Document:

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Exhibit 10.6

SECOND AMENDED AND RESTATED PINNACLE WEST CAPITAL CORPORATION

INVESTORS ADVANTAGE PLAN

          Pinnacle West Capital Corporation, an Arizona corporation (the “Company”),
hereby amends and restates, as of June 23, 2004, the Pinnacle West Capital
Corporation Investors Advantage Plan (the “Plan”):

ARTICLE 1

DEFINITIONS

          The terms defined in this Article I shall, for all purposes of this Plan,
have the following respective meanings:

          Account

          The term “Account” shall mean, as to any Participant, the account
maintained by the Administrator evidencing (i) the shares (and/or fraction of a
share) of Common Stock (a) purchased through the Plan and/or (b) deposited by
such Participant into the Plan pursuant to Section 4.1 hereof and credited to
such Participant; (ii) any dividends in the form of shares of Common Stock and
any shares resulting from a Common Stock split on such shares, and (iii) cash
held in the Plan pending investment in Common Stock for such Participant.

          Account Shares

          The term “Account Shares” shall mean all shares (and/or fraction of a
share) of Common Stock credited to the Account of a Participant by the
Administrator, which shall include shares deposited into the Plan pursuant to
Section 4.1 hereof.

          Administrator

          The term “Administrator” shall mean the individual (who may be an employee
of the Company), bank, trust company, or other entity (including the Company)
appointed from time to time by the Company to act as Administrator hereunder.

          Automatic Investment Form

          The term “Automatic Investment Form” shall mean documentation that the
Administrator shall require to be completed and received if Participant elects
to make an initial cash investment, or authorize automatic monthly investments,
to be deducted directly from a U.S. checking, savings, or credit union account
which is a member of the Automated Clearing House (“ACH”) network.

 

 

          Cash Investment Form

          The term “Cash Investment Form” shall mean documentation prepared by the
Administrator that may be utilized by a Participant when making an optional
cash investment pursuant to Section 2.4 hereof.

          Cash Investment Only option

          As defined in Subsection 2.2.3 hereof.

          Common Stock

          The Company’s Common Stock, no par value.

          Company

          As defined in the Preamble.

          Company Share Purchase Price

          The term “Company Share Purchase Price,” when used with respect to newly
issued shares of Common Stock, or shares of Common Stock held in the Company’s
treasury, shall mean the average of the high and low sales prices of Common
Stock on a given trading day as reported on the New York Stock Exchange
Composite Tape and published in The Wall Street Journal, or, for any day on
which there is no such publication, as published in another generally accepted
publication for the first business day of the relevant Investment Period (as
defined below), provided that the New York Stock Exchange is open for trading
on such day. In the absence of knowledge of inaccuracy, the Company may rely
upon such prices as published in The Wall Street Journal or such other
publication. In the event no trading is so reported for a trading day, the
Company Share Purchase Price for such shares may be determined by the Company
on the basis of such market quotations as it deems appropriate.

          Direct Deposit Authorization Form

          The term “Direct Deposit Authorization Form” shall mean documentation that
the Administrator shall require to be completed and received if Participant
elects to have Dividends deposited directly to a financial institution which is
a member of the ACH network.

          Dividend

          The term “Dividend” shall mean cash dividends paid on Reinvestment
Eligible Securities.

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          Dividend Payment Date

          The term “Dividend Payment Date” shall mean a date on which a cash
dividend on shares of Common Stock is paid.

          Dividend Processing Period

          The term “Dividend Processing Period” shall mean a 13-15 business day
period which begins on the Ex-Dividend Date.

          Dividend Record Date

          The term “Dividend Record Date” shall mean the date fixed for the
determination of shareholders of record who will be entitled to receive a
Dividend payable on a Dividend Payment Date.

          Eligible Securities

          The term “Eligible Securities” shall mean those securities of the Company
and its subsidiaries, whether issued prior to, on, or after the date hereof,
set forth in Section 6.1 hereof, and such other securities of the Company and
its subsidiaries as the Company may designate, in its sole discretion, pursuant
to Section 6.2 hereof.

          Enrollment Forms

          The term “Enrollment Forms” shall mean the documentation that the
Administrator shall require to be completed and received (subject to Section
2.1 hereof with respect to automatic enrollment of Plan Participants) prior to
an investor’s enrollment in the Plan pursuant to Section 2.1 hereof, a
Participant’s changing his/her options under the Plan pursuant to Section 7.1
hereof, or, at the option of a Participant as described in Section 4.1 hereof,
a Participant’s depositing shares of Common Stock into the Plan pursuant to
Section 4.1 hereof. An Enrollment Form may also be used by the Administrator
for other purposes as described herein or as determined by the Administrator
from time to time.

          Exchange Act

          The term “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.

          Ex-Dividend Date

          The term “Ex-Dividend Date” shall mean a date prior to the Dividend Record
Date, based on industry regulations, necessary to allow for the settlement of
traded securities by the Dividend Record Date.

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          Foreign Person

          The term “Foreign Person” shall mean a Person that is a citizen or
resident of, or is organized or incorporated under, or has its principal place
of business in, a country other than the United States, its territories, and
possessions.

          Full Dividend Reinvestment option

          As defined in Subsection 2.2.1 hereof.

          Independent Agent

          The term “Independent Agent” shall mean an agent independent of the
Company who satisfies applicable legal requirements (including without
limitation the requirements of Regulation M and Rule 10b-18 promulgated under
the Exchange Act) and who has been selected by the Company, pursuant to Section
10.6 hereof, to serve as an Independent Agent for purposes of making purchases
and sales of Common Stock under the Plan.

          Initial Enrollment Form

          The term “Initial Enrollment Form” shall mean the specific type of
Enrollment Form (defined above) required for all new investors in the Plan who
are not existing shareholders.

          Investment Date

          The term “Investment Date” shall mean the date on which the purchase price
for all shares of Common Stock to be purchased during an Investment Period has
been determined. If shares are purchased from the Company pursuant to Section
3.3 hereof, the Investment Date will be the first day of the relevant
Investment Period. If the Investment Date would otherwise fall on a day on
which the New York Stock Exchange is not open, the first day immediately
succeeding such day on which the New York Stock Exchange is open will be the
Investment Date.

          Investment Period

          The term “Investment Period” shall mean the period during which Common
Stock is purchased. An Investment Period will occur approximately every 5
business days, except that an Investment Period, which would normally begin on
a Dividend Record Date, will be postponed until the second business day
following the Dividend Record Date.

          Investment Statement

          The term “Investment Statement” shall mean a written statement prepared by
the Administrator and sent to a Participant after an Investment Period in which
the Participant’s Account had investment activity, or otherwise as the
Administrator shall

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determine to be appropriate or as provided in this Plan, which statement
reflects (i) the purchase price and number of Account Shares purchased for or
credited to the Participant’s Account for such Investment Period, (ii) the
total number of Account Shares credited to the Participant’s Account at the
date of such statement, and (iii) such additional information regarding the
Participant’s Account as the Administrator may determine to be pertinent to the
Participant.

          Market Share Purchase Price

          The term “Market Share Purchase Price,” when used with respect to shares
of Common Stock purchased in the open market, shall mean the weighted average
purchase price per share (including brokerage commissions, any related service
charges, and applicable taxes) of the aggregate number of shares purchased in
the open market for an Investment Date.

          Market Share Sales Price

          The term “Market Share Sales Price,” when used with respect to shares of
Common Stock sold under the Plan, shall mean the weighted average sales price
per share (less brokerage commissions, any related service charges, and
applicable taxes) of the aggregate number of shares sold in the open market for
the relevant period.

          Maximum Amount

          As defined in Section 2.4 hereof.

          Partial Dividend Reinvestment option

          As defined in Subsection 2.2.2 hereof.

          Participant

          As defined in Section 2.1 hereof.

          Person

          The term “Person” shall mean any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock company,
trust, estate, or unincorporated organization.

          Plan

          As defined in the Preamble.

          Plan History Statement

          The term “Plan History Statement” shall mean a written statement prepared
by the Administrator and sent to each Participant upon withdrawal of any or all
Account Shares upon the issuance of a certificate therefor or upon the sale of
any or all

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Account Shares from the Participant’s Account, or otherwise as the
Administrator shall determine to be appropriate or as provided in this Plan,
which statement reflects (i) the number of Account Shares so withdrawn and
certificated, (ii) the number of Account Shares so sold, (iii) the number of
Account Shares, if any, remaining in the Participant’s Account at the date of
such statement, and (iv) such additional information regarding the
Participant’s Account as the Administrator may determine to be pertinent to the
Participant.

          Reinvestment Eligible Securities

          The term “Reinvestment Eligible Securities” shall mean (i) those Eligible
Securities of which a Participant is the record or registered holder and on
which such Participant has elected to have all or a portion of the Dividends
paid reinvested in Common Stock and (ii) a Participant’s Account Shares except
for Account Shares as to which the Participant has elected not to have
Dividends reinvested in Common Stock and has notified the Administrator by
delivery of a completed Enrollment Form of such election.

          Sales/Transfer Request Form

          The term “Sales/Transfer Request Form” shall mean the documentation that
the Administrator may require to be completed and received prior to a
Participant’s (i) sale of Account Shares pursuant to Section 5.1 hereof, (ii)
gift or transfer of Account Shares pursuant to Section 5.2 hereof, and (iii)
termination of participation in the Plan pursuant to Section 7.2 hereof.

          A pronoun or adjective in the masculine gender includes the feminine
gender, and the singular includes the plural, unless the context clearly
indicates otherwise.

ARTICLE II

PARTICIPATION

          Section 2.1 Participation. Any Person, whether or not a record holder of
Common Stock, may elect to participate in the Plan; provided, however, that if
such Person is a Foreign Person, he must provide evidence satisfactory to the
Administrator that his/her participation in the Plan would not violate local
laws applicable to the Company, the Plan, or such Foreign Person.

          An election by a Person to participate in the Plan shall be made by
completing and returning to the Administrator an Enrollment Form, or an Initial
Enrollment Form, and, subject to the last two paragraphs of this Section 2.1
below, (i) electing to have Dividends on Eligible Securities of which such
Person is the record holder invested in Common Stock pursuant to Section 2.2
hereof, (ii) depositing certificates representing Common Stock of which such
person is the record holder into the Plan pursuant to Section 4.1 hereof, or
(iii) making an initial cash investment pursuant to Section 2.3 hereof.

