EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
SOFTWARE SPECTRUM, INC.,
EGGHEAD, INC.
AND
DJ&J SOFTWARE CORPORATION
DATED AS OF MARCH 23, 1996
PAGE
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CONTENTS
ARTICLE I PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES . . . . . 1
1.1 Purchase of Assets. . . . . . . . . . . . . . . . . . . . . . 1
1.1.1 Equipment and Other Personal Property. . . . . . . . . 2
1.1.2 Equipment and Other Personal Property Leases . . . . . 2
1.1.3 Intellectual Property. . . . . . . . . . . . . . . . . 2
1.1.4 Governmental Licenses. . . . . . . . . . . . . . . . . 3
1.1.5 Contract Rights and Other Intangible Assets. . . . . . 3
1.1.6 Books, Records, Manuals and Documents. . . . . . . . . 4
1.1.7 Insurance Proceeds . . . . . . . . . . . . . . . . . . 4
1.1.8 Other Assets . . . . . . . . . . . . . . . . . . . . . 4
1.1.9 Amended Schedules. . . . . . . . . . . . . . . . . . . 5
1.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . 5
1.2.1 Tax Refunds. . . . . . . . . . . . . . . . . . . . . . 5
1.2.2 Cash and Equivalents . . . . . . . . . . . . . . . . . 5
1.2.3 Excluded Equipment . . . . . . . . . . . . . . . . . . 5
1.2.4 Seller Receivables . . . . . . . . . . . . . . . . . . 5
1.2.5 Excluded Intellectual Property . . . . . . . . . . . . 6
1.2.6 Excluded Contracts . . . . . . . . . . . . . . . . . . 6
1.2.7 Excluded Real Property . . . . . . . . . . . . . . . . 6
1.2.8 Other Excluded Assets. . . . . . . . . . . . . . . . . 6
1.2.9 Amended Schedules. . . . . . . . . . . . . . . . . . . 7
1.3 Assumption of Liabilities . . . . . . . . . . . . . . . . . . 7
1.3.1 Equipment and Other Personal Property Leases . . . . . 7
1.3.2 Intellectual Property; Contract Obligations. . . . . . 7
1.3.3 Amended Schedules. . . . . . . . . . . . . . . . . . . 7
1.3.4 Post-Closing Liabilities . . . . . . . . . . . . . . . 7
1.4 Excluded Liabilities. . . . . . . . . . . . . . . . . . . . . 7
1.4.1 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . 8
1.4.2 Litigation . . . . . . . . . . . . . . . . . . . . . . 8
1.4.3 Claims . . . . . . . . . . . . . . . . . . . . . . . . 8
1.4.4 Hazardous Materials. . . . . . . . . . . . . . . . . . 8
1.4.5 Employment Obligations; Severance. . . . . . . . . . . 9
1.4.6 Indebtedness . . . . . . . . . . . . . . . . . . . . . 9
1.4.7 Employee Benefit Plans . . . . . . . . . . . . . . . . 9
1.4.8 Excluded Assets. . . . . . . . . . . . . . . . . . . . 9
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1.4.9 Amended Schedules. . . . . . . . . . . . . . . . . 9
1.5 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.6 Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . 10
1.7 Seller Receivables. . . . . . . . . . . . . . . . . . . . . . 10
1.7.1 Collection Obligation. . . . . . . . . . . . . . . . . 10
1.7.2 Payment to Seller. . . . . . . . . . . . . . . . . . . 11
1.7.3 Duty of Care; Covenants. . . . . . . . . . . . . . . . 13
1.7.4 Errors, Returns, Pre-Closing Discounts and Adjustments 13
1.7.5 Accounting and Records; Inspection Rights. . . . . . . 14
1.7.6 Uncollected Seller Receivables . . . . . . . . . . . . 15
1.8 Instruments of Sale and Transfer; Further Assurances. . . . . 17
1.9 Allocation of Purchase Price. . . . . . . . . . . . . . . . . 18
1.10 Assignment of Contracts and Rights. . . . . . . . . . . . . . 18
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . 19
2.1 Organization, Good Standing, Etc. . . . . . . . . . . . . . . 20
2.2 Due Authorization, Execution and Enforceability . . . . . . . 20
2.3 No Approvals or Notices Required; No Conflicts With
Instruments . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.4 Absence of Certain Changes or Events. . . . . . . . . . . . . 21
2.5 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.6 Property . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.7 Compliance With Environmental Laws. . . . . . . . . . . . . . 24
2.8 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.9 Claims and Legal Proceedings. . . . . . . . . . . . . . . . . 26
2.10 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . 26
2.11 Trade Secrets; Know-How . . . . . . . . . . . . . . . . . . . 28
2.12 Licenses, Permits, Authorizations, Etc. . . . . . . . . . . . 28
2.13 Seller Receivables; Transferred VLAM Revenue. . . . . . . . . 28
2.14 Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . 29
2.15 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.16 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . 29
2.17 Financial Statements and Reports. . . . . . . . . . . . . . . 30
2.18 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.19 Absence of Questionable Payments. . . . . . . . . . . . . . . 30
2.20 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . . . . 31
3.1 Organization, Good Standing, Power, Etc.. . . . . . . . . . . 31
3.2 Due Authorization, Execution and Enforceability . . . . . . . 31
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3.3 No Approvals or Notices Required; No Conflicts
With Instruments. . . . . . . . . . . . . . . . . . . . . . . 32
3.4 Claims and Legal Proceedings. . . . . . . . . . . . . . . . . 32
3.5 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.6 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE IV COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 33
4.1 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.2 Access . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.3 Advice of Claims. . . . . . . . . . . . . . . . . . . . . . . 34
4.4 Conduct Prior to the Closing Date . . . . . . . . . . . . . . 34
4.5 Insurance; Loss of or Damage to Assets. . . . . . . . . . . . 35
4.6 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.7 Confidentiality; Publicity. . . . . . . . . . . . . . . . . . 36
4.8 Agreement Not to Compete. . . . . . . . . . . . . . . . . . . 37
4.9 Post-Closing Employment Obligations . . . . . . . . . . . . . 38
4.10 Proposals for Acquisition of Division . . . . . . . . . . . . 40
4.11 Fulfillment Agreement . . . . . . . . . . . . . . . . . . . . 40
4.12 Call Center Lease . . . . . . . . . . . . . . . . . . . . . . 40
4.13 Proration; Reimbursements With Respect to Leased Property . . 41
4.14 Expenses; Certain Payments. . . . . . . . . . . . . . . . . . 41
4.15 Employee Benefits Matters . . . . . . . . . . . . . . . . . . 41
4.16 Delivery of Interim Financial Statements. . . . . . . . . . . 42
4.17 Protection and Preservation of Records. . . . . . . . . . . . 42
ARTICLE V THE CLOSING; CLOSING CONDITIONS . . . . . . . . . . . . . . 43
5.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.2 Conditions to Obligations of Each Party . . . . . . . . . . . 43
5.2.1 Xxxx-Xxxxx-Xxxxxx. . . . . . . . . . . . . . . . . . . 43
5.2.2 No Injunctions . . . . . . . . . . . . . . . . . . . . 43
5.3 Conditions to Obligations of Purchaser. . . . . . . . . . . . 44
5.3.1 Accuracy of Representations and Warranties . . . . . . 44
5.3.2 Performance of Agreements. . . . . . . . . . . . . . . 44
5.3.3 Officers' Certificates . . . . . . . . . . . . . . . . 45
5.3.4 No Governmental Proceeding or Litigation . . . . . . . 45
5.3.5 Delivery of Documents. . . . . . . . . . . . . . . . . 45
5.3.6 Material Adverse Change. . . . . . . . . . . . . . . . 46
5.4 Conditions to Obligations of Seller . . . . . . . . . . . . . 46
5.4.1 Accuracy of Representations and Warranties . . . . . . 46
5.4.2 Performance of Agreements. . . . . . . . . . . . . . . 47
5.4.3 Officers' Certificates . . . . . . . . . . . . . . . . 47
5.4.4 Delivery of Purchase Price and Documents . . . . . . . 47
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ARTICLE VI TERMINATION . . . . . . . . . . . . . . . . . . . . . . . 47
6.1 Termination by Mutual Consent . . . . . . . . . . . . . . . . 47
6.2 Termination by Purchaser. . . . . . . . . . . . . . . . . . . 48
6.3 Termination by Seller . . . . . . . . . . . . . . . . . . . . 48
6.4 Termination by Either Purchaser or Seller . . . . . . . . . . 48
6.5 Effect of Termination and Abandonment . . . . . . . . . . . . 49
ARTICLE VII DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 49
7.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . 49
7.2 Other Definitional Matters. . . . . . . . . . . . . . . . . . 54
ARTICLE VIII GENERAL . . . . . . . . . . . . . . . . . . . . . . . . 54
8.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.2 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.3 Indemnification and Survival of Warranties. . . . . . . . . . 55
8.4 Bulk Sales. . . . . . . . . . . . . . . . . . . . . . . . . . 57
8.5 Entire Understanding. . . . . . . . . . . . . . . . . . . . . 57
8.6 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . 57
8.7 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 57
8.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.9 Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . 58
8.10 Parties in Interest . . . . . . . . . . . . . . . . . . . . . 58
8.11 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 58
EXHIBITS:
Exhibit 1.7.3 Seller Receivables Collection Procedures
Exhibit 1.7.4 Seller Receivables Errors List
Exhibit 1.8(a)-1 Form of Xxxx of Sale
Exhibit 1.8(a)-2 Form of Assignment and Assumption Agreement
Exhibit 4.8 Largest 200 Customers
Exhibit 4.11 Form of Fulfillment Agreement
Exhibit 4.12 Form of Call Center Lease
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made this 23rd day of
March, 1996 by and among Software Spectrum, Inc., a Texas corporation
("Purchaser"), Egghead, Inc., a Washington corporation ("Seller"), and DJ&J
Software Corporation, a Washington corporation and a wholly owned subsidiary of
Seller ("Operating").
RECITALS
A. Seller desires and intends to sell, or to cause Operating to sell,
certain of the operating assets of its corporate, governmental and educational
products division ("Division"), an operating division of Seller, at the price
and on the terms and conditions herein set forth.
B. Purchaser desires and intends to purchase certain of the operating
assets of Division and to assume certain liabilities of Division at the price
and on the terms and conditions herein set forth.
C. Capitalized terms used in this Agreement shall have the respective
meanings set forth in Article VII. Except as otherwise specified in this
Agreement, all references to "Seller" shall include Operating and all other
direct or indirect wholly owned subsidiaries of Seller.
AGREEMENT
In consideration of the terms hereof, the parties hereto agree as follows:
ARTICLE I PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES
1.1 PURCHASE OF ASSETS
Subject to the terms and conditions of this Agreement, Seller hereby
agrees to sell, assign, transfer and deliver to Purchaser, and Purchaser hereby
agrees to purchase, acquire and accept from Seller, certain tangible and
intangible assets of Seller for use or used primarily in Seller's operation of
Division as of the close of business on the Closing Date, except for the
Excluded Assets (the "Assets"). The Assets shall include, but not be limited
to, the following:
1.1.1 EQUIPMENT AND OTHER PERSONAL PROPERTY
All equipment, furniture, computer hardware, fixtures, improvements and
other tangible personal property, wherever located, owned by Seller for use or
used primarily in the operation of Division's business, except for Excluded
Assets, and otherwise including, without limitation, the equipment, furniture,
computer hardware, fixtures, improvements and other tangible property described
in Schedule 1.1.1 to the Disclosure Memorandum (which Schedule also lists the
location of such property) and, to the extent actually assignable or
transferable, all rights to the agreements with and warranties received from the
manufacturers and distributors of all such personal property and fixtures and
any related contract rights, choices in action, claims, credits, rights of
recovery and setoffs with respect to such personal property and fixtures. Within
five business days prior to the Closing Date, Seller will provide Purchaser with
an updated Schedule 1.1.1 that contains a complete inventory of the items
described on such Schedule, including cost, book value and acquisition date,
estimated as closely as possible where necessary.
1.1.2 EQUIPMENT AND OTHER PERSONAL PROPERTY LEASES
All of Seller's right, title and interest in, to and under the leases and
rental agreements in respect of equipment or other tangible personal property
for use or used primarily in the operation of Division's business listed in
Schedule 1.1.2 to the Disclosure Memorandum, except for Excluded Assets (the
"Personal Property Leases"). Schedule 1.1.2 sets forth the material terms of
each Personal Property Lease, including lease term, cancellation rights, monthly
rental and renewal terms.
1.1.3 INTELLECTUAL PROPERTY
All intellectual property rights possessed or owned by Seller and used
primarily in the operation of Division's business or necessary for the operation
of Division's business, as of the close of business on the Closing Date, and all
right, title and interest of Seller in, to and under licenses, sublicenses or
like agreements providing Seller any right or concession to use any software,
information or other intellectual property, and, in each case, for use or used
primarily in Seller's operation of Division's business or necessary for the
operation of Division's business as of the close of business on the Closing
Date, including all technology, know-how, trade secrets, formulae, drawings,
designs, systems, forms, technical manuals, data, computer programs, product
information and development work-in-progress, and all documentary evidence
thereof (including the rights of Seller to prevent the use by others), except
for the Excluded Assets, and otherwise including, but not limited to, the
intellectual property rights described in Schedule 1.1.3 to the Disclosure
Memorandum. All right, title and interest of Seller in, to and under those
trademarks,
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trademark registrations, trademark registration applications, service marks,
trade names, all other names and slogans embodying business, product or service
goodwill, and copyrights and copyrighted material described in Schedule 1.1.3 to
the Disclosure Memorandum, which is a true and complete list of all such rights
that are primarily related to the operation of Division's business. In order to
provide for an orderly transfer of the Assets and transition of the business of
Division to Purchaser, at the Closing, Seller shall grant Purchaser a
nonexclusive, royalty-free right and license to use the name "Egghead" for the
limited purpose of using existing packaging, forms, marketing material,
documents, and promotional material and other supplies used in Division's
business until the termination or expiration of the term of the Fulfillment
Agreement; provided, however, that Purchaser shall not hold itself out as agent,
partner, joint venturer or representative of Seller. To the extent Purchaser
acquires an interest in Egghead-Uchida, Inc., Purchaser shall also have the
indirect right to use the name "Egghead" through Egghead-Uchida, Inc., pursuant
to the Joint Venture Agreement, until Purchaser disposes of its interest in
Egghead-Uchida, Inc. or such right is terminated, by agreement with
Egghead-Uchida, Inc. and Xxxxxx Xxxx, Co., Ltd. or otherwise.
1.1.4 GOVERNMENTAL LICENSES
All governmental licenses, permits, authorizations, certificates of
inspection and approvals (including any of the foregoing issued or granted by
any federal, state or local government) relating primarily or exclusively to the
conduct of Division's business as of the close of business on the Closing Date,
to the extent assignable or transferable, including, without limitation, the
licenses, permits, authorizations, certificates of inspection and approvals
described in Schedule 1.1.4 to the Disclosure Memorandum.
1.1.5 CONTRACT RIGHTS AND OTHER INTANGIBLE ASSETS
(a) Subject to Section 1.1.5(b), all of Seller's right, title and
interest in, to and under all contracts and agreements, customer purchase
orders, customer sales orders, sale and distribution agreements, volume license
and maintenance ("VLAM") agreements, joint venture interests, and other
instruments and agreements relating primarily or exclusively to Seller's
operation of Division's business as of the close of business on the Closing
Date, and all goodwill associated with Division's business, including, without
limitation, Seller's right, title and interest in, to and under the Joint
Venture Shares, the Joint Venture Agreement, and the other contracts, agreements
and other assets described in Schedule 1.1.5 to the Disclosure Memorandum.
(b) The pro rata portion of all rights to revenue (including any and
all directly related cash prepayments or accounts receivable) accruing under or
associated
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with Division's VLAM agreements and relationships allocable to periods on and
after the Closing Date in accordance with the terms of such contracts and
recognizable as revenue in such future periods in accordance with GAAP,
consistently applied (the "Transferred VLAM Revenue"). Schedule 1.1.5 to the
Disclosure Memorandum lists the VLAM agreements and the customers with whom
Seller has VLAM relationships for which revenue was allocable to periods after
December 30, 1995 as of such date and the amount of such revenue as of
December 30, 1995 to be recognized in such future periods in accordance with
GAAP, consistently applied (the "Preliminary VLAM Revenue"), along with all
other VLAM agreements and relationships that were active as of December 30,
1995.
1.1.6 BOOKS, RECORDS, MANUALS AND DOCUMENTS
All of Seller's books and records (including all disks, tapes and other
media-storage data and information), mailing lists, customer lists, pricing
files and formulae, vendor data, equipment maintenance records, warranty
information, records of facilities operations, business plans (or portions
thereof) relating exclusively to Division, standard forms of documents, manuals
of operations or business procedures for use or used primarily in Seller's
operation of Division's business as of the close of business on the Closing
Date, wherever located, relating to Division's current operations, which may be
in the format specified in Schedule 1.1.6 to the Disclosure Memorandum,
including, without limitation, the books and records described in Schedule 1.1.6
to the Disclosure Memorandum and, with respect to the Call Center, any soil test
reports, building inspection reports, building plans, blueprints, renderings and
surveys in Seller's possession or otherwise available to Seller.
1.1.7 INSURANCE PROCEEDS
All insurance proceeds paid or payable to Seller in respect of any damage
to or destruction or loss of any assets or rights of Seller reflected on the
Schedules referred to in this Section 1.1, including any assets of Seller that,
as far as could reasonably be foreseen, would have been included in the Assets
but for such damage, destruction or loss.
1.1.8 OTHER ASSETS
Any other assets for use or used primarily in connection with Division's
business (including, without limitation, rights in telephone numbers or
communication codes used primarily by Division) reasonably necessary for the
conduct of Division's business, other than the Excluded Assets.
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1.1.9 AMENDED SCHEDULES
All Schedules referred to in this Section 1.1 shall be deemed to include
any amendments thereto pursuant to Section 4.1(b).
1.2 EXCLUDED ASSETS
Seller shall not transfer to Purchaser and Purchaser shall not acquire
the following assets (the "Excluded Assets"), which are specifically excluded
from the Assets:
1.2.1 TAX REFUNDS
Seller's rights to refunds of Taxes paid with respect to Division's
business for the periods on or prior to the Closing Date.
1.2.2 CASH AND EQUIVALENTS
Seller's cash, bank deposits or similar cash and cash equivalent items
existing as of the close of business on the Closing Date, whether or not arising
from Seller's operation of Division.
1.2.3 EXCLUDED EQUIPMENT
All of Seller's right, title and interest in and to any equipment that is
used partially, but not primarily, in Seller's operation of Division described
in Schedule 1.2.3 to the Disclosure Memorandum including, without limitation,
the telephone switching equipment that services the Call Center and any
equipment relating to centralized management services provided by Seller's
corporate headquarters.
1.2.4 SELLER RECEIVABLES
Subject to Purchaser's rights set forth in Section 1.7.6 and except for
any portion thereof that constitutes Transferred VLAM Revenue under
Section 1.1.5(b), all of Seller's right, title and interest in and to (a) the
trade accounts receivable accrued in accordance with GAAP arising from Seller's
operation of Division, as of the Closing Date (the "Seller Receivables"), and
(b) all other accounts receivable, accrued in accordance with GAAP arising from
Seller's operation of Division, as of the close of business on the Closing Date,
including, without limitation, advertising and promotional expenditures
reimbursable from suppliers under cooperative advertising and other promotional
and market development fund arrangements, amounts due from
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vendors for returned inventory, vendor rebates, marketing expenses payable by
vendors and other programs.
1.2.5 EXCLUDED INTELLECTUAL PROPERTY
All of Seller's right, title and interest in, to and under all trade
names, trademarks, service marks, copyrights, patents and their registrations
and applications used by Seller, other than the trade names, trademarks, service
marks, copyrights and patents listed in Schedule 1.1.3 to the Disclosure
Memorandum, and all goodwill associated therewith, including, without
limitation, all intellectual property rights possessed or owned by Seller
relating to centralized management services provided by Seller's corporate
headquarters to both Division's and Seller's retail operations, all intellectual
property rights possessed or owned by Seller through ELEKOM all right, title and
interest of Seller in, to and under licenses, sublicenses or like agreements
providing Seller or ELEKOM any right or concession to use any intellectual
property and all technology, know-how, trade secrets, formulae, drawings,
designs, systems, forms, technical manuals, data, computer programs, product
information and development work-in-progress and all documentary evidence
thereof, and including, without limitation, the trade names, trademarks, service
marks and copyrights and their registrations and applications listed in Schedule
1.2.5 to the Disclosure Memorandum; subject to Purchaser's limited right to use
the name "Egghead" referenced in Section 1.1.3, and the right of Egghead-Uchida,
Inc. to use such name pursuant to the Joint Venture Agreement until such right
is terminated, by agreement with Egghead-Uchida, Inc. and Xxxxxx Xxxx, Co., Ltd.
or otherwise.
1.2.6 EXCLUDED CONTRACTS
All of Seller's right, title and interest in, to and under all contracts
and agreements not specifically listed or described in Schedules 1.1.2 to 1.1.7
to the Disclosure Memorandum, including, without limitation, those described in
Schedule 1.2.6 to the Disclosure Memorandum.
1.2.7 EXCLUDED REAL PROPERTY
All real property, and all rights thereto, owned or leased by Seller,
subject to Seller's agreement to enter into the Call Center Lease at the
Closing.
1.2.8 OTHER EXCLUDED ASSETS
All other assets of Seller described in Schedule 1.2.8 to the Disclosure
Memorandum.
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1.2.9 AMENDED SCHEDULES
All Schedules referred to in this Section 1.2 shall be deemed to include
any amendments thereto pursuant to Section 4.1(b).
1.3 ASSUMPTION OF LIABILITIES
Subject to the terms and conditions of this Agreement, Purchaser shall
assume and agree to pay, perform and fully discharge the following liabilities
and obligations and no others (together, the "Assumed Liabilities"):
1.3.1 EQUIPMENT AND OTHER PERSONAL PROPERTY LEASES
The liabilities and obligations of Seller arising or to be performed
after the Closing Date in respect of the Personal Property Leases listed in
Schedule 1.1.2 to the Disclosure Memorandum.
1.3.2 INTELLECTUAL PROPERTY; CONTRACT OBLIGATIONS
All liabilities and obligations of Seller arising or to be performed
after the Closing Date in respect of the licenses, agreements and instruments
listed in Schedules 1.1.3 and 1.1.5 to the Disclosure Memorandum (including,
without limitation, any payments to vendors directly related to the Transferred
VLAM Revenue).
1.3.3 AMENDED SCHEDULES
All Schedules referred to in this Section 1.3 shall be deemed to include
any amendments thereto pursuant to Section 4.1(b).
1.3.4 POST-CLOSING LIABILITIES
Except as otherwise provided in this Agreement, Purchaser shall be
responsible only for those liabilities and obligations of Division, to the
extent that such liabilities and obligations are not Excluded Liabilities, that
arise from or relate to Purchaser's ownership or operation of the Assets after
the Closing.
1.4 EXCLUDED LIABILITIES
Purchaser shall not assume any liabilities other than the Assumed
Liabilities and shall moreover not assume any other obligations of Seller,
including, without limitation, any of the following obligations or liabilities
(all obligations or liabilities not assumed by Purchaser herein are called the
"Excluded Liabilities"):
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1.4.1 TAXES
Any liabilities for Taxes, either accruing or relating to the periods on
or prior to the Closing Date or penalties or interest thereon.
1.4.2 LITIGATION
Any claim, judgment, penalty, settlement agreement or other obligation to
pay damages in respect of any action, suit or proceeding that is pending or
threatened prior to the Closing Date, including, without limitation, those
listed in Schedule 2.9 to the Disclosure Memorandum.
1.4.3 CLAIMS
All claims and liabilities that relate to injuries, actions or events
that occurred on or before the Closing Date whether based on any act or omission
of Seller, in the operation of Division's business, or others, including,
without limitation, claims based on auto accidents, workers' compensation,
product liability, negligence or strict liability.
1.4.4 HAZARDOUS MATERIALS
All claims and liabilities arising out of or relating to (a) the
treatment, storage or disposal before the Closing Date of Hazardous Materials by
Seller or any other Person (including, without limitation, any previous owner,
lessor or sublessor) on or at the Call Center or any other real property
previously owned, leased, subleased or used by Seller or Division in the
operation of Division's business; (b) Releases of Hazardous Materials on, at or
from any assets or properties, including, without limitation, the Call Center,
owned, leased, subleased or used by Seller or Division in the operation of
Division's business at any time such assets or properties were owned, leased,
subleased or used by Seller in the operation of Division's business;
(c) generation, transportation or disposal of Hazardous Materials by Seller in
the operation of Division's business; (d) Releases of Hazardous Materials by any
Person (including, without limitation, any previous owner, lessee or sublessee)
on or from the Call Center prior to Seller's ownership or use thereof; (e) the
existence of any Hazardous Material in the Call Center facility at the Closing
Date; or (f) a violation of any Environmental Law occurring prior to the Closing
Date in connection with Seller's operation of Division's business.
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1.4.5 EMPLOYMENT OBLIGATIONS; SEVERANCE
Except as provided in Section 4.9 and Section 4.15, all claims, expenses,
costs and liabilities (whether based in tort, contract or otherwise), from
whatever source such obligations and costs arise, including, without limitation,
contractual obligations, notices to employees, employment manuals, course of
dealings, past practices, obligations relating to Section 2806 or 4999 of the
Code, or otherwise, relating to the employment of any Person by Seller,
including matters pertaining to existing and prior employment practices of
Seller and all severance obligations and other costs of termination of employees
of Seller wherever located resulting from any termination or cessation of
employment, for any period occurring on or prior to the Closing Date.
1.4.6 INDEBTEDNESS
Any loan, note, advance, credit, payable, intercompany allocation or
other form of indebtedness of any kind or nature owing by Division as of the
Closing Date.
1.4.7 EMPLOYEE BENEFIT PLANS
Except as provided in Section 4.15 and as otherwise required by law, all
liabilities and obligations with respect to either the continuation or
termination by Seller of any Employee Benefit Plan for the benefit of Division
employees and all liabilities with respect to payroll, bonuses, hourly and
salary vacation pay, workers' compensation liability, fringe benefits and other
employee benefits with respect to or that relate to periods of employment on or
prior to the Closing Date.
1.4.8 EXCLUDED ASSETS
All liabilities and obligations in respect of any Excluded Asset.
1.4.9 AMENDED SCHEDULES
All Schedules referred to in this Section 1.4 shall be deemed to include
any amendments thereto pursuant to Section 4.1(b).
1.5 TAXES
Seller shall be responsible for the payment of all sales and use Taxes
arising out of the transfer of the Assets, and Seller shall pay its portion
prorated as of the Closing Date of state and local personal property Taxes on
assets used in the operation of Division's business.
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1.6 PURCHASE PRICE
On the Closing Date, and subject to the terms and conditions of this
Agreement, in full consideration for the Assets, and in addition to Purchaser's
assumption of the Assumed Liabilities, Purchaser shall deliver to Seller in same
day funds by wire transfer to an account designated by Seller the aggregate
purchase price of $45,000,000 (the "Purchase Price").
