Inc., MCSQ,
Inc., MCST, Inc., MCSR, Inc., MCSS, Inc., MicroAge Logistics
Services, Inc., Complete Distribution, Inc., MicroAge
Infosystems Services, Inc., Advanced Systems Consultants,
Inc., PCClearance, Inc., Image Choice, Inc. and MCSY, Inc.
(individually and collectively, "Seller") and Deutsche
Financial Services Corporation ("Purchaser"), dated as of the
28th day of January, 1998.
<PAGE>
10.8 Amendment to Restated and Amended Purchase Agreement by and
between MicroAge Computer Centers, Inc., MicroAge Solutions,
Inc., MCSA, Inc., MCSZ, Inc., MCSJ, Inc., MCSP, Inc., MCSQ,
Inc., MCST, Inc., MCSR, Inc., MCSS, Inc., MicroAge Logistics
Services, Inc., Complete Distribution, Inc., MicroAge
Infosystems Services, Inc., Advanced Systems Consultants,
Inc., PCClearance, Inc., Image Choice, Inc. and MCSY, Inc.
(individually and collectively, "Seller") and Deutsche
Financial Services Corporation ("Purchaser"), dated as of the
5th day of February, 1998.
10.9 Amendment to Restated and Amended Purchase Agreement by and
between MicroAge Computer Centers, Inc., MicroAge Solutions,
Inc., MCSA, Inc., MCSZ, Inc., MCSJ, Inc., MCSP, Inc., MCSQ,
Inc., MCST, Inc., MCSR, Inc., MCSS, Inc., MicroAge Logistics
Services, Inc., Complete Distribution, Inc., MicroAge
Infosystems Services, Inc., Advanced Systems Consultants,
Inc., PCClearance, Inc., Image Choice, Inc. and MCSY, Inc.
(individually and collectively, "Seller") and Deutsche
Financial Services Corporation ("Purchaser"), dated as of the
30th day of April, 1998.
10.10 Amendment to Second Restated Agreement for Wholesale Financing
by and between MicroAge Computer Centers, Inc., MicroAge
Logistics Services, Inc. and Deutsche Financial Services
Corporation, dated as of the 31st day of March, 1997.
10.11 Amendment to Second Restated Agreement for Wholesale Financing
by and between MicroAge Computer Centers, Inc., MicroAge
Logistics Services, Inc. and Deutsche Financial Services
Corporation, dated as of the 31st day of October, 1997.
10.12 Amendment to Second Restated Agreement for Wholesale Financing
by and between MicroAge Computer Centers, Inc., MicroAge
Logistics Services, Inc. and Deutsche Financial Services
Corporation, dated as of the 28th day of January, 1998.
10.13 Amendment to Second Restated Agreement for Wholesale Financing
by and between MicroAge Computer Centers, Inc., MicroAge
Logistics Services, Inc. and Deutsche Financial Services
Corporation, dated as of the 5th day of February, 1998.
10.14 Amendment to Second Restated Agreement for Wholesale Financing
by and between MicroAge Computer Centers, Inc., MicroAge
Logistics Services, Inc., Pinacor, Inc., and Deutsche
Financial Services Corporation, dated as of the 30th day of
April, 1998.
<PAGE>
10.15 Amendment #2 to Agreement for Wholesale Financing by and
between MicroAge Computer Centers, Inc., MicroAge Logistics
Services, Inc. and IBM Credit Corporation, dated as of August
25, 1997.
10.16 Amendment #3 to Agreement for Wholesale Financing by and
between MicroAge Computer Centers, Inc., MicroAge Logistics
Services, Inc. and IBM Credit Corporation, dated as of March
13, 1998.
10.17 Amendment #4 to Agreement for Wholesale Financing by and
between MicroAge Computer Centers, Inc., MicroAge Logistics
Services, Inc., Pinacor, Inc., and IBM Credit Corporation,
dated as of April 30, 1998.
- - --------------------
(1) The Company has applied to the Commission for confidential treatment of
a portion of this exhibit.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MICROAGE, INC.
(Registrant)
Date: June 16, 1998 By: /s/ Jeffrey D. McKeever
--------------------------------
Jeffrey D. McKeever
Chairman of the Board and
Chief Executive Officer
Date: June 16, 1998 By: /s/ James R. Daniel
--------------------------------
James R. Daniel
Senior Vice President
Chief Financial Officer and Treasurer
MICROAGE, INC.
1995 DIRECTOR INCENTIVE PLAN
(Amended and Restated as of April 1, 1998)
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION
1.1 ESTABLISHMENT OF THE PLAN. Effective November 1, 1995, MicroAge,
Inc., a Delaware corporation, established the "MicroAge, Inc. 1995 Director
Incentive Plan" (the "Plan") for the benefit of its Non-employee Directors. The
Plan sets forth the terms of grants of Stock Options and Restricted Stock to
Non-employee Directors, and such grants are subject to the terms in this Plan.
1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to encourage
ownership in the Company by Non-employee Directors, and to strengthen the
ability of the Company to attract and retain the services of experienced and
knowledgeable individuals as Non-employee Directors of the Company and to
provide those individuals with a further incentive to work for the best
interests of the Company and its stockholders.
1.3 EFFECTIVE DATE AND DURATION OF THE PLAN. As noted above, the Plan
originally became effective as of November 1, 1995 (the "Original Effective
Date"). The Plan shall remain in effect until all Shares subject to it shall
have been purchased or acquired according to the Plan's provisions, subject to
the right of the Board of Directors to terminate the Plan at any time pursuant
to Article 9 or Section 10.4. However, no Award may be granted under the Plan on
or after November 1, 2005.
1.4 AMENDMENT AND RESTATEMENT OF PLAN. By adoption of this document,
but conditioned on the approval of this document by the stockholders of the
Company, the Company hereby amends and restates the Plan in its entirety
effective as of April 1, 1998 (the "Effective Date"). The changes made by this
amended and restated Plan shall not have any impact on any Award made prior to
the Effective Date or entitle any Non-employee Director to any additional or
supplemental Awards for service as a Non-employee Director prior to the
Effective Date, except as required by Sections 6.1 and 7.1.
ARTICLE 2. DEFINITIONS AND CONSTRUCTION
2.1 DEFINITIONS. For purposes of the Plan, the following terms will
have the meanings set forth below:
(a) "Award" means a grant of Non-Qualified Stock Options or Restricted
Stock under the Plan.
(b) "Board" or "Board of Directors" means the Board of Directors of the
Company, and includes any committee of the Board of Directors designated by the
Board to administer this Plan.
(c) "Change of Control" means and includes each of the following:
(1) A change of control of the Company of a nature that would
be required to be reported in response to Item 6(e) of Schedule 14A of
the 1934 Act regardless of whether the Company is subject to such
reporting requirement;
1
<PAGE>
(2) A change of control of the Company through a transaction
or series of transactions, such that any person (as that term is used
in Section 13 and 14(d)(2) of the 1934 Act), excluding affiliates of
the Company as of the Original Effective Date, is or becomes the
beneficial owner (as that term is used in Section 13(d) of the 1934
Act) directly or indirectly, of securities of the Company representing
20% or more of the combined voting power of the Company's then
outstanding securities;
(3) The individuals who, as of the Effective Date, 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 paragraph, considered as though such
person were a member of the Incumbent Board;
(4) Any consolidation or liquidation of the Company in which
the Company is not the continuing or surviving corporation or pursuant
to which Shares would be converted into cash, securities or other
property, other than a merger of the Company in which the holders of
the Shares immediately before the merger have the same proportionate
ownership of common stock of the surviving corporation immediately
after the merger;
(5) The stockholders of the Company approve any plan or
proposed plan for the liquidation or dissolution of the Company; or
(6) Substantially all of the assets of the Company are sold or
otherwise transferred to parties that are not within a "controlled
group of corporations" (as defined in Section 1563 of the Code) in
which the Company is a member.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(e) "Committee" means the committee appointed by the Board to
administer the Plan.
(f) "Company" means MicroAge, Inc., a Delaware corporation, or any
successors as provided in Section 10.3.
(g) "Director" means any individual who is a member of the Board of
Directors of the Company.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor provision.
(i) "Fair Market Value" means the closing price for Shares on the
relevant date as reported on the Nasdaq National Market (or any national
securities exchange on which the Shares are then listed), or (if there were no
sales on such date) the closing price on the next preceding date for which a
closing price was reported.
2
<PAGE>
(j) "Grant Date" means (1) with respect to Awards granted pursuant to
Section 6.1 and Section 7.1, the Service Commencement Date; (2) with respect to
Awards granted pursuant to Sections 6.2 and Section 7.2, November 1, 1998 and
each anniversary of that date through and including November 1, 2004; and (3)
with respect to Awards granted pursuant to Sections 6.3 and 7.3, the date
selected by the Board or the Committee.
(k) "Non-employee Director" means any individual who is a member of the
Board of Directors of the Company, but who is not otherwise a common-law
employee of the Company.
(l) "Non-Qualified Stock Option" or "NQSO" means an option to purchase
Shares, granted under Article 7, that is not intended to be an incentive stock
option qualifying under Code Section 422.
(m) "Option" means a Non-Qualified Stock Option granted under the Plan.
(n) "Participant" means a Non-employee Director of the Company who has
been granted an Award under the Plan.
(o) "Period of Restriction" means the period during which the transfer
of Shares of Restricted Stock is limited in some way, and the Shares are subject
to a substantial risk of forfeiture, as provided in Article 6.
(p) "Person" shall have the meaning assigned to it in Section 3(a)(9)
of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a
"group" as defined in Section 13(d).
(q) "Restricted Stock" means an Award granted to a Non-employee
Director pursuant to Article 6.
(r) "Service Commencement Date" means the first Board meeting at which
an individual serves as a Non-employee Director; provided, however, that if such
individual's Service Commencement Date is between January 1, 1998 and April 1,
1998, such individual's Service Commencement Date shall be deemed to be April 2,
1998.
(s) "Shares" means the shares of common stock of the Company.
2.2 GENDER AND NUMBER. Except as indicated by the context, any
masculine term also shall include the feminine, the plural shall include the
singular, and the singular shall include the plural.
2.3 SEVERABILITY. If any provision of the Plan is determined to be
invalid for any reason, the remaining portion of the Plan shall be construed and
enforced as if the invalid provision had not been included.
ARTICLE 3. ADMINISTRATION
3.1 THE COMMITTEE. The Plan will be administered by the Committee,
subject to the restrictions set forth in the Plan.
3
<PAGE>
3.2 ADMINISTRATION BY THE COMMITTEE. The Committee has the full power,
discretion, and authority to interpret and administer the Plan in a manner that
is consistent with the Plan's provisions.
3.3 DECISIONS BINDING. The Committee's determinations and decisions
under the Plan and all related orders or resolutions of the Board shall be
final, conclusive, and binding on all persons, including the Company, its
stockholders, employees, Participants, and their estates and beneficiaries.
ARTICLE 4. SHARES SUBJECT TO THE PLAN.
4.1 NUMBER OF SHARES. The total number of Shares available for grant
under the Plan may not exceed 250,000, subject to adjustment as provided in
Section 4.3. The Shares issued as Restricted Stock and the Shares issued
pursuant to Options exercised under the Plan may be authorized and unissued
Shares or Shares reacquired by the Company, as determined by the Committee.
4.2 LAPSED AWARDS. If any Option or Share of Restricted Stock granted
under the Plan terminates, expires, or lapses for any reason, any Shares subject
to purchase pursuant to such Option and any such Shares of Restricted Stock
again will be available for grant under the Plan.
4.3 ADJUSTMENTS. The Committee may make or provide for such adjustments
inthe (a) number of Shares covered by outstanding Options and Restricted Stock
granted hereunder, (b) prices per share applicable to outstanding Options and
(c) kind of Shares covered thereby, as the Committee in its sole discretion may
in good faith determine to be equitably required in order to prevent dilution or
enlargement of the rights of Participants that otherwise would result from (x)
any stock dividend, stock split, combination or exchange of Shares,
recapitalization or other change in the capital structure of the Company, (y)
any merger, consolidation, spin-off, spin-out, split-off, split-up,
reorganization, partial or complete liquidation, or other distribution of assets
(other than a normal cash dividend), issuance of rights or warrants to purchase
securities, or (z) any other corporate transaction or event having an effect
similar to any of the foregoing. Moreover, in the event of any such transaction
or event, the Committee may provide in substitution for any or all outstanding
Awards under this Plan such alternative consideration as it may in good faith
determine to be equitable under the circumstances and may require in connection
therewith the surrender of all Awards so replaced. The Committee may also make
or provide for such adjustments in the number of Shares specified in Section 4.1
as the Committee in its sole discretion may in good faith determine to be
appropriate in order to reflect any transaction or event described in this
Section 4.3. Any adjustment pursuant to this Section 4.3 will be conclusive and
binding for all purposes of the Plan.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 ELIGIBILITY. Persons eligible to participate in the Plan are
limited to Non-employee Directors.
5.2 ACTUAL PARTICIPATION. All new Non-employee Directors will receive a
grant of Restricted Stock pursuant to Section 6.1 and a grant of Options
pursuant to Section 7.1. All Non-employee Directors will receive grants of
Restricted Stock pursuant to Section 6.2 and grants of Options pursuant to
Section 7.2. All Non-employee Directors will be eligible to receive grants of
Restricted Stock pursuant to Section 6.3 and grants of Options pursuant to
Section 7.3.
4
<PAGE>
ARTICLE 6. RESTRICTED STOCK GRANTS
6.1 INITIAL GRANT OF RESTRICTED STOCK UPON FIRST BECOMING A
NON-EMPLOYEE DIRECTOR. Each individual who first becomes a Non-employee Director
on or after January 1, 1998, shall be granted 1,000 shares of Restricted Stock,
effective as of the Service Commencement Date. The specific terms of the
Restricted Stock grant will be subject to this Article 6 and the Restricted
Stock Agreement executed pursuant to Section 6.4.
6.2 ANNUAL GRANT OF RESTRICTED STOCK. Each individual who is a
Non-employee Director on the relevant Grant Date shall be granted 1,000 Shares
of Restricted Stock on such Grant Date, through and including the November 1,
2004 Grant Date, subject to the limitation on the number of Shares that may be
awarded under the Plan. The specific terms of each annual Restricted Stock grant
will be subject to the provisions of this Article 6 and the Restricted Stock
Agreement executed pursuant to Section 6.4.
6.3 DISCRETIONARY GRANT OF RESTRICTED STOCK. The Board and the
Committee shall each have the authority to grant Restricted Stock, in addition
to that granted under Sections 6.1 and 6.2, in such amounts and at such times as
the Board or the Committee determines appropriate. The specific terms of a
discretionary Restricted Stock grant made pursuant to this Section 6.3 will be
subject to the provisions of this Article 6 and the Restricted Stock Agreement
executed pursuant to Section 6.4.
6.4 RESTRICTED STOCK AGREEMENT. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Agreement that will not include any terms or
conditions that are inconsistent with the terms and conditions of the Plan.
6.5 NONTRANSFERABILITY OF RESTRICTED STOCK. The Shares of Restricted
Stock granted may not be sold, transferred, pledged, assigned, or otherwise
alienated until the end of the applicable Period of Restriction.
6.6 PERIOD OF RESTRICTION. Restricted Stock granted at each Grant Date
shall be deemed to be a separate grant. Subject to the last paragraph of this
Section 6.6, the Period of Restriction for each grant of Shares of Restricted
Stock under this Article 6 shall expire on the later to occur of:
(a) the target vesting date determined pursuant to the
schedule below; and
(b) the date the stock price hurdles with respect to each
grant of Restricted Stock are met in accordance with the schedule below, on or
after the target vesting date.
- - --------------------------------------------------------------------------------
Percentage of Shares in Target Vesting Date Stock Price Hurdle
Grant Become Unrestricted After Target Vesting Date
- - --------------------------------------------------------------------------------
First 34% First anniversary of Fair Market Value on the
the Grant Date Grant Date plus 10%
- - --------------------------------------------------------------------------------
Second 33% Second anniversary of First stock price
the Grant Date hurdle plus 10%
- - --------------------------------------------------------------------------------
Third 33% Third anniversary of Second stock price
the Grant Date hurdle plus 10%
- - --------------------------------------------------------------------------------
5
<PAGE>
Notwithstanding the foregoing, the number of Shares of Restricted Stock
that have satisfied the requirements of paragraphs (a) and (b) above (the
"Vested Restricted Stock"), for which the Period of Restriction shall expire
shall equal the lesser of the number of such Shares of Vested Restricted Stock
or "A," where "A" is determined in accordance with the following formula:
A = B - (2 x C)
-----------
2
For purposes of the foregoing formula: (1) "B" shall equal the total number of
Shares (excluding options or warrants to purchase Shares) that the Participant
has owned for at least 12 months for which the Periods of Restriction, if
applicable, have expired and that are no longer subject to any restrictions
under this Plan; and (2) "C" shall equal the number of Shares of Restricted
Stock previously granted to Participant under the Plan for which the Periods of
Restriction have expired and that are no longer subject to any restrictions
under the Plan.
6.7 CERTIFICATE LEGEND. Any certificate representing Shares of
Restricted Stock granted pursuant to the Plan shall bear the following legend:
"The sale or other transfer of the Shares of stock represented by this
certificate, whether voluntary, involuntary, or by operation of law, is
subject to certain restrictions on transfer as set forth in the
MicroAge, Inc. 1995 Director Incentive Plan, and the corresponding
Restricted Stock Agreement. A copy of the Plan and the Restricted Stock
Agreement may be obtained from the Secretary of MicroAge, Inc."
6.8 REMOVAL OF RESTRICTIONS. Except as otherwise provided in the Plan,
Shares of Restricted Stock covered by each Restricted Stock grant made under the
Plan shall become freely transferable by the Director after the last day of the
Period of Restriction. Once the Shares are released from the restrictions, the
Director shall be entitled to have the legend required by Section 6.7 removed
from his or her Share certificate. All rights with respect to the Restricted
Stock granted to a Director under the Plan shall be available during his or her
lifetime only to such Director.
6.9 VOTING RIGHTS. During the Period of Restriction, Directors holding
Shares of Restricted Stock granted hereunder shall have voting rights with
respect to those Shares.
6.10 DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of
Restriction, Directors holding Shares of Restricted Stock granted hereunder
shall be entitled to receive any dividend or other distribution paid with
respect to those Shares while they are so held.
