<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 2)
-------------
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
- ---
EXCHANGE ACT OF 1934 For the fiscal year ended March 30, 1996
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
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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 No.)
EAST 22705 MISSION
LIBERTY LAKE, WASHINGTON 99019
- ------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (509) 922-7031
---------------
Securities registered pursuant to Section 12(b) of the Act: NONE
-----
Securities registered pursuant to
Section 12(g) of the Act: COMMON STOCK, $.01 PAR VALUE
----------------------------
(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K
------
To the best of Egghead, Inc.'s knowledge, the aggregate market value of the
voting stock held by non-affiliates of the registrant at May 24, 1997 was
$47,745,815.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
OUTSTANDING AT
CLASS July 8, 1997
----- --------------
Common Stock, $.01 par value 17,614,342 shares
DOCUMENTS INCORPORATED BY REFERENCE
[None]
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
A) Documents filed as a part of this report:
1. Financial Statements
The Consolidated Financial Statements, Notes thereto, Financial
Statement Schedules (none), and Accountants' Report thereon are
included in Part II, Item 8, of this report.
2a. Exhibits
(i) 3.1 Restated Articles of Incorporation of the
Company
(vii) 3.2 Amended Bylaws of the Company
(ix) 10.1 * Microsoft 1995/1996 Channel Agreement dated July
1, 1995, as amended through January 1, 1996.
10.2 (Intentionally left blank.)
10.3 (Intentionally left blank.)
10.4 (Intentionally left blank.)
(iv) 10.5 * Microsoft January - June, 1993 Reseller Rebate
and Marketing Fund Agreement.
(v) 10.6 * Microsoft 1993/1994 Channel Agreement dated July
1, 1993.
(v) 10.7 * Rebate and Marketing Fund Addendum to the
1993/1994 Microsoft Channel Agreement dated
November 1, 1993.
(v) 10.8 * Amendment to the Microsoft 1993/1994 Channel
Agreement (appointment as a Major Chain
Reseller) dated November 10, 1993.
(v) 10.9 * Reseller agreement with WordPerfect Corporation
dated April 1, 1994.
(vi) 10.10 * Microsoft 1994/1995 Channel Agreement dated July
1, 1994.
(vi) 10.11 * Addendum to the Microsoft 1994/1995 Channel
Agreement dated July 1, 1994.
(vii) 10.11a Amendment No. 1 to the Addendum to the Microsoft
1994/1995 Channel Agreement (Appointment as a
Large Account Reseller) dated July 1994.
(vi) 10.12 * Follow up letter dated August 2, 1994, from
Microsoft regarding Microsoft 1994/1995 Channel
Agreement dated July 1, 1994.
(vii) 10.13 * Addendum to the 1994/1995 Microsoft Channel
Agreement dated January 1995.
10.14 (Intentionally left blank.)
10.15 Lease, as amended, dated June 9, 1988, between
Sammamish Park Place I Limited Partnership as
Landlord and DJ&J Software Corporation as Tenant
regarding the Company's administrative
headquarters. (Previously filed with
registrant's Form 10-K for the fiscal year ended
April 1, 1989, as Exhibit 10.46.)
10.16 First Amendment to June 9, 1988 lease between
Sammamish Park Place I Limited Partnership and
DJ&J Software Corporation dated
October 4, 1989. (Previously filed with
registrant's Form 10-K for the fiscal year ended
March 31, 1990, as Exhibit 10.46a.)
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(CONTINUED)
10.17 Lease dated March 23, 1992 between
Sammamish Park Place II Limited Partnership
as Landlord and DJ&J Software Corporation
as Tenant regarding the Company's
administrative headquarters. (Previously
filed with registrant's Form 10-K for the
fiscal year ended March 28, 1992, as
Exhibit 10.47.)
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.
(Previously filed with registrant's Form
10-Q for the first quarter of fiscal 1995
ended July 2, 1994.)
(vi) 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.
(vi) 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.
(iii) 10.19 Lease dated March 23, 1989, between The CHY
Company as Landlord and DJ&J Software as
Tenant regarding the Company's Sacramento
distribution facility.
(iii) 10.20 First amendment to lease between The CHY
Company as Landlord and DJ&J Software, as
Tenant regarding the Company's Sacramento
distribution facility.
10.21 (Intentionally left blank.)
(i) 10.22 Lease Agreement dated January 7, 1988, with
Granite Properties, a limited partnership,
as Landlord and DJ&J Software Corporation,
as Tenant regarding Lancaster distribution
facility.
(i) 10.23 Master License Agreement dated February 12,
1988, with Staples, Inc. as Licensor and
DJ&J Software Corporation as Licensee,
regarding an exclusive right to sell items
in Staples' discount stores.
10.24 First Amendment to Master License Agreement
between Staples, Inc. and DJ&J Software
Corporation dated November 14, 1990.
(Previously filed with registrant's Form
10-K for the fiscal year ended March 30,
1991, as same Exhibit number.)
(viii) 10.25 Asset Purchase Agreement by and among
Software Spectrum, Inc., Egghead, Inc. and
DJ&J Software Corporation dated as of March
23, 1996 with Exhibits 4.11 and 4.12
thereto
10.26 (Intentionally left blank.)
10.27 Form of Indemnification Agreement between
the Company and its directors. (Previously
filed with registrant's Form 10-Q for the
third quarter of fiscal 1995 ended December
31, 1994.)
10.28 Form of Indemnification Agreement between
DJ&J Software Corporation and its
directors. (Previously filed with
registrant's Form 10-Q for the third
quarter of fiscal 1995 ended December 31,
1994.)
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(CONTINUED)
(vi) 10.29 Revolving Loan Agreement dated September
30, 1994, among Seattle-First National Bank
and U.S. Bank of Washington, National
Association, Egghead, Inc., and DJ&J
Software Corporation.
10.30 Revolving Loan Agreement dated September
30, 1993 among Seattle-First National Bank
and U.S. Bank of Washington, National
Association, Egghead, Inc., and DJ&J
Software Corporation. (Previously filed
with registrant's Form 10-Q dated October
16, 1993, as same exhibit number.)
10.31 (Intentionally left blank.)
10.32 (Intentionally left blank.)
10.33 ** Executive employment agreement between
Egghead, Inc. and Terence M. Strom dated
June 28, 1993. (Previously filed with
registrant's Form 10-Q dated October 16,
1993, as Exhibit 10.34.)
(ii) 10.34 ** Egghead, Inc. 1989 Executive Retention
Incentive Stock Option Plan.
(ii) 10.35 ** Egghead, Inc. 1989 Executive Retention
Incentive Stock Option Agreement between
Egghead, Inc. and Stuart M. Sloan dated
February 23, 1989.
(ii) 10.36 ** Egghead, Inc. 1989 Executive Retention Non-
Qualified Stock Option Agreement between
Egghead, Inc. and Stuart M. Sloan dated February
23, 1989.
(iii) 10.36a ** Amendment No. 1 to Egghead, Inc. 1989
Executive Retention Non-Qualified Stock
Option Agreement between Egghead, Inc. and
Stuart M. Sloan dated April 17, 1991.
10.37 (Intentionally left blank.)
10.38 (Intentionally left blank.)
(ii) 10.39 ** Egghead, Inc. 1989 Executive Retention
Incentive Stock Option Agreement between
Egghead, Inc. and Ronald A. Weinstein dated
February 23, 1989.
(iii) 10.39a ** Amendment No. 1 to Egghead, Inc. 1989
Executive Retention Incentive Stock Option
Agreement between Egghead, Inc. and Ronald
A. Weinstein dated April 17, 1991.
(ii) 10.40 ** Egghead, Inc. 1989 Executive Retention Non-
Qualified Stock Option Agreement between
Egghead, Inc. and Ronald A. Weinstein dated
February 23, 1989.
(iii) 10.40a ** Amendment No. 1 to Egghead, Inc. 1989
Executive Retention Non-Qualified Stock
Option Agreement between Egghead, Inc. and
Ronald A. Weinstein dated April 17, 1991.
10.41 (Intentionally left blank.)
10.42 (Intentionally left blank.)
(ii) 10.43 ** Egghead, Inc. 1989 Executive Retention
Incentive Stock Option Agreement between
Egghead, Inc. and Matthew J. Griffin dated
February 23, 1989.
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(CONTINUED)
(ii) 10.44 ** Egghead, Inc. 1989 Executive Retention Non-
Qualified Stock Option Agreement between
Egghead, Inc. and Matthew J. Griffin dated
February 23, 1989.
(iii) 10.44a ** Egghead, Inc. 1989 Executive Retention Non-
Qualified Stock Option Agreement between
Egghead, Inc., and Matthew J. Griffin dated
April 17, 1991.
10.45 (Intentionally left blank.)
10.46 (Intentionally left blank.)
10.47 (Intentionally left blank.)
10.48 ** Egghead, Inc. 1989 Employee Stock Purchase
plan. (Previously filed with registrant's
Form S-8 dated June 23, 1990, as Exhibit
10.)
10.49 ** Egghead, Inc. 1993 Stock Option Plan.
(Previously filed with registrant's Form
10-Q dated October 16, 1993, as Exhibit
10.31.)
(x) 10.50 ** Egghead, Inc. Restated Nonemployee Director
Stock Option Plan.
(x) 21.1 Schedule of subsidiaries.
(x) 23.1 Consent of Independent Public Accountants.
(x) 24.1 Power of Attorney.
(x) 27 Financial Data Schedule.
Footnotes
(i) Previously filed with registrant's Registration Statement on
Form S-1, Registration No. 33-21472, as same Exhibit number.
(ii) Previously filed with the registrant's Form 8-K dated
February 23, 1989, as Exhibit numbers 10.1 to 10.13.
(iii) Previously filed with registrant's Form 10-K for the fiscal
year ended March 28, 1992, as same Exhibit number.
(iv) Previously filed with registrant's Form 10-K for the fiscal
year ended April 3, 1993, as same Exhibit number.
(v) Previously filed with registrant's Form 10-K for the fiscal
year ended April 2, 1994, as same Exhibit number.
(vi) Previously filed with registrant's Form 10-Q for the second
quarter of fiscal 1995 ended October 1, 1994.
(vii) Previously filed with registrant's Form 10-K for the fiscal
year ended April 1, 1995, as same Exhibit number.
(viii) Previously filed with registrant's Form 8-K dated March 23,
1996, as Exhibit number 2.1.
(ix) Filed herewith.
(x) Previously filed with registrant's Form 10-K for the fiscal
year ended March 30, 1996, as the same Exhibit number.
* 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.
2b. Form 8-K
Egghead, Inc., filed one report on Form 8-K, dated March 23,
1996, during the fourth quarter of its fiscal year ended
March 30, 1996, which reported on Items 5 and 7 of Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amended report
to be signed on its behalf by the undersigned, thereunto duly authorized,
in the city of Liberty Lake, State of Washington, on July 15, 1997.
EGGHEAD, INC.
By /S/ TERENCE M. STROM
------------------------------------
Terence M. Strom
Director and Attorney-in-Fact
EGGHEAD, INC.
By /S/ GEORGE P. ORBAN
----------------------
George P. Orban
Chief Executive Officer
Chairman of the Board
EGGHEAD, INC.
By /S/ BRIAN W. BENDER
----------------------
Brian W. Bender
Chief Financial Officer
Chief Accounting Officer
<PAGE>
MICROSOFT CORPORATION
1995/1996 CHANNEL
AGREEMENT
This Microsoft Corporation 1995/1996 Channel Agreement ("Agreement") is entered
into as of the 1st day of July, 1995 between MICROSOFT CORPORATION ("MS") having
its principal place of business at One Microsoft Way, Redmond, WA 98052-6399 and
EGGHEAD SOFTWARE ("CUSTOMER") having its principal place of business at 22011 SE
51st Street, Issaquah, WA 98027.
1. DEFINITIONS
All capitalized terms included in this Agreement are as defined in Schedule A
attached hereto.
2. TERM OF AGREEMENT
2.1 TERM
This Agreement shall take effect on the date indicated above and shall continue
until June 30, 1996.
2.2 TERMINATION
Either MS or CUSTOMER may terminate this Agreement and/or any amendment hereto
at any time, with or without cause, upon thirty (30) days prior written notice.
Neither party shall be responsible to the other for any costs or damages
resulting from the termination of this Agreement. Rights to payment of money
which have accrued prior to termination shall survive termination. Any Product
acquired by CUSTOMER pursuant to this Agreement which is in its possession as of
the termination of this Agreement shall be distributed by CUSTOMER subject to
the restrictions in this Agreement, or may be returned to MS only within sixty
(60) days of termination as authorized herein. CUSTOMER shall make a final
report to MS within ninety (90) days of termination of this Agreement.
Termination of this Agreement shall automatically terminate any amendments
hereto.
3. CUSTOMER OBLIGATIONS
3.1 FINANCIAL STATEMENT
CUSTOMER will provide to MS' credit management, quarterly Financial Statements
within forty-five (45) days after the end of each calendar quarter. CUSTOMER
Financial Statements will be used by MS' credit department solely for the
purpose of establishing and reviewing CUSTOMER's credit. Financial Statements
should be forwarded to attn. Credit Manager, Finance, Microsoft, One Microsoft
Way, Redmond, WA 98052-6399.
3.2 NO OTHER PRODUCT WARRANTIES BY CUSTOMER
Neither CUSTOMER nor any of its employees or agents shall have any right to make
any other warranties or promises for the use of Product which are not contained
in the written warranty document accompanying the Product. CUSTOMER may,
however, make representations and give instructions for the use of the Product
which are contained on the Product label or container, or End User documentation
provided with the manual or MS product literature denoted by a MS part number or
authorized in writing by MS.
3.3 NO ALTERATIONS OF PRODUCT
CUSTOMER shall not alter the Product or Product packaging, and shall have no
authority to make copies of MS diskettes or documentation. CUSTOMER shall
distribute Product to its customers in unopened packages as shipped by MS.
MICROSOFT CONFIDENTIAL - DISCLOSURE PROHIBITED
<PAGE>
3.4 USE OF TRADEMARKS
The appropriate trademark symbol (either "-TM-" or "-Registered Trademark-" in a
superscript following the Product name) shall be used whenever a Product name is
first mentioned in any advertisement, brochure, or other material circulated or
displayed by CUSTOMER. MS' current trademark list is available upon requested.
3.5 AUTHORIZED DISTRIBUTION
Product acquired under this Agreement shall be distributed only within the
Territory. CUSTOMER shall not, without the prior written consent of MS,
distribute Product to any Reseller or End User whom they have reason to believe
may re-distribute such Product outside of the Territory.
3.6 TAXES
CUSTOMER shall be liable for all sales, use, value added, duties, tariffs or
other similar taxes of any nature whatsoever associated with the distribution of
the Product, and shall indemnify and hold MS harmless from any such taxes or
expenses.
4. MS OBLIGATIONS
4.1 ASSISTANCE WITH REPORTING
Upon request, MS shall use best efforts to assist CUSTOMER in data reporting,
and will work with CUSTOMER's MIS department to facilitate the data reporting
process.
4.2 NO WARRANTIES FOR PRODUCT NOT MANUFACTURED BY MS
MS makes no warranties as to items distributed under a third party name,
copyright, trademark or trade name which may be included within the retail
package of a Product sold hereunder.
4.3 AUDITS
During the term of this Agreement and for a period of two (2) years following
its termination, MS may audit the applicable records and operations of CUSTOMER
as is reasonable to verify CUSTOMER's compliance with the terms of this
Agreement. CUSTOMER shall promptly correct any errors and omissions disclosed by
such audit. Any audit will be conducted during CUSTOMER's normal business hours
in such a manner as not to unreasonably interfere with CUSTOMER's normal
business activities.
5. CUSTOMER AND MS OBLIGATIONS
5.1 PRODUCT WARRANTY; LIMITATION OF LIABILITY
(A) MS warrants its software and hardware Product to End Users as defined in
the written limited warranty document accompanying each Product. All replacement
Product is delivered subject to the terms of the MS limited Product warranty.
THE ABOVE LIMITED WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, OR STATUTORY, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE AND OF ALL OTHER OBLIGATIONS OR LIABILITIES ON
MS' PART.
(B) NEITHER MS NOR ANYONE ELSE WHO HAS BEEN INVOLVED IN THE CREATION,
PRODUCTION, OR DELIVERY OF ANY PRODUCT WHICH ARE THE SUBJECT OF THIS AGREEMENT
SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, OR INCIDENTAL DAMAGES
(INCLUDING DAMAGES FOR LOSS OF BUSINESS PROFITS, BUSINESS INTERRUPTION, LOSS OF
BUSINESS INFORMATION, AND THE LIKE) ARISING OUT OF THE USE OR INABILITY TO USE
ANY PRODUCT EVEN IF MS HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
(C) IN ANY CASE, THE LIABILITY OF MS (i) UNDER ANY PROVISION OF THIS
AGREEMENT; (ii) FOR ANY DAMAGES CAUSED BY A PROGRAM DEFECT OR FAILURE IN ANY
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD SOFTWARE PAGE 2
<PAGE>
PRODUCT OR (iii) ARISING FROM A COURT OF PROPER JURISDICTION HOLDING ANY OF THE
ABOVE WARRANTIES OR DISCLAIMERS OF WARRANTIES INADEQUATE OR INVALID SHALL BE
LIMITED TO THE AMOUNT ACTUALLY PAID BY CUSTOMER TO MS UNDER MS AGREEMENT. MS'
LIMITATION OF LIABILITY IS CUMULATIVE WITH ALL OF MS' EXPENDITURES BEING
AGGREGATED TO DETERMINE SATISFACTION OF THE LIMIT. THE EXISTENCE OF CLAIMS OR
SUITS AGAINST MORE THAN ONE PRODUCT LICENSED UNDER THIS AGREEMENT WILL NOT
ENLARGE OR EXTEND THE LIMIT. CUSTOMER RELEASES MS FROM ALL OBLIGATIONS,
LIABILITY, CLAIMS OR DEMANDS IN EXCESS OF THE LIMITATION.
5.2 SEMESTER PROGRAMS
(A) MARKETING FUNDS
Each Semester, MS may allow CUSTOMER to participate in programs which provide
the opportunity to earn marketing funds. CUSTOMER's participation in such
programs shall be governed by CUSTOMER's then current Microsoft Rebate and
Marketing Fund Addendum to this Agreement, and Microsoft's Marketing Fund
Guidelines, as such may be promulgated and modified by MS, in its sole
discretion, from time to time.
(B) REBATES
Each Semester, MS may allow CUSTOMER to participate in programs which provide
the opportunity to earn rebates as described in CUSTOMER's current Microsoft
Rebate and Marketing Fund Addendum to this Agreement, and CUSTOMER's Rebate
Program Guidelines, as such may be promulgated and modified by MS, in its sole
discretion, from time to time.
(C) ELECTRONIC DATA INTERCHANGE
MS shall require CUSTOMER to provide weekly and monthly sales reporting during
the term of this Agreement. Such sales reporting shall be submitted to MS in
accordance with the Electronic Data Interchange (EDI) Guidelines as provided to
CUSTOMER by MS, from time to time.
6. PATENT, COPYRIGHT AND TRADEMARK INFRINGEMENT
MS shall defend and pay the amount of any final adverse judgement against
CUSTOMER, or settlement to which MS has consented, resulting from claims of
infringement of any United States patent, copyright, trademark and/or service
mark with respect to a Product, provided that the Product has not been altered,
and provided further that MS is notified promptly in writing of such a claim and
has sole control over its defense or settlement, and CUSTOMER provides
reasonable assistance in the defense of the same.
7. DELAY IN PERFORMANCE
Neither party shall be liable for failure or delay in the performance of any of
its obligations under this Agreement, except obligations for the payment of
money, if such delay or failure is caused by circumstances beyond the control of
the party affected. Strikes or other labor difficulties which are not capable of
being terminated on terms acceptable to the party affected shall not be
considered circumstances within the control of such party. In the event of
Product shortages, MS shall have the right to allocate available supplies of the
Product in its sole discretion.
8. NO WAIVER
None of the provisions of this Agreement shall be deemed to have been waived by
any act or acquiescence on the part of MS, CUSTOMER or their respective agents
or employees, but may be waived only by an instrument in writing signed by an
authorized officer of the waiving party. No waiver of any provision of this
Agreement shall constitute a waiver of any other provision or of the same
provision on another occasion.
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD SOFTWARE PAGE 3
<PAGE>
9. NO PARTNERSHIP OR AGENCY
Nothing in this Agreement shall be deemed to create or constitute a partnership,
joint venture, franchise, agency, or contract of employment between MS and
CUSTOMER.
10. ATTORNEY'S FEES; GOVERNING LAW
In the event an action is commenced to enforce a party's rights under this
Agreement, the prevailing party in such action shall be entitled to recover its
costs and attorneys' fees. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Washington. CUSTOMER consents to
non-exclusive jurisdiction and venue in King County, Washington.
