-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DzwWOXUaStLXylw1jJghGeXQAbkzfyARl5MAbG88vtBypyS8PcYJeu9w3eTdMAZO bKzaMYgOcKADGFmw/nzKTQ== 0000950147-99-000651.txt : 19990623 0000950147-99-000651.hdr.sgml : 19990623 ACCESSION NUMBER: 0000950147-99-000651 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19990502 FILED AS OF DATE: 19990621 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICROAGE INC /DE/ CENTRAL INDEX KEY: 0000814249 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-COMPUTER & PERIPHERAL EQUIPMENT & SOFTWARE [5045] IRS NUMBER: 860321346 STATE OF INCORPORATION: DE FISCAL YEAR END: 1103 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-15995 FILM NUMBER: 99649622 BUSINESS ADDRESS: STREET 1: 2400 S MICROAGE WY MS8 CITY: TEMPE STATE: AZ ZIP: 85282 BUSINESS PHONE: 6023662000 MAIL ADDRESS: STREET 1: 2400 SOUTH MICROAGE WAY MS8 CITY: TEMPE STATE: AZ ZIP: 85282 10-Q 1 QUARTERLY REPORT FOR THE QTR ENDED 5/2/99 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934, For the quarterly period ended May 2, 1999 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission file number 0-15995 MICROAGE, INC. (Exact name of registrant as specified in its charter) Delaware 86-0321346 (State of incorporation) (I.R.S. Employer Identification No.) 2400 South MicroAge Way, Tempe, AZ 85282 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (602) 366-2000 The registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of shares of the registrant's Common Stock (par value $.01 per share) outstanding at May 30, 1999 was 20,497,305. INDEX MICROAGE, INC. PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated balance sheets -- May 2, 1999 and November 1, 1998. 2 Consolidated statements of operations -- Quarters ended 3 May 2, 1999 and May 3, 1998; 26 weeks ended May 2, 1999 and May 3, 1998. Consolidated statements of cash flows -- 26 weeks ended 4 May 2, 1999 and May 3, 1998. Notes to consolidated financial statements. 5 Item 2. Management's Discussion and Analysis of Financial Condition 7 and Results of Operations. PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 15 Item 6. Exhibits and Reports on Form 8-K 16 SIGNATURES 17 1 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) MICROAGE, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands, except share data) ASSETS May 2, November 1, 1999 1998 ----------- ---------- Current assets: Cash and cash equivalents $ 57,328 $ 41,894 Accounts and notes receivable, net 288,156 529,877 Inventory, net 449,245 486,150 Other 23,561 24,432 ----------- ---------- Total current assets 818,290 1,082,353 Property and equipment, net 95,670 92,147 Intangible assets, net 10,056 126,105 Other 24,557 14,538 ----------- ---------- Total assets $ 948,573 $1,315,143 =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 731,204 $ 967,501 Accrued liabilities 21,438 24,279 Current portion of long-term obligations 3,102 3,095 Other 7,731 8,868 ----------- ---------- Total current liabilities 763,475 1,003,743 Line of credit 12,600 -- Long-term obligations 4,209 5,553 Other long-term liabilities 17,178 15,361 Stockholders' equity: Preferred stock, par value $1.00 per share; Shares authorized: 5,000,000 Issued and outstanding: none -- -- Common stock, par value $.01 per share; Shares authorized: 40,000,000 Issued: May 2, 1999 -- 20,527,554 November 1, 1998 -- 20,284,789 205 203 Additional paid-in capital 210,173 206,720 Retained earnings (deficit) (58,769) 83,729 Treasury stock, at cost; Shares: May 2, 1999 -- 30,249 November 1, 1998 -- 16,378 (498) (166) ----------- ---------- Total stockholders' equity 151,111 290,486 ----------- ---------- Total liabilities and stockholders' equity $ 948,573 $1,315,143 =========== ========== The accompanying notes are an integral part of these financial statements. 2 MICROAGE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share data)
Quarter ended 26 weeks ended ------------------------ ------------------------ May 2, May 3, May 2, May 3, 1999 1998 1999 1998 ---------- ---------- ---------- ---------- Revenue $1,656,541 $1,326,950 $3,101,382 $2,505,961 Cost of sales 1,569,903 1,242,369 2,912,974 2,347,555 ---------- ---------- ---------- ---------- Gross profit 86,638 84,581 188,408 158,406 Operating and other expenses Operating expenses 106,025 79,652 195,312 152,713 Restructuring and other one-time charges 134,159 5,600 134,159 5,600 ---------- ---------- ---------- ---------- Total 240,184 85,252 329,471 158,313 ---------- ---------- ---------- ---------- Operating income (loss) (153,546) (671) (141,063) 93 Other expenses - net 12,260 9,171 19,508 20,112 ---------- ---------- ---------- ---------- Loss before income taxes (165,806) (9,842) (160,571) (20,019) Income tax benefit (18,465) (3,885) (15,296) (7,946) ---------- ---------- ---------- ---------- Net loss $ (147,341) $ (5,957) $ (145,275) $ (12,073) ========== ========== ========== ========== Net loss per common and common equivalent share: Basic $ (7.19) $ (0.30) $ (7.12) $ (0.62) ========== ========== ========== ========== Diluted $ (7.19) $ (0.30) $ (7.12) $ (0.62) ========== ========== ========== ========== Weighted average common and common equivalent shares outstanding: Basic 20,481 19,584 20,412 19,520 ========== ========== ========== ========== Diluted 20,481 19,584 20,412 19,520 ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements. 3 MICROAGE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Increase (Decrease) in Cash and Cash Equivalents (in thousands) 26 weeks ended ------------------------- May 2, May 3, 1999 1998 --------- --------- Cash flows from operating activities: Net loss $(145,275) $ (12,073) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 23,741 18,451 Provision for losses on accounts and notes receivable 12,304 6,630 Restructuring and other one-time charges 130,917 -- Changes in assets and liabilities, net of business acquisitions: Accounts and notes receivable 228,706 (15,466) Inventory 36,905 (29,338) Other current assets 871 (3,844) Other assets (10,711) (5,613) Accounts payable (235,391) 103,414 Accrued liabilities (2,841) 630 Other liabilities (1,820) 9,193 --------- --------- Net cash provided by operating activities 37,406 71,984 Cash flows from investing activities: Purchases of property and equipment (29,211) (28,232) Purchases of businesses and investments in unconsolidated companies, net of cash acquired (5,500) -- --------- --------- Net cash used in investing activities (34,711) (28,232) Cash flows from financing activities: Proceeds from issuance of stock - stock option and employee stock purchase plans 2,411 2,139 Net borrowings (payments) under line of credit 12,600 (30,650) Shareholder distributions - pooled companies -- (129) Net change in long-term obligations (2,272) (1,937) --------- --------- Net cash provided by (used in) financing activities 12,739 (30,577) --------- --------- Net increase in cash and cash equivalents 15,434 13,175 Cash and cash equivalents at beginning of period 41,894 22,279 --------- --------- Cash and cash equivalents at end of period $ 57,328 $ 35,454 ========= ========= The accompanying notes are an integral part of these financial statements. 4 MICROAGE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of MicroAge, Inc. (the "Company") do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results for the periods have been included. Certain prior year amounts have been reclassified to conform with current year financial statement presentation. Operating results for the 26 weeks ended May 2, 1999 are not necessarily indicative of the results that may be expected for the year ending October 31, 1999. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended November 1, 1998. NOTE B - OTHER EXPENSES - NET Other expenses - net consists of the following (in thousands): Quarters ended 26 weeks ended ------------------ ------------------ May 2, May 3, May 2, May 3, 1999 1998 1999 1998 ------- ------- ------- ------- Interest expense $ 992 $ 988 $ 1,815 $ 3,333 Expenses from sales of accounts receivable 4,140 4,993 6,823 10,570 Amortization expense 2,842 2,068 5,209 4,180 Other 4,286 1,122 5,661 2,029 ------- ------- ------- ------- $12,260 $ 9,171 $19,508 $20,112 ======= ======= ======= ======= NOTE C - RESTRUCTURING AND OTHER ONE-TIME CHARGES During the quarter ended May 2, 1999, the Company recorded $134 million of restructuring and other one-time charges ($124 million, or $6.07 per share, after taxes). The restructuring and other one-time charges included a $123 million write-down of impaired goodwill; $8 million for the write-down to net realizable value of software and equipment no longer utilized by the Company due to the implementation of a new branch automation system; $2 million in employee termination benefits; and $1 million for one-time contract termination and business closure costs. The goodwill written off during the quarter resulted from businesses acquired primarily in fiscal 1997 and fiscal 1998. Recent competitive increases in the industry as well as operating losses caused the Company to reassess the recoverability of its long-lived assets. The fair value of the assets, determined through a discounted cash flow analysis as well as other market analyses, was compared to the carrying amount of the assets. The difference was recorded as a charge to earnings in the second quarter. 5 The charges associated with employee termination benefits consist primarily of severance pay for 79 associates. The reductions were completed by May 2, 1999 and occurred in Pinacor, the Company's distribution business, and in an imaging business that the Company decided to exit during the quarter. All actions related to the restructuring were implemented as of May 2, 1999, and the liability for restructuring accruals at May 2, 1999 was $3 million. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain statements contained in this Item may be "forward-looking statements" within the meaning of The Private Securities Litigation Reform Act of 1995. These forward-looking statements may include projections of revenue and net income and issues that may affect revenue or net income; projections of capital expenditures; plans for future operations; financing needs or plans; plans relating to the Company's products and services; and assumptions relating to the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking information. Some of the important factors that could cause the Company's actual results to differ materially from those projected in forward-looking statements made by the Company include, but are not limited to, the following: intense competition; narrow margins; dependence on supplier incentive funds; product supply and dependence on key vendors; potential fluctuations in quarterly results; risks of declines in inventory values; no assurance of successful acquisitions or investments; the capital intensive nature of the Company's business; dependence on information systems; year 2000 issues; dependence on independent shipping companies; rapid technological change; and possible volatility of stock price. Reference is made to Exhibit 99.1 of the Company's Report on Form 10-K for the year ended November 1, 1998 for additional discussion of the foregoing factors. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The Company operates two independent businesses - a distribution business operated through a wholly-owned subsidiary, Pinacor, Inc. ("Pinacor"), and an integration business, MicroAge Technology Services ("MTS"). These businesses have separate management teams, operate autonomously in their respective marketplaces, and contract with headquarters for a limited number of services, such as payroll processing, employee benefits and information services. RECENT DEVELOPMENTS During the second quarter of fiscal 1999, the Company experienced increased competitive pressures and other economic factors that negatively impacted the Company's gross margins and operating results. In addition, operating expenses increased from the first quarter of fiscal 1999 to the second quarter of fiscal 1999. The Company has taken actions to increase gross margins and decrease operating expenses. These actions include price increases, the elimination of several hundred positions at Pinacor and MTS, closing several branch locations and exiting several businesses that were no longer strategic. In addition, changes in the computer integration and distribution industry as well as recent operating losses caused the Company to reassess the recoverability of its goodwill during the quarter. The Company determined that, based on cash flow and other market analyses, a substantial portion of its goodwill was impaired. See Note C to the Consolidated Financial Statements. The Company also completed the implementation of a new branch automation system during the quarter. Charges were recognized during the quarter related to the conversion to the new system as well as for the completion of the separation of the Company into two independent businesses, Pinacor and MTS. 7 In connection with these developments, the Company recorded restructuring and other expenses aggregating $152 million ($136 million or $6.64 per share after taxes). These charges included $123 million for the write-down to net realizable value of goodwill, $13 million for the write off of assets no longer utilized or otherwise impaired after the system conversion and completion of the Company split described above, $8 million for severance and business exit costs and $8 million related to Pinacor's Latin America distribution business. The charges for Pinacor Latin America were primarily the result of the continuing deterioration of the South American economy and consist of receivable and inventory write-downs and the write-down of Pinacor's investment in several Latin American companies. The total charges of $152 million include $18 million of charges that were recorded as components of cost of sales, operating expenses and other expenses in the accompanying statements of operations. In June 1999, the Company announced that it had retained an investment banking firm to help explore financial options designed to enhance shareholder value. The following table illustrates the recognition within the consolidated statements of operations of the restructuring and other unusual charges described above (in thousands): Quarter ended May 2, 1999 ----------------------------------------- Restructuring and other As Reported unusual charges As Adjusted ----------- --------------- ----------- Cost of sales $1,569,903 $ 6,016 $1,563,887 Operating expenses 106,025 9,773 96,252 Restructuring and other one-time charges 134,159 134,159 -- Operating loss (153,546) 147,948 (3,598) Other expenses - net 12,260 2,350 9,910 Loss before income taxes $ (165,806) $152,298 $ (13,508) In addition to the actions and charges taken above, the Company took actions subsequent to the end of the fiscal quarter to further reduce operating expenses and improve profitability. These actions include the elimination of several hundred positions and the closure of several branch operations. The charges related to these actions and other actions that may be taken will be recognized in the third fiscal quarter ended August 1, 1999. Excluding these charges and other expense reduction initiatives, the Company expects the third fiscal quarter results will be at or near breakeven. 8 RESULTS OF OPERATIONS The following table sets forth, for the indicated periods, data as percentages of total revenue:
Quarter ended ----------------------------------------------------------------------- May 2, Jan. 31, Nov. 1, Aug. 2, May 3, 1999 1999 1998 1998 1998 ---------- ---------- ---------- ---------- ---------- Revenue (in thousands) $1,656,541 $1,444,841 $1,572,824 $1,441,246 $1,326,950 Cost of sales(1) 94.4% 93.0% 93.1% 94.0% 93.6% ---------- ---------- ---------- ---------- ---------- Gross profit(1) 5.6 7.0 6.9 6.0 6.4 Operating and other expenses Operating expenses(1) 5.8 6.2 5.8 5.4 6.0 Restructuring and other one-time charges(2) 9.2 0.0 0.0 0.0 0.4 ---------- ---------- ---------- ---------- ---------- Operating income (loss) (9.4) 0.9 1.1 0.6 0.0 Other expenses - net(1) 0.6 0.5 0.4 0.5 0.7 ---------- ---------- ---------- ---------- ---------- Income (loss) before income taxes (10.0) 0.4 0.7 0.1 (0.7) Income tax provision (benefit) (1.1) 0.2 0.5 0.1 (0.3) ---------- ---------- ---------- ---------- ---------- Net income (loss) (8.9)% 0.1% 0.2% 0.0 (0.4)% ========== ========== ========== ========== ==========
