<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended MARCH 31, 1999 Commission File No. 000-22513
AMAZON.COM, INC.
(Exact name of registrant as specified in its charter)
Delaware 91-1646860
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1516 Second Avenue, 4th Floor, Seattle, Washington 98101
(Address of principal executive offices, zip code)
Registrant's telephone number, including area code: (206) 622-2335
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
161,562,425 shares of $0.01 par value common stock outstanding as of April 30,
1999 (after adjusting for the three-for-one stock split payable on January 4,
1999)
Page 1 of 26
Exhibit Index on Page 26
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AMAZON.COM, INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1999
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
----
<S> <C>
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 21
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities and Use of Proceeds 22
Item 3. Defaults Upon Senior Securities 23
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K 24
Signatures 25
Exhibit Index 26
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMAZON.COM, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
MARCH 31, DECEMBER 31,
1999 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(unaudited)
ASSETS
Current assets:
Cash ............................................................... $ 5,248 $ 25,561
Marketable securities .............................................. 1,437,717 347,884
Inventories ........................................................ 45,236 29,501
Prepaid expenses and other ......................................... 37,077 21,308
------------ ------------
Total current assets ....................................... 1,525,278 424,254
Fixed assets, net .................................................... 60,600 29,791
Goodwill and other, net .............................................. 187,194 187,003
Deferred charges ..................................................... 39,912 7,412
------------ ------------
Total assets ............................................ $ 1,812,984 $ 648,460
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................................... $ 133,018 $ 113,273
Accrued advertising ................................................ 16,187 13,071
Other liabilities and accrued expenses ............................. 45,194 34,423
Current portion of long-term debt and capital lease obligation ..... 7,186 808
------------ ------------
Total current liabilities .................................. 201,585 161,575
Long-term debt and capital lease obligation .......................... 1,533,862 348,140
Stockholders' equity:
Preferred stock, $0.01 par value:
Authorized shares -- 10,000
Issued and outstanding shares -- none ........................... -- --
Common stock, $0.01 par value:
Authorized shares -- 300,000
Issued and outstanding shares --161,371 and 159,267
shares at March 31, 1999 and December 31, 1998, respectively .. 1,614 1,593
Additional paid-in capital ......................................... 306,414 300,130
Note receivable from officer for common stock ...................... (1,099) (1,099)
Deferred compensation .............................................. (1,275) (1,625)
Accumulated other comprehensive income (loss) ...................... (4,390) 1,806
Accumulated deficit ................................................ (223,727) (162,060)
------------ ------------
Total stockholders' equity ................................. 77,537 138,745
------------ ------------
Total liabilities and stockholders' equity .............. $ 1,812,984 $ 648,460
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
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AMAZON.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
QUARTER ENDED
MARCH 31,
--------------------------------
1999 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales ................................................................... $ 293,643 $ 87,361
Cost of sales ............................................................... 228,852 68,063
------------ ------------
Gross profit ................................................................ 64,791 19,298
Operating expenses:
Marketing and sales ...................................................... 60,744 19,914
Product development ...................................................... 23,477 7,320
General and administrative ............................................... 11,165 2,049
Merger and acquisition related costs, including amortization of goodwill
and other purchased intangibles ........................................ 25,309 --
------------ ------------
Total operating expenses ............................................... 120,695 29,283
Loss from operations ........................................................ (55,904) (9,985)
Interest income ............................................................. 10,925 1,645
Interest expense ............................................................ (16,688) (2,029)
------------ ------------
Net interest expense ................................................... (5,763) (384)
------------ ------------
Net loss .................................................................... $ (61,667) $ (10,369)
============ ============
Basic and diluted loss per share ............................................ $ (0.39) $ (0.07)
============ ============
Shares used in computation of basic and diluted
loss per share ........................................................... 156,897 141,318
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
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AMAZON.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
QUARTER ENDED
MARCH 31,
----------------------------------
1999 1998
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss ........................................................................ $ (61,667) $ (10,369)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization ............................................... 5,223 1,841
Amortization of deferred compensation related to stock options .............. 115 185
Non-cash merger and acquisition related costs, including amortization of
goodwill and other purchased intangibles ................................. 25,218 --
Loss on sale of marketable securities ....................................... 4,190 --
Non-cash interest expense ................................................... 7,468 --
Changes in operating assets and liabilities:
Inventories .............................................................. (15,735) (2,703)
Prepaid expenses and other ............................................... (14,423) (1,122)
Other non-current assets ................................................. (1,161) (127)
Accounts payable ......................................................... 19,745 1,582
Accrued advertising ...................................................... 3,116 1,895
Other liabilities and accrued expenses ................................... 10,717 1,547
------------ ------------
Net cash used in operating activities ................................. (17,194) (7,271)
INVESTING ACTIVITIES:
Sales and maturities of marketable securities ................................... 1,217,942 4,500
Purchases of marketable securities .............................................. (2,342,230) (7,499)
Purchases of fixed assets ....................................................... (19,062) (2,163)
------------ ------------
Net cash used in investing activities ................................. (1,143,350) (5,162)
FINANCING ACTIVITIES:
Proceeds from issuance of capital stock and exercise of stock options ........... 6,540 1,415
Proceeds from long-term debt .................................................... 1,250,000 --
Repayment of long-term debt ..................................................... (81,249) --
Financing costs ................................................................. (34,900) --
------------ ------------
Net cash provided by financing activities ............................. 1,140,391 1,415
Effect of exchange rate changes ...................................................... (160) --
------------ ------------
Net decrease in cash ................................................................. (20,313) (11,018)
Cash at beginning of period .......................................................... 25,561 110,119
------------ ------------
Cash at end of period ................................................................ $ 5,248 $ 99,101
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Fixed assets acquired under capital lease ............................................ $ 14,594 $ --
Fixed assets acquired under financing agreement ...................................... 4,421 --
</TABLE>
See accompanying notes to consolidated financial statements.
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AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - ACCOUNTING POLICIES
Unaudited Interim Financial Information
The financial statements as of March 31, 1999 and 1998 have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission (the "SEC"). These statements are unaudited and, in the opinion of
management, include all adjustments (consisting of normal recurring adjustments
and accruals) necessary to present fairly the results for the periods presented.
The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to such SEC rules and
regulations. Operating results for the quarter ended March 31, 1999 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999. These financial statements should be read in conjunction with
the audited financial statements and the accompanying notes included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998.
Certain prior period balances have been reclassified to conform to the current
period presentation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Comprehensive Loss
As of January 1, 1998, the Company adopted SFAS No. 130, Reporting Comprehensive
Income, which establishes standards for the reporting and display of
comprehensive loss and its components in the financial statements. Comprehensive
loss was $67.9 million for the three-month period ended March 31, 1999, which
consisted of net loss, unrealized gains and losses on marketable securities and
foreign currency translation adjustments; and $10.4 million for the three-month
period ended March 31, 1998, which consisted of net loss.
NOTE 2 - LONG-TERM DEBT
Convertible Subordinated Notes
On February 3, 1999, Amazon.com completed the offering of $1.25 billion
aggregate principal amount of 4 3/4% Convertible Subordinated Notes
("Convertible Notes") due 2009. Interest is payable in arrears in cash
semi-annually on February 1 and August 1 of each year, commencing August 1,
1999. Holders of the Convertible Notes may convert any portion of a note, in
multiples of $1,000, into common stock of Amazon.com at an initial conversion
price of $156.055 per share. The Convertible Notes are unsecured general
obligations of the Company and are subordinated to the prior payment in full of
all of Amazon.com's senior debt and are also effectively subordinated to all
indebtedness and other liabilities.
Senior Discount Notes
During the quarter, the Company repurchased $126.0 million (face amount) of its
10% Senior Discount Notes (the "Senior Discount Notes"), representing accreted
value of $83.9 million. The Senior Discount Notes, which are due in May 2008,
were issued in May 1998. As of March 31, 1999, the remaining face amount
outstanding was $404 million.
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NOTE 3 - DEFERRED CHARGES
Deferred charges associated with the issuance of the Senior Discount Notes
(see Note 2) are amortized into interest expense over the life of the
Senior Discount Notes.
NOTE 4 - COMMITMENTS AND CONTINGENCIES
Legal Proceedings
In October 1998, Wal-Mart Stores, Inc. ("Wal-Mart") filed a lawsuit in
Bentonville, Arkansas against the Company and other defendants alleging actual
and threatened misappropriation of trade secrets and ancillary common-law
claims. In January 1999, Wal-Mart filed an identical action in Seattle,
Washington, and the Arkansas action was dismissed. The parties settled the
pending action without payment by either party on April 2, 1999.
On April 7, 1999, Amazon Bookstore, Inc. ("AB") filed a lawsuit in Minneapolis,
Minnesota against the Company alleging trademark infringement and unfair
competition under state and federal law. AB does not have a federal registration
and is attempting to obtain cancellation of the Company's registration of the
marks Amazon.com, Amazon.com Books and Amazon Books, injunctive relief
precluding the Company's use of these marks, damages, the Company's profits,
treble damages, costs and attorneys' fees. The Company is assessing the
claim.
From time to time, the Company is subject to other legal proceedings and claims
in the ordinary course of business, including employment related claims and
claims of alleged infringement of trademarks, copyrights and other intellectual
property rights. The Company currently is not aware of any such legal
proceedings or claims that it believes will have, individually or in the
aggregate, a material adverse effect on its business, prospects, financial
condition and operating results.
NOTE 5 - STOCKHOLDERS' EQUITY
On June 1, 1998, the Company effected a two-for-one stock split to stockholders
of record on May 20, 1998, and on January 4, 1999, effected a three-for-one
stock split to stockholders of record on December 18, 1998. Both stock splits
were effected in the form of a stock dividend. The accompanying consolidated
financial statements have been restated to reflect the splits.
The Convertible Notes may be converted into, in the aggregate, 8,009,996 shares
of Amazon.com common stock.
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NOTE 6 - EARNINGS (LOSS) PER SHARE
The following represents the calculations for net loss per share:
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31,
--------------------------------------
1999 1998
------------ ------------
<S> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net loss - as reported ................ $ (61,667) $ (10,369)
============ ============
Weighted average shares outstanding ... 160,360 145,889
Weighted average common shares issued
subject to repurchase agreements .. (3,463) (4,571)
------------ ------------
Shares used in computation of basic and
diluted loss per share ............ 156,897 141,318
============ ============
Basic and diluted loss per share ...... $ (0.39) $ (0.07)
============ ============
</TABLE>
All of the Company's stock options are excluded from diluted loss per share
since their effect is antidilutive.
NOTE 7 - SUBSEQUENT EVENTS
On April 12, 1999, the Company announced that it agreed to acquire LiveBid.com,
Inc., which provides the technology and ability to conduct live, event-based
auctions on the Internet.
On April 26, 1999, the Company announced that it agreed to acquire three
Internet companies: e-Niche Incorporated ("Exchange.com"), Accept.com and Alexa
Internet. Exchange.com operates Bibliofind and MusicFile, on-line marketplaces
for rare books and music and music memorabilia. Accept.com develops technology
aimed at simplifying person-to-person and business-to-consumer e-commerce
transactions. Alexa Internet offers a Web navigation service which enhances the
usability of Internet browsers. Consideration for these acquisitions totaled
approximately $645 million and was comprised mostly of common stock.
All four acquisitions will be accounted for under the purchase accounting
method. All acquisitions are expected to close in the second quarter, subject to
customary closing conditions, including clearance under the Hart-Scott Rodino
Antitrust Improvements Act and approval by shareholders of the acquired
companies.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following "Management's Discussion and Analysis of Financial Condition and
Results of Operations" includes "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. This Act provides a
"safe harbor" for forward-looking statements to encourage companies to provide
prospective information about themselves so long as they identify these
statements as forward-looking and provide meaningful cautionary statements
identifying important factors that could cause actual results to differ from the
projected results. All statements other than statements of historical fact we
make in this Form 10-Q are forward-looking. In particular, the statements herein
regarding industry prospects and our future results of operations or financial
position are forward-looking statements. Forward-looking statements reflect our
current expectations and are inherently uncertain. Our actual results may differ
significantly from our expectations. The section entitled "Additional Factors
That May Affect Future Results" describes some, but not all, of the factors that
could cause these differences.
OVERVIEW
Amazon.com, Inc. ("Amazon.com" or the "Company") is the Internet's number one
book, music and video retailer. Amazon.com, one of the most widely known, used
and cited commerce sites on the Web, offers more than 4.7 million book, music
CD, video, DVD, computer game and other titles, and a free electronic greeting
card service. The Company also provides a community of on-line shoppers an easy
and safe way to purchase and sell a large selection of products through
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Amazon.com Auctions. Amazon.com is a proven technology leader; it has developed
electronic commerce innovations such as 1-Click ordering, personalized shopping
services and easy-to-use search and browse features.
The Company is expanding and enhancing the customer shopping experience by
actively investing in emerging internet technologies and markets through
internal development, acquisitions and investments.
RECENT EVENTS
During the quarter, the Company launched Amazon.com Auctions. New product
offerings and other lines of business generally result in incremental increases
in headcount and related costs, as well as technology and related infrastructure
costs.
A new distribution center was leased and opened in Nevada during the
quarter. Subsequent to March 31, 1999, the Company leased distribution centers
and is entering into leases for additional facilities. Expansion of the
Company's distribution center network has and will require it to commit to
lease obligations, stock inventories, purchase fixed assets and install
leasehold improvements.
The Company has been active in investing in or acquiring companies that have
strategic and complementary technologies and product offerings. Subsequent to
March, 31, 1999, the Company announced the planned acquisitions of e-Niche
Incorporated ("Exchange.com"), Accept.com, and Alexa Internet. These and any
additional acquisitions and investments will result in increased on-going
headcount and operating costs.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Net Sales
Quarter Ended March 31,
-------------------------
1999 1998 % Change
------------ ------- --------
<S> <C> <C> <C>
(in thousands)
Net sales.......................................................... $293,643 $87,361 236%
</TABLE>
Net sales include the selling price of books, music, video and other products
sold by the Company, net of returns, as well as outbound shipping and handling
charges. Growth in net sales reflects a significant increase in units sold due
to the growth of the Company's customer base, repeat purchases from the
Company's existing customers, and the introduction of music and video product
offerings during the second half of 1998. The Company's approximately 2.3
million cumulative customer accounts, as of March 31, 1998, grew 265% to 8.4
million accounts as of March 31, 1999. Repeat customers represented 66% of the
orders placed during the quarter ended March 31, 1999. The Company launched
Amazon.co.uk in the United Kingdom, and amazon.de in Germany in the fourth
quarter of 1998.
International sales, including export sales from the United States, represented
22% and 21% of net sales for the quarters ended March 31, 1999 and 1998,
respectively.
The Company launched Amazon.com Auctions late in the quarter ended March 31,
1999. Revenue related to auction services was minimal.
<TABLE>
<CAPTION>
Gross Profit
Quarter Ended March 31,
------------------------
1999 1998 % Change
---------- -------- --------
<S> <C> <C> <C>
(in thousands)
Gross profit........................................................ $64,791 $19,298 236%
Gross margin........................................................ 22.1% 22.1%
</TABLE>
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Gross profit is net sales less the cost of sales, which consists of the cost of
merchandise sold to customers, and outbound and inbound shipping costs. Gross
profit increased in absolute dollars, reflecting the Company's increased sales
volume. Improved book margins were offset by the addition of lower margin music
and video titles, leaving gross margin unchanged from the quarter ended March
31, 1998.
The Company believes that offering its customers attractive prices is an
essential component of its business strategy. Accordingly, the Company offers
20% and 30% discounts on hundreds of thousands of titles, with featured titles
discounted at 40% or more and certain "special value" editions discounted up to
89%. The Company may in the future expand or increase the discounts it offers to
its customers and may otherwise alter its pricing structure and policies.
The Company over time intends to expand its operations by promoting new or
complementary products or sales formats and by expanding the breadth and depth
of its product or service offerings. Gross margins attributable to new business
areas may be lower than those associated with the Company's existing business
activities.
<TABLE>
<CAPTION>
Marketing and Sales
Quarter Ended March 31,
-------------------------
1999 1998 % Change
---------- ---------- --------
<S> <C> <C> <C>
(in thousands)
Marketing and sales................................................. $60,744 $19,914 205%
Percentage of net sales............................................. 20.7% 22.8%
</TABLE>
Marketing and sales expenses consist primarily of fulfillment costs and
advertising, public relations and promotional expenditures, and include payroll
and related expenses for personnel engaged in marketing, selling and fulfillment
activities. All fulfillment costs not included in cost of sales, including the
cost of operating and staffing distribution and customer service centers, are
included in marketing and sales. Marketing and sales expenses increased, in
absolute dollars, primarily due to increases in the Company's advertising and
promotional expenditures, increased payroll and related costs associated with
fulfilling customer demand, increased facilities costs associated with increased
distribution capacity and increased credit card merchant fees resulting from
higher sales. Such expenses decreased as a percentage of net sales due to the
significant increase in net sales. The Company intends to continue to pursue its
branding and marketing campaign and to expand its distribution network through
the addition of highly automated regional and international distribution centers
in anticipation of sales growth. Increases in sales will drive increases in
fulfillment costs. As a result, the Company expects marketing and sales expenses
to increase significantly in absolute dollars.
<TABLE>
<CAPTION>
Product Development
Quarter Ended March 31,
-------------------------
1999 1998 % Change
---------- ---------- --------
<S> <C> <C> <C>
(in thousands)
Product development................................................. $23,477 $ 7,320 221%
Percentage of net sales............................................. 8.0% 8.4%
</TABLE>
Product development expenses consist principally of payroll and related expenses
for development, editorial, systems and telecommunications operations personnel
and consultants, systems and telecommunications infrastructure, and costs of
acquired content. The absolute dollar increase in product development expenses
was primarily attributable to increased staffing and associated costs related
to enhancing the features, content and functionality of the Company's Web site
and transaction-processing systems, as well as increased investment in systems
and telecommunications infrastructure. Such expenses decreased as a percentage
of net sales due to the significant increase in net sales. To date, all product
development costs have been expensed as incurred. The Company believes that
continued investment in product development is critical to attaining its
strategic objectives. In addition to ongoing investments in its Web stores and
infrastructure, the Company intends to increase investments in product,
service and international expansion. As a result, the Company expects product
development expenses to increase significantly in absolute dollars.
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<TABLE>
<CAPTION>
General and Administrative
Quarter Ended March 31,
-------------------------
1999 1998 % Change
---------- ---------- --------
<S> <C> <C> <C>
(in thousands)
General and administrative......................................... $11,165 $2,049 445%
Percentage of net sales............................................ 3.8% 2.3%
</TABLE>
General and administrative expenses consist of payroll and related expenses for
executive, accounting and administrative personnel, recruiting, professional
fees and other general corporate expenses. The increase in general and
administrative expenses was primarily due to increased staffing and associated
costs, legal and professional fees, facilities and other related costs. The
Company expects general and administrative expenses to increase in absolute
dollars as the Company expands its staff and incurs additional costs related to
the growth of its business, including investments associated with product,
service and international expansion.
<TABLE>
<CAPTION>
Merger and Acquisition Related Costs, Including Amortization
of Goodwill and Other Purchased Intangibles Quarter Ended March 31,
-------------------------
1999 1998 % Change
---------- ---------- --------
<S> <C> <C> <C>
(in thousands)
Merger and acquisition related costs, including amortization of
goodwill and other purchased intangibles........................ $25,309 -- --
Percentage of net sales......................................... 8.6% -- --
</TABLE>
Merger and acquisition related costs consist of amortization of goodwill and
other purchased intangibles, equity in loss of investees, and certain
non-recurring merger and acquisition related costs. The increase in these costs
is largely the result of acquisition and investment related activity occurring
in the latter half of 1998. It is likely that the Company will continue to
expand its business through acquisitions and investments. Subsequent to March
31, 1999, the Company announced plans to acquire Exchange.com, Accept.com and
Alexa Internet. If these transactions close as planned, merger and acquisition
related costs will increase as a result of related goodwill amortization. Any
additional acquisitions or impairment of goodwill and other purchased
intangibles, as well as equity in losses of equity investees, could result in
additional merger and acquisition related costs.
<TABLE>
<CAPTION>
Interest Income and Expense
Quarter Ended March 31,
-------------------------
1999 1998 % Change
---------- ---------- --------
<S> <C> <C> <C>
(in thousands)
Interest income................................................. $10,925 $ 1,645 564%
Interest expense................................................ (16,688) (2,029) 722%
</TABLE>
Interest income on cash and marketable securities increased due to higher
balances resulting from the Company's financing activities, principally the
February 1999 issuance of $1.25 billion aggregate principal amount of 4 3/4%
Convertible Subordinated Notes ("Convertible Notes"). Interest expense for the
quarter ended March 31, 1999 consists primarily of interest on the Convertible
Notes and Senior Discount Notes, the amortization of deferred charges related to
the Senior Discount Notes and interest on asset acquisitions financed through
loans and capital leases. Interest income and expense are expected to increase
because subsequent quarters will include a full three months of interest expense
for the Convertible Notes and interest income on related proceeds.
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Income Taxes
The Company has not generated any taxable income to date and therefore has not
paid any federal income taxes since inception. Utilization of the Company's net
operating loss carryforwards, which begin to expire in 2011, may be subject to
certain limitations under Section 382 of the Internal Revenue Code of 1986, as
amended. The Company has provided a full valuation allowance on the deferred tax
asset, consisting primarily of net operating loss carryforwards, because of
uncertainty regarding its realizability.
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PRO FORMA RESULTS OF OPERATIONS
Pro forma information regarding the Company's results, excluding merger and
acquisition related costs (discussed above) are presented for informational
purposes and are not in accordance with generally accepted accounting
principles.
<TABLE>
<CAPTION>
Quarter Ended March 31,
-----------------------------
1999 1998
-----------------------------
<S> <C> <C>
(in thousands, except
per share data)
Pro forma loss from operations, excluding merger and acquisition related costs $ (30,595) $ (9,985)
=============================
Pro forma net loss, excluding merger and acquisition related costs $ (36,358) $ (10,369)
=============================
Pro forma basic and diluted loss per share, excluding merger and acquisition related costs $ (0.23) (0.07)
=============================
Shares used in computation of basic and diluted loss per share 156,897 141,318
=============================
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999 the Company's principal sources of liquidity consisted of $5.2
million of cash and $1.4 billion of marketable securities compared to $25.6
million of cash and $347.9 million of marketable securities at December 31,
1998.
Net cash used in operating activities was $17.2 million and $7.3 million for the
quarters ended March 31, 1999 and 1998, respectively. Net operating cash flows
were primarily attributable to quarterly net losses and increases in inventories
and prepaid expenses and other, partially offset by non-cash charges for
depreciation and amortization and merger and acquisition related costs, as well
as increases in accounts payable, accrued advertising and other liabilities and
accrued expenses.
Net cash used in investing activities was $1.1 billion and $5.2 million for the
quarters ended March 31, 1999 and March 31, 1998, respectively, and consisted of
purchases of marketable securities and fixed assets, partially offset by sales
and maturities of marketable securities. Cash available for investment purposes
increased substantially in 1999 as a result of the issuance of the Convertible
Notes.
Net cash provided by financing activities of $1.1 billion for the quarter ended
March 31, 1999 resulted from net proceeds from issuance of the Convertible Notes
offset by the repurchase of $126 million, face amount, of the Senior Discount
Notes. Net cash provided by financing activities of $1.4 million for the quarter
ended March 31, 1998 resulted from net proceeds from the exercise of stock
options and the issuance of capital stock.
As of March 31, 1999, the Company's principal commitments consisted of
obligations outstanding under its Convertible Notes and Senior Discount Notes,
obligations in connection with the acquisition of fixed assets and leases and
commitments for advertising and promotional arrangements. The Company
anticipates a substantial increase in its capital expenditures and lease
commitments consistent with anticipated growth in operations, infrastructure and
personnel, including growth associated with product and service offerings,
geographic expansion and integration of business combinations.
During the first quarter, the Company leased and opened a distribution center in
Nevada. In the second quarter, the Company entered into leases for
distribution centers in Kansas and Germany and is entering into leases for
additional facilities. The Company intends to continue to establish
additional distribution centers within the next 12 months. Expansion of the
Company's distribution center network has and will require it to commit to
lease obligations, stock inventories, purchase fixed assets and install
leasehold improvements. In addition, the Company may continue to increase its
merchandise inventory in order to provide better availability to customers and
achieve purchasing efficiencies.
On February 3, 1999, Amazon.com completed the offering of $1.25 billion
Convertible Notes. Interest on the Convertible Notes is payable semi-annually.
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The Company believes that current cash and marketable securities balances will
be sufficient to meet its anticipated cash needs for at least the next 12
months. However, any projections of future cash needs and cash flows are subject
to substantial uncertainty. If current cash, marketable securities and cash that
may be generated from operations are insufficient to satisfy the Company's
liquidity requirements, the Company may seek to sell additional equity or debt
securities or to obtain a line of credit. The sale of additional equity or
convertible debt securities could result in additional dilution to the Company's
stockholders. In addition, the Company will, from time to time, consider the
acquisition of or investment in complementary businesses, products, services and
technologies, and the repurchase and retirement of debt, which might impact the
Company's liquidity requirements or cause the Company to issue additional equity
or debt securities. There can be no assurance that financing will be available
in amounts or on terms acceptable to the Company, if at all.
YEAR 2000 IMPLICATIONS
Many current installed computer systems and software may be coded to accept only
two-digit entries in the date code field and can not distinguish 21st century
dates from 20th century dates. As a result, many software and computer systems
may need to be upgraded or replaced. The Company is in the process of assessing
and remediating the Year 2000 issue and expects its assessment to be completed
in the second quarter of 1999 and remediation efforts to be completed no later
than the third quarter. The Company has not incurred material costs to date in
the process, and does not believe that the cost of additional actions will have
a material effect on its operating results or financial condition. However, the
Company has established a budget totaling approximately $1 million for the
acquisition of contract software services that will assist in the Year 2000
assessment and remediation activities. Amazon.com's current systems and products
may contain undetected errors or defects with Year 2000 date functions that may
result in material costs. In addition, the Company utilizes third-party
equipment, software and content, including non-information technology systems,
such as security systems, building equipment and systems with embedded
micro-controllers that may not be Year 2000 compliant.
The Company has developed a plan to modify its information technology to
recognize the Year 2000 and has begun converting critical data-processing
systems. The Company is in the process of assessing whether its non-information
technology systems are adequately addressing the Year 2000 issue. Failure of
third-party equipment, software or content to operate properly with regard to
the Year 2000 issue could require the Company to incur unanticipated expenses to
remedy problems, which could have a material adverse effect on its business,
operating results and financial condition.
Amazon.com is assessing whether third parties in its supply and distribution
chain are adequately addressing Year 2000 compliance issues. The Company has
initiated formal communications with significant suppliers and service providers
to determine the extent to which its systems may be vulnerable if they fail to
address and correct their own Year 2000 issues. The Company cannot guarantee
that the systems of suppliers or other companies on which it relies will be Year
2000 compliant. Failure by suppliers or other companies to convert their systems
could disrupt the Company's systems. Additionally, the computer systems
necessary to maintain the viability of the Internet or any of the Web sites that
direct consumers to the Company's online stores may not be Year 2000 compliant.
Computers used by customers to access the Company's online stores may not be
Year 2000 compliant, delaying customers' product purchases. The Company is in
the process of developing a contingency plan that will address situations that
may result should Year 2000 compliance for critical operations not be fully
achieved in 1999. The Company cannot guarantee that its systems will be Year
2000 compliant or that the Year 2000 problem will not adversely affect its
business, which includes limiting or precluding customer purchases.
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
In addition to the factors discussed in the "Overview" and "Liquidity and
Capital Resources" sections of this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and in the Company's Annual
Report on Form 10-K for the year ended December 31, 1998 the following
additional factors may affect the Company's future results:
We Have a Limited Operating History
We incorporated in July 1994 and began offering products for sale on our Web
site in July 1995. Accordingly, we have a relatively short operating history
upon which you can evaluate our business and prospects. You should consider our
prospects in light of the risks, expenses and difficulties frequently
encountered by early-stage online commerce companies. As an early-
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stage online commerce company, we have an evolving and unpredictable business
model, we face intense competition, we must effectively manage our growth and we
must respond quickly to rapid changes in customer demands and industry
standards. We may not succeed in addressing these challenges and risks.
We have an Accumulated Deficit and Anticipate Further Losses
We have incurred significant losses since we began doing business. As of March
31, 1999, we had an accumulated deficit of $223.7 million. To succeed we must
invest heavily in marketing and promotion and in developing our product,
technology and operating infrastructure. In addition, the expenses associated
with our recent acquisitions, and interest expense related to our outstanding
notes, will adversely affect our operating results. Our aggressive pricing
programs have resulted in relatively low product gross margins, so we need to
generate and sustain substantially higher revenues in order to become
profitable. Although our revenues have grown, we cannot sustain our current rate
of growth. Our percentage growth rate will decrease in the future. For these
reasons we believe that we will continue to incur substantial operating losses
for the foreseeable future, and these losses may be significantly higher than
our current losses.
Unpredictability of Future Revenues; Potential Fluctuations in Quarterly
Operating Results; Seasonality; Consumer Trends
Due to our limited operating history and the unpredictability of our industry,
we cannot accurately forecast our revenues. We base our current and future
expense levels on our investment plans and estimates of future revenues. Our
expenses are to a large extent fixed. We may not be able to adjust our spending
quickly if our revenues fall short of our expectations. Further, we may make
pricing, purchasing, service, marketing, acquisition or financing decisions that
could adversely affect our business results.
Our quarterly operating results will fluctuate for many reasons, including:
- our ability to retain existing customers, attract new customers and
satisfy our customers' demand,
- our ability to acquire merchandise, manage our inventory and fulfill
orders,
- changes in gross margins of our current and future products,
services and markets,
- introduction of our new sites, services and products or those of
competitors,
- changes in usage of the Internet and online services and consumer
acceptance of the Internet and online commerce,
- timing of upgrades and developments in our systems and
infrastructure,
- the level of traffic on our Web sites,
- the effects of acquisitions and other business combinations, and
related integration,
- technical difficulties, system downtime or Internet brownouts,
- introductions of popular books, music selections and other products
or services,
- our level of merchandise returns, and
- disruptions in service by common shipping carriers due to strikes or
otherwise.
The popularity of our auction services and certain items offered through our
auction services may vary over time due to perceived scarcity, subjective value,
"fads" and consumer trends in general. If the popularity of our auction services
or the items that are listed for sale declines, our revenues from our auction
services will fall.
Both seasonal fluctuations in Internet usage and traditional retail seasonality
may affect our business. Internet usage generally declines during the summer.
Sales in the traditional retail book and music industries usually increase
significantly in the fourth calendar quarter of each year.
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For these reasons, you should not rely on period-to-period comparisons of our
financial results to forecast our future performance. Our future operating
results may fall below the expectations of securities analysts or investors,
which would likely cause the trading price of our common stock to decline.
Intense Competition
The online commerce market is new, rapidly evolving and intensely competitive.
In addition, the retail book, music and video industries are intensely
competitive. Our current or potential competitors include:
- online booksellers and vendors of other products such as CDs,
videotape and DVDs,
- a number of indirect competitors, including Web portals and Web
search engines, such as Yahoo! Inc. and America Online, Inc., that
are involved in online commerce, either directly or in collaboration
with other retailers,
- online auction services, including eBay, Inc. and Yahoo! Auctions
run by Yahoo!,
- publishers, distributors and retail vendors of books, music, video
and other products, including Barnes & Noble, Inc., Bertelsmann AG
and other large specialty booksellers and media corporations, many
of which possess significant brand awareness, sales volume and
customer bases, and
- traditional retailers who currently sell, or who may sell, products
or services through the Internet.
We believe that the principal competitive factors in our market are brand
recognition, selection, personalized services, convenience, price,
accessibility, customer service, quality of search tools, quality of editorial
and other site content, and reliability and speed of fulfillment.
Many of our current and potential competitors have longer operating histories,
larger customer bases, greater brand recognition and significantly greater
financial, marketing and other resources than we have. They may be able to
secure merchandise from vendors on more favorable terms and may be able to adopt
more aggressive pricing or inventory policies. They also can devote more
resources to technology development and marketing than we can. We also expect to
experience increased competition from online commerce sites that provide goods
and services at or near cost, relying on advertising revenues to achieve
profitability.
As the online commerce market continues to grow, other companies may enter into
business combinations or alliances that strengthen their competitive positions.
For example, in late 1998, (1) Bertelsmann AG announced that it purchased a 50%
interest in Barnes & Noble's online venture, barnesandnoble.com inc., and
intends to launch online stores in several countries, (2) Barnes & Noble
announced its pending acquisition of Ingram Book Group, currently our largest
single supplier, and (3) online music retailers CDnow, Inc. and N2K Inc.
announced a merger. We may not be able to compete successfully against these and
future competitors.
Competition in the Internet and online commerce markets probably will intensify.
As various Internet market segments obtain large, loyal customer bases,
participants in those segments may use their market power to expand into the
markets in which we operate. In addition, new and expanded Web technologies may
increase the competitive pressures on online retailers. For example, "shopping
agent" technologies permit customers to quickly compare our prices with those of
our competitors. This increased competition may reduce our operating margins,
diminish our market share or impair the value of our brand.
Risks of System Interruption
Customer access to our Web sites directly affects the volume of orders we
fulfill and thus affects our revenues. We experience occasional system
interruptions that make our Web sites unavailable or prevent us from efficiently
fulfilling orders, which may reduce the volume of goods we sell and the
attractiveness of our products and services. These interruptions will continue.
