SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as Permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 240.14a-11(c) or Rule 240.14a-12
MICROAGE, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date filed:
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MICROAGE(R), INC.
2400 SOUTH MICROAGE WAY
TEMPE, ARIZONA 85282-1896
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 31, 1999
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
MicroAge, Inc., a Delaware corporation (the "Company"), will be held at the
MicroAge Executive Briefing Center, 1650 West Alameda, Tempe, Arizona 85282, on
Wednesday, March 31, 1999, at 4:00 p.m., Arizona time, for the following
purposes:
1. to elect three Class I Directors to serve until the 2002 Annual
Meeting of Stockholders or until their successors are elected and
qualified;
2. to approve an increase in authorized shares under the MicroAge, Inc.
1995 Associate Stock Purchase Plan; and
3. to transact such other business as may properly come before the
meeting.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on February 5,
1999 are entitled to notice of and to vote at the meeting. A complete list of
the stockholders entitled to vote at the meeting will be open for examination by
any stockholder, for any purposes germane to the meeting, at the offices of the
Company, at 2400 South MicroAge Way, Tempe, Arizona 85282-1896, during normal
business hours commencing March 19, 1999.
YOUR VOTE IS IMPORTANT!
By order of the Board of Directors,
Alan P. Hald
Secretary
Tempe, Arizona
February 18, 1999
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT............................................................. 1
ELECTION OF DIRECTORS..................................................... 2
NOMINEES ............................................................... 2
DIRECTORS CONTINUING IN OFFICE.......................................... 2
SECURITY OWNERSHIP OF MANAGEMENT
AT DECEMBER 31, 1998.................................................... 4
OTHER INFORMATION REGARDING THE BOARD OF DIRECTORS........................ 5
PRINCIPAL STOCKHOLDERS.................................................... 7
EXECUTIVE COMPENSATION.................................................... 9
SUMMARY COMPENSATION TABLE.............................................. 9
OPTION/SAR GRANTS IN LAST FISCAL YEAR................................... 11
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES................................. 12
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN PENSION BENEFITS................. 12
EMPLOYMENT CONTRACTS AND RELATED MATTERS................................ 13
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION............................................. 14
STOCK PERFORMANCE GRAPH................................................... 18
APPROVAL OF AN INCREASE IN AUTHORIZED SHARES UNDER THE
MICROAGE, INC. 1995 ASSOCIATE STOCK PURCHASE PLAN..................... 19
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................ 23
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE REQUIREMENTS...... 23
AUDITORS ................................................................. 23
STOCKHOLDER NOMINATIONS AND PROPOSALS..................................... 23
i
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MICROAGE, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 31, 1999
This Proxy Statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of MicroAge, Inc., a Delaware
corporation (the "Company"), for use at the Annual Meeting of Stockholders to be
held on Wednesday, March 31, 1999, at 4:00 p.m., Arizona time (the "1999 Annual
Meeting"), and at any adjournment or adjournments thereof. Only stockholders of
record at the close of business on February 5, 1999 (the "Record Date") will be
entitled to notice of and to vote at the meeting. On the Record Date, the
Company had outstanding 20,447,215 shares of Common Stock, par value $.01 per
share ("Common Stock"). There are no other voting securities outstanding.
Each stockholder is entitled to one vote per share for the election of
directors and on each proposal as well as on all other matters that may be
properly brought before the meeting. If the accompanying proxy is signed and
returned, the shares represented thereby will be voted in accordance with any
directions on the proxy. If a proxy does not specify how the shares represented
thereby are to be voted in connection with the election of the director
nominees, it is intended that it will be voted for the director nominees named
herein. A stockholder may revoke the proxy at any time prior to the voting
thereof by giving due notice of such revocation to the Company, by executing and
duly delivering a subsequent proxy, or by attending the 1999 Annual Meeting and
voting in person. This Proxy Statement and the enclosed proxy are first being
mailed to stockholders on or about February 18, 1999.
The presence in person or by proxy of holders of a majority of the
outstanding shares of Common Stock entitled to vote will constitute a quorum for
the transaction of business at the 1999 Annual Meeting. If a quorum is present,
a plurality of the votes cast at the 1999 Annual Meeting is required for the
election of directors. Each other matter being submitted to the stockholders for
approval requires the affirmative vote of a majority of the aggregate number of
shares present at the 1999 Annual Meeting and entitled to vote on that matter.
Abstentions are counted as "shares present" for purposes of determining the
presence of a quorum and have the effect of a vote "against" any matter as to
which they are specified. Broker non-votes with respect to any matter are not
considered "shares present" and will not affect the outcome of the vote on such
matter.
In addition to the use of the mails, proxies may be solicited by
directors, officers, or regular associates (employees) of the Company in person,
by telegraph, telecopy, telephone, or other electronic means, including e-mail.
The Company has retained American Stock Transfer and Trust Company to assist in
the distribution of proxy solicitation materials and the solicitation of proxies
for an anticipated fee of $6,000. The Company will pay all expenses of the
solicitation.
As of the date of this Proxy Statement, the Company knows of no matters
to be brought before the meeting other than those referred to in the
accompanying notice of annual meeting. If, however, any other
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matters properly come before the meeting, it is intended that proxies in the
accompanying form will be voted thereon in accordance with the judgment of the
persons voting such proxies.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation provides for the
division of the Board of Directors into three classes: Class I, Class II, and
Class III. Each director is elected for three years and the terms are staggered
so that only one class is elected by the stockholders annually. At the 1999
Annual Meeting, three Class I directors will be elected to serve until the 2002
Annual Meeting of Stockholders or until their successors are duly elected and
qualified.
It is the intention of those persons named in the accompanying form of
proxy or their substitutes to vote for the election of the nominees listed below
unless instructed to the contrary. However, if any nominee named herein at the
time of the election becomes unavailable to serve (which is not anticipated)
and, as a consequence, other nominees are designated, the persons named in the
proxy or their substitutes will have the discretion or authority to vote or
refrain from voting in accordance with their judgment with respect to the other
nominees.
NOMINEES
DIRECTORS CONTINUING IN OFFICE
NOMINEES FOR ELECTION AS CLASS I DIRECTORS
(TERM TO EXPIRE AT 2002 ANNUAL MEETING)
WILLIAM H. MALLENDER, 63, was elected a director of the Company in
1987. Mr. Mallender is Chairman of the Board of the IAP Aerospace Group, Inc. of
Hartford, Connecticut, and IAP Aircraft, Ltd. of London, England, and Vice
Chairman of Alpha Engineering Associates, Inc. of Long Beach, California. From
1983 until June 1997, Mr. Mallender served as Chairman of the Board and Chief
Executive Officer of Talley Industries, Inc.
LYNDA M. APPLEGATE, 49, was elected a director of the Company effective
January 18, 1996. Since 1986, Ms. Applegate has served as a Professor at the
Harvard Business School.
DIANNE C. WALKER, 42, was elected a director of the Company effective
April 3, 1998. She is an independent consultant on electric utility mergers and
acquisitions and asset purchase transactions. Ms. Walker served as an electric
energy consultant for Bear Stearns and Kidder Peabody from January 1990 to
December 1994. Ms. Walker is also a director of Arizona Public Service Company,
Comdial Corporation, and Microtest, Inc.
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CLASS II DIRECTORS
(TERM TO EXPIRE AT 2000 ANNUAL MEETING)
JEFFREY D. MCKEEVER, 56, has served as Chief Executive Officer of the
Company since February 1987 and as Chairman of the Board since October 1991. He
co-founded the Company in August 1976 and has served as a director of the
Company since October 1976. He also served as President from June 1995 to
January 1996, January 1993 to February 1993, and February 1987 to October 1991,
Chairman of the Board and Secretary from October 1976 to February 1987, and as
Treasurer from October 1976 to February 1983 and from February 1987 to December
1988. Pursuant to his employment agreement, the Company has agreed to have the
Board of Directors nominate Mr. McKeever for election to the Board of Directors
of the Company as long as he owns at least 80,000 shares of Common Stock. See
"Employment Contracts and Related Matters" for additional information regarding
Mr. McKeever's employment agreement.
STEVEN G. MIHAYLO, 55, was elected a director of the Company in 1988.
Since 1969, Mr. Mihaylo has served as Chief Executive Officer and since 1983 as
Chairman of the Board of Inter-Tel, Incorporated, a publicly-held company that
designs, manufactures, and services digital and analog telephone systems and
voice processing systems, and provides long distance services.
CLASS III DIRECTORS
(TERM TO EXPIRE AT 2001 ANNUAL MEETING)
ROY A. HERBERGER, JR., 56, was elected a director of the Company
effective January 18, 1996. Since 1989, Mr. Herberger has served as President of
Thunderbird, the American Graduate School of International Management. Mr.
Herberger is also a director of Pinnacle West Capital Corporation, Bank of
America of Arizona, and Express America Holdings Corporation.
CYRUS F. FREIDHEIM, JR., 63, was elected a director of the Company
effective January 29, 1998. Since 1990, Mr. Freidheim has served as Vice
Chairman of Booz Allen & Hamilton, Inc., an international management and
technology consulting firm. Mr. Freidheim is also a director of Household
International, Inc. and Security Capital Group.
3
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SECURITY OWNERSHIP OF MANAGEMENT
AT DECEMBER 31, 1998
NUMBER OF SHARES PERCENTAGE OF
OF COMMON STOCK COMMON STOCK
BENEFICIALLY BENEFICIALLY
NAME OWNED (1) OWNED
---------------- -------------
Lynda M. Applegate
Director ..................................... 3,334 (2)
James R. Daniel
Executive Vice President - Services,
Chief Financial Officer and Treasurer ........ 126,960 (2)
Cyrus F. Freidheim, Jr .........................
Director ..................................... 4,500 (2)
Alan P. Hald
Secretary .................................... 445,409 2.2%
Roy A. Herberger, Jr ...........................
Director ..................................... 3,834 (2)
Christopher J. Koziol
Executive Vice President -- Sales ............ 103,022 (2)
William H. Mallender
Director ..................................... 12,834(3) (2)
Jeffrey D. McKeever
Chairman of the Board and Chief
Executive Officer ............................ 645,370(3) 3.1%
Steven G. Mihaylo
Director ..................................... 11,334 (2)
Robert G. O'Malley
Chief Executive Officer, Pinacor, Inc. ....... 44,924 (2)
Dianne C. Walker
Director ..................................... 2,000 (2)
All executive officers and directors ........... 1,493,082 7.1%
as a group (17 persons)
- ----------
(1) Includes shares, if any, held by spouse; held in joint tenancy with spouse;
held by or for the benefit of the listed individual (or group member) or
one or more members of his immediate family; with respect to which the
listed individual (or group member) has or shares voting or investment
powers (including shares allocated to the listed individual's (or group
member's) account under the MicroAge, Inc. Retirement Savings Plan);
subject to stock options that were exercisable on December 31, 1998 or
within 60 days thereafter, or in which the listed individual (or group
4
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member) otherwise has a beneficial interest. At December 31, 1998, all
directors and executive officers as a group owned beneficially an aggregate
of 1,493,082 shares (7.1%), of which 682,020 shares, including 270,075
shares for Mr. McKeever, 334 shares for Ms. Applegate, 334 shares for Mr.
