SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|X| Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934,
For the quarterly period ended January 30, 2000 or
|_| Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 0-15995
MICROAGE, INC.
(Exact name of registrant as specified in its charter)
Delaware 86-0321346
(State of incorporation) (I. R. S. Employer
Identification No.)
2400 South MicroAge Way
Tempe, AZ 85282-1896
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (480) 366-2000
The registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and
(2) has been subject to such filing requirements for the past 90 days.
Yes |_| x No |_|
The number of shares of the registrant's Common Stock (par value $.01 per share)
outstanding at March 20, 2000 was 21,727,813.
<PAGE>
INDEX
MICROAGE, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets -- January 30, 2000 and October 31, 1999.
Consolidated statements of operations -- Quarters ended January 30,
2000 and January 31, 1999.
Consolidated statements of cash flows -- Quarters ended January 30,
2000 and January 31, 1999.
Notes to consolidated financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
1
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
MICROAGE, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share data)
Assets
<TABLE>
<CAPTION>
January 30, October 31,
2000 1999
--------------- ---------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 31,818 $ 67,656
Accounts and notes receivable, net of
allowance of $37,929 and $29,680 respectively 394,214 220,386
Inventory 245,240 336,653
Other 24,826 27,150
--------------- ---------------
Total current assets 696,098 651,845
Property and equipment, net 95,589 102,175
Intangible assets, net 12,359 12,693
Other 24,848 19,930
--------------- ---------------
Total assets $ 828,894 $ 786,643
=============== ===============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 598,066 $ 549,394
Accrued liabilities 34,927 33,065
Current portion of long-term obligations 2,768 2,497
Other 5,962 7,558
--------------- ---------------
Total current liabilities 641,723 592,514
Line of credit 87,089 45,000
Long-term obligations 3,233 4,080
Other long-term liabilities 12,229 12,155
Stockholders' equity:
Preferred stock, par value $1.00 per share;
Shares authorized: 5,000,000
Issued and outstanding: none - -
Common stock, par value $.01 per share;
Shares authorized: 40,000,000
Issued: January 30, 2000 - 21,030,245
October 31, 1999 - 20,838,211 210 208
Additional paid-in capital 220,611 220,522
Retained deficit (136,194) (87,829)
Treasury stock, at cost;
Shares: January 30, 2000 - 412
October 31, 1999 - 412 (7) (7)
--------------- ---------------
Total stockholders' equity 84,620 132,894
--------------- ---------------
Total liabilities and stockholders' equity $ 828,894 $ 786,643
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
MICROAGE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Quarter ended
----------------------------------
January 30, January 31,
2000 1999
-------------- --------------
<S> <C> <C>
Revenue $ 1,112,881 $1,444,841
Cost of sales 1,063,315 1,343,071
-------------- --------------
Gross profit 49,566 101,770
Operating and other expenses
Operating expenses 73,814 89,287
Restructuring and other one-time charges 10,113 -
-------------- --------------
Total 83,927 89,287
-------------- --------------
Operating income (loss) (34,361) 12,483
Other expenses - net 13,985 7,248
-------------- --------------
Income (loss) before income taxes (48,346) 5,235
Income tax provision (benefit) - 3,169
-------------- --------------
Net income (loss) $ (48,346) $ 2,066
============== ==============
Net income (loss) per common and common equivalent share:
Basic $ (2.31) $ 0.10
============== ==============
Diluted $ (2.31) $ 0.10
============== ==============
Weighted average common and common equivalent shares outstanding:
Basic 20,907 20,344
============== ==============
Diluted 20,907 21,034
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
MICROAGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Increase (Decrease) in Cash and Cash Equivalents
(in thousands)
<TABLE>
<CAPTION>
Quarter ended
---------------------------------
January 30, January 31,
2000 1999
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (30,253) $ 2,067
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 11,242 11,396
Provision for losses on accounts and notes receivable 2,766 3,028
Restructuring and other one-time charges 3,675 -
Changes in assets and liabilities, net of business acquisitions:
Accounts and notes receivable (194,687) 230,554
Inventory 91,413 (19,128)
Other current assets 2,324 947
Other assets (5,518) (12,769)
Accounts payable 1,297 (242,818)
Accrued liabilities 1,862 1,598
Other liabilities (1,539) 883
-------------- --------------
Net cash used in operating activities (117,418) (24,243)
Cash flows from investing activities:
Purchases of property and equipment (3,297) (18,134)
-------------- --------------
Net cash used in investing activities (3,297) (18,134)
Cash flows from financing activities:
Net activity in overdraft facility 43,698 42,989
Proceeds from issuance of stock-stock option
and employee stock purchase plans - 577
Net borrowings under line of credit 42,089 -
Principal payments on debt (910) (1,246)
-------------- --------------
Net cash provided by (used in) financing activities 84,877 (669)
-------------- --------------
Net decrease in cash and cash equivalents (35,838) (57)
Cash and cash equivalents at beginning of period 67,656 41,894
-------------- --------------
Cash and cash equivalents at end of period $ 31,818 $ 41,837
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
MICROAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of MicroAge, Inc.
(the "Company") do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair statement of results for the periods
have been included. Certain prior year amounts have been reclassified to conform
with current year financial statement presentation. Operating results for the 13
weeks ended January 30, 2000 are not necessarily indicative of the results that
may be expected for the year ending October 29, 2000. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's Annual Report on Form 10-K for the year ended October 31, 1999.
Basic earnings per share is computed using the weighted average number of common
shares outstanding during the period. Diluted earnings per share is computed
using the weighted average number of common and dilutive common equivalent
shares outstanding. Dilutive common equivalent shares consist of stock options
and warrants using the treasury stock method. The effect of stock options and
warrants is not included at January 30, 2000 as it would be anti-dilutive. The
weighted average common and common equivalent shares consist of the following:
<TABLE>
<CAPTION>
Fiscal years ended
--------------- -- ---------------
January 30, January 31,
2000 1999
--------------- ---------------
(in thousands)
<S> <C> <C>
Weighted average common shares 20,907 20,344
Dilutive effect of stock options and warrants - 690
--------------- --------------
Weighted average common and common
equivalent shares outstanding 20,907 21,034
=============== ==============
</TABLE>
NOTE B - OTHER EXPENSES - NET
Other expenses - net consists of the following (in thousands):
Quarters ended
-----------------------------
January 30, January 31,
2000 1999
-------------- -------------
Interest income ($ 209) ($ 884)
Interest expense 1,172 823
Credit facility interest expense 6,462 -
Expenses from sale of
accounts receivable - 2,683
Amortization expense 933 2,367
Flooring expense (1) 5,105 2,379
5
<PAGE>
Other 522 (120)
-------------- -------------
$ 13,985 $7,248
============== =============
1) Flooring expense represents amounts paid to finance companies that
provide credit lines to certain reseller customers of the Company.
NOTE C - RECENT DEVELOPMENTS
The Company experienced a greater than anticipated slowdown in revenue in its
first fiscal quarter due to lack of customer demand primarily related to Year
2000 concerns and to increased competitive pressures during the Company's major
distribution competitors' year ends. Due to the lower revenue levels, it became
apparent that the Company would not meet the covenants in its primary financing
facilities (the "Facilities") for the first fiscal quarter. As a result, the
Company negotiated modifications to the Facilities. In order to grant the
modifications, one of the Company's lenders changed the terms under which the
Company borrows, effectively reducing the Company's capacity to borrow under
that agreement. At the time of the modifications, the Company estimated that
operating results would be sufficient to comply with the modified covenants.
During the second fiscal quarter, the Company has sought to improve its cash
flows by aggressively reducing inventory and accounts receivable. However, the
Company has not attained forecasted sales levels during the second fiscal
quarter, primarily because of the Company's inability to obtain sufficient
product supply from its vendors. Many vendors have limited the Company's ability
to purchase product from them. This has resulted in lower collateral levels
under the Facilities, which further reduces the Company's borrowing capacity. As
a result of these developments, the Company anticipates that it will be unable
to comply with the current financial covenants in the Facilities for the second
fiscal quarter. The Company is engaged in discussions with its lenders and
vendors in order to improve its liquidity position and to increase the flow of
product from the vendors. The Company has also requested modifications to the
Inventory Facility. Although the Company believes that the best interests of its
lenders, vendors, and the Company would be served through a modified Inventory
Facility and increased product flow from its vendors, there can be no assurance
that the lenders or vendors will ultimately agree, that the Inventory Facility
will be modified, or that product flow will increase. In the meantime, the
Company continues to take steps to conserve and manage cash flow.
NOTE D - RESTRUCTURING AND OTHER ONE-TIME CHARGES
In response to lower revenue levels and gross margins, the Company has continued
during the first quarter and the beginning of the second quarter to take actions
to increase gross margins and decrease operating expenses. These actions include
price increases, the elimination of several hundred positions at Pinacor and MTS
and the closure of branch locations.
In connection with these developments, during the quarter ended January 30,
2000, the Company recorded $10 million of restructuring and other one-time
charges ($6 million, or 29 cents per share, after taxes). All actions related to
this restructuring were implemented as of January 30, 2000. The restructuring
and other one-time charges included $1 million in employee termination benefits
(primarily severance pay) and $9 million for facility closure costs. The
facility closure costs include lease expense on closed facilities, net of
anticipated sub-lease income, and losses on disposals of fixed assets at closed
facilities.
6
<PAGE>
The charges associated with employee termination benefits consist primarily of
severance pay for approximately 190 associates. The reductions were completed by
January 30, 2000 and occurred in both Pinacor and in MTS.
Included in accounts payable in the accompanying balance sheet is an accrual of
$6 million for restructuring and other one-time charges from prior quarters
which have not yet been paid. The accrual primarily relates to lease expense for
remaining terms on previously closed facilities, net of anticipated sub-lease
income.
As the Company continues to reduce its cost structure, additional restructuring
charges will be recognized in future quarters for severance and facility closure
costs.
NOTE E - FINANCING ARRANGEMENTS
On October 28, 1999, the Company entered into two new financing facilities (the
"Facilities"). The Facilities, as amended, provide for borrowings of up to $520
million and include a $300 million revolving credit facility (the "Credit
Facility") and a $220 million inventory financing facility (the "Inventory
Facility"); the Company also has an additional $20 inventory financing facility
with another lender. The Credit Facility includes a $145 million sublimit for
the issuance of letters of credit.
Borrowings under the Facilities are secured by substantially all of the
Company's assets, subject to other liens permitted under the Facilities. The
Facilities contain certain restrictive covenants, including capital expenditure
limitations, a minimum interest coverage ratio, a minimum earnings before
interest, taxes, depreciation and amortization (EBITDA) amount and a minimum
debt to EBITDA ratio.
Borrowings under the Facilities are limited based on borrowing base formulas
that consider eligible inventories, eligible accounts receivable and letters of
credit. Borrowings are also subject to the satisfaction of customary conditions,
including the absence of any material adverse change in the Company's business
or financial condition.
Interest rates on the Credit Facility are based on the agent's base rate plus a
specified margin or LIBOR plus a specified margin. The current margins are 2.5%
for base rate advances and 3.5% for LIBOR advances. The margins may be adjusted
from time to time based on the Company's performance against covenants. The
Credit Facility also includes letter of credit and unused line fees. The Credit
Facility has a termination date of October 31, 2002.
Payments for products purchased under the Inventory Facility vary depending upon
the product supplier, but generally are due 30 days from the date of the
advance. No interest or finance charges are payable on the Inventory Facility if
payments are made when due. The Company has the ability under the Inventory
Facility to extend payments 30 days beyond the initial due date with a financing
fee of LIBOR plus 3.75%. This ability is limited by minimum collateral
restrictions. The Inventory Facility has a termination date of October 18, 2002.
During the first quarter of fiscal year 2000 it became apparent that the Company
would not meet its minimum EBITDA and maximum debt to EBITDA covenants for the
quarter ending January 30, 2000 and for each of the remaining periods in fiscal
2000. As a result, the Company renegotiated these covenants, as well as related
financial ratio covenants. See NOTE C - RECENT DEVELOPMENTS above for additional
information about the Company's status with its lenders.
7
<PAGE>
NOTE F - SEGMENT REPORTING
The Company operates primarily in two industry segments: the wholesale
distribution of computer equipment through Pinacor and technology infrastructure
services through MTS. The Company operates primarily in the United States, and
therefore has only one reportable geographic segment.
The following table presents certain segment financial information (in
thousands):
<TABLE>
<CAPTION>
Quarter ended January 30, 2000
---------------------------------------------------------------------
Pinacor MTS Other Total
---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Net revenue from external customers $ 748,606 $ 354,046 $ 10,229 $ 1,112,881
Intersegment revenue 124,302 - 3,321 127,623
---------------- --------------- --------------- ----------------
Total revenue $ 872,908 $ 354,046 $ 13,550 $ 1,240,504
Loss before taxes (1) $ (25,958) $ (17,832) $ (245) $ (44,035)
<CAPTION>
Quarter ended January 31, 1999
---------------------------------------------------------------------
Pinacor MTS Other Total
---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Net revenue from external customers $ 987,323 $ 447,626 $ 9,892 $ 1,444,841
Intersegment revenue 317,096 - - 317,096
---------------- --------------- --------------- ----------------
Total revenue $ 1,304,419 $ 447,626 $ 9,892 $ 1,761,937
Income (loss) before taxes $ 16,908 $ (6,470) $ 550 $ 10,988
</TABLE>
<TABLE>
<CAPTION>
Reconciliation Fiscal years ended
---------------------------------
January 30, January 31,
2000 1999
--------------- ---------------
<S> <C> <C>
Revenue
Total revenue for segments $ 1,240,504 $ 1,761,937
Elimination of intersegment revenue (127,623) (317,096)
=============== ===============
Total consolidated revenue $ 1,112,881 $ 1,444,841
=============== ===============
Income (loss) before taxes
Total from segments $ (44,035) $ 10,988
Unallocated amounts (4,311) (5,753)
=============== ===============
Total consolidated income (loss) before taxes $ (48,346) $ 5.235
=============== ===============
</TABLE>
(1) Includes an allocated portion of restructuring and other one-time charges
for the fiscal quarter ended January 30, 2000.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Certain statements contained in this Item may be "forward-looking
statements" within the meaning of The Private Securities Litigation Reform Act
of 1995. These forward-looking statements may include projections of revenue and
net income and issues that may affect revenue or net income; projections of
capital expenditures; plans for future operations; financing needs or plans;
plans relating to the Company's products and services; and assumptions relating
to the foregoing. Forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified. Future events
and actual results could differ materially from those set forth in, contemplated
by, or underlying the forward-looking information. Some of the important factors
that could cause the Company's actual results to differ materially from those
projected in forward-looking statements made by the Company include, but are not
limited to, the following: intense competition; narrow margins; the capital
intensive nature of the Company's business; the availability of working capital
financing; dependence on supplier incentive funds; potential changes in vendor
terms and conditions; product supply and dependence on key vendors; potential
changes in customer demand; potential fluctuations in quarterly results; risks
of declines in inventory values; dependence on information systems; dependence
on independent shipping companies; rapid technological change; and possible
volatility of stock price. The Company undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events, or otherwise.
The Company operates primarily through two businesses - a distribution business
operated through a wholly-owned subsidiary, Pinacor, Inc. ("Pinacor"), and an
integration business, MicroAge Technology Services, L.L.C. ("MTS").
Recent Developments
Liquidity Issues. The Company's ability to continue to finance its business is
contingent upon improving cash flows through reductions in inventory and
accounts receivable, attaining forecasted sales levels, reducing operating
costs, and complying with financial covenants in its credit facilities.
The Company experienced a greater than anticipated slowdown in revenue in its
first fiscal quarter due to lack of customer demand primarily related to Year
2000 concerns and to increased competitive pressures during the Company's major
distribution competitors' year ends. Due to the lower revenue levels, it became
apparent that the Company would not meet the covenants in its primary financing
facilities (the "Facilities") for the first fiscal quarter. As a result, the
Company negotiated modifications to the Facilities. In order to grant the
modifications, one of the Company's lenders changed the terms under which the
Company borrows, effectively reducing the Company's capacity to borrow under
that agreement. As discussed in greater detail in "Liquidity and Capital
Resources" below, the Facilities consist of a $300 million Credit Facility and a
$220 million Inventory Financing Facility. At the time of the modifications, the
Company estimated that operating results would be sufficient to comply with the
modified covenants.
During the second fiscal quarter, the Company has sought to improve its cash
flows by aggressively reducing inventory and accounts receivable; the Company
also expects to further reduced operating expenses during the second fiscal
quarter. However, the Company has not attained forecasted sales levels during
the second fiscal quarter, primarily because of the Company's inability to
obtain sufficient product supply from its vendors. Many vendors have limited the
Company's ability to purchase product from them. This has resulted in lower
collateral levels under the Facilities, which further reduces the Company's
borrowing capacity. As a result of these developments, the Company anticipates
that it will be unable to comply with the current financial covenants in the
Facilities for the second fiscal quarter. The Company is engaged in discussions
with its lenders and vendors in order to improve its liquidity position and to
increase the flow of product from the vendors. The Company has also requested
modifications to the Inventory Facility. Although the Company believes that the
best interests of its lenders, vendors, and the Company would be served through
a modified Inventory Facility and increased product flow from its vendors, there
can be no assurance that the lenders or vendors will ultimately agree, that the
Inventory Facility will be modified, or that product flow will increase. In the
meantime, the Company continues to take steps to conserve and manage cash flow.
9
<PAGE>
Responses to Current Issues
In response to lower revenue levels and gross margins, the Company has continued
during the first quarter and the beginning of the second quarter to take actions
to increase gross margins and decrease operating expenses. These actions include
price increases, the elimination of several hundred positions at Pinacor and
MTS, and the closure of branch locations.
In connection with these developments, during the quarter ended January 30,
2000, the Company recorded $10 million of restructuring and other one-time
charges ($6 million, or 29 cents per share, after taxes). All actions related to
this restructuring were implemented as of January 30, 2000. The restructuring
and other one-time charges included $1 million in employee termination benefits
(primarily severance pay) and $9 million for facility closure costs. The
facility closure costs include lease expense on closed facilities, net of
anticipated sub-lease income, and losses on disposals of fixed assets at closed
facilities.
The charges associated with employee termination benefits consist primarily of
severance pay for approximately 190 associates. The reductions were completed by
January 30, 2000 and occurred in both Pinacor and in MTS.
Included in accounts payable in the accompanying balance sheet is an accrual of
$6 million for restructuring and other one-time charges from prior quarters
which have not yet been paid. The accrual primarily relates to lease expense for
remaining terms on previously closed facilities, net of anticipated sub-lease
income.
As the Company continues to reduce its cost structure, additional restructuring
charges will be recognized in future quarters for severance and facility closure
costs.
Results of Operations
Jan. 30, Oct. 31, Aug. 1, May 2, Jan. 31,
2000 1999 1999 1999 1999
-------- -------- ------- ------ --------
Revenue (in thousands) 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales (1) 95.5 93.8 93.5 94.4 93.0
----- ----- ----- ----- -----
Gross profit (1) 4.5 6.2 6.5 5.6 7.0
Operating and other expenses
Operating expenses (1) 6.6 5.9 5.9 5.8 6.2
Restructuring and other
one-time charges (2) 0.9 2.8 0.3 9.2 0.0
----- ----- ----- ----- -----
Operating income (loss) (3.0) (2.5) 0.3 (9.4) 0.9
Other expenses - net (1) 1.3 0.6 0.6 0.6 0.5
----- ----- ----- ----- -----
Income (loss) before income tax (4.3) (3.1) (0.3) (10.0) 0.4
Income tax provision (benefit) -- (0.4) (0.1) (1.1) 0.2
----- ----- ----- ----- -----
Net income (loss) (4.3)% (2.7)% (0.2)% (8.9)% 0.1%
===== ===== ===== ===== =====
Total Revenue. Total revenue of $1.1 billion decreased $332 million, or 23%, for
the quarter ended January 30, 2000 as compared to the quarter ended January 31,
1999. This revenue decrease included a $430 million, or 33%, decrease in Pinacor
(distribution business) revenue and a $105 million, or 22%, decrease in MTS
(integration business) revenue. These decreases were partially offset by lower
eliminations of intercompany revenue.
The decreases in revenue in the quarter ended January 30, 2000 compared to the
quarter ended January 31, 1999 are primarily due to reduced demand due to Year
2000 concerns, changes in Pinacor's sourcing relationship with Compaq Computer
Corporation (see "Changes in Supplier Terms and Conditions" below), and to a
focus within MTS to reduce unprofitable product revenue. The Company's revenue
levels in the early part of its second fiscal quarter are lower than the first
fiscal quarter levels due to the issues described above in "Recent Developments
- - Liquidity Issues." Unless the product supply issues are resolved, the Company
expects total revenue for its second fiscal quarter to be lower than first
quarter levels.
10
<PAGE>
Gross Profit Percentage. The Company's gross profit percentage was 4.5% for the
quarter ended January 30, 2000 and 7.0% for the quarter ended January 30, 1999.
The decrease in the Company's gross profit percentage in the quarter ended
January 30, 2000 as compared to the quarter ended January 31, 1999 is primarily
due to lower product margins in both Pinacor and MTS and to lower service
margins in MTS. Gross margins on sales to reseller customers decreased due to
increased competitive pressures. In addition, changes in supplier terms and
conditions impacted both Pinacor and MTS margins. Supplier incentive funds were
lower as a percentage of total revenue and, due to reductions in price
protection and return privileges, product costs were higher in the first quarter
of fiscal 2000 compared to the first quarter of fiscal 1999. MTS service margins
were impacted by lower than anticipated revenue, which resulted in lower
utilization of service personnel.
Future gross profit percentages may be affected by market pressures, the
introduction of new Company initiatives, changes in revenue mix, changes in
supplier incentive funds, changes in suppliers' terms and conditions, the
Company's utilization of early payment discount opportunities, supplier pricing
actions, and other competitive and economic pressures. See "Potential
Fluctuations in Operating Results" below for information regarding industry
trends that may affect future gross profit percentages.
Operating Expenses. Operating expenses totaled $74 million for the quarter ended
January 30, 2000, compared to $89 million for the quarter ended January 31,
1999. The decrease in dollars is due to actions taken by the Company to reduce
operating expenses. See "Recent Developments - "Responses to Current Issues"
above for a discussion of recent actions taken.
Other Expenses - Net. Other expenses - net increased to $14.0 million for the
quarter ended January 30, 2000 from $7.2 million for the quarter ended January
31, 1999. The increase in other expenses was primarily due to an increase in
financing costs.
Financing costs increased due to increased average borrowings as a result of
changes in the Company's major suppliers' policies. During fiscal 1999 certain
major suppliers changed the terms of their credit arrangements with the Company.
These changes include a decrease in the number of days the Company has to pay
for product purchases and a decrease in the amount of reseller purchases from
the Company that the suppliers are willing to subsidize. These changes increased
the Company's working capital requirements and financing costs. These increases
were offset by a decrease in amortization expense due to the write-down of
impaired goodwill during the second quarter of fiscal 1999.
Income Tax Provision. During the quarter ended January 30, 2000, the Company
recorded a valuation allowance of approximately $18 million to reduce the
Company's total net deferred tax assets to their estimated net realizable value.
Realization of the Company's remaining net deferred tax assets of $47 million is
dependent on generating sufficient taxable income prior to their expiration and
utilization of available carryback provisions. The net deferred tax assets at
January 30, 2000 are considered realizable; however, they could be reduced in
the near term if estimates of future taxable income during the carryforward
period are reduced. As a result of the valuation allowance booked during the
first quarter of fiscal 2000, the Company recorded no net tax benefit on its
pre-tax loss for the quarter, compared to a provision equal to 60.5% of income
before tax for the quarter ended January 31, 1999.
Liquidity and Capital Resources
On October 28, 1999, the Company entered into two new financing facilities (the
"Facilities"). The Facilities, as amended, provide for borrowings of up to $520
million and include a $300 million revolving credit facility (the "Credit
Facility") and $220 million in inventory financing facility (the "Inventory
Facility"); the Company also has an additional $20 million inventory financing
facility with another lender. The Credit Facility includes a $145 million
sublimit for the issuance of letters of credit.
Borrowings under the Facilities are secured by substantially all of the
Company's assets, subject to other liens permitted under the Facilities. The
Facilities contain certain restrictive covenants, including capital expenditure
limitations, a minimum interest coverage ratio, a minimum earnings before
interest, taxes, depreciation and amortization (EBITDA) amount and a minimum
debt to EBITDA ratio.
11
<PAGE>
Borrowings under the Facilities are limited based on borrowing base formulas
that consider eligible inventories, eligible accounts receivable and letters of
credit. Borrowings are also subject to the satisfaction of customary conditions,
including the absence of any material adverse change in the Company's business
or financial condition.
Interest rates on the Credit Facility are based on the agent's base rate plus a
specified margin or LIBOR plus a specified margin. The current margins are 2.5%
for base rate advances and 3.5% for LIBOR advances. The margins may be adjusted
from time to time based on the Company's performance against covenants. The
Credit Facility also includes letter of credit and unused line fees. The Credit
Facility has a termination date of October 31, 2002.