6.11 TERMINATION OF SERVICE ON BOARD. If a Participant's service on the
Board terminates for any reason before the end of a Period of Restriction with
respect to any grant of Restricted Stock, the Restricted Stock that is subject
to a Period of Restriction shall continue to vest in accordance with the
schedule set forth in Section 6.6 until the third anniversary of the date upon
which a Participant's service on the Board terminates, at which time the
Restricted Stock that remains subject to a Period of Restriction shall be
forfeited (and will again be available for grant under the Plan).
6
<PAGE>
ARTICLE 7. OPTION GRANTS
7.1 INITIAL GRANT OF OPTIONS UPON FIRST BECOMING A NON-EMPLOYEE
DIRECTOR. Each individual who first becomes a Non-employee Director on or after
January 1, 1998, shall be granted an Option to purchase 2,500 Shares, effective
as of the Service Commencement Date. The specific terms of the Option will be
subject to the provisions of this Article 7 and the Option Agreement executed
pursuant to Section 7.5.
7.2 ANNUAL GRANT OF OPTIONS. Beginning with the November 1, 1998 Grant
Date, each individual who is a Non-employee Director on the Grant Date shall be
granted an Option to purchase 2,500 Shares on such Grant Date through and
including the November 1, 2004 Grant Date, subject to the limitations on the
number of Shares that may be awarded under this Plan. The specific terms of each
annual Option grant are subject to the provisions of this Article 7 and the
Option Agreement executed pursuant to Section 7.5.
7.3 DISCRETIONARY GRANT OF OPTIONS. The Board and the Committee shall
have the authority to grant Options, in addition to those granted under Sections
7.1 and 7.2, in such amounts and at such times as the Board or the Committee
determines appropriate. The specific terms of a discretionary Option grant made
pursuant to this Section 7.3 will be subject to the provisions of this Article 7
and the Option Agreement executed pursuant to Section 7.5.
7.4 EXERCISABILITY. Options granted at each Grant Date under this Plan
shall be deemed to be a separate grant. The Participant may exercise all or part
of each separate Option granted under this Plan on or after the later to occur
of:
(a) the date each Option grant vests in accordance with the
schedule below; and
(b) the date the stock price hurdles with respect to each
Option grant are met in accordance with the schedule below, on or after the date
the Option grant vests.
- - --------------------------------------------------------------------------------
Percentage of Shares Date Option Stock Price Hurdle
Exercisable in Option Grant Grant Vests After Vesting Date
- - --------------------------------------------------------------------------------
First 34% First anniversary of Option Price
the Grant Date plus 10%
- - --------------------------------------------------------------------------------
Second 33% Second anniversary of First stock price
the Grant Date hurdle plus 10%
- - --------------------------------------------------------------------------------
Third 33% Third anniversary of Second stock price
the Grant Date hurdle plus 10%
- - --------------------------------------------------------------------------------
Notwithstanding the above, each Option under this Plan will become 100%
exercisable on the ninth anniversary of the date such Option is granted, unless
such Option expires before such date in accordance with the terms of this Plan.
The Option may not be exercised at any time after the expiration date in 7.7
below.
7
<PAGE>
7.5 OPTION AGREEMENT. Each Option grant will be evidenced by an Option
Agreement that will not include any terms or conditions that are inconsistent
with the terms and conditions of this Plan.
7.6 OPTION PRICE. The exercise price per Share under an Option granted
pursuant to this Article 7 shall be equal to the Fair Market Value of such Share
on the date of the relevant Grant Date ("Option Price").
7.7 DURATION OF OPTIONS. Each Option granted under this Article 7 shall
expire on the tenth anniversary date of its grant unless the Option is earlier
terminated, forfeited, or surrendered pursuant to a provision of this Plan or
the applicable Option Agreement.
7.8 PAYMENT. Options are exercisable by delivering a written notice of
exercise to the Secretary of the Company, setting forth the number of Shares to
be exercised, accompanied by full payment for the Shares. The Option Price is
payable:
(a) in cash or its equivalent;
(b) by tendering previously acquired Shares having a Fair
Market Value at the time of exercise equal to the total Option Price (provided
that the Shares tendered upon Option exercise have been held by the Participant
for at least six months prior to their tender to satisfy the Option Price); or
(c) by a combination of (a) and (b).
As soon as practicable after receipt of a written notification of
exercise and full payment, the Company shall cause to be delivered to the
Participant, in the Participant's name, Share certificates in an appropriate
amount based upon the number of Shares purchased pursuant to the exercise of the
Option.
7.9 RESTRICTIONS ON SHARE TRANSFERABILITY. To the extent necessary to
ensure that Options granted under this Article 7 comply with applicable law, the
Board shall impose restrictions on any Shares acquired pursuant to the exercise
of an Option under this Article 7, including, without limitation, restrictions
under applicable federal securities laws, under the requirements of any Stock
exchange or market upon which such Shares are then listed and/or traded, and
under any blue sky or state securities laws applicable to such Shares.
7.10 TERMINATION OF SERVICE ON BOARD. If a Participant's service on the
Board is terminated for any reason, and a portion of the Participant's Award is
not fully vested or exercisable as of that date, the portion of the
Participant's Award that is exercisable and fully vested will remain fully
vested and exercisable. The portion of the Award that is not fully vested and
exercisable shall continue to vest in accordance with the schedule set forth in
Section 7.4 and will become exerciseable at the time described in Section 7.4.
To the extent an Option is exerciseable as of the date of termination
of service on the Board, or becomes exerciseable thereafter, it will remain
exerciseable at any time prior to its expiration date by the Participant or such
other person or persons as shall have been named as the Participant's legal
representative or beneficiary, or by such persons that have acquired the
Participant's rights under the Option by will or by the laws of descent and
distribution.
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7.11 NONTRANSFERABILITY OF OPTIONS. Except as otherwise allowed by
uniform rules adopted by the Board or the Committee, no Option granted under
this Article 7 shall be sold, transferred, pledged, assigned, or otherwise
alienated, other than by will, or by the laws of descent and distribution.
Further, all Options granted to a Participant under this Article 7 shall be
exercisable during his or her lifetime only by such Participant.
ARTICLE 8. CHANGE OF CONTROL
8.1 EFFECT OF CHANGE OF CONTROL ON RESTRICTED STOCK. In the event of a
Change of Control of the Company, all Restricted Stock granted under the Plan
that is still outstanding and not yet vested or still subject to a Period of
Restriction, shall become immediately 100% vested in each Participant and the
Period of Restriction shall immediately expire, as of the first date that the
definition of Change of Control has been fulfilled.
8.2 EFFECT OF CHANGE OF CONTROL ON OPTIONS. In the event of a Change of
Control of the Company, all Options granted under the Plan that are still
outstanding and not yet vested and exerciseable, shall become immediately 100%
vested in each Participant and exerciseable, as of the first date that the
definition of Change of Control has been fulfilled, and shall be exercisable for
the remaining duration of the Option. All Options that are exercisable as of the
effective date of the Change of Control will remain exercisable for the
remaining duration of the Option
ARTICLE 9. AMENDMENT, MODIFICATION, AND TERMINATION
9.1 AMENDMENT, MODIFICATION, AND TERMINATION. The Committee may
terminate, amend, or modify the Plan at any time and from time to time. However,
the Committee may not amend, modify, or terminate the Plan without stockholder
approval if stockholder approval is required under applicable law or by any
national securities exchange or system on which the Shares are then listed or
reported.
9.2 AWARDS PREVIOUSLY GRANTED. Unless required by law, no termination,
amendment, or modification of the Plan shall in any manner adversely affect any
Award previously granted under the Plan, without the written consent of the
Participant holding the Award.
ARTICLE 10. MISCELLANEOUS
10.1 INDEMNIFICATION. Each individual who is or was a member of the
Board shall be indemnified and held harmless by the Company from any loss, cost,
liability, or expense that may be imposed upon or reasonably incurred by him or
her in connection with or resulting from any claim, action, suit, or proceeding
to which he or she may be a party or in which he or she may be involved by
reason of any action taken or failure to act under this Plan and from any and
all amounts paid by him or her in settlement thereof, with the Company's
approval, or paid by him or her in satisfaction of any judgment in any such
action, suit, or proceeding against him or her, provided he or she shall give
the Company an opportunity, at its own expense, to assume and defend the same
before he or she undertakes to defend it on his or her own behalf.
The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such individuals may be entitled under
the Company's Certificate of Incorporation or By-Laws,
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as a matter of law, or otherwise, or any power that the Company may have to
indemnify them or hold them harmless.
10.2 BENEFICIARY DESIGNATION. Each Participant under the Plan may name
any beneficiary or beneficiaries to whom any benefit under the Plan is to be
paid in the event of his or her death. Each designation will revoke all prior
designations by the same Participant, shall be in a form prescribed by the
Committee, and will be effective only when filed by the Participant in writing
with the Committee during his or her lifetime. In the absence of any such
designation, benefits remaining unpaid at the Participant's death shall be paid
to the Participant's estate.
10.3 SUCCESSORS. All obligations of the Company under the Plan, with
respect to Awards granted hereunder, shall be binding on any successor to the
Company, whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation, or otherwise, of all or substantially
all of the business and/or assets of the Company.
10.4 REQUIREMENTS OF LAW. The granting of Awards under the Plan shall
be subject to all applicable laws, rules, and regulations, and to such approvals
by any governmental agencies or national securities exchanges as may be
required. Notwithstanding any other provisions of the Plan, the Committee may,
in its sole discretion, terminate, amend, or modify the Plan in any way
necessary to comply with applicable requirements of Rule 16b-3 promulgated by
the Securities and Exchange Commission as interpreted pursuant to no-action
letters and interpretive releases.
10.5 GOVERNING LAW. To the extent not preempted by federal law, the
Plan, and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of Arizona.
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MICROAGE, INC.
1997 LONG-TERM INCENTIVE PLAN
ARTICLE 1 PURPOSE
1.1 GENERAL. The purpose of the MicroAge, Inc. 1997 Long-Term Incentive
Plan (the "Plan") is to promote the success, and enhance the value, of MicroAge,
Inc. (the "Company") by linking the personal interests of its officers,
associates and independent contractors or consultants to those of Company
shareholders and by providing its officers, key associates, independent
contractors and consultants with an incentive for outstanding performance. The
Plan is further intended to provide flexibility to the Company in its ability to
motivate, attract, and retain the services of such individuals upon whose
judgment, interest, and special effort the successful conduct of the Company's
operation is largely dependent. Accordingly, the Plan permits the grant of
incentive awards from time to time to officers, other key associates, and
independent contractors and consultants.
ARTICLE 2 EFFECTIVE DATE
2.1 EFFECTIVE DATE. The Plan is effective as of September 25, 1997 (the
"Effective Date). Within one year after the Effective Date, the Plan shall be
submitted to the shareholders of the Company for their approval. The Plan will
be deemed to be approved by the shareholders if it receives the affirmative vote
of the holders of a majority of the shares of stock of the Company present, or
represented, and entitled to vote at a meeting duly held in accordance with
applicable provisions of the Delaware General Corporation Law and the Company's
By-Laws and Certificate of Incorporation. Any Awards granted under the Plan
prior to shareholder approval are effective when made (unless the Committee
specifies otherwise at the time of grant), but no Award may be exercised or
settled and no restrictions relating to any Award may lapse before shareholder
approval. If the shareholders fail to approve the Plan, any Award previously
made shall be automatically canceled without any further act.
ARTICLE 3 DEFINITIONS AND CONSTRUCTION.
3.1 DEFINITIONS. When a word or phrase appears in this Plan with the
initial letter capitalized, and the word or phrase does not commence a sentence,
the word or phrase shall generally be given the meaning ascribed to it in this
Section or in Sections 1.1 or 2.1 unless a clearly different meaning is required
by the context. The following words and phrases shall have the following
meanings:
(a) "Award" means any Option, Stock Appreciation Right,
Restricted Stock Award, Performance Share Award, or Performance-Based
Award granted to a Participant under the Plan.
(b) "Award Agreement" means any written agreement, contract,
or other instrument or document evidencing an Award.
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(c) "Board" means the Board of Directors of the Company.
(d) "Change of Control" means and includes each of the
following:
(1) A change of control of the Company of a nature
that would be required to be reported in response to Item 6(e)
of Schedule 14A of the Securities Exchange Act of 1934, as
amended ("1934 Act") regardless of whether the Company is
subject to such reporting requirement;
(2) A change of control of the Company through a
transaction or series of transactions, such that any person
(as that term is used in Section 13 and 14(d)(2) of the 1934
Act), excluding affiliates of the Company as of the Effective
Date, is or becomes the beneficial owner (as that term is used
in Section 13(d) of the 1934 Act) directly or indirectly, of
securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding
securities;
(3) The individuals who, as of the Effective Date,
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 Effective Date 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 1934
Act or any successor provision thereto) shall be, for purposes
of this paragraph, considered as though such person were a
member of the Incumbent Board;
(4) Any consolidation or liquidation of the Company
in which the Company is not the continuing or surviving
corporation or pursuant to which Stock would be converted into
cash, securities or other property, other than a merger of the
Company in which the holders of the shares of Stock
immediately before the merger have the same proportionate
ownership of common stock of the surviving corporation
immediately after the merger;
(5) The shareholders of the Company approve any plan
or proposal for the liquidation or dissolution of the Company;
or
(6) Substantially all of the assets of the Company
are sold or otherwise transferred to parties that are not
within a "controlled group of corporations" (as defined in
Section 1563 of the Code) in which the Company is a member.
(e) "Code" means the Internal Revenue Code of 1986, as
amended.
(f) "Committee" means the committee of the Board described in
Article 4.
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(g) "Covered Employee" means an Employee who is a "covered
employee" within the meaning of Section 162(m) of the Code.
(h) "Disability shall mean any illness or other physical or
mental condition of a Participant which renders the Participant
incapable of performing his customary and usual duties for the Company,
or any medically determinable illness or other physical or mental
condition resulting from a bodily injury, disease or mental disorder
which in the judgment of the Committee is permanent and continuous in
nature. The Committee may require such medical or other evidence as it
deems necessary to judge the nature and permanency of the Participant's
condition.
(i) "Fair Market Value" means, as of any given date, the fair
market value of Stock or other property determined by such methods or
procedures as may be established from time to time by the Committee.
Unless otherwise determined by the Committee, the Fair Market Value of
Stock as of any date shall be the closing price for the Stock as
reported on the NASDAQ National Market System (or on any national
securities exchange on which the Stock is then listed) for that date
or, if no closing price is so reported for that date, the closing price
on the next preceding date for which a closing price was reported.
(j) "Incentive Stock Option" means an Option that is intended
to meet the requirements of Section 422 of the Code or any successor
provision thereto.
(k) "Non-Employee Director" means of member of the Board who
qualifies as a "Non-Employee Director" as defined in Rule 16b-3(b)(3)
of the Exchange Act, or any successor definition adopted by the Board.
(l) "Non-Qualified Stock Option" means an Option that is not
intended to be an Incentive Stock Option.
(m) "Option" means a right granted to a Participant under
Article 7 of the Plan to purchase Stock at a specified price during
specified time periods. An Option may be either an Incentive Stock
Option or a Non-Qualified Stock Option.
(n) "Participant" means a person who, as an officer, key
associate, independent contractor or consultant of the Company or any
Subsidiary, has been granted an Award under the Plan.
(o) "Performance-Based Awards" means the Restricted Stock
Awards and Performance Share Awards granted to selected Covered
Employees pursuant to Articles 9 and 10, but which are subject to the
terms and conditions set forth in Article 11. All Performance-Based
Awards are intended to qualify as "performance-based compensation"
under Section 162(m) of the Code.
(p) "Performance Criteria" means the criteria that the
Committee selects for purposes of establishing the Performance Goal or
Performance Goals for a Participant for a Performance Period. The
Performance Criteria that will be used to establish Performance Goals
are limited to the following: pre- or after-tax net earnings, revenue
growth, operating income, operating cash flow,
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return on net assets, return on shareholders' equity, return on assets,
return on capital, Stock price growth, shareholder returns, gross or
net profit margin, earnings per share, price per share of Stock, and
market share, any of which may be measured either in absolute terms or
as compared to any incremental increase or as compared to results of
one or more companies or of a peer group. The Committee shall, within
the time prescribed by Section 162(m) of the Code, define in an
objective fashion the manner of calculating the Performance Criteria it
selects to use for such Performance Period for such Participant.
(q) "Performance Goals" means, for a Performance Period, the
goals established in writing by the Committee for the Performance
Period based upon the Performance Criteria. Depending on the
Performance Criteria used to establish such Goal, the Goal may be
expressed in terms of overall Company performance or the performance of
an operating unit or the performance of the individual. The Committee,
in its discretion, may, within the time prescribed by Section 162(m) of
the Code, adjust or modify the calculation of Performance Goals for
such Performance Period in order to prevent the dilution or enlargement
of the rights of Participants, (i) in the event of, or in anticipation
of, any unusual or extraordinary corporate item, transaction, event, or
development; (ii) in recognition of, or in anticipation of, any other
unusual or nonrecurring events affecting the Company, or the financial
statements of the Company; or (iii) in response to, or in anticipation
of, changes in applicable laws, regulations, accounting principles, or
business conditions.
(r) "Performance Period" means the one or more periods of
time, which may be of varying and overlapping durations, as the
Committee may select, over which the attainment of one or more
Performance Goals will be measured for the purpose of determining a
Participant's right to, and the payment of, a Performance-Based Award.
(s) "Performance Share" means a right granted to a Participant
under Article 9, to receive cash, Stock, or other Awards, the payment
of which is contingent upon achieving certain performance goals
established by the Committee.
(t) "Plan" means the MicroAge, Inc. 1997 Long-Term Incentive
Plan, as amended from time to time.
(u) "Restricted Stock Award" means Stock granted to a
Participant under Article 10 that is subject to certain restrictions
and to risk of forfeiture.
(v) "Retirement" means a Participant's termination of
employment with the Company after attaining any normal or early
retirement age specified in any pension, profit sharing or other
retirement program sponsored by the Company.
(w) "Stock" means the common stock of the Company and such
other securities of the Company that may be substituted for Stock
pursuant to Article 13.
(x) "Stock Appreciation Right" or "SAR" means a right granted
to a Participant under Article 8 to receive a payment equal to the
difference between the Fair Market Value of a share of
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Stock as of the date of exercise of the SAR over the grant price of the
SAR, all as determined pursuant to Article 8.
(y) "Subsidiary" means any corporation of which a majority of
the outstanding voting stock or voting power is beneficially owned
directly or indirectly by the Company.