Herberger, 1,334 shares for Mr. Mallender, 1,334 shares for Mr. Mihaylo,
40,000 shares for Mr. O'Malley, 81,330 shares for Mr. Daniel, 131,760
shares for Mr. Hald, and 83,649 shares for Mr. Koziol, are subject to stock
options granted by the Company that were exercisable on December 31, 1998
or within 60 days thereafter. The Pinacor Option grant to Mr. McKeever is
described in footnote 4 to the Summary Compensation Table on page 9.
(2) Common Stock beneficially owned does not exceed one percent of the
outstanding Common Stock at December 31, 1998.
(3) Mr. McKeever disclaims beneficial ownership in 6,450 of these shares held
by family members. Mr. Mallender disclaims beneficial ownership in 1,000 of
these shares held by his wife.
OTHER INFORMATION REGARDING THE BOARD OF DIRECTORS
BOARD OF DIRECTORS' MEETINGS, AUDIT, COMPENSATION, AND CORPORATE
GOVERNANCE COMMITTEES. The Company's Board of Directors met in person or acted
by written consent six times during the fiscal year ended November 1, 1998
("fiscal year 1998"). The Board of Directors maintains a standing Audit
Committee, Compensation Committee, and Corporate Governance Committee. Directors
who are not officers or associates (employees) of the Company receive an $18,000
annual retainer fee and $1,500 for attendance at regular Board meetings, $1,000
for attendance at special Board meetings, and $1,000 for attendance at meetings
of committees of which they are members. Each Committee Chairperson receives an
additional annual retainer fee of $3,000. Directors are reimbursed for
reasonable travel expenses incurred to attend Board or Committee meetings.
The Audit Committee is responsible for recommending the appointment of
the Company's independent accountants to the full Board and for reviewing and
evaluating the Company's accounting principles, its system of internal
accounting controls, and its Code of Conduct. The Audit Committee met two times
during fiscal year 1998, and consisted of Messrs. Mihaylo (Chairman) and
Freidheim and Ms. Applegate and Ms. Walker.
The Compensation Committee acts on matters relating to the compensation
of directors, senior management, and key associates (employees) of the Company,
including the granting of stock options and the approval of employment
agreements. The Compensation Committee met in person or acted by written consent
ten times during fiscal year 1998, and consisted of Messrs. Mallender
(Chairman), Herberger and Freidheim and Ms. Applegate.
The Corporate Governance Committee is responsible for making
recommendations to the full Board of Directors with respect to director
nominees, officer appointments, and Board Committee members, and is responsible
for reviewing labor relations matters. The Corporate Governance Committee met
four times during fiscal year 1998, and consisted of Messrs. Herberger
(Chairman), Mihaylo, and Mallender.
1995 DIRECTOR INCENTIVE PLAN. Under the Company's 1995 Director
Incentive Plan, as amended (the "Director Plan"), on November 1 of each year,
beginning in 1998 and ending in 2004, each person serving as a director of the
Company who is not also an associate (employee) of the Company is automatically
granted (i) 1,000 shares of Common Stock, subject to certain restrictions as
described below
5
<PAGE>
("Director Restricted Stock"), and (ii) options to purchase 2,500 shares of
Common Stock ("Director Options"). The Director Plan also provides that on the
date of the first Board meeting at which a non-employee director first serves on
the Company's Board of Directors that person will automatically be granted 1,000
shares of Director Restricted Stock and 2,500 Director Options. Non-vested
Director Restricted Stock continues to vest for up to three years and Director
Options continue to vest following the cessation of an individual's service as a
director. The Company's Board of Directors or a committee of the Board may grant
Director Options and Director Restricted Stock at its discretion. Messrs.
Mihaylo, Mallender, Herberger, Freidheim, and Ms. Applegate and Ms. Walker were
each granted 1,000 shares of Director Restricted Stock and 2,500 Director
Options effective November 1, 1998. In addition, Mr. Freidheim was granted 1,000
shares of Director Restricted Stock and 2,500 Director Options on April 2, 1998,
which was his "Service Commencement Date" under the Director Plan, and Ms.
Walker was granted 1,000 shares of Director Restricted Stock and 2,500 Director
Options on May 28, 1998, which was her "Service Commencement Date" under the
Director Plan.
The restrictions on the Director Restricted Stock will lapse on the
later of (i) the date the director owns (for one year) shares of Common Stock,
but the restrictions will lapse on one share of Director Restricted Stock for
each two shares of unrestricted stock the director owns; and (ii) the date the
shares of Director Restricted Stock "vest." The Director Restricted Stock has
two vesting hurdles. First, the Director Restricted Stock vests in one-third
increments over the three years following the date of grant. Second, the
Director Restricted Stock vests in one-third increments following the date of
grant only if the Common Stock trades above certain specified prices after the
first vesting hurdle occurs. In the case of Director Restricted Stock granted on
April 2, 1998, the Common Stock must trade at or above (i) $15.81 on or after
April 2, 1999; (ii) $17.39 on or after April 2, 2000; and (iii) $19.13 on or
after April 2, 2001. In the case of Director Restricted Stock granted on May 28,
1998, the Common Stock must trade at or above (i) $14.30 on or after May 28,
1999; (ii) $15.73 on or after May 28, 2000; and (iii) $17.30 on or after May 28,
2001. In the case of the Director Restricted Stock granted on November 1, 1998,
the Common Stock must trade at or above (i) $15.68 on or after November 1, 1999;
(ii) $17.24 on or after November 1, 2000; and (iii) $18.96 on or after November
1, 2001.
The exercise price of the Director Options is the fair market value of
the Common Stock on the relevant grant date (i.e., each November 1, or April 2
in the case of Mr. Friedheim's grant of Director Options, or May 28 in the case
of Ms. Walker's grant of Director Options). In the case of the Director Options
granted on April 2, 1998, the exercise price is $14.375 per share. In the case
of the Director Options granted on May 28, 1998, the exercise price is $13.00
per share. In the case of the Director Options granted on November 1, 1998, the
exercise price is $14.25 per share. Each Director Option has two vesting
hurdles. First, the Director Options vest in one-third increments over the
three-year period following the date of grant. Second, the Director Options vest
in one-third increments over the three years following the date of grant only if
the Common Stock trades at or above certain specified prices after the first
vesting hurdle occurs. In the case of the Director Options granted on April 2,
1998, the Common Stock must trade at or above (i) $15.81 on or after April 2,
1999; (ii) $17.39 on or after April 2, 2000; and (iii) $19.13 on or after April
2, 2001. In the case of the Director Options granted on May 28, 1998, the Common
Stock must trade at or above (i) $14.30 on or after May 28, 1999; (ii) $15.73 on
or after May 28, 2000; and (iii) $17.30 on or after May 28, 2001. In the case of
the Director Options granted on November 1, 1998, the Common Stock must trade at
or above (i) $15.68 on or after November 1, 1999; (ii) $17.24 on or after
November 1, 2000; and (iii) $18.96 on or after November 1, 2001.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock by each person who is known to the Company
to own beneficially more than 5% of the outstanding Common Stock:
NUMBER OF SHARES OF PERCENTAGE OF
COMMON STOCK COMMON STOCK
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED (1) OWNED(2)
- ------------------------------------ ------------------- -------------
Sanford C. Bernstein & Co., Inc.(3) 1,161,995 5.7%
One State Street Plaza,
New York, N.Y. 10004
Brookhaven Capital Management Co., 1,124,000 5.5%
Ltd.(4)
3000 Sandhill Road, Building 3, Ste. 105
Menlo Park, California 94025
Vincent A. Carrino (5) 1,203,500 5.9%
Thomson Horstmann & Bryant, Inc.(6) 1,197,500 5.9%
Park 80 West, Plaza Two
Saddle Brook, NJ 07663
- ----------
(1) The beneficial ownership information regarding: (i) Sanford C. Bernstein &
Co., Inc. is as of February 5, 1999; (ii) Brookhaven Capital Management
Co., Ltd. is as of July 31, 1998; (iii) Vincent A. Carrino is as of July
31, 1998; and (iv) Thomson Horstmann & Bryant, Inc. is as of January 25,
1999. For certain additional information with respect to beneficial
ownership of the Common Stock, see "Security Ownership of Management at
December 31, 1998," "Executive Compensation," and "Certain Relationships
and Related Transactions."
(2) The percentage of Common Stock beneficially owned is based on the number of
shares of Common Stock outstanding on December 31, 1998.
(3) Sanford C. Bernstein & Co., Inc. is a registered investment advisor.
Sanford C. Bernstein & Co., Inc. has sole dispositive power with respect to
1,161,995 shares, sole voting power with respect to 946,900 shares, and
shared voting power with respect to 24,095 shares. The information
contained in this section was obtained from a Schedule 13G/A dated February
5, 1999 filed by Sanford C. Bernstein & Co., Inc. with the Securities and
Exchange Commission. The Company makes no representation as to the accuracy
or completeness of the information reported.
(4) Brookhaven Capital Management Co., Ltd. is a registered investment advisor.
Brookhaven Capital Management Co., Ltd. has shared voting power and shared
dispositive power with respect to 1,124,000 shares. The information
contained in this section was obtained from a Schedule 13G dated July 31,
1998, filed jointly by Brookhaven Capital Management Co., Ltd. and Vincent
A. Carrino with the Securities and Exchange Commission. The Company makes
no representation as to the accuracy or completeness of the information
reported.
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(5) Vincent A. Carrino has shared voting power and shared dispositive power
with respect to 1,203,500 shares. The information contained in this section
was obtained from a Schedule 13G dated July 31, 1998, filed jointly by
Vincent A. Carrino and Brookhaven Capital Management Co., Ltd. with the
Securities and Exchange Commission. The Company makes no representation as
to the accuracy or completeness of the information reported.
(6) Thomson Horstmann & Bryant, Inc. is an investment advisor registered under
Section 203 of the Investment Advisors Act of 1940. Thomson Horstmann &
Bryant, Inc. has sole dispositive power with respect to 1,197,500 shares,
sole voting power with respect to 751,900 shares, and shared voting power
with respect to 19,800 shares. The information contained in this section
was obtained from a Schedule 13G dated January 25, 1999, filed by Thomson
Horstmann & Bryant, Inc. with the Securities and Exchange Commission. The
Company makes no representation as to the accuracy or completeness of the
information reported.