1.7 SELLER RECEIVABLES
1.7.1 COLLECTION OBLIGATION
On the Closing Date, Seller will provide to Purchaser Schedule 1.7 to the
Disclosure Memorandum, which will set forth a preliminary list of the Seller
Receivables as of the most recent fiscal month end for which such information is
available. Nine business days after the Closing Date, Seller will provide
Purchaser with a revised Schedule 1.7, which will constitute the definitive list
of the Seller Receivables. Beginning on the first business day after the
Closing Date and for 150 days thereafter (the "Collection Period"), Seller
authorizes Purchaser to act as its agent for the collection of the Seller
Receivables, subject to monitoring by Seller. On the Closing Date, Seller shall
assign and transfer to Purchaser its lockbox account for receipt of the Seller
Receivables and shall continue to require customers of Division to submit
payments on the Seller Receivables to such lockbox. Such payments will be
subject to the payment and reporting provisions set forth in Section 1.7.2.
Purchaser shall have the right to endorse the name of Seller on any checks,
drafts or instruments received with respect to the Seller Receivables for
deposit to the account of Purchaser. In order to ensure that Purchaser will
effect its obligations under this Section 1.7 in accordance with the standard of
care set forth in Section 1.7.3, Purchaser covenants and agrees to (a) offer
employment during the Collection Period to all the Relevant Employees who are
designated as collection staff in Schedule 4.9 to the Disclosure Memorandum,
(b) use its commercially reasonable best efforts to hire such employees, and
(c) utilize such Relevant Employees as are hired to perform its obligations
under this Section 1.7. Seller acknowledges that Purchaser, in its discretion
after consultation with Seller, may terminate the employment of any of the
Relevant Employees employed pursuant to this Section 1.7.1 either for cause
(consisting of nonperformance, failure to adhere to Purchaser's reasonable
policies or consistent poor performance of the responsibilities related to their
specific job, including, without limitation, failure to perform in accordance
with the collection guidelines set forth in Schedule 1.7.3 that relate to their
position) or without cause with Seller's consent, which consent will not be
unreasonably withheld.
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1.7.2 PAYMENT TO SELLER
(a) Purchaser shall apply all payments received from the customers of
Division who generated the Seller Receivables in the following manner:
(i) If a payment is identified to a specific Seller Receivable,
Purchaser shall apply it against such Seller Receivable upon such
identification and remit such payment as provided in 1.7.2(b).
(ii) If a payment is not designated or identified to a specific
invoice or account receivable, then Purchaser shall, using the
information provided by Seller with respect to the Seller Receivables,
contact the relevant customer in order to determine, in good faith, the
appropriate invoice or account receivable to which such payment is to be
applied. Seller may monitor such contacts pursuant to Section 1.7.5(c).
Forty-five days after receipt of such payment, Purchaser shall apply such
payment to the Seller Receivables unless the relevant customer advises
Purchaser within such forty-five day period that such payment does not
relate to a Seller Receivable.
(iii) Purchaser shall apply any payment credited to a Seller
Receivable pursuant to Section 1.7.2(a)(ii) first to such customer's
Seller Receivable that has been outstanding for the longest period until
all Seller Receivables for such customer are fully paid.
(b) Seller and Purchaser agree to provide each other with reports, and
Purchaser agrees to remit payments to Seller, as follows:
(i) On a daily basis commencing on the first business day of the
Collection Period, Purchaser shall cause the lockbox service to
electronically transmit to Seller a payment notice, in the same format
currently provided to Seller by the lockbox service, listing all payments
received from customers on the immediately preceding business day, at
Purchaser's sole cost and expense.
(ii) Within 24 hours of receipt of the payment notice from the
lockbox service, Seller shall generate and transmit to Purchaser, at
Seller's sole cost and expense, a report in a format agreed to between
Purchaser and Seller, listing the "edits" or unidentified payments
referred to in Section 1.7.2(a)(ii) (the "Exception Report"). Subject to
receipt of the Exception Reports from Seller, Purchaser shall use such
Exception Reports to determine amounts to be applied to the Seller
Receivables.
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(iii) On Friday of each week of the Collection Period and on the
last day thereof, Seller shall generate and transmit to Purchaser, at
Seller's sole cost and expense, a report identifying for each daily
deposit received by the lockbox during the preceding Friday through
Thursday period (or portion thereof) and for any day prior to that period
on which a Section 1.7.2(a)(ii) unidentified payment was received that
has not yet been applied: (A) the Section 1.7.2(a)(i) payments applied
to the Seller Receivables, (B) the payments applied to Purchaser's
accounts receivable, (C) the Section 1.7.2(a)(ii) unidentified payments,
and (D) the total payments received by the lockbox service reflected in
the daily payment notices for the period (the "Weekly Detailed Cash
Application Report").
(iv) On Monday of each week of the Collection Period and on the
last day thereof, Purchaser shall remit to Seller by wire transfer in
same day funds to a bank designated by Seller all payments: (A) received
and applied against the Seller Receivables during the preceding week (or
portion thereof) in accordance with Section 1.7.2(a)(i) and (B) all
payments received by the lockbox service that appeared as unidentified
payments on prior Exception Reports and that were reconciled and applied
against the Seller Receivables during the preceding week (or portion
thereof) in accordance with Section 1.7.2(a)(ii).
(v) Concurrent with such weekly remittance of payment, Purchaser
shall transmit to Seller, at its sole cost and expense, a report
containing summary totals by day of all payments received by the lockbox
service during the Collection Period through the end of the preceding
week listing: (A) the Section 1.7.2(a)(i) payments applied to the Seller
Receivables, (B) the payments applied to Purchaser's accounts receivable,
(C) the Section 1.7.2(a)(ii) payments that remain unidentified at the end
of such weekly period, and (D) the total payments received by the lockbox
service during the Collection Period (the "Weekly Report"). The Weekly
Report shall reconcile to the weekly cash remittances to Seller.
(c) Pursuant to Section 1.7.5, Seller and Purchaser shall have access
each at its own cost, to all documentation on which the information in all the
reports referred to in this Section 1.7.2 are based. Prior to the Closing Date,
Purchaser shall cooperate with Seller to run tests, if necessary, to ensure that
all such reports will be timely transmitted. If Seller should receive any
payments from any of the customers of Division following the Closing (other than
for retail products that Seller may sell to such customers pursuant to Section
4.8), Seller shall promptly (but no later than one week after receipt thereof)
forward to Purchaser any such payment, along with any
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information available to it concerning any such payment and the invoice to which
such payment may relate.
1.7.3 DUTY OF CARE; COVENANTS
Purchaser shall take or cause to be taken such action as Seller may
reasonably request so as to effect the collection, and to provide Seller the
full benefits, of the Seller Receivables. In so doing, Purchaser agrees to
adhere to the collection guidelines outlined in Exhibit 1.7.3. In so acting on
behalf of Seller, Purchaser expressly represents and warrants that it shall
(a) exert its commercially reasonable best efforts to collect the Seller
Receivables (which shall be evidenced by the exertion of the level of diligence
Purchaser uses in collecting its own accounts receivable) and (b) not directly
or indirectly enter into any agreement or understanding, written or oral,
regarding the payment of a Seller Receivable with any customer who generated
such Seller Receivable that would adversely affect Seller's ability to collect,
or delay the collection of, such Seller Receivable; provided that actions that
are consistent with Purchaser's obligation under clause (a) above shall not
contravene this clause (b).
1.7.4 ERRORS, RETURNS, PRE-CLOSING DISCOUNTS AND ADJUSTMENTS
"Errors" are accounting errors relating to the Seller Receivables of the
type set forth in Exhibit 1.7.4. "Returns" are CGE Products that have been
returned to Purchaser that Purchaser has identified to an invoice generated by
Seller prior to the Closing Date and for which Purchaser has issued a return
authorization. A "Pre-Closing Discount" is the amount by which Seller offers,
between the date of this Agreement and the Closing Date, to reduce the amount
owing on an account receivable from a customer of Division in order to induce
prompt payment, which offered discount is asserted by such customer against
Purchaser, following the Closing, as the basis for nonpayment of the
corresponding portion of a Seller Receivable (notwithstanding any express
expiration date set forth in Seller's offer), and which Purchaser believes to be
uncollectable after making an initial effort to collect such amount under
Section 1.7.3. "Adjustments" are reductions in the amount of the Seller
Receivables as a result of Errors, Returns or Pre-Closing Discounts. At least
weekly during, and on the last day of, the Collection Period, Purchaser shall
transmit (electronically, by hand, or by overnight delivery or by any other
means agreed to between Seller and Purchaser) to Seller, at Purchaser's sole
cost and expense, a report (in a format approved by Seller to be agreed to with
Purchaser prior to Closing) listing any Errors discovered by Purchaser during
the preceding week, or portion thereof. Such report shall also list any Returns
received by Purchaser within the 75 days following the Closing Date and any Pre-
Closing Discounts. Seller shall review the Errors, Returns and Pre-Closing
Discounts report and the related
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supporting documentation (which Purchaser shall supply to Seller therewith)
within one week after receipt thereof. If Seller agrees with Purchaser's
identification of an Error, Return or Pre-Closing Discount, or the calculation
of the amount thereof, such Error, Return or Pre-Closing Discount shall result
in an Adjustment. If Seller disagrees with Purchaser's identification of an
Error, Return or Pre-Closing Discount, the issue shall be resolved pursuant to
the audit procedures set forth in Section 1.7.5(b).
For CGE Products returned after the first 75 days following the Closing
Date and before the end of the Collection Period, Purchaser shall use its
commercially reasonable best efforts to apply any credits issued for Returns to
original customer invoices. Purchaser agrees to remit to Seller, as frequently
as possible but at least by the end of each month during the remainder of the
Collection Period, payment for any such credit memos applied to the Seller
Receivables during such month (or portion thereof), in the amount of 85% of the
aggregate amount of such credit memos, together with copies of the credit memos
issued or a report listing such credit memos in sufficient detail for
verification by Seller.
1.7.5 ACCOUNTING AND RECORDS; INSPECTION RIGHTS
(a) Purchaser shall keep current, complete and accurate records
regarding all payments received, payments made to Seller and collection efforts
by Purchaser and shall provide, in addition to the reports required by
Section 1.7.2 and Section 1.7.4, such other reports, in an electronic or other
format as may be reasonably requested by Seller in connection with the Seller
Receivables. During the Collection Period and for such additional period as may
be required to complete the transactions contemplated by Section 1.7.6,
Purchaser shall, during Purchaser's normal business hours, afford to Seller's
accountants, counsel, officers and other representatives access to, and permit
them to make such inspections as may reasonably be requested of, its books and
records relating to the Seller Receivables. If, as a result of such inspection
or otherwise, Seller should inquire of Purchaser orally or in writing regarding
any aspect of its performance of its obligations under this Section 1.7,
Purchaser shall respond to such inquiry promptly after receipt of the inquiry.
(b) Upon Seller's request, Purchaser shall also provide access to such
books and records, during Purchaser's normal business hours, for examination,
reproduction, and audit by an independent accounting firm (a "Big Six"
accounting firm that has not provided services to either Purchaser or Seller for
a period of five years preceding such audit); provided, however, that Purchaser
shall not be required to permit more than two such audits by such accounting
firm during the Collection Period. If any such audit discloses any
understatement of the payments due Seller, Purchaser shall
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immediately pay to Seller any deficiency. If the deficiency with respect to any
audit is in excess of five percent of the amounts determined to be payable to
Seller pursuant to such audit or if the audit discloses any breach by Purchaser
of its representations or covenants in Section 1.7.3, Purchaser shall reimburse
Seller for all costs incurred by Seller to conduct the audit. Such
reimbursement shall not excuse or cure any default under or breach of this
Section 1.7 by Purchaser and shall be in addition to any damages or other
remedies available to Seller in respect of such breach. Seller's acceptance of
any payment shall be without prejudice to Seller's rights pursuant to this
Section 1.7 or to any other rights or remedies afforded to Seller under any
other provision of this Agreement or by applicable law. Any such reimbursement
shall not be subject to the limitation set forth in Section 8.3.5, and any
payment made by Purchaser to Seller shall not be counted toward calculating the
aggregate amount of claims set forth in such limitation.
(c) In connection with its right to monitor the performance of
Purchaser's obligations under this Section 1.7, Seller shall have the right
(jointly with a representative of Purchaser) to monitor telephone conversations
between the Relevant Employees identified in Section 1.7.1 and the customers who
have outstanding Seller Receivables to the extent permitted by applicable law.
In addition, Seller may, at its discretion, provide funding to Purchaser for
incentive bonuses of up to $1,000 per month per Relevant Employee to be paid to
such Relevant Employees by Purchaser, conditioned on such employees meeting
performance standards in the collection of the Seller Receivables reasonably
established by Seller and consistent with the collection guidelines set forth in
Exhibit 1.7.3, and otherwise structured at Seller's discretion, after
consultation with Purchaser. Such incentive bonuses shall be payable by
Purchaser to the Relevant Employees who have earned them on the earlier of the
end of the Collection Period and the Relevant Employee's termination by
Purchaser without cause.
1.7.6 UNCOLLECTED SELLER RECEIVABLES
(a) Except to the extent provided below, Purchaser's obligations under
this Section 1.7 shall terminate immediately following the Collection Period.
Thirty days prior to the termination of the Collection Period (the
"Determination Date"), Purchaser shall provide Seller with a list of the
Uncollected Seller Receivables. "Uncollected Seller Receivables" means the
Seller Receivables that remain uncollected on the Determination Date, net of any
remaining Adjustments.
(b) On the Determination Date, Purchaser shall preliminarily designate
from among the Uncollected Seller Receivables, in a writing delivered with the
list of the Uncollected Seller Receivables, an amount of Seller Receivables with
an aggregate face value of $1,000,000; provided, however, that Purchaser may
not designate less
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than the total amount of the Uncollected Seller Receivables for any given
customer. For purposes of this Section 1.7.6, a "customer" means all accounts
listed by Seller under a specific Enterprise Number. At the end of the
Collection Period, in accordance with Section 1.7.6(f), Purchaser shall submit a
definitive list of designated Seller Receivables having an aggregate face value
of $1,000,000, which will become the "Designated Seller Receivables." Within
two days of Seller's receipt of the list of Designated Seller Receivables,
Seller shall transfer and assign to Purchaser all right, title and interest in
the Designated Seller Receivables by delivery of an Assignment and Assumption
Agreement or other appropriate document of transfer.
(c) Purchaser shall then purchase the remaining Uncollected Seller
Receivables, net of the Designated Seller Receivables (the "Residual Seller
Receivables"), in whole only, and not in part. Purchaser must first give
written notice to Seller within five days after the Determination Date,
specifying the price at which it offers to purchase all the Residual Seller
Receivables (the "Offered Price"). Seller shall have five days after receipt of
such written notice of exercise to accept or reject the Offered Price by written
notice to Purchaser.
(d) If Seller rejects the Offered Price pursuant to Section 1.7.6 (c),
the price for the Residual Seller Receivables shall be established through the
following appraisal process. Within four days of Seller's written notice of
rejection of Purchaser's offer, Seller and Purchaser shall each select an
independent appraiser (which may be a factor or other entity in the business of
valuing and collecting accounts receivable), and within four days thereafter,
the two appraisers shall select a third appraiser, to value the Residual Seller
Receivables. Each party shall pay half of the fees and expenses of the
appraisers so selected. Within five days of the selection of the third
appraiser, the appraisers shall each independently determine the aggregate value
of the Residual Seller Receivables. The price payable by Purchaser for the
Residual Seller Receivables (the "Residual Price") shall be the average of the
values determined by the three appraisers. Purchaser shall then be obligated to
purchase, and Seller shall be obligated to sell, all such Residual Seller
Receivables at the Residual Price, reduced as provided in Section 1.7.6(f).
(e) Within five days of Seller's acceptance of Purchaser's offer
pursuant to Section 1.7.6(c) or the determination of the Residual Price pursuant
to Section 1.7.6(d), Purchaser shall deliver to Seller in same day funds the
full amount of the Offered Price or the Residual Price, as applicable, and
Seller shall transfer and assign to Purchaser all right, title and interest to
such Residual Seller Receivables by delivery of an Assignment and Assumption
Agreement or other appropriate document of transfer concurrent with such
payment. Following termination of the Collection
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Period, Purchaser may retain all rights to the lockbox service transferred to it
pursuant to Section 1.7.1.
(f) Purchaser shall continue to collect the Seller Receivables in
accordance with its duties under this Section 1.7 during the pendency of the
procedures outlined in this Section 1.7.6, and all payments received, against
Designated Seller Receivables or otherwise, shall be remitted to Seller in
accordance with Section 1.7.2. Any payments collected against any preliminary
designated Seller Receivables shall reduce the amount of such preliminary
designated Seller Receivables, and Purchaser may designate additional
Uncollected Seller Receivables to comprise an aggregate amount of $1,000,000 in
face amount of the Designated Seller Receivables. Any such payments made after
acceptance of Purchaser's offer by Seller pursuant to Section 1.7.6(c) shall
reduce, dollar for dollar, the amount of the Offered Price and any such payments
received after determination of the Residual Price pursuant to Section 1.7.6(d)
shall reduce, dollar for dollar, the Residual Price.
1.8 INSTRUMENTS OF SALE AND TRANSFER; FURTHER ASSURANCES
(a) On or prior to the Closing Date, Seller shall deliver to Purchaser
and Purchaser shall deliver to Seller, as applicable, such instruments of sale
and assignment as shall, in the reasonable judgment of Purchaser and Seller, be
effective to vest in Purchaser on the Closing Date good and marketable right,
title and interest in and to the Assets free and clear of all Encumbrances and
to evidence the assumption of the Assumed Liabilities by Purchaser, including,
without limitation, a Xxxx of Sale substantially in the form of Exhibit 1.8(a)-1
(the "Xxxx of Sale") and one or more Assignment and Assumption Agreements
substantially in the form of Exhibit 1.8(a)-2 (the "Assignment and Assumption
Agreement"), executed by Seller, Operating and International, as applicable.
Seller shall take all reasonable additional steps as may be necessary to put
Purchaser in possession and operating control of the Assets at the Closing, and
Purchaser shall take all reasonable additional steps as may be necessary for it
to assume the Assumed Liabilities at the Closing.
(b) From time to time following the Closing, Seller and Purchaser shall
execute and deliver, or cause to be executed and delivered, to the other party
such additional instruments of conveyance and transfer and evidences of
assumption as such party may reasonably request or as may be otherwise necessary
or desirable to carry out the purposes of this Agreement.
(c) Purchaser shall cooperate with Seller and use its commercially
reasonable best efforts to obtain the release of Seller from any guarantee of
obligations that constitutes Assumed Liabilities upon or following the Closing.
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1.9 ALLOCATION OF PURCHASE PRICE
Purchaser and Seller shall timely and properly file Internal Revenue
Service Form 8594 based on the allocation of the Purchase Price to be agreed to
by Purchaser and Seller prior to the Closing.
1.10 ASSIGNMENT OF CONTRACTS AND RIGHTS
(a) Notwithstanding anything in this Agreement to the contrary, this
Agreement shall not constitute an agreement to assign any claim, contract,
license, real property lease, personal property lease, commitment, sales order
or purchase order or any claim, right or benefit arising thereunder or resulting
therefrom (including, without limitation, the Joint Venture Agreement and the
Joint Venture Shares) if the agreement to assign or attempt to assign, without
the consent of a third party, would constitute a breach thereof or in any way
adversely affect the rights of Purchaser thereunder (the "Nonassignable
Assets"). Seller will use its commercially reasonable best efforts in
cooperation with Purchaser to obtain consents to assignment of the Nonassignable
Assets from all such third parties prior to the Closing Date and, following the
Closing Date, will cooperate with Purchaser and take all such other action as
Purchaser may reasonably request to obtain consents to assignment. Until such
consent is obtained, or if an attempted assignment thereof would be ineffective
or would adversely affect the rights of Seller or Purchaser thereunder so that
Purchaser would not in fact receive all such rights, Purchaser or Seller will
cooperate with each other in any arrangement designed to provide for Purchaser
the benefits of any such claim, contract, license, lease, commitment, sales
order or purchase order. To the extent reasonably requested by Purchaser,
following the execution of this Agreement and prior to Closing, Seller agrees to
assist Purchaser in arranging meetings with customers of Division, conducting
joint sales calls both at the customer's offices and by telephone, and to take
all other action reasonably requested by Purchaser in order to provide a
transition of the customer relationships and contracts from Seller to Purchaser
on and after the Closing Date. Such arrangements, to the extent provided in
Section 1.3 in respect of liabilities or obligations thereunder arising or to be
performed after the Closing Date, shall be subject to Purchaser's obligation to
undertake and perform Seller's obligations under the Nonassignable Assets,
arising or to be performed after the Closing Date.
(b) To the extent permitted by applicable law, in the event consents to
the assignment thereof cannot be obtained, such Nonassignable Assets shall be
held, as of and from the Closing Date, by Seller in trust for Purchaser, and the
covenants and obligations thereunder shall be performed by Purchaser in Seller's
name and all benefits and obligations existing thereunder shall be for
Purchaser's account. At all
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times prior to and following the Closing, Seller shall take or cause to be taken
such action in its name or otherwise as Purchaser may reasonably request so as
to provide Purchaser the benefits of the Nonassignable Assets (including,
without limitation, cooperating and assisting in the novation of any government
contracts) and to effect collection of money or other consideration to become
due and payable under the Nonassignable Assets, and Seller shall promptly pay
over to Purchaser all money or other consideration received by it in respect to
all Nonassignable Assets. As of and from the Closing Date, Seller authorizes
Purchaser, to the extent permitted by applicable law and the terms of the
Nonassignable Assets, at Purchaser's expense, to perform all the obligations and
receive all of Seller's benefits under the Nonassignable Assets, and appoints
Purchaser its attorney-in-fact to act in its name and on its behalf with respect
thereto. In the case of the Joint Venture Agreement and the Joint Venture
Shares, if Seller has not obtained the consents required for the transfer of its
interests therein by the Closing Date and if necessary to avoid a breach of the
Joint Venture Agreement, Purchaser agrees to cooperate with Seller to permit
Seller to perform its obligations under the Joint Venture Agreement by making
available such of the Assets and the services of any Relevant Employee hired by
Purchaser as, in each case, shall be necessary for Seller to perform such
obligations, on reasonable terms and conditions to be determined by Seller and
Purchaser. Seller agrees to indemnify Purchaser, its successors and permitted
assigns, and its officers, directors, affiliates, employees and controlling
Persons and to hold each such Person harmless against and in respect of any and
all losses, damages, costs and expenses, including attorneys' fees incurred by
any such Person, by reason of any asserted breach or nonperformance by Seller of
the Joint Venture Agreement or any of Seller's obligations thereunder or under,
or by reason of any attempt by Seller to obtain consent to the transfer of
rights thereunder, or to the transfer of the Joint Venture Shares. In the event
that Purchaser reasonably determines that the consents required for the transfer
of the Joint Venture Agreement and the Joint Venture Shares cannot be obtained
within a reasonable time after the Closing or at all, Seller, at Purchaser's
request, shall take all reasonable steps necessary to terminate the Joint
Venture Agreement.
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER
To induce Purchaser to enter into and perform this Agreement, Seller
represents and warrants to Purchaser (which representations and warranties shall
survive the Closing and the Closing Date as provided in Section 8.3) as follows:
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2.1 ORGANIZATION, GOOD STANDING, ETC.
(a) Seller, Operating and International are corporations duly
organized, validly existing and in good standing under the laws of the
jurisdiction of their incorporation. Each of Seller, Operating and
International has full power and authority to execute, deliver and perform this
Agreement and each of the Ancillary Documents to which it is a party. Each of
Seller, Operating and International has all requisite power and authority to own
the Assets owned by them and, collectively, to carry on Division's business.
Seller owns, directly or indirectly, all the outstanding shares of Operating and
International.
(b) Egghead-Uchida, Inc. is a corporation duly organized, validly
existing and in good standing under the laws of Japan and has all requisite
power and authority to conduct its business pursuant to the Joint Venture
Agreement. International owns all the Joint Venture Shares. Seller has
delivered to Purchaser true and complete copies of the Joint Venture Agreement
and all documents and financial information relating to the joint venture
established by the Joint Venture Agreement and the Joint Venture Shares
available to Seller. Seller has funded in full all of its commitments set forth
in the Joint Venture Agreement, and Seller does not have any other commitments
or understandings with respect to its obligations under the Joint Venture
Agreement or relating to the Joint Venture Shares, except as set forth in the
Joint Venture Agreement or in Schedule 2.1(b) to the Disclosure Memorandum.
2.2 DUE AUTHORIZATION, EXECUTION AND ENFORCEABILITY
This Agreement and the consummation of the transactions contemplated
hereby have been duly approved by the Boards of Directors of Seller, Operating
and International and have been duly authorized by all other necessary corporate
action on the part of Seller, Operating and International. Seller has caused,
or prior to the Closing will cause, any other subsidiary that owns Assets to
take all necessary corporate action on its part to approve and authorize the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Seller and Operating and is a legal, valid and
binding obligation of Seller and Operating enforceable in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally and by
general equitable principles (regardless of whether the issue of enforceability
is considered in a proceeding in equity or at law). Each Ancillary Document to
which Seller, Operating or International is a party, when executed and delivered
by Seller, Operating or International, as the case may be, will be a legal,
valid and binding obligation of Seller, Operating or International, as the case
may be, enforceable in accordance with its terms, except as such enforceability
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may be limited by bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally and by general equitable principles
(regardless of whether the issue of enforceability is considered in a proceeding
in equity or at law).
2.3 NO APPROVALS OR NOTICES REQUIRED; NO CONFLICTS WITH INSTRUMENTS
The execution, delivery and performance of this Agreement and the
Ancillary Documents by Seller, Operating and International, as the case may be,
and the consummation of the transactions contemplated hereby will not:
(a) constitute a violation (with or without the giving of notice or lapse of
time, or both) of any provision of law applicable to Seller, (b) require any
consent, approval or authorization of any Person or Governmental Body, except as
described in Section 5.2.1 and Schedule 2.3 to the Disclosure Memorandum,
(c) result in a default under, an acceleration or termination of, or the
creation in any Person of the right to accelerate, terminate, modify or cancel,
or in any other way affect the rights of Purchaser (as assignee or transferee of
Seller) under, any agreement, lease, note or other restriction, Encumbrance,
obligation or liability that relates to Division's business and to which Seller
is a party or by which it is bound or to which the Assets or Division are
subject, except as described in Schedule 2.3 to the Disclosure Memorandum, or
(d) result in the creation of any Encumbrance upon the Assets.