11. ENTIRE AGREEMENT
This Agreement and all attached Amendments, Addenda and Schedules constitute the
entire agreement between MS and CUSTOMER, and supersedes and terminates any and
all prior agreements or contracts, written or oral, entered into between the
parties relating to the subject matter hereof. Any representations, promises, or
conditions in connection therewith not in writing signed by both parties shall
not be binding upon either party. This Agreement shall control any provisions in
purchase orders which are inconsistent with this Agreement
12. U.S. GOVERNMENT RESTRICTED RIGHTS
Any Product which CUSTOMER distributes or licenses to or on behalf of the United
States of America, its agencies and/or instrumentalities (the "Government"), are
provided to CUSTOMER with RESTRICTED RIGHTS. Use, duplication or disclosure by
the Government is subject to restriction as set forth in subparagraph (c)(1)(ii)
of the rights in Technical Data and Computer Software clause at DFAR
252.227-7013, or as set forth in the particular department or agency regulations
or rules which provide MS protection equivalent to or greater than the
above-cited clause. CUSTOMER shall comply with any requirements of the
Government to obtain such RESTRICTED RIGHTS protection, including without
limitation, the placement of any restrictive legends on the Product software,
Product documentation, and any license agreement used in connection with the
distribution of the Product. Manufacturer is Microsoft Corporation, One
Microsoft Way, Redmond, Washington 98052-6399. Under no circumstances shall MS
be obligated to comply with any Governmental requirements regarding the
submission of or the request for exemption from submission of cost or pricing
data or cost accounting requirements. For any distribution or license of the
Product that would require compliance by MS with Governmental requirements
relating to cost or pricing data or cost accounting requirements, CUSTOMER must
obtain an appropriate waiver or exemption from such requirements for the benefit
of MS from the appropriate Governmental authority before the distribution and/or
license of the Product to the Government.
13. CONFIDENTIALITY
CUSTOMER expressly undertakes to retain in confidence the terms and conditions
of this Agreement, and all information and know-how transmitted to it by MS and
make no use of such information and know-how except under the terms and during
the existence of this Agreement. CUSTOMER shall guarantee and ensure its
employees' compliance with this paragraph. CUSTOMER's obligations under this
paragraph shall survive any termination of this Agreement and shall extend to
the earlier of such time as the information is public domain or five (5) years
following the termination of this Agreement.
14. NO ASSIGNMENT
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, provided that CUSTOMER may
not assign its rights or obligations under this Agreement in any way without the
prior written consent of MS.
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD SOFTWARE PAGE 4
<PAGE>
15. NOTICES
All notices sent by MS or CUSTOMER alleging, regarding, responding to, or in any
way connected with any claim of breach of this Agreement or any other legal
obligation related hereto, shall be sent via U.S. certified mail (return receipt
requested), or via overnight courier (e.g., Federal Express, or DHL), and
addressed as follows:
<TABLE>
<S> <C>
If to MS: Microsoft Corporation
One Microsoft Way
Redmond, WA 98052-6399
Attn: Sr. Vice President, Microsoft North America
With cc to: Law and Corporate Affairs
If to CUSTOMER:
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
Attn:
--------------------------------------------------
</TABLE>
16. SURVIVAL
Sections 2.2, 3.2, 3.3, 3.4, 3.5, 3.6, 4.2, 4.3, 5.1, 5.2(c), 11, 12, 13, 14 and
16 shall survive any termination of this Agreement.
IN WITNESS WHEREOF, the parties have signed this Agreement on the dates
indicated below. This Agreement is not binding until executed by MS.
<TABLE>
<S> <C>
MICROSOFT CORPORATION ("MS") EGGHEAD SOFTWARE ("CUSTOMER")
By: By:
- --------------------------------------- ---------------------------------------
- ------------------------------------------- -------------------------------------------
Name (please print) Name (please print)
- ------------------------------------------- -------------------------------------------
Title Title
- ------------------------------------------- -------------------------------------------
Date Date
</TABLE>
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD SOFTWARE PAGE 5
<PAGE>
SCHEDULE A
DEFINED TERMS
"DISTRIBUTOR" is defined as any MS customer which purchases MS Product
directly from MS, and distributes said Product to Resellers.
"END USER" is defined as the ultimate consumer of Product.
"FINANCIAL STATEMENT" is defined as a Balance Sheet as of the last day of
the calendar quarter, and an Income Statement and Statement of Cash Flows for
the quarter and year-to-date, prepared in accordance with Generally Accepted
Accounting Principles ("GAAP"). Any deviation from GAAP in the quarterly
statements shall be clearly noted. These statements must be signed by an officer
of CUSTOMER as being representative of the books and accounts of CUSTOMER.
"PRODUCT" is defined as any MS Stock Keeping Unit ("SKU") listed on
CUSTOMER's then current Price List.
"PURCHASE CREDIT" is defined as a dollar amount credited to CUSTOMER's
account with MS, which amount may only be used by CUSTOMER in the manner set
forth in this Agreement.
"RESELLER" is defined as any software retailer which purchases Product from
MS or a MS authorized Distributor.
"SEMESTER" is defined as a six month period. There are two (2) Semesters
during the term of this Agreement, January 1 through June 30, and July I through
December 31.
"TERRITORY" is defined as the geographic boundaries of the United States of
America, excluding all United States territories, possessions, or protectorates.
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD SOFTWARE PAGE A1
<PAGE>
REBATE AND MARKETING FUND
ADDENDUM TO THE 1995/1996 MICROSOFT
CHANNEL AGREEMENT
(JANUARY - JUNE, 1995)
This Addendum ("Addendum") entered into as of the 1st day of July, 1995,
supplements that certain Microsoft 1995/1996 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.
2. TERM AND TERMINATION
This Addendum shall be effective as of the date indicated above, and shall
expire on December 31, 1995. 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 1995/1996 Channel
Agreement, and the Addendum to The Microsoft 1995/1996 Channel Agreement
(Appointment As a Direct Reseller).
3. DEFINITIONS
For purposes of this Addendum, capitalized terms not otherwise defined herein,
shall have the same definitions as set forth in the Agreement. Additional
capitalized terms included in this Addendum are as defined in Schedule A
attached hereto.
4. REBATES
CUSTOMER is eligible to receive up to a [ * ] percent [ * ] Rebate on its
Qualified Sales made during the Rebate and Marketing Fund Period. The Rebate
shall be paid provided CUSTOMER complies with the Rebate Program Guidelines
outlined in Schedule B. Notwithstanding such Rebate Program Guidelines, MS may,
at its sole discretion, pay all or any portion 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 Rebate Program Guidelines.
5. MARKETING FUNDS
5.1 BASE LEVEL FUNDS
MS hereby grants to CUSTOMER the use of Marketing Funds calculated monthly by
the total number of each Product CUSTOMER purchased from MS multiplied by each
Product's respective Marketing Fund Accrual rate as outlined in Schedule C
attached hereto. MS reserves the right to modify Schedule C at anytime without
notice. Marketing Funds accrue monthly and shall expire on February 29, 1995.
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 July 1, 1995, for each full month after July 1,
1995, 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.
* CONFIDENTIAL TREATMENT REQUESTED
MICROSOFT CONFIDENTIAL - DISCLOSURE PROHIBITED
<PAGE>
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.
5.4 MARKETING FUND AUDIT
During the term of this Agreement and for a period of two (2) years following
its termination, MS may audit the applicable records and operations of CUSTOMER
as is reasonable to verify CUSTOMER's use of Base Level Marketing Funds and
Opportunity Funds. Any audit will be conducted during CUSTOMER's normal business
hours in such a manner as not to unreasonably interfere with CUSTOMER's normal
business activities. Should such audit disclose material discrepancies, audit
expenses shall be paid by CUSTOMER. For purposes of this Addendum, "material
discrepancies" shall mean ten thousand U.S. dollars (US$10,000) or more.
If the results of such audit show that CUSTOMER used Marketing Funds in any
manner other than is authorized under this Addendum, MS shall be entitled to
recover from CUSTOMER any and all Marketing Funds so used, in additional to any
other remedies available to MS under law or equity plus injunctive relief and/or
any other damages as may be permitted by law.
5.5 MARKETING FUND REIMBURSEMENT POLICY FOR MICROSOFT-REGISTERED TRADEMARK-
WINDOWS-REGISTERED TRADEMARK- 95
CUSTOMER agrees to abide by the Marketing Fund Reimbursement Guidelines,
attached hereto as Schedule G, and as revised from time to time by MS.
6. REPORTING REQUIREMENTS
CUSTOMER shall submit reports to MS as outlined in CUSTOMER's Rebate Program
Guidelines, and Schedule F attached hereto in accordance with the EDI
Implementation Guide attached hereto as Schedule E. Failure by CUSTOMER to
comply with the terms of the Guidelines shall result in CUSTOMER's loss of its
monthly Compliance Rebate total for each month 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.
<TABLE>
<S> <C>
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
- ------------------------------------------- -------------------------------------------
Date Date
</TABLE>
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD SOFTWARE PAGE 2
JULY - DECEMBER, 1995, REBATE AND
MARKETING FUND ADDENDUM
<PAGE>
SCHEDULE A
DEFINITIONS
"AMS REPORTING" (ACCOUNT MANAGEMENT SYSTEMS REPORTING) is defined as a
monthly report of CUSTOMER's monthly Sell To sales of all MS Product, reported
in the format Attached hereto as Schedule F.
"ELECTRONIC DATA INTERCHANGE" or "EDI" is defined as the ANSI-ASCII X.12
standard, adopted by CompTIA, by which CUSTOMER shall submit sales reporting to
MS.
"INVENTORY REPORTING" is defined as the reporting of Product specific month
end inventory. If CUSTOMER has multiple locations, inventory reporting shall be
by location, and shall include the name, street address, city, state and zip
code for each location.
"MARKETING FUNDS" is defined as the purchase credit amount accrued by
CUSTOMER as a percentage of Qualified Purchases, and used to fund CUSTOMER's
pre-approved MS marketing activities.
"MARKETING FUND ACCRUAL" is defined as the dollar amount MS grants CUSTOMER
for each Product purchased from MS.
"MICROSOFT MARKETING FUNDS GUIDELINES" is defined as MS' then current terms
and conditions attached hereto as Attachment D, available from the Microsoft
Reseller Account Representative, for the use of Marketing Funds.
"QUALIFIED SALES" is defined as net sales, made during the Rebate and
Marketing Fund Period, to CUSTOMER's End User customers as reported to MS in
CUSTOMER's normal sales reporting.
"QUALIFIED PURCHASES" is defined as net purchases made during the Rebate and
Marketing Fund Period; provided, however, that Qualified Purchases shall include
only those purchases which are shipped to CUSTOMER during the Rebate and
Marketing Fund Period, less returns, and credits for which payment in full has
been received by MS from CUSTOMER within thirty (30) days after the end of the
Rebate and Marketing Fund Period, and shall not include Microsoft Select.
"REBATE" is defined as the dollar amount paid to CUSTOMER by MS in the form
of a purchase credit for achieving of specific rebate program goals and
reporting requirements as set forth herein.
"REBATE AND MARKETING FUND PERIOD" is defined as the six (6) calendar
months, from July 1, 1995 through December 31, 1995, during which CUSTOMER shall
earn Rebates and Marketing Funds.
"SALESOUT" or "SELL THROUGH REPORTING" is defined as the reporting of the
number of Product units that CUSTOMER location distributes to its customers.
"SELL TO" is defined as Product specific (per MS SKU) sales to all End
Users.
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD SOFTWARE PAGE A1
JULY - DECEMBER, 1995, REBATE AND
MARKETING FUND ADDENDUM
<PAGE>
SCHEDULE B
REBATE PROGRAM GUIDELINES
REBATE PROGRAM OVERVIEW
PROGRAMS: Microsoft offers four rebate programs for the July - December, 1995
Rebate period. Rebate percentages available are listed in the table below.
Details on each program are also included in this document.
<TABLE>
<CAPTION>
MAXIMUM PERCENTAGE OUTLINED ON
REBATE INCENTIVE AVAILABLE PAGE(S)
- ----------------------------------------------------------- --------------------- -----------
<S> <C> <C>
Compliance Program [ * ] B2 - B4
Total Sales-out Program [ * ] B4 - B5
Business Systems Program [ * ] B5 - B6
Win Office and Mac Office Sales-out Program [ * ] B7 - B8
Consumer Sales-out Program [ * ] B8 - B9
-----
TOTAL [ * ]
-----
-----
</TABLE>
REBATE CALCULATIONS AND PAYMENTS: Rebates will be paid in the form of a
Microsoft purchase credit forty-five (45) days after the end of each quarterly
rebate period (i.e. November 15th for July - September, 1995 quarter). Rebates
are calculated by multiplying the achieved rebate percentage by the total
Qualified Sales for the rebate period. Revenue generated from Microsoft Select
Enrollment Forms executed by MS on or after July 1, 1994, shall be included in
calculating CUSTOMER's
achievement toward the Sales-out goal, but shall not be included in CUSTOMER's
final total Qualified Sales for purposes of Rebate payment. Revenue generated
from Microsoft Select Enrollment Forms executed by MS prior to July 1, 1994 will
be included in calculating CUSTOMER's achievement towards the sales-out goal and
will also be eligible for a Grandfathered rebate. Rebate payment for such Select
Enrollment Forms shall be in the form of a purchase credit forty-five (45) days
after the end of each quarterly rebate period.
PURCHASES THROUGH DISTRIBUTION: CUSTOMER's purchases through distribution will
be subtracted from CUSTOMER's Qualified Sales for purposes of Rebate payment.
PRODUCT AVAILABILITY: If Microsoft is unable to ship a CURRENT VERSION of a
product for any ten (10) consecutive business days, CUSTOMER's purchases through
distribution of those SKUs will count toward CUSTOMER's Qualified Sales for
purchases of Rebate payment.
All copies of eligible purchase orders placed through distribution along with a
copy of the Microsoft Stock Out Report must be sent to Microsoft no later than
fifteen (15) days following the semester end. Please send purchase order copies
and the Microsoft Stock Out Report to the following address:
MICROSOFT CORPORATION
ONE MICROSOFT WAY
BLDG. 22/4051
REDMOND, WA 98052
ATTN: KRISTIN WEEBER, REBATE SPECIALIST
COMPLIANCE REBATE PAYMENT: The Microsoft Compliance Rebate will be calculated
on a monthly basis. If CUSTOMER has met all of the Compliance Rebate criteria in
a given month, CUSTOMER will be entitled to one percent of that month's total
Qualified Sales. The rebate payment will be made forty-five (45) days after the
end of each quarterly rebate period.
* CONFIDENTIAL TREATMENT REQUESTED
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD SOFTWARE PAGE B1
JULY - DECEMBER, 1995, REBATE AND
MARKETING FUND ADDENDUM
<PAGE>
ANY ISSUES REGARDING REBATES SHOULD BE SENT IN WRITING TO KRISTIN WEEBER, REBATE
SPECIALIST, NO LATER THAN THIRTY (30) DAYS FOLLOWING RECEIPT OF REBATE PAYMENT.
If such written notice is not provided within thirty (30) days, CUSTOMER shall
have no further right to dispute rebate payment.
COMPLIANCE REBATE PROGRAM
PROGRAM OBJECTIVES: The objective of the Compliance Rebate Program is to
provide incentive for CUSTOMER to comply with Microsoft contractual requirements
for payments, Street Dates, reporting, and EDI ordering for Select 3.0.
NON-COMPLIANCE: During any given month, failure to comply with any or all of
the current compliance criteria will result in the forfeiture of the entire
compliance rebate for that month.
1. MICROSOFT PAYMENT REQUIREMENTS:
Microsoft requires it's customers to pay it's invoices within terms. In order to
maintain compliance, 100% of the gross invoice value for non-Select and 85% of
the gross invoice value for Select must be current as of Microsoft's fiscal
month-end. Unapplied credits will be excluded from the calculation. Failure to
comply with this section will result in the loss of CUSTOMER's Select Compliance
Rebate.
2. MICROSOFT STREET DATE REQUIREMENTS:
From time to time, Microsoft may announce a new product or new versions of an
existing product for which Microsoft shall set a Street Date. In order to comply
with the Street Date requirements, CUSTOMER shall not:
- Ship or deliver the product to any end-user customer prior to the Street
Date.
- Accept any end user payment for the product prior to the Street Date.
Checks and/or credit card numbers may be accepted by CUSTOMER, but can
only be processed when product is delivered to the end user on or after
the Street Date.
- Advertise, merchandise, or promote the product to end user customers until
it is officially announced by Microsoft. Usually, the product announcement
is on the Street Date. If the product announcement is earlier than the
Street Date, Microsoft will clearly communicate the announce date to the
channel. If product is announced by Microsoft before the Street Date, the
product can be advertised, merchandised and/or promoted immediately after
such announcement, provided that all such promotions clearly state that
the product is not yet available for purchase.
- Allow it's distribution centers and/or warehouses to distribute, for a
period of up to twelve months, a Street Date product to any individual
sales office, retail store, or outlet which Microsoft in its sole
discretion has determined to be in violation of the Street Date
Requirements.
In the event CUSTOMER violates the Street Date for any special products
specified in a Microsoft Street Date letter (including, but not limited to
Microsoft-Registered Trademark- Windows-Registered Trademark- 95), CUSTOMER
shall forfeit up to the entire Compliance Rebate for the six month Rebate period
in which the violation occurred.
Should CUSTOMER fail to comply with the Street Date Requirements, Microsoft may
also, for a period of up to twelve (12) months, withhold shipments to CUSTOMER
of future product until the Street Date of such product.
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD SOFTWARE PAGE B2
JULY - DECEMBER, 1995, REBATE AND
MARKETING FUND ADDENDUM
<PAGE>
Should CUSTOMER wish to report a Street Date violation, CUSTOMER may fax a copy
of a dated sales receipt to STREET DATE VIOLATIONS AT MICROSOFT AT (206)
936-7329. Once a violation has been reported, Microsoft shall investigate the
violation, and take remedial action as appropriate. Please note, in order to
confirm a suspected violation, Microsoft must receive a dated sales receipt.
3. MICROSOFT TRANSACTION REQUIREMENTS
Electronic Data Interchange format ("EDI") transactions are defined as 850/855
EDI transactions. CUSTOMER must place EDI transaction orders at a minimum of
once per month per Enrollment Site if product is purchased during said month.
4. MICROSOFT REPORTING REQUIREMENTS
ALL REPORTS OUTLINED BELOW MUST BE TIMELY, ACCURATE, AND COMPLETE. FOR PURPOSES
OF THE MICROSOFT CHANNEL AGREEMENT, "TIMELY" IS DEFINED 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 sent to Microsoft via
Electronic Data Interchange format ("EDI") of weekly Sales, Inventory, and
Internal Market Share. CUSTOMER must make the EDI reports available to MS' EDI
mailbox each Monday by 12:00 noon (Pacific time). These reports shall cover the
seven-day period ending the prior Friday night. Please refer to the EDI
Reporting Guidelines for details on reporting requirements.
Microsoft reserves the right to conduct audits on CUSTOMER's market share data
at any time. If the results of the audit show that CUSTOMER is reporting one or
more market share categories incorrectly, CUSTOMER must correct the specified
categories and provide the corrected back data through the beginning of July,
1994 before CUSTOMER is eligible to receive a compliance rebate.
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 AE 10 Pack.
- All volume licensing agreements (such as MOLP, Variable Licenses, and
Enterprise Licenses) should be reported as one unit for each license sold.
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD SOFTWARE PAGE B3
JULY - DECEMBER, 1995, REBATE AND
MARKETING FUND ADDENDUM
<PAGE>
MARKET SHARE REPORTING
The following table outlines the Market Share product categories for EDI
reporting. The table also specifies the top competitive products that must be
included in the aggregated market share reporting for the Fast Track Rebate
Program. All competitive products within a given category must be reported. The
products listed below are just examples, not a comprehensive list.