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          Any Person who has met such requirements and has made and not revoked such
election is herein referred to as a “Participant.” Notwithstanding the
foregoing, each participant in the Plan on the date of effectiveness hereof is
automatically a Participant without submitting a new Enrollment Form; provided,
however, that any such Participant who wishes to change his/her current
participation in any way must submit a new Enrollment Form to the
Administrator. A Participant may elect to participate in any or all of the
forms of investment provided in Sections 2.2 through 2.4 hereof and to utilize
the Plan’s safekeeping services provided in Section 4.1 hereof by submitting an
Enrollment Form designating such election to the Administrator; provided,
however, that, alternatively, a Participant may elect to make optional cash
investments pursuant to Section 2.4 hereof by submitting to the Administrator a
completed optional Cash Investment Form in lieu of an Enrollment Form.

          The Company reserves the right to restrict participation in this Plan if
it believes that such participation may be contrary to the general intent of
this Plan or in violation of applicable law.

          Section 2.2 Dividend Reinvestment. A Participant may elect any of the
Full Dividend Reinvestment, Partial Dividend Reinvestment, and Cash Investment
Only options described in Subsections 2.2.1, 2.2.2, and 2.2.3 hereof.

          Subsection 2.2.1 Full Dividend Reinvestment. Participants enrolling in
the “Full Dividend Reinvestment” option will have Dividends earned on all
Common Stock, both in their Plan Accounts and held of record by such
Participants, reinvested in shares (and/or a fraction of a share) of Common
Stock to be credited to their Accounts in lieu of receiving such Dividends
directly.

          Subsection 2.2.2 Partial Dividend Reinvestment. Participants enrolling in
the “Partial Dividend Reinvestment” option will have Dividends on a designated
number of shares of Reinvestment Eligible Securities held of record or in their
Plan Accounts paid directly to the Participant in the manner otherwise
associated with payment of Dividends, with the balance being reinvested in
shares (and/or a fraction of a share) of Common Stock to be credited to their
Accounts in lieu of receiving such Dividends directly.

          Subsection 2.2.3 Cash Investment Only. Participants enrolling in the
“Cash Investment Only” option may make cash investments pursuant to Sections
2.3 and 2.4 hereof. Dividends on Eligible Securities held by such Participants
of record or in their Plan Accounts will not be reinvested. Such Dividends
will be paid directly to Participant either by check or direct deposit, at the
election of the Participant.

          Subsection 2.2.4 No Option Chosen. If Participants do not indicate a
participation option as described in Subsections 2.2.1, 2.2.2, and 2.2.3 hereof
on their Enrollment Forms, except as otherwise provided for Plan participants
in Section 2.1 hereof, such Participants will be deemed to have elected the
Full Dividend Reinvestment option described in Subsection 2.2.1 hereof.

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          Section 2.3 Initial Cash Investment. A Person who is not already a
Common Stock shareholder of record may become a Participant by returning to the
Administrator a completed Initial Enrollment Form, accompanied by an initial
cash payment of at least $50, by check, money order, or electronic funds
transfer, payable through a U.S. bank or other U.S. financial institution, in
U.S. dollars, to Pinnacle West Capital Corporation, to be invested in Common
Stock pursuant to Subsections 3.3.2 or 3.4.2 hereof. Initial cash investments
may be made by electronic funds transfer by completing and forwarding an
Automatic Investment Form to the Administrator authorizing the deduction of a
set amount.

          Section 2.4 Optional Cash Investments. A Participant may elect to make
cash payments at any time or from time to time to the Plan, in any amount, by
check, money order, or electronic funds transfer, payable through a U.S. bank
or other U.S. financial institution, in U.S. dollars, to Pinnacle West Capital
Corporation, for investment in Common Stock pursuant to Subsections 3.3.2 or
3.4.2 hereof; provided, however, that a Participant may not invest more than
$150,000 in aggregate amount in any calendar year (the “Maximum Amount”) and
provided further that any such payment must be accompanied by a new Enrollment
Form or a Cash Investment Form. For purposes of determining whether the
Maximum Amount has been reached, initial cash investments made pursuant to
Section 2.3 hereof shall be counted as optional cash investment, and Dividends
reinvested pursuant to Section 2.2.1 or 2.2.2 shall not be counted as optional
cash investments. Automatic cash investments may be made monthly by completing
and forwarding an Automatic Investment Form to the Administrator, authorizing
the deduction of a set amount.

ARTICLE III

DIVIDEND REINVESTMENT AND STOCK PURCHASE

          Section 3.1 Dividend Reinvestment. Dividends as to which reinvestment
has been elected by a Participant shall be paid to the Administrator or its
nominee on behalf of such Participant. Dividends shall be reinvested, at the
Company’s election, subject to Section 10.7 hereof, in either (i) newly issued
shares of Common Stock or shares of Common Stock held in the Company’s treasury
purchased from the Company or (ii) shares of Common Stock purchased in the open
market.

          Section 3.2 Investment of Optional Cash Payments and Initial Cash
Payments. Any optional cash investments and initial cash investments may be
made by either (a) check or money order received by the Administrator from a
Participant and as to which no request for return has been received at least
two business days prior to the next scheduled Investment Period, or (b)
electronic funds deduction, which deduction, regardless of when the Participant
completes and forwards his/her Automatic Investment Form to the Company, will
occur only once a month, on or about the 10th day of each month, unless and
until the Company implements more frequent electronic funds deductions dates.
Such optional cash investments and initial cash investments will be invested
during the next Investment Period following the receipt or event specified in
(a) or (b) above, in either (i) newly issued shares of Common Stock or

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shares of Common Stock held in the Company’s treasury purchased from the
Company or (ii) shares of Common Stock purchased in the open market.

          Section 3.3 Investment and Reinvestment in Newly Issued or Treasury
Shares. Dividend reinvestment in newly issued shares of Common Stock or shares
of Common Stock held in the Company’s treasury shall be governed by Subsection
3.3.1 hereof. Any optional cash investments and/or initial cash investments to
be invested in either newly issued shares of Common Stock or shares of Common
Stock held in the Company’s treasury will be governed by Subsection 3.3.2
hereof.

          Subsection 3.3.1 Dividend Reinvestment. As soon as practicable following
an Investment Date with respect to which the Company elects to issue new shares
of Common Stock or sell shares of Common Stock held in the Company’s treasury
to the Plan in order to effect the reinvestment of Dividends, the Company shall
issue to the Administrator upon the Company’s receipt of the funds described in
Subsection 3.3.3(a) below, for crediting by the Administrator to the Account of
a Participant as of such Investment Date, shares (and/or fraction of a share
rounded to three decimal places or other fraction determined from time to time
by the Administrator) of Common Stock as provided in Subsection 3.3.3 below.
Such shares shall be issued or sold to, and registered in the name of, the
Administrator or its nominee as custodian for such Participant. No interest
shall be paid on Dividends held pending reinvestment pursuant to this
Subsection 3.3.1.

          Subsection 3.3.2 Cash Investments. As soon as practicable following an
Investment Date with respect to which the Company elects to issue new shares of
Common Stock or sell shares of Common Stock held in the Company’s treasury to
the Plan in order to effect the investment of optional cash investments and/or
initial cash investments, the Company shall issue to the Administrator upon the
Company’s receipt of the funds described in Subsection 3.3.3(b) below, for
crediting by the Administrator to the Account of a Participant as of such
Investment Date, shares (and/or fraction of a share rounded to three decimal
places or other fraction determined from time to time by the Administrator) of
Common Stock as provided in Subsection 3.3.3 below. Such shares shall be
issued or sold to, and registered in the name of, the Administrator or its
nominee as custodian for such Participant. No interest shall be paid on cash
investments held pending investment pursuant to this Subsection 3.3.2.

          Subsection 3.3.3 Number of Shares to be Issued. If shares are to be
issued or sold pursuant to Subsections 3.3.1 or 3.3.2 above, the number of
shares (and/or fraction of a share rounded to three decimal places or other
fraction determined from time to time by the Administrator) of Common Stock
that will be credited to the account of a Participant as of an Investment Date
will be equal to (a) the amount of any Dividends paid to the Administrator on
behalf of such Participant since the preceding Investment Date plus (b) the
amount of any optional cash investments and/or initial cash investment received
by the Administrator from such Participant at least two business days prior to
the next scheduled Investment Period and not previously invested, subject to
the provisions of Section 3.6 hereof, divided by (c) the Company Share Purchase
Price on such Investment Date.

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          Section 3.4 Investment and Reinvestment in Shares Purchased in the Open
Market. Dividend reinvestment in shares of Common Stock purchased in the open
market shall be governed by Subsection 3.4.1 hereof. Any optional cash
investments and/or initial cash investments to be invested in shares of Common
Stock purchased in the open market shall be governed by Subsection 3.4.2
hereof.

          Subsection 3.4.1 Dividend Reinvestment. During an Investment Period with
respect to which the Company elects to effect reinvestment of Dividends in
shares of Common Stock purchased in the open market, the Administrator shall
(if it is an Independent Agent), or shall cause an Independent Agent to, apply
the amount of any Dividends paid to the Administrator on behalf of a
Participant since the preceding Investment Date to the purchase of shares
(and/or fraction of a share rounded to three decimal places or other fraction
determined from time to time by the Administrator) of Common Stock in the open
market as provided in Subsection 3.4.3 below. Such shares shall be registered
in the name of the Administrator or its nominee as custodian for such
Participant. No interest shall be paid on Dividends held pending reinvestment
pursuant to this Subsection 3.4.1.

          Subsection 3.4.2 Cash Investments. During an Investment Period with
respect to which the Company elects to effect the investment of optional cash
investments and/or initial cash investments in shares of Common Stock purchased
in the open market, the Administrator shall cause an Independent Agent to
purchase for crediting by the Administrator to the Account of a Participant a
number of shares (and/or fraction of a share rounded to three decimal places or
other fraction determined from time to time by the Administrator) of Common
Stock in the open market as provided in Subsection 3.4.3 below. Such shares
shall be registered in the name of the Administrator or its nominee as
custodian for such Participant. No interest shall be paid on cash investments
held pending investment pursuant to this Subsection 3.4.2.