Payments for products purchased under the Inventory Facility vary depending upon
the product supplier, but generally are due 30 days from the date of the
advance. No interest or finance charges are payable on the Inventory Facility if
payments are made when due. The Company has the ability under the Inventory
Facility to extend payments 30 days beyond the initial due date with a financing
fee of LIBOR plus 3.75%. This ability is limited by minimum collateral
restrictions. The Inventory Facility has a termination date of October 18, 2002.
During the first quarter of fiscal year 2000 it became apparent that the Company
would not meet its minimum EBITDA and maximum debt to EBITDA covenants for the
quarter ending January 30, 2000 and for each of the remaining periods in fiscal
2000. As a result, the Company renegotiated these covenants, as well as related
financial ratio covenants. See "Recent Developments - Liquidity Issues" above
regarding the Company's request for modifications to the Inventory Facility and
for additional information about the Company's liquidity position.
Cash used in operating activities was $117 million in the quarter ended January
30, 2000 as compared to $24 million used by operating activities in the quarter
ended January 31, 1999. The change was primarily due to a net loss of $48
million and an increase in cash used in accounts receivable offset by cash
provided by inventory and a decrease in cash used by a change in accounts
payable. During the quarter ended January 30, 2000, cash used by accounts
receivable was $177 million, compared to a $230 million provided by accounts
receivable in the quarter ended January 31, 1999. The change was primarily due
to a reduction in the amount of receivables sold to a finance company in the
first fiscal quarter of 2000. The amount of sold receivables decreased from $255
million at October 31, 1999 to zero at January 30, 2000. The change in inventory
provided $91 million in cash in the first quarter of fiscal 2000 compared to $19
million used in the first quarter of fiscal 1999. The change in inventory was
primarily due to the Company's efforts to decrease inventory levels in response
to lower sales volume and borrowing capability. Changes in accounts payable
provided cash of $1 million in the quarter ended January 30, 2000 compared to
cash used of $243 million for the quarter ended January 31, 1999. Cash used in
the first quarter of fiscal 1999 was primarily due to changes in supplier credit
terms.
Cash used in investing activities decreased from $18 million in the first
quarter of fiscal 1999 to $3 million in the first quarter of fiscal 2000
primarily due to a decrease in purchases of property and equipment as a result
of reduced capital expenditure initiatives to facilitate cash flow.
Cash provided by financing activities was $85 million in the first quarter of
fiscal 2000 compared $42 million in the first quarter of fiscal 1999. The change
was primarily due to borrowings under the Company's line of credit.
12
<PAGE>
Changes in Supplier Terms and Conditions
The key suppliers of the Company provide various incentives for promoting and
marketing their product offerings. A large portion of the incentives is passed
on to the Company's customers. However, a portion of the incentives positively
impact the Company's income.
Beginning in fiscal 1998, the major manufacturers announced and/or instituted
changes in their sales incentive programs and inventory management programs.
Pursuant to these changes, the major manufacturers have (i) reduced the amount
of product that the Company is allowed to return, (ii) reduced the amount of
price protection coverage offered to the Company and (iii) changed incentives to
programs based on sales of the manufacturers' products, rather than on purchases
of the products from the manufacturers.
In addition, several of the Company's major suppliers have changed the terms of
their credit arrangements with the Company. These changes include a decrease in
the number of days the Company has to pay for product purchases and a decrease
in the amount of reseller purchases from the Company that the suppliers are
willing to subsidize. These changes have increased the Company's working capital
requirements and financing costs. Further changes in incentives or other terms
and conditions could have a material adverse effect on the Company's operating
results.
During the quarter ended August 1, 1999, the Company announced a change in the
Pinacor product sourcing relationship with Compaq. In October 1999, the Company
began sourcing certain Compaq products from other Compaq distributors instead of
sourcing directly from Compaq. Compaq has indicated that Pinacor remains an
authorized distributor and reseller and will be able to distribute the full
range of Compaq products. In addition, Pinacor will continue to order some
products directly from Compaq. During the quarter ended January 30, 2000, Compaq
sales decreased approximately $106 million, or 55%, when compared to the quarter
ended October 31, 1999. In addition to the declines in Compaq revenue, the
Company believes that sales of other suppliers' products have decreased as
customers that purchase Compaq products from other sources move purchases of
other products to those sources. In response to the Compaq change as well as
other changes in product sales, Pinacor has taken and will continue to take
actions to reduce operating expenses to partially offset the impact of the
revenue decline. See "Recent Developments - Response to Current Issues" above.
Potential Fluctuations in Quarterly Results
The Company's operating results may vary significantly from quarter to quarter
depending on certain factors, including, but not limited to, demand for the
Company's information technology products and services, availability of working
capital and product financing, the amount of supplier incentive funds received
by the Company, the results of acquired businesses, product availability,
competitive conditions, new product introductions, changes in customer order
patterns, changes in supplier terms and conditions and general economic
conditions. In particular, the Company's operating results are sensitive to
changes in the mix of product and service revenues, product margins, inventory
adjustments, and interest rates. Although the Company attempts to control its
expense levels, these levels are based, in part, on anticipated revenues.
Therefore, the Company may not be able to control spending in a timely manner to
compensate for any unexpected revenue shortfall. As a result, quarterly
period-to-period comparisons of the Company's financial results are not
necessarily meaningful and should not be relied upon as an indication of future
performance. In addition, although the Company's financial performance has not
exhibited significant seasonality in the past, the Company and the computer
industry in general tend to follow a sales pattern with peaks occurring near the
end of the calendar year, due primarily to special supplier promotions and
year-end business purchases. However, sales for the quarter ended January 31,
2000 were negatively impacted due to Year 2000 concerns.
13
<PAGE>
Inflation
The Company believes that inflation has generally not had a material impact on
its operations.
14
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Agreement and General Release, dated February 15, 2000, between MicroAge,
Inc. and James R. Daniel.
10.2 Agreement and General Release, dated February 15, 2000, between Pinacor,
Inc., and James G. Manton.
10.3 Second Amendment to the MicroAge, Inc. Retirement Savings Plan, dated as
of March 15, 2000.
10.4 Second Amendment to the MicroAge, Inc. Executive Supplemental Savings
Plan, dated as of March 15, 2000.
10.5 Letter agreement, dated March 12, 1999, regarding extension of Authorized
Apple Wholesaler U.S. Sales Agreement, from Apple Computer, Inc. to
Pinacor, Inc.
10.6 Amendment to Authorized Apple Wholesaler U.S. Sales Agreement, dated May
17, 1999, between Pinacor, Inc. and Apple Computer, Inc.
10.7 Letter agreement, dated June 25, 1999, regarding Revised Authorization
Requirements Applicable to Build-To-Order Business Systems Products under
Compaq Computer Corporation United States Reseller Agreement dated June 1,
1995, from Compaq Computer Corporation to MicroAge Computer Centers, Inc.
10.8 Compaq Computer Corporation Channel Program Authorization Requirements,
dated September 1, 1999, between Compaq Computer Corporation and MicroAge
Computer Centers, Inc.
10.9 Distributor Agreement, dated September 14, 1999, between Compaq Latin
America Corporation and Pinacor, Inc.
10.10 U.S. Agreement for Authorized Distributor, dated March 25, 1999, between
Pinacor, Inc. and Hewlett-Packard Company.
10.11 Software Installation Agreement, dated November 1, 1999, between Pinacor,
Inc. and Hewlett-Packard Company.
10.12 IBM Business Partner Agreement, Authorized Assembler Attachment, undated,
between Pinacor, Inc. and International Business Machines Corporation.
10.13 IBM Business Partner Agreement, Co-Location Attachment, dated January 12,
1999, between Pinacor, Inc. and International Business Machines
Corporation.
10.14 Amendment to IBM Business Partner Agreement, Co-Location Attachment, dated
May 25, 1999, between Pinacor, Inc. and International Business Machines
Corporation.
10.15 IBM Business Partner Agreement, Distributor Profile, dated September 10,
1999, between Pinacor, Inc. and International Business Machines
Corporation.
10.16 IBM Digital Manufacturing Solutions (DMS), Project Change Authorization,
dated May 24, 1999, between Pinacor, Inc. and International Business
Machines Corporation.
10.17 IBM Business Partner Agreement Printing Systems Company
Reseller/Distributor Profile, dated September 27, 1999, between Pinacor,
Inc. and International Business Machines Corporation.
27 Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during the quarter ended
January 30, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MICROAGE, INC.
(Registrant)
Date: March 20, 2000 By: /s/ Jeffrey D. McKeever
-----------------------
Jeffrey D. McKeever
Chairman of the Board and
Chief Executive Officer
Date: March 20, 2000 By: /s/ Raymond L. Storck
---------------------
Raymond L. Storck
Vice President, Controller,
Chief Financial Officer and Treasurer
AGREEMENT AND GENERAL RELEASE
This Agreement and General Release (hereinafter "Agreement")
is entered into this 15th day of February, 2000, in the County of Maricopa,
State of Arizona, between Pinacor, Inc., a Delaware corporation ("Pinacor"), and
James G. Manton ("Executive").
RECITALS
WHEREAS, Executive is serving as the President of Pinacor until
February 15, 2000;
WHEREFORE, the parties have agreed that it is in their respective best
interests to amicably resolve all matters relative to Executive's employment
with Pinacor and separation therefrom pursuant to the following terms and
conditions:
I.
Pinacor covenants and agrees to provide Executive with the severance
benefits specified in Paragraphs 1-9 on Exhibit A attached hereto (the
"Severance Benefits") and the additional benefits specified in Paragraph 10 on
Exhibit A attached hereto (the "Additional Benefits"). Executive covenants and
agrees to execute the resignation letter attached hereto as Exhibit B resigning
from his position as an officer of the companies listed on such exhibit. The
parties acknowledge and agree that the Severance Benefits provided to Executive
as set forth on Exhibit A are provided pursuant to Section 4.2 of the Employment
Agreement, dated as of August 1, 1998, by and among Pinacor, MicroAge, Inc., and
Executive (the "Employment Agreement"). The parties agree that Pinacor will not
provide the Additional Benefits hereunder until Executive signs and returns the
"Non-Revocation" form attached hereto as Exhibit C.
Executive's separation from employment with Pinacor will be effective
as of February 15, 2000 (the "Separation Date").
It is expressly understood and agreed that, other than the severance
benefits being provided to Executive pursuant to this Agreement, neither Pinacor
nor any of its affiliates is otherwise indebted to Executive for any other
damages, wages, benefits, or reimbursements.
II.
In exchange for the promises set forth in Paragraph I above, Executive
does hereby forever release, discharge, cancel, waive, and acquit, for himself
and for his marital community, heirs, executors, administrators and assigns,
Pinacor and any and all of its affiliates, subsidiaries, corporate parents,
agents, officers, owners, employees, attorneys, successors and assigns, of and
from any and all rights, claims, demands, causes of action, obligations,
damages, penalties, fees, costs, expenses, and liability of any nature
whatsoever which Executive has, had or may hereafter have against them or any of
them, arising out of, or by reason of any cause, matter, or thing whatsoever
existing as of the date of execution of this Agreement, WHETHER KNOWN TO THE
PARTIES AT THE TIME OF EXECUTION OF THIS AGREEMENT OR NOT. This FULL WAIVER OF
ALL CLAIMS includes, without limitation, attorney's fees, any claims, demands,
or causes of action arising out of, or relating in any manner whatsoever to, the
<PAGE>
employment and/or termination of the employment of Executive, such as, BUT NOT
LIMITED TO, any charge, claim, lawsuit or other proceeding arising under the
Civil Rights Act of 1866, 1964, Title VII as amended by the Civil Rights Act of
1991, the Americans with Disabilities Act, the Age Discrimination in Employment
Act (ADEA), the Labor Management Relations Act, the Employee Retirement Income
Security Act, the Consolidated Omnibus Budget Reconciliation Act, the Fair Labor
Standards Act, the Arizona Civil Rights Act, the Worker Adjustment and
Retraining and Notification Act, Workman's Compensation Claims, or any other
federal, state, or local statute. Executive further covenants and agrees not to
institute, nor cause to be instituted, any legal proceeding, including filing
any claim or complaint with any government agency alleging any violations of law
or public policy, against Pinacor and/or any and all of its affiliates,
subsidiaries, corporate parents, agents, officers, owners, employees, successors
and assigns premised upon any legal theory or claim whatsoever, including
without limitation, contract, tort, wrongful discharge, personal injury,
interference with contract, defamation, negligence, infliction of emotional
distress, fraud, or deceit, except to enforce the terms of this Agreement.
III.
The parties and their respective attorneys agree to hold in strict
confidence the terms and conditions of this Agreement. The parties covenant and
agree that neither they nor their attorneys will, either directly or through any
other person, agent or representative, discuss publicly or privately the nature
or content of this Agreement with any non-party to this Agreement, except as to
either party's accountants, any state tax department or the federal Internal
Revenue Service, or any other state or federal official in response to a
legitimate inquiry.
IV.
Executive, by his execution of this Agreement, avows that the following
statements are true:
A. That he has been given the opportunity and has in fact read this
entire Agreement, that it is in plain language, and he has had all questions
regarding its meaning answered to his satisfaction;
B. That he has been advised to seek independent advice and/or counsel
of his choosing and that he has been given the full opportunity to seek such
advice and/or counsel;
C. That he fully understands the contents of this Agreement and
understands that it is a FULL WAIVER OF ALL CLAIMS, including arbitration claims
and awards, including any rights under the ADEA and as to ADEA claims is not a
waiver of future claims;
D. That this FULL WAIVER OF ALL CLAIMS is given in return for valuable
consideration, as provided under the terms of this Agreement;
E. That he enters into this Agreement knowingly and voluntarily in
exchange for the promises referenced in this Agreement and that no other
representations have been made to him to induce or influence his execution of
this Agreement. Executive has been given at least twenty-one (21) days within
which to consider this Agreement before signing and seven (7) days
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<PAGE>
following his execution of the Agreement to revoke this Agreement. The Agreement
shall not become effective or enforceable until the foregoing revocation period
has expired and Executive has signed and returned the "Non-Revocation" form
attached hereto as Exhibit C; and
F. That he understands his continuing obligations under the Employment
Agreement, including but not limited to his obligations (a) to maintain the
confidentiality of Confidential Information (ss. 5.1 of the Employment
Agreement), and (b) not to compete with Pinacor or its affiliates for a
twenty-four month period (ss. 5.9 of the Employment Agreement). Without limiting
the generality of Executive's non-competition obligations, during the
Non-Competition Period (as defined in Section 5.9(a) of the Employment
Agreement) Executive agrees that Executive will not, within the United States,
act as an agent, representative, consultant, officer, director, member,
independent contractor, or employee of Arrow Electronics, Inc.; Avnet, Inc.; CHS
Electronics, Inc.; Compaq Computer Corporation; CompuCom Systems, Inc.; CompUSA,
Inc.; Dell Computer; En Pointe Technologies, Inc.; Entex Information Services;
GE Capital; Hewlett-Packard; Ikon Office Solutions, Inc.; Inacom Corp; Ingram
Micro, Inc.; Insight Enterprises Inc.; Integrated Information Systems; Merisel,
Inc.; Pomeroy Computer Resources, Inc.; Sarcom; Tech Data Corporation; Xerox
Connect; or any Affiliates or successors of the foregoing.
V.
The parties confirm their continuing obligations under Section 5.10 of
the Employment Agreement, which provides as follows:
During the term of this Agreement, the Non-Competition Period, the
Employee Non-Solicitation Period, and the Customer Non-Solicitation
Period, neither the Executive nor the Company will disparage the other,
and neither will disclose to any third party the conditions of
Executive's employment with the Company, except as may be required (i)
pursuant to applicable law or regulations, including the rules and
regulations of the Securities and Exchange Commission, (ii) to
effectuate the provisions of employee plans or programs and insurance
policies, or (iii) as may be otherwise contemplated herein or unless
such information becomes publicly available without fault of the party
making such disclosure.
VI.
This Agreement shall be governed in all respects, whether as to
validity, construction, capacity, performance, or otherwise, by the laws of the
State of Arizona, and no action involving this Agreement may be brought except
in the Superior Court for the State of Arizona or the Federal District Court for
the District of Arizona.
VII.
If any provision of this Agreement or the application thereof is held
to be invalid, void, or unenforceable for whatever reason, the remaining
provisions not so declared shall nevertheless continue in full force and effect
without being impaired in any manner whatsoever.
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<PAGE>
VIII.
This Agreement constitutes the sole and entire Agreement between the
parties hereto, and supersedes any and all understandings and agreements made
prior hereto, other than the Employment Agreement. There are no collateral
understandings, representations, or agreements other than those contained herein
or in the Employment Agreement. It is understood and agreed that the execution
of this Agreement by Pinacor is not an admission of liability on its part to
Executive, but is an agreement to put to rest any claim of any kind whatsoever
relating to the employment relationship or otherwise, except that the parties
may enforce their respective rights under the Employment Agreement to the extent
they are not inconsistent with this Agreement.
IN WITNESS WHEREOF, the undersigned parties have signed this Agreement
on the date indicated herein.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
CAUTION! THIS IS A RELEASE! READ BEFORE SIGNING!
PINACOR, INC.
By: /s/ Jeffrey D. McKeever
------------------------------
Its: Chairman of the Board
Date: March 2, 2000
James G. Manton
/s/ James G. Manton
------------------------------
Date: March 2, 2000
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<PAGE>
VERIFICATION
STATE OF ARIZONA )
) ss.
County of Maricopa )
On this 2nd day of March, 2000, before me, the undersigned Notary Public,
personally appeared James G. Manton, known to me to be the person whose name is
subscribed to the within instrument, and acknowledged that he executed the same
for the purpose therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Barbara L. Baker
-------------------------------
Notary Public
My Commission Expires August 23, 2000
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<PAGE>
Exhibit A
Severance Benefits
1. Section 4.2 Payments. Pinacor and Executive acknowledge that
Executive is entitled to the following payments pursuant to Section 4.2 of the
Employment Agreement (all capitalized terms have the meanings ascribed to such
terms in the Employment Agreement):
A. Accrued Base Salary (Section 4.2(a)): Executive
acknowledges receipt of all Base Salary Payments through the Separation Date.
B. Accrued Vacation Payment (Section 4.2(b)): see Paragraph 2
below.
C. Accrued Reimbursable Expenses (Section 4.2(c)): see
Paragraph 3 below.
D. Accrued Benefits (Section 4.2(d)): See Paragraphs 4-5
below.
E. Accrued Annual Fixed Cash Bonus and Annual Incentive Bonus
(Section 4.2(e)): not applicable.
F. Exercise of Vested Options and Warrants (Section 2(f)): see
Paragraph 8 below.
2. Accrued Vacation Days. As of February 15, 2000, Executive had 264
hours of unused accrued hours, or 33 days (the "Accrued Vacation Days"). Pinacor
will reimburse Executive for such unused accrued vacation days in an amount
equal to Executive's current annual base salary ($350,000) less his 1999 MEP
waiver ($26,500) multiplied by a fraction, the numerator of which is the number
of unused accrued vacation days (33), and the denominator of which is 260. On or
promptly following the Separation Date, Pinacor will pay Executive $37,790.36
for these accrued unused vacation days.
3. Reimbursable Expenses. Pinacor will, in accordance with standard
policies, reimburse Executive for all reasonable travel and other expenses
incurred by Executive prior to the Separation Date and submitted for
reimbursement on or before March 15, 2000.
4. Medical and Dental Plans. As of the Separation Date, Pinacor will
cease making contributions to the monthly premiums it made while Executive was
an active Pinacor associate. Executive's monthly premiums are paid through
February 29, 2000. Executive will be entitled to 18 months of COBRA coverage
(through August 31, 2001) (the "COBRA Period"). Executive will be required to
pay the full COBRA premium in order to continue medical and/or dental benefits
during the COBRA Period. Any questions regarding COBRA coverage should be
directed to Tom Bock at 480-366-2527 or Tonya Fischer at 480-366-2661.
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<PAGE>
5. 401(k) Plan and Supplemental Savings Plan. Executive participates in
the Pinacor Retirement Savings Plan (the "401(k) Plan") and the Pinacor
Executive Supplemental Savings Plan (the "ESSP"). Executive has received
information regarding his options under the 401(k) Plan and the ESSP. Any
questions regarding the 401(k) Plan or the ESSP should be directed to Tom Bock
at 480-366-2527 or Vanessa Miller at 480-366-2287. As of the Separation Date, no
additional contributions will be made to the 401(k) Plan or the ESSP.
6. Split-Dollar Insurance Agreement. Executive and Pinacor entered into
a Split-Dollar Insurance Agreement, dated as of August 1, 1998 (the
"Split-Dollar Agreement"). Pinacor has paid the premium payments on the Policy
(as such term is defined in the Split-Dollar Agreement) through August 24, 2000.
By March 15, 2000, Executive may elect to retain the Policy by paying Pinacor an
amount equal to Pinacor's security interest in the Policy ($38,266.08). If
Executive does not elect to retain the Policy, Pinacor's obligations under the
Split-Dollar Agreement will terminate and Executive will transfer the Policy to
Pinacor pursuant to the Policy Change of Ownership attached hereto as Exhibit D.
Executive agrees to sign Exhibit D at the same time Executive signs this
Agreement. Pinacor will not cause the Policy to be transferred to Pinacor unless
Executive has not paid Pinacor the security interest in the Policy by March 16,
2000.
7. Disability Insurance. Executive currently has disability insurance
pursuant to the UNUM Disability Policy (the "UNUM Policy"). The UNUM Policy will
terminate as of the Separation Date. Any questions regarding the UNUM Policy
should be directed to Ellen Steele-Allare at 602-955-7370.
8. Stock Options (Non-MEP). During Executive's employment Executive was
granted the following stock options:
A. Pursuant to the 1994 Long-Term Incentive Plan Grant Letter,
dated as of December 14, 1994 (the "1994 Grant Letter"), Executive was
granted the option to purchase a total of 3,000 shares of Common Stock
at an exercise price of $10.88 per share. Pursuant to the terms of the
1994 Grant Letter, on or before the Separation Date, Executive is
entitled to purchase up to 1,800 shares of Common Stock at an exercise
price of $10.88 per share. In accordance with the terms of the 1994
Grant Letter, all options thereunder will terminate on the Separation
Date.
B. Pursuant to the 1994 Stock Option Plan Grant Letter, dated
as of March 15, 1995 (the "March 1995 Grant Letter"), Executive was
granted the option to purchase a total of 3,000 shares of Common Stock
at an exercise price of $9.25 per share. Pursuant to the terms of the
March 1995 Grant Letter, on or before the Separation Date, Executive is
entitled to purchase up to 1,200 shares of Common Stock at an exercise
price of $9.25 per share. In accordance with the terms of the March
1995 Grant Letter, all options thereunder will terminate on the
Separation Date.
C. Pursuant to the 1994 Stock Option Plan Grant Letter, dated
as of December 13, 1995 (the "December 1995 Grant Letter"), Executive
was granted the
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<PAGE>
option to purchase a total of 3,000 shares of Common Stock at an
exercise price of $8.75 per share. Pursuant to the terms of the
December 1995 Grant Letter, on or before the Separation Date, Executive
is entitled to purchase up to 1,800 shares of Common Stock at an
exercise price of $8.75 per share. In accordance with the terms of the
December 1995 Grant Letter, all options thereunder will terminate on
the Separation Date.
D. Pursuant to the 1994 Long-Term Incentive Plan Incentive
Stock Option Award, dated December 4, 1996 (the "1996 Incentive
Award"), Executive was granted the option to purchase a total of 30,000
shares of Common Stock at an exercise price of $24.00 per share.
Pursuant to the terms of the 1996 Incentive Award, on or before the
Separation Date, Executive is entitled to purchase up to 18,000 shares
of Common Stock at an exercise price of $24.00 per share. In accordance
with the terms of the 1996 Incentive Award, all options thereunder will
terminate on the Separation Date.
E. Pursuant to the 1994 Long-Term Incentive Plan Incentive
Stock Option Award, dated April 2, 1998 (the "1998 Incentive Award"),
Executive was granted the option to purchase a total of 40,000 shares
of Common Stock at an exercise price of $14.35 per share. Pursuant to
the terms of the 1998 Incentive Award, on or before the Separation
Date, Executive is entitled to purchase up to 8,000 shares of Common
Stock at an exercise price of $14.35 per share. In accordance with the
terms of the 1998 Incentive Award, all options thereunder will
terminate on the Separation Date.
F. Pursuant to the 1997 Long-Term Incentive Plan Stock Option
Award, dated January 28, 1999 (the "January 1999 Incentive Award"),
Executive was granted the option to purchase a total of 50,000 shares
of Common Stock at an exercise price of $16.56 per share. Pursuant to
the terms of the January 1999 Incentive Award, on or before the
Separation Date, Executive is entitled to purchase up to 10,000 shares
of Common Stock at an exercise price of $16.56 per share. In accordance
with the terms of the January 1999 Incentive Award, all options
thereunder will terminate on the Separation Date.
