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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-21958
QUICKRESPONSE SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 68-0102251
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
1400 MARINA WAY SOUTH, RICHMOND, CALIFORNIA 94804
(Address of principal executive offices, including zip code)
(510) 215-5000
(Registrant's telephone number, including area code)
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 $0.001 per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ X ]
The aggregate market value of voting stock held by non-affiliates of the
Registrant as of February 18, 1998 was approximately $344,166,000 (based upon
the closing price for shares of the Registrant's common stock as reported by the
Nasdaq National Market). Shares of common stock held by each officer, director
and holder of 5% or more of the outstanding common stock have been excluded in
that such persons may be deemed to be affiliates. This determination of
affiliate status is not necessarily a conclusive determination for other
purposes.
Number of shares of common stock outstanding as of February 18, 1998: 8,537,991.
DOCUMENTS INCORPORATED BY REFERENCE
Designated portions of the following documents are incorporated by reference
into this Report on Form 10-K where indicated:
1. QuickResponse Services, Inc. Proxy Statement for the Annual Meeting of
Stockholders to be held on or about May 5, 1998, Part III.
The exhibit index appears on Pages 45-47.
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QUICKRESPONSE SERVICES, INC.
1997 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
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PART I
<S> <C> <C>
ITEM 1 Business 3
ITEM 2 Facilities 14
ITEM 3 Legal Proceedings 14
ITEM 4 Submission of Matters to a Vote of Security Holders 14
PART II
ITEM 5 Market for Registrant's Common Equity
and Related Stockholder Matters 15
ITEM 6 Selected Financial Data 16
ITEM 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 17
ITEM 8 Financial Statements 21
ITEM 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 37
PART III
ITEM 10 Directors and Executive Officers of the Registrant 38
ITEM 11 Executive Compensation 40
ITEM 12 Security Ownership of Certain Beneficial Owners and
Management 40
ITEM 13 Certain Relationships and Related Transactions 40
PART IV
ITEM 14 Exhibits, Financial Statement Schedules and Reports
on Form 8-K 41
SIGNATURES 44
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PART I
ITEM 1. BUSINESS
EXCEPT FOR THE HISTORICAL FINANCIAL INFORMATION CONTAINED HEREIN, THE MATTERS
DISCUSSED IN THIS ANNUAL REPORT ON FORM 10-K MAY BE CONSIDERED
"FORWARD-LOOKING" STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. SUCH STATEMENTS INCLUDE DECLARATIONS
REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE COMPANY AND ITS
MANAGEMENT. THESE FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE
PERFORMANCE AND INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES, AND THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS INCLUDE,
BUT ARE NOT LIMITED TO, THOSE LISTED UNDER "BUSINESS--RISK FACTORS" AND
ELSEWHERE HEREIN, AND OTHER RISKS IDENTIFIED FROM TIME TO TIME IN THE
COMPANY'S REPORTS AND REGISTRATION STATEMENTS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
QuickResponse Services, Inc. (the "Company" or "QRS") is a leading provider of
electronic commerce merchandising and logistics solutions that optimize its
customers' performance throughout the retail demand chain. The Company's
products and services are organized in five product families: Catalog Services,
Network Services, Inventory Management Services, Logistics Management Services
and Professional Services. The Company provides its retailer, vendor and carrier
customers with a single source for implementing demand chain management
solutions.
The Company's primary products, described more completely in "Business--QRS
Services," are as follows:
- - QRS Catalog Services includes QRS KEYSTONE, a comprehensive product
information database. QRS KEYSTONE was the first independent product
information database using the industry standard Universal Product Code
("U.P.C.") numbering system. It is a central repository of timely,
complete, and accurate vendor product information. Retailers and vendors
access QRS KEYSTONE and electronically exchange industry standard business
documents using QRS CONCOURSE.
- - QRS Network Services includes QRS CONCOURSE and QRS ALLIANCE. QRS CONCOURSE
is a connection that provides two-way electronic transmission of business
data while its partner service, QRS ALLIANCE, allows any size manufacturer,
retailer or vendor to communicate with its partners electronically.
- - QRS Inventory Management Services ("IMS") includes QRS CATALYST, QRS
MARINER and QRS HORIZON. They work together as network-centric applications
to eliminate the costly capital and operating investment of sales analysis,
replenishment and forecasting solutions located at the vendor or retailer
site. QRS CATALYST is a management tool that transforms sales into
actionable information. It enables users to track which products are
selling by U.P.C. and store location to aid in buying and manufacturing
decisions. QRS MARINER is an effectively managed tool for increasing sales
velocity. It is a customized solution for retailers and vendors that
utilizes a series of models and daily sales information in which to run
analyses. The system determines recommended order quantity and
electronically communicates and tracks the flow of reordered items to
ensure timely delivery. QRS HORIZON is a tool to project consumer demand.
- - QRS Logistics Management Services ("LMS") provides logistics information to
improve merchandise movement and inventory management. QRS LMS allows
retailers and vendors to tender and track motor freight shipments to
carriers, using QRS CONCOURSE, and provide delivery performance reporting.
QRS LMS represents a single source of information that provides trading
partners with the data necessary to evaluate carrier performance and
efficiency.
- - QRS Professional Services, formed in 1997, provides education and
consulting services using strategic tools and industry expertise.
The Company's business is subject to various risks and uncertainties that are
described herein under "Risk Factors."
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The Company was incorporated in California in 1985 and reincorporated into
Delaware in October 1997. On October 14, 1997, QRS created a wholly owned
Canadian sales subsidiary, QRS Canada, Inc. Except as otherwise noted, all
references to the Company and QRS refer to the Company and its Canadian
subsidiary.
At December 31, 1997, QRS had 216 employees. The Company's principal executive
offices are located at 1400 Marina Way South, Richmond, California 94804, and
its telephone number is 510-215-5000.
INDUSTRY BACKGROUND
The United States general merchandise retail industry accounts for revenues in
excess of $1.5 trillion, with approximately 1,000 retailers recording sales in
excess of $80 million. As competitive pressures within the industry have
intensified, retailers have focused increasingly upon the importance of
efficient demand chain management to improve their financial performance.
Failure to manage merchandise to meet customer demand results in lost sales.
Kurt Salmon Associates ("KSA"), a global management consulting firm specializing
in the retail industry, in a 1997 study estimated that in the soft goods
industry alone, inefficiencies such as inadequate information, excess
inventories and slow communications between vendors and retailers result in over
$25 billion in lost revenues each year. In addition, KSA estimated that an
opportunity currently exists for $102 billion in annual savings across all
consumer durables. Demand chain management is a complex problem. For example,
the average department store carries more than one million stockkeeping units
("SKUs") at a time--some carry as many as five million--each unique in terms of
product style, size and color. Each retailer's SKUs are produced by hundreds, or
in some cases thousands, of vendors. These vendors are required to manage rapid
production and accurate delivery of ordered merchandise to multiple retail
locations. To address these issues, retailers and vendors have in recent years
sought to develop strategies for optimizing selection, availability and flow of
information and merchandise while minimizing absolute inventory levels. QRS'
network-centric applications align closely with its customers' needs in
providing solutions to improve the efficiencies throughout the retail demand
chain.
Technology has made significant contributions to the evolution of merchandise
management. The replacement of cash registers with point of sale terminals
during the 1980s made possible automatic price look-up and merchandise tracking.
These capabilities, and the rapid spread of bar coding, soon led to the retail
industry's adoption of a standardized product identification, numbering and
communication format. Known as the universal product code, or U.P.C., this
standard has greatly increased the efficiency with which retailers and vendors
can mark, track and exchange product information.
During the same period, advances in data communications and the availability of
public data networks fostered the use of computers for the electronic
transmission of transaction documents, including purchase orders, invoices and
shipping instructions. Such paperless transactions are widely referred to as
electronic data interchange, or EDI. In conjunction with the broad use of
standard U.P.C.-based data, EDI has benefited retailers by lowering costs,
reducing errors and improving the timeliness of the merchandise ordering
process.
Despite the benefits of EDI, retailers have continued to rely on paper U.P.C.
catalogs or magnetic tapes published by each vendor as their primary source of
product information. Although updated frequently, such information quickly
becomes outdated and as a result these catalogs and tapes cannot provide the
real-time information necessary for quick response merchandise management. In
order to efficiently implement merchandise management, retailers and vendors
need an independent, reliable, centralized database containing U.P.C. product
information accessible through a reliable and secure data network.
QRS SERVICES
In order to improve the flow of information, goods and services throughout the
retail demand chain, the Company offers a range of services, including QRS
KEYSTONE (catalog services), QRS CONCOURSE and QRS ALLIANCE (network services),
QRS CATALYST (sales analysis), QRS MARINER (replenishment), QRS HORIZON,
(forecasting), QRS LMS (logistics management services), and QRS Professional
Services (implementation, training and support). These
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services may be implemented incrementally, allowing customers to integrate
functions over time within their organizations and with their trading partners.
QRS CATALOG SERVICES. QRS KEYSTONE, formerly known as The QRS Catalog, is the
retail industry's largest U.P.C. database. As of December 31, 1997, it contained
over 57 million U.P.C. entries and supported a vendor customer base of nearly
5,600 companies. QRS KEYSTONE classifies a vendor's merchandise entries by name,
merchandise classification, style number and U.P.C., as well as by size, color
and other relevant characteristics. The U.P.C. classification system underlies
all subsequent transaction processing. When loaded into the database, the data
is screened for accuracy and completeness by the Company's software and is
further reviewed by a Company customer support representative. Vendor
information is protected and is available only to trading partners approved by
the vendor.
Pricing of QRS KEYSTONE is based upon the formation of trading partnerships
between vendors and retailers. Each time a retailer accesses a vendor's data in
QRS KEYSTONE, a trading partnership is formed and a specific fee is charged for
that month. In addition to the trading partnership charges, a usage fee is
charged based on the actual number of records the retailer retrieves from QRS
KEYSTONE.
There are four methods to access the catalog database: QRS KEYSTONE Genesis, the
original mainframe interface that was developed in 1988; QRS KEYSTONE for
Windows, developed in 1996, which provides additional ordering information
through the enhancement of extended data elements as well as providing new
filtering techniques; QRS KEYSTONE Realtime, which is a proprietary
computer-to-computer communication interface system providing retailers with a
method of data retrieval from QRS KEYSTONE via their own host; and QRS KEYSTONE
Web, developed late in 1997, which is an Internet-based interface for vendors
with under 100 U.P.C. codes.
QRS NETWORK SERVICES. QRS Network Services consists of QRS CONCOURSE and QRS
ALLIANCE. QRS CONCOURSE is a portfolio of services offering one of the
industry's most secure, reliable and cost effective connectivity packages. It is
designed to remove from customers the distracting demands of providing wide area
network connectivity, allowing customers to focus on their core competencies.
QRS ALLIANCE is a family of electronic commerce enablement tools offering a
complete spectrum of solutions for trading partners of all sizes. QRS
ALLIANCE provides services that allow retailers to achieve 100% electronic
data interchange with all of their trading partners. Products such as QRS
ECONNECT, an easy-to-use, Windows-based software package that gets smaller
partners up and running quickly, and EDI to Fax, the simple solution in which
the retailer sends QRS an EDI document that is then translated and faxed to
the small trading partner, make QRS ALLIANCE a complete electronic commerce
enablement solution. In 1997, QRS began developing the next generation of QRS
ECONNECT, a product known as QRS QUICKSTEP. QRS QUICKSTEP will create secure,
encrypted EDI over the Internet for the smaller partners of retailers.
Within QRS Network Services, QRS Internet Services enables organizations to
benefit from a connected world with Internet access, content hosting, web
security, web development and Internet security services.
The Company provides its value-added services in a network-centric model. The
Company's applications for QRS Catalog Services, QRS Inventory Management
Services and QRS Logistics Management Services reside within the Company's data
operations environment and are accessible primarily through the network of
International Business Machines Corporation ("IBM"), which is a Value-Added
Network.
QRS IMS. QRS IMS, formerly known as Collaborative Replenishment Services, or
CRS, is a network-centric suite of applications that includes QRS CATALYST
(sales analysis), QRS MARINER (replenishment), and QRS HORIZON (a forecasting
tool). Based on individual manufacturer and retailer needs, QRS IMS is intended
to increase both retailers' and manufacturers' sales by having the right
merchandise at the right place at the right time.
QRS CATALYST provides tools for the retailer and vendor to enhance inventory
management. With QRS CATALYST, both retailers and their vendors can view daily
sales in an easy-to-use Windows environment. The information is
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available by product, size, color and specific store location. This information
provides immediate data on which products are doing well and which should be
discontinued.
While customers have a choice of implementing third-party or in-house
replenishment services, QRS believes QRS MARINER is superior to those because it
permits replenishment models to be run daily, by U.P.C. and by store location.
This provides optimum merchandise management at the SKU level on a daily basis.
Most in-house and third-party applications are run monthly or bi-monthly and
require large capital and operating cost investments. Because all components of
QRS MARINER are network-centric, the Company believes that capital and operating
costs for both the retailer and the manufacturer will be reduced. For example,
the initial replenishment program, started in 1996, resulted in a 25% increase
in sales with a 30% decrease in inventory for that customer.
QRS HORIZON enables both retailers and their vendors to forecast sales for up to
53 weeks using seasonal and promotional variables. From the simplest statistical
method to sophisticated neural networking technologies, QRS HORIZON supports a
variety of statistical methods, allowing users to facilitate informed buying
and/or production decisions.
QRS LMS. QRS LMS has approximately 350 enabled customers and is a market leader
in providing logistical information and communication services. QRS LMS enables
shippers to tender and track motor freight shipments to carriers via QRS
CONCOURSE, and provides delivery performance reporting. QRS LMS allows the
capture, transmission, storage and management of shipment information. This
provides customers with electronic access to real-time information and allows
both retailers and manufacturers to conduct electronic commerce for tendering,
freight invoicing and other functions, track the current status of in-transit
shipments and notify affected parties of impending service failures.
The proactive notification of potential service failures and easy access to
accurate, timely information helps eliminate the uncertainty surrounding
individual orders or shipments. This leads to a reduction in costs and
order-fulfillment cycles as distribution channels become more efficient.
QRS PROFESSIONAL SERVICES. QRS Professional Services provides a team of
experienced consultants to assist retailers and manufacturers design and execute
an electronic commerce plan using strategic tools and industry expertise.
Through analysis of their businesses, QRS Professional Services can determine
what solutions are needed within an organization and what changes or
enhancements should be made to internal systems and/or processes.
The components of QRS Professional Services include: Strategic Consulting,
Readiness Study, Operational Analysis, Implementation Management and Educational
Programs.
MARKETING, SALES AND CUSTOMER SUPPORT
The Company's marketing strategy is to provide a comprehensive interenterprise
solution for retail demand chain management. The Company's marketing activities
include participation in industry conventions, trade shows and user groups. The
Company's sales and marketing personnel include numerous individuals with prior
retail, replenishment, transportation and EDI experience.
The Company utilizes experienced software development and customer service
personnel to assist customers in implementing and using the Company's catalog
and network services. The Company operates a 24-hour hotline for customers to
call with questions and problems and has a program to regularly contact its
customers by telephone to ensure customer satisfaction, currency of catalog data
and maximization of trading partner opportunities.
The Company provides the capability for any trading partner to trade with any
other trading partner using electronic commerce solutions. Retailers
generally transact business with a number of vendors and vice versa.
Generally, the larger partner, and more advanced user of electronic commerce,
is referred to as the "hub." The Company works with the larger "hubs" to
facilitate and standardize their electronic commerce processes with their
many "spokes," or smaller partners.
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In addition to its own sales force, the Company also benefits from the marketing
efforts of IBM. IBM, in coordination with the Company, actively promotes the use
of its network services in the retail industry. The Company cooperates with IBM
marketing teams to generate leads and qualify prospects. IBM field sales
personnel currently are compensated for generating EDI revenue for IBM through
customer use of QRS services.
RETAILERS AND VENDOR CUSTOMERS
The Company markets its services to retailers and vendors, primarily in the
United States and Canada. As of December 31, 1997, the Company's Catalog and
Network Services were being utilized by 241 retailers representing most segments
of the retail industry, with an emphasis in apparel and department store
retailers. The Company's customers also included approximately 5,600 general
merchandise vendors, selling a variety of goods ranging from apparel and shoes
to cosmetics to electronics and automotive goods.
The Company's customer base increased 19% from approximately 5,200 customers at
December 31, 1996 to approximately 6,180 customers at December 31, 1997. Its QRS
KEYSTONE customer base increased by 20% from approximately 1,500 at December 31,
1996 to approximately 1,800 at year-end 1997. The number of U.P.C.s active in
QRS KEYSTONE grew 19% from 48 million at December 31, 1996 to 57 million at
December 31, 1997. By December 31, 1997, 126 retailers used QRS KEYSTONE,
including 22 who required their vendors to use QRS KEYSTONE.
The Company provides services and generates revenues by enabling certain hub
customers and their trading partners to conduct business over the Company's
network. Due to the large number of trading partners that transact business with
each other, including one or more hub customers, the difficulty of allocating
trading partner network services to individual hub customers, and the
differences in the manner in which hub customers and trading partners allocate
the cost of network services among each other, the Company cannot precisely
attribute revenues to particular trading relationships. However, in 1997, the
Company refined its estimation techniques and determined that no individual
customer or hub customer trading partnership exceeded 10% of total revenues for
any of the three years in the period ended December 31, 1997.
COMPETITION
The Company believes it provides a competitive advantage through its
interenterprise database, its retail focus, relationships and expertise, its
daily management of inventory at the U.P.C. and store level, and its
network-centric applications, which significantly lower customers' capital
requirements.
The Company competes on the basis of service offerings, availability and quality
of support, implementation services, sales and marketing resources and price.
The Company's competitors include a number of companies providing EDI and
related network services to retailers and vendors. The EDI services business is
highly competitive, and competitive pricing may materially and adversely affect
the prices the Company can charge for its services. Competition may also affect
the Company's ability to attract new customers and retain and expand business
with its existing customers and may impact negatively the range of services
offered to its customers. The Company expects competition to increase as more
companies enter the market and existing competitors continue to change and
expand their product offerings. Several companies, including General Electric
Information Services Company, Sterling Commerce, Inc. and others, offer EDI and
certain other network services, including a U.P.C. catalog. In-house systems and
third-party software providers are the Company's largest competitors relative to
QRS IMS. Competitors for the Company's QRS LMS offerings are primarily other
freight carriers who provide outsourcing to customers.
The Company differentiates itself from its competitors in part by providing the
U.P.C. catalog containing product information from the largest number of
vendors. The Company's business and results of operations could be materially
and adversely affected if other competitors introduce catalogs or if any
competitor provides a catalog that is superior to the Company's catalog. Many of
the Company's existing and potential competitors have
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financial, marketing or technological resources that exceed those of the
Company, and there can be no assurance that the Company will be able to compete
successfully. Some large retailers and vendors operate private computer networks
for transacting business with their trading partners. It is possible that
additional retailers and vendors, including certain of the Company's existing
customers, may develop and implement similar private networks, thereby reducing
the demand for the Company's services.
IBM RELATIONSHIP
The Company does not operate its own Value-Added Network and has formed a
strategic alliance with IBM to outsource the Company's network operation
requirements.
The Company entered into an agreement with IBM for the purchase of $250
million of network services over a three-year period commencing January 1,
1998. The agreement includes specified annual minimum purchases and a
graduated adjustment charge if total purchases fall below the total minimum
amount. Based on historical and projected usage, management believes that the
Company will be able to meet the purchase requirements under this agreement.
Additionally, the Company and IBM signed a Retail Industry Marketing agreement
under which the Company provides to IBM certain professional services related to
the retail industry.
DATA CENTER
The Company operates its primary data center at its Richmond, California
offices. The data center operates 24 hours a day, seven days a week, and is
connected to the Company's network provider through three leased data circuits
in two routings to ensure availability. The data center consists primarily of
leased mainframe, client/server, disk storage, tape drive and other peripheral
technology to provide on-line, batch and back-up operations. Catalog data is
backed up and shipped off site daily. The Company's facility and data center are
both secured with controlled access doors and the data center is equipped with a
Halon fire protection system, an Uninterrupted Power Supply, and a diesel
generator permitting 24 hours of continuous electrical power. The data center
has a separate, isolated power source from the remainder of the facility. The
Company has contracted for an alternative operations facility in the event of
physical disaster.
PRODUCT DEVELOPMENT
The Company is focused on the development and upgrading of its valued-added
applications (QRS Catalog Services, QRS IMS and QRS LMS) and its network
services technology and architecture. The Company is not involved with the
development, maintenance and operation of the IBM Value-Added Network used to
run network applications used by the Company and many of its customers.
In 1997, 1996, and 1995, the Company expensed $4,365,000, $3,127,000, and
$2,023,000, respectively, of product development costs and capitalized
$1,114,000, $245,000, and $252,000, respectively, related to the development and
enhancement of the Catalog Services interface, an Internet-based EDI product
(QRS QUICKSTEP), IMS, and new technology and architecture research. In order to
compete actively in the market of EDI applications, the Company plans to
continue to invest in the development of new and existing software products and
technology. Capitalized software development costs are amortized over three
years. The Company's product development effort consists of in-house development
of software applications and integration of third-party software tools to
provide service offerings and contracted software development.
PROPRIETARY RIGHTS
The Company regards certain features of its software and documentation as
proprietary information and relies on a combination of contract, copyright,
trademark and trade secret laws and other measures for its protection. Although
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data provided to QRS by its vendor customers is not proprietary to the Company,
the Company seeks to protect its U.P.C. catalog applications through copyright
laws. The Company has no patents, and existing copyright laws afford only
limited protection. The Company believes that, because of the rapid pace of
technological change in the EDI and other network services industry, trade
secret and copyright protection are less significant than factors such as the
knowledge, ability and experience of the Company's employees, product
enhancements and the timeliness and quality of support services.
UNIQUEST
On May 20, 1993, the Company sold its software and services business to
Uniquest, a publicly held company. The gain recognized from the sale of this
business for the year ended December 31, 1993 was $1,441,000. In connection with
the sale, the Company entered into various agreements with the buyer, including
the sublease of approximately 40,000 square feet of office space through
June 30, 2000. Minimum monthly lease payments ranged from $53,000 to $75,000
through the seven-year term of the lease.
At December 31, 1993, Uniquest was delinquent in its payments and owed the
Company approximately $1,358,000 under sublease and data center cost sharing
agreements. As a result, the Company provided an allowance of $1,018,000 against
these receivables and made additional provisions of $2,009,000 against
nonpayment of future obligations. The result of the allowance and provision
described was to reduce the gain from the sale of the software and services
business by $3,027,000. A $1,700,000 reserve, provided in 1992 for lease
payments related to another vacant building, was included in the sublease loss
reserves at December 31, 1993.
In May 1995, Uniquest entered into voluntary bankruptcy and subsequently
dissolved, resulting in the termination of the Company's sublease with Uniquest.
The Company received a payment of $923,000 and wrote off the balance of a note
for delinquent rent and data cost sharing amounts of approximately $1,158,000
against the sublease loss reserves. The Company filed a claim with the
Creditors' Committee for unsecured amounts owed by Uniquest totaling
approximately $740,000. During 1995 the Company recorded $164,000 as sublease
income and $77,000 as data center cost reimbursements from Uniquest as
reductions of occupancy expense and data center cost of sales, respectively.
At December 31, 1997, the Company maintains sublease loss reserves of
$2,030,000. The Company may recognize additional gain from the sale of the
software and services business at such time that all outstanding matters with
the discontinued business are resolved. Management believes that certain of
these matters will be resolved in 1998 and, accordingly, $1,691,000 of the total
reserves are classified as current on December 31, 1997.
RISK FACTORS
INTENSE COMPETITION. The Company competes with a number of companies providing
electronic commerce services to retailers and vendors. The electronic commerce
services business is highly competitive, and competitive pricing may materially
adversely affect the prices the Company can charge. Competition may also affect
the Company's ability to gain new customers and retain and expand business with
its existing customers, and the range of services offered to its customers. The
Company expects competition to increase as more companies enter the market and
existing competitors continue to change and expand their product offerings. Many
of the Company's existing and potential competitors have financial, marketing or
technological resources that exceed those of the Company, and there can be no
assurance that the Company will be able to compete successfully. Some large
retailers and vendors operate private computer networks for transacting business
with their trading partners. It is possible that additional retailers and
vendors, including certain of the Company's existing customers, may develop and
implement similar private networks, thereby reducing the demand for the
Company's services. IBM has, under certain license and maintenance agreements
with the Company, the right to market the Company's catalog applications in
competition with the Company, in return for prescribed royalty and maintenance
payments. IBM has informed the Company that various types of information
regarding such matters as IBM's current activities, intentions, plans and
projections with respect to its business are confidential to IBM and,
accordingly, will not be disclosed. Although the Company does not believe that
IBM has any current intention to enter the Company's market, there can be no
assurance that IBM will
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not exercise its license rights and become a competitor, and the Company's
inability to obtain information may limit the Company's ability to provide for
any such contingency. If IBM were to become a competitor, the Company's business
and results of operations could be materially adversely affected. See
"Dependence on IBM" and "Business - Competition."
DEPENDENCE ON KEY CUSTOMERS. While none of the Company's customers accounted for
more than 10% of total revenues for any of the three years in the period ended
December 31, 1997, the Company's customers include several key hubs who
represent a significant amount of the Company's business. The Company provides
services and generates revenues by enabling certain hub customers and their
trading partners to conduct business over the Company's network. While the
estimated revenues attributable to each hub customer and revenues from its
trading partners related only to that hub customer do not exceed 10%, the
estimated revenues attributable to all of the billings of a certain hub customer
and 100 percent of its trading partners may exceed 10%.
Because of the large number of trading partners that transact business with each
other, the difficulty of allocating trading partner network services to any
particular hub customer, and differences in the manner in which hub customers
and trading partners allocate the cost of network services among each other, the
Company cannot precisely attribute revenues to particular hub customer programs.
In addition, one or more of the Company's retail customers could elect either to
develop their own catalog and EDI services or to transfer all or a significant
portion of their trading activities to a competitor. Any such transfer could
result in many of that retailer's vendor partners electing not to maintain their
U.P.C. catalog information with the Company. Any transfer that results in a loss
or significant reduction in the Company's catalog and network services business
could have a material adverse effect on the Company's business and results of
operations. See "Business - Retailer and Vendor Customers" and Note 8 to the
Financial Statements.
DEPENDENCE ON IBM. Since 1988, the Company has used the IBM Value-Added Network
("VAN") to provide customers with certain electronic commerce services,
including EDI and connectivity. The maintenance and operation of the VAN is
controlled solely by IBM. The Company depends on the IBM VAN for a substantial
part of its revenues and such dependence is expected to continue for the
foreseeable future. Since the Company has no right to control the maintenance
and operation of the VAN, IBM's decision with respect to such matters may have a
material impact on the Company's business and results of operations. In
addition, disruption or unavailability of the IBM VAN could have a material
adverse effect on the Company's business and results of operations.
IBM charges the Company for the network services used by its customers. These
charges are subject to specified volume discounts and allowances. In the event
that IBM decides to increase the prices that it charges the Company or reduces
the amount of discounts or allowances, there can be no assurance that the
Company will be able to pass along these changes to its customers. If it cannot
do so, the Company's business and results of operations could be materially
adversely affected. The Company has an agreement with IBM for the purchase of
$250 million of network services over a three-year period beginning January 1,
1998. See Note 7 to the Financial Statements.
While the Company believes that it is the only remarketer of IBM services to the
retail industry, the Company does not have an exclusive arrangement with IBM. If
IBM marketed its network services directly to the Company's customers or
permitted a competitor of QRS to use and remarket these services to the retail
industry, the Company's business and results of operations could be materially
adversely affected. IBM is free to compete against the Company, and there can be
no assurance that IBM will not choose to compete with the Company in the future.
IBM provides the Company's customers certain EDI implementation and support
services. If IBM were unable or unwilling to provide these services, the Company
would either have to provide these services directly or arrange for a third
party to provide such services. There can be no assurance that the Company would
be able to do so on a timely basis, if at all, or that the costs of any such
arrangements would not materially adversely affect the Company's business and
results of operations. See "Business - Value-Added Network Services."
10
<PAGE>
YEAR 2000 COMPLIANCE. Many currently installed computer systems and software
products are coded to accept only two digit entries in the date code field and
therefore are not designed to handle any dates beyond the year 1999. These date
code fields will need to accept four digit entries to distinguish 21st century
dates from 20th century dates. As a result, in less than two years, computer
systems and/or software used by many companies may need to be upgraded to comply
with such "Year 2000" requirements and to remain functional. Significant
uncertainty exists in the software industry concerning the potential effects
associated with such compliance. The Company is assessing both the internal
readiness of its computer systems and the compliance of its computer products
and software sold to customers for handling the year 2000. The Company currently
projects that the majority of the compliance effort will be absorbed with the
product enhancements planned for 1998, although there can be no assurance to
that effect. The Company expects to implement successfully the systems and
programming changes necessary to address Year 2000 issues and does not believe
that the cost of such actions will have a material effect on the Company's
results of operations or financial condition. There can be no assurance,
however, that there will not be a delay in, or increased costs associated with,
the implementation of such changes, and the Company's inability to implement
such changes could have an adverse effect on the Company's business, operating
results or financial condition.
The Company believes that purchasing patterns of customers and potential
customers may be affected by Year 2000 issues in a variety of ways. Many
companies are expending significant resources to correct or patch their current
software systems for Year 2000 compliance. These expenditures may result in
reduced funds available to purchase software products or services such as those
offered by the Company. In addition, as the Company is currently in the process
of updating its systems, products and services to be Year 2000 compliant, the
demand for the Company's products and services could decrease in the period
before the Company becomes fully compliant. Many potential customers may also
choose to defer purchasing Year 2000 compliant products until they believe it is
absolutely necessary, thus resulting in potentially stalled market sales within
the industry. Any of the foregoing, or combination thereof, could result in a
material adverse effect on the Company's business, operating results and
financial condition.
Moreover, some of the Company's customers and third-party vendors may use
systems that are not Year 2000 compliant. The Company is currently contacting
such customers and third-party vendors to determine whether their systems are
Year 2000 compliant and, if they are not, obtain a commitment from such
customers and third-party vendors that they will be Year 2000 compliant prior to
December 31, 1998. Any Year 2000 compliance problem of the Company's customers
or third-party vendors could result in a material adverse effect on the
Company's business, operating results or financial condition.
In addition, some commentators have stated that a significant amount of
litigation will arise out of Year 2000 compliance issues, and the Company is
aware of at least two such lawsuits against other software vendors. Because of
the unprecedented nature of such litigation, it is uncertain whether or to what
extent the Company may be affected by it.
TECHNOLOGICAL CHANGE. The EDI services industry is characterized by continuously
evolving standards and technology. The Company's ability to anticipate or guide
retail industry standards, to continue to apply advances in network technology
and to develop new catalog and other applications will be a significant factor
in the Company's ability to grow and remain competitive. Because the Company's
current pricing structure is partially based on the number of characters
transmitted, the Company's business and results of operations could be
materially adversely affected if new compression technology were introduced
which reduces the number of characters needed to electronically transmit
business documents. In addition, new technologies could be developed or enhanced
that could make existing catalog and EDI services technologically obsolete.
There can be no assurance that the Company will be able to respond in a timely
manner to technological changes or that the ability of competitors to
successfully incorporate evolving standards and technologies into new services
will not render the Company's services noncompetitive. The failure by the
Company to adapt to or incorporate new standards or technology could have a
material adverse effect on the Company's business and results of operation.
11
<PAGE>
DEPENDENCE ON NEW PRODUCT INTRODUCTIONS. The Company's future growth depends on
its successful and timely introduction of new products and services in markets
that do not currently exist or are just emerging. The Company, however, has not
yet completed development of all of these services and there can be no assurance
that the Company will successfully complete any such development or that if such
development is completed, the Company's planned introduction of these services
will realize market acceptance or will meet the technical or other requirements
of potential customers.
Software products as complex as those used in the electronic commerce industry
may contain undetected errors or failures when first introduced or when new
versions are released. If software errors are discovered after introduction, the
Company could experience delays or lost revenues during the period required to
correct these errors. There can be no assurance that, despite testing by the
Company and by current and potential customers, errors will not be found in new
products or releases after commencement of commercial shipments, resulting in
loss of, or delay in, market acceptance, which could have a material adverse
effect on the business, results of operations and financial condition of the
Company. See "Business - Product Development."
DEPENDENCE ON DATA CENTER. QRS Catalog Services runs on a computer system
contained in the Company's data center facility in Richmond, California. The
data center is located in a single facility and the Company has no present
intention of establishing an additional data center in a separate location. The
Company utilizes fault-tolerant IBM mainframe computer equipment. The Company
has arranged for use of off-site computer facilities, if necessary, and has
taken other precautions to protect itself and its customers from events that
could interrupt delivery of the Company's services. These precautions include
off-site storage of back-up data, fire protection and physical security systems
and an early warning detection and Halon fire extinguishing system.
Notwithstanding these precautions, there can be no assurance that a fire,
earthquake or other natural disaster affecting the data center would not disable
the Company's computer system. The Company's data center connects to the IBM San
Francisco hub. In the event that service through this location is interrupted,
the Company has back-up access through the IBM Seattle hub. Any significant
damage to the Company's data center or disruption of its connectivity to the IBM
network could have a material adverse effect on the Company's business and
results of operations. See "Business - Data Center."
ABILITY TO MANAGE GROWTH. The Company has significantly increased its service
offerings and customers. Maintaining profitability during a period of expansion
will depend, among other things, on the Company's ability to manage effectively
its operations. Difficulties in managing continued growth could have a material
adverse effect on the Company's business and results of operations.
DEPENDENCE ON KEY PERSONNEL. The Company's success depends to a significant
extent upon the performance of its executive officers and other key employees,
particularly the members of senior management. The Company has no "key
personnel" life insurance for any of its senior management and does not
currently intend to purchase any such policies. There is no assurance that QRS
will be able to continue to attract and retain the qualified personnel necessary
for the development of its business. The loss of the services of key personnel
or the failure to recruit necessary additional personnel could have a material
adverse effect on the Company's business and results of operations.
LIMITED PROTECTION OF PROPRIETARY TECHNOLOGY. The Company relies on a
combination of copyright, trade secret and trademark laws and nondisclosure
agreements to protects its proprietary rights. Existing copyright laws afford
only limited protection. While the Company uses both internal proprietary and
IBM network security measures, it may be possible for unauthorized third parties
to copy the Company's products and services or to reverse engineer or otherwise
obtain and use information that the Company regards as proprietary. Policing
unauthorized use of the Company's products and services is difficult. Further,
the laws of certain countries in which the Company's products or services may be
distributed may not protect the Company's products or services and intellectual
rights to the same extent as the laws of the United States. If unauthorized
third parties copy or reverse engineer or otherwise obtain and use information
the Company regards as proprietary, the Company's business and results of
operations could be materially adversely affected.
12
<PAGE>
THE INTERNET. The Internet is an interconnected global network of computer
systems linked together through a common protocol. Although the Company believes
that the Internet will provide opportunities to expand the electronic commerce
market, there can be no assurance that the Company's efforts to exploit such
opportunities will be successful or that increased usage of the Internet for
electronic commerce or increased competition will not adversely affect the
business, results of operations, and financial condition of the Company. To
date, the Company's customers and potential customers have made limited use of
the Internet to exchange their "mission-critical"data.
FACTORS AFFECTING OPERATION RESULTS; POTENTIAL FLUCTUATIONS IN QUARTERLY
RESULTS. The Company's future quarterly operating results may vary and reduced
levels of earnings or losses could be experienced in one or more quarters.
Fluctuations in the Company's quarterly operating results could result from a
variety of factors, including changes in the levels of revenues derived from
each product, the timing of new service announcements by the Company or its
competitors, changes in pricing policies by the Company or its competitors,
market acceptance of new and enhanced versions of the products and services of
the Company or its competitors, the size and timing of significant orders,
changes in operation expenses, changes in the Company's strategy, the
introduction of alternative technologies, the effect of potential acquisitions
and industry and general economic factors. The Company has limited or no control
over many of these factors.
GOVERNMENT REGULATORY AND INDUSTRIAL POLICY RISKS. Current regulations and laws
governing the telecommunications industry generally do not apply to providers of
electronic commerce services and products. Except for government regulations in
certain foreign countries (which may affect the provision of certain of the
Company's services or use of certain of its products) and regulations governing
the ability of the Company to disclose the contents of communications by its
customers, there are no government regulations pertaining to the pricing,
service characteristics or capabilities, geographic distribution or quality
control features of the Company's electronic commerce services or products.
There exists, however, the risk that governmental policies affecting the
electronic commerce industry could be implemented by executive order,
legislation, administrative order, or otherwise. If such policies are adopted,
they could have a material adverse effect on the business, results of
operations, and financial condition of the Company.
VOLATILITY OF STOCK PRICE. The market price of the Company's Common Stock has
fluctuated significantly since the initial public offering in August 1993. The
market price of the Common Stock could be subject to significant fluctuations in
the future based on factors such as announcements of new products by QRS or its
competitors, quarterly fluctuations in the Company's financial results or other
electronic commerce services companies' financial results, changes in analysts'
estimates of the Company's financial performance, general conditions in the
electronic commerce services industry and conditions in the financial markets.
In addition, the stock market in general has experienced extreme price and
volume fluctuations, which have particularly affected the market prices for many
high technology companies and which have often been unrelated to the operating
performance of the specific companies. Many technology companies, including the
Company, have recently experienced historic highs in the market price of their
equity securities. There can be no assurance that the market price of the
Common Stock will not decline substantially from such historic highs, or
otherwise continue to experience significant fluctuations in the future.
13
<PAGE>
ITEM 2. FACILITIES
The Company leases approximately 40,000 square feet of office space in Richmond,
California for its corporate headquarters. The lease expires on June 30, 2010.
Management believes that the Company's facilities are adequate for its level of
business and its near-term growth requirements.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
14
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's common stock has been traded in the over-the-counter market on the
Nasdaq National Market under the symbol QRSI since the Company's initial public
offering in August 1993. According to records of the Company's transfer agent,
the Company had approximately 68 stockholders of record as of February 16, 1998.
Because many of such shares are held by brokers and other institutions on behalf
of stockholders, the Company is unable to estimate the total number of
beneficial holders of the common stock. The following table sets forth the low
and high sales prices of the Company's common stock for the two-year period
ended December 31, 1997:
<TABLE>
<CAPTION>
PERIOD ENDED LOW HIGH
- --------------------------------------- -------- --------
<S> <C> <C>
Quarters ended December 31, 1996:
First Quarter $ 17.75 $ 26.25
Second Quarter 25.50 37.13
Third Quarter 27.75 41.50
Fourth Quarter 28.00 40.25
Quarters ended December 31, 1997:
First Quarter 26.38 35.25
Second Quarter 23.88 39.06
Third Quarter 31.00 39.50
Fourth Quarter 31.75 38.31
</TABLE>
DIVIDEND POLICY
The Company's policy has been to reinvest earnings to fund future growth.