          Subsection 3.4.3 Number of Shares to be Purchased and Other Matters.
Purchases in the open market pursuant to Subsection 3.4.1 and Subsection 3.4.2
hereof may begin on the first day of the applicable Investment Period and shall
be completed no later than 30 days from such date, unless completion at a later
date is necessary or advisable under applicable law, including without
limitation any federal securities laws. Open market purchases pursuant to
Subsection 3.4.1 and Subsection 3.4.2 hereof may be made on any securities
exchange on which the Common Stock is traded, in the over-the-counter market or
by negotiated transactions, and may be upon such terms and subject to such
conditions with respect to price and delivery to which the Independent Agent
may agree. With regard to open market purchases of shares of Common Stock
pursuant to Subsection 3.4.1 and Subsection 3.4.2 hereof, none of the Company,
the Administrator, or any Participant shall have any authority or power to
direct the time or price at which shares of Common Stock may be purchased, the
markets on which such shares are to be purchased (including on any securities
exchange, in the over the counter market, or in negotiated transactions), or
the selection of the broker or dealer (other than the Independent Agent)
through or from whom purchases may be made, except that the timing of such
purchases must be made in accordance with the terms and conditions of the Plan.
For the purpose of making, or

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causing to be made, purchases of shares of Common Stock pursuant to
Subsection 3.4.1 and Subsection 3.4.2 hereof, and sales of Account Shares
pursuant to Section 5.1 hereof, the Administrator may authorize the Independent
Agent to commingle each Participant’s funds with those of all other
Participants and to offset purchases of shares of Common Stock against sales of
shares of Common Stock to be made for Participants, resulting in a net purchase
or a net sale of shares. The number of shares (and/or fraction of a share
rounded to three decimal places or other fraction determined from time to time
by the Administrator) of Common Stock that shall be credited to a Participant’s
Account with respect to and as of an Investment Date pursuant to Subsection
3.4.1 and Subsection 3.4.2 shall be equal to (a) the amount of any Dividends
paid to the Administrator on behalf of such Participant since the preceding
Investment Date plus (b) the amount of any optional cash investments and/or
initial cash investment received by the Administrator from such Participant at
least two business days prior to the next scheduled Investment Period and not
previously invested, subject to the provisions of Section 3.6 hereof, divided
by (c) the Market Share Purchase Price with respect to such Investment Date.

          Section 3.5 Request to Stop Investment. If a written request to stop
investment of optional cash investments and/or an initial cash investment is
received by the Administrator from a Participant at least two business days
prior to the next scheduled Investment Period during which investment of such
cash investments would be effected pursuant to the provisions of this Plan,
such optional cash investments and/or initial cash investment shall not be
invested in Common Stock and shall be returned to such Participant. If such a
request is not received by the Administrator by such time, such optional cash
investments or initial cash investment shall be invested in shares of Common
Stock for such Participant’s Account.

          Section 3.6 Return of Uninvested Monies. Any Dividends to be reinvested
in shares of Common Stock pursuant to Subsection 3.3.1 or Subsection 3.4.1
hereof and not reinvested in shares of Common Stock within 30 days of the
applicable Dividend Payment Date shall be promptly returned to the Participant
at his/her address of record by First Class Mail. Any optional cash
investments and initial cash investments to be invested in shares of Common
Stock pursuant to Subsection 3.3.2 or Subsection 3.4.2 hereof and not invested
in shares of Common Stock within 35 days of receipt by the Administrator or the
Company shall be promptly returned to the Participant at his/her address of
record by First Class Mail.

          Section 3.7 Uncollectible Funds. If the Administrator does not receive
credit for a cash payment because of insufficient funds or incorrect ACH draft
information, the requested purchase will be deemed void. Any shares credited
will be immediately removed from the Participant’s Account. The Administrator
will be entitled to sell those shares to satisfy any uncollected amounts, and
if the net proceeds of the sale of such shares are not sufficient to satisfy
the balance of such uncollected amounts, the Administrator may sell additional
shares from the Participant’s Account to satisfy the uncollected balance. In
addition, an “insufficient funds” fee of $20.00 will be charged to the
Participant. The Administrator may place a hold on the Account until this fee
is paid, or may sell shares from the Account to pay this fee.

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ARTICLE IV

SAFEKEEPING SERVICES FOR DEPOSITED COMMON STOCK

          Section 4.1 Deposited Common Stock. A Participant may elect to have
certificates representing shares of Common Stock of which the Participant is
the record holder deposited into the Plan by delivering such certificates to
the Administrator, along with either (i) an Enrollment Form with the
certificate safekeeping option checked thereon or (ii) a letter with respect to
such certificates directing the Administrator to deposit the shares represented
by such certificates into the Plan Account of the Participant. Shares of
Common Stock so deposited shall be transferred into the name of the
Administrator or its nominee and credited to the depositing Participant’s
Account. Shares of Common Stock deposited into the Plan pursuant to this
Section 4.1 shall be treated as shares purchased pursuant to the Plan.

          Section 4.2 Withdrawal of Common Stock Deposited Pursuant to Section 4.1.
Shares of Common Stock deposited pursuant to Section 4.1 hereof may be
withdrawn from the Plan pursuant to Section 8.1 hereof.

ARTICLE V

SALE OF ACCOUNT SHARES; GIFT OR TRANSFER OF ACCOUNT SHARES

          Section 5.1 Sale of Account Shares. A Participant may request, at any
time, that all or a portion of his/her whole Account Shares be sold by
delivering to the Administrator a completed Sale/Transfer Request Form or other
written instructions to that effect. The Administrator shall forward such sale
instructions to the Independent Agent as soon as practicable after receipt
thereof. The Independent Agent shall make such sales as soon as practicable
(in accordance with any applicable stock transfer requirements and federal and
state securities laws) after processing such sale instructions. As soon as
practicable following the receipt of proceeds from such sale, the Administrator
shall mail by First Class Mail to such Participant at his/her address of record
a check in an amount equal to (a) the Market Share Sales Price multiplied by
(b) the number of his/her Account Shares sold, minus a $5.00 service fee.

          With regard to open market sales of Account Shares pursuant to this
Section 5.1, none of the Company, the Administrator or any Participant shall
have any authority or power to direct the time or price at which shares of
Common Stock may be sold, the markets on which such shares are to be sold
(including on any securities exchange, in the over-the-counter market, or in
negotiated transactions), or the selection of the broker or dealer (other than
the Independent Agent) through or from whom sales may be made, except that the
timing of such sales must be made in accordance with the terms and conditions
of the Plan.

          Section 5.2 Gift or Transfer of Account Shares. A Participant may elect
to transfer (whether by gift, private sale, or otherwise) ownership of all or a
portion of his/her Account Shares to the Account of another Participant or
establish an Account for a Person not already a Participant by delivering to
the Administrator a completed

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Sale/Transfer Request Form to that effect and a stock assignment (stock
power) acceptable to the Administrator along with such other documentation as
may be required by the Administrator. If the transferee is not already a
Participant, the Administrator will require the completion and delivery of an
Enrollment Form for the transferee prior to the transfer. No fraction of a
share of Common Stock credited to the transferor’s Account shall be transferred
unless the transferor’s entire Account is transferred.

          Account Shares transferred in accordance with the preceding paragraph
shall continue to be registered in the name of the Administrator as custodian
and shall be credited to the transferee’s Account. Unless otherwise requested
by a transferee who is already a Participant on a completed Enrollment Form,
the reinvestment of Dividends on such transferred Account Shares in shares of
Common Stock under the Plan shall be made in proportion to the reinvestment
level (i.e., full, partial or none) of the transferee’s other Account Shares.
Unless otherwise requested by the transferor, the Administrator shall deliver
an Investment Statement to such transferee showing the transfer of such Account
Shares into his/her Account. The transferor may request that the Administrator
deliver such Investment Statement to the transferor for personal delivery to
the transferee and/or the transferor may request that the Administrator deliver
to such transferee a gift certificate. The transferor may request that the
Administrator send the gift certificate directly to such transferee with the
first Investment Statement following such transfer, or request that the
Administrator deliver such gift certificate to the transferor for personal
delivery to the transferee. The Administrator shall comply with any such
request of a transferor relating to Investment Statements and/or gift
certificates as soon as practicable following receipt of such request.

          Section 5.3 Reinvestment of Dividends on Remaining Account Shares. If
only a portion of a Participant’s Account Shares are Reinvestment Eligible
Securities and the Participant elects to (i) sell a portion of his/her Account
Shares pursuant to Section 5.1 hereof, (ii) transfer a portion of his/her
Account Shares pursuant to Section 5.2 hereof, or (iii) withdraw a portion of
his/her Account Shares pursuant to Section 8.1 hereof, all of the Account
Shares which are Reinvestment Eligible Securities shall be sold, transferred,
or withdrawn, as the case may be, before any Account Shares which are not
Reinvestment Eligible Securities are sold, transferred, or withdrawn unless the
Participant gives specific instructions to the contrary in connection with such
sale, transfer, or withdrawal of Account Shares.

ARTICLE VI

ELIGIBLE SECURITIES

          Section 6.1 Eligible Securities. The Common Stock of the Company and its
subsidiaries shall be Eligible Securities.

          Section 6.2 Additional Eligible Securities. The Company may from time to
time or at any time designate other securities of the Company and its
subsidiaries as

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Eligible Securities by notifying the Administrator in writing of the
designation of such securities as Eligible Securities.

ARTICLE VII

TREATMENT OF ACCOUNTS

          Section 7.1 Changing Plan Options. A Participant may elect to change
his/her Plan options, including changing the reinvestment levels (i.e., Full
Dividend Reinvestment, Partial Dividend Reinvestment, or Cash Investment Only)
of Dividends on Reinvestment Eligible Securities by delivering to the
Administrator a new Enrollment Form to that effect. To be effective with
respect to any Dividend Payment Date, the Enrollment Form with respect to such
Reinvestment Eligible Securities must be received by the Administrator prior to
the Dividend Record Date relating to such Dividend Payment Date. If the
Enrollment Form is not received by the Administrator by such time, such
instructions shall not become effective until after such Dividend Payment Date.
The shares of Common Stock purchased from the reinvestment of such Dividend
shall be credited to the Participant’s Account. After the Administrator’s
receipt of effective option changing instructions, Dividends on Reinvestment
Eligible Securities as to which the reinvestment election has been revoked will
be paid directly to the Participant in the manner otherwise associated with the
payment of Dividends.