<TABLE>
<CAPTION>
CATEGORY MICROSOFT PRODUCT COMPETITIVE PRODUCTS
- --------------------------- --------------------------------- --------------------------------------------
<S> <C> <C>
Windows word processors Microsoft-Registered Trademark- WordPerfect-Registered Trademark- for
Word for Windows-Registered Trademark-
Windows-Registered Trademark- Ami Pro-Registered Trademark- for
Windows-Registered Trademark-
Windows spreadsheets Microsoft-Registered Trademark- 1-2-3-Registered Trademark- for
Excel for Windows-Registered Trademark-
Windows-Registered Trademark- Quattro Pro-Registered Trademark- for
Windows-Registered Trademark-
Windows bundles Microsoft-Registered Trademark- Lotus-Registered Trademark- Smartsuite
Office for WordPerfect-Registered Trademark-
Windows-Registered Trademark- Borland-Registered Trademark- Office
Novell-Registered Trademark- Perfect Office
Windows Databases Microsoft Paradox-TM- for Windows-Registered Trademark-
Access-Registered Trademark- for dBase-Registered Trademark- for
Windows-Registered Trademark- Windows-Registered Trademark-
FoxPro-Registered Trademark- for Approach
Windows-Registered Trademark- Superbase-Registered Trademark-
Mail Servers Microsoft-Registered Trademark- Lotus-Registered Trademark- cc:Mail-TM-
Mail Lotus Notes-Registered Trademark-
WordPerfect-Registered Trademark- Office
Network Operating Systems Microsoft-Registered Trademark- Novell-Registered Trademark-
Windows Netware-Registered Trademark- 4.x, 3.x, 2.x.
NT-TM- Server Novell-Registered Trademark- UnixWare
OS/Lan Server
Banyan-Registered Trademark-
SCO-Registered Trademark- Unix
</TABLE>
Accounts are required to report sell-through units and inventory units for each
Microsoft SKU, but are required only to report the total license count for
competitive product sell-through for each category. All SKUs for these titles
should be counted, including full packaged product, upgrades, Microsoft license
packs, education, and government SKUs. Please refer to the EDI Reporting
Guidelines for details on reporting requirements.
EXAMPLE: IF CUSTOMER SOLD-THROUGH FIFTY(50) UNITS OF LOTUS-Registered Trademark-
1-2-3-Registered Trademark- FOR WINDOWS-Registered Trademark- AND A 20 USER MMLP
OF QUATTRO PRO-Registered Trademark- FOR WINDOWS-Registered Trademark- IN ONE
WEEK, THEN CUSTOMER WOULD REPORT A TOTAL OF SEVENTY (70) LICENSES FOR SELL-
THROUGH OF COMPETITOR'S PRODUCTS IN THE WINDOWS SPREADSHEET CATEGORY.
MBS REPORTING
CUSTOMER must submit MBS 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
BLDG. 8N/2
ONE MICROSOFT WAY
REDMOND, WA 98052
* CONFIDENTIAL TREATMENT REQUESTED
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD SOFTWARE PAGE B4
JULY - DECEMBER, 1995, REBATE AND
MARKETING FUND ADDENDUM
<PAGE>
Should CUSTOMER provide both monthly MBS reporting and weekly Fast Track
reporting on a compliant basis for three (3) consecutive months, MS may at its
sole discretion grant a written waiver of CUSTOMER monthly MBS reporting
requirements.
TOTAL SALES-OUT REBATE PROGRAM
PROGRAM OBJECTIVE: The objective of the Total Sales-out Rebate Program is to
increase the sales of Microsoft products. All license types (Select, Microsoft
Open License, Full Package Product, MLPs) are included in measuring performance
against this goal.
REBATE PERCENTAGES: The total possible rebate percentage achievable for the
Total Sales-out Rebate Program is [ * ] of Qualified Sales for the July -
December, 1995 semester.
GOAL DEFINITIONS: The program goals are based upon the following:
- CUSTOMER's historical sales-out of Microsoft products by Microsoft product
division.
- Microsoft's United States total sales-out goals.
- CUSTOMER's contribution to Microsoft's historical sales.
REBATE GOALS: CUSTOMER has a first quarter sales-out goal and a total semester
sales-out goal. CUSTOMER's performance for the first three months of the July
- -December, 1995 semester will be measured against the first quarter sales-out
goal. At the end of the first quarter, CUSTOMER will receive the percentage of
the eligible rebate earned based on performance against the first quarter goal.
At the end of the semester, CUSTOMER will be measured on their six-month
performance against the total semester goal. Even if CUSTOMER does not meet 100%
of the first quarter goal, CUSTOMER can still achieve 100% of the semester goal
provided that the semester goal is met at the end of the six-month period.
CUSTOMER's Total Sales-out Rebate Program goals are as follows:
- Quarter 1 Goal (July - September, 1995): [ * ]
- Semester Goal (July - December, 1995): [ * ]
SALES-OUT DEFINITIONS/MEASUREMENT: Microsoft Product Sales-out is defined as
those Microsoft net product units sold through CUSTOMER's outlet locations.
CUSTOMER's full packaged product, Microsoft Open License, and upgrade sales-out
units will be measured from the sales-out reported by CUSTOMER to Microsoft.
Licensing sales (Select, Microsoft Maintenance) are captured and generated by
Microsoft's financial systems and included in total sales-out used to measure
product sales-out rebate performance.
Microsoft Select 2.x and 1.x and Microsoft Maintenance revenue 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.
PAYMENT: At the end of the semester, CUSTOMER will be paid a sales-out rebate
based on performance against the semester goal. If CUSTOMER achieves greater
than sixty percent (60%) of the semester sales-out goal, CUSTOMER will receive
the exact achieved percentage of the eligible sales-out rebate up to one hundred
percent (100%). If CUSTOMER achieves less than sixty percent (60%) of the
sales-out rebate goal, CUSTOMER 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.
* CONFIDENTIAL TREATMENT REQUESTED
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD SOFTWARE PAGE B5
JULY - DECEMBER, 1995, REBATE AND
MARKETING FUND ADDENDUM
<PAGE>
Although Microsoft pays the sales-out rebate ultimately based on performance
against the semester sales-out goal, Microsoft also pays a sales-out rebate at
the end of the first quarter based on performance against the first quarter
goal. Microsoft pays a portion of the rebate after the first quarter to provide
incentive for CUSTOMER to focus on sales-out throughout the entire semester. The
scale for the first quarter payment is the same as the scale for the semester
payment. The first quarter payment amount will be subtracted from the final
semester payment for the sales-out rebate.
EXAMPLE: IF CUSTOMER HAS A QUARTERLY SALES OUT GOAL OF $1,000,000 AND A TOTAL
SEMESTER GOAL $2,500,000, AND CUSTOMER SELLS $800,000 OVER THE FIRST QUARTER
PERIOD AND $2,600,000 OVER THE ENTIRE SEMESTER PERIOD, CUSTOMER WILL RECEIVE THE
FOLLOWING REBATE PAYMENTS:
<TABLE>
<CAPTION>
SELL-THROUGH
PERIOD GOAL ACHIEVED PAYMENT
- ---------------- ------------- ------------- -------------------------------------------------------
<S> <C> <C> <C>
First Quarter $ 1,000,000 $ 800,000 80% of [ * ] eligible rebate = [ * ] of July -
September Qualified Sales.
Semester $ 2,500,000 $ 2,600,000 104% of [ * ] eligible rebate = [ * ] of July -
December Qualified Sales less first quarter payment.
The maximum allowable rebate is [ * ].
</TABLE>
BUSINESS SYSTEMS REBATE PROGRAM
PROGRAM OBJECTIVE: The objective of the Microsoft Business Systems Rebate
Program is to increase the Microsoft Business Systems revenue as well as to
increase the ratio of Microsoft Windows NT Client to Server sales. The Microsoft
Business Systems products consist of any license type of the following products:
MICROSOFT-REGISTERED TRADEMARK- BACKOFFICE, MICROSOFT-REGISTERED TRADEMARK-
EXCHANGE, MICROSOFT-REGISTERED TRADEMARK- MAIL, MICROSOFT-REGISTERED TRADEMARK-
SNA SERVER, MICROSOFT-REGISTERED TRADEMARK- SQL SERVER-REGISTERED TRADEMARK-,
MICROSOFT-REGISTERED TRADEMARK- SYSTEMS MANAGEMENT SERVER,
MICROSOFT-REGISTERED TRADEMARK- WINDOWS NT-TM- SERVER, AND
MICROSOFT-REGISTERED TRADEMARK- WINDOWS NT-TM-WORKSTATION.
REBATE PERCENTAGES: The total possible rebate percentage achievable for the
Business Systems Rebate Program is [ * ] of Qualified Sales for the July -
December, 1995 semester.
GOAL DEFINITIONS: The program goals are based upon the following:
- Existing Microsoft Business Systems revenue.
- Microsoft's Business Systems revenue goals.
- Microsoft's Windows NT Client to Server Ratio goals.
REBATE GOALS: CUSTOMER must meet a minimum Windows NT Client to Server Ratio of
[ * ] in order to receive any portion of the Business Systems rebate.
Performance against the Client to Server goal will be measured against all
license types of Microsoft Windows NT including full packaged product, MLPs,
MOLP, and Select license types. Provided that CUSTOMER meets the [ * ] Client to
Server Ratio, CUSTOMER's achievement against the Business Systems goal will be
based on CUSTOMER's performance against the Business Systems revenue goal.
CUSTOMER has a first quarter rebate goal and a total semester rebate goal.
CUSTOMER's performance for the first three months of the July - December, 1995
semester will be measured against the first quarter rebate goal. At the end of
the first quarter, CUSTOMER will receive the percentage of the eligible rebate
earned based on performance against the first quarter goal. At the end of the
semester, CUSTOMER will be measured on their six-month performance against the
total semester goal. Even if CUSTOMER does not meet 100% of the first quarter
goal, CUSTOMER can still achieve 100% of the semester goal provided that the
semester goal is met at the end of the six-month period.
* CONFIDENTIAL TREATMENT REQUESTED
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD SOFTWARE PAGE B6
JULY - DECEMBER, 1995, REBATE AND
MARKETING FUND ADDENDUM
<PAGE>
CUSTOMER's Business Systems Rebate Program goals are as follows:
- Minimum Windows NT Client to Server Ratio of [ * ]
- Quarter 1 Goal (July - September, 1995): [ * ]
- Semester Goal (July - December, 1995): [ * ]
PAYMENT: As stated earlier, CUSTOMER must attain a [ * ] Client to Server ratio
of Microsoft Windows NT in order to receive any portion of the Business Systems
Rebate. Provided CUSTOMER meets the Client to Server Ratio requirement, CUSTOMER
will be paid a Business Systems rebate based on performance against the semester
goal at the end of the semester. If CUSTOMER achieves greater than sixty percent
(60%) of the semester Business Systems revenue goal and attains a minimum of
[ * ] Windows NT Client to Server ratio, CUSTOMER will receive the exact
achieved percentage of the eligible Business Systems rebate up to one hundred
percent (100%). If CUSTOMER achieves less than sixty percent (60%) of the
Business Systems revenue goal, CUSTOMER will not receive any portion of the
Business Systems 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 Business Systems goal.
Although Microsoft pays the rebate ultimately based on performance against the
semester goal, Microsoft also pays a rebate at the end of the first quarter
based on performance against the first quarter goal. Microsoft pays a portion of
the rebate after the first quarter to provide incentive for CUSTOMER to focus on
the Business Systems rebate program throughout the entire semester. The scale
for the first quarter payment is the same as the scale for the semester payment.
The first quarter payment amount will be subtracted from the final semester
payment for the rebate.
EXAMPLE:
GOALS:
- QUARTERLY BUSINESS SYSTEMS REVENUE GOAL OF $1,000,000
- SEMESTER BUSINESS SYSTEMS REVENUE GOAL OF $2,500,000
- MINIMUM WINDOWS NT CLIENT TO SERVER RATIO OF 10:1
PERFORMANCE:
- WINDOWS NT CLIENT TO SERVER RATIO OF 11:1
- ACTUAL QUARTER BUSINESS SYSTEMS REVENUE IS $800,000
- ACTUAL SEMESTER BUSINESS SYSTEMS REVENUE IS $2,600,000
BECAUSE CUSTOMER ATTAINED THE MINIMUM WINDOWS NT CLIENT TO SERVER RATIO OF 10:1,
CUSTOMER'S BUSINESS SYSTEMS REBATE PAYMENT WOULD BE AS FOLLOWS:
<TABLE>
<CAPTION>
SELL THROUGH
PERIOD GOAL ACHIEVED PAYMENT
- ---------------- ------------- ------------- -------------------------------------------------------
<S> <C> <C> <C>
First Quarter $ 1,000,000 $ 800,000 80% of [ * ] eligible rebate = [ * ] of July -
September Qualified Sales.
Semester $ 2,500,000 $ 2,600,000 104% of [ * ] eligible rebate = [ * ] of July -
December Qualified Sales less first quarter payment.
The maximum allowable Business Systems rebate is [ * ].
</TABLE>
* CONFIDENTIAL TREATMENT REQUESTED
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD SOFTWARE PAGE B7
JULY - DECEMBER, 1995, REBATE AND
MARKETING FUND ADDENDUM
<PAGE>
OFFICE SALES-OUT REBATE PROGRAM
PROGRAM OBJECTIVE: The objective of the Microsoft Office Sales-out Rebate
Program is to increase sales and support the efforts of Microsoft Office for
Windows Standard and Professional products and Microsoft Office for the
Macintosh products. All Microsoft Office license types (Select, Microsoft Open
License, Full Package Product, MLPs) are included in measuring performance
against this goal.
REBATE PERCENTAGES: The total possible rebate percentage achievable for Office
Sales-out Rebate Program is [ * ] percent [ * ] of net qualified purchases for
July - December, 1995.
GOAL DEFINITIONS: The program goals are based upon the following:
- CUSTOMER's historical Sales-out of Office.
- Microsoft's North America Office Sales-out goals.
- CUSTOMER's contribution to Microsoft's historical Office sales.
REBATE GOALS: CUSTOMER has a first quarter sales-out goal and a total semester
sales-out goal. CUSTOMER's performance for the first three months of the July
- -December, 1995 semester will be measured against the first quarter sales-out
goal. At the end of the first quarter, CUSTOMER will receive the percentage of
the eligible rebate earned based on performance against the first quarter-goal.
At the end of the semester, CUSTOMER will be measured on their six-month
performance against the total semester goal. Even if CUSTOMER does not meet 100%
of the first quarter goal, CUSTOMER can still achieve 100% of the semester goal
provided that the semester goal is met at the end of the six-month period.
CUSTOMER's Office Sales-out Rebate Program goals are as follows:
- Quarter 1 Goal (July - September, 1995): [ * ]
- Semester Goal (July - December, 1995): [ * ]
SALES-OUT DEFINITIONS/MEASUREMENT: Microsoft Office Product Sales-out is
defined as those Office net product units sold through reseller outlet
locations. CUSTOMER's full packaged product and upgrade sales-out units will
measured from the sales-out reported by CUSTOMER to Microsoft, which includes
MOLP sales. Licensing sales (Select, and Microsoft Maintenance) are captured and
generated by Microsoft's financial systems and included in total Sales-out used
to measure Office product sales-out rebate performance.
Microsoft Select 2.x and 1.x and Microsoft Maintenance revenue 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.
PAYMENT: At the end of the semester, CUSTOMER will be paid a sales-out rebate
based on performance against the semester goal. If CUSTOMER achieves greater
than sixty percent (60%) of the semester sales-out goal, CUSTOMER will receive
the exact achieved percentage of the eligible sales-out rebate up to one hundred
percent (100%). If CUSTOMER achieves less than sixty percent (60%) of the
sales-out rebate goal, CUSTOMER 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.
* CONFIDENTIAL TREATMENT REQUESTED
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD SOFTWARE PAGE B8
JULY - DECEMBER, 1995, REBATE AND
MARKETING FUND ADDENDUM
<PAGE>
Although Microsoft pays the sales-out rebate ultimately based on performance
against the semester sales-out goal, Microsoft also pays a sales-out rebate at
the end of the first quarter based on performance against the first quarter
goal. The scale for the first quarter payment is the same as the scale for the
semester payment. The first quarter payment amount will be subtracted from the
final semester payment for the sales-out rebate.
EXAMPLE: IF CUSTOMER HAS A QUARTERLY SALES-OUT GOAL OF $1,000,000 AND A TOTAL
SEMESTER GOAL $2,500,000, AND CUSTOMER SELLS $800,000 OVER THE FIRST QUARTER
PERIOD AND $2,600,000 OVER THE ENTIRE SEMESTER PERIOD, CUSTOMER WILL RECEIVE THE
FOLLOWING REBATE PAYMENTS:
<TABLE>
<CAPTION>
SELL-THROUGH
PERIOD GOAL ACHIEVED PAYMENT
- ---------------- ------------- ------------- -------------------------------------------------------
<S> <C> <C> <C>
First Quarter $ 1,000,000 $ 800,000 80% of [ * ] eligible rebate = [ * ] of July -
September Qualified Purchases.
Semester $ 2,500,000 $ 2,600,000 104% of [ * ] eligible rebate = [ * ] of July -
December Qualified Purchases less first quarter
payment. The maximum allowable rebate is [ * ]
</TABLE>
CONSUMER PRODUCT SALES-OUT REBATE PROGRAM
PROGRAM OBJECTIVE: The objective of the Microsoft Consumer Product Sales-out
Rebate Program is to increase sales and support the efforts of Microsoft
Consumer Division products. All Microsoft Consumer license types (Select,
Microsoft Open License, Full Package Product, MLPs) are included in measuring
performance against this goal.
REBATE PERCENTAGES: The total possible rebate percentage achievable for
Consumer Product Sales-out Rebate Program is [ * ] of net qualified
purchases for July - December, 1995.
GOAL DEFINITIONS: The program goals are based upon the following:
- CUSTOMER's historical Sales-out of Consumer products.
- Microsoft's North America Consumer Division Sales-out goals.
- CUSTOMER's contribution to Microsoft's historical Consumer product sales.
REBATE GOALS: CUSTOMER has a first quarter sales-out goal and a total semester
sales-out goal. CUSTOMER's performance for the first three months of the July
- -December, 1995 semester will be measured against the first quarter sales-out
goal. At the end of the first quarter, CUSTOMER will receive the percentage of
the eligible rebate earned based on performance against the first quarter goal.
At the end of the semester, CUSTOMER will be measured on their six-month
performance against the total semester goal. Even if CUSTOMER does not meet 100%
of the first quarter goal, CUSTOMER can still achieve 100% of the semester goal
provided that the semester goal is met at the end of the six-month period.
CUSTOMER's Consumer Product Sales-out Rebate Program goals are as follows:
- Quarter 1 Goal (July - September, 1995): [ * ]
- Semester Goal (July - December, 1995): [ * ]
SALES-OUT DEFINITIONS/MEASUREMENT: Microsoft Consumer Product Sales-out is
defined as those Consumer net product units sold through reseller outlet
locations. CUSTOMER's full packaged product and upgrade sales-out units will be
measured from the sales-out reported by CUSTOMER to
* CONFIDENTIAL TREATMENT REQUESTED
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD SOFTWARE PAGE B9
JULY - DECEMBER, 1995, REBATE AND
MARKETING FUND ADDENDUM
<PAGE>
Microsoft, which includes MOLP sales. Licensing sales (Select, and Microsoft
Maintenance) are captured and generated by Microsoft's financial systems and
included in total Sales-out used to measure Consumer product sales-out rebate
performance.
Microsoft Select 2.x and 1.x and Microsoft Maintenance revenue 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.
PAYMENT: At the end of the semester, CUSTOMER will be paid a sales-out rebate
based on performance against the semester goal. If CUSTOMER achieves greater
than sixty percent (60%) of the semester sales-out goal, CUSTOMER will receive
the exact achieved percentage of the eligible sales-out rebate up to one hundred
percent (100%). If CUSTOMER achieves less than sixty percent (60%) of the
sales-out rebate goal, CUSTOMER will 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.
Although Microsoft pays the sales-out rebate ultimately based on performance
against the semester sales-out goal, Microsoft also pays a sales-out rebate at
the end of the first quarter based on performance against the first quarter
goal. The scale for the first quarter payment is the same as the scale for the
semester payment. The first quarter payment amount will be subtracted from the
final semester payment for the sales-out rebate.
EXAMPLE: IF CUSTOMER HAS A QUARTERLY SALES-OUT GOAL OF $1,000,000 AND A TOTAL
SEMESTER GOAL $2,500,000, AND CUSTOMER SELLS $800,000 OVER THE FIRST QUARTER
PERIOD AND $2,600,000 OVER THE ENTIRE SEMESTER PERIOD, CUSTOMER WILL RECEIVE THE
FOLLOWING REBATE PAYMENTS:
<TABLE>
<CAPTION>
SELL-THROUGH
PERIOD GOAL ACHIEVED PAYMENT
- ---------------- ------------- ------------- -------------------------------------------------------
<S> <C> <C> <C>
First Quarter $ 1,000,000 $ 800,000 80% of [ * ] eligible rebate = [ * ] of July -
September Qualified Purchases.
