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 2, 1999 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 30, 1999 was 20,497,305.
<PAGE>
INDEX
MICROAGE, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets -- May 2, 1999 and November 1, 1998. 2
Consolidated statements of operations -- Quarters ended 3
May 2, 1999 and May 3, 1998; 26 weeks ended May 2, 1999
and May 3, 1998.
Consolidated statements of cash flows -- 26 weeks ended 4
May 2, 1999 and May 3, 1998.
Notes to consolidated financial statements. 5
Item 2. Management's Discussion and Analysis of Financial Condition 7
and Results of Operations.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
MICROAGE, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share data)
ASSETS
May 2, November 1,
1999 1998
----------- ----------
Current assets:
Cash and cash equivalents $ 57,328 $ 41,894
Accounts and notes receivable, net 288,156 529,877
Inventory, net 449,245 486,150
Other 23,561 24,432
----------- ----------
Total current assets 818,290 1,082,353
Property and equipment, net 95,670 92,147
Intangible assets, net 10,056 126,105
Other 24,557 14,538
----------- ----------
Total assets $ 948,573 $1,315,143
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 731,204 $ 967,501
Accrued liabilities 21,438 24,279
Current portion of long-term obligations 3,102 3,095
Other 7,731 8,868
----------- ----------
Total current liabilities 763,475 1,003,743
Line of credit 12,600 --
Long-term obligations 4,209 5,553
Other long-term liabilities 17,178 15,361
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 2, 1999 -- 20,527,554
November 1, 1998 -- 20,284,789 205 203
Additional paid-in capital 210,173 206,720
Retained earnings (deficit) (58,769) 83,729
Treasury stock, at cost;
Shares: May 2, 1999 -- 30,249
November 1, 1998 -- 16,378 (498) (166)
----------- ----------
Total stockholders' equity 151,111 290,486
----------- ----------
Total liabilities and stockholders' equity $ 948,573 $1,315,143
=========== ==========
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 2, May 3, May 2, May 3,
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue $1,656,541 $1,326,950 $3,101,382 $2,505,961
Cost of sales 1,569,903 1,242,369 2,912,974 2,347,555
---------- ---------- ---------- ----------
Gross profit 86,638 84,581 188,408 158,406
Operating and other expenses
Operating expenses 106,025 79,652 195,312 152,713
Restructuring and other one-time charges 134,159 5,600 134,159 5,600
---------- ---------- ---------- ----------
Total 240,184 85,252 329,471 158,313
---------- ---------- ---------- ----------
Operating income (loss) (153,546) (671) (141,063) 93
Other expenses - net 12,260 9,171 19,508 20,112
---------- ---------- ---------- ----------
Loss before income taxes (165,806) (9,842) (160,571) (20,019)
Income tax benefit (18,465) (3,885) (15,296) (7,946)
---------- ---------- ---------- ----------
Net loss $ (147,341) $ (5,957) $ (145,275) $ (12,073)
========== ========== ========== ==========
Net loss per common and
common equivalent share:
Basic $ (7.19) $ (0.30) $ (7.12) $ (0.62)
========== ========== ========== ==========
Diluted $ (7.19) $ (0.30) $ (7.12) $ (0.62)
========== ========== ========== ==========
Weighted average common and common
equivalent shares outstanding:
Basic 20,481 19,584 20,412 19,520
========== ========== ========== ==========
Diluted 20,481 19,584 20,412 19,520
========== ========== ========== ==========
</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)
26 weeks ended
-------------------------
May 2, May 3,
1999 1998
--------- ---------
Cash flows from operating activities:
Net loss $(145,275) $ (12,073)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 23,741 18,451
Provision for losses on accounts and notes
receivable 12,304 6,630
Restructuring and other one-time charges 130,917 --
Changes in assets and liabilities, net of
business acquisitions:
Accounts and notes receivable 228,706 (15,466)
Inventory 36,905 (29,338)
Other current assets 871 (3,844)
Other assets (10,711) (5,613)
Accounts payable (235,391) 103,414
Accrued liabilities (2,841) 630
Other liabilities (1,820) 9,193
--------- ---------
Net cash provided by operating activities 37,406 71,984
Cash flows from investing activities:
Purchases of property and equipment (29,211) (28,232)
Purchases of businesses and investments in
unconsolidated companies, net of cash acquired (5,500) --
--------- ---------
Net cash used in investing activities (34,711) (28,232)
Cash flows from financing activities:
Proceeds from issuance of stock - stock option
and employee stock purchase plans 2,411 2,139
Net borrowings (payments) under line of credit 12,600 (30,650)
Shareholder distributions - pooled companies -- (129)
Net change in long-term obligations (2,272) (1,937)
--------- ---------
Net cash provided by (used in) financing activities 12,739 (30,577)
--------- ---------
Net increase in cash and cash equivalents 15,434 13,175
Cash and cash equivalents at beginning of period 41,894 22,279
--------- ---------
Cash and cash equivalents at end of period $ 57,328 $ 35,454
========= =========
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 2, 1999 are not necessarily indicative of the results that may
be expected for the year ending October 31, 1999. 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 1, 1998.
NOTE B - OTHER EXPENSES - NET
Other expenses - net consists of the following (in thousands):
Quarters ended 26 weeks ended
------------------ ------------------
May 2, May 3, May 2, May 3,
1999 1998 1999 1998
------- ------- ------- -------
Interest expense $ 992 $ 988 $ 1,815 $ 3,333
Expenses from sales of
accounts receivable 4,140 4,993 6,823 10,570
Amortization expense 2,842 2,068 5,209 4,180
Other 4,286 1,122 5,661 2,029
------- ------- ------- -------
$12,260 $ 9,171 $19,508 $20,112
======= ======= ======= =======
NOTE C - RESTRUCTURING AND OTHER ONE-TIME CHARGES
During the quarter ended May 2, 1999, the Company recorded $134 million of
restructuring and other one-time charges ($124 million, or $6.07 per share,
after taxes). The restructuring and other one-time charges included a $123
million write-down of impaired goodwill; $8 million for the write-down to net
realizable value of software and equipment no longer utilized by the Company due
to the implementation of a new branch automation system; $2 million in employee
termination benefits; and $1 million for one-time contract termination and
business closure costs.
The goodwill written off during the quarter resulted from businesses acquired
primarily in fiscal 1997 and fiscal 1998. Recent competitive increases in the
industry as well as operating losses caused the Company to reassess the
recoverability of its long-lived assets. The fair value of the assets,
determined through a discounted cash flow analysis as well as other market
analyses, was compared to the carrying amount of the assets. The difference was
recorded as a charge to earnings in the second quarter.
5
<PAGE>
The charges associated with employee termination benefits consist primarily of
severance pay for 79 associates. The reductions were completed by May 2, 1999
and occurred in Pinacor, the Company's distribution business, and in an imaging
business that the Company decided to exit during the quarter.
All actions related to the restructuring were implemented as of May 2, 1999, and
the liability for restructuring accruals at May 2, 1999 was $3 million.
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
1, 1998 for additional discussion of the foregoing factors. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
The Company operates two independent businesses - a distribution business
operated through a wholly-owned subsidiary, Pinacor, Inc. ("Pinacor"), and an
integration business, MicroAge Technology Services ("MTS"). These businesses
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.
RECENT DEVELOPMENTS
During the second quarter of fiscal 1999, the Company experienced increased
competitive pressures and other economic factors that negatively impacted the
Company's gross margins and operating results. In addition, operating expenses
increased from the first quarter of fiscal 1999 to the second quarter of fiscal
1999. The Company has taken actions to increase gross margins and decrease
operating expenses. These actions include price increases, the elimination of
several hundred positions at Pinacor and MTS, closing several branch locations
and exiting several businesses that were no longer strategic.
In addition, changes in the computer integration and distribution industry as
well as recent operating losses caused the Company to reassess the
recoverability of its goodwill during the quarter. The Company determined that,
based on cash flow and other market analyses, a substantial portion of its
goodwill was impaired. See Note C to the Consolidated Financial Statements.
The Company also completed the implementation of a new branch automation system
during the quarter. Charges were recognized during the quarter related to the
conversion to the new system as well as for the completion of the separation of
the Company into two independent businesses, Pinacor and MTS.
7
<PAGE>
In connection with these developments, the Company recorded restructuring and
other expenses aggregating $152 million ($136 million or $6.64 per share after
taxes). These charges included $123 million for the write-down to net realizable
value of goodwill, $13 million for the write off of assets no longer utilized or
otherwise impaired after the system conversion and completion of the Company
split described above, $8 million for severance and business exit costs and $8
million related to Pinacor's Latin America distribution business. The charges
for Pinacor Latin America were primarily the result of the continuing
deterioration of the South American economy and consist of receivable and
inventory write-downs and the write-down of Pinacor's investment in several
Latin American companies.
The total charges of $152 million include $18 million of charges that were
recorded as components of cost of sales, operating expenses and other expenses
in the accompanying statements of operations.
In June 1999, the Company announced that it had retained an investment banking
firm to help explore financial options designed to enhance shareholder value.
The following table illustrates the recognition within the consolidated
statements of operations of the restructuring and other unusual charges
described above (in thousands):
Quarter ended May 2, 1999
-----------------------------------------
Restructuring
and other
As Reported unusual charges As Adjusted
----------- --------------- -----------
Cost of sales $1,569,903 $ 6,016 $1,563,887
Operating expenses 106,025 9,773 96,252
Restructuring and other
one-time charges 134,159 134,159 --
Operating loss (153,546) 147,948 (3,598)
Other expenses - net 12,260 2,350 9,910
Loss before income taxes $ (165,806) $152,298 $ (13,508)
In addition to the actions and charges taken above, the Company took actions
subsequent to the end of the fiscal quarter to further reduce operating expenses
and improve profitability. These actions include the elimination of several
hundred positions and the closure of several branch operations. The charges
related to these actions and other actions that may be taken will be recognized
in the third fiscal quarter ended August 1, 1999. Excluding these charges and
other expense reduction initiatives, the Company expects the third fiscal
quarter results will be at or near breakeven.
8
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the indicated periods, data as percentages
of total revenue:
<TABLE>
<CAPTION>
Quarter ended
-----------------------------------------------------------------------
May 2, Jan. 31, Nov. 1, Aug. 2, May 3,
1999 1999 1998 1998 1998
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenue (in thousands) $1,656,541 $1,444,841 $1,572,824 $1,441,246 $1,326,950
Cost of sales(1) 94.4% 93.0% 93.1% 94.0% 93.6%
---------- ---------- ---------- ---------- ----------
Gross profit(1) 5.6 7.0 6.9 6.0 6.4
Operating and other expenses
Operating expenses(1) 5.8 6.2 5.8 5.4 6.0
Restructuring and other
one-time charges(2) 9.2 0.0 0.0 0.0 0.4
---------- ---------- ---------- ---------- ----------
Operating income (loss) (9.4) 0.9 1.1 0.6 0.0
Other expenses - net(1) 0.6 0.5 0.4 0.5 0.7
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes (10.0) 0.4 0.7 0.1 (0.7)
Income tax provision (benefit) (1.1) 0.2 0.5 0.1 (0.3)
---------- ---------- ---------- ---------- ----------
Net income (loss) (8.9)% 0.1% 0.2% 0.0 (0.4)%
========== ========== ========== ========== ==========
</TABLE>
(1) Calculations for the quarter ended May 2, 1999 exclude the effects of
$18.1 million of charges discussed above. Inclusion of such expenses
would result in the following percentage relationship to net sales for
the quarter:
Cost of sales 94.8%
Gross profit 5.2
Operating expenses 6.4
Other expenses - net 0.7
(2) Calculations for the quarter ended May 2, 1999 include the effects of
$18.1 million of charges excluded from cost of sales, gross profit,
operating expenses and other expenses as discussed in footnote (1)
above.
The following discussion of results of operations for the quarter and 26 weeks
ended May 2, 1999 exclude the effect of the restructuring and other unusual
charges discussed above in "Recent Developments."
TOTAL REVENUE. Total revenue of $1.7 billion increased $330 million, or 25%, for
the quarter ended May 2, 1999 as compared to the quarter ended May 3, 1998. This
revenue increase included a $298 million, or 25%, increase in Pinacor
(distribution business) revenue and a $17 million, or 4%, increase in MTS
(integration business) revenue. The remaining increase in consolidated revenue
was due to a decrease in the elimination of intercompany revenue.
Total revenue increased $595 million, or 24%, for the 26 weeks ended May 2, 1999
as compared to the 26 weeks ended May 3, 1998. This revenue increase included a
$553 million, or 25%, increase in Pinacor revenue and a $28 million, or 3%,
increase in MTS revenue. The remaining increase in consolidated revenue was due
to a decrease in the elimination of intercompany revenue.
9
<PAGE>
The increase in revenue was attributable to sales to resellers added since May
3, 1998, increased demand for the Company's major suppliers' products, the
Company's addition of new product offerings, service revenue growth and the
growth of the microcomputer products industry.
GROSS PROFIT PERCENTAGE. The Company's gross profit percentage was 5.6% for the
quarter ended May 2, 1999 and 6.4% for the quarter ended May 3, 1998. The gross
profit percentage was 6.3% for the 26 weeks ended May 2, 1999 and May 3, 1998.
The decrease in the Company's gross profit percentage during the second quarter
was due to lower margins in Pinacor, partially offset by higher margins in MTS.
Pinacor margins decreased primarily as a result of decreased product trading
margins. This decline in trading margins was the result of increased competitive
pressures, particularly during the first half of the second quarter, and to
decreased supplier funds during the quarter. Pinacor instituted a price increase
during the second quarter and adjusted salesperson compensation plans to incent
higher margin sales. As a result, product trading margins increased in the
latter part of the quarter; however, supplier funds remain at lower levels than
in previous quarters.
MTS margins increased for the second quarter of fiscal 1999 compared to the
second quarter of fiscal 1998, but decreased compared to the first quarter of
fiscal 1999. The increase from the second quarter of 1998 was due primarily to
an increase in service revenue, which has higher gross margins than product
revenue margins. The decrease from the first quarter of fiscal 1999 was due to
increased competitive pressures in both product and services and to
under-utilization of service staff. MTS has taken actions to increase service
margins through the elimination of under-utilized service associates.
Future gross profit percentages may be affected by market pressures, the
introduction of new Company initiatives, changes in revenue mix, future
acquisitions, changes in supplier incentive funds, changes in suppliers' terms
and conditions, the Company's utilization of early payment discount
opportunities, supplier pricing actions, and other competitive and economic
pressures. See "Potential Fluctuations in Operating Results" below for
information regarding industry trends that may affect future gross profit
percentages.
OPERATING EXPENSES. As a percentage of revenue, operating expenses decreased to
5.8% for the quarter ended May 2, 1999, compared to 6.0% for the quarter ended
May 3, 1998. Operating expenses increased from $153 million, or 6.1% of revenue,
for the 26 weeks ended May 3, 1998 to $186 million, or 6.0% of revenue, for the
26 weeks ended May 2, 1999, primarily as a result of increased business volume.
Although operating expenses have decreased as a percentage of revenue, total
spending increased during the second fiscal quarter at the same time that gross
profit dollars decreased. As a result, the Company has taken actions to reduce
operating expenses. See "Recent Developments" for a discussion of actions taken.
10
<PAGE>
OTHER EXPENSES - NET. Other expenses - net increased to $9.9 million for the
quarter ended May 2, 1999 from $9.2 million for the quarter ended May 3, 1998
and $7.2 million for the first fiscal quarter of 1999. Other expenses - net
decreased to $17.2 million for the 26 weeks ended May 2, 1999 from $20.1 million
for the 26 weeks ended May 3, 1998. The increase for the second fiscal quarter
of 1999 compared to the first quarter of fiscal 1999 was primarily due to
increased average borrowings as a result of changes in the Company's major
suppliers' policies. During the first quarter of fiscal 1999 certain major
suppliers changed the terms of their credit arrangements with the Company. These
changes include a decrease in the number of days the Company has to pay for
product purchases and a decrease in the amount of reseller purchases from the
Company that the suppliers are willing to subsidize. These changes increased the
Company's working capital requirements and financing costs.
INCOME TAX PROVISION. As a percentage of loss before tax, the income tax benefit
was 20.1% for the quarter ended May 2, 1999 compared to 39.5% for the quarter
ended May 3, 1998. The decrease in the effective tax rate is due to the impact
of permanent differences, primarily consisting of goodwill amortization and
meals and entertainment expenses, between book income and taxable income.
CHANGES IN SUPPLIER TERMS AND CONDITIONS
The key suppliers of the Company provide various incentives for promoting and
marketing their product offerings. A large portion of the incentives is passed
on to the Company's customers. However, a portion of the incentives positively
impact the Company's income.
Beginning in May 1998, the major manufacturers announced and/or instituted
changes in their sales incentive programs and inventory management programs.
Pursuant to these changes, the major manufacturers have (i) reduced the amount
of product that the Company is allowed to return, (ii) reduced the amount of
price protection coverage offered to the Company and (iii) changed incentives to
programs based on sales of the manufacturers' products, rather than on purchases
of the products from the manufacturers.
In addition, several of the Company's major suppliers have changed the terms of
their credit arrangements with the Company. These changes include a decrease in
the number of days the Company has to pay for product purchases and a decrease
in the amount of reseller purchases from the Company that the suppliers are
willing to subsidize. These changes have increased the Company's working capital
requirements and financing costs. Further changes in incentives or other terms
and conditions could have a material adverse effect on the Company's operating
results.
During the quarter ended May 2, 1999, the Company announced a change in the
Pinacor product sourcing relationship with Compaq Computer Corporation
("Compaq"). By the end of the Company's fiscal year, Pinacor will begin sourcing
certain Compaq products from other Compaq distributors instead of sourcing
directly from Compaq. Compaq has indicated that Pinacor will continue to be a
Compaq Channel partner and will be able to distribute the full range of Compaq
products. In addition, Pinacor will continue to order some products directly
from Compaq. The Company believes that this change will have a negative impact
on its operating results, but the amount of the impact of this change cannot be
determined at this time.
