SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549
FORM 10-Q/A (Amendment No. 1)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period from July 3, 1994 to October 1, 1994
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-16930
EGGHEAD, INC.
(Exact name of registrant as specified in its charter)
Washington 91-1296187
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification Number)
22011 S.E. 51st
Issaquah, Washington 98027
(Address of principal executive offices)
(Zip Code)
(206) 391-0800
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
YES _X_ NO ____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock:
Outstanding at
Class October 29, 1994
Common Stock 17,163,406
$.01 par value shares
Part II. OTHER INFORMATION
ITEM 6. Exhibits and Reports On Form 8-K
a. Exhibits
*10.10 Microsoft 1994/1995 Channel Agreement dated July 1, 1994.
*10.11a Follow up letter dated August 2, 1994, from Microsoft regarding
Microsoft 1994/1995 Channel Agreement dated July 1, 1994.
*10.11b Addendum to Microsoft 1994/1995 Channel Agreement dated July 1,
1994.
10.18 Lease Termination and Rent Payment Agreement between
Sammamish
Park Place II Limited Partnership as Landlord and DJ&J Software
Corporation as Tenant regarding the Company's administrative
headquarters.
10.18a First Amendment to Lease Termination and Rent Payment
Agreement
between Sammamish Park Place II Limited Partnership as Landlord
and DJ&J Software Corporation as Tenant.
10.18b Second Amendment to Lease Termination and Rent Payment
Agreement between Sammamish Park Place II Limited Partnership
as Landlord and DJ&J Software Corporation as Tenant.
*10.29 Revolving Loan Agreement dated September 30, 1994, among
Security Pacific Bank Washington, N.A. and U.S. Bank of
Washington, National Association, Egghead, Inc., and DJ&J
Software Corporation.
**10.31a Separation agreement between Egghead, Inc. and DJ&J Software
Corporation (collectively, the "Company") and Ronald P.
Erickson dated August 1, 1994.
27 Financial Data Schedule.
28 Report of Independent Public Accountants.
b. Reports on Form 8-K
None.
* Confidential portions of this exhibit have been omitted and filed
separately with the Commission pursuant to an Application for
Confidential Treatment under Rule 24b-2 under the Securities Exchange
Act of 1934. Each exhibit has been marked to identify the confidential
portions that are omitted.
** Designates management contract or compensatory plan or arrangement.
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.
EGGHEAD, INC.
(Registrant)
Date: April 25, 1995
Carolyn J. Tobias
Senior Vice President,
Chief Financial Officer
(Principal Financial and Accounting Officer)
Rebate and Marketing Fund
Addendum to The 1994/1995 Microsoft
Channel Agreement
(July - December, 1994)
This Addendum ("Addendum") entered into as of the 1st day of July, 1994,
modifies that certain Microsoft 1993/1994 Channel Agreement
("Agreement") between MICROSOFT CORPORATION ("MS") having its principal
place of business at One Microsoft Way Redmond, WA 98052 and EGGHEAD
SOFTWARE ("CUSTOMER") having its principal place of business at 22011 SE
51st Street, Issaquah, WA 98027. The Agreement is hereby supplemented
as follows:
1. Purpose
The purpose of this Addendum is to set forth the framework by which
CUSTOMER may earn Rebates and Marketing Funds. For purposes of this
Addendum, capitalized terms not otherwise defined herein, shall have the
same definitions as set forth in the Agreement
2. Term and Termination
This Addendum shall be effective as of the date executed by MS below,
and shall expire on December 31, 1994. Either party may terminate this
Addendum, with or without cause, upon thirty (30) days prior written
notice. This Addendum is not valid unless both MS and CUSTOMER have
executed a Microsoft 1994/1995 Channel Agreement.
3. Definitions
All capitalized terms included in this Addendum are as defined in
Schedule A attached hereto.
4. Rebates
4.1 Rebate Program
CUSTOMER is eligible to receive up to a ----- percent (-----%) Rebate
during the Rebate and Marketing Fund Period. The Rebate shall be paid
provided CUSTOMER complies with the program guidelines outlined in
Schedule B. Notwithstanding such program guidelines, MS may, at its sole
discretion, ------------------------- of the Rebate prior to the end of
the Rebate and Marketing Fund Period. The Rebate so paid may be
adjusted subsequently based upon compliance with the program guidelines.
5. Marketing Funds
5.1 Base Level Funds
In partial consideration for CUSTOMER's Qualified ----------------, MS
hereby grants to CUSTOMER the use of Marketing Funds calculated --------
- -- by the total --------- Product CUSTOMER purchased from MS multiplied
by each Product s respective Marketing Fund --------------- as outlined
in Schedule C attached hereto. MS reserves the right to modify Schedule
C at anytime without notice. Marketing Funds accrue ---- and shall
expire on -----------------.
Marketing Funds shall not begin accruing until both CUSTOMER and MS have
executed this Addendum. Should CUSTOMER fail to execute, or should MS
be unable to execute this Addendum by ----------------, for each full
month after --------------, in which this Addendum is not executed,
CUSTOMER shall not receive such month's Marketing Fund accrual.