Semester $ 2,500,000 $ 2,600,000 104% of [ * ] eligible rebate = [ * ] of July -
December Qualified Purchases less first quarter
payment. The maximum allowable rebate is [ * ]
</TABLE>
* CONFIDENTIAL TREATMENT REQUESTED
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD SOFTWARE PAGE B10
JULY - DECEMBER, 1995, REBATE AND
MARKETING FUND ADDENDUM
<PAGE>
AMENDMENT NO. 1 TO THE
REBATE AND MARKETING FUND ADDENDUM TO THE
MICROSOFT 1995/1996 CHANNEL AGREEMENT
This Amendment No. 1 ("Amendment"), dated the first day of January, 1996, amends
that certain Rebate and Marketing Fund Addendum to The Microsoft 1995/1996
Channel Agreement ("Addendum"), dated July 1, 1995, between MICROSOFT
CORPORATION ("MS") having its principal place of business at One Microsoft Way,
Redmond, WA 98052 and DJ&J SOFTWARE CORPORATION d/b/a EGGHEAD ("CUSTOMER")
having its principal place of business at 22705 East Mission, Liberty Lake, WA
99019. The Addendum is hereby amended as follows:
2. TERM AND TERMINATION
The first sentence of the section is replaced with the following:
"This Addendum shall be effective as of January 1, 1996, and shall expire on
June 30, 1996."
4. REBATES
The section is replaced in its entirety with:
"4.1 PACKAGED PRODUCT REBATE
CUSTOMER is eligible to receive up to a [ * ] percent [ * ] Rebate on its
Qualified Sales, excluding Open License sales, made during the Rebate and
Marketing Fund Period. The Rebate shall be paid provided CUSTOMER complies with
the Rebate Program Guidelines outlined in Schedule B.
4.2 OPEN LICENSE REBATE
CUSTOMER is eligible to receive up to a [ * ] percent [ * ] Rebate on its Open
License sales made during the Rebate and Marketing Fund Period. The Rebate shall
be paid provided CUSTOMER complies with the those portions of the Packaged
Product Rebate Guidelines outlined in Schedule J.
4.3 PROVISION FOR EARLY PAYMENT OF REBATES
Notwithstanding such Rebate Program Guidelines, MS may, at its sole discretion,
pay all or any portion 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 Rebate Program Guidelines."
5. MARKETING FUNDS
The section is replaced in its entirety with:
"5.1 OPPORTUNITY FUNDS
Periodically, MS at its discretion may allow CUSTOMER to participate in MS
programs which provide the opportunity to earn Opportunity Marketing Funds.
CUSTOMER's participation in such programs shall be governed by this Addendum.
Grant of Opportunity Marketing Funds is subject to prior approval by MS.
5.2 USE OF MARKETING FUNDS
Acquisition, use of, and proof of expenditures of Opportunity Marketing Funds
shall be in accordance with this Addendum, and the terms of each Opportunity
Fund Proposal approved by CUSTOMER's MS Account Manager. Without limiting the
foregoing, CUSTOMER shall abide by the Spending Period dates as outlined in the
then-current Microsoft Marketing Fund Guidelines. Marketing Fund Claims
exceeding the then-current balance in CUSTOMER's Marketing Fund account at MS'
Marketing Fund vendor, currently Pinpoint Marketing, Inc. ("PMI") or submitted
in excess of the pre-approved dollar amount shall not be granted to CUSTOMER.
* CONFIDENTIAL TREATMENT REQUESTED
MICROSOFT CONFIDENTIAL - DISCLOSURE PROHIBITED
<PAGE>
CUSTOMER must obtain MS approval from a MS representative prior to claiming
Marketing Funds. CUSTOMER agrees to report to PMI any suspected error or
discrepancy in the amount of Marketing Funds received by CUSTOMER within thirty
(30) days of receipt thereof. Failure to provide such notice within the
specified period shall mean that CUSTOMER forfeits the opportunity to request a
re-audit. MS reserves the right at any time to adjust CUSTOMER's Marketing Fund
balance should MS discover that an error or discrepancy has occurred.
5.3 MARKETING FUND AND REBATE AUDIT
During the term of this Addendum and for a period of two (2) years following its
termination, MS may audit the applicable records and operations of CUSTOMER as
is reasonable to verify CUSTOMER's compliance with the terms of this Addendum.
Additionally, MS may audit specific Opportunity Marketing Fund claims submitted
by CUSTOMER as outlined in CUSTOMER's then current Marketing Fund Guidelines.
Any audit shall be conducted during CUSTOMER's normal business hours in such a
manner as not to unreasonably interfere with CUSTOMER's normal business
activities. Audit expenses shall be paid by MS unless material discrepancies are
disclosed by such audit, in which case audit expenses shall be paid by CUSTOMER.
For purposes of this Section, "material discrepancies" shall mean ten thousand
U.S. dollars (US$10,000) or more.
If the results of any audit show that CUSTOMER used Marketing Funds in any
manner other than as authorized under this Addendum, MS shall be entitled to
recover from CUSTOMER any and all Marketing Funds so used, in addition to any
other remedies available to MS under law or equity plus injunctive relief and/or
any other damages as may be permitted by law. Further, if any such audits shows
that CUSTOMER has submitted incorrect sales reporting, and such reporting was
the basis of any rebate payment, MS shall have the right to recover any and all
rebate paid."
5.4 MARKETING FUND REIMBURSEMENT POLICY
CUSTOMER agrees to abide by the Marketing Fund Reimbursement Guidelines,
attached hereto as Schedule G, and as revised from time to time by MS."
6. REPORTING REQUIREMENTS
The first sentence of the section is replaced with the following:
CUSTOMER shall submit reports to MS as outlined in CUSTOMER's Rebate Program
Guidelines in accordance with the then current EDI Implementation Guide provided
by MS.
SCHEDULE B
The Schedule is replaced in its entirety with the attached Schedule H.
SCHEDULE G
The Schedule is replaced in its entirety with the attached Schedule I.
AMENDMENT NO. 1 TO THE REBATE AND PAGE 2
MARKETING FUND ADDENDUM TO THE
MICROSOFT 1995/1996 CHANNEL AGREEMENT
<PAGE>
IN WITNESS WHEREOF, the parties have signed this Amendment on the date indicated
below. This Amendment is hereby made part of the Addendum. All terms and
conditions of the Addendum not amended herein shall remain in full force and
effect. This Amendment is not binding until executed by MS.
<TABLE>
<S> <C>
AGREED AND ACCEPTED TO BY AGREED AND ACCEPTED TO BY
MICROSOFT CORPORATION ("MS"): DJ&J SOFTWARE CORPORATION
D/B/A EGGHEAD ("CUSTOMER"):
By: By:
- --------------------------------------- ---------------------------------------
- ------------------------------------------- -------------------------------------------
Name (please print) Name (please print)
- ------------------------------------------- -------------------------------------------
Title Title
- ------------------------------------------- -------------------------------------------
</TABLE>
AMENDMENT NO. 1 TO THE REBATE AND PAGE 3
MARKETING FUND ADDENDUM TO THE
MICROSOFT 1995/1996 CHANNEL AGREEMENT
<PAGE>
SCHEDULE H
JANUARY - JUNE, 1996
REBATE GUIDELINES
PROGRAMS: Microsoft offers five rebate programs for the January - June, 1996
Rebate period. The total available Rebate is divided as follows:
<TABLE>
<CAPTION>
MAXIMUM PERCENTAGE
REBATE INCENTIVE AVAILABLE
- ------------------------------------------------------------------------- ---------------------
<S> <C>
Compliance Program [ * ]
Total Sales-out Program [ * ]
Business Systems Program [ * ]
Desktop Applications Sales-out Program [ * ]
Consumer Sales-out Program [ * ]
-----
TOTAL [ * ]
-----
-----
</TABLE>
REBATE CALCULATIONS AND PAYMENTS: Rebates will be paid in the form of a
Microsoft purchase credit forty-five (45) days after the end of each quarterly
rebate period (i.e. May 15th for January - March, 1996 quarter). Any such Rebate
paid shall be credited against CUSTOMER's account balance. In the event
CUSTOMER's account balance is less than the total Rebate payment, MS may, at its
sole discretion, elect to pay the Rebate in the form of a check. In no case
shall CUSTOMER deduct from invoice any Rebate payment due from MS prior to the
issue of the purchase credit or check. Rebates are calculated by multiplying the
achieved rebate percentage by the total Qualified Sales for the rebate period.
Revenue generated from Microsoft Select Enrollment Forms executed by MS on or
after July 1, 1994, shall be included in calculating CUSTOMER's achievement
toward the Sales-out goal, but shall not be included in CUSTOMER's final total
Qualified Sales for purposes of Rebate payment. Revenue generated from Microsoft
Select Enrollment Forms executed by MS prior to July 1, 1994 will be included in
calculating CUSTOMER's achievement towards the sales-out goal and will also be
eligible for a Grandfathered rebate. Rebate payment for such Select Enrollment
Forms shall be in the form of a purchase credit forty-five (45) days after the
end of each quarterly rebate period.
PURCHASES THROUGH DISTRIBUTION: CUSTOMER's full packaged product and MLP
purchases through distribution will be subtracted from CUSTOMER's Qualified
Sales for purposes of Rebate payment.
PRODUCT AVAILABILITY: If Microsoft is unable to ship a CURRENT VERSION of a
product for any ten (10) consecutive business days, CUSTOMER's purchases through
distribution of those SKUs will count toward CUSTOMER's Qualified Sales for
purchases of Rebate payment.
All copies of eligible purchase orders placed through distribution along with a
copy of the Microsoft Stock Out Report must be sent to Microsoft no later than
fifteen (15) days following the quarter end. Please send purchase order copies
and the Microsoft Stock Out Report to the following address:
MICROSOFT CORPORATION
ONE MICROSOFT WAY
BLDG. 22/4054
REDMOND, WA 98052
ATTN: KRISTIN WEEBER, MARKETING MANAGER
COMPLIANCE REBATE PAYMENT: The Microsoft Compliance Rebate will be calculated
on a monthly basis. If CUSTOMER has met all of the Compliance Rebate criteria in
a given month, CUSTOMER will be entitled to two percent of that month's total
Qualified Sales. The rebate payment will be made forty-five (45) days after the
end of each quarterly rebate period.
* CONFIDENTIAL TREATMENT REQUESTED
AMENDMENT NO. 1 TO THE REBATE AND PAGE H4
MARKETING FUND ADDENDUM TO THE
MICROSOFT 1995/1996 CHANNEL AGREEMENT
<PAGE>
ANY ISSUES REGARDING REBATES SHOULD BE SENT IN WRITING TO KRISTIN WEEBER,
MARKETING MANAGER, NO LATER THAN THIRTY (30) DAYS FOLLOWING RECEIPT OF REBATE
PAYMENT. If such written notice is not provided within thirty (30) days,
CUSTOMER shall have no further right to dispute rebate payment.
COMPLIANCE REBATE PROGRAM
PROGRAM OBJECTIVES: The objective of the Compliance Rebate Program is to
provide incentive for CUSTOMER to comply with Microsoft contractual requirements
for payments, Street Dates, reporting, and EDI ordering for Select 3.0.
NON-COMPLIANCE: During any given month, failure to comply with any or all of
the current compliance criteria will result in the forfeiture of the entire
compliance rebate for that month.
1. MICROSOFT PAYMENT REQUIREMENTS
Microsoft requires its customers to pay its invoices within terms. In order to
maintain compliance, 100% of the gross invoice value for non-Select and 85% of
the gross invoice value for Select must be current as of Microsoft's fiscal
month-end. Unapplied credits will be excluded from the calculation. Failure to
comply with this section will also result in the loss of CUSTOMER's Select
Compliance Rebate.
2. MICROSOFT STREET DATE REQUIREMENTS
From time to time, Microsoft may announce a new product or new versions of an
existing product for which Microsoft shall set a Street Date. In order to comply
with the Street Date requirements, CUSTOMER shall not:
- Ship or deliver the product to any end-user customer prior to the Street
Date.
- Accept any end user payment for the product prior to the Street Date.
Checks and/or credit card numbers may be accepted by CUSTOMER, but can
only be processed when product is delivered to the end user on or after
the Street Date.
- Advertise, merchandise, or promote the product to end user customers until
it is officially announced by Microsoft. Usually, the product announcement
is on the Street Date. If the product announcement is earlier than the
Street Date, Microsoft will clearly communicate the announce date to the
channel. If product is announced by Microsoft before the Street Date, the
product can be advertised, merchandised and/or promoted immediately after
such announcement, provided that all such promotions clearly state that
the product is not yet available for purchase.
- Allow it's distribution centers and/or warehouses to distribute, for a
period of up to twelve months, a Street Date product to any individual
sales office, retail store, or outlet which Microsoft in its sole
discretion has determined to be in violation of the Street Date
Requirements.
In the event CUSTOMER violates the Street Date for any special products
specified in a Microsoft Street Date letter, CUSTOMER shall forfeit up to the
entire Compliance Rebate for the six month Rebate period in which the violation
occurred.
Should CUSTOMER fail to comply with the Street Date Requirements, Microsoft may
also, for a period of up to twelve (12) months, withhold shipments to CUSTOMER
of future product until the Street Date of such product.
AMENDMENT NO. 1 TO THE REBATE AND PAGE H5
MARKETING FUND ADDENDUM TO THE
MICROSOFT 1995/1996 CHANNEL AGREEMENT
<PAGE>
Should CUSTOMER wish to report a Street Date violation, CUSTOMER may fax a copy
of a dated sales receipt to STREET DATE VIOLATIONS AT MICROSOFT AT (206)
936-7329. Once a violation has been reported, Microsoft shall investigate the
violation, and take remedial action as appropriate. Please note, in order to
confirm a suspected violation, Microsoft must receive a dated sales receipt.
3. MICROSOFT TRANSACTION REQUIREMENTS
Electronic Data Interchange format ("EDI") transactions are defined as 850/855
EDI transactions. CUSTOMER must place EDI transaction orders at a minimum of
once per month per Enrollment Site if product is purchased during said month.
4. MICROSOFT REPORTING REQUIREMENTS
ALL REPORTS OUTLINED BELOW MUST BE TIMELY, ACCURATE, AND COMPLETE. FOR PURPOSES
OF THIS AGREEMENT, "TIMELY" IS DEFINED 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.
Reporting is defined as a weekly report sent to Microsoft via Electronic Data
Interchange format ("EDI") of weekly Sales, Inventory, and Internal Market
Share. CUSTOMER must make the EDI reports available to MS' EDI mailbox each
Monday by 12:00 noon (Pacific time). These reports shall cover the seven-day
period ending the prior Saturday night. Please refer to the EDI Reporting
Guidelines for details on reporting requirements.
REPORTING REQUIREMENTS
- - Each unit of single license Full Package Product should be reported as one
unit. This applies for both MS products and for competitive products.
- - Any single Microsoft product that includes multiple licenses should be
reported as one unit MS 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 AE 10 Pack.
- - All volume licensing agreements (such as MOLP, Variable Licenses, and
Enterprise Licenses) should be reported as one unit for each license sold.
- - Each competitive multiple license product should be reported as the number of
licenses represented.
Accounts are required to report sell-through units and inventory units for each
MS SKU, but are required only to report the total license count for competitive
product sell-through for each category. All SKUs for these titles should be
counted, including full packaged product, upgrades, license packs, education,
and government SKUs. Please refer to the EDI Reporting Guidelines for details on
reporting requirements.
AMENDMENT NO. 1 TO THE REBATE AND PAGE H6
MARKETING FUND ADDENDUM TO THE
MICROSOFT 1995/1996 CHANNEL AGREEMENT
<PAGE>
MARKET SHARE REPORTING
The following table outlines the Market Share product categories for EDI
reporting. The table also specifies the top competitive products that must be
included in the aggregated market share reporting. All competitive products
within a given category must be reported. The products listed below are just
examples, not a comprehensive list.
<TABLE>
<CAPTION>
CATEGORY MICROSOFT PRODUCT COMPETITIVE PRODUCTS
- --------------------------- --------------------------------- --------------------------------------------
<S> <C> <C>
Windows word processors Microsoft-Registered Trademark- WordPerfect-Registered Trademark- for
Word for Windows-Registered Trademark-
Windows-Registered Trademark- Lotus-Registered Trademark-
WordPro-Registered Trademark- for
Windows-Registered Trademark-
Windows spreadsheets Microsoft-Registered Trademark- 1-2-3-Registered Trademark- for
Excel for Windows-Registered Trademark-
Windows-Registered Trademark- Quattro Pro-Registered Trademark- for
Windows-Registered Trademark-
Windows bundles Microsoft-Registered Trademark- Lotus-Registered Trademark- Smartsuite
Office for WordPerfect-Registered Trademark-
Windows-Registered Trademark- Borland-Registered Trademark- Office
Novell-Registered Trademark- Perfect Office
Windows Databases Microsoft Paradox-TM- for Windows-Registered Trademark-
Access-Registered Trademark- for dBase-Registered Trademark- for
Windows-Registered Trademark- Windows-Registered Trademark-
FoxPro-Registered Trademark- for Approach
Windows-Registered Trademark- Superbase-Registered Trademark-
Mail Servers Microsoft-Registered Trademark- Lotus-Registered Trademark- cc:Mail-TM-
Mail Lotus Notes-Registered Trademark-
WordPerfect-Registered Trademark- Office
Network Operating Systems Microsoft-Registered Trademark- Novell-Registered Trademark-
Windows Netware-Registered Trademark- 4.x, 3.x, 2.x.
NT-TM- Server Novell-Registered Trademark- UnixWare
OS/Lan Server
Banyan-Registered Trademark-
SCO-Registered Trademark- Unix
</TABLE>
EXAMPLE: IF CUSTOMER SOLD-THROUGH FIFTY(50) UNITS OF LOTUS-Registered Trademark-
1-2-3-Registered Trademark- FOR WINDOWS-Registered Trademark- AND A 20 USER MMLP
OF QUATTRO PRO-Registered Trademark- FOR WINDOWS-Registered Trademark- IN ONE
WEEK, THEN CUSTOMER WOULD REPORT A TOTAL OF SEVENTY (70) LICENSES FOR SELL-
THROUGH OF COMPETITOR'S PRODUCTS IN THE WINDOWS SPREADSHEET CATEGORY.
SALES-OUT REBATE PROGRAMS
PROGRAM OBJECTIVE: The objective of all Sales-out Rebate Programs is to
increase the sales of Microsoft products. All license types (Select, Microsoft
Open License, Full Package Product, MLPs) are included in measuring performance
against this goal, however, the Rebate is paid on full packaged product and MOLP
sales only.
REBATE GOALS: CUSTOMER has first quarter sales-out goals and total semester
sales-out goals. CUSTOMER's performance for the first three months of the
January - June, 1996, semester will be measured against the first quarter
sales-out goals. At the end of the first quarter, CUSTOMER will receive the
percentage of the eligible rebates earned based on performance against the first
quarter goals. At the end of the semester, CUSTOMER will be measured on their
six-month performance against the total semester goals. Even if CUSTOMER does
not meet 100% of the first quarter goals, CUSTOMER can still achieve 100% of the
semester goals provided that the semester goals are met at the end of the
six-month period.
SALES-OUT DEFINITIONS/MEASUREMENT: MS Product Sales-out is defined as those MS
net product units sold through CUSTOMER's outlet locations. CUSTOMER's full
packaged product, Microsoft Open License, and upgrade sales-out units will be
measured from the sales-out reported by CUSTOMER to MS. Licensing sales (Select,
Microsoft Maintenance) are captured and generated by MS' financial systems and
included in total sales-out used to measure product sales-out rebate
performance.
* CONFIDENTIAL TREATMENT REQUESTED
AMENDMENT NO. 1 TO THE REBATE AND PAGE H7
MARKETING FUND ADDENDUM TO THE
MICROSOFT 1995/1996 CHANNEL AGREEMENT
<PAGE>
Any Microsoft Select 2.x and 1.x and Microsoft Maintenance revenue credit is
granted as MS recognizes the revenue. This occurs when MS has received the
customer's license reporting. Following receipt of reporting, MS bills the
customer/reseller and simultaneously recognizes the revenue.
PAYMENT: At the end of the semester, CUSTOMER will be paid sales-out rebates
based on performance against the semester goals. If CUSTOMER achieves greater
than sixty percent (60%) of each semester sales-out goal, CUSTOMER will receive
the exact achieved percentage of the eligible sales-out rebate up to one hundred
percent (100%). If CUSTOMER achieves less than sixty percent (60%) of any
sales-out rebate goal, CUSTOMER will not receive any portion of that sales-out
rebate.
Although MS pays the sales-out rebate ultimately based on performance against
the semester sales-out goal, Microsoft also pays a sales-out rebate at the end
of the first quarter based on performance against the first quarter goal.
Microsoft pays a portion of the rebate after the first quarter to provide
incentive for CUSTOMER to focus on sales-out throughout the entire semester. The
scale for the first quarter payment is the same as the scale for the semester
payment. The first quarter payment amount will be subtracted from the final
semester payment for the sales-out rebate.