G. Pursuant to the 1997 Long-Term Incentive Plan Stock Option
Award, dated April 5, 1999 (the "April 1999 Incentive Award"),
Executive was granted an option to purchase a total of 50,000 shares of
Common Stock at an exercise price of $5.44 per share. As of the
Separation Date, none of the options under the April 1999 Incentive
Award had vested. In accordance with the terms of the April 1999
Incentive Award, all options thereunder will terminate on the
Separation Date.
H. Pursuant to the 1997 Long-Term Incentive Plan Stock Option
Award, dated December 2, 1999 (the "December 1999 Incentive Award"),
Executive was granted an option to purchase a total of 50,000 shares of
Common Stock at an exercise price of $4.1875 per share. As of the
Separation Date, none of the options under the December 1999 Incentive
Award had vested. In accordance with the terms of the
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<PAGE>
December 1999 Incentive Award, all options thereunder will terminate on
the Separation Date.
9. Management Equity Programs.
A. Pursuant to the 1997 Management Equity Program Award
Agreement, dated November 4, 1996, as amended (the "1997 MEP
Agreement"), Executive had the right to receive 59,574 options as a
result of his election to restructure his compensation package by
reducing his compensation. In accordance with the terms of the 1997 MEP
Agreement, as of the Separation Date, Executive has obtained 59,574
vested options under the 1997 MEP Agreement by reducing his
compensation. Following the Separation Date, these options will
continue to vest in accordance with the terms of the 1997 MEP
Agreement.
B. Pursuant to the 1999 Management Equity Program Award
Agreement dated, April 23, 1999 (the "1999 MEP Agreement"), Executive
had the right to receive up to 18,043 options as a result of his
election to waive a portion of his salary during the period from May 1,
1999 through May 1, 2000. In accordance with the terms of the 1999 MEP
Agreement, on the Separation Date, Executive has obtained 14,284
options under the 1999 MEP Agreement by reducing his compensation
($20,979.16 waived through February 15, 2000 divided by $5.875 (common
stock closing price on April 23, 1999) multiplied by 4 (the leverage
factor)). Following the Separation Date, these options will continue to
vest in accordance with the terms of the 1999 MEP Agreement.
10. Extension of Options. Pursuant to a unanimous written consent dated
as of February 15, 2000, the Compensation Committee extended the exercise period
of all that had vested as of the Separation Date, as described in Section 8,
paragraphs A-F above, for twelve (12) months after the Separation Date.
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<PAGE>
Exhibit B
February 15, 2000
To the Board of Directors of each of the corporations attached hereto as
Schedule 1:
I hereby resign my positions as an officer of Pinacor, Inc. and its
subsidiaries and affiliates, including each of the corporations attached hereto
as Schedule 1, effective as of February 15, 2000.
Sincerely,
/s/ James G. Manton
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<PAGE>
Schedule 1
COMPANY POSITION
- ------- --------
Pinacor, Inc. President
Complete Distribution, Inc. President
ConnectWorks, Inc. President
Contract PC, Inc. President
InterPC DE BOLIVIA President
InterPC DE COLOMBIA President
InterPC DE ECUADOR President
InterPC DE VENEZUELA President
Pinacor Logistics Services, Inc. President
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<PAGE>
Exhibit C
Non-Revocation
As of the Date Shown on This Form
By signing below, I hereby verify that I have chosen not to revoke my agreement
to, and execution of, the Agreement and General Release. My signature confirms
my renewed agreement to the terms of that Agreement, including the release and
waiver of any and all claims relating to my employment with the Employer and its
successors, assigns, and affiliated companies, and/or the termination of that
employment
/s/ James G. Manton
- -------------------------------------------------------------
James G. Manton* Date: March 17, 2000
*Do not sign, date, or return this document until eight (8) days after you sign
the Agreement and General Release. The signed and dated document should be
returned to James H. Domaz, Pinacor, Inc., 2400 South MicroAge Way, MS #36,
Tempe, Arizona 85282-1896.
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<PAGE>
VERIFICATION
STATE OF ARIZONA )
) ss.
County of Maricopa )
On this 17th day of March, 2000, before me, the undersigned Notary Public,
personally appeared James G. Manton, known to me to be the person whose name is
subscribed to the within instrument, and acknowledged that he executed the same
for the purpose therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Barbara L. Baker
-----------------------------------
Notary Public
My Commission Expires August 23, 2000
-14-
<PAGE>
Exhibit D
(Policy Change of Ownership)
-15-
AGREEMENT AND GENERAL RELEASE
This Agreement and General Release (hereinafter "Agreement") is entered
into this 15th day of February, 2000, in the County of Maricopa, State of
Arizona, between MicroAge, Inc., a Delaware corporation ("MicroAge"), and James
R. Daniel ("Executive").
RECITALS
WHEREAS, Executive is currently serving as the Executive Vice President,
Chief Financial Officer, and Treasurer of MicroAge;
WHEREFORE, the parties have agreed that it is in their respective best
interests to amicably resolve all matters relative to Executive's employment
with MicroAge and separation therefrom pursuant to the following terms and
conditions:
I.
MicroAge covenants and agrees to provide Executive with the severance
benefits specified in Paragraphs 1-9 on Exhibit A attached hereto (the
"Severance Benefits") and the additional benefits specified in Paragraphs 10-11
on Exhibit A attached hereto (the "Additional Benefits"). Executive covenants
and agrees to execute the resignation letter attached hereto as Exhibit B
resigning from his position as an officer and/or director of the companies
listed on such exhibit. The parties acknowledge and agree that the Severance
Benefits provided to Executive as set forth on Exhibit A are provided pursuant
to Section 4.2 of the Amended and Restated Employment Agreement, dated as of
November 4, 1996, by and between MicroAge and Executive (the "Employment
Agreement"). The parties agree that MicroAge will not provide the Additional
Benefits hereunder until Executive signs and returns the "Non-Revocation" form
attached hereto as Exhibit C.
Executive's separation from employment with MicroAge will be effective as
of February 15, 2000 (the "Separation Date").
It is expressly understood and agreed that, other than the severance
benefits being provided to Executive pursuant to this Agreement, neither
MicroAge nor any of its affiliates is otherwise indebted to Executive for any
other damages, wages, benefits, or reimbursements.
II.
In exchange for the promises set forth in Paragraph I above, Executive does
hereby forever release, discharge, cancel, waive, and acquit, for himself and
for his marital community, heirs, executors, administrators and assigns,
MicroAge and any and all of its affiliates, subsidiaries, corporate parents,
agents, directors, officers, owners, employees, attorneys, successors and
assigns, of and from any and all rights, claims, demands, causes of action,
obligations, damages, penalties, fees, costs, expenses, and liability of any
nature whatsoever which Executive has, had or may hereafter have against them or
any of them, arising out of, or by reason of any cause, matter, or thing
whatsoever existing as of the date of execution of this Agreement, WHETHER KNOWN
TO THE PARTIES AT THE TIME OF EXECUTION
<PAGE>
OF THIS AGREEMENT OR NOT. This FULL WAIVER OF ALL CLAIMS includes, without
limitation, attorney's fees, any claims, demands, or causes of action arising
out of, or relating in any manner whatsoever to, the employment and/or
termination of the employment of Executive, such as, BUT NOT LIMITED TO, any
charge, claim, lawsuit or other proceeding arising under the Civil Rights Act of
1866, 1964, Title VII as amended by the Civil Rights Act of 1991, the Americans
with Disabilities Act, the Age Discrimination in Employment Act (ADEA), the
Labor Management Relations Act, the Employee Retirement Income Security Act, the
Consolidated Omnibus Budget Reconciliation Act, the Fair Labor Standards Act,
the Arizona Civil Rights Act, the Worker Adjustment and Retraining and
Notification Act, Workman's Compensation Claims, or any other federal, state, or
local statute. Executive further covenants and agrees not to institute, nor
cause to be instituted, any legal proceeding, including filing any claim or
complaint with any government agency alleging any violations of law or public
policy, against MicroAge and/or any and all of its affiliates, subsidiaries,
corporate parents, agents, officers, owners, employees, successors and assigns
premised upon any legal theory or claim whatsoever, including without
limitation, contract, tort, wrongful discharge, personal injury, interference
with contract, defamation, negligence, infliction of emotional distress, fraud,
or deceit, except to enforce the terms of this Agreement. Notwithstanding the
foregoing, neither the Company nor Executive intends that Executive waive his
indemnification and other rights under Article IX of the Company's Amended and
Restated Certificate of Incorporation.
III.
The parties and their respective attorneys agree to hold in strict
confidence the terms and conditions of this Agreement. The parties covenant and
agree that neither they nor their attorneys will, either directly or through any
other person, agent or representative, discuss publicly or privately the nature
or content of this Agreement with any non-party to this Agreement, except as to
either party's accountants, any state tax department or the federal Internal
Revenue Service, or any other state or federal official in response to a
legitimate inquiry.
IV.
Executive, by his execution of this Agreement, avows that the following
statements are true:
A. That he has been given the opportunity and has in fact read this entire
Agreement, that it is in plain language, and has had all questions regarding its
meaning answered to his satisfaction;
B. That he has been advised to seek independent advice and/or counsel of
his choosing and that he has been given the full opportunity to seek such advice
and/or counsel;
C. That he fully understands the contents of this Agreement and understands
that it is a FULL WAIVER OF ALL CLAIMS, including arbitration claims and awards,
including any rights under the ADEA and as to ADEA claims is not a waiver of
future claims;
D. That this FULL WAIVER OF ALL CLAIMS is given in return for valuable
consideration, as provided under the terms of this Agreement;
2
<PAGE>
E. That he enters into this Agreement knowingly and voluntarily in exchange
for the promises referenced in this Agreement and that no other representations
have been made to him to induce or influence his execution of this Agreement.
Executive has been given at least twenty-one (21) days within which to consider
this Agreement before signing and seven (7) days following his execution of the
Agreement to revoke this Agreement. The Agreement shall not become effective or
enforceable until the foregoing revocation period has expired and Executive has
signed and returned the "Non-Revocation" form attached hereto as Exhibit C; and
F. That he understands his continuing obligations under the Employment
Agreement, including but not limited to his obligations (a) to maintain the
confidentiality of Confidential Information (ss. 5.1 of the Employment
Agreement), and (b) not to compete with MicroAge or its affiliates for a
twenty-four month period (ss. 5.9 of the Employment Agreement). Without limiting
the generality of Executive's non-competition obligations, during the
Non-Competition Period (as defined in Section 5.9(a) of the Employment
Agreement) Executive agrees that Executive will not, within the United States,
act as an agent, representative, consultant, officer, director, member,
independent contractor, or employee of Arrow Electronics, Inc.; Avnet, Inc.; CHS
Electronics, Inc.; Compaq Computer Corporation; CompuCom Systems, Inc.; CompUSA,
Inc.; Dell Computer; En Pointe Technologies, Inc.; Entex Information Services;
GE Capital; Hewlett-Packard; Ikon Office Solutions, Inc.; Inacom Corp; Ingram
Micro, Inc.; Insight Enterprises Inc.; Integrated Information Systems; Merisel,
Inc.; Pomeroy Computer Resources, Inc.; Sarcom; Tech Data Corporation; Xerox
Connect; or any Affiliates or successors of the foregoing.
V.
The parties confirm their continuing obligations under Section 5.10 of the
Employment Agreement, which provides as follows:
During the term of this Agreement and the Non-Competition Period, neither
the Executive nor the Company will disparage the other, and neither will
disclose to any third party the conditions of Executive's employment with
the Company, except as may be required (i) pursuant to applicable law or
regulations, including the rules and regulations of the Securities and
Exchange Commission, (ii) to effectuate the provisions of employee plans or
programs and insurance policies, or (iii) as may be otherwise contemplated
herein or unless such information becomes publicly available without fault
of the party making such disclosure.
VI.
For a period of twelve (12) months following the Separation Date, Executive
agrees to assist MicroAge and make himself reasonably available to MicroAge in
connection with ongoing or new litigation or other proceedings to which MicroAge
or any of its affiliates is, or may become, a party and for which Executive may
have information or knowledge relevant to any such litigation or proceedings.
MicroAge agrees to promptly reimburse Executive for all reasonable travel and
other expenses incurred by Executive in performing his obligations under this
Article VI.
3
<PAGE>
VII.
This Agreement shall be governed in all respects, whether as to validity,
construction, capacity, performance, or otherwise, by the laws of the State of
Arizona, and no action involving this Agreement may be brought except in the
Superior Court for the State of Arizona or the Federal District Court for the
District of Arizona.
VIII.
If any provision of this Agreement or the application thereof is held to be
invalid, void, or unenforceable for whatever reason, the remaining provisions
not so declared shall nevertheless continue in full force and effect without
being impaired in any manner whatsoever.
IX.
This Agreement constitutes the sole and entire Agreement between the
parties hereto, and supersedes any and all understandings and agreements made
prior hereto, other than the Employment Agreement. There are no collateral
understandings, representations, or agreements other than those contained herein
or in the Employment Agreement. It is understood and agreed that the execution
of this Agreement by MicroAge is not an admission of liability on its part to
Executive, but is an agreement to put to rest any claim of any kind whatsoever
relating to the employment relationship or otherwise, except that the parties
may enforce their respective rights under the Employment Agreement to the extent
they are not inconsistent with this Agreement.
IN WITNESS WHEREOF, the undersigned parties have signed this Agreement on
the date indicated herein.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
4
<PAGE>
CAUTION! THIS IS A RELEASE! READ BEFORE SIGNING!
------------------------------------------------
MICROAGE, INC.
By: /s/ Jeffrey D. McKeever
-------------------------------------------------------
Its: Chairman of the Board and Chief Executive Officer
Date: February 24, 2000
James R. Daniel
/s/ James R. Daniel
- ----------------------------------------------------------
Date: February 24, 2000
5
<PAGE>
VERIFICATION
STATE OF ARIZONA )
) ss.
County of Maricopa )
On this 24th day of February, 2000, before me, the undersigned Notary
Public, personally appeared James R. Daniel, known to me to be the person whose
name is subscribed to the within instrument, and acknowledged that he executed
the same for the purpose therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Barbara L. Baker
----------------------------------------------
Notary Public
My Commission Expires August 23, 2000
6
<PAGE>
Exhibit A
---------
Severance Benefits
1. Section 4.2 Payments. MicroAge and Executive acknowledge that Executive
is entitled to the following payments pursuant to Section 4.2 of the Employment
Agreement (all capitalized terms have the meanings ascribed to such terms in the
Employment Agreement):
A. Accrued Base Salary (Section 4.2(a)): Executive acknowledges
receipt of all Base Salary Payments through the Separation Date.
B. Accrued Vacation Payment (Section 4.2(b)): see Paragraph 2 below.
C. Accrued Reimbursable Expenses (Section 4.2(c)): see Paragraph 3
below.
D. Accrued Benefits (Section 4.2(d)): See Paragraphs 4-5 below.
E. Accrued Annual Fixed Cash Bonus and Annual Incentive Bonus (Section
4.2(e)): not applicable.
F. Exercise of Vested Options and Warrants (Section 2(f)): see
Paragraph 8 below.
2. Accrued Vacation Days. As of February 15, 2000, Executive had 189 hours
of unused accrued hours, or 23.625 days (the "Accrued Vacation Days"). MicroAge
will reimburse Executive for such unused accrued vacation days in an amount
equal to Executive's current annual base salary less his 1999 MEP waiver
($255,000) multiplied by a fraction, the numerator of which is the number of
unused accrued vacation days (23.625), and the denominator of which is 260. On
or promptly following the Separation Date, MicroAge will pay Executive
$23,170.65 for these accrued unused vacation days.
3. Reimbursable Expenses. MicroAge will, in accordance with standard
policies, reimburse Executive for all reasonable travel and other expenses
incurred by Executive prior to the Separation Date and submitted for
reimbursement on or before March 15, 2000.
4. Medical and Dental Plans. As of the Separation Date, MicroAge will cease
making contributions to the monthly premiums it made while Executive was an
active MicroAge associate. Executive's monthly premiums are paid through
February 29, 2000. Executive will be entitled to 18 months of COBRA coverage
(through August 31, 2001) (the "COBRA Period"). Executive will be required to
pay the full COBRA premium in order to continue medical and/or dental benefits
during the COBRA Period. Any questions regarding COBRA coverage should be
directed to Tom Bock at 480-366-2527 or Tonya Fischer at 480-366-2661.
7
<PAGE>
5. 401(k) Plan and Supplemental Savings Plan. Executive participates in the
MicroAge Retirement Savings Plan (the "401(k) Plan") and the MicroAge Executive
Supplemental Savings Plan (the "ESSP"). Executive has received information
regarding his options under the 401(k) Plan and the ESSP. Any questions
regarding the 401(k) Plan or the ESSP should be directed to Tom Bock at
480-366-2527 or Vanessa Miller at 480-366-2287. As of the Separation Date, no
additional contributions will be made to the 401(k) Plan or the ESSP.
6. Split-Dollar Insurance Agreement. Executive and MicroAge entered into a
Split-Dollar Insurance Agreement, dated as of September 1, 1995 (the
"Split-Dollar Agreement"). MicroAge has paid the premium payments on the Policy
(as such term is defined in the Split-Dollar Agreement) through August 24, 2000.
By March 15, 2000, Executive may elect to retain the Policy by paying MicroAge
an amount equal to MicroAge's security interest in the Policy ($106,273.77). If
Executive does not elect to retain the Policy, MicroAge's obligations under the
Split-Dollar Agreement will terminate and Executive will transfer the Policy to
MicroAge pursuant to the Policy Change of Ownership attached hereto as Exhibit
D. Executive agrees to sign Exhibit D at the same time Executive signs this
Agreement. MicroAge will not cause the Policy to be transferred to MicroAge
unless Executive has not paid MicroAge the security interest in the Policy by
March 16, 2000.
7. Disability Insurance. Executive currently has disability insurance
pursuant to separate policies: (1) the UNUM Disability Policy (the "UNUM
Policy") and (2) the Paul Revere Individual Disability Policy (the "Individual
Policy"). The UNUM Policy will terminate as of April 1, 2000. MicroAge will
cause the Individual Policy to remain in full force and effect until December
22, 2000. After December 22, 2000, Executive will be responsible for the full
premium payments if Executive wishes to continue coverage under the Individual
Policy. If Executive elects to continue coverage under the Individual Policy,
Executive should contact Ellen Steele-Allare (602-955-7370) on or before
December 1, 2000.
8. Stock Options (Non-MEP). During Executive's employment Executive was
granted the following stock options:
A. Pursuant to the 1994 Stock Option Plan Grant Letter, dated
as of December 13, 1995 (the "1994 Grant Letter"), Executive was
granted the option to purchase a total of 10,000 shares of Common Stock
at an exercise price of $8.75 per share. Pursuant to the terms of the
1994 Grant Letter, on or before the Separation Date, Executive is
entitled to purchase up to 8,000 shares of Common Stock at an exercise
price of $8.75 per share. In accordance with the terms of the 1994
Grant Letter, all options thereunder will terminate on the Separation
Date.
B. Pursuant to the 1994 Long-Term Incentive Plan Incentive
Stock Option Award (the "1994 Incentive Award"), dated December 4, 1996
Executive was granted the option to purchase a total of 10,000 shares
of Common Stock at an exercise price of $24.00 per share. Pursuant to
the terms of the 1994 Incentive Award, on or before the Separation
Date, Executive is entitled to purchase up to 6,000 shares of Common
Stock
8
<PAGE>
at an exercise price of $24.00 per share. In accordance with the terms
of the 1994 Incentive Award, all options thereunder will terminate on
the Separation Date.
C. Pursuant to the 1997 Long-Term Incentive Stock Option
Award, dated April 2, 1998 (the "April 1998 Letter"), Executive was
granted the option to purchase a total of 10,000 shares of Common Stock
at an exercise price of $14.375 per share. Pursuant to the terms of the
April 1998 Letter, on or before the Separation Date, Executive is
entitled to purchase up to 2,000 shares of Common Stock at an exercise
price of $14.375 per share, subject to certain stock price hurdles. In
accordance with the terms of the April 1998 Letter, all options
thereunder will terminate on the Separation Date.
D. Pursuant to the 1997 Long-Term Incentive Stock Option
Award, dated September 24, 1998 (the "September 1998 Letter"),
Executive was granted the option to purchase 60,000 shares of Common
Stock at an exercise price of $13.25 per share. Pursuant to the terms
of the September 1998 Letter, on or before the Separation Date,
Executive is entitled to purchase up to 12,000 shares of Common Stock
at an exercise price of $13.25 per share. In accordance with the terms
of the September 1998 Letter, all options thereunder will terminate on
the Separation Date.
E. Pursuant to the 1997 Long-Term Incentive Stock Option
Award, dated January 28, 1999 (the "January 1999 Letter"), Executive
was granted the option to purchase a total of 10,000 shares of Common
Stock at an exercise price of $16.56 per share. Pursuant to the terms
of the January 1999 Letter, on or before the Separation Date, Executive
is entitled to purchase up to 2,000 shares of Common Stock at an
exercise price of $16.56 per share. In accordance with the terms of the
January 1999 Letter, all options thereunder will terminate on the
Separation Date.
F. Pursuant to the 1997 Long-Term Incentive Stock Option
Award, dated April 5, 1999 (the "April 1999 Letter"), Executive was
granted an option to purchase a total of 50,000 shares of Common Stock
at an exercise price of $5.44 per share. As of the Separation Date,
Executive is not entitled to exercise any of the options under the
April 1999 Letter. In accordance with the terms of the April 1999
Letter, all options thereunder will terminate on the Separation Date.
9. Management Equity Programs.
A. Pursuant to the 1994 Management Equity Program Award
Agreement, dated December 9, 1993, as amended (the "1994 MEP
Agreement"), Executive received 104,698 options as a result of his
election to restructure his compensation package by reducing his
compensation. In accordance with the terms of the 1994 MEP Agreement,
as of the Separation Date, Executive has obtained 104,698 options under
the 1994 MEP Agreement by reducing his compensation. Following the
Separation Date, these options will continue to vest in accordance with
the terms of the 1994 MEP Agreement.
9
<PAGE>
B. Pursuant to the 1999 Management Equity Program Award
Agreement, dated April 7, 1999 (the "1999 MEP Agreement"), Executive
had the right to receive up to 57,873 options as a result of his
election to waive a portion of his salary during the period from May 1,
1999 through May 1, 2000. In accordance with the terms of the 1999 MEP
Agreement, on the Separation Date, Executive has obtained 45,816
options under the 1994 MEP Agreement by reducing his compensation
($67,291.73 waived through February 15, 2000 divided by $5.875 (common
stock closing price on April 23, 1999) multiplied by 4 (the leverage
factor)). Following the Separation Date, these options will continue to
vest in accordance with the terms of the 1999 MEP Agreement.
10. Extension of Options. Pursuant to a unanimous written consent dated as
of February 15, 2000, the Compensation Committee extended the exercise period of
all options that had vested as of the Separation Date, as described in Section
8, paragraphs A-E above, for twelve (12) months after the Separation Date.
11. Retention of Certain Equipment. Executive may retain the following
equipment he was using during his employment with MicroAge: (a) the desktop
computer located in Executive's office; (b) the desktop computer located in
Executive's home; (c) the laptop computer used by Executive; (d) the two (2)
cell phones used by Executive (one car phone and one mobile phone); and (e) the
Palm Pilot used by Executive. As of the Separation Date, MicroAge will transfer
the foregoing equipment and the related cellular phone accounts to Executive and
Executive will be responsible for maintaining such accounts.
10
<PAGE>
Exhibit B
---------
February 15, 2000
To the Board of Directors of each of the corporations attached hereto as
Schedule 1:
I hereby resign my positions as an officer and/or director, as the case may
be, of MicroAge, Inc. and its subsidiaries and affiliates, including each of the
corporations attached hereto as Schedule 1, effective as of February 15, 2000.