We need to add additional software and hardware and upgrade our systems and
network infrastructure to accommodate increased traffic on our Web sites and
increased sales volume. Without these upgrades, we
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face additional system interruptions, slower response times, diminished customer
service, impaired quality and speed of order fulfillment, and delays in our
financial reporting. We cannot accurately project the rate or timing of any
increases in traffic or sales volume on our Web sites and, therefore, the
integration and timing of these upgrades are uncertain.
We maintain substantially all of our computer and communications hardware at a
single leased facility in Seattle, Washington. Our systems and operations could
be damaged or interrupted by fire, flood, power loss, telecommunications
failure, break-ins, earthquake and similar events. We do not have backup systems
or a formal disaster recovery plan and we may not have sufficient business
interruption insurance to compensate us for losses from a major interruption.
Computer viruses, physical or electronic break-ins and similar disruptions could
cause system interruptions, delays, and loss of critical data and could prevent
us from providing services and accepting and fulfilling customer orders.
We May Have Difficulty Managing Our Growth
We have rapidly and significantly expanded our operations and will further
expand our operations to address potential growth of our product and service
offerings and customer base. We will expand our product and service offerings
and our international operations and will pursue other market opportunities. We
need to expand significantly our distribution center network and improve our
transaction-processing, operational and financial systems, procedures and
controls. This expansion will continue to place a significant strain on our
management, operational facilities and financial resources. Because it is
difficult to predict sales increases and lead times for developing distribution
centers are long, we may over-expand our facilities, which may result in excess
inventory, warehousing, fulfillment and distribution capacity. We also need to
expand, train and manage our employee base. Our current and planned personnel,
systems, procedures and controls may not be adequate to support and effectively
manage our future operations. We may not be able to hire, train, retain,
motivate and manage required personnel or to successfully identify, manage and
exploit market opportunities, which may limit our growth.
Risk of Entering New Business Areas
We intend to expand our operations by promoting new or complementary products,
services or sales formats and by expanding our product or service offerings.
This will require significant additional expense and could strain our
management, financial and operational resources. We cannot expect to benefit in
these new markets from the first-to-market advantage that we experienced in the
online book market. Our gross margins in these new business areas may be lower
than our existing business activities. We may not be able to expand our
operations in a cost-effective or timely manner. Any new business that our
customers do not receive favorably could damage our reputation and the
Amazon brand.
Risk of International Expansion
We plan to expand our presence in foreign markets. We have relatively little
experience in purchasing, marketing and distributing products or services for
these markets and may not benefit from any first-to-market advantages. It will
be costly to establish international facilities and operations, promote our
brand internationally, and develop localized Web sites and stores and other
systems. We may not succeed in our efforts in these countries. If revenues from
international activities do not offset the expense of establishing and
maintaining foreign operations, our business prospects, financial condition and
operating results will suffer.
As the international online commerce market continues to grow, competition in
this market will likely intensify. In addition, governments in foreign
jurisdictions may regulate Internet or other online services in such areas as
content, privacy, network security, encryption or distribution. This may affect
our ability to conduct business internationally.
Risk of Business Combinations and Strategic Alliances
We may expand our operations or market presence by entering into business
combinations, investments, joint ventures or other strategic alliances with
other companies. These transactions create risks such as:
- difficulty assimilating the operations, technology and personnel of
the combined companies;
- disruption of our ongoing business;
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- problems retaining key technical and managerial personnel;
- expenses associated with amortization of goodwill and other
purchased intangible assets;
- additional operating losses and expenses of acquired businesses; and
- impairment of relationships with existing employees, customers and
business partners.
We may not succeed in addressing these risks. In addition, the businesses we
acquire may incur operating losses.
Rapid Technological Change
Technology in the online commerce industry changes rapidly. Customer
functionality requirements and preferences also change. Competitors often
introduce new products and services with new technologies. These changes and the
emergence of new industry standards and practices could render our existing Web
sites and proprietary technology obsolete. To succeed we must enhance our Web
site responsiveness, functionality and features, acquire and license leading
technologies, enhance our existing services, develop new services and technology
and respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis. We may not be able to adapt
quickly enough to changing customer requirements and industry standards.
We Depend on Key Personnel
We depend on the continued services and performance of our senior management and
other key personnel, particularly Jeffrey P. Bezos, our president, chief
executive officer and chairman of the board. We do not have long-term employment
agreements with any of our key personnel, and we do not have "key person" life
insurance policies. The loss of any of our executive officers or other key
employees could harm our business.
We Rely on a Small Number of Suppliers
We purchase a majority of our products from three major vendors, Ingram, Baker &
Taylor, Inc. and Valley Media, Inc. In late 1998, Barnes & Noble, one of our
largest competitors, announced an agreement to purchase Ingram. Ingram is our
single largest supplier and supplied approximately 40% of our inventory
purchases in 1998 and approximately 60% of our inventory purchases in 1997.
Although we increased our direct purchasing from manufacturers during 1998, we
continue to purchase a majority of our products from these three suppliers. We
do not have long-term contracts or arrangements with most of our vendors to
guarantee the availability of merchandise, particular payment terms or the
extension of credit limits. Our current vendors may stop selling merchandise to
us on acceptable terms. We may not be able to acquire merchandise from other
suppliers in a timely and efficient manner and on acceptable terms.
We are Highly Leveraged
We have significant indebtedness. As of March 31, 1999, we were indebted
under the Senior Discount Notes, the Convertible Notes, the capitalized lease
obligations and other asset financing totaling approximately $1.5 billion.
We may incur substantial additional debt in the future. Our indebtedness could:
- make it difficult to make principal and interest payments on the
Convertible Notes and the Senior Discount Notes,
- make it difficult to obtain necessary financing for working capital,
capital expenditures, debt service requirements or other purposes,
- limit our flexibility in planning for, or reacting to, changes in
our business and competition, and
- make it more difficult for us to react in the event of an economic
downturn.
We may not be able to meet our debt service obligations. If our cash flow is
inadequate to meet our obligations, we may face substantial liquidity problems.
If we are unable to generate sufficient cash flow or obtain funds for required
payments, or if
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we fail to comply with other covenants in our indebtedness, we will be in
default. This would permit our creditors to accelerate the maturity of our
indebtedness.
Risks Associated with Domain Names
We hold rights to various Web domain names, including "Amazon.com,"
"Amazon.co.uk" and "Amazon.de." Governmental agencies typically regulate domain
names. These regulations are subject to change. We may not be able to acquire or
maintain appropriate domain names in all countries in which we do business.
Furthermore, regulations governing domain names may not protect our trademarks
and similar proprietary rights. We may be unable to prevent third parties from
acquiring domain names that are similar to, infringe upon or diminish the value
of our trademarks and other proprietary rights.
Governmental Regulation and Legal Uncertainties
At this time, we face general business regulations and laws or regulations
regarding taxation and access to online commerce. For example, expanding our
distribution center network or other aspects of our business may result in
additional sales and other tax obligations. Regulatory authorities may adopt
specific laws and regulations governing the Internet or online commerce. These
regulations may cover taxation, user privacy, pricing, content, copyrights,
distribution, electronic contracts and characteristics and quality of products
and services. Changes in consumer protection laws also may impose additional
burdens on companies conducting business online. In addition, many states
currently regulate "auctions" and "auctioneers" in conducting auctions and may
regulate online auction services. These laws or regulations may impede the
growth of the Internet or other online services. This could, in turn, diminish
the demand for our products and services and increase our cost of doing
business. Moreover, it is not clear how existing laws governing issues such as
property ownership, sales and other taxes, libel and personal privacy apply to
the Internet and online commerce. Unfavorable resolution of these issues may
harm our business.
Risks Related to Auction Services
We may be unable to prevent users of our auction services from selling unlawful
goods, or from selling goods in an unlawful manner. We may face civil or
criminal liability for unlawful activities by our online auction users. Any
costs we incur as a result of liability relating to the sale of unlawful goods
or the unlawful sale of goods could harm our business.
In running our auction services, we rely on sellers of goods to make accurate
representations and provide reliable delivery and on buyers to pay the agreed
purchase price. We do not take responsibility for delivery of payment or goods
to any users of our services. While we can suspend or terminate the accounts of
users who fail to fulfill their delivery obligations to other users, we cannot
require users to make payments or deliver goods. We do not compensate users who
believe they have been defrauded by other users except through our limited
guarantee program.
Risk of Uncertain Protection of Intellectual Property
Third parties that license our proprietary rights, such as trademarks, patented
technology or copyrighted material, may take actions that diminish the value of
our proprietary rights or reputation. In addition, the steps we take to protect
our proprietary rights may not be adequate and third parties may infringe or
misappropriate our copyrights, trademarks, trade dress, patents and similar
proprietary rights. Other parties may claim that we infringed their proprietary
rights. We have been subject to claims, and expect to continue to be subject to
legal proceedings and claims, regarding alleged infringement by us and our
licensees of the trademarks and other intellectual property rights of third
parties. Such claims, whether or not meritorious, may result in the expenditure
of significant financial and managerial resources. Most recently, Amazon
Bookstore, Inc. filed suit against us alleging trademark infringement and unfair
competition under state and federal law. Amazon Bookstore is seeking injunctive
relief against our use of the marks Amazon.com, Amazon.com Books and Amazon
Books, the cancellation of our federal trademark registrations, damages,
profits, treble damages, costs and attorneys' fees. We have only recently been
served with the complaint and are assessing the claim.
Risks of Year 2000 Noncompliance
We have developed a plan to modify our information technology to recognize the
year 2000 and have begun converting our critical data processing systems. We
have initiated formal communications with our significant suppliers and service
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providers to determine the extent to which our systems may be vulnerable if they
fail to address and correct their own Year 2000 issues. We cannot guarantee that
the systems of suppliers or other companies on which we rely will be Year 2000
compliant. Their failure to convert their systems could disrupt our systems. In
addition, the computer systems necessary to maintain the viability of the
Internet or any of the Web sites that direct consumers to our online stores may
not be Year 2000 compliant. Finally, computers used by our customers to access
our online stores may not be Year 2000 compliant, delaying our customers'
purchases of our products. We are in the process of developing a formal
contingency plan. We cannot guarantee that our systems will be Year 2000
compliant or that the Year 2000 problem will not adversely affect our business,
which includes limiting or precluding customer purchases.
Our Stock Price is Highly Volatile
The trading price of our common stock fluctuates significantly. For example,
during the 52-week period ended May 14, 1999 (as adjusted for the 2-for-1 split
of our common stock on June 1, 1998 and 3-for-1 split of our common stock on
January 4, 1999), the reported closing price of our common stock on the Nasdaq
National Market was as high as $210.125 and as low as $13.646 per share. Trading
prices of our common stock may fluctuate in response to a number of events and
factors, such as:
- quarterly variations in operating results;
- announcements of innovations;
- new products, services and strategic developments by us or our
competitors, or business combinations and investments by us or our
competitors;
- changes in our operating expense levels or losses;
- changes in financial estimates and recommendations by securities
analysts;
- performance by other online commerce companies; and
- news reports relating to trends in the Internet, book, music, video
or other product or service industries.
Any of these events may cause our stock price to fall, which may adversely
affect our business and financing opportunities. In addition, the stock market
in general and the market prices for Internet-related companies in particular
have experienced significant volatility that often has been unrelated to such
companies' operating performance. These broad market and industry fluctuations
may adversely affect the trading price of our common stock regardless of our
operating performance.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not have any derivative financial instruments as of March 31,
1999. However, the Company is exposed to interest rate risk. The Company employs
established policies and procedures to manage its exposure to changes in the
market risk of its marketable securities, which are classified as
available-for-sale as of March 31, 1999. The Company's Senior Discount Notes,
Convertible Notes and other long-term debt have fixed interest rates and the
fair value of these instruments is affected by changes in market interest rates.
The Company believes that the market risk arising from holdings of its financial
instruments is not material.
Information relating to quantitative and qualitative disclosure about market
risk is set forth below and in "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources."
The table below provides information about the Company's marketable securities,
including principal cash flows for 1999 through 2003 and thereafter and the
related weighted average interest rates.
Principal (notional) amounts by expected maturity in U.S. dollars (thousands):
<TABLE>
<CAPTION>
ESTIMATED
FAIR VALUE
AT MARCH 31,
1999 2000 2001 2002 2003 THEREAFTER* TOTAL 1999
---------- ---------- --------- ---------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial paper and
short obligations.......... 94,549 -- -- -- -- -- 94,549 109,781
Weighted average
interest rate....... 4.88%
Corporate notes and bonds..... 3,500 97,208 134,455 -- -- -- 235,163 235,167
Weighted average
interest rate....... 5.92% 5.89% 5.38%
Asset-backed and
agency securities.......... 194,409 93,792 127,760 51,946 52,545 117,060 637,512 494,995
Weighted average
interest rate....... 8.85% 6.54% 6.22% 6.02% 5.97% 6.07%
Treasury notes and bonds...... 146,106 91,696 97,525 29,129 124,500 -- 488,956 590,821
Weighted average
interest rate....... 5.00% 5.99% 5.05% 6.67% 5.12%
Equity Securities............. -- -- -- -- -- 8,080 8,080 6,953
----------- ----------- ----------- ---------- ----------- ----------- ------------- -------------
Total Portfolio............... 438,564 282,696 359,740 81,075 177,045 125,140 1,464,260 1,437,717
=========== =========== =========== ========== =========== =========== ============= =============
</TABLE>
* includes equity securities which do not have expected maturities.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 4 - Commitments and Contingencies in Part I, Item 1. Financial
Statements
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ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Convertible Subordinated Notes
On February 3, 1999, Amazon.com completed the offering of $1.25 billion
aggregate principal amount of 4 3/4% Convertible Subordinated Notes
("Convertible Notes" or "notes") due 2009. Interest on the notes is payable in
arrears in cash semi-annually on February 1 and August 1 of each year,
commencing August 1, 1999.
Holders of the Convertible Notes may convert any portion of a note, in multiples
of $1,000, into common stock of Amazon.com at an initial conversion price of
$156.055 per share. In lieu of fractional shares, Amazon.com will pay a cash
adjustment based on the closing price of the common stock on the last business
day prior to the conversion. The initial conversion price of $156.055 shall be
adjusted by Amazon.com if various events occur, including: (i) the issuance of
common stock as a dividend or distribution on the common stock; (ii)
subdivisions and combinations of the common stock; (iii) issuance to all holders
of common stock of rights or warrants to purchase common stock; (iv)
distribution to all holders of common stock of capital stock (other than our
common stock), debt instruments or assets; (v) distributions of cash, other than
certain quarterly cash dividends on the common stock; (vi) payment on a tender
offer or exchange offer by Amazon.com or one of Amazon.com's subsidiaries for
all or any portion of the common stock if the payment exceeds the current market
price of the common stock on the trading day prior to the last date for tenders
or exchanges; and (vii) payment on certain tender offers or exchange offers by a
third party if, as of the closing date of the offer, Amazon.com's Board of
Directors does not recommend rejection of the offer.
Amazon.com may redeem the notes, in whole or in part, at any time prior
to February 6, 2002, at a price equal to $1,000 per note plus accrued and
unpaid interest if: (i) the closing price of Amazon.com's common stock has
exceeded 150% of the conversion price in effect for at least 20 trading days in
any consecutive 30-trading day period, ending on the trading day prior to the
mailing of the notice of redemption; and (ii) the shelf registration statement
covering resales of the notes and the common stock issuable upon conversion of
the notes is effective and available for use for the 30 days following the
redemption date. If Amazon.com redeems any of the notes prior to February 6,
2002, Amazon.com is required to make an additional cash payment with respect to
the notes called for redemption in an amount equal to $212.60 per $1,000 note,
less the amount of any interest paid.
After February 6, 2002, Amazon.com may redeem the notes on at least 30
days' notice at the redemption prices set forth in the indenture for the
Convertible Notes (the "Indenture"). If Amazon.com redeems less than all of the
outstanding notes, the trustee will select the notes to be redeemed in
multiples of $1,000 by lot, pro rata or any other method the trustee considers
fair and appropriate.
Upon the occurrence of a "fundamental change" (as defined in the Indenture)
prior to the maturity of the notes, each holder thereof shall have the right to
require Amazon.com to redeem all or any part of such holder's Convertible Notes
at a price equal to 100% of the principal amount of the notes being redeemed,
together with accrued interest to, but excluding, the date of redemption.
Amazon.com has, for the benefit of the holders of the Convertible Notes, filed
with the SEC a shelf registration statement covering resales of the notes and
the common stock issuable upon conversion thereof (the "Registrable
Securities"). Pursuant to a registration rights agreement, Amazon.com will use
commercially reasonable efforts to cause the shelf registration statement to
become effective as promptly as is practicable, but in any event within 180 days
of such first date of original issuance, and to keep the shelf registration
statement effective until the earlier of (i) the sale pursuant to the shelf
registration statement of all the Registrable Securities and (ii) the expiration
of the holding period applicable to such securities held by non-affiliates of
Amazon.com under Rule 144(k) of the Securities Act of 1933, as amended, or any
successor provision, subject to certain permitted exceptions.
The Convertible Notes are unsecured general obligations of Amazon.com.
The notes are subordinated to the prior payment in full of all of Amazon.com's
senior debt and are also effectively subordinated to all indebtedness and other
liabilities, including trade payables and lease obligations, of any of
Amazon.com's subsidiaries. As of March 31, 1999, Amazon.com had approximately
$291 million of outstanding senior indebtedness. The Indenture does not
prevent Amazon.com from incurring additional senior or subordinated debt.
The Indenture does not contain any financial covenants or restrictions on the
payment of dividends, the incurrence of indebtedness, including senior
indebtedness, or the issuance or repurchase of other outstanding securities of
Amazon.com.
Page 22
<PAGE> 23
Morgan Stanley & Co. Incorporated, Credit Suisse First Boston Corporation and
Donaldson, Lufkin & Jenrette Securities Corporation, who acted as placement
agents for the Convertible Notes, received an aggregate fee of $35 million. The
notes were issued pursuant to safe-harbor exemptions from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
solely to qualified institutional buyers and institutional "accredited
investors" pursuant to Rule 144A and Regulation D of the Securities Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
Page 23
<PAGE> 24
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER TITLE
- -------------- -----
<S> <C>
4.1* Indenture, dated as of February 3, 1999, between the
registrant and The Bank of New York, as Trustee, including
the form of 4 3/4% Convertible Subordinated Note due 2009
attached as Exhibit A thereto.
4.2* Registration Rights Agreement, dated as of February 3, 1999,
by and among the registrant and the Initial Purchasers
10.1** Sales Agreement, dated March 11, 1999, by and between
Amazon.com, Inc. and The Buschman Company
10.2** Sales Agreement, dated March 11, 1999, by and between
Amazon.com, Inc. and The Buschman Company
10.3** Sales Agreement, dated March 11, 1999, by and between
Amazon.com, Inc. and The Buschman Company
10.4** Sales Agreement, dated March 11, 1999, by and between
Amazon.com, Inc. and The Buschman Company
10.5** Sales Agreement, dated March 11, 1999, by and between
Amazon.com, Inc. and The Buschman Company
10.6** Lease Agreement, dated April 12, 1999, by and between
Amazon.com.ksdc, Inc. and TGFWII, L.L.C.
27.1 Financial Data Schedule
</TABLE>
- ----------
* Incorporated by reference to the registrant's Current Report on Form 8-K
filed with the SEC on February 4, 1999.
** Contains omitted, confidential material, which material has been filed
separately with the SEC pursuant to a request for confidential treatment
under Rule 24b-2, promulgated by the SEC under the Securities Exchange Act
of 1934, as amended.
(b) Reports on Form 8-K
On January 5, 1999, the Company filed a Form 8-K under Item 5 announcing
the Company's financial results for the fourth quarter of 1998.
On January 27, 1999, the Company filed a Form 8-K under Item 5 announcing
the Company's financial results for the fourth quarter of 1998, and the
1998 fiscal year.
On January 28, 1999, the Company filed a Form 8-K under Item 5 announcing
a $500 million offering of Subordinated Convertible Notes.
On January 29, 1999, the Company filed a Form 8-K under Item 5 announcing
that it priced its private offering of 4 3/4% Convertible Subordinated
Notes, due 2009, and increased the size of the offering from $500 million
to approximately $1.25 billion.
On February 4, 1999, the Company filed a Form 8-K under Item 5 announcing
that it completed the sale of its private offering of $1.25 billion
aggregate principal amount of 4 3/4% Convertible Subordinated Notes due
2009.
On March 29, 1999, the Company filed a Form 8-K under Item 5 announcing
its plans to launch a person-to-person auction service.
On March 30, 1999, the Company filed a Form 8-K under Item 5 announcing
that it launched its online auction site.
Page 24
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMAZON.COM, INC.
(REGISTRANT)
DATED: May 17, 1999
By: /s/ JOY D. COVEY
-----------------------------
Joy D. Covey
Chief Financial Officer and
Vice President of Finance and Administration
Page 25
<PAGE> 26
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER TITLE
- -------------- -----
<S> <C>
4.1* Indenture, dated as of February 3, 1999, between the
registrant and The Bank of New York, as Trustee, including
the form of 4 3/4% Convertible Subordinated Note due 2009
attached as Exhibit A thereto.
4.2* Registration Rights Agreement, dated as of February 3, 1999,
by and among the registrant and the Initial Purchasers
10.1** Sales Agreement, dated March 11, 1999, by and between
Amazon.com, Inc. and The Buschman Company
10.2** Sales Agreement, dated March 11, 1999, by and between
Amazon.com, Inc. and The Buschman Company
10.3** Sales Agreement, dated March 11, 1999, by and between
Amazon.com, Inc. and The Buschman Company
10.4** Sales Agreement, dated March 11, 1999, by and between
Amazon.com, Inc. and The Buschman Company
10.5** Sales Agreement, dated March 11, 1999, by and between
Amazon.com, Inc. and The Buschman Company
10.6** Lease Agreement, dated April 12, 1999, by and between
Amazon.com.ksdc, Inc. and TGFWII, L.L.C.
27.1 Financial Data Schedule
</TABLE>
- ----------
* Incorporated by reference to the registrant's Current Report on Form 8-K
filed with the SEC on February 4, 1999.
** Contains omitted, confidential material, which material has been filed
separately with the SEC pursuant to a request for confidential treatment
under Rule 24b-2, promulgated by the SEC under the Securities Exchange Act
of 1934, as amended.
Page 26
<PAGE> 1
EXHIBIT 10.1
SALES AGREEMENT
This Sales Agreement, hereinafter called "Sales Agreement," made by and
between Amazon.com, Inc., a Delaware corporation (hereinafter called
"Purchaser"), and The Buschman Company, an Ohio corporation (hereinafter called
"Seller"), constitutes the agreement of the parties as follows:
A) CONTRACT DOCUMENTS
In addition to the Standard Terms and Conditions set forth in Part B
below, the following documents ("Additional Contract Documents") are also part
of this Sales Agreement and are hereby incorporated by reference herein. To the
extent any such Additional Contract Document contains any term or condition
inconsistent with the Standard Terms and Conditions below, the Standard Terms
and Conditions shall govern. The Additional Contract Documents, copies of which
are appended hereto, are as follows:
1. The Phase I Fernley, Nevada Proposal for Amazon.com, Inc. dated
January 18, 1999 (including and as amended by such amendments thereto as may
later be specifically agreed in writing(s) signed by both Seller and Purchaser
from time to time, the "Proposal").
B) STANDARD TERMS AND CONDITIONS
ARTICLE 1. DEFINITIONS
When used in this Sales Agreement, the capitalized terms listed below
shall have the following meanings:
"Acceptance" shall mean the mutual agreement between the parties in
writing that (i) all Work has been completed (except for minor punch list items
or claims of non-material deficiencies in the Work), (ii) all Equipment has been
delivered to Purchaser and properly installed at the Worksite or stored at the
Worksite, as applicable, and (iii) the Equipment successfully meets all elements
of the Acceptance Test.
"Acceptance Test" shall mean the terms and conditions under which
Purchaser will accept tender of the Equipment, including the criteria concerning
the design, engineering, performance, functional, feature, and other
specifications or requirements which the Equipment must meet in order to be
accepted, all as agreed in the Proposal and/or the Specifications.
"Affiliate" shall mean, (i) with respect to Seller, any corporation,
partnership or other entity that is in or under the control of Seller, and to
the extent specified in the Proposal, any corporation, partnership or other
entity that is under the control of Seller's parent corporation, Pinnacle
Automation Company, Inc., and (ii) with respect to Purchaser, any corporation,
<PAGE> 2
partnership or other entity that controls, is controlled by, or is in or under
common control with, Purchaser. For purposes of this definition, "control"
means, with respect to a corporation, partnership or other entity, the
beneficial ownership of ownership, profits, voting or similar interests
(including any right or option to obtain such an interest) representing at least
50% of the total interests of the pertinent entity then outstanding, or the
possession, directly or indirectly, of the power to direct or cause the
direction of the general management and policies of such corporation,
partnership or other entity, whether through the ownership of voting securities,
by contract or otherwise.
"Equipment" shall mean all the equipment, machinery, parts, vendor
components, Software, and other goods and items intended to be installed at the
Worksite pursuant to this Sales Agreement, excluding for the avoidance of doubt,
Seller's tools, equipment and other items which are not deliverables under the
Proposal.
"Maintenance or Software Support Agreement" shall mean any agreement
that may be entered into between Purchaser and Seller or any of Seller's
Affiliates pertaining to the maintenance and/or support of the Equipment.
"Proposal" shall have the meaning ascribed to it under Article A hereof.
"Purchase Price" shall mean the total compensation to be paid to the
Seller in consideration for the sale of the Equipment and the performance of the
Work (which may include, without limitation, the installation of the Equipment)
as set forth in the Proposal.
"Sales Agreement" shall have the meaning ascribed to such it in the
preamble and Article A hereof, and including, without limitation, all
Specifications.
"Seller Equipment" shall mean all Equipment which is not Third-Party
Equipment.
"Seller Software" shall mean all Software which is not Third-Party
Software.
"Seller's Plant" means any plant or facility (i) at which any Seller
Equipment is designed, developed, made, inspected or tested by or for Seller or
(ii) at which any Equipment is stored by or for Seller, as applicable.
"Software" shall mean all computer programming code or programs, in
machine readable object code form, that is developed or furnished by or on
behalf of Seller or any of Seller's Affiliates as a deliverable to Purchaser, or
caused to be developed or furnished by Seller or any of Seller's Affiliates to
Purchaser as a deliverable under this Sales Agreement, and all Upgrades thereto.
For the avoidance of doubt, "Software" shall not include any Source Code.
"Source Code" shall mean, with respect to Seller Software, (i) the
human-readable form of computer programming code thereof as prepared and written
by the programmer(s) who developed the Seller Software, together with (ii) any
build tools (e.g. compilers, linkers
-2-
<PAGE> 3
and other related tools), compile/link scripts, program comments, installation
scripts and related system documentation, including all comments and any
procedural code such as job control language, necessary for any reasonably
skilled programmer to recompile such source code into fully functioning object
code of the Seller Software, to the extent that the items listed in this clause
(ii) exist.
"Specifications" shall mean the design, engineering, performance,
functional and other criteria, feature descriptions and other specifications or
requirements for any Equipment and/or Work that are contained in this Sales
Agreement, including, without limitation, the Proposal, or in any documents
contemplated hereby or thereby or other documents delivered by Seller pursuant
hereto or thereto and in each case agreed to by Purchaser.
"Third-Party Hardware" shall mean that portion of the Equipment which is
not developed, manufactured or owned by on behalf of Seller or any of Seller's
Affiliates, provided that the same is identified as "Third-Party Hardware" in
the Proposal, and provided further however that "Third-Party Hardware" shall not
include any Third-Party Software. To the greatest extent possible, Third-Party
Hardware manufacturers shall be identified in the Proposal.
"Third-Party Software" shall mean that portion of the Software which is
not developed, manufactured or owned by on behalf of Seller or any of Seller's
Affiliates, provided that the same is identified as "Third-Party Software" in
the Proposal. To the greatest extent possible, Third-Party Software
manufacturers shall be identified in the Proposal.
"Upgrade" shall mean each and every revision, enhancement, modification,
amendment, upgraded version and future release of the Software (including,
without limitation, versions and releases correcting programming errors, beta
versions as well as versions containing materially increased functionality)
delivered by Seller or any of its Affiliates to Purchaser pursuant to this Sales
Agreement or any Maintenance or Software Support Agreement.
"Work" shall mean all the Equipment and other items (including without
limitation, materials, supplies, drawings and data), and manufacturing,
installation, integration and other services, to be supplied or performed by or
on behalf of Seller hereunder.
"Worksite" shall mean the location or destination where the Equipment is
to be installed or, in the case of purchases of Equipment for storage and later
installation, stored, as applicable.
ARTICLE 2. PERMITS; COMPLIANCE WITH LAWS
Prior to the installation of the Equipment, Purchaser shall procure and
pay for all building, erection and other licenses, permits, authorizations and
inspections required in
-3-
<PAGE> 4
connection with the Worksite, excepting Seller's Plant. Seller shall be
responsible for the procurement of and payment for all other licenses, permits,
authorizations and inspections associated with the Work. Seller shall comply,
and shall cause all of its consultants and subcontractors to comply, with
building, electrical or other laws, codes or regulations of local, state or
federal agencies or authorities in regard to the Work, and shall otherwise
comply with all other applicable laws, regulations, rules, orders and other
requirements of governmental authorities having jurisdiction with respect to the
Equipment or Seller's performance of the Work.
ARTICLE 3. INTELLECTUAL PROPERTY INDEMNIFICATION
Seller shall defend, indemnify and hold Purchaser and its Affiliates
harmless from and against any and all expenses, costs, claims, demands, causes
of action and damages of whatever kind which Purchaser may incur in connection
with any suit or claim of infringement of any patent, copyright or trademark, or
misappropriation of any trade secret or other intellectual property right
resulting from (i) Purchaser's or its Affiliates' use of any portion of the
Equipment as contemplated in the Proposal and otherwise in accordance with this
Sales Agreement or applicable Equipment documentation delivered by Purchaser by
Seller hereunder, or (ii) performance of the Work, except, in each case with
respect to each of the foregoing clauses (i) and (ii), to the extent directly
attributable to Third-Party Hardware or Third-Party Software. Seller shall
receive written notice from Purchaser within ten (10) days after proper legal
service is received by Purchaser of any such suit or claim, provided that
failure to receive such notice shall not relieve Seller of its obligations under
this Article 3 except to the extent that Seller's ability to defend such suit or
claim is materially impaired due to such failure. Seller is hereby authorized by
Purchaser to, at Seller's expense, appear in and assume the defense of, and be
given the complete control of the settlement of, any such suit or claim;
provided that (a) if Purchaser or any of its Affiliates wishes to participate in
the defense and settlement of the claim, Purchaser or any of its Affiliates may
do at its own cost, (b) Purchaser is kept timely informed of all material
actions taken by Seller in connection with any such settlement, suit or claim
(including, without limitation, of settlement offers and responses (to the
extent the delivery of such information does not require Seller to waive work
product immunity or attorney/client privilege or otherwise violate the terms of
any protective order between Seller and any third party plaintiff or
defendant)); and (c) Seller shall not enter into or acquiesce to any settlement
admitting to or stipulating to any guilt, fault, liability or wrongdoing on the
part of Purchaser or any of its Affiliates without Purchaser's prior written
consent. In the event that Purchaser's right or ability to use the Equipment is
threatened or impaired as a result of any such suit or claim, Seller shall, at
its own expense, do one of the following, (1) diligently procure for Purchaser
the right to continue using the Equipment, or (2) modify the Equipment or, if
necessary and by mutual agreement, substitute functionally equivalent Equipment,
to the extent necessary to avoid infringement or misappropriation; provided in
each case that if such modified or substituted equipment fails to comply with
all Specifications applicable to the original, unmodified Equipment, Purchaser
shall be entitled to equitable compensation with respect to
-4-
<PAGE> 5
such noncompliance. Seller hereby assigns to or otherwise transfers to the
benefit of Purchaser all of its right, title and interest in and to any
intellectual property right infringement or misappropriation indemnification or
defense rights Seller may have with respect to Third Party Software and Third
Party Hardware, and will, at its expense, take any actions as may be necessary
to enable Purchaser to exercise such rights and realize such benefit to the
fullest extent possible. It is mutually agreed that the provisions set forth
herein are Seller's only obligations with respect to infringement of any patent,
copyright or trademark, or misappropriation of any trade secret or other
intellectual property right.
ARTICLE 4. LABOR AND PERSONNEL
Seller shall furnish all labor and personnel required for the
installation of the Equipment at the Worksite. All Work (including without
limitation all labor and other services) will be performed in a timely,
first-class and professional manner. All labor and personnel performing Work at
the Worksite (excluding Seller's Plant) shall comply with Purchaser's or its
Affiliates then-applicable policies, rules and regulations with respect to such
Worksite. If labor or personnel performing Work hereunder fail to so comply with
such policies, rules and regulations, or otherwise fail to perform Work in a
timely, first-class and professional manner, Purchaser in its discretion may
request removal of any such labor or personnel, and Seller shall remove such
labor or personnel from the applicable Worksite in accordance with each such
request. Seller will manage the transition of replacement personnel to minimize
impact on the project. Seller will be responsible for all acts, omissions,
negligence and misconduct of labor or personnel performing Work. For the
avoidance of doubt, Seller's subcontractors, as more fully discussed in Article
5 hereof, are labor and personnel for purposes of this Article 4.
