UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 5, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______________ to ________________
Commission file number 0-20022
POMEROY COMPUTER RESOURCES, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 31-1227808
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1020 Petersburg Road, Hebron, Kentucky 41048
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (606) 586-0600
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
---------------------- --------------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01
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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 requirements
for the past 90 days.
YES X NO
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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 the 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. [ ]
The aggregate market value of voting stock of the Registrant held by non
affiliates was $182,747,000 as of March 11, 1999.
The number of shares outstanding of the Registrant's common stock as of March
11, 1999 was 11,718,934.
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POMEROY COMPUTER RESOURCES, INC.
FORM 10-K
YEAR ENDED JANUARY 5, 1999
TABLE OF CONTENTS
PART I Page
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Item 1. Business 1
Item 2. Properties 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters 7
Item 6. Selected Financial Data 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 8. Financial Statements and Supplementary Data 13
Item 9. Disagreements on Accounting and Financial 13
Disclosures
PART III
Item 10. Directors and Executive Officers of the Registrant 14
Item 11. Executive Compensation 16
Item 12. Security Ownership of Certain Beneficial Owners
and Management 23
Item 13. Certain Relationships and Transactions 24
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports
on Form 8-K 24
SIGNATURES Chief Executive Officer, Chief Financial Officer and
Chief Accounting Officer 40
Directors 40
Report of Independent
Certified Public Accountants F-1
Financial Statements F-2 to F-18
Exhibits
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SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
--------------------------------------------------------------
Certain of the matters discussed under the captions "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" may constitute forward-looking statements for purposes of the
Securities Act of 1933 and the Securities Exchange Act of 1934, as amended, and
as such may involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company
to be materially different from future results, performance or achievements
expressed or implied by such forward-looking statements. Important factors that
could cause the actual results, performance or achievements of the Company to
differ materially from the Company's expectations are disclosed in this document
and in documents incorporated herein by reference, including, without
limitation, those statements made in conjunction with the forward-looking
statements under "Business" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the factors discussed under
"Business - Certain Business Factors.". All written or oral forward-looking
statements attributable to the Company are expressly qualified in their entirety
by such factors.
PART I
ITEM 1. BUSINESS
Pomeroy Computer Resources, Inc. (the "Company") is a Delaware Corporation
organized in February 1992 to consolidate and reorganize predecessor companies.
All of the predecessor companies were controlled by David B. Pomeroy, the
Company's Chairman of the Board, President and Chief Executive Officer.
The Company's business is comprised of (1) the sale and leasing of a broad range
of desktop computer equipment including hardware, software, and related
products, and (2) the provision of information technology (IT) services which
support such computer products. Prior to January 6, 1999, the Company
(including its wholly-owned subsidiaries Global Combined Technologies, Inc.,
Pomeroy Computer Resources of South Carolina, Inc. and Technology Integration
Financial Services, Inc.) operated the IT products and services business as a
single integrated business. In December, 1998, the Company formed a new
subsidiary, Pomeroy Select Integration Solutions, Inc. ("Pomeroy Select"), for
the purpose of operating independently the IT services business previously
operated by the Company other than procurement and configuration services which
are directly related to the sale of products. On January 6, 1999, the Company
transferred the assets, liabilities, business, operations and personnel
comprising its IT services business (excluding procurement and configuration
services) in exchange for 10 million shares of Class B common stock of Pomeroy
Select. The separation of the IT services business is a part of the Company's
ongoing strategy to expand its services revenue.
The Company now operates in two industry segments -- products and services. The
products segment is primarily engaged in the sale, distribution, and leasing of
computers, hardware, software and related products. The Company offers products
from an array of manufacturers including Compaq, Hewlett-Packard, IBM,
Microsoft, Nortel Networks, Novell and 3Com. The services segment offers three
categories of services: life cycle services, internetworking services and
customer support services. Life cycle services include warranty and
non-warranty repair and maintenance; a full range of install, move, add or
change services; redeployment and mobile systems management; evaluation and
tracking of information technology assets; and end-of-life services.
Internetworking services include project management; network design,
integration, management, migration and support; and cabling services. Customer
support services include customized help desk services, Internet-based training
on many popular software packages and video/teleconferencing services.
The Company provides products and services primarily to large and medium sized
corporate, health care, governmental, financial and educational customers. See
Note 17 of Notes to Consolidated Financial Statements for a presentation of
segment information.
The Company's strategy for building shareholder value is to provide
comprehensive solutions to improve the productivity of its clients' information
technology systems. Key elements of the Company's strategy are: (1) to leverage
client relationships to continue expanding higher-margin services revenues, (2)
to maintain and enhance technical expertise by hiring and training highly
qualified technicians and systems engineers, and (3) to expand offerings and
geographic coverage through strategic acquisitions.
Page 1
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The Company is an authorized dealer or reseller for the products of over 35
major vendors. The Company believes that its access to major vendors enables it
to offer a wide range of products to meet the diverse requirements of its
customers. However, the increasing demand for microcomputers has resulted in
significant product supply shortages from time to time because manufacturers
have been unable to produce sufficient quantities of certain products to meet
demand. The Company has in the past and expects in the future to experience some
difficulty in obtaining an adequate supply of products from its major vendors
which has resulted, and may continue to result, in delays in completing sales.
These delays have not had, and are not anticipated to have, a material adverse
effect on the Company's results of operations. However, the failure to obtain
adequate product supply could have a material adverse effect on the Company's
results of operations.
The Company has entered into dealer agreements with its major
vendors/manufacturers. These agreements are typically subject to periodic
renewal and to termination on short notice. Substantially all of the Company's
dealer agreements may be terminated by the vendor without cause upon 30 to 90
days advance notice, or immediately upon the occurrence of certain events. A
vendor could also terminate an authorized dealer agreement for reasons unrelated
to the Company's performance. Although the Company has never lost a major
vendor/manufacturer, the loss of such a vendor/product line or the deterioration
of the Company's relationship with such a vendor/manufacturer would have a
material adverse effect on the Company.
The Company has been selected as a participant in the IBM channel assembly
program. Although this program has not generated significant revenues to date,
the Company does expect more significant revenues from this program during
fiscal 1999. The objective of channel assembly programs is to achieve cost
savings through lower finished goods inventory, higher inventory turns and lower
price protection requirements, while passing cost savings on to customers and
minimizing the direct marketers' pricing advantage.
The Company has also established relationships with industry leaders relating to
its services segment including the authorization to perform warranty and
non-warranty repair work. In some cases, the authorization of Pomeroy Select to
continue performing warranty work for a particular manufacturer's products is
dependent upon the performance of the Company under dealer agreement with that
manufacturer. The Company's technical personnel currently have an aggregate of
more than 200 Microsoft certifications, more than 300 Novell certifications, 33
Nortel Networks Specialist certifications, five Nortel Networks Expert
certifications, 17 IBM Professional Service Expert certifications, 19 Compaq
Accredited Systems Engineer certifications, 15 HP Network Technical Professional
certifications, nine Citrix Certified Administrator certifications, five Cisco
Internetworking Engineer certifications, four Computer Associates Certified
Unicenter Engineer certifications and various other certifications.
The Company's sales are generated primarily by its 253 person direct sales and
sales support personnel located in 30 regional offices in 14 states throughout
the Southeast and Midwest United States. The Company's business strategy is to
provide its customers with a complete package of advanced microcomputer
products, high level services and support, including designing and installing
systems, training system users, maintaining and repairing hardware and software
and brokering used equipment. The Company believes that its ability to combine
competitive pricing of computer hardware, software and related products with
higher margin sophisticated services and support allows it to compete
effectively against a variety of alternative microcomputer distribution
channels, including independent dealers, superstores, mail order and direct
sales by manufacturers. With many businesses seeking assistance to optimize
their information technology investments and control ongoing costs throughout
the life cycle of technology systems, the Company is using its resources to
assist customers in their decision-making, project implementation and equipment
management.
Most microcomputer products are sold pursuant to purchase orders. For larger
procurements, the Company may enter into written contracts with customers. These
contracts typically establish prices for certain equipment and services and
require short delivery dates for equipment and services ordered by the customer.
These contracts do not require the customer to purchase microcomputer products
or services exclusively from the Company and may be terminated without cause
upon 30 to 90 days' notice. Most contracts are for a term of 12 to 24 months
and, in order to be renewed, may require submission of a new bid in response to
the customer's request for proposal. As of January 5, 1999, the Company has been
awarded contracts which it estimates will result in an aggregate of
approximately $32.2 million of net sales and revenues in fiscal 1999.
Subsequent to January 5, 1999, the Company was awarded a contract which it
estimates will result in an aggregate of approximately $15.0 million of net
sales and revenues over a three year period. Of this amount, approximately
$19.0 million is expected to be generated in fiscal 1999. By comparison, as of
January 5, 1998, the Company had been awarded contracts which it estimated would
result in an aggregate of approximately $35.8 million of net sales and revenues
after January 5, 1998. Of this amount, the Company estimated that $29.5 million
of net sales and revenues would be generated during fiscal year 1998 and the
remainder would be generated after the end of fiscal year 1998. The estimates
of management could be materially less than stated as a result of factors which
would cause one or more of these customers to order less product or services
than is anticipated. Such factors include that the customer finds another
supplier for the desired products at a lower price or on better terms, the
internal business needs of the customer change causing the customer to require
less or different products and services, or a significant change in technology
or other industry conditions occurs which alters the customer's needs or timing
of purchases.
Page 2
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The Company generally provides its services to its customers on a
time-and-materials basis and pursuant to written contracts or purchase orders.
The Company's arrangements with its customers generally can be terminated by
either party with limited or no advance notice. The Company also provides some
of its services under fixed-price contracts rather than contracts billed on a
time-and-materials basis. Fixed-price contracts are used when the Company
believes it can clearly define the scope of services to be provided and the cost
of providing those services.
For fiscal years 1996, 1997 and 1998, sales of computer hardware, software, and
related products accounted for approximately 91.2%, 89.7% and 87.0%
respectively, of the consolidated net sales and revenues of the Company. The
Company's revenues from its service and support activities have grown over the
last several years. For fiscal years 1996, 1997 and 1998, revenues from service
and support activities were approximately $29.6 million, $50.5 million, and
$81.6 million respectively, and accounted for approximately 8.8%, 10.3%, and
13.0% respectively, of the consolidated net sales and revenues of the Company.
COMPETITION
The microcomputer products and services market is highly competitive.
Distribution has evolved from manufacturers selling through direct sales forces
to sales by manufacturers to aggregators (wholesalers), resellers and
value-added resellers. Competition, in particular the pressure on pricing, has
resulted in industry consolidation. In the future, the Company may face fewer
but larger competitors as a consequence of such consolidation. These competitors
may have access to greater financial resources than the Company. In response to
continuing competitive pressures, including specific price pressure from the
direct telemarketing and mail order distribution channels, the microcomputer
distribution channel is currently undergoing segmentation into value-added
resellers who emphasize advanced systems together with service and support for
business networks, as compared to computer "superstores," who offer retail
purchasers a relatively low cost, low service alternative and direct-mail
suppliers which offer low cost and limited service. Certain superstores have
expanded their marketing efforts to target segments of the Company's customer
base, which could have a material adverse impact on the Company's operations and
financial results. While price is an important competitive factor in the
Company's business, the Company believes that its sales are principally
dependent upon its service, technical expertise, reputation and experience. The
Company's principal competitive strengths include: (i) quality assurance; (ii)
service and technical support; (iii) lower pricing of products through
alternative distribution sources; (iv) prompt delivery of products to customers;
and (v) various financing alternatives.
The Company competes for product sales directly with local, national and
international distributors and resellers. In addition, the Company competes with
microcomputer manufacturers that sell their product through their own direct
sales forces and to distributors. Although the Company believes its prices and
delivery terms are competitive, certain competitors offer more aggressive
hardware pricing to their customers.
The Company's services segment competes, directly and indirectly, with a variety
of national and regional service providers, including services organizations of
established computer product manufacturers, value-added resellers, systems
integrators, internal corporate management information systems and, to a lesser
extent, consulting firms, aggregators and distributors. The Company believes
that the principal competitive factors for information technology services
include technical expertise, the availability of skilled technical personnel,
breadth of service offerings reputation, financial stability and price. To be
competitive, the Company must respond promptly and effectively to the challenges
of technological change, evolving standards and its competitor's innovations by
continuing to enhance its service offerings and expand its sales channels. Any
pricing pressures, reduced margins or loss of market share resulting from the
Company's failure to compete effectively could materially adversely affect its
business.
The Company believes its services segment competes successfully by providing a
comprehensive solution for its customers' information technology asset
management and networking services needs. The Company delivers cost-effective,
flexible, consistent, reliable and comprehensive solutions to meet customers'
information technology infrastructure service requirements. The Company also
believes that it distinguishes itself on the basis of its technical expertise,
competitive pricing and its ability to understand its customers' needs.
CERTAIN BUSINESS FACTORS
Page 3
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DEPENDENCE ON MAJOR CUSTOMERS
During fiscal 1998, approximately 30.2% of the Company's total net sales and
revenues were derived from its top 10 customers. No customer accounted for more
than 5.0% of the Company's total net sales and revenues in fiscal 1998.
In addition, no customer accounted for more than 5% of the net sales and
revenues for either the products or services segments in fiscal 1998.
RAPID GROWTH
The Company has grown rapidly both internally and through acquisitions, and the
Company intends to continue to pursue both types of growth opportunities as part
of its business strategy. There can be no assurance that the Company will be
successful in maintaining its rapid growth in the future. The Company expects
that more of its future growth will result from acquisitions. In fiscal 1998,
the Company completed several acquisitions and continues to evaluate expansion
and acquisition opportunities that would complement its ongoing operations.
There can be no assurance that the Company will be able to identify, acquire or
profitably manage additional companies or successfully integrate such additional
companies into the Company without substantial costs, delays or other problems.
In addition, there can be no assurance that companies acquired in the future
will be profitable at the time of their acquisition or will achieve levels of
profitability that justify the investment therein. Acquisitions may involve a
number of special risks, including, but not limited to, adverse short-term
effects on the Company's reported operating results, diversion of management's
attention, dependence on retaining, hiring and training key personnel, risks
associated with unanticipated problems or legal liabilities and amortization of
acquired intangible assets, some or all of which could have a material adverse
effect on the Company's operations and financial results.
VENDOR REBATES AND VOLUME DISCOUNTS
The Company's profitability has been favorably affected by its ability to obtain
rebates and volume discounts from manufacturers and through aggregators and
distributors. Any change in the level of rebates, volume discount schedules or
other marketing programs offered by manufacturers that results in the reduction
or elimination of rebates or discounts currently received by the Company could
have a material adverse effect on the Company's operations and financial
results. In particular, a reduction or elimination of rebates related to
government and educational customers could adversely affect the Company's
ability to serve those customers profitably.
MANUFACTURER MARKET DEVELOPMENT FUNDS
Several manufacturers offer market development funds, cooperative advertising
and other promotional programs to computer resellers such as the Company. The
Company utilizes these programs to fund some of its advertising and promotional
programs. The funds received from manufacturers are offset directly against the
expense, thereby reducing selling, general and administrative expenses and
increasing net income. While such programs have been available to the Company in
the past, there is no assurance that these programs will be continued. Any
discontinuance or material reduction of these programs could have an adverse
effect on the Company's operations and financial results.
MANAGEMENT INFORMATION SYSTEM
The Company relies upon the accuracy and proper utilization of its management
information system to provide timely distribution services, manage its inventory
and track its financial information. To manage its growth, the Company is
continually evaluating the adequacy of its existing systems and procedures
(including Year 2000 issues) and has recently implemented a new warehouse
management system and continues to integrate additional functions. The Company
anticipates that it will regularly need to make capital expenditures to upgrade
and modify its management information system, including software and hardware,
as the Company grows and the needs of its business change. There can be no
assurance that the Company will anticipate all of the demands which its
expanding operations will place on its management information system. The
occurrence of a significant system failure or the Company's failure to expand or
successfully implement its systems could have a material adverse effect on the
Company's operations and financial results.
In addition, the Company may realize exposure and risk if the systems, including
its management information system, on which it depends are not Year 2000
compliant. The Company also relies on the Year 2000 compliance of products of
third party manufacturers and developers. Potential areas of exposure include
the Year 2000 related failure of (1) the Company's internal systems, (2)
products or systems on which the Company has performed services and (3) systems
of third parties with whom the Company has a business relationship. If the
Company's present efforts to address the Year 2000 compliance issues are not
successful, or if the Company's suppliers, customers and other parties with whom
it conducts business do not successfully address such issues, the Company's
business, results of operations and financial condition could be materially and
adversely affected.
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DEPENDENCE ON TECHNICAL EMPLOYEES
The success of the Company's services business, in particular its network and
integration services, depends in large part upon the Company's ability to
attract and retain highly skilled technical employees in competitive labor
markets. There can be no assurance that the Company will be able to attract and
retain sufficient numbers of skilled technical employees. The loss of a
significant number of the Company's existing technical personnel or difficulty
in hiring or retaining technical personnel in the future could have a material
adverse effect on the Company's operations and financial results.
INVENTORY MANAGEMENT
The information technology industry is characterized by rapid product
improvement and technological change resulting in relatively short product life
cycles and rapid product obsolescence. While most of the inventory stocked by
the Company is for specific customer orders, inventory devaluation or
obsolescence could have a material adverse effect on the Company's operations
and financial results. Current industry practice among manufacturers is to
provide price protection intended to reduce the risk of inventory devaluation,
although such policies are subject to change at any time and there can be no
assurance that such price protection will be available to the Company in the
future. During fiscal 1998, many manufacturers reduced the number of days for
which they provided price protection. Also, the Company currently has the option
of returning inventory to certain manufacturers and distributors, subject to
certain limitations. The amount of inventory that can be returned to
manufacturers without a restocking fee varies under the Company's agreements and
such return policies may provide only limited protection against excess
inventory. There can be no assurance that new product developments will not have
a material adverse effect on the value of the Company's inventory or that the
Company will successfully manage its existing and future inventory. In addition,
the Company stocks parts inventory for its services business. Parts inventory is
more likely to experience a decrease in valuation as a result of technological
change and obsolescence and there are no price protection practices offered by
manufacturers with respect to parts.
DEPENDENCE ON KEY PERSONNEL
The success of the Company is dependent on the services of David B. Pomeroy, II,
its Chairman of the Board, President and Chief Executive Officer and other key
personnel. The Company maintains $1.0 million in key man life insurance insuring
the life of Mr. Pomeroy. The loss of the services of Mr. Pomeroy or other key
personnel could have a material adverse effect on the Company's business. The
Company has entered into employment agreements with certain of its key
personnel, including Mr. Pomeroy. The Company's success and plans for future
growth will also depend on its ability to attract and retain highly skilled
personnel in all areas of its business.
EMPLOYEES
As of January 5, 1999, the Company had 1,699 full-time employees consisting of
the following: 1,024 technical personnel; 253 direct sales representatives and
sales support personnel; 83 management personnel; and 339 administrative and
distribution personnel. The Company has no collective bargaining agreements and
believes its relations with its employees are good.
BACKLOG
The Company does not have a significant backlog of business since it normally
delivers and installs products purchased by its customers within 10 days from
the date of order. Accordingly, backlog is not material to the Company's
business or indicative of future sales. From time to time, the Company
experiences difficulty in obtaining products from its major vendors as a result
of general industry conditions. These delays have not had, and are not
anticipated to have, a material adverse effect on the Company's results of
operations.
PATENTS AND TRADEMARKS
The Company owns no trademarks or patents. Although the Company's various dealer
agreements do not generally allow the Company to use the trademarks and trade
names of these various manufacturers, the agreements do permit the Company to
refer to itself as an "authorized representative" or an "authorized service
provider" of the products of those manufacturers and to use their trademarks and
trade names for marketing purposes. The Company considers the use of these
trademarks and trade names in its marketing efforts to be important to its
business.
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ACQUISITIONS
Acquisitions have contributed significantly to the Company's growth. The Company
believes that acquisitions are one method of increasing its presence in existing
markets, expanding into new geographic markets, adding experienced service
personnel, gaining new product offerings and services, obtaining more
competitive pricing as a result of increased purchasing volumes of particular
products and improving operating efficiencies through economies of scale. In
recent years, there has been consolidation among providers of microcomputer
products and services and the Company believes that this consolidation will
continue, which, in turn, may present additional opportunities for the Company
to grow through acquisitions. The Company continually seeks to identify and
evaluate potential acquisition candidates. The Company is currently engaged in
preliminary discussions with potential acquisition candidates. Although it has
no binding commitments to acquire such candidates, management believes that the
Company may acquire one or more of these candidates in the future.
During fiscal 1998, the Company completed several acquisitions. The total
consideration given consisted of $21.2 million in cash, subordinated notes of
$3.3 million and 39,000 unregistered shares of the Company's common stock with
an approximate value of $0.8 million. Interest on the subordinated notes is
payable quarterly. Principal is payable in equal annual installments over a
period of two years.
ITEM 2. PROPERTIES
The Company's principal executive offices and distribution facility comprised of
approximately 36,000 and 111,000 square feet of space, respectively are located
in Hebron, Kentucky. These facilities are leased from Pomeroy Investments, LLC
("Pomeroy Investments"), a Kentucky limited liability company controlled by
David B. Pomeroy, II, Chief Executive Officer of the Company, under a ten year
triple-net lease agreement which expires in May 2006. The lease agreement
provides for 2 five year renewal options.
The Company also has noncancelable operating leases for its regional offices,
expiring at various dates between 1999 and 2006. The Company believes there will
be no difficulty in negotiating the renewal of its real property leases as they
expire or in finding other satisfactory space. In the opinion of management, the
properties are in good condition and repair and are adequate for the particular
operations for which they are used. The Company does not own any real property.
ITEM 3. LEGAL PROCEEDINGS
Various legal actions arising in the normal course of business have been brought
against the Company. Management believes these matters will not have a material
adverse effect on the Company's consolidated financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Page 6
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The following table sets forth, for the periods indicated, the high and low
sales price for the Common Stock for the quarters indicated as reported on the
NASDAQ National Market. The following prices have been adjusted to reflect the
three-for-two stock split in the form of a stock dividend effected on October 6,
1997.
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1997 1998
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High Low High Low
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First Quarter $25.33 $12.17 $25.25 $15.25
Second Quarter $19.17 $12.50 $27.75 $20.38
Third Quarter $29.17 $16.67 $28.31 $11.00
Fourth Quarter $31.25 $14.00 $22.63 $10.88
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As of March 11, 1999, there were approximately 330 holders of record of the
Company's common stock.
Dividends
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The Company has not paid any cash dividends since its organization and the
completion of its initial public offering. The Company has no plans to pay cash
dividends in the foreseeable future, and the payment of such dividends are
restricted under the Company's current borrowing agreement.
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ITEM 6. SELECTED FINANCIAL DATA
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SELECTED FINANCIAL DATA
(In thousands, except per share data)
For the Fiscal Years Ended January 5,
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1995(1) 1996 1997(2) 1998(3) 1999 (5,6)
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Consolidated Statement of Income Data:
Net sales and revenues. . . . . . . . . . . $144,575 $230,710 $336,358 $491,448 $ 627,928
Cost of sales and service . . . . . . . . . 120,901 197,174 281,753 410,063 517,506
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Gross profit. . . . . . . . . . . . . . . . 23,674 33,536 54,605 81,385 110,422
Operating expenses:
Selling, general and administrative . . . . 17,231 23,247 35,175 50,597 69,947
Depreciation and amortization . . . . . . . 886 1,004 2,561 3,940 5,377
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Total operating expenses. . . . . . . . . . 18,117 24,251 37,736 54,537 75,324
Income from operations. . . . . . . . . . . 5,557 9,285 16,869 26,848 35,098
Other expense (income):
Interest expense. . . . . . . . . . . . . . 1,031 1,999 2,170 974 2,670
Litigation settlement and related costs (4) - - 4,392 - -
Miscellaneous.. . . . . . . . . . . . . . . (57) (64) (221) 54 (140)
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Total other expense . . . . . . . . . . . . 974 1,935 6,341 1,028 2,530
Income before income taxes. . . . . . . . . 4,583 7,350 10,528 25,820 32,568
Income tax expense. . . . . . . . . . . . . 1,856 2,983 4,296 9,507 12,409
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Net income. . . . . . . . . . . . . . . . . $ 2,727 $ 4,367 $ 6,232 $ 16,313 $ 20,159
========= ========= ========= ========= ===========
Earnings per common share (diluted) . . . . $ 0.50 $ 0.73 $ 0.77 $ 1.44 $ 1.72
Consolidated Balance Sheet Data:
Working capital . . . . . . . . . . . . . . $ 6,556 $ 10,340 $ 27,203 $ 63,028 $ 71,364
Long-term debt, net of current maturities . 167 100 2,189 1,434 8,231
Equity. . . . . . . . . . . . . . . . . . . 13,130 19,200 46,593 88,777 112,989
Total assets. . . . . . . . . . . . . . . . 57,061 63,985 121,380 167,264 254,226
<FN>
1) During fiscal 1994, the Company acquired all of the outstanding stock of
Xenas Communications Corp.
2) During fiscal 1996, the Company acquired the assets of The Computer
Supply Store and Communication Technology, Inc. See Note 12 of Notes to
Consolidated Financial Statements.
3) During fiscal 1997, the Company acquired the assets of Magic Box, Micro
Care and The Computer Store. See Note 12 of Notes to Consolidated Financial
Statements.
4) Fiscal year 1996 reflects the Vanstar litigation settlement and related
costs of $4,392. Without this charge, net income would have been $8,845 and
diluted earnings per common share would have been $1.09.
5) During Fiscal 1998, the Company acquired the assets of Commercial
Business Systems, Access Technologies, Inc. and all of the outstanding stock of
Global Combined Technologies, Inc. See Note 12 of Notes to Consolidated
Financial Statements.
6) During the fourth quarter of fiscal 1998, the Company's results include
an after tax charge of $681 thousand ($0.06 per diluted share) related to the
uncollectibility of certain vendor warranty claims. Exclusive of this charge,
diluted earnings per share for fiscal 1998 would have been $1.78.
</TABLE>
Page 8
<PAGE>
QUARTERLY RESULTS OF OPERATIONS (in thousands, except per share data)
The following table sets forth certain unaudited operating results of each of
the eight prior quarters. This information is unaudited, but in the opinion of
management includes all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of the results of operations of such periods.
<TABLE>
<CAPTION>
Fiscal 1998
------------------------------------------------
First Second Third Fourth
Quarter (1) Quarter Quarter Quarter (2,3)
------------ -------- -------- --------------
<S> <C> <C> <C> <C>
Net sales and revenues . . $ 135,198 $158,843 $163,790 $ 170,097
Gross Profit . . . . . . . 23,232 27,270 29,515 30,405
Net income . . . . . . . . $ 4,277 $ 5,008 $ 5,393 $ 5,481
Earnings per common share:
Basic. . . . . . . . . . . $ 0.38 $ 0.44 $ 0.47 $ 0.48
Diluted. . . . . . . . . . $ 0.37 $ 0.42 $ 0.46 $ 0.47
Fiscal 1997
--------------------------------------------------
First Second Third Fourth
Quarter Quarter (4) Quarter (5) Quarter (6)
-------- ------------ ------------ ------------
Net sales and revenues . . $100,366 $ 118,218 $ 130,729 $ 142,135
Gross Profit . . . . . . . 16,904 19,135 21,533 23,813
Net income . . . . . . . . $ 2,958 $ 3,969 $ 4,540 $ 4,846
Earnings per common share:
Basic. . . . . . . . . . . $ 0.29 $ 0.35 $ 0.40 $ 0.43
Diluted. . . . . . . . . . $ 0.28 $ 0.34 $ 0.39 $ 0.41
<FN>
1) During the first quarter of fiscal 1998, the Company acquired certain
assets of Commercial Business Systems and all of the outstanding stock of Global
Combined Technologies, Inc. See Note 12 of Notes to Consolidated Financial
Statements.
2) During the fourth quarter of fiscal 1998, the Company acquired certain
assets of Access Technologies, Inc. See Note 12 of Notes to Consolidated
Financial Statements.
3) During the fourth quarter of fiscal 1998, the Company's results include
an after tax charge of $681 thousand ($0.06 per diluted share) related to the
uncollectibility of certain vendor warranty claims. Exclusive of this charge,
basic earnings per share and diluted earnings per share in the fourth quarter
would have been $0.54 and $0.53, respectively.
4) During the second quarter of fiscal 1997, the Company acquired
substantially all of the assets of Magic Box. See Note 12 of Notes to
Consolidated Financial Statements.
5) During the third quarter of fiscal 1997, the Company acquired certain
assets of Micro Care. See Note 12 of Notes to Consolidated Financial Statements.
6) During the fourth quarter of fiscal 1997, the Company acquired the
Computer Store, Inc. See Note 12 of Notes to Consolidated Financial Statements.
</TABLE>
Page 9
<PAGE>
ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FISCAL YEAR 1998 COMPARED TO FISCAL YEAR 1997
Total Net Sales and Revenues. Total net sales and revenues increased
$136.5 million, or 27.8%, to $627.9 million in fiscal 1998 from $491.4 million
in fiscal 1997. This increase was attributable to an increase in sales to
existing and new customers and to acquisitions completed in fiscal years 1998
and 1997. Excluding acquisitions completed in fiscal years 1998 and 1997, total
net sales and revenues increased 9.7%.
Products sales increased $105.5 million, or 23.9%, to $546.4 million in
fiscal 1998 from $440.9 million in fiscal 1997. On a comparable basis, as
described above, products sales increased 5.2%. Services revenues increased
$31.1 million, or 61.6%, to $81.6 million in fiscal 1998 from $50.5 million in
fiscal 1997. On a comparable basis, as described above, service revenues
increased 49.3%. Services revenues include all of the IT services transferred
to Pomeroy Select on January 6, 1999 plus the configuration services retained by
the Company.
Gross Profit. Gross profit margin was 17.6% in fiscal 1998 compared to
16.6% in fiscal 1997. The Company improved its gross margin by increasing the
volume of higher-margin services revenues which offset a decrease in products
gross margins, the growth in products sales and the write-off of $1.1 million of
vendor receivables related to parts returned and warranty work performed prior
to fiscal 1998. Services revenues increased to 13.0% of total net sales and
revenues in fiscal 1998 compared to 10.3% of total net sales and revenues in
fiscal 1997. The write-offs were primarily due to internal reporting and
tracking problems. Prior to fiscal 1998, the Company's tracking and control of
reimbursements due from vendors was performed manually. The Company's ability to
organize and retain the support documentation for warranty claims, as well as
its collection efforts, was hindered due to the manual nature of the reporting
and tracking processes. Beginning in January 1998, the Company automated its
processes for recording and tracking warranty claims, substantially reducing the
tracking and follow up issues which existed under the manual system. As a result
of the changes to these processes, the Company anticipates that the write-offs
pertaining to vendor receivables as a percentage of total vendor receivables
will decrease in the future. Factors that may have an impact on gross margin in
the future include the percentage of equipment sales with lower-margin customers
and the ratio of service revenues to total net sales and revenues.
Operating Expenses. Selling, general and administrative expenses
(including rent expense and provision for doubtful accounts) expressed as a
percentage of total net sales and revenues increased to 11.1% in fiscal 1998
from 10.3% for fiscal 1997. This increase is primarily attributable to the
investment made in technical personnel during the first nine months of fiscal
1998 to generate the increase in service revenues. This trend declined during
the fourth quarter of fiscal 1998 as the Company achieved greater billable
personnel utilization. Total operating expenses expressed as a percentage of
total net sales and revenues increased to 12.0% in fiscal 1998 from 11.1% in
fiscal 1997 due to the factor described above.
Income from Operations. Income from operations increased $8.3 million, or
31.0%, to $35.1 million in fiscal 1998 from $26.8 million in fiscal 1997. The
Company's operating margin increased to 5.6% in fiscal 1998 from 5.5% in fiscal
1997 as the increase in gross profit margin offset the increase in operating
expenses as a percentage of total net sales and revenues.
Interest Expense. Total interest expense increased $1.7 million, or
170.0%, to $2.7 million in fiscal 1998 from $1.0 million in fiscal 1997. This
increase is primarily related to higher average borrowings during fiscal 1998 as
a result of higher working capital requirements.
Income Taxes. The Company's effective tax rate was 38.1% in fiscal 1998
compared to 36.8% in fiscal 1997. This increase is the result of an increase
in taxable income in states which have higher tax rates.
Net Income. Net income increased $3.9 million, or 23.9%, to $20.2 million
in fiscal 1998 from $16.3 million in fiscal 1997. The increase was a result of
the factors described above.
FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996
Total Net Sales and Revenues. Total net sales and revenues increased
$155.0 million, or 46.1%, to $491.4 million in fiscal 1997 from $336.4 million
in fiscal 1996. This increase was attributable to an increase in sales to
existing and new customers and to acquisitions completed in fiscal years 1997
and 1996. Excluding acquisitions completed in fiscal years 1997 and 1996, total
net sales and revenues increased 35.8%.
Page 10
<PAGE>
Sales of equipment and supplies increased $134.2 million, or 43.8%, to
$440.9 million in fiscal 1997 from $306.7 million in fiscal 1996. On a
comparable basis, as described above, sales of equipment and supplies increased
33.9%. Service and other revenues increased $20.8 million, or 70.0%, to $50.5
million in fiscal 1997 from $29.7 million in fiscal 1996. On a comparable basis,
as described above, service revenues increased 55.3%.
Gross Profit. Gross profit margin was 16.6% in fiscal 1997 compared to
16.2% in fiscal 1996. The Company improved its gross margin by increasing the
volume of higher-margin service revenues which offset a decrease in hardware
gross margins and the growth in equipment sales. Service and other revenues
increased to 10.3% of total net sales and revenues in fiscal 1997 compared to
8.8% of total net sales and revenues in fiscal 1996. Factors that may have an
impact on gross margin in the future include the percentage of equipment sales
with lower-margin customers and the ratio of service revenues to total net sales
and revenues.
Operating Expenses. Selling, general and administrative expenses
(including rent expense and provision for doubtful accounts) expressed as a
percentage of total net sales and revenues decreased to 10.3% in fiscal 1997
from 10.5% for fiscal 1996. This decrease is primarily attributable to the
increased productivity of technical personnel which contributed to the growth of
the Company's service business. Total operating expenses expressed as a
percentage of total net sales and revenues decreased to 11.1% in fiscal 1997
from 11.2% in fiscal 1996 due to the factor described above.
Income from Operations. Income from operations increased $9.9 million, or
58.6 %, to $26.8 million in fiscal 1997 from $16.9 million in fiscal 1996. The
Company's operating margin increased to 5.5% in fiscal 1997 from 5.0% in fiscal
1996 because of the increase in gross margin and the decrease in operating
expenses as a percentage of total net sales and revenues.
Interest Expense. Total interest expense decreased $1.2 million or 54.5%,
to $1.0 million in fiscal 1997 from $2.2 million in fiscal 1996. This decrease
is primarily related to lower average borrowings during fiscal 1997 as a result
of the secondary public offering in February 1997.
Income Taxes. The Company's effective tax rate was 36.8% in fiscal 1997
compared to 40.8% in fiscal 1996. This reduction is the result of Kentucky state
income tax credits earned in fiscal 1997.
Net Income. Net income increased $10.1 million, or 162.9%, to $16.3
million in fiscal 1997 from $6.2 million in fiscal 1996. The increase was a
result of the factors described above. Net income, excluding the impact of the
Vanstar settlement in fiscal 1996, increased $7.5 million, or 85.2%, in fiscal
1997 compared with $8.8 million in fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Cash provided by operating activities was $3.5 million in fiscal 1998. Cash
used in investing activities included $21.2 million for acquisitions and $3.2
million for capital expenditures. Cash provided by financing activities included
$16.3 million of net proceeds from bank notes payable, $7.0 million of proceeds
under notes payable, $3.4 million from the exercise of stock options less $2.1
million of repayments on various notes payable.
A significant part of the Company's inventories is financed by floor plan
arrangements with third parties. At January 5, 1999, these lines of credit
totaled $72.0 million, including $60.0 million with Deutsche Financial Services
("DFS") and $12.0 million with IBM Credit Corporation ("ICC"). Borrowings under
the DFS and ICC floor plan arrangements are made on thirty day notes. All such
borrowings are secured by the related inventory. Financing on substantially all
of the arrangements is interest free due to subsidies by manufacturers. Overall,
the average rate on these arrangements is less than 1.0%. The Company classifies
amounts outstanding under the floor plan arrangements as accounts payable.
The Company's financing of receivables is provided through a portion of its
credit facility with DFS which was finalized on July 14, 1998. The credit
facility provides a credit line of $60.0 million for accounts receivable
financing. The accounts receivable portion of the credit facility carries a
variable interest rate based on the prime rate less 125 basis points. At January
5, 1999, the amount outstanding was $39.6 million, including $12.6 million of
overdrafts on the Company's books in accounts at a participant bank on the
credit facility, which was at an interest rate of 6.5%. The overdrafts were
subsequently funded through the normal course of business. The credit facility
is collateralized by substantially all of the assets of the Company, except
those assets that collateralize certain other financing arrangements. Under the
terms of the credit facility, the Company is subject to various financial
covenants.
Page 11
<PAGE>
During fiscal 1998, the Company increased the leasing activity through its
wholly-owned leasing subsidiary, Technology Integration Financial Services, Inc.
("TIFS"). Through TIFS, the Company provides its customers with leasing
alternatives for the Company's products and services. The impact of this
increased leasing activity for fiscal 1998 was not material. However, further
increases in leasing operations could impact one or more of total net sales and
revenues, gross margin, operating income, net income, total debt and liquidity,
depending on the amount of leasing activity and the types of leasing
transactions. The funding of the Company's net investment in sales-type leases
is provided by various financial institutions primarily on a nonrecourse basis.
The Company believes that the anticipated cash flow from operations and
current financing arrangements will be sufficient to satisfy the Company's
capital requirements for the next twelve months. Historically, the Company has
financed acquisitions using a combination of cash, shares of its Common Stock
and seller financing. The Company anticipates that any future acquisitions will
be financed in a similar manner.
OTHER
Year 2000 Issues
Background. The following is a discussion of the Year 2000 date issue
("Year 2000 issue") as it affects the Company. Many computer programs and
embedded chips in other forms of technology use only the last two digits to
identify a year in a date field. As a result of this design decision, some of
these systems could fail to operate or fail to produce correct results if "00"
is interpreted to mean 1900, rather than 2000. These problems are widely
expected to increase in frequency and severity as the year 2000 approaches.
Assessment. The Company currently believes its potential exposure to
problems arising from the Year 2000 issue lies primarily in three areas:
(1) The Company's internal operating systems which may not be Year 2000
compliant;
(2) Potential Year 2000 non-compliance of systems of third parties with
whom the Company has a business relationship; and,
(3) Non-compliance of information technology products developed by third
parties on which the Company performs services.
The Company has completed an assessment of its principal internal systems.
However, it continues to assess its Year 2000 exposure with respect to third
parties. While the cost of these assessment efforts is not expected to be
material to the Company's financial position or results of operations, there is
no assurance that this will be the case.
Internal Operating Systems. The Company is dependent upon management
information systems for all phases of its operations and financial reporting.
The Company began addressing the affect of the Year 2000 issue in 1996. The
Company has acquired Year 2000 compliant versions for all of its principal
systems and modules. The Company is in the process of testing the Year 2000
compliant versions of all hardware and software components and applications
pertaining to its internal operating systems upon which the Company relies.
There may be some non-critical applications that are not Year 2000 compliant.
Third-Party Relationships. The failure of a supplier to deliver timely
Year 2000 compliant products to our customers could jeopardize the Company's
ability to meet obligations to customers. In addition, we may be liable for Year
2000 non-compliance of information technology products on which the Company
performs services. The Company is conducting a program to identify and resolve
Year 2000 exposure from third parties. Any failure of third parties with whom
the Company has a business relationship to resolve Year 2000 problems with their
products in a timely manner could materially adversely affect our business,
financial condition or results of operations. The Company is also dependent on
third party service providers, such as telephone companies, banks and insurance
carriers. The Company is not aware of any significant Year 2000 exposure,
however, we have not inquired or implemented any program to assure Year 2000
compliance by them.
State of Readiness. The Company estimates that it will complete its
testing of its principal information technology systems by the beginning of the
second quarter of fiscal 1999. Upon completion of the testing of the Year 2000
versions of its principal systems, the Company will convert all operations to
the Year 2000 compliant system, which is estimated to be operational during the
third quarter of fiscal 1999.
Costs to Address Year 2000 Issues. Other than time spent by the
Company's own personnel, the Company has not incurred any significant costs in
identifying Year 2000 issues. The Company does not anticipate any significant
costs to make its internal systems Year 2000 compliant because no remediation is
expected to be required. Accordingly, the Company has not deferred other
information technology projects due to Year 2000 efforts.
Page 12
<PAGE>
Risks of Year 2000 Issues. The Company believes the most
reasonably likely worst case Year 2000 scenario would include a combination of
some or all of the following:
(1) Internal IT modules or systems may fail to operate or may give
erroneous information. Such failure could result in shipping delays, reduced
utilization of technical personnel, inability to timely generate financial
reports and statements, inability of the Company to communicate with its branch
offices, and computer network downtime resulting in numerous inefficiencies and
higher payroll expenses.
(2) Non-IT components in HVAC, lighting, telephone, security and similar
systems might fail and cause the entire system to fail.
(3) Communications with customers that depend upon IT or non-IT
technology, such as EDI (including automatic ordering by and for customers), and
obtaining current pricing from vendors, may fail or give erroneous information.
These types of problems could result in such difficulties as the inability to
receive or process customer orders, shipping delays, or sale of products at
erroneous prices.
(4) The unavailability of product as a result of Year 2000 problems
experienced by one or more key vendors of the Company, or as a result of changes
in inventory levels of aggregators, VARs and similar providers in response to an
anticipated Year 2000 problem or the inability of the Company to develop
alternative sources for products.
(5) Products sold to some of the Company's customers could fail to
perform some or all of their intended functions. In such a situation, the
Company's maximum obligation would be to repair or replace the defective
products to the extent the Company is required to do so under manufacturer
warranty.
Contingency Plans. The Company believes its plans for addressing the
Year 2000 issue are adequate. The Company does not believe it will incur a
material financial impact from system failures, or from the costs associated
with assessing the risks of failure, arising from Year 2000 problems.
Consequently, the Company does not intend to create a detailed contingency plan.
In the event the Company does not adequately identify and resolve Year 2000
issues, the absence of a detailed contingency plan may adversely affect its
business, financial condition and results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Registrant hereby incorporates the financial statements required by this item by
reference to Item 14 hereof.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
Page 13
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information with respect to each person
who is a director or executive officer of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------- --- ------------------------------------------------------------
<S> <C> <C>
David B. Pomeroy, II 49 Chairman of the Board, President and Chief Executive Officer
Stephen E. Pomeroy 30 Director, Chief Financial Officer and Treasurer
James C. Eck 50 Vice President of Sales
Victor Eilau 40 President, Technology Integration Financial Services, Inc.
Richard C. Mills 43 Director, Chief Operating Officer
James H. Smith, III 48 Director
David W. Rosenthal 47 Director
Michael E. Rohrkemper 52 Director
Kenneth R. Waters 47 Director
William Lomicka 62 Director
</TABLE>
David B. Pomeroy, II was a founder of the first of the Company's
predecessor businesses ("the Pomeroy Companies") in 1981. Mr. Pomeroy controlled
the Pomeroy Companies until their reorganization into Pomeroy Computer Resources
in 1992 and has served as Chairman of the Board, President and Chief Executive
Officer since 1992.
Stephen E. Pomeroy was named a Director and Secretary and Treasurer in
February, 1998, and Chief Financial Officer in May 1997. Mr. Pomeroy was the
Vice President of Marketing and Corporate Development from September 1996 to May
1997. Prior to that time, Mr. Pomeroy was the Director of New Market Development
of the Company from 1994 to September 1996 and Account Executive from 1991 to
1994. From 1985 to 1991, Mr. Pomeroy was employed by the Company on a part-time
basis. In December 1998, Mr. Pomeroy was named President and Chief Executive
Officer of Pomeroy Select Integration Solutions, Inc. (a wholly-owned
subsidiary of the Company).
Richard C. Mills was named a Director in February 1998 and Chief Operating
Officer in May 1997. Mr. Mills joined the Company in January 1993 and was Vice
President of Operations from July 1993 to May 1997. Prior to that time, Mr.
Mills was the founder and president of The Computer Store of Kentucky, Inc., a
Louisville-based retailer of computer products. Mr. Mills resigned as Chief
Operating Officer effective March 1, 1999.
James C. Eck joined the Company in September 1995 and was made Vice
President of Sales effective February 1996. From 1983 until 1995, Mr. Eck was
employed by Canon USA Incorporated, a New York-based manufacturer of digital and
analog office equipment, and served as the director and general manager of the
National Accounts Division Office Equipment Group for Canon since 1991.
Victor Eilau joined the Company in July 1997 and was made President of
Technology Integration Financial Services, Inc. (a wholly-owned subsidiary of
the Company). For the previous five years Mr. Eilau was a Vice President of
Comdisco, Inc.
James H. Smith, III has been a Director of the Company since April 1992.
Mr. Smith is a shareholder in the law firm of Lindhorst & Dreidame Co., L.P.A.,
Cincinnati, Ohio, where he has practiced law since 1979. Lindhorst & Dreidame
acts as outside general counsel to the Company.
Page 14
<PAGE>
Dr. David W. Rosenthal has been a Director of the Company since April 1992.
Dr. Rosenthal is a Professor of Marketing at Miami University, Oxford, Ohio, a
position he has held for more than the last five years. Dr. Rosenthal has also
served as a consultant with Stratvertise, a marketing research and strategic
consulting firm since 1975.
Michael E. Rohrkemper has been a Director of the Company since July 1993.
Mr. Rohrkemper is a certified public accountant and has been a partner in the
accounting firm of Rohrkemper and Ossege Ltd. since January 1991.
Kenneth E. Waters has been a Director of the Company since April 1997 and
provides consulting services to the Company. Mr. Waters has worked in the
computer industry since 1977. Most recently, he has been an industry
consultant, serving as such from February 1995 until present as well as from
April 1993 to August 1993 and January 1991 to August 1992. From September 1993
to January 1995, Mr. Waters was the President of Micro, Inc., a computer
reseller. From September 1992, to March 1993, Mr. Waters was the President and
CEO of Power Up Software, a software manufacturer. From July 1978 to September
1988, Mr. Waters was employed by Vanstar (then known as ComputerLand), holding
various management positions, with his last position being CEO. Mr. Waters was
also a Director of Vanstar from September 1987 to July 1989. Mr. Waters
resigned as a Director effective January 5, 1999.
William H. Lomicka was elected to the Board of Directors effective January
7, 1999. Mr. Lomicka is president of Mayfair Capital, Inc., a private
investment firm, a position he has held since 1989.
Stephen E. Pomeroy is the son of David B. Pomeroy, II. There are no other
family relationships among the Company's directors and executive officers.
BOARD OF DIRECTORS
There were four meetings of the Board of Directors in 1998. Each member of
the Board of Directors attended at least seventy-five percent (75%) of the
aggregate of the total number of meetings of the Board and committees on which
he served.
Committees of the Board of Directors
------------------------------------
The Company has a standing audit committee, which held two meetings during
1998, composed of two non-employee directors, Messrs. Smith and Rohrkemper, and
Mr. Pomeroy, Chairman of the Board, President and Chief Executive Officer. The
audit committee consults with the independent auditors regarding their
examination of the financial statements of the Company and regarding the
adequacy of internal controls. It reports to the Board of Directors on these
matters and recommends the independent auditors to be designated for the ensuing
year.
The Company has a standing compensation committee, which held one meeting
during 1998, composed of three non-employee directors, Messrs. Smith, Rohrkemper
and Waters, and Mr. Pomeroy. This committee reviews the compensation paid by the
Company and makes recommendations on these matters to the Board of Directors.
Mr. Waters resigned from the Board effective January 5, 1999 and his position as
a compensation committee member has not been replaced.
The Company has a standing stock option committee, which held one meeting
during 1998, consisting of Messrs. Rosenthal, Rohrkemper and Smith. This
committee administers the 1992 Non-Qualified and Incentive Stock Option Plan.
Section 16(a) Beneficial Ownership Reporting Compliance
-------------------------------------------------------
During fiscal 1998, Mr. Stephen E. Pomeroy, Chief Financial Officer for Pomeroy
Computer Resources, Inc. failed to file one Form 4 with respect to the grant of
25,000 options to purchase shares of the Common Stock of the Company in August
1998. This transaction was subsequently reported on a Form 5 for December 1998.
During fiscal 1998, Mr. Richard C. Mills, Chief Operating Officer for Pomeroy
Computer Resources, Inc. failed to file one Form 4 with respect to the grant of
25,000 options to purchase shares of Common Stock of the Company in August 1998.
Page 15
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
----------------------------------------------
The following table is a summary for the fiscal years 1996, 1997 and 1998
of certain information concerning the compensation paid or accrued by the
Company to the Chief Executive Officer and to each person who at any time during
1998 was an executive officer of the Company and whose aggregate salary and
bonus exceeded $100,000 (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Annual Compensation Compensation Awards
------------------------------------- -------------------
Name and Principal Other Annual Stock Options
Position Year Salary (1) Bonus Compensation # (2)
- ----------------------- ---- ----------- -------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
David B. Pomeroy 1998 $ 475,000 - (3) - 25,000 (4)
CEO . . . . . . . . . . 1997 $ 395,000 $720,000 - 25,000
1996 $ 395,000 $499,845 - 56,250
Richard C. Mills. . . . 1998 $ 250,000 $ 7,500 $ 98,953 (5) 30,000
Chief Operating Officer 1997 $ 185,000 $ 14,000 $ 61,833 (5) 35,000
1996 $ 156,967 $ 10,000 $ 56,220 (5) 54,000
Stephen E. Pomeroy. . . 1998 $ 125,000 $ 52,000 $ 38,504 (6) 45,000
CFO . . . . . . . . . . 1997 $ 115,000 $ 41,324 $ 18,500 (6) 30,000
1996 $ 100,000 $100,000 $ 21,762 (6) 29,250
James C. Eck. . . . . . 1998 $ 192,500 $ 16,000 $ 35,668 (7) 5,000
Vice President of . . . 1997 $ 175,000 $ 34,400 $ 31,067 (7) 10,000
Sales . . . . . . . . . 1996 $ 150,000 $ 75,000 $ 17,400 (7) -
Victor Eilau. . . . . . 1998 $ 294,665 $ 46,934 - 10,000
President, Technology . 1997 $ 124,800 $ 50,000 - 15,000
Integration Financial
Services, Inc.
<FN>
(1) Includes amounts deferred at the direction of the executive officer
pursuant to the Company's 401(k) Retirement Plan.
(2) Unless otherwise noted, all stock options are awarded based on the fair
market value of the Company's common stock at the time of grant.
(3) Excludes $300,000 of incentive cash bonus that was forgone.
(4) Does not include options that were granted to Mr. Pomeroy after fiscal
1998.
(5) Includes commission of $37,616, $20,500 and $48,220 in 1998, 1997 and
1996, respectively. Includes accruals pursuant to deferred compensation
agreements of $61,337, $41,333 and $8,000 in 1998, 1997 and 1996,
respectively.
(6) Represents amounts accrued pursuant to deferred compensation agreements.
(7) Includes commissions of $19,000, $14,400 and $17,400 in 1998, 1997 and
1996, respectively. Includes amounts accrued pursuant to deferred
compensation agreements of $16,668 and $16,667 in 1998 and 1997,
respectively.
</TABLE>
Page 16
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning the grant of
options to purchase Common Stock to any of the Named Executive Officers during
fiscal year 1998.
<TABLE>
<CAPTION>
Individual Grants
- -----------------------------------------------------------------------------------------
Potential Realizable Value
No. of Shares of Percent of Total at Assumed Annual
Common Stock Options Granted to Exercise or Rates of Stock Price
Underlying Options Employees Base Price Expiration Appreciation for Option Term
----------------------------
Name Granted in Fiscal Year ($/Sh) Date 5% 10%
- -------------------- ------------------- ------------------- ------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
David B. Pomeroy, II 25,000 (1) 16.78% $ 17.50 01/06/03 $ 121,000 $ 267,000
Richard C. Mills . . 5,000 3.36% $ 17.50 01/06/00 $ 9,000 $ 18,000
25,000 16.78% $ 16.00 08/21/00 $ 41,000 $ 84,000
Stephen E. Pomeroy . 20,000 13.43% $ 17.50 01/06/00 $ 36,000 $ 74,000
25,000 16.78% $ 16.00 08/21/00 $ 41,000 $ 84,000
James C. Eck . . . . 5,000 3.36% $ 17.50 01/06/00 $ 9,000 $ 18,000
Victor Eilau . . . . 5,000 3.36% $ 17.50 01/06/00 $ 9,000 $ 18,000
5,000 3.36% $ 25.06 07/06/00 $ 13,000 $ 26,000
<FN>
(1) Does not include options that were granted to Mr. Pomeroy after fiscal
1998.
</TABLE>
AGGREGATE STOCK OPTION EXERCISES IN YEAR ENDED JANUARY 5, 1999
AND YEAR-END STOCK OPTION VALUES
The following table sets forth information concerning aggregated option
exercises in fiscal year 1998 and the number and value of unexercised options
held by each of the Named Executive Officers at January 5, 1999.
<TABLE>
<CAPTION>
NO. OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS AT JANUARY 5, 1999 VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
JANUARY 5, 1999 JANUARY 5, 1999
SHARES (#) ($)
--------------------------- -------------------------
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- -------------------- --------------- ------------- --------------------------- -------------------------
<S> <C> <C> <C> <C>
David B. Pomeroy, II 20,000 $ 318,245 123,375 / 0 $ 1,488,000 / $0
Richard C. Mills . . 120,866 $ 2,106,540 65,000 / 0 $ 368,000 / $0
Stephen E. Pomeroy . - $ - 116,625 / 0 $ 1,136,000 / $0
James C. Eck . . . . - $ - 15,000 / 0 $ 77,000 / $0
Victor Eilau . . . . - $ - 25,000 / 0 $ 92,000 / $0
</TABLE>
Page 17
<PAGE>
Submitted by Board of Directors
COMPENSATION OF THE BOARD OF DIRECTORS
Each director who is not an employee of the Company, except for Messrs.
Smith and Waters, receives a quarterly retainer of Two Thousand Dollars ($2,000)
plus Five Hundred Dollars ($500) for each Board of Directors meeting attended
(including as part of each such meeting any committee meetings held on the same
date), and Five Hundred Dollars ($500) for any committee meetings attended which
were not held on the same date as a Board of Directors meeting. Beginning with
the fourth quarter of fiscal 1993, the amount earned by such directors is
automatically deposited by the Company, on a quarterly basis, into a broker
account established for each such Director unless the Director requests receipt
of the cash instead. The broker is directed to utilize the funds deposited for
each Director to purchase shares of Common Stock of the Company on the open
market. Mr. Smith's law firm, Lindhorst & Dreidame Co., L.P.A., is compensated
for his time in attendance at Directors' Meetings based on his hourly rate. Mr.
Waters is paid a monthly consulting fee of $1,500 in lieu of the quarterly
retainer and the fee for meetings attended and for providing consulting.
EMPLOYMENT AGREEMENTS
David B. Pomeroy, II, the Chairman of the Board and Chief Executive Officer
of the Company, has an employment agreement with the Company for a term of three
years, which is extended on a daily basis resulting in a perpetual three year
term.
Effective January 6, 1998, Mr. Pomeroy entered into a Seventh Amendment to
the Employment Agreement with the Company (the "Seventh Amendment"). Mr.
Pomeroy's compensation under the Seventh Amendment consisted of a base salary
of $475,000 for fiscal 1998 and each subsequent fiscal year unless modified by
the Compensation Committee. Under the Seventh Amendment Mr. Pomeroy was entitled
to a cash bonus of up to a maximum of $400,000 and up to a maximum of 75,000
non-qualified stock options in fiscal 1998 based upon the Company's operating
income. Mr. Pomeroy has forgone a fiscal 1998 incentive cash bonus of $300,000.
Mr. Pomeroy may also be paid a discretionary bonus under any compensation,
benefit or management incentive plan. Fifty percent of any discretionary bonus
would be paid in cash and fifty percent would be treated as incentive
deferred compensation.
Under the amended Employment Agreement, the Company has agreed to pay all
premiums for a term life insurance policy with a death benefit equal to
$3,000,000 insuring the life of Mr. Pomeroy. The owner and beneficiary of this
term life insurance policy is a trust established by Mr. Pomeroy. The Company
and the trust entered into a split dollar arrangement whereunder the Company
will pay all premiums on a whole life insurance policy with a death benefit
equal to $2,000,000 insuring the life of Mr. Pomeroy, less the reportable
economic benefit to the trust.
Under the Seventh Amendment Mr. Pomeroy was granted an option to acquire
25,000 shares of Common Stock at a per share price equal to the fair market
value of a share of Common Stock on January 3, 1997. In addition, the Company
agreed to pay Mr. Pomeroy $5,000 per month during the term of the Agreement, for
the business use of real estate owned by Mr. Pomeroy in Arizona. In the event of
a change of control (as defined in the Agreement), the Company is required to
provide Mr. Pomeroy with 100 hours of flight time on a private air carrier for
business use per year for the term of the agreement. Currently the cost of one
hour of flight time ranges from $1,400 to $2,300 depending on various factors.
Mr. Mills has an employment agreement with the Company effective January 1,
1993. The term of Mr. Mills' agreement is three years and is extended annually
for additional one-year periods unless either party gives 60 days written notice
of termination. The agreement provides for a stated base salary, which was
$250,000 in fiscal 1998, and a discretionary bonus to be determined by the Board
of Directors. Effective March 1, 1999, Mr. Mills resigned as Chief Operating
Officer and his employment agreement was terminated as of that date by the
agreement of the parties.
Mr. Stephen E. Pomeroy's employment agreement with the Company was
terminated upon the execution of an employment agreement between Pomeroy Select
and Mr. Pomeroy effective January 6, 1999. Mr. Pomeroy's employment agreement
with Pomeroy Select has a term of three years, which is extended on a daily
basis resulting in a perpetual three year term. Mr. Pomeroy's employment
agreement provides for an annual base salary of $175,000 during the year ending
January 5, 2000 and for each subsequent year unless modified by the Compensation
Committee. Under the employment agreement, he may earn quarterly and annual
bonuses upon Pomeroy Select meeting certain predetermined goals. Mr. Pomeroy's
base salary was $125,000 in fiscal 1998. The amount of any annual bonus will be
paid 50% in cash and 50% as incentive deferred compensation.
Page 18
<PAGE>
Mr. Eck has an employment agreement with the Company extending from
September 18, 1995 to January 5, 1999, which is extended annually for successive
one-year periods unless either party gives 30 days written notice of
termination. Mr. Eck's compensation under the agreement consists of a base
salary, which was $192,500 in fiscal 1998, annual and quarterly bonuses, monthly
commissions based on gross sales, and stock options. The amount of any annual
bonuses are determined on the basis of attainment of certain economic goals, and
are to be paid 50% in cash and 50% as incentive deferred compensation.
Mr. Eilau, President of Technology Integration Financial Services, Inc.
("TIFS"), a wholly-owned subsidiary of the Company, has an employment agreement
with the Company extending from July 6, 1997 to July 5, 2000, which is extended
annually for successive one-year periods unless either party gives 30 days
written notice of termination. Mr. Eilau's compensation under the agreement
consists of a base salary, which was $295,000 in fiscal 1998, deferred
compensation based on Company revenues and pre-tax income and cash bonuses based
on TIFS pre-tax income.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In fiscal 1998, the Compensation Committee consisted of David B. Pomeroy,
II, James H. Smith, III, Michael E. Rohrkemper and Kenneth R. Waters. Mr.
Pomeroy is the Chief Executive Officer of the Company. Mr. Waters resigned from
the Board of Directors effective January 5, 1999.
The Company's principal executive offices and distribution facility are
located in Hebron, Kentucky, comprised of approximately 36,000 and 111,000
square feet of space, respectively. These facilities are leased from Pomeroy
Investments, LLC ("Pomeroy Investments"), a Kentucky limited liability company
controlled by David B. Pomeroy, II, Chief Executive Officer of the Company,
under a ten year triple-net lease agreement which expires in May 2006. The lease
agreement provides for 2 five year renewal options.
The Company from time to time has made advances to Pomeroy Investments to
satisfy Pomeroy Investments' working capital needs.
James H. Smith, a director of the Company, is a stockholder in the law firm
of Lindhorst & Dreidame Co., L.P.A. Lindhorst & Dreidame Co. serves as general
counsel to the Company. The legal services provided by Lindhorst & Dreidame Co.
constituted less than 5% of the firm's business in 1998.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
------------------------------------
The Compensation Committee of the Board of Directors is currently composed
of two (2) non-employee directors, Messrs. Smith and Rohrkemper, and Mr.
Pomeroy, Chairman of the Board, President and Chief Executive Officer. During
fiscal 1998, Mr. Waters was also a member of the compensation committee. Mr
Waters resigned from the Company's Board of Directors effective January 5, 1999.
The Committee is responsible for the establishment and oversight of the
Company's Executive Compensation Program. This program is designed to meet the
objectives of attracting, retaining and motivating executive employees and
providing a balance of short term and long term incentives that can recognize
individual contributions from an executive and the overall operating and
financial results of the Company. The Committee intends to review Executive
Compensation on a regular basis and to compare the competitiveness of the
Company's executive compensation and corporate performance with other
corporations comparable to the Company. The committee believes that the
significant equity interest in the Company held by the Company's management
aligns the interests of the shareholders and management. Through the programs
adopted by the Company a significant portion of Executive Compensation is linked
to individual and corporate performance and stock price appreciation.
The basic elements of the Company's Executive Compensation Program consist
primarily of base salary, potential for annual cash opportunities and stock
options. The Committee believes that incentives play an important role in
motivating executive performance and attempts to reward achievement of both
short and long term goals. However, the emphasis on using stock options as a
long term incentive is intended to insure a proper balance in the achievement of
long term business objectives which ties a significant portion of the
executive's compensation to factors which impact on the performance of the
Company's stock.
Compensation opportunities must be adequate to enable the Company to
compete effectively in the labor market for qualified executives. The elements
of the Executive Compensation Program are designed to meet these demands, and at
the same time encourage increases in shareholder value.
Page 19
<PAGE>
BASE SALARIES
Base salaries for executives are initially determined by evaluating the
duties and responsibilities of the position to be held by the individual,
experience and the competitive marketplace for executive talent. The Company has
entered into Employment Agreements that establish salaries for certain executive
officers. Salaries for executives and other employees are reviewed periodically
and may be set at higher levels if the Company concludes that is appropriate in
light of that particular individual's responsibilities, experience and
performance.
ANNUAL CASH BONUSES
The Company's executives and other employees are eligible to receive annual
cash awards or bonuses at the discretion of the Committee with the approval of
the Board of Directors. In determining whether such discretionary awards should
be made, the Committee considers corporate performance measured by financial and
operating results including income, return on assets and management of expenses
and costs.
LONG TERM COMPENSATION
A. 1992 NON-QUALIFIED AND INCENTIVE STOCK OPTION PLAN
The Company's 1992 Non-Qualified and Incentive Stock Option Plan (the
"Option Plan") has presently reserved for issuance an aggregate of 1,850,000
common shares. The Option Plan was adopted to encourage ownership of common
shares by officers and key employees of the Company to encourage their continued
employment with the Company and to provide them with incentives to promote the
success of the Company. The Stock Option Committee of the Board of Directors
grants options under and otherwise administers the Option Plan. The exercise
price for options under the Option Plan must be at least one hundred percent
(100%) of the fair market value of the common shares on the date of grant;
provided, however, in the event that an incentive stock option is granted to an
employee who owns more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or, if applicable, a subsidiary or parent
corporation of the Company, the exercise price per share for such incentive
stock options cannot be less than one hundred ten percent (110%) of the fair
market value of the common shares on the date of grant. The exercise price of
options granted under the Option Plan is payable in cash or, at the discretion
of the Stock Option Committee in whole or in part, in common shares, valued at
their fair market value at the date of exercise. Each option granted under the
Option Plan expires on the date or dates set forth in the specific option award
as determined by the Stock Option Committee in its sole discretion, but not
later than ten (10) years from the date of grant. The Option Plan will terminate
on February 13, 2002, but such termination will not affect any outstanding
options previously granted.
The tax consequences of the granting and exercise of an option under the
Option Plan to the recipient of the option depend upon the type of option
granted. Taxable gain on a non-qualified stock option is determined on the date
of exercise of the option and is measured by the difference between the fair
market value of the common shares on the date of exercise and the exercise
price. Gain from the granting and exercise of incentive stock options is
deferred until the option holder sells the common shares received upon exercise
of the option. Generally, the amount of gain is measured by the difference
between the sales price of the common shares and the exercise price of the
option. In the case of a non-qualified stock option granted and exercised under
the Option Plan, the Company is entitled to a tax deduction equal to the amount
of income recognized by the option holder, subject to certain withholding and
reporting requirements. With respect to incentive stock options, the Company is
not entitled to a deduction in connection with the granting or exercise of such
an option or the sale of the common shares issued upon the exercise of the
option.
The Option Plan may be amended any time by the Board of Directors, but no
amendment can be made without the approval of the Company's shareholders if
shareholder approval is required under Section 422A of the Internal Revenue Code
of 1986 or Rule 16b-3 under the Securities Exchange Act of 1934. No amendment
may, however, impair the rights or obligations of the holder of any option
granted under the Option Plan without his or her consent.
B. 1992 OUTSIDE DIRECTORS' STOCK OPTION PLAN
The Company's 1992 Outside Directors' Stock Option Plan (the "Directors'
Plan") has reserved for issuance an aggregate of 262,500 common shares to
outside directors. The purpose of the plan is to encourage outside directors of
the Company to acquire or increase their ownership of common shares on
reasonable terms, to foster a strong incentive for outside directors to put
forth maximum effort for the continued success and growth of the Company, to aid
in retaining such individuals who put forth such efforts and to assist in
attracting the best available individuals to serve as directors of the Company
in the future. The Directors' Plan became effective February 13, 1992 and will
terminate ten (10) years from that date. Pursuant to the Directors' Plan, an
option to purchase 10,000 common shares is automatically granted on the first
Page 20
<PAGE>
day of the initial term of an outside director. Thereafter, an option to
purchase an additional 2,500 common shares will automatically be granted upon
the first day of each consecutive year of service on the Board of Directors. The
exercise price of the options will be the fair market value of the shares on the
date the option is granted. The options may be exercised after one (1) year from
the date of grant for not more than one-third (1/3) of the shares subject to the
option and an additional one-third (1/3) of the shares subject to the option may
be exercised for each of the next two (2) years thereafter. To the extent not
exercised, options granted under the Directors' Plan will expire five (5) years
after the date of grant except upon termination of the director's service on the
Board, in which case the option may be exercised within three (3) months of the
date of such termination (but not beyond the term of the option) and, except
upon death of the director in which case the option may be exercised by the
deceased director's legatee, personal representative or distributee within one
(1) year of the date of death (but not beyond the term of the option).
C. EMPLOYEE BENEFIT PLANS
The Company maintains a 401(k) savings plan which generally covers all
employees of the Company. Plan participants may contribute up to fifteen percent
(15%) of their annual base salary on a pre-tax basis, although contributions of
certain highly compensated employees may be limited under federal tax laws. In
fiscal 1998, the Company began making contributions to the plan based on a
participant's annual pay.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Pomeroy served as Chairman of the Board and Chief Executive Officer
throughout fiscal 1998. Mr. Pomeroy's compensation, which includes an annual
salary, bonuses and stock options, was determined in accordance with the terms
of the Seventh Amendment to his Employment Agreement. The Seventh Amendment,
which established the performance criteria for fiscal 1998, was adopted by the
Compensation Committee in December 1997. The terms of Mr. Pomeroy's Employment
Agreement and any amendments thereto are based on the factors described above
including a review of the compensation paid to executives of comparable
companies.
Submitted by the Compensation Committee
James H. Smith, III, Michael E. Rohrkemper and David B. Pomeroy, II
Page 21
<PAGE>
PERFORMANCE GRAPH
The following Performance Graph compares the percentage of the cumulative
total shareholder return on the Company's common shares with the cumulative
total return assuming reinvestment of dividends of (i) the S&P 500 Stock Index
and (ii) the NASDAQ Industrial Index.
CUMULATIVE TOTAL RETURN
BASED ON REINVESTMENT OF $100 BEGINNING APRIL 10, 1992
[CUMULATIVE TOTAL RETURN GRAPH]
<TABLE>
<CAPTION>
Pomeroy S&P500 NASDAQ Industrial
<S> <C> <C> <C>
4/92 100 100 100
12/92 81.9 107.9 107.2
12/93 135.2 115.5 119.2
12/94 119.6 113.8 111.5
12/95 166 152.6 142.7
12/96 726.8 183.5 164.1
12/97 557 240.4 232.2
12/98 687.2 304.5 324.3
</TABLE>
Page 22
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
---------------------------------------------------------------------
The following table sets forth certain information, as of March 11, 1999,
with respect to each person known to the Company to be the beneficial owner of
more than five percent (5%) of its outstanding common stock, and information
with respect to the beneficial ownership of its common stock by each Director,
each Named Executive Officer, and by the Directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
AMOUNT & NATURE OF
NAME BENEFICIAL OWNERSHIP (1) % OF CLASS
- --------------------------- ------------------------ -----------
<S> <C> <C>
David B. Pomeroy, II. . . . 2,458,425 (2) 20.64%
Richard C. Mills. . . . . . 185,866 (3) 1.58%
Stephen E. Pomeroy. . . . . 122,201 (4) 1.03%
James C. Eck. . . . . . . . 18,000 (5) *
Victor Eilau. . . . . . . . 25,000 (6) *
James H. Smith, III . . . . 14,798 (7) *
David W. Rosenthal . . . . 5,000 (8) *
Michael E. Rohrkemper . . . 15,688 (9) *
Kenneth R. Waters . . . . . 5,500 (10) *
William H. Lomicka . . . . - -
Directors and all Executive
Officers as a Group. . . . 2,850,478 (11) 23.43%
<FN>
- ------------------------------------
* Less than one percent (1%)
(1) The "Beneficial Owner" of a security includes any person who shares
voting power or investment power with respect to such security or has
the right to acquire beneficial ownership of such security within 60
days based solely on information provided to the Company.
(2) Includes 22,636 shares owned by his spouse as to which Mr. Pomeroy
disclaims beneficial ownership. Also includes 193,375 shares issuable
upon exercise of stock options.
(3) Includes 65,000 shares of Common Stock issuable upon exercise of stock
options.
(4) Includes 116,625 shares of Common Stock issuable upon exercise of stock
options.
(5) Includes 15,000 shares of Common Stock issuable upon exercise of stock
options.
(6) Includes 25,000 shares of Common Stock issuable upon exercise of stock
options.
(7) Includes 11,187 shares issuable upon exercise of stock options.
(8) Includes 1,500 shares of Common Stock owned by his spouse and 3,000
shares issuable to his spouse upon the exercise of stock options, as to
which Dr. Rosenthal disclaims beneficial ownership.
(9) Includes 247 shares of Common Stock held by Rohrkemper & Ossege Ltd., a
partnership in which Mr. Rohrkemper has a 60% interest. Also includes
10,625 shares of Common Stock issuable upon exercise of stock options.
(10) Includes 5,000 shares of Common Stock issuable upon exercise of stock
options.
(11) Includes 446,559 shares of Common Stock issuable upon exercise of stock
options.
</TABLE>
Page 23
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
James H. Smith, III, a director of the Company, is a shareholder in the law
firm of Lindhorst & Dreidame Co. L.P.A., which serves as general counsel to the
Company. See "Compensation Committee Interlocks and Insider Participation".
Mr. David B. Pomeroy, II the Chairman of the Board, President and Chief
Executive Officer of the Company, engaged in certain transactions with the
Company in the last fiscal year. See "Compensation Committee Interlocks and
Insider Participation" and "Employment Agreements."
Addie W. Rosenthal, the spouse of Dr. Rosenthal, a member of the Board of
Directors, serves as Vice President of Marketing and Investor Relations for the
Company.
Kenneth R. Waters, a director of the Company since April 1997, served as a
consultant to the Company from June 1996 through November 1996. Mr. Waters was
paid $1,500 per month for his services for a total of $9,000 during the term of
the consulting arrangement. In January 1997, the Company retained Mr. Waters to
provide additional consulting services to the Company on an on-going basis. Mr.
Waters is paid $1,500 per month which also includes his compensation as a member
of the Board of Directors. Mr. Waters resigned as a director effective January
5, 1999. He was elected to the Board of Directors of Pomeroy Select Integration
Solutions, Inc. (a wholly-owned subsidiary of the Company) in December 1998.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report:
<TABLE>
<CAPTION>
1998 Form
10-K Page
---------
<S> <C> <C>
1. Financial Statements:
Report of Independent Certified Public Accountants F-1
Consolidated Balance Sheets,
January 5, 1998 and January 5, 1999 F-2 to F-3
For each of the three fiscal years in
The period ended January 5, 1999:
Consolidated Statements of Income F-4
Consolidated Statements of Cash Flows F-5
Consolidated Statements of Equity F-6
Notes to Consolidated Financial Statements F-7 to F-18
2. Financial Statement Schedules:
None
Filed Herewith
(page #) or
Incorporated
3. Exhibits by Reference to:
-------- ----------------
3(a) Certificate of Incorporation of the Company Exhibit 3(a) of Company's
Form S-1 filed Feb. 14, 1992
3(b) Bylaws of the Company Exhibit 3(a) of Company's
Form S-1 filed Feb. 14, 1992
Page 24
<PAGE>
4 Rights Agreement between the Company and The Fifth Exhibit 4 of Company's Form
Third Bank, as Rights Agent dated as of February 8-K filed February 23, 1998
23,1998
10(i) Material Agreements
(b)(1) Agreement for Wholesale Financing (Security Exhibit 10(i)(b)(1) of
Agreement) between IBM Credit Corporation and Company's Form 10-K filed
the Company dated April 2, 1992 April 7, 1994
(b)(2) Addendum to Agreement for Wholesale Financing Exhibit 10(i)(b)(2) of
between IBM Credit Corporation and the Company Company's Form 10-K filed
dated July 7, 1993 April 7, 1994
(c)(1) Agreement for Wholesale Financing (Security Exhibit 10(i)(c)(1) of
Agreement) between ITT Commercial Finance Company's Form 10-K filed
Corporation and the Company dated March 27, 1992 April 7, 1994
(c)(2) Addendum to Agreement for Wholesale Financing Exhibit 10(i)(c)(2) of
between ITT Commercial Finance Corporation and Company's Form 10-K filed
the Company dated July 7, 1993 April 7, 1994
(c)(3) Amendment to Agreement for Wholesale Financing Exhibit 10(i)(c)(3) of
between Deutsche Financial Services f/k/a ITT Company's Form 10-Q filed May
Commercial Finance Corporation and the Company 18, 1995
dated May 5, 1995.
(d)(1) Asset Purchase Agreement among the Company; Exhibit 10(i)(z) of Company's
TCSS; and Richard Feaster, Victoria Feaster, Form 8-K dated March 14, 1996
Harry Feaster, Carolyn Feaster, Victoria
Feaster, trustee of the Emily Patricia Feaster
Trust, and Victoria Feaster, as trustee of the
Nicole Ann Feaster Trust dated March 14, 1996
(d)(2) Lease between the Company and TCSS dated March Exhibit 10.48 of Company's
15, 1996 Form S-1 filed June 4, 1996
(d)(3) Lease between Arthur K. Jones Trust, Firststar Exhibit 10.49 of Company's
Bank Des Moines, N.A., and William A. Jones, Form S-1 filed June 4, 1996
Trustees, and The Computer Supply Store, Inc.
dated July 1, 1994 (assigned to the Company
effective as of March 14, 1996)
(d)(4) Registration Rights Agreement between the Exhibit 10.50 of Company's
Company and TCSS dated March 14, 1996 Form S-1 filed June 4, 1996
(d)(5) Employment Agreement between the Company and Exhibit 10.51 of Company's
Richard Feaster dated March 14, 1996 Form S-1 filed June 4, 1996
(d)(6) Employment Agreement between the Company and Exhibit 10.52 of Company's
Victoria Feaster dated March 14, 1996 Form S-1 filed June 4, 1996
(e)(1) IBM Agreement for Authorized Dealers Exhibit 10(i)(e)(1) of
and Industry Remarketers with the Company's Form S-1 filed
Company, dated September 3, 1991 Feb. 14, 1992
(e)(2) Schedule of Substantially Exhibit 10(i)(e)(2) of
Identical IBM Agreements for Company's Form S-1 filed
Authorized Dealers and Industry Feb. 14, 1992
Remarketers
Page 25
<PAGE>
(f) Compaq Computer Corporation United Exhibit 10(i)(f) of Company's
States Dealer Agreement with the Form S-1 filed Feb. 14, 1992
Company, dated September 27, 1990
(g) Dealer Sales Agreement between Exhibit 10(i)(g) of Company's
Apple Computer, Inc. and the Form S-1 filed Feb. 14, 1992
Company, dated April 1, 1991
(i) Lease between F.G.&H. Partnership Exhibit 10(i)(i) of Company's
and the Company for 908 DuPont Road, Form S-1 filed Feb. 14, 1992
Louisville, KY, dated May 9, 1990
(j)(1) Purchase Agreement between the Company and Exhibit 10.86 of Company's
First of Michigan Corporation dated March 28, Form S-1 filed June 4, 1996
1996
(j)(2) Purchase Agreement between the Company and John Exhibit 10.87 of Company's
C. Donnelly dated March 28, 1996 Form S-1 filed June 4, 1996
(j)(3) Purchase Agreement between the Company and Dan Exhibit 10.88 of Company's
B. French dated March 28, 1996 Form S-1 filed June 4, 1996
(j)(4) Purchase Agreement between the Company and Exhibit 10.89 of Company's
James C. Penman dated March 28, 1996 Form S-1 filed June 4, 1996
(l) Covenant not to Compete between the Company and Exhibit 10(i)(l)(2) of
Richard C. Mills dated July 7, 1993 Company's Form 10-K filed
April 7, 1994
(m)(1) Asset Purchase Agreement among the Company, AA Exhibit 10.5 of Company's
Microsystems, Inc. and Stuart Raburn dated Form S-3 filed January 3, 1997
August 2, 1996
(m)(2) Promissory Note dated August 2, 1996 of the Exhibit 10.6 of Company's
Company in favor of AA Microsystems, Inc. Form S-3 filed January 3, 1997
(n)(1) Lease between Crown Development Group and the Exhibit 10(i)(n) of Company's
Company for 3740 St. Johns Bluff Road, Suite Form 10-K filed March 31, 1993
19, Jacksonville, FL dated September 17, 1992
(n)(2) Amendment to Lease between Crown Development Exhibit 10(i)(n)(2) of
Group and the Company for 3740 St. Johns Bluff Company's Form 10-K filed
Road, Suite 19, Jacksonville, FL dated December April 4, 1996
11, 1995
(p)(1) Remarketing and Agency Agreement (the Exhibit 10(i)(p)(1) of
"Remarketing Agreement") between Information Company's Form S-1 filed Feb.
Leasing Corporation and the Company dated 14, 1992
January 7, 1990
(p)(2) Amendment No. 1 to the Remarketing Agreement Exhibit 10(i)(p)(2) of
dated November 12, 1991 Company's Form S-1 filed Feb.
14, 1992
(p)(3) Letter, dated February 2, 1994, extending term Exhibit 10(i)(p)(3) of
of Remarketing Agreement to May 1, 1996 Company's Form 10-K filed
April 4, 1996
Page 26
<PAGE>
(p)(4) Amendment No. 2 to the Remarketing Agreement Exhibit 10(i)(p)(4) of
dated October 10, 1995 Company's Form 10-K filed
April 4, 1996
(q) Lease between Athens Properties and the Company Exhibit 10(i)(q) of Company's
for Crosspark Drive, Knoxville, TN dated Form 10-K filed April 4, 1996
October 31, 1995
(r)(1) Asset Purchase Agreement among the Company, Exhibit 10.7 of Company's
Communications Technology, Inc. d/b/a DILAN and Form S-3 filed January 3, 1997
Robert Martin dated October 11, 1996
(r)(2) Subordinated Promissory Note dated October 11, Exhibit 10.8 of Company's
1996 of the Company in favor of Communications Form S-3 filed January 3, 1997
Technology, Inc.
(r)(3) Subordination Agreement among the Company, Exhibit 10.9 of Company's
Communications Technology, Inc. and Star Bank, Form S-3 filed January 3, 1997
N.A. dated October 11, 1996
(s) Services Agreement between the Company and Exhibit 10.13 of Company's
Nationwide Mutual Insurance and the Company Form S-3 filed January 3, 1997
dated December 11, 1996
(t1) Asset Purchase Agreement among the Company and Exhibit 10(i)(t)(1) of
Magic Box, Inc. dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(2) Employment Agreement between the Company and Exhibit 10(i)(t)(2) of
Israel Fintz, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(3) Incentive Deferred Compensation Agreement Exhibit 10(i)(t)(3) of
between the Company and Israel Fintz, dated Company's Form 10-Q filed
June 26, 1997 August 11, 1997
(t)(4) Employment Agreement between the Company and Exhibit 10(i)(t)(4) of
Allison Sokol, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(5) Incentive Deferred Compensation Agreement Exhibit 10(i)(t)(5) of
between the Company and Allison Sokol, dated Company's Form 10-Q filed
June 26, 1997 August 11, 1997
(t)(6) Power of Attorney given to the Company by Magic Exhibit 10(i)(t)(6) of
Box, Inc. for the collection of Accounts Company's Form 10-Q filed
Receivable, dated June 26, 1997 August 11, 1997
(t)(7) Agreement for the Assumption of Liabilities Exhibit 10(i)(t)(7) of
between the Company and Magic Box, Inc. Company's Form 10-Q filed
August 11, 1997
(t)(8) Subordination Agreement by and among the Exhibit 10(i)(t)(8) of
Company, Magic Box, Inc. and Star Bank, N.A., Company's Form 10-Q filed
dated June 26, 1997 August 11, 1997
(t)(9) Subordinated Promissory Note between the Exhibit 10(i)(t)(9) of
Company and Israel Fintz, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
Page 27
<PAGE>
(t)(10) Subordinated Promissory Note between the Exhibit 10(i)(t)(10) of
Company and Allison Sokol, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(11) Subordinated Promissory Note between the Exhibit 10(i)(t)(11) of
Company and Marvin Rosen, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(12) Subordinated Promissory Note between the Exhibit 10(i)(t)(12) of
Company and M. Ronald Krongold, dated June 26, Company's Form 10-Q filed
1997 August 11, 1997
(t)(13) General Bill of Sale between the Company and Exhibit 10(i)(t)(13) of
Magic Box, Inc., dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(14) Non Compete Agreement between the Company and Exhibit 10(i)(t)(14) of
Israel Fintz, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(15) Non Compete Agreement between the Company and Exhibit 10(i)(t)(15) of
Allison Sokol, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(16) Non Compete Agreement between the Company and Exhibit 10(i)(t)(16) of
Marvin Rosen, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(17) Non Compete Agreement between the Company and Exhibit 10(i)(t)(17) of
M. Ronald Krongold, dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(t)(18) Non Compete Agreement between the Company and Exhibit 10(i)(t)(18) of
Magic Box, Inc., dated June 26, 1997 Company's Form 10-Q filed
August 11, 1997
(u) Lease between NWI Airpark L.P. and the Company Exhibit 10(i)(u) of Company's
for 717 Airpark Center Drive, Nashville, TN Form 10-K filed April 4, 1995
dated February 24, 1994
(v)(1) Promissory Note dated May 30, 1997 by and among Exhibit 10(i)(v)(1) of
Star Bank, N.A., the Company and Pomeroy Company's Form 10-Q filed
Computer Leasing Company, Inc. August 11, 1997
(v)(2) Loan Agreement dated October 31,1997 between Exhibit 10(i)(v)(2) of
The Fifth Third Bank of Northern Kentucky, Inc. Company's Form 10-K filed
and Technology Integration Financial Services, April 5, 1998
Inc.
(v)(3) Guarantor Agreement dated October 31,1997 Exhibit 10(i)(v)(3) of
between Pomeroy Computer Resources, Inc and The Company's Form 10-K filed
Fifth Third Bank of Northern Kentucky, Inc. April 5, 1998
(v)(4) Addendum 1 to Guarantor Agreement dated October Exhibit 10(i)(v)(4) of
31,1997 between Pomeroy Computer Resources, Inc Company's Form 10-K filed
and The Fifth Third Bank of Northern Kentucky, April 5, 1998
Inc.
(v)(5) Assignment Agreement between dated October Exhibit 10(i)(v)(5) of
31,1997 between The Fifth Third Bank of Company's Form 10-K filed
Northern Kentucky, Inc. and Technology April 5, 1998
Integration Financial Services, Inc.
Page 28
<PAGE>
(v)(6) Incumbency and Authorization Agreement dated Exhibit 10(i)(v)(6) of
October 31,1997 between The Fifth Third Bank of Company's Form 10-K filed
Northern Kentucky, Inc. and Technology April 5, 1998
Integration Financial Services, Inc.
(v)(7) Draw Facility Note dated October 31,1997 Exhibit 10(i)(v)(7) of
between The Fifth Third Bank of Northern Company's Form 10-K filed
Kentucky, Inc. and Technology Integration April 5, 1998
Financial Services, Inc.
(v)(8) Revolving Credit Note dated October 31,1997 Exhibit 10(i)(v)(8) of
between The Fifth Third Bank of Northern Company's Form 10-K filed
Kentucky, Inc. and Technology Integration April 5, 1998
Financial Services, Inc.
(v)(9) Security Agreement dated October 31,1997 Exhibit 10(i)(v)(9) of
between The Fifth Third Bank of Northern Company's Form 10-K filed
Kentucky, Inc. and Technology Integration April 5, 1998
Financial Services, Inc.
(w)(1) Non Compete Agreement between the Company and Exhibit 10(i)(w)(1) of
Microcare Computer Services, Inc., dated July Company's Form 10-Q filed
24, 1997 November 10, 1997
(w)(2) Non Compete Agreement between the Company and Exhibit 10(i)(w)(2) of
Microcare, Inc., dated July 24, 1997 Company's Form 10-Q filed
November 10, 1997
(w)(3) Assignment and Assumption Agreement between the Exhibit 10(i)(w)(3) of
Company, and Microcare Computer Services, Inc., Company's Form 10-Q filed
and Microcare Inc., dated July 24, 1997 November 10, 1997
(w)(4) Assumption of Liabilities Agreement between the Exhibit 10(i)(w)(4) of
Company, and Microcare Computer Services, Inc., Company's Form 10-Q filed
and Microcare Inc., dated July 24, 1997 November 10, 1997
(w)(5) Non Compete Agreement between the Company, and Exhibit 10(i)(w)(5) of
Robert L. Versprille, dated July 24, 1997 Company's Form 10-Q filed
November 10, 1997
(w)(6) Consent for Use of Similar Name between the Exhibit 10(i)(w)(6) of
Company and Microcare, Inc., dated July 24, 1997 Company's Form 10-Q filed
November 10, 1997
(w)(7) Subordination Agreement between the Company, Exhibit 10(i)(w)(7) of
and Microcare Computer Services, Inc., and Star Company's Form 10-Q filed
Bank, N.A., dated July 24, 1997 November 10, 1997
(w)(8) Subordinated Promissory Note between the Exhibit 10(i)(w)(8) of
Company and Microcare Computer Services, Inc., Company's Form 10-Q filed
dated July 24, 1997 November 10, 1997
(w)(9) Registration Rights Agreement between the Exhibit 10(i)(w)(9) of
Company and Microcare Computer Services, Inc., Company's Form 10-Q filed
dated July 24, 1997 November 10, 1997
(w)(10) General Bill of Sale and Assignment between the Exhibit 10(i)(w)(10) of
Company and Microcare Computer Services, Inc., Company's Form 10-Q filed
dated July 24, 1997 November 10, 1997
Page 29
<PAGE>
(w)(11) General Bill of Sale and Assignment between the Exhibit 10(i)(w)(11) of
Company and Microcare, Inc., dated June 24, 1997 Company's Form 10-Q filed
November 10, 1997
(w)(12) Asset Purchase Agreement between the Company, Exhibit 10(i)(w)(12) of
and Microcare Computer Services, Inc., Company's Form 10-Q filed
Microcare Inc., and Robert L. Versprille dated November 10, 1997
July 24, 1997
(w)(13) Employment Agreement between the Company and Exhibit 10(i)(w)(13) of
Robert L. Versprille, dated July 24, 1997 Company's Form 10-Q filed
November 10, 1997
(x) Lease between the Company and Pomeroy Exhibit 10(i)(x) of Company's
Investments, LLC for buildings at Airpark Form 10-Q filed November 17,
International dated September 5, 1995 1995
(y) Lease between the Company and New England Exhibit 10(i)(y) of Company's
Mutual Life Insurance Company for building at Form 10-Q filed November 17,
Lexington Business Center dated October 4, 1995 1995
(z)(1) Asset Purchase Agreement between the Company Exhibit 10(i)(z)(1) of
and Cabling Unlimited, Inc. dated October 13, Company's Form 10-K filed
1995 April 4, 1996
(z)(2) Agreement between Cabling Unlimited, Inc. and Exhibit 10(i)(z)(2) of
the Company dated October 13, 1995 Company's Form 10-K filed
April 4, 1996
(z)(3) Agreement between Karen Epperson and the Exhibit 10(i)(z)(3) of
Company dated October 13, 1995 Company's Form 10-K filed
April 4, 1996
(z)(4) Employment Agreement between Karen Epperson and Exhibit 10(i)(z)(4) of
the Company dated October 13, 1995 Company's Form 10-K filed
April 4, 1996
(z)(5) Assumption of Liabilities between Cabling Exhibit 10(i)(z)(5) of
Unlimited, Inc. and the Company dated October Company's Form 10-K filed
13, 1995 April 4, 1996
(cc)(1) Plan of Reorganization dated October 17,1997 Exhibit (10)(i)(cc)(1) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina and The Computer Store, Inc. April 5,1998
(cc)(2) Plan of Merger dated October 17,1997 between Exhibit (10)(i)(cc)(2) of
Pomeroy Computer Resources of South Carolina Company's Form 10-K filed
and The Computer Store, Inc. April 5,1998
(cc)(3) Articles of Merger dated October 17,1997 Exhibit (10)(i)(cc)(3) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina and The Computer Store, Inc. April 5,1998
(cc)(4) Employment Agreement dated October 17,1997 Exhibit (10)(i)(cc)(4) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc. and Jeffrey F. Hipp April 5,1998
(cc)(5) Employment Agreement dated October 17,1997 Exhibit (10)(i)(cc)(5) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc. and Ronald D. Hildreth April 5,1998
Page 30
<PAGE>
(cc)(6) Employment Agreement dated October 17,1997 Exhibit (10)(i)(cc)(6) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc. and Authur M. Cox April 5,1998
(cc)(7) Guaranty of Employment Agreement dated October Exhibit (10)(i)(cc)(7) of
17,1997 between Pomeroy Computer Resources of Company's Form 10-K filed
South Carolina, Inc. and Authur M. Cox April 5,1998
(cc)(8) Guaranty of Employment Agreement dated October Exhibit (10)(i)(cc)(8) of
17,1997 between Pomeroy Computer Resources of Company's Form 10-K filed
South Carolina, Inc. and Ronald D. Hildreth April 5,1998
(cc)(9) Guaranty of Employment Agreement dated October Exhibit (10)(i)(cc)(9) of
17,1997 between Pomeroy Computer Resources of Company's Form 10-K filed
South Carolina, Inc. and Jeffery F. Hipp April 5,1998
(cc)(10) Non-Compete Agreement dated October 17,1997 Exhibit (10)(i)(cc)(10) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc. and Authur M. Cox April 5,1998
(cc)(11) Non-Compete Agreement dated October 17,1997 Exhibit (10)(i)(cc)(11) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc. and Ronald D. Hildreth April 5,1998
(cc)(12) Non-Compete Agreement dated October 17,1997 Exhibit (10)(i)(cc)(12) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc. and Jeffrey F. Hipp April 5,1998
(cc)(13) Investor's Certificate dated October 17,1997 Exhibit (10)(i)(cc)(13) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc. and Jeffrey F. Hipp April 5,1998
(cc)(14) Investor's Certificate dated October 17,1997 Exhibit (10)(i)(cc)(14) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc. and Ronald D. Hildreth April 5,1998
(cc)(15) Investor's Certificate dated October 17,1997 Exhibit (10)(i)(cc)(15) of
between Pomeroy Computer Resources of South Company's Form 10-K filed
Carolina, Inc. and Authur M. Cox April 5,1998
(cc)(16) Escrow Agreement dated October 17,1997 between Exhibit (10)(i)(cc)(16) of
Pomeroy Computer Resources of South Carolina, Company's Form 10-K filed
Inc., Authur M. Cox, Ronald D. Hildreth, and April 5,1998
Jeffrey F. Hipp
(cc)(17) Opinion Letter on Plan of Merger dated October Exhibit (10)(i)(cc)(17) of
17,1997 between Pomeroy Computer Resources of Company's Form 10-K filed
South Carolina and The Computer Store, Inc. April 5,1998
(dd)(1) Asset Purchase Agreement dated March 6, 1998 Exhibit (10)(i)(dd)(1) of
between the Company and Commercial Business Company's Form 10-Q filed
Systems, Inc. May 6,1998
(dd)(2) Employment Agreement dated March 6, 1998 Exhibit (10)(i)(dd)(2) of
between the Company and Thomas Clayton Company's Form 10-Q filed
May 6,1998
Page 31
<PAGE>
(dd)(3) Employment Agreement dated March 6, 1998 Exhibit (10)(i)(dd)(3) of
between the Company and Steven Shapiro Company's Form 10-Q filed
May 6,1998
(dd)(4) Subordinated Promissory Note dated March 6, Exhibit (10)(i)(dd)(4) of
1998 between the Company and Commercial Company's Form 10-Q filed
Business System, Inc. May 6,1998
(dd)(5) Subordination Agreement dated March 6, 1998 Exhibit (10)(i)(dd)(5) of
between the Company and Commercial Business Company's Form 10-Q filed
System, Inc. May 6,1998
(dd)(6) General Bill of Sales and Assignment dated Exhibit (10)(i)(dd)(6) of
March 6, 1998 between the Company and Company's Form 10-Q filed
Commercial Business System, Inc. May 6,1998
(dd)(7) Assumption of Liabilities dated March 6, 1998 Exhibit (10)(i)(dd)(7) of
between the Company and Commercial Business Company's Form 10-Q filed
System, Inc. May 6,1998
(dd)(8) Power of Attorney dated March 6, 1998 between Exhibit (10)(i)(dd)(8) of
the Company and Commercial Business System, Inc. Company's Form 10-Q filed
May 6,1998
(dd)(9) Assignment and Assumption Agreement dated March Exhibit (10)(i)(dd)(9) of
6, 1998 between the Company and Commercial Company's Form 10-Q filed
Business System, Inc. May 6,1998
(dd)(10) Agreement dated March 6, 1998 between the Exhibit (10)(i)(dd)(10) of
Company and Commercial Business System, Inc. Company's Form 10-Q filed
May 6,1998
(dd)(11) Assignment and Assumption of Lease Agreement Exhibit (10)(i)(dd)(11) of
dated March 6, 1998 between the Company and Company's Form 10-Q filed
Commercial Business System, Inc. May 6,1998
(dd)(12) Assignment and Assumption of Lease Agreement Exhibit (10)(i)(dd)(12) of
dated March 6, 1998 between the Company and Company's Form 10-Q filed
Commercial Business System, Inc. May 6,1998
(dd)(13) Covenant Not to Compete Agreement dated March Exhibit (10)(i)(dd)(13) of
6, 1998 between the Company and Steve Shapiro Company's Form 10-Q filed
May 6,1998
(dd)(14) Covenant Not to Compete Agreement dated March Exhibit (10)(i)(dd)(14) of
6, 1998 between the Company and Thomas Clayton Company's Form 10-Q filed
May 6,1998
(dd)(15) Covenant Not to Compete Agreement dated March Exhibit (10)(i)(dd)(15) of
6, 1998 between the Company and Commercial Company's Form 10-Q filed
Business Systems, Inc. May 6,1998
(dd)(16) Consent for use of Similar Name Agreement dated Exhibit (10)(i)(dd)(16) of
March 6, 1998 between the Company and Company's Form 10-Q filed
Commercial Business Systems, Inc. May 6,1998
(dd)(17) Agreement dated March 6, 1998 between the Exhibit (10)(i)(dd)(17) of
Company and Commercial Business Systems, Inc. Company's Form 10-Q filed
May 6,1998
Page 32
<PAGE>
(ee)(1) Stock Purchase Agreement dated February 26, Exhibit (10)(i)(ee)(1) of
1998 between J. Walter Duncan Jr. , Nicholas Company's Form 10-Q filed
Duncan, James B. Kite, O. Dean Higganbotham, May 6,1998
and Dale Higganbotham and Pomeroy Computer
Resources, Inc.