(1) Calculations for the quarter ended May 2, 1999 exclude the effects of $18.1 million of charges discussed above. Inclusion of such expenses would result in the following percentage relationship to net sales for the quarter: Cost of sales 94.8% Gross profit 5.2 Operating expenses 6.4 Other expenses - net 0.7 (2) Calculations for the quarter ended May 2, 1999 include the effects of $18.1 million of charges excluded from cost of sales, gross profit, operating expenses and other expenses as discussed in footnote (1) above. The following discussion of results of operations for the quarter and 26 weeks ended May 2, 1999 exclude the effect of the restructuring and other unusual charges discussed above in "Recent Developments." TOTAL REVENUE. Total revenue of $1.7 billion increased $330 million, or 25%, for the quarter ended May 2, 1999 as compared to the quarter ended May 3, 1998. This revenue increase included a $298 million, or 25%, increase in Pinacor (distribution business) revenue and a $17 million, or 4%, increase in MTS (integration business) revenue. The remaining increase in consolidated revenue was due to a decrease in the elimination of intercompany revenue. Total revenue increased $595 million, or 24%, for the 26 weeks ended May 2, 1999 as compared to the 26 weeks ended May 3, 1998. This revenue increase included a $553 million, or 25%, increase in Pinacor revenue and a $28 million, or 3%, increase in MTS revenue. The remaining increase in consolidated revenue was due to a decrease in the elimination of intercompany revenue. 9 The increase in revenue was attributable to sales to resellers added since May 3, 1998, increased demand for the Company's major suppliers' products, the Company's addition of new product offerings, service revenue growth and the growth of the microcomputer products industry. GROSS PROFIT PERCENTAGE. The Company's gross profit percentage was 5.6% for the quarter ended May 2, 1999 and 6.4% for the quarter ended May 3, 1998. The gross profit percentage was 6.3% for the 26 weeks ended May 2, 1999 and May 3, 1998. The decrease in the Company's gross profit percentage during the second quarter was due to lower margins in Pinacor, partially offset by higher margins in MTS. Pinacor margins decreased primarily as a result of decreased product trading margins. This decline in trading margins was the result of increased competitive pressures, particularly during the first half of the second quarter, and to decreased supplier funds during the quarter. Pinacor instituted a price increase during the second quarter and adjusted salesperson compensation plans to incent higher margin sales. As a result, product trading margins increased in the latter part of the quarter; however, supplier funds remain at lower levels than in previous quarters. MTS margins increased for the second quarter of fiscal 1999 compared to the second quarter of fiscal 1998, but decreased compared to the first quarter of fiscal 1999. The increase from the second quarter of 1998 was due primarily to an increase in service revenue, which has higher gross margins than product revenue margins. The decrease from the first quarter of fiscal 1999 was due to increased competitive pressures in both product and services and to under-utilization of service staff. MTS has taken actions to increase service margins through the elimination of under-utilized service associates. Future gross profit percentages may be affected by market pressures, the introduction of new Company initiatives, changes in revenue mix, future acquisitions, changes in supplier incentive funds, changes in suppliers' terms and conditions, the Company's utilization of early payment discount opportunities, supplier pricing actions, and other competitive and economic pressures. See "Potential Fluctuations in Operating Results" below for information regarding industry trends that may affect future gross profit percentages. OPERATING EXPENSES. As a percentage of revenue, operating expenses decreased to 5.8% for the quarter ended May 2, 1999, compared to 6.0% for the quarter ended May 3, 1998. Operating expenses increased from $153 million, or 6.1% of revenue, for the 26 weeks ended May 3, 1998 to $186 million, or 6.0% of revenue, for the 26 weeks ended May 2, 1999, primarily as a result of increased business volume. Although operating expenses have decreased as a percentage of revenue, total spending increased during the second fiscal quarter at the same time that gross profit dollars decreased. As a result, the Company has taken actions to reduce operating expenses. See "Recent Developments" for a discussion of actions taken. 10 OTHER EXPENSES - NET. Other expenses - net increased to $9.9 million for the quarter ended May 2, 1999 from $9.2 million for the quarter ended May 3, 1998 and $7.2 million for the first fiscal quarter of 1999. Other expenses - net decreased to $17.2 million for the 26 weeks ended May 2, 1999 from $20.1 million for the 26 weeks ended May 3, 1998. The increase for the second fiscal quarter of 1999 compared to the first quarter of fiscal 1999 was primarily due to increased average borrowings as a result of changes in the Company's major suppliers' policies. During the first quarter of fiscal 1999 certain major suppliers changed the terms of their credit arrangements with the Company. These changes include a decrease in the number of days the Company has to pay for product purchases and a decrease in the amount of reseller purchases from the Company that the suppliers are willing to subsidize. These changes increased the Company's working capital requirements and financing costs. INCOME TAX PROVISION. As a percentage of loss before tax, the income tax benefit was 20.1% for the quarter ended May 2, 1999 compared to 39.5% for the quarter ended May 3, 1998. The decrease in the effective tax rate is due to the impact of permanent differences, primarily consisting of goodwill amortization and meals and entertainment expenses, between book income and taxable income. CHANGES IN SUPPLIER TERMS AND CONDITIONS The key suppliers of the Company provide various incentives for promoting and marketing their product offerings. A large portion of the incentives is passed on to the Company's customers. However, a portion of the incentives positively impact the Company's income. Beginning in May 1998, the major manufacturers announced and/or instituted changes in their sales incentive programs and inventory management programs. Pursuant to these changes, the major manufacturers have (i) reduced the amount of product that the Company is allowed to return, (ii) reduced the amount of price protection coverage offered to the Company and (iii) changed incentives to programs based on sales of the manufacturers' products, rather than on purchases of the products from the manufacturers. In addition, several of the Company's major suppliers have changed the terms of their credit arrangements with the Company. These changes include a decrease in the number of days the Company has to pay for product purchases and a decrease in the amount of reseller purchases from the Company that the suppliers are willing to subsidize. These changes have increased the Company's working capital requirements and financing costs. Further changes in incentives or other terms and conditions could have a material adverse effect on the Company's operating results. During the quarter ended May 2, 1999, the Company announced a change in the Pinacor product sourcing relationship with Compaq Computer Corporation ("Compaq"). By the end of the Company's fiscal year, Pinacor will begin sourcing certain Compaq products from other Compaq distributors instead of sourcing directly from Compaq. Compaq has indicated that Pinacor will continue to be a Compaq Channel partner and will be able to distribute the full range of Compaq products. In addition, Pinacor will continue to order some products directly from Compaq. The Company believes that this change will have a negative impact on its operating results, but the amount of the impact of this change cannot be determined at this time. 11 POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS The Company's operating results may vary significantly from quarter to quarter depending on certain factors, including, but not limited to, demand for the Company's information technology products and services, the amount of supplier incentive funds received by the Company, the results of acquired businesses, product availability, competitive conditions, new product introductions, changes in customer order patterns, changes in supplier terms and conditions and general economic conditions. In particular, the Company's operating results are sensitive to changes in the mix of product and service revenues, product margins, inventory adjustments and interest rates. Although the Company attempts to control its expense levels, these levels are based, in part, on anticipated revenues. Therefore, the Company may not be able to control spending in a timely manner to compensate for any unexpected revenue shortfall. As a result, quarterly period-to-period comparisons of the Company's financial results are not necessarily meaningful and should not be relied upon as an indication of future performance. In addition, although the Company's financial performance has not exhibited significant seasonality in the past, the Company and the computer industry in general tend to follow a sales pattern with peaks occurring near the end of the calendar year, due primarily to special supplier promotions and year-end business purchases. LIQUIDITY AND CAPITAL RESOURCES The Company has financed its growth and cash needs to date primarily through working capital financing facilities, bank credit lines, common stock offerings and cash generated from operations. The primary uses of cash have been to fund increases in inventory and accounts receivable resulting from increased sales. If the Company is successful in achieving continued revenue growth, its working capital requirements are likely to increase. In addition, as discussed above, changes in supplier payment terms have increased the Company's working capital requirements. Cash provided by operating activities was $37 million for the 26 weeks ended May 2, 1999 as compared to $72 million for the 26 weeks ended May 3, 1998. This decrease was primarily due to changes in cash provided by accounts receivable, inventory and accounts payable. During the 26 weeks ended May 2, 1999, $229 million was provided by changes in accounts receivable as compared to $15 million used during the 26 weeks ended May 3, 1998. This was due to an increase in receivables sold to a finance company. Cash provided by inventory during the 26 weeks ended May 2, 1999 was $37 million as compared to $29 million used during the 26 weeks ended May 3, 1998. These increases were offset by cash used by changes in accounts payable of $235 million during the 26 weeks ended May 2, 1999 as compared to cash provided of $103 million during the 26 weeks ended May 3, 1998. The change in cash resulting from accounts payable was primarily due to changes in suppliers' terms. See "Changes in Supplier Terms and Conditions". Cash used in investing activities was $35 million during the 26 weeks ended May 2, 1999 as compared to $28 million during the 26 weeks ended May 3, 1998. This increase was primarily due to purchases of businesses and investments in unconsolidated subsidiaries. 12 Cash provided by financing activities was $13 million during the 26 weeks ended May 2, 1999 compared to cash used of $31 million during the 26 weeks ended May 3, 1998. This change was primarily due to net borrowings under the Company's line of credit of $13 million for the 26 weeks ended May 2, 1999 compared to net payments of $31 million for the 26 weeks ended May 3, 1998. The Company maintains three financing agreements (the "Agreements") with financing facilities totaling $800 million. The Agreements include an accounts receivable facility (the "A/R Facility") and inventory financing facilities (the "Inventory Facilities"). Under the A/R Facility, the Company has the right to sell certain accounts receivable from time to time, on a limited recourse basis, up to an aggregate amount of $350 million sold at any given time. At May 2, 1999, the net amount of sold accounts receivable was $271 million. The Inventory Facilities provide for borrowings up to $450 million. Within the Inventory Facilities, the Company has lines of credit for the purchase of inventory from selected product suppliers ("Inventory Lines of Credit") and a line of credit for general working capital requirements ("Supplemental Line of Credit"). Payments for products purchased under the Inventory Lines of Credit vary depending upon the product supplier, but generally are due between 30 and 60 days from the date of the advance. Amounts borrowed under the Supplemental Line of Credit may remain outstanding until the expiration date of the Agreements (August 2000). No interest or finance charges are payable on the Inventory Lines of Credit if payments are made when due. At May 2, 1999, the Company had $290 million outstanding under the Inventory Lines of Credit (included in accounts payable in the accompanying Balance Sheets), and $13 million outstanding under the Supplemental Line of Credit. Of the $800 million of financing capacity represented by the Agreements, $226 million was unused as of May 2, 1999. Utilization of the unused portion is dependent upon the Company's collateral availability at the time the funds would be needed. There can be no assurance that the Company will be able to borrow adequate amounts on terms acceptable to the Company. Borrowings under the Agreements are secured by substantially all of the Company's assets, and the Agreements contain certain restrictive covenants, including tangible net worth requirements and ratios of debt to tangible net worth and current assets to current liabilities. At May 2, 1999, the Company was in compliance with these covenants. In addition to the financing facilities discussed above, the Company maintains an accounts receivable purchase agreement (the "Purchase Agreement") with a commercial credit corporation (the "Buyer") whereby the Buyer agrees to purchase, from time to time at its option, on a limited recourse basis, certain accounts receivable of the Company. Under the terms of the Purchase Agreement, no finance charges are assessed if the accounts are settled within forty days. At May 2, 1999, the net amount of sold accounts receivable under the Purchase Agreement was $23 million. The Company also maintains trade credit arrangements with its suppliers and other creditors to finance product purchases. A few major suppliers maintain security interests in their products sold to the Company. 13 As discussed above, several of the Company's major suppliers have changed the terms of their credit arrangements with the Company. These changes include a decrease in the number of days the Company has to pay for product purchases and a decrease in the amount of reseller purchases from the Company that the suppliers are willing to subsidize. These changes have increased the Company's working capital requirements and financing costs. The additional borrowings that will be required to pay suppliers on shorter terms could exceed the borrowings available under the Agreements due to collateral constraints. The unavailability of a significant portion of, or the loss of, the Agreements or trade credit from suppliers would have a material adverse effect on the Company. Although the Company has no material capital commitments, the Company expects to make capital expenditures of approximately $15 to $20 million during the remainder of fiscal 1999. INFLATION The Company believes that inflation has generally not had a material impact on its operations. 14 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The Annual Meeting of Stockholders was held on March 31, 1999. (b)(1) The following individuals were elected to the Board of Directors as Class I Directors for three-year terms expiring at the Company's 2002 Annual Meeting of Stockholders: William H. Mallender, Lynda M. Applegate, and Dianne C. Walker. (b)(2) The following individuals' terms continued after the Annual Meeting as Class II Directors: Jeffrey D. McKeever and Steven G. Mihaylo. Their terms will expire at the Company's 2000 Annual Meeting of Stockholders. (b)(3) The following individuals' terms continued after the Annual Meeting as Class III Directors: Roy A. Herberger, Jr. and Cyrus F. Freidheim, Jr. Their terms will expire at the Company's 2001 Annual Meeting of Stockholders. (c) The matters submitted for vote at the Annual Meeting were as follows: (c)(1) Election of Class I Directors for three-year terms expiring at the Company's 2002 Annual Meeting of Stockholders. See Item 4(b)(1) above. The shares were voted as follows: NOMINEE NUMBER OF SHARES ------- ---------------- William H. Mallender For 16,228,309 Against 0 Withheld 581,122 Abstentions 0 Broker Non-votes 0 Lynda M. Applegate For 16,231,462 Against 0 Withheld 577,969 Abstentions 0 Broker Non-votes 0 Dianne C. Walker For 16,183,795 Against 0 Withheld 625,636 Abstentions 0 Broker Non-votes 0 15 (c)(2) Approval of Increase in Authorized Shares under the MicroAge, Inc. 1995 Associate Stock Purchase Plan. The shares were voted as follows: For 16,117,323 Against 588,258 Withheld 0 Abstentions 32,866 Broker Non-votes 0 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10.1 Form of MicroAge, Inc. 1999 Management Equity Program Award Agreement* 10.2 MicroAge, Inc. 1999 Management Equity Program Award Agreement between MicroAge, Inc. and Jeffrey D. McKeever* 10.3 MicroAge, Inc. 1999 Management Equity Program Award Agreement between MicroAge, Inc. and James R. Daniel* 10.4 MicroAge, Inc. 1999 Management Equity Program Award Agreement between MicroAge, Inc. and Christopher J. Koziol* 10.5 MicroAge, Inc. 1999 Management Equity Program Award Agreement between MicroAge, Inc. and Robert G. O'Malley* 10.6 MicroAge, Inc. 1995 Director Incentive Plan Stock Option Agreement between MicroAge, Inc. and William H. Mallender* 10.7 MicroAge, Inc. 1995 Director Incentive Plan Stock Option Agreement between MicroAge, Inc. and Lynda M. Applegate* 10.8 MicroAge, Inc. 1995 Director Incentive Plan Stock Option Agreement between MicroAge, Inc. and Cyrus F. Freidheim* 10.9 MicroAge, Inc. 1995 Director Incentive Plan Stock Option Agreement between MicroAge, Inc. and Roy A. Herberger* 10.10 MicroAge, Inc. 1995 Director Incentive Plan Stock Option Agreement between MicroAge, Inc. and Dianne C. Walker* 10.11 MicroAge, Inc. 1995 Director Incentive Plan Stock Option Agreement between MicroAge, Inc. and Steven G. Mihaylo* 11 EPS Detail Calculation (Statement re: Computation of Per Share Earnings) 27 Financial Data Schedule - ---------- * Management contract for compensatory plan or arrangement. (b) During the quarter ended May 2, 1999, MicroAge, Inc. filed one report on Form 8-K, dated January 28, 1999 and filed February 13, 1999, pursuant to Item 5 to disclose an extension of MicroAge, Inc.'s Amended and Restated Rights Agreement from February 23, 1999 through the end of the current fiscal year, October 31, 1999. 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MICROAGE, INC. (Registrant) Date: June 21, 1999 By: /s/ Jeffrey D. McKeever ------------------------------------- Jeffrey D. McKeever Chairman of the Board and Chief Executive Officer Date: June 21, 1999 By: /s/ James R. Daniel ------------------------------------- James R. Daniel Executive Vice President Services, Chief Financial Officer and Treasurer 17 EXHIBIT INDEX 10.1 Form of MicroAge, Inc. 1999 Management Equity Program Award Agreement* 10.2 MicroAge, Inc. 1999 Management Equity Program Award Agreement between MicroAge, Inc. and Jeffrey D. McKeever* 10.3 MicroAge, Inc. 1999 Management Equity Program Award Agreement between MicroAge, Inc. and James R. Daniel* 10.4 MicroAge, Inc. 1999 Management Equity Program Award Agreement between MicroAge, Inc. and Christopher J. Koziol* 10.5 MicroAge, Inc. 1999 Management Equity Program Award Agreement between MicroAge, Inc. and Robert G. O'Malley* 10.6 MicroAge, Inc. 1995 Director Incentive Plan Stock Option Agreement between MicroAge, Inc. and William H. Mallender* 10.7 MicroAge, Inc. 1995 Director Incentive Plan Stock Option Agreement between MicroAge, Inc. and Lynda M. Applegate* 10.8 MicroAge, Inc. 1995 Director Incentive Plan Stock Option Agreement between MicroAge, Inc. and Cyrus F. Freidheim* 10.9 MicroAge, Inc. 1995 Director Incentive Plan Stock Option Agreement between MicroAge, Inc. and Roy A. Herberger* 10.10 MicroAge, Inc. 1995 Director Incentive Plan Stock Option Agreement between MicroAge, Inc. and Dianne C. Walker* 10.11 MicroAge, Inc. 1995 Director Incentive Plan Stock Option Agreement between MicroAge, Inc. and Steven G. Mihaylo* 11 EPS Detail Calculation (Statement re: Computation of Per Share Earnings) 27 Financial Data Schedule - ---------- * Management contract for compensatory plan or arrangement. EX-10.1 2 FORM OF MGMT EQUITY PROGRAM AWARD AGR MICROAGE, INC. 1999 MANAGEMENT EQUITY PROGRAM AWARD AGREEMENT (_______________________) April 7, 1999 Dear __________: Pursuant to the action taken by the Board of Directors of MicroAge, Inc. (the "COMPANY") and the Compensation Committee of the Board of Directors, you are hereby offered participation in the 1999 Management Equity Program (the "1999 MEP") under the MicroAge, Inc. Long-Term Incentive Plan (the "PLAN"). Under the 1999 MEP, you have the opportunity to receive options to restructure your compensation package to some extent. Essentially, you may elect to purchase shares of the common stock of the Company if you irrevocably elect to waive all or a portion of your base salary you may receive from May 1, 1999 through May 1, 2000 under the following terms and conditions. BEFORE YOU ELECT TO PARTICIPATE IN THE 1999 MEP, READ THIS AWARD AGREEMENT. YOU WILL BE REQUIRED TO SIGN THIS AWARD AGREEMENT, AND YOUR SIGNATURE WILL EVIDENCE THAT YOU HAVE READ THIS AWARD AGREEMENT, UNDERSTAND IT, AND AGREE WITH ITS TERMS AND CONDITIONS. TO PARTICIPATE IN THE 1999 MEP, YOU MUST COMPLETE AND SIGN THIS AWARD AGREEMENT AND RETURN IT TO ALESIA MARTIN (EXTENSION 65150) BY 12:00 P.M. NOON ON FRIDAY, APRIL 23, 1999. 