          Section 7.2 Right of Termination of Participation. If a Participant’s
Sale/Transfer Request Form or other written instructions acceptable to the
Administrator indicates the Participant’s desire to terminate his/her
participation in the Plan, within 30 days of the receipt of such request, the
Administrator shall either mail certificates representing all whole Account
Shares, if any, by First Class Mail to the Participant at his/her address of
record, pursuant to Section 8.1 hereof, along with a check for the cash value
of any fraction of a share of Common Stock credited to his/her Account, or
shall cause the Account Shares to be sold, or gifted or transferred pursuant to
Sections 5.1 or 5.2, respectively, in any such case, as shall have been
directed by the Participant.

          Section 7.3 Stock Splits, Stock Dividends and Rights Offerings. Any
shares or other securities representing stock splits or other noncash
distributions on Account Shares shall be credited to such Participant’s
Account. Stock splits, combinations, recapitalizations and similar events
affecting the Common Stock shall, as to shares credited to Accounts of
Participants, be credited to such Accounts on a pro rata basis.

          In the event of a rights offering, a Participant shall receive rights
based upon the total number of whole shares of Common Stock credited to his/her
Account.

          Section 7.4 Shareholder Materials; Voting Rights. The Administrator
shall send or forward to each Participant all applicable proxy solicitation
materials and other shareholder materials or consent solicitation materials.
Participants shall have the exclusive right to exercise all voting rights
respecting Account Shares credited to their

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respective Accounts. A Participant may vote all of his/her Account Shares
in person or by proxy. A Participant’s proxy card shall include all his/her
Account Shares and shares of Common Stock of which he is the record holder.
Account Shares shall not be voted unless a Participant or his/her proxy votes
them. Fractions of shares of Common Stock shall be voted.

          Solicitation of the exercise of Participants’ voting rights by the
management of the Company and others under a proxy or consent provision
applicable to all holders of Common Stock shall be permitted. Solicitation of
the exercise of Participants’ tender or exchange offer rights by management of
the Company and others shall also be permitted. The Administrator shall notify
the Participants of each occasion for the exercise of their voting rights or
rights with respect to a tender offer or exchange offer within a reasonable
time before such rights are to be exercised. Such notification shall include
all information distributed to the shareholders of the Company by the Company
regarding the exercise of such rights.

          Section 7.5 Investment and Plan History. As soon as practicable after
each Investment Period, the Administrator shall send an Investment Statement to
each Participant for whom Dividends were reinvested or shares of Common Stock
were purchased or who deposited Common Stock into the Plan pursuant to Section
4.1 hereof during such Investment Period. Additionally, the Administrator
shall send a Plan History Statement to each Participant following a sale,
transfer, or withdrawal of Account Shares by a Participant.

ARTICLE VIII

CERTIFICATES AND FRACTIONS OF SHARES

          Section 8.1 Certificates. A Participant, at any time or from time to
time, may request in writing to receive a certificate for all or a portion of
his/her whole Account Shares and the Administrator shall, as soon as
practicable after receipt of such written request, mail such certificate by
First Class Mail to such Participant at his/her address of record; provided,
however, that upon the mailing of such certificate the shares of Common Stock
represented by such certificate shall no longer be Account Shares but shall
remain Reinvestment Eligible Securities (except to the extent such Participant
has elected not to have Dividends on such Account Shares reinvested in Common
Stock).

          Section 8.2 Fractional Share. Fractions of shares of Common Stock shall
be credited to Accounts as provided in Article III hereof; provided, however,
that no certificate for a fraction of a share shall be distributed to any
Participant at any time; and provided, further, that the Company shall issue
and sell only whole shares of Common Stock to the Administrator in respect of
Dividends reinvested in, and purchases made by the Administrator hereunder of,
newly issued shares or shares of Common Stock held in the Company’s treasury.

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ARTICLE IX

CONCERNING THE PLAN

          Section 9.1 Suspension, Modification, and Termination. The Company may
at any time and from time to time, at its sole option, suspend, modify, amend,
or terminate the Plan, in whole, in part or in respect of Participants in one
or more jurisdictions; provided, however, no such amendment shall decrease the
Account of any Participant or result in a distribution to the Company of any
amount credited to the Account of any Participant. Upon complete termination
of the Plan, the Accounts of all Participants (or in the case of partial
termination of the Plan, the Accounts of all affected Participants) shall be
treated as if each such Participant had elected to terminate his/her
participation in the Plan pursuant to Section 7.2 hereof. The Administrator
shall promptly send each affected Participant notice of such suspension,
modification or termination.

          Section 9.2 Rules and Regulations. The Company may from time to time
adopt such administrative rules and regulations concerning the Plan as it deems
necessary or desirable for the administration of the Plan. The Company shall
have the power and authority to interpret the terms and the provisions of the
Plan and shall interpret and construe the Plan and reconcile any inconsistency
or supply any omitted detail in a manner consistent with the general terms of
the Plan and applicable law.

          Section 9.3 Costs. All costs of administration of the Plan shall be paid
by the Company; provided, however, that any brokerage commissions, service
charges, or applicable taxes incurred in connection with open market purchases
and sales of shares of Common Stock made under the Plan shall be borne by the
Participants. In addition, Participants will be responsible for a $5.00
service fee on all sales transactions, as set forth in Section 5.1, and will be
subject to an insufficient funds fee as described in Section 3.7.

          Section 9.4 Termination of a Participant. If a Participant does not have
at least one whole Account Share or own or hold any other Common Stock of
record for which Dividends are designated for reinvestment pursuant to this
Plan, the Participant’s participation in the Plan may be terminated by the
Company, in its sole discretion, after written notice is mailed to such
Participant at his/her address of record. Additionally, the Company, in its
sole discretion, may terminate any Participant’s participation in the Plan
after written notice mailed in advance to such Participant at his/her address
of record, if the Company believes that such Participant’s participation may be
contrary to the general intent of the Plan or in violation of applicable law.
Upon such termination, the Account of such Participant shall be treated as if
he had elected to terminate his/her participation in the Plan pursuant to
Section 7.2 hereof.

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ARTICLE X

ADMINISTRATION OF THE PLAN

          Section 10.1 Selection of an Administrator. The Administrator shall be
appointed by the Company. The Administrator’s appointment to serve as such may
be revoked by the Company at any time. The Administrator may resign at any
time upon reasonable notice to the Company. In the event that no Administrator
is appointed, the Company shall be deemed to be the Administrator for purposes
of the Plan. The Company shall be the initial Administrator.

          Section 10.2 Compensation. The officers of the Company shall make such
arrangements regarding compensation, reimbursement of expenses and
indemnification of the Administrator and any Independent Agent as they from
time to time deem reasonable and appropriate.

          Section 10.3 Authority and Duties of Administrator. The Administrator
shall have the authority to undertake any act necessary to fulfill its duties
as set forth in the various provisions of the Plan. Upon receipt, the
Administrator shall deposit all Dividends, optional cash investments and
initial cash investments in the Trust Account. The Administrator shall
maintain appropriate records of the Accounts of Participants.

          Section 10.4 Liability of the Company, the Administrator and Any
Independent Agent. The Company, the Administrator, and any Independent Agent
shall not be liable for any act done in good faith, or for the good faith
omission to act in administering or performing their duties with respect to the
Plan, including, without limitation, any claim of liability arising out of
failure to terminate a Participant’s Account upon such Participant’s death
prior to receipt of notice in writing of such death, or with respect to the
prices at which shares are purchased or sold for a Participant’s Account and
the times when such purchases and sales are made, or with respect to any loss
or fluctuation in the market value after the purchase or sale of such shares.

          Section 10.5 Records and Reports. The Administrator shall keep
appropriate records concerning the Plan, Accounts of Participants, purchases
and sales of Common Stock made under the Plan, and Participants’ addresses of
record and shall send shareholder materials and statements to each Participant
in accordance with the provisions of Sections 7.4 and 7.5 hereof.

          Section 10.6 Selection of Independent Agent. Any Independent Agent
serving in such capacity pursuant to the Plan shall be selected by the Company,
and the Administrator and the Company, or either of them, shall, subject to the
provisions hereof, make such arrangements and enter into such agreements with
the Independent Agent in connection with the activities contemplated by the
Plan as the Administrator and the Company, or either of them, deem reasonable
and appropriate.

          Section 10.7 Source of Shares of Common Stock. The Company shall not
change the source of shares of Common Stock purchased by Participants in the
Plan (i.e., either (a) newly issued shares of Common Stock or shares of Common
Stock

- 17 -

 

held in the Company’s treasury purchased from the Company or (b) shares of
Common Stock purchased in the open market) more than once in any three-month
period. The Company may exercise its right to change the source of shares upon
approval by any one of the following:

          (i) the Company’s Board of Directors,

          (ii) the Finance Committee of the Company’s Board of Directors,

          (iii) the Company’s Chief Financial Officer, or

          (iv) the Company’s Treasurer

     provided, however, that, if necessary and requested by the Independent
Agent at any time, the Company may settle fractional shares with treasury stock
even if otherwise shares are being purchased on the open market.

ARTICLE XI

MISCELLANEOUS PROVISIONS

          Section 11.1 Controlling Law. This Plan shall be construed, regulated
and administered under the laws of the State of Arizona.

          Section 11.2 Acceptance of Terms and Conditions of Plan by Participants.
Each Participant, by completing an Enrollment Form and as a condition of
participation herein, for himself, his/her heirs, executors, administrators,
legal representatives and assigns, approves and agrees to be bound by the
provisions of this Plan and any subsequent amendments hereto, and all actions
of the Company and the Administrator hereunder.

          Section 11.3 Receipt by Administrator. Monies, Enrollment Forms, and
other forms and communications will be considered to be received when
delivered, either by postal service or electronic delivery or in person, during
business hours of the Company or the Administrator, as the case may be, to the
Company’s or Administrator’s corporate headquarters.

- 18 -

 

CERTIFICATE

     I, NANCY C. LOFTIN, Vice President, General Counsel and Secretary of
Pinnacle West Capital Corporation, an Arizona corporation, do HEREBY CERTIFY
that the foregoing is a true, correct and complete copy of the Second Amended
and Restated Pinnacle West Capital Corporation Investors Advantage Plan and
that it is in full force and effect as of the date hereof.

     IN WITNESS WHEREOF, I have signed this Certificate as of this 23rd day of
June 2004.