2.4 ABSENCE OF CERTAIN CHANGES OR EVENTS
Except as set forth in Schedule 2.4 to the Disclosure Memorandum, since
December 30, 1995, and through the Closing Date, Seller has not, with respect to
Division:
(a) taken any action or entered into or agreed to enter into any
transaction, agreement or commitment (other than this Agreement and matters
relating hereto), not in the ordinary course of business;
(b) encumbered or disposed of any Assets, except in the ordinary
course of business;
(c) entered into or agreed to enter into any transaction,
agreement or commitment, suffered the occurrence of any event or events or
experienced any change in financial condition, business, results of operations
or otherwise that, in the aggregate, has interfered or could interfere with the
normal and usual operations of the business of Division;
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(d) made any amendment to or terminated any contract, which
amendments or terminations, individually or in the aggregate, would have a
Material Adverse Effect on Division;
(e) waived or canceled any debts, claims or rights relating to
Division, which waivers or cancellations, individually or in the aggregate,
would have a Material Adverse Effect on Division;
(f) made any material change in the terms, status, relationships
or policies relating to Division's business, customers and operations, which
changes, individually or in the aggregate, would have a Material Adverse Effect
on Division;
(g) terminated any Relevant Employee (except that a Relevant
Employee to whom Purchaser does not make an offer pursuant to Section 4.9(a) may
be terminated with Purchaser's consent, which consent shall not be unreasonably
withheld);
(h) made any material alteration in the manner of keeping the
books, accounts or records of Division, or in the accounting practices therein
reflected, except as required by GAAP or as contemplated under this Agreement or
the Fulfillment Agreement to permit performance of its obligations hereunder and
thereunder; or
(i) except as contemplated by this Agreement, made, accrued or
become liable for any bonus, profit-sharing or incentive payment to Relevant
Employees, except for accruals under existing plans, if any, or increased the
rate of compensation payable or to become payable by Division to any of the
Relevant Employees, other than compensation increases in the ordinary course of
business.
2.5 TAXES
All Taxes of Seller with respect to its operation of Division's business
that have become due and payable have been timely paid or are being contested in
good faith with appropriate and adequate reserves in accordance with GAAP,
consistently applied, and Seller has no liability for any such Tax with respect
to its operation of Division's business, and no interest or penalties have
accrued or are accruing with respect thereto, whether federal, state, county,
local or otherwise with respect to any periods prior to and including the
Closing Date that, if not paid, would cause the Assets to be subject to an
Encumbrance in the hands of Purchaser or for which Purchaser would be liable
either as a "transferee" within the meaning of Section 6901 of the Code or any
similar provision of state, local or foreign law or as a result of any bulk
sale, fraudulent conveyance or similar law. Seller has filed all federal,
state,
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county and other local and excise, franchise, property, sales, use, payroll,
income and other Tax returns required to be filed by Seller, and such returns
are true, correct and complete in all material respects.
2.6 PROPERTY
(a) Schedule 2.6(a) to the Disclosure Memorandum contains a legal
description of the Call Center, and Seller has provided to Purchaser a complete
and accurate list of all items of personal property exceeding $10,000 in value
(the "Personal Property") owned or leased and used by Seller primarily in the
operation of Division's business as of the date of such Schedule, wherever such
Personal Property may be located. Seller has delivered to Purchaser true and
complete copies of all leases, subleases, rental agreements, contracts of sale,
tenancies or licenses of any portion of the Call Center and the Personal
Property. The Assets, including the Personal Property, together with the Call
Center Lease, the services provided by the Fulfillment Agreement and any
licenses granted by Seller to Purchaser hereunder, together with Purchaser's
existing vendor relationships, include all property and services reasonably
required or otherwise necessary for use in the conduct of Division's business as
presently conducted.
(b) Seller has good and valid title to the Call Center, free and clear
of all Encumbrances, except as specifically described in Schedule 2.6(b) to the
Disclosure Memorandum. Except as described in Schedule 2.6(b) to the Disclosure
Memorandum, no consent is required from any party with respect to the Call
Center in connection with the consummation of the transactions described in or
contemplated by this Agreement.
(c) There are no adverse zoning, environmental or other governmental
restrictions that currently or, to Seller's knowledge after due inquiry, may
prospectively restrict the use of all or any portion of the Call Center for the
conduct thereon of Division's business in the manner presently conducted.
(d) There are no existing leases, subleases, tenancies or licenses of
any portion of the Call Center, except for those identified in Schedule 2.6(d)
to the Disclosure Memorandum.
(e) Each lease, license, rental agreement, contract of sale or other
agreement to which Personal Property is subject is valid and in good standing,
Seller has performed all obligations imposed on it thereunder, and neither
Seller nor any other party thereto is in default thereunder in any material
respect, nor is there any event that with notice or lapse of time, or both,
would constitute a default thereunder. Seller has not received notice and is
not otherwise aware that any party to any such
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lease, license, rental agreement, contract of sale or other agreement intends to
cancel, terminate or refuse to renew the same or to exercise or decline to
exercise any option or other right thereunder. The Personal Property is not
subject to any lease, license, contract of sale or other agreement that could be
reasonably expected to have an adverse effect on Division.
(f) Except as specifically set forth in Schedule 2.6(f) to the
Disclosure Memorandum, and except for assessments for Taxes not yet due and
payable, the Personal Property is, or, on the Closing Date, will be, free and
clear of all Encumbrances, and, other than Personal Property leased by Seller
for use in the operation of Division's business and so noted on the list
supplied pursuant to Section 2.6(a), Seller has good and marketable title
thereto. The furniture, equipment and computer hardware described in Schedule
1.1.1 to the Disclosure Memorandum is in good repair and operating condition,
ordinary wear and tear excepted.
(g) Seller has no knowledge of any physical defect in the Call Center
that could be reasonably expected to have an adverse effect on Division.
2.7 COMPLIANCE WITH ENVIRONMENTAL LAWS
Except as reasonably could not (a) impair Purchaser's rights under this
Agreement or rights to or use of the Assets, (b) impair the value of Division to
Purchaser, or (c) result in any liability or obligation of Purchaser, or except
as specifically set forth in Schedule 2.7 to the Disclosure Memorandum, Seller
has not treated, stored or disposed of Hazardous Materials on the Call Center or
any real property previously owned, leased, subleased or used by Seller in the
operation of Division's business, in violation of any Environmental Laws.
Except as specifically set forth in Schedule 2.7 to the Disclosure Memorandum,
to the best knowledge of Seller, there have been no Releases of Hazardous
Materials on, at or from any assets or properties, including, without
limitation, the Call Center or any real property owned, leased, subleased or
used by Seller in the operation of Division's business at any time such assets
or properties were owned, leased, subleased or used by Seller, including,
without limitation, any Releases of Hazardous Materials that could subject
Seller or Purchaser to liability under any Environmental Laws. Except as
specifically set forth in Schedule 2.7 to the Disclosure Memorandum, to the best
knowledge of Seller, there has been no generation or transportation of Hazardous
Materials by Seller in the operation of Division that could subject Seller or
Purchaser to liability under any Environmental Laws. Except as specifically set
forth in Schedule 2.7 to the Disclosure Memorandum, to the best knowledge of
Seller, there have been no Releases of Hazardous Materials by Seller on or from
the Call Center prior to Seller's lease, sublease, ownership or use thereof that
could subject Seller or Purchaser to liability under any Environmental Laws.
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2.8 CONTRACTS
Schedules 1.1.5A(1), (3) and (4) and Schedule 2.8C (and all schedules
included as a subpart of or within such Schedules) to the Disclosure Memorandum
contain a complete and accurate list of all written contracts to which Seller is
a party and that relate primarily or materially to the operation of Division's
business, other than contracts that involve obligations of or to Seller in
relation thereto of less than $50,000 as of December 30, 1995, vendor contracts,
VLAM contracts and relationships that are or will be listed on Schedule 1.1.5B
and purchase orders (other than blanket purchase orders with an aggregate dollar
value in excess of $50,000). Schedule 1.1.5B. to the Disclosure Memorandum
contains a complete and accurate list of all VLAM reseller agreements that are
active as of December 30, 1995 and the amount of the Preliminary VLAM Revenue
related thereto. Seller covenants and agrees to provide Purchaser on the
Closing Date with a revised Schedule 1.1.5B listing the VLAM reseller agreements
that are active as of the Closing Date, the amount of the Transferred VLAM
Revenue by customer and the period to which such Transferred VLAM Revenue
relates and the active VLAM customer relationships and/or agreements as of the
Closing Date. Schedule 2.8D lists the names of all software vendors with whom
Seller had active vendor relationships for products sold by Division as of
February 24, 1996.
Except as specifically set forth in Schedule 1.1.5A, Schedule 1.1.5B or
Schedule 2.8 to the Disclosure Memorandum, all contracts set forth on Schedules
1.1.5A(1), (3) and (4) and Schedule 1.1.5B (and all schedules included as a
subpart of or within such Schedules) are valid and in full force and effect,
Seller and Division have performed in all material respects all obligations
imposed upon them thereunder, and there are, under any of such contracts (with
or without the lapse of time or the giving of notice or both), no breaches of or
defaults or events of default by Seller, or to Seller's knowledge, by any other
party thereto that would have an adverse effect on Division's business. Except
as specifically set forth in Schedule 1.1.5A or Schedule 1.1.5B to the
Disclosure Memorandum, no executive officer or regional manager of Seller (a) is
aware that any Significant Customer of Division or any customer of Division with
an active VLAM relationship listed on Schedule 1.1.5B intends to materially
alter its existing relationship with Seller or (b) has received any notice of
termination, intent to terminate or intent to withhold consent to assignment
(whether oral or written) with respect to any of the contracts or customer
relationships to be assigned to Purchaser hereunder or to be held for the
benefit of Purchaser. Except as specifically set forth in Schedule 1.1.5A or
Schedule 1.1.5B to the Disclosure Memorandum, to the best of Seller's knowledge,
no other party to any of the contracts listed on Schedule 1.1.5 to the
Disclosure Memorandum has evidenced, or communicated in any manner, any intent
in the future to withhold consent to
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assignment, cancel, terminate or refuse to renew such contract or to exercise or
decline to exercise any option or other right thereunder.
As soon as practicable after the execution of this Agreement, Seller
shall have delivered true and correct copies of all contracts listed in
Schedules 1.1.5A(1), (3) and (4) and Schedule 1.1.5B to the Disclosure
Memorandum, subject only to restrictions in such contracts requiring that all or
part of the information therein shall be kept confidential. Prior to the
Closing, Seller agrees to use its commercially reasonable best efforts to obtain
from the other party or parties to any such contract their consent to the
disclosure of confidential information to Purchaser.
2.9 CLAIMS AND LEGAL PROCEEDINGS
Except as specifically set forth in Schedule 2.9 to the Disclosure
Memorandum, there are no claims, actions, suits, arbitrations, proceedings or
investigations pending or threatened against Seller with respect to the
operation of Division, before or by any governmental or nongovernmental
department, commission, board, bureau, agency or instrumentality ("Agency"), or
any other Person. Except as set forth therein, none of the matters listed in
Schedule 2.9 will, and, to Seller's knowledge, no valid basis exists for any
claim, action, suit, arbitration, proceeding or investigation by any Agency or
other Person that could reasonably be expected to, (a) impair Purchaser's rights
under this Agreement or rights to or use of the Assets, (b) impair the value of
Division to Purchaser, or (c) result in any liability or obligation of
Purchaser. There are no outstanding or unsatisfied judgments, orders, decrees
or stipulations to which Seller, with respect to its operation of Division, is a
party that involve the transactions contemplated herein or that would have an
adverse effect on Division.
2.10 LABOR MATTERS
Except as set forth in Schedule 2.10 to the Disclosure Memorandum, there
are no disputes, employee grievances or disciplinary actions pending or, to
Seller's knowledge, threatened between Seller and any of the Relevant Employees,
and Seller, with respect to the Relevant Employees, has complied in all material
respects with all provisions of all laws relating to the employment of labor.
Except as set forth in Schedule 2.10 to the Disclosure Memorandum, Seller has
not incurred liability for any arrears of wages or Taxes, or penalties for
failure to comply with any such laws. Seller has no knowledge of any
organizational efforts presently being made or threatened by or on behalf of any
labor union with respect to the Relevant Employees. Schedule 2.10 to the
Disclosure Memorandum contains a complete and correct summary of the status of
the investigations relating to the classification of Division's employees under
federal and state law. Except as set forth therein, none of the
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matters listed in Schedule 2.10 to the Disclosure Memorandum could reasonably be
expected to have an adverse effect on Purchaser's operation of Division
following the Closing.
Except as specifically set forth in Schedule 2.10 to the Disclosure
Memorandum, Seller with respect to the Relevant Employees is not a party to any
of the following:
(a) management, employment or other contract providing for the
employment or rendition of executive services;
(b) employment contract that is not terminable without penalty
by Seller on 30 days' notice;
(c) bonus, incentive, deferred compensation, severance pay,
pension, profit-sharing, retirement, stock purchase, stock option, employee
benefit or similar plan, agreement or arrangement;
(d) collective bargaining agreement or other agreement with any
labor union or other employee organization (and no such agreement is currently
being requested, or is under discussion by management with any group of
employees or others); or
(e) other employment contract or other compensation agreement or
arrangement, oral or written, affecting or relating to current or former
employees of Division.
Set forth in Schedule 4.9 to the Disclosure Memorandum is (a) a correct
list of all Relevant Employees and their respective positions as of March 1,
1996, and (b) an analysis of the Relevant Employees, by employment category,
showing the number of Relevant Employees in each category, the exempt versus
nonexempt status of each category, and the average year of service and average
salary for the Relevant Employees in each category, as of February 23, 1996.
All the contracts and other agreements and arrangements set forth in
Schedule 2.10 to the Disclosure Memorandum are valid and in full force and
effect, Seller has performed all material obligations imposed upon it
thereunder, and there are, under any of such contracts, agreements or
arrangements, no defaults or events of default by Seller or, to Seller's
knowledge, any other party thereto that would have an adverse effect on Division
or its relationship with the Relevant Employees.
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2.11 TRADE SECRETS; KNOW-HOW
Except as set forth in Schedule 2.11 to the Disclosure Memorandum,
Seller owns, or has full and unrestricted rights to, all technology and know-how
now used by Division and has full power to transfer to Purchaser all such
rights.
A true and complete description of (a) all license agreements and
consulting agreements used primarily in or related primarily to the operation of
Division to which Seller is a party pursuant to which consulting services are
provided to or by Seller or intellectual property is licensed to or by Seller
and (b) any interference actions or adverse claims made or threatened in respect
thereof and any claims made or threatened for alleged infringement thereof is
specifically set forth in Schedule 2.11 to the Disclosure Memorandum. To the
best of Seller's knowledge, in its operation of Division, it does not infringe
any valid trademark, trade name, service xxxx or copyright of any other Person
or entity. All agreements listed in Schedule 2.11 to the Disclosure Memorandum
are valid and enforceable, Seller has performed all material obligations imposed
upon it thereunder, and neither Seller nor, to Seller's knowledge, any other
party thereto is in default thereunder in any material respect, nor is there any
event that with notice or lapse of time, or both, would constitute a material
default thereunder by Seller or, to Seller's knowledge, any other party thereto.
Seller has not received notice that any party to any such agreement intends to
cancel, terminate or refuse to renew the same or to exercise or decline to
exercise any option or other right thereunder. Except as listed in
Schedule 2.11 to the Disclosure Memorandum, Seller, with respect to Division,
has not entered into any agreement to indemnify any Person against any claim or
charge of infringement of any trademarks, trade names, copyrights, technology,
know-how or other intangible rights.
2.12 LICENSES, PERMITS, AUTHORIZATIONS, ETC.
Seller has received all currently required governmental approvals,
authorizations, consents, licenses, orders, registrations and permits of all
agencies, whether federal, state, local or foreign, related to or necessary for
the operation of Division's business. Schedule 2.12 to the Disclosure
Memorandum sets forth a list of all such approvals, authorizations, consents,
licenses, orders, registrations and permits.
2.13 SELLER RECEIVABLES; TRANSFERRED VLAM REVENUE
All the Seller Receivables will have been accrued and the Transferred
VLAM Revenue set forth in Schedule 1.1.5 to the Disclosure Memorandum on the
Closing Date will have been deferred in accordance with GAAP, consistently
applied. Both the Seller Receivables and the Transferred VLAM Revenue set forth
in Schedule 1.1.5 to the Disclosure Memorandum on the Closing Date will be
legal, valid and binding
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obligations of the obligors, subject only to possible
Errors of the type set forth in Schedule 1.7.4 to the Disclosure Memorandum, and
will have been generated in the ordinary course of the operation of Division's
business by Seller, consistent with past practices. Both the preliminary list
of the Seller Receivables provided to Purchaser on the Closing Date and the
definitive list of Seller Receivables provided to Purchaser following the
Closing will include, at a minimum, the name and address of the account debtor,
a customer contact name and telephone number, the unpaid balance on the account
and an aging by invoice.
2.14 APPLICABLE LAWS
Except as set forth in Schedule 2.10 to the Disclosure Memorandum,
Seller, with respect to Division, has complied, and is in compliance, with all
federal, state, local and foreign laws, rules, ordinances, decrees and orders
applicable to the operation of Division's business or the Call Center. Except
as set forth in Schedule 2.10 to the Disclosure Memorandum, Seller is not aware
of any basis for and has not received notification of any unasserted present or
past unremedied failure by Seller, with respect to Division, to comply with any
such laws, rules, ordinances, decrees and orders.
2.15 INSURANCE
Seller maintains, with respect to Division's business, adequate
insurance protection against all liabilities, claims and risks against which it
is customary for corporations engaged in the same or a similar business
similarly situated to insure. Schedule 2.15 to the Disclosure Memorandum sets
forth a list of all property and casualty insurance policies and fidelity bonds
held by Seller that are related to Division. All such policies and bonds are in
full force and effect, and there is no threat by any of the insurers to
terminate any of such policies or bonds or increase the premiums payable under
such policies or bonds.
2.16 EMPLOYEE BENEFIT PLANS
Seller maintains for the benefit of current or former employees of
Division only those Employee Benefit Plans listed in Schedule 2.10 to the
Disclosure Memorandum. Seller is not now a contributing employer to any multi-
employer plan as described in Section 4001(a)(3) of ERISA with respect to any
employees of Division. Seller has not been a contributing employer to any
multi-employer plan with respect to employees of Division in the past five
years. Each and every pension plan (as defined in Section 3(2) of ERISA)
maintained by Seller for the benefit of the employees of Division has been
issued a favorable determination letter with respect to its qualified status
under Section 401(a) of the Code by the Internal Revenue Service,
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or an application for such a determination letter has been filed with the
Internal Revenue Service within the requisite time period to allow Seller to
make remedial amendments for such qualification purposes.
2.17 FINANCIAL STATEMENTS AND REPORTS
Seller has previously furnished Purchaser with true, complete and
correct copies of the financial information of Division as of and for the fiscal
years ended April 1, 1993, April 1, 1994 and April 1, 1995, and for the nine
months ended December 30, 1995 (the "Financials"). The Financials for the full
fiscal years have been derived from the audited financial statements of Seller
contained in its annual reports on Form 10-K filed pursuant to the Exchange Act
for the related fiscal years and, for the interim nine-month period, from the
unaudited quarterly financial statements of Seller contained in its quarterly
report on Form 10-Q filed pursuant to the Exchange Act for the referenced nine-
month period (the "SEC Reports"). The financial statements contained in the SEC
Reports have been prepared in accordance with GAAP, consistently applied (except
as may be indicated therein or in the notes thereto).
2.18 BROKERAGE
Except for Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation ("DLJ"),
Seller has not retained any broker or finder in connection with the transactions
contemplated by this Agreement. All fees of DLJ shall be exclusively for the
account of Seller, and any brokerage or finder's fee due to any broker or finder
in violation of the foregoing representation shall be paid by Seller.
2.19 ABSENCE OF QUESTIONABLE PAYMENTS
To the best of Seller's knowledge, none of Seller or any director,
officer, agent, employee or other Person acting on behalf of Seller has used any
Division funds for improper or unlawful contributions, payments, gifts or
entertainment or made any improper or unlawful expenditures relating to
political activity to any government official or other Person. Seller has
adequate financial controls to prevent such improper or unlawful contributions,
payments, gifts, entertainment or expenditures. To the best of Seller's
knowledge, none of Seller or any director, officer, agent, employee or other
Person acting on behalf of Seller has accepted or received any improper or
unlawful contributions, payments, gifts or expenditures in connection with the
operation of Division's business.
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2.20 FULL DISCLOSURE
No information furnished by Seller to Purchaser in connection with this
Agreement (including, without limitation, all information in the Schedules to
the Disclosure Memorandum) is false or misleading in any material respect. In
connection with such information and with this Agreement and the transactions
contemplated hereby, Seller has not made any untrue statement of a material fact
or omitted to state a material fact necessary in order to make the statements
made or information delivered, in the light of the circumstances under which
they were made, not misleading.
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
PURCHASER
To induce Seller to enter into this Agreement, Purchaser represents and
warrants to Seller (which representations and warranties shall survive the
Closing and the Closing Date as provided in Section 8.3) all as follows in this
Article III:
3.1 ORGANIZATION, GOOD STANDING, POWER, ETC.
Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Purchaser has
full power and authority to execute, deliver and perform this Agreement and each
of the Ancillary Documents to which it is a party.
3.2 DUE AUTHORIZATION, EXECUTION AND ENFORCEABILITY
This Agreement and the consummation of the transactions contemplated
hereby have been duly approved by Purchaser's Board of Directors and have been
duly authorized by all other necessary corporate action on the part of
Purchaser. This Agreement has been duly executed and delivered by Purchaser and
is a legal, valid and binding obligation of Seller enforceable in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights generally
and by general equitable principles (regardless of whether the issue of
enforceability is considered in a proceeding in equity or at law). Each
Ancillary Document to which Purchaser is a party, when executed and delivered by
Purchaser, will be a legal, valid and binding obligation of Purchaser
enforceable in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally and by general equitable principles (regardless of
whether the issue of enforceability is considered in a proceeding in equity or
at law).
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3.3 NO APPROVALS OR NOTICES REQUIRED; NO CONFLICTS WITH INSTRUMENTS
The execution, delivery and performance of this Agreement and the
Ancillary Documents by Purchaser and the consummation of the transactions
contemplated hereby will not, to the extent that the occurrence of any matter
referred to in the following clause (a), (c) or (d), or the nonreceipt of any
consent, approval or authorization referred to in clause (b), reasonably could
(i) impair Seller's rights under this Agreement or (ii) result in any liability
or obligation of Seller: (a) constitute a violation (with or without the giving
of notice or lapse of time) of any provision of law applicable to Purchaser,
(b) require any consent, approval or authorization of any Person or Governmental
Body, except as described in Section 5.2.1, (c) result in a default under, an
acceleration or termination of, or the creation in any party of the right to
accelerate, terminate, modify or cancel, any material agreement, lease, note or
other restriction, Encumbrance, obligation or liability to which Purchaser is a
party or by which Purchaser is bound or to which its assets are subject, or
(d) conflict with or result in a breach of or constitute a default under any
provision of the articles of incorporation or bylaws of Purchaser.
3.4 CLAIMS AND LEGAL PROCEEDINGS
There are no claims, actions, suits, arbitrations, proceedings or
investigations pending or, to Purchaser's knowledge, threatened against
Purchaser, before or by any Agency or any other Person, and there are no
outstanding or unsatisfied judgments, orders, decrees or stipulations to which
Purchaser is a party that involve the transactions contemplated hereby or that
would alone or in the aggregate have a material adverse effect on the business,
business prospects, assets or financial condition of Purchaser.
3.5 BROKERAGE
Except for Xxxx Xxxxxx Xxxxxxxx, Inc. ("Xxxx Xxxxxx"), Purchaser has not
retained any broker or finder in connection with the transactions contemplated
by this Agreement. All fees of Xxxx Xxxxxx shall be exclusively for the account
of Purchaser, and any brokerage or finder's fee due to any broker or finder in
violation of the foregoing representation shall be paid by Purchaser.
3.6 FINANCING
Purchaser has available sufficient sources of financing to perform its
obligation hereunder to pay the Purchase Price.
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ARTICLE IV COVENANTS
Purchaser covenants and agrees with Seller to perform and observe the
following covenants, and Seller covenants and agrees with Purchaser to perform
and observe the following covenants:
4.1 SCHEDULES
(a) All representations and warranties contained herein shall apply
to any exhibits, schedules or certificates (including all Schedules to the
Disclosure Memorandum) delivered by Seller or any officer thereof to Purchaser,
and each such exhibit, schedule or certificate (including all Schedules to the
Disclosure Memorandum) shall be deemed to be a representation by Seller as to
the matters set forth therein.
(b) On or prior to the Closing Date, Seller may deliver to Purchaser
one or more Schedules to the Disclosure Memorandum that are revised or updated
to reflect changes to the operations or condition of Division's business between
the date hereof and the Closing Date. Except with respect to the delivery of
revised Schedule 1.1.5 to the Disclosure Memorandum to list additional contracts
with customers, to reflect expiration of contracts in accordance with their
terms and to set forth the amount of the Transferred VLAM Revenue, such
revisions and updates (i) shall be effective only for the purpose of permitting
Seller to deliver to Purchaser at the Closing an officers' certificate that
contains a true and accurate restatement as of the Closing Date of the
representations and warranties of Seller as set forth herein and (ii) shall not
be effective for the purpose of determining any right to indemnification that
Purchaser may have under Section 8.3 or any right to terminate, or not to
consummate the Closing under, this Agreement that Purchaser may have under
Article VI, which rights shall be determined as if Seller had restated as of the
Closing Date all of its representations and warranties without any revision or
update to any Schedule to the Disclosure Memorandum.
(c) Other than as set forth in Section 4.1(b), all Schedules to the
Disclosure Memorandum may be amended only as agreed to in writing by the parties
hereto.
4.2 ACCESS
Seller shall, and shall cause each of its subsidiaries to, afford, during
normal business hours during the period from the date of this Agreement through
the Closing Date, to Purchaser's accountants, counsel, financial advisors,
officers, environmental consultants and other representatives reasonable access
to, and permit them to make such inspections as may reasonably be requested of,
its properties, books, contracts,
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commitments and records primarily or materially relating to Division (excluding
all vendor contracts, other than the active VLAM contracts transferred to
Purchaser hereunder), and also permit such interviews with its officers and
employees as may be reasonably requested in respect of Division's business, all
the foregoing to be coordinated through such officers of Seller as Seller may
designate; and, during such period, Seller shall, and shall cause each of its
subsidiaries to, promptly furnish to Purchaser all information concerning
Division's properties, assets, business and personnel as Purchaser may
reasonably request and will facilitate and assist Purchaser during normal
business hours in conducting interviews with employees of Seller relating to
Division. Seller will provide support and assistance to Purchaser during normal
business hours, as reasonably requested by Purchaser, in order to provide an
orderly transition of Division's business on the Closing Date. From the date of
this Agreement through the Closing Date, Purchaser and Seller shall consult with
each other regarding any inquiries made by antitrust regulatory authorities
relating to this Agreement or the transactions contemplated herein, including
any issues raised by such authorities and the possible resolutions thereof. No
investigation pursuant to this Section 4.2 shall affect any representation or
warranty in this Agreement of any party hereto or any condition to the
obligations of the parties hereto. All information obtained by Purchaser or
Seller pursuant to this Section 4.2 shall be kept confidential in accordance
with the Confidentiality Agreement or, after the Closing Date, Section 4.7 of
this Agreement.