ARTICLE 4 ADMINISTRATION
4.1 COMMITTEE. The Plan shall be administered by a Committee that is
appointed by, and shall serve at the discretion of, the Board. The Committee
shall consist of at least two individuals, each of whom qualifies as (i) a
Non-Employee Director, and (ii) an "outside director" under Code Section 162(m)
and the regulations issued thereunder. Subject to the foregoing, the
Compensation Committee of the Board shall constitute the Committee, unless the
Board determines otherwise.
4.2 ACTION BY THE COMMITTEE. A majority of the Committee shall
constitute a quorum. The acts of a majority of the members present at any
meeting at which a quorum is present and acts approved in writing by a majority
of the Committee in lieu of a meeting shall be deemed the acts of the Committee.
Each member of the Committee is entitled to, in good faith, rely or act upon any
report or other information furnished to that member by any officer or other
associate of the Company or any Subsidiary, the Company's independent certified
public accountants, or any executive compensation consultant or other
professional retained by the Company to assist in the administration of the
Plan.
4.3 AUTHORITY OF COMMITTEE. The Committee has the exclusive power,
authority and discretion to:
(a) Designate Participants to receive Awards;
(b) Determine the type or types of Awards to be granted to
each Participant;
(c) Determine the number of Awards to be granted and the
number of shares of Stock to which an Award will relate;
(d) Determine the terms and conditions of any Award granted
under the Plan including but not limited to, the exercise price, grant
price, or purchase price, any restrictions or limitations on the Award,
any schedule for lapse of forfeiture restrictions or restrictions on
the exercisability of an Award, and accelerations or waivers thereof,
based in each case on such considerations as the Committee in its sole
discretion determines; provided, however, that the Committee shall not
have the authority to accelerate the vesting, or waive the forfeiture,
of any Performance-Based Awards;
(e) Determine whether, to what extent, and under what
circumstances an Award may be settled in, or the exercise price of an
Award may be paid in, cash, Stock, other Awards, or other property, or
an Award may be canceled, forfeited, or surrendered;
(f) Prescribe the form of each Award Agreement, which need not
be identical for each Participant;
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(g) Decide all other matters that must be determined in
connection with an Award;
(h) Establish, adopt or revise any rules and regulations as it
may deem necessary or advisable to administer the Plan; and
(i) Make all other decisions and determinations that may be
required under the Plan or as the Committee deems necessary or
advisable to administer the Plan.
4.4 DECISIONS BINDING. All decisions and determinations made by the
Committee with respect to any Award granted under the Plan, any Award Agreement,
or the interpretation of the Plan are final, binding and conclusive on all
parties.
ARTICLE 5 SHARES SUBJECT TO THE PLAN
5.1 NUMBER OF SHARES. Subject to adjustment provided in Section 13.1,
the aggregate number of shares of Stock reserved and available for grant under
the Plan shall be 2,000,000.
5.2 LAPSED AWARDS. To the extent that an Award terminates, expires or
lapses for any reason, any shares of Stock subject to the Award will again be
available for the grant of an Award under the Plan and shares subject to SARs or
other Awards settled in cash will be available for the grant of an Award under
the Plan.
5.3 STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may
consist, in whole or in part, of authorized and unissued Stock, treasury Stock
or Stock purchased on the open market.
5.4 LIMITATION ON NUMBER OF SHARES SUBJECT TO AWARDS. Notwithstanding
any provision in the Plan to the contrary, and subject to the adjustment in
Section 13.1, the maximum number of shares of Stock with respect to one or more
Awards that may be granted to any one Participant during any fiscal year of the
Company shall be 200,000.
ARTICLE 6 ELIGIBILITY AND PARTICIPATION
6.1 ELIGIBILITY. Persons eligible to participate in this Plan include
all officers, key associates and independent contractors and consultants of the
Company or a Subsidiary, as determined by the Committee, including associates
who are also members of the Board, but excluding those Board members who are not
also associates of the Company or a Subsidiary.
6.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may, from time to time, select from among all eligible associates,
those to whom Awards shall be granted and shall determine the nature and amount
of each Award. No associate shall have any right to be granted an Award under
this Plan.
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ARTICLE 7 STOCK OPTIONS
7.1 GENERAL. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(a) EXERCISE PRICE. The exercise price per share of Stock
under an Option shall be determined by the Committee and set forth in
the Award Agreement. The exercise price for any Option shall not be
less than the Fair Market Value as of the date of grant.
(b) TIME AND CONDITIONS OF EXERCISE. The Committee shall
determine the time or times at which an Option may be exercised in
whole or in part. The Committee also shall determine the performance or
other conditions, if any, that must be satisfied before all or part of
an Option may be exercised.
(c) PAYMENT. The Committee shall determine the methods by
which the exercise price of an Option may be paid, the form of payment,
including, without limitation, cash, shares of Stock, or other property
(including broker-assisted "cashless exercise" arrangements), and the
methods by which shares of Stock shall be delivered or deemed to be
delivered to Participants.
(d) EVIDENCE OF GRANT. All Options shall be evidenced by a
written Award Agreement between the Company and the Participant. The
Award Agreement shall include such provisions as may be specified by
the Committee.
7.2 INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock Options
granted under the Plan must comply with the following additional rules:
(a) EXERCISE PRICE. The exercise price per share of Stock
shall be set by the Committee, provided that the exercise price for any
Incentive Stock Option may not be less than the Fair Market Value as of
the date of the grant.
(b) EXERCISE. In no event, may any Incentive Stock Option be
exercisable for more than ten years from the date of its grant.
(c) LAPSE OF OPTION. An Incentive Stock Option shall lapse
under the following circumstances:
(1) The Incentive Stock Option shall lapse ten years
from the date it is granted, unless an earlier time is set in
the Award Agreement.
(2) The Incentive Stock Option shall lapse in
accordance with the Option Agreement, but shall in no event be
exercisable for a period exceeding three months after the
Participant's termination of employment, other than for
Disability or death, in which case the Incentive Stock Option
shall lapse no later than 12 months after such Disability or
death.
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(d) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market
Value (determined as of the time an Award is made) of all shares of
Stock with respect to which Incentive Stock Options are first
exercisable by a Participant in any calendar year may not exceed
$100,000.00 or such other dollar limitation as set forth in Section
422(d) of the Code or any successor provision. If for any reason
Incentive Stock Options that are first exercisable for any Participant
in any calendar year exceed this limitation, the excess Options shall
be deemed to be Non-Qualified Stock Options.
(e) TEN PERCENT OWNERS. An Incentive Stock Option shall be
granted to any individual who, at the date of grant, owns stock
possessing more than ten percent of the total combined voting power of
all classes of Stock of the Company only if such Option is granted at a
price that is not less than 110% of Fair Market Value on the date of
grant and the Option is exercisable for no more than five years from
the date of grant.
(f) EXPIRATION OF INCENTIVE STOCK OPTIONS. No Award of an
Incentive Stock Option may be made pursuant to this Plan after the
tenth anniversary of the Effective Date.
(g) RIGHT TO EXERCISE. During a Participant's lifetime, an
Incentive Stock Option may be exercised only by the Participant.
7.3 MANAGEMENT EQUITY PROGRAM
(a) ELIGIBILITY. In addition to any other Award granted to a
Participant under the Plan, the Committee may, in its sole and absolute
discretion, select one or more Participants to participate in the
Management Equity Program. Under the Management Equity Program,
selected Participants may receive Awards of Options pursuant to the
terms and conditions set forth in this Section 7.3
(b) RECEIPT OF AWARDS. A Participant selected to participate
in the Management Equity Program shall receive Awards of Options in
exchange for the Participant's irrevocable waiver of a designated
amount or percentage of the Participant's base salary or any bonuses
otherwise payable during the period the waiver is in effect. The
receipt of the Options pursuant to the Management Equity Program shall
be subject to such terms and conditions as determined by the Committee
in its sole and absolute discretion and as set forth in a Management
Equity Program Award Agreement.
(c) FORMULA. The number of Non-Qualified Stock Options granted
to the Participant pursuant to this Section 7.3 shall be determined by
multiplying the total dollar amount of the base salary or bonuses
waived by the Participant under a Management Equity Program Award
Agreement by a leveraging factor and dividing the product by the Fair
Market Value of one share of Stock as of the first day of the calendar
year for which the Participant's waiver is first effective, or as of
the original effective date of the waiver if the waiver is first
effective as of some date other than the first day of a calendar year.
(d) MANAGEMENT EQUITY PROGRAM AWARD AGREEMENT. Subsequent to a
Participant being selected to participate in the Management Equity
Program, such Participant shall
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enter into a Management Equity Program Award Agreement in such form and
at such time as the Committee shall require.
(e) WAIVER REQUIREMENTS AND RESTRICTIONS. In any one
Management Equity Program Award Agreement, a Participant shall not be
allowed to waive his base salary or any bonuses for more than a three
(3) year period, except that bonuses may be waived over a longer period
as may be required, up to the maximum of a ten (10) year period. The
Committee shall determine, in its sole and absolute discretion, the
minimum or maximum percentage of base salary or any bonuses that may be
waived by a Participant, the leveraging factor to be used in the
formula set forth in Section 7.3(c) and all other matters the Committee
deems necessary or advisable for implementing the Management Equity
Program. Any and all rules or procedures adopted by the Committee
pursuant to the preceding sentence shall be in writing and shall be
communicated to all Participants selected by the Committee for
participation in the Management Equity Program.
ARTICLE 8 STOCK APPRECIATION RIGHTS
8.1 GRANT OF SARs. The Committee is authorized to grant SARs to
Participants on the following terms and conditions:
(a) RIGHT TO PAYMENT. Upon the exercise of a Stock
Appreciation Right, the Participant to whom it is granted has the right
to receive the excess, if any, of:
(1) The Fair Market Value of a share of Stock on the
date of exercise; over
(2) The grant price of the Stock Appreciation Right
as determined by the Committee, which shall not be less than
the Fair Market Value of a share of Stock on the date of grant
in the case of any SAR related to any Incentive Stock Option.
(b) OTHER TERMS. All awards of Stock Appreciation Rights shall
be evidenced by an Award Agreement. The terms, methods of exercise,
methods of settlement, form of consideration payable in settlement, and
any other terms and conditions of any Stock Appreciation Right shall be
determined by the Committee at the time of the grant of the Award and
shall be reflected in the Award Agreement.
ARTICLE 9 PERFORMANCE SHARES
9.1 GRANT OF PERFORMANCE SHARES. The Committee is authorized to grant
Performance Shares to Participants on such terms and conditions as may be
selected by the Committee. The Committee shall have the complete discretion to
determine the number of Performance Shares granted to each Participant. All
Awards of Performance Shares shall be evidenced by an Award Agreement.
9.2 RIGHT TO PAYMENT. Upon the Award of a Performance Share, the
Participant has the right to receive the cash, stock, or other property
evidenced by the Award Agreement. The Committee shall set performance goals and
other terms or conditions to payment of the Performance Shares in its discretion
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which, depending on the extent to which they are met, will determine the number
and value of Performance Shares that will be paid to the Participant, provided
that the time period during which the performance goals must be met shall, in
all cases, exceed six months.
9.3 OTHER TERMS. Performance Shares may be payable in cash, Stock, or
other property, and have such other terms and conditions as determined by the
Committee and reflected in the Award Agreement.
ARTICLE 10 RESTRICTED STOCK AWARDS
10.1 GRANT OF RESTRICTED STOCK. The Committee is authorized to make
Awards of Restricted Stock to Participants in such amounts and subject to such
terms and conditions as may be selected by the Committee. All Awards of
Restricted Stock shall be evidenced by a Restricted Stock Award Agreement.
10.2 ISSUANCE AND RESTRICTIONS. Restricted Stock shall be subject to
such restrictions on transferability and other restrictions as the Committee may
impose (including, without limitation, limitations on the right to vote
Restricted Stock or the right to receive dividends on the Restricted Stock).
These restrictions may lapse separately or in combination at such times, under
such circumstances, in such installments, or otherwise, as the Committee
determines at the time of the grant of the Award or thereafter.
10.3 FORFEITURE. Except as otherwise determined by the Committee at the
time of the grant of the Award or thereafter, upon termination of employment
during the applicable restriction period, Restricted Stock that is at that time
subject to restrictions shall be forfeited and reacquired by the Company,
provided, however, that the Committee may provide in any Award Agreement that
restrictions or forfeiture conditions relating to Restricted Stock will be
waived in whole or in part in the event of terminations resulting from specified
causes, and the Committee may in other cases waive in whole or in part
restrictions or forfeiture conditions relating to Restricted Stock.
10.4 CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock granted under
the Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing shares of Restricted Stock are registered in the name
of the Participant, certificates must bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Restricted Stock, and
the Company shall retain physical possession of the certificate until such time
as all applicable restrictions lapse.
10
<PAGE>
ARTICLE 11 PERFORMANCE-BASED AWARDS
11.1 PURPOSE. The purpose of this Article 11 is to provide the
Committee the ability to qualify the Restricted Stock Awards under Article 10
and the Performance Share Awards under Article 9 as "performance-based
compensation" under Section 162(m) of the Code. If the Committee, in its
discretion, decides to grant a Performance-Based Award to a Covered Employee,
the provisions of this Article 11 shall control over any contrary provision
contained in Articles 9 or 10.
11.2 APPLICABILITY. This Article 11 shall apply only to those Covered
Employees selected by the Committee to receive Performance-Based Awards. The
Committee may, in its discretion, grant Restricted Stock Awards or Performance
Share Awards to Covered Employees that do not satisfy the requirements of this
Article 11. The designation of a Covered Employee as a Participant for a
Performance Period shall not in any manner entitle the Participant to receive an
Award for the period. Moreover, designation of a Covered Employee as a
Participant for a particular Performance Period shall not require designation of
such Covered Employee as a Participant in any subsequent Performance Period and
designation of one Covered Employee as a Participant shall not require
designation of any other Covered Employees as a Participant in such period or in
any other period.
11.3 DISCRETION OF COMMITTEE WITH RESPECT TO PERFORMANCE AWARDS. With
regard to a particular Performance Period, the Committee shall have full
discretion to select the length of such Performance Period, the type of
Performance-Based Awards to be issued, the kind and/or level of the Performance
Goal, and whether the Performance Goal is to apply to the Company, an operating
unit of the Company, or the Participant individually.
11.4 PAYMENT OF PERFORMANCE AWARDS. Unless otherwise provided in the
relevant Award Agreement, a Participant must be employed by the Company or a
Subsidiary on the last day of the Performance Period to be eligible for a
Performance Award for such Performance Period. Furthermore, a Participant shall
be eligible to receive payment under a Performance-Based Award for a Performance
Period only if the Performance Goals for such period are achieved.
In determining the actual size of an individual Performance-Based
Award, the Committee may reduce or eliminate the amount of the Performance-Based
Award earned for the Performance Period, if in its sole and absolute discretion,
such reduction or elimination is appropriate.
11.5 MAXIMUM AWARD PAYABLE. Notwithstanding any provision contained in
the Plan to the contrary, the maximum Performance-Based Award payable to any one
Participant under the Plan for a Performance Period is 200,000 Shares, or in the
event the Performance-Based Award is paid in cash, such maximum
Performance-Based Award shall be determined by multiplying 200,000 Shares by the
Fair Market Value of one Share as of the date of grant of the Performance-Based
Award.
ARTICLE 12 PROVISIONS APPLICABLE TO AWARDS
12.1 STAND-ALONE, TANDEM, AND SUBSTITUTE AWARDS. Awards granted under
the Plan may, in the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution for, any other Award granted
under the Plan. If an Award is granted in substitution for
11
<PAGE>
another Award, the Committee may require the surrender of such other Award in
consideration of the grant of the new Award. Awards granted in addition to or in
tandem with other Awards may be granted either at the same time as or at a
different time from the grant of such other Awards.
12.2 EXCHANGE PROVISIONS. The Committee may at any time offer to
exchange or buy out any previously granted Award for a payment in cash, Stock,
or another Award (subject to Section 12.1), based on the terms and conditions
the Committee determines and communicates to the Participant at the time the
offer is made.
12.3 TERM OF AWARD. The term of each Award shall be for the period as
determined by the Committee, provided that in no event shall the term of any
Incentive Stock Option or a Stock Appreciation Right granted in tandem with the
Incentive Stock Option exceed a period of ten years from the date of its grant.
12.4 FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan and
any applicable law or Award Agreement, payments or transfers to be made by the
Company or a Subsidiary on the grant or exercise of an Award may be made in such
forms as the Committee determines at or after the time of grant, including
without limitation, cash, Stock, other Awards, or other property, or any
combination, and may be made in a single payment or transfer, in installments,
or on a deferred basis, in each case determined in accordance with rules adopted
by, and at the discretion of, the Committee.
12.5 LIMITS ON TRANSFER. No right or interest of a Participant in any
Award may be pledged, encumbered, or hypothecated to or in favor of any party
other than the Company or a Subsidiary, or shall be subject to any lien,
obligation, or liability of such Participant to any other party other than the
Company or a Subsidiary. Except as otherwise provided by the Committee, no Award
shall be assignable or transferable by a Participant other than by will or the
laws of descent and distribution.
12.6 BENEFICIARIES. Notwithstanding Section 12.5, a Participant may, in
the manner determined by the Committee, designate a beneficiary to exercise the
rights of the Participant and to receive any distribution with respect to any
Award upon the Participant's death. A beneficiary, legal guardian, legal
representative, or other person claiming any rights under the Plan is subject to
all terms and conditions of the Plan and any Award Agreement applicable to the
Participant, except to the extent the Plan and Award Agreement otherwise
provide, and to any additional restrictions deemed necessary or appropriate by
the Committee. If the Participant is married, a designation of a person other
than the Participant's spouse as his beneficiary with respect to more than 50
percent of the Participant's interest in the Award shall not be effective
without the written consent of the Participant's spouse. If no beneficiary has
been designated or survives the Participant, payment shall be made to the person
entitled thereto under the Participant's will or the laws of descent and
distribution. 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 Committee.
12.7 STOCK CERTIFICATES. All Stock certificates delivered under the
Plan are subject to any stop-transfer orders and other restrictions as the
Committee deems necessary or advisable to comply with federal or state
securities laws, rules and regulations and the rules of any national securities
exchange or automated quotation system on with the Stock is listed, quoted, or
traded. The Committee may place legends on any Stock certificate to reference
restrictions applicable to the Stock.