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EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
awarded to or paid by the Company and its subsidiaries to the chief executive
officer and the four most highly compensated executive officers of the Company
for services rendered during the fiscal years ended November 1, 1998, November
2, 1997, and November 3, 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------- ------------------------- -------
OTHER RESTRICTED SECURITIES LTIP ALL OTHER
SALARY BONUS ANNUAL STOCK UNDERLYING PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(1) COMPENSATION($) AWARD(S) OPTIONS/SARS($) ($)(2) ($)(3)
- --------------------------- ---- -------- -------- --------------- -------- --------------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James R. Daniel 1998 $340,008 $ 18,010 0 0 100,000 0 $33,572
Executive Vice President- 1997 $322,833 $196,399 0 0 10,000 0 $23,667
Services, Chief Financial 1996 $285,582 $ 77,527 0 0 114,698 0 $18,511
Officer, and Treasurer
Alan P. Hald 1998 $325,008 $ 13,831 0 0 0 0 $67,336
Secretary 1997 $318,500 $105,880 0 0 5,000 0 $73,454
1996 $282,173 $ 46,654 0 0 135,638 0 $73,190
Christopher J. Koziol 1998 $262,506 $120,000 0 0 125,000 0 $25,188
Executive Vice President - 1997 $208,833 $159,200 0 0 10,000 0 $20,747
Sales 1996 $161,539 $ 77,190 0 0 71,192 0 $15,065
Jeffrey D. McKeever 1998 $650,000 $ 36,403 0 0 369,000(4) 0 $96,123
Chairman of the Board 1997 $587,500 $371,321 0 0 0 0 $93,310
and Chief Executive 1996 $460,962 $ 87,121 0 0 306,611 0 $98,670
Officer
Robert G. O'Malley 1998 $330,000 $111,652 0 0 10,000 0 $27,278
Chief Executive Officer, 1997 $300,000 $129,021 0 0 155,035 0 $24,127
Pinacor, Inc. 1996 $245,128 $ 69,883 0 0 65,000 0 $16,631
</TABLE>
- ----------
(1) See footnote 2 below for a discussion of (a) the MicroAge, Inc. 1994
Management Equity Program (the "1994 MEP"), under which each of the named
individuals (other than Mr. O'Malley) received option grants by agreeing to
reduce his compensation and (b) the MicroAge, Inc. 1997 Management Equity
Program (the "1997 MEP"), under which Mr. O'Malley received options by
agreeing to reduce his compensation.
(2) The 1996 totals include options granted to each named individual under the
1994 MEP (other than Mr. O'Malley, who did not participate in the 1994 MEP
because he was not employed by the Company at the time the 1994 MEP was
adopted) as a result of his election to restructure his compensation
package by reducing his calendar year 1993, 1994, 1995, 1996, and 1997
compensation. The total number of 1994 MEP options granted to each of the
named individuals (other than Mr. O'Malley) under the 1994 MEP and the
compensation amounts waived by each of the named individuals (other than
Mr. O'Malley) under the 1994 MEP are as follows: Mr. McKeever (241,611;
$600,000); Mr. Hald (125,638; $312,000); Mr. Daniel (104,698; $260,000);
and Mr. Koziol (43,692; $108,000). In accordance with Securities and
Exchange Commission rules, the 1994 MEP options originally granted during
fiscal year 1994 are reported under fiscal year 1996 as a result of the MEP
option repricing that occurred in fiscal year 1996. Mr. O'Malley's 1997
total includes options
9
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granted to him under the 1997 MEP as a result of his election to
restructure his compensation package by reducing his fiscal year 1997,
1998, and 1999 compensation. The total number of 1997 MEP options granted
to Mr. O'Malley under the 1997 MEP and the compensation amounts waived by
him under the 1997 MEP are as follows: 135,035; $340,000.
During the 1996 and 1997 fiscal years, the 1994 MEP compensation reductions
for each of the named individuals (other than Mr. O'Malley) were as
follows: Mr. McKeever (1996: $78,125 salary reduction and $250,000 bonus
reduction; 1997: $12,500 salary reduction); Mr. Hald (1996: $40,625 salary
reduction and $45,000 bonus reduction; 1997: $6,500 salary reduction); Mr.
Daniel (1996: $13,542 salary reduction and $65,000 bonus reduction; 1997:
$2,167 salary reduction); and, Mr. Koziol (1996: $7,292 salary reduction
and $15,000 bonus reduction; 1997: $1,167 salary reduction). During the
1997 and 1998 fiscal years, the 1997 MEP compensation reduction for Mr.
O'Malley was as follows: (1997: $40,000 salary reduction and $70,000 bonus
reduction; 1998: $40,000 salary reduction and $70,000 bonus reduction). No
SARs were granted during fiscal years 1996 - 1998.
(3) The 1998 amounts include, as to each named individual, the following
amounts for the indicated purposes: Mr. McKeever (life insurance premiums:
$79,413; the Company's contribution to the MicroAge, Inc. Retirement
Savings Plan (the "401(k) Plan"): $2,150; the Company's contribution to the
MicroAge, Inc. Executive Supplemental Savings Plan (the "ESSP"): $14,100;
and the above market interest credited to Executive's account under the
ESSP (the "Interest"): $460); Mr. Hald (life insurance premiums: $62,136;
401(k) Plan contribution: $2,150; and ESSP contribution: $3,050); Mr.
O'Malley (life insurance premiums: $14,878; 401(k) Plan contribution:
$2,150; ESSP contribution: $9,489; and Interest: $761); Mr. Daniel (life
insurance premiums: $14,763; 401(k) Plan contribution: $2,150; ESSP
contribution: $13,410; and Interest: $3,249); and Mr. Koziol (life
insurance premiums: $12,320; 401(k) Plan contribution: $2,150; ESSP
contribution: $10,545; and Interest: $173).
(4) In addition to the options to purchase Company Common Stock granted to Mr.
McKeever during fiscal year 1998, Mr. McKeever was also granted an option
to purchase sixty (60) shares of common stock of Pinacor, Inc., a
wholly-owned subsidiary of the Company ("Pinacor"), representing six
percent (6%) of Pinacor's outstanding common stock as of May 2, 1998, at an
exercise price of $150,000 per share (the "Pinacor Option"). The Pinacor
Option vests in one-third increments over the three-year period following
the date of grant in accordance with the following schedule: 20 shares on
May 2, 1999; 20 shares on May 2, 2000; and 20 shares on May 2, 2001;
provided, however, that vesting of the Pinacor Option may be accelerated in
certain circumstances such as a change of control of the Company or the
disposition of Pinacor.
10
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning grants of stock
options to the named executive officers of the Company during the fiscal year
ended November 1, 1998:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------
PERCENT OF
NUMBER OF TOTAL POTENTIAL REALIZABLE
SECURITIES OPTIONS/ VALUE AT ASSUMED
UNDERLYING SARS EXERCISE ANNUAL RATE OF STOCK
OPTIONS/ GRANTED TO PRICE APPRECIATION FOR
SARS ASSOCIATES IN (PER EXPIRATION OPTION TERM
NAME GRANTED FISCAL YEAR SHARE) DATE 5% 10%
---- ------- ----------- ------ ---- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
James R. Daniel 40,000 3.98% $14.38 4/02/08 $ 361,740 $ 916,721
60,000 5.97% $13.25 9/24/08 $ $1,267,025
499,971
Christopher J. Koziol 50,000 4.97% $14.38 4/02/08 $ 452,175 $1,145,901
75,000 7.46% $14.38 7/27/08 $ 678,263 $1,718,851
Jeffrey D. McKeever(1) 169,000 16.81% $13.25 4/10/08 $1,408,252 $3,568,788
200,000 19.89% $14.38 4/02/08 $1,808,701 $4,583,603
Robert G. O'Malley 10,000 .99% $14.38 4/02/08 $ 90,435 $ 229,180
Total 1,005,375
</TABLE>
- ----------
(1) In addition to the options to purchase Company Common Stock granted to Mr.
McKeever during fiscal year 1998, Mr. McKeever was granted the Pinacor
Option. See footnote 4 to the Summary Compensation Table. Mr. McKeever was
the only Company associate to receive a grant of Pinacor options during
fiscal year 1998. Although there is no publicly-traded market for Pinacor
common stock, for purposes of calculating the "potential realizable value"
of the Pinacor Option, Securities and Exchange Commission rules require the
Company to assume a per share value for Pinacor common stock. The
assumption used was $200,000 per share on the date of grant. Using this
required valuation as well as the required assumption that the value of
Pinacor common stock will increase by five percent and ten percent over the
ten year term of the Pinacor Option, the potential realizable value of the
Pinacor Option would be $10.5 million and $22.1 million, respectively.
11
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth information concerning option exercises
by the named executive officers of the Company during the fiscal year ended
November 1, 1998 and the value of such officers' unexercised options at November
1, 1998. There were no outstanding SARs as of November 1, 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS/SARS AT IN-THE-MONEY OPTIONS/
ON VALUE FISCAL YEAR-END SARS AT FISCAL YEAR-END
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James R. Daniel 9,000 $ 71,595 42,429 180,309 $202,320 $ 457,700
Alan P. Hald 7,500 $115,200 101,879 93,759 $529,285 $ 493,675
Christopher J. Koziol 3,750 $ 57,600 71,584 175,608 $309,722 $ 187,784
Jeffrey D. McKeever 30,000 $208,200 186,537 569,074 $782,354 $1,104,407
Robert G. O'Malley 0 $ 0 33,000 206,035 $135,220 $ 218,220
</TABLE>
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN PENSION BENEFITS
PENSION TABLE YEARS
OF BENEFIT ACCRUAL
SERVICE
--------------------------------
5 10 15
FINAL AVERAGE PAY -------- --------- ---------
$250,000.................................. $ 57,609 $ 115,218 $ 172,844
$300,000.................................. $ 70,108 $ 140,215 $ 210,344
$350,000.................................. $ 82,606 $ 165,213 $ 247,844
$400,000.................................. $ 95,105 $ 190,210 $ 285,344
$450,000.................................. $107,604 $ 215,208 $ 322,844
$500,000.................................. $120,103 $ 240,205 $ 360,344
$550,000.................................. $132,602 $ 265,202 $ 397,844
$600,000.................................. $145,101 $ 290,199 $ 435,344
$650,000.................................. $157,600 $ 315,196 $ 472,844
$700,000.................................. $170,099 $ 340,193 $ 510,344
The Company maintains a non-qualified deferred compensation plan for
certain executives who are selected for participation by the Board and who have
attained age 50 and completed 10 years of service with the Company. This plan,
which is known as the "Supplemental Executive Retirement Plan" or "SERP,"
provides a benefit to a participant upon retirement or termination of
employment. The annual
12
<PAGE>
benefit, payable in the form of a life annuity, equals 75% of the average of the
participant's compensation for the highest five calendar years out of the
fifteen calendar years preceding retirement or termination, reduced by the
participant's "Other Benefits." The "Other Benefits" are the participant's
annual Social Security benefit (based on the participant's compensation at the
time of termination of employment) and an annuity that is actuarially equivalent
to the sum of the participant's employer contribution accounts in the 401(k)
Plan and the MicroAge, Inc. Executive Supplemental Savings Plan ("ESSP"). The
annual benefit payable under the SERP is reduced proportionately if the
participant terminates employment with less than 15 years of "Benefit Accrual
Service" (service after age 50). Compensation, for purposes of calculating the
annual benefit is generally defined as amounts considered to be "wages" under
Internal Revenue Code (the "Code") Section 3401(a), salaries or bonuses deferred
under any Company deferred compensation plan, and any participant contribution
to the 401(k) plan, but excluding a certain Warrant Restitution and Founder's
Bonus paid to Messrs. McKeever and Hald and any income attributable to Mr.