(ee)(2) Non-Compete Agreement dated February 26, 1998 Exhibit (10)(i)(ee)(2) of
between O. Dean Higganbotham and Pomeroy Company's Form 10-Q filed
Computer Resources, Inc. May 6,1998
(ee)(3) Non-Compete Agreement dated February 26, 1998 Exhibit (10)(i)(ee)(3) of
between Dale Higganbotham and Pomeroy Computer Company's Form 10-Q filed
Resources, Inc. May 6,1998
(ee)(4) Non-Compete Agreement dated February 26, 1998 Exhibit (10)(i)(ee)(4) of
between J. Walter Duncan Jr. and Pomeroy Company's Form 10-Q filed
Computer Resources, Inc. May 6,1998
(ee)(5) Non-Compete Agreement dated February 26, 1998 Exhibit (10)(i)(ee)(5) of
between Nicholas V. Duncan and Pomeroy Computer Company's Form 10-Q filed
Resources, Inc. May 6,1998
(ee)(6) Non-Compete Agreement dated February 26, 1998 Exhibit (10)(i)(ee)(6) of
between James B. Kite and Pomeroy Computer Company's Form 10-Q filed
Resources, Inc. May 6,1998
(ee)(7) Employment Agreement dated February 26, 1998 Exhibit (10)(i)(ee)(7) of
between O. Dean Higganbotham, Global Combined Company's Form 10-Q filed
Technologies, Inc. and Pomeroy Computer May 6,1998
Resources, Inc.
(ee)(8) Employment Agreement dated February 26, 1998 Exhibit (10)(i)(ee)(8) of
between Dale Higganbotham, Global Combined Company's Form 10-Q filed
Technologies, Inc. and Pomeroy Computer May 6,1998
Resources, Inc.
(ee)(9) Termination of Employment Agreement dated March Exhibit (10)(i)(ee)(9) of
17, 1998 between Nicholas V. Duncan and Global Company's Form 10-Q filed
Combined Technologies, Inc. May 6,1998
(ee)(10) Termination of Employment Agreement dated March Exhibit (10)(i)(ee)(10) of
17, 1998 between O. Dean Higganbotham and Company's Form 10-Q filed
Global Combined Technologies, Inc. May 6,1998
(ee)(11) Termination of Employment Agreement dated March Exhibit (10)(i)(ee)(11) of
17, 1998 between Dale Higganbotham and Global Company's Form 10-Q filed
Combined Technologies, Inc. May 6,1998
(ee)(12) Purchaser's Certificate Dated March 17, 1998 Exhibit (10)(i)(ee)(12) of
between the Company and Global Combined Company's Form 10-Q filed
Technologies, Inc. May 6,1998
(ee)(13) Incentive Deferred Compensation Agreement dated Exhibit (10)(i)(ee)(13) of
March 17, 1998 between Dale Higganbotham and Company's Form 10-Q filed
Global Combined Technologies, Inc. May 6,1998
(ee)(14) Subordination Agreement dated March 17, 1998 Exhibit (10)(i)(ee)(14) of
between the Company, Nicholas V. Duncan, and Company's Form 10-Q filed
Star Bank, N.A. May 6,1998
Page 33
<PAGE>
(ee)(15) Subordination Agreement dated March 17, 1998 Exhibit (10)(i)(ee)(15) of
between the Company, James B, Kite, and Star Company's Form 10-Q filed
Bank, N.A. May 6,1998
(ee)(16) Subordination Agreement dated March 17, 1998 Exhibit (10)(i)(ee)(16) of
between the Company, O. Dean Higganbotham, and Company's Form 10-Q filed
Star Bank, N.A. May 6,1998
(ee)(17) Subordination Agreement dated March 17, 1998 Exhibit (10)(i)(ee)(17) of
between the Company, Dale Higganbotham, and Company's Form 10-Q filed
Star Bank, N.A. May 6,1998
(ee)(18) Subordination Agreement dated March 17, 1998 Exhibit (10)(i)(ee)(18) of
between the Company, J. Walter Duncan Jr., and Company's Form 10-Q filed
Star Bank, N.A. May 6,1998
(ee)(19) Subordinated Promissory Note dated March 17, Exhibit (10)(i)(ee)(19) of
1998 between the Company and James B, Kite. Company's Form 10-Q filed
May 6,1998
(ee)(20) Subordinated Promissory Note dated March 17, Exhibit (10)(i)(ee)(20) of
1998 between the Company and Dean Higganbotham Company's Form 10-Q filed
May 6,1998
(ee)(21) Subordinated Promissory Note dated March 17, Exhibit (10)(i)(ee)(21) of
1998 between the Company and Dale Higganbotham Company's Form 10-Q filed
May 6,1998
(ee)(22) Subordinated Promissory Note dated March 17, Exhibit (10)(i)(ee)(22) of
1998 between the Company and J. Walter Duncan Company's Form 10-Q filed
Jr. May 6,1998
(ee)(23) Business Credit and Security Agreement among Exhibit (10)(i)(ee)(23) of
Pomeroy Computer Resources, Inc. and Deutsche Company's Form 10-Q filed
Financial Services Corporation, dated July 14, November 12,1998
1998
(ff)(1) The Asset Purchase Agreement dated December 9, E-1 TO E-54
1998, by, between and among the Company, Access
Technologies, Inc., Mark V. Putman, Paul
Bishop, and Dave Barthel
(ff)(2) Employment Agreement by and between the Company E-55 TO E-65
and Mark Putman, dated December 9, 1998
(ff)(3) Employment Agreement by and between the Company E-66 TO E-78
and Paul Bishop, dated December 9, 1998
(ff)(4) Employment Agreement by and between the Company E-79 TO E-90
and Greg Livingston, dated December 9, 1998
(ff)(5) Employment Agreement by and between the Company E-91 TO E-102
and Phillip Qualls, dated December 9, 1998
Page 34
<PAGE>
(ff)(6) Exhibit G Excluded assets of the Asset Purchase E-103
Agreement
(ff)(7) General Bill of Sale and Assignment of the E-104 TO E-105
Asset Purchase agreement
(ff)(8) Assumption of Liabilities of the Asset Purchase E-106 TO E-108
Agreement
(ff)(9) Promissory Note between the Company and Access E-109 TO E-110
Technologies, Inc., dated December 9, 1998
(ff)(10) Consent for Use of Similar Name by Access E-111
Technologies, Inc., dated December 9, 1998
(ff)(11) Power of Attorney issued to the Company by E-112 TO E-113
Access Technologies, Inc., dated December 9,
1998
(ff)(12) Letter Agreement regarding Contracts by and E-114
between Access Technologies, Inc. and the
Company, dated December 9, 1998
(ff)(13) Assignment and Assumption Agreement by and E-115 TO E-117
between Access Technologies, Inc. and the
Company, dated December 9, 1998
(ff)(14) Subordination Agreement among the Company, E-118 TO E-133
Access Technologies, Inc. and Deutsche
Financial Services Company, dated December 9,
1998
(ff)(15) Subordinated Promissory Note issued by the E-134 TO E-137
Company to Access Technologies, Inc., dated
December 9, 1998
(ff)(16) Letter of Instructions to Fifth Third Bank E-138 TO E-140
issued by the Company pursuant to the Asset
Purchase Agreement, dated December 9, 1998
(ff)(17) Investor's Certificate between Access E-141 TO E-143
Technologies, Inc. (Investor) and the Company,
dated December 9, 1998
(ff)(18) Consent of Deutsche Financial Services Company E-144
to the Company on the purchase of substantially
all the operating assets of Access
Technologies, Inc.
(ff)(19) Sublease Agreement by and between Access E-145 TO E-148
Technologies, Inc. and the Company, dated
December 9, 1998
(ff)(20) Noncompetition Agreement by and between David E-149 TO E-153
Barthel and the Company, dated December 9, 1998
(ff)(21) Noncompetition Agreement by and between Paul E-154 TO E-158
Bishop and the Company, dated December 9, 1998
Page 35
<PAGE>
(ff)(22) Noncompetition Agreement by and between Mark E-159 TO E-163
Putman and the Company, dated December 9, 1998
(ff)(23) Noncompetition Agreement by and between Access E-164 TO E-168
Technologies, Inc. and the Company, dated
December 9, 1998
(ff)(24) Noncompetition Agreement by and between Greg E-169 TO E-173
Livingston and the Company, dated December 9,
1998
(ff)(25) Noncompetition Agreement by and between Robert E-174 TO E-178
Hendry and the Company, dated December 9, 1998
(ff)(26) Assignment and Assumption Lease by and between E-179 TO E-181
Access Technologies, Inc. and the Company,
dated December 9, 1998
(gg)(1) Workstation Procurement and Support Service E-182 TO E-239
Agreement by and between the Procter and Gamble
Company and the Company, dated January 26, 1999
(gg)(2) Statement of Work to Workstation Procurement E-240 TO E-242
and Support Services Agreement by and between
the Procter and Gamble Company and the Company.
(gg)(3) Attachment A - P&G Sites of Statement of Work E-243 TO E-245
to Workstation Procurement and Support Services
Agreement
(gg)(4) Attachment B-1 - Procurement, Workstation E-246 TO E-252
Distribution and Workstation Disposal Services
of Statement of Work to Workstation Procurement
Services Agreement
(gg)(5) Attachment B-2 - Packaged Software Help Desk E-253 TO E-255
Services of Statement of Work to Workstation
Procurement Services Agreement
(gg)(6) Attachment B-3 - Deskside and Server Support E-256 TO E-258
Services of Statement of Work to Workstation
Procurement Services Agreement
(gg)(7) Attachment C - Transition Services of Statement E-259 TO E-260
of Work to Workstation Procurement Services
Agreement
(gg)(8) Attachment D - Termination and Decommissioning E-261 TO E-262
of Statement of Work to Workstation Procurement
Services Agreement
(gg)(9) Attachment E - Service Levels of Statement of E-263 TO E-273
Work to Workstation Procurement Services
Agreement
(gg)(10) Attachment F - Special Projects of Statement of E-274 TO E-276
Work to Workstation Procurement Services
Agreement
Page 36
<PAGE>
(gg)(11) Attachment G - Resource Charges, Financial E-277 TO E-279
Responsibility and Pricing of Statement of Work
to Workstation Procurement Services Agreement
(gg)(12) Attachment H - Overall Management of Statement E-280 TO E-283
of Work to Workstation Procurement Services
Agreement
(gg)(13) Attachment I - Quality Processes of Statement E-284
of Work to Workstation Procurement Services
Agreement
(gg)(14) Exhibit G-1 of Attachment G of Statement of E-285 TO E-286
Work to Workstation Procurement Services
Agreement.
(gg)(15) Attachment E- Exhibit 1 of Statement of Work to E-287 TO E-290
Workstation Procurement Services Agreement.
10(iii) Material Employee Benefit and Other Agreements
(a)(1) Employment Agreement between the Company Exhibit 10(iii)(a) of
And David B. Pomeroy, dated March 12, 1992 Company's Form S-1 Filed
Feb. 14,1992
(a)(2) First Amendment to Employment Agreement between Exhibit 10(iii)(a)(2) of
the Company and David B. Pomeroy effective July Company's Form 10-K filed
6, 1993 April 7, 1994
(a)(3) Second Amendment to Employment Agreement Exhibit 10(iii)(a)(3) of
between the Company and David B. Pomeroy dated Company's Form 10-K filed
October 14, 1993 April 7, 1994
(a)(4) Agreement between the Company and David B. Exhibit 10(iii)(a)(4) of
Pomeroy related to the personal guarantee of Company's Form 10-K filed
the Datago agreement by David B. Pomeroy and April 7, 1994
his spouse effective July 6, 1993
(a)(5) Third Amendment to Employment Agreement Exhibit 10(iii)(a)(5) of
between the Company and David B. Pomeroy Company's Form 10-Q filed
effective January 6, 1995 November 17, 1995
(a)(6) Supplemental Executive Compensation Agreement Exhibit 10(iii)(a)(6) of
between the Company and David B. Pomeroy Company's Form 10-Q filed
effective January 6, 1995 November 17, 1995
(a)(7) Collateral Assignment Split Dollar Agreement Exhibit 10(iii)(a)(7) of
between the Company; Edwin S. Weinstein, as Company's Form 10-Q filed
Trustee; and David B. Pomeroy dated June 28, November 17,1995
1995
(a)(8) Fourth Amendment to Employment Agreement Exhibit 10(iii)(a)(8) of
between the Company and David B. Pomeroy dated Company's Form 10-Q filed May
December 20, 1995, effective January 6, 1995 17, 1996
(a)(9) Fifth Amendment to Employment Agreement Exhibit 10(iii)(a)(9) of
between the Company and David B. Pomeroy Company's Form 10-Q filed May
effective January 6, 1996 17, 1996
Page 37
<PAGE>
(a)(10) Sixth Amendment to Employment Agreement Exhibit 10.10 of Company's
between the Company and David B. Pomeroy Form S-3 filed January 3, 1997
effective January 6, 1997
(a)(11) Award Agreement between the Company and David Exhibit 10.11 of Company's
B. Pomeroy effective January 6, 1997 Form S-3 filed January 3, 1997
(a)(12) Registration Rights Agreement between the Exhibit 10.12 of Company's
Company and David B. Pomeroy effective January Form S-3 filed January 3, 1997
6, 1997
(a)(13) Seventh Amendment to Employment Agreement Exhibit 10)(iii)(a)(13) of
between the Company and David B. Pomeroy Company's Form 10-Q filed May
effective January 6, 1998 6, 1998
(a)(14) Collateral Assignment Split Dollar Agreement Exhibit 10)(iii)(a)(14) of
between the Company, James H. Smith as Trustee, Company's Form 10-Q filed May
and David B. Pomeroy dated January 6, 1998 6, 1998
(c)(1) Employment Agreement between the Company and Exhibit 10(iii)(c)(1) of
Victor Eilau dated July 6, 1997 Company's Form 10-Q filed
August 11, 1997
(c)(2) Performance Share Right Agreement between the Exhibit 10(iii)(c)(2) of
Company and Victor Eilau dated July 6, 1997 Company's Form 10-Q filed
August 11, 1997
(d) The Company Savings 401(k) Plan, Exhibit 10(iii)(d) of
effective July 1, 1991 Company's Form S-1 filed Feb.
14, 1992
(f) The Company's 1992 Non-Qualified Exhibit 10(iii)(f) of
and Incentive Stock Option Plan, Company's
dated February 13, 1992 Form S-1 filed Feb. 14, 1992
(g) The Company's 1992 Outside Directors Exhibit 10(iii)(g) of
Stock Option Plan, dated February 13, Company's Form S-1 filed
1992 Feb. 14, 1992
(h) Employment Agreement between the Company and Exhibit 10(iii)(h) of
Richard C. Mills dated July 7, 1993 Company's Form 10-K filed
April 7, 1994
(I) Employment Agreement between the Company and Exhibit 10.64 of Company's
James Eck dated February 6, 1996, and effective Form S-1 filed June 4, 1996
as of September 18, 1995
(j)(1) Employment Agreement between the Company and Exhibit 10.3 of Company's
Stephen E. Pomeroy dated November 13, 1996 Form S-3 filed January 3, 1997
(j)(2) Incentive Deferred Compensation Agreement Exhibit 10.4 of Company's
between the Company and Stephen E. Pomeroy Form S-3 filed January 3, 1997
dated November 13, 1996
(j)(3) Employment Agreement between Pomeroy Select E-291 TO E-302
Integration Solutions, Inc. and Stephen E. Pomeroy,
dated January 6, 1999.
Page 38
<PAGE>
11 Computation of Per Share Earnings E-1
21 Subsidiaries of the Company E-2
27 Financial Data Schedule E-3
</TABLE>
(b) Reports on Form 8-K:
None.
Page 39
<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 report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Pomeroy Computer Resources, Inc.
By: /s/ David B. Pomeroy
--------------------------------------
David B. Pomeroy
Chairman of the Board, President and
Chief Executive Officer
By: /s/ Stephen E. Pomeroy
--------------------------------------
Stephen E. Pomeroy
Chief Financial Officer and Chief
Accounting Officer
Dated: April 5, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature and Title Date
- -------------------------------------- --------------
<S> <C>
By: /s/ David B. Pomeroy April 5, 1999
- --------------------------------------
David B. Pomeroy, Director
By: /s/ Stephen E. Pomeroy April 5, 1999
- --------------------------------------
Stephen E. Pomeroy, Director
By: /s/ James H. Smith III April 5, 1999
- --------------------------------------
James H. Smith III, Director
By:
- --------------------------------------
Dr. David W. Rosenthal, Director
By: /s/ Michael E. Rohrkemper April 5, 1999
- --------------------------------------
Michael E. Rohrkemper, Director
By:
- --------------------------------------
William H. Lomicka, Director
By:
- --------------------------------------
Richard C. Mills, Director
</TABLE>
Page 40
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Pomeroy Computer Resources, Inc.
We have audited the accompanying consolidated balance sheets of Pomeroy Computer
Resources, Inc. as of January 5, 1998 and 1999, and the related consolidated
statements of income, equity, and cash flows for each of the three years in the
period ended January 5, 1999. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Pomeroy
Computer Resources, Inc. at January 5, 1998 and 1999, and the consolidated
results of its operations and its consolidated cash flows for each of the three
years in the period ended January 5, 1999 in conformity with generally accepted
accounting principles.
Grant Thornton LLP
/s/ Grant Thornton LLP
Cincinnati, Ohio
February 16, 1999
F-1
<PAGE>
<TABLE>
<CAPTION>
POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands) January 5, January 5,
1998 1999
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 380 $ 3,962
Accounts receivable:
Trade, less allowance of $355 and $279 at January 5, 1998 and
1999, respectively. . . . . . . . . . . . . . . . . . . . . . . 79,531 125,797
Vendor receivables, less allowance of $223 and $319 at January 5,
1998 and 1999, respectively . . . . . . . . . . . . . . . . . . 19,575 38,201
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601 993
----------- -----------
Total receivables. . . . . . . . . . . . . . . . . . . . . . 99,707 164,991
----------- -----------
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,160 33,333
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 816 2,084
----------- -----------
Total current assets.. . . . . . . . . . . . . . . . . . . . 140,063 204,370
----------- -----------
Equipment and leasehold improvements:
Furniture, fixtures and equipment. . . . . . . . . . . . . . . . . 12,174 17,593
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . 5,142 6,203
----------- -----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,316 23,796
Less accumulated depreciation. . . . . . . . . . . . . . . . . . . 6,770 10,323
----------- -----------
Net equipment and leasehold improvements . . . . . . . . . . 10,546 13,473
----------- -----------
Investment in lease residuals . . . . . . . . . . . . . . . . . . . . 3,480 3,219
Goodwill and other intangible assets. . . . . . . . . . . . . . . . . 12,697 32,249
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 478 915
----------- -----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . $ 167,264 $ 254,226
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands) January 5, January 5,
1998 1999
----------- -----------
LIABILITIES & EQUITY
<S> <C> <C>
Current liabilities:
Current portion of notes payable . . . . . . . . . . . . . . . . . . . $ 2,077 $ 5,028
Accounts payable:
Floor plan financing. . . . . . . . . . . . . . . . . . . . . . . . 22,818 34,767
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,220 44,050
----------- -----------
Total accounts payable . . . . . . . . . . . . . . . . . . . . . 40,038 78,817
Bank notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . 22,611 39,629
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,503 4,065
Accrued liabilities:
Employee compensation and benefits. . . . . . . . . . . . . . . . . 2,938 3,707
Income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,051 61
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 283
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 741 1,416
----------- -----------
Total current liabilities. . . . . . . . . . . . . . . . . . . . 77,035 133,006
----------- -----------
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,434 8,231
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 18 -
Equity:
Preferred stock (no shares issued or outstanding). . . . . . . . . . . - -
Common stock (11,402 and 11,707 shares issued and outstanding
at January 5, 1998 and 1999, respectively). . . . . . . . . . . . . 114 117
Paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,226 64,394
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . 28,641 48,800
----------- -----------
88,981 113,311
Less treasury stock, at cost (21 and 31 shares at January 5, 1998 and
1999, respectively) . . . . . . . . . . . . . . . . . . . . . . . . 204 322
----------- -----------
Total equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,777 112,989
----------- -----------
Total liabilities and equity. . . . . . . . . . . . . . . . . . . . $ 167,264 $ 254,226
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data) Fiscal Years Ended January 5,
------------------------------
1997 1998 1999
--------- -------- ---------
<S> <C> <C> <C>
Net sales and revenues:
Sales - equipment and supplies. . . . . $306,745 $440,983 $546,375
Service . . . . . . . . . . . . . . . . 29,613 50,465 81,553
--------- -------- ---------
Total net sales and revenues. . . 336,358 491,448 627,928
--------- -------- ---------
Cost of sales and service:
Equipment and supplies. . . . . . . . . 275,272 400,059 500,995
Service . . . . . . . . . . . . . . . . 6,481 10,004 16,511
--------- -------- ---------
Total cost of sales and service . 281,753 410,063 517,506
--------- -------- ---------
Gross profit. . . . . . . . . . . . . . 54,605 81,385 110,422
--------- -------- ---------
Operating expenses:
Selling, general and administrative . . 33,384 48,316 67,394
Rent expense. . . . . . . . . . . . . . 1,546 1,956 2,412
Depreciation. . . . . . . . . . . . . . 1,925 2,958 3,748
Amortization. . . . . . . . . . . . . . 636 982 1,629
Provision for doubtful accounts . . . . 245 325 141
--------- -------- ---------
Total operating expenses. . . . . 37,736 54,537 75,324
--------- -------- ---------
Income from operations . . . . . . . . . . 16,869 26,848 35,098
--------- -------- ---------
Other expense (income):
Interest expense. . . . . . . . . . . . 2,170 974 2,670
Litigation settlement and related costs 4,392 - -
Miscellaneous . . . . . . . . . . . . . (221) 54 (140)
--------- -------- ---------
Total other expense . . . . . . . 6,341 1,028 2,530
--------- -------- ---------
Income before income tax. . . . . . . . 10,528 25,820 32,568
Income tax expense. . . . . . . . . . . 4,296 9,507 12,409
--------- -------- ---------
Net income. . . . . . . . . . . . . . . $ 6,232 $ 16,313 $ 20,159
========= ======== =========
Weighted average shares outstanding:
Basic . . . . . . . . . . . . . . . . . 7,834 11,052 11,466
========= ======== =========
Diluted . . . . . . . . . . . . . . . . 8,106 11,367 11,751
========= ======== =========
Earnings per common share:
Basic . . . . . . . . . . . . . . . . . $ 0.80 $ 1.48 $ 1.76
========= ======== =========
Diluted . . . . . . . . . . . . . . . . $ 0.77 $ 1.44 $ 1.72
========= ======== =========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) Fiscal Years Ended January 5,
-------------------------------
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income. . . . . . . . . . . . . . . . . . . $ 6,232 $ 16,313 $ 20,159
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . 1,925 2,958 3,748
Amortization . . . . . . . . . . . . . . . . . . . 636 982 1,629
Deferred income taxes. . . . . . . . . . . . . . . 57 (638) (331)
Net acquisition of lease residuals . . . . . . . . (273) (437) 261
Issuance of common shares for stock awards . . . . 40 65 -
Changes in working capital accounts, net of
effects of acquisitions:
Accounts receivable. . . . . . . . . . . . . . . . (24,007) (29,618) (41,639)
Inventories. . . . . . . . . . . . . . . . . . . . (1,959) (16,369) 8,062
Prepaids . . . . . . . . . . . . . . . . . . . . . (199) (71) (1,129)
Floor plan financing . . . . . . . . . . . . . . . 16,932 (11,791) 11,949
Trade payables . . . . . . . . . . . . . . . . . . (3,949) 10,321 6,111
Deferred revenue . . . . . . . . . . . . . . . . . (355) 1,031 366
Income tax payable . . . . . . . . . . . . . . . . 426 3,270 (4,766)
Other, net . . . . . . . . . . . . . . . . . . . . (392) 1,044 (912)
--------- --------- ---------
Net operating activities . . . . . . . . . . . . . (4,886) (22,940) 3,508
--------- --------- ---------
Cash Flows from Investing Activities:
Capital expenditures. . . . . . . . . . . . . . (3,459) (2,399) (3,181)
Acquisition of subsidiary companies, net of
cash acquired. . . . . . . . . . . . . . . . . . . - (509) (10,214)
Acquisition of reseller assets, net of cash
acquired . . . . . . . . . . . . . . . . . . . . . (9,934) (2,990) (10,999)
--------- --------- ---------
Net investing activities . . . . . . . . . . . . . (13,393) (5,898) (24,394)
--------- --------- ---------
Cash Flows from Financing Activities:
Payments under notes payable . . . . . . . . . . . (1,288) (843) (2,149)
Proceeds under notes payable . . . . . . . . . . . - - 6,995
Net proceeds of stock offering . . . . . . . . . . 17,924 23,256 -
Net proceeds (payments) under bank notes payable . 6,419 (1,535) 16,319
Proceeds from exercise of stock options. . . . . . 1,767 1,531 3,375
Purchase of treasury stock . . . . . . . . . . . . - - (118)
Other. . . . . . . . . . . . . . . . . . . . . . . - - 46
Retirement of stock warrants . . . . . . . . . . . (330) - -
--------- --------- ---------
Net financing activities. . . . . . . . . . . . 24,492 22,409 24,468
--------- --------- ---------
Increase (decrease) in cash. . . . . . . . . . . . 6,213 (6,429) 3,582
Cash:
Beginning of period . . . . . . . . . . . . . . 596 6,809 380
--------- --------- ---------
End of period . . . . . . . . . . . . . . . . . $ 6,809 $ 380 $ 3,962
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands, except for Common Paid-in Retained Treasury Total
share amounts) stock capital earnings stock equity
------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Balances at January 5, 1996 . . . . $ 26 $ 13,279 $ 6,098 $ (204) $ 19,199
Net income . . . . . . . . . . . 6,232 6,232
3,076 common shares issued
for stock awards . . . . . . . . 40 40
113,316 common shares issued
for acquisitions . . . . . . . . 1 1,474 1,475
Stock options exercised and
related tax benefit. . . . . . . 4 2,049 2,053
Retirement of stock warrants . . (330) (330)
Effect of 3 for 2 stock split. . 20 (20) -
1,402,500 common shares
issued by public offering. . . . 14 17,910 17,924
------- --------- ---------- ---------- ---------
Balances at January 5, 1997 . . . . 65 34,402 12,330 (204) 46,593
Net income . . . . . . . . . . . 16,313 16,313
5,188 common shares issued
for stock awards . . . . . . . . 65 65
36,953 common shares issued
for acquisitions . . . . . . . . 1,021 1,021
Stock options exercised and
related tax benefit. . . . . . . 1 1,530 1,531
Effect of 3 for 2 stock split. . 38 (38) (2) (2)
1,020,000 common shares
issued by public offering. . . . 10 23,246 23,256
------- --------- ---------- ---------- ---------
Balances at January 5, 1998 . . . . 114 60,226 28,641 (204) 88,777
Net income . . . . . . . . . . . 20,159 20,159
38,885 common shares issued
for acquisitions . . . . . . . . 750 750
Stock options exercised and
related tax benefit. . . . . . . 3 3,372 3,375
Repayment of obligations under
Section 16(b) of the Securities
Exchange Act of 1934 . . . . . . 46 46
Purchase of treasury stock . . . (118) (118)
------- --------- ---------- ---------- ---------
Balances at January 5, 1999 . . . . $ 117 $ 64,394 $ 48,800 $ (322) $112,989
======= ========= ========== ========== =========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED JANUARY 5, 1997, JANUARY 5, 1998 AND JANUARY 5, 1999
1. COMPANY DESCRIPTION
Pomeroy Computer Resources, Inc. (the "Company") was organized in February 1992
to consolidate and reorganize predecessor companies. The Company has 15 million
shares of $.01 par value common stock authorized, with 11.7 million shares
outstanding. The Company is also authorized to issue 2 million shares of $.01
par value preferred stock. In fiscal 1995 the Company formed a wholly-owned
subsidiary, Technology Integration Financial Services, Inc. ("TIFS") (f/k/a -
Pomeroy Computer Leasing Company, Inc. ("PCL")), for the purpose of leasing
computer equipment to the Company's customers. In fiscal 1997, the Company
formed a wholly-owned subsidiary, Pomeroy Computer Resources of South Carolina,
Inc. ("PCR-SC") for the purpose of acquiring The Computer Store ("TCS"), a
computer reseller and service provider located in Columbia, South Carolina. In
fiscal 1998, the Company formed a wholly-owned subsidiary, Pomeroy Select
Integration Solutions, Inc. ("Pomeroy Select"), to which the Company transferred
the assets, liabilities, business, operations and personnel comprising the
Company's information technology ("IT") services business on January 6, 1999.
The Company sells, installs and services microcomputers and microcomputer
equipment primarily for commercial, health care, governmental, financial and
educational customers. The Company also derives revenue from customer support
services, including network analysis and design, systems configuration, cabling,
custom installation, training, maintenance and repair. The Company has thirty
regional offices located in 14 states throughout the Southeast and Midwest
United States. The Company grants credit to substantially all customers in these
areas.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The accompanying consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries Xenas
Communication Corp., TIFS, PCR-SC, Global Combined Technologies, Inc. and
Pomeroy Select. All significant intercompany accounts and transactions have been
eliminated in consolidation. Certain reclassifications have been made to the
1997 financial statements included herein to conform with the presentation used
in fiscal 1998.
Fiscal Year - The Company's fiscal year is a 12- month period ending January 5.
References to fiscal 1996, 1997 and 1998 are for the fiscal years ended January
5, 1997, January 5, 1998 and January 5, 1999, respectively.
Goodwill and Other Intangible Assets - Goodwill is amortized using the
straight-line method over periods of fifteen to twenty-five years. In accordance
with SFAS No. 121, "Accounting for The Impairment of Long-Lived Assets", the
Company evaluates its goodwill on an ongoing basis to determine potential
impairment by comparing the carrying value to the undiscounted estimated
expected future cash flows of the related assets. Other intangible assets are
amortized using the straight-line method over periods up to ten years.
Equipment and Leasehold Improvements - Equipment and leasehold improvements are
stated at cost. Depreciation on equipment is computed using the straight-line
method over estimated useful lives. Depreciation on leasehold improvements is
computed using the straight-line method over estimated useful lives or the term
of the lease, whichever is less. Expenditures for repairs and maintenance are
charged to expense as incurred and additions and improvements that significantly
extend the lives of assets are capitalized. Upon sale or retirement of
depreciable property, the cost and accumulated depreciation are removed from the
related accounts and any gain or loss is reflected in the results of operations.
Income Taxes - Deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
F-7
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Vendor Incentive Rebates - Certain vendors provide incentive rebates to perform
product training, advertising and other sales and market development activities.
The Company recognizes these rebates when it has completed its obligation to
perform under the specific incentive arrangement. Incentive rebates are recorded
as reductions of selling, general and administrative expense or, if volume
based, cost of sales.
Inventories - Inventories are stated at the lower of cost or market. Cost is
determined by the average cost method.
Revenue Recognition - The Company recognizes revenue on the sale of equipment
and supplies when the products are shipped. Service revenue is recognized when
the applicable services are provided.
Deferred Revenue - Revenues received on maintenance contracts are recognized
ratably over the lives of the contracts. Costs related to maintenance contracts
are recognized when incurred.
Stock-Based Compensation - The Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock-Based Compensation", in the Fall of 1995. The
statement encourages, but does not require, companies to record compensation
cost for stock-based employee compensation plans at fair value beginning in
fiscal 1996. The Company elected to account for stock-based compensation using
the intrinsic value method prescribed in Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees". Accordingly, compensation cost
for stock options is measured as the excess, if any, of the quoted market price
of the Company's common stock at the date of grant over the amount an employee
must pay to acquire the stock. The Company adopted SFAS No. 123 for disclosure
purposes and for non-employee stock options. This had no material effect on the
results of operations or financial position of the Company.
Earnings per Common Share - The computation of basic earnings per common share
is based upon the weighted average number of common shares outstanding during
the period. Diluted earnings per common share is based upon the weighted average
number of common shares outstanding during the period plus, in periods in which
they have a dilutive effect, the effect of common shares contingently issuable,
primarily from stock options.
In the fourth quarter of 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, Earnings Per Share ("SFAS 128"). SFAS 128 changed
the computation, presentation and disclosure requirements for earnings per share
("EPS") . Under SFAS 128, EPS is presented as basic earnings per share ("basic
EPS") and diluted earnings per share ("diluted EPS") and replaces the
presentation of primary EPS and fully diluted EPS. The adoption of SFAS 128
resulted in the restatement of earnings per share for all periods presented in
the Company's consolidated financial statements.
The following is a reconciliation of the number of shares used in the basic EPS
and diluted EPS computations:
<TABLE>
<CAPTION>
(in thousands, except per Fiscal Years
-------------------------------------------------------------
share data) 1996 1997 1998
------------------- ------------------- -------------------
Per Share Per Share Per Share
Shares Amount Shares Amount Shares Amount
------ ----------- ------ ----------- ------ -----------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS. . . . . . . . . . . . 7,834 $ 0.80 11,052 $ 1.48 11,466 $ 1.76
Effect of dilutive stock options 272 (0.03) 315 (0.04) 285 (0.04)
------ ----------- ------ ----------- ------ -----------
Diluted EPS. . . . . . . . . . . 8,106 $ 0.77 11,367 $ 1.44 11,751 $ 1.72
====== =========== ====== =========== ====== ===========
</TABLE>
Use of Estimates in Financial Statements - In preparing financial statements in
conformity with generally accepted accounting principles, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements, as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Fair Value Disclosures - The fair value of financial instruments approximates
carrying value.
Comprehensive Income - The Company does not have any comprehensive income items
other than net income.
F-8
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
New Pronouncements - In February 1998, the Accounting Standards Executive
Committee issued SOP 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. SOP 98-1 established the accounting for
costs of software developed or purchased for internal use, including when such
cost should be capitalized. The Company elected to early adopt SOP 98-1
beginning January 6, 1998. The Company does not expect SOP 98-1 to have a
material effect on the Company's financial condition or results of operations.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting No. 133, Accounting for Derivative Instruments and Hedging
Activities, which requires entities to report all derivatives at fair value as
assets or liabilities in their statements of financial position. This statement
is effective for financial statements issued for fiscal periods beginning after
June 15,1999. The Company does not currently have any derivative instruments or
hedging activities to report under this standard.
3. ACCOUNTS RECEIVABLE
The following table summarizes the activity in the allowance for doubtful
accounts for fiscal years 1996, 1997 and 1998:
<TABLE>
<CAPTION>
(in thousands) Trade Other
------- --------
<S> <C> <C>
Balance January 5, 1996. $ 201 $ 210
Provision 1996 . . . . . 250 31
Accounts written-off . . (249) (604)
Recoveries . . . . . . . 170 500
------- --------
Balance January 5, 1997. 372 137
Provision 1997 . . . . . 125 200
Accounts written-off . . (601) (415)
Recoveries . . . . . . . 459 301
------- --------
Balance January 5, 1998. 355 223
Provision 1998 . . . . . 193 1,100
Accounts written-off . . (444) (1,171)
Recoveries . . . . . . . 175 167
------- --------
Balance January 5, 1999. $ 279 $ 319
======= ========
</TABLE>
4. INVENTORIES
Inventories consist of items held for resale and are comprised of the following
components as of the end of fiscal:
<TABLE>
<CAPTION>
(in thousands) 1997 1998
------- -------
<S> <C> <C>
Equipment and supplies. $33,914 $28,081
Service parts . . . . . 5,246 5,252
------- -------
Total . . . . . . . . . $39,160 $33,333
======= =======
</TABLE>
F-9
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
5. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets consist of the following as of the end of
the fiscal year, net of accumulated amortization of $1,826 thousand (1997) and
$3,419 thousand (1998), respectively:
<TABLE>
<CAPTION>
(in thousands) 1997 1998
------- -------
<S> <C> <C>
Goodwill . . . . . . . . . $12,159 $31,531
Convenants not to compete. 61 292
Customer lists . . . . . . 477 426
------- -------
$12,697 $32,249
======= =======
</TABLE>
In fiscal 1996, the Company acquired certain assets of The Computer Supply
Store, Inc. ("TCSS") a privately held computer reseller located in Des Moines,
Iowa, AA Microsystems, Inc. ("AA Micro"), a network service provider located in
Birmingham, Alabama, and Communications Technology, Inc. ("DILAN"), a privately
held network integrator located in Hickory, North Carolina (See Note 12). The
Company recorded $5.7 million, $0.4 million and $2.5 million of goodwill in
connection with those acquisitions, respectively.
In fiscal 1997, the Company acquired certain assets of Magic Box, Inc. ("Magic
Box") , a privately held network integrator located in Miami, Florida, and Micro
Care, Inc. ("Micro Care"), a privately held systems integrator located in
Indianapolis, Indiana. A wholly-owned subsidiary of the Company, Pomeroy
Computer Resources of South Carolina, Inc., acquired all the assets and
liabilities of The Computer Store Inc., a network integrator located in
Columbia, South Carolina. The Company recorded $1.7 million, $1.9 million and
$0.4 million of goodwill in connection with those acquisitions, respectively.
In fiscal 1998, the Company acquired certain assets of Commercial Business
Systems, a privately held systems integrator in Richmond, Virginia, and Access
Technologies, Inc. ("Access"), a privately held telecommunications and computer
networking provider in Memphis, Tennessee. The Company recorded $1.9 million and
$8.9 million of goodwill in connection with those acquisitions, respectively. In
addition, the Company acquired through a stock purchase Global Combined
Technologies, Inc. a privately held systems integrator in Oklahoma City,
Oklahoma. The Company recorded $9.7 million of goodwill in connection with this
acquisition.
6. BORROWING ARRANGEMENTS
Prior to July 14, 1998, the Company had an available line of credit up to the
lesser of $20 million, or an amount based upon a formula of eligible trade
receivables, at an interest rate that varies based on the prime rate of the bank
or the LIBOR rate at the Company's election. At January 5, 1998, bank notes
payable include $6.5 million of overdrafts in accounts with the Company's
lender. These amounts were subsequently funded through the normal course of
business. The interest rate charged was 7.50% at January 5, 1998. The agreement,
which expired in June 1998, was collateralized by substantially all assets of
the Company, except those assets which collateralize certain other financing
arrangements. Under the revolving credit agreement, the Company could not make
any cash dividend payments.
On July 14, 1998, the Company finalized a $120 million credit facility with
Deutsche Financial Services Corp. ("DFS"). This credit facility provides a
credit line of $60.0 million for inventory financing and $60.0 million for
accounts receivable financing. The inventory financing portion of the credit
facility utilizes thirty day notes and provides interest free financing due to
subsidies by manufacturers. The credit facility can be amended, with proper
notification, if the thirty day interest free subsidies provided by
manufacturers are revised. At January 5, 1999, bank notes payable include $12.6
million of overdrafts in accounts with a participant bank to this credit
facility. These amounts were subsequently funded through the normal course of
business. The accounts receivable portion of the credit facility carries a
variable interest rate based on the prime rate less 125 basis points. The
interest rate charged was 6.5% at January 5, 1999. The credit facility is
collateralized by substantially all of the assets of the Company, except those
assets that collateralize certain other financing arrangements. Under the terms
of the credit facility, the Company is subject to various financial covenants.
F-10
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The maximum amount outstanding and the average amount outstanding on bank note
payable were as follows:
<TABLE>
<CAPTION>
(in thousands)
Maximum Amount Average Amount
Period Ending Outstanding Outstanding
- ---------------- --------------- ---------------
<S> <C> <C>
January 5, 1997. $ 26,687 $ 17,402
January 5, 1998. $ 25,800 $ 8,002
January 5, 1999. $ 51,600 $ 27,845
</TABLE>
The above average amounts outstanding are calculated by dividing the sum of the
average daily balances for each month by the number of months in the period. The
weighted average interest rate on the bank revolving credit agreements was 8.2%,
7.3% and 7.6% in fiscal 1996, 1997 and 1998, respectively.
The Company finances inventory through floor plan arrangements with two finance
companies. As of January 5, 1999, the floor plan lines of credit were $60
million with DFS and $12 million with IBM Credit Corporation ("ICC"). Borrowings
under the ICC floor plan arrangement are made on sixty day notes, with one-half
of the note amount due in thirty days. Borrowings under both floor plan
arrangement are made on thirty day notes. Financing on many of the arrangements
which are subsidized by manufacturers is interest free. The average rate on the
plans overall is less than 1.0%.
The maximum amount outstanding and the average amount outstanding on each of the
floor plan arrangements were as follows:
<TABLE>
<CAPTION>
(in thousands) ICC DFS
-------------------------------- --------------------------------
Maximum Amount Average Amount Maximum Amount Average Amount
Period Ending Outstanding Outstanding Outstanding Outstanding
- ---------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
January 5, 1997. $ 9,045 $ 5,779 $ 27,349 $ 18,532
January 5, 1998. $ 19,985 $ 10,459 $ 39,092 $ 25,069
January 5, 1999. $ 27,779 $ 18,516 $ 38,097 $ 25,040
</TABLE>
The average amount outstanding is calculated by dividing the sum of the
outstanding balances at the end of each month by the number of months in the
applicable period.
7. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
(in thousands) Fiscal Years
-------------------------
1996 1997 1998
------ ------- --------
<S> <C> <C> <C>
Current:
Federal. . . . . . . . . . $3,205 $8,742 $11,430
State. . . . . . . . . . . 1,034 1,036 1,310
------ ------- --------
Total current. . . . . . . 4,239 9,778 12,740
------ ------- --------
Deferred:
Federal. . . . . . . . . . 46 (217) (311)
State. . . . . . . . . . . 11 (54) (20)
------ ------- --------
Total deferred . . . . . . 57 (271) (331)
------ ------- --------
Total income tax provision $4,296 $9,507 $12,409
====== ======= ========
</TABLE>
F-11
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The approximate tax effect of the temporary differences giving rise to the
Company's deferred income tax assets (liabilities) are:
<TABLE>
<CAPTION>
(in thousands) Fiscal Years
------------------
1997 1998
-------- --------
<S> <C> <C>
Deferred Tax Assets:
Bad debt provision . . . . . . . . $ 282 $ 353
Depreciation . . . . . . . . . . . 193 293
Deferred compensation. . . . . . . 409 584
-------- --------
Total deferred tax assets. . . . . 884 1,230
-------- --------
Deferred Tax Liabilities
Acquisition of lease residuals . . (620) (615)
Accounts Receivable. . . . . . . . (518) (388)
Other. . . . . . . . . . . . . . . - (119)
-------- --------
Total deferred tax liabilities . . (1,138) (1,122)
-------- --------
Net deferred tax asset (liability) $ (254) $ 108
======== ========
</TABLE>
The Company's effective income tax rate differs from the Federal statutory rate
as follows:
<TABLE>
<CAPTION>
Fiscal Years
------------------
1996 1997 1998
---- ----- -----
<S> <C> <C> <C>
Tax at Federal statutory rate 34.0 35.0 35.0
State taxes . . . . . . . . . 6.6 4.7 4.4
Kentucky Relocation Credits . - (2.2) (1.9)
Other . . . . . . . . . . . . 0.2 (0.7) 0.6
---- ----- -----
Effective tax rate. . . . . . 40.8 36.8 38.1
==== ===== =====
</TABLE>
8. OPERATING LEASES
The Company leases office and warehouse space, vehicles and certain office
equipment from various lessors. Lease terms vary in duration and include various
option periods. The leases generally require the Company to pay taxes and
insurance. Future minimum lease payments under noncancelable operating leases
with initial or remaining terms in excess of one year as of January 5, 1999 are
as follows:
<TABLE>
<CAPTION>
(in thousands)
Fiscal Year
- -----------------------------
<S> <C>
1999. . . . . . . . . . . . . $ 2,738
2000. . . . . . . . . . . . . 2,170
2001. . . . . . . . . . . . . 1,902
2002. . . . . . . . . . . . . 1,561
2003. . . . . . . . . . . . . 1,315
Thereafter. . . . . . . . . . 2,457
-------
Total minimum lease payments. $12,143
=======
</TABLE>
9. EMPLOYEE BENEFIT PLANS
The Company has a savings plan intended to qualify under sections 401(a) and
401(k) of the Internal Revenue Code. The plan covers substantially all employees
of the Company. The Company did not contribute to the plan in fiscal 1996 or
1997. Beginning January 6, 1998, the Company made contributions
F-12
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
to the plan based on a participant's annual pay. Contributions made by the
Company for fiscal 1998 were Approximately $169 thousand. During fiscal 1998,
the distribution of assets from the Employee Stock Ownership Plan was completed.
10. INVESTMENT IN LEASE RESIDUALS
The Company participates in a Remarketing and Agency Agreement ("Agreement")
with Information Leasing Corporation ("ILC") whereby the Company obtains rights
to 50% of lease residual values for services rendered in connection with
locating the lessee, selling the equipment to ILC and agreeing to assist in
remarketing the used equipment.
During fiscal 1996, 1997 and 1998 the Company sold equipment and related support
services to ILC, for lease to ILC's customers, in amounts of $15.2 million, $7.7
million, and $2.8 million, respectively. The Company also obtained rights to
lease residuals from ILC in the amount of $575 thousand, $562 thousand and $250
thousand in 1996, 1997, and 1998, respectively. Such amounts are recorded as a
reduction of the related cost of sales. Residuals acquired in this manner are
recorded at the estimated present value of the interest retained.
The Company also purchases residuals associated with separate leasing
arrangements entered into by ILC. Such transactions do not involve the sale of
equipment and related support services by the Company to ILC. Residuals acquired
in this manner are accounted for at cost.
The carrying value of investments in lease residuals is evaluated on a quarterly
basis, and is subject only to downward market adjustments until ultimately
realized through a sale or re-lease of the equipment.
11. MAJOR CUSTOMERS
Sales to a major customer were approximately $40.3 million for fiscal 1996.
Sales to a major customer were approximately $60.4 million for fiscal 1997.
There were no sales to a major customer for fiscal 1998.
12. ACQUISITIONS
During fiscal 1996, the Company completed several acquisitions. The total
consideration given consisted of $7.2 million in cash, subordinated notes of
$4.0 million and 170 thousand unregistered shares of the Company's common stock
with an approximate value of $1.5 million. Interest on the subordinated notes is
payable quarterly. Principal is payable in equal annual installments. The
acquisitions were accounted for as purchases, accordingly the purchase price was
allocated to assets and liabilities based on their estimated value as of the
dates of acquisition. The results of operations of the acquisitions are included
in the consolidated statement of income from the dates of acquisition.
The following table summarizes, on an unaudited pro forma basis, adjusted to
reflect a three-for-two splits of the Company's common stock in the form of a
stock dividends paid on October 4, 1996 and October 6, 1997, the estimated
combined results of the Company and the 1996 acquisitions assuming the
acquisitions had occurred on January 6, 1995. These results include certain
adjustments, primarily goodwill amortization and interest expense, and are not
necessarily indicative of what results would have been had the Company owned
these businesses during fiscal 1996:
<TABLE>
<CAPTION>
Fiscal 1996
------------
<S> <C>
(in thousands)
Net sales and revenues. . . . $ 364,005
Net income. . . . . . . . . . $ 6,250
Net income per common share:
Basic . . . . . . . . . . . . $ 0.80
Diluted . . . . . . . . . . . $ 0.77
</TABLE>
During fiscal 1997, the Company completed several acquisitions. The total
consideration given consisted of $3.7 million in cash, subordinated notes of
$1.3 million and 37 thousand unregistered shares of the Company's common stock
with an approximate value of $1.0 million. Interest on the subordinated notes is
F-13
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
payable quarterly. Principal is payable in equal annual installments. The
acquisitions were accounted for as purchases, accordingly the purchase price
was allocated to assets and liabilities based on their estimated value as of the
dates of acquisition. The results of operations of the acquisitions are included
in the consolidated statement of income from the dates of acquisition. If the
1997 acquisitions had occurred on January 6, 1996, the pro forma operations of
the Company would not have been materially different than that reported in the
accompanying consolidated statements of income.
During fiscal 1998, the Company completed several acquisitions. The total
consideration given consisted of $21.2 million in cash, subordinated notes of
$3.3 million and 39 thousand unregistered shares of the Company's stock with an
approximate value of $0.8 million. Interest on the subordinated notes is payable
quarterly. Principal is payable in equal annual installments. The acquisitions
were accounted for as purchases, accordingly the purchase price was allocated to
assets and liabilities based on their estimated value as of the dates of
acquisition. The results of operations of the acquisitions are included in the
consolidated statement of income from the dates of acquisition. If the 1998
acquisitions had occurred on January 6, 1997, the pro forma operations of the
Company would not have been materially different than that reported in the
accompanying consolidated statements of income.
13. RELATED PARTIES
The Company leases its headquarters and distribution facility from a company
that is controlled by the Chief Executive Officer of the Company. It is a triple
net lease agreement which expires in the year 2006. The base rental for 1998 was
$828 thousand. The annual rental for these properties was determined on the
basis of a fair market value rental opinion provided by an independent real
estate company.
14. SUPPLEMENTAL CASH FLOW DISCLOSURES
Supplemental disclosures with respect to cash flow information and non-cash
investing and financing activities are as follows:
<TABLE>
<CAPTION>
(in thousands) Fiscal Years
-----------------------------
1996 1997 1998
-------- -------- ---------
<S> <C> <C> <C>
Interest paid . . . . . . . . . $ 2,065 $ 1,045 $ 2,463
======== ======== =========
Income taxes paid . . . . . . . $ 3,813 $ 4,920 $ 17,432
======== ======== =========
Business combinations accounted
for as purchases:
Assets acquired . . . . . . . . $24,526 $ 7,358 $ 50,228
Liabilities assumed . . . . . . (9,121) (1,495) (25,015)
Note payable. . . . . . . . . . (3,996) (1,343) (3,250)
Stock issued. . . . . . . . . . (1,475) (1,021) (750)
-------- -------- ---------
Net cash paid . . . . . . . . . $ 9,934 $ 3,499 $ 21,213
======== ======== =========
</TABLE>
15. STOCKHOLDERS' EQUITY AND STOCK OPTION PLANS
In July 1996, the Company completed a secondary public offering of 1.4 million
new shares of its common stock. The net proceeds of $17.9 million were used to
reduce amounts outstanding under the line of credit. If this secondary offering
had been completed as of January 6, 1996, pro forma basic and diluted earnings
per share would have been $0.77 and $0.75, respectively, for fiscal 1996. This
computation assumes no interest expense related to the credit line and the
issuance of only a sufficient number of shares to eliminate the credit line at
the beginning of fiscal 1996.
In February 1997, the Company completed a secondary public offering of 1.02
million shares of its common stock. The net proceeds of $23.3 million were used
to reduce amounts outstanding under the Company's line of credit. If this
secondary offering had been completed as of January 6, 1997, pro forma basic and
diluted earnings per share would have been $1.38 and $1.34 , respectively, for
fiscal 1997. This computation assumes no interest expense related to the credit
line and the issuance of only a sufficient number of shares to eliminate the
credit line at the beginning of fiscal 1997.
F-14
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
On September 6, 1996, the Company's Board of Directors authorized a
three-for-two stock split in the form of a stock dividend payable October 4,
1996, to shareholders of record September 19, 1996. The split resulted in the
issuance of 2.1 million new shares of common stock. The stated par value of each
share was not changed from $0.01. A total of $20 thousand was reclassified from
the Company's additional paid in capital account to the Company's common stock
account. Accordingly, net income per common share, weighted average shares
outstanding and stock option plan information were restated to reflect the stock
split.
On September 8, 1997, the Company's Board of Directors authorized a
three-for-two stock split in the form of a stock dividend payable October 6,
1997, to shareholders of record September 22, 1997. The split resulted in the
issuance of 3.8 million new shares of common stock. The stated par value of each
share was not changed from $0.01. A total of $38 thousand was reclassified from
the Company's additional paid in capital account to the Company's common stock
account. Accordingly, net income per common share, weighted average shares
outstanding and stock option plan information were restated to reflect the stock
split.
In January 1998, the Board of Directors of the Company approved the repricing of
certain unexercised options granted under the 1992 Non-Qualified and Incentive
Stock Option Plan. As a result, 109,649 options granted during fiscal 1997 were
repriced to $16.63 per share from $34.19 per share. These amounts approved by
the Board of Directors do not give effect to the stock split approved after the
date of the original grant of the options.
The Company's 1992 Non-Qualified and Incentive Stock Option Plan provides
certain employees of the Company with options to purchase common stock of the
Company through options at an exercise price equal to the market value on the
date of grant. 990,000 shares of the common stock of the Company are reserved
for issuance under the plan. The plan will terminate ten years from the date of
adoption. Stock options granted under the plan are exercisable in accordance
with various terms as authorized by the Compensation Committee. To the extent
not exercised, options will expire not more than ten years after the date of
grant.
The Company's 1992 Outside Directors' Stock Option Plan provides outside
directors of the Company with options to purchase common stock of the Company at
an exercise price equal to the market value of the shares at the date of grant.
175,000 shares of common stock of the Company are reserved for issuance under
the plan. The plan will terminate ten years from the date of adoption. Pursuant
to the plan, an option to purchase 10,000 shares of common stock automatically
will be granted on the first day of the initial term of a director. An
additional 2,500 shares of common stock automatically will be granted to an
eligible director upon the first day of each consecutive year of service on the
board. Options may be exercised after one year from the date of grant for not
more than one-third of the shares subject to the option and an additional
one-third of the shares subject to the option may be exercised for each of the
next two years thereafter. To the extent not exercised, options will expire five
years after the date of grant.
F-15
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The following summarizes the stock option transactions under the plans for the
three fiscal years ended January 5, 1999:
<TABLE>
<CAPTION>
Weighted Average
Shares Exercise price
--------- -----------------
<S> <C> <C>
Options outstanding January 5, 1996 218,540 $ 8.32
Granted . . . . . . . . . . . . . . 149,600 13.83
Exercised . . . . . . . . . . . . . (197,047) 8.97
Stock split effect. . . . . . . . . 121,082 7.21
---------
Options outstanding January 5, 1997 292,175 7.27
Granted . . . . . . . . . . . . . . 216,328 30.10
Exercised . . . . . . . . . . . . . (95,260) 8.70
Forfeitures . . . . . . . . . . . . (4,700) 34.19
Stock split effect. . . . . . . . . 227,754 5.61
---------
Options outstanding January 5, 1998 636,297 12.01
Granted . . . . . . . . . . . . . . 278,953 17.75
Exercised . . . . . . . . . . . . . (264,990) 8.98
Forfeitures . . . . . . . . . . . . (7,175) 10.24
Repricing effect. . . . . . . . . . (54,826) 6.16
---------
Options outstanding January 5, 1999 588,259 $ 13.97
=========
</TABLE>
The following summarizes options outstanding and exercisable at January 5, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------------------------------------------
Weighted Avg. Number
Range of Number Outstanding Remaining Weighted Avg. Exercisable Weighted Avg.
Exercise Prices at 1/5/99 Contractual Life Exercise Price at 1/5/99 Exercise Price
- ---------------- ------------------ ---------------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
3.63 to $7.95 . 161,249 1.54 $ 5.53 134,417 $ 5.43
13.25 to $19.54 402,010 1.20 $ 16.70 393,260 $ 16.76
21.50 to $28.25 25,000 3.50 $ 24.45 25,000 $ 24.45
------------------ -----------
588,259 1.48 $ 13.97 552,677 $ 14.36
================== ===========
</TABLE>
The weighted average fair value at date of grant for options granted during
fiscal 1997 and 1998 was $6.77 and $7.00, respectively. The fair value of
options at the date of grant was estimated using the Black-Scholes model with
the following weighted average assumptions:
<TABLE>
<CAPTION>
Fiscal 1996 Fiscal 1997 Fiscal 1998
------------ ------------ ------------
<S> <C> <C> <C>
Expected life (years) 1.7 1.8 2.0
Interest rate . . . . 5.8% 6.1% 5.3%
Volatility. . . . . . 55% 56% 69%
Dividend yield. . . . 0% 0% 0%
</TABLE>
Had compensation cost for the Company's stock option plans been determined based
on the fair value at the grant date for awards in fiscal 1995 and 1996
consistent with the provisions of SFAS No. 123, the Company's net income and
earnings per share would have been reduced to the pro forma amounts indicated
below:
F-16
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
(in thousands, except per
share amounts) Fiscal 1996 Fiscal 1997 Fiscal 1998
------------ ------------ ------------
<S> <C> <C> <C>
Net income - as reported . . . . . . . . . $ 6,232 $ 16,313 $ 20,159
Net income - pro forma . . . . . . . . . . $ 5,777 $ 14,455 $ 18,929
Net income per common share - as reported
Basic. . . . . . . . . . . . . . . . . . 0.80 1.48 1.76
Diluted. . . . . . . . . . . . . . . . . 0.77 1.44 1.72
Net income per common share - pro forma
Basic. . . . . . . . . . . . . . . . . . 0.74 1.31 1.65
Diluted. . . . . . . . . . . . . . . . . 0.71 1.27 1.57
</TABLE>
In fiscal 1996 and 1997, 3,076 and 544, respectively, shares of common stock
were awarded to officers of the Company. Compensation expense resulting from the
awards was $40 thousand in fiscal 1996 and $20 thousand in fiscal 1997.
16. LITIGATION
There are various legal actions arising in the normal course of business that
have been brought against the Company. Management believes these matters will
not have a material adverse effect on the Company's consolidated financial
position or results of operations.
17. SEGMENT INFORMATION AND CONCENTRATIONS
Segment Information - The Company operates in two industry segments: products
and services. The products segment is primarily engaged in the sale,
distribution and leasing of microcomputers and related products. The services
segment offers three categories of services: life cycle services;
internetworking services and customer support services. Life cycle services
include warranty and non warranty repair and maintenance; a full range of
install, move, add or change services; redeployment and mobile systems
management; evaluation and tracking of information technology assets; and
end-of-life services. Internetworking services include project management;
network design, integration, management, migration and support; and cabling
services. Customer support services include customized help desk services,
Internet-based training on many popular software packages and
video/teleconferencing services. The Company provides products and services
primarily to large and medium sized corporate, health care, governmental,
financial and educational customers located in the United States. The Company
has no operations outside the United States.
The accounting policies of the segments are the same as those discussed in the
summary of significant accounting policies. Certain reclassifications have been
made to conform to segment reporting. The Company evaluates performance based on
operating earnings of the respective business units. Intersegment sales and
transfers are not significant.
Summarized financial information concerning the Company's reportable segments is
shown in the following table. (in thousands)
<TABLE>
<CAPTION>
Fiscal 1996
--------------------------------------
Products Services Consolidated
--------- ------------ -------------
<S> <C> <C> <C>
Revenue . . . . . . . . . . . $ 309,962 $ 26,396 $ 336,358
Income from operation . . . . $ 13,497 $ 3,372 $ 16,869
Total assets. . . . . . . . . $ 103,698 $ 17,682 $ 121,380
Capital expenditures . . . . . $ 3,205 $ 254 $ 3,459
Depreciation and amortization $ 2,223 $ 338 $ 2,561
</TABLE>
F-17
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
Fiscal 1997
--------------------------------------
Products Services Consolidated
--------- ------------ -------------
<S> <C> <C> <C>
Revenue . . . . . . . . . . . $ 446,239 $ 45,209 $ 491,448
Income from operation . . . . $ 20,815 $ 6,033 $ 26,848
Total assets. . . . . . . . . $ 142,562 $ 24,702 $ 167,264
Capital expenditures . . . . . $ 1,444 $ 955 $ 2,399
Depreciation and amortization $ 3,358 $ 582 $ 3,940
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1998
--------------------------------------
Products Services Consolidated
--------- ------------ -------------
<S> <C> <C> <C>
Revenue . . . . . . . . . . . $ 555,433 $ 72,495 $ 627,928
Income from operation . . . . $ 23,118 $ 11,980 $ 35,098
Total assets. . . . . . . . . $ 212,027 $ 42,199 $ 254,226
Capital expenditures . . . . . $ 2,807 $ 374 $ 3,181
Depreciation and amortization $ 4,382 $ 995 $ 5,377
</TABLE>
Concentrations - During fiscal 1998, approximately 30.2% of the Company's total
net sales and revenues were derived from its top ten customers.
Due to the demand for the products sold by the Company, significant product
shortages occur from time to time because manufacturers are unable to produce
certain products to meet increased demand. Failure to obtain adequate product
shipments could have a material adverse effect on the Company's operations and
financial results.
The Company is required to have authorizations from manufacturers in order to
sell their products. The loss of a significant vendor's authorization could have
a material adverse effect on the Company's business.
18. SUBSEQUENT EVENTS
Pomeroy Select Integration Solutions, Inc. On January 6, 1999, the Company
contributed the assets, liabilities, business, operations and personnel of its
IT services business to POMEROY SELECT in exchange for 10,000,000 shares of its
Class B Common Stock. Pomeroy Select's Board of Directors authorized management
to file a registration statement with the Securities and Exchange Commission
(the "SEC") with respect to an initial public offering of its Class A Common
Stock.
F-18
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and is entered into this
__________ day of December, 1998, by, between and among POMEROY COMPUTER
RESOURCES, INC., a Delaware corporation, (the "Purchaser"), ACCESS TECHNOLOGIES,
INC., a Tennessee corporation ("Seller"), MARK V. PUTMAN ("M. Putman"), PAUL
BISHOP ("P. Bishop"), and DAVID BARTHEL ("D. Barthel") (M. Putman, P. Bishop,
and D. Barthel hereinafter referred to collectively as the "Shareholders" and
individually as "Shareholder").
W I T N E S S E T H :
WHEREAS, Seller is a full service provider of a variety of computer service and
support solutions, including installation, training, set-up and consultation, to
large and medium size commercial, governmental and other professional customers
throughout Memphis, Tennessee and the Mid-South area of the United States (the
"Business"); and
WHEREAS, M. Putman is the owner of two hundred fifty-five (255) shares of the
outstanding stock of Seller, P. Bishop is the owner of one hundred eighty-two
and one-half (182.50) shares of the outstanding stock of Seller and D. Barthel
is the owner of sixty-two and one-half (62.50) shares of the outstanding stock
of Seller, which stock, in the aggregate, constitutes 88% of the outstanding
stock of Seller; and
WHEREAS, Purchaser desires to purchase substantially all the assets of Seller
used in its Business and assume certain of the liabilities of Seller in
connection with the Business, and Seller desires to sell substantially all of
such assets, subject to such liabilities, but only (i) upon the terms and
subject to the conditions set forth in this Agreement, (ii) the representations,
warranties, covenants, indemnifications, assurances and undertakings of Seller,
Shareholders and of Purchaser contained in this Agreement, (iii) the agreements
of Seller to refrain from competition with Purchaser for five (5) years from the
closing of this transaction , (iv) the agreement of M. Putman and P. Bishop to
refrain from competition for the later of five (5) years from the Closing Date
or one (1) year after the termination of such individual's employment with
Purchaser pursuant to and in accordance with, the terms of their respective
Employment Agreements to be executed upon Closing, and (v) the agreement of D.
Barthel to refrain from competition for the later of one (1) year from the
Closing Date or one (1) year after the termination of D. Barthel's employment
with Purchaser.
NOW, THEREFORE, in consideration of the above premises and the mutual promises,
covenants, agreements, representations and warranties herein contained, the
parties hereto agree as follows:
<PAGE>
1.
DEFINITIONS
-----------
1.1 Affiliate. "Affiliate" shall have the meaning ascribed to such term in Rule
---------
405 promulgated under the Securities Act of 1933, as amended.
1.2 Assumed Liabilities. The "Assumed Liabilities" are the liabilities of
--------------------
Seller assumed or paid at Closing by the Purchaser pursuant to Sections 3.1
and 3.2 of this Agreement.
1.3 Balance Sheet. The "Balance Sheet" is the audited balance sheet of Seller
-------------
as of September 30, 1998, included as part of the Financial Statements.
1.4 Closing. The "Closing" shall be the consummation of the transactions
-------
contemplated under this Asset Purchase Agreement.
1.5 Closing Date. The "Closing Date" shall be as of 10:00 a.m., E.D.T.,
-------
December 7th, 1998.
1.6 Code. The "Code" is the Internal Revenue Code of 1986, as amended, 26
----
U.S.C. ss.1 et seq.
1.7 Court. A "Court" is any federal, state, municipal, domestic, foreign or
-----
other governmental tribunal or an arbitrator or person with similar power
or authority.
1.8 Disclosure Schedule. The "Disclosure Schedule" is the Disclosure Schedule
-------------------
dated the date of this Agreement and delivered by Seller to Purchaser.
1.9 Encumbrance. An "Encumbrance" is any security interest, lien, or
-----------
encumbrance whether imposed by agreement, understanding, law or otherwise,
on any Purchased Assets (as defined herein).
1.10 Excluded Assets. An "Excluded Asset" is any asset set forth in Section 2.3.
---------------
1.11 Financial Statements. The "Financial Statements" are the audited financial
--------------------
statements of Seller for the period beginning January 1, 1998 and ending
September 30, 1998 and the unaudited financial statements (except for the
balance sheets, which are audited ) for the years ending December 31, 1997
and December 31, 1996, including any and all notes thereto.
1.12 Governmental Entity. A "Governmental Entity" is any Court or any federal,
--------------------
state, municipal, domestic, foreign or other administrative agency,
department, commission, board, bureau or other governmental authority or
instrumentality.
1.13 Knowledge. "Knowledge of Seller and Shareholder" shall mean the actual
---------
knowledge of any of the Shareholders.
-2-
<PAGE>
1.14 Net Asset Amount. "Net Asset Amount" shall have the meaning set forth in
-----------------
Section 5.1.
1.15 Person. Any natural person, firm, partnership, association, corporation,
------
company, limited liability company, limited partnership, trust, business
trust, governmental authority or other entity.
1.16 Pro Forma Balance Sheet. The "Pro Forma Balance Sheet" is the unaudited
------------------------
balance sheet of Seller prepared as described in Section 5.1 and adjusted
for Excluded Assets of Seller and Excluded Liabilities of Seller as of the
Closing Date.
1.17 Pro Forma EBIT. The earnings of Seller's Business for the period commencing
--------------
January 1, 1998 and ending upon the Closing Date and the earnings of
Purchaser's Access/Memphis Division for the period commencing on the
Closing Date and ending December 31, 1998 before interest and taxes, and
without incorporating gains or losses realized on the disposition of assets
other than in the ordinary course of business. The determination of Pro
Forma EBIT shall be determined in accordance with the provisions set forth
in Section 5.2.
1.18 Purchase Price. The "Purchase Price" is the total consideration paid by
--------------
Purchaser to Seller for the Purchased Assets as set forth in Section 4.1.
1.19 Purchased Assets. The "Purchased Assets" are the assets of Seller used in
----------------
the Business, acquired by the Purchaser pursuant to the terms of this
Agreement.
1.20 Seller's Accountant. Seller's Accountant shall mean Rhea & Ivy, P.L.C.,
--------------------
6000 Poplar Avenue, Memphis, Tennessee 38120.
1.21 September 30, 1998 Pro Forma Balance Sheet. The "September 30, 1998 Pro
-------------------------------------------
Forma Balance Sheet is the audited balance sheet of Seller relating to the
Business adjusted for Excluded Assets of Seller and Excluded Liabilities of
Seller as of such date, a copy of which is attached hereto as Exhibit S.
1.22 Tax or Taxes: Any federal, state, provincial, local, foreign or other
------------
income, alternative, minimum, any taxes under Section 1374 of the Code, any
taxes under Section 1375 of the Code, accumulated earnings, personal
holding company, franchise, capital stock, net worth, capital, profits,
windfall profits, gross receipts, value added, sales, use, goods and
services, excise, customs duties, transfer, conveyance, mortgage,
registration, stamp, documentary, recording, premium, severance,
environmental, including taxes under Section 59A of the Code), real
property, personal property, ad valorem, intangibles, rent, occupancy,
license, occupational, employment, unemployment insurance, social security,
disability, workers' compensation, payroll, health care, withholding,
estimated or other similar tax, duty or other governmental charge or
assessment or deficiencies thereof (including all interest and penalties
thereon and additions thereto whether disputed or not).
-3-
<PAGE>
1.23 Tax Return. A "Tax Return" is a report, return or other information
-----------
required to be supplied to a Governmental Entity in connection with Taxes
including, where permitted or required, combined or consolidated returns
for any group of entities that includes Seller.
2.
TERMS
-----
2.1 Agreement.
---------
Seller agrees to sell and convey to Purchaser the Purchased Assets as
hereinafter set forth in Section 2.2. The agreements of Purchaser and
Seller are expressly conditioned upon the terms, conditions, covenants,
representations and warranties as hereinafter set forth.
2.2 Assets to be Sold by Seller and Purchased by Purchaser.
------------------------------------------------------
At the Closing of this Agreement, Purchaser shall purchase and Seller shall
sell all the assets of Seller, used in the Business, except for the
Excluded Assets. The Purchased Assets shall include, but not be limited to:
(a) The tangible personal property and assets of Seller of every kind and
description, real, personal or mixed, wherever located, used in the
Business including without limitation, all such assets as reflected on
the September 30, 1998 Pro Forma Balance Sheet (excepting those assets
disposed of, and including those assets acquired, in the ordinary
course of business since the date of the September 30, 1998 Pro Forma
Balance Sheet). Such fixed assets and equipment of Seller are set
forth on attached Exhibit A;
(b) All intangible assets of Seller which are used in the Business of
Seller, including without limitation, all purchase orders, contract
rights and agreements, work in process, customers lists, supplier
agreements, patents, trademarks and service marks (including the
goodwill associated with the marks), office supplies, computer
programs, claims of the Seller, the right to the use of the corporate
and trade names of or used by the Seller, or any derivative thereof,
as all or a part of a corporate or trade name;
(c) All investment securities, cash and cash equivalents and customers
notes receivable relating to the Business;
(d) All inventory of the Business which shall be valued on a moving
average basis at the lower of cost of acquisition, less any trade or
cash discounts, or market, as set forth on Exhibit B attached hereto;
-4-
<PAGE>
(e) All accounts receivable and vendor receivables relating to the
Business as set forth on Exhibit C attached hereto;
(f) Certain vehicles of Seller set forth on attached Exhibit D;
(g) All prepaid expenses applicable to the Business, including but not
limited to all prepaid software licenses ;
(h) All of Seller's fixed rate contracts and time and material contracts
with the organizations set forth on attached Exhibit E;
(i) All vendor rebates, spiff money, retainage amounts under any
contracts, and any customer deposits;
(j) All of Seller's service contracts which are set forth on attached
Exhibit F;
(k) All distribution contracts and authorizations of Seller related to the
Business;
(l) All base artwork, photo materials, plates (if owned by Seller),
separations and other materials that are used by Seller for printing
brochures and promotional materials including all intellectual
property rights therein;
(m) The assignment of any telephone numbers used in the Business of
Seller;
(n) The entire right, title, benefit and interest of Seller, now existing
or hereafter arising, in or to all indemnities, guarantees,
warranties, claims and choses of action of Seller against other
parties with respect to the Purchased Assets, including by way of
example and not limitation, any rights under insurance policies and
any other rights thereunder, but only with respect to the Purchased
Assets;
(o) The Seller's rights under the agreements set forth in Schedule 2.2(o)
with respect to the parties set forth therein, pursuant to which such
parties agreed not to disclose, use or communicate information
regarding such parties' business (which is part of the Business) and
not to engage in certain activities competitive with the Business; and
(p) All other fees, assets, property, business and going concern value,
ant to disclose confidential information or not to compete, if any)
and rights under the respective asset purchase agreements, stock
purchase agreements ord rights of Seller (including the rights under
covenants or agreements not to disclose confidential information or
not to compete, if any) and rights under the respective asset purchase
agreements, stock purchase agreements or other documents set forth on
Schedule 2.2(p) (and related documents) pursuant to which Seller
acquired certain of the assets of the parties set forth in such
Schedule.
-5-
<PAGE>
2.3 Excluded Assets.
---------------
The Excluded Assets are set forth on Exhibit G hereto.
2.4 Lease Agreements.
----------------
Seller is the lessee under certain lease agreements calling for payments of
more than $5,000.00 per year covering the following real and personal
properties:
(i) Real property located at 5828 Shelby Oaks Drive, Memphis, Tennessee
38134
At the Closing, Seller and Purchaser shall execute necessary documentation
for the assignment of these leases and all of Seller's right and interest
thereunder to Purchaser and, at the Closing, Seller shall assign all its
rights and interest in said leases to Purchaser. Purchaser agrees to
indemnify and hold Seller harmless from any liability with respect to the
aforementioned leases occurring after the Closing Date. To the extent that
the assignment of any lease shall require the consent of other parties
thereto, this Agreement shall not constitute an assignment thereof and
Seller shall obtain any such necessary consents or assignments by the
Closing, or as reasonably possible after the Closing.
2.5 Instruments of Transfer.
-----------------------
Except as otherwise provided herein, at Closing, Seller will deliver to
Purchaser such bills of sale, endorsements, assignments and other good and
sufficient instruments of transfer and assignment as shall be effective to
vest in Purchaser good and marketable title and interest in and to the
Purchased Assets. At or after the Closing, and without further
consideration, Seller will execute and deliver to Purchaser such further
instruments of conveyance and transfer and take such other action as
Purchaser may reasonably request in order to more effectively convey and
transfer to Purchaser any of the Purchased Assets or for aiding and
assisting and collecting and reducing to possession and exercising rights
with respect thereto. Seller and the Shareholders agree to use their best
efforts to obtain and deliver to Purchaser such consents, approvals,
assurances and statements from third parties as Purchaser may reasonably
require in a form reasonably satisfactory to Purchaser. In addition to the
foregoing, Seller will deliver to Purchaser the originals or copies of all
of Seller's books, records and other data relating to the Purchased Assets;
and simultaneously with such delivery, Seller shall take all such acts as
may be necessary to put Purchaser in actual possession, and operating
control of the Purchased Assets. Seller shall cooperate with Purchaser to
permit Purchaser, if possible, to enjoy Seller's ratings and benefits under
workmen's compensation laws and unemployment compensation laws to the
extent permitted by such laws.
-6-
<PAGE>
2.6 Instruments Giving Certain Powers and Rights.
--------------------------------------------
At the Closing, Seller shall, by appropriate instrument, constitute and
appoint Purchaser, its successors and assigns, the true and lawful attorney
of Seller with full power of substitution, in the name of Purchaser, or the
name of Seller, on behalf of and for the benefit of Purchaser, to collect
all accounts receivable and/or vendor receivables and other items being
transferred and assigned to Purchaser as provided herein, to endorse,
without recourse, any and all checks in the name of Seller the proceeds of
which Purchaser is entitled to hereunder, to institute and prosecute, in
the name of Seller or otherwise, all proceedings which Purchaser may deem
proper in order to collect, assert or enforce any claim, right or title of
any kind in or to the Purchased Assets, to defend and compromise any and
all actions, suits and proceedings in respect of any of the Purchased
Assets, and to do all such acts and things in relation thereto as Purchaser
may deem advisable. Seller agrees that the foregoing powers are coupled
with an interest and shall be irrevocable by Seller, directly or
indirectly, by the dissolution of Seller or in any manner or for any
reason. Seller further agrees that Purchaser shall retain for its own
account any amounts collected pursuant to the foregoing powers, and Seller
shall pay or transfer to Purchaser, if and when received, any amounts which
shall be received by Seller after the Closing in respect of any such
receivables or other assets, properties, rights or business to be
transferred and assigned to Purchaser as provided herein. Seller further
agrees that, at any time or from time to time after the Closing, it will,
upon the request of Purchaser and at Seller's expense, do, execute,
acknowledge and deliver, or will cause to be done, executed, acknowledged
or delivered, all such further reasonable acts, assignments, transfers,
powers of attorney or assurances as may be required in order to further
transfer, assign, grant, assure and confirm to Purchaser, or to aid and
assist in the collection or granting of possession by Purchaser of, any of
the Purchased Assets, or to vest in Purchaser good and marketable title to
the Purchased Assets.
To the extent that any assignment does not result in a complete transfer of
the contracts to Purchaser because of a provision in any contract against
Seller's assignment of any its right thereunder, Seller shall cooperate
with Purchaser in any reasonable manner proposed by Purchaser to complete
the acquisition of the contracts and Seller's rights, benefits and
privileges thereunder in order to fulfill and carry out Seller's
obligations under this Agreement. Such additional action may include, but
is not limited to: (i) entering into a subcontract between Seller and
Purchaser which allows Purchaser to perform Seller's duties under such
contracts and to enforce Seller's rights thereunder; (ii) the sale of
Seller's stock owned by Shareholders (and any other shareholder of Seller
that is not party to this Agreement) to Purchaser on terms to which all
parties may mutually agree in good faith to allow Purchaser to operate
Seller as a wholly-owned subsidiary to enforce the contracts; or (iii)
entering into a new multi-party agreement with such customers which allows
Purchaser to perform Seller's obligations and enforce Seller's rights under
the contracts.
-7-
<PAGE>
3.
ASSUMPTION OF LIABILITIES
-------------------------
3.1 Liabilities to be Paid Off at Closing or Assumed.
------------------------------------------------
(a) At the Closing, Purchaser shall assume and pay off or discharge when
due (and secure the release of Seller and all Shareholders from any
and all personal liability or guaranty with respect to such
obligations) the following:
(i) Accounts payable incurred in the ordinary course of the Business,
which accounts payable totaled $3,031,055.00 on September 30,
1998;
(ii) Accrued commissions payable, salaries and wages and interest
incurred in the ordinary course of business, which items totaled
$297,744.00 on September 30, 1998;
(iii)Unearned income in the amount of $95,000.00 as of September 30,
1998;
(iv) A line of credit payable to Enterprise National Bank which
provides for a maximum principal amount of $700,000, and the
outstanding amount of which, as of September 30, 1998, is
$424,926.00, which line of credit is collateralized by a security
interest in Seller's receivables and inventory;
(v) Long term debt (including current portion) to various
institutions set forth on Exhibit S attached hereto, the
outstanding amount of which, as of September 30, 1998, is
$1,727,703.00.
The Assumed Liabilities to be assumed as set forth in Sections
3.1(a)(i) through (v) as may be incurred, increased or decreased since
September 30, 1998 to the Pro Forma Balance Sheet for operations in
the ordinary course of business or any other transaction permitted by
this Agreement, and subject to the satisfaction of the Net Asset
Amount requirement set forth in Section 4.1(d) as of the Closing Date.
(b) It is the parties' intent that Purchaser shall pay off at Closing, or
assume and pay off or discharge when due, all obligations of Seller
set forth in Section 3.1(a) above for which any Shareholder has
personal liability and Purchaser agrees to use its best efforts to
secure the release of any Shareholder from such personal guaranty
after the Closing if such releases are not secured prior to Closing.
-8-
<PAGE>
3.2 Executory Contracts.
-------------------
At the Closing, Purchaser shall assume and pay, perform and discharge when
due the following:
(a) All the obligations and liabilities of Seller arising after the
Closing under the contracts described in Section 2.4 and those other
executory contracts and agreements described on Schedule 3.2(a); and
(b) All future liabilities for merchandise in transit F.O.B. shipping
point which has not been received and/or entered into inventory by
Seller as of the Closing and for which no bill has been posted by
Seller as of the Closing.
3.3 Excluded Liabilities.
--------------------
Notwithstanding anything in this Agreement to the contrary, Purchaser shall
not assume or become responsible for any claim, liability or obligation of
any nature whatsoever, whether known or unknown, accrued, absolute,
contingent or otherwise (a "Liability") of Seller except the Assumed
Liabilities. Without limiting the generality of the foregoing, the
following are included among the Liabilities of Seller which Purchaser
shall not assume or become responsible for (unless specifically included as
Assumed Liabilities):
(a) all Liabilities for any Taxes whether deferred or which have accrued
or may accrue or become due and payable by Seller either prior to, on
or after the Closing Date, including, without limitation, all Taxes
and fees of a similar nature arising from the sale and transfer of the
Purchased Assets to Purchaser, except to the extent such liability is
assumed under Section 3.1(a) and as reflected on the Pro Forma Balance
Sheet;
(b) all Liabilities and obligations to directors, officers, employees or
agents of Seller, including, without limitation, all Liabilities and
obligations for wages, salary, bonuses, commissions, vacation (except
as set forth in Section 3.1(a)(vi)) or severance pay, profit sharing
or pension benefits, and all Liabilities and obligations arising under
any bonus, commission, salary or compensation plans or arrangements,
accruing prior to or on the Closing Date, except to the extent such
liability is assumed under Section 3.1(a) and as reflected on the Pro
Forma Balance Sheet.
(c) all Liabilities and obligations with respect to unemployment
compensation claims and workmen's compensation claims and claims for
race, age and sex discrimination or sexual harassment or for unfair
labor practice based on or arising from occurrences, circumstances or
events, or exposure to conditions, existing or occurring prior to the
Closing Date and for which any claim may be asserted by any of
Seller's employees, prior to, on or after the Closing Date;
-9-
<PAGE>
(d) all Liabilities of Seller to third parties for personal injury or
damage to property based on or arising from occurrences, circumstances
or events, or exposure to conditions, existing or occurring prior to
the Closing Date and for which any claim may be asserted by any third
party prior to, on or after the Closing Date;
(e) all Liabilities and obligations of Seller arising under or by virtue
of federal, state or local environmental laws based on or arising from
occurrences, circumstances or events, or exposure to conditions,
existing or occurring prior to the Closing Date and for which any
claim may be asserted prior to, on or after the Closing Date;
(f) all Liabilities of Seller including any costs of attorneys' fees
incurred in connection therewith, for litigation, claims, demands or
governmental proceedings arising from occurrences, circumstances or
events, or exposure to conditions occurring or existing prior to the
Closing Date;
(g) all Liabilities based on any theory of liability or product warranty
with respect to any product manufactured or sold prior to the Closing
Date and for which any claim may be asserted by any third party, prior
to, on or after the Closing Date;
(h) all attorneys' fees, accountants or auditors' fees, and other costs
and expenses incurred by Seller and/or Shareholders in connection with
the negotiation, preparation and performance of this Agreement or any
of the transactions contemplated hereby;
(i) all Liabilities of Seller in connection with the Excluded Assets,
including but not limited to, notes payable of $85,000.00 and
$48,000.00, respectively, relating to the asset purchase transaction
with Datacom, Inc.;
(j) any Liabilities of Seller with respect to any options, warrants,
agreements or convertible or other rights to acquire shares of its
capital stock of any class;
(k) any Liabilities of Seller incurred incident to any indemnification for
the breach of any representations, warranties, covenants or other
agreements made by Seller under any of the asset purchase, stock,
reorganization or other legal transaction set forth in Disclosure
Schedule 2.2(q);
(l) all other debts, Liabilities, obligations, contracts and commitments
(whether direct or indirect, known or unknown, contingent or fixed,
liquidated or unliquidated, and whether now or hereinafter arising)
arising out of or relating to the ownership, operation or use of any
of the Purchased Assets on or prior to the Closing Date or the conduct
of the Business of Seller prior to the Closing Date, except only for
the liabilities and obligations to be assumed or aid, performed or
discharged by Purchaser constituting the Assumed Liabilities.
-10-
<PAGE>
Seller shall pay all of its respective liabilities not being assumed
hereunder by Purchaser within the customary time for payment of such
liabilities.
It is the intent of the parties that upon Closing, all employees of
Seller involved in the Business will be terminated by Seller and
Purchaser will extend offers of employment to such individuals.
4.
CONSIDERATION FOR THE PURCHASED ASSETS
--------------------------------------
4.1 Purchase Price for the Purchased Assets.
---------------------------------------
Subject to the other terms of this Agreement, the Purchase Price for the
Purchased Assets shall be the sum of:
(a) Nine Million Dollars ($9,000,000.00);
(b) The liabilities assumed or paid off at Closing under Section 3.1; and
(c) Any amount that may be paid pursuant to Section 4.5.
The sum of the items contained in Sections 4.1(a),(b) and (c) above shall
be adjusted by the amounts determined under Sections 4.1(d) and (e).
(d) If the Net Asset Amount of Seller as of the Closing Date as shown on
the ProForma Balance Sheet is less than $182,500.00, the Purchase
Price shall be decreased on a dollar-for-dollar basis to the extent of
such deficit. If the Net Asset Amount of Seller as of the Closing Date
as shown on the Pro Forma Balance Sheet is greater than $182,500.00,
the Purchase Price shall be increased on a dollar-for-dollar basis to
the extent of such excess. The determination of the Net Asset Amount
shall be made in the manner provided for in Section 5.1 hereof.
(e) During the calendar year 1998, if Seller's Pro Forma EBIT for the
period January 1, 1998 through the Closing Date and Purchaser's
Access/Memphis Division's EBIT from its operations, from the Closing
Date to December 31, 1998 is less than Two Million Three Hundred Fifty
Thousand Dollars ($2,350,000.00) in the aggregate, the Purchase Price
shall be decreased on a dollar-for-dollar basis equal to the
difference between Two Million Three Hundred Fifty Thousand Dollars
($2,350,000.00) and the total of such Pro Forma EBIT. In the event
that Seller's Pro Forma EBIT and Purchaser's Access/Memphis Division's
Pro Forma EBIT for the applicable periods is greater than Two Million
Three Hundred Fifty Thousand Dollars ($2,350,000.00) in the aggregate,
no increase to the Purchase Price shall be made under this Section
4.1(e). The determination of Seller's Pro Forma EBIT and Purchaser's
Access/Memphis Division's Pro Forma EBIT shall be made in the Manner
provided for in Section 5.2 hereof.
-11-
<PAGE>
4.2 Payment of the Purchase Price for The Purchased Assets.
------------------------------------------------------
Subject to the conditions, covenants, representations and warranties
hereof, at Closing, Purchaser shall deliver:
(a) By certified or bank cashier's check or by wire transfer to Seller,
the amount of One Million Five Hundred Fifteen Thousand Three Hundred
Seventy-Eight Dollars ($1,515,378.00), Which amount is an advance
payment by Purchaser to Seller for a portion of the amount projected
in good faith by the parties to be owed by Purchaser to Seller
pursuant to the provisions of Section 4.1(d), which advance payment
shall be credited against the amount ultimately determined to be owed
to Seller by Purchaser, to the extent applicable, pursuant to the
provisions of Section 5. 1 upon the conclusion of the determination of
the Net Asset Amount; and
(b) By Purchaser's promissory note in the amount of Seven Million Dollars
($7,000,000.00), which promissory note shall bear Interest at the rate
of six and three quarter percent (6.75%). The principal of said note
and all accrued interest thereon shall be due on January 4, 1999. Such
note shall be secured by Purchaser's irrevocable stand-by letter of
credit from Deutsche Bank to Seller, as beneficiary. A copy of said
note is attached hereto as Exhibit H. A copy of said stand-by letter
of credit is attached hereto as Exhibit I.