12
<PAGE>
12.8 TENDER OFFERS. In the event of a public tender for all or any
portion of the Stock, or in the event that a proposal to merge, consolidate, or
otherwise combine with another company is submitted for shareholder approval,
the Committee may in its sole discretion declare previously granted Options to
be immediately exercisable. To the extent that this provision causes Incentive
Stock Options to exceed the dollar limitation set forth in Section 7.2(d), the
excess Options shall be deemed to be Non-Qualified Stock Options.
12.9 ACCELERATION UPON DEATH OR DISABILITY. Notwithstanding any other
provision in the Plan or any Participant's Award Agreement to the contrary, upon
the Participant's death or Disability, all outstanding Options, Stock
Appreciation Rights, and other Awards in the nature of rights that may be
exercised shall become fully exercisable and all restrictions on outstanding
Awards shall lapse. Any Option or Stock Appreciation Rights Awards shall then
lapse in accordance with the other provisions of this Plan and the Award
Agreement.
12.10 ACCELERATION UPON A CHANGE OF CONTROL. If a Change of Control
occurs, all outstanding Options, Stock Appreciation Rights, and other Awards in
the nature of rights that may be exercised shall become fully exercisable and
all restrictions on outstanding Awards shall lapse. In the event that the
Committee becomes aware of an event that will cause a Change of Control to
occur, the Committee may give each Participant the right to exercise Awards
prior to the occurrence of the event over such period as the Committee, in its
sole and absolute discretion, shall determine. To the extent that this provision
causes Incentive Stock Options to exceed the dollar limitation set forth in
Section 7.2(d), the excess Options shall be deemed to be Non-Qualified Stock
Options.
ARTICLE 13 ADJUSTMENTS
13.1 GENERAL. The Committee may make or provide for such adjustments in
the (a) number of shares of Stock covered by outstanding Awards granted
hereunder, (b) prices per share applicable to outstanding Awards and (c) kind of
shares covered thereby, as the Committee in its sole discretion may in good
faith determine to be equitably required in order to prevent dilution or
enlargement of the rights of Participants that otherwise would result from (x)
any stock dividend, stock split, combination or exchange of shares of Stock,
recapitalization or other change in the capital structure of the Company, (y)
any merger, consolidation, spin-off, spin-out, split-off, split-up,
reorganization, partial or complete liquidation, or other distribution of assets
(other than a normal cash dividend), issuance of rights or warrants to purchase
securities, or (z) any other corporate transaction or event having an effect
similar to any of the foregoing. Moreover, in the event of any such transaction
or event, the Committee may provide in substitution for any or all outstanding
Awards under this Plan such alternative consideration as it may in good faith
determine to be equitable under the circumstances and may require in connection
therewith the surrender of all Awards so replaced. The Committee may also make
or provide for such adjustments in the number of shares of Stock specified in
Section 5.1 as the Committee in its sole discretion may in good faith determine
to be appropriate in order to reflect any transaction or event described in this
Section 13.1. Any adjustment pursuant to this Section 13.1 will be conclusive
and binding for all purposes of the Plan.
13
<PAGE>
ARTICLE 14 AMENDMENT, MODIFICATION AND TERMINATION
14.1 AMENDMENT, MODIFICATION AND TERMINATION. With the approval of the
Board, at any time and from time to time, the Committee may terminate, amend or
modify the Plan.
14.2 AWARDS PREVIOUSLY GRANTED. No termination, amendment, or
modification of the Plan shall adversely affect in any material way any Award
previously granted under the Plan, without the written consent of the
Participant. The Committee also may modify the terms of a previously granted
Award; provided, however, that the Committee may not amend a previously granted
Award to the detriment of the Participant without the Participant's consent.
ARTICLE 15 GENERAL PROVISIONS
15.1 NO RIGHTS TO AWARDS. No Participant or employee shall have any
claim to be granted any Award under the Plan, and neither the Company nor the
Committee is obligated to treat Participants and associates uniformly.
15.2 NO STOCKHOLDERS RIGHTS. No Award gives the Participant any of the
rights of a shareholder of the Company unless and until shares of Stock are in
fact issued to such person in connection with such Award.
15.3 WITHHOLDING. The Company or any Subsidiary shall have the
authority and the right to deduct or withhold, or require a Participant to remit
to the Company, an amount sufficient to satisfy Federal, state, and local taxes
(including the Participant's FICA obligation) required by law to be withheld
with respect to any taxable event arising as a result of this Plan.
15.4 NO RIGHT TO EMPLOYMENT. Nothing in the Plan or any Award Agreement
shall interfere with or limit in any way the right of the Company or any
Subsidiary to terminate any Participant's employment at any time, nor confer
upon any Participant any right to continue in the employ of the Company or any
Subsidiary.
15.5 UNFUNDED STATUS OF AWARDS. The Plan is intended to be an
"unfunded" plan for incentive compensation. With respect to any payments not yet
made to a Participant pursuant to an Award, nothing contained in the Plan or any
Award Agreement shall give the Participant any rights that are greater than
those of a general creditor of the Company or any Subsidiary.
15.6 INDEMNIFICATION. To the extent allowable under applicable law,
each member of the Committee or of the Board shall be indemnified and held
harmless by the Company from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by such member in connection with or
resulting from any claim, action, suit, or proceeding to which he or she may be
a party or in which he or she may be involved by reason of any action or failure
to act under the Plan and against and from any and all amounts paid by him or
her in satisfaction of judgment in such action, suit, or proceeding against him
or her provided he or she gives the Company an opportunity, at its own expense,
to handle and defend the same before he or she undertakes to handle and defend
it on his or her own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
14
<PAGE>
entitled under the Company's Articles of Incorporation or By-Laws, as a matter
of law, or otherwise, or any power that the Company may have to indemnify them
or hold them harmless.
15.7 RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or other benefit plan of the
Company or any Subsidiary.
15.8 EXPENSES. The expenses of administering the Plan shall be borne by
the Company and its Subsidiaries.
15.9 TITLES AND HEADINGS. The titles and headings of the Sections in
the Plan are for convenience of reference only, and in the event of any
conflict, the text of the Plan, rather than such titles or headings, shall
control.
15.10 FRACTIONAL SHARES. No fractional shares of stock shall be issued
and the Committee shall determine, in its discretion, whether cash shall be
given in lieu of fractional shares or whether such fractional shares shall be
eliminated by rounding up.
15.11 SECURITIES LAW COMPLIANCE. With respect to any person who is, on
the relevant date, obligated to file reports under Section 16 of the 1934 Act,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent any
provision of the Plan or action by the Committee fails to so comply, it shall be
void to the extent permitted by law and voidable as deemed advisable by the
Committee.
15.12 GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company
to make payment of awards in Stock or otherwise shall be subject to all
applicable laws, rules, and regulations, and to such approvals by government
agencies as may be required. The Company shall be under no obligation to
register under the Securities Act of 1933, as amended (the "1933 Act"), any of
the shares of Stock paid under the Plan. If the shares paid under the Plan may
in certain circumstances be exempt from registration under the 1933 Act, the
Company may restrict the transfer of such shares in such manner as it deems
advisable to ensure the availability of any such exemption.
15.13 GOVERNING LAW. The Plan and all Award Agreements shall be
construed in accordance with and governed by the laws of the State of Delaware.
15
SEVENTH 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, the Third Amendment dated
November 4, 1996, the Fourth Amendment dated December 4, 1996, the Fifth
Amendment dated January 31, 1997 and the Sixth Amendment dated August 1, 1997 is
hereby further amended as follows:
1. The changes made to the Plan by this Seventh Amendment are effective
as of November 3, 1997, unless otherwise specified below.
2. This Seventh Amendment shall amend only the provisions of the Plan
as set forth herein, and those provisions not expressly amended hereby shall be
considered in full force and effect.
3. Section 2.65 of the Plan is hereby amended and restated in its
entirety to read as follows:
2.65 Valuation Date and Valuation Period. The term "Valuation
Date" shall mean the last business day of each Plan Year and such other
dates as may be established by the Advisory Committee for the valuation
and adjustment of the accounts of Participants, including daily
valuations. The term "Valuation Period" shall mean the period
commencing on the date immediately following a Valuation Date and
ending on the next Valuation Date.
<PAGE>
4. Article 2 of the Plan is hereby amended by adding a new Section 2.67
to the end thereof which shall read as follows:
2.67 Acquired Company. The term "Acquired Company" shall mean
any corporation or other entity the stock, assets or business of which
has been acquired by an Employer, whether by merger, consolidation,
purchase of assets or otherwise, and any predecessor thereto designated
by an Employer.
5. Effective February 1, 1998, Section 3.01 of the Plan is hereby
amended by adding a new subsection (d) to the end thereof which shall read as
follows:
(d) Notwithstanding any provision of this Section
3.01 to the contrary, if an Employee was employed by an Acquired
Company and was deferring compensation pursuant to a Code Section
401(k) cash or deferred arrangement sponsored by the Acquired Company
immediately prior to the effective date of the acquisition of the
Acquired Company, such Employee shall become a Participant on the first
day of the Plan quarter coincident with or next following the effective
date of said acquisition, regardless of whether the Employee is
twenty-one (21) years of age and has completed one (1) Year of Service;
provided, however, that said Employee is then employed by an Employer
that has adopted this Plan.
6. Section 4.07(b)(i) of the Plan is hereby amended and restated in its
entirety to read as follows:
(i) amounts transferred to this Plan directly from
another qualified plan, including any promissory note
the terms of which comply with Section 72(p) of the
Code and which is transferred to this Plan directly
from a qualified plan sponsored by an Acquired
Company;
7. Effective March 1, 1998, the Plan is hereby amended by adding a new
Article 16 to the end thereof which shall read as follows:
16. LOANS
16.01 General Rule. The Advisory Committee is authorized but
is not required to direct the Trustee to make a loan or loans to a
Participant as a segregated investment of the Participant's accounts.
Such loans shall be available to all Participants on a
nondiscriminatory basis, except that the Advisory Committee may
discriminate on the basis of credit worthiness. The Advisory Committee
shall not direct the Trustee to make loans to
2
<PAGE>
Highly Compensated Employees in amounts which, when expressed as a
percentage of the Participant's vested interest in his accounts, are
greater than those available to other Participants; provided, however,
that the Advisory Committee may adopt a rule precluding loans of less
than One Thousand Dollars ($1,000.00).
16.02 Amount of Loan; Security.
(a) Amount. The total outstanding loans from the
Trust Fund to any Participant at any time shall not exceed the
Participant's vested interest in his accounts, determined as of the
most recent Valuation Date for the Plan, provided, however, that no
portion of the Participant's vested interest in his accounts which is
held in Employer Stock shall be made available for loan to the
Participant. Any loan which is made pursuant to Section 16.01 shall be
treated as a taxable distribution to the extent that it causes the
outstanding balance at any time of all loans from all "employee pension
benefit plans" (as defined in ERISA) of the Employer that are intended
to "qualify" under Section 401(a) of the Code to exceed fifty percent
(50%) of the present value of the Participant's nonforfeitable accrued
benefit under all such plans; provided that such maximum shall not be
more than Fifty Thousand Dollars ($50,000.00) with such Fifty Thousand
Dollar ($50,000.00) limitation to be reduced by the highest outstanding
loan balance during the twelve (12) month period preceding the date on
which a loan is made. The Advisory Committee may, in the exercise of
its discretion, prohibit the making of any loan that would be treated
as a taxable distribution.
(b) Security. The loan shall be evidenced by the
Participant's promissory note and shall be secured by an assignment of
the Participant's vested interest in his accounts and such additional
collateral as the Advisory Committee shall deem necessary, provided
that in no event shall the loan be secured by an assignment of more
than fifty percent (50%) of the Participant's vested (non-forfeitable)
interest in his accounts. In determining whether a pledge of additional
collateral is necessary, the Advisory Committee shall consider the
Participant's credit worthiness and the impact on the Plan in the event
of a default under the loan prior to the date on which Participant's
benefits will commence under the Plan.
16.03 Terms of Loan.
(a) Interest Rate. All loans shall bear interest at a
rate determined by the Advisory Committee which shall provide the Plan
with a return commensurate with the interest rates charged by persons
in the business of lending money for similar loans. Subject to the
foregoing, the terms of any loan shall be arrived at by mutual
agreement between the Advisory Committee and the Participant pursuant
to a uniform, nondiscriminatory policy.
(b) Repayment Period. All loans shall be repayable in
semi-monthly installments over a period not exceeding five (5) years,
except that the term may exceed five (5) years (but shall not exceed
fifteen (15) years or such shorter period set by the Plan
3
<PAGE>
Administrator) if the Participant establishes to the satisfaction of
the Advisory Committee, in its sole discretion, that the proceeds of
the loan will be used, within a reasonable time after the funds are
disbursed, to acquire or construct the Participant's principal
residence.
(c) Costs. Any costs incurred by the Advisory
Committee or Trustee to establish, process, administer or collect the
loan shall be charged directly and solely to the Participant unless
other mutually agreeable arrangements are made by the Advisory
Committee and the Participant.
16.04 Default. In the event that the Participant does not
repay such loan or loans and the interest thereon in a timely fashion,
the Trustee may exercise every creditor's right at law or equity
available to the Trustee. The Trustee may not, however, deduct or
offset the payments in default or the unpaid outstanding balance of the
loan from or against the Participant's accounts until such time as the
account becomes payable pursuant to the other provisions of this Plan.
When payments become due hereunder, the Trustee may deduct the total
amount of the loan then outstanding, together with any interest then
due and owing, from any payment or distribution (including any payment
due to the Participant's surviving spouse pursuant to Section 6.03) to
which such Participant or his beneficiary or beneficiaries may become
entitled.
16.05 Transferred Loans Accepted Pursuant to Section 4.07. In
the event that a Participant transfers a promissory note to the Plan
from a qualified plan maintained by an Acquired Company in connection
with a "rollover" under Section 4.07, such promissory note shall be
administered by the Advisory Committee and the Trustee in accordance
with the terms of the promissory note. To the extent there is a
conflict between the terms of a transferred promissory note and this
Article 16 or other rules promulgated by the Advisory Committee, the
terms of the transferred promissory note shall control.
To signify its adoption of this Seventh Amendment, MicroAge, Inc. has
caused this Seventh Amendment to be executed by its duly authorized officer on
this 2nd day of April, 1998.
MICROAGE, INC.
By: /s/ Jeffrey D. McKeever
---------------------------------
Jeffrey D. McKeever
Chairman of the Board and
Chief Executive Officer
4
EIGHTH 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 amended by the First Amendment dated May
10, 1995, the Second Amendment dated March 14, 1996, the Third Amendment dated
November 4, 1996, the Fourth Amendment dated December 4, 1996, the Fifth
Amendment dated January 31, 1997, the Sixth Amendment dated August 1, 1997 and
the Seventh Amendment effective November 3, 1997, is hereby further amended as
follows:
1. The changes made to the Plan by this Eighth Amendment are effective
as of the date of its execution.
2. This Eighth Amendment shall amend only the provisions of the Plan as
set forth herein, and those provisions not expressly amended hereby shall be
considered in full force and effect.
3. Section 3.01 of the Plan is hereby amended and restated in its
entirety to read as follows:
3.01 Eligibility to Participate.
(a) For purposes of making Elective Deferrals in
accordance with Section 4.02 of the Plan, each Employee shall become a
Participant on the later of May 1, 1998 or the first day of the Plan
quarter (the first day of the Plan Year, i.e., November 3 in 1997,
February 1, May 1, or August 1) coincident with or next following the
later of the Employee's employment commencement date or his
twenty-first birthday.
(b) For purposes of receiving Employer Matching
Contributions pursuant to Section 4.03 of the Plan and ESOP
Contributions pursuant to Section 4.08 of the Plan, each Employee who
has attained at least twenty-one (21) years of age, and has completed
at least one (1) Year of Service with the Employer, shall become a
Participant on the first day of the Plan quarter (the first day of the
Plan Year, i.e., November 3 in 1997, February 1,
<PAGE>
May 1, or August 1) coincident with or next following the date on which
the Employee completes all of the eligibility requirements of this
subsection (b).
(c) Any Employee who was a participant in the Prior
Plan on the day before the Effective Date of this Plan shall continue
as a Participant in the Plan.
(d) For purposes of eligibility under subsection (b)
above, the term "Year of Service" shall mean a twelve (12) consecutive
month period during which an Employee completes at least one thousand
(1,000) Hours of Service, measured from the date the Employee completes
his first Hour of Service. The Plan shall measure the second and any
subsequent twelve (12) month period from the first day of the Plan Year
in which the first anniversary of the Employee's first Hour of Service
occurs, regardless of whether the Employee is entitled to be credited
with One Thousand (1,000) Hours of Service during the initial
eligibility computation period. An Employee who is credited with One
Thousand (1,000) Hours of Service in both the initial eligibility
computation period and the first Plan Year which commences prior to the
first anniversary of the Employee's initial eligibility computation
period will be credited with two (2) Years of Service for purposes of
eligibility. For purposes of determining eligibility under subsection
(b) above, all service with the Employer shall be counted.
(e) Notwithstanding any provision of this Section
3.01 to the contrary, if an Employee was employed by an Acquired
Company and was deferring compensation pursuant to a Code Section
401(k) cash or deferred arrangement sponsored by the Acquired Company
immediately prior to the effective date of the acquisition of the
Acquired Company, such Employee shall become a Participant in the Plan
for all purposes on the first day of the Plan quarter coincident with
or next following the effective date of said acquisition, regardless of
whether the Employee is twenty-one (21) years of age and has completed
one (1) Year of Service; provided, however, that said Employee is then
employed by an Employer that has adopted this Plan.
To signify its adoption of this Eighth Amendment, MicroAge, Inc. has
caused this Eighth Amendment to be executed by its duly authorized officer on
this 2nd day of April, 1998.
MICROAGE, INC.
By: /s/ Jeffrey D. McKeever
-------------------------------
Jeffrey D. McKeever
Chairman of the Board and
Chief Executive Officer
2
NON-QUALIFIED STOCK OPTION AGREEMENT
(Jeffrey D. McKeever)
Mr. Jeffrey D. McKeever
2400 South MicroAge Way
Tempe, Arizona 85282
Dear Jeff:
Pursuant to action taken by the Compensation Committee (the
"Committee") of the Board of Directors of MicroAge, Inc. ("MicroAge") on May 2,
1998 (the "Grant Date") and action by written consent of the sole director of
MCCI Holding Company ("Holding Company"), you are hereby granted the option
(hereinafter the "Option") to purchase a total of sixty (60) shares of common
stock of Pinacor, Inc. ("Pinacor") owned by Holding Company as of the Grant Date
(the "Common Stock"), representing six percent (6%) of Pinacor's outstanding
Common Stock as of the Grant Date, at an exercise price of *** per share,
subject to the provisions and conditions set forth below. The Option granted
under this Agreement is not intended to be an incentive stock option within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended.
