Rebate and Marketing Fund
Addendum to The 1994/1995 Microsoft
Channel Agreement
(January - June, 1995)
This Addendum ("Agreement") entered into as of the 1st day of January,
1995, supplements that certain Microsoft 1994/1995 Channel Agreement
("Agreement") between MICROSOFT CORPORATION ("MS") having its principal
place of business at One Microsoft Way Redmond, WA 98052 and EGGHEAD
SOFTWARE ("CUSTOMER") having its principal place of business at 22011 SE
51st Street, Issaquah, WA 98027. The Agreement is hereby supplemented
as follows:
1. Purpose
The purpose of this Addendum is to set forth the framework by which
CUSTOMER may earn Rebates and Marketing Funds.
2. Term and Termination
This Addendum shall be effective as of the date indicated above,and
shall expire on June 30, 1995. Either party may terminate this
Addendum, with or without cause, upon (30) days prior written notice.
This Addendum is not valid unless both MS and CUSTOMER have executed a
Microsoft 1994/1995 Channel Agreement.
3. Definitions
For purposes of this Addendum, capitalized terms not otherwise defined
herein, shall have the same definitions as set forth in the Agreement.
Additional capitalized terms included in this Addendum are as defined in
Schedule A attached hereto.
4. Rebates
CUSTOMER is eligible to receive up to a <F4> percent <F4> Rebate on its
Qualified Purchase made during the Rebate and Marketing Fund Period. The
Rebate shall be paid provided CUSTOMER complies with the Rebate Program
Guidelines outlined in Schedule B. Notwithstanding such Rebate Program
Guidelines, MS may, at its sole discretion, pay all or any portion of
the Rebate prior to the end of the Rebate and Marketing Fund Period.
The Rebate so paid may be adjusted subsequently based upon compliance
with the Rebate Program Guidelines.
5. Marketing Funds
5.1 Base Level Funds
MS hereby grants to CUSTOMER the use of Marketing Funds calculated
monthly by the total number of each Product CUSTOMER purchased from MS
multiplied by each Product's respective Marketing Fund Accrual rate as
outlined in Schedule C attached hereto. MS reserves the right to modify
Schedule C at anytime without notice. Marketing Funds accrue monthly
and shall expire on December 31, 1995.
Marketing Funds shall not begin accruing until both CUSTOMER and MS have
executed this Addendum. Should CUSTOMER fail to execute, or should MS
be unable to execute this Addendum by January 1, 1995, for each full
month after January 1, 1995, in which this Addendum is not executed,
CUSTOMER shall not receive such month's Marketing Fund accrual.
5.2 Opportunity Funds
Periodically, MS may allow CUSTOMER to participate in other MS programs
in which CUSTOMER shall receive additional Marketing Funds.
5.3 Guidelines for Marketing Fund Use
MS shall provide CUSTOMER with a guideline of activities which MS sees
as a priority for spending the funds. The Microsoft Reseller Marketing
Fund Guidelines is attached hereto as Schedule D.
6. Reporting Requirements
CUSTOMER shall submit reports to MS as outlined in CUSTOMER's Rebate
Program Guidelines, and in Schedule F attached hereto in accordance with
the EDI Implementation Guide attached hereto as Schedule E. Failure by
CUSTOMER to comply with the terms of the Guidelines shall result in
CUSTOMER's loss of its monthly Compliance Rebate total for each month
reporting is non-compliant.
IN WITNESS WHEREOF, the parties have signed this Addendum on the date
indicated below. This Addendum is hereby made part of the Agreement.
All terms and conditions of the Agreement not supplemented herein shall
remain in full force and effect. This Addendum is not binding until
executed by MS.
AGREED AND ACCEPTED TO BY AGREED AND ACCEPTED TO BY
MICROSOFT CORPORATION ("MS"): EGGHEAD SOFTWARE
("CUSTOMER"):
By:/ss Johan Liedgren By: /ss Thomas F. Quinn
Name: (please print) Name: (please print)
Title: Direct, Channel Policies Title: Dir. Gen'l.