11
<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, changes in supplier terms and conditions and general
economic conditions. In particular, the Company's operating results are
sensitive to changes in the mix of product and service revenues, product
margins, inventory adjustments and interest rates. 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. In addition, as discussed above,
changes in supplier payment terms have increased the Company's working capital
requirements.
Cash provided by operating activities was $37 million for the 26 weeks ended May
2, 1999 as compared to $72 million for the 26 weeks ended May 3, 1998. This
decrease was primarily due to changes in cash provided by accounts receivable,
inventory and accounts payable. During the 26 weeks ended May 2, 1999, $229
million was provided by changes in accounts receivable as compared to $15
million used during the 26 weeks ended May 3, 1998. This was due to an increase
in receivables sold to a finance company. Cash provided by inventory during the
26 weeks ended May 2, 1999 was $37 million as compared to $29 million used
during the 26 weeks ended May 3, 1998. These increases were offset by cash used
by changes in accounts payable of $235 million during the 26 weeks ended May 2,
1999 as compared to cash provided of $103 million during the 26 weeks ended May
3, 1998. The change in cash resulting from accounts payable was primarily due to
changes in suppliers' terms. See "Changes in Supplier Terms and Conditions".
Cash used in investing activities was $35 million during the 26 weeks ended May
2, 1999 as compared to $28 million during the 26 weeks ended May 3, 1998. This
increase was primarily due to purchases of businesses and investments in
unconsolidated subsidiaries.
12
<PAGE>
Cash provided by financing activities was $13 million during the 26 weeks ended
May 2, 1999 compared to cash used of $31 million during the 26 weeks ended May
3, 1998. This change was primarily due to net borrowings under the Company's
line of credit of $13 million for the 26 weeks ended May 2, 1999 compared to net
payments of $31 million for the 26 weeks ended May 3, 1998.
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 2, 1999, the net amount of
sold accounts receivable was $271 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") and a
line of credit for general working capital requirements ("Supplemental Line of
Credit"). Payments for products purchased under the Inventory Lines of Credit
vary depending upon the product supplier, but generally are due between 30 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 2, 1999, the
Company had $290 million outstanding under the Inventory Lines of Credit
(included in accounts payable in the accompanying Balance Sheets), and $13
million outstanding under the Supplemental Line of Credit.
Of the $800 million of financing capacity represented by the Agreements, $226
million was unused as of May 2, 1999. 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 2, 1999, 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 2, 1999, the net amount of sold accounts receivable under the Purchase
Agreement was $23 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.
13
<PAGE>
As discussed above, several of the Company's major suppliers have changed the
terms of their credit arrangements with the Company. These changes include a
decrease in the number of days the Company has to pay for product purchases and
a decrease in the amount of reseller purchases from the Company that the
suppliers are willing to subsidize. These changes have increased the Company's
working capital requirements and financing costs. The additional borrowings that
will be required to pay suppliers on shorter terms could exceed the borrowings
available under the Agreements due to collateral constraints.
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 $15 to $20 million during the
remainder of fiscal 1999.
INFLATION
The Company believes that inflation has generally not had a material impact on
its operations.
14
<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 March 31, 1999.
(b)(1) The following individuals were elected to the Board of
Directors as Class I Directors for three-year terms expiring
at the Company's 2002 Annual Meeting of Stockholders: William
H. Mallender, Lynda M. Applegate, and Dianne C. Walker.
(b)(2) The following individuals' terms continued after the Annual
Meeting as Class II Directors: Jeffrey D. McKeever and Steven
G. Mihaylo. Their terms will expire at the Company's 2000
Annual Meeting of Stockholders.
(b)(3) The following individuals' terms continued after the Annual
Meeting as Class III Directors: Roy A. Herberger, Jr. and
Cyrus F. Freidheim, Jr. Their terms will expire at the
Company's 2001 Annual Meeting of Stockholders.
(c) The matters submitted for vote at the Annual Meeting were as
follows:
(c)(1) Election of Class I Directors for three-year terms expiring at
the Company's 2002 Annual Meeting of Stockholders. See Item
4(b)(1) above. The shares were voted as follows:
NOMINEE NUMBER OF SHARES
------- ----------------
William H. Mallender For 16,228,309
Against 0
Withheld 581,122
Abstentions 0
Broker Non-votes 0
Lynda M. Applegate For 16,231,462
Against 0
Withheld 577,969
Abstentions 0
Broker Non-votes 0
Dianne C. Walker For 16,183,795
Against 0
Withheld 625,636
Abstentions 0
Broker Non-votes 0
15
<PAGE>
(c)(2) Approval of Increase in Authorized Shares under the MicroAge,
Inc. 1995 Associate Stock Purchase Plan. The shares were voted
as follows:
For 16,117,323
Against 588,258
Withheld 0
Abstentions 32,866
Broker Non-votes 0
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Form of MicroAge, Inc. 1999 Management Equity Program Award
Agreement*
10.2 MicroAge, Inc. 1999 Management Equity Program Award Agreement
between MicroAge, Inc. and Jeffrey D. McKeever*
10.3 MicroAge, Inc. 1999 Management Equity Program Award Agreement
between MicroAge, Inc. and James R. Daniel*
10.4 MicroAge, Inc. 1999 Management Equity Program Award Agreement
between MicroAge, Inc. and Christopher J. Koziol*
10.5 MicroAge, Inc. 1999 Management Equity Program Award Agreement
between MicroAge, Inc. and Robert G. O'Malley*
10.6 MicroAge, Inc. 1995 Director Incentive Plan Stock Option
Agreement between MicroAge, Inc. and William H. Mallender*
10.7 MicroAge, Inc. 1995 Director Incentive Plan Stock Option
Agreement between MicroAge, Inc. and Lynda M. Applegate*
10.8 MicroAge, Inc. 1995 Director Incentive Plan Stock Option
Agreement between MicroAge, Inc. and Cyrus F. Freidheim*
10.9 MicroAge, Inc. 1995 Director Incentive Plan Stock Option
Agreement between MicroAge, Inc. and Roy A. Herberger*
10.10 MicroAge, Inc. 1995 Director Incentive Plan Stock Option
Agreement between MicroAge, Inc. and Dianne C. Walker*
10.11 MicroAge, Inc. 1995 Director Incentive Plan Stock Option
Agreement between MicroAge, Inc. and Steven G. Mihaylo*
11 EPS Detail Calculation (Statement re: Computation of Per Share
Earnings)
27 Financial Data Schedule
- ----------
* Management contract for compensatory plan or arrangement.
(b) During the quarter ended May 2, 1999, MicroAge, Inc. filed one
report on Form 8-K, dated January 28, 1999 and filed February
13, 1999, pursuant to Item 5 to disclose an extension of
MicroAge, Inc.'s Amended and Restated Rights Agreement from
February 23, 1999 through the end of the current fiscal year,
October 31, 1999.
16
<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 21, 1999 By: /s/ Jeffrey D. McKeever
-------------------------------------
Jeffrey D. McKeever
Chairman of the Board and
Chief Executive Officer
Date: June 21, 1999 By: /s/ James R. Daniel
-------------------------------------
James R. Daniel
Executive Vice President Services,
Chief Financial Officer and Treasurer
17
<PAGE>
EXHIBIT INDEX
10.1 Form of MicroAge, Inc. 1999 Management Equity Program Award
Agreement*
10.2 MicroAge, Inc. 1999 Management Equity Program Award Agreement
between MicroAge, Inc. and Jeffrey D. McKeever*
10.3 MicroAge, Inc. 1999 Management Equity Program Award Agreement
between MicroAge, Inc. and James R. Daniel*
10.4 MicroAge, Inc. 1999 Management Equity Program Award Agreement
between MicroAge, Inc. and Christopher J. Koziol*
10.5 MicroAge, Inc. 1999 Management Equity Program Award Agreement
between MicroAge, Inc. and Robert G. O'Malley*
10.6 MicroAge, Inc. 1995 Director Incentive Plan Stock Option
Agreement between MicroAge, Inc. and William H. Mallender*
10.7 MicroAge, Inc. 1995 Director Incentive Plan Stock Option
Agreement between MicroAge, Inc. and Lynda M. Applegate*
10.8 MicroAge, Inc. 1995 Director Incentive Plan Stock Option
Agreement between MicroAge, Inc. and Cyrus F. Freidheim*
10.9 MicroAge, Inc. 1995 Director Incentive Plan Stock Option
Agreement between MicroAge, Inc. and Roy A. Herberger*
10.10 MicroAge, Inc. 1995 Director Incentive Plan Stock Option
Agreement between MicroAge, Inc. and Dianne C. Walker*
10.11 MicroAge, Inc. 1995 Director Incentive Plan Stock Option
Agreement between MicroAge, Inc. and Steven G. Mihaylo*
11 EPS Detail Calculation (Statement re: Computation of Per Share
Earnings)
27 Financial Data Schedule
- ----------
* Management contract for compensatory plan or arrangement.
MICROAGE, INC.
1999 MANAGEMENT EQUITY PROGRAM
AWARD AGREEMENT
(_______________________)
April 7, 1999
Dear __________:
Pursuant to the action taken by the Board of Directors of MicroAge,
Inc. (the "COMPANY") and the Compensation Committee of the Board of Directors,
you are hereby offered participation in the 1999 Management Equity Program (the
"1999 MEP") under the MicroAge, Inc. Long-Term Incentive Plan (the "PLAN").
Under the 1999 MEP, you have the opportunity to receive options to restructure
your compensation package to some extent. Essentially, you may elect to purchase
shares of the common stock of the Company if you irrevocably elect to waive all
or a portion of your base salary you may receive from May 1, 1999 through May 1,
2000 under the following terms and conditions.
BEFORE YOU ELECT TO PARTICIPATE IN THE 1999 MEP, READ THIS AWARD AGREEMENT. YOU
WILL BE REQUIRED TO SIGN THIS AWARD AGREEMENT, AND YOUR SIGNATURE WILL EVIDENCE
THAT YOU HAVE READ THIS AWARD AGREEMENT, UNDERSTAND IT, AND AGREE WITH ITS TERMS
AND CONDITIONS.
TO PARTICIPATE IN THE 1999 MEP, YOU MUST COMPLETE AND SIGN THIS AWARD
AGREEMENT AND RETURN IT TO ALESIA MARTIN (EXTENSION 65150) BY 12:00 P.M.
NOON ON FRIDAY, APRIL 23, 1999.
1. EFFECTIVE DATE. The effective date of your participation in the 1999
MEP, and the grant date of your MEP options, is April 23, 1999.
2. SALARY WAIVER. You hereby elect to waive a portion of your salary
during the period from May 1, 1999 through May 1, 2000 (the "WAIVER PERIOD") in
the following amount (the "WAIVER AMOUNT"): $____________________. NOTE: the
MINIMUM Waiver Amount is $__________ (10% of your current base salary) and the
MAXIMUM Waiver Amount is $____________ (25% of your current base salary).
1
<PAGE>
3. NUMBER OF OPTIONS GRANTED. In exchange for electing to waive the
Waiver Amount specified in Paragraph 2, above, you are hereby granted an option
to purchase the number of shares of MicroAge, Inc. Common Stock calculated
pursuant to the formula below (TO BE COMPLETED BY MICROAGE):
(1) Waiver Amount: $___________
(2) $ ____________________ (Waiver Amount)
Multiplied by Four (4) (the "LEVERAGE FACTOR"): $___________
(3) Common Stock Closing Price on Effective Date
(April 23, 1999) (the "COMMON STOCK PRICE"): $___________
(4) Total Options Granted (2) / (3) (rounded up): $___________
4. VESTING OF OPTIONS. Your options will vest in one-third (1/3)
increments beginning on May 1, 2000, and will be fully vested on May 1, 2002.
5. EXPIRATION OF OPTIONS. Subject to Section 6 and 7 of this Award
Agreement, your options will expire, unless sooner exercised, on April 23, 2009.
6. TERMINATION OF EMPLOYMENT.
DEATH. Upon your death, your beneficiary will be entitled to receive
the number of options determined by multiplying the sum of your compensation
actually waived up to the date of your death by the Leverage Factor and dividing
the product by the Common Stock Price; provided, however, that only the total
compensation waived by you up to the date of your death will be considered. All
options received by your beneficiary will be fully vested and immediately
exercisable. Your beneficiary will have up to one year from the date of your
death to exercise the options. After that one year period, the options will be
canceled. UNDER NO CIRCUMSTANCES WILL YOU OR YOUR BENEFICIARY BE ENTITLED TO
RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO
WAIVE UNDER THE 1999 MEP.
DISABILITY. Upon your termination of employment due to a "Disability"
(as that term is defined in the Plan) you will be entitled to receive the number
of options determined by multiplying the sum of your compensation actually
waived up to the date of your termination by the Leverage Factor and dividing
the product by the Common Stock Price; provided, however, that only the total
compensation waived by you up to the date of your termination will be
considered. All options received will be fully vested and immediately
exercisable. You will have up to one year from the date of termination of
employment to exercise the options. After that one year period, the options will
be canceled. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL
TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999
MEP.
VOLUNTARY OR INVOLUNTARY. Upon your voluntary or involuntary
termination of employment, you will be entitled to receive the number of options
determined by multiplying the sum of your compensation actually waived up to the
date of your termination by the Leverage Factor and dividing the product by the
Common Stock Price; provided, however, that only the total compensation waived
by you up to the date of termination of employment will be considered. Your
options will continue to vest under the above vesting schedule as if you
continued to be employed by the Company and continued participating in the 1999
2
<PAGE>
MEP. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR
ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP.
7. TERMINATION OF 1999 MEP. If the Committee decides to terminate the
1999 MEP, you will be entitled to receive a number of options determined by
multiplying the sum of your compensation actually waived up to the date of your
termination by the Leverage Factor and dividing the product by the Common Stock
Price; provided, however, that only the total compensation waived by you up to
the date of termination will be considered. All options received will be fully
vested and immediately exercisable. You will have up to thirty days from the
date of such termination to exercise the options. After such thirty day period,
the options will be canceled. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO
RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO
WAIVE UNDER THE 1999 MEP.
8. CHANGE OF CONTROL. Upon a "Change of Control" (as that term is
defined in the Plan), you will be entitled to receive the number of options
determined by multiplying the sum of your compensation actually waived up to the
date of the Change of Control by the Leverage Factor and dividing the product by
the Common Stock Price; provided, however, that only the total compensation
waived by you up to the date of Change of Control will be considered. All
options will be fully vested and immediately exercisable. In the event of a
dissolution or liquidation of the Company or a merger or consolidation in which
the Company would not be the surviving or resulting corporation, you will be
entitled to receive the number of options determined by multiplying the sum of
your compensation actually waived up to the date of exercise by the Leverage
Factor and dividing the product by the Common Stock Price; provided, however,
that only the total compensation waived by you up to the date of exercise will
be considered. All options will be fully vested and exercisable (a) in the case
of a dissolution or liquidation, at anytime after the Company's Board of
Directors takes action authorizing the dissolution or liquidation of the Company
or (b) in the case of a merger or consolidation in which the Company would not
be the resulting or surviving corporation, upon the Company's public
announcement that a definitive agreement regarding such a merger or
consolidation has been reached. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO
RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO
WAIVE UNDER THE 1999 MEP.
9. COMPANY INFORMATION. By signing this Award Agreement, you
acknowledge that you have been given, or were offered, a copy of the Company's
(i) Annual Report on Form 10-K for the fiscal year ended November 1, 1998, and
(ii) Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1999
(the "SEC REPORTS"), and that you were given an opportunity to ask questions of
any of the Company's executive officers regarding the SEC Reports or any other
matter regarding the Company.
10. RISK OF INVESTMENT. By signing this Award Agreement, you recognize
that your participation in the 1999 MEP is a speculative investment in that the
success or failure of your investment depends on the market value of the
Company's Common Stock over a several year period. You further recognize that
all or a portion of your investment (i.e., your Waiver Amount) may be lost. You
also acknowledge that you were given the opportunity to consult with your
personal advisor(s) regarding the 1999 MEP.
3
<PAGE>
I hereby elect to participate in the 1999 MEP under the terms and
conditions set forth above and acknowledge that I have read and understood the
terms and conditions of the 1999 MEP.
SIGNATURE___________________
DATE________________________
SSN_________________________
ACCEPTED:
MICROAGE, INC.
BY _________________________
ITS_________________________
4
MICROAGE, INC.
1999 MANAGEMENT EQUITY PROGRAM
AWARD AGREEMENT
JEFFREY. D. McKEEVER
April 23, 1999
Dear Jeff:
Pursuant to the action taken by the Board of Directors of MicroAge,
Inc. (the "COMPANY") and the Compensation Committee of the Board of Directors,
you are hereby offered participation in the 1999 Management Equity Program (the
"1999 MEP") under the MicroAge, Inc. Long-Term Incentive Plan (the "PLAN").
Under the 1999 MEP, you have the opportunity to receive options to restructure
your compensation package to some extent. Essentially, you may elect to purchase
shares of the common stock of the Company if you irrevocably elect to waive all
or a portion of your base salary you may receive from May 1, 1999 through May 1,
2000 under the following terms and conditions.
BEFORE YOU ELECT TO PARTICIPATE IN THE 1999 MEP, READ THIS AWARD AGREEMENT. YOU
WILL BE REQUIRED TO SIGN THIS AWARD AGREEMENT, AND YOUR SIGNATURE WILL EVIDENCE
THAT YOU HAVE READ THIS AWARD AGREEMENT, UNDERSTAND IT, AND AGREE WITH ITS TERMS
AND CONDITIONS.