5.2 Opportunity Funds
Periodically, MS may allow CUSTOMER to participate in other MS programs
in which CUSTOMER shall receive additional Marketing Funds.
5.3 Guidelines for Marketing Fund Use
MS shall provide CUSTOMER with a guideline of activities which MS sees
as a priority for spending the funds. The Microsoft Reseller Marketing
Fund Guidelines is attached hereto as Schedule D, and Section 5.4 below.
5.4 Street Date Program
From time to time, MS may announce new Product or new versions of
existing Product for which MS shall set a Street Date. MS shall ship
such Product to CUSTOMER provided that:
(a) CUSTOMER shall not display or sell the Product in any sales
office, retail store, or outlet prior to established Street Date; and
(b) CUSTOMER's distribution centers and warehouse shall not
distribute, for period of up to ----- (-----) months, Product to any
individual sales office, retail store or outlet which MS in its sole
discretion has determined in violation of the Street Date Program.
Should CUSTOMER violate the terms of this Section 4.2, CUSTOMER shall be
penalized ----- (-----) of the total Marketing Fund accrual for the ----
- ------- in which the violation occurred. Further, for a period of up to
- ----- (-----) months, MS reserves that right to withhold shipment to
CUSTOMER of future Product until the Street Date of such Product
6. Reporting Requirements
CUSTOMER shall submit reports to MS as outlined in CUSTOMER's Rebate
Guidelines, and in Schedule E attached hereto in accordance with the EDI
Reporting Guidelines attached hereto as Schedule F. Failure by CUSTOMER
to comply with the terms of the Guidelines will result in CUSTOMER's
loss of its ------------------------- total for each ----- reporting is
non-compliant. Further, CUSTOMER shall ----- (-----) of its Marketing
Fund accruals for each ----- reporting is non-compliant.
IN WITNESS WHEREOF, the parties have signed this Addendum on the date
indicated below. This Addendum is hereby made part of the Agreement.
All terms and conditions of the Agreement not supplemented herein shall
remain in full force and effect. This Addendum is not binding until
executed by MS.
AGREED AND ACCEPTED TO BY AGREED AND ACCEPTED TO BY
MICROSOFT CORPORATION ("MS"): EGGHEAD SOFTWARE
("CUSTOMER")
By By
Name (please print) Name (please print)
Title Title
6/30/94
Date Date
Schedule B
Rebate Program Guidelines
Rebate Program Overview
Programs The July/December, 1994, Rebate period offers two
rebate programs. Rebate percentages available are
listed in the table below. Details on each program
are also included in this document.
Maximum Percentage Outlined on
Rebate Incentive Available Page(s)
---------- Program -----% B-2/B-3
Total Sales-out Program -----% B-4
Total -----%
Rebate Rebates will be paid in the form of Microsoft purchase
credits ----
Calculations days after the end of each quarter rebate period
(i.e. ---------------
and Payments for July/September 1994 quarter). Rebates are
calculated by multiplying the achieved rebate
percentage by the total ----------- for the rebate
period. Note: ---------------------------------------
- ------------------------------------------------------
- -----------------------------------------------
Compliance Provided that Egghead is compliant with all of the
compliance
Rebate requirements, the compliance rebate will be paid in
the form of a
Payment purchase credit for use toward Microsoft products each
- ----- to Egghead on the ------------------------------
- -.
Any issues surrounding rebates should be sent in
writing to Kristin Weeber, Rebate Specialist, no later
than 30 days following receipt of rebate payment. If
such written notice is not provided within thirty (30)
days, Egghead shall have no further right to dispute
rebate payment.
Compliance Rebate Program
Program The objective of the Compliance Rebate Program is to
incent
Objectives Egghead to be compliant with Microsoft contractual
requirements for payments, Street Dates, and
reporting.
Non- Failure to be compliant with any or all of the current
compliance
compliance will result in the -----------------------------------
- ---------------------.
1. Microsoft At all times during the Rebate Period, a minimum
of --------------
Payment percent (-----%) of Egghead's total dollar amount due
to MS shall
Requirements be ----- (net ----- days).
2. Microsoft Street Date Program requirements are as outlined
in Section 5.4
Street Date of the Addendum.
Requirements
3. Microsoft All reports outlined below must be Timely,
Accurate and
Reporting Complete. For purposes of this Schedule B, "Timely"
is defined
Requirements as MS receipt of reporting by the due date and time
indicated, "Accurate" is defined as the correct
population of all reporting fields, and "Complete" is
defined as the population of all required reporting
fields.
FAST TRACK REPORTING
Fast Track Reporting is defined as a weekly report via
Electronic Data Interchange format ("EDI") of weekly -
- --------------------. Egghead must report sales from
- --------------------------. Egghead must make the EDI
reports available to MS' EDI mailbox each Monday by
8:00am (Pacific time). These reports shall cover the
seven-day period ending the prior Friday night
Reporting Requirements
Each unit of single license Full Package Product
should be reported as one unit. This applies
for both Microsoft products and for competitive
products.