Merchandising
Date: 5/15/95 Date: 5/9/95
Schedule A
Definitions
"AMS Reporting" (Account Management Systems Reporting) is defined
as a monthly report of CUSTOMER's monthly Sell To sales of all MS
Product, reported in the format Attached hereto as Schedule F.
"Electronic Data Interchange" or "EDI" is defined as the ANSI-ASCII
X.12 standard, adopted by ABCD, by which CUSTOMER shall submit sales
reporting to MS.
"Inventory Reporting" is defined as the reporting of Product
specific month end inventory. If CUSTOMER has multiple locations,
inventory reporting shall be by location, and shall include the name,
street address, city, state and zip code for each location.
"Marketing Funds" is defined as the purchase credit amount accrued
by CUSTOMER as a percentage of Qualified Purchases, and used to fund
CUSTOMER's pre-approved MS marketing activities.
"Marketing Fund Accrual" is defined as the dollar amount MS grants
CUSTOMER for each Product purchased from MS.
"Microsoft Marketing Funds Guidelines" is defined as MS' then
current terms and conditions attached hereto as Attachment D, available
from the Microsoft Reseller Account Representative, for the use of
Marketing Funds.
"Qualified Purchases" is defined as net purchases made during the
Rebate and Marketing Fund Period; provided, however, that Qualified
Purchases shall include only those purchases which are shipped to
CUSTOMER during the Rebate and Marketing Fund Period, less returns, and
credits for which payment in full has been received by MS from CUSTOMER
within thirty (30) days after the end of the Rebate and Marketing Fund
Period, and shall not include Microsoft Select.
"Rebate" is defined as the dollar amount paid to CUSTOMER by MS in
the form of a purchase credit for achieving of specific rebate program
goals and reporting requirements as set forth herein.
"Rebate and Marketing Fund Period" is defined as the six (6)
calendar months, from January 1, 1995 through June 30, 1995, during
which CUSTOMER shall earn Rebates and Marketing Funds.
"Salesout" or "Sell Through Reporting" is defined as the reporting
of the number of Product units that CUSTOMER location distributes to its
customers.
"Sell To" is defined as Product specific (per MS SKU) sales to all
End Users.
Schedule B
Rebate Program Guidelines
REBATE PROGRAM OVERVIEW
Programs: The January-June, 1995, Rebate period offers five rebate
programs. Rebate percentages available are listed in the table below.
Details on each program are also included in this document.
Maximum Percentage
Outlined on
Rebate Incentive Available
Page(s)
Compliance Program <F4> B2-4
Total Sales-out Program <F4> B5
BackOffice Sales-out Program <F4> B6-7
Win Office and Mac Office Sales-out Program <F4> B8-9
Consumer Sales-out Program <F4> BIO-11
Total <F4>
Rebate Calculations and Payments: Rebates will be paid in the form of
Microsoft purchase credits forty-five (45) days after the end of each
quarterly rebate period (i.e. May 15th for January - March, 1995
quarter). Rebates are calculated by multiplying the achieved rebate
percentage by the total Qualified Purchases for the rebate period.
Revenue generated from Microsoft Select Enrollment Agreements executed
by MS on or after July 1, 1994, shall be included in calculating
Egghead's achievement toward the Sales-out goal, but shall not be
included in Egghead's final total Qualified Purchases for purposes of
Rebate payment. Revenue generated from Microsoft Select Enrollment
Agreements executed by MS prior to July 1, 1994 will be included in
calculating Egghead's achievement towards the sales-out goal and will
also be eligible for a rebate. Rebate payment for such Select
Enrollment Agreements shall be in the form of a purchase credit forty-
five (45) days after the end of each quarterly rebate period.
Product Availability: If Microsoft is unable to ship a current version
of a product for any ten (10) consecutive business days, Egghead's
purchases through distribution of those SKUs will count toward Egghead's
Qualified Purchases for the semester.