	 	 	 	 	 
	 	 	 
	 	                                    /s/ Nancy C. Loftin
 	 
	 	NANCY C. LOFTIN 	 
	 	Vice President, General Counsel and
Secretary 	 
	 

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EXHIBIT 10.1

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is entered into as of February 14,
2004 between DIRECT ALLIANCE CORPORATION, an Arizona corporation (“Company”),
and BRANSON SMITH (“Executive”) to be effective as of November 1, 2003.

R E C I T A L S

A. Effective as of November 1, 2003 Executive shall be employed by Company
in the position of President. Prior to such date, Executive was employed
by Insight Enterprises, Inc. (“Parent”).

B. Executive and Parent are parties to an Employment Agreement that was
entered into on July 1, 1999, as amended as of July 1, 2001 (the “Old
Agreement”).

C. Company has decided to offer Executive a new employment agreement, the
terms and provisions of which are set forth below.

NOW, THEREFORE, IT IS HEREBY MUTUALLY AGREED AS FOLLOWS:

     1. TERMS OF AGREEMENT.

          (a) Replacement of Old Agreement. Except as specifically provided in this
Agreement, this Agreement shall replace and supersede the Old Agreement for all
purposes as of November 1, 2003.

          (b) Initial Term. Executive shall be employed by Company for the duties
set forth in Section 2 for a two-year term, commencing as of November 1, 2003
and ending on October 31, 2005 (the “Initial Term”), unless sooner terminated
in accordance with the provisions of this Agreement.

          (c) Renewal Term; Employment Period Defined. On each successive day after
the commencement of the Initial Term, without further action on the part of
Company or Executive, this Agreement shall be automatically renewed for a new
2-year term dated effective and beginning upon each such successive day (the
“Renewal Term”); provided, however, that Company may notify Executive, or the
Executive may notify the Company, at any time, that there shall be no renewal
of this Agreement, and in the event of such notice,the Agreement shall
immediately cease to renew and shall terminate naturally at the end of the then
current Renewal Period. No severance or other post-termination compensation
will be due or payable in the event of a termination resulting from
non-renewal. The period of time commencing as of the date hereof and ending on
the effective date of the termination of employment of Executive under this or
any successor Agreement shall be referred to as the “Employment Period.”

     2. POSITION AND DUTIES.

          (a) Job Duties. Company does hereby employ, engage and hire Executive as
its President, and Executive does hereby accept and agree to such employment,
engagement, and hiring. Executive’s duties and authority during the Employment
Period shall be such executive and managerial duties as the Board of Directors
of Parent (the “Board”) shall reasonably determine. Executive will devote full
time on behalf of the Company, or such lesser amount of time as the Board may
determine, reasonable absences because of illness, personal and family
exigencies excepted.

1

 

          (b) Best Efforts. Executive agrees that at all times during the Employment
Period he will faithfully, and to the best of his ability, experience and
talents, perform the duties that may be required of and from him and fulfill
his responsibilities hereunder pursuant to the express terms hereof.
Executive’s ownership of, or participation (including any board memberships)
in, any entity (other than Company) must be disclosed to the Board; provided,
however, that Executive need not disclose any equity interest held in any
public company or any private company that is not engaged in a competing
business as defined in Section 10 of this Agreement when such interest
constitutes less than 5% of the issued and outstanding equity of such public or
private company.

     3. COMPENSATION.

          (a) Base Salary. Company shall pay Executive a “Base Salary” in
consideration for Executive’s services to Company at the rate of $250,000 per
annum. The Base Salary shall be payable as nearly as possible in equal
semi-monthly installments or in such other installments as are customary from
time to time for Company’s or Parent’s executives. The Base Salary may be
adjusted from time to time in accordance with the procedures established by
Company or Parent for salary adjustments for executives, provided that the Base
Salary shall not be reduced.

          (b) Incentive Compensation..

	 	 	 	Executive shall be entitled to an incentive bonus, calculated and
payable quarterly, equal to two percent (2.0%) of Company’s “net
earnings”.The Compensation Committee of the Board (the “Committee”)
may, but is not required to, award additional bonus amounts for
extraordinary performance or to adjust for inequities resulting from
application of the formula.
	 
	 	(1)	 	For purposes of calculating Executive’s incentive bonus
pursuant to this Subsection (b), Company’s “net earnings” shall be
Company’s consolidated net after tax earnings calculated in
accordance with accounting principles generally accepted in the
United States (US GAAP) and applicable Securities and Exchange
Commission regulations, prior to any incentive bonus amounts for
Executive and other executives of Company. All allocations of
overhead expense from Parent to determine Company’s “net earnings”
shall be on a basis consistent with the allocation methods applied
for prior accounting periods, provided, however, that changes thereto
required by U.S. Generally Accepted Accounting Principles shall be
deemed acceptable. The amounts payable pursuant to this
subparagraph (b) shall be paid on or before thirty (30) days after
the public financial reporting by Parent at the end of the applicable
fiscal quarter.
	 
	 	(2)	 	If upon final presentation of consolidated financial statements
to Parent by the Parent’s outside Certified Public Accountants, the
“net earnings” of Company requires adjustment, then, within thirty
(30) days after such presentation, Company or Executive, as the case
may be, shall pay to the other the amount necessary to cause the net
amount of incentive bonus paid to be the proper amount after
adjustment; provided that if Executive shall pay Company pursuant to
the provisions of this clause (3), then the amount the Executive
shall pay will be reduced by the taxes withheld by Company
attributable to such amount (“Withheld Portion”), and the Company
shall apply the Withheld Portion toward Company’s withholding
obligations with regard to any subsequent payments of Base Salary and
incentive compensation made pursuant to Sections 3(a) and 3(b).

          (c) Incentive and Benefit Plans. Executive will be entitled to
participate in those incentive compensation and benefit plans reserved for
Company’s or Parent’s executives, including any stock option plan maintained by
Parent, in accordance with the terms of such compensation and benefit plans.
Additionally,

2

 

Executive shall be entitled to participate in any other benefit
plans sponsored by Company or Parent, including but
not limited to, any savings plan, life insurance plan and health insurance
plan available generally to employees of Company or Parent from time to time,
subject to any restrictions specified in, or amendments made to, such plans.

     4. BUSINESS EXPENSES.

          The Company will reimburse Executive for any and all necessary, customary
and usual expenses which are incurred by Executive on behalf of Company,
provided Executive provides Company with receipts to substantiate the business
expense in accordance with Company’s policies or otherwise reasonably justifies
the expense to the Company.

     5. DEATH OR DISABILITY.

          (a) Death. This Agreement shall terminate upon Executive’s death.
Executive’s estate shall be entitled to receive the Base Salary due through the
date of his death. Company shall also pay to Executive’s estate a prorated
portion of any incentive compensation to which Executive would have been
entitled (had Executive not died) for the year in which this Agreement
terminated due to Executive’s death. No Base Salary or other payment or
benefit will be payable with respect to any period after death except as
expressly provided elsewhere in this Agreement.

          (b) Disability. This Agreement shall also terminate in the event of
Executive’s “Disability”. For purposes of this Agreement, “Disability” means
the total and complete inability of Executive to perform the essential duties
associated with his normal position with Company (after any accommodations
required by the Americans with Disabilities Act or applicable state law) due to
a physical or mental injury or illness that occurs while Executive is actively
employed by Company. Any dispute concerning whether Disability has occurred
will be determined by a physician selected by mutual agreement of Company and
Executive. If this Agreement is terminated due to Executive’s Disability,
Executive shall receive all of the payments and benefits called for by Section
6(c).

     6. TERMINATION BY COMPANY.

          (a) Termination for Cause. Company may terminate this Agreement at any
time during the Initial Term or any Renewal Terms for “Cause” upon written
notice to Executive. If Company terminates this Agreement for “Cause,”
Executive’s Base Salary shall immediately cease, and Executive shall not be
entitled to severance payments, incentive compensation payments or any other
payments or benefits pursuant to this Agreement, except for any vested rights
pursuant to any benefit plans in which Executive participates and any accrued
compensation, vacation pay and similar items. For purposes of this Agreement,
the term “Cause” shall mean the termination of Executive’s employment by
Company for one or more of the following reasons:

     (1) The criminal conviction for any felony involving theft or
embezzlement from Company or any affiliate;

     (2) The criminal conviction for any felony involving moral
turpitude that reflects adversely upon the standing of Company in
the community; or

     (3) The criminal conviction for any felony involving fraud
committed against Company, any affiliate or any individual or entity
that provides goods or services to, receives goods or services from
or otherwise deals with Company or any affiliate.

3

 

     (4) Acts by Executive that constitute repeated and material
violations of this Agreement, any written employment policies of
Company or any written directives of Company. A violation will not
be considered to be “repeated” unless such violation has occurred
more than once and after receipt of written notice from Company of
such violation.

          Any termination of Executive when there is not Cause is “without Cause.”
If Company terminates Executive for Cause, and it is later determined as
provided in Section 11 of this Agreement that Cause did not exist, Company will
pay Executive the amount he would have received under this Agreement if his
employment had been terminated by Company without Cause, plus interest at the
Prime Rate published by the Wall Street Journal on the date of termination.
Such payments and interest shall be calculated as of the effective date of the
initial termination. Payment shall be made within fifteen (15) days after such
later determination is made.

          (b) Termination Without Cause. Company also may terminate Executive’s
employment at any time during the Initial Term or any Renewal Term without
Cause. If Company terminates this Agreement pursuant to this paragraph, Company
shall provide Executive with ninety (90) days advance written notice. This
Agreement shall continue during such notice period. The termination of this
Agreement shall be effective on the ninetieth (90th) day (the “Termination
Date”) following the day on which the notice is given.

     Company may, at its discretion, place Executive on a paid administrative
leave during all or any part of said notice period. During the administrative
leave, Company may bar Executive’s access to Company’s offices or facilities if
reasonably necessary to the smooth operation of Company, or may provide
Executive with access subject to such reasonable terms and conditions as
Company chooses to impose.

          (c) Severance Compensation. Should Executive’s employment by Company be
terminated without Cause, Executive shall receive as a lump sum immediately
upon such termination an amount equal to the total amount of his Base Salary
for the remainder of the Initial Term or Renewal Terms, if later, less 90 days,
determined as if the employment of the Executive had not been terminated prior
to the end of such term and as if the Executive had continued to perform all of
his obligations under this Agreement and as an employee and officer of the
Company. Executive shall have no duty to mitigate damages in order to receive
the compensation described by this Subsection and the compensation shall not be
reduced or offset by other income, payments or profits received by Executive
from any source.