Accordingly, the Company has paid no cash dividends on its common stock and does
not anticipate declaring dividends on its common stock in the foreseeable
future.
15
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA)
-------------------------------------------------------------------
STATEMENT OF OPERATIONS DATA 1997 1996 1995 (1) 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues $71,632 $56,746 $42,134 $31,382 $22,457
Operating earnings 12,639 9,442 2,479 5,311 3,124
Earnings from continuing
operations before income taxes 14,625 11,019 3,961 5,980 1,911
Discontinued operations:
Gain from sale of software and
services business - - - - 1,441
Income tax expense (benefit) 5,850 4,408 1,574 (7,985) -
Extraordinary loss on extinguishment
of debt - - - - (763)
------- ------- ------- ------- -------
Net earnings $8,775 $6,611 $2,387 $13,965 $2,589
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Basic earnings per share:
Continuing operations $1.04 $0.79 $0.29 $1.74 $0.38
Discontinued operations - - - - 0.29
Extraordinary item - - - - (0.15)
------- ------- ------- ------- -------
Net earnings per share $1.04 $0.79 $0.29 $1.74 $0.52
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Diluted earnings per share:
Continuing operations $1.01 $0.77 $0.28 $1.67 $0.34
Discontinued operations - - - - 0.26
Extraordinary item - - - - (0.14)
------- ------- ------- ------- -------
Net earnings per share $1.01 $0.77 $0.28 $1.67 $0.46
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
(1) 1995 results include write-off of purchased in-process research and
development of $4,318,000.
<TABLE>
<CAPTION>
DECEMBER 31,
(IN THOUSANDS)
-------------------------------------------------------------------
BALANCE SHEET DATA 1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Working capital $42,347 $29,416 $30,248 $23,024 $17,946
Total assets 64,002 55,946 46,592 39,910 23,135
Long-term debt - - - - 493
Stockholders' equity 54,729 43,570 35,430 31,427 15,485
</TABLE>
16
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EXCEPT FOR THE HISTORICAL FINANCIAL INFORMATION CONTAINED HEREIN, THE MATTERS
DISCUSSED IN THIS ANNUAL REPORT ON FORM 10-K MAY BE CONSIDERED
"FORWARD-LOOKING" STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. SUCH STATEMENTS INCLUDE DECLARATIONS
REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE COMPANY AND ITS
MANAGEMENT. THESE FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE
PERFORMANCE AND INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES, AND THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS
INCLUDE, BUT ARE NOT LIMITED TO, THOSE LISTED UNDER "BUSINESS - RISK FACTORS"
AND ELSEWHERE HEREIN, AND OTHER RISKS IDENTIFIED FROM TIME TO TIME IN THE
COMPANY'S REPORTS AND REGISTRATION STATEMENTS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
GENERAL
The Company's product and service families are Catalog Services, Network
Services, Inventory Management Services (IMS), Logistics Management Services
(LMS), and Professional Services. The Company derives revenues from five
principal and related sources: the transmission of standard business documents
over a network, monthly charges for accessing Catalog Services, IMS-related fees
based on negotiated monthly service charges, LMS fees, and consulting fees.
Network Services pricing is based primarily on the volume of characters
transmitted and the type of network access utilized. Network Services pricing
also incorporates discounts based on volume.
DELAWARE REINCORPORATION
On October 21, 1997, the Company completed its plan to reincorporate in Delaware
(the "Reincorporation") through the merger (the "Merger") of QuickResponse
Services, Inc., a California corporation ("QRS-California"), with and into the
Company. As a result of the Merger, the outstanding shares of QRS-California
were automatically converted into shares of the Company.
CANADIAN SUBSIDIARY
On October 14, 1997, QRS created a wholly owned Canadian sales subsidiary, QRS
Canada, Inc.
17
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage of
revenues represented by certain line items in the Company's statements of
operations:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenues 100% 100% 100%
Cost of sales 56 60 61
---- ---- ----
Gross profit 44 40 39
Operating expenses:
Sales and marketing 13 11 11
Product development 6 6 5
General and administrative 7 7 7
Purchased in-process research
and development - - 10
---- ---- ----
Total operating expenses 26 24 33
---- ---- ----
Operating earnings 18 16 6
Interest income 2 3 3
---- ---- ----
Earnings before income taxes 20% 19% 9%
---- ---- ----
---- ---- ----
</TABLE>
REVENUES
Revenues increased from $42.1 million in 1995 to $56.7 million in 1996 and to
$71.6 million in 1997, representing increases of 35% from 1995 to 1996 and 26%
from 1996 to 1997. These increases were primarily attributable to four factors.
First, the number of customers increased from 156 retailers and 4,865 vendors at
December 31, 1995 to 205 retailers and 4,973 vendors as of December 31, 1996 and
to 241 retailers and 5,921 vendors and carriers as of December 31, 1997. Second,
the number of catalog trading partnerships increased significantly as a result
of the increase in the number of customers and their trading links with each
other. Third, customers increased the number, type and size of transactions
transmitted over the network, as well as the utilization of Catalog Services.
Fourth, the Company expanded its product offerings among the Inventory
Management Services and Professional Services.
COST OF SALES
Cost of sales consists primarily of the cost of purchasing network services, the
cost of the Company's data centers and technical customer support services. Cost
of sales increased from $25.5 million in 1995 to $33.8 million in 1996 and to
$40.5 million in 1997. These increases were principally due to increases in
purchased network services reflecting growth in network services purchased under
a long-term contract, discounted based upon a multi-year volume commitment, and
an expanded customer support group reflecting growth in customers and products.
Cost of sales as a percentage of revenue decreased from 61% and 60% in 1995 and
1996, respectively, to 56% in 1997. Cost of sales as a percentage of revenues
decreased in 1997 primarily due to increases in higher margin revenue from
Catalog Services, increased operating efficiencies in data center operations,
and higher discounts on network services. These benefits were partially offset
by increased sales of certain lower margin network services and volume discounts
earned by larger customers.
SALES AND MARKETING EXPENSES
Sales and marketing expenses consist primarily of personnel and related costs in
the Company's sales and marketing organizations as well as the costs of various
marketing programs. Sales and marketing costs increased from $4.7 million in
1995 to $6.5 million in 1996 and to $9.0 million in 1997, reflecting the general
increase in the number of customers and the size of the Company's operations.
Sales and marketing expenses represented 11% of revenues in
18
<PAGE>
years 1995 and 1996 and 13% of revenues in 1997. The increase as a percentage of
revenue was due to the Company's expansion of its retailer and vendor-specific
coverage and growth in its Program Sales and Enablement organization, the group
responsible for rapidly enabling trading partners for key hub customers.
PRODUCT DEVELOPMENT EXPENSES
Product development expenses consist primarily of personnel and equipment costs
related to research, development and implementation of new services and
enhancement of existing services. Product development expenses increased from
$2.0 million in 1995 to $3.1 million in 1996 and to $4.4 million in 1997 and
represented 5%, 6% and 6% of revenues, respectively.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses consist primarily of personnel and related
costs of the Company's finance and administrative organizations, as well as
professional fees and other costs. General and administrative expenses increased
from $3.1 million in 1995 to $3.9 million in 1996 and to $5.1 million in 1997
and represented 7% in each of three years.
PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT
In October 1995, the Company acquired certain assets and liabilities of ShipNet
Systems, Inc. ("ShipNet"), a provider of transportation logistics services. The
total acquisition cost was $4.9 million, including $200,000 paid in cash,
assumption of certain liabilities of $3.3 million, shutdown, relocation and
severance expenses of $1.1 million associated with integrating ShipNet's
operations, and $300,000 in transaction costs related to the acquisition.
The acquisition was accounted for as a purchase transaction. In connection with
the acquisition and in conjunction with the Company's capitalized software
policies, $4.3 million of the purchase price was allocated to purchased
in-process research and development and charged to operations as technological
feasibility had not been established and no alternative future uses existed at
the acquisition date. The Company allocated $0.6 million of the purchase price
to current assets and property and equipment.
In addition, the Company spent approximately $100,000, $600,000, and $330,000 in
1995, 1996 and 1997, respectively, in order to complete the development of the
acquired in-process products. As of December 31, 1997, the Company does not
anticipate further development spending on the acquired in-process products.
INTEREST INCOME
Interest income consists primarily of interest earned on cash, cash equivalents
and investment securities, including cash accumulated from the Company's initial
public offering of common stock in August 1993, as well as subsequent positive
cash flow from operations. Interest income increased from $1.5 million in 1995
to $1.6 million in 1996 and to $2.0 million in 1997. The increase in 1997 is
primarily due to higher balances in the Company's cash, cash equivalents and
investment securities accounts.
INCOME TAX EXPENSE
The Company's income tax expense was $1.6 million, $4.4 million and $5.9 million
for the years 1995, 1996 and 1997, respectively. The Company's effective income
tax rate in 1995, 1996 and 1997 was 40%.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased from $29.4 million at December 31, 1996
to $42.3 million at December 31, 1997. Cash, cash equivalents and short-term
marketable securities available-for-sale increased from $24.6 million at
December 31, 1996 to $33.8 million at December 31, 1997. At December 31, 1996
and 1997, $10 million and
19
<PAGE>
$1.0 million, respectively, of marketable securities available-for-sale were
classified as non-current assets and, therefore, were not included in working
capital. Total assets increased from $55.9 million at December 31, 1996 to $64.0
million at December 31, 1997, while total liabilities decreased from $12.4
million at December 31, 1996 to $9.3 million at December 31, 1997.
During 1995, the Company acquired certain assets of ShipNet for $4.9 million
including the assumption of certain liabilities, relocation, personnel and
transaction costs. The Company disbursed approximately $2.3 million, $1.2
million, and $1.2 million of such funds in 1995, 1996 and 1997, respectively.
The Company expects no future disbursements related to the acquisition of
ShipNet assets.
Management believes that the cash, cash equivalents and marketable securities
available-for-sale at December 31, 1997, and cash anticipated to be generated
from future operations will be sufficient for the Company to meet its working
capital needs and capital expenditures through 1998. However, the Company may
choose to raise additional cash through the sale of equity or debt prior to such
time. The Company has no plans to pay dividends with respect to common stock in
the foreseeable future.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field and therefore are not
designed to handle any dates beyond the year 1999. These date code fields will
need to accept four digit entries to distinguish 21st century dates from 20th
century dates. As a result, in less than two years, computer systems and/or
software used by many companies may need to be upgraded to comply with such
"Year 2000" requirements and to remain functional. Significant uncertainty
exists in the software industry concerning the potential effects associated with
such compliance. The Company is assessing both the internal readiness of its
computer systems and the compliance of its computer products and software sold
to customers for handling the year 2000. The Company currently projects that the
majority of the compliance effort will be absorbed with the product enhancements
planned for 1998, although there can be no assurance to that effect.
The Company expects to implement successfully the systems and programming
changes necessary to address Year 2000 issues and does not believe that the cost
of such actions will have a material effect on the Company's results of
operations or financial condition. There can be no assurance, however, that
there will not be a delay in, or increased costs associated with, the
implementation of such changes, and the Company's inability to implement such
changes could have an adverse effect on the Company's business, operating
results or financial condition.
Moreover, some of the Company's customers and third-party vendors may use
systems that are not Year 2000 compliant. The Company is currently contacting
such customers and third-party vendors to determine whether their systems are
Year 2000 compliant and, if they are not, obtain a commitment from such
customers and third-party vendors that they will be Year 2000 compliant prior to
December 31, 1998. Any Year 2000 compliance problem of the Company's customers
or third-party vendors could result in a material adverse effect on the
Company's business, operating results or financial condition. See "Risk Factors
- - Year 2000 Compliance."
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
20
<PAGE>
ITEM 8. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
PAGE
<S> <C>
Independent Auditors' Report 22
Consolidated Balance Sheets 23
Consolidated Statements of Earnings 24
Consolidated Statements of Stockholders' Equity 25
Consolidated Statements of Cash Flows 26
Notes to Consolidated Financial Statements 27-36
</TABLE>
21
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
QuickResponse Services, Inc.:
We have audited the accompanying consolidated balance sheets of QuickResponse
Services, Inc. and subsidiary (the "Company") as of December 31, 1997 and 1996,
and the related consolidated statements of earnings, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1997.
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, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at December 31, 1997
and 1996, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
San Francisco, California
February 4, 1998
22
<PAGE>
QUICKRESPONSE SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . $16,091 $16,022
Marketable securities, available-for-sale . . . . . . . . . . . . . . . . . . 17,694 8,605
Accounts receivable - net of allowance for doubtful accounts of $873 and $722
in 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,567 9,294
Deferred income tax assets. . . . . . . . . . . . . . . . . . . . . . . . . . 870 4,130
Prepaid expenses and other. . . . . . . . . . . . . . . . . . . . . . . . . . 1,260 1,141
------- -------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,482 39,192
------- -------
Property and equipment:
Furniture and fixtures. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,162 1,322
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,782 2,993
Leasehold improvements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,800 1,344
------- -------
11,744 5,659
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . 4,062 2,572
------- -------
Total property and equipment . . . . . . . . . . . . . . . . . . . . . . . 7,682 3,087
------- -------
Marketable securities, available-for-sale. . . . . . . . . . . . . . . . . . . . 1,000 9,985
Deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,576 2,308
Capitalized product development costs - net of accumulated amortization of
$2,590 and $2,818 in 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . 2,085 1,199
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 175
------- -------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $64,002 $55,946
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,733 $ 5,480
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 2,711 3,435
Current portion of sublease loss reserves . . . . . . . . . . . . . . . . . . 1,691 861
------- -------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 8,135 9,776
Deferred rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 799 923
Sublease loss reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339 1,677
------- -------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,273 12,376
------- -------
Commitments and contingencies. . . . . . . . . . . . . . . . . . . . . . . . . . - -
Stockholders' equity:
Preferred stock - $0.01 par value; 10,000,000 shares authorized; none issued
and outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Common stock - $0.001 par value; 20,000,000 shares authorized; 8,531,366
shares outstanding in 1997 and 8,407,220 in 1996 . . . . . . . . . . . . . . 63,864 61,394
Treasury stock at cost (1,300 shares) . . . . . . . . . . . . . . . . . . . . (35) -
Unrealized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . (9) 42
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,091) (17,866)
------- -------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . 54,729 43,570
------- -------
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . . . . . $64,002 $55,946
------- -------
------- -------
</TABLE>
See notes to financial statements.
23
<PAGE>
QUICKRESPONSE SERVICES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . $71,632 $56,746 $42,134
Cost of sales. . . . . . . . . . . . . . . . . . . . . 40,450 33,802 25,520
------- ------- -------
Gross profit . . . . . . . . . . . . . . . . . . . . . 31,182 22,944 16,614
Operating expenses:
Sales and marketing . . . . . . . . . . . . . . . . 9,041 6,512 4,707
Product development . . . . . . . . . . . . . . . . 4,365 3,127 2,023
General and administrative. . . . . . . . . . . . . 5,137 3,863 3,087
Purchased in-process research and development . . . - - 4,318
------- ------- -------
Total operating expenses . . . . . . . . . . . . 18,543 13,502 14,135
Operating earnings . . . . . . . . . . . . . . . . . . 12,639 9,442 2,479
Interest income. . . . . . . . . . . . . . . . . . . . 1,986 1,577 1,482
------- ------- -------
Earnings before income taxes . . . . . . . . . . . . . 14,625 11,019 3,961
Income tax expense . . . . . . . . . . . . . . . . . . 5,850 4,408 1,574
------- ------- -------
Net earnings . . . . . . . . . . . . . . . . . . . . . $ 8,775 $ 6,611 $ 2,387
------- ------- -------
------- ------- -------
Basic earnings per share . . . . . . . . . . . . . . . $1.04 $0.79 $0.29
------- ------- -------
------- ------- -------
Shares used to compute basic earnings per share. . . . 8,464 8,346 8,228
------- ------- -------
------- ------- -------
Diluted earnings per share . . . . . . . . . . . . . . $1.01 $0.77 $0.28
------- ------- -------
------- ------- -------
Shares used to compute diluted earnings per share. . . 8,727 8,613 8,499
------- ------- -------
------- ------- -------
</TABLE>
See notes to financial statements.
24
<PAGE>
QUICKRESPONSE SERVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS)
COMMON STOCK ON ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT INVESTMENT DEFICIT EQUITY
------------------------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995 . . . . . . . . 8,130,293 $ 58,291 $ (26,864) $ 31,427
Stock option compensation. . . . . . . . 35 35
Exercise of stock options, including tax
benefit . . . . . . . . . . . . . . . 143,951 1,363 1,363
Issuance of common stock under
Employee Stock Purchase Plan. . . . . 16,580 180 180
Exercise of warrant. . . . . . . . . . . 15,000 38 38
Net earnings . . . . . . . . . . . . . . 2,387 2,387
--------- --------- --------- --------- ---------
Balance, December 31, 1995 . . . . . . . 8,305,824 59,907 (24,477) 35,430
Stock option compensation. . . . . . . . 35 35
Exercise of stock options, including tax
benefit . . . . . . . . . . . . . . . 80,190 1,141 1,141
Issuance of common stock under
Employee Stock Purchase Plan. . . . . 19,206 306 306
Exercise of warrant. . . . . . . . . . . 2,000 5 5
Unrealized gain on investments . . . . . $ 42 42
Net earnings . . . . . . . . . . . . . . 6,611 6,611
--------- --------- --------- --------- ---------
Balance, December 31, 1996 . . . . . . . 8,407,220 61,394 42 (17,866) 43,570
Purchase of treasury stock . . . . . . . (1,300) (35) (35)
Stock option compensation. . . . . . . . 26 26
Exercise of stock options, including tax
benefit . . . . . . . . . . . . . . . 103,270 2,015 2,015
Issuance of common stock under
Employee Stock Purchase Plan. . . . . 17,176 416 416
Exercise of warrant. . . . . . . . . . . 5,000 13 13
Unrealized gain (loss) on investments. . (51) (51)
Net earnings . . . . . . . . . . . . . . 8,775 8,775
--------- --------- --------- --------- ---------
Balance, December 31, 1997 . . . . . . . 8,531,366 $ 63,829 $ (9) $ (9,091) $ 54,729
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
See notes to financial statements.
25
<PAGE>
QUICKRESPONSE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Operating activities:
Net earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,775 $ 6,611 $ 2,387
Adjustment to reconcile net earnings to net cash provided by (used in)
operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . 1,718 1,153 618
Stock compensation . . . . . . . . . . . . . . . . . . . . . . . . . 26 35 35
Purchased in-process research and development. . . . . . . . . . . . - - 4,318
Purchase of trading securities - net . . . . . . . . . . . . . . . . - - (8,401)
Changes in:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . (5,273) (1,262) (2,273)
Prepaid expenses and other. . . . . . . . . . . . . . . . . . . . (119) (329) (343)
Deferred income tax assets. . . . . . . . . . . . . . . . . . . . 3,902 3,877 1,338
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . (2) (8) (5)
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . (1,747) 1,898 1,750
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . 510 1,149 61
Deferred rent . . . . . . . . . . . . . . . . . . . . . . . . . . (124) (218) (99)
Sublease loss reserves (net). . . . . . . . . . . . . . . . . . . (508) (464) 326
-------- -------- --------
Net cash provided by (used in) operating activities. . . . . . 7,158 12,442 (288)
-------- -------- --------
Investing activities:
Marketable securities - available for sale, net . . . . . . . . . . . . (155) (572) 2,335
Purchase of property and equipment. . . . . . . . . . . . . . . . . . . (6,085) (1,551) (2,197)
Capitalization of product development costs . . . . . . . . . . . . . . (1,114) (245) (252)
Payment of liabilities assumed in the acquisition of Shipnet. . . . . . (1,234) (1,151) (2,339)
-------- -------- --------
Net cash used in investing activities. . . . . . . . . . . . . (8,588) (3,519) (2,453)
-------- -------- --------
Financing activities:
Proceeds from employee stock purchase plan issuances. . . . . . . . . . 416 306 180
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . 1,105 328 354
Exercise of warrants. . . . . . . . . . . . . . . . . . . . . . . . . . 13 5 38
Purchase of treasury stock. . . . . . . . . . . . . . . . . . . . . . . (35) - -
-------- -------- --------
Net cash provided by financing activities. . . . . . . . . . . 1,499 639 572
-------- -------- --------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . 69 9,562 (2,169)
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . 16,022 6,460 8,629
-------- -------- --------
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . $ 16,091 $ 16,022 $ 6,460
-------- -------- --------
-------- -------- --------
Other cash flow information:
Taxes paid during the year. . . . . . . . . . . . . . . . . . . . . . . $ 1,074 $ 498 $ 284
-------- -------- --------
-------- -------- --------
Noncash investing and financing activities:
Tax benefit from non-qualified stock options exercised. . . . . . . . . $ 910 $ 813 $ 1,009
Assumption of liabilities related to ShipNet acquisition. . . . . . . . - - 4,724
Assumption of accounts receivable, property and equipment, and other
assets related to ShipNet acquisition. . . . . . . . . . . . . . . . - - 406
Unrealized gain (loss) on marketable securities, available-for-sale . . (51) 42 -
</TABLE>
See notes to financial statements
26
<PAGE>
QUICKRESPONSE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: DESCRIPTION OF THE BUSINESS
The Company's product families are Catalog Services, Network Services, Inventory
Management Services (IMS), Logistics Management Services (LMS), and Professional
Services. The Company derives revenues from five principal and related sources:
the transmission of standard business documents over a network, monthly charges
for accessing Catalog Services, IMS-related fees based on negotiated monthly
service charges, LMS fees, and consulting fees. Network Services pricing is
based primarily on the volume of characters transmitted and the type of network
access utilized. Network Services pricing also incorporates discounts based on
volume.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The accompanying financial statements include the accounts of QuickResponse
Services, Inc. and its wholly owned subsidiary, QRS Canada, Inc. All
significant intercompany transactions have been eliminated.
REVENUE RECOGNITION
All services revenues are recognized in the month in which the service is
performed.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid temporary investments with original
maturities of three months or less to be cash equivalents.
MARKETABLE SECURITIES, AVAILABLE-FOR-SALE
Effective April 1, 1995, the Company determined that its portfolio of marketable
debt securities met the criteria for being classified as "Available for Sale"
under Statement of Financial Accounting Standard ("SFAS") No. 115 "Accounting
for Certain Investments in Debt and Equity Securities. "Previously the Company
had classified its marketable securities as "Trading Securities" under that
Standard. There was no effect on the financial statements from the change in
classification of these marketable debt securities, since the cost of such
securities approximated the fair market value at March 31, 1995. The Company
classifies those marketable securities that mature in less than one year as
short-term marketable securities.
PRODUCT DEVELOPMENT COSTS
The Company capitalizes certain development costs related to its product
offerings based upon the establishment of technological feasibility. Capitalized
development costs are amortized over various periods up to three years. The
capitalization and ongoing assessment of recoverability of development costs
requires considerable judgment by management with respect to certain external
factors, including, but not limited to, technological and economic feasibility,
and estimated economic life. Costs incurred to maintain existing product
offerings are expensed as incurred.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated on a straight-line
basis over their estimated useful lives, which are generally three years for
software and five years for equipment and hardware. Leasehold improvements are
amortized over the remaining period of the lease or over the estimated useful
life of the improvement, whichever is shorter. Depreciation expense for the
years ended December 31, 1997, 1996 and 1995 was $1,490,000, $924,000 and
$516,000, respectively.
STOCK OPTION COMPENSATION
The Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation "effective for the Company's year ended December 31, 1996. SFAS No.
123 established accounting and disclosure requirements using a fair-value based
method of accounting for stock-based employee compensation plans. As allowed
under provisions of SFAS No. 123, the Company has chosen to continue the
intrinsic value based method and provides pro forma disclosures of
27
<PAGE>
net earnings and earnings per share as if the accounting provisions of SFAS No.
123 had been adopted; therefore such adoption has no effect on the Company's
earnings or cash flows. See note 10.
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 128, "Earnings per Share." The Company adopted SFAS No. 128 in the year
ended December 31, 1997 as required and restated earnings per share ("EPS") data
for all prior periods to conform with SFAS No. 128.
SFAS No. 128 requires a dual presentation of basic and diluted EPS. Basic EPS
excludes dilution and is computed by dividing net income by the weighted average
of common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments include cash and equivalents, customer
receivables, accounts payable, and certain other accrued liabilities. The
carrying amounts of these items are a reasonable estimate of their fair values.
RECENTLY ISSUED ACCOUNTING STANDARDS
During June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which requires that an enterprise report the change in its net assets
from nonowner sources by major components and as a single total. The FASB also
issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," which establishes annual and interim standards for an enterprise's
operating segments and related disclosures about its products, services,
geographic areas, and major customers. Adoption of these Statements will not
impact the Company's consolidated financial position, results of operations or
cash flows, and any effect will be limited to the form and content of its
disclosures. Such Statements are effective for fiscal years beginning after
December 15, 1997, with earlier application permitted.
USE OF ESTIMATES
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles necessarily requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the balance
sheet dates and the reported amounts of revenues and expenses for the periods
presented. Actual results could differ from these estimates.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the 1997
presentation.
28
<PAGE>
NOTE 3: MARKETABLE SECURITIES, AVAILABLE FOR SALE
Marketable securities, available-for-sale are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
December 31, 1997
Debt issued by:
Government/Agencies $ 9,995 $10 - $10,005
Corporate bonds 8,708 2 $(21) 8,689
--------- ---------- --------- --------
Total marketable securities 18,703 12 (21) 18,694
Less long-term marketable
securities, available-for-sale 999 1 - 1,000
--------- ---------- --------- --------
Short-term marketable
securities, available-for-sale $17,704 $11 $(21) $17,694
--------- ---------- --------- --------
--------- ---------- --------- --------
<CAPTION>
GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
December 31, 1996
Debt issued by:
Government/Agencies $ 7,965 $20 $ - $ 7,985
Corporate bonds 10,583 22 - 10,605
--------- ---------- --------- --------
Total marketable securities 18,548 42 - 18,590
Less long-term marketable
securities, available-for-sale 9,965 20 - 9,985
--------- ---------- --------- --------
Short-term marketable
securities, available-for-sale $ 8,583 $22 $ - $ 8,605
--------- ---------- --------- --------
--------- ---------- --------- --------
</TABLE>
The long-term marketable securities held at December 31, 1997 have contractual
maturities of two years or less.
NOTE 4: INCOME TAXES
The Company accounts for income taxes using the asset and liability method under
SFAS No. 109, "Accounting for Income Taxes."
The Company provides a deferred tax expense or benefit for differences between
financial accounting and tax reporting. Deferred income taxes represent
operating loss carryforwards, tax credit carryforwards and future net tax
effects resulting from temporary differences between the financial statement and
tax bases of assets and liabilities, using enacted tax rates in effect for the
year in which the differences are expected to reverse.
29
<PAGE>
The income tax expense (credit) for the years ended December 31, 1997, 1996 and
1995 consisted of (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Current:
Federal $1,813 $ 906 $ 127
State 1,045 438 284
------ ------ ------
2,858 1,344 411
------ ------ ------
Deferred:
Federal 2,749 2,519 1,303
State 243 545 (140)
------ ------ ------
2,992 3,064 1,163
------ ------ ------
Total $5,850 $4,408 $1,574
------ ------ ------
------ ------ ------
</TABLE>
Significant components of the Company's deferred tax balances as of December 31,
1997 and 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Deferred tax assets:
Minimum tax credit carryforwards . . . . . . . . . . $393 $ 391
Net operating loss carryforwards . . . . . . . . . . - 1,916
Research and development credit carryforwards. . . . 898 899
Purchased in-process research and development. . . . 898 973
Allowance for doubtful accounts. . . . . . . . . . . 318 282
Other reserves not currently deductible. . . . . . . 1,224 1,807
Deferred rent. . . . . . . . . . . . . . . . . . . . 344 399
State taxes. . . . . . . . . . . . . . . . . . . . . 36 39
------------ ------------
Total deferred income tax assets. . . . . . . . . 4,111 6,706
Deferred tax liabilities:
Depreciation . . . . . . . . . . . . . . . . . . . . 247 126
Deducted research and development expenses . . . . . 418 142
------------ ------------
Total deferred income tax liabilities . . . . . . 665 268
------------ ------------
Deferred income tax assets, net . . . . . . . . . . . . $3,446 $6,438
------------ ------------
------------ ------------
</TABLE>
A reconciliation of the federal statutory tax rate to the Company's effective
tax rate is as follows (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------------------------------
1997 1996 1995
---------------------------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Provision at statutory tax rate . . . $5,118 35% $3,746 34% $1,347 34%
State income taxes, net of federal
tax benefit . . . . . . . . . . . 880 6 649 6 243 6
Other . . . . . . . . . . . . . . . . (148) (1) 13 - (16) -
---------- ---------- ---------- ---------- ---------- ----------
Total . . . . . . . . . . . . . . . . $5,850 40% $4,408 40% $1,574 40%
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
For income tax purposes, the Company had no remaining and no expired federal
operating loss carryforwards at December 31, 1997. The Company has federal
research and development credit carryforwards of approximately
30
<PAGE>
$898,000 which expire from 2005 to 2013, and federal credits for prior-year
minimum tax paid of $393,000 which have an indefinite life. Section 382 of the
Internal Revenue Code imposes limitations on the utilization of loss and credit
carryforwards when changes in control, as defined, have occurred. Primarily as
a result of the sale of shares in the Company's public offering in 1993, a
change of control occurred. As a result, the utilization of the credit
carryforwards is limited annually under Section 382. The Company does not
believe that the Section 382 limitations will result in the loss of any benefits
related to the carryforwards.
NOTE 5: ACQUISITION OF SHIPNET SYSTEMS, INC. ("SHIPNET")
In October 1995, the Company acquired certain assets and liabilities of ShipNet
Systems, Inc. ("ShipNet"), a provider of transportation logistics services. The
total acquisition cost was $4,902,000, comprised of $200,000 paid in cash,
assumption of certain liabilities of $3,302,000, shutdown, relocation and
severance expenses of $1,100,000 associated with rationalizing ShipNet's
operations, and $300,000 in transaction costs related to the acquisition.
The acquisition was accounted for as a purchase transaction. In connection with
the acquisition and in conjunction with the Company's capitalized software
policies, $4,318,000 of the purchase price was allocated to in-process research
and development and, as technological feasibility had not been established and
no alternative future uses existed at the acquisition date, charged to
operations. The Company allocated $584,000 of the purchase price to current
assets and property and equipment.
The Company completed the relocation of acquired assets in the third quarter of
1997 and anticipates no further expense related to the acquisition of Shipnet.
NOTE 6: SUBLEASE LOSS RESERVES
On May 20, 1993, the Company divested its software and services business to
Uniquest, a publicly held company. In connection with the sale, the Company
entered into various agreements with the buyer, including the sublease of
approximately 40,000 square feet of office space through June 30, 2000. Minimum
monthly lease payments ranged from $53,000 to $75,000 through the seven-year
term of the lease.
At December 31, 1993, Uniquest owed the Company approximately $1,358,000 which
was delinquent under sublease and data center cost sharing agreements. As a
result, the Company provided an allowance of $1,018,000 against these
receivables and made additional provisions of $2,009,000 against nonpayment of
future obligations. The result of the allowance and provision described was to
reduce the gain from sale of the software and services business by $3,027,000. A
$1,700,000 reserve provided in 1992 for lease payments related to another vacant
building was added to sublease loss reserves at December 31, 1993.
In May 1995, Uniquest entered into voluntary bankruptcy and subsequently
dissolved, resulting in the termination of the Company's sublease with Uniquest.
The Company received a payment of $923,000 and wrote off the balance of a note
for delinquent rent and data cost sharing amounts of approximately $1,158,000
against the sublease loss reserves. The Company filed a claim with the
Creditors' Committee for unsecured amounts owed by Uniquest totaling
approximately $740,000. During 1995, the Company recorded $164,000 as sublease
income and $77,000 as data center cost reimbursements from Uniquest as
reductions of occupancy expense and data center-cost of sales, respectively.
At December 31, 1997, the Company maintains sublease loss reserves of
$2,030,000. The Company may recognize additional gain from sale of the software
and services business at such time that all outstanding matters with the
discontinued business are resolved. Management believes that certain of these
matters will be resolved in 1998 and, accordingly, $1,691,000 of the total
reserves are classified as current on December 31, 1997.
31
<PAGE>
NOTE 7: COMMITMENTS AND CONTINGENCIES
The Company entered into an agreement with IBM for the purchase of $250 million
of network services over a three-year period commencing January 1, 1998. The
agreement includes specified annual minimum purchases and a graduated adjustment
charge if total purchases fall below the total minimum amount. Based on
historical and projected usage, management believes that the Company will meet
the purchase requirements under this agreement.
Additionally, the Company and IBM signed a Retail Industry Marketing agreement
under which the Company provides to IBM certain professional services related to
the retail industry. The Company recognized $1,000,000 of revenue in the fourth
quarter of 1997 as a result of these agreements.
The Company leases office buildings and certain equipment under various
non-cancelable operating lease agreements expiring through the year 2010. The
leases for office buildings generally provide renewal options and additional
rents based on increases in operating expenses of the buildings.
The Company's corporate building lease agreement provides for significant
periods of "free rent" when no cash is required. The total cash payments over
the life of the lease are divided by the total number of months in the lease
period and the average rent is charged to expense each month during the lease
period. During the periods of "free rent", this expense creates a deferred
liability which is amortized to expense over the life of the lease.
Total rent expense charged to continuing operations for the years ended December
31, 1997, 1996 and 1995 was $1,372,000, $1,331,000 and $1,272,000 respectively.
At December 31, 1997, future minimum payments under long-term operating leases
are as follows (in thousands):
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1998 . . . . . . . . . . . . . . $ 1,522
1999 . . . . . . . . . . . . . . 1,571
2000 . . . . . . . . . . . . . . 1,602
2001 . . . . . . . . . . . . . . 1,640
2002 & Thereafter. . . . . . . . 10,376
--------
Total. . . . . . . . . . . . . . . $16,710
--------
--------
</TABLE>
NOTE 8: MAJOR TRADING PARTNERSHIP PROGRAMS
The Company provides services and generates revenues by enabling certain hub
customers and their trading partners to conduct business over the Company's
network. Due to the large number of trading partners that transact business with
each other, including one or more hub customers, the difficulty of allocating
trading partner network services to individual hub customers, and the
differences in the manner in which hub customers and trading partners allocate
the cost of network services among each other, the Company cannot precisely
attribute revenues to particular trading relationships. However, in 1997, the
Company refined its estimation techniques and determined that no individual
customer or hub customer trading partnership exceeded 10% of total revenues for
any of the three years in the period ended December 31, 1997.
NOTE 9: RETIREMENT SAVINGS PLANS
The Company has a defined contribution retirement savings plan for all eligible
employees. The plan allows discretionary, matching employer contributions of up
to 50% of the maximum allowable employee contribution ($9,500 in 1997 and 1996
and $9,240 in 1995). The amounts charged to continuing operations during 1997,
1996 and 1995 were approximately $324,000, $238,000 and $135,000, respectively.
32
<PAGE>
The Company established a nonqualified deferred compensation plan for certain
employees, effective as of December 1, 1997. The specific terms of the plan are
in the process of being determined and management expects to finalize the plan
in the first quarter of 1998.
NOTE 10: COMMON STOCK, STOCK OPTIONS AND WARRANTS
In 1989, the Board of Directors approved a Non-Qualified Stock Option Plan (the
"Plan"). The Plan was amended in 1990. The Plan provides for the granting of
options to certain employees and directors to purchase shares of common stock of
the Company at prices determined by the Board of Directors.
In June 1993, the Board of Directors adopted an Employee Stock Purchase Plan
(the "Purchase Plan"). The Purchase Plan provides for the purchase of common
stock by eligible employees. A total of 150,000 shares of common stock has been
reserved for purchase under the Purchase Plan. The purchase price per share is
85% of the lower of (i) the fair market value of the common stock on the
participant's entry date (first business day in January, April, July and October
each year) into a purchase period (first business day in January and through the
last business day in December each year) or (ii) the fair market value on the
annual purchase date (the last business day in December each year). For a
participant whose entry date is subsequent to the start date of the purchase
period (first business day in January each year), the clause (i) value will not
be less than the fair market value of the common stock on the start date of the
purchase period. In 1997 and 1996, employees acquired 17,176 and 19,206 shares
of common stock, respectively, under the Purchase Plan.
In June 1993, the Board of Directors also approved the 1993 Stock Option/Stock
Issuance Plan (the "1993 Plan"). A total of 1,850,000 shares of common stock
has been reserved for issuance under this plan. The 1993 Plan is divided into
three separate components: (i) the Discretionary Option Grant Program under
which key employees (including officers), certain non-employee directors and
consultants may, at the discretion of the Plan Administrator, be granted options
to purchase shares of Common Stock at an exercise price not less than 85% of the
fair market value of such shares on the grant date, (ii) the Automatic Option
Grant Program under which option grants will automatically be made at periodic
intervals to certain non-employee members of the Board to purchase shares of
Common Stock at an exercise price equal to 100% of the fair market value of the
option shares on the grant date, and (iii) the Stock Issuance Program under
which key employees (including officers), certain non-employee and consultants
may, in the Plan Administrator's discretion, be issued shares of Common Stock
directly, either through the purchase of such shares at a price not less than
85% of their fair market value at the time of issuance or as a bonus tied to the
performance of services or the Company's attainment of financial objectives,
without any cash payment required of the recipient.
All outstanding options under the 1993 Stock Option/Stock Issuance Plan (the
"1993 Plan") have been granted at fair market value on the date of grant and
vest in equal annual installments over periods up to four years. Outstanding
options granted under earlier plans were granted at fair market value or lesser
values, and vest over different periods, primarily over periods up to four
years.
Stockholders approved additional allocations of 500,000 shares of common stock
to the stock option pool under the 1993 Stock Option/Issuance Plan in each of
May 1995 and May 1996 (1,000,000 shares total).
In December 1997, the Board of Directors approved the 1997 Special Non-Officer
Stock Option Plan which permits the Company to grant options to purchase up to
150,000 shares of common stock. The persons eligible to receive options through
this plan are those employees who are neither executive officers of the Company
nor members of the Board of Directors.
33
<PAGE>
The following table shows the activity in the Company's stock option plans:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
OPTIONS PRICE
--------- --------
<S> <C> <C>
Balance, December 31, 1994 (97,469 exercisable at $5.25 weighted average price per share). 543,362 $ .45
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 294,000 17.98
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (143,951) 2.46
Canceled. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,125) 12.79
--------- --------
Balance, December 31, 1995 (93,276 exercisable at $9.72 weighted average price per share). 669,286 $12.94
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265,750 29.79
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (80,190) 4.09
Canceled. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,500) 12.82
--------- --------
Balance, December 31, 1996 (205,408 exercisable at $13.70 weighted average price per share) 839,346 $18.96
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 614,650 31.64
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (103,265) 10.70
Canceled. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (42,250) 23.74
--------- --------
Balance, December 31, 1997 (320,580 exercisable at $18.36 weighted average price per share) 1,308,481 $25.54
--------- --------
--------- --------
</TABLE>
Warrants issued in connection with a line of credit and the public offering to
purchase 16,756 shares of common stock at $2.50 to $18.50 were outstanding at
December 31, 1997. Options to purchase approximately 78,596 shares of common
stock are available for future grants under the plans.