(c) The Assumed Liabilities assumed or paid off under Section 3.1; and
(d) Thirty-Eight Thousand Eight Hundred Eighty-Five (38,885) shares of the
common stock of Purchaser, which common shares shall be issued to
Seller on January 4, 1999. Incident to the issuance of such shares,
Seller shall execute such documentation containing such
representations concerning the holding of Purchaser's shares,
including that Seller is able to bear the economic risk of holding the
shares to be delivered hereunder for the period required by applicable
federal securities laws because such shares will not have been
registered under the Securities Act of 1933 and therefore cannot be
sold unless they are subsequently registered under the Act or an
exemption from registration is available. The form of the
documentation to be executed by Seller incident to the issuance of
these shares is attached hereto as Exhibit J.
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(e) The remaining sum of One Million Two Hundred Fifty Thousand Dollars
($1,250,000.00) as may be adjusted as set forth in Sections 5.1 or
5.2, shall be payable pursuant to the terms of Purchaser's
subordinated promissory note. The note shall bear interest at the
prime rate of Chase Manhattan Bank as of the date of Closing. The
principal of the note shall be payable in two (2) equal annual
installments with the first principal payment commencing on the first
annual anniversary of the Closing and the remaining principal payment
being due on the second annual anniversary date of the Closing.
Interest on the unpaid principal balance of the note shall be paid
quarterly with the first interest payment being due and payable ninety
(90) days from Closing. Such note and all obligations of Purchaser
thereunder will be subordinated and made junior in right of payment to
the extent and in the manner provided in a Subordination Agreement to
be executed between Deutsche Financial Services Company and Purchaser
and Seller. A copy of said note is attached hereto as Exhibit K. Such
note shall be subordinate to Purchaser's lender pursuant to the terms
of a Subordination Agreement in the form attached hereto as Exhibit L.
4.3 Piggyback Registration.
----------------------
4.3.1 Definitions.
------------
For purposes of this Section, the following terms shall, unless the context
otherwise requires, have the following meanings:
(a) "Piggyback Registration" means any registration of securities of
Purchaser (or any successor thereto) under the Securities Act of 1933,
as amended (other than a registration on Form S-3 relating to a
Dividend Reinvestment Plan, S-4 or S-8); provided, however, a
Piggyback Registration does not include any registration of securities
of Purchaser on behalf of The Computer Supply Store, Inc. or any
successor of The Computer Supply Store, Inc. pursuant to its demand
registration rights under Section 2 of the Registration Rights
Agreement dated March 14, 1996;
(b) "Registrable Securities" means the common stock of Purchaser issued to
Seller pursuant to Section 4.2(d) of this Agreement (and any shares of
common stock issued to Seller as a result of any stock split, stock
dividend, recapitalization or reorganization involving such additional
shares of common stock); provided, however, shares of common stock
will cease to be Registrable Securities when such shares have been
sold to the public in an offering registered under the Securities Act
of 1933, as amended, or in a transaction effected in accordance with
Rule 144 promulgated under the Securities Act of 1933, as amended;
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(c) "Cutback Registration" or "Right to Eliminate Registration" means any
registration in which the underwriter or underwriters managing such
registration advise Purchaser and Purchaser in turn notifies in
writing the holders of Registrable Securities requested to be included
therein, that marketing factors require a limitation of the number of
shares of common stock to be underwritten in such registration or a
complete elimination of any shares of common stock to be underwritten
in such registration relating to the Registrable Securities.
4.3.2 Piggyback Registration Rights.
------------------------------
(a) If Purchaser at any time within three (3) years of the Closing Date
proposes to register any of its securities under the 1933 Act on a
form which permits inclusion of the shares of common stock held by
Seller (the "Shares") (or stock into which such Shares may be
convertible upon such public offering), it shall promptly each such
time give written notice to Seller of its intention to do so, and,
upon the written request, given within twenty (20) days after receipt
of any such notice, of Seller to register any Shares, Purchaser shall
as soon as practicable thereafter cause all such Shares specified by
Seller to be registered under the 1933 Act, to the extent requisite to
permit the sale or other disposition by Seller of such Shares so
registered.
(b) Whenever Purchaser is under an obligation hereunder to effect the
registration of any of its securities, Purchaser shall, as
expeditiously as practicable:
(i) Prepare and file with the Securities and Exchange Commission a
registration statement with respect to such securities and use
its best efforts to cause such registration statement to remain
effective;
(ii) Prepare and file with the Securities and Exchange Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to
keep such registration statement effective, and to comply with
the provisions of the 1933 Act with respect to the sale or other
disposition of all securities covered by such registration
statement whenever Seller shall desire to sell or dispose of the
same;
(iii)Furnish to Seller such number of copies of the prospectus
contained in such registration statement, including any
preliminary prospectus, in conformity with the requirements of
the 1933 Act and such other documents as Seller may reasonably
request in order to facilitate the public sale or other
disposition of such securities;
(iv) Use every reasonable effort to register or qualify the securities
covered by such registration statement under the securities or
blue sky laws of such jurisdictions as the managing underwriters
of such public offering, if any, shall request and do any and all
other acts of things which may be necessary to enable Seller to
consummate the public sale or other disposition in such
jurisdictions of such securities; and
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<PAGE>
(v) Before filing the registration statement or prospectus of
amendments or supplements thereto, with the Securities and
Exchange Commission, furnish Seller's counsel with copies of all
such documents proposed to be filed, the portions of which
documents pertaining to Seller and its Shares shall be subject to
the reasonable approval of such counsel;
provided, however, that Purchaser shall not in any event be
-------- -------
required to use its best efforts to maintain the effectiveness of
any such registration statement for a period in excess of
one-hundred eighty (180) days.
(c) Seller shall pay its pro-rata share (based on the number of Shares it
--- ----
is selling pursuant to the registration statement in relation to the
total number of shares of Purchaser's common stock being sole pursuant
thereto) of all expenses incurred in effecting the registrations
provided for herein, including, without limitation, all registration
and filing fees, printing expenses, fees and disbursements of counsel
for Purchaser, underwriting expenses and commissions, expenses of any
audits incident to or required by any such registration and expenses
of complying with the securities or blue sky laws of any
jurisdictions.
(d) (i) In the event of any registration of any of its securities under
the 1933 Act pursuant hereto, Purchaser shall indemnify and hold
harmless the Seller and any affiliate thereof against any losses,
claims, damages or liabilities, joint or several, to which such
Seller or affiliate may become subject under the 1933 Act or any
other statute or common law, in so far as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out
of or are based upon (1) any alleged untrue statement of any
material fact contained, on the effective date thereof, in any
registration statement under which such securities were
registered under the 1933 Act, any preliminary prospectus or
final prospectus contained therein, or any summary prospectus
issued in connection with any securities being registered, or any
amendment or supplement thereto, or (2) any alleged omission to
state in any such document a material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading, and
shall reimburse Seller or affiliates, for any legal or other
expenses reasonably incurred by Seller or affiliate, in
connection with investigating or defending any such loss, damage,
liability or action; provided, however, that
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<PAGE>
Purchaser shall not be liable to any Seller or affiliate, in any
such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any alleged untrue
statements or alleged omission made in such registration
statement, preliminary prospectus, summary prospectus,
prospectus, or amendment or supplement thereto in reliance upon
and in conformity with written information furnished to Purchaser
by Seller or affiliate for use therein, or upon such statement or
omission therein based on the authority of an expert within the
meaning of that term as defined in the 1933 Act (but only if
Purchaser had no reasonable ground to believe, and did not
believe, that the statements made on the authority of an expert
were untrue or that there was an omission to state a material
fact).
(ii) Seller shall indemnify and hold harmless Purchaser any affiliate
thereof against any losses, claims, damages, or liabilities,
joint or several, to which any such Purchaser or affiliate may
become subject under the 1933 Act or any other statute or at
common law, in so far as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are
based upon (1) any alleged untrue statement of any material fact
contained, on the effective date thereof, in any registration
statement under which such securities were registered under the
1933 Act at the request of Seller, any preliminary prospectus or
final prospectus contained therein, or any summary prospectus
issued in connection with any such securities being registered,
or any amendment or supplement thereto, or (2) any alleged
omission to state in any such document a material fact required
to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not
misleading, in the case of (1) or (2) to the extent, but only to
the extent, that such alleged untrue statement, preliminary
summary prospectus, prospectus, amendment or supplement in
reliance upon and in conformity with written information
furnished to Purchaser by Seller for use therein, and then only
to the extent that such alleged untrue statements or alleged
omissions by Seller were not based on the authority of an expert
(within the meaning of that term as defined in 1933 Act) as to
which Seller had no reasonable ground to believe, and did not
believe, that the statements made on the authority of such expert
were untrue or that there was an omission to state a material
fact.
(iii)Notwithstanding anything contained herein to the contrary, the
indemnity contained in subparagraphs (i) and (ii) above shall
remain in full force and effect regardless of any investigation
made by or on behalf of Seller or affiliate thereof in the case
of subparagraph (i) and regardless of any investigation made by
or on behalf of Purchaser or affiliate thereof in the case of
subparagraph (ii), and such indemnity shall survive the Closing
Date and any subsequent transfer of such securities by Seller of
affiliate.
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<PAGE>
(e) If
(i) Seller requests registration of any of its Shares under paragraph
(1) above, and
(ii) the offering proposed to be made is to be an underwritten public
offering, and
(iii)the managing underwriters of such public offering furnish a
written opinion that the total amount of securities to be
included in such offering would exceed the maximum amount of
securities (as specified in such opinion) which can be marketed
at a price reasonably related to the then current market value of
such securities;
then the rights of Seller, the holders of other securities having
the right to include such securities in such registration and
Purchaser to participate in such offering shall be in the
following order of priority:
First: Seller and the person(s) (including Purchaser in the case
of a primary offering) requesting such registration shall be
entitled to participate pro rata among themselves in accordance
with the number of shares of Purchaser's common stock which
Seller and such person(s) shall request to be registered; and
then
Second: Purchaser (if the offering is not a primary offering) and
all holders of other securities having the right to include such
securities in such registration shall be entitled to participate
in accordance with the relative priorities, if any, as shall
exist among them and Purchaser.
No securities of Purchaser (issued or unissued) other than those
registered and included in the underwritten offering shall be
offered for sale or other disposition in a transaction which
would require registration under the 1933 Act until the
expiration of 180 days after the effective date of the
registration statement in which the Shares were included pursuant
to paragraph (a) above or such earlier time consented to by the
managing underwriters.
4.3.3Notwithstanding anything contained herein to the contrary, in the event
that the underwriter or underwriters managing such registration would
advise Purchaser and Purchaser would in turn notify in writing the holders
of Registrable Securities that a Cutback Registration or Right to Eliminate
Registration has been implemented, Seller shall have no rights under this
Agreement against Purchaser, its officers, directors, shareholders or
affiliates or the underwriter or underwriters managing such registration
and Seller shall indemnify and hold harmless PCR and/or the underwriter or
underwriters managing such registration from any loss, damage, liability or
deficiency and any and all related costs and expenses (including reasonable
legal and accounting fees) arising out of, directly or indirectly, the
underwriter or underwriters managing such registration determination to
implement either a Cutback Registration or a Right to Eliminate
Registration as it pertains to The Piggyback Registration rights granted to
Seller hereunder.
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<PAGE>
4.4 Allocation of Purchase Price.
----------------------------
The Purchase Price to be paid to Seller hereunder, including the
liabilities assumed or paid by Purchaser pursuant to Section 3.1, shall be
allocated as set forth on Exhibit M attached hereto. Seller, Shareholders
and Purchaser agree that each shall act in a manner consistent with such
allocation in (a) filing Internal Revenue Form 8594; and (b) in paying
sales and other transfer taxes in connection with the purchase and sale of
assets pursuant to this Agreement.
4.5 Potential Adjustment to Purchase Price.
--------------------------------------
If the earnings before interest and taxes ("EBIT") of the Purchaser's
Access/ Memphis Division during any of fiscal years 1999 (January 6, 1999
to January 5, 2000), 2000, 2001 or 2002 exceed the applicable EBIT
threshold for such year set forth below:
Fiscal 1999 - $1,975,000.00
Fiscal 2000 - $2,225,000.00
Fiscal 2001 - $2,475,000.00
Fiscal 2002 - $2,725,000.00
Purchaser shall pay Seller, by bank check or wiring within ninety (90) days
following the end of the fiscal year, an amount equal to fifty-five percent
(55%) of the EBIT of Purchaser's Access/Memphis Division in excess of the
EBIT Threshold for the applicable year or Portion thereof, subject to a
cumulative limitation of Six Million Dollars ($6,000,000.00) during such
aggregate period. Any EBIT shortfall in any year shall not be offset
against any excess EBIT in any subsequent year(s) hereunder, it being the
intent of the parties that the EBIT Threshold set forth herein shall apply
to each applicable year separately, subject, however, to the cumulative
limitation of Six Million Dollars ($6,000,000.00) during such aggregate
period. Such cash payment by the Purchaser shall be additional Purchase
Price which will be added to the good will allocation of the Purchase
Price. Commencing on the later of January 6, 1999 or the installation of
the Astea accounting system at Purchaser's Access/Memphis Division, a 1.5%
MAS royalty fee on gross sales by the Purchaser's Access/ Memphis Division
shall be made incident to said determination. For each subsequent year
described above in this paragraph for which the Purchaser may be required
to pay additional Purchase Price, the parties shall, in good faith, agree
upon a MAS royalty fee to be charged hereunder based on the level of
services and support being provided by the Purchaser to its Access/Memphis
Division. Provided, however, such MAS royalty fee shall be 1.5% if the
parties are unable to come to an agreement for each subsequent year. For
purposes of this Section, the term "Access/Memphis Division" shall be
defined as the Business acquired from Seller, whether operated solely, or
in part, in Purchaser and/or any subsidiary, Affiliate or successor of
Purchaser.
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<PAGE>
For purposes of this Section, the term "EBIT" shall mean the net income
before taxes and before interest expense of the Purchaser's Access/Memphis
Division during the applicable period. The EBIT shall be determined by the
internally-generated financial statements of Purchaser determined in the
manner set forth above in accordance with generally accepted accounting
principles, consistently applied, provided that no effect shall be given to
any increase in the amounts of depreciation, amortization or other expense
or deduction taken on tangible or intangible assets of Purchaser, if such
increase is attributable to a revaluation of such assets incident to their
acquisition pursuant to the terms of this Agreement. Said determination of
EBIT shall be subject to verification as described below. In addition, for
purposes of determining EBIT for any particular year, except as noted
above, no item of income or expense will be allocated by the Purchaser to
Purchaser's Access/Memphis Division unless such items are reasonably
calculated to contribute to the increase in profits of such Access/Memphis
Division, it being the intent of the parties that the Purchaser shall
exercise the utmost good faith with respect to allocations of income and
expense to Purchaser's Access/Memphis Division. Incident to the
determination of EBIT of Purchaser's Access/Memphis Division, no
compensation of any executive or other employee of Purchaser or its
affiliates who do not work directly for Purchaser's Access/Memphis Division
shall be allocated to such division. Any payment made to Seller pursuant to
this Section 4.5 shall not be charged against the EBIT for any year.
The determination of EBIT shall include any current accounts of Seller that
Purchaser may contribute, assign or move to another of its divisions or one
of its subsidiaries, including but not limited to those current accounts
set forth on Schedule 4.5. No current account of Seller shall be removed
from the Access/Memphis Division without the Consent of Seller, and no
current account of PCR shall be removed from PCR to the Access/Memphis
Division without the consent of PCR.
Within ninety (90) days after the end of each fiscal year or period
described herein, Purchaser will deliver to Seller a copy of the report of
EBIT prepared by Purchaser for the subject period along with any supporting
documentation reasonably requested by Seller. Within thirty (30) days
following delivery to Seller of such report, Seller shall have the right to
object in writing to the results contained in such determination. If timely
objection is not made by the Seller to such determination, such
determination shall become final and binding for purposes of this
Agreement. If timely objection is made by Seller to Purchaser and Seller
and Purchaser are able to resolve their differences in writing within
thirty (30) days following the expiration of the thirty-day (30-day)
period, then such determination shall become
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<PAGE>
final and binding as it regards to this Agreement. If timely objection is
made by Seller to Purchaser and Seller and Purchaser are unable to resolve
their differences in writing within thirty (30) days following the
expiration of the thirty-day (30-day) period, then all disputed matters
pertaining to the report shall be submitted to and reviewed by an
arbitrator (the "Arbitrator") which shall be an independent accounting firm
selected by Purchaser and Seller. If Purchaser and Seller are unable to
agree promptly on an accounting firm to serve as the Arbitrator, each shall
select by no later than the 30th day following the expiration of the
sixty-day (60-day) period, an accounting firm, and the two selected
accounting firms shall be instructed to select promptly another independent
accounting firm, such newly selected firm to serve as the Arbitrator. The
Arbitrator shall consider only the disputed matters pertaining to the
determination and shall act promptly to resolve all disputed matters, and
its decision with respect to all disputed matters shall be final and
binding upon Seller and Purchaser. Expenses of the Arbitration (including
reasonable attorney and accounting fees) shall be borne one-half (1/2) by
Purchaser and one-half (1/2) by Seller.
4.6 Certain Closing Expenses.
------------------------
Except as set forth below, Seller shall be responsible for and shall pay
all federal, state and local sales tax (if any), documentary stamp tax and
all other duties, or other like charges properly payable upon and in
connection with the conveyance and transfer of the Purchased Assets by
Seller to Purchaser. Seller shall reimburse Purchaser for the cost of the
standby Letter of Credit referenced in Section 4.2(b), which amount will be
deducted from the interest payable to Seller by Purchaser under Section
4.2(b). Purchaser shall be responsible for and shall pay all sales tax, if
any, properly payable in connection with the conveyance and transfer of all
motor vehicles by Seller to Purchaser hereunder.
5.
POST-CLOSING ADJUSTMENTS
------------------------
5.1 Within thirty (30) days after the Closing (the "Post Closing Date"), the
Seller will deliver to Purchaser a copy of the Pro Forma Balance Sheet
prepared by the Seller along with any supporting documentation reasonably
requested by Purchaser reflecting the Net Asset Amount as of the Closing
which shall be defined as the total of the Purchased Assets less the total
of the Assumed Liabilities, as reflected on the Pro Forma Balance Sheet
(the "Net Asset Report"). The Pro Forma Balance Sheet shall be prepared
using the same accounting methods, policies, practices and procedures, with
consistent classifications, judgments, estimations and methodologies as
used in the preparation of the September 30, 1998 audited Balance Sheet and
the September 30, 1998 Pro Forma Balance Sheet. Within fifteen (15) days
following delivery to Purchaser of the Net Asset Report, Purchaser shall
have the right to object in writing to the results contained therein. If
timely objection is not made by Purchaser to the Net Asset Report, the Net
Asset Report shall become final and binding for purposes of this Agreement.
If
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<PAGE>
timely objection is made by Purchaser to the Net Asset Report, and Seller
and Purchaser are able to resolve their differences in writing within ten
(10) days following the expiration of such fifteen (15) day period, then
the Net Asset Report as resolved shall become final and binding as it
relates to this Agreement. If timely objection is made by Purchaser to the
Net Asset Report and Seller and Purchaser are unable to resolve their
differences in writing within such ten (10) day period, then all disputed
matters pertaining to the Net Asset Report shall be submitted to and
reviewed by an arbitrator (the "Arbitrator") which shall be an independent
accounting firm selected by Seller and Purchaser. If Purchaser and Seller
are unable to agree promptly on the accounting firm to serve as the
Arbitrator, each shall select by not later than the seventh (7th) day
following the expiration of the Net Asset Report objection period, an
nationally recognized accounting firm, and each selected accounting firm
shall be instructed to jointly select promptly another nationally
recognized accounting firm, such third accounting firm shall serve as the
Arbitrator. The Arbitrator shall consider only the disputed matters
pertaining to the determination and shall act promptly and fairly to
resolve all disputed matters and its decision with respect to all disputed
matters shall be final and binding upon Seller and Purchaser. The expenses
of the arbitration (including reasonable attorney and accounting fees)
shall be borne one-half (1/2) by Purchaser and one-half (1/2) by Seller. If
the Net Asset Amount (as shown on the Net Asset Report) is less than
$182,500.00, the Purchase Price to be paid to Seller shall be decreased on
a dollar-for-dollar basis for such difference by first repaying to
Purchaser by certified or cashier's check or wire transfer the advance
payment made by Purchaser to Seller at Closing against the Net Asset Amount
determination as set forth in Section 4.2(a) and then by decreasing the
face amount of the subordinated promissory note as set forth in Section
4.2(e), if necessary, and if the decrease is in excess of the advance
payment and the face amount of the subordinated promissory note, such
additional amount equal to the excess shall be paid immediately by Seller
to Purchaser by certified or cashier's check or wire transfer on the date
of the resolution of this determination. If the Net Asset Amount (as shown
on the Net Asset Report) is greater Than $182,500.00, the Purchase Price to
be paid to Seller shall be increased on a dollar-for-dollar basis for such
excess. In the event such excess is greater than the advance payment made
by Purchaser to Seller under Section 4.2(a), any additional amount owing
shall be paid immediately by Purchaser to Seller by certified or cashier's
check or wire transfer on the date of the resolution of this determination.
In the event the increase in Purchase Price is less than the amount of the
advance payment made under Section 4.2(a) by Purchaser to Seller, the
difference between the amount of the advance payment paid to Seller at
Closing and the amount that Seller is entitled to pursuant to this
provision, shall be repaid to Purchaser by Seller by certified or cashier's
check or wire transfer on the date of the resolution of this determination.
5.2 Within ninety (90) days after December 31, 1998, Seller will deliver to
Purchaser a determination of Seller's Pro Forma EBIT prepared by Seller's
Accountant for the period commencing January 1, 1998 and ending on the
Closing Date along with any supporting documentation
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<PAGE>
reasonably requested by Purchaser. Seller's Pro Forma EBIT shall be
prepared using the same accounting methods, policies, practices and
procedures, with consistent classifications, judgments, estimations and
methodologies as used in the preparation of the September 30, 1998 audited
Balance Sheet and the September 30, 1998 Pro Forma Balance Sheet. Purchaser
will deliver to Seller a determination of the Access/Memphis Division's Pro
Forma EBIT prepared by Purchaser for the period commencing on the Closing
Date and ending December 31, 1998 along with any supporting documentation
reasonably requested by Seller. Within fifteen (15) days following delivery
of such reports, the parties shall have the right to object in writing to
the results contained in such determination. If timely objection is not
made by either party of such determination, such determination shall become
final and binding. If timely objection is made by either party, and
Purchaser and Seller are able to resolve their differences in writing
within ten (10) days following the expiration of the Pro Forma EBIT
objection period, then such determination as resolved shall become final
and binding as it relates to this Agreement. If timely objection is made by
either party, and Seller and Purchaser are unable to resolve their
differences in writing within ten (10) days following the expiration of the
Pro Forma EBIT objection period, then all disputed matters relating to the
report shall be submitted to and reviewed by an Arbitrator according to the
process and procedure set forth in Section 5.1 above. The expenses of the
arbitration (including reasonable attorney and accounting fees) shall be
borne one-half by Purchaser and one-half by Seller. Any net reduction in
the Purchase Price as a result of said adjustment shall be made in the
manner set forth in Section 4.1(e) and shall be reflected by decreasing the
face amount of the note set forth in Section 4.2(e).
6.
EMPLOYMENT AGREEMENTS
---------------------
6.1 Employment Agreements of Shareholders.
-------------------------------------
At Closing, Purchaser shall enter into an Employment Agreements with M.
Putman, P. Bishop, Gregory Livingston and Phillip Qualls. Copies of said
Employment Agreements are attached hereto and made a part hereof as
Exhibits N, N-1, N-2 and N-3.
7.
COVENANT NOT TO COMPETE AGREEMENTS
----------------------------------
7.1 Covenant Not to Compete Agreements of Seller and Shareholders.
-------------------------------------------------------------
At Closing, Seller and each Shareholder shall enter into Covenant Not to
Compete Agreements with Purchaser. Copies of said Covenant Not to Compete
Agreements are attached hereto and made a part hereof as Exhibits O, O-1,
O-2, and O-3.
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7.2 As an express condition of this Agreement, certain shareholders of Seller
who are not parties to this Agreement, specifically, Gregory Livingston,
Phillip Qualls and Robert Hendry shall enter into covenant not to compete
agreements in the form of Exhibits O-4, O-5 and O-6, respectively, attached
hereto and made a part hereof.
8.
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
AND SHAREHOLDERS
----------------
Except as set forth in the Disclosure Schedule attached hereto, Seller and
Shareholders, jointly and severally, represent and warrant to Purchaser
that the following statements are true and correct as of the date hereof:
8.1 Organization, Good Standing, Qualification and Power of Seller.
--------------------------------------------------------------
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Tennessee and has the corporate
power and authority to own, lease and operate the Purchased Assets and to
conduct the Business currently being conducted by it. The Seller is duly
qualified and validly existing in Tennessee and in good standing in each of
the other jurisdictions in which it is required by the nature of its
business or the ownership of its properties to so qualify. Seller has no
subsidiaries. The Disclosure Schedule correctly lists, with respect to the
Seller, each jurisdiction in which it is qualified to do business as a
foreign corporation.
8.2 Capitalization.
--------------
The authorized capitalization of the Seller consists solely of One Thousand
(1,000) shares of no par common stock, of which five hundred sixty-eight
(568) shares representing one hundred percent (100%) of the issued stock
are currently owned in the manner set forth in Disclosure Schedule, are
fully paid and nonassessable and have not been issued in violation of the
preemptive rights of any person. Except as set forth in Disclosure
Schedule, Seller is not obligated to issue or acquire any of its
securities, nor has it granted options or any similar rights with respect
to any of its securities.
8.3 Authority to Make Agreement.
---------------------------
Seller and each Shareholder have the full legal power and authority to
enter into, execute, deliver and perform their respective obligations under
this Agreement and each of the other agreements, instruments and other
instruments to be delivered incident hereto ("Other Seller Documents").
This Agreement and the Other Seller Documents have been duly and validly
executed and delivered by Seller and each Shareholder, and are the legal
and binding obligation of each of them, enforceable
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in accordance with their respective terms, subject to principles of equity,
bankruptcy laws, and laws affecting creditors' rights generally. Seller has
taken all necessary action (including action of its Board of Directors and
Shareholders) to authorize and approve the execution and delivery of this
Agreement and the Other Seller Documents, the performance of its
obligations thereunder and the consummation of the transactions
contemplated thereby.
8.4 Existing Agreements, Governmental Approvals and Permits.
-------------------------------------------------------
(a) The execution, delivery and performance of this Agreement and the
Other Seller Documents by Seller, the sale, transfer, conveyance,
assignment and delivery of the Purchased Assets to Purchaser as
contemplated in this Agreement, and the consummation of the other
transactions contemplated thereby: (i) do not violate any provisions
of law, statute, ordinance or regulation applicable to Seller, any
Shareholder or the Purchased Assets, (ii) (except for Seller's secured
creditors set forth in Section 3.1, whose consent shall be obtained
prior to Closing and except as set forth in Disclosure Schedule), will
not conflict with, or result in the breach or termination of any
provision of, or constitute a default under (in each case whether with
or without the giving of notice or the lapse of time or both) the
Articles of Incorporation or Bylaws of Seller or any indenture,
mortgage, lease, deed of trust, or other instrument, contract or
agreement or any license, permit, approval, authority, or any order,
judgment, arbitration award, or decree to which Seller or any
Shareholder is a party or by which Seller or any Shareholder or any of
their assets and properties are bound (including, without limitation,
the Purchased Assets), and (iii) will not result in the creation of
any encumbrance upon any of the properties, assets, or Business of
Seller or of any Shareholder. Neither Seller, nor any Shareholder, nor
any of their assets or properties (including, without limitation, the
Purchased Assets) is subject to any provision of any mortgage, lease,
contract, agreement, instrument, license, permit, approval, authority,
order, judgment, arbitration award or decree, or to any law, rule,
ordinance, or regulation, or any other restriction of any kind or
character, which would prevent Seller or any Shareholder from entering
into this Agreement or any of the Other Seller Documents or from
consummating the transactions contemplated thereby.
(b) Neither Seller nor any Shareholder is a party to, subject to or bound
by any agreement, judgment, award, order, writ, injunction or decree
of any court, governmental body or arbitrator which would prevent the
use by Purchaser of the Purchased Assets in accordance with present
practices of Seller after the Closing Date or which, by operation of
law, or pursuant to its terms, would be breached, terminate, lapse or
be subject to termination or default under (in each case whether with
or without notice, the passage of time or both) upon the consummation
of the transactions contemplated in this Agreement.
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(c) No approval, authority or consent of, or filing by Seller with, or
notification to, any foreign, federal, state or local court, authority
or governmental or regulatory body or agency or any person is
necessary to authorize the execution and delivery of this Agreement or
the Other Seller Documents by Seller or any Shareholder, the sale,
transfer, conveyance, assignment and delivery of the Purchased Assets
to Purchaser, or the consummation of the other transactions
contemplated thereby, or to continue the use and operation of the
Purchased Assets by Purchaser after the Closing Date.
8.5 Financial Statements.
--------------------
(a) Copies of the Financial Statements are attached to the Disclosure
Schedule. Each of the Financial Statements are true and complete in
all material respects and were prepared in accordance with generally
accepted accounting principles (except for the Pro Forma Balance Sheet
of Seller which will be prepared as set forth in Section 5.2) applied
on a consistent basis throughout the periods indicated (except as
noted on such Financial Statements) and fairly present in all material
respects the financial position and condition of the Seller as of the
respective dates thereof and the results of its operation and changes
in financial position for the respective periods then ended.
(b) Except to the extent reflected, reserved against, or disclosed on the
Pro Forma Balance Sheet, the Financial Statements, or the Disclosure
Schedule, the Seller had, as of such date, no material liabilities or
obligations of any nature, whether accrued, absolute, contingent, or
otherwise, including without limitation, unfunded pension or other
retirement plan liabilities and tax liabilities whether or not
incurred in respect of or measured by the Seller's income, for any
period prior to the date of said Financial Statements, or arising out
of transactions entered into or any set of facts existing prior
thereto. Except to the extent disclosed on the Disclosure Schedule,
there exists no basis for the assertion against Seller, as of the date
of the Financial Statements or the Pro Forma Balance Sheet, of any
material liability of any nature or in any amount not fully reflected,
reserved against, or disclosed in said Financial Statements or Pro
Forma Balance Sheet.
8.6 Customers.
---------
The Disclosure Schedule includes a correct list of the twenty-five (25)
largest customers of the Seller by sales in dollars for each of the past
two (2) years and the amount of business done by the Seller with each such
customer for each year. Assuming that Purchaser continues to conduct the
Business in the ordinary course consistent with Seller's prior practices
generally and specifically with respect to Seller's current customers,
Seller has no knowledge that any of the current customers of Seller will or
intend to (a) cease doing business with the Seller; or (b) materially alter
the amount of business they are presently doing with the Seller; or (c) not
do business with the Purchaser after the Closing.
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8.7 Intangible Property.
-------------------
The Disclosure Schedule includes an accurate list and summary description
of all patents, franchises, distributorships, registered and unregistered
trademarks, trade names and service marks, licenses, brand names and
company lists and all applications for the foregoing, presently owned
and/or held (as a licensee or otherwise) by the Seller. The Seller is not a
licensor in respect to any patents, trade secrets, inventions, shop rights,
know-how, trademarks, trade names, copyrights, or applications therefor.
The Disclosure Schedule contains an accurate and complete description of
such intangible property and the items of all licenses and other agreements
relating thereto. All of the above-mentioned intangibles used in the
Seller's Business are the sole property of the Seller, do not require the
consent of or consent to any other person as a condition to their use or
the transaction provided for herein and do not infringe upon the rights of
others.
8.8 Significant Agreements.
----------------------
The Disclosure Schedule contains an accurate and complete list of all
contracts, agreements, licenses, instruments and understandings (whether or
not in writing) to which the Seller is a party or is bound and that are
material to the Business, assets, financial condition or results of
operations of the Seller. Without limiting the generality of the foregoing,
such list includes all such contracts, agreements, licenses and
instruments:
(a) Providing for payments of more than Five Thousand Dollars ($5,000.00)
per year, other than purchase orders incurred in the ordinary course
of business;
(b) Providing for the extension of credit other than consistent with
normal credit terms described in the Disclosure Schedule;
(c) Limiting the ability of the Seller to conduct its Business or any
other business or to otherwise compete in its or any other business,
including as to manner or place;
(d) Providing for a guarantee or indemnity by the Seller, including but
not limited to any indemnification provided under any asset purchase
agreement, stock purchase agreement, or other transaction that Seller
is a party to;
(e) With any Affiliate of Seller;
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(f) With any labor union or employees' association connected with Seller's
Business;
(g) For the employment or retention of any director, officer, employee,
agent, shareholder, consultant, broker or advisor of Seller or any
other contract between Seller and any director, officer, employee,
agent, shareholder, consultant or advisor which does not provide for
termination at will by the Seller without further cost or other
liability to the Seller as of or at any time after the Closing.
(h) In the nature of a profit sharing, bonus stock option, stock purchase,
pension, deferred compensation, retirement, severance,
hospitalization, insurance or other plan or contract providing benefit
to any person or former director, officer, employee, agent,
shareholder, consultant, broker or advisor of Seller, or such person's
dependents, beneficiaries or heirs;
(i) In the nature of an indenture, mortgage, promissory note, loan or
credit agreement or other contract relating to the borrowing of money
or a line of credit by the Seller or relating to the direct or
indirect guarantee or assumption by the Seller of obligations of
others;
(j) Leases or subleases with respect to any property, real, personal or
mixed, in which the Seller is involved, as lessor or lessee; and
(k) Distributorship Agreement(s) or License Agreement(s) with respect to
any property which Seller has entered into as licensor.
True and correct copies of all items so disclosed in the Disclosure
Schedule have been provided or made available to Purchaser. Each of such
items listed, or required to be listed, is a valid and binding obligation
of the parties thereto enforceable in accordance with its terms, subject to
principles of equity, bankruptcy laws, and laws affecting creditors' rights
generally, and there have been no material defaults or claims of material
default by the Seller and there are no facts or conditions that have
occurred or that are anticipated to occur which, through the passage of
time or the giving of notice, or both, would constitute a default by the
Seller, or would cause the acceleration of any obligation of any party
thereto or the creation of an Encumbrance upon any asset of the Seller.
There are no material oral contracts, agreements or understandings made by
any Shareholder, whether or not binding, material to the Seller, except
such as have been disclosed in the Disclosure Schedule and for which an
accurate summary description has been provided.
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8.9 Inventory.
---------
Except as specifically described on the Disclosure Schedule, all inventory
is reflected on the September 30, 1998 Balance Sheet and at the Closing
Date will consist of items of quality and quantity which are usable or
saleable in the ordinary course of business of Seller in the conduct of its
Business, and items of below standard quality and items not usable or
saleable in the ordinary course of Seller's business have been written down
in value in accordance with good business practices to estimated net
realizable market value or adequate reserves have been provided therefor.
The values at which the inventory are carried on the September 30, 1998
Balance Sheet reflect the normal valuation policy of Seller in setting
inventory at the lower of cost or net realizable market values, all in
accordance with generally accepted accounting principles. Except as set
forth on the Disclosure Schedule, since September 30, 1998, the inventory
of Seller has been maintained at normal and adequate levels for the
continuation of the Business in its normal course. No change has occurred
in such inventory which affects or will affect the usability or salability
thereof, no write-downs or write-offs of the value of such inventory has
occurred and no additional amounts have been reserved with respect
to such inventories. The Disclosure Schedule lists the location of all
inventory together with a brief description of the type and amount at each
location.
8.10 Accounts Receivable and Vendor Receivables.
------------------------------------------
All accounts receivable and vendor receivables of Seller which have arisen
in connection with the Business or otherwise and which are reflected on the
Financial Statements and all receivables which have arisen since September
30, 1998 through the Closing shall have arisen only from bonafide
transactions in the ordinary course of business and represent valid,
collectible and existing claims, net of any reserve as reflected on the
September 30, 1998 Pro Forma Balance Sheet. Subject to customer credit, the
payment of each account and vendor receivable will not be subject to any
known defense, counterclaim condition (other than Seller's performance in
the ordinary course of business) whatsoever. The Disclosure Schedule hereto
accurately lists, as of the Closing Date, all receivables arising out of or
relating to the Business, the amount owing and aging of such accounts
receivable, the name of the party from whom such account receivable is
owing, any security in favor of Seller for the repayment of such account
receivable which Seller purports to have. Seller has delivered to Purchaser
complete and correct copies of all instruments, documents and agreements
evidencing such accounts receivable and of all instruments, documents or
agreements (if any) creating security therefor.
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8.11 Taxes.
-----
Except as to Taxes not yet due and payable, and except for Taxes the
payment of which is being diligently contested in good faith and by proper
proceedings and for which adequate reserves have been established in
accordance with generally accepted accounting principles, and except as set
forth in the Disclosure Schedule, Seller has filed all returns and reports
that are now required to be filed by it in connection with any federal,
state or local tax, duty or charge levied, assessed or imposed upon it, or
its property, including unemployment, social security and similar taxes;
and all of such taxes have been either paid or adequate reserves or other
provision has been made therefor. Seller and Shareholders shall pay,
without right of reimbursement from Purchaser, all of Seller and
Shareholders' income Taxes including but not limited to any Taxes
attributable to any gain under Section 1374 of the Code, including any
interest and penalties thereon, that relate to the activities of Seller
through the Closing including this transaction, as due.
8.12 Title to Purchased Assets; Encumbrances.
---------------------------------------
(a) With respect to all Purchased Assets sold, at the Closing Seller shall
have good and marketable title to the Purchased Assets being acquired
by Purchaser, free and clear of all Encumbrances whatsoever;
immediately after the transfer of all the Purchased Assets being
acquired by Purchaser from Seller, Purchaser will own all of said
Purchased Assets free and clear of all Encumbrances whatsoever,
whether perfected or unperfected; and, by way of illustration but not
limitation, there are not any unpaid taxes, assessments or charges due
or payable by Seller to any federal, state or local agency, or any
obligations or liabilities or any unsatisfied judgments against, or,
to the best of Seller's knowledge, any litigation or proceedings
pending or threatened against Seller by Seller's employees, clients,
customers, creditors, suppliers, or any other party (nor state of
facts for any such obligation, liability, litigation or proceeding),
that could become a claim, obligation, liability, lien or other charge
of or against Purchaser or the Purchased Assets. To the best of
knowledge of Seller, all of Seller's tangible and other operating
assets used in the Business which are beingsold hereunder to Purchaser
are, in all material respects, in good operating condition and repair,
free of all structural, material or mechanical defects and conform
with all applicable laws and regulations.
(b) Except as otherwise specifically set forth herein, Seller is not a
party to any contract, agreement, lease or commitment that would
result in any claim, obligation, liability, lien or other charge
against Purchaser or the Purchased Assets, and Purchaser is not
obligated to assume the obligations under any contract, agreement,
lease or commitment of Seller, except as specifically set forth
herein.
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8.13 Pending Actions.
---------------
Seller has not been served with or received notice of any actions, suits,
arbitrations, OSHA, EPA or other governmental violations, or any other
proceedings or investigations, either administrative or judicial, strikes,
lockouts or NLRB charges or complaints ("Actions and Disputes"). To the
best of Seller's knowledge, there are no Actions or Disputes pending or
threatened against or affecting (directly or indirectly) the Seller or its
property or assets, nor are there any facts or conditions which exist which
would give rise to any such Actions or Disputes which, if determined
adversely to Seller, would have a material adverse effect upon Seller's
Business.
8.14 Insurance.
---------
The Disclosure Schedule contains an accurate and complete listing (showing
type of insurance, amount, insurance company, annual premium and special
exclusions)
of all policies of fire, liability, worker's compensation and other forms
of insurance owned or held by the Seller. All such policies are in full
force and effect; are sufficient for compliance with all requirements of
law and of all agreements to which the Seller is a party; are valid,
outstanding and enforceable policies; provide adequate insurance coverage
for the assets and operations of the Seller and will remain in full force
and effect through the Closing. There are no outstanding requirements or
recommendations by any insurance company that issued a policy with respect
to any of the properties and assets of the Seller by any Board of Fire
Underwriters or other body exercising similar functions or by any
Governmental Entity requiring or recommending any repairs or other work to
be done on or with respect to any of the properties and assets of the
Seller or requiring or recommending any equipment or facilities to be
installed on or in connection with any of the properties or assets of the
Seller.
8.15 Status of Business.
------------------
(a) Since September 30, 1998, the Business of the Seller has been operated
only in the ordinary course, and, except as set forth in the
Disclosure Schedule or permitted under Section 2.3 dealing with
Excluded Assets, there has not been with respect to the Business:
(i) Any material change in its condition (financial or other),
assets, liabilities, obligations, business or earnings, except
changes in the ordinary course of business, none of which in the
aggregate has been materially adverse;
(ii) Any material liability or obligation incurred or assumed, or any
material contract, agreement, arrangement, lease (as lessor or
lessee), or other commitment entered into or assumed, on behalf
of the Business, whether written or oral, except in the ordinary
course of business;
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<PAGE>
(iii)Any purchase or sale of material assets in anticipation of this
Agreement, or any purchase, lease, sale, abandonment or other
disposition of material assets, except in the ordinary course of
business;
(iv) Any waiver or release of any material rights, except for rights
of nominal value;
(v) Any cancellation or compromise of any material debts owed to
Seller or material claims known by Seller against another person
or entity, except in the ordinary course of business;
(vi) Any damage or destruction to or loss of any physical assets or
property of Seller which materially adversely affects the
Business or any of the properties of the Seller (whether or not
covered by insurance);
(vii)Any material changes in the accounting practices, depreciation
or amortization policy or rates theretofore adopted by the
Seller, or any material revaluation or write-up or write-down of
any of its assets;
(viii) Any direct or indirect redemption, purchase or other
acquisition for value by the Seller of its shares, or any
agreement to do so;
(ix) Any material increase in the compensation levels or in the method
of determining the compensation of any of the Seller's officers,
directors, agents or employees, or any bonus payment or similar
arrangement with or for the benefit of any such person, any
increase in benefits expense to the Seller, any payments made or
declared into any profit-sharing, pension, or other retirement
plan for the benefit of employees of the Seller, except in the
ordinary course of business;
(x) Any loans or advances between the Seller and any Shareholder, or
any family member or any associate or Affiliate of the Seller or
of any Shareholder;
(xi) Any material contract canceled or the terms thereof amended or
any notice received with respect to any such contract terminating
or threatening termination or amendment of any such contract;
(xii)Any transfer or grant of any material rights under any leases,
licenses, agreements, or with respect to any trade secrets or
know-how;
(xiii) Any labor trouble or employee controversy materially adversely
affecting its Business or assets; or
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(xiv)Any dividend or other distribution on or in respect of shares of
its capital stock, except for any distributions made pursuant to
the provisions of Section 2.3 relating to Excluded Assets.
(b) Seller is not
(i) in violation of any outstanding judgment, order, injunction,
award or decree specifically relating to the Business, or
(ii) in violation of any federal, state or local law, ordinance or
regulation which is applicable to the Business, except where such
violation does not have a materially adverse effect on the
Business.
Seller has all permits, licenses, orders, approvals, authorizations,
concessions and franchises of any federal, state or local governmental
or regulatory body that are material to or necessary in the conduct of
the Business, except where failure to have such permit, license,
order, approval, authorization, concession or franchise does not have
a materially adverse effect on the Business. All such permits,
licenses, orders, approvals, concessions and franchises are set forth
on the Disclosure Schedule and are in full force and effect and there
is no proceeding, or to the knowledge of Seller, threatened to revoke
or limit any of them.
(c) No claim, litigation, action, investigation or proceeding is pending
or, to the knowledge of Seller, threatened, and no order, injunction
or decree is outstanding, against or relating to the Business or its
assets, and Seller does not know of any information which could result
in such a claim, litigation, action, investigation or proceeding,
which, if determined adversely to Seller, would have a material
adverse effect upon Seller's Business.
(d) Seller has accrued or paid in full, to all employees of the Business,
in the normal course of its operations, all wages, salaries,
commissions, bonuses, vacations and other direct compensation for all
services performed by them. To the best of Seller's knowledge, Seller
is in compliance with all federal, state and local laws, ordinances
and regulations relating to employment and employment practices at the
Business, and all employee benefit plans and tax laws relating to
employment at the Business, except where such non-compliance would not
have a materially adverse effect on the Business. There is no unfair
labor practice complaint against Seller relating to the Business
pending before the National Labor Relations Board or similar agency or
body and, to the best of Seller's knowledge, no condition exists that
could give rise to any unfair labor practice complaint. There is no
labor strike, dispute, slowdown or stoppage actually pending or, to
the knowledge of Seller, threatened against or involving the Business.
Seller has no labor contracts or collective bargaining agreements with
respect to any of its employees.
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8.16 Environmental Laws.
------------------
(a) To the best of Seller's knowledge, the real estate located at 5828
Shelby Oaks Drive, Memphis, Tennessee 38134, ("Real Estate") has not
been used or operated in any fashion involving producing, handling and
disposing of chemicals, toxic substances, wastes and effluent
materials, x-rays or other materials or devices in material violation
of any laws, rules, regulations or orders, and to the best of Seller's
knowledge, the Real Estate is in material compliance with applicable
laws, regulations, ordinances, decrees and orders arising under or
relating to health, safety, and environmental laws and regulations,
including without limitation the Federal Occupation and Safety Health
Act, 29 U.S.C. ss.651, et seq.; Federal Resource Conservation and
Recovery Act ("RCRA"), 42 U.S.C. ss.6901, et seq.; Federal
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. ss.9601, et seq.; the Federal Clean Air Act, 42
U.S.C. ss.2401, et seq.; the Federal Clean Water Act, 33 U.S.C.
ss.1251, et seq.; and all state and local laws that correspond
therewith or supplement such laws.
(b) To the best of Seller's knowledge, the Real Estate has not been
operated, in violation of any laws, rules, regulations or orders, so
as to involve or create any surface impoundments, incinerators, land
fills, waste storage tanks, waste piles, or deep well injection
systems or for the purpose of storage, treatment or disposal of a
hazardous waste as defined by RCRA or hazardous substance, pollutant
or contaminate as defined by CERCLA and, to the best of Seller's
knowledge, no acts have been committed that would make the Real Estate
or any part thereof subject to remedial action under RCRA or CERCLA or
corresponding state or local laws.
(c) To the best of Seller's knowledge, there have not been, are not now
and as of the Closing Date, there will be no solid waste, hazardous
waste, hazardous substance, toxic substance, toxic chemicals,
pollutants or contaminants, underground storage tanks, purposeful
dumps, or accidental spills in, on or about the Real Estate or any of
the assets of the Seller, whether real or personal, owned or leased,
or stored on any real property owned or leased by the Seller or by the
Seller's lessees, licensees, invites, or predecessors.
(d) Seller is not engaged in, and to the best of Seller's knowledge and
belief, is not threatened with any litigation, or governmental or
other proceeding which may give rise to any claim against the Real
Estate. Specifically, there are no pending suits, charges, actions,
governmental investigations, or other proceedings, involving, directly
or indirectly without limitation, the laws, statutes and regulations
set forth in subsection (a), above, whether initiated by a third party
or by Seller and there are none, to the best of Seller's knowledge,
threatened against or relating to or involving the Real Estate or the
transactions contemplated by this Agreement. Seller is not in default
with respect to any order, writ, injunction or decree of any federal,
state, local or foreign court, department, agency or instrumentality.
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(e) The Disclosure Schedule will list all waste disposal sites, dump sites
and other areas either on the Real Estate or offsite at which
hazardous or toxic waste generated by the Seller has been disposed (in
each case identifying such waste) and it will specifically identify
each such site or area which is or has been included in any published
federal, state or local (domestic or foreign) superfund or other list
of hazardous or toxic waste sites or areas.
(f) To the best of Seller's knowledge, Seller has obtained all permits,
and licenses and other authorizations required by all environmental
laws; and all of such permits, licenses and other authorizations are
in full force and effect as of the date hereof. A true and correct
list of all such permits, licenses and other authorizations is set
forth in the Disclosure Schedule.
8.17 Certain Employees.
-----------------
(a) Each of the following is included in the list of agreements set forth
in the Disclosure Schedule: all collective bargaining agreements,
employment and consulting agreements, bonus plans, deferred
compensation plans, employee pension plans or retirement plans,
employee profit-sharing plans, employee stock purchase and stock
option plans, hospitalization insurance, and other plans and
arrangements providing for employee benefits of employees of the
Seller.
(b) The Disclosures Schedule contains a true, complete and accurate list
of the following: the names, positions, and compensation of the
present employees of the Seller, together with a statement of the
annual salary payable to salaried employees and a summary of the
bonuses and description of agreements for additional compensation and
other like benefits, if any, paid or payable to such persons for the
period set forth in the Disclosure Schedule. Except as listed in the
Disclosure Schedule, to the best of Seller's knowledge, all employees
of Seller are employees-at-will.
(c) Seller has no retired employees who are receiving or are entitled to
receive any payments, health or other benefits from Seller.
8.18 Payments to Employees.
---------------------
All accrued obligations of Seller relating to employees and agents of
Seller, whether arising by operation of law, by contract, or by past
service, for payments to trusts or other funds or to any governmental
agency, or to any individual employee or agent (or his heirs, legatees, or
legal representatives) with respect to unemployment compensation benefits,
profit sharing or retirement benefits, or social security benefits have
been paid or accrued by Seller. All obligations of Seller as an employer or
principal relating to employees or agents, whether arising by operation of
law, by contract, or by past practice, for vacation and holiday pay,
bonuses, and other forms of compensation which are or may become payable to
such employees or agents, have been paid or will be paid or accrued by
Seller.
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8.19 Change of Corporate Name.
------------------------
At the Closing, Seller, if requested by Purchaser, will adopt and file with
the Secretary of State of Tennessee an Amendment to the Charter of Seller
changing the name of Seller to a name substantially dissimilar to Access
Technologies, Inc. and Seller shall also execute a Consent for Use of
Similar Name form, as set forth in the Disclosure Schedule, granting to
Purchaser the use of the name Access Technologies, Inc.
8.20 Brokers and Finders.
-------------------
Except as set forth in the Disclosure Schedule, no broker, finder or other
person or entity acting in a similar capacity has participated on behalf of
Seller in bringing about the transaction herein contemplated, or rendered
any service with respect thereto or been in any way involved therewith.
8.21 Preservation of Organization.
----------------------------
Except as set forth on the Disclosure Schedule, since September 30. 1998,
the Seller has kept intact the Business and organization of the Seller;
retained the services of all the Seller's material employees and agents,
retained the Seller's arrangements with the manufacturers of the products
distributed by Seller in the same manner as conducted prior to such date,
and engaged in no transaction other than in the ordinary course of Seller's
Business.
8.22 Absence of Certain Business Practices.
-------------------------------------
Neither Seller, nor, to Seller's knowledge, any officer, employee or agent
of the Seller, nor any other Person acting on its behalf, has, directly or
indirectly, within the past five years given or agreed to give any gift,
bribe, rebate or kickback or otherwise provide any similar benefit to any
customer, supplier, governmental employee or any other Person who is or may
be in a position to help or hinder Seller or the Business (or assist Seller
in connection with any actual or proposed transaction relating to the
Business or any other business previously operated by Company) (i) which
subjected or might have subjected Seller to any damage or penalty in any
civil, criminal or governmental litigation or proceeding, (ii) which if not
given in the past, might have had a material adverse effect on the
Business, (iii) which if not continued in the future, might have a material
adverse effect on the Business or subject Seller to suit or penalty in any
private or governmental litigation or proceeding, (iv) for any of the
purposes described in Section 162(c) of the Code or (v) for the purpose of
establishing or maintaining any concealed fund or concealed bank account.
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8.23 Suppliers.
---------
The Disclosure Statement sets forth the names of and description of
contractual arrangements (whether or not binding or in writing) with the
twenty-five (25) largest suppliers of the Seller by sales or services in
dollars. Assuming that Purchaser continues to conduct the Business in the
ordinary course consistent with Seller's prior practices generally and
specifically with respect to Seller's current suppliers, Seller has no
direct knowledge that any of the current suppliers of the Seller will, or
intend to, (a) cease doing business with the Seller; or (b) materially
alter the amount of business they are currently doing with the Seller; or
(c) not do business with the Purchaser after the Closing.
8.24 Product Liability Claims.
------------------------
To the best of Seller's knowledge, there are no material product liability
claims against the Seller, either potential or existing, which are not
fully covered by product liability insurance coverage with a responsible
company which, if determined adversely to Seller, would have a material
adverse effect upon Seller's Business.
8.25 Employee Benefit Plans.
----------------------
For the purposes of this Section 8.25, "Seller" shall include all persons
who are members of a controlled group, a group of trades or businesses
under common control, or an affiliated service group (within the meanings
of Sections 414(b), (c) or (m) of the Code), of which the Seller is a
member.
(a) The Employee Benefit Plans presently maintained by the Seller or to
which the Seller has contributed within the past six (6) years,
including any terminated or frozen plans which have not yet
distributed all plan assets, are fully set forth in the Disclosure
Schedule. For purposes of this provision, the term "Employee Benefit
Plan" shall mean:
(i) A Welfare Benefit Plan as defined in Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")
established for the purpose of providing for its participants or
their beneficiaries, through the purchase of insurance or
otherwise, medical, surgical, or hospital care or benefits, or
benefits in the event of sickness, accident, disability, death or
unemployment (including any plan or program of severance pay), or
vacation benefits, apprenticeship or other training programs, or
day care centers, scholarship funds, or prepaid legal services,
or any benefit described in Section 302(c) of the Labor
Management Relations Act of 1947;
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(ii) An Employee Pension Benefit Plan as defined in Section 3(2) of
ERISA established or maintained by the Seller for the purpose of
providing retirement income to employees or for the purpose of
providing deferral of income by employees for periods extending
to the termination of covered employment or beyond; and
(iii)Any other plan or arrangement not covered by ERISA but which
provides benefits to employees or former employees and results in
an accrued liability on the part of the Seller either by contract
or by operation of law.
(b) With respect to any such Employee Benefit Plans, the Seller represents
and warrants that, to the best of Seller's knowledge;
(i) The Seller has not, with respect to any Employee Benefit Plans,
engaged in any prohibited transaction, as such term is defined in
Section 4975 of the Code or Section 406 of ERISA.
(ii) The Seller has, with respect to any Employee Benefit Plans,
substantially complied with all reporting and disclosure
requirements required by Title I, Subtitle B, Part 1 of ERISA.
(iii)There was no accumulated funding deficiency (as defined in
section 302 of ERISA and Section 412 of the Code) with respect to
any Employee Pension Benefit Plan which is a defined benefit
pension plan, whether or not waived, as of the last day of the
most recent fiscal year of the plans ending prior to the date of
this Agreement.
(iv) Except as described on the Disclosure Schedule, there are no
contributions due to any Employee Pension Benefit Plan for the
most recent fiscal year of the plans ending prior to the date of
this Agreement and the Seller's Financial Statements reflect any
liability of the Seller to make contributions to the Employee
Pension Benefit Plans.
(v) No material liability to the Pension Benefit Guaranty Corporation
("PBGC") has been asserted with respect to any Employee Pension
Benefit Plan which is a defined benefit pension plan.
(vi) There has been no reportable event as described in Section
4043(b) of ERISA since the effective date of Section 4043 of
ERISA with respect to any Employee Pension Benefit Plan which is
a defined benefit plan.
(vii)Except for claims for benefits by participants and beneficiaries
in the normal course of events, to the best of Seller's
knowledge, there are no claims, pending or threatened, by any
individual or Governmental
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Entity, which, if decided adversely, would have a material
adverse effect upon the financial condition of any Employee
Benefit Plan, the plan administrator of any Employee Benefit
Plan, or the Seller.
(viii) The Seller has made available for inspection all annual reports
for the Seller filed on Internal Revenue Service ("IRS") Form
5500 or 5500C, all reports for the Seller prepared by an actuary
for the last three plan years, the plan and trust documents and
the Summary Plan Description, as amended, for each Employee
Benefit Plan and the last filed PBGC1 Form (if applicable) for
each Employee Benefit Plan, with respect to any Employee Benefit
Plans other than multi-employer plans (within the meaning of
Section 3(37) of ERISA), and other reports filed with the PBGC
during the last three plan years.
(ix) All Employee Pension Benefit Plans are intended to be qualified
retirement plans under the Code. The IRS has issued, and the
Seller has made available for inspection, one or more
determination letters with respect to the qualification of all
Employee Pension Benefit Plans stating that the IRS has made a
favorable determination as to the qualification of such Plan
under Section 401(a) of the Code, and that continued
qualification of the Plan in its present form will depend upon
its effect in operation. The time for adoption of any amendments
required by changes in the Code since such determination letters
were issued, or changes required by the IRS as a condition for
continued qualification of such plans has not expired, or did not
expire without such amendments being made. Such plans are now,
and always have been, established in writing and maintained and
operated in accordance with the plan documents, ERISA, the Code,
and all other applicable laws. Except as described in the
Disclosure Schedule, such Plans are now and always have been,
established in writing and maintained and operated substantially
in accordance with the plan documents, ERISA, the Code and all
other applicable laws, in all material respects.
(x) There is no liability arising from the termination or partial
termination of any Employee Benefit Plan, except for liabilities
as to which adequate reserves are reflected on the Financial
Statements, and there exists no condition presenting a material
risk of such liability.
(xi) The Seller has timely made any contributions it is obligated to
make to any multi-employer plan within the meaning of Section
3(37) of ERISA. The Seller has no liability arising as a result
of withdrawal from any multi-employer plan, no such withdrawal
liability has been asserted and no such withdrawal liability will
be asserted with regard
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to any withdrawal or partial withdrawal on or before the date of
this Agreement.
8.26 Assets Necessary to the Business.
--------------------------------
The Seller owns all assets and properties (tangible and intangible)
necessary to carry on its Business and operations as presently conducted
and as shown on the Financial Statements. Such assets and properties are
all of the assets and properties necessary to carry on Seller's Business as
presently conducted and none of the Shareholders (other than through their
ownership of stock in the Seller and/or as set forth on the Disclosure
Schedule) nor any member of their respective families owns or leases or has
any interest in any assets or properties presently being used to carry on
the Business of Seller.
8.27 Transactions with Affiliates.
----------------------------
Except as disclosed on the Disclosure Schedule, there is no lease,
sublease, contract, agreement or other arrangement of any kind whatsoever
entered into by Seller and any Shareholder or Affiliate.
8.28 Territorial Restrictions.
------------------------
Except as described in the Disclosure Schedule, Seller is not restricted by
any written agreement or understanding with any other Person from carrying
on the Business anywhere in the world. Neither Purchaser nor any of its
Affiliates will, as a result of its acquisition of the Purchased Assets,
become restricted in carrying on the Business anywhere in the world as a
result of any contract or other agreement to which Seller is a party or by
which it is bound.
8.29 Full Disclosure.
---------------
None of the representations and warranties made by the Seller herein, or
made on its behalf, including any disclosures made in the Disclosure
Schedule, contains or will contain, to the best of Seller's knowledge, any
untrue statement of material fact or omits or will omit any material fact.
9.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser hereby represents and warrants to Seller that the following statements
are true and correct as of the date hereof.
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9.1 Organization, Good Standing and Power of Purchaser.
--------------------------------------------------
(a) Purchaser is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and has full
corporate power and lawful authority to execute, deliver and perform
this Agreement and conduct the Business of Seller currently conducted
by Seller in each of the jurisdictions in which Seller currently
conducts its Business, which are the only jurisdictions where the
failure to be so qualified by Purchaser will have a material adverse
effect on the business prospects or financial condition of Purchaser.
9.2 Status of Agreements.
--------------------
(a) All requisite corporate action (including action of its Board of
Directors) to approve, execute, deliver and perform this Agreement and
each of the other agreements, instruments and other documents to be
delivered by and on behalf of Purchaser ("Other Purchaser Documents")
in connection herewith has been taken by Purchaser. This Agreement has
been duly and validly executed and delivered by Purchaser and
constitutes the valid and binding obligation of Purchaser enforceable
in accordance with its terms. All Other Purchaser Documents in
connection herewith will, when executed and delivered, constitute the
valid and binding obligation of Purchaser enforceable in accordance
with their respective terms.
(b) No authorization, approval, consent or order of, or registration,
declaration or filing with, any court, governmental body or agency or
other public or private body, entity or person is required (except for
Purchaser's primary lender, Deutsche Financial Services Company, whose
consent shall be obtained prior to Closing) in connection with the
execution, delivery or performance of this Agreement or any Other
Purchaser Documents in connection herewith.
(c) Neither the execution, delivery nor performance of this Agreement or
any of the Other Purchaser Documents in connection herewith does or
will:
(i) conflict with, violate or result in any breach of any judgment,
decree, order, statute, ordinance, rule or regulation applicable
to Purchaser;
(ii) conflict with, violate or result in any breach of any agreement
or instrument to which Purchaser is a party or by which Purchaser
or any of Purchaser's assets or properties is bound, or
constitute a default thereunder or give rise to a right of
acceleration of an obligation of Purchaser; or
(iii)conflict with or violate any provision of the Articles of
Incorporation or By-Laws of Purchaser.
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9.3 Brokers and Finders.
-------------------
Except for J. C. Bradford & Co., whose fees will be paid by Purchaser, no
broker, finder or other person or entity acting in a similar capacity has
participated on behalf of Purchaser in bringing about the transaction
herein contemplated, or rendered any service with respect thereto or been
in any way involved therewith.
9.4 MD&A Update.
-----------
Since October 5, 1998, there has been no material adverse change in the
results of operations or financial condition of Purchaser, nor are there
any trends, demands, commitments, events or uncertainties known to
Purchaser which could affect the Purchaser's liquidity, capital resources
or results of operations as of the date hereof or as of the Closing (other
than those previously disclosed by Purchaser in its periodic reports filed
with the Securities and Exchange Commission) that would require discussion
in Management's Discussion and Analysis of Financial Condition and Results
of Operations ("MD&A") prepared in accordance with Item 303 of Regulation
S-K promulgated by the Securities and Exchange Commission if such MD&A were
required to be updated through the date hereof and through the Closing.
9.5 Shares.
------
The shares of Common Stock of the Purchaser that are to be issued to Seller
pursuant to this Agreement have been duly authorized and, when issued in
accordance with the terms of this Agreement, will be validly issued and
outstanding, fully paid and non-assessable. Purchaser's common stock is
properly listed and authorized for quotation on the NASDAQ National Market
System.
9.6 Certain Proceedings.
-------------------
There is no suit, action, proceeding at law or in equity, arbitration,
administrative proceeding or other proceeding that has been commenced or,
to the knowledge of Purchaser, threatened against and that challenges, or
may have the effect of preventing, delaying, making illegal, or otherwise
interfering with, the transaction contemplated by this Agreement.
9.7 Compliance with Applicable Law.
------------------------------
Purchaser has operated in material compliance with all federal, state,
county and municipal laws, ordinances and regulations applicable thereto
except for such
noncompliance which in the aggregate does not result in a material adverse
effect on the business of Purchaser.
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9.8 Permits.
-------
Purchaser has all permits and licenses required by applicable law, except
where failure to secure such license or permits does not have a material
adverse effect on the business of Purchaser taken as a whole.
9.9 None of the representations and warranties made by the Purchaser herein
contains or will contain, to the best of Purchaser's knowledge, any untrue
statement of material fact or omits or will omit any material fact.
10.
BULK SALES ACT
--------------
10.1 Compliance with Bulk Sales Act.
------------------------------
Purchaser waives compliance with the provisions of any applicable bulk
sales law and Seller and Shareholders, jointly and severally, agree to
indemnify and hold harmless Purchaser from any liability incurred as a
result of the failure to so comply, except to liabilities explicitly
assumed hereunder by Purchaser.
11.
SURVIVAL OF AND RELIANCE UPON
-----------------------------
REPRESENTATIONS, WARRANTIES AND AGREEMENTS; INDEMNIFICATION
-----------------------------------------------------------
11.1 Survival of Representations and Warranties.
------------------------------------------
The parties acknowledge and agree that all representations, warranties and
agreements contained in this Agreement or in any agreement, instrument,
exhibit, certificate, schedule or other document delivered in connection
herewith, shall survive the Closing and continue to be binding upon the
party giving such representation, warranty or agreement and shall be fully
enforceable to the extent provided for in Sections 11.3 and 11.4 hereof, at
law or in equity, for the period beginning on the date of Closing and
ending two (2) years thereafter, except for the representations, warranties
and agreements designated and identified in Sections 3.1, 3.2, 3.3, 4.2,
8.3, 8.11, 8.12, 8.13, 8.16 and 9.2 which shall survive the Closing and
shall terminate in accordance with the statute of limitations governing
written contracts in the State of Tennessee and Exhibits N, N-1, N-2, N-3
and O, O-1, O-2, O-3, O-4, O-5, O-6, O-7, O-8, O-9, O-10 and O-11, which
shall terminate as provided therein.
11.2 Reliance Upon and Enforcement of Representations, Warranties and
---------------------------------------------------------------------------
Agreements.
----------
(a) Seller hereby agrees that, notwithstanding any right of Purchaser to
fully investigate the affairs of Seller, and notwithstanding knowledge
of facts determined or determinable by Purchaser pursuant to such
investigation or right of investigation, Purchaser has the right to
rely fully upon the representations, warranties and agreements of
Seller contained in this Agreement and upon the accuracy of any
document, certificate or exhibit given or delivered to Purchaser
pursuant to the provisions of this Agreement.
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(b) Purchaser hereby agrees that, notwithstanding any right of Seller to
fully investigate the affairs of Purchaser, and notwithstanding
knowledge of facts determined or determinable by Seller pursuant to
such investigation or right of investigation, Seller have the right to
rely fully upon the representations, warranties and agreements of
Purchaser contained in this Agreement and upon the accuracy of any
document, certificate or exhibit given or delivered to Seller pursuant
to the provisions of this Agreement.
11.3 Indemnification by Seller and Shareholders.
------------------------------------------
Provided Purchaser makes a written claim for indemnification against Seller
and/or Shareholders within any applicable survival period specified in
Section 11.1 and subject to the limitations set forth in Section 11.6,
Seller and Shareholders (jointly and severally, shall indemnify Purchaser
against and hold it harmless from:
(i) any and all loss, damage, liability or deficiency resulting from or
arising out of any inaccuracy in or breach of any representation,
warranty, covenant, or obligation made or incurred by Seller herein or
in any other agreement, instrument or document delivered by or on
behalf of Seller pursuant to the provisions of the Agreement;
(ii) any imposition (including by operation of law) or attempted imposition
by a third party upon Purchaser of any liability of Seller which
Purchaser has not specifically agreed to assume pursuant to Sections
3.1 and 3.2 of this Agreement;
(iii)any liability (except for any Assumed Liabilities described in
Section 3.1 and 3.2) or other obligation incurred by or imposed upon
Purchaser resulting from the failure of the parties to comply with the
provisions of any law relating to bulk transfers which may be
applicable to the transaction herein contemplated;
(iv) any and all costs and expenses (including reasonable legal and
accounting fees) related to any of the foregoing.
Except as otherwise provided in this Agreement, nothing in this Section
11.3 shall be construed to limit the amount to which, or the time by which,
by reason of offset or otherwise, the Purchaser may recover from Seller or
the Shareholders pursuant to this Agreement resulting from Seller's or the
Shareholders' breach or violation of any representation, warranty, covenant
or agreement contained herein.
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Any amounts to which Purchaser, its successors or assigns, is entitled to
indemnification pursuant to the provisions of this Section, shall first be
offset against the amount payable to Seller under the subordinated
promissory note. Provided, however, the offset in any one year may not
exceed the aggregate amount of principal and interest due on said
subordinated promissory note for said year.
11.4 Indemnification by Purchaser.
----------------------------
Provided Shareholders and Seller make a written claim for indemnification
against Purchaser within any applicable survival period specified in
Section 11.1 and subject to the limitations set forth in Section 11.6,
Purchaser shall indemnify Seller and Shareholders against and hold it
harmless from any and all loss, damage, liability or deficiency resulting
from or arising out of: (i) any Assumed Liabilities; (ii) any liability of
Purchaser arising out of Purchaser's operations subsequent to the Closing
(except to the extent such liability is the result of a breach of a
covenant or warranty of Seller hereunder); (iii) any inaccuracy in or
breach of any representation, warranty, covenant or obligation made or
incurred by Purchaser herein or in any other agreement, instrument, or
document delivered by or on behalf of Purchaser pursuant to the provisions
of this Agreement; and (iv) any and all related costs and expenses
(including reasonable legal and accounting fees). Except as otherwise
provided herein, nothing in this Section 11.4 shall be construed to limit
the amount to which, or the time by which, by reason of offset or
otherwise, that Seller may recover from Purchaser pursuant to this
Agreement resulting from its breach or violation of any representation,
warranty, covenant or agreement contained herein.
11.5 Notification of and Participation in Claims.
-------------------------------------------
(a) No claim for indemnification shall arise until notice thereof is given
to the party from whom indemnity is sought. Such notice shall be sent
within ten (10) days after the party to be indemnified has received
notification of such claim, but failure to notify the indemnifying
party shall in no event prejudice the right of the party to be
indemnified under this Agreement, unless the indemnifying party shall
be prejudiced by such failure and then only to the extent of such
prejudice. In the event that any legal proceeding shall be instituted
or any claim or demand is asserted by any third party in respect of
which Seller/Shareholders on the one hand, or Purchaser on the other
hand, may have an obligation to indemnify the other, the party
asserting such right
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<PAGE>
to indemnity (the "Party to be Indemnified") shall give or cause to be
given to the party from whom indemnity is sought (the "Indemnifying
Party") written notice thereof and the Indemnifying Party shall have
the right, at its option and expense, to participate in the defense of
such proceeding, claim or demand, but not to control the defense,
negotiation or settlement thereof, which control shall at all times
rest with the Party to be Indemnified, unless the Indemnifying Party
irrevocably acknowledges in writing full and complete responsibility
for and agrees to provide indemnification of the Party to be
Indemnified, in which case such Indemnifying Party may assume such
control through counsel of its choice and at its expense. In the event
the Indemnifying Party assumes control of the defense, the
Indemnifying Party shall not be responsible for the legal costs and
expenses of the Party to be Indemnified in the event the Party to be
Indemnified decides to join in such defense. The parties hereto agree
to cooperate fully with each other in connection with the defense,
negotiation or settlement of any such third party legal proceeding,
claim or demand.
(b) If the Party to be Indemnified is also the party controlling the
defense, negotiation or settlement of any matter, and if the Party to
be Indemnified determines to compromise the matter, the Party to be
Indemnified shall immediately advise the Indemnifying Party of the
terms and conditions of the proposed settlement. If the Indemnifying
Party agrees to accept such proposal, the Party to be Indemnified
shall proceed to conclude the settlement of the matter, and the
Indemnifying Party shall immediately indemnify the Party to be
Indemnified pursuant to the terms of Sections 11.3 and 11.4 hereunder.
If the Indemnifying Party does not agree within fourteen (14) days to
accept the settlement (said 14-day period to begin on the first
business day following the date such party receives a complete copy of
the settlement proposal), the Indemnifying Party shall immediately
assume control of the defense, negotiation or settlement thereof, at
that Indemnifying Party's expense. Thereafter, the Party to be
Indemnified shall be indemnified in the entirety for any liability
arising out of the ultimate defenses, negotiation or settlement of
such matter.
(c) If the Indemnifying Party is the party controlling the defense,
negotiation or settlement of any matter, and the Indemnifying Party
determines to compromise the matter, the Indemnifying Party shall
immediately advise the Party to be Indemnified of the terms and
conditions of the proposed settlement and irrevocably acknowledge in
writing full and complete responsibility for, and agree to provide,
indemnification of the Party to be Indemnified. If the Party to be
Indemnified agrees to accept such proposal, the Indemnifying Party
shall proceed to conclude the settlement of the matter and immediately
indemnify the Party to be Indemnified pursuant to the terms of
Sections 11.3 or 11.4 hereunder. If the Party to be Indemnified does
not agree within fourteen (14) days to accept the settlement (said
14-day period
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to begin on the first business day following the date such party
receives a complete copy of the settlement proposal), the Party to be
Indemnified shall immediately assume control of the defense,
negotiation or settlement thereof, at the Party to be Indemnified's
expense. If the final amount paid to resolve the claim is less than
the amount of the original proposed settlement made by the
Indemnifying Party, then the Party to be Indemnified shall receive
such indemnification pursuant to Sections 11.3 or 11.4 hereof,
including any and all expenses incurred by the Party to be Indemnified
incurred in connection with the defense, negotiation or settlement of
such matter. If the amount finally paid to resolve the claim is equal
to or greater than the amount of the original proposed settlement
proposed by the Indemnifying Party, then the Indemnifying Party shall
provide indemnification pursuant to Sections 11.3 and 11.4 for the
amount of the original settlement proposal submitted by the
Indemnifying Party, and the Party to be Indemnified shall be
responsible for all amounts in excess of the original settlement
proposal submitted by the Indemnifying Party and all costs and
expenses incurred by the Party to be Indemnified in connection with
such defense, negotiation or settlement.
11.6 Limitation on Liability.
-----------------------
(a) Notwithstanding anything contained herein to the contrary, no claims
for indemnification shall be made by Purchaser against the Seller and
Shareholders until such time as all claims hereunder, net of income
tax benefit realized and/or realizable by Purchaser, total more than
One Hundred Thousand Dollars ($100,000.00) in the aggregate and then
indemnification shall be made only to the extent that such claim or
claims exceed One Hundred Thousand Dollars ($100,000.00) in the
aggregate. In addition, notwithstanding anything contained herein to
the contrary, the maximum aggregate liability that the Seller and
Shareholders may be collectively required to pay Purchaser under this
Section 11 shall be limited to an amount equal to the total
consideration paid hereunder by Purchaser to Seller for the Purchased
Assets. In addition, the maximum liability that any Shareholder may be
individually required to pay Purchaser under this Section 11 shall not
exceed an amount equal to the total consideration paid Seller
hereunder by Purchaser hereunder multiplied by the following
respective percentages: M. Putman - 51%, P. Bishop - 36.50%, and D.
Barthel - 12.50%.
(b) Notwithstanding anything contained in this Agreement to the contrary,
the maximum amount that Purchaser may be collectively required to pay
to Seller and Shareholders under this Section 11 as a result of any
and all breaches shall be limited to the total consideration paid
under this Agreement by Purchaser to Seller.
(c) For purposes of this Section 11.6 ($100,000.00 basket amount), the
amount of any indemnification claim shall be reduced by the effect of
any income tax benefit realized by Purchaser. For purposes hereof, the
marginal rate of 40% shall be utilized.
(d) Notwithstanding anything contained herein to the contrary, in the
event any Excluded Liability would attach to the Purchased Assets
under any successor liability statute or otherwise, notwithstanding
the fact that such liability was an Excluded Liability, Seller shall
be responsible for the payment of such Excluded Liability and the lien
on Purchased Assets (which would represent a breach of certain
representations under the Agreement) related to such liability shall
not make such Excluded Liability subject to the basket amount
referenced in Section 11.6(a) above.
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12.
THE CLOSING
-----------
12.1 Date, Time and Place of Closing.
-------------------------------
Consummation of the transactions contemplated hereby (the "Closing") shall
take place on December 7, 1998 (the "Closing Date"), at 10:00 a.m. EST at
the offices of Lindhorst & Dreidame, 312 Walnut Street, Suite 2300,
Cincinnati, Ohio 45202, or on such other Closing Date, or at such other
time and/or place as the parties may mutually agree upon.
12.2 Conditions Precedent to Purchaser's Obligations.
-----------------------------------------------
The obligation of Purchaser to perform in accordance with this Agreement
and to consummate the transactions herein contemplated is subject to the
satisfaction of the following conditions at or before the Closing:
(a) Seller shall have complied with and performed all of the
representations, warranties, agreements and covenants hereunder
required to be performed by it prior to or at the Closing;
(b) There shall be no pending or threatened legal action which, if
successful, would prohibit consummation or require substantial
rescission of the transactions contemplated by this Agreement;
(c) The business, aggregate properties and operations of Seller shall not
have been materially adversely affected as a result of any fire,
accident or other casualty or any labor disturbance or act of God or
the public enemy, and there shall otherwise have been no material
adverse change to the business, aggregate properties, or operations of
Seller since September 30, 1998;
(d) Seller shall have delivered to Purchaser, at or before the Closing,
the following documents, all of which shall be in form and substance
reasonably acceptable to the Purchaser and its counsel:
(i) The instruments of transfer required by Sections 2.5 and 2.6;
(ii) Releases (or copies thereof) of all liens, claims, charges,
encumbrances, security interests and restrictions on Purchased
Assets necessary to provide Purchaser with good, marketable and
indefeasible title to each of the Purchased Assets at the
Closing;
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(iii)Certified copies of the corporate actions taken by the Board of
Directors and Shareholders of Seller authorizing the execution,
delivery and performance of this Agreement;
(iv) Certificates of Existence for Seller from the Secretary of State
of Tennessee dated no earlier than fifteen (15) days prior to
Closing;
(v) Opinion letter of Baker, Donelson, Bearman and Caldwell for
Seller containing the opinion set forth in Exhibit P;
(vi) Seller shall have entered into the Subordination Agreement in the
form attached hereto as Exhibit L;
(vii)Seller, the Shareholders and the other individuals set forth in
Section 7.2 shall have entered into the non-competition
agreements as set forth in Exhibits O, O-1, O-2, O-3, O-4, O-5
and O-6.
(viii) M. Putman, P. Bishop, Phillip Qualls and Gregory Livingston
shall have entered into the Employment Agreements set forth in
Exhibits N, N-1, N-2 and N-3.
(ix) The express conditions set forth in Section 13 have been
satisfied or waived.
(e) Seller will adopt and file with the Secretary of State of Tennessee an
Amendment to the Charter of Seller changing the name of Seller to a
name substantially dissimilar to Access Technologies, Inc. and Seller
shall execute a Consent for Use of Similar Name form as set forth in
Section 8.19.
(f) Purchaser shall have received assurances in form and substance
satisfactory to it (that may include insurance certificates) that
Seller has made all provisions necessary under applicable law, with
regard to an employer's obligation to provide for a continuation of
health insurance and
other benefits of any employee, who is not employed by Seller
following termination of employment.
12.3 Conditions Precedent to Seller's Obligations.
--------------------------------------------
The obligation of Seller to perform in accordance with this Agreement and
to consummate the transactions herein contemplated is subject to the
satisfaction of the following conditions at or before the Closing:
(a) Performance by Purchaser of all of the representations, warranties,
agreements and covenants to be performed by it at or before the
Closing;
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(b) There shall be no pending or threatened legal action which, if
successful, would prohibit consummation or require substantial
rescission of the transactions contemplated by this Agreement;
(c) Purchaser shall deliver to Seller at or before the Closing the
following documents, all of which shall be in form and substance
acceptable to Seller and its counsel:
(i) A certified or bank cashier's check or wire transfer for the
aggregate amount to be paid to Seller at the Closing pursuant to
Section 4.2(a) hereof;
(ii) Assumption of Liabilities Agreement under which Purchaser assumes
the Liabilities set forth in Sections 3.1 and 3.2;
(iii) A promissory note as set forth in Section 4.2(b);
(iv) A subordinated promissory note as set forth in Section 4.2(e);
(v) Evidence that the stock of Purchaser will be delivered to Seller
pursuant to Section 4.2(d) on January 4, 1999;
(vi) A stand-by letter of credit is delivered to Seller as required in
Section. 4.2(b);
(vii)Certified copies of the corporate actions taken by Purchaser
authorizing the execution, delivery and performance of this
Agreement;
(viii) Certificate of Good Standing for Purchaser from the Secretary
of State of Delaware dated no earlier than fifteen (15) days
prior to the date of Closing;
(ix) Opinion letter of Lindhorst & Dreidame Co., L.P.A., counsel for
Purchaser, addressed to Seller and dated the Closing Date,
containing the opinions set forth on Exhibit R;
(d) Purchaser shall have entered into the Employment Agreements set forth
in Exhibit N, N-1, N-2 and N-3.
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<PAGE>
13.
GENERAL PROVISIONS
------------------
13.1 Publicity.
---------
All public announcements relating to this Agreement or the transactions
contemplated hereby will be made by Purchaser with the consent of Seller,
which consent will not be unreasonably withheld, except for any disclosure
which may be required because of Purchaser's being a publicly-traded
corporation on the over-the-counter market.
13.2 Expenses.
--------
Purchaser will bear and pay all of its expenses incident to the
transactions contemplated by this Agreement which are incurred by Purchaser
or its representatives and Seller shall bear and pay all of the expenses
incident to the transactions contemplated by this Agreement which are
incurred by Seller or their respective representatives.
13.3 Notices.
-------
All notices and other communications required by this Agreement shall be in
writing and shall be deemed given if delivered by hand or mailed by
registered mail or certified mail, return receipt requested, to the
appropriate party at the following address (or at such other address for a
party as shall be specified by notice pursuant hereto):
(a) If to Purchaser, to:
Pomeroy Computer Resources, Inc.
1020 Petersburg Road
Hebron, Kentucky 41048
With a copy to:
James H. Smith III, Esq.
Lindhorst & Dreidame
312 Walnut Street, Suite 2300
Cincinnati, Ohio 45202
(b) If to Seller, to:
Access Technologies, Inc.
5828 Shelby Oaks Drive
Memphis, Tennessee 38134
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<PAGE>
With a copy to:
Caldwell D. Lowrance, Jr., Esq.
Baker, Donelson, Bearman & Caldwell
165 Madison Avenue, Suite 2000
Memphis, Tennessee 38103
(c) If to Shareholders, to:
Mark Putman
Paul Bishop
David Barthel
5828 Shelby Oaks Drive
Memphis, Tennessee 38134
13.4 Binding Effect.
--------------
Except as may be otherwise provided herein, this Agreement and all the
provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, legal representatives,
successors and assigns.
13.5 Headings.
--------
The headings in this Agreement are intended solely for convenience of
reference and shall be given no effect in the construction or
interpretation of this Agreement.
13.6 Exhibits.
--------
The Exhibit and Disclosure Schedule referred to in this Agreement
constitute an integral part of this Agreement as if fully rewritten herein.
13.7 Counterparts.
------------
This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original, but all of which constitute together one and
the same document.
13.8 Governing Law.
-------------
This Agreement shall be construed in accordance with and governed by the
laws of the State of Tennessee, without regard to its laws regarding
conflict of laws.
13.9 Severability.
------------
If any provision of this Agreement shall be held unenforceable, invalid, or
void to any extent for any reason, such provision shall remain in force and
effect to the maximum extent allowable, if any, and the enforceability or
validity of the remaining provisions of this Agreement shall not be
affected thereby.
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<PAGE>
13.10 Waivers; Remedies Exclusive.
----------------------------
No waiver of any right or option hereunder by any party shall operate as a
waiver of any other right or option, or the same right or option with
respect to any subsequent occasion for its exercise, or of any right to
damages. No waiver by any party of any breach of this Agreement or of any
representation or warranty contained herein shall be held to constitute a
waiver of any other breach or a continuation of the same breach. No waiver
of any of the provisions of this Agreement shall be valid and enforceable
unless such waiver is in writing and signed by the party granting the same.
Except as otherwise provided in the notes issued pursuant to Sections
4.2(b) and 4.2(e), the stand-by letter of credit issued pursuant to Section
4.2(b), the Employment Agreements and the Covenant Not to Compete
Agreements, the indemnification provided for by Section 11 herein shall
constitute the exclusive remedy of any party with respect to (i) the
matters for which such indemnification is provided and (ii) any other
matters arising out of, relating to or connected with this Agreement or the
transactions contemplated hereby, and whether any claims or causes of
action asserted with respect to any such matters are brought in contract,
tort or other legal theory whatsoever.
13.11 Assignments.
------------
Except as otherwise provided in this Agreement, no party shall assign its
rights or obligations hereunder prior to Closing without the prior written
consent of the other party.
13.12 Entire Agreement.
-----------------
This Agreement and the agreements, instruments and other documents to be
delivered hereunder constitute the entire understanding and agreement
concerning the subject matter hereof. All negotiations between the parties
hereto are merged into this Agreement, and there are no representations,
warranties, covenants, understandings, or agreements, oral or otherwise, in
relation thereto between the parties other than those incorporated herein
and to be delivered hereunder. Except as otherwise expressly contemplated
by this Agreement, nothing expressed or implied in this Agreement is
intended or shall be construed so as to grant or confer on any person, firm
or corporation other than the parties hereto any rights or privilege
hereunder. No supplement, modification or amendment of this Agreement shall
be binding unless executed in writing by the parties hereto.
13.13 Business Records.
-----------------
Seller and Shareholders shall be permitted to retain copies of such books
and records relating to the Purchased Assets and relating to the accounting
and tax matters of the Business and to have access to all original copies
of records so delivered to Purchaser at reasonable times, for any
reasonable business purpose, for a period of six (6) years after the
Closing.
-52-
<PAGE>
13.14 Dissolution of Seller.
----------------------
Purchaser acknowledges that following Closing, Seller will adopt a Plan of
Liquidation with the intent to dissolve the corporation. Provided, however,
Seller and Shareholders agree that the Plan of Liquidation will not be
effectuated and implemented by Seller until all of the conditions set forth
in Section 2 of this Agreement regarding the transfer of all the respective
Purchased Assets have been effectuated by Seller. Seller acknowledges that
Purchaser will suffer irreparable harm in the event that Seller would
liquidate according to its Plan of Liquidation prior to satisfying all of
its obligations under the terms of this Agreement and the exhibits hereto.
The parties hereto have executed this Agreement as of the date first above
written.
WITNESSES: ACCESS TECHNOLOGIES, INC.
_______________________________________
_______________________________________ By:________________________________
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<PAGE>
POMEROY COMPUTER RESOURCES,
_______________________________________ INC.
_______________________________________ By:________________________________
_______________________________________
_______________________________________ ___________________________________
MARK V. PUTMAN
_______________________________________
_______________________________________ ___________________________________
PAUL BISHOP
_______________________________________
_______________________________________ ___________________________________
DAVID BARTHEL
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<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the _________ day of December, 1998, by and between
POMEROY COMPUTER RESOURCES, INC., a Delaware corporation ("Company"), and MARK
PUTMAN ("Employee").
W I T N E S S E T H :
WHEREAS, the Company entered into an Asset Purchase Agreement ("Purchase
Agreement") of even date pursuant to which it purchased substantially all the
assets of Access Technologies, Inc. (Access); and
WHEREAS, Employee owns Forty-Four and 89/100 percent (44.89%) of the outstanding
stock of Access; and
WHEREAS, Employee, as an inducement for and in consideration of Company entering
into the Purchase Agreement, has agreed to enter into and execute this
Employment Agreement pursuant to Section 6 thereof; and
WHEREAS, Company desires to engage the services of Employee, pursuant to the
terms, conditions and provisions as hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein set forth, the parties hereby covenant and agree as follows:
1. Employment. The Company agrees to employ the Employee, and the Employee
----------
agrees to be employed by the Company, upon the following terms and
conditions.
2 Term. The initial term of Employee's employment pursuant to this Agreement
----
shall begin on the 9th day of December, 1998, and shall continue for a
period of four (4) years and twenty-seven (27) days, ending January 5, 2003
unless terminated earlier pursuant to the provisions of Section 10,
provided that Sections 8, 9, 10(b) and 11, if applicable, shall survive the
termination of such employ-ment and shall expire in accordance with the
terms set forth therein.
3. Renewal Term. The term of Employee's employment shall automatically renew
------------
for additional consecutive renewal terms of one (1) year unless either
party gives written notice of his/its intent not to renew the terms of this
Agreement sixty (60) days prior to expiration of the then expiring term.
4. Duties. Employee shall serve as Vice President of Operations for the
------
Company's Access/Memphis Division. Employee shall be responsible to and
report directly to the officers of Company. Employee shall devote his best
efforts and substantially all his time during normal business hours to the
diligent, faithful and loyal discharge of the duties of his employment and
towards the proper, efficient and successful conduct of the Company's
affairs. Employee fur-ther agrees to refrain during the term of this
Agreement from making any sales of competing services or products or from
profiting from any transaction involving computer services or products for
his account without the express written consent of Company.
<PAGE>
5. Compensation. For all services rendered by the Employee under this
------------
Agreement (in addition to other monetary or other benefits referred to
herein), compensation shall be paid to Employee as follows:
(a) Base Salary: During each fiscal year of the initial term of this
Agreement, Employee shall be paid an annual base salary of Eighty-Four
Thousand Dollars ($84,000.00). For the first twenty-seven (27) days of
this Agreement, Employee shall be compensated at the rate of Seven
Thousand Dollars ($7,000.00) per month. Said base salary shall be
payable in accordance with the historical payroll practices of the
Company.
(b) Annual Cash Bonus - Incentive Stock Option - Access/Memphis Division:
In addition to Employee's base salary as set forth in Section 5(a)
above, during the first fiscal year of the initial term of this
Agreement (January 6, 1999 through January 5, 2000), Employee shall be
entitled to a cash bonus and incentive stock option award in the event
Employee satisfies certain economic criteria pertaining to the
Company's Access/Memphis Division set forth as follows:
(i) Gross sales of Company's Access/Memphis Division greater than
$30,000,000.00 with net profit before taxes (NPBT) greater than
$2,350,000.00 but less than $2,450,000.00, equals $20,000.00 cash
bonus plus 5,000 incentive stock options;
(ii) Gross sales of Company's Access/Memphis Division greater than
$30,000,000.00 with NPBT greater than or equal to $2,450,000.00
but less than $2,550,000.00, equals $25,000.00 cash bonus plus
6,000 incentive stock options;
(iii)Gross sales of Company's Access/Memphis Division greater than
$30,000,000.00 with NPBT greater than or equal to $2,550,000.00
equals $30,000.00 cash bonus plus 7,500 incentive stock options.
(iv) For purposes of this Section 5(b), the term Gross Sales shall
mean the gross sales of equipment, software and services by
Company's Access/Memphis Division during the applicable period.
In making said gross sales determination, all gains and losses
realized on the sale or other disposition of Companys
Access/Memphis Division's assets not in the ordinary course shall
be excluded. In addition, any gross sales of Company's
Access/Memphis Division relating to any acquisitions that are
-2-
<PAGE>
closed in such year shall be excluded. All refunds or returns
which are made during such period shall be subtracted along with
all accounts receivable derived from such sales that are written
off during such period in accordance with Company s
Access/Memphis Divisions's accounting system. Such gross sales
and NPBT of Company's Access/Memphis Division shall be determined
by the Company's internally generated accounting statements
determined in the manner set forth above and in accordance with
generally accepted accounting principles. Commencing on the later
of January 6, 1999 or the installation of the ASTEA accounting
system at Company's Access/Memphis Division, a 1.5% MAS royalty
fee on gross sales by Company's Access/Memphis Division shall be
made incident to said NPBT determination. In determining NPBT of
Access/Memphis Division, no effect shall be given to any increase
in the amounts of depreciation, amortization or other expense or
deduction taken on tangible or intangible assets of the Company,
if such increase is attributable to a revaluation of such assets
incident to the acquisition of substantially all of the assets of
Access by the Company. In addition, NPBT shall be determined
prior to recording of any interest expense attributable to
Company's acquisition of substantially all the assets of Access.