          (d) Incentive Compensation. Executive shall not be entitled to receive any
incentive compensation payments for the fiscal year in which his employment is
terminated for Cause or any later years. If Executive is terminated without
Cause, Executive shall receive as a lump sum immediately upon such termination
the bonus that would have been awarded determined as if the employment of the
Executive had not been terminated prior to the end of the latest Renewal Term,
as if Executive had continued to perform all of his obligation under this
Agreement and as an employee of the Company, and as if the financial
performance of Company and/or Parent continues as it had been for the
immediately preceding last four (4) fiscal quarters ended prior to the
Termination Date, consistent with the following five sentences. If the
Termination Date occurs during Q1 2004, the incentive compensation payment
shall be based on Executive’s percentage under the Old Agreement and the
financial performance of Parent during all of FY 2003. If the Termination Date
occurs during Q2 2004, Executive’s incentive compensation payments shall be
based on his percentage under the Old Agreement and Parent’s performance during
the last three quarters of FY 2003, plus his percentage under Section 3(b) of
this Agreement and Company’s performance during Q1 2004. If the Termination
Date occurs during Q3 2004, Executive’s incentive compensation payments would
be based on his percentage under the Old Agreement and Parent’s performance
during the last two quarters of FY 2003, plus his percentage under Section 3(b)
of this

4

 

Agreement and Company’s performance during the first two quarters of
2004. If the Termination Date occurs during Q4 2004,
Executive’s incentive compensation payments would be based on his
percentage under the Old Agreement and Parent’s performance during the last
quarter of FY 2003, plus his percentage under Section 3(b) of this Agreement
and Company’s performance during the first three quarters of 2004. If the
Termination Date is after December 31, 2004, the incentive compensation payment
shall be based on the financial performance of Company for the immediately
preceding last four (4) fiscal quarters ended prior to the Termination Date and
shall be consistent with Section 3(b) of this Agreement. Executive shall have
no duty to mitigate damages in order to receive the compensation described by
this Subsection and the compensation shall not be reduced or offset by other
income, payments or profits received by Executive from any source. If there is
no binding incentive compensation program, policy, or practice in effect on the
effective date of the termination, Company, in the exercise of its discretion,
may elect to pay Executive a portion of the incentive compensation to which he
would have been entitled (had his employment not terminated) for the prorated
portion, up to the date of termination, of the year in which his employment is
terminated without Cause.

          (e) Other Plans. Except to the extent specified in this Section 6 and as
provided in this Subsection (e), termination of this Agreement shall not affect
Executive’s participation in, distributions from, and vested rights under any
employee benefit, stock option, restricted stock or other equity-based plan of
Company, which will be governed by the terms of those respective plans, in the
event of Executive’s termination of employment. If Company terminates
Executive without Cause on or before December 31, 2004, at the time the
termination is effective, Company shall extend the time within which Executive
may exercise any then vested stock options until April 11, 2005. Executive
shall have no duty to mitigate damages in order to receive the compensation
described by this Subsection and the compensation shall not be reduced or
offset by other income, payments or profits received by Executive from any
source.

     7. TERMINATION BY EXECUTIVE

          (a) General. Executive may terminate this Agreement at any time, with or
without “Good Reason.” If Executive terminates this Agreement without Good
Reason, Executive shall provide Company with ninety (90) days advance written
notice. If Executive terminates this Agreement with Good Reason, Executive
shall provide Company with thirty (30) days advance written notice. Company
may, at its discretion, place Executive on a paid administrative leave during
all or any part of any such notice period. During the administrative leave,
Company may bar Executive’s access to Company’s offices or facilities if
reasonably necessary to the smooth operation of Company, or may provide
Executive with access subject to such reasonable terms and conditions as
Company chooses to impose

          (b) Good Reason Defined. For purposes of this Agreement, “Good Reason”
shall mean and include each of the following (unless Executive has expressly
agreed to such event in a signed writing):

     (1) The removal of Executive’s title of President of Company or
the assignment to Executive by Company of duties that are not senior
executive duties by nature except in connection with the termination
of Executive’s employment by Company either without Cause or for
Cause, Executive’s death or Disability, termination by Executive
either with or without Good Reason, or the expiration of the
Agreement without renewal;

     (2) The recommended travel of Executive by the Board in
furtherance of Company business which is materially more extensive
than at November 1, 2003 (the “Relevant Date”);

     (3) The assignment of Executive by the Company to a location
more than 50 miles from the present executive offices of the
Company.

5

 

     (4) Reduction by Company of Executive’s Base Salary as set
forth in this Agreement or as the same may be increased from time to
time.

     (5) Failure by Company to compensate Executive pursuant to the
same incentive and equity formulas as are used for all senior
executives of Company whose incentive is based on Company
performance or to continue in effect any savings, life insurance,
health and accident or disability plan in which Executive is
participating on the Relevant Date (or plans which provide Executive
with substantially similar benefits) or the taking of any action by
Company which would adversely affect Executive’s participation in or
materially reduce his benefit under any of such plans or deprive him
of any material fringe benefit enjoyed by him as of the Relevant
Date or any later date. Amendment or modification of said plans, to
the extent required pursuant to applicable federal law and the
procedures set forth in the respective plan, or amendments of such
plans that apply to either all employees generally or all senior
executives shall not be considered to be “Good Reason” for purposes
of this clause (5).

     (6) Failure of Company to obtain a specific written agreement
satisfactory to Executive from any successor to the business, or
substantially all the assets, of Company to assume this Agreement or
issue a substantially similar agreement.

     (7) The termination of this Agreement by Company without Cause
or any attempted termination by Company purportedly for Cause if it
is thereafter determined that Cause did not exist under this
Agreement with respect to the termination.

     (8) Breach of any material provisions of this Agreement by
Company which is not cured within thirty (30) days after receipt by
Company of written notice of such breach from Executive.

     (9) Any action taken by Company over the specific,
contemporaneous, written objection of the Executive that is likely
(i) to cause a material reduction in the value of this Agreement to
Executive or (ii) to materially impair Executive’s abilities to
discharge his duties hereunder. This provision is not intended to
affect either the Company’s or Executive’s right to terminate this
Agreement as provided for elsewhere herein.

          (c) Effect of Good Reason Termination. If Executive terminates this
Agreement for Good Reason (as defined in Section 7(b)), it shall for all
purposes be treated as a termination by Company without Cause. Without
limiting the generality of the previous sentence, if Executive terminates his
employment with Good Reason on or before December 31, 2004, at the time the
termination is effective, Company shall extend the time within which Executive
may exercise any then vested stock options until April 11, 2005.

          (d) Effect of Termination without Good Reason. If Executive terminates
this Agreement without Good Reason, while the termination shall not be
characterized as a termination for Cause, it shall for all purposes, result in
the same compensation and have the same effect on other benefits, including
options, as a termination for Cause.

     8. CHANGE IN CONTROL OF COMPANY

          (a) General. Company considers the maintenance of a sound and vital
management to be essential to protecting and enhancing the best interests of
Parent and its shareholders. Company recognizes that the continuing possibility
of an unsolicited tender offer or other takeover bid for Parent or a sale of
all or

6

 

substantially all of the assets or stock of Company may be unsettling to
Executive and other senior executives of Company and
may result in the departure or distraction of management personnel to the
detriment of Parent and its shareholders. The Board and the Committee have
previously determined that it is in the best interests of Parent and its
shareholders for Company to minimize these concerns by making this Change in
Control provision an integral part of this Employment Agreement, which would
provide the Executive with a continuation of benefits in the event the
Executive’s employment with Company terminates under certain limited
circumstances.

          This provision is offered to help assure a continuing dedication by
Executive to his duties to Company notwithstanding the occurrence of a tender
offer or other takeover bid involving Parent or a sale of the stock or assets
of Company. In particular, the Board and the Committee believe it important,
should Parent receive proposals from third parties with respect to the future
of Parent or Company, to enable Executive, without being influenced by the
uncertainties of his own situation, to assess and advise the Board whether such
proposals would be in the best interests of Parent and its shareholders and to
take such other action regarding such proposals as the Board might determine to
be appropriate. The Board and the Committee also wish to demonstrate to
Executive that Company is concerned with his welfare and intends to see he is
treated fairly.

          (b) Continued Eligibility to Receive Benefits. In view of the foregoing
and in further consideration of Executive’s continued employment with Company,
if a Change in Control occurs, Executive shall be entitled to a lump-sum
severance benefit provided in subparagraph (c) of this Section 8 if, prior to
the expiration of twenty-four (24) months after the Change in Control,
Executive notifies Company of his intent to terminate his employment with
Company for Good Reason or Company terminates Executive’s employment without
Cause. If Executive triggers the application of this Section by terminating
employment for Good Reason, he must do so within one hundred twenty (120) days
following his receipt of notice of the occurrence of the last event that
constitutes Good Reason. The full severance benefits provided by this Section
shall be payable regardless of the period remaining until the expiration of the
Agreement without renewal.

          (c) Receipt of Benefits. If Executive is entitled to receive a severance
benefit pursuant to Section 8(b) hereof, Company will provide Executive with
the following benefits:

     (1) A lump sum severance payment within ten (10) days following
Executive’s last day of work equal to the sum of (i) two (2) times
the greater of Executive’s annualized Base Salary in effect on the
date of termination of employment or Executive’s highest annualized
Base Salary in effect on any date during the term of this Agreement
and (ii) two (2) times the higher annual bonus that would have been
awarded, based on the method of calculation then in effect, during
the one of the two immediately preceding fiscal years which would
produce the higher award.

     (2) Executive shall be vested in any and all stock bonus and
stock option plans and agreements of Company in which Executive had
an interest, vested or contingent. If applicable law prohibits such
vesting, then Company shall pay Executive an amount equal to the
value of benefits and rights that would have, but for such
prohibition, have been vested in Executive.