EXAMPLE: IF CUSTOMER HAS A QUARTERLY TOTAL SALES OUT GOAL OF $1,000,000 AND A
SEMESTER TOTAL SALES OUT GOAL $2,500,000, AND CUSTOMER SELLS $800,000 OVER THE
FIRST QUARTER PERIOD AND $2,600,000 OVER THE ENTIRE SEMESTER PERIOD, CUSTOMER
WILL RECEIVE THE FOLLOWING REBATE PAYMENTS.
<TABLE>
<CAPTION>
SELL-THROUGH
PERIOD GOAL ACHIEVED PAYMENT
- ---------------- ------------- ------------- -------------------------------------------------------
<S> <C> <C> <C>
First Quarter... $ 1,000,000 $ 800,000 80% of [ * ] eligible rebate = [ * ] of January - March
sales.
Semester $ 2,500,000 $ 2,600,000 104% of [ * ] eligible rebate = [ * ] of January - June
sales less first quarter payment. The maximum allowable
total sales out rebate is [ * ].
</TABLE>
TOTAL SALES-OUT REBATE PROGRAM
REBATE PERCENTAGES: The total possible rebate percentage achievable for the
Total Sales-out Rebate Program is [ * ] of Qualified Sales for the January -
June, 1996 semester.
CUSTOMER's Total Sales-out Rebate Program goals are as follows:
- Quarter 1 Goal (January - March, 1996): [ * ]
- Semester Goal (January - June, 1996): [ * ]
DESKTOP APPLICATIONS SALES-OUT REBATE PROGRAM
REBATE PERCENTAGES: The total possible rebate percentage achievable for the
Desktop Applications Sales-out Rebate Program is [ * ] of Qualified Sales for
the January - June, 1996 semester.
CUSTOMER's Office Sales-out Rebate Program goals are as follows:
- Quarter 1 Goal (January - March, 1996): [ * ]
- Semester Goal (January - June, 1996): [ * ]
CONSUMER PRODUCT SALES-OUT REBATE PROGRAM
REBATE PERCENTAGES: The total possible rebate percentage achievable for the
Consumer Product Sales-out Rebate Program is [ * ] of Qualified Sales for the
January - June, 1996 semester.
* CONFIDENTIAL TREATMENT REQUESTED
AMENDMENT NO. 1 TO THE REBATE AND PAGE H8
MARKETING FUND ADDENDUM TO THE
MICROSOFT 1995/1996 CHANNEL AGREEMENT
<PAGE>
CUSTOMER Office Sales-out Rebate Program goals are as follows:
- Quarter I Goal (January - March, 1996): [ * ]
- Semester Goal (January - June, 1996): [ * ]
BUSINESS SYSTEMS SALES-OUT REBATE PROGRAM
REBATE PERCENTAGES: The total possible rebate percentage achievable for the
Business Systems Sales-out Rebate Program is [ * ] of Qualified Sales for the
January - June, 1996 semester.
REBATE GOALS: CUSTOMER must sell a minimum number
Microsoft-Registered Trademark- BackOffice client licenses in order to receive
any portion of the Business Systems rebate. Provided that CUSTOMER sells the
minimum number of BackOffice client licenses, CUSTOMER's achievement against the
Business Systems goal will be based on CUSTOMER's performance against the
Business Systems revenue goal.
CUSTOMER's BackOffice client license unit goals are as follows:
- Quarter 1 Goal (January - March, 1996) [ * ]
- Semester Goal (January - June, 1996) [ * ]
CUSTOMER's Business Systems Sales-out Rebate Program goals are as follows:
- Quarter 1 Goal (January - March, 1996): [ * ]
- Semester Goal (January - June, 1996): [ * ]
* CONFIDENTIAL TREATMENT REQUESTED
AMENDMENT NO. 1 TO THE REBATE AND PAGE H9
MARKETING FUND ADDENDUM TO THE
MICROSOFT 1995/1996 CHANNEL AGREEMENT
<PAGE>
SCHEDULE I
MARKETING FUND REIMBURSEMENT POLICY
OVERVIEW
As designated from time to time by MS, CUSTOMER must comply with MS' Marketing
Fund Reimbursement Policy in order to receive Marketing Funds from MS.
RULES
1. PROGRAM SCOPE. This Program affects only CUSTOMER's eligibility for MS
Marketing Funds, and CUSTOMER is always free to advertise and price all MS
products however CUSTOMER chooses.
MARKETING FUNDS AND PRICE ADVERTISING. In order for CUSTOMER to be eligible for
Marketing Funds, all advertisements of such product made by CUSTOMER or on
CUSTOMER's behalf must state no less than the price designated by MS exclusive
of sales tax.
Alternatively, CUSTOMER's advertisements may state no price whatsoever. The
following specific requirements apply to advertisements in which CUSTOMER is
offering other services or products together with the product:
- CUSTOMER may advertise "free" end-user training or support in connection
with the product.
- CUSTOMER may advertise a package of products offered for a single price
including the product, but only if the net package price is at or above
the price designated by MS. Alternatively, CUSTOMER's advertisements may
state no price whatsoever.
- MS reserves the right to change the designated price upon notice to
CUSTOMER.
3. LOSS OF MARKETING FUNDS. If CUSTOMER fails to comply with the rules of this
Program, then notwithstanding any other provisions of the Addendum to which
this Schedule is attached, CUSTOMER will be ineligible to receive Opportunity
Funds for a period of six (6) months. Marketing Funds ineligibility shall begin
with the entire month in which the failure to comply first occurred and shall
continue for six (6) months which may include CUSTOMER's ineligibility for
Opportunity Funds in a subsequent Rebate and Marketing Fund Period. MS' sole
judgment is final in determining CUSTOMER compliance with this Program.
4. ADVERTISEMENTS. The term "advertisement" means any printed, broadcast,
direct mail or transmitted advertisements for the product, including without
limitation, all newspaper, television, radio, and Internet or on-line
advertisements.
5. QUESTIONS AND INQUIRIES. If CUSTOMER has questions about whether CUSTOMER's
advertisements comply with this Program or if CUSTOMER has other inquiries,
CUSTOMER must direct these questions and inquires to the following MS contact:
Arlene Yanow
One Microsoft Way
Redmond, WA 98052
(206) 882-8080
The above contact is CUSTOMER's only authorized source of information at MS
about this Program, and CUSTOMER may not rely on any other source of
information, including other MS employees. No MS employee, including the above
contact, is authorized to communicate with CUSTOMER about any alleged
infractions of any other reseller.
8. PROGRAM MODIFICATIONS/TERMINATION: MS reserves the right to modify or
terminate this program at any time, in its sole discretion.
AMENDMENT NO. 1 TO THE REBATE AND PAGE I1
MARKETING FUND ADDENDUM TO THE
MICROSOFT 1995/1996 CHANNEL AGREEMENT
<PAGE>
SCHEDULE J
JANUARY - JUNE, 1996
OPEN LICENSE
REBATE PROGRAMS
PROGRAMS: Microsoft offers three Open License rebate programs for the January -
June, 1996 Rebate period. The total available Rebate is divided as follows:
<TABLE>
<CAPTION>
MAXIMUM PERCENTAGE
REBATE INCENTIVE AVAILABLE
- --------------------------------------------------------------- -------------------
<S> <C>
Compliance Program [ * ]
Total Sales-out Program [ * ]
Business Systems Program [ * ]
TOTAL [ * ]
</TABLE>
All guidelines, including actual Rebate goals, shall be as outlined for the
Packaged Product Rebate.
* CONFIDENTIAL TREATMENT REQUESTED
AMENDMENT NO. 1 TO THE REBATE AND PAGE I2
MARKETING FUND ADDENDUM TO THE
MICROSOFT 1995/1996 CHANNEL AGREEMENT
<PAGE>
ADDENDUM TO THE
MICROSOFT 1995/1996
CHANNEL AGREEMENT
(APPOINTMENT AS A DIRECT RESELLER)
This Addendum ("Addendum") entered into as of the 1st day of July, 1995,
modifies that certain Microsoft 1995/1996 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 supplemented as follows:
1. PURPOSE
The purpose of this Addendum is to set forth the framework by which MS appoints
CUSTOMER as a non-exclusive Direct Reseller in the United States of America for
the MS Product listed on the CUSTOMER Price List attached hereto as Schedule B.
For purposes of this Addendum, capitalized terms not otherwise defined herein,
shall have the same definition as set forth in the Agreement.
2. DEFINITIONS
For purposes of this Addendum, capitalized terms are as defined in Schedule A
attached hereto.
3. CUSTOMER OBLIGATIONS
3.1 DISTRIBUTION TO END USERS ONLY
Product distributed pursuant to this Addendum shall be distributed solely to End
Users located in the Territory, and not to Resellers of any kind.
3.2 LICENSING PROVISIONS
CUSTOMER acknowledges that the Product are distributed to End Users subject to
the terms of the applicable Microsoft End User License Agreement. CUSTOMER shall
make commercially reasonable efforts to prevent distribution of Product to End
Users who intend to copy or reproduce the Product in violation of the Microsoft
End User License Agreement.
3.3 PRODUCT PURCHASES
Product acquired by CUSTOMER shall be purchased only from MS or MS authorized
Distributors.
3.4 PAYMENT TERMS
Payment terms are net thirty (30) days from the date of MS' invoice, subject to
approval of open term by MS. All invoices outstanding over thirty (30) days may
be assessed a finance charge of the then current prime rate plus two percent
(2%) per month of the legal maximum, whichever is less. Failure by CUSTOMER to
meet payment terms may result in a hold by MS of all pending CUSTOMER orders.
All payments to MS by CUSTOMER pursuant to this Addendum shall be in the form of
a bank wire transfer, sent to the following:
First Interstate Bank of Washington
Seattle Main Branch
ABA: #125 000 286
Beneficiary: Microsoft Corporation
Account No. 001 025865
3.5 SHIPMENT SHORTAGE CLAIMS
CUSTOMER shall submit all claims for shortages and/or variances in shipments to
MS in writing within fifteen (15) days of CUSTOMER's receipt of the shipment.
All such claims not submitted in
MICROSOFT CONFIDENTIAL - DISCLOSURE PROHIBITED
<PAGE>
writing to MS within the fifteen (15) day period shall be deemed waived by
CUSTOMER. CUSTOMER shall be responsible for all such claims made with respect to
freight collect shipments, and shall not withhold payment to MS a result of such
claims.
3.6 PRODUCT FORECASTING
From time to time, MS may require Product forecasting for CUSTOMER. CUSTOMER
shall comply with all Product forecasting requirements designated by MS from
time to time.
4. MS OBLIGATIONS
4.1 NEW PRODUCTS; PROMOTIONAL PRODUCTS
MS may elect at any time during the term of this Addendum to announce new or
Promotional Product to which the terms and conditions of this Addendum to not
apply. In the event MS elects to announce Promotional Product, MS shall provide
CUSTOMER with thirty (30) days prior written notice of such announcement.
4.2 INVENTORY PRICE PROTECTION
During the term of this Addendum, MS shall grant CUSTOMER a price adjustment
against Product price reductions made by MS, which price reductions are made on
an indefinite basis, on all CUSTOMER's inventory which CUSTOMER reports as in
its inventory as of the day of the reduction. Such price adjustment shall be in
the form of a Purchase Credit equal to the difference between the lowest price
paid by CUSTOMER during the six (6) months prior to the price reduction and the
reduced price, and shall be paid no later than thirty (30) days after CUSTOMER
provides proof of inventory. Special temporary prices and promotional offerings,
which may include price reductions or free goods, shall not be considered a
price reduction to which this Section applies.
5. CUSTOMER AND MS OBLIGATIONS
5.1 PRICE SCHEDULE
CUSTOMER prices are set forth on the CUSTOMER Price List attached hereto as
Schedule B. MS may modify the CUSTOMER Price List at any time upon thirty (30)
days written notice to CUSTOMER. MS may offer, without prior notice, temporary
"special" prices on any or all Product.
5.2 DELIVERY AND PRODUCT DISTRIBUTION
Product shall be invoiced and shipped Free On Board ("FOB") Bothell, Washington,
and CUSTOMER shall be responsible for freight charges. Should CUSTOMER desire to
specify its own carrier, delivery shall then be "freight collect."
In any month CUSTOMER participates in the MS Rate Based Distribution Program,
for all CUSTOMER warehouses that receive a minimum of $200,000 of Product in MS
Master Carton quantities calculated on the basis of CUSTOMER's net prices from
MS, and MS chooses the carrier, the freight costs of delivery of Product to
those CUSTOMER warehouses for that month will be paid by MS.
In any month CUSTOMER's Rate Based Distribution Program participation exceeds
seventy five percent (75%) of eligible product shipments, CUSTOMER will be
allowed to adjust CUSTOMER's forecast of two (2) MS Product SKU's. Such
adjustments to the forecast shall not exceed fifty (50%) upward or one hundred
percent (100%) downward from the final forecast, four weeks prior to the first
ship date.
5.3 ORDER PROCESSING
CUSTOMER shall order Product from MS by written or electronically transmitted
purchase order. All orders by CUSTOMER shall be in Master Pack quantities only.
MS shall have ten (10) days from
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD PAGE 2
DIRECT PURCHASING RESELLER ADDENDUM
<PAGE>
receipt to reject any purchase order. MS shall fulfill unconditional written or
electronic purchase orders from CUSTOMER subject to CUSTOMER's credit limits,
current payment status, and approved Average Payment Days ("APD") guidelines as
determined by MS.
Except as provided herein, CUSTOMER shall have the right to change or cancel any
purchase order, provided that CUSTOMER notifies MS of the change or cancellation
no later than twenty-four (24) hours prior to the order shipment to CUSTOMER by
MS. Should CUSTOMER choose to change any purchase order line item, CUSTOMER
shall be required to submit a new purchase order to MS, clearly indicating which
line item(s) are changed. Line item changes shall not affect the remaining items
on CUSTOMER's purchase order. Should CUSTOMER choose to cancel a purchase order,
CUSTOMER must provide MS with a written cancellation request.
MS may elect, during the term of this Agreement, to require CUSTOMER to
implement order management via EDI. Should MS require such order management
change, MS shall provide CUSTOMER with no less than one hundred twenty (120)
days prior written notice.
Notwithstanding the foregoing, MS reserves the right to limit order quantities.
5.4 DEFECTIVE PRODUCT CREDIT
At MS' sole discretion, MS may determine that a Product or Product shipment is
Defective. Should MS determine that a Product or Product shipment is Defective,
MS shall provide CUSTOMER with a replacement for all Defective Product destroyed
at CUSTOMER's location. MS shall pay freight costs for shipment of replacement
Product from MS to CUSTOMER.
5.5 INVENTORY BALANCING
To reduce its inventory risk, CUSTOMER shall be entitled to balance its Product
inventory in accordance with the following:
(A) Product inventory may be balanced only during the Months of January, May
and September, and within thirty (30) days of the date of issue of the Return
Authorization;
(B) Product may be balanced only if, at the time of balancing, it is listed
on the then current MS Price List;
(C) Product may be balanced only if CUSTOMER's Product return is accompanied
by a new Product order in an aggregate dollar amount equal to or greater than
the aggregate dollar amount of the Product return;
(D) The aggregate quantity of Product that may be returned shall be limited
to; (i) in the case of Product classified by MS as "Consumer Product"
(excluding, however, the Microsoft Mouse Product), [ * ] percent [ * ] of net
dollar shipment of such Consumer Product for the four full Months immediately
preceding the inventory balancing request, (ii) in the case of
Microsoft-Registered Trademark- Windows-Registered Trademark- 95,
[ * ] percent [ * ] of net dollar shipments of
Microsoft-Registered Trademark- Windows-Registered Trademark- 95, (iii) in the
case of Microsoft-Registered Trademark- Office for Windows-Registered Trademark-
95, [ * ] percent [ * ] of Microsoft-Registered Trademark- Office
for Windows-Registered Trademark- 95, and (iv) in the case of all Product other
than that referred to in clauses (i) through (iv) above, to [ * ]
percent [ * ] of net dollar shipments of all other Product for the four full
Months immediately preceding the inventory balancing request, where net
shipments shall not include any Microsoft-Registered Trademark- Variable
Licenses; Microsoft Enterprise Licenses, or Microsoft Maintenance;
(E) Promotional Product may not be balanced;
(F) Product to be balanced may only include Product purchase by CUSTOMER
from MS;
(G) Unresaleable Product may not be balanced; and
* CONFIDENTIAL TREATMENT REQUESTED
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD PAGE 3
DIRECT PURCHASING RESELLER ADDENDUM
<PAGE>
(H) Product is subject to inspection by MS or an MS authorized agent prior
to return by CUSTOMER to MS pursuant to the terms of MS' then current Return
Processing Guidelines.
CUSTOMER must submit a written or electronic MS Return Authorization to return
Product for the purpose of inventory balancing, summarizing the quantities of
each Product to be returned. Upon verification that CUSTOMER has met its
inventory balancing terms, MS shall issue a Return Authorization Number, which
shall expire thirty (30) days from the date of issue.
If the foregoing conditions have been met, CUSTOMER shall return Product to MS
freight prepaid in cartons clearly marked with the Return Authorization Number
and a packing slip attached to the outside. Any Product returned to MS which
does not comply with the provisions of this Section may, at MS' sole discretion,
be returned by MS to CUSTOMER subject to a five percent (5%) inspection fee and
the freight costs incurred by MS in returning such Product, which shall be paid
immediately by CUSTOMER to MS upon receipt of an invoice therefor.
Upon receipt of Product which complies with the conditions set forth in this
Section, MS shall issue a Purchase Credit for the returned Product in an amount
equal to the lowest price CUSTOMER paid for the Product in the six (6) Months
prior to the return. In no event will cash refunds be given for exchanges,
replacements, or returned merchandise hereunder. CUSTOMER shall pay all freight
and other costs of replacement Product in the same manner and on the dame terms
as new Product purchased by CUSTOMER under this Addendum.
5.6 PRIOR VERSION CREDIT
When MS ships a new version of a Product or a Discontinued Product to CUSTOMER,
CUSTOMER shall receive a Purchase Credit for prior version of the Product,
provided CUSTOMER complies with all of the following:
(A) Product shall be destroyed at CUSTOMER's location once every other
Month;
(B) Product for which CUSTOMER receives a Purchase Credit must be offset by
a new Product order in an aggregate dollar amount equal to or greater than the
aggregate dollar amount of the Purchase Credit, and is solely for the new
version of the Product for which CUSTOMER has received such Purchase Credit;
(C) CUSTOMER shall be eligible to receive a Purchase Credit for up to one
hundred eighty (180) days from the date the new version of such Product first
ships from MS to CUSTOMER;
(D) Promotional Product is not eligible for credit pursuant to this Section;
(E) Product must only include Product purchased by CUSTOMER from MS;
(F) Unresaleable Product is not eligible for credit pursuant to this
Section; and
(G) Product shall be limited to the version number immediately prior to the
new Product version.
MS shall use its best efforts to notify CUSTOMER within thirty (30) days prior
to the shipment of any new Product version, or the existence of a Discontinued
Product which would be subject to this Section.
It the foregoing conditions have been met, Product shall be destroyed at
CUSTOMER's locations pursuant to the terms of MS' then current Return Processing
Guidelines.
5.7 UNRESALEABLE PRODUCT ALLOWANCE
CUSTOMER shall be eligible to receive a Purchase Credit of up to [ * ] percent
[ * ] of CUSTOMER's net purchases, excluding Microsoft Variable Licenses,
Microsoft Enterprise Licenses, and Microsoft
* CONFIDENTIAL TREATMENT REQUESTED
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD PAGE 4
DIRECT PURCHASING RESELLER ADDENDUM
<PAGE>
Maintenance, for the previous two (2) Months. Such Purchase Credit shall be to
compensate CUSTOMER for Product held in CUSTOMER's inventory which is no longer
resaleable, provided that CUSTOMER agrees to destroy or recycle all such
Product, and provide MS with a full report of all Unresaleable Product.
Unresaleable Product may not be resold or donated.
5.8 PRODUCT AUTHORIZATION CATEGORY PROCEDURES
From time to time, MS may classify certain of its Product by Product
Authorization Category, which Product may only be obtained and distributed by
CUSTOMER upon written authorization from MS. Such written authorization from MS
may be specific to the particular CUSTOMER outlet location. CUSTOMER may apply
for such authorization by completing the applicable Reseller Authorization
Application and/or Agreement process required by MS. MS may by prior written
notification terminate CUSTOMER's authorization to obtain and distribute Product
Authorization Category Product with respect to one or more CUSTOMER outlets. For
each Product Authorization Category Product distributed, CUSTOMER shall complete
and return to MS all requested customer registration documents.