All copies of eligible purchase orders placed through distribution along
with a copy of the Microsoft Stock Out Report must be sent to Microsoft
no later than fifteen (15) days following the semester end. Please send
purchase order copies and the Microsoft Stock Out Report to the
following address:
Microsoft Corporation
One Microsoft Way
Bldg. 22/4051
Redmond, WA 98052
Attn: Kristin Weeber, Rebate Specialist
Compliance Rebate Payment: Provided that Egghead fulfills all of the
compliance requirements, the Compliance Rebate will be paid monthly, on
the 20th of following month in the form of a purchase credit for use
toward purchasing Microsoft products.
Any issues regarding rebates should be sent in writing to Kristin
Weeber, Rebate Specialist, no later than thirty (30) days following
receipt of rebate payment. If such written notice is not provided
within thirty (30) days, Egghead shall have no further right to dispute
rebate payment.
COMPLIANCE REBATE PROGRAM
Program Objectives: The objective of the Compliance Rebate Program is to
incent Egghead to comply with Microsoft contractual requirements for
payments, Street Dates, and reporting.
Non-compliance: During any given month, failure to comply with any or
all of the current compliance criteria will result in the forfeiture of
the entire compliance rebate for that month.
1. Microsoft Payment Requirements:
Microsoft requires it's customers to pay it's invoices within terms. In
order to maintain compliance, 100% of the gross invoice value for non-
Select and 85% of the gross invoice value for Select must be current as
of Microsoft's fiscal month-end. Unapplied credits will be excluded
from the calculation.
2. Microsoft Street Date Requirements:
From time to time, Microsoft may announce a new product or new versions
of an existing product for which Microsoft shall set a Street Date. In
order to comply with the Street Date requirements, Egghead shall not:
Ship or deliver the product to any end-user customer
prior to the Street Date.
Accept any end user payment for the product prior to the Street
Date. Checks and/or credit card numbers may be accepted by
Egghead, but can only be processed when product is delivered to the
end user on or after the Street Date.
Advertise, merchandise, or promote the product to end user
customers until it is officially announced by Microsoft. Usually,
the product announcement is on the Street Date. If the product
announcement is earlier than the Street Date, Microsoft will
clearly communicate the announce date to the channel. If product
is announced by Microsoft before the Street Date, the product can
be advertised, merchandised and/or promoted immediately after such
announcement, provided that all such promotions clearly state that
the product is not yet available for purchase.
Allow it's distribution centers and/or warehouses to distribute,
for a period of up to twelve months, a Street Date product to any
individual sales office, retail store, or outlet which Microsoft in
its sole discretion has determined to be in violation of the Street
Date Requirements.
In the event Egghead violates the Street Date for any special products
specified in a Microsoft Street Date letter (including, but not limited
to Microsoft<F1> Windows<F1>), Egghead shall forfeit up to the entire
Compliance Rebate for the Rebate period in which the violation occurred.
Should Egghead fail to comply with the Street Date Requirements,
Microsoft may also, for a period of up to twelve (12) months, withhold
shipments to Egghead of future product until the Street Date of such
product.
Microsoft shall penalize all Street Date violators. Should Egghead wish
to report a Street Date violation, Egghead may fax a copy of a dated
sales receipt to Melanie Eberle at Microsoft at (206) 936-5141. Once a
violation has been reported, Microsoft shall investigate the violation,
apply penalties as appropriate, and inform the violating reseller of the
penalty, Please note, in order to confirm a suspected violation,
Microsoft must receive a dated sales receipt.
3. Microsoft Reporting Requirements
All reports outlined below must be Timely, Accurate, and Complete. For
purposes of the Microsoft Channel Agreement, "Timely" is defined as MS
receipt of reporting by the due date and time indicated, "Accurate" is
defined as the correct population of all reporting fields, and
"Complete" is defined as the population of all required reporting
fields.