4.3 ADVICE OF CLAIMS
From the date of this Agreement to and including the Closing Date,
Seller will promptly advise Purchaser in writing of the commencement or threat,
or any rulings, decrees or other material developments in any claim, action or
suit described in Schedule 2.9 to the Disclosure Memorandum or arising as
described herein, of any claims, litigation or proceedings against or affecting
Division, of which it has notice or knowledge.
4.4 CONDUCT PRIOR TO THE CLOSING DATE
(a) From the date of this Agreement to and including the Closing
Date, except as permitted, required or specifically contemplated by this
Agreement or otherwise as approved in writing by Purchaser (which approval shall
not be unreasonably withheld), all actions of Seller with respect to Division
will be taken in the ordinary course of business and Seller will take no action
inconsistent with this Agreement or that will cause any representation,
warranty, Exhibit to this Agreement or Schedule to the Disclosure Memorandum to
be untrue at the Closing Date, and will use commercially reasonable best efforts
to cause the conditions set forth in
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Sections 5.2 and 5.3 to be satisfied as soon as practicable following the date
hereof and to preserve the continuity of Division and Division's beneficial
relationships with its employees, suppliers, distributors, customers and others
having business dealings with it. Purchaser shall use commercially reasonable
best efforts to cause the conditions set forth in Sections 5.2 and 5.4 to be
satisfied as soon as practicable following the date hereof.
Each party (the "Notifying Party") shall promptly advise the other
parties (the "Notified Parties") in writing of any event, or the nonoccurrence
of any event, (i) that has caused, or would reasonably be expected to cause, a
material breach by the Notifying Party of any representation or warranty that is
not qualified as to materiality or a breach by the Notifying Party of any
representation or warranty that is qualified by materiality, (ii) that has
caused, or would reasonably be expected to cause, any covenant, condition or
agreement contained in this Agreement or any Ancillary Document not to be
complied with or satisfied, or (iii) in the case of Seller, having, or that
would reasonably be expected to have, a Material Adverse Effect on Division;
provided, however, that the delivery of any such notice shall not limit or
otherwise affect the remedies available hereunder to the Notified Parties.
(b) Without limiting the generality of the foregoing or limiting or
reducing Purchaser's rights and Seller's obligations pursuant to Article I,
Seller agrees to use all commercially reasonable best efforts to obtain, prior
to the Closing, written consent to assignment (in form and substance reasonably
satisfactory to Purchaser) of all agreements listed in Schedule 1.1.5 to the
Disclosure Memorandum for which such consent is required, as reasonably
requested by Purchaser, and to otherwise use all commercially reasonable best
efforts prior to the Closing Date to provide for the transfer of customer
relationships to Purchaser immediately following the Closing Date.
4.5 INSURANCE; LOSS OF OR DAMAGE TO ASSETS
(a) Seller shall maintain, from the period commencing on the date of
this Agreement and ending on the Closing Date, the same insurance coverages it
maintained prior to the date hereof in respect of Division and the Assets.
(b) Seller shall give Purchaser prompt written notice of (i) any
loss, damage or destruction to any of the tangible Assets occurring on or after
the date hereof and on or prior to the Closing Date, (ii) the estimated value of
the portion of the tangible Assets so lost, damaged or destroyed, and (iii) the
estimated cost of repair, replacement or reconstruction thereof. Without regard
to the limitation set forth in Section 8.3.5, any insurance proceeds paid to
Seller in respect of any such loss, damage or destruction shall be paid to
Purchaser in accordance with Section 1.1.7 and
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Seller shall pay all retention, deductible or copayments required under such
insurance policies, it being acknowledged that all risk of loss of the Assets on
or prior to the Closing Date will remain with Seller.
4.6 COOPERATION
(a) Each party shall fully cooperate with the other parties and their
advisors (i) in connection with any steps required to be taken as part of any
party's obligations hereunder, (ii) in order to comply with their respective
financial reporting obligations under applicable securities laws, and (iii) in
order to carry out the purposes of this Agreement.
(b) Without limiting the generality of the foregoing, except as
otherwise provided in this Agreement, Seller and Purchaser shall (i) cooperate
in the preparation and filing of such materials as may be required in order to
comply with the requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended, and (ii) use commercially reasonable efforts to prevent the
entry in a judicial or administrative proceeding brought under any antitrust law
of any permanent or preliminary injunction or other order that would make
consummation of the transactions contemplated by this Agreement in accordance
with the terms hereof unlawful or would prevent, delay or impose conditions on
such consummation.
(c) Notwithstanding any other provision of this Agreement, in
response to any action taken or threatened to be taken by any court or
Governmental Body, Purchaser shall not be required under this Agreement to sell,
license or otherwise dispose of, hold separate or otherwise divest itself of any
portion of its business or assets or any portion of the business or assets of
Division or agree to any limitations or restrictions in connection with its
operation of such businesses that are likely to have a material adverse effect
on the expected benefits of the transactions contemplated hereby to Purchaser,
in order to consummate the transactions contemplated hereby.
4.7 CONFIDENTIALITY; PUBLICITY
The Confidentiality and Standstill Agreement, dated November 7, 1994,
between Seller and Purchaser, as amended and supplemented on January 13, 1995
and November 10, 1995 (the "Confidentiality Agreement"), shall remain in full
force and effect until the Closing Date, except that (a) in the event that this
Agreement shall be terminated prior to the Closing Date the time periods
contained in the Confidentiality Agreement shall run from the date of
termination of this Agreement and (b) Seller shall not request a return of any
information or material referred to in the Confidentiality Agreement unless this
Agreement shall be terminated prior to the
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Closing Date in accordance with its terms. On the Closing Date, the
Confidentiality Agreement shall terminate. From and after the Closing Date,
Seller agrees to maintain any information and material used primarily in
Division's business in confidence and not to use such information for any
purpose other than internal accounting and Tax return preparation purposes, and
Purchaser agrees to maintain any information and material received under the
Confidentiality Agreement with respect to Seller and its business (other than
Division's business) in confidence and not use such information for any purpose;
provided, however, that each party hereto may disclose: (i) the Purchase Price
and general terms of the transactions contemplated by this Agreement, (ii) any
other information regarding such transactions as may be required by federal
securities laws or other laws applicable to such party, and (iii) any
information the disclosure of which is consented to in writing by the other
party. Purchaser and Seller will use commercially reasonable efforts to provide
the other party with copies of any press release or other public disclosure
relating to this Agreement at least 24 hours prior to release.
4.8 AGREEMENT NOT TO COMPETE
(a) Seller understands and acknowledges that Purchaser is entitled to
protect and preserve the going-concern value of Division to the full extent
permitted by law and that Purchaser would not have entered into this Agreement
absent the provisions of this Section 4.8(a), and, therefore, for the
consideration to be received by Seller under this Agreement, Seller agrees that
for a period of five years following the Closing Date, neither Seller nor any of
its subsidiaries will directly or indirectly (i) engage in or represent in any
way that it is connected with the corporate, governmental and educational
business that it currently conducts through Division (except to the extent that
the Seller Receivables are collected in its name), (ii) offer contract pricing
for software or services to corporate, governmental or educational businesses,
or (iii) engage in marketing and sales efforts through outbound telemarketing or
a direct sales force; provided, however, that marketing and sales of products
through Seller's retail channels (including offers and sales of products through
general mass market advertising, through the Internet or through electronic
ordering systems) shall not be prohibited by this Section 4.8(a) so long as in
connection with such activities, Seller does not engage in the activities
expressly prohibited by clause (i), (ii) or (iii) above and provided further
that Seller, in any event, shall not sell more than 300 copies of any software
product stock keeping unit on a single purchase order to any customer listed on
Exhibit 4.8 (which Exhibit lists the largest 200 customers of Division based on
revenues from such customers recorded during that portion of fiscal 1996 ended
January 27, 1996), other than any incidental sales in such amounts to any such
customers who might place the order in person in one of Seller's retail stores.
Seller shall not be deemed to have violated or
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breached the terms of this Section 4.8(a) solely by the offer and sale of
Seller's Eletrade suite of products; provided that such offers and sales do not
include as part of the Eletrade suite of products any type of electronic
catalogue that includes product offerings by Seller of the nature sold by
Division. Seller will offer to sell to Purchaser, for five years following the
Closing Date, any such electronic catalogue product at the best price and terms
that Seller makes available to any of its customers.
For a period of one year following the Closing Date, Seller agrees that
it will not hire, retain or employ any Person that is or becomes an employee of
Purchaser on or prior to the Closing Date (other than Relevant Employees that
are employed pursuant to Section 1.7.1 and whose employment is terminated by
Purchaser on or prior to the end of the Collection Period). For purposes of
this Section 4.8(a), the phrase "directly or indirectly engage in" includes
having a direct or indirect ownership interest (other than ownership of less
than five percent of the outstanding voting securities of a Person, which is
registered under Section 12 of the Exchange Act) in any Person that engages in
the business in question.
(b) Purchaser understands and acknowledges that Seller is entitled to
protect and preserve the going-concern value of Seller to the full extent
permitted by law and that Seller would not have entered into this Agreement
absent the provisions of this Section 4.8(b), and, therefore, for the
consideration to be received by Purchaser under this Agreement, Purchaser agrees
that for a period of one year following the Closing Date, except as expressly
permitted in this Agreement, neither Purchaser nor any of its subsidiaries will
hire, retain or employ any Person that is or becomes an employee of Seller's
management information services department on or prior to the Closing Date,
other than Relevant Employees who are terminated by Seller as contemplated by
this Agreement.
(c) Notwithstanding any other provision of this Agreement, each of
the parties to this Agreement understands and agrees that the remedy of
indemnity payments pursuant to Section 8.3 and other remedies at law would be
inadequate in the case of any breach of the covenants contained in
Sections 4.8(a) and 4.8(b), and Seller and Purchaser agree that a party shall be
entitled to equitable relief, including the remedy of specific performance,
without posting of bond or other security, with respect to any breach or
attempted breach of such covenants by the other party.
4.9 POST-CLOSING EMPLOYMENT OBLIGATIONS
(a) Schedule 4.9 to the Disclosure Memorandum contains a true and
complete list of the Relevant Employees, their current positions with Division,
their salary and benefits for the year ended December 31, 1995, the hire date
for each such employee and their current employment status. On or prior to the
Closing Date,
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Purchaser will offer employment to the Relevant Employees
designated in accordance with Section 1.7.1 and will designate all other
Relevant Employees that Purchaser will offer to employ on or immediately after
the Closing Date.
(b) Seller shall be and remain solely liable for all liabilities and
obligations of, including all benefits, severance, medical, dental and optical
claims, disability payments, group life and accidental death and dismemberment
insurance claims, retirement benefits and vacation benefits relating to its past
and present employment of, all of its employees, including the Relevant
Employees, through the Closing Date. With respect to such employees, Seller
shall have sole responsibility for complying with, and shall retain all
liabilities and obligations resulting from any noncompliance with, the
requirements of COBRA, the WARN Act and any other state, federal or local
requirements with respect to any termination of employment caused by a reduction
in work force, shutdown, plant closure or other employment termination in
connection with the transactions contemplated by this Agreement.
(c) Offers of employment by Purchaser to the Relevant Employees
pursuant to Section 1.7.1 or identified pursuant to Section 4.9(a) shall be on
terms and conditions comparable to those extended to Purchaser's employees
performing comparable functions, and shall include all customary benefits
(including, if applicable, severance benefits); except that Seller shall remain
liable, and shall reimburse Purchaser for costs incurred by Purchaser, for any
and all severance benefits and other severance-related costs relating to the
Relevant Employees hired pursuant to Section 1.7.1 whose employment is
terminated by Purchaser within the 30 days following the Collection Period. To
the Relevant Employees who are hired by Purchaser on the Closing Date and whose
employment is subsequently terminated by Purchaser, Purchaser will give service
benefit credit under the terms of Purchaser's severance pay plan for their
period of service with Seller. All Relevant Employees hired by Purchaser
pursuant to Section 4.9(a) who are designated in Schedule 4.9 to the Disclosure
Memorandum as being currently eligible to receive sales commissions under
Seller's sales commission policies shall be eligible to receive sales
commissions from Purchaser in accordance with Purchaser's sales commission
policies, including, to the extent payable under Purchaser's policies,
commissions relating to the Transferred VLAM Revenue.
(d) To the extent any Person seeks severance pay or other sums
pursuant to a severance pay practice or obligation maintained by Seller, Seller
shall indemnify, defend and hold harmless Purchaser for any such claims,
liabilities or obligations. Except as provided in Section 4.9(c), to the extent
any Relevant Employee hired by Purchaser on or after the Closing Date seeks
severance pay, benefits, commissions or any other sums relating to the
employment, discharge, termination of employment or
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other conduct by Purchaser from and after the hiring of such Relevant Employee
by Purchaser, Purchaser shall indemnify, defend and hold harmless Seller for any
such claims, liabilities or obligations. None of the payments provided for in
this Section 4.9 shall be subject to the limitation set forth in Section 8.3.5,
nor shall such payments be counted toward calculating the aggregate amount of
claims set forth in such limitation.
4.10 PROPOSALS FOR ACQUISITION OF DIVISION
Seller will, and will cause its agents, directors and employees to,
immediately notify each other Person that has indicated an interest in acquiring
Division of the execution of this Agreement by Seller and Purchaser and will
immediately cease discussions or negotiations with each such Person conducted
heretofore in respect of any sale of the Assets or of Division (an "Acquisition
Transaction"). Seller shall promptly request and obtain the return of all
information provided to any such Person. Seller shall not, and shall not permit
its officers, employees, representatives or agents to, directly or indirectly,
(a) solicit, initiate or encourage discussions or negotiations with, or provide
any information to, any Person other than Purchaser or its affiliates, or any
group in which Purchaser or its affiliates participate, concerning an
Acquisition Transaction or (b) otherwise solicit, initiate or encourage
inquiries or the submission of any proposal contemplating an Acquisition
Transaction. Seller will promptly communicate to Purchaser the terms of any
inquiry or proposal that it may receive with respect to an Acquisition
Transaction. Seller's notification under this Section 4.10 shall include the
identity of the Person making such proposal and the terms of such proposal.
4.11 FULFILLMENT AGREEMENT
Prior to the Closing, the parties shall prepare and agree upon the
definitive terms of a Fulfillment Agreement (the "Fulfillment Agreement"), to be
entered into at the Closing, in substantially the form set forth in Exhibit 4.11
and any additional terms agreed upon by the parties, the primary purpose of
which shall be to facilitate the orderly transfer of Division's business from
Seller to Purchaser.
4.12 CALL CENTER LEASE
Prior to the Closing, the parties shall prepare and agree upon the
definitive terms of a Lease Agreement (the "Call Center Lease"), to be entered
into at the Closing, in substantially the form set forth in Exhibit 4.12 and any
additional terms agreed upon by the parties, pursuant to which Seller will lease
to Purchaser its call center facility located in Liberty Lake, Washington (the
"Call Center").
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4.13 PRORATION; REIMBURSEMENTS WITH RESPECT TO LEASED PROPERTY
Purchaser and Seller shall each pay their respective portions prorated
as of the Closing Date of (a) state and local ad valorem personal property Taxes
payable on the Assets and (b) rental payments due on the Assets. Each party
shall pay to the other party any amounts owed hereunder as promptly as
practicable after such amounts are determined.
4.14 EXPENSES; CERTAIN PAYMENTS
(a) In the event that this Agreement shall be terminated by Purchaser
pursuant to Section 6.2 (a "Purchaser Termination"), Seller shall promptly (and,
in any event, within five days after submission of statements therefor) pay
Purchaser all its reasonable and documented out-of-pocket fees and expenses
incurred in connection with this Agreement, including legal fees and expenses
and amounts payable to bank financial institutions and investment bankers in
connection with any financing of the transactions contemplated hereby in an
amount not to exceed $750,000. Further, notwithstanding the termination of this
Agreement, if, within 12 months following a Purchaser Termination, Seller or any
of its affiliates enters into an agreement for the sale of Division or any
material part thereof with any third party, Seller agrees to pay Purchaser a fee
of $3,000,000 within two business days after such agreement is entered into by
Seller or any of its affiliates.
(b) In the event that this Agreement shall be terminated by Seller
pursuant to Section 6.3, Purchaser shall promptly (and, in any event, within
five days after submission of statements therefor) pay Seller all its reasonable
and documented out-of-pocket fees and expenses incurred in connection with this
Agreement, including legal fees and expenses and amounts payable to investment
bankers in connection with any of the transactions contemplated hereby in an
amount not to exceed $750,000.
(c) This Section 4.14 shall survive termination of this Agreement for
any reason.
4.15 EMPLOYEE BENEFITS MATTERS
(a) Each Relevant Employee hired by Purchaser on the Closing Date and
his or her dependents will be eligible to enroll in Purchaser's group health
plan upon meeting the eligibility requirements thereof and, if permitted under
Purchaser's group health plan will receive credit for service with Seller toward
the applicable health plan service requirement; provided, however, that if the
preexisting condition exclusion of Purchaser's group health plan shall apply,
and with respect to any Relevant Employee
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hired by Purchaser on the Closing Date or his or her dependent who is adversely
affected by the preexisting condition exclusion, Seller will pay on behalf of
such Relevant Employee or dependent the continuation coverage premiums required
to maintain such person's coverage under Seller's group health plan for a period
that shall not exceed the lesser of the applicable period during which the
preexisting exclusion limitation applies and six months.
(b) Seller agrees that any Relevant Employee hired by Purchaser on
the Closing Date may roll over any eligible rollover distribution from an
eligible Seller retirement plan to an employee compensation plan adopted by
Purchaser pursuant to Section 401(k) of the Code (a "Purchaser 401(k) Plan") to
the extent permitted by such Purchaser 401(k) Plan and pursuant to its terms;
provided that such Relevant Employees will be subject to all vesting and other
requirements applicable to new employees of Purchaser participating in such
Purchaser 401(k) Plan. "Eligible rollover distribution" and "eligible
retirement plan" have the meanings given them under Section 402 of the Code.
(c) Seller will, in accordance with the applicable provisions of each
pension, profit-sharing, 401(k) or other funded welfare benefit plan maintained
by Seller, make all contributions required to be made under such plans on behalf
of the employees of Division for their period of employment with Seller on or
before the date those contributions are due under each such plan.
4.16 DELIVERY OF INTERIM FINANCIAL STATEMENTS
Within three weeks after the last day of each fiscal month end after the
date hereof until the Closing Date, Seller shall deliver to Purchaser statements
of earnings of Division for the one-month period then ended (the "Interim
Financial Statements"). The Interim Financial Statements shall be prepared so
as to present fairly, in all material respects, consistent with past practices,
the results of operations of Division for the periods covered thereby.
4.17 PROTECTION AND PRESERVATION OF RECORDS
In consideration for Seller's transfer of the books and records relating
to Division pursuant to Section 1.1.6 (the "Division Records"), Purchaser agrees
to protect and preserve the Division Records using the same standard of care
that Purchaser uses with respect to its own records and to provide Seller with
reasonable access to the Division Records for its legitimate business purposes
during normal business hours for a period of seven years (the "Retention
Period"). Seller will deliver to Purchaser along with the Division Records an
inventory of such records and specific permitted destruction dates for such
records. In accordance with Section 8.3,
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Purchaser shall indemnify and hold harmless Seller against any and all losses,
damages, costs and expenses arising from the loss or destruction by Purchaser of
any Division Records that is not in accordance with the destruction schedule
provided by Seller. Purchaser shall not be liable for any destruction or loss
of Division Records after the date set forth for its destruction in such
schedule or, in any event, after the Retention Period has terminated. If
necessary in connection with any audit, investigation or legal process, Seller
shall be permitted to copy Division Records at Seller's expense during normal
business hours upon five days' prior notice to Purchaser. Purchaser agrees to
notify Seller if it should receive any request, order or subpoena to provide the
Division Records to any governmental entity or other third party.
ARTICLE V THE CLOSING; CLOSING CONDITIONS
5.1 CLOSING
Subject to the fulfillment or waiver of the conditions set forth in this
Article V, the Closing shall take place at the offices of Xxxxxxx Coie,
0000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxx, Xxxxxxxxxx, xx (a) the fifth business
day following the satisfaction of the conditions set forth in Section 5.2 or
(b) such other date as Purchaser and Seller may agree or as may be necessary to
permit the fulfillment or waiver of the conditions set forth in this Article V
(such date, the "Closing Date").
5.2 CONDITIONS TO OBLIGATIONS OF EACH PARTY
The respective obligations of each party to consummate the transactions
contemplated by this Agreement are subject to the fulfillment at or prior to the
Closing of each of the following conditions, any and all of which may be waived
in whole or in part by the party being benefited thereby, to the extent
permitted by applicable law:
5.2.1 XXXX-XXXXX-XXXXXX
The parties shall have received notification of the expiration or early
termination of the waiting period under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
5.2.2 NO INJUNCTIONS
There shall not be in effect any judgment, writ, order, injunction or
decree of any court or Governmental Body of competent jurisdiction restraining,
enjoining or
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otherwise preventing or materially delaying consummation of the transactions
contemplated by this Agreement or the Ancillary Documents.
5.3 CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligation of Purchaser to consummate the transactions contemplated
by this Agreement is subject to the fulfillment at or prior to the Closing of
each of the following conditions, any and all of which may be waived in whole or
in part by Purchaser, to the extent permitted by applicable law:
5.3.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of Seller contained herein (including
the Schedules to the Disclosure Memorandum) shall have been true, in the case of
representations and warranties qualified as to materiality, and true in all
material respects, in the case of representations and warranties not so
qualified, when made and shall be true or true in all material respects, as the
case may be, as of the Closing Date as though made on that date, except to the
extent that such representations and warranties are made as of a specified date,
in which case such representations and warranties shall be true or true in all
material respects, as the case may be, as of the specified date; provided,
however, that a failure of the condition set forth in this Section 5.3.1 shall
not be deemed to have occurred if any such failure of a representation or
warranty to be true or true in all material respects, as the case may be,
results only in an Excluded Liability and reasonably could not (a) impair
Purchaser's rights under this Agreement or rights to or use of the Assets,
(b) impair the value of Division's business to Purchaser, or (c) result in any
liability or obligation of Purchaser.
5.3.2 PERFORMANCE OF AGREEMENTS
(a) Seller shall have performed all obligations and agreements and
complied in all material respects with all covenants and conditions contained in
this Agreement and the Ancillary Documents to be performed and complied with by
it at or prior to the Closing.
(b) A minimum of 30 calendar days shall have expired from the date of
execution of this Agreement in order to provide for an orderly transition of
contracts and customer, employee and vendor relationships relating to Division.
(c) All updates and changes to the Disclosure Memorandum and all
supporting information shall have been delivered by Seller to Purchaser at least
five business days prior to the Closing Date.
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(d) Seller shall have provided to Purchaser complete copies of all
information, commitments, contracts, documents and agreements relating primarily
or materially to the operation of Division (excluding all vendor contracts,
other than the active VLAM contracts transferred to Purchaser hereunder)
pursuant to a schedule agreed to by Seller and Purchaser.
5.3.3 OFFICERS' CERTIFICATES
Purchaser shall have received certificates of Seller's President or Vice
President, dated the Closing Date, in form and substance reasonably satisfactory
to Purchaser, certifying that the conditions to Seller's obligations have been
fulfilled (including a certification as to the accuracy of Seller's
representations and warranties as set forth in Section 5.3.1). Purchaser shall
have received certificates of Seller's Secretary or Assistant Secretary, dated
the Closing Date, in form and substance reasonably satisfactory to Purchaser.
5.3.4 NO GOVERNMENTAL PROCEEDING OR LITIGATION
In connection with the transactions contemplated by this Agreement,
there shall not have been instituted or be pending any action, investigation,
inquiry or other proceeding having a reasonable likelihood of success by or
before any Governmental Body or court of competent jurisdiction, nor shall there
be in effect any judgment, writ, decree, injunction or order of any Governmental
Body or court of competent jurisdiction, in either case, seeking or imposing any
remedy, restriction, condition or other action of the type referred to in
Section 4.6(c); provided, however, that with respect to any such judgment, writ,
decree, injunction or order Seller shall have performed its obligations under
Section 4.6(b), subject to the terms of Section 4.6(c).
5.3.5 DELIVERY OF DOCUMENTS
Seller shall deliver the following documents, agreements and supporting
papers to Purchaser at the Closing, and the delivery of each shall be a
condition to Purchaser's performance of their respective obligations to be
performed at the Closing:
(a) An executed Xxxx of Sale;
(b) A counterpart of the Assignment and Assumption Agreements
executed by Seller, Operating and International, as applicable;
(c) Documents and instruments necessary to transfer Seller's
lockbox account to Purchaser, together with an instrument evidencing Purchaser's
endorsement authority with respect to the Seller Receivables;
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(d) Written consent to assignment (in form and substance
reasonably satisfactory to Purchaser) of all agreements listed on Schedule
5.3.5(d) to the Disclosure Memorandum;
(e) A counterpart of the Fulfillment Agreement;
(f) A counterpart of the Call Center Lease; and
(g) Counterparts of each of the other Ancillary Documents to be
executed by Seller duly executed by Seller.
5.3.6 MATERIAL ADVERSE CHANGE
From the date of the most recent financial information provided to
Purchaser by Seller through the Closing Date, Division shall not have
experienced a Material Adverse Change; provided that, for purposes of this
Section 5.3.6 only, a Material Adverse Change shall not be deemed to have
occurred unless the revenues of Division decline from the corresponding period
in the prior year (a) more than 22% for the month of February 1996, (b) more
than 20% in the aggregate for the months of March and April 1996 combined, and
(c) more than 20% for any month beginning after April 1996.
5.4 CONDITIONS TO OBLIGATIONS OF SELLER
The obligation of Seller to consummate the transactions contemplated by
this Agreement is subject to the fulfillment at or prior to the Closing of each
of the following conditions, any and all of which may be waived in whole or in
part by Seller, to the extent permitted by applicable law:
5.4.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of Purchaser contained herein shall
have been true when made and shall be true, in the case of representations and
warranties qualified as to materiality, and true in all material respects, in
the case of representations and warranties not so qualified, as of the Closing
Date as though made on that date, except as affected by transactions
contemplated hereby and except to the extent that such representations and
warranties are made as of a specified date, in which case such representations
and warranties shall be true or true in all material respects, as the case may
be, as of the specified date.
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5.4.2 PERFORMANCE OF AGREEMENTS
Purchaser shall have performed all obligations and agreements and
complied in all material respects with all covenants and conditions contained in
this Agreement to be performed and complied with by it at or prior to the
Closing Date.
5.4.3 OFFICERS' CERTIFICATES
Seller shall have received certificates of Purchaser's Chief Executive
Officer, President or Vice President, dated the Closing Date, in form and
substance reasonably satisfactory to Seller, certifying that the conditions to
Purchaser's obligations have been fulfilled. Seller shall have received
certificates of Purchaser's Secretary or Assistant Secretary, dated the Closing
Date, in form and substance reasonably satisfactory to Seller.