McKeever's exercise of the Pinacor Option described in footnote 4 to the Summary
Compensation Table on page 9.
Once calculated, the annual benefits are paid in the form of an
actuarially equivalent lump sum. No benefits will be paid under the SERP if a
participant dies prior to his retirement or other termination from employment.
The table above shows estimated annual benefit payments on a
life-annuity basis. The estimated annual benefit payments included in the table
reflect an offset for the estimated Social Security benefit payments, but the
table does not reflect an offset for the value of the participant's 401(k) or
ESSP employer account balances.
Messrs. McKeever and Hald are currently the only participants in the
SERP. Mr. McKeever has six years, and Mr. Hald has two years, of Benefit Accrual
Service and both are expected to have 15 years of Benefit Accrual Service at
normal retirement at age 65. Separate trusts are being established and funded
that will serve as the funding vehicles for the benefits due to Mr. McKeever and
Mr. Hald. The trust assets are available to pay the claims of Company creditors
in certain instances. Initially, the only assets of the trusts will be the
Company's interests under various life insurance policies on the lives of Mr.
McKeever and Mr. Hald. The imputed income for the death coverage under some of
these policies is included in the insurance premiums paid on behalf of Messrs.
McKeever and Hald and referenced in footnote 3 to the Summary Compensation
Table.
EMPLOYMENT CONTRACTS AND RELATED MATTERS
Messrs. McKeever, Hald, Daniel, and Koziol are each employed pursuant to
an employment agreement with the Company for a period of three years for each of
Messrs. McKeever and Hald, two years for Mr. Daniel, and one year for Mr.
Koziol. Each agreement is terminable by either party at any time and provides
for an automatic renewal of the agreement unless otherwise terminated so that
the remaining term of the agreement is always the length of each of the named
officer's original terms described immediately above. Each agreement includes
restrictions and noncompetition covenants during the term of the agreement and
for a period of 24 months after termination of employment for Messrs. McKeever,
Hald, and Daniel, and 12 months for Mr. Koziol. Upon the Company's termination
of the executive's employment without cause following a change of control or,
under certain circumstances, upon
13
<PAGE>
the executive's termination of employment following a change of control, the
Company must pay a lump sum severance pay benefit equal to, for each of Messrs.
McKeever and Hald: three times (i) his base salary and (ii) his incentive bonus
for the prior fiscal year; for Mr. Daniel: two times (i) his base salary and
(ii) his incentive bonus for the prior fiscal year; and for Mr. Koziol:
one-and-one half times (i) his base salary for the prior fiscal year and (ii)
the average of his incentive bonuses for the two prior fiscal years. Upon the
Company's termination of the executive's employment without cause prior to a
change of control or, under certain circumstances, upon the executive's
termination of employment prior to a change of control, the Company must pay a
severance pay benefit equal to, for each of Messrs. McKeever and Hald: three
times (i) his base salary and (ii) the average of his incentive bonus for the
three prior fiscal years; for Mr. Daniel: two times (i) his base salary and (ii)
the average of his incentive bonus for the two prior fiscal years; and for Mr.
Koziol: (i) his base salary and (ii) the average of his incentive bonus for the
two prior fiscal years.
In addition, the Company may elect, during the term of the
noncompetition covenant, to pay supplementary severance pay to Messrs. McKeever
and Hald in an amount equal to their respective monthly pay. Also, upon
termination of Messrs. McKeever and Hald's employment for specified
circumstances, including a material change in the employment relationship, a
change in control of the Company, or termination by the Company without cause,
the terminated executive has certain additional rights including the following:
(i) the right to sell to the Company all Common Stock beneficially owned by the
executive as of the executive's termination date, at the fair market value of
the Common Stock on the termination date, subject to certain limitations; and
(ii) should the executive hold any stock options which have not vested, receive,
as additional severance pay, a lump sum payment in an amount equal to the
excess, if any, of the fair market value of the shares subject to outstanding
stock options over the exercise price specified in all non-vested stock options,
subject to certain limitations.
Mr. O'Malley entered into an employment agreement effective as of
January 4, 1999 with Pinacor. The agreement is for two years and is terminable
by either party at any time and provides for automatic renewal of the agreement
unless otherwise terminated so that the remaining term of the agreement is
always two years. The agreement includes restrictions and noncompetition
covenants during the term of the agreement and for a period of 24 months after
termination of Mr. O'Malley's employment. Upon Pinacor's termination of Mr.
O'Malley's employment without cause following a change of control or, under
certain circumstances, upon Mr. O'Malley's termination of employment following a
change of control, Pinacor must pay a lump sum severance pay benefit equal to
two times his (i) base salary and (ii) his incentive bonus for the prior fiscal
year. Upon Pinacor's termination of Mr. O'Malley's employment without cause
prior to a change of control or, under certain circumstances, upon his
termination of employment prior to a change of control, Pinacor must pay a
severance pay benefit equal to two times (i) his base salary and (ii) the
average of his incentive bonus for the two prior fiscal years.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Company's Executive Compensation program is administered by the
Compensation Committee of the Board of Directors. The members of the
Compensation Committee are not employees of the Company. The Compensation
Committee determines the compensation of the Company's executive
14
<PAGE>
officers, approves any employment agreements with executive officers, and
administers the Company's stock option plans and certain of the Company's other
benefit plans.
EXECUTIVE COMPENSATION POLICIES
OVERVIEW. Incentive compensation arrangements are the cornerstone of the
Compensation Committee's executive compensation policies. These incentive
compensation arrangements reward those executive officers who achieve individual
and Company objectives that increase stockholder value.
The Company's executive compensation package consists of three
components: base salary and related benefits; annual cash bonus incentives; and
stock-based compensation incentives. The Compensation Committee reviews each of
these components and develops an incentive compensation package for each of the
Company's executive officers based, in part, upon the review of competitive
compensation information and the recommendations of compensation consultants and
senior management. The Compensation Committee strives to develop individual
compensation packages for the Company's executive officers that will encourage
superior individual and Company-wide performance, serve to retain those
executive officers that perform well, and lead to increased stockholder value.
Each component of the Company's executive compensation package is discussed in
detail below.
BASE SALARY AND BENEFITS. The first component of the Company's executive
compensation package is base salary and related benefits. Each executive officer
receives a base salary and benefits based on competitive compensation
information and his or her responsibilities and performance. The Compensation
Committee, with the assistance of an independent compensation consultant,
compared the Company's compensation levels with leading published surveys of
executive compensation levels in the high technology industry and in
organizations comparable in terms of industry and scope, as well as with recent
proxy data for eleven publicly-traded companies also involved in the
manufacturing, integration, and distribution of computer information technology
products and services. The Compensation Committee attempts to set the base
salary and benefits component of the executive officer's compensation packages
within the competitive range of salary and benefits levels of the executive
officers of the eleven comparative companies. The Compensation Committee reviews
each executive officer's base salary and benefits on at least an annual basis.
ANNUAL INCENTIVE BONUS. The second component of the Company's executive
compensation package is an annual incentive bonus. Consistent with prior years,
during fiscal year 1998, the Compensation Committee established bonus
compensation formulas for the Company's executive officers that gave each
executive officer the ability to earn a cash bonus calculated as a percentage of
his base salary. This is consistent with the Compensation Committee's overriding
policy of incentive compensation arrangements.
The Compensation Committee's fiscal year 1998 bonus plan (the "1998
Bonus Plan") established a formula by which executive officer bonus awards were
tied directly to the Company's success in achieving targeted earnings goals.
With the exception of Mr. O'Malley and Mr. Koziol, none of the Company's
executive officers received bonuses determined under the 1998 Bonus Plan because
the Company failed to meet the required earnings goals. In light of Mr.
O'Malley's and Mr. Koziol's contributions to Pinacor's fiscal year 1998
financial results, as well as Mr. Koziol's contributions to the Company's
newly-separated integration business, the Compensation Committee awarded Mr.
O'Malley and Mr. Koziol cash incentive bonuses of $107,600 and $120,000,
respectively. In addition, Messrs.
15
<PAGE>
Daniel, Hald, McKeever, and O'Malley each received fixed bonuses of $18,010,
$13,831, $36,403, and $4,052, respectively, pursuant to their employment
agreements, as reflected in the Summary Compensation Table on page 9.
STOCK-BASED COMPENSATION INCENTIVES. The third component of the
Company's executive compensation package is stock-based compensation incentives,
traditionally stock options. This compensation component is an important
incentive tool designed to more closely align the interests of the executive
officers of the Company with the long-term interests of the Company's
stockholders and to encourage its executive officers to remain with the Company.
The Compensation Committee traditionally grants options to the Company's
executive officers and key associates (employees) on an annual basis. In
selecting recipients and the size of option grants during fiscal year 1998, the
Compensation Committee considered the recommendations of the Company's Chief
Executive Officer and Chairman of the Board, Jeffrey D. McKeever; the other
components of the recipients' compensation packages; the recipients'
responsibilities and performance; the Company's performance during the preceding
fiscal year; and prior option grants. The Compensation Committee gave a great
deal of weight to Mr. McKeever's recommendations.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
In fiscal year 1998, the Chief Executive Officer of the Company, Jeffrey
D. McKeever, was compensated pursuant to an employment agreement. Under the
agreement, Mr. McKeever was entitled to receive a base salary of $650,000 plus a
fixed cash bonus of $35,321. In arriving at Mr. McKeever's base salary, the
Compensation Committee, with the assistance of an independent compensation
consultant, compared Mr. McKeever's compensation level to the market base salary
rates gathered from seven surveys that are established sources of executive
compensation data in the high technology industry. The Compensation Committee
set Mr. McKeever's base salary at approximately the median level of market base
salary rates for chief executive officers.
Under the 1998 Bonus Plan discussed above under "Annual Incentive
Bonus," Mr. McKeever did not receive an incentive bonus during fiscal year 1998
because the Company did not meet the targeted earnings goals.
Fiscal year 1998 was a significant year as a result of the Company's
decision to restructure the Company into two independent businesses - a
distribution business operated through Pinacor, and an integration business. In
addition, the Company announced that it was exploring various financial options
for Pinacor in an effort to unlock the value created by the formation of
Pinacor. Mr. McKeever conceived of the restructuring plan and had an active role
in implementing it.