ARTICLE 5. SUBCONTRACTORS AND ASSIGNMENTS
(a) Seller may assign or subcontract any of its obligations under this
Sales Agreement to any supplier, builder or other contractor which Seller, in
its good faith discretion, reasonably considers qualified; provided, however,
that (i) Seller may not so assign or subcontract any of its obligations under
this Sales Agreement to any contractor which will perform Work or supply
Equipment hereunder representing in excess of twenty percent (20%) of the
Purchase Price without the Purchaser's prior written consent (which consent may
be evidenced by Purchaser's written acceptance of Seller's Proposal to the
extent such Proposal clearly identifies such potential subcontractor and the
scope of Work it will perform), and (ii) in any event Seller remains primarily
liable for the performance of all of Seller's obligations under the terms and
conditions of this Sales Agreement. The restriction set forth in clause (i) of
the proviso of the preceding sentence does not apply to Seller's procurement of
raw materials or purchases of goods or other Equipment components from Seller's
routine vendors and subcontractors from whom Seller routinely procures the same
as part of its standard manufacture of Equipment.
-5-
<PAGE> 6
(b) Except as provided in Article 5(a), neither Seller nor Purchaser may
assign their respective rights to or delegate their duties arising from this
Sales Agreement without the prior written consent of the nonassigning or
nondelegating party, which consent shall not be unreasonably withheld; provided,
however, that, if Seller or Purchaser consents to any assignment or delegation,
the assignee or delegatee shall, as a condition to such assignment or
delegation, agree to be subject to the terms and conditions of this Sales
Agreement. Notwithstanding the foregoing, Purchaser may assign this Sales
Agreement to any of its Affiliates or in connection with any merger,
consolidation, reorganization, sale of all or substantially all of its assets or
similar transaction without the prior written consent of Seller; provided that
the assignee or delegatee is financially capable of performing its obligations
hereunder and/or Purchaser remains primarily liable for the performance of all
of Purchaser's obligations under the terms and conditions of this Sales
Agreement.
ARTICLE 6. TAXES
Unless otherwise indicated, the Purchase Price contains no provision for
sales, use, excise, or other similar taxes. It is Purchaser's responsibility to
pay any such taxes should they be levied upon Seller. If such taxes are included
as part of the Purchase Price and the rate or base of the tax is increased or
decreased, or if Seller receives any tax credits related to the Work, Purchaser
will pay any such increased taxes and Seller will give credit for any tax
decrease or credit. Seller will pay any taxes specified in this paragraph and be
reimbursed by Purchaser within thirty (30) days after receipt at the address
specified in Article 11(e) of a separate invoice therefor from Seller. Purchaser
shall be solely responsible for the prompt payment of any and all personal
property taxes of any kind that may become due or payable with respect to the
Equipment at any time following delivery thereof to the Worksite. For the
avoidance of doubt and notwithstanding any other provision of this Sales
Agreement, (a) in no event shall Purchaser have any liability or obligation to
(i) pay taxes in respect of Seller's income or gross revenues, or (ii) reimburse
Seller for or otherwise pay any taxes with respect to which Purchaser is exempt
and Purchaser provides Seller a certificate of exemption, and (b) should
Purchaser challenge any taxes specified in this paragraph, Seller will at its
expense provide Purchaser with reasonable assistance in so challenging the same
and, if Seller receives funds or credits in connection with any such contest,
promptly refund the amount of such refund or credit to Purchaser.
ARTICLE 7. INSPECTION; SHIPMENT; REJECTION
Seller will furnish Purchaser, upon its request, with safe and
sufficient access to Seller's Plant for the purposes of conducting in process
inspections and tests to determine Seller's and the Equipment's compliance with
this Sales Agreement, including without limitation the Specifications. No
inspection or test, delay or failure to inspect or test, or failure to discover
any defect or noncompliance will (i) relieve Seller of any of its obligations
under this Sales Agreement, or (ii) impair Purchaser's rights under Article 7(c)
or any other right or remedy afforded to Purchaser. Purchaser shall conduct such
in process inspections and tests in a manner as to not interfere with Seller's
planned performance.
-6-
<PAGE> 7
Seller shall ship Equipment in accordance with the delivery terms
specified in the Proposal. If Seller has manufactured Equipment to meet
Purchaser's schedule and Purchaser requests delay in shipment, Seller shall have
the right to store such Equipment at Purchaser's expense. Seller shall obtain
approval from Purchaser's Project Manager for each shipment release to ensure
the readiness of the Worksite to accept such shipment.
Notwithstanding any other provision of this Sales Agreement, Seller
acknowledges and agrees that Purchaser may reject, refuse acceptance of or
revoke acceptance of any Equipment, or any tender thereof, which does not
strictly comply with the requirements of this Sales Agreement including without
limitation all applicable Specifications. Purchaser shall notify Seller of any
such rejection, refusal or revocation. In any such event, Purchaser may, with
respect to such noncompliance, elect to: (a) retain any or all of such Equipment
for repair, replacement or other correction by Seller, or (b) retain any or all
of such Equipment without correction by Seller. Seller shall promptly comply
with any direction by Purchaser for correction. Purchaser shall be entitled, in
addition to all other remedies available to Purchaser at law or in equity, to
recover from Seller, by price reduction, credit, offset, invoice or otherwise,
an equitable amount for the diminished value of any uncorrected Equipment and
all reasonable costs and expenses incurred by Purchaser in connection with
Equipment which is rightfully rejected or with respect to which acceptance is
refused or revoked by Purchaser (including, but not limited to, reasonable costs
and expenses to return Equipment to Seller for correction to the extent not
otherwise disclaimed or limited under this Sales Agreement).
ARTICLE 8. SITE CONDITIONS AND PROVISIONS BY PURCHASER
Seller shall not be liable to Purchaser for any failure to deliver and
install any Equipment in accordance with this Sales Agreement, to the extent
that such failure results solely from Purchaser's failure to provide at the
Worksite reasonable means of access to a minimum of dock doors, the availability
of a dock leveler, and a completely enclosed building to protect Seller's
Equipment from the elements, with a water-tight roof and such electric current,
water, heat, ventilation, light and other utilities and facilities as may
reasonably be required for the installation of the Equipment. Purchaser shall
allow Seller reasonable access to the Worksite for inspection of compliance with
these requirements, prior to commencement of the installation. Seller shall
promptly notify Purchaser in writing of any failure by Purchaser to provide any
of the access, availability, items or conditions set forth above or any other
failure by Purchaser to provide access, availability, items, materials,
conditions or assistance as otherwise may be required under this Sales
Agreement.
ARTICLE 9. INSURANCE AND RISK OF LOSS
Upon delivery of the Equipment at the Worksite, and until Acceptance of
the Equipment, Purchaser shall, at its expense, take out and maintain
"installation floater" insurance in an amount at least equal to the Purchase
Price covering all risks of loss of the
-7-
<PAGE> 8
Equipment and any and all associated expenses. Such installation floater
insurance shall name Seller as an insured party and shall provide for an
insurer's waiver of subrogation in favor of all insured parties. Upon Acceptance
of the Equipment, Purchaser shall be responsible for and shall bear any and all
risk of loss or damage to the Equipment except as may otherwise be provided for
in this Sales Agreement. Notwithstanding the foregoing, this Article 9 does not
apply when Worksite is Seller's Plant.
ARTICLE 10. COMPLETION, CHANGES, DELAYS, ERRORS
At any time prior to final payment, Purchaser may request in writing any
substitutions, deviations, additions, or deletions in the Equipment, Work and/or
Specifications (hereinafter referred to as "Changes") and Seller must comply
with the same. If any Change results in an increase or decrease in the time or
expense required for the Work not then performed in accordance with the Sales
Agreement, the parties will equitably adjust schedules for performance of such
Work and/or the Purchaser Price to reflect the increase or decrease. All the
terms and conditions of this Sales Agreement shall apply to such Changes. If by
any such Changes or by other causes within control of Purchaser Seller's
performance is delayed or prevented by Purchaser, Purchaser agrees to reimburse
Seller for its reasonable, documented, out-of-pocket expenses incident to such
delay which may include, without limitation, the costs of storing, maintaining,
repairing, and refurbishing Equipment, demurrage, labor and material escalation
and pull out charges. In such event, Purchaser also agrees to excuse the delay
and accept Seller's performance at an appropriately deferred completion date.
Where Seller's performance under this Sales Agreement is delayed as above, the
Purchase Price shall be revised to reflect any changes in labor wage rates,
material costs and other costs caused by such delay and actually incurred by
Seller in its performance.
ARTICLE 11. PURCHASE AND SALE; PURCHASE PRICE; PAYMENT
The Purchaser shall purchase the Equipment and Work from Seller, and
Seller shall sell and provide the Equipment and Work to Purchaser, as provided
below:
(a) Consideration: Seller shall sell and provide the Equipment and/or
Work, as applicable, to Purchaser as provided in and in accordance with this
Sales Agreement. In full consideration of Seller's sale and provision of the
Equipment and Work to Purchaser, Purchaser shall pay Seller the Purchase Price
as set forth in, and subject to, this Article 11.
(b) Payment Terms: Unless otherwise specified in the Proposal, Seller
shall submit to the Purchaser [*] invoices for [*] payments for labor and
material expended
- --------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
-8-
<PAGE> 9
or purchased for that month. The amounts constituting (or as applicable, the
method(s) for determining the amounts constituting) the [*] payments, retention,
or other payments applicable to this Sales Agreement, or the amounts
constituting (or as applicable, the method(s) for determining the amounts
constituting) such other payment structure as may be reflected in the Proposal,
will be as set forth in the Proposal. Seller's monthly invoices shall contain a
certification regarding the accuracy and completeness of the amounts invoiced
and that such amounts are consistent with the procedures agreed to in the
Proposal.
(c) Retention Rights: Notwithstanding Article 11(b), payment of the
amounts referred to therein shall be subject to a retention amount as specified
in the Proposal. The retention amount specified in the Proposal shall not become
due until (1) Acceptance has occurred, and (2) Seller submits to Purchaser, for
both monthly and final invoices, receipts, releases and waivers of liens arising
out of this Sales Agreement, to the extent and in such form as may be designated
by the Purchaser; provided that payment of such retention amount is subject to
reduction as set forth in Article 11(d). If any subcontractor or supplier
refuses to furnish a release or waiver required by the Purchaser, the Seller may
in lieu thereof furnish at the Seller's expense a bond satisfactory to the
Purchaser to indemnify the Purchaser against any such lien. If any such lien
remains unsatisfied after all payments are made, the Seller shall refund to the
Purchaser all monies that the latter may be compelled to pay in discharging such
lien, including all costs and reasonable attorney's fees.
(d) Retention Reduction: If all the conditions of payment set forth in
Article 11(c) have been met (except for minor punch list items or claims of
non-material deficiencies in the Work, the value of which items or claims will
be mutually determined in good faith by Purchaser and Seller), Seller will
invoice Purchaser for the retention amount less twice the determined value of
such items or claims. Upon the correction or elimination of such items or
claims, Seller will invoice Purchaser for the balance of the retention amount.
(e) Invoicing: Purchaser shall make payment of properly invoiced amounts
within thirty (30) days from receipt of invoice at the following address:
Amazon.com, Inc.
Attn: Jimmy Wright
215 Columbia Street
Seattle, Washington 98104
(f) Subcontractor Liens or Releases: Upon receipt of funds from the
Purchaser, Seller will sign and furnish a lien waiver to the Purchaser covering
the Work, Equipment and payment described in the applicable invoice and will
send the same to the Purchaser with the next invoice. The Seller will either
obtain lien waivers and releases from suppliers and subcontractors on behalf of
whom such payment was sought by the Seller or furnish Purchaser with a bond
satisfactory to Purchaser to indemnify Purchaser against any claim by lien or
otherwise by Seller's suppliers or subcontractors. The Purchaser is authorized
to withhold from any invoice, without interest, monies due the Seller equal to
the amount of
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[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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<PAGE> 10
monies previously disbursed to the Seller with respect to which Seller fails to
furnish Purchaser with supplier or subcontractor lien waivers and releases or a
bond as provided in this Sales Agreement.
(g) Purchaser Right of Invoice Rejection or Revocation: The Purchaser
may (1) decline to approve the Seller's invoice in whole or in part or (2)
nullify the whole or any part of any invoice previously approved, in each case
to such extent as may be necessary to protect the Purchaser from loss because
of:
o Defective Work not remedied;
o Failure of the Seller to make payments properly to subcontractor or
suppliers for labor, materials or Equipment;
o Reasonable evidence that the Work cannot be completed for the unpaid
balance of the Purchase Price; or
o Damage to the Purchaser's or its Affiliate's property or another
contractor's work.
ARTICLE 12. SOFTWARE
License Grant: Title to the Seller Software remains at all times with
Seller. Seller hereby grants Purchaser a nonexclusive right and license to use
Seller Software and documentation associated with it on the Equipment in the
manner contemplated by the Proposal or as otherwise permitted under this Sales
Agreement. Additionally, Purchaser may make backup and archival copies as
reasonably deemed necessary by Purchaser, provided that Seller's copyright
notice and other proprietary markings are reproduced in such copies.
Restricted Use: Each copy of Seller Software provided under this license
may be used only on the Equipment on which the Seller Software is delivered and
installed or on other equipment approved by Seller in writing. Use of the Seller
Software in a network environment is authorized under the license only to the
extent reasonably necessary for the Purchaser's or its Affiliates internal
purposes with respect to the Equipment or as otherwise specified in this Sales
Agreement. No other use of the Seller software is authorized unless specifically
agreed to in a writing signed by Seller.
Copies and Modifications: Purchaser shall not use, copy, rent, lease,
sell, modify, prepare derivative works of, decompile, disassemble, otherwise
reverse engineer, or transfer Seller Software except with Seller's prior written
consent or otherwise as permitted under this Sales Agreement.
Source Code; Escrow Agreement: Seller shall at all times keep and
maintain a complete master, reproducible copy of all Source Code of all Seller
Software installed at the Worksite in escrow in accordance with the terms and
conditions of the Escrow Agreement
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<PAGE> 11
attached hereto as Exhibit A (the "Escrow Agreement") and which agreement is
hereby made part of this Sales Agreement, being incorporated herein by this
reference. Seller will promptly update the Source Code in escrow to reflect all
Upgrades installed at the Worksite.
In the event that (i) a Major Failure occurs (as defined under Article
17 b)) related to Seller Software and Seller fails to respond to and perform its
warranty or maintenance obligations under this Sales Agreement, or Seller (or
any Seller Affiliate, if applicable) fails to respond to and perform its
obligations under any Maintenance or Software Support Agreement, in each case in
connection with the occurrence of such Major Failure, and Seller does not cure
such failure to respond and perform within five (5) business days after written
notice thereof from Purchaser, (ii) Seller fails to offer maintenance or
software support services to Purchaser as reasonably required by Purchaser for
it to continue its use of the Equipment as contemplated by this Sales Agreement
and on terms no less favorable than those offered to Seller's similarly situated
customers for similar services, (iii) this Sales Agreement is terminated by
Purchaser pursuant to Article 16(a)(1), or (iv) Seller (1) becomes insolvent or
bankrupt or makes an assignment for the benefit of creditors, (2) has a receiver
or trustee in bankruptcy is appointed for it, or (3) has any proceeding in
bankruptcy, receivership or liquidation instituted against it which is not
dismissed within thirty (30) days following the commencement thereof, Purchaser
shall be entitled to the Source Code as provided for in the Escrow Agreement.
Seller hereby grants to Purchaser, effective upon the occurrence of any
of the events set forth in any of the clauses (i) through (iv) of the
immediately preceding paragraph, a perpetual, non-exclusive, right and license
to (a) use, copy, modify, adapt and create derivative works of the Source Code,
and (b) decompile, reverse engineer or disassemble any Seller Software or
modify, adapt or create derivative works of Seller Software or its
documentation, in each case solely in connection with Purchaser's and its
Affiliates' and their respective contractors' use, maintenance and support of
the Software in accordance with their respective rights under this Sales
Agreement. Notwithstanding each of the clauses (a) and (b) above, the Source
Code referred to above is hereby deemed to be Seller Software for purposes of
Purchaser's continued compliance with the terms of Articles 12 b) (except that
Purchaser's rights under clauses (a) and (b) above may be performed in its test
and development areas and equipment for the purposes set forth in this
paragraph), 12 f) and 12 i) hereof.
Any Source Code delivered under this Article will be provided on an "as
is" basis, without any representation, warranty or liability of Seller
whatsoever, except that Seller hereby represents and warrants to Purchaser that
the Source Code in Escrow at all times is the Source Code of the latest version
of the Seller Software (including all Upgrades) installed at the Worksite.
Further, Seller disclaims any representations, warranties or liabilities
relating to modifications to, or adaptations or derivative works of, the Source
Code, Software or its documentation created by or for Purchaser and/or its
Affiliates pursuant to the immediately preceding paragraph; provided, however,
that nothing in this paragraph will limit any of
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<PAGE> 12
Seller's representations or warranties under this Sales Agreement with respect
to the unmodified Software or its documentation.
Term: The term of the licenses granted pursuant to this Article 12 shall
be perpetual, subject to termination only in accordance with Article 16d). Upon
any such termination of this license, Purchaser shall return the Seller Software
and all copies of it and all documentation to Seller.
Trade Secret Protection: Purchaser understands and agrees that Seller
Software and all documentation related thereto constitutes the valuable
technology, know-how and trade secrets of Seller. Purchaser agrees during the
term of this Agreement and thereafter to hold the Seller Software, including any
copies of it and any documentation related to it, in confidence and to not
permit any person or entity to obtain access to it except as required for
Purchaser's and its Affiliates' own internal use and provided such person or
entity has agreed in writing to hold such in confidence.
Software Upgrades: Except as may be otherwise agreed to in a Maintenance
or Software Support Agreement, or otherwise required under this Sales Agreement,
Seller shall have no obligation to provide Upgrades to Purchaser due to later
versions or revisions introduced into the marketplace. Materials, installation,
and customization to implement such Upgrades will be made available to Purchaser
at prices normally offered to Seller's preferred customers. Notwithstanding the
foregoing, Seller will provide and Purchaser will not be charged for, any
Upgrades required in order to correct Software to meet applicable Specifications
pursuant to Seller's obligations under the Sales Agreement or any Maintenance or
Software Support Agreement.
Seller Software Warranty Performance: As part of Seller's warranty of
the Equipment, but not in limitation of Purchaser's rights under this Sales
Agreement, Purchaser agrees that Seller may perform Seller Software warranty
service remotely via a modem in addition to other reasonable means. The Seller
Software warranty is void if the Seller Software has been altered, modified or
changed in any way from the original delivery configuration, without the written
authorization of Seller, unless so altered, modified or changed by or on behalf
of Seller or as may otherwise be permitted hereunder.
Software Markings: The Seller Software and users manuals, logos, product
names and other support materials, if any, are either patented, copyrighted,
trademarked, or otherwise proprietary to Seller. Purchaser agrees never to
remove any such notices and product identification.
Third Party Software: Software delivered to Purchaser pursuant to this
Sales Agreement may contain Third Party Software. Seller hereby assigns to or
otherwise transfers to the benefit of Purchaser all of Seller's right, title and
interest in and to all warranties, indemnities, product guaranties and other
representations made by third party manufacturers which Seller may have with
respect to Third Party Software, and will at its expense take any
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<PAGE> 13
and all actions as may be necessary to enable Purchaser to exercise rights
thereunder and realize the benefit thereof to the fullest extent possible;
provided that nothing in this Sales Agreement shall have the effect of extending
or otherwise expanding upon any of such third party warranties, indemnities,
product guarantees or representations assigned or otherwise transferred by
Seller to Purchaser. Seller hereby represents and warrants to Purchaser that
Purchaser and its Affiliates will have all rights necessary to use Third Party
Software delivered under the Sales Agreement as contemplated in this Sales
Agreement (including, without limitation, the Specifications).
Purchaser's Affiliates. All rights and obligations of Purchaser under
this Article 12 shall extend to each of Purchaser's Affiliates, and Purchaser
shall ensure that each of Purchaser's Affiliates complies with the provisions of
this Article 12 in connection with its exercise of its rights hereunder.
ARTICLE 13. DELAYED PAYMENTS
In the event that Purchaser fails to make due and punctual payments for
the Equipment and/or Work as provided herein, interest shall accrue on the
amount due and unpaid at the rate of one percent (1%) per month for each full
calendar month or part thereof during which such amount shall be outstanding,
such interest to commence to accrue on the thirtieth (30th) day after such
amount is due and payable hereunder. If the interest rate provided herein
exceeds the maximum interest rate permitted by law, then the interest payable
shall be at such maximum permissible rate.
ARTICLE 14. CONTINGENCIES
In the event of any condition or contingency, existing or future, which
is beyond the reasonable control and without the fault or negligence of either
party which prevents or delays the performance by such party of this Sales
Agreement ("Event of Force Majeure"), such party shall be entitled to an
appropriate extension of time for performance of this Sales Agreement. Events of
Force Majeure shall include, without limitation, acts of God, fire, floods,
transport delays, strikes, labor disputes and interference by civil or military
authorities. If an Event of Force Majeure occurs, the affected party shall take
measures to mitigate and minimize the effect of such event in order to continue
with the performance of its obligations under this Sales Agreement. If the
period of such an event extends beyond six (6) months, then either party may
terminate this Sales Agreement under Article 16(a)(3) below.
ARTICLE 15. MAINTENANCE OR SOFTWARE SUPPORT
Seller will throughout the warranty period and for a period of five (5)
years thereafter offer maintenance services to Purchaser as reasonably required
by Purchaser for it to continue its use of the Equipment as contemplated by this
Sales Agreement and on terms no less favorable than those offered to Seller's
similarly situated customers for similar services. To
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<PAGE> 14
the extent maintenance services are not provided for in the Proposal or
elsewhere as part of this Sales Agreement, Seller and Purchaser will subsequent
to the date hereof, at Purchaser's option, negotiate in good faith as to
Seller's provision of the same to Purchaser.
ARTICLE 16. TERMINATION
(a) This Sales Agreement may be terminated upon the occurrence of any of
the following events:
(1) Other than as provided for in Article 16(a)(2), in the event
that either party shall breach or fail to comply with any provisions of this
Sales Agreement and such breach or failure shall continue for a period of thirty
(30) days after the giving of written notice thereof by the other party, the
other party may terminate this Sales Agreement immediately upon the giving of
written notice thereof to the defaulting party.
(2) Notwithstanding the foregoing, if Purchaser shall have failed to
make any payment due under this Sales Agreement within forty-five (45) days
after having been so notified by Seller, Seller may terminate this Sales
Agreement immediately after the expiration of the forty-five (45) day period by
giving notice of such termination to Purchaser.
(3) If an Event of Force Majeure occurs and continues for a period
greater than six (6) months, either party may terminate this Sales Agreement
upon giving written notice thereof to the other party. In such event, the amount
to which Seller shall be entitled shall be determined as per Article 16(b).
(b) In addition to the foregoing, Purchaser may terminate this Sales
Agreement or any portion thereof without cause effective thirty (30) days after
written notice thereof is received by Seller. If Purchaser terminates this Sales
Agreement pursuant to this Article 16(b), then Seller shall be reimbursed by
Purchaser for Seller's reasonable, documented costs incurred through the
termination date in its performance and/or termination of the terminated portion
of this Sales Agreement, plus Seller's expected profit with respect to the
terminated portion as contemplated in the Proposal, less any progress or other
payments received by Seller before termination. Seller's Chief Financial Officer
shall certify as to the accuracy and completeness of such costs incurred and
expected profit invoiced to Purchaser. Purchaser shall pay Seller net thirty
(30) days after receipt of invoice and certificate from Seller. Seller will keep
its regularly maintained corporate books and records related to this Sales
Agreement for five (5) years following a termination hereunder. During such
period, and only to the extent necessary to support Seller's reimbursement under
this Article 16 b), Seller will make its books and records as necessary to
support Seller's reimbursement available for audit to an independent public
accountant, selected by Purchaser and at Purchaser's sole cost and expense,
under terms of confidentiality applicable to this Sales Agreement; provided that
if any such audit reveals a discrepancy in favor of Seller in excess of five
percent (5%), then Seller will reimburse Purchaser for the costs of such audit.
Any such audit will be conducted in a manner which will not unreasonably
interfere with Seller's operations.
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<PAGE> 15
Upon receipt or delivery (as applicable) of a termination notice under
paragraph 16(a), or upon receipt of Purchaser's termination notice under Article
16(b) above, Seller shall take the following actions:
Stop work to the extent relating to the terminated portion of this Sales
Agreement;
Take all commercially reasonable actions to limit amounts for which
Purchaser may be responsible in connection with this Article, including
terminating all subcontracts to the extent they relate to the terminated portion
of this Sales Agreement;
Assign to Purchaser all of Seller's right, title and interest to all
Third Party Software and Third Party Hardware and deliver the Equipment or
components thereof (regardless of status of completion) consistent with Seller's
progress or other payments received by Seller before and pursuant to
termination; and
Deliver, assign and otherwise transfer, in the manner contemplated by
this Sales Agreement, title to any Work and other drawings, plans and documents
(regardless of status of completion) that, if this Sales Agreement had been
completed, would have been furnished to Purchaser.
d) Notwithstanding anything to the contrary contained in this Sales
Agreement, the licenses granted under Article 12 may not be terminated except
upon the occurrence of a substantial, material breach of this Sales Agreement by
Purchaser that (i) is not cured within twenty (20) days after Purchaser receives
written notice from Seller of the breach, and (ii) is of such a nature that
Seller cannot reasonably be made whole through an award of monetary damages.
Following any termination of this Sales Agreement that does not involve a
termination of the licenses granted under Article 12, Purchaser's and its
Affiliates' and contractors' use of the Seller Software will remain subject to
the restrictions contained in Article 12.
ARTICLE 17. WARRANTY
a) Standard Warranty: Seller hereby warrants that the Equipment shall
(i) be free from all liens, charges or encumbrances, except any lien of the
Seller in respect of any unpaid portion of the Purchase Price; (ii) be free from
defects in materials and workmanship and shall conform to the provisions and
specifications of this Sales Agreement (including without limitation the
Specifications); (iii) be new and, if no quality is specified, of a quality
consistent with the Seller's usual and normal production; and (iv) conform with
OSHA regulations in force at the time of Acceptance of the Equipment. Seller
shall use its reasonable best efforts to as soon as practicable obtain for
Seller's own benefit Third-Party Hardware and Third-Party Software warranties
that are at least co-extensive with Seller's warranty obligations to Purchaser
under clause (ii) of the immediately preceding sentence with respect to the
Equipment. Notwithstanding the foregoing, if Seller, after so using its
reasonable best efforts, fails to obtain for Seller's own benefit such
warranties, then Seller
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<PAGE> 16
shall immediately notify Purchaser in writing of the nature and extent of such
failure, and the parties shall negotiate in good faith as to (a) adjustment of
schedules for performance of the Work in order for Seller to secure such
warranties, (b) Seller's limited release from its warranty obligations under
clause (ii) of the immediately preceding sentence with respect to such
Third-Party Hardware or Third-Party Software, and/or (c) a reduction or increase
in the Purchaser Price to reflect the changed schedule and/or lessened warranty
obligations, as applicable. Any agreement between the parties resulting from
such negotiations must be in writing. Seller's failure to notify Purchaser as
required above shall constitute Seller's waiver of its renegotiation rights in
the preceding sentence, and the provisions of this Article 17 shall remain in
full force and effect. Seller shall, at its option, repair or replace
(replacement parts to be shipped F.O.B. Worksite) any defective Equipment or
component thereof; provided, however, that Seller is given written notice of any
defect during the Warranty Period (as defined below). For purposes of Articles
17a) and b), the warranty period shall commence on the earlier of the date of
first commercial use of the Equipment by Purchaser or the date of Acceptance of
the Equipment, and the warranty period shall end one year after such
commencement date ("Warranty Period"). Purchaser shall give Seller prompt
reasonable written notice of any claim under the foregoing warranty within the
Warranty Period and permit Seller to inspect the Equipment in order to verify
the defect or nonconformity. Seller shall promptly and reasonably respond to
verify and correct the defect. Purchaser's remedies and Seller's obligations in
connection with any claim made under this warranty shall be limited to repair or
replacement at Seller's expense of the Equipment or part thereof which is
defective. Labor performed at the Worksite with regard to such claims is not
included in this warranty. Purchaser shall be responsible for the normal
maintenance and repair of the Equipment and shall perform the same in accordance
with generally accepted maintenance procedures or such other reasonable
procedures as are set forth in maintenance and repair manuals provided by Seller
to Purchaser. Seller shall not, under this Article 17, be responsible for or
obligated to pay or to reimburse Purchaser for (a) any work or repairs performed
on the Equipment by third parties (other than on behalf of Seller and except for
mutually agreed subcontractors), (b) any materials furnished by third parties
(other than on behalf of Seller) for use in connection with the Equipment if the
same was undertaken or furnished without mutual prior written consent or (c) any
loss or damage arising from improper operation or maintenance of the Equipment
by Purchaser or from ordinary wear and tear.
b) Major Failure Warranty: Notwithstanding other provisions of this
Article 17, in instances of a Major Failure during the Warranty Period, Seller
will provide all necessary parts and labor to correct the defect. A "Major
Failure" is defined as failure of the Equipment or portion of the Equipment to
operate as described in the Proposal or the applicable Specifications, which
significantly impacts Purchaser's ability to use the affected Equipment or
portion thereof, and which Purchaser's maintenance personnel or available
contractors cannot remedy without significant expense or effort. Seller will
respond to a Major Failure by immediately dispatching such servicemen by
commercial air carrier, or by responding as otherwise agreed between the
parties, upon request and notification of a Major Failure by
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<PAGE> 17
Purchaser as may be necessary to promptly correct the defect, and such
servicemen shall thereafter diligently and continuously perform such services as
may be necessary to promptly correct such defect until corrected. Should it
later be reasonably and mutually determined in good faith by Seller and
Purchaser that the necessary corrective services rendered by Seller were within
the capabilities of the Purchaser's maintenance personnel or available
contractors without the expenditure of significant expense or effort, the
Purchaser will reimburse Seller for the labor and expenses of the service trip.
Year 2000: Seller hereby represents and warrants that the Equipment,
when used in accordance with its associated documentation, shall perform
properly and without change in operations related to the advent of the new
century (defined as commencing at 12:00 am, January 1, 2000), including but not
limited to, by accurately processing date data (including without limitation by
calculating, comparing and sequencing) within, from, into and between centuries
(including, but not limited to, the twentieth and twenty-first centuries), and
by properly calculating leap years, except to the extent that any failure of the
Equipment to so perform is directly attributable to (i) the failure of other
technology, systems or interfaces, Third Party Software, or Third Party Hardware
to properly exchange date data with the Equipment, (ii) a change in the
operating environment not contemplated in this Sales Agreement, including
without limitation the Specifications, or (iii) any addition to or modification
of the Equipment by or on behalf of Purchaser or any of its Affiliates that has
not been authorized in writing by Seller or made by or on behalf of Seller or
any of its Affiliates. In the event of any material failure of the Equipment to
operate as warranted above, Purchaser's sole remedy, and Seller's sole
obligation, shall be to promptly respond and diligently and continuously work to
correct until corrected (or provide a functionally equivalent work around for)
any reproducible error or failure reported by Purchaser in writing to Seller on
or before January 1, 2001. If Seller is unable to remedy such error or failure
within a reasonable time, Seller and Purchaser shall enter into good faith
discussions to agree to reductions in Purchase Price or other equitable
adjustments to account for such delay or inability to remedy said failure.
Seller agrees to use its reasonable best efforts to incorporate a statement in
all purchase orders that Seller issues under this Sales Agreement that requires
any Third Party Software delivered hereunder to be Year 2000 compliant
consistent with the minimum requirements of this Article 17c). The remedies
provided in this paragraph are exclusive remedies for failure of the Equipment
to perform as warranted hereunder.
Third Party Software and Third Party Hardware: The foregoing warranties
in Article 17a), b) and c) specifically exclude warranties relating to Third
Party Software or Third Party Hardware to the extent specified in such Articles.
Seller hereby assigns and otherwise transfers to the benefit of Purchaser all of
Seller's right, title and interest in and to all assignable or transferable
warranties with respect to Third Party Software and Third Party Hardware and all
assignable or transferable rights of Seller against any manufacturer or supplier
thereof, including without limitation with respect to all indemnity agreements,
and will at its expense take any and all actions as may be necessary to enable
Purchaser to exercise rights thereunder and realize the benefit thereof to the
fullest extent possible. To the
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<PAGE> 18
extent any of such warranties, indemnities or rights are not assignable or
transferable, Seller agrees to exercise for the benefit of Purchaser any and all
claims, rights, remedies, warranties, representations and indemnities against or
obtained from any such third party manufacturers or suppliers.
Disclaimer: OTHER THAN AS SPECIFICALLY SET FORTH ABOVE, SELLER MAKES NO
OTHER WARRANTIES, WHETHER WRITTEN, ORAL OR IMPLIED, INCLUDING WITHOUT
LIMITATION, WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OR MERCHANTABILITY.
ARTICLE 18. USE OF INSTALLED PORTIONS OF THE EQUIPMENT
Whenever, as determined by Seller, the installation of any portion of
the Equipment has been completed, Seller may make available such portion for
Purchaser's use, provided, however, that Seller and Purchaser shall mutually
agree on the terms and conditions of such use. Except as otherwise agreed by
Seller and Purchaser (including where appropriate, an adjustment in the Purchase
Price and/or schedule otherwise provided for in this Sales Agreement), such use
shall not interfere with the installation of the remainder of the Equipment.