Any single Microsoft product that includes
multiple licenses should be reported as one
unit. Microsoft will then convert the quantity
of multiple license units sold to the number of
licenses they represent. Examples of these
products include MMLP 20 Pack, MMLP 100 Pack,
and AED 10 Pack.
Each competitive multiple license product should
be reported as the number of licenses
represented.
All volume licensing agreements (such as MOLP,
MVLP, and MELP) should be reported as one unit
for each license sold.
Example: If Egghead sold a quantity of five units of a
Microsoft 20 user MMLP, Egghead would report a
quantity of five units of that SKU. However, if
Egghead sold a quantity of five units of a
competitor's 20 user MMLP, Egghead would report a
quantity of 100 licenses.
3. Microsoft
Reporting ------------------------- REPORTING
Requirements
The following table outlines the ---------------
product categories for EDI reporting. In addition,
the table also specifies the Microsoft products and
the competitive products that will be included in the
aggregated ---------------- reporting for the Fast
Track Rebate Program:
Category Microsoft product Competitive
Products
Windows word Word for Windows* ------------------
- -------
processors ------------------
- -------
Windows Microsoft* Excel for ------------------
- -------
spreadsheets Windows* ------------------
- -------
Windows bundles Office for Windows* ------------------
- -------
Windows Databases Microsoft Access* for ------------------
- ------- Windows* ------
- -------------------
FoxPro* for Windows* ------------------
- -------
Mail Servers Microsoft* Mail ------------------
- -------
------------------
- -------
Network Operating WindowsNT* Advanced ------------------
- -------
Systems Server ------------------
- -------
LAN Manager ------------------
- -------
------------------
- -------
Accounts are required to report -------- (CTIA type
"32") units and ------------------ for each Microsoft
SKU, but are required only to report total license
count for --------------------- (CTIA type "32") for
each category. All SKUs for these titles should be
counted, including full packaged product, upgrades,
multiple license packs, education, and government
SKUs.
Example: If Egghead sold-through 50 units of ---------
- --------------------- for Windows in one week, then
Egghead would report a total of 70 units sell-through
of ------------------ products in the Windows
Spreadsheet category.
- ---------------------- REPORTING
Egghead must submit ----- or ----- reporting by the
10th of each month for the prior month in the format
outlined in Schedule D. Reporting shall be transmitted
in electronic format and sent via modem to 1-800-831-
6316, or on tape or diskette to MS at the following
address:
Microsoft Corporation
Reseller Reporting Group
One Microsoft Way
Redmond, WA 98052
Should Egghead provide on a compliant basis for three
(3) consecutive months both monthly ----- and -----
reporting, and weekly Fast Track Reporting, MS may at
its sole discretion grant a written waiver of Egghead
monthly ----- and ----- Reporting requirements.
Total Sales-out Rebate Program
Program Objective The objective of the Total Sales-out Rebate Program is
to increase sales of Microsoft products.
Rebate Percentages The total possible rebate percentage achievable for
Total Sales- out Rebate Program is -----% of Qualified ------------
- ---------- for July/December 1994.
Goal Definition The program goals are based upon the following:-----------
- -------------------- of Microsoft products.
Microsoft's ------------------------------------
- --------------.
Egghead's --------------------------------------
- -------------.
Rebate Goals Egghead's Total Sales-out Rebate Program goals are as
follows:
July - September, 1994: $----------
October - December, 1994: $----------
Sales-out Definitions/ Measurements Microsoft Product Sales-out is defined
as those Microsoft product units sold through Egghead outlet locations.
Egghead's full packaged product, MOLP, and upgrade sales-out units
will be measured from the sales-out reported by
Egghead to Microsoft Revenue from licensing sales is
captured and generated by Microsoft's financial
systems and included in total sales-out used to
measure product sales-out rebate performance.
License revenue (Select and Microsoft Maintenance)
credit is granted as Microsoft recognizes the revenue.
This occurs when Microsoft has received the customer's
license reporting. Following receipt of reporting,
Microsoft bills the customer/reseller and
simultaneously recognizes the revenue.
Program Requirements Egghead must achieve -----% of the Microsoft dollar --
- ----------- goal in order to receive their entire sales-out
rebate for July/December 1994. If Egghead achieves
greater than -----% of their sales-out goal,
Egghead will receive the exact achieved percentage of
the sales-out rebate goal. If Egghead achieves less
than -----% of their rebate goal, they will not
receive any portion of the sales-out rebate. The
purpose of this scale is to offer an incentive for
accounts to meet a portion of their goal in the event
they cannot achieve the full Microsoft sales-out
goal.
Example: If Egghead has a quarterly sales out
goal of ------------------- and Egghead sells -----------
- ----- over the quarter period, Egghead will receive --
- ---% of the eligible -----% sales out rebate
percentage, or -----%.