During fiscal year 1998, the Compensation Committee determined that it
would be appropriate to increase Mr. McKeever's equity stake in the Company to
better align Mr. McKeever's interests with those of the Company's other
stockholders in order to maximize stockholder value, particularly in the current
rapidly-changing competitive environment. To that end, the Compensation
Committee approved the option grants to Mr. McKeever described in the
"Options/SAR Grants In Last Fiscal Year" Table. In addition, with the assistance
of a compensation consultant, the Committee approved the grant of the Pinacor
Option
16
<PAGE>
to Mr. McKeever in order to incentivize Mr. McKeever to maximize stockholder
value with respect to Pinacor. See footnote 4 to the "Summary Compensation
Table."
Overall, the Compensation Committee believes that Mr. McKeever has
managed the Company well in a challenging business climate. Based on the
incentive compensation arrangements provided to Mr. McKeever, as described in
the preceding paragraph, the Compensation Committee did not increase Mr.
McKeever's base salary during fiscal year 1998.
SECTION 162(m) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Code, adopted as part of the Revenue
Reconciliation Act of 1993, generally limits to $1 million the deduction that
can be claimed by any publicly-held corporation for compensation paid to any
"covered employee" in any taxable year. The term "covered employee" for this
purpose is defined generally as the chief executive officer and the four other
highest paid employees of the corporation. Performance-based compensation is
outside the scope of the $1 million limitation and, hence, generally can be
deducted by a publicly-held corporation without regard to amount; provided that,
among other requirements, such compensation is approved by stockholders.
It is the general policy of the Company to make a reasonable effort to
satisfy the requirements of Section 162(m) in order to secure the maximum
possible deductions. At the same time, the Company recognizes that it must
appropriately compensate its key executives in order to enhance stockholder
value. On occasion, certain considerations may necessitate the implementation of
a compensation program pursuant to which some or all of the compensation paid
will not be deductible. For example, the Pinacor Option, which is described in
footnote 4 to the "Summary Compensation Table" does not comply with Section
162(m) because it was not granted pursuant to a stockholder approved plan. As a
result, all or part of the income attributable to the exercise of that option
may not be deductible.
WILLIAM H. MALLENDER, CHAIRMAN
LYNDA M. APPLEGATE
CYRUS F. FREIDHEIM, JR.
ROY A. HERBERGER, JR.
17
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the total cumulative stockholder return on
the Company's Common Stock for the period September 30, 1993 through November 1,
1998 with the cumulative total return on the (a) Nasdaq Index and (b) Standard &
Poor's MidCap Index that includes 400 companies with a total capitalization of
$975 billion. The comparison assumes that $100 was invested on September 30,
1993 in the Company's Common Stock and in each of the comparison indices.
COMPARISON OF 61 MONTH CUMULATIVE RETURN*
AMONG MICROAGE, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE S & P MIDCAP 400 INDEX
MICROAGE, INC. NASDAQ STOCK MARKET (U.S.) S & P MIDCAP 400
-------------- -------------------------- ----------------
9/30/93 100 100 100
10/30/94 73 103 103
10/29/95 50 138 124
11/3/96 120 163 146
11/2/97 136 215 194
11/1/98 88 241 199
* $100 INVESTED ON 9/30/93 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS
18
<PAGE>
PROPOSAL 2
APPROVAL OF AN INCREASE IN AUTHORIZED SHARES UNDER THE
MICROAGE, INC. 1995 ASSOCIATE STOCK PURCHASE PLAN
The Board of Directors of the Company has approved and recommends that
the stockholders approve an amendment to the MicroAge, Inc. 1995 Associate Stock
Purchase Plan (the "Associate Plan") to increase the number of authorized shares
of Common Stock that may be purchased under the Associate Plan from 500,000 to
1,000,000. The Board of Directors of the Company believes the increase in the
authorized shares is in the best interest of the Company.
The Associate Plan was previously approved by the Board of Directors
and the Company's stockholders. The Associate Plan provides a means for the
Company's employees ("associates") to authorize payroll deductions on a
voluntary basis to be used for the periodic purchase of the Company's Common
Stock. Under the Associate Plan, the Company sells shares to participants at a
price equal to the lesser of 85% of the fair market value of Common Stock at the
beginning of a six-month subscription period or 85% of fair market value of
Common Stock at the end of the subscription period. The Associate Plan is
intended to qualify as an "employee stock purchase plan" under Section 423 of
the Internal Revenue Code of 1986, as amended (the "Code").
The Board of Directors believes that the Associate Plan encourages
broader stock ownership by associates of the Company and thereby provides an
incentive for non-executive associates to contribute to the profitability and
success of the Company. The Associate Plan offers a convenient means for such
associates who might not otherwise own Common Stock in the Company to purchase
and hold Common Stock, and the discounted sale feature of the Associate Plan
provides a meaningful inducement to participate. The Board believes that
associates' continuing economic interest, as stockholders, in the performance
and success of the Company enhances the entrepreneurial spirit of the Company,
which can greatly contribute to the long-term growth and profitability of the
Company.
DESCRIPTION OF THE ASSOCIATE PLAN
Under the terms of the Associate Plan, the shares of the Company's
Common Stock purchased by participants are purchased directly from the Company.
The maximum number of shares that may currently be purchased under the Associate
Plan is 500,000, subject to appropriate adjustment in the case of any
extraordinary dividend or other distribution, recapitalization, forward or
reverse split, reorganization, merger, consolidation, spin-off, combination,
repurchase, share exchange, or other similar corporate transaction or event
affecting the Common Stock. The amendment to the Associate Plan would increase
the maximum number of shares that may be purchased under the Associate Plan to
1,000,000. Shares purchased from the Company are either authorized but unissued
shares or treasury shares.
The Associate Plan is administered by the Board of Directors, although
the Board may delegate some or all of its administrative duties to a Board
committee or a committee of associates. The Board or such committee has
authority to interpret the Associate Plan, construe terms, adopt rules and
regulations, prescribe forms, and make all determinations under the Associate
Plan. If a participant is a member of a committee administering the Associate
Plan, such person may not decide any matter relating to his or her participation
in the Associate Plan.
19
<PAGE>
Any associate of the Company is eligible to participate in the Associate
Plan, except those who have been employed by the Company for less than one year,
those associates who customarily work less than 20 hours per week or 5 months
per year, and any associate who owns five percent or more of the total combined
voting power or value of all outstanding shares of all classes of securities of
the Company or any subsidiary. Approximately 3,000 associates of the Company are
currently eligible to participate in the Associate Plan.
An eligible associate may enroll for any six-month subscription period,
commencing January 1 and July 1 of each year, by filing an enrollment form with
the Company during the two-week period before the commencement of the
subscription period. After initial enrollment in the Associate Plan, the
associate will be automatically re-enrolled in the Associate Plan for subsequent
subscription periods unless he or she files a notice of withdrawal before such
subscription period begins, terminates employment, or otherwise become
ineligible to participate.
Upon enrollment in the Associate Plan, the associate must elect a rate
at which he or she will make payroll contributions for the purchase of Common
Stock. An associate generally may elect to make contributions in an amount not
less than two percent nor more than ten percent of such associate's earnings (or
such higher or lower rates as the Board may specify), although an associate's
contributions will be adjusted downward (or refunded to the extent necessary to
ensure that he or she will not purchase during any offering period Common Stock
that has a fair market value, as of the beginning of the offering period, in
excess of $12,500 (representing an annual limitation of $25,000)). All associate
contributions will be made by means of direct payroll deduction. The
contribution rate elected by a participant continues in effect until modified by
the participant.
The contributions of an associate are credited to the associate's
account. As described above, the Company will sell shares directly to the
custodian for associates' accounts at a price equal to the lesser of 85% of the
fair market value of Common Stock at the beginning of the six-month subscription
period or 85% of the fair market value of Common Stock at the end of the
subscription period.
Pursuant to either of the above methods, shares of the Company's Common
Stock are purchased on a given purchase date in the aggregate for all accounts
under the Associate Plan. Shares purchased are credited to the accounts
maintained by the custodian for each participant in proportion to the payroll
contribution from each participant. No interest is credited on payroll
contributions pending investment in Common Stock. Any dividends paid on Common
Stock credited to participants' accounts are automatically reinvested in
additional shares by the custodian through purchases directly from the Company.
(The Company has never declared or paid a cash dividend on the Common Stock and
does not presently intend to do so). Participants have the exclusive right to
vote or direct the voting of shares credited to their accounts, and are
permitted to withdraw, transfer, or sell their shares without restriction.
Participants' rights under the Associate Plan are nontransferable except
pursuant to the laws of descent and distribution.
A participant's enrollment in the Associate Plan may be terminated at
any time, effective for payroll periods or subscription periods beginning after
the filing of a notice of termination of enrollment. Enrollment will also
terminate upon termination of a participant's employment by the Company and its
subsidiaries. Upon termination of enrollment, cash amounts resulting from
previous payroll contributions will be repaid to the participant. The custodian
will continue to hold Common Stock for the account of such a participant until
the participant sells or withdraws the Common Stock, but in no event more than
20
<PAGE>
one year after the participant ceases to be employed by the Company and its
subsidiaries. A participant may also reduce or eliminate future contributions
for future payroll periods without thereby terminating enrollment. In such case,
previous payroll contributions held in the participant's cash account will be
used for the purchase of Common Stock at the next purchase date.
The Company pays costs and expenses incurred in the administration of
the Associate Plan and maintenance of accounts, and pays brokerage fees and
commissions for purchases. The Company does not pay brokerage fees and expenses
relating to sales by participants, and participants are charged reasonable fees
by the custodian for withdrawals of share certificates and other specified
services. The custodian is responsible for furnishing account statements to
participants.
The Board of Directors may amend, alter, suspend, discontinue, or
terminate the Associate Plan without further stockholder approval, except
stockholder approval must be obtained within one year after the effectiveness of
such action if required by law or regulation or under the rules of any automated
quotation system (such as the Nasdaq National Market) or securities exchange on
which the Common Stock is then quoted or listed, or if such stockholder approval
is necessary in order for the Associate Plan to continue to meet the
requirements of Section 423 of the Code. The Associate Plan will continue until
terminated by action of the Board, although, as noted above, the number of
shares authorized under the Associate Plan is limited.
The Associate Plan has been subject to two previous amendments. By the
First Amendment to the Associate Plan, the Company amended the Associate Plan to
provide that no fractional shares would be purchased on behalf of an Associate
Plan participant and to make certain other nonmaterial changes. By the Second
Amendment to the Associate Plan, the Company amended the Associate Plan to
change the definition of "purchase date" for shares of Common Stock.
On February 5, 1999, the last reported sale price of the Company's
Common Stock on the Nasdaq National Market was $13.50 per share.
FEDERAL INCOME TAX CONSEQUENCES
The Company believes that under present law the following federal
income tax consequences would generally result under the Associate Plan. Rights
to purchase shares under the Associate Plan are intended to constitute "options"
issued pursuant to an "employee stock purchase plan" within the meaning of
Section 423 of the Code:
(1) No taxable income results to the participants upon the grant of a
right to purchase or upon the purchase of shares for his or her account under
the Associate Plan (although the amount of a participant's payroll contributions
under the Associate Plan will be taxable as ordinary income to the participant).