The Company and Employee shall implement various provisions of
the Asset Purchase Agreement relating to determining current
customers of Company and Access. For each subsequent fiscal year
for which Employee may be entitled to a bonus hereunder, the
parties shall, in good faith, agree upon an MAS royalty fee to be
charged hereunder based on the level of services and support
being provided by the Company to its Access/Memphis Division.
Provided, however, such MAS royalty fee shall be 1.5% if the
parties are unable to come to an agreement for such year. Any
cash bonus amount determined under Section 5 (b) shall be payable
to Employee within thirty (30) days of the determination.
(v) Any award of the incentive stock options to acquire common stock
of Company earned hereunder during the first year of this
Agreement shall be at the fair market value of the common shares
as of January 5, 2000 or any other applicable date, which shall
mean with respect to such shares, the average between the high
and low bid and asked prices for such shares on the
over-the-counter market on the last business day prior to the
date on which the value is to be determined (or the next
preceding date on which sales occurred if there were no sales on
such date).
-3-
<PAGE>
(vi) The parties agree that in January, 2000, January 2001 and
January, 2002, they will negotiate in good faith, the level of
gross sales and NPBT of Company's Access/Memphis Division for the
aforementioned cash bonus and incentive stock option award to be
earned for such years, which gross sales and NPBT criteria shall
be predicated upon Company's Access/Memphis Division's goals,
projections and budgets established at the outset of such fiscal
year.
(c) In addition to Employee's base salary as set forth in Section 5(a) and
any annual cash bonus/incentive stock option award that Employee may
be entitled to under Section 5(b) based on Company's Access/Memphis
Division's performance, Employee shall be entitled to a cash bonus and
incentive stock option award in the event Employee satisfies certain
economic criteria pertaining to Company's performance during the
fiscal years 1999, 2000, 2001 and 2002.
The parties agree that in January, 1999, January, 2000, January 2001
and January 2002, they will negotiate in good faith the implementation
of economic criteria for the earning of an annual cash bonus and
incentive stock option award for Employee for each of the four fiscal
years of this Agreement which will be predicated upon the attainment
of Company goals, projections and budgets established at the outset
for such fiscal years which shall be consistent with the goals set
forth for Senior Management of Company for such year(s). The cash
bonus and incentive stock option award shall be predicated on the
structure (as to amount) used for the cash bonus/incentive stock
option award based on Company's Access/Memphis Division's results as
set forth in Section 5(b).
(i) For purposes of this Section, the term Gross Sales shall mean the
gross sales of equipment, software and services by Company during
the applicable period, determined on a consolidated basis. In
making said gross sales determination, all gains and losses
realized on the sale or other disposition of Companys assets not
in the ordinary course shall be excluded. In addition, any gross
sales of Company relating to any acquisitions that are closed in
such year shall be excluded. All refunds or returns which are
made during such period shall be subtracted along with all
accounts receivable derived from such sales that are written off
during such period in accordance with Companys accounting system.
Such gross sales of Company and any other economic criteria
adopted hereunder shall be determined by the internally-generated
financial statements of Company determined in the manner set
forth above in accordance with generally accepted accounting
principles. Any cash bonus amount determined under Section 5(c)
shall be payable to Employee within thirty (30) days of the
determination.
-4-
<PAGE>
(ii) Any award of the incentive stock options to acquire the common
stock of the Company earned hereunder during the first year of
this Agreement shall be at the fair market value of the common
shares as of January 5, 2000 or any other applicable date, as
defined in Section 5(b)(v).
(d) Company will deliver to Employee copies of the reports of any
determination made hereunder by Company for the subject period, along
with any documentation reasonably requested by Employee. Within
fifteen (15) days following delivery to Employee of such report,
Employee shall have the right to object in writing to the results
contained in such determination. If timely objection is not made by
Employee to such determination, such determination shall become final
and binding for purposes of this Agreement. If a timely objection is
made by Employee, and the Company and Employee are able to resolve
their differences in writing within fifteen (15) days following the
expiration of the initial 15-day period, then such determination shall
become final and binding as it pertains to this Agreement. If timely
objection is made by Employee to Company, and Employee and Company are
unable to resolve their differences in writing within fifteen (15)
days following the expiration of the initial 15-day period, then all
disputed matters pertaining to the report shall be submitted and
reviewed by the Arbitrator (Arbitrator), which shall be an independent
accounting firm selected by Company and Employee. If Employee and
Company are unable to promptly agree on the accounting firm to serve
as the Arbitrator, each shall select, by not later than fifteen (15)
days following the expiration of the initial fifteen (15) day period,
one accounting firm and the two selected accounting firms shall then
be instructed to select promptly a third accounting firm, such third
accounting firm to serve as the Arbitrator. The Arbitrator shall
consider only the disputed matters pertaining to the determination and
shall act promptly to resolve all disputed matters. A decision with
respect to all disputed matters shall be final and binding upon
Company and Employee. The expenses of Arbitration (including
reasonable attorney and accounting fees) shall be borne one-half by
Employee and one-half by Company.
6. Fringe Benefits. During the term of this Agreement, Employee shall be
----------------
entitled to the following benefits:
(a) Health Insurance - Employee shall be provided with the standard family
medical health and insurance coverage maintained by Company on its
employees. Company and Employee shall each pay fifty percent (50%) of
the cost of such coverage.
(b) Vacation - Employee shall be entitled each year to a vacation of three
weeks during which time his compensa-tion will be paid in full.
Provided, however, such weeks may not be taken consecutively without
the written consent of Company.
-5-
<PAGE>
(c) Retirement Plan - Employee shall participate, after meeting
eligibility requirements, in any qualified retirement plans and/or
welfare plans maintained by the Company during the term of this
Agreement.
(d) Automobile - Company shall provide Employee with an automobile
allowance of $400.00 per month. Employee shall be responsible for all
insurance, maintenance and repairs to such vehicle.
(e) Cellular Phone - Company shall provide Employee with a cellular phone
allowance of $75.00 per month. Employee shall provide Company, upon
request, with documentation supporting the business use of said
cellular phone.
(f) Other Company Programs - Employee shall be eligible to participate in
any other plans or programs implemented by the Company for all of its
employees with duties and responsibilities similar to Employee.
(g) Employee shall be responsible for any and all taxes owed, if any, on
the fringe benefits provided to him pursuant to this Section 6.
7. Expenses. During the term of this Agreement, Employee shall be entitled to
--------
receive prompt reimbursement for all reasonable and customary travel and
entertainment expenses or other out-of-pocket business expenses incurred by
Employee in fulfilling the Employee's duties and responsibilities
hereunder, including, all expenses of travel and living expenses while away
from home on business or at the request of and in the service of the
Company, provided that such expenses are incurred and accounted for in
accordance with the reasonable policies and procedures established by the
Company.
8. Non-Competition. Employee expressly acknowledges the provisions of Section
---------------
7 of the Purchase Agreement relating to Employee's Covenant Not to Compete
with Company. Accordingly, such provisions of Section 7 are incorporated
herein by reference to the extent as if restated in full herein. In
addition to the consideration received under this Agreement, Employee
acknowledges that as one of the owners of the common stock of Access, he
has received substantial consideration pursuant to such Purchase Agreement
and that as an inducement for, and in consideration of, Company entering
into the Purchase Agreement and Company entering into this Agreement,
Employee has agreed to be bound by such provisions of Section 7 of the
Pur-chase Agreement. Accordingly, such provisions of Section 7 and Exhibit
O-1 and the restrictions on Employee thereby imposed shall apply as stated
therein.
-6-
<PAGE>
9. Non-Disclosure and Assignment of Confidential Information. The Employee
------------------------------------------------------------
acknowledges that the Company's trade secrets and confidential and
proprietary information, including without limitation:
(a) unpublished information concerning the Company's:
(i) research activities and plans,
(ii) marketing or sales plans,
(iii) pricing or pricing strategies,
(iv) operational techniques,
(v) customer and supplier lists, and
(vi) strategic plans;
(b) unpublished financial information, including unpublished information
concerning revenues, profits and profit margins;
(c) internal confidential manuals; and
(d) any "material inside information" as such phrase is used for purposes
of the Securities Exchange Act of 1934, as amended;
all constitute valuable, special and unique proprietary and trade
secret information of the Company. In recognition of this fact, the
Employee agrees that the Employee will not disclose any such trade
secrets or confidential or proprietary information (except (i)
information which becomes publicly available without violation of this
Agreement, (ii) information of which the Employee did not know and
should not have known was disclosed to the Employee in violation of
any other person's confidentiality obligation, and (iii) disclosure
required in connection with any legal process), nor shall the Employee
make use of any such information for the benefit of any person, firm,
operation or other entity except the Company and its subsidiaries or
affiliates. The Employee's obligation to keep all of such information
confidential shall be in effect during and for a period of five (5)
years after the termination of his employment; provided, however, that
the Employee will keep confidential and will not disclose any trade
secret or similar information protected under law as intangible
property (subject to the same exceptions set forth in the
parenthetical clause above) for so long as such protection under law
is extended.
10. Termination.
-----------
(a) The Employee's employment with the Company may be terminated at any
time as follows:
(i) By Employee's death;
(ii) By Employee's physical or mental disability which renders
Employee unable to perform his duties hereunder.
-7-
<PAGE>
(iii)By the Company, for cause upon three (3) day's written notice to
Employee. For purposes of this Agreement, the term "cause" shall
mean termination upon: (i) the engaging by Employee in conduct
which is demonstrably and materially injurious to the Company,
monetarily or otherwise, including but not limited to any
material misrepresentation related to the performance of his
duties; (ii) the conviction of Employee of a felony or other
crime involving theft or fraud, (iii) Employee's gross neglect or
gross misconduct in carrying out his duties hereunder resulting,
in either case, in material harm to the Company; or (iv) any
material breach by Employee of this Agreement. Notwithstanding
the foregoing, Employee shall not be deemed to have been
terminated for cause under (i) and (iv) above, unless and until
there has been delivered to him a copy of the resolution of an
officer of the Company, finding that Employee engaged in the
conduct set forth above in this section and specifying the
particulars thereof in detail, and Employee shall not have cured
or abated such conduct to the reasonable satisfaction of the
Company within fifteen (15) days of receipt of such resolution.
This provision shall be applicable solely to the extent the
conduct to which the alleged breach relates is susceptible to
being cured in the reasonable determination of such officer.
(b) Compensation upon Termination: In the event of termination of
employment, the Employee or his estate, in the event of death, shall
be entitled to his annual base salary and other benefits provided
hereunder to the date of his termination. In addition, Employee shall
be entitled to receive any bonus accrued to the date of his
termination of employment as provided in Sections 5(b) and 5(c), which
shall be payable (if applicable) pursuant to the terms thereof.
11. Disability. In the event that Employee becomes temporarily disabled and/or
----------
totally and permanently disabled, physically or mentally, which renders him
unable to perform his duties hereunder, Employee shall receive one hundred
percent (100%) of his base annual salary (in effect at the time of such
disability) for a period of one (1) year following the initial date of such
disability (offset by any payments to the Employee received pursuant to
disability benefit plans, if any, maintained by the Company.) Such payments
shall be payable in twelve consecutive equal monthly installments and shall
commence thirty (30) days after the determination by the physicians of such
disability as set forth below.
For purposes of this Agreement, Employee shall be deemed to be temporarily
disabled and/or totally and permanently disabled if attested to by two
qualified physicians, (one to be selected by Company and the other by
Employee) competent to give opinions in the area of the disabled Employee's
physical and/or mental condition. If the two physicians disagree, they
shall select a third physician, whose opinion shall control. Employee shall
be deemed to be temporarily disabled and/or totally and permanently
-8-
<PAGE>
disabled if he shall become disabled as a result of any medically
determinable impairment of mind or body which renders it impossible for
such Employee to perform satisfactorily his duties hereunder, and the
qualified physician(s) referred to above certify that such disability does,
in fact, exist. The opinion of the qualified physician(s) shall be given by
such physician(s), in writing directed to the Company and to Employee. The
physician(s) decision shall include the date that disability began, if
possible, and the 12th month of such disability, if possible. The decision
of such physician(s) shall be final and conclusive and the cost of such
examination shall be paid by Employer.
12. Severability. In case any one (1) or more of the provisions or part of a
------------
provision contained in this Agreement shall be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a
provision of this Agreement. In such a situation, this Agreement shall be
reformed and construed as if such invalid, illegal or unenforceable
provision, or part of a provision, had never been contained herein, and
such provision or part shall be reformed so that it will be valid, legal
and enforceable to the maximum extent possible.
13. Governing Law. This Agreement shall be governed and construed under the
--------------
laws of the State of Tennessee and shall not be modified or discharged, in
whole or in part, except by an agreement in writing signed by the parties.
14. Notices. All notices, requests, demands and other communications relating
-------
to this Agreement shall be in writing and shall be deemed to have been duly
given if delivered personally or mailed by certified or registered mail,
return receipt re-quested, postage prepaid to the following addresses (or
to such other address for a party as shall be specified by notice pursuant
hereto):
If to Company, to: Pomeroy Computer Resources, Inc.
1020 Petersburg Road
Hebron, Kentucky 41048
With a copy to: James H. Smith III
Lindhorst & Dreidame Co., L.P.A.
312 Walnut Street, Suite 2300
Cincinnati, Ohio 45202
If to Employee, to: the Employee's residential address, as
set forth in the Company's records
-9-
<PAGE>
With a copy to: Caldwell D. Lowrance, Jr., Esq.
165 Madison Avenue, Suite 2000
Memphis, Tennessee 38103
15. Enforcement of Rights. The parties expressly recognize that any breach of
---------------------
this Agreement by either party is likely to result in irrevocable injury to
the other party and agree that such other party shall be entitled, if it so
elects, to institute and prosecute proceedings in any court of competent
jurisdiction in Shelby County, Tennessee, either at law or in equity, to
obtain damages for any breach of this Agreement, or to enforce the specific
performance of this Agreement by each party or to enjoin any party from
activities in violation of this Agreement. Should either party engage in
any activities prohibited by this Agreement, such party agrees to pay over
to the other party all compensation, remuneration, monies or property of
any sort received in connection with such activities. Such payment shall
not impair any rights or remedies of any non-breaching party or obligations
or liabilities of any breaching party pursuant to this Agreement or any
applicable law.
16. Entire Agreement. This Agreement and the Purchase Agreement referred to
-----------------
herein contain the entire understanding of the parties with respect to the
subject matter contained herein and may be altered, amended or superseded
only by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
17. Parties in Interest.
---------------------
(a) This Agreement is personal to each of the parties hereto. No party may
assign or delegate any rights or obligations hereunder without first
obtaining the written consent of the other party hereto; provided,
however, that nothing in this Section 17 shall preclude (i) Employee
from designating a beneficiary to receive any benefit payable
hereunder upon his death, or (ii) executors, administrators, or legal
representatives of Employee or his estate from assigning any rights
hereunder to person or persons entitled thereto. Notwithstanding the
foregoing, this Agreement shall be binding upon and inure to the
benefit of any successor corporation of Company
(b) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the assets of the Company or the business with respect to which
the duties and responsibilities of Employee are principally related,
to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that Company would have been required to
perform it if no such succession had taken place. As used in this
Agreement "Company" shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid which
executes and delivers the assumption agreement provided for in this
Section 17 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
-10-
<PAGE>
18. Representations of Employee. Employee represents and warrants that he is
----------------------------
not party to or bound by any agreement or contract or subject to any
restrictions including without limitation any restriction imposed in
connection with previous employment which prevents Employee from entering
into and performing his obligations under this Agreement.
19. Counterparts. This Agreement may be executed simulta-neously in several
------------
counterparts, each of which shall be deemed an original part, which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed effec-tive as of the day
and year first above written.
WITNESSES: COMPANY:
POMEROY COMPUTER RESOURCES, INC.
__________________________
__________________________ By:_________________________________
Stephen E. Pomeroy
Chief Financial Officer
-11-
<PAGE>
EMPLOYEE:
__________________________
__________________________ _____________________________________
MARK PUTMAN
-12-
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the _________ day of December, 1998, by and between
POMEROY COMPUTER RESOURCES, INC., a Delaware corporation ("Company"), and PAUL
BISHOP ("Employee").
W I T N E S S E T H :
WHEREAS, the Company entered into an Asset Purchase Agreement ("Purchase
Agreement") of even date pursuant to which it purchased substantially all the
assets of Access Technologies, Inc. (Access); and
WHEREAS, Employee owns Thirty-Two and 13/100 (32.13%) of the outstanding stock
of Access; and
WHEREAS, Employee, as an inducement for and in consideration of Company entering
into the Purchase Agreement, has agreed to enter into and execute this
Employment Agreement pursuant to Section 6 thereof; and
WHEREAS, Company desires to engage the services of Employee, pursuant to the
terms, conditions and provisions as hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein set forth, the parties hereby covenant and agree as follows:
1. Employment. The Company agrees to employ the Employee, and the Employee
----------
agrees to be employed by the Company, upon the following terms and
conditions.
2 Term. The initial term of Employee's employment pursuant to this Agreement
----
shall begin on the 9th day of December, 1998, and shall continue for a
period of two (2) years and twenty-seven (27) days, ending January 5, 2001
unless terminated earlier pursuant to the provisions of Section 10,
provided that Sections 8, 9 and 10(b), shall survive the termination of
such employ-ment and shall expire in accordance with the terms set forth
therein.
3. Renewal Term. The term of Employee's employment shall automatically renew
------------
for additional consecutive renewal terms of one (1) year unless either
party gives written notice of his/its intent not to renew the terms of this
Agreement sixty (60) days prior to expiration of the then expiring term.
4. Duties. Employee shall serve as Director of Sales State and Local
------
Government for the Company's Access/Memphis Division. Employee shall be
responsible to and report directly to Vice President of Operations of the
Company's Access/Memphis Division. Employee shall devote his best efforts
and substantially all his time during normal business hours to the
diligent, faithful and loyal discharge of the duties of his employment and
towards the proper, efficient and successful conduct of the Company's
affairs. Employee fur-ther agrees to refrain during the term of this
Agreement from making any sales of competing services or products or from
profiting from any transaction involving computer services or products for
his account without the express written consent of Company.
<PAGE>
5. Compensation. For all services rendered by the Employee under this
------------
Agreement (in addition to other monetary or other benefits referred to
herein), compensation shall be paid to Employee as follows:
(a) Base Salary: During each fiscal year of the initial term of this
Agreement, Employee shall be paid an annual base salary of Seventy-Two
Thousand Dollars ($72,000.00). For the first twenty-seven (27) days of
this Agreement, Employee shall be compensated at the rate of Six
Thousand Dollars ($6,000.00) per month. Said base salary shall be
payable in accordance with the historical payroll practices of the
Company.
(b) Quarterly Commissions for Company's Access/Memphis Division's
Governmental and Educational Accounts Sales: In addition to Employee's
base salary as set forth in Section 5(a) above, commencing January 6,
1999 through January 5, 2000, Employee shall be entitled to a
quarterly commission in the event the Employee satisfies the following
economic criteria during such quarter:
(i) Gross profit of Company's Access/Memphis Division's Governmental
and Educational Accounts Sales greater than $775,000.00 but less
than or equal to $875,000.00, equals $5,000.00 cash bonus;
(ii) Gross profit of Company's Access/Memphis Division's Governmental
and Educational Accounts Sales greater than $875,000.00 but less
than or equal to $975,000.00, equals $7,500.00 cash bonus;
(iii)Gross profit of Company's Access/Memphis Division's Governmental
and Educational Accounts Sales greater than $975,000.00, equals
$10,000.00 cash bonus.
(iv) For purposes of this Section, the term Gross Profit of Company's
Access/Memphis Division's Governmental and Educational Accounts
Sales shall mean the gross sales of equipment, software and
services rendered to governmental and educational accounts by the
Company's Access/ Memphis Division less the cost of goods sold
for such items.
-2-
<PAGE>
(v) The quarterly commission determination shall be based upon the
Company's internally generated accounting statements and the
determination by the Company's Chief Financial Officer shall be
final, binding and conclusive upon all parties hereto and the
Company's financial statements for the Company's Access/Memphis
Division shall be provided to Employee.
(vi) Any commissions due Employee hereunder shall be paid within
thirty (30) days of the conclusion of such quarter during the
applicable period.
(vii)The Company shall provide a quarterly commission plan for
Employee based upon the Company's Access/Memphis Division's
Governmental and Educational Accounts Sales for the period
January 6, 2000 through January 5, 2001, which plan will be
predicated upon the goals, projections and budgets established at
the outset of said year for the Company's Access/Memphis Division
as it relates to the accounts set forth above.
(c) Annual Cash Bonus - Incentive Stock Option - Access/Memphis Division:
In addition to Employee's base salary as set forth in Section 5(a)
above, and any commission compensation to which Employee may be
entitled under Section 5(b), during the first fiscal year of the
initial term of this Agreement (January 6, 1999 through January 5,
2000), Employee shall be entitled to a cash bonus and incentive stock
option award in the event Employee satisfies certain economic criteria
pertaining to the Company's Access/Memphis Division set forth as
follows:
(i) Gross sales of Company's Access/Memphis Division greater than
$30,000,000.00 with net profit before taxes (NPBT) greater than
$2,350,000.00 but less than $2,450,000.00, equals $5,000.00 cash
bonus plus 5,000 incentive stock options;
(ii) Gross sales of Company's Access/Memphis Division greater than
$30,000,000.00 with NPBT greater than or equal to $2,450,000.00
but less than $2,550,000.00, equals $7,500.00 cash bonus plus
6,000 incentive stock options;
(iii)Gross sales of Company's Access/Memphis Division greater than
$30,000,000.00 with NPBT greater than or equal to $2,550,000.00
equals $10,000.00 cash bonus plus 7,500 incentive stock options.
(iv) For purposes of this Section 5(c), the term Gross Sales shall
mean the gross sales of equipment, software and services by
Company's Access/Memphis Division during the applicable period.
In making said gross sales determination, all gains and losses
realized on the sale or other disposition of Companys
Access/Memphis Division's assets not in the ordinary course shall
-3-
<PAGE>
be excluded. In addition, any gross sales of Company's
Access/Memphis Division relating to any acquisitions that are
closed in such year shall be excluded. All refunds or returns
which are made during such period shall be subtracted along with
all accounts receivable derived from such sales that are written
off during such period in accordance with Companys Access/Memphis
Divisions's accounting system. Such gross sales and NPBT of
Company's Access/Memphis Division shall be determined by the
Company's internally generated accounting statements determined
in the manner set forth above and in accordance with generally
accepted accounting principles. Commencing on the later of
January 6, 1999 or the installation of the ASTEA accounting
system at Company's Access/Memphis Division, a 1.5% MAS royalty
fee on gross sales by Company's Access/Memphis Division shall be
made incident to said NPBT determination. In determining NPBT of
Access/Memphis Division, no effect shall be given to any increase
in the amounts of depreciation, amortization or other expense or
deduction taken on tangible or intangible assets of the Company,
if such increase is attributable to a revaluation of such assets
incident to the acquisition of substantially all of the assets of
Access by the Company. In addition, NPBT shall be determined
prior to recording of any interest expense attributable to
Company's acquisition of substantially all the assets of Access
by the Company. The Company and Employee shall implement various
provisions of the Asset Purchase Agreement relating to
determining current customers of Company and Access. For each
subsequent fiscal year for which Employee may be entitled to a
bonus hereunder, the parties shall, in good faith, agree upon an
MAS royalty fee to be charged hereunder based on the level of
services and support being provided by the Company to its
Access/Memphis Division. Provided, however, such MAS royalty fee
shall be 1.5% if the parties are unable to come to an agreement
for such year. Any cash bonus amount determined under Section 5
(b) shall be payable to Employee within thirty (30) days of the
determination.
(v) Any award of the incentive stock options to acquire common stock
of Company earned hereunder during the first year of this
Agreement shall be at the fair market value of the common shares
as of January 5, 2000 or any other applicable date, which shall
mean with respect to such shares, the average between the high
and low bid and asked prices for such shares on the
over-the-counter market on the last business day prior to the
date on which the value is to be determined (or the next
preceding date on which sales occurred if there were no sales on
such date).
-4-
<PAGE>
(vi) The parties agree that in January, 2000, they will negotiate in
good faith, the level of gross sales and NPBT of Company's
Access/Memphis Division for the aforementioned cash bonus and
incentive stock option award to be earned for such year, which
gross sales and NPBT criteria shall be predicated upon Company's
Access/Memphis Division's goals, projections and budgets
established at the outset of such fiscal year.
(d) In addition to Employee's base salary as set forth in Section 5(a),
any quarterly commission to which Employee may be entitled under
Section 5(b) and any annual cash bonus/incentive stock option award
that Employee may be entitled to under Section 5(c) based on Company's
Access/Memphis Division's performance, Employee shall be entitled to a
cash bonus and incentive stock option award in the event Employee
satisfies certain economic criteria pertaining to Company's
performance during the fiscal years 1999 and 2000.
The parties agree that in January, 1999 and January, 2000, they will
negotiate in good faith the implementation of economic criteria for
the earning of an annual cash bonus and incentive stock options award
for Employee for each of the two fiscal years of this Agreement which
will be predicated upon the attainment of Company goals, projections
and budgets established at the outset for such fiscal years which
shall be consistent with the goals set forth for Senior Management of
the Company for such year(s). The cash bonus and incentive stock
option award shall be predicated on the structure (as to amount) used
for the cash bonus/incentive stock option award based on Company's
Access/Memphis Division's results as set forth in Section 5(c).
(i) For purposes of this Section, the term Gross Sales shall mean the
gross sales of equipment, software and services by Company during
the applicable period, determined on a consolidated basis. In
making said gross sales determination, all gains and losses
realized on the sale or other disposition of Companys assets not
in the ordinary course shall be excluded. In addition, any gross
sales of Company relating to any acquisitions that are closed in
such year shall be excluded. All refunds or returns which are
made during such period shall be subtracted along with all
accounts receivable derived from such sales that are written off
during such period in accordance with Companys accounting system.
Such gross sales of Company and any other economic criteria
adopted hereunder shall be determined by the internally-generated
financial statements of Company determined in the manner set
forth above in accordance with generally accepted accounting
principles and such determination shall be final, binding and
conclusive upon all parties hereto. Any cash bonus amount
determined under Section 5(d) shall be payable to Employee within
thirty (30) days of the determination.
-5-
<PAGE>
(ii) Any award of the incentive stock options to acquire the common
stock of the Company earned hereunder during the first year of
this Agreement shall be at the fair market value of the common
shares as of January 5, 2000 or any other applicable date, as
defined in Section 5(c)(v).
(e) Company will deliver to Employee copies of the reports of any
determination made hereunder by Company for the subject period, along
with any documentation reasonably requested by Employee. Within
fifteen (15) days following delivery to Employee of such report,
Employee shall have the right to object in writing to the results
contained in such determination. If timely objection is not made by
Employee to such determination, such determination shall become final
and binding for purposes of this Agreement. If a timely objection is
made by Employee, and the Company and Employee are able to resolve
their differences in writing within fifteen (15) days following the
expiration of the initial 15-day period, then such determination shall
become final and binding as it pertains to this Agreement. If timely
objection is made by Employee to Company, and Employee and Company are
unable to resolve their differences in writing within fifteen (15)
days following the expiration of the initial 15-day period, then all
disputed matters pertaining to the report shall be submitted and
reviewed by the Arbitrator (Arbitrator), which shall be an independent
accounting firm selected by Company and Employee. If Employee and
Company are unable to promptly agree on the accounting firm to serve
as the Arbitrator, each shall select, by not later than fifteen (15)
days following the expiration of the initial fifteen (15) day period,
one accounting firm and the two selected accounting firms shall then
be instructed to select promptly a third accounting firm, such third
accounting firm to serve as the Arbitrator. The Arbitrator shall
consider only the disputed matters pertaining to the determination and
shall act promptly to resolve all disputed matters. A decision with
respect to all disputed matters shall be final and binding upon
Company and Employee. The expenses of Arbitration (including
reasonable attorney and accounting fees) shall be borne one-half by
Employee and one-half by Company.
6. Fringe Benefits. During the term of this Agreement, Employee shall be
----------------
entitled to the following benefits:
(a) Health Insurance - Employee shall be provided with the standard family
medical health and insurance coverage maintained by Company on its
employees. Company and Employee shall each pay fifty percent (50%) of
the cost of such coverage.
-6-
<PAGE>
(b) Vacation - Employee shall be entitled each year to a vacation of two
(2) weeks during which time his compensa-tion will be paid in full.
Provided, however, such weeks may not be taken consecutively without
the written consent of Company.
(c) Retirement Plan - Employee shall participate, after meeting
eligibility requirements, in any qualified retirement plans and/or
welfare plans maintained by the Company during the term of this
Agreement.
(d) Automobile - Company shall provide Employee with an automobile
allowance of $400.00 per month. Employee shall be responsible for all
insurance, maintenance and repairs to such vehicle.
(e) Cellular Phone - Company shall provide Employee with a cellular phone
allowance of $75.00 per month. Employee shall provide Company, upon
request, with documentation supporting the business use of said
cellular phone.
(f) Other Company Programs - Employee shall be eligible to participate in
any other plans or programs implemented by the Company for all of its
employees with duties and responsibilities similar to Employee.
(g) Employee shall be responsible for any and all taxes owed, if any, on
the fringe benefits provided to him pursuant to this Section 6.
7. Expenses. During the term of this Agreement, Employee shall be entitled to
--------
receive prompt reimbursement for all reasonable and customary travel and
entertainment expenses or other out-of-pocket business expenses incurred by
Employee in fulfilling the Employee's duties and responsibilities
hereunder, including, all expenses of travel and living expenses while away
from home on business or at the request of and in the service of the
Company, provided that such expenses are incurred and accounted for in
accordance with the reasonable policies and procedures established by the
Company.
8. Non-Competition. Employee expressly acknowledges the provisions of Section
---------------
7 of the Purchase Agreement relating to Employee's Covenant Not to Compete
with Company. Accordingly, such provisions of Section 7 are incorporated
herein by reference to the extent as if restated in full herein. In
addition to the consideration received under this Agreement, Employee
acknowledges that as one of the owners of the common stock of Access, he
has received substantial consideration pursuant to such Purchase Agreement
and that as an inducement for, and in consideration of, Company entering
into the Purchase Agreement and Company entering into this Agreement,
Employee has agreed to be bound by such provisions of Section 7 of the
Pur-chase Agreement. Accordingly, such provisions of Section 7 and Exhibit
O-2 and the restrictions on Employee thereby imposed shall apply as stated
therein.
-7-
<PAGE>
9. Non-Disclosure and Assignment of Confidential Information. The Employee
------------------------------------------------------------
acknowledges that the Company's trade secrets and confidential and
proprietary information, including without limitation:
(a) unpublished information concerning the Company's:
(i) research activities and plans,
(ii) marketing or sales plans,
(iii) pricing or pricing strategies,
(iv) operational techniques,
(v) customer and supplier lists, and
(vi) strategic plans;
(b) unpublished financial information, including unpublished information
concerning revenues, profits and profit margins;
(c) internal confidential manuals; and
(d) any "material inside information" as such phrase is used for purposes
of the Securities Exchange Act of 1934, as amended;
all constitute valuable, special and unique proprietary and trade secret
information of the Company. In recognition of this fact, the Employee agrees
that the Employee will not disclose any such trade secrets or confidential or
proprietary information (except (i) information which becomes publicly available
without violation of this Agreement, (ii) information of which the Employee did
not know and should not have known was disclosed to the Employee in violation of
any other person's confidentiality obligation, and (iii) disclosure required in
connection with any legal process), nor shall the Employee make use of any such
information for the benefit of any person, firm, operation or other entity
except the Company and its subsidiaries or affiliates. The Employee's
obligation to keep all of such information confidential shall be in effect
during and for a period of five (5) years after the termination of his
employment; provided, however, that the Employee will keep confidential and will
not disclose any trade secret or similar information protected under law as
intangible property (subject to the same exceptions set forth in the
parenthetical clause above) for so long as such protection under law is
extended.
10. Termination.
-----------
(a) The Employee's employment with the Company may be terminated at any
time as follows:
(i) By Employee's death;
(ii) By Employee's physical or mental disability which renders
Employee unable to perform his duties hereunder.
-8-
<PAGE>
(iii)By the Company, for cause upon three (3) day's written notice to
Employee. For purposes of this Agreement, the term "cause" shall
mean termination upon: (i) the engaging by Employee in conduct
which is demonstrably and materially injurious to the Company,
monetarily or otherwise, including but not limited to any
material misrepresentation related to the performance of his
duties; (ii) the conviction of Employee of a felony or other
crime involving theft or fraud, (iii) Employee's gross neglect or
gross misconduct in carrying out his duties hereunder resulting,
in either case, in material harm to the Company; or (iv) any
material breach by Employee of this Agreement. Notwithstanding
the foregoing, Employee shall not be deemed to have been
terminated for cause under Sections (i) and (iv) above, unless
and until there has been delivered to him a copy of the
resolution of an officer of the Company, finding that Employee
engaged in the conduct set forth above and specifying the
particulars thereof in detail, and Employee shall not have cured
or abated such conduct to the reasonable satisfaction of the
Company within fifteen (15) days of receipt of such resolution.
This provision shall be applicable solely to the extent the
conduct to which the alleged breach relates is susceptible to
being cured in the reasonable determination of such officer.
(b) Compensation upon Termination: In the event of termination of
employment, the Employee or his estate, in the event of death, shall
be entitled to his annual base salary and other benefits provided
hereunder to the date of his termination. In addition, Employee shall
be entitled to receive any commissions and/or bonus accrued to the
date of his termination of employment as provided in Sections 5(b),
(c) and 5(d), which shall be payable (if applicable) pursuant to the
terms thereof.
11. Severability. In case any one (1) or more of the provisions or part of a
------------
provision contained in this Agreement shall be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a
provision of this Agreement. In such a situation, this Agreement shall be
reformed and construed as if such invalid, illegal or unenforceable
provision, or part of a provision, had never been contained herein, and
such provision or part shall be reformed so that it will be valid, legal
and enforceable to the maximum extent possible.
12. Governing Law. This Agreement shall be governed and construed under the
--------------
laws of the State of Tennessee and shall not be modified or discharged, in
whole or in part, except by an agreement in writing signed by the parties.
-9-
<PAGE>
13. Notices. All notices, requests, demands and other communications relating
-------
to this Agreement shall be in writing and shall be deemed to have been duly
given if delivered personally or mailed by certified or registered mail,
return receipt re-quested, postage prepaid to the following addresses (or
to such other address for a party as shall be specified by notice pursuant
hereto):
If to Company, to: Pomeroy Computer Resources, Inc.
1020 Petersburg Road
Hebron, Kentucky 41048
With a copy to: James H. Smith III
Lindhorst & Dreidame Co., L.P.A.
312 Walnut Street, Suite 2300
Cincinnati, Ohio 45202
If to Employee, to: the Employee's residential address, as
set forth in the Company's records
With a copy to: Caldwell D. Lawrence, Jr., Esq.
165 Madison Avenue, Suite 2000
Memphis, Tennessee 38103
14. Enforcement of Rights. The parties expressly recognize that any breach of
---------------------
this Agreement by either party is likely to result in irrevocable injury to
the other party and agree that such other party shall be entitled, if it so
elects, to institute and prosecute proceedings in any court of competent
jurisdiction in Shelby County, Tennessee, either at law or in equity, to
obtain damages for any breach of this Agreement, or to enforce the specific
performance of this Agreement by each party or to enjoin any party from
activities in violation of this Agreement. Should either party engage in
any activities prohibited by this Agreement, such party agrees to pay over
to the other party all compensation, remuneration, monies or property of
any sort received in connection with such activities. Such payment shall
not impair any rights or remedies of any non-breaching party or obligations
or liabilities of any breaching party pursuant to this Agreement or any
applicable law.
15. Entire Agreement. This Agreement and the Purchase Agreement referred to
-----------------
herein contain the entire understanding of the parties with respect to the
subject matter contained herein and may be altered, amended or superseded
only by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
16. Parties in Interest.
---------------------
(a) This Agreement is personal to each of the parties hereto. No party may
assign or delegate any rights or obligations hereunder without first
obtaining the written consent of the other party hereto; provided,
however, that nothing in this Section 17 shall preclude (i) Employee
from designating a beneficiary to receive any benefit payable
hereunder upon his death, or (ii) executors, administrators, or legal
representatives of Employee or his estate from assigning any rights
hereunder to person or persons entitled thereto. Notwithstanding the
foregoing, this Agreement shall be binding upon and inure to the
benefit of any successor corporation of Company
-10-
<PAGE>
(b) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the assets of the Company or the business with respect to which
the duties and responsibilities of Employee are principally related,
to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that Company would have been required to
perform it if no such succession had taken place. As used in this
Agreement "Company" shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid which
executes and delivers the assumption agreement provided for in this
Section 17 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
17. Representations of Employee. Employee represents and warrants that he is
----------------------------
not party to or bound by any agreement or contract or subject to any
restrictions including without limitation any restriction imposed in
connection with previous employment which prevents Employee from entering
into and performing his obligations under this Agreement.
18. Counterparts. This Agreement may be executed simulta-neously in several
------------
counterparts, each of which shall be deemed an original part, which
together shall constitute one and the same instrument.
-11-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed effec-tive as of the day
and year first above written.
WITNESSES: COMPANY:
POMEROY COMPUTER RESOURCES, INC.
__________________________
__________________________ By:_________________________________
Stephen E. Pomeroy
Chief Financial Officer
EMPLOYEE:
__________________________
__________________________ _____________________________________
PAUL BISHOP
-12-
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the _________ day of_______________, 1998, by and
between POMEROY COMPUTER RESOURCES, INC., a Delaware corporation ("Company"),
and GREGORY LIVINGSTON ("Employee").
W I T N E S S E T H :
WHEREAS, the Company entered into an Asset Purchase Agreement ("Purchase
Agreement") of even date pursuant to which it purchased substantially all the
assets of Access Technologies, Inc. (Access); and
WHEREAS, Employee owns Two and 06/100 percent (2.06%) of the outstanding stock
of Access; and
WHEREAS, Employee, as an inducement for and in consideration of Company entering
into the Purchase Agreement, has agreed to enter into and execute this
Employment Agreement pursuant to Section 6 thereof; and
WHEREAS, Company desires to engage the services of Employee, pursuant to the
terms, conditions and provisions as hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein set forth, the parties hereby covenant and agree as follows:
1. Employment. The Company agrees to employ the Employee, and the Employee
----------
agrees to be employed by the Company, upon the following terms and
conditions.
2 Term. The initial term of Employee's employment pursuant to this Agreement
----
shall begin on the 9th day of December, 1998, and shall continue for a
period of two (2) years and twenty-seven (27) days, ending January 5, 2001
unless terminated earlier pursuant to the provisions of Section 10,
provided that Sections 8, 9 and 10(b), shall survive the termination of
such employ-ment and shall expire in accordance with the terms set forth
therein.
3. Renewal Term. The term of Employee's employment shall automatically renew
------------
for additional consecutive renewal terms of one (1) year unless either
party gives written notice of his/its intent not to renew the terms of this
Agreement sixty (60) days prior to expiration of the then expiring term.
4. Duties. Employee shall serve as Director of Sales Commercial Accounts for
------
the Company's Access/Memphis Division. Employee shall be responsible to and
report directly to Vice President of Operations for the Access/Memphis
Division. Employee shall devote his best efforts and substantially all his
time during normal business hours to the diligent, faithful and loyal
discharge of the duties of his employment and towards the proper, efficient
and successful conduct of the Company's affairs. Employee fur-ther agrees
to refrain during the term of this Agreement from making any sales of
competing services or products or from profiting from any transaction
involving computer services or products for his account without the express
written consent of Company.
<PAGE>
5. Compensation. For all services rendered by the Employee under this
------------
Agreement (in addition to other monetary or other benefits referred to
herein), compensation shall be paid to Employee as follows:
(a) Base Salary: During each fiscal year of the initial term of this
Agreement, Employee shall be paid an annual base salary of Seventy-Two
Thousand Dollars ($72,000.00). For the first twenty-seven (27) days of
this Agreement, Employee shall be compensated at the rate of Six
Thousand Dollars ($6,000.00) per month. Said base salary shall be
payable in accordance with the historical payroll practices of the
Company.
(b) Quarterly Commissions for Company's Access/Memphis Division's
Commercial Accounts Sales: In addition to Employee's base salary as
set forth in Section 5(a) above, commencing January 6, 1999 through
January 5, 2000, Employee shall be entitled to a quarterly commission
in the event the Employee satisfies the following economic criteria
during such quarter:
(i) Gross profit of Company's Access/Memphis Division's Commercial
Accounts Sales greater than $1,260,000.00 but less than or equal
to $1,360,000.00, equals $10,000.00 cash bonus;
(ii) Gross profit of Company's Access/Memphis Division's Commercial
Accounts Sales greater than $1,360,000.00 but less than or equal
to $1,460,000.00, equals $12,000.00 cash bonus;
(iii)Gross profit of Company's Access/Memphis Division's Commercial
Accounts Sales greater than $1,460,000.00, equals $15,000.00 cash
bonus.
(iv) For purposes of this Section, the term Gross Profit of Company's
Access/Memphis Division's Commercial Accounts Sales shall mean
the gross sales of equipment, software and services rendered to
commercial accounts by the Company's Access/ Memphis Division
less the cost of goods sold for such items.
-2-
<PAGE>
(v) The quarterly commission determination shall be based upon the
Company's internally generated accounting statements and the
determination by the Company's Chief Financial Officer shall be
final, binding and conclusive upon all parties hereto and the
Company's financial statements for the Company's Access/Memphis
Division shall be provided to Employee.
(vi) Any commissions due Employee hereunder shall be paid within
thirty (30) days of the conclusion of such quarter during the
applicable period.
(vii)The Company shall provide a quarterly commission plan for
Employee based upon the gross profit of the Company's
Access/Memphis Division's Commercial Accounts Sales for the
period January 6, 2000 through January 5, 2001, which plan will
be predicated upon the goals, projections and budgets established
at the outset of said year for the Company's Access/Memphis
Division as it relates to the accounts set forth above.
(c) Annual Cash Bonus - Incentive Stock Option - Access/Memphis Division:
In addition to Employee's base salary as set forth in Section 5(a)
above, and any commission compensation to which Employee may be
entitled under Section 5(b), during the first fiscal year of the
initial term of this Agreement (January 6, 1999 through January 5,
2000), Employee shall be entitled to a cash bonus and incentive stock
option award in the event Employee satisfies certain economic criteria
pertaining to the Company's Access/Memphis Division set forth as
follows:
(i) Gross sales of Company's Access/Memphis Division greater than
$30,000,000.00 with net profit before taxes (NPBT) greater than
$2,350,000.00 but less than $2,450,000.00, equals $5,000.00 cash
bonus plus 5,000 incentive stock options;
(ii) Gross sales of Company's Access/Memphis Division greater than
$30,000,000.00 with NPBT greater than or equal to $2,450,000.00
but less than $2,550,000.00, equals $7,500.00 cash bonus plus
6,000 incentive stock options;
(iii)Gross sales of Company's Access/Memphis Division greater than
$30,000,000.00 with NPBT greater than or equal to $2,550,000.00
equals $10,000.00 cash bonus plus 7,500 incentive stock options.
(iv) For purposes of this Section 5(c), the term Gross Sales shall
mean the gross sales of equipment, software and services by
Company's Access/Memphis Division during the applicable period.
In making said gross sales determination, all gains and losses
realized on the sale or other disposition of Companys
Access/Memphis Division's assets not in the ordinary course shall
be excluded. In addition, any gross sales of Company's
-3-
<PAGE>
Access/Memphis Division relating to any acquisitions that are
closed in such year shall be excluded. All refunds or returns
which are made during such period shall be subtracted along with
all accounts receivable derived from such sales that are written
off during such period in accordance with Companys Access/Memphis
Divisions's accounting system. Such gross sales and NPBT of
Company's Access/Memphis Division shall be determined by the
Company's internally generated accounting statements determined
in the manner set forth above and in accordance with generally
accepted accounting principles. Commencing on the later of
January 6, 1999 or the installation of the ASTEA accounting
system at Company's Access/Memphis Division, a 1.5% MAS royalty
fee on gross sales by Company's Access/Memphis Division shall be
made incident to said NPBT determination. In determining NPBT of
Access/Memphis Division, no effect shall be given to any increase
in the amounts of depreciation, amortization or other expense or
deduction taken on tangible or intangible assets of the Company,
if such increase is attributable to a revaluation of such assets
incident to the acquisition of substantially all of the assets of
Access. In addition, NPBT shall be determined prior to recording
of any interest expense attributable to Company's acquisition of
substantially all the assets of Access by the Company. The
Company and Employee shall implement various provisions of the
Asset Purchase Agreement relating to determining current
customers of Company and Access. For each subsequent fiscal year
for which Employee may be entitled to a bonus hereunder, the
parties shall, in good faith, agree upon an MAS royalty fee to be
charged hereunder based on the level of services and support
being provided by the Company to its Access/Memphis Division.
Provided, however, such MAS royalty fee shall be 1.5% if the
parties are unable to come to an agreement for such year. Any
cash bonus amount determined under Section 5 (b) shall be payable
to Employee within thirty (30) days of the determination.
(v) Any award of the incentive stock options to acquire common stock
of Company earned hereunder during the first year of this
Agreement shall be at the fair market value of the common shares
as of January 5, 2000 or any other applicable date, which shall
mean with respect to such shares, the average between the high
and low bid and asked prices for such shares on the
over-the-counter market on the last business day prior to the
date on which the value is to be determined (or the next
preceding date on which sales occurred if there were no sales on
such date).
(vi) The parties agree that in January, 2000, they will negotiate in
good faith, the level of gross sales and NPBT of Company's
Access/Memphis Division for the aforementioned cash bonus and
incentive stock option award to be earned for such year, which
gross sales and NPBT criteria shall be predicated upon Company's
Access/Memphis Division's goals, projections and budgets
established at the outset of such fiscal year.
-4-
<PAGE>
(d) In addition to Employee's base salary as set forth in Section 5(a),
any quarterly commission to which Employee may be entitled under
Section 5(b) and any annual cash bonus/incentive stock option award
that Employee may be entitled to under Section 5(c) based on Company's
Access/Memphis Division's performance, Employee shall be entitled to a
cash bonus and incentive stock option award in the event Employee
satisfies certain economic criteria pertaining to Company's
performance during the fiscal years 1999 and 2000.
The parties agree that in January, 1999 and January, 2000, they will
negotiate in good faith the implementation of economic criteria for
the earning of an annual cash bonus and incentive stock option award
for Employee for each of the two fiscal years of this Agreement which
will be predicated upon the attainment of Company goals, projections
and budgets established at the outset for such fiscal years which
shall be consistent with the goals of Senior Management of the Company
for such year(s). The cash bonus and incentive stock option award
shall be predicated on the structure (as to amount) used for the cash
bonus/incentive stock option award based on Company's Access/Memphis
Division's results as set forth in Section 5(c).
(i) For purposes of this Section, the term Gross Sales shall mean the
gross sales of equipment, software and services by Company during
the applicable period, determined on a consolidated basis. In
making said gross sales determination, all gains and losses
realized on the sale or other disposition of Companys assets not
in the ordinary course shall be excluded. In addition, any gross
sales of Company relating to any acquisitions that are closed in
such year shall be excluded. All refunds or returns which are
made during such period shall be subtracted along with all
accounts receivable derived from such sales that are written off
during such period in accordance with Companys accounting system.
Such gross sales of Company and any other economic criteria
adopted hereunder shall be determined by the internally-generated
financial statements of Company determined in the manner set
forth above in accordance with generally accepted accounting
principles. Any cash bonus amount determined under Section 5(d)
shall be payable to Employee within thirty (30) days of the
determination.
(ii) Any award of the incentive stock options to acquire the common
stock of the Company earned hereunder during the first year of
this Agreement shall be at the fair market value of the common
shares as of January 5, 2000 or any other applicable date, as
defined in Section 5(c)(v).
-5-
<PAGE>
(e) Company will deliver to Employee copies of the reports of any
determination made hereunder by Company for the subject period, along
with any documentation reasonably requested by Employee. Within
fifteen (15) days following delivery to Employee of such report,
Employee shall have the right to object in writing to the results
contained in such determination. If timely objection is not made by
Employee to such determination, such determination shall become final
and binding for purposes of this Agreement. If a timely objection is
made by Employee, and the Company and Employee are able to resolve
their differences in writing within fifteen (15) days following the
expiration of the initial 15-day period, then such determination shall
become final and binding as it pertains to this Agreement. If timely
objection is made by Employee to Company, and Employee and Company are
unable to resolve their differences in writing within fifteen (15)
days following the expiration of the initial 15-day period, then all
disputed matters pertaining to the report shall be submitted and
reviewed by the Arbitrator (Arbitrator), which shall be an independent
accounting firm selected by Company and Employee. If Employee and
Company are unable to promptly agree on the accounting firm to serve
as the Arbitrator, each shall select, by not later than fifteen (15)
days following the expiration of the initial fifteen (15) day period,
one accounting firm and the two selected accounting firms shall then
be instructed to select promptly a third accounting firm, such third
accounting firm to serve as the Arbitrator. The Arbitrator shall
consider only the disputed matters pertaining to the determination and
shall act promptly to resolve all disputed matters. A decision with
respect to all disputed matters shall be final and binding upon
Company and Employee. The expenses of Arbitration (including
reasonable attorney and accounting fees) shall be borne one-half by
Employee and one-half by Company.
6. Fringe Benefits. During the term of this Agreement, Employee shall be
----------------
entitled to the following benefits:
(a) Health Insurance - Employee shall be provided with the standard family
medical health and insurance coverage maintained by Company on its
employees. Company and Employee shall each pay fifty percent (50%) of
the cost of such coverage.
(b) Vacation - Employee shall be entitled each year to a vacation of two
(2) weeks during which time his compensa-tion will be paid in full.
Provided, however, such weeks may not be taken consecutively without
the written consent of Company.
-6-
<PAGE>
(c) Retirement Plan - Employee shall participate, after meeting
eligibility requirements, in any qualified retirement plans and/or
welfare plans maintained by the Company during the term of this
Agreement.
(d) Automobile - Company shall provide Employee with an automobile
allowance of $400.00 per month. Employee shall be responsible for all
insurance, maintenance and repairs to such vehicle.
(e) Cellular Phone - Company shall provide Employee with a cellular phone
allowance of $75.00 per month. Employee shall provide Company, upon
request, with documentation supporting the business use of said
cellular phone.
(f) Other Company Programs - Employee shall be eligible to participate in
any other plans or programs implemented by the Company for all of its
employees with duties and responsibilities similar to Employee.
(g) Employee shall be responsible for any and all taxes owed, if any, on
the fringe benefits provided to him pursuant to this Section 6.
7. Expenses. During the term of this Agreement, Employee shall be entitled to
--------
receive prompt reimbursement for all reasonable and customary travel and
entertainment expenses or other out-of-pocket business expenses incurred by
Employee in fulfilling the Employee's duties and responsibilities
hereunder, including, all expenses of travel and living expenses while away
from home on business or at the request of and in the service of the
Company, provided that such expenses are incurred and accounted for in
accordance with the reasonable policies and procedures established by the
Company.
8. Non-Competition. Employee expressly acknowledges the provisions of Section
---------------
7 of the Purchase Agreement relating to Employee's Covenant Not to Compete
with Company. Accordingly, such provisions of Section 7 are incorporated
herein by reference to the extent as if restated in full herein. In
addition to the consideration received under this Agreement, Employee
acknowledges that as one of the owners of the common stock of Access, he
has received substantial consideration pursuant to such Purchase Agreement
and that as an inducement for, and in consideration of, Company entering
into the Purchase Agreement and Company entering into this Agreement,
Employee has agreed to be bound by such provisions of Section 7 of the
Pur-chase Agreement. Accordingly, such provisions of Section 7 and Exhibit
O-4 and the restrictions on Employee thereby imposed shall apply as stated
therein.
9. Non-Disclosure and Assignment of Confidential Information. The Employee
------------------------------------------------------------
acknowledges that the Company's trade secrets and confidential and
proprietary information, including without limitation:
(a) unpublished information concerning the Company's:
-7-
<PAGE>
(i) research activities and plans,
(ii) marketing or sales plans,
(iii) pricing or pricing strategies,
(iv) operational techniques,
(v) customer and supplier lists, and
(vi) strategic plans;
(b) unpublished financial information, including unpublished information
concerning revenues, profits and profit margins;
(c) internal confidential manuals; and
(d) any "material inside information" as such phrase is used for purposes
of the Securities Exchange Act of 1934, as amended;
all constitute valuable, special and unique proprietary and trade secret
information of the Company. In recognition of this fact, the Employee agrees
that the Employee will not disclose any such trade secrets or confidential or
proprietary information (except (i) information which becomes publicly available
without violation of this Agreement, (ii) information of which the Employee did
not know and should not have known was disclosed to the Employee in violation of
any other person's confidentiality obligation, and (iii) disclosure required in
connection with any legal process), nor shall the Employee make use of any such
information for the benefit of any person, firm, operation or other entity
except the Company and its subsidiaries or affiliates. The Employee's
obligation to keep all of such information confidential shall be in effect
during and for a period of five (5) years after the termination of his
employment; provided, however, that the Employee will keep confidential and will
not disclose any trade secret or similar information protected under law as
intangible property (subject to the same exceptions set forth in the
parenthetical clause above) for so long as such protection under law is
extended.
10. Termination.
-----------
(a) The Employee's employment with the Company may be terminated at any
time as follows:
(i) By Employee's death;
(ii) By Employee's physical or mental disability which renders
Employee unable to perform his duties hereunder for a consecutive
period of ninety (90) days or for an aggregate of 120 days or
more during any twelve-month period.
-8-
<PAGE>
(iii)By the Company, for cause upon three (3) day's written notice to
Employee. For purposes of this Agreement, the term "cause" shall
mean termination upon: (i) the engaging by Employee in conduct
which is demonstrably and materially injurious to the Company,
monetarily or otherwise, including but not limited to any
material misrepresentation related to the performance of his
duties; (ii) the conviction of Employee of a felony or other
crime involving theft or fraud, (iii) Employee's gross neglect or
gross misconduct in carrying out his duties hereunder resulting,
in either case, in material harm to the Company as a whole; or
(iv) any material breach by Employee of this Agreement.
Notwithstanding the foregoing, Employee shall not be deemed to
have been terminated for cause under Sections (i) and (iv) above,
unless and until there has been delivered to him a copy of the
resolution of an officer of the Company, finding that Employee
engaged in the conduct set forth above in this section and
specifying the particulars thereof in detail, and Employee shall
not have cured or abated such conduct to the reasonable
satisfaction of the Company within fifteen (15) days of receipt
of such resolution. This provision shall be applicable solely to
the extent the conduct to which the alleged breach relates is
susceptible to being cured in the reasonable determination of
such officer.
(iv) By the Employee for Good Reason. For purposes of this Agreement,
Good Reason shall mean, without Employee's express consent, the
occurrence of any of the following circumstances:
(A) a substantial diminution in Employee's duties,
responsibilities or authority after written demand has been
made upon Company by Employee and Company has had a
thirty-day period to correct such matter (except during any
period when the Employee is unable to perform all or
substantially all of the Employee's duties and/or
responsibilities as a result of Employee's illness (either
physical or mental) or other incapacity; or
(B) any breach by Company of the Agreement but only after
written demand has been made upon Company by Employee
setting forth in detail the basis for such breach and
Company has failed to cure such breach within thirty (30)
days.
(b) Compensation upon Termination: In the event of termination of
employment (including but not limited to Employee's termination of
this Agreement for Good Reason), the Employee or his estate, in the
event of death, shall be entitled to his annual base salary and other
benefits provided hereunder to the date of his termination. In
addition, Employee shall be entitled to receive any commissions and/or
bonus accrued to the date of his termination of employment as provided
in Sections 5(b), 5(c) and 5(d) which shall be payable (if applicable)
pursuant to the terms thereof.
-9-
<PAGE>
11. Severability. In case any one (1) or more of the provisions or part of a
------------
provision contained in this Agreement shall be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a
provision of this Agreement. In such a situation, this Agreement shall be
reformed and construed as if such invalid, illegal or unenforceable
provision, or part of a provision, had never been contained herein, and
such provision or part shall be reformed so that it will be valid, legal
and enforceable to the maximum extent possible.
12. Governing Law. This Agreement shall be governed and construed under the
--------------
laws of the State of Tennessee and shall not be modified or discharged, in
whole or in part, except by an agreement in writing signed by the parties.
13. Notices. All notices, requests, demands and other communications relating
-------
to this Agreement shall be in writing and shall be deemed to have been duly
given if delivered personally or mailed by certified or registered mail,
return receipt re-quested, postage prepaid to the following addresses (or
to such other address for a party as shall be specified by notice pursuant
hereto):
If to Company, to: Pomeroy Computer Resources, Inc.
1020 Petersburg Road
Hebron, Kentucky 41048
With a copy to: James H. Smith III
Lindhorst & Dreidame Co., L.P.A.
312 Walnut Street, Suite 2300
Cincinnati, Ohio 45202
If to Employee, to: the Employee's residential address, as
set forth in the Company's records
With a copy to: Douglas P. Quay
Warren Cox Lawyers
Morgan Keegan Tower
5 N. Front Street, Suite 1300
Memphis, Tennessee 38103-1190
14. Enforcement of Rights. The parties expressly recognize that any breach of
---------------------
this Agreement by either party is likely to result in irrevocable injury to
the other party and agree that such other party shall be entitled, if it so
elects, to institute and prosecute proceedings in any court of competent
jurisdiction in Shelby County, Tennessee, either at law or in equity, to
obtain damages for any breach of this Agreement, or to enforce the specific
performance of this Agreement by each party or to enjoin any party from
activities in violation of this Agreement.
-10-
<PAGE>
15. Entire Agreement. This Agreement and the Purchase Agreement referred to
-----------------
herein contain the entire understanding of the parties with respect to the
subject matter contained herein and may be altered, amended or superseded
only by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
16. Parties in Interest.
---------------------
(a) This Agreement is personal to each of the parties hereto. No party may
assign or delegate any rights or obligations hereunder without first
obtaining the written consent of the other party hereto; provided,
however, that nothing in this Section 17 shall preclude (i) Employee
from designating a beneficiary to receive any benefit payable
hereunder upon his death, or (ii) executors, administrators, or legal
representatives of Employee or his estate from assigning any rights
hereunder to person or persons entitled thereto. Notwithstanding the
foregoing, this Agreement shall be binding upon and inure to the
benefit of any successor corporation of Company
(b) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the assets of the Company or the business with respect to which
the duties and responsibilities of Employee are principally related,
to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that Company would have been required to
perform it if no such succession
-11-
<PAGE>
had taken place. As used in this Agreement "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which executes and delivers the assumption
agreement provided for in this Section 17 or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation
of law.
17. Representations of Employee. Employee represents and warrants that he is
----------------------------
not party to or bound by any agreement or contract or subject to any
restrictions including without limitation any restriction imposed in
connection with previous employment which prevents Employee from entering
into and performing his obligations under this Agreement.
18. Counterparts. This Agreement may be executed simulta-neously in several
------------
counterparts, each of which shall be deemed an original part, which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed effec-tive as of the day
and year first above written.
WITNESSES: COMPANY:
POMEROY COMPUTER RESOURCES, INC.
__________________________
__________________________ By:_________________________________
Stephen E. Pomeroy
Chief Financial Officer
EMPLOYEE:
__________________________
__________________________ _____________________________________
GREGORY LIVINGSTON
-12-
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the _________ day of_______________, 1998, by and
between POMEROY COMPUTER RESOURCES, INC., a Delaware corporation ("Company") and
PHILLIP QUALLS ("Employee").
W I T N E S S E T H :
WHEREAS, the Company entered into an Asset Purchase Agreement ("Purchase
Agreement") of even date pursuant to which it purchased substantially all the
assets of Access Technologies, Inc. (Access); and
WHEREAS, Employee owns Three and 37/100 percent (3.37%) of the outstanding stock
of Access; and
WHEREAS, Employee, as an inducement for and in consideration of Company entering
into the Purchase Agreement, has agreed to enter into and execute this
Employment Agreement pursuant to Section 6 thereof; and
WHEREAS, Company desires to engage the services of Employee, pursuant to the
terms, conditions and provisions as hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein set forth, the parties hereby covenant and agree as follows:
1. Employment. The Company agrees to employ the Employee, and the Employee
----------
agrees to be employed by the Company, upon the following terms and
conditions.
2 Term. The initial term of Employee's employment pursuant to this Agreement
----
shall begin on the 9th day of December, 1998, and shall continue for a
period of two (2) years and twenty-seven (27) days, ending January 5, 2001
unless terminated earlier pursuant to the provisions of Section 10,
provided that Sections 8, 9 and 10(b), shall survive the termination of
such employ-ment and shall expire in accordance with the terms set forth
therein.
3. Renewal Term. The term of Employee's employment shall automatically renew
------------
for additional consecutive renewal terms of one (1) year unless either
party gives written notice of his/its intent not to renew the terms of this
Agreement sixty (60) days prior to expiration of the then expiring term.
4. Duties. Employee shall serve as Director of Sales Commercial Accounts for
------
the Company's Access/Memphis Division. Employee shall be responsible to and
report directly to Vice President of Operations for the Access/Memphis
Division. Employee shall devote his best efforts and substantially all his
time during normal business hours to the diligent, faithful and loyal
discharge of the duties of his employment and towards the proper, efficient
and successful conduct of the Company's affairs. Employee fur-ther agrees
to refrain during the term of this Agreement from making any sales of
competing services or products or from profiting from any transaction
involving computer services or products for his account without the express
written consent of Company.
<PAGE>
5. Compensation. For all services rendered by the Employee under this
------------
Agreement (in addition to other monetary or other benefits referred to
herein), compensation shall be paid to Employee as follows:
(a) Base Salary: During each fiscal year of the initial term of this
Agreement, Employee shall be paid an annual base salary of Seventy-Two
Thousand Dollars ($72,000.00). For the first twenty-seven (27) days of
this Agreement, Employee shall be compensated at the rate of Six
Thousand Dollars ($6,000.00) per month. Said base salary shall be
payable in accordance with the historical payroll practices of the
Company.
(b) Quarterly Commissions for Company's Access/Memphis Division's
Commercial Accounts Sales: In addition to Employee's base salary as
set forth in Section 5(a) above, commencing January 6, 1999 through
January 5, 2000, Employee shall be entitled to a quarterly commission
in the event the Employee satisfies the following economic criteria
during such quarter:
(i) Gross profit of Company's Access/Memphis Division's Commercial
Accounts Sales greater than $1,260,000.00 but less than or equal
to $1,360,000.00, equals $10,000.00 cash bonus;
(ii) Gross profit of Company's Access/Memphis Division's Commercial
Accounts Sales greater than $1,360,000.00 but less than or equal
to $1,460,000.00, equals $12,000.00 cash bonus;
(iii)Gross profit of Company's Access/Memphis Division's Commercial
Accounts Sales greater than $1,460,000.00, equals $15,000.00 cash
bonus.
(iv) For purposes of this Section, the term Gross Profit of Company's
Access/Memphis Division's Commercial Accounts Sales shall mean
the gross sales of equipment, software and services rendered to
commercial accounts by the Company's Access/ Memphis Division
less the cost of goods sold for such items.
(v) The quarterly commission determination shall be based upon the
Company's internally generated accounting statements and the
determination by the Company's Chief Financial Officer shall be
final, binding and conclusive upon all parties hereto and the
Company's financial statements for the Company's Access/Memphis
Division shall be provided to Employee.
-2-
<PAGE>
(vi) Any commissions due Employee hereunder shall be paid within
thirty (30) days of the conclusion of such quarter during the
applicable period.
(vii)The Company shall provide a quarterly commission plan for
Employee based upon the gross profit of the Company's
Access/Memphis Division's Commercial Accounts Sales for the
period January 6, 2000 through January 5, 2001, which plan will
be predicated upon the goals, projections and budgets established
at the outset of said year for the Company's Access/Memphis
Division as it relates to the accounts set forth above.
(c) Annual Cash Bonus - Incentive Stock Option - Access/Memphis Division:
In addition to Employee's base salary as set forth in Section 5(a)
above, and any commission compensation to which Employee may be
entitled under Section 5(b), during the first fiscal year of the
initial term of this Agreement (January 6, 1999 through January 5,
2000), Employee shall be entitled to a cash bonus and incentive stock
option award in the event Employee satisfies certain economic criteria
pertaining to the Company's Access/Memphis Division set forth as
follows:
(i) Gross sales of Company's Access/Memphis Division greater than
$30,000,000.00 with net profit before taxes (NPBT) greater than
$2,350,000.00 but less than $2,450,000.00, equals $5,000.00 cash
bonus plus 5,000 incentive stock options;
(ii) Gross sales of Company's Access/Memphis Division greater than
$30,000,000.00 with NPBT greater than or equal to $2,450,000.00
but less than $2,550,000.00, equals $7,500.00 cash bonus plus
6,000 incentive stock options;
(iii)Gross sales of Company's Access/Memphis Division greater than
$30,000,000.00 with NPBT greater than or equal to $2,550,000.00
equals $10,000.00 cash bonus plus 7,500 incentive stock options.
(iv) For purposes of this Section 5(c), the term Gross Sales shall
mean the gross sales of equipment, software and services by
Company's Access/Memphis Division during the applicable period.
In making said gross sales determination, all gains and losses
realized on the sale or other disposition of Companys
Access/Memphis Division's assets not in the ordinary course shall
be excluded. In addition, any gross sales of Company's
Access/Memphis Division relating to any acquisitions that are
closed in such year shall be excluded. All refunds or returns
which are made during such period shall be subtracted along with
all accounts receivable derived from such sales that are written
off during such period in accordance with Companys Access/Memphis
Divisions's accounting system. Such gross sales and NPBT of
Company's Access/Memphis Division shall be determined by the
Company's internally generated accounting statements determined
in the manner set forth above and in accordance with generally
accepted accounting principles. Commencing on the later of
January 6, 1999 or the installation of the ASTEA accounting
-3-
<PAGE>
system at Company's Access/Memphis Division, a 1.5% MAS royalty
fee on gross sales by Company's Access/Memphis Division shall be
made incident to said NPBT determination. In determining NPBT of
Access/Memphis Division, no effect shall be given to any increase
in the amounts of depreciation, amortization or other expense or
deduction taken on tangible or intangible assets of the Company,
if such increase is attributable to a revaluation of such assets
incident to the acquisition of substantially all of the assets of
Access. In addition, NPBT shall be determined prior to recording
of any interest expense attributable to Company's acquisition of
substantially all the assets of Access by the Company. The
Company and Employee shall implement various provisions of the
Asset Purchase Agreement relating to determining current
customers of Company and Access. For each subsequent fiscal year
for which Employee may be entitled to a bonus hereunder, the
parties shall, in good faith, agree upon an MAS royalty fee to be
charged hereunder based on the level of services and support
being provided by the Company to its Access/Memphis Division.
Provided, however, such MAS royalty fee shall be 1.5% if the
parties are unable to come to an agreement for such year. Any
cash bonus amount determined under Section 5 (b) shall be payable
to Employee within thirty (30) days of the determination.
(v) Any award of the incentive stock options to acquire common stock
of Company earned hereunder during the first year of this
Agreement shall be at the fair market value of the common shares
as of January 5, 2000 or any other applicable date, which shall
mean with respect to such shares, the average between the high
and low bid and asked prices for such shares on the
over-the-counter market on the last business day prior to the
date on which the value is to be determined (or the next
preceding date on which sales occurred if there were no sales on
such date).
(vi) The parties agree that in January, 2000, they will negotiate in
good faith, the level of gross sales and NPBT of Company's
Access/Memphis Division for the aforementioned cash bonus and
incentive stock option award to be earned for such year, which
gross sales and NPBT criteria shall be predicated upon Company's
Access/Memphis Division's goals, projections and budgets
established at the outset of such fiscal year.
-4-
<PAGE>
(d) In addition to Employee's base salary as set forth in Section 5(a),
any quarterly commission to which Employee may be entitled under
Section 5(b) and any annual cash bonus/incentive stock option award
that Employee may be entitled to under Section 5(c) based on Company's
Access/Memphis Division's performance, Employee shall be entitled to a
cash bonus and incentive stock option award in the event Employee
satisfies certain economic criteria pertaining to Company's
performance during the fiscal years 1999 and 2000.
The parties agree that in January, 1999 and January, 2000, they will
negotiate in good faith the implementation of economic criteria for
the earning of an annual cash bonus and incentive stock option award
for Employee for each of the two fiscal years of this Agreement which
will be predicated upon the attainment of Company goals, projections
and budgets established at the outset for such fiscal years which
shall be consistent with the goals of Senior Management of the Company
for such year(s). The cash bonus and incentive stock option award
shall be predicated on the structure (as to amount) used for the cash
bonus/incentive stock option award based on Company's Access/Memphis
Division's results as set forth in Section 5(c) . (i) For purposes of
this Section, the term Gross Sales shall mean the gross sales of
equipment, software and services by Company during the applicable
period, determined on a consolidated basis. In making said gross sales
determination, all gains and losses realized on the sale or other
disposition of Companys assets not in the ordinary course shall be
excluded. In addition, any gross sales of Company relating to any
acquisitions that are closed in such year shall be excluded. All
refunds or returns which are made during such period shall be
subtracted along with all accounts receivable derived from such sales
that are written off during such period in accordance with Companys
accounting system. Such gross sales of Company and any other economic
criteria adopted hereunder shall be determined by the
internally-generated financial statements of Company determined in the
manner set forth above in accordance with generally accepted
accounting principles. Any cash bonus amount determined under Section
5(d) shall be payable to Employee within thirty (30) days of the
determination.
(ii) Any award of the incentive stock options to acquire the common
stock of the Company earned hereunder during the first year of
this Agreement shall be at the fair market value of the common
shares as of January 5, 2000 or any other applicable date, as
defined in Section 5(c)(v).
-5-
<PAGE>
(e) Company will deliver to Employee copies of the reports of any
determination made hereunder by Company for the subject period, along
with any documentation reasonably requested by Employee. Within
fifteen (15) days following delivery to Employee of such report,
Employee shall have the right to object in writing to the results
contained in such determination. If timely objection is not made by
Employee to such determination, such determination shall become final
and binding for purposes of this Agreement. If a timely objection is
made by Employee, and the Company and Employee are able to resolve
their differences in writing within fifteen (15) days following the
expiration of the initial 15-day period, then such determination shall
become final and binding as it pertains to this Agreement. If timely
objection is made by Employee to Company, and Employee and Company are
unable to resolve their differences in writing within fifteen (15)
days following the expiration of the initial 15-day period, then all
disputed matters pertaining to the report shall be submitted and
reviewed by the Arbitrator (Arbitrator), which shall be an independent
accounting firm selected by Company and Employee. If Employee and
Company are unable to promptly agree on the accounting firm to serve
as the Arbitrator, each shall select, by not later than fifteen (15)
days following the expiration of the initial fifteen (15) day period,
one accounting firm and the two selected accounting firms shall then
be instructed to select promptly a third accounting firm, such third
accounting firm to serve as the Arbitrator. The Arbitrator shall
consider only the disputed matters pertaining to the determination and
shall act promptly to resolve all disputed matters. A decision with
respect to all disputed matters shall be final and binding upon
Company and Employee. The expenses of Arbitration (including
reasonable attorney and accounting fees) shall be borne one-half by
Employee and one-half by Company.
6. Fringe Benefits. During the term of this Agreement, Employee shall be
----------------
entitled to the following benefits:
(a) Health Insurance - Employee shall be provided with the standard family
medical health and insurance coverage maintained by Company on its
employees. Company and Employee shall each pay fifty percent (50%) of
the cost of such coverage.
(b) Vacation - Employee shall be entitled each year to a vacation of two
(2) weeks during which time his compensa-tion will be paid in full.
Provided, however, such weeks may not be taken consecutively without
the written consent of Company.
(c) Retirement Plan - Employee shall participate, after meeting
eligibility requirements, in any qualified retirement plans and/or
welfare plans maintained by the Company during the term of this
Agreement.
(d) Automobile - Company shall provide Employee with an automobile
allowance of $400.00 per month. Employee shall be responsible for all
insurance, maintenance and repairs to such vehicle.
-6-
<PAGE>
(e) Cellular Phone - Company shall provide Employee with a cellular phone
allowance of $75.00 per month. Employee shall provide Company, upon
request, with documentation supporting the business use of said
cellular phone.
(f) Other Company Programs - Employee shall be eligible to participate in
any other plans or programs implemented by the Company for all of its
employees with duties and responsibilities similar to Employee.
(g) Employee shall be responsible for any and all taxes owed, if any, on
the fringe benefits provided to him pursuant to this Section 6.
7. Expenses. During the term of this Agreement, Employee shall be entitled to
--------
receive prompt reimbursement for all reasonable and customary travel and
entertainment expenses or other out-of-pocket business expenses incurred by
Employee in fulfilling the Employee's duties and responsibilities
hereunder, including, all expenses of travel and living expenses while away
from home on business or at the request of and in the service of the
Company, provided that such expenses are incurred and accounted for in
accordance with the reasonable policies and procedures established by the
Company.
8. Non-Competition. Employee expressly acknowledges the provisions of Section
---------------
7 of the Purchase Agreement relating to Employee's Covenant Not to Compete
with Company. Accordingly, such provisions of Section 7 are incorporated
herein by reference to the extent as if restated in full herein. In
addition to the consideration received under this Agreement, Employee
acknowledges that as one of the owners of the common stock of Access, he
has received substantial consideration pursuant to such Purchase Agreement
and that as an inducement for, and in consideration of, Company entering
into the Purchase Agreement and Company entering into this Agreement,
Employee has agreed to be bound by such provisions of Section 7 of the
Pur-chase Agreement. Accordingly, such provisions of Section 7 and Exhibit
O-5 and the restrictions on Employee thereby imposed shall apply as stated
therein.
9. Non-Disclosure and Assignment of Confidential Information. The Employee
------------------------------------------------------------
acknowledges that the Company's trade secrets and confidential and
proprietary information, including without limitation:
(a) unpublished information concerning the Company's:
(i) research activities and plans,
(ii) marketing or sales plans,
(iii) pricing or pricing strategies,
(iv) operational techniques,
(v) customer and supplier lists, and
(vi) strategic plans;
-7-
<PAGE>
(b) unpublished financial information, including unpublished information
concerning revenues, profits and profit margins;
(c) internal confidential manuals; and
(d) any "material inside information" as such phrase is used for purposes
of the Securities Exchange Act of 1934, as amended;
all constitute valuable, special and unique proprietary and trade secret
information of the Company. In recognition of this fact, the Employee agrees
that the Employee will not disclose any such trade secrets or confidential or
proprietary information (except (i) information which becomes publicly available
without violation of this Agreement, (ii) information of which the Employee did
not know and should not have known was disclosed to the Employee in violation of
any other person's confidentiality obligation, and (iii) disclosure required in
connection with any legal process), nor shall the Employee make use of any such
information for the benefit of any person, firm, operation or other entity
except the Company and its subsidiaries or affiliates. The Employee's obligation
to keep all of such information confidential shall be in effect during and for a
period of five (5) years after the termination of his employment; provided,
however, that the Employee will keep confidential and will not disclose any
trade secret or similar information protected under law as intangible property
(subject to the same exceptions set forth in the parenthetical clause above) for
so long as such protection under law is extended.
10. Termination.
-----------
(a) The Employee's employment with the Company may be terminated at any
time as follows:
(i) By Employee's death;
(ii) By Employee's physical or mental disability which renders
Employee unable to perform his duties hereunder for a consecutive
period of ninety (90) days or for an aggregate of 120 days or
more during any twelve-month period.
(iii)By the Company, for cause upon three (3) day's written notice to
Employee. For purposes of this Agreement, the term "cause" shall
mean termination upon: (i) the engaging by Employee in conduct
which is demonstrably and materially injurious to the Company,
monetarily or otherwise, including but not limited to any
material misrepresentation related to the performance of his
duties; (ii) the conviction of Employee of a felony or other
crime involving theft or fraud, (iii) Employee's gross neglect or
gross misconduct in carrying out his duties hereunder resulting,
in either case, in material harm to the Company taken as a whole;
-8-
<PAGE>
or (iv) any material breach by Employee of this Agreement.
Notwithstanding the foregoing, Employee shall not be deemed to
have been terminated for cause under Sections (i) and (iv) above,
unless and until there has been delivered to him a copy of the
resolution of an officer of the Company, finding that Employee
engaged in the conduct set forth above in this section and
specifying the particulars thereof in detail, and Employee shall
not have cured or abated such conduct to the reasonable
satisfaction of the Company within fifteen (15) days of receipt
of such resolution. This provision shall be applicable solely to
the extent the conduct to which the alleged breach relates is
susceptible to being cured in the reasonable determination of
such officer.
(iv) By the Employee for Good Reason. For purposes of this Agreement,
Good Reason shall mean, without Employee's express consent, the
occurrence of any of the following circumstances:
(A) a substantial diminution in Employee's duties,
responsibilities or authority after written demand has been
made upon Company by Employee and Company has had a
thirty-day period to correct such matter (except during any
period when the Employee is unable to perform all or
substantially all of the Employee's duties and/or
responsibilities as a result of Employee's illness (either
physical or mental) or other incapacity; or
(B) any breach by Company of the Agreement but only after
written demand has been made upon Company by Employee
setting forth in detail the basis for such breach and
Company has failed to cure such breach within thirty (30)
days.
(b) Compensation upon Termination: In the event of termination of
employment (including but not limited to Employee's termination of
this Agreement for Good Reason), the Employee or his estate, in the
event of death, shall be entitled to his annual base salary and other
benefits provided hereunder to the date of his termination. In
addition, Employee shall be entitled to receive any commissions and/or
bonus accrued to the date of his termination of employment as provided
in Sections 5(b), 5(c) and 5(d) which shall be payable (if applicable)
pursuant to the terms thereof.
11. Severability. In case any one (1) or more of the provisions or part of a
------------
provision contained in this Agreement shall be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a
provision of this Agreement. In such a situation, this Agreement shall be
reformed and construed as if such invalid, illegal or unenforceable
provision, or part of a provision, had never been contained herein, and
such provision or part shall be reformed so that it will be valid, legal
and enforceable to the maximum extent possible.
-9-
<PAGE>
12. Governing Law. This Agreement shall be governed and construed under the
--------------
laws of the State of Tennessee and shall not be modified or discharged, in
whole or in part, except by an agreement in writing signed by the parties.
13. Notices. All notices, requests, demands and other communications relating
-------
to this Agreement shall be in writing and shall be deemed to have been duly
given if delivered personally or mailed by certified or registered mail,
return receipt re-quested, postage prepaid to the following addresses (or
to such other address for a party as shall be specified by notice pursuant
hereto):
If to Company, to: Pomeroy Computer Resources, Inc.
1020 Petersburg Road
Hebron, Kentucky 41048
With a copy to: James H. Smith III
Lindhorst & Dreidame Co., L.P.A.
312 Walnut Street, Suite 2300
Cincinnati, Ohio 45202
If to Employee, to: the Employee's residential address, as
set forth in the Company's records
With a copy to: Douglas P. Quay
Warren Cox Lawyers
Morgan Keegan Tower
5 N. Front Street, Suite 1300
Memphis, Tennessee 38103-1190
14. Enforcement of Rights. The parties expressly recognize that any breach of
---------------------
this Agreement by either party is likely to result in irrevocable injury to
the other party and agree that such other party shall be entitled, if it so
elects, to institute and prosecute proceedings in any court of competent
jurisdiction in Shelby County, Tennessee, either at law or in equity, to
obtain damages for any breach of this Agreement, or to enforce the specific
performance of this Agreement by each party or to enjoin any party from
activities in violation of this Agreement.
15. Entire Agreement. This Agreement and the Purchase Agreement referred to
-----------------
herein contain the entire understanding of the parties with respect to the
subject matter contained herein and may be altered, amended or superseded
only by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
-10-
<PAGE>
16. Parties in Interest.
---------------------
(a) This Agreement is personal to each of the parties hereto. No party may
assign or delegate any rights or obligations hereunder without first
obtaining the written consent of the other party hereto; provided,
however, that nothing in this Section 17 shall preclude (i) Employee
from designating a beneficiary to receive any benefit payable
hereunder upon his death, or (ii) executors, administrators, or legal
representatives of Employee or his estate from assigning any rights
hereunder to person or persons entitled thereto. Notwithstanding the
foregoing, this Agreement shall be binding upon and inure to the
benefit of any successor corporation of Company
(b) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the assets of the Company or the business with respect to which
the duties and responsibilities of Employee are principally related,
to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that Company would have been required to
perform it if no such succession
had taken place. As used in this Agreement "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which executes and delivers the assumption
agreement provided for in this Section 17 or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation
of law.
17. Representations of Employee. Employee represents and warrants that he is
----------------------------
not party to or bound by any agreement or contract or subject to any
restrictions including without limitation any restriction imposed in
connection with previous employment which prevents Employee from entering
into and performing his obligations under this Agreement.
18. Counterparts. This Agreement may be executed simulta-neously in several
------------
counterparts, each of which shall be deemed an original part, which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed effec-tive as of the day
and year first above written.
-11-
<PAGE>
WITNESSES: COMPANY:
POMEROY COMPUTER RESOURCES, INC.
__________________________
__________________________ By:_________________________________
Stephen E. Pomeroy
Chief Financial Officer
EMPLOYEE:
__________________________
__________________________ ____________________________________
PHILLIP QUALLS
-12-
<PAGE>
EXHIBIT G
EXCLUDED ASSETS
---------------
1. The Purchased Price or any part thereof received by Seller for the sale of
the Purchased Assets;
2. Seller's minute book and stock records;
3. Country club membership to Colonial Country Club, Memphis, Tennessee;
4. Obligations, or receivable, due from the Datacomm Connectivity & Solutions,
Inc. ("Datacomm") shareholders pursuant to Section 2(f) of that certain
Asset Purchase Agreement by and among Seller, Datacomm and the Datacomm
shareholders in the approximate amount of $457,640.00 as of December 8,
1998;
5. All proceeds (including without limitation cash and note(s) receivable)
from the sale of Seller's controlled access division to Video Verification
Services, Inc.;
6. Employee advances in the amount set forth in Exhibit S;
7. Any and all indemnification rights of Seller under the Asset Purchase
Agreement by and among Seller, Datacomm and the Datacomm shareholders.
8. All of Seller's Tax refunds or receivable or any rights thereto.
<PAGE>
GENERAL BILL OF SALE AND ASSIGNMENT
-----------------------------------
KNOW ALL MEN BY THESE PRESENTS:
That Access Technologies, Inc., a Tennessee corporation, ("Company") for good
and valuable consideration received from Pomeroy Computer Resources, Inc., a
Delaware corporation ("Purchaser"), does hereby, in accordance with the terms
and conditions of the Asset Purchase Agreement, dated December ___, 1998 (the
"Agreement"), by and between Company and Purchaser, sell, assign, transfer,
convey, deliver and confirm to Purchaser, its successors and assigns, or its
nominee, those certain assets of Company ("Purchased Assets") described in the
Agreement as the Purchased Assets, relating to Company's Business, which
Purchased Assets shall include without limitation:
The Purchased Assets but excluding the Excluded Assets as defined in the
Agreement.
TO HAVE AND TO HOLD to Purchaser, its successors and assigns forever.
Company hereby represents, warrants and covenants that, at and until delivery of
this General Bill of Sale and Assignment, Company has good and marketable title
to the Purchased Assets, free and clear of any imperfections of title, liens,
encumbrances, charges, equities or restrictions, of any nature whatsoever; that
from and after the delivery by Company to Purchaser of this General Bill of Sale
and Assignment, Purchaser will own the Purchased Assets and have good and
marketable title thereto, free and clear of any imperfections of title, liens,
encumbrances, charges, equities or restrictions of any nature whatsoever.
Company, for itself and its successors, further covenants and agrees that, in
the event there are any such Purchased Assets covered by this General Bill of
Sale and Assignment which cannot be transferred or assigned by it without the
consent of or notice to a third party and in respect of which any necessary
consent or notice has not at the date of delivery of this General Bill of Sale
and Assignment been given or obtained, the beneficial interest in and to the
asset/contract shall, in any event, pass hereby to Purchaser, and Company, for
itself and its successors and assigns, covenants and agrees (i) to hold and
hereby declares that it holds such Purchased Assets in trust for and for the
benefit of Purchaser, its successors and assigns; (ii) if requested by
Purchaser, Company will use all reasonable efforts (not including the obligation
to make any payment of funds incident thereto) to obtain and secure such
consents to transfer such Purchased Assets; and (iii) to make or complete such
transfer or transfers as soon as reasonably possible.
Company hereby further covenants that it will, at any time and from time to
time, at the request of Purchaser, execute and deliver to Purchaser any new or
confirmatory instrument and all other and further instruments necessary or
convenient, which Purchaser may reasonably request, to vest in Purchaser
Company's full right, title and interest in or to any of the Purchased Assets,
or to enable Purchaser to realize upon or otherwise to enjoy any such property,
assets or rights or to carry into effect the intent or purpose hereof.
<PAGE>
This General Bill of Sale and Assignment, being further documentation of the
transfers, conveyances and assignments provided in the Agreement, does not
expand or limit the rights and obligations provided in said Agreement.
This instrument shall be binding upon, inure to the benefit of and be
enforceable by the Company and Purchaser and their respective successors and
assigns.
Any capitalized terms used, but not defined herein, shall have the definition
set forth in the Agreement.
IN WITNESS WHEREOF, Access Technologies, Inc. has caused this instrument to be
executed by its officer thereunto duly authorized as of this ____ day of
December, 1998.
Signed and delivered in ACCESS TECHNOLOGIES, INC.,
the presence of a Tennessee corporation
_________________________ By: ________________________________
President
_________________________
STATE OF OHIO
COUNTY OF HAMILTON, ss
BE IT REMEMBERED, that on this _____ day of December, 1998, before me, the
undersigned, a Notary Public in and for said County, personally appeared
__________ _________________, who acknowledged himself to be the President of
Access Technologies, Inc., a Tennessee corporation, and that he, as such
President being authorized to do so, executed the foregoing instrument for the
purposes therein contained, by signing the name of the corporation by himself as
President.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my
notarial seal on the day and year last above written.
____________________________________
NOTARY PUBLIC
-2-
<PAGE>
ASSUMPTION OF LIABILITIES
-------------------------
THIS ASSUMPTION OF LIABILITIES is made this ____ day of December, 1998 by and
between Access Technologies, Inc., a Tennessee corporation ("Seller") and
Pomeroy Computer Resources, Inc., a Delaware corporation ("Purchaser").
WHEREAS, pursuant to an Asset Purchase Agreement dated December ___, 1998 (the
"Agreement") by and between Purchaser and Seller and Mark V. Putman, Paul Bishop
and David Barthel, Purchaser wishes to assume certain obligations of Seller.
NOW, THEREFORE, pursuant to the Agreement and in consideration of the premises,
and for good and valuable consideration, the receipt of which is hereby
acknowledged, the Seller and Purchaser hereby agree as follows:
1. Assumption
----------
Purchaser hereby accepts, assumes and agrees to pay and perform the
obligations of Seller as set forth on Exhibit "1" attached hereto and made
a part hereof. Purchaser agrees to indemnify and hold Seller harmless from
any liability with respect to such assumed obligations.
2. Excluded Liabilities
---------------------
Notwithstanding anything to the contrary in the Agreement or in this
Assumption of Liabilities, Purchaser shall not assume or be liable for any
liabilities of Seller not listed on Exhibit "1" attached hereto and made
part hereof.
3. The Agreement
--------------
Nothing contained in this Assumption of Liabilities shall be deemed to
supersede, restrict, impair, diminish, enlarge or expand in any respect any
of the obligations, agreements, covenants or warranties of Seller or
Purchaser contained in the Agreement. All terms used in this Assumption of
Liabilities shall have the meaning defined in the Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Assumption of
Liabilities to be executed in their names on the date first above written.
ACCESS TECHNOLOGIES, INC.,
a Tennessee corporation
By: ________________________________
President
<PAGE>
POMEROY COMPUTER RESOURCES, INC.,
a Delaware corporation
By: ________________________________
Stephen E. Pomeroy, Chief Financial
Officer
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
The foregoing instrument was acknowledged before me this ____ day of
December, 1998 by _________________, President of Access Technologies, Inc., a
Tennessee corporation, on behalf of the corporation.
_________________________________
NOTARY PUBLIC
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
The foregoing instrument was acknowledged before me this ____ day of
December, 1998 by Stephen E. Pomeroy, Chief Financial Officer of Pomeroy
Computer Resources Inc., a Delaware corporation, on behalf of the corporation.
_________________________________
NOTARY PUBLIC
<PAGE>
EXHIBIT "1"
LIABILITIES BEING ASSUMED
(i) Accounts payable incurred in the ordinary course of the Business, which
accounts payable totaled $3,031,055.00 on September 30, 1998;
(ii) Accrued commissions payable, salaries and wages and interest incurred in
the ordinary course of business, which items totaled $297,744.00 on
September 30, 1998;
(iii) Unearned income in the amount of $95,000.00 as of September 30, 1998;
(iv) A line of credit payable to Enterprise National Bank, which provides for a
maximum principal amount of $700,000.00, and the outstanding amount of
which, as of September 30, 1998, is $424,926.00, which line of credit is
collateralized by a security interest in Seller's receivables and
inventory;
(v) Long term debt (including current portion) to various institutions set
forth on Exhibit S to the Agreement, the outstanding amount of which, as of
September 30, 1998, is $1,727,703.00;
(vi) The Assumed Liabilities to be assumed as set forth in Sections 3.1(a)(i)
through (v) of the Agreement ((i) to (v) above), as may be incurred,
increased or decreased since September 30, 1998 to the Pro Forma Balance
Sheet for operations in the ordinary course of business or any other
transaction permitted by the Agreement and subject to the satisfaction of
the Net Asset Amount requirement set forth in Section 4.1(d) of the
Agreement as of the Closing Date;
<PAGE>
(vii)All of the obligations and liabilities of Seller arising after the Closing
under the contracts described in Section 2.4 of the Agreement and those
other executory contracts and agreements described on Exhibit "A" attached
hereto; and
(viii) All future liabilities of merchandise in transit FOB shipping point which
has not been received and/or entered into inventory by Seller as of the
Closing and for which no bill has been posted by Seller as of the Closing.
<PAGE>
PROMISSORY NOTE
$7,000,000.00 Cincinnati, Ohio
December ___, 1998
1. FOR VALUE RECEIVED, POMEROY COMPUTER RESOURCES, INC., a Delaware
corporation (hereinafter, together with its successors in title and assigns,
called the "Borrower") does hereby absolutely and unconditionally promise to pay
to the order of ACCESS TECHNOLOGIES, INC., a Tennessee corporation ("Lender"),
the sum of Seven Million Dollars ($7,000,000.00), together with interest on the
outstanding principal balance from the date hereof, at the rate specified below.
2. Interest on the unpaid principal balance shall accrue at the rate of six
and 75/100 percent (6.75%) from the date of Closing. Interest and the unpaid
principal balance of this note shall be due and payable in full on January 4,
1999.
3. All payments received hereunder shall be applied first to interest and
then to principal. This Note may be prepaid, in whole or in part, at any time,
without penalty.
4. This Note and all obligations of the Borrower hereunder are secured by
an irrevocable standby letter of credit of Borrower issued by Deutsche Bank.