5.4.4 DELIVERY OF PURCHASE PRICE AND DOCUMENTS
Purchaser shall deliver the following funds, documents, agreements and
supporting papers to Seller at the Closing, and the delivery of each shall be a
condition to Seller's performance of its obligations to be performed at the
Closing:
(a) Payment, in same day funds, to Seller of the full amount
of the Purchase Price;
(b) A counterpart of the Assignment and Assumption Agreements
executed by Purchaser;
(c) A counterpart of the Fulfillment Agreement;
(d) A counterpart of the Call Center Lease; and
(e) Counterparts of each of the other Ancillary Documents to
be executed by Purchaser duly executed by Purchaser.
ARTICLE VI TERMINATION
6.1 TERMINATION BY MUTUAL CONSENT
This Agreement may be terminated at any time prior to the Closing either
by the mutual written consent of Purchaser and Seller or by mutual action of
their respective Boards of Directors.
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6.2 TERMINATION BY PURCHASER
This Agreement may be terminated at any time prior to the Closing (upon
written notice from Purchaser to Seller) by Purchaser if (a) there has been a
material breach by Seller of any representation or warranty that is not
qualified as to materiality or a breach by Seller of any representation that is
qualified as to materiality, in each case which breach has not been cured, if
capable of being cured, within 30 days after receipt by Seller of notice of the
breach; provided, however, that no right to terminate this Agreement shall arise
from any such breach that results only in an Excluded Liability and that
reasonably could not (i) impair Purchaser's rights under this Agreement or
rights to or use of the Assets, (ii) impair the value of Division to Purchaser,
or (iii) result in any liability or obligation of Purchaser or (b) Seller shall
have failed to comply in any material respect with any of its covenants or
agreements contained in this Agreement required to be complied with prior to the
date of such termination, which failure to comply has not been cured, if capable
of being cured, within 30 days after receipt by Seller of notice of such failure
to comply.
6.3 TERMINATION BY SELLER
This Agreement may be terminated at any time prior to the Closing (upon
written notice from Seller to Purchaser) by Seller if (a) there has been a
material breach by Purchaser of any representation or warranty that is not
qualified as to materiality or a breach by Purchaser of any representation that
is qualified as to materiality, in each case which breach has not been cured, if
capable of being cured, within 30 days after receipt by Purchaser of notice of
the breach or (b) Purchaser shall have failed to comply in any material respect
with any of its covenants or agreements contained in this Agreement required to
be complied with prior to the date of such termination, which failure to comply
has not been cured, if capable of being cured, within 30 days after receipt by
Purchaser of notice of such failure to comply.
6.4 TERMINATION BY EITHER PURCHASER OR SELLER
This Agreement may be terminated (upon notice from the terminating party
to the other party) by action of the Board of Directors of either Purchaser or
Seller if (a) the Closing shall not have occurred by May 31, 1996; provided,
however, that (i) the right to terminate this Agreement under this clause (a)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of or resulted in the failure of the
Closing to occur on or before such date and (ii) such date shall be extended
through the later of the receipt of notification of the expiration of the
waiting period under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended, as such period may have been extended by the applicable Governmental
Body, and the completion of any litigation in which the parties are
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involved pursuant to Section 4.6(b) in connection with a challenge to the
transactions contemplated hereby on antitrust grounds (but such extension shall
terminate no later than July 31, 1996) or (b) any court of competent
jurisdiction in the United States or Governmental Body in the United States
shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the Closing, and
such order, decree, ruling or other action shall have become final and
nonappealable.
6.5 EFFECT OF TERMINATION AND ABANDONMENT
In the event of termination of this Agreement pursuant to this Article VI, no
party hereto (or any of its directors or officers) shall have any liability or
further obligation to any other party to this Agreement, except as expressly
provided in this Agreement (including, but not limited to, Section 4.14) and
except that nothing herein will relieve any party from liability for any breach
of this Agreement.
ARTICLE VII DEFINITIONS
7.1 DEFINED TERMS
As used in this Agreement, the following terms shall have the following
meanings:
"Acquisition Transaction" is defined in Section 4.10.
"Adjustments" is defined in Section 1.7.4.
"Agency" is defined in Section 2.9.
"Ancillary Documents" means the Xxxx of Sale, the Assignment and
Assumption Agreement, the Call Center Lease and the Fulfillment Agreement.
"Assets" is defined in Section 1.1.
"Assignment and Assumption Agreement" is defined in Section 1.8(a).
"Assumed Liabilities" is defined in Section 1.3.
"Xxxx of Sale" is defined in Section 1.8(a).
"business day" means any day on which banks in New York, New York are
open for business.
"Call Center" is defined in Section 4.12.
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"Call Center Lease" is defined in Section 4.12.
"CGE Products" are products sold by Division to its customers.
"Closing" means the Closing of the purchase and sale of the Assets and
the assumption by Purchaser of the Assumed Liabilities on the Closing Date, in
accordance with this Agreement.
"Closing Date" is defined in Section 5.1.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collection Period" is defined in Section 1.7.1.
"Confidentiality Agreement" is defined in Section 4.7.
"Xxxx Xxxxxx" is defined in Section 3.5.
"Designated Seller Receivables" is defined in Section 1.7.6(b).
"Determination Date" is defined in Section 1.7.6(a).
"Disclosure Memorandum" means that certain Disclosure Memorandum dated
the date hereof and delivered by Seller to Purchaser on the date hereof in
connection with this Agreement.
"Division" is defined in Recital A.
"Division Records" is defined in Section 4.17.
"DLJ" is defined in Section 2.18.
"ELEKOM" means ELEKOM Corporation, a Washington corporation and an
indirect wholly owned subsidiary of Seller.
"Employee Benefit Plans" means all employee pension benefit plans, as
defined in Section 3(2) of ERISA, employee welfare benefit plans, as defined in
Section (3)(1) of ERISA, and any deferred compensation, performance, bonus,
incentive, vacation pay, holiday pay, severance, insurance, retirement, excess
benefit, fringe benefit or other plan, trust or arrangement, whether or not
covered by ERISA, whether written or oral, for the benefit of Division's
employees.
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"Encumbrance" means any lien, mortgage, lease, pledge, deed of trust,
security interest, conditional sales agreement, charge, encumbrance or other
adverse claim or interest of any kind.
"Enterprise Number" means the number utilized by Seller for recording
accounting information with respect to a specific customer (which generally
relates to an entire entity, but in some instances may relate to a specific
division or other sub-group within an entity).
"Environmental Laws" means all federal, state and local laws (whether
under common law, statute, ordinance, rule, regulation or otherwise), permits,
orders, decrees, guidelines, standards, policies and other requirements of
Governmental Bodies, whether existing as of the Closing Date or at any time
prior, relating to the protection of human health, safety or the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Errors" is defined in Section 1.7.4.
"Exception Report" is defined in Section 1.7.2(b)(ii).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Assets" is defined in Section 1.2.
"Excluded Liabilities" is defined in Section 1.4.
"Financials" is defined in Section 2.17.
"Fulfillment Agreement" is defined in Section 4.11.
"GAAP" means generally accepted accounting principles and standards.
"Governmental Body" means any federal, state, municipal, political
subdivision or other governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign.
"Hazardous Materials" means all chemicals, materials, substances or
wastes that are designated, defined or included in any definition under any
Environmental Laws as dangerous, hazardous, radioactive or toxic or as a
pollutant or contaminant.
"Indemnifying Party" is defined in Section 8.3.3.
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"Indemnitee" is defined in Section 8.3.3.
"Interim Financial Statements" is defined in Section 4.16.
"International" means Egghead International, Inc., a Washington
corporation and wholly owned subsidiary of Seller.
"Joint Venture Agreement" means that certain joint venture agreement
dated February 20, 1995 between International and Xxxxxx Xxxx, Co., Ltd., a
Japanese corporation.
"Joint Venture Shares" means all the shares of Egghead-Uchida, Inc., a
Japanese corporation formed pursuant to the Joint Venture Agreement, owned by
International.
"Material Adverse Change" or "Material Adverse Effect" means, when used
with respect to Division, any change or effect, respectively, that is or would
reasonably be expected (so far as can be foreseen at the time) to be materially
adverse to the business, properties, Assets, liabilities, condition (financial
or otherwise), results of operation or prospects of Division taken as a whole.
"Nonassignable Assets" is defined in Section 1.10(a).
"Notified Parties" is defined in Section 4.4(a).
"Notifying Party" is defined in Section 4.4(a).
"Offered Price" is defined in Section 1.7.6(c).
"Operating" is defined in the first paragraph of this Agreement.
"Person" means any individual, partnership, joint-stock company,
firm, corporation, association, unincorporated organization, joint venture,
trust or other entity.
"Personal Property" is defined in Section 2.6(a).
"Personal Property Leases" is defined in Section 1.1.2.
"Pre-Closing Discount" is defined in Section 1.7.4.
"Preliminary VLAM Revenue" is defined in Section 1.1.5(b).
"Purchase Price" is defined in Section 1.6.
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"Purchaser" is defined in the first paragraph of this Agreement.
"Purchaser 401(k) Plan" is defined in Section 4.15(b).
"Purchaser Termination" is defined in Section 4.14(a).
"Release" means releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing or
dumping.
"Relevant Employees" means those employees listed on Schedule 4.9 to the
Disclosure Memorandum.
"Residual Price" is defined in Section 1.7.6(d).
"Residual Seller Receivables" is defined in Section 1.7.6(c).
"Retention Period" is defined in Section 4.17.
"Returns" is defined in Section 1.7.4.
"SEC Reports" is defined in Section 2.17.
"Seller" is defined in the first paragraph of this Agreement.
"Seller Receivables" is defined in Section 1.2.4.
"Significant Customer" means a customer that purchased in excess of
$50,000 of shrinkwrap software during that portion of fiscal 1996 ended
December 30, 1995.
"Taxes" means all taxes, charges, fees, levies or other assessments,
including, without limitation, income, excise, gross receipts, personal
property, real property, sales, use, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, severance, stamp, occupation,
windfall profits, social security and unemployment or other taxes imposed by the
United States, or any agency or instrumentality thereof, any state, county,
local or foreign government, or any agency or instrumentality thereof, and any
interest or fines, and any and all penalties or additions relating to such
taxes, charges, fees, levies or other assessments.
"Transferred VLAM Revenue" is defined in Section 1.1.5(b).
"Uncollected Seller Receivables" is defined in Section 1.7.6(a).
"VLAM" is defined in Section 1.1.5(a).
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"WARN Act" means the Worker Adjustment and Retraining Notification Act,
as amended.
"Weekly Report" is defined in Section 1.7.2(b)(v).
"Weekly Detailed Cash Application Report" is defined in
Section 1.7.2(b)(iii).
7.2 OTHER DEFINITIONAL MATTERS
(a) The words "this Agreement," "hereby," "herein," "hereof" and
"hereunder" and words of similar import shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and the words "Article,"
"Section," "Schedule" and "Exhibit" and like references are to this Agreement,
unless otherwise specified.
(b) Singular and plural forms, as the case may be, of terms defined
herein shall have correlative meanings.
(c) Any defined term that relates to a document shall include within
its definition any amendments, modifications, renewals, restatements,
extensions, supplements or substitutions that may heretofore have been or that
may hereafter be executed in accordance with the terms thereof and as may be
permitted by this Agreement.
ARTICLE VIII GENERAL
8.1 EXPENSES
(a) Except as otherwise set forth in this Agreement, whether or not
the transactions contemplated by this Agreement are consummated, Purchaser shall
pay its own fees, costs and expenses and Seller shall pay its own fees, costs
and expenses incident to the negotiation, preparation and carrying out of this
Agreement.
(b) Any fees payable directly to the United States government under
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, shall be
shared equally by Purchaser and Seller.
8.2 AMENDMENT
Purchaser and Seller may amend, modify or supplement this Agreement at
any time, but only in a writing duly executed on behalf of each of the parties.
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8.3 INDEMNIFICATION AND SURVIVAL OF WARRANTIES
8.3.1 Seller agrees to indemnify Purchaser, its successors and
permitted assigns, and the officers, directors, affiliates, employees,
controlling Persons and agents of the foregoing and to hold each such party
harmless against and in respect of any and all losses, damages, costs and
expenses, including, without limitation, attorneys' fees incurred by any such
party by reason of a breach of any of the representations or warranties, or
covenants or agreements contained in this Agreement, damages suffered and costs,
and liabilities incurred as a result of Seller's failure to satisfy the Excluded
Liabilities, breach of undertakings in any other document, supplement,
instrument, agreement, letter, amendment or assignment related to or executed in
connection herewith, or in any officers' certificate or other certificate
delivered to Purchaser or its affiliates at or in connection with the Closing.
Purchaser agrees to indemnify Seller, its successors and assigns, and the
officers, directors, affiliates, employees, controlling Persons and agents of
the foregoing and to hold each such party harmless against and in respect of any
and all losses, damages, costs and expenses, including attorneys' fees incurred
by such party by reason of a breach of any of the representations or warranties,
or covenants or agreements contained in this Agreement or damages suffered as a
result of Purchaser's failure to satisfy the Assumed Liabilities, breach of
undertakings in any other document, supplement, instrument, agreement, letter,
amendment or assignment related to or executed in connection herewith, or in any
officers' certificate or other certificate delivered to Seller or its affiliates
at or in connection with the Closing. For purposes of the indemnifications made
in this Section 8.3, all representations and warranties shall be deemed to have
been made as of and at the Closing Date, except to the extent that such
representations and warranties are made as of a specified date, in which case
such representations and warranties shall be true as of the specified date.
8.3.2 The indemnified party shall promptly notify the indemnifying
party in writing of any matters that may give rise to the right of
indemnification hereunder.
8.3.3 With respect to claims made by third parties, if Purchaser or
Seller is threatened with any claim, or any claim is presented to or any action
or proceeding commenced against Purchaser or Seller, that may give rise to the
right of indem-nification hereunder, Purchaser or Seller, as the case may be
(the "Indemnitee"), will give written notice thereof promptly (and in no event
later than the last survival date of the representation and warranty for the
breach of which indemnification is sought) to the party or parties bearing the
indemnification obligation (the "Indemnifying Party"). The Indemnifying Party
shall have the right to participate in the defense of such claim, action or
proceeding, and, to the extent the Indemnifying Party so desires, jointly with
any other Indemnifying Party similarly notified, to assume the defense
- 55 -
thereof with counsel mutually satisfactory to such parties and the Indemnitee.
If, pursuant to the foregoing, the Indemnifying Party and the Indemnitee agree
upon mutually satisfactory counsel to assume the defense, the Indemnifying Party
shall assume the expense of such counsel's fees and shall no longer assume the
expense of the Indemnitee's attorneys' fees. In the event the Indemnifying
Party undertakes to compromise or defend any such liability, the Indemnifying
Party shall notify the Indemnitee in writing promptly of its intention to do so,
and the Indemnitee shall cooperate with the Indemnifying Party and its counsel
in the compromising of or the defending against any such liabilities or claims,
at the expense of the Indemnifying Party. Such cooperation shall include, but
shall not be limited to, the provision to the Indemnifying Party of reasonable
access to the Indemnitee's business records, research, documents and employees
as they relate to the defense of any indemnified claim. In response to a bona
fide settlement offer, the Indemnifying Party may settle the monetary portion of
an indemnifiable matter that it has duly elected to contest without the consent
of the Indemnitee unless such settlement has a material adverse effect on the
Indemnitee, in which case such matters shall only be settled with the consent of
the Indemnitee; provided, however, that the Indemnifying Party shall not have
the right to agree to a settlement involving injunctive or other equitable
relief without obtaining the prior written consent of the Indemnitee. In the
event the Indemnitee unreasonably declines to consent to the monetary settlement
described in the preceding sentence, then the Indemnitee shall have no right to
indemnification beyond the amount of the proposed settlement.
8.3.4 All representations and warranties made by Purchaser in
Article III and Seller in Article II shall survive the Closing until 18 months
after the Closing Date (except for the representations and warranties set forth
in Sections 2.1 and 2.2, which shall survive indefinitely, and the
representations and warranties for Taxes, Compliance With Environmental Laws and
ERISA set forth in Sections 2.5, 2.7 and 2.16, respectively, which shall survive
for the applicable statute of limitations period (including any extensions that
may have been obtained) plus an additional three months) and shall thereafter be
null and void. Unless specifically limited as to duration, the agreements,
covenants and other obligations under this Agreement, other than the
representations and warranties referred to above, shall survive the Closing
indefinitely. Each statement appearing in any Schedule to the Disclosure
Memorandum or this Agreement shall survive the Closing for the same period as
the provision of this Agreement to which such Schedule relates. All
indemnification claims under this Agreement shall be made by notice given during
the period specified above for survival of the provision of this Agreement on
which such claim is based. The indemnification obligations for claims that are
timely presented hereunder shall last until the matter giving rise to such
indemnification obligations, including all appeals with respect thereto, has
been fully and finally resolved.
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8.3.5 No claim for indemnification shall be made under this Section 8.3
until the aggregate amount of any claim or claims equals or exceeds 1% of the
Purchase Price, at which time the Indemnitee shall have the right to
indemnification for all losses, damages, costs and expenses, including the
amount of such losses that were first incurred equal to 1% of the Purchase
Price.
8.4 BULK SALES
Purchaser hereby waives compliance with the Bulk Sales Laws of the State
of Washington and Seller agrees to indemnify and hold harmless Purchaser from,
and reimburse Purchaser for, any and all claims, liabilities or obligations that
Purchaser may suffer or incur by virtue of such noncompliance.
8.5 ENTIRE UNDERSTANDING
Except as provided herein with respect to the Confidentiality Agreement,
the terms set forth in this Agreement and in the Ancillary Documents are
intended by the parties as a final, complete and exclusive expression of the
terms of their agreement and may not be contradicted, explained or supplemented
by evidence of any prior agreement, any contemporaneous oral agreement or any
consistent additional terms.
8.6 WAIVERS
Any terms, covenants, representations, warranties or agreements of any
party hereto may be waived at any time by an instrument in writing executed by
the party for whose benefit such terms exist. The failure of any party at any
time or times to require performance of any provision hereof shall in no manner
affect its right at a later time to enforce the same. No waiver by any party of
any condition or breach of any terms, covenants, representations, warranties or
agreements contained in this Agreement shall be effective unless in writing, and
no waiver in any one or more instances shall be deemed to be a further or
continuing waiver of any other condition or any breach of any other terms,
covenants, representations, warranties or agreements.
8.7 COUNTERPARTS
This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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8.8 HEADINGS
The headings preceding the text of Sections of this Agreement are for
convenience only and shall not be deemed parts hereof.
8.9 APPLICABLE LAW
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Washington, as applied to contracts
executed and to be fully performed in such state.
8.10 PARTIES IN INTEREST
All the terms and provisions of this Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
permitted assigns of the parties hereto, whether herein so expressed or not, but
neither this Agreement nor any part hereof shall be assigned without the prior
written consent of the other party; provided, however, that Purchaser may, prior
to or after the Closing, assign all or part of its right, title and interest in,
to and under this Agreement and the documents, agreements and supporting papers
delivered in connection herewith to a wholly owned subsidiary of Purchaser that
succeeds to the ownership of the Assets or to any lender to Purchaser or such
successor subsidiary from time to time; provided further that no such assignment
shall relieve Purchaser of its obligations hereunder. This Agreement is not
intended, nor shall it be construed, to confer any enforceable rights on any
Person not a party hereto.
8.11 NOTICES
Any notice or demand desired or required to be given hereunder shall be
in writing and deemed given when personally delivered or deposited in the mail,
postage prepaid, sent certified or registered, and addressed as respectively set
forth below, or to such other address as any party shall have previously
designated by such a notice. Any notice so delivered personally shall be deemed
to be received on the date of delivery and any notice so mailed shall be deemed
to be received three days after the date on which it was mailed.
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Notices to Purchaser and Seller shall be sent as follows:
TO PURCHASER:
(a) SOFTWARE SPECTRUM, INC.
0000 Xxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xx. Xxxx X. Xxxx
with a copy to:
Xxxxx Xxxxxxx Rain Xxxxxxx
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xx. Xxxxxx X. Xxxxxx
TO SELLER OR OPERATING:
(b) EGGHEAD, INC.
00000 Xxxx Xxxxxxx
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxx
with a copy to:
Xxxxxxx Coie
0000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xx. Xxxxxxx X. Xxxx
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IN WITNESS WHEREOF, the parties hereto have entered into and signed this
Agreement as of the date and year first above written.
SOFTWARE SPECTRUM, INC.
By /s/ Xxxx X. Xxxx
-----------------------
Its CEO
-------------------
EGGHEAD, INC.
By /s/ Xxxxxxxx Xxxxx
-----------------------
Its President & CEO
-------------------
DJ&J SOFTWARE CORPORATION
By /s/ Xxxxxxxx Xxxxx
-----------------------
Its President & CEO
-------------------
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The Disclosure Memorandum and Exhibits 1.7.3, 1.7.4, 1.8(a)-1, 1.8(a)-2
and 4.8 to the Asset Purchase Agreement have been omitted pursuant to Item
601(b)(2) of Regulation S-K. A copy of the Disclosure Memorandum and such
exhibits will be furnished supplementally to the Securities and Exchange
Commission upon request.
EXHIBIT 4.11
FULFILLMENT AGREEMENT
THIS FULFILLMENT AGREEMENT (this "Agreement") is entered into this _____
day of ______, 1996 by and among Software Spectrum, Inc., a Texas corporation
("Purchaser"), Egghead, Inc., a Washington corporation ("Seller"), and DJ&J
Software Corporation, a Washington corporation and a wholly owned subsidiary of
Seller ("Operating").
RECITALS
A. Pursuant to that certain Asset Purchase Agreement dated March 23, 1996
among the parties hereto (the "Purchase Agreement"), Purchaser is acquiring
certain of the operating assets of the corporate, governmental and educational
products division of Seller ("Division").
B. During the period following the date of this Agreement, Purchaser
desires to obtain from Seller, and Seller is willing to provide to Purchaser
through Operating, certain fulfillment services with respect to sales of
products to customers of Division (the "CGE Products") and other services
relating to the business of Division, all in accordance with the terms and
conditions of this Agreement.
C. All terms not defined herein shall have the same meaning as set forth
in the Purchase Agreement. The words "this Agreement," "hereby," "herein,"
"hereof," and "hereunder" and words of similar import shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
the word "Section," "Schedule" and like references are to this Agreement, unless
otherwise specified. Except as otherwise specified in this Agreement, all
references to "Seller" shall include Operating.
AGREEMENT
1. SERVICES TO BE PROVIDED.
1.1 SERVICES PROVIDED.
During the Fulfillment Period (as hereinafter defined), Seller shall
provide to Purchaser the following fulfillment services (the "Fulfillment
Services") with respect to sales of CGE Products to customers of Division:
(a) Maintain in inventory the CGE Products listed in Schedule A(1) in the
quantities set forth on Schedule A, as such CGE Products and such amounts may be
amended from time to time by agreement between Seller and Purchaser, which shall
consist of CGE Products sold primarily by Division and only incidentally by
Seller's retail operations (the "Schedule A Inventory"), but only to the extent
such CGE Products are available from suppliers (it being understood that Seller
and Purchaser shall use their commercially reasonable best efforts to return to
the supplier any CGE Products that have been deleted from (or the amounts
reduced on) Schedule A);
(b) Maintain in inventory an adequate supply of CGE Products listed on
Schedule B(2) that are sold by both Division and Seller's retail operations (the
"Schedule B Inventory"), but only to the extent such CGE Products are available
from suppliers;
(c) Maintain in inventory an adequate supply of new software products
released by publishers during the term hereof that Seller and Purchaser shall
identify periodically by mutual agreement (the "New Product Inventory"), but
only to the extent such new products are available from suppliers (provided that
a 50-50 distribution of the available supply of any high-demand new products
between Seller's retail operations and Division shall constitute an "adequate"
supply);
(d) Supply the CGE Products listed in Schedule C, if available in Seller's
inventory, but shall have no obligation to maintain inventories of such
products;
(e) As part of the Fulfillment Services, Seller will ensure that
Purchaser's packing slips, invoices and "remit to" information are included on
the cartons shipped pursuant to this Agreement. In this regard, Purchaser will
provide Seller with supplies of forms for inclusion with the cartons that
conform to, and do not require modification of, Seller's existing software
formats and computer system;
(f) Ensure the shipment of Schedule A Inventory, Schedule B Inventory and
New Product Inventory products (in the case of the Schedule B Inventory and New
Product Inventory to the extent available from suppliers) to customers of
Division such that 98% of orders for such products received prior to 2:00 p.m.,
Spokane time,
--------------------------
(1) Seller and Purchaser will agree, prior to the Closing Date, on a subset
of the CGE Products that will be listed on Schedule A.
(2) Seller and Purchaser will agree, prior to the Closing Date, on a subset
of the CGE Products that will be listed on Schedule B.
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for fulfillment are accurately filled and shipped on the same day that such
orders are received; provided that such products are available in Seller's
inventory;
(g) Process invoices relating to orders shipped pursuant to this Section
1.1. Customer returns, customer credits and price adjustments for products
shipped by Seller pursuant to this Agreement during the Fulfillment Period shall
be the sole responsibility of Purchaser. Seller will cooperate with Purchaser
and will use commercially reasonable best efforts to assist Purchaser in
obtaining credits from vendors for returns for any products not authorized for
sale by Purchaser but shipped by Seller pursuant to this Agreement during the
Fulfillment Period; and
(h) Provide Purchaser with reports on the Fulfillment Services in the same
reporting formats, with the same detail, with the same frequency and promptness
and for the same time periods as historically prepared by Seller for Division
prior to Closing.
Purchaser understands and agrees that (i) Seller will have no obligation to
maintain in inventory or otherwise make available any products not listed on
Schedule A, Schedule B or Schedule C or included in New Product Inventory, and
that Purchaser will obtain any such products ("special orders") from other
sources, and (ii) Purchaser assumes responsibility for all special order
processing. In connection with special order processing, Purchaser will be
responsible for locating such products and arranging for shipment of such
products to Seller's warehouse. Seller will process such products in Seller's
inventory and will ship such products to the customer in accordance with the
terms of this Agreement. Purchaser agrees to pay to Seller the per carton fee
set forth in Section 4(a) for all such special orders processed by Seller.
1.2 TECHNICAL SYSTEMS SUPPORT.
Seller will also make available to Purchaser the following technical
systems support services relating to the Assets or the business of Division, as
requested by Purchaser (the "Systems Support" and, together with the Fulfillment
Services, the "Services"), for the following periods:
(a) IBM AS400 computer processing services and reporting for those
software applications in existence on the date of the Purchase Agreement or used
by Division during the last three months for up to four months from the Closing
Date (including, without limitation, the VLAM software and the order entry,
invoicing, inventory and related customer reporting and vendor reporting
systems), except that Seller shall maintain any such software applications
relating to collection of the Seller Receivables for up to 150 days from the
Closing Date;
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(b) Use of Seller's AT&T telephone switch for up to one year from the
Closing Date;
(c) Use of Seller's OCTEL voice mail system for up to one year from the
Closing Date; and
(d) Support of Seller's existing Lotus Notes access to the field sales
personnel and management through Seller's servers for up to one year from the
Closing Date.