Moreover, the Option is not being granted pursuant to any stock option or other
plan. For purposes of this Agreement, MicroAge and Holding Company are referred
to collectively as the "Company."
1. You may purchase all or any of the shares of Common Stock included
in any installment under this Option on or after the date the installment vests
in accordance with the schedule below:
----------------------------------------------
NUMBER OF SHARES
EXERCISABLE IN DATE
INSTALLMENT INSTALLMENT VESTS
----------------------------------------------
20 May 2, 1999
----------------------------------------------
20 May 2, 2000
----------------------------------------------
20 May 2, 2001
----------------------------------------------
2. In the event of your death or Disability, any portion of your Option
that is not exercisable shall become fully exercisable. Notwithstanding the
above, you may not exercise the Option at any time after the Expiration Date
hereinafter set forth.
3. The Option may be exercised by making payment in full to the
Treasurer of Holding Company, 2400 South MicroAge Way, Tempe, Arizona 85282, for
the shares which you so elect
- - --------------------
*** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for
confidential treatment.
<PAGE>
to purchase, at the price per share herein prescribed, whereupon you will
receive a stock certificate representing the shares for which you have made
payment. Holding Company, however, will not be obligated to deliver any stock
unless and until:
(a) there has been compliance with any federal or state laws
or regulations or national securities exchange requirements which
Holding Company may deem applicable; and
(b) all legal matters in connection with the sale and delivery
of the Common Stock have been approved by Holding Company's legal
counsel.
4. Upon the exercise of an Option, the purchase price will be paid in
cash or, in the sole discretion of the Committee, in Common Stock, or a
combination thereof, unless the Committee approves an alternative arrangement,
including a loan to you from the Company for all or a portion of the purchase
price. Each share of Common Stock received by Holding Company in payment of all
or a portion of the purchase price specified in this Option will be valued at
its Fair Market Value on the date of exercise.
5. The Committee may require, in its sole discretion, that you satisfy
the payment of any federal, state, or local tax withholding amount due as a
result of your exercise of an Option by:
(a) requiring you to deliver to Holding Company that number of
shares of Common Stock then owned by you, duly endorsed for transfer to
Holding Company and free and clear of any liens, claims, security
interests or encumbrances whatsoever (based on the Fair Market Value of
the Common Stock on the date such Option is exercised), which are
required to satisfy the payment of such tax withholding amount; or
(b) requiring you to deliver to Holding Company a check, made
payable to the order of Holding Company, in the aggregate amount
required to satisfy the payment of such tax withholding amount.
The right described in (a) or (b) above shall be exercised in a written
notice by the Committee delivered to you as soon as practicable after receipt of
your written exercise of any Option hereunder.
6. The Committee may suspend or postpone the receipt of shares in
payment of the exercise price specified in this Agreement if at any time:
(a) it has knowledge of information concerning Pinacor which
upon disclosure to the public might, in its opinion, materially affect
the market price of the Common Stock;
(b) non-Pinacor events of an extraordinary nature occur which,
in its opinion, may not have been effectively reflected in the market;
or
(c) such suspension or postponement for any other reason
would, in its opinion, be in the best interests of Pinacor or the
Company.
2
<PAGE>
7. The Committee hereby reserves and will have the right, by written
notice to you, to change the provisions of this Option in any manner that it may
deem necessary or advisable to carry out the purpose of this grant as a result
of, or to comply with, any change in applicable regulations, interpretations or
statutory enactments, provided that any such change will be applicable only to
shares for which payment will not then have been made as herein provided.
8. This Option will terminate upon the earliest to occur of:
(a) May 2, 2008 at 5:00 p.m. Arizona time (the "Expiration
Date");
(b) the date you cease to be employed by the Company or any of
its subsidiaries for any reason other than your retirement, death or
Disability; or
(c) one (1) year after the date you cease to be employed by
the Company or any of its subsidiaries by reason of your retirement,
death or Disability.
9. Anything herein to the contrary notwithstanding, the following
provisions will apply:
(a) If, at any time within the term of this Option or within
one (1) year after termination of employment or within one (1) year
after you exercise any portion of this Option, whichever is the latest,
you engage in any activity in competition with any activity of the
Company, or inimical, contrary, or harmful to the interests of the
Company, including, but not limited to: (i) conduct related to your
employment for which either civil or criminal penalties against you may
be sought, (ii) violation of Company policies, including, without
limitation, the Company's insider trading policy, (iii) failing to give
the Company at least thirty (30) days' written notice of your intent to
terminate your employment with the Company, (iv) accepting employment
with or serving as a consultant, advisor, or in any other capacity to
an employer that is in competition with or acting against the interests
of the Company, including employing or recruiting any present, former,
or future employee of the Company, (v) disclosing or misusing any
confidential information or material concerning the Company, or (vi)
participating in a hostile takeover attempt of MicroAge, then (A) this
Option shall terminate effective the date upon which you enter into
such activity, unless terminated sooner by operation of another term or
condition of this Agreement, (B) you will return any shares of Common
Stock that you then own if the Company tenders to you, in the exercise
of its discretion, the amount you paid to acquire those shares, and (C)
you will pay the Company an amount equal to the difference between the
amount you paid for said shares and the amount you received for a sale
of any shares that you have disposed of in an arms length transaction.
If you dispose of any shares in other than an arms length transaction,
you will pay to the Company an amount equal to the difference between
the amount you paid for the shares and the Fair Market Value of the
shares.
(b) By accepting this Option, you consent to a deduction from
any amounts the Company owes you from time to time (including amounts
owed to you as wages or other compensation, fringe benefits, or
vacation pay, as well as any other amounts owed to you by the Company),
to the extent of the amounts you owe the Company under clause (a) of
this Section 9. Whether or not the Company elects to make any set-off
in whole or in part, if the Company does not recover by means of
set-off the full amounts you owe it, calculated as set forth above, you
agree to pay immediately the unpaid balance to the Company.
3
<PAGE>
(c) You may be released from your obligations under clause (a)
of this Section 9 only if the Committee determines, in its sole
discretion, that such action is in the best interests of the Company.
10. The Committee will have the discretion to accelerate the vesting in
whole or in part with respect to any Options that may otherwise not be
exercisable on the date you cease to be employed by the Company or any of its
subsidiaries for any reason other than your death or Disability, upon such terms
and conditions established by the Committee at that time, or upon such other
dates that the Committee will determine in its sole and absolute discretion.
11. In the event of a stock dividend, stock split, combination or
exchange of shares, recapitalization or other change in the capital structure of
Pinacor, any merger, consolidation, spin-off, spin-out, split-off, split-up,
reorganization, partial or complete liquidation, or other distribution of assets
(other than a normal cash dividend), issuance of rights or warrants to purchase
securities or any other corporate transaction or event having an effect similar
to any of the foregoing, the Committee shall make such adjustments in the number
of unpurchased shares subject to this Option and in the exercise price per share
as it may determine to be appropriate and equitable to preserve your
proportionate interest in this Option and to prevent dilution or enlargement of
your rights hereunder. The Committee may, in its discretion, upon the occurrence
of any of the foregoing events, provide in substitution for any or all
outstanding shares subject to this Option such alternative consideration as it
may in good faith determine to be equitable under the circumstances and may
require your surrender of this Option in connection with such substitution.
12. This Option will be exercisable until the Expiration Date as
defined in Section 8(a) and, except as provided in Section 8 above, only by you
during your lifetime and only while you are employed by the Company. Unless
otherwise provided in writing by the Committee in its sole discretion, the
Option shall not be transferable by you, expressly or by operation of law, other
than by will or the laws of descent and distribution. Any other attempted
transfer or other disposition of this Option by you will be void and will
constitute valid grounds for cancellation of this Option by the Company.
13. In the event that a "Disposition" of Pinacor is approved by the
Board of Directors of MicroAge, Holding Company, or Pinacor or a proposed
Disposition is submitted to the shareholders of MicroAge, Holding Company, or
Pinacor for approval, all of the Options will become immediately exercisable,
despite any provisions in Section 1 to the contrary. Additionally, upon a Change
of Control, your Options will automatically become immediately exercisable,
despite any provisions in Section 1 to the contrary.
14. The term "Disposition" as used in Section 13, means and includes
each of the following:
(a) the sale or other transfer of all or substantially all of
the Common Stock of Pinacor or Holding Company to any individual or
entity other than an "Affiliate." For this purpose, an "Affiliate" is
any entity that is part of the same controlled group of corporations as
MicroAge within the meaning of Section 1563 of the Internal Revenue
Code of 1986 (the "Code").
4
<PAGE>
(b) Pinacor or Holding Company is merged, consolidated, or
otherwise combined with any entity other than an Affiliate of MicroAge.
15. The term "Change of Control" means and includes each of the
following:
(a) A change of control of MicroAge of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of the
Securities Exchange Act of 1934, as amended ("1934 Act"), regardless of
whether MicroAge is subject to such reporting requirement;
(b) A change of control of MicroAge through a transaction or
series of transactions, such that any person (as that term is used in
Section 13 and 14(d)(2) of the 1934 Act), excluding affiliates of
MicroAge as of the Grant Date, is or becomes the beneficial owner (as
that term is used in Section 13(d) of the 1934 Act), directly or
indirectly, of securities of MicroAge representing twenty percent (20%)
or more of the combined voting power of MicroAge's then outstanding
securities;
(c) The individuals who, as of the Grant Date, constitute the
Board of Directors of MicroAge (the "Incumbent Board") cease for any
reason to constitute at least eighty percent (80%) of the Board of
Directors of MicroAge; provided, however, that any person becoming a
member of the Board of Directors of MicroAge subsequent to the Grant
Date whose election, or nomination for election by MicroAge's
stockholders, was approved by a vote of at least eighty percent (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 MicroAge, as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the 1934 Act or
any successor provision thereto) shall be, for purposes of this
paragraph, considered as though such person were a member of the
Incumbent Board;
(d) Any consolidation or liquidation of MicroAge in which
MicroAge is not the continuing or surviving corporation or pursuant to
which common stock of MicroAge would be converted into cash, securities
or other property, other than a merger of MicroAge in which the holders
of the shares of MicroAge's common stock immediately before the merger
have the same proportionate ownership of common stock of the surviving
corporation immediately after the merger;
(e) The shareholders of MicroAge approve any plan or proposal
for the liquidation or dissolution of MicroAge; or
(f) Substantially all of the assets of MicroAge are sold or
otherwise transferred to parties that are not Affiliates (as such term
is defined in Section 14(a) above).
16. The term "Disability" shall mean any illness or other physical or
mental condition which renders you incapable of performing your customary and
usual duties for the Company, or any medically determinable illness or other
physical or mental condition resulting from a bodily injury, disease or mental
disorder which in the judgment of the Committee is permanent and continuous in
nature. The Committee may require such medical or other evidence as it deems
necessary to judge the nature and permanency of your condition.
5
<PAGE>
17. The term "Fair Market Value" with respect to the Common Stock shall
mean as of any given date, the fair market value of the Common Stock determined
by such methods or procedures as may be established from time to time by the
Committee.
18. This Agreement shall be governed in all respects by the laws of the
state of Delaware.
19. No Option gives you any of the rights of a shareholder of Pinacor
unless and until shares of Common Stock are in fact issued to you.
20. The Agreement is intended to be an "unfunded" plan for incentive
compensation. With respect to any payments not yet made to you pursuant to an
Option, nothing contained in this Agreement shall give you any rights that are
greater than those of a general creditor of the Company or any subsidiary.
21. No payment under this Agreement shall be taken into account in
determining any benefits under any pension, retirement, savings, profit sharing,
group insurance, welfare or other benefit plan of the Company or any subsidiary.
22. The expenses of administering this Agreement shall be borne by
MicroAge.
23. With respect to any person who is, on the relevant date, obligated
to file reports under Section 16 of the 1934 Act, transactions pursuant to this
Agreement are intended to comply with all applicable conditions of Rule 16b-3 or
its successors under the 1934 Act. To the extent any provision of this Agreement
or action by the Committee fails to so comply, it shall be void to the extent
permitted by law and voidable as deemed advisable by the Committee.
24. Neither the Company nor Pinacor shall be under any obligation to
register under the Securities Act of 1933, as amended (the "1933 Act"), any of
the shares of Common Stock. If the shares may in certain circumstances be exempt
from registration under the 1933 Act, the Committee may restrict the transfer of
such shares in such manner as it deems advisable to ensure the availability of
any such exemption.
25. The Company shall not be required to deliver any shares of Common
Stock pursuant to the exercise of all or any part of the Option if, in the
opinion of counsel for MicroAge, such issuance would violate the Securities Act
of 1933 or any other applicable federal or state securities or other laws or
regulations. The Board of Directors of MicroAge may require that you, prior to
the issuance of any such shares pursuant to exercise of the Option, sign and
deliver to MicroAge a written statement ("Investment Letter") stating (a) that
you are purchasing the shares for investment and not with a view to the sale or
distribution thereof; (b) that you will not sell any shares received upon
exercise of the Option or any other shares of Pinacor that you may then own or
thereafter acquire except either (i) through a broker on a national securities
exchange or (ii) with the prior written approval of MicroAge; and (c) containing
such other terms and conditions as counsel for MicroAge may reasonably require
to assure compliance with the Securities Act of 1933 or other applicable federal
or state securities laws and regulations. Such Investment Letter shall be in
form and content acceptable to the Board of Directors of MicroAge in its sole
discretion.
26. This Agreement may be amended only by a written agreement executed
by MicroAge, Holding Company, and you.
6
<PAGE>
27. This Agreement shall be effective as of May 2, 1998.
Please acknowledge receipt of this Option and acceptance of its terms by
completing the bottom portion of both letters, then return one of the letters to
James Domaz in the Legal Department.
MICROAGE, INC. I hereby acknowledge receipt of the
foregoing Option and accept its terms.
By: /s/ William H. Mallender Signature: /s/ Jeffrey D. McKeever
--------------------------- --------------------------
William H. Mallender Jeffrey D. McKeever
Chairman, Compensation Social Security No.___________
Committee
MCCI Holding Company
By: /s/ Jeffrey D. McKeever
---------------------------
Jeffrey D. McKeever
Chairman of the Board and
President
7
AMENDMENT TO RESTATED AND AMENDED PURCHASE AGREEMENT
This Amendment to Restated and Amended Purchase Agreement ("Amendment")
is made by and between MICROAGE COMPUTER CENTERS, INC., MICROAGE SOLUTIONS,
INC., MCSA, INC., MCSZ, INC., MCSJ, INC., MCSP, INC., MCSQ, INC., MCST, INC.,
MCSR, INC., MCSS, INC., MICROAGE LOGISTICS SERVICES, INC., COMPLETE
DISTRIBUTION, INC., MICROAGE INFOSYSTEMS SERVICES, INC., ADVANCED SYSTEMS
CONSULTANTS, INC., PCCLEARANCE, INC., IMAGE CHOICE, INC. and MCSY, INC.
(individually and collectively, "Seller") and DEUTSCHE FINANCIAL SERVICES
CORPORATION ("Purchaser") as of the 31st day of October, 1997.
WHEREAS, Purchaser and Seller entered into that certain Restated and
Amended Purchase Agreement dated as of August 3, 1995, as amended (the "Purchase
Agreement"); and
WHEREAS, Purchaser and Seller desire to amend the Purchase Agreement as
provided herein.
NOW, THEREFORE, for and in consideration of the premises, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Purchaser and Seller agree as follows (except as otherwise defined
herein, all capitalized terms will have the same meanings set forth in the
Purchase Agreement):
1. Section 6.2(iv) of the Purchase Agreement is hereby amended and
restated in its entirety to read as follows:
"(iv) The Consolidated Group shall at all times maintain, on a
consolidated basis, a ratio of (a) the sum of (I) current
assets, plus (II) the Outstanding Balance of all Sold
Receivables to (b) the sum of (III) current liabilities plus
(IV) that portion of the Outstanding Balance of all Sold
Receivables which Seller has elected to receive if Seller has
received any or all of the amount due prior to Collection of
such Sold Receivables by Purchaser pursuant to the third
sentence of Section 2.1.B, of not less than one (1.0) to one
(1)."
2. Except as expressly modified or amended herein, all other terms and
provisions of the Purchase Agreement, including without limitation all
letter agreements regarding fees and other amounts payable to Purchaser
in connection with the Purchase Agreement, to the extent consistent with
the foregoing, will remain unmodified and in full force and effect and
the Purchase Agreement, as hereby amended, is ratified and confirmed by
Purchaser and Seller.
IN WITNESS WHEREOF, Purchaser and Seller have executed this Amendment as
of the date and year first above written.
SELLER MICROAGE COMPUTER CENTERS, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MICROAGE SOLUTIONS, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
<PAGE>
MCSA, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCSZ, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCSJ, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCSP, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCSQ, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCST, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCSR, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCSS, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MICROAGE LOGISTICS SERVICES, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
COMPLETE DISTRIBUTION, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MICROAGE INFOSYSTEMS SERVICES, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
ADVANCED SYSTEMS CONSULTANTS, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
2
<PAGE>
PCCLEARANCE, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
IMAGE CHOICE, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCSY, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
PURCHASER DEUTSCHE FINANCIAL SERVICES CORPORATION
By: /s/ Stephen H. Patyk
----------------------------
Title: Area General Manager
-------------------------
3
AMENDMENT TO RESTATED AND AMENDED PURCHASE AGREEMENT
This Amendment to Restated and Amended Purchase Agreement ("Amendment")
is made by and between MICROAGE COMPUTER CENTERS, INC., MICROAGE SOLUTIONS,
INC., MCSA, INC., MCSZ, INC., MCSJ, INC., MCSP, INC., MCSQ, INC., MCST, INC.,
MCSR, INC., MCSS, INC., MICROAGE LOGISTICS SERVICES, INC., COMPLETE
DISTRIBUTION, INC., MICROAGE INFOSYSTEMS SERVICES, INC., ADVANCED SYSTEMS
CONSULTANTS, INC., PCCLEARANCE, INC., IMAGE CHOICE, INC. and MCSY, INC.
(individually and collectively, "Seller") and DEUTSCHE FINANCIAL SERVICES
CORPORATION ("Purchaser") as of the 28th day of January, 1998.