FAST TRACK REPORTING
Fast Track Reporting is defined as a weekly report sent to Microsoft via
Electronic Data Interchange format ("EDI") of weekly Sell To sales,
Inventory, and Internal Market Share. Egghead must report sales from
Egghead to End Users. Egghead must make the EDI reports available to
MS' EDI mailbox each Monday by 12:00 noon (Pacific time). These reports
shall cover the seven-day period ending the prior Friday night Please
refer to the EDI Implementation Guide for details on reporting
requirements.
Microsoft reserves the right to conduct audits on Egghead's market share
data at any time. If the results of the audit show that Egghead is
reporting one or more market share categories incorrectly, Egghead must
correct the specified categories and provide the corrected back data
through the beginning of January before Egghead is eligible to receive a
compliance rebate.
Reporting Requirements
Each unit of single license Full Package Product should be
reported as one unit. This applies for both Microsoft products
and for competitive products.
Any single Microsoft product that includes multiple licenses
should be reported as one unit. Microsoft win then convert the
quantity of multiple license units sold to the number of licenses
they represent. Examples of these products include MMLP 20 Pack,
MMLP 100 Pack, and AE 10 Pack.
Each competitive multiple license product should be reported as
the number of licenses represented.
All volume licensing agreements (such as MOLP, MVLP, and MELP)
should be reported as one unit for each license sold.
Example: If Egghead sold a quantity of five (5) units of a Microsoft 20
user MMLP, Egghead would report a quantity of five units of that SKU.
However, if Egghead sold a quantity of five units of a competitor's 20
user MMLP, Egghead would report a quantity of 100 licenses.
MARKET SHARE REPORTING
The following table outlines the Market Share product categories for EDI
reporting. The table also specifies the top competitive products that
must be included in the aggregated market share reporting for the Fast
Track Rebate Program. All other competitive products in each category
should also be included in the market share reporting.
Category Microsoft Product Competitive Products
Windows word Microsoft Word for <F4>
processors Windows<F1>
Windows Microsoft<F1> Excel <F4>
spreadsheets for Windows<F1>
Windows bundles Microsoft<F1>Office <F4>
for Windows<F1>
Window Microsoft Access<F1> <F4>
Databases for Windows<F1>
FoxPro<F1> for
Windows<F1> <F4>
Mail Servers Microsoft<F1> Mail <F4>
Network Microsoft<F1> <F4>
Operating Windows NT<F1>
Systems Advanced Server
LAN Manager
COMPLIANCE REBATE PROGRAM
Accounts are required to report sell-to units and inventory units for
each Microsoft SKU, but are required only to report the total license
count for competitive product sell-to for each category. All SKUs for
these titles should be counted, including full packaged product,
upgrades, Microsoft license packs, education, and government SKUs.
Please refer to the EDI Implementation Guide for details on reporting
requirements.
Example: If Egghead sold-through fifty (50) units of <F4>
in one week, then Egghead would report a total of seventy
(70) Sales-out licenses of competitor's products in the Windows
Spreadsheet category.
AMS/MBS REPORTING
Egghead must submit AMS or MBS reporting by the 10th of each month for
the prior month in the format outlined in Schedule D of the January -
June, 1995 Rebate and Marketing Fund Addendum to the Microsoft Channel
Agreement. Reporting shall be transmitted in electronic format and sent
via modem to 1-800-831-6316, or on tape or diskette to MS at the
following address:
Microsoft Corporation
Reseller Reporting Group
Bldg. 8N/2
One Microsoft Way Redmond, WA 98052
Should Egghead provide both monthly AMS and MBS and weekly Fast Track
Reporting on a compliant basis for three (3) consecutive months, MS may
at its sole discretion grant a written waiver of Egghead monthly AMS and
NBS Reporting requirements.
TOTAL SALES-OUT REBATE PROGRAM
Program Objective: The objective of the Total Sales-out Rebate Program
is to increase sales of Microsoft products.
Rebate Percentages: The total possible rebate percentage achievable for
Total Sales-out Rebate Program is <F4> percent <F4> of Qualified
Purchases for January - June, 1995.