1. EFFECTIVE DATE. The effective date of your participation in the 1999 MEP, and the grant date of your MEP options, is April 23, 1999. 2. SALARY WAIVER. You hereby elect to waive a portion of your salary during the period from May 1, 1999 through May 1, 2000 (the "WAIVER PERIOD") in the following amount (the "WAIVER AMOUNT"): $____________________. NOTE: the MINIMUM Waiver Amount is $__________ (10% of your current base salary) and the MAXIMUM Waiver Amount is $____________ (25% of your current base salary). 1 3. NUMBER OF OPTIONS GRANTED. In exchange for electing to waive the Waiver Amount specified in Paragraph 2, above, you are hereby granted an option to purchase the number of shares of MicroAge, Inc. Common Stock calculated pursuant to the formula below (TO BE COMPLETED BY MICROAGE): (1) Waiver Amount: $___________ (2) $ ____________________ (Waiver Amount) Multiplied by Four (4) (the "LEVERAGE FACTOR"): $___________ (3) Common Stock Closing Price on Effective Date (April 23, 1999) (the "COMMON STOCK PRICE"): $___________ (4) Total Options Granted (2) / (3) (rounded up): $___________ 4. VESTING OF OPTIONS. Your options will vest in one-third (1/3) increments beginning on May 1, 2000, and will be fully vested on May 1, 2002. 5. EXPIRATION OF OPTIONS. Subject to Section 6 and 7 of this Award Agreement, your options will expire, unless sooner exercised, on April 23, 2009. 6. TERMINATION OF EMPLOYMENT. DEATH. Upon your death, your beneficiary will be entitled to receive the number of options determined by multiplying the sum of your compensation actually waived up to the date of your death by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of your death will be considered. All options received by your beneficiary will be fully vested and immediately exercisable. Your beneficiary will have up to one year from the date of your death to exercise the options. After that one year period, the options will be canceled. UNDER NO CIRCUMSTANCES WILL YOU OR YOUR BENEFICIARY BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP. DISABILITY. Upon your termination of employment due to a "Disability" (as that term is defined in the Plan) you will be entitled to receive the number of options determined by multiplying the sum of your compensation actually waived up to the date of your termination by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of your termination will be considered. All options received will be fully vested and immediately exercisable. You will have up to one year from the date of termination of employment to exercise the options. After that one year period, the options will be canceled. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP. VOLUNTARY OR INVOLUNTARY. Upon your voluntary or involuntary termination of employment, you will be entitled to receive the number of options determined by multiplying the sum of your compensation actually waived up to the date of your termination by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of termination of employment will be considered. Your options will continue to vest under the above vesting schedule as if you continued to be employed by the Company and continued participating in the 1999 2 MEP. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP. 7. TERMINATION OF 1999 MEP. If the Committee decides to terminate the 1999 MEP, you will be entitled to receive a number of options determined by multiplying the sum of your compensation actually waived up to the date of your termination by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of termination will be considered. All options received will be fully vested and immediately exercisable. You will have up to thirty days from the date of such termination to exercise the options. After such thirty day period, the options will be canceled. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP. 8. CHANGE OF CONTROL. Upon a "Change of Control" (as that term is defined in the Plan), you will be entitled to receive the number of options determined by multiplying the sum of your compensation actually waived up to the date of the Change of Control by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of Change of Control will be considered. All options will be fully vested and immediately exercisable. In the event of a dissolution or liquidation of the Company or a merger or consolidation in which the Company would not be the surviving or resulting corporation, you will be entitled to receive the number of options determined by multiplying the sum of your compensation actually waived up to the date of exercise by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of exercise will be considered. All options will be fully vested and exercisable (a) in the case of a dissolution or liquidation, at anytime after the Company's Board of Directors takes action authorizing the dissolution or liquidation of the Company or (b) in the case of a merger or consolidation in which the Company would not be the resulting or surviving corporation, upon the Company's public announcement that a definitive agreement regarding such a merger or consolidation has been reached. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP. 9. COMPANY INFORMATION. By signing this Award Agreement, you acknowledge that you have been given, or were offered, a copy of the Company's (i) Annual Report on Form 10-K for the fiscal year ended November 1, 1998, and (ii) Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1999 (the "SEC REPORTS"), and that you were given an opportunity to ask questions of any of the Company's executive officers regarding the SEC Reports or any other matter regarding the Company. 10. RISK OF INVESTMENT. By signing this Award Agreement, you recognize that your participation in the 1999 MEP is a speculative investment in that the success or failure of your investment depends on the market value of the Company's Common Stock over a several year period. You further recognize that all or a portion of your investment (i.e., your Waiver Amount) may be lost. You also acknowledge that you were given the opportunity to consult with your personal advisor(s) regarding the 1999 MEP. 3 I hereby elect to participate in the 1999 MEP under the terms and conditions set forth above and acknowledge that I have read and understood the terms and conditions of the 1999 MEP. SIGNATURE___________________ DATE________________________ SSN_________________________ ACCEPTED: MICROAGE, INC. BY _________________________ ITS_________________________ 4 EX-10.2 3 MGMT EQUITY PROGRAM-JEFFREY D. MCKEEVER MICROAGE, INC. 1999 MANAGEMENT EQUITY PROGRAM AWARD AGREEMENT JEFFREY. D. McKEEVER April 23, 1999 Dear Jeff: Pursuant to the action taken by the Board of Directors of MicroAge, Inc. (the "COMPANY") and the Compensation Committee of the Board of Directors, you are hereby offered participation in the 1999 Management Equity Program (the "1999 MEP") under the MicroAge, Inc. Long-Term Incentive Plan (the "PLAN"). Under the 1999 MEP, you have the opportunity to receive options to restructure your compensation package to some extent. Essentially, you may elect to purchase shares of the common stock of the Company if you irrevocably elect to waive all or a portion of your base salary you may receive from May 1, 1999 through May 1, 2000 under the following terms and conditions. BEFORE YOU ELECT TO PARTICIPATE IN THE 1999 MEP, READ THIS AWARD AGREEMENT. YOU WILL BE REQUIRED TO SIGN THIS AWARD AGREEMENT, AND YOUR SIGNATURE WILL EVIDENCE THAT YOU HAVE READ THIS AWARD AGREEMENT, UNDERSTAND IT, AND AGREE WITH ITS TERMS AND CONDITIONS. TO PARTICIPATE IN THE 1999 MEP, YOU MUST COMPLETE AND SIGN THIS AWARD AGREEMENT AND RETURN IT TO ALESIA MARTIN (EXTENSION 65150) BY 12:00 P.M. NOON ON FRIDAY, APRIL 23, 1999. 1. EFFECTIVE DATE. The effective date of your participation in the 1999 MEP, and the grant date of your MEP options, is April 23, 1999. 2. SALARY WAIVER. You hereby elect to waive a portion of your salary during the period from May 1, 1999 through May 1, 2000 (the "WAIVER PERIOD") in the following amount (the "WAIVER AMOUNT"): $162,500. NOTE: the MINIMUM Waiver Amount is $65,000 (10% of your current base salary) and the MAXIMUM Waiver Amount is $162,500 (25% of your current base salary). 3. NUMBER OF OPTIONS GRANTED. In exchange for electing to waive the Waiver Amount specified in Paragraph 2, above, you are hereby granted an option to purchase the number of shares of MicroAge, Inc. Common Stock calculated pursuant to the formula below (to be completed by MicroAge): (1) Waiver Amount: $162,500 (2) $162,500 (Waiver Amount) Multiplied by Four (4) (the "Leverage Factor"): $650,000 (3) Common Stock Closing Price on Effective Date (April 23, 1999) (the "Common Stock Price"): $ 5.875 (4) Total Options Granted (2) / (3) (rounded up): 110,639 4. VESTING OF OPTIONS. Your options will vest in one-third (1/3) increments beginning on May 1, 2000, and will be fully vested on May 1, 2002. 5. EXPIRATION OF OPTIONS. Subject to Section 6 and 7 of this Award Agreement, your options will expire, unless sooner exercised, on April 23, 2009. 6. TERMINATION OF EMPLOYMENT. DEATH. Upon your death, your beneficiary will be entitled to receive the number of options determined by multiplying the sum of your compensation actually waived up to the date of your death by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of your death will be considered. All options received by your beneficiary will be fully vested and immediately exercisable. Your beneficiary will have up to one year from the date of your death to exercise the options. After that one year period, the options will be canceled. UNDER NO CIRCUMSTANCES WILL YOU OR YOUR BENEFICIARY BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP. DISABILITY. Upon your termination of employment due to a "Disability" (as that term is defined in the Plan) you will be entitled to receive the number of options determined by multiplying the sum of your compensation actually waived up to the date of your termination by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of your termination will be considered. All options received will be fully vested and immediately exercisable. You will have up to one year from the date of termination of employment to exercise the options. After that one year period, the options will be canceled. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP. VOLUNTARY OR INVOLUNTARY. Upon your voluntary or involuntary termination of employment, you will be entitled to receive the number of options determined by multiplying the sum of your compensation actually waived up to the date of your termination by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of termination of employment will be considered. Your options will continue to vest under the above vesting schedule as if you continued to be employed by the Company and continued participating in the 1999 2 MEP. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP. 7. TERMINATION OF 1999 MEP. If the Committee decides to terminate the 1999 MEP, you will be entitled to receive a number of options determined by multiplying the sum of your compensation actually waived up to the date of your termination by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of termination will be considered. All options received will be fully vested and immediately exercisable. You will have up to thirty days from the date of such termination to exercise the options. After such thirty day period, the options will be canceled. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP. 8. CHANGE OF CONTROL. Upon a "Change of Control" (as that term is defined in the Plan), you will be entitled to receive the number of options determined by multiplying the sum of your compensation actually waived up to the date of the Change of Control by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of Change of Control will be considered. All options will be fully vested and immediately exercisable. In the event of a dissolution or liquidation of the Company or a merger or consolidation in which the Company would not be the surviving or resulting corporation, you will be entitled to receive the number of options determined by multiplying the sum of your compensation actually waived up to the date of exercise by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of exercise will be considered. All options will be fully vested and exercisable (a) in the case of a dissolution or liquidation, at anytime after the Company's Board of Directors takes action authorizing the dissolution or liquidation of the Company or (b) in the case of a merger or consolidation in which the Company would not be the resulting or surviving corporation, upon the Company's public announcement that a definitive agreement regarding such a merger or consolidation has been reached. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP. 9. COMPANY INFORMATION. By signing this Award Agreement, you acknowledge that you have been given, or were offered, a copy of the Company's (i) Annual Report on Form 10-K for the fiscal year ended November 1, 1998, and (ii) Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1999 (the "SEC REPORTS"), and that you were given an opportunity to ask questions of any of the Company's executive officers regarding the SEC Reports or any other matter regarding the Company. 10. RISK OF INVESTMENT. By signing this Award Agreement, you recognize that your participation in the 1999 MEP is a speculative investment in that the success or failure of your investment depends on the market value of the Company's Common Stock over a several year period. You further recognize that all or a portion of your investment (i.e., your Waiver Amount) may be lost. You also acknowledge that you were given the opportunity to consult with your personal advisor(s) regarding the 1999 MEP. 3 I hereby elect to participate in the 1999 MEP under the terms and conditions set forth above and acknowledge that I have read and understood the terms and conditions of the 1999 MEP. SIGNATURE /s/ Jeffery D. McKeever ----------------------- DATE April 23, 1999 ----------------------- SSN ----------------------- ACCEPTED: MICROAGE, INC. BY ----------------------- ITS ----------------------- 4 EX-10.3 4 MGMT EQUITY PROGRAM-JAMES R. DANIEL MICROAGE, INC. 1999 MANAGEMENT EQUITY PROGRAM AWARD AGREEMENT JAMES R. DANIEL April 23, 1999 Dear Jim: Pursuant to the action taken by the Board of Directors of MicroAge, Inc. (the "COMPANY") and the Compensation Committee of the Board of Directors, you are hereby offered participation in the 1999 Management Equity Program (the "1999 MEP") under the MicroAge, Inc. Long-Term Incentive Plan (the "PLAN"). Under the 1999 MEP, you have the opportunity to receive options to restructure your compensation package to some extent. Essentially, you may elect to purchase shares of the common stock of the Company if you irrevocably elect to waive all or a portion of your base salary you may receive from May 1, 1999 through May 1, 2000 under the following terms and conditions. BEFORE YOU ELECT TO PARTICIPATE IN THE 1999 MEP, READ THIS AWARD AGREEMENT. YOU WILL BE REQUIRED TO SIGN THIS AWARD AGREEMENT, AND YOUR SIGNATURE WILL EVIDENCE THAT YOU HAVE READ THIS AWARD AGREEMENT, UNDERSTAND IT, AND AGREE WITH ITS TERMS AND CONDITIONS. TO PARTICIPATE IN THE 1999 MEP, YOU MUST COMPLETE AND SIGN THIS AWARD AGREEMENT AND RETURN IT TO ALESIA MARTIN (EXTENSION 65150) BY 12:00 P.M. NOON ON FRIDAY, APRIL 23, 1999. 1. EFFECTIVE DATE. The effective date of your participation in the 1999 MEP, and the grant date of your MEP options, is April 23, 1999. 2. SALARY WAIVER. You hereby elect to waive a portion of your salary during the period from May 1, 1999 through May 1, 2000 (the "WAIVER PERIOD") in the following amount (the "WAIVER AMOUNT"): $85,000. NOTE: the MINIMUM Waiver Amount is $34,000 (10% of your current base salary) and the MAXIMUM Waiver Amount is $85,000 (25% of your current base salary). 3. NUMBER OF OPTIONS GRANTED. In exchange for electing to waive the Waiver Amount specified in Paragraph 2, above, you are hereby granted an option to purchase the number of shares of MicroAge, Inc. Common Stock calculated pursuant to the formula below (to be completed by MicroAge): (1) Waiver Amount: $ 85,000 (2) $85,000 (Waiver Amount) Multiplied by Four (4) (the "Leverage Factor"): $340,000 (3) Common Stock Closing Price on Effective Date (April 23, 1999) (the "Common Stock Price"): $ 5.875 (4) Total Options Granted (2) / (3) (rounded up): 57,873 4. VESTING OF OPTIONS. Your options will vest in one-third (1/3) increments beginning on May 1, 2000, and will be fully vested on May 1, 2002. 5. EXPIRATION OF OPTIONS. Subject to Section 6 and 7 of this Award Agreement, your options will expire, unless sooner exercised, on April 23, 2009. 6. TERMINATION OF EMPLOYMENT. DEATH. Upon your death, your beneficiary will be entitled to receive the number of options determined by multiplying the sum of your compensation actually waived up to the date of your death by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of your death will be considered. All options received by your beneficiary will be fully vested and immediately exercisable. Your beneficiary will have up to one year from the date of your death to exercise the options. After that one year period, the options will be canceled. UNDER NO CIRCUMSTANCES WILL YOU OR YOUR BENEFICIARY BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP. DISABILITY. Upon your termination of employment due to a "Disability" (as that term is defined in the Plan) you will be entitled to receive the number of options determined by multiplying the sum of your compensation actually waived up to the date of your termination by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of your termination will be considered. All options received will be fully vested and immediately exercisable. You will have up to one year from the date of termination of employment to exercise the options. After that one year period, the options will be canceled. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP. VOLUNTARY OR INVOLUNTARY. Upon your voluntary or involuntary termination of employment, you will be entitled to receive the number of options determined by multiplying the sum of your compensation actually waived up to the date of your termination by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of termination of employment will be considered. Your options will continue to vest under the above vesting schedule as if you continued to be employed by the Company and continued participating in the 1999 2 MEP. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP. 7. TERMINATION OF 1999 MEP. If the Committee decides to terminate the 1999 MEP, you will be entitled to receive a number of options determined by multiplying the sum of your compensation actually waived up to the date of your termination by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of termination will be considered. All options received will be fully vested and immediately exercisable. You will have up to thirty days from the date of such termination to exercise the options. After such thirty day period, the options will be canceled. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP. 8. CHANGE OF CONTROL. Upon a "Change of Control" (as that term is defined in the Plan), you will be entitled to receive the number of options determined by multiplying the sum of your compensation actually waived up to the date of the Change of Control by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of Change of Control will be considered. All options will be fully vested and immediately exercisable. In the event of a dissolution or liquidation of the Company or a merger or consolidation in which the Company would not be the surviving or resulting corporation, you will be entitled to receive the number of options determined by multiplying the sum of your compensation actually waived up to the date of exercise by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of exercise will be considered. All options will be fully vested and exercisable (a) in the case of a dissolution or liquidation, at anytime after the Company's Board of Directors takes action authorizing the dissolution or liquidation of the Company or (b) in the case of a merger or consolidation in which the Company would not be the resulting or surviving corporation, upon the Company's public announcement that a definitive agreement regarding such a merger or consolidation has been reached. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP. 9. COMPANY INFORMATION. By signing this Award Agreement, you acknowledge that you have been given, or were offered, a copy of the Company's (i) Annual Report on Form 10-K for the fiscal year ended November 1, 1998, and (ii) Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1999 (the "SEC REPORTS"), and that you were given an opportunity to ask questions of any of the Company's executive officers regarding the SEC Reports or any other matter regarding the Company. 10. RISK OF INVESTMENT. By signing this Award Agreement, you recognize that your participation in the 1999 MEP is a speculative investment in that the success or failure of your investment depends on the market value of the Company's Common Stock over a several year period. You further recognize that all or a portion of your investment (i.e., your Waiver Amount) may be lost. You also acknowledge that you were given the opportunity to consult with your personal advisor(s) regarding the 1999 MEP. 3 I hereby elect to participate in the 1999 MEP under the terms and conditions set forth above and acknowledge that I have read and understood the terms and conditions of the 1999 MEP. SIGNATURE /s/ James R. Daniel ----------------------- DATE April 23, 1999 ----------------------- SSN ----------------------- ACCEPTED: MICROAGE, INC. BY ----------------------- ITS ----------------------- 4 EX-10.4 5 MGMT EQUITY PROGRAM-CHRISTOPHER J. KOZIOL MICROAGE, INC. 1999 MANAGEMENT EQUITY PROGRAM AWARD AGREEMENT CHRISTOPHER J. KOZIOL April 23, 1999 Dear Chris: Pursuant to the action taken by the Board of Directors of MicroAge, Inc. (the "Company") and the Compensation Committee of the Board of Directors, you are hereby offered participation in the 1999 Management Equity Program (the "1999 MEP") under the MicroAge, Inc. Long-Term Incentive Plan (the "Plan"). Under the 1999 MEP, you have the opportunity to receive options to restructure your compensation package to some extent. Essentially, you may elect to purchase shares of the common stock of the Company if you irrevocably elect to waive all or a portion of your base salary you may receive from May 1, 1999 through May 1, 2000 under the following terms and conditions. BEFORE YOU ELECT TO PARTICIPATE IN THE 1999 MEP, READ THIS AWARD AGREEMENT. YOU WILL BE REQUIRED TO SIGN THIS AWARD AGREEMENT, AND YOUR SIGNATURE WILL EVIDENCE THAT YOU HAVE READ THIS AWARD AGREEMENT, UNDERSTAND IT, AND AGREE WITH ITS TERMS AND CONDITIONS. TO PARTICIPATE IN THE 1999 MEP, YOU MUST COMPLETE AND SIGN THIS AWARD AGREEMENT AND RETURN IT TO ALESIA MARTIN (EXTENSION 65150) BY 12:00 P.M. NOON ON FRIDAY, APRIL 23, 1999. 1. EFFECTIVE DATE. The effective date of your participation in the 1999 MEP, and the grant date of your MEP options, is April 23, 1999. 2. SALARY WAIVER. You hereby elect to waive a portion of your salary during the period from May 1, 1999 through May 1, 2000 (the "WAIVER PERIOD") in the following amount (the "WAIVER AMOUNT"): $60,000. NOTE: the MINIMUM Waiver Amount is $30,000 (10% of your current base salary) and the MAXIMUM Waiver Amount is $75,000 (25% of your current base salary). 3. NUMBER OF OPTIONS GRANTED. In exchange for electing to waive the Waiver Amount specified in Paragraph 2, above, you are hereby granted an option to purchase the number of shares of MicroAge, Inc. Common Stock calculated pursuant to the formula below (to be completed by MicroAge): (1) Waiver Amount: $ 60,000 (2) $60,000 (Waiver Amount) Multiplied by Four (4) (the "Leverage Factor"): $240,000 (3) Common Stock Closing Price on Effective Date (April 23, 1999) (the "Common Stock Price"): $ 5.875 (4) Total Options Granted (2) / (3) (rounded up): 40,851 4. VESTING OF OPTIONS. Your options will vest in one-third (1/3) increments beginning on May 1, 2000, and will be fully vested on May 1, 2002. 5. EXPIRATION OF OPTIONS. Subject to Section 6 and 7 of this Award Agreement, your options will expire, unless sooner exercised, on April 23, 2009. 6. TERMINATION OF EMPLOYMENT. DEATH. Upon your death, your beneficiary will be entitled to receive the number of options determined by multiplying the sum of your compensation actually waived up to the date of your death by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of your death will be considered. All options received by your beneficiary will be fully vested and immediately exercisable. Your beneficiary will have up to one year from the date of your death to exercise the options. After that one year period, the options will be canceled. UNDER NO CIRCUMSTANCES WILL YOU OR YOUR BENEFICIARY BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP. DISABILITY. Upon your termination of employment due to a "Disability" (as that term is defined in the Plan) you will be entitled to receive the number of options determined by multiplying the sum of your compensation actually waived up to the date of your termination by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of your termination will be considered. All options received will be fully vested and immediately exercisable. You will have up to one year from the date of termination of employment to exercise the options. After that one year period, the options will be canceled. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP. VOLUNTARY OR INVOLUNTARY. Upon your voluntary or involuntary termination of employment, you will be entitled to receive the number of options determined by multiplying the sum of your compensation actually waived up to the date of your termination by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of termination of employment will be considered. Your options will continue to vest under the above vesting schedule as if you continued to be employed by the Company and continued participating in the 1999 2 MEP. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP. 7. TERMINATION OF 1999 MEP. If the Committee decides to terminate the 1999 MEP, you will be entitled to receive a number of options determined by multiplying the sum of your compensation actually waived up to the date of your termination by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of termination will be considered. All options received will be fully vested and immediately exercisable. You will have up to thirty days from the date of such termination to exercise the options. After such thirty day period, the options will be canceled. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP. 8. CHANGE OF CONTROL. Upon a "Change of Control" (as that term is defined in the Plan), you will be entitled to receive the number of options determined by multiplying the sum of your compensation actually waived up to the date of the Change of Control by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of Change of Control will be considered. All options will be fully vested and immediately exercisable. In the event of a dissolution or liquidation of the Company or a merger or consolidation in which the Company would not be the surviving or resulting corporation, you will be entitled to receive the number of options determined by multiplying the sum of your compensation actually waived up to the date of exercise by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of exercise will be considered. All options will be fully vested and exercisable (a) in the case of a dissolution or liquidation, at anytime after the Company's Board of Directors takes action authorizing the dissolution or liquidation of the Company or (b) in the case of a merger or consolidation in which the Company would not be the resulting or surviving corporation, upon the Company's public announcement that a definitive agreement regarding such a merger or consolidation has been reached. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP. 9. COMPANY INFORMATION. By signing this Award Agreement, you acknowledge that you have been given, or were offered, a copy of the Company's (i) Annual Report on Form 10-K for the fiscal year ended November 1, 1998, and (ii) Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1999 (the "SEC REPORTS"), and that you were given an opportunity to ask questions of any of the Company's executive officers regarding the SEC Reports or any other matter regarding the Company. 10. RISK OF INVESTMENT. By signing this Award Agreement, you recognize that your participation in the 1999 MEP is a speculative investment in that the success or failure of your investment depends on the market value of the Company's Common Stock over a several year period. You further recognize that all or a portion of your investment (i.e., your Waiver Amount) may be lost. You also acknowledge that you were given the opportunity to consult with your personal advisor(s) regarding the 1999 MEP. 3 I hereby elect to participate in the 1999 MEP under the terms and conditions set forth above and acknowledge that I have read and understood the terms and conditions of the 1999 MEP. SIGNATURE /s/ Christopher J. Koziol ----------------------- DATE April 23, 1999 ----------------------- SSN ----------------------- ACCEPTED: MICROAGE, INC. BY ----------------------- ITS ----------------------- 4 EX-10.5 6 MGMT EQUITY PROGRAM-ROBERT G. O'MALLEY MICROAGE, INC. 1999 MANAGEMENT EQUITY PROGRAM AWARD AGREEMENT ROBERT G. O'MALLEY April 23, 1999 Dear Bob: Pursuant to the action taken by the Board of Directors of MicroAge, Inc. (the "COMPANY") and the Compensation Committee of the Board of Directors, you are hereby offered participation in the 1999 Management Equity Program (the "1999 MEP") under the MicroAge, Inc. Long-Term Incentive Plan (the "PLAN"). Under the 1999 MEP, you have the opportunity to receive options to restructure your compensation package to some extent. Essentially, you may elect to purchase shares of the common stock of the Company if you irrevocably elect to waive all or a portion of your base salary you may receive from May 1, 1999 through May 1, 2000 under the following terms and conditions. BEFORE YOU ELECT TO PARTICIPATE IN THE 1999 MEP, READ THIS AWARD AGREEMENT. YOU WILL BE REQUIRED TO SIGN THIS AWARD AGREEMENT, AND YOUR SIGNATURE WILL EVIDENCE THAT YOU HAVE READ THIS AWARD AGREEMENT, UNDERSTAND IT, AND AGREE WITH ITS TERMS AND CONDITIONS. TO PARTICIPATE IN THE 1999 MEP, YOU MUST COMPLETE AND SIGN THIS AWARD AGREEMENT AND RETURN IT TO ALESIA MARTIN (EXTENSION 65150) BY 12:00 P.M. NOON ON FRIDAY, APRIL 23, 1999. 1. EFFECTIVE DATE. The effective date of your participation in the 1999 MEP, and the grant date of your MEP options, is April 23, 1999. 2. SALARY WAIVER. You hereby elect to waive a portion of your salary during the period from May 1, 1999 through May 1, 2000 (the "WAIVER PERIOD") in the following amount (the "WAIVER AMOUNT"): $48,000. NOTE: the MINIMUM Waiver Amount is $37,000 (10% of your current base salary) and the MAXIMUM Waiver Amount is $92,500 (25% of your current base salary). 3. NUMBER OF OPTIONS GRANTED. In exchange for electing to waive the Waiver Amount specified in Paragraph 2, above, you are hereby granted an option to purchase the number of shares of MicroAge, Inc. Common Stock calculated pursuant to the formula below (to be completed by MicroAge): (1) Waiver Amount: $ 48,000 (2) $48,000 (Waiver Amount) Multiplied by Four (4) (the "Leverage Factor"): $192,000 (3) Common Stock Closing Price on Effective Date (April 23, 1999) (the "Common Stock Price"): $ 5.875 (4) Total Options Granted (2) / (3) (rounded up): 32,681 4. VESTING OF OPTIONS. Your options will vest in one-third (1/3) increments beginning on May 1, 2000, and will be fully vested on May 1, 2002. 5. EXPIRATION OF OPTIONS. Subject to Section 6 and 7 of this Award Agreement, your options will expire, unless sooner exercised, on April 23, 2009. 6. TERMINATION OF EMPLOYMENT. DEATH. Upon your death, your beneficiary will be entitled to receive the number of options determined by multiplying the sum of your compensation actually waived up to the date of your death by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of your death will be considered. All options received by your beneficiary will be fully vested and immediately exercisable. Your beneficiary will have up to one year from the date of your death to exercise the options. After that one year period, the options will be canceled. UNDER NO CIRCUMSTANCES WILL YOU OR YOUR BENEFICIARY BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP. DISABILITY. Upon your termination of employment due to a "Disability" (as that term is defined in the Plan) you will be entitled to receive the number of options determined by multiplying the sum of your compensation actually waived up to the date of your termination by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of your termination will be considered. All options received will be fully vested and immediately exercisable. You will have up to one year from the date of termination of employment to exercise the options. After that one year period, the options will be canceled. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP. VOLUNTARY OR INVOLUNTARY. Upon your voluntary or involuntary termination of employment, you will be entitled to receive the number of options determined by multiplying the sum of your compensation actually waived up to the date of your termination by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of termination of employment will be considered. Your options will continue to vest under the above vesting schedule as if you continued to be employed by the Company and continued participating in the 1999 2 MEP. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP. 7. TERMINATION OF 1999 MEP. If the Committee decides to terminate the 1999 MEP, you will be entitled to receive a number of options determined by multiplying the sum of your compensation actually waived up to the date of your termination by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of termination will be considered. All options received will be fully vested and immediately exercisable. You will have up to thirty days from the date of such termination to exercise the options. After such thirty day period, the options will be canceled. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP. 8. CHANGE OF CONTROL. Upon a "Change of Control" (as that term is defined in the Plan), you will be entitled to receive the number of options determined by multiplying the sum of your compensation actually waived up to the date of the Change of Control by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of Change of Control will be considered. All options will be fully vested and immediately exercisable. In the event of a dissolution or liquidation of the Company or a merger or consolidation in which the Company would not be the surviving or resulting corporation, you will be entitled to receive the number of options determined by multiplying the sum of your compensation actually waived up to the date of exercise by the Leverage Factor and dividing the product by the Common Stock Price; provided, however, that only the total compensation waived by you up to the date of exercise will be considered. All options will be fully vested and exercisable (a) in the case of a dissolution or liquidation, at anytime after the Company's Board of Directors takes action authorizing the dissolution or liquidation of the Company or (b) in the case of a merger or consolidation in which the Company would not be the resulting or surviving corporation, upon the Company's public announcement that a definitive agreement regarding such a merger or consolidation has been reached. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE COMPENSATION YOU ELECTED TO WAIVE UNDER THE 1999 MEP. 9. COMPANY INFORMATION. By signing this Award Agreement, you acknowledge that you have been given, or were offered, a copy of the Company's (i) Annual Report on Form 10-K for the fiscal year ended November 1, 1998, and (ii) Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1999 (the "SEC REPORTS"), and that you were given an opportunity to ask questions of any of the Company's executive officers regarding the SEC Reports or any other matter regarding the Company. 10. RISK OF INVESTMENT. By signing this Award Agreement, you recognize that your participation in the 1999 MEP is a speculative investment in that the success or failure of your investment depends on the market value of the Company's Common Stock over a several year period. You further recognize that all or a portion of your investment (i.e., your Waiver Amount) may be lost. You also acknowledge that you were given the opportunity to consult with your personal advisor(s) regarding the 1999 MEP. 3 I hereby elect to participate in the 1999 MEP under the terms and conditions set forth above and acknowledge that I have read and understood the terms and conditions of the 1999 MEP. SIGNATURE /s/ Robert G. O'Malley ----------------------- DATE April 23, 1999 ----------------------- SSN ----------------------- ACCEPTED: MICROAGE, INC. BY ----------------------- ITS ----------------------- 4 EX-10.6 7 DIRECTOR INCENTIVE PLAN--WILLIAM H. MALLENDER MICROAGE, INC. 1995 DIRECTOR INCENTIVE PLAN STOCK OPTION AGREEMENT FOR WILLIAM H. MALLENDER April 29, 1999 Dear Bill: You were earlier notified that you are eligible to receive options to restructure your Director fees package to some extent. You completed a Director's Fee Waiver, attached hereto as EXHIBIT A, and in the Waiver you irrevocably elected to waive $30,000.00 (the "WAIVER AMOUNT") of your Director fees in return for the option to purchase (the "OPTION") shares of common stock of the Company ("SHARES"). Based on your Waiver, and pursuant to action taken by the Board of Directors of MicroAge, Inc. (the "COMPANY") under Section 7.3 of the MicroAge, Inc. 1995 Director Incentive Plan (Amended and Restated as of April 1, 1998) (the "PLAN") you are hereby granted the Options as set forth below. 