Seller agrees to cooperate with Purchaser and to provide reasonable
assistance to Purchaser in identifying all reports and other information that
will be reasonably required in order to permit Purchaser to fully utilize the
Services. All Services provided by Seller shall be performed in a commercially
reasonable manner within a reasonable time period after request for such
services. Purchaser will pay $50.00 per employee hour worked for the Systems
Support for all applications maintenance and in connection with the conversion
of Seller's computer systems to Purchaser's systems performed pursuant to this
Section 1.2 at Purchaser's request. As part of the Systems Support provided,
Seller will document the Systems Support performed at the hourly rate set forth
above for such services; provided that, Purchaser will not be charged for
incidental, ministerial and other services not of a technical or professional
nature. Seller will not charge Purchaser for (i) services in connection with the
transfer to Purchaser of data or other information relating to or concerning
Division in the form currently available to Seller, (ii) a copy, in electronic
or other suitable form, of the data created by Seller during the Fulfillment
Period in the ordinary course of providing the Fulfillment Services, or (iii)
Systems Support required or reasonably requested in order to allow Purchaser to
perform its obligations under Section 1.7 of the Purchase Agreement, except as
specified in such Section 1.7.
Upon the Closing, Purchaser will assume telephone voice and data line
charge responsibility for Purchaser's operations and data line charge
responsibility for Lotus Notes access from the field in its current
configuration and Seller will not maintain such capability beyond the periods
set forth in Section 1.2 (b)-(d).
2. NATURE OF SERVICES; AUTHORITY.
In providing Purchaser with the Fulfillment Services and the Systems
Support as described in this Agreement, Seller shall comply with all reasonable
instructions of Purchaser so long as such instructions do not have the effect of
making materially more burdensome the Services to be provided by Seller pursuant
to this Agreement. Under no circumstances shall Seller have the authority to
contract for or otherwise legally bind Purchaser, and Seller shall under no
circumstances be deemed to be an
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agent or representative of Purchaser. Likewise, under no circumstances shall
Purchaser have the authority to contract for or otherwise legally bind Seller,
and Purchaser shall under no circumstances be deemed to be an agent or
representative of Seller. Seller shall retain exclusive control over its
employees responsible for providing the Services contemplated by this Agreement,
and Seller shall be responsible for and will indemnify Purchaser against any
claims brought by such employees with respect to their employment by Seller
(including the provision of the Services provided hereunder by such employees).
3. TERM.
3.1 BASE TERM.
This Agreement shall be for a base term of 120 days from the date hereof
(the "Fulfillment Period"), subject to termination in accordance with Section
3.2. To the extent Purchaser requests Systems Support for periods extending
beyond the Fulfillment Period in accordance with Section 1.2, all terms of this
Agreement that do not relate expressly to the Fulfillment Services shall remain
in full force and effect.
3.2 TERMINATION.
Purchaser may at any time terminate this Agreement by giving Seller 45
days' advance written notice. If this Agreement should be terminated prior to
120 days from the date hereof, the Fulfillment Period provided for in Section
3.1 shall extend only until the earlier of the expiration of such 45-day period
and the remainder of the base term set forth in Section 3.1.
3.3 EFFECT OF TERMINATION.
Upon receipt of a notice of termination in accordance with Section 3.2,
Seller shall continue to be responsible for providing the Fulfillment Services
in accordance with Section 1.1 through such termination.
4. PAYMENT.
Seller shall render to Purchaser an invoice on Monday of each week during
the Fulfillment Period, commencing on the first Monday after the Closing Date
(and on the last day of the Fulfillment Period) and such invoice shall include a
detailed list of the items invoiced and items shipped, reconciling the same, in
a form reasonably acceptable to Purchaser, covering:
(a) all CGE Product inventory shipped in fulfillment of orders during the
period beginning on the immediately preceding Monday and ending on the
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immediately preceding Saturday, at Seller's weighted average cost (which
represents Seller's net invoice costs) ("Seller's Cost") plus $3.00 per carton
handling charge (freight to be billed directly by freight carriers and paid by
Purchaser and postage associated with invoice processing to be paid by
Purchaser), and
(b) all Systems Support performed by Seller during the prior half-monthly
period.
Purchaser shall remit payment to Seller by wire transfer in same day funds
within five business days of receipt of each such invoice that includes the
reconciliation required to be included therein.
5. INVENTORY PURCHASE UPON TERMINATION.
At the end of the Fulfillment Period (as adjusted in accordance with
Section 3.2), Purchaser will purchase at Seller's Cost, in cash F.O.B., Seller's
Distribution Centers in Lancaster, Pennsylvania, or Sacramento, California, as
applicable, up to $6,000,000 of Division's then-remaining Schedule A Inventory.
6. VOLUME REBATES AND MARKETING FUNDS.
(a) After the Closing, Seller relinquishes any rights or claims to
marketing funds and sell-through rebates derived from the business activities of
the acquired Assets, including those related to the CGE Products purchased and
fulfilled by Seller and sold by Division during the Fulfillment Period or
purchased by Purchaser in accordance with Section 5.
(b) Seller agrees to cooperate with Purchaser to arrange sell-through and
purchase rebates with major suppliers based on sales and purchases fulfilled by
Seller derived from business activities relating to the acquired Assets, (any
such rebates to be paid to Purchaser by such suppliers).
7. RECORDS; CONFIDENTIALITY.
Seller shall cause to be kept accurate books and records with respect to
the costs and expenses incurred in connection with the Services provided
hereunder, and Purchaser shall be permitted to inspect such books and records
with respect to such costs and expenses during normal business hours upon
reasonable notice to Seller. Purchaser shall have the right to make copies of
such records, at Purchaser's expense. Purchaser and Seller agree that each of
them shall keep confidential such records in accordance with the terms of
Section 4.7 of the Purchase Agreement.
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8. INDEPENDENT CONTRACTOR STATUS.
Seller shall render and perform the Services as an independent contractor,
in accordance with the standards set forth in Section 9(c), subject to its
compliance with the provisions of this Agreement and with all applicable laws,
ordinances and regulations.
9. DISCLAIMER; LIMITED LIABILITY.
(a) Provided that Seller continues to perform its obligations under this
Agreement in a commercially reasonable manner, nothing in this Agreement will
require Seller to provide or develop additional systems support programs, to
retain employees that it determines are not otherwise necessary in the conduct
of its business or to render any service not provided for in this Agreement, or
in a manner or pursuant to methods different from the standard set forth in
Section 9(c), or, in performing Fulfillment Services or Systems Support
hereunder, to make any change or addition that will require capital
expenditures.
(b) The duties of Seller under this Agreement are subject to interruption
or discontinuance by Seller at any time and from time to time, without incurring
liability to Purchaser or any other Person for any loss, damage or expense that
may result therefrom, for force majeure or other causes beyond Seller's control.
(c) Subject to Section 9(b), Seller will use commercially reasonable
efforts to make the Fulfillment Services and Systems Support available with
substantially the same degree of care as it used in providing Fulfillment
Services to Division prior to the Closing.
10. MISCELLANEOUS.
10.1 COMPLETE AGREEMENT; CONSTRUCTION.
This Agreement, together with the Purchase Agreement and the other
Ancillary Documents, shall constitute the entire agreement between the parties
with respect to the subject matter hereof and shall supersede all previous
negotiations, commitments and writings with respect to such subject matter.
10.2 APPLICABLE LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Washington, as applied to contracts executed and to be
fully performed in such state.
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10.3 NOTICES.
Any notice or demand desired or required to be given hereunder shall be in
writing and deemed given when personally delivered or deposited in the mail,
postage prepaid, sent certified or registered, and addressed as respectively set
forth below, or to such other address as any party shall have previously
designated by such a notice. Any notice so delivered personally shall be deemed
to be received on the date of delivery and any notice so mailed shall be deemed
to be received three days after the date on which it was mailed.
Notices to Purchaser and Seller shall be sent as follows:
TO PURCHASER:
Software Spectrum, Inc.
0000 Xxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Attn: Mr. Xxxxx Xxxxxx
TO SELLER OR OPERATING:
Egghead, Inc.
00000 Xxxx Xxxxxxx
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xx. Xxxxxxx X. Xxxxx
10.4 AMENDMENTS.
This Agreement may not be modified or amended except by an agreement in
writing signed by the parties.
10.5 SUCCESSORS AND ASSIGNS.
Except in connection with a merger or consolidation or the sale of all or
substantially all the assets of a party hereto, neither this Agreement nor any
part hereof shall be assigned without the prior written consent of the other
party, and any attempt to assign any rights or obligations arising under this
Agreement without such consent shall be void; PROVIDED, HOWEVER, that the
provisions of this Agreement shall be binding upon, inure to the benefit of and
be enforceable by the respective successors and permitted assigns of the parties
hereto.
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10.6 NO THIRD-PARTY BENEFICIARIES.
This Agreement is not intended, nor shall it be construed, to confer any
enforceable rights on any Person not a party hereto.
10.7 TITLES AND HEADINGS.
Titles and headings to Sections herein are for convenience only and shall
not be deemed parts thereof.
10.8 ENFORCEABILITY.
Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. Without prejudice to any rights or remedies otherwise available
to any party hereto, each party hereto acknowledges that damages would be an
inadequate remedy for any breach of the provisions of this Agreement and agrees
that the obligations of the parties hereunder shall be specifically enforceable.
10.9 COUNTERPARTS.
This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
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IN WITNESS WHEREOF, the parties hereto have entered into and signed this
Agreement as of the date and year first above written.
SOFTWARE SPECTRUM, INC. EGGHEAD, INC.
By By
--------------------- ------------------
Its Its
------------------- ----------------
DJ&J SOFTWARE CORPORATION
By
------------------
Its
----------------
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EXHIBIT 4.12
LEASE AGREEMENT
THIS LEASE (this "Lease") made this______day of____________, 1996,
between DJ&J SOFTWARE CORPORATION, d/b/a EGGHEAD, a Washington corporation
("Landlord"), and SOFTWARE SPECTRUM, INC., a Texas corporation ("Tenant").
AS PARTIES HERETO, Landlord and Tenant agree as follows:
1. LEASE DATA AND EXHIBITS
The terms used herein shall have the following meanings unless otherwise
specifically modified by provisions of this Lease:
1.1 BUILDING 1
"Building 1" shall mean office building number 1, located at 00000 Xxxx
Xxxxxxx, Xxxxxxx Xxxx, Xxxxxxxxxx, situated on the real property ("Property")
more particularly described in EXHIBIT A, as outlined on the site plan attached
hereto as EXHIBIT B-1.
1.2 BUILDING 2
"Building 2" shall mean office building number 2, located at 00000 Xxxx
Xxxxxxx, Xxxxxxx Xxxx, Xxxxxxxxxx, situated on the Property, and outlined on the
site plan attached hereto as EXHIBIT B-1.
1.3 BUILDINGS
"Buildings" shall mean Building 1 and Building 2, together with the
enclosed passageway that connects Buildings 1 and 2.
1.4 COMPLEX
"Complex" shall mean the Buildings, the Common Area and the Parking Area.
1.5 CAFETERIA
"Cafeteria" shall mean the cafeteria servicing the Buildings and located
within Building 1, as outlined on the site plan attached hereto as EXHIBIT B-1.
1.6 Premises
"PREMISES" shall mean approximately 53,980 rentable square feet in
Building 2, as outlined on the floor plan attached hereto as EXHIBIT B-2.
1.7 COMMON AREA
"Common Area" shall mean all areas of the Buildings designated by
Landlord as common areas for the use generally of Landlord and other tenants
of the Buildings, including, but not limited to, hallways, the enclosed
passageway between the Buildings and the Cafeteria (but excluding Landlord's
lobby area, as outlined on EXHIBIT B-1, which shall be for Landlord's
exclusive use).
1.8 PARKING AREA
"Parking Area" shall mean the unreserved parking spaces in the parking
area adjacent to the Buildings, as such parking area is outlined on the site
plan
attached hereto as EXHIBIT B-1.
1.9 TENANT'S PERCENTAGE OF THE COMPLEX
"Tenant's Percentage of the Complex" shall mean fifty-one percent (51%),
calculated on the basis of a total of 53,980 rentable square feet in the
Premises and a total of 106,033 rentable square feet in the Buildings (exclusive
of the covered passageway and the Cafeteria) at the time of the Commencement
Date of this Lease. It is understood and agreed by the parties that Tenant's
Percentage of the Complex shall be verified by actual measurements to be taken
by an architect, engineer or similar professional mutually agreed upon by
Landlord and Tenant within sixty (60) days after the Commencement Date, and
recomputed accordingly in the event the total rentable square feet leased by
Tenant increases or decreases, or in the event the total rentable square feet in
the Buildings increases or decreases.
1.10 COMMENCEMENT DATE AND EXPIRATION DATE
"Commencement Date" shall mean ______, 1996. If Tenant shall occupy the
Premises prior to the Commencement Date first stated herein, then the
Commencement Date shall be the date of such occupancy.
"Expiration Date" shall mean _______, 1999.
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1.11 RENT
"Rent" shall mean Basic Rent and Additional Rent as hereinafter defined:
1.11.1 BASIC RENT
"Basic Rent" shall mean:
Months 1-12 $26,765.08 per month
Months 13-24 $30,588.67 per month
Months 25-36 $34,412.25 per month
1.11.2 ADDITIONAL RENT
"Additional Rent" shall mean the Actual Costs Allocable to the Premises
(as hereinafter defined) for a Lease Year (as hereinafter defined), payable
in equal monthly installments based on the Estimated Costs Allocable to the
Premises (as hereinafter defined) and using the following definitions:
(a) "Operating Costs" shall mean all reasonable expenses
normally or customarily paid or incurred by Landlord and not otherwise
reimbursed by any tenant for maintaining, operating and repairing the Complex
and the personal property used in conjunction therewith, including, without
limitation, the costs of: refuse collection; water, sewer and utilities
services; emergency power backup; supplies; janitorial and cleaning services;
window washing; landscape maintenance; maintenance of telephone switching and
related equipment; services of independent contractors; premiums for
insurance (including, without limitation, policies of casualty and liability
insurance of such types and in such amounts as Landlord deems necessary or
desirable in the exercise of Landlord's reasonable judgment), provided Tenant
is named an additional insured thereunder; licenses, permits and inspection
fees; and any other reasonable expense or charge, whether or not hereinabove
described, which in accordance with generally accepted accounting principles
would be considered an expense normally incurred for maintaining, operating
or repairing the Complex; provided, however, that to the extent Tenant pays
directly for any of the foregoing services with respect to the Premises
(e.g., electrical service separately metered to the Premises or custodial
services separately contracted for the Premises), then for the purposes of
this Lease, "Operating Costs" with respect to such services shall mean the
cost of providing such services to the Common Area only. If the costs of
providing such services to the Common Area only are not separately billed by
the providers of such services, then the portion of the costs allocable to
the Common Area for such services shall equal the costs of such services,
multiplied by the Common Area's Percentage of the Complex. Notwithstanding
anything to the contrary
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contained herein, Tenant shall never be responsible for Operating Costs charged
with respect to Landlord's lobby.
(b) "Real Property Taxes" shall mean taxes on real property and
personal property, including all tenant improvements for which Landlord is not
otherwise entitled to reimbursement by any tenant or other occupant, charges and
assessments levied with respect to the Property, the Buildings, any
improvements, fixtures and equipment used directly in the operation of the
Complex and located in the Buildings or on the Property; and any taxes levied or
assessed in addition to or in lieu of, in whole or in part, such real property
or personal property taxes; and any tax on Landlord's gross receipts unless such
tax cannot be charged to Tenant pursuant to applicable law.
(c) "Lease Year" shall mean the 12-month period commencing
January 1 and ending December 31.
(d) "Actual Costs" shall mean the actual expenses paid or
incurred by Landlord for Operating Costs and Real Property Taxes during any
Lease Year of the term hereof.
(e) "Actual Costs Allocable to the Premises" shall mean the
Actual Costs multiplied by Tenant's Percentage of the Complex.
(f) "Estimated Costs Allocable to the Premises" shall mean
Landlord's estimate of Actual Costs Allocable to the Premises for the
following Lease Year as reasonably determined by Landlord.
1.11.3 COMMON AREA'S PERCENTAGE OF THE COMPLEX
"Common Area's Percentage of the Complex" shall mean______ percent
(____%), calculated on the basis of a total of_______ rentable square feet of
area in the Common Area and a total of 106,033 rentable square feet in the
Buildings (exclusive of the covered passageway, and the Cafeteria) at the
Commencement Date of this Lease. The parties agree that the Common Area's
Percentage of the Buildings shall be recomputed if the total rentable area of
the Common Area or of the Buildings changes during the term of this Lease.
1.12 PERMITTED USES
"Permitted Uses" shall mean use of the Premises by Tenant only for
general office purposes and for no other business or purpose without the
prior written consent of Landlord.
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1.13 DEFAULT RATE
"Default Rate" shall mean a rate equal to four percent (4%) per annum
over the prime rate of Seattle-First National Bank (or its successors) as
announced from time to time.
1.14 EXHIBITS
The following exhibits are made a part of this Lease:
EXHIBIT A - Legal Description
EXHIBIT B-1 - Site Plan of Property
EXHIBIT B-2 - Floor Plan of Premises
In the event of any inconsistency in the provisions of this Section and more
specific provisions set forth elsewhere in this Lease, the more specific
provision shall control.
2. PREMISES
Landlord does hereby lease the Premises to Tenant, and Tenant does hereby
lease the Premises from Landlord, in their "as is" condition, upon the terms and
conditions herein set forth.
The parties acknowledge that Landlord owns and will continue to occupy
Building 1 and that, accordingly, Landlord and Tenant will share the use of the
Cafeteria and the enclosed passageway between the Buildings. Landlord will also
have rights of access through the Premises, for ingress and egress to and from
the electrical room and the security room in Building 2, as more fully described
in Section 16 below.
3. TERM
The term of this Lease ("Lease Term") shall be a period extending for
three years, commencing on the Commencement Date and expiring on the
Expiration Date, subject to Tenant's renewal options as set forth in Section
4.
4. OPTION TO RENEW
4.1 OPTION
Landlord grants Tenant the option to extend the Lease Term for one (1)
renewal term of three (3) years, commencing immediately upon the Expiration Date
-5-
(each, a "Renewal Term"). This option to renew is expressly conditioned on
Tenant's being, on both the date Tenant exercises its option and the first day
of the applicable Renewal Term, in full and faithful compliance in all material
respects with each and every one of its obligations contained in this Lease.
4.2 EXERCISE OF OPTION; LANDLORD'S RIGHT TO CANCEL EXERCISE
To exercise its option, Tenant must give written notice ("Renewal
Notice") thereof to Landlord at least one hundred twenty (120) days prior to
the first day of the applicable Renewal Term. Landlord is under no
obligation to notify Tenant of this deadline. Tenant understands and agrees
that time is of the essence and unless so exercised by the deadline specified
above, the renewal options herein granted will terminate.
4.3 RENEWAL TERMS
During the applicable Renewal Term, each and every provision of this
Lease will remain unchanged and in full force and effect except that the
Basic Rent will be adjusted as of the first day of the applicable Renewal
Term to the then fair market rental rate as of such date (the "Market Rate").
The "Market Rate" for the Premises will be specified by Landlord, acting in
good faith, and will be the then current base rental rate being offered by
landlords owning similar office space in the vicinity of the Property,
adjusted to reflect the location of the Premises in the Building and the
desirability of the Premises versus the location and desirability of such
other space, if materially different.
4.4 DETERMINATION OF MARKET RATE
Landlord will notify Tenant in writing of the Market Rate at least eighty
(80) days prior to the first day of the applicable Renewal Term. If Tenant
disagrees with the Market Rate specified by Landlord, it will so notify Landlord
immediately and they will meet as soon as possible thereafter in a good faith
effort to resolve their disagreement.
If the parties are still in disagreement sixty (60) days prior to the
first day of the applicable Renewal Term, the Market Rate will be determined
by a panel of three arbitrators, one to be selected by Landlord within
forty-six (46) days before the first day of the applicable Renewal Term (or
by Tenant if Landlord fails to appoint an appraiser within the time provided
above), one to be selected by Tenant (or by Landlord if Tenant fails to do so
within ten (10) days after demand from Landlord), and one to be selected by
the first two arbitrators. Each such arbitrator will be an independent MAI
appraiser with at least ten (10) years' experience in appraising
-6-
commercial real estate in the vicinity of the Property. The cost of the
arbitrator selected by Tenant will be borne by Tenant, the cost of the
arbitrator selected by Landlord will be borne by Landlord, and the cost of the
third arbitrator will be shared equally by Tenant and Landlord. The arbitrators
will meet within five (5) days of their appointment and will render a decision
within ten (10) days thereafter. The Market Rate determined by the arbitrators
will be binding upon both parties.
Until the Market Rate is determined as provided herein, Tenant will pay
Basic Rent based on the Market Rate specified by Landlord, and if the Market
Rate is subsequently determined to be different from the Market Rate specified
by Landlord, Landlord or Tenant, as the case may be, will reimburse the other
for such difference within twenty (20) days of the date of final determination
of the Market Rate.
5. PAYMENT OF BASIC RENT
Commencing on the Commencement Date, Tenant shall pay Landlord Basic Rent
in lawful money of the United States in advance on or before the first day of
each month without offset or deduction at the offices of Landlord at 00000
X. Xxxxxxx, Xxxxxxx Xxxx, Xxxxxxxxxx 00000, or such other place as may be
designated by Landlord. Basic Rent for any period during the Lease Term which
is less than one month shall be a pro rata portion of the monthly installment.
6. PAYMENT OF ADDITIONAL RENT
Commencing on the Commencement Date, Tenant shall pay Landlord as
Additional Rent one-twelfth (1/12) of the Estimated Costs Allocable to the
Premises in lawful money of the United States in advance on or before the first
day of each month, without deduction or offset, at the address specified in
Section 5. Prior to the commencement of each Lease Year during the Lease Term,
Landlord shall furnish Tenant a written statement of the Estimated Costs
Allocable to the Premises for such Lease Year, together with the calculation of
the estimated monthly Additional Rent payable during such Lease Year. If at any
time or times during such Lease Year it appears to Landlord that the Actual
Costs Allocable to the Premises will vary from Landlord's estimate by more than
five percent (5%) on an annual basis, Landlord may, by written notice to Tenant,
revise Landlord's estimate for such Lease Year, and subsequent Additional Rent
payments by Tenant for such Lease Year shall be recalculated based on Landlord's
revised Estimated Costs Allocable to the Premises.
Within ninety (90) days after the close of each Lease Year during the
Lease Term, or as soon thereafter as practicable, but not later than one
hundred twenty (120) days after the close of such Lease Year, Landlord shall
deliver to Tenant a written statement setting forth the Actual Costs
Allocable to the Premises during the
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preceding Lease Year. If such costs for any Lease Year exceed Estimated Costs
Allocable to the Premises paid by Tenant to Landlord, Tenant shall pay the
amount of such excess to Landlord as Additional Rent within forty-five (45) days
after receipt of such statement by Tenant. If such statement shows such costs
to be less than the amount paid by Tenant to Landlord, then the amount of such
overpayment by Tenant shall be credited by Landlord to the next immediate Rent
payable by Tenant. Tenant shall have the right, at Tenant's sole expense, to
audit Landlord's books regarding Actual Costs, provided that (i) such right
shall not be exercised more than once each calendar year, and (ii) such right
must be exercised, if at all, by delivery of written notice to Landlord on or
before thirty (30) days after Landlord's delivery of the written statement
setting forth Actual Costs Allocable to the Premises during the preceding Lease
Year. If the audit reveals that Landlord's statement is determined to be in
error by more than five percent (5%), the amount of Additional Rent payable by
Tenant attributable to Actual Costs Allocable to the Premises shall be
recalculated based upon the results of any such audit.
If the Expiration Date is a day other than the last day of a Lease Year,
the amount of any adjustment between Actual Costs and Estimated Costs Allocable
to the Premises with respect to the Lease Year in which such termination occurs
shall be prorated on the basis of a 365-day year. Any amount payable by
Landlord to Tenant or by Tenant to Landlord with respect to such adjustment
shall be payable within forty-five (45) days after delivery by Landlord to
Tenant of the Statement of Actual Costs Allocable to the Premises with respect
to such Lease Year.
7. [INTENTIONALLY OMITTED]
8. Uses
The Premises shall be used only for Permitted Uses and for no other
purpose without the prior written consent of Landlord. No act shall be done
in or about the Premises that is unlawful or that will increase the existing
rate of insurance on the Buildings. Tenant shall not commit or allow to be
committed any waste upon the Premises, or any public or private nuisance or
other act or thing which disturbs the quiet enjoyment of Landlord or any
other tenant in the Buildings. Tenant shall not, without the written consent
of Landlord, use any apparatus, machinery or device in or about the Premises
which will cause any substantial noise or vibration or any increase in the
normal use of electric power. If any of Tenant's office machines and
equipment should disturb the quiet enjoyment of Landlord or any other tenant
in the Buildings, then Tenant shall provide adequate insulation, or take
other action as may be necessary to eliminate the disturbance. Tenant shall
comply with all laws relating to Tenant's use of the Premises and shall
observe such reasonable rules and regulations
-8-
as may be adopted and published by Landlord for the safety, care and cleanliness
of the Premises or the Buildings, and for the preservation of good order
therein, including but not limited to any rules and regulations and/or
declaration of protective covenants attached to this Lease. Notwithstanding the
foregoing, no rules or regulations hereafter promulgated by Landlord shall
materially diminish Tenant's rights or increase Tenant's obligations under this
Lease.
9. SERVICES AND UTILITIES
9.1 GENERAL
Landlord shall maintain the Common Area in reasonably good order and
condition except for damage occasioned by the act or omission of Tenant, the
repair of which damage shall be paid for by Tenant.
Landlord shall furnish (or cause to be furnished) the Premises with
electricity for lighting and operation of normal power usage office machines,
water, heat and normal air conditioning service. Landlord shall also provide
light replacement service for Landlord-furnished light. If the foregoing
services are not separately metered to Tenant, the cost of providing such
services shall be reimbursed by Tenant to Landlord in the form of Additional
Rent pursuant to Section 6. Tenant shall, at Tenant's expense, provide for its
own trash disposal and janitorial services with respect to the Premises.