TO PARTICIPATE IN THE 1999 MEP, YOU MUST COMPLETE AND SIGN THIS AWARD AGREEMENT
AND RETURN IT TO ALESIA MARTIN (EXTENSION 65150) BY 12:00 P.M. NOON ON FRIDAY,
APRIL 23, 1999.
1. EFFECTIVE DATE. The effective date of your participation in the 1999
MEP, and the grant date of your MEP options, is April 23, 1999.
2. SALARY WAIVER. You hereby elect to waive a portion of your salary
during the period from May 1, 1999 through May 1, 2000 (the "WAIVER PERIOD") in
the following amount (the "WAIVER AMOUNT"): $162,500. NOTE: the MINIMUM Waiver
Amount is $65,000 (10% of your current base salary) and the MAXIMUM Waiver
Amount is $162,500 (25% of your current base salary).
<PAGE>
3. NUMBER OF OPTIONS GRANTED. In exchange for electing to waive the
Waiver Amount specified in Paragraph 2, above, you are hereby granted an option
to purchase the number of shares of MicroAge, Inc. Common Stock calculated
pursuant to the formula below (to be completed by MicroAge):
(1) Waiver Amount: $162,500
(2) $162,500 (Waiver Amount)
Multiplied by Four (4) (the "Leverage Factor"): $650,000
(3) Common Stock Closing Price on Effective Date
(April 23, 1999) (the "Common Stock Price"): $ 5.875
(4) Total Options Granted (2) / (3) (rounded up): 110,639
4. VESTING OF OPTIONS. Your options will vest in one-third (1/3)
increments beginning on May 1, 2000, and will be fully vested on May 1, 2002.
5. EXPIRATION OF OPTIONS. Subject to Section 6 and 7 of this Award
Agreement, your options will expire, unless sooner exercised, on April 23, 2009.
6. TERMINATION OF EMPLOYMENT.
DEATH. Upon your death, your beneficiary will be entitled to receive
the number of options determined by multiplying the sum of your compensation
actually waived up to the date of your death by the Leverage Factor and dividing
the product by the Common Stock Price; provided, however, that only the total
compensation waived by you up to the date of your death will be considered. All
options received by your beneficiary will be fully vested and immediately
exercisable. Your beneficiary will have up to one year from the date of your
death to exercise the options. After that one year period, the options will be
canceled. UNDER NO CIRCUMSTANCES WILL YOU OR YOUR BENEFICIARY BE ENTITLED TO
RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO
WAIVE UNDER THE 1999 MEP.
DISABILITY. Upon your termination of employment due to a "Disability"
(as that term is defined in the Plan) you will be entitled to receive the number
of options determined by multiplying the sum of your compensation actually
waived up to the date of your termination by the Leverage Factor and dividing
the product by the Common Stock Price; provided, however, that only the total
compensation waived by you up to the date of your termination will be
considered. All options received will be fully vested and immediately
exercisable. You will have up to one year from the date of termination of
employment to exercise the options. After that one year period, the options will
be canceled. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL
TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999
MEP.
VOLUNTARY OR INVOLUNTARY. Upon your voluntary or involuntary
termination of employment, you will be entitled to receive the number of options
determined by multiplying the sum of your compensation actually waived up to the
date of your termination by the Leverage Factor and dividing the product by the
Common Stock Price; provided, however, that only the total compensation waived
by you up to the date of termination of employment will be considered. Your
options will continue to vest under the above vesting schedule as if you
continued to be employed by the Company and continued participating in the 1999
2
<PAGE>
MEP. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR
ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP.
7. TERMINATION OF 1999 MEP. If the Committee decides to terminate the
1999 MEP, you will be entitled to receive a number of options determined by
multiplying the sum of your compensation actually waived up to the date of your
termination by the Leverage Factor and dividing the product by the Common Stock
Price; provided, however, that only the total compensation waived by you up to
the date of termination will be considered. All options received will be fully
vested and immediately exercisable. You will have up to thirty days from the
date of such termination to exercise the options. After such thirty day period,
the options will be canceled. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO
RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO
WAIVE UNDER THE 1999 MEP.
8. CHANGE OF CONTROL. Upon a "Change of Control" (as that term is
defined in the Plan), you will be entitled to receive the number of options
determined by multiplying the sum of your compensation actually waived up to the
date of the Change of Control by the Leverage Factor and dividing the product by
the Common Stock Price; provided, however, that only the total compensation
waived by you up to the date of Change of Control will be considered. All
options will be fully vested and immediately exercisable. In the event of a
dissolution or liquidation of the Company or a merger or consolidation in which
the Company would not be the surviving or resulting corporation, you will be
entitled to receive the number of options determined by multiplying the sum of
your compensation actually waived up to the date of exercise by the Leverage
Factor and dividing the product by the Common Stock Price; provided, however,
that only the total compensation waived by you up to the date of exercise will
be considered. All options will be fully vested and exercisable (a) in the case
of a dissolution or liquidation, at anytime after the Company's Board of
Directors takes action authorizing the dissolution or liquidation of the Company
or (b) in the case of a merger or consolidation in which the Company would not
be the resulting or surviving corporation, upon the Company's public
announcement that a definitive agreement regarding such a merger or
consolidation has been reached. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO
RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO
WAIVE UNDER THE 1999 MEP.
9. COMPANY INFORMATION. By signing this Award Agreement, you
acknowledge that you have been given, or were offered, a copy of the Company's
(i) Annual Report on Form 10-K for the fiscal year ended November 1, 1998, and
(ii) Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1999
(the "SEC REPORTS"), and that you were given an opportunity to ask questions of
any of the Company's executive officers regarding the SEC Reports or any other
matter regarding the Company.
10. RISK OF INVESTMENT. By signing this Award Agreement, you recognize
that your participation in the 1999 MEP is a speculative investment in that the
success or failure of your investment depends on the market value of the
Company's Common Stock over a several year period. You further recognize that
all or a portion of your investment (i.e., your Waiver Amount) may be lost. You
also acknowledge that you were given the opportunity to consult with your
personal advisor(s) regarding the 1999 MEP.
3
<PAGE>
I hereby elect to participate in the 1999 MEP under the terms and
conditions set forth above and acknowledge that I have read and understood the
terms and conditions of the 1999 MEP.
SIGNATURE /s/ Jeffery D. McKeever
-----------------------
DATE April 23, 1999
-----------------------
SSN
-----------------------
ACCEPTED:
MICROAGE, INC.
BY
-----------------------
ITS
-----------------------
4
MICROAGE, INC.
1999 MANAGEMENT EQUITY PROGRAM
AWARD AGREEMENT
JAMES R. DANIEL
April 23, 1999
Dear Jim:
Pursuant to the action taken by the Board of Directors of MicroAge,
Inc. (the "COMPANY") and the Compensation Committee of the Board of Directors,
you are hereby offered participation in the 1999 Management Equity Program (the
"1999 MEP") under the MicroAge, Inc. Long-Term Incentive Plan (the "PLAN").
Under the 1999 MEP, you have the opportunity to receive options to restructure
your compensation package to some extent. Essentially, you may elect to purchase
shares of the common stock of the Company if you irrevocably elect to waive all
or a portion of your base salary you may receive from May 1, 1999 through May 1,
2000 under the following terms and conditions.
BEFORE YOU ELECT TO PARTICIPATE IN THE 1999 MEP, READ THIS AWARD AGREEMENT. YOU
WILL BE REQUIRED TO SIGN THIS AWARD AGREEMENT, AND YOUR SIGNATURE WILL EVIDENCE
THAT YOU HAVE READ THIS AWARD AGREEMENT, UNDERSTAND IT, AND AGREE WITH ITS TERMS
AND CONDITIONS.
TO PARTICIPATE IN THE 1999 MEP, YOU MUST COMPLETE AND SIGN THIS AWARD AGREEMENT
AND RETURN IT TO ALESIA MARTIN (EXTENSION 65150) BY 12:00 P.M. NOON ON FRIDAY,
APRIL 23, 1999.
1. EFFECTIVE DATE. The effective date of your participation in the 1999
MEP, and the grant date of your MEP options, is April 23, 1999.
2. SALARY WAIVER. You hereby elect to waive a portion of your salary
during the period from May 1, 1999 through May 1, 2000 (the "WAIVER PERIOD") in
the following amount (the "WAIVER AMOUNT"): $85,000. NOTE: the MINIMUM Waiver
Amount is $34,000 (10% of your current base salary) and the MAXIMUM Waiver
Amount is $85,000 (25% of your current base salary).
<PAGE>
3. NUMBER OF OPTIONS GRANTED. In exchange for electing to waive the
Waiver Amount specified in Paragraph 2, above, you are hereby granted an option
to purchase the number of shares of MicroAge, Inc. Common Stock calculated
pursuant to the formula below (to be completed by MicroAge):
(1) Waiver Amount: $ 85,000
(2) $85,000 (Waiver Amount)
Multiplied by Four (4) (the "Leverage Factor"): $340,000
(3) Common Stock Closing Price on Effective Date
(April 23, 1999) (the "Common Stock Price"): $ 5.875
(4) Total Options Granted (2) / (3) (rounded up): 57,873
4. VESTING OF OPTIONS. Your options will vest in one-third (1/3)
increments beginning on May 1, 2000, and will be fully vested on May 1, 2002.
5. EXPIRATION OF OPTIONS. Subject to Section 6 and 7 of this Award
Agreement, your options will expire, unless sooner exercised, on April 23, 2009.
6. TERMINATION OF EMPLOYMENT.
DEATH. Upon your death, your beneficiary will be entitled to receive
the number of options determined by multiplying the sum of your compensation
actually waived up to the date of your death by the Leverage Factor and dividing
the product by the Common Stock Price; provided, however, that only the total
compensation waived by you up to the date of your death will be considered. All
options received by your beneficiary will be fully vested and immediately
exercisable. Your beneficiary will have up to one year from the date of your
death to exercise the options. After that one year period, the options will be
canceled. UNDER NO CIRCUMSTANCES WILL YOU OR YOUR BENEFICIARY BE ENTITLED TO
RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO
WAIVE UNDER THE 1999 MEP.
DISABILITY. Upon your termination of employment due to a "Disability"
(as that term is defined in the Plan) you will be entitled to receive the number
of options determined by multiplying the sum of your compensation actually
waived up to the date of your termination by the Leverage Factor and dividing
the product by the Common Stock Price; provided, however, that only the total
compensation waived by you up to the date of your termination will be
considered. All options received will be fully vested and immediately
exercisable. You will have up to one year from the date of termination of
employment to exercise the options. After that one year period, the options will
be canceled. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL
TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999
MEP.
VOLUNTARY OR INVOLUNTARY. Upon your voluntary or involuntary
termination of employment, you will be entitled to receive the number of options
determined by multiplying the sum of your compensation actually waived up to the
date of your termination by the Leverage Factor and dividing the product by the
Common Stock Price; provided, however, that only the total compensation waived
by you up to the date of termination of employment will be considered. Your
options will continue to vest under the above vesting schedule as if you
continued to be employed by the Company and continued participating in the 1999
2
<PAGE>
MEP. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR
ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP.
7. TERMINATION OF 1999 MEP. If the Committee decides to terminate the
1999 MEP, you will be entitled to receive a number of options determined by
multiplying the sum of your compensation actually waived up to the date of your
termination by the Leverage Factor and dividing the product by the Common Stock
Price; provided, however, that only the total compensation waived by you up to
the date of termination will be considered. All options received will be fully
vested and immediately exercisable. You will have up to thirty days from the
date of such termination to exercise the options. After such thirty day period,
the options will be canceled. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO
RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO
WAIVE UNDER THE 1999 MEP.
8. CHANGE OF CONTROL. Upon a "Change of Control" (as that term is
defined in the Plan), you will be entitled to receive the number of options
determined by multiplying the sum of your compensation actually waived up to the
date of the Change of Control by the Leverage Factor and dividing the product by
the Common Stock Price; provided, however, that only the total compensation
waived by you up to the date of Change of Control will be considered. All
options will be fully vested and immediately exercisable. In the event of a
dissolution or liquidation of the Company or a merger or consolidation in which
the Company would not be the surviving or resulting corporation, you will be
entitled to receive the number of options determined by multiplying the sum of
your compensation actually waived up to the date of exercise by the Leverage
Factor and dividing the product by the Common Stock Price; provided, however,
that only the total compensation waived by you up to the date of exercise will
be considered. All options will be fully vested and exercisable (a) in the case
of a dissolution or liquidation, at anytime after the Company's Board of
Directors takes action authorizing the dissolution or liquidation of the Company
or (b) in the case of a merger or consolidation in which the Company would not
be the resulting or surviving corporation, upon the Company's public
announcement that a definitive agreement regarding such a merger or
consolidation has been reached. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO
RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO
WAIVE UNDER THE 1999 MEP.
9. COMPANY INFORMATION. By signing this Award Agreement, you
acknowledge that you have been given, or were offered, a copy of the Company's
(i) Annual Report on Form 10-K for the fiscal year ended November 1, 1998, and
(ii) Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1999
(the "SEC REPORTS"), and that you were given an opportunity to ask questions of
any of the Company's executive officers regarding the SEC Reports or any other
matter regarding the Company.
10. RISK OF INVESTMENT. By signing this Award Agreement, you recognize
that your participation in the 1999 MEP is a speculative investment in that the
success or failure of your investment depends on the market value of the
Company's Common Stock over a several year period. You further recognize that
all or a portion of your investment (i.e., your Waiver Amount) may be lost. You
also acknowledge that you were given the opportunity to consult with your
personal advisor(s) regarding the 1999 MEP.
3
<PAGE>
I hereby elect to participate in the 1999 MEP under the terms and
conditions set forth above and acknowledge that I have read and understood the
terms and conditions of the 1999 MEP.
SIGNATURE /s/ James R. Daniel
-----------------------
DATE April 23, 1999
-----------------------
SSN
-----------------------
ACCEPTED:
MICROAGE, INC.
BY
-----------------------
ITS
-----------------------
4
MICROAGE, INC.
1999 MANAGEMENT EQUITY PROGRAM
AWARD AGREEMENT
CHRISTOPHER J. KOZIOL
April 23, 1999
Dear Chris:
Pursuant to the action taken by the Board of Directors of MicroAge,
Inc. (the "Company") and the Compensation Committee of the Board of Directors,
you are hereby offered participation in the 1999 Management Equity Program (the
"1999 MEP") under the MicroAge, Inc. Long-Term Incentive Plan (the "Plan").
Under the 1999 MEP, you have the opportunity to receive options to restructure
your compensation package to some extent. Essentially, you may elect to purchase
shares of the common stock of the Company if you irrevocably elect to waive all
or a portion of your base salary you may receive from May 1, 1999 through May 1,
2000 under the following terms and conditions.
BEFORE YOU ELECT TO PARTICIPATE IN THE 1999 MEP, READ THIS AWARD AGREEMENT. YOU
WILL BE REQUIRED TO SIGN THIS AWARD AGREEMENT, AND YOUR SIGNATURE WILL EVIDENCE
THAT YOU HAVE READ THIS AWARD AGREEMENT, UNDERSTAND IT, AND AGREE WITH ITS TERMS
AND CONDITIONS.
TO PARTICIPATE IN THE 1999 MEP, YOU MUST COMPLETE AND SIGN THIS AWARD AGREEMENT
AND RETURN IT TO ALESIA MARTIN (EXTENSION 65150) BY 12:00 P.M. NOON ON FRIDAY,
APRIL 23, 1999.
1. EFFECTIVE DATE. The effective date of your participation in the 1999
MEP, and the grant date of your MEP options, is April 23, 1999.
2. SALARY WAIVER. You hereby elect to waive a portion of your salary
during the period from May 1, 1999 through May 1, 2000 (the "WAIVER PERIOD") in
the following amount (the "WAIVER AMOUNT"): $60,000. NOTE: the MINIMUM Waiver
Amount is $30,000 (10% of your current base salary) and the MAXIMUM Waiver
Amount is $75,000 (25% of your current base salary).
<PAGE>
3. NUMBER OF OPTIONS GRANTED. In exchange for electing to waive the
Waiver Amount specified in Paragraph 2, above, you are hereby granted an option
to purchase the number of shares of MicroAge, Inc. Common Stock calculated
pursuant to the formula below (to be completed by MicroAge):
(1) Waiver Amount: $ 60,000
(2) $60,000 (Waiver Amount)
Multiplied by Four (4) (the "Leverage Factor"): $240,000
(3) Common Stock Closing Price on Effective Date
(April 23, 1999) (the "Common Stock Price"): $ 5.875
(4) Total Options Granted (2) / (3) (rounded up): 40,851
4. VESTING OF OPTIONS. Your options will vest in one-third (1/3)
increments beginning on May 1, 2000, and will be fully vested on May 1, 2002.
5. EXPIRATION OF OPTIONS. Subject to Section 6 and 7 of this Award
Agreement, your options will expire, unless sooner exercised, on April 23, 2009.
6. TERMINATION OF EMPLOYMENT.
DEATH. Upon your death, your beneficiary will be entitled to receive
the number of options determined by multiplying the sum of your compensation
actually waived up to the date of your death by the Leverage Factor and dividing
the product by the Common Stock Price; provided, however, that only the total
compensation waived by you up to the date of your death will be considered. All
options received by your beneficiary will be fully vested and immediately
exercisable. Your beneficiary will have up to one year from the date of your
death to exercise the options. After that one year period, the options will be
canceled. UNDER NO CIRCUMSTANCES WILL YOU OR YOUR BENEFICIARY BE ENTITLED TO
RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO
WAIVE UNDER THE 1999 MEP.
DISABILITY. Upon your termination of employment due to a "Disability"
(as that term is defined in the Plan) you will be entitled to receive the number
of options determined by multiplying the sum of your compensation actually
waived up to the date of your termination by the Leverage Factor and dividing
the product by the Common Stock Price; provided, however, that only the total
compensation waived by you up to the date of your termination will be
considered. All options received will be fully vested and immediately
exercisable. You will have up to one year from the date of termination of
employment to exercise the options. After that one year period, the options will
be canceled. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL
TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999
MEP.