     (3) Executive shall be compensated in a manner selected by the
Company to provide for life, disability, accident and group health
and dental insurance benefits, at substantially the levels Executive
was receiving immediately prior to his termination, for a period of
time expiring upon the earlier of (i) the end of the period of 42
months following his termination of employment or (ii) the day on
which he becomes eligible to receive any substantially similar
continuing health care benefits under any plan or program of any
other employer or source without being required to pay any premium
with respect thereto. At Company’s option, Company may satisfy the
obligation to provide the benefits pursuant to this Section by
either (1) paying for or reimbursing

7

 

Executive at reasonable
intervals for the actual cost of such benefits (and Executive shall
cooperate with
Company in all respects in securing and maintaining such
benefits, including exercising all appropriate COBRA elections and
complying with all terms and conditions of such coverage in a manner
to minimize the cost), (2) payment of a lump sum in the amount of
the present value, discounted at Company’s effective borrowing rate,
of the premiums for such benefits for the continuing coverage period
(which shall be calculated based on the conclusive presumption that
the cost or premiums will remain constant at the rate existing for
COBRA coverage immediately following termination), or (3) a
combination of the foregoing options (for example, Company may elect
to pay Executive’s premiums during the period of time covered by
COBRA, and thereafter pay a lump sum to cover the present value of
the remaining cost).

     Executive shall have no duty to mitigate damages or loss in order to
receive the benefits provided by this Section or in this Agreement. If
Executive is entitled to receive the payments called for by this Section 8(c),
Executive’s right to receive the compensation provided by Section 6(c) or 7(c)
shall to the extent of such payments be reduced.

          (d) Change in Control Defined. For purposes of this Agreement, a “Change
in Control” means any one or more of the following events:

     (1) When the individuals who, at the beginning of any period of
two years or less, constituted the Board cease, for any reason, to
constitute at least a majority thereof unless the election or
nomination for election of each new director was approved by the
vote of at least two thirds of the directors then still in office
who were directors at the beginning of such period;

     (2) A change of control of the Parent or the Company through a
transaction or series of transactions, such that any person (as that
term is used in Section 13 and 14(d)(2) of the Securities Exchange
Act of 1934 (1934 Act”)), excluding affiliates of the Company as of
the Effective Date, is or becomes the beneficial owner (as that term
is used in Section 13(d) of the 1934 Act) directly or indirectly, of
securities of the Parent representing 20% or more of the combined
voting power of the Parent’s then outstanding securities or
securities of the Company representing a majority of the combined
voting power of the Company’s then outstanding securities;

     (3) Any merger, consolidation or liquidation of the Parent in
which the Parent is not the continuing or surviving company or
pursuant to which stock would be converted into cash, securities or
other property, other than a merger of the Parent in which the
holders of the shares of stock immediately before the merger have
the same proportionate ownership of common stock of the surviving
company immediately after the merger;

     (4) Any merger, consolidation or liquidation of Company with
non-affiliated parties in which the Company is not the continuing or
surviving company or pursuant to which Company’s stock would be
converted into cash, securities or other property;

     (5) The shareholders of the Parent or Company approve any plan
or proposal for the liquidation or dissolution of Parent or the
Company; or

     (6) Substantially all of the assets of the Parent or Company
are sold or otherwise transferred to parties that are not within a
“controlled group of corporations” (as defined in Section 1563 of
the Code) in which Company is a member at the Relevant Date.

8

 

          (e) Good Reason Defined. For purposes of this Section, “Good Reason” shall
have the meaning assigned to it in Section 7(b), except that for this purpose
only, Section 7(b)(1) shall read, “[t]the failure of Company and any ultimately
controling successor entity to continue Executive’s title of President of
Company or the equivalent successor entity or the assignment to Executive by
Company or such successor entity of duties that are materially different from
Executive’s duties before the Change in Control or that are inconsistent with
his position as President of Company or such successor entity unless Executive
accepts a position at Parent or one of its subsidiaries.”

          (f) Notice of Termination by Executive. Any termination by Executive under
this Section 8 shall be communicated by written notice to Company which shall
set forth generally the facts and circumstances claimed to provide a basis for
such termination.

          (g) Gross-Up Allowance

          (1) General Rules. The Code places significant tax consequences
on Executive and Company if the total payments made to Executive
due, or deemed due, to a Change in Control exceed prescribed limits.
For example, if Executive’s “Base Period Income” (as defined below)
is $100,000 and Executive’s “Total Payments” exceed 299% of such
Base Period Income (the “Cap”), Executive will be subject to an
excise tax under Section 4999 of the Code of 20% of all amounts paid
to him in excess of $100,000. In other words, if Executive’s Cap is
$299,999, he will not be subject to an excise tax if he receives
exactly $299,999. If Executive receives $300,000, he will be subject
to an excise tax of $40,000 (20% of $200,000). In the event such a
consequence occurs, for any reason, due to this Agreement or
otherwise, Company shall pay to Executive a “gross-up allowance”
equal in amount to the sum of (i) the excise tax liability of
Executive on the Total Payments, and (ii) all the total excise,
income, and payroll tax liability of Executive on the “gross-up
allowance,” further increased by all additional excise, and income,
and payroll tax liability thereon, which increase shall be part of
the “gross-up allowance” for purpose of computing the gross-up
allowance. Company shall indemnify and hold Executive harmless from
such additional tax liability for the income and payroll tax arising
from the “gross-up allowance” and all excise tax arising with
respect to compensation and other payments made to Executive under
this Agreement and excise, income, and payroll tax on the “gross-up
allowance, and all penalties and interest thereon. The purpose and
effect of the gross-up allowance is to cause Executive to have the
same net compensation after income, excise, and payroll taxes that
Executive would have if there was no tax under Code § 4999.

          (2) Special Definitions. For purposes of this Section, the
following specialized terms will have the following meanings:

	 	(i)	 	“Base Period Income”. “Base Period Income” is an
amount equal to Executive’s “annualized includable
compensation” for the “base period” as defined in Sections
28OG(d)(1) and(2)of the Code and the regulations adopted
thereunder. Generally, Executive’s “annualized includable
compensation” is the average of his annual taxable income from
the Company for the “base period,” which is the five calendar
years prior to the year in which the Change of Control occurs.
	 
	 	(ii)	 	“Cap” or 280G Cap”. “Cap” or “28OG Cap” shall
mean an amount equal to 2.99 times Executive’s “Base Period
Income.” This is the maximum amount which he may
receive without becoming subject to the excise tax imposed by
Section 4999 of the

9

 

	 	 	 	Code or which Company may pay without
loss of deduction under Section 28OG of the Code.
	 
	 	(iii)	 	“Total Payments”. The “Total Payments” include
any “payments in the nature of compensation” (as defined in
Section 280G of the Code and the regulations adopted
thereunder), made pursuant to this Agreement or otherwise, to
or for Executive’s benefit, the receipt of which is contingent
or deemed contingent on a Change of Control and to which
Section 28OG of the Code applies.

          (h) Effect of Repeal. In the event that the provisions of Sections 28OG
and 4999 of the Code are repealed without succession, this Section shall be of
no further force or effect.

          (i) Employment by Successor. For purposes of this Agreement employment by
a successor of Company or a successor of any subsidiary of Company that has
assumed this Agreement, or continuing employment by Parent, Company or any
other subsidiary of Parent after a Change in Control, shall be considered to be
employment by Company or one of its subsidiaries. As a result, if Executive is
employed by Company or by such a successor, or by Parent or one of its other
subsidiaries, following a Change in Control, he will not be entitled to receive
the benefits provided by Section 8 unless his employment with the Company or
the successor is subsequently terminated without Cause or he terminates his
employment for Good Reason.

     9. CONFIDENTIALITY.

          Because of Executive’s knowledge of and participation in executive issues
and decisions as a result of his present and former executive positions, for
purposes of Sections 9 and 10 of this Agreement, “Company” shall be interpreted
to include Parent, Company and all of Parent’s direct and indirect
subsidiaries.

          Executive covenants and agrees to hold in strictest confidence, and not
disclose to any person, firm or company, without the express written consent of
Company , any and all of Company’s confidential data, including but not limited
to information and documents concerning Company’s business, customers, and
suppliers, market methods, files, trade secrets, or other “know-how” or
techniques or information not of a published nature or generally known (for the
duration they are not published or generally known) which shall come into his
possession, knowledge, or custody concerning the business of Company, except as
such disclosure may be required by law or in connection with Executive’s
employment hereunder or except as such matters may have been known to Executive
at the time of his employment by Company. This covenant and agreement of
Executive shall survive this Agreement and continue to be binding upon
Executive after the expiration or termination of this Agreement, whether by
passage of time or otherwise so long as such information and data shall be
treated as confidential by Company.

     10. RESTRICTIVE COVENANTS.

          (a) Covenant-not-to-Compete. In consideration of Company’s agreements
contained herein and the payments to be made by it to Executive pursuant
hereto, Executive agrees that, for a period of time equal to the time remaining
in the Initial Term or any Renewal Term (or if, but only if, a court or
tribunal of final authority finds that this period is unenforceable because it
is unreasonably long, then, if it would shorten the duration, for one (1) year)
following his termination of employment and so long as Company is continuously
not in default of its obligations to provide payments or employment-type
benefits to Executive hereunder or under any other agreement, covenant, or
obligation, he will not, without prior written consent of Company, consult with
or act as an advisor to another company about activity which is a “Competing
Business” of such company in the Restricted Territory, as defined below. For
purposes of this Agreement, Executive shall be deemed to be engaged

10

 

in a
“Competing Business” if, in any capacity, including proprietor, shareholder,
partner, officer, director or employee, he engages or
participates, directly or indirectly, in the operation, ownership or
management of the activity of any proprietorship, partnership, company or other
business entity which activity is competitive with the then actual business in
which Company is engaged on the date of, or any business contemplated by the
Company’s business plan in effect on the date of notice of, Executive’s
termination of employment. Nothing in this subparagraph is intended to limit
Executive’s ability to own equity in a public company constituting less than
five percent (5%) of the outstanding equity of such company, when Executive is
not actively engaged in the management thereof. If requested by Executive,
Company shall furnish Executive with a good-faith written description of the
business or businesses in which Company is then actively engaged or which is
contemplated by Company’s current business plan within 30 days after such
request is made, and only those activities so timely described in which Company
is, in fact, actively engaged or which are so contemplated may be treated as
activities which are competitive with Company.

          (b) Non-Solicitation. Executive recognizes that Company’s customers are
valuable and proprietary resources of Company. Accordingly, Executive agrees
that for a period of one year following his termination of employment, and only
so long as Company is continuously not in default of its obligations to provide
payments or employment-type benefits to Executive hereunder or under any other
agreement, covenant, or obligation, he will not directly or indirectly, through
his own efforts or through the efforts of another person or entity, solicit
business in the Restricted Territory for or in connection with any Competing
Business from any individual or entity which obtained products or services from
Company at any time during Executive’s employment with Company; he will not
solicit business for or in connection with a Competing Business from any
individual or which may have been solicited by Executive on behalf of Company
and he will not solicit, hire or engage employees of Company who would have the
skills and knowledge necessary to enable or assist efforts by Executive to
engage in a Competing Business.