The Company applies APB Opinion 25 and related Interpretations in accounting for
its employee stock-based compensation plans. Accordingly, no compensation cost
has been recognized for its stock option plans. Had compensation cost for the
Company's stock-based plans been determined based on the fair value at the grant
dates for awards under those plans consistent with the method of SFAS No. 123,
the Company's net earnings and net earnings per share would have been decreased
to the proforma amounts indicated in the following table. As 1996 was the
initial phase-in period for applying this Statement, the proforma results
indicated are not necessarily representative of the effects on proforma
disclosures of net earnings for future periods as they exclude options that were
granted prior to January 1, 1995, with vesting periods in 1995 and later.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA)
--------------------------------------
1997 1996 1995
<S> <C> <C> <C>
NET EARNINGS
As reported $ 8,775 $ 6,611 $ 2,387
-------- -------- --------
-------- -------- --------
Proforma $ 6,916 $ 5,489 $ 2,021
-------- -------- --------
-------- -------- --------
BASIC EARNINGS PER SHARE
As reported $ 1.04 $ 0.79 $ 0.29
-------- -------- --------
-------- -------- --------
Proforma $ 0.82 $ 0.66 $ 0.25
-------- -------- --------
-------- -------- --------
DILUTED EARNINGS PER SHARE
As reported $ 1.01 $ 0.77 $ 0.28
-------- -------- --------
-------- -------- --------
Proforma $ 0.79 $ 0.64 $ 0.24
-------- -------- --------
-------- -------- --------
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants made in 1997, 1996 and 1995 under the 1993 Stock
Option/Stock Issuance Plan and for purchases made in 1997, 1996 and 1995 under
the Employee Stock Purchase Plan: risk-free interest rates are 5.91% in 1997,
6.07% in 1996 and 5.91% in 1995; expected volatility is 51.4% in 1997 and 51% in
both 1996 and 1995; expected lives in all years are 18 months beyond each
incremental vesting
34
<PAGE>
period (total life of 2 to 5.5 years, depending upon each grant's individual
vesting schedule). No dividends are assumed for any plan in any year. The
weighted average fair value of options granted during 1997, 1996, and 1995 was
$14.18, $13.27 and $8.05, respectively.
The status of options outstanding as of December 31, 1997 is summarized as
follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ----------------------------------------------------------------- --------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
----------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 5.25- 5.25 40,000 5.3 $ 5.25 40,000 $ 5.25
9.00-10.38 73,420 6.3 10.15 55,795 10.09
12.50-14.13 92,500 6.9 14.04 11,250 13.40
16.00-16.00 75,000 7.2 16.00 39,687 16.00
18.25-19.13 156,536 7.9 18.40 80,036 18.47
21.88-23.00 10,000 7.1 22.44 7,500 22.63
28.00-29.25 353,875 8.9 28.75 63,812 28.96
31.75-31.75 390,500 10.0 31.75 -
35.75-35.75 32,150 9.6 35.75 -
36.00-37.75 84,500 9.1 37.12 22,500 36.96
----------------- ----------- ----------- ---------- ----------- ----------
$ 5.25-37.75 1,308,481 8.6 $ 25.54 320,580 $ 18.36
----------------- ----------- ----------- ---------- ----------- ----------
----------------- ----------- ----------- ---------- ----------- ----------
</TABLE>
NOTE 11: QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
1997 QUARTERLY
---------------------------------------------------------------------
QUARTER QUARTER QUARTER QUARTER YEAR
ENDED ENDED ENDED ENDED ENDED
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, DEC. 31,
IN THOUSANDS, EXCEPT PER SHARE DATA 1997 1997 1997 1997 (1) 1997
--------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Revenues $16,354 $17,003 $18,253 $20,022 $71,632
Gross profit 7,231 7,389 7,759 8,803 31,182
Net earnings 1,925 2,095 2,254 2,501 8,775
Basic earnings per share 0.23 0.25 0.27 0.29 1.04
Diluted earnings per share 0.22 0.24 0.26 0.29 1.01
</TABLE>
(1) See Note 7 to Financial Statements.
<TABLE>
<CAPTION>
1996 QUARTERLY
---------------------------------------------------------------------
QUARTER QUARTER QUARTER QUARTER YEAR
ENDED ENDED ENDED ENDED ENDED
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, DEC. 31,
IN THOUSANDS, EXCEPT PER SHARE DATA 1996 1996 1996 1996 1996
--------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Revenues $12,717 $13,607 $14,657 $15,765 $56,746
Gross profit 4,941 5,319 5,890 6,794 22,944
Net earnings 1,371 1,511 1,713 2,016 6,611
Basic earnings per share 0.16 0.18 0.20 0.24 0.79
Diluted earnings per share 0.16 0.18 0.20 0.23 0.77
</TABLE>
35
<PAGE>
NOTE 12: EARNINGS PER SHARE
The Company calculates basic earnings per share (EPS) and diluted EPS in
accordance with SFAS No. 128. Basic EPS is calculated by dividing net earnings
for the period by the weighted average common shares outstanding for that
period. Diluted EPS takes into account the effect of dilutive instruments, such
as stock options, and uses the average share price for the period in determining
the number of incremental shares that are to be added to the weighted average
number of shares outstanding.
The following is a summary of the calculation of the number of shares used in
calculating basic and diluted EPS:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Shares used to compute basic EPS 8,464,000 8,345,679 8,228,483
Add: effect of dilutive securities 263,396 267,321 270,517
--------- --------- ---------
Shares used to compute diluted EPS 8,727,396 8,613,000 8,499,000
--------- --------- ---------
--------- --------- ---------
</TABLE>
36
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
37
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Peter R. Johnson (2)(3)(4) 49 Chairman of the Board of Directors and the Nomination Committee
H. Lynn Hazlett, Ph.D. 61 Chief Executive Officer and Director
John Simon 40 President
Shawn M. O'Connor 38 Executive Vice President, Chief Operating Officer, Chief Financial Officer,
and Secretary
Paul Benchener 52 Vice President, Marketing
Glenn DuBois 44 Vice President, Sales
Philip Swift 47 Vice President, Information Services
Tania Amochaev (4) 48 Director, Chairman of the Executive Committee
Steven D. Brooks (2)(3)(4) 46 Director, Chairman of the Audit Committee
John P. Dougall 54 Director
Garth Saloner (1)(2) 43 Director
Philip Schlein (1) 64 Director
Garen K. Staglin (1)(3)(4) 53 Director, Chairman of the Compensation Committee
</TABLE>
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee
(3) Member of the Nomination Committee
(4) Member of the Executive Committee
Mr. Johnson founded the Company in 1985 and has been Chairman of the Board since
the Company's inception. Mr. Johnson served as the Chief Executive Officer of
the Company from inception to March 1991 and again from January 1992 to May
1993. Before founding the Company, Mr. Johnson was a corporate general manager
of Myer Emporium Limited, a large retailer in Australia. Mr. Johnson served as
the Chief Executive Officer of Uniquest Incorporated from December 1993 to
December 1994. From 1995 to the present, Mr. Johnson was a private investor and
a consultant to technology companies.
Dr. Hazlett was named a director of the Company in May 1994 and was named Chief
Executive Officer in February 1997. He also served as President of the Company
from February 1997 to January 1998. From January 1994 to February 1997, Dr.
Hazlett owned and operated Supply Chain Associates, a retail supply chain
consultancy practice. Dr. Hazlett served as Vice President, Business Systems at
VF Corporation, a global apparel manufacturer, from 1989 to January 1994. From
1984 to 1989, Dr. Hazlett served as President and Chief Executive Officer of
Information and Communications, Inc., a division of Carson Pirie Scott &
Company, a conglomerate comprised of 33 department stores, 400 specialty stores
and a mail order catalog business. Prior to that, Dr. Hazlett also served as
Corporate Vice President and Chief Information Officer at Levi Strauss & Co., a
manufacturer of apparel. Dr. Hazlett is a director of National Industries
for the Blind, a non-profit organization, and TRINET Corporation, a provider
of human resource services.
Mr. Simon was named President of the Company in January 1998. Mr. Simon
previously held various positions with the Company since 1988, including
Executive Vice President from January 1994 to January 1998. From 1980 to 1988,
Mr. Simon was employed by Carter Hawley Hale Stores, Inc., a retail company,
most recently as Senior Program Manager of its Information Services Division,
and prior to that held a number of merchandising, store management, and
information services positions.
Mr. O'Connor was named Executive Vice President and Chief Operating Officer in
January 1998. Mr. O'Connor joined the Company in February 1995 and became Vice
President, Chief Financial Officer and Secretary in March 1995. Before joining
the Company, from 1992 to November 1994, Mr. O'Connor was Vice President and
Chief Financial Officer for Diasonics Ultrasound, Inc., a medical equipment
manufacturer. From 1988 to 1992, Mr. O'Connor held various management positions
with Diasonics Ultrasound.
38
<PAGE>
Mr. Benchener joined the Company in August 1996 as Vice President, Marketing.
Prior to joining the Company, from 1992 to August 1996, Mr. Benchener was
Director of Global Quick Response Services at Levi Strauss, where he held
various positions from 1976 to 1991. Mr. Benchener currently serves as Chair of
the Voluntary Interindustry Commerce Standards Board and on the Executive
Committee of the Uniform Code Council.
Mr. DuBois joined the Company in July 1997 as Vice President of Sales. Prior to
joining the Company, from July 1996 to June 1997, he was the Vice President of
Sales for the LizWear Division of Liz Claiborne, Inc., a manufacturer of
apparel. From July 1991 to July 1996, Mr. DuBois was with the Lee Division of VF
Corporation, initially as Director of Business Systems and Planning and,
beginning in 1994, as Regional Vice President of Sales. Prior to that, from 1983
to 1991, Mr. DuBois served in various management roles in both retail relations
and systems for Levi Strauss.
Mr. Swift joined the Company in October 1996 as Vice President, Product
Development and was named Vice President of Information Systems in January 1998.
Before joining the Company, from 1992 to October 1996, Mr. Swift was Department
Head of Information Products at VISA, a credit card transaction processing
company. From 1989 to 1991, Mr. Swift was Senior Project Manager at Matson
Navigation, a shipping company.
Ms. Amochaev was named a director in May 1992 and was named Chairman of the
Executive Committee of the Board of Directors in February 1997. Ms. Amochaev
served as the President of the Company from May 1992 until February 1997, and as
Chief Executive Officer from May 1993 until February 1997. Before joining the
Company, from 1988 to 1992, Ms. Amochaev was Chief Executive Officer of Natural
Language, Inc., a client server database tool software company. From 1984 to
1987, Ms. Amochaev was President and Chief Executive Officer of Comserv
Corporation, a manufacturing applications software company that was sold in 1987
to Management Science America. Ms. Amochaev currently serves as a director of
Walker Interactive Systems, Inc., a financial software company, of Government
Technology Services, Inc., a computer reseller to the government, and of
Symantec Corporation, a software company.
Mr. Brooks was named a director of the Company in January 1994. Since September
1997, Mr. Brooks has been a Managing Director of Donaldson Lufkin & Jenrette
Securities Corporation, an investment banking firm. From 1996 to August 1997,
Mr. Brooks was a private investor and a consultant to technology companies. From
1994 to 1996, Mr. Brooks served as Managing Director and Head of Global
Technology Investment Banking at Union Bank of Switzerland Securities, LLC. From
1988 to 1994, Mr. Brooks was a private investor and consultant to
high-technology firms. From 1986 to 1988, Mr. Brooks served as Managing Partner
of investment banking at Robertson, Stephens & Co., an investment bank. Mr.
Brooks is a Director of Paychex, Inc., a national payroll processing and
business services company, and VERITAS Software Corporation, a systems
management software company, as well as several private companies.
Mr. Dougall has been a director of the company since July 1990. Mr. Dougall has
been employed since November 1996 by Aristocrat Leisure Limited, an Australian
publicly listed company and a supplier to gambling and entertainment companies,
where he currently serves as Chairman and Chief Executive Officer. From January
1992 to September 1996, Mr. Dougall served as Chief Executive Officer of AWA
Limited, an electronics and telecommunications company. Mr. Dougall held various
executive positions with the Company from July 1990 to January 1992, serving as
President of the Company from February 1991 to June 1991 and as President and
Chief Executive Officer from June 1991 to January 1992. From February 1988 to
June 1990, Mr. Dougall was the Executive Director of Paxus Corporation, a
software services and outsourcing firm.
Mr. Saloner was named a director of the Company in December 1993. Mr. Saloner
has served as the Robert A. Magowan Professor of Strategic Management and
Economics at the Graduate School of Business at Stanford University since 1990.
He also serves as Associate Dean for Academic Affairs and Director of Research
and Course Development at Stanford. From 1982 to 1990, Mr. Saloner taught as a
professor in the Economics Department of the Massachusetts Institute of
Technology.
39
<PAGE>
Mr. Schlein was named a director of the Company in February 1996. Mr. Schlein
has been a general partner of BMS Partners L.P., a venture partner of U.S.
Venture Partners, a venture capital firm, since April 1985. Mr. Schlein held
various executive positions with R.H. Macy & Company, Inc. from September 1957
to December 1973 and was President and Chief Executive Officer of Macy's
California division from January 1974 to January 1985. Mr. Schlein currently
serves as a director of Burnham Pacific Incorporated, a commercial real estate
development and leasing company, Ross Stores, a clothing store chain, and
Resound Corporation, a hearing device manufacturing company. Additionally, Mr.
Schlein served as a director of Apple Computer, Inc. from 1979 to 1987.
Mr. Staglin was named a director of the Company in 1991. Since 1991, Mr. Staglin
has served as the Chief Executive Officer and Chairman of the Board of Directors
of Safelite Glass Corporation, a replacement auto glass manufacturing and
retailing company. From 1980 to 1991, Mr. Staglin was Vice President and General
Manager of Automatic Data Processing, a computer networking services company.
Mr. Staglin currently serves as a director of First Data Corporation, a supplier
of computer services for credit card processing and other financial services,
Cybercash, Inc., a provider of secure transaction services for the Internet, and
Grimes Aerospace Corporation, a manufacturer of aircraft replacement parts and
repair services. In 1994, he was named a member of the Advisory Council to the
Stanford Graduate School of Business.
The information required in this Item 10 with respect to compliance with Section
16(a) of the Exchange Act is hereby incorporated by reference from the
information under the caption "Compliance with Section 16(a) of the Exchange Act
of 1934" in the Company's definitive proxy statement (the "Proxy Statement").
The Proxy Statement will be filed with the Securities and Exchange Commission no
later than 120 days after the close of the Company's last fiscal year in
connection with the solicitation of proxies for its Annual Meeting of
Stockholders to be held on May 5, 1998.
ITEM 11. EXECUTIVE COMPENSATION
Pursuant to Paragraph G(3) of the General Instructions to Form 10-K, the
information called for in this Part III, Item 11 of Form 10-K is omitted since
the Company will file, not later than 120 days after the close of the fiscal
year ended December 31, 1997, with the Securities and Exchange Commission, its
Proxy Statement, which shall contain, under the caption "Executive Compensation
and Other Information," the information required by this item.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Pursuant to Paragraph G(3) of the General Instructions to Form 10-K, the
information called for in this Part III, Item 12 of Form 10-K is omitted since
the Company will file, not later than 120 days after the close of the fiscal
year ended December 31, 1997, with the Securities and Exchange Commission, its
Proxy Statement, which shall contain, under the caption "Security Ownership Of
Certain Beneficial Owners and Management," the information required by this
item.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to Paragraph G(3) of the General Instructions to Form 10-K, the
information called for in this Part III, Item 13 of Form 10-K is omitted since
the Company will file, not later than 120 days after the close of the fiscal
year ended December 31, 1997, with the Securities and Exchange Commission, its
Proxy Statement, which shall contain, under the caption "Certain Relationships
and Related Transactions" the information required by this item.
40
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are filed or incorporated by reference as part of this
Form 10-K:
(a) ITEMS FILED AS PART OF REPORT:
1. FINANCIAL STATEMENTS
Independent Auditors' Report
Consolidated Balance Sheets
Consolidated Statements of Earnings
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2. FINANCIAL STATEMENT SCHEDULES
All schedules are omitted because they are not applicable or not
required or because the required information is included in the
financial statements or notes thereto.
(b) REPORTS ON FORM 8-K
None
(c) EXHIBITS
EXHIBIT
NO. DESCRIPTION
2.1 Agreement and Plan of Merger of QuickResponse Delaware, Inc. and
QuickResponse Services, Inc.
3.1 Certification of Incorporation of the Company.
3.2 Certificate of Correction of Certificate of Incorporation of the
Company.
3.3 Bylaws of the Company.
4.1 Specimen of Common Stock Certificate of the Registrant.*
10.1 1993 Stock Option/Stock Insurance Plan and forms of agreement
thereunder.*
10.2 Employee Stock Purchase Plan.*
10.3 Form of 1990 Nonqualified Stock Option Agreement.*
10.4 Employment Agreement dated April 22, 1992 between the Registrant and
Tania Amochaev.*
10.5 Employment Agreement dated March 1, 1993 between the Registrant and
Tania Amochaev.*
10.6 Form of Indemnification Agreement.*
10.7 Lease Agreement dated April 27, 1990 between the Registrant and
Schooner Drive Associates, a California Limited Partnership.*
10.8 Sublease dated May 1, 1993 between the Registrant and PRJ&, Inc.*
10.9 Preferred Stock Purchase and Debt Consolidation Agreement, dated as of
March 22, 1991 among the Registrant, Peter R. Johnson and International
Business Machines Corporation.*
41
<PAGE>
10.10 First Amendment dated as of May 20, 1993 to the Preferred Stock
Purchase and Debt Consolidation Agreement among the Registrant, Peter
R. Johnson, and International Business Machines Corporation.*
10.11 Replacement Consolidated Convertible Notes dated March 22, 1991 issued
to International Business Machines Corporation.*
10.12 Security Agreement dated as of March 22, 1991 between the Registrant
and International Business Machines Corporation.*
10.13 Warrant dated March 22, 1991 issued to International Business Machines
Corporation.*
10.14 License Agreement dated March 22, 1991 between the Registrant and
International Business Machines Corporation.*
10.15 First Amendment dated as of May 20, 1993 to the License Agreement
between the Registrant and International Business Machines
Corporation.*
10.16 Maintenance and Support Agreement dated March 22, 1991 between the
Registrant and International Business Machines Corporation.*
10.17 First Amendment dated as of May 20, 1993 to the Maintenance and Support
Agreement between the Registrant and International Business Machines
Corporation.*
10.18 Marketing Agreement dated March 22, 1991 between the Registrant and
International Business Machines Corporation.*
10.19 Common Stock Purchase Agreement dated April 3, 1989 by and among
Registrant and Retail Shopping International (Aust) Pty. Ltd., Barclays
Investment Pty. Ltd., and Peter R. Johnson.*
10.20 Business Loan Agreement dated May 30, 1990 between Registrant and
Silicon Valley Bank as amended on June 3, 1993.*
10.22 Warrant dated July 16, 1992 issued to Steven D. Brooks.*
10.23 Warrant dated March 31, 1993 issued to Steven D. Brooks.*
10.24 # Volume Discount Agreement dated December 16, 1991 between the
Registrant and International Business Machines Corporation.*
10.25 Facilities and Cost Sharing Agreement dated May 1, 1993 between the
Registrant and PRJ&, Inc.*
10.26 Data Center Services Agreement dated April 30, 1993 between the
Registrant and PRJ&, Inc.*
10.27 Agreement and Plan of Merger dated May 20, 1993 among the Registrant,
Uniquest Incorporated, PRJ Acquisition Corp. and PRJ&, Inc.*
10.28 Consent and Release Agreement dated as of May 20, 1993 among the
Registrant, PRJ&, Inc., Peter R. Johnson, Uniquest Incorporated and
International Business Machines Corporation.*
10.29 Separation Agreement dated May 1, 1993 between the Registrant and PRJ&,
Inc.*
10.30 Assignment, Bill of Sale and Assumption Agreement dated as of May 20,
1993 between the Registrant and PRJ&, Inc.*
10.31 Escrow Agreement dated May 20, 1993 among the Registrant, Uniquest
Incorporated and Bank of America NT&SA.*
10.32 Pledge Agreement dated as of May 20, 1993 between the Registrant and
International Business Machines Corporation.*
10.33 Agreement dated as of July 13, 1993 between the Registrant and
International Business Machines Corporation.*
42
<PAGE>
10.34 # Advantis Industry Remarketer Agreement dated as of January 6, 1994
between Advantis and the Registrant.**
10.35 Uniquest Forbearance Agreement between Uniquest Incorporated and the
Registrant.**
10.36 # International Remarketer Agreement dated as of November 11, 1996
between Advantis and the Registrant.***
10.37 # Employment Agreement dated as of February 6, 1997 between Registrant
and Lynn Hazlett.***
10.38 Reserved.
10.39 Fourth Amendment, dated August 7, 1997, to Lease Agreement between the
Registrant and Marina Westhore Partners, LLC, successor in interest to
Schooner Drive Association, a California Limited Partnership.****
10.40 Option Agreement dated August 7, 1997 between the Registrant and Marina
Westshore Partners, LLC.****
10.41 ## Employment Agreement dated as of December 24, 1997 between Registrant
and John Simon.
10.42 ## Employment Agreement dated as of December 24, 1997 between Registrant
and Shawn O'Connor.
10.43 ## Retail Management Agreement dated as of December 31, 1997 between
Registrant and International Business Machines Corporation.
10.44 ## Business Partner Agreement dated December 31, 1997 between Registrant
and International Business Machines Corporation.
10.45 1997 Non-Officer Stock Plan.
10.46 Non-qualified Deferred Compensation Plan.
23.1 Consent of Deloitte & Touche LLP, Independent Auditors.
24.1 Power of Attorney (see page 44).
27.1 Financial Data Schedule.
- --------------------
* Incorporated by reference to Exhibit of same number of the Registrant's
Registration Statement on Form S-1 (Registration No. 33-63938).
** Incorporated by reference to Exhibit of same number filed with the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1994.
*** Incorporated by reference to Exhibit of same number filed with the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1996.
**** Incorporated by reference to Exhibit of same number filed with the
Registrant's Quarterly Report on Form 10-Q for the period ended
September 30, 1997.
# Confidential treatment has been granted with respect to portions of this
document.
## Confidential treatment has been requested with respect to portions of
this document.
43
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on this 5th day of March, 1998.
QUICKRESPONSE SERVICES, INC.
/s/ Shawn M. O'Connor
---------------------------------------
Shawn M. O'Connor, Executive Vice President,
Chief Operating Officer, Chief Financial
Officer, and Secretary
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints Lynn Hazlett, acting
alone, his or her true and lawful attorney-in-fact with authority to execute in
the name of each person, and to file with the Securities and Exchange
Commission, together with any exhibits thereto and other documents therewith,
any and all amendments to this Annual Report on Form 10-K for the fiscal year
ended December 31, 1997 necessary or advisable to enable QuickResponse Services,
Inc. to comply with the Securities Exchange Act of 1934, any rules, regulations
and requirements of the Securities and Exchange Commission in respect thereof,
which amendments may make such other changes in the report as the aforesaid
attorney-in-fact executing the same deems appropriate.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual
Report on Form 10-K for the fiscal year ended December 31, 1997 has been signed
by the following persons in the capacities indicated and on the dates indicated.
SIGNATURE DATE
/s/ H. Lynn Hazlett March 5, 1998
- --------------------------------------------------------
H. Lynn Hazlett, Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Peter R. Johnson March 5, 1998
- --------------------------------------------------------
Peter R. Johnson, Chairman of the Board of Directors
/s/ Tania Amochaev March 5, 1998
- --------------------------------------------------------
Tania Amochaev, Director
/s/ Steven D. Brooks March 5, 1998
- --------------------------------------------------------
Steven D. Brooks, Director
/s/ John P. Dougall March 5, 1998
- --------------------------------------------------------
John P. Dougall, Director
/s/ Philip Schlein March 5, 1998
- --------------------------------------------------------
Philip Schlein, Director
/s/ Garen K. Staglin March 5, 1998
- --------------------------------------------------------
Garen K. Staglin, Director
/s/ Garth Saloner March 5, 1998
- --------------------------------------------------------
Garth Saloner, Director
/s/ Shawn M. O'Connor March 5, 1998
- --------------------------------------------------------
Shawn M. O'Connor, Executive Vice President, Chief
Operating Officer, Chief Financial Officer, and
Secretary (Principal Financial and Accounting
Officer)
44
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
2.1 Agreement and Plan of Merger of QuickResponse Delaware, Inc. and
QuickResponse Services, Inc.
3.1 Certification of Incorporation of the Company.
3.2 Certificate of Correction of Certificate of Incorporation of the
Company.
3.3 Bylaws of the Company.
4.1 Specimen of Common Stock Certificate of the Registrant.*
10.1 1993 Stock Option/Stock Insurance Plan and forms of agreement
thereunder.*
10.2 Employee Stock Purchase Plan.*
10.3 Form of 1990 Nonqualified Stock Option Agreement.*
10.4 Employment Agreement dated April 22, 1992 between the Registrant and
Tania Amochaev.*
10.5 Employment Agreement dated March 1, 1993 between the Registrant and
Tania Amochaev.*
10.6 Form of Indemnification Agreement.*
10.7 Lease Agreement dated April 27, 1990 between the Registrant and
Schooner Drive Associates, a California Limited Partnership.*
10.8 Sublease dated May 1, 1993 between the Registrant and PRJ&, Inc.*
10.9 Preferred Stock Purchase and Debt Consolidation Agreement, dated as of
March 22, 1991 among the Registrant, Peter R. Johnson and International
Business Machines Corporation.*
10.10 First Amendment dated as of May 20, 1993 to the Preferred Stock
Purchase and Debt Consolidation Agreement among the Registrant, Peter
R. Johnson, and International Business Machines Corporation.*
10.11 Replacement Consolidated Convertible Notes dated March 22, 1991 issued
to International Business Machines Corporation.*
10.12 Security Agreement dated as of March 22, 1991 between the Registrant
and International Business Machines Corporation.*
10.13 Warrant dated March 22, 1991 issued to International Business Machines
Corporation.*
10.14 License Agreement dated March 22, 1991 between the Registrant and
International Business Machines Corporation.*
10.15 First Amendment dated as of May 20, 1993 to the License Agreement
between the Registrant and International Business Machines
Corporation.*
10.16 Maintenance and Support Agreement dated March 22, 1991 between the
Registrant and International Business Machines Corporation.*
10.17 First Amendment dated as of May 20, 1993 to the Maintenance and Support
Agreement between the Registrant and International Business Machines
Corporation.*
10.18 Marketing Agreement dated March 22, 1991 between the Registrant and
International Business Machines Corporation.*
10.19 Common Stock Purchase Agreement dated April 3, 1989 by and among
Registrant and Retail Shopping International (Aust) Pty. Ltd., Barclays
Investment Pty. Ltd., and Peter R. Johnson.*
10.20 Business Loan Agreement dated May 30, 1990 between Registrant and
Silicon Valley Bank as amended
45
<PAGE>
on June 3, 1993.*
10.22 Warrant dated July 16, 1992 issued to Steven D. Brooks.*
10.23 Warrant dated March 31, 1993 issued to Steven D. Brooks.*
10.24 # Volume Discount Agreement dated December 16, 1991 between the
Registrant and International Business Machines Corporation.*
10.25 Facilities and Cost Sharing Agreement dated May 1, 1993 between the
Registrant and PRJ&, Inc.*
10.26 Data Center Services Agreement dated April 30, 1993 between the
Registrant and PRJ&, Inc.*
10.27 Agreement and Plan of Merger dated May 20, 1993 among the Registrant,
Uniquest Incorporated, PRJ Acquisition Corp. and PRJ&, Inc.*
10.28 Consent and Release Agreement dated as of May 20, 1993 among the
Registrant, PRJ&, Inc., Peter R. Johnson, Uniquest Incorporated and
International Business Machines Corporation.*
10.29 Separation Agreement dated May 1, 1993 between the Registrant and PRJ&,
Inc.*
10.30 Assignment, Bill of Sale and Assumption Agreement dated as of May 20,
1993 between the Registrant and PRJ&, Inc.*
10.31 Escrow Agreement dated May 20, 1993 among the Registrant, Uniquest
Incorporated and Bank of America NT&SA.*
10.32 Pledge Agreement dated as of May 20, 1993 between the Registrant and
International Business Machines Corporation.*
10.33 Agreement dated as of July 13, 1993 between the Registrant and
International Business Machines Corporation.*
10.34 # Advantis Industry Remarketer Agreement dated as of January 6, 1994
between Advantis and the Registrant.**
10.35 Uniquest Forbearance Agreement between Uniquest Incorporated and the
Registrant.**
10.36 # International Remarketer Agreement dated as of November 11, 1996
between Advantis and the Registrant.***
10.37 # Employment Agreement dated as of February 6, 1997 between Registrant
and Lynn Hazlett.***
10.38 Reserved.
10.39 Fourth Amendment, dated August 7, 1997, to Lease Agreement between the
Registrant and Marina Westhore Partners, LLC, successor in interest to
Schooner Drive Association, a California Limited Partnership.****
10.40 Option Agreement dated August 7, 1997 between the Registrant and Marina
Westshore Partners, LLC.****
10.41 ## Employment Agreement dated as of December 24, 1997 between Registrant
and John Simon.
10.42 ## Employment Agreement dated as of December 24, 1997 between Registrant
and Shawn O'Connor.
10.43 ## Retail Management Agreement dated as of December 31, 1997 between
Registrant and International Business Machines Corporation.
10.44 ## Business Partner Agreement dated December 31, 1997 between Registrant
and International Business Machines Corporation.
10.45 1997 Non-Officer Stock Plan.
10.46 Non-qualified Deferred Compensation Plan.
46
<PAGE>
23.1 Consent of Deloitte & Touche LLP, Independent Auditors.
24.1 Power of Attorney (see page 44).
27.1 Financial Data Schedule.
- --------------------
* Incorporated by reference to Exhibit of same number of the Registrant's
Registration Statement on Form S-1 (Registration No. 33-63938).
** Incorporated by reference to Exhibit of same number filed with the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1994.
*** Incorporated by reference to Exhibit of same number filed with the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1996.
**** Incorporated by reference to Exhibit of same number filed with the
Registrant's Quarterly Report on Form 10-Q for the period ended
September 30, 1997.
# Confidential treatment has been granted with respect to portions of this
document.
## Confidential treatment has been requested with respect to portions of
this document.
47
<PAGE>
CERTIFICATE OF MERGER
OF
QUICKRESPONSE SERVICES, INC.,
a California corporation
INTO
QUICKRESPONSE SERVICES, INC.,
a Delaware corporation
(under Section 252 of the Delaware General Corporation Law)
It is hereby certified that:
FIRST: The name and state of incorporation of each of the
constituent business corporations participating in the merger herein certified
are as follows:
(i) QuickResponse Services, Inc., which is incorporated under the
laws of the State of California ("QuickResponse California") and
(ii) QuickResponse Services, Inc., which is incorporated under the
laws of the State of Delaware ("QuickResponse Delaware").
SECOND: An Agreement and Plan of Merger dated as of August 30,
1997 (the "Agreement of Merger") between QuickResponse California and
QuickResponse Delaware has been approved, adopted, certified, executed and
acknowledged by each of the aforesaid constituent corporations in accordance
with subsection (c) of Section 252 of the General Corporation Law of the
State of Delaware: to wit, by QuickResponse California in accordance with the
laws of the State of its incorporation and by QuickResponse Delaware in the
same manner as is provided in Section 251 of the General Corporation Law of
the State of Delaware.
THIRD: The name of the surviving corporation in the merger
herein certified is QuickResponse Delaware, which will, upon effectiveness of
the merger, continue its existence as said surviving corporation under the
name "QuickResponse Services, Inc." upon the effective date of said merger
pursuant to the provisions of the General Corporation Law of the State of
Delaware.
FOURTH: The Certificate of Incorporation of QuickResponse Delaware
shall continue to be the Certificate of Incorporation of said surviving
corporation without change or amendment until further amended in accordance
with the provisions of the General Corporation Law of the State of Delaware.
<PAGE>
FIFTH: The executed Agreement of Merger between the aforesaid
constituent corporations is on file at the principal place of business of the
aforesaid surviving corporation. The address of the principal place of
business of the surviving corporation is 1400 Marina Way South, Richmond,
California 94804.
SIXTH: A copy of the Agreement of Merger will be furnished by the
surviving corporation, on request and without cost, to any stockholder of
either constituent corporation.
SEVENTH: The authorized capital stock of QuickResponse California
consists of (a) 20,000,000 shares of Common Stock, par value $0.001 per
share, and (b) 10,000,000 shares of Preferred Stock, par value $0.001 per
share.
EIGHTH: Pursuant to the Certificate of Incorporation and the Bylaws
of QuickResponse Delaware, which shall continue to be the Certificate of
Incorporation and Bylaws of the surviving corporation, the directors of the
surviving corporation are classified into three classes, as nearly equal in
number as possible as determined by the board of directors, with (i) the term
of office of the first class to expire at the 1998 Annual Meeting of
Stockholders, (ii) the term of office of the second class to expire at the
1999 Annual Meeting of Stockholders and (iii) the term of office of the third
class to expire at the 2000 Annual Meeting of Stockholders. On and after the
effectiveness of the merger herein certified, the Board of Directors of the
surviving corporation shall consist of eight (8) members divided into three
classes, as follows:
Initial Class I Directors
-------------------------
John P. Dougall
Philip Schlein
Initial Class II Directors
--------------------------
Peter R. Johnson
Tania Amochaev
Steven D. Brooks
Initial Class III Directors
---------------------------
H. Lynn Hazlett
Garth Saloner
Garen K. Staglin
Such individuals shall serve as directors of the surviving
corporation upon and after the effectiveness until their successors shall
have been duly elected and qualified or until as otherwise provided by law,
the Certificate of Incorporation of the surviving corporation or the Bylaws
of the surviving corporation.
2.
<PAGE>
NINTH: The officers of QuickResponse Delaware immediately prior to
the effectiveness of the merger shall be the officers of the surviving
corporation upon and after the effectiveness of the merger until their
successors shall have been duly elected and qualified or until as otherwise
provided by law, the Certificate of Incorporation of the surviving
corporation or the Bylaws of the surviving corporation.
Dated: October 20, 1997
QUICKRESPONSE SERVICES, INC.,
a California corporation
By: /s/ H. Lynn Hazlett
-------------------------------------
Name: H. Lynn Hazlett
Title: PRESIDENT AND CHIEF EXECUTIVE
OFFICER
ATTEST:
/s/ Shawn M. O'Connor
- -----------------------------
Name: Shawn M. O'Connor
Title: SECRETARY
QUICKRESPONSE SERVICES, INC.,
a Delaware corporation
By: /s/ H. Lynn Hazlett
-------------------------------------
Name: H. Lynn Hazlett
Title: PRESIDENT AND CHIEF EXECUTIVE
OFFICER
ATTEST:
/s/ Shawn M. O'Connor
- -----------------------------
Name: Shawn M. O'Connor
Title: SECRETARY
3.
<PAGE>
AGREEMENT AND PLAN OF MERGER
OF QUICKRESPONSE SERVICES, INC.
A DELAWARE CORPORATION
AND
QUICKRESPONSE SERVICES, INC.
A CALIFORNIA CORPORATION
THIS AGREEMENT AND PLAN OF MERGER dated as of August 30, 1997 (the
"Agreement") is between QuickResponse Services, Inc., a Delaware corporation
("QuickResponse Delaware") and QuickResponse Services, Inc., a California
corporation ("QuickResponse California"). QuickResponse Delaware and
QuickResponse California are sometimes referred to herein as the
"Constituent Corporations."
RECITALS
A. QuickResponse Delaware is a corporation duly organized and
existing under the laws of the State of Delaware and has an authorized
capital of 30,000,000 shares, 20,000,000 of which are designated "Common
Stock", $0.001 par value, and 10,000,000 of which are designated "Preferred
Stock", $0.001 par value. As of August 30, 1997, 1,000 shares of Common Stock
were issued and outstanding, all of which were held by QuickResponse
California. No shares of Preferred Stock were outstanding.
B. QuickResponse California is a corporation duly organized and
existing under the laws of the State of California and has an authorized
capital of 30,000,000 shares, 20,000,000 of which are designated "Common
Stock", no par value, and 10,000,000 of which are designated "Preferred
Stock", $.01 par value. As of July 31, 1997, 8,494,945 shares of Common Stock
and no shares of Preferred Stock were outstanding.
C. The Board of Directors of QuickResponse California has
determined that, for the purpose of effecting the reincorporation of
QuickResponse California in the State of Delaware, it is advisable and in the
best interests of QuickResponse California that QuickResponse California
merge with and into QuickResponse Delaware upon the terms and conditions
herein provided.
D. The respective Boards of Directors of QuickResponse Delaware
and QuickResponse California have approved this Agreement and have directed
that this Agreement be submitted to a vote of their respective stockholders
and executed by the undersigned officers.
NOW, THEREFORE, in consideration of the mutual agreements and
covenants set forth herein, QuickResponse Delaware and QuickResponse
California hereby agree, subject to the terms and conditions hereinafter set
forth, as follows:
<PAGE>
I. MERGER
1.1 MERGER. In accordance with the provisions of this Agreement,
the Delaware General Corporation Law and the California General Corporation
Law, QuickResponse California shall be merged with and into QuickResponse
Delaware (the "Merger"), the separate existence of QuickResponse California
shall cease and QuickResponse Delaware shall be, and is herein sometimes
referred to as, the "Surviving Corporation," and the name of the Surviving
Corporation shall be QuickResponse Services, Inc.
1.2 FILING AND EFFECTIVENESS. The Merger shall become effective
when the following actions shall have been completed:
(a) This Agreement and the Merger shall have been adopted and
approved by the stockholders of each Constituent Corporation in accordance
with the requirements of the Delaware General Corporation Law and the
California General Corporation Law;
(b) All of the conditions precedent to the consummation of the
Merger specified in this Agreement shall have been satisfied or duly waived by
the party entitled to satisfaction thereof;
(c) An executed Certificate of Merger or an executed counterpart
of this Agreement meeting the requirements of the Delaware General
Corporation Law shall have been filed with the Secretary of State of the
State of Delaware; and
(d) An executed Certificate of Merger or an executed counterpart
of this Agreement meeting the requirements of the California General
Corporation Law shall have been filed with the Secretary of State of the
State of California.
The date and time when the Merger shall become effective, as
aforesaid, is herein called the "Effective Date of the Merger."