1. STOCK OPTION GRANT. In exchange for electing to waive the Waiver Amount, subject to the terms and conditions set forth below, you are hereby granted the Option to purchase a total of Twenty Thousand Four Hundred Twenty-Six (20,426) Shares at the price of $5.875 per Share, which was the closing price of the Shares on April 23, 1999 (the "GRANT DATE"). The number of Shares was calculated pursuant to the following formula: (a) Waiver Amount $ 30,000.00 (b) $30,000.00 (Waiver Amount) Multiplied by Four (4) (the "Leverage Factor") $120,000.00 (c) Common Stock Closing Price on Grant Date (April 23, 1999)(the "Common Stock Price") $ 5.875 (d) Total Options Granted (b) / (c) (rounded up): 20,426 The Option granted hereby is NOT intended to be an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended. 2. EXERCISABILITY. You may purchase all or any of the Shares included in any installment under this Option, on or after the later to occur of: (1) the date the Option grant vests in accordance with the schedule below; and (2) the date the stock price hurdle with respect to each Option grant is met, on or after the date the Option grant vests. ================================================================================ PERCENTAGE OF SHARES EXERCISABLE IN DATE OPTION STOCK PRICE HURDLE OPTION GRANT GRANT VESTS AFTER VESTING DATE - -------------------------------------------------------------------------------- First 34% May 1, 2000 $5.875 Second 33% May 1, 2001 $6.46 Third 33% May 1, 2002 $7.11 ================================================================================ NOTWITHSTANDING THE ABOVE, YOUR OPTION UNDER THIS AGREEMENT WILL BECOME 100% EXERCISABLE ON THE NINTH ANNIVERSARY OF THE GRANT DATE, UNLESS SUCH OPTION EXPIRES BEFORE SUCH DATE IN ACCORDANCE WITH THE TERMS OF THE PLAN AND THIS AGREEMENT. YOU MAY NOT EXERCISE THE OPTION AT ANY TIME AFTER THE EXPIRATION DATE IN PARAGRAPH 5 BELOW. 3. EXERCISE AND STOCK DELIVERY. Vested Options may be exercised by delivering in writing a request to purchase Shares describing the number of Shares to be purchased and accompanied by payment in full to the Secretary of the Company, 2400 South MicroAge Way, MS #8, Tempe, AZ 85282-1896, for the Shares which you so elect to purchase, at the price per Share herein prescribed, whereupon you will receive a stock certificate representing the Shares for which you have made payment. The Company, however, shall not be obligated to deliver any stock unless and until: (a) there has been compliance with any federal or state laws or regulations or national securities exchange requirements which the Company may deem applicable; and (b) all legal matters in connection with the sale and delivery of the Shares have been approved by the Company's legal counsel. Upon the exercise of an Option, the purchase price shall be paid in cash, check, or, in the sole discretion of the Committee, in Shares, or a combination thereof. Each Share received by the Company in payment of all or a portion of the purchase price specified in this Option shall be valued at its fair market value on the date of payment and must have been held by you for at least six months prior to the tender of the Share to the Company. 2 4. TRANSFER RESTRICTIONS. Except as otherwise allowed by uniform rules adopted by the Board or the Committee, this Option shall be exercisable during your lifetime only by you and shall not be transferable by you, expressly or by operation of law, other than by will and the laws of descent and distribution. Any other attempted transfer or other disposition of this Option by you shall be void and shall constitute valid grounds for cancellation of this Option by the Company. 5. TERMINATION OF OPTION. THIS OPTION AND ALL YOUR RIGHTS HEREUNDER SHALL, UNLESS SOONER TERMINATED IN ACCORDANCE WITH THE PROVISIONS HEREOF, CEASE AND TERMINATE ON APRIL 23, 2009 (THE "EXPIRATION DATE"), AT 5:00 P.M. ARIZONA TIME. 6. TERMINATION OF SERVICE ON THE BOARD. Upon the date your service on the Company's Board is terminated for any reason, you, or in the event of your death your beneficiary, will be entitled to receive the number of Options determined by multiplying the sum of your Director fees actually earned and waived up to the date of your termination by the Leverage Factor and dividing the product by the Common Stock Price (and rounding up the resulting quotient); provided, however, that only the total Director fees earned and waived by you up to the date of termination will be considered. To the extent your Options are fully vested and exercisable as of the date of your termination, they will remain exercisable at any time prior to the Expiration Date. The portion of your Option that is not fully vested and exercisable as of the date of your termination, if any, shall continue to vest in accordance with the schedule set forth above and will become exercisable at the time it becomes fully vested prior to its Expiration Date. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE WAIVER. 7. CHANGE OF CONTROL. Upon a "Change of Control" (as that term is defined in the Plan), you will be entitled to receive the number of Options determined by multiplying the sum of your Director fees actually earned and waived up to the Change of Control by the Leverage Factor and dividing the product by the Common Stock Price (and rounding up the resulting quotient); provided, however, that only the total Director fees earned and waived by you up to the Change of Control will be considered. In the event of a Change of Control, all Options under this Agreement will become 100% vested and will be exercisable until the Expiration Date. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE WAIVER. 8. TERMINATION OF PURCHASE PROGRAM. If the Board decides to terminate your ability to waive all or a portion of your Director fees in return for the Option (the "Purchase Program"), you will be entitled to receive a number of Options determined by multiplying the sum of your Director fees actually earned and waived up to the date of the termination of the Purchase Program by the Leverage Factor and dividing the product by the Common Stock Price (and rounding up the resulting quotient); provided, however, that only the Director fees earned and waived by you up to the date of the termination of the Purchase Program will be considered. All Options received will be fully vested and immediately exercisable. You will have up to thirty days from the date of such termination to exercise the Options. After such thirty day period, the Options will be canceled. 3 UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE WAIVER. 9. MISSED MEETINGS. If you miss a meeting for which you have waived all or a portion of the meeting fee, the portion of the Waiver Amount that would have been satisfied had you attended that meeting (the "DEFICIT AMOUNT"), will be made up by charging the special meeting fees and the regular meeting fees, that you have not already waived, for those meetings that occur after the missed meeting but before May 2, 2000. If, by May 1, 2000, the Deficit Amount is not made up in full by charging subsequent meeting fees as set forth in the preceding sentence, you must pay the Company any remaining Deficit Amount by such date. 10. COMPLIANCE. The Committee hereby reserves and shall have the right to terminate, renew, or modify the Plan in any way necessary to comply with applicable requirements of Rule 16b-3 promulgated by the Securities and Exchange Commission as interpreted pursuant to no-action letters and interpretive releases. PLEASE ACKNOWLEDGE RECEIPT OF THIS AGREEMENT BY SIGNING AND INSERTING YOUR SOCIAL SECURITY NUMBER ON BOTH LETTERS, THEN RETURNING BOTH LETTERS TO JEFF MCKEEVER'S OFFICE AT MICROAGE, INC., 2400 SOUTH MICROAGE WAY, MAIL STATION #24, TEMPE, AZ 85282-1896 FOR HIS EXECUTION. THE ORIGINALLY EXECUTED LETTER WILL BE RETURNED TO YOU FOR YOUR FILES AND THE COPY WILL BE RETAINED BY THE COMPANY'S LEGAL DEPARTMENT. MICROAGE, INC. By: /s/ Jeffrey D. McKeever ------------------------------ Jeffrey D. McKeever Chairman of the Board and Chief Executive Officer I HEREBY ACKNOWLEDGE RECEIPT OF THE FOREGOING OPTION. Signature: /s/ William H. Mallender ----------------------------------- Social Security No.: ------------------------- 4 EXHIBIT A MICROAGE, INC. DIRECTOR'S FEE WAIVER WILLIAM H. MALLENDER RETAINER FEES I hereby elect to waive the following amount of the retainer fees $18,000 payable to me for the next four quarters: THE ANNUAL RETAINER IS $18,000 AND IS PAID IN ARREARS IN QUARTERLY INSTALLMENTS OF $4,500 EACH. YOU MAY ELECT TO WAIVE ALL OR A PORTION OF EACH QUARTERLY INSTALLMENT FOR THE THIRD AND FOURTH QUARTERS OF THE CURRENT FISCAL YEAR AND THE FIRST AND SECOND QUARTERS OF THE FISCAL YEAR THAT WILL END IN 2000. IF YOU WOULD LIKE TO WAIVE ANY PORTION OF THESE FEES, WRITE THE AMOUNT OF THE TOTAL RETAINER FEES TO BE WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE FOUR QUARTERLY INSTALLMENTS. BOARD MEETING FEES I hereby elect to waive the following amount of my regular Board $ 9,000 meeting fees for the six regularly scheduled Board meetings between May 1, 1999 and April 30, 2000: THE MAXIMUM WAIVER IS $9,000. IF YOU WANT TO WAIVE ANY PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE SIX MEETINGS. COMPENSATION COMMITTEE MEETING FEES I hereby elect to waive the following amount of my regular $ 2,000 Compensation Committee meeting fees for the two regularly scheduled meetings between May 1, 1999 and April 30, 2000: THE MAXIMUM WAIVER IS $2,000. IF YOU WANT TO WAIVE ANY PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE TWO MEETINGS. GOVERNANCE COMMITTEE MEETING FEES I hereby elect to waive the following amount of my regular $ 1,000 Governance Committee meeting fees for the two regularly scheduled meetings between May 1, 1999 and April 30, 2000: THE MAXIMUM WAIVER IS $2,000. IF YOU WANT TO WAIVE ANY PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE TWO MEETINGS. LEAD DIRECTOR FEES I hereby elect to waive the following amount of the Lead Director $ -- fees payable to me for the next four quarters: THE ANNUAL LEAD DIRECTOR FEE IS $3,000 AND IS PAID IN ARREARS IN QUARTERLY INSTALLMENTS OF $750 EACH. YOU MAY ELECT TO WAIVE ALL OR A PORTION OF EACH QUARTERLY INSTALLMENT FOR THE THIRD AND FOURTH QUARTERS OF THE CURRENT FISCAL YEAR AND THE FIRST AND SECOND QUARTERS OF THE FISCAL YEAR THAT WILL END IN 2000. IF YOU WOULD LIKE TO WAIVE ANY PORTION OF THESE FEES, WRITE THE AMOUNT OF THE TOTAL LEAD DIRECTOR FEES TO BE WAIVED ON THE BLANK LINE ABOVE. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE FOUR QUARTERLY INSTALLMENTS. COMMITTEE CHAIR FEES I hereby elect to waive the following amount of the Committee $ -- Chair fees payable to me for the next four quarters: THE ANNUAL COMMITTEE CHAIR FEE IS $3,000 AND IS PAID IN ARREARS IN QUARTERLY INSTALLMENTS OF $750 EACH. YOU MAY ELECT TO WAIVE ALL OR A PORTION OF EACH QUARTERLY INSTALLMENT FOR THE THIRD AND FOURTH QUARTERS OF THE CURRENT FISCAL YEAR AND THE FIRST AND SECOND QUARTERS OF THE FISCAL YEAR THAT WILL END IN 2000. IF YOU WOULD LIKE TO WAIVE ANY PORTION OF THESE FEES, WRITE THE AMOUNT OF THE TOTAL COMMITTEE CHAIR FEES TO BE WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE FOUR QUARTERLY INSTALLMENTS. WAIVER AMOUNT $30,000 By signing this Waiver, I acknowledge that I have been given, or was offered, a copy of the Company's (i) Annual Report on Form 10-K for the fiscal year ended November 1, 1998, and (ii) Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1999 (the "SEC Reports"), and that I was given an opportunity to ask questions of any of the Company's executive officers regarding the SEC Reports or any other matter regarding the Company. By signing this Waiver, I recognize that purchasing options is a speculative investment in that the success or failure of my investment depends on the market value of the Company's stock over a several year period. I further recognize that all or a portion of my investment (i.e., my Waiver Amount) may be lost. I also acknowledge that I was given the opportunity to consult with my personal advisor(s) regarding this Waiver. I hereby elect to waive the Waiver Amount set forth above. By signing this Waiver I agree to the terms and conditions set forth above and acknowledge that I have read and understand the sample Stock Option Agreement that was given to me. SIGNATURE /s/ William H. Mallender -------------------------------- DATE April 13, 1999 -------------------------------- SSN -------------------------------- PLEASE FAX YOUR SIGNED FORM TO THOMAS R. HOECKER AT (602) 382-6070. YOUR FORM MUST BE RECEIVED BY MR. HOECKER BY NOON (ARIZONA TIME) ON FRIDAY, APRIL 23, 1999. EX-10.7 8 DIRECTOR INCENTIVE PLAN--LYNDA M. APPLEGATE MICROAGE, INC. 1995 DIRECTOR INCENTIVE PLAN STOCK OPTION AGREEMENT FOR LYNDA M. APPLEGATE April 29, 1999 Dear Lynda: You were earlier notified that you are eligible to receive options to restructure your Director fees package to some extent. You completed a Director's Fee Waiver, attached hereto as EXHIBIT A, and in the Waiver you irrevocably elected to waive $31,000.00 (the "WAIVER AMOUNT") of your Director fees in return for the option to purchase (the "OPTION") shares of common stock of the Company ("SHARES"). Based on your Waiver, and pursuant to action taken by the Board of Directors of MicroAge, Inc. (the "COMPANY") under Section 7.3 of the MicroAge, Inc. 1995 Director Incentive Plan (Amended and Restated as of April 1, 1998) (the "PLAN") you are hereby granted the Options as set forth below. 1. STOCK OPTION GRANT. In exchange for electing to waive the Waiver Amount, subject to the terms and conditions set forth below, you are hereby granted the Option to purchase a total of Twenty Thousand Four Hundred Twenty-Six (20,426) Shares at the price of $5.875 per Share, which was the closing price of the Shares on April 23, 1999 (the "GRANT DATE"). The number of Shares was calculated pursuant to the following formula: (a) Waiver Amount $ 31,000.00 (b) $30,000.00 (Waiver Amount) Multiplied by Four (4) (the "Leverage Factor") $124,000.00 (c) Common Stock Closing Price on Grant Date (April 23, 1999)(the "Common Stock Price") $ 5.875 (d) Total Options Granted (b) / (c) (rounded up): 21,107 The Option granted hereby is NOT intended to be an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended. 2. EXERCISABILITY. You may purchase all or any of the Shares included in any installment under this Option, on or after the later to occur of: (1) the date the Option grant vests in accordance with the schedule below; and (2) the date the stock price hurdle with respect to each Option grant is met, on or after the date the Option grant vests. ================================================================================ PERCENTAGE OF SHARES EXERCISABLE IN DATE OPTION STOCK PRICE HURDLE OPTION GRANT GRANT VESTS AFTER VESTING DATE - -------------------------------------------------------------------------------- First 34% May 1, 2000 $5.875 Second 33% May 1, 2001 $6.46 Third 33% May 1, 2002 $7.11 ================================================================================ NOTWITHSTANDING THE ABOVE, YOUR OPTION UNDER THIS AGREEMENT WILL BECOME 100% EXERCISABLE ON THE NINTH ANNIVERSARY OF THE GRANT DATE, UNLESS SUCH OPTION EXPIRES BEFORE SUCH DATE IN ACCORDANCE WITH THE TERMS OF THE PLAN AND THIS AGREEMENT. YOU MAY NOT EXERCISE THE OPTION AT ANY TIME AFTER THE EXPIRATION DATE IN PARAGRAPH 5 BELOW. 3. EXERCISE AND STOCK DELIVERY. Vested Options may be exercised by delivering in writing a request to purchase Shares describing the number of Shares to be purchased and accompanied by payment in full to the Secretary of the Company, 2400 South MicroAge Way, MS #8, Tempe, AZ 85282-1896, for the Shares which you so elect to purchase, at the price per Share herein prescribed, whereupon you will receive a stock certificate representing the Shares for which you have made payment. The Company, however, shall not be obligated to deliver any stock unless and until: (a) there has been compliance with any federal or state laws or regulations or national securities exchange requirements which the Company may deem applicable; and (b) all legal matters in connection with the sale and delivery of the Shares have been approved by the Company's legal counsel. Upon the exercise of an Option, the purchase price shall be paid in cash, check, or, in the sole discretion of the Committee, in Shares, or a combination thereof. Each Share received by the Company in payment of all or a portion of the purchase price specified in this Option shall be valued at its fair market value on the date of payment and must have been held by you for at least six months prior to the tender of the Share to the Company. 2 4. TRANSFER RESTRICTIONS. Except as otherwise allowed by uniform rules adopted by the Board or the Committee, this Option shall be exercisable during your lifetime only by you and shall not be transferable by you, expressly or by operation of law, other than by will and the laws of descent and distribution. Any other attempted transfer or other disposition of this Option by you shall be void and shall constitute valid grounds for cancellation of this Option by the Company. 5. TERMINATION OF OPTION. THIS OPTION AND ALL YOUR RIGHTS HEREUNDER SHALL, UNLESS SOONER TERMINATED IN ACCORDANCE WITH THE PROVISIONS HEREOF, CEASE AND TERMINATE ON APRIL 23, 2009 (THE "EXPIRATION DATE"), AT 5:00 P.M. ARIZONA TIME. 6. TERMINATION OF SERVICE ON THE BOARD. Upon the date your service on the Company's Board is terminated for any reason, you, or in the event of your death your beneficiary, will be entitled to receive the number of Options determined by multiplying the sum of your Director fees actually earned and waived up to the date of your termination by the Leverage Factor and dividing the product by the Common Stock Price (and rounding up the resulting quotient); provided, however, that only the total Director fees earned and waived by you up to the date of termination will be considered. To the extent your Options are fully vested and exercisable as of the date of your termination, they will remain exercisable at any time prior to the Expiration Date. The portion of your Option that is not fully vested and exercisable as of the date of your termination, if any, shall continue to vest in accordance with the schedule set forth above and will become exercisable at the time it becomes fully vested prior to its Expiration Date. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE WAIVER. 7. CHANGE OF CONTROL. Upon a "Change of Control" (as that term is defined in the Plan), you will be entitled to receive the number of Options determined by multiplying the sum of your Director fees actually earned and waived up to the Change of Control by the Leverage Factor and dividing the product by the Common Stock Price (and rounding up the resulting quotient); provided, however, that only the total Director fees earned and waived by you up to the Change of Control will be considered. In the event of a Change of Control, all Options under this Agreement will become 100% vested and will be exercisable until the Expiration Date. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE WAIVER. 8. TERMINATION OF PURCHASE PROGRAM. If the Board decides to terminate your ability to waive all or a portion of your Director fees in return for the Option (the "Purchase Program"), you will be entitled to receive a number of Options determined by multiplying the sum of your Director fees actually earned and waived up to the date of the termination of the Purchase Program by the Leverage Factor and dividing the product by the Common Stock Price (and rounding up the resulting quotient); provided, however, that only the Director fees earned and waived by you up to the date of the termination of the Purchase Program will be considered. All Options received will be fully vested and immediately exercisable. You will have up to thirty days from the date of such termination to exercise the Options. After such thirty day period, the Options will be canceled. 3 UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE WAIVER. 9. MISSED MEETINGS. If you miss a meeting for which you have waived all or a portion of the meeting fee, the portion of the Waiver Amount that would have been satisfied had you attended that meeting (the "DEFICIT AMOUNT"), will be made up by charging the special meeting fees and the regular meeting fees, that you have not already waived, for those meetings that occur after the missed meeting but before May 2, 2000. If, by May 1, 2000, the Deficit Amount is not made up in full by charging subsequent meeting fees as set forth in the preceding sentence, you must pay the Company any remaining Deficit Amount by such date. 10. COMPLIANCE. The Committee hereby reserves and shall have the right to terminate, renew, or modify the Plan in any way necessary to comply with applicable requirements of Rule 16b-3 promulgated by the Securities and Exchange Commission as interpreted pursuant to no-action letters and interpretive releases. PLEASE ACKNOWLEDGE RECEIPT OF THIS AGREEMENT BY SIGNING AND INSERTING YOUR SOCIAL SECURITY NUMBER ON BOTH LETTERS, THEN RETURNING BOTH LETTERS TO JEFF MCKEEVER'S OFFICE AT MICROAGE, INC., 2400 SOUTH MICROAGE WAY, MAIL STATION #24, TEMPE, AZ 85282-1896 FOR HIS EXECUTION. THE ORIGINALLY EXECUTED LETTER WILL BE RETURNED TO YOU FOR YOUR FILES AND THE COPY WILL BE RETAINED BY THE COMPANY'S LEGAL DEPARTMENT. MICROAGE, INC. By: /s/ Jeffrey D. McKeever ------------------------------ Jeffrey D. McKeever Chairman of the Board and Chief Executive Officer I HEREBY ACKNOWLEDGE RECEIPT OF THE FOREGOING OPTION. Signature: /s/ Lynda M. Applegate ----------------------------------- Social Security No.: ------------------------- 4 EXHIBIT A MICROAGE, INC. DIRECTOR'S FEE WAIVER LYNDA M. APPLEGATE RETAINER FEES I hereby elect to waive the following amount of the retainer fees $18,000 payable to me for the next four quarters: THE ANNUAL RETAINER IS $18,000 AND IS PAID IN ARREARS IN QUARTERLY INSTALLMENTS OF $4,500 EACH. YOU MAY ELECT TO WAIVE ALL OR A PORTION OF EACH QUARTERLY INSTALLMENT FOR THE THIRD AND FOURTH QUARTERS OF THE CURRENT FISCAL YEAR AND THE FIRST AND SECOND QUARTERS OF THE FISCAL YEAR THAT WILL END IN 2000. IF YOU WOULD LIKE TO WAIVE ANY PORTION OF THESE FEES, WRITE THE AMOUNT OF THE TOTAL RETAINER FEES TO BE WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE FOUR QUARTERLY INSTALLMENTS. BOARD MEETING FEES I hereby elect to waive the following amount of my regular Board $ 9,000 meeting fees for the six regularly scheduled Board meetings between May 1, 1999 and April 30, 2000: THE MAXIMUM WAIVER IS $9,000. IF YOU WANT TO WAIVE ANY PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE SIX MEETINGS. AUDIT COMMITTEE MEETING FEES I hereby elect to waive the following amount of my regular Audit $ 2,000 Committee meeting fees for the two regularly scheduled meetings between May 1, 1999 and April 30, 2000: THE MAXIMUM WAIVER IS $2,000. IF YOU WANT TO WAIVE ANY PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE TWO MEETINGS. COMPENSATION COMMITTEE MEETING FEES I hereby elect to waive the following amount of my regular $ 2,000 Compensation Committee meeting fees for the two regularly scheduled meetings between May 1, 1999 and April 30, 2000: THE MAXIMUM WAIVER IS $2,000. IF YOU WANT TO WAIVE ANY PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE TWO MEETINGS. WAIVER AMOUNT $31,000 By signing this Waiver, I acknowledge that I have been given, or was offered, a copy of the Company's (i) Annual Report on Form 10-K for the fiscal year ended November 1, 1998, and (ii) Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1999 (the "SEC Reports"), and that I was given an opportunity to ask questions of any of the Company's executive officers regarding the SEC Reports or any other matter regarding the Company. By signing this Waiver, I recognize that purchasing options is a speculative investment in that the success or failure of my investment depends on the market value of the Company's stock over a several year period. I further recognize that all or a portion of my investment (i.e., my Waiver Amount) may be lost. I also acknowledge that I was given the opportunity to consult with my personal advisor(s) regarding this Waiver. I hereby elect to waive the Waiver Amount set forth above. By signing this Waiver I agree to the terms and conditions set forth above and acknowledge that I have read and understand the sample Stock Option Agreement that was given to me. SIGNATURE /s/ Lynda M. Applegate -------------------------------- DATE April 21, 1999 -------------------------------- SSN -------------------------------- PLEASE FAX YOUR SIGNED FORM TO THOMAS R. HOECKER AT (602) 382-6070. YOUR FORM MUST BE RECEIVED BY MR. HOECKER BY NOON (ARIZONA TIME) ON FRIDAY, APRIL 23, 1999. EX-10.8 9 DIRECTOR INCENTIVE PLAN--CYRUS F. FREIDHEIM MICROAGE, INC. 1995 DIRECTOR INCENTIVE PLAN STOCK OPTION AGREEMENT FOR CYRUS F. FREIDHEIM April 29, 1999 Dear Cyrus: You were earlier notified that you are eligible to receive options to restructure your Director fees package to some extent. You completed a Director's Fee Waiver, attached hereto as EXHIBIT A, and in the Waiver you irrevocably elected to waive $31,000.00 (the "WAIVER AMOUNT") of your Director fees in return for the option to purchase (the "OPTION") shares of common stock of the Company ("SHARES"). Based on your Waiver, and pursuant to action taken by the Board of Directors of MicroAge, Inc. (the "COMPANY") under Section 7.3 of the MicroAge, Inc. 1995 Director Incentive Plan (Amended and Restated as of April 1, 1998) (the "PLAN") you are hereby granted the Options as set forth below. 1. STOCK OPTION GRANT. In exchange for electing to waive the Waiver Amount, subject to the terms and conditions set forth below, you are hereby granted the Option to purchase a total of Twenty Thousand Four Hundred Twenty-Six (20,426) Shares at the price of $5.875 per Share, which was the closing price of the Shares on April 23, 1999 (the "GRANT DATE"). The number of Shares was calculated pursuant to the following formula: (a) Waiver Amount $ 31,000.00 (b) $30,000.00 (Waiver Amount) Multiplied by Four (4) (the "Leverage Factor") $124,000.00 (c) Common Stock Closing Price on Grant Date (April 23, 1999)(the "Common Stock Price") $ 5.875 (d) Total Options Granted (b) / (c) (rounded up): 21,107 The Option granted hereby is NOT intended to be an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended. 2. EXERCISABILITY. You may purchase all or any of the Shares included in any installment under this Option, on or after the later to occur of: (1) the date the Option grant vests in accordance with the schedule below; and (2) the date the stock price hurdle with respect to each Option grant is met, on or after the date the Option grant vests. ================================================================================ PERCENTAGE OF SHARES EXERCISABLE IN DATE OPTION STOCK PRICE HURDLE OPTION GRANT GRANT VESTS AFTER VESTING DATE - -------------------------------------------------------------------------------- First 34% May 1, 2000 $5.875 Second 33% May 1, 2001 $6.46 Third 33% May 1, 2002 $7.11 ================================================================================ NOTWITHSTANDING THE ABOVE, YOUR OPTION UNDER THIS AGREEMENT WILL BECOME 100% EXERCISABLE ON THE NINTH ANNIVERSARY OF THE GRANT DATE, UNLESS SUCH OPTION EXPIRES BEFORE SUCH DATE IN ACCORDANCE WITH THE TERMS OF THE PLAN AND THIS AGREEMENT. YOU MAY NOT EXERCISE THE OPTION AT ANY TIME AFTER THE EXPIRATION DATE IN PARAGRAPH 5 BELOW. 3. EXERCISE AND STOCK DELIVERY. Vested Options may be exercised by delivering in writing a request to purchase Shares describing the number of Shares to be purchased and accompanied by payment in full to the Secretary of the Company, 2400 South MicroAge Way, MS #8, Tempe, AZ 85282-1896, for the Shares which you so elect to purchase, at the price per Share herein prescribed, whereupon you will receive a stock certificate representing the Shares for which you have made payment. The Company, however, shall not be obligated to deliver any stock unless and until: (a) there has been compliance with any federal or state laws or regulations or national securities exchange requirements which the Company may deem applicable; and (b) all legal matters in connection with the sale and delivery of the Shares have been approved by the Company's legal counsel. Upon the exercise of an Option, the purchase price shall be paid in cash, check, or, in the sole discretion of the Committee, in Shares, or a combination thereof. Each Share received by the Company in payment of all or a portion of the purchase price specified in this Option shall be valued at its fair market value on the date of payment and must have been held by you for at least six months prior to the tender of the Share to the Company. 2 4. TRANSFER RESTRICTIONS. Except as otherwise allowed by uniform rules adopted by the Board or the Committee, this Option shall be exercisable during your lifetime only by you and shall not be transferable by you, expressly or by operation of law, other than by will and the laws of descent and distribution. Any other attempted transfer or other disposition of this Option by you shall be void and shall constitute valid grounds for cancellation of this Option by the Company. 5. TERMINATION OF OPTION. THIS OPTION AND ALL YOUR RIGHTS HEREUNDER SHALL, UNLESS SOONER TERMINATED IN ACCORDANCE WITH THE PROVISIONS HEREOF, CEASE AND TERMINATE ON APRIL 23, 2009 (THE "EXPIRATION DATE"), AT 5:00 P.M. ARIZONA TIME. 6. TERMINATION OF SERVICE ON THE BOARD. Upon the date your service on the Company's Board is terminated for any reason, you, or in the event of your death your beneficiary, will be entitled to receive the number of Options determined by multiplying the sum of your Director fees actually earned and waived up to the date of your termination by the Leverage Factor and dividing the product by the Common Stock Price (and rounding up the resulting quotient); provided, however, that only the total Director fees earned and waived by you up to the date of termination will be considered. To the extent your Options are fully vested and exercisable as of the date of your termination, they will remain exercisable at any time prior to the Expiration Date. The portion of your Option that is not fully vested and exercisable as of the date of your termination, if any, shall continue to vest in accordance with the schedule set forth above and will become exercisable at the time it becomes fully vested prior to its Expiration Date. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE WAIVER. 7. CHANGE OF CONTROL. Upon a "Change of Control" (as that term is defined in the Plan), you will be entitled to receive the number of Options determined by multiplying the sum of your Director fees actually earned and waived up to the Change of Control by the Leverage Factor and dividing the product by the Common Stock Price (and rounding up the resulting quotient); provided, however, that only the total Director fees earned and waived by you up to the Change of Control will be considered. In the event of a Change of Control, all Options under this Agreement will become 100% vested and will be exercisable until the Expiration Date. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE WAIVER. 8. TERMINATION OF PURCHASE PROGRAM. If the Board decides to terminate your ability to waive all or a portion of your Director fees in return for the Option (the "Purchase Program"), you will be entitled to receive a number of Options determined by multiplying the sum of your Director fees actually earned and waived up to the date of the termination of the Purchase Program by the Leverage Factor and dividing the product by the Common Stock Price (and rounding up the resulting quotient); provided, however, that only the Director fees earned and waived by you up to the date of the termination of the Purchase Program will be considered. All Options received will be fully vested and immediately exercisable. You will have up to thirty days from the date of such termination to exercise the Options. After such thirty day period, the Options will be canceled. 3 UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE WAIVER. 9. MISSED MEETINGS. If you miss a meeting for which you have waived all or a portion of the meeting fee, the portion of the Waiver Amount that would have been satisfied had you attended that meeting (the "DEFICIT AMOUNT"), will be made up by charging the special meeting fees and the regular meeting fees, that you have not already waived, for those meetings that occur after the missed meeting but before May 2, 2000. If, by May 1, 2000, the Deficit Amount is not made up in full by charging subsequent meeting fees as set forth in the preceding sentence, you must pay the Company any remaining Deficit Amount by such date. 10. COMPLIANCE. The Committee hereby reserves and shall have the right to terminate, renew, or modify the Plan in any way necessary to comply with applicable requirements of Rule 16b-3 promulgated by the Securities and Exchange Commission as interpreted pursuant to no-action letters and interpretive releases. PLEASE ACKNOWLEDGE RECEIPT OF THIS AGREEMENT BY SIGNING AND INSERTING YOUR SOCIAL SECURITY NUMBER ON BOTH LETTERS, THEN RETURNING BOTH LETTERS TO JEFF MCKEEVER'S OFFICE AT MICROAGE, INC., 2400 SOUTH MICROAGE WAY, MAIL STATION #24, TEMPE, AZ 85282-1896 FOR HIS EXECUTION. THE ORIGINALLY EXECUTED LETTER WILL BE RETURNED TO YOU FOR YOUR FILES AND THE COPY WILL BE RETAINED BY THE COMPANY'S LEGAL DEPARTMENT. MICROAGE, INC. By: /s/ Jeffrey D. McKeever ------------------------------ Jeffrey D. McKeever Chairman of the Board and Chief Executive Officer I HEREBY ACKNOWLEDGE RECEIPT OF THE FOREGOING OPTION. Signature: /s/ Cyrus F. Freidheim ----------------------------------- Social Security No.: ------------------------- 4 EXHIBIT A MICROAGE, INC. DIRECTOR'S FEE WAIVER CYRUS F. FREIDHEIM RETAINER FEES I hereby elect to waive the following amount of the retainer fees $18,000 payable to me for the next four quarters: THE ANNUAL RETAINER IS $18,000 AND IS PAID IN ARREARS IN QUARTERLY INSTALLMENTS OF $4,500 EACH. YOU MAY ELECT TO WAIVE ALL OR A PORTION OF EACH QUARTERLY INSTALLMENT FOR THE THIRD AND FOURTH QUARTERS OF THE CURRENT FISCAL YEAR AND THE FIRST AND SECOND QUARTERS OF THE FISCAL YEAR THAT WILL END IN 2000. IF YOU WOULD LIKE TO WAIVE ANY PORTION OF THESE FEES, WRITE THE AMOUNT OF THE TOTAL RETAINER FEES TO BE WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE FOUR QUARTERLY INSTALLMENTS. BOARD MEETING FEES I hereby elect to waive the following amount of my regular Board $ 9,000 meeting fees for the six regularly scheduled Board meetings between May 1, 1999 and April 30, 2000: THE MAXIMUM WAIVER IS $9,000. IF YOU WANT TO WAIVE ANY PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE SIX MEETINGS. AUDIT COMMITTEE MEETING FEES I hereby elect to waive the following amount of my regular Audit $ 2,000 Committee meeting fees for the two regularly scheduled meetings between May 1, 1999 and April 30, 2000: THE MAXIMUM WAIVER IS $2,000. IF YOU WANT TO WAIVE ANY PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE TWO MEETINGS. COMPENSATION COMMITTEE MEETING FEES I hereby elect to waive the following amount of my regular $ 2,000 Compensation Committee meeting fees for the two regularly scheduled meetings between May 1, 1999 and April 30, 2000: THE MAXIMUM WAIVER IS $2,000. IF YOU WANT TO WAIVE ANY PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE TWO MEETINGS. WAIVER AMOUNT $31,000 By signing this Waiver, I acknowledge that I have been given, or was offered, a copy of the Company's (i) Annual Report on Form 10-K for the fiscal year ended November 1, 1998, and (ii) Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1999 (the "SEC Reports"), and that I was given an opportunity to ask questions of any of the Company's executive officers regarding the SEC Reports or any other matter regarding the Company. By signing this Waiver, I recognize that purchasing options is a speculative investment in that the success or failure of my investment depends on the market value of the Company's stock over a several year period. I further recognize that all or a portion of my investment (i.e., my Waiver Amount) may be lost. I also acknowledge that I was given the opportunity to consult with my personal advisor(s) regarding this Waiver. I hereby elect to waive the Waiver Amount set forth above. By signing this Waiver I agree to the terms and conditions set forth above and acknowledge that I have read and understand the sample Stock Option Agreement that was given to me. SIGNATURE /s/ Cyrus F. Freidheim -------------------------------- DATE April 11, 1999 -------------------------------- SSN -------------------------------- PLEASE FAX YOUR SIGNED FORM TO THOMAS R. HOECKER AT (602) 382-6070. YOUR FORM MUST BE RECEIVED BY MR. HOECKER BY NOON (ARIZONA TIME) ON FRIDAY, APRIL 23, 1999. EX-10.9 10 DIR INCENTIVE PLAN--ROY A. HERBERGER, JR. MICROAGE, INC. 1995 DIRECTOR INCENTIVE PLAN STOCK OPTION AGREEMENT FOR ROY A. HERBERGER, JR. April 29, 1999 Dear Roy: You were earlier notified that you are eligible to receive options to restructure your Director fees package to some extent. You completed a Director's Fee Waiver, attached hereto as EXHIBIT A, and in the Waiver you irrevocably elected to waive $10,000.00 (the "WAIVER AMOUNT") of your Director fees in return for the option to purchase (the "OPTION") shares of common stock of the Company ("SHARES"). Based on your Waiver, and pursuant to action taken by the Board of Directors of MicroAge, Inc. (the "COMPANY") under Section 7.3 of the MicroAge, Inc. 1995 Director Incentive Plan (Amended and Restated as of April 1, 1998) (the "PLAN") you are hereby granted the Options as set forth below. 