WHEREAS, Purchaser and Seller entered into that certain Restated and
Amended Purchase Agreement dated as of August 3, 1995, as amended (the "Purchase
Agreement"); and
WHEREAS, Purchaser and Seller desire to amend the Purchase Agreement as
provided herein.
NOW, THEREFORE, for and in consideration of the premises, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Purchaser and Seller agree as follows (except as otherwise defined
herein, all capitalized terms will have the same meanings set forth in the
Purchase Agreement):
1. Section 6.2(ii) of the Purchase Agreement is hereby deleted in its
entirety.
2. Except as expressly modified or amended herein, all other terms and
provisions of the Purchase Agreement, including without limitation all
letter agreements regarding fees and other amounts payable to Purchaser
in connection with the Purchase Agreement, to the extent consistent with
the foregoing, will remain unmodified and in full force and effect and
the Purchase Agreement, as hereby amended, is ratified and confirmed by
Purchaser and Seller.
IN WITNESS WHEREOF, Purchaser and Seller have executed this Amendment as
of the date and year first above written.
SELLER MICROAGE COMPUTER CENTERS, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MICROAGE SOLUTIONS, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCSA, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCSZ, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
<PAGE>
MCSJ, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCSP, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCSQ, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCST, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCSR, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCSS, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MICROAGE LOGISTICS SERVICES, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
COMPLETE DISTRIBUTION, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MICROAGE INFOSYSTEMS SERVICES, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
ADVANCED SYSTEMS CONSULTANTS, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
PCCLEARANCE, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
IMAGE CHOICE, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
2
<PAGE>
MCSY, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
PURCHASER DEUTSCHE FINANCIAL SERVICES CORPORATION
By: /s/ Stephen H. Patyk
----------------------------
Title: Area General Manager
-------------------------
AMENDMENT TO RESTATED AND AMENDED PURCHASE AGREEMENT
This Amendment to Restated and Amended Purchase Agreement ("Amendment")
is made by and between MICROAGE COMPUTER CENTERS, INC., MICROAGE SOLUTIONS,
INC., MCSA, INC., MCSZ, INC., MCSJ, INC., MCSP, INC., MCSQ, INC., MCST, INC.,
MCSR, INC., MCSS, INC., MICROAGE LOGISTICS SERVICES, INC., COMPLETE
DISTRIBUTION, INC., MICROAGE INFOSYSTEMS SERVICES, INC., ADVANCED SYSTEMS
CONSULTANTS, INC., PCCLEARANCE, INC., IMAGE CHOICE, INC. and MCSY, INC.
(individually and collectively, "Seller") and DEUTSCHE FINANCIAL SERVICES
CORPORATION ("Purchaser") as of the 5th day of February, 1998.
WHEREAS, Purchaser and Seller entered into that certain Restated and
Amended Purchase Agreement dated as of August 3, 1995, as amended (the "Purchase
Agreement"); and
WHEREAS, Purchaser and Seller desire to amend the Purchase Agreement as
provided herein.
NOW, THEREFORE, for and in consideration of the premises, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Purchaser and Seller agree as follows (except as otherwise defined
herein, all capitalized terms will have the same meanings set forth in the
Purchase Agreement):
1. As of the date of this Amendment, the definition of the "Regular Line
of Credit" as set forth in Paragraph E of the Recitals in the Purchase
Agreement is hereby amended to mean an inventory floorplan credit
facility in the amount of One Hundred Fifty Million Dollars
($150,000,000).
2. The reference to Three Hundred Million Dollars ($300,000,000) at the
end of the first sentence of Section 9.2.C of the Purchase Agreement is
hereby amended to mean Four Hundred Million Dollars ($400,000,000).
3. Except as expressly modified or amended herein, all other terms and
provisions of the Purchase Agreement, including without limitation all
letter agreements regarding fees and other amounts payable to Purchaser
in connection with the Purchase Agreement, to the extent consistent with
the foregoing, will remain unmodified and in full force and effect and
the Purchase Agreement, as hereby amended, is ratified and confirmed by
Purchaser and Seller.
IN WITNESS WHEREOF, Purchaser and Seller have executed this Amendment as
of the date and year first above written.
SELLER MICROAGE COMPUTER CENTERS, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MICROAGE SOLUTIONS, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCSA, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCSZ, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCSJ, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
<PAGE>
MCSP, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCSQ, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCST, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCSR, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCSS, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MICROAGE LOGISTICS SERVICES, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
COMPLETE DISTRIBUTION, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MICROAGE INFOSYSTEMS SERVICES, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
ADVANCED SYSTEMS CONSULTANTS, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
PCCLEARANCE, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
IMAGE CHOICE, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCSY, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
PURCHASER DEUTSCHE FINANCIAL SERVICES CORPORATION
By: /s/ Stephen H. Patyk
----------------------------
Title: Area General Manager
-------------------------
2
AMENDMENT TO RESTATED AND AMENDED PURCHASE AGREEMENT
This Amendment to Restated and Amended Purchase Agreement ("Amendment")
is made by and between MICROAGE COMPUTER CENTERS, INC. ("MCCI"), MICROAGE
SOLUTIONS, INC. ("MAS"), MCSA, INC. ("MCSA"), MCSZ, INC. ("MCSZ"), MCSJ, INC.
("MCSJ"), MCSP, INC. ("MCSP"), MCSQ, INC. ("MCSQ"), MCST, INC. ("MCST"), MCSR,
INC. ("MCSR"), MCSS, INC. ("MCSS"), MICROAGE LOGISTICS SERVICES, INC. ("MLS"),
COMPLETE DISTRIBUTION, INC. ("CDI"), MICROAGE INFOSYSTEMS SERVICES, INC.
("MIS"), ADVANCED SYSTEMS CONSULTANTS, INC. ("ASC"), PCCLEARANCE, INC. ("PC"),
IMAGE CHOICE, INC. ("Image"), and MCSY, INC. ("MCSY") (individually and
collectively, "Seller"), the affiliates of Seller listed in the third Recital
hereto, and DEUTSCHE FINANCIAL SERVICES CORPORATION ("Purchaser") as of April
30, 1998.
WHEREAS, Purchaser and Seller entered into that certain Restated and
Amended Purchase Agreement, dated as of August 3, 1995, as amended (the
"Purchase Agreement"); and
WHEREAS, certain entities comprising the Seller desire to participate
in the corporate restructuring described on Exhibit A attached hereto (the
"Restructuring"); and
WHEREAS, Pinacor, Inc. ("Pinacor"), Cass Marketing Services, Inc.
("Cass"), Advanced Information Services, Inc. ("AIS"), Margre, Inc. ("Margre"),
Plus Fours, Inc. ("Plus"), Integrated Solutions Incorporated ("ISI"), WASH Data,
Inc. ("WASH"), N Corporation ("N"), CAL Data, Inc. ("CAL"), Gaines Computer,
Inc. ("Gaines"), KNB, Inc. ("KNB"), Pride Technologies, Inc. ("Pride"), Access
MicroSystems, Inc. ("Access"), and Micro Retailing, Inc. ("MicroRetailing") are
affiliates of Seller and will be creating accounts receivable which they desire
to sell to Purchaser; and
WHEREAS, Seller, Purchaser, Pinacor, Cass, AIS, Margre, Plus, ISI,
WASH, N, CAL, Gaines, KNB, Pride, Access, and MicroRetailing believe that it is
in their best interests to make Pinacor, Cass, AIS, Margre, Plus, ISI, WASH, N,
CAL, Gaines, KNB, Pride, Access, and MicroRetailing parties to the Purchase
Agreement as additional Sellers thereunder; and
WHEREAS, ASC, MAS, MCSJ, MCSP, MCSQ, MCST, MCSR, MCSY, and MCSZ are
being merged out of existence in the Restructuring and are not and will not be
generating accounts receivable; and
WHEREAS, MIS, MCSS and PC are no longer generating accountants
receivable; and
WHEREAS, Seller desires the consent of Purchaser to the Restructuring
and in connection therewith to amend the Purchase Agreement in the manner
hereinafter set forth.
<PAGE>
NOW, THEREFORE, for and in consideration of the premises, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Purchaser and Seller agree as follows (except as otherwise defined
herein, all capitalized terms will have the same meanings set forth in the
Purchase Agreement):
1. Seller represents and warrants to Purchaser that Exhibit A
completely and accurately describes the Restructuring. The Purchaser
hereby consents to the Restructuring.
2. MIS, MCSS, and PC are hereby released from all obligations under the
Purchase Agreement, such parties agree that no accounts receivable
generated by them will appear on any assignment schedule delivered
pursuant to the Purchase Agreement, and such parties shall no longer be
party to the Purchase Agreement.
3. Pinacor, Cass, AIS, Margre, Plus, ISI, WASH, N, CAL, Gaines, KNB,
Pride, Access, and MicroRetailing are hereby made parties to the
Purchase Agreement, and all references to "Seller" in the Purchase
Agreement shall be deemed to be references to MCCI, MCSA, MLS, CDI, and
Image (collectively, the "Original Seller"), Pinacor, CASS, AIS,
Margre, Plus, ISI, WASH, N, CAL, Gaines, KNB, Pride, Access and
MicroRetailing, acting jointly and severally. Pinacor, Cass, AIS,
Margre, Plus, ISI, WASH, N, CAL, Gaines, KNB, Pride, Access, and
MicroRetailing hereby expressly assume, on a joint and several basis,
all obligations of Original Seller under the Purchase Agreement,
including, without limitation, all obligations regarding fees and other
amounts payable to Purchaser under letter agreements executed by
Original Seller and Purchaser in connection with the Purchase
Agreement. Nothing herein shall be deemed to release any Original
Seller from any such obligations. Original Seller, Pinacor, Cass, AIS,
Margre, Plus, ISI, WASH, N, CAL, Gaines, KNB, Pride, Access, and
MicroRetailing hereby affirm all representations, warranties and
repurchase obligations of Original Seller in the Purchase Agreement, in
connection with Accounts sold by Original Seller and agree that they
make identical representations, warranties and agreements with respect
to Accounts to be sold by Pinacor, Cass, AIS, Margre, Plus, ISI, WASH,
N, CAL, Gaines, KNB, Pride, Access, and MicroRetailing thereunder.
Original Seller, Pinacor, Cass, AIS, Margre, Plus, ISI, WASH, N, CAL,
Gaines, KNB, Pride, Access, and MicroRetailing agree that they shall be
jointly and severally responsible and liable for all obligations,
representations and warranties of Original Seller, Pinacor, Cass, AIS,
Margre, Plus, ISI, WASH, N, CAL, Gaines, KNB, Pride, Access, and
MicroRetailing under the Purchase Agreement, as amended hereby.
In furtherance of the foregoing and not as a limitation, to
secure all of their respective current and future debts to Purchaser,
whether under the Purchase Agreement or any current or future guaranty
or other agreement, including, without limitation, all obligations of
Seller arising in connection with the Purchase Agreement, whether now
or hereafter existing, due or to become due, direct or indirect, or
absolute or contingent,
2
<PAGE>
including Repurchase obligations pursuant to Section 2.1.D,
indemnification obligations pursuant to Section 10.1 and payments on
account of Collections received, Pinacor, Cass, AIS, Margre, Plus, ISI,
WASH, N, CAL, Gaines, KNB, Pride, Access, and MicroRetailing hereby
assign and grant to Purchaser a security interest in all of their
respective right, title and interest now or hereafter existing in, to
and under all inventory, equipment, fixtures, accounts (including
without limitation all Sold Receivables), contract rights, chattel
paper, instruments, documents of title, deposit accounts, reserves and
general intangibles, now owned or hereafter acquired, and all
attachments, accessions, parts, accessories, substitutions and
replacements thereto, and all proceeds thereof, and to the extent
related to the property described above, all books, correspondence,
credit files, records, invoices and other papers and documents,
including without limitation, to the extent so related, all tapes,
cards, computer runs, computer programs and other papers and documents
in their respective possession or control or any computer bureau from
time to time acting for each of them, and to the extent so related, all
rights in, to and under all policies of insurance, including claims of
rights to payments thereunder and proceeds therefrom, including any
credit insurance, and all proceeds thereof.
Pinacor, Cass, AIS, Margre, Plus, ISI, WASH, N, CAL, Gaines,
KNB, Pride, Access, and MicroRetailing each hereby appoint MicroAge
Computer Centers, Inc. as its duly authorized agent for purposes of
executing each Assignment of Receivables, and each such Assignment of
Receivables duly executed by MicroAge Computer Centers, Inc. and
delivered to Purchaser shall for all purposes be deemed executed and
delivered by each of them.
4. Schedules A and B, and Exhibit I, to the Purchase Agreement, are
hereby restated in their entirety and replaced by Schedules A and B,
and Exhibit I, attached hereto and incorporated herein by this
reference.
5. Section 6.2(iii) of the Purchase Agreement is hereby amended and
restated in its entirety to read as follows:
"(iii) For the period commencing May 1, 1998 and ending August
31, 1998, the Consolidated Group shall at all times maintain,
on a consolidated basis, a ratio of (a) the sum of (I) total
liabilities plus (II) that portion of the Outstanding Balance
of all Sold Receivables which Seller has elected to receive if
Seller has received any or all of the amount due prior to
Collection of such Sold Receivables by Purchaser pursuant to
the third sentence of Section 2.1.B, to (b) Tangible Net
Worth, of less than seven and one-half (7.5) to one (1) (the
'Leverage Ratio'). Commencing September 1, 1998, the Leverage
Ratio shall at all times be less than six and one-half (6.5)
to one (1)."
3
<PAGE>
6. Except as expressly modified or amended herein, all other terms and
provisions of the Purchase Agreement, including, without limitation,
all letter agreements regarding fees and other amounts payable to
Purchaser in connection with the Purchase Agreement, to the extent
consistent with the foregoing, will remain unmodified and in full force
and effect and the Purchase Agreement, as hereby amended, is ratified
and confirmed by Purchaser, Seller, and Pinacor, Cass, AIS, Margre,
Plus, ISI, WASH, N, CAL, Gaines, KNB, Pride, Access and MicroRetailing.
IN WITNESS WHEREOF, Purchaser, Seller, Pinacor, Cass, AIS, Margre,
Plus, ISI, WASH, N, CAL, Gaines, KNB, Pride, Access, and MicroRetailing have
executed this Amendment as of the date and year first above written.
SELLER MICROAGE COMPUTER CENTERS, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MICROAGE SOLUTIONS, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCSA, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCSZ, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
4
<PAGE>
MCSJ, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCSP, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCSQ, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCST, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCSR, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
5
<PAGE>
MCSS, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MICROAGE LOGISTICS SERVICES, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
COMPLETE DISTRIBUTION, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MICROAGE INFOSYSTEMS SERVICES, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
ADVANCED SYSTEMS CONSULTANTS, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
6
<PAGE>
PCCLEARANCE, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
IMAGE CHOICE, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MCSY, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
PINACOR, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
CASS MARKETING SERVICES, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
7
<PAGE>
ADVANCED INFORMATION
SERVICES, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MARGRE, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
PLUS FOURS, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
INTEGRATED SOLUTIONS
INCORPORATED
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
WASH DATA, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
8
<PAGE>
N CORPORATION
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
CAL DATA, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
GAINES COMPUTER, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
KNB, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
PRIDE TECHNOLOGIES, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
9
<PAGE>
ACCESS MICROSYSTEMS, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MICRORETAILING, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
PURCHASER DEUTSCHE FINANCIAL SERVICES
CORPORATION
By: /s/ Stephen H. Patyk
--------------------------------
Title: Area General Manager
-----------------------------
10
AMENDMENT TO SECOND RESTATED AGREEMENT FOR WHOLESALE FINANCING
This Amendment to Second Restated Agreement for Wholesale Financing
("Amendment") is made by and between MICROAGE COMPUTER CENTERS, INC. ("MCCI"),
MICROAGE LOGISTICS SERVICES, INC. ("MLS") and DEUTSCHE FINANCIAL SERVICES
CORPORATION ("DFS") as of the 31st day of March, 1997.
WHEREAS, DFS, MCCI and MLS entered into that certain Second Restated
Agreement for Wholesale Financing dated as of August 3, 1995, as amended (the
"AWF");
WHEREAS, DFS, MCCI and MLS desire to amend the AWF as provided herein.
NOW, THEREFORE, for and in consideration of the premises, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, DFS, MCCI and MLS agree as follows (except as otherwise defined
herein, all capitalized terms will have the same meanings set forth in the AWF):
1. The definition of "Supplemental Inventory Limit" as set forth in
Section 1 of the AWF is hereby amended to mean One Hundred Fifty Million
Dollars ($150,000,000.00).
2. The definition of "Aggregate A/R and Supplemental Inventory Limit" as
set forth in Section 1 of the AWF is hereby amended to mean Five Hundred
Million Dollars ($500,000,000.00).
3. Section 10(c) of the AWF is hereby amended and restated in its
entirety to read as follows:
"(c) The Consolidated Group shall at all times maintain, on a
consolidated basis, a ratio of (i) the sum of (A) total
liabilities plus (B) that portion of the Outstanding Balance (as
defined in the Purchase Agreement) of all Sold Receivables (as
defined in the Purchase Agreement) which MCCI and its affiliates
have elected to receive if MCCI and its affiliates have received
any or all of the amount due prior to Collection (as defined in
the Purchase Agreement) of such Sold Receivables by DFS)
pursuant to the third sentence of Section 2.1.B of the Purchase
Agreement, to (ii) Tangible Net Worth, of less than 6.5 to 1
(the 'Leverage Ratio')."
4. The reference to Two Hundred Million Dollars ($200,000,000.00) at the
end of the second to last sentence of Section 21 of the AWF is hereby
amended to mean Three Hundred Million Dollars ($300,000,000.00).
5. Except as expressly modified or amended herein, all other terms and
provisions of the AWF, including without limitation all letter
agreements regarding interest charges, fees and other amounts payable to
DFS in connection with the AWF, to the extent consistent with the
foregoing, will remain unmodified and in full force and effect and the
AWF, as hereby amended, is ratified and confirmed by DFS, MCCI and MLS.
<PAGE>
IN WITNESS WHEREOF, DFS, MCCI and MLS have executed this Amendment as of
the date and year first above written.
MICROAGE COMPUTER CENTERS, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MICROAGE LOGISTICS SERVICES, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
DEUTSCHE FINANCIAL SERVICES CORPORATION
By: /s/ Stephen H. Patyk
--------------------------------
Title: Area General Manager
-----------------------------
AMENDMENT TO SECOND RESTATED AGREEMENT FOR WHOLESALE FINANCING
This Amendment to Second Restated Agreement for Wholesale Financing
("Amendment") is made by and between MICROAGE COMPUTER CENTERS, INC. ("MCCI"),
MICROAGE LOGISTICS SERVICES, INC. ("MLS"), and DEUTSCHE FINANCIAL SERVICES
CORPORATION ("DFS") as of the 31st day of October, 1997.