VOLUNTARY OR INVOLUNTARY. Upon your voluntary or involuntary
termination of employment, you will be entitled to receive the number of options
determined by multiplying the sum of your compensation actually waived up to the
date of your termination by the Leverage Factor and dividing the product by the
Common Stock Price; provided, however, that only the total compensation waived
by you up to the date of termination of employment will be considered. Your
options will continue to vest under the above vesting schedule as if you
continued to be employed by the Company and continued participating in the 1999
2
<PAGE>
MEP. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR
ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP.
7. TERMINATION OF 1999 MEP. If the Committee decides to terminate the
1999 MEP, you will be entitled to receive a number of options determined by
multiplying the sum of your compensation actually waived up to the date of your
termination by the Leverage Factor and dividing the product by the Common Stock
Price; provided, however, that only the total compensation waived by you up to
the date of termination will be considered. All options received will be fully
vested and immediately exercisable. You will have up to thirty days from the
date of such termination to exercise the options. After such thirty day period,
the options will be canceled. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO
RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO
WAIVE UNDER THE 1999 MEP.
8. CHANGE OF CONTROL. Upon a "Change of Control" (as that term is
defined in the Plan), you will be entitled to receive the number of options
determined by multiplying the sum of your compensation actually waived up to the
date of the Change of Control by the Leverage Factor and dividing the product by
the Common Stock Price; provided, however, that only the total compensation
waived by you up to the date of Change of Control will be considered. All
options will be fully vested and immediately exercisable. In the event of a
dissolution or liquidation of the Company or a merger or consolidation in which
the Company would not be the surviving or resulting corporation, you will be
entitled to receive the number of options determined by multiplying the sum of
your compensation actually waived up to the date of exercise by the Leverage
Factor and dividing the product by the Common Stock Price; provided, however,
that only the total compensation waived by you up to the date of exercise will
be considered. All options will be fully vested and exercisable (a) in the case
of a dissolution or liquidation, at anytime after the Company's Board of
Directors takes action authorizing the dissolution or liquidation of the Company
or (b) in the case of a merger or consolidation in which the Company would not
be the resulting or surviving corporation, upon the Company's public
announcement that a definitive agreement regarding such a merger or
consolidation has been reached. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO
RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO
WAIVE UNDER THE 1999 MEP.
9. COMPANY INFORMATION. By signing this Award Agreement, you
acknowledge that you have been given, or were offered, a copy of the Company's
(i) Annual Report on Form 10-K for the fiscal year ended November 1, 1998, and
(ii) Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1999
(the "SEC REPORTS"), and that you were given an opportunity to ask questions of
any of the Company's executive officers regarding the SEC Reports or any other
matter regarding the Company.
10. RISK OF INVESTMENT. By signing this Award Agreement, you recognize
that your participation in the 1999 MEP is a speculative investment in that the
success or failure of your investment depends on the market value of the
Company's Common Stock over a several year period. You further recognize that
all or a portion of your investment (i.e., your Waiver Amount) may be lost. You
also acknowledge that you were given the opportunity to consult with your
personal advisor(s) regarding the 1999 MEP.
3
<PAGE>
I hereby elect to participate in the 1999 MEP under the terms and
conditions set forth above and acknowledge that I have read and understood the
terms and conditions of the 1999 MEP.
SIGNATURE /s/ Christopher J. Koziol
-----------------------
DATE April 23, 1999
-----------------------
SSN
-----------------------
ACCEPTED:
MICROAGE, INC.
BY
-----------------------
ITS
-----------------------
4
MICROAGE, INC.
1999 MANAGEMENT EQUITY PROGRAM
AWARD AGREEMENT
ROBERT G. O'MALLEY
April 23, 1999
Dear Bob:
Pursuant to the action taken by the Board of Directors of MicroAge,
Inc. (the "COMPANY") and the Compensation Committee of the Board of Directors,
you are hereby offered participation in the 1999 Management Equity Program (the
"1999 MEP") under the MicroAge, Inc. Long-Term Incentive Plan (the "PLAN").
Under the 1999 MEP, you have the opportunity to receive options to restructure
your compensation package to some extent. Essentially, you may elect to purchase
shares of the common stock of the Company if you irrevocably elect to waive all
or a portion of your base salary you may receive from May 1, 1999 through May 1,
2000 under the following terms and conditions.
BEFORE YOU ELECT TO PARTICIPATE IN THE 1999 MEP, READ THIS AWARD AGREEMENT. YOU
WILL BE REQUIRED TO SIGN THIS AWARD AGREEMENT, AND YOUR SIGNATURE WILL EVIDENCE
THAT YOU HAVE READ THIS AWARD AGREEMENT, UNDERSTAND IT, AND AGREE WITH ITS TERMS
AND CONDITIONS.
TO PARTICIPATE IN THE 1999 MEP, YOU MUST COMPLETE AND SIGN THIS AWARD AGREEMENT
AND RETURN IT TO ALESIA MARTIN (EXTENSION 65150) BY 12:00 P.M. NOON ON FRIDAY,
APRIL 23, 1999.
1. EFFECTIVE DATE. The effective date of your participation in the 1999
MEP, and the grant date of your MEP options, is April 23, 1999.
2. SALARY WAIVER. You hereby elect to waive a portion of your salary
during the period from May 1, 1999 through May 1, 2000 (the "WAIVER PERIOD") in
the following amount (the "WAIVER AMOUNT"): $48,000. NOTE: the MINIMUM Waiver
Amount is $37,000 (10% of your current base salary) and the MAXIMUM Waiver
Amount is $92,500 (25% of your current base salary).
<PAGE>
3. NUMBER OF OPTIONS GRANTED. In exchange for electing to waive the
Waiver Amount specified in Paragraph 2, above, you are hereby granted an option
to purchase the number of shares of MicroAge, Inc. Common Stock calculated
pursuant to the formula below (to be completed by MicroAge):
(1) Waiver Amount: $ 48,000
(2) $48,000 (Waiver Amount)
Multiplied by Four (4) (the "Leverage Factor"): $192,000
(3) Common Stock Closing Price on Effective Date
(April 23, 1999) (the "Common Stock Price"): $ 5.875
(4) Total Options Granted (2) / (3) (rounded up): 32,681
4. VESTING OF OPTIONS. Your options will vest in one-third (1/3)
increments beginning on May 1, 2000, and will be fully vested on May 1, 2002.
5. EXPIRATION OF OPTIONS. Subject to Section 6 and 7 of this Award
Agreement, your options will expire, unless sooner exercised, on April 23, 2009.
6. TERMINATION OF EMPLOYMENT.
DEATH. Upon your death, your beneficiary will be entitled to receive
the number of options determined by multiplying the sum of your compensation
actually waived up to the date of your death by the Leverage Factor and dividing
the product by the Common Stock Price; provided, however, that only the total
compensation waived by you up to the date of your death will be considered. All
options received by your beneficiary will be fully vested and immediately
exercisable. Your beneficiary will have up to one year from the date of your
death to exercise the options. After that one year period, the options will be
canceled. UNDER NO CIRCUMSTANCES WILL YOU OR YOUR BENEFICIARY BE ENTITLED TO
RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO
WAIVE UNDER THE 1999 MEP.
DISABILITY. Upon your termination of employment due to a "Disability"
(as that term is defined in the Plan) you will be entitled to receive the number
of options determined by multiplying the sum of your compensation actually
waived up to the date of your termination by the Leverage Factor and dividing
the product by the Common Stock Price; provided, however, that only the total
compensation waived by you up to the date of your termination will be
considered. All options received will be fully vested and immediately
exercisable. You will have up to one year from the date of termination of
employment to exercise the options. After that one year period, the options will
be canceled. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL
TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999
MEP.
VOLUNTARY OR INVOLUNTARY. Upon your voluntary or involuntary
termination of employment, you will be entitled to receive the number of options
determined by multiplying the sum of your compensation actually waived up to the
date of your termination by the Leverage Factor and dividing the product by the
Common Stock Price; provided, however, that only the total compensation waived
by you up to the date of termination of employment will be considered. Your
options will continue to vest under the above vesting schedule as if you
continued to be employed by the Company and continued participating in the 1999
2
<PAGE>
MEP. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR
ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP.
7. TERMINATION OF 1999 MEP. If the Committee decides to terminate the
1999 MEP, you will be entitled to receive a number of options determined by
multiplying the sum of your compensation actually waived up to the date of your
termination by the Leverage Factor and dividing the product by the Common Stock
Price; provided, however, that only the total compensation waived by you up to
the date of termination will be considered. All options received will be fully
vested and immediately exercisable. You will have up to thirty days from the
date of such termination to exercise the options. After such thirty day period,
the options will be canceled. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO
RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO
WAIVE UNDER THE 1999 MEP.
8. CHANGE OF CONTROL. Upon a "Change of Control" (as that term is
defined in the Plan), you will be entitled to receive the number of options
determined by multiplying the sum of your compensation actually waived up to the
date of the Change of Control by the Leverage Factor and dividing the product by
the Common Stock Price; provided, however, that only the total compensation
waived by you up to the date of Change of Control will be considered. All
options will be fully vested and immediately exercisable. In the event of a
dissolution or liquidation of the Company or a merger or consolidation in which
the Company would not be the surviving or resulting corporation, you will be
entitled to receive the number of options determined by multiplying the sum of
your compensation actually waived up to the date of exercise by the Leverage
Factor and dividing the product by the Common Stock Price; provided, however,
that only the total compensation waived by you up to the date of exercise will
be considered. All options will be fully vested and exercisable (a) in the case
of a dissolution or liquidation, at anytime after the Company's Board of
Directors takes action authorizing the dissolution or liquidation of the Company
or (b) in the case of a merger or consolidation in which the Company would not
be the resulting or surviving corporation, upon the Company's public
announcement that a definitive agreement regarding such a merger or
consolidation has been reached. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO
RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO
WAIVE UNDER THE 1999 MEP.
9. COMPANY INFORMATION. By signing this Award Agreement, you
acknowledge that you have been given, or were offered, a copy of the Company's
(i) Annual Report on Form 10-K for the fiscal year ended November 1, 1998, and
(ii) Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1999
(the "SEC REPORTS"), and that you were given an opportunity to ask questions of
any of the Company's executive officers regarding the SEC Reports or any other
matter regarding the Company.
10. RISK OF INVESTMENT. By signing this Award Agreement, you recognize
that your participation in the 1999 MEP is a speculative investment in that the
success or failure of your investment depends on the market value of the
Company's Common Stock over a several year period. You further recognize that
all or a portion of your investment (i.e., your Waiver Amount) may be lost. You
also acknowledge that you were given the opportunity to consult with your
personal advisor(s) regarding the 1999 MEP.
3
<PAGE>
I hereby elect to participate in the 1999 MEP under the terms and
conditions set forth above and acknowledge that I have read and understood the
terms and conditions of the 1999 MEP.
SIGNATURE /s/ Robert G. O'Malley
-----------------------
DATE April 23, 1999
-----------------------
SSN
-----------------------
ACCEPTED:
MICROAGE, INC.
BY
-----------------------
ITS
-----------------------
4
MICROAGE, INC.
1995 DIRECTOR INCENTIVE PLAN
STOCK OPTION AGREEMENT FOR
WILLIAM H. MALLENDER
April 29, 1999
Dear Bill:
You were earlier notified that you are eligible to receive options to
restructure your Director fees package to some extent. You completed a
Director's Fee Waiver, attached hereto as EXHIBIT A, and in the Waiver you
irrevocably elected to waive $30,000.00 (the "WAIVER AMOUNT") of your Director
fees in return for the option to purchase (the "OPTION") shares of common stock
of the Company ("SHARES"). Based on your Waiver, and pursuant to action taken by
the Board of Directors of MicroAge, Inc. (the "COMPANY") under Section 7.3 of
the MicroAge, Inc. 1995 Director Incentive Plan (Amended and Restated as of
April 1, 1998) (the "PLAN") you are hereby granted the Options as set forth
below.
1. STOCK OPTION GRANT. In exchange for electing to waive the Waiver
Amount, subject to the terms and conditions set forth below, you are hereby
granted the Option to purchase a total of Twenty Thousand Four Hundred
Twenty-Six (20,426) Shares at the price of $5.875 per Share, which was the
closing price of the Shares on April 23, 1999 (the "GRANT DATE"). The number of
Shares was calculated pursuant to the following formula:
(a) Waiver Amount $ 30,000.00
(b) $30,000.00 (Waiver Amount)
Multiplied by Four (4) (the "Leverage Factor") $120,000.00
(c) Common Stock Closing Price on Grant Date
(April 23, 1999)(the "Common Stock Price") $ 5.875
(d) Total Options Granted (b) / (c)
(rounded up): 20,426
The Option granted hereby is NOT intended to be an incentive stock option within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended.
<PAGE>
2. EXERCISABILITY. You may purchase all or any of the Shares included
in any installment under this Option, on or after the later to occur of:
(1) the date the Option grant vests in accordance with the schedule
below; and
(2) the date the stock price hurdle with respect to each Option grant
is met, on or after the date the Option grant vests.
================================================================================
PERCENTAGE OF SHARES
EXERCISABLE IN DATE OPTION STOCK PRICE HURDLE
OPTION GRANT GRANT VESTS AFTER VESTING DATE
- --------------------------------------------------------------------------------
First 34% May 1, 2000 $5.875
Second 33% May 1, 2001 $6.46
Third 33% May 1, 2002 $7.11
================================================================================
NOTWITHSTANDING THE ABOVE, YOUR OPTION UNDER THIS AGREEMENT WILL BECOME
100% EXERCISABLE ON THE NINTH ANNIVERSARY OF THE GRANT DATE, UNLESS SUCH OPTION
EXPIRES BEFORE SUCH DATE IN ACCORDANCE WITH THE TERMS OF THE PLAN AND THIS
AGREEMENT. YOU MAY NOT EXERCISE THE OPTION AT ANY TIME AFTER THE EXPIRATION DATE
IN PARAGRAPH 5 BELOW.
3. EXERCISE AND STOCK DELIVERY. Vested Options may be exercised by
delivering in writing a request to purchase Shares describing the number of
Shares to be purchased and accompanied by payment in full to the Secretary of
the Company, 2400 South MicroAge Way, MS #8, Tempe, AZ 85282-1896, for the
Shares which you so elect 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. The Company, however, shall 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 the Company
may deem applicable; and
(b) all legal matters in connection with the sale and delivery of the
Shares have been approved by the Company's legal counsel.
Upon the exercise of an Option, the purchase price shall be paid in
cash, check, or, in the sole discretion of the Committee, in Shares, or a
combination thereof. Each Share received by the Company in payment of all or a
portion of the purchase price specified in this Option shall be valued at its
fair market value on the date of payment and must have been held by you for at
least six months prior to the tender of the Share to the Company.
2
<PAGE>
4. TRANSFER RESTRICTIONS. Except as otherwise allowed by uniform rules
adopted by the Board or the Committee, this Option shall be exercisable during
your lifetime only by you and shall not be transferable by you, expressly or by
operation of law, other than by will and the laws of descent and distribution.
Any other attempted transfer or other disposition of this Option by you shall be
void and shall constitute valid grounds for cancellation of this Option by the
Company.
5. TERMINATION OF OPTION. THIS OPTION AND ALL YOUR RIGHTS HEREUNDER
SHALL, UNLESS SOONER TERMINATED IN ACCORDANCE WITH THE PROVISIONS HEREOF, CEASE
AND TERMINATE ON APRIL 23, 2009 (THE "EXPIRATION DATE"), AT 5:00 P.M. ARIZONA
TIME.
6. TERMINATION OF SERVICE ON THE BOARD. Upon the date your service on
the Company's Board is terminated for any reason, you, or in the event of your
death your beneficiary, will be entitled to receive the number of Options
determined by multiplying the sum of your Director fees actually earned and
waived up to the date of your termination by the Leverage Factor and dividing
the product by the Common Stock Price (and rounding up the resulting quotient);
provided, however, that only the total Director fees earned and waived by you up
to the date of termination will be considered. To the extent your Options are
fully vested and exercisable as of the date of your termination, they will
remain exercisable at any time prior to the Expiration Date. The portion of your
Option that is not fully vested and exercisable as of the date of your
termination, if any, shall continue to vest in accordance with the schedule set
forth above and will become exercisable at the time it becomes fully vested
prior to its Expiration Date. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO
RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU ELECTED TO
WAIVE UNDER THE DIRECTOR'S FEE WAIVER.
7. CHANGE OF CONTROL. Upon a "Change of Control" (as that term is
defined in the Plan), you will be entitled to receive the number of Options
determined by multiplying the sum of your Director fees actually earned and
waived up to the Change of Control by the Leverage Factor and dividing the
product by the Common Stock Price (and rounding up the resulting quotient);
provided, however, that only the total Director fees earned and waived by you up
to the Change of Control will be considered. In the event of a Change of
Control, all Options under this Agreement will become 100% vested and will be
exercisable until the Expiration Date. UNDER NO CIRCUMSTANCES WILL YOU BE
ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU
ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE WAIVER.
8. TERMINATION OF PURCHASE PROGRAM. If the Board decides to terminate
your ability to waive all or a portion of your Director fees in return for the
Option (the "Purchase Program"), you will be entitled to receive a number of
Options determined by multiplying the sum of your Director fees actually earned
and waived up to the date of the termination of the Purchase Program by the
Leverage Factor and dividing the product by the Common Stock Price (and rounding
up the resulting quotient); provided, however, that only the Director fees
earned and waived by you up to the date of the termination of the Purchase
Program will be considered. All Options received will be fully vested and
immediately exercisable. You will have up to thirty days from the date of such
termination to exercise the Options. After such thirty day period, the Options
will be canceled.
3
<PAGE>
UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY
PORTION OF THE DIRECTOR FEES YOU ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE
WAIVER.