Seller shall not be liable for the cost of repairs, rework or replacement which
may be required due to ordinary wear and tear resulting from such use.
ARTICLE 19. INSURANCE BY SELLER
Seller will maintain insurance coverage covering its operation and its
obligations pursuant to Article 20, in at least the following amounts:
Commercial General Liability - Bodily Injury and Property damage - $1,000,000
Per Occurrence.
Personal Injury Liability - $1,000,000 Limit.
Business Auto - Bodily Injury & Property Damage - $500,000 Combined Single
Limit.
Umbrella Liability - $20,000,000 Limit of Liability
Worker's Compensation - Coverage A - Statutory
Coverage B - Employer's Liability; $100,000 each accident; $100,000 each
employee; $500,000 Policy Limit
Foreign Products Liability - $1,000,000 Per Occurrence.
Insurance shall be purchased from companies having a rating of A-VII or
better in the current BEST'S INSURANCE REPORTS published by A. M. Best Company.
Policies of
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<PAGE> 19
insurance shall name Purchaser as an additional insured, provide for an
insurer's waiver of subrogation in favor of all insured parties, and provide
that they will not be canceled or materially changed without reasonable prior
written notice to Purchaser. Certificates of insurance evidencing coverage shall
be submitted in advance of or concurrent with the execution of the Work, and on
each insurance policy renewal thereafter. Seller shall, at Purchaser's request,
provide copies of requested insurance policies. If Seller does not provide
Purchaser with such certificates of insurance, then Purchaser will so advise
Seller. Thereafter, if Seller does not furnish evidence of acceptable coverage
within fifteen (15) days, then Purchaser shall have the right, in its sole
discretion, to (i) withhold payments from Seller until evidence of such
acceptable coverage is provided, or (ii) immediately terminate this Sales
Agreement. Failure to obtain and maintain required insurance shall not relieve
Seller of any obligation contained in this Sales Agreement. Additionally, any
approval by Purchaser of any of Seller's insurance policies shall not relieve
Seller of any obligation contained in this Sales Agreement.
ARTICLE 20. INDEMNIFICATION
Seller shall indemnify, defend and hold Purchaser harmless from and
against any and all expenses, losses, costs, claims, demands, causes of action,
and damages of whatever kind, (a) which result from injuries at the Worksite
during the installation, or testing of the Equipment, (b) which are due to the
negligence or willful misconduct of Seller or its employees or contractors, or
(c) to the extent otherwise related to any claim, action, suit or proceeding
involving the Equipment which is based upon injuries to persons (including
death) or property arising from or relating to (i) the use of the Equipment in
accordance with Seller's operation, maintenance and other related manuals and
documents delivered to Purchaser by Seller hereunder, or (ii) the design or
manufacture of the Equipment as contemplated in the Proposal (including, without
limitation, the Specifications), including without limitation, product liability
claims. Purchaser shall indemnify, defend, and hold Seller harmless from and
against any and all expenses, losses, costs, claims, demands, causes of action,
and damages of whatever kind which result from the negligent or willful use or
operation of the Equipment by any person (other than Seller or Seller's
employees or contractors) other than in its normal and intended manner, and
removal or modification of safety features unless Purchaser notifies Seller and
such removal or modification is approved by Seller or made by or on behalf of
Seller or any of its Affiliates.
ARTICLE 21. LIMITATION OF LIABILITY
Notwithstanding any other provision of this Sales Agreement, except to
the extent constituting a third party claim (or portion thereof) subject to
indemnification under Article 3 or Article 20 (such portion of such claim
subject to indemnification under Article 20 being a "Third-Party Non-IP
Consequential Damage Indemnified Claim"), neither party shall be liable to the
other party or anyone claiming through such other party for any special,
indirect, incidental or consequential damages of any kind whatsoever, including
without limitation loss of profit or reputation incurred by either Party,
whether such damages arise out of the
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<PAGE> 20
use, inability to use, failure of, delay in delivery of, or nondelivery of, the
Equipment, or out of any termination of this Agreement, or otherwise.
Notwithstanding any other provision of this Agreement, each party's aggregate
liability under Article 20 for Third-Party Non-IP Consequential Damage
Indemnified Claims shall not exceed the greater of [*].
ARTICLE 22. WAIVER
Except as otherwise expressly provided in this Sales Agreement, no
failure on the part of either party to exercise, and no delay in exercising, any
right, privilege, or power under this Sales Agreement shall operate as a waiver
or relinquishment thereof; nor shall any single or partial exercise by either
party of any right, privilege or power under this Sales Agreement preclude any
other or further exercise thereof, or the exercise of any other right, privilege
or power. Waiver by any party of any breach of any provision of this Sales
Agreement shall not constitute or be construed as a continuing waiver, or as a
waiver of any other breach of any provision of this Sales Agreement.
ARTICLE 23. ENTIRE AGREEMENT
This instrument, together with any attachments specifically made a part
of this Sales Agreement and any documents incorporated in such attachments by
reference, embodies the whole agreement of the parties relating to the subject
matter of this Sales Agreement and supersedes any and all prior oral or written
specifications, communications and agreements by or on behalf of the parties.
This Sales Agreement may not be varied by any purchase order, acknowledgment,
confirmation, invoice, or shipping document issued by either party. Any
amendments or modifications of this Sales Agreement must be in writing and
signed by an officer or General Counsel of Purchaser and an officer or General
Counsel of Seller to be binding.
ARTICLE 24: CONFIDENTIALITY AGREEMENT
With respect to information received by either party as a result of or
in connection with this Sales Agreement, the parties will abide by the terms and
conditions of following Mutual Nondisclosure Agreements, as applicable (but only
to the extent that the information constitutes "Confidential Information" as
defined in the Mutual Nondisclosure Agreement):
The Buschman Company: Agreement signed with Amazon.com dated January 14, 1999
Real Time Solutions: Agreement signed with Amazon.com dated January 19, 1999
White Systems, Inc.: Agreement signed with Amazon.com dated January 19, 1999
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[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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<PAGE> 21
ARTICLE 25. GOVERNING LAW
This Sales Agreement shall be governed by and interpreted in accordance
with the laws of the State of Washington, without regard to its choice of law
provisions.
ARTICLE 26. PUBLICITY
Neither party shall disclose the terms of this Sales Agreement or the
existence or nature of any relationship between the parties (including, without
limitation in any press release or public communication) to any third party
without the prior written consent of the other party.
ARTICLE 27. SOLICITATION
Seller and Purchaser agree that, for the period commencing with the
commencement of Work hereunder (whether of not prior to the date hereof) until
one year following Acceptance, or any earlier termination of this Sales
Agreement, neither party will, except with the other party's written approval,
offer or seek to offer or solicit employment to the other party's employees or
staff. Notwithstanding the foregoing, the parties agree that general
solicitations or advertisements (by any means or media) shall not constitute
prohibited offers or solicitations for purposes of this Article 27.
Notwithstanding any other provision of this Sales Agreement, each party's
exclusive remedy for a violation of this Article 27 is recovery of such party's
direct damages and/or specific performance in connection therewith, as
applicable. The parties agree that under no circumstances shall a violation of
this Article 27 give rise to a right to terminate this Agreement.
ARTICLE 28. SURVIVAL
Articles 3, 12, 15, 17(c), 20, 21, 24 and 27 (together with all other
provisions that reasonably may be interpreted as surviving termination or
expiration of this Sales Agreement) will survive the Acceptance of the
Equipment, the performance of the Work and performance of Seller's warranty
obligations hereunder.
ARTICLE 29. DISPUTES
Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, ("Claim") shall be resolved in accordance with this
Article 29.
Any Claim shall first be submitted by the claiming party to the other
party in writing within a reasonable period after the event giving rise to it,
which writing shall include a description of such Claim, the proposed remedy for
such Claim and data supporting such Claim. If the parties are unable to resolve
the Claim informally, either party may submit the Claim for joint consideration
by and between Purchaser's senior logistics officer and Seller's Chief Executive
Officer.
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<PAGE> 22
Arbitration. Claims that have been properly raised and considered in the
above procedures but have not been resolved shall be resolved exclusively by
arbitration before a panel of three arbitrators in Seattle, Washington or in
such other location as may be reasonable given the facts and circumstances
involved in such Claim. The arbitration shall be conducted in accordance with
the applicable rules of the American Arbitration Association currently in effect
unless the parties mutuality agree otherwise.
Notice of the demand for arbitration shall be filed in writing with the
other party to the Sales Agreement and in accordance with the applicable rules
of the American Arbitration Association and shall be made within the statutes of
limitation that are applicable to the Claim.
The parties shall apply to the arbitrators for relevant discovery
consistent with the Federal Rules of Civil Procedure, which the arbitrators
shall be authorized to order. Either party may request that the arbitrators'
award include findings of fact and conclusions of law.
The arbitrators shall not be empowered to grant exemplary or punitive
damages. The award rendered by the arbitrator or arbitrators shall be final, and
judgment may be entered upon it in accordance with applicable law in any court
having jurisdiction thereof.
Within 30 days of receipt from the of the written findings of fact and
conclusions of law, either party will have the right to file with the
arbitrators and serve on the other party a written motion to reconsider. The
arbitrators may request the nonmoving or responding party to file a written
response within 10 days after receipt of that request, and the arbitrators
thereupon will reconsider the issues raised by the motion and response (if any)
and either confirm or alter their decision, which will then be final, binding
and conclusive upon the parties. The cost of such motion for reconsideration and
written opinion of the arbitrators, including attorneys' fees, will be awarded
against the moving party if it does not substantially prevail on its motion.
Upon demand of either party, the arbitration shall include, by
consolidation, joinder or third party claim, any person or entity (a) that is
substantially involved in a common question of fact or law, (b) where the
presence of such person or entity is required if complete relief is to be
accorded in the arbitration, or (c) who is alleged to be liable to a party for
all or part of a claim in the arbitration.
The agreement herein among the parties shall be specifically enforceable
under applicable law in any court having jurisdiction thereof.
Each party agrees that all aspects of any arbitration are "Confidential
Information" under the Mutual Non-disclosure Agreement referred to in Article
24.
Seller shall diligently carry on the Work, and Purchaser shall continue
its duties under this Agreement, during any dispute resolution proceedings,
unless otherwise agreed in
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<PAGE> 23
writing. The requirements of this paragraph cannot be waived with respect to any
Claim except by an explicit written waiver signed the party against whom the
Claim is brought.
Notwithstanding the foregoing, nothing in this Article 29 will preclude
either party from seeking provisional remedies (including, without limitation,
temporary restraining orders and preliminary injunctions) from any court of
competent jurisdiction to protect its rights pending resolution as provided for
above. Further, unless otherwise agreed by the parties in writing, this Article
29 will not apply to disputes relating to the enforceability of, or a party's
rights under, any United States or foreign patent or other intellectual property
right.
ARTICLE 30. TRANSFER OF TITLE AND RESERVATION OF SECURITY INTEREST
Upon Acceptance, title to the Work shall transfer to Purchaser. For the
avoidance of doubt, notwithstanding the transfer of possession of the Equipment
by Seller to Purchaser, Seller shall retain legal title to, and hereby reserves
a purchase money security interest in, the Equipment until Acceptance. Seller
shall have the rights of a secured creditor under the Uniform Commercial Code
for the jurisdiction applicable during such period. Purchaser hereby authorizes
Seller to file, and to sign on behalf of Purchaser as the debtor, any financing
statements or other documents with State or local recording offices which may be
required to perfect such security interest. In circumstances where Acceptance
has occurred and the Equipment is thereafter stored at Seller's Plant, Seller
hereby authorizes Purchaser to file, and to sign on behalf of Seller any
financing statements or other documents with State or local recording offices
which may be required to perfect Purchaser's security interest in the Equipment
so stored.
ARTICLE 31. NOTICES
All notices, requests, demands, applications, services of process, and
other communications which are required to be or may be given under this Sales
Agreement shall be in writing and shall be deemed to have been duly given if
sent by telecopy or facsimile transmission, answer back requested, or delivered
by courier or mailed, certified first class mail, postage prepaid, return
receipt requested, to the parties to this Agreement at the following addresses:
If to Purchaser: Amazon.com, Inc.
1516 2nd Avenue
Seattle, WA 98101
Attn: General Counsel
Fax: 206-834-7010
With a copy to: Amazon.com, Inc.
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<PAGE> 24
1516 2nd Avenue
Seattle, WA 98101
Attn: Chief Logistics Officer
Fax: 206-694-2004
If to Seller:
_______________________________
_______________________________
_______________________________
Attn: The President
Fax: __________________________
With a copy to: The Buschman Company
10045 International Boulevard
Cincinnati, Ohio 45246
Attn: General Counsel
Fax: 513/881-5144
or to such other address as either party shall have furnished to the other by
notice given in accordance with this Article. Such notice shall be effective (i)
if delivered in person or by courier, upon actual receipt by the intended
recipient, or (ii) if sent by telecopy or facsimile transmission, on the date of
transmission unless transmitted after normal business hours, in which case on
the following date, (iii) if mailed, upon the date of first attempted delivery.
ARTICLE 32. HEADINGS
Headings used in this Sales Agreement are for convenience and ease of
reference only, are not part of this Sales Agreement and shall not be relevant
to or affect the meaning or interpretation of this Sales Agreement.
ARTICLE 33. INTERPRETATION
Except where otherwise expressly provided or unless the context
otherwise necessarily requires: (i) references to a given law or rule are
references to that law or rule as amended or modified as of the date on which
the reference is made, (ii) reference to a given agreement or instrument is a
reference to that agreement or instrument as originally executed, and as
modified, amended, supplemented and restated through the date as of which
reference is made to that agreement or instrument, and (iii) accounting terms
have the meanings given to them by U.S. generally accepted accounting principles
applied on a consistent basis by the accounting entity to which they refer.
ARTICLE 34. ATTORNEY'S FEES AND COSTS
If any suit is brought, or an attorney retained to collect any money due
under this Sales Agreement, or to collect a judgment for breach of this Sales
Agreement, the prevailing
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<PAGE> 25
party shall be entitled to recover, in addition to any other remedy,
reimbursement for attorneys' fees, court costs, investigation costs and other
related expenses incurred in connection therewith.
ARTICLE 35. SEVERABILITY
This Sales Agreement will be enforced to the fullest extent permitted by
applicable law. If for any reason any provision of this Sales Agreement is held
to be invalid or unenforceable to any extent, then such: (i) provision will be
interpreted, construed or reformed to the extent reasonably required to render
the same valid, enforceable and consistent with the original intent underlying
such provision; (ii) provision will be void to the extent it is held to be
invalid or unenforceable; (iii) provision will remain in effect to the extent
that it is not invalid or unenforceable; and (iv) such invalidity or
unenforceability will not affect any other provision of this Sales Agreement or
any other agreement between the parties.
ARTICLE 36. REMEDIES
Except as otherwise expressly provided in this Sales Agreement, each and
all of the rights and remedies provided in this Sales Agreement, and each and
all of the remedies allowed at law and in equity, will be cumulative, and the
exercise of one right or remedy will not be exclusive of the right to exercise
or resort to any and all other rights or remedies provided in this Sales
Agreement or at law or in equity.
ARTICLE 37. RELATIONSHIP
The Parties are independent contractors under this Sales Agreement. Each
party acknowledges and agrees that it is not and will not be during the term of
this Sales Agreement, be an employee or an agent of the other party. Each party
and its employees, subcontractors, and agents shall not be entitled to or
eligible for any of the benefits that the other party provides for its
employees. Each party shall be solely responsible for withholding and paying its
and its employees', subcontractors' and agents' taxes and other charges,
including without limitation, federal, state and local income and social
security taxes, workmen's compensation and unemployment insurance. Nothing in
this Sales Agreement will be deemed to constitute, create, give effect to or
otherwise recognize a joint venture, partnership, franchise or business entity
of any kind. Nothing in this Sales Agreement will be construed as providing for
the sharing of profits or losses arising out of the efforts of the parties
hereto.
ARTICLE 38. USE OF MARKS; PRESS RELEASES
Seller will not use any trade name, trademark, service mark or logo of
Purchaser (or any name, mark or logo confusingly similar thereto) in any
advertising, promotions or
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<PAGE> 26
otherwise, or otherwise make any press release or disclosure concerning this
Sales Agreement or the activities contemplated hereby, without Purchaser's prior
written consent.
ARTICLE 39. PERMITTED DISCLOSURE
To the extent either party is required to disclose information that
otherwise requires the other party's prior written consent under Articles 26 or
38 of this Sales Agreement, each party hereby consents to the other party's
disclosure to the extent that such disclosure is (i) required by law (provided
that the disclosing party (a) gives the other party prior written notice
sufficient to allow the other party to seek a protective order or other
appropriate remedy, (b) discloses only such information as is so required, and
(c) and uses commercially reasonable efforts to obtain confidential treatment
for any information so disclosed), or (ii) necessary in connection with (aa)
such party's performance of this Sales Agreement, (bb) such party's standard
accounting disclosure obligations, or (cc) the proposed sale or reorganization
of such party's business or the like, provided in each of cases (aa), (bb) and
(cc) that each person to whom such information is disclosed has a need to know
the same, and is bound to keep the same confidential to at least the same extent
as required herein (including pursuant to any applicable confidentiality
agreement between the parties hereto). In both cases (i) and (ii) above, the
disclosing party shall, within the earliest possible time under the
circumstances (or, if the disclosure is to be made under case (ii)(cc) above to
a person or entity which may reasonably be deemed to be a competitor of the
non-disclosing party (or any of its affiliates), then in advance of any such
disclosure), notify or advise the other party of such disclosure, the
information disclosed or to be disclosed, and the identity of recipient of such
information.
IN WITNESS WHEREOF, the parties hereto have caused this Sales Agreement
and all annexes, exhibits and attachments thereto to come into effect on the
last date appearing below:
AUTHORIZED FOR PURCHASER BY:
Amazon.com, Inc.
Signature /s/ Jimmy M. Wright
-------------------------
Name Jimmy M. Wright
------------------------------
Title V.P./C.L.O.
-----------------------------
Date 3/11/99
------------------------------
AUTHORIZED FOR SELLER BY:
The Buschman Company
Signature /s/ James R. McCarthy
-------------------------
Name James R. McCarthy
------------------------------
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<PAGE> 27
Title President
-----------------------------
Date 3/11/99
------------------------------
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<PAGE> 28
ALLIANCE PRICING SUMMARY FORM
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
DESCRIPTION HOURS LIST MULTIPLIER SELL PRICE
PRICE/COST
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[ * ]
- -------------------------------------------------------------------------------------------------------
TOTAL $ 461,518
- -------------------------------------------------------------------------------------------------------
</TABLE>
- --------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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<PAGE> 29
PROVISIONS
o Prices do not include any state, local sales/use tax and Performance Bond
costs.
o Installation services are based on nonunion labor during regular working
hours. Buschman uses overtime labor, as applicable, to make any tie-ins
that would affect operations.
o Electrical installation is performed under license.
o price breakdown is offered for accounting purposes only.
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<PAGE> 30
OPTIONS
The following prices are to be added/(deducted) from the total System
Purchase Price on page 1 of this section. Upon selection, Buschman submits price
breakdown summary, if so required.
OPTION 1
[X] ACCEPTED [ ] REJECTED
Add gravity flanker conveyor to second side of existing powered
take-away on the third level of the 8 existing pick module fingers.
TOTAL ADD TO BASE PRICE $[*]
ADDED JANUARY 26, 1999
- --------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
<PAGE> 1
EXHIBIT 10.2
SALES AGREEMENT
This Sales Agreement, hereinafter called "Sales Agreement," made by and
between Amazon.com, Inc., a Delaware corporation (hereinafter called
"Purchaser"), and The Buschman Company, an Ohio corporation (hereinafter called
"Seller"), constitutes the agreement of the parties as follows:
A) CONTRACT DOCUMENTS
In addition to the Standard Terms and Conditions set forth in Part B
below, the following documents ("Additional Contract Documents") are also part
of this Sales Agreement and are hereby incorporated by reference herein. To the
extent any such Additional Contract Document contains any term or condition
inconsistent with the Standard Terms and Conditions below, the Standard Terms
and Conditions shall govern. The Additional Contract Documents, copies of which
are appended hereto, are as follows:
1. The Phase II Fernley, Nevada Proposal for Amazon.com, Inc. dated
February 5, 1999, except that Section 4 thereof is hereby deleted and replaced
in its entirety with the pages attached to this Sales Agreement as Attachment 1
(including and as amended by such amendments thereto as may later be
specifically agreed in writing(s) signed by both Seller and Purchaser from time
to time, the "Proposal").
B) STANDARD TERMS AND CONDITIONS
ARTICLE 1. DEFINITIONS
When used in this Sales Agreement, the capitalized terms listed below
shall have the following meanings:
<PAGE> 2
"Acceptance" shall mean the mutual agreement between the parties in
writing that (i) all Work has been completed (except for minor punch list items
or claims of non-material deficiencies in the Work), (ii) all Equipment has been
delivered to Purchaser and properly installed at the Worksite or stored at the
Worksite, as applicable, and (iii) the Equipment successfully meets all elements
of the Acceptance Test.
"Acceptance Test" shall mean the terms and conditions under which
Purchaser will accept tender of the Equipment, including the criteria concerning
the design, engineering, performance, functional, feature, and other
specifications or requirements which the Equipment must meet in order to be
accepted, all as agreed in the Proposal and/or the Specifications.
"Affiliate" shall mean, (i) with respect to Seller, any corporation,
partnership or other entity that is in or under the control of Seller, and to
the extent specified in the Proposal, any corporation, partnership or other
entity that is under the control of Seller's parent corporation, Pinnacle
Automation Company, Inc., and (ii) with respect to Purchaser, any corporation,
partnership or other entity that controls, is controlled by, or is in or under
common control with, Purchaser. For purposes of this definition, "control"
means, with respect to a corporation, partnership or other entity, the
beneficial ownership of ownership, profits, voting or similar interests
(including any right or option to obtain such an interest) representing at least
50% of the total interests of the pertinent entity then outstanding, or the
possession, directly or indirectly, of the power to direct or cause the
direction of the general management and policies of such corporation,
partnership or other entity, whether through the ownership of voting securities,
by contract or otherwise.
"Equipment" shall mean all the equipment, machinery, parts, vendor
components, Software, and other goods and items intended to be installed at the
Worksite pursuant to this Sales Agreement, excluding for the avoidance of doubt,
Seller's tools, equipment and other items which are not deliverables under the
Proposal.
"Maintenance or Software Support Agreement" shall mean any agreement
that may be entered into between Purchaser and Seller or any of Seller's
Affiliates pertaining to the maintenance and/or support of the Equipment.
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<PAGE> 3
"Proposal" shall have the meaning ascribed to it under Article A hereof.
"Purchase Price" shall mean the total compensation to be paid to the
Seller in consideration for the sale of the Equipment and the performance of the
Work (which may include, without limitation, the installation of the Equipment)
as set forth in the Proposal.
"Sales Agreement" shall have the meaning ascribed to such it in the
preamble and Article A hereof, and including, without limitation, all
Specifications.
"Seller Equipment" shall mean all Equipment which is not Third-Party
Equipment.
"Seller Software" shall mean all Software which is not Third-Party
Software.
"Seller's Plant" means any plant or facility (i) at which any Seller
Equipment is designed, developed, made, inspected or tested by or for Seller or
(ii) at which any Equipment is stored by or for Seller, as applicable.
"Software" shall mean all computer programming code or programs, in
machine readable object code form, that is developed or furnished by or on
behalf of Seller or any of Seller's Affiliates as a deliverable to Purchaser, or
caused to be developed or furnished by Seller or any of Seller's Affiliates to
Purchaser as a deliverable under this Sales Agreement, and all Upgrades thereto.
For the avoidance of doubt, "Software" shall not include any Source Code.
"Source Code" shall mean, with respect to Seller Software, (i) the
human-readable form of computer programming code thereof as prepared and written
by the programmer(s) who developed the Seller Software, together with (ii) any
build tools (e.g. compilers, linkers and other related tools), compile/link
scripts, program comments, installation scripts and related system
documentation, including all comments and any procedural code such as job
control language, necessary for any reasonably skilled programmer to recompile
such source code into fully functioning object code of the Seller Software, to
the extent that the items
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<PAGE> 4
listed in this clause (ii) exist.
"Specifications" shall mean the design, engineering, performance,
functional and other criteria, feature descriptions and other specifications or
requirements for any Equipment and/or Work that are contained in this Sales
Agreement, including, without limitation, the Proposal, or in any documents
contemplated hereby or thereby or other documents delivered by Seller pursuant
hereto or thereto and in each case agreed to by Purchaser.
"Third-Party Hardware" shall mean that portion of the Equipment which is
not developed, manufactured or owned by on behalf of Seller or any of Seller's
Affiliates, provided that the same is identified as "Third-Party Hardware" in
the Proposal, and provided further however that "Third-Party Hardware" shall not
include any Third-Party Software. To the greatest extent possible, Third-Party
Hardware manufacturers shall be identified in the Proposal.
"Third-Party Software" shall mean that portion of the Software which is
not developed, manufactured or owned by on behalf of Seller or any of Seller's
Affiliates, provided that the same is identified as "Third-Party Software" in
the Proposal. To the greatest extent possible, Third-Party Software
manufacturers shall be identified in the Proposal.
"Upgrade" shall mean each and every revision, enhancement, modification,
amendment, upgraded version and future release of the Software (including,
without limitation, versions and releases correcting programming errors, beta
versions as well as versions containing materially increased functionality)
delivered by Seller or any of its Affiliates to Purchaser pursuant to this Sales
Agreement or any Maintenance or Software Support Agreement.
"Work" shall mean all the Equipment and other items (including without
limitation, materials, supplies, drawings and data), and manufacturing,
installation, integration and other services, to be supplied or performed by or
on behalf of Seller hereunder.
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<PAGE> 5
"Worksite" shall mean the location or destination where the Equipment is
to be installed or, in the case of purchases of Equipment for storage and later
installation, stored, as applicable.
ARTICLE 2. PERMITS; COMPLIANCE WITH LAWS
Prior to the installation of the Equipment, Purchaser shall procure and
pay for all building, erection and other licenses, permits, authorizations and
inspections required in connection with the Worksite, excepting Seller's Plant.
Seller shall be responsible for the procurement of and payment for all other
licenses, permits, authorizations and inspections associated with the Work.
Seller shall comply, and shall cause all of its consultants and subcontractors
to comply, with building, electrical or other laws, codes or regulations of
local, state or federal agencies or authorities in regard to the Work, and shall
otherwise comply with all other applicable laws, regulations, rules, orders and
other requirements of governmental authorities having jurisdiction with respect
to the Equipment or Seller's performance of the Work.
ARTICLE 3. INTELLECTUAL PROPERTY INDEMNIFICATION
Seller shall defend, indemnify and hold Purchaser and its Affiliates
harmless from and against any and all expenses, costs, claims, demands, causes
of action and damages of whatever kind which Purchaser may incur in connection
with any suit or claim of infringement of any patent, copyright or trademark, or
misappropriation of any trade secret or other intellectual property right
resulting from (i) Purchaser's or its Affiliates' use of any portion of the
Equipment as contemplated in the Proposal and otherwise in accordance with this
Sales Agreement or applicable Equipment documentation delivered by Purchaser by
Seller hereunder, or (ii) performance of the Work, except, in each case with
respect to each of the foregoing clauses (i) and (ii), to the extent directly
attributable to Third-Party Hardware or Third-Party Software. Seller shall
receive written notice from Purchaser within ten (10) days after proper legal
service is received by Purchaser of any such suit or claim, provided that
failure to receive such notice shall not relieve Seller of its obligations under
this Article 3 except to the extent that Seller's ability to defend such suit or
claim is materially impaired due to such failure. Seller is hereby authorized by
Purchaser to, at Seller's expense, appear in and assume the defense of, and be
given the complete control of the settlement of, any such suit or claim;
provided that (a) if Purchaser or any of its Affiliates wishes to participate in
the defense and settlement of the claim, Purchaser or any of its Affiliates may
do at its own
-5-
<PAGE> 6
cost, (b) Purchaser is kept timely informed of all material actions taken by
Seller in connection with any such settlement, suit or claim (including, without
limitation, of settlement offers and responses (to the extent the delivery of
such information does not require Seller to waive work product immunity or
attorney/client privilege or otherwise violate the terms of any protective order
between Seller and any third party plaintiff or defendant)); and (c) Seller
shall not enter into or acquiesce to any settlement admitting to or stipulating
to any guilt, fault, liability or wrongdoing on the part of Purchaser or any of
its Affiliates without Purchaser's prior written consent. In the event that
Purchaser's right or ability to use the Equipment is threatened or impaired as a
result of any such suit or claim, Seller shall, at its own expense, do one of
the following, (1) diligently procure for Purchaser the right to continue using
the Equipment, or (2) modify the Equipment or, if necessary and by mutual
agreement, substitute functionally equivalent Equipment, to the extent necessary
to avoid infringement or misappropriation; provided in each case that if such
modified or substituted equipment fails to comply with all Specifications
applicable to the original, unmodified Equipment, Purchaser shall be entitled to
equitable compensation with respect to such noncompliance. Seller hereby assigns
to or otherwise transfers to the benefit of Purchaser all of its right, title
and interest in and to any intellectual property right infringement or
misappropriation indemnification or defense rights Seller may have with respect
to Third Party Software and Third Party Hardware, and will, at its expense, take
any actions as may be necessary to enable Purchaser to exercise such rights and
realize such benefit to the fullest extent possible. It is mutually agreed that
the provisions set forth herein are Seller's only obligations with respect to
infringement of any patent, copyright or trademark, or misappropriation of any
trade secret or other intellectual property right.
ARTICLE 4. LABOR AND PERSONNEL
Seller shall furnish all labor and personnel required for the
installation of the Equipment at the Worksite. All Work (including without
limitation all labor and other services) will be performed in a timely,
first-class and professional manner. All labor and personnel performing Work at
the Worksite (excluding Seller's Plant) shall comply with Purchaser's or its
Affiliates then-applicable policies, rules and regulations with respect to such
Worksite. If labor or personnel performing Work hereunder fail to so comply with
such policies, rules and regulations, or otherwise fail to perform Work in a
timely, first-class and professional manner, Purchaser in its discretion may
request removal of any such labor or personnel, and Seller shall remove such
labor or personnel from the applicable Worksite in accordance with each such
request. Seller will manage the transition of replacement personnel to minimize
impact on the project. Seller will be responsible for all acts, omissions,
negligence and misconduct of labor or personnel performing Work. For the
avoidance of doubt, Seller's subcontractors, as more fully discussed in Article
5 hereof, are
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<PAGE> 7
labor and personnel for purposes of this Article 4.
ARTICLE 5. SUBCONTRACTORS AND ASSIGNMENTS
(a) Seller may assign or subcontract any of its obligations under this
Sales Agreement to any supplier, builder or other contractor which Seller, in
its good faith discretion, reasonably considers qualified; provided, however,
that (i) Seller may not so assign or subcontract any of its obligations under
this Sales Agreement to any contractor which will perform Work or supply
Equipment hereunder representing in excess of twenty percent (20%) of the
Purchase Price without the Purchaser's prior written consent (which consent may
be evidenced by Purchaser's written acceptance of Seller's Proposal to the
extent such Proposal clearly identifies such potential subcontractor and the
scope of Work it will perform), and (ii) in any event Seller remains primarily
liable for the performance of all of Seller's obligations under the terms and
conditions of this Sales Agreement. The restriction set forth in clause (i) of
the proviso of the preceding sentence does not apply to Seller's procurement of
raw materials or purchases of goods or other Equipment components from Seller's
routine vendors and subcontractors from whom Seller routinely procures the same
as part of its standard manufacture of Equipment.
(b) Except as provided in Article 5(a), neither Seller nor Purchaser may
assign their respective rights to or delegate their duties arising from this
Sales Agreement without the prior written consent of the nonassigning or
nondelegating party, which consent shall not be unreasonably withheld; provided,
however, that, if Seller or Purchaser consents to any assignment or delegation,
the assignee or delegatee shall, as a condition to such assignment or
delegation, agree to be subject to the terms and conditions of this Sales
Agreement. Notwithstanding the foregoing, Purchaser may assign this Sales
Agreement to any of its Affiliates or in connection with any merger,
consolidation, reorganization, sale of all or substantially all of its assets or
similar transaction without the prior written consent of Seller; provided that
the assignee or delegatee is financially capable of performing its obligations
hereunder and/or Purchaser remains primarily liable for the performance of all
of Purchaser's obligations under the terms and conditions of this Sales
Agreement.
ARTICLE 6. TAXES
-7-
<PAGE> 8
Unless otherwise indicated, the Purchase Price contains no provision for
sales, use, excise, or other similar taxes. It is Purchaser's responsibility to
pay any such taxes should they be levied upon Seller. If such taxes are included
as part of the Purchase Price and the rate or base of the tax is increased or
decreased, or if Seller receives any tax credits related to the Work, Purchaser
will pay any such increased taxes and Seller will give credit for any tax
decrease or credit. Seller will pay any taxes specified in this paragraph and be
reimbursed by Purchaser within thirty (30) days after receipt at the address
specified in Article 11(e) of a separate invoice therefor from Seller. Purchaser
shall be solely responsible for the prompt payment of any and all personal
property taxes of any kind that may become due or payable with respect to the
Equipment at any time following delivery thereof to the Worksite. For the
avoidance of doubt and notwithstanding any other provision of this Sales
Agreement, (a) in no event shall Purchaser have any liability or obligation to
(i) pay taxes in respect of Seller's income or gross revenues, or (ii) reimburse
Seller for or otherwise pay any taxes with respect to which Purchaser is exempt
and Purchaser provides Seller a certificate of exemption, and (b) should
Purchaser challenge any taxes specified in this paragraph, Seller will at its
expense provide Purchaser with reasonable assistance in so challenging the same
and, if Seller receives funds or credits in connection with any such contest,
promptly refund the amount of such refund or credit to Purchaser.