5. Upon the occurrence of an Event of Default, the entire principal amount
outstanding under this Note, and accrued interest thereon, shall at once become
due and payable, at the option of the Lender and the Lender shall have the
remedies set forth in the Asset Purchase Documents.
6. When this Note becomes due, by acceleration or otherwise, the Lender may,
at its option, demand, sue for, collect or make any compromise or settlement it
deems desirable with reference to property held as security herefor. The
failure to exercise any option to declare the maturity hereof or to exercise any
other rights under any of the covenants or conditions contained in the Asset
Purchase Documents shall not be taken or deemed to be a waiver of the right to
exercise such option or to declare such maturity after any subsequent violation
of any such covenants or conditions. All remedies provided for herein upon any
default by the Borrower shall be cumulative and not exclusive.
7. The provisions of this Note and the obligations of the Borrower hereunder
shall in all respects be governed by and interpreted and determined in
accordance with the internal laws of the State of Tennessee.
8. The Borrower hereby unconditionally and irrevocably waives notice of
acceptance, presentment, notice of nonpayment (except as provided herein),
protest, notice of protest, suit and all other conditions precedent in
connection with the delivery, acceptance, collection and/or enforcement of this
Note.
<PAGE>
9. Should all or any part of the indebtedness represented by this Note be
collected by action in law, or in bankruptcy, insolvency, receivership or other
court proceedings, or should this Note be placed in the hands of attorneys for
collection after the occurrence of an Event of Default, the Borrower hereby
promises to pay to the Lender of this Note, upon demand by the Lender hereof at
any time, in addition to principal and all (if any) other amounts payable on or
in respect of this Note or the indebtedness evidenced hereby, all court costs
and reasonable attorneys' fees and all other reasonable collection charges and
expenses incurred or sustained by the Lender of this Note.
10. If for any circumstances whatsoever, the fulfillment of any provision of
this Note involves transcending the limit of validity prescribed by any
applicable usury statute or any other applicable law with regard to obligations
of like character and amount, then the obligation to be fulfilled will be
reduced to the limit of such validity as provided in such statute of law, so
that in no event shall any exaction of interest be possible under this Note in
excess of the limit of such validity. In no event shall the Borrower be bound
to pay interest of more than the legal limit for the use, forbearance or
detention of money, and the right to demand any such excess is hereby expressly
waived by the Lender.
11. No delay or omission of the holder of this Note to exercise any right or
power arising from any default shall impair any such right or power or be
considered to be a waiver of any such default or any acquiescence therein, nor
shall the action or non-action of the holder in case of default on the part of
the Borrower impair any right or power resulting therefrom.
12. As used herein, the following terms shall have the following meanings,
respectively:
(a) "Asset Purchase Agreement" - The Asset Purchase Agreement between
and among the Borrower and the Lender dated December ___, 1998.
(b) "Event of Default" - The failure of Borrower to make any payment
of principal or interest due under this Note after receipt of written notice
from the Lender to the Borrower that such installment has not been paid.
WITNESSES: BORROWER
Pomeroy Computer Resources, Inc.
_____________________________
By: _____________________________
_____________________________ Its: _____________________________
- 2-
<PAGE>
CONSENT FOR USE OF SIMILAR NAME
On the ____ day of __________, 1998, the Board of Directors of Access
Technologies, Inc. a Tennessee corporation, passed the following resolution:
RESOLVED, that Access Technologies, Inc. gives its consent to Pomeroy
Computer Resources, Inc., a Delaware corporation, for the use of the name Access
Technologies, Inc.
ACCESS TECHNOLOGIES, INC.
By: __________________________________
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
THAT ACCESS TECHNOLOGIES, INC. ("Seller") hereby constitutes and appoints
POMEROY COMPUTER RESOURCES, INC. ("Purchaser"), its successors and assigns, the
true and lawful attorney of Seller with full power of substitution, in the name
of Purchaser, or the name of Seller, on behalf of and for the benefit of
Purchaser, to collect all receivables and other items being transferred and
assigned to Purchaser as provided herein, to endorse, without recourse, any and
all checks in the name of Seller the proceeds of which Purchaser is entitled to
hereunder, to institute and prosecute, in the name of Seller or otherwise, all
proceedings which Purchaser may deem proper in order to collect, assert or
enforce any claim, right or title of any kind in or to the Purchased Assets, to
defend and compromise any and all actions suits and proceedings in respect of
any of the Purchased Assets, and to do all such acts and things in relation
thereto as Purchaser may deem advisable. Seller agrees that the foregoing
powers are coupled with an interest and shall be irrevocable by Seller, directly
or indirectly, by the dissolution of Seller or in any manner or for any reason.
Seller further agrees that Purchaser shall retain for its own account any
amounts collected pursuant to the foregoing powers, and Seller shall pay or
transfer to Purchaser, if and when received, any amounts which shall be received
by Seller after the Closing in respect of any receivables or other assets,
properties, rights or business to be transferred and assigned to Purchaser as
provided herein.
Seller hereby gives unto Purchaser full power to do and perform any, all and
every act requisite, necessary or proper to be done in carrying out the purposes
for which this power is granted as might or could be done if personally present,
with full power of substitution or revocation.
This power shall survive the liquidation or dissolution of Seller.
IN WITNESS WHEREOF, Access Technologies, Inc. has caused this instrument to be
executed by its officer thereunto duly authorized as of this ____ day of
December, 1998.
<PAGE>
WITNESSES ACCESS TECHNOLOGIES, INC., a Tennessee
corporation
______________________________
______________________________ BY:_____________________________
President
STATE OF OHIO
COUNTY OF HAMILTON, ss
BE IT REMEMBERED, that on this ____ day of December, 1998, before me, the
undersigned, a Notary Public in and for said County, personally appeared
_________________, who acknowledged himself to be the President of Access
Technologies, Inc., a Tennessee corporation, and that he, as such President
being authorized to do so, executed the foregoing instrument for the purposes
therein contained, by signing the name of the corporation by himself as
President.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my
notarial seal on the day and year last above written.
_________________________________
NOTARY PUBLIC
<PAGE>
December ___, 1998
Pomeroy Computer Resources, Inc.
1020 Petersburg Road
Hebron, Kentucky 41048
Gentlemen:
Reference is made to that certain Asset Purchase Agreement dated December
___, 1998, and an Assignment and Assumption Agreement of even date herewith
pursuant to which the undersigned, ACCESS TECHNOLOGIES, INC. (Seller) sold,
assigned, transferred and conveyed to POMEROY COMPUTER RESOURCES, INC. (Pomeroy
) to the extent permitted, its interest in certain contracts as set forth on
Exhibit A attached to said Assignment and Assumption Agreement. Pursuant to
such Assignment and Assumption Agreement, Seller agreed to take additional
action to carry out the terms of the Asset Purchase Agreement to enable Pomeroy
to perform the obligations of Seller under these contracts and to allow Pomeroy
to enforce Sellers rights under these contracts.
In order to fulfill this obligation, the undersigned hereby agrees that
until such time as a new contract with these customers is obtained, or an
assignment is approved by them, Pomeroy is hereby engaged by Seller to perform
Sellers obligations under the contracts in consideration for all remaining
amounts to be paid to Seller under such contracts and/or any other consideration
to be provided to Seller under the contracts. Seller agrees to cooperate with
Purchaser in performing these contracts and in dealing with the customers,
including such billing procedures, invoicing procedures, collection procedures
and other bookkeeping issues or customer relations issues as Pomeroy may deem
necessary and appropriate to fulfill its duties under the contracts. To
acknowledge your agreement and acceptance to the foregoing, please execute the
duplicate original enclosed herewith and return it to the undersigned.
Sincerely,
ACCESS TECHNOLOGIES, INC.
By: ___________________________________
President
Agreed and Accepted this ____ day of December, 1998.
POMEROY COMPUTER RESOURCES, INC.
By: ___________________________________
Stephen E. Pomeroy, Chief Financial Officer
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
THIS ASSIGNMENT and Assumption Agreement ("Assignment") is made this ____
day of December, 1998 by and between ACCESS TECHNOLOGIES, INC., a Tennessee
corporation ("Seller"), and POMEROY COMPUTER RESOURCES, INC., a Delaware
corporation ("Purchaser").
WHEREAS, pursuant to an Asset Purchase Agreement, dated December ___, 1998
(the "Agreement"), by and between Purchaser and Seller and Mark V. Putman, Paul
Bishop and David Barthel, Purchaser wishes to assume Seller's rights, benefits
and privileges of certain contracts, and Seller is desirous of assigning to
Purchaser all of its rights, benefits and privileges in certain contracts.
NOW, THEREFORE, in consideration of the foregoing and the agreements and
covenants herein set forth, and other good and valuable consideration paid by
Purchaser to Seller, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ASSIGNMENT:
- ----------
1. Seller does hereby sell, assign, transfer and convey to Purchaser, to the
extent legally permitted, the contracts set forth on Exhibit "A" attached
hereto, and all of Sellers rights, interest, benefits and privileges
thereunder.
REPRESENTATIONS:
- ---------------
2. Seller hereby represents, warrants and covenants to Purchaser that (i)
Seller is a party to the contracts listed on Exhibit "A" and has not sold,
assigned, transferred or conveyed its interest therein to any other person
or entity; (ii) Seller has complied with and fulfilled all of its duties
and obligations under the contracts, is not in default, and has not
breached any of the terms or provisions of the contracts and the contracts
remain in full force and effect as of the date hereof; (iii) Seller is not
aware of any facts or circumstances which give rise or could give rise with
the giving of notice or the lapsing of time to a breach or default under
the contracts; and (iv) the other parties to the contracts set forth on
Exhibit "A" are not in default and have not breached any of the terms or
provisions of the contracts.
ADDITIONAL ACTION BY SELLER:
- ------------------------------
3. To the extent this Assignment does not result in a complete transfer of the
contracts to Purchaser because of a prohibition in the contracts against
Seller's assignment of any of its rights thereunder, Seller shall cooperate
with Purchaser in any reasonable manner proposed by Purchaser (which shall
not be required to expend any funds incident thereto) to complete the
acquisition of the contracts and Seller's rights, benefits and privileges
thereunder in order to fulfill and carry out Seller's obligations under the
Agreement. Such additional action may include, but is not limited to: (i)
entering into a subcontract between Seller and Purchaser which allows
Purchaser to perform Seller's duties under the contracts set forth on
Exhibit "A" and to enforce Seller's rights thereunder; (ii) the sale of
Sellers stock owned by Mark V. Putman, Paul Bishop and David Barthel (and
any other shareholders of Seller that is not a party to this Agreement) to
Purchaser on terms to which all parties then mutually agree in good faith
to allow Purchaser to operate Seller as a wholly-owned subsidiary to
enforce the contracts; or (iii) entering into a new multi-party agreement
with the customers identified in the contracts set forth on Exhibit "A"
which allows Purchaser to perform Seller's obligations and enforce Sellers'
rights under the contracts.
Page 1 of 3
<PAGE>
ASSUMPTION OF OBLIGATIONS:
- ---------------------------
4. Purchaser shall be responsible for the performance and discharge of all the
duties and obligations of Seller contained in the contract set forth on
Exhibit "A" upon the earlier to occur of: (i) the completion of the
assignment of the contracts and Seller's rights, interest, benefits and
privileges thereunder; or (ii) in accordance with any proposed transaction
contemplated or set forth in Paragraph 3 hereof, or (iii) Purchaser is
receiving the entire economic benefit from such contracts.
MUTUAL INDEMNIFICATION:
- -----------------------
5. Purchaser hereby agrees to indemnify and hold harmless Seller from and
against any and all loss, cost or expense (including, without limitation,
reasonable attorneys' fees), resulting by reason of Purchaser's failure to
perform any of the obligations of Seller under the Contracts after the date
that Purchaser actually acquires all of the rights, interest, benefits and
privileges of the Seller under each contract. Seller hereby agrees to
indemnify and hold harmless Purchaser from and against any and all loss,
cost or expense (including, without limitation, reasonable attorneys' fees)
resulting by reason of the failure of Seller to perform any of the
obligations of the Seller under the contracts on or prior to the date that
the rights, interest, privileges, benefits and any interest in the
contracts are actually assigned to the Purchaser.
BINDING EFFECT:
- ---------------
6. All of the covenants, terms and conditions set forth herein shall be
binding upon and shall inure to the benefit of the parties hereof and their
respective successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Assignment as of the
date first above written.
Page 2 of 3
<PAGE>
WITNESSES: SELLER:
------
____________________________ ACCESS TECHNOLOGIES, INC.
____________________________ BY:_______________________________
President
____________________________
____________________________ _____________________________________
MARK V. PUTMAN, Individually
____________________________
____________________________ _____________________________________
PAUL BISHOP, Individually
____________________________
____________________________ _____________________________________
DAVID BARTHEL, Individually
WITNESSES: PURCHASER:
---------
____________________________ POMEROY COMPUTER RESOURCES, INC.
____________________________ BY: ________________________________
Stephen E. Pomeroy, Chief Financial
Officer
Page 3 of 3
<PAGE>
SUBORDINATION AGREEMENT
-----------------------
THIS SUBORDINATION AGREEMENT (this "Agreement") is entered into effective
as of December ___, 1998, among (i) POMEROY COMPUTER RESOURCES, INC., a Delaware
corporation (the "Borrower"), (ii) ACCESS TECHNOLOGIES, INC. a Tennessee
corporation, its successors and assigns (the "Subordinated Creditor") and (iii)
DEUTSCHE FINANCIAL SERVICES COMPANY, its successors or assigns (the "Senior
Credi-tor").
RECITALS
WHEREAS, Pursuant to a Loan Agreement dated as of _____________, 1998
between the Borrower and the Senior Creditor, the Senior Creditor has extended a
commitment to make available to Borrower certain credit in the aggregate
principal amount of One Hundred Twenty Million Dollars ($120,000,000.00) (the
"Senior Loan"); and
WHEREAS, Borrower is using a portion of the proceeds of the Senior Loan to
purchase substantially all the assets of Subordinated Creditor's computer
service and support solutions business; and
WHEREAS, in connection with the acquisition of such assets of Subordinated
Creditor, the Subordinated Creditor will take back a promissory note in the
original principal amount of $1,250,000.00 plus interest, fees, costs and other
amounts payable in respect thereof ("Acquisition Debt") in partial consideration
of the payment of the purchase price for such assets; and
WHEREAS, a condition under the Senior Loan is the execution and delivery of
this Subordination Agreement.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the parties agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms, when used in this
--------------
Agreement, including the introductory paragraph and Recitals hereto, shall,
---------
except where the context otherwise requires, have the following meanings:
"Acquisition Debt" has the meaning specified in the third paragraph of the
-----------------
recitals hereto.
"Acquisition Note" means the promissory note issued by Borrower to the
-----------------
Subordinated Creditor which evidences the Acquisition Debt.
"Agreement" means this Subordination Agreement.
---------
<PAGE>
"Applicable Law" means and includes statutes and rules and regulations
---------------
thereunder and interpretations thereof by any governmental agency charged with
the administration or the interpretation thereof, and orders, requests,
directives, instructions and notices of any governmental authority.
"Bankruptcy or Insolvency Proceeding" means any insol-vency or bankruptcy
-------------------------------------
case or proceeding, or any receivership, liquidation, reorganization, assignment
for the benefit of creditors or other similar case or proceeding for the
liquida-tion, dissolu-tion, reorgan-ization or winding up of the Borrower, or of
all or any portion of the property of Borrower, whether voluntary or
involuntary, partial or complete.
"Borrower" has the meaning specified in the introductory paragraph hereto.
--------
"Enforcement Action" means (a) the acceleration of any Subordinated Debt,
-------------------
(b) any realization or foreclosure upon any collateral securing the Subordinated
Debt, (c) any demand by the Subordinated Creditor for payment of the
Subordinated Debt, or (d) subject always to the provisions contained in the next
sentence, the enforce-ment of any of the rights or remedies of the Subordi-nated
Creditor against the Borrower, whether under the Subordinated Debt Documents or
otherwise, and whether by action at law, suit in equity, arbitration proceedings
or otherwise. The term "Enforcement Action" shall not include or be deemed to
include the giving of notices (including, without limitation, notices of
default, notices of Events of Default, notices of demand for payment, notices of
breaches of covenants, etc.), the making of requests or the delivery of other
communications pursuant to and upon the terms permitted or otherwise
contemplated by any of the Subordinated Debt Documents, it being understood and
agreed that any action of the kind described above in the foregoing sentence may
be taken by the Subordinated Creditor at any time and from time to time after
the date hereof without any limitation or restric-tion.
"Enforcement Action Notice" has the meaning specified in Section 3.2(b).
---------------------------
"Event of Default" has, in connection with permitted payments under Section
----------------
2.6 hereof, the meaning specified in the Senior Loan Agreement and, with respect
to Standstill Events as defined herein and as used in Section 3., has the
meaning specified in the Acquisition Note.
"Extension of Credit" means any loan, letter of credit or other extension
---------------------
of credit of any kind or character and in the case of revolving credit
facilities, includes lending and relending up to the maximum amount thereof and
any Permitted Increase.
"Instrument" means any contract, agreement, indenture, mortgage or other
----------
document or writing (whether a formal agree-ment, letter or otherwise) under
which any obligation is evidenced, assumed or undertaken, or any right to any
lien is granted or perfected.
"Payment in Full" and "Paid in Full" mean payment in full in cash.
----------------- --------------
-2-
<PAGE>
"Payment or Distribution on Account of Subordinated Debt" or "Payment or
--------------------------------------------------------------------------
Distribution" means any payment or distribution of any kind or character,
- ------------
whether in cash, securities or other property or any combination thereof, and
whether voluntary or involuntary, on account of principal of, or interest on any
Subordinated Debt, or on account of any redemption, retirement, repurchase or
other acquisition for value of any Subordinated Debt.
"Permitted Increase" means any increase in the principal amount of the
--------
Senior Debt effected by Senior Lender, except the aggregate amounts of any such
increases outstanding at any one time shall not exceed the amount set forth on
Exhibit A attached hereto.
"Proceeds" shall have the meaning (a) ascribed to that term under the
--------
U.C.C. and shall in any event include any and all payments or distributions of
any kind or character received by way of exercise of rights of set-off,
counterclaim or cross--claim, or enforcement of any claim, against the Borrower,
(b) any and all proceeds of any insurance, indemnity, warranty, guaranty of
letter of credit payable to the Borrower with respect to any collateral securing
the Subordinated Debt or Senior Debt, or (c) any and all other amounts from time
to time paid or payable or distributable under or with respect to any collateral
securing the Subordinated Debt or Senior Debt.
"Deutsche Financial Services Company", as used in the defined terms "Senior
-----------------------------------
Debt" and "Senior Debt Documents", means and includes Deutsche Financial
Services Company, the party executing this Agreement as Senior Creditor, and its
successors or assigns in title and any so-called "partici-pants" purchasing any
participating interests or so-called "participants" in any of the rights, title
or interest of Deutsche Financial Services Company under any of the Senior Debt
Documents or in relation to any of the Senior Debt.
"Reorganization Securities" means securities issued by the Borrower (or any
-------------------------
successor) in exchange for all Subordinated Debt upon the effectiveness of a
plan of reorganization in bankruptcy of the Borrower that are either (a) equity
securities of the Borrower having no mandatory redemption, repurchase or
dividend obligations, and that are not convertible into or exchangeable for any
securi-ties having mandatory payment, redemption, repurchase or dividend
obligations or (b) debt securities of the Borrower the payment of which is
subordinated, at least to the extent provided in this Agreement with respect to
the Subordinated Debt, prior to the Payment in Full of the Senior Debt, provided
--------
that no class of Senior Debt is impaired (within the meaning of Section 1124 of
Title 11 of the United States Code) by such plan of reorganization.
"Senior Creditor" has the meaning specified in the introduc-tory paragraph
----------------
hereto.
"Senior Debt" means all indebtedness and other obligations of the Borrower,
-----------
contingent or otherwise, to the Senior Creditor, now or hereafter existing,
under or with respect to:
-3-
<PAGE>
(a) Extension of Credit by the Senior Creditor under the Senior
Debt Documents in an aggregate outstanding principal amount not exceeding One
Hundred Twenty Million Dollars ($120,000,000.00).
(b) interest (including interest accruing at the contract rate
after the commencement of any Bankruptcy or Insolvency Proceeding, whether or
not such interest is an allowed claim in such proceeding) on Extensions of
Credit described in clause (a) of this definition and on any Permitted Increase
----------
described in clause (c) below, and fees, costs, expenses, indemni-ties,
-----------
reimbursements and other amounts owing to the Senior Creditor on Extensions of
Credit described in clause (a) of this definition; and
(c) any Permitted Increase.
"Senior Debt Documents" means, collectively, (a) the Senior Loan Agreement
----------------------
and (b) the Senior Note (subject always to the provisions of the defined term
------- ------
"Senior Debt") and each other Instrument executed in connection with or
evidencing, governing, guaranteeing or securing any indebtedness under any such
document or any Permitted Increase, all as the same may be amended, modified or
supplemented pursuant to the terms thereof in accordance with the provisions of
this Agreement.
"Senior Loan" has the meaning specified in the first paragraph of the
------------
Recitals hereto.
"Senior Loan Agreement" has the meaning specified in the first paragraph of
---------------------
the Recitals hereto.
--------
"Standstill Event" means the occurrence of any one or more of the Events of
---------------- ---------
Default under the Acquisition Note.
- -------
"Standstill Event Notice" shall mean the date the Subordinated Creditor
-------------------------
shall have provided written notice of such Standstill Event to the Senior
Creditor and Borrower.
"Standstill Period" means, in relation to any Standstill Event, the period
------------------
beginning on the date the Standstill Event in relation to such Standstill Period
shall have occurred and ending on the date determined pursuant to Section
3.1(a).
"Subordinated Creditor" has the meaning specified in the introductory
----------------------
paragraph hereto or any holder of the Acquisition Note.
"Subordinated Debt" means all indebtedness and other obliga-tions of the
------------------
Borrower, contingent or otherwise, now or hereafter existing, under or in
respect of the Acquisition Note, and interest (including interest accruing after
the occurrence of an Event of Default as defined in the Acquisition Note), fees,
costs, expenses, indemnities, reimbursements thereon and other amounts payable
in respect thereof (including any such obliga-tions to prepay, repurchase,
retire, redeem or acquire for value any such indebted-ness).
-4-
<PAGE>
"Subordinated Debt Documents" means, collectively, (a) the Acquisition Note
---------------------------
and (b) each Instrument now or hereafter executed in connection with or
evidencing, governing, guarantying or securing any indebtedness under any such
document.
"U.C.C." means the Uniform Commercial Code, as in effect from time to time
------
in the State of Missouri.
SECTION 1.2. Senior Loan Agreement. Unless otherwise defined herein or
---------------------
the context otherwise requires, terms used in this Agreement, including the
introductory paragraph and Recitals hereto, that are defined in the Senior Loan
--------
Agreement (as in effect on the date hereof), have the meanings given to such
terms in the Senior Loan Agreement (as in effect on the date hereof).
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or
-------------------
the context otherwise requires, terms for which meanings are provided in the
U.C.C. are used in this Agreement, including the introductory paragraph and
Recitals hereto, with such meanings.
----
SECTION 1.4. General Provisions Relating to Definitions. Terms for
---------------------------------------------
which meanings are defined in this Agreement shall apply equally to the singular
and plural forms of the terms defined. Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter forms.
The term "including" means including, without limiting the generality of any
description preceding such term. Except as otherwise expressly provided herein,
each reference herein to any Person shall include a reference to such Person's
successors in title and assigns or (as the case may be) his successors, assigns,
heirs, executors, administrators and other legal represen-tatives. Except as
otherwise expressly provided herein, references to any Instrument defined in
this Agreement refer to such Instrument as originally executed, or, if
subsequent-ly varied, replaced or supplemented from time to time, as so varied,
replaced or supplemented and in effect at the relevant time of reference
thereto.
ARTICLE 2
DEBT SUBORDINATION ARRANGEMENTS
SECTION 2.1. Agreement to Subordinate. The Borrower and the
--------------------------
Subordinated Creditor agree with and for the benefit of the Senior Creditor that
all Subordi-nated Debt is hereby expressly subordi-nated and made junior in
right of payment, to the extent and in the manner provided in this Agreement, to
the prior Payment in Full of all Senior Debt.
SECTION 2.2. Bankruptcy or Insolvency Proceeding. In the event of any
-----------------------------------
Bankruptcy or Insolvency Proceeding:
(a) The Senior Creditor shall first be entitled to receive Payment
in Full of all Senior Debt before the Subordi-nated Creditor shall be entitled
to receive any payment or distribu-tion on account of Subordinated Debt (other
than distributions in the form of Reorganization Securities); and
-5-
<PAGE>
(b) the Senior Creditor shall be entitled to receive (until
Payment in Full of all Senior Debt) any payment or distribution on account of
Subordinated Debt (other than distributions in the form of Reorganization
Securities) which may be payable or deliverable to the Subordinated Creditor
(including any such payment or distribution payable or deliverable by virtue of
the provisions of, or any security for, any Instrument governing indebtedness
which is subordi-nate and junior in right of payment to the Subordinated Debt).
SECTION 2.3. Delivery of Prohibited Payments or Distribu-tions on
---------------------------------------------------------
Account of Subor-dinated Debt to Senior Creditor. If any Payment or
-------------------------------------------------
Distribution on Account of Subordinated Debt (other than distributions in the
form of Reorganization Securities or distributions authorized by Sections 2.6
and 2.8) is collected or received by the Subordinated Creditor, then such
payment or distribution shall be paid over or delivered forthwith to the Senior
Creditor.
SECTION 2.4. Subrogation. Upon payment in full in cash of all Senior
-----------
Debt, the Subordinated Creditor shall be immediately subrogated to the rights of
the Senior Creditor (to the extent of the payments and distributions previously
made to the Senior Creditor pursuant to the provisions of this Article 2) to
---------
receive payments and distributions of property of the Borrower applicable to
Senior Debt until all amounts owing on Subordinated Debt shall be paid in full.
No payments or distribu-tions applicable to Senior Debt which the Subordinated
Creditor shall receive by reason of its being subrogated to the rights of the
Senior Creditor pursuant to the provisions of this Section 2.4 shall, as between
-----------
the Borrower and its creditors, other than the Senior Creditor and the
Subordinated Creditor, be deemed to be a payment by the Borrower to or for the
account of Subordinated Debt; and, for the purposes of such subrogation, no
payments or distribu-tions to the Senior Creditor of any property to which the
Subordinated Creditor would be entitled except for the provisions of this
Agreement, and no payment pursuant to provisions of this Agreement to the Senior
Creditor by the Subordinated Creditor, shall, as between the Borrower and its
creditors, if any, other than the Senior Creditor and the Subordin-ated
Creditor, be deemed to be a payment by the Borrower to or for the account of
Senior Debt, it being understood that the provisions of this Agreement are
intended solely for the purpose of defining the relative rights of the
Subordinated Creditor, on the one hand, and the Senior Creditor, on the other
hand, and nothing contained in this Section 2.4 or elsewhere in this Agreement
------------
is intended to or shall impair, as between the Borrower and the Subordi-nated
Creditor, the obliga-tion of Borrower, which is absolute and unconditional, to
pay to the Subordinated Creditor, subject to the rights of the Senior Creditor
under this Agreement, the Subordinated Debt as and when the same shall become
due and payable in accordance with its terms.
-6-
<PAGE>
SECTION 2.5. Senior Defaults and Acceleration. In any circumstances
----------------------------------
where Section 2.2 does not apply, the Subordinated Creditor will not be entitled
to receive or retain any direct or indirect payment (except any payment
previously made by Borrower to the Subordinated Creditor which complied with
Sections 2.6 and 2.8) (in cash, property, by set-off or otherwise) from the
Borrower of or on account of any Acquisition Debt if:
(a) all or any part of the Senior Debt is due and payable at
stated maturity, by acceleration or otherwise; or
(b) at the time of making such payment and immediately after
giving effect thereto, there shall exist an Event of Default under the Senior
Loan Agreement.
SECTION 2.6. Permitted Payments. The Subordinated Creditor shall not
-------------------
be entitled to receive or retain any prepay-ment (in cash, property, by set-off
or otherwise) of or on account of the Acquisition Note until such time as the
Senior Debt is paid in full. Provided that there exists no Event of Default (or
event which would become and Event of Default with notice or the passage of
time) under the Senior Loan Agreement which remains uncured, the Subordinated
Creditor shall be entitled to receive and retain interest repayment and
principal repayment, under the Acquisition Debt in accordance with the terms of
the Acquisition Note.
SECTION 2.7. Turn-Over of Payments Received. If the Subordinated
---------------------------------
Creditor shall receive any payment with respect to the Acquisition Note which
the Subordinated Creditor is not permitted to receive and retain pursuant to
this Agreement, such payment shall be held in trust by the Subordinated Creditor
for the benefit of, and shall be paid over promptly on demand to the Senior
Creditor or its successors and assigns, as their respec-tive interests may
appear, for application to the payment of all Senior Debt remaining unpaid until
the same shall have been paid in full in cash, after giving effect to any
concurrent payment or distribution to the Senior Creditor. No such payments or
distributions to the Senior Creditor or its successors and assigns shall be
deemed to discharge the Senior Debt until it is repaid in full.
SECTION 2.8. Permitted Payments; Right to Retain Payments.
-------------------------------------------------
Notwith-standing the foregoing, any payment in respect of the Acquisition Debt
made in compliance with the terms of this Agreement and received by the
Subordinated Creditor shall become its sole and absolute property and shall not
be subject to any payment over or any distribution to or claim by the Senior
Creditor or any other person, unless at the time of receipt of such payment (i)
an event specified in either Section 2.2, 2.5(a) or 2.5(b) shall have occurred
and be continuing and with respect to an event specified in Section 2.5(b) only,
the Senior Creditor shall have given Subordinated Creditor notice of such event
within sixty (60) days of the occurrence of such event of default. In the event
that the Subordinated Creditor receives any payment on the Subordinated Debt
made in compliance herewith, and Senior Creditor has not given any notice as
described above, such payment shall conclusively be determined to be a permitted
payment hereunder, otherwise, upon receipt of such notice within such sixty (60)
day period, Subordinated Creditor shall promptly remit such payment to Senior
Creditor for application in accordance with Section 2.3 hereof.
-7-
<PAGE>
SECTION 2.9. Borrower's Obligations Absolute. The provisions of this
--------------------------------
Agreement are solely for the purpose of defining the relative rights of Senior
Creditor as the holder of the Senior Debt, Borrower and the holder of the
Acquisition Note. Nothing herein shall impair, as between the Borrower and the
Senior Creditor, its successors or assigns, as the holder of any Senior Debt,
the obligations of the Borrower, which are uncondi-tional and absolute, to pay
to the holder thereof the Senior Debt, in accordance with the terms of the
Senior Loan Agreement. Nothing herein shall impair, as between the Borrower and
the Subordinated Creditor, the obligations of the Borrower which are
unconditional and absolute to pay Subordinated Creditor in accordance with the
terms of the Acquisition Note, subject to the terms of this Subordination
Agreement.
ARTICLE 3
LIMITATIONS ON CERTAIN ENFORCEMENT ACTIONS
SECTION 3.1. Imposition of Standstill Period.
-----------------------------------
(a) Each Standstill Period will commence on the date the
Standstill Event in relation to such Standstill Period shall have occurred and
will terminate upon the earliest to occur of (i) the date which is 180 days
after the later of (a) occurrence of an Event of Default as defined in the
Acquisition Note or (b) the giving of the Standstill Event Notice; (ii) the
date, after such Standstill Period shall have commenced, such Standstill Event
shall have been cured or waived or shall otherwise have ceased to exist; or
(iii) December 7, 2000.
(b) At any time during a Standstill Period, Borrower or Senior
Creditor may cause any Event of Default under the Acquisition Debt to be cured
and, in such event, the Subordinated Creditor shall not have any right to
accelerate the principal payment of the Acquisition Debt as relates to such
Event of Default that was cured.
SECTION 3.2. Limitations on Enforcement Actions. The Subordi-nated
-------------------------------------
Creditor will not take any Enforcement Action until such time as:
(a) any Standstill Period is no longer continuing; and
(b) the Subordinated Creditor shall have given to the Borrower and
the Senior Creditor not less than 30 days' prior written notice (an
"Enfor-cement Action Notice") of the intent of the Subordi-nated Creditor to
-----------------
take such Enforcement Action.
SECTION 3.3. Certain Notices. The Subordinated Creditor shall not take
---------------
any action of the kind described in the second sentence of the defined term
"Enforcement Action" until the Subordinated Creditor shall have given the Senior
Creditor at least two (2) days prior notice to the taking thereof.
-8-
<PAGE>
SECTION 3.4. Limitations on Commencement of Bankruptcy or Insolvency
---------------------------------------------------------
Proceeding. The Subordinated Creditor will not commence or institute, or join
- ----------
with any other Person or Persons in com-menc-ing or in-stituting, any Bankruptcy
or Insolvency Proceeding.
SECTION 3.5. Limitation on Remedies Upon Acceleration of Senior Debt.
--------------------------------------------------------
Notwithstanding any contrary provision of any Subordinated Debt Document, the
acceleration of any Senior Debt by the commencement of legal proceedings by the
Senior Creditor against the Borrower to enforce payment of any Senior Debt shall
entitle the Subordinated Creditor to accelerate Subordinated Debt or take other
Enforcement Action (subject to the applicable provisions of Section 2.3 of this
Agree-ment).
ARTICLE 4
WAIVERS
SECTION 4.1. Waivers of Notice, etc. The obligations of the
-------------------------
Subordinated Creditor under this Agreement, and the subordi-nation arrangements
contained herein, shall not be to any extent or in any way or manner whatsoever
impaired or otherwise affected by any of the following, whether or not the
Subordinated Creditor shall have had any notice or knowledge of any thereof:
(a) the dissolution, termination of existence, death, bankruptcy,
liquidation, insolvency, appointment of a receiver for all or any part of the
property of, assignment for the benefit of creditors by, or the commencement of
any Bankruptcy or Insolvency Proceeding by or against, the Borrower;
(b) the absorption, merger or consolidation of, or the
effectuation of any other change whatsoever in the name, membership,
constitution or place of formation of, the Borrower;
(c) any extension or postponement of the time for the payment of
any Senior Debt, the acceptance of any partial payment thereon, any and all
other indulgences whatsoever by the Senior Creditor in respect of any Senior
Debt, the taking, addition, substitution or release, in whole or in part, at any
time or times, of any collateral securing any Senior Debt, or the addition,
substitution or release, in whole or in part, of any Person or Persons primarily
or secondarily liable in respect of any Senior Debt;
(d) any action or delay in acting or failure to act on the part of
the Senior Creditor under any Senior Debt Docu-ments or in respect of the Senior
Debt or any collateral securing any Senior Debt or otherwise, including (i) any
action by the Senior Creditor to enforce any of its rights, remedies or claims
in respect of any collateral securing any Senior Debt, (ii) any failure by the
Senior Creditor strictly or diligently to assert any rights or to pursue any
remedies or claims against the Borrower or any other Person or Persons under any
of the Senior Debt Documents or provided by statute or at law or in equity,
(iii) any failure by the Senior Creditor to perfect or to preserve the
perfection or priority of any of its Liens securing any Senior Debt, or (iv) any
failure or refusal by the Senior Creditor to foreclose or to real-ize upon any
collateral securing any Senior Debt or to take any action to enforce any of its
rights, remedies or claims under any Senior Debt Document;
-9-
<PAGE>
(e) any modification or amendment of, or any sup-ple-ment or
addition to, any Senior Debt Document;
(f) any waiver, consent or other action or ac-qui-es-cence by the
Se-nior Creditor in respect of any default by the Borrower in its performance or
observance of or compliance with any term, covenant or condition contained in
any Senior Debt Document; or
(g) the declaration that any Senior Debt Document or any provision
thereof is null and void or illegal, invalid, unenforceable or inadmissible in
evidence; or the failure of any Senior Debt Document to be in full force and
effect.
The Subordinated Creditor hereby absolutely, uncondi-tionally and
irrevocably assents to and waives notice of any and all matters hereinbefore
specified in clauses (a) through (g),
------------ ---
ARTICLE 5
AGREEMENT OF SENIOR CREDITOR AND BORROWER
SECTION 5.1. Agreement of Senior Creditor to Provide Subordinated
---------------------------------------------------------
Creditor with Notice. Senior Creditor agrees to provide the Subordinated
- ----------------------
Creditor with notice of any and all written notice(s) of an Event of Default
that Senior Creditor has provided to the Borrower declaring an Event of Default
under the Senior Loan Documents within ten (10) business days of such fact. Such
notice shall be provided in writing to the disbursement agent at the following
address:
Access Technologies, Inc.
Attention: Mark Putman
5828 Shelby Oaks Drive
Memphis, Tennessee 38134
or at such other address as may be provided by the Subordinated Creditor to the
Senior Creditor; and
With a copy to: Caldwell D. Lowrance, Jr., Esq.
Baker, Donelson, Bearman and Caldwell
165 Madison Avenue, Suite 2000
Memphis, Tennessee 38103
Notwithstanding the agreement of Senior Creditor to deliver notices
pursuant to the terms above, Subordinated Creditor and Borrower hereby
acknowledge that the failure to delivery any such notice shall not (i) affect or
be deemed to be a waiver by Senior Creditor of any of the rights or remedies of
Senior Creditor under this Agreement or (ii) create any liability on behalf of
Senior Creditor with respect to such failure to Subordinated Creditor.
-10-
<PAGE>
ARTICLE 6
MISCELLANEOUS
SECTION 6.1. Amendments, Waivers, etc. The provisions of this
--------------------------
Agreement may from time to time be amended, modified or waived, if such
amendment, modification or waiver is in writing and consented to by the
Subordinated Creditor, Borrower and by the Senior Creditor. No failure or delay
on the part of any Person in exercising any power or right under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power or right preclude any other or further exercise thereof or the
exercise of any other power or right. No notice to or demand hereunder shall
entitle any Person to any notice or demand in similar or other circumstances,
unless otherwise required by this Agreement. The remedies herein provided are
cumulative and not exclusive of any other remedies provided at law or in equity.
No waiver or approval by a Person under this Agreement shall, except as may be
otherwise stated in such waiver or approval, be applicable to any subsequent
transac-tions. No waiver or approval hereunder shall require any similar or
dissimi-lar waiver or approval thereafter to be granted hereunder.
SECTION 6.2. Further Assurances. The Subordi-nated Creditor and the
-------------------
Borrower will, from time to time at its own expense, promptly execute and
deliver all such further Instru-ments, and take all such further action, as may
be reasonably necessary or appropriate, or as the Senior Creditor may reasonably
request, in order to carry out the intent of this Agreement.
SECTION 6.3. Specific Performance. Senior Creditor is hereby
---------------------
authorized to demand specific performance of this Agree-ment at any time when
the Subordinated Creditor shall have failed to comply with any of the provisions
of this Agreement applicable to them whether or not Borrower shall have complied
with any of the provisions hereof applicable to it, and the Subordinated
Creditor hereby irrevocably waives any defense based on the adequacy of a remedy
at law which might be asserted as a bar to such remedy of specific performance.
SECTION 6.4. Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdic-tion shall, as to such jurisdiction,
be ineffec-tive to the extent of such prohibition or unenforceabili-ty without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforce-ability of any such provision in any other jurisdiction.
SECTION 6.5. Enforcement by Senior Creditor. The Borrower and the
---------------------------------
Subordinated Creditor acknowl-edge and agree that their respective obliga-tions
hereun-der are, and are intend-ed to be, an inducement and con-sider-ation to
the Senior Creditor to acquire and con-tinue to hold, or to continue to hold,
the Senior Debt. The Senior Creditor shall be deemed con-clusively to have
relied upon the ob-ligations hereunder of the Borrower and the Subordinated
Creditor in acquiring and continuing to hold, or in continuing to hold, the
Senior Debt. The Senior Creditor is hereby made an obligee hereunder and may
enforce directly the obliga-tions of the Borrower and the Subordinated Credi-tor
contained herein. The Senior Creditor, by accepting the benefits of this
Agreement, is bound by the provi-sions hereof.
-11-
<PAGE>
SECTION 6.6. Continuing Agreement. This Agree-ment shall in all
---------------------
respects be a continuing agreement, and this Agree-ment and the agree-ments and
obligations of the Borrower and the Subordi-nated Creditor hereunder shall
remain in full force and effect until all Senior Debt is indefeasibly paid in
full or all Subordi-nated Debt is paid in full in compliance with this
Agree-ment.
SECTION 6.7. Successors and Assigns. This Agreement shall be binding
-----------------------
upon, and shall inure to the benefit of, the Borrower and the Senior Credi-tor
and the Subordinated Creditor and their respective successors in title and
assigns. The rights and ob-li-gations of the Subor-dinated Creditor under this
Agreement shall be assigned automatically to, and the term "Subordi-nated
Creditor" as used in this Agreement shall automatically include, any assignee or
successor of such Subordinated Creditor, and such as-sign-ee or successor shall
au-tomatically become a party to this Agreement as a Subordinated Creditor
without the need for the execution of any Instrument or the taking of any other
action. The Subordi-nated Creditor shall deliver a complete copy of this
Agreement to any potential assignee or succes-sor of the Subordi-nated Creditor
prior to the effectiveness of any such assignment. At the request of the
Senior Creditor, the Subordinated Creditor shall execute and deliver to the
Senior Creditor an instrument of acces-sion hereto.
SECTION 6.8. Notices. All notices and other communica-tions provided
-------
to a party hereunder shall (except as otherwise specifi-cally provided herein)
be in writing or by facsimile transmission and addressed or delivered to it at
its address desig-nated for notices set forth below its signature hereto; at the
addresses specified in Section 5.1 if notice is to the Subordinated Creditor; or
at such other address as may be designat-ed by such party in a notice to the
other parties. Any notice, if mailed and properly addressed with postage
prepaid, and any notice, if transmitted by facsimile transmission, shall be
deemed given when received.
SECTION 6.9. Entire Agreement. This Agreement consti-tutes the entire
----------------
agreement among the Borrower, the Senior Creditor and the Subordinated Creditor
with respect to the subject matter hereof and supersedes any prior or
contemp-oraneous agreements, represen-tations, warranties or understandings,
whether oral, written or implied, as to the subject matter of this Agreement.
SECTION 6.10. CHOICE OF LAW. THIS AGREEMENT HAS BEEN EXECUTED AND
---------------
DELIVERED IN THE STATE OF MISSOURI AND SHALL IN ALL RESPECTS BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF SUCH STATE APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
-12-
<PAGE>
SECTION 6.11. Service of Process. This Subordination Agreement shall
-------------------
be deemed made in the state in which the principal office of the Senior Creditor
is located, and all documents evidencing same, and all the rights and
obligations of the Subordinated Creditor and the Senior Creditor hereunder,
shall in any respects be governed by and construed in accordance with the laws
of the state in which the principal office of the Senior Creditor is located,
including all matters of construction, validity and performance. Without
limitation on the Senior Creditor's ability to exercise all its rights to
protect or enforce the Senior Loan and the Subordinated Obligations, the
Subordinated Creditor and the Senior Creditor agree that in any action or
proceeding commenced by or on behalf of the parties arising out of or relating
to this Subordination Agreement and/or any documents evidencing same, shall be
commenced and maintained exclusively in the court of applicable general
jurisdiction located in the federal district court of applicable general
jurisdiction located in the federal district in which the principal office of
the Senior Creditor is located or any other courts of applicable general
jurisdiction located in the district where the Senior Creditor is located. The
Subordinated Creditor and the Senior Creditor also agree that a summons and
complaint commencing an action or proceeding in any such courts by or on behalf
of such parties shall be properly served and shall confer personal jurisdiction
on a party to which said party consents, if (a) served personally or by
certified mail to the party at any of its addresses noted herein, or (b) as
otherwise provided under the laws of the state in which the principal office of
the Senior Creditor is located. The loan(s) or other financial accommodation(s)
is in part related to the aforesaid provisions on jurisdiction, which the Senior
Creditor deems a vital part of this subordination arrangement.
SECTION 6.12. Waiver of Jury Trial. To the extent not prohibited by
----------------------
Applicable Law which cannot be waived, each of the parties hereto waives, and
covenants that it will not assert (whether as plaintiff, defendant or
otherwise), any right to trial by jury in any forum in respect of any issue,
claim, demand, action or cause of action arising out of or based upon this
Agreement or the subject matter hereof, in each case whether now existing or
hereafter arising and whether in contract or tort or otherwise. Each of the
parties hereto acknowledges that the provisions of this Section 6.12 constitute
------------
a material inducement upon which the Senior Creditor is relying and will rely in
holding Senior Debt. Any party and the Senior Creditor may file an original
counterpart or a copy of this Section 6.12 with any court as written evidence of
------------
the consent of each of the parties hereto to the waiver of its right to trial by
jury.
SECTION 6.13. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same Instrument.
SECTION 6.14. Headings. The descriptive headings in this Agreement are
--------
inserted for convenience of reference only and shall not affect the meaning or
interpretation of this Agreement or any provision hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers as of the day and in the
year first above written.
-13-
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
By:______________________________
Title:___________________________
Address: _________________________
_________________________
Fax: _________________________
Attention: _________________________
_________________________
DEUTSCHE FINANCIAL SERVICES COMPANY
By:______________________________
Title:___________________________
Address: _________________________
_________________________
Fax: _________________________
Attention: _________________________
_________________________
ACCESS TECHNOLOGIES, SYSTEMS, INC.
By:______________________________
Title: President
Address: _________________________
_________________________
Fax: _________________________
Attention: _________________________
_________________________
-14-
<PAGE>
STATE OF OHIO )
: SS:
COUNTY OF HAMILTON )
On this ____ day of ______________, 19___, before me personally appeared
_______________________, to me known, who, being by me duly sworn, declared that
he is the _______________ of POMEROY COMPUTER RESOURCES, INC., a signatory of
the foregoing Subordination Agreement; and that, being duly authorized, he did
execute the foregoing Subordination Agreement on behalf of POMEROY COMPUTER
RESOURCES, INC.; and that the foregoing Subordination Agreement constitutes the
free act and deed of POMEROY COMPUTER RESOURCES, INC.
_________________________________
Notary Public
My Commission Expires:
STATE OF OHIO )
: SS:
COUNTY OF HAMILTON )
On this ____ day of ________, 1998, before me personally appeared
___________ ________, to me known, who, being by me duly sworn, declared that he
is the President of ACCESS TECHNOLOGIES, INC., a signatory of the foregoing
Subordination Agreement; and that, being duly authorized, he did execute the
foregoing Subordination Agreement on behalf of ACCESS TECHNOLOGIES, INC., and
that the foregoing Subordination Agreement constitutes the free act and deed of
ACCESS TECHNOLOGIES, INC.
________________________________
Notary Public
My Commission Expires:
-15-
<PAGE>
STATE OF ___________ )
: SS:
COUNTY OF __________ )
On this ____ day of _________, 1998, before me personally appeared
_______________, to me known, who, being by me duly sworn, declared that he is
the __________ of DEUTSCHE FINANCIAL SERVICES COMPANY, a signatory of the
foregoing Subordination Agreement; and that, being duly authorized, he did
execute the foregoing Subordination Agreement on behalf of DEUTSCHE FINANCIAL
SERVICES COMPANY; and that the foregoing Subordination Agreement constitutes the
free act and deed of DEUTSCHE FINANCIAL SERVICES COMPANY.
________________________________
Notary Public
My Commission Expires: __________
-16-
<PAGE>
SUBORDINATED PROMISSORY NOTE
$1,250,000.00 Cincinnati, Ohio
(to be adjusted as hereinafter set forth) December ___, 1998
1. FOR VALUE RECEIVED, POMEROY COMPUTER RESOURCES, INC., a Delaware
corporation (hereinafter, together with its successors in title and assigns,
called the "Borrower") does hereby absolutely and unconditionally promise to pay
to the order of ACCESS TECHNOLOGIES, INC., a Tennessee corporation ("Lender"),
the sum of One Million Two Hundred Fifty Thousand Dollars ($1,250,000.00) (as
may be adjusted in the manner hereinafter set forth), together with interest on
the outstanding principal balance from the date hereof, at the rate specified
below.
2. The initial face amount of this note ($1,250,000.00) shall be adjusted
downward by any decrease required by Sections 4.1(d) and/or 4.1(e) of the Asset
Purchase Agreement. Such adjustments and the manner in which they are to be
made shall be done in accordance with Sections 5.1 and 5.2, respectively, of the
Asset Purchase Agreement. If, prior to such adjustment, Borrower has made any
interest payment to Lender hereunder, the parties agree to adjust any prior
payments to equitably reflect the decrease made as a result of any adjustments
contained in Sections 4.1(d) and/or 4.1(e) of the Asset Purchase Agreement.
3. Interest shall accrue at the prime rate of Chase Manhattan Bank as of the
date of Closing. Interest on the unpaid principal balance of this note shall be
due and payable quarterly with the first interest payment due and payable ninety
(90) days from the date hereof and on the ____ day of each successive quarter
thereafter. Principal shall be paid in two (2) equal annual installments of Six
Hundred Twenty-Five Thousand Dollars ($625,000.00), as may be adjusted pursuant
to the provisions of paragraph 2, commencing on the first Anniversary Date of
this Note and continuing on the next successive Anniversary Date until paid in
full.
4. All payments received hereunder shall be applied first to interest and
then to principal. Subject to the Subordination Agreement, as defined below,
this Note may be prepaid, in whole or in part, at any time, without penalty.
5. This Note and all obligations of the Borrower hereunder are subordinated
and made junior in right of payment to the extent and in the manner provided in
the Subordination Agreement of even date herewith (the "Subordination
Agreement") between Deutsche Financial Services Company, the Lender and the
Borrower and no action may be taken by the Lender except in accordance with the
terms of such Subordination Agreement as long as it is in effect.
6. Upon the occurrence of an Event of Default, the entire principal amount
outstanding under this Note, and accrued interest thereon, shall at once become
due and payable, at the option of the Lender and the Lender shall have the
remedies set forth in the Asset Purchase Documents and Subordination Agreement.
During the continuance of any Event of Default, all principal evidenced by this
Note (whether for principal or otherwise) shall (to the extent permitted by
applicable law) bear interest at the annual rate of twelve percent (12%). The
unpaid interest accrued during the continuation of any Event of Default on the
indebtedness evidenced by this Note (whether for principal or otherwise) in
accordance with the foregoing terms of this paragraph shall become and be
absolutely due and payable by the Borrower to the Lender hereof on demand by the
Lender of this Note at any time. Interest will continue to accrue on all
indebtedness evidenced hereby until the Event of Default shall be cured or
otherwise remedied.
<PAGE>
7. This Note is issued pursuant and subject to the terms and conditions of
the Asset Purchase Agreement. This Note is subject to all terms and conditions
set forth in the Asset Purchase Documents, including, but not limited to, terms
of default and rights of acceleration, if any. Any holder of this Note is
subject to all claims and defenses which the Borrower could pursue against
Lender under the Asset Purchase Agreement.
8. When this Note becomes due, by acceleration or otherwise, the Lender may,
at its option, subject to the Subordination Agreement, demand, sue for, collect
or make any compromise or settlement it deems desirable with reference to
property held as security herefor. The failure to exercise any option, to
declare the maturity hereof, or to exercise any other rights under any of the
covenants or conditions contained in the Asset Purchase Documents shall not be
taken or deemed to be a waiver of the right to exercise such option or to
declare such maturity after any subsequent violation of any such covenants or
conditions. All remedies provided for herein upon any default by the Borrower
shall be cumulative and not exclusive.
9. Notwithstanding the above, pursuant to the Asset Purchase Agreement,
Lender made certain representations, warranties, covenants and agreements with
and to the Borrower. Lender agrees that if the Borrower is entitled to
indemnification from the Lender under the Asset Purchase Agreement or any other
of the Asset Purchase Documents, the amount of such indemnification due from
Lender may be set off against the amounts payable hereunder if permitted under
the Asset Purchase Agreement, being first applied to interest and the
withholding all or any part of payment due hereunder as a result of such a set
off shall not be considered an Event of Default hereunder. Lender agrees that
the amount to which the Borrower may be entitled to recover from Lender shall
not be limited by either the amount paid or due to be paid to Lender hereunder
or by the terms of this Note but shall be governed by the terms of the Asset
Purchase Documents.
10. The provisions of this Note and the obligations of the Borrower
hereunder shall in all respects be governed by and interpreted and determined in
accordance with the internal laws of the State of Tennessee.
11. The rights of the Lender hereunder are fully assignable and
transferrable, except that any assignment and/or transfer made to a competitor
of Borrower shall be made only with the prior written approval of Borrower,
which approval shall not be unreasonably withheld. A competitor of Borrower is
any individual or entity that engages in the leasing, servicing or selling of
computers, computer equipment or computer support solutions.
-2-
<PAGE>
12. The Borrower hereby unconditionally and irrevocably waives notice of
acceptance, presentment, notice of nonpayment (except as provided herein),
protest, notice of protest, suit and all other conditions precedent in
connection with the delivery, acceptance, collection and/or enforcement of this
Note.
13. Should all or any part of the indebtedness represented by this Note be
collected by action in law, or in bankruptcy, insolvency, receivership or other
court proceedings, or should this Note be placed in the hands of attorneys for
collection after the occurrence of an Event of Default, the Borrower hereby
promises to pay to the Lender of this Note, upon demand by the Lender hereof at
any time, in addition to principal and all (if any) other amounts payable on or
in respect of this Note or the indebtedness evidenced hereby, all court costs
and reasonable attorneys' fees and all other reasonable collection charges and
expenses incurred or sustained by the Lender of this Note.
14. If for any circumstances whatsoever, the fulfillment of any provision of
this Note involves transcending the limit of validity prescribed by any
applicable usury statute or any other applicable law with regard to obligations
of like character and amount, then the obligation to be fulfilled will be
reduced to the limit of such validity as provided in such statute of law, so
that in no event shall any exaction of interest be possible under this Note in
excess of the limit of such validity. In no event shall the Borrower be bound
to pay interest of more than the legal limit for the use, forbearance or
detention of money, and the right to demand any such excess is hereby expressly
waived by the Lender.
15. No delay or omission of the holder of this Note to exercise any right or
power arising from any default shall impair any such right or power or be
considered to be a waiver of any such default or any acquiescence therein, nor
shall the action or non-action of the holder in case of default on the part of
the Borrower impair any right or power resulting therefrom.
16. As used herein, the following terms shall have the following meanings,
respectively:
(a) "Anniversary Date" - December ____, 1999 and each December ___
thereafter.
(b) "Asset Purchase Agreement" - The Asset Purchase Agreement by and
between the Borrower and the Lender dated December ___, 1998.
(c) "Asset Purchase Documents" - The Asset Purchase Agreement and all
Exhibits thereto (except for any employment agreements and all noncompetition
agreements, other than the one provided by Lender) by and between the parties to
the Asset Purchase Agreement.
(d) "Event of Default" -
(i) The failure of Borrower to make any payment of principal or
interest due under this Note for a period of ten (10) days after receipt of
written notice from the Lender to the Borrower that such installment has not
been paid; or
-3-
<PAGE>
(ii) A default under the Senior Debt loan documentation that has
been declared in writing, remains uncured past any applicable cure period, and
results in the declared acceleration of the Senior Debt.
(e) "Senior Debt" - The Debt of the Borrower to Deutsche Financial
Services Company, as set forth in the Subordination Agreement.
WITNESSES: BORROWER
Pomeroy Computer Resources, Inc.
_____________________________
By: _____________________________
_____________________________ Its: _____________________________
THE OBLIGATION REPRESENTED BY THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A
SUBORDINATION AGREEMENT DATED DECEMBER ___, 1998 IN FAVOR OF DEUTSCHE FINANCIAL
SERVICES COMPANY, TO WHICH REFERENCE IS HEREBY MADE, RESTRICTING THE RIGHTS OF
THE MAKER OR DRAWER AND OF ANY HOLDER WITH RESPECT TO PAYMENTS ON ACCOUNT OF THE
PRINCIPAL AND INTEREST HEREOF.
-4-
<PAGE>
December ____, 1998
Mr. Dana Hushak
Corporate Trust Department
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Dear Dana:
Pursuant to an Asset Purchase Agreement by and between Pomeroy Computer
Resources, Inc. and Access Technologies, Inc., a Tennessee corporation, the
following number of shares of stock should be issued on January 4, 1999 and with
issue date as of such date from the authorized but previously unissued shares of
the common stock of Pomeroy Computer Resources, Inc. as follows:
Access Technologies, Inc. - ________ shares
Pursuant to the Asset Purchase Agreement, this corporation is entitled to
these shares on January 4, 1999.
For your information, the address of this corporation is as follows:
Access Technologies, Inc.
5828 Shelby Oaks Drive
Memphis, Tennessee 38134
Federal ID No. ____________
The stock to be issued is unregistered and should contain the stock legend
attached hereto as Exhibit A.
Should you have any questions regarding these instructions, please call me
at (606) 586-0600 or the Company's counsel, James H. Smith III, at Lindhorst &
Dreidame at 421-6630.
<PAGE>
Mr. Dana Hushak
April 2, 1999
Page 2
Many thanks for your cooperation on this matter.
Very truly yours,
POMEROY COMPUTER RESOURCES, INC.
Stephen Pomeroy
Chief Financial Officer
<PAGE>
Exhibit A
"The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"), or under
any applicable state securities laws, and may not be offered or resold unless
registered under the Act, any applicable state securities law, or unless, in the
opinion of counsel for the Investor, an exemption from registration is
available, the availability of which must be established to the satisfaction of
the Company."
<PAGE>
INVESTOR'S CERTIFICATE
The undersigned, Access Technologies, Inc. ("Investor"), a Tennessee
corporation, intends to acquire thirty-eight thousand eight hundred eighty-five
(38,885) shares of the common stock, par value $.01 (the "Securities") of
POMEROY COMPUTER RESOURCES, INC., a Delaware corporation (the "Company")
pursuant to the terms and conditions of an Asset Purchase Agreement entered into
between the Company and Investor dated the 9th day of December, 1998. The
Securities will be acquired by Investor from the Company upon the closing of the
transactions contemplated by the Asset Purchase Agreement.
In order to induce the Company to close the transactions contemplated by the
Asset Purchase Agreement and to induce the Company to issue the Securities,
Investor hereby certifies to the Company as follows:
1. Investor's full name and business address are as follows:
Name: Business Address:
----- ------------------
Access Technologies, Inc. 5828 Shelby Oaks Drive
Memphis, Tennessee 38134
2. Investor is purchasing the Securities in its own name and for its own
account and no other person has any interest in or right with respect to
the Securities, nor has it agreed to give any person such interest or right
in the future.
3. Investor is acquiring the Securities for investment purposes and not with a
view to or for sale in connection with any distribution of the Securities.
It recognizes that the Securities have not been registered under the
Securities Act of 1933, as amended (the "Act"), or qualified under the
securities laws of the State of Tennessee or any other state, and that any
disposition of the Securities is subject to restrictions imposed by federal
and state law, and that the certificates representing the Securities will
bear a restrictive legend to that effect. Investor also recognizes that it
cannot transfer or dispose of the Securities absent registration and
qualification or an available exemption from registration and
qualification. Investor represents that it is familiar with the provisions
of Rule 144 of the Rules and Regulations of the Securities and Exchange
Commission and that it understands that the Securities are "Restricted
Securities" as such term is defined in said Rule 144. The Investor
under-stands that the Tennessee Division of Securities has made no finding
or determination relating to the fairness for investment of the Securities
offered by the Company and that no such recommendation or endorsement will
be made.
4. Investor has not seen nor received any advertisement or general
solicitation with respect to the sale of the Securities.
-2-
<PAGE>
5. The total consideration to be paid by Investor to purchase the Securities
has a value of $750,000.00 and consists of a portion of the value of the
assets of Investor being sold to the Company in exchange for which the
Securities constitute a portion of the purchase price, all as more fully
specified in the Asset Purchase Agreement.
6. Investor represents by reason of the business and/or financial experience
of its directors, officers and shareholders, or by reason of the business
or financial experience of its professional advisor, who is unaffiliated
with and who is not compensated, directly or directly, by the Company or
any affiliate or selling agent of the Company that it is capable of
evaluating the merits and risks of this investment in the shares of the
Company and protecting its own interest in connection with the investment.
Description of Business Experience of Board of Directors and Shareholders:
PRESIDENT AND SHAREHOLDERS HAVE BEEN IN THE INDUSTRY FOR __ YEARS, HAVE
ACQUIRED A COMPUTER SERVICE COMPANY AND HAVE ACTIVELY INVESTED IN STOCKS OF
PUBLIC COMPANY'S FOR _____ YEARS.
_____ Check if a Professional Advisor is used
Name and Address of Professional Advisor: _____________________________
___________________________________________________________________________
___________________________________________________________________________
Describe business or experience of Professional Advisor:
___________________________________________________________________________
___________________________________________________________________________
7. Investor acknowledges that during the course of the negotiation of the
Asset Purchase Agreement, and before completing the acquisition of the
Securities, it has been provided with financial and other written
information about the Company. Investor, its officers, directors and
shareholders have read the Asset Purchase Agreement, reviewed it with
counsel and been given the opportunity by the Company to obtain any
information and ask any questions concerning the Company, the Securities
and its investment that it or they have felt necessary, and to the extent
that they have availed themselves of that opportunity, have received
satisfactory information and answers. If Investor has requested any
additional information that the Company possessed or could acquire without
unreasonable effort or expense and that was necessary to verify the
accuracy of the financial and other written information furnished to it by
the Company, that additional information was provided to it and was
satisfactory. In reaching the decision to sell substantially all of its
operating assets and to receive as partial consideration therefor the
Securities, Investor, its officers, directors and shareholders have
carefully evaluated Investor's financial resources and investment position
and the risks associated with this investment, and Investor acknowledges
that it is able to bear the economic risks of this investment. By electing
to make this investment, Investor realizes that it may lose its entire
investment. Investor fully acknowledges that its financial condition is
such that it is not under any present necessity or constraint to dispose of
the Securities to satisfy any existing or contemplated debt or undertaking.
8. Investor understands that the Company will instruct its transfer agent and
registrar not to transfer all or any portion of the Securities to any other
person, firm or entity, or to perform any registration unless the transfer
is pursuant to a registration statement which is effective under the Act or
an available exemption from the registration requirements of the Act.
Investor hereby agrees that the following legend shall be placed on the
face or back of all certificates representing the Securities:
"The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"), or
under any applicable state securities laws, and may not be offered or
resold unless registered under the Act, and any applicable state securities
law, or unless, in the opinion of counsel for the Investor, an exemption
from registration is available, the availability of which must be
established to the satisfaction of the Company."
9. Investor represents that (a) it is a corporation duly organized and validly
existing under the laws of the State of Tennessee and (b) eighty-eight
percent (88%) of its outstanding stock is owned by Mark V. Putman, Paul
Bishop and David Barthel.
IN WITNESS WHEREOF, the undersigned has executed this Investor's Certificate
this ____ day of December, 1998.
ACCESS TECHNOLOGIES, INC.
By: ________________________________
President
Taxpayer Identification No.: ____________
-3-
<PAGE>
December ___, 1998
Mr. David B. Pomeroy
Pomeroy Computer Resources, Inc.
1020 Petersburg Road
Hebron, Kentucky 41048
Dear Dave:
Deutsche Financial Services Company hereby gives its consent to the
purchase by Pomeroy Computer Resources, Inc. of substantially all the operating
assets of Access Technologies, Inc., a Tennessee corporation, relating to its
computer service and support solutions business for the sum of $9,000,000.00, as
such amount may be adjusted upward or downward as set forth in the Asset
Purchase Agreement, plus the assumption of liabilities as set forth in the
Agreement and to the entering into of Employment Agreements with Mark V. Putman,
Paul Bishop, Greg Livingston and Phillip Qualls.
Sincerely,
DEUTSCHE FINANCIAL SERVICES COMPANY
Michael Scott
<PAGE>
SUBLEASE AGREEMENT
This Sublease Agreement made and entered into this ____ day of December,
1998, by and between Access Technologies, Inc., a Tennessee corporation (the
Sublandlord ) and Pomeroy Computer Resources, Inc., a Delaware, a Delaware
corporation (the Subtenant).
W I T N E S S E T H :
WHEREAS, ______________, a ______________________ (the Landlord) as
landlord, and Sublandlord, as tenant, entered into a ___________________ dated
_______________________ (the Master Lease), a copy of which is attached hereto
as Exhibit A; and
WHEREAS, the Master Lease was amended by a letter amendment, dated
_____________________ (the Amendment), a copy of which is attached hereto as
Exhibit B; and
WHEREAS, Subtenant wishes to sublease the property described in the Master
Lease (the Premises).
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties agree as follows:
1. Premises. Subject to the terms and conditions of this Sublease,
--------
Sublandlord hereby leases to Subtenant the Premises.
2. Term. The term of this Sublease shall commence on _______________,
----
199__. The term of this Sublease shall end on the date the Master Lease
expires. If the Master Lease is renewed pursuant to the Amendment, then
Subtenant shall have an option to renew this Sublease for an additional term of
____ (__) years, provided that written notice exercising such option is given to
Sublandlord at least three (3) months prior to the expiration of the initial
term of this Sublease. Sublandlord is under to obligation to renew the Master
Lease.
3. Rent. Subtenant agrees to pay during the term of this Sublease as
----
rent for the Premises the amount of rent and other charges to be paid to
Sublandlord pursuant to the Master Lease, as amended. Such rent and other
charges shall be paid to Sublandlord on or before the due date under the Master
Lease at the address set forth for Sublandlord in Paragraph 13 below.
4. Insurance and Waiver. Subtenant agrees to carry and maintain
----------------------
comprehensive general liability insurance in such amounts and in such form as is
required by the Master Lease. Such policies of insurance shall name Sublandlord
as an additional insured. Subtenant shall provide Sublandlord with proof of
insurance prior to commencement of this Sublease and each renewal date during
the term of this Sublease. In addition, Subtenant shall provide copies of the
policies of insurance within fifteen (15) days after they are obtained.
Subtenant is responsible for insuring its business and personal property located
on the Premises. Subtenant hereby waives and releases all claims against
Sublandlord for any loss, injury or damage to persons, property, or Subtenant's
business caused by theft, Act of God, public enemy, injunction, riot, strike,
war, court order, order of governmental body or authority, regulation, fire,
explosion, water, rain, other casualty, or any cause beyond Sublandlord's
control.
<PAGE>
5. Assignment or Subletting. Sublessee shall not assign this Sublease,
------------------------
nor sublet all or any portion of the Premises, without the prior written consent
of the Landlord, which consent shall not be unreasonably withheld.
6. Net Sublease. This Sublease is a net Sublease, and Sublandlord
-------------
shall not be required to make any expenditures whatsoever in connection with
this Sublease or to make any repairs to, or maintain, the Premises in any way
during the term of this Sublease, except as expressly provided herein.
Sublandlord will not be obligated to provide any services to Subtenant, and
Subtenant shall look solely to Landlord for the provision of any services
provided for in the Master Lease. Sublandlord makes no representation regarding
the availability or adequacy of any utility service.
7. Condition of Premises. Except as expressly provided herein,
-----------------------
Subtenant accepts the Premises in its present condition, and agrees that it is
leasing the Premises on an as is, where is basis.
8. Master Lease. This Sublease is subject to the terms and provisions
-------------
of the Master Lease. With respect to the Premises, Subtenant will comply with,
or cause to be complied with, the terms and conditions of the Master Lease in
order to avoid any default under the Master Lease.
9. Indemnification. Subtenant will indemnify and hold harmless
---------------
Sublandlord against and from any loss, liability, penalty, claim, cause of
action or expense (including reasonable attorney's fees and court costs)
incurred by or asserted against Sublandlord arising out of any default under the
Master Lease caused by Subtenant, any default under the Master Lease allowed by
Subtenant on the Premises, any default by Subtenant under this Sublease, or
otherwise related to the use of the Premises by Subtenant, unless caused by
Sublandlord's negligence or intentionally harmful acts. Subtenant's
indemnification obligations under this paragraph shall survive termination or
expiration of this Sublease.
10. Entire Agreement. All prior understandings and agreements between
-----------------
Sublandlord and Subtenant are merged within this Sublease. This Sublease may
not be changed in any manner other than by an agreement in writing and signed by
the party against whom enforcement of the change is sought.
-2-
<PAGE>
11. Waiver of Condition or Covenant. No waiver of any condition or
-----------------------------------
covenant of this Sublease by Sublandlord shall be deemed to imply or constitute
a further waiver by Sublandlord of any other condition or covenant under this
Sublease. The rights and remedies created by this Sublease are cumulative and
the use of one remedy shall not be taken to exclude or waive the right to the
use of another.
12. Peaceable Enjoyment. So long as Subtenant complies with the terms
--------------------
and conditions of this Sublease, Subtenant's right to peaceably enjoy the
Premises shall not be disturbed by Sublandlord.
13. Notices. Any notice or demand given pursuant to this Sublease
-------
shall be given in writing and shall be deemed given when personally delivered or
when deposited in the U.S. mail if sent by certified mail, return receipt
requested, postage prepaid, and addressed to the recipient as follows:
Sublandlord: Access Technologies, Inc.
5828 Shelby Oaks Drive
Memphis, Tennessee 38134
Subtenant: Pomeroy Computer Resources, Inc.
1020 Petersburg Road
Hebron, Kentucky 41048
Either party may change its address for notice by giving notice to the other
party pursuant to this paragraph.
14. Default and Remedies. If Subtenant (i) fails to pay rent when due
---------------------
or (ii) fails to observe or perform any other term, covenant or condition of
this Sublease to be observed or performed by Subtenant and such failure
continues for a period of fifteen (15) days after written notice of such failure
to Subtenant, the Sublandlord may, in addition to any other remedy available at
law or equity or otherwise provided for in this Sublease, pursue one or more of
the following remedies, without further notice:
(a) Terminate this Sublease;
(b) Retake possession of the Premises without terminating the
Sublease, and relet the Premises for the Sublessee's account on
such terms as Sublandlord deems appropriate; or
(c) Cure the default, and any amount reasonably expended by
Sublandlord to cure such default shall be deemed additional rent
under the terms of this Lease, which additional rent shall not be
paid to Landlord, but shall be paid to Sublandlord upon demand,
together with interest at the rate of ten per cent (10%) per
annum from the date of the expenditure by Sublandlord.
-3-
<PAGE>
If Sublandlord re-enters the Premises without terminating this Sublease,
Sublandlord may subsequently terminate the Sublease at any time at Sublandlord's
option.
15. Binding Effect. This Sublease shall be binding upon, and shall
---------------
inure to the benefit to Sublandlord, Subtenant and their successors in interest.
IN WITNESS WHEREOF, the parties have duly executed this Sublease on the
date first above written.
POMEROY COMPUTER ACCESS TECHNOLOGIES, INC.
RESOURCES, INC.
By: __________________________ By: ________________________________
Name: _______________________ Name: ______________________________
Title: _________________________ Title: ______________________________
-4-
<PAGE>
AGREEMENT
---------
This Agreement made and entered into this __________ day of December, 1998, by
and between DAVID BARTHEL (hereinafter referred to as "Owner") and POMEROY
COMPUTER RESOURCES, INC., a Delaware corporation (hereinafter referred to as
"Purchaser").
W I T N E S S E T H :
WHEREAS, simultaneously with the execution of this Agreement, Purchaser entered
into an Asset Purchase Agreement ("Asset Purchase Agreement") with ACCESS
TECHNOLOGIES, INC., a Tennessee corporation, ("Company), for the acquisition of
certain of its assets (the Business); and
WHEREAS, Owner owns Eleven percent (11%) of the outstanding stock of Company;
and
WHEREAS, Purchaser would not have entered into the Asset Purchase Agreement with
Company without the consent of Owner to enter into this covenant not to compete
agreement; and
WHEREAS, pursuant to Sections 7.1 and 14.2(d)(vii) of said Asset Purchase
Agreement, Owner agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and in consideration of the execution and closing of the Asset
Purchase Agreement, the parties hereto agree as follows:
1. As an inducement for Purchaser to enter into the Asset Purchase Agreement
with Company (11% of the stock of which is owned by Owner), Owner covenants
and agrees that for a period equal to the later of one (1) year from the
closing of the Asset Purchase Agreement of even date or one (1) year after
the termination of Owner's employment with Purchaser, Owner will not, or
with any other person, corporation or entity, directly or indi-rectly, by
stock or other ownership, investment, management, employment or otherwise,
or in any relation-ship whatsoever:
(a) Solicit, divert or take away or attempt to solicit, divert or take
away, any of the business, clients, customers or patronage of
Purchaser or any affiliate or subsidiary thereof relating to the
Business of Purchaser, as defined below; or
(b) Attempt to seek or cause any clients or customers of Purchaser or any
such affiliate or subsidiary relating thereto to refrain from
continuing their patronage of the Business of Purchaser; or
-2-
<PAGE>
(c) Engage in the Business of Purchaser in any state in which Purchaser or
its subsidiaries has an office during the term of this Agreement. A
list of the states in which Purchaser and its subsidiaries currently
transact business is attached hereto as Exhibit A; or
(d) Knowingly employ or engage, or attempt to employ or engage, in any
capacity, any person in the employ of the Purchaser or any affiliate
or subsidiary.
(e) Nothing in this Agreement shall prohibit Owner from owning or
purchasing less than five percent (5%) of the outstanding stock of any
publicly-traded company whose stock is traded on a nationally or
regionally recognized stock exchange or is quoted on NASDAQ or the OTC
bulletin board or from taking any action described in items 1(b)-(d)
above for the benefit of or on behalf of Purchaser or any of its
subsidiaries.
For purposes of this Section, the Business of Purchaser shall mean any
person, corporation, partnership or other legal entity engaged, directly or
indirectly, through subsidiaries or affiliates, in the following line of
business:
(i) Distributing of computer hardware, software, peripheral devices, and
related products and services to other entities or persons engaged in
any manner in the business of the distribution, sale, resale or
servicing, whether at the wholesale or retail level, or leasing or
renting, of computer hardware, software, peripheral devices or related
products;
(ii) Sale or servicing, whether at the wholesale or retail level, or
leasing or renting, of computer hardware, software, peripheral devices
or related products;
(iii)Sale, servicing or supporting of microcomputer products and
microcomputer support solutions and computer integration products,
peripheral devices and related products, and the sale of networking
services; and
(iv) Any other business activity which can reasonably be determined to be
competitive with the principal business activity being engaged in by
Purchaser or any of its subsidiaries.
Owner has carefully read all the terms and conditions of this Paragraph 1
and has given careful consideration to the covenants and restrictions
imposed upon Owner herein, and agrees that the same are necessary for the
reasonable and proper protection of Owner's Business acquired by Purchaser
and have been separately bargained for and agrees that Purchaser has been
induced to enter into the Asset Purchase Agree-ment and pay the
consideration described in Paragraph 2 by the represen-tation of Owner that
he will abide by and be bound by each of the covenants and restrictions
-3-
<PAGE>
herein; and Owner agrees that Purchaser is entitled to injunctive relief in
the event of any breach of any covenant or restriction contained herein in
addition to all other remedies provided by law or equity. Owner hereby
acknowledges that each and every one of said covenants and restrictions is
reasonable with respect to the subject matter, the length of time and
geographic area embraced therein, and agrees that irrespec-tive of when or
in what manner this agreement may be terminated, said covenants and
restrictions shall be operative during the full period or periods
hereinbefore mentioned and throughout the area hereinbefore described.
The parties acknowledge that this Agreement, which Agreement is ancillary
to the main thrust of the Asset Purchase Agreement, is being entered into
to protect the legitimate business interests of Purchaser, including, but
not limited to, (i) trade secrets; (ii) valuable confidential business or
professional information that otherwise does not qualify as trade secrets;
(iii) substantial relationships with specific prospective or existing
customers or clients; (iv) client or customer good will associated with an
on-going business by way of trade name, trademark, or service mark, a
specific geographic location, or a specific marketing or trade area; and
(v) extraordinary or specialized training. In the event that any provision
or portion of Paragraph 1 shall for any reason be held invalid or
unenforceable, it is agreed that the same shall not affect the validity or
enforceability of any other provision of Paragraph 1 of this Agreement, but
the remaining pro-visions of Paragraph 1 of this Agreement shall continue
in force and effect; and that if such invalidity or unenforceability is due
to the reason-ableness of the line of business, time or geographical area
covered by certain covenants and restrictions contained in Paragraph 1,
said covenants and restrictions shall nevertheless be effective for such
line of business, period of time and for such area as may be deter-mined by
arbitration or by a Court of competent jurisdiction to be reasonable.
2. The consideration for Owner's covenant not to compete shall be One Dollar
($1.00) and other valuable consideration, including the consideration paid
by the Purchaser to Company pursuant to an Asset Purchase Agreement to
which Owner is a party of even date herewith.
3. The terms and conditions of this Agreement shall be binding upon the Owner
and Purchaser, and their successors, heirs and assigns.
4. This Agreement shall be construed in accordance with and governed by the
laws of the State of Tennessee.
IN WITNESS WHEREOF, the parties hereto have executed this Agree-ment on the day
and year first above written.
__________________________________
DAVID BARTHEL
POMEROY COMPUTER RESOURCES , INC.
By:________________________________
STEPHEN E. POMEROY, Chief Financial Officer
-4-
<PAGE>
EXHIBIT A
---------
STATES IN WHICH POMEROY
AND/OR ITS PARENT CORPORATION
AND/OR SUBSIDIARIES TRANSACT BUSINESS
1. Alabama
2. Arkansas
3. Florida
4. Georgia
5. Indiana
6. Illinois
7. Iowa
8. Kentucky
9. Mississippi
10. North Carolina
11. Ohio
12. Oklahoma
13. South Carolina
14. Tennessee
15. Texas
16. Virginia
17. West Virginia
<PAGE>
AGREEMENT
---------
This Agreement made and entered into this __________ day of December, 1998, by
and between PAUL BISHOP (hereinafter referred to as "Owner") and POMEROY
COMPUTER RESOURCES, INC., a Delaware corporation (hereinafter referred to as
"Purchaser").
W I T N E S S E T H :
WHEREAS, simultaneously with the execution of this Agreement, Purchaser entered
into an Asset Purchase Agreement ("Asset Purchase Agreement") with ACCESS
TECHNOLOGIES, INC., a Tennessee corporation, ("Company), for the acquisition of
certain of its assets (the Business); and
WHEREAS, Owner owns Thirty-Two and Thirteen Hundred percent (32.13%) of the
outstanding stock of Company; and
WHEREAS, Purchaser would not have entered into the Asset Purchase Agreement with
Company without the consent of Owner to enter into this covenant not to compete
agreement; and
WHEREAS, pursuant to Sections 7.1 and 14.2(d)(vii) of said Asset Purchase
Agreement, Owner agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and in consideration of the execution and closing of the Asset
Purchase Agreement, the parties hereto agree as follows:
1. As an inducement for Purchaser to enter into the Asset Purchase Agreement
with Company (32.13% of the stock of which is owned by Owner), Owner
covenants and agrees that for a period equal to the later of five (5) years
from the closing of the Asset Purchase Agreement of even date or one (1)
year after the termination of Owner's employment with Purchaser pursuant to
the terms of an Employment Agreement of even date, Owner will not, or with
any other person, corporation or entity, directly or indi-rectly, by stock
or other ownership, investment, management, employment or otherwise, or in
any relation-ship whatsoever:
(a) Solicit, divert or take away or attempt to solicit, divert or take
away, any of the business, clients, customers or patronage of
Purchaser or any affiliate or subsidiary thereof relating to the
Business of Purchaser, as defined below; or
(b) Attempt to seek or cause any clients or customers of Purchaser or any
such affiliate or subsidiary relating thereto to refrain from
continuing their patronage of the Business of Purchaser; or
<PAGE>
(c) Engage in the Business of Purchaser in any state in which Purchaser or
its subsidiaries has an office during the term of this Agreement. A
list of the states in which Purchaser and its subsidiaries currently
transact business is attached hereto as Exhibit A; or
(d) Knowingly employ or engage, or attempt to employ or engage, in any
capacity, any person in the employ of the Purchaser or any affiliate
or subsidiary.
(e) Nothing in this Agreement shall prohibit Owner from owning or
purchasing less than five percent (5%) of the outstanding stock of any
publicly-traded company whose stock is traded on a nationally or
regionally recognized stock exchange or is quoted on NASDAQ or the OTC
bulletin board or from taking any action described in items 1(b)-(d)
above for the benefit of or on behalf of Purchaser or any of its
subsidiaries.
For purposes of this Section, the Business of Purchaser shall mean any
person, corporation, partnership or other legal entity engaged, directly or
indirectly, through subsidiaries or affiliates, in the following line of
business:
(i) Distributing of computer hardware, software, peripheral devices, and
related products and services to other entities or persons engaged in
any manner in the business of the distribution, sale, resale or
servicing, whether at the wholesale or retail level, or leasing or
renting, of computer hardware, software, peripheral devices or related
products;
(ii) Sale or servicing, whether at the wholesale or retail level, or
leasing or renting, of computer hardware, software, peripheral devices
or related products;
(iii)Sale, servicing or supporting of microcomputer products and
microcomputer support solutions and computer integration products,
peripheral devices and related products, and the sale of networking
services; and
(iv) Any other business activity which can reasonably be determined to be
competitive with the principal business activity being engaged in by
Purchaser or any of its subsidiaries.
Owner has carefully read all the terms and conditions of this Paragraph 1
and has given careful consideration to the covenants and restrictions
imposed upon Owner herein, and agrees that the same are necessary for the
reasonable and proper protection of Owner's Business acquired by Purchaser
and have been separately bargained for and agrees that Purchaser has been
induced to enter into the Asset Purchase Agree-ment and pay the
consideration described in Paragraph 2 by the represen-tation of Owner that
he will abide by and be bound by each of the covenants and restrictions
-2-
<PAGE>
herein; and Owner agrees that Purchaser is entitled to injunctive relief in
the event of any breach of any covenant or restriction contained herein in
addition to all other remedies provided by law or equity. Owner hereby
acknowledges that each and every one of said covenants and restrictions is
reasonable with respect to the subject matter, the length of time and
geographic area embraced therein, and agrees that irrespec-tive of when or
in what manner this agreement may be terminated, said covenants and
restrictions shall be operative during the full period or periods
hereinbefore mentioned and throughout the area hereinbefore described.
The parties acknowledge that this Agreement, which Agreement is ancillary
to the main thrust of the Asset Purchase Agreement, is being entered into
to protect the legitimate business interests of Purchaser, including, but
not limited to, (i) trade secrets; (ii) valuable confidential business or
professional information that otherwise does not qualify as trade secrets;
(iii) substantial relationships with specific prospective or existing
customers or clients; (iv) client or customer good will associated with an
on-going business by way of trade name, trademark, or service mark, a
specific geographic location, or a specific marketing or trade area; and
(v) extraordinary or specialized training. In the event that any provision
or portion of Paragraph 1 shall for any reason be held invalid or
unenforceable, it is agreed that the same shall not affect the validity or
enforceability of any other provision of Paragraph 1 of this Agreement, but
the remaining pro-visions of Paragraph 1 of this Agreement shall continue
in force and effect; and that if such invalidity or unenforceability is due
to the reason-ableness of the line of business, time or geographical area
covered by certain covenants and restrictions contained in Paragraph 1,
said covenants and restrictions shall nevertheless be effective for such
line of business, period of time and for such area as may be deter-mined by
arbitration or by a Court of competent jurisdiction to be reasonable.
2. The consideration for Owner's covenant not to compete shall be One Dollar
($1.00) and other valuable consideration, including the consideration paid
by the Purchaser to Company pursuant to an Asset Purchase Agreement to
which Owner is a party of even date herewith.
3. The terms and conditions of this Agreement shall be binding upon the Owner
and Purchaser, and their successors, heirs and assigns.
4. This Agreement shall be construed in accordance with and governed by the
laws of the State of Tennessee.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agree-ment on the day
and year first above written.
__________________________________
PAUL BISHOP
POMEROY COMPUTER RESOURCES , INC.
By:________________________________
STEPHEN E. POMEROY, Chief Financial Officer
-4-
<PAGE>
EXHIBIT A
---------
STATES IN WHICH POMEROY
AND/OR ITS PARENT CORPORATION
AND/OR SUBSIDIARIES TRANSACT BUSINESS
1. Alabama
2. Arkansas
3. Florida
4. Georgia
5. Indiana
6. Illinois
7. Iowa
8. Kentucky
9. Mississippi
10. North Carolina
11. Ohio
12. Oklahoma
13. South Carolina
14. Tennessee
15. Texas
16. Virginia
17. West Virginia
<PAGE>
AGREEMENT
---------
This Agreement made and entered into this ___________ day of December, 1998, by
and between MARK V. PUTMAN (hereinafter referred to as "Owner") and POMEROY
COMPUTER RESOURCES, INC., a Delaware corporation (hereinafter referred to as
"Purchaser").
W I T N E S S E T H :
WHEREAS, simultaneously with the execution of this Agreement, Purchaser entered
into an Asset Purchase Agreement ("Asset Purchase Agreement") with ACCESS
TECHNOLOGIES, INC., a Tennessee corporation, ("Company), for the acquisition of
certain of its assets (the Business); and
WHEREAS, Owner owns Forty-Four and Eighty-Nine Hundred percent (44.89%) of the
outstanding stock of Company; and
WHEREAS, Purchaser would not have entered into the Asset Purchase Agreement with
Company without the consent of Owner to enter into this covenant not to compete
agreement; and
WHEREAS, pursuant to Sections 7.1 and 14.2(d)(vii) of said Asset Purchase
Agreement, Owner agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and in consideration of the execution and closing of the Asset
Purchase Agreement, the parties hereto agree as follows:
1. As an inducement for Purchaser to enter into the Asset Purchase Agreement
with Company (44.89% of the stock of which is owned by Owner), Owner covenants
and agrees that for a period equal to the later of five (5) years from the
closing of the Asset Purchase Agreement of even date or one (1) year after the
termination of Owner's employment with Purchaser pursuant to the terms of an
Employment Agreement of even date, Owner will not, or with any other person,
corporation or entity, directly or indi-rectly, by stock or other ownership,
investment, management, employment or otherwise, or in any relation-ship
whatsoever:
(a) Solicit, divert or take away or attempt to solicit, divert or take
away, any of the business, clients, customers or patronage of
Purchaser or any affiliate or subsidiary thereof relating to the
Business of Purchaser, as defined below; or
(b) Attempt to seek or cause any clients or customers of Purchaser or any
such affiliate or subsidiary relating thereto to refrain from
continuing their patronage of the Business of Purchaser; or
<PAGE>
(c) Engage in the Business of Purchaser in any state in which Purchaser or
its subsidiaries has an office during the term of this Agreement. A
list of the states in which Purchaser and its subsidiaries currently
transact business is attached hereto as Exhibit A; or
(d) Knowingly employ or engage, or attempt to employ or engage, in any
capacity, any person in the employ of the Purchaser or any affiliate
or subsidiary.
(e) Nothing in this Agreement shall prohibit Owner from owning or
purchasing less than five percent (5%) of the outstanding stock of any
publicly-traded company whose stock is traded on a nationally or
regionally recognized stock exchange or is quoted on NASDAQ or the OTC
bulletin board or from taking any action described in items 1(b)-(d)
above for the benefit of or on behalf of Purchaser or any of its
subsidiaries.
For purposes of this Section, the Business of Purchaser shall mean any
person, corporation, partnership or other legal entity engaged, directly or
indirectly, through subsidiaries or affiliates, in the following line of
business:
(i) Distributing of computer hardware, software, peripheral devices, and
related products and services to other entities or persons engaged in
any manner in the business of the distribution, sale, resale or
servicing, whether at the wholesale or retail level, or leasing or
renting, of computer hardware, software, peripheral devices or related
products;
(ii) Sale or servicing, whether at the wholesale or retail level, or
leasing or renting, of computer hardware, software, peripheral devices
or related products;
(iii)Sale, servicing or supporting of microcomputer products and
microcomputer support solutions and computer integration products,
peripheral devices and related products, and the sale of networking
services; and
(iv) Any other business activity which can reasonably be determined to be
competitive with the principal business activity being engaged in by
Purchaser or any of its subsidiaries.
Owner has carefully read all the terms and conditions of this Paragraph 1
and has given careful consideration to the covenants and restrictions
imposed upon Owner herein, and agrees that the same are necessary for the
reasonable and proper protection of Owner's Business acquired by Purchaser
and have been separately bargained for and agrees that Purchaser has been
induced to enter into the Asset Purchase Agree-ment and pay the
consideration described in Paragraph 2 by the represen-tation of Owner that
he will abide by and be bound by each of the covenants and restrictions
herein; and Owner agrees that Purchaser is entitled to injunctive relief in
-2-
<PAGE>
the event of any breach of any covenant or restriction contained herein in
addition to all other remedies provided by law or equity. Owner hereby
acknowledges that each and every one of said covenants and restrictions is
reasonable with respect to the subject matter, the length of time and
geographic area embraced therein, and agrees that irrespec-tive of when or
in what manner this agreement may be terminated, said covenants and
restrictions shall be operative during the full period or periods
hereinbefore mentioned and throughout the area hereinbefore described.
The parties acknowledge that this Agreement, which Agreement is ancillary
to the main thrust of the Asset Purchase Agreement, is being entered into
to protect the legitimate business interests of Purchaser, including, but
not limited to, (i) trade secrets; (ii) valuable confidential business or
professional information that otherwise does not qualify as trade secrets;
(iii) substantial relationships with specific prospective or existing
customers or clients; (iv) client or customer good will associated with an
on-going business by way of trade name, trademark, or service mark, a
specific geographic location, or a specific marketing or trade area; and
(v) extraordinary or specialized training. In the event that any provision
or portion of Paragraph 1 shall for any reason be held invalid or
unenforceable, it is agreed that the same shall not affect the validity or
enforceability of any other provision of Paragraph 1 of this Agreement, but
the remaining pro-visions of Paragraph 1 of this Agreement shall continue
in force and effect; and that if such invalidity or unenforceability is due
to the reason-ableness of the line of business, time or geographical area
covered by certain covenants and restrictions contained in Paragraph 1,
said covenants and restrictions shall nevertheless be effective for such
line of business, period of time and for such area as may be deter-mined by
arbitration or by a Court of competent jurisdiction to be reasonable.
2. The consideration for Owner's covenant not to compete shall be One Dollar
($1.00) and other valuable consideration, including the consideration paid by
the Purchaser to Company pursuant to an Asset Purchase Agreement to which Owner
is a party of even date herewith.
3. The terms and conditions of this Agreement shall be binding upon the
Owner and Purchaser, and their successors, heirs and assigns.
4. This Agreement shall be construed in accordance with and governed by the
laws of the State of Tennessee.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agree-ment on the day
and year first above written.
__________________________________
MARK V. PUTMAN
POMEROY COMPUTER RESOURCES , INC.
By:________________________________
STEPHEN E. POMEROY, Chief Financial Officer
-4-
<PAGE>
EXHIBIT A
---------
STATES IN WHICH POMEROY
AND/OR ITS PARENT CORPORATION
AND/OR SUBSIDIARIES TRANSACT BUSINESS
1. Alabama
2. Arkansas
3. Florida
4. Georgia
5. Indiana
6. Illinois
7. Iowa
8. Kentucky
9. Mississippi
10. North Carolina
11. Ohio
12. Oklahoma
13. South Carolina
14. Tennessee
15. Texas
16. Virginia
17. West Virginia
<PAGE>
AGREEMENT
---------
This Agreement made and entered into this ________ day of December, 1998, by and
between ACCESS TECHNOLOGIES, INC., a Tennessee corporation (hereinafter referred
to as "Seller") and POMEROY COMPUTER RESOURCES, INC., a Delaware corporation
(hereinafter referred to as "Purchaser").