Landlord shall not be liable for any loss, injury or damage to property
caused by or resulting from any variation, interruption or failure of such
services to be provided by Landlord (including, but not limited to, the
emergency power backup system) due to any cause whatsoever, or from failure to
make any repairs or perform any maintenance. In the event of such variation,
interruption or failure, however, Landlord shall use reasonable diligence to
restore such service. No temporary interruption or failure of such services
incident to the making of repairs, alterations or improvements, or due to
accident or strike, or conditions or events beyond Landlord's reasonable control
shall be deemed an eviction of Tenant or relieve Tenant from any of Tenant's
obligations hereunder. Landlord will use reasonable efforts to notify Tenant at
least forty-eight (48) hours in advance of any scheduled or anticipated
interruption in any such services. Notwithstanding anything to the contrary
contained in this Section 9 or elsewhere in this Lease, if any such slowdown,
interruption or stoppage of any such services, or the Landlord's inability to
perform any covenant herein creates a condition which interferes substantially
with Tenant's normal use of the Premises as allowed under this Lease, and as a
consequence Tenant is compelled to discontinue or materially curtail business in
the Premises in whole or in part for a period of twenty (20) consecutive days,
then the Basic Rent and Additional Rent shall
-9-
be proportionately abated during the time of such discontinuance or curtailment
of business, but no such abatement shall continue beyond the time that the
slowdown, interruption, stoppage or inability to perform no longer persists,
regardless of any delay by Tenant in resuming operation of business after that
time. If any such slowdown, interruption, stoppage or inability to perform
continues for a period of forty-five (45) consecutive days and Tenant is
compelled (whether for prudent business reasons or otherwise) to discontinue
business in the Premises, Tenant shall have the right thereafter to terminate
this Lease upon notice to Landlord; however, such termination right shall not
continue beyond the time that the slowdown, interruption, stoppage or inability
to perform no longer persists.
Before installing any equipment (other than customary and normal office
equipment) in the Premises that generates more than a minimum amount of heat,
Tenant shall obtain the written permission of Landlord and Landlord may refuse
to grant such permission if the amount of heat generated would place an above
average burden on the air-conditioning system of the Buildings unless Tenant
shall agree to pay at Landlord's election: (a) the costs of Landlord for
installation, operation and maintenance of supplementary air-conditioning units
as necessitated by such equipment or (b) an amount reasonably determined by
Landlord to cover the additional burden on the existing air-conditioning system
generated by such Tenant equipment.
If Tenant uses any equipment in the Premises requiring above average
power usage as compared to other areas of the Complex, Tenant shall in
advance, on the first day of each month during the Lease Term, pay Landlord
as Additional Rent the reasonable amount estimated by Landlord as the cost of
furnishing electricity for the operation of such equipment; provided,
however, that this provision shall not be applicable if electricity is
separately metered for the Premises. Basic Rent does not include any amount
to cover the cost of furnishing electricity for such purposes unless so
stated therein.
At Tenant's request, Landlord shall use its best efforts to cause
utilities furnished to Tenant to be separately metered, and Tenant shall pay
for the installation costs of and the conversion to any meters required. To
the extent meters cannot be installed, or the cost of such installation is
excessive, Tenant shall continue to pay for such utilities as part of the
Additional Rent.
9.2 TELEPHONE SWITCHING EQUIPMENT
During the period commencing on the Commencement Date and ending on the
first anniversary of the Commencement Date, Tenant shall be entitled to the
nonexclusive use (in common with Landlord) of Landlord's telephone switching
-10-
equipment (and related equipment and services, including computer servers and
long distance lines) which services the Premises (collectively, "Telephone
Switching Equipment"). Tenant shall cooperate with Landlord in making the
necessary connections for such nonexclusive use, and Tenant will not create
demands on the Telephone Switching Equipment that would cause the system to
become overloaded or out of repair. Landlord shall not be liable for any loss,
injury or damage to Tenant or Tenant's property caused by or resulting from any
variation, interruption or failure of the Telephone Switching Equipment due to
any cause whatsoever, or from failure to make any repairs or perform any
maintenance. In the event of such variation, interruption or failure, however,
Landlord shall use reasonable diligence to restore such service. Landlord shall
maintain the Telephone Switching Equipment in accordance with reasonably prudent
business practices, but Landlord does not guarantee its operation or
performance.
Tenant shall pay Landlord for its usage of the Telephone Switching
Equipment, as determined by Landlord's internal meters and/or third-party
supplier's invoices. Tenant shall perform and shall pay for any configuration
changes and enhancements to the Telephone Switching Equipment required by
Tenant, provided that Tenant's right to reconfigure and enhance the Telephone
Switching Equipment shall in no way impact Landlord's use of the Telephone
Switching Equipment. If Tenant requires the services of an employee of Landlord
in connection with Tenant's connection to, or reconfiguration, maintenance or
use of the Telephone Switching Equipment, Tenant shall also pay Landlord at the
rate of $50 per hour per person. All payments due to Landlord under this
Section 9.2 shall be deemed to be Additional Rent and shall be paid by Tenant
within ten (10) days after Landlord's delivery of a xxxx therefor.
9.3 CAFETERIA
Tenant shall be entitled to nonexclusive use (in common with Landlord) of
the Cafeteria servicing the Building. Operating Costs relating to the Cafeteria
will not include subsidies paid by Landlord for any food service operations, but
will include all other costs and expenses with respect to the Cafeteria. Tenant
agrees to cause its employees, agents and invitees to comply with all reasonable
rules and regulations as may be adopted and published by Landlord from time to
time for the safety, care and cleanliness of the Cafeteria and for the
preservation of good order therein.
10. PARKING AND ACCESS
The Parking Area shall be used for vehicle parking only and shall be used
for no other purposes except as required for trash disposal (including exterior
storage) without the prior written consent of Landlord. The Parking Area shall
be available to Tenant and its invitees on a first come, first serve basis, and
Tenant shall ensure that
-11-
all parking spaces designated as "Visitor Parking" in the Parking Area are kept
available for visitors of Landlord and Tenant, also on a first come, first serve
basis. Tenant agrees that Tenant will not park, nor will Tenant permit Tenant's
employees, agents, guests, invitees and/or licensees to park, on streets within
the Property or in any other spaces, lots or areas within the Property except as
may be specifically provided for in this Lease.
Trucks or other vehicles may only temporarily park at bays serving the
Premises while loading and unloading, and shall not be stored in the parking,
maneuvering or loading areas. Tenant, Tenant's employees, agents, guests,
invitees and licensees shall use all due care and best efforts not to interfere
with Landlord's and other tenants' use of parking and maneuvering areas.
11. TAX ON RENT
If any governmental authority shall in any manner levy a tax on Rent
payable under this Lease or rentals accruing from use of property, or such tax
in any form against Landlord measured by income derived from the leasing or
rental of the Complex, such tax shall be paid by Tenant either directly or
through Landlord; provided, however, that Tenant shall not be liable to pay any
federal or state income tax imposed on Landlord.
12. PERSONAL PROPERTY TAXES
Tenant shall pay prior to delinquency all personal property taxes payable
with respect to all property of Tenant located on the Premises or in Building 2
and shall promptly provide written proof of such payment upon request of
Landlord.
13. IMPROVEMENTS
Prior to the Commencement Date, Landlord shall, at its own expense,
construct demising walls and an exterior doorway for Tenant's new entry, as
outlined on EXHIBIT B-2 attached hereto. Landlord will submit its plans and
specifications for such walls and doorway to Tenant for Tenant's review and
approval, which approval will not be unreasonably withheld or delayed. Tenant
shall be solely responsible for all furnishings required for its entry.
All standard or special tenant improvements which are affixed to the
Premises, including, but not limited to, any paid for by Landlord, shall at all
times be the property of Landlord. Notwithstanding anything in this Lease to
the contrary, however, Tenant improvements such as telephone and computer
equipment (except for lines and internal Building wiring) whether or not affixed
to the Premises, will
-12-
remain the property of Tenant. Upon the Expiration Date or sooner termination
of the Lease Term, all improvements and additions to the Premises made by Tenant
shall become the property of Landlord, except Tenant may remove Tenant's trade
fixtures, office supplies and movable office furniture and equipment not
attached to Building 2 provided: (a) such removal is made prior to the
Expiration Date or sooner termination of the Lease Term, (b) no Event of Default
(as defined in Section 24 of this Lease) exists at the time of such removal, and
(c) Tenant immediately repairs all damage caused by or resulting from such
removal. All other property in the Premises and any alterations or additions
thereto (including, without limitation, wall-to-wall carpeting, paneling, wall
covering or lighting fixtures and apparatus) and any other article affixed to
the floor, wall or ceiling of the Premises shall become the property of Landlord
and shall remain upon and be surrendered with the Premises, Tenant hereby
waiving all rights to any payment or compensation therefor. If, however,
Landlord so requests in writing, Tenant will, prior to the Expiration Date or
sooner termination of the Lease Term, remove such alterations, additions,
fixtures, equipment and property placed or installed by Tenant in the Premises
as requested by Landlord, and will immediately repair any damage caused by or
resulting from such removal to the condition of the Premises prevailing upon the
Commencement Date, reasonable wear and tear excepted.
If Tenant shall fail to remove any of Tenant's property of any nature
whatsoever from the Premises on the Expiration Date, sooner termination of the
Lease Term or when Landlord has the right of reentry, Landlord may, at
Landlord's option, remove and store said property without liability for loss
thereof or damage thereto, such storage to be for the account and at the expense
of Tenant. If Tenant shall not pay the cost of storing any such property after
it has been stored for a period of thirty (30) days or more, Landlord may, at
Landlord's option, sell, or permit to be sold, any or all of such property at
public or private sale (and Landlord may become a purchaser at such sale), in
such manner and at such times and places as Landlord in Landlord's sole
discretion may deem proper, without notice to Tenant, and shall apply the
proceeds of such sale: first, to the cost and expense of such sale, including
reasonable attorneys' fees actually incurred; second, to the payment of the
costs or charges for storing any such property; third, to the payment of any
other sums of money which may then be or thereafter become due Landlord from
Tenant under any of the terms hereof; and, fourth, the balance, if any, to
Tenant.
14. ALTERATIONS AND CARE OF PREMISES
Tenant shall take good care of the Premises (and all telephone lines,
equipment, fixtures and mechanical systems therein) and shall promptly make all
necessary repairs and maintenance, except those to be made by Landlord as
provided
-13-
herein, in order to keep the Premises in neat, clean and sanitary condition.
Tenant shall maintain all signs approved by Landlord in good, clean and
attractive condition.
Landlord will be responsible only for structural repairs or
replacement of or to the roof, foundations, sub-floor and structural walls of
the Buildings, HVAC, mechanical, electrical and life safety systems in the
Complex (including the Premises), normal wear and tear excepted. Nothing
herein will limit Tenant's obligation to pay its share of Operating Costs
with respect to the maintenance and operation of the HVAC, mechanical,
electrical and life safety systems in the Complex.
Tenant shall, at the expiration or sooner termination of this Lease,
surrender and deliver the Premises to Landlord in as good condition and in the
same layout and configuration as when received by Tenant from Landlord or as
thereafter improved with Landlord's consent, reasonable wear and tear and damage
by fire or other insured casualty excepted.
Tenant shall not make any material alterations, additions or improvements
in or to the Premises, or add, disturb or change in any material way any floor
covering, wall covering, window blinds, fixtures, plumbing or wiring without
first obtaining the written consent of Landlord, which consent will not be
unreasonably withheld or delayed. Tenant shall deliver to Landlord full and
complete plans and specifications prepared by a licensed architect for any such
material alteration, addition or improvement along with keys to any locks
changed by Tenant provided that Tenant shall not be required to retain an
architect in connection with the installation of telephone, computer and
security equipment contemplated hereby. Landlord acknowledges and agrees that
Tenant will have the right to construct a new telephone, security and computer
room for the operation of Tenant's business; provided, however, that Tenant
submits its plans and specifications for such construction to Landlord for
Landlord's review and approval prior to the commencement of such construction,
which approval will not be unreasonably withheld or delayed. In addition,
notwithstanding the above, Tenant shall have the right to make nonstructural
alterations which do not exceed Five Thousand Dollars ($5,000) in any one
instance, and minor decorations to the Premises, without obtaining Landlord's
written consent, but Tenant shall deliver to Landlord copies of all plans and
drawings relating to any such nonstructural alterations.
Landlord shall have the right to approve the contractor to be hired by
Tenant to construct any alteration, and such contractor shall be fully licensed
and bonded and insured.
Landlord does not and will not make any covenant or warranty, express or
implied, that any such plans or specifications submitted by Tenant are accurate,
-14-
complete or in any way suited for their intended purpose. Further, Tenant shall
indemnify and hold Landlord harmless from any liability, claim or suit,
including attorneys' fees, arising from any injury, damage, cost or loss
sustained by persons or property as a result of any defect in design, material
or workmanship arising as a result of any Tenant improvements.
All such work so done by Tenant shall be done in accordance with all
laws, ordinances and rules and regulations of any federal, state, county,
municipal or other public authority and/or Board of Fire Underwriters.
Tenant expressly covenants and agrees that no liens of mechanics,
materialmen, laborers, architects, artisans, contractors, subcontractors or
any other lien of any kind whatsoever shall be created against or imposed
upon the Premises, the Property or the Complex, and that in the event any
such claims or liens of any kind whatsoever shall be asserted or filed by any
persons, firms or corporations performing labor or furnishing material in
connection with such work, Tenant shall pay off or cause the same to be
discharged of record within ten (10) days of notification thereof. All
alterations, improvements or changes made by Tenant to the Premises shall be
the property of Landlord and shall remain upon and be surrendered with the
Premises upon the termination of this Lease.
Landlord shall have the right, but not the obligation, to inspect any
alterations during and at the conclusion of construction. If, in Landlord's
reasonable opinion, the same are not installed in accordance with plans and
specifications submitted to Landlord under the requirements of this Section,
then, in addition to any other remedy provided to Landlord under this Lease,
Landlord shall have the right to require Tenant to reconstruct the same to
conform to such plans and specifications and at Tenant's cost and expense.
Tenant acknowledges and agrees that a material condition to the
granting of approval of Landlord to any alterations and/or improvements
and/or repairs required under this Lease or desired by Tenant is that the
contractors who perform such work shall carry a comprehensive liability
policy, naming Landlord as an additional insured thereon, with a combined
single limit for personal or bodily injury of not less than One Million
Dollars ($1,000,000), at Tenant's expense. Landlord may require proof of
such insurance coverage from each contractor at the time of submission of
Tenant's request for Landlord's consent to commence work.
All damage or injury done to the Premises by Tenant or by any persons who
may be in or upon the Premises with the consent (express or implied) of Tenant,
including the cracking or breaking of glass of any windows or doors, shall be
paid for by Tenant and Tenant shall pay for all damage to the Buildings and any
appurtenances thereto caused by Tenant or Tenant's employees, agents, guests,
invitees and/or licensees. Tenant shall not put any curtains, draperies, blinds
or other hangings in, on
-15-
or beside the windows in the Premises or place any furniture on the patios, if
any, without first obtaining Landlord's consent, which shall not be unreasonably
withheld or delayed. All normal repairs necessary to maintain the Premises in a
tenantable condition shall be done by or under the direction of Landlord.
Tenant shall promptly notify Landlord of any damage to the Premises requiring
repair. Landlord shall, in the exercise of prudent business practices, determine
those repairs that are necessary to maintain the Premises in good condition.
15. HAZARDOUS MATERIAL
15.1 DEFINITION OF "ENVIRONMENTAL LAWS"
The term "Environmental Laws" means any and all state, federal and local
statutes, regulations and ordinances relating to the protection of human health
and the environment.
15.2 DEFINITION OF "HAZARDOUS MATERIAL"
The term "Hazardous Material" means any hazardous or toxic substance,
material or waste, including, but not limited to, those substances, materials
and wastes listed in the United States Department of Transportation Hazardous
Materials Table (49 C.F.R. Section 172.101) or by the United States
Environmental Protection Agency as hazardous substances (40 C.F.R. pt. 302 and
amendments thereto), petroleum products and their derivatives, and such other
substances, materials and wastes as become regulated or subject to cleanup
authority under any Environmental Laws. Notwithstanding the foregoing, the term
"Hazardous Material" shall not include: (1) chemicals routinely used in
business office areas or (2) janitorial supplies, cleaning fluids, or chemicals
necessary for the day-to-day operation or other maintenance of the Premises if
the disposition, handling, storage or quantity of the items described in (1) and
(2) herein are at all times in compliance with all applicable legal
requirements.
15.3 LIMITATION ON USES OF HAZARDOUS MATERIAL
Tenant shall:
(a) not cause or permit any Hazardous Material to be brought
upon, used, kept or stored on or about the Premises by Tenant or its agents,
contractors or subtenants without the prior written consent of Landlord;
-16-
(b) cause the Premises and all of Tenant's operations conducted
thereon to comply with all Environmental Laws and orders of any governmental
authorities having jurisdiction under any Environmental Laws; and
(c) obtain, keep in effect and comply with all governmental
permits and authorizations required by Environmental Laws with respect to the
Premises or Tenant's operations.
15.4 NOTICES
Tenant shall immediately notify Landlord in writing if Tenant becomes
aware of any of the following:
(a) Any violation of Environmental Laws regarding the Premises
or Tenant's operations;
(b) Any order, notice of violation, fine or penalty or other
similar action relating to Hazardous Material or Environmental Laws and to the
Premises or Tenant's operations; or
(c) Any complaint or lawsuit filed or threatened to be filed by
any person or other entity, including, without limitation, any governmental
authority, relating to Hazardous Material or Environmental Laws and to the
Premises or Tenant's operations.
15.5 Indemnification
Tenant agrees to defend (with counsel approved by Landlord), fully
indemnify, and hold entirely free and harmless Landlord from and against all
claims, judgments, damages, penalties, fines, costs, liabilities or losses
(including, without limitation, diminution in value of the Premises, damages for
the loss or restriction on the use of rentable or usable space or of any amenity
of the Premises, damages arising from any adverse impact on marketing of space,
sums paid in settlement of claims, attorneys' fees, consultant fees and expert
fees) that arise during or after the Lease Term and that are imposed on, or paid
by or asserted against Landlord by reason or on account of, or in connection
with, or arising out of Tenant's use, generation, manufacture, refinement,
transportation, treatment, storage, handling, recycling or disposal of Hazardous
Material, or any release of Hazardous Material in connection with or as a result
of Tenant's use or activities, or of Tenant's agents, contractors or subtenants,
or any violation of any Environmental Law by Tenant or its agents,
subcontractors or subtenants; provided, however, this indemnity provision will
not apply to any Hazardous Material present on the Premises prior to the
Commencement Date;
-17-
provided further, however, that Tenant acknowledges that Landlord has disclosed
to Tenant the presence of asbestos floor tiles currently covered by carpeting
within the Premises. In the event any tenant improvements or other alterations
require Tenant to disturb the floor tiles, Tenant will comply with all
Environmental Laws in connection with the disturbance of such tiles, and will
take all actions necessary to prevent or minimize any damage or personal injury
that may be caused by the release of, or exposure to, such asbestos.
15.6 SURVIVAL
The provisions of this Section 15 shall survive the expiration or earlier
termination of this Lease.
16. ACCESS
16.1 GENERALLY
Landlord and Landlord's employees and agents shall not have any right to
enter the Premises without having given Tenant at least twenty-four (24) hours
prior written notice of such entry, but no such notice shall be required in
cases of emergency involving an imminent risk to persons or property or in cases
of access to the security and electrical rooms as provided in Section 16.3.
When reasonably necessary, Landlord may temporarily close entrances, doors,
corridors, elevators or other facilities without liability to Tenant by reason
of such closure and without such action by Landlord being construed as an
eviction of Tenant or as relieving Tenant from the duty of observing and
performing any of the provisions of this Lease. Landlord shall have the right to
enter the Premises for the purpose of showing the Premises to prospective
tenants within one hundred twenty (120) days prior to the Expiration Date or
sooner termination of the Lease Term. Landlord shall not be liable for the
consequences of admitting by passkey, or refusing to admit to the Premises,
Tenant or Tenant's employees, agents, guests, invitees and/or licensees.
Landlord shall indemnify and hold Tenant harmless from and against all
loss, cost, expense, claim or damage arising from any negligent act or omission
of any employee, agent or invitee of Landlord while in the Premises.
16.2 EXERCISE FACILITIES AND TELEPHONE EQUIPMENT ROOM
Landlord has retained exclusive use of, and does not lease to Tenant, the
exercise facilities and the telephone equipment room located in Building 2, as
outlined on the site plan attached hereto as EXHIBIT B-1. Landlord agrees to
use commercially reasonable best efforts to comply with all reasonable requests
of Tenant
-18-
to assist Tenant in Tenant's installation of its Telephone Switching Equipment
and systems in the Premises. Landlord and Landlord's employees and agents shall
not have access to the exercise facilities or the telephone equipment room
through the Premises.
16.3 SECURITY AND ELECTRICAL ROOMS
Landlord has retained exclusive use of, and does not lease to Tenant, the
electrical room located in Building 2, as outlined on the site plan attached
hereto as EXHIBIT B-1. Landlord agrees to use commercially reasonable best
efforts to comply with all reasonable requests of Tenant to assist Tenant in
Tenant's installation of its wiring and connections for computer and electrical
equipment required by Tenant for the operation of its business in the Premises.
Landlord and Tenant will share use of the security room, located in Building 2
as outlined on the site plan attached hereto as EXHIBIT B-1. The costs and
expenses that are paid or incurred by Landlord for maintaining, operating and
repairing the security room will be included within Operating Costs to be shared
by Tenant under this Lease. In addition, each party shall defend and indemnify
the other party and save the other party harmless from and against any and all
liability, damages, costs or expenses, including reasonable attorneys' fees,
arising from any act, omission or negligence of the indemnifying party or its
employees or agents arising from such party's use of or access to the security
room. In no event will either party be liable for, and each party releases the
other party from, any damages, costs or expenses resulting from or in any way
associated with a breach in the security system resulting from the releasing
party's use of or access to the security room. Tenant shall permit Landlord and
Landlord's employees and agents to enter into, upon and through the Premises, at
all times required by Landlord, for ingress and egress to and from the security
room and the electrical room. Landlord's access through the Premises to the
security and electrical rooms will be limited to Landlord's technical,
maintenance and security personnel. Such access shall be by card-key only, and
shall be on an as-needed basis only. Landlord will keep records of its access
to the security and electrical rooms and will provide such records to Tenant
upon request.
17. INSURANCE
17.1 FIRE AND EXTENDED COVERAGE INSURANCE ON TENANT'S PERSONAL PROPERTY AND
FIXTURES
At all times during the Lease Term, Tenant shall keep in force at
Tenant's sole cost and expense fire insurance and extended coverage in
companies reasonably acceptable to Landlord, equal to the full replacement
cost of Tenant's fixtures,
-19-
furnishings, equipment and contents upon the Premises. Landlord shall be named
as an additional insured on all such policies.
At all times during the Lease Term, Landlord shall keep in force fire
insurance and extended coverage in an amount equal to the full replacement cost
of the Complex (exclusive of the properties owned by Tenant) in amounts and with
companies acceptable to Landlord in the exercise of prudent business practices.
Tenant acknowledges that it will pay its proportionate share of such insurance
pursuant to Section 6 and Tenant will be named an additional insured on such
policies.
17.2 LIABILITY INSURANCE
Tenant shall, during the Lease Term, keep in full force and effect a
policy of public liability and property damage insurance with respect to the
Premises and the business operated by Tenant in the Premises, with a combined
single limit for personal or bodily injury and property damage of not less
than One Million Dollars ($1,000,000). The policy shall name Tenant as
insured, and Landlord as an additional insured and shall contain a clause
that the insurer will not cancel or change the insurance without first giving
Landlord thirty (30) days' written notice. The insurance shall be provided
by an insurance company approved by Landlord and a copy of the policy or a
certificate of insurance shall be delivered to Landlord. All public
liability, property damage and other liability policies shall be written as
primary policies, not contributing with and not in excess of coverage which
Landlord may carry. All such policies shall contain a provision that
Landlord, although named as an additional insured, shall nevertheless be
entitled to recover under said policies for any loss occasioned to Landlord,
Landlord's employees and/or agents by reason of the negligence of Tenant.
All such insurance shall specifically insure the performance by Tenant of the
indemnity agreement as to liability for injury to or death of persons or
injury or damage to property as contained in Section 20. Any insurance
(whether liability or casualty) required by the terms of this Lease to be
carried by Tenant may be carried under a blanket policy (or policies)
covering other properties of Tenant or its related or affiliated
corporations, or both; provided, however, that Tenant provide Landlord
evidence reasonably satisfactory to Landlord that (a) Landlord is named as an
additional insured on such policy or policies and (b) the coverage under such
policy or policies is sufficient to cover the limits required herein.
17.3 LANDLORD'S LIABILITY INSURANCE
At all times during the term of this Lease, Landlord shall maintain in
full force and effect comprehensive public liability insurance with minimum
limits of One Million Dollars ($1,000,000) for injury to or death of one or
more persons in any one occurrence and One Million Dollars ($1,000,000) for
damage to or destruction of
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property in any one occurrence. Any insurance (whether liability or casualty)
required by the terms of this Lease to be carried by Landlord may be under a
blanket policy (or policies) covering other properties of Landlord and/or its
related or affiliated corporations.
17.4 LENDER
Any mortgage lender interested in any part of the Buildings or Premises
may, at Landlord's option, be afforded coverage under any policy required to be
secured by Tenant hereunder, by use of a mortgagee's endorsement to the policy
or policies.
18. DAMAGE OR DESTRUCTION
If the Premises or all or part of the Complex shall be destroyed or
rendered untenantable, either wholly or in part, by fire or other unavoidable
casualty such that Tenant cannot reasonably continue to carry out its normal
business activities from the Premises until such damage is repaired, which
repairs Landlord's Architect reasonably believes can be repaired within one
hundred eighty (180) days from the casualty, and provided such repairs do not
actually require more than two hundred ten (210) days from the date of the
casualty to be completed, then this Lease shall not terminate. Otherwise,
either party may, by written notice to the other, either (a) terminate this
Lease within sixty (60) days after (i) such casualty or (ii) the end of such two
hundred ten (210) day period, as applicable, or (b) keep this Lease in effect,
in which case Landlord shall restore the Premises to their previous condition;
provided during such restoration Basic Rent and Additional Rent shall be abated
in the same proportion as the untenantable portion of the Premises bears to the
whole thereof; and provided further if the damage is due directly or indirectly
to the fault or neglect of Tenant or Tenant's employees, agents, guests,
invitees and/or licensees, there shall be no abatement of Rent. Landlord shall
not be required to repair or restore fixtures, improvements or other property of
Tenant.
19. WAIVER OF SUBROGATION
Whether the loss or damage is due to the negligence of either Landlord or
Tenant, their employees or agents, or any other cause, Landlord and Tenant do
each herewith and hereby release and relieve the other and any other tenant, its
employees and agents from responsibility for, and waive their entire claim of
recovery (including deductible amounts under the policies of insurance referred
to below) for, any loss or damage to the real or personal property of either
located anywhere in the Buildings arising out of or incident to the occurrence
of any of the perils which are covered by their respective fire insurance
policies, with extended coverage endorsements, that each of them is required to
carry under this Lease (regardless of whether such
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coverage is actually in effect). Each party shall cause its insurance carriers
to consent to such waiver and to waive all rights of subrogation against the
other party.
20. INDEMNIFICATION
Subject to Section 19, Tenant shall defend and indemnify Landlord and
save Landlord harmless from and against any and all liability, damages, costs
or expenses, including attorneys' fees, arising from any act, omission or
negligence of Tenant or Tenant's employees, agents, guests, invitees and/or
licensees in or about the Premises, the Common Area and the Parking Area, or
arising from any breach or default under this Lease by Tenant, or arising
from any accident, injury or damage, howsoever and by whomsoever caused, to
any person or property, occurring in or about the Premises, the Common Area
and the Parking Area; provided that the foregoing provision shall not be
construed to make Tenant responsible for loss, damage, liability or expense
resulting from injuries to third parties caused by the negligence of Landlord
or Landlord's employees, agents and/or invitees.