Goal Definitions: The program goals are based upon the following:
- - Egghead's historical sales-out of Microsoft products by Microsoft
business division.
- - Microsoft's United States total sales-out goals.
- - Egghead's contribution to Microsoft's historical sales.
Rebate Goals: Egghead has a first quarter sales-out goal and a total
semester sales-out goal. Egghead's performance for the first three
months of the January - June, 1995 semester will be measured against the
first quarter sales-out goal. At the end of the first quarter, Egghead
will receive the percentage of the eligible rebate earned based on
performance against the first quarter goal. At the end of the semester,
Egghead will be measured on their six-month performance against the
total semester goal. Even if Egghead does not meet <F4> of the first
quarter goal, Egghead can still achieve <F4> of the semester goal
provided that the semester goal is met at the end of the six-month
period.
Egghead's Total Sales-out Rebate Program goals are as follows:
- - Quarter 1 Goal (January-March, 1995): <F4>
- - Semester Goal (January-June, 1995): <F4>
Sales-out Definitions/Measurement: Microsoft Product Sales-out is
defined as all Microsoft net product units sold through Egghead outlet
locations. Egghead's full packaged product, MOLP, and upgrade sales-out
units will be measured from the sales-out reported by Egghead to
Microsoft. Revenue from licensing sales is captured and generated by
Microsoft's financial systems and included in total sales-out used to
measure product sales-out rebate performance.
License revenue (Select and Microsoft Maintenance) credit is granted as
Microsoft recognizes the revenue. This occurs when Microsoft has
received the customer's license reporting. Following receipt of
reporting, Microsoft bills the customer/reseller and simultaneously
recognizes the revenue.
Payment: At the end of the semester, Egghead will be paid a sales-out
rebate based on performance against the semester goal. If Egghead
achieves greater than <F4> percent <F4> of the semester sales-out
goal, Egghead will receive the exact achieved percentage of the eligible
sales-out rebate up to one <F4> percent <F4>. If Egghead
achieves less than <F4> percent <F4> of the sales-out rebate goal,
Egghead will not receive any portion of the sales-out rebate. The
purpose of this scale is to offer an incentive for accounts to meet a
portion of their goal in the event they cannot achieve the full
Microsoft sales-out goal.
Although Microsoft pays the sales-out rebate ultimately based on
performance against the semester sales-out goal, Microsoft also pays a
sales-out rebate at the end of the first quarter based on performance
against the first quarter goal. The scale for the first quarter payment
is the same as the scale for the semester payment. The first quarter
payment amount will be subtracted from the final semester payment for
the sales-out rebate.
Example: If Egghead has a quarterly sales-out goal of $10,000,000 and a
total semester goal $25,000,000, and Egghead sells $8,000,000 over the
first quarter period and $27,500,000 over the entire semester period,
Egghead will receive the following rebate payments:
PERIOD GOAL SELL-THROUGH PAYMENT
ACHIEVED
First Quarter $10,000,000 $8,000,000 <F4> of <F4> eligible rebate =
<F4> of January-March
Qualified Purchases.
Semester $25,000,000 $27,500,000 <F4> of <F4> eligible rebate=
<F4> of January-June Qualified
Purchases less first quarter
payment.
BACKOFFICE PRODUCT SALES-OUT REBATE PROGRAM
Program Objective: The objective of the BackOffice Sales-Out Rebate
Program is to increase the sales and support the efforts of Microsoft
BackOffice products. The Microsoft BackOffice products consist of any
license type of the following products: Windows NT Server operating
system version 3.5, Microsoft SQL Server database server 4.21, Microsoft
SNA Server 2.1, Microsoft Systems Management Server 1.0, and Microsoft
Mail 3.2.
Rebate Percentages: The total possible rebate percentage achievable for
the BackOffice Sales-out Rebate Program is <F4> percent <F4> of
Qualified Purchases for January - June, 1995.
Goal Definitions: The program goals are based upon the following:
- Egghead's historical Sales-out of BackOffice Products.