6.0 SURVIVAL
Sections 3.1, 3.2, and 3.4 shall survive any termination of this Addendum.
IN WITNESS WHEREOF, the parties have signed this Addendum on the dates indicated
below. All terms and conditions of the Agreement not amended herein shall remain
in full force and effect. This Addendum is not binding until executed by MS.
<TABLE>
<S> <C>
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
- ------------------------------------------- -------------------------------------------
Date Date
</TABLE>
* CONFIDENTIAL TREATMENT REQUESTED
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD PAGE 5
DIRECT PURCHASING RESELLER ADDENDUM
<PAGE>
SCHEDULE A
DEFINITIONS
"DEFECTIVE PRODUCT" is defined as a manufacturer's defect in materials or
media.
"DISCONTINUED PRODUCT" is defined as Product that MS has stopped
manufacturing and discontinued from the CUSTOMER Price List.
"INVENTORY BALANCING" is defined as the return of eligible MS Product for
the purpose of reducing CUSTOMER's stock of such Product.
"MONTH" is defined as a MS fiscal month as outlined in the calendar attached
hereto as Schedule C.
"PROMOTIONAL PRODUCT" is defined as a special Product SKU which is available
to CUSTOMER for resale for a limited time. Free Product promotions are not
considered Promotional Product.
"RETURN AUTHORIZATION NUMBER" is defined as the unique number assigned to
CUSTOMER by MS for the purpose of Product returns for CUSTOMER to MS.
"UNRESALEABLE PRODUCT" is defined as any Product held in CUSTOMER's
inventory, including damaged Product and Product returned by CUSTOMER's
customers which is no longer fit for resale, and is ineligible for return to MS.
for purposes of this Addendum, Unresaleable Product shall not include that
Product which has sustained solely shrink wrap damage.
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD PAGE A1
DIRECT PURCHASING RESELLER ADDENDUM
<PAGE>
SCHEDULE B
CUSTOMER PRICE LIST
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD PAGE B1
DIRECT PURCHASING RESELLER ADDENDUM
<PAGE>
SCHEDULE C
MS CALENDAR
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD PAGE C1
DIRECT PURCHASING RESELLER ADDENDUM
<PAGE>
ADDENDUM TO THE
MICROSOFT 1995/1996
CHANNEL AGREEMENT
(START32 CAMPAIGN REBATE)
This Addendum ("Addendum") supplements that certain Microsoft 1995/1996 Channel
Agreement ("Agreement") dated July 1, 1995, by and between MICROSOFT CORPORATION
("MS") having its principal place of business at One Microsoft Way, Redmond, WA
98052 and EGGHEAD ("CUSTOMER") having its principal place of business at 22705 E
Mission, Liberty Lake, WA 99019. The Agreement is hereby supplemented as
follows:
1. PURPOSE
The purpose of this Addendum is to set forth the framework by which CUSTOMER
shall earn a Rebate on sales of certain Microsoft Select and Microsoft Open
License products to End User customers.
2. TERM AND TERMINATION
This Addendum shall be effective as of January 1, 1996, and shall expire on June
30, 1996. Either party may terminate this Addendum, with or with out cause, upon
thirty (30) days prior written notice. This Addendum is not valid unless both
CUSTOMER and MS have executed a Microsoft 1995/1996 Channel Agreement, and the
Addendum to The Microsoft 1995/1996 Channel Agreement (Appointment As A Large
Account Reseller).
3. DEFINITIONS
For purposes of this Addendum, capitalized terms not otherwise defined herein
shall have the same definition as set forth in the Agreement and it's current
addenda.
4. REBATE
4.1 REBATE PROGRAM
CUSTOMER is eligible to receive [ * ] dollars ($[ * ]) plus a
[ * ] percent [ * ] Rebate on sales of those Microsoft-Registered Trademark-
Windows-Registered Trademark- SKUs listed on the attached Schedule A, and
[ * ] dollars ($[ * ]) plus a [ * ] percent [ * ] Rebate on sales
of those Microsoft-Registered Trademark- Office SKUs listed on the attached
Schedule B. Each of the two available [ * ] percent [ * ] Rebates shall be
measured and paid independent of the other. The Rebate shall be paid provided
CUSTOMER complies with the program guidelines outlined in Section 4.2 below.
4.2 PROGRAM GUIDELINES
4.2(A) ELIGIBILITY
In order to participate in the Start32 Campaign Rebate, CUSTOMER must provide
compliant weekly EDI sales, inventory and market share reporting by May 1, 1996.
4.2(B) QUALIFIED SALES
Only revenue recognized for those SKUs listed on Schedules A and B shall be
eligible. In order to be considered Qualified Sales, payment for licenses must
be invoiced by Microsoft between January 1, 1996 and July 31, 1996.
Additionally, all Select usage reports must be received by MS by July 15, 1996.
Licenses invoiced in January, 1996, shall not be considered Qualified Sales
unless the licenses were actually purchased by the End User during the term of
this Addendum.
Two year, pre-paid Maintenance sales made during the term of this Addendum
shall be considered Qualified Sales. Two year, pre-paid Maintenance sales made
prior to the term of this Addendum shall not be considered Qualified Sales.
* CONFIDENTIAL TREATMENT REQUESTED
MICROSOFT CONFIDENTIAL - DISCLOSURE PROHIBITED
<PAGE>
4.2(C) REBATE GOALS
CUSTOMER's Start32 Campaign Rebate license goals are as follows:
<TABLE>
<S> <C>
Microsoft-Registered Trademark-
Windows-Registered Trademark-: [ * ] licenses
Microsoft-Registered Trademark- Office: [ * ] licenses
</TABLE>
4.2(D) REBATE PAYMENT
Provided that CUSTOMER achieves one hundred percent (100%) of it's
Microsoft-Registered Trademark- Windows-Registered Trademark- and/or
Microsoft-Registered Trademark- Office Rebate goals, CUSTOMER shall receive the
Rebate indicated in Section 4.1 above. Any such Rebate earned shall be paid to
CUSTOMER in the form of a purchase credit forty-five (45) days after the
expiration of this Addendum.
IN WITNESS WHEREOF, the parties have signed this Addendum on the dates
indicated below. This Addendum is hereby made part of the Agreement. All terms
and conditions of the Agreement, or its addenda and amendments not supplemented
herein shall remain in full force and effect. This Addendum is not binding until
executed by MS.
<TABLE>
<S> <C>
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
- ------------------------------------------- -------------------------------------------
Date Date
</TABLE>
* CONFIDENTIAL TREATMENT REQUESTED
ADDENDUM TO THE MICROSOFT PAGE 2
1995/1996 CHANNEL AGREEMENT
(START32 CAMPAIGN REBATE)
<PAGE>
ADDENDUM TO THE MICROSOFT
1995/1996 CHANNEL AGREEMENT
(APPOINTMENT AS A LARGE ACCOUNT RESELLER)
This Addendum ("Addendum") entered into this 1st day of July, 1995, supplements
that certain 1995/1996 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 MS appoints
CUSTOMER as a nonexclusive Large Account Reseller in the Territory and Canada
with the right to acquire Microsoft Select Software Products from MS and to
distribute such Select Software Products and their associated license rights to
Select Customers which have designated CUSTOMER in their Enrollment Form as
their Large Account Reseller.
2. DEFINITIONS
For purposes of this Addendum, capitalized terms are as defined in Schedule A
attached hereto.
3. CUSTOMER OBLIGATIONS
3.1 DISTRIBUTION OF SELECT SOFTWARE PRODUCTS
CUSTOMER my only distribute Select Software Products to Select Customers located
in the Territory and Canada, and at the direction of its Select Customer's,
outside of the Territory and Canada. Select Customers are entitled to distribute
the rights associated with their Select Software Products outside of the
Territory if they so elect, in accordance with the Master Agreement and all
applicable laws. However, in the event a Select Customer wants to initiate an
Enrollment Form in a country outside of the Territory, the Select Customer is
required by the terms of the Microsoft Select Program to locate a Large Account
Reseller in the desired country and acquire Select Software Products from that
Large Account Reseller.
3.2 DOCUMENTATION
CUSTOMER shall be authorized to purchase documentation SKUs from Microsoft Easy
Fulfillment (MEF) and to resell these documentation SKUs directly to CUSTOMER's
Select Customers.
3.3 DISTRIBUTION RESTRICTIONS
MS's authorization of the Large Account Reseller to acquire and distribute
Select Software Products as set forth herein shall not include the authorization
for the Large Account Reseller to use Select Software Products internally or to
distribute or otherwise transfer Select Software Products to any entity which
owns, controls, is owned or controlled by, or under common ownership or control
with the Large Account Reseller ("Large Account Reseller Affiliates") without
the prior written consent of MS. For the purposes of this Addendum, an entity is
"controlled" by another if that other company or legal entity, either directly
or through its control of another company or legal entity: (i) holds the
majority of voting rights in it; (ii) is a member of it and has the right to
appoint or remove a majority of its board of directors; or (iii) is a member of
it and controls alone or under an agreement with other shareholders or members,
the majority of the voting rights in it.
3.4 CUSTOMER ACCEPTANCE OF ENROLLMENT FORMS
Upon execution by MS of a Select Customer's Enrollment Form naming CUSTOMER as
the Large Account Reseller, MS shall deliver to CUSTOMER's designated Select
Program Administrator a copy of such Enrollment Form. CUSTOMER shall have
fifteen (15) days from the date of receipt of the Enrollment Form to decline to
acquire and distribute Select Software Products associated with such
MICROSOFT CONFIDENTIAL - DISCLOSURE PROHIBITED
<PAGE>
Enrollment Form by notifying MS in writing of such election. All other
Enrollment Forms delivered to CUSTOMER by MS shall be deemed as accepted by
CUSTOMER fifteen (15) days after receipt by CUSTOMER, and shall constitute
CUSTOMER's agreement to pay MS as set forth in Section 3.6 below for all copies
of Select Software Products made by the Select Customer pursuant to the
Enrollment Form and its associated Master Agreement.
3.5 CUSTOMER SELECT PRICE SCHEDULE
CUSTOMER's prices are set forth on the CUSTOMER Select Price Schedule attached
hereto as Schedule B. MS may modify the CUSTOMER Select Price Schedule at any
time by providing thirty (30) days written notice to CUSTOMER.
3.6 CUSTOMER'S REPORTING AND/OR ORDERING AND PAYMENT TO MS
(A) MICROSOFT SELECT 1.X AND 2.X ENROLLMENT AGREEMENT REPORTING
For each executed Microsoft Select version 1.x or version 2.x Enrollment
Agreement, the Select Customer is obligated by the terms of the Microsoft Select
Program to deliver to MS within fifteen (15) days of the end of each calendar
quarter, a written verified report for each Select Software Product acquired
from CUSTOMER pursuant to the terms of this Agreement. Following receipt of a
report from a given Select Customer, MS shall invoice CUSTOMER and CUSTOMER
shall be obligated to pay MS the fees set forth on Schedule B for each unit
reported by the Select Customer.
Should the Select Customer elect to submit reports to MS in addition to the
Select Customer's regular quarterly report, MS shall invoice CUSTOMER
immediately following receipt of such report, and CUSTOMER shall be obligated to
pay MS pursuant to the terms of this Section 3.6.
In the event CUSTOMER wants to receive copies of its Select Customers' quarterly
reports, CUSTOMER shall negotiate with its Select Customers for the right to
receive such copies.
(B) MICROSOFT SELECT 3.0 ENROLLMENT FORM ORDERING
For each of its executed Microsoft Select version 3.0 Enrollment Forms, CUSTOMER
shall deliver to MS via Electronic Data Interchange ("EDI") no later than the
fifteenth (15th) day of each calendar month, a purchase order for each Select
Software Product ordered and acquired from CUSTOMER by the Select Customer or
Enrollment site pursuant to the terms of this Agreement during the previous
month. Following receipt of such purchase order, MS shall invoice CUSTOMER and
CUSTOMER shall be obligated to pay MS the fees set forth on Schedule B for each
unit indicated on the purchase order, along with any applicable quarterly
Maintenance fees.
(C) PAYMENT TERMS
All amounts are due and owing net thirty (30) days of date of invoice. All
payments not received by MS from CUSTOMER within the required time frame may be
assessed a finance charge of the then-current prime rate plus two percent (2%)
per month or the legal maximum, which ever is less. CUSTOMER shall be obligated
to pay MS regardless of whether CUSTOMER has received payment from the Select
Customer. All payments shall be in the form of bank wire transfer, sent to the
following:
First Interstate Bank of WA
Seattle Main Branch
ABA: #125-000-286
Beneficiary: Microsoft Corporation
Account No. 001-025865
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD SOFTWARE PAGE 2
LARGE ACCOUNT RESELLER ADDENDUM
<PAGE>
3.7 TAXES
(A) SALES TAX
CUSTOMER shall either provide MS with a bona fide resale certificate for all
Select Software Products delivered to CUSTOMER by MS pursuant to the terms of
this Addendum, or shall pay to MS all applicable sales, use or other excise
taxes due on such Select Software Products.
(B) WITHHOLDING TAXES
In the event taxes are required to be withheld by any government on payments
required hereunder, CUSTOMER may deduct such taxes from the amount owed and pay
such taxes to the appropriate tax authority; provided, however, that CUSTOMER
shall promptly secure and deliver to MS an official receipt for any such taxes
withheld or other documents necessary to enable MS to claim a foreign tax
credit. CUSTOMER shall make certain that any taxes withheld are minimized to the
extent possible under the applicable law.
3.8 AGREEMENTS BETWEEN CUSTOMER AND ITS SELECT CUSTOMERS
With the exception of the terms contained in this Addendum and the terms
relating to the exercise of the intellectual property rights set forth in the
applicable Select Software Products, the applicable License Agreement for such
Select Software Products, Master Agreement and Enrollment Form, CUSTOMER shall
have complete discretion to establish with each Select Customer the pricing and
all other terms and conditions regarding CUSTOMER's provision of Select Software
Products and their associated license rights to CUSTOMER's Select Customers. The
negotiation of these terms between CUSTOMER and its Select Customers shall not
be subject to approval or review by MS in any way.
3.9 ROLE OF THE SELECT PROGRAM ADMINISTRATOR
CUSTOMER agrees to appoint a representative to serve as CUSTOMER's Select
Program Administrator. CUSTOMER agrees to promptly make that individual, as well
as CUSTOMER's other sales employees, available for training on the Microsoft
Select Program and on the licensing policies related to such products at such
times and places as MS reasonably requests. The individual appointed by CUSTOMER
as its Select Program Administrator shall be an individual generally
knowledgeable on MS products and in regard to Microsoft's Select Program. The
Select Program Administrator shall be responsible for administering all of
CUSTOMER's Select Customer billings, for general administration of CUSTOMER's
Select Customers and for working with the Microsoft Select Account Manager (or
local MS Contact) in regard to any problems relevant to a given Select Customer.
CUSTOMER's Select Program Administrator shall be:
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
CUSTOMER shall provide MS with at least ten (10) days advance written notice of
any change in the individual serving as its Select Program Administrator.
3.10 ENROLLMENT OF NEW SELECT CUSTOMERS
CUSTOMER's solicitation of new customers shall be on such terms and conditions
as MS specifies from time to time. MS reserves the right to accept or reject in
its sole discretion any proposed customer.
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD SOFTWARE PAGE 3
LARGE ACCOUNT RESELLER ADDENDUM
<PAGE>
3.11 CUSTOMER'S REPRESENTATIONS AND WARRANTIES
CUSTOMER hereby represents and warrants that:
(A) It will use its best efforts to service and support its Select Customers
and will promptly inform the appropriate Microsoft Select contact of any
difficulties it encounters in servicing its Select Customers;
(B) It will not alter in any way or form the Select Software Products or
their packaging;
(C) It will only deliver the Select Software Products to the Select Customer
specified on the outside of the Select Software Product packaging and will only
deliver CD-ROMs and program materials and information to the Select Customer
named on each such CD-ROM or materials; and
(D) It will promptly inform MS of any known or suspected violations by a
Select Customer of the terms and conditions of the Master Agreement, Enrollment
Form, its Select Software Products and/or the applicable License Agreement.
3.12 CONFIDENTIALITY
CUSTOMER expressly undertakes to retain in confidence the terms and conditions
of this Addendum, and the terms and conditions of all executed Select Master
Agreements and Select Enrollment Forms which are made available to CUSTOMER.
Should CUSTOMER disclose the terms and conditions of any executed Select Master
Agreement or Select Enrollment Form, this Addendum shall immediately terminate.
CUSTOMER shall guarantee and ensure its employees' compliance with this
paragraph. CUSTOMER's obligations under this paragraph shall survive any
termination of this Agreement and shall extend to the earlier of such time as
the information is in the public domain or five (5) years following the
termination of this Agreement.
4. CUSTOMER AND MS OBLIGATIONS
4.1 DELIVERY OF SELECT SOFTWARE PRODUCTS AND SELECT CD-ROMS
Within fifteen (15) days of MS's approval of a given Enrollment Form, MS agrees
to deliver to CUSTOMER the Select Software Products identified on the Enrollment
Form. Each Select Software Product delivered to CUSTOMER will be a custom
package specific to the named Select Customer and will set forth the Customer's
Select Agreement Number and any special conditions relevant to the named Select
Customer. Select Software Products are provided in order that CUSTOMER may
provide the Select Software Products and their associated license rights to the
named Select Customer on such pricing and payment terms and conditions as
CUSTOMER and the Select Customer agree. CUSTOMER agrees to pay MS for Select
Software Products as set forth in Section 3.6 above. From time to time during
the term of this Addendum, MS will provide CUSTOMER with CD-ROMs containing
upgraded copies of the Select Software Products covered by a Select Customer's
Select Agreement. CUSTOMER agrees to immediately deliver all CD-ROMs and any
additional MS supplied program information and materials to the named Select
Customer.
4.2 RESERVATION OF RIGHTS
MS expressly reserves the right at any time during the term of this Addendum to
terminate any Select Customer's status as a Select Customer in the event the
Select Customer fails to comply with the terms of either the Master Agreement,
the Enrollment Form or the applicable License Agreement. MS agrees to promptly
notify CUSTOMER of the termination of any Select Customer to whom CUSTOMER has
distributed Select Software Products. Following such a notice, CUSTOMER shall
thereafter not deliver to the terminated Select Customer any additional Select
Software Products, licenses, CD-ROMs or any additional program information and
materials. Termination shall not, however, affect the Select Customer's
obligation to file the next due order/report and MS's right to invoice CUSTOMER
in regard to such order. If MS terminates a given Select Customer, CUSTOMER
shall not
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD SOFTWARE PAGE 4
LARGE ACCOUNT RESELLER ADDENDUM
<PAGE>
have any claim against MS or the Select Customer for damages or lost profits
resulting from such termination. CUSTOMER shall, however, be entitled to invoice
the Select Customer for copies of Select Software Products reproduced by the
Select Customer as set forth in the Customer's final order, such invoice to be
on the terms and conditions previously agreed to between CUSTOMER and the Select
Customer.
4.3 OBLIGATIONS ON TERMINATION
Promptly following termination of this Addendum, MS shall inform each of
CUSTOMER's Select Customers that CUSTOMER is no longer a Large Account Reseller
and shall request that each Select Customer appoint a new Large Account
Reseller. In the event this Addendum is terminated without cause or expires of
its own accord, each Select Customer shall be obligated to file its next due
order/ report and to pay CUSTOMER any and all amounts due for such order as
agreed to between CUSTOMER and the Select Customer. CUSTOMER shall in turn be
obligated to pay to MS in accordance with the terms of this Addendum any and all
amounts due MS as a result of the Select Customer's above-referenced order.
Thereafter, any and all future payments by CUSTOMER's Select Customers shall be
made to each Select Customer's newly designated Large Account Reseller (if any)
or to MS as the case may be and CUSTOMER shall not be entitled to any portion
of, or any compensation for its Select Customers' future orders and payments. In
the event this Addendum is terminated for cause, MS shall be entitled to direct
all of CUSTOMER's Select Customers to report/order and pay to MS or to the
Select Customer's newly designated Select Large Account Reseller any and all
payments due after termination. In such an event, CUSTOMER shall not under any
circumstances be entitled to any portion of, or any compensation for, the Select
Customers' next orders and payments or any future orders and payments.
4.4 ESSENTIAL ELEMENT
Both CUSTOMER and MS acknowledge that this Addendum is essential to any
agreement it enters into with a Select Customer. Except as is specifically
provided in Section 4.3 related to CUSTOMER's right to collect any outstanding
payment following termination of this Addendum, CUSTOMER's rights to acquire
and/or distribute Select Software Products, Select CD-ROMs and/or any additional
program information and materials, and to collect payment from its Select
Customers are conditional upon this Addendum being in full force and effect.