9. MISSED MEETINGS. If you miss a meeting for which you have waived all
or a portion of the meeting fee, the portion of the Waiver Amount that would
have been satisfied had you attended that meeting (the "DEFICIT AMOUNT"), will
be made up by charging the special meeting fees and the regular meeting fees,
that you have not already waived, for those meetings that occur after the missed
meeting but before May 2, 2000. If, by May 1, 2000, the Deficit Amount is not
made up in full by charging subsequent meeting fees as set forth in the
preceding sentence, you must pay the Company any remaining Deficit Amount by
such date.
10. COMPLIANCE. The Committee hereby reserves and shall have the right
to terminate, renew, 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.
PLEASE ACKNOWLEDGE RECEIPT OF THIS AGREEMENT BY SIGNING AND INSERTING
YOUR SOCIAL SECURITY NUMBER ON BOTH LETTERS, THEN RETURNING BOTH LETTERS TO JEFF
MCKEEVER'S OFFICE AT MICROAGE, INC., 2400 SOUTH MICROAGE WAY, MAIL STATION #24,
TEMPE, AZ 85282-1896 FOR HIS EXECUTION. THE ORIGINALLY EXECUTED LETTER WILL BE
RETURNED TO YOU FOR YOUR FILES AND THE COPY WILL BE RETAINED BY THE COMPANY'S
LEGAL DEPARTMENT.
MICROAGE, INC.
By: /s/ Jeffrey D. McKeever
------------------------------
Jeffrey D. McKeever
Chairman of the Board and
Chief Executive Officer
I HEREBY ACKNOWLEDGE RECEIPT OF THE FOREGOING OPTION.
Signature: /s/ William H. Mallender
-----------------------------------
Social Security No.:
-------------------------
4
<PAGE>
EXHIBIT A
MICROAGE, INC.
DIRECTOR'S FEE WAIVER
WILLIAM H. MALLENDER
RETAINER FEES
I hereby elect to waive the following amount of the retainer fees $18,000
payable to me for the next four quarters:
THE ANNUAL RETAINER IS $18,000 AND IS PAID IN ARREARS IN
QUARTERLY INSTALLMENTS OF $4,500 EACH. YOU MAY ELECT TO
WAIVE ALL OR A PORTION OF EACH QUARTERLY INSTALLMENT FOR THE
THIRD AND FOURTH QUARTERS OF THE CURRENT FISCAL YEAR AND THE
FIRST AND SECOND QUARTERS OF THE FISCAL YEAR THAT WILL END
IN 2000. IF YOU WOULD LIKE TO WAIVE ANY PORTION OF THESE
FEES, WRITE THE AMOUNT OF THE TOTAL RETAINER FEES TO BE
WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE
WILL BE CHARGED EQUALLY AGAINST THE FOUR QUARTERLY
INSTALLMENTS.
BOARD MEETING FEES
I hereby elect to waive the following amount of my regular Board $ 9,000
meeting fees for the six regularly scheduled Board meetings
between May 1, 1999 and April 30, 2000:
THE MAXIMUM WAIVER IS $9,000. IF YOU WANT TO WAIVE ANY
PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON
THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE
CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE SIX
MEETINGS.
COMPENSATION COMMITTEE MEETING FEES
I hereby elect to waive the following amount of my regular $ 2,000
Compensation Committee meeting fees for the two regularly
scheduled meetings between May 1, 1999 and April 30, 2000:
THE MAXIMUM WAIVER IS $2,000. IF YOU WANT TO WAIVE ANY
PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON
THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE
CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE TWO
MEETINGS.
GOVERNANCE COMMITTEE MEETING FEES
I hereby elect to waive the following amount of my regular $ 1,000
Governance Committee meeting fees for the two regularly scheduled
meetings between May 1, 1999 and April 30, 2000:
THE MAXIMUM WAIVER IS $2,000. IF YOU WANT TO WAIVE ANY
PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON
THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE
CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE TWO
MEETINGS.
<PAGE>
LEAD DIRECTOR FEES
I hereby elect to waive the following amount of the Lead Director $ --
fees payable to me for the next four quarters:
THE ANNUAL LEAD DIRECTOR FEE IS $3,000 AND IS PAID IN
ARREARS IN QUARTERLY INSTALLMENTS OF $750 EACH. YOU MAY
ELECT TO WAIVE ALL OR A PORTION OF EACH QUARTERLY
INSTALLMENT FOR THE THIRD AND FOURTH QUARTERS OF THE CURRENT
FISCAL YEAR AND THE FIRST AND SECOND QUARTERS OF THE FISCAL
YEAR THAT WILL END IN 2000. IF YOU WOULD LIKE TO WAIVE ANY
PORTION OF THESE FEES, WRITE THE AMOUNT OF THE TOTAL LEAD
DIRECTOR FEES TO BE WAIVED ON THE BLANK LINE ABOVE. THE
AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE FOUR
QUARTERLY INSTALLMENTS.
COMMITTEE CHAIR FEES
I hereby elect to waive the following amount of the Committee $ --
Chair fees payable to me for the next four quarters:
THE ANNUAL COMMITTEE CHAIR FEE IS $3,000 AND IS PAID IN
ARREARS IN QUARTERLY INSTALLMENTS OF $750 EACH. YOU MAY
ELECT TO WAIVE ALL OR A PORTION OF EACH QUARTERLY
INSTALLMENT FOR THE THIRD AND FOURTH QUARTERS OF THE CURRENT
FISCAL YEAR AND THE FIRST AND SECOND QUARTERS OF THE FISCAL
YEAR THAT WILL END IN 2000. IF YOU WOULD LIKE TO WAIVE ANY
PORTION OF THESE FEES, WRITE THE AMOUNT OF THE TOTAL
COMMITTEE CHAIR FEES TO BE WAIVED ON THE BLANK LINE TO THE
RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST
THE FOUR QUARTERLY INSTALLMENTS.
WAIVER AMOUNT $30,000
By signing this Waiver, I acknowledge that I have been given, or was
offered, a copy of the Company's (i) Annual Report on Form 10-K for the fiscal
year ended November 1, 1998, and (ii) Quarterly Report on Form 10-Q for the
fiscal quarter ended January 31, 1999 (the "SEC Reports"), and that I was given
an opportunity to ask questions of any of the Company's executive officers
regarding the SEC Reports or any other matter regarding the Company.
By signing this Waiver, I recognize that purchasing options is a
speculative investment in that the success or failure of my investment depends
on the market value of the Company's stock over a several year period. I further
recognize that all or a portion of my investment (i.e., my Waiver Amount) may be
lost. I also acknowledge that I was given the opportunity to consult with my
personal advisor(s) regarding this Waiver.
I hereby elect to waive the Waiver Amount set forth above. By signing
this Waiver I agree to the terms and conditions set forth above and acknowledge
that I have read and understand the sample Stock Option Agreement that was given
to me.
SIGNATURE /s/ William H. Mallender
--------------------------------
DATE April 13, 1999
--------------------------------
SSN
--------------------------------
PLEASE FAX YOUR SIGNED FORM TO THOMAS R. HOECKER AT (602) 382-6070. YOUR FORM
MUST BE RECEIVED BY MR. HOECKER BY NOON (ARIZONA TIME) ON FRIDAY, APRIL 23,
1999.
MICROAGE, INC.
1995 DIRECTOR INCENTIVE PLAN
STOCK OPTION AGREEMENT FOR
LYNDA M. APPLEGATE
April 29, 1999
Dear Lynda:
You were earlier notified that you are eligible to receive options to
restructure your Director fees package to some extent. You completed a
Director's Fee Waiver, attached hereto as EXHIBIT A, and in the Waiver you
irrevocably elected to waive $31,000.00 (the "WAIVER AMOUNT") of your Director
fees in return for the option to purchase (the "OPTION") shares of common stock
of the Company ("SHARES"). Based on your Waiver, and pursuant to action taken by
the Board of Directors of MicroAge, Inc. (the "COMPANY") under Section 7.3 of
the MicroAge, Inc. 1995 Director Incentive Plan (Amended and Restated as of
April 1, 1998) (the "PLAN") you are hereby granted the Options as set forth
below.
1. STOCK OPTION GRANT. In exchange for electing to waive the Waiver
Amount, subject to the terms and conditions set forth below, you are hereby
granted the Option to purchase a total of Twenty Thousand Four Hundred
Twenty-Six (20,426) Shares at the price of $5.875 per Share, which was the
closing price of the Shares on April 23, 1999 (the "GRANT DATE"). The number of
Shares was calculated pursuant to the following formula:
(a) Waiver Amount $ 31,000.00
(b) $30,000.00 (Waiver Amount)
Multiplied by Four (4) (the "Leverage Factor") $124,000.00
(c) Common Stock Closing Price on Grant Date
(April 23, 1999)(the "Common Stock Price") $ 5.875
(d) Total Options Granted (b) / (c)
(rounded up): 21,107
The Option granted hereby is NOT intended to be an incentive stock option within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended.
<PAGE>
2. EXERCISABILITY. You may purchase all or any of the Shares included
in any installment under this Option, on or after the later to occur of:
(1) the date the Option grant vests in accordance with the schedule
below; and
(2) the date the stock price hurdle with respect to each Option grant
is met, on or after the date the Option grant vests.
================================================================================
PERCENTAGE OF SHARES
EXERCISABLE IN DATE OPTION STOCK PRICE HURDLE
OPTION GRANT GRANT VESTS AFTER VESTING DATE
- --------------------------------------------------------------------------------
First 34% May 1, 2000 $5.875
Second 33% May 1, 2001 $6.46
Third 33% May 1, 2002 $7.11
================================================================================
NOTWITHSTANDING THE ABOVE, YOUR OPTION UNDER THIS AGREEMENT WILL BECOME
100% EXERCISABLE ON THE NINTH ANNIVERSARY OF THE GRANT DATE, UNLESS SUCH OPTION
EXPIRES BEFORE SUCH DATE IN ACCORDANCE WITH THE TERMS OF THE PLAN AND THIS
AGREEMENT. YOU MAY NOT EXERCISE THE OPTION AT ANY TIME AFTER THE EXPIRATION DATE
IN PARAGRAPH 5 BELOW.
3. EXERCISE AND STOCK DELIVERY. Vested Options may be exercised by
delivering in writing a request to purchase Shares describing the number of
Shares to be purchased and accompanied by payment in full to the Secretary of
the Company, 2400 South MicroAge Way, MS #8, Tempe, AZ 85282-1896, for the
Shares which you so elect 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. The Company, however, shall 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 the Company
may deem applicable; and
(b) all legal matters in connection with the sale and delivery of the
Shares have been approved by the Company's legal counsel.
Upon the exercise of an Option, the purchase price shall be paid in
cash, check, or, in the sole discretion of the Committee, in Shares, or a
combination thereof. Each Share received by the Company in payment of all or a
portion of the purchase price specified in this Option shall be valued at its
fair market value on the date of payment and must have been held by you for at
least six months prior to the tender of the Share to the Company.
2
<PAGE>
4. TRANSFER RESTRICTIONS. Except as otherwise allowed by uniform rules
adopted by the Board or the Committee, this Option shall be exercisable during
your lifetime only by you and shall not be transferable by you, expressly or by
operation of law, other than by will and the laws of descent and distribution.
Any other attempted transfer or other disposition of this Option by you shall be
void and shall constitute valid grounds for cancellation of this Option by the
Company.
5. TERMINATION OF OPTION. THIS OPTION AND ALL YOUR RIGHTS HEREUNDER
SHALL, UNLESS SOONER TERMINATED IN ACCORDANCE WITH THE PROVISIONS HEREOF, CEASE
AND TERMINATE ON APRIL 23, 2009 (THE "EXPIRATION DATE"), AT 5:00 P.M. ARIZONA
TIME.
6. TERMINATION OF SERVICE ON THE BOARD. Upon the date your service on
the Company's Board is terminated for any reason, you, or in the event of your
death your beneficiary, will be entitled to receive the number of Options
determined by multiplying the sum of your Director fees actually earned and
waived up to the date of your termination by the Leverage Factor and dividing
the product by the Common Stock Price (and rounding up the resulting quotient);
provided, however, that only the total Director fees earned and waived by you up
to the date of termination will be considered. To the extent your Options are
fully vested and exercisable as of the date of your termination, they will
remain exercisable at any time prior to the Expiration Date. The portion of your
Option that is not fully vested and exercisable as of the date of your
termination, if any, shall continue to vest in accordance with the schedule set
forth above and will become exercisable at the time it becomes fully vested
prior to its Expiration Date. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO
RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU ELECTED TO
WAIVE UNDER THE DIRECTOR'S FEE WAIVER.
7. CHANGE OF CONTROL. Upon a "Change of Control" (as that term is
defined in the Plan), you will be entitled to receive the number of Options
determined by multiplying the sum of your Director fees actually earned and
waived up to the Change of Control by the Leverage Factor and dividing the
product by the Common Stock Price (and rounding up the resulting quotient);
provided, however, that only the total Director fees earned and waived by you up
to the Change of Control will be considered. In the event of a Change of
Control, all Options under this Agreement will become 100% vested and will be
exercisable until the Expiration Date. UNDER NO CIRCUMSTANCES WILL YOU BE
ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU
ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE WAIVER.
8. TERMINATION OF PURCHASE PROGRAM. If the Board decides to terminate
your ability to waive all or a portion of your Director fees in return for the
Option (the "Purchase Program"), you will be entitled to receive a number of
Options determined by multiplying the sum of your Director fees actually earned
and waived up to the date of the termination of the Purchase Program by the
Leverage Factor and dividing the product by the Common Stock Price (and rounding
up the resulting quotient); provided, however, that only the Director fees
earned and waived by you up to the date of the termination of the Purchase
Program will be considered. All Options received will be fully vested and
immediately exercisable. You will have up to thirty days from the date of such
termination to exercise the Options. After such thirty day period, the Options
will be canceled.
3
<PAGE>
UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY
PORTION OF THE DIRECTOR FEES YOU ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE
WAIVER.
9. MISSED MEETINGS. If you miss a meeting for which you have waived all
or a portion of the meeting fee, the portion of the Waiver Amount that would
have been satisfied had you attended that meeting (the "DEFICIT AMOUNT"), will
be made up by charging the special meeting fees and the regular meeting fees,
that you have not already waived, for those meetings that occur after the missed
meeting but before May 2, 2000. If, by May 1, 2000, the Deficit Amount is not
made up in full by charging subsequent meeting fees as set forth in the
preceding sentence, you must pay the Company any remaining Deficit Amount by
such date.
10. COMPLIANCE. The Committee hereby reserves and shall have the right
to terminate, renew, 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.
PLEASE ACKNOWLEDGE RECEIPT OF THIS AGREEMENT BY SIGNING AND INSERTING
YOUR SOCIAL SECURITY NUMBER ON BOTH LETTERS, THEN RETURNING BOTH LETTERS TO JEFF
MCKEEVER'S OFFICE AT MICROAGE, INC., 2400 SOUTH MICROAGE WAY, MAIL STATION #24,
TEMPE, AZ 85282-1896 FOR HIS EXECUTION. THE ORIGINALLY EXECUTED LETTER WILL BE
RETURNED TO YOU FOR YOUR FILES AND THE COPY WILL BE RETAINED BY THE COMPANY'S
LEGAL DEPARTMENT.
MICROAGE, INC.
By: /s/ Jeffrey D. McKeever
------------------------------
Jeffrey D. McKeever
Chairman of the Board and
Chief Executive Officer
I HEREBY ACKNOWLEDGE RECEIPT OF THE FOREGOING OPTION.
Signature: /s/ Lynda M. Applegate
-----------------------------------
Social Security No.:
-------------------------
4
<PAGE>
EXHIBIT A
MICROAGE, INC.
DIRECTOR'S FEE WAIVER
LYNDA M. APPLEGATE
RETAINER FEES
I hereby elect to waive the following amount of the retainer fees $18,000
payable to me for the next four quarters:
THE ANNUAL RETAINER IS $18,000 AND IS PAID IN ARREARS IN
QUARTERLY INSTALLMENTS OF $4,500 EACH. YOU MAY ELECT TO
WAIVE ALL OR A PORTION OF EACH QUARTERLY INSTALLMENT FOR THE
THIRD AND FOURTH QUARTERS OF THE CURRENT FISCAL YEAR AND THE
FIRST AND SECOND QUARTERS OF THE FISCAL YEAR THAT WILL END
IN 2000. IF YOU WOULD LIKE TO WAIVE ANY PORTION OF THESE
FEES, WRITE THE AMOUNT OF THE TOTAL RETAINER FEES TO BE
WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE
WILL BE CHARGED EQUALLY AGAINST THE FOUR QUARTERLY
INSTALLMENTS.
BOARD MEETING FEES
I hereby elect to waive the following amount of my regular Board $ 9,000
meeting fees for the six regularly scheduled Board meetings
between May 1, 1999 and April 30, 2000:
THE MAXIMUM WAIVER IS $9,000. IF YOU WANT TO WAIVE ANY
PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON
THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE
CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE SIX
MEETINGS.
AUDIT COMMITTEE MEETING FEES
I hereby elect to waive the following amount of my regular Audit $ 2,000
Committee meeting fees for the two regularly scheduled meetings
between May 1, 1999 and April 30, 2000:
THE MAXIMUM WAIVER IS $2,000. IF YOU WANT TO WAIVE ANY
PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON
THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE
CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE TWO
MEETINGS.
COMPENSATION COMMITTEE MEETING FEES
I hereby elect to waive the following amount of my regular $ 2,000
Compensation Committee meeting fees for the two regularly
scheduled meetings between May 1, 1999 and April 30, 2000:
THE MAXIMUM WAIVER IS $2,000. IF YOU WANT TO WAIVE ANY
PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON
THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE
CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE TWO
MEETINGS.