Sincerely,
James R. Daniel
11
<PAGE>
Schedule 1
----------
COMPANY POSITION
MicroAge, Inc. Executive Vice President,
Chief Financial Officer,
and Treasurer
153000 Canada Limited Treasurer
Complete Distribution, Inc. Treasurer
ConnectWorks, Inc. Treasurer
Contract PC, Inc. Treasurer
ELERIS, Inc. Treasurer
InterCom Marketing, Inc. Treasurer
InterPC DE BOLIVIA Treasurer
InterPC DE COLOMBIA Treasurer
InterPC DE ECUADOR Treasurer
InterPC DE VENEZUELA Treasurer
MaxSource, L.L.C. Treasurer
MCCI Holding Company Treasurer
MCSS, Inc. Treasurer
MicroAge Administration, Inc. Treasurer
MicroAge Computer Centers, Inc. Treasurer
MicroAge Deutschland GmbH Director and Treasurer
MicroAge Europe Limited Treasurer
MicroAge Government, Inc. Treasurer
MicroAge Infosystems Services, Inc. Treasurer
MicroAge Infosystems Services Europe, Limited Treasurer
MicroAge L&D L.L.C. Treasurer
MicroAge of California, Inc. Treasurer
MicroAge Paymaster, Inc. Treasurer
MicroAge Technologies, Inc. Treasurer
MicroAge Technology Services, L.L.C. Treasurer
MicroAge Teleservices, L.L.C. Treasurer
MicroAge (UK) Limited Director and Treasurer
MicroAge Ventures, Inc. Treasurer
MTS Holding Company Treasurer
PCClearance, Inc. Treasurer
PriTech Solutions, Inc. Treasurer
Pinacor, Inc. Treasurer
Pinacor Logistics Services, Inc. Treasurer
Quality Integration Services Treasurer
12
<PAGE>
Exhibit C
---------
Non-Revocation
As of the Date Shown on This Form
By signing below, I hereby verify that I have chosen not to revoke my
agreement to, and execution of, the Agreement and General Release. My signature
confirms my renewed agreement to the terms of that Agreement, including the
release and waiver of any and all claims relating to my employment with the
Employer and its successors, assigns, and affiliated companies, and/or the
termination of that employment
/s/ James R. Daniel
- ----------------------------------------------------------------------
James R. Daniel* Date: March 8, 2000
*Do not sign, date, or return this document until eight (8) days after you sign
the Agreement and General Release. The signed and dated document should be
returned to James H. Domaz, MicroAge, Inc., 2400 South MicroAge Way, Tempe,
Arizona 85282-1896.
13
<PAGE>
VERIFICATION
STATE OF ARIZONA )
) ss.
County of Maricopa )
On this 8th day of March, 2000, before me, the undersigned Notary Public,
personally appeared James R. Daniel, known to me to be the person whose name is
subscribed to the within instrument, and acknowledged that he executed the same
for the purpose therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Barbara L. Baker
------------------------------------
Notary Public
My Commission Expires August 23, 2000
14
<PAGE>
Exhibit D
---------
((Policy Change of Ownership)
15
SECOND AMENDMENT TO THE
MICROAGE, INC.
RETIREMENT SAVINGS PLAN
Effective July 1, 1988, MicroAge, Inc. (the "Company") established the
MicroAge, Inc. Retirement Savings Plan (the "Plan") for its employees. The Plan
was most recently amended and restated in its entirety effective as of November
2, 1998. The Plan was subsequently amended by a First Amendment. By this
instrument, the Company intends to amend the Plan to allow direct participation
in the Plan by ESSP Participants and to provide the Advisory Committee with
authority to establish policies and procedures governing the amount of Elective
Deferrals that may be made by the ESSP Participants.
1. This Second Amendment is effective as of March 1, 2000.
2. This Second Amendment shall amend only the provisions of the Plan as set
forth herein, and those provisions not expressly amended shall be considered in
full force and effect.
3. Section 4.1(b) of the Plan is hereby amended by restating the first
paragraph thereof in its entirety to provide as follows:
(b) SPECIAL RULES FOR ESSP PARTICIPANTS. Effective March 1,
2000, ESSP Participants shall be allowed to make Elective
Deferrals directly to this Plan. Moreover, following the end of
the 1999-2000 Plan Year, Elective Deferrals may be made by a
direct transfer to the Trustee from the trustee of the ESSP on
behalf of each ESSP Participant who is an active Employee on the
day such transfer is made to this Plan. The amount of Elective
Deferrals made by a ESSP Participant directly to this Plan and
those amounts transferred to this Plan from the ESSP on behalf of
each such Participant shall not exceed the least of (1) the
dollar limitation imposed by Section 402(g) of the Code for such
year or (2) the maximum amount that may be transferred to this
Plan without causing this Plan to violate the ADP limitations
described in Section 4.3 for the Plan Year or (3) any other
applicable limitation.
<PAGE>
4. Section 4.1(b)(3) of the Plan is hereby amended and restated in its
entirety to provide as follows:
(3) The amount transferred to this Plan from the ESSP on
behalf of each electing Participant who also is an ESSP
Participant shall equal the lesser of (i) the amount available
for transfer pursuant to the ESSP for the relevant Plan Year or
(ii) an amount equal to the Participant's Compensation for the
Plan Year multiplied by the "maximum ADP" for the group
consisting of ESSP Participants who also are Participants in this
Plan (calculated in accordance with the principles set forth in
Section 4.3(b)(1)). For purposes of the preceding sentence, the
"maximum ADP" is the highest ADP that could be contributed by
ESSP Participants who also are Participants in the Plan without
requiring the return of any Excess Contributions pursuant to
Section 4.3(d). In making this determination, the Advisory
Committee may increase the maximum ADP of the remaining ESSP
Participants if others will not be transferring the maximum
amount permitted. Appropriate adjustments will be made to take
into account any Elective Deferrals made by an ESSP Participant
during a Plan Year either prior to the effective date of his
participation in the ESSP or after February 29, 2000, with the
manner of adjustment to be determined by the Advisory Committee
in accordance with rules and procedures of uniform application.
In the event that an ESSP Participant is not an active Employee
on the day that the transfer contemplated by this Section 4.1(b)
is made to this Plan, no transfer shall be made on behalf of such
ESSP Participant and the "amount available for transfer pursuant
to the ESSP""referred to in clause (i) above shall be deemed to
be zero.
5. Section 4.1(d) of the Plan is hereby amended by the addition of the
following sentence to the end thereof:
Elective Deferrals for ESSP Participants are subject to such
limitations (e.g., a cap on Elective Deferrals of six percent (6%)) as
may be set forth in the policies and procedures adopted by the
Advisory Committee.
2
<PAGE>
To signify its adoption of this Second Amendment, MicroAge, Inc., has
caused this Second Amendment to be executed by its duly authorized officer on
this 15th day of March, 2000.
MICROAGE, INC.
By: /s/ Jeffrey D. McKeever
---------------------------
Jeffrey D. McKeever
Chairman of the Board
SECOND AMENDMENT TO THE
MICROAGE, INC.
EXECUTIVE SUPPLEMENTAL SAVINGS PLAN
MicroAge, Inc., a corporation organized and existing under the laws of the
State of Delaware (the "Company"), previously adopted the MicroAge, Inc.
Executive Supplemental Savings Plan (the "Plan") in order to provide its key
executives with an opportunity and incentive to save for retirement and other
purposes. The Plan was most recently amended by a First Amendment effective as
of May 1, 1999. By this document, the Company wishes to amend the Plan to
suspend contributions to the Plan until such time as the Plan Administrator
takes action to permit additional contributions.
1. The changes made to the Plan by this Second Amendment are effective as
of March 1, 2000.
2. This Second Amendment shall amend only the provisions of the Plan as set
forth herein, and those provisions not expressly amended hereby shall be
considered in full force and effect, including those provisions which permit
amounts contributed to the Plan for the Plan Year beginning November 1, 1999, to
be eligible for transfer to the Company's 401(k) Plan.
3. Section 4.1, Participant Contributions, of the Plan is hereby amended by
the addition of the following sentences at the end thereof:
Notwithstanding the foregoing, effective March 1, 2000, all further
Deferral Contributions on behalf of Participants are suspended.
Deferral Contributions under this Section 4.1 may resume only when the
Plan Administrator takes affirmative action to revoke the suspension
of Deferral Contributions.
<PAGE>
To signify its adoption of this Second Amendment, the Company has caused
this Second Amendment to be executed by its duly authorized officer on this 15th
day of March, 2000.
MICROAGE, INC.
By: /s/ Jeffrey D. McKeever
---------------------------
Jeffrey D. McKeever
Chairman of the Board
March 12, 1999
Ms. Heidi Sanders
Pinacor
3001 South Priest Drive
Tempe, AZ 85282-3492
Subject: Contract Extension
Dear Heidi,
The Authorized Apple Wholesale U.S. Sales Agreement between Apple Computer, Inc.
and Pinacor will expire on March 31, 1999. Apple would like to offer Pinacor an
extension of this agreement through March 31, 2000.
Any order placed by Pinacor under your Authorized Apple Wholesaler status after
March 31, 1999 will be construed as acceptance of this offer.
Sincerely,
Apryl Lane
Sr. Contract Specialist
Bids & Contracts Management
Amendment to the Authorized Wholesaler U.S. Sales Agreement
This Amendment to the Authorized Apple Wholesale U.S. Sales Agreement
("Agreement") amends the Authorized Apple Wholesaler U.S. Sales Agreement
("Agreement") entered into between Apple Computer, Inc. ("Apple") and
________________________ ("Wholesaler") in Cupertino, CA on _________________
19__.
The parties agree to amend the Agreement as follows;
1. Add Section 3D to the Agreement as is below:
"D. Wholesaler will purchase Products only from Apple as covered by the
terms and conditions herein, unless otherwise authorized by Apple."
2. Section 3C(9) is added to the Agreement as follows:
"(9) Wholesaler will review and use commercially reasonable efforts to
perform any remediation necessary for Wholesaler to continue to perform
its obligations under this Agreement after January 1, 2000."
3. The first sentence of Section 7B(2), "Wholesaler understands that Apple
does not sell software." is removed.
4. Section 12E(1) is amended by adding the following sentence at the end of
the section:
"If Apple does not purchase Product remaining in Wholesaler's inventory,
Wholesaler may sell the Product solely to an Authorized Apple Reseller or
to an Authorized Apple Wholesaler subject to Apple's approval."
5. All other terms and conditions of the Agreement shall remain unchanged and
in full force and effect. Where there are conflicts between the Agreement
and this Amendment, this Amendment will prevail.
Thne parties execute this Amendment through their authorized representatives as
of the dates set forth below.
Wholesaler Apple Computer, Inc.
SIGNATURE:___________________________ SIGNATURE:___________________________
PRINT NAME:__________________________ PRINT NAME:__________________________
TITLE:_______________________________ TITLE:_______________________________
DATE:________________________________ DEPT.: Bids & Contracts Management
EFFECTIVE DATE:______________________
June 25, 1999
Mr. Jeffrey Mckeever
MicroAge Computer Centers, Inc
2400 South MicroAge Way
Tempe, AZ 85282
Re: Revised Authorization Requirements Applicable to Build-To-Order Business
Systems Products Under COMPAQ COMPUTER CORPORATION UNITED STATES RESELLER
AGREEMENT, dated June 1, 1995, (the "Reseller Agreement") between Compaq
Computer Corporation and MicroAge Computer Centers, Inc.
Dear Mr. Mckeever:
As you know, Compaq Computer Corporation announced the Distributor Alliance
Program May 10, 1999, naming Inacom, Ingram Micro, Marisal, and Tech Data as the
four participants. These Distributor Alliance Partners will distribute the
Compaq Build-to-Order (BTO) Business Systems Products to all Compaq Authorized
Channels and Resellers in the United States. Business Systems Products include
all Intel-based systems, StorageWorks Business Systems Products, Alpha-based NT
Servers and all Network Access Communications Products. Compaq will allow
MicroAge to purchase StorageWorks Business Systems Products directly from Compaq
through December 31, 1999. This exciting program was designed to provide a more
efficient method of distributing Compaq BTO Business Systems Product to
Channels, resellers and customers alike.
Although your authorization to purchase BTO Business Systems Products is
changing, MicroAge Computer Centers, Inc. remains a valued Compaq Channel
Partner. In addition to continuing authorization to resell BTO Business Systems
Products, you may continue to purchase Configure-to-Order (CTO) Business Systems
Products directly from Compaq. Terms and conditions CTO Products remain
unchanged.
Here are the key changes that will be effective October 1, 1999:
o Compaq will no longer accept orders from MicroAge Computer Centers, Inc. for
Build-to-Order Business Systems Products with the exception StorageWorks
Business Systems Product. All other BTO Business System Products must be
purchased from a Compaq Distributor Alliance Partner.
o The attached Authorization Requirements applicable to all Compaq Products
shall replace the Authorized US1 Reseller Program Requirements attached to
your Reseller Agreement.
o MicroAge Computer Centers, Inc. will be eligible to participate in the
following channel programs:
o Market Development Funds (MDF) of 0.3% for Business Systems Products and
3% for NAC Products. MDF earnings will be calculated based on Channel
Sales-Out.
o Pass-Through Price Protection of 3 days for Prosignia PCs, Deskpro,
Armada, and PC Options and 7 days for Prosignia and Prollant Servers,
Alpha NT only Servers, NT Personal Workstations, and Server Options.
o Channel Goal Attainment
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o Indirect Flooring
MicroAge Computer Centers, Inc. may elect to either receive indirect
Flooring for purchases of Compaq Products from Distributor Alliance
Partners OR pass-thru Indirect Flooring to Compaq Authorized Resellers
that purchase Compaq Products form MicroAge Computer Centers, Inc. This
election will remain in effect August 1, 1999 through December 31, 1999.
MicroAge Computer Centers, Inc. will be given the option to re-elect for
the period of January 1, 2000 through June 30, 2000 and again for the
period of July 1, 2000 through December 31, 2000. MicroAge Computer
Centers, Inc. must submit election covering the period of August 1 -
December 31, 1999 no later than July 15, 1999. Please submit the
enclosed Indirect Flooring Election Form to:
Compaq Computer Corporation
Attention: Fay Watson - MS580502
20555 SH249
Houston, TX 77070
o MicroAge Computer Centers, Inc. will no longer be eligible to participate in
the following programs as they relate to Compaq Business Systems products:
o Product Returns
BTO Business Systems Products purchased from Compaq in 3Q'99 may be
returned to Compaq through December 31, 1999. There is no change to
current returns limits for product purchased from Compaq. Compaq will
not accept returns for products purchased from Distributor Alliance
Partners.
o Price Protection
MicroAge Computer Centers, Inc. will no longer receive Price Protection
terms of 3 weeks for Deskpro, Armada, and PC Options and 5 weeks for
Proliant Servers, Alpha NT only Servers, NT Personal Workstations, and
Server Options.
o Direct Flooring
o DOA Testing Incentive
MicroAge Computer Centers, Inc. will not be eligible to participate in
the DOA Testing Program after December 31, 1999.
Since its inception. Compaq has led the channel through mutually beneficial
changes -- changes that ultimately created stronger relationships between Compaq
and the channel. In doing so, we have collectively been focused on providing
customers with the best product selection at the best prices using the best
purchasing and delivery mechanisms. The Distributor Alliance Program is a bold
new step to better allow us to do this by maximizing Compaq's channel
efficiencies while providing extensive benefits for partners, resellers and
customers.
Sincerely,
Compaq Computer Corporation
J. Michael Pocock, Vice President
North America Channel Sales
Attachments
COMPAQ COMPUTER CORPORATION
CHANNEL PROGRAM AUTHORIZATION REQUIREMENTS
Compaq Channels must at all times meet the following requirements, which are
material terms of the Agreement, to retain their eligibility to participate in
Compaq's Channel Program.
Procurement and Distribution
o Distributor shall procure all Compaq Build-to-Order Business Systems
Products directly from Compaq Distributor Alliance Partners in the U.S. or
Compaq Authorized Channel Partners in the U.S. (as identified by Compaq)
and shall not procure Compaq Build-to-Order Business Systems Products from
any other source unless otherwise agreed to in writing by Compaq.
Distributor shall procure all Compaq Enterprise Products (if authorized)
directly from Compaq in the U.S. or from Compaq Enterprise Authorized
Channel Partners in the U.S. (as identified by Compaq) and shall not
procure Compaq Enterprise Products from any other source unless otherwise
agreed to in writing by Compaq. Distributor shall procure all Compaq
Configure-to-Order Products directly from Compaq in the U.S. (and shall
not procure such products from any other source than Compaq in the U.S.)
unless otherwise agreed to in writing by Compaq. Distributor shall not
import Compaq Products purchased in other countries by Distributor or
Distributor's affiliated entities or third parties.
o Goods purchased or received under this Agreement as well as all information
disclosed by Compaq are subject to United States export regulations.
Distributor may not export such goods or information without first
obtaining written permission from Compaq.
o Compaq reserves the right to market Compaq Products or other products to
Compaq Authorized Resellers, or any other third parties, or in the
geographic areas served by Distributor, either directly or indirectly,
through any means without obligation or liability to Distributor.
o Distributor shall sell to end users and Compaq Authorized Resellers and
shall not sell or otherwise make available Compaq Products to any
unauthorized third party for the purpose of resale to others unless
approval to do so has been given by Compaq to Distributor in writing.
o Distributor shall make its best efforts to stop selling Compaq Products to
Compaq Authorized Resellers upon one (l)-day written notice (and in any
event not more than five (5) days thereafter) of the termination or
expiration of the Compaq Reseller Agreement with any Authorized Reseller.
Upon the expiration or termination of its Reseller Agreement with Compaq,
said Reseller shall no longer be an Authorized Reseller.
o Distributor shall not incorporate or substitute parts or options not
manufactured or sold by Compaq into Compaq Products unless Distributor
notifies the Compaq Authorized Reseller or end customer of such
incorporation or substitution in writing. Distributor shall also inform the
Compaq Authorized Reseller or customer that parts or options not
manufactured or sold by Compaq are not warranted by Compaq.
o Distributor shall maintain for five (5) years from the date of sale a list
of all customers and their addresses at the time of sale together with
Compaq product serial numbers, and shall provide such information to Compaq
upon request. Failure to maintain or provide this information within ten
(10) days of request may result in suspension and forfeiture of amounts due
Distributor under Compaq programs including, but not limited to, Compaq
Product Returns, Goal Attainment, MDF, TOSS, Price Protection, rebates,
promotions, DOA Testing Incentives, or Shipping Quality Incidents, in
Compaq's sole discretion.
Financial
o Distributor shall not deduct against amounts owed by Distributor to Compaq
any claims against Compaq prior to the issuance of credit by Compaq
including, but not limited to, Goal Attainment, MDF, TOSS, Price
Protection, rebates, promotions, DOA Testing Incentives, or Shipping
Quality Incidents. Claims so deducted are subject to suspension and
forfeiture by Distributor, in Compaq's sole discretion.
o Distributor shall obtain and keep current Commercial General Liability
insurance at a minimum limit of $2,000,000 (CDN) per occurrence,
$2,000,000 (CDN) aggregate, including Compaq Computer Corporation as
Additional Insured. Compaq's status as an Additional Insured shall be
limited to the terms and conditions of the Distributor Agreement. The
Commercial General Liability insurance is to be maintained for the full
term of this Agreement. Compaq reserves the right to require Distributor
to provide valid Certificates of Insurance showing Compaq Computer
Corporation as the Certificate Holder as evidence that the required
insurance has been in place since the inception of this Agreement, and is
still currently valid. Each Certificate of Insurance shall contain a
provision that coverage afforded under the required policy or policies
will not be cancelled or non-renewed without at least thirty (30) days
prior written notice to Compaq.
o Distributor shall maintain an overall credit rating satisfactory to Compaq
in its sole judgment.
o In the event of any merger, consolidation, change in key management,
change of control, transfer of any substantial part of Distributor's
business, whether by sale of stock, sale of assets, or otherwise,
Distributor shall notify Compaq in writing within ten (10) days of such
change. Authorization to resell Compaq Products is personal to Distributor
and, upon occurrence of any of the above-mentioned events, Compaq reserves
the right to terminate this Agreement immediately.
o Distributor shall provide Compaq with a valid resale exemption
certificate(s), as required by law, in lieu of, or with respect to, sales
tax for the Compaq Products purchased. Distributor agrees to promptly
notify Compaq of the revocation or modification of any such resale
exemption certificate.
Service and Support
o Distributor shall maintain at each of its Authorized Service Locations one
or more full-time employees who have, in the sole judgment of Compaq,
passed the applicable service authorization training and are, in the sole
judgment of Compaq, capable of effectively providing warranty and
maintenance service on all Compaq Products.
o Distributor shall maintain at each of its Authorized Service Locations
adequate floor space and related facilities to provide warranty and
maintenance service to purchasers of Compaq Products.
o Distributor shall maintain adequate tools and test equipment at each
Authorized Service Location to provide warranty service for Compaq
Products.
o Distributor shall validate all warranty claims and render warranty service
by the end of the next business day of the receipt by Distributor of any
Compaq Products regardless of place of purchase, according to procedures
established by Compaq.
o Distributor shall not perform service on Compaq Products using parts not
manufactured or sold by Compaq without identifying to the customer which
parts are not manufactured or sold by Compaq and notifying the customer
that such parts are not warranted by Compaq.
o Distributor shall use only parts manufactured or designed by Compaq when
performing warranty service on Compaq Products.
o Distributor shall promptly report to Compaq all suspected Compaq product
defects or safety problems and keep Compaq informed of customer complaints.
o Distributor shall provide all assistance reasonably required by Compaq in
implementing any mandatory safety changes.
Sales Support
o Distributor shall exert its best efforts to recruit value-added resellers
from Distributor's reseller network consistent with the objectives and
requirements of Compaq, and to pre-qualify these resellers for Compaq
according to the criteria established by Compaq.
o Distributor shall provide Compaq with an annual business plan, updated
quarterly, according to guidelines established by Compaq.
o Distributor shall establish and maintain compensation plans (or other
incentive plans) for Distributor's employees, agents and subcontractors
involved in the marketing, advertising, promotion, sales and/or servicing
of Compaq Products which are at all times proportionally fair to Compaq in
comparison to similar plans for any other competitive products sold by
Distributor and which reflect Distributor's obligation to exert best
efforts to sell Compaq Products.
o Distributor shall develop and implement marketing programs, acceptable to
Compaq and appropriate for promoting Compaq Products to Compaq Authorized
Resellers and end customers.
o Distributor shall use its best efforts to market, advertise, promote and
sell Compaq Products. To that end Distributor shall maintain at each
Authorized Sales Location one or more employees who have, in the sole
judgment of Compaq, passed Compaq sales authorization training and are
capable of effectively marketing Compaq Products.
o Distributor shall promptly respond to all inquiries or requests related to
Compaq Products from Compaq Authorized Resellers. Distributor shall forward
to Compaq Authorized Resellers all technical and sales materials relating
to Compaq Products which are furnished to Distributor by Compaq for the
purpose of redistribution, including copies of Compaq product lists.
General
o Distributor agrees to provide Compaq with a weekly sales and inventory
report and such other reports in accordance with the procedures specified
from time to time by Compaq.
o Distributor shall conduct business at all times in a manner that reflects
favorably upon the reputation, quality, goodwill and credibility of Compaq
and Compaq Products. To this end, Distributor shall not disparage Compaq or
Compaq Products in any way or make any representations or express any
opinions regarding the features or capabilities of Compaq Products which
are not consistent with those found in literature or other materials
distributed by Compaq.
o Distributor shall obey all applicable laws, comply with all applicable
rules and regulations, and conduct business in an ethical manner.
o Distributor is encouraged to conduct all applicable business transactions
through Electronic Data Interchange (ED[). Compaq will exercise its best
efforts to provide Distributor with reasonable EDI business and technical
support and information in order to enable Distributor to implement ED[
transactions within the specified period.
Audit
o Upon five (5) days prior written notice from Compaq, Distributor shall
allow Compaq or its third party representatives access to Distributors
facilities, systems, and records for the purpose of verifying the accuracy
of any information provided to Compaq by Distributor, and ensuring
Distributor's compliance with the terms of these Authorization Requirements
and with the terms of Compaq programs including but not limited to, Compaq
Product Returns, Goal Attainment, MDF, TOSS, Price Protection, rebates,
promotions, DOA Testing Incentives, or Shipping Quality Incidents.
o Any failure to comply with audit requirements may result in suspension and
forfeiture of amounts due Distributor under Compaq programs including, but
not limited to, Compaq Product Returns, Goal Attainment, MDF, TOSS, Price
Protection, rebates, promotions, DOA Testing Incentives, or Shipping
Quality Incidents until completion of the audit, in Compaq's sole
discretion.
o If, as a result of an audit, Compaq determines that amounts paid or claimed
by Distributor to be payable to Distributor under Compaq programs do not
comply with the Agreement or applicable program requirements, Distributor
shall promptly repay Compaq for any such amounts paid to Distributor by
Compaq and, if such amounts improperly paid or claimed by Distributor
exceed $50,000 for any calendar quarter, Distributor shall wspromptly pay
Compaq for the reasonable costs of the audit.
Compaq reserves the right to change its Channel Program Authorization
Requirements from time to time at its sole discretion.
Req-ID
September 1, 1999
DISTRIBUTOR AGREEMENT BETWEEN COMPAQ LATIN AMERICA CORPORATION AND
PINACOR
This Distributor Agreement ("Agreement") is made and entered into this
14th day of September, 1999 ("Effective Date"), by and between Compaq Latin
America Corporation ("Compaq"), a Delaware, U.S.A. corporation, with offices at
20555 SH 249, Houston, Texas 77070 and Pinacor ("Distributor"), a Delaware
corporation, with offices at 3001 South Priest Dr., Tempe, AZ.
ARTICLE I -- DEFINITIONS
Section 1.01. Definitions. The following definitions shall apply to the
terms used in this Agreement unless otherwise indicated:
(a) "Agreement" means this Distribution Agreement as amended or
supplemented from time to time.
(b) "Authorized Reseller" means a reseller who has entered into an
agreement to purchase products from Distributor for the purpose of resale and
who has been registered with Compaq by Distributor. The term "Authorized
Reseller" as used in this Agreement specifically excludes Authorized Compaq
Dealers.