W I T N E S S E T H :
WHEREAS, Seller is a full-service provider of a variety of computer service and
support solutions, including installation, training, set-up and consultation,
to large and medium size commercial, governmental and other professional
customers throughout Memphis, Tennessee and the Mid-South area of the United
States; and
WHEREAS, simultaneously with the execution of this Agreement, Seller and
Purchaser have entered into an Asset Purchase Agreement ("Asset Purchase
Agreement") whereby Seller has sold to Purchaser substantially all of the assets
of Seller relating to the Business; and
WHEREAS, the Purchaser would not have entered into the Asset Purchase Agreement
with Seller without the consent of Seller to enter into this Covenant Not to
Compete Agreement; and
WHEREAS, pursuant to Sections 7.1 and 14.2(d)(vii) of said Asset Purchase
Agreement, Seller agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and in consideration of the execution and closing of the Asset
Purchase Agreement, the parties hereto agree as follows:
1. In consideration of the payments to be made by Purchaser to Seller for
its assets, Seller covenants and agrees that for a period equal to five (5)
years from the closing of the Asset Purchase Agreement of even date, Seller will
not, or with any other person, corporation or entity, directly or indi-rectly,
by stock or other ownership, investment, management, employment or otherwise, or
in any relation-ship whatsoever:
(a) Solicit, divert or take away or attempt to solicit, divert or take
away, any of the business, clients, customers or patronage of
Purchaser or any affiliate or subsidiary thereof relating to the
Business of Purchaser, as defined below; or
(b) Attempt to seek or cause any clients or customers of Purchaser or any
such affiliate or subsidiary relating thereto to refrain from
continuing their patronage of the Business of Purchaser; or
<PAGE>
(c) Engage in the Business of Purchaser in any state in which Purchaser or
its subsidiaries has an office during the term of this Agreement. A
list of the states in which Purchaser and its subsidiaries currently
transact business is attached hereto as Exhibit A; or
(d) Knowingly employ or engage, or attempt to employ or engage, in any
capacity, any person in the employ of the Purchaser or any affiliate
or subsidiary.
(e) Nothing in this Agreement shall prohibit Seller from owning or
purchasing less than five percent (5%) of the outstanding stock of any
publicly-traded company whose stock is traded on a nationally or
regionally recognized stock exchange or is quoted on NASDAQ or the OTC
bulletin board or from taking any action described in items 1(b)-(d)
above for the benefit of or on behalf of Purchaser or any of its
subsidiaries.
For purposes of this Section, the Business of Purchaser shall mean any
person, corporation, partnership or other legal entity engaged, directly or
indirectly, through subsidiaries or affiliates, in the following line of
business:
(i) Distributing of computer hardware, software, peripheral devices,
and related products and services to other entities or persons
engaged in any manner in the business of the distribution, sale,
resale or servicing, whether at the wholesale or retail level, or
leasing or renting, of computer hardware, software, peripheral
devices or related products;
(ii) Sale or servicing, whether at the wholesale or retail level, or
leasing or renting, of computer hardware, software, peripheral
devices or related products;
(iii)Sale, servicing, or supporting of microcomputer products,
microcomputer support solutions and computer integration
products, peripheral devices and related products and the sale of
networking services; and
(iv) Any other business activity which can reasonably be determined to
be competitive with the principal business activity being engaged
in by Purchaser or any of its subsidiaries.
Seller has carefully read all the terms and conditions of this Paragraph 1
and has given careful consideration to the covenants and restrictions
imposed upon Seller herein, and agrees that the same are necessary for the
reasonable and proper protection of Seller's Business acquired by Purchaser
and have been separately bargained for and agrees that Purchaser has been
induced to enter into the Asset Purchase Agree-ment and pay the
consideration described in Paragraph 2 by the represen-tation of Seller
that it will abide by and be bound by each of the covenants and
restrictions herein; and Seller agrees that Purchaser is entitled to
injunctive relief in the event of any breach of any covenant or restriction
contained herein in addition to all other remedies provided by law or
equity. Seller hereby acknowledges that each and every one of said
covenants and restrictions is reasonable with respect to the subject
matter, the length of time and geographic area embraced therein, and agrees
that irrespec-tive of when or in what manner this agreement may be
terminated, said covenants and restrictions shall be operative during the
full period or periods hereinbefore mentioned and throughout the area
hereinbefore described.
-2-
<PAGE>
The parties acknowledge that this Agreement, which Agreement is ancillary
to the main thrust of the Asset Purchase Agreement, is being entered into
to protect the legitimate business interests of Purchaser, including, but
not limited to, (i) trade secrets; (ii) valuable confidential business or
professional information that otherwise does not qualify as trade secrets;
(iii) substantial relationships with specific prospective or existing
customers or clients; (iv) client or customer good will associated with an
on-going business by way of trade name, trademark, or service mark, a
specific geographic location, or a specific marketing or trade area; and
(v) extraordinary or specialized training. In the event that any provision
or portion of Paragraph 1 shall for any reason be held invalid or
unenforceable, it is agreed that the same shall not affect the validity or
enforceability of any other provision of Paragraph 1 of this Agreement, but
the remaining pro-visions of Paragraph 1 of this Agreement shall continue
in force and effect; and that if such invalidity or unenforceability is due
to the reason-ableness of the line of business, time or geographical area
covered by certain covenants and restrictions contained in Paragraph 1,
said covenants and restrictions shall nevertheless be effective for such
line of business, period of time and for such area as may be deter-mined by
arbitration or by a Court of competent jurisdiction to be reasonable.
2. The consideration for Seller's covenant not to compete shall be One Dollar
($1.00) and other valuable consideration, including the consideration paid
by the Purchaser to Seller pursuant to an Asset Purchase Agreement to which
Seller and Purchaser are parties of even date herewith.
3. The terms and conditions of this Agreement shall be binding upon the Seller
and Purchaser, and their successors, heirs and assigns.
4. This Agreement shall be construed in accordance with and governed by the
laws of the State of Tennessee.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agree-ment on the day
and year first above written.
SELLER:
------
ACCESS TECHNOLOGIES, INC.
By: __________________________________
President
PURCHASER:
---------
POMEROY COMPUTER RESOURCES, INC.
By: ___________________________________
Stephen E. Pomeroy, Chief Financial Officer
-4-
<PAGE>
EXHIBIT A
----------
STATES IN WHICH POMEROY
AND/OR ITS PARENT CORPORATION
AND/OR SUBSIDIARIES TRANSACT BUSINESS
1. Alabama
2. Arkansas
3. Florida
4. Georgia
5. Indiana
6. Illinois
7. Iowa
8. Kentucky
9. Mississippi
10. North Carolina
11. Ohio
12. Oklahoma
13. South Carolina
14. Tennessee
15. Texas
16. Virginia
17. West Virginia
-5-
<PAGE>
AGREEMENT
---------
This Agreement made and entered into this ____ day of December, 1998, by and
between GREGORY LIVINGSTON (hereinafter referred to as "Owner") and POMEROY
COMPUTER RESOURCES, INC., a Delaware corporation (hereinafter referred to as
"Purchaser").
W I T N E S S E T H :
WHEREAS, simultaneously with the execution of this Agreement, Purchaser entered
into an Asset Purchase Agreement ("Asset Purchase Agreement") with ACCESS
TECHNOLOGIES, INC., a Tennessee corporation, ("Company), for the acquisition of
certain of its assets (the Business); and
WHEREAS, Owner owns Two and 06/100 percent (2.06%) of the outstanding stock of
Company; and
WHEREAS, Purchaser would not have entered into the Asset Purchase Agreement with
Company without the consent of Owner to enter into this covenant not to compete
agreement; and
WHEREAS, pursuant to Sections 7.1 and 14.2(d)(vii) of said Asset Purchase
Agreement, Owner agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and in consideration of the execution and closing of the Asset
Purchase Agreement, the parties hereto agree as follows:
1. As an inducement for Purchaser to enter into the Asset Purchase Agreement
with Company (2.06% of the stock of which is owned by Owner), Owner
covenants and agrees that for a period equal to the later of three (3)
years from the closing of the Asset Purchase Agreement of even date or one
(1) year after the termination of Owner's employment pursuant to the terms
of an Employment Agreement of even date, with Purchaser (except that if the
Employment Agreement is terminated for Good Reason as defined therein, then
the term of this Agreement shall be for a period equal to six months from
the date Owner terminates the Employment Agreement for Good Reason), Owner
will not, or with any other person, corporation or entity, directly or
indi-rectly, by stock or other ownership, investment, management,
employment or otherwise, or in any relation-ship whatsoever:
(a) Solicit, divert or take away or attempt to solicit, divert or take
away, any of the business, clients, customers or patronage of
Purchaser or any affiliate or subsidiary thereof relating to the
Business of Purchaser, as defined below; or
<PAGE>
(b) Attempt to seek or cause any clients or customers of Purchaser or any
such affiliate or subsidiary relating thereto to refrain from
continuing their patronage of the Business of Purchaser; or
(c) Engage in the Business of Purchaser in any state in which Purchaser or
its subsidiaries has an office during the term of this Agreement. A
list of the states in which Purchaser and its subsidiaries currently
transact business is attached hereto as Exhibit A; or
(d) Knowingly employ or engage, or attempt to employ or engage, in any
capacity, any person in the employ of the Purchaser or any affiliate
or subsidiary.
(e) Nothing in this Agreement shall prohibit Owner from owning or
purchasing less than five percent (5%) of the outstanding stock of any
publicly-traded company whose stock is traded on a nationally or
regionally recognized stock exchange or is quoted on NASDAQ or the OTC
bulletin board or from taking any action described in items 1(b)-(d)
above for the benefit of or on behalf of Purchaser or any of its
subsidiaries. Nothing herein shall preclude Owner from engaging in the
business of software development.
For purposes of this Section, the Business of Purchaser shall mean any
person, corporation, partnership or other legal entity engaged, directly or
indirectly, through subsidiaries or affiliates, in the following line of
business:
(i) Distributing of computer hardware, software, peripheral devices, and
related products and services to other entities or persons engaged in
any manner in the business of the distribution, sale, resale or
servicing, whether at the wholesale or retail level, or leasing or
renting, of computer hardware, software, peripheral devices or related
products;
(ii) Sale or servicing, whether at the wholesale or retail level, or
leasing or renting, of computer hardware, software, peripheral devices
or related products;
(iii)Sale, servicing or supporting of microcomputer products and
microcomputer support solutions and computer integration products,
peripheral devices and related products, and the sale of networking
services; and
(iv) Any other business activity which can reasonably be determined to be
competitive with the principal business activity being currently
engaged in by Purchaser or any of its subsidiaries.
Owner has carefully read all the terms and conditions of this Paragraph 1
and has given careful consideration to the covenants and restrictions
imposed upon Owner herein, and agrees that the same are necessary for the
reasonable and proper protection of Owner's Business acquired by Purchaser
and have been separately bargained for and agrees that Purchaser has been
induced to enter into the Asset Purchase Agree-ment and pay the
consideration described in Paragraph 2 by the represen-tation of Owner that
he will abide by and be bound by each of the covenants and restrictions
herein; and Owner agrees that Purchaser is entitled to injunctive relief in
the event of any breach of any covenant or restriction contained herein in
addition to all other remedies provided by law or equity. Owner hereby
acknowledges that each and every one of said covenants and restrictions is
reasonable with respect to the subject matter, the length of time and
geographic area embraced therein, and agrees that irrespec-tive of when or
in what manner this agreement may be terminated, said covenants and
restrictions shall be operative during the full period or periods
hereinbefore mentioned and throughout the area hereinbefore described.
The parties acknowledge that this Agreement, which Agreement is ancillary
to the main thrust of the Asset Purchase Agreement, is being entered into
to protect the legitimate business interests of Purchaser, including, but
not limited to, (i) trade secrets; (ii) valuable confidential business or
professional information that otherwise does not qualify as trade secrets;
(iii) substantial relationships with specific prospective or existing
customers or clients; (iv) client or customer good will associated with an
on-going business by way of trade name, trademark, or service mark, a
specific geographic location, or a specific marketing or trade area; and
(v) extraordinary or specialized training. In the event that any provision
or portion of Paragraph 1 shall for any reason be held invalid or
unenforceable, it is agreed that the same shall not affect the validity or
enforceability of any other provision of Paragraph 1 of this Agreement, but
the remaining pro-visions of Paragraph 1 of this Agreement shall continue
in force and effect; and that if such invalidity or unenforceability is due
to the reason-ableness of the line of business, time or geographical area
covered by certain covenants and restrictions contained in Paragraph 1,
said covenants and restrictions shall nevertheless be effective for such
line of business, period of time and for such area as may be deter-mined by
arbitration or by a Court of competent jurisdiction to be reasonable.
2. The consideration for Owner's covenant not to compete shall be One Dollar
($1.00) and other valuable consideration, including the consideration paid
by the Purchaser to Company pursuant to an Asset Purchase Agreement to
which Owner is a party of even date herewith.
3. The terms and conditions of this Agreement shall be binding upon the Owner
and Purchaser, and their successors, heirs and assigns.
4. This Agreement shall be construed in accordance with and governed by the
laws of the State of Tennessee.
IN WITNESS WHEREOF, the parties hereto have executed this Agree-ment on the day
and year first above written.
__________________________________
GREGORY LIVINGSTON
POMEROY COMPUTER RESOURCES , INC.
By:________________________________
STEPHEN E. POMEROY, Chief Financial Officer
<PAGE>
EXHIBIT A
---------
STATES IN WHICH POMEROY
AND/OR ITS PARENT CORPORATION
AND/OR SUBSIDIARIES TRANSACT BUSINESS
1. Alabama
2. Arkansas
3. Florida
4. Georgia
5. Indiana
6. Illinois
7. Iowa
8. Kentucky
9. Mississippi
10. North Carolina
11. Ohio
12. Oklahoma
13. South Carolina
14. Tennessee
15. Texas
16. Virginia
17. West Virginia
<PAGE>
AGREEMENT
---------
This Agreement made and entered into this __________ day of December, 1998, by
and between ROBERT HENDRY (hereinafter referred to as "Owner") and POMEROY
COMPUTER RESOURCES, INC., a Delaware corporation (hereinafter referred to as
"Purchaser").
W I T N E S S E T H :
WHEREAS, simultaneously with the execution of this Agreement, Purchaser entered
into an Asset Purchase Agreement ("Asset Purchase Agreement") with ACCESS
TECHNOLOGIES, INC., a Tennessee corporation, ("Company), for the acquisition of
certain of its assets (the Business); and
WHEREAS, Owner owns Three and Ninety-One Hundred percent (3.91%) of the
outstanding stock of Company; and
WHEREAS, Purchaser would not have entered into the Asset Purchase Agreement with
Company without the consent of Owner to enter into this covenant not to compete
agreement; and
WHEREAS, pursuant to Sections 7.1 and 14.2(d)(vii) of said Asset Purchase
Agreement, Owner agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and in consideration of the execution and closing of the Asset
Purchase Agreement, the parties hereto agree as follows:
1. As an inducement for Purchaser to enter into the Asset Purchase Agreement
with Company (3.91% of the stock of which is owned by Owner), Owner
covenants and agrees that for a period equal to the later of two (2) years
from the closing of the Asset Purchase Agreement of even date or two (2)
years after the termination of Owner's employment with Purchaser, Owner
will not, or with any other person, corporation or entity, directly or
indi-rectly, by stock or other ownership, investment, management,
employment or otherwise, or in any relation-ship whatsoever:
(a) Solicit, divert or take away or attempt to solicit, divert or take
away, any of the business, clients, customers or patronage of
Purchaser or any affiliate or subsidiary thereof relating to the
Business of Purchaser, as defined below; or
(b) Attempt to seek or cause any clients or customers of Purchaser or any
such affiliate or subsidiary relating thereto to refrain from
continuing their patronage of the Business of Purchaser; or
<PAGE>
(c) Engage in the Business of Purchaser in any state in which Purchaser or
its subsidiaries has an office during the term of this Agreement. A
list of the states in which Purchaser and its subsidiaries currently
transact business is attached hereto as Exhibit A; or
(d) Knowingly employ or engage, or attempt to employ or engage, in any
capacity, any person in the employ of the Purchaser or any affiliate
or subsidiary.
(e) Nothing in this Agreement shall prohibit Owner from owning or
purchasing less than five percent (5%) of the outstanding stock of any
publicly-traded company whose stock is traded on a nationally or
regionally recognized stock exchange or is quoted on NASDAQ or the OTC
bulletin board or from taking any action described in items 1(b)-(d)
above for the benefit of or on behalf of Purchaser or any of its
subsidiaries.
For purposes of this Section, the Business of Purchaser shall mean any
person, corporation, partnership or other legal entity engaged, directly or
indirectly, through subsidiaries or affiliates, in the following line of
business:
(i) Distributing of computer hardware, software, peripheral devices, and
related products and services to other entities or persons engaged in
any manner in the business of the distribution, sale, resale or
servicing, whether at the wholesale or retail level, or leasing or
renting, of computer hardware, software, peripheral devices or related
products;
(ii) Sale or servicing, whether at the wholesale or retail level, or
leasing or renting, of computer hardware, software, peripheral devices
or related products;
(iii)Sale, servicing or supporting of microcomputer products and
microcomputer support solutions and computer integration products,
peripheral devices and related products, and the sale of networking
services; and
(iv) Any other business activity which can reasonably be determined to be
competitive with the principal business activity being engaged in by
Purchaser or any of its subsidiaries.
Owner has carefully read all the terms and conditions of this Paragraph 1
and has given careful consideration to the covenants and restrictions
imposed upon Owner herein, and agrees that the same are necessary for the
reasonable and proper protection of Owner's Business acquired by Purchaser
and have been separately bargained for and agrees that Purchaser has been
induced to enter into the Asset Purchase Agree-ment and pay the
consideration described in Paragraph 2 by the represen-tation of Owner that
-2-
<PAGE>
he will abide by and be bound by each of the covenants and restrictions
herein; and Owner agrees that Purchaser is entitled to injunctive relief in
the event of any breach of any covenant or restriction contained herein in
addition to all other remedies provided by law or equity. Owner hereby
acknowledges that each and every one of said covenants and restrictions is
reasonable with respect to the subject matter, the length of time and
geographic area embraced therein, and agrees that irrespec-tive of when or
in what manner this agreement may be terminated, said covenants and
restrictions shall be operative during the full period or periods
hereinbefore mentioned and throughout the area hereinbefore described.
The parties acknowledge that this Agreement, which Agreement is ancillary
to the main thrust of the Asset Purchase Agreement, is being entered into
to protect the legitimate business interests of Purchaser, including, but
not limited to, (i) trade secrets; (ii) valuable confidential business or
professional information that otherwise does not qualify as trade secrets;
(iii) substantial relationships with specific prospective or existing
customers or clients; (iv) client or customer good will associated with an
on-going business by way of trade name, trademark, or service mark, a
specific geographic location, or a specific marketing or trade area; and
(v) extraordinary or specialized training. In the event that any provision
or portion of Paragraph 1 shall for any reason be held invalid or
unenforceable, it is agreed that the same shall not affect the validity or
enforceability of any other provision of Paragraph 1 of this Agreement, but
the remaining pro-visions of Paragraph 1 of this Agreement shall continue
in force and effect; and that if such invalidity or unenforceability is due
to the reason-ableness of the line of business, time or geographical area
covered by certain covenants and restrictions contained in Paragraph 1,
said covenants and restrictions shall nevertheless be effective for such
line of business, period of time and for such area as may be deter-mined by
arbitration or by a Court of competent jurisdiction to be reasonable.
2. The consideration for Owner's covenant not to compete shall be One Dollar
($1.00) and other valuable consideration, including the consideration paid
by the Purchaser to Company pursuant to an Asset Purchase Agreement to
which Owner is a party of even date herewith.
3. The terms and conditions of this Agreement shall be binding upon the Owner
and Purchaser, and their successors, heirs and assigns.
4. This Agreement shall be construed in accordance with and governed by the
laws of the State of Tennessee.
IN WITNESS WHEREOF, the parties hereto have executed this Agree-ment on the day
and year first above written.
-3-
<PAGE>
__________________________________
ROBERT HENDRY
POMEROY COMPUTER RESOURCES , INC.
By:________________________________
STEPHEN E. POMEROY, Chief Financial Officer
-4-
<PAGE>
EXHIBIT A
---------
STATES IN WHICH POMEROY
AND/OR ITS PARENT CORPORATION
AND/OR SUBSIDIARIES TRANSACT BUSINESS
1. Alabama
2. Arkansas
3. Florida
4. Georgia
5. Indiana
6. Illinois
7. Iowa
8. Kentucky
9. Mississippi
10. North Carolina
11. Ohio
12. Oklahoma
13. South Carolina
14. Tennessee
15. Texas
16. Virginia
17. West Virginia
<PAGE>
ASSIGNMENT AND ASSUMPTION OF LEASE
This Assignment of Lease ("Assignment") entered into as of the _____ day of
December, 1998, by and between ACCESS TECHNOLOGIES, INC., a Tennessee
corporation ("Assignor"), and POMEROY COMPUTER RESOURCES, INC., a Delaware
corporation ("Assignee").
WHEREAS, Assignor, as tenant, and Lorental Investments N.V. Corp. ("Landlord"),
as landlord, entered into a certain Lease Agreement (the "Lease") dated April
15, 1998, covering the real property (the "Property") located at 5828 Shelby
Oaks, Memphis, Tennessee; and
WHEREAS, Assignee has purchased substantially all of Assignors assets, and in
connection therewith, Assignor desires to assign to Assignee, and Assignee
desires to assume from Assignor, the Lease and all of the rights, benefits, and
privileges of the tenant thereunder.
NOW, THEREFORE, in consideration of the foregoing and the agreements and
covenants herein set forth and other good and valuable consideration paid by
Assignee to Assignor, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. ASSIGNMENT. Assignor hereby assigns unto Assignee all of the tenant's
----------
interest in the Lease, effective as of December ___, 1998 (the "Effective
Date").
2. REPRESENTATIONS. Assignor hereby warrants and covenants to Assignee that
---------------
(i) Assignor is the current holder of the tenant's interest under the
Lease, (ii) a true and correct copy of the Lease presently in force is
attached hereto as Exhibit "A," and (iii) to Assignor's knowledge, no state
of facts currently exists that, with the passage of time or the giving of a
written notice, or both, would constitute an event of default under the
terms of the Lease.
3. ASSUMPTION. Assignor shall not be responsible to the Landlord under the
----------
Lease for the discharge or performance of any duties or obligations to be
performed or discharged by the tenant thereunder after the Effective Date.
By accepting this assignment, and by its execution, Assignee hereby assumes
and agrees to perform all of the terms, covenants and conditions to be
performed by the tenant under the Lease, from and after the Effective Date.
4. MUTUAL INDEMNIFICATION. Assignee hereby agrees to indemnify and hold
-----------------------
harmless Assignor from and against any and all loss, cost or expense
(including, without limitation, reasonable attorneys' fees) resulting by
reason of Assignee's failure to perform any of the obligations of tenant
under the Lease after the Effective Date. Assignor hereby agrees to
indemnify and hold harmless Assignee from and against any and all loss,
cost or expense (including, without limitation, reasonable attorneys' fees)
resulting by reason of the failure of Assignor to perform any of the
obligations of the tenant under the Lease on or prior to the Effective
Date.
5. CONDITION PRECEDENT. This Assignment is contingent upon the written consent
-------------------
of the Landlord.
6. BINDING EFFECT. All of the covenants, terms and conditions set forth herein
--------------
shall be binding upon and shall inure to the benefit of the parties hereof
and their respective successors and assigns.
Page 1 of 3 Pages
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Assignment as of the date
first above written.
ASSIGNOR:
--------
ACCESS TECHNOLOGIES, INC.
BY:_________________________________
President
ASSIGNEE:
--------
POMEROY COMPUTER RESOURCES, INC.
BY:__________________________________
Stephen E. Pomeroy, Chief Financial
Officer
Page 2 of 3 Pages
<PAGE>
CONSENT
The undersigned hereby consents to the foregoing Assignment.
LORENTAL INVESTMENTS N.V. CORP.
BY:_____________________________________
Page 3 of 3 Pages
<PAGE>
CONFIDENTIAL
WORKSTATION PROCUREMENT AND SUPPORT SERVICES AGREEMENT
BY AND BETWEEN
THE PROCTER & GAMBLE COMPANY
AND
POMEROY COMPUTER RESOURCES
DATED JANUARY 26, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
1. BACKGROUND AND OBJECTIVES 1
1.1. Background 1
1.2. Objectives 1
1.3. Construction 2
2. DEFINITIONS 2
2.1. Certain Definitions 2
2.2. Other Terms 5
3. TERM 5
3.1. Term 5
3.2. Extension 5
4. SERVICES 5
4.1. Provision of Services. 5
4.2. Transition 6
4.3. Adjustments to Services. 7
4.4. New Services 7
4.5. Fulfilling Service Requirements 8
5. PROCUREMENT 9
5.1. Orders 9
5.2. Timing of Delivery. 9
5.3. Cancellation and Rescheduling of Orders 9
5.4. Termination of Orders. 10
5.5. Quantity 10
5.6. Acceptance 10
5.7. Incorrect Delivery 11
5.8. Order Tracking 11
5.9. Packing 11
5.10. Labeling 11
5.11. Testing 11
5.12. Shipping 11
5.13. Title and Risk of Loss 12
5.14. Quantity and Quality Requirements 12
6. VENDOR PERSONNEL 13
6.1. Key Personnel 13
6.2. Qualifications and Retention of Vendor Personnel 13
7. PERFORMANCE STANDARDS 14
7.1. Quality 14
7.2. Failure to Perform 14
7.3. Periodic Reviews 15
7.4. Measurement and Monitoring Tools 15
7.5. Quality Assurance 15
8. PROJECT AND CONTRACT MANAGEMENT 15
8.1. Procedures Manual 15
8.2. Change Control 16
8.3. Reports and Meetings 16
8.4. Subcontracting 17
i
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9. P&G RESPONSIBILITIES 18
9.1. Responsibilities 18
9.2. Saving Clause 18
10. EQUIPMENT, SOFTWARE AND FACILITIES 19
10.1. P&G Equipment 19
10.2. Software 19
10.3. P&G Facilities 19
11. CHARGES 20
11.1. Charges 20
11.2. Pass-Through Expenses 21
11.3. Incidental Expenses 22
11.4. Meet or Release 22
11.5. Favored Nations 22
11.6. Technology Changes and Technology Breakthrough 22
11.7. Spending with Historically Underutilized Businesses 23
12. INVOICING AND PAYMENT 23
12.1. Invoicing 23
12.2. Payment Due 24
12.3. Taxes 24
12.4. Accountability 25
12.5. Proration 25
12.6. Refundable Items 25
12.7. Off Set 25
12.8. Disputed Charges 25
13. AUDITS 26
13.1. Audit Rights 26
13.2. Audit Follow-ups 26
14. SAFEGUARDING OF DATA; CONFIDENTIALITY 26
14.1. Security Precautions 26
14.2. Confidentiality 27
15. INTELLECTUAL PROPERTY 29
16. REPRESENTATIONS AND WARRANTIES 29
16.1. Work Standards 29
16.2. Maintenance 30
16.3. Efficiency and Cost Effectiveness 30
16.4. Technology 30
16.5. Pass-Through Warranties 30
16.6. Non-Infringement 30
16.7. Viruses 30
16.8. Disabling Code 30
16.9. Authorization 31
16.10. Inducements 31
16.11. Year 2000 Warranty 31
17. INSURANCE 32
17.1. Insurance Responsibility 32
17.2. Insurance Requirements 33
ii
<PAGE>
18. INDEMNITIES 34
18.1. General Indemnities 34
18.2. Environmental Indemnity 34
18.3. Rework and Product Liability Indemnification 35
18.4. Infringement 35
18.5. Indemnification Procedures 35
18.6. Subrogation 36
19. LIABILITY 36
20. DISPUTE RESOLUTION 37
20.1. Informal Dispute Resolution 37
20.2. Litigation 37
20.3. Continued Performance 38
20.4. Governing Law and Language 38
21. TERMINATION 38
21.1. Breach of Terms 38
21.2. Vendor Bankruptcy 39
21.3. Changes in Vendor Ownership 39
21.4. Termination for Convenience 40
21.5. Extension of Termination Effective Date 40
21.6. Termination/Expiration Assistance 40
21.7. Survival 40
21.8. Equitable Remedies 41
22. GENERAL 41
22.1. Force Majeure 41
22.2. Agreement Precedence 42
22.3. Entire Agreement; Amendment 42
22.4. Compliance with Laws and Regulations 42
22.5. Environmental Compliance) 42
22.6. Customs Law Compliance 43
22.7. Notices 43
22.8. Notice of Labor Union Contract Expiration Date or Notice of Labor Disputes 44
22.9. Counterparts 44
22.10. Headings 44
22.11. Relationship of Parties 44
22.12. Severability 44
22.13. Waiver of Default; Cumulative Remedies 44
22.14. Survival 44
22.15. Media Releases 45
22.16. Service Marks 45
22.17. Third Party Beneficiaries 45
22.18. Third Party Services 45
22.19. Nonsolicitation 45
22.20. Covenant Against Pledging 45
22.21. Covenant of Good Faith 46
iii
<PAGE>
23. SUPPLEMENTAL TERMS 46
23.1. Third-Party Relationships 46
23.2. Overtime, Travel, and Motor Vehicle Operation 46
23.3. Chemical Safety Training 47
23.4. Security Training 47
23.5. Background Checks 47
23.6. Reference Checks and Competitor Ties 49
23.7. Competitor Relations 49
23.8. Controlled Substances 49
23.9. Confirmation of Background Checks and Checks for Controlled Substances 50
23.10. Security Inspections 51
23.11. Work Limitation 51
23.12. Quality 51
23.13. Bloodborne Pathogen Training 51
23.14. Credible Threats 51
23.15. P&G Site and Safety Rules 51
</TABLE>
iv
<PAGE>
TABLE OF STATEMENT OF WORK ATTACHMENTS
<TABLE>
<CAPTION>
ATTACHMENT DESCRIPTION
- ---------- ------------------------------------
<S> <C>
A P&G Sites
B-1 Procurement, CWDC and Disposal
B-2 Packaged Software Help Desk Services
B-3 Deskside and Server Support Services
C Transition
D Termination and Decommissioning
E Service Levels
F Special Projects
G Charges
H Overall Management
I Quality Processes
</TABLE>
<PAGE>
WORKSTATION PROCUREMENT AND SUPPORT SERVICES AGREEMENT
BY AND BETWEEN
THE PROCTER & GAMBLE COMPANY
AND
POMEROY COMPUTER RESOURCES
This Workstation Procurement and Support Services Agreement (the
"Agreement"), effective as of April 1, 1999 (the "Effective Date"), is entered
into by and between THE PROCTER & GAMBLE COMPANY, an Ohio corporation with
offices at One Procter & Gamble Plaza, Cincinnati, Ohio 45202, on behalf of
itself and its affiliates worldwide ("P&G"), and Pomeroy Computer Resources, a
Delaware Corporation with its principal place of business located at 1020
Petersburg Road, Hebron, Kentucky, 41048 ("Vendor"). As used in this Agreement,
"Party" means either P&G or Vendor, as appropriate, and "Parties" means P&G and
Vendor. The Parties agree that the following terms and conditions shall apply
to the Products and Services to be provided by Vendor under this Agreement.
1
<PAGE>
1. BACKGROUND AND OBJECTIVES
1.1. BACKGROUND
This Agreement is being made and entered into with reference to the
following:
(a) P&G desires that certain procurement and end-user support
services, activities and responsibilities currently performed by
or for P&G be performed and managed by an experienced, capable
and best-in-class vendor skilled in the performance and
management of such functions.
(b) Vendor is a large and well-known provider of technology services.
Vendor warrants that it has the skills, qualifications, and
experience necessary to perform and manage such services in an
efficient, cost-effective and controlled manner, with a high
degree of quality and responsiveness, and that it has performed
similar services for other customers. Vendor, and any of its
subcontractors performing Services (as defined below) under this
Agreement, warrants that it will constantly strive to improve the
efficiency, quality and effectiveness of the Services to be
provided to P&G under this Agreement.
(c) In reliance on these statements and representations, its own
independent analysis, and after examination and evaluation of
Vendor's and competitive proposals to P&G, P&G has selected
Vendor as its Vendor of choice to provide the Services described
herein during the term of this Agreement. This Agreement
documents the terms and conditions under which P&G agrees to
purchase, and Vendor agrees to provide, such Products and
Services.
1.2. OBJECTIVES
P&G and Vendor have agreed upon the following specific goals and
objectives for this Agreement:
(a) P&G will obtain, and Vendor will provide, for the charges
specified in this Agreement, the Services described herein, as
such Services evolve during the term of this Agreement and are
enhanced and supplemented as provided herein;
(b) P&G will realize significant cost savings during the term of this
Agreement, including cost savings from advances in
state-of-the-art technology, economies of scale and other
efficiencies arising from the use of Vendor as a service
provider;
(c) Vendor's provision of the Services will result in continuing
improvements in the accuracy, quality, completeness and
responsiveness of back office services;
(d) Creating a contractual relationship that is flexible and highly
responsive to the procurement and end-user support demands of
P&G's business;
(e) Ensuring that Vendor is P&G's single point-of-contact regarding
the Services provided by Vendor under this Agreement;
1
<PAGE>
(f) Providing a structure that enables P&G to better manage its
procurement and end-user support services costs for the Services
under this Agreement; and
(g) Prior to the expiration or termination for any reason of this
Agreement, or during the transition of P&G from this Agreement,
Vendor will provide best efforts in providing assistance to P&G
assuming, or transferring to another entity, full responsibility
for all of the Services then being provided by Vendor. It is the
intention of the Parties that any such transition of
responsibilities be planned and implemented in a manner that will
avoid disruptions in P&G's business operations.
1.3. CONSTRUCTION
The provisions of this Article 1 are intended to be a general
introduction to this Agreement and are not intended to expand the
scope of the Parties obligations under this Agreement or to alter the
plain meaning of the terms and conditions of this Agreement. However,
to the extent the terms and conditions of this Agreement do not
address a particular circumstance or are otherwise unclear or
ambiguous, such terms and conditions are to be interpreted and
construed so far as to give effect to the goals and objectives set
forth in this Section.
2. DEFINITIONS
2.1. CERTAIN DEFINITIONS
As used in this Agreement:
(a) "Applications Software" or "Applications" shall mean those
programs and programming, including the supporting documentation
and media, that provides business functionality to P&G end users.
As of the Effective Date, the Applications includes the packaged
and other software identified in Exhibit 1 to Attachment B-2 to
the Statement of Work. P&G may revise the identified Applications
from time-to-time with notice to Vendor.
(b) "Change Control Procedure" shall have the meaning given in
Section 8.2(c).
(c) "Confidential Information" shall have the meaning given in
Section 14.2(e).
(d) "CPU" shall have the meaning: a separate unit which runs an
operating system and includes a processor chip and memory.
Printers, detached monitors, and detached peripherals are not
CPU's.
(e) "CWDC" shall refer to the Vendor provided Cincinnati Workstation
Distribution Center located at 1050 Elijah Creek Road, Hebron, KY
41048. Vendor may change the location of the CWDC at its cost and
expense with P&G's prior approval. P&G shall not incur any
additional or incremental charges as a result of Vendor's
relocation of the CWDC.
(f) "Effective Date" shall mean the date set forth in the
introductory paragraph of this Agreement.
2
<PAGE>
(g) "Equipment" shall mean the computer equipment owned or leased by
P&G that Vendor shall provide the Services for under this
Agreement, including all such equipment existing immediately
prior to the Effective Date and all such equipment procured or
leased (either directly by P&G or through Vendor) following the
Effective Date. As of the Effective Date, the Equipment includes
servers, workstations, laptops, printers and associated
attachments, features, accessories, peripheral devices, and other
equipment.
(h) "Including" and its derivatives (such as "include" and
"includes") shall mean including without limitation. This term is
as defined, whether or not capitalized in this Agreement.
(i) "Key Vendor Personnel" shall have the meaning given in Section
6.1(a).
(j) "Losses" shall mean all losses, liabilities, damages and claims,
and all related costs and expenses (including reasonable legal
fees and disbursements and costs of investigation, litigation,
settlement, judgment, interest and penalties).
(k) "Out-of-Pocket Expenses" shall mean reasonable and actual
out-of-pocket expenses incurred by Vendor for equipment,
materials, supplies, or other Services provided to P&G under this
Agreement, but not including Vendor's overhead costs (or
allocations thereof), administrative expenses or other mark-ups.
(l) "P&G" shall have the meaning given in the introductory paragraph
of this Agreement.
(m) "P&G Contract Executive" shall have the meaning given in Section
9.1(a).
(n) "P&G Sites" shall refer to the list of P&G sites identified in
Attachment A of the Statement of Work. P&G may revise such list
of P&G Sites upon notice to Vendor.
(o) "P&G Data" shall mean all information, whether or not
Confidential Information, entered in Software or Equipment by or
on behalf of P&G and information derived from such information,
including information as stored in or processed through the
Equipment or Software.
(p) "Party" and "Parties" shall have the meanings given in the
introductory paragraph of this Agreement.
(q) "Pass-Through Expenses" shall mean the Vendor expenses listed in
Attachment G to the Statement of Work which P&G has agreed to pay
directly or reimburse Vendor for on an Out-of-Pocket Expenses
basis.
3
<PAGE>
(r) "Performance Standards" shall mean, individually and
collectively, the quantitative and qualitative performance
standards and commitments for the Services contained in this
Agreement, including Service Levels.
(s) "Procedures Manual" shall mean the standards and procedures
manual described in Section 8.1(a).
(t) "Product" means any Equipment, Software or other workplace
technology expense and consumable items ordered and delivered to
P&G by Vendor pursuant to this Agreement.
(u) "Order" shall have the meaning given in Section 5.1(a).
(v) "Services" shall have the meaning given in Section 4.1(a).
(w) "Service Levels" shall have the meaning given in Section 7.1.
x) "Software" shall mean Applications Software and Systems Software
unless a more specific reference is required.
(y) "Statement of Work" shall refer to the Statement of Work attached
to this Agreement, including the attachments thereto.
(z) "Systems Software" shall mean those programs and programming
(including the supporting documentation, media, on-line help
facilities and tutorials) that perform tasks basic to the
functioning of the Equipment and which are required to operate
the Applications Software.
(aa) "Term" shall have the meaning specified in Section 3.1
(bb) "Transition" shall have the meaning given in Section 4.2(a).
(cc) "Transition Plan" shall have the meaning given in Section 4.2(b).
(dd) "Transition Start Date" shall be the date when this Agreement has
been executed by both Parties.
(ee) "Vendor" shall have the meaning given in the introductory
paragraph of this Agreement.
(ff) "Vendor Project Executive" shall have the meaning given in
Section 6.1(c).
(gg) "Virus" shall mean: (i) program code, programming instruction or
set of instructions intentionally constructed with the ability to
damage, interfere with or otherwise adversely affect computer
programs, data files or operations; or (ii) other code typically
designated to be a virus.
4
<PAGE>
(hh) "Year 2000 Compliant" means the ability of a Product or Vendor
facility or systems to (i) correctly process, provide, interpret,
manipulate and receive date data within and between the twentieth
and twenty-first centuries, without causing logical or
mathematical inconsistencies, processing errors, loss of
functionality or performance, or other failures, and (ii)
interoperate with other technical systems (including but not
limited to hardware and software) having the characteristics
described in (i) and with date data of the twentieth and
twenty-first centuries. With respect to any data that is
generated or provided in conjunction with this Agreement, such
data shall contain such information or be so formatted as to
permit equipment or software with the characteristics described
in (i) of the foregoing sentence to correctly process, provide,
interpret, manipulate and receive such data within and between
the twentieth and twenty-first centuries, without causing logical
or mathematical inconsistencies, processing errors, loss of
functionality or performance, or other failures with respect to
such equipment or software.
2.2. OTHER TERMS
Other terms used in this Agreement are defined in the context in which
they are used and shall have the meanings there indicated.
3. TERM
3.1. TERM
Unless terminated earlier or extended in accordance with the
provisions of this Agreement, the term of this Agreement will commence
on the Effective Date and will expire on the third (3rd) anniversary
of the Effective Date (the "Term").
3.2. EXTENSION
Upon giving written notice to Vendor ninety (90) days prior to the
then-existing expiration date of this Agreement, P&G shall have the
right to extend the Term of this Agreement for up to one (1) year on
the terms and conditions then in effect, excluding those of Attachment
G-1, which P&G and Vendor agree to negotiate in good faith. P&G shall
have two (2) such extension options of up to one (1) year each.
4. SERVICES
4.1. PROVISION OF SERVICES.
(a) Commencing on the Effective Date, or as otherwise agreed in the
Transition Plan, Vendor shall provide the services, functions and
responsibilities described in this Agreement and the Statement of
Work, as they may evolve during the Term and as they may be
supplemented, enhanced, modified or replaced ("Services").
5
<PAGE>
(b) If any services, functions or responsibilities not specifically
described in this Agreement are required for the proper
performance and provision of the Services, they shall be deemed
to be implied by and included within the scope of the Services to
the same extent and in the same manner as if specifically
described in this Agreement. Except as otherwise expressly
provided in this Agreement, Vendor shall be responsible for
providing the facilities, personnel and other resources as
necessary to provide the Services.
4.2. TRANSITION
(a) Beginning on the Transition Start Date, and ending on the
Effective Date, or such other date as agreed upon in the
Transition Plan , Vendor shall plan, prepare for and conduct the
transition of the Services from P&G and its contractors in
accordance with the description of transition activities set
forth in Attachment C to the Statement of Work and the Transition
Plan (as defined in Section 4.2(b) below) (the "Transition").
Vendor's responsibilities with respect to the Transition include:
(i) maintaining without disruption the normal services provided
by the services, functions and responsibilities being
transitioned;
(ii) paying all costs incurred by Vendor with the Transition; and
(iii)otherwise performing such transition tasks as are necessary
to enable Vendor to provide the Services following the
Transition.
(b) The Transition shall be conducted in accordance with a written
plan which shall include: (i) a description of the services,
functions and responsibilities being transitioned; (ii) a
description of the methods and procedures, personnel and
organization Vendor will use to perform the Transition; (iii) a
schedule of Transition activities; (iv) a detailed description of
the respective roles and responsibilities of P&G, its contractors
and Vendor; and (v) such other information and planning as are
necessary to ensure that the Transition takes place on schedule
and without disruption to P&G operations (the "Transition Plan").
Vendor shall be responsible for revising and finalizing the
Transition Plan; provided that: (i) Vendor shall cooperate and
work closely with P&G and its contractors in developing the
Transition Plan (including incorporating P&G's reasonable
comments); and (ii) the Transition Plan shall be subject to
written approval by P&G.
(c) Vendor shall not initiate any stoppage of services, functions or
responsibilities being transitioned until Vendor's capabilities
to perform such service, function or responsibility is
demonstrated to P&G's satisfaction.
(d) P&G reserves the right to monitor and otherwise participate in
the Transition. Vendor shall immediately notify P&G if such
monitoring or participation has (or in Vendor's reasonable
opinion may) cause a problem or delay in the Transition and work
with P&G to prevent or circumvent such problem or delay.
6
<PAGE>
(e) If the Transition is not completed on or before the Scheduled
Transition Completion Date set forth in Section 4.2(a) above (or
such other date agreed by the Parties) due to the fault of
Vendor, then Vendor shall be responsible for reimbursing P&G for
any direct costs incurred by P&G until the transition is
complete.
4.3. ADJUSTMENTS TO SERVICES.
(a) In accordance with the terms of this Agreement, P&G may increase
or reduce its requirements for the Services during the Term.
(b) P&G has as of the Effective Date and thereafter will have the
right to perform itself, or retain third parties to perform, any
of the Services. To the extent P&G performs any of the Services
itself, or retains third parties to do so, Vendor shall cooperate
with P&G or any such third party, which cooperation shall
include: (i) providing access to the CWDC and any other
facilities being used to provide the Services (as necessary for
P&G or a third party to perform); and; (ii) providing such
information regarding the Services as a person with reasonable
commercial skills and expertise would find reasonably necessary
for P&G or a third party to perform its work. Third parties
retained by P&G shall, to the extent performing work at Vendor's
facilities, comply with Vendor's reasonable work standards,
methodologies and procedures. Vendor shall immediately notify P&G
if an act or omission of such a third party may cause a problem
or delay in providing the Services and shall work with P&G to
prevent or circumvent such problem or delay. In the event the
scope of Services being performed by Vendor is reduced pursuant
to this Section, the charges shall be equitably adjusted to
reflect projected cost savings to Vendor resulting from Vendor's
ceasing to provide the services no longer required.
(c) During the Term, Vendor shall provide the Services to such other
entities and additional sites as P&G designates from time to
time. For purposes of this Agreement, Services provided to these
entities shall be considered to be Services provided to P&G.
4.4. NEW SERVICES
In the event that P&G requests Vendor to perform functions that are
materially different from, and in addition to, the Services, the
Parties' obligations with respect to such functions shall be as
follows.
(a) If the performance of the additional functions would be reflected
in an increased volume of chargeable resource usage, and the
incremental resources and expenses required to perform the
additional functions would not be disproportionately greater than
the corresponding increase in the volume or composition of such
chargeable resource usage from performing such additional
functions, then the charge, if any, for such additional functions
shall be determined pursuant to Attachment G to the Statement of
Work and the other provisions of this Section, and the additional
functions shall then be considered "Services" and shall be
subject to the provisions of this Agreement.
7
<PAGE>
(b) If the incremental resources and expenses required to perform the
additional functions would be disproportionately greater than the
corresponding increase in the volume or composition of chargeable
resource usage from performing them, then prior to performing
such additional functions:
(i) Vendor shall quote to P&G a charge for such additional
functions, which may be based upon the required proportional
increase in applicable resources relative to the charges
under this Agreement. Such a quote shall, in any event, take
into account the existing and future volume of business
between P&G and Vendor.
(ii) P&G, upon receipt of such quote, may then elect to have
Vendor perform the additional functions, and the charges
under this Agreement shall be adjusted, if appropriate, to
reflect such functions. If P&G so elects, such services
shall then be deemed "Services" and shall be subject to the
provisions of this Agreement.
(iii)P&G may elect to solicit and receive bids from third
parties to perform such additional functions. If P&G elects
such third party services, Vendor shall cooperate with those
third parties.
(c) The Parties anticipate that the Services will evolve and be
supplemented, modified, enhanced or replaced over time to keep
pace with technological advancements and improvements in the
methods of delivering services, and the Parties acknowledge that
these will not be deemed to result in functions materially
different from and in addition to the Services.
(d) If P&G's request for materially different and additional services
pursuant to this Section includes a request for Vendor to
correspondingly reduce or eliminate Services it is providing,
then such services will be considered "Replacement Services." In
such event, the Parties shall determine the resources and
expenses required to provide the Replacement Services, including
implementation and on-going support, and the reduction in
resources and expenses related to the Services being replaced.
The net increase or decrease in resources and expenses will be
the basis on which Vendor shall quote a price to P&G for
Replacement Services.
4.5. FULFILLING SERVICE REQUIREMENTS
Should Vendor fail (due to causes within Vendor's control) to meet the
Service Levels or other mutually agreed upon schedule, Vendor shall
take all reasonable steps, including but not limited to, working extra
hours, shifts, or days to fulfill Vendor's obligations hereunder. All
costs for such effort will be at Vendor's expense. With respect to
Vendor's procurement obligations hereunder, Vendor may use alternate
shipping methods to expedite delivery to P&G to meet schedules to
which both Parties agree. In such cases, Vendor must receive P&G's
approval prior to the use of any carrier other than those on P&G's
approved carrier list. Additional shipping costs resulting from
expedited deliveries or use of alternate carriers will be at Vendor's
expense.
8
<PAGE>
5. PROCUREMENT
5.1. ORDERS
(a) All purchases of Products shall be made in writing or other P&G
approved electronic means (e.g., by a product order, AMEX order,
or other means under a blanket purchase order that may be issued
by P&G) (each, an "Order") issued by P&G to Vendor from time to
time pursuant to this Section, unless otherwise expressly agreed
by the Parties in writing. P&G will not be liable to Vendor for
any charges, additional or otherwise, for Products provided by
Vendor unless set forth in an Order, or otherwise mutually agreed
upon by the Parties in writing.
(b) Vendor agrees to provide and deliver, and P&G agrees to purchase
any Product that is specified by P&G in an Order that is accepted
by Vendor.
(c) Vendor shall be deemed to have accepted an Order on the next
business day for non-expedited Orders and within one hour for
expedited Orders following receipt of such Order if Vendor has
not notified P&G in writing or other P&G electronic means of its
rejection of the Order prior to such time.
(d) Estimates, forecasts or blanket purchase orders furnished by P&G
to Vendor shall not constitute Orders or commitments for
purchases.
(e) Orders placed under this Agreement may be made by means of mail
or fax, or other P&G approved electronic means (e.g., electronic
data interchange).
5.2. TIMING OF DELIVERY.
(a) Delivery dates for Products shall be firm. Vendor will deliver
Products strictly in accordance with the terms and conditions of
this Agreement and the Order.
(b) If Vendor discovers any potential delay that threatens the timely
delivery or the full delivery of Products with respect to an
Order, Vendor shall immediately notify P&G of such delay. If
requested by P&G, Vendor shall provide a written plan for
correction of such delay.
(c) If Vendor fails to make any delivery of a Product within the
Service Levels for the Order, P&G shall be entitled to terminate
the corresponding Order in accordance with the terms of this
Agreement.
5.3. CANCELLATION AND RESCHEDULING OF ORDERS
(a1) Except for CPU's P&G can cancel an Order at no cost or liability
anytime 3 days prior to the scheduled delivery date set forth in
the Order. Should P&G cancel any Order other than for cause
during the 3 day period prior to the scheduled delivery date, P&G
agrees to pay to Vendor cancellation charges equal to the lesser
of (i) Vendor's actual and reasonable costs associated with
restocking the Products ordered and (ii) 10 percent (10%) of the
Order price.
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(a2) For CPU's, P&G can cancel an order anytime until shipment from
manufacturer.
(b) P&G may change the "ship to" destination of any Order by
submitting notice to Vendor in writing at least 48 hours prior to
shipment. If such change is requested by P&G with less than 48
hours of notice prior to shipment, Vendor will use all reasonable
efforts to implement such change.
(c) P&G may reschedule any Order at no cost or liability at anytime
prior to actual shipment. If the new shipment date is within (10)
days of the scheduled shipment date, then Vendor shall arrange
and pay for all additional transportation and storage cost for
the Order. If the new shipment date is more than 10 days of the
scheduled shipment date, then such reasonable additional
transportation and storage costs incurred by Vendor, if any,
shall be payable by P&G.
5.4. TERMINATION OF ORDERS.
In the event that Vendor:
(a) fails to correct the failure of a Product to comply with a
representation, warranty or covenant as set forth in this
Agreement;
(b) fails to meet P&G's quantity requirements and quality as it
refers to acceptance testing requirements set forth in an Order;
(c) fails to achieve acceptance with respect to a Product; or
(d) fails to make delivery in a timely fashion as set forth in this
Agreement;
then P&G may, by giving written notice to Vendor, terminate the
corresponding Order and any other affected Orders, in whole or in
part, for cause as of a date specified in the notice of termination.
In such event, P&G may return any associated Products to Vendor, in
which case Vendor shall promptly refund to P&G all charges paid by P&G
to Vendor for such Products, and P&G shall have no further payment
obligations to Vendor with respect to such Products.
5.5. QUANTITY
P&G has no minimum purchase obligations under this Agreement.
5.6. ACCEPTANCE
Acceptance of CPU's that P&G has ordered from Vendor shall occur upon
delivery into the CWDC facility. Acceptance of CPU's drop shipped to
non-Greater Cincinnati Area sites shall occur upon delivery to the
location's receiving area and P&G has signed a receipt that CPUs have
been delivered properly. Acceptance of all other Products that P&G has
ordered from Vendor shall occur upon Vendor's delivery into the
interior of the P&G destination facility, and P&G has signed a receipt
that the applicable Products have been properly delivered.
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5.7. INCORRECT DELIVERY
(a) Early deliveries of Products may be refused due to space or
security considerations and returned or stored at Vendor's
expense and risk of loss.
(b) P&G assumes no liability for Products produced, processed,
rendered or shipped in excess of the amounts specified in any
Order submitted pursuant to this Agreement.
5.8. ORDER TRACKING
Vendor shall be responsible for tracking the delivery of all Products
from receipt of the corresponding Order until delivery of such
Products to the P&G-designated place of delivery. Vendor will provide
P&G with current, real-time status reports and information on Orders
and such other information and reports as reasonably requested by P&G
regarding Orders.
5.9. PACKING
All Products delivered to P&G pursuant to this Agreement shall be
preserved, packaged and packed by Vendor to ensure safe delivery to
their destinations without damages due to shipment.
5.10. LABELING
(a) Vendor will label each component of any Product, each container
and each set of packing documentation with bar-coded part and
serial numbers, asset identification information, and such other
information as directed by P&G.
(b) At P&G's option, Vendor will mark each shipping carton with (i) a
brief description of the contents and quantities of the Products
shipped within such shipping carton, and (ii) the address of the
delivery destination specified on the applicable Order.
5.11. TESTING
In accordance with the Procedures Manual, Vendor will test Products
shipped and installed to ensure that such Products meet the applicable
warranties and specifications.
5.12. SHIPPING
(a) Vendor will ship all Products to the delivery destination
specified by P&G in the corresponding Order. Vendor will (i) ship
all deliveries complete, and (ii) not ship any substitute item in
place of a Product specified in an Order, unless otherwise agreed
by P&G in writing.
(b) Unless otherwise instructed by P&G, Vendor will:
(i) Verify that all subordinate documents bear the correct
delivery or tracking number;
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(ii) Enclose a packing memorandum with each shipment and, when
more than one package is shipped, identify the one which
contains the memorandum;
(iii)Render invoices in duplicate or as otherwise specified by
P&G, showing the correct delivery or tracking number and
such other information as requested by P&G;
(iv) Render separate invoices for each shipment, whether or not a
complete delivery;
(v) Verify that bills of lading match corresponding shipping
invoices; and
(vi) Forward applicable bills of lading and shipping notices with
items shipped.
(c) All shipments will be F.O.B. to the interior of the P&G
destination facility, unless otherwise agreed in writing by P&G.
P&G will reimburse Vendor for Vendor's actual, reasonable
out-of-pocket freight and insurance costs on an Out-of-Pocket
Expense basis for Products shipped from the manufacturer to the
CWDC, if separately charged by the manufacturer, or the
manufacturer to P&G if dropped shipped to a P&G Site; provided,
however that Vendor substantiates such costs by providing P&G
with freight bills or other written documentation that adequately
verifies such charges. There shall be no separate shipping or
insurance charges associated with Vendor's delivery of Products
from the CWDC to P&G except as defined in Exhibit G-1 of
Attachment G.
5.13. TITLE AND RISK OF LOSS
Except for CPU's, risk of loss and title to any item shipped to
Greater Cincinnati Area P&G sites will pass to P&G upon delivery into
the interior of the P&G destination facility of other sites specified
by P&G. For P&G locations outside of the Greater Cincinnati Area, risk
of loss and title will pass upon delivery to the P&G receiving area.
For CPUs, title will pass to P&G upon delivery into the interior of
the CWDC facility or, if drop shipped, risk of loss and title will
pass upon delivery to the receiving area of a non-Cincinnati area
site. Vendor shall obtain no title or other rights in any Equipment or
Software ordered by P&G directly with the manufacturer for delivery to
the CWDC. Vendor shall maintain proper controls for protecting and
segregating P&G's inventory placed at the CWDC and shall permit P&G to
audit Vendor's controls.
5.14. QUANTITY AND QUALITY REQUIREMENTS
Without limiting any other rights or remedies P&G may have under this
Agreement, should Vendor be unable to meet P&G's quantity and quality
requirements under this Agreement, P&G may, reduce the allocation by
the amount of Vendor's inability to ship, or cancel this Agreement or
any Order without any obligation to Vendor.
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6. VENDOR PERSONNEL
6.1. KEY PERSONNEL
(a) "Key Vendor Personnel" shall be the personnel filling the
positions of Vendor Project Executive and such other Vendor
personnel designated by P&G in accordance with Attachment H to
the Statement of Work.
(b) P&G may from time to time change the positions designated as Key
Vendor Personnel under this Agreement.
(c) Vendor shall designate an individual to serve as "Vendor Project
Executive" for P&G. The assigned Vendor Project Executive shall
be subject to P&G reasonable approval. The Vendor Project
Executive shall (i) serve as the single point of accountability
for the Services and (ii) have day-to-day authority for ensuring
customer satisfaction.
(d) The Vendor shall cause each of the Key Vendor Personnel to devote
substantially full time and effort to the provision of the
Services under this Agreement.
6.2. QUALIFICATIONS AND RETENTION OF VENDOR PERSONNEL
(a) Before assigning an individual to a Key Vendor Personnel
position, whether as an initial assignment or a subsequent
assignment, Vendor shall notify P&G of the proposed assignment,
shall introduce the individual to appropriate P&G representatives
(and, upon request, provide such representatives with the
opportunity to interview the individual) and shall provide P&G
with a resume and other information about the individual
reasonably requested by P&G. If P&G in good faith objects to the
proposed assignment, the Parties shall attempt to resolve P&G's
concerns on a mutually agreeable basis. If the Parties have not
been able to resolve P&G's concerns within five (5) working days,
Vendor shall not assign the individual to that position and shall
propose to P&G the assignment of another individual of suitable
ability and qualifications. Personnel filling Key Vendor
Personnel positions may not be transferred or re-assigned until a
suitable replacement has been approved by P&G.
(b) The personnel Vendor assigns to perform the Services shall be
properly educated, trained and qualified for the Services they
are to perform. Vendor will not charge P&G for the time the
replacement employee takes to learn how to perform the
responsibilities assigned to him or her.
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(c) P&G and Vendor both agree that it is in their best interests to
keep the turnover rate of the Vendor personnel performing the
Services to a reasonably low level. Accordingly, if P&G
determines that Vendor's turnover rate is excessive and so
notifies Vendor, Vendor shall provide data concerning its
turnover rate and shall meet with P&G to discuss the reasons for
the turnover rate. If appropriate, Vendor shall submit to P&G its
proposals for reducing the turnover rate, and the Parties shall
mutually agree on a program to bring the turnover rate down to an
acceptable level. In any event, notwithstanding transfer or
turnover of personnel, Vendor remains obligated to perform the
Services without degradation and in accordance with this
Agreement.
7. PERFORMANCE STANDARDS
7.1. QUALITY
Quantitative performance standards for certain of the Services
("Service Levels") are set forth in Attachment E to the Statement of
Work. At all times Vendor's level of performance shall be at least
equal to specific Service Levels and consistent with acceptable best
industry standards.
7.2. FAILURE TO PERFORM
(a) Vendor recognizes that its failure to meet the Service Levels may
have a material adverse impact on the business and operations of
P&G and that the damage from Vendor's failure to meet a Service
Level is not susceptible of precise determination. Accordingly,
in the event that Vendor fails to meet Service Levels for reasons
other than the wrongful actions of P&G or circumstances that
constitute force majeure under this Agreement, then in addition
to any non-monetary remedies available to P&G under this
Agreement, at law, or in equity, P&G may elect in lieu of
pursuing other monetary remedies to recover as its sole and
exclusive monetary remedy for such failure to meet Service Levels
the Service Level Credits specified in Attachment E to the
Statement of Work as liquidated damages.
(b) If Vendor fails to meet any Service Level, Vendor shall (i)
proactively manage, investigate and report daily on the root
causes of the problem; (ii) in order to correct the problem and
begin meeting the Service Levels, create a written corrective
action plan and submit same to P&G for input and approval; (iii)
implement the action plan, involving all concerned parties, and
manage and monitor the corrective action plan until Service
Levels are restored; (iv) treat Service level issues as emergency
situations to be resolved as quickly as possible; (v) advise P&G,
as to the extent requested by P&G, of the progress achieved in
restoring Service Levels; and (vi) take appropriate preventive
measures so that Service Level problems do not recur.
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7.3. PERIODIC REVIEWS
For each calendar quarter during the first year of the Term of this
Agreement and at least annually thereafter, P&G and Vendor shall
review the Service Levels and shall make adjustments to them as
appropriate to reflect improved performance capabilities associated
with advances in the technology and methods used to perform the
Services. The Parties expect and understand that the Service Levels
will be improved over time.
7.4. MEASUREMENT AND MONITORING TOOLS
Vendor shall utilize the necessary measurement and monitoring tools
and procedures required to measure and report Vendor's performance of
the Services against the applicable Service Levels. Such measurement
and monitoring shall permit reporting at a level of detail sufficient
to verify compliance with the Service Levels, and shall be subject to
audit by P&G. Vendor shall provide P&G with information and access to
such tools and procedures upon request, for purposes of verification.
7.5. QUALITY ASSURANCE
The Vendor shall provide and implement the quality assurance
procedures that are reasonably necessary for the Services to be
performed in accordance with the Service Levels. Such procedures shall
include checkpoint reviews, testing, acceptance, and other procedures
for P&G to assure the quality of Vendor's performance, and shall be
included in the Procedures Manual.
8. PROJECT AND CONTRACT MANAGEMENT
8.1. PROCEDURES MANUAL
(a) The "Procedures Manual" shall describe how Vendor shall perform
the Services under this Agreement, the equipment and software
being used, and the documentation (e.g., operations manuals, user
guides, specifications, etc.) which provide further details of
such activities. The Procedures Manual shall describe the
activities Vendor proposes to undertake in order to provide the
Services, including where appropriate, those direction,
supervision, monitoring, staffing, reporting, planning and
oversight activities normally undertaken at facilities that
provide services of the type Vendor shall provide under this
Agreement, and further including quality assurance procedures
approved by P&G. The Procedures Manual shall be suitable for use
by P&G to understand the Services. The Procedures Manual will
also document all processes and procedures included in Attachment
I to the Statement of Work.
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(b) Within thirty (30) days of the Effective Date, the Vendor shall
deliver a draft Procedures Manual to P&G, for its comments and
review. Vendor shall incorporate reasonable comments or
suggestions of P&G and shall finalize the Procedures Manual
within sixty (60) days of the Effective Date. The final
Procedures Manual shall be subject to the approval of P&G. Vendor
shall periodically update the Procedures Manual to reflect
changes in the operations or procedures described therein.
Updates of the Procedures Manual shall be provided to P&G for
review, comment, and approval. Vendor shall perform the Services
in accordance with the Procedures Manual. In the event of a
conflict between the provisions of this Agreement and the
Procedures Manual, the provisions of this Agreement shall
control.
8.2. CHANGE CONTROL
(a) Prior to using any software or equipment to provide the Services,
Vendor shall have verified that the item has been properly
installed, is operating in accordance with its specifications,
and is performing its intended functions in a reliable manner
(b) Vendor shall make no change which adversely affects the function
or performance of the Services, including implementing changes in
technology, without first obtaining P&G's approval, which
approval P&G may withhold in its sole discretion. Vendor may make
temporary changes required by an emergency if it has been unable
to contact an appropriate P&G manager to obtain such approval
after making reasonable efforts. Vendor shall document and
promptly report such emergency changes to P&G.
(c) As part of the Procedures Manual, Vendor shall prepare and
provide to P&G a "Change Control Procedure" detailing how Vendor
will comply with such requirements and otherwise control changes
to the Services. The Change Control Procedure shall be provided
to P&G for review and comment and the reasonable comments or
suggestions of P&G shall be incorporated into the Change Control
Procedure. Vendor shall perform the Services in accordance with
the Change Control Procedure.
8.3. REPORTS AND MEETINGS
(a) Promptly after commencement of services, P&G will identify an
appropriate set of periodic reports to be issued by Vendor to
P&G. Such reports shall be issued at the frequency determined by
P&G. Within fifteen (15) days of such notification, Vendor shall
provide P&G with suggested formats for such reports, for P&G's
review and approval. In any event, Vendor shall provide to P&G,
commencing on the month after the Effective Date, a monthly
performance report delivered to P&G within fifteen (15) days
after the end of each month, in a form mutually established by
the Parties, describing Vendor's performance of the Services in
the preceding month. At a minimum, the monthly performance
reports will address the following:
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(i) separately address Vendor's performance in each area of the
Services;
(ii) for each area of the Services, assess the degree to which
Vendor has attained or failed to attain the pertinent
objectives in that area, including measurements with respect
to the Service Levels;
(iii)explain deviations from the Service Levels and include a
plan for corrective action where appropriate;
(iv) describe the status of applications development projects,
problem resolution efforts, and other initiatives;
(v) set forth a record of all material personnel changes that
pertain to the Services and describe planned changes during
the upcoming month that may affect the Services;
(vi) set forth the utilization of resources for the month and
report on utilization trends and statistics; and
(vii)include such documentation and other information as P&G may
reasonably request to verify compliance with this Agreement.
(b) Within thirty (30) days after commencement of services, the
Parties shall determine an appropriate set of meetings to be held
between representatives of P&G and Vendor. Vendor shall prepare
and circulate an agenda sufficiently in advance to give
participants an opportunity to prepare for the meeting, and shall
incorporate into such agenda items that P&G desires to discuss.
At P&G's request, Vendor shall prepare and circulate minutes
promptly after a meeting. As of the Effective Date, such meetings
shall include (i) a monthly meeting among operational personnel
representing P&G and Vendor to discuss performance and planned or
anticipated activities and changes that might adversely affect
performance, and (ii) an annual senior management meeting by all
of the Parties to review relevant contract and performance
issues.
8.4. SUBCONTRACTING
(a) Vendor shall directly provide all Products and Services covered
by this Agreement. Vendor shall obtain written authorization from
P&G prior to assigning or subcontracting any work or services
covered by this Agreement or any of P&G's Orders referencing this
Agreement.
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(b) P&G shall have the right during the Term to revoke its prior
approval of any subcontractor and direct the Vendor to replace
such subcontractor, if the subcontractor's performance is
deficient, good faith doubts exist concerning the subcontractor's
ability to render future performance because of changes in the
subcontractor's ownership, management, financial condition, or
otherwise, or there have been material misrepresentations by or
concerning the subcontractor. The Vendor shall remain responsible
for obligations performed by subcontractors to the same extent as
if such obligations were performed by Vendor employees. Vendor
shall be P&G's sole point of contact regarding the Services,
including with respect to payment. Without limiting the
generality of the foregoing, Vendor shall obligate all its
subcontractors to meet all applicable terms and conditions
herein, including the audit rights, proprietary and intellectual
property rights, confidentiality obligations, and supplemental
terms set forth herein.
9. P&G RESPONSIBILITIES
9.1. RESPONSIBILITIES
In addition to P&G's responsibilities as expressly set forth elsewhere
in this Agreement, P&G shall be responsible for the following:
(a) P&G shall designate one or more individuals to whom all Vendor
communications concerning this Agreement may be addressed (each,
a "P&G Contract Executive").
(b) P&G shall cooperate with Vendor by, among other things, making
available, as reasonably requested by Vendor, management
decisions, information, approvals and acceptances so that Vendor
may accomplish its obligations and responsibilities hereunder.
The P&G Contract Executive or his/her designee will be the
principal point of contact for obtaining such decisions,
information, approvals and acceptances.
9.2. SAVING CLAUSE
P&G's failure to perform any of its responsibilities set forth in this
Agreement (other than P&G's obligations to pay undisputed amounts)
shall not constitute a material breach of the Agreement or otherwise
be deemed to be grounds for termination by Vendor; provided, however,
that Vendor's nonperformance of its obligations under this Agreement
shall be excused if and to the extent (i) such Vendor nonperformance
results from P&G's failure to perform its responsibilities, and (ii)
Vendor provides P&G with reasonable notice of such nonperformance and
uses commercially reasonable efforts to perform notwithstanding P&G's
failure to perform.
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10. EQUIPMENT, SOFTWARE AND FACILITIES
10.1. P&G EQUIPMENT
As of the Transition Start Date, P&G grants to Vendor, for the sole
purpose of performing the Services, the right of access to the
Equipment. Vendor shall not sell, dispose of, lease, encumber, or in
any other manner interfere with P&G's ownership or other interest in
such Equipment. Notwithstanding anything to the contrary herein, the
foregoing grant to access to the Equipment is a limited right as
provided above and shall not be considered a transfer of any ownership
interest therein. Vendor shall be responsible for such Equipment when
in Vendor's possession or control to the same extent as if Vendor were
the owner of such Equipment, including maintaining insurance and risk
of loss over such Equipment.
10.2. SOFTWARE
Subject to the Parties having obtained any required consents, as of
the Transition Start Date P&G grants to Vendor for the sole purpose of
performing the Services, the same rights of access to the Software.
Vendor shall comply with the duties, including use restrictions and
those of nondisclosure, imposed on P&G by the licenses for such
Software. Except as otherwise requested or approved by P&G (or the
relevant licensor), Vendor shall cease all access to such Software
upon expiration or termination of this Agreement.
10.3. P&G FACILITIES
(a) P&G Obligations
(i) P&G will provide office space only for Vendor's on-site
staff as generally identified in the Statement of Work.
Vendor will be responsible to provide any other facilities
and support it needs to provide the Services. P&G will
retain the costs of applicable facilities leases and related
leasehold improvements with respect to the P&G facilities.
(ii) P&G may relocate the office space from time to time with
notice to Vendor.
(iii)The P&G facilities shall be made available to Vendor on an
"AS IS, WHERE IS" basis.
(b) Vendor Obligations
(i) Subject to P&G's approval, which may be withheld at P&G's
sole discretion, Vendor shall use the P&G facilities for the
sole and exclusive purpose of providing the Services. Use of
such facilities by Vendor does not constitute a leasehold
interest in favor of Vendor or it's subcontractors.
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(ii) Vendor shall use the P&G facilities in a reasonably
efficient manner. Vendor shall be responsible for any damage
to the P&G facilities resulting from the abuse, misuse,
neglect or negligence of Vendor, its employees and
subcontractors or other failure to comply with its
obligations respecting the P&G facilities.
(iii)Vendor, its employees and agents shall keep the P&G
facilities in good order, not commit or permit waste or
damage to such facilities, not use such facilities for any
unlawful purpose or act and comply with P&G's standard
policies and procedures, including procedures for the
security of the P&G facilities.
(iv) Vendor shall permit P&G and its agents and representatives
to enter into those portions of the P&G facilities occupied
by Vendor staff at any time to perform facilities-related
services.
(v) Vendor shall not make any improvements or changes involving
structural, mechanical or electrical alterations to the P&G
facilities without P&G's prior written approval. Any
improvements to the P&G facilities will become the property
of P&G.
(vi) When the P&G facilities are no longer required for
performance of the Services, Vendor shall return such
facilities to P&G in substantially the same condition as
when Vendor began use of such facilities, subject to
reasonable wear and tear.
11. CHARGES
11.1 CHARGES
a. All charges for the Services are set forth in Attachment G of the
Statement of Work. P&G shall not be required to pay any amount
for the Services in addition to that payable to Vendor under
Attachment G of the Statement of Work. Vendor charges will not be
subject to any separate cost of living adjustments during the
initial 3-year term. The pricing adjustments in (b) and ( c )
below are applicable only to the Deskside and Server Support
Services (Statement of Work Attachment B-3).
b. Pricing for the first one year extension (for a 4th year of the
Agreement), which occurs at P&G's option shall be negotiated
between P&G and Vendor. Price increase from the Terms in Exhibit
G-1 shall not exceed a cap described as follows:
The current price will be adjusted based on the most recently
published 12 month period from the Bureau of Labor Statistics (BLS)
table (Employment Cost Index for Private Industry Workers). The
percentage to be used will be in the BLS table under 'Total
Compensation' for the 'Midwest' area. This percentage will be
multiplied by 1.5 to calculate the cap.
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Example of cap for per workstation pricing model:
Current Workstation Price $339.30
Current BLS Percentage 3.5%
Adjustment (3.5% x 1.5) 5.25%
NEW WORKSTATION PRICE $357.11
Example of cap for Per Outsourced Person Pricing Model:
Current Outsourced Person Rate $75,600
Current BLS Percentage 3.5%
Adjustment (3.5% x 1.5) 5.25%
NEW OUTSOURCED PERSON RATE $79,569
c. Pricing for the second one year extension ( for a 5th year of the
Agreement), which occurs at P&G's option shall be negotiated
between P&G and Vendor. Price increase from the Terms for the
first one year extension shall not exceed a cap described as
follows:
Both pricing models will be calculated as shown for the first one year
extension except that the 1.5 multiplication factor shall not be
applied.
11.2. PASS-THROUGH EXPENSES
(a) Pass-Through Expenses are charges to be paid directly by P&G or
through Vendor on an Out-of-Pocket Expenses basis. All
Pass-Through Expenses are listed in Attachment G to the Statement
of Work. If the Parties agree that a particular Pass-Through
Expense is to be paid by P&G directly, Vendor shall promptly
provide P&G with the original third-party invoice for such
expense together with a statement that Vendor has reviewed the
invoiced charges and made a determination of which charges are
proper and valid and should be paid by P&G. Otherwise, Vendor
shall act as payment agent for P&G and shall pay third-party
charges comprising the Pass-Through Expense. Prior to making any
such payment, however, Vendor shall review the invoice charges to
determine whether such charges are proper and valid and should be
paid and shall provide P&G with a reasonable opportunity to
review the invoice to confirm Vendor's determination. Following
such review by Vendor and P&G, Vendor shall pay the amounts due
and shall invoice P&G for such charges.
(b) Vendor shall use commercially reasonable efforts to minimize the
amount of Pass-Through Expenses. With respect to services or
materials paid for on a Pass-Through Expenses basis, P&G reserves
the right to: (i) obtain such services or materials directly from
a third party; (ii) designate the third party source for such
services or materials; (iii) designate the particular services or
materials (e.g, equipment make and model) Vendor shall obtain,
provided that if Vendor demonstrates to P&G that such designation
will have an adverse impact on Vendor's ability to meet the
Service Levels, such designation shall be subject to Vendor's
approval; (iv) require Vendor to identify and consider multiple
sources for such services or materials or to conduct a
competitive procurement; and (v) review and approve the
Pass-Through Expense for such services or materials before
entering into a contract for such services or materials.
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11.3. INCIDENTAL EXPENSES
Vendor acknowledges that, except as expressly provided otherwise in
the Agreement, expenses that Vendor expects to incur in performing the
Services (such as, but not limited to, travel and lodging, document
reproduction and shipping, and long-distance telephone) are included
in Vendor's charges and rates set forth in this Agreement.
Accordingly, such Vendor expenses are not separately reimbursable by
P&G unless, on a case-by-case basis for unusual expenses, P&G has
agreed in advance and in writing to reimburse Vendor for the expense.
11.4. MEET OR RELEASE
If at any time during the period of this Agreement P&G can purchase
Products or Services of like quality at a price which will result in a
total delivered cost to P&G that is lower than the total delivered
cost of the Products or Services purchased hereunder, P&G may notify
Vendor of such total delivered cost and Vendor shall have an
opportunity of pricing Products and Services hereunder on such a basis
as to result in the same or lower total delivered cost to P&G. If
Vendor fails to do so or cannot legally do so, P&G may purchase from
the supplier of the lower total cost products and services, and any
purchases so made shall be held to apply to this Agreement, and the
obligation of P&G and Vendor shall be reduced accordingly.
11.5. FAVORED NATIONS
(a) If, during the Term of this Agreement, Vendor provides products
or services substantially the same as those listed herein at
prices lower than the prices then effective under this Agreement,
said lower price(s) shall apply to all Products or Services
thereafter provided under this Agreement during the period of
sale at such lower price(s) to others, provided Vendor can
legally extend such lower price(s) to P&G.
(b) Within thirty (30) days after the beginning of each Contract
Year, Vendor's Chief Financial Officer shall certify in writing
to P&G that Vendor is in compliance with this section, and shall
provide the information reasonably requested by P&G to verify
such compliance.
11.6. TECHNOLOGY CHANGES AND TECHNOLOGY BREAKTHROUGH
(a) Should P&G, by reason of technology change or changes in business
requirements, no longer need the Products or Services purchased
under this Agreement, P&G shall have the right to discontinue
payment of the fees under this Agreement, provided P&G has given
Vendor not less than thirty (30) days notice, and provided
further that use of the Product or Services by P&G is
discontinued. In the event advance payment has been made for such
Products or Services during a period for which use is
discontinued, P&G shall be entitled to a pro-rata refund from the
Vendor for the period for which the products or services are not
used.
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(b) In the event that there is a technological breakthrough that
provides opportunities for additional savings, the Party
identifying such breakthrough will perform a preliminary savings
analysis. The Parties will then jointly validate this preliminary
analysis and jointly prepare a technology implementation plan. If
the plan requires the implementation of new equipment and/or
software, other capital, one-time charges, or changes to other
resources depending upon the effect on each Party's respective
obligations under this Agreement, the following will apply:
(i) In the case of Vendor responsibilities, Vendor will propose
revised charges based upon the effect of the plan on its
original cost assumptions. If the implementation plan
specifies that Vendor will reduce certain resources (either
personnel or otherwise), the revised charges will reflect
the Vendor's reduction of these resources; and
(ii) In the case of P&G's responsibilities, P&G will pay for its
implementation costs as specified in the implementation plan
and shall be entitled to the reduced Vendor charges once the
changes are implemented.
11.7 SPENDING WITH HISTORICALLY UNDERUTILIZED BUSINESSES (HUB)
Vendor will make a good faith effort to utilize HUB business partners
to deliver products and related accessories equal to or greater than
15% of P&G's spending with Vendor on such products (excluding
services). Vendor may utilize HUB business partners at its discretion,
in keeping with the other terms of this Agreement, ensuring Service
Level Agreements (SLAs) and customer satisfaction goals are achieved.
Vendor shall report all HUB spending on a quarterly basis to P&G by
October 10, January 10, April 10, and July 10 on the form supplied by
P&G. Upon agreement of the Parties, the spending rate and the basis
for HUB spending may be adjusted annually on July 1 by P&G.
Vendor will investigate opportunities for HUB spending on the services
part of this agreement. Vendor will make a good faith effort to
utilize such HUB service partners consistent with the objectives as
described above.
12. INVOICING AND PAYMENT
12.1. INVOICING
(a) Vendor shall invoice P&G for amounts due under this Agreement on
a monthly basis in arrears. The invoice shall show details as to
charges as specified by P&G. Vendor shall include the
calculations utilized to establish the charges.
(b) To the extent a credit may be due P&G pursuant to this Agreement,
Vendor shall provide P&G with an appropriate credit against
amounts then due and owing; if no further payments are due to
Vendor, Vendor shall pay such amounts to P&G within ten (10)
days.
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(c) Vendor shall render a single consolidated invoice for each
month's charges, showing such details as reasonably specified by
P&G.
(d) P&G will continue to charge back Products and Services to user
departments and field offices under this Agreement. As such,
Vendors are required to provide a mechanism to allow the
invoicing of specific P&G cost centers for the Products and
Services consumed.
(e) On all invoices subject to discount for prompt payment, the
discount period shall be calculated from the date the invoice is
received in P&G's office or the date of delivery of Product or
performance of Service ordered herein, whichever is later.
(f) For Products bought "delivered" or "F.O.B. destination," Vendor
shall prepay freight or other transportation charges. For goods
bought "F.O.B. point of origin" or "F.O.B. Vendor's Plant," on
which the Vendor prepays the freight and invoices P&G, the Vendor
shall include the transportation charges on the invoice and
attach the freight bill and bill of lading. If the freight bill
is not attached, the Vendor must show on the invoice, in addition
to the transportation charge, the weight of the shipment, the
freight rate charged, the name of the carrier, and attach to the
invoice a copy of the bill of lading only. P&G may withhold
payment of Vendor's invoice until the date that this condition
has been fulfilled and reserves the right to take cash discount
from this later date. If P&G requests that Products be shipped
'freight collect' P&G shall be responsible for transportation
charges. On shipments originating in the U.S., the "non-recourse"
clause on the bill of lading covering the shipment must not be
signed, and any overcharges which may accrue will be for Vendor's
account.
12.2. PAYMENT DUE
(a) Subject to the other provisions of this Article 12, invoices
provided for under Section 12.1 and properly submitted to P&G
pursuant to this Agreement shall be due and payable by P&G within
ten (10) days after receipt thereof, but in no case before P&G
accepts the Products and has received an executed copy of this
Agreement. Any amount due under this Agreement for which a time
for payment is not otherwise specified shall be due and payable
within ten (10) days after receipt of a proper invoice for such
amount.
(b) Invoices shall be prepared and sent in accordance with the terms
of this Agreement. Invoices that do not follow these instructions
are subject to potentially significant delays in payment.
12.3. TAXES
P&G is responsible for all sales and use taxes. P&G shall pay all
sales and use taxes directly to the State of Ohio, due to its Direct
Pay Permit. P&G shall not be responsible for taxes based on Vendor's
net income.
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12.4. ACCOUNTABILITY
Vendor shall maintain complete and accurate records of and supporting
documentation for the amounts billable to and payments made by P&G
hereunder, in accordance with generally accepted accounting principles
applied on a consistent basis, and shall retain such records in
accordance with P&G's records retention policy as this policy may be
adjusted from time to time. Vendor agrees to provide P&G with
documentation and other information with respect to each invoice as
may be reasonably requested by P&G to verify accuracy and compliance
with the provisions of this Agreement. P&G and its authorized agents
and representatives shall have access to such records for purposes of
audit during normal business hours during the Term and during the
period for which Vendor is required to maintain such records.
12.5. PRORATION
Periodic charges under this Agreement are to be computed on a calendar
month basis, and shall be prorated for any partial month.
12.6. REFUNDABLE ITEMS
(a) Prepaid Amounts. Where P&G has prepaid for a service or function
for which Vendor is assuming financial responsibility under this
Agreement, Vendor shall refund to P&G, upon either Party
identifying the prepayment, that portion of such prepaid expense
which is attributable to periods on and after the Effective Date.
(b) Refunds and Credits. If Vendor should receive a refund, credit or
other rebate for goods or services paid for P&G, Vendor shall
promptly notify P&G of such refund, credit, or rebate and shall
promptly pay the full amount of such refund, credit or rebate, as
the case may be to P&G.
12.7. OFF SET
With respect to any amount to be paid by P&G hereunder, P&G may off
set against such amount any amount that Vendor is obligated to pay P&G
hereunder.
12.8. DISPUTED CHARGES
Subject to Section 12.2, P&G shall pay undisputed charges when such
payments are due under this Article. P&G may withhold payment of
particular charges that P&G disputes in good faith.
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13. AUDITS
13.1. AUDIT RIGHTS
Vendor shall provide to P&G, its auditors (including internal audit
staff), inspectors, regulators and other representatives as P&G may
designate in writing, access at all reasonable times to the part of
the facility at which Vendor is providing Services, to Vendor
personnel providing the Services, and to the data and records relating
to the Services, for the purpose of performing audits and inspections,
and to examine Vendor's performance of the Services, including (to the
extent applicable to the Services performed by Vendor and to the
charges therefor) (i) audits of practices and procedures, (ii) audits
of general controls and security practices and procedures, (iii)
audits of disaster recovery and back-up procedures, (iv) any audit
necessary to enable P&G to meet applicable regulatory requirements
and, (v) audits of any charges hereunder payable on an Out-of-Pocket
basis or at cost with a mark-up. Vendor shall provide to such
auditors, inspectors, regulators, and representatives such assistance,
as they reasonably require. Vendor shall cooperate fully with P&G or
their designees in connection with audit functions and with regard to
examinations by regulatory authorities. P&G's auditors and other
representatives shall comply with Vendor's reasonable security
requirements.
13.2. AUDIT FOLLOW-UPS
(a) Following an audit or examination, P&G shall conduct (in the case
of an internal audit), or request its external auditors or
examiners to conduct, an exit conference with Vendor to obtain
factual concurrence with issues identified in the review. Vendor
shall make available promptly to P&G the results of any review or
audit conducted by Vendor, its parent, Affiliates, or
subsidiaries, or their contractors, agents or representatives
(including internal and outside auditors), relating to Vendor's
operating practices and procedures to the extent relevant to the
Services or P&G.
(b) Vendor and P&G shall meet to review each audit report promptly
after the issuance thereof and to mutually agree upon the
appropriate manner, if any, in which to respond to the changes
suggested by the audit report. P&G and Vendor agree to develop
mutually acceptable operating procedures for the sharing of audit
and regulatory findings and reports related to Vendor's operating
practices and procedures produced by auditors or regulators of
either party.
14. SAFEGUARDING OF DATA; CONFIDENTIALITY
14.1. SECURITY PRECAUTIONS
Vendor agrees to take any appropriate security precautions requested
by P&G including, but not limited to, prohibiting visitors in the area
during performance of the Services. P&G reserves the right to reduce
or discontinue its purchases under this Agreement, without further
obligation, for repeated violations of security practices that are
agreed to between P&G and Vendor
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14.2. CONFIDENTIALITY
(a) P&G Data shall remain the property of P&G and, upon P&G's
request, the termination or expiration of this Agreement for any
reason, or, with respect to any particular data, on such earlier
date that the same shall be no longer required by Vendor in order
to render the Services hereunder, such P&G Data shall be promptly
returned to P&G by Vendor in a form acceptable to P&G or, if P&G
so elects, shall be destroyed. P&G Data shall not be utilized by
Vendor for any purpose other than that of rendering the Services
under this Agreement, nor shall P&G Data or any part thereof be
sold, assigned, leased, or otherwise disposed of to third parties
by Vendor or commercially exploited by or on behalf of Vendor,
its employees or agents. Vendor shall not possess or assert any
lien or other right against or to P&G Data.
(b) All technical, experimental, manufacturing and other information
disclosed by P&G to Vendor pursuant to this Agreement are
considered by P&G as being highly confidential in nature. Vendor
agrees to take all reasonable precaution to prevent disclosure to
third parties. Vendor shall hold in confidence P&G's interest in
specific materials and any technical or business information
Vendor may learn, observe or otherwise obtain concerning P&G, or
of its subsidiaries, incident to Vendor's performance under the
terms of this Agreement.
(c) Vendor agrees to take all reasonable precautions to establish and
maintain safeguards against the destruction, loss, or alteration
of P&G Data in the possession of Vendor.
(d) Without limiting the generality of Section 14.2(c) above:
(i) Vendor personnel shall not attempt to access, or allow
access to, any data, files or programs within the
information systems environment to which they are not
entitled under this Agreement. If such access is attained,
Vendor shall immediately report such incident to P&G,
describe in detail any accessed materials and return to P&G
any copied or removed materials.
(ii) Vendor shall institute industry "best practices" systems
security measures to guard against the unauthorized access,
alteration or destruction of Software and P&G Data.
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(e) As used in this Agreement, "Confidential Information" shall mean
all information, in any form, furnished or made available
directly or indirectly by P&G to Vendor which is marked
confidential, restricted, proprietary, or with a similar
designation. Confidential Information also shall include, whether
or not designated "Confidential Information", (i) all
specifications, designs, documents, correspondence, software,
documentation, data and other materials and work products
produced by either Vendor or its subcontractors in the course of
performing the Services, (ii) all information concerning the
operations, affairs and businesses of P&G, the financial affairs
of P&G, and the relations of P&G with its customers, employees
and service providers (including customer lists, customer
information, account information and consumer markets), (iii)
Software provided to Vendor by or through P&G; and (iv) other
information or data stored on magnetic media or otherwise or
communicated orally, and obtained, received, transmitted,
processed, stored, archived, or maintained by Vendor under this
Agreement.
(f) Vendor shall not (i) make any use or copies of the Confidential
Information of P&G except as contemplated by this Agreement, (ii)
acquire any right in or assert any lien against the Confidential
Information of P&G, (iii) sell, assign, lease, or otherwise
dispose of Confidential Information to third parties or
commercially exploit such information, or (iv) refuse for any
reason (including a default or material breach of this Agreement
by P&G) to promptly provide the Confidential Information
(including copies thereof) to P&G if requested to do so in the
form reasonably requested. Upon expiration or any termination of
this Agreement and completion of Vendor's obligations under this
Agreement, Vendor shall (except as otherwise provided with
respect to Vendor intellectual property, archival files, or
elsewhere in this Agreement) return or destroy, as P&G may
direct, all documentation in any medium that contains, refers to,
or relates to the Confidential Information, and retain no copies.
In addition, Vendor shall take reasonable steps to ensure that
their employees comply with these confidentiality provisions.
(g) The obligations of Vendor specified in Section 14.2(f) shall not
apply to any particular information which Vendor can demonstrate
(i) was, at the time of disclosure to it, in the public domain;
(ii) after disclosure to it, is published or otherwise becomes
part of the public domain through no fault of Vendor; (iii) was
in the possession of Vendor at the time of disclosure to it; (iv)
was received after disclosure to it from a third party who had a
lawful right to disclose such information to it; or (v) was
independently developed by Vendor without reference to
Confidential Information. In addition, Vendor shall not be
considered to have breached its obligations under Section 14.2(f)
for disclosing Confidential Information as required to satisfy
any legal requirement of a competent government body, provided
that, immediately upon receiving any such request and to the
extent that it may legally do so, Vendor advises P&G promptly and
prior to making such disclosure in order that P&G may interpose
an objection to such disclosure, take action to assure
confidential handling of the Confidential Information, or take
such other action as it deems appropriate to protect the
Confidential Information.
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(h) In the event of any disclosure or loss of, or inability to
account for, any Confidential Information, Vendor shall notify
P&G immediately.
(i) Nothing contained in this Article shall be construed as
obligating P&G to disclose its Confidential Information to
Vendor, or as granting to or conferring to Vendor, expressly or
implicitly, any rights or license to the Confidential
Information.
(j) Vendor shall not disclose Confidential Information of P&G to a
subcontractor or business partners unless and until such
subcontractor or business partner has agreed in writing to
protect the confidentiality of such Confidential Information in a
manner substantially equivalent to that required of Vendor under
this Agreement. Vendor shall take reasonable steps to ensure that
their subcontractors and business partners comply with these
confidentiality provisions.
(k) These obligations of confidentiality and nonuse shall survive
termination or expiration of this Agreement.
15. INTELLECTUAL PROPERTY
Vendor agrees, and will instruct its employees and agents, to disclose
to P&G all creations, ideas, discoveries, developments and inventions
relating to services provided hereunder. All creations, ideas,
discoveries, developments and inventions made in performance of this
Agreement shall become the property of P&G. Vendor agrees and will
obtain an acknowledgment from each of its employees and agents to
assign outright the entire right, title and interest both in the
United States and abroad to such creations, ideas, discoveries,
developments and inventions, without payment other than the services
fee provided herein. Vendor, its employees and agents will execute any
and all documents which P&G determines may be necessary or convenient
to fully implement P&G's property rights in such creations, ideas,
discoveries, developments and inventions, including but not limited to
obtaining patents and copyrights, and to fully cooperate in the
prosecution of any such proprietary rights at P&G's expense. Copyright
in and to any work of authorship arising from services hereunder shall
be vested in P&G in perpetuity as a work-made-for-hire pursuant to
United States Copyright Law. Vendor, its employees and agents warrant
that no other party has any right, title or interest to or in any
creations, ideas, discoveries, developments or inventions which are
provided to P&G pursuant to services under this Agreement. Unless
otherwise directed by P&G, Vendor, its employees and agents agree that
they will return to P&G upon completion of services under this
Agreement all creations, ideas, discoveries, developments and
inventions in documentary form remaining in their possession
pertaining to the work.
16. REPRESENTATIONS AND WARRANTIES
16.1. WORK STANDARDS
Vendor represents and warrants that the Services shall be rendered
with promptness and diligence and shall be executed in a workmanlike
manner, in accordance with the practices and professional standards
used in well-managed operations performing services similar to the
Services. Vendor further represents and warrants that (i) it shall use
adequate numbers of qualified individuals with suitable training,
education, experience, and skill to perform the Services and (ii) it
shall perform the Services as necessary to meet or exceed the Service
Levels.