ARTICLE 7. INSPECTION; SHIPMENT; REJECTION
Seller will furnish Purchaser, upon its request, with safe and
sufficient access to Seller's Plant for the purposes of conducting in process
inspections and tests to determine Seller's and the Equipment's compliance with
this Sales Agreement, including without limitation the Specifications. No
inspection or test, delay or failure to inspect or test, or failure to discover
any defect or noncompliance will (i) relieve Seller of any of its obligations
under this Sales Agreement, or (ii) impair Purchaser's rights under Article 7(c)
or any other right or remedy afforded to Purchaser. Purchaser shall conduct such
in process inspections and tests in a manner as to not interfere with Seller's
planned performance.
Seller shall ship Equipment in accordance with the delivery terms
specified in the Proposal. If Seller has manufactured Equipment to meet
Purchaser's schedule and Purchaser requests delay in shipment, Seller shall have
the right to store such Equipment at Purchaser's expense. Seller shall obtain
approval from Purchaser's Project Manager for each shipment release to ensure
the readiness of the Worksite to accept such shipment.
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<PAGE> 9
Notwithstanding any other provision of this Sales Agreement, Seller
acknowledges and agrees that Purchaser may reject, refuse acceptance of or
revoke acceptance of any Equipment, or any tender thereof, which does not
strictly comply with the requirements of this Sales Agreement including without
limitation all applicable Specifications. Purchaser shall notify Seller of any
such rejection, refusal or revocation. In any such event, Purchaser may, with
respect to such noncompliance, elect to: (a) retain any or all of such Equipment
for repair, replacement or other correction by Seller, or (b) retain any or all
of such Equipment without correction by Seller. Seller shall promptly comply
with any direction by Purchaser for correction. Purchaser shall be entitled, in
addition to all other remedies available to Purchaser at law or in equity, to
recover from Seller, by price reduction, credit, offset, invoice or otherwise,
an equitable amount for the diminished value of any uncorrected Equipment and
all reasonable costs and expenses incurred by Purchaser in connection with
Equipment which is rightfully rejected or with respect to which acceptance is
refused or revoked by Purchaser (including, but not limited to, reasonable costs
and expenses to return Equipment to Seller for correction to the extent not
otherwise disclaimed or limited under this Sales Agreement).
ARTICLE 8. SITE CONDITIONS AND PROVISIONS BY PURCHASER
Seller shall not be liable to Purchaser for any failure to deliver and
install any Equipment in accordance with this Sales Agreement, to the extent
that such failure results solely from Purchaser's failure to provide at the
Worksite reasonable means of access to a minimum of dock doors, the availability
of a dock leveler, and a completely enclosed building to protect Seller's
Equipment from the elements, with a water-tight roof and such electric current,
water, heat, ventilation, light and other utilities and facilities as may
reasonably be required for the installation of the Equipment. Purchaser shall
allow Seller reasonable access to the Worksite for inspection of compliance with
these requirements, prior to commencement of the installation. Seller shall
promptly notify Purchaser in writing of any failure by Purchaser to provide any
of the access, availability, items or conditions set forth above or any other
failure by Purchaser to provide access, availability, items, materials,
conditions or assistance as otherwise may be required under this Sales
Agreement.
ARTICLE 9. INSURANCE AND RISK OF LOSS
Upon delivery of the Equipment at the Worksite, and until Acceptance of
the
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<PAGE> 10
Equipment, Purchaser shall, at its expense, take out and maintain "installation
floater" insurance in an amount at least equal to the Purchase Price covering
all risks of loss of the Equipment and any and all associated expenses. Such
installation floater insurance shall name Seller as an insured party and shall
provide for an insurer's waiver of subrogation in favor of all insured parties.
Upon Acceptance of the Equipment, Purchaser shall be responsible for and shall
bear any and all risk of loss or damage to the Equipment except as may otherwise
be provided for in this Sales Agreement. Notwithstanding the foregoing, this
Article 9 does not apply when Worksite is Seller's Plant.
ARTICLE 10. COMPLETION, CHANGES, DELAYS, ERRORS
At any time prior to final payment, Purchaser may request in writing any
substitutions, deviations, additions, or deletions in the Equipment, Work and/or
Specifications (hereinafter referred to as "Changes") and Seller must comply
with the same. If any Change results in an increase or decrease in the time or
expense required for the Work not then performed in accordance with the Sales
Agreement, the parties will equitably adjust schedules for performance of such
Work and/or the Purchaser Price to reflect the increase or decrease. All the
terms and conditions of this Sales Agreement shall apply to such Changes. If by
any such Changes or by other causes within control of Purchaser Seller's
performance is delayed or prevented by Purchaser, Purchaser agrees to reimburse
Seller for its reasonable, documented, out-of-pocket expenses incident to such
delay which may include, without limitation, the costs of storing, maintaining,
repairing, and refurbishing Equipment, demurrage, labor and material escalation
and pull out charges. In such event, Purchaser also agrees to excuse the delay
and accept Seller's performance at an appropriately deferred completion date.
Where Seller's performance under this Sales Agreement is delayed as above, the
Purchase Price shall be revised to reflect any changes in labor wage rates,
material costs and other costs caused by such delay and actually incurred by
Seller in its performance.
ARTICLE 11. PURCHASE AND SALE; PURCHASE PRICE; PAYMENT
The Purchaser shall purchase the Equipment and Work from Seller, and
Seller shall sell and provide the Equipment and Work to Purchaser, as provided
below:
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<PAGE> 11
(a) Consideration: Seller shall sell and provide the Equipment and/or
Work, as applicable, to Purchaser as provided in and in accordance with this
Sales Agreement. In full consideration of Seller's sale and provision of the
Equipment and Work to Purchaser, Purchaser shall pay Seller the Purchase Price
as set forth in, and subject to, this Article 11.
(b) Payment Terms: Unless otherwise specified in the Proposal, Seller
shall submit to the Purchaser [*] invoices for [*] payments for labor and
material expended or purchased for that month. The amounts constituting (or as
applicable, the method(s) for determining the amounts constituting) the [*]
payments, retention, or other payments applicable to this Sales Agreement, or
the amounts constituting (or as applicable, the method(s) for determining the
amounts constituting) such other payment structure as may be reflected in the
Proposal, will be as set forth in the Proposal. Seller's monthly invoices shall
contain a certification regarding the accuracy and completeness of the amounts
invoiced and that such amounts are consistent with the procedures agreed to in
the Proposal.
(c) Retention Rights: Notwithstanding Article 11(b), payment of the
amounts referred to therein shall be subject to a retention amount as specified
in the Proposal. The retention amount specified in the Proposal shall not become
due until (1) Acceptance has occurred, and (2) Seller submits to Purchaser, for
both monthly and final invoices, receipts, releases and waivers of liens arising
out of this Sales Agreement, to the extent and in such form as may be designated
by the Purchaser; provided that payment of such retention amount is subject to
reduction as set forth in Article 11(d). If any subcontractor or supplier
refuses to furnish a release or waiver required by the Purchaser, the Seller may
in lieu thereof furnish at the Seller's expense a bond satisfactory to the
Purchaser to indemnify the Purchaser against any such lien. If any such lien
remains unsatisfied after all payments are made, the Seller shall refund to the
Purchaser all monies that the latter may be compelled to pay in discharging such
lien, including all costs and reasonable attorney's fees.
(d) Retention Reduction: If all the conditions of payment set forth in
Article 11(c) have been met (except for minor punch list items or claims of
non-material deficiencies in the Work, the value of which items or claims will
be mutually determined in good faith by Purchaser and Seller), Seller will
invoice Purchaser for the retention amount less twice the determined value of
such items or claims. Upon the correction or elimination of such items or
claims, Seller will invoice Purchaser for the balance of the retention amount.
- --------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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<PAGE> 12
(e) Invoicing: Purchaser shall make payment of properly invoiced amounts
within thirty (30) days from receipt of invoice at the following address:
Amazon.com, Inc.
Attn: Jimmy Wright
215 Columbia Street
Seattle, Washington 98104
(f) Subcontractor Liens or Releases: Upon receipt of funds from the
Purchaser, Seller will sign and furnish a lien waiver to the Purchaser covering
the Work, Equipment and payment described in the applicable invoice and will
send the same to the Purchaser with the next invoice. The Seller will either
obtain lien waivers and releases from suppliers and subcontractors on behalf of
whom such payment was sought by the Seller or furnish Purchaser with a bond
satisfactory to Purchaser to indemnify Purchaser against any claim by lien or
otherwise by Seller's suppliers or subcontractors. The Purchaser is authorized
to withhold from any invoice, without interest, monies due the Seller equal to
the amount of monies previously disbursed to the Seller with respect to which
Seller fails to furnish Purchaser with supplier or subcontractor lien waivers
and releases or a bond as provided in this Sales Agreement.
(g) Purchaser Right of Invoice Rejection or Revocation: The Purchaser
may (1) decline to approve the Seller's invoice in whole or in part or (2)
nullify the whole or any part of any invoice previously approved, in each case
to such extent as may be necessary to protect the Purchaser from loss because
of:
o Defective Work not remedied;
o Failure of the Seller to make payments properly to subcontractor or
suppliers
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<PAGE> 13
for labor, materials or Equipment;
o Reasonable evidence that the Work cannot be completed for the unpaid
balance of the Purchase Price; or
o Damage to the Purchaser's or its Affiliate's property or another
contractor's work.
ARTICLE 12. SOFTWARE
License Grant: Title to the Seller Software remains at all times with
Seller. Seller hereby grants Purchaser a nonexclusive right and license to use
Seller Software and documentation associated with it on the Equipment in the
manner contemplated by the Proposal or as otherwise permitted under this Sales
Agreement. Additionally, Purchaser may make backup and archival copies as
reasonably deemed necessary by Purchaser, provided that Seller's copyright
notice and other proprietary markings are reproduced in such copies.
Restricted Use: Each copy of Seller Software provided under this license
may be used only on the Equipment on which the Seller Software is delivered and
installed or on other equipment approved by Seller in writing. Use of the Seller
Software in a network environment is authorized under the license only to the
extent reasonably necessary for the Purchaser's or its Affiliates internal
purposes with respect to the Equipment or as otherwise specified in this Sales
Agreement. No other use of the Seller software is authorized unless specifically
agreed to in a writing signed by Seller.
Copies and Modifications: Purchaser shall not use, copy, rent, lease,
sell, modify, prepare derivative works of, decompile, disassemble, otherwise
reverse engineer, or transfer Seller Software except with Seller's prior written
consent or otherwise as permitted under this Sales Agreement.
Source Code; Escrow Agreement: Seller shall at all times keep and
maintain a
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<PAGE> 14
complete master, reproducible copy of all Source Code of all Seller Software
installed at the Worksite in escrow in accordance with the terms and conditions
of the Escrow Agreement attached hereto as Exhibit A (the "Escrow Agreement")
and which agreement is hereby made part of this Sales Agreement, being
incorporated herein by this reference. Seller will promptly update the Source
Code in escrow to reflect all Upgrades installed at the Worksite.
In the event that (i) a Major Failure occurs (as defined under Article
17 b)) related to Seller Software and Seller fails to respond to and perform its
warranty or maintenance obligations under this Sales Agreement, or Seller (or
any Seller Affiliate, if applicable) fails to respond to and perform its
obligations under any Maintenance or Software Support Agreement, in each case in
connection with the occurrence of such Major Failure, and Seller does not cure
such failure to respond and perform within five (5) business days after written
notice thereof from Purchaser, (ii) Seller fails to offer maintenance or
software support services to Purchaser as reasonably required by Purchaser for
it to continue its use of the Equipment as contemplated by this Sales Agreement
and on terms no less favorable than those offered to Seller's similarly situated
customers for similar services, (iii) this Sales Agreement is terminated by
Purchaser pursuant to Article 16(a)(1), or (iv) Seller (1) becomes insolvent or
bankrupt or makes an assignment for the benefit of creditors, (2) has a receiver
or trustee in bankruptcy is appointed for it, or (3) has any proceeding in
bankruptcy, receivership or liquidation instituted against it which is not
dismissed within thirty (30) days following the commencement thereof, Purchaser
shall be entitled to the Source Code as provided for in the Escrow Agreement.
Seller hereby grants to Purchaser, effective upon the occurrence of any
of the events set forth in any of the clauses (i) through (iv) of the
immediately preceding paragraph, a perpetual, non-exclusive, right and license
to (a) use, copy, modify, adapt and create derivative works of the Source Code,
and (b) decompile, reverse engineer or disassemble any Seller Software or
modify, adapt or create derivative works of Seller Software or its
documentation, in each case solely in connection with Purchaser's and its
Affiliates' and their respective contractors' use, maintenance and support of
the Software in accordance with their respective rights under this Sales
Agreement. Notwithstanding each of the clauses (a) and (b) above, the Source
Code referred to above is hereby deemed to be Seller Software for purposes of
Purchaser's continued compliance with the terms of Articles 12 b) (except that
Purchaser's rights under clauses (a) and (b) above may be performed in its test
and development areas and equipment for the purposes set forth in this
paragraph), 12 f) and 12 i) hereof.
Any Source Code delivered under this Article will be provided on an "as
is" basis,
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<PAGE> 15
without any representation, warranty or liability of Seller whatsoever, except
that Seller hereby represents and warrants to Purchaser that the Source Code in
Escrow at all times is the Source Code of the latest version of the Seller
Software (including all Upgrades) installed at the Worksite. Further, Seller
disclaims any representations, warranties or liabilities relating to
modifications to, or adaptations or derivative works of, the Source Code,
Software or its documentation created by or for Purchaser and/or its Affiliates
pursuant to the immediately preceding paragraph; provided, however, that nothing
in this paragraph will limit any of Seller's representations or warranties under
this Sales Agreement with respect to the unmodified Software or its
documentation.
Term: The term of the licenses granted pursuant to this Article 12 shall
be perpetual, subject to termination only in accordance with Article 16d). Upon
any such termination of this license, Purchaser shall return the Seller Software
and all copies of it and all documentation to Seller.
Trade Secret Protection: Purchaser understands and agrees that Seller
Software and all documentation related thereto constitutes the valuable
technology, know-how and trade secrets of Seller. Purchaser agrees during the
term of this Agreement and thereafter to hold the Seller Software, including any
copies of it and any documentation related to it, in confidence and to not
permit any person or entity to obtain access to it except as required for
Purchaser's and its Affiliates' own internal use and provided such person or
entity has agreed in writing to hold such in confidence.
Software Upgrades: Except as may be otherwise agreed to in a Maintenance
or Software Support Agreement, or otherwise required under this Sales Agreement,
Seller shall have no obligation to provide Upgrades to Purchaser due to later
versions or revisions introduced into the marketplace. Materials, installation,
and customization to implement such Upgrades will be made available to Purchaser
at prices normally offered to Seller's preferred customers. Notwithstanding the
foregoing, Seller will provide and Purchaser will not be charged for, any
Upgrades required in order to correct Software to meet applicable Specifications
pursuant to Seller's obligations under the Sales Agreement or any Maintenance or
Software Support Agreement.
Seller Software Warranty Performance: As part of Seller's warranty of
the Equipment, but not in limitation of Purchaser's rights under this Sales
Agreement, Purchaser agrees that Seller may perform Seller Software warranty
service remotely via a modem in
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<PAGE> 16
addition to other reasonable means. The Seller Software warranty is void if the
Seller Software has been altered, modified or changed in any way from the
original delivery configuration, without the written authorization of Seller,
unless so altered, modified or changed by or on behalf of Seller or as may
otherwise be permitted hereunder.
Software Markings: The Seller Software and users manuals, logos, product
names and other support materials, if any, are either patented, copyrighted,
trademarked, or otherwise proprietary to Seller. Purchaser agrees never to
remove any such notices and product identification.
Third Party Software: Software delivered to Purchaser pursuant to this
Sales Agreement may contain Third Party Software. Seller hereby assigns to or
otherwise transfers to the benefit of Purchaser all of Seller's right, title and
interest in and to all warranties, indemnities, product guaranties and other
representations made by third party manufacturers which Seller may have with
respect to Third Party Software, and will at its expense take any and all
actions as may be necessary to enable Purchaser to exercise rights thereunder
and realize the benefit thereof to the fullest extent possible; provided that
nothing in this Sales Agreement shall have the effect of extending or otherwise
expanding upon any of such third party warranties, indemnities, product
guarantees or representations assigned or otherwise transferred by Seller to
Purchaser. Seller hereby represents and warrants to Purchaser that Purchaser and
its Affiliates will have all rights necessary to use Third Party Software
delivered under the Sales Agreement as contemplated in this Sales Agreement
(including, without limitation, the Specifications).
Purchaser's Affiliates. All rights and obligations of Purchaser under
this Article 12 shall extend to each of Purchaser's Affiliates, and Purchaser
shall ensure that each of Purchaser's Affiliates complies with the provisions of
this Article 12 in connection with its exercise of its rights hereunder.
ARTICLE 13. DELAYED PAYMENTS
In the event that Purchaser fails to make due and punctual payments for
the Equipment and/or Work as provided herein, interest shall accrue on the
amount due and unpaid at the rate of one percent (1%) per month for each full
calendar month or part thereof
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<PAGE> 17
during which such amount shall be outstanding, such interest to commence to
accrue on the thirtieth (30th) day after such amount is due and payable
hereunder. If the interest rate provided herein exceeds the maximum interest
rate permitted by law, then the interest payable shall be at such maximum
permissible rate.
ARTICLE 14. CONTINGENCIES
In the event of any condition or contingency, existing or future, which
is beyond the reasonable control and without the fault or negligence of either
party which prevents or delays the performance by such party of this Sales
Agreement ("Event of Force Majeure"), such party shall be entitled to an
appropriate extension of time for performance of this Sales Agreement. Events of
Force Majeure shall include, without limitation, acts of God, fire, floods,
transport delays, strikes, labor disputes and interference by civil or military
authorities. If an Event of Force Majeure occurs, the affected party shall take
measures to mitigate and minimize the effect of such event in order to continue
with the performance of its obligations under this Sales Agreement. If the
period of such an event extends beyond six (6) months, then either party may
terminate this Sales Agreement under Article 16(a)(3) below.
ARTICLE 15. MAINTENANCE OR SOFTWARE SUPPORT
Seller will throughout the warranty period and for a period of five (5)
years thereafter offer maintenance services to Purchaser as reasonably required
by Purchaser for it to continue its use of the Equipment as contemplated by this
Sales Agreement and on terms no less favorable than those offered to Seller's
similarly situated customers for similar services. To the extent maintenance
services are not provided for in the Proposal or elsewhere as part of this Sales
Agreement, Seller and Purchaser will subsequent to the date hereof, at
Purchaser's option, negotiate in good faith as to Seller's provision of the same
to Purchaser.
ARTICLE 16. TERMINATION
(a) This Sales Agreement may be terminated upon the occurrence of any of
the
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<PAGE> 18
following events:
(1) Other than as provided for in Article 16(a)(2), in the event
that either party shall breach or fail to comply with any provisions of this
Sales Agreement and such breach or failure shall continue for a period of thirty
(30) days after the giving of written notice thereof by the other party, the
other party may terminate this Sales Agreement immediately upon the giving of
written notice thereof to the defaulting party.
(2) Notwithstanding the foregoing, if Purchaser shall have failed to
make any payment due under this Sales Agreement within forty-five (45) days
after having been so notified by Seller, Seller may terminate this Sales
Agreement immediately after the expiration of the forty-five (45) day period by
giving notice of such termination to Purchaser.
(3) If an Event of Force Majeure occurs and continues for a period
greater than six (6) months, either party may terminate this Sales Agreement
upon giving written notice thereof to the other party. In such event, the amount
to which Seller shall be entitled shall be determined as per Article 16(b).
(b) In addition to the foregoing, Purchaser may terminate this Sales
Agreement or any portion thereof without cause effective thirty (30) days after
written notice thereof is received by Seller. If Purchaser terminates this
Sales Agreement pursuant to this Article 16(b), then Seller shall be reimbursed
by Purchaser for Seller's reasonable, documented costs incurred through the
termination date in its performance and/or termination of the terminated portion
of this Sales Agreement, plus Seller's expected profit with respect to the
terminated portion as contemplated in the Proposal, less any progress or other
payments received by Seller before termination. Seller's Chief Financial Officer
shall certify as to the accuracy and completeness of such costs incurred and
expected profit invoiced to Purchaser. Purchaser shall pay Seller net thirty
(30) days after receipt of invoice and certificate from Seller. Seller will keep
its regularly maintained corporate books and records related to this Sales
Agreement for five (5) years following a termination hereunder. During such
period, and only to the extent necessary to support Seller's reimbursement under
this Article 16 b), Seller will make its books and records as necessary to
support Seller's reimbursement available for audit to an independent public
accountant, selected by Purchaser and at Purchaser's sole cost and expense,
under terms of confidentiality applicable to this Sales Agreement; provided that
if any such audit reveals a discrepancy in favor of Seller in excess of five
percent (5%), then Seller will reimburse Purchaser for the costs of such audit.
Any such audit will be conducted
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in a manner which will not unreasonably interfere with Seller's operations.
Upon receipt or delivery (as applicable) of a termination notice under
paragraph 16(a), or upon receipt of Purchaser's termination notice under Article
16(b) above, Seller shall take the following actions:
Stop work to the extent relating to the terminated portion of this Sales
Agreement;
Take all commercially reasonable actions to limit amounts for which
Purchaser may be responsible in connection with this Article, including
terminating all subcontracts to the extent they relate to the terminated portion
of this Sales Agreement;
Assign to Purchaser all of Seller's right, title and interest to all
Third Party Software and Third Party Hardware and deliver the Equipment or
components thereof (regardless of status of completion) consistent with Seller's
progress or other payments received by Seller before and pursuant to
termination; and
Deliver, assign and otherwise transfer, in the manner contemplated by
this Sales Agreement, title to any Work and other drawings, plans and documents
(regardless of status of completion) that, if this Sales Agreement had been
completed, would have been furnished to Purchaser.
d) Notwithstanding anything to the contrary contained in this Sales
Agreement, the licenses granted under Article 12 may not be terminated except
upon the occurrence of a substantial, material breach of this Sales Agreement by
Purchaser that (i) is not cured within twenty (20) days after Purchaser receives
written notice from Seller of the breach, and (ii) is of such a nature that
Seller cannot reasonably be made whole through an award of monetary damages.
Following any termination of this Sales Agreement that does not involve a
termination of the licenses granted under Article 12, Purchaser's and its
Affiliates' and contractors' use of the Seller Software will remain subject to
the restrictions contained in Article 12.
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<PAGE> 20
ARTICLE 17. WARRANTY
a) Standard Warranty: Seller hereby warrants that the Equipment shall
(i) be free from all liens, charges or encumbrances, except any lien of the
Seller in respect of any unpaid portion of the Purchase Price; (ii) be free from
defects in materials and workmanship and shall conform to the provisions and
specifications of this Sales Agreement (including without limitation the
Specifications); (iii) be new and, if no quality is specified, of a quality
consistent with the Seller's usual and normal production; and (iv) conform with
OSHA regulations in force at the time of Acceptance of the Equipment. Seller
shall use its reasonable best efforts to as soon as practicable obtain for
Seller's own benefit Third-Party Hardware and Third-Party Software warranties
that are at least co-extensive with Seller's warranty obligations to Purchaser
under clause (ii) of the immediately preceding sentence with respect to the
Equipment. Notwithstanding the foregoing, if Seller, after so using its
reasonable best efforts, fails to obtain for Seller's own benefit such
warranties, then Seller shall immediately notify Purchaser in writing of the
nature and extent of such failure, and the parties shall negotiate in good faith
as to (a) adjustment of schedules for performance of the Work in order for
Seller to secure such warranties, (b) Seller's limited release from its warranty
obligations under clause (ii) of the immediately preceding sentence with respect
to such Third-Party Hardware or Third-Party Software, and/or (c) a reduction or
increase in the Purchaser Price to reflect the changed schedule and/or lessened
warranty obligations, as applicable. Any agreement between the parties resulting
from such negotiations must be in writing. Seller's failure to notify Purchaser
as required above shall constitute Seller's waiver of its renegotiation rights
in the preceding sentence, and the provisions of this Article 17 shall remain in
full force and effect. Seller shall, at its option, repair or replace
(replacement parts to be shipped F.O.B. Worksite) any defective Equipment or
component thereof; provided, however, that Seller is given written notice of any
defect during the Warranty Period (as defined below). For purposes of Articles
17a) and b), the warranty period shall commence on the earlier of the date of
first commercial use of the Equipment by Purchaser or the date of Acceptance of
the Equipment, and the warranty period shall end one year after such
commencement date ("Warranty Period"). Purchaser shall give Seller prompt
reasonable written notice of any claim under the foregoing warranty within the
Warranty Period and permit Seller to inspect the Equipment in order to verify
the defect or nonconformity. Seller shall promptly and reasonably respond to
verify and correct the defect. Purchaser's remedies and Seller's obligations in
connection with any claim made under this warranty shall be limited to repair or
replacement at Seller's expense of the Equipment or part thereof which is
defective. Labor performed at the Worksite with regard to such claims is not
included in this warranty. Purchaser shall be responsible for the normal
maintenance and repair of the Equipment and shall perform the same in accordance
with generally accepted maintenance procedures or such other reasonable
procedures as are set forth in maintenance and repair manuals provided by Seller
to Purchaser. Seller shall not, under this Article 17, be responsible for or
obligated to pay or to reimburse Purchaser for (a) any work or repairs
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performed on the Equipment by third parties (other than on behalf of Seller and
except for mutually agreed subcontractors), (b) any materials furnished by third
parties (other than on behalf of Seller) for use in connection with the
Equipment if the same was undertaken or furnished without mutual prior written
consent or (c) any loss or damage arising from improper operation or maintenance
of the Equipment by Purchaser or from ordinary wear and tear.
b) Major Failure Warranty: Notwithstanding other provisions of this
Article 17, in instances of a Major Failure during the Warranty Period, Seller
will provide all necessary parts and labor to correct the defect. A "Major
Failure" is defined as failure of the Equipment or portion of the Equipment to
operate as described in the Proposal or the applicable Specifications, which
significantly impacts Purchaser's ability to use the affected Equipment or
portion thereof, and which Purchaser's maintenance personnel or available
contractors cannot remedy without significant expense or effort. Seller will
respond to a Major Failure by immediately dispatching such servicemen by
commercial air carrier, or by responding as otherwise agreed between the
parties, upon request and notification of a Major Failure by Purchaser as may be
necessary to promptly correct the defect, and such servicemen shall thereafter
diligently and continuously perform such services as may be necessary to
promptly correct such defect until corrected. Should it later be reasonably and
mutually determined in good faith by Seller and Purchaser that the necessary
corrective services rendered by Seller were within the capabilities of the
Purchaser's maintenance personnel or available contractors without the
expenditure of significant expense or effort, the Purchaser will reimburse
Seller for the labor and expenses of the service trip.
Year 2000: Seller hereby represents and warrants that the Equipment,
when used in accordance with its associated documentation, shall perform
properly and without change in operations related to the advent of the new
century (defined as commencing at 12:00 am, January 1, 2000), including but not
limited to, by accurately processing date data (including without limitation by
calculating, comparing and sequencing) within, from, into and between centuries
(including, but not limited to, the twentieth and twenty-first centuries), and
by properly calculating leap years, except to the extent that any failure of the
Equipment to so perform is directly attributable to (i) the failure of other
technology, systems or interfaces, Third Party Software, or Third Party Hardware
to properly exchange date data with the Equipment, (ii) a change in the
operating environment not contemplated in this Sales Agreement, including
without limitation the Specifications, or (iii) any addition to or modification
of the Equipment by or on behalf of Purchaser or any of its Affiliates that has
not been authorized in writing by Seller or made by or on behalf of Seller or
any of its Affiliates. In the event of any material failure of the Equipment to
operate as warranted above, Purchaser's sole remedy, and Seller's sole
obligation, shall be to promptly respond and
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diligently and continuously work to correct until corrected (or provide a
functionally equivalent work around for) any reproducible error or failure
reported by Purchaser in writing to Seller on or before January 1, 2001. If
Seller is unable to remedy such error or failure within a reasonable time,
Seller and Purchaser shall enter into good faith discussions to agree to
reductions in Purchase Price or other equitable adjustments to account for such
delay or inability to remedy said failure. Seller agrees to use its reasonable
best efforts to incorporate a statement in all purchase orders that Seller
issues under this Sales Agreement that requires any Third Party Software
delivered hereunder to be Year 2000 compliant consistent with the minimum
requirements of this Article 17c). The remedies provided in this paragraph are
exclusive remedies for failure of the Equipment to perform as warranted
hereunder.
Third Party Software and Third Party Hardware: The foregoing warranties
in Article 17a), b) and c) specifically exclude warranties relating to Third
Party Software or Third Party Hardware to the extent specified in such Articles.
Seller hereby assigns and otherwise transfers to the benefit of Purchaser all of
Seller's right, title and interest in and to all assignable or transferable
warranties with respect to Third Party Software and Third Party Hardware and all
assignable or transferable rights of Seller against any manufacturer or supplier
thereof, including without limitation with respect to all indemnity agreements,
and will at its expense take any and all actions as may be necessary to enable
Purchaser to exercise rights thereunder and realize the benefit thereof to the
fullest extent possible. To the extent any of such warranties, indemnities or
rights are not assignable or transferable, Seller agrees to exercise for the
benefit of Purchaser any and all claims, rights, remedies, warranties,
representations and indemnities against or obtained from any such third party
manufacturers or suppliers.
Disclaimer: OTHER THAN AS SPECIFICALLY SET FORTH ABOVE, SELLER MAKES NO
OTHER WARRANTIES, WHETHER WRITTEN, ORAL OR IMPLIED, INCLUDING WITHOUT
LIMITATION, WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OR MERCHANTABILITY.
ARTICLE 18. USE OF INSTALLED PORTIONS OF THE EQUIPMENT
Whenever, as determined by Seller, the installation of any portion of
the Equipment has been completed, Seller may make available such portion for
Purchaser's use, provided, however, that Seller and Purchaser shall mutually
agree on the terms and conditions of such
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<PAGE> 23
use. Except as otherwise agreed by Seller and Purchaser (including where
appropriate, an adjustment in the Purchase Price and/or schedule otherwise
provided for in this Sales Agreement), such use shall not interfere with the
installation of the remainder of the Equipment. Seller shall not be liable for
the cost of repairs, rework or replacement which may be required due to ordinary
wear and tear resulting from such use.
ARTICLE 19. INSURANCE BY SELLER
Seller will maintain insurance coverage covering its operation and its
obligations pursuant to Article 20, in at least the following amounts:
Commercial General Liability - Bodily Injury and Property damage - $1,000,000
Per Occurrence.
Personal Injury Liability - $1,000,000 Limit.
Business Auto - Bodily Injury & Property Damage - $500,000 Combined Single
Limit.
Umbrella Liability - $20,000,000 Limit of Liability
Worker's Compensation - Coverage A - Statutory
Coverage B - Employer's Liability; $100,000 each accident; $100,000 each
employee; $500,000 Policy Limit
Foreign Products Liability - $1,000,000 Per Occurrence.
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<PAGE> 24
Insurance shall be purchased from companies having a rating of A-VII or
better in the current BEST'S INSURANCE REPORTS published by A. M. Best Company.
Policies of insurance shall name Purchaser as an additional insured, provide for
an insurer's waiver of subrogation in favor of all insured parties, and provide
that they will not be canceled or materially changed without reasonable prior
written notice to Purchaser. Certificates of insurance evidencing coverage shall
be submitted in advance of or concurrent with the execution of the Work, and on
each insurance policy renewal thereafter. Seller shall, at Purchaser's request,
provide copies of requested insurance policies. If Seller does not provide
Purchaser with such certificates of insurance, then Purchaser will so advise
Seller. Thereafter, if Seller does not furnish evidence of acceptable coverage
within fifteen (15) days, then Purchaser shall have the right, in its sole
discretion, to (i) withhold payments from Seller until evidence of such
acceptable coverage is provided, or (ii) immediately terminate this Sales
Agreement. Failure to obtain and maintain required insurance shall not relieve
Seller of any obligation contained in this Sales Agreement. Additionally, any
approval by Purchaser of any of Seller's insurance policies shall not relieve
Seller of any obligation contained in this Sales Agreement.
ARTICLE 20. INDEMNIFICATION
Seller shall indemnify, defend and hold Purchaser harmless from and
against any and all expenses, losses, costs, claims, demands, causes of action,
and damages of whatever kind, (a) which result from injuries at the Worksite
during the installation, or testing of the Equipment, (b) which are due to the
negligence or willful misconduct of Seller or its employees or contractors, or
(c) to the extent otherwise related to any claim, action, suit or proceeding
involving the Equipment which is based upon injuries to persons (including
death) or property arising from or relating to (i) the use of the Equipment in
accordance with Seller's operation, maintenance and other related manuals and
documents delivered to Purchaser by Seller hereunder, or (ii) the design or
manufacture of the Equipment as contemplated in the Proposal (including, without
limitation, the Specifications), including without limitation, product liability
claims. Purchaser shall indemnify, defend, and hold Seller harmless from and
against any and all expenses, losses, costs, claims, demands, causes of action,
and damages of whatever kind which result from the negligent or willful use or
operation of the Equipment by any person (other than Seller or Seller's
employees or contractors) other than in its normal and intended manner, and
removal or modification of safety features unless Purchaser notifies Seller and
such removal or modification is approved by Seller or made by or on behalf of
Seller or any of its Affiliates.