1.3 EFFECT OF THE MERGER. Upon the Effective Date of the Merger,
the separate existence of QuickResponse California shall cease and
QuickResponse Delaware, as the Surviving Corporation, (i) shall continue to
possess all of its assets, rights, powers and property as constituted
immediately prior to the Effective Date of the Merger (ii) shall be subject
to all actions previously taken by its and QuickResponse California's Board
of Directors, (iii) shall succeed, without other transfer, to all of the
assets, rights, powers and property of QuickResponse California in the manner
more fully set forth in Section 259 of the Delaware General Corporation Law,
(iv) shall continue to be subject to all of its debts, liabilities and
obligations as constituted immediately prior to the Effective Date of the
Merger and (v) shall succeed, without other transfer, to all of the debts,
liabilities and obligations of QuickResponse California in the same manner as
if QuickResponse Delaware
2.
<PAGE>
had itself incurred them, all as more fully provided under the applicable
provisions of the Delaware General Corporation Law and the California General
Corporation Law.
II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of QuickResponse Delaware as in effect immediately prior to the
Effective Date of the Merger shall continue in full force and effect as the
Certificate of Incorporation of the Surviving Corporation until duly amended
in accordance with the provisions thereof and applicable law.
2.2 BYLAWS. The Bylaws of QuickResponse Delaware as in effect
immediately prior to the Effective Date of the Merger shall continue in full
force and effect as the Bylaws of the Surviving Corporation until duly
amended in accordance with the provisions thereof and applicable law.
2.3 DIRECTORS AND OFFICERS. The directors and officers of
QuickResponse California immediately prior to the Effective Date of the
Merger shall be the directors and officers of the Surviving Corporation until
their successors shall have been duly elected and qualified or until as
otherwise provided by law, the Certificate of Incorporation of the Surviving
Corporation or the Bylaws of the Surviving Corporation.
III. MANNER OF CONVERSION OF STOCK
3.1 QUICKRESPONSE CALIFORNIA COMMON SHARES. Upon the Effective
Date of the Merger, each share of QuickResponse California Common Stock, no
par value, issued and outstanding immediately prior thereto shall by virtue
of the Merger and without any action by the Constituent Corporations, the
holder of such shares or any other person, be converted into and exchanged for
one fully paid and nonassessable share of Common Stock, $.001 par value, of
the Surviving Corporation.
3.2 QUICKRESPONSE CALIFORNIA OPTIONS, STOCK PURCHASE RIGHTS AND
CONVERTIBLE SECURITIES. Upon the Effective Date of the Merger, the Surviving
Corporation shall assume and continue the stock option plans and all other
employee benefit plans of QuickResponse California. Each outstanding and
unexercised option, or other right to purchase, or security convertible into,
QuickResponse California Common Stock shall become an option, or right to
purchase, or a security convertible into the Surviving Corporation's Common
Stock on the basis of one share of the Surviving Corporation's Common Stock
for each share of QuickResponse California Common Stock issuable pursuant to
any such option, or stock purchase right or convertible security, on the same
terms and conditions and at an exercise or conversion price per share equal
to the exercise or conversion price per share applicable to any such
QuickResponse California option, stock purchase right or other convertible
security at the Effective Date of the Merger. There are
3.
<PAGE>
no options, purchase rights for or securities convertible into Preferred
Stock of QuickResponse California.
A number of shares of the Surviving Corporation's Common Stock
shall be reserved for issuance upon the exercise of options, stock purchase
rights and convertible securities equal to the number of shares of
QuickResponse California Common Stock so reserved immediately prior to the
Effective Date of the Merger.
3.3 QUICKRESPONSE DELAWARE COMMON STOCK. Upon the Effective Date
of the Merger, each share of QuickResponse Delaware Common Stock, $.001 par
value, issued and outstanding immediately prior thereto shall, by virtue of
the Merger and without any action by QuickResponse Delaware, the holder of
such shares or any other person, be cancelled and returned to the status of
authorized but unissued shares.
3.4 EXCHANGE OF CERTIFICATES. After the Effective Date of the
Merger, each holder of an outstanding certificate representing shares of
QuickResponse California Common Stock may, at such stockholder's option,
surrender the same for cancellation to Chase Mellon Shareholder Services, as
exchange agent (the "Exchange Agent"), and each such holder shall be entitled
to receive in exchange therefor a certificate or certificates representing
the number of shares of the Surviving Corporation's Common Stock into which
the surrendered shares were converted as herein provided. Until so
surrendered, each outstanding certificate theretofore representing shares of
QuickResponse California Common Stock shall be deemed for all purposes to
represent the number of whole shares of the Surviving Corporation's Common
Stock into which such shares of QuickResponse California Common Stock were
converted in the Merger.
The registered owner on the books and records of the Surviving
Corporation or the Exchange Agent of any such outstanding certificate shall,
until such certificate shall have been surrendered for transfer or conversion
or otherwise accounted for to the Surviving Corporation or the Exchange
Agent, have and be entitled to exercise any voting and other rights with
respect to and to receive dividends and other distributions upon the shares
of Common Stock of the Surviving Corporation represented by such outstanding
certificate as provided above.
Each certificate representing Common Stock of the Surviving
Corporation so issued in the Merger shall bear the same legends, if any, with
respect to the restrictions on transferability as the certificates of
QuickResponse California so converted and given in exchange therefore, unless
otherwise determined by the Board of Directors of the Surviving Corporation
in compliance with applicable laws.
If any certificates for shares of QuickResponse Delaware stock is
to be issued in a name other than that in which the certificate surrendered
in exchange therefor is registered, it shall a be condition of issuance thereof
that the certificate so surrendered shall be properly endorsed and otherwise
in proper form for transfer, that such transfer otherwise
4.
<PAGE>
be proper and that the person requesting such transfer pay to the Exchange
Agent any transfer or other taxes payable by reason of issuance of such new
certificate in a name other than that of the registered holder of the
certificate surrendered or establish to the satisfaction of QuickResponse
Delaware that such tax has been paid or is not payable.
IV. GENERAL
4.1 COVENANTS OF QUICKRESPONSE DELAWARE. QuickResponse Delaware
covenants and agrees that it will, on or before the Effective Date of the
Merger:
(a) Qualify to do business as a foreign corporation in the State
of California and in connection therewith irrevocably appoint an agent for
service of process as required under the provisions of Section 2105 of the
California General Corporation Law.
(b) File any and all documents with the California Franchise Tax
Board necessary for the assumption by QuickResponse Delaware of all of the
franchise tax liabilities of QuickResponse California.
(c) Take such other actions as may be required by the California
General Corporation Law.
4.2 FURTHER ASSURANCES. From time to time, as and when required
by QuickResponse Delaware or by its successors or assigns, there shall be
executed and delivered on behalf of QuickResponse California such deeds and
other instruments, and there shall be taken or caused to be taken by it such
further and other actions as shall be appropriate or necessary in order to
vest or perfect in or conform of record or otherwise by QuickResponse
Delaware the title to and possession of all the property, interests, assets,
rights, privileges, immunities, powers, franchises and authority of
QuickResponse California and otherwise to carry out the purposes of this
Agreement, and the officers and directors of QuickResponse Delaware are fully
authorized in the name and on behalf of QuickResponse California or otherwise
to take any and all such action and to execute and deliver any and all such
deeds and other instruments.
4.3 ABANDONMENT. At any time before the Effective Date of the
Merger, this Agreement may be terminated and the Merger may be abandoned for
any reason whatsoever by the Board of Directors of either QuickResponse
California or of QuickResponse Delaware, or of both, notwithstanding the
approval of this Agreement by the shareholders of QuickResponse California or
by the sole stockholder of QuickResponse Delaware, or by both.
4.4 AMENDMENT. The Boards of Directors of the Constituent
Corporations may amend this Agreement at any time prior to the filing of this
Agreement or certificate in lieu thereof with the Secretary of State of the
State of Delaware, provided that an
5.
<PAGE>
amendment made subsequent to the adoption of this Agreement by the
stockholders of either Constituent Corporation shall not: (1) alter or change
the amount or kind of shares, securities, cash, property and/or rights to be
received in exchange for or on conversion of all or any of the shares of any
class or series thereof of such Constituent Corporation, (2) alter or change
any term of the Certificate of Incorporation of the Surviving Corporation to
be effected by the Merger or (3) alter or change any of the terms and
conditions of this Agreement if such alteration or change would adversely
affect the holders of any class or series of capital stock of either
Constituent Corporation.
4.5 REGISTERED OFFICE. The registered office of the Surviving
Corporation in the State of Delaware is located at 32 Lockerman Square, Suite
L-100, City of Dover, County of Kent, Delaware 19901, and The Prentice-Hall
Corporation System, Inc., is the registered agent of the Surviving
Corporation at such address.
4.6 AGREEMENT. Executed copies of this Agreement will be on file
at the principal place of business of the Surviving Corporation at 1400
Marina Way South, Richmond, California 94804 and copies thereof will be
furnished to any stockholder of either Constituent Corporation, upon request
and without cost.
4.7 GOVERNING LAW. This Agreement shall in all respects be
construed, interpreted and enforced in accordance with and governed by the
laws of the State of Delaware and, so far as applicable, the merger
provisions of the California General Corporation Law.
4.8 COUNTERPARTS. In order to facilitate the filing and recording
of this Agreement, the same may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which together
shall constitute one and the same instrument.
6.
<PAGE>
IN WITNESS WHEREOF, this Agreement having first been approved by
the resolutions of the Board of Directors of QuickResponse Delaware and
QuickResponse California, is hereby executed on behalf of each of such two
corporations and attested by their respective officers thereunto duly
authorized.
QUICKRESPONSE SERVICES, INC.,
a Delaware corporation
By: /s/ H. Lynn Hazlett
-----------------------------------------
H. Lynn Hazlett, President and Chief
Executive Officer
ATTEST:
/s/ Shawn M. O'Connor
- ------------------------------
Shawn M. O'Connor, Secretary
QUICKRESPONSE SERVICES, INC.,
a California corporation
By: /s/ H. Lynn Hazlett
-----------------------------------------
H. Lynn Hazlett, President and Chief
Executive Officer
ATTEST:
/s/ Shawn M. O'Connor
- ------------------------------
Shawn M. O'Connor, Secretary
<PAGE>
CERTIFICATE OF SECRETARY
QUICKRESPONSE SERVICES, INC., A DELAWARE CORPORATION
The undersigned, Shawn M. O'Connor, Secretary of QuickResponse
Delaware, Inc., a corporation organized and existing under the laws of the
State of Delaware, hereby certifies, as such Secretary, that the Agreement
and Plan of Merger to which this Certificate is attached, after having been
first duly signed on behalf of the said corporation and having been signed on
behalf of QuickResponse Services, Inc., a corporation of the State of
California, was duly adopted by the sole stockholder of the corporation,
which Agreement and Plan of Merger was thereby adopted as the act of the
stockholders of said QuickResponse Delaware, Inc., a Delaware corporation,
and constitutes the duly adopted agreement and act of said corporation.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
name this 30th day of August, 1997.
/s/ Shawn M. O'Connor
--------------------------------
Shawn M. O'Connor, Secretary
<PAGE>
CERTIFICATE OF SECRETARY
QUICKRESPONSE SERVICES, INC., A CALIFORNIA CORPORATION
The undersigned, Shawn M. O'Connor, hereby certifies that he is the
duly elected and acting Secretary of QuickResponse Services, Inc., a
California corporation ("QuickResponse California"), and hereby certifies
that the attached Agreement and Plan of Merger between QuickResponse Delaware,
Inc., a Delaware corporation, and QuickResponse California was duly approved
by the shareholders of QuickResponse California on May 30, 1997.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
name this 30th day of August, 1997.
/s/ Shawn M. O'Connor
--------------------------------
Shawn M. O'Connor, Secretary
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "QUICKRESPONSE DELAWARE, INC.", FILED IN THIS OFFICE ON THE
TWENTY-THIRD DAY OF JUNE, A.D. 1997, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
[SEAL]
/s/ Edward J. Freel
[SEAL] -----------------------------------
EDWARD J. FREEL, SECRETARY OF STATE
AUTHENTICATION: 8527432
DATE: 06-24-97
<PAGE>
CERTIFICATE OF INCORPORATION OF
QUICKRESPONSE DELAWARE, INC.
FIRST: The name of this corporation is QuickResponse Delaware, Inc.
SECOND: The address of the registered office of the corporation in the State of
Delaware is 1013 Centre Road, Wilmington, New Castle, Delaware 19805, and the
name of its registered agent at that address is The Corporation Service Company.
THIRD: The name and mailing address of the incorporator of the
corporation is:
Andrew Baw
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303
FOURTH: The purpose of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law Of Delaware.
FIFTH: The corporation is authorized to issue 30,000,000 shares,
20,000,000 of which are designated "Common Stock," $0.001 par value, and
10,000,000 of which are designated "Preferred Stock," $0.001 par value. The
Board of Directors is hereby authorized to fix or alter the rights, preferences,
privileges and restrictions granted to or imposed upon any series of Preferred
Stock, and the number of shares constituting any such series and the designation
thereof, or of any of them. The Board of Directors is also authorized to
increase or decrease the number of shares of any series, prior or subsequent to
the issue of that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be so decreased,
the shares constituting such decrease shall resume the status which they had
prior to the adoption of the resolution originally fixing the number of shares
of such series.
SIXTH: In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized to make, repeal,
alter, amend and rescind from time to time any or all of the bylaws of the
corporation; provided, however, that any bylaw amendment adopted by the Board of
Directors increasing or reducing the authorized number of directors or amending,
repealing, altering or rescinding Article 3,
<PAGE>
Section 3.2 of the Bylaws of the corporation shall require a resolution adopted
by the affirmative vote of not less than sixty-six and two-thirds percent
(66-2/3%) of the directors. Any Bylaw amendment adopted by the stockholders
increasing or reducing the authorized number of directors or amending,
repealing, altering or rescinding Article 3, Section 3.2 of the Bylaws of the
corporation shall require the approval of not less than sixty-six and two-thirds
percent (66-2/3%) of the total voting power of all outstanding shares of stock
of the corporation entitled to vote thereon.
SEVENTH: The number of directors of the corporation shall be fixed
from time to time by a Bylaw or amendment thereof duly adopted by the Board of
Directors.
The Board of Directors shall be classified with respect to the time
for which they severally hold office into three classes designated Class I,
Class II and Class III, as nearly equal in number as possible. Each director
shall serve for a term ending on the date of the third annual meeting of
stockholders following the annual meeting at which the director was elected;
provided, however, that the directors first elected to Class I shall serve for a
term ending on the annual meeting next following the end of fiscal year 1997,
the directors first elected to Class II shall serve for a term ending on the
annual meeting next following the end of fiscal year 1998 and the directors
first elected to Class III shall serve for a term ending on the annual meeting
next following the end of fiscal year 1999. Notwithstanding the foregoing, each
director shall serve until his successor shall have been duly elected and
qualified, unless he shall resign, become disqualified, disabled or shall
otherwise be removed.
At each annual election, directors chosen to succeed those whose terms
then expire shall be of the same class as the directors they succeed, unless by
reason of any intervening changes in the authorized number of directors, the
Board shall designate one or more directorships whose term then expires as
directorships of another class in order more nearly to achieve equality of
number of directors among the classes.
Notwithstanding the rule that the three classes shall be as nearly
equal in number of directors as possible, in the event of any change in the
authorized number of directors, each director then continuing to serve as such
shall nevertheless continue as a director of the class of which he is a member
until the expiration of his current term, or his prior death, resignation or
removal. If any newly created directorship may, consistently with the rule that
the three classes shall be as nearly equal in number of directors as possible,
be allocated to any class, the Board shall allocate it to that of the available
class whose term of office is due to expire at the earliest date following such
allocation.
EIGHTH: No stockholder will be permitted to cumulate votes in any
election of directors.
NINTH: Special meetings of the stockholders of this corporation for
any purpose or purposes may be called at any time upon the request in writing of
a majority of
2.
<PAGE>
the Board of Directors or by the Chairman of the Board or the President of the
corporation. Any such request shall state the purpose or purposes of the
proposed meeting. As soon as reasonably practicable after receipt of such a
request, written notice of such meeting, stating the place, date (which shall be
sixty (60) days from the date of the notice) and hour of the meeting, shall be
given to each stockholder entitled to vote at such meeting. Special meetings
may not be called other than as provided in this ARTICLE NINTH.
TENTH: Stockholders of the corporation shall take action by meetings
held pursuant to this Certificate of Incorporation and the Bylaws. Stockholders
may not take any action by written consent in lieu of a meeting. Meetings of
stockholders may be held within or outside of the State of Delaware, as the
Bylaws may provide. The books of the corporation may be kept (subject to any
provision contained in the statute) outside the State of Delaware at such place
or places as may be designated from time to time by the Board of Directors or in
the Bylaws of the corporation.
ELEVENTH: The corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred on
stockholders herein are granted subject to this reservation. Notwithstanding
the foregoing, the provisions set forth in ARTICLES SIXTH, SEVENTH, TENTH,
TWELFTH and this ARTICLE ELEVENTH may not be repealed or amended in any respect
unless such repeal or amendment is approved by the affirmative vote of not less
than sixty-six and two-thirds percent (66-2/3%) of the total voting power of all
outstanding shares of stock of this corporation entitled to vote thereon, unless
such amendment or repeal has been previously approved by the vote of not less
than sixty-six and two-thirds percent (66-2/3%) of the members of the Board of
Directors, in which case those Articles of this Certificate of Incorporation may
be so amended or repealed by a vote of not less than a majority of the total
voting power of all outstanding shares of stock of the corporation entitled to
vote thereon.
TWELFTH: A director of the corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived any
improper personal benefit. If the Delaware General Corporation Law is hereafter
amended to authorize, with the approval of a corporation's stockholder, further
reductions in the liability of the directors of a corporation for breach of
fiduciary duty, then a director of the corporation shall not be liable for any
such breach to the fullest extent permitted by the Delaware General Corporation
Law as so amended. Any repeal or modification of the foregoing provisions of
this ARTICLE TWELFTH by the stockholders of the corporation shall not adversely
affect any right or protection of a director of the corporation existing at the
time of such repeal or modification.
3.
<PAGE>
THIRTEENTH: Elections of directors need not be by written ballot
unless the Bylaws of the corporation shall so provide.
THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation to do business both within and without the
State of Delaware, and in pursuance of the Delaware General Corporation Law,
does hereby make this Certificate, hereby declaring and certifying that this is
my act and deed and the facts herein stated are true, and accordingly have
hereunto set my hand this 19th day of June 1997.
/s/ Andrew Baw
---------------------------
Andrew Baw
4.
<PAGE>
PAGE 1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF CORRECTED CERTIFICATE OF
INCORPORATION OF "QUICKRESPONSE DELAWARE, INC.", CHANGING ITS NAME FROM
"QUICKRESPONSE DELAWARE, INC." TO "QUICKRESPONSE SERVICES, INC.", FILED IN THIS
OFFICE ON THE TWENTY-FIRST DAY OF OCTOBER, A.D. 1997, AT 9:01 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ Edward J. Freel
[SEAL] -------------------------------------
EDWARD J. FREEL, SECRETARY OF STATE
2765731 8101 AUTHENTICATION: 8714410
971354233 DATE: 10-21-97
<PAGE>
CERTIFICATE OF CORRECTION
TO THE
CERTIFICATE OF INCORPORATION
OF QUICKRESPONSE DELAWARE, INC.
FILED IN THE OFFICE OF THE SECRETARY OF STATE
OF DELAWARE ON JUNE 23, 1997
(Pursuant to Section 103(f)
of the Delaware General Corporation Law)
QuickResponse Delaware, Inc. (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware (the "General Corporation Law") does hereby certify that:
FIRST: That the Corporation was originally incorporated on June 23,
1997, under the name QuickResponse Delaware, Inc. pursuant to the General
Corporation Law; and
SECOND: That the Certificate of Incorporation was filed with the
Secretary of State of Delaware on June 23, 1997 and that said Certificate
requires correction as permitted by Section 103(f) of the General Corporation
Law of the State of Delaware.
THIRD: The inaccuracy or defect of said Certificate exists in the
First Article which incorrectly states that the name of the corporation is
QuickResponse Delaware, Inc.
FOURTH: The First Article in its corrected form is hereby set forth
as follows:
"The name of this corporation is QuickResponse Services, Inc."
IN WITNESS WHEREOF, this Certificate of Correction to the Certificate
of Incorporation of the Corporation has been executed by the President and
Secretary of the Corporation this 20th day of October, 1997.
QUICKRESPONSE DELAWARE, INC.
By: /s/ H. Lynn Hazlett
-------------------------------------
H. Lynn Hazlett, President
and Chief Executive Officer
Attest: /s/ Shawn M. O'Connor
------------------------------
Shawn M. O'Connor, Secretary
<PAGE>
BYLAWS
OF
QUICKRESPONSE DELAWARE, INC.
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held at such time and place either within or without the
State of Delaware as shall be designated from time to time by the Board of
Directors and stated in the notice of the meeting. Meetings of stockholders for
any other purpose may be held at such time and place, within or without the
State of Delaware, as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year
1997, shall be held at such date and time as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting, at which
they shall elect by a plurality vote a Board of Directors, and transact such
other business as may properly be brought before the meeting.
<PAGE>
Section 3. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each stockholder entitled to vote
at such meeting not fewer than ten (10) nor more than sixty (60) days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten (10) days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof and may be inspected by any stockholder who is
present.
Section 5. The stockholders of the corporation may not call special
meetings of the stockholders for any purpose or purposes.
Section 6. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting
2.
<PAGE>
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented any business may be transacted which
might have been transacted at the meeting as originally notified. If the
adjournment is for more than thirty (30) days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
Section 7. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power, present in person or
represented by proxy, shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation a different vote is required, in which case
such express provision shall govern and control the decision of such question.
Section 8. Unless otherwise provided in the certificate of
incorporation each stockholder shall at every meeting of the stockholders be
entitled to one (1) vote in person or by proxy for each share of the capital
stock having voting power held by such stockholder, but no proxy shall be voted
on after three (3) years from its date, unless the proxy provides for a longer
period.
Section 9. Nominations for election to the Board of Directors must be
made by the Board of Directors or by any stockholder of any outstanding class of
capital stock of the corporation entitled to vote for the election of directors.
Nominations, other than those made by the Board of Directors of the corporation,
must be preceded by notification in writing received by the Secretary of the
corporation not less than twenty (20) days nor more than
3.
<PAGE>
sixty (60) days prior to any meeting of stockholders called for the election of
directors. Such notification shall contain the written consent of each proposed
nominee to serve as a director if so elected and the following information as to
each proposed nominee and as to each person, acting alone or in conjunction with
one or more other persons as a partnership, limited partnership, syndicate or
other group, who participates or is expected to participate in making such
nomination or in organizing, directing or financing such nomination or
solicitation of proxies to vote for the nominee:
(a) the name, age, residence, address, and business address of
each proposed nominee and of each such person;
(b) the principal occupation or employment, the name, type of
business and address of the corporation or other organization in which such
employment is carried on of each proposed nominee and of each such person;
(c) the amount of stock of the corporation owned beneficially,
either directly or indirectly, by each proposed nominee and each such person;
and
(d) a description of any arrangement or understanding of each
proposed nominee and of each such person with each other or any other person
regarding future employment or any future transaction to which the corporation
will or may be a party.
The presiding officer of the meeting shall have the authority to
determine and declare to the meeting that a nomination not preceded by
notification made in accordance with the foregoing procedure shall be
disregarded.
Section 10. At any meeting of the stockholders, only such business
shall be conducted as shall have been brought before the meeting (a) pursuant to
the corporation's
4.
<PAGE>
notice of meeting, (b) by or at the direction of the Board of Directors or
(c) by any stockholder of the corporation who is a stockholder of record at the
time of giving of the notice provided for in this Bylaw, who shall be entitled
to vote at such meeting and who complies with the notice procedures set forth in
this Bylaw.
For business to be properly brought before any meeting by a
stockholder pursuant to clause (c) of this Section 12, the stockholder must have
given timely notice thereof in writing to the Secretary of the corporation. To
be timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the corporation not less than twenty (20)
days nor more than sixty (60) days prior to the date of the meeting. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the meeting (a) a brief description of the
business desired to be brought before the meeting and the reasons for conducting
such business at the meeting, (b) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, and the name
and address of the beneficial owner, if any, on whose behalf the proposal is
made, (c) the class and number of shares of the corporation which are owned
beneficially and of record by such stockholder of record and by the beneficial
owner, if any, on whose behalf of the proposal is made and (d) any material
interest of such stockholder of record and the beneficial owner, if any, on
whose behalf the proposal is made in such business.
Notwithstanding anything in these Bylaws to the contrary, no business
shall be conducted at a meeting except in accordance with the procedures set
forth in this Section 12. The presiding officer of the meeting shall, if the
facts warrant, determine and declare to the
5.
<PAGE>
meeting that business was not properly brought before the meeting and in
accordance with the procedures prescribed by this Section 12, and if such person
should so determine, such person shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted.
Notwithstanding the foregoing provisions of this Section 12, a stockholder shall
also comply with all applicable requirements of the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder with respect to the
matters set forth in this Section 12.
Section 11. The stockholders of the Corporation may not take action
by written consent without a meeting but must take any such actions at a duly
called annual or special meeting.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
Board of Directors shall be determined by resolution of the Board of Directors
or by the stockholders at the annual meeting of the stockholders, except as
provided in Section 2 of this Article, and each director elected shall hold
office until his successor is elected and qualified. Directors need not be
stockholders.
Section 2. Vacancies and new created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and
6.
<PAGE>
shall qualify, unless sooner displaced. If there are no directors in office,
then an election of directors may be held in the manner provided by statute.
If, at the time of filling any vacancy or any newly created directorship, the
directors then in office shall constitute less than a majority of the whole
Board of Directors (as constituted immediately prior to any such increase), the
Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten percent (10%) of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships or
to replace the directors chosen by the directors then in office.
Section 3. The business of the corporation shall be managed by or
under the direction of its Board of Directors which may exercise all such powers
of the corporation and do all such lawful acts and things as are not by statute
or by the certificate of incorporation or by these bylaws directed or required
to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting, and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly
7.
<PAGE>
elected Board of Directors, or in the event such meeting is not held at the time
and place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors or as shall be specified in a written
waiver signed by all of the directors.
Section 6. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the Board of Directors.
Section 7. Special meetings of the Board of Directors may be called
by the president on two (2) days' notice to each director by mail or forty-eight
(48) hours notice to each director either personally or by telegram; special
meetings shall be called by the president or secretary in like manner and on
like notice on the written request of two directors unless the Board of
Directors consists of only one director, in which case special meetings shall be
called by the president or secretary in like manner and on like notice on the
written request of the sole director.
Section 8. At all meetings of the Board of Directors a majority of
the directors shall constitute a quorum for the transaction of business, and the
act of a majority of the directors present at any meeting at which there is a
quorum shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
8.
<PAGE>
Section 9. Unless otherwise restricted by the certificate of
incorporation of these bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the Board of Directors or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board of Directors or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a
majority of the whole Board of Directors, designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee.
In the absence of disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he
9.
<PAGE>
or they constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any such absent or
disqualified member.
Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
corporation and may authorize the seal of the corporation to be affixed to all
papers which may require it, but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution or amending the bylaws of the corporation; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors.
Section 12. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of
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the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or bylaw, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these bylaws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
bylaws, a waiver thereof in
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writing, signed by the person or persons entitled to said notice, whether before
or after the time stated therein, shall be deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
Board of Directors and shall be a president, treasurer and a secretary. The
Board of Directors may elect from among its members a Chairman of the Board and
a Vice Chairman of the Board. The Board of Directors may also choose one or
more vice-presidents, assistant secretaries and assistant treasurers. Any
number of offices may be held by the same person, unless the certificate of
incorporation or these bylaws otherwise provide.
Section 2. The Board of Directors at its first meeting after each
annual meeting of stockholders shall choose a president, a treasurer and a
secretary and may choose vice presidents.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board of Directors.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by
the Board of Directors
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may be removed at any time by the affirmative vote of a majority of the Board of
Directors. Any vacancy occurring in any office of the corporation shall be
filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if any, shall preside at all
meetings of the Board of Directors and of the stockholders at which he shall be
present. He shall have and may exercise such powers as are, from time to time,
assigned to him by the Board of Directors and as may be provided by law.
Section 7. In the absence of the Chairman of the Board, the Vice
Chairman of the Board, if any, shall preside at all meetings of the Board of
Directors and of the stockholders at which he shall be present. He shall have
and may exercise such powers as are, from time to time, assigned to him by the
Board of Directors and as may be provided by law.
THE PRESIDENT AND VICE-PRESIDENTS
Section 8. The president shall be the chief executive officer of the
corporation; and in the absence of the Chairman and Vice Chairman of the Board,
he shall preside at all meetings of the stockholders and the Board of Directors;
he shall have general and active management of the business of the corporation
and shall see that all orders and resolutions of the Board of Directors are
carried into effect.
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Section 9. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation.
Section 10. In the absence of the president or in the event of his
inability or refusal to act, the vice-president, if any, (or in the event there
be more than one (1) vice-president, the vice-presidents in the order designated
by the directors, or in the absence of any designation, then in the order of
their election) shall perform the duties of the president, and when so acting,
shall have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 11. The secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors and shall
perform such other duties as may be prescribed by the Board of Directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to
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any instrument requiring it and when so affixed, it may be attested by his
signature or by the signature of such assistant secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the corporation and to attest the affixing by his signature.
Section 12. The assistant secretary, or if there be more than one
(1), the assistant secretaries in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the secretary and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 13. The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors.
Section 14. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 15. If required by the Board of Directors, he shall give the
corporation a bond (which shall be renewed every six (6) years) in such sum and
with such surety or
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sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of his office and for the restoration to the
corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 16. The assistant treasurer, or if there shall be more than
one (1), the assistant treasurers in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election) shall, in the absence of the treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
treasurer and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by, the
chairman or vice- chairman of the Board of Directors, or the president or a
vice-president and the treasurer or an assistant treasurer, or the secretary or
an assistant secretary of the corporation, certifying the number of shares owned
by him in the corporation.
Certificates may be issued for partly paid shares and in such case
upon the face or back of the certificates issued to represent any such partly
paid shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating,
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optional or other special rights of each class of stock or series thereof and
the qualification, limitations or restrictions of such preferences and/or rights
shall be set forth in full or summarized on the face or back of the certificate
which the corporation shall issue to represent such class or series of stock,
provided that, except as otherwise provided in section 202 of the General
Corporation Law of Delaware, in lieu of the foregoing requirements, there may be
set forth on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
Section 2. Any of or all the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or
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destroyed certificate or certificates, or his legal representative, to advertise
the same in such manner as it shall require and/or to give the corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholder or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any other action.
A determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
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REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property or in shares of the capital
stock, subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purposes as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
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CHECKS
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
SEAL
Section 5. The Board of Directors may adopt a corporate seal having
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal, Delaware." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 6. The corporation shall, to the fullest extent authorized
under the laws of the State of Delaware, as those laws may be amended and
supplemented from time to time, indemnify any director made, or threatened to be
made, a party to an action or proceeding, whether criminal, civil,
administrative or investigative, by reason of being a director of the
corporation or a predecessor corporation or, at the corporation's request, a
director or officer of another corporation, provided, however, that the
corporation shall indemnify any such
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agent in connection with a proceeding initiated by such agent only if such
proceeding was authorized by the Board of Directors of the corporation. The
indemnification provided for in this Section 6 shall: (i) not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any bylaw, agreement or vote of stockholders or disinterested directors or
otherwise, both as to action in their official capacities and as to action in
another capacity while holding such office, (ii) continue as to a person who has
ceased to be a director and (iii) inure to the benefit of the heirs, executors
and administrators of such a person. The corporation's obligation to provide
indemnification under this Section 6 shall be offset to the extent of any other
source of indemnification or any otherwise applicable insurance coverage under a
policy maintained by the corporation or any other person.
Expenses incurred by a director of the corporation in defending a
civil or criminal action, suit or proceeding by reason of the fact that he is or
was a director of the corporation (or was serving at the corporation's request
as a director or officer of another corporation) shall be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the corporation as authorized by relevant sections of the
General Corporation Law of Delaware. Notwithstanding the foregoing, the
corporation shall not be required to advance such expenses to an agent who is a
party to an action, suit or proceeding brought by the corporation and approved
by a majority of the Board of Directors of the corporation which alleges willful
misappropriation of corporate assets by such agent, disclosure of confidential
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information in violation of such agent's fiduciary or contractual obligations to
the corporation or any other willful and deliberate breach in bad faith of such
agent's duty to the corporation or its stockholders.
The foregoing provisions of this Section 6 shall be deemed to be a
contract between the corporation and each director who serves in such capacity
at any time while this bylaw is in effect, and any repeal or modification
thereof shall not affect any rights or obligations then existing with respect to
any state of facts then or theretofore existing or any action, suit or
proceeding theretofore or thereafter brought based in whole or in part upon any
such state of facts.
The Board of Directors in its discretion shall have power on behalf of
the corporation to indemnify any person, other than a director, made a party to
any action, suit or proceeding by reason of the fact that he, his testator or
intestate, is or was an officer or employee of the corporation.
To assure indemnification under this Section 6 of all directors,
officers and employees who are determined by the corporation or otherwise to be
or to have been "fiduciaries" of any employee benefit plan of the corporation
which may exist from time to time, Section 145 of the General Corporation Law of
Delaware shall, for the purposes of this Section 6, be interpreted as follows:
an "other enterprise" shall be deemed to include such an employee benefit plan,
including without limitation, any plan of the corporation which is governed by
the Act of Congress entitled "Employee Retirement Income Security Act of 1974,"
as amended from time to time; the corporation shall be deemed to have requested
a person to serve an employee benefit plan where the performance by such person
of his duties
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to the corporation also imposes duties on, or otherwise involves services by,
such person to the plan or participants or beneficiaries of the plan; excise
taxes assessed on a person with respect to an employee benefit plan pursuant to
such Act of Congress shall be deemed "fines."
ARTICLE VIII
AMENDMENTS
Section 1. Subject to the Certificate of Incorporation of the
corporation, these bylaws may be altered, amended or repealed or new bylaws may
be adopted by the stockholders or by the Board of Directors, when such power is
conferred upon the Board of Directors by the certificate of incorporation at any
regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or of the Board of Directors if notice of
such alteration, amendment, repeal or adoption of new bylaws be contained in the
notice of such special meeting. If the power to adopt, amend or repeal bylaws
is conferred upon the Board of Directors by the certificate or incorporation, it
shall not divest or limit the power of the stockholders to adopt, amend or
repeal bylaws.
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[LOGO] [LETTERHEAD]
December 24, 1997
John S. Simon
10 Tenaya Lane
Novato, CA 94947
Dear John,
Following our recent discussions it is with pleasure that I confirm our
verbal offer for continued employment with QRS Corporation. The following
summarizes our offer:
REPORTING TO: The Chairman and the Board of Directors
POSITION: President and Member of the Board
As the President, you will have an overall corporate perspective and
responsibility. You will have responsibility for the following functions:
- - Strategy and Planning
- - Business Development
- - Sales Marketing
KEY OBJECTIVES:
I. ACHIEVE REVENUE GROWTH AND GROSS MARGIN COMPETITIVENESS WHILE EXCEEDING
CUSTOMER EXPECTATIONS FOR SERVICE QUALITY.
1. Establish and maintain CAGR of *
2. Ensure COGS moves toward * of revenue.
3. Meet or exceed 75% customer satisfaction as evidenced by
comprehensive attitude surveys
II. BE PERCEIVED AS THE PREEMINENT GLOBAL DEMAND CHAIN SOLUTION PROVIDER TO
RETAILERS AND THEIR SUPPLIERS.
III. EXPAND OUR SERVICE OFFERINGS, MARKET SEGMENTS AND GEOGRAPHICAL COVERAGE.
IV. BE RECOGNIZED AS "THE" PLACE TO WORK IN THE ELECTRONIC COMMERCE INDUSTRY.
* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed
separately with the Commission pursuant to Rule 24b-2.
<PAGE>
KEY RESULT AREAS:
A. Achieve planned Company revenue, margin, profit and cash flow.
B. Maintain a high quality, efficient and motivated staff.
C. Communicate and foster the Company's core values.
D. Ensure quality in the Company's products and services.
E. Successfully develop and implement new Electronic Commerce products.
F. Evolve QRS product architecture and implement Data Warehouse.
G. Expand Professional Services to facilitate product implementation and
market penetration.
H. Provide efficient internal systems and tools that support objectives and
leverage staff.
I. Implement complimentary acquisitions and alliances that increase growth.
J. Ensure the maintenance of adequate facilities and plan for future needs.
ANNUAL COMPENSATION:
With regard to 1998 objectives and compensation, the following points have
been agreed between us:
Key elements of our agreement that impact 1998 compensation are as follows:
(i) Your annual BASE COMPENSATION will be $220,000 or $18,333 per month.
(ii) In addition, you will receive an ANNUAL INCENTIVE COMPENSATION of
$140,000 that will be administered by me and reviewed by the
Compensation Committee.
Therefore your annual total target compensation (base compensation
plus incentive at 100%) shall not be less than $360,000.
Specific incentive targets for 1998 will be (as a percentage of the
1997 annual incentive compensation of $140,000) as follows:
a) Achieve Total Revenue of *. 30%
Award will be paid pro-rata within range of 80% to 100% of
goal with the full 30% payable at 100% of goal. Below 80%,
the award for this particular target will be zero. Payout
rate doubles on revenues over *.
* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed
separately with the Commission pursuant to Rule 24b-2.
<PAGE>
b) Achieve Operating Profit of * 30%
Award will be paid pro-rate within range of 80% to 100% of
goal with the full 30% payable at 100% of goal. Above 110%
achievement an additional $20,000 will be awarded together
with continuing proportional and incremental incentive.
Below 80% the award for this particular target will be zero.
c) Implementation/adhere to the company's mission, core values 10%
and management process.
d) Meet or exceed Marketing objectives (refer 1998 plan). 15%
e) Meet or exceed Sales objectives (refer 1998 plan). 15%
(iii) Your position will be reviewed in July and it is our current
objective, depending primarily on your performance, to move forward
with a promotion to CEO at that time.
(iv) Your compensation and annual incentives will be reviewed in the first
quarter of each year (unless there is a change in objectives,
location, etc. in which case it will be reviewed at that time), to
ensure that it continues to be equitable, appropriate to the location
and provide appropriate incentive and support to the agreed objectives.
LONG TERM INCENTIVE:
Non-qualified options to purchase an additional 50,000 shares of common stock
in QRS have been granted to you. These options will have priced on the date
of this letter and will vest over 4 years, in accordance with the defined
plan, copies of which are available for your review.
In addition, non-qualified options to purchase another 50,000 shares of
common stock in QRS will be granted to you and will be considered to be fully
vested when the company establishes and maintains compound annual growth of
* for a period of two years.
This position is for no set period or term and just as you have the right to
resign your position, at any time, for any reason, QRS reserves the right to
terminate your employment, at any time, with or without cause, with or
without notice.
However, if you are terminated, other than for cause, you will be paid the
base compensation and benefits for a further twelve months, from the date of
termination.
* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed
separately with the Commission pursuant to Rule 24b-2.