(c) "Compaq Products" means the products described in Exhibit A, as
updated and revised by Compaq from time to time.
(e) "Territory" means the territory listed in Exhibit "B".
ARTICLE 2 -- APPOINTMENT OF DISTRIBUTOR
Section 2.01. Appointment of Distributor. Compaq hereby appoints
Distributor as an Authorized Distributor for Compaq Products in the Territory.
Distributor agrees to purchase Compaq Products from Compaq for the sole purpose
of distributing them in accordance with the terms and conditions of this
Agreement. Distributor shall not ship Compaq Products, either directly or
indirectly, to any location outside of the Territory without the prior written
consent of Compaq.
Section 2.02. Non-exclusive Appointment. Distributor's appointment
hereunder is NONEXCLUSIVE. Compaq reserves the right during the term of this
Agreement and thereafter to solicit, market, or otherwise sell directly or
indirectly Compaq Products or other products in the Territory without obligation
or liability to Distributor.
Section 2.03. Authorized Resellers. (a) Distributor shall sell Compaq
Products only in the Territory and shall register with Compaq the name, address,
and telephone number of each Authorized Reseller.
(b) Compaq may withdraw the registration of an Authorized Reseller upon
thirty (30) days written notice to Distributor at which time Distributor shall
(i) immediately stop reselling Compaq Products to the reseller, (ii) demand the
immediate return of all Compaq Confidential information and Compaq-supplied
sales aids and materials, and (iii) confirm with Compaq its receipt of such
materials from the reseller.
Section 2.04. Automatic Termination. This Agreement shall terminate
automatically without prior notice in the event that:
(a) Distributor represents that its appointment is exclusive either by
registering with a government agency in the Territory or elsewhere or by any
other action that would in any way imply or appear to be a representation of an
exclusive arrangement or that would result in an official governmental or legal
designation of an exclusive arrangement between the Parties, in which case such
registration or representation shall be null and void; or
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(b) This Agreement is deemed by operation of law to be an exclusive
agreement in the Territory or country in which the Distributor is located or is
doing business.
Section 2.05. Independent Contractor. Distributor is an independent
contractor and is not a legal representative or agent of Compaq for any purpose
whatsoever.
ARTICLE 3 - TERM
Section 3.01. Term. (a) The term of this Agreement shall be twelve (12)
months commencing on the Effective Date.
(b) This Agreement will be automatically renewed at the conclusion of
the initial twelve (12) month period for successive twelve (12) month periods
unless one of the Parties indicates by written notice to the other Party not
less than thirty (30) days prior to the end of such twelve (12) month period
that it does not intend to renew. Notwithstanding any of the foregoing, this
Agreement may be terminated by either Party at any time pursuant to Article 15
of this Agreement.
ARTICLE 4 -- DUTIES OF THE PARTIES
Section 4.0 1. Duties of Compaq. Compaq shall perform the following
duties:
(a) Provide Distributor technical assistance and information concerning
Compaq Products
(b) Train three (3) of Distributor's employees to perform sales and
marketing services for Compaq Products;
(c) Provide Distributor with an initial quantity, as determined by
Compaq, of sales aids, data sheets, brochures, instruction sheets and other
materials to assist Distributor in the promotion and sale of Compaq Products and
as part of Compaq's and sales training. Compaq will make available to
Distributor additional copies of such materials and additional sales training at
a reasonable cost.
Section 4.02. Duties of Distributor. Distributor shall perform the
following material duties at all times during the term of this Agreement:
(a) Exert its best efforts to market, advertise, promote, sell, and
support Compaq Products;
(b) Purchase Compaq Products from only Compaq, unless Compaq grants in
writing permission to purchase Compaq Products from an other source;
(c) Exert its best efforts to recruit resellers from its reseller
network consistent with the objectives and requirements of Compaq;
(d) Obey all applicable laws, comply with all applicable rules and
regulations, and conduct business in an ethical manner;
(e) Comply with all applicable Distributor authorization requirements,
which may be amended from time to time by Compaq at its sole discretion;
(f) Refuse to sell or otherwise make available Compaq Products to any
unauthorized third party for the purpose of reselling the product to others,
unless Compaq grants in writing permission to make such sales;
(g) Incorporate into Compaq Products only parts and options
manufactured or sold by Compaq and inform Authorized Resellers that parts and
options not manufactured or sold by Compaq are not warranted by Compaq; and
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(h) Report promptly to Compaq any suspected problems relating to Compaq
Products and keep Compaq informed of any customer complaints.
ARTICLE 5 -- ORDERING COMPAQ PRODUCTS
Section 5.01. Ordering Procedures. Distributor shall order Compaq
Products pursuant to procedures established and amended by Compaq from time to
time at its sole discretion, which procedures are herein incorporated by
reference.
Section 5.02. Orders Subject to Acceptance. All orders shall be subject
to acceptance by Compaq and shall be governed solely by the terms and conditions
of this Agreement. No additional or different provisions contained in
Distributor's purchase orders or other business forms or correspondence shall be
of any force whatsoever.
Section 5.03. Product Availability, Delay, and Partial Shipments.
Distributor acknowledges that product availability may be subject to production,
shipping, or other delays. In such event, Distributor agrees that Compaq may, at
its sole discretion, allocate distribution of Compaq Products among Compaq's
customers, notwithstanding the effect such allocation may have on Distributor's
outstanding orders. Compaq may make the shipments of Compaq Products ordered by
Distributor in one or more installments.
Section 5.04. Product Discontinuance. COMPAQ reserves the unilateral
right, without any prior notice, to cease making available any COMPAQ Product to
Distributor.
Section 5.05. Scheduling Compaq Products. Prior to the commencement of
this Agreement and, thereafter, on or before each anniversary of the Effective
Date, Distributor will submit a written forecast to COMPAQ of the COMPAQ
Products required for each of the next twelve (12) months. COMPAQ reserves the
right to supply all or a portion of Distributor's forecast, consistent with
availability, production schedules, product demand and other factors as
determined by COMPAQ in its sole discretion. COMPAQ shall have no liability or
obligation to Distributor for partial or late delivery or for failure to
deliver.
Section 5.06. Sales Out and Inventory Information. Distributor agrees
to provide COMPAQ with a monthly summary by model number, customer name, and
unit serial number of the COMPAQ Products sold at each Authorized Location as
well as Distributor's current inventory position. This information shall be
submitted to COMPAQ in accordance with the procedures specified from time to
time by COMPAQ, including but not limited to, by providing Compaq with access to
Distributor's facilities and files for the purposes of verifying such
information.
Section 5.07. Licenses. (a) Compaq shall be responsible for obtaining
export licenses and other export approvals for shipping Compaq Products from the
United States to the Territory.
(b) Distributor shall be responsible for obtaining import licenses and
other legally required import approvals to import products into the Territory,
unless Compaq, at its sole discretion, elects to assume such responsibilities
from time to time.
(c) The Parties agree to cooperate to ensure that all necessary
documents and information are expeditiously supplied to the party responsible
for obtaining such licenses and approvals.
(d) The shipment of Compaq Products under any Order shall be dependent
upon the grant of legally required licenses and approvals. Failure or inability
to ship due to the inability to acquire the necessary licenses and approvals
shall not constitute a breach of this Agreement or subject the Parties to
liability as a result thereof.
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ARTICLE 6 -- PRICES AND PAYMENT
Section 6.01. Price. Distributor shall pay Compaq for Compaq Products
at the applicable prices specified in the Compaq Distributor Price List ("Price
List" or "Applicable Price List") in effect on the date an Order is received or
shipped by Compaq, whichever is less.
Section 6.02. Price List. (a) The Price List in force as of the
Effective Date of this Agreement is that contained in Exhibit A.
(b) Compaq shall have the right to amend the Price List at any time.
The Price List will be published and become effective either on the date of
publication or on a later date specified by Compaq and will remain in effect
until a new Price List is published and becomes effective.
(c) The prices contained in the Price List are F.O.B. the shipping
location designated by Compaq and are exclusive of all transportation costs,
export taxes, personal property taxes, value added taxes, customs duties or any
other charges associated with the transportation, exportation, importation, or
sale of Compaq Products. All such costs for each Compaq Product shall be paid by
Distributor pursuant to the then current billing practices of Compaq.
(d) The suggested resale prices for Compaq Products contained in any
price list are suggestions only. Distributor is under no obligation whatsoever
to accept any such suggested prices. Compaq expressly disclaims any intention to
have Distributor adhere to the suggested resale prices.
Section 6.03. Payment and Means of Payment. (a) Payment in full for
each Compaq Product shall be made in US Dollars and is due and payable within
the time period established by Compaq, at Compaq's sole discretion ("Due Date").
(b) Distributor shall, prior to the Effective Date of this Agreement,
arrange credit terms acceptable to Compaq in order to secure payment for Compaq
Products. Distributor shall bear all expenses associated with the origination
and maintenance of any credit arrangement.
Section 6.04. Failure To Make Payments; Interest. If payment is not
received by Compaq by the Due Date, Distributor shall pay an additional
financing charge of the conventional rate plus a spread of 0.5 % for each month
or portion thereof during which payment remains outstanding.
Section 6.05. Right To Stop Shipments. If COMPAQ has given Distributor
notice of termination of this Agreement or if Distributor is delinquent on any
payment for COMPAQ Products, COMPAQ shall have the right to stop all shipments
to Distributor. The order for any such stopped shipment shall be considered to
have been cancelled by Distributor.
Section 6.06. Right to Setoff. Compaq shall have the right to setoff
off or apply any and all amounts owed by Distributor, its subsidiaries and
affiliates, against any and all amounts owed or which may subsequently be owing
by Compaq to Distributor, its affiliates, subsidiaries, or their successor in
interest.
Section 6.07. Litigation To Collect Sums Owed. In the event that it
becomes necessary for Compaq to institute litigation or other proceedings to
collect sums owed by Distributor, Distributor shall be responsible for
reasonable attorneys' fees, fees, and other costs incurred by Compaq in
connection with such action, and agrees to indemnity Compaq against any expenses
or attorneys' fees pertaining thereto.
Section 6.08. Price Protection. When the adoption of a new Applicable
Price List results in the reduction of the price of any COMPAQ Product, COMPAQ
may provide Distributor price protection for such products pursuant to written
policies or procedures established by COMPAQ from time to time at its sole
discretion.
ARTICLE 7 -- CANCELLATION CHARGES
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Section 7.01. Cancellation Charges. Compaq shall have the right to
impose a cancellation charge for any order that is canceled or deferred by
Distributor at a rate, not to exceed five (5) percent of such order, to be
established by Compaq at its sole discretion. Compaq may waive any cancellation
charge. A waiver by Compaq of a cancellation charge in one or more instances
shall not constitute a waiver by Compaq of its right to impose a cancellation
charge in a subsequent instance.
ARTICLE 8 -- TITLE AND RISK OF LOSS OR DAMAGE
Section 8.01. Title. Title and risk of loss or damage to each Compaq
Product shall pass to Distributor upon delivery to Distributor or to
Distributor's designated agent or customs broker, whichever occurs first. Compaq
will use a customs broker of its choice as Distributor's designated agent in the
absence of written instructions to the contrary from the Distributor.
Distributor may amend its delivery instructions upon thirty (30) days written
notice to Compaq.
ARTICLE 9 --SECURITY INTEREST
Section 9.01. Security Interest. Compaq reserves a purchase money
security interest in the Compaq Products shipped to Distributor under this
Agreement, in the proceeds thereof, in the amount of the Compaq Products'
purchase prices, and in the accounts receivable for such Compaq Products.
Distributor expressly grants Compaq the right to file in Distributor's name any
document required to perfect such purchase money security interest. Distributor
agrees to sign any documents required to permit Compaq to perfect any such
purchase money security interest.
ARTICLE 10 - SERVICE AUTHORIZATION / SPARE PARTS
Section 10.0 1. Service and Spare Parts Authorization. The parties
agree that this Agreement does not grant Distributor authorization to perform
service on COMPAQ Products or to purchase or sell spare parts for COMPAQ
Products. The aforementioned authorization, if any, shall be governed by a
separate authorized warranty service provider agreement to be a reed to by the
parties.
ARTICLE 11 -- LIMITED WARRANTY
Section 11.01. Limited Warranty, The applicable Compaq limited warranty
statement is included with each Compaq Product shipped to Distributor.
Distributor shall not make any other warranty, whether written or oral, with
respect to Compaq Products.
Section 11.02. Third Party Warranty. Compaq may offer Compaq Products
to distributor for which the warranty may be provided by both Compaq and a third
party. In such instances, Distributor will be notified as to how to respond to a
request for warranty services.
Section 11.03. Warranty Service, Distributor agrees to send defective
products that are discovered by Distributor prior to sale to a COMPAQ authorized
service provider for service,
Section 11.4. Limitations of Warranty. EXCEPT FOR THE WARRANTY SET
FORTH IN THE COMPAQ LIMITED WARRANTY STATEMENT, COMPAQ MAKES NO WARRANTIES OR
REPRESENTATIONS WITH RESPECT TO THE PERFORMANCE OF COMPAQ PRODUCTS. ALL IMPLIED
WARRANTIES, INCLUDING BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE HEREBY DISCLAIMED.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH ELSEWHERE IN THIS AGREEMENT,
THE LIABILITY OF COMPAQ FOR DAMAGES CAUSED BY DEFECTIVE COMPAQ PRODUCTS IS
LIMITED TO THE TERMS OF THE LIMITED WARRANTY STATEMENT. COMPAQ SHALL HAVE THE
RIGHT TO CHANGE ITS LIMITED WARRANTY AT ANY TIME WITHOUT FURTHER NOTICE OR
OBLIGATION TO DISTRIBUTOR OR ANY OTHER PERSON BY REASON OF SUCH CHANGE.
5
<PAGE>
ARTICLE 12 -- TRADEMARKS AND RELATED MATTERS
Section 12.0 1. Use of Trademarks and Trade Names. No rights are
granted to Distributor to use trademarks and trade names of Compaq, its parent
or related companies ("Trademarks") or trademarks or trade names of third
parties used in connection with the Compaq Products, except to identify Compaq
Products purchased from Compaq pursuant to this Agreement and to do so only in
the Territory. Distributor shall provide to Compaq, for prior review and written
approval, all promotional, advertising and other materials and activity using or
displaying Trademarks or referring to Distributor as an "Authorized Compaq
Distributor," unless such materials and activity are within the guidelines set
forth by Compaq. Distributor agrees to change or correct, at Distributor's
expense, any such material or activity which Compaq, in its sole judgment,
determines to be inaccurate, objectionable, misleading or a misuse of such
trademarks or trade names.
Section 12.02. Goodwill. Distributor recognizes Compaq's, its parent's
or related companies' ownership of and title to the Trademarks and the goodwill
attaching thereto, and agrees that any goodwill which accrues because of
Distributor's use of the Trademarks shall vest in and become the property of
Compaq. Distributor agrees not to contest or take any action to contest the
Trademarks or to use, employ or attempt to register any trademark which is
confusingly or deceptively similar to the Trademarks.
Section 12.03. Use of Similar Trademarks. Distributor shall promptly
notify Compaq if any person other than an Authorized Compaq Distributor is using
a trademark similar to the Trademarks and, at the expense of Compaq, shall, if
requested, join in any action Compaq may deem advisable to protect its
Trademarks.
ARTICLE 13 - PATENTS AND COPYRIGHTS
Section 13.01. Defense Against Suits. Compaq will defend Distributor
against a claim that Compaq Products infringe any patent or copyright and will
pay resulting costs, damages and attorneys' fees finally awarded by a court,
provided that (i) Distributor promptly notifies Compaq in writing of the claim;
and (ii) Compaq has sole control of the defense and all related settlement
negotiations.
Section 13.02. Replacement or Modification of Products To Make them
Non-Infringing. If the Compaq Products or the operation thereof become, or in
opinion of Compaq are likely to become, the subject of such a claim, Distributor
will permit Compaq, at the sole option and expense of Compaq, either to procure
the right for the Distributor to continue marketing and using the Compaq
Products or to replace or modify them so that they become non-infringing. If
neither of the foregoing alternatives is available on terms which are
reasonable, in the sole judgment of Compaq, Distributor will return the Compaq
Products upon written request by Compaq and Compaq agrees to grant Distributor a
credit equal to the price paid by Distributor to Compaq for the returned Compaq
Products.
Section 13.03. Non-Compaq Products. Compaq, its parent or related
companies, shall have no liability for any claim based upon the combination,
operation or use of any Compaq Product supplied hereunder with equipment, data
or programming not supplied by Compaq, or based upon any alteration or
modification of the Compaq Products.
Section 13.04. Entire Obligation of Compaq. The foregoing states the
entire obligation of Compaq, its parent or related companies, to Distributor
with respect to infringement of patents and copyrights.
ARTICLE 14 -- CONFIDENTIAL INFOR ATION
Section 14.01. Confidential Information. Confidential information shall
mean all information designated "Compaq Confidential" and disclosed to
Distributor which relates to the present or future development and business
activities of Compaq, including, but not limited to, all sales, promotional,
advertising, and support programs. Distributor shall hold such confidential
information in trust and confidence for Compaq and shall not use it except in
furtherance of the relationship set forth in this Agreement, nor publish,
disclose or disseminate it, except as may be authorized by Compaq in writing
Upon expiration or termination of this
6
<PAGE>
Agreement, Distributor shall promptly deliver to Compaq all written or
descriptive matter containing any such confidential information.
ARTICLE 15 -- TERMINATION
Section 15.01. Right To Terminate for Any Reason. Either Party shall
have the right to terminate this Agreement at any time, for any reason or no
reason whatsoever, at such Party's sole discretion, said termination to be
effective thirty (30) days from the date written notice of termination is
received by the non-terminating Party.
Section 15.02. Immediate Termination. (a) Upon the occurrence of any
of the following enumerated circumstances, termination of this Agreement by
Compaq shall be effective immediately upon receipt by Distributor of written
notice of termination:
(i) A receiver, liquidator, trustee or similar administrator is
appointed to take charge of all or substantially all of Distributor's assets;
(ii) Distributor is adjudged or becomes bankrupt or insolvent, is
unable to pay its debts as they become due, or makes an assignment for the
benefit of its creditors;
(iii) Any judicial proceedings are commenced by or on behalf of
Distributor pursuant to any bankruptcy, insolvency or debtor relief law;
(iv) Distributor voluntarily or involuntarily undertakes to dissolve or
wind up its affairs;
(v) Distributor defaults in any payment due to Compaq and such default
continues for a period of thirty (30) days after the Due Date;
(vi) Distributor makes any false or misleading representations in
connection with the business relationship of the parties or engages in fraud,
criminal or negligent conduct in connection with the business relationship of
the parties;
(vii) Any competitor of Compact purchases or otherwise acquires an
interest of any sort or size in Distributor; or
(viii) Distributor breaches any other material term of this Agreement.
(b) If for any reason such circumstances are found not to exist,
termination shall nevertheless be effective thirty (30) days from the date of
receipt by Distributor of Compaq's written notice of termination pursuant to
Section 15.0 1.
Section 15.03. Change in Status. In the event of any merger,
consolidation, change in key management, or reorganization of Distributor, or
any change of control, directly or indirectly, of Distributor, or transfer of
any substantial part of Distributor's business, whether by transfer of stock,
sale of assets, merger, consolidation or otherwise, Distributor shall notify
Compaq in writing not more than ten (10) days after such change in status, and
Compaq shall have the right, in its sole discretion, to terminate this Agreement
effective immediately upon written notice to Distributor in the event of such
change in status.
Section 15.04. Consequences of Termination. UNDERSTANDING FULLY THE
RISK THAT THIS AGREEMENT MAY BE TERMINATED AT ANY TIME FOR ANY REASON OR FOR NO
REASON WHATSOEVER, the Parties agree that in the event of termination that
terminating Party shall not under any circumstances be liable by reason of such
termination for damages or otherwise, whether for the loss of present or
prospective commissions or lost profits, or for expenditures, investments,
opportunities foregone, or for the inability to fulfill customers' contracts, or
otherwise.
7
<PAGE>
Section 15.05. Repurchase of Inventory. (a) If Compaq terminates this
Agreement, Compaq may, at its sole option, repurchase some or all of the Compaq
Products in Distributor's inventory at prices to be agreed upon by Compaq and
Distributor, but in no event greater than the price invoiced to and actually
paid by the Distributor less any credits received by Distributor with respect to
such products. In the event the factory box seal of a Compaq Product has been
broken, the price to be paid by Compaq shall not exceed 50% of the price
invoiced to and actually paid by Distributor.
(b) If Distributor terminates this Agreement, Compaq may, at its sole
discretion, accept return of some or all of the Compaq Products in Distributor's
inventory. If Compaq chooses to accept such returns, Distributor will be
reimbursed the price invoiced to and actually paid by the Distributor less (i)
any credits received by Distributor with respect to such products, (ii) a
fifteen (15) percent handling charge, and (iii) any return shipment charges paid
by Compaq.
Section 15.06. Acceleration of Due Date. Termination of this Agreement
shall automatically accelerate the Due Date such that all outstanding invoices
shall be due and payable as of the effective date of termination.
Section 15.07. Rejection of Orders. (a) Upon notice of termination of
this Agreement, Compaq may reject all or part of any orders received from
Distributor after the date of notice of termination. Compaq may also, in its
sole discretion, refuse to fill any orders received prior to notice of
termination. Any Compaq Products to be shipped to Distributor prior to the
effective date of termination shall be paid for by Distributor by certified or
cashier's check prior to the shipping date.
Section 15.08. Promotional Allowances. Upon the date of notice of termination:
(a) All promotional allowances available to Distributor for use which
are not already subject to valid and existing claims submitted by Distributor
and received by Compaq shall no longer be available for use by Distributor;
(b) Distributor shall no longer be entitled to accrue additional
promotional allowances; and
(c) Distributor's rights under any inventory-return or price protection
policy that may have been established by Compaq shall terminate.
Section 15.09. Actions bv Distributor Upon Termination. Upon the
effective date of termination of this Agreement:
(a) Distributor shall promptly return all advertising, promotional,
technical, sales, or other materials supplied by Compaq;
(b) Distributor shall cease holding itself out as an authorized seller
of Compaq Products,
(c) Distributor shall notify and arrange for all publishers and others
who may identify, list, or publish Distributor's name as a Distributor of Compaq
Products to discontinue such listings as soon as practicable; and
(d) Distributor shall no longer sell Compaq Products to its customers
without the prior written consent of Compaq.
8
<PAGE>
ARTICLE 16 -- INDEMNIFICATION
Section 16.01. Indemnification. Distributor agrees to indemnity against
and hold Compaq harmless from any and all claims by any other party resulting,
directly or indirectly, from Distributor's acts, omissions, misrepresentations,
or negligence, regardless of the form of action.
ARTICLE 17 -- LIMITATION OF REMEDIES/LIABILITY
Section 1.7.01. Limitation of Remedies. (a) In all situations
involving the performance or nonperformance of Compaq Products, Distributor's
remedy is set forth in Article I I of this Agreement.
(b) In the event of the failure, or threatened failure, of a Party to
fulfill any of its obligations hereunder, the other Party shall be entitled to
seek injunctive relief, to request that such obligation be fulfilled and, if
that does not occur promptly thereafter, to terminate this Agreement, and where
appropriate, bring an action for any monies due hereunder. Without limitation,
Compaq shall have the right to seek enforcement of its rights regarding patents,
copyrights, trademarks or trade names and enforcement of Distributor's
obligation to cease representing itself as an Authorized Compaq Distributor.
(c) Neither Party shall have any liability for indirect, special or
consequential damages in connection with this Agreement, even if advised of the
possibility of such damages, or for any claim by any third party except as
expressly stated in this Agreement. The foregoing limitation of liability will
not apply to claims concerning enforcement of Compaq's rights regarding
copyrights, trademarks or trade names and enforcement of Distributor's
obligation to cease representing itself as an Authorized Compaq Distributor.
ARTICLE 18 -- GENERAL PROVISIONS
Section 18.01. Non-Assignability. Distributor shall not assign any
right or interest herein nor delegate any duty or obligation without the prior
written consent of Compaq. Any attempt to assign any of the rights, duties, or
obligations of this Agreement without such consent is null and void.
Section 18.02. Entire Agreement. The entire understanding between the
Parties is incorporated herein and supersedes all prior discussions and
agreements between the Parties relating to the subject matter hereto. This
Agreement can be modified only by a written amendment executed by Distributor
and Compaq, and shall not be supplemented or modified by any course of dealing
or trade usage. Variance from or addition to the terms and conditions of this
Agreement in any order, or other written notification from Distributor will be
of no effect.
Section 18.03. Titles and Captions. All article and section titles or
captions in this Agreement are for convenience only. They shall not be deemed
part of this Agreement and in no way define, limit, extend, or describe the
scope or intent of any of its provisions.
Section 18.04. Survival of Obligations and Duties. Any obligations and
duties which by their nature extend beyond the expiration or termination of this
Agreement shall survive any expiration or termination and remain in effect.