ARTICLE 21. LIMITATION OF LIABILITY
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<PAGE> 25
Notwithstanding any other provision of this Sales Agreement, except to
the extent constituting a third party claim (or portion thereof) subject to
indemnification under Article 3 or Article 20 (such portion of such claim
subject to indemnification under Article 20 being a "Third-Party Non-IP
Consequential Damage Indemnified Claim"), neither party shall be liable to the
other party or anyone claiming through such other party for any special,
indirect, incidental or consequential damages of any kind whatsoever, including
without limitation loss of profit or reputation incurred by either Party,
whether such damages arise out of the use, inability to use, failure of, delay
in delivery of, or nondelivery of, the Equipment, or out of any termination of
this Agreement, or otherwise. Notwithstanding any other provision of this
Agreement, each party's aggregate liability under Article 20 for Third-Party
Non-IP Consequential Damage Indemnified Claims shall not exceed the greater of
[*].
ARTICLE 22. WAIVER
Except as otherwise expressly provided in this Sales Agreement, no
failure on the part of either party to exercise, and no delay in exercising, any
right, privilege, or power under this Sales Agreement shall operate as a waiver
or relinquishment thereof; nor shall any single or partial exercise by either
party of any right, privilege or power under this Sales Agreement preclude any
other or further exercise thereof, or the exercise of any other right, privilege
or power. Waiver by any party of any breach of any provision of this Sales
Agreement shall not constitute or be construed as a continuing waiver, or as a
waiver of any other breach of any provision of this Sales Agreement.
ARTICLE 23. ENTIRE AGREEMENT
This instrument, together with any attachments specifically made a part
of this Sales Agreement and any documents incorporated in such attachments by
reference, embodies the whole agreement of the parties relating to the subject
matter of this Sales Agreement and supersedes any and all prior oral or written
specifications, communications and agreements by or on behalf of the parties.
This Sales Agreement may not be varied by any purchase order, acknowledgment,
confirmation, invoice, or shipping document issued by either party. Any
amendments or modifications of this Sales Agreement must be in writing and
signed by an officer or General Counsel of Purchaser and an officer or General
Counsel of Seller to be
- --------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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<PAGE> 26
binding.
ARTICLE 24: CONFIDENTIALITY AGREEMENT
With respect to information received by either party as a result of or
in connection with this Sales Agreement, the parties will abide by the terms and
conditions of following Mutual Nondisclosure Agreements, as applicable (but only
to the extent that the information constitutes "Confidential Information" as
defined in the Mutual Nondisclosure Agreement):
The Buschman Company: Agreement signed with Amazon.com dated January 14, 1999
Real Time Solutions: Agreement signed with Amazon.com dated January 19, 1999
White Systems, Inc.: Agreement signed with Amazon.com dated January 19, 1999
ARTICLE 25. GOVERNING LAW
This Sales Agreement shall be governed by and interpreted in accordance
with the laws of the State of Washington, without regard to its choice of law
provisions.
ARTICLE 26. PUBLICITY
Neither party shall disclose the terms of this Sales Agreement or the
existence or nature of any relationship between the parties (including, without
limitation in any press release or public communication) to any third party
without the prior written consent of the other party.
ARTICLE 27. SOLICITATION
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<PAGE> 27
Seller and Purchaser agree that, for the period commencing with the
commencement of Work hereunder (whether of not prior to the date hereof) until
one year following Acceptance, or any earlier termination of this Sales
Agreement, neither party will, except with the other party's written approval,
offer or seek to offer or solicit employment to the other party's employees or
staff. Notwithstanding the foregoing, the parties agree that general
solicitations or advertisements (by any means or media) shall not constitute
prohibited offers or solicitations for purposes of this Article 27.
Notwithstanding any other provision of this Sales Agreement, each party's
exclusive remedy for a violation of this Article 27 is recovery of such party's
direct damages and/or specific performance in connection therewith, as
applicable. The parties agree that under no circumstances shall a violation of
this Article 27 give rise to a right to terminate this Agreement.
ARTICLE 28. SURVIVAL
Articles 3, 12, 15, 17(c), 20, 21, 24 and 27 (together with all other
provisions that reasonably may be interpreted as surviving termination or
expiration of this Sales Agreement) will survive the Acceptance of the
Equipment, the performance of the Work and performance of Seller's warranty
obligations hereunder.
ARTICLE 29. DISPUTES
Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, ("Claim") shall be resolved in accordance with this
Article 29.
Any Claim shall first be submitted by the claiming party to the other
party in writing within a reasonable period after the event giving rise to it,
which writing shall include a description of such Claim, the proposed remedy for
such Claim and data supporting such Claim. If the parties are unable to resolve
the Claim informally, either party may submit the Claim for joint consideration
by and between Purchaser's senior logistics officer and Seller's Chief Executive
Officer.
Arbitration. Claims that have been properly raised and considered in the
above
-27-
<PAGE> 28
procedures but have not been resolved shall be resolved exclusively by
arbitration before a panel of three arbitrators in Seattle, Washington or in
such other location as may be reasonable given the facts and circumstances
involved in such Claim. The arbitration shall be conducted in accordance with
the applicable rules of the American Arbitration Association currently in effect
unless the parties mutuality agree otherwise.
Notice of the demand for arbitration shall be filed in writing with the
other party to the Sales Agreement and in accordance with the applicable rules
of the American Arbitration Association and shall be made within the statutes of
limitation that are applicable to the Claim.
The parties shall apply to the arbitrators for relevant discovery
consistent with the Federal Rules of Civil Procedure, which the arbitrators
shall be authorized to order. Either party may request that the arbitrators'
award include findings of fact and conclusions of law.
The arbitrators shall not be empowered to grant exemplary or punitive
damages. The award rendered by the arbitrator or arbitrators shall be final, and
judgment may be entered upon it in accordance with applicable law in any court
having jurisdiction thereof.
Within 30 days of receipt from the of the written findings of fact and
conclusions of law, either party will have the right to file with the
arbitrators and serve on the other party a written motion to reconsider. The
arbitrators may request the nonmoving or responding party to file a written
response within 10 days after receipt of that request, and the arbitrators
thereupon will reconsider the issues raised by the motion and response (if any)
and either confirm or alter their decision, which will then be final, binding
and conclusive upon the parties. The cost of such motion for reconsideration and
written opinion of the arbitrators, including attorneys' fees, will be awarded
against the moving party if it does not substantially prevail on its motion.
Upon demand of either party, the arbitration shall include, by
consolidation, joinder or third party claim, any person or entity (a) that is
substantially involved in a common question of fact or law, (b) where the
presence of such person or entity is required if complete relief is to be
accorded in the arbitration, or (c) who is alleged to be liable to a party for
all or part of a claim in the arbitration.
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<PAGE> 29
The agreement herein among the parties shall be specifically enforceable
under applicable law in any court having jurisdiction thereof.
Each party agrees that all aspects of any arbitration are "Confidential
Information" under the Mutual Non-disclosure Agreement referred to in Article
24.
Seller shall diligently carry on the Work, and Purchaser shall continue
its duties under this Agreement, during any dispute resolution proceedings,
unless otherwise agreed in writing. The requirements of this paragraph cannot be
waived with respect to any Claim except by an explicit written waiver signed the
party against whom the Claim is brought.
Notwithstanding the foregoing, nothing in this Article 29 will preclude
either party from seeking provisional remedies (including, without limitation,
temporary restraining orders and preliminary injunctions) from any court of
competent jurisdiction to protect its rights pending resolution as provided for
above. Further, unless otherwise agreed by the parties in writing, this Article
29 will not apply to disputes relating to the enforceability of, or a party's
rights under, any United States or foreign patent or other intellectual property
right.
ARTICLE 30. TRANSFER OF TITLE AND RESERVATION OF SECURITY INTEREST
Upon Acceptance, title to the Work shall transfer to Purchaser. For the
avoidance of doubt, notwithstanding the transfer of possession of the Equipment
by Seller to Purchaser, Seller shall retain legal title to, and hereby reserves
a purchase money security interest in, the Equipment until Acceptance. Seller
shall have the rights of a secured creditor under the Uniform Commercial Code
for the jurisdiction applicable during such period. Purchaser hereby authorizes
Seller to file, and to sign on behalf of Purchaser as the debtor, any financing
statements or other documents with State or local recording offices which may be
required to perfect such security interest. In circumstances where Acceptance
has occurred and the Equipment is thereafter stored at Seller's Plant, Seller
hereby authorizes Purchaser to file, and to sign on behalf of Seller any
financing statements or other documents with State or local recording offices
which may be required to perfect Purchaser's security interest in the Equipment
so stored.
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<PAGE> 30
ARTICLE 31. NOTICES
All notices, requests, demands, applications, services of process, and
other communications which are required to be or may be given under this Sales
Agreement shall be in writing and shall be deemed to have been duly given if
sent by telecopy or facsimile transmission, answer back requested, or delivered
by courier or mailed, certified first class mail, postage prepaid, return
receipt requested, to the parties to this Agreement at the following addresses:
If to Purchaser: Amazon.com, Inc.
1516 2nd Avenue
Seattle, WA 98101
Attn: General Counsel
Fax: 206-834-7010
With a copy to: Amazon.com, Inc.
1516 2nd Avenue
Seattle, WA 98101
Attn: Chief Logistics Officer
Fax: 206-694-2004
If to Seller:
Attn: The President
Fax:
With a copy to: The Buschman Company
10045 International Boulevard
Cincinnati, Ohio 45246
Attn: General Counsel
Fax: 513/881-5144
or to such other address as either party shall have furnished to the other by
notice given in accordance with this Article. Such notice shall be effective (i)
if delivered in person or by courier, upon actual receipt by the intended
recipient, or (ii) if sent by telecopy or facsimile transmission, on the date of
transmission unless transmitted after normal business hours, in which case on
the following date, (iii) if mailed, upon the date of first attempted delivery.
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<PAGE> 31
ARTICLE 32. HEADINGS
Headings used in this Sales Agreement are for convenience and ease of
reference only, are not part of this Sales Agreement and shall not be relevant
to or affect the meaning or interpretation of this Sales Agreement.
ARTICLE 33. INTERPRETATION
Except where otherwise expressly provided or unless the context
otherwise necessarily requires: (i) references to a given law or rule are
references to that law or rule as amended or modified as of the date on which
the reference is made, (ii) reference to a given agreement or instrument is a
reference to that agreement or instrument as originally executed, and as
modified, amended, supplemented and restated through the date as of which
reference is made to that agreement or instrument, and (iii) accounting terms
have the meanings given to them by U.S. generally accepted accounting principles
applied on a consistent basis by the accounting entity to which they refer.
ARTICLE 34. ATTORNEY'S FEES AND COSTS
If any suit is brought, or an attorney retained to collect any money due
under this Sales Agreement, or to collect a judgment for breach of this Sales
Agreement, the prevailing party shall be entitled to recover, in addition to any
other remedy, reimbursement for attorneys' fees, court costs, investigation
costs and other related expenses incurred in connection therewith.
ARTICLE 35. SEVERABILITY
This Sales Agreement will be enforced to the fullest extent permitted by
applicable law. If for any reason any provision of this Sales Agreement is held
to be invalid or unenforceable to any extent, then such: (i) provision will be
interpreted, construed or reformed to the extent reasonably required to render
the same valid, enforceable and
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<PAGE> 32
consistent with the original intent underlying such provision; (ii) provision
will be void to the extent it is held to be invalid or unenforceable; (iii)
provision will remain in effect to the extent that it is not invalid or
unenforceable; and (iv) such invalidity or unenforceability will not affect any
other provision of this Sales Agreement or any other agreement between the
parties.
ARTICLE 36. REMEDIES
Except as otherwise expressly provided in this Sales Agreement, each and
all of the rights and remedies provided in this Sales Agreement, and each and
all of the remedies allowed at law and in equity, will be cumulative, and the
exercise of one right or remedy will not be exclusive of the right to exercise
or resort to any and all other rights or remedies provided in this Sales
Agreement or at law or in equity.
ARTICLE 37. RELATIONSHIP
The Parties are independent contractors under this Sales Agreement. Each
party acknowledges and agrees that it is not and will not be during the term of
this Sales Agreement, be an employee or an agent of the other party. Each party
and its employees, subcontractors, and agents shall not be entitled to or
eligible for any of the benefits that the other party provides for its
employees. Each party shall be solely responsible for withholding and paying its
and its employees', subcontractors' and agents' taxes and other charges,
including without limitation, federal, state and local income and social
security taxes, workmen's compensation and unemployment insurance. Nothing in
this Sales Agreement will be deemed to constitute, create, give effect to or
otherwise recognize a joint venture, partnership, franchise or business entity
of any kind. Nothing in this Sales Agreement will be construed as providing for
the sharing of profits or losses arising out of the efforts of the parties
hereto.
ARTICLE 38. USE OF MARKS; PRESS RELEASES
Seller will not use any trade name, trademark, service mark or logo of
Purchaser (or
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<PAGE> 33
any name, mark or logo confusingly similar thereto) in any advertising,
promotions or otherwise, or otherwise make any press release or disclosure
concerning this Sales Agreement or the activities contemplated hereby, without
Purchaser's prior written consent.
ARTICLE 39. PERMITTED DISCLOSURE
To the extent either party is required to disclose information that
otherwise requires the other party's prior written consent under Articles 26 or
38 of this Sales Agreement, each party hereby consents to the other party's
disclosure to the extent that such disclosure is (i) required by law (provided
that the disclosing party (a) gives the other party prior written notice
sufficient to allow the other party to seek a protective order or other
appropriate remedy, (b) discloses only such information as is so required, and
(c) and uses commercially reasonable efforts to obtain confidential treatment
for any information so disclosed), or (ii) necessary in connection with (aa)
such party's performance of this Sales Agreement, (bb) such party's standard
accounting disclosure obligations, or (cc) the proposed sale or reorganization
of such party's business or the like, provided in each of cases (aa), (bb) and
(cc) that each person to whom such information is disclosed has a need to know
the same, and is bound to keep the same confidential to at least the same extent
as required herein (including pursuant to any applicable confidentiality
agreement between the parties hereto). In both cases (i) and (ii) above, the
disclosing party shall, within the earliest possible time under the
circumstances (or, if the disclosure is to be made under case (ii)(cc) above to
a person or entity which may reasonably be deemed to be a competitor of the
non-disclosing party (or any of its affiliates), then in advance of any such
disclosure), notify or advise the other party of such disclosure, the
information disclosed or to be disclosed, and the identity of recipient of such
information.
IN WITNESS WHEREOF, the parties hereto have caused this Sales Agreement
and all annexes, exhibits and attachments thereto to come into effect on the
last date appearing below:
AUTHORIZED FOR PURCHASER BY:
Amazon.com, Inc.
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<PAGE> 34
Signature /s/ Jimmy M. Wright
-------------------------
Name Jimmy M. Wright
------------------------------
Title V.P./C.L.O.
-----------------------------
Date 3/11/99
------------------------------
AUTHORIZED FOR SELLER BY:
The Buschman Company
Signature /s/ James R. McCarthy
-------------------------
Name James R. McCarthy
------------------------------
Title President
-----------------------------
Date 3/11/99
------------------------------
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<PAGE> 35
ATTACHMENT 1
PRICING; PAYMENT SCHEDULE
The pricing set forth in this Proposal is fixed pricing.
Storage and handling costs for Equipment are not included in the
pricing. Storage and handling costs will be invoiced monthly as they are
incurred.
The Purchase Price shall be paid as follows: [*].
- -----------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
-35-
<PAGE> 36
ALLIANCE PRICING SUMMARY FORM - FERNLEY PHASE II
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
DESCRIPTION HOURS LIST PRICE/COST MULTIPLE SELL PRICE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[ * ]
</TABLE>
- -----------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
-36-
<PAGE> 37
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
<S> <C>
TOTAL $ 24,233,532
- --------------------------------------------------------------------------------------------------------
</TABLE>
-37-
<PAGE> 38
PRICE BREAKDOWN
[*]
- -----------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
-38-
<PAGE> 39
PROJECT TOTAL................................................... $ 24,233,532
============
-39-
<PAGE> 40
BUYOUT SUMMARY
The following is a summary of the Buyout equipment and the categories
that they have been assigned.
Major Purchases - [*].
o Tilt-tray
o Mezzanine
Major Purchases - [*].
o Belt Curves
o Shrink-Wrap Tunnels
o Carton Erectors
o Extendable Conveyors
- -----------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
-40-
<PAGE> 41
Major Purchases - [*].
o Scales
o Tapers
o Chutes
o Printer/Applicators
o Air Compressors
o Structural Steel
o Trolley Carriers
o Packing Tables
o Platforms/Catwalks/Stiles
o Pick-to-light shelving
o Reject pullers
- ---------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
-41-
<PAGE> 42
o Netting
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<PAGE> 43
PROVISIONS
o Prices do not include freight.
o Prices do not include any state, local sales/use taxes and Performance
Bond costs.
o Installation services are based on using nonunion labor during regular
working hours. Buschman uses overtime labor, as applicable, to make any
tie-ins that would affect operations.
o Electrical installation is performed under license.
o This price is a total price for the conveyor system. The equipment being
manufactured and stored, based on the blanket order, will be applied and
the price deducted as necessary.
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<PAGE> 1
EXHIBIT 10.3
SALES AGREEMENT
This Sales Agreement, hereinafter called "Sales Agreement," made by and
between Amazon.com, Inc., a Delaware corporation (hereinafter called
"Purchaser"), and The Buschman Company, an Ohio corporation (hereinafter called
"Seller"), constitutes the agreement of the parties as follows:
A) CONTRACT DOCUMENTS
In addition to the Standard Terms and Conditions set forth in Part B
below, the following documents ("Additional Contract Documents") are also part
of this Sales Agreement and are hereby incorporated by reference herein. To the
extent any such Additional Contract Document contains any term or condition
inconsistent with the Standard Terms and Conditions below, the Standard Terms
and Conditions shall govern. The Additional Contract Documents, copies of which
are appended hereto, are as follows:
1. The Standard Proposal for Amazon.com, Inc. dated February 5, 1999,
except that Section 4 thereof is hereby deleted and replaced in its entirety
with the pages attached to this Sales Agreement as Attachment 1, and that for
purposes hereof such proposal shall apply to "Site A" yet to be determined
(including and as amended by such amendments thereto as may later be
specifically agreed in writing(s) signed by both Seller and Purchaser from time
to time, the "Proposal").
B) STANDARD TERMS AND CONDITIONS
ARTICLE 1. DEFINITIONS
When used in this Sales Agreement, the capitalized terms listed below
shall have the following meanings:
"Acceptance" shall mean the mutual agreement between the parties in
writing that (i) all Work has been completed (except for minor punch list items
or claims of non-material deficiencies in the Work), (ii) all Equipment has been
delivered to Purchaser and properly installed at the Worksite or stored at the
Worksite, as applicable, and (iii) the Equipment successfully meets all elements
of the Acceptance Test.
"Acceptance Test" shall mean the terms and conditions under which
Purchaser will accept tender of the Equipment, including the criteria concerning
the design, engineering, performance, functional, feature, and other
specifications or requirements which the Equipment must meet in order to be
accepted, all as agreed in the Proposal and/or the Specifications.
"Affiliate" shall mean, (i) with respect to Seller, any corporation,
partnership or other entity that is in or under the control of Seller, and to
the extent specified in the Proposal, any
<PAGE> 2
corporation, partnership or other entity that is under the control of Seller's
parent corporation, Pinnacle Automation Company, Inc., and (ii) with respect to
Purchaser, any corporation, partnership or other entity that controls, is
controlled by, or is in or under common control with, Purchaser. For purposes of
this definition, "control" means, with respect to a corporation, partnership or
other entity, the beneficial ownership of ownership, profits, voting or similar
interests (including any right or option to obtain such an interest)
representing at least 50% of the total interests of the pertinent entity then
outstanding, or the possession, directly or indirectly, of the power to direct
or cause the direction of the general management and policies of such
corporation, partnership or other entity, whether through the ownership of
voting securities, by contract or otherwise.
"Equipment" shall mean all the equipment, machinery, parts, vendor
components, Software, and other goods and items intended to be installed at the
Worksite pursuant to this Sales Agreement, excluding for the avoidance of doubt,
Seller's tools, equipment and other items which are not deliverables under the
Proposal.
"Maintenance or Software Support Agreement" shall mean any agreement
that may be entered into between Purchaser and Seller or any of Seller's
Affiliates pertaining to the maintenance and/or support of the Equipment.
"Proposal" shall have the meaning ascribed to it under Article A hereof.
"Purchase Price" shall mean the total compensation to be paid to the
Seller in consideration for the sale of the Equipment and the performance of the
Work (which may include, without limitation, the installation of the Equipment)
as set forth in the Proposal.
"Sales Agreement" shall have the meaning ascribed to such it in the
preamble and Article A hereof, and including, without limitation, all
Specifications.
"Seller Equipment" shall mean all Equipment which is not Third-Party
Equipment.
"Seller Software" shall mean all Software which is not Third-Party
Software.
"Seller's Plant" means any plant or facility (i) at which any Seller
Equipment is designed, developed, made, inspected or tested by or for Seller or
(ii) at which any Equipment is stored by or for Seller, as applicable.
"Software" shall mean all computer programming code or programs, in
machine readable object code form, that is developed or furnished by or on
behalf of Seller or any of Seller's Affiliates as a deliverable to Purchaser, or
caused to be developed or furnished by Seller or any of Seller's Affiliates to
Purchaser as a deliverable under this Sales Agreement, and all Upgrades thereto.
For the avoidance of doubt, "Software" shall not include any Source Code.
-2-
<PAGE> 3
"Source Code" shall mean, with respect to Seller Software, (i) the
human-readable form of computer programming code thereof as prepared and written
by the programmer(s) who developed the Seller Software, together with (ii) any
build tools (e.g. compilers, linkers and other related tools), compile/link
scripts, program comments, installation scripts and related system
documentation, including all comments and any procedural code such as job
control language, necessary for any reasonably skilled programmer to recompile
such source code into fully functioning object code of the Seller Software, to
the extent that the items listed in this clause (ii) exist.
"Specifications" shall mean the design, engineering, performance,
functional and other criteria, feature descriptions and other specifications or
requirements for any Equipment and/or Work that are contained in this Sales
Agreement, including, without limitation, the Proposal, or in any documents
contemplated hereby or thereby or other documents delivered by Seller pursuant
hereto or thereto and in each case agreed to by Purchaser.
"Third-Party Hardware" shall mean that portion of the Equipment which is
not developed, manufactured or owned by on behalf of Seller or any of Seller's
Affiliates, provided that the same is identified as "Third-Party Hardware" in
the Proposal, and provided further however that "Third-Party Hardware" shall not
include any Third-Party Software. To the greatest extent possible, Third-Party
Hardware manufacturers shall be identified in the Proposal.
"Third-Party Software" shall mean that portion of the Software which is
not developed, manufactured or owned by on behalf of Seller or any of Seller's
Affiliates, provided that the same is identified as "Third-Party Software" in
the Proposal. To the greatest extent possible, Third-Party Software
manufacturers shall be identified in the Proposal.
"Upgrade" shall mean each and every revision, enhancement, modification,
amendment, upgraded version and future release of the Software (including,
without limitation, versions and releases correcting programming errors, beta
versions as well as versions containing materially increased functionality)
delivered by Seller or any of its Affiliates to Purchaser pursuant to this Sales
Agreement or any Maintenance or Software Support Agreement.
"Work" shall mean all the Equipment and other items (including without
limitation, materials, supplies, drawings and data), and manufacturing,
installation, integration and other services, to be supplied or performed by or
on behalf of Seller hereunder.
"Worksite" shall mean the location or destination where the Equipment is
to be installed or, in the case of purchases of Equipment for storage and later
installation, stored, as applicable.
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ARTICLE 2. PERMITS; COMPLIANCE WITH LAWS
Prior to the installation of the Equipment, Purchaser shall procure and
pay for all building, erection and other licenses, permits, authorizations and
inspections required in connection with the Worksite, excepting Seller's Plant.
Seller shall be responsible for the procurement of and payment for all other
licenses, permits, authorizations and inspections associated with the Work.
Seller shall comply, and shall cause all of its consultants and subcontractors
to comply, with building, electrical or other laws, codes or regulations of
local, state or federal agencies or authorities in regard to the Work, and shall
otherwise comply with all other applicable laws, regulations, rules, orders and
other requirements of governmental authorities having jurisdiction with respect
to the Equipment or Seller's performance of the Work.
ARTICLE 3. INTELLECTUAL PROPERTY INDEMNIFICATION
Seller shall defend, indemnify and hold Purchaser and its Affiliates
harmless from and against any and all expenses, costs, claims, demands, causes
of action and damages of whatever kind which Purchaser may incur in connection
with any suit or claim of infringement of any patent, copyright or trademark, or
misappropriation of any trade secret or other intellectual property right
resulting from (i) Purchaser's or its Affiliates' use of any portion of the
Equipment as contemplated in the Proposal and otherwise in accordance with this
Sales Agreement or applicable Equipment documentation delivered by Purchaser by
Seller hereunder, or (ii) performance of the Work, except, in each case with
respect to each of the foregoing clauses (i) and (ii), to the extent directly
attributable to Third-Party Hardware or Third-Party Software. Seller shall
receive written notice from Purchaser within ten (10) days after proper legal
service is received by Purchaser of any such suit or claim, provided that
failure to receive such notice shall not relieve Seller of its obligations under
this Article 3 except to the extent that Seller's ability to defend such suit or
claim is materially impaired due to such failure. Seller is hereby authorized by
Purchaser to, at Seller's expense, appear in and assume the defense of, and be
given the complete control of the settlement of, any such suit or claim;
provided that (a) if Purchaser or any of its Affiliates wishes to participate in
the defense and settlement of the claim, Purchaser or any of its Affiliates may
do at its own cost, (b) Purchaser is kept timely informed of all material
actions taken by Seller in connection with any such settlement, suit or claim
(including, without limitation, of settlement offers and responses (to the
extent the delivery of such information does not require Seller to waive work
product immunity or attorney/client privilege or otherwise violate the terms of
any protective order between Seller and any third party plaintiff or
defendant)); and (c) Seller shall not enter into or acquiesce to any settlement
admitting to or stipulating to any guilt, fault, liability or wrongdoing on the
part of Purchaser or any of its Affiliates without Purchaser's prior written
consent. In the event that Purchaser's right or ability to use the Equipment is
threatened or impaired as a result of any such suit or claim, Seller shall, at
its own expense, do one of the following, (1) diligently procure for Purchaser
the right to continue using the Equipment, or (2) modify the Equipment or, if
necessary and
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<PAGE> 5
by mutual agreement, substitute functionally equivalent Equipment, to the extent
necessary to avoid infringement or misappropriation; provided in each case that
if such modified or substituted equipment fails to comply with all
Specifications applicable to the original, unmodified Equipment, Purchaser shall
be entitled to equitable compensation with respect to such noncompliance. Seller
hereby assigns to or otherwise transfers to the benefit of Purchaser all of its
right, title and interest in and to any intellectual property right infringement
or misappropriation indemnification or defense rights Seller may have with
respect to Third Party Software and Third Party Hardware, and will, at its
expense, take any actions as may be necessary to enable Purchaser to exercise
such rights and realize such benefit to the fullest extent possible. It is
mutually agreed that the provisions set forth herein are Seller's only
obligations with respect to infringement of any patent, copyright or trademark,
or misappropriation of any trade secret or other intellectual property right.
ARTICLE 4. LABOR AND PERSONNEL
Seller shall furnish all labor and personnel required for the
installation of the Equipment at the Worksite. All Work (including without
limitation all labor and other services) will be performed in a timely,
first-class and professional manner. All labor and personnel performing Work at
the Worksite (excluding Seller's Plant) shall comply with Purchaser's or its
Affiliates then-applicable policies, rules and regulations with respect to such
Worksite. If labor or personnel performing Work hereunder fail to so comply with
such policies, rules and regulations, or otherwise fail to perform Work in a
timely, first-class and professional manner, Purchaser in its discretion may
request removal of any such labor or personnel, and Seller shall remove such
labor or personnel from the applicable Worksite in accordance with each such
request. Seller will manage the transition of replacement personnel to minimize
impact on the project. Seller will be responsible for all acts, omissions,
negligence and misconduct of labor or personnel performing Work. For the
avoidance of doubt, Seller's subcontractors, as more fully discussed in Article
5 hereof, are labor and personnel for purposes of this Article 4.
ARTICLE 5. SUBCONTRACTORS AND ASSIGNMENTS
(a) Seller may assign or subcontract any of its obligations under this
Sales Agreement to any supplier, builder or other contractor which Seller, in
its good faith discretion, reasonably considers qualified; provided, however,
that (i) Seller may not so assign or subcontract any of its obligations under
this Sales Agreement to any contractor which will perform Work or supply
Equipment hereunder representing in excess of twenty percent (20%) of the
Purchase Price without the Purchaser's prior written consent (which consent may
be evidenced by Purchaser's written acceptance of Seller's Proposal to the
extent such Proposal clearly identifies such potential subcontractor and the
scope of Work it will perform), and (ii) in any event Seller remains primarily
liable for the performance of all of Seller's obligations under the terms and
conditions of this Sales Agreement. The restriction set forth in clause (i) of
the proviso of the preceding sentence does not apply to Seller's procurement of
raw materials or purchases of goods or other Equipment components from
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Seller's routine vendors and subcontractors from whom Seller routinely procures
the same as part of its standard manufacture of Equipment.
(b) Except as provided in Article 5(a), neither Seller nor Purchaser may
assign their respective rights to or delegate their duties arising from this
Sales Agreement without the prior written consent of the nonassigning or
nondelegating party, which consent shall not be unreasonably withheld; provided,
however, that, if Seller or Purchaser consents to any assignment or delegation,
the assignee or delegatee shall, as a condition to such assignment or
delegation, agree to be subject to the terms and conditions of this Sales
Agreement. Notwithstanding the foregoing, Purchaser may assign this Sales
Agreement to any of its Affiliates or in connection with any merger,
consolidation, reorganization, sale of all or substantially all of its assets or
similar transaction without the prior written consent of Seller; provided that
the assignee or delegatee is financially capable of performing its obligations
hereunder and/or Purchaser remains primarily liable for the performance of all
of Purchaser's obligations under the terms and conditions of this Sales
Agreement.
ARTICLE 6. TAXES
Unless otherwise indicated, the Purchase Price contains no provision for
sales, use, excise, or other similar taxes. It is Purchaser's responsibility to
pay any such taxes should they be levied upon Seller. If such taxes are included
as part of the Purchase Price and the rate or base of the tax is increased or
decreased, or if Seller receives any tax credits related to the Work, Purchaser
will pay any such increased taxes and Seller will give credit for any tax
decrease or credit. Seller will pay any taxes specified in this paragraph and be
reimbursed by Purchaser within thirty (30) days after receipt at the address
specified in Article 11(e) of a separate invoice therefor from Seller. Purchaser
shall be solely responsible for the prompt payment of any and all personal
property taxes of any kind that may become due or payable with respect to the
Equipment at any time following delivery thereof to the Worksite. For the
avoidance of doubt and notwithstanding any other provision of this Sales
Agreement, (a) in no event shall Purchaser have any liability or obligation to
(i) pay taxes in respect of Seller's income or gross revenues, or (ii) reimburse
Seller for or otherwise pay any taxes with respect to which Purchaser is exempt
and Purchaser provides Seller a certificate of exemption, and (b) should
Purchaser challenge any taxes specified in this paragraph, Seller will at its
expense provide Purchaser with reasonable assistance in so challenging the same
and, if Seller receives funds or credits in connection with any such contest,
promptly refund the amount of such refund or credit to Purchaser.
ARTICLE 7. INSPECTION; SHIPMENT; REJECTION
Seller will furnish Purchaser, upon its request, with safe and
sufficient access to Seller's Plant for the purposes of conducting in process
inspections and tests to determine Seller's and the Equipment's compliance with
this Sales Agreement, including without limitation the Specifications. No
inspection or test, delay or failure to inspect or test, or failure to discover
any defect or noncompliance will (i) relieve Seller of any of its obligations
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<PAGE> 7
under this Sales Agreement, or (ii) impair Purchaser's rights under Article 7(c)
or any other right or remedy afforded to Purchaser. Purchaser shall conduct such
in process inspections and tests in a manner as to not interfere with Seller's
planned performance.
Seller shall ship Equipment in accordance with the delivery terms
specified in the Proposal. If Seller has manufactured Equipment to meet
Purchaser's schedule and Purchaser requests delay in shipment, Seller shall have
the right to store such Equipment at Purchaser's expense. Seller shall obtain
approval from Purchaser's Project Manager for each shipment release to ensure
the readiness of the Worksite to accept such shipment.