<PAGE>
For the purposes of this agreement, termination "for cause" shall mean: (1)
the willful failure by you to substantially perform your material duties
after a written demand for substantial performance is delivered to you by the
company which specifically identifies the manner in which you have not
substantially performed your duties; (2) the failure in a material respect by
you to follow reasonable policies or directives, established by the company,
after written notice to you that you were not following such policies or
directives, or; (3) your willful misconduct having material detrimental
effect on the company.
Alternatively, if there is a change of control of the company (as defined in
the stock option plan), and within 24 months of such change in control, there
is a material reduction in base compensation plus short term incentive
target, (for this purpose, 15% will be deemed a material reductions), or a
material reduction in your responsibility, and as a result you choose to
resign, you will be paid the base compensation plus short term incentive
target for a further 12 months from the time of such reduction, and any
unvested QRS options that you hold will vest in full, at such time, subject
to the terms and conditions of your stock option grant.
Shawn, I look forward to working with you in your new position.
Sincerely,
/s/ Peter R. Johnson
Peter R. Johnson
Chairman
Your signature below indicates that you have reviewed and accept this offer
of employment with QRS Corporation. Please sign this letter in the space
provided and return to me by the close of business, January 15, 1998.
/s/ John S. Simon
- -----------------------------------------
John S. Simon
<PAGE>
[LOGO] [LETTERHEAD]
December 24, 1997
Shawn M. O'Connor
1010 Dunhill Court
Danville, CA 94506
Dear Shawn,
Following our recent discussions it is with pleasure that I confirm our
verbal offer for continued employment with QRS Corporation. The following
summarizes our offer:
REPORTING TO: The CEO, the Chairman and the Board of Directors
POSITION: EVP, Chief Operating Officer and Company Secretary
As the Chief Operating Officer, you will have an overall corporate
perspective and responsibility. You will have responsibility for the
following functions:
- - Finance and Administration
- - Research and Development
- - Operations
- - Customer Support
- - Implementation Support
KEY OBJECTIVES:
I. ACHIEVE REVENUE GROWTH AND GROSS MARGIN COMPETITIVENESS WHILE
EXCEEDING CUSTOMER EXPECTATIONS FOR SERVICE QUALITY.
1. Establish and maintain CAGR of *
2. Ensure COGS moves toward * of revenue.
3. Meet or exceed 75% customer satisfaction as evidenced by
comprehensive attitude surveys
II. BE PERCEIVED AS THE PREEMINENT GLOBAL DEMAND CHAIN SOLUTION PROVIDER
TO RETAILERS AND THEIR SUPPLIERS.
III. EXPAND OUR SERVICE OFFERINGS, MARKET SEGMENTS AND GEOGRAPHICAL
COVERAGE.
IV. BE RECOGNIZED AS "THE" PLACE TO WORK IN THE ELECTRONIC COMMERCE
INDUSTRY.
* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed
separately with the Commission pursuant to Rule 24b-2.
<PAGE>
KEY RESULT AREAS:
A. Achieve planned Company revenue, margin, profit and cash flow.
B. Maintain a high quality, efficient and motivated staff.
C. Communicate and foster the Company's core values.
D. Ensure quality in the Company's products and services.
E. Successfully develop and implement new Electronic Commerce products.
F. Evolve QRS product architecture and implement Data Warehouse.
G. Expand Professional Services to facilitate product implementation and
market penetration.
H. Provide efficient internal systems and tools that support objectives
and leverage staff.
I. Implement complimentary acquisitions and alliances that increase
growth.
J. Ensure the maintenance of adequate facilities and plan for future
needs.
ANNUAL COMPENSATION:
With regard to 1998 objectives and compensation, the following points have
been agreed between us:
Key elements of our agreement that impact 1998 compensation are as follows:
(i) Your annual BASE COMPENSATION will be $210,000 or $17,500 per month.
(ii) In addition, you will receive an ANNUAL INCENTIVE COMPENSATION of
$130,000 that will be administered by the CEO and me and reviewed by the
Compensation Committee.
Therefore your annual total target compensation (base compensation plus
incentive at 100%) shall not be less than $340,000.
Specific incentive targets for 1998 will be (as a percentage of the
1997 annual incentive compensation of $130,000) as follows:
a) Achieve Total Revenue of *. 30%
Award will be paid pro-rata within range of 80% to 100% of goal
with the full 30% payable at 100% of goal. Below 80%, the award
for this particular target will be zero. Payout rate doubles on
revenues over *.
* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed
separately with the Commission pursuant to Rule 24b-2.
<PAGE>
b) Achieve Operating Profit of *. 30%
Award will be paid pro-rate within range of 80% to 100% of goal
with the full 30% payable at 100% of goal. Above 110% achievement
an additional $20,000 will be awarded together with continuing
proportional and incremental incentive. Below 80% the award for
this particular target will be zero.
c) Implementation/adhere to the company's mission, 10%
core values and management process.
d) Meet or exceed Operations, Customer Service and Enabling 15%
Objectives (refer 1998 plan).
e) Meet or exceed R&D objectives (refer 1998 plan). 15%
(iii) Your position will be reviewed in July and it is our current
objective, depending primarily on your performance, to move forward with
a promotion to President and COO at that time.
(iv) Your compensation and annual incentives will be reviewed in the first
quarter of each year (unless there is a change in objectives, location,
etc. in which case it will be reviewed at that time), to ensure that it
continues to be equitable, appropriate to the location and provide
appropriate incentive and support to the agreed objectives.
LONG TERM INCENTIVE:
Non-qualified options to purchase an additional 50,000 shares of common stock
in QRS have been granted to you. These options will have priced on the date
of this letter and will vest over 4 years, in accordance with the defined
plan, copies of which are available for your review.
In addition, non-qualified options to purchase another 50,000 shares of
common stock in QRS will be granted to you and will be considered to be fully
vested when the company establishes and maintains compound annual growth of
* for a period of two years.
This position is for no set period or term and just as you have the right to
resign your position, at any time, for any reason, QRS reserves the right to
terminate your employment, at any time, with or without cause, with or
without notice.
However, if you are terminated, other than for cause, you will be paid the
base compensation and benefits for a further twelve months, from the date of
termination.
* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed
separately with the Commission pursuant to Rule 24b-2.
<PAGE>
For the purposes of this agreement, termination "for cause" shall mean: (1)
the willful failure by you to substantially perform your material duties
after a written demand for substantial performance is delivered to you by the
company which specifically identifies the manner in which you have not
substantially performed your duties; (2) the failure in a material respect by
you to follow reasonable policies or directives, established by the company,
after written notice to you that you were not following such policies or
directives, or; (3) your willful misconduct having material detrimental effect
on the company.
Alternatively, if there is a change of control of the company (as defined in
the stock option plan), and within 24 months of such change of control, there
is a material reduction in base compensation plus short term incentive
target, (for this purpose, 15% will be deemed a material reductions), or a
material reduction in your responsibility, and as a result you choose to
resign, you will be paid the base compensation plus short term incentive
target for a further 12 months from the time of such reduction, and any
unvested QRS options that you hold will vest in full, at such time, subject
to the terms and conditions of your stock option grant.
Shawn, I look forward to working with you in your new position.
Sincerely,
/s/ Peter R. Johnson
Peter R. Johnson
Chairman
Your signature below indicates that you have reviewed and accept this offer of
employment with QRS Corporation. Please sign this letter in the space
provided and return to me by the close of business, January 15, 1998.
/s/ Shawn M. O'Connor
- ----------------------------
Shawn M. O'Connor
<PAGE>
RETAIL MANAGEMENT AGREEMENT [LOGO]
- --------------------------------------------------------------------------------
Each of us agrees that the following terms and conditions apply to the project
to be jointly undertaken by the parties (Project) for the purpose described in
the Attachment to the Retail Management Agreement (Attachment).
1. ASSOCIATED CONTRACT DOCUMENTS
The Attachment describes the details of the Project and, if needed,
additional terms and conditions.
A Change Authorization to Retail Management Agreement (Change
Authorization) modifies the terms and conditions of this Agreement, the
Attachment or any previous Change Authorizations. Both parties must sign
such Change Authorization.
The IBM Agreement for Exchange of Confidential Information contains the
terms and conditions under which the parties will exchange confidential
information, if any.
- --------------------------------------------------------------------------------
Each of us agrees that the complete agreement between us about this transaction
consists of 1) this Agreement, 2) its attachments and 3) any other applicable
agreements, transaction documents, and Change Authorizations. This statement of
the agreement supersedes all proposals or other prior agreements, oral or
written, and all other communications between us relating to this subject. Any
reproduction of this Agreement by reliable means will be considered an original
of this document.
Agreed to: Agreed to:
QUICKRESPONSE SERVICES, INC. INTERNATIONAL BUSINESS MACHINES
CORPORATION
By: /s/ Shawn M. O'Connor By: /s/ Al Giffin January 15, 1998
---------------------- ----------------------------------
Authorized Signature Authorized Signature
Name (type or print): SHAWN O'CONNOR Name (type or print): AL GIFFIN
Date: 12/31/97 Date: 12/31/97
Agreement number:
IBM Business Partner no:
Business Partner Address: IBM Address:
QuickResponse Services IBM Corporation
1400 Marina Way South 3405 W. Dr. M. L. King Jr. Blvd.
Richmond, CA 94804 Tampa, FL 33607
Attention: Order Support Services
- --------------------------------------------------------------------------------
After signing, please return a copy of this Agreement to the IBM address above.
- --------------------------------------------------------------------------------
Page 1 of 4
<PAGE>
2. DEFINITIONS
INVENTION means any idea, concept, know-how, technique, invention,
discovery, or improvement, whether or not patentable, that either of us
first conceives or reduces to practice during the term of the Project and
while in performance of this Agreement and for which 2 patent application
is filed.
MATERIALS means literary works or other works of authorship, not available
under other IBM or non-IBM agreements, which result from a Project, such as
programs, program listings, programming tools, documentation, reports,
drawings, suggestions, test scenarios, and results.
3. PERSONNEL
Each of us will designate a person ("Project Representative") with
authority to represent it in all matters concerning the Project and to whom
all notices will be addressed. Each of us will provide the other prompt
written notice of replacement of such person.
Each of us will be responsible for the supervision, direction and control
of our own personnel while engaged in Project activities. Neither of us
will prevent the other's personnel from engaging in activities with third
parties that are similar to Project activities.
4. ESTIMATED SCHEDULE
Each of us agrees to make reasonable efforts to perform our
responsibilities according to the Estimated Schedule. The term of the
Project will begin on the date specified in the Attachment and will end
upon the earlier of 1) the acceptance by both of us of the Materials or 2)
the expiration of a Project's duration.
5. CONFIDENTIAL INFORMATION
Each of us agrees that 211 information exchanged will be nonconfidential.
If the Project requires the exchange of confidential information, such
exchange will be made under a separate confidentiality agreement.
6. OWNERSHIP AND LICENSE
You hereby assign to IBM and IBM will have all right, title and interest,
including ownership of copyright, in the Materials and all copies made from
them, whether the Materials are developed solely by IBM or you, or jointly
by IBM and you. If requested, you agree to provide to IBM a certificate of
originality in the form provided by IBM, with respect to the Materials
assigned to IBM.
IBM hereby grants to you an irrevocable, non-exclusive, worldwide, paid-up
license to use, execute, reproduce, display, perform, distribute
(internally only) copies of, and prepare derivative works based upon, the
Materials. Such license includes the right to grant sublicenses to your
subsidiaries. You will reproduce and include the copyright notice and any
other legend, following IBM's copyright instructions, on any copies of the
Materials you make.
Nothing contained in this Agreement will restrict the use of any ideas,
concepts, know-how, or techniques which either of us, individual or
jointly, develops or provides during the term of the Project.
7. INVENTIONS
An Invention will be treated as follows:
if made separately by the employees of one of us, it will be the property
of that party (Inventing Party). The Inventing Party hereby grants to the
other an irrevocable, non-exclusive, worldwide, paid-up license under such
Invention, all patent applications filed therefor, and all patents issued
thereon;
Page 2 of 4
<PAGE>
if made jointly by the employees of both of us, it and all patent
applications filed therefor and all patents issued thereon will be jointly
owned. Each of us has the right to grant licenses to third parties or
assign our rights therein without accounting to the other.
All licenses granted to either of us include the unrestricted right to
make, have made, use, lease, sell or otherwise transfer any apparatus, and
to practice any method, covered by the Invention. Such license shall
include the right to grant sublicenses to our subsidiaries.
Nothing contained in this Agreement shall be deemed to grant any license
under any patent or patent applications arising out of any other inventions
of either of us.
8. REPRESENTATIONS AND WARRANTIES
Each of us represents and warrants that:
1. the Materials will be original;
2. no portion of the Materials will violate any copyright of any third
party;
3. each of us has agreements with our employees sufficient to meet our
obligations under this Agreement.
Neither of us warrants or assumes any liabilities in connection with the
accomplishment or completion of any Project activities or that the
Materials will be error free.
EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT, NEITHER OF US MAKES ANY
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
9. TERMINATION / EXPIRATION
Either of us may terminate this Agreement, with or without cause, upon
written notice. Upon receipt of such notice, both parties will end all
Project activities in an orderly manner as soon as practical or in
accordance with a schedule agreed to by both of us.
If this Agreement is terminated or a Project's duration expires, each of us
will deliver to the other a copy of the Materials developed through such
termination or expiration. Such Materials are subject to the provisions of
Sections 6 and 7.
Any provisions of this Agreement which by their nature extend beyond the
termination or expiration of this Agreement will remain in effect beyond
such termination or expiration until fulfilled and shall apply to our
successors and assigns.
10. LIMITATION OF REMEDIES
Each party's entire liability and the other's exclusive remedy shall be as
follows.
For any claim concerning performance or nonperformance by either of us
pursuant to, or in any way related to, the subject matter of this
Agreement, the damaged party shall be entitled to recover actual damages to
the limits set forth in this Section.
Each party's liability for actual damages from any cause whatsoever will be
limited to $25,000. This limitation will apply, except as otherwise stated
in this Section, regardless of the form of action, whether in contract or
in tort, including negligence. This limitation will not apply to claims
for bodily injury or damage to real property or tangible personal property
for which the other is legally liable.
In no event will either of us be liable for any lost profits, lost savings,
incidental damages, or other economic consequential damages, even if
advised of the possibility of such damages. In addition, neither of us
will be liable for any damages claimed by the other based on any third
party claim.
Page 3 of 4
<PAGE>
11. GENERAL
Each of us will bear its own Project expenses.
Neither of us may assign our rights or delegate or subcontract our duties
or obligations under this Agreement without prior written consent. Any
attempt to do so is void.
This Agreement shall not prevent either of us or our subsidiaries from
marketing, acquiring or developing materials, products or services which
are competitive to those of the other, except that any such materials,
products or services may not violate any statutory or common law rights of
the other. Each of us may pursue activities independently with any third
party, even if similar to the activities under this Agreement.
Each of us agrees not to use the other's name, trade name, trademarks, or
other designation without prior written consent.
Neither of us will disclose the existence of this Agreement or the Project
without prior written consent, except to the extent required by law.
Neither of us will be responsible for failure to fulfill its obligations
under this Agreement due to causes beyond its control.
Neither of us may bring an action, regardless of form, arising out of this
Agreement, more than two years after the cause of action has arisen.
If there is a conflict between the terms and conditions of this Agreement
and its Attachment, those of the Attachment prevail. Except as modified by
the Attachment, the terms and conditions of this Agreement remain in full
force and effect.
The laws of the State of New York govern this Agreement.
Page 4 of 4
<PAGE>
RETAIL MANAGEMENT AGREEMENT [LOGO]
ATTACHMENT
- --------------------------------------------------------------------------------
1. PURPOSE
The purpose of this Attachment to Retail Management Agreement is to define
your responsibilities to IBM in your activities as an IBM Business Partner
in retail industry management, for which IBM will pay you a fee.
2. SCOPE OF WORK
Under this Attachment, you will provide services to assist IBM in
evaluating opportunities to sell network services in the retail industry to
improve IBM's market share and competitive position.
3. TERM
The term of this Attachment shall be from the date of execution of this
Attachment until December 31, 2000. However, this Attachment will be
terminated in the event the Business Partner Agreement between IBM and QRS
is terminated.
4. IBM RESPONSIBILITIES
We will cooperate with you and promptly respond to your requests for
information to assist you to complete your tasks under the scope of this
Attachment.
Agreed to: Agreed to:
QUICKRESPONSE SERVICES, INC. INTERNATIONAL BUSINESS MACHINES
CORPORATION
By: /s/ Shawn M. O'Connor By: /s/ Al Giffin January 15, 1998
---------------------- ----------------------------------
Authorized Signature Authorized Signature
Name (type or print) SHAWN O'CONNOR Name (type or print): AL GIFFIN
Date: 12/31/97 Date: 12/31/97
Agreement number:
IBM Business Partner no:
Business Partner Address: IBM Address:
QuickResponse Services IBM Corporation
1400 Marina Way South 3405 W. Dr. M. L. King Jr. Blvd.
Richmond, CA 94804 Tampa, FL 33607
Attention: Order Support Services
Page 1 of 3
<PAGE>
5. YOUR RESPONSIBILITIES
QRS will provide the following Retail Industry Management Services to IBM.
You will:
1. INDUSTRY REQUIREMENTS:
a. identify, gather, quantify and communicate "network services" and
"electronic commerce" requirements to IBM,
b. include an opportunity statement and prioritization of
requirements, and
c. provide current information on industry and segment trends,
market analysis and issues with IBM management;
2. INDUSTRY STANDARDS:
a. participate with industry standards organizations and report to
IBM issues and recommendations for resolution, and identify
opportunities to influence these organizations where appropriate;
3. COMPETITIVE ANALYSIS:
a. collect and communicate pertinent competitive information to IBM
relating to competitive offerings, services, and initiatives
relating to electronic commerce and network services as well as
items you feel would be of interest to IBM, and
b. make recommendations to IBM that would improve IBM's competitive
position in the marketplace in general as well as specific areas
you identify both tactically and strategically;
4. MARKET MANAGEMENT:
a. share QRS market analysis information and recommend to IBM
actions that will enable IBM to increase Market share both in
conjunction with QRS and independently. The recommendations
should include industry initiatives and offerings by market
segment;
5. TRADE SHOWS:
a. represent IBM at trade shows and industry functions and
communicate issues and recommend solutions that enhance the
visibility and image of IBM and QRS. Make recommendation of
joint and/or individual participation at industry functions;
6. NON-TRADITIONAL OPPORTUNITIES:
a. communicate to IBM business opportunities that are outside the
scope of our Remarketer Agreement such as data center
outsourcing, EDI outsourcing and general information systems
opportunities. Specifically, QRS should identify at least five
"EDI Outsourcing" opportunities to IBM over the term of this
Agreement. QRS and IBM will work together to determine what
actions, if any, that may lead to an individual or joint sales
engagement of these various opportunities;
7. FORECASTING & OPPORTUNITY REVIEW:
a. provide a three year business forecast to IBM that is updated on
a semi-annual basis, and
b. conduct joint opportunity reviews to establish action plans to
engage and close specific opportunities.
Input to IBM will take place on an ongoing basis with formal reviews
semi-annually. These formal reviews will include all the topical areas
listed above and others to which we may both agree from time to time.
These formal reviews will be scheduled on a mutually agreeable basis.
IBM and QRS will annually re-evaluate the QRS responsibilities described in
this section and IBM may reasonably modify these responsibilities to
reflect IBM business requirements following the process described in the
Retail Management Agreement.
Page 2 of 3
<PAGE>
6. RESULTING MATERIALS
Resulting Materials under this Attachment are reports covering the
information and topics described in section 5, Your Responsibilities.
7. ESTIMATED SCHEDULE
Reports under this Attachment are generally due at the semi-annual review
meetings on dates to be mutually agreed upon. Interim or special reports
or information will be provide as both of us agree from time to time.
8. PROJECT REPRESENTATIVES
Within 30 days of the start of work under this Agreement, both of us will
identify project representatives for this Attachment.
9. COMPENSATION
In consideration for the Retail Industry Management Services provided by
QRS, IBM will pay QRS a nonrefundable fee of * each year during the term
of this Attachment, payable in installments of * before the end of the
months of April, July, October of the same year and January of the
following year. In the event that this Agreement is terminated before
the end of any calendar year, IBM will prorate the annual fee for the
period of work performed prior to termination.
In recognition of the successful contract completion and revenue
overachievement of the five year industry remarketer agreement which
concluded on December 31, 1997, IBM will pay QRS a nonrefundable fee for
activities completed through December 31, 1997 of *, payable within 30
days after execution of this Attachment.
* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed
separately with the Commission pursuant to Rule 24b-2.
Page 3 of 3
<PAGE>
Exhibit 10.44
IBM BUSINESS PARTNER AGREEMENT
IBM GLOBAL SERVICES' NETWORK SERVICES ATTACHMENT FOR
REMARKETING
- --------------------------------------------------------------------------------
THESE TERMS OF THIS ATTACHMENT PREVAIL OVER THE DOCUMENTS REFERRED TO BELOW.
MODIFICATIONS TO THE OTHER DOCUMENTS APPLY ONLY IN YOUR ROLE AS A SOLUTION
PROVIDER - REMARKETER OF IBM GLOBAL SERVICES' NETWORK SERVICES.
1. DEFINITIONS
THE FOLLOWING TERMS MODIFY THE "DEFINITIONS" SECTION OF THE GENERAL TERMS:
CUSTOMER is a party to whom you remarket Eligible Services and provide User
Identifications. A Customer may not remarket an Eligible Service. A
Customer may authorize End Users to access and use an Eligible Service for
the Customer's business purposes only.
END USER is any party accessing an Eligible Service, including programs,
data, or equipment within an Eligible Service, using User Identifications
obtained from a Customer or any other authorization means the Customer
controls. An End User may not remarket or authorize
other parties to access an Eligible Service.
Except for this Attachment, all occurrences of the term "End User" are
replaced by the term "Customer."
ELIGIBLE SERVICE is a Service that we approve you to remarket.
- --------------------------------------------------------------------------------
Each of us agrees that the complete agreement between us about this transaction
consists of 1) this Attachment and 2) the IBM International Customer Agreement
(or any equivalent agreement signed by both of us).
Agreed to: Agreed to:
QUICKRESPONSE SERVICES INTERNATIONAL BUSINESS MACHINES CORPORATION
By /s/ Lynn Hazlett By: /s/ Al Giffin January 15, 1998
------------------------------ ------------------------------------------
Authorized Signature Authorized Signature
Name (type or print):LYNN HAZLETT Name (type or print): AL GIFFIN
Date: 12/31/97 Date: 12/31/97
Agreement Number
Customer Lead Company address: IBM LEAD COMPANY ADDRESS:
QUICKRESPONSE SERVICES IBM CORPORATION
1400 MARINA WAY SOUTH 3405 DR. MARTIN LUTHER KING JR. BLVD.
RICHMOND, CA 94804 TAMPA, FL 33607
ATTENTION: ORDER SUPPORT SERVICES
- ------------------------------------------------------------------------------
AFTER SIGNING, PLEASE RETURN A COPY OF THIS AGREEMENT TO THE "IBM LEAD COMPANY
ADDRESS" SHOWN ABOVE.
- ------------------------------------------------------------------------------
Page 1 of 20
<PAGE>
CUSTOMER PREMISES EQUIPMENT (CPE) is equipment, its features, conversions,
upgrades, elements, accessories, licensed internal code, software, or any
combination of them that we locate and install on your, your Customer's, or
an End User's premises for the purpose of providing a Service. The term
Customer Premises Equipment does not include Machines sold or leased to you
by IBM.
SERVICE START DATE of an Eligible Service is the date the Eligible Service
is made available to you or your Customer.
USER IDENTIFICATION is a code or codes, such as a user ID or password,
which enables approval or access to programs, data, or equipment through a
Service.
2. OUR RELATIONSHIP
THE FOLLOWING TERMS MODIFY THE SUBSECTION ENTITLED "RESPONSIBILITIES" OF
THE "OUR RELATIONSHIP" SECTION OF THE GENERAL TERMS:
14. each of us will comply with the highest ethical principles in
performing under this Agreement. Neither of us will offer or make payments
or gifts (monetary or otherwise) to anyone for the purpose of wrongfully
influencing decisions in favor of the other party, directly or indirectly.
Either of us may terminate this Agreement immediately in case of 1) a
breach of this clause or 2) when either of us reasonably believes such a
breach has occurred.
THE FOLLOWING TERMS MODIFY THE SUBSECTION ENTITLED "OTHER RESPONSIBILITIES"
OF THE "OUR RELATIONSHIP" SECTION OF THE GENERAL TERMS:
You agree:
1. to pay charges for all Eligible Services usage incurred by any means
by you directly or through resale;
2. to be responsible for charges and damages resulting from use of User
Identifications under your control;
3. to 1) comply, 2) require your Customers to comply and 3) require your
Customers to have their End Users comply, with all laws, regulations,
and conventions, including, but not limited to, those related to data
privacy, international communications, consumer transactions, and
exportation and importation of technical or personal data applicable
to the use of Eligible Services under this Agreement;
4. to inform your Customers, and have your Customers inform their End
Users, that each, as applicable, is responsible for obtaining all
necessary governmental, regulatory, or statutory approvals for their
use of the Eligible Services, and to obtain any required permission if
they use an Eligible Service to copy, download, display, distribute,
or execute programs or perform other works;
5. never to conduct any illegal activity using the Eligible Services, or
engage in other disruptive activities, including, but not limited to,
spamming, flaming, or unauthorized entry into computer systems. We
may immediately suspend access or terminate an Eligible Service for
failure to abide by this requirement;
6. that you, and to inform your Customers that they, are responsible for
data, programs, or other material provided by either of you for use
with an Eligible Service, and for ensuring that --
a. your use, and informing your Customers that their use, of an
Eligible Service to provide data, programs, or other material
does not result in our violating anyone's rights, and
b. the disclosure or use of the data, programs or other material
through the Eligible Service does not breach any contractual
relationship;
Page 2 of 20
<PAGE>
7. before your Customers' End Users access an Eligible Service, to
require your Customers to inform the End Users, in writing, of the
applicable terms of this Agreement (for example, the Eligible Services
warranty) and that we have no liability to such End Users;
8. to inform your Customers, and require them to inform their End Users,
that we are not responsible for the content of the information and
data that either of them transmit using our Eligible Services;
9. to provide required marketing and support activities to your Customers
and their End Users, including installation and application assistance
and technical support. We provide marketing and technical support to
you (and not to your Customers or their End Users);
10. to report, or have your Customers report promptly to us, all suspected
and actual problems with Eligible Services;
11. to assist us in tracing and locating Equipment;
12. to keep records of your Customers and the Eligible Services they use,
including, as applicable, identification of the Eligible Service
provided, the date of your Customer's initial access to an Eligible
Service, and the Customer's name and address;
13. to require your Customers to keep a record of End Users outside the
Customer's Enterprise including the name and address of the End User,
the date of initial Eligible Service access by the End User, and the
Eligible Service provided by location of each Eligible Service
transaction, including sales, credits, and warranty claims, for five
years;
14. to make reasonable efforts to conduct business activities with us
(including order entry) using our automated electronic system, if
available;
15. to arrange for your marketing and support personnel to attend training
courses we provide within one year of the commencement date of this
Agreement or within the first year that you assign additional
personnel to perform a particular function. We will inform you of the
courses we provide. We provide required education courses to you on a
tuition-free basis; however, you are responsible for travel expenses,
lodging and meals, and expenses for educational materials not included
in the tuition fee;
16. to appoint a service administrator as your contact with us to resolve
network operational problems, order Eligible Services and authorize
others to do so; and
17. not to assign, or other transfer this Agreement, your rights under it,
or any of its approvals, or delegate any duties, unless expressly
permitted to do so under this Agreement. Notwithstanding the
foregoing, you may assign this Agreement, solely with respect to IBM
Global Services' Network Services, to Related Companies within your
Enterprise to the extent permitted by law. Otherwise, any attempt to
do so is void.
ITEM 9 IS DELETED.
THE FOLLOWING TERMS MODIFY THE SECOND SENTENCE OF THE FIRST PARAGRAPH OF
THE SUBSECTION ENTITLED "OUR REVIEW OF YOUR COMPLIANCE WITH THIS AGREEMENT"
OF THE "OUR RELATIONSHIP" SECTION OF THE GENERAL TERMS:
You agree to provide us with relevant records on our reasonable advance
written request.
THE REMAINDER OF THE PARAGRAPH IS UNCHANGED.
3. CONFIDENTIAL INFORMATION
A NEW ITEM IS ADDED TO THE LIST IN ITEM F OF THE "CONFIDENTIAL INFORMATION"
SECTION OF THE GENERAL TERMS:
4) technical information.
Page 3 of 20
<PAGE>
4. INTERNAL USE
THE FOLLOWING TERMS REPLACE THE "INTERNAL USE PRODUCTS" SECTION OF THE
GENERAL TERMS:
You may acquire any IBM Global Services' Network Services for your internal
use. We describe in writing how you may use such Services in advance of
your acquiring them. Your use of IBM Global Services' Network Services
will count toward your revenue attainment.
5. ORDERING AND DELIVERY
THE FOLLOWING TERMS REPLACE THE TERMS OF THE "ORDERING AND DELIVERY"
SECTION OF THE REMARKETER TERMS ATTACHMENT IN ITS ENTIRETY:
You may order Eligible Services from us as we specify in an Exhibit. We
accept your order either by communicating to you in writing, including
electronic communication (for example, sending you an order confirmation or
an invoice), or by providing the Eligible Service to you. You agree to
order Eligible Services in sufficient time for them to count toward your
minimum attainment objectives, if applicable.
Although we do not warrant installation and availability dates, we will use
reasonable efforts to meet your requested installation and availability
dates.
An order may not be modified within 10 business days of the Eligible
Service's estimated installation or availability date. We may not be able
to honor a request for cancellation if it is received less than 10 business
days before the Eligible Service's estimated installation date or Service
Start Date. If a cancellation charge applies, we will specify the
cancellation percentage in the Exhibit. We will advise you if the
cancellation charge applies to an order you cancel.
6. PRICE, INVOICING, PAYMENT AND TAXES
THE FOLLOWING TERMS REPLACE THE SUBSECTION ENTITLED "PRICE AND DISCOUNT"
AND THE SUBSECTION ENTITLED "PRICE AND DISCOUNT CHANGES" IN THE "PRICE,
INVOICING, PAYMENT AND TAXES" SECTION OF THE REMARKETER TERMS ATTACHMENT.
PRICE AND DISCOUNT
The amount payable for an Eligible Service will be based on one or more of
the following charges:
1. one-time (for example, Eligible Service installation charges);
2. recurring (for example, a periodic charge for Eligible Services);
3. usage (for example, network traffic charges).
Charges for Eligible Services are billed, as we specify in a transaction
document, in advance, periodically during the provision or performance of
the Eligible Service, or after the Eligible Service is completed.
We specify discountable and non-discountable charges, adjustment charges,
credits, and education and reporting requirements in a transaction
document.
For a discounted-charge Eligible Service, we will reduce your charges by
the applicable discount percent we specify in an Exhibit.
Page 4 of 20
<PAGE>
PRICE AND DISCOUNT CHANGES
We will not increase the Eligible Service charges during the first year of
the contract period. Thereafter, we may increase Eligible Service charges
by giving you three months' written notice except for one-time charges
which we may increase without notice. However, an increase to one-time
charges does not apply to you if 1) we receive your order before the
announcement date of the increase and 2) we make the Eligible Service
available to you within three months after our receipt of your order.
Increases become effective on the first day of a month. If the effective
date as we specify in the notice is other than the first day of a month,
the increase applies on the first day of the following month.
When the cumulative effect of an increase in Eligible Service charges in
any one year of the contract period results in a change to our invoice to
you of more than six (unless we specify otherwise in writing) percent
(determined by recalculating your last invoice using the new charges), you
may terminate this Attachment by giving us written notice. We must receive
the notice before the effective date of the change.
For one-time charges, you receive the benefit of a price decrease when the
Service Start Date occurs on or after the effective date of the decrease.
For recurring charges and usage charges, you receive the benefit of a
decrease on the first day of the month following the effective date of the
decrease.
7. WARRANTY FOR ELIGIBLE SERVICES
The following terms replace the "Installation and Warranty" section of the
Remarketer Terms Attachment in its entirety:
For each Eligible Service, we warrant that we provide it:
1. using reasonable skill and care; and
2. according to its current description contained in a transaction
document.
We do not warrant uninterrupted or error free operation of an Eligible
Service. We will identify in a transaction document Eligible Services that
we do not warrant.
The warranty will be voided by misuse, accident, modification, unsuitable
physical or operating environment, improper maintenance by you, or failure
caused by a service or program for which we are not responsible.
You will afford us the opportunity to correct any deficiency in an Eligible
Service before being found in breach of our obligations under this
Agreement. You will permit us to take all reasonable and appropriate
measures to restore the Eligible Service to conform to its description. In
addition, we may, at our option, substitute for or add to Eligible Services
and take such other measures as may be necessary, in each case, to correct
an Eligible Service deficiency.
We are not responsible for the selection of, use of, and results obtained
from, Eligible Services by you, your Customers, or their End Users.
You are not authorized to make any warranty commitment, whether written or
oral, on our behalf.
Page 5 of 20
<PAGE>
THESE WARRANTIES ARE YOUR EXCLUSIVE WARRANTIES AND REPLACE ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
WE ARE NOT RESPONSIBLE FOR INVALID DESTINATIONS AND TRANSMISSION ERRORS IN,
CORRUPTION OF, OR THE SECURITY OF YOUR INFORMATION CARRIED OVER FACILITIES
OF THIRD PARTY PROVIDERS OF COMMUNICATION CIRCUITS AND ASSOCIATED
EQUIPMENT. WE DO NOT GUARANTEE THAT OUR SECURITY PROCEDURES WILL PREVENT
THE LOSS OF, ALTERATION OF, OR IMPROPER ACCESS TO, YOUR INFORMATION.
Unless we specify otherwise, we provide non-IBM Eligible Services and
Programs WITHOUT WARRANTY OF ANY KIND. However, non-IBM manufacturers,
suppliers, or publishers may provide their own warranties to you. Warranty
terms for Programs are described in the Program's license terms. For
non-IBM Eligible Services and Programs we approve you to market, you agree
to inform your Customers in writing 1) that the Eligible Services and
Programs are non-IBM, 2) of the applicable manufacturer's or supplier's
warranty (if any), and 3) of the procedure to obtain warranty service.
You are responsible for all programs, data, or equipment you, your
Customers, or their End Users provide which you, your Customers, or their
End Users use to access the network.
8. ACCESS TO ELIGIBLE SERVICES
The following terms are in addition to the terms of the Remarketer Terms
Attachment:
We will provide User Identifications to you which enable access to Eligible
Services. You may authorize the Customer to use an Eligible Service by
providing a User Identification to that Customer. The Customer may in turn
provide to their End Users User Identifications for their use of the
Eligible Services. You are responsible for the control and distribution of
User Identifications to Customers. You will require your Customers to be
responsible for the control and distribution of User Identifications to End
Users. We have no responsibility for misuse of User Identifications we
provide to you.
You agree to notify us in writing of a newly authorized Customer and of the
User Identifications assigned to that Customer. You also agree to provide
us with all information we require to enable your Customers and their End
Users to access an Eligible Service (or to terminate such access).
We may withdraw access to an Eligible Service from you when, in our
reasonable, good faith opinion, you, your Customers, or their End Users
cause any part of an Eligible Service to malfunction or if there is a
failure to make changes which, in our reasonable judgment, are necessary to
correct malfunctions. We will restore the Eligible Service when the
problem has been corrected to our reasonable satisfaction.
No Customer or End User shall be a third party beneficiary under this
Agreement, nor shall any Customer or End User have any rights under this
Agreement. We shall not have any obligation or liability to any Customer
or End User.
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9. CUSTOMER PREMISES EQUIPMENT
THE FOLLOWING TERMS ARE IN ADDITION TO THE TERMS OF THE REMARKETER TERMS
ATTACHMENT.
We may provide Customer Premises Equipment to be installed on your, your
Customer's, or your Customer's End User's premises for the purpose of
providing an Eligible Service. The Customer Premises Equipment is, and
will remain, our or our lessor's asset and will not become your, your
Customers, nor your Customer's End User's fixture or realty.
Certain Customer Premises Equipment may contain licensed internal code. We
will identify this Customer Premises Equipment to you. Such Customer
Premises Equipment may be subject to additional terms we specify.
No right, title, or interest in or to the Customer Premises Equipment, or
licensed internal code associated with it, or any related planning
information, is passed. However, we will use such Customer Premises
Equipment to provide Eligible Services to you, your Customers, and their
End Users.
As appropriate, we will provide you physical planning information for the
Customer Premises Equipment. You will ensure that your Customers, and
require that your Customers ensure that their End Users, comply with that
information in order to provide an environment meeting our specifications.
OUR RESPONSIBILITIES
We agree to:
1. install at your, your Customers' or their End Users' sites (unless we
specify otherwise), the Customer Premises Equipment we provide;
2. maintain the Customer Premises Equipment; and
3. be responsible for all dismantling, return, removal, and shipping
charges for the Customer Premises Equipment.
YOUR RESPONSIBILITIES
You agree that you, your Customers, and that your Customers require their
End Users, as applicable, to:
1. be responsible for loss of or damage to the Customer Premises
Equipment to the extent caused by your, your employees', your agents',
your Customers' or their End Users' intentional acts or negligence;
2. provide us or our designee with all assistance reasonably necessary to
permit us access to applicable sites to perform inspection,
installation, preparation for return, or maintenance as is
appropriate;
3. provide, at no cost to us, adequate security to protect the Customer
Premises Equipment from theft, loss, damage, or misuse;
4. allow us to install mandatory engineering changes (such as those
required for safety) on Customer Premises Equipment;
5. return to us, or permit us or our designee to remove at our
discretion, the Customer Premises Equipment and physical planning
documentation at the expiration or termination of the Eligible
Service;
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6. not alter the Customer Premises Equipment and any licensed internal
code associated with it in any manner, not move it to other locations,
nor transfer it to anyone else without our prior written approval;
7. keep the Customer Premises Equipment free from all liens, charges, or
encumbrances; and
8. affix on the Customer Premises Equipment any reasonable marking or
label we require, as we specify.
Additionally, you agree that you or your Customers, as applicable, will
provide and pay for the physical space and electrical power for the
Customer Premises Equipment at applicable sites.
10. CUSTOMER TRANSMITTED DATA
The following terms are in addition to the terms of the Remarketer Terms
Attachment:
We maintain security procedures for your data while it is stored on or
transmitted over equipment and facilities we control. You are responsible
for management of your data stored on or transmitted over our network.
Such management includes, but is not limited to, backup and restoration of
data, erasing data from disk space you control, and your selection and use
of the security features and options that we provide as Eligible Services.
Apart from Eligible Services we provide, you are responsible for developing
and maintaining management and security procedures you deem appropriate,
such as application logon security and encryption of data, to protect your
information.