Section 18.05. Invalidity of Provisions. If any provision or provisions
of this Agreement shall be held to be invalid, illegal or unenforceable, such
provision shall be enforced to the fullest extent permitted by applicable law
and the validity, legality and enforceability of the remaining provisions shall
not in any way be affected or impaired thereby.
Section 18.06. Contingencies Beyond a Party's Control. Neither Party
shall be liable for failure to fulfill its obligations under this Agreement if
such failure is caused by the occurrence of any contingency beyond its
reasonable control.
Section 18.07. Expiration of Claims. No action, except those regarding
claims by third parties, or claims with respect to patents, copyrights,
trademarks or trade names and enforcement of Distributor's obligation
9
<PAGE>
to cease representing itself as an Authorized Compaq Distributor, regardless of
form, arising out of this Agreement may be brought by either party more than two
(2) years after the cause of action has arisen, or, in the case of non-payment,
more than two (2) years from the date the last payment was due.
Section 18.08. Addresses and Notices. Notices required or permitted
hereunder shall be in writing and deemed given and received when properly posted
by registered or certified mail, postage prepaid, first class, in an envelope
properly addressed (i) if to Compaq, to 20555 SH 249, Houston, Texas 77070,
Attention: Vice President and General Manger, Compaq Latin America; or (ii) if
to Distributor, to the address set forth in the introduction of this Agreement,
or to such other address as Distributor or Compaq specifies in writing to the
other party.
Section 18.09. Waiver. Any waiver of any kind by Compaq of a breach of
this Agreement (i) must be in writing, (ii) Shall be effective only to the
extent set forth in such writing, and (iii) Shall not operate or be construed as
a waiver of any subsequent breach by Distributor. Any Compaq delay or omission
in exercising any right, power, or remedy pursuant to a breach or default by
Distributor shall not impair any right, power or remedy which Compaq may have.
Section 18. 10. Governing Law. This Agreement is governed by the laws
of Texas.
Section 18.11. Re-export of U.S. Goods. Compaq Products purchased or
received under this Agreement as well as all information disclosed by Compaq are
subject to United States export regulations. Distributor may not reexport such
goods or information without first obtaining written permission from Compaq
which shall be conditioned on Distributor first obtaining the required United
States export license.
Section 18.12. Re-export of U.S. Technical Data. Distributor hereby
gives assurances to Compaq that it shall not export, re-export or otherwise
disclose, directly or indirectly, either technical data received from Compaq or
the direct product of such technical data to any person or destination when such
export, reexport or disclosure is prohibited by the laws of the United states or
regulations of a Department of the United States.
Section 18.13. Familiarity with Foreign Corrupt Practices Act. (a)
Distributor is familiar with the Foreign Corrupt Practices Act ("FCPA") and its
purposes and is aware that the FCPA prohibits the payment or giving of anything
of value, either directly or indirectly, by a U.S. company to an official of a
foreign government for the purpose of influencing an act or decision in his
official capacity, or inducing him to use his influence with the foreign
government, to assist the U.S. company in obtaining or retaining business for or
with, or directing business to, any person. Distributor represents that it will
not take any action which would constitute a violation of the FCPA.
(b) If Compaq learns or has reason to believe that Distributor has
violated the FCPA or any other applicable United States law or regulation in
connection with this Agreement, it shall have the right to terminate the
Agreement immediately notwithstanding any provision in this Agreement to the
contrary. Distributor agrees to indemnify and hold harmless Compaq for any
action taken by Distributor in connection with this Agreement that violates the
FCPA or any other applicable United States law or regulation.
Section 18.14. Attorneys' Fees. In any action or proceeding between the
Parties hereto, or brought to enforce the terms of this Agreement, the
prevailing party in such action or proceeding shall be entitled to recover it
attorneys' fees and costs.
Section 18.15. Language of this Agreement. The Parties have requested
that this Agreement and the documents relating hereto be drawn up in the English
language.
Section 18.16. Counterparts. This Agreement may be executed in
counterparts, all of which taken together shall constitute one agreement binding
on all the Parties notwithstanding that both Parties may not be signatories to
the original or same counterpart.
Section 18.17. Confidentiality of Agreement. This Agreement is Compaq
Confidential.
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<PAGE>
Section 18.18. Authority To Sign. The individuals signing this
Agreement hereby represent and warrant that they are empowered and authorized to
sign on behalf of and bind the Party for whom they have signed.
ARTICLE 19 -- COMPAQ POLICY
Section 19.0 1. Compaq Policy. Compaq does not entertain complaints
from its Distributors about any other Distributor's pricing practices. In
executing this Agreement, Distributor recognizes this policy and will cooperate
in complying with this policy.
THE PARTIES ACKNOWLEDGE THAT THEY HAVE READ THIS AGREEMENT AND AGREE
TO BE BOUND BY ITS TERMS AND CONDITIONS
PINACOR
/s/ Shelly Bodine
- -----------------
Shelly Bodine
Vice President Pinacor Purchasing
COMPAQ LATIN AMERICA CORPORATION
/s/ Enrique Ospina
- ------------------
Enrique Ospina
Vice President and General Manager
11
<PAGE>
EXHIBIT "B"
-----------
CPU's OPTIONS
----- -------
Argentina All Latin America
Bolivia
Brazil
Caribbean
Central America
Chile
Colombia
Ecuador
Mexico
Paraguay
Peru
Puerto Rico
Uruguay
Venezuela
HEWLETT-PACKARD COMPANY
U.S. AGREEMENT FOR AUTHORIZED DISTRIBUTOR
SIGNATURE PAGE
ICN # 0008290001
LEGAL BUSINESS NAME: Pinacor, Inc.
ADDRESS: 3001 South Priest Drive
CITY, STATE, ZIP Tempe, AZ 85282-2323
PHONE, FAX # (800)-PINACOR, (602) 366-2323
E-MIAL/INTERNET ADDRESS pinacor.com
DBA(s)
All documents marked with a "X" below govern the relationship between HP and you
for the purchase and resale of HP Products. HP and Distributor agree that its
volume level, at Net Distributor price, for HP Products on the
Exhibit(s)/Program(s) noted for the term of this Agreement Is:
<TABLE>
<CAPTION>
<S> <C> <C>
AGREEMENTS: AUTHORIZED RESELLER DOCUMENTS: ATTACHMENTS:
__X__ HP Reseller Business Terms __X__ U.S. Authorized Reseller Agreement __X__ HP Product Categories
__X__ U.S. Distributor Agreement __X__ U.S. Volume Reseller Addendum __X__ Distributor Matrix
__X__ HP Operations Policy Manual _____ U.S. Solutions Reseller Certification __X__ Exhibit L Approved Locs
__X__ U.S. International VAR Amendment
_____ U.S. GSA Agent
ADDENDA & EXHIBITS: COMMITMENTS:
___ U.S. Solutions Distributor ___ $ 50,000,000 - and up
_X_ U.S. Volume Distributor
_X_ U20D Full Line Volume Products
___ U80D Volume CAD/Specialty Distributor Products _X_ $ 200,000,000 - and up (sell through)
___ $ 50.000,000 and up (sell through)
_X_ U40A Volume Accessory Product
_X_ U40C Volume Consumable Products _X_ $ 5,000,000 - and up (sell through)
___ U27D ___ $ 10,000,000 - and up (sell through)
Volume Personal Computing _X_ $ 15,000,000 - and up (sell through)
_X_ U.S. Federal Distributor
_X_ U.S. Calculator Distributor
_X_UD Calculator Distributor Products _X_ $ 1,000,000 - and up
___ U.S. Volume Distributor Storage Products
___U29D QD Storage Products
_X_ U.S. Distributor Personal Computing TopValue Products
_X_ U74D Distributor Personal Computing TopValue Products
_X_ U.S. Select Express Distributor
_X_ U76D Select Express Products
_X_ U.S. Volume Distributor Channel Assembly
_X_ U77 Volume Distributor Channel Assembly _X_ 20,000 - units and up _X_
Microsoft Software Product Installation
Terms
___ U.S. Refurbished/Excess Products
___ U.S. Solutions Support Options
___ HP Configuration Tools License
___ U.S. HP Software License Terms
___ U.S. Software License Terms - MPE Products
___ U.S. Solutions - UNIX Products
___A2T20 HP-UX Server Products ___A2T21Unbundled HP-UX Server Products
___A2T22 HP-UX Workstation Products ___A2T23 Unbundled HP-UX Workstation
Products ___A2T24 Solutions Enterprise Storage Products ___A2T25 Other
Peripheral and HP-UX Related Products ___A2T30 HP Symmetrix Products
___ U.S. Solutions-MPE Products
___A2T28 Solutions-MPE Multi-user Products
___ U.S. Solutions-Openview IT Service Management and Electronic Business
Software
___A2T26 HP Openview NT Solutions
___A2T27 HP Openview IT Service Management and Electronic Business
___ HP Unbundling Program
___E81PL HP Unbundling Program Products Software
___ U.S. Solutions Entry Level Computer Products
___A2T31HP Entry-Level Enterprise Computer Products
___A2T32 HP Unbundled Entry-Level Enterprise Computer
___ A2T15 Two-Tier Back-Up Recovery Quickship Services
___ A2T16 Two-Tier Electronic Distribution Software Products
</TABLE>
Page I of 2
<PAGE>
STATEMENT OF OWNERSHIP:
Form of Organization: (i.e. Corporation, General Partnership, Limited
Partnership, Sole proprietor): Corporation For a Corporation,
specify whether: Publicly Held __X____ Privately Held: __________ State of
Incorporation/Organization Delaware
Identify Company ownership and management structure as follows (attach
additional pages if necessary):
o Sole proprietor Identify all owners, officers and ownership
percentages held
o Trust Identify Trustee(s), Administrators and
Beneficiaries of Trust
o Partnership: Identify all General Partners, Limited
Partners, Officers and ownership percentages
held Specify dollar investment of limited
partners
o Privately Held Corporation: Identify all shareholders with class and
percentage ownership, Officers and Board of
Director Members
o Publicly Held Corporation: Identify owners of 20% or more of each class
of shares with class and percentage ownership
Officers and Board of Director Members
NAMES TITLES OWNERSHIP INTEREST
Percentage Ownership Type of Ownership interest
(Dollar Investment in (Assets, Common or
Limited Partners) Preferred Shares)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If Company is 100% owned by another corporation, identify the parent
corporation's ownership and management structure above and the identity of the
parent corporation below:
MicroAge, Inc.
- --------------------------------------------------------------------------------
Parent/Owner, Including DBA(s)
2400 S. Microage Way
- --------------------------------------------------------------------------------
Address
Tempe AZ. 85282 (602)804-2000
- --------------------------------------------------------------------------------
city State Zip Telephone
Delaware (602)
- --------------------------------------------------------------------------------
State of Parent/Owner's- Incorporation Fax
This Distributor Agreement is made and entered into by and between Pinacor,
Inc., a Delaware Corporation, and Hewlett-Packard Company, a Delaware
Corporation.
AUTHORIZED SIGNATURE HEWLETT-PACKARD COMPANY
- -------------------- -----------------------
- ----------------------------- ------------------------
Don Lyons
- -------------------
Typed Name Susan Weatherman
Reseller Contracts &
Negotiation Manager
March 25th, 1999 4/1/99 March 31,2000
- ---------------- ----------------------------------
Title Effective Date Expiration Date
Page 2 of 2
<PAGE>
AMENDMENT BETWEEN PINACOR, INC. AND HEWLETT-PACKARD COMPANY
US DISTRIBUTOR AGREEMENT
3 E4 - In the 1st line, before "Authorized" add "to"
In the 3rd line, before "including" add "provided by HP to Distributor"
8D - Delete in its entirety.
RESELLER BUSINESS TERMS
3A3 - In the 7th line after "change" add "or provide such information on the 1st
day on which they are legally permitted to provide such information, whichever
is earlier."
4B - Add to end "unless expressly permitted by HP in writing,"
15A - In the 2nd sentence delete "Reseller is solely liable" and replace with
"HP is not liable." Delete the 3rd sentence.
VOLUME OPERATION POLICY MANUAL
I B2 - In the 2nd paragraph, lines 2 and 3, replace "provide" with "make
available"
CHANNEL ASSEMBLY ADDENDUM
14B I - Add to the end "which are not specifically authorized or required by
this Channel Assembly Addendum or any other agreement between HP and
Distributor."
14B5 - Delete "in whole or in part"
FEDERAL DISTRIBUTOR ADDENDUM
1B - Replace last sentence with "Distributor desires to acquire HP Products for
resale/distribution to the US Federal Government facilitated by GSA Agents, as
permitted by HP."
1C - Replace 1st sentence with "HP has attached to this Addendum the US GSA
Agent Addendum, which, with the US Authorized Reseller Agreement, substantially
represents the agreement(s) that HP will use in appointing GSA Agents to
facilitate the selling of HP Products from Distributor for resale to the US
Federal Government. Eligible Resellers must have signed an US Authorized
Reseller Agreement prior to appointment as GSA Agents."
26 - In the 2nd paragraph replace the 1st sentence with "Distributor may sell HP
Products to the US Federal Government, facilitated by GSA Agents for resale
purposes outside of the US if the end-user Customer is a US Government Agency or
Department or has valid purchasing authority from the GSA list of authorized
end-user agencies ("Purchaser")."
26 - In the 3rd paragraph the 3rd line should ad "Products to HP in the US "
SELECT EXPRESS
3C3 - Before "forecast" add "non-binding."
14
<PAGE>
PINACOR, INC, HEWLETT-PACKARD COMPANY
/s/ Don Lyons /s/ Susan Weatherman
- --------------------------------------------------------------------------------
Signature Signature
Don Lyons Susan Weatherman
- --------------------------------------------------------------------------------
Typed Name Typed Name
Group Vice President Reseller Contract Negotiation Manager
- --------------------------------------------------------------------------------
Title Title
3/25/99 4-1-99
- --------------------------------------------------------------------------------
Signing Date Effective Date
15
SOFTWARE INSTALLATION AGREEMENT
(FOR MICROSOFT SOFTWARE PRODUCTS)
THIS SOFTWARE INSTALLATION AGREEMENT (this "SOFTWARE INSTALLATION AGREEMENT") is
made as of November 1, 1999 ("Effective Date"), by and between:
HP: HEWLETT-PACKARD COMPANY
3000 Hanover Street
Palo Alto, CA 94304-1112
and
COMPANY: PINACOR, INC.
3001 South Priest Drive
Tempe, AZ 85282-2323
Please provide, on Exhibit D of this Agreement, all of the locations where
Microsoft software installation will occur.
HP and Pinacor, Inc. hereby agree as follows:
1. DEFINITIONS
1.1. "Customer Systems" shall mean the HP personal computer products as set
forth in Appendix A.
1.2. "Contract Manufacturing Agreement" shall mean the 3rd Party Installer
Agreement, to be executed between HP and Pinacor, Inc. under which
Pinacor, Inc. performs on behalf of HP certain assembly activities with
respect to the Customer Systems.
1.3. "MS" or "Microsoft" shall mean Microsoft Corporation.
1.4. "MS Product" shall mean the Microsoft software products as set forth in
Appendix B.
1.5. "Product" as used in the attached Appendix C shall have the same
meaning as "MS Product" for the purposes of this Software Installation
Agreement.
1.6. "Third Party Installer" or "COMPANY" shall mean Pinacor, Inc. as first
defined above.
1.7. "APM" shall mean Associated Product Materials, consisting of a
certificate of authenticity, an end user license agreement, a MS
product registration card, and/or other materials reasonably designated
by MS from time to time which HP may, or which Third Party Installer
may if authorized in writing by Microsoft, acquire from an Authorized
Replicator.
1.8. "Authorized Replicator " shall mean a third party approved by MS and HP
from which Third Party Installer may acquire Product(s) reproduced in
accordance with MS specifications.
1.9. "Product Deliverables" shall mean (i) Product software in object code
form, if applicable; (ii) installation utilities and related
documentation, if applicable; (iii) a single copy of Product end user
documentation; (iv) one or more units of Product hardware, if
applicable; and (v) any other deliverables identified in HP's License
Agreement with Microsoft or otherwise identified by MS as Product
Deliverables.
1.10. "EULA" shall mean MS' standard end user license agreement for the
Product which shall consist of the applicable license and MS' standard
warranty terms for the specific Product.
1
<PAGE>
2. SCOPE
2.1 MS Product License. HP has been granted a license to load, preinstall
and distribute the MS Products pursuant to a certain license agreement
between HP and Microsoft. HP has also agreed to the terms and
conditions substantially as set forth in Appendix C with respect to
HP's use of any third party installer for the MS Products.
2.2 Third Party Installer. In order for Pinacor, Inc. to be authorized as a
Third Party Installer by HP and Microsoft, to load and pre-install the
MS Product on Customer Systems under the Contract Manufacturing
Agreement, Pinacor, Inc. hereby agrees to abide by the terms and
conditions imposed by Microsoft as set forth in the attached Appendix
C.
3. OTHER PROVISIONS
3.1 Breach. A breach of any provision of this Software Installation
Agreement, including all provisions incorporated by reference herein,
shall constitute a material breach of the Contract Manufacturing
Agreement between Pinacor, Inc. and HP.
3.2 Term. The term of this Software Installation Agreement shall commence
on the Effective Date referenced herein and will automatically renew on
an annual basis in conjunction with the U.S. Distributor or U.S. Direct
Reseller Agreement between Hewlett-Packard Company and Pinacor, Inc..
3.3 Third Party Beneficiary. Microsoft shall be a third party beneficiary
of this Software Installation Agreement and shall be entitled to
enforce the terms of this Software Installation Agreement in the event
HP fails to do so.
3.4 Limitation of Liability. Pinacor, Inc. agrees that IN NO EVENT, SHALL
HP OR MS HAVE ANY LIABILITY TO Pinacor, Inc. FOR CONSEQUENTIAL,
INCIDENTAL OR SPECIAL DAMAGES ARISING FROM ANY CLAIM OR ACTION
HEREUNDER, BASED ON CONTRACT, TORT OR OTHER LEGAL THEORY.
AGREED:
HEWLETT-PACKARD Pinacor, Inc.
By: By:
Print Name: Print Name:
Title: Title:
HP/Pinacor, Inc. - MS SWINST.
2
<PAGE>
APPENDIX A
to
Software Installation Agreement
CUSTOMER SYSTEMS
HPPRODUCTS
AS OF: November 01, 1999:
Reference Description
[LIST HP PRODUCTS] Product Families HP Brio PC's HP Vectra PC's HP Kayak
Workstations
The above HP Product list may change from time to time upon notice by HP.
3
<PAGE>
APPENDIX B
to
Software Installation Agreement
MSPRODUCTS
[LIST MS PRODUCTS]
MS Windows 95
MS Windows 98
MS Windows NT
MS Windows NT 4.0
MS Office 2000
MS Office 2000 Professional
The above MS Product list may change from time to time upon notice by HP.
4
<PAGE>
APPENDIX C
to
Software Installation Agreement
MS THIRD PARTY INSTALLER TERMS
1. THIRD PARTY INSTALLER CONDITIONS
The conditions listed below apply to the Third Party Installer.
The Third Party Installer shall:
(1) comply with Sections II(a), II(e), II(f) of HP's License Agreement
with Microsoft, and Sections 2(b), 2(e), 2(f), 2(h), 6(c), 7(a), 11, 13, 14 and
17(a) of HP's Business Terms Document with Microsoft, as set forth below;
(2) consent to venue and jurisdiction in the state and federal courts
sitting in the State of Washington with respect to any action brought by MS to
enforce its rights under the Installation Agreement;
(3) provide access to Third Party Installer premises to audit for
inspection team(s) sent on behalf of MS or HP, with reasonable notice, in order
that such team, accompanied by HP if HP so desires, may perform an audit of the
Third Party Installer's relevant books and records and/or an inspection of the
Third Party Installer's relevant procedures to determine compliance with the
terms of the Installation Agreement and the Agreement;
(4) halt reproduction of the Product upon notice from HP or MS of the
suspension, termination, or expiration of this Agreement;
(5) distribute the Customer Systems with Preinstalled Product Software
only to HP, HP Subsidiaries, HP resellers, HP distributors, and, upon MS's
written approval to HP, end-user customers, on behalf of HP;
(6) pay MS' or HP's attorneys' fees if, after reasonable efforts
otherwise, HP or MS employs attorneys to enforce any rights arising out of the
Installation Agreement and HP and/or MS are the prevailing party in connection
with such enforcement;
(7) report to HP or MS, upon HP or MS request and in the form provided
by HP or MS, information concerning Products installed including, without
limitation, the number of units of each Product installed and/or the number of
packages inserted, and the number of units of Product packages in inventory; and
(8) maintain the inventory of Product packages received from HP or the
Authorized Replicator on behalf of HP, if any, separate from inventory of
Product packages, if any, in the Third Party Installer's possession for other MS
OEMs (including the Third Party Installer, if the Third Party Installer is an MS
OEM), in order to distinguish each Product package from Product packages of
other MS OEMs. Authorized Replicator shall place HP's name on a conspicuous
location on each Product package delivered to the Third Party Installer by or on
behalf of HP.
II. LICENSE GRANT OF HPS LICENSE AGREEMENT.
(a) Subject to limitations in this Agreement and Third Party Installer's
compliance with all terms and conditions of this Agreement, HP grants to Third
Party Installer a non-exclusive, limited license to:
5
<PAGE>
(i) install one (1) copy of Product software on a Customer System hard disk or
ROM ("Preinstalled Product Software") in accordance with instructions
accompanying the Product Deliverables; and
(ii) distribute with Customer System(s):
(A) one (1) copy of Preinstalled Product Software,
(B) one (1) copy of Product software on external media (i.e., diskette or
CD-ROM) as acquired from Authorized Replicator, and
(C) one (1) copy of Product end user documentation as acquired from Authorized
Replicator.
(e) (i) Unless otherwise provided in the Agreement, Third Party Installer's
license to distribute the Product is limited to distribution only with those
Customer System(s) and only inside the Customer System package.
....(ii) Third Party Installer shall comply with additional provisions, if any,
identified by HP with respect to Product.
.... (iii) Third Party Installer may supplement but shall not modify or
translate Product end user documentation. Third Party Installer shall not remove
or modify the package contents of Product or APM.
(f) (i) Third Party Installer shall include APM with Product software
distributed on behalf of HP.
(ii) Third Party Installer must distribute one (1) copy of Product end user
documentation as may be required by MS with and inside the package of each
Customer System distributed with Product software and/or hardware.
2 PRODUCT TERMS OF HP'S BUSINESS TERMS DOCUMENT
(b) With respect to Supplements, ET may also grant to Third Party Installer one
or more non-exclusive, limited additional rights, including without limitation,
those set forth in a "Supplement Addendum" for such Supplement. If Third Party
Installer decides to exercise any such additional rights granted for a
particular Supplement, Third Party Installer agrees to fully comply with all of
the terms and conditions of the applicable Supplement Addendum.
(e) Unless otherwise provided in the Agreement, Third Party Installer shall
place Product packages inside Customer System packages and install Product
software on the hard disk drive or ROM of a Customer System solely on Third
Party Installer premises by Third Party Installer employees.
(f) Third Party Installer shell not reverse engineer, decompile or disassemble
any Product except as permitted by applicable law without the possibility of
contractual waiver. Except as necessary to install Preinstalled Product
software, Third Party Installer may not reproduce Product or any part of Product
Deliverables. Third Party Installer shall make no use of Product Deliverables
except as described in the License Grant Section of the License Agreement.
(h)Third Party Installer agrees that it shall not distribute Product in
encrypted form, except as otherwise specifically provided in this Agreement.
6. ADDITIONAL RESTRICTIONS.
(c) Where Third Party Installer distributes Preinstalled Product Software, Third
Party Installer shall place a notice over either the Customer System power
switch in the "off' position or the power inlet connector
6
<PAGE>
which informs the end user that turning on the Customer System indicates
acceptance of the terms of the EULA. Third Party Installer may use alternative
procedures previously approved in writing by HP, and/or other alternative
procedures, subject to HP review and approval, provided that (i) the end user is
required to take some affirmative action to use or install the Product software,
such as breaking a seal, (ii) the end user is advised that taking such action
indicates acceptance of the terms and conditions of the FULA; and (iii) the end
user has the opportunity to read the EULA and the applicable warranty in its
entirety before taking such action.
7. INTELLECTUAL PROPERTY NOTICES.
(a) Third Party Installer will not remove any copyright, trademark or patent
notices that appear on the Product as delivered to Third Party Installer.
11. OBLIGATIONS UPON TERMINATION
(a) Within ten (10) days after termination or expiration of this Agreement,
Third Party Installer shall deliver to HP, or at HP' direction, destroy, all
units of Product for which a royalty has not been paid and all Product
Deliverables. There shall be no refund or adjustment for amounts paid for
Product(s) returned to HP in accordance with this Section 11 (a).
(b) Upon termination or expiration of this Agreement, all of Third Party
Installer's license rights herein shall cease and Third Party Installer shall
cease all distribution of Product. Sections 13 and 14 of this Agreement shall
survive termination or expiration of this Agreement.