WAIVER AMOUNT $31,000
By signing this Waiver, I acknowledge that I have been given, or was
offered, a copy of the Company's (i) Annual Report on Form 10-K for the fiscal
year ended November 1, 1998, and (ii) Quarterly Report on Form 10-Q for the
fiscal quarter ended January 31, 1999 (the "SEC Reports"), and that I was given
<PAGE>
an opportunity to ask questions of any of the Company's executive officers
regarding the SEC Reports or any other matter regarding the Company.
By signing this Waiver, I recognize that purchasing options is a
speculative investment in that the success or failure of my investment depends
on the market value of the Company's stock over a several year period. I further
recognize that all or a portion of my investment (i.e., my Waiver Amount) may be
lost. I also acknowledge that I was given the opportunity to consult with my
personal advisor(s) regarding this Waiver.
I hereby elect to waive the Waiver Amount set forth above. By signing
this Waiver I agree to the terms and conditions set forth above and acknowledge
that I have read and understand the sample Stock Option Agreement that was given
to me.
SIGNATURE /s/ Lynda M. Applegate
--------------------------------
DATE April 21, 1999
--------------------------------
SSN
--------------------------------
PLEASE FAX YOUR SIGNED FORM TO THOMAS R. HOECKER AT (602) 382-6070. YOUR FORM
MUST BE RECEIVED BY MR. HOECKER BY NOON (ARIZONA TIME) ON FRIDAY, APRIL 23,
1999.
MICROAGE, INC.
1995 DIRECTOR INCENTIVE PLAN
STOCK OPTION AGREEMENT FOR
CYRUS F. FREIDHEIM
April 29, 1999
Dear Cyrus:
You were earlier notified that you are eligible to receive options to
restructure your Director fees package to some extent. You completed a
Director's Fee Waiver, attached hereto as EXHIBIT A, and in the Waiver you
irrevocably elected to waive $31,000.00 (the "WAIVER AMOUNT") of your Director
fees in return for the option to purchase (the "OPTION") shares of common stock
of the Company ("SHARES"). Based on your Waiver, and pursuant to action taken by
the Board of Directors of MicroAge, Inc. (the "COMPANY") under Section 7.3 of
the MicroAge, Inc. 1995 Director Incentive Plan (Amended and Restated as of
April 1, 1998) (the "PLAN") you are hereby granted the Options as set forth
below.
1. STOCK OPTION GRANT. In exchange for electing to waive the Waiver
Amount, subject to the terms and conditions set forth below, you are hereby
granted the Option to purchase a total of Twenty Thousand Four Hundred
Twenty-Six (20,426) Shares at the price of $5.875 per Share, which was the
closing price of the Shares on April 23, 1999 (the "GRANT DATE"). The number of
Shares was calculated pursuant to the following formula:
(a) Waiver Amount $ 31,000.00
(b) $30,000.00 (Waiver Amount)
Multiplied by Four (4) (the "Leverage Factor") $124,000.00
(c) Common Stock Closing Price on Grant Date
(April 23, 1999)(the "Common Stock Price") $ 5.875
(d) Total Options Granted (b) / (c)
(rounded up): 21,107
The Option granted hereby is NOT intended to be an incentive stock option within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended.
<PAGE>
2. EXERCISABILITY. You may purchase all or any of the Shares included
in any installment under this Option, on or after the later to occur of:
(1) the date the Option grant vests in accordance with the schedule
below; and
(2) the date the stock price hurdle with respect to each Option grant
is met, on or after the date the Option grant vests.
================================================================================
PERCENTAGE OF SHARES
EXERCISABLE IN DATE OPTION STOCK PRICE HURDLE
OPTION GRANT GRANT VESTS AFTER VESTING DATE
- --------------------------------------------------------------------------------
First 34% May 1, 2000 $5.875
Second 33% May 1, 2001 $6.46
Third 33% May 1, 2002 $7.11
================================================================================
NOTWITHSTANDING THE ABOVE, YOUR OPTION UNDER THIS AGREEMENT WILL BECOME
100% EXERCISABLE ON THE NINTH ANNIVERSARY OF THE GRANT DATE, UNLESS SUCH OPTION
EXPIRES BEFORE SUCH DATE IN ACCORDANCE WITH THE TERMS OF THE PLAN AND THIS
AGREEMENT. YOU MAY NOT EXERCISE THE OPTION AT ANY TIME AFTER THE EXPIRATION DATE
IN PARAGRAPH 5 BELOW.
3. EXERCISE AND STOCK DELIVERY. Vested Options may be exercised by
delivering in writing a request to purchase Shares describing the number of
Shares to be purchased and accompanied by payment in full to the Secretary of
the Company, 2400 South MicroAge Way, MS #8, Tempe, AZ 85282-1896, for the
Shares which you so elect 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. The Company, however, shall 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 the Company
may deem applicable; and
(b) all legal matters in connection with the sale and delivery of the
Shares have been approved by the Company's legal counsel.
Upon the exercise of an Option, the purchase price shall be paid in
cash, check, or, in the sole discretion of the Committee, in Shares, or a
combination thereof. Each Share received by the Company in payment of all or a
portion of the purchase price specified in this Option shall be valued at its
fair market value on the date of payment and must have been held by you for at
least six months prior to the tender of the Share to the Company.
2
<PAGE>
4. TRANSFER RESTRICTIONS. Except as otherwise allowed by uniform rules
adopted by the Board or the Committee, this Option shall be exercisable during
your lifetime only by you and shall not be transferable by you, expressly or by
operation of law, other than by will and the laws of descent and distribution.
Any other attempted transfer or other disposition of this Option by you shall be
void and shall constitute valid grounds for cancellation of this Option by the
Company.
5. TERMINATION OF OPTION. THIS OPTION AND ALL YOUR RIGHTS HEREUNDER
SHALL, UNLESS SOONER TERMINATED IN ACCORDANCE WITH THE PROVISIONS HEREOF, CEASE
AND TERMINATE ON APRIL 23, 2009 (THE "EXPIRATION DATE"), AT 5:00 P.M. ARIZONA
TIME.
6. TERMINATION OF SERVICE ON THE BOARD. Upon the date your service on
the Company's Board is terminated for any reason, you, or in the event of your
death your beneficiary, will be entitled to receive the number of Options
determined by multiplying the sum of your Director fees actually earned and
waived up to the date of your termination by the Leverage Factor and dividing
the product by the Common Stock Price (and rounding up the resulting quotient);
provided, however, that only the total Director fees earned and waived by you up
to the date of termination will be considered. To the extent your Options are
fully vested and exercisable as of the date of your termination, they will
remain exercisable at any time prior to the Expiration Date. The portion of your
Option that is not fully vested and exercisable as of the date of your
termination, if any, shall continue to vest in accordance with the schedule set
forth above and will become exercisable at the time it becomes fully vested
prior to its Expiration Date. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO
RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU ELECTED TO
WAIVE UNDER THE DIRECTOR'S FEE WAIVER.
7. CHANGE OF CONTROL. Upon a "Change of Control" (as that term is
defined in the Plan), you will be entitled to receive the number of Options
determined by multiplying the sum of your Director fees actually earned and
waived up to the Change of Control by the Leverage Factor and dividing the
product by the Common Stock Price (and rounding up the resulting quotient);
provided, however, that only the total Director fees earned and waived by you up
to the Change of Control will be considered. In the event of a Change of
Control, all Options under this Agreement will become 100% vested and will be
exercisable until the Expiration Date. UNDER NO CIRCUMSTANCES WILL YOU BE
ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU
ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE WAIVER.
8. TERMINATION OF PURCHASE PROGRAM. If the Board decides to terminate
your ability to waive all or a portion of your Director fees in return for the
Option (the "Purchase Program"), you will be entitled to receive a number of
Options determined by multiplying the sum of your Director fees actually earned
and waived up to the date of the termination of the Purchase Program by the
Leverage Factor and dividing the product by the Common Stock Price (and rounding
up the resulting quotient); provided, however, that only the Director fees
earned and waived by you up to the date of the termination of the Purchase
Program will be considered. All Options received will be fully vested and
immediately exercisable. You will have up to thirty days from the date of such
termination to exercise the Options. After such thirty day period, the Options
will be canceled.
3
<PAGE>
UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY
PORTION OF THE DIRECTOR FEES YOU ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE
WAIVER.
9. MISSED MEETINGS. If you miss a meeting for which you have waived all
or a portion of the meeting fee, the portion of the Waiver Amount that would
have been satisfied had you attended that meeting (the "DEFICIT AMOUNT"), will
be made up by charging the special meeting fees and the regular meeting fees,
that you have not already waived, for those meetings that occur after the missed
meeting but before May 2, 2000. If, by May 1, 2000, the Deficit Amount is not
made up in full by charging subsequent meeting fees as set forth in the
preceding sentence, you must pay the Company any remaining Deficit Amount by
such date.
10. COMPLIANCE. The Committee hereby reserves and shall have the right
to terminate, renew, 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.
PLEASE ACKNOWLEDGE RECEIPT OF THIS AGREEMENT BY SIGNING AND INSERTING
YOUR SOCIAL SECURITY NUMBER ON BOTH LETTERS, THEN RETURNING BOTH LETTERS TO JEFF
MCKEEVER'S OFFICE AT MICROAGE, INC., 2400 SOUTH MICROAGE WAY, MAIL STATION #24,
TEMPE, AZ 85282-1896 FOR HIS EXECUTION. THE ORIGINALLY EXECUTED LETTER WILL BE
RETURNED TO YOU FOR YOUR FILES AND THE COPY WILL BE RETAINED BY THE COMPANY'S
LEGAL DEPARTMENT.
MICROAGE, INC.
By: /s/ Jeffrey D. McKeever
------------------------------
Jeffrey D. McKeever
Chairman of the Board and
Chief Executive Officer
I HEREBY ACKNOWLEDGE RECEIPT OF THE FOREGOING OPTION.
Signature: /s/ Cyrus F. Freidheim
-----------------------------------
Social Security No.:
-------------------------
4
<PAGE>
EXHIBIT A
MICROAGE, INC.
DIRECTOR'S FEE WAIVER
CYRUS F. FREIDHEIM
RETAINER FEES
I hereby elect to waive the following amount of the retainer fees $18,000
payable to me for the next four quarters:
THE ANNUAL RETAINER IS $18,000 AND IS PAID IN ARREARS IN
QUARTERLY INSTALLMENTS OF $4,500 EACH. YOU MAY ELECT TO
WAIVE ALL OR A PORTION OF EACH QUARTERLY INSTALLMENT FOR THE
THIRD AND FOURTH QUARTERS OF THE CURRENT FISCAL YEAR AND THE
FIRST AND SECOND QUARTERS OF THE FISCAL YEAR THAT WILL END
IN 2000. IF YOU WOULD LIKE TO WAIVE ANY PORTION OF THESE
FEES, WRITE THE AMOUNT OF THE TOTAL RETAINER FEES TO BE
WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE
WILL BE CHARGED EQUALLY AGAINST THE FOUR QUARTERLY
INSTALLMENTS.
BOARD MEETING FEES
I hereby elect to waive the following amount of my regular Board $ 9,000
meeting fees for the six regularly scheduled Board meetings
between May 1, 1999 and April 30, 2000:
THE MAXIMUM WAIVER IS $9,000. IF YOU WANT TO WAIVE ANY
PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON
THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE
CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE SIX
MEETINGS.
AUDIT COMMITTEE MEETING FEES
I hereby elect to waive the following amount of my regular Audit $ 2,000
Committee meeting fees for the two regularly scheduled meetings
between May 1, 1999 and April 30, 2000:
THE MAXIMUM WAIVER IS $2,000. IF YOU WANT TO WAIVE ANY
PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON
THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE
CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE TWO
MEETINGS.
COMPENSATION COMMITTEE MEETING FEES
I hereby elect to waive the following amount of my regular $ 2,000
Compensation Committee meeting fees for the two regularly
scheduled meetings between May 1, 1999 and April 30, 2000:
THE MAXIMUM WAIVER IS $2,000. IF YOU WANT TO WAIVE ANY
PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON
THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE
CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE TWO
MEETINGS.
WAIVER AMOUNT $31,000
By signing this Waiver, I acknowledge that I have been given, or was
offered, a copy of the Company's (i) Annual Report on Form 10-K for the fiscal
year ended November 1, 1998, and (ii) Quarterly Report on Form 10-Q for the
fiscal quarter ended January 31, 1999 (the "SEC Reports"), and that I was given
<PAGE>
an opportunity to ask questions of any of the Company's executive officers
regarding the SEC Reports or any other matter regarding the Company.
By signing this Waiver, I recognize that purchasing options is a
speculative investment in that the success or failure of my investment depends
on the market value of the Company's stock over a several year period. I further
recognize that all or a portion of my investment (i.e., my Waiver Amount) may be
lost. I also acknowledge that I was given the opportunity to consult with my
personal advisor(s) regarding this Waiver.
I hereby elect to waive the Waiver Amount set forth above. By signing
this Waiver I agree to the terms and conditions set forth above and acknowledge
that I have read and understand the sample Stock Option Agreement that was given
to me.
SIGNATURE /s/ Cyrus F. Freidheim
--------------------------------
DATE April 11, 1999
--------------------------------
SSN
--------------------------------
PLEASE FAX YOUR SIGNED FORM TO THOMAS R. HOECKER AT (602) 382-6070. YOUR FORM
MUST BE RECEIVED BY MR. HOECKER BY NOON (ARIZONA TIME) ON FRIDAY, APRIL 23,
1999.
MICROAGE, INC.
1995 DIRECTOR INCENTIVE PLAN
STOCK OPTION AGREEMENT FOR
ROY A. HERBERGER, JR.
April 29, 1999
Dear Roy:
You were earlier notified that you are eligible to receive options to
restructure your Director fees package to some extent. You completed a
Director's Fee Waiver, attached hereto as EXHIBIT A, and in the Waiver you
irrevocably elected to waive $10,000.00 (the "WAIVER AMOUNT") of your Director
fees in return for the option to purchase (the "OPTION") shares of common stock
of the Company ("SHARES"). Based on your Waiver, and pursuant to action taken by
the Board of Directors of MicroAge, Inc. (the "COMPANY") under Section 7.3 of
the MicroAge, Inc. 1995 Director Incentive Plan (Amended and Restated as of
April 1, 1998) (the "PLAN") you are hereby granted the Options as set forth
below.
1. STOCK OPTION GRANT. In exchange for electing to waive the Waiver
Amount, subject to the terms and conditions set forth below, you are hereby
granted the Option to purchase a total of Twenty Thousand Four Hundred
Twenty-Six (20,426) Shares at the price of $5.875 per Share, which was the
closing price of the Shares on April 23, 1999 (the "GRANT DATE"). The number of
Shares was calculated pursuant to the following formula:
(a) Waiver Amount $10,000.00
(b) $30,000.00 (Waiver Amount)
Multiplied by Four (4) (the "Leverage Factor") $40,000.00
(c) Common Stock Closing Price on Grant Date
(April 23, 1999)(the "Common Stock Price") $ 5.875
(d) Total Options Granted (b) / (c)
(rounded up): 6,809
The Option granted hereby is NOT intended to be an incentive stock option within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended.
<PAGE>
2. EXERCISABILITY. You may purchase all or any of the Shares included
in any installment under this Option, on or after the later to occur of:
(1) the date the Option grant vests in accordance with the schedule
below; and
(2) the date the stock price hurdle with respect to each Option grant
is met, on or after the date the Option grant vests.
================================================================================
PERCENTAGE OF SHARES
EXERCISABLE IN DATE OPTION STOCK PRICE HURDLE
OPTION GRANT GRANT VESTS AFTER VESTING DATE
- --------------------------------------------------------------------------------
First 34% May 1, 2000 $5.875
Second 33% May 1, 2001 $6.46
Third 33% May 1, 2002 $7.11
================================================================================
NOTWITHSTANDING THE ABOVE, YOUR OPTION UNDER THIS AGREEMENT WILL BECOME
100% EXERCISABLE ON THE NINTH ANNIVERSARY OF THE GRANT DATE, UNLESS SUCH OPTION
EXPIRES BEFORE SUCH DATE IN ACCORDANCE WITH THE TERMS OF THE PLAN AND THIS
AGREEMENT. YOU MAY NOT EXERCISE THE OPTION AT ANY TIME AFTER THE EXPIRATION DATE
IN PARAGRAPH 5 BELOW.
3. EXERCISE AND STOCK DELIVERY. Vested Options may be exercised by
delivering in writing a request to purchase Shares describing the number of
Shares to be purchased and accompanied by payment in full to the Secretary of
the Company, 2400 South MicroAge Way, MS #8, Tempe, AZ 85282-1896, for the
Shares which you so elect 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. The Company, however, shall 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 the Company
may deem applicable; and
(b) all legal matters in connection with the sale and delivery of the
Shares have been approved by the Company's legal counsel.
Upon the exercise of an Option, the purchase price shall be paid in
cash, check, or, in the sole discretion of the Committee, in Shares, or a
combination thereof. Each Share received by the Company in payment of all or a
portion of the purchase price specified in this Option shall be valued at its
fair market value on the date of payment and must have been held by you for at
least six months prior to the tender of the Share to the Company.
2
<PAGE>
4. TRANSFER RESTRICTIONS. Except as otherwise allowed by uniform rules
adopted by the Board or the Committee, this Option shall be exercisable during
your lifetime only by you and shall not be transferable by you, expressly or by
operation of law, other than by will and the laws of descent and distribution.
Any other attempted transfer or other disposition of this Option by you shall be
void and shall constitute valid grounds for cancellation of this Option by the
Company.
5. TERMINATION OF OPTION. THIS OPTION AND ALL YOUR RIGHTS HEREUNDER
SHALL, UNLESS SOONER TERMINATED IN ACCORDANCE WITH THE PROVISIONS HEREOF, CEASE
AND TERMINATE ON APRIL 23, 2009 (THE "EXPIRATION DATE"), AT 5:00 P.M. ARIZONA
TIME.