CUSTOMER acknowledges further that, if and when it is the subject of a
bankruptcy filing (under any Chapter of 11 United States Code Section 101 ET
SEQ. including any future amendments), then assumption of any contract with a
Select Customer is conditional upon the assumption of this Addendum.
5. SURVIVAL
Sections 3.6, 3.7, 3.12, 4.3, and 4.4 shall survive any termination of this
Addendum.
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD SOFTWARE PAGE 5
LARGE ACCOUNT RESELLER ADDENDUM
<PAGE>
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.
<TABLE>
<S> <C>
MICROSOFT CORPORATION EGGHEAD SOFTWARE
("MS") ("CUSTOMER")
By: By:
- --------------------------------------- ---------------------------------------
- ------------------------------------------- -------------------------------------------
Name (please print) Name (please print)
- ------------------------------------------- -------------------------------------------
Title Title
- ------------------------------------------- -------------------------------------------
Date Date
</TABLE>
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD SOFTWARE PAGE 6
LARGE ACCOUNT RESELLER ADDENDUM
<PAGE>
SCHEDULE A
DEFINITIONS
"ENROLLMENT AGREEMENT" is defined as the Microsoft Select Enrollment
Agreement in the form provided by MS to be signed by each Select Customer and
CUSTOMER, and approved by MS.
"ENROLLMENT FORM" is defined as the Microsoft Select Enrollment Form in the
form provided by MS to be signed by each Select Customer and approved by MS.
"LARGE ACCOUNT RESELLER" is defined as any reseller which MS has authorized
to distribute licenses to Select Customers.
"LEAD CUSTOMER" is defined as the company or entity signing a Master
Agreement.
"LEAD CUSTOMER AFFILIATE" is defined as a company or legal entity which owns
and controls, is owned or controlled by, or is under common ownership and
control with, the Lead Customer.
"LICENSE AGREEMENT(S)" is defined as the license agreement attached to the
Enrollment Form.
"MASTER AGREEMENT" is defined as the Microsoft Select Master Agreement in
the form provided by MS to be signed by a given Select Customer or an entity
acting on behalf of the Select Customer.
"MASTER AGREEMENT NUMBER" is defined as the number assigned by MS to a given
Master Agreement
"SELECT CUSTOMER" is defined as the Lead Customer, any Lead Customer
Affiliate and /or identifiable division, business unit or office location of the
foregoing identified as the Select Customer on an Enrollment Form.
"SELECT PROGRAM ADMINISTRATOR" is defined as the individual appointed by
CUSTOMER to act as CUSTOMER's primary contact with respect to the Microsoft
Select Program.
"SELECT SOFTWARE PRODUCT" is defined as the MS software as designated from
time to time by Microsoft which may be reproduced pursuant to an Enrollment
Form.
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD SOFTWARE PAGE A1
LARGE ACCOUNT RESELLER ADDENDUM
<PAGE>
SCHEDULE B
CUSTOMER SELECT PRICE SCHEDULE
MICROSOFT 1995/1996 CHANNEL AGREEMENT EGGHEAD SOFTWARE PAGE B1
LARGE ACCOUNT RESELLER ADDENDUM
<PAGE>
AMENDMENT NO. 1 TO THE
LARGE ACCOUNT RESELLER ADDENDUM TO THE
MICROSOFT 1995/1996 CHANNEL AGREEMENT
This Amendment No. 1 ("Amendment"), dated this first day of January, 1996,
amends that certain Large Account Reseller Addendum to The Microsoft 1995/1996
Channel Agreement ("Addendum") dated July 1, 1995, between MICROSOFT CORPORATION
("MS") having its principal place of business at One Microsoft Way, Redmond, WA
98052 and DJ&J SOFTWARE CORPORATION d/b/a EGGHEAD ("CUSTOMER") having its
principal place of business at 22705 East Mission, Liberty Lake, WA 99019. The
Addendum is hereby amended as follows:
2. TERM AND TERMINATION
The first sentence of the section is replaced with the following:
"This Addendum shall be effective as of January 1, 1996, and shall expire June
30, 1996."
SCHEDULE B
Schedule B is replaced in its entirety with the attached Schedule C.
IN WITNESS WHEREOF, the parties have signed this Amendment on the date indicated
below. This Amendment is hereby made part of the Addendum. All terms and
conditions of the Addendum not amended herein shall remain in full force and
effect. This Amendment is not binding until executed by MS.
<TABLE>
<S> <C>
AGREED AND ACCEPTED TO BY AGREED AND ACCEPTED TO BY
MICROSOFT CORPORATION ("MS") DJ&J SOFTWARE CORPORATION
D/B/A EGGHEAD ("CUSTOMER")
By: By:
- --------------------------------------- ---------------------------------------
- ------------------------------------------- -------------------------------------------
Name (please print) Name (please print)
- ------------------------------------------- -------------------------------------------
Title Title
- ------------------------------------------- -------------------------------------------
Date Date
</TABLE>
MICROSOFT CONFIDENTIAL - DISCLOSURE PROHIBITED
<PAGE>
SCHEDULE C
JANUARY - JUNE, 1996
REBATE GUIDELINES
SELECT REBATE PROGRAM OVERVIEW
PROGRAMS: Microsoft offers four Select rebate programs for the January - June,
1996 Rebate period:
<TABLE>
<CAPTION>
MAXIMUM PERCENTAGE
REBATE INCENTIVE AVAILABLE
- ------------------------------------------------------------------------- ---------------------
<S> <C>
Compliance Program [ * ]
Maintenance Sales-out Program [ * ]
Enterprise Sales-out Program [ * ]
Business Systems Sales-out Program [ * ]
-----
TOTAL [ * ]
-----
-----
</TABLE>
REBATE CALCULATIONS AND PAYMENTS: Rebates will be paid in the form of a
Microsoft purchase credit forty-five (45) days after the end of each quarterly
rebate period (i.e. May 15th for the January - March, 1996 quarter). Any such
Rebate paid shall be credited against CUSTOMER's account balance. In the event
CUSTOMER's account balance is less than the total Rebate payment, MS may, at its
sole discretion, elect to pay the Rebate in the form of a check. In no case
shall CUSTOMER deduct from invoice any Rebate payment due from MS prior to the
issue of the purchase credit or check. Rebates are calculated by multiplying the
achieved rebate percentage by the total Qualified Select Sales for the rebate
period. All Microsoft Select revenue will be included in calculating CUSTOMER's
performance against the Select Rebate goals. Revenue generated from Microsoft
Select Enrollment Forms executed by MS prior to July 1, 1994, shall be included
in calculating CUSTOMER's achievement toward the Select Rebate goals, but shall
not be included in CUSTOMER's final total Qualified Select Sales for purposes of
the Rebate payment. Only revenue generated from Microsoft Select Enrollment
Forms executed by MS on or after July 1, 1994 (excluding any Microsoft Select
Maintenance) will be included in CUSTOMER's final total Qualified Select Sales
for purposes of the Rebate payment.
ANY ISSUES SURROUNDING REBATES SHOULD BE SENT IN WRITING TO KRISTIN WEEBER,
MARKETING MANAGER, NO LATER THAN THIRTY (30) DAYS FOLLOWING RECEIPT OF REBATE
PAYMENT. If such written notice is not provided within thirty (30) days,
CUSTOMER shall have no further right to dispute rebate payment.
COMPLIANCE REBATE PROGRAM
PROGRAM OBJECTIVES: The objective of the Compliance Rebate Program is to
provide incentive for CUSTOMER to comply with Microsoft contractual requirements
for payments, Street Dates, and EDI ordering for Select 3.0.
NON-COMPLIANCE: During any given month, failure to comply with any or all of
the current compliance criteria will result in the forfeiture of the entire
compliance rebate for that month.
1. MICROSOFT PAYMENT REQUIREMENTS
Microsoft requires its customers to pay its invoices within terms. In order to
maintain compliance, 85% of the gross invoice value for Select must be current
as of Microsoft's fiscal month-end. Unapplied credits will be excluded from the
calculation.
* CONFIDENTIAL TREATMENT REQUESTED
AMENDMENT NO. 1 TO THE LARGE ACCOUNT PAGE C2
RESELLER REBATE ADDENDUM TO THE MICROSOFT
1995/1996 CHANNEL AGREEMENT
<PAGE>
2. MICROSOFT STREET DATE REQUIREMENTS
From time to time, Microsoft may announce a new product or new versions of an
existing product for which Microsoft shall set a Street Date. In order to comply
with the Street Date requirements, CUSTOMER shall not:
- Ship or deliver the product to any end-user customer prior to the Street
Date.
- Accept any end user payment for the product prior to the Street Date.
Checks and/or credit card numbers may be accepted by CUSTOMER, but can
only be processed when product is delivered to the end user on or after
the Street Date.
- Advertise, merchandise, or promote the product to end user customers until
it is officially announced by Microsoft. Usually, the product announcement
is on the Street Date. If the product announcement is earlier than the
Street Date, Microsoft will clearly communicate the announcement date to
the channel. If product is announced by Microsoft before the Street Date,
the product can be advertised, merchandised and/or promoted immediately
after such announcement, provided that all such promotions clearly state
that the product is not yet available for purchase.
- Allow it's distribution centers and/or warehouses to distribute, for a
period of up to twelve months, a Street Date product to any individual
sales office, retail store, or outlet which Microsoft in its sole
discretion has determined to be in violation of the Street Date
Requirements.
In the event CUSTOMER violates the Street Date for any special products
specified in a Microsoft Street Date letter, CUSTOMER shall forfeit up to the
entire Compliance Rebate for the six month Rebate period in which the violation
occurred.
Should CUSTOMER fail to comply with the Street Date Requirements, Microsoft may
also, for a period of up to twelve (12) months, withhold shipments to CUSTOMER
of future product until the Street Date of such product.
Should CUSTOMER wish to report a Street Date violation, CUSTOMER may fax a copy
of a dated sales receipt to STREET DATE VIOLATIONS AT MICROSOFT AT (206)
936-7329. Once a violation has been reported, Microsoft shall investigate the
violation, and take remedial action as appropriate. Please note, in order to
confirm a suspected violation, Microsoft must receive a dated sales receipt.
3. MICROSOFT REPORTING REQUIREMENTS
CUSTOMER must comply with the reporting requirements as outlined in CUSTOMER's
then current 1995/1996 Channel Agreement and/or Senior Partner Marketing Fund
and Reporting Agreement, as applicable. Should MS elect to modify the EDI
Guidelines at anytime other than the beginning of each semester, CUSTOMER shall
have no less than thirty (30) days to comply with such changes.
4. MICROSOFT TRANSACTION REQUIREMENTS
Electronic Data Interchange format ("EDI") transactions include, but are not
limited to 850/855 EDI transactions and all other EDI reporting requirements
which may be required by MS and in the EDI Implementation Guide provided by MS
from time to time. Should MS elect to modify the EDI Guidelines at any time
other than the beginning of each semester, CUSTOMER shall have no less than
thirty (30) days to comply with such changes. CUSTOMER must place EDI
transaction orders at a minimum of once per month per Enrollment Site if product
is purchased during said month.
AMENDMENT NO. 1 TO THE LARGE ACCOUNT PAGE C3
RESELLER REBATE ADDENDUM TO THE MICROSOFT
1995/1996 CHANNEL AGREEMENT
<PAGE>
5. SELECT CERTIFICATION PROGRAM
CUSTOMER shall participate in and obtain certification in the Microsoft Select
Certification Program for no less than two (2) CUSTOMER Select administration
contacts by June 30, 1996.
COMPLIANCE REBATE CALCULATION: The Microsoft Compliance Rebate will be
calculated on a monthly basis. If CUSTOMER has met all of the Compliance Rebate
criteria in a given month, CUSTOMER will be entitled to a Rebate payment equal
to one percent (1%) of that month's total Qualified Select Sales. The rebate
payment will be made forty-five (45) days after the end of each quarterly rebate
period.
SALES-OUT REBATE PROGRAMS
REBATE GOALS: CUSTOMER has first quarter sales-out goals and total semester
sales-out goals. CUSTOMER's performance for the first three months of the
January - June, 1996, semester will be measured against the first quarter
sales-out goals. At the end of the first quarter, CUSTOMER will receive the
percentage of the eligible rebates earned based on performance against the first
quarter goals. At the end of the semester, CUSTOMER will be measured on their
six-month performance against the total semester goals. Even if CUSTOMER does
not meet 100% of the first quarter goals, CUSTOMER can still achieve 100% of the
semester goals provided that the semester goals are met at the end of the
six-month period.
SALES-OUT DEFINITIONS/MEASUREMENT: MS Product Sales-out is defined as those MS
net product units sold through CUSTOMER's outlet locations. For the Business
Systems sales-out goal, CUSTOMERs full packaged product, Microsoft Open License,
and upgrade sales-out units will be measured from the sales-out reported by
CUSTOMER to MS. For the Maintenance and Enterprises sales-out goals, only the
appropriate Select license will be measured. Licensing sales (Select, Microsoft
Maintenance) are captured and generated by MS' financial systems and included in
total sales-out used to measure product sales-out rebate performance.
Any Microsoft Select 2.x and 1.x and Microsoft Maintenance revenue credit is
granted as MS recognizes the revenue. This occurs when MS has received the
customer's license reporting. Following receipt of reporting, MS bills the
customer/reseller and simultaneously recognizes the revenue.
PAYMENT: At the end of the semester, CUSTOMER will be paid sales-out rebates
based on performance against the semester goals. If CUSTOMER achieves greater
than sixty percent (60%) of each semester sales-out goal, CUSTOMER will receive
the exact achieved percentage of the eligible sales-out rebate up to one hundred
percent (100%). If CUSTOMER achieves less than sixty percent (60%) of any
sales-out rebate goal, CUSTOMER will not receive any portion of that sales-out
rebate.
Although MS pays the sales-out rebate ultimately based on performance against
the semester sales-out goal, MS also pays a sales-out rebate at the end of the
first quarter based on performance against the first quarter goal. MS pays a
portion of the rebate after the first quarter to provide incentive for CUSTOMER
to focus on sales-out throughout the entire semester. The scale for the first
quarter payment is the same as the scale for the semester payment. The first
quarter payment amount will be subtracted from the final semester payment for
the sales-out rebate.
AMENDMENT NO. 1 TO THE LARGE ACCOUNT PAGE C4
RESELLER REBATE ADDENDUM TO THE MICROSOFT
1995/1996 CHANNEL AGREEMENT
<PAGE>
EXAMPLE: IF CUSTOMER HAS A QUARTERLY BUSINESS SYSTEMS SALES OUT GOAL OF
$1,000,000 AND A TOTAL SEMESTER BUSINESS SYSTEMS GOAL $2,500,000, AND CUSTOMER
SELLS $800,000 OVER THE FIRST QUARTER PERIOD AND $2,600,000 OVER THE ENTIRE
SEMESTER PERIOD, CUSTOMER WILL RECEIVE THE FOLLOWING REBATE PAYMENTS:
<TABLE>
<CAPTION>
SELL-THROUGH
PERIOD GOAL ACHIEVED PAYMENT
- ---------------- ------------- ------------- -------------------------------------------------------
<S> <C> <C> <C>
First Quarter $ 1,000,000 $ 800,000 80% of [ * ] eligible rebate = [ * ] of January - June
sales.
Semester $ 2,500,000 $ 2,600,000 104% of [ * ] eligible rebate = [ * ] of January - June
sales less first quarter payment. The maximum allowable
rebate is [ * ].
</TABLE>
SELECT MAINTENANCE SALES-OUT REBATE PROGRAM
REBATE PERCENTAGES: The total possible rebate percentage achievable for the
Maintenance Sales-out Rebate Program is [ * ] of Qualified Sales for the January
- -June, 1996 muster.
CUSTOMER's Total Sales-out Rebate Program goals are as follows:
- Quarter 1 Goal (January - March, 1996): [ * ]
- Semester Goal (January - June, 1996): [ * ]
ENTERPRISE SALES-OUT REBATE PROGRAM
REBATE PERCENTAGES: The total possible rebate percentage achievable for the
Enterprise Sales-out Rebate Program is [ * ] of Qualified Sales for the January
- -June, 1996 semester.
CUSTOMER's Total Sales-out Rebate Program goals are as follows:
- Quarter 1 Goal (January - March, 1996): [ * ]
- Semester Goal (January - June, 1996): [ * ]
BUSINESS SYSTEMS SALES-OUT REBATE PROGRAM
REBATE PERCENTAGES: The total possible rebate percentage achievable for the
Business Systems Sales-out Rebate Program is [ * ] of Qualified Sales for the
January - June, 1996 semester.
REBATE GOALS: CUSTOMER must meet a minimum Microsoft-Registered Trademark-
BackOffice client license unit sales goal in order to receive any portion of the
Business Systems rebate. Provided that CUSTOMER meets the client license unit
sales goal, CUSTOMER's achievement against the Business Systems goal will be
based on CUSTOMER's performance against the Business Systems revenue goal.
CUSTOMER's Microsoft-Registered Trademark- BackOffice unit sales goals are as
follows:
- Quarter 1 Goal (January - March, 1996): [ * ]
- Semester Goal (January - June, 1996): [ * ]
CUSTOMER's Business Systems Sales-out Rebate Program goals are as follows:
- Quarter 1 Goal (January - March, 1996): [ * ]
- Semester Goal (January - June, 1996): [ * ]
* CONFIDENTIAL TREATMENT REQUESTED
AMENDMENT NO. 1 TO THE LARGE ACCOUNT PAGE C5
RESELLER REBATE ADDENDUM TO THE MICROSOFT
1995/1996 CHANNEL AGREEMENT
<PAGE>
LARGE ACCOUNT RESELLER
REBATE ADDENDUM TO THE
MICROSOFT 1995/1996 CHANNEL AGREEMENT
(JULY - DECEMBER, 1995)
This Addendum ("Addendum") entered into as of the 1st day of July, 1995,
supplements that certain Microsoft 1995/1996 Channel Agreement ("Agreement")
between MICR0SOFT 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 on Microsoft Select sales.
2. TERM AND TERMINATION
This Addendum shall be effective as of the date indicated above, and shall
expire December 31, 1995. 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 1995/1996 Channel
Agreement and the Addendum to the Microsoft 1995/1996 Channel Agreement
(Appointment As A Large Account Reseller).
3. DEFINITIONS
For purposes of this Addendum, capitalized terms not otherwise defined herein,
shall have the same definitions as set forth in the Agreement. Additional
capitalized terms included in this Addendum are as defined in Schedule A
attached hereto.
4. REBATES
CUSTOMER is eligible to receive up to a [ * ] percent [ * ] Rebate on its
Qualified Select Sales made during the Rebate Period. The Rebate shall be paid
provided CUSTOMER complies with the Select Rebate Program Guidelines outlined in
Schedule B. Notwithstanding such Rebate Program Guidelines, MS may, at its sole
discretion, pay all or any portion of the Rebate prior to the end of the Rebate
Period. The Rebate so paid may be adjusted subsequently based upon compliance
with the Rebate Program Guidelines.
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.
<TABLE>
<S> <C>
AGREED AND ACCEPTED BY AGREED AND ACCEPTED TO BY
MICROSOFT CORPORATION EGGHEAD SOFTWARE
("MS") ("CUSTOMER")
By: By:
- --------------------------------------- ---------------------------------------
- ------------------------------------------- -------------------------------------------
Name (please print) Name (please print)
- ------------------------------------------- -------------------------------------------
Title Title
- ------------------------------------------- -------------------------------------------
Date Date
</TABLE>
* CONFIDENTIAL TREATMENT REQUESTED
MICROSOFT CONFIDENTIAL - DISCLOSURE PROHIBITED
<PAGE>
SCHEDULE A
DEFINITIONS
"ELECTRONIC DATA INTERCHANGE" OR "EDI" is defined as the ANSI-ASCII X.12
standard, adopted by CompTIA, by which CUSTOMER shall order and report to MS.
"QUALIFIED SELECT SALES" is defined as net Select sales excluding the Select
Maintenance revenue of all Enrollment Agreements signed prior to July 1, 1995,
and all revenue from Enrollment Agreements signed prior to July 1, 1994, made
during the Rebate Period, to CUSTOMER's End User customers as reported to MS in
CUSTOMER's normal sales reporting.
"REBATE" is defined as the dollar amount paid to CUSTOMER by MS in the form
of a purchase credit for achieving specific rebate goals as set forth herein.
"REBATE PERIOD" is defined as the six (6) calendar months, July 1, 1995 -
December 31, 1995, during which CUSTOMER shall be eligible to earn Rebates.
"STREET DATE" is defined as the date prior to which new Product or new
versions of existing Product shall not be available for End User purchase.