Solely for the purposes of network maintenance, we may need to view and
work with portions of the data you transmit over our network such as
address header information. You agree that we may use, copy, display,
store, transmit, translate, rearrange or reformat, view and distribute your
data domestically and internationally for such purposes. We agree not to
reverse assemble, reverse compile, or to disclose to third parties the
information that you transmit over our network while using the Eligible
Service (unless required by law, court order, an authorized government
entity, or as otherwise authorized by you).
Each of us agrees that access to ideas, concepts, know-how, and techniques
contained in data viewed or worked with during network maintenance pursuant
to the Agreement and retained in our employees' memories will not prohibit
or prevent either of us from developing or marketing any service or
product.
You will take appropriate measures to inform your Customers, and require
that they inform their End Users, of these provisions.
11. CHANGES TO AND TERMINATION OF ELIGIBLE SERVICES
THE FOLLOWING TERMS ARE IN ADDITION TO THE TERMS OF THE REMARKETER TERMS
ATTACHMENT.
We may, at our sole discretion and without liability to you, implement a
change to an Eligible Service or our network. However, we will give you
three months' written notice of a substantial change to an Eligible
Service's terms or description. We will give you one year's written notice
if we terminate an Eligible Service (or if we change this one year notice
period). However, if a third party claims, such claim having in our good
faith, reasonable judgment a substantial probability of success, that a
Product, Customer Premises Equipment, or application program that we
provide as part of an Eligible Service infringes a patent or copyright, we
reserve the right to terminate the Eligible Service effective immediately.
We will use reasonable efforts to replace the Eligible Service with one
that is at least functionally equivalent, or, if that is not reasonably
possible, give you a prorated credit for any charges you paid in advance
for the Eligible Service.
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We will give you three months' written notice if we change invoicing
procedures.
You agree to give us one month's written notice to terminate your use of,
or remarketing of, an Eligible Service. The termination will be effective
at that month's end.
12. GENERAL
THE FOLLOWING TERMS ARE IN ADDITION TO THE TERMS OF THE REMARKETER TERMS
ATTACHMENT.
Except for the right to use application programs that we authorize you,
your Customers or End Users to access through the Eligible Services, we
grant no other rights to those programs to you, your Customers or End
Users.
Our network is generally available 24 hours a day, seven days a week. We
reserve the right to schedule reasonable hours for maintenance or network
changes at our discretion.
13. ENDING THE AGREEMENT
THE FOLLOWING TERMS MODIFY THE "ENDING THE AGREEMENT" SECTION OF THE
REMARKETER TERMS ATTACHMENT:
The second and third paragraphs are replaced:
If either of us terminates for cause, the terminating party shall allow the
other a reasonable opportunity to cure. If the breaching party fails to do
so, the date of termination is that specified in the notice.
However, if either party breaches a material term of the Agreement, the
other party may terminate the Agreement on 30 days' written notice.
Examples of such breach by you are: if you do not maintain reasonable
customer satisfaction; if you do not materially comply with the terms of a
transaction document; if you repudiate this Agreement; or if you make any
material misrepresentations to us. You agree that our only obligation is
to provide the notice called for in this section and we are not liable for
any claims or losses if we do so.
THE FOLLOWING IS AN ADDITIONAL PARAGRAPH:
Both of us agree that in the event either of us decides to end this
Agreement for reasons other than material breach, we will mutually develop
a disengagement plan and a reasonable schedule, then implement the plan to
terminate our respective activities under this Agreement.
14. COUNTRY UNIQUE TERMS
ASIA PACIFIC
AUSTRALIA
Eligible Services and Products are provided by Advantra Pty. Ltd. in
Australia.
INDONESIA
Products and Eligible Services are provided by PT Sistelindo Mitralintas in
Indonesia.
The following modifies the definition of Enterprise in section 1 of the
General Terms.
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1. DEFINITIONS
"including the Service Provider Company's agent in Indonesia, PT Sistelindo
Mitralintas, a corporation established and domiciled in Jakarta,
Indonesia."
2. AGREEMENT STRUCTURE AND CONTRACT DURATION
Add the following:
All orders must be confirmed in writing.
REMARKETER TERMS ATTACHMENT
4. PRICE, INVOICING, PAYMENT AND TAXES
Add the following:
You may withdraw a Product from an order or terminate an Eligible Service
to which an increase applies by providing us with written notice within one
month of the date of our notice of increase.
IBM GLOBAL SERVICES' NETWORK SERVICES ATTACHMENT FOR REMARKETING
13. ENDING THE AGREEMENT
The following sentence is added:
A termination hereunder shall not require a court decree; we both waive in
this regard the provision in article 1266 of the Indonesian Civil Code,
2nd, 3rd and 4th paragraphs to the extent the article provision requires
such court decree for the termination of an agreement creating mutual
obligations.
9. CUSTOMER PREMISES EQUIPMENT
The first two paragraphs are replaced with the following:
We will, if applicable, provide CPE specified in the local Agreement
Transaction Document to be installed on your premises for the purpose of
providing a Service. The CPE is and will remain the asset of the Service
Provider Company or its lessor and will not become a fixture or realty.
Certain CPE may contain licensed internal code. We will specify this in
the local Agreement Transaction Document.
MALAYSIA
Services and Products are provided by IBM VADS SDN BHD in Malaysia.
The following terms modify sections 9 and 16 in the General Terms.
9. LIMITATION OF LIABILITY
Our liability for actual damages from any cause whatsoever will be limited
to the lesser of:
a) RM75,000 or
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b) the total amount invoiced for your use of the Eligible Service which
is the subject of the action during the previous twelve months before
the cause of action arose.
16. GOVERNING LAW
Any dispute arising in connection with this Agreement which cannot be
settled by negotiation between the parties or their representatives shall
be submitted to arbitration in accordance with the Rules for Arbitration of
the Kuala Lumpur Regional Arbitration Centre.
The following new section is added to the IBM Global Services' Network
Services Attachment for Remarketing following section 14.
15. LICENSE
The Eligible Services are made available in accordance with the terms of
the license for Value Added Network Services granted by the government of
Malaysia in 1991. In the event that such license or any successor thereof
or VADS SDN BHD's registration thereunder is revoked, terminated or
amended, VADS SDN BHD's shall, notwithstanding any other terms, have the
right to terminate this Agreement or amend it accordingly on three months'
notice.
SINGAPORE
IBM GLOBAL SERVICES' NETWORK SERVICES ATTACHMENT FOR REMARKETING
1. DEFINITIONS
The following sentence is added to the definition of "End User:"
"The Eligible Services are provided solely for your own use and are not to
be provided by you to others. We reserve the right to withdraw access to
the Services should you be found to be in breach of this condition."
4. CHARGES AND PAYMENT
The following terms are added:
Usage charges are payable up-front if a) they are for the minimum usage
specified, and b) you buy units at up-front prices.
"If we have agreed not to change specified charges to you over a specified
period (period type charges), changes to those charges will not apply to
you until expiration of the protection period.
The following terms modify section 9 in the GENERAL TERMS.
9. LIABILITY
The following paragraph replaces item 3 in the first paragraph.
"Our liability for actual damages to you, from any cause whatsoever, will
be limited to the greater of S$100,000 or the total amount invoiced for
your use of the Eligible Service which is the subject of the action during
the previous twelve months before the cause of action arose. This
limitation will apply regardless of the form of action, whether in contract
or in tort including negligence. This limitation will not apply to
payments referred to in Section 8 Patents and Copyrights, and to claims for
bodily injury or damage to real property for which we are legally liable."
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IBM GLOBAL SERVICES' NETWORK SERVICES ATTACHMENT FOR REMARKETING
9. CUSTOMER PREMISES EQUIPMENT
The term "CPE" in this section does not apply to equipment purchased by you
where the asset title passes to you.
SOUTH KOREA
IBM GLOBAL SERVICES' NETWORK SERVICES ATTACHMENT FOR REMARKETING
9. CUSTOMER PREMISES EQUIPMENT
The following is added at the end of this section:
"Each of us will use only communication equipment of the type approved by
the Ministry of Communication."
TAIWAN
Eligible Services and Products are provided by Global Communications
Network (GCN Taiwan) in Taiwan.
THAILAND
Services are provided by Thai GlobalNet Services Company Ltd. in Thailand.
Some Services are provided by the Communication Authority of Thailand.
IBM GLOBAL SERVICES' NETWORK SERVICES ATTACHMENT FOR REMARKETING
6. PRICE, INVOICING, PAYMENT AND TAXES
Price and Discount Changes
The following is added at the end of this subsection:
However, in the event that the Communication Authority of Thailand imposes
an order without notice requiring immediate implementation, we will give
you as much notice as is reasonably possible, but such notice may be only
one month in advance of the changes. We will identify to you in writing
changes resulting from orders from the Communication Authority of Thailand.
GENERAL TERMS
11. CHANGES TO THE AGREEMENT TERMS
The following is added at the end of the first paragraph:
However, in the event that the Communication Authority of Thailand imposes
an order without notice requiring immediate implementation, we will give
you as much notice as is reasonably possible, but such notice may be only
one month in advance of the changes. We will identify to you in writing
changes resulting from orders from the Communication Authority of Thailand.
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REMARKETER TERMS ATTACHMENT
15. ENDING THE AGREEMENT
The following is added to the first paragraph:
When you pay for Eligible Services in advance, you agree to provide written
notice of termination to us not less than 30 days prior to the end of the
payment period specified in the applicable Transaction Document.
Notwithstanding the foregoing, in the event that the agreement between Thai
GlobalNet Services Company and the Communication Authority of Thailand is
terminated, we will give you six months' written notice of termination. We
will give you 90 days' notice of termination in the event that a
communication regulation is changed or repealed allowing unrestricted
operation of telecommunication services without requiring the Communication
Authority of Thailand's approval.
Add the following at the end of the section:
We will consider you to be in default of this Agreement and we may
terminate this Agreement in Thailand in the event that:
a) you conduct any transaction which results in cessation of your
business, if you suspend your business operations, or dispose of your
assets to any third party except for normal business operations; or
b) a receiver is appointed for your business undertaking or if you file
any claims for bankruptcy or make any special arrangement or composition
with your creditors.
If we terminate this Agreement for any of the reasons in this paragraph,
charges you have prepaid for Eligible Services are not refundable.
IBM GLOBAL SERVICES' NETWORK SERVICES ATTACHMENT FOR REMARKETING
2. OUR RELATIONSHIP
The following is added to the end of item 3:
"including, but not limited to, obtaining any required licenses,
permission, or approval of applicable organizations or government entities
for connecting equipment you provide to the network, or interconnecting
your private network with the IBM Global Network."
The following is added to item 6:
You will, at your own expense, install and maintain the equipment in good
working order at all times. We shall not be responsible for any breakage,
loss, damage to or operational failure of your equipment. If your
equipment must be connected to other equipment to use Eligible Services and
such equipment is under the responsibility of another commercial
organization or governmental organization, you will directly contact and
obtain any license, permission and approval for such connection as required
by such commercial organization or governmental organization. You are
responsible for any expenses associated with obtaining such permission and
approval. We are not responsible for inconvenience or damages resulting
from Eligible Service interruption caused directly or indirectly by your
equipment or equipment or networks provided by third parties not affiliated
with the IBM Global Network.
The following items are added after item 17:
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18. to use the Eligible Services only for your normal business operations;
19. not to use the Eligible Services in any manner which may compete with
or cause a conflict of interest with us or the Communication Authority of
Thailand or cause any damage, whether directly or indirectly, to us or to
the Communication Authority of Thailand;
12. not to receive or transmit any message, data, or code that violates
the Telephone and Telegraph Act of B.E. 2477 or use the Services in any
manner which may, directly or indirectly, cause any harm to society,
security or public order or good morals of the country or against the
Cabinet's resolutions or the Communication Authority of Thailand's
policies, rules, regulations and notifications; and
13. to comply with Thailand rules of Eligible Service utilization.
- --------------------------------------------------------------------------------
EUROPE, MIDDLE EAST, AFRICA (EMEA)
CENTRAL EUROPE AND RUSSIA (CER)
In addition to the above terms for EMEA countries, the following terms
apply to all CER countries (Albania, Armenia, Blearus, Bosnia/Herzegovina,
Bulgaria, Croatia, Czech Republic, Georgia, Hungary, Kazakhstan, Kirghizia,
Macedonia, Moldova, Poland, Romania, Russia, Serbia/Montenegro, Slovak
Republic, Slovenia, Ukraine).
Some Eligible Services are provided by the national PTT in CER countries.
IBM GLOBAL SERVICES' NETWORK SERVICES ATTACHMENT FOR REMARKETING
2. OUR RELATIONSHIP
Additional responsibilities are added as follows:
18. to procure communication lines from the national PTT prior to the
Start Date of an Eligible Service and to maintain the communication lines
for the duration of this Agreement. Any communication equipment you
provide must comply with specifications provided by the IBM Computing
Center;
19. to be responsible for the attachment and operation of communication
equipment you provide. IBM's responsibility ends at the applicable
interface to the IBM CPE. IBM is not responsible for maintenance and
operation of the national PTT communication lines including those within
the IBM computing center network.
FRANCE
Eligible Services and Products are provided by Axone in France.
ITALY
In Italy, Eligible Services and Products will be provided by IN.TE.S.A.
S.p.A. (hereinafter called INTESA), according to the terms of this
Agreement. The following additional terms integrate and replace the terms
stated in the Agreement. In the event of any conflict between the clauses
of the Agreement and those of such additional clauses, the latter shall
prevail.
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REMARKETER TERMS ATTACHMENT
4. PRICE, INVOICING, PAYMENT AND TAXES
The following terms are added:
"The applicable charges for each Service, fixed by INTESA for INTESA's
customers, are indicated in Transaction Documents. For one-time charges,
the relevant amount will be invoiced in the month of the start date of the
Service. For periodic charges, the relevant amount will be invoiced in
advance with reference to the related period."
"The first invoice will be issued by INTESA in the month of the Start Date
of the Service. Payment shall be made cash within 30 days from the end of
the month of the invoice. If the order specifies that payment shall be
made cash via Factor, INTESA will be free to assign its credits to the
Factor specified in the Transaction Document. Without prejudice to the
provisions on cash payment via Factor, all payments shall be made to INTESA
at 125, via Servais, Turin, ITALY, which remains the place of receipt of
customer's payments, also in the event that payment of all or part of the
charges due has been otherwise agreed in writing, or, however, made by
means of delivery of promissory notes or banking receipts.
You may withdraw a Product from an order or terminate a Service to which an
increase applies by providing us with written notice within one month of
the date of our notice of increase.
The following terms modify section 16 in the General Terms.
16. GOVERNING LAW
These additional provisions shall be governed by the laws of Italy and the
competent court will be Turin in Italy. The Attachment for Italian
Burdensome Clauses (Clausole Onerose) must be signed prior to doing
business in Italy, whenever Services or Products will be obtained in Italy.
The Attachment must be signed whether Italy is the country where the
Business Partner Lead Company and Service Provider Lead Company are located
or when business will be transacted by other Business Partner Companies and
Service Provider Companies.
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BUSINESS PARTNER AGREEMENT [COMPANY FIGURE]
ATTACHMENT FOR ITALIAN BURDENSOME CLAUSES (CLAUSOLE ONEROSE)
PURSUANT TO ARTICLES 1341 AND 1342 OF THE ITALIAN LAW - CIVIL CODE, YOU MUST
SPECIFICALLY ACCEPT THE CLAUSES LISTED IN THIS ATTACHMENT (CALLED "CLAUSOLE
ONEROSE") BY SIGNING THIS ATTACHMENT. THE BUSINESS PARTNER AGREEMENT IS VOID IN
ITALY IN THE ABSENCE OF YOUR SIGNATURE ON THIS ATTACHMENT.
You hereby specifically accept the following clauses in the General Terms (GT),
Remarketer Terms Attachment (RT), and IBM Global Services' Network Services
Attachment for Remarketing (NS).
2. Agreement Structure (GT)
8. Access to EligibleServices (NS)
11. Changes to the Agreement Terms (GT, NS)
8. Patents and Copyrights (GT)
9. Liability (GT)
15. Ending the Agreement (GT)
13. Ending the Agreement (NS)
16. Governing Law (GT)
1. Our Relationship (RT)
2. Our Relationship (NS)
7. Warranty for Eligible Services (NS)
9. Customer Premises Equipment (NS)
10. Customer Transmitted Data (NS)
You specifically accept the Italian country unique terms in section 14 (NS).
If any of the clauses mentioned above have been amended by a written document
signed by both of us, by signing this Attachment you are specifically accepting
the amended terms.
- --------------------------------------------------------------------------------
Each of us agrees that the complete agreement between us about this transaction
consists of 1) this Attachment, 2) any other Transaction Documents, and 3) the
Business Partner Agreement (or any equivalent agreement signed by both of us).
Agreed to: (Business Partner Lead Company name)
By /s/ Al Giffin
------------------------------
Authorized Signature
Name (type or print): AL GIFFIN
Date: JANUARY 15, 1998
Business Partner Lead Company number: Agreement number:
Business Partner Lead Company address: Service Provider Lead Company
Name and Address:
- -------------------------------------------------------------------------------
After signing, please return a copy of this Agreement to the "Service Provider
Lead Company address" shown above.
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PAKISTAN
GENERAL TERMS
2. AGREEMENT STRUCTURE
The following paragraph is added:
Service Supplements and Schedule of Charges are unseparable parts of this
Agreement. The charges and payment schedule is defined in the Schedule of
Charges; the Eligible Services that we will provide you under this
Agreement are defined in the Service Supplement.
Any reproduction of this Agreement, an Attachment, or a Transaction
Document, must be attested by a Court of Law, to be considered an original.
6. PRICE, INVOICING, PAYMENT AND TAXES
The following is added:
We will give you three months' written notice if we increase Eligible
Service charges or revise our prices due to an act of Government or change
invoicing procedures, or when a planned change would substantially alter a
Eligible Service from its current description. We will give you 12 months'
notice if we terminate a Eligible Service (or if we change this 12-month
notice period). However, if a third party claims that a Product we provide
as part of a Service infringes a patent or copyright, we reserve the right
to terminate the Eligible Service effective immediately.
9. LIABILITY
Item 3 in the first paragraph is modified to read:
3. the amount of any other actual loss or damage, up to the greater of
this Agreement amount or the charges (if recurring or usage, 12 months'
charges apply) for the Services or Product that is the subject of the
claim.
IBM GLOBAL SERVICES' NETWORK SERVICES TERMS ATTACHMENT
8. ACCESS TO ELIGIBLE SERVICES
The following is added:
We assume no responsibility for not providing Services due to reasons
arising from Pakistan's PTT or a private network operator's ability to
provide data and/or communications lines.
2. OUR RELATIONSHIP
Add a new item 18:
18. obtain, install, and maintain suitable equipment, including
communication lines, as necessary to access the Services.
NETHERLANDS
IBM GLOBAL SERVICES' NETWORK SERVICES ATTACHMENT FOR REMARKETING
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8. CUSTOMER PREMISES EQUIPMENT
The first two paragraphs are replaced with the following:
We will, if applicable, provide CPE specified in the local Agreement
Transaction Document to be installed on your premises for the purpose of
providing a Service. The CPE is and will remain the asset of the Service
Provider Company or its lessor and will not become a fixture or realty.
Certain CPE may contain licensed internal code. We will specify this in
the local Agreement Transaction Document.
NORWAY
Eligible Services and Products are provided by Norsk Informasjonsteknologi
AS (NIT AS) in Norway.
PORTUGAL
Eligible Services and products are provided by COMPENSA in Portugal.
TURKIYE
GENERAL TERMS
6. PRICING, INVOICING, PAYMENT AND TAXES
The following paragraph is added:
IBM will specify charges for each Service in the Schedule of Charges.
These charges do not include applicable taxes. These taxes will be
specified separately in IBM's invoice. The invoice for the Service will be
issued at the first working day of the beginning of the Eligible Service.
The amount of the invoice is based on the sales exchange rate of US dollars
published by the Central Bank of Turkiye on the issue date of the invoice.
Upon the receipt of the IBM's invoice, you will make the payment within
fifteen days following the issue date of the invoice. IBM will debit
interest rate of 8% per months if the payment is not made within this
specified period. The accommodation and travel expenses incurred outside
of Istanbul will be invoiced separately.
The following is added as a new section 17.
17. NOTIFICATION ADDRESS
Each of us accept the addresses stated in "Schedule A" as their
notification addresses. All notifications made to these addresses will be
valid unless any change in the addresses are notified to the other party in
writing.
IBM GLOBAL SERVICES' NETWORK SERVICES ATTACHMENT FOR REMARKETING
2. OUR RELATIONSHIP
The following items are added as items 18 and 19:
18. IBM assumes no responsibility for Turkish PTT's and/or Turk Telekom
A.S.'s inability to provide data and/or communications lines in a timely
manner and/or interruptions in the Eligible Service caused by Turkish PTT
and/or Turk Telekom A.S. after the communication lines are provided;
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and
19. IBM assumes no responsibility for not providing the Eligible Services
due to reasons arising from non-IBM hardware and software products.
UKRAINE
Eligible Services and Products are provided by M.C.I. Ltd. (hereinafter
called M.C.I.) in Ukraine.
Eligible Services in the territory of Ukraine are provided under license
issued to M.C.I. by Ministry of Communication of Ukraine and governed by
Ukrainian "Law of Communication." In the event that such license is
revoked, terminated or amended, M.C.I. shall, notwithstanding any other
terms, have the right to terminate this Agreement or amend it accordingly
on three months' written notice.
IBM GLOBAL SERVICES NETWORK SERVICES' ATTACHMENT FOR REMARKETING
2. OUR RELATIONSHIP
Additional responsibilities are added as follows:
18. to procure communication lines from the Ukrainian PTT prior to the
Service Start Date and to maintain the communication lines for the duration
of this Agreement if applicable. Any equipment you provide must comply
with specifications provided by M.C.I.;
19. to be responsible for the attachment and operation of communication
equipment you provide. M.C.I. responsibilities end at the applicable
interface to M.C.I. equipment. M.C.I. is not responsible for maintenance
and operation of the Ukrainian PTT lines including those within the M.C.I.
computing center network.
- --------------------------------------------------------------------------------
LATIN AMERICA
BRASIL
Eligible Services and Products will be provided by GSI in Brasil.
GENERAL TERMS
3. OUR RELATIONSHIP
The following sentence is added to item 6, Other Responsibilities:
Electronic information will be used only for the purpose of communication
between parties.
Item 10 is modified to read:
10. neither of us is responsible for failure to fulfill its obligations
due to causes beyond its control except for what is covered under Article
27 of Law Number 8.078/90.
6. PRICING, INVOICING, PAYMENT AND TAXES
The following sentence is added:
Page 19 of 20
<PAGE>
Price increases and/or readjustment will be subject to Brazilian
legislation and will be specified in Transaction Documents.
IBM GLOBAL SERVICES' NETWORK SERVICES ATTACHMENT FOR REMARKETING
9. CUSTOMER PREMISES EQUIPMENT
All Equipment provided in Brazil will be subject to Brazilian legislation,
and will have terms and conditions specified in Transaction Documents.
CHILE
Eligible Services and Products are provided by ISSC Chile in Chile.
DOMINICAN REPUBLIC
Eligible Services and Products are provided by GBM de Republica Dominicana
S.A. in the Dominican Republic.
EL SALVADOR
Eligible Services and Products are provided by GBM de El Salvador in El
Salvador.
GUATEMALA
Eligible Services and Products are provided by GBM de Guatemala in
Guatemala.
MEXICO
Eligible Services and Products are provided by IBM Servicos Corporativos de
Informacion (ISCI) in Mexico.
PANAMA
Eligible Services and Products are provided by GBM de Panama S.A. in
Panama.
- --------------------------------------------------------------------------------
NORTH AMERICA
CANADA AND CARIBBEAN NORTH DISTRICT
The Caribbean North District is comprised of the following countries:
Anguilla, Antigua, Aruba, Bahamas, Barbados, Barbuda, Bermuda, Cayman
Islands, Dominica, Grenada, Guyana, Jamaica, Montserrat, Netherlands
Antilles, St. Kitts and Nevis, St. Lucia, St. Maarten, St. Vincent and
Grenadines, Suriname, Tortolla, Trinidad and Tobago, and Turks and Caicos.
Services and Products are provided by Bermuda Computer Services Limited in
Bermuda.
Page 20 of 20
<PAGE>
IBM BUSINESS PARTNER AGREEMENT [LOGO]
INTERNATIONAL SOLUTION PROVIDER PROFILE
- --------------------------------------------------------------------------------
We welcome you as an IBM Business Partner-Solution Provider.
This Profile covers the details of your approval to actively market Eligible
Services. As our Solution Provider, you enhance Eligible Services with your
solution to provide Services capable of satisfying the Customer's requirements.
By signing below, each of us agrees to the terms of the following (collectively
called the "Agreement"):
(a) this Profile;
(b) General Terms (Z125-5478-00 11/96);
(c) the applicable Attachments referred to in this Profile; and
(d) the Exhibit.
This Agreement and its applicable transaction documents are the complete
agreement regarding this relationship, and replace any prior oral or written
communications between us. Once this Profile is signed, 1) any reproduction of
this Agreement or a transaction document made by reliable means (for example,
photocopy or facsimile) is considered an original, to the extent permissible
under applicable law, and 2) all Products and Services you market and Services
you perform under this Agreement are subject to it. If you have not already
signed an Agreement for Exchange of Confidential Information (AECI), your
signature on this Profile includes your acceptance of the AECI provided to you.
After signing this Profile, please return 2 copy to the IBM address shown below.
Agreed to: Agreed to:
QUICKRESPONSE SERVICES, INC. INTERNATIONAL BUSINESS MACHINES
CORPORATION
By: /s/ Shawn M. O'Connor By: /s/ Al Giffin
------------------------------ -----------------------------
Authorized Signature
Name (type or print) SHAWN O'CONNOR Name (type or print): AL GIFFIN
Date: 12/31/97 Date: 12/31/97
Agreement number:
IBM Business Partner no:
Business Partner Address IBM Address:
QuickResponse Services IBM Corporation
1400 Marina Way South 3405 Dr. Martin Luther King Jr. Blvd.
Richmond, CA 94804 Tampa, FL 33607
Attention: Order Support Services
Page 1 of 4
<PAGE>
DETAILS OF OUR AGREEMENT
CONTRACT START DATE: January 1, 1998 DURATION: 3 years
This Agreement shall commence on January 1, 1998, and terminate on 31 December
2000.
The effective date of this Agreement and all modifications to this Agreement are
effective on the first day of the month after signature by you and acceptance by
IBM.
Should each of us decide to continue our relationship for an additional term
upon expiration of the term of this Agreement, this Agreement shall remain in
effect until terminated by both parties or replaced by a new Agreement.
RELATIONSHIP APPROVAL/ACCEPTANCE OF ADDITIONAL TERMS:
EACH OF US AGREES TO THE TERMS OF THE FOLLOWING BY SIGNING THIS PROFILE. COPIES
OF THE ATTACHMENTS ARE INCLUDED.
APPROVED RELATIONSHIP ATTACHMENT REFERENCE
Solution Provider Attachment Z125-5480-00 11/96
Remarketer Terms Attachment Z125-5497-00 11/96
IBM Global Services' Network
Services Terms Z125-5xxx-00 12/97 (QRS)
Attachment for Remarketing
International Attachment
for Solution Provider - 7 January 1998
Remarketer
You are approved to remarket Eligible Services to Customers, in the Retail
Industry and those organizations in the supply chain that provide finished goods
and services, directly and indirectly, and those organizations that distribute
those goods and services. The table in the Exhibit lists standard industry
codes ("SIC") and retail industry definitions.
ELIGIBLE SERVICES APPROVAL:
You are approved to market under Remarketer Terms Eligible Services in the
following IBM Global Services offering categories from the Network Services
business segment. The terms of the Exhibit apply to the Eligible Services
listed in it. In addition, you are authorized to market any other Eligible
Services listed in the Exhibit. Not all Eligible Services in each offering
category are available in all countries.
* Managed Data Network Services
* Managed Messaging and Collaborative Services
* Managed Electronic Transaction Services
* Managed Internet and Intranet Services
MINIMUM REVENUE COMMITMENT
The minimum gross revenue commitment for the Agreement term is $ 250,000,000.00
as follows:
Minimum attainment by end of: Gross Revenue Amount
---------------------------- --------------------
12 months $60,000,000.00
24 months $140,000,000.00
Agreement term $250,000,000.00
ADJUSTMENT CHARGES
In the event you have not met your $250,000,000 minimum revenue commitment by
the end of the Agreement period, you agree to pay an adjustment charge as
follows:
Page 2 of 4
<PAGE>
<TABLE>
<CAPTION>
ACTUAL GROSS REVENUE TO IBM ADJUSTMENT CHARGE
<S> <C>
$250,000,000.00 - $225,000,000.00 1.5% of amount less than $250,000,000.00
$224,999,999.00 - $200,000,000.00 $450,000.00 + 2.0% of amount less than $225,000,000.00
$199,999,999.00 - $150,000,000.00 $950,000.00 + 3.0% of amount less than $200,000,000.00
$149,999,999.00 - $100,000,000.00 $2,450,000.00 + 4.0% of amount less than $150,000,000.00
$99,999,999.00 - $0.00 $4,450,000.00 + 5.0% of amount less than $100,000,000.00
</TABLE>
In the event you terminate this Agreement and you have not met your minimum
revenue commitment, the adjustment charges shall become due and payable. In the
event IBM terminates this Agreement with cause, you will be required to pay the
adjustment charges. In the event IBM terminates this Agreement without cause,
you will not be required to pay the adjustment charges.
VALUE-ADDED ENHANCEMENT DESCRIPTIONS
You will provide the following value-added enhancements and support services
with Eligible Services:
1. Catalog Services;
2. Inventory Management Services;
3. Network Services;
4. Logistics Management Services; and
5. Professional Services.
PARTICIPATING BUSINESS PARTNER COMPANIES AND IBM COMPANIES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
COUNTRY BUSINESS PARTNER COMPANY IBM COMPANY
NAME AND ADDRESS NAME AND ADDRESS
- --------------------------------------------------------------------------------
<S> <C> <C>
Argentina QuickResponse Services IBM Argentina S.A.
1400 Marina Way South Ing. Enrique Butty 275
Richmond, CA 94804 USA 1300 Buenos Aires
- --------------------------------------------------------------------------------
Australia QuickResponse Services Advantra Pty. Ltd.
1400 Marina Way South Darling Park
Richmond, CA 94804 USA 201 Sussex Street
Sydney NSW 2000
- --------------------------------------------------------------------------------
Austria QuickResponse Services IBM Oesterreich GESMBH
1400 Marina Way South Obere Donaustrasse 95
Richmond, CA 94804 USA A-1020 Vienna
- --------------------------------------------------------------------------------
Belgium QuickResponse Services IBM IN Belgium
1400 Marina Way South Sq. Victoria Regina 1
Richmond, CA 94804 USA 1210 Bruxelles
- --------------------------------------------------------------------------------
Brazil QuickResponse Services GSI Brasil
1400 Marina Way South Rua Totoia, 1157
Richmond, CA 94804 USA 10 Andar CEP 04707-900
- --------------------------------------------------------------------------------
Canada QRS Canada Inc. IBM Canada
674 Aspen Road 3500 Avenue East
Pickering, Ontario L1V 3Z1 Business/Financial Services
Markham, Ontario
- --------------------------------------------------------------------------------
Denmark QuickResponse Services IBM Denmark A.S.
1400 Marina Way South Nymollevej 91
Richmond, CA 94804 USA 2800 Lyngby
- --------------------------------------------------------------------------------
France QuickResponse Services IBM France Axone - DRCE
1400 Marina Way South 4 Av. Montaigne
Richmond, CA 94804 USA Le Montaigne
93881 Noisy Le Grand
- --------------------------------------------------------------------------------
Germany QuickResponse Services IBM Deutchland
1400 Marina Way South Informationssysteme GmbH
Richmond, CA 94804 USA Pascalstrasse 100
70569 Stuttgart
- --------------------------------------------------------------------------------
Page 3 of 4
<PAGE>
- --------------------------------------------------------------------------------
Hong Kong QuickResponse Services IBM China/Hong Kong Corp.
1400 Marina Way South 13/F Hongkong Telecom Tower
Richmond, CA 94804 USA Taikoo Place, 979 King's Road
Quarry Bay, Hong Kong
- --------------------------------------------------------------------------------
Italy QuickResponse Services IN.TE.S.A. SPA
1400 Marina Way South Via Servais, 125
Richmond, CA 94804 USA 10146 Torino
- --------------------------------------------------------------------------------
Israel QuickResponse Services IBM Israel Ltd.
1400 Marina Way South IBM Building
Richmond, CA 94804 USA 2 Weizmann Street
P.O.B. 33666
Tel Aviv 61336
- --------------------------------------------------------------------------------
Japan QuickResponse Services IBM Japan Ltd.
1400 Marina Way South 2-12 Roppongi 3-Chome
Richmond, CA 94804 USA Minato-ku
Tokyo 106
- --------------------------------------------------------------------------------
Mexico QuickResponse Services IBM Mexico
1400 Marina Way South Avanida Casa de la Moneda
Richmond, CA 94804 USA Col Lomas de Sotelo
11200 Mexico D.F.
- --------------------------------------------------------------------------------
The Netherlands QuickResponse Services IBM Nederland N.V.
1400 Marina Way South Johan Huizengerlaan 765
Richmond, CA 94804 USA 1066 VM Amsterdam
2713 HA Zoetermeer
- --------------------------------------------------------------------------------
Pakistan QuickResponse Services IBM Pakistan
1400 Marina Way South 3. Avari Plaza, Fatima
Richmond, CA 94804 USA Jinnah Rd.
Karachi
- --------------------------------------------------------------------------------
Singapore QuickResponse Services IBM Singapore Pte. Ltd.
1400 Marina Way South 80 Anson Road
Richmond, CA 94804 USA IBM Towers
Singapore 0207
- --------------------------------------------------------------------------------
South Africa QuickResponse Services IBM South Africa Ltd.
1400 Marina Way South IBM Park
Richmond, CA 94804 USA Sandhurst
Sandton 2196
- --------------------------------------------------------------------------------
South Korea QuickResponse Services IBM Korea
1400 Marina South Voido-Dong, Yeongdeungpo-gu,
Richmond, CA 94804 USA Seoul, Republic of Korea
- --------------------------------------------------------------------------------
Spain QuickResponse Services IBM ISS Spain
1400 Marina Way South Ctra. Barcelona, KM 18.40
Richmond, CA 94804 USA San Fernando de Henares
28850 Madrid
- --------------------------------------------------------------------------------
Switzerland QuickResponse Services IBM (Switzerland) Busines
1400 Marina Way South Baendliweg 21
Richmond, CA 94804 USA 8010 Zurich
- --------------------------------------------------------------------------------
Taiwan QuickResponse Services IBM Taiwan
1400 Marina Way South 12F, 2, Sec. 1
Richmond, CA 94804 USA Tun Hua S. Road
Taipei
- --------------------------------------------------------------------------------
Thailand QuickResponse Services IBM Thailand Co. Ltd.
1400 Marina Way South 388 Phaholyothin Road
Richmond, CA 94804 USA Phyathai
Bangkok 10400
- --------------------------------------------------------------------------------
United Kingdom QuickResponse Services IBM United Kingdom Ltd.
1400 Marina Way South P.O. Box 31
Richmond, CA 94804 USA Birminghan Road
Warwick CV34 5JL
- --------------------------------------------------------------------------------
Venezuela QuickResponse Services IBM Venezuela S.A.
1400 Marina Way South Avenida Ernesto Blohm
Richmond, CA 94804 USA Chuao Caracas
- --------------------------------------------------------------------------------
</TABLE>
Page 4 of 4
<PAGE>
IBM BUSINESS PARTNER AGREEMENT [LOGO]
SOLUTION PROVIDER ATTACHMENT
- --------------------------------------------------------------------------------
THESE TERMS PREVAIL OVER AND ARE IN ADDITION TO OR MODIFY THE REMARKETER TERMS
ATTACHMENT AND THE COMPLEMENTARY MARKETING TERMS ATTACHMENT.
1. MARKETING APPROVAL
You may be approved as a Solution Provider under a remarketer relationship
or under a complementary marketing relationship, or both. If we approve
you to market the same Products and Services under both remarketer and
complementary marketing terms, all transactions will be under remarketer
terms. You may unilaterally elect not to participate under remarketer
terms for a specific transaction or business segment by providing us a
signed IBM Business Partner Statement of Election. If you meet the
marketing approval requirements of the complementary marketing terms, you
may participate under those terms.
We may specify the specific industry codes to which you may market Products
and Services. If we do so, you agree to comply.
2. VALUE ADDED ENHANCEMENT
For Products we specify in the Exhibit, you are required to have a solution
which is a value added enhancement that we approve and specify on your
Profile and which significantly adds to the Product's function and
capability.
You agree to market Products and Services only with your approved value
added enhancement as part of an integrated solution for End Users. Certain
Products we specify do not require a value added enhancement.
In the event we withdraw approval of your value added enhancement, we also
withdraw your approval as an IBM Business Partner for that value added
enhancement.
We may, at any time, modify the criteria for approval of your value added
enhancement. You are responsible to modify your value added enhancement to
meet these criteria.
You agree to market Products, including processor upgrades requiring a
processor serial number change, to only End Users for whom your value added
enhancement is their primary reason for acquiring the Products, and who
intend the on-going use of such enhancement.
A sale to an End User without a value added enhancement when required, is a
material breach of the Agreement.
However, your value added enhancement is not required to be the End User's
primary reason for acquiring upgrades to systems you previously installed
with your enhancement and where your enhancement is still in productive
use. Upgrades include processor upgrades (non-serial number change),
peripherals and programs.
Unless we specify otherwise in writing, you may market upgrades to only
those End Users where you have installed your value added enhancement, and
who intend on-going use of that value added enhancement.
Page 1 of 3
<PAGE>
3. YOUR RESPONSIBILITIES TO IBM
You agree:
1. to develop a mutually acceptable business plan with us, if we require
one. Such plan will document each of our marketing plans as they
apply to our relationship. We will review the plan, at a minimum,
once a year;
2. that, unless precluded by applicable law, one of the requirements for
you to retain this relationship is that you achieve the minimum annual
attainment we specify in your Profile;
3. to order Products and Services, as we specify in the operations guide;
4. to maintain trained personnel, as we specify in your Profile or
Exhibit, as applicable;
5. to provide us, on our request, relevant financial information about
your business so we may, for example, use this information in our
consideration to extend credit terms to you;
6. to have access to the Products you are approved to market for 1)
demonstration purposes, 2) providing support your End Users and 3)
supporting your value added enhancement; and
7. to maintain the capability to demonstrate Products we approve you to
market.
4. YOUR RESPONSIBILITIES TO END USERS
WHEN YOU MARKET PRODUCTS AND SERVICES UNDER COMPLEMENTARY MARKETING TERMS,
ITEMS 10 AND 11 DO NOT APPLY AND ITEMS 2 AND 5 ONLY APPLY WHEN YOU USE OUR
CENTRAL ORDER FACILITY.