Notwithstanding any other provision of this Sales Agreement, Seller
acknowledges and agrees that Purchaser may reject, refuse acceptance of or
revoke acceptance of any Equipment, or any tender thereof, which does not
strictly comply with the requirements of this Sales Agreement including without
limitation all applicable Specifications. Purchaser shall notify Seller of any
such rejection, refusal or revocation. In any such event, Purchaser may, with
respect to such noncompliance, elect to: (a) retain any or all of such Equipment
for repair, replacement or other correction by Seller, or (b) retain any or all
of such Equipment without correction by Seller. Seller shall promptly comply
with any direction by Purchaser for correction. Purchaser shall be entitled, in
addition to all other remedies available to Purchaser at law or in equity, to
recover from Seller, by price reduction, credit, offset, invoice or otherwise,
an equitable amount for the diminished value of any uncorrected Equipment and
all reasonable costs and expenses incurred by Purchaser in connection with
Equipment which is rightfully rejected or with respect to which acceptance is
refused or revoked by Purchaser (including, but not limited to, reasonable costs
and expenses to return Equipment to Seller for correction to the extent not
otherwise disclaimed or limited under this Sales Agreement).
ARTICLE 8. SITE CONDITIONS AND PROVISIONS BY PURCHASER
Seller shall not be liable to Purchaser for any failure to deliver and
install any Equipment in accordance with this Sales Agreement, to the extent
that such failure results solely from Purchaser's failure to provide at the
Worksite reasonable means of access to a minimum of dock doors, the availability
of a dock leveler, and a completely enclosed building to protect Seller's
Equipment from the elements, with a water-tight roof and such electric current,
water, heat, ventilation, light and other utilities and facilities as may
reasonably be required for the installation of the Equipment. Purchaser shall
allow Seller reasonable access to the Worksite for inspection of compliance with
these requirements, prior to commencement of the installation. Seller shall
promptly notify Purchaser in writing of any failure by Purchaser to provide any
of the access, availability, items or conditions set forth above or any other
failure by Purchaser to provide access, availability, items, materials,
conditions or assistance as otherwise may be required under this Sales
Agreement.
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ARTICLE 9. INSURANCE AND RISK OF LOSS
Upon delivery of the Equipment at the Worksite, and until Acceptance of
the Equipment, Purchaser shall, at its expense, take out and maintain
"installation floater" insurance in an amount at least equal to the Purchase
Price covering all risks of loss of the Equipment and any and all associated
expenses. Such installation floater insurance shall name Seller as an insured
party and shall provide for an insurer's waiver of subrogation in favor of all
insured parties. Upon Acceptance of the Equipment, Purchaser shall be
responsible for and shall bear any and all risk of loss or damage to the
Equipment except as may otherwise be provided for in this Sales Agreement.
Notwithstanding the foregoing, this Article 9 does not apply when Worksite is
Seller's Plant.
ARTICLE 10. COMPLETION, CHANGES, DELAYS, ERRORS
At any time prior to final payment, Purchaser may request in writing any
substitutions, deviations, additions, or deletions in the Equipment, Work and/or
Specifications (hereinafter referred to as "Changes") and Seller must comply
with the same. If any Change results in an increase or decrease in the time or
expense required for the Work not then performed in accordance with the Sales
Agreement, the parties will equitably adjust schedules for performance of such
Work and/or the Purchaser Price to reflect the increase or decrease. All the
terms and conditions of this Sales Agreement shall apply to such Changes. If by
any such Changes or by other causes within control of Purchaser Seller's
performance is delayed or prevented by Purchaser, Purchaser agrees to reimburse
Seller for its reasonable, documented, out-of-pocket expenses incident to such
delay which may include, without limitation, the costs of storing, maintaining,
repairing, and refurbishing Equipment, demurrage, labor and material escalation
and pull out charges. In such event, Purchaser also agrees to excuse the delay
and accept Seller's performance at an appropriately deferred completion date.
Where Seller's performance under this Sales Agreement is delayed as above, the
Purchase Price shall be revised to reflect any changes in labor wage rates,
material costs and other costs caused by such delay and actually incurred by
Seller in its performance.
ARTICLE 11. PURCHASE AND SALE; PURCHASE PRICE; PAYMENT
The Purchaser shall purchase the Equipment and Work from Seller, and
Seller shall sell and provide the Equipment and Work to Purchaser, as provided
below:
(a) Consideration: Seller shall sell and provide the Equipment and/or
Work, as applicable, to Purchaser as provided in and in accordance with this
Sales Agreement. In full consideration of Seller's sale and provision of the
Equipment and Work to Purchaser, Purchaser shall pay Seller the Purchase Price
as set forth in, and subject to, this Article 11.
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<PAGE> 9
(b) Payment Terms: Unless otherwise specified in the Proposal, Seller
shall submit to the Purchaser [*] invoices for [*] payments for labor and
material expended or purchased for that month. The amounts constituting (or as
applicable, the method(s) for determining the amounts constituting) the [*]
payments, retention, or other payments applicable to this Sales Agreement, or
the amounts constituting (or as applicable, the method(s) for determining the
amounts constituting) such other payment structure as may be reflected in the
Proposal, will be as set forth in the Proposal. Seller's monthly invoices shall
contain a certification regarding the accuracy and completeness of the amounts
invoiced and that such amounts are consistent with the procedures agreed to in
the Proposal.
(c) Retention Rights: Notwithstanding Article 11(b), payment of the
amounts referred to therein shall be subject to a retention amount as specified
in the Proposal. The retention amount specified in the Proposal shall not become
due until (1) Acceptance has occurred, and (2) Seller submits to Purchaser, for
both monthly and final invoices, receipts, releases and waivers of liens arising
out of this Sales Agreement, to the extent and in such form as may be designated
by the Purchaser; provided that payment of such retention amount is subject to
reduction as set forth in Article 11(d). If any subcontractor or supplier
refuses to furnish a release or waiver required by the Purchaser, the Seller may
in lieu thereof furnish at the Seller's expense a bond satisfactory to the
Purchaser to indemnify the Purchaser against any such lien. If any such lien
remains unsatisfied after all payments are made, the Seller shall refund to the
Purchaser all monies that the latter may be compelled to pay in discharging such
lien, including all costs and reasonable attorney's fees.
(d) Retention Reduction: If all the conditions of payment set forth in
Article 11(c) have been met (except for minor punch list items or claims of
non-material deficiencies in the Work, the value of which items or claims will
be mutually determined in good faith by Purchaser and Seller), Seller will
invoice Purchaser for the retention amount less twice the determined value of
such items or claims. Upon the correction or elimination of such items or
claims, Seller will invoice Purchaser for the balance of the retention amount.
(e) Invoicing: Purchaser shall make payment of properly invoiced amounts
within thirty (30) days from receipt of invoice at the following address:
Amazon.com, Inc.
Attn: Jimmy Wright
215 Columbia Street
Seattle, Washington 98104
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[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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<PAGE> 10
(f) Subcontractor Liens or Releases: Upon receipt of funds from the
Purchaser, Seller will sign and furnish a lien waiver to the Purchaser covering
the Work, Equipment and payment described in the applicable invoice and will
send the same to the Purchaser with the next invoice. The Seller will either
obtain lien waivers and releases from suppliers and subcontractors on behalf of
whom such payment was sought by the Seller or furnish Purchaser with a bond
satisfactory to Purchaser to indemnify Purchaser against any claim by lien or
otherwise by Seller's suppliers or subcontractors. The Purchaser is authorized
to withhold from any invoice, without interest, monies due the Seller equal to
the amount of monies previously disbursed to the Seller with respect to which
Seller fails to furnish Purchaser with supplier or subcontractor lien waivers
and releases or a bond as provided in this Sales Agreement.
(g) Purchaser Right of Invoice Rejection or Revocation: The Purchaser
may (1) decline to approve the Seller's invoice in whole or in part or (2)
nullify the whole or any part of any invoice previously approved, in each case
to such extent as may be necessary to protect the Purchaser from loss because
of:
o Defective Work not remedied;
o Failure of the Seller to make payments properly to subcontractor or
suppliers for labor, materials or Equipment;
o Reasonable evidence that the Work cannot be completed for the unpaid
balance of the Purchase Price; or
o Damage to the Purchaser's or its Affiliate's property or another
contractor's work.
ARTICLE 12. SOFTWARE
License Grant: Title to the Seller Software remains at all times with
Seller. Seller hereby grants Purchaser a nonexclusive right and license to use
Seller Software and documentation associated with it on the Equipment in the
manner contemplated by the Proposal or as otherwise permitted under this Sales
Agreement. Additionally, Purchaser may make backup and archival copies as
reasonably deemed necessary by Purchaser, provided that Seller's copyright
notice and other proprietary markings are reproduced in such copies.
Restricted Use: Each copy of Seller Software provided under this license
may be used only on the Equipment on which the Seller Software is delivered and
installed or on other equipment approved by Seller in writing. Use of the Seller
Software in a network environment is authorized under the license only to the
extent reasonably necessary for the Purchaser's or its Affiliates internal
purposes with respect to the Equipment or as otherwise specified in this Sales
Agreement. No other use of the Seller software is authorized unless specifically
agreed to in a writing signed by Seller.
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Copies and Modifications: Purchaser shall not use, copy, rent, lease,
sell, modify, prepare derivative works of, decompile, disassemble, otherwise
reverse engineer, or transfer Seller Software except with Seller's prior written
consent or otherwise as permitted under this Sales Agreement.
Source Code; Escrow Agreement: Seller shall at all times keep and
maintain a complete master, reproducible copy of all Source Code of all Seller
Software installed at the Worksite in escrow in accordance with the terms and
conditions of the Escrow Agreement attached hereto as Exhibit A (the "Escrow
Agreement") and which agreement is hereby made part of this Sales Agreement,
being incorporated herein by this reference. Seller will promptly update the
Source Code in escrow to reflect all Upgrades installed at the Worksite.
In the event that (i) a Major Failure occurs (as defined under Article
17 b)) related to Seller Software and Seller fails to respond to and perform its
warranty or maintenance obligations under this Sales Agreement, or Seller (or
any Seller Affiliate, if applicable) fails to respond to and perform its
obligations under any Maintenance or Software Support Agreement, in each case in
connection with the occurrence of such Major Failure, and Seller does not cure
such failure to respond and perform within five (5) business days after written
notice thereof from Purchaser, (ii) Seller fails to offer maintenance or
software support services to Purchaser as reasonably required by Purchaser for
it to continue its use of the Equipment as contemplated by this Sales Agreement
and on terms no less favorable than those offered to Seller's similarly situated
customers for similar services, (iii) this Sales Agreement is terminated by
Purchaser pursuant to Article 16(a)(1), or (iv) Seller (1) becomes insolvent or
bankrupt or makes an assignment for the benefit of creditors, (2) has a receiver
or trustee in bankruptcy is appointed for it, or (3) has any proceeding in
bankruptcy, receivership or liquidation instituted against it which is not
dismissed within thirty (30) days following the commencement thereof, Purchaser
shall be entitled to the Source Code as provided for in the Escrow Agreement.
Seller hereby grants to Purchaser, effective upon the occurrence of any
of the events set forth in any of the clauses (i) through (iv) of the
immediately preceding paragraph, a perpetual, non-exclusive, right and license
to (a) use, copy, modify, adapt and create derivative works of the Source Code,
and (b) decompile, reverse engineer or disassemble any Seller Software or
modify, adapt or create derivative works of Seller Software or its
documentation, in each case solely in connection with Purchaser's and its
Affiliates' and their respective contractors' use, maintenance and support of
the Software in accordance with their respective rights under this Sales
Agreement. Notwithstanding each of the clauses (a) and (b) above, the Source
Code referred to above is hereby deemed to be Seller Software for purposes of
Purchaser's continued compliance with the terms of Articles 12 b) (except that
Purchaser's rights under clauses (a) and (b) above may be performed in its test
and development areas and equipment for the purposes set forth in this
paragraph), 12 f) and 12 i) hereof.
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Any Source Code delivered under this Article will be provided on an "as
is" basis, without any representation, warranty or liability of Seller
whatsoever, except that Seller hereby represents and warrants to Purchaser that
the Source Code in Escrow at all times is the Source Code of the latest version
of the Seller Software (including all Upgrades) installed at the Worksite.
Further, Seller disclaims any representations, warranties or liabilities
relating to modifications to, or adaptations or derivative works of, the Source
Code, Software or its documentation created by or for Purchaser and/or its
Affiliates pursuant to the immediately preceding paragraph; provided, however,
that nothing in this paragraph will limit any of Seller's representations or
warranties under this Sales Agreement with respect to the unmodified Software or
its documentation.
Term: The term of the licenses granted pursuant to this Article 12 shall
be perpetual, subject to termination only in accordance with Article 16d). Upon
any such termination of this license, Purchaser shall return the Seller Software
and all copies of it and all documentation to Seller.
Trade Secret Protection: Purchaser understands and agrees that Seller
Software and all documentation related thereto constitutes the valuable
technology, know-how and trade secrets of Seller. Purchaser agrees during the
term of this Agreement and thereafter to hold the Seller Software, including any
copies of it and any documentation related to it, in confidence and to not
permit any person or entity to obtain access to it except as required for
Purchaser's and its Affiliates' own internal use and provided such person or
entity has agreed in writing to hold such in confidence.
Software Upgrades: Except as may be otherwise agreed to in a Maintenance
or Software Support Agreement, or otherwise required under this Sales Agreement,
Seller shall have no obligation to provide Upgrades to Purchaser due to later
versions or revisions introduced into the marketplace. Materials, installation,
and customization to implement such Upgrades will be made available to Purchaser
at prices normally offered to Seller's preferred customers. Notwithstanding the
foregoing, Seller will provide and Purchaser will not be charged for, any
Upgrades required in order to correct Software to meet applicable Specifications
pursuant to Seller's obligations under the Sales Agreement or any Maintenance or
Software Support Agreement.
Seller Software Warranty Performance: As part of Seller's warranty of
the Equipment, but not in limitation of Purchaser's rights under this Sales
Agreement, Purchaser agrees that Seller may perform Seller Software warranty
service remotely via a modem in addition to other reasonable means. The Seller
Software warranty is void if the Seller Software has been altered, modified or
changed in any way from the original delivery configuration, without the written
authorization of Seller, unless so altered, modified or changed by or on behalf
of Seller or as may otherwise be permitted hereunder.
Software Markings: The Seller Software and users manuals, logos, product
names and other support materials, if any, are either patented, copyrighted,
trademarked, or
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otherwise proprietary to Seller. Purchaser agrees never to remove any such
notices and product identification.
Third Party Software: Software delivered to Purchaser pursuant to this
Sales Agreement may contain Third Party Software. Seller hereby assigns to or
otherwise transfers to the benefit of Purchaser all of Seller's right, title and
interest in and to all warranties, indemnities, product guaranties and other
representations made by third party manufacturers which Seller may have with
respect to Third Party Software, and will at its expense take any and all
actions as may be necessary to enable Purchaser to exercise rights thereunder
and realize the benefit thereof to the fullest extent possible; provided that
nothing in this Sales Agreement shall have the effect of extending or otherwise
expanding upon any of such third party warranties, indemnities, product
guarantees or representations assigned or otherwise transferred by Seller to
Purchaser. Seller hereby represents and warrants to Purchaser that Purchaser and
its Affiliates will have all rights necessary to use Third Party Software
delivered under the Sales Agreement as contemplated in this Sales Agreement
(including, without limitation, the Specifications).
Purchaser's Affiliates. All rights and obligations of Purchaser under
this Article 12 shall extend to each of Purchaser's Affiliates, and Purchaser
shall ensure that each of Purchaser's Affiliates complies with the provisions of
this Article 12 in connection with its exercise of its rights hereunder.
ARTICLE 13. DELAYED PAYMENTS
In the event that Purchaser fails to make due and punctual payments for
the Equipment and/or Work as provided herein, interest shall accrue on the
amount due and unpaid at the rate of one percent (1%) per month for each full
calendar month or part thereof during which such amount shall be outstanding,
such interest to commence to accrue on the thirtieth (30th) day after such
amount is due and payable hereunder. If the interest rate provided herein
exceeds the maximum interest rate permitted by law, then the interest payable
shall be at such maximum permissible rate.
ARTICLE 14. CONTINGENCIES
In the event of any condition or contingency, existing or future, which
is beyond the reasonable control and without the fault or negligence of either
party which prevents or delays the performance by such party of this Sales
Agreement ("Event of Force Majeure"), such party shall be entitled to an
appropriate extension of time for performance of this Sales Agreement. Events of
Force Majeure shall include, without limitation, acts of God, fire, floods,
transport delays, strikes, labor disputes and interference by civil or military
authorities. If an Event of Force Majeure occurs, the affected party shall take
measures to mitigate and minimize the effect of such event in order to continue
with the performance of its obligations under this Sales Agreement. If the
period of such an event extends beyond six
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<PAGE> 14
(6) months, then either party may terminate this Sales Agreement under Article
16(a)(3) below.
ARTICLE 15. MAINTENANCE OR SOFTWARE SUPPORT
Seller will throughout the warranty period and for a period of five (5)
years thereafter offer maintenance services to Purchaser as reasonably required
by Purchaser for it to continue its use of the Equipment as contemplated by this
Sales Agreement and on terms no less favorable than those offered to Seller's
similarly situated customers for similar services. To the extent maintenance
services are not provided for in the Proposal or elsewhere as part of this Sales
Agreement, Seller and Purchaser will subsequent to the date hereof, at
Purchaser's option, negotiate in good faith as to Seller's provision of the same
to Purchaser.
ARTICLE 16. TERMINATION
(a) This Sales Agreement may be terminated upon the occurrence of any of
the following events:
(1) Other than as provided for in Article 16(a)(2), in the event
that either party shall breach or fail to comply with any provisions of this
Sales Agreement and such breach or failure shall continue for a period of thirty
(30) days after the giving of written notice thereof by the other party, the
other party may terminate this Sales Agreement immediately upon the giving of
written notice thereof to the defaulting party.
(2) Notwithstanding the foregoing, if Purchaser shall have failed to
make any payment due under this Sales Agreement within forty-five (45) days
after having been so notified by Seller, Seller may terminate this Sales
Agreement immediately after the expiration of the forty-five (45) day period by
giving notice of such termination to Purchaser.
(3) If an Event of Force Majeure occurs and continues for a period
greater than six (6) months, either party may terminate this Sales Agreement
upon giving written notice thereof to the other party. In such event, the amount
to which Seller shall be entitled shall be determined as per Article 16(b).
(b) In addition to the foregoing, Purchaser may terminate this Sales
Agreement or any portion thereof without cause effective thirty (30) days after
written notice thereof is received by Seller. If Purchaser terminates this Sales
Agreement pursuant to this Article 16(b), then Seller shall be reimbursed by
Purchaser for Seller's reasonable, documented costs incurred through the
termination date in its performance and/or termination of the terminated portion
of this Sales Agreement, plus Seller's expected profit with respect to the
terminated portion as contemplated in the Proposal, less any progress or other
payments received by Seller before termination. Seller's Chief Financial Officer
shall certify as to the accuracy and completeness of such costs incurred and
expected profit invoiced to Purchaser. Purchaser shall pay Seller net thirty
(30) days after receipt of invoice and certificate from Seller. Seller
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will keep its regularly maintained corporate books and records related to this
Sales Agreement for five (5) years following a termination hereunder. During
such period, and only to the extent necessary to support Seller's reimbursement
under this Article 16 b), Seller will make its books and records as necessary to
support Seller's reimbursement available for audit to an independent public
accountant, selected by Purchaser and at Purchaser's sole cost and expense,
under terms of confidentiality applicable to this Sales Agreement; provided that
if any such audit reveals a discrepancy in favor of Seller in excess of five
percent (5%), then Seller will reimburse Purchaser for the costs of such audit.
Any such audit will be conducted in a manner which will not unreasonably
interfere with Seller's operations.
Upon receipt or delivery (as applicable) of a termination notice under
paragraph 16(a), or upon receipt of Purchaser's termination notice under Article
16(b) above, Seller shall take the following actions:
Stop work to the extent relating to the terminated portion of this Sales
Agreement;
Take all commercially reasonable actions to limit amounts for which
Purchaser may be responsible in connection with this Article, including
terminating all subcontracts to the extent they relate to the terminated portion
of this Sales Agreement;
Assign to Purchaser all of Seller's right, title and interest to all
Third Party Software and Third Party Hardware and deliver the Equipment or
components thereof (regardless of status of completion) consistent with Seller's
progress or other payments received by Seller before and pursuant to
termination; and
Deliver, assign and otherwise transfer, in the manner contemplated by
this Sales Agreement, title to any Work and other drawings, plans and documents
(regardless of status of completion) that, if this Sales Agreement had been
completed, would have been furnished to Purchaser.
d) Notwithstanding anything to the contrary contained in this Sales
Agreement, the licenses granted under Article 12 may not be terminated except
upon the occurrence of a substantial, material breach of this Sales Agreement by
Purchaser that (i) is not cured within twenty (20) days after Purchaser receives
written notice from Seller of the breach, and (ii) is of such a nature that
Seller cannot reasonably be made whole through an award of monetary damages.
Following any termination of this Sales Agreement that does not involve a
termination of the licenses granted under Article 12, Purchaser's and its
Affiliates' and contractors' use of the Seller Software will remain subject to
the restrictions contained in Article 12.
ARTICLE 17. WARRANTY
a) Standard Warranty: Seller hereby warrants that the Equipment shall
(i) be free from all liens, charges or encumbrances, except any lien of the
Seller in respect of any unpaid
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portion of the Purchase Price; (ii) be free from defects in materials and
workmanship and shall conform to the provisions and specifications of this Sales
Agreement (including without limitation the Specifications); (iii) be new and,
if no quality is specified, of a quality consistent with the Seller's usual and
normal production; and (iv) conform with OSHA regulations in force at the time
of Acceptance of the Equipment. Seller shall use its reasonable best efforts to
as soon as practicable obtain for Seller's own benefit Third-Party Hardware and
Third-Party Software warranties that are at least co-extensive with Seller's
warranty obligations to Purchaser under clause (ii) of the immediately preceding
sentence with respect to the Equipment. Notwithstanding the foregoing, if
Seller, after so using its reasonable best efforts, fails to obtain for Seller's
own benefit such warranties, then Seller shall immediately notify Purchaser in
writing of the nature and extent of such failure, and the parties shall
negotiate in good faith as to (a) adjustment of schedules for performance of the
Work in order for Seller to secure such warranties, (b) Seller's limited release
from its warranty obligations under clause (ii) of the immediately preceding
sentence with respect to such Third-Party Hardware or Third-Party Software,
and/or (c) a reduction or increase in the Purchaser Price to reflect the changed
schedule and/or lessened warranty obligations, as applicable. Any agreement
between the parties resulting from such negotiations must be in writing.
Seller's failure to notify Purchaser as required above shall constitute Seller's
waiver of its renegotiation rights in the preceding sentence, and the provisions
of this Article 17 shall remain in full force and effect. Seller shall, at its
option, repair or replace (replacement parts to be shipped F.O.B. Worksite) any
defective Equipment or component thereof; provided, however, that Seller is
given written notice of any defect during the Warranty Period (as defined
below). For purposes of Articles 17a) and b), the warranty period shall commence
on the earlier of the date of first commercial use of the Equipment by Purchaser
or the date of Acceptance of the Equipment, and the warranty period shall end
one year after such commencement date ("Warranty Period"). Purchaser shall give
Seller prompt reasonable written notice of any claim under the foregoing
warranty within the Warranty Period and permit Seller to inspect the Equipment
in order to verify the defect or nonconformity. Seller shall promptly and
reasonably respond to verify and correct the defect. Purchaser's remedies and
Seller's obligations in connection with any claim made under this warranty shall
be limited to repair or replacement at Seller's expense of the Equipment or part
thereof which is defective. Labor performed at the Worksite with regard to such
claims is not included in this warranty. Purchaser shall be responsible for the
normal maintenance and repair of the Equipment and shall perform the same in
accordance with generally accepted maintenance procedures or such other
reasonable procedures as are set forth in maintenance and repair manuals
provided by Seller to Purchaser. Seller shall not, under this Article 17, be
responsible for or obligated to pay or to reimburse Purchaser for (a) any work
or repairs performed on the Equipment by third parties (other than on behalf of
Seller and except for mutually agreed subcontractors), (b) any materials
furnished by third parties (other than on behalf of Seller) for use in
connection with the Equipment if the same was undertaken or furnished without
mutual prior written consent or (c) any loss or damage arising from improper
operation or maintenance of the Equipment by Purchaser or from ordinary wear and
tear.
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b) Major Failure Warranty: Notwithstanding other provisions of this
Article 17, in instances of a Major Failure during the Warranty Period, Seller
will provide all necessary parts and labor to correct the defect. A "Major
Failure" is defined as failure of the Equipment or portion of the Equipment to
operate as described in the Proposal or the applicable Specifications, which
significantly impacts Purchaser's ability to use the affected Equipment or
portion thereof, and which Purchaser's maintenance personnel or available
contractors cannot remedy without significant expense or effort. Seller will
respond to a Major Failure by immediately dispatching such servicemen by
commercial air carrier, or by responding as otherwise agreed between the
parties, upon request and notification of a Major Failure by Purchaser as may be
necessary to promptly correct the defect, and such servicemen shall thereafter
diligently and continuously perform such services as may be necessary to
promptly correct such defect until corrected. Should it later be reasonably and
mutually determined in good faith by Seller and Purchaser that the necessary
corrective services rendered by Seller were within the capabilities of the
Purchaser's maintenance personnel or available contractors without the
expenditure of significant expense or effort, the Purchaser will reimburse
Seller for the labor and expenses of the service trip.
Year 2000: Seller hereby represents and warrants that the Equipment,
when used in accordance with its associated documentation, shall perform
properly and without change in operations related to the advent of the new
century (defined as commencing at 12:00 am, January 1, 2000), including but not
limited to, by accurately processing date data (including without limitation by
calculating, comparing and sequencing) within, from, into and between centuries
(including, but not limited to, the twentieth and twenty-first centuries), and
by properly calculating leap years, except to the extent that any failure of the
Equipment to so perform is directly attributable to (i) the failure of other
technology, systems or interfaces, Third Party Software, or Third Party Hardware
to properly exchange date data with the Equipment, (ii) a change in the
operating environment not contemplated in this Sales Agreement, including
without limitation the Specifications, or (iii) any addition to or modification
of the Equipment by or on behalf of Purchaser or any of its Affiliates that has
not been authorized in writing by Seller or made by or on behalf of Seller or
any of its Affiliates. In the event of any material failure of the Equipment to
operate as warranted above, Purchaser's sole remedy, and Seller's sole
obligation, shall be to promptly respond and diligently and continuously work to
correct until corrected (or provide a functionally equivalent work around for)
any reproducible error or failure reported by Purchaser in writing to Seller on
or before January 1, 2001. If Seller is unable to remedy such error or failure
within a reasonable time, Seller and Purchaser shall enter into good faith
discussions to agree to reductions in Purchase Price or other equitable
adjustments to account for such delay or inability to remedy said failure.
Seller agrees to use its reasonable best efforts to incorporate a statement in
all purchase orders that Seller issues under this Sales Agreement that requires
any Third Party Software delivered hereunder to be Year 2000 compliant
consistent with the minimum requirements of this Article 17c). The remedies
provided in this paragraph are exclusive remedies for failure of the Equipment
to perform as warranted hereunder.
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Third Party Software and Third Party Hardware: The foregoing warranties
in Article 17a), b) and c) specifically exclude warranties relating to Third
Party Software or Third Party Hardware to the extent specified in such Articles.
Seller hereby assigns and otherwise transfers to the benefit of Purchaser all of
Seller's right, title and interest in and to all assignable or transferable
warranties with respect to Third Party Software and Third Party Hardware and all
assignable or transferable rights of Seller against any manufacturer or supplier
thereof, including without limitation with respect to all indemnity agreements,
and will at its expense take any and all actions as may be necessary to enable
Purchaser to exercise rights thereunder and realize the benefit thereof to the
fullest extent possible. To the extent any of such warranties, indemnities or
rights are not assignable or transferable, Seller agrees to exercise for the
benefit of Purchaser any and all claims, rights, remedies, warranties,
representations and indemnities against or obtained from any such third party
manufacturers or suppliers.
Disclaimer: OTHER THAN AS SPECIFICALLY SET FORTH ABOVE, SELLER MAKES NO
OTHER WARRANTIES, WHETHER WRITTEN, ORAL OR IMPLIED, INCLUDING WITHOUT
LIMITATION, WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OR MERCHANTABILITY.
ARTICLE 18. USE OF INSTALLED PORTIONS OF THE EQUIPMENT
Whenever, as determined by Seller, the installation of any portion of
the Equipment has been completed, Seller may make available such portion for
Purchaser's use, provided, however, that Seller and Purchaser shall mutually
agree on the terms and conditions of such use. Except as otherwise agreed by
Seller and Purchaser (including where appropriate, an adjustment in the Purchase
Price and/or schedule otherwise provided for in this Sales Agreement), such use
shall not interfere with the installation of the remainder of the Equipment.
Seller shall not be liable for the cost of repairs, rework or replacement which
may be required due to ordinary wear and tear resulting from such use.
ARTICLE 19. INSURANCE BY SELLER
Seller will maintain insurance coverage covering its operation and its
obligations pursuant to Article 20, in at least the following amounts:
Commercial General Liability - Bodily Injury and Property damage - $1,000,000
Per Occurrence.
Personal Injury Liability - $1,000,000 Limit.
Business Auto - Bodily Injury & Property Damage - $500,000 Combined Single
Limit.
Umbrella Liability - $20,000,000 Limit of Liability
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Worker's Compensation - Coverage A - Statutory
Coverage B - Employer's Liability; $100,000 each accident; $100,000 each
employee; $500,000 Policy Limit
Foreign Products Liability - $1,000,000 Per Occurrence.
Insurance shall be purchased from companies having a rating of A-VII or
better in the current BEST'S INSURANCE REPORTS published by A. M. Best Company.
Policies of insurance shall name Purchaser as an additional insured, provide for
an insurer's waiver of subrogation in favor of all insured parties, and provide
that they will not be canceled or materially changed without reasonable prior
written notice to Purchaser. Certificates of insurance evidencing coverage shall
be submitted in advance of or concurrent with the execution of the Work, and on
each insurance policy renewal thereafter. Seller shall, at Purchaser's request,
provide copies of requested insurance policies. If Seller does not provide
Purchaser with such certificates of insurance, then Purchaser will so advise
Seller. Thereafter, if Seller does not furnish evidence of acceptable coverage
within fifteen (15) days, then Purchaser shall have the right, in its sole
discretion, to (i) withhold payments from Seller until evidence of such
acceptable coverage is provided, or (ii) immediately terminate this Sales
Agreement. Failure to obtain and maintain required insurance shall not relieve
Seller of any obligation contained in this Sales Agreement. Additionally, any
approval by Purchaser of any of Seller's insurance policies shall not relieve
Seller of any obligation contained in this Sales Agreement.
ARTICLE 20. INDEMNIFICATION
Seller shall indemnify, defend and hold Purchaser harmless from and
against any and all expenses, losses, costs, claims, demands, causes of action,
and damages of whatever kind, (a) which result from injuries at the Worksite
during the installation, or testing of the Equipment, (b) which are due to the
negligence or willful misconduct of Seller or its employees or contractors, or
(c) to the extent otherwise related to any claim, action, suit or proceeding
involving the Equipment which is based upon injuries to persons (including
death) or property arising from or relating to (i) the use of the Equipment in
accordance with Seller's operation, maintenance and other related manuals and
documents delivered to Purchaser by Seller hereunder, or (ii) the design or
manufacture of the Equipment as contemplated in the Proposal (including, without
limitation, the Specifications), including without limitation, product liability
claims. Purchaser shall indemnify, defend, and hold Seller harmless from and
against any and all expenses, losses, costs, claims, demands, causes of action,
and damages of whatever kind which result from the negligent or willful use or
operation of the Equipment by any person (other than Seller or Seller's
employees or contractors) other than in its normal and intended manner, and
removal or modification of safety features unless Purchaser notifies Seller and
such removal or modification is approved by Seller or made by or on behalf of
Seller or any of its Affiliates.
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ARTICLE 21. LIMITATION OF LIABILITY
Notwithstanding any other provision of this Sales Agreement, except to
the extent constituting a third party claim (or portion thereof) subject to
indemnification under Article 3 or Article 20 (such portion of such claim
subject to indemnification under Article 20 being a "Third-Party Non-IP
Consequential Damage Indemnified Claim"), neither party shall be liable to the
other party or anyone claiming through such other party for any special,
indirect, incidental or consequential damages of any kind whatsoever, including
without limitation loss of profit or reputation incurred by either Party,
whether such damages arise out of the use, inability to use, failure of, delay
in delivery of, or nondelivery of, the Equipment, or out of any termination of
this Agreement, or otherwise. Notwithstanding any other provision of this
Agreement, each party's aggregate liability under Article 20 for Third-Party
Non-IP Consequential Damage Indemnified Claims shall not exceed the greater of
[*].
ARTICLE 22. WAIVER
Except as otherwise expressly provided in this Sales Agreement, no
failure on the part of either party to exercise, and no delay in exercising, any
right, privilege, or power under this Sales Agreement shall operate as a waiver
or relinquishment thereof; nor shall any single or partial exercise by either
party of any right, privilege or power under this Sales Agreement preclude any
other or further exercise thereof, or the exercise of any other right, privilege
or power. Waiver by any party of any breach of any provision of this Sales
Agreement shall not constitute or be construed as a continuing waiver, or as a
waiver of any other breach of any provision of this Sales Agreement.
ARTICLE 23. ENTIRE AGREEMENT
This instrument, together with any attachments specifically made a part
of this Sales Agreement and any documents incorporated in such attachments by
reference, embodies the whole agreement of the parties relating to the subject
matter of this Sales Agreement and supersedes any and all prior oral or written
specifications, communications and agreements by or on behalf of the parties.