WHEREAS, DFS, MCCI and MLS entered into that certain Second Restated
Agreement for Wholesale Financing dated as of August 3, 1995, as amended (the
"AWF");
WHEREAS, DFS, MCCI and MLS desire to amend the AWF as provided herein.
NOW, THEREFORE, for and in consideration of the premises, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, DFS, MCCI and MLS agree as follows (except as otherwise defined
herein, all capitalized terms will have the same meanings set forth in the AWF,
and all references to MCCI shall be deemed references to MCCI and MLS, jointly
and severally):
1. Section 10(d) of the AWF is hereby amended and restated in its
entirety to read as follows:
"(d) The Consolidated Group shall at all times maintain, on a
consolidated basis, a ratio of (i) the sum of (A) current assets
plus (B) the Outstanding Balance of all Sold Receivables, to
(ii) the sum of (C) current liabilities plus (D) that portion of
the Outstanding Balance of all Sold Receivables which MCCI and
its affiliates have elected to receive if MCCI and its
affiliates have received any or all of the amount due prior to
Collection of such Sold Receivables by DFS pursuant to the third
sentence of Section 2.1.B of the Purchase Agreement, of not less
than 1.0 to 1."
2. Except as expressly modified or amended herein, all other terms and
provisions of the AWF, including without limitation all letter
agreements regarding interest charges, fees and other amounts payable to
DFS in connection with the AWF, to the extent consistent with the
foregoing, will remain unmodified and in full force and effect and the
AWF, as hereby amended, is ratified and confirmed by DFS, MCCI and MLS.
IN WITNESS WHEREOF, DFS, MCCI and MLS have executed this Amendment as of
the date and year first above written.
MICROAGE COMPUTER CENTERS, INC. DEUTSCHE FINANCIAL SERVICES CORPORATION
By: /s/ James R. Daniel By: /s/ Stephen H. Patyk
--------------------------- ------------------------------
Title: Treasurer Title: Area General Manager
------------------------ ---------------------------
MICROAGE LOGISTICS SERVICES, INC.
By: /s/ James R. Daniel
---------------------------
Title: Treasurer
------------------------
AMENDMENT TO SECOND RESTATED AGREEMENT FOR WHOLESALE FINANCING
This Amendment to Second Restated Agreement for Wholesale Financing
("Amendment") is made by and between MICROAGE COMPUTER CENTERS, INC. ("MCCI"),
MICROAGE LOGISTICS SERVICES, INC. ("MLS"), and DEUTSCHE FINANCIAL SERVICES
CORPORATION ("DFS") as of the 28th day of January, 1998.
WHEREAS, DFS, MCCI and MLS entered into that certain Second Restated
Agreement for Wholesale Financing dated as of August 3, 1995, as amended (the
"AWF");
WHEREAS, DFS, MCCI and MLS desire to amend the AWF as provided herein.
NOW, THEREFORE, for and in consideration of the premises, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, DFS, MCCI and MLS agree as follows (except as otherwise defined
herein, all capitalized terms will have the same meanings set forth in the AWF,
and all references to MCCI shall be deemed references to MCCI and MLS, jointly
and severally):
1. Section 10(b) of the AWF is hereby deleted in its entirety.
2. Except as expressly modified or amended herein, all other terms and
provisions of the AWF, including without limitations all letter
agreements regarding interest charges, fees and other amounts payable to
DFS in connection with the AWF, to the extent consistent with the
foregoing, will remain unmodified and in full force and effect and the
AWF, as hereby amended, is ratified and confirmed by DFS, MCCI and MLS.
IN WITNESS WHEREOF, DFS, MCCI and MLS have executed this Amendment as of
the date and year first above written.
MICROAGE COMPUTER CENTERS, INC. DEUTSCHE FINANCIAL SERVICES CORPORATION
By: /s/ James R. Daniel By: /s/ Stephen H. Patyk
------------------------------ -----------------------------
Title: Treasurer Title: Area General Manager
--------------------------- --------------------------
MICROAGE LOGISTICS SERVICES, INC.
By: /s/ James R. Daniel
------------------------------
Title: Treasurer
---------------------------
AMENDMENT TO SECOND RESTATED AGREEMENT FOR WHOLESALE FINANCING
This Amendment to Second Restated Agreement for Wholesale Financing
("Amendment") is made by and between MICROAGE COMPUTER CENTERS, INC. ("MCCI"),
MICROAGE LOGISTICS SERVICES, INC. ("MLS"), and DEUTSCHE FINANCIAL SERVICES
CORPORATION ("DFS") as of the 5th day of February, 1998.
WHEREAS, DFS, MCCI and MLS entered into that certain Second Restated
Agreement for Wholesale Financing dated as of August 3, 1995, as amended (the
"AWF");
WHEREAS, DFS, MCCI and MLS desire to amend the AWF as provided herein.
NOW, THEREFORE, for and in consideration of the premises, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, DFS, MCCI and MLS agree as follows (except as otherwise defined
herein, all capitalized terms will have the same meanings set forth in the AWF,
and all references to MCCI shall be deemed references to MCCI and MLS, jointly
and severally):
1. The definition of the "Regular Line of Credit" as set forth in
Section 1 of the AWF is hereby amended to mean a line of credit to
finance the purchase of Inventory by MCCI and MLS in an amount up to One
Hundred Fifty Million Dollars ($150,000,000.00).
2. Subsection 9(a)(i) of the AWF is hereby amended and restated in its
entirety to read as follows (all references to MCCI shall be deemed to
be references to MCCI and MLS, jointly and severally):
"(i) sixty percent (60%) of the remainder of (A) the wholesale
invoice price to MCCI of the Excess Inventory as reflected in
the Inventory Warehouse Status Report, minus (B) an obsolescence
reserve in the amount of Three Percent (3%) of the wholesale
invoice price net of any price protection credits to MCCI of the
Excess Inventory which are not reflected in the Inventory
Warehouse Status Report, or such other obsolescence reserve
amount as DFS deems reasonably necessary from time to time;
minus (C) any Deficit Net Collateral Value of the Regular
Inventory and any Deficit Net Collateral Value of the IBM Credit
Inventory, as calculated pursuant to clause (ii) below, and
minus (D) the Guaranty Reserve Amount as defined in clause (iii)
below (the 'Net Excess Inventory Availability');"
3. The reference to Three Hundred Million Dollars ($300,000,000.00) at
the end of the second to last sentence of Section 21 of the AWF is
hereby amended to mean Four Hundred Million Dollars ($400,000,000.00).
4. Except as expressly modified or amended herein, all other terms and
provisions of the AWF, including without limitations all letter
agreements regarding interest charges, fees and other amounts payable to
DFS in connection with the AWF, to the extent consistent with the
foregoing, will remain unmodified and in full force and effect and the
AWF, as hereby amended, is ratified and confirmed by DFS, MCCI and MLS.
<PAGE>
IN WITNESS WHEREOF, DFS, MCCI and MLS have executed this Amendment as of
the date and year first above written.
MICROAGE COMPUTER CENTERS, INC. DEUTSCHE FINANCIAL SERVICES CORPORATION
By: /s/ James R. Daniel By: /s/ Stephen H. Patyk
------------------------------ --------------------------------
Title: Treasurer Title: Area General Manager
--------------------------- -----------------------------
MICROAGE LOGISTICS SERVICES, INC.
By: /s/ James R. Daniel
------------------------------
Title: Treasurer
---------------------------
2
AMENDMENT TO SECOND RESTATED AGREEMENT
FOR WHOLESALE FINANCING
This Amendment to Second Restated Agreement for Wholesale Financing
("Amendment") is made by and among MicroAge Computer Centers, Inc. ("MCCI"),
MicroAge Logistics Services, Inc. ("MLS"), Pinacor, Inc. ("Pinacor"), and
Deutsche Financial Services Corporation ("DFS") as of April 30, 1998.
WHEREAS, DFS, MCCI, and MLS entered into that certain Second Restated
Agreement for Wholesale Financing, dated August 3, 1995, as amended (the "AWF");
WHEREAS, Pinacor is an affiliate of MCCI and MLS and will be acquiring
inventory with financing provided by DFS;
WHEREAS, DFS, MCCI, MLS and Pinacor believe it is in their best
interests to make Pinacor a party to the AWF;
WHEREAS, MCCI, MLS, and Pinacor desire to participate in the corporate
restructuring described on Exhibit A attached hereto (the "Restructuring"); and
WHEREAS, MCCI, MLS, and Pinacor desire the consent of DFS to the
Restructuring and in connection therewith to amend the AWF in the manner
hereinafter set forth.
NOW, THEREFORE, for and in consideration of the premises, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, DFS, MCCI, MLS, and Pinacor agree as follows (except as otherwise
defined herein, all capitalized terms will have the same meanings set forth in
the AWF):
1. MCCI, MLS, and Pinacor represent and warrant to DFS that
Exhibit A completely and accurately describes the
Restructuring. DFS hereby consents to the Restructuring.
2. Pinacor is hereby made a party to the AWF, and all references
to "MCCI" in the AWF shall be deemed to be references to
MicroAge Computer Centers, Inc., MicroAge Logistics Services,
Inc., and Pinacor, Inc. acting jointly and severally. Pinacor
hereby expressly assumes, on a joint and several basis, all
obligations of MCCI and MLS under the AWF, including, without
limitation, all obligations regarding interest charges, fees
and other amounts payable to DFS under letter agreements
executed by MCCI, MLS and DFS in connection with the AWF.
Nothing herein shall be deemed to release MCCI or MLS from any
such obligations. MCCI, MLS and Pinacor hereby affirm all
representations,
<PAGE>
warranties and obligations of MCCI and MLS in the AWF. MCCI,
MLS and Pinacor agree that they shall be jointly and severally
responsible and liable for all obligations, representations
and warranties of MCCI and/or MLS and/or Pinacor under the
AWF, as amended hereby.
In furtherance of the foregoing and not as a limitation, to
secure all of its current and future debts owed to DFS,
whether under the AWF or any current or future guaranty or
other agreement, Pinacor grants to DFS a security interest in
all inventory, equipment, fixtures, accounts, contract rights,
chattel paper, instruments, documents of title, deposit
accounts, reserves and general intangibles, now owned or
hereafter acquired, and all attachments, parts, accessories,
accessions, substitutions and replacements thereto, and all
proceeds thereof, and to the extent related to the property
described above, all books, correspondence, credit files,
records, invoices and other papers and documents, including
without limitation, to the extent so related, all tapes,
cards, computer runs, computer programs and other papers and
documents in the possession or control of Pinacor or any
computer bureau from time to time acting for Pinacor, and to
the extent so related, all rights in, to and under all
policies of insurance, including claims of rights to payments
thereunder and proceeds therefrom, including any credit
insurance, and all proceeds thereof.
3. Exhibit B to the AWF is hereby restated in its entirety and
replaced by Exhibit B attached hereto and incorporated herein
by reference.
4. Exhibit D to the AWF is hereby restated in its entirety and
replaced by Exhibit D attached hereto and incorporated herein
by reference.
5. Section 10(c) of the AWF is hereby amended and restated in its
entirety to read as follows:
"(c) For the period commencing May 1, 1998 and ending August
31, 1998, the Consolidated Group shall at all times maintain,
on a consolidated basis, a ratio of (i) the sum of (A) total
liabilities plus (B) that portion of the Outstanding Balance
(as defined in the Purchase Agreement) of all Sold Receivables
(as defined in the Purchase Agreement) which MCCI and its
affiliates have elected to receive if MCCI and its affiliates
have received any or all of the amount due prior to Collection
(as defined in the Purchase Agreement) of such Sold
Receivables by DFS) pursuant to the third sentence of Section
2.1.B of the Purchase Agreement, to (ii) Tangible Net Worth,
of less than 7.5 to 1 (the 'Leverage Ratio'). Commencing
September 1, 1998, the Leverage Ratio shall at all times be
less than six and one-half (6.5) to one (1)."
2
<PAGE>
6. Except as expressly modified or amended herein, all other
terms and provisions of the AWF, including, without
limitation, all letter agreements regarding interest charges,
fees and other amounts payable to DFS in connection with the
AWF, to the extent consistent with the foregoing, will remain
unmodified and in full force and effect and the AWF, as hereby
amended, is ratified and confirmed by DFS, MCCI, MLS, and
Pinacor.
IN WITNESS WHEREOF, DFS, MCCI, MLS, and Pinacor have executed this
Amendment as of the date and year first above written.
MICROAGE COMPUTER CENTERS, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
MICROAGE LOGISTICS SERVICES, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
PINACOR, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
DEUTSCHE FINANCIAL SERVICES
CORPORATION
By: /s/ Stephen H. Patyk
----------------------------
Title: Area General Manager
-------------------------
3
AMENDMENT #2 TO
AGREEMENT FOR WHOLESALE FINANCING
(Security Agreement)
This Amendment #2 to the Agreement for Wholesale Financing (this "Amendment") is
made as of August 25, 1997 by and between MicroAge Computer Centers, Inc., a
Delaware corporation ("MCCI"), MicroAge Logistics Services, Inc., a Delaware
corporation ("MLS") and IBM Credit Corporation, a Delaware corporation ("IBM
Credit").
RECITALS
WHEREAS, MCCI and IBM Credit have entered into that certain Agreement
for Wholesale Financing dated as of December 17, 1993 (as amended, supplemented
or as otherwise modified from time to time, the "Agreement");
WHEREAS, MLS is an affiliate of MCCI and will be acquiring inventory
with financing provided by IBM Credit;
WHEREAS, IBM Credit, MCCI and MLS believe it is in their best interests
to make MLS a party to the Agreement, and
WHEREAS, IBM Credit, MCCI and MLS have agreed to modify the Agreement
as more specifically set forth below, upon and subject to the terms and
conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, MCCI and MLS ("we" or "us") and IBM Credit ("you") hereby agree as
follows:
Section 1. All capitalized terms not otherwise defined herein shall have the
respective meanings set forth in the Agreement.
Section 2. Modification of Agreement
A. The Agreement is hereby modified by hereby making MLS a party to the
Agreement, and all references to "MCCI" in the Agreement shall be deemed to be
references to MicroAge Computer Centers, Inc. and MicroAge Logistics Services,
Inc., acting jointly and severally. MLS hereby expressly assumes, on a joint and
several basis, all obligations of MCCI under the Agreement, including without
limitation all obligations regarding interest charges, fees and other amounts
payable to IBM Credit under letter agreements executed by MCCI and IBM Credit in
connection with the Agreement. Nothing herein shall be deemed to release MCCI
from any such obligations. MCCI and MLS hereby affirm all representations,
warranties and obligations of MCCI in the Agreement. MCCI and MLS agree that
they shall be jointly and severally responsible and liable for all obligations,
representations and warranties of MCCI and/or MLS under the Agreement, as
amended hereby.
In furtherance of the foregoing and not as a limitation, to secure all of its
current and future debts owed to IBM Credit, whether under the
<PAGE>
Agreement or any current or future guaranty or other agreement, MLS grants to
IBM Credit a security interest in all inventory, equipment, fixtures, accounts,
contract rights, chattel paper, instruments, documents of title, deposit
accounts, reserves and general intangibles, now owned or hereafter acquired, and
all attachments, parts, accessories, accessions, substitutions, and replacements
thereto and all proceeds thereof, and to the extent related to the property
described above, all books, correspondence, credit files, records, invoices and
other papers and documents, including without limitation, to the extent so
related, all tapes, cards, computer runs, computer programs and other papers and
documents in our possession or control or in the possession or control of any
computer bureau from time to time acting for us, and, to the extent so related,
all rights in, to and under all policies of insurance, including claims of
rights to payments thereunder and proceeds therefrom, including any credit
insurance, and all proceeds thereof.
B. Paragraph 15 (a) of the Agreement is hereby amended by deleting such
paragraph in its entirety and substituting, in lieu thereof, the following:
"We both agree that all written material, disclosed to or received by
either of us from the other under this Agreement and the Original AWF or by you
from DFS under the Participation Agreement executed by and between you and DFS
on August 3, 1995 will be deemed "Proprietory Information" of such other party,
unless and until such time as:"
C. Paragraph 15(b)(2) of the Agreement is hereby amended by inserting
therein immediately following the word "consultants" the words "any party or
parties who may provide insurance to you in connection with any obligations owed
by us, including the obligations owed by us to you under this Agreement or the
obligations owed by us to DFS in which you are participating pursuant to the
Participation Agreement executed by and between you and DFS on August 3, 1995."
D. Paragraph 16 is hereby amended by deleting the first sentence
thereof in its entirety and substituting, in lieu thereof, the following:
"16. Each of the following shall constitute a default ("Default"): if
(i) we do not comply with any of the terms of this Agreement, the Financing
Agreement or any related documents in any material respect, or if we do not
fulfill any obligations to you under this Agreement in any material respect, the
Financing Agreement or any related documents, or any guarantor of our
indebtedness to you under this Agreement or any other agreements breaches any of
the terms, warranties or representations contained in any guaranty or other
agreements between any guarantor and you, or we or any member of the
Consolidated Group become insolvent or cease to do business as a going concern
which materially affects the business of the Consolidated Group, or (ii); we or
any member of the Consolidated Group file a voluntary petition for bankruptcy
protection, have filed against it any involuntary bankruptcy petition which
remains undismissed for a period of sixty (60) days, make any assignment for the
benefit of creditors, consent to the appointment of a custodian, receiver,
trustee, liquidator, administrator or person with similar powers or have any of
our properties seized or attached, or take any action to authorize, or for the
purpose of effectuating the foregoing; (iii) judgment is entered in an amount in
excess of one hundred thousand dollars ($100,000.00) and
<PAGE>
such judgment is not satisfied, dismissed stayed or superseded by bond within
thirty (30) days after the day of entry thereof (and in the event of a stay or
superseded by bond, such judgment is not discharged within thirty (30) days
after termination of any such stay or bond); (iv) we or any member of the
Consolidated Group dissolve or liquidate which materially affects the business
of the Consolidated Group, or we or any member of the Consolidated Group or any
of our directors or stockholders take any action to dissolve or liquidate which
materially affects the business of the Consolidated Group; (v) any auditor
qualifies his opinion relative to any financial statement delivered to you under
this Agreement with respect to a "going concern" or like qualification or
exception or a qualification arising out of the scope of the audit; (vi) there
issues a warrant of distress for any rent or taxes with respect to any premises
occupied by us or any member of the Consolidated Group in or upon which the
Products, or any part thereof, may at any time be situated and such warrant
shall continue for a period of ten (10) days from the date such warrant is
issued; or (vii) we or any member of the Consolidated Group are in default under
any of our obligations to DFS under any agreement between us or any member of
the Consolidated Group and DFS (including, without limitation, any Agreement for
Wholesale Financing or Purchase Agreement) in any material respect, and the
applicable cure period thereunder, if any, has expired."