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16.2. MAINTENANCE
Vendor represents and warrants that it shall maintain the Equipment
and Software so that they operate in accordance with their
specifications, including (i) maintaining Equipment in good operating
condition, subject to normal wear and tear, (ii) undertaking repairs
and preventive maintenance on Equipment in accordance with the
applicable Equipment manufacturer's recommendations, and (iii)
performing Software maintenance in accordance with the applicable
Software vendor's documentation and recommendations.
16.3. EFFICIENCY AND COST EFFECTIVENESS
Vendor represents and warrants that it shall use its best efforts to
use efficiently the resources or services necessary to provide the
Services. Vendor represents and warrants that it shall use its best
efforts to perform the Services in the most cost-effective manner
consistent with the required level of quality and performance.
16.4. TECHNOLOGY
Vendor represents and warrants that it shall provide the Services
using, consistent with the Change Control Procedures, proven, current
technology that will enable P&G to take advantage of technological
advancements in its industry and support P&G's efforts to maintain
competitiveness in the markets in which it competes.
16.5. PASS-THROUGH WARRANTIES
Vendor represents and warrants that it shall pass-through to P&G any
and all warranties and indemnities provided by the manufacturer or
vendor of the Products.
16.6. NON-INFRINGEMENT
Vendor represents and warrants that it shall perform its
responsibilities under this Agreement in a manner that does not
infringe, or constitute an infringement or misappropriation of, any
patent, copyright, trademark, trade secret or other proprietary rights
of any third party.
16.7. VIRUSES
Vendor represents and warrants that it shall use its best efforts to
ensure that no Viruses are coded or introduced into the systems used
to provide the Services. Vendor agrees that, in the event a Virus is
found to have been introduced into the systems used to provide the
Services, Vendor shall use its best efforts at no additional charge to
assist P&G in reducing the effects of the Virus and, if the Virus
causes a loss of operational efficiency or loss of data, to assist P&G
to the same extent to mitigate and restore such losses.
16.8. DISABLING CODE
Vendor represents and warrants that it shall not insert into P&G's
environment any code which would have the effect of disabling or
otherwise shutting down all or any portion of the Services.
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16.9. AUTHORIZATION
Each Party represents and warrants to the other that:
(a) it has the requisite corporate or partnership power and authority
to enter into this Agreement and to carry out the transactions
contemplated by this Agreement; and
(b) the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated by this Agreement
have been duly authorized by the requisite corporate or
partnership action on the part of such Party.
16.10. INDUCEMENTS
Vendor represents and warrants to P&G that it has not violated any
applicable laws or regulations or any P&G policies of which Vendor has
been given notice regarding the offering of unlawful inducements in
connection with this Agreement. If at any time during the Term of this
Agreement, P&G determines that the foregoing warranty is inaccurate,
then, in addition to any other rights P&G may have at law or in
equity, P&G shall have the right to terminate this Agreement for cause
without affording Vendor an opportunity to cure.
16.11. YEAR 2000 WARRANTY
(a) Vendor warrants that all work performed and Vendor's facilities
and systems covered or used in connection with Vendor's
provisioning of the Services under this Agreement are Year 2000
Compliant. In the event that said work performed and facilities
used is/are unable to meet such standards, Vendor shall make all
reasonable effort to promptly modify said work and facilities so
as to enable it/them to be Year 2000 Compliant at no cost to P&G.
If said work and facilities are still not Year 2000 Compliant
thirty (30) days after receipt of written notice of the
non-compliance, P&G shall have the right to terminate the
portion(s) of this Agreement directly related to the
non-compliant work or facilities. Within fifteen (15) days of any
written notice of termination under this warranty, Vendor shall
provide P&G with a full refund of fees or other funds paid for
the said work and use of said facilities, as well as the pro rata
portion for the remaining Term of any other charges such as
Services fees, paid by P&G for the said work and use of said
facilities terminated in accordance with this clause.
(b) Vendor will pass through to P&G all applicable Year 2000
warranties it receives from the original equipment manufacturer.
In the event that one or more products is/are unable to meet such
standards, Vendor shall make all reasonable effort to promptly
modify such products so as to enable it/them to be Year 2000
Compliant at no cost to P&G. If products are still not Year 2000
Compliant thirty (30) days after receipt of written notice of the
non-compliance, P&G shall have the right to terminate the
portion(s) of this Agreement directly related to the
non-compliant products. Within fifteen (15) days of any written
notice of termination under this warranty, Vendor shall assist
P&G in its efforts to obtain from the manufacturer, a full refund
of fees or other funds paid for the products, as well as the pro
rata portion for the remaining Term of any other charges such as
Services fees, paid by P&G for the products terminated in
accordance with this clause.
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17. INSURANCE
17.1. INSURANCE RESPONSIBILITY
Vendor agrees to protect, defend, indemnify and save P&G harmless from
any and all Losses on account of damage to property or personal
injury, including death, which may be sustained by itself, its
employees, or P&G or P&G's employees or third persons, arising out of
or in connection with Services rendered hereunder whether such loss,
damage, injury or liability is contributed to by the negligence of P&G
or its employees (except that this indemnity shall not apply to
damages, injuries, or the costs incident thereto found to be caused by
the sole negligence of P&G) and Vendor expressly acknowledges that it
will indemnify P&G for personal injury claims of Vendor's employees
where Vendor is responsible to those employees for worker's
compensation. Vendor further agrees to provide complete and adequate
insurance, to indemnify itself and P&G against same and agrees to name
P&G as an additional insured under its liability policies. Vendor's
indemnity obligation shall be limited to the amount of its insurance
coverage, so long as that coverage includes contractual liability
coverage for the liability assumed hereunder, includes P&G as an
additional insured and is at least in the amount required by the
Section 17.2. This provision shall not be construed in any
circumstance to constitute an indemnification contrary to any
governing law which shall prohibit indemnification against any loss,
liability or cost or expense incident thereto caused by the negligence
of such indemnitee, nor shall this provision be construed as a
guarantee of the quality of the Services rendered hereunder.
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17.2. Insurance Requirements
(a) Vendor shall provide and maintain during this Agreement the
following insurance with carriers acceptable to P&G in amounts
not less than those specified and will furnish P&G with
Certificates of Insurance indicating the companies carrying the
specified coverages with the effective dates and dates of
expiration of said policies, which certificates shall provide for
thirty (30) days' advance notice to P&G prior to modification or
termination of the policies:
<TABLE>
<CAPTION>
COVERAGE MINIMUM LIMITS
- ----------------------------------------- --------------------------------
<S> <C>
Worker's Compensation Statutory requirement
Employer's Liability At least $100,000 each accident
Comprehensive Automobile Liability, At least $1,000,000 each
Bodily Injury and Property Damage accident, combined single limit
Liability
Commercial General Liability, At least $2,000,000 each
including Completed Operations and occurrence, combined single
Contractual Liability--Contractual limit; and $2,000,000 aggregate,
Liability is to include liability assumed combined single limit
under this contract; Bodily Injury and
Property Damage Liability
Errors and Omissions Liability At least $2,000,000 each
Insurance covering the liability for occurrence, combined single
financial loss due to error, omission, limit; and $2,000,000 aggregate,
negligence of employees and machine combined single limit
malfunction
</TABLE>
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(b) Vendor agrees to indemnify and hold harmless P&G from any loss or
damage which P&G may suffer by reason of Vendor's non-compliance
with these provisions.
18. INDEMNITIES
18.1. GENERAL INDEMNITIES
Vendor agrees to indemnify, defend and hold harmless P&G and its
affiliates and their respective officers, directors, employees,
agents, successors, and assigns, from any and all Losses and
threatened Losses arising from, in connection with, or based on
allegations of, any of the following:
(a) Vendor's breach of any of the terms and conditions of this Agreement;
(b) Vendor's failure to observe or perform any duties or obligations to be
observed or performed on or after the Transition Start Date by Vendor
under third party software licenses;
(c) Vendor's breach of its obligations with respect to Confidential
Information;
(d) Any claims arising out of or related to occurrences Vendor is required
to insure against pursuant to this Agreement;
(e) Any claims of infringement of any patent, trade secret, copyright or
other proprietary rights, alleged to have occurred because of Products
or other resources provided by Vendor to P&G, or based upon
performance of the Services, by Vendor; and
(f) Any claim or action by, on behalf of, or related to, Vendor's
employees or subcontractors arising on or after the Transition Start
Date, including claims arising under occupational health and safety,
worker's compensation, ERISA or other applicable federal, state, or
local laws or regulations.
18.2. ENVIRONMENTAL INDEMNITY
Vendor agrees to comply with all applicable federal, state, provincial
and/or local environmental laws, ordinances, codes, rules, regulations
and permits and to handle all products in an environmentally safe
manner so as to prevent any contamination of the structure, soil or
ground water in, on, or adjacent to the Vendor's facility or plant at
which Vendor performs the work which is the subject of this Agreement.
Vendor agrees to indemnify P&G and its affiliates and their respective
officers, directors, employees, agents, successors, and assigns, from
any and all Losses and threatened Losses arising from, in connection
with, or based on allegations of, any conditions or activities at or
involving any facility or plant at which Vendor performs the work
which is the subject of this Agreement.
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18.3. REWORK AND PRODUCT LIABILITY INDEMNIFICATION
In the event of any failure or defect in Product produced hereunder
resulting from Vendor's failure to comply with the terms of this
Agreement, Vendor agrees (upon P&G's request) to replace, rework
and/or scrap any defective Product or authorize P&G to do so at
Vendor's expense and Vendor shall assume responsibility for P&G's
total costs incurred by P&G related thereto. In addition, Vendor shall
be responsible for claims by third parties against P&G for loss or
damage based on personal injury or destruction of property due to
defects in the Product for which Vendor is responsible. Vendor is
liable for any damage to P&G's stocks, equipment and goods caused by
incorrect or insufficient Product description of Vendor's goods.
18.4. INFRINGEMENT
If any item used by Vendor to provide the Services becomes, or in
Vendor's reasonable opinion is likely to become, the subject of an
infringement or misappropriation claim or proceeding, Vendor shall, in
addition to indemnifying P&G as provided in this Article 18 and to the
other rights P&G may have under this Agreement, promptly at Vendor's
expense use best efforts to secure the right to continue using the
item or replace or modify the item to make it non-infringing, provided
that any such replacement or modification will not degrade the
performance or quality of the affected component of the Services. In
the event neither of such actions can be accomplished by Vendor, and
only in such event, Vendor shall remove the item from the Services and
Vendor's charges shall be equitably adjusted to reflect such removal.
18.5. INDEMNIFICATION PROCEDURES
With respect to third-party claims, the following procedures shall
apply:
(a) Notice. Promptly after receipt, by any entity entitled to
indemnification, of notice of the commencement or threatened
commencement of any civil, criminal, administrative, or
investigative action or proceeding involving a claim in respect
of which the indemnitee will seek indemnification pursuant to any
such Section, the indemnitee shall notify the indemnitor of such
claim in writing. No failure to so notify an indemnitor shall
relieve it of its obligations under this Agreement except to the
extent that it can demonstrate damages attributable to such
failure. Within fifteen (15) days following receipt of written
notice from the indemnitee relating to any claim, but no later
than ten (10) days before the date on which any response to a
complaint or summons is due, the indemnitor shall notify the
indemnitee in writing if the indemnitor elects to assume control
of the defense and settlement of that claim (a "Notice of
Election").
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(b) Procedure Following Notice of Election: If the indemnitor
delivers a Notice of Election relating to any claim within the
required notice period, the indemnitor shall be entitled to have
sole control over the defense and settlement of such claim;
provided, however, that (i) the indemnitee shall be entitled to
participate in the defense of such claim and to employ counsel at
its own expense to assist in the handling of such claim, and (ii)
the indemnitor shall obtain the prior written approval of the
indemnitee before entering into any settlement of such claim or
ceasing to defend against such claim. After the indemnitor has
delivered a Notice of Election relating to any claim in
accordance with the preceding paragraph, the indemnitor shall not
be liable to the indemnitee for any legal expenses incurred by
such indemnitee in connection with the defense of that claim. In
addition, the indemnitor shall not be required to indemnify the
indemnitee for any amount paid or payable by such indemnitee in
the settlement of any claim for which the indemnitor has
delivered a timely Notice of Election if such amount was agreed
to without the written consent of the indemnitor.
(c) Procedure Where No Notice of Election Is Delivered: If the
indemnitor does not deliver a Notice of Election relating to any
claim within the required notice period, the indemnitee shall
have the right to defend the claim in such manner as it may deem
appropriate, at the cost and expense of the indemnitor. The
indemnitor shall promptly reimburse the indemnitee for all such
costs and expenses.
18.6. SUBROGATION
In the event that an indemnitor shall be obligated to indemnify an
indemnitee pursuant to this Article 18, the indemnitor shall, upon
payment of such indemnity in full, be subrogated to all rights of the
indemnitee with respect to the claims to which such indemnification
relates.
19. LIABILITY
IN NO EVENT, WHETHER IN CONTRACT OR IN TORT (INCLUDING BREACH OF WARRANTY,
NEGLIGENCE AND STRICT LIABILITY IN TORT), SHALL A PARTY BE LIABLE FOR
INDIRECT OR CONSEQUENTIAL, EXEMPLARY, PUNITIVE OR SPECIAL DAMAGES EVEN IF
SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES IN ADVANCE.
THE FORGOING LIMITATIONS AND EXCLUSIONS SHALL NOT APPLY RESPECT TO: (I)
DAMAGES OCCASIONED BY THE WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF VENDOR;
(II) CLAIMS THAT ARE THE SUBJECT OF INDEMNIFICATION PURSUANT TO THIS
AGREEMENT; (III) DAMAGES OCCASIONED BY VENDOR'S VIOLATIONS OF LAWS; AND
(IV) DAMAGES OCCASIONED BY IMPROPER OR WRONGFUL TERMINATION OF THIS
AGREEMENT OR ABANDONMENT OF THE WORK BY VENDOR. NOTWITHSTANDING ANYTHING TO
THE CONTRARY IN THIS AGREEMENT, P&G'S TOTAL LIABILITY HEREUNDER SHALL NOT
EXCEED AMOUNTS THEN DUE AND OWING AT THE TIME OF THE CLAIM.
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20. DISPUTE RESOLUTION
20.1. INFORMAL DISPUTE RESOLUTION
Prior to the initiation of formal dispute resolution procedures, the
Parties shall first attempt to resolve their dispute informally, as
follows:
(a) Upon the written request of a Party, each Party shall appoint a
designated representative who does not devote substantially all of his
or her time to performance under this Agreement, whose task it will be
to meet for the purpose of endeavoring to resolve such dispute.
(i) The designated representatives shall meet as often as the Parties
reasonably deem necessary in order to gather and furnish to the
other all information with respect to the matter in issue which
the Parties believe to be appropriate and germane in connection
with its resolution. The representatives shall discuss the
problem and attempt to resolve the dispute without the necessity
of any formal proceeding.
(ii) During the course of discussion, all reasonable requests
made by one Party to another for nonprivileged information,
reasonably related to this Agreement, shall be honored in
order that each of the Parties may be fully advised of the
other's position.
(iii)The specific format for the discussions shall be left to
the discretion of the designated representatives.
(b) Formal proceedings for the resolution of a dispute may not be
commenced until the earlier of:
(i) either of the designated representatives concluding in good
faith that amicable resolution through continued negotiation
of the matter does not appear likely; or
(ii) thirty (30) days after the initial written request to
appoint a designated representative pursuant to Section
19.1(a) above (this period shall be deemed to run
notwithstanding any claim that the process described in this
Section 20.1 was not followed or completed).
(c) This Section 20.1 shall not be construed to prevent a Party from
instituting, and a Party is authorized to institute, formal
proceedings earlier to avoid the expiration of any applicable
limitations period, or to preserve a superior position with
respect to other creditors, or as provided in this Agreement.
20.2. LITIGATION
(a) Immediate Injunctive Relief. The Parties agree that the only
circumstance in which disputes between them shall not be subject
to the provisions of Section 20.1 is where a Party makes a good
faith determination that a breach of the terms of this Agreement
by the other Party is such that a temporary restraining order or
other injunctive relief is the only appropriate and adequate
remedy. If a Party files a pleading with a court seeking
immediate injunctive relief and this pleading is challenged by
the other Party and the injunctive relief sought is not awarded
in substantial part, the Party filing the pleading seeking
immediate injunctive relief shall pay all of the costs and
attorneys' fees of the Party successfully challenging the
pleading.
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(b) Jurisdiction. The Parties consent to venue in Ohio and to the
non-exclusive jurisdiction of competent Ohio state courts or
federal courts in the State of Ohio for all litigation which may
be brought, subject to the requirement for arbitration hereunder,
with respect to the terms of, and the transactions and
relationships contemplated by, this Agreement. The Parties
further consent to the jurisdiction of any state court located
within a district which encompasses assets of a Party against
which a judgment has been rendered, either through arbitration or
through litigation, for the enforcement of such judgment or award
against the assets of such Party.
20.3. CONTINUED PERFORMANCE
Each Party agrees to continue performing its obligations under this
Agreement while any dispute is being resolved except to the extent the
issue in dispute precludes performance (dispute over payment shall not
be deemed to preclude performance).
20.4. GOVERNING LAW AND LANGUAGE
(a) This Agreement and performance under it shall be governed by and
construed in accordance with the laws of state of Ohio without
regard to its choice of law principles. The Parties agree that
the United Nations Convention on International Sale of Goods
shall have no force or effect on transactions relating to this
Agreement.
(b) Both parties understand the English language and are fully aware
of all terms and conditions contained herein.
21. TERMINATION
21.1. BREACH OF TERMS
In the event that Vendor:
(a) commits a material breach of this Agreement, which breach is not
cured within thirty (30) days after notice of breach from P&G to
Vendor;
(b) commits a material breach of this Agreement which is not capable
of being cured within thirty (30) days and fails to (i) proceed
promptly and diligently to correct the breach, (ii) develop
within thirty (30) days following written notice of breach from
P&G a complete plan for curing the breach, and (iii) cure the
breach within sixty (60) days of notice thereof;
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(c) commits a material breach of this Agreement that is not subject
to cure with due diligence within sixty (60) days of written
notice thereof;
(d) commits numerous breaches of its duties or obligations which
collectively constitute a material breach of this Agreement; or
(e) fails to meet all the Service Levels in any two consecutive
months or three times in a rolling six month period;
then P&G may, by giving written notice to Vendor, terminate this
Agreement, in whole or in part, as of a date specified in the notice
of termination. If P&G chooses to terminate this Agreement in part,
the charges payable under this Agreement will be equitably adjusted to
reflect those Services that are terminated.
21.2. VENDOR BANKRUPTCY
In the event Vendor shall be unable to pay its bills as they become
due in the ordinary course, or if a trustee or receiver of any of its
property shall be appointed, or if Vendor shall make any assignment
for the benefit of creditors, or if a petition in bankruptcy shall be
filed by or against Vendor, or if Vendor shall liquidate its business
for any reason, P&G shall have the right to terminate this Agreement
immediately without further obligation. Vendor will make available for
P&G's removal products, or other of P&G's property then under Vendor's
control. Vendor further agrees not to encumber such products or other
property, as through security liens or pledges, in any way. P&G's
right to remove such products shall have priority over all other
claimants.
21.3. CHANGES IN VENDOR OWNERSHIP
In recognition of the confidentiality obligation Vendor has assumed
hereunder, Vendor agrees not to assign or transfer its right and
obligations hereunder without the express written consent of P&G,
which shall not be unreasonably withheld. If for any reason Vendor
decides to sell or transfer the operation used in the fulfillment of
this Agreement, Vendor shall provide P&G with at least ninety (90)
days advance written notice of its intent to transfer or sell such
operation and will extend to P&G an option exercisable within ninety
(90) days after the date of such notice to sublease the portions of
the facility used in performance of this Agreement and to lease any
and all equipment for the purpose of conducting the operation by or on
behalf of P&G. At P&G's option, any new owner of operations
transferred or sold by the Vendor will be obligated to provide all
products or services under the same terms as this Agreement. It is
understood that this option does not in any way limit the other rights
and obligations of the Parties set forth in this Agreement. P&G
reserves the right to reduce or discontinue purchases under this
Agreement, or terminate this Agreement, without obligation if any
company obtains whole or part corporate ownership of Vendor.
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21.4. TERMINATION FOR CONVENIENCE
P&G may terminate this Agreement, in whole or in part, for convenience
and without cause at any time by giving Vendor at least three (3)
months prior written notice designating the termination date. In such
event, P&G will pay Vendor all accrued undisputed charges through the
termination date associated with the termination Services and will
reimburse Vendor for its Out-of-Pocket Expenses incurred in assisting
P&G in the transfer of the Services to P&G or to a new vendor
designated by P&G. In the event that a purported termination for cause
by P&G is determined by a competent authority not to be properly a
termination for cause, then such termination by P&G shall be deemed to
be a termination for convenience under this agreement.
21.5. EXTENSION OF TERMINATION EFFECTIVE DATE
P&G may extend the effective date of termination or expiration one or
more times as it elects, at its sole discretion, provided that the
total of all such extensions shall not exceed 180 days following the
original effective date of termination. This extension shall be under
the same rates and terms and conditions in place at the time of
termination.
21.6. TERMINATION/EXPIRATION ASSISTANCE
Commencing six (6) months prior to expiration or on such earlier date
as P&G may request, or commencing upon any notice of termination or of
non-renewal (including, without limitation, notice based upon breach
or default by P&G), and continuing through the effective date of
expiration (as such effective date may be extended), or, if
applicable, through the effective date of termination of this
Agreement (as such effective date may be extended pursuant to Section
21.5), Vendor shall provide to P&G, or at P&G's request to P&G's
designee, the termination/expiration assistance set forth in
Attachment D to the Statement of Work and any such other reasonable
termination/expiration assistance requested by P&G to allow the
Services to continue without interruption or adverse effect and to
facilitate the orderly transfer of the Services to P&G or its
designee. Such assistance shall include the following:
(a) P&G or P&G's designee shall be permitted to undertake, without
interference from Vendor, to hire any Vendor employees primarily
performing the Services as of the date Vendor receives notice of
termination, or, in the case of expiration, within the 6-month
period (or longer period requested by P&G) prior to expiration.
Vendor shall waive, and shall cause its subcontractors to waive,
their rights, if any, under contracts with such personnel
restricting the ability of such personnel to be recruited or
hired by P&G. P&G or its designee shall have reasonable access to
such personnel for interviews and recruitment.
(b) Vendor granting P&G a perpetual, irrevocable, royalty free
license to use any software owned or licensed by Vendor and
utilized in performing the Services.
(c) Vendor shall make available to P&G or its designee, pursuant to
reasonable terms and conditions, any third party services then
being utilized by Vendor in the performance of the Services.
Vendor shall be entitled to retain the right to utilize any such
third party services in connection with the performance of
services for any other Vendor customer.
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21.7. SURVIVAL
Section 21.6 shall survive termination/expiration of this Agreement.
For a period of twelve (12) months following the effective date of
termination/expiration under other provisions of this Agreement,
Vendor shall provide to P&G, at P&G's request, any or all of the
Services being performed by Vendor prior to such effective date. To
the extent Vendor is to perform Services under this Section, the
provisions of this Agreement, including rates and charges but not
minimum conditions, shall be applicable as such provisions would have
been applicable to such Services prior to such effective date.
21.8. EQUITABLE REMEDIES
Vendor acknowledges that, in the event it breaches (or attempts or
threatens to breach) its obligation to provide P&G
termination/expiration assistance as provided in Section 21.6, P&G
will be irreparably harmed. If a court of competent jurisdiction
should find that Vendor has breached (or attempted or threatened to
breach) any such obligations, Vendor agrees that without any
additional findings of irreparable injury or other conditions to
injunctive relief, it shall not oppose the entry of an appropriate
order compelling performance by Vendor and restraining it from any
further breaches (or attempted or threatened breaches).
22. GENERAL
22.1. FORCE MAJEURE
(a) No Party shall be liable for any default or delay in the
performance of its obligations under this Agreement (i) if and to
the extent such default or delay is caused, directly or
indirectly, by: fire, flood, earthquake, elements of nature or
acts of God; riots, civil disorders, rebellions or revolutions in
any country; or any other cause beyond the reasonable control of
such Party, (ii) provided the non-performing Party is without
fault in causing such default or delay, and such default or delay
could not have been prevented by reasonable precautions and can
not reasonably be circumvented by the non-performing Party
through the use of alternate sources, workaround plans or other
means (including with respect to Vendor by Vendor meeting its
obligations for performing disaster recovery services).
(b) In such event the non-performing Party shall be excused from
further performance or observance of the obligation(s) so
affected for as long as such circumstances prevail and such Party
continues to use its best efforts to recommence performance or
observance whenever and to whatever extent possible without
delay. Any Party so delayed in its performance shall immediately
notify the Party to whom performance is due by telephone (to be
confirmed in writing within two (2) days of the inception of such
delay) and describe at a reasonable level of detail the
circumstances causing such delay.
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(c) If any event under Section 22.1(a) above substantially prevents,
hinders, or delays performance of the Services necessary for the
performance of P&G functions reasonably identified by P&G as
critical for more than five (5) consecutive days, then at P&G's
option: (i) P&G may cease paying Vendor hereunder and procure
such Services from an alternate source for so long as the delay
in performance shall continue; (ii) P&G may terminate any portion
of this Agreement so affected and the charges payable hereunder
shall be equitably adjusted to reflect those terminated Services;
or (iii) P&G may terminate this Agreement without liability to
P&G or Vendor as of a date specified by P&G in a written notice
of termination to Vendor. Vendor shall not have the right to any
additional payments from P&G for costs or expenses incurred by
Vendor as a result of any force majeure occurrence.
22.2. AGREEMENT PRECEDENCE
In the event of any conflict between this Agreement, the Statement of
Work, the Statement of Work attachments and an Order, this Agreement
shall take precedence. In the event of any conflict between this
Agreement and any amendments or supplements thereof, the amendments or
supplements shall take precedence.
22.3. ENTIRE AGREEMENT; AMENDMENT
This Agreement, including the Statement of Work and any attachments
referred to herein and attached hereto, each of which is incorporated
herein for all purposes, constitutes the entire agreement between the
Parties with respect to the subject matter hereof and supersedes all
prior agreements, whether written or oral, with respect to the subject
matter contained in this Agreement. No change, waiver, or discharge
hereof shall be valid unless in writing and signed by an authorized
representative of the Party against which such change, waiver, or
discharge is sought to be enforced.
22.4. COMPLIANCE WITH LAWS AND REGULATIONS
Vendor shall perform its obligations in a manner that complies with
the applicable laws, regulations, ordinances and codes, including
without limitation identifying and procuring required permits,
certificates, approvals and inspections. If a charge of non-compliance
by Vendor with any such laws, regulations, ordinances, or codes
occurs, Vendor shall promptly notify P&G of such charges in writing.
22.5. ENVIRONMENTAL COMPLIANCE
Vendor warrants that all substances provided hereunder comply in all
respects with the applicable requirements of the Canadian
Environmental Protection Act, the U.S. Toxic Substances Control Act,
Regulations under said Acts and all other relevant legislation. Vendor
warrants that all substances it provides to P&G will accurately
correspond to P&G's specification(s) and that it will notify P&G in
advance of any proposed change in the substance(s) specified and
supplied hereunder. Any such changes must be mutually agreed upon by
P&G and Vendor prior to shipment to P&G. Vendor agrees to indemnify
and hold harmless P&G and its affiliates from all damages and
liability resulting from any breach of the warranties included in this
Paragraph.
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22.6. CUSTOMS LAW COMPLIANCE
Vendor warrants compliance with applicable customs laws and related
governmental laws and regulations. Vendor agrees to indemnify and save
P&G harmless for any Losses as a result of Vendor's failure to comply.
For all orders of non-US origin goods, P&G will inform Vendor(s) of
the specific destination(s) of the shipment(s) and the import
regulations and other legal requirements of the country of destination
will apply. In the event that the customs authorities of the
destination country refuse entry of the goods, except for P&G's
failure to obtain the appropriate import license or pay duty, P&G will
not be responsible to pay for the same and, if payment has already
been made, Vendor will reimburse P&G in full. Vendor shall be
responsible for the repatriation of the goods at Vendor's own cost.
22.7. NOTICES
All notices, requests, demands, and determinations under this
Agreement (other than routine operational communications), shall be in
writing and shall be deemed duly given (i) when delivered by hand,
(ii) one (1) day after being given to an express courier with a
reliable system for tracking delivery, (iii) when sent by confirmed
facsimile with a copy sent by another means specified in this Section,
or (iv) six (6) days after the day of mailing, when mailed by United
States mail, registered or certified mail, return receipt requested,
postage prepaid, and addressed as follows:
In the case of P&G: The Procter & Gamble Company
One Procter & Gamble Plaza
Cincinnati, Ohio 45202
Attn: D. R. Sarge,
Associate Director of IT Purchases
With a copy to: The Procter & Gamble Company
One Procter & Gamble Plaza
Cincinnati, Ohio 45202
Attn: General Counsel of P&G
In the case of Vendor: Pomeroy Computer Resources
1020 Petersburg Road
Hebron, KY 41048
Attn: Dave Pomeroy
A Party may from time to time change its address or designee for
notification purposes by giving the other prior written notice of the
new address or designee and the date upon which it will become
effective.
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22.8.NOTICE OF LABOR UNION CONTRACT EXPIRATION DATE OR NOTICE OF LABOR
DISPUTES
Vendor agrees to notify P&G in writing of the existence of any labor
contract, including the expiration date and name of union involving
Vendor's facilities providing Products or Services to P&G hereunder,
including Vendor's subcontractors, if any. Whenever an actual or
potential labor dispute impacts, or threatens to impact the timely
performance of services under the Agreement, the Vendor shall
immediately notify P&G in writing of all relevant information with
respect to such dispute.
22.9. COUNTERPARTS
This Agreement may be executed in several counterparts, all of which
taken together shall constitute one single agreement between the
parties hereto.
22.10. HEADINGS
The article and section headings and the table of contents used herein
are for reference and convenience only and shall not enter into the
interpretation hereof.
22.11. RELATIONSHIP OF PARTIES
Vendor, in furnishing services to P&G hereunder, is acting as an
independent contractor, and Vendor has the sole right and obligation
to supervise, manage, contract, direct, procure, perform or cause to
be performed, all work to be performed by Vendor under this Agreement.
Vendor is not an agent of P&G and has no authority to represent P&G as
to any matters, except as expressly authorized in this Agreement.
22.12. SEVERABILITY
In the event that any provision of this Agreement conflicts with the
law under which this Agreement is to be construed or if any such
provision is held invalid by an arbitrator or a court with
jurisdiction over the Parties, such provision shall be deemed to be
restated to reflect as nearly as possible the original intentions of
the Parties in accordance with applicable law. The remainder of this
Agreement shall remain in full force and effect.
22.13. WAIVER OF DEFAULT; CUMULATIVE REMEDIES
(a) A delay or omission by either Party hereto to exercise any right
or power under this Agreement shall not be construed to be a
waiver thereof. A waiver by either of the Parties hereto of any
of the covenants to be performed by the other or any breach
thereof shall not be construed to be a waiver of any succeeding
breach thereof or of any other covenant herein contained.
(b) All remedies provided for in this Agreement shall be cumulative
and in addition to and not in lieu of any other remedies
available to either Party at law, in equity or otherwise.
22.14. SURVIVAL
Any provision of this Agreement which contemplates performance or
observance subsequent to any termination or expiration of this
Agreement shall survive any termination or expiration of this
Agreement and continue in full force and effect.
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22.15. MEDIA RELEASES
All media releases, public announcements, and public disclosures by
either Party relating to this Agreement or the subject matter of this
Agreement, including without limitation, promotional or marketing
material (both internal and external), but not including announcements
intended solely for internal distribution or to meet legal or
regulatory requirements beyond the reasonable control of the
disclosing Party, shall be coordinated with and approved by the other
Party prior to release. Vendor may not list P&G as a customer or
describe the services provided by Vendor under this Agreement in
proposals and other marketing materials except as agreed above.
22.16. SERVICE MARKS
Vendor agrees that it shall not, without P&G's prior written consent,
which P&G may grant or withhold in its absolute discretion, use the
name, service marks or trademarks of P&G.
22.17. THIRD PARTY BENEFICIARIES
Except as provided in this Agreement, this Agreement is entered into
solely between, and may be enforced only by, P&G and Vendor. This
Agreement shall not be deemed to create any rights in third parties,
including without limitation suppliers and customers of a Party, or to
create any obligations of a Party to any such third parties. Vendor
acknowledges and agrees that the affiliates of P&G are third party
beneficiaries to the terms of this Agreement and that any such
affiliate may bring suit in its own behalf to enforce the term of this
Agreement.
22.18. THIRD PARTY SERVICES
P&G will have the right to engage third parties to provide products
and services to P&G without restriction. At P&G's request, Vendor will
cooperate and provide reasonable assistance to such third parties.
22.19. NONSOLICITATION
Except as otherwise provided in this Agreement, Vendor may not
directly or indirectly solicit for employment or hire (whether part-
or full-time and whether as employee or independent contractor)
employees of P&G at any time during the Term or for a period of one
(1) year thereafter without the prior written consent of P&G.
22.20. COVENANT AGAINST PLEDGING
Vendor agrees that, without the prior written consent of P&G, it shall
not assign, transfer, pledge, hypothecate or otherwise encumber its
rights to receive payments from P&G under this Agreement for any
reason whatsoever.
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22.21. COVENANT OF GOOD FAITH
Each Party agrees that, in its respective dealings with the other
Party under or in connection with this Agreement, it shall act in good
faith.
23. SUPPLEMENTAL TERMS
The following terms and conditions shall apply with respect to all
Vendor personnel (including employees and subcontractors) on P&G's
sites:
23.1. THIRD-PARTY RELATIONSHIPS
(a) Vendor Responsibility . Vendor agrees that no authority has been
conferred upon it by P&G to hire any person or persons on behalf
of P&G, and P&G undertakes no obligation of any sort to Vendor's
employees. It is understood that the Vendor shall select, engage,
and discharge its employees, agents or servants and otherwise
direct and control their services. It is further understood that
for all purposes of this Agreement, the Vendor is an independent
contractor and, as such, the Vendor agrees to comply with and
shall be responsible for all requirements of Federal, State and
Local laws and regulations, including by way of example only and
without limiting the generality of the foregoing, The Fair Labor
Standards Act, Labor Management Regulations Act, the Americans
with Disabilities Act, all other laws and regulations relating to
labor and equal employment opportunity, Worker's Compensation,
Occupational Safety and Health Act, the Employee Retirement
Income Security Act, and the Immigration Reform and Control Act.
Vendor will also comply with all laws concerning qualification to
do business and engage in the work involved under this Agreement
and will file all returns and reports required of it and pay all
taxes and contributions imposed upon it. Vendor agrees to
indemnify and hold harmless P&G for any liability, damage, cost,
or expense P&G may suffer as a result of Vendor's failure to
assume or fulfill the obligations set forth in this paragraph.
(b) Unauthorized Aliens . Vendor certifies that it has complied with
the Immigration Reform and Control Act of 1986, or any amendment
thereto, and that none of its employees utilized by P&G are
unauthorized aliens.
23.2. OVERTIME, TRAVEL, AND MOTOR VEHICLE OPERATION
(a) Overtime and Travel . In the event P&G may require the services
of certain personnel for overtime and/or for travel, Vendor will
be notified and all necessary arrangements will be made through
it. Vendor will advise P&G of any premium cost for such services.
Vendor shall advance reasonable travel expenses to its employee
and shall invoice P&G for expenses incurred, listing the total of
all daily expenses by major spending categories (i.e., fares,
automobile use, lodging, miles, telephone, local transportation,
etc.). Vendor shall retain supporting documents to substantiate
such expenses for P&G's audit at P&G's option.
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(b) Operation of Motor Vehicles . Vendor acknowledges that certain
personnel may be asked to provide services which require
operation of motor vehicles owned by P&G. Vendor agrees that
P&G-owned vehicles will be used only for completion of specific
work assignments as designated by P&G and for no other purposes.
Vendor also acknowledges that any of its employees who may be
required to operate P&G-owned vehicles shall have a valid
driver's license and that said vehicles shall be operated in a
safe manner at all times. Vendor shall inform its employees who
may operate P&G-owned vehicles of this agreement and obtain their
written acknowledgment that they understand and agree to use such
vehicles only as authorized.
23.3. CHEMICAL SAFETY TRAINING
If the Vendor's employees covered by this agreement are to have
assignments in which chemicals will be handled and/or processed,
Vendor acknowledges that P&G requires Vendor to provide for safety
training of such employees at Vendor's expense under requirements for
Vendor responsibility in Federal OSHA regulations, 29 CFR 1910.1200.
23.4. SECURITY TRAINING
Vendor shall provide a security training to all persons referred to
P&G, including review of P&G's confidentiality leaflet "Information
for the Temporary Agency Personnel and Contract Person." Vendor shall
obtain their employee's signature on a copy of this leaflet both the
first time they are sent to P&G and after the final assignment with
P&G. It will not be necessary to obtain signatures for each
assignment--only before the very first and after the very last. The
leaflet with its signatures should be kept in Vendor employee's file
and made available for audit.
23.5. BACKGROUND CHECKS
Vendor shall perform conviction checks (felonies and misdemeanors)
every two years for all individuals referred to P&G, and for those
currently on assignment at P&G's facility. The following guidelines
should be used to determine if Vendor's employee may be sent to work
on P&G's premises or represent P&G on another company's premises.
(a) Vendor must exclude an individual from P&G's premises or from
directly representing P&G if he/she has EVER been convicted of
the following types of crime:
(i) Any type of Murder
47
<PAGE>
(ii) Voluntary Manslaughter
(iii) Aggravated Assault
(iv) Assault with a Deadly Weapon
(v) Kidnapping
(vi) Rape
(vii) Sexual Battery or Gross Sexual Imposition
(viii) Arson
(ix) Robbery
(x) Trafficking in Drugs
(b) If Vendor's employee will deal directly with cash on behalf of
P&G or with the authorization of any type of payment, Vendor must
exclude any individual who has ever received a misdemeanor or
felony conviction for the following types of crime:
(i) Theft
(ii) Embezzlement
(iii) Fraud of any kind
(c) Other than the specific felony charges listed in 12.3.7.1 (which
excludes an individual from P&G's premises), Vendor must exclude
any individual convicted of a felony (e.g., Burglary,
Unauthorized Criminal Access to Computer Systems, etc.) within
the last five (5) years.
(d) Vendor must exclude any individual convicted of a misdemeanor
within the last two (2) years. Individuals with convictions for
traffic violations do not fall into the exclusion category.
Individuals with DUI convictions do not fall into the exclusion
category unless he/she will be driving a Company vehicle, or
multiple charges exist. Vendor should contact their P&G Contract
Executive for clarification if uncertainties exist.
(e) Vendor must exclude any individual from P&G's premises, or from
representing P&G directly, if he/she meets ANY of the above
guidelines.
(f) Note that Different states may have different names for the above
types of crime. For example, some states may refer to "assault
with a deadly weapon" as "battery with a dangerous ordnance."
Conviction checks should consist of the following:
48
<PAGE>
(i) Ohio/Kentucky Residents: Check in the city and county of
residence and - the city and county of employment. For
Hamilton County, checks should be obtained from the Hamilton
County Justice Center (Records Division, Court & Main
Streets).
(ii) New to area (resident less than two years): Check in the
city and county of former residence. If the individual has
moved several times in the past two (2) years, contact the
P&G Contract Executive for clarification around required
checks.
23.6. REFERENCE CHECKS AND COMPETITOR TIES
Vendor shall check all references provided by applicants before
sending to P&G and shall not refer anyone who has poor
references. P&G is to be made aware of any person being referred
who has worked for a company that makes products like P&G's every
time this person is referred to P&G, and must agree before the
person is sent to P&G's facility.
23.7. COMPETITOR RELATIONS
Vendor shall check to see if the individual lives with, or is related
to, anyone who works for a company that makes products similar to
P&G's products, such as household and industrial cleaning products,
beauty care and personal care products, food and beverage products,
paper and cellulose products, industrial chemicals and
pharmaceuticals. If so, P&G is to be made aware of this every time
this person is referred to P&G, and must agree before the person is
sent to P&G's facility.
23.8. CONTROLLED SUBSTANCES
(a) P&G prohibits the use, possession, or distribution of any
controlled substance or alcoholic beverage by a Vendor or an
employee of the Vendor on any of P&G's premises or by a Vendor or
an employee of the Vendor representing P&G on another's premises.
A controlled substance is any drug or drug-like substance whose
sale, use, or possession is unlawful, or any prescribed substance
used without a prescription. Violators of this policy will be
banned from P&G's premises.
(b) The Vendor shall not permit users of controlled substances to
work on P&G's premises or to represent P&G on another's premises.
Any employee of the Vendor who is assigned to P&G must be tested
before being sent to P&G for the presence of amphetamines,
barbiturates, benzodiazepines, cannabinoids (marijuana, THC,
hashish), cocaine, opiates, methadone, methaqualone, and
phencyclidine (PCP) by a qualified laboratory using initial
screening and confirmation of any positive results. A qualified
laboratory must follow the standards of the College of American
Pathologists, meet any federal, state, and local laws and
regulations, and use a cutoff limit within the detection ranges
specified in this contract. Any individual who has been tested
once but has not worked on P&G's premises or represented P&G on
another's premises for more than the six (6) previous months must
be retested in accordance with this paragraph.
49
<PAGE>
(c) Anyone who confirms positive for a controlled substance without a
legitimate medical reason will not be assigned to work on P&G's
premises or represent P&G on another's premises. Furthermore, the
Vendor will control the work assignments of anyone taking a
prescription drug for a legitimate medical reason so the person
does not present a safety risk to himself/herself, other
personnel, or P&G's property.
(d) A Vendor must have a written policy on substance abuse to assure
compliance with the above criteria.
(e) A qualified laboratory must use a cutoff limit within the
detection ranges specified in the table below:
DRUG DETECTION THRESHOLDS (MG/ML)
---------------------------------
<TABLE>
<CAPTION>
DRUG, DRUG GROUP TYPICAL DETECTION
OR DRUG METABOLITES THRESHOLD, MG/ML
- ------------------------ -----------------
<S> <C>
Amphetamines 300-1250
Barbiturates 200-1000
Benzodiazepines 100-1000
Cannabinoids (marijuana) 20-100
Cocaine metabolites 300
Opiates 300
Methadone 300
Methaqualone 300-1000
Phencyclidine (PCP) 25-75
</TABLE>
23.9.CONFIRMATION OF BACKGROUND CHECKS AND CHECKS FOR CONTROLLED SUBSTANCES
P&G shall have the right to require confirmation that the conviction
checks and drug tests of Sections 23.5 and 23.8 above, respectively,
have been and are being conducted pursuant to this Supplemental
Agreement. Said confirmation may take the form of an audit which P&G
may conduct of Vendor's records. However, any such audit shall be done
at a reasonable time and place and shall not be unduly burdensome on
the Vendor's business operations. Furthermore, any information
regarding any of Vendor's employees or applicants which may be
revealed during such audit shall remain confidential.
50
<PAGE>
23.10. SECURITY INSPECTIONS
Vendor agrees that parcels, packages, briefcases, gym bags, and
similar items carried by Vendor's employees shall be subject to
inspection by security representatives of P&G.
23.11. WORK LIMITATION
Vendor agrees to assume full responsibility for selecting, engaging,
and discharging its employees, agents, or servants and for otherwise
directing and controlling their activities. If Vendor's employees are
to be supervised or controlled by P&G, then the following shall apply:
Vendor must comply with P&G's "1,000 Hours" policy. Any employee of
the Vendor who works 1,000 hours or more in any combination of
assignments on any of P&G's premises or representing P&G on another's
premises for any combination of Vendors in P&G's fiscal year will not
be permitted to work as a Vendor employee at P&G's facilities or
represent P&G on another's premises at any time in the next P&G's
fiscal year. Such individuals will become eligible to work again at
P&G's facilities on July 1 of the following year.
23.12. QUALITY
Should Vendor be unable to meet P&G's performance quality
requirements, P&G may cancel this Agreement without any obligation to
Vendor.
23.13. BLOODBORNE PATHOGEN TRAINING
If the Vendor's employees covered by this agreement are to have
assignments in which they could be exposed to bloodborne pathogens,
Vendor acknowledges that P&G requires Vendor to provide for any
training at Vendor's expense under requirements in Federal Regulation
29 CFR 1910.1030. Furthermore, Vendor agrees to offer to any such
employees who could be exposed to bloodborne pathogens at Vendor's
expense any and all inoculations as may be required under Federal
Regulation 29 CFR 1910.1030 and to follow any and all other
requirements under said Federal Regulation.
23.14. CREDIBLE THREATS
Vendor shall immediately inform P&G of any credible threat made
against anyone on P&G's premises and/or against P&G's property by any
of Vendor's employees. Vendor is required to communicate any such
information of a credible threat to P&G's security contact for that
site.
23.15. P&G SITE AND SAFETY RULES
Vendor agrees that when on P&G's premises, Vendor and its employees
will conform to the requirements of the P&G Site's work and safety
rules.
51
<PAGE>
IN WITNESS WHEREOF, P&G and Vendor have each caused this Agreement to be
signed and delivered by its duly authorized officer.
THE PROCTER & GAMBLE COMPANY POMEROY COMPUTER RESOURCES
By:________________________________ By:_______________________________
Name:______________________________ Name:____________________________
Title:_____________________________ Title:_____________________________
Date:______________________________ Date:_____________________________
52
<PAGE>
Statement of Work
To
Workstation Procurement and Support Services Agreement
By and Between
The Procter & Gamble Company
And
Pomeroy Computer Resources
INTRODUCTION
As set forth in Section 4.1 of the Agreement, the Vendor shall perform the
services, functions, and responsibilities described in this Statement of Work
(SOW), including the Attachments hereto and incorporated herein by this
reference, as well as the additional services, functions and responsibilities
that Vendor has committed to perform as described throughout the Agreement. The
descriptions of the Services in this Schedule are intended to be comprehensive
but not necessarily complete or all-inclusive. All capitalized terms not
defined in this Schedule will have the meanings given them in the Agreement.
OVERVIEW OF SOW AND SERVICES
This SOW provides a general description of the Services to be performed during
the Term of the Agreement. The following Attachments are attached to this SOW
and provide further details regarding the services, functions and
responsibilities of Vendor under this Agreement:
Attachment A P&G Sites
Attachment B-1 Procurement, Workstation Distribution and
Workstation Disposal Services
Attachment B-2 Packaged Software Help Desk Services
Attachment B-3 Deskside and Server Support Services
Attachment C Transition Services
Attachment D Termination and Decommissioning
Attachment E Service Levels
Attachment F Special Projects
Attachment G Resource Charges, Financial Responsibility and
Pricing
Attachment H Overall Management
Attachment I Quality Processes
As more fully described herein, Vendor will provide the following services:
1. Transition Services
2. Procurement Services
3. Workstation Distribution Services
4. Expenses and Software Procurement Services
5. Packaged Software Help Desk Services
6. Deskside and Server Support Services
7. Workstation Disposal Services
During the Term, Vendor's Services will include the services identified under
the Vendor SOW Responsibilities section below for the P&G owned personal
computer deskside hardware and software systems including all related
peripherals (Workstations) and workplace servers including related peripherals
(Workplace Servers) located at the P&G Sites. The P&G Sites include those sites
specified in Attachment A as of the Effective Date.
P&G's responsibilities are those identified in the P&G SOW Responsibilities
section below.
In accordance with the terms of the Agreement, Vendor shall provide the Services
and P&G shall pay Vendor the charges specified in Attachment G.
<PAGE>
STANDARD TECHNOLOGIES
P&G uses standard technologies as follows:
(1) Deployable Technologies List (DTL) - The DTL is a dynamic listing of
hardware and software technologies that have been approved by P&G for use within
P&G. The list is updated regularly and will be available to Vendor.
(2) Standard Platforms are comprised of a set of hardware and software that
have been tested by P&G resources for use together, and approved for broad
deployment within P&G. There may be more than one Standard Platform in use at
any time, according to the needs of business units.
VENDOR SOW RESPONSIBILITIES
The Vendor will provide:
(A) SOW Management Services, including the assignment of Vendor Project
--------------------------
Executive to whom all P&G communications may be addressed and who has the
authority to act for and bind Vendor and its subcontractors in connection
with all aspects of the Services. Vendor will also designate certain Key
Vendor Personnel reporting to Vendor Project Executive. Vendor will provide
P&G with reasonable advance notice of any changes to Vendor Project
Executive and Key Vendor Personnel and discuss with P&G any objections P&G
may have to replacement candidates. The Vendor will resolve P&G concerns on
a mutually agreeable basis. Unless otherwise agreed in writing by the
parties:
(1) Vendor Project Executive shall not be transferred from the P&G account
during the performance of this SOW without prior written approval of
P&G, such approval shall not be unreasonably withheld.
(2) Neither Vendor Project Executive nor the Vendor Technical Manager
assigned to P&G's account shall be assigned by Vendor to the direct
competitors of P&G or one of its Affiliates to work in the same or
similar capacity as such personnel worked for Vendor on P&G's account
within a period of six (6) months after leaving the P&G account.
(B) Transition Services, as identified in Attachment C.
--------------------
(C) Termination and Decommissioning Services, in accordance with Attachment D,
---------------- ------------------------
to assure a smooth transition of Services to P&G or another supplier upon
termination or expiration of the Services.
(D) Procurement and Deskside and Workplace Server Support Services, as further
---------------------------------------------------------------
specified in Attachments B and E, including the following Services:
(1) Procurement Services;
(2) Workstation Distribution Services;
(3) Expense and Software Procurement Services;
(4) Packaged Software Help Desk Services
(5) Deskside and Server Support Services;
(6) Workstation Disposal Services
(F) Quality Processes and Procedures Services, development and maintaining of a
------------------------------------------
Procedures Manual which will describe the Change Management Process,
Problem Management Process, Service Level Management Process, Reporting and
Documentation Process, Scheduled Meetings, Review Committee, and Dispute
Resolution Processes in accordance with Attachment I. The contents of the
Procedures Manual are subject to approval by P&G.
(G) Service Level Management Services, including the Services descriptions and
----------------------------------
the measurement methodology in accordance with Attachment E.
(H) Other Project Services, The Vendor will also prepare and execute additional
-----------------------
project plans during the Term in accordance with the process and procedures
specified in Attachment F.
<PAGE>
P&G SOW RESPONSIBILITIES
To enable Vendor to provide the Services, P&G will provide:
(A) SOW Management Interface including the assignment of a P&G Contract
--------------------------
Executive to whom all Vendor communications may be addressed and who has
the authority to act for P&G in connection with all aspects of the
Services.
(B) Facilities and Related Support. Subject to P&G's reasonable security
---------------------------------
requirements, P&G will provide Vendor and subcontractor personnel with full
and safe access to P&G Sites.
(C) Non-Standard Software Support including problem determination and
--------------------------------
resolution support to P&G end-users for all P&G developed applications or
other software products not supported by third party vendors after Vendor
has expended reasonable efforts to provide such support.
(D) Local Support Center, including responsibility for the problem logging
---------------------
services, tracking services, reporting services, problem coordination
services, support services including second level, problem review and root
cause analysis.
(E) Network Services and Support, including responsibility for all common
--------------------------------
carrier services for local, long distance, WATS (in and out), maintenance
of an inventory and configuration diagram of the data network, all LAN/WAN
telecommunications and network services required to support P&G end-users,
and the data communication line between Packaged Software Support Help Desk
and P&G.
(F) Other Responsibilities comprised of providing:
----------------------
(1) Personnel and equipment to reasonably ensure the physical security of
P&G Sites,
(2) All consumables including print and media supplies required by P&G
end-users,
(3) All costs associated with off-site data storage, if any,
(4) Such other P&G activities and functions as are described in this SOW,
(5) Capital Forecasting for Desksides and Workplace Servers,
(6) Workplace P&G end-user needs assessment,
(7) Workplace Technology Recommendation,
(8) Workplace Research, Engineering and Development, technology gate
keeping standard setting for Desksides,
(9) Notify Vendor of support calls,
(10) P&G end-user training on Deskside applications, except for Deskside
orientation training provided by Vendor,
(11) P&G end-user communications via bulletins, memoranda, etc., and
(12) Information Systems Strategic Planning,
P&G will be financially responsible for all costs and expenses associated
with its SOW Responsibilities.
CHANGE CONTROL PROCEDURES
Change Authorizations will be the effective means to implement changes to this
SOW. The Parties will mutually determine appropriate procedures related to
Change Authorizations. The resulting procedures will be included in the
Procedures Manual.
<PAGE>
ATTACHMENT A: P&G SITES
AS OF THE TRANSITION START DATE, THE P&G SITES INCLUDE THE FOLLOWING:
<TABLE>
<CAPTION>
SITE BUILDING STREET
- -------------------- -------------------------------------------- --------------------------------
<S> <C> <C>
GH GOVERNOR'S HILL 8500 GOVERNOR'S HILL
GO CENTRAL BUILDING 301 EAST 6TH STREET PLAZA 1
GO CHEMED BLDG FLR 2,6,7,8,9,10 & 14 255 EAST 5TH STREET
GO HARTFORD BLDG 630 MAIN STREET
GO PNC BANK (FLOORS 11 & 12) 201 EAST 5TH STREET
GO POLK BLDG (FLOOR 10) 400 PIKE STREET
GO SYCAMORE BLDG 299 EAST 6TH STREET
GO TERRACE (NORTH) 300 EAST 6TH STREET PLAZA 2
GO TOWER EAST 5TH & BROADWAY PLAZA 2
GO TOWER NORTH 5TH & BROADWAY PLAZA 2
HCRC HEALTH CARE RESEARCH CENTER 8340 MASON-MONTGOMERY ROAD
IV BLDG 96 TRAILER 5201 SPRING GROVE AVE
IV ESTE ENGINEERING LAB I 4530 ESTE AVE
IV ESTE ENGINEERING LAB II 4550 ESTE AVE
IV FLUOR DANIELS, INC. 134 MERCHANT STREET
IV GLOBAL PROCESS DEVELOPMENT FACILITIES (GPDF) 5384 VINE STREET
IV ITC ANNEX 5299 SPRING GROVE AVE.
IV ITC MAIN 5299 SPRING GROVE AVE.
IV IVORYDALE - CLOCK TOWER 5201 SPRING GROVE AVE
IV IVORYDALE - FOOD PLANT 5204 SPRING GROVE AVE
IV IVORYDALE PLANT 5495 JUNE STREET
IV IVORYDALE PLANT - NORTH MURRAY ROAD 400 MURRAY RD.
IV IVORYDALE PLANT - NORTH MURRAY ROAD 500 MURRAY RD.
IV IVORYDALE SOAP PLANT 5201 SPRING GROVE AVE
IV IVORYDALE SOAP PLANT & GENERAL 5201 SPRING GROVE AVE
IV MITCHELL LABS
IV OLEAN PLANT KINGS ROAD
IV ST. BERNARD PLANT 5289 VINE STREET
MVL MIAMI VALLEY LABS 11810 E. MIAMI RIVER ROAD
SW ADMIN (BLDG A) 11510 REED HARTMAN
SW BAR SOAP & HCP (BLDG B) 11520 REED HARTMAN
SW BAXTER PEAS 4460 CARVER WOODS
SW BLUE ASH DATA CENTER (BLDG D) 11540 REED HARTMAN
SW BLUE ASH OFFICE CENTER 10200 ALLIANCE ROAD
SW BRECON TECH CENTER 7731 E. KEMPER ROAD
SW GROOMS ROAD-HEALTH CARE (HC BLD) 11450 GROOMS ROAD
SW HABA (HEALTH & BEAUTY-HB BLDG) 11511 REED HARTMAN HIGHWAY
SW HEEKIN BUILDING (HK BLDG) 11310 CORNELL PARK DRIVE
SW IND CLEANING (BLDG C) 11530 REED HARTMAN
SW KEMPER ENG LAB 7800 PALACE DR
SW LOCKWOOD GREEN ENGINEERING 11311 CORNELL PARK
SW NALS ANNEX - CORNELL TECH CENTER 5430 CORNELL ROAD
SW PARK PLACE (RC BLDG) 11370 REED HARTMAN HIGHWAY
SW PSDF - CP BUILDING - CORNELL PARK BUILDING 11262 CORNELL PARK DRIVE
SW PSDF NALS 5600 CORNELL ROAD
SW R&CD BLDG 11380 REED HARTMAN HIGHWAY
SW REDNA PRODUCTIONS - BLOCK BLDG 637 REDNA TERRACE
SW RHBP NORTH - BUILDING 11305 REED HARTMAN HWY.
SW RHBP RESEARCH CENTER 11325 REED HARTMAN HWY.
SW RHBP WEST - BUILDING 11325 REED HARTMAN HWY.
SW RHBP SOUTH - BUILDING 11315 REED HARTMAN HWY.
SITE BUILDING STREET
- -------------------- -------------------------------------------- --------------------------------
SW SOLVENT BUILDING 11580 REED HARTMAN HWY.
SW SURVEY PACK BUILDING 134 WILLIAMSON ROAD
SW UTILITIES (U BLDG) 11590 REED HARTMAN HIGHWAY
SW WILLIAMSON ROAD WAREHOUSE (NORTH) 11431 REED HARTMAN
SW WILLIAMSON ROAD WAREHOUSE (SOUTH) 11335 REED HARTMAN SUITE 134
WH ADMINISTRATION BLDG 6090 CENTER HILL ROAD
WH BEVERAGE BLDG (COFFEE) 6210 CENTER HILL ROAD
WH COMPOST AREA 6086 CENTER HILL ROAD
WH ENGINEERING BLDG 6300 CENTER HILL ROAD
WH ENGINEERING BLDG 302 6302 CENTER HILL ROAD
WH ENGINEERING BLDG 310 6310 CENTER HILL ROAD
WH FOOD & BEVERAGE BLDG (110) 6110 CENTER HILL ROAD
WH FOODS BLDG 6071 CENTER HILL ROAD
WH INTERNATIONAL 6060 CENTER HILL ROAD
WH PACKOUT BUILDING 6120 CENTER HILL ROAD
WH PAPER EAST 6105 CENTER HILL ROAD
WH PAPER TERRACE 6100 CENTER HILL ROAD
WH SERVICE BLDG 6083 CENTER HILL ROAD
WH SOLVENT BUILDING 6190 CENTER HILL ROAD
WH SUBSTATION 301 6301 CENTER HILL ROAD
WH WEST BLDG 6250 CENTER HILL ROAD
ADSB ADVERTISING SERVICES BLDG 2150 SUNNYBROOK DRIVE
AO AIRLINE OPERATIONS-HANGER 4 WILMER AVE.
BGP BGP 7785 EAST KEMPER ROAD
BGP BGP - NORTHLAND 650 NORTHLAND BLVD. - FLOOR 6
N/A CASCADE PILOT PLANT 4510 KINGS RUN DRIVE
N/A CINCINNATI SALES OFFICE 120 WEST 5TH STREET (5TH & RACE)
N/A GRADY ANIMAL LAB - 790 BLDG 790 COMPTON ROAD
N/A M2SE 2220 VICTORY PARKWAY
N/A MALSBARY 4380 MALSBARY ROAD
N/A MATRIX MARKETING 4600 MONTGOMERY RD.
N/A MITCHELL II WHSE. & SHIPPING 4831 SPRING GROVE AVE.
N/A MITCHELL III 4831 SPRING GROVE AVE.
N/A BECKETT RIDGE UNION CENTER BOULEVARD
NON-CINCINNATI SITES
- ----------------------------------------------------------------------------------------------------
SITE NAME
- ----------------------------------------------------------------------------------------------------
AY Albany, GA
ALX Alexandria, LA
ANH Anaheim,CA
ATL Atlanta, GA
ABNME Auburn, ME
AUG Augusta,GA
AV Avenel, NJ
CAPE Cape Girardeau, MO
CAY Cayay, Puerto Rico
CBD Mobile CBD Est. (TX)
CMTNH Claremont, NH
DVR Dover, NH
FV Fayetteville, AR
GIORGIO Giorgio. CA
GBAY Green Bay, WI
GBS Greensboro, NC
GVN Greenville, NC
GVS Greenville, SC
HEN Henderson,KY
HV Hunt Valley, MD
IC Iowa City, IA
JKSN Jackson, TN
KCF Kansas City, MO
KCS Kansas City, KS
LX Lexington, KY
LM Lima, OH
MP Mehoopany, PA
MO Modesto, CA
NOLA New Orleans, LA
NOR Norwich, NY
OX Oxnard, CA
PHX Phoenix, AZ
PLY Plymouth, IN
SACT Sacramento, CA
SHR Sherman, TX
SBR South Brunswick, NJ
STL St. Louis, MO
CANADA SITES
- ----------------------------------------------------------------------------------------------------
SITE NAME
- ----------------------------------------------------------------------------------------------------
BELL Belleville, CAN
BRK Brockville, CAN
HAM Hamilton, CAN
TOR Toronto GO
CAL Calgary (west)
MONT Montreal (Quebec)
HAL Halifax (Altantic)
CAM Cambridge Pharm.
WEST Weston Road, CAN
</TABLE>
<PAGE>
ATTACHMENT B-1
PROCUREMENT, CWDC, AND DISPOSAL
This Attachment describes the Services that a Vendor will provide in relation to
Workstation Procurement, Cincinnati Workstation Distribution Center (CWDC), IS
Expense Procurement, and Workstation Disposal.
1. DESCRIPTION OF VENDOR RESPONSIBILITIES
Vendor will provide the Services described below during the Term. Vendor is
responsible for documenting and maintaining procedures executed by Vendor in the
Procedures Manual. Vendor shall provide the Services in accordance with the
terms of the Agreement, the Service Levels, the descriptions contained in this
Attachment B, and the procedures as established and documented during the
transition phase of this work.
I. VENDOR SHALL PROVIDE THE NECESSARY SERVICES TO PROCURE PRODUCTS ORDERED
THROUGH VENDOR BY P&G. SUCH SERVICES, RESPONSIBILITIES, AND FUNCTIONS SHALL
INCLUDE THE FOLLOWING:
1. Documentation and on-going maintenance of the Procedures Manual outlining
activities performed by Vendor for P&G (this Procedures Manual shall be
available to P&G upon request);
2. Procurement of Equipment for P&G Sites in accordance with that defined by
the current DTL or as instructed by the P&G owner of procurement of Equipment;
3. Ensure multiple suppliers are available for models on the DTL and
communicate to P&G supply capability and pricing;
4. Assisting with scheduling adjustments, when necessary, due to budget
changes, capacity issues, etc.;
5. Negotiation of final pricing agreements reflective of the region's
forecasted volumes and within the upper limit set forth by P&G and the Product
manufacturer (if existing);
6. Acquisition of Product as Ordered on P&G's behalf;
7. Acceptance of Orders (i.e., authorized Purchase Orders (POs) and order
releases against POs) from designated P&G representative(s). When placing an
Order, Vendor will request specific delivery dates if necessary, obtain
estimated delivery dates, and communicate any delay to appropriate P&G
personnel;
8. Confimation of Orders, placement and delivery dates to P&G Order
Management Team.
9. Tracking of the status of Orders and reporting on its disposition through
electronic or verbal means;
10. Procurement of non-standard workstation Products not listed on the DTL,
DTL Products, and P&G approved exceptions;
11. Maintenance of a web-based or electronic system (available for
incorporation in P&G's asset mangement tool) for the placement and tracking of
Orders, as well as alternate forms of placement (fax, telephone) for Product
Orders;
12. Maintenance of an electronic product-based catalogue available for use
in P&G's asset mangement system which includes Products listed on the DTL and/or
Products available from Vendor and approved by P&G for purchase. This catalog
will contain, at a minimum, descriptions of the products, version and pricing
data;
13. Invoicing as required for the procurement of Products;
14. Responsibility for timeliness of delivery and actions of selected
carriers used to transport Products;
15. A receivables balance reconciliation and the resolution of "dead on
arrivals" (DOA), overages, shorts and damages identified at point of receipt;
16. Incurrence of costs associated with the resolution of DOA, overages,
shorts and damages;
17. Provision of electronic files listing Products purchased and pertinent
information for each system (i.e. serial number, description, delivery location,
etc) for fixed asset creation; and
18. Ensuring delivery to requesting P&G Site(s) or CWDC, as applicable, on
timing specified by the ordering party or as arranged between the ordering party
and Vendor.
IIA. VENDOR SHALL PROVIDE THE SERVICES TO MAINTAIN A CINCINNATI WORKSTATION
DISTRIBUTION CENTER (CWDC). SUCH SERVICES, RESPONSIBILITIES, AND FUNCTIONS
SHALL INCLUDE THE FOLLOWING WHEN ORDERED THROUGH VENDOR:
1a. Documentation and on-going maintenance of the Procedures Manual
outlining activities performed by Vendor for P&G (this Procedures Manual shall
be available to P&G upon request);
2a. Receipt of Products Ordered by P&G;
3a. Resolution of DOA, overages, shorts, and damages identified at the point
of receipt;
4a. Afixing of asset tags or other identifiers (such as Year 2000 compliance
stickers) as required and provided by P&G;
5a. Entry of Product availability or creation of inventory records in P&G's
asset management system and Vendor's system(s);
6a. Local warehousing of Equipment (including workstations, peripherals and
workstation-related equipment for P&G Sites);
7a. Reporting against available used, refurbished or new inventory through
the use of P&G and Vendor asset management tools;
8a. Determination of the stocking levels required for expense items and
Equipment;
9a. Maintenance of Equipment and Software inventory as needed to meet
Service Levels and maintain standardized Equipment for users;
10a. Initial assembly and configuration of Equipment as necessary to form a
complete system for the user;
11a. Verification that items picked from stock or received into stock match
the part number ordered;
12a. Maintenance of standardized Software platforms for loading on Equipment
(e.g., workstations and servers);
13a. Provision of installation documentation for the Software platform
loading processes;
14a. Installation of standardized Software platforms on requested Equipment
(e.g., workstations and servers);
15a. Equipment and Software testing;
16a. Creation of the IQOQ documentation and processes for P&G approval for
regulated P&G Site installations;
17a. Reconditioning of Equipment as necessary to ready for redeployment
(i.e. addition of memory);
18a. Tracking of assets' movement as a result of CWDC functions through the
use of P&Gs asset management system;
19a. Tracking of Product as required to ensure no loss of P&G Products in
Vendor's care (e.g., Equipment ordered directly by P&G from the manufacturer for
delivery to the CWDC);
20a. Coordination and delivery of Product to appropriate, identified users
at P&G Sites on timing specified by the ordering party or as arranged between
the ordering party and Vendor;
21a. Securing of signature of P&G employee on inter-company receipt
paperwork for verification of delivery and acceptance of the Product(s);
22a. Scheduling and collection of Product from a secured P&G area as
requested and transportation back to CWDC;
23a. Removal of identifying asset tags for Equipment leaving the P&G asset
pool;
24a. Cleansing and erasure of workstation and server hard drives and any
other Equipment containing P&G data in accordance with P&G security guidelines
for assets leaving P&G or being redeployed to end-users;
25a. Clean-up, packaging and shipping of the Equipment slated for donation;
26a. Tranfer of workstations to disposal vendor and P&G asset management
system update, as needed, and;
27a. Provision of storage for redeploy inventory.
<PAGE>
IIB. VENDOR SHALL PROVIDE THE SERVICES TO MAINTAIN A CINCINNATI WORKSTATION
DISTRIBUTION CENTER (CWDC). SUCH SERVICES, RESPONSIBILITIES, AND FUNCTIONS
SHALL INCLUDE THE FOLLOWING WHEN ORDERED THROUGH THIRD PARTY:
1b. Documentation and on-going maintenance of the Procedures Manual
outlining activities performed by Vendor for P&G (this Procedures Manual shall
be available to P&G upon request);
2b. Receipt of workstation and related products ordered by P&G;
3b. Reporting to the Order Management Team of DOA, overages, shorts, and
damages identified at the point of receipt;
4b. Afixing of asset tags or other identifiers (such as Year 2000 compliance
stickers) as required and provided by P&G;
5b. Entry of Product availability or creation of inventory records in P&G's
asset management system and Vendor's system(s);
6b. Local warehousing of Equipment (including workstations, peripherals and
workstation-related equipment for P&G Sites);
7b. Reporting against available used, refurbished or new inventory through
the use of P&G and Vendor asset management tools;
8b. Determination of the stocking levels required for expense items and
Equipment;
9b. Maintenance of Equipment and Software inventory as needed to meet
Service Levels and maintain standardized Equipment for users;
10b. Initial assembly and configuration of Equipment as necessary to form a
complete system for the user;
11b. Verification that items picked from stock or received into stock match
the part number ordered;
12b. Maintenance of standardized Software platforms for loading on Equipment
(e.g., workstations and servers);
13b. Provision of installation documentation for the Software platform
loading processes;
14b. Installation of standardized Software platforms on requested Equipment
(e.g., workstations and servers);
15b. Equipment and Software testing;
16b. Creation of the IQOQ documentation and processes for P&G approval for
regulated P&G Site installations;
17b. Reconditioning of Equipment as necessary to ready for redeployment
(i.e. addition of memory);
18b. Tracking of assets' movement as a result of CWDC functions through the
use of P&Gs asset management system;
19b. Tracking of Product as required to ensure no loss of P&G Products in
Vendor's care (e.g., Equipment ordered directly by P&G from the manufacturer for
delivery to the CWDC);
20b. Coordination and delivery of Product to appropriate, identified users
at P&G Sites on timing specified by the ordering party or as arranged between
the ordering party and Vendor;
21b. Securing of signature of P&G employee on inter-company receipt
paperwork for verification of delivery and acceptance of the Product(s);
22b. Scheduling and collection of Product from a secured P&G area as
requested and transportation back to CWDC;
23b. Removal of identifying asset tags for Equipment leaving the P&G asset
pool;
24b. Cleansing and erasure of workstation and server hard drives and any
other Equipment containing P&G data in accordance with P&G security guidelines
for assets leaving P&G or being redeployed to end-users;
25b. Clean-up, packaging and shipping of the Equipment slated for donation;
26b. Tranfer of workstations to disposal vendor and P&G asset management
system update, as needed, and;
27b. Provision of storage for redeploy inventory.
III. VENDOR SHALL PROVIDE THE NECESSARY SERVICES TO PROCURE PRODUCTS
ORDERED THROUGH VENDOR BY P&G. (IS EXPENSE ITEMS AND SOFTWARE). SUCH SERVICES,
RESPONSIBILITIES, AND FUNCTIONS SHALL INCLUDE THE FOLLOWING:
IS EXPENSE PROCUREMENT
1. Documentation and on-going maintenance of the Procedures Manual outlining
activities performed by Vendor for P&G (this Procedures Manual shall be
available to P&G upon request);
2. Procurement of non-standard Products not listed on the DTL, DTL Products
and P&G approved exceptions;
3. Ensure multiple suppliers are available for Products to be procured and
communicate to P&G supply capability and pricing;
4. Negotiate final pricing of Products on P&G's behalf reflective of
forecasted volumes (if provided);
5. Acquisition of Product as ordered on P&G's behalf;
6. Acceptance of American Express (or other P&G approved credit card) and
Orders (i.e., authorized POs and order releases against POs) from designated P&G
representative(s). When placing an Order, Vendor will request specific delivery
dates if necessary, obtain estimated delivery dates, and communicate any delay
to appropriate P&G personnel.
7. Confimation of Orders, placement and delivery dates to P&G Order
Management Team.
8. Tracking of the status of Products ordered and reporting on its
disposition through electronic or verbal means;
9. Maintenance of a web-based or electronic system (available for
incorporation in P&G's asset mangement tool) for the placement and tracking of
Orders, as well as alternate forms of placement (fax, telephone) for Orders for
Products;
10. Maintenance of an electronic Product-based catalogue available for use
in P&G's asset mangement system which includes Products listed on the DTL and/or
Products available from Vendor and approved by P&G for purchase. This catalog
will contain, at a minimum, descriptions of the products, version and pricing
data;
11. Invoicing as required for the procurement of Products;
12. Responsibility for timeliness of delivery and actions of selected
carriers used to transport Products;
13. Resolution of DOA, overages, shorts and damages identified at the point
of receipt;
14. Incurrence of costs associated with the resolution of DOA, overages,
shorts and damages;
15. Provision of electronic files listing Products purchased and pertinent
information for each Products (description, cost, etc) for inventory record
creation within P&G's asset management system; and
16. Ensuring delivery to requesting P&G Site(s) or CWDC, as applicable, on
timing specified by the ordering party or as arranged between the ordering party
and Vendor.
<PAGE>
SOFTWARE PROCUREMENT
1. Documentation and on-going maintenance of the Procedures Manual outlining
activities performed by Vendor for P&G (this Procedures Manual shall be
available to P&G upon request);
2. Acquisition of Software products they are instructed by P&G to purchase,
including non-DTL and non-standard Software for which an exception has been
approved by P&G.
3. Procurement of Software products from a P&G approved Software reseller.
If the Software products are not available through that reseller, Vendor can
procure them through another means (e.g., another reseller, or directly from the
software manufacturer, or exclusive distributor of that manufacturer).
4. Ensuring that P&G is obtaining the best price for the Software products
acquired. Vendor will provide pricing data and supply capability to P&G when
requested. If it is determined by Vendor that P&G's selected Software reseller
is not the best price, or a P&G negotiated price, Vendor will inform appropriate
P&G personnel.
5. Negotiate pricing of Software products on P&G's behalf when combined
volumes will decrease price;
6. Acceptance of American Express (or other P&G approved credit card) and
Orders (i.e., authorized POs and order releases against POs) from designated P&G
representative(s). When placing an Order, Vendor will request specific
delivery dates if necessary, obtain estimated delivery dates, and communicate
any delay to appropriate P&G personnel.
7. Confirmation of Order receipt, placement and delivery dates to
appropriate P&G personnel.
8. Tracking the status of open Orders and reporting on its disposition
through electronic or verbal means to proper P&G personnel.
9. Maintain a web-based or electronic system for the placement and tracking
of Software Orders as well as alternate forms of Order placement (i.e. fax,
telephone). This system will integrate into P&G's asset management systems.
10. Maintenance of an electronic product-based catalogue available for use
in P&G's asset mangement system which includes Products listed on the DTL and/or
Products available from Vendor and approved by P&G for purchase. This catalog
will contain, at a minimum, descriptions of the products, version and pricing
data.
11. Responsibility for timeliness of delivery and actions of selected
carriers used to transport Products;
12. Resolution of overages, shorts and damages identified at the point of
receipt;
13. Incurrence of costs associated with the resolution of overages, shorts
and damages;
14. Provision of electronic files of all Software products purchased and
pertinent information for each item (description, cost,etc.), and maintain an
electronic inventory of these same items. This inventory data will integrate
into P&G's asset management systems;
15. Provision of detailed reports on Software product purchases when
requested by P&G;
16. Ensuring delivery to requesting P&G Site(s) or CWDC, as applicable, on
timing specified by the ordering party or as arranged between the ordering party
and Vendor;
17. Assist in pricing and licensing negotiations when requested by P&G; and
18. Vendor will assist P&G asset management personnel in reconciling their
inventory records with P&G asset management systems, Software reseller purchase
activity reports, Software manufacturer records, and any other Software product
data systems, when requested by P&G.
<PAGE>
IV. VENDOR SHALL PROVIDE THE PERSONNEL, AT P&G DETERMINED STAFFING LEVELS, AT
ATTACHMENT G-1 PRICING, TO MAINTAIN A DEDICATED P&G ORDER MANAGEMENT TEAM. THE
INITIAL SERVICES, RESPONSIBILITIES, AND FUNCTIONS OF THIS TEAM SHALL INCLUDE THE
FOLLOWING:
1. Aggregation of Orders from authorized P&G representatives through P&Gs
asset management system or approved alternative forms of Orders;
2. Reconciliation of Orders within P&Gs asset management system;
3. Confirmation of validated Orders against the current standard Product
configuration or pre-approved substitutes;
4. Assurance that all Orders will result in functional systems including
necessary attachments and required cabling;
5. Confirmation of Order placement and delivery dates to P&G internal
customers.
6. Placement of Orders with appropriate vendors for the procurement of
Product;
7. Determination of need for drop shipment at desk, drop shipment at CWDC,
fill from surge inventory or redeploy from inventory;
8. Accounts Receivable functions related to the matching of paperwork and
issuance of agreement to pay (i.e., "OK to pay");
9. Cross check & validate AMEX charges and payments;
10. Manage exceptions/outages with supply chain contacts;
11. Cross-functional verification of inventory;
12. Provision of updates to P&G's capital management system;
13. Entering of invoice data into the P&G asset management system;
14. Creation of new assets within the P&G asset management system upon
receipt and verification against Finance systems;
15. Initiation of cross-charging for Product by next available billing cycle
after installation of items;
16. Entering of Product information and charges into P&G's asset management
system for feed to chargback system;
17. Correction of cross charging within P&G's asset management system as
directed by authorized P&G representatives;
18. Tracking of all asset movement as a result of functions performed,
through the use of P&Gs asset management system;
19. Update of asset records with cross-charges changes;
20. Tracking of procurement against annual capital allocation;
21. Creation of a pass file for department chargeback and fixed asset
creation; and
22. Ad hoc reports related to product availability, orders, inventory, etc.
V. VENDOR SHALL PROVIDE THE NECESSARY SERVICES TO COLLECT AND DISPOSE OF P&G
DESIGNATED PRODUCTS. THE SERVICES, RESPONSIBILITIES, AND FUNCTIONS OF THIS TEAM
SHALL INCLUDE THE FOLLOWING:
1. Presentation of loading reports for Product picked-up to include
description, serial number and volume of Product received;
2. Disposal in accordance with Federal, State and Local guidelines; and
3. Sale of Product and compensation to P&G for Product received.
<PAGE>
2. DESCRIPTION OF P&G RESPONSIBILITIES
P&G will provide Vendor with the following support in providing the Services
described above during the Term:
I. WITH REGARD TO WORKSTATION, IS EXPENSE AND SOFTWARE PROCUREMENT:
1. Determination of workstation configurations to be procured by Vendor;
2. Provision of DTL and associated updates to Vendor;
3. Product pricing negotiation (with Vendor's assistance if requested by
P&G) with manufacturers and vendors; and
4. Determination of chargeback amounts.
II. WITH REGARD TO THE CWDC:
1. Provision of an initial process for set-up of environment for
installation and configuration of workstations; and
2. Change management for the update of the installation image required by
P&G Sites;
III. WITH REGARD TO THE ORDERING TEAM:
1. Processes for creation assets in the P&G asset management system;
2. Processes for the chargeback of expense items and workstations to
appropriate end-users; and
3. Definition of approved systems configurations;
IV. WITH REGARD TO DISPOSAL:
1. Guidelines related to the hardware configurations to be disposed
<PAGE>
ATTACHMENT B-2
PACKAGED SOFTWARE HELP DESK SERVICES
This Attachment describes the Packaged Software Help Desk portion of the
Services Vendor will provide.
1. DESCRIPTION OF VENDOR RESPONSIBILITIES
Vendor will provide the Packaged Sofware Help Desk Services identified herein
during the Term. Vendor is responsible for documenting and maintaining
procedures executed by Vendor in accordance with the Procedures Manual. This
document will be available to P&G upon request. Vendor shall provide the
Services in accordance with the terms of the Agreement, the Service Levels, and
the Procedures Manual.
I. PACKAGED SOFTWARE HELP DESK SERVICES
- --------------------------------------------
Vendor will provide P&G Packaged Software Help Desk support for all supported
software calls. These Services will be provided to various organizations that
are a part of P&G's North America operations. Supported Software includes the
listed Software set forth in Exhibit 1 to this Attachment B-2. P&G may amend
the listed Software on Exhibit 1 on notice to Vendor.
A. VENDOR SHALL PROVIDE THE NECESSARY SERVICES TO PROVIDE PACKAGED
SOFTWARE HELP DESK SERVICES. SUCH SERVICES, FUNCTIONS AND
RESPONSIBILITIES SHALL INCLUDE THE FOLLOWING:
(1) Provide packaged software trained personnel who understand user
expectations and offer prompt service, easy support access, and
knowledgeable help for problem resolution;
(2) Call handling includes a quality, comprehensive
problem-management process to coordinate or escalate calls, if
required;
(3) Acting on behalf of P&G, Vendor Help Desk agents will invoke
entitlement procedures to prevent unauthorized access to the P&G
organization;
(4) Calls that are misdirected to the Vendor, or calls that cannot be
adequately resolved by the Vendor, i.e., on-site visit required,
will be warm-transferred back to the P&G Local Call Center for
resolution;
(5) Support will include resolution of application problems that do
not require desk side services. This includes:
(A) application problem resolution for supported software,
(B) configuration (user preference) support,
(C) end user training ("how to") support, etc.
(6) Provide Vendor Key Personnel as a single point of contact for the
P&G Packaged Software Help Desk team as required. This individual
will be responsible for any changes in schedule, exceptions and
as the first point of escalation;
(7) Provide logging and tracking of all Packaged Software Help Desk
calls;
(8) Monitoring of all open problem records and track problem
resolution progress through to closure or transfer to a P&G
managed support organization;
(9) Provide problem descriptions and background information to P&G
managed support organizations when it is necessary to transfer
calls that cannot be adequately resolved by the Packaged Software
Help Desk Team;
(10) Provide summary reporting to P&G as requested, and
(11) Issues, actions and plans pertaining to deficiencies in Service
Levels per Attachment E.
<PAGE>
2. DESCRIPTION OF P&G RESPONSIBILITIES
P&G will provide Vendor with the following support in providing the Services
during the Term:
(1) A list of users with access to Vendor service;
(2) A single point of contact with decision making authority to provide
guidance and direction for exceptions/escalations as required;
(3) A minimum of 4 weeks notice for the roll out of each site as well as any
change to the planned roll out schedule, and
(4) ACD capability for each site.
<PAGE>
EXHIBIT 1: P&G SHRINK WRAP SUPPORT SOFTWARE
This list is subject to change. Procter & Gamble will notify the Vendor in
advance of any changes.
Below is the list of those packages the Packaged Software Help Desk will
support. There are two lists, separated into high- and low-volume applications
based on call volumes.
<PAGE>
HELP DESK LIST (HV)
Adobe Acrobat
Attachmate Rally!
cc:Mail
cc:Mobile
Lotus Notes
Micrografx ABC FlowCharter
Microsoft Access
Microsoft Excel
Microsoft Office
Microsoft Powerpoint
Microsoft Project
Microsoft Word
Netscape
Norton Anti-virus
Novell Netware
OnTime
Windows 3.1/95/97
WinZip
<PAGE>
HELP DESK LIST (LV)
Adobe Illustrator
Adobe Pagemaker
Adobe Photoshop
Adobe Premier
Avery Label Pro
ClarisDraw
CorelDraw
FastTrack Schedule
FolioViews (Except SGML Toolkit for Windows (V4.0) Document Management Software)
HoTMetaL Pro
Impromptu
Macintosh System 7.x
Micrografx Designer
Micrografx Picture Publisher
Norton Commander
Norton Utilities
Primavera (Except Project Planner (P3) (V2.0) Project Management)
Scheduler Plus
<PAGE>
ATTACHMENT B-3
DESKSIDE AND SERVER SUPPORT SERVICES
This Attachment describes the Deskside and Server Support Services portion of
the Services Vendor will provide.
1. DESCRIPTION OF VENDOR RESPONSIBILITIES
Vendor will provide the Deskside and Server Support Services identified herein
during the Term. Vendor is responsible for documenting and maintaining
procedures executed by Vendor in accordance with the Procedures Manual. This
document will be available to P&G upon request. Vendor shall provide the
Services in accordance with the terms of the Agreement, the Service Levels, and
the Procedures Manual.
I. DESKSIDE AND WORKPLACE SERVER SUPPORT SERVICES
A. VENDOR SHALL PROVIDE THE NECESSARY SERVICES TO INSTALL, SET-UP AND
CONNECT ALL P&G DESIGNATED EQUIPMENT, INCLUDING WORKSTATION, SERVERS
AND RELATED PERIPHERALS, AT THE P&G SITES. SUCH SERVICES, FUNCTIONS
AND RESPONSIBILITIES SHALL INCLUDE THE FOLLOWING:
1. Installation of Equipment, including workstations and workplace
servers and related peripheral equipment and LAN-attached
equipment (e.g. file servers and printers) which includes testing
at the point of final delivery (e.g. end-user desktop);
2. Installation of additional Software on end-user workstation
Equipment after the initial order and delivery as requested by
P&G;
3. Coordinate Equipment delivery to designated P&G Sites;
4. Install Software on workstation Equipment and standard Network
Operating Systems (NOS) and standard P&G software on workplace
server Equipment;
5. Set-up and install workstation Equipment at designated end-user
office;
6. Set-up and install workplace server Equipment at designated P&G
Sites;
7. Connect workstation Equipment to network environment and
peripherals and test functionality against installation check
list in Procedures Manual;
8. Connect workplace server Equipment to network environment and
peripherals and test functionality against installation check
list in Procedures Manual;
9. Schedule, coordinate and perform data migration from existing
end-user workstation Equipment;
10. Schedule and coordinate the migration of P&G data from workplace
server Equipment;
11. Provide itemized data for cross charging purposes by next
available billing cycle after installation of Equipment;
12. Implement mutually agreed upon policy specified in the Procedures
Manual for consolidating moves, when possible, to obtain
efficiencies;
13. Deinstall, pack and relocate Equipment as requested;
14. Coordinate with P&G's process for providing required mainframe
and workplace server Equipment access;
15. Coordinate with P&G's process for providing network connections;
and
16. Provide P&G end-user with any necessary user performed tasks
instructions, and reinstall, reconnect and test all relocated
Equipment (e.g., workstations and workplace servers and related
peripherals) against established installation check list's as
setforth in Procedures Manual;
17. Provide assistance to P&G in preparing end-user training
materials;
18. Perform brief operation qualification of workstation Equipment;
19. Update Asset Management System to reflect installation;
20. Coordinate scheduling of installations;
B. VENDOR SHALL PROVIDE THE NECESSARY SERVICES TO TROUBLESHOOT, IDENTIFY,
CORRECT AND REPAIR OR REPLACE EQUIPMENT, AND TO PROVIDE CORRECTIVE
MAINTENANCE AND PREVENTIVE MAINTENANCE. SUCH SERVICES, FUNCTIONS AND
RESPONSIBILITIES SHALL INCLUDE THE FOLLOWING:
(1) Coordinate, troubleshoot and provide repair service on Equipment;
(2) Provide Equipment corrective maintenance, parts and repair for
all Equipment installed in accordance with manufacturers
specifications;
(3) Manage and provide replacement of Equipment;
(4) Provide interface to the P&G problem management process;
(5) Provide Equipment preventive maintenance in accordance with
manufacturers specifications;
(6) Dispatch technicians as necessary to fulfill the Services in
accordance with the Service Levels;
(7) Update trouble tickets;
(8) File and process warranty claims; Interface with and coordinate
problem identification and resolution with P&G Support
Organizations (Network Operations, Server Operations, P&G
applications, functional Support Organizations and non-LAN
systems problems);
(9) Provide second level Software support by referring and
coordinating problem identification and resolution of Software
problems with third party software and services providers;
(10) Provide Vendor interface to P&G documenting formal Documents of
Understanding (DOUs) in the Procedures Manual between Vendor and
the appropriate P&G organizations (e.g. Network Operations,
Server Operations, and Function Support Organizations) necessary
to provide streamlined Services to P&G end-users;
C. VENDOR SHALL PROVIDE THE NECESSARY SERVICES TO UPGRADE EQUIPMENT. SUCH
SERVICES, FUNCTIONS AND RESPONSIBILITIES SHALL INCLUDE THE FOLLOWING:
(1) Upgrade, test, reinstall, and reconfigure Equipment as requested
by P&G;
(2) Dispatch technicians;
(3) Troubleshoot and repair Equipment problems;
(4) Update trouble tickets;
D. VENDOR SHALL PROVIDE THE NECESSARY SERVICES TO PROVIDE P&G ASSET
TRACKING DATA FOR EQUIPMENT AND SOFTWARE FOR WHICH VENDOR PERFORMS
SERVICES. SUCH SERVICES, FUNCTIONS AND RESPONSIBILITIES SHALL INCLUDE
THE FOLLOWING:
(1) Track and report all warranty and non-warranty changes to
Equipment and Software performed by Vendor;
(2) Provide monthly reports and reasonable level of ad hoc reports as
requested by P&G and as set forth in the Procedures Manual;
(3) Provide interfaces to problem tracking, asset management and
inventory management process.
E. VENDOR SHALL PROVIDE THE NECESSARY SERVICES TO REDEPLOY AND PREPARE
EQUIPMENT FOR DISPOSAL. SUCH SERVICES, FUNCTIONS AND RESPONSIBILITIES
SHALL INCLUDE THE FOLLOWING:
(1) Provide the handling of Equipment returns and fulfill new Orders
with P&G's existing assets;
(2) Reinstall used P&G Equipment at P&G Sites based on standards
established by P&G;
(3) Test functionality of Equipment prior to reinstallation;
(4) Format applicable Equipment hard drives prior to disposal to
erase all software and data in accordance with P&G Data Security
Guidelines;
(5) Deliver Equipment to designated pick up point for disposal.
<PAGE>
F. VENDOR SHALL PROVIDE THE NECESSARY SERVICES TO INTERFACE WITH P&G'S
CROSS-CHARGING AND CAPITAL MANAGEMENT SYSTEM SERVICES. SUCH SERVICES,
FUNCTIONS AND RESPONSIBILITIES SHALL INCLUDE THE FOLLOWING:
(1) Interface with P&G information systems at the time the product is
delivered and when Equipment is returned or disposed of to
maintain correct cross-charging and correct asset inventory;
(2) Maintain records of all Services provided for appropriate
cross-charging to P&G end-user departments;
(3) Provide updates to P&G's capital management system;
(4) Make corrections to cross charging records as directed by P&G;
G. VENDOR SHALL PROVIDE THE NECESSARY SERVICES TO DISPATCH, COORDINATE
AND PERFORM REPAIR AND MAINTENANCE SERVICES. SUCH SERVICES, FUNCTIONS
AND RESPONSIBILITIES SHALL INCLUDE THE FOLLOWING:
(1) Dispatch the Vendor maintenance providers performing Equipment
repair services;
(2) Coordinate repair activities with P&G Support Organizations;
H. VENDOR SHALL PROVIDE THE NECESSARY SERVICES TO REPORT ON, AND PERFORM
ROOT CAUSE ANALYZES FOR, EQUIPMENT AND SOFTWARE PROBLEMS. SUCH
SERVICES, FUNCTIONS AND RESPONSIBILITIES SHALL INCLUDE THE FOLLOWING:
(1) Provide monthly review and reporting of top 10 problems;
(2) Prepare trending information noting patterns of recurring
problems, and make problem prevention recommendations;
I. VENDOR SHALL PROVIDE THE NECESSARY SERVICES TO TROUBLESHOOT, IDENTIFY,
CORRECT, REPAIR, UPGRADE AND TEST WORKPLACE SERVER EQUIPMENT. SUCH
SERVICES, FUNCTIONS AND RESPONSIBILITIES SHALL INCLUDE THE FOLLOWING:
(1) Provide all hardware repairs, parts and upgrades following
certified manufacturer processes;
(2) Perform post repair or post upgrade testing with P&G guidance;
(3) Perform equipment changes as directed by the P&G workplace
Server Operations group;
2. DESCRIPTION OF P&G RESPONSIBILITIES
P&G will provide Vendor with the following support in providing the
Services during the Term:
(1) Remove and dispose of all packing material;
(2) Provide required mainframe and workplace Server connectivity and
access;
(3) Provide all required network connections;
(4) Provide P&G Site facilites/power;
(5) Provide access to P&G Sites during normal business hours and
non-business hours as requested;
(6) Receive, log and dispatch trouble calls to vendor and track.