6. TERMINATION OF SERVICE ON THE BOARD. Upon the date your service on
the Company's Board is terminated for any reason, you, or in the event of your
death your beneficiary, will be entitled to receive the number of Options
determined by multiplying the sum of your Director fees actually earned and
waived up to the date of your termination by the Leverage Factor and dividing
the product by the Common Stock Price (and rounding up the resulting quotient);
provided, however, that only the total Director fees earned and waived by you up
to the date of termination will be considered. To the extent your Options are
fully vested and exercisable as of the date of your termination, they will
remain exercisable at any time prior to the Expiration Date. The portion of your
Option that is not fully vested and exercisable as of the date of your
termination, if any, shall continue to vest in accordance with the schedule set
forth above and will become exercisable at the time it becomes fully vested
prior to its Expiration Date. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO
RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU ELECTED TO
WAIVE UNDER THE DIRECTOR'S FEE WAIVER.
7. CHANGE OF CONTROL. Upon a "Change of Control" (as that term is
defined in the Plan), you will be entitled to receive the number of Options
determined by multiplying the sum of your Director fees actually earned and
waived up to the Change of Control by the Leverage Factor and dividing the
product by the Common Stock Price (and rounding up the resulting quotient);
provided, however, that only the total Director fees earned and waived by you up
to the Change of Control will be considered. In the event of a Change of
Control, all Options under this Agreement will become 100% vested and will be
exercisable until the Expiration Date. UNDER NO CIRCUMSTANCES WILL YOU BE
ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU
ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE WAIVER.
8. TERMINATION OF PURCHASE PROGRAM. If the Board decides to terminate
your ability to waive all or a portion of your Director fees in return for the
Option (the "Purchase Program"), you will be entitled to receive a number of
Options determined by multiplying the sum of your Director fees actually earned
and waived up to the date of the termination of the Purchase Program by the
Leverage Factor and dividing the product by the Common Stock Price (and rounding
up the resulting quotient); provided, however, that only the Director fees
earned and waived by you up to the date of the termination of the Purchase
Program will be considered. All Options received will be fully vested and
immediately exercisable. You will have up to thirty days from the date of such
termination to exercise the Options. After such thirty day period, the Options
will be canceled.
3
<PAGE>
UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY
PORTION OF THE DIRECTOR FEES YOU ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE
WAIVER.
9. MISSED MEETINGS. If you miss a meeting for which you have waived all
or a portion of the meeting fee, the portion of the Waiver Amount that would
have been satisfied had you attended that meeting (the "DEFICIT AMOUNT"), will
be made up by charging the special meeting fees and the regular meeting fees,
that you have not already waived, for those meetings that occur after the missed
meeting but before May 2, 2000. If, by May 1, 2000, the Deficit Amount is not
made up in full by charging subsequent meeting fees as set forth in the
preceding sentence, you must pay the Company any remaining Deficit Amount by
such date.
10. COMPLIANCE. The Committee hereby reserves and shall have the right
to terminate, renew, 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.
PLEASE ACKNOWLEDGE RECEIPT OF THIS AGREEMENT BY SIGNING AND INSERTING
YOUR SOCIAL SECURITY NUMBER ON BOTH LETTERS, THEN RETURNING BOTH LETTERS TO JEFF
MCKEEVER'S OFFICE AT MICROAGE, INC., 2400 SOUTH MICROAGE WAY, MAIL STATION #24,
TEMPE, AZ 85282-1896 FOR HIS EXECUTION. THE ORIGINALLY EXECUTED LETTER WILL BE
RETURNED TO YOU FOR YOUR FILES AND THE COPY WILL BE RETAINED BY THE COMPANY'S
LEGAL DEPARTMENT.
MICROAGE, INC.
By: /s/ Jeffrey D. McKeever
------------------------------
Jeffrey D. McKeever
Chairman of the Board and
Chief Executive Officer
I HEREBY ACKNOWLEDGE RECEIPT OF THE FOREGOING OPTION.
Signature: /s/ Roy A. Herberger, Jr.
-----------------------------------
Social Security No.:
-------------------------
4
<PAGE>
EXHIBIT A
MICROAGE, INC.
DIRECTOR'S FEE WAIVER
ROY A. HERBERGER, JR.
RETAINER FEES
I hereby elect to waive the following amount of the retainer fees $ 2,000
payable to me for the next four quarters:
THE ANNUAL RETAINER IS $18,000 AND IS PAID IN ARREARS IN
QUARTERLY INSTALLMENTS OF $4,500 EACH. YOU MAY ELECT TO
WAIVE ALL OR A PORTION OF EACH QUARTERLY INSTALLMENT FOR THE
THIRD AND FOURTH QUARTERS OF THE CURRENT FISCAL YEAR AND THE
FIRST AND SECOND QUARTERS OF THE FISCAL YEAR THAT WILL END
IN 2000. IF YOU WOULD LIKE TO WAIVE ANY PORTION OF THESE
FEES, WRITE THE AMOUNT OF THE TOTAL RETAINER FEES TO BE
WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE
WILL BE CHARGED EQUALLY AGAINST THE FOUR QUARTERLY
INSTALLMENTS.
BOARD MEETING FEES
I hereby elect to waive the following amount of my regular Board $ 2,000
meeting fees for the six regularly scheduled Board meetings
between May 1, 1999 and April 30, 2000:
THE MAXIMUM WAIVER IS $9,000. IF YOU WANT TO WAIVE ANY
PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON
THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE
CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE SIX
MEETINGS.
COMPENSATION COMMITTEE MEETING FEES
I hereby elect to waive the following amount of my regular $ 2,000
Compensation Committee meeting fees for the two regularly
scheduled meetings between May 1, 1999 and April 30, 2000:
THE MAXIMUM WAIVER IS $2,000. IF YOU WANT TO WAIVE ANY
PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON
THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE
CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE TWO
MEETINGS.
GOVERNANCE COMMITTEE MEETING FEES
I hereby elect to waive the following amount of my regular $ 2,000
Governance Committee meeting fees for the two regularly scheduled
meetings between May 1, 1999 and April 30, 2000:
THE MAXIMUM WAIVER IS $2,000. IF YOU WANT TO WAIVE ANY
PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON
THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE
CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE TWO
MEETINGS.
<PAGE>
COMMITTEE CHAIR FEES
I hereby elect to waive the following amount of the Committee $ 2,000
Chair fees payable to me for the next four quarters:
THE ANNUAL COMMITTEE CHAIR FEE IS $3,000 AND IS PAID IN
ARREARS IN QUARTERLY INSTALLMENTS OF $750 EACH. YOU MAY
ELECT TO WAIVE ALL OR A PORTION OF EACH QUARTERLY
INSTALLMENT FOR THE THIRD AND FOURTH QUARTERS OF THE CURRENT
FISCAL YEAR AND THE FIRST AND SECOND QUARTERS OF THE FISCAL
YEAR THAT WILL END IN 2000. IF YOU WOULD LIKE TO WAIVE ANY
PORTION OF THESE FEES, WRITE THE AMOUNT OF THE TOTAL
COMMITTEE CHAIR FEES TO BE WAIVED ON THE BLANK LINE TO THE
RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST
THE FOUR QUARTERLY INSTALLMENTS.
WAIVER AMOUNT $10,000
By signing this Waiver, I acknowledge that I have been given, or was
offered, a copy of the Company's (i) Annual Report on Form 10-K for the fiscal
year ended November 1, 1998, and (ii) Quarterly Report on Form 10-Q for the
fiscal quarter ended January 31, 1999 (the "SEC Reports"), and that I was given
an opportunity to ask questions of any of the Company's executive officers
regarding the SEC Reports or any other matter regarding the Company.
By signing this Waiver, I recognize that purchasing options is a
speculative investment in that the success or failure of my investment depends
on the market value of the Company's stock over a several year period. I further
recognize that all or a portion of my investment (i.e., my Waiver Amount) may be
lost. I also acknowledge that I was given the opportunity to consult with my
personal advisor(s) regarding this Waiver.
I hereby elect to waive the Waiver Amount set forth above. By signing
this Waiver I agree to the terms and conditions set forth above and acknowledge
that I have read and understand the sample Stock Option Agreement that was given
to me.
SIGNATURE /s/ Roy A. Herberger, Jr.
--------------------------------
DATE April 15, 1999
--------------------------------
SSN
--------------------------------
PLEASE FAX YOUR SIGNED FORM TO THOMAS R. HOECKER AT (602) 382-6070. YOUR FORM
MUST BE RECEIVED BY MR. HOECKER BY NOON (ARIZONA TIME) ON FRIDAY, APRIL 23,
1999.
MICROAGE, INC.
1995 DIRECTOR INCENTIVE PLAN
STOCK OPTION AGREEMENT FOR
DIANNE C. WALKER
April 29, 1999
Dear Dianne:
You were earlier notified that you are eligible to receive options to
restructure your Director fees package to some extent. You completed a
Director's Fee Waiver, attached hereto as EXHIBIT A, and in the Waiver you
irrevocably elected to waive $10,000.00 (the "WAIVER AMOUNT") of your Director
fees in return for the option to purchase (the "OPTION") shares of common stock
of the Company ("SHARES"). Based on your Waiver, and pursuant to action taken by
the Board of Directors of MicroAge, Inc. (the "COMPANY") under Section 7.3 of
the MicroAge, Inc. 1995 Director Incentive Plan (Amended and Restated as of
April 1, 1998) (the "PLAN") you are hereby granted the Options as set forth
below.
1. STOCK OPTION GRANT. In exchange for electing to waive the Waiver
Amount, subject to the terms and conditions set forth below, you are hereby
granted the Option to purchase a total of Twenty Thousand Four Hundred
Twenty-Six (20,426) Shares at the price of $5.875 per Share, which was the
closing price of the Shares on April 23, 1999 (the "GRANT DATE"). The number of
Shares was calculated pursuant to the following formula:
(a) Waiver Amount $10,000.00
(b) $30,000.00 (Waiver Amount)
Multiplied by Four (4) (the "Leverage Factor") $40,000.00
(c) Common Stock Closing Price on Grant Date
(April 23, 1999)(the "Common Stock Price") $ 5.875
(d) Total Options Granted (b) / (c)
(rounded up): 6,809
The Option granted hereby is NOT intended to be an incentive stock option within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended.
<PAGE>
2. EXERCISABILITY. You may purchase all or any of the Shares included
in any installment under this Option, on or after the later to occur of:
(1) the date the Option grant vests in accordance with the schedule
below; and
(2) the date the stock price hurdle with respect to each Option grant
is met, on or after the date the Option grant vests.
================================================================================
PERCENTAGE OF SHARES
EXERCISABLE IN DATE OPTION STOCK PRICE HURDLE
OPTION GRANT GRANT VESTS AFTER VESTING DATE
- --------------------------------------------------------------------------------
First 34% May 1, 2000 $5.875
Second 33% May 1, 2001 $6.46
Third 33% May 1, 2002 $7.11
================================================================================
NOTWITHSTANDING THE ABOVE, YOUR OPTION UNDER THIS AGREEMENT WILL BECOME
100% EXERCISABLE ON THE NINTH ANNIVERSARY OF THE GRANT DATE, UNLESS SUCH OPTION
EXPIRES BEFORE SUCH DATE IN ACCORDANCE WITH THE TERMS OF THE PLAN AND THIS
AGREEMENT. YOU MAY NOT EXERCISE THE OPTION AT ANY TIME AFTER THE EXPIRATION DATE
IN PARAGRAPH 5 BELOW.
3. EXERCISE AND STOCK DELIVERY. Vested Options may be exercised by
delivering in writing a request to purchase Shares describing the number of
Shares to be purchased and accompanied by payment in full to the Secretary of
the Company, 2400 South MicroAge Way, MS #8, Tempe, AZ 85282-1896, for the
Shares which you so elect 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. The Company, however, shall 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 the Company
may deem applicable; and
(b) all legal matters in connection with the sale and delivery of the
Shares have been approved by the Company's legal counsel.
Upon the exercise of an Option, the purchase price shall be paid in
cash, check, or, in the sole discretion of the Committee, in Shares, or a
combination thereof. Each Share received by the Company in payment of all or a
portion of the purchase price specified in this Option shall be valued at its
fair market value on the date of payment and must have been held by you for at
least six months prior to the tender of the Share to the Company.
2
<PAGE>
4. TRANSFER RESTRICTIONS. Except as otherwise allowed by uniform rules
adopted by the Board or the Committee, this Option shall be exercisable during
your lifetime only by you and shall not be transferable by you, expressly or by
operation of law, other than by will and the laws of descent and distribution.
Any other attempted transfer or other disposition of this Option by you shall be
void and shall constitute valid grounds for cancellation of this Option by the
Company.
5. TERMINATION OF OPTION. THIS OPTION AND ALL YOUR RIGHTS HEREUNDER
SHALL, UNLESS SOONER TERMINATED IN ACCORDANCE WITH THE PROVISIONS HEREOF, CEASE
AND TERMINATE ON APRIL 23, 2009 (THE "EXPIRATION DATE"), AT 5:00 P.M. ARIZONA
TIME.
6. TERMINATION OF SERVICE ON THE BOARD. Upon the date your service on
the Company's Board is terminated for any reason, you, or in the event of your
death your beneficiary, will be entitled to receive the number of Options
determined by multiplying the sum of your Director fees actually earned and
waived up to the date of your termination by the Leverage Factor and dividing
the product by the Common Stock Price (and rounding up the resulting quotient);
provided, however, that only the total Director fees earned and waived by you up
to the date of termination will be considered. To the extent your Options are
fully vested and exercisable as of the date of your termination, they will
remain exercisable at any time prior to the Expiration Date. The portion of your
Option that is not fully vested and exercisable as of the date of your
termination, if any, shall continue to vest in accordance with the schedule set
forth above and will become exercisable at the time it becomes fully vested
prior to its Expiration Date. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO
RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU ELECTED TO
WAIVE UNDER THE DIRECTOR'S FEE WAIVER.
7. CHANGE OF CONTROL. Upon a "Change of Control" (as that term is
defined in the Plan), you will be entitled to receive the number of Options
determined by multiplying the sum of your Director fees actually earned and
waived up to the Change of Control by the Leverage Factor and dividing the
product by the Common Stock Price (and rounding up the resulting quotient);
provided, however, that only the total Director fees earned and waived by you up
to the Change of Control will be considered. In the event of a Change of
Control, all Options under this Agreement will become 100% vested and will be
exercisable until the Expiration Date. UNDER NO CIRCUMSTANCES WILL YOU BE
ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU
ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE WAIVER.
8. TERMINATION OF PURCHASE PROGRAM. If the Board decides to terminate
your ability to waive all or a portion of your Director fees in return for the
Option (the "Purchase Program"), you will be entitled to receive a number of
Options determined by multiplying the sum of your Director fees actually earned
and waived up to the date of the termination of the Purchase Program by the
Leverage Factor and dividing the product by the Common Stock Price (and rounding
up the resulting quotient); provided, however, that only the Director fees
earned and waived by you up to the date of the termination of the Purchase
Program will be considered. All Options received will be fully vested and
immediately exercisable. You will have up to thirty days from the date of such
termination to exercise the Options. After such thirty day period, the Options
will be canceled.
3
<PAGE>
UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY
PORTION OF THE DIRECTOR FEES YOU ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE
WAIVER.
9. MISSED MEETINGS. If you miss a meeting for which you have waived all
or a portion of the meeting fee, the portion of the Waiver Amount that would
have been satisfied had you attended that meeting (the "DEFICIT AMOUNT"), will
be made up by charging the special meeting fees and the regular meeting fees,
that you have not already waived, for those meetings that occur after the missed
meeting but before May 2, 2000. If, by May 1, 2000, the Deficit Amount is not
made up in full by charging subsequent meeting fees as set forth in the
preceding sentence, you must pay the Company any remaining Deficit Amount by
such date.
10. COMPLIANCE. The Committee hereby reserves and shall have the right
to terminate, renew, 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.
PLEASE ACKNOWLEDGE RECEIPT OF THIS AGREEMENT BY SIGNING AND INSERTING
YOUR SOCIAL SECURITY NUMBER ON BOTH LETTERS, THEN RETURNING BOTH LETTERS TO JEFF
MCKEEVER'S OFFICE AT MICROAGE, INC., 2400 SOUTH MICROAGE WAY, MAIL STATION #24,
TEMPE, AZ 85282-1896 FOR HIS EXECUTION. THE ORIGINALLY EXECUTED LETTER WILL BE
RETURNED TO YOU FOR YOUR FILES AND THE COPY WILL BE RETAINED BY THE COMPANY'S
LEGAL DEPARTMENT.
MICROAGE, INC.
By: /s/ Jeffrey D. McKeever
------------------------------
Jeffrey D. McKeever
Chairman of the Board and
Chief Executive Officer
I HEREBY ACKNOWLEDGE RECEIPT OF THE FOREGOING OPTION.
Signature: /s/ Dianne C. Walker
-----------------------------------
Social Security No.:
-------------------------
4
<PAGE>
EXHIBIT A
MICROAGE, INC.
DIRECTOR'S FEE WAIVER
DIANNE C. WALKER
RETAINER FEES
I hereby elect to waive the following amount of the retainer fees $10,000
payable to me for the next four quarters:
THE ANNUAL RETAINER IS $18,000 AND IS PAID IN ARREARS IN
QUARTERLY INSTALLMENTS OF $4,500 EACH. YOU MAY ELECT TO
WAIVE ALL OR A PORTION OF EACH QUARTERLY INSTALLMENT FOR THE
THIRD AND FOURTH QUARTERS OF THE CURRENT FISCAL YEAR AND THE
FIRST AND SECOND QUARTERS OF THE FISCAL YEAR THAT WILL END
IN 2000. IF YOU WOULD LIKE TO WAIVE ANY PORTION OF THESE
FEES, WRITE THE AMOUNT OF THE TOTAL RETAINER FEES TO BE
WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE
WILL BE CHARGED EQUALLY AGAINST THE FOUR QUARTERLY
INSTALLMENTS.