E. The Agreement is hereby modified by deleting Exhibit A and Exhibit B
in their entirety and substituting in lieu thereof, the Exhibit A and Exhibit B
attached hereto.
Section 3. Representations and Warranties. We make to you the following
representations and warranties all of which are material and are made to induce
you to enter into this Agreement.
Section 3.1 Accuracy and Completeness of Warranties and Representations. All
representations made by us in the Agreement were true and accurate and complete
in every respect as of the date made, and, as amended by this Amendment, all
representations made by us in the Agreement are true, accurate and complete in
every material respect as of the date hereof, and do not fail to disclose any
material fact necessary to make representations not misleading.
Section 3.2 Violation of Other Agreements. The execution and delivery of this
Amendment and the performance and observance of the covenants to be performed
and observed hereunder do not violate or cause us not to be in compliance with
the terms of any agreement to which we are a party.
Section 3.3 Litigation. Except as has been disclosed by us to you in writing,
there is no litigation, proceeding, investigation or labor dispute pending or
threatened against us, which if adversely determined, would materially adversely
affect our ability to perform our obligations under the Agreement and the other
documents, instruments and agreements executed in connection therewith or
pursuant hereto.
Section 3.4 Enforceability of Amendment. This Amendment has been duly
authorized, executed and delivered by us and is enforceable against us in
accordance with its terms.
<PAGE>
Section 4. Ratification of Agreement. Except as specifically amended hereby, all
of the provisions of the Agreement shall remain unamended and in full force and
effect. We hereby, ratify, confirm and agree that the Agreement, as amended
hereby, represents a valid and enforceable obligation of ours, and is not
subject to any claims, offsets or defense.
Section 5. Governing Law. This Amendment shall be governed by and interpreted in
accordance with the laws of the State of Arizona.
Section 6. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original and all of which shall
constitute one agreement.
IN WITNESS WHEREOF, this Amendment has been duly executed by the authorized
officers of the undersigned as of the day and year first above written.
MICROAGE COMPUTER CENTERS, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
/s/ Alan Hald
-------------------------------
Secretary
MICROAGE LOGISTICS SERVICES, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
/s/ Alan Hald
-------------------------------
Secretary
Accepted and Agreed:
IBM CREDIT CORPORATION
By: /s/ Ronald J. Bachner
----------------------------
Title: Manager Global Strategic
------------------------
Account Marketing
-----------------
AMENDMENT #3 TO
AGREEMENT FOR WHOLESALE FINANCING
(Security Agreement)
This Amendment #3 to the Agreement for Wholesale Financing (this "Amendment") is
made as of March 13, 1998 by and between MicroAge Computer Centers, Inc., a
Delaware corporation ("MCCI"), MicroAge Logistics Services, Inc., a Delaware
corporation ("MLS") and IBM Credit Corporation, a Delaware corporation ("IBM
Credit").
RECITALS
MCCI, MLS and IBM Credit have entered into that certain Agreement for
Wholesale Financing dated as of December 17, 1993 (as amended, supplemented or
as otherwise modified from time to time, the "Agreement").
The parties have agreed to modify the Agreement as more specifically
set forth below, upon and subject to the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, MCCI and MLS ("we" or "us") and IBM Credit ("you") hereby agree as
follows:
Section 1. All capitalized terms not otherwise defined herein shall have the
respective meanings set forth in the Agreement.
Section 2. Modification of Agreement
A. Paragraph 8 of the Agreement is hereby amended by deleting the fifth
sentence therein, and substituting in lieu thereof, the following sentence:
"We also agree that such insurance policy shall include a lender's loss
payable endorsement or mortgagee clause in form and substance satisfactory to
you designating that any loss payable thereunder with respect to such Products
shall be payable to you."
B. Paragraph 13(b) of the Agreement is hereby amended by deleting such
Paragraph 13(b) in its entirety and substituting, in lieu of thereof, the
following Paragraph 13(b):
"(b) {Deleted - space reserved to preserve overall
numbering scheme}"
<PAGE>
C. Paragraph 13(c) of the Agreement is hereby amended by deleting such
Paragraph 13(c) in its entirety and substituting, in lieu of thereof, the
following Paragraph 13(c):
"(c) The Consolidated Group shall at all times maintain, on a
consolidated basis, a ratio of (i) the sum of (A) total liabilities plus (B)
that portion of the Outstanding Balance (as defined in the Purchase Agreement
executed with Deutche Financial Services (DFS) of all Sold Receivables (as
defined in the Purchase Agreement executed with DFS) which we and our affiliates
have elected to receive if we and our affiliates have received any or all of the
amount due prior to Collections (as defined in the Purchase Agreement executed
with DFS) of such Sold Receivables by DFS pursuant to Section 2.1.B of such
Purchase Agreement, to (ii) Tangible Net Worth of less than six and one half
(6.5) to one (1.0) (the "Leverage Ratio")."
D. Paragraph 13(d) of the Agreement is hereby amended by deleting such
Paragraph 13(d) in its entirety and substituting, in lieu of thereof, the
following Paragraph 13(d):
"(d) The Consolidated Group shall at all times maintain, on a
consolidated basis, a ratio of (i) the sum of (A) current assets plus (B) the
Outstanding Balance of all Sold Receivables to (ii) the sum of (C) current
liabilities plus (D) that portion of the Outstanding Balance of all Sold
Receivables which we and our affiliates have elected to receive if we and our
affiliates have received any and all of the amount due prior to Collection of
such Sold Receivables by you pursuant to the third sentence of Section 2.1.B of
the Purchase Agreement, of not less than one (1.0) to one (1.0)."
E. Paragraph 15 (b) (2) of the Agreement is hereby amended by inserting
therein immediately following the word "consultants" the words ", any
participant of or any party or parties you may enter into discussions with to
assign or participate a portion of your interests in connection with any
obligations owed by us, including the obligations owed by us to DFS in which you
are participating pursuant to the Participation Agreement executed by and
between you and DFS on August 3, 1995,"
Section 3. Representations and Warranties. We make to you the following
representations and warranties all of which are material and are made to induce
you to enter into this Agreement.
Section 3.1 Accuracy and Completeness of Warranties and Representations. All
representations made by us in the Agreement were true and accurate and complete
in every respect as of the date made, and, as amended by this Amendment, all
representations made by us in the Agreement are true, accurate and complete in
every material respect as of the date hereof, and do not fail to disclose any
material fact necessary to make representations not misleading.
<PAGE>
Section 3.2 Violation of Other Agreements. The execution and delivery of this
Amendment and the performance and observance of the covenants to be performed
and observed hereunder do not violate or cause us not to be in compliance with
the terms of any agreement to which we are a party.
Section 3.3 Litigation. Except as has been disclosed by us to you in writing,
there is no litigation, proceeding, investigation or labor dispute pending or
threatened against us, which if adversely determined, would materially adversely
affect our ability to perform our obligations under the Agreement and the other
documents, instruments and agreements executed in connection therewith or
pursuant hereto.
Section 3.4 Enforceability of Amendment. This Amendment has been duly
authorized, executed and delivered by us and is enforceable against us in
accordance with its terms.
Section 4. Ratification of Agreement. Except as specifically amended hereby, all
of the provisions of the Agreement shall remain unamended and in full force and
effect. We hereby, ratify, confirm and agree that the Agreement, as amended
hereby, represents a valid and enforceable obligation of ours, and is not
subject to any claims, offsets or defense.
Section 5. Governing Law. This Amendment shall be governed by and interpreted in
accordance with the laws of the State of Arizona.
Section 6. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original and all of which shall
constitute one agreement.
IN WITNESS WHEREOF, this Amendment has been duly executed by the authorized
officers of the undersigned as of the day and year first above written.
MICROAGE COMPUTER CENTERS, INC. MICROAGE LOGISTICS SERVICES, INC.
By: /s/ James R. Daniel By: /s/ James R. Daniel
--------------------------- ----------------------------
Title: Treasurer Title: Treasurer
------------------------ -------------------------
/s/ James H. Domaz /s/ James H. Domaz
- - ------------------------------ -------------------------------
Asst. Secretary Asst. Secretary
Accepted and Agreed:
IBM CREDIT CORPORATION
By: /s/ Ronald J. Bachner
---------------------------
Title: Mgr. Global Strategic
------------------------
Account Marketing
AMENDMENT #4 TO
AGREEMENT FOR WHOLESALE FINANCING
(Security Agreement)
This Amendment #4 to the Agreement for Wholesale Financing (this "Amendment") is
made as of April 30, 1998 by and between MicroAge Computer Centers, Inc., a
Delaware corporation ("MCCI"), MicroAge Logistics Services, Inc., a Delaware
corporation ("MLS"), Pinacor, Inc., a Delaware corporation ("Pinacor"), and IBM
Credit Corporation, a Delaware corporation ("IBM Credit").
RECITALS
WHEREAS, MCCI, MLS and IBM Credit have entered into that certain
Agreement for Wholesale Financing dated as of December 17, 1993 (as amended,
supplemented or as otherwise modified from time to time, the "Agreement");
WHEREAS, Pinacor is an affiliate of MCCI and MLS and will be acquiring
inventory with financing provided by IBM Credit;
WHEREAS, IBM Credit, MCCI, MLS and Pinacor believe it is in their best
interests to make Pinacor a party to the Agreement;
WHEREAS, MCCI, MLS and Pinacor desire to participate in the corporate
restructuring described on Exhibit C attached hereto (the "Restructuring")' and
WHEREAS, MCCI, MLS and Pinacor desire the consent of IBM Credit to the
Restructuring and in connection therewith to amend the Agreement in the manner
hereinafter set forth.
AGREEMENT
NOW, THEREFORE, for and in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, IBM Credit ("you"), MCCI, MLS and Pinacor ("we" or "us") hereby
agree as follows (except as otherwise defined herein, all capitalized terms
shall have the same meanings set forth in the Agreement).
1. MCCI, MLS and Pinacor hereby represent and warrant to IBM Credit
that Exhibit C completely and accurately describes the Restructuring. IBM Credit
consents to the Restructuring.
2. Pinacor is hereby made a party to the Agreement, and all references
to "MCCI" in the Agreement shall be deemed to be references to MicroAge Computer
Centers, Inc., MicroAge Logistics Services, Inc., and Pinacor, Inc. acting
jointly and severally. Pinacor hereby expressly assumes, on a joint and several
basis, all obligations of MCCI and MLS under the agreement, including without
limitation, all obligations regarding interest charges, fees and other amounts
payable to IBM Credit under letter agreements executed by MCCI, MLS and IBM
Credit in connection with the Agreement. Nothing herein shall be deemed to
release MCCI or MLS from any such obligations. MCCI, MLS and Pinacor
<PAGE>
hereby affirm all representations, warranties and obligations of MCCI and MLS in
the Agreement. MCCI, MLS and Pinacor agree that they shall be jointly and
severally responsible and liable for all obligations, representations and
warranties of MCCI and/or MLS and/or Pinacor under the Agreement, as amended
hereby.
In furtherance of the foregoing and not as a limitation, to secure all of its
current and future debts owed to IBM Credit, whether under the Agreement or any
current or future guaranty or other agreement, Pinacor grants to IBM Credit a
security interest in all inventory, equipment, fixtures, accounts, contract
rights, chattel paper, instruments, documents of title, deposit accounts,
reserves and general intangibles, now owned or hereafter acquired, and all
attachments, parts, accessories, accessions, substitutions, and replacements
thereto and all proceeds thereof, and to the extent related to the property
described above, all books, correspondence, credit files, records, invoices and
other papers and documents, including without limitation, to the extent so
related, all tapes, cards, computer runs, computer programs and other papers and
documents in the possession or control of Pinacor or any computer bureau from
time to time acting for Pinacor, and, to the extent so related, all rights in,
to and under all policies of insurance, including claims of rights to payments
thereunder and proceeds therefrom, including any credit insurance, and all
proceeds thereof.
3. Paragraph 13(c) of the Agreement is hereby amended by deleting such
Paragraph 13(c) in its entirety and substituting, in lieu thereof, the
following.
"(c) For the period commencing May 1, 1998 and ending August 31, 1998,
the Consolidated Group shall at all times maintain, on a consolidated basis, a
ratio of (i) the sum of (A) total liabilities plus (B) that portion of the
Outstanding Balance (as defined in the Purchase Agreement executed with Deutche
Financial Services (DFS) of all Sold Receivables (as defined in the Purchase
Agreement executed with DFS) which we and our affiliates have elected to receive
if we and our affiliates have received any or all of the amount due prior to
Collections (as defined in the Purchase Agreement executed with DFS) of such
Sold Receivables by DFS pursuant to Section 2.1.B of such Purchase Agreement, to
(ii) Tangible Net Worth of less than seven and one half (7.5) to one (1.0)(the
"Leverage Ratio"). Commencing September 1, 1998, the Leverage Ratio shall at all
time be less than six and one half (6.5) to one (1).
4. Exhibit A to the Agreement is hereby restated in its entirety and
replaced by Exhibit A attached hereto and incorporated herein by reference.
5. Exhibit B to the Agreement is hereby restated in its entirety and
replaced by Exhibit B attached hereto and incorporated herein by reference.
6. Representations and Warranties. We make to you the following
representations and warranties all of which are material and are made to induce
you to enter into this Agreement.
<PAGE>
6.1 Accuracy and Completeness of Warranties and Representations. All
representations made by us in the Agreement were true and accurate and complete
in every respect as of the date made, and, as amended by this Amendment, all
representations made by us in the Agreement are true, accurate and complete in
every material respect as of the date hereof, and do not fail to disclose any
material fact necessary to make representations not misleading.
6.2 Violation of Other Agreements. The execution and delivery of this
Amendment and the performance and observance of the covenants to be performed
and observed hereunder do not violate or cause us not to be in compliance with
the terms of any agreement to which we are a party.
6.3 Litigation. Except as has been disclosed by us to you in writing,
there is no litigation, proceeding, investigation or labor dispute pending or
threatened against us, which if adversely determined, would materially adversely
affect our ability to perform our obligations under the Agreement and the other
documents, instruments and agreements executed in connection therewith or
pursuant hereto.
6.4 Enforceability of Amendment. This Amendment has been duly
authorized, executed and delivered by us and is enforceable against us in
accordance with its terms.
7. Ratification of Agreement. Except as specifically amended hereby,
all of the provisions of the Agreement shall remain unamended and in full force
and effect. We hereby, ratify, confirm and agree that the Agreement, as amended
hereby, represents a valid and enforceable obligation of ours, and is not
subject to any claims, offsets or defense.
8. Governing Law. This Amendment shall be governed by and interpreted
in accordance with the laws of the State of Arizona.
9. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original and all of which shall
constitute one agreement.
IN WITNESS WHEREOF, this Amendment has been duly executed by the authorized
officers of the undersigned as of the day and year first above written.
MICROAGE COMPUTER CENTERS, INC.
By: /s/ James R. Daniel
----------------------------
Title: Treasurer
-------------------------
/s/ James H. Domaz
-------------------------------
Asst. Secretary
<PAGE>
MICROAGE LOGISTICS SERVICES, INC.
By: /s/ James R. Daniel
------------------------------
Title: Treasurer
---------------------------
/s/ James H. Domaz
---------------------------------
Asst. Secretary
PINACOR, Inc.
By: /s/ James R. Daniel
------------------------------
Title: Treasurer
---------------------------
/s/ James H. Domaz
---------------------------------
Asst. Secretary
Accepted and Agreed:
IBM CREDIT CORPORATION
By: /s/ Ronald J. Bachner
------------------------------
Title: Mgr. Global Strategic
---------------------------------
Account Marketing
EXHIBIT 11 - CALCULATION OF NET INCOME (LOSS) PER COMMON SHARE
MICROAGE, INC
NET INCOME (LOSS) PER COMMON SHARE CALCULATION
(in thousands)
<TABLE>
<CAPTION>
Quarter ended 26 weeks ended
-------------------- --------------------
May 3, May 4, May 3, May 4,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Basic
Weighted average common shares 19,584 17,336 19,520 17,255
-------- -------- -------- --------
Diluted
Weighted average shares from primary
calculation 19,584 17,336 19,520 17,255
Dilutive effect of stock options and warrants -- 540 -- 806
-------- -------- -------- --------
Weighted average common and common
equivalent shares outstanding - diluted 19,584 17,876 19,520 18,061
-------- -------- -------- --------
Net income (loss) $ (5,255) $ 6,567 $(10,669) $ 11,604
Net income (loss) per common and common equivalent share:
Basic $ (0.27) $ 0.38 $ (0.54) $ 0.67
======== ======== ======== ========
Diluted $ (0.27) $ 0.37 $ (0.54) $ 0.64
======== ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial
information extracted from the Consolidated
Balance Sheets (Unaudited) as of May 3, 1998 and
November 2, 1997 and the Consolidated Statements
of Operations (Unaudited) for the quarters ended
May 3, 1998 and May 4, 1997
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-01-1998
<PERIOD-START> NOV-03-1997
<PERIOD-END> MAY-03-1998
<EXCHANGE-RATE> 1
<CASH> 37,204
<SECURITIES> 0
<RECEIVABLES> 405,961
<ALLOWANCES> 11,752
<INVENTORY> 517,459
<CURRENT-ASSETS> 964,560
<PP&E> 183,915
<DEPRECIATION> 91,589
<TOTAL-ASSETS> 1,139,912
<CURRENT-LIABILITIES> 869,486
<BONDS> 0
0
0
<COMMON> 196
<OTHER-SE> 255,763
<TOTAL-LIABILITY-AND-EQUITY> 1,139,912
<SALES> 1,326,950
<TOTAL-REVENUES> 1,326,950
<CGS> 1,242,369
<TOTAL-COSTS> 1,242,369
<OTHER-EXPENSES> 5,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 988
<INCOME-PRETAX> (9,140)
<INCOME-TAX> (3,885)
<INCOME-CONTINUING> (5,255)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,255)
<EPS-PRIMARY> (0.27)
<EPS-DILUTED> (0.27)
</TABLE>