1. STOCK OPTION GRANT. In exchange for electing to waive the Waiver Amount, subject to the terms and conditions set forth below, you are hereby granted the Option to purchase a total of Twenty Thousand Four Hundred Twenty-Six (20,426) Shares at the price of $5.875 per Share, which was the closing price of the Shares on April 23, 1999 (the "GRANT DATE"). The number of Shares was calculated pursuant to the following formula: (a) Waiver Amount $10,000.00 (b) $30,000.00 (Waiver Amount) Multiplied by Four (4) (the "Leverage Factor") $40,000.00 (c) Common Stock Closing Price on Grant Date (April 23, 1999)(the "Common Stock Price") $ 5.875 (d) Total Options Granted (b) / (c) (rounded up): 6,809 The Option granted hereby is NOT intended to be an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended. 2. EXERCISABILITY. You may purchase all or any of the Shares included in any installment under this Option, on or after the later to occur of: (1) the date the Option grant vests in accordance with the schedule below; and (2) the date the stock price hurdle with respect to each Option grant is met, on or after the date the Option grant vests. ================================================================================ PERCENTAGE OF SHARES EXERCISABLE IN DATE OPTION STOCK PRICE HURDLE OPTION GRANT GRANT VESTS AFTER VESTING DATE - -------------------------------------------------------------------------------- First 34% May 1, 2000 $5.875 Second 33% May 1, 2001 $6.46 Third 33% May 1, 2002 $7.11 ================================================================================ NOTWITHSTANDING THE ABOVE, YOUR OPTION UNDER THIS AGREEMENT WILL BECOME 100% EXERCISABLE ON THE NINTH ANNIVERSARY OF THE GRANT DATE, UNLESS SUCH OPTION EXPIRES BEFORE SUCH DATE IN ACCORDANCE WITH THE TERMS OF THE PLAN AND THIS AGREEMENT. YOU MAY NOT EXERCISE THE OPTION AT ANY TIME AFTER THE EXPIRATION DATE IN PARAGRAPH 5 BELOW. 3. EXERCISE AND STOCK DELIVERY. Vested Options may be exercised by delivering in writing a request to purchase Shares describing the number of Shares to be purchased and accompanied by payment in full to the Secretary of the Company, 2400 South MicroAge Way, MS #8, Tempe, AZ 85282-1896, for the Shares which you so elect to purchase, at the price per Share herein prescribed, whereupon you will receive a stock certificate representing the Shares for which you have made payment. The Company, however, shall not be obligated to deliver any stock unless and until: (a) there has been compliance with any federal or state laws or regulations or national securities exchange requirements which the Company may deem applicable; and (b) all legal matters in connection with the sale and delivery of the Shares have been approved by the Company's legal counsel. Upon the exercise of an Option, the purchase price shall be paid in cash, check, or, in the sole discretion of the Committee, in Shares, or a combination thereof. Each Share received by the Company in payment of all or a portion of the purchase price specified in this Option shall be valued at its fair market value on the date of payment and must have been held by you for at least six months prior to the tender of the Share to the Company. 2 4. TRANSFER RESTRICTIONS. Except as otherwise allowed by uniform rules adopted by the Board or the Committee, this Option shall be exercisable during your lifetime only by you and shall not be transferable by you, expressly or by operation of law, other than by will and the laws of descent and distribution. Any other attempted transfer or other disposition of this Option by you shall be void and shall constitute valid grounds for cancellation of this Option by the Company. 5. TERMINATION OF OPTION. THIS OPTION AND ALL YOUR RIGHTS HEREUNDER SHALL, UNLESS SOONER TERMINATED IN ACCORDANCE WITH THE PROVISIONS HEREOF, CEASE AND TERMINATE ON APRIL 23, 2009 (THE "EXPIRATION DATE"), AT 5:00 P.M. ARIZONA TIME. 6. TERMINATION OF SERVICE ON THE BOARD. Upon the date your service on the Company's Board is terminated for any reason, you, or in the event of your death your beneficiary, will be entitled to receive the number of Options determined by multiplying the sum of your Director fees actually earned and waived up to the date of your termination by the Leverage Factor and dividing the product by the Common Stock Price (and rounding up the resulting quotient); provided, however, that only the total Director fees earned and waived by you up to the date of termination will be considered. To the extent your Options are fully vested and exercisable as of the date of your termination, they will remain exercisable at any time prior to the Expiration Date. The portion of your Option that is not fully vested and exercisable as of the date of your termination, if any, shall continue to vest in accordance with the schedule set forth above and will become exercisable at the time it becomes fully vested prior to its Expiration Date. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE WAIVER. 7. CHANGE OF CONTROL. Upon a "Change of Control" (as that term is defined in the Plan), you will be entitled to receive the number of Options determined by multiplying the sum of your Director fees actually earned and waived up to the Change of Control by the Leverage Factor and dividing the product by the Common Stock Price (and rounding up the resulting quotient); provided, however, that only the total Director fees earned and waived by you up to the Change of Control will be considered. In the event of a Change of Control, all Options under this Agreement will become 100% vested and will be exercisable until the Expiration Date. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE WAIVER. 8. TERMINATION OF PURCHASE PROGRAM. If the Board decides to terminate your ability to waive all or a portion of your Director fees in return for the Option (the "Purchase Program"), you will be entitled to receive a number of Options determined by multiplying the sum of your Director fees actually earned and waived up to the date of the termination of the Purchase Program by the Leverage Factor and dividing the product by the Common Stock Price (and rounding up the resulting quotient); provided, however, that only the Director fees earned and waived by you up to the date of the termination of the Purchase Program will be considered. All Options received will be fully vested and immediately exercisable. You will have up to thirty days from the date of such termination to exercise the Options. After such thirty day period, the Options will be canceled. 3 UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE WAIVER. 9. MISSED MEETINGS. If you miss a meeting for which you have waived all or a portion of the meeting fee, the portion of the Waiver Amount that would have been satisfied had you attended that meeting (the "DEFICIT AMOUNT"), will be made up by charging the special meeting fees and the regular meeting fees, that you have not already waived, for those meetings that occur after the missed meeting but before May 2, 2000. If, by May 1, 2000, the Deficit Amount is not made up in full by charging subsequent meeting fees as set forth in the preceding sentence, you must pay the Company any remaining Deficit Amount by such date. 10. COMPLIANCE. The Committee hereby reserves and shall have the right to terminate, renew, or modify the Plan in any way necessary to comply with applicable requirements of Rule 16b-3 promulgated by the Securities and Exchange Commission as interpreted pursuant to no-action letters and interpretive releases. PLEASE ACKNOWLEDGE RECEIPT OF THIS AGREEMENT BY SIGNING AND INSERTING YOUR SOCIAL SECURITY NUMBER ON BOTH LETTERS, THEN RETURNING BOTH LETTERS TO JEFF MCKEEVER'S OFFICE AT MICROAGE, INC., 2400 SOUTH MICROAGE WAY, MAIL STATION #24, TEMPE, AZ 85282-1896 FOR HIS EXECUTION. THE ORIGINALLY EXECUTED LETTER WILL BE RETURNED TO YOU FOR YOUR FILES AND THE COPY WILL BE RETAINED BY THE COMPANY'S LEGAL DEPARTMENT. MICROAGE, INC. By: /s/ Jeffrey D. McKeever ------------------------------ Jeffrey D. McKeever Chairman of the Board and Chief Executive Officer I HEREBY ACKNOWLEDGE RECEIPT OF THE FOREGOING OPTION. Signature: /s/ Roy A. Herberger, Jr. ----------------------------------- Social Security No.: ------------------------- 4 EXHIBIT A MICROAGE, INC. DIRECTOR'S FEE WAIVER ROY A. HERBERGER, JR. RETAINER FEES I hereby elect to waive the following amount of the retainer fees $ 2,000 payable to me for the next four quarters: THE ANNUAL RETAINER IS $18,000 AND IS PAID IN ARREARS IN QUARTERLY INSTALLMENTS OF $4,500 EACH. YOU MAY ELECT TO WAIVE ALL OR A PORTION OF EACH QUARTERLY INSTALLMENT FOR THE THIRD AND FOURTH QUARTERS OF THE CURRENT FISCAL YEAR AND THE FIRST AND SECOND QUARTERS OF THE FISCAL YEAR THAT WILL END IN 2000. IF YOU WOULD LIKE TO WAIVE ANY PORTION OF THESE FEES, WRITE THE AMOUNT OF THE TOTAL RETAINER FEES TO BE WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE FOUR QUARTERLY INSTALLMENTS. BOARD MEETING FEES I hereby elect to waive the following amount of my regular Board $ 2,000 meeting fees for the six regularly scheduled Board meetings between May 1, 1999 and April 30, 2000: THE MAXIMUM WAIVER IS $9,000. IF YOU WANT TO WAIVE ANY PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE SIX MEETINGS. COMPENSATION COMMITTEE MEETING FEES I hereby elect to waive the following amount of my regular $ 2,000 Compensation Committee meeting fees for the two regularly scheduled meetings between May 1, 1999 and April 30, 2000: THE MAXIMUM WAIVER IS $2,000. IF YOU WANT TO WAIVE ANY PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE TWO MEETINGS. GOVERNANCE COMMITTEE MEETING FEES I hereby elect to waive the following amount of my regular $ 2,000 Governance Committee meeting fees for the two regularly scheduled meetings between May 1, 1999 and April 30, 2000: THE MAXIMUM WAIVER IS $2,000. IF YOU WANT TO WAIVE ANY PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE TWO MEETINGS. COMMITTEE CHAIR FEES I hereby elect to waive the following amount of the Committee $ 2,000 Chair fees payable to me for the next four quarters: THE ANNUAL COMMITTEE CHAIR FEE IS $3,000 AND IS PAID IN ARREARS IN QUARTERLY INSTALLMENTS OF $750 EACH. YOU MAY ELECT TO WAIVE ALL OR A PORTION OF EACH QUARTERLY INSTALLMENT FOR THE THIRD AND FOURTH QUARTERS OF THE CURRENT FISCAL YEAR AND THE FIRST AND SECOND QUARTERS OF THE FISCAL YEAR THAT WILL END IN 2000. IF YOU WOULD LIKE TO WAIVE ANY PORTION OF THESE FEES, WRITE THE AMOUNT OF THE TOTAL COMMITTEE CHAIR FEES TO BE WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE FOUR QUARTERLY INSTALLMENTS. WAIVER AMOUNT $10,000 By signing this Waiver, I acknowledge that I have been given, or was offered, a copy of the Company's (i) Annual Report on Form 10-K for the fiscal year ended November 1, 1998, and (ii) Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1999 (the "SEC Reports"), and that I was given an opportunity to ask questions of any of the Company's executive officers regarding the SEC Reports or any other matter regarding the Company. By signing this Waiver, I recognize that purchasing options is a speculative investment in that the success or failure of my investment depends on the market value of the Company's stock over a several year period. I further recognize that all or a portion of my investment (i.e., my Waiver Amount) may be lost. I also acknowledge that I was given the opportunity to consult with my personal advisor(s) regarding this Waiver. I hereby elect to waive the Waiver Amount set forth above. By signing this Waiver I agree to the terms and conditions set forth above and acknowledge that I have read and understand the sample Stock Option Agreement that was given to me. SIGNATURE /s/ Roy A. Herberger, Jr. -------------------------------- DATE April 15, 1999 -------------------------------- SSN -------------------------------- PLEASE FAX YOUR SIGNED FORM TO THOMAS R. HOECKER AT (602) 382-6070. YOUR FORM MUST BE RECEIVED BY MR. HOECKER BY NOON (ARIZONA TIME) ON FRIDAY, APRIL 23, 1999. EX-10.10 11 DIRECTOR INCENTIVE PLAN--DIANNE C. WALKER MICROAGE, INC. 1995 DIRECTOR INCENTIVE PLAN STOCK OPTION AGREEMENT FOR DIANNE C. WALKER April 29, 1999 Dear Dianne: You were earlier notified that you are eligible to receive options to restructure your Director fees package to some extent. You completed a Director's Fee Waiver, attached hereto as EXHIBIT A, and in the Waiver you irrevocably elected to waive $10,000.00 (the "WAIVER AMOUNT") of your Director fees in return for the option to purchase (the "OPTION") shares of common stock of the Company ("SHARES"). Based on your Waiver, and pursuant to action taken by the Board of Directors of MicroAge, Inc. (the "COMPANY") under Section 7.3 of the MicroAge, Inc. 1995 Director Incentive Plan (Amended and Restated as of April 1, 1998) (the "PLAN") you are hereby granted the Options as set forth below. 1. STOCK OPTION GRANT. In exchange for electing to waive the Waiver Amount, subject to the terms and conditions set forth below, you are hereby granted the Option to purchase a total of Twenty Thousand Four Hundred Twenty-Six (20,426) Shares at the price of $5.875 per Share, which was the closing price of the Shares on April 23, 1999 (the "GRANT DATE"). The number of Shares was calculated pursuant to the following formula: (a) Waiver Amount $10,000.00 (b) $30,000.00 (Waiver Amount) Multiplied by Four (4) (the "Leverage Factor") $40,000.00 (c) Common Stock Closing Price on Grant Date (April 23, 1999)(the "Common Stock Price") $ 5.875 (d) Total Options Granted (b) / (c) (rounded up): 6,809 The Option granted hereby is NOT intended to be an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended. 2. EXERCISABILITY. You may purchase all or any of the Shares included in any installment under this Option, on or after the later to occur of: (1) the date the Option grant vests in accordance with the schedule below; and (2) the date the stock price hurdle with respect to each Option grant is met, on or after the date the Option grant vests. ================================================================================ PERCENTAGE OF SHARES EXERCISABLE IN DATE OPTION STOCK PRICE HURDLE OPTION GRANT GRANT VESTS AFTER VESTING DATE - -------------------------------------------------------------------------------- First 34% May 1, 2000 $5.875 Second 33% May 1, 2001 $6.46 Third 33% May 1, 2002 $7.11 ================================================================================ NOTWITHSTANDING THE ABOVE, YOUR OPTION UNDER THIS AGREEMENT WILL BECOME 100% EXERCISABLE ON THE NINTH ANNIVERSARY OF THE GRANT DATE, UNLESS SUCH OPTION EXPIRES BEFORE SUCH DATE IN ACCORDANCE WITH THE TERMS OF THE PLAN AND THIS AGREEMENT. YOU MAY NOT EXERCISE THE OPTION AT ANY TIME AFTER THE EXPIRATION DATE IN PARAGRAPH 5 BELOW. 3. EXERCISE AND STOCK DELIVERY. Vested Options may be exercised by delivering in writing a request to purchase Shares describing the number of Shares to be purchased and accompanied by payment in full to the Secretary of the Company, 2400 South MicroAge Way, MS #8, Tempe, AZ 85282-1896, for the Shares which you so elect to purchase, at the price per Share herein prescribed, whereupon you will receive a stock certificate representing the Shares for which you have made payment. The Company, however, shall not be obligated to deliver any stock unless and until: (a) there has been compliance with any federal or state laws or regulations or national securities exchange requirements which the Company may deem applicable; and (b) all legal matters in connection with the sale and delivery of the Shares have been approved by the Company's legal counsel. Upon the exercise of an Option, the purchase price shall be paid in cash, check, or, in the sole discretion of the Committee, in Shares, or a combination thereof. Each Share received by the Company in payment of all or a portion of the purchase price specified in this Option shall be valued at its fair market value on the date of payment and must have been held by you for at least six months prior to the tender of the Share to the Company. 2 4. TRANSFER RESTRICTIONS. Except as otherwise allowed by uniform rules adopted by the Board or the Committee, this Option shall be exercisable during your lifetime only by you and shall not be transferable by you, expressly or by operation of law, other than by will and the laws of descent and distribution. Any other attempted transfer or other disposition of this Option by you shall be void and shall constitute valid grounds for cancellation of this Option by the Company. 5. TERMINATION OF OPTION. THIS OPTION AND ALL YOUR RIGHTS HEREUNDER SHALL, UNLESS SOONER TERMINATED IN ACCORDANCE WITH THE PROVISIONS HEREOF, CEASE AND TERMINATE ON APRIL 23, 2009 (THE "EXPIRATION DATE"), AT 5:00 P.M. ARIZONA TIME. 6. TERMINATION OF SERVICE ON THE BOARD. Upon the date your service on the Company's Board is terminated for any reason, you, or in the event of your death your beneficiary, will be entitled to receive the number of Options determined by multiplying the sum of your Director fees actually earned and waived up to the date of your termination by the Leverage Factor and dividing the product by the Common Stock Price (and rounding up the resulting quotient); provided, however, that only the total Director fees earned and waived by you up to the date of termination will be considered. To the extent your Options are fully vested and exercisable as of the date of your termination, they will remain exercisable at any time prior to the Expiration Date. The portion of your Option that is not fully vested and exercisable as of the date of your termination, if any, shall continue to vest in accordance with the schedule set forth above and will become exercisable at the time it becomes fully vested prior to its Expiration Date. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE WAIVER. 7. CHANGE OF CONTROL. Upon a "Change of Control" (as that term is defined in the Plan), you will be entitled to receive the number of Options determined by multiplying the sum of your Director fees actually earned and waived up to the Change of Control by the Leverage Factor and dividing the product by the Common Stock Price (and rounding up the resulting quotient); provided, however, that only the total Director fees earned and waived by you up to the Change of Control will be considered. In the event of a Change of Control, all Options under this Agreement will become 100% vested and will be exercisable until the Expiration Date. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE WAIVER. 8. TERMINATION OF PURCHASE PROGRAM. If the Board decides to terminate your ability to waive all or a portion of your Director fees in return for the Option (the "Purchase Program"), you will be entitled to receive a number of Options determined by multiplying the sum of your Director fees actually earned and waived up to the date of the termination of the Purchase Program by the Leverage Factor and dividing the product by the Common Stock Price (and rounding up the resulting quotient); provided, however, that only the Director fees earned and waived by you up to the date of the termination of the Purchase Program will be considered. All Options received will be fully vested and immediately exercisable. You will have up to thirty days from the date of such termination to exercise the Options. After such thirty day period, the Options will be canceled. 3 UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE WAIVER. 