- Microsoft's North America BackOffice Product Sales-out goals.
- Egghead's contribution to Microsoft's historical BackOffice
product sales.
Rebate Goals: Egghead has a first quarter sales-out goal and a total
semester sales-out goal. Egghead's performance for the first three
months of the January - June, 1995 semester will be measured against the
first quarter sales-out goal. At the end of the first quarter, Egghead
will receive the percentage of the eligible rebate earned based on
performance against the first quarter goal. At the end of the semester,
Egghead will be measured on their six-month performance against the
total semester goal. Even if Egghead does not meet <F4> of the first
quarter goal, Egghead can still achieve <F4> of the semester goal
provided that the semester goal is met at the end of the six-month
period.
Egghead's BackOffice Sales-out Rebate Program goals are as follows:
- Quarter 1 Goal (January - March, 1995): <F4>
- Semester Goal (January - June, 1995): <F4>
Sales-out Definitions/Measurement: Microsoft BackOffice Product Sales-
out is defined as those BackOffice product units sold through reseller
outlet locations. Egghead's full packaged product and upgrade sales-out
units will measured from the sales-out reported by Egghead to Microsoft,
which includes MOLP sales. Licensing sales (Select, and Microsoft
Maintenance) are captured and generated by Microsoft's financial systems
and included in total Sales-out used to measure BackOffice product
sales-out rebate performance.
Special Agreement product units will be excluded from product sales-out
measurement.
License revenue (Select and Microsoft Maintenance) credit is granted as
Microsoft recognizes the revenue. This occurs when Microsoft has
received the customer's license reporting. Following receipt of
reporting, Microsoft bills the customer/reseller and simultaneously
recognizes the revenue. Prepaid Maintenance licenses are
recognized monthly over the maintenance period. For example, if a
reseller prepays maintenance for two (2) year coverage, then the
reseller will receive one twenty fourth (1/24th) sales-out credit each
month over the course of the two years.
Payment: At the end of the semester, Egghead will be paid a sales-out
rebate based on performance against the semester goal. If Egghead
achieves greater than <F4> percent <F4> of the semester sales-out
goal, Egghead will receive the exact achieved percentage of the eligible
sales-out rebate up to <F4> percent <F4>. If Egghead achieves
less than <F4> percent <F4> of the sales-out rebate goal, Egghead will
not receive any portion of the sales-out rebate. The purpose of this
scale is to offer an incentive for accounts to meet a portion of their
goal in the event they cannot achieve the full Microsoft sales-out goal.
BACKOFFICE PRODUCT SALES-OUT REBATE PROGRAM
Although Microsoft pays the sales-out rebate ultimately based on
performance against the semester sales-out goal, Microsoft also pays a
sales-out rebate at the end of the first quarter based on performance
against the first quarter goal. The scale for the first quarter payment
is the same as the scale for the semester payment. The first quarter
payment amount will be subtracted from the final semester payment for
the sales-out rebate.
Example: If Egghead has a quarterly sales-out goal of $1,000,000 and a
total semester goal $2,500,000, and Egghead sells $800,000 over the
first quarter period and $2,600,000 over the entire semester period,
Egghead will receive the following rebate payments.
PERIOD GOAL SELL-THROUGH PAYMENT
ACHIEVED
First Quarter $1,000,000 $800,000 <F4> of <F4> eligible
rebate = <F4> of January -
March Qualified Purchases.
Semester $2,500,000 $2,600,000 <F4> of <F4> eligible
rebate = <F4> of January -
June Qualified Purchases
less first quarter payment.
The maximum allowable
is <F4>.
BackOffice Product SKUs: The BackOffice SKU list can be found on pages
B12-B20 of this document.
OFFICE SALES-OUT REBATE PROGRAM
Program Objective: The objective of the Office Sales-out Rebate Program
is to increase sales and support the efforts of Microsoft Office for
Windows Standard and Professional products and Microsoft Office for the
Macintosh products.