You agree to:
1. assist the End User to achieve productive use of your solution and the
Products and Services you marketed;
2. configure Products we approve you to market. On your request, we may
assist you;
3. identify and select the required technology based upon the End User's
requirements, and confirm that the Product configuration is fully
capable of the satisfactory performance of your solution;
4. not make representations that IBM is responsible for the Products'
configuration and their ability to satisfy the End User's
requirements:
5. advise the End User of Product installation requirements:
6. develop a plan, agreed to by the End User. for installation and
post-installation support for the offering you market. For Products
and Services we approve you to market, such support includes your
being the primary contact for Product and Services information,
technical advice and operational advice associated with the offering.
However, you may delegate these support responsibilities for Products
and any other associated products to another IBM Business Partner who
is approved to market such Products. If you do, you retain customer
satisfaction responsibility. Alternatively, such support
responsibilities will be provided by IBM if you market the applicable
IBM Services to the End User. If you do, we assume customer
satisfaction responsibility for such support:
7. assist the End User in Product problem determination and resolution,
unless this responsibility is delegated as specified in item 6 above;
8. give written notice to the End User of any modification you make to a
Product and the name of the warranty service provider and advise that
such modification may void the warranty for the Product;
Page 2 of 3
<PAGE>
9. support the End User in planning fulfillment of Product training and
education requirements, including informing the End User of
educational offerings, as applicable;
10. inform the End User that the sales receipt (or other documentation
such as Proof of Entitlement, if it is required) will be necessary for
proof of warranty entitlement or for Program upgrades; and
11. provide warranty information to the End User.
Page 3 of 3
<PAGE>
IBM BUSINESS PARTNER AGREEMENT [LOGO]
IBM GLOBAL SERVICES' NETWORK SERVICES EXHIBIT
- --------------------------------------------------------------------------------
A. GLOBAL TERMS
1. ADMINISTRATIVE CHARGES AND CREDITS
There will be no charge for establishing new QRS invoice accounts to
support client administration and the electronic delivery of monthly
billing information to QRS.
2. LICENSED PROGRAMS
QRS Customers must contract directly with IBM for licensed programs.
Programs ordered by a QRS Customer under an IBM account ID which is part of
QRS billing rollup structure will be invoiced to QRS.
3. REPORTS
Upon request, QRS shall promptly provide IBM with their monthly sales
analysis. These reports shall include the revenue to IBM of the Eligible
Services by the industry segment and by the IBM Service offerings within
the industry segment line of business.
4. MOST FAVORED REMARKETER
If during the Agreement term IBM provides more favorable prices and/or
discounts to an IBM Business Partner-Solution Provider remarketer with whom
IBM has substantially the same or less combination of support, minimum
revenue commitment, Eligible Services, and geographic area terms, IBM will
offer prices and/or discounts to you that are at least as favorable as
those we provide to the other IBM Business Partner-Solution Provider
remarketer provided you agree in writing to accept any and all terms
associated with such prices and/or discounts.
5. CHARGE PROTECTION
If IBM increases the prices for Eligible Service in the aggregate such that
the effect on the pre-tax invoice amount is more than seven percent in any
year commencing on an anniversary date of this Agreement, you may terminate
this Agreement upon six months' written notice to us. In the event of such
termination, you will have no obligation to pay adjustment charges for
failure to meet your minimum revenue commitment.
If IBM decreases the prices for Eligible Services in the aggregate such
that the effect on the pre-tax invoice amount is more than seven percent in
any year commencing on an anniversary date of this Agreement, IBM will
proportionally lower your minimum revenue commitment and the adjustment
charges specified in the Profile.
6. RETAIL INDUSTRY
The IBM Industry Segments as further identified by the Standard Industry
Code ("SIC") and description, consist of the following:
Page 1 of 12
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
INDUSTRY
SEGMENT SIC DESCRIPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
DA RETAIL - APPAREL MANUFACTURING
- --------------------------------------------------------------------------------
DA 2251 Women's hosiery, except socks
- --------------------------------------------------------------------------------
DA 2252 Hosiery, nec
- --------------------------------------------------------------------------------
DA 2253 Knit outerwear mills
- --------------------------------------------------------------------------------
DA 2254 Knit underwear mills
- --------------------------------------------------------------------------------
DA 2259 Knitting mills, nec
- --------------------------------------------------------------------------------
DA 2311 Men's and boys' suits and coats
- --------------------------------------------------------------------------------
DA 2321 Men's and boy's shirts
- --------------------------------------------------------------------------------
DA 2322 Men's and boys' underwear and night wear
- --------------------------------------------------------------------------------
DA 2323 Men's and boys' neckwear
- --------------------------------------------------------------------------------
DA 2325 Men's and boys' trousers and slacks
- --------------------------------------------------------------------------------
DA 2326 Men's and boys' work clothing
- --------------------------------------------------------------------------------
DA 2329 Men's and boys' clothing, nec
- --------------------------------------------------------------------------------
DA 2331 Women's and misses' blouses and shirts
- --------------------------------------------------------------------------------
DA 2335 Women's, junior's and misses' dresses
- --------------------------------------------------------------------------------
DA 2337 Women's and misses' suits and coats
- --------------------------------------------------------------------------------
DA 2339 Women's and misses' outerwear, nec
- --------------------------------------------------------------------------------
DA 2341 Women's and children's underwear
- --------------------------------------------------------------------------------
DA 2342 Bras, girdles, and allied garments
- --------------------------------------------------------------------------------
DA 2353 Hats, caps, and millinery
- --------------------------------------------------------------------------------
DA 2361 Girls' and childrens' dresses, blouses
- --------------------------------------------------------------------------------
DA 2369 Girls' and children's outerwear, nec
- --------------------------------------------------------------------------------
DA 2371 Fur goods
- --------------------------------------------------------------------------------
DA 2381 Fabric dress and work gloves
- --------------------------------------------------------------------------------
DA 2384 Robes and dressing gowns
- --------------------------------------------------------------------------------
DA 2385 Waterproof outerwear
- --------------------------------------------------------------------------------
DA 2386 Leather and sheep-lined clothing
- --------------------------------------------------------------------------------
DA 2387 Apparel belts
- --------------------------------------------------------------------------------
DA 2389 Apparel and accessories, nec
- --------------------------------------------------------------------------------
DA 2391 Curtains and draperies
- --------------------------------------------------------------------------------
DA 2392 House furnishings, nec
- --------------------------------------------------------------------------------
DA 2393 Textile bags
- --------------------------------------------------------------------------------
DA 2394 Canvas and related products
- --------------------------------------------------------------------------------
DA 2395 Pleating and stitching
- --------------------------------------------------------------------------------
DA 2396 Automotive and apparel trimmings
- --------------------------------------------------------------------------------
DA 2397 Schiffli machine embroideries
- --------------------------------------------------------------------------------
DA 2399 Fabricated textile products, nec
- --------------------------------------------------------------------------------
DA 3111 Leather tanning and finishing
- --------------------------------------------------------------------------------
DA 3131 Footwear cut stock
- --------------------------------------------------------------------------------
DA 3142 House slippers
- --------------------------------------------------------------------------------
DA 3143 Men's footwear, except athletic
- --------------------------------------------------------------------------------
DA 3144 Women's footwear, except athletic
- --------------------------------------------------------------------------------
DA 3149 Footwear, except rubber, nec
- --------------------------------------------------------------------------------
DA 3151 Leather gloves and mittens
- --------------------------------------------------------------------------------
DA 3161 Luggage
- --------------------------------------------------------------------------------
DA 3171 Women's handbags and purses
- --------------------------------------------------------------------------------
DA 3172 Personal leather goods, nec
- --------------------------------------------------------------------------------
DA 3199 Leather goods, nec
- --------------------------------------------------------------------------------
DB RETAIL - MASS MERCHANDISE
- --------------------------------------------------------------------------------
DB 5331 Variety stores
- --------------------------------------------------------------------------------
</TABLE>
Page 2 of 12
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------------------------------------------------------
DB 533A Discount stores
- --------------------------------------------------------------------------------
DC RETAIL - DEPARTMENT STORES
- --------------------------------------------------------------------------------
DC 5311 Department stores
- --------------------------------------------------------------------------------
DC 5399 Miscellaneous general merchandise stores
- --------------------------------------------------------------------------------
DD RETAIL - DIRECTED MARKETING
- --------------------------------------------------------------------------------
DD 5961 Catalog and mail order houses
- --------------------------------------------------------------------------------
DE RETAIL - SPECIALTY
- --------------------------------------------------------------------------------
DE 5611 Men's and boy's clothing stores
- --------------------------------------------------------------------------------
DE 5621 Women's clothing stores
- --------------------------------------------------------------------------------
DE 5632 Women's accessory and specialty stores
- --------------------------------------------------------------------------------
DE 5641 Children's and infants' wear stores
- --------------------------------------------------------------------------------
DE 5651 Family clothing stores
- --------------------------------------------------------------------------------
DE 5661 Shoe stores
- --------------------------------------------------------------------------------
DE 5699 Miscellaneous apparel and accessory stores
- --------------------------------------------------------------------------------
DE 5731 Radio, TV and electronic stores
- --------------------------------------------------------------------------------
DE 5734 Computer and software stores
- --------------------------------------------------------------------------------
DE 5735 Record and prerecorded tape stores
- --------------------------------------------------------------------------------
DE 5736 Musical instrument stores
- --------------------------------------------------------------------------------
DE 5932 Used merchandise stores
- --------------------------------------------------------------------------------
DE 5941 Sporting goods and bicycle shops
- --------------------------------------------------------------------------------
DE 5942 Book stores
- --------------------------------------------------------------------------------
DE 5942 Stationery stores
- --------------------------------------------------------------------------------
DE 5944 Jewelry stores
- --------------------------------------------------------------------------------
DE 5945 Hobby, toy, and game shops
- --------------------------------------------------------------------------------
DE 5946 Camera and photographic supply stores
- --------------------------------------------------------------------------------
DE 5947 Gift, novelty, and souvenir shops
- --------------------------------------------------------------------------------
DE 5948 Luggage and leather goods stores
- --------------------------------------------------------------------------------
DE 5949 Sewing, needlework and piece goods
- --------------------------------------------------------------------------------
DE 5983 Fuel oil dealers
- --------------------------------------------------------------------------------
DE 5984 Liquified petroleum gas dealers
- --------------------------------------------------------------------------------
DE 5989 Fuel dealers, nec
- --------------------------------------------------------------------------------
DE 5992 Florists
- --------------------------------------------------------------------------------
DE 5993 Tobacco stores and stands
- --------------------------------------------------------------------------------
DE 5994 News dealers and newsstands
- --------------------------------------------------------------------------------
DE 5995 Optical goods stores
- --------------------------------------------------------------------------------
DE 5999 Miscellaneous retail stores, nec
- --------------------------------------------------------------------------------
DG RETAIL - PHARMACY/DRUG
- --------------------------------------------------------------------------------
DG 5912 Drug stores and proprietary stores
- --------------------------------------------------------------------------------
DH RETAIL - FOOD
- --------------------------------------------------------------------------------
DH 5812 Eating places
- --------------------------------------------------------------------------------
DH 5813 Drinking places
- --------------------------------------------------------------------------------
DR RETAIL - HARDGOODS
- --------------------------------------------------------------------------------
DR 5211 Lumber and Other Building Materials
- --------------------------------------------------------------------------------
DR 5231 Paint, Glass and Wallpaper Stores
- --------------------------------------------------------------------------------
DR 5251 Hardware Stores
- --------------------------------------------------------------------------------
DR 5261 Retail Nurseries, Lawn and Garden Stores
- --------------------------------------------------------------------------------
</TABLE>
Page 3 of 12
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------------------------------------------------------
DR 5712 Furniture Stores
- --------------------------------------------------------------------------------
DR 5713 Floor Covering Stores
- --------------------------------------------------------------------------------
DR 5714 Drapery, Curtain and Upholstery Stores
- --------------------------------------------------------------------------------
DR 5719 Miscellaneous Home Furnishing Stores
- --------------------------------------------------------------------------------
DR 5722 Household Appliance Stores
- --------------------------------------------------------------------------------
</TABLE>
Page 4 of 12
<PAGE>
B. US CHARGES AND DISCOUNTS
1. ELIGIBLE SERVICES
In addition to the Eligible Services in the offering categories listed in
the Solution Provider Profile, you are authorized to market the following
Eligible Services under the Remarketer Terms in the United States:
* Support Services
* Capacity Services
* Software Mail
* SHOWBBS
Eligible Services are described in the applicable IBM Global Services
Service Descriptions.
2. NONDISCOUNTABLE CHARGES
This section lists Eligible Services and applicable nondiscountable charges
which differ from the generally available charges in the applicable IBM
Global Services Fee Schedules.
2.1 SELECTED MANAGED DATA NETWORK SERVICES
2.1.1 REMOTE ACCESS
HOURLY ACCESS RATES
* * * *. Remote Access is
described in the IBM Global Services Service Description.
The charges are as follows:
* * *
[TABLE REDACTED]
* * *
SNA remote access includes X.3 PAD communications interface for
asynchronous dial communication with X-25 hosts attached to the IBM
Global Network.
* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed
separately with the Commission pursuant to Rule 24b-2.
Page 5 of 12
<PAGE>
REMOTE ACCESS SERVERS
CONNECTIVITY SERVER
Under Multiprotocol remote access, IBM provides a server, called the
remote access Connectivity Server, on your premises.
Dial Services - Connectivity Server *
SECURID AND ACE/SERVER
IP remote access, TCP/IP communications feature, supports the use of
SecurID and Security Dynamics ACE/Server as attachment tested in the
IBM Global Network environment. In addition to standard remote
accessusage charges, there is a monthly charge for the support of
SecurID and the ACE/Server. The charges are as follows:
SECURIDU ACE/SERVER-TM- *
FOR EACH ACE/SERVER REGISTERED
X3 PAD COMMUNICATION INTERFACE
Remote access includes X.3 PAD (packet assembler/disassembler)
communication interface for remote asynchronous communication with
X.25 hosts attached to the IBM Global Network. The X.3 PAD support is
limited to selected cities and "800" number access. There is a *
discount on the X.3 PAD monthly charges listed in the IBM Global
Services Managed Data Network Services Fee Schedule.
2.1.2 LEASED LINE NETWORK SERVICES
QRS and IBM will cooperatively sell all Leased Line Network Services
as described in this subsection and the IBM Global Services Managed
Data Network Services Service Description. QRS will identify and
qualify each opportunity and notify IBM. IBM will engage all
qualified opportunities through the solution and fulfillment.
* * * *
INTERNETWORKING AND MULTIPROTOCOL SOLUTIONS
Internetworking and Multiprotocol Solutions provide communications
through high speed leased line multiprotocol connections to the IBM
Global Network from one or more of your designated locations. IBM
provides the leased line connection, routers, digital service units
(DSUs) and modems.
The technical implementation of the connections will be determined by
IBM. Requirements not consistent with these configurations will be
reviewed by IBM as custom solutions. Line speeds provided are
specified in the Managed Data Network Services Service Description and
Fee Schedule.
DIAL BACKUP OPTIONS
As an additional option, switched 56,000 bps dial backup support for a
56,000 bps LAN leased line connection to the same node as the primary
connection is available.
Switched 56,000 bps dial backup support for a 56.000 bps leased line
connection to an alternate node is available as a pre-approved special
bid.
Switched 56,000 bps dial backup support for leased line speeds higher
than 56,000 bps to the same or an alternate node is not generally
available. Each situation must be reviewed separately via the IBM
special bid process and it may, in IBM's sole discretion, be
determined that leased line backup to an alternate node is the
recommended backup option.
* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed
separately with the Commission pursuant to Rule 24b-2.
Page 6 of 12
<PAGE>
There is a one-time installation charge for each internetworking
configuration 56,000 bps dial backup connection of * unless it is
ordered with the original leased line connection.
ALASKA, HAWAII AND PUERTO RICO PASS THROUGH SURCHARGES
The following surcharges are applicable for point-to-point 56KB to T1
Internetworking and Multiprotocol Solutions leased line connections to
Anchorage, Alaska, Honolulu and San Juan, Puerto Rico.
* * *
[TABLE REDACTED]
* * *
IBM Sales Support should be contacted in order to identify the
applicable surcharge on other Hawaii or Puerto Rico or Alaska
locations.
CONVERSION CHARGES FOR INSTALLED INTERNETWORKING AND MULTIPROTOCOL
SOLUTIONS LEASED LINES
The charges are as follows:
* * *
[TABLE REDACTED]
* * *
LEASED LINE SERVICES CONNECTIONS
These Eligible Services are described in the IBM Global Services
Managed Data Network Services Service Description under the section
entitled "Leased Line Services connections."
NON-SNI CONNECTION
Point-to-point leased line tail circuits provide communication
attachment of non-host communication equipment (e.g., workstation
controllers, IBM AS/4000-Registered Trademark-s, and IBM System/36s)
to the IBM Global Network. The following charges are for 9,600 bps,
14,400 bps, 19,200 bps, and 56,000 bps tail circuit Connectivity
Services. Domestic traffic charges do not apply.
* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed
separately with the Commission pursuant to Rule 24b-2.
Page 7 of 12
<PAGE>
SNI HOST CONNECTION
Point-to-Point leased line SNI host connections provide communication
attachment of host computers to IBM. The following charges are for
9,600 bps, 14,400 bps, 19,200 bps, and 56,000 bps SNI host
connections.
HIGH SPEED SNI CONNECTIONS
High speed connections for SNI are available as custom solutions. The
charges are as follows:
* * *
[TABLE REDACTED]
* * *
There is a one-time installation charge of * for line speeds
128KB - T1.
ALASKA, HAWAII AND PUERTO RICO PASS THROUGH SURCHARGES
The following surcharges are applicable for point-to-point 9.6KB to
56KB Leased Line Network Services SNA Host connections to Alaska,
Honolulu, Hawaii and San Juan, Puerto Rico.
* * *
[TABLE REDACTED]
* * *
IBM Sales Support should be contacted to identify the surcharge on
other Hawaii or Puerto Rico locations and at all times for Alaska
surcharge.
CONVERSION CHARGES FOR INSTALLED LEASED LINE SERVICES SNA HOST
CONNECTIONS
Type 1 and Type 2 SNA leased line conversions are more fully described
in the IBM Global Services Managed Data Network Services Service
Description in the section entitled "Leased Line Services
conversions." The charges are as follows:
* * *
[TABLE REDACTED]
* * *
BUSINESS RECOVERY SERVICE (BRS) FOR MDNS
SNA DIAL BACKUP OPTIONS
NETWORK DIAL BACKUP SERVICE (NDBS)
This Service, for dial backup of analog line SNA connections, was
withdrawn from marketing on February 27, 1996.
* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed
separately with the Commission pursuant to Rule 24b-2.
Page 8 of 12
<PAGE>
An installation charge applies except when NDBS is ordered for
installation at the same time as leased line connection.
CUSTOM SOLUTION LEASED LINE DIAL BACKUP OPTION (SNBU)
The Custom Solution leased line dial backup option is available for
shared leased Line, intracompany shared leased line and point-to-point
leased line Service. For analog lines at speeds of 9,600 bps through
19,200 bps, the SNBU service is similar to the Network Dial Backup
Service except that the Customer provides all four business extensions
required in the backup configuration and the Customer places the
backup calls to IBM. (The Eligible Service and pricing are described
in the "SNBU" Supplement for Custom Solution PRO118).
IBM Systems Assurance is required for network dial backup.
DIAL BACKUP ALTERNATE NODE (DBAN)
DBAN provides dial backup to an alternate node for SNA analog
connections at speeds of 9,600 bps, 14,400 bps or 19,200 bps and SNA
digital connections at 56,000 bps for both SNI host and non SNI
connections. DBAN for analog connection provides 4,800 bps backup for
a 2 wire connection and at original line speed for a 4 wire
connection. DBAN for 56,000 bps digital connections provides backup
at either 14,400 bps or 56,000 bps.
The charges are as follows:
* * *
[TABLE REDACTED]
* * *
An installation charge applies except when DBAN is ordered for
installation at the same time as leased line connection. All
interexchange and local exchange carrier charges will be passed
through to customer.
MANAGED DATA NETWORK SERVICES TRAFFIC CHARGES
* * *.
2.2 MANAGED INTERNET AND INTRANET SERVICES
2.2.1 IBM INTERNET CONNECTION SERVICES
IBM INTERNET CONNECTION CORPORATE DIAL SERVICES
* * *. The charges are as
follows:
* * *
[TABLE REDACTED]
* * *
Other related charges for custom mail domain, monthly user ID mailbox
charge and user ID registration charge are described in the IBM Global
Services Managed Internet and Intranet Services Fee Schedule.
* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed
separately with the Commission pursuant to Rule 24b-2.
Page 9 of 12
<PAGE>
IBM GLOBAL NETWORK FIREWALL SECURITY OPTION
IBM Global Network Firewall Security option is described in the IBM
Global Services Managed Internet and Intranet Services Service
Description in the section titled "Security.'
3. DISCOUNTABLE CHARGES
Eligible Services not listed under "Nondiscountable Charges" are eligible
for discounts applied to the charges specified in the IBM Global Services
Fee Schedules. Those discounts are specified below. Other applicable
discounts are described in the applicable IBM Global Services Fee
Schedules.
* * *
[TABLE REDACTED]
* * *
* * * *.
3.1 MANAGED ELECTRONIC TRANSACTION SERVICES DISCOUNT TABLE
Discounts for Managed Electronic Transaction Services charges will be
calculated as indicated in the following table:
* * *
[TABLE REDACTED]
* * *
Managed Electronic Transaction Services charges, exclusive of
Information Exchange charges, eligible for discount must not exceed
* of the net monthly charges invoiced to you by IBM. If such
charges exceed * of the net monthly charges, IBM will reevaluate the
mix of charges to determine future discounts for Managed Electronic
Transaction Services.
4. EDUCATION
* * * *
* * * *.
5. TRAINED PERSONNEL REQUIREMENTS
QRS shall provide the following trained personnel:
* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed
separately with the Commission pursuant to Rule 24b-2.
Page 10 of 12
<PAGE>
* * *
[TABLE REDACTED]
* * *
6. REVENUE GROWTH BONUS
* * * *
* * * *.
* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed
separately with the Commission pursuant to Rule 24b-2.
Page 11 of 12
<PAGE>
C. INTERNATIONAL CHARGES AND DISCOUNTS
1. ELIGIBLE SERVICES
In addition to the Eligible Services in the offering categories listed in
the Solution Provider Profile, you are authorized to market the following
Eligible Services under the Remarketer Terms in countries outside the
United States:
* Support Services
* Capacity Services
* Software Mall
* SHOWBBS
Eligible Services are described in the applicable IBM Global Services Service
Descriptions.
2. DISCOUNTS
A discount of * applies to all charges eligible for discount outside of
the United States.
* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed
separately with the Commission pursuant to Rule 24b-2.
Page 12 of 12
<PAGE>
[LOGO]
IBM BUSINESS PARTNER AGREEMENT
REMARKETER TERMS ATTACHMENT
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION TITLE PAGE
<S> <C> <C>
1. Our Relationship.................... 2
2. Ordering and Delivery............... 2
3. Inventory Adjustments............... 3
4. Price, Invoicing, Payment and Taxes. 3
5. Licensed Internal Code.............. 5
6. Programs............................ 5
7. Export.............................. 6
8. Title............................... 6
9. Risk of Loss........................ 6
10. Installation and Warranty........... 6
11. Warranty Service.................... 7
12. Marketing of Services for a Fee..... 7
13. Marketing of Financing.............. 8
14. Engineering Changes................. 8
15. Ending the Agreement................ 8
</TABLE>
Page 1 of 9
<PAGE>
[LOGO]
IBM BUSINESS PARTNER AGREEMENT
REMARKETER TERMS ATTACHMENT
- --------------------------------------------------------------------------------
1. OUR RELATIONSHIP
As our IBM Business Partner, you market to your Customers the Products and
Services (including shrink-wrap Services) we provide to you. These terms
apply to a Business Partner whose method of distribution is under our
remarketer terms, and includes Distributors, Resellers, Solution Providers,
and Systems Integrators.
RESPONSIBILITIES
Each of us agrees:
1. we offer a money-back guarantee to End Users for certain Products.
You agree to inform the End User of the terms of this guarantee before
the applicable sale. For any such Product, you agree to 1) accept its
return in the time frame we specify, 2) refund the full amount paid to
you for it, and 3) dispose of it (including all its components) as we
specify. We will pay a transportation charge for return of the
Product to us and will give you an appropriate credit.
2. each of us is free to set its own prices and terms; and
3. neither of us will discuss its Customer prices and terms in the
presence of the other.
OTHER RESPONSIBILITIES
You agree:
1. to refund the amount paid for a Product or Service returned to you if
such return is provided for in its warranty or license. You may
return the Product to us for credit at our expense. as we specify in
the operations guide:
2. to provide us with sufficient, free and safe access to your
facilities, at a mutually convenient time, for us to fulfill our
obligations:
3. to retain records, as we specify in the operations guide. of each
Product and Service transaction (for example, a sale or credit) for
three years:
4. to provide us with marketing, sales, installation reporting and
inventory information for our Products and Services, as we specify in
the operations guide:
5. that, when you are approved to market to Remarketers. to market
Products and Services which require certification, only to Remarketers
who are certified to market them:
6. to comply with all terms regarding Program upgrades:
7. to provide a dated sales receipt (or its equivalent, such as an
invoice) as we specify in the operations guide. to your Customers,
before or upon delivery of Products and Services; and
8. to report to us any suspected Product defects or safety problems, and
to assist us in tracing and locating Products.
2. ORDERING AND DELIVERY
You may order Products and Services from us as we specify ill the
operations guide. You agree to order them in sufficient time to count
toward your minimum annual attainment, if applicable.
We will agree to a location to which we will ship. We may establish
criteria for you to maintain at such location (for example, certain
physical characteristics, such as a loading dock), as we specify in the
operations guide.
Page 2 of 9
<PAGE>
Upon becoming aware of any discrepancy between our shipping manifest and
the Products and Services received from us, you agree to notify us
immediately. We will work with you to reconcile any differences.
Although we do not warrant delivery dates, we will use reasonable efforts
to meet your requested delivery dates.
We select the method of transportation and pay associated charges for
Products and Services we ship.
We may not be able to honor your request for modification or cancellation
of an order. We may apply a cancellation charge for orders you cancel
within 10 business days before the order is scheduled to be shipped. The
Exhibit will specify if a cancellation charge applies and where we will
specify the charge.
If we are unable to stop shipment of an order you cancel, and you return
such Product to us after shipment, our inventory adjustment terms apply.
3. INVENTORY ADJUSTMENTS
We will specify in your Exhibit the Products and Services to which this
section applies.
Products and Services you return to us for credit must have been acquired
directly from us. You must request and receive approval from us to return
the Products and Services.
Products and Services must be received by us within one month of our
approving their return, unless we specify otherwise to you in writing. We
will issue a credit to you when we accept the returned Products and
Services.
Certain Products may be acquired only as Machines Bond Programs packaged
together as a solution. These Products must be returned with all their
components intact.
For certain Products and Services you return, a handling charge applies.
We will specify the handling charge percentage in the Exhibit. We
determine your total handling charge by multiplying the inventory
adjustment credit amount for the Products and Services by the handling
charge percent.
You agree to pay transportation and associated charges for Products and
Services you return.
Unless we specify otherwise, returned Products and Services must be in
their unopened and undamaged packages.
You agree to ensure the returned Products and Services are free of any
legal obligations or restrictions that prevent their return. We accept
them only from locations within the country to which we ship Products and
Services.
We will reject any returned Products and Services that (do not comply with
these terms.
4. PRICE, INVOICING, PAYMENT AND TAXES PRICE AND DISCOUNT
PRICE AND DISCOUNT
The price, and discount if we specify one, for each Product and Service
will be made available to you in a communication which we provide to you in
published form or through our electronic information systems or a
combination of both. Unless we specify otherwise, discounts do not apply
to Program upgrades, accessories, or field-installed Machine features,
conversions, or upgrades.
The price for each Product and Service is the lower of the price in effect
on the date we receive your order, or the date we ship a product or
"shrink-wrap" Service, or the start date of a Service, if it is within six
months of the date we receive your order.
Page 3 of 9
<PAGE>
PRICE AND DISCOUNT CHANGES
We may change prices and increase discounts at any time. We may decrease
discounts on one month's written notice.
Price increases for Products and Services included in a project do not
apply to you for up to two years from the start date of a project (we will
protect the price that was in effect at the time we received the first
order for the project) if you documented the project to us and we approved
and accepted such documentation. We will specify additional details, if
any, to you in writing.
We will specify in your Exhibit if the following credit terms do not apply
to Products and Services we approve you to market.
If we decrease the price or increase the discount for a Product or Service,
you will be eligible to receive a price decrease credit or a discount
increase credit for those you acquired directly from us that are in your
inventory, or in transit, or if the Product's date of installation or
Service start date has not occurred. However, Products acquired from us
under a special offering (for example, a promotional price or a special
incentive) may not be eligible for a full credit. You must certify your
inventory to us in writing within one month of the effective date of the
change. The credit is the difference between the price you paid, after any
adjustments, and the new price.
THE FOLLOWING TERMS APPLY TO PROGRAMS LICENSED ON A RECURRING-CHARGE BASIS:
We may increase a recurring charge for a Program by giving you three
months' written notice. An increase applies on the first day of the
invoice or charging period on or after the effective date we specify in the
notice.
INVOICING, PAYMENT AND TAXES
Amounts are due upon receipt of invoice and payable as specified in a
transaction document. You agree to pay accordingly, including any late
payment fee. Details of any late payment fee will be provided upon request
at the time of order and will be included in the notice.
You may use a credit only after we issue it.
If any authority requires us to include in our invoice to you a duty, tax,
levy, or fee which they impose, excluding those based on our net income,
upon any transaction under this Agreement, then you agree to pay that
amount.
RESELLER TAX EXEMPTION
You agree to provide us with your valid reseller exemption documentation
for each applicable taxing jurisdiction to which we ship Products. If we
do not receive such documentation, we will charge you applicable taxes and
duties. You agree to notify us promptly if this documentation is rescinded
or modified. You are liable for any claims or assessments that result from
any taxing jurisdiction refusing to recognize your exemption.
PURCHASE MONEY SECURITY INTEREST
You grant us a purchase money security interest in your proceeds front the
sale of, and your accounts receivable for, a Product, until we receive the
amounts due. You agree to sign an appropriate document (for example, a
"UCC-1") to permit us to perfect our purchase money security interest.
FAILURE TO PAY ANY AMOUNTS DUE
If you fail to pay any amounts due in the required period of time, you
agree that we may do one or more of the following, unless precluded by law:
1. impose a finance charge, as we specify to you in writing, up to the
maximum permitted by law, on the portion which was not paid during the
required period:
2. require payment on or before delivery of Products and Services;
Page 4 of 9
<PAGE>
3. repossess any Products and Services for which you have not paid. If
we do so, you agree to pay all expenses associated with repossession
and collection, including reasonable attorneys' fees. You agree to
make the Products and Services available to us at a site that is
mutually convenient;
4. not accept your order until any amounts due are paid:
5. terminate this Agreement; or
6. pursue any other remedy available at law.
We may offset any amounts due you, or designated for your use (for example,
marketing funds or promotional offerings), against amounts due us or any or
our Related Companies.
In addition, if your account with any of our Related Companies becomes
delinquent, we may invoke any of these options when allowable by applicable
law.
5. LICENSED INTERNAL CODE
We will identify each Specific Machine in the Exhibit. We grant the
rightful possessor of a Specific Machine a license to use the Code (or any
replacement we provide) on, or in conjunction with, only the Specific
Machine, designated by serial number, for which the Code is provided. We
license the Code to only one rightful possessor at a time. You agree that
you are bound by the terms of the separate license agreement that we will
provide to you.
YOUR RESPONSIBILITIES
You agree to inform your End User, and record on the sales receipt, that
the Machine you provide is a Specific Machine using Licensed Internal Code.
You agree to provide the applicable license agreement to your End User
before the sale is finalized.
6. PROGRAMS
You agree to ensure the End User has signed the license agreement for a
Program requiring a signature, as we specify in the Exhibit, before such
Program is provided to the End User, and to provide any required
documentation to us. All other Programs are licensed under the terms of
the agreement provided with them. You agree, where applicable, to provide
the Program license to the End User before such Program is provided to the
End User.
We will designate in the Exhibit if 1) we will ship the media and
documentation to you or, if you request and we agree, to the End User, 2)
you may copy and redistribute the media and documentation to the End User,
or 3) you must copy and redistribute the media and documentation to the End
User. If we ship the media and documentation, we may charge you. We will
specify such charge to you in writing. If you copy and redistribute, you
must be licensed to use the Program from which you make the copies. A
Program license you acquired for use under the Demonstration, Development
and Evaluation Products terms fulfill this requirement.
Programs licensed to you on a recurring-charge basis are licensed for the
period indicated in our invoice. You may market such Programs only on the
same basis as licensed to you. You may not charge an End User a one-time
charge for a Program you license from us on a recurring-charge basis.
However, you may charge (lie End User whatever amount you wish for the
recurring-charge.
PROGRAM SERVICES
Program Services are described in the Programs license agreement. You are
responsible to provide your Customers. who are licensed for a Program. the
Program Services we make available to you.
If the End User agrees in writing, you may:
1. delegate this responsibility to another IBM Business Partner who is
approved to market the Product, or
Page 5 of 9
<PAGE>
2. provide an enhanced version of this support through the applicable IBM
Service you market to the End User.
If you delegate your support responsibilities to another IBM Business
Partner, you retain customer satisfaction responsibility. However. if you
market our applicable Services to the End User, we assume customer
satisfaction responsibility for such support.
7. EXPORT
You may actively market Products and Services only within the geographic
scope specified in this Agreement. You may not market outside this scope,
and you agree not to use anyone else to do so.
If a Customer acquires a Product for export, our responsibilities, if any,
under this Agreement no longer apply to that Product unless the Product's
warranty or license terms state otherwise. You agree to use your best
efforts to ensure that your Customer complies with all export laws and
regulations, including those of the United States and the country specified
in the Governing Law Section of this Agreement, and any laws and
regulations of the country in which the Product is imported or exported.
Before your sale of such Product, you agree to prepare a support plan for
it and obtain your Customer's agreement to that plan. Within one month of
sale, you agree to provide us with the Customer's name and address, Machine
type/model and serial number, date of sale, and destination country.
We exclude these Products from:
1. any of your attainment toward your objectives; and
2. qualification for applicable promotional offerings and marketing
funds.
We may also reduce future supply allocations to you by the number of
exported Products.
8. TITLE
When you order a Machine, we transfer title to you when we ship file
Machine.
Any prior transfer to you of title to a Machine reverts back to IBM when it
is accepted by us as a returned Machine.
We do not transfer a Program's title.
9. RISK OF LOSS
We bear the risk of loss of, or damage to, a Product or Service until its
initial delivery from us to you or, if you request and we agree, delivery
from us to your Customer. Thereafter, you assume the risk.
10. INSTALLATION AND WARRANTY
We will ensure that Machines we install are in good working order and
conform to their specifications, We provide instructions to enable the
set-up of Customer-Set-Up Machines. We are not responsible for the
installation of Program or non-IBM Machines. We do, however, preload
Programs onto certain Machines. We provide a copy of our applicable
warranty statement to you. You agree to provide it to the End User for
review before the sale is finalized, unless we specify otherwise.
We calculate the expiration date of an IBM Machine's warranty period from
the Machine's Date of Installation. Warranty terms for Programs are
described in the Programs' license terms.
We provide non-IBM Products WITHOUT WARRANTIES OF ANY KIND, unless we
specify otherwise. However, non-IBM manufacturers. suppliers, or
publishers may provide their own warranties to you.
Page 6 of 9
<PAGE>
For non-IBM Products we approve you to market, you agree to inform your
Customer in writing 1) that the Products are non-IBM, 2) the manufacturer
or supplier who is responsible for warranty (if any), and 3) of the
procedure to obtain any warranty service.
DATE OF INSTALLATION FOR A MACHINE WE ARE RESPONSIBLE TO INSTALL
The Date of Installation for a Machine we are responsible to install is the
business day after the day 1) we install it or, 2) it is made available for
installation, if you (or the End User) defer installation. Otherwise (for
example, if others install or break its warranty seal), it is the day we
deliver the Machine to you (or the End User). In such event, we reserve
the right to inspect the Machine to ensure its qualification for warranty
entitlement.
THE DATE OF INSTALLATION FOR A CUSTOMER-SET-UP MACHINE
The Date of Installation for a Customer-Set-Up Machine is the date the
Machine is installed which you or your Remarketer, if applicable, record on
the End User's sales receipt. You must also notify us of this date upon
our request.
INSTALLATION OF MACHINE FEATURES, CONVERSIONS, AND UPGRADES
We sell features, conversions and upgrades for installation on Machines,
and, in certain instances, only for installation on a designated, serial
numbered Machine. Many of these transactions involve the removal of parts
and their return to us. As applicable, you represent that you have the
permission from the owner and any lien holders to 1) install features,
conversions and upgrades and 2) transfer the ownership and possession of
removed parts (which become our property) to us. You further represent
that all removed pails are genuine, and unaltered, and in good working
order. A part that replaces a removed part will assume the warranty and
maintenance Service status of the replaced part. You agree to allow us to
install the feature, conversion, or upgrade within 30 days of its delivery.
Otherwise, we may terminate the transaction and you must return the
feature. conversion, or upgrade to us at your expense.
11. WARRANTY SERVICE
We will specify in the Exhibit whether you or we are responsible to provide
Warranty Service for a Machine.
When we are responsible for providing Warranty Service for Machines, you
are not authorized to provide such Service, unless we specify otherwise in
the Exhibit.
When you are responsible for providing Warranty Service. you agree to do so
according to the terms we specify in the Warranty Service Attachment.
12. MARKETING OF SERVICES FOR A FEE
If you marketed a Product to an End User under this Agreement, or if you
are approved in your Profile to market a Service, you may, as we specify in
the Exhibit, 1) market Services, or 2) provide a qualified lead to us so
that we may market Services, to the End User on any machine or program, and
receive a fee from us. We provide Services to the End User under the terms
of our applicable agreement, signed by the End User.
You will receive a fee for a lead when it 1) is submitted oil the form we
provide to you, 2) is for an opportunity which is not known to us, and 3)
results, in (the End User ordering the Service from us within six months
from the date we received the lead from you.
Alternatively, you will receive a fee for marketing when 1) You identify
the opportunity and perform the marketing activities, 2) you provide us
with the order and any required documents signed by the End User, and 3) if
a standard Statement of Work is used. there are no changes, and no
marketing assistance from us is required.
You may market Services on eligible non-IBM Products regardless of whether
you marketed a Machine or Program to the End User.
Page 7 of 9
<PAGE>
We will not pay you the fee if the machine or program is already under the
applicable Service or if there is agreement to place the Machine or Program
under the applicable Service or if the Service was terminated by the End
User within the last six months.
If the Service is terminated within three months of the date payment from
the End User was due us, you agree to reimburse us for any payments we made
to you associated with it. The reimbursement may be prorated if the
Service is on a recurring charge basis.