(2) If the participant disposes of shares less than two years after the
first day of a subscription period with respect to which he or she purchased the
shares, then at that time the participant will realize ordinary income in an
amount equal to the fair market value of the shares on the date of purchase
minus the amount of the participant's payroll deductions used to purchase the
shares.
21
<PAGE>
(3) If the participant holds the shares for at least two years after the
first day of a subscription period with respect to which he or she purchased the
shares, then at the time the participant disposes of the shares he or she will
realize ordinary income in an amount equal to the lesser of (i) the fair market
value of the shares on the first day of the offering period minus the amount of
the participant's payroll deductions used to purchase the shares, and (ii) the
fair market value of the shares on the date of disposition minus the amount of
the participant's payroll deductions used to purchase the shares.
(4) In addition, the participant will realize a long-term or short-term
capital gain or loss, as the case may be, in an amount equal to the difference
between the amount realized upon any sale of the Common Stock and the
participant's basis in the Common Stock (i.e., the purchase price plus the
amount, if any, taxed to the participant as ordinary income, as described in (2)
and (3) above).
(5) If the statutory holding period described in (2) and (3) above is
satisfied, the Company will not receive any deduction for federal income tax
purposes with respect to any discount in the sale price of Common Stock
applicable to such participant. If such statutory holding period is not
satisfied, the Company generally should be entitled to a tax deduction in an
amount equal to the amount taxed to the participant as ordinary income.
The foregoing provides only a general description of the application of
federal income tax laws to the Associate Plan. The summary does not address the
effects of other federal taxes or taxes imposed under state, local, or foreign
tax laws. Because of the complexities of the tax laws, participants are
encouraged to consult a tax advisor as to their individual circumstances.
Approval of the amendment to increase the number of authorized shares
under the 1995 Associate Stock Purchase Plan requires the vote of the holders of
a majority of the outstanding shares of Company Common Stock present for this
proposal at the 1999 Annual Meeting. Abstentions are considered present for this
proposal, so they will have the same effect as votes against the proposal.
Broker non-votes are not considered present for this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
22
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has entered into employment agreements with Messrs.
McKeever, Hald, Daniel, and Koziol. Pinacor has entered into an employment
agreement with Mr. O'Malley. See "Executive Compensation -- Employment Contracts
and Related Matters."
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and officers, and persons who own more than 10%
of a registered class of the Company's equity securities, to file reports of
ownership and changes of ownership with the Securities and Exchange Commission.
Based solely on its review of the copies of such forms received by it, the
Company believes that, except as discussed below, during fiscal year 1998 all
filing requirements applicable to its directors, officers, and greater than 10%
beneficial owners were complied with. A Form 5 was not timely filed (although
such Form 5 was subsequently filed) for the following persons, with the
transactions that were not reported on a timely basis following each person's
name: John H. Andrews (2), Lynda M. Applegate (2), James R. Daniel (2), James H.
Domaz (1), Cyrus F. Freidheim, Jr. (4), Roy A. Herberger, Jr. (2), Christopher
J. Koziol (2), John S. Lewis (1), William H. Mallender (2), James G. Manton (1),
Robert W. Mason (1), Jeffrey D. McKeever (1), Steven G. Mihaylo (2), Mark D.
Mumford (1), Robert G. O'Malley (1), Kathleen S. Pushor (1), Raymond L. Storck
(1), and Dianne C. Walker (4).
AUDITORS
The Board of Directors has appointed PricewaterhouseCoopers LLP to audit
the consolidated financial statements of the Company for the fiscal year ending
October 31, 1999. Representatives of PricewaterhouseCoopers LLP are expected to
be present at the meeting and will be available to respond to appropriate
questions and may make a statement if they so desire.
STOCKHOLDER NOMINATIONS AND PROPOSALS
The Company's By-Laws require that there be furnished to the Company
written notice with respect to the nomination of a person for election as a
director (other than a person nominated at the direction of the Board of
Directors), as well as the submission of a proposal (other than a proposal
submitted at the direction of the Board of Directors), at a meeting of
stockholders. In order for any such nomination or submission to be proper, the
notice must contain certain information concerning the nominating or proposing
stockholder, and the nominee or the proposal, as the case may be, and must be
furnished to the Company generally not less than 60 nor more than 90 days prior
to the first anniversary date of the preceding year's annual meeting. To
properly bring a director nomination or other matter before the 2000 Annual
Meeting of Stockholders, the nomination or proposal must be received by January
31, 2000. A copy of the applicable By-Law provision may be obtained, without
charge, upon written request to the Secretary of the Company at its principal
executive offices in Tempe, Arizona.
23
<PAGE>
In addition to the foregoing, in accordance with the rules of the
Securities and Exchange Commission, any proposal that a stockholder intends to
present at the 2000 Annual Meeting of Stockholders must be received by the
Company by October 22, 1999 to be eligible for inclusion in the proxy statement
and proxy form relating to such meeting.
24
<PAGE>
===============================FRONT OF PROXY CARD==============================
MICROAGE, INC.
2400 SOUTH MICROAGE WAY
TEMPE, ARIZONA 85282-1896
PROXY
The undersigned hereby appoints Jeffrey D. McKeever and James R. Daniel
and each of them, proxies, with power of substitution and revocation, acting
unanimously and voting or if only one is present and voting then that one, to
vote the shares of stock of MICROAGE, INC. which the undersigned is entitled to
vote, at the annual meeting of stockholders to be held at the MicroAge Executive
Briefing Center, 1650 West Alameda, Tempe, Arizona 85282, on Wednesday, March
31, 1999, at 4:00 p.m., Arizona time, and at any adjournment or adjournments
thereof, with all the powers the undersigned would possess if present:
(Continued and to be signed on reverse side)
================================BACK OF PROXY CARD==============================
A [X] Please mark your votes as in this example.
1. ELECTION OF CLASS I DIRECTORS:
[ ] FOR all nominees listed at right (except as marked to the contrary below)
[ ] WITHHOLD authority to vote for all nominees listed at right
Nominees: William H. Mallender, Lynda M. Applegate, Dianne C. Walker
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THAT NOMINEE'S NAME AT RIGHT.
2. APPROVAL OF AN INCREASE IN AUTHORIZED SHARES UNDER THE MICROAGE, INC. 1995
ASSOCIATE STOCK PURCHASE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON ALL OTHER
MATTERS THAT PROPERLY MAY BE PRESENTED AT THE MEETING.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF MICROAGE, INC.
AND WILL BE VOTED FOR THE ELECTION OF DIRECTORS UNLESS MARKED TO WITHHOLD
AUTHORITY AND WILL BE VOTED IN ACCORDANCE WITH ANY SPECIFICATION INDICATED
HEREON; IN THE ABSENCE OF A SPECIFICATION AS TO ANY PROPOSAL, THIS PROXY WILL BE
VOTED FOR SUCH PROPOSAL.
PLEASE SIGN AND DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE
NEED BE AFFIXED IF MAILED IN THE UNITED STATES.
The undersigned hereby revokes proxy or proxies heretofore given to vote such
shares at said meeting or at any adjournment thereof.
Signature of Stockholder _____________________________ Date _____________, 1999
FIRST CLASS MAIL IMPORTANT: PLEASE SIGN AND RETURN PROMPTLY PROXY MATERIAL
ENCLOSED. (Please sign exactly as name appears on this proxy, indicating where
proper, official position or representative capacity.)
<PAGE>
APPENDIX TO MICROAGE, INC. PROXY STATEMENT
(FILED PURSUANT TO PROXY RULES, SCHEDULE 14A,
ITEM 10, INSTRUCTION 3)
MICROAGE, INC.
1995 ASSOCIATE STOCK PURCHASE PLAN
1. PURPOSE. The purpose of this 1995 Associate Stock Purchase Plan (the
"Plan") is to encourage stock ownership by associates of MicroAge, Inc. (the
"Company") and its Subsidiaries and thereby provide associates with an incentive
to contribute to the profitability and success of the Company. The Plan is
intended to qualify as an "employee stock purchase plan" under Section 423 of
the Code and will be maintained for the exclusive benefit of eligible associates
of the Company and its Subsidiaries.
2. DEFINITIONS. For purposes of the Plan, in addition to the terms
defined in Section 1, terms are defined as set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Cash Account" means the account maintained on behalf of the
Participant by the Custodian for the purpose of holding cash contributions
pending investment in Stock.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Custodian" means Peacock, Hislop, Staley & Given, Inc. or the
successor thereto as may be appointed by the Board.
(e) "Earnings" means a Participant's salary or wages for services
performed for the Company and its Subsidiaries and received by a Participant for
services rendered during a specified pay period.
(f) "Enrollment Period" means the two-week period immediately prior to
each Subscription Period.
(g) "Fair Market Value" means the closing price for Shares on the
relevant date as reported on the NASDAQ National Market System (or any national
securities exchange on which the Shares are then listed), or (if there were no
sales on such date) the closing price on the next preceding date for which a
closing price was reported.
(h) "Participant" means an associate of the Company or a Subsidiary
who is participating in the Plan.
<PAGE>
(i) "Purchase Date" means the fifth business day after the end of each
Subscription Period.
(j) "Purchase Right" means a Participant's option to purchase shares
which is deemed to be outstanding during a Subscription Period. A Purchase Right
represents an "option" as such term is used under Section 423 of the Code.
(k) "Stock" means the Common Stock of the Company, and such other
securities as may be substituted for Stock under Section 4.
(l) "Stock Account" means the account maintained on behalf of the
Participant by the Custodian for the purpose of holding Stock acquired upon
investment under the Plan.
(m) "Subscription Period" means the six-month period beginning on
January 1 and July 1 of each year, with the first Subscription Period to begin
on July 1, 1995.
(n) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
3. ADMINISTRATION.
(a) Board Administration. The Plan will be administered by the Board.
The Board may delegate its administrative duties and authority (other than
authority to amend the Plan) to any Board committee or to any officers or
associates or committee thereof as the Board may designate (in which case
references to the Board will be deemed to mean the administrator to which such
duties and authority have been delegated). The Board will have full authority to
adopt, amend, suspend, waive, and rescind such rules and regulations and appoint
such agents as it may deem necessary or advisable to administer the Plan, to
correct any defect or supply any omission or reconcile any inconsistency in the
Plan and to construe and interpret the Plan and rules and regulations
thereunder, to furnish to the Custodian such information as the Custodian may
require, and to make all other decisions and determinations under the Plan
(including determinations relating to eligibility). No person acting in
connection with the administration of the Plan will, in that capacity,
participate in deciding any matter relating to his or her participation in the
Plan.
(b) The Custodian. The Custodian will act as custodian under the Plan,
and will perform such duties as are set forth in the Plan and in any agreement
between the Company and the Custodian. The Custodian will establish and
maintain, as agent for Participants, Cash and Stock Accounts and any other
subaccounts as may be necessary or desirable for the administration of the Plan.
(c) Waivers. The Board may waive or modify any requirement that a
notice or election be made or filed under the Plan a specified period in advance
in an individual case or by adopting a rule or regulation under the Plan,
without amending the Plan.