Rebate Percentages: The total possible rebate percentage achievable for
the Office Sales-out Rebate Program is <F4> percent <F4> of net
qualified purchases for January - June, 1995.
Goal Definitions: The program goals are based upon the following:
- Egghead's historical Sales-out of Office.
- Microsoft's North America Office Sales-out goals.
- Egghead's contribution to Microsoft's historical Office
sales.
Rebate Goals: Egghead has a first quarter sales-out goal and a total
semester sales-out goal. Egghead's performance for the first three
months of the January - June, 1995 semester will be measured against the
first quarter sales-out goal. At the end of the first quarter, Egghead
will receive the percentage of the eligible rebate earned based on
performance against the first quarter goal. At the end of the semester,
Egghead will be measured on their six-month performance against the
total semester goal. Even if Egghead does not meet <F4> of the first
quarter goal, Egghead can still achieve <F4> of the semester goal
provided that the semester goal is met at the end of the six-month
period.
Egghead's Office Sales-out Rebate Program goals are as follows:
Quarter 1 Goal (January - March, 1995): <F4>
Semester Goal (January - June, 1995): <F4>
Sales-Out Definitions/Measurement: Microsoft Office Product Sales-out is
defined as those Office net product units sold through reseller outlet
locations. Egghead's full packaged product and upgrade sales-out units
will measured from the sales-out reported by Egghead to Microsoft, which
includes MOLP sales. Licensing sales (Select, and Microsoft
Maintenance) are captured and generated by Microsoft's financial systems
and included in total Sales-out used to measure Office product sales-out
rebate performance.
Special Agreement product units will be excluded from product sales-out
measurement
License revenue (Select and Microsoft Maintenance) credit is granted as
Microsoft recognizes the revenue. This occurs when Microsoft has
received the customer's license reporting. Following receipt of
reporting, Microsoft bills the customer/reseller and simultaneously
recognizes the revenue. Prepaid Maintenance licenses are recognized
monthly over the maintenance period. For example, if a reseller prepays
maintenance for two year coverage, then the reseller will receive one
twenty fourth (1/24th) Sales-out credit each month over the course of
the two years.
Payment: At the end of the semester, Egghead will be paid a sales-out
rebate based on performance against the semester goal. If Egghead
achieves greater than <F4> percent <F4> of the semester sales-out
goal, Egghead will receive the exact achieved percentage of the eligible
sales-out rebate up to <F4> percent <F4>. If Egghead achieves
less than <F4> percent <F4> of the sales-out rebate goal, Egghead will
not receive any portion of the sales-out rebate. The purpose of this
scale is to offer an incentive for accounts to meet a portion of their
goal in the event they cannot achieve the full Microsoft sales-out
goal.
OFFICE SALES-OUT REBATE PROGRAM
Although Microsoft pays the sales-out rebate ultimately based on
performance against the semester sales-out goal, Microsoft also pays a
sales-out rebate at the end of the first quarter based on performance
against the first quarter goal. The scale for the first quarter payment
is the same as the scale for the semester payment. The first quarter
payment amount will be subtracted from the final semester payment for
the sales-out rebate.
Example: If Egghead has a quarterly sales-out goal of $1,000,000 and a
total semester goal $2,500,000, and Egghead sells $800,000 over the
first quarter period and $2,600,000 over the entire semester period,
Egghead will receive the following rebate payments:
PERIOD GOAL SELL-THROUGH PAYMENT
ACHIEVED
First Quarter $1,000,000 $800,000 <F4> of <F4> eligible
rebate = <F4> of January -
March Qualified Purchases.
Semester $2,500,000 $2,600,000 <F4> of <F4> eligible
rebate = <F4> of January -
June Qualified Purchases
less first quarter payment.
The maximum allowable
is <F4>.
Office SKU List: The Office SKU list can be found on pages B21 - B23
of
this document.
CONSUMER SALES-OUT REBATE PROGRAM
Program Objective: The objective of the Consumer Sales-out Rebate
Program is to increase sales and support the efforts of Microsoft
Consumer products.