MICROSOFT 1995/1996 CHANNEL AGREEMENT PAGE A1
LARGE ACCOUNT RESELLER REBATE ADDENDUM
JULY - DECEMBER, 1995
<PAGE>
SCHEDULE B
REBATE PROGRAM GUIDELINES
SELECT REBATE PROGRAM OVERVIEW
PROGRAMS: Microsoft offers four Select rebate programs for the July - December,
1995 Rebate period. Rebate percentages available are listed in the table below.
Details on each program are also included in this document.
<TABLE>
<CAPTION>
MAXIMUM PERCENTAGE OUTLINED ON
REBATE INCENTIVE AVAILABLE PAGE(S)
- ----------------------------------------------------------- --------------------- -----------
<S> <C> <C>
Compliance Program [ * ] B1 - B2
Business Systems Program [ * ] B2 - B4
Maintenance Program [ * ] B4 - B5
Enterprise (MELP) Program [ * ] B5 - B6
-----
TOTAL [ * ]
-----
-----
</TABLE>
REBATE CALCULATIONS AND PAYMENTS: Rebates will be paid in the form of a
Microsoft purchase credit forty-five (45) days after the end of each quarterly
rebate period (i.e. November 15th for the July - September, 1995 quarter).
Rebates are calculated by multiplying the achieved rebate percentage by the
total Qualified Select Sales for the rebate period. All Microsoft Select revenue
will be included in calculating CUSTOMER's performance against the Select Rebate
goals. Revenue generated from Microsoft Select Enrollment Forms executed by MS
prior to July 1, 1994, shall be included in calculating CUSTOMER's achievement
toward the Select Rebate goals, but shall not be included in CUSTOMER's final
total Qualified Select Sales for purposes of the Rebate payment. Only revenue
generated from Microsoft Select Enrollment Forms executed by MS on or after July
1, 1994 (excluding any Microsoft Select Maintenance) will be included in
CUSTOMER's final total Qualified Select Sales for purposes of the Rebate
payment.
ANY ISSUES SURROUNDING REBATES SHOULD BE SENT IN WRITING TO KRISTIN WEEBER,
REBATE SPECIALIST, NO LATER THAN THIRTY (30) DAYS FOLLOWING RECEIPT OF REBATE
PAYMENT. If such written notice is not provided within thirty (30) days,
CUSTOMER shall have no further right to dispute rebate payment.
COMPLIANCE REBATE PROGRAM
PROGRAM OBJECTIVES: The objective of the Compliance Rebate Program is to
provide incentive for CUSTOMER to comply with Microsoft contractual requirements
for payments, Street Dates, and EDI ordering for Select 3.0.
NON-COMPLIANCE: During any given month, failure to comply with any or all of
the current compliance criteria will result in the forfeiture of the entire
compliance rebate for that month.
1. MICROSOFT PAYMENT REQUIREMENTS:
Microsoft requires it's customers to pay it's invoices within terms. In order to
maintain compliance, 85% of the gross invoice value for Select must be current
as of Microsoft's fiscal month-end. Unapplied credits will be excluded from the
calculation.
2. MICROSOFT STREET DATE REQUIREMENTS:
From time to time, Microsoft may announce a new product or new versions of an
existing product for which Microsoft shall set a Street Date. In order to comply
with the Street Date requirements, CUSTOMER shall not:
- Ship or deliver the product to any end-user customer prior to the Street
Date.
* CONFIDENTIAL TREATMENT REQUESTED
MICROSOFT 1995/1996 CHANNEL AGREEMENT PAGE A2
LARGE ACCOUNT RESELLER REBATE ADDENDUM
JULY - DECEMBER, 1995
<PAGE>
- Accept any end user payment for the product prior to the Street Date.
Checks and/or credit card numbers may be accepted by CUSTOMER, but can
only be processed when product is delivered to the end user on or after
the Street Date.
- Advertise, merchandise, or promote the product to end user customers until
it is officially announced by Microsoft. Usually, the product announcement
is on the Street Date. If the product announcement is earlier than the
Street Date, Microsoft will clearly communicate the announce date to the
channel. If product is announced by Microsoft before the Street Date, the
product can be advertised, merchandised and/or promoted immediately after
such announcement, provided that all such promotions clearly state that
the product is not yet available for purchase.
- Allow it's distribution centers and/or warehouses to distribute, for a
period of up to twelve months, a Street Date product to any individual
sales office, retail store, or outlet which Microsoft in its sole
discretion has determined to be in violation of the Street Date
Requirements.
In the event CUSTOMER violates the Street Date for any special products
specified in a Microsoft Street Date letter (including, but not limited to
Microsoft-Registered Trademark- Windows-Registered Trademark- 95), CUSTOMER
shall forfeit up to the entire Compliance Rebate for the six month Rebate period
in which the violation occurred.
Should CUSTOMER fail to comply with the Street Date Requirements, Microsoft may
also, for a period of up to twelve (12) months, withhold shipments to CUSTOMER
of future product until the Street Date of such product.
Should CUSTOMER wish to report a Street Date violation, CUSTOMER may fax a copy
of a dated sales receipt to STREET DATE VIOLATIONS AT MICROSOFT AT (206)
936-7329. Once a violation has been reported, Microsoft shall investigate the
violation, and take remedial action as appropriate. Please note, in order to
confirm a suspected violation, Microsoft must receive a dated sales receipt.
3. MICROSOFT REPORTING REQUIREMENTS
CUSTOMER must comply with the reporting requirements as outlined in the
1995/1996 Channel Agreement and/or the Senior Partner Marketing Fund and
Reporting Agreement. as applicable.
4. MICROSOFT TRANSACTION REQUIREMENTS
Electronic Data Interchange format ("EDI") transactions include, but are not
limited to 850/855 EDI transactions and all other EDI reporting requirements
which may be required by MS and in the EDI Implementation Guide attached hereto
as Schedule C. CUSTOMER must place EDI transaction orders at a minimum of once
per month per Enrollment Site if product is purchased during said month.
COMPLIANCE REBATE CALCULATION: The Microsoft Compliance Rebate will be
calculated on a monthly basis. If CUSTOMER has met all of the Compliance Rebate
criteria in a given month, CUSTOMER will be entitled to a Rebate payment equal
to one percent (1%) of that month's total Qualified Select Sales. The rebate
payment will be made forty-five (45) days after the end of each quarterly rebate
period.
BUSINESS SYSTEMS REBATE PROGRAM
PROGRAM OBJECTIVE: The objective of the Microsoft Business Systems Rebate
Program is to increase the Microsoft Business Systems revenue as well as to
increase the ratio of Microsoft Windows NT Client licenses to Server license
sales. The Microsoft Business Systems products consist of any license
MICROSOFT 1995/1996 CHANNEL AGREEMENT PAGE A3
LARGE ACCOUNT RESELLER REBATE ADDENDUM
JULY - DECEMBER, 1995
<PAGE>
type of the following products: MICROSOFT-REGISTERED TRADEMARK- BACKOFFICE,
MICROSOFT-REGISTERED TRADEMARK- MAIL, MICROSOFT-REGISTERED TRADEMARK- EXCHANGE,
MICROSOFT-REGISTERED TRADEMARK- SNA SERVER, MICROSOFT-REGISTERED TRADEMARK- SQL
SERVER-TM-, MICROSOFT-REGISTERED TRADEMARK- SYSTEMS MANAGEMENT SERVER,
MICROSOFT-REGISTERED TRADEMARK- WINDOWS NT-TM- SERVER, AND
MICROSOFT-REGISTERED TRADEMARK- WINDOWS NT-TM- WORKSTATION.
REBATE PERCENTAGES: The total possible rebate percentage achievable for the
Business Systems Rebate Program is [ * ] of Qualified Select Sales for the July
- -December, 1995 semester.
GOAL DEFINITIONS: The program goals are based upon the following:
- Existing Microsoft Business Systems revenue.
- Microsoft's Business Systems revenue goals.
- Microsoft's Windows NT Client to Server Ratio goals.
REBATE GOALS: CUSTOMER must meet a minimum Windows NT Client to Server Ratio of
[ * ] in order to receive any portion of the Business Systems rebate.
Performance against the Client to Server goal will be measured against all
license types of Microsoft Windows NT including full packaged product, MLPs,
MOLP, and Select license types. Provided that CUSTOMER meets the [ * ] Client to
Server Ratio, CUSTOMER's achievement against the Business Systems goal will be
based on CUSTOMER's performance against the Business Systems revenue goal.
CUSTOMER's performance against the revenue goal will also be based on all
license types.
CUSTOMER has a first quarter rebate goal and a total semester rebate goal.
CUSTOMER's performance for the first three months of the July - December, 1995
semester will be measured against the first quarter rebate goal. At the end of
the first quarter, CUSTOMER will receive the percentage of the eligible rebate
earned based on performance against the first quarter goal. At the end of the
semester, CUSTOMER will be measured on their six-month performance against the
total semester goal. Even if CUSTOMER does not meet 100% of the first quarter
goal, CUSTOMER can still achieve 100% of the semester goal provided that the
semester goal is met at the end of the six-month period.
CUSTOMER's Business Systems Rebate Program goals are as follows:
- Minimum Windows NT Client to Server Ratio of [ * ]
- Quarter 1 Goal (July - September, 1995): [ * ]
- Semester Goal (July - December, 1995): [ * ]
PAYMENT: As stated earlier, CUSTOMER must attain a [ * ] Client to Server ratio
of Microsoft Windows NT in order to receive any portion of the Business Systems
Rebate. Provided CUSTOMER meets the Client to Server Ratio requirement, CUSTOMER
will be paid a Business Systems rebate based on performance against the semester
goal at the end of the semester. If CUSTOMER achieves greater than sixty percent
(60%) of the semester Business Systems revenue goal, and attains a minimum of
[ * ] Windows NT Client to Server ratio CUSTOMER will receive the exact achieved
percentage of the eligible Business Systems rebate up to one hundred percent
(100%). If CUSTOMER achieves less than sixty percent (60%) of the Business
Systems revenue goal, CUSTOMER will not receive any portion of the Business
Systems 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 Business Systems goal.
Although Microsoft pays the rebate ultimately based on performance against the
semester goal, Microsoft also pays a rebate at the end of the first quarter
based on performance against the first quarter goal. Microsoft pays a portion of
the rebate after the first quarter as an incentive for CUSTOMER to focus on the
Business Systems rebate program throughout the entire semester. The scale for
the first quarter payment is the same as the scale for the semester payment. The
first quarter
* CONFIDENTIAL TREATMENT REQUESTED
MICROSOFT 1995/1996 CHANNEL AGREEMENT PAGE A4
LARGE ACCOUNT RESELLER REBATE ADDENDUM
JULY - DECEMBER, 1995
<PAGE>
payment amount will be subtracted from the final semester payment for the
rebate. Should CUSTOMER fail to meet the minimum attainment for the final
semester goal, MS will not seek reimbursement for Rebate paid. Please note:
Although performance against the Business Systems Rebate is based on all Select,
and non-Select Business Systems revenue, payment will be based on Select revenue
only.
EXAMPLE:
GOALS:
- QUARTERLY BUSINESS SYSTEMS REVENUE GOAL OF $1,000,000
- SEMESTER BUSINESS SYSTEMS REVENUE GOAL OF $2,500,000
- MINIMUM WINDOWS NT CLIENT TO SERVER RATIO OF 10:1
PERFORMANCE:
- WINDOWS NT CLIENT TO SERVER RATIO OF 11:1
- ACTUAL QUARTER BUSINESS SYSTEMS REVENUE IS $800,000
- ACTUAL SEMESTER BUSINESS SYSTEMS REVENUE IS $2,600,000
BECAUSE CUSTOMER ATTAINED THE MINIMUM WINDOWS NT CLIENT TO SERVER RATIO OF
[ * ], CUSTOMER'S BUSINESS SYSTEMS REBATE PAYMENT WOULD BE AS FOLLOWS:
<TABLE>
<CAPTION>
SELL THROUGH
PERIOD GOAL ACHIEVED PAYMENT
- ---------------- ------------- ------------- -------------------------------------------------------
<S> <C> <C> <C>
First Quarter $ 1,000,000 $ 800,000 80% of [ * ] eligible rebate = [ * ] of July -
September Select Sales.
Semester $ 2,500,000 $ 2,600,000 104% of [ * ] eligible rebate = [ * ] of July -
December Select Sales less first quarter payment. The
maximum allowable Business Systems rebate is [ * ].
</TABLE>
MAINTENANCE REBATE PROGRAM
PROGRAM OBJECTIVE: The objective of the Microsoft Maintenance Rebate Program is
to increase the Microsoft Maintenance revenue percentage of total Select
revenue.
REBATE PERCENTAGES: The total possible rebate percentage achievable for the
Maintenance Rebate Program is [ * ] of Qualified Select Sales for the July -
December, 1995 semester.
GOAL DEFINITIONS: The program goals are based upon the following:
- Existing Maintenance revenue percentage of total Select revenue.
- Microsoft's Maintenance revenue goals.
REBATE GOALS: CUSTOMER's achievement against the Maintenance goal will be based
on CUSTOMER's Select Maintenance revenue percentage of CUSTOMER's total Select
revenue.
CUSTOMER has a first quarter rebate goal and a total semester rebate goal.
CUSTOMER's performance for the first three months of the July - December, 1995
semester will be measured against the first quarter rebate goal. At the end of
the first quarter, CUSTOMER will receive the percentage of the eligible rebate
based on performance against the first quarter goal. At the end of the semester,
* CONFIDENTIAL TREATMENT REQUESTED
MICROSOFT 1995/1996 CHANNEL AGREEMENT PAGE A5
LARGE ACCOUNT RESELLER REBATE ADDENDUM
JULY - DECEMBER, 1995
<PAGE>
CUSTOMER will be measured on their six-month performance against the total
semester goal. Even if CUSTOMER does not meet 100% of the first quarter goal,
CUSTOMER can still achieve 100% of the semester goal provided that the semester
goal is met at the end of the six-month period.
CUSTOMER's Maintenance Rebate Program goals are as follows:
- Quarter 1 Goal (July - September, 1995): [ * ]
- Semester Goal (July - December, 1995): [ * ]
PAYMENT: CUSTOMER will be paid a Maintenance rebate based on performance
against the semester goal at the end of the semester. If CUSTOMER achieves
greater than eighty percent (80%) of the semester Maintenance rebate goal,
CUSTOMER will receive the exact achieved percentage of the eligible Maintenance
rebate up to one hundred percent (100%). If CUSTOMER achieves less than eighty
percent (80%) of the Maintenance rebate goal, CUSTOMER will not receive any
portion of the Maintenance 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 Maintenance goal.
Although Microsoft pays the rebate ultimately based on performance against the
semester goal, Microsoft pays a rebate at the end of the first quarter based on
performance against the first quarter goal. Microsoft pays a portion of the
rebate after the first quarter as an incentive for CUSTOMER to focus on the
Maintenance rebate program throughout the entire semester. The scale for the
first quarter payment is the same as the scale for the semester payment. The
first quarter payment amount will be subtracted from the final semester rebate
payment. However, if CUSTOMER does not meet the minimum attainment for the
semester goal, Microsoft will not seek reimbursement of the first quarter rebate
payment.
EXAMPLE:
GOALS:
- QUARTERLY MAINTENANCE GOAL OF 25% OF TOTAL SELECT REVENUE
- SEMESTER MAINTENANCE GOAL OF 25% OF TOTAL SELECT REVENUE
PERFORMANCE:
- ACTUAL MAINTENANCE REVENUE IS 23% OF TOTAL SELECT REVENUE AT THE END OF
THE QUARTER
- ACTUAL MAINTENANCE REVENUE IS 27% OF SELECT REVENUE AT THE END OF THE
SEMESTER
CUSTOMER'S MAINTENANCE REBATE PAYMENT WOULD BE AS FOLLOWS:
<TABLE>
<CAPTION>
PERCENTAGE
PERIOD GOAL ACHIEVED PAYMENT
- ---------------- --------- ------------- ------------------------------------------------------------------
<S> <C> <C> <C>
First Quarter 25% 23% 92% of [ * ] eligible rebate = [ * ] of July - September Select
Sales.
Semester 25% 27% 108% of [ * ] eligible rebate = [ * ] of July - December Select
Sales less first quarter payment. The maximum allowable
Maintenance rebate is [ * ].
</TABLE>
ENTERPRISE REBATE PROGRAM
PROGRAM OBJECTIVE: The objective of the Microsoft Enterprise Rebate Program is
to increase the Microsoft Enterprise revenue percentage of total Select revenue.
REBATE PERCENTAGES: The total possible rebate percentage achievable for the
Enterprise Rebate Program is [ * ] of Qualified Select Sales for the July -
December, 1995 semester.
* CONFIDENTIAL TREATMENT REQUESTED
MICROSOFT 1995/1996 CHANNEL AGREEMENT PAGE A6
LARGE ACCOUNT RESELLER REBATE ADDENDUM
JULY - DECEMBER, 1995
<PAGE>
GOAL DEFINITIONS: The program goals are based upon the following:
- Existing Enterprise revenue percentage of total Select revenue.
- Microsoft's Enterprise revenue goals.
REBATE GOALS: CUSTOMER's achievement against the Enterprise goal will be based
on CUSTOMER's Enterprise revenue percentage of CUSTOMER's total Select revenue.
CUSTOMER has a first quarter rebate goal and a total semester rebate goal.
CUSTOMER's performance for the first three months of the July - December, 1995
semester will be measured against the first quarter rebate goal. At the end of
the first quarter, CUSTOMER will receive the percentage of the eligible rebate
earned based on performance against the first quarter goal. At the end of the
semester, CUSTOMER will be measured on their six-month performance against the
total semester goal. Even if CUSTOMER does not meet 100% of the first quarter
goal, CUSTOMER can still achieve 100% of the semester goal provided that the
semester goal is met at the end of the six-month period.
CUSTOMER's Enterprise Rebate Program goals are as follows:
- Quarter 1 Goal (July - September, 1995): [ * ].
- Semester Goal (July - December, 1995): [ * ]
PAYMENT: CUSTOMER will be paid a Enterprise rebate based on performance against
the semester goal at the end of the semester. If CUSTOMER achieves greater than
eighty percent (80%) of the semester Enterprise rebate goal, CUSTOMER will
receive the exact achieved percentage of the eligible Enterprise rebate up to
one hundred percent (100%). If CUSTOMER achieves less than eighty percent (80%)
of the Enterprise rebate goal, CUSTOMER will not receive any portion of the
Enterprise 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 Enterprise goal.
Although Microsoft pays the rebate ultimately based on performance against the
semester goal, Microsoft also pays a rebate at the end of the first quarter
based on performance against the first quarter goal. Microsoft pays a portion of
the rebate after the first quarter as an incentive for CUSTOMER to focus on the
Enterprise rebate program throughout the entire semester. The scale for the
first quarter payment is the same as the scale for the semester payment. The
first quarter payment amount will be subtracted from the final semester rebate
payment. However, if CUSTOMER does not meet the minimum attainment for the
semester goal, Microsoft will not seek reimbursement of the first quarter rebate
payment.
EXAMPLE:
GOALS:
- QUARTERLY ENTERPRISE GOAL OF [ * ] OF TOTAL SELECT REVENUE
- SEMESTER ENTERPRISE GOAL OF [ * ] OF TOTAL SELECT REVENUE
PERFORMANCE:
- ACTUAL ENTERPRISE REVENUE IS [ * ] OF TOTAL SELECT REVENUE AT THE END OF
THE QUARTER
- ACTUAL ENTERPRISE REVENUE IS [ * ] OF SELECT REVENUE AT THE END OF THE
SEMESTER
* CONFIDENTIAL TREATMENT REQUESTED
MICROSOFT 1995/1996 CHANNEL AGREEMENT PAGE A7
LARGE ACCOUNT RESELLER REBATE ADDENDUM
JULY - DECEMBER, 1995
<PAGE>
CUSTOMER'S ENTERPRISE REBATE PAYMENT WOULD BE AS FOLLOWS:
<TABLE>
<CAPTION>
PERCENTAGE
PERIOD GOAL ACHIEVED PAYMENT
- ---------------- --------- ------------- ------------------------------------------------------------------
<S> <C> <C> <C>
First Quarter 35% 36% 103% of [ * ] eligible rebate = [ * ] of July - September Select
Sales.
Semester 35% 27% 77% of [ * ] eligible rebate does not qualify for any portion of
the Business Systems rebate. However the first quarter payment
will not be affected and Microsoft will not ask for reimbursement.
</TABLE>
* CONFIDENTIAL TREATMENT REQUESTED
MICROSOFT 1995/1996 CHANNEL AGREEMENT PAGE A8
LARGE ACCOUNT RESELLER REBATE ADDENDUM
JULY - DECEMBER, 1995