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<PAGE>
(d) Other Administrative Provisions. The Company will furnish
information from its records as directed by the Board, and such records,
including a Participant's Earnings, will be conclusive on all persons unless
determined by the Board to be incorrect. Each Participant and other person
claiming benefits under the Plan must furnish to the Company in writing an
up-to-date mailing address and any other information as the Board or Custodian
may reasonably request. Any communication, statement, or notice mailed with
postage prepaid to any such Participant or other person at the last mailing
address filed with the Company will be deemed sufficiently given when mailed and
will be binding upon the named recipient. The Plan will be administered on a
reasonable and nondiscriminatory basis and uniform rules will apply to all
persons similarly situated. All Participants will have equal rights and
privileges (subject to the terms of the Plan) with respect to Purchase Right
outstanding during any given Subscription Period.
4. STOCK SUBJECT TO PLAN. Subject to adjustment as provided below, the
total number of shares of Stock reserved and available for issuance or which may
be otherwise acquired upon exercise of Purchase Rights under the Plan will be
$500,000. Any shares of Stock delivered by the Company under the Plan may
consist, in whole or in part, of authorized and unissued shares or treasury
shares. The number and kind of such shares of Stock subject to the Plan will be
proportionately adjusted, as determined by the Board, in the event of any
extraordinary dividend or other distribution, recapitalization, forward or
reverse split, reorganization, merger, consolidation, spin-off, combination,
repurchase, or share exchange, or other similar corporate transaction or event
affecting the Stock.
5. ENROLLMENT AND CONTRIBUTIONS.
(a) Eligibility. An associate of the Company or a Subsidiary may be
enrolled in the Plan for any Subscription Period if such associate is employed
by the Company or a Subsidiary on the first day of the Subscription Period,
unless one of the following applies to the associate:
(i) Such person has been employed for less than one year with
the Company or a Subsidiary;
(ii) Such person is customarily employed by the Company or a
Subsidiary for 20 hours or less a week or for not more than
five months in any calendar year; or
(iii) Such person would, immediately upon enrollment, be deemed
to own, for purposes of Section 423(b)(3) of the Code, an
aggregate of five percent or more of the total combined
voting power or value of all outstanding shares of all
classes of the Company or any Subsidiary.
The Company will notify an associate of the date as of which he or she is
eligible to enroll in the Plan, and will make available to each eligible
associate the necessary enrollment forms.
(b) Initial Enrollment. An associate who is eligible under Section 5(a)
(or who will become eligible on or before a given Subscription Period) may,
after receiving current information
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<PAGE>
about the Plan, initially enroll in the Plan by executing and filing with the
Company's Human Resources Department a properly completed enrollment form,
including the associate's election as to the rate of payroll contributions for
the Subscription Period. To be effective for any Subscription Period, such
enrollment form must be filed during the Enrollment Period immediately preceding
such Subscription Period.
(c) Automatic Re-enrollment for Subsequent Subscription Periods. A
Participant whose enrollment in, and payroll contributions under, the Plan
continues throughout a Subscription Period will automatically be re-enrolled in
the Plan for the next Subscription Period unless (i) the Participant terminates
enrollment before the next Subscription Period in accordance with Section 7(a),
or (ii) on the last day of the relevant Enrollment Period he or she is
ineligible to participate under Section 5(a). The initial rate of payroll
contributions for a Participant who is automatically re-enrolled for a
Subscription Period will be the same as the rate of payroll contribution in
effect at the end of the preceding Subscription Period, unless the Participant
files a new enrollment form during the Enrollment Period immediately preceding
such Subscription Period designating a different rate of payroll contributions.
(d) Payroll Contributions. A Participant will make contributions under
the Plan by means of payroll deductions from each payroll period which ends
during the Subscription Period, at the rate elected by the Participant in his or
her enrollment form filed during the Enrollment Period immediately preceding
such Subscription Period (except that such rate may be changed during the
Subscription Period to the extent permitted below). The rate of payroll
contributions elected by a Participant may not be less than two percent (2%) nor
more than ten percent (10%) of the Participant's Earnings for each payroll
period, and only whole percentages may be elected; provided, however, that the
Board may specify a lower minimum rate and higher maximum rate, subject to
Section 8(c). Notwithstanding the above, a Participant's payroll contributions
will be adjusted downward by the Company as necessary to ensure that the limit
on the amount of Stock purchased with respect to a Subscription Period set forth
in Section 6(a)(iii) is not exceeded. A Participant may elect to increase,
decrease, or discontinue payroll contributions for a future Subscription Period
by filing a new enrollment form during the Enrollment Period immediately
preceding such Subscription Period designating a different rate of payroll
contributions. In addition, a Participant may elect to decrease or discontinue
payroll contributions during a Subscription Period by filing a new enrollment
form, such change to be effective for the next payroll after the Participant's
new enrollment form is received.
(e) Crediting Payroll Contributions to Cash Accounts. All payroll
contributions by a Participant under the Plan will be credited to a Cash Account
maintained by the Custodian on behalf of the Participant. The Custodian will
credit payroll contributions to each Participant's Cash Account upon receipt by
the Custodian from the Company of information identifying the amount of payroll
contribution. The Company will deposit with the Custodian an amount equal to the
aggregate payroll contributions for the Subscription Period (not otherwise
repaid to Participant under Section 7(b)) on or before the Purchase Date for
such Subscription Period.
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<PAGE>
(f) No Interest on Cash Accounts. No interest will be credited or
payable by the Company on payroll contributions or by the Custodian on cash
balances in Participant's Cash Accounts pending investment in Stock.
6. PURCHASES OF STOCK
(a) Purchase Rights. Enrollment in the Plan for any Subscription Period
by a Participant will constitute a grant by the Company of a Purchase Right to
such Participant for such Subscription Period. Each Purchase Right will be
subject to the following terms:
(i) The Purchase prices at which Stock will be purchased under a
Purchase Right will be as specified in Section 6(c).
(ii) Except as limited in (iii) below, the number of shares of
Stock that may be purchased upon exercise of the Purchase
Right for a Subscription Period will equal the number of
shares (including fractional shares) that can be purchased
at the purchase price specified in Section 6(c) with the
aggregate amount credited to the Participant's Cash Account
as of the Purchase Date.
(iii) The number of shares of Stock subject to a Participant's
Purchase Right for any Subscription Period will not exceed
the lesser of (A) the number derived by dividing $12,500 by
100% of the Fair Market Value of one share of Stock on the
Enrollment Date for the Subscription Period, or (B) 5,000
shares of Stock.
(iv) The Purchase Right will be automatically exercised on the
Purchase Date for the Subscription Period.
(v) Payments by a Participant for Stock purchased under a
Purchase Right will be made only through payroll deduction
in accordance with Section 5(d) and (e).
(vi) The Purchase Right will expire on the earlier of the
Purchase Date for the Subscription Period or the date on
which the Participant's enrollment in the Plan terminates.
(b) Purchase of Stock. At or as promptly as practicable after the
Purchase Date for a Subscription Period, amounts credited to each Participant's
Cash Account as of such Purchase Date will be applied by the Custodian to the
purchase of shares of Stock, in accordance with the terms of the Plan. Shares of
Stock will be purchased by the Custodian from the Company. Shares sold by the
Company may be authorized but unissued shares or treasury shares, as permitted
under Section 4. The Custodian will aggregate the amounts in all Cash Accounts
when purchasing Stock, and shares purchased will be allocated to each
Participant's Stock Account in proportion to the cash amounts withdrawn from
such Participant's Cash Account. Upon completion of purchases in respect
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<PAGE>
of a Purchase Date (which will be completed in not more than 30 days after the
Purchase Date), all shares of Stock so purchased for a Participant will be
credited to the Participant's Stock Account.
(c) Purchase Price. The purchase price of each share of Stock purchased
in respect of a Purchase Date will equal 85% of the lesser of (i) the Fair
Market Value of a share of Stock on the Enrollment Date or (ii) the Fair Market
Value of a share of Stock on the Purchase Date.
(d) Dividend Reinvestment; Other Distributions. Cash dividends on any
Stock credited to a Participant's Stock Account will be automatically reinvested
in additional shares of Stock; such amounts will not be available in the form of
cash to Participants. All cash dividends paid on Stock credited to Participants'
Stock Accounts will be paid over by the Company to the Custodian at the dividend
payment date. The Custodian will aggregate all purchase of Stock in connection
with dividend reinvestment for a given dividend payment date. Purchases of Stock
for purposes of dividend reinvestment will be made as promptly as practicable
(but not more than 30 days) after a dividend payment date. The Custodian will
make such purchases, as directed by the Board, either (i) in transactions on the
NASDAQ National Market System, any securities exchange upon which Stock is
traded, otherwise in the over-the-counter market, or in negotiated transactions,
or (ii) directly from the Company at 100% of the Fair Market Value of a share of
Stock on the dividend payment date. Any shares of Stock distributed as a
dividend or distribution in respect of shares of Stock or in connection with a
split of the Stock credited to a Participant's Stock Account will be credited to
such Account.
(e) Withdrawals and Transfers. Shares of Stock may be withdrawn from a
Participant's Stock Account, in which case one or more certificates for whole
shares may be issued in the name of, and delivered to, the Participant, with
such Participant receiving cash in lieu of fractional shares based on the Fair
Market Value of a share of Stock on the date of withdrawal. Alternatively, whole
shares of Stock may be withdrawn from a Participant's Stock Account by means of
a transfer to a broker-dealer or financial institution that maintains an account
for the Participant, together with the transfer of cash in lieu of fractional
shares based on the Fair Market Value of a share of Stock on the date of
withdrawal. Participants may not designate any other person to receive shares of
Stock withdrawn or transferred under the Plan. A Participant seeking to withdraw
or transfer shares of Stock must give instructions to the Custodian in such
manner and form as may be prescribed by the Custodian, which instructions will
be acted upon as promptly as practicable. Withdrawals and transfers will be
subject to any fees imposed in accordance with Section 8(a).
(f) Excess Account Balances. If any amounts remain in a Cash Account
following a Purchase Date as a result of the limitation set forth in Section
6(a)(iii), such amounts will be returned to the Participant by the Custodian as
promptly as practicable.
7. TERMINATION AND DISTRIBUTIONS.
(a) Termination of Enrollment. A Participant's enrollment in the Plan
will terminate upon (i) the beginning of any payroll period or Subscription
Period that begins after he or she files a written notice of termination of
enrollment with the Company, provided that such Participant will continue to be
deemed to be enrolled with respect to any completed Subscription Period for
which
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<PAGE>
purchases have not been completed, (ii) such time as the Participant becomes
ineligible to participate under Section 5(a)(i) of the Plan, or (iii) the
termination of the Participant's employment by the Company and its Subsidiaries.
An associate whose enrollment in the Plan terminates may again enroll in the
Plan as of any subsequent Subscription Period that is at least 90 days after
such termination of enrollment if he or she satisfies the eligibility
requirements of Section 5(a) as of such Subscription Period. A Participant's
election to discontinue payroll contributions will not constitute a termination
of enrollment.