13. NONDISCLOSURE AGREEMENT.
COMPANY shall keep confidential: (a) installation utilities and related
documentation included in the Product Deliverables; (b) other materials included
in the Product Deliverables which are not made generally available to end users
which HP labels as HP Confidential or Proprietary, if possible; (c) the terms
and conditions of this Agreement; and (d) other non-public information and
know-how disclosed to COMPANY by HP. As used in the preceding sentence "if
possible" means that HP will use all reasonable efforts to identify in writing
and/or mark with an appropriate legend or marking, any materials included in the
Product Deliverables which HP considers confidential. Notwithstanding the above,
for the purposes of this Agreement, any object code programs or other Product
Deliverables that HP makes generally available to end users shall not be
considered confidential. Further notwithstanding the above, COMPANY may disclose
the terms and conditions of this Agreement in confidence to its immediate legal
and financial consultants as required in the ordinary course of COMPANY's
business.
14.AUDITS AND INSPECTIONS.
(a) During the term of this Agreement and for three (3) years thereafter, Third
Party Installer agrees to keep all usual and proper records and books of account
and all usual and proper entries relating to each Product licensed sufficient to
substantiate the number of copies of Product and the number of Customer Systems
distributed by or for Third Party Installer. Third Party Installer shall
maintain on Third Party Installer premises such records for itself .
(b) In order to verify statements issued by Third Party Installer and Third
Party Installer's compliance with the terms of this Agreement, HP may cause (i)
an audit to be made of Third Party Installer's relevant books and records and/or
(ii) an inspection to be made of Third Party Installer's facilities and
procedures. Any audit and/or inspection shall be conducted during regular
business hours at Third Party Installer's facilities, with reasonable notice.
Any audit shall be conducted by an independent certified public accountant
selected by HP (other than on a contingent fee basis).
(c) Third Party Installer agrees to provide HP' designated audit or inspection
team access to the relevant Third Party Installer's records and facilities.
7
<PAGE>
(d) Prompt adjustment shall be made to compensate for any errors or omissions
disclosed by such audit Any such audit shall be paid for by HP or MS unless
material discrepancies are disclosed. "Material" shall mean a discrepancy of
five percent (5%) of reported Product shipments compared to actual Product
shipments. If material discrepancies are disclosed, Third Party Installer agrees
to pay HP or MS for the costs associated with the audit. In no event shall
audits be made more frequently than semi-annually unless the immediately
preceding audit disclosed a material discrepancy.
17.GENERAL.
(a) Third Party Installer agrees that it will not export or re-export Product to
any country, person, entity orend user subject to U.S.A. export restrictions.
Restricted countries currently include, but are not necessarily limited to,
Cuba, the Federal Republic of Yugoslavia (Serbia and Montenegro, U.N. Protected
Areas and areas of Republic of Bosnia and Herzegovina under the control of
Bosnian Serb forces), Iran, Iraq, Libya, North Korea, and Syria. Third Party
Installer warrants and represents that neither the U.S.A. Bureau of Export
Administration nor any other federal agency has suspended, revoked or denied
Third Party Installer's export privileges.
8
<PAGE>
APPENDIX D
to
Software Installation Agreement
Locations where Microsoft software will be installed
Location(s):
Name: _________________________________________________________________________
Address 1:_____________________________________________________________________
Address 2: ____________________________________________________________________
City: _____________________________________State: ____________zip: ____________
Telephone: (_____) ________ - ______________________
Name: _________________________________________________________________________
Address 1:_____________________________________________________________________
Address 2: ____________________________________________________________________
City: _____________________________________State: ____________zip: ____________
Telephone: (_____) ________ - ______________________
Name: _________________________________________________________________________
Address 1:_____________________________________________________________________
Address 2: ____________________________________________________________________
City: _____________________________________State: ____________zip: ____________
Telephone: (_____) ________ - ______________________
Name: _________________________________________________________________________
Address 1:_____________________________________________________________________
Address 2: ____________________________________________________________________
City: _____________________________________State: ____________zip: ____________
Telephone: (_____) ________ - ______________________
Name: _________________________________________________________________________
Address 1:_____________________________________________________________________
Address 2: ____________________________________________________________________
City: _____________________________________State: ____________zip: ____________
Telephone: (_____) ________ - ______________________
Name: _________________________________________________________________________
Address 1:_____________________________________________________________________
Address 2: ____________________________________________________________________
City: _____________________________________State: ____________zip: ____________
Telephone: (_____) ________ - ______________________
9
<PAGE>
EXHIBIT U37D
OMNIBOOKS PRODUCTS - DISTRIBUTORS
SUMMARY
A. Discount Schedule
DISCOUNTS
A
20%
B. The capital letter referenced left of the Product number on the Product
List indicates the applicable Discount column A above.
C. Products purchased under this Exhibit shall be included in determining
whether the volume level under Exhibit U20D to the Distributor's Agreement
with HP has been satisfied.
D. Sourcing Restrictions
Products on this Exhibit may be sourced from HP or any HP Authorized
Distributor. Please refer to the HP Product Categories document for more
information.
E. Selling Restrictions
Selling Restrictions are described in HP Product Categories document.
F. Program Matrix
----------------------------------------------------------------------
CAT. QD MO PP SA DR
----------------------------------------------------------------------
O2 o o (a) o
----------------------------------------------------------------------
QD: Qualified Distribution
o Products are designated as "Qualified Distribution Products". The Reseller
must have submitted the appropriate Qualified Distribution Application and
received approval to order such products.
MO: Minimum Order
o Minimum Order, release and ship to volume is $1,000.
PP: Price Protection
o HP's standard Price Protection policy applies; please refer to the HP
Operations Policy Manual for additional information.
SA: Stock Adjustment
(a) Products must be returned from, Distributor within thirty (30) days of
original shipment by HP. Eligible Products returned for stock adjustment
may not exceed fifteen percent (15%) of the previous quarters net dollars
of invoiced shipments. Restocking charges will apply to returns in any one
(1) quarter exceeding five percent (5%) of shipments. Such Products are
eligible for stock adjustment restocking charges of three percent (3%) of
list price value of the returned Products.
DR: Defective Return
o Eligible defective and customer satisfaction returns may not exceed three
percent (3%) of the net dollars of invoiced shipments during the previous
quarter. (Except that if the total number of defective units exceeds the
returns cap percentage, HP shall honor the Product warranty for those
units.) Please refer to the HP Operations Policy Manual for additional
information.
The HP Products on the Exhibit are U.S. versions only.
<PAGE>
EXHIBIT U74A
OMNIBOOK TOPVALUE PRODUCTS
DISTRIBUTORS
A. Discount Schedule
DISCOUNT
A
20%
B. The capital letter referenced left of the Product number on the Product List
indicates the applicable Discount column A above.
C. Products purchased under this Exhibit will be included in determining whether
the volume level under Product Exhibit U20D to the Distributor's Agreement with
HP has been satisfied.
D. Sourcing Restrictions
Products on this Exhibit may be sourced from HP or any HP Authorized
Distributor. Please refer to the HP Product Categories document for more
information.
E. Selling Restrictions
Selling Restrictions are described in HP Product Categories document.
F. Program Matrix
----------------------------------------------------------------------
CAT. QD MO PP SA DR
----------------------------------------------------------------------
O3 o (a) (a) o
----------------------------------------------------------------------
QD: Qualified Distribution
o Products are designated as "Qualified Distribution Products" (QD). The
Reseller must have submitted the appropriate Qualified Distribution
Application and received approval to order such products.
MO: Minimum Order
o Minimum Order, release, and ship to volume is $1,000.
PP: Price Protection
(a) Price Protection will be calculated based on fourteen (14) days' inventory;
please refer to the U.S. Personal Computing TopValue Program Distributor
Addendum for additional information.
SA: Stock Adjustment
(a) Products are not eligible for Stock Adjustment.
DR: Defective Return
o Eligible defective and customer satisfaction returns may not exceed three
percent (3%) of the net dollars of TopValue invoiced shipments during the
previous quarter. (Except that if the total number of defective units
exceeds the returns cap percentage, HP shall honor the Product warranty for
those units.) Please refer to the U.S. Personal Computing TopValue Program
Distributor Addendum for additional information.
The HP Products on the Exhibit are U.S. versions only.
Page I of 1
IBM Business Partner Agreement
Authorized Assembler Attachment
These terms are in addition to and prevail over the terms of the Solution
Provider Attachment and Distributor Attachment, as applicable, and the
Remarketer Terms Attachment.
By signing this Attachment you accept its terms.
We approve you as our Authorized Assembler 1) to assemble and test (according to
our specifications) Approved Products and 2) as our Distributor to market
Approved Products to IBM Remarketers specifically approved for the Products or,
3) as our Solution Provider to market Products to End Users. Unless we specify
otherwise, your Related Companies are not authorized to assemble and test
Approved Products.
As our Authorized Assembler you must have and maintain ISO 9000 Certification.
We will specify in the Authorized Assembler Exhibit, additional terms such as
those regarding Approved Products, such as inspection and packaging requirements
and our returns process. We will also list approved Components in the Authorized
Assembler Exhibit. We will notify you if we withdraw any ISUs or Components from
marketing. If we do so, you agree that upon the effective date of the withdrawal
you will no longer use such ISUs or Components in the assembly and testing of
Approved Products.
We will specify in a document we call an Authorized Assembler Operations Guide
(Operations Guide), processes and guidelines for the assembly and testing of
Approved Products, such as those regarding quality control or requirements, such
as the minimum number of trained personnel and pre-assembly certification which
must be met at each Authorized Location.
- -------------------------------------------------------------------------------
Both of us agree that the complete agreement between us about this relationship
consists of this Attachment and the IBM Business Partner Agreement.
Agreed to: Agreed to:
PINACOR, INC. International Business
Machines Corporation
By /s/ Shelly Bodine By
- -------------------------------------------------------------------------------
Authorized signature Authorized signature
Name (type or print) Shelly Bodine, Name (type or print)
V.P. Purchasing
Date: Date:
IBM Business Partner number: 1006951
IBM Business Partner address: IBM address:
3001 SOUTH PRIEST, MS#46 4111 NORTHSIDE PARKWAY
TEMPE, AZ 85282 ATLANTA, GA 30327
- --------------------------------------------------------------------------------
After signing, please return a copy of this Attachment to the IBM address shown
above.
- --------------------------------------------------------------------------------
Page 1 of 7
<PAGE>
I. Definitions
Approved Products -means the IBM Products you configure, assemble, and
test from an ISU and Components, according to our specifications. The
terms of the Agreement regarding a Product also apply to an Approved
Product.
Components means the IBM Machine parts (such as hard files, memory, and
adapter cards), miscellaneous assembly parts (such as screws, brackets,
and cables), and product ship groups (such as publications and power
cords) we specify. The terms of the Agreement regarding a Machine also
apply to a Component.
Incomplete System Unit (called "ISU") means the partially assembled IBM
system unit we identify in the Exhibit, from which an Approved Product
is to be configured. The terms of the Agreement regarding a Machine also
apply to an ISU.
Program Tool means any program we provide for testing purposes (such as
diagnostics code or virus-protection programs), and any preload-enabling
code we provide.
2. Allocation and Ordering
Unless we specify otherwise in the Authorized Assembler Exhibit, you
agree to:
1. provide us, on a monthly basis, a report of your current on-hand
inventory and a forecast of your requirements for the next four
months (or otherwise upon our request), for ISU's and
Components; and
2. order only the ISUs, Components and/or upgrade features as we
describe in the Authorized Assembler Exhibit.
3. Assembly and Testing
We will:
1. provide initial training for your personnel, as we specify in
our assembly and testing processes included in the Operations
Guide; and
2. certify each of your Authorized Locations upon your establishing
their compliance with (a) our assembly, testing, and associated
processes, (including handling of any Program or return of
Components or ISUs), and (b) maintaining the minimum number of
trained personnel we specify.
You agree to:
1. assemble and test Approved Products using new or used ISUs and
Components provided by us under the terms of this Attachment. You
may not assemble Approved Products using ISUs or Components that
were used by you in any manner or were acquired from any other
source, including a trade-in. An Approved Product returned to you
must be treated as a used machine unless you can establish that
the Approved Product had not been installed;
2. ship-only Approved Products in the original IBM Incomplete
System unit packaging;
3. meet the certification requirements we specify in the Operations
Guide, including maintaining a minimum number of IBM-trained
assembly technicians at each Authorized Location, as we specify
in the Product Approval Section of this Attachment;
4. create an assembly record, as we specify in the Operations Guide,
for each Approved Product in the format we specify and provide it
to us promptly;
5. include, in unmodified form, all publications, license
agreements, certificates of authenticity, labels, and ship groups
with each Approved Product, as we describe in the Authorized
Assembler Exhibit;
6. make copies of the Authorized Assembler Exhibit, and allow your
personnel to use such copies, only as necessary for the
performance of your responsibilities under this Attachment;
7. assemble and test Approved Products only at Authorized Locations;
8. provide on-going assembly and testing training to your
personnel, as we specify;
9. acquire and maintain any tools and other equipment necessary to
perform our assembly and testing processes;
Page 2 of 7
<PAGE>
10. unless we specify otherwise in the Authorized Assembler Exhibit,
use IBM ISUs and Components only as described in this Attachment.
You may not, for example, distribute or resell ISU's. However,
you may sell Components when they are part of an IBM specified
configuration for a field installed feature conversion that is
not deemed a 'Returned Parts Feature Conversion';
11. ensure that each Approved Product and its carton have labels that
indicate the Approved Product may contain used parts; and
12. conspicuously mark the outside of the shipping container and to
label the Approved Product, as we specify in the Authorized
Assembler Exhibit, to identify the Approved Product as having
been assembled according to our specifications by an IBM
Authorized Assembler.
You represent and warrant that an Approved Product will be free from
defects in your workmanship under normal use and operation, for the
duration of the applicable warranty.
4. Program Tools
Grant of License
A Program Tool is owned by International Business Machines Corporation
or one of its subsidiaries or an IBM Supplier, and is copyrighted and
licensed, not sold. We grant you a nonexclusive, nontransferable license
to use a Program Tool only in the assembly and testing of Approved
Products. You may make one copy of a Program Tool for backup purposes.
No other rights under this license are granted.
You may not, for example, do any of the following:
1. use or copy a Program Tool, except as provided in this Attachment-
2. modify or merge a Program Tool;
3. reverse assemble, reverse compile, or otherwise translate a Program
Tool;
4. sublicense or assign the license for a Program Tool; or
5. distribute a Program Tool to any third party.
No Warranty
SUBJECT TO ANY STATUTORY WARRANTIES WHICH CANNOT BE EXCLUDED, IBM MAKES
NO WARRANTIES OR CONDITIONS EITHER EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION, WARRANTIES OF NON-INFRINGEMENT AND THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, CONCERNING THE
FUNCTION, PERFORMANCE OR DOCUMENTATION FOR A PROGRAM TOOL.
This exclusion also applies to any of our subcontractors, suppliers or
program developers (collectively called "Suppliers").
Responsibilities
For each Authorized Location, we will provide you (electronically, on
media or otherwise) with a single copy of each Program Tool we specify,
in the Authorized Assembler Exhibit.
You agree to:
1. for a Program Tool licensed under the terms of a third-party
agreement, execute that agreement and comply with its terms;
2. not remove any identification code that may be placed on a
Program Tool by us; and
Page 3 of 7
<PAGE>
3. make payments, if any, due for any additional programs or other
code you add.
5. Quality, Reliability, and Safety
We will, prior to including a Machine type/model or specified feature
conversion configuration in the Authorized Assembler Exhibit as an
Approved Product, test the standard configurations of such Machine
type/model and specified feature conversion, as applicable, to ensure
that it meets the quality, reliability and safety specifications,
including FCC, UL and other specifications, set out in the Operations
Guide. If you make any alterations or attachments to the standard
configurations, you are responsible for ensuring compliance with these
specifications.
You agree:
1. upon our request, to immediately stop assembly of Approved
Products;
2. to comply with our recall process, if any, for Approved
Products;
3. not to modify or alter the subassemblies (such as power
supplies, processors, planars) or other mechanical subassemblies
of any Component or ISU;
4. to identify the additional IBM components, if any, added to an
Approved Product, in the electronic assembly record and identify
any non-IBM components;
5. not to use any ozone-depleting substances in your assembly and
testing processes;
6. to comply with all environmental laws and regulations regarding
the disposal of materials used in assembly and test processes;
7. to make any changes and improvements we identify as a result of
periodic audits of your processes and compliance with the terms
of the Agreement;
8. if an IBM service representative determines that failure of an
Approved Product is due to poor workmanship or noncompliance
with our specifications, to reimburse us for any expenses we
incur to correct the deficiency or noncompliance;
9. to track data on failure rates in the assembly process and to
provide this data to us, as we specify in the Authorized
Assembler Exhibit;
10. provide us with sufficient, free, and safe access to your
facilities, at a mutually-convenient time, for us (or an
independent auditor) to audit your compliance with our assembly
and testing processes. You also agree to provide sufficient,
free and safe access to your facilities to any agency or entity
that is necessary to obtain or maintain any required
certification or approval;
11. to allow us, at our discretion and at any time to remove an
in-process or completed Approved Product from your Authorized
Location so that we may perform our own testing;
12. to establish a Quality Management System, as we specify in the
Operations Guide; and
13. to establish an Electrostatic Discharge (ESD) protection
program, as we specify in the Operations Guide.
You represent and warrant that an Approved Product will fully
comply with all functional, quality, and reliability
specifications or standards set out in the Operations Guide
including all FCC, UL and those for consumer product safety.
6. Marketing of Approved Products
You agree:
1. to specify in all bids and proposals you provide;
a. that an Approved Product will be assembled by you according
to our specifications; and
Page 4 of 7
<PAGE>
b. the appropriate warranty terms as described in the exhibit,
for the Approved Product and any additional components;
2. to specify in all invoices you provide, the serial number of the
ISU, all feature codes of the Components, and any additional
components, as applicable, included in the Approved Product,
including a clear and conspicuous reference to the manufacturer
of any additional components and that the Approved Products were
assembled by you according to our specifications;
3. to comply with all applicable laws and regulations in marketing
Approved Products that have "used" content;
4. that Approved Products you assemble:
a. will count towards your minimum attainment requirements;
b. will qualify for business development fund and other
marketing programs unless specifically excluded in such
marketing program announcements; and
c. are eligible Products under the terms of the North American
Marketing Attachment for Distributors and the North American
Marketing Attachment if indicated as eligible in the IBM
Business Partner Exhibit and installed as part of a RS/6000
System; and
5. not to place Approved Products under an IBM Business partner
Trial Program.
You may use Approved Products to fulfill your or your Remarketer's, as
applicable, internal use and demonstration Machine requirements. You
agree to advise us of all such transactions. We will adjust our discount
to you accordingly. However, since the original intent is your resale of
Approved Products, IBM does not charge you, and is not responsible for
charging you, a sales tax on the Approved Products which are
subsequently used for internal use or demonstration purposes by you, or
your Remarketer if applicable. It is your responsibility to self assess
any use tax that may apply for Approved Products taken out of inventory
for internal use or demonstration purposes.
7. Prices
For an ISU, we will invoice you a net price equal to our list price for
that model configuration, less 1) the price of the agreed-to removed
components (listed in the Authorized Assembler Exhibit) and 2) your
applicable discount. We will apply such discount to your purchase of
Components, as well as configured Machines.
In the event that the price of a Component corresponding to a standard,
specify or select feature of an Approved Product changes, and the
related price of the Approved Product does not change accordingly, we
reserve the right to adjust the price of an ISU so that the combined
price of the ISU and Component is equal to the price of the Approved
Product.
When this results in a price increase for the ISU, we will charge you an
amount equal to the difference between the new ISU and the previous ISU
price, less your Remarketer discount, for any affected ISUs in your
inventory. Otherwise, all the terms of the Agreement relating to a price
increase or decrease apply.
For Preloaded Programs, we will invoice you a net price equal to our
list price for such Programs less your applicable discount.
8. Returns
We accept returns of ISUs and Components and configured Machines
acquired under the terms of this Attachment:
1. under the inventory adjustment terms of the Agreement. They must
be returned in their original, unopened containers. No open-box
returns will be accepted; or
2. if they fail during the assembly and testing process. You agree
to return to us, subject to our authorization, the failed parts
along with failure documentation, as we specify. Upon our
receipt of the ISU. or Component and verification of the
failure, we will issue a credit to you. You may choose to (a)
purchase a replacement for the failed item, in which case the
credit issued will not apply toward your inventory adjustment
category limit, or (b)
Page 5 of 7
<PAGE>
notify us of your intent to include the defective part as a returned
item under the inventory adjustment terms of the Agreement.
Once assembled and tested, an Approved Product may not be returned.
9. Ownership and License
We own all intellectual property rights (including ownership of
copyright) in and to the design, developed under our direction and at
our expense, of 1) the Approved Products and 2) the processes used or
developed to assemble and test Approved Products.
We grant you a revocable, nonexclusive, nontransferable, paid-up,
limited license to such designs to enable you to, solely in the
performance of your responsibilities under the Agreement:
1. assemble, use for testing purposes, the Approved Products; and
2. use, in connection with the assembly, testing, sale or
distribution of Approved Products, the Approved Product name and
its associated trademark.
10. Indemnification
In addition to the damages for which you are liable under law and the
terms of the Agreement, you will defend, indemnify and hold us harmless
from all fines, claims, and expenses of any kind (including reasonable
attorney's fees and expenses) arising from or connected with:
1. allegations that you have violated or otherwise failed to comply
with any applicable law, ordinance, rule or regulation in the
performance of your obligations under this Attachment;
2. any breach, default, or noncompliance by you related to your
representations, warranties or obligations under this Attachment;
3. alteration or modification by you of any Program Tool, whether we
approved of such alteration or modification or not;
4. modification by you of any assembly or test process, agency
compliance requirement, or other specifications contained in the
Authorized Assembler Exhibit or the Operations Guide, as
appropriate; and
5. unauthorized use or distribution of Program Tools by you.
11. Term and Termination
This Attachment becomes effective on the date it is agreed to by us and
will remain in effect for the contract period duration specified in your
Profile, unless terminated earlier by either of us under the terms of
this Section.
This Attachment will end if your Distributor or Solution Provider
relationship, as applicable, ends.
Either of us may terminate this Attachment, with or without cause, on
three months' written notice. The following are examples of a breach of
a material term for which we may terminate this Attachment immediately:
if you do not 1) comply with our assembly and testing specifications, or
2) maintain the required number of trained personnel.
In the event that notice of termination is given, we may 1) reject any
or all orders received from you after such notice and prior to the
effective date of termination or 2) limit shipments during this period.
In addition, as of the date the notice of termination is given, we may
discontinue extension of any pricing terms previously made available to
you.
When this Attachment ends, you agree to sell to us, at the price you
paid us, all new and unused ISUs and Components in your inventory
including associated documentation, in your possession or control.
12. Product Approval
Products Yes/No Minimum number
Page 6 of 7
<PAGE>
of IBM Trained
assembly technicians by
Authorized Locations
RS/6000 Yes 2
- -------------------------------
STORAGE SYSTEMS No 1
- -------------------------------
13. Authorized Locations
3001 South Priest Drive
-----------------------
Tempe, AZ 85282
-----------------
Page 7 of 7
IBM Business Partner Agreement
Co-Location Attachment
The terms of this Attachment are in addition to those of the IBM Business
Partner Agreement. They apply to you if we approve you to participate in the
Co-Location Marketing Program.
Under the Co-Location Marketing Program, you agree to "co-locate" a portion of
your IBM personal computer receiving/shipping operations to an IBM facility
located in or near Research Triangle Park, North Carolina.
The following documents set forth additional terms regarding your participation
in the Co-Location Marketing Program, and are incorporated herein by reference:
o IBM High Turns Incentive Program - Operational Letter
o Co-Location Program Exhibit for Residency on IBM Premises
o Co-Location Program IBM Warehouse Operating Rules
1) IBM will provide you with access to a dedicated staging area (Co-location
facility) at our site at which you will accept delivery of Products from us and
prepare them for shipment by you. In addition, you are authorized to use the
Co-location facility to perform asset tagging, custom image loading and light
configuration (addition of IBM options and/or 3rd party components to complete
IBM systems). You may not use the Co-location facility for any other purpose.
You will have the right of access to the IBM site through the main entrance to
it, and use of common facilities within the site, subject to IBM's rules of
access and the site's security requirements, including those set forth in the
attached Exhibit for Residency on IBM Premises and IBM Warehouse Operating
Rules.
2) Orders for IBM personal computer products ("Products") under your IBM
Business Partner Agreement may be designated for shipment to your Co-location
facility. Such orders must be placed using the unique customer number assigned
by IBM which designates the "ship to" address of the Co-location facility.
3) We will provide you with access to one or more dedicated loading docks,
located within, adjacent to, or in close proximity to your Co-location facility.
You are responsible for movement of Products to and from your assigned loading
dock(s).
4) You will be solely responsible for the shipment of all Products from your
Co-location facility and for your agreement with your selected carriers. We will
coordinate your access to our loading docks.