Landlord shall not be liable for any loss or damage to person or property
sustained by Tenant or other persons, which may be caused by the Buildings or
the Premises, or any appurtenances thereto, being out of repair, or the bursting
or leakage of any water, gas, sewer or steam pipe, or by theft, or by any act or
neglect of any tenant or occupant of the Buildings or of any other person, or by
any other cause of whatsoever nature except to the extent that Tenant's loss is
caused by the gross negligence, willful misconduct or willful omission of
Landlord or Landlord's employees or agents. Tenant agrees to use and occupy the
Premises, the Common Area and the Parking Area at Tenant's own risk and, except
as specifically set forth in the preceding sentence, hereby releases Landlord,
Landlord's employees and/or agents from all claims for any damage or injury to
the fullest extent permitted by law.
21. ASSIGNMENT AND SUBLETTING
Subject to the terms set forth herein, Tenant shall not assign, transfer,
mortgage or encumber this Lease nor sublet the whole or any part of the Premises
without first obtaining Landlord's written consent, which consent may be
withheld or conditioned in Landlords' sole reasonable discretion. Any consent
granted by Landlord shall require that such subtenant or assignee consent to be
bound by all of the terms and conditions of this Lease. No such assignment or
subletting shall relieve Tenant of any liability under this Lease regardless of
whether such liability arises by or through Tenant. Assignment or subletting
shall not operate as a waiver of the necessity for a written consent to any
subsequent assignment or subletting, and the terms of such consent shall be
binding upon any person holding by, under or through Tenant.
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Landlord may, at Landlord's election, collect rent directly from such assignee
or subtenant.
If Tenant is a corporation, then any transfer of this Lease by
operation of law, merger, consolidation or liquidation shall constitute an
assignment for the purpose of this Section; provided, however, that as long
as Tenant is a publicly owned company, Landlord's consent to an assignment of
this Lease will not be required as a result of merger, consolidation or
liquidation, or any change in the ownership of, or power to vote, the
majority or controlling interest of Tenant's outstanding voting stock unless
(a) such change is the result of any reorganization or merger by which the
Tenant's rights under this Lease are transferred to a subsidiary or affiliate
or any other entity in which Tenant has controlling interest (in which case
Tenant agrees to guaranty performance under this Lease and upon receipt of
such guaranty, in form and content satisfactory to Landlord, Landlord's
consent will automatically be deemed to be given) or (b) such change results
from Tenant's merger with, or purchase by, any competitor of Landlord.
In the event Tenant should desire to assign this Lease or sublet the
Premises or any part hereof, Tenant shall give Landlord written notice at least
thirty (30) days in advance of the date on which Tenant desires to make such
assignment or sublease, which notice shall specify: (a) the name and business
of the proposed assignee or sublessee, (b) the amount and location of the space
affected, (c) the proposed effective date and duration of the subletting or
assignment, and (d) the proposed rental to be paid to Tenant by such sublessee
or assignee. Landlord shall then have a period of fifteen (15) days following
receipt of such notice within which to notify Tenant in writing that Landlord
elects either (i) to permit Tenant to assign or sublet such space, in which
event if the proposed rental rate between Tenant and sublessee is greater than
the Rent payable under this Lease, then such excess rental shall be deemed
Additional Rent owed by Tenant to Landlord under this Lease, and the amount of
such excess, including any subsequent increases due to escalation or otherwise,
shall be paid by Tenant to Landlord in the same manner that Tenant pays the Rent
hereunder and in addition thereto or (ii) to withhold consent to Tenant's
assignment or subleasing such space and to continue this Lease in full force and
effect as to the entire Premises.
22. SIGNS
Tenant shall not inscribe any inscription, or post, place or in any
manner display any sign, notice, picture, placard or poster or any
advertising matter whatsoever, anywhere in or about the Premises or the
Buildings at places visible (either directly or indirectly as an outline or
shadow on a glass pane) from anywhere outside the Premises without first
obtaining Landlord's written consent thereto (and
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Landlord shall not consent to any sign outside the Premises unless it is on the
side of Building 2 facing Signal Drive, in which case Landlord's consent under
this paragraph is hereby deemed given to Tenant, but Tenant shall deliver to
Landlord drawings or plans showing any such sign prior to its installation).
Any such consent by Landlord shall be upon the understanding and condition that
Tenant will remove the same at the Expiration Date or sooner termination of the
Lease Term and Tenant shall repair any damage to the Premises or the Building
caused thereby.
23. LIENS AND INSOLVENCY
Tenant shall keep the Premises and the Complex free from any liens
arising out of any work performed and materials ordered or obligations
incurred by Tenant, and Tenant does hereby indemnify and hold Landlord
harmless from any liability arising from such lien. In the event any lien is
filed against the Complex, the Property described on EXHIBIT A or the
Premises by any person claiming by, through or under Tenant, Tenant shall
promptly, upon request of Landlord and at Tenant's sole costs and expense,
furnish to Landlord a bond in form, content and amount, and issued by a
surety, satisfactory to Landlord, in its sole discretion, indemnifying
Landlord, the Property and the Complex against all liability, costs and
expenses, including, without limitation, attorneys' fees, which Landlord may
incur as a result thereof. Provided such bond has been furnished, and after
written notice to Landlord, Tenant may contest any such lien by appropriate
proceedings conducted in good faith and with due diligence, at Tenant's sole
cost and expense, if and only if such proceedings suspend the collection of
any amount claimed from Landlord, Tenant, the Property and the Premises, and
neither the Property, the Complex nor the Premises (or any part thereof) is
or will be in danger of being sold, forfeited or lost.
24. DEFAULTS
24.1 EVENTS OF DEFAULT
The following events are referred to, collectively, as "Events of
Default" or, individually, as an "Event of Default":
(a) Tenant defaults in the due and punctual payment of Rent, and
such default continues for five (5) days after written notice from Landlord
delivered by hand to Tenant's last known address or via facsimile to Tenant's
last known facsimile number; however, Tenant will not be entitled to more than
one (1) written notice for monetary defaults during any twelve (12) month
period, and if after such written notice any Rent is not paid within five (5)
days of when due, an Event of Default will be considered to have occurred
without further notice;
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(b) This Lease or the Premises or any part of the Premises are
taken upon execution or by other process of law directed against Tenant, or
are taken upon or subject to any attachment by any creditor of Tenant or
claimant against Tenant, and the attachment is not discharged or disposed of
within thirty (30) days after its levy;
(c) Tenant files a petition in bankruptcy or insolvency or for
reorganization or arrangement under the bankruptcy laws of the United States or
under any insolvency act of any state, or admits the material allegations of any
such petition by answer or otherwise, or is dissolved or makes an assignment for
the benefit of creditors;
(d) Involuntary proceedings under any such bankruptcy law or
insolvency act or for the dissolution of Tenant are instituted against Tenant,
or a receiver or trustee is appointed for all or substantially all of the
property of Tenant, and such proceeding is not dismissed or such receivership or
trusteeship vacated within sixty (60) days after such institution or
appointment; or
(e) Tenant breaches any of the other agreements, terms,
covenants or conditions that this Lease requires Tenant to perform, and such
breach continues for a period of thirty (30) days after written notice from
Landlord to Tenant or, if such breach cannot be cured reasonably within such
thirty (30) day period, if Tenant fails to diligently commence to cure such
breach within thirty (30) days after written notice from Landlord and to
complete such cure within a reasonable time thereafter.
24.2 LANDLORD'S REMEDIES
If any one or more Events of Default set forth in Section 24.1 occur,
then Landlord has the right, at its election:
(a) To give Tenant written notice by hand delivery to Tenant's
last known address or via facsimile to Tenant's last known facsimile number of
Landlord's intention to terminate this Lease on the earliest date permitted by
law or on any later date specified in such notice, in which case Tenant's right
to possession of the Premises will cease and this Lease will be terminated,
except as to Tenant's liability, as if the expiration of the term fixed in such
notice were the end of the term;
(b) Without further demand or notice, to reenter and take
possession of the Premises or any part of the Premises, repossess the same,
expel Tenant and those claiming through or under Tenant, and remove the effects
of both or either, using such force for such purposes as may be necessary,
without being liable
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for prosecution, without being deemed guilty of any manner of trespass and
without prejudice to any remedies for arrears of monthly rent or other amounts
payable under this Lease or as a result of any preceding breach of covenants or
conditions; or
(c) Without further demand or notice to cure any Event of
Default and to charge Tenant for the cost of effecting such cure, including,
without limitation, reasonable attorneys' fees and interest on the amount so
advanced at the rate of ten percent (10%) per annum, provided that Landlord will
have no obligation to cure any such Event of Default of Tenant.
Should Landlord elect to reenter as provided in (b), or should Landlord take
possession pursuant to legal proceedings or pursuant to any notice provided by
law, Landlord may, from time to time, without terminating this Lease, relet the
Premises or any part of the Premises in Landlord's or Tenant's name, but for the
account of Tenant, for such term or terms (which may be greater or less than the
period that would otherwise have constituted the balance of the term) and on
such conditions and upon such other terms (which may include concessions of free
rent and alteration and repair of the Premises) as Landlord, in its reasonable
discretion, may determine, and Landlord may collect and receive the Rent.
Landlord will in no way be responsible or liable for any failure to relet the
Premises, or any part of the Premises, or for any failure to collect any Rent
due upon such reletting. No such reentry or taking possession of the Premises
by Landlord will be construed as an election on Landlord's part to terminate
this Lease unless a written notice of such intention is given to Tenant. No
written notice from Landlord under this Section 24.2 or under a forcible or
unlawful entry and detainer statute or similar law will constitute an election
by Landlord to terminate this Lease unless such notice specifically so states.
Landlord reserves the right following any such reentry or reletting to exercise
its right to terminate this Lease by giving Tenant such written notice, in which
event this Lease will terminate as specified in such notice.
24.3 CERTAIN DAMAGES
In the event that Landlord does not elect to terminate this Lease as
permitted in Section 24.2(a), but on the contrary elects to take possession as
provided in Section 24.2(b), Tenant shall pay to Landlord monthly Rent and other
sums as provided in this Lease that would be payable under this Lease if such
repossession had not occurred, less the net proceeds, if any, of any reletting
of the Premises after deducting all of Landlord's reasonable expenses in
connection with such reletting, including, without limitation, all repossession
costs, brokerage commissions, attorneys' fees, expenses of employees, alteration
and repair costs and expenses of preparation for such reletting. If, in
connection with any reletting, the new lease term extends beyond the existing
term, or the Premises covered by such new lease include
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other premises not part of the Premises, a fair apportionment of the rent
received from such reletting and the expenses incurred in connection with such
reletting as provided in this Section 24.3 will be made in determining the net
proceeds from such reletting, and any rent concessions will be equally
apportioned over the term of the new lease. Tenant shall pay such rent and
other sums to Landlord monthly on the day on which the monthly Rent would have
been payable under this Lease if possession had not been retaken, and Landlord
will be entitled to receive such rent and other sums from Tenant on each such
day. Landlord will attempt to mitigate damages arising from an Event of Default
by making reasonable efforts to relet the Premises in whole or in part.
24.4 Continuing Liability After Termination
If this Lease is terminated on account of the occurrence of an Event of
Default, Tenant will remain liable to Landlord for damages in an amount equal to
monthly Rent and other amounts that would have been owing by Tenant for the
balance of the term had this Lease not been terminated, less the net proceeds,
if any, of any reletting of the Premises by Landlord subsequent to such
termination, after deducting all of Landlord's expenses in connection with such
reletting, including, without limitation, the expenses enumerated in
Section 24.3. Landlord will be entitled to collect such damages from Tenant
monthly on the day on which monthly Rent and other amounts would have been
payable under this Lease if this Lease had not been terminated, and Landlord
will be entitled to receive such monthly Rent and other amounts from Tenant on
each such day. Alternatively, at the option of Landlord, in the event this
Lease is so terminated, Landlord will be entitled to recover against Tenant as
damages for loss of the bargain and not as a penalty:
(a) The worth at the time of award of the unpaid Rent that had
been earned at the time of termination;
(b) The worth at the time of award of the amount by which the
unpaid Rent that would have been earned after termination until the time of
award exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided;
(c) The worth at the time of award of the amount by which the
unpaid Rent for the balance of the term of this Lease (had the same not been so
terminated by Landlord) after the time of award exceeds the amount of such
rental loss that Tenant proves could be reasonably avoided; and
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(d) Any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform its obligations
under this Lease or, in the ordinary course of business, likely to result
therefrom.
The "worth at the time of award" of the amounts referred to in (a) and (b) above
is computed by adding interest at the interest rate of ten percent (10%) per
annum on the termination date from the termination date until the time of the
award. The "worth at the time of award" of the amount referred to in (c) above
is computed by discounting such amount at the discount rate of the Federal
Reserve Bank of Seattle, Washington, at the time of award plus one percent (1%).
24.5 CUMULATIVE REMEDIES
Any suit or suits for the recovery of the amounts and damages set
forth in Sections 24.3 and 24.4 may be brought by Landlord, from time to
time, at Landlord's election, and nothing in this Lease will be deemed to
require Landlord to await the date upon which this Lease or the term would
have expired had there occurred no Event of Default. Each right and remedy
provided for in this Lease is cumulative and is in addition to every other
right or remedy provided for in this Lease or now or hereafter existing at
law or in equity or by statute or otherwise, and the exercise or beginning of
the exercise by Landlord of any one or more of the rights or remedies
provided for in this Lease or now or hereafter existing at law or in equity
or by statute or otherwise will not preclude the simultaneous or later
exercise by Landlord of any or all other rights or remedies provided for in
this Lease or now or hereafter existing at law or in equity or by statute or
otherwise. All costs incurred by Landlord in collecting any amounts and
damages owing by Tenant pursuant to the provisions of this Lease or to
enforce any provision of this Lease, including reasonable attorneys' fees
from the date any such matter is turned over to an attorney, whether or not
one or more actions are commenced by Landlord, will also be recoverable by
Landlord from Tenant.
25. PRIORITY
This Lease shall be subordinate to any mortgage or deed of trust now
existing upon the Premises or the Property and to any and all advances to be
made thereunder, and to interest thereon, and all renewals, replacements or
extensions thereof. Tenant agrees to subordinate its interest in the Premises
and under this Lease to the lien of a future mortgage or deed of trust which
secures a loan to Landlord for the benefit of the Complex or Premises (or a loan
to refinance such a loan), and further agrees to attorn to the holder of such
mortgage or such deed of trust, provided that the holder of such mortgage or
deed of trust delivers to Tenant a nondisturbance agreement providing that so
long as Tenant is not in default under this Lease, Tenant's possession
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of the Premises and rights under the Lease shall not be effected by a
foreclosure, a deed in lieu of foreclosure or any other post-default remedy or
proceeding under such mortgage or deed of trust.
26. NONWAIVER
Waiver by Landlord of any breach of any term, covenant or condition
herein contained shall not be deemed to be a waiver of such term, covenant or
condition, or of any subsequent breach of the same or any other term,
covenant or condition herein contained. The subsequent acceptance of Rent by
Landlord shall not be deemed to be a waiver of any preceding breach by Tenant
of any term, covenant or condition of this Lease, other than the failure of
Tenant to pay the particular Rent so accepted, regardless of Landlord's
knowledge of such preceding breach at the time of acceptance of such Rent.
27. SURRENDER OF POSSESSION
Upon the Expiration Date or sooner termination of the Lease Term, whether
by lapse of time or otherwise, Tenant shall promptly and peacefully surrender
the Premises to Landlord.
28. HOLDOVER
If Tenant shall, with the written consent of Landlord, hold over after
the Expiration Date of the Lease Term, Tenant shall be deemed to be occupying
the Premises on a month-to-month tenancy, which tenancy may be terminated as
provided by the laws of the State of Washington. During such tenancy, Tenant
agrees to pay to Landlord twice the Basic Rent as set forth herein, unless a
different rate shall be agreed upon, and to be bound by all of the terms,
covenants and conditions herein specified, so far as applicable.
29. CONDEMNATION
If all of the Premises, or such portions of Building 2 as may be required
for the reasonable use of the Premises, are taken by eminent domain, this Lease
shall automatically terminate as of the date Tenant is required to vacate the
Premises and all Rent shall be paid to that date. In case of a taking of a part
of the Premises, or a portion of Building 2 not required for the reasonable use
of the Premises, then this Lease shall continue in full force and effect and the
Rent shall be equitably reduced based on the proportion by which Tenant's
Percentage of the Complex is reduced, such Rent reduction to be effective as of
the date possession of such portion is delivered to the condemning authority.
Landlord reserves all rights to damage to the
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Premises for any taking by eminent domain, and Tenant hereby assigns to Landlord
any right Tenant may have to such damages or award, and Tenant shall make no
claim against Landlord for damages for termination of the leasehold interest or
interference with Tenant's business. Tenant shall have the right, however, to
claim and recover from the condemning authority compensation for any loss to
which Tenant may be put for Tenant's moving expenses, provided that such damages
may be claimed only if they are awarded separately in the eminent domain
proceedings and not as part of the damages recoverable by Landlord.
30. NOTICES
All notices under this Lease shall be in writing and delivered in person,
via facsimile or sent by registered or certified mail: to Landlord at the same
place Rent payments are made, Attn: CFO; to Tenant at 0000 Xxxxxxx Xxxxx,
Xxxxxxx, Xxxxx 00000, Attn: CEO, Facsimile No. ; and to the holder of
any first mortgage or deed of trust at such place as such holder shall specify
to Tenant in writing; or such other addresses and facsimile numbers as may from
time to time be designated by such party in writing. Notices given as aforesaid
shall be deemed given on the date of personal delivery, the date any facsimile
is transmitted or the date of such mailing.
31. COSTS AND ATTORNEYS' FEES
If Tenant or Landlord shall take any action for any relief against the
other, declaratory or otherwise, arising out of this Lease, including any suit
by Landlord for the recovery of rent or possession of the Premises, the losing
party shall pay the successful party a reasonable sum for attorneys' fees and
costs in such action, at trial and on appeal, and such attorneys' fees and costs
shall be deemed to have accrued on the commencement of such action.
In the event Tenant requests Landlord's consent to any assignment or
sublease hereunder or to any modification or amendment of this Lease, then
Tenant shall pay reasonable attorneys' fees incurred by Landlord in connection
with Landlord's review of such request and preparation of any documents required
to evidence Landlord's consent, if granted.
32. LANDLORD'S LIABILITY
Anything in this Lease to the contrary notwithstanding, covenants,
undertakings and agreements herein made on the part of Landlord are made and
intended not as personal covenants, undertakings and agreements or for the
purpose of binding Landlord personally or the assets of Landlord except
Landlord's interest in the
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Premises and the Complex, but are made and intended for the purpose of binding
only Landlord's interest in the Premises and the Complex, including, but not
limited to, any and all net consideration received by Landlord from the sale of
all or any portion thereof, and all net insurance and condemnation proceeds paid
to Landlord in connection therewith. No personal liability or personal
responsibility is assumed by, or shall at any time be asserted or enforceable
against, Landlord or Landlord's heirs, legal representatives, successors and
assigns on account of this Lease or on account of any covenant, undertaking or
agreement of Landlord contained in this Lease.
33. ESTOPPEL CERTIFICATES
Tenant shall, from time to time upon written request of Landlord,
execute, acknowledge and deliver to Landlord or Landlord's designee a written
statement stating: the date this Lease was executed and the date it expires;
the date Tenant entered into occupancy of the Premises; the amount of Basic
Rent and Additional Rent and the date to which such Rent has been paid; and
certifying (to the extent that the same is true and correct): that this
Lease is in full force and effect and has not been assigned, modified,
supplemented or amended in any way (or specifying the date of agreement so
effecting this Lease); that this Lease represents the entire agreement
between the parties as to this leasing; that any conditions under this Lease
to be performed by Landlord have been satisfied; that any required
contributions by Landlord to Tenant on account of Tenant's improvements have
been received; that there are no existing defenses or offsets which Tenant
has against the enforcement of this Lease by Landlord; that no Rent has been
paid in advance; and stating the amount of the Security Deposit paid to
Landlord. It is intended that any such statement may be relied upon by a
prospective purchaser of Landlord's interest or a mortgagee of Landlord's
interest or assignee of any mortgage upon Landlord's interest in the
Property. If Tenant shall fail to respond within ten (10) business days of
receipt by Tenant of a written request by Landlord as herein provided, Tenant
shall be deemed to have given such certificate as above provided without
modification and shall be deemed to have admitted the accuracy of any
information supplied by Landlord to a prospective purchaser or mortgagee and
that this Lease is in full force and effect, that there are no uncured
defaults in Landlord's performance, that the Security Deposit is as stated in
this Lease and that not more than one month's Rent has been paid in advance.
34. TRANSFER OF LANDLORD'S INTEREST
This Lease shall be assignable by Landlord without the consent of Tenant.
In the event of any transfer or transfers of Landlord's interest in the Premises
or the Property, other than a transfer for security purposes only, the
transferor shall be
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automatically relieved of any and all obligations and liabilities on the part of
Landlord accruing from and after the date of such transfer and Tenant agrees to
attorn to the transferee.
35. RIGHT TO PERFORM
If Tenant shall fail to pay any sum of money, other than Rent,
required to be paid by Tenant hereunder or shall fail to perform any other
act on Tenant's part to be performed hereunder, and such failure shall
continue for ten (10) business days after notice thereof by Landlord,
Landlord may, but shall not be obligated so to do, and without waiving or
releasing Tenant from any obligations of Tenant, make any such payment or
perform any such other act on Tenant's part to be made or performed as
provided in this Lease. Landlord shall have (in addition to any other right
or remedy of Landlord) the same rights and remedies in the event of the
nonpayment of sums due under this Section as in the case of default by Tenant
in the payment of Rent.
36. EXECUTION OF LEASE BY LANDLORD
The submission of this document for examination and negotiation does not
constitute an offer to lease, or a reservation of or option for the Premises,
and this document shall become effective and binding only upon execution and
delivery by Landlord. No act or omission of any employee or agent of Landlord
or of Landlord's broker shall alter, change or modify any of the provisions
hereof.
37. GENERAL
37.1 TITLES
The title to sections of this Lease are not a part of this Lease and
shall have no effect upon the construction or interpretation of any part
hereof.
37.2 GOVERNING LAW
This Lease shall be construed and governed by the laws of the State of
Washington.
37.3 BINDING EFFECT
All of the covenants, agreements, terms and conditions contained in this
Lease shall apply to and be binding upon Landlord and Tenant and their
respective heirs, executors, administrators, successors and assigns.
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37.4 NO BROKER ENGAGED BY TENANT
Tenant represents and warrants to Landlord that Tenant has not engaged
any broker, finder or other person who would be entitled to any commission or
fee in respect of the negotiation, execution or delivery of this Lease and
shall indemnify and hold harmless Landlord against any loss, cost, liability
or expense incurred by Landlord as a result of any claim asserted by any such
broker, finder or other person on the basis of any arrangements or agreements
made or alleged to have been made by or on behalf of Tenant.
37.5 ENTIRE AGREEMENT
This Lease contains all covenants and agreements between Landlord and
Tenant relating in any manner to the lease, use and occupancy of the Premises
and other matters set forth in this Lease. No prior agreements or understanding
pertaining to the same shall be valid or of any force or effect and the
covenants and agreements of this Lease shall not be altered, modified or added
to except in writing signed by Landlord and Tenant.
37.6 VALIDITY
Any provision of this Lease which shall prove to be invalid, void or
illegal shall in no way affect, impair or invalidate any other provision hereof
and the remaining provisions hereof shall nevertheless remain in full force and
effect.
37.7 INTEREST
Any Rent or other sums payable by Tenant to Landlord which shall not be
paid within fifteen (15) days after the due date thereof shall bear interest
from the due date at the Default Rate calculated from the date of delinquency to
the date of payment.
37.8 INTERPRETATION
This Agreement and each of the terms and provisions hereof are deemed to
have been explicitly negotiated between the parties, and the language in all
parts of this Agreement shall, in all cases, be construed according to its fair
meaning and not strictly for or against either party.
37.9 AUTHORIZATION
If Tenant is a corporation or partnership, Tenant represents and warrants
that the execution, delivery and performance of this Lease have been duly
authorized by all necessary persons. The officer or partner executing this
Lease on behalf of Tenant
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further individually represents and warrants that he or she is duly authorized
to execute and deliver this Lease to Landlord on behalf of Tenant.
37.10 NO RECORDING
Tenant shall not record this Lease or any notice or memorandum thereof in
the records of the county auditor without Landlord's prior written consent.
IN WITNESS WHEREOF, this Lease has been executed the day and year first
above set forth.
LANDLORD:
DJ&J SOFTWARE CORPORATION,
d/b/a EGGHEAD
By
--------------------------------
Name:
-----------------------------
Title:
-----------------------------
TENANT:
SOFTWARE SPECTRUM, INC.
By
--------------------------------
Name:
-----------------------------
Title:
-----------------------------
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STATE OF WASHINGTON )
) ss.
COUNTY OF_______________)
On this______day of_______________, 1996, before me, the undersigned, a
Notary Public in and for the State of Washington, duly commissioned and
sworn, personally appeared ___________________________________________, to me
known to be the person who signed as _________________________________________
of DJ&J SOFTWARE CORPORATION, d/b/a EGGHEAD, the corporation that executed
the within and foregoing instrument, and acknowledged said instrument to be
the free and voluntary act and deed of said corporation for the uses and
purposes therein mentioned, and on oath stated that
_____________________________________ was duly elected, qualified and acting
as said officer of the corporation, that
_____________________________________________ was authorized to execute said
instrument and that the seal affixed, if any, is the corporate seal of said
corporation.
IN WITNESS WHEREOF I have hereunto set my hand and official seal the day
and year first above written.
----------------------------
(Signature of Notary)
----------------------------
(Print or stamp name of Notary)
NOTARY PUBLIC in and for the State
of Washington, residing at
My Appointment Expires:
STATE OF WASHINGTON )
) ss.
COUNTY OF_______________)
On this __________ day of __________________, 1996, before me, the
undersigned, a Notary Public in and for the State of Washington, duly
commissioned and sworn, personally appeared ________________________, to me
known to be the person who signed as ______________________________________
of SOFTWARE SPECTRUM, INC., the corporation that executed the within and
foregoing instrument, and acknowledged said instrument to be the free and
voluntary act and deed of said corporation for the uses and purposes therein
mentioned, and on oath stated that ___________________ was duly elected,
qualified and acting as said officer of the
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corporation, that ____________________________ was authorized to execute said
instrument and that the seal affixed, if any, is the corporate seal of said
corporation.
IN WITNESS WHEREOF I have hereunto set my hand and official seal the day
and year first above written.
-----------------------------
(Signature of Notary)
-----------------------------
(Print or stamp name of Notary)
NOTARY PUBLIC in and for the State
of Washington, residing at_____________.
My Appointment Expires:________________.
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