(b) Distribution. As soon as practicable after a Participant's
enrollment in the Plan terminates, amounts in the Participant's Cash Account
which resulted from payroll contributions will be repaid to the Participant. If
amounts credited to the Participant's Cash Account have not yet been deposited
by the Company with the Custodian, the Company rather than the Custodian will
make the repayment to the Participant. The Custodian will continue to maintain
the Participant's Stock Account for the Participant until the earlier of such
time as the Participant directs the sale of all Stock in the Account, withdraws,
or transfers all Stock in the Account, or one year after the Participant ceases
to be employed by the Company and its Subsidiaries. If a Participant's
termination of enrollment results from his or her death, all amounts payable
will be paid to his or her estate.
8. GENERAL.
(a) Costs. Costs and expenses incurred in the administration of the
Plan and maintenance of Accounts will be paid by the Company, to the extent
provided in this Section 8(a). Any brokerage fees and commissions for the
purchase of Stock under the Plan (including Stock purchased upon reinvestment of
dividends and distributions) will be paid by the Company, but any brokerage fees
and commissions for the sale of Stock under the Plan by a Participant will be
borne by such Participant. The rate at which such fees and commissions will be
charged to Participants will be determined by the Custodian or any broker-dealer
used by the Custodian (including an affiliate of the Custodian), and
communicated from time to time to Participants. In addition, the Custodian may
impose or pass through a reasonable fee for the withdrawal of Stock in the form
of stock certificates (as permitted under Section 6(e)), and reasonable fees for
other services unrelated to the purchase of Stock under the Plan, to the extent
approved in writing by the Company and communicated to Participants.
(b) Statements to Participants. The Custodian will reflect payroll
contributions, purchases, sales, and withdrawals and transfers of shares of
Stock and other Plan transactions by appropriate adjustments to the
Participant's Accounts. The Custodian will, not less frequently than
semi-annually, provide or cause to be provided a written statement to the
Participant showing the transactions in his or her Accounts and the date
thereof, the number of shares of Stock purchased or sold, the aggregate purchase
price paid or sales price received, the purchase or sales price per share, the
brokerage fees and commissions paid (if any), the total shares held for the
Participant's Stock Account (computed to at least three decimal places), and
other information.
(c) Compliance with Section 423. It is the intent of the Company that
this Plan comply in all respects with applicable requirements of Section 423 of
the Code and regulations thereunder. Accordingly, if any provision of this Plan
does not comply with such requirements, such
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<PAGE>
provision will be construed or deemed amended to the extent necessary to conform
to such requirements.
9. GENERAL PROVISIONS.
(a) Compliance With Legal and Other Requirements. The Plan, the
granting and exercising of Purchase Rights hereunder, and the other obligations
of the Company and the Custodian under the Plan will be subject to all
applicable federal and state laws, rules, and regulations, and to such approvals
by any regulatory or governmental agency as may be required. The Company may, in
its discretion, postpone the issuance or delivery of Stock upon exercise of
Purchase Rights until completion of such registration or qualification of such
Stock or other required action under any federal or state law, rule, or
regulation, listing or other required action with respect to any automated
quotation system or stock exchange upon which the Stock or other Company
securities are designated or listed, or compliance with any other contractual
obligation of the Company, as the Company may consider appropriate, and may
require any Participant to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
delivery of Stock in compliance with applicable laws, rules, and regulations,
designation or listing requirements, or other contractual obligations.
(b) Limits on Encumbering Rights. No right or interest of a Participant
under the Plan, including any Purchase Right, may be pledged, encumbered, or
hypothecated to or in favor of any party, subject to any lien, obligation, or
liability of such Participant, or otherwise assigned, transferred, or disposed
of except pursuant to the laws of descent or distribution, and any right of a
Participant under the Plan will be exercisable during the Participant's lifetime
only by the Participant.
(c) No Right to Continued Employment. Neither the Plan nor any action
taken hereunder, including the grant of a Purchase Right, will be construed as
giving any associate the right to be retained in the employ of the Company or
any of its Subsidiaries, nor will it interfere in any way with the right of the
Company or any of its Subsidiaries to terminate any associate's employment at
any time.
(d) Taxes. The Company or any Subsidiary is authorized to withhold from
any payment to be made to a Participant, including any payroll and other
payments not related to the Plan, amounts of withholding and other taxes due in
connection with any transaction under the Plan, and a Participant's enrollment
in the Plan will be deemed to constitute his or her consent to such withholding.
In addition, Participants may be required to advise the Company of sales and
other dispositions of Stock acquired under the plan in order to permit the
Company to comply with tax laws and to claim any tax deductions to which the
Company may be entitled with respect to the Plan. (This provision and other Plan
provisions do not set forth an explanation of the tax consequences to
Participants under the Plan. A brief summary of the tax consequences will be
included in disclosure documents to be separately furnished to Participants.)
(e) Changes to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan without the consent of shareholders or
Participants, except that any such action will be subject to the approval of the
Company's shareholders within one year after such Board
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<PAGE>
action if such shareholder approval is required by any federal or state law or
regulation or the rules of any automated quotation system or stock exchange on
which the Stock may then be quoted or listed, or if such shareholder approval is
necessary in order for the Plan to continue to meet the requirements of Section
423 of the Code, and the Board may otherwise, in its discretion, determine to
submit other such actions to shareholders for approval; provided, however, that,
without the consent of an affected Participant, no amendment, alteration,
suspension, discontinuation, or termination of the Plan may materially and
adversely affect the rights of such Participant with respect to outstanding
Purchase Rights relating to any Subscription Period that has been completed
prior to such Board action. The foregoing notwithstanding, upon termination of
the Plan the Board may elect to terminate all outstanding Purchase Rights at
such time as the Board may designate; in the event of such termination of any
Purchase Right prior to its exercise, all amounts contributed to the Plan which
remain in a Participant's Cash Account will be returned to the Participant
(without interest) as promptly as practicable.
(f) No Rights to Participate; No Shareholder Rights. No Participant or
associate will have any claim to participate in the Plan with respect to
Subscription Periods that have not commenced, and the Company will have no
obligation to continue the Plan. No Purchase Right will confer on any
Participant any of the rights of a shareholder of the Company unless and until
Stock is duly issued or transferred and delivered to the Participant (or
credited to the Participant's Stock Account).
(g) Fractional Shares. Unless otherwise determined by the Board,
purchases of Stock under the Plan executed by the Custodian may result in the
crediting of fractional shares of Stock to the Participant's Stock Account. Such
fractional shares will be computed to at least three decimal places. Fractional
shares will not, however, be issued by the Company, and certificates
representing fractional shares will not be delivered to Participants under any
circumstances.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board nor its submission to the shareholders of the Company for approval will be
construed as creating any limitations on the power of the Board to adopt such
other compensatory arrangements as it may deem desirable, including, without
limitation, the granting of stock options otherwise than under the Plan, and
such arrangements may be either applicable generally or only in specific cases.
(i) Plan Year. The Plan will operate on a plan year that ends December
31 in each year.
(j) Governing Law. The validity, construction, and effect of the Plan
and any rules and regulations relating to the Plan will be determined in
accordance with the laws of the State of Arizona, without giving effect to
principles of conflicts of laws, and applicable federal law.
(k) Effective Date. The Plan will become effective at such time as the
Plan has been approved by shareholders of the Company, at a meeting thereof, by
a vote sufficient to meet the requirements of Section 423(b)(2) of the Code.
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<PAGE>
FIRST AMENDMENT
TO THE
MICROAGE, INC
1995 ASSOCIATE STOCK PURCHASE PLAN
Effective March 15, 1995, the shareholders of MicroAge, Inc. (the
"Company") approved the adoption of the MicroAge, Inc. 1995 Associate Stock
Purchase Plan (the "Plan"). By this instrument, the Company desires to amend the
Plan to provide that no fractional shares shall be purchased on behalf of a
participant under the Plan and to make certain other nonmaterial changes.
1. This Amendment shall amend only those Sections specified herein and
those Sections not amended hereby shall remain in full force and effect.
2. Section 6(a)(ii) of the Plan, is hereby amended and restated in its
entirety as follows:
(ii) Except as limited in (iii) below, the number of shares of Stock
that may be purchased upon exercise of the Purchase Right for a
Subscription Period will equal the number of whole shares
(excluding fractional shares) that can be purchased at the
purchase price specified in Section 6(c) with the aggregate
amount credited to the Participant's Cash Account as of the
Purchase Date.
3. Section 6(a)(iii)(A) of the Plan, is hereby amended and restated in
its entirety as follows:
(A) the number derived by dividing $12,500 by 100% of the Fair Market
Value of one share of Stock on the first day of the Subscription
Period, or
4. Section 6(c)(i) of the Plan, is hereby amended and restated in its
entirety as follows:
(i) the Fair Market Value of a share of Stock on the first day of the
Subscription Period or
5. Section 6(f) of the Plan is hereby amended and restated in its
entirety as follows:
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<PAGE>
(f) Excess Account Balances. If any amounts remain in a Cash Account
following a Purchase Date as a result of the limitations set forth in Section
6(a)(ii) or (iii), such amounts will be held in the Participant's Cash Account
to be applied to the purchase of whole shares of Stock for the next following
Subscription Period or otherwise repaid to a Participant under Section 7(b). In
no event shall an excess balance in a Participant's Cash Account be used to
purchase fractional shares of Stock.
6. Section 9(g) of the Plan is hereby amended and restated in its
entirety as follows:
(g) No Fractional Shares. Unless otherwise determined by the Board,
purchases of Stock under the Plan executed by the Custodian may not result in
the crediting of fractional shares of Stock to the Participant's Stock Account.
Fractional shares will not be issued by the Company, and certificates
representing fractional shares will not be delivered to Participants under any
circumstances.
7. Except as otherwise specifically provided herein, this First
Amendment shall be effective as of the effective date of the Plan, March 15,
1995.
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<PAGE>
SECOND AMENDMENT
TO THE
MICROAGE, INC
1995 ASSOCIATE STOCK PURCHASE PLAN
Effective March 15, 1995, the shareholders of MicroAge, Inc. (the
"Company") approved the adoption of the MicroAge, Inc. 1995 Associate Stock
Purchase Plan (the "Plan"). By the First Amendment to the Plan, the Company
amended the Plan to make various technical changes. By this instrument, the
Company desires to amend the Plan to provide that the "Purchase Date" for shares
shall be the last business day of each Subscription Period rather than the fifth
business day following the last day of each Subscription Period.
1. This Second Amendment shall amend only that Section specified herein
and those Sections not amended hereby shall remain in full force and effect.
2. Section 2(i) of the Plan, which defines the term "Purchase Date,"
shall be amended and restated in its entirety as follows:
(i) "Purchase Date" means the last business day of each Subscription
Period.
3. This Second Amendment shall be effective for Subscription Periods
beginning on or after January 1, 1996.
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