          (c). Remedies: Reasonableness. Executive acknowledges and agrees that a
breach by Executive of the provisions of this Section 10 will constitute such
damage as will be irreparable and the exact amount of which will be impossible
to ascertain and, for that reason, agrees that Company will be entitled to an
injunction to be issued by any court of competent jurisdiction restraining and
enjoining Executive from violating the provisions of this Section. The right to
an injunction shall be in addition to and not in lieu of any other remedy
available to Company for such breach or threatened breach, including the
recovery of damages from Executive.

          Executive expressly acknowledges and agrees that (i) the Restrictive
Covenants contained herein are reasonable as to time and geographical area and
do not place any unreasonable burden upon him; (ii) the general public will not
be harmed as a result of enforcement of these Restrictive Covenants; and (iii)
Executive understands and hereby agrees to each and every term and condition of
the Restrictive Covenants set forth in this Agreement.

          Executive also expressly acknowledges and agrees that Executive’s
covenants and agreements in this Section 10 shall survive this Agreement and
continue to be binding upon Executive after the expiration or termination of
this Agreement, whether by passage of time or otherwise

          (d) Restricted Territory. Executive and Company understand and agree that
Company’s business is not geographically restricted and is unrelated to the
physical location of Company facilities or the physical location of any
Competing Business, due to extensive use of the Internet, telephones, facsimile
transmissions and other means of electronic information and product
distribution. Executive and Company further understand and agree that
Executive will, in part, work toward expanding the Company’s markets and
geographic business territories, and will be compensated for performing this
work on behalf of Company.

11

 

          Accordingly, Company has a protectable business interest in, and the
parties intend the Restricted Territory to encompass, each and every location
from which Executive could engage in Competing Business in any
country, state, province, county or other political subdivision in which
Company has customers, employees, suppliers, distributors or other business
partners or operations. If, but only if, this Restrictive Territory is held to
be invalid on the ground that it is unreasonably broad, the Restricted
Territory shall include each location from which Executive can conduct business
in any of the following locations: the United States (including each state in
which the Company conducts sales or operations), Canada, the United Kingdom,
and each political subdivision of each of the foregoing countries. If, but
only if, this Restrictive Territory is held to be invalid on the grounds that
it is unreasonably broad, then the restricted territory shall be the United
States (including each state in which the Company conducts sales or
operations), Canada, the United Kingdom, any other country in which the
Company conducts sales or operations, and each political subdivision of each of
the foregoing countries in which Company can articulate a legitimate
protectable business interest.

     11. DISPUTE RESOLUTION.

          (a) Mediation. Any and all disputes arising under, pertaining to or
touching upon this Agreement, or the statutory rights or obligations of either
party hereto, shall, if not settled by negotiation, be subject to non-binding
mediation before an independent mediator. Notwithstanding the foregoing, both
Executive and Company may seek preliminary injunctive or other judicial relief
if such action is necessary to avoid irreparable damage during the pendency of
the proceedings described in this Section 11. Any demand for mediation shall be
made in writing and served upon the other party to the dispute, by certified
mail, return receipt requested, at the address specified in Section 13. The
demand shall set forth with reasonable specificity the basis of the dispute and
the relief sought. The mediation hearing will occur at a time and place
convenient to the parties in Maricopa County, Arizona, within thirty (30) days
of the date of selection or appointment of the mediator. Mediation or the
waiver of mediation by both parties shall be a condition precedent to
Arbitration.

          (b) Arbitration. In the event that the dispute is not settled through
mediation, the parties shall then proceed to binding arbitration before an
independent arbitrator. The mediator shall not serve as the arbitrator. EXCEPT
AS PROVIDED IN SECTION 11 (a), ALL DISPUTES INVOLVING ALLEGED UNLAWFUL
EMPLOYMENT DISCRIMINATION, TERMINATION BY ALLEGED BREACH OF CONTRACT OR POLICY,
OR ALLEGED EMPLOYMENT TORT COMMITTED BY COMPANY OR A REPRESENTATIVE OF COMPANY,
INCLUDING CLAIMS OF VIOLATIONS OF FEDERAL OR STATE DISCRIMINATION STATUTES OR
PUBLIC POLICY, SHALL BE RESOLVED PURSUANT TO THIS SECTION 11 AND THERE SHALL BE
NO RECOURSE TO COURT, WITH OR WITHOUT A JURY TRIAL.

The arbitration hearing shall occur at a time and place convenient to the
parties in Maricopa County, Arizona, within sixty (60) days of selection or
appointment of the arbitrator unless such time period is extended by the
arbitrator for good cause shown. If Company has adopted, with the consent of
Executive, a policy that is applicable to arbitrations with executives, the
arbitration shall be conducted in accordance with said policy, to the extent
that the policy is consistent with this Agreement and the Federal Arbitration
Act, 9 U.S.C. §§ 1-16. If no such policy has been adopted, the arbitration
shall be governed by the National Rules f or the Resolution of Employment
Disputes of the American Arbitration Association (“AAA”) in effect on the date
of the first notice of demand for arbitration. Notwithstanding any provisions
in such rules to the contrary, the arbitrator shall issue findings of fact and
conclusions of law, and an award, within f if teen (15) days of the date of the
hearing unless the parties otherwise agree.

12

 

          (c) Procedure. Issues of procedure, arbitrability, or confirmation of
award shall be governed by the Federal Arbitration Act, 9 U.S. C. SS 1-16,
except that court review of the arbitrator’s award shall be that of an
appellate court reviewing a decision of a trial judge sitting without a jury.

          (d) Expenses. The costs and expenses of any arbitration shall be borne by
Company. Should Executive or Company, at any time, initiate mediation or
arbitration for breach of this Agreement, Company shall reimburse Executive for
all amounts spent by Executive to pursue such mediation or arbitration
(including reasonable attorneys fees and costs), regardless of the outcome,
unless the mediator or arbitrator finds Executive’s action to have been
frivolous and without merit.

     12. BENEFIT AND BINDING EFFECT

          This Agreement shall inure to the benefit of and be binding upon Company,
its successors and assigns, including but not limited to any company, person,
or other entity which may acquire all or substantially all of the assets and
business of Company or any company with or into which Company may be
consolidated or merged, and Executive, his heirs, executors, administrators,
and legal representatives, provided that the obligations of Executive may not
be delegated.

     13. NOTICES

          All notices hereunder shall be in writing and delivered personally or sent
by registered or certified mail, postage prepaid and return receipt requested:

	 	 	 	 	 
	

	 	If to Company, to:
	 	Insight Enterprises, Inc.
	

	 	 	 	Attn: CEO and General Counsel
	

	 	 	 	1305 West Auto Drive
	

	 	 	 	Tempe, Arizona 85283
	 
	 	 	 	 
	

	 	With a copy to:
	 	The Chairman of Parent’s
	

	 	 	 	Compensation Committee
	 
	 	 	 	 
	

	 	If to Executive, to:
	 	Branson Smith
	

	 	 	 	6862 N. La Place
	

	 	 	 	Tucson, AZ 85750

Either party may change the address to which notices are to be sent to it by
giving ten (10) days written notice of such change of address to the other
party in the manner above provided for giving notice. Notices will be
considered delivered on personal delivery or on the date of deposit in the
United States mail in the manner provided for giving notice by mail.

     14. ENTIRE AGREEMENT

          The entire understanding and agreement between the parties has been
incorporated into this Agreement, and this Agreement supersedes all other
agreements and understandings between Executive and Company with respect to the
relationship of Executive with Company, except with respect to other continuing
or future bonus, incentive, stock option, health, benefit and similar plans or
agreements.

     15. GOVERNING LAW

13

 

          This Agreement shall be governed by and interpreted in accordance with the
laws of the State of Arizona.

     16. CAPTIONS

          The captions included herein are for convenience and shall not constitute
a part of this Agreement.

     17. DEFINITIONS

          Throughout this Agreement, certain defined terms will be identified by the
capitalization of the first letter of the defined word or the first letter of
each substantive word in a defined phrase. Whenever used, these terms will be
given the indicated meaning.

     18. SEVERABILITY

          If any one or more of the provisions or parts of a provision contained in
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity or unenforceability shall not
affect any other provision or part of a provision of this Agreement, but this
Agreement shall be reformed and construed as if such invalid, illegal or
unenforceable provision or part of a provision had never been contained herein
and such provisions or part thereof shall be reformed so that it would be
valid, legal and enforceable to the maximum extent permitted by law. Any such
reformation shall be read as narrowly as possible to give the maximum effect to
the mutual intentions of Executive and Company.

     19. TERMINATION OF EMPLOYMENT

          The termination of this Agreement by either party also shall result in the
termination of Executive’s employment relationship with Company in the absence
of an express written agreement providing to the contrary. Neither party
intends that any oral employment relationship continue after the termination of
this Agreement.

     20. TIME IS OF THE ESSENCE

          Company and Executive agree that time is of the essence with respect to
the duties and performance of the covenants and promises of this Agreement.

     21. NO CONSTRUCTION AGAINST EITHER PARTY

          This Agreement is the result of negotiation between Company and Executive
and both have had the opportunity to have this Agreement reviewed by their
legal counsel and other advisors. Accordingly, this Agreement shall not be
construed for or against Company or Executive, regardless of which party
drafted the provision at issue. The language in all parts of this Agreement
shall in all cases be construed as a whole according to its fair meaning and
not strictly for or against either party. The Section headings contained in
this Agreement are for reference purposes only and will not affect the meaning
or interpretation of this Agreement in any way. Whenever the words “include,”
“includes,” or “including” are used in the Agreement, they shall be deemed to
be followed by the words “without limitation.

14

 

	 	 	 
	

	 	DIRECT ALLIANCE CORPORATION, an
	

	 	Arizona Corporation
	 
	 	 
	

	 	By: /s/Timothy A. Crown
	

	 	

	

	 	Timothy A. Crown
	

	 	Its CEO
	 
	 	 
	

	 	/s/ Branson Smith
	

	 	

	

	 	Branson Smith

15

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