5) You will be responsible for staffing the Co-location facility with your own
employees or contract employees consistent with your needs. We will provide you
with the name of local contract work organizations if requested. You are solely
responsible for the supervision and conduct of your employees and contractors
while they are in and adjacent to your Co-location facility. You agree not to
solicit IBM employees working at the IBM site for employment within your
organization. Each party agrees not to solicit the others employees working at
the IBM site for employment within its organization."*
Page 1 of
<PAGE>
6) IBM will, at its expense, provide major infrastructure improvements, as
determined by IBM, such as roadways, parking lots, addition of dock doors,
exterior lighting, air conditioning, general warehouse lighting/sprinklers,
etc., to prepare our warehouses for Co-location. You will be required to pay for
all fit up costs unique to your Co-location facility which you approve,
including those incurred by IBM, such as electrical power distribution,
compressed air, vacuum, exhaust systems, task/workbench lighting,
data/communication lines & cabling, telecommunications equipment (PC's, servers,
hubs, routers, bridges, fax, etc.), test equipment, conveyor systems, work
benches, pallet racks, pallet rack sprinklers, material handling equipment,
packaging equipment, ESD protection, fixtures, totes, hand tools, emergency
power for customer equipment, etc. *** All fitups you pay for shall be your
property and you have the right to remove them. *** IBM will invoice you for
these fit-up costs which are provided by IBM. Payment will be due as specified
in our invoice and is in addition to any charges otherwise due us under your IBM
Business Partner Agreement or any other agreement between us. You also agree to
pay amounts equal to any applicable taxes resulting from your participation in
the program (but not taxes based on our net income. *** IBM will be responsible
for all real estate taxes, except for taxes assessed on fitups you own. *** No
alterations or improvements may be made by you without IBM's prior written
permission.
7) You may place your trade or other fixtures, tools, furniture, equipment and
other personal property in me Co-location facility. It is our preference that
I/T and telecommunications equipment in the Co-location facility be IBM logo
hardware. If this is not practical due to I/T standardization or other reasons
please let your IBM account team know. IBM is not responsible for loss of or
damage to your improvements or personal property in the Co-location facility.
8) You are responsible to pay IBM for the space used by your Co-location
facility at the rate set forth in the IBM High Turns Incentive Program -
Operational Letter. Services in this charge include rent, utilities, building
maintenance, general cleaning services, trash removal, paper/corrugated
recycling, building security personnel and monitoring, heating, air conditioning
(if applicable to your space), and fire protection systems (building sprinkler
and fire alarm systems).
9) IBM will provide you a, freight credit based on the actual weight of product
shipped into your Co-location facility at the rate set forth in the IBM High
Turns Incentive Program Operational Letter.
10) On a quarterly basis, IBM will process a financial transaction(s) (invoice
and/or payment) to you for the space charges and freight credit. We may combine
the space charges and the freight credit into a single transaction.
11) Either of us may end your participation in the Co-location program at any
time with 30 days' written notice to the other. However, if IBM terminates your
participation in co-location program or ***you elect to end participation in the
Co-location program other than as a result of a material breach by IBM, you will
be responsible for all space charges referenced above for the remainder of the
current calendar year after your Co-location operations cease. Upon termination,
you agree to promptly remove all of your Property from the Co-location facility.
12) IBM makes no representation or warranty, written or oral, of any kind as to
the condition of our premises, including your staging area and our loading dock,
or its fitness for any purpose. You agree to make a physical investigation of
our premises, including your staging area and our loading dock, prior to
beginning operations in the Co-location facility and agree the space meets your
requirements and the condition and suitability for your use unless specifically
stated in writing to IBM. In addition to our respective obligations under your
IBM Business Partner Agreement, each party will indemnify the other for damages
for bodily injury (including death) and damage to real property and tangible
personal property for which the indemnifying party is legally liable.
Page 2 of
<PAGE>
13) Except as provided in the IBM High Turns Incentive Program - Operational
Letter, normal IBM Business Partner programs (e.g. price protection, product
returns, flooring, etc.) will apply to Products ordered through the Co-location
program.
14) Space availability and specific location will be determined by IBM after you
sign this Attachment and have provided detailed customer fit-up requirements to
IBM. IBM will not begin design or fit-up of your Co-location facility until this
Attachment is signed and returned to IBM.
Agreed to: (Business Partner Name) Agreed to:
Pinacor Inc. International Business Machines
Corporation
By: /s/ James G. Manton By:
---------------------- --------------------------
Authorized Signature Authorized Signature
Name: James G. Manton Name:
---------------------- --------------------------
Type or Print Type or Print
Title: President & COO Title:
---------------------- --------------------------
Date: January 12, 1999 Date:
---------------------- --------------------------
Page 3 of
Amendment to IBM Business Partner Agreement Co-Location Attachment
- --------------------------------------------------------------------------------
The terms of this amendment supersede the terms in the original exhibit
entitled, *Co-Location Program IBM Warehouse Operating Rules".
Under Work Flow and Procedures,
Remove:
o At the end of each day, the Business Partner shall prepare an activity
analysis by pan number. The analysis will include IBM shipments received
(number in), the Business Partner shipments made (number out), the inventory
on hand in the secured area (in-process), and the inventory from the
previous day (starting position). Discrepancies and problem resolutions
should be noted on the reports. IBM may request copies of these daily
inventory reports on a periodic basis. The IBM Coordinator will act as the
IBM focal point for assisting in the resolution of any unreconcilable
counts.
Add:
o Business Partner agrees to Process EDI 846 (Inventory transaction) and EDI
867 (point of sale transaction) transaction by Location ID to IBM weekly.
Agreed to: (Business Partner Name) Agreed to:
International Business Machines
Corporation
By: /s/ Don Lyons By:
----------------------- -----------------------
Authorized Signature Authorized Signature
Name:Don Lyons Name:
----------------------- -----------------------
Type or Print Type or Print
Title: Group VP-Procurement & Logistics Title:
Page 1 of 1
IBM Business Partner Agreement
Distributor Profile
- --------------------------------------------------------------------------------
We welcome you as an IBM Business Partner-Distributor
The Profile covers the details of your approval to actively market Products and
Services, as our Distributor.
By signing below, each of us agrees to the terms of the following (collectively
called the "Agreement"):
(a) this Profile;
(b) General Terms (Z125-5478-04 12/98);
(c) the applicable Attachments referred to in this Profile; and
(d) the Exhibit.
This Agreement and its applicable transaction documents are the complete
agreement regarding this relationship, and replace any prior oral or written
communications between us. Once this Profile is signed, 1) any reproduction of
this Agreement or a transaction document made by reliable means (for example,
photocopy or facsimile) is considered an original, to the extent permissible
under applicable law, and 2) all Products and Services you market and Services
you perform under this Agreement are subject to it. If you have not already
signed an Agreement for Exchange of Confidential Information (AECI), your
signature on this Profile includes your acceptance of the AECI.
After signing this Profile, please return a copy to the IBM address shown below.
Revised Profile (yes/no): Yes Date received by IBM: 9/10/99
Agreed to: (IBM Business Partner name) Agreed to:
PINACOR, Inc International Business Machines
Corporation
By /s/ Don Lyons By /s/ L. John Garcia
------------------ --------------------
Authorized Signature Authorized Signature
Name (type or print): Don Lyons Name (type or print):
Date: 9/9/99 Date: 9-10-99
IBM Business Partner address: IBM address:
3001 South Priest, MS#46 4111 NORTHSIDE PARKWAY
TEMPE, AZ 85282 ATLANTA, GA 30327
Page 1 of 5
<PAGE>
DETAILS OF OUR RELATIONSHIP
Contract Period Start Date (month/year): 01/99 Duration: 24 months
Relationship Approval/Acceptance of Additional Terms:
For each approved relationship, each of us agrees to the terms of the following
by signing this Profile. Copies of the Attachments are included.
<TABLE>
<CAPTION>
Applicable
Approved Relationship (yes/no) Attachment
<S> <C> <C>
Distributor Attachment yes Z125-5486-03 12/98
Remarketer Terms Attachment yes Z125-5497-02 12/98
Warranty Service Attachment no Z125-5499-02 12/98
Complementary Marketing Terms Attachment
for Distributors yes Z125-5775-00 03/98
Authorized Assembler Attachment yes Z125-5530-01 04/97
North American Marketing Attachment
for Distributors yes Z125-5892-01 06/99
Federal Remarketer Attachment yes Z125-5514-01 02/99
Attachment for Services Marketing for Remarketers yes Z125-5750-00 11/97
Attachment for Finance Services from IBM Credit Corp. yes Z125-5795-02 05/99
Attachment for ServiceSuite - Remarketer no Z125-5767-01 02/99
</TABLE>
Product and Services Approval:
The following Products and Services are listed in the Exhibit. The terms of an
Exhibit apply to the Products and Services listed in it.
When we approve you for Products listed in the Exhibit, you are also approved to
market their associated Programs and peripherals.
When we approve you for Products included in the IBM Business Partner Exhibit,
you are also approved for their associated Products listed in the IBM Personal
Computer Products Exhibit and those eligible Products listed in PARTNERLink.
For Products and Services we specify you acquire from us, we may specify in your
Exhibit that you acquire the Products and Services from a supplier instead of
from us. When you acquire the Products and Services from a supplier, the terms
of the Agreement relating to your acquisition of Products and Services directly
from us (for example, terms relating to the ordering of Products and Services)
are not applicable. All other terms apply.
<TABLE>
<CAPTION>
Approved to Market to:
IBM Approved Remarketers All Remarketers End Users
System Types (1) (yes/no) (yes/no) (yes/no)
<S> <C> <C> <C>
1) IBM Systern/390 (2) (5) no
IBM R/390 no
IBM P/390 no
2) IBM RS/6000 (6) yes
3) IBM RS/6000 SP (6) yes
4) IBM AS/400 (6)
9401 no
9401/150 no
9402 no
9406 no
5) IBM 469X Point of Sale Products (6) no
IBM 4614 SureOne (6) no
</TABLE>
Page 2 of 5
<PAGE>
<TABLE>
<CAPTION>
Approved to Market to:
IBM Approved Remarketers All Remarketers End Users
System Types (1) (yes/no) (yes/no) (yes/no)
IBM Personal Computer Products (3)
<S> <C> <C> <C>
1 ) IBM PC Desktop yes
2) IBM PC Server yes
3) IBM Mobile yes
4) ASCII Terminals yes yes yes
5) Cables & Associated Products yes yes yes
6) PC Features & Options yes yes yes
Additional Products (1)
1) IBM Network Integration Products yes
2) 3745 Communications Controller no
3) 3746 Expansion Unit/Controller no
4)-Graphics no
5) Finance Products Category J1 no
6) IBM Storage Products (6) no
Category S1 Products no
Category S2 Products no
Category S3 Products no
Category S6 Products no
Category S7 Products no
Category S9 Products no
Software Only
1) Tivoli Enterprise Software
Category (SW1 131) no
Category (SW1C1) no
2) F.A.S.T. Software no
3) Enterprise File Systems no
IBM Global Services (4)
1) Product Support Services
a) Hardware -Product Services no
b) Software Services no
c) Systems Management Services no
d) Site & Connectivity Services no
e) Business & Technology Solutions no
f) Business Recovery Services no
g) Other Services no
2) IBM Professional Services
a) IBM Consulting Services no
</TABLE>
Certified Products you are approved to market.
----------------------------------------- ---------------------
----------------------------------------- ---------------------
(1) When approved for other than IBM Personal Computer Company Products
additional terms apply. These terms are included in the Distributor Schedule
A transaction document.
(2) Eligible Products are identified in Schedule A.
(3) Please refer to the IBM Personal Computer Products Exhibit for details on
direct acquisition criteria. (4) You may market this Service without the
requirement to have marketed a Machine or Program,
(5) When we approve you to market these Products, you are also approved to
market the associated Programs under complementary marketing terms only.
These Programs are not available for marketing under remarketer terms.
(6) These Products are eligible for marketing under the terms of the North
American Marketing Attachment Distributors.
Page 3 of 5
<PAGE>
Exclusions, if applicable:
Although included by reference in Product or Services approval, you are not
approved to market these individual Products or Services.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Minimum Annual Attainment:
Product/Service Volume/Revenue Measurement
Period Dates
DISTRIBUTOR RELATIONSHIP $30,000,000 01/01/99 to 12/31/99
DISTRIBUTOR RELATIONSHIP $30,000,000 01/01/00 to 12/31/00
RS/6000 $20,000,000 01/01/99 to 12/31/99
RS16000 $20,000,000 01/01/00 to 12/31/00
NETWORKING $2,000,000 01/01/99 to 12/31/99
NETWORKING $2,000,000 01/01/00 to 12/31/00
Locations:
- --------------------------------------------------------------------------------
Location (street address, city, state, ZIP code)
- --------------------------------------------------------------------------------
2400 S. MICROAGE WAY
TEMPE, AZ 85282
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Your Commitment, if applicable:
This section identifies your Revenue Commitment and the Applicable Additional
Discount Percentage. At your request we will review your revenue attainment
against your Revenue Commitment at any time to determine if you qualify for a
higher Applicable Additional Discount Percentage.
After each annual measurement period, IBM will review your revenue attainment.
If your revenue attainment is less than the Revenue Commitment, your Applicable
Additional Discount Percentage will be adjusted downward to the appropriate
level. Additionally if your revenue attainment is greater than your Revenue
Commitment, your Applicable Additional Discount Percentage will be adjusted
upward as appropriate.
-------------------------------------------------------------------
IBM Network Revenue Applicable Additional
Integration Commitment Discount Percentage (1)
Products (Annual)
ENTRY _________
-------------------------------------------------------------------
-------------------------------------------------------------------
IBM 3746 Revenue Applicable
Communications Commitment Discount
Control (Annual) Percentage
N/A __________
-------------------------------------------------------------------
(1) The products eligible for the Applicable Additional Discount Percentage are
identified in the Business Partner Exhibit.
Assignment of Warranty Service Responsibility, if applicable:
You assign to us, or an IBM Premier Personal Computer Servicer, Warranty Service
responsibility for the following Machines.
Page 4 of 5
<PAGE>
Type/Model Type/Model Type/Model Type/Model
- ---------------- ---------------- -------------- ---------------
- ---------------- ---------------- -------------- ---------------
- ---------------- ---------------- -------------- ---------------
- ---------------- ---------------- -------------- ---------------
Unless you are assigning to us, please specify the name of the IBM Premier
Personal Computer Servicer.*
- ---------------------------------------
Page 5 of 5
Customer Agreement
IBM Digital Manufacturing Solutions (DMS)
Project Change Authorization
The purpose of this Project Change Authorization is to alter the existing
Statement of Work to include the installation of IBM IndustryView for AAP at the
Pinacor Cincinnati facility. The initial evaluation of IndustryView for AAP
installation at the Cincinnati site is a estimate of 60 hours at $200 per hour
totaling $12,000. Additionally, 2% of the total contract revenue will be billed
as an administrative fee and $3000 for travel.
Estimated Total Charges: $12,000 Additionally, 2% of the total contract revenue
will be billed as an Administrative Fee.
Estimated Total Expenses: $3000
Project Scope Addition:
1) The IndustryView team will assist Pinacor by working with the
customer team to perform the following: Perform a Requirements and
Design Study and prepare a Statement of Work for the Cincinnati
location.
Key Assumptions:
IBM's estimated charges and schedules to perform the following additions to the
existing Statement of Work are based on the following key assumptions.
Deviations that arise during the proposed project change request will be managed
through the procedure described in Project Change Control Procedure in Appendix
B of the original Statement of Work.
I All necessary Pinacor representatives are available for interview in each
subject area.
Modifications to Existing Statement of Work Dated March 16, 1999
Add the following to the IBM responsibilities section after 2.2.3:
2.2.3.1 Define and Validate Requirements and Develop Detail Design for the
IndustryView for AAP Cincinnati
Task Description: The purpose of this task is to define and validate that the
functions provided by the base application software and the required
enhancements will support the intended Cincinnati business environment. The
following functional requirements will be addressed in this task:
o MSTAR Interface Requirements
o EDI requirements
o Test server requirements
o Business rules requirements
o Routing requirements
o Administrative profile requirements
o Unique Cincinnati business and schedule requirement
o New reporting requirements
The sub tasks are:
1. Develop an interview procedure and checklist.
2. Develop an interview schedule and plan.
3. Develop documentation standards for interview results.
4. Conduct interviews of key Pinacor personnel to validate the requirements for
the Pinacor Cincinnati IndustryView installation.
5. Refine/identify the interfaces required between the IndustryView for
AAP and other systems.
6. Review requirements statement with the Pinacor IT and MSTAR support Team.
7. Document that the requirements identified are met by the application
software packages and the proposed design enhancements.
- --------------------------------------------------------------------------------
Page 1
<PAGE>
Customer Agreement
IBM Digital Manufacturing Solutions (DMS)
Project Change Authorization
8. Consult with Pinacor on identified interfaces and dependencies to existing
computer systems that are required to support the Cincinnati facility.
Completion Criteria: Documentation of the Pinacor requirements for the
integration of IndustryView for AAP into the Cincinnati facility will be
complete when the Pinacor Requirements Report and Design Report are delivered to
the Pinacor Project Executive.
Deliverables: The following item will be delivered to Pinacor as a result of
this task:
The IndustryView for AAP Cincinnati Design Report.
IndustryView for AAP Statement of Work for the Cincinnati Pinacor
Facility
This offer will expire on 5/30/99.
Both of us agree that the complete agreement between us about these Services
will consist of, (1) This Statement of Work, and (2) the IBM Customer Agreement
or IBM Customer Agreement - Project Support Services, as applicable (or any
equivalent agreement signed by both of us).
Agreed to: Agreed to:
Pinacor Corporation International Business Machines
Corporation
By: /s/ Don Lyons By:
- ------------------------------------ ---------------------------------
Authorized Signature Date Authorized Signature
Date
Authorized Name (print) Don Lyons
----------
Customer Number: 5816159 IBM Customer Agreement
Number. CFTG68A
Customer Address:
525 West Alameda
Tempe, Arizona 85282-1824 Office Number:
Project Name or Identifier:IV-AAP IBM Office Address:
Project Change Request Number: PCR # 2 1798 N.W. 40th Street
Boca Raton, Florida 33431
Estimated Start Date May 20,1999
Estimated End Date: June 4,1999
- --------------------------------------------------------------------------------
Page 2
IBM Business Partner Agreement IBM
Printing Systems Company Reseller/Distributor Profile
- --------------------------------------------------------------------------------
We welcome you as an IBM Business Partner.
This Profile covers the details of your approval to actively market, Products
and Services, as our Reseller/Distributor.
By signing below, each of us agrees to the terms of the following (collectively
called the "Agreement"):
(a) this Profile;
(b) General Terms (Z125-5478-04 12/98);
(c) the applicable Attachments referred to in this Profile, and
(d) the Exhibit.
This Agreement and its applicable transaction documents are the complete
agreement regarding this relationship, and replace any prior oral or written
communications between us. Once this Profile is signed, 1) any reproduction of
this Agreement or a transaction document made by reliable means (for example,
photocopy or facsimile) is considered an original, to the extent permissible
under applicable law, and 2) all Products and Services you market and Services
you perform under this Agreement are subject to it. If you have not already
signed an Agreement for Exchange of Confidential Information (AECI), your
signature on this Profile includes your acceptance of the AECI.
IBM may assign this Agreement, in whole or in part, to 1) a Related Company or
2) a third party if a) the assignment deals with the rights to payment or
placement of orders or b) in conjunction with the sale of a part of its business
utilizing this Agreement.
After signing this Profile, please return a copy to the IBM address shown below.
Revised Profile (yes/no): no Date received by IBM: September 27,
1999
Agreed to: (IBM Business Partner name) Agreed to:
PINACOR INC International Business Machines
Corporation
By /s/ Shelly Bodine By /s/ Louise Paradis
---------------------- -------------------------
Authorized Signature Authorized Signature
Name (type or print): SHELLY BODINE Name (type or print): LOUISE PARADIS
Date: 9-22-99 Date: Sept. 27, 1999
IBM Business Partner address: IBM address:
3001 South Priest Drive 6300 Diagonal Highway
Tempe, AZ 65282 Boulder, CO 80301
Page 1 of 4
<PAGE>
DETAILS OF OUR RELATIONSHIP
Contract Period Start Date (month/year): 08/01/1999 Duration: 24 months
Relationship Approval/Acceptance of Additional Terms:
For each approved relationship, each of us agrees to the terms of the following
by signing this Profile. Copies of the Attachments are included.
Approved Relationship Applicable
(yes/no) Attachment -
Printing Systems Company Reseller Attachment yes Z125-5828-02 08/98
Printing Systems Company Distributor Attachment yes Z125-5829-02 08/98
Remarketer Terms Attachment yes Z125-5497-02 12/98
Additional Terms
Attachment for Services Marketing for Remarketers no Z125-5750-00 11/97
Federal Remarketer Attachment no Z125-5514-01 02/99
Federal GSA Attachment no Z125-5551-01 09/98
Latin American Printing Systems Company
Reseller and Distributor Attachment yes Z125-5835-00 04/98
Product and Services Approval:
The following Products are listed in the Exhibit. The terms of an Exhibit apply
to the Products listed in it.
Approved to Market to:
Remarketers End Users
IBM Printing Systems Company Products
1)[Distributed yes yes
2)Network yes yes
3)Production yes yes
4)Software yes yes
5)Availability Services yes yes
6)Professional Services yes yes
Page 2 of 4
<PAGE>
Minimum Annual Attainment.
Product/Service Volume/Revenue Measurement
Period Dates
PSC PRINTERS/SOFTWARE/SERVICES $1,000,000/ yr 08/01/1999 TO 07/31/2001
- --------------------------------- ------------ ---------------------
- --------------------------------- ------------ ---------------------
- --------------------------------- ------------ ---------------------
Locations:
- -------------------------------------------------------------------------------
LOC. ID: Location (street address, city, state, ZIP code)
- -------------------------------------------------------------------------------
LOCID: 97400 PSC DISTRIBUTOR POOL/DEMO
- -------------------------------------------------------------------------------
2400 S. MICROAGE
- -------------------------------------------------------------------------------
TEMPE, AZ 85282
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LOC. ID: Location (street address, city, state, ZIP code)
- -------------------------------------------------------------------------------
LOCID: 96816 PSC RESELLER POOL/DEMO
- -------------------------------------------------------------------------------
2400 S. MICROAGE
- -------------------------------------------------------------------------------
TEMPE, AZ 85282
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LOC. ID: Location (street address, city, state, ZIP code)
- -------------------------------------------------------------------------------
LOCID: 24692 DISTRIBUTOR POOL
- -------------------------------------------------------------------------------
5389 PROVIDENT DR
- -------------------------------------------------------------------------------
CINCINNATI, OH 45246
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LOC. ID: Location (street address, city, state, ZIP code)
- -------------------------------------------------------------------------------
LOCID: 26652 DISTRIBUTOR POOL
- -------------------------------------------------------------------------------
1430 E. GREG ST
- -------------------------------------------------------------------------------
SPARKS, NV 89431
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LOC. ID: Location (street address, city, state, ZIP code)
- -------------------------------------------------------------------------------
LOCID: 25798 RESELLER WHSE POOL
- -------------------------------------------------------------------------------
1228 FOREST PARKWAY
- -------------------------------------------------------------------------------
PAULSBORO, NJ 08066
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LOC. ID: Location (street address, city, state, ZIP code)
- -------------------------------------------------------------------------------
LOCID: 24739 RESELLER WHSE POOL
- -------------------------------------------------------------------------------
421 W. ALAMEDA
- -------------------------------------------------------------------------------
TEMPE, AZ 85282
- -------------------------------------------------------------------------------
Page 3 of 4
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets (Unaudited) as of January 30, 2000 and October 31,
1999 and the Consolidated Statements of Operations (Unaudited) for the quarters
ended January 30, 2000 and January 31, 1999.
</LEGEND>
<CIK> 0000814249
<NAME> MICROAGE INC
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1999
<PERIOD-END> JAN-01-1999
<EXCHANGE-RATE> 1
<CASH> 31,818
<SECURITIES> 0
<RECEIVABLES> 450,236
<ALLOWANCES> 37,929
<INVENTORY> 245,240
<CURRENT-ASSETS> 714,191
<PP&E> 228,603
<DEPRECIATION> 133,014
<TOTAL-ASSETS> 846,987
<CURRENT-LIABILITIES> 641,723
<BONDS> 0
0
0
<COMMON> 208
<OTHER-SE> 102,505
<TOTAL-LIABILITY-AND-EQUITY> 846,987
<SALES> 1,112,881
<TOTAL-REVENUES> 1,112,881
<CGS> 1,063,315
<TOTAL-COSTS> 1,063,315
<OTHER-EXPENSES> 13,985
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 963
<INCOME-PRETAX> (48,346)
<INCOME-TAX> (18,093)
<INCOME-CONTINUING> (30,253)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (30,253)
<EPS-BASIC> (1.45)
<EPS-DILUTED> (1.45)
</TABLE>