9. MISSED MEETINGS. If you miss a meeting for which you have waived all or a portion of the meeting fee, the portion of the Waiver Amount that would have been satisfied had you attended that meeting (the "DEFICIT AMOUNT"), will be made up by charging the special meeting fees and the regular meeting fees, that you have not already waived, for those meetings that occur after the missed meeting but before May 2, 2000. If, by May 1, 2000, the Deficit Amount is not made up in full by charging subsequent meeting fees as set forth in the preceding sentence, you must pay the Company any remaining Deficit Amount by such date. 10. COMPLIANCE. The Committee hereby reserves and shall have the right to terminate, renew, or modify the Plan in any way necessary to comply with applicable requirements of Rule 16b-3 promulgated by the Securities and Exchange Commission as interpreted pursuant to no-action letters and interpretive releases. PLEASE ACKNOWLEDGE RECEIPT OF THIS AGREEMENT BY SIGNING AND INSERTING YOUR SOCIAL SECURITY NUMBER ON BOTH LETTERS, THEN RETURNING BOTH LETTERS TO JEFF MCKEEVER'S OFFICE AT MICROAGE, INC., 2400 SOUTH MICROAGE WAY, MAIL STATION #24, TEMPE, AZ 85282-1896 FOR HIS EXECUTION. THE ORIGINALLY EXECUTED LETTER WILL BE RETURNED TO YOU FOR YOUR FILES AND THE COPY WILL BE RETAINED BY THE COMPANY'S LEGAL DEPARTMENT. MICROAGE, INC. By: /s/ Jeffrey D. McKeever ------------------------------ Jeffrey D. McKeever Chairman of the Board and Chief Executive Officer I HEREBY ACKNOWLEDGE RECEIPT OF THE FOREGOING OPTION. Signature: /s/ Dianne C. Walker ----------------------------------- Social Security No.: ------------------------- 4 EXHIBIT A MICROAGE, INC. DIRECTOR'S FEE WAIVER DIANNE C. WALKER RETAINER FEES I hereby elect to waive the following amount of the retainer fees $10,000 payable to me for the next four quarters: THE ANNUAL RETAINER IS $18,000 AND IS PAID IN ARREARS IN QUARTERLY INSTALLMENTS OF $4,500 EACH. YOU MAY ELECT TO WAIVE ALL OR A PORTION OF EACH QUARTERLY INSTALLMENT FOR THE THIRD AND FOURTH QUARTERS OF THE CURRENT FISCAL YEAR AND THE FIRST AND SECOND QUARTERS OF THE FISCAL YEAR THAT WILL END IN 2000. IF YOU WOULD LIKE TO WAIVE ANY PORTION OF THESE FEES, WRITE THE AMOUNT OF THE TOTAL RETAINER FEES TO BE WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE FOUR QUARTERLY INSTALLMENTS. BOARD MEETING FEES I hereby elect to waive the following amount of my regular Board $ -- meeting fees for the six regularly scheduled Board meetings between May 1, 1999 and April 30, 2000: THE MAXIMUM WAIVER IS $9,000. IF YOU WANT TO WAIVE ANY PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE SIX MEETINGS. AUDIT COMMITTEE MEETING FEES I hereby elect to waive the following amount of my regular Audit $ -- Committee meeting fees for the two regularly scheduled meetings between May 1, 1999 and April 30, 2000: THE MAXIMUM WAIVER IS $2,000. IF YOU WANT TO WAIVE ANY PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE TWO MEETINGS. GOVERNANCE COMMITTEE MEETING FEES I hereby elect to waive the following amount of my regular $ -- Governance Committee meeting fees for the two regularly scheduled meetings between May 1, 1999 and April 30, 2000: THE MAXIMUM WAIVER IS $2,000. IF YOU WANT TO WAIVE ANY PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE TWO MEETINGS. WAIVER AMOUNT $10,000 By signing this Waiver, I acknowledge that I have been given, or was offered, a copy of the Company's (i) Annual Report on Form 10-K for the fiscal year ended November 1, 1998, and (ii) Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1999 (the "SEC Reports"), and that I was given an opportunity to ask questions of any of the Company's executive officers regarding the SEC Reports or any other matter regarding the Company. By signing this Waiver, I recognize that purchasing options is a speculative investment in that the success or failure of my investment depends on the market value of the Company's stock over a several year period. I further recognize that all or a portion of my investment (i.e., my Waiver Amount) may be lost. I also acknowledge that I was given the opportunity to consult with my personal advisor(s) regarding this Waiver. I hereby elect to waive the Waiver Amount set forth above. By signing this Waiver I agree to the terms and conditions set forth above and acknowledge that I have read and understand the sample Stock Option Agreement that was given to me. SIGNATURE /s/ Dianne C. Walker -------------------------------- DATE April 22, 1999 -------------------------------- SSN -------------------------------- PLEASE FAX YOUR SIGNED FORM TO THOMAS R. HOECKER AT (602) 382-6070. YOUR FORM MUST BE RECEIVED BY MR. HOECKER BY NOON (ARIZONA TIME) ON FRIDAY, APRIL 23, 1999. EX-10.11 12 DIRECTOR INCENTIVE PLAN--STEVEN G. MIHAYLO MICROAGE, INC. 1995 DIRECTOR INCENTIVE PLAN STOCK OPTION AGREEMENT FOR STEVEN G. MIHAYLO April 29, 1999 Dear Steve: You were earlier notified that you are eligible to receive options to restructure your Director fees package to some extent. You completed a Director's Fee Waiver, attached hereto as EXHIBIT A, and in the Waiver you irrevocably elected to waive $17,000.00 (the "WAIVER AMOUNT") of your Director fees in return for the option to purchase (the "OPTION") shares of common stock of the Company ("SHARES"). Based on your Waiver, and pursuant to action taken by the Board of Directors of MicroAge, Inc. (the "COMPANY") under Section 7.3 of the MicroAge, Inc. 1995 Director Incentive Plan (Amended and Restated as of April 1, 1998) (the "PLAN") you are hereby granted the Options as set forth below. 1. STOCK OPTION GRANT. In exchange for electing to waive the Waiver Amount, subject to the terms and conditions set forth below, you are hereby granted the Option to purchase a total of Twenty Thousand Four Hundred Twenty-Six (20,426) Shares at the price of $5.875 per Share, which was the closing price of the Shares on April 23, 1999 (the "GRANT DATE"). The number of Shares was calculated pursuant to the following formula: (a) Waiver Amount $17,000.00 (b) $30,000.00 (Waiver Amount) Multiplied by Four (4) (the "Leverage Factor") $68,000.00 (c) Common Stock Closing Price on Grant Date (April 23, 1999)(the "Common Stock Price") $ 5.875 (d) Total Options Granted (b) / (c) (rounded up): 11,575 The Option granted hereby is NOT intended to be an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended. 2. EXERCISABILITY. You may purchase all or any of the Shares included in any installment under this Option, on or after the later to occur of: (1) the date the Option grant vests in accordance with the schedule below; and (2) the date the stock price hurdle with respect to each Option grant is met, on or after the date the Option grant vests. ================================================================================ PERCENTAGE OF SHARES EXERCISABLE IN DATE OPTION STOCK PRICE HURDLE OPTION GRANT GRANT VESTS AFTER VESTING DATE - -------------------------------------------------------------------------------- First 34% May 1, 2000 $5.875 Second 33% May 1, 2001 $6.46 Third 33% May 1, 2002 $7.11 ================================================================================ NOTWITHSTANDING THE ABOVE, YOUR OPTION UNDER THIS AGREEMENT WILL BECOME 100% EXERCISABLE ON THE NINTH ANNIVERSARY OF THE GRANT DATE, UNLESS SUCH OPTION EXPIRES BEFORE SUCH DATE IN ACCORDANCE WITH THE TERMS OF THE PLAN AND THIS AGREEMENT. YOU MAY NOT EXERCISE THE OPTION AT ANY TIME AFTER THE EXPIRATION DATE IN PARAGRAPH 5 BELOW. 3. EXERCISE AND STOCK DELIVERY. Vested Options may be exercised by delivering in writing a request to purchase Shares describing the number of Shares to be purchased and accompanied by payment in full to the Secretary of the Company, 2400 South MicroAge Way, MS #8, Tempe, AZ 85282-1896, for the Shares which you so elect to purchase, at the price per Share herein prescribed, whereupon you will receive a stock certificate representing the Shares for which you have made payment. The Company, however, shall not be obligated to deliver any stock unless and until: (a) there has been compliance with any federal or state laws or regulations or national securities exchange requirements which the Company may deem applicable; and (b) all legal matters in connection with the sale and delivery of the Shares have been approved by the Company's legal counsel. Upon the exercise of an Option, the purchase price shall be paid in cash, check, or, in the sole discretion of the Committee, in Shares, or a combination thereof. Each Share received by the Company in payment of all or a portion of the purchase price specified in this Option shall be valued at its fair market value on the date of payment and must have been held by you for at least six months prior to the tender of the Share to the Company. 2 4. TRANSFER RESTRICTIONS. Except as otherwise allowed by uniform rules adopted by the Board or the Committee, this Option shall be exercisable during your lifetime only by you and shall not be transferable by you, expressly or by operation of law, other than by will and the laws of descent and distribution. Any other attempted transfer or other disposition of this Option by you shall be void and shall constitute valid grounds for cancellation of this Option by the Company. 5. TERMINATION OF OPTION. THIS OPTION AND ALL YOUR RIGHTS HEREUNDER SHALL, UNLESS SOONER TERMINATED IN ACCORDANCE WITH THE PROVISIONS HEREOF, CEASE AND TERMINATE ON APRIL 23, 2009 (THE "EXPIRATION DATE"), AT 5:00 P.M. ARIZONA TIME. 6. TERMINATION OF SERVICE ON THE BOARD. Upon the date your service on the Company's Board is terminated for any reason, you, or in the event of your death your beneficiary, will be entitled to receive the number of Options determined by multiplying the sum of your Director fees actually earned and waived up to the date of your termination by the Leverage Factor and dividing the product by the Common Stock Price (and rounding up the resulting quotient); provided, however, that only the total Director fees earned and waived by you up to the date of termination will be considered. To the extent your Options are fully vested and exercisable as of the date of your termination, they will remain exercisable at any time prior to the Expiration Date. The portion of your Option that is not fully vested and exercisable as of the date of your termination, if any, shall continue to vest in accordance with the schedule set forth above and will become exercisable at the time it becomes fully vested prior to its Expiration Date. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE WAIVER. 7. CHANGE OF CONTROL. Upon a "Change of Control" (as that term is defined in the Plan), you will be entitled to receive the number of Options determined by multiplying the sum of your Director fees actually earned and waived up to the Change of Control by the Leverage Factor and dividing the product by the Common Stock Price (and rounding up the resulting quotient); provided, however, that only the total Director fees earned and waived by you up to the Change of Control will be considered. In the event of a Change of Control, all Options under this Agreement will become 100% vested and will be exercisable until the Expiration Date. UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE WAIVER. 8. TERMINATION OF PURCHASE PROGRAM. If the Board decides to terminate your ability to waive all or a portion of your Director fees in return for the Option (the "Purchase Program"), you will be entitled to receive a number of Options determined by multiplying the sum of your Director fees actually earned and waived up to the date of the termination of the Purchase Program by the Leverage Factor and dividing the product by the Common Stock Price (and rounding up the resulting quotient); provided, however, that only the Director fees earned and waived by you up to the date of the termination of the Purchase Program will be considered. All Options received will be fully vested and immediately exercisable. You will have up to thirty days from the date of such termination to exercise the Options. After such thirty day period, the Options will be canceled. 3 UNDER NO CIRCUMSTANCES WILL YOU BE ENTITLED TO RECEIVE CASH EQUAL TO ALL OR ANY PORTION OF THE DIRECTOR FEES YOU ELECTED TO WAIVE UNDER THE DIRECTOR'S FEE WAIVER. 9. MISSED MEETINGS. If you miss a meeting for which you have waived all or a portion of the meeting fee, the portion of the Waiver Amount that would have been satisfied had you attended that meeting (the "DEFICIT AMOUNT"), will be made up by charging the special meeting fees and the regular meeting fees, that you have not already waived, for those meetings that occur after the missed meeting but before May 2, 2000. If, by May 1, 2000, the Deficit Amount is not made up in full by charging subsequent meeting fees as set forth in the preceding sentence, you must pay the Company any remaining Deficit Amount by such date. 10. COMPLIANCE. The Committee hereby reserves and shall have the right to terminate, renew, or modify the Plan in any way necessary to comply with applicable requirements of Rule 16b-3 promulgated by the Securities and Exchange Commission as interpreted pursuant to no-action letters and interpretive releases. PLEASE ACKNOWLEDGE RECEIPT OF THIS AGREEMENT BY SIGNING AND INSERTING YOUR SOCIAL SECURITY NUMBER ON BOTH LETTERS, THEN RETURNING BOTH LETTERS TO JEFF MCKEEVER'S OFFICE AT MICROAGE, INC., 2400 SOUTH MICROAGE WAY, MAIL STATION #24, TEMPE, AZ 85282-1896 FOR HIS EXECUTION. THE ORIGINALLY EXECUTED LETTER WILL BE RETURNED TO YOU FOR YOUR FILES AND THE COPY WILL BE RETAINED BY THE COMPANY'S LEGAL DEPARTMENT. MICROAGE, INC. By: /s/ Jeffrey D. McKeever ------------------------------ Jeffrey D. McKeever Chairman of the Board and Chief Executive Officer I HEREBY ACKNOWLEDGE RECEIPT OF THE FOREGOING OPTION. Signature: /s/ Steven G. Mihaylo ----------------------------------- Social Security No.: ------------------------- 4 EXHIBIT A MICROAGE, INC. DIRECTOR'S FEE WAIVER STEVEN G. MIHAYLO RETAINER FEES I hereby elect to waive the following amount of the retainer fees $ 9,000 payable to me for the next four quarters: THE ANNUAL RETAINER IS $18,000 AND IS PAID IN ARREARS IN QUARTERLY INSTALLMENTS OF $4,500 EACH. YOU MAY ELECT TO WAIVE ALL OR A PORTION OF EACH QUARTERLY INSTALLMENT FOR THE THIRD AND FOURTH QUARTERS OF THE CURRENT FISCAL YEAR AND THE FIRST AND SECOND QUARTERS OF THE FISCAL YEAR THAT WILL END IN 2000. IF YOU WOULD LIKE TO WAIVE ANY PORTION OF THESE FEES, WRITE THE AMOUNT OF THE TOTAL RETAINER FEES TO BE WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE FOUR QUARTERLY INSTALLMENTS. BOARD MEETING FEES I hereby elect to waive the following amount of my regular Board $ 4,500 meeting fees for the six regularly scheduled Board meetings between May 1, 1999 and April 30, 2000: THE MAXIMUM WAIVER IS $9,000. IF YOU WANT TO WAIVE ANY PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE SIX MEETINGS. AUDIT COMMITTEE MEETING FEES I hereby elect to waive the following amount of my regular Audit $ 1,000 Committee meeting fees for the two regularly scheduled meetings between May 1, 1999 and April 30, 2000: THE MAXIMUM WAIVER IS $2,000. IF YOU WANT TO WAIVE ANY PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE TWO MEETINGS. GOVERNANCE COMMITTEE MEETING FEES I hereby elect to waive the following amount of my regular $ 1,000 Governance Committee meeting fees for the two regularly scheduled meetings between May 1, 1999 and April 30, 2000: THE MAXIMUM WAIVER IS $2,000. IF YOU WANT TO WAIVE ANY PORTION OF THIS AMOUNT, WRITE IN THE AMOUNT TO BE WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE MEETING FEES FOR THESE TWO MEETINGS. COMMITTEE CHAIR FEES I hereby elect to waive the following amount of the Committee $ 1,500 Chair fees payable to me for the next four quarters: THE ANNUAL COMMITTEE CHAIR FEE IS $3,000 AND IS PAID IN ARREARS IN QUARTERLY INSTALLMENTS OF $750 EACH. YOU MAY ELECT TO WAIVE ALL OR A PORTION OF EACH QUARTERLY INSTALLMENT FOR THE THIRD AND FOURTH QUARTERS OF THE CURRENT FISCAL YEAR AND THE FIRST AND SECOND QUARTERS OF THE FISCAL YEAR THAT WILL END IN 2000. IF YOU WOULD LIKE TO WAIVE ANY PORTION OF THESE FEES, WRITE THE AMOUNT OF THE TOTAL COMMITTEE CHAIR FEES TO BE WAIVED ON THE BLANK LINE TO THE RIGHT. THE AMOUNT YOU WAIVE WILL BE CHARGED EQUALLY AGAINST THE FOUR QUARTERLY INSTALLMENTS. WAIVER AMOUNT $17,000 By signing this Waiver, I acknowledge that I have been given, or was offered, a copy of the Company's (i) Annual Report on Form 10-K for the fiscal year ended November 1, 1998, and (ii) Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1999 (the "SEC Reports"), and that I was given an opportunity to ask questions of any of the Company's executive officers regarding the SEC Reports or any other matter regarding the Company. By signing this Waiver, I recognize that purchasing options is a speculative investment in that the success or failure of my investment depends on the market value of the Company's stock over a several year period. I further recognize that all or a portion of my investment (i.e., my Waiver Amount) may be lost. I also acknowledge that I was given the opportunity to consult with my personal advisor(s) regarding this Waiver. I hereby elect to waive the Waiver Amount set forth above. By signing this Waiver I agree to the terms and conditions set forth above and acknowledge that I have read and understand the sample Stock Option Agreement that was given to me. SIGNATURE /s/ Steven G. Mihaylo -------------------------------- DATE April 12, 1999 -------------------------------- SSN -------------------------------- PLEASE FAX YOUR SIGNED FORM TO THOMAS R. HOECKER AT (602) 382-6070. YOUR FORM MUST BE RECEIVED BY MR. HOECKER BY NOON (ARIZONA TIME) ON FRIDAY, APRIL 23, 1999. EX-11 13 CALCULATION OF NET INCOME (LOSS) PER SHARE EXHIBIT 11 - CALCULATION OF NET INCOME (LOSS) PER COMMON SHARE MICROAGE, INC. NET INCOME (LOSS) PER COMMON SHARE CALCULATION (in thousands)
Quarter ended 26 weeks ended ---------------------- --------------------- May 2, May 3, May 2, May 3, 1999 1998 1999 1998 --------- -------- --------- -------- BASIC Weighted average common shares 20,481 19,584 20,412 19,520 --------- -------- --------- -------- DILUTED Weighted average shares from basic calculation 20,481 19,584 20,412 19,520 Dilutive effect of stock options and warrants -- -- -- -- --------- -------- --------- -------- Weighted average common and common equivalent shares outstanding - diluted 20,481 19,584 20,412 19,520 --------- -------- --------- -------- NET INCOME (LOSS) $(147,341) $ (5,957) $(145,275) $(12,073) Net income (loss) per common and common equivalent share: Basic $ (7.19) $ (0.30) $ (7.12) $ (0.62) ========= ======== ========= ======== Diluted $ (7.19) $ (0.30) $ (7.12) $ (0.62) ========= ======== ========= ========
EX-27 14 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS (UNAUDITED) AS OF MAY 2, 1999 AND NOVEMBER 1, 1998 AND THE CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE QUARTERS ENDED MAY 2, 1999 AND MAY 3, 1998. 1,000 U.S. DOLLARS 6-MOS OCT-31-1999 NOV-02-1998 MAY-02-1999 1 57,328 0 315,493 27,337 449,245 818,290 216,039 120,369 948,573 763,475 0 0 0 205 150,906 948,573 1,656,541 1,656,541 1,569,903 1,569,903 12,260 0 992 (165,806) (18,465) (147,341) 0 0 0 (147,341) (7.19) (7.19)
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