BOARD MEETING FEES
I hereby elect to waive the following amount of my regular Board $ --
meeting fees for the six regularly scheduled Board meetings
between May 1, 1999 and April 30, 2000:
THE MAXIMUM WAIVER IS $9,000. IF YOU WANT TO WAIVE ANY
PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON
THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE
CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE SIX
MEETINGS.
AUDIT COMMITTEE MEETING FEES
I hereby elect to waive the following amount of my regular Audit $ --
Committee meeting fees for the two regularly scheduled meetings
between May 1, 1999 and April 30, 2000:
THE MAXIMUM WAIVER IS $2,000. IF YOU WANT TO WAIVE ANY
PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON
THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE
CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE TWO
MEETINGS.
GOVERNANCE COMMITTEE MEETING FEES
I hereby elect to waive the following amount of my regular $ --
Governance Committee meeting fees for the two regularly scheduled
meetings between May 1, 1999 and April 30, 2000:
THE MAXIMUM WAIVER IS $2,000. IF YOU WANT TO WAIVE ANY
PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON
THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE
CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE TWO
MEETINGS.
WAIVER AMOUNT $10,000
By signing this Waiver, I acknowledge that I have been given, or was
offered, a copy of the Company's (i) Annual Report on Form 10-K for the fiscal
year ended November 1, 1998, and (ii) Quarterly Report on Form 10-Q for the
fiscal quarter ended January 31, 1999 (the "SEC Reports"), and that I was given
<PAGE>
an opportunity to ask questions of any of the Company's executive officers
regarding the SEC Reports or any other matter regarding the Company.
By signing this Waiver, I recognize that purchasing options is a
speculative investment in that the success or failure of my investment depends
on the market value of the Company's stock over a several year period. I further
recognize that all or a portion of my investment (i.e., my Waiver Amount) may be
lost. I also acknowledge that I was given the opportunity to consult with my
personal advisor(s) regarding this Waiver.
I hereby elect to waive the Waiver Amount set forth above. By signing
this Waiver I agree to the terms and conditions set forth above and acknowledge
that I have read and understand the sample Stock Option Agreement that was given
to me.
SIGNATURE /s/ Dianne C. Walker
--------------------------------
DATE April 22, 1999
--------------------------------
SSN
--------------------------------
PLEASE FAX YOUR SIGNED FORM TO THOMAS R. HOECKER AT (602) 382-6070. YOUR FORM
MUST BE RECEIVED BY MR. HOECKER BY NOON (ARIZONA TIME) ON FRIDAY, APRIL 23,
1999.
MICROAGE, INC.
1995 DIRECTOR INCENTIVE PLAN
STOCK OPTION AGREEMENT FOR
STEVEN G. MIHAYLO
April 29, 1999
Dear Steve:
You were earlier notified that you are eligible to receive options to
restructure your Director fees package to some extent. You completed a
Director's Fee Waiver, attached hereto as EXHIBIT A, and in the Waiver you
irrevocably elected to waive $17,000.00 (the "WAIVER AMOUNT") of your Director
fees in return for the option to purchase (the "OPTION") shares of common stock
of the Company ("SHARES"). Based on your Waiver, and pursuant to action taken by
the Board of Directors of MicroAge, Inc. (the "COMPANY") under Section 7.3 of
the MicroAge, Inc. 1995 Director Incentive Plan (Amended and Restated as of
April 1, 1998) (the "PLAN") you are hereby granted the Options as set forth
below.
1. STOCK OPTION GRANT. In exchange for electing to waive the Waiver
Amount, subject to the terms and conditions set forth below, you are hereby
granted the Option to purchase a total of Twenty Thousand Four Hundred
Twenty-Six (20,426) Shares at the price of $5.875 per Share, which was the
closing price of the Shares on April 23, 1999 (the "GRANT DATE"). The number of
Shares was calculated pursuant to the following formula:
(a) Waiver Amount $17,000.00
(b) $30,000.00 (Waiver Amount)
Multiplied by Four (4) (the "Leverage Factor") $68,000.00
(c) Common Stock Closing Price on Grant Date
(April 23, 1999)(the "Common Stock Price") $ 5.875
(d) Total Options Granted (b) / (c)
(rounded up): 11,575
The Option granted hereby is NOT intended to be an incentive stock option within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended.
<PAGE>
2. EXERCISABILITY. You may purchase all or any of the Shares included
in any installment under this Option, on or after the later to occur of:
(1) the date the Option grant vests in accordance with the schedule
below; and
(2) the date the stock price hurdle with respect to each Option grant
is met, on or after the date the Option grant vests.
================================================================================
PERCENTAGE OF SHARES
EXERCISABLE IN DATE OPTION STOCK PRICE HURDLE
OPTION GRANT GRANT VESTS AFTER VESTING DATE
- --------------------------------------------------------------------------------
First 34% May 1, 2000 $5.875
Second 33% May 1, 2001 $6.46
Third 33% May 1, 2002 $7.11
================================================================================
NOTWITHSTANDING THE ABOVE, YOUR OPTION UNDER THIS AGREEMENT WILL BECOME
100% EXERCISABLE ON THE NINTH ANNIVERSARY OF THE GRANT DATE, UNLESS SUCH OPTION
EXPIRES BEFORE SUCH DATE IN ACCORDANCE WITH THE TERMS OF THE PLAN AND THIS
AGREEMENT. YOU MAY NOT EXERCISE THE OPTION AT ANY TIME AFTER THE EXPIRATION DATE
IN PARAGRAPH 5 BELOW.
3. EXERCISE AND STOCK DELIVERY. Vested Options may be exercised by
delivering in writing a request to purchase Shares describing the number of
Shares to be purchased and accompanied by payment in full to the Secretary of
the Company, 2400 South MicroAge Way, MS #8, Tempe, AZ 85282-1896, for the
Shares which you so elect 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. The Company, however, shall 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 the Company
may deem applicable; and
(b) all legal matters in connection with the sale and delivery of the
Shares have been approved by the Company's legal counsel.
Upon the exercise of an Option, the purchase price shall be paid in
cash, check, or, in the sole discretion of the Committee, in Shares, or a
combination thereof. Each Share received by the Company in payment of all or a
portion of the purchase price specified in this Option shall be valued at its
fair market value on the date of payment and must have been held by you for at
least six months prior to the tender of the Share to the Company.
2
<PAGE>
4. TRANSFER RESTRICTIONS. Except as otherwise allowed by uniform rules
adopted by the Board or the Committee, this Option shall be exercisable during
your lifetime only by you and shall not be transferable by you, expressly or by
operation of law, other than by will and the laws of descent and distribution.
Any other attempted transfer or other disposition of this Option by you shall be
void and shall constitute valid grounds for cancellation of this Option by the
Company.
5. TERMINATION OF OPTION. THIS OPTION AND ALL YOUR RIGHTS HEREUNDER
SHALL, UNLESS SOONER TERMINATED IN ACCORDANCE WITH THE PROVISIONS HEREOF, CEASE
AND TERMINATE ON APRIL 23, 2009 (THE "EXPIRATION DATE"), AT 5:00 P.M. ARIZONA
TIME.
6. TERMINATION OF SERVICE ON THE BOARD. Upon the date your service on
the Company's Board is terminated for any reason, you, or in the event of your
death your beneficiary, will be entitled to receive the number of Options
determined by multiplying the sum of your Director fees actually earned and
waived up to the date of your termination by the Leverage Factor and dividing
the product by the Common Stock Price (and rounding up the resulting quotient);
provided, however, that only the total Director fees earned and waived by you up
to the date of termination will be considered. To the extent your Options are
fully vested and exercisable as of the date of your termination, they will
remain exercisable at any time prior to the Expiration Date. The portion of your
Option that is not fully vested and exercisable as of the date of your
termination, if any, shall continue to vest in accordance with the schedule set
forth above and will become exercisable at the time it becomes fully vested
prior to its Expiration Date. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO
RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU ELECTED TO
WAIVE UNDER THE DIRECTOR'S FEE WAIVER.
7. CHANGE OF CONTROL. Upon a "Change of Control" (as that term is
defined in the Plan), you will be entitled to receive the number of Options
determined by multiplying the sum of your Director fees actually earned and
waived up to the Change of Control by the Leverage Factor and dividing the
product by the Common Stock Price (and rounding up the resulting quotient);
provided, however, that only the total Director fees earned and waived by you up
to the Change of Control will be considered. In the event of a Change of
Control, all Options under this Agreement will become 100% vested and will be
exercisable until the Expiration Date. UNDER NO CIRCUMSTANCES WILL YOU BE
ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU
ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE WAIVER.
8. TERMINATION OF PURCHASE PROGRAM. If the Board decides to terminate
your ability to waive all or a portion of your Director fees in return for the
Option (the "Purchase Program"), you will be entitled to receive a number of
Options determined by multiplying the sum of your Director fees actually earned
and waived up to the date of the termination of the Purchase Program by the
Leverage Factor and dividing the product by the Common Stock Price (and rounding
up the resulting quotient); provided, however, that only the Director fees
earned and waived by you up to the date of the termination of the Purchase
Program will be considered. All Options received will be fully vested and
immediately exercisable. You will have up to thirty days from the date of such
termination to exercise the Options. After such thirty day period, the Options
will be canceled.
3
<PAGE>
UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY
PORTION OF THE DIRECTOR FEES YOU ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE
WAIVER.
9. MISSED MEETINGS. If you miss a meeting for which you have waived all
or a portion of the meeting fee, the portion of the Waiver Amount that would
have been satisfied had you attended that meeting (the "DEFICIT AMOUNT"), will
be made up by charging the special meeting fees and the regular meeting fees,
that you have not already waived, for those meetings that occur after the missed
meeting but before May 2, 2000. If, by May 1, 2000, the Deficit Amount is not
made up in full by charging subsequent meeting fees as set forth in the
preceding sentence, you must pay the Company any remaining Deficit Amount by
such date.
10. COMPLIANCE. The Committee hereby reserves and shall have the right
to terminate, renew, 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.
PLEASE ACKNOWLEDGE RECEIPT OF THIS AGREEMENT BY SIGNING AND INSERTING
YOUR SOCIAL SECURITY NUMBER ON BOTH LETTERS, THEN RETURNING BOTH LETTERS TO JEFF
MCKEEVER'S OFFICE AT MICROAGE, INC., 2400 SOUTH MICROAGE WAY, MAIL STATION #24,
TEMPE, AZ 85282-1896 FOR HIS EXECUTION. THE ORIGINALLY EXECUTED LETTER WILL BE
RETURNED TO YOU FOR YOUR FILES AND THE COPY WILL BE RETAINED BY THE COMPANY'S
LEGAL DEPARTMENT.
MICROAGE, INC.
By: /s/ Jeffrey D. McKeever
------------------------------
Jeffrey D. McKeever
Chairman of the Board and
Chief Executive Officer
I HEREBY ACKNOWLEDGE RECEIPT OF THE FOREGOING OPTION.
Signature: /s/ Steven G. Mihaylo
-----------------------------------
Social Security No.:
-------------------------
4
<PAGE>
EXHIBIT A
MICROAGE, INC.
DIRECTOR'S FEE WAIVER
STEVEN G. MIHAYLO
RETAINER FEES
I hereby elect to waive the following amount of the retainer fees $ 9,000
payable to me for the next four quarters:
THE ANNUAL RETAINER IS $18,000 AND IS PAID IN ARREARS IN
QUARTERLY INSTALLMENTS OF $4,500 EACH. YOU MAY ELECT TO
WAIVE ALL OR A PORTION OF EACH QUARTERLY INSTALLMENT FOR THE
THIRD AND FOURTH QUARTERS OF THE CURRENT FISCAL YEAR AND THE
FIRST AND SECOND QUARTERS OF THE FISCAL YEAR THAT WILL END
IN 2000. IF YOU WOULD LIKE TO WAIVE ANY PORTION OF THESE
FEES, WRITE THE AMOUNT OF THE TOTAL RETAINER FEES TO BE
WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE
WILL BE CHARGED EQUALLY AGAINST THE FOUR QUARTERLY
INSTALLMENTS.
BOARD MEETING FEES
I hereby elect to waive the following amount of my regular Board $ 4,500
meeting fees for the six regularly scheduled Board meetings
between May 1, 1999 and April 30, 2000:
THE MAXIMUM WAIVER IS $9,000. IF YOU WANT TO WAIVE ANY
PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON
THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE
CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE SIX
MEETINGS.
AUDIT COMMITTEE MEETING FEES
I hereby elect to waive the following amount of my regular Audit $ 1,000
Committee meeting fees for the two regularly scheduled meetings
between May 1, 1999 and April 30, 2000:
THE MAXIMUM WAIVER IS $2,000. IF YOU WANT TO WAIVE ANY
PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON
THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE
CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE TWO
MEETINGS.
GOVERNANCE COMMITTEE MEETING FEES
I hereby elect to waive the following amount of my regular $ 1,000
Governance Committee meeting fees for the two regularly scheduled
meetings between May 1, 1999 and April 30, 2000:
THE MAXIMUM WAIVER IS $2,000. IF YOU WANT TO WAIVE ANY
PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON
THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE
CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE TWO
MEETINGS.
<PAGE>
COMMITTEE CHAIR FEES
I hereby elect to waive the following amount of the Committee $ 1,500
Chair fees payable to me for the next four quarters:
THE ANNUAL COMMITTEE CHAIR FEE IS $3,000 AND IS PAID IN
ARREARS IN QUARTERLY INSTALLMENTS OF $750 EACH. YOU MAY
ELECT TO WAIVE ALL OR A PORTION OF EACH QUARTERLY
INSTALLMENT FOR THE THIRD AND FOURTH QUARTERS OF THE CURRENT
FISCAL YEAR AND THE FIRST AND SECOND QUARTERS OF THE FISCAL
YEAR THAT WILL END IN 2000. IF YOU WOULD LIKE TO WAIVE ANY
PORTION OF THESE FEES, WRITE THE AMOUNT OF THE TOTAL
COMMITTEE CHAIR FEES TO BE WAIVED ON THE BLANK LINE TO THE
RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST
THE FOUR QUARTERLY INSTALLMENTS.
WAIVER AMOUNT $17,000
By signing this Waiver, I acknowledge that I have been given, or was
offered, a copy of the Company's (i) Annual Report on Form 10-K for the fiscal
year ended November 1, 1998, and (ii) Quarterly Report on Form 10-Q for the
fiscal quarter ended January 31, 1999 (the "SEC Reports"), and that I was given
an opportunity to ask questions of any of the Company's executive officers
regarding the SEC Reports or any other matter regarding the Company.
By signing this Waiver, I recognize that purchasing options is a
speculative investment in that the success or failure of my investment depends
on the market value of the Company's stock over a several year period. I further
recognize that all or a portion of my investment (i.e., my Waiver Amount) may be
lost. I also acknowledge that I was given the opportunity to consult with my
personal advisor(s) regarding this Waiver.
I hereby elect to waive the Waiver Amount set forth above. By signing
this Waiver I agree to the terms and conditions set forth above and acknowledge
that I have read and understand the sample Stock Option Agreement that was given
to me.
SIGNATURE /s/ Steven G. Mihaylo
--------------------------------
DATE April 12, 1999
--------------------------------
SSN
--------------------------------
PLEASE FAX YOUR SIGNED FORM TO THOMAS R. HOECKER AT (602) 382-6070. YOUR FORM
MUST BE RECEIVED BY MR. HOECKER BY NOON (ARIZONA TIME) ON FRIDAY, APRIL 23,
1999.
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 2, May 3, May 2, May 3,
1999 1998 1999 1998
--------- -------- --------- --------
<S> <C> <C> <C> <C>
BASIC
Weighted average common shares 20,481 19,584 20,412 19,520
--------- -------- --------- --------
DILUTED
Weighted average shares from
basic calculation 20,481 19,584 20,412 19,520
Dilutive effect of stock options
and warrants -- -- -- --
--------- -------- --------- --------
Weighted average common and common
equivalent shares outstanding - diluted 20,481 19,584 20,412 19,520
--------- -------- --------- --------
NET INCOME (LOSS) $(147,341) $ (5,957) $(145,275) $(12,073)
Net income (loss) per common and
common equivalent share:
Basic $ (7.19) $ (0.30) $ (7.12) $ (0.62)
========= ======== ========= ========
Diluted $ (7.19) $ (0.30) $ (7.12) $ (0.62)
========= ======== ========= ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS (UNAUDITED) AS OF MAY 2, 1999 AND NOVEMBER 1, 1998
AND THE CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE QUARTERS ENDED
MAY 2, 1999 AND MAY 3, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-02-1998
<PERIOD-END> MAY-02-1999
<EXCHANGE-RATE> 1
<CASH> 57,328
<SECURITIES> 0
<RECEIVABLES> 315,493
<ALLOWANCES> 27,337
<INVENTORY> 449,245
<CURRENT-ASSETS> 818,290
<PP&E> 216,039
<DEPRECIATION> 120,369
<TOTAL-ASSETS> 948,573
<CURRENT-LIABILITIES> 763,475
<BONDS> 0
0
0
<COMMON> 205
<OTHER-SE> 150,906
<TOTAL-LIABILITY-AND-EQUITY> 948,573
<SALES> 1,656,541
<TOTAL-REVENUES> 1,656,541
<CGS> 1,569,903
<TOTAL-COSTS> 1,569,903
<OTHER-EXPENSES> 12,260
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 992
<INCOME-PRETAX> (165,806)
<INCOME-TAX> (18,465)
<INCOME-CONTINUING> (147,341)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (147,341)
<EPS-BASIC> (7.19)
<EPS-DILUTED> (7.19)
</TABLE>