Rebate Percentages: The total possible rebate percentage achievable
for
the Consumer Sales-out Rebate Program is <F4> percent <F4> of net
qualified purchases for January - June, 1995.
Goal Definitions: The program goals are based upon the following:
- Egghead's historical Sales-out of Microsoft Consumer products.
- Microsoft's North America Consumer Sales-out goals.
- Egghead's contribution to Microsoft's historical Consumer
sales.
Rebate Goals: Egghead has a first quarter sales-out goal and a total
semester sales-out goal. Egghead's performance for the first three
months of the January - June, 1995 semester will be measured against
the
firm quarter sales-out goal. At the end of the first quarter,
Egghead
will receive the percentage of the eligible rebate earned based on
performance against the first quarter goal. At the end of the
semester,
Egghead will be measured on their six-month performance against the
total semester goal. Even if Egghead does not meet <F4> of the first
quarter goal, Egghead can still achieve <F4> of the semester goal
provided that the semester goal is met at the end of the six-month
period.
Egghead's Consumer Sales-out Rebate Program goals are as follows:
Quarter 1 Goal (January - March, 1995): <F4>
Semester Goal (January - June, 1995): <F4>
Sales-out Definitions/Measurement: Microsoft Consumer Product Sales-
out
is defined as those Consumer net product units sold through reseller
outlet locations. Egghead's full packaged product and upgrade sales-
out
units will measured from the sales-out reported by Egghead to
Microsoft,
which includes MOLP sales. Licensing sales (Select, and Microsoft
Maintenance) are captured and generated by Microsoft's financial
systems
and included in total Sales-out used to measure Consumer product
sales-
out rebate performance.
Special Agreement product units will be excluded from product sales-
out
measurement
License revenue (Select and Microsoft Maintenance) credit is granted
as
Microsoft recognizes the revenue. This occurs when Microsoft has
received the customer's license reporting. Following receipt of
reporting, Microsoft bills the customer/reseller and simultaneously
recognizes the revenue. Prepaid Maintenance licenses are recognized
monthly over the maintenance period. For example, if a reseller
prepays
maintenance for two year coverage, then the reseller will receive one
twenty fourth (1/24th) Sales-out credit each month over the course of
the two years.
Payment: At the end of the semester, Egghead will be paid a sales-out
rebate based on performance against the semester goal. If Egghead
achieves greater than <F4> percent <F4> of the semester sales-out
goal, Egghead will receive the exact achieved percentage of the
eligible
sales-out rebate up to <F4> percent <F4>. If Egghead
achieves
less than <F4> percent <F4> of the sales-out rebate goal, Egghead
will
not receive any portion of the sales-out rebate. The purpose of this
scale is to offer an incentive for accounts to meet a portion of
their
goal in the event they cannot achieve the full Microsoft sales-out
goal.
Although Microsoft pays the sales-out rebate ultimately based on
performance against the semester sales-out goal, Microsoft also pays
a
sales-out rebate at the end of the first quarter based on performance
against the first quarter goal. The scale for the first quarter
payment
is the same as the scale for the semester payment. The first quarter
payment amount will be subtracted from the final semester payment for
the sales-out rebate.
Example: If Egghead has a quarterly sales-out goal of $1,000,000 and
a
total semester goal of $2,500,000, and Egghead sells $800,000 over
the
first quarter period and S2,600,000 over the entire semester period,
Egghead will receive the following rebate payments:
PERIOD GOAL SELL-THROUGH PAYMENT
ACHIEVED
First Quarter $1,000,000 $800,000 <F4> of <F4> eligible
rebate = <F4> of January -
March Qualified Purchases.
Semester $2,500,000 $2,600,000 <F4> of <F4> eligible
rebate = <F4> of January -
June Qualified Purchases
less first quarter payment.
The maximum allowable
is <F4>.
Office SKU List: The Office SKU list can be found on pages B24 - B26
of
this document.
<F1> Registered Trademark
<F4> Confidential Treatment Requested