We periodically reconcile amounts we paid you to amounts you actually
earned. We may deduct amounts due us from future payments we make to You,
or ask you to pay amounts due us. Each of us agrees to promptly pay the
other any amounts due.
13. MARKETING OF FINANCING
If we approve you on your Profile, you may market our Financing Services
for Products and Services and any associated products and services you
market to the End User. If you market our Financing Services, we will pay
you a fee as we specify to you in your Exhibit.
We provide Financing Services to the End User under the terms of our
applicable agreements signed by the End User. You agree that, for the
items that will be financed 1) you will promptly provide us any required
documents including invoices, with serial numbers, if applicable, 2) the
supplier will transfer clear title to us, and 3) you will not transfer to
us any obligations under your agreements with the End User.
We will pay you or the supplier when the End User has initiated financing
and acknowledged acceptance of the items being financed.
14. ENGINEERING CHANGES
You agree to allow us to install mandatory engineering changes (such as
those required for safety) on all Machines in your inventory, and to use
your best efforts to enable us to install such engineering changes on your
Customers' Machines. Mandatory engineering changes are installed at our
expense and any removed parts become our property.
During the warranty period, we manage and install engineering changes at:
1. your or your Customer's location for Machines for which we provide
Warranty Service; and
2. your location for other Machines.
Alternatively, we may provide you with the parts (at no charge) and
instructions to do the installation yourself. We will reimburse you for
your labor as we specify.
15. ENDING THE AGREEMENT
Either of us may terminate this Agreement, with or without cause. on three
months' written notice. If, under applicable law, a longer period is
mandatory, then the notice period is the minimum notice period allowable.
If we terminate for cause (such as you not meeting your minimum annual
attainment), we may, at our discretion, allow you a reasonable opportunity
to cure. If you fail to do so, the date of termination is that specified
in the notice.
However, if either party breaches a material term of the Agreement, the
other party may terminate the Agreement on written notice. Examples of
such breach by you are: if you do not maintain customer satisfaction; if
you do not comply with the terms of a transaction document: if you
repudiate this Agreement; or if you make any material misrepresentations to
us. You agree that our only obligation is to provide the, notice called for
in this section and we are not liable for any claims or losses if we do so.
At the end of this Agreement, you agree to:
1. pay for or return to us, at our discretion, any Products or
shrink-wrap Services for which you have not paid: and
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<PAGE>
2. allow us, at our discretion, to acquire any that are in your
possession or control, at the price you paid us, less any credits
issued to you.
Products and shrink-wrap Services to be returned must be in their unopened
and undamaged packages and in your inventory (or in transit from us) on the
day this Agreement ends. We will inspect them, and reserve the right of
rejection. You agree to pay all the shipping charges.
At the end of this Agreement, each of us agrees to immediately settle any
accounts with the other. When allowable by applicable law, we may offset
any amounts due you against amounts due us or any of our Related Companies.
You agree that if we permit you to perform certain activities after this
Agreement ends, you will do so under the terms of this Agreement.
Page 9 of 9
<PAGE>
IBM BUSINESS PARTNER AGREEMENT
[LOGO]
GENERAL TERMS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION TITLE PAGE
<S> <C> <C>
1. Definitions................................. 2
2. Agreement Structure and Contract Duration... 3
3. Our Relationship............................ 4
4. Status Change............................... 5
5. Confidential Information.................... 5
6. Marketing Funds and Promotional Offerings... 6
7. Production Status........................... 6
8. Patents and Copyrights...................... 6
9. Liability................................... 7
10. Trademarks.................................. 7
11. Changes to the Agreement Terms.............. 8
12. Internal Use Products....................... 8
13. Demonstration. Development and Evaluation
Products.................................... 8
14. Electronic Communications................... 9
15. Geographic Scope............................ 9
16. Governing Law............................... 9
</TABLE>
Page 1 of 9
<PAGE>
IBM BUSINESS PARTNER AGREEMENT
[LOGO]
GENERAL TERMS
- --------------------------------------------------------------------------------
1. DEFINITIONS
BUSINESS PARTNER is a business entity which is approved by us to market
Products and Services under this Agreement.
CUSTOMER is either an End User or a Remarketer. We specify in your Profile
if we approve you to market to End Users or Remarketers, or both.
END USER is anyone, who is not part of the Enterprise of which you are a
part, who uses Services or acquires Products for its own use and not for
resale.
ENTERPRISE is any legal entity (such as a corporation) and the subsidiaries
it owns by more than 50 percent. An Enterprise also includes other
entities as IBM and the Enterprise agree in writing.
LICENSED INTERNAL CODE is called "Code'. Certain Machines we specify
(called "Specific Machines") use Code. International Business Machines
Corporation or one of its subsidiaries owns copyrights in Code or has the
right to license Code. IBM or a third party owns all copies of Code,
including all copies made from them.
MACHINE is a machine, its features, conversions, upgrades, elements,
accessories, or any combination of them. The term "Machine" includes an
IBM Machine and any non-IBM Machine (including other equipment) that we
approve you to market.
PRODUCT is a Machine or Program, that we approve you to market, as we
specify in your Profile.
PROGRAM is an IBM Program or a non-IBM Program provided by us, under its
applicable license terms, that we approve you to market.
RELATED COMPANY is any corporation, company or other business entity:
1. more than 50 percent of whose voting shares are owned or Controlled
indirectly, by either of us, or
2. which owns or controls, directly or indirectly, more than 50 percent
of the voting shares of either of us, or
3. more than 50 percent of whose voting shares are under common ownership
or control directly or indirectly with the voting shares of either of
us.
However, any such corporation, company or other business, entity is
considered to be a Related Company only so long as such ownership or
control exists. "Voting shares" are outstanding shares or securities
representing the right to vole for the election of directors or other
managing authority.
REMARKETER is a business entity which acquires Products, and Services, as
applicable, for the purpose of marketing.
SERVICE is performance of a task, provision of advice and counsel.
assistance, or use of a resource (such as a network and associated enhanced
communication and support) treat we approve you to market.
Page 2 of 9
<PAGE>
2. AGREEMENT STRUCTURE AND CONTRACT DURATION
PROFILES
We specify the details of our relationship (for example, the type of
Business Partner you are) in a document called a "Profile." Each of us
agrees to the terms of the Profile, the General Terms, the applicable
Attachments referred to in the Profile, and the Exhibit (collectively
called the "Agreement") by signing the Profile.
GENERAL TERMS
The General Terms apply to all of our Business Partners.
ATTACHMENTS
We describe, in a document entitled an "Attachment". additional terms that
apply. Attachments may include, for example, terms that apply to the
method of Product distribution (Remarketer Terms Attachment or
Complementary Marketing Terms Attachment) and terms that apply to the type
of Business Partner you are, for example, the terms that apply to a
Distributor relationship as described in the Distributor Attachment. We
specify in your Profile the Attachments that apply.
EXHIBITS
We describe in an Exhibit, specific information about Products and
Services, for example, the Products and Services you may market, and
warranty information the Products.
TRANSACTION DOCUMENTS
We will provide to you the appropriate "transaction documents." The
following are examples of transaction documents, with examples of the
information and responsibilities they may contain:
1. invoices (item, quantity, price, payment terms and amount due); and
2. order acknowledgements (confirmation of Products and quantities
ordered).
CONFLICTING TERMS
If there is a conflict among the terms in the various documents, the terms
of:
1. a transaction document prevail over those of all the documents;
2. an Exhibit prevail over the terms of the Profile. Attachment and the
General Terms;
3. a Profile prevail over the terms of an Attachment and the General
Terms: and
4. an Attachment prevail over the terms of the General Terms.
If there is an order of precedence within a type of document. such order
will be stated in the document (for example, the terms of the Distributor
Attachment prevail over the terms of the Remarketer Terms Attachment, and
will be so stated in the Distributor Attachment).
OUR ACCEPTANCE OF YOUR ORDER
Products and Services become subject to this Agreement when we accept your
order by:
1. sending you a transaction document; or
2. providing the Products or Services.
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<PAGE>
ACCEPTANCE OF THE TERMS IN A TRANSACTION DOCUMENT
You accept the terms in a transaction document by doing any of the
following:
1. signing it (those requiring a signature must be signed):
2. accepting the Product or Services;
3. providing the Product or Services to your Customer: or
4. making any payment for the Product or Services.
CONTRACT DURATION
We specify the contract start date and the duration in your Profile.
Unless we specify otherwise in writing, the Agreement will be renewed
automatically for subsequent two year periods. Each of us is responsible
to provide the other with three months written notice if this Agreement
will not be renewed.
3. OUR RELATIONSHIP
RESPONSIBILITIES
Each of us agrees that:
1. you are an independent contractor, and this Agreement is
non-exclusive. Neither of us is a legal representative or legal agent
of the other. Neither of us is legally a partner of the other (for
example, neither of us is responsible for debts incurred by the
other), and neither of us is an employee or franchise of the other,
nor does this Agreement create a joint venture between us;
2. each of us is responsible for our own expenses regarding fulfillment
of our responsibilities and obligations under the terms of this
Agreement;
3. neither of us will disclose the terms of this Agreement, unless both
of us agree in writing to do so, or unless required by law;
4. neither of us will assume or create any obligations on behalf of the
other or make any representations or warranties about the other, other
than those authorized;
5. any terms of this Agreement, which by their nature extend beyond the
date this Agreement ends. remain in effect until fulfilled and apply
to respective successors and assignees:
6. we may withdraw a Product or Service from marketing at any time:
7. we will allow the other a reasonable opportunity to comply before it
claims the other has not met its obligations, unless we specify
otherwise in the Agreement:
8. neither of us will bring a legal action against the other more than
two years after the cause of action arose, unless otherwise provided
by local law without the possibility of contractual waiver:
9. failure by either of us to insist on strict performance or to exercise
a right when entitled does not prevent either of us from doing so at a
later time. either in relation to that default or any subsequent one;
10. neither of us is responsible for failure to fulfill obligations due to
causes beyond the reasonable control of either of us;
11. IBM reserves the right to assign, in whole or in part this, Agreement
and any orders hereunder, to any other IBM Related Company:
12. IBM does not guarantee the results of any of its marketing plans: and
13. each of us will comply with all applicable laws and regulations (such
as those governing consumer transactions).
Page 4 of 9
<PAGE>
OTHER RESPONSIBILITIES
You agree:
1. to be responsible for customer satisfaction for all your activities,
and to participate in customer satisfaction programs as we determine;
2. that your rights under this Agreement are not property rights and,
therefore, you can not transfer them to anyone else or encumber them
in any way. For example, you can not sell your approval to market our
Products or Services or your rights to use our Trademarks;
3. to maintain the criteria we specified when we approved you;
4. to achieve and maintain the certification requirements for the
Products and Services you are approved to market, as we specify in
your Profile;
5. not to assign or otherwise transfer this Agreement, your rights under
it, or any of its approvals, or delegate any duties, unless expressly
permitted to do so under this Agreement. Otherwise, any attempt to do
so is void:
6. to conduct business activities with us (including placing orders)
which we specify in the operations guide, using our automated
electronic system if available. You agree to pay all your expenses
associated with it such as your equipment and communication costs;
7. that when we provide you with access to our information systems, it is
only in support of your marketing activities. Programs we provide to
you for your use with our information systems, which are in support of
your marketing activities, are subject to the terms of their
applicable license agreements, except you may not transfer them;
8. to promptly provide us with IBM documents we may require from you or
the End User (for example, our license agreement signed by the End
User) when applicable; and
9. to comply with the highest ethical principles in performing under the
Agreement. You will not offer or make payments or gifts (monetary or
otherwise) to anyone for the purpose of wrongfully influencing
decisions in favor of IBM, directly or indirectly. IBM may terminate
this Agreement immediately in case of 1) a breach of this clause or 2)
when IBM reasonably believes such a breach has occurred.
OUR REVIEW OF YOUR COMPLIANCE WITH THIS AGREEMENT
We may periodically review your compliance with this Agreement. You agree
to provide us with relevant records on request. We may reproduce and
retain copies of these records. We, or an independent auditor, may conduct
a review of your compliance with this Agreement on your premises during
your normal business hours.
If, during our review of your compliance with this Agreement. we find you
have materially breached the terms of this relationship, in addition to our
rights under law and the terms of this Agreement, for transactions that are
the subject of the broach, you agree to refund the amount equal to the
discount (or fee, if applicable) we gave you for the Products or Services
or we may offset any amounts due to you from us.
4. STATUS CHANGE
You agree to give us prompt written notice (unless precluded by law or
regulation) of any change or anticipated change in your financial
condition. Utilities,, structure, or operating environment (for example, a
material change in equity ownership or management or any substantive change
to information supplied in your application). Upon notification of such
change, (or in the event of failure to give notice of such change) IBM
relay, at its sole discretion, immediately terminate this Agreement.
5. CONFIDENTIAL INFORMATION
This section comprises a Supplement to the IBM Agreement for Exchange of
Confidential Information. "Confidential Information" means:
1. all information IBM marks or otherwise states to be confidential:
2. any of the following prepared or provided by IBM:
Page 5 of 9
<PAGE>
a. sales leads,
b. information regarding Prospects,
c. unannounced information about Products and Services,
d. business plans, or
e. market intelligence;
f. any of the following written information you provide to us on our
request and which you mark as confidential:
1) reporting data,
2) financial data, or
3) the business plan.
All other information exchanged between us is nonconfidential, unless
disclosed under a separate Supplement to the IBM Agreement for Exchange of
Confidential Information.
6. MARKETING FUNDS AND PROMOTIONAL OFFERINGS
We may provide marketing funds and promotional offerings to you. If we do,
you agree to use them according to our guidelines and to maintain records
of your activities regarding the use of such funds and offerings for three
years. We may withdraw or recover marketing funds and promotional
offerings from you if you breach any terms of the Agreement. Upon
notification of termination of the Agreement, marketing funds and
promotional offerings will no longer be available for use by you, unless we
specify otherwise in writing.
7. PRODUCTION STATUS
Each IBM Machine is manufactured from new parts, or new and used parts. In
some cases, the IBM Machine may not be new and may have been previously
installed. You agree to inform your Customer of these terms in writing
(for example, in your proposal or brochure).
8. PATENTS AND COPYRIGHTS
For the purpose of this section only, the term Product includes Licensed
Internal Code (if applicable).
If a third party claims that a Product we provide under this Agreement
infringes that party's patents or Copyrights, we will defend you against
that claim at our expense and pay all costs, damages, and attorneys' fees
that a court finally awards, provided that you:
1. promptly notify us in writing of the claim: and
2. allow us to control, and cooperate with us in, the defense and any
related settlement negotiations.
If you maintain an inventory, and such a claim is made or appears likely to
be made about a Product in your inventory, you agree to permit us either to
enable you to continue to market and use the Product, or to modify or
replace it. if we determine that none of these alternatives is reasonably
available, you agree to return the Product to us on our written request.
We will then give you a credit, as we determine, which will be either 1)
the price you paid us for the Product (less any price-reduction credit). or
2) the depreciated price.
This is our entire obligation to you regarding any claims of infringement.
CLAIMS FOR WHICH WE ARE NOT RESPONSIBLE
We have no obligation regarding any claim based oil any of the following:
1. anything you provide which is incorporated into a Product:
2. your modification of a Product, or a Program's use in other than its
specified operating environment:
Page 6 of 9
<PAGE>
3. the combination, operation, or use of a Product with any Products not
provided by us as a system, or the combination, operation, or use of a
Product with any product, data, or apparatus that we did not provide;
or
4. infringement by a non-IBM Product alone, as opposed to its combination
with Products we provide to you as a system.
9. LIABILITY
Circumstances may arise where, because of a default or other liability, one
of us is entitled to recover damages from the other. In each such
instance, regardless of the basis on which damages can be claimed, the
following terms apply as your exclusive remedy and our exclusive liability.
OUR LIABILITY
We are responsible only for:
1. payments referred to in the "Patents and Copyrights" section above;
2. bodily injury (including death), and damage to real property and
tangible personal property caused by our Products: and
3. the amount of any other actual loss or damage, up to the greater of
$100,000 or the charges (if recurring, 12 months' charges apply) for
the Product that is the subject of the claim.
ITEMS FOR WHICH WE ARE NOT LIABLE
Under no circumstances (except as required by law) are we liable for any of
the following:
1. third-party claims against you for losses or damages (other than those
under the first two items above in the subsection entitled "Our
Liability");
2. loss of, or damage to, your records or data; or
3. special, incidental, or indirect damages, or for any economic
consequential damages (including lost profits or savings) even if we
are informed of their possibility.
YOUR LIABILITY
In addition to damages for which you are liable under law and the terms of
this Agreement, you will indemnify us for claims made against us by others
(particularly regarding statements, representations, or warranties not
authorized by US) assisting out of your conduct under this Agreement or as
a result of your relations with anyone else.
10. TRADEMARKS
We will notify you in written guidelines of the IBM Business Partner title
and emblem which you are authorized to use. You may not modify the emblem
in any way. You may use our Trademarks (which include the title, emblem,
IBM trade remarks and service marks) only:
1. within the geographic scope of this Agreement;
2. in association with Products and Services we approve you to market;
and
3. as described in the written guidelines provided to you.
The royalty normally associated with non-exclusive use of the Trademarks
will be waived, since the use of this asset is in conjunction with
marketing activities for Products and Services.
You agree to promptly modify any advertising or promotional materials that
do not comply with our guidelines. If you receive any complaints about
your use of a Trademark, you agree to promptly notify us. When this
Agreement ends, you agree, to promptly stop using our Trademarks. If you
do not, you agree to pay any expenses and fees we incur in getting you to
stop.
You agree not to register or use any mark that is confusingly similar to
any of our Trademarks.
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<PAGE>
Our Trademarks, and any goodwill resulting from your use of them. belong to
us.
11. CHANGES TO THE AGREEMENT TERMS
We may change the terms of this Agreement by giving you one month's written
notice.
We may, however, change the following terms without advance notice:
1. those we specify in this Agreement as not requiring advance notice;
2. those of the Exhibit unless otherwise limited by this Agreement; and
3. those relating to safety and security.
Otherwise, for any other change to be valid, both of us must agree in
writing. Changes are not retroactive. Additional or different terms in an
order or other communication from you are void.
12. INTERNAL USE PRODUCTS
You may acquire Products you are approved to market for your internal use
within your Business Partner operations. Except for personal computer
Products, you are required to advise us when you order Products for your
internal use.
We will specify in your Exhibit the discount or price, as applicable, at
which you may acquire the Products for internal use. Such Products do not
count (except for personal computer and Printing System Products which do
count) toward 1) your minimum annual attainment 2) determination of your
discount or price, as applicable or 3) for determining your marketing or
promotional funds.
Any value added enhancement or systems integration services otherwise
required by your relationship is not applicable when you acquire Products
for internal use. You must retain such Products for a minimum of 12
months, unless we specify otherwise in the Exhibit.
13. DEMONSTRATION, DEVELOPMENT AND EVALUATION PRODUCTS
You may acquire Products you are approved to market for demonstration,
development and evaluation purposes, unless we specify otherwise in the
Exhibit. Such Products must be used primarily in support of your Product
marketing activities. Additionally, such Products do not count (except for
personal computer and Printing System Products, which do count) toward 1)
your minimum annual attainment 2) determination of your discount or price,
as applicable or 3) for determining your marketing or promotional funds.
We will specify in your Exhibit the Products we make available to you for
such purposes, the applicable discount or price, and the maximum quantity
of such Products you may acquire and the period they are to be retained.
The maximum number of input/output devices you may acquire is the number
supported by the system to which they attach.
If you acquired the maximum quantity of Machines, you may still acquire a
field upgrade, if available.
We may decrease the discount we provide for such Products on one month's
written notice.
You may make these Products available to a Customer for the purpose of
demonstration and evaluation. Such Products may be provided to an End User
for no more than three months. For a Program, you agree to ensure the
Customer has been advised of the requirement to accept the terms of a
license agreement before using the Program.
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<PAGE>
14. ELECTRONIC COMMUNICATIONS
Each of us may communicate with the other by electronic means. and such
communication is acceptable as a signed writing to the extent permissible
under applicable law. Both of us agree that for all electronic
communications. an identification code (called a "user ID") contained in an
electronic document is legally sufficient to verify the sender's identity
and the document's authenticity.
15. GEOGRAPHIC SCOPE
All the rights and obligations of both of us are valid only in the United
States and Puerto Rico.
16. GOVERNING LAW
The laws of the State of New York govern this Agreement.
The "United Nations Convention on Contracts for the International Sale of
Goods" does not apply.
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<PAGE>
IBM BUSINESS PARTNER AGREEMENT
[LOGO]
INTERNATIONAL ATTACHMENT FOR SOLUTION PROVIDER - REMARKETER
- --------------------------------------------------------------------------------
THE TERMS OF THIS ATTACHMENT PREVAIL OVER THE TERMS OF THE REMARKETER TERMS
ATTACHMENT.
Under the terms of this Attachment, the Business Partner Lead Company agrees to
coordinate the activities of its local Business Partner Companies, and the IBM
Lead Company agrees to coordinate the activities of the local IBM country
organizations (IBM Companies). All such local Business Partner Companies and
local IBM Companies are specified in the "Details of Our Agreement" section of
the Profile for each country in which the local Business Partner Company is
approved to market.
Terms that are unique to a country are included in each of the Agreement's
applicable documents. The terms of the Agreement applicable to the country in
which the Eligible Services are acquired by the Customer apply. All references
in the Agreement to "Country Name" are deemed to be the country in which
Eligible Services are acquired by the Customer.
The Business Partner Lead Company will distribute copies of the Agreement
(including this Attachment and any other applicable Attachment) to their local
Business Partner Companies. The IBM Lead Company will distribute copies of the
Agreement (including this Attachment and any other applicable Attachment) to
their local IBM Companies. The local Business Partner Company and the local IBM
Company, in a country, will acknowledge between each other, written acceptance
of the Agreement either by initially ordering Eligible Services, or by other
written confirmation.
As the Business Partner Lead Company, you warrant that, in accepting the terms
of this Attachment, all of your local Business Partner Companies are Related
Companies. However, with IBM approval which shall not be unreasonably withheld,
you may use authorized sales agents to represent you in a particular country.
In the event you are approved to use sales agents, you agree to maintain an
appropriate agreement with each of your sales agents requiring them to comply
with the applicable terms of this Agreement. Local Business Partner Companies
may provide local transaction documents, such as service descriptions, to your
local sales agents on your behalf. You agree to designate your local sales
agents as your authorized representatives for receipt and acceptance of service
of legal process (including, but not limited to, lawsuits, subpoenas, summonses,
and the like). Further, you agree to consent to jurisdiction in all countries
in which Eligible Services are being provided to you or your agents. We may
proceed against you directly if your agents engage in activities that violate
the applicable terms of this Agreement, its Attachments and transaction
documents, including but not limited to filing claims or suits against you
directly in the country in which we are providing Eligible Services to you or
your sales agents.
The Agreement (including this Attachment but excluding transaction documents and
the Exhibit) is written in English.
WORLDWIDE AGGREGATION
We provide discounts based on the volume committed by the Business Partner Lead
Company, aggregated worldwide, for Eligible Services specified on the Profile.
Only Eligible Services acquired directly from IBM or an IBM affiliated network
services provider: 1) count toward worldwide aggregation; and 2) are eligible
for the discount we provide.
During the contract period, the Business Partner Lead Company may increase the
volume commitment to qualify for increased discounts, if applicable. Such
discounts apply only to provision of Eligible Services after the revised volume
commitment is accepted by the IBM Lead Company.
Page 1 of 1
<PAGE>
QUICKRESPONSE SERVICES, INC.
SPECIAL NON-OFFICER STOCK OPTION PLAN
ARTICLE ONE
GENERAL
A. This Special Non-Officer Stock Option Plan is intended to promote
the interests of Quickresponse Services, Inc., a Delaware corporation, by
authorizing an additional reserve of shares of the Corporation's common stock
for issuance through long-term option grants to individuals in the employ of the
Corporation (or any Parent or Subsidiary) who are neither officers of the
Corporation nor members of the Board and who are not otherwise Section 16
Insiders.
B. The Plan shall become effective immediately upon adoption by the
Board on December 24, 1997.
C. This Plan shall supplement the authorized share reserve under the
Corporation's 1993 Stock Option/Stock Issuance Plan, and share issuances under
this Plan shall not reduce or otherwise affect the number of shares of the
Corporation's common stock available for issuance under the 1993 Stock
Option/Stock Issuance Plan. In addition, share issuances under the 1993 Stock
Option/Stock Issuance Plan shall not reduce or otherwise affect the number of
shares of the Corporation's common stock available for issuance under this Plan.
Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.
I. ADMINISTRATION OF THE PLAN
A. The Plan Administrator shall have full power and discretion
(subject to the express provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for the proper administration of the Plan
and to make such determinations under, and issue such interpretations of, the
provisions of the Plan and any outstanding option grants thereunder as it may
deem necessary or advisable. Decisions of the Plan Administrator shall be final
and binding on all parties who have an interest in the Plan or any outstanding
option thereunder.
B. The individuals serving as Plan Administrator shall serve for
such period as the Board may determine and shall be subject to removal by the
Board at any time.
<PAGE>
C. Service as Plan Administrator shall constitute service as a Board
member, and each Board member serving as Plan Administrator shall accordingly be
entitled to full indemnification and reimbursement as a Board member for such
service. No individual serving as Plan Administrator shall be liable for any
act or omission made in good faith with respect to the Plan or any option
granted under the Plan.
II. ELIGIBILITY
A. The persons eligible to participate in the Plan shall be limited
to those Employees who are neither officers of the Corporation nor members of
the Board and who are not otherwise Section 16 Insiders.
B. The Plan Administrator shall have full authority to determine
which eligible Employees are to receive option grants under the Plan, the number
of shares to be covered by each such grant, the time or times at which each
granted option is to become exercisable and the maximum term for which the
option may remain outstanding. All options granted under the Plan shall be
Non-Statutory Options.
III. STOCK SUBJECT TO THE PLAN
A. Shares of Common Stock shall be available for issuance under the
Plan and shall be drawn from either the Corporation's authorized but unissued
shares of Common Stock or from reacquired shares of Common Stock, including
shares repurchased by the Corporation on the open market. The maximum number of
shares of Common Stock reserved for issuance over the term of the Plan shall be
limited to 150,0000 shares, subject to adjustment from time to time in
accordance with the provisions of this Section III.
B. Should one or more outstanding options under this Plan expire or
terminate for any reason prior to exercise in full (including any option
cancelled in accordance with the cancellation-regrant provisions of Section III
of Article Two), then the shares subject to the portion of each option not so
exercised shall be available for subsequent issuance under the Plan. Should the
exercise price of an outstanding option under the Plan be paid with shares of
Common Stock, then the number of shares of Common Stock available for issuance
under the Plan shall be reduced by the gross number of shares for which the
option is exercised, and not by the net number of shares of Common Stock
actually issued to the holder of such option.
C. Should any change be made to the Common Stock issuable under the
Plan by reason of any stock split, stock dividend, recapitalization, combination
of shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration, then
appropriate adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, and (ii) the number and/or class of
securities and price per share in effect under each option outstanding under the
Plan. Such adjustments to the outstanding options are to be effected in a
manner which shall preclude the enlargement or dilution
2.
<PAGE>
of rights and benefits under such options. The adjustments determined by the
Plan Administrator shall be final, binding and conclusive.
3.
<PAGE>
ARTICLE TWO
OPTION GRANT PROGRAM
I. OPTION TERMS
Options granted under the Plan shall be authorized by action of the
Plan Administrator and shall be evidenced by one or more instruments in the form
approved by the Plan Administrator; PROVIDED, however, that each such instrument
shall comply with the terms and conditions specified below. All such granted
options shall be Non-Statutory Options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the grant date.
2. Full payment of the exercise price shall become immediately
due upon exercise of the option and shall be payable in one or more of the forms
specified below:
(i) cash or check made payable to the Corporation's order,
(ii) shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date, or
(iii) through a special sale and remittance procedure
pursuant to which the Optionee shall concurrently provide irrevocable
instructions to (a) a Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Corporation, out of
the sale proceeds available on the settlement date, sufficient funds to
cover the aggregate exercise price payable for the purchased shares plus
all applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation in connection with such purchase
and to (b) the Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the sale
transaction.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
4.
<PAGE>
B. TERM AND EXERCISE OF OPTIONS. Each option shall be exercisable
at such time or times, during such period and for such number of shares as shall
be determined by the Plan Administrator and set forth in the documents
evidencing such option. No option shall have a maximum term in excess of ten
(10) years. During the lifetime of the Optionee, the option shall be
exercisable only by the Optionee and shall not be assignable or transferable
except for a transfer of the option effected by will or by the laws of
inheritance following the Optionee's death.
C. EFFECT OF TERMINATION OF SERVICE.
1. The following provisions shall govern the exercise of any
option held by the Optionee at the time of cessation of Service or death:
(i) Should Optionee cease to remain in Service for any
reason (other than death, Permanent Disability or Misconduct) while the
option is outstanding, then Optionee shall retain the right to exercise
that option until the EARLIER of (A) the expiration of the three (3)-month
period commencing with the date of such cessation of Service or (B) the
expiration of the ten (10)-year option term.
(ii) If the Optionee dies while holding an outstanding
option, then the personal representative of Optionee's estate or the person
or persons to whom the option is transferred pursuant to Optionee's will or
in accordance with the laws of inheritance shall have the right to exercise
the option. Such right shall lapse, and the option shall cease to be
outstanding, upon the EARLIER of (A) the expiration of the twelve
(12)-month period measured from the date of Optionee's death or (B) the
expiration of the ten (10)-year option term.
(iii) Should Optionee cease Service by reason of Permanent
Disability while the option is outstanding, then Optionee shall retain the
right to exercise that option until the EARLIER of (A) the expiration of
the twelve (12) month period commencing with the date of such cessation of
Service or (B) the expiration of the ten (10)-year option term.
(iv) Should Optionee's Service be terminated for Misconduct,
then each outstanding option held by the Optionee shall terminate
immediately and cease to remain outstanding.
(v) During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than the number of
shares for which the option is exercisable on the date of Optionee's
cessation of Service. Upon the expiration of the applicable exercise
period or (if earlier) upon the expiration of the option term, the option
shall terminate and cease to be outstanding for any otherwise exercisable
shares for which the option has not been exercised. However, the option
shall, immediately upon Optionee's cessation of Service for any
5.
<PAGE>
reason, terminate and cease to be outstanding with respect to any and all
option shares for which the option is not otherwise at the time
exercisable.
2. The Plan Administrator shall have the discretion, exercisable
either at the time an option is granted or at any time while the option remains
outstanding, to:
(i) extend the period of time for which the option is to
remain exercisable following Optionee's cessation of Service or death from
the limited period otherwise in effect for that option to such greater
period of time as the Plan Administrator shall deem appropriate, but in no
event beyond the expiration of the option term, and/or
(ii) permit the option to be exercised, during the applicable
post-Service exercise period, not only with respect to the number of shares
of Common Stock for which such option is exercisable at the time of the
Optionee's cessation of Service but also with respect to one or more
additional installments for which the option would have become exercisable
had the Optionee continued in Service.
D. SHAREHOLDER RIGHTS. A Optionee shall have none of the rights of
a shareholder with respect to any option shares until such person shall have
exercised the option and paid the exercise price for the purchased shares.
II. CORPORATE TRANSACTION
A. In the event of any Corporate Transaction, each option which is
at the time outstanding under the Plan shall automatically accelerate so that
each such option shall, immediately prior to the specified effective date for
such Corporate Transaction, become fully exercisable with respect to the total
number of shares of Common Stock at the time subject to that option and may be
exercised for all or any portion of those shares as fully-vested shares.
However, an outstanding option under the Plan shall NOT so accelerate if and to
the extent: (i) such option is, in connection with the Corporate Transaction, to
be assumed by the successor corporation or parent thereof, (ii) such option is
to be replaced with a cash incentive program of the successor corporation which
preserves the option spread existing at the time of the Corporate Transaction
and provides for subsequent payout in accordance with the same exercise/vesting
schedule applicable to such option or (iii) the acceleration of such option is
subject to other limitations imposed by the Plan Administrator at the time of
the option grant.
B. The Plan Administrator shall have the discretionary authority to
structure one or more options under the Plan so that those options shall
immediately accelerate upon an Involuntary Termination of the Optionee's Service
within a designated period (not to exceed twelve (12) months) following the
effective date of a Corporate Transaction in which those options are assumed by
the successor corporation and accordingly do not accelerate at the time of such
Corporate Transaction.
6.
<PAGE>
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options under the Plan shall terminate and cease to
remain outstanding, except to the extent assumed by the successor corporation or
its parent company.
D. Each outstanding option which is assumed in connection with the
Corporate Transaction shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply and pertain to the number and class of
securities which would have been issued to the Optionee, in consummation of the
Corporate Transaction, had such person exercised the option immediately prior to
such Corporate Transaction. Appropriate adjustments shall also be made to the
exercise price payable per share, PROVIDED the aggregate exercise price payable
for such securities shall remain the same. In addition, the class and number of
securities available for issuance under the Plan following the consummation of
the Corporate Transaction shall be appropriately adjusted.
E. The grant of options under the Plan shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
III. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the sole and exclusive authority to
effect, at any time and from time to time, with the consent of the affected
Optionees, the cancellation of any or all outstanding options under the Plan and
to grant in substitution new options under the Plan covering the same or
different numbers of shares of Common Stock but with an exercise price per share
not less than the Fair Market Value of the Common Stock on the new grant date.
7.
<PAGE>
ARTICLE THREE
MISCELLANEOUS
I. AMENDMENT OF THE PLAN
The Board has complete and exclusive power and authority to amend or
modify the Plan in any or all respects whatsoever. However, no such amendment
or modification shall adversely affect rights and obligations with respect to
stock options at the time outstanding under the Plan, unless the affected
Optionees consent to such amendment.
II. TAX WITHHOLDING
The Corporation's obligation to deliver shares of Common Stock upon
the exercise of stock options under the Plan shall be subject to the
satisfaction of all applicable Federal, state and local income tax and
employment tax withholding requirements.
III. EFFECTIVE DATE AND TERM OF PLAN
A. This Plan became effective upon approval by the Board at the
December 24, 1997 Board meeting and shall not be subject to shareholder
approval.
B. The Plan shall terminate upon the EARLIER of (i) December 31,
2007 or (ii) the date on which all shares available for issuance under the Plan
shall have been issued pursuant to the exercise of options under the Plan. If
the date of termination is determined under clause (i) above, then all option
grants outstanding on such date shall thereafter continue to have force and
effect in accordance with the provisions of the instruments evidencing those
grants.
IV. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
pursuant to option grants under the Plan shall be used for general corporate
purposes.
V. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option under
the Plan, and the issuance of Common Stock upon the exercise of the stock
options granted hereunder shall be subject to the Corporation's procurement of
all approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the stock options granted under it and the Common Stock issued
pursuant to it.
8.
<PAGE>
B. No shares of Common Stock or other assets shall be issued or
delivered under this Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any securities exchange on which the Common Stock is then listed for trading.
VI. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing the Plan, nor
any action taken by the Plan Administrator hereunder, nor any provision of the
Plan shall be construed so as to grant any individual the right to remain in
Service for any period of specific duration, and the Corporation (or any Parent
or Subsidiary employing such individual) may terminate such individual's Service
at any time and for any reason, with or without cause.
9.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporations Board of Directors.
B. CODE shall mean the Internal Revenue Code of 1986, as amended.
C. COMMON STOCK shall mean the Corporation's common stock.
D. CORPORATE TRANSACTION shall mean any of the following
shareholder-approved transactions to which the Corporation is a party:
- a merger or consolidation in which the Corporation is not the
surviving entity, except for a transaction the principal purpose of which
is to change the State in which the Corporation is incorporated;
- the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation; or
- any reverse merger in which the Corporation is the surviving
entity but in which securities possessing more than fifty percent (50%) of
the total combined voting power of the Corporation's outstanding securities
are transferred to a person or persons different from the persons holding
those securities immediately prior to such merger.
E. CORPORATION shall mean Quickresponse Services, Inc., a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Quickresponse Services, Inc. which shall by
appropriate action adopt the Plan.
F. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
G. EXERCISE DATE shall mean the date on which the Corporation shall have
received written notice of the option exercise.
A-1.
<PAGE>
H. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
- If the Common Stock is at the time traded on the Nasdaq National
Market, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question, as such price is reported by
the National Association of Securities Dealers on the Nasdaq National
Market. If there is no closing selling price for the Common Stock on the
date in question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
- If the Common Stock is at the time listed on any national
securities exchange, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question on that
exchange, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
I. INVOLUNTARY TERMINATION shall mean the termination of the Service of
any individual which occurs by reason of:
- such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
- such individual's voluntary resignation following (A) a change in
his or her position with the Corporation which materially reduces his or
her duties and responsibilities or the level of management to which he or
she reports, (B) a reduction in his or her level of compensation (including
base salary, fringe benefits and target bonuses under corporate-performance
based bonus or incentive programs) by more than fifteen percent (15%) or
(C) a relocation of such individual's place of employment by more than
fifty (50) miles, provided and only if such change, reduction or relocation
is effected by the Corporation without the individual's consent.
J. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
or dishonesty by the Optionee, any unauthorized use or disclosure by the
Optionee of confidential information or trade secrets of the Corporation (or any
Parent or Subsidiary), or any other intentional misconduct by the Optionee
adversely affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
any Optionee or other person in the Service of the Corporation (or any Parent or
Subsidiary).
A-2.
<PAGE>
K. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
L. OPTIONEE shall mean any person to whom an option is granted under the
Plan.
M. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
N. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability
of the Optionee to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment expected to result in death
or to be of continuous duration of twelve (12) months or more.
0. PLAN shall mean the Corporation's Special Non-Officer Stock Option
Plan, as set forth in this document.
P. PLAN ADMINISTRATOR shall mean the committee comprised of one or more
Board members appointed by the Board to administer the Plan.
Q. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit restrictions of Section 16 of the
1934 Act.
R. SERVICE shall mean the provision of services on a periodic basis to
the Corporation (or any Parent or Subsidiary) in the capacity of an Employee or
an independent consultant or advisor, except to the extent otherwise
specifically provided in the applicable stock option agreement.
S. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
A-3.
<PAGE>
EXHIBIT 10.46
NON-QUALIFIED DEFERRED COMPENSATION PLAN
QuickResponse Services, Inc. established a nonqualified deferred compensation
plan for a certain select group of employees, effective as of December 1, 1997.
The specific terms of the plan are in the process of being finalized. A
finalized plan document shall be filed as soon as it is complete.
49
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-67138, No. 33-74734 and No. 33-94878 of QuickResponse Services, Inc. on Forms
S-8 of our report dated February 4, 1998, appearing in the Annual Report on Form
10-K of QuickResponse Services, Inc. for the year ended December 31, 1997.
/s/ Deloitte & Touche LLP
San Francisco, California
March 4, 1998
48
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<PAGE>
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<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
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<SECURITIES> 18,694
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0
0
<COMMON> 63,864
<OTHER-SE> (9,135)
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