<PAGE>
ATTACHMENT C
TRANSITION
OVERVIEW
This Attachment C documents a general overview of the activities necessary to
transition the services, functions and responsibilities that Vendor is
responsible for executing. The focus of this is to ensure that Services
delivered by both the incoming and outgoing vendors provide the services,
functions and responsibilities at service levels required by P&G during the
Transition Period and the period immediately following the transition.
The overall intent is that Vendor will transition to overall execution of
day-to-day activities, delivering the Services, at the Service Levels. On the
Transition Start Date Vendor will begin their plan for transition. The
transition plan will be provided to P&G for review and comment and approved by
P&G. Vendor will be expected to fully cooperate with the outgoing vendor in
completing a successful transition to the same degree that it would cooperate
with P&G to ensure adverse impact of a transition on the P&G business is
minimized.
Transition period begins on the Transition Start Date and is currently scheduled
to be complete no later than the Effective Date or as otherwise agreed in the
Transition Plan. In no event will the transition be considered complete until
mutually agreed upon by the Parties. The date the Transition is mutually agreed
to be complete shall be the "Transition Completion Date." The scope of work
during the Transition Period will be determined jointly by the Vendor and the
P&G Transition Manager.
Vendor will have its Key Vendor Personnel in place through the Transition Period
TRANSITION PLAN
At a minimum, the Transition Plan will address the following:
PROCUREMENT & FINANCIAL CONTROL
Transition of all administrative tasks, processes and electronic interfaces
associated with procurement, including open orders, existing inventory, AR
functions, asset management tasks, logistical planning, tasks as they
relate to charge-back and fixed asset creation, order handling and
reporting.
WORKSTATION DISTRIBUTION CENTER
Transition processes and electronic interfaces related to P&G asset
receipt, Barcode & E-tagging, P&G inventory updates, asset storage,
pre-delivery preparation and distribution of P&G assets, asset liquidation,
(LAN infrastructure, fax machines, implementation of telecommunications
circuits and phone lines to P&G) and scheduling and coordination of
shipping of all P&G assets to the appropriate location(s).
OPERATIONS
Physical transitioning of the Vendor desktop computing services & support
infrastructure, spare parts inventory, problem call dispatching scheduling
and coordination of transition of open/unresolved calls.
TECHNICAL
Acquisition of any Vendor owned assets. Acceptance of Vendor data, and
application software to include Lotus Notes Databases and WEB Pages.
Transfer of any data owned by P&G or about P&G operations, that may be in
the outgoing Vendor files or databases, to the incoming Vendor. This data
transfer will be done in a manner that is secure and provides access as
designated by P&G.
VENDOR PROJECT OFFICE
The Project Executive will be responsible for the management, tracking,
reporting, and successful results of the Transition Plan. Weekly project
status reports will be provided to review project progress, proposed
changes, and document results. Minutes and issues will be kept by the
Vendor.
SHRINK WRAP HELP DESK
Responsible for transitioning all aspects of call problem management and
tracking systems to include the problem management system. Coordinate the
transfer of P&G owned data files from the outgoing Vendor to the incoming
Vendor as required.
<PAGE>
TRANSITION MANAGEMENT
Management of the Transition Process is further agreed to include:
1. Transition Methodology - The Vendor Account Manager will work closely
with the designated P&G Transition Manager to ensure all planned
activities are completed according to the agreed to schedule &
process. Vendor will be responsible for tasks that are designated as
Vendor responsibilities as agreed to by both parties.
2. The Transition Plan - The document will include the activities
necessary to transition responsibility for support and acquisition of
P&G's Systems from Vendor to P&G's identified agent. The Plan will be
reviewed by the Transition Team and updated weekly by Vendor to
reflect the latest information regarding transition schedules,
resource requirements, dependencies, exposures, and general transition
progress.
3. Vendor Transition Team members will be assigned specific tasks.
Coordination will take place through regularly scheduled transition
meetings. The Vendor is responsible to call and chair meetings when
they involve planning or implementation of the Vendor
responsibilities, notifying P&G or other parties as appropriate.
4. Procter & Gamble will designate a Transition Manager to act as the
liaison between any Non-P&G organization or company involved in the
transition of services. Vendor will attend meetings with P&G and other
parties as appropriate to plan transition of services to the other
party. These meetings will be chaired by P&G.
5. Vendor will cooperate fully with other parties that may be involved in
trasition of services to ensure the transition occurs with no
disruption to P&G business or service levels.
6. Due to the critical nature of the transition process and the need to
expedite all activities, it will be the responsibility of both Parties
to bring issues, concerns, and comments to the attention all Parties
before or at regularly scheduled meetings
7. Items that could impede the successful, timely completion of the
Transition tasks are classified as issues, concerns or exposures.
These major issues, concerns, or exposures (and their related action
plans) will be identified as alerts & concerns needing P&G's action.
8. Transition of Procurement operations will include cut over methodology
for P&G Asset information and open order information/handling.
9. Transition of Deskside Service Operations will include open call
handling procedures for cut over date 72 business hours prior to
commencement of services.
10. Action steps for open calls older than 24 business hours that are not
closed before the commencement date will be documented and agreed to
by P&G and Vendor.
<PAGE>
ATTACHMENT D
TERMINATION AND DECOMMISSIONING
OVERVIEW
This documents the activities necessary to decommission all services and support
that Vendor is responsible for providing to P&G at the time the services are
terminated for any reason. The focus of this is to ensure that services
delivered by Vendor transition to P&G or its designated agent with minimum
adverse impact on the P&G business.
The overall intent is that Vendor will continue to focus on the day-to-day
activities, delivering the Services at the Service Levels. Concurrently, no
later than 90 days prior to termination, Vendor will establish a decommissioning
team to develop a Decommissioning Plan and then implement that plan (unless for
some reason termination date is established with less than 90 days notice, in
which case the team will be established within 5 days of notice of termination).
The plan will be reviewed by and approved by P&G. In the event Services are
being transitioned to another party selected by P&G, Vendor will cooperate with
the other party in completing a successful transition to the same degree that it
would cooperate with P&G to ensure impact of a transition on the P&G business is
minimized.
The "Decommissioning Period" begins 90 days prior to the effective date of
termination, and ends on the effective date of termination. Unless otherwise
provided herein, the Vendor and P&G both have the same full responsibilities
identified in this agreement throughout the Decommisioning Period as any other
period during the Term.
The Vendor will retain its Key Vendor Personnel in place through the
Decommissioning Period, and for sufficient time after the termination date to
ensure Vendor responsibilities have been fufilled.
DECOMMISSIONING PLAN
At a minimum, the Decommissiong Plan will address the following scope:
PROCUREMENT & FINANCIAL CONTROL
Decommissioning all administrative tasks and electronic interfaces
associated with procurement, asset inventory administration, P&G cross
charging, purchase orders and DOA handling.
WORKSTATION DISTRIBUTION CENTER
Decommissioning processes and electronic interfaces related to P&G asset
receipt, Barcode & E-tagging, P&G inventory updates, asset storage,
pre-delivery preparation and distribution of P&G assets, asset liquidation,
LAN infrastructure, fax machines, cancellation of telecommunications
circuits and phone lines to P&G, and scheduling and coordination through a
P&G Project Manager the packing and shipping of all P&G assets to the
appropriate location(s)
OPERATIONS
Physical decommissioning of the Vendor desktop computing services & support
infrastructure, spare parts inventory, electronic 2-way problem call
dispatching scheduling and coordination of transition of open/unresolved
calls
TECHNICAL
Return of all P&G assets and removal of all Vendor owned assets. Removal of
all Vendor data, and application software from all P&G computing platforms
to include Lotus Notes Databases and WEB Pages. Transfer of any data owned
by P&G or about P&G operations, that may be in Vendor files or databases,
to P&G or another party designated by P&G. This data transfer will be done
in a manner that is secure and provides access as designated by P&G.
<PAGE>
VENDOR PROJECT OFFICE
The Project Executive (Account Manager) will be responsible for the
management, tracking, reporting, and successful results of the
Decommissioning Plan. Weekly project status teleconferences will be held to
review project progress, proposed changes, and document results. Minutes
and issues will continue be kept by the Vendor Project Office. The office
will be responsible for producing a final report to P&G once the format is
agreed upon.
PACKAGED SOFTWARE HELP DESK
Responsible for decommissioning all aspects of call problem management and
tracking systems to include the problem management system. Coordinate the
transfer of P&G owned data files to P&G as required.
DECOMMISSIONING MANAGEMENT
Management of the Decommissioning Process is further agreed to include:
a. Decommission Methodology - The Vendor Project Executive will work
closely with the designated P&G Decommission Manager to ensure all
planned activities are completed according to the agreed to schedule &
process. Vendor will be responsible for tasks that are designated as
Vendor responsibilities as agreed to by both parties
b. The Decommission Plan - The document will include the activities
necessary to transition responsibility for support of P&G's Systems
from Vendor to P&G's identified agent. The Plan will be reviewed by
the Decommission Team and updated weekly by Vendor to reflect the
latest information regarding transition schedules, resource
requirements, dependencies, exposures, and general transition progress
c. Vendor Decommission Team members will be assigned specific tasks.
Coordination will take place through regularly scheduled decommission
meetings. The Vendor is responsible to call and chair meetings when
they involve planning or implementation of the Vendor
responsibilities, notifying P&G or other parties as appropriate.
d. Procter & Gamble will designate a Project Executive to act as the
liaison between any Non-P&G organization or company involved in the
transition of services. Vendor will attend meetings with P&G and other
parties as appropriate to plan transition of services to the other
party. These meetings will be chaired by P&G.
e. Vendor will cooperate fully with other parties that may be involved in
trasition of services to ensure the transition occrs with no
disruption to P&G business or service levels.
f. Due to the critical nature of the decommission process and the need to
expedite all activities, it will be the responsibility of both Parties
to bring issues, concerns, and comments to the attention all Parties
before or at regularly scheduled meetings
g. Items that could impede the successful, timely completion of the
Decommission tasks are classified as issues, concerns or exposures.
These major issues, concerns, or exposures (and their related action
plans) will be identified as Alerts & Concerns needing P&G's action
h. Decommission of Procurement operations will include cut over
methodology for P&G Asset information and open order
information/handling
i. Decommission of Deskside Service Operations will include open call
handling procedures for cut over date 72 business hours prior to
contract end date
j. Action steps for open calls older than 24 business hours that are not
closed before the cut over date will be documented and agreed to by
P&G and Vendor
<PAGE>
ATTACHMENT E
SERVICE LEVELS
The following sections define the Service Levels for this Agreement as of the
Transition Completion Date. All Services Levels, unless otherwise stated, shall
be measured on a calendar monthly basis. A Service Level Credit is the
Financial Remedy associated with the particular Service Level Metric in the
table. A Service Level Target represents the goal for the Service Level Metric,
but does not have a specific Service Level Credit or Financial Remedy
associated.
PROCUREMENT
<TABLE>
<CAPTION>
SERVICE LEVEL METRIC SERVICE LEVEL CALCULATION SERVICE LEVEL CREDIT
OR TARGET2
---------------------
<S> <C> <C> <C>
Perfect Orders
(Satisfy each of the requirements
identified below)
Delivery Timeliness1 98% 100*(Total Orders Not Delivered By $ 25 per Incident
(See below for lead time requirements) Requested Date/Total Orders)
--------------------------------------
Order Ship Complete 98% 100*(Total Orders Not Shipped SL Target
(No Overages/Shorts/Damages or DOAs) Complete/Total Orders)
--------------------------------------
Invoiced Correctly (Orders) 100% 100*(Total Invoices Not Correct/Total SL Target
(Invoice on-time and accurate) Invoices)
--------------------------------------
Vendor-Initiated Changes to the Delivery 0% 100*(Total Orders Requiring Changes SL Target
Schedule (Percent of total Orders/month) to Delivery Schedule/Total Orders)
--------------------------------------
Availability of Electronic Order and Order 98% 100*(Total Time System Not SL Target
Tracking System Available/Total Service Level
(M-F 7:30 AM EST to 8:30 PM EST) Availability of System)
--------------------------------------
Availability of 800 Number for Order 98% 100*(Total Time System Not SL Target
Assistance (M-F 7:30 AM EST to 8:30 PM EST) Available/Total Service Level
Availability of System)
--------------------------------------
P&G Satisfaction Survey 4.0 / 5.0 scale Average score of survey questions SL Target
related to procurement processes
--------------------------------------
</TABLE>
1 - Delivery timeliness is defined as Orders being delivered to the CWDC or drop
shipped to the specified delivery address/contact on or before the time
specified on the order (e.g., next day).
2 - Service Level Credit represents the Financial Remedy associated with missing
the Service Level for the specific metric. Service Level Targets represent key
metrics to be tracked and managed in meeting the Service Level Agreement, but do
not have a specific Financial Remedy associated with the metric.
<PAGE>
PROCUREMENT LEAD TIMES
The table below details the service levels for the maximum lead time that the
Vendor requires for different order types.
<TABLE>
<CAPTION>
ORDER TYPE SERVICE LEVELS1
- -------------------------------------------------- ---------------------------------------------
<S> <C>
Normal Orders - Equipment 3 Days
---------------------------------------------
Normal Orders - Equipment (e.g. workstations and 5 Days
servers) configured with standardized Software
platforms
Expedited Orders - Equipment 1 Day
---------------------------------------------
Expedited Orders -Equipment (e.g. workstations and 2 Days
servers) configured with standardized Software
platforms
IS Expense and Software Orders Minimum Shipment Option As Offered By Vendor2
- -------------------------------------------------- ---------------------------------------------
</TABLE>
1 - A day is defined as a business day. If an order is received after 10 AM ET,
Day 1 is considered to be the following business day.
2 - The minimum shipment option offered will be considered the maximum lead time
that Vendor requires to ensure delivery of the product (e.g. same-day delivery).
<PAGE>
CINCINNATI WORKSTATION DISTRIBUTION CENTER
<TABLE>
<CAPTION>
SERVICE LEVEL METRIC SERVICE LEVEL CALCULATION SERVICE LEVEL CREDIT OR TARGET
- --------------------------------------- ---------------- ----------------------------------- -------------------------------
<S> <C> <C> <C>
Perfect Orders
(Satisfy each of the requirements
identified below)
Delivery Timeliness1 98% 100*(Total Orders Not Delivered By $ 25 per Incident
(To user's desk or delivery location Requested Date/Total Orders)
specified on order)
Order Ship Complete 98% 100*(Total Orders Not Shipped SL Target
(All equipment provided and no DOAs) Complete/Total Orders)
-----------------------------------
Installation Quality 1 100% 100*(Total Configurable Equipment SL Target
(No site corrective action required on Orders in Error/Total Configurable
standardized Software platform loaded Equipment Orders)
on machine)
Installation Quality 2 100% 100*(Total Configurable, IQOQ SL Target
(IQ/OQ complete, if needed) Equipment Orders with IQOQ in
Error/Total Configurable, IQOQ
Equipment Orders)
-----------------------------------
"Surge" Order Delivery Timeliness2 100% 100*(Total Surge Orders Not SL Target
(On-time and correct) Delivered By Requested Date/Total
Surge Orders)
-----------------------------------
"Non-Surge" or Normal Order Delivery 100% 100*(Total Normal Orders Not SL Target
Timeliness (for Orders shipped to the Delivered By Requested Date/Total
WDC)3 Normal Orders)
(On-time and correct)
Invoiced Correctly (Base Service) 100% 100*(Total Invoices Not SL Target
(Invoice on-time and accurate) Correct/Total Invoices)
-----------------------------------
Timeliness and Completeness of 100% 100*(Total Transaction Files in SL Target
Monthly Cross-Charge Transaction File Error/Total Transaction Files)
-----------------------------------
Disposal Pick-Up Timeliness1 98% 100*(Total Pick-Up Orders Not $ 25 per Incident
Performed By Requested
Date/Total Pick-Up Orders)
Completeness of Hard Drive Secure 100% 100*(Total Equipment Cleansing SL Target
Erasure and Asset Tag Removal and Erasures in Error/Total
(Before release to the Workstation Equipment Cleansing and Erasures)
Disposal Vendor)
- ---------------------------------------
Asset Tags Returned within Five (5) 100% 100(Total Asset Tags Not Returned SL Target
Days of Pick-Up in 5 Days/Total Asset Tags
Expected Returned in 5 Days)
-----------------------------------
P&G Satisfaction Survey 4.0 / 5.0 scale Average score of survey questions SL Target
related to procurement processes
-----------------------------------
</TABLE>
1 - Delivery or pick-up timeliness is defined as Orders or Product being
delivered or picked-up on the day that the ordering party requests. If no
requested date is given, products will be delivered in accordance with
established Service Levels.
2 - Surge Orders are defined as Orders for any Product which is held in stock at
the CWDC. Any Surge Order received before 2 p.m. should be delivered on the
current or following day. Any Surge Order received after 2 p.m. should be
delivered within 2 days.
3 - "Non-Surge" or Normal Orders are defined as Orders for any Product not
normally held in stock at the CWDC, and are subject to the Procurement Service
Level Table attached above.
<PAGE>
WORKSTATION DISPOSAL
<TABLE>
<CAPTION>
SERVICE LEVEL METRIC SERVICE LEVEL CALCULATION SERVICE LEVEL CREDIT OR TARGET
- ---------------------------------- ---------------- ---------------------------------- -------------------------------
<S> <C> <C> <C>
Disposal Pick-Up Timeliness1 98% 100*(Total Pick-Up Orders Not $ 25 per Incident
Performed By Requested
Date/Total Pick-Up Orders)
----------------------------------
Disposal Inventory Documentation 100% 100*(Total Inventories Not SL Target
Received at Pick-Up Received/Total Inventories
Expected)
Checks Received within Two (2) 98% 100*(Total Checks Not SL Target
Weeks of Pick-Up for those items Returned/Total Checks Expected
returning value To Be Returned)
- ---------------------------------- ----------------------------------
Invoiced Correctly (Base Service) 100% 100*(Total Invoices Not SL Target
(Invoice on-time and accurate) Correct/Total Invoices)
----------------------------------
Disposed Workstations in 100% 100*(Total Disposal Not in SL Target
Compliance with Local, State, and Compliance/Total Disposals)
Federal Regulations
P&G Satisfaction Survey 4.0 / 5.0 scale Average score of survey questions SL Target
related to procurement processes
----------------------------------
</TABLE>
1 - Disposal pick-up timeliness is defined as workstations being picked-up on
the day that is requested from the CWDC with a minimum of five (5) days notice.
<PAGE>
SERVICE LEVEL REPORTING REQUIREMENTS
This section defines the reports to be provided to P&G to ensure service levels
are being met. This list reflects the current requirements and is subject to
modification as additional information is required. Note that with advance
notice to Vendor, P&G may conduct an audit of the reports provided, at its own
expense and so as not to interfere with Vendor's normal business operations.
P&G will notify the Vendor in advance of any changes made to these requirements.
WORKSTATION PROCUREMENT
<TABLE>
<CAPTION>
REPORT DESCRIPTION FREQUENCY
- ------------------ -------------------------------------------------------- ------------------------
<S> <C> <C>
Primary SLA Report Details the performance metrics listed above at the Monthly (Including
CWDC and the site level. This report should be given to Year-to-Date Statistics)
the Regional Asset manager and each SAT.
--------------------------------------------------------
</TABLE>
CINCINNATI WORKSTATION DISTRIBUTION CENTER
<TABLE>
<CAPTION>
REPORT DESCRIPTION FREQUENCY
- ------------------ -------------------------------------------------------- ------------------------
<S> <C> <C>
Primary SLA Report Details the performance metrics listed above at the Monthly (Including
CWDC and the site level. This report should be given to Year-to-Date Statistics)
the Regional Asset manager and each SAT.
--------------------------------------------------------
</TABLE>
CINCINNATI WORKSTATION DISTRIBUTION CENTER
<TABLE>
<CAPTION>
REPORT DESCRIPTION FREQUENCY
- ------------------ ----------------------------------------------------------- ------------------------
<S> <C> <C>
Primary SLA Report Details the performance metrics listed above at two Monthly (Including
levels: the sub-site level and Cincinnati as a whole. This Year-to-Date Statistics)
report should be given to the Regional Asset manager,
the Cincinnati SATs, and the P&G manager of the
CWDC.
-----------------------------------------------------------
</TABLE>
WORKSTATION DISPOSAL
<TABLE>
<CAPTION>
REPORT DESCRIPTION FREQUENCY
- -------------------- ------------------------------------------------------- ------------------------
<S> <C> <C>
Disposal Summary Details the total number of disposed workstations, the Monthly (Including
dates disposed, and the financial outcome. This report Year-to-Date Statistics)
should be given to the Regional Asset Manager.
-------------------------------------------------------
Site Disposal Report The manager of the CWDC and the Regional Asset Upon Pick-Up
Manager should be provided with a report that contains
the disposal reference number and the serial number,
description, and disposal date for each item disposed.
-------------------------------------------------------
Primary SLA Report Details the performance metrics listed above at Monthly (Including
the CWDC and the site level. The report Year-to-Date Statistics)
should provide verification of secure hard drive
erasure for all disposed machines. This report
should be given to the Regional Asset manager
and each SAT.
-------------------------------------------------------
</TABLE>
<PAGE>
END-USER BREAK/FIX SUPPORT
<TABLE>
<CAPTION>
SERVICE LEVEL METRIC SERVICE LEVEL CALCULATION SERVICE LEVEL CREDIT OR
TARGET
------------------------
<S> <C> <C> <C>
Highest Priority - Resolution Time 90% in 30 minutes 100*(Total Highest Priority $ 25 per Incident
Calls not resolved within
Service Level/Total Highest
Priority Calls)
-------------------------------
High Priority - Resolution Time 90% in 2 hours 100*(Total High Priority Calls $ 25 per Incident
not resolved within Service
Level/Total High Priority
Calls)
-------------------------------
Standard Priority - Resolution Time 90% in 6 hours 100*(Total Standard Priority $ 25 per Incident
Calls not resolved within
Service Level/Total Standard
Priority Calls)
-------------------------------
Invoiced Correctly 100% 100*(Total Invoices Not SL Target
(Invoice on-time and accurate) Correct/Total Invoices)
-------------------------------
Problem Aging
Open Calls as a % of Total Calls 10% 100*(Total Calls Open/Total SL Target
Calls)
-------------------------------
% of Open Calls Less than 1 Day Old >=50% 100*(Total Calls Open Less SL Target
than 1 Day/Total Calls)
-------------------------------
% of Open Calls Between 1 and 2 Days Old <=35% 100*(Total Calls Open SL Target
Between 1 and 2 Days/Total
Calls)
-------------------------------
% of Open Calls Between 2 and 5 Days Old <=10% 100*(Total Calls Open SL Target
Between 2 and 5 Days/Total
Calls)
-------------------------------
% of Open Calls Between 5 and 20 Days Old <= 4% 100*(Total Calls Open SL Target
Between 5 and 20 Days/Total
Calls)
-------------------------------
% of Open Calls Over 20 Days Old <= 1% 100*(Total Calls Open Over SL Target
20 Days/Total Calls)
-------------------------------
Calls Resolved Within 24 Hours 90% 100*(Total Calls Resolved SL Target
Within 24 Hours/Total Calls)
-------------------------------
P&G Satisfaction Survey 4.0 / 5.0 scale Average score of survey SL Target
questions related to
procurement processes
-------------------------------
</TABLE>
1 - Resolution Time is defined as the time a trouble call is received by the
Vendor until the end-user's problem has been resolved or properly closed.
<PAGE>
SERVER BREAK/FIX SUPPORT
<TABLE>
<CAPTION>
SERVICE LEVEL METRIC SERVICE LEVEL CALCULATION SERVICE LEVEL CREDIT
- --------------------------------------- ------------------ ----------------------------- ---------------------
<S> <C> <C> <C>
Availability of Maintenance Personnel 7 X 24 NA
------------------ -----------------------------
Time to Acknowledge Server Outage Calls 100% in 15 minutes 100*(Total Calls SL Target
Acknowledged in more than
15 minutes/Total Server
Outage Calls)
-----------------------------
Repair Resolution Time 95% in 4 hours 100*(Total Call with repair $ 250 per Incident
resolution time more than 4 measured annually
hours/Total Calls Requiring
Repairs)
Repair Resolution Time 100% in 8 hours 100*(Total Calls with repair SL Target
resolution time more than 8
hours/Total Calls Requiring
Repairs)
P&G Satisfaction Survey 4.0 / 5.0 scale Average score of survey SL Target
questions related to
procurement processes
-----------------------------
</TABLE>
1 - FOR SERVERS, RESOLUTION TIME IS DEFINED AS THE ELAPSED TIME BETWEEN THE TIME
A TROUBLE CALL IS RECEIVED BY THE VENDOR UNTIL THE SERVER IS ON-LINE AND
AVAILABLE FOR USE. IF ADDITIONAL P&G ACTION IS REQUIRED BEFORE THE SERVER CAN
BE MADE AVAILABLE FOR USE, SUCH AS THE RESTORATION OF DATA TO A REPLACED DISK
DRIVE, THEN THE ELAPSED TIME ENDS WHEN P&G IS NOTIFIED THAT THEY MAY BEGIN THEIR
ACTION.
PACKAGED SOFTWARE HELP DESK SUPPORT
<TABLE>
<CAPTION>
SERVICE LEVEL METRIC SERVICE LEVEL CALCULATION
- -------------------------------------------------- ---------------- --------------------------------------------------------
<S> <C> <C>
Hold Time 30 seconds Average hold time for all calls
in a month
--------------------------------------------------------
Abandonment Rate 3% 100*(Total Abandoned
Calls/Total Calls)
--------------------------------------------------------
1st Time Resolution 80% 100*(Total 1st Time
Resolution Calls/Total Calls)
--------------------------------------------------------
Invoiced Correctly 100% 100*(Total Invoices Not
(Invoice on-time and accurate) Correct/Total Invoices)
--------------------------------------------------------
Availability of 800 Number for Support Assistance 100% 100*(Total Time 800 Number not available during Service
(M-F 7:30 AM EST to 8:30 PM EST) Level time/Total Time 800
Number is suppose to
available per Service Level)
--------------------------------------------------------
Problem Aging
Open Calls as a % of Total Calls 15% 100*(Total Calls Open/Total
Calls)
--------------------------------------------------------
% of Open Calls Less than 1 Day Old >=50% 100*(Total Calls Open Less
than 1 Day/Total Calls)
--------------------------------------------------------
% of Open Calls Between 1 and 2 Days Old <=35% 100*(Total Calls Open
Between 1 and 2 Days/Total
Calls)
--------------------------------------------------------
% of Open Calls Between 2 and 5 Days Old <=10% 100*(Total Calls Open
Between 2 and 5 Days/Total
Calls)
--------------------------------------------------------
% of Open Calls Between 5 and 20 Days Old <= 4% 100*(Total Calls Open
Between 5 and 20 Days/Total
Calls)
--------------------------------------------------------
% of Open Calls Over 20 Days Old <= 1% 100*(Total Calls Open Over
20 Days/Total Calls)
--------------------------------------------------------
Calls Resolved Within 24 Hours 90% 100*(Total Calls Resolved in
24 Hours/Total Calls)
--------------------------------------------------------
P&G Satisfaction Survey 4.0 / 5.0 scale Average score of survey
questions related to
procurement processes
--------------------------------------------------------
</TABLE>
<PAGE>
SERVICE LEVEL REPORTING REQUIREMENTS
This section defines the reports to be provided to P&G to ensure service levels
are being met. This list reflects the current requirements and is subject to
modification as additional information is required. Note that with advance
notice to Vendor, P&G may conduct an audit of the reports provided, at its own
expense and so as not to interfere with Vendor's normal business operations.
P&G will notify the Vendor in advance of any changes made to these requirements.
END-USER BREAK/FIX SUPPORT
<TABLE>
<CAPTION>
REPORT DESCRIPTION FREQUENCY
- ------------------ ----------------------------------------------------------- ------------------------
<S> <C> <C>
Primary SLA Report Details the performance metrics listed above at two Monthly (Including
levels: the sub-site level and Cincinnati as a whole. This Year-to-Date Statistics)
report should be given to Regional Workplace Support
and each SAT.
-----------------------------------------------------------
Problem Aging Total number of open calls broken down by the age Both Weekly and
categories specified in the Service Levels. Monthly
----------------------------------------------------------- ------------------------
Types of Call Total number of calls broken down by problem type. Monthly
- ------------------ ----------------------------------------------------------- ------------------------
</TABLE>
SERVER BREAK/FIX SUPPORT
<TABLE>
<CAPTION>
REPORT DESCRIPTION FREQUENCY
- ------------------ ----------------------------------------------------------- -------------------------
<S> <C> <C>
Primary SLA Report Details the performance metrics listed above at two Monthly (Including
levels: the sub-site level and Cincinnati as a whole. This Year-to-Date Statistics)
report should be given to Regional Workplace Support Financial calculation to
and each SAT. be done on an annual
basis
-------------------------
Problem Aging Total number of open calls broken down by the age Monthly
categories specified in the Service Levels.
-----------------------------------------------------------
</TABLE>
PACKAGE SOFTWARE HELP DESK SUPPORT SERVICES
<TABLE>
<CAPTION>
REPORT DESCRIPTION FREQUENCY
- ------------------ ----------------------------------------------------------- ------------------------
<S> <C> <C>
Primary SLA Report Details the performance metrics listed above at two Monthly (Including
levels: the sub-site level and Cincinnati as a whole. This Year-to-Date Statistics)
report should be given to Regional Workplace Support
and each SAT.
-----------------------------------------------------------
Problem Aging Total number of open calls broken down by the age Both Weekly and
categories specified in the Service Levels. Monthly
----------------------------------------------------------- ------------------------
Types of Call Total number of calls broken down by problem type. Monthly
- ------------------ ----------------------------------------------------------- ------------------------
</TABLE>
<PAGE>
ATTACHMENT F
SPECIAL PROJECTS
This Attachment describes the methodology and principles associated with
defining and scoping Special Projects that are requested by P&G for Vendor to
perform. Generally, P&G may require Vendor to perform projects within the scope
of the Services. These projects are considered "Special Projects" in that they
generally require further definition of Services to be performed by Vendor so
the Parties have a clear understanding of the scope, deliverables and other
unique aspects of the project. Special Projects shall not be separately
chargeable by Vendor unless P&G requires that the project be performed outside
outside Normal Business Hours (as hereinafter defined). "Normal Business Hours"
shall be Monday through Friday 7:30a.m. to 5:30p.m. The Vendor shall use the
rates set forth under "Special Projects" in Attachment G to the Statement of
Work when calculating the applicable charges for the Special Project.
SPECIAL PROJECTS
- -----------------
Vendor will be required to work in collaboration with P&G administration to
support Special Projects. P&G will be responsible for the original project
planning (scope, scheduling, etc.) and will provide trouble-shooting guides
specific to the project. Vendor will collaborate with P&G to determine
additional staffing needs and to provide assistance for these Special Projects,
including required support outside of Normal Business Hours.
EACH SPECIAL PROJECT SHALL HAVE A PROJECT PLAN THAT WILL CONTAIN THE FOLLOWING
TYPES OF INFORMATION:
1. Purpose: This section will provide a high level, executive summary of
the overall purpose of the project, and an understanding of the scope
of work required by the project.
2. Parties Responsibilties: This section will list, describe and assign
all of the responsibilities required in order to complete the project.
Each responsibility will be assigned to either Vendor, P&G, or, where
appropriate, a third party.
3. Deliverable Materials: This section will provide a complete list and
description of all materials which will be delivered for the project.
4. Estimated Schedule: This section will provide a map of the planned
schedule for completion of the project. The dates for any milestones
and responsibilities upon which the parties are relying must be
stated.
5. Completion Criteria: Any completion criteria Vendor is required to
meet must be set forth in this section.
6. Required Equipment and Materials: This section will list any required
equipment and materials, including required Equipment and Software,
and will state which party is responsible for providing each.
7. Charges: If the Special Project is chargeable as provided above,
Vendor shall quote the charges for P&G's approval in accordance with
Attachment G to the Statement of Work. The charges may be specified as
a fixed price and/or on a time and materials basis. These charges will
be added to P&G's monthly invoices according to the agreed upon
schedule for payment.
8. Project Representative: This section will identify a representative
for each party for each project.
The attached template will be used to identify and track Special
Projects.
<PAGE>
EXHIBIT 1 - TEMPLATE PROJECT PLAN FOR SPECIAL PROJECTS
Project Plan Number: .
- -------------------------------------
This Project Plan describes a Special Project agreed upon by Vendor and P&G,
and is subject to all the terms of the Procurement and End-User Support
Agreement (the "Agreement") between Vendor and P&G dated ________, 199_. No
changes to those terms are authorized on this form. This form will be used only
for projects directly related to the scope of Services contained in the
Agreement.
1. PURPOSE & SCOPE OF WORK
2. PARTIES' RESPONSIBILITIES
RESPONSIBILITIES PARTY RESPONSIBLE
- ---------------------------------------------------------- --------------------
- ---------------------------------------------------------- --------------------
- ---------------------------------------------------------- --------------------
- ---------------------------------------------------------- --------------------
- ---------------------------------------------------------- --------------------
3. DELIVERABLE MATERIALS
MATERIAL
- ---------------------------------------------------------- --------------------
- ---------------------------------------------------------- --------------------
- ---------------------------------------------------------- --------------------
- ---------------------------------------------------------- --------------------
- ---------------------------------------------------------- --------------------
4. SCHEDULE
RESPONSIBILITY/MILESTONE ESTIMATED COMPLETION
DATE
- ---------------------------------------------------------- --------------------
- ---------------------------------------------------------- --------------------
- ---------------------------------------------------------- --------------------
- ---------------------------------------------------------- --------------------
- ---------------------------------------------------------- --------------------
a.
b.
c.
d.
<PAGE>
5. COMPLETION CRITERIA
Completion Criteria PARTY RESPON.
- ---------------------------------------------------------- --------------------
- ---------------------------------------------------------- --------------------
- ---------------------------------------------------------- --------------------
- ---------------------------------------------------------- --------------------
- ---------------------------------------------------------- --------------------
6. REQUIRED EQUIPMENT AND MATERIALS
EQUIPMENT/MATERIALS OWN
- ---------------------------------------------------------- --------------------
- ---------------------------------------------------------- --------------------
- ---------------------------------------------------------- --------------------
- ---------------------------------------------------------- --------------------
- ---------------------------------------------------------- --------------------
7. NUMBER OF RESOURCES REQUIRED AND RELATED CHARGES, IF APPLICABLE.
8. PROJECT REPRESENTATIVE
NAME:
- ---------------------------------------------------------- --------------------
TITLE:
- ---------------------------------------------------------- --------------------
PARTY REPRESENTING:
- ---------------------------------------------------------- --------------------
ADDRESS:
PHONE:
- ---------------------------------------------------------- --------------------
FAX:
- ---------------------------------------------------------- --------------------
THE PROCTER & GAMBLE COMPANY POMEROY COMPUTER RESOURCES
By:________________________________ By:________________________________
Name:______________________________ Name:______________________________
Title:_____________________________ Title:_____________________________
Date:______________________________ Date:______________________________
<PAGE>
ATTACHMENT G
CHARGES
1. INTRODUCTION
1.1. This Attachment describes the methodology for calculating the charges
for the Services being provided by Vendor for P&G pursuant to the
Agreement. The prices and rates for the Services, as set forth in this
Attachment G, are fixed for the Term, unless modified and amended by
mutual agreement of the Parties in accordance with the terms of the
Agreement.
1.2. The Services are further defined and described in the Agreement and
the Statement of Work, including Attachments B-1, B-2 and B-3 thereto.
For specific charges, see Exhibit G-1 to this Attachment G. All
Services will be billed in accordance with the terms and conditions of
this Agreement at the end of each month.
1.3. The charges are grouped into Service categories as listed below, with
a description of the applicable charges included under each such
Service category. Exhibit G-1 to this Attachment G identifies the
particular charges and rates for each Service category. This
Attachment outlines all charges that may be payable by P&G for the
Services.
1.4. As required by the terms of the Agreement, Vendor shall implement
processes, tools and procedures necessary to accurately monitor,
record, and report the Services provided, and the procurement of the
Products. In accordance with the terms of the Agreement, each monthly
invoice shall be supported by an appropriate level of detail. At a
minimum, each invoice shall be supported by an accounting consistent
with the payment terms as described in the Agreement.
1.5. P&G reserves the right not to accept billing for any other costs or
services not outlined in this Attachment or its Exhibits.
1.6. With respect to recurring charges, the extent of the charges shall be
determined by multiplying the applicable per unit price by the
corresponding applicable number of units (be it number of
workstations, servers, or problem tickets) as provided in Exhibit G-1
of Attachment G.
2. SERVICE CATEGORIES AND PRICING METHODOLOGY
2.1. Procurement Service (Defined as WS Procurement and IS Expense
Procurement in Exhibit G-1 of Attachment G)
(a) This Service will be invoiced to P&G based on a % upcharge on
Vendor's Cost (as hereinafter defined) for the Products. "Cost"
as used herein shall refer to Vendor's actual cost for the
Product subject of the Order issued by P&G from Vendor's
lowest-tier supplier for such Product or P&G's negotiated price
for such Product, net of all applicable discounts, rebates, and
the like, plus the applicable upcharge identifed in Exhibit G-1
to this Attachment G.
<PAGE>
(b) Actual Out-of-Pocket or negotiated freight charges will be paid
by P&G, if applicable or as specified in Exhibit G-1.
(c) If applicable and set forth in Exhibit G-1 to this Attachment G,
there will be an expedited order charge on any Product
Orders,which are to be expedited, as set forth in the Procurement
Lead Times Table.
2.2. CWDC Management Service
The charges for this Service, as specified in Exhibit G-1 to this
Attachment G, will be charged on a per workstation/expense item on a monthy
basis.
2.3. Packaged Software Helpdesk Service
(a) This service will be charged on a per Call (as hereinafter defined)
basis.
(b) For purposes of this Agreement, a "Call" shall refer to a problem
ticket opened by Vendor customer representative for a new problem
initiated by a P&G end-user. P&G shall not be charged for any other
calls, including: (i) any calls resolved without having to speak to a
Vendor customer representative; (ii) follow-up or status calls made on
the same problem ticket; (iii) call necessitated do to Vendor's
failure to meet a Service Level or perform the Services properly.
2.4. Deskside and Server Support Support Service
(a) This service will be billed on a per workstation (and server) basis at
the rates set forth in Exhibit G-1 to this Attachment G.
(b) For purposes hereof, a "workstation" or "server" shall include any and
all peripheral equipment connected to the workstation or server, as
the case may be.
(c) Billing for individual service categories is to begin when the entire
category of service is being provided, or as agreed to by P&G.
Further, service categories with billing based on actual number of
workstations and servers will be determined from unit counts taken
from P&G's Asset Management System. The initial unit count will be
established on or before the Effective Date and updated every 6 months
or in the event of a major change.
(d) At P&G's sole option and upon 90 days prior notice to Vendor at any
time during the Term, P&G may convert the per workstation support
charges to a per technician pricing identified in Exhibit G-1 to this
Attachment G for any or all of the P&G Sites. Vendor agrees to
reasonably cooperate with P&G in assessing the feasibility of making
such a change, including providing historical analysis of the what the
fees would have been if per technician pricing was being utilized.
<PAGE>
2.5. Workstation Disposal
(a) This Service will be billed as a percentage of the residual value of
units disposed of on a monthly basis. Disposal preparation Services
will be done at the CWDC. The disposal fee is, again, a percentage of
the residual value of the units disposed. P&G will receive all
proceeds from the sale of disposed Equipment, net of any amounts due
to the Vendor as set forth in Exhibit G-1 to this Attachment G.
2.6 P & G Order Management Team
(a) This team will be billed monthly on a per FTE basis. P & G has the
right to determine the staffing levels of this team.
3. SPECIAL PROJECTS HANDLING
3.1. If P&G initiates a request of Vendor to perform a Special Project (as
outlined in Attachment F), Vendor will develop a quote of the cost for
those resources for the requesting P&G Manager, using the form in
Attachment F. The quote will be developed by using the Special Project
Resources Rates as specified in Exhibit G-1 to this Attachment G with a
time estimate to complete the project. Vendor will invoice P&G on a project
basis for the actual number of hours that the Special Project FTEs were
working on P&G projects during the applicable period. P&G is not
responsible for any charges for Special Projects unless the special
projects form from Attachment F has been signed by P&G and placed on file
with the P&G Contract Executive.
3.2. The Special Projects Resource Rates specified in Exhibit G-1 to this
Attachment G are based upon an FTE being equal to 1900 billable hours per
year. Vendor will provide P&G with advance notice and obtain P&G written
approval if overtime rates (time and 1/2) or other premium rates (holidays
etc.) are applicable for any FTEs on any special projects. Generally, time
and will apply to overtime hours for special projects resources (>40
hours/week) and double time will apply to special projects performed on
Sundays or vendor recognized holidays. Vendor will provide P&G with
advanced notice and obtain P&G's approval of any travel or lodging expenses
associated with FTEs assigned to Special Projects. P&G will be invoiced for
these on an Out-of-Pocket basis.
<PAGE>
ATTACHMENT H
OVERALL MANAGEMENT
1.1 OVERVIEW AND OBJECTIVE
This attachment describes the approach Vendor will use to provide continuous and
overall management of Services. Additionally, the responsibilities of Vendor
with regard to project management are identified.
The success of Services depends upon prudent strategic guidance and precise
operational management. Vendor is responsible for day-to-day operational
management.
Vendor's service philosophy should incorporate several key strategies:
- Support of the P&G Local Support Center to answer questions, resolve
problems and provide services for user help and support, accessible
through the P&G Local Call Center.
- Support of P&G's procurement owner/team and affiliated organizations
(i.e. finance and accounting) to answer questions, resolve problems,
and offer guidance in relation to the procurement of Equipment, CWDC,
disposal processes, and the activities of the ordering team.
- A structured and managed interface between Vendor and P&G's retained
responsibilities.
- A dedicated delivery team, headed by a senior Vendor Project
Executive, providing a single point of contact for P&G management
regarding the ongoing delivery of service.
- Dedication to provide trained on-site personnel to deliver local
support.
Vendor's approach to contract project management should maintain a proven track
record of performance and customer satisfaction through a number of key tactics:
- A dedicated project team assigned to assure sharp focus on P&G's
needs.
- A close relationship with P&G, assuring a team-oriented approach to
maintaining high quality Service delivery.
- A Vendor focus on Customer Satisfaction.
- A Vendor's contract management commitment to responsive and quality
service delivery.
- Vendor is the prime contractor for all Services. In accordance with
the terms of the Agreement, Vendor will enlist subcontractors to
deliver Services where appropriate. In these cases, Vendor will assure
that all subcontracted services are delivered according to the terms
of the Agreement.
Vendor will apply a tailored set of existing processes to suit P&G requirements
as reflected in this Agreement. Vendor is accountable for meeting the Service
Levels.
<PAGE>
1.2 SUPPORT MODEL AND ORGANIZATIONAL RELATIONSHIPS
1.2.1 PROJECT EXECUTIVE
Vendor will assign a Vendor Project Executive to be the senior executive for the
project. The Vendor Project Executive will select and assign appropriate
resources and management for each major functional element of the project.
Vendor Project Office facilities will be readily accessible to appropriate P&G
personnel and will provide managerial support for activities performed for P&G
Sites.
1.2.2 VENDOR PROJECT EXECUTIVE RESPONSIBILITIES
The experience of Vendor management team is vital to the success of the project.
P&G has identified the following position as being a key position to the success
of the contract.
PROJECT EXECUTIVE - The Project Executive has overall management responsibility
for the success of the project.
Vendor Project Executive will:
- Managing the overall relationship between Vendor and Vendor IT
executives and Vendor User executives;
- Managing the customer satisfaction with all Services provided by
Vendor under this Agreement;
- Providing overall personnel management of Vendor personnel assigned to
the project; and
- Manage the Project for Vendor including planning, directing, and
monitoring all Project activities;
- Develop the detailed Project Plan for transition and on-going
maintenance of services;
- Maintain a file of the Project Plan and any associated documentation;
- Establish/maintain the project team and orient the team members
regarding the project management process and the Project Plan,
including the individual responsibilities, schedules, etc.;
- Be Vendor primary point of contact for establishing and maintaining
communications P&G;
- Define the resources required for the project and assure those
resources are available as scheduled;
- Measure, track, and evaluate progress regarding the provision of the
designated services to the required designated Service Levels;
- Administer and be accountable for project change control;
- Plan, schedule and participate in periodic project reviews, as
applicable;
- Establish and maintain the necessary financial controls for those
areas of the project for which Vendor has responsibility.
<PAGE>
1.3 VENDOR MANAGEMENT STRUCTURE
Positions needed to ensure the success of the project and the functions awarded
therein will be named and staffed accordingly by Vendor. This staffing plan
will be subject to review by P&G. At a minimum, Vendor will provide to P&G
organizational charts indicating the reporting lines and responsibilities of key
members of Vendor project team. One individual may be responsible for more than
one designated service. This document shall be updated and resubmitted as
needed.
This named Project Team will provide overall strategic guidance for the project
as well as perform day-to-day administrative tasks including contract
management, report review, and Service Level review. Vendor Project Team will be
located such that it is readily accessible to appropriate P&G personnel.
1.5 PROCEDURES MANUAL
A key to success of the Project is Vendor's experience in implementing and
following repeatable processes and procedures for all elements of the services
delivered. The processes and procedures developed to guide the execution of
tasks for each of the designated dervices will be created and maintained in a
Procedures Manual.
The Procedures Manual is a living tool in that it will not be viewed as final at
any point in time. The sections of the manual will reflect the actual processes
and procedures being followed by Vendor and the Project Team and staff, and they
will be continually under evaluation for refinement and improvement.
1.5.1 CONTENT
The Procedures Manual is intended to be a comprehensive collection of processes,
procedures, and relevant measurement materials that describe how each designated
service will be managed, executed, and measured. The Procedures Manual includes
the following sections:
Services
- Procedure/process documentation
- Procedure/process diagrams
- Roles and responsibilities
- Other supporting/relevant materials will be included Service Level
Management
- Service Level strategy
- Service Level metrics for each service
- Other supporting/relevant materials will be included Documents of
Vendor Management Process
- Vendor management process
- Vendor Project Team, including organization charts
- Vendor Key Positions, including organization charts
- Vendor/P&G Contract with all attachments
- Other supporting/relevant materials will be included Reporting
strategy
- Sample reports
- Other supporting/relevant materials will be included Service Locations
(Attachment A) Change Control
- Designated service process change control
- Project change control
<PAGE>
ATTACHMENT I
QUALITY PROCESSES
In consultation with P&G, Vendor will use quality processes which will include:
1. Change Management Process specifying that all material changes to the
---------------------------
Services or related operations of P&G will be properly documented and no changes
to the Services will be made which adversely affect the business operations of
P&G without first obtaining the proper sign-off from the authorized P&G
approvers.
2. Problem Management Processspecifying the process for managing P&G End
----------------------------
User Deskside and Workplace Server problems. The procedures will establish the
process to identify problem 'owners', back-up contacts and escalation points.
3. Service Level Management Process ensures that there is understanding and
---------------------------------
consistency of levels of service provided by Vendor to P&G. Service Level
Management ensures that the appropriate service levels are negotiated with the
customer, are documented and measurable, and are reported on to the users of
services provided by Vendor. Through trending and analysis of those
measurements, service level management provides a base for enhancements to the
environment plans which are cost effective and provide for continuous
improvement efforts.
4. Disaster Recovery Process - Vendor includes P&G's disaster recovery
---------------------------
procedures as they relate to Vendor' provision of the Services.
5. Reporting and Documentation Process specifying that Vendor will provide a
-----------------------------------
set of periodic reports to P&G. At a minimum, these reports will include
monthly performance reports documenting Vendor' Service Level performance,
monthly project schedule reports documenting the status of ongoing projects, and
monthly change reports documenting operational changes performed during the
previous month. Vendor will provide P&G with such documentation and other
information as may be reasonably requested by P&G to verify the accuracy of the
reports specified above.
6. Scheduled Meetings - The parties will mutually determine an appropriate
-------------------
set of periodic meetings to be held between representatives of P&G and Vendor.
The meetings will include weekly meetings among operational personnel to discuss
ongoing issues relating to daily performance and planned or anticipated
activities and changes, monthly Review Committee meetings to review the
performance reports, the project schedule reports, the changes reports, and such
other matters as appropriate, and a quarterly senior management meeting to
review relevant contract and performance issues.
<PAGE>
EXHIBIT G-1 OF ATTACHMENT G
<TABLE>
<CAPTION>
SERVICE CATEGORY SERVICE CHARGED ADDITIONAL DESCRIPTION CHARGE- PREF.
(%=markup on cost, SVC LEVELS
$= per item/event)
- ------------------- ------------------------------- ----------------------------------------------- --------------
<S> <C> <C> <C>
WS PROCUREMENT
- ------------------- ------------------------------- ----------------------------------------------- --------------
Mgmt. Up Charge
- ------------------- ------------------------------- ----------------------------------------------- --------------
Dell Hardware -0.25%
- ------------------- ------------------------------- ----------------------------------------------- --------------
Other Manufacturers 2%
- ------------------- ------------------------------- ----------------------------------------------- --------------
Freight In Charges out-of-pocket
or Negotiated
- ------------------- ------------------------------- ----------------------------------------------- --------------
Freight Out Charges Hardware shipped to outside Cincinnati out-of-pocket
or Negotiated
- ------------------- ------------------------------- ----------------------------------------------- --------------
Expedited Orders $ 50 per order
- ------------------- ------------------------------- ----------------------------------------------- --------------
CWDC MGMT
- ------------------- ------------------------------- ----------------------------------------------- --------------
WS Mgmt. Charge $ 15
- ------------------- ------------------------------- ----------------------------------------------- --------------
Cincinnati Delivery System or Stand-alone Hardware $ 10/System
Charges $5 stand alone
- ------------------- ------------------------------- ----------------------------------------------- --------------
Standard Software $ 10
Platform Installation
- ------------------- ------------------------------- ----------------------------------------------- --------------
IQ charge $ 5
- ------------------- ------------------------------- ----------------------------------------------- --------------
Surge Item Expense
Order Mgmt.
- ------------------- ------------------------------- ----------------------------------------------- --------------
Mgmt charge $ 0
- ------------------- ------------------------------- ----------------------------------------------- --------------
Delivery Cincy $ 3
- ------------------- ------------------------------- ----------------------------------------------- --------------
or Negotiated
- ------------------- ------------------------------- ----------------------------------------------- --------------
Workstation Disposal Disposal Prep. $ 15
/ Secure Erase
- ------------------- ------------------------------- ----------------------------------------------- --------------
IS EXPENSE PROC. Should include any 3rd party reseller charges
- ------------------- ------------------------------- ----------------------------------------------- --------------
IS Expense 6%
Procurement Mgmt
- ------------------- ------------------------------- ----------------------------------------------- --------------
Software Proc. Mgmt 10%
- ------------------- ------------------------------- ----------------------------------------------- --------------
Freight out-of-pocket
or Negotiated
- ------------------- ------------------------------- ----------------------------------------------- --------------
PKG SW HELPDESK
Charge per Call
- ------------------- ------------------------------- ----------------------------------------------- --------------
0-10,000 calls $ 0
- ------------------- ------------------------------- ----------------------------------------------- --------------
10,001-20,000 calls $ 0
- ------------------- ------------------------------- ----------------------------------------------- --------------
20,001-20,999 calls $ 0
- ------------------- ------------------------------- ----------------------------------------------- --------------
21,000+ calls $ 0
- ------------------- ------------------------------- ----------------------------------------------- --------------
Web Based Support $ 0
- ------------------- ------------------------------- ----------------------------------------------- --------------
WORKSTATION AND SERVER SUPPORT
(for Cincinnati, OH and Hunt Valley, MD Only)
- ------------------- ------------------------------- ----------------------------------------------- --------------
Break/Fix Workstation support Per workstation charge per year
- ------------------- ------------------------------- ----------------------------------------------- --------------
less than 16,001 wks $ 352.80
- ------------------- ------------------------------- ----------------------------------------------- --------------
16,001-18,000 $ 339.30
- ------------------- ------------------------------- ----------------------------------------------- --------------
18,001-19,000 $ 310.50
- ------------------- ------------------------------- ----------------------------------------------- --------------
19,001-20,000 $ 300.60
- ------------------- ------------------------------- ----------------------------------------------- --------------
20,001-22,000 $ 292.50
- ------------------- ------------------------------- ----------------------------------------------- --------------
22,001-24,000 $ 283.50
- ------------------- ------------------------------- ----------------------------------------------- --------------
24,001+ $ 280.80
- ------------------- ------------------------------- ----------------------------------------------- --------------
Server Break Fix per server per year
- ------------------- ------------------------------- ----------------------------------------------- --------------
0-50 Servers $ 1,875
- ------------------- ------------------------------- ----------------------------------------------- --------------
51-100 Servers $ 1,845
- ------------------- ------------------------------- ----------------------------------------------- --------------
101-150 Servers $ 1,815
- ------------------- ------------------------------- ----------------------------------------------- --------------
151-200 Servers $ 1,780
- ------------------- ------------------------------- ----------------------------------------------- --------------
201-250 Servers $ 1,750
- ------------------- ------------------------------- ----------------------------------------------- --------------
251-300 Servers $ 1,690
- ------------------- ------------------------------- ----------------------------------------------- --------------
301-350 Servers $ 1,625
- ------------------- ------------------------------- ----------------------------------------------- --------------
351-400 Servers $ 1,565
- ------------------- ------------------------------- ----------------------------------------------- --------------
401+ Servers $ 1,500
- ------------------- ------------------------------- ----------------------------------------------- --------------
DIPOSAL
Disposal Prep Cincinnati Only (primarily $ 0
done at CWDC)
- ------------------- ------------------------------- ----------------------------------------------- --------------
Workstation Disposal Cincinnati Only 17.5%
Fee
- ------------------- ------------------------------- ----------------------------------------------- --------------
P&G ORDER MGMT TEAM
Charge per FTE Anticipated to be 3-4 $ 3,466/Mo.
people
- ------------------- ------------------------------- ----------------------------------------------- --------------
SPECIAL PROJECTS
Special projects
Resources
- ------------------- ------------------------------- ----------------------------------------------- --------------
Technician hrly rate* $ 45
- ------------------- ------------------------------- ----------------------------------------------- --------------
Sys. Engineer hrly rate* $ 55
- ------------------- ------------------------------- ----------------------------------------------- --------------
*Overtime is time and and PCR holidays and Sundays are double time.
- ------------------- ------------------------------- ----------------------------------------------- --------------
WORKSTATION SUPPORT PRICING
METHODOLOGY CONVERSION OPTION
- -----------------------------
Charge per support staff FTE $75,600 yr.
staff FTE
- ------------------- ------------------------------- ----------------------------------------------- --------------
</TABLE>
<PAGE>
ATTACHMENT E
EXHIBIT 1
DESCRIPTION AND CALUCULATION OF FINANCIAL REMEDIES FOR SERVICE LEVELS
The vendor will manage and track measurements associated with the Service Levels
of this agreement as defined in Appendix E. In the event that the required
Service levels are not achieved in the applicable period, the following are
examples of how Financial Remedies will be assessed as described in each of the
following areas:
PROCUREMENT FINANCIAL REMEDIES
The goal is to exceed the minimum target of 98% as set in Attachment E,
Procurement, for Delivery Timeliness to the CWDC. This committment will be
monitored on a rolling month basis. A rolling month is defined as two
consecutive months. Pomeroy will achieve a 98% success rate. If Pomeroy fails
to achieve the 98% Service Level for two (2) consecutive months, Procter &
Gamble will receive a $25.00 credit per incident below stated 98% success rate
in the second month. Each individual order is defined as an incident. See
examples below:
<TABLE>
<CAPTION>
ROLLING TOTAL ORDERS MET DUE DATE SUCCESS RATE INCIDENTS SERVICE LEVEL
MONTH MINIMUM BELOW 98% CREDIT DUE TO
TARGETS SUCCESS RATE PROCTER &
GAMBLE
--------------
<S> <C> <C> <C> <C> <C>
MARCH 100 98 98% 0 $ 0
------------ ------------ ------------- ------------- --------------
APRIL 100 97 97% 1 $ 0
------------ ------------ ------------- ------------- --------------
MAY 100 98 98% 0 $ 0
------------ ------------ ------------- ------------- --------------
JUNE 100 96 96% 2 $ 0
------------ ------------ ------------- ------------- --------------
JULY 100 92 92% 6 $ 150
------------ ------------ ------------- ------------- --------------
AUGUST 100 97 97% 1 $ 25
------------ ------------ ------------- ------------- --------------
SEPTEMBER 100 99 99% 0 $ 0
</TABLE>
CINCINNATI WORKSTATION DISTRIBUTION CENTER FINANCIAL REMEDIES
The goal is to exceed the minimum target of 98% as set in Attachment E,
Cincinnati Workstation Distribution Center, for Delivery Timeliness to the
ordering party. This committment will be monitored on a rolling month basis. A
rolling month is defined as two consecutive months. Pomeroy will achieve a 98%
success rate. If Pomeroy fails to achieve the 98% Service Level for two (2)
consecutive months, Procter & Gamble will receive a $25.00 credit per incident
below stated 98% success rate in the second month. Each individual order is
defined as an incident. See examples below:
<TABLE>
<CAPTION>
ROLLING TOTAL ORDERS MET DUE DATE SUCCESS RATE INCIDENTS SERVICE LEVEL
MONTH MINIMUM BELOW 98% CREDIT DUE TO
TARGETS SUCCESS RATE PROCTER &
GAMBLE
--------------
<S> <C> <C> <C> <C> <C>
MARCH 100 98 98% 0 $ 0
------------ ------------ ------------- ------------- --------------
APRIL 100 97 97% 1 $ 0
------------ ------------ ------------- ------------- --------------
MAY 100 98 98% 0 $ 0
------------ ------------ ------------- ------------- --------------
JUNE 100 96 96% 2 $ 0
------------ ------------ ------------- ------------- --------------
JULY 100 92 92% 6 $ 150
------------ ------------ ------------- ------------- --------------
AUGUST 100 97 97% 1 $ 25
------------ ------------ ------------- ------------- --------------
SEPTEMBER 100 99 99% 0 $ 0
</TABLE>
CINCINNATI WORKSTATION DISTRIBUTION CENTER FINANCIAL REMEDIES (CONTINUED)
The goal is to exceed the minimum target of 98% as set in Attachment E,
Cincinnati Workstation Distribution Center, for Disposal Pick-up Timeliness.
This committment will be monitored on a rolling month basis. A rolling month is
defined as two consecutive months. Pomeroy will achieve a 98% success rate. If
Pomeroy fails to achieve the 98% Service Level for two (2) consecutive months,
Procter & Gamble will receive a $25.00 credit per incident below stated 98%
success rate in the second month. Each individual order is defined as an
incident. See examples below:
<TABLE>
<CAPTION>
ROLLING TOTAL PICK-UP MET DUE DATE SUCCESS RATE INCIDENTS SERVICE LEVEL
MONTH ORDERS MINIMUM BELOW 98% CREDIT DUE TO
TARGETS SUCCESS RATE PROCTER &
GAMBLE
--------------
<S> <C> <C> <C> <C> <C>
MARCH 100 98 98% 0 $ 0
------------- ------------ ------------- ------------- --------------
APRIL 100 97 97% 1 $ 0
------------- ------------ ------------- ------------- --------------
MAY 100 98 98% 0 $ 0
------------- ------------ ------------- ------------- --------------
JUNE 100 96 96% 2 $ 0
------------- ------------ ------------- ------------- --------------
JULY 100 92 92% 6 $ 150
------------- ------------ ------------- ------------- --------------
AUGUST 100 97 97% 1 $ 25
------------- ------------ ------------- ------------- --------------
SEPTEMBER 100 99 99% 0 $ 0
</TABLE>
WORKSTATION DISPOSAL FINANCIAL REMEDIES
The goal is to exceed the minimum target of 98% for Workstation Disposal as
described in Attachment E, Workstation Disposal Pick-up Timeliness. This
committment will be monitored on a rolling month basis. A rolling month is
defined as two consecutive months. Pomeroy will achieve a 98% success rate. If
Pomeroy fails to achieve the 98% Service Level for two (2) consecutive months,
Procter & Gamble will receive a $25.00 credit per incident below stated 98%
success rate in the second month. Each individual order is defined as an
incident. See examples below:
<TABLE>
<CAPTION>
ROLLING TOTAL MET DUE DATE SUCCESS RATE INCIDENTS SERVICE LEVEL
MONTH DISPOSAL MINIMUM BELOW 98% CREDIT DUE TO
TARGETS SUCCESS RATE PROCTER &
GAMBLE
--------------
<S> <C> <C> <C> <C> <C>
MARCH 100 98 98% 0 $ 0
-------- ------------ ------------- ------------- --------------
APRIL 100 97 97% 1 $ 0
-------- ------------ ------------- ------------- --------------
MAY 100 98 98% 0 $ 0
-------- ------------ ------------- ------------- --------------
JUNE 100 96 96% 2 $ 0
-------- ------------ ------------- ------------- --------------
JULY 100 92 92% 6 $ 150
-------- ------------ ------------- ------------- --------------
AUGUST 100 97 97% 1 $ 25
-------- ------------ ------------- ------------- --------------
SEPTEMBER 100 99 99% 0 $ 0
</TABLE>
<PAGE>
END USER BREAK FIX SERVICE FINACIAL REMEDIES - HIGHEST PRIORITY
The goal is to provide repairs as defined in Attachment B-3 of the Statement of
Work. This committment will be monitored on a rolling month basis. A rolling
month is defined as two consecutive months. Pomeroy will achieve a 98% success
rate. If Pomeroy fails to achieve the 98% Service Level for two (2) consecutive
months, Procter & Gamble will receive a $25.00 credit per incident below stated
98% success rate in the second month. Each individual highest priority ticket
is defined as an incident. See examples below:
<TABLE>
<CAPTION>
ROLLING TOTAL HIGHEST MET SUCCESS RATE INCIDENTS SERVICE LEVEL
MONTH PRIORITY RESOLUTION BELOW 90% CREDIT DUE TO
TICKETS TIME (30 SUCCESS RATE PROCTER &
MINUTES) GAMBLE
----------- --------------
<S> <C> <C> <C> <C> <C>
- ---------
MARCH 1000 1000 100% 0 $0
------------- ----------- ------------- ------------- --------------
APRIL 1000 890 89% 10 $0
------------- ----------- ------------- ------------- --------------
MAY 1000 900 90% 0 $0
------------- ----------- ------------- ------------- --------------
JUNE 1000 850 85% 50 $0
------------- ----------- ------------- ------------- --------------
JULY 1000 865 86.5% 35 $875
------------- ----------- ------------- ------------- --------------
AUGUST 1000 899 89.9% 11 $275
------------- ----------- ------------- ------------- --------------
SEPTEMBER 1000 970 97% 30 $0
</TABLE>
END USER BREAK FIX SERVICE FINACIAL REMEDIES - HIGH PRIORITY
The goal is to provide repairs as defined in Attachment B-3 of the Statement of
Work. This committment will be monitored on a rolling month basis. A rolling
month is defined as two consecutive months. Pomeroy will achieve a 98% success
rate. If Pomeroy fails to achieve the 98% Service Level for two (2) consecutive
months, Procter & Gamble will receive a $25.00 credit per incident below stated
98% success rate in the second month. Each individual high priority ticket is
defined as an incident. See examples below:
<TABLE>
<CAPTION>
ROLLING TOTAL HIGH MET SUCCESS RATE INCIDENTS SERVICE LEVEL
MONTH PRIORITY RESOLUTION BELOW 90% CREDIT DUE TO
TICKETS TIME (2 SUCCESS RATE PROCTER &
HOURS) GAMBLE
----------- --------------
<S> <C> <C> <C> <C> <C>
MARCH 1000 1000 100% 0 $ 0
---------- ----------- ------------- ------------- --------------
APRIL 1000 890 89% 10 $ 0
---------- ----------- ------------- ------------- --------------
MAY 1000 900 90% 0 $ 0
---------- ----------- ------------- ------------- --------------
JUNE 1000 850 85% 50 $ 0
---------- ----------- ------------- ------------- --------------
JULY 1000 865 86.5% 35 $ 875
---------- ----------- ------------- ------------- --------------
AUGUST 1000 899 89.9% 11 $ 275
---------- ----------- ------------- ------------- --------------
SEPTEMBER 1000 970 97% 30 $ 0
</TABLE>
<PAGE>
END USER BREAK FIX SERVICE FINACIAL REMEDIES - STANDARD PRIORITY
The goal is to provide repairs as defined in Attachment B-3 of the Statement of
Work. This committment will be monitored on a rolling month basis. A rolling
month is defined as two consecutive months. Pomeroy will achieve a 98% success
rate. If Pomeroy fails to achieve the 98% Service Level for two (2) consecutive
months, Procter & Gamble will receive a $25.00 credit per incident below stated
98% success rate in the second month. Each individual standard priority ticket
is defined as an incident. See examples below:
<TABLE>
<CAPTION>
ROLLING TOTAL MET SUCCESS RATE INCIDENTS SERVICE LEVEL
MONTH STANDARD RESOLUTION BELOW 90% CREDIT DUE TO
PRIORITY TIME (6 SUCCESS RATE PROCTER &
TICKETS HOURS) GAMBLE
-------- ----------- --------------
<S> <C> <C> <C> <C> <C>
MARCH 1000 1000 100% 0 $ 0
-------- ----------- ------------- ------------- --------------
APRIL 1000 890 89% 10 $ 0
-------- ----------- ------------- ------------- --------------
MAY 1000 900 90% 0 $ 0
-------- ----------- ------------- ------------- --------------
JUNE 1000 850 85% 50 $ 0
-------- ----------- ------------- ------------- --------------
JULY 1000 865 86.5% 35 $ 875
-------- ----------- ------------- ------------- --------------
AUGUST 1000 899 89.9% 11 $ 275
-------- ----------- ------------- ------------- --------------
SEPTEMBER 1000 970 97% 30 $ 0
</TABLE>
SERVER BREAK FIX SERVICE FINACIAL REMEDIES
The goal is to provide repairs as defined in Attachment B-3 of the Statement of
Work. This committment will be monitored on a monthly basis. The Financial
Remedies will be calculated on an annual basis starting upon the Effective Date
of the contract. If Pomeroy fails to achieve the stated repair rate for each
12-month period, Procter & Gamble will receive a $250.00 credit per incident
below the stated success rate. Each individual order is defined as an incident.
See examples below:
<TABLE>
<CAPTION>
12 MONTH TOTAL TICKETS MET SUCCESS RATE INCIDENTS SERVICE LEVEL
PERIOD RESOLUTION BELOW 95% CREDIT DUE TO
TIME (4 SUCCESS RATE PROCTER &
HOURS) GAMBLE
----------- --------------
<S> <C> <C> <C> <C> <C>
4/1/99-3/31/00 100 98 98% 0 $ 0
------------- ----------- ------------- ------------- --------------
4/1/00-3/31/01 120 110 91.6% 4 $ 1,000
- -------------- ------------- ----------- ------------- ------------- --------------
</TABLE>
<PAGE>
POMEROY SELECT INTEGRATION SOLUTIONS, INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of this 6th day of January, 1999, by and between
POMEROY SELECT INTEGRATION SOLUTIONS, INC., a Delaware corporation ("Company"),
and STEPHEN E. POMEROY ("Employee").
W I T N E S S E T H:
WHEREAS, Employee has been employed by Pomeroy Computer Resources, Inc.
("PCR"), pursuant to an Employment Agreement dated November 13, 1996;
WHEREAS, the Company is a subsidiary of PCR;
WHEREAS, the Company and Employee desire to provide for Employee's
employment by the Company and to provide Employee with compensation incident
thereto;
WHEREAS, the Company and Employee desire to enter into a new Employment
Agreement to set forth new responsibilities, duties and benefits for Employee;
and
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein set forth, the parties hereby covenant and agree as follows:
1. Employment. The Company agrees to employ the Employee, and the Employee
----------
agrees to be employed by the Company, upon the following terms and conditions.
2. Term. Subject to the provisions for termination as hereinafter provided,
----
the term of this Employment Agreement shall begin on the 6th day of January,
1999, and shall continue for three (3) years, thereafter. On each day during the
term of this Agreement, such term automatically shall be extended on a daily
basis such that the term of this Agreement shall continue to be three (3) years
unless this Agreement is terminated as provided in Section 10, provided that
Sections 8, 9,10(b), 10(c), if applicable, and 11, if applicable, shall survive
the termination of such employment and shall expire in accordance with the terms
set forth therein.
3. Place of Employment. In connection with Employee's employment by
--------------------
Company, Employee shall be based at the principal executive offices of the
Company located in Hebron, Kentucky.
4. Duties. Employee shall serve as President and Chief Executive Officer of
------
the Company upon execution hereof and appropriate action by the Board of
Directors. Employee shall be responsible to and report directly to the Board of
Directors. Employee shall devote his best efforts and substantially all his time
during normal business hours to the diligent, faithful and loyal discharge of
the duties of his employment and towards the proper, efficient and successful
conduct of the Company's affairs. Employee further agrees to refrain during the
term of this Agreement from making any sales of competing services or products
or from profiting from any transaction involving computer services or products
for his account without the express written consent of Company.
5. Compensation and Related Matters. As compensation and consideration for
--------------------------------
the performance by Employee of Employee's duties, responsibilities and covenants
pursuant to this Employment Agreement, the Company will pay the Employee and the
Employee agrees to accept in full payment for such performance, the amounts and
benefits set forth below:
(a) Base Salary: Employee shall receive a base annual salary of
------------
$175,000.00 during the fiscal year 1999 and for each subsequent
year unless modified by the Compensation Committee.
(b) Quarterly Bonuses: If the Company's gross revenue for a quarter
------------------
exceeds $24 million, Employee shall receive a $10,000.00
quarterly bonus; if the Company's gross revenue for a quarter
exceeds $27 million, Employee shall receive a $15,000.00
quarterly bonus; or if the Company's gross revenue for a quarter
exceeds $30 million, Employee shall receive a $25,000.00
quarterly bonus.
(c) Annual Bonus: In the event the Company's gross revenue for the
------------
year ending January 5, 2000, is $100 million, Employee shall
receive an annual bonus, payable as deferred compensation vesting
over a five year period. If the minimum gross revenue standard is
met, the annual bonus is calculated as follows: if net profit
after taxes for the year (as a percentage of gross revenue)
equals or exceeds 9%, Employee shall receive a $25,000.00 bonus;
if the net profit after taxes for the year (as a percentage of
gross revenue) equals or exceeds 10%, Employee shall receive a
$75,000.00 bonus; or if net profit after taxes for the year (as a
percentage of gross revenue) equals or exceeds 11%, Employee
shall receive a $100,000.00 bonus.
(d) Award of Stock Options: On January 6, 1999, employee shall be
-----------------------
awarded the right to purchase 400,000 shares of Class A Common
Stock, $.01 par value, of Pomeroy Select Integration Solutions,
Inc. as follows: 1) 200,000 shares of Class A Common Stock shall
vest immediately and shall be awarded at the initial public
offering price of the Class A Common Stock; and 2) 200,000 shares
of Class A Common Stock, shall vest over a period of three years
from the date of the award and shall be awarded at the initial
public offering price. Said purchases shall be subject to any
conditions contained in the Pomeroy Select Integration Solutions,
Inc., Stock Plan and Award Agreement.
(e) Compensation of Employee by salary payments and bonus shall not
be deemed exclusive and shall not prevent Employee from
participating in any other compensation or benefit plan of the
Company. Salary payments (including any increased salary
payments) hereunder shall not in any way limit or reduce any
other obligation of the Company hereunder or under any other
compensation or benefit plan or agreement under which the
Employee is entitled to receive payments or other benefits from
the Company, and no other compensation, benefit or payment
hereunder or under any other compensation or benefit plan or
agreement under which the Employee is entitled to receive
payments or other benefits from the Company shall in any way
limit or reduce the obligation of the Company to pay the
Employee's salary hereunder.
<PAGE>
6. Fringe Benefits. During the term of this Agreement, Employee shall be
----------------
entitled to the following benefits;
(a) Health Insurance - During the term of this Agreement, Employee
shall be provided with the standard medical health and insurance coverage
maintained by Company on its employees. Company and Employee shall each pay
fifty percent (50%) of the cost of such coverage.
(b) Vacation - Employee shall be entitled each year to a vacation of
two (2) weeks during which time his compensation will be paid in full. Provided,
however, such weeks may not be taken consecutively without the written consent
of Company.
(c) Insurance - During the term of this Agreement, Company shall
maintain on the life of Employee, provided he is insurable at standard rates, a
term life insurance policy in the amount of $300,000.00. Employee shall have the
right to designate the beneficiary of such policy. Employee agrees to take any
and all physicals that are necessary incident to the issuance and/or renewal of
said policy. In addition, Employee agrees to take any and all physicals that are
necessary incident to the procurement of key person insurance upon his life by
Company. In the event that Employee is not insurable at standard rates during
the term of this Agreement, but Employee is able to procure rated coverage,
Employee shall have the right to procure coverage for a lower amount of
insurance, the cost of which is equivalent to the standard term rate cost of
$300,000.00 of coverage. In the event Employee is not insurable, then Company
shall pay Employee an amount equal to the projected cost of the contemplated
term insurance of $300,000.00 at standard rates.
(d) Automobile Use - Company shall provide Employee with an automobile
allowance of $861.47 per month during the term of this Agreement. Company shall
also reimburse Employee for all standard car insurance premiums during said
term. Employee shall be responsible for all maintenance and repair to such
vehicle and for any deductible under such insurance coverage.
(e) Expenses - Company shall reimburse Employee for all reasonable gas
expenses incurred by him incident to the business use and operation of his
automobile. Employee shall provide Company, upon request, with any documentation
substantiating such expenditures hereunder.
(f) Retirement Plan - Employee shall participate, after meeting
eligibility requirements, in any qualified retirement plans and/or welfare plans
maintained by the the Company during the term of this Agreement.
Employee shall be responsible for any and all taxes, owed, if
any, on the fringe benefits provided to him pursuant to this Section 6.
<PAGE>
7. Expenses. During the term of Employee's employment hereunder, Employee
--------
shall be entitled to receive prompt reimbursement for all other reasonable and
customary expenses incurred by Employee in fulfilling Employee's duties and
responsibilities hereunder, provided that such expenses are incurred and
accounted for in accordance with the policies and procedures established by
Company.
8. Non-Competition. In connection with the diligent, faithful and loyal
---------------
discharge of the duties of Employee's employment under this Agreement, Employee
agrees that so long as he is employed by the Company (whether or not pursuant to
the provisions of this Agreement) he will not, directly or indirectly, be
employed by, or otherwise give assistance to or be affiliated with (as an
employee, consultant, independent contractor of any type, director or otherwise)
any person, firm, corporation or entity which is directly or indirectly engaged
in a competitive business with that carried on by the Company or any of its
subsidiaries. Employee agrees that so long as he is employed by the Company, he
will not own, engage in, conduct, manage, operate, participate in, be employed
by or be connected in any manner whatsoever with any competitive business with
that carried on by Company or any of its subsidiaries or become associated with,
in any capacity, or solicit or sell to, customers of the Company or any its
subsidiaries or employ or attempt to employ any current or future employee of
the Company or any of its subsidiaries or induce any employee of the Company or
of any of its subsidiaries to leave its employ.
In addition, as an inducement for and as additional consideration for the
Company entering into this Agreement (and by virtue of Employee's unique and
sensitive position and special background, and in recognition that the
employment of the Employee by a competitor of the Company represents a serious
competitive danger to the Company, and the use of Employee's talent and
knowledge and information about the Company's business, strategies and plans can
and would constitute a valuable competitive advantage over the Company),
Employee agrees that for a period of one (1) year commencing on the termination
of employment, he will not with any other person, corporation or entity,
directly or indirectly, by stock or other ownership, investment, employment, or
otherwise, or in any relation whatsoever:
(1) solicit, divert or take away or attempt to solicit, divert or
take away any of the business, customers or patronage of the Company or of any
of its subsidiaries;
(2) attempt to seek or cause any customers of the Company or any
of its subsidiaries thereto to refrain from continuing their patronage;
(3) engage in any competitive business with that carried on by
the Company and any of its subsidiaries on the date of Employee's termination in
any state in which the Company or any of its subsidiaries do business;
(4) knowingly employ or attempt to employ in any capacity any
employee or agent of Company, or any of its subsidiaries.
For purposes of this Section 8, a competitive business shall mean any
corporation, partnership or other legal entity engaged, directly or indirectly,
through subsidiaries or affiliates, in any of the following business activities:
<PAGE>
(i) providing skilled resource staffing services, technical
support services, life cycle management services, professional services,
enabling services, advanced systems services and web-based application
development services for computer hardware, software, peripheral devices, and
related products;
(ii) any other business activity which can reasonably be
determined to be competitive with the principal business activity being engaged
in by the Company or any of its subsidiaries; and
(iii) any other business activity which Company or any of its
subsidiaries subsequently become involved in after the date of this Agreement.
This one-year non-competition provision commencing on the date of
Employee's termination of employment shall not be applicable if the Employee is
terminated by the Company without cause pursuant to Section 10(a)(v).
Employee has carefully read and has given careful consideration to all the
terms and conditions of this Agreement and agrees that they are necessary for
the reasonable and proper protection of the Company's business. The Employee
acknowledges that the Company has entered into this Agreement because of
Employee's promise that he will abide by and be bound by each of the terms
contained in Sections 8 and 9. The Employee agrees that Company shall be
entitled to injunctive relief to enforce these terms in addition to all other
legal remedies. Employee acknowledges that each and every one of the terms of
this provision is reasonable in all respects including their subject matter,
duration, scope and the geographical area embraced herein and waives any and all
right to compensation and/or benefits herein mentioned or referred to if
Employee violates the provisions of Sections 8 or 9.
9. Non-Disclosure and Assignment of Confidential Information. The
--------------------------------------------------------------
Employee acknowledges that the Company's trade secrets and confidential and
proprietary information, including without limitation:
(a) unpublished information concerning the Company's:
(i) research activities and plans,
(ii) marketing or sales plans,
(iii) pricing or pricing strategies,
(iv) operational techniques
(v) customer and supplier lists, and
(vi) strategic plans;
(b) unpublished financial information, including unpublished
information concerning revenues, profits and profit margins;
(c) internal confidential manuals; and
<PAGE>
(d) any "material inside information" as such phrase is used for
purposes of the Securities Exchange Act of 1934, as amended;
all constitute valuable, special and unique proprietary and trade secret
information of the Company. In recognition of this fact, the Employee agrees
that the Employee will not disclose any such trade secrets or confidential or
proprietary information (except (i) information which becomes publicly available
without violation of this Employment Agreement, (ii) information of which the
Employee did not know and should not have known was disclosed to the Employee in
violation of any other person's confidentiality obligation, and (iii) disclosure
required in connection with any legal process), nor shall the Employee make use
of any such information for the benefit of any person, firm, operation or other
entity except the Company and its subsidiaries or affiliates. The Employee's
obligation to keep all of such information confidential shall be in effect
during and for a period of five (5) years after the termination of his
employment; provided, however, that the Employee will keep confidential and will
not disclose any trade secret or similar information protected under law as
intangible property (subject to the same exceptions set forth in the
parenthetical clause above) for so long as such protection under law is
extended.
10. Termination.
-----------
(a) The Employee's employment with the Company may be terminated at
any time as follows:
(i) By the Employee at his discretion, upon sixty (60) days
written notice to Company;
(ii) By Employee's death;
(iii) If the Employee is "permanently disabled" (as defined
below), the Company may terminate the Employee's employment hereunder. For
purposes of this Agreement, the Employee's permanent disability shall be deemed
to occur after one hundred fifty (150) days in the aggregate during any
consecutive twelve (12) month period, or after one hundred fifty (150)
consecutive days, during which the Employee, by reason of his physical or mental
illness, shall have been unable to discharge fully his duties under this
Agreement. In the event the Employee, after receipt of a notice of termination
from the Company, with respect to his permanent disability, shall dispute that
his permanent disability shall have occurred, he shall promptly submit to a
physical examination by the Chief of Medicine of any major accredited hospital
in the metropolitan Cincinnati area and, unless such physician shall issue his
written statement to the effect that in his opinion, based on his diagnosis, the
Employee is capable of resuming his employment and devoting his full time and
energy to discharging his duties within ten (10) days after the date of such
statement, such permanent disability shall be deemed to have occurred without
further dispute by the Employee. If at any time prior to the expiration of said
above described period of permanent disability, the Employee shall no longer be
disabled so that he is, on a regular and continuous basis and for the
foreseeable future, able to resume and carry on his duties under this Agreement,
then he shall be reinstated under this Agreement for the then remainder of the
term hereof at the salary level herein set forth.
<PAGE>
(iv) By the Company for cause upon three (3) days written notice
to Employee. For purposes of this Agreement, the term "cause" shall mean (a)
fraud, misappropriation, embezzlement or intentional and material damage to
property of the Company; (b) any material breach by Employee of the provisions
of this Agreement; or (c) conviction of Employee of a felony or other crime
involving theft or fraud. Notwithstanding the foregoing, Employee shall not be
deemed to have been terminated for cause unless and until there shall have been
delivered to him a copy of a resolution of the Board of Directors of the Company
or any appropriately designated committed of the Board, finding that he has
engaged in the conduct set forth above and specifying the particulars thereof in
detail, and Employee shall not have cured such conduct (in the event such
conduct is capable of being cured) to the reasonable satisfaction of the Board
within thirty (30) days of receipt of such resolution.
(v) By the Company at its discretion, without cause, upon sixty
(60) days written notice to Employee; provided that Company complies with the
provisions of Section 10 (c).
(vi) By the Employee within ninety (90) days following a Change
in Control as defined in Exhibit A attached hereto, unless Employee has accepted
employment with the successor entity and such successor entity has assumed this
Employment Agreement pursuant to the provisions of Section 17.(b).
(b) Compensation upon Termination: In the event of termination of
employment, the Employee or his estate, in the event of death, shall be entitled
to his annual base salary and other benefits provided hereunder to the date of
his termination. In addition, Employee shall be entitled to receive any bonuses
accrued to the date of his termination of employment as provided in Section
5(b), any vested incentive compensation that may be due Employee under this
Agreement, which shall be payable (if applicable) pursuant to the terms thereof
and any other vested deferred compensation that Employee has earned prior to the
date of this Agreement, which shall be payable pursuant to the terms thereof.
(c) In the event that Company would terminate Employee's
employment hereunder without cause pursuant to Section 10 (a)(v), Company shall
be obligated to pay Employee, as severance pay, Employee's annual base salary in
effect prior to such termination for the remaining term of the Agreement (as
originally set forth in Section 2), as due.
(d) In the event that a Change in Control as defined in Exhibit A
has occurred and such successor entity has not assumed this Agreement pursuant
to the provisions of Section 17(b), the Company shall pay Employee his full base
salary at the rate then in effect for the remaining term of this Agreement, at
the time such payments are due.
(e) In addition, if Employee becomes entitled to any payment or
benefit pursuant to (d) above in this Section 10 (all such payments being called
"Severance Payment") from the Company (or any persons whose actions result in a
Change in Control, any person affiliated with Company or such person) in
connection with any termination of the Employee's employment hereunder following
a Change in Control, which severance payment is subject to the excise tax (the
"Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended, (the "Code") (or any successor provision), Company shall pay Employee
pursuant to the procedures set forth below an additional amount (the "Gross-up
Payment") such that the net amount retained by the Employee, after deduction of
any Excise Tax on the Severance Payment and any federal and state and local
income tax and Excise Tax upon such Gross-Up payment shall be equal to the
Severance Payment.
<PAGE>
11. Compensation Upon Termination for Disability. During any period
------------------------------------------------
that Employee fails to perform his duties hereunder as a result of incapacity
due to physical or mental illness, the Employee shall continue to receive his
full base salary at the rate then in effect for such period (offset by any
payments to the Employee received pursuant to disability benefit plans, if any,
maintained by the Company) and all other compensation and benefits to which he
was then entitled hereunder until his employment is terminated pursuant to
Section 10(a)(iii) hereof. Thereafter in the event of the termination of
Employee's employment due to his permanent disability pursuant to Section
10(a)(iii) hereof the Employee,
(i) for the balance of the three (3) year term of this Agreement shall
be entitled to receive his full base salary at the rate then effect, at the time
such payments are due; and
(ii) for the balance of the period referred to in subparagraph (i)
above shall be entitled to participate in all medical, life and other employee
"welfare benefit plans and programs in which the Employee was entitled to
participate immediately prior to the date of termination provided that
Employee's continued participation is possible under the general terms and
provisions of such plans and programs. In the event that the Employee's
participation in any such plan or program is barred, the Company shall arrange
to provide Employee with benefits substantially similar to those which the
Employee would otherwise have been entitled to receive under such plans and
programs from which his continued participation is barred.
12. Severability. In case any one (1) or more of the provisions or part
------------
of a provision contained in this Agreement shall be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision or part of a provision of this Agreement.
In such a situation, this Agreement shall be reformed and construed as if such
invalid, illegal or unenforceable provision, or part of a provision, had never
been contained herein, and such provision or part shall be reformed so that it
will be valid, legal and enforceable to the maximum extent possible.
13. Governing Law. This Agreement shall be governed and construed under
-------------
the laws of the Commonwealth of Kentucky and shall not be modified or
discharged, in whole or in part, except by an agreement in writing signed by the
parties.
14. Notices. All notices, requests, demands and other communications
-------
relating to this Agreement shall be in writing and shall be deemed to have been
duly given if delivered personally or mailed by certified or registered mail,
return receipt requested, postage prepaid:
If to Company, to: Pomeroy Select Integration Solutions, Inc.
1020 Petersburg Road
Hebron, Kentucky 41048
<PAGE>
With a copy to: James H. Smith III
Lindhorst & Dreidame Co., L.P.A.
312 Walnut Street, Suite 2300
Cincinnati, Ohio 45202
If to Employee, to the Employee's residential address, as set forth in the
Company's records.
15. Enforcement of Rights. The parties expressly recognize that any
-----------------------
breach of this Agreement by either party is likely to result in irrevocable
injury to the other party and agree that such other party shall be entitled, if
it so elects, to institute and prosecute proceedings in any court of competent
jurisdiction, either in law or in equity, to obtain damages for any breach of
this Agreement, or to enforce the specific performance of this Agreement by each
party or to enjoin any party from activities in violation of this Agreement.
Should either party engage in any activities prohibited by this Agreement, such
party agrees to pay over to the other party all compensation, remuneration,
monies or property of any sort received in connection with such activities. Such
payment shall not impair any rights or remedies of any non-breaching party or
obligations or liabilities of any breaching party pursuant to this Agreement or
any applicable law.
16. Entire Agreement. This Agreement contains the entire understanding
------ ---------
of the parties with respect to the subject matter contained herein and may be
altered, amended or superseded only by an agreement in writing, signed by the
party against whom enforcement of any waiver, change, modification, extension or
discharge is sought.
17. Parties in Interest.
---------------------
(a) This Agreement is personal to each of the parties hereto. No party
may assign or delegate any rights or obligations hereunder without first
obtaining the written consent of the other party hereto; provided, however, that
nothing in this Section 17 shall preclude (I) Employee from designating a
beneficiary to receive any benefit payable hereunder upon his death, or (ii)
executors, administrators, or legal representatives of Employee or his estate
from assigning any rights hereunder to person or persons entitled thereto.
Notwithstanding the foregoing, this Agreement shall be binding upon and inure to
the benefit of any successor corporation of the Company.
(b) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the assets of the Company or the business with respect to
which the duties and responsibilities of Employee are principally related, to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business and/or assets
as aforesaid which executes and delivers the assumption agreement provided for
in this Section 17 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
<PAGE>
18. Representations of Employee. Employee represents and warrants that
----------------------------
he is not party to or bound by any agreement or contract or subject to any
restrictions including without limitation any restriction imposed in connection
with previous employment which prevents Employee from entering into and
performing his obligations under this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed effective as of the
day and year first above written.
WITNESSES Pomeroy Select Integration Solutions, Inc.
____________________________ By:____________________________________
____________________________
____________________________ _______________________________________
Stephen E. Pomeroy
_____________________________
<PAGE>
EXHIBIT A
For purposes of this Agreement, a "Change in Control" shall occur (i) upon
the sale or other disposition to a person, entity or group (as such term is used
in Rule 13d-5 promulgated under the Securities Exchange Act of 1934, as amended)
(such a person, entity or group being referred to as an "Outside Party") of
fifty percent (50%) or more of the consolidated assets of the Company taken as a
whole, or (ii) in the event shares representing a majority of the voting power
of the Company are acquired by a person or group (as such term is used in Rule
13d-5) of persons other than the holders of the Common Stock of the Company on
January 6, 1999.
<PAGE>
Pomeroy Computer Resources, Inc.
Exhibit 11 - Computation of Earnings Per Share
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Fiscal Years
------------------------
1996 1997 1998
------ ------- -------
<S> <C> <C> <C>
BASIC
Weighted average common shares
outstanding 7,834 11,052 11,466
====== ======= =======
Net income $6,232 $16,313 $20,144
====== ======= =======
Net income per common share $ 0.80 $ 1.48 $ 1.76
====== ======= =======
DILUTED
Weighted average common shares
outstanding 7,834 11,052 11,466
Dilutive effect of stock options outstanding
during the period 272 315 285
====== ======= =======
Total common and common equivalent
shares 8,106 11,367 11,751
====== ======= =======
Net income $6,232 $16,313 $20,144
====== ======= =======
Net income per common share $ 0.77 $ 1.44 $ 1.72
====== ======= =======
</TABLE>
<PAGE>
EXHIBIT 21
Subsidiaries of Pomeroy Computer Resources, Inc.
<TABLE>
<CAPTION>
Subsidiary State of Incorporation
- ------------------------------------------------------------------------------------------- ----------------------
<S> <C>
Xenas Communications Corp. Ohio
The subsidiary does business under the name Envision.
Technology Integration Financial Services, Inc.
f/k/a Pomeroy Computer Leasing Company, Inc. Kentucky
The subsidiary does business under the name Technology Integration Financial Services, Inc.
Pomeroy Computer Resources of South Carolina, Inc. South Carolina
Pomeroy Select Integration Solutions, Inc. Delaware
Global Combined Technologies, Inc. Oklahoma
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The following Financial Data Schedule contains standard reports for the year
ended January 5, 1999.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-05-1999
<PERIOD-START> JAN-06-1998
<PERIOD-END> JAN-05-1999
<CASH> 3962
<SECURITIES> 0
<RECEIVABLES> 164991
<ALLOWANCES> 598
<INVENTORY> 33333
<CURRENT-ASSETS> 204370
<PP&E> 23796
<DEPRECIATION> 10323
<TOTAL-ASSETS> 254226
<CURRENT-LIABILITIES> 133006
<BONDS> 0
<COMMON> 117
0
0
<OTHER-SE> 112872
<TOTAL-LIABILITY-AND-EQUITY> 254226
<SALES> 546375
<TOTAL-REVENUES> 627928
<CGS> 500995
<TOTAL-COSTS> 517506
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 141
<INTEREST-EXPENSE> 2670
<INCOME-PRETAX> 32568
<INCOME-TAX> 12409
<INCOME-CONTINUING> 20159
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20159
<EPS-PRIMARY> 1.76
<EPS-DILUTED> 1.72
</TABLE>