This Sales Agreement may not be varied by any purchase order, acknowledgment,
confirmation, invoice, or shipping document issued by either party. Any
amendments or modifications of this Sales Agreement must be in writing and
signed by an officer or General Counsel of Purchaser and an officer or General
Counsel of Seller to be binding.
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[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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ARTICLE 24: CONFIDENTIALITY AGREEMENT
With respect to information received by either party as a result of or
in connection with this Sales Agreement, the parties will abide by the terms and
conditions of following Mutual Nondisclosure Agreements, as applicable (but only
to the extent that the information constitutes "Confidential Information" as
defined in the Mutual Nondisclosure Agreement):
The Buschman Company: Agreement signed with Amazon.com dated January 14, 1999
Real Time Solutions: Agreement signed with Amazon.com dated January 19, 1999
White Systems, Inc.: Agreement signed with Amazon.com dated January 19, 1999
ARTICLE 25. GOVERNING LAW
This Sales Agreement shall be governed by and interpreted in accordance
with the laws of the State of Washington, without regard to its choice of law
provisions.
ARTICLE 26. PUBLICITY
Neither party shall disclose the terms of this Sales Agreement or the
existence or nature of any relationship between the parties (including, without
limitation in any press release or public communication) to any third party
without the prior written consent of the other party.
ARTICLE 27. SOLICITATION
Seller and Purchaser agree that, for the period commencing with the
commencement of Work hereunder (whether of not prior to the date hereof) until
one year following Acceptance, or any earlier termination of this Sales
Agreement, neither party will, except with the other party's written approval,
offer or seek to offer or solicit employment to the other party's employees or
staff. Notwithstanding the foregoing, the parties agree that general
solicitations or advertisements (by any means or media) shall not constitute
prohibited offers or solicitations for purposes of this Article 27.
Notwithstanding any other provision of this Sales Agreement, each party's
exclusive remedy for a violation of this Article 27 is recovery of such party's
direct damages and/or specific performance in connection therewith, as
applicable. The parties agree that under no circumstances shall a violation of
this Article 27 give rise to a right to terminate this Agreement.
ARTICLE 28. SURVIVAL
Articles 3, 12, 15, 17(c), 20, 21, 24 and 27 (together with all other
provisions that reasonably may be interpreted as surviving termination or
expiration of this Sales Agreement) will survive the Acceptance of the
Equipment, the performance of the Work and performance of Seller's warranty
obligations hereunder.
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ARTICLE 29. DISPUTES
Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, ("Claim") shall be resolved in accordance with this
Article 29.
Any Claim shall first be submitted by the claiming party to the other
party in writing within a reasonable period after the event giving rise to it,
which writing shall include a description of such Claim, the proposed remedy for
such Claim and data supporting such Claim. If the parties are unable to resolve
the Claim informally, either party may submit the Claim for joint consideration
by and between Purchaser's senior logistics officer and Seller's Chief Executive
Officer.
Arbitration. Claims that have been properly raised and considered in the
above procedures but have not been resolved shall be resolved exclusively by
arbitration before a panel of three arbitrators in Seattle, Washington or in
such other location as may be reasonable given the facts and circumstances
involved in such Claim. The arbitration shall be conducted in accordance with
the applicable rules of the American Arbitration Association currently in effect
unless the parties mutuality agree otherwise.
Notice of the demand for arbitration shall be filed in writing with the
other party to the Sales Agreement and in accordance with the applicable rules
of the American Arbitration Association and shall be made within the statutes of
limitation that are applicable to the Claim.
The parties shall apply to the arbitrators for relevant discovery
consistent with the Federal Rules of Civil Procedure, which the arbitrators
shall be authorized to order. Either party may request that the arbitrators'
award include findings of fact and conclusions of law.
The arbitrators shall not be empowered to grant exemplary or punitive
damages. The award rendered by the arbitrator or arbitrators shall be final, and
judgment may be entered upon it in accordance with applicable law in any court
having jurisdiction thereof.
Within 30 days of receipt from the of the written findings of fact and
conclusions of law, either party will have the right to file with the
arbitrators and serve on the other party a written motion to reconsider. The
arbitrators may request the nonmoving or responding party to file a written
response within 10 days after receipt of that request, and the arbitrators
thereupon will reconsider the issues raised by the motion and response (if any)
and either confirm or alter their decision, which will then be final, binding
and conclusive upon the parties. The cost of such motion for reconsideration and
written opinion of the arbitrators, including attorneys' fees, will be awarded
against the moving party if it does not substantially prevail on its motion.
Upon demand of either party, the arbitration shall include, by
consolidation, joinder or third party claim, any person or entity (a) that is
substantially involved in a common
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question of fact or law, (b) where the presence of such person or entity is
required if complete relief is to be accorded in the arbitration, or (c) who is
alleged to be liable to a party for all or part of a claim in the arbitration.
The agreement herein among the parties shall be specifically enforceable
under applicable law in any court having jurisdiction thereof.
Each party agrees that all aspects of any arbitration are "Confidential
Information" under the Mutual Non-disclosure Agreement referred to in Article
24.
Seller shall diligently carry on the Work, and Purchaser shall continue
its duties under this Agreement, during any dispute resolution proceedings,
unless otherwise agreed in writing. The requirements of this paragraph cannot be
waived with respect to any Claim except by an explicit written waiver signed the
party against whom the Claim is brought.
Notwithstanding the foregoing, nothing in this Article 29 will preclude
either party from seeking provisional remedies (including, without limitation,
temporary restraining orders and preliminary injunctions) from any court of
competent jurisdiction to protect its rights pending resolution as provided for
above. Further, unless otherwise agreed by the parties in writing, this Article
29 will not apply to disputes relating to the enforceability of, or a party's
rights under, any United States or foreign patent or other intellectual property
right.
ARTICLE 30. TRANSFER OF TITLE AND RESERVATION OF SECURITY INTEREST
Upon Acceptance, title to the Work shall transfer to Purchaser. For the
avoidance of doubt, notwithstanding the transfer of possession of the Equipment
by Seller to Purchaser, Seller shall retain legal title to, and hereby reserves
a purchase money security interest in, the Equipment until Acceptance. Seller
shall have the rights of a secured creditor under the Uniform Commercial Code
for the jurisdiction applicable during such period. Purchaser hereby authorizes
Seller to file, and to sign on behalf of Purchaser as the debtor, any financing
statements or other documents with State or local recording offices which may be
required to perfect such security interest. In circumstances where Acceptance
has occurred and the Equipment is thereafter stored at Seller's Plant, Seller
hereby authorizes Purchaser to file, and to sign on behalf of Seller any
financing statements or other documents with State or local recording offices
which may be required to perfect Purchaser's security interest in the Equipment
so stored.
ARTICLE 31. NOTICES
All notices, requests, demands, applications, services of process, and
other communications which are required to be or may be given under this Sales
Agreement shall be in writing and shall be deemed to have been duly given if
sent by telecopy or facsimile transmission, answer back requested, or delivered
by courier or mailed, certified first class
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mail, postage prepaid, return receipt requested, to the parties to this
Agreement at the following addresses:
If to Purchaser: Amazon.com, Inc.
1516 2nd Avenue
Seattle, WA 98101
Attn: General Counsel
Fax: 206-834-7010
With a copy to: Amazon.com, Inc.
1516 2nd Avenue
Seattle, WA 98101
Attn: Chief Logistics Officer
Fax: 206-694-2004
If to Seller: _____________________________
_____________________________
_____________________________
Attn: The President
Fax:
With a copy to: The Buschman Company
10045 International Boulevard
Cincinnati, Ohio 45246
Attn: General Counsel
Fax: 513/881-5144
or to such other address as either party shall have furnished to the other by
notice given in accordance with this Article. Such notice shall be effective (i)
if delivered in person or by courier, upon actual receipt by the intended
recipient, or (ii) if sent by telecopy or facsimile transmission, on the date of
transmission unless transmitted after normal business hours, in which case on
the following date, (iii) if mailed, upon the date of first attempted delivery.
ARTICLE 32. HEADINGS
Headings used in this Sales Agreement are for convenience and ease of
reference only, are not part of this Sales Agreement and shall not be relevant
to or affect the meaning or interpretation of this Sales Agreement.
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ARTICLE 33. INTERPRETATION
Except where otherwise expressly provided or unless the context
otherwise necessarily requires: (i) references to a given law or rule are
references to that law or rule as amended or modified as of the date on which
the reference is made, (ii) reference to a given agreement or instrument is a
reference to that agreement or instrument as originally executed, and as
modified, amended, supplemented and restated through the date as of which
reference is made to that agreement or instrument, and (iii) accounting terms
have the meanings given to them by U.S. generally accepted accounting principles
applied on a consistent basis by the accounting entity to which they refer.
ARTICLE 34. ATTORNEY'S FEES AND COSTS
If any suit is brought, or an attorney retained to collect any money due
under this Sales Agreement, or to collect a judgment for breach of this Sales
Agreement, the prevailing party shall be entitled to recover, in addition to any
other remedy, reimbursement for attorneys' fees, court costs, investigation
costs and other related expenses incurred in connection therewith.
ARTICLE 35. SEVERABILITY
This Sales Agreement will be enforced to the fullest extent permitted by
applicable law. If for any reason any provision of this Sales Agreement is held
to be invalid or unenforceable to any extent, then such: (i) provision will be
interpreted, construed or reformed to the extent reasonably required to render
the same valid, enforceable and consistent with the original intent underlying
such provision; (ii) provision will be void to the extent it is held to be
invalid or unenforceable; (iii) provision will remain in effect to the extent
that it is not invalid or unenforceable; and (iv) such invalidity or
unenforceability will not affect any other provision of this Sales Agreement or
any other agreement between the parties.
ARTICLE 36. REMEDIES
Except as otherwise expressly provided in this Sales Agreement, each and
all of the rights and remedies provided in this Sales Agreement, and each and
all of the remedies allowed at law and in equity, will be cumulative, and the
exercise of one right or remedy will not be exclusive of the right to exercise
or resort to any and all other rights or remedies provided in this Sales
Agreement or at law or in equity.
ARTICLE 37. RELATIONSHIP
The Parties are independent contractors under this Sales Agreement. Each
party acknowledges and agrees that it is not and will not be during the term of
this Sales Agreement, be an employee or an agent of the other party. Each party
and its employees,
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subcontractors, and agents shall not be entitled to or eligible for any of the
benefits that the other party provides for its employees. Each party shall be
solely responsible for withholding and paying its and its employees',
subcontractors' and agents' taxes and other charges, including without
limitation, federal, state and local income and social security taxes, workmen's
compensation and unemployment insurance. Nothing in this Sales Agreement will be
deemed to constitute, create, give effect to or otherwise recognize a joint
venture, partnership, franchise or business entity of any kind. Nothing in this
Sales Agreement will be construed as providing for the sharing of profits or
losses arising out of the efforts of the parties hereto.
ARTICLE 38. USE OF MARKS; PRESS RELEASES
Seller will not use any trade name, trademark, service mark or logo of
Purchaser (or any name, mark or logo confusingly similar thereto) in any
advertising, promotions or otherwise, or otherwise make any press release or
disclosure concerning this Sales Agreement or the activities contemplated
hereby, without Purchaser's prior written consent.
ARTICLE 39. PERMITTED DISCLOSURE
To the extent either party is required to disclose information that
otherwise requires the other party's prior written consent under Articles 26 or
38 of this Sales Agreement, each party hereby consents to the other party's
disclosure to the extent that such disclosure is (i) required by law (provided
that the disclosing party (a) gives the other party prior written notice
sufficient to allow the other party to seek a protective order or other
appropriate remedy, (b) discloses only such information as is so required, and
(c) and uses commercially reasonable efforts to obtain confidential treatment
for any information so disclosed), or (ii) necessary in connection with (aa)
such party's performance of this Sales Agreement, (bb) such party's standard
accounting disclosure obligations, or (cc) the proposed sale or reorganization
of such party's business or the like, provided in each of cases (aa), (bb) and
(cc) that each person to whom such information is disclosed has a need to know
the same, and is bound to keep the same confidential to at least the same extent
as required herein (including pursuant to any applicable confidentiality
agreement between the parties hereto). In both cases (i) and (ii) above, the
disclosing party shall, within the earliest possible time under the
circumstances (or, if the disclosure is to be made under case (ii)(cc) above to
a person or entity which may reasonably be deemed to be a competitor of the
non-disclosing party (or any of its affiliates), then in advance of any such
disclosure), notify or advise the other party of such disclosure, the
information disclosed or to be disclosed, and the identity of recipient of such
information.
IN WITNESS WHEREOF, the parties hereto have caused this Sales Agreement
and all annexes, exhibits and attachments thereto to come into effect on the
last date appearing below:
AUTHORIZED FOR PURCHASER BY:
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<PAGE> 27
Amazon.com, Inc.
Signature /s/ Jimmy M. Wright
-------------------------
Name Jimmy M. Wright
------------------------------
Title V.P./C.L.O.
-----------------------------
Date 3/11/99
------------------------------
AUTHORIZED FOR SELLER BY:
The Buschman Company
Signature /s/ James R. McCarthy
-------------------------
Name James R. McCarthy
------------------------------
Title President
-----------------------------
Date 3/11/99
------------------------------
-27-
<PAGE> 28
ATTACHMENT 1
PRICING; PAYMENT SCHEDULE
The pricing set forth in this Proposal is fixed pricing, based on a
building configuration/layout which has been mutually developed between Bushman
and Amazon.com, and which is assumed to be typical of buildings which may be
located and leased or purchased by Amazon.com in the near future. The Equipment
will be engineered based on such standard configuration/layout, manufactured and
placed into storage (if required). Once a specific building has been located and
purchased by Amazon.com, the standard configuration/layout will be modified to
suit the specific building parameters. Once this has been accomplished, a change
order to this Proposal will be developed to reflect the building-specific
configuration/layout, as well as necessary changes for travel, local labor, and
freight based on the site of the specific building.
Storage and handling costs for Equipment are not included in the
pricing. Storage and handling costs will be invoiced monthly as they are
incurred.
The Purchase Price shall be paid as follows: [*].
- -----------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
-28-
<PAGE> 29
ALLIANCE PRICING SUMMARY FORM- STANDARD
<TABLE>
- --------------------------------------------------------------------------------------------------------
DESCRIPTION HOURS LIST PRICE/COST MULTIPLE SELL PRICE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[ * ]
- --------------------------------------------------------------------------------------------------------
TOTAL $ 27,512,531
- --------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
-29-
<PAGE> 30
PRICE BREAKDOWN
[ * ]
PROJECT TOTAL................................................. $ 27,512,531
============
- -----------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
-30-
<PAGE> 31
BUYOUT SUMMARY
The following is a summary of the Buyout equipment and the categories
that they have been assigned.
Major Purchases - [*].
o Tilt-tray
o Mezzanine
Major Purchases - [*].
o Belt Curves
o Shrink-Wrap Tunnels
o Carton Erectors
o Extendable Conveyors
Major Purchases - [*].
o Scales
o Tapers
o Chutes
o Printer/Applicators
o Air Compressors
o Structural Steel
o Trolley Carriers
o Packing Tables
o Platforms/Catwalks/Stiles
o Pick-to-light shelving
o Reject pullers
o Netting
- -----------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
-31-
<PAGE> 32
PROVISIONS
o Prices do not include any state, local sales/use taxes and Performance
Bond costs.
o Installation services are based on using nonunion labor during regular
working hours. Buschman uses overtime labor, as applicable, to make any
tie-ins that would affect operations.
o Electrical installation is performed under license.
o This price is a total price for the conveyor system. The equipment being
manufactured and stored, based on the blanket order, will be applied and
the price deducted as necessary.
o Other services including ongoing Operational Audits, Slotting, Labor
Standards, and Equipment Maintenance will be priced at a later date if
requested.
o The price does not include trash compactors.
o Freight estimate is based on shipping to [*]. Actual freight charges
will be determined once the job has been chosen and will then be
adjusted accordingly.
o Local labor rate will be adjusted accordingly to the city and state
selected for each site.
- -----------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
-32-
<PAGE> 1
EXHIBIT 10.4
SALES AGREEMENT
This Sales Agreement, hereinafter called "Sales Agreement," made by and
between Amazon.com, Inc., a Delaware corporation (hereinafter called
"Purchaser"), and The Buschman Company, an Ohio corporation (hereinafter called
"Seller"), constitutes the agreement of the parties as follows:
A) CONTRACT DOCUMENTS
In addition to the Standard Terms and Conditions set forth in Part B
below, the following documents ("Additional Contract Documents") are also part
of this Sales Agreement and are hereby incorporated by reference herein. To the
extent any such Additional Contract Document contains any term or condition
inconsistent with the Standard Terms and Conditions below, the Standard Terms
and Conditions shall govern. The Additional Contract Documents, copies of which
are appended hereto, are as follows:
1. The Standard Proposal for Amazon.com, Inc. dated February 5, 1999,
except that Section 4 thereof is hereby deleted and replaced in its entirety
with the pages attached to this Sales Agreement as Attachment 1, and that for
purposes hereof such proposal shall apply to "Site B" yet to be determined
(including and as amended by such amendments thereto as may later be
specifically agreed in writing(s) signed by both Seller and Purchaser from time
to time, the "Proposal").
B) STANDARD TERMS AND CONDITIONS
ARTICLE 1. DEFINITIONS
When used in this Sales Agreement, the capitalized terms listed below
shall have the following meanings:
"Acceptance" shall mean the mutual agreement between the parties in
writing that (i) all Work has been completed (except for minor punch list items
or claims of non-material deficiencies in the Work), (ii) all Equipment has been
delivered to Purchaser and properly installed at the Worksite or stored at the
Worksite, as applicable, and (iii) the Equipment successfully meets all elements
of the Acceptance Test.
"Acceptance Test" shall mean the terms and conditions under which
Purchaser will accept tender of the Equipment, including the criteria concerning
the design, engineering, performance, functional, feature, and other
specifications or requirements which the Equipment must meet in order to be
accepted, all as agreed in the Proposal and/or the Specifications.
"Affiliate" shall mean, (i) with respect to Seller, any corporation,
partnership or other entity that is in or under the control of Seller, and to
the extent specified in the Proposal, any
<PAGE> 2
corporation, partnership or other entity that is under the control of Seller's
parent corporation, Pinnacle Automation Company, Inc., and (ii) with respect to
Purchaser, any corporation, partnership or other entity that controls, is
controlled by, or is in or under common control with, Purchaser. For purposes of
this definition, "control" means, with respect to a corporation, partnership or
other entity, the beneficial ownership of ownership, profits, voting or similar
interests (including any right or option to obtain such an interest)
representing at least 50% of the total interests of the pertinent entity then
outstanding, or the possession, directly or indirectly, of the power to direct
or cause the direction of the general management and policies of such
corporation, partnership or other entity, whether through the ownership of
voting securities, by contract or otherwise.
"Equipment" shall mean all the equipment, machinery, parts, vendor
components, Software, and other goods and items intended to be installed at the
Worksite pursuant to this Sales Agreement, excluding for the avoidance of doubt,
Seller's tools, equipment and other items which are not deliverables under the
Proposal.
"Maintenance or Software Support Agreement" shall mean any agreement
that may be entered into between Purchaser and Seller or any of Seller's
Affiliates pertaining to the maintenance and/or support of the Equipment.
"Proposal" shall have the meaning ascribed to it under Article A hereof.
"Purchase Price" shall mean the total compensation to be paid to the
Seller in consideration for the sale of the Equipment and the performance of the
Work (which may include, without limitation, the installation of the Equipment)
as set forth in the Proposal.
"Sales Agreement" shall have the meaning ascribed to such it in the
preamble and Article A hereof, and including, without limitation, all
Specifications.
"Seller Equipment" shall mean all Equipment which is not Third-Party
Equipment.
"Seller Software" shall mean all Software which is not Third-Party
Software.
"Seller's Plant" means any plant or facility (i) at which any Seller
Equipment is designed, developed, made, inspected or tested by or for Seller or
(ii) at which any Equipment is stored by or for Seller, as applicable.
"Software" shall mean all computer programming code or programs, in
machine readable object code form, that is developed or furnished by or on
behalf of Seller or any of Seller's Affiliates as a deliverable to Purchaser, or
caused to be developed or furnished by Seller or any of Seller's Affiliates to
Purchaser as a deliverable under this Sales Agreement, and all Upgrades thereto.
For the avoidance of doubt, "Software" shall not include any Source Code.
-2-
<PAGE> 3
"Source Code" shall mean, with respect to Seller Software, (i) the
human-readable form of computer programming code thereof as prepared and written
by the programmer(s) who developed the Seller Software, together with (ii) any
build tools (e.g. compilers, linkers and other related tools), compile/link
scripts, program comments, installation scripts and related system
documentation, including all comments and any procedural code such as job
control language, necessary for any reasonably skilled programmer to recompile
such source code into fully functioning object code of the Seller Software, to
the extent that the items listed in this clause (ii) exist.
"Specifications" shall mean the design, engineering, performance,
functional and other criteria, feature descriptions and other specifications or
requirements for any Equipment and/or Work that are contained in this Sales
Agreement, including, without limitation, the Proposal, or in any documents
contemplated hereby or thereby or other documents delivered by Seller pursuant
hereto or thereto and in each case agreed to by Purchaser.
"Third-Party Hardware" shall mean that portion of the Equipment which is
not developed, manufactured or owned by on behalf of Seller or any of Seller's
Affiliates, provided that the same is identified as "Third-Party Hardware" in
the Proposal, and provided further however that "Third-Party Hardware" shall not
include any Third-Party Software. To the greatest extent possible, Third-Party
Hardware manufacturers shall be identified in the Proposal.
"Third-Party Software" shall mean that portion of the Software which is
not developed, manufactured or owned by on behalf of Seller or any of Seller's
Affiliates, provided that the same is identified as "Third-Party Software" in
the Proposal. To the greatest extent possible, Third-Party Software
manufacturers shall be identified in the Proposal.
"Upgrade" shall mean each and every revision, enhancement, modification,
amendment, upgraded version and future release of the Software (including,
without limitation, versions and releases correcting programming errors, beta
versions as well as versions containing materially increased functionality)
delivered by Seller or any of its Affiliates to Purchaser pursuant to this Sales
Agreement or any Maintenance or Software Support Agreement.
"Work" shall mean all the Equipment and other items (including without
limitation, materials, supplies, drawings and data), and manufacturing,
installation, integration and other services, to be supplied or performed by or
on behalf of Seller hereunder.
"Worksite" shall mean the location or destination where the Equipment is
to be installed or, in the case of purchases of Equipment for storage and later
installation, stored, as applicable.
-3-
<PAGE> 4
ARTICLE 2. PERMITS; COMPLIANCE WITH LAWS
Prior to the installation of the Equipment, Purchaser shall procure and
pay for all building, erection and other licenses, permits, authorizations and
inspections required in connection with the Worksite, excepting Seller's Plant.
Seller shall be responsible for the procurement of and payment for all other
licenses, permits, authorizations and inspections associated with the Work.
Seller shall comply, and shall cause all of its consultants and subcontractors
to comply, with building, electrical or other laws, codes or regulations of
local, state or federal agencies or authorities in regard to the Work, and shall
otherwise comply with all other applicable laws, regulations, rules, orders and
other requirements of governmental authorities having jurisdiction with respect
to the Equipment or Seller's performance of the Work.
ARTICLE 3. INTELLECTUAL PROPERTY INDEMNIFICATION
Seller shall defend, indemnify and hold Purchaser and its Affiliates
harmless from and against any and all expenses, costs, claims, demands, causes
of action and damages of whatever kind which Purchaser may incur in connection
with any suit or claim of infringement of any patent, copyright or trademark, or
misappropriation of any trade secret or other intellectual property right
resulting from (i) Purchaser's or its Affiliates' use of any portion of the
Equipment as contemplated in the Proposal and otherwise in accordance with this
Sales Agreement or applicable Equipment documentation delivered by Purchaser by
Seller hereunder, or (ii) performance of the Work, except, in each case with
respect to each of the foregoing clauses (i) and (ii), to the extent directly
attributable to Third-Party Hardware or Third-Party Software. Seller shall
receive written notice from Purchaser within ten (10) days after proper legal
service is received by Purchaser of any such suit or claim, provided that
failure to receive such notice shall not relieve Seller of its obligations under
this Article 3 except to the extent that Seller's ability to defend such suit or
claim is materially impaired due to such failure. Seller is hereby authorized by
Purchaser to, at Seller's expense, appear in and assume the defense of, and be
given the complete control of the settlement of, any such suit or claim;
provided that (a) if Purchaser or any of its Affiliates wishes to participate in
the defense and settlement of the claim, Purchaser or any of its Affiliates may
do at its own cost, (b) Purchaser is kept timely informed of all material
actions taken by Seller in connection with any such settlement, suit or claim
(including, without limitation, of settlement offers and responses (to the
extent the delivery of such information does not require Seller to waive work
product immunity or attorney/client privilege or otherwise violate the terms of
any protective order between Seller and any third party plaintiff or
defendant)); and (c) Seller shall not enter into or acquiesce to any settlement
admitting to or stipulating to any guilt, fault, liability or wrongdoing on the
part of Purchaser or any of its Affiliates without Purchaser's prior written
consent. In the event that Purchaser's right or ability to use the Equipment is
threatened or impaired as a result of any such suit or claim, Seller shall, at
its own expense, do one of the following, (1) diligently procure for Purchaser
the right to continue using the Equipment, or (2) modify the Equipment or, if
necessary and
-4-
<PAGE> 5
by mutual agreement, substitute functionally equivalent Equipment, to the extent
necessary to avoid infringement or misappropriation; provided in each case that
if such modified or substituted equipment fails to comply with all
Specifications applicable to the original, unmodified Equipment, Purchaser shall
be entitled to equitable compensation with respect to such noncompliance. Seller
hereby assigns to or otherwise transfers to the benefit of Purchaser all of its
right, title and interest in and to any intellectual property right infringement
or misappropriation indemnification or defense rights Seller may have with
respect to Third Party Software and Third Party Hardware, and will, at its
expense, take any actions as may be necessary to enable Purchaser to exercise
such rights and realize such benefit to the fullest extent possible. It is
mutually agreed that the provisions set forth herein are Seller's only
obligations with respect to infringement of any patent, copyright or trademark,
or misappropriation of any trade secret or other intellectual property right.
ARTICLE 4. LABOR AND PERSONNEL
Seller shall furnish all labor and personnel required for the
installation of the Equipment at the Worksite. All Work (including without
limitation all labor and other services) will be performed in a timely,
first-class and professional manner. All labor and personnel performing Work at
the Worksite (excluding Seller's Plant) shall comply with Purchaser's or its
Affiliates then-applicable policies, rules and regulations with respect to such
Worksite. If labor or personnel performing Work hereunder fail to so comply with
such policies, rules and regulations, or otherwise fail to perform Work in a
timely, first-class and professional manner, Purchaser in its discretion may
request removal of any such labor or personnel, and Seller shall remove such
labor or personnel from the applicable Worksite in accordance with each such
request. Seller will manage the transition of replacement personnel to minimize
impact on the project. Seller will be responsible for all acts, omissions,
negligence and misconduct of labor or personnel performing Work. For the
avoidance of doubt, Seller's subcontractors, as more fully discussed in Article
5 hereof, are labor and personnel for purposes of this Article 4.
ARTICLE 5. SUBCONTRACTORS AND ASSIGNMENTS
(a) Seller may assign or subcontract any of its obligations under this
Sales Agreement to any supplier, builder or other contractor which Seller, in
its good faith discretion, reasonably considers qualified; provided, however,
that (i) Seller may not so assign or subcontract any of its obligations under
this Sales Agreement to any contractor which will perform Work or supply
Equipment hereunder representing in excess of twenty percent (20%) of the
Purchase Price without the Purchaser's prior written consent (which consent may
be evidenced by Purchaser's written acceptance of Seller's Proposal to the
extent such Proposal clearly identifies such potential subcontractor and the
scope of Work it will perform), and (ii) in any event Seller remains primarily
liable for the performance of all of Seller's obligations under the terms and
conditions of this Sales Agreement. The restriction set forth in clause (i) of
the proviso of the preceding sentence does not apply to Seller's procurement of
raw materials or purchases of goods or other Equipment components from
-5-
<PAGE> 6
Seller's routine vendors and subcontractors from whom Seller routinely procures
the same as part of its standard manufacture of Equipment.
(b) Except as provided in Article 5(a), neither Seller nor Purchaser may
assign their respective rights to or delegate their duties arising from this
Sales Agreement without the prior written consent of the nonassigning or
nondelegating party, which consent shall not be unreasonably withheld; provided,
however, that, if Seller or Purchaser consents to any assignment or delegation,
the assignee or delegatee shall, as a condition to such assignment or
delegation, agree to be subject to the terms and conditions of this Sales
Agreement. Notwithstanding the foregoing, Purchaser may assign this Sales
Agreement to any of its Affiliates or in connection with any merger,
consolidation, reorganization, sale of all or substantially all of its assets or
similar transaction without the prior written consent of Seller; provided that
the assignee or delegatee is financially capable of performing its obligations
hereunder and/or Purchaser remains primarily liable for the performance of all
of Purchaser's obligations under the terms and conditions of this Sales
Agreement.
ARTICLE 6. TAXES
Unless otherwise indicated, the Purchase Price contains no provision for
sales, use, excise, or other similar taxes. It is Purchaser's responsibility to
pay any such taxes should they be levied upon Seller. If such taxes are included
as part of the Purchase Price and the rate or base of the tax is increased or
decreased, or if Seller receives any tax credits related to the Work, Purchaser
will pay any such increased taxes and Seller will give credit for any tax
decrease or credit. Seller will pay any taxes specified in this paragraph and be
reimbursed by Purchaser within thirty (30) days after receipt at the address
specified in Article 11(e) of a separate invoice therefor from Seller. Purchaser
shall be solely responsible for the prompt payment of any and all personal
property taxes of any kind that may become due or payable with respect to the
Equipment at any time following delivery thereof to the Worksite. For the
avoidance of doubt and notwithstanding any other provision of this Sales
Agreement, (a) in no event shall Purchaser have any liability or obligation to
(i) pay taxes in respect of Seller's income or gross revenues, or (ii) reimburse
Seller for or otherwise pay any taxes with respect to which Purchaser is exempt
and Purchaser provides Seller a certificate of exemption, and (b) should
Purchaser challenge any taxes specified in this paragraph, Seller will at its
expense provide Purchaser with reasonable assistance in so challenging the same
and, if Seller receives funds or credits in connection with any such contest,
promptly refund the amount of such refund or credit to Purchaser.
ARTICLE 7. INSPECTION; SHIPMENT; REJECTION
Seller will furnish Purchaser, upon its request, with safe and
sufficient access to Seller's Plant for the purposes of conducting in process
inspections and tests to determine Seller's and the Equipment's compliance with
this Sales Agreement, including without limitation the Specifications. No
inspection or test, delay or failure to inspect or test, or failure to discover
any defect or noncompliance will (i) relieve Seller of any of its obligations
-6-
<PAGE> 7
under this Sales Agreement, or (ii) impair Purchaser's rights under Article 7(c)
or any other right or remedy afforded to Purchaser. Purchaser shall conduct such
in process inspections and tests in a manner as to not interfere with Seller's
planned performance.
Seller shall ship Equipment in accordance with the delivery terms
specified in the Proposal. If Seller has manufactured Equipment to meet
Purchaser's schedule and Purchaser requests delay in shipment, Seller shall have
the right to store such Equipment at Purchaser's expense. Seller shall obtain
approval from Purchaser's Project Manager for each shipment release to ensure
the readiness of the Worksite to accept such shipment.
Notwithstanding any other provision of this Sales Agreement, Seller
acknowledges and agrees that Purchaser may reject, refuse acceptance of or
revoke acceptance of any Equipment, or any tender thereof, which does not
strictly comply with the requirements of this Sales Agreement including without
limitation all applicable Specifications. Purchaser shall notify Seller of any
such rejection, refusal or revocation. In any such event, Purchaser may, with
respect to such noncompliance, elect to: (a) retain any or all of such Equipment
for repair, replacement or other correction by Seller, or (b) retain any or all
of such Equipment without correction by Seller. Seller shall promptly comply
with any direction by Purchaser for correction. Purchaser shall be entitled, in
addition to all other remedies available to Purchaser at law or in equity, to
recover from Seller, by price reduction, credit, offset, invoice or otherwise,
an equitable amount for the diminished value of any uncorrected Equipment and
all reasonable costs and expenses incurred by Purchaser in connection with
Equipment which is rightfully rejected or with respect to which acceptance is
refused or revoked by Purchaser (including, but not limited to, reasonable costs
and expenses to return Equipment to Seller for correction to the extent not
otherwise disclaimed or limited under this Sales Agreement).
ARTICLE 8. SITE CONDITIONS AND PROVISIONS BY PURCHASER
Seller shall not be liable to Purchaser for any failure to deliver and
install any Equipment in accordance with this Sales Agreement, to the extent
that such failure results solely from Purchaser's failure to provide at the
Worksite reasonable means of access to a minimum of dock doors, the availability
of a dock leveler, and a completely enclosed building to protect Seller's
Equipment from the elements, with a water-tight roof and such electric current,
water, heat, ventilation, light and other utilities and facilities as may
reasonably be required for the installation of the Equipment. Purchaser shall
allow Seller reasonable access to the Worksite for inspection of compliance with
these requirements, prior to commencement of the installation. Seller shall
promptly notify Purchaser in writing of any failure by Purchaser to provide any
of the access, availability, items or conditions set forth above or any other
failure by Purchaser to provide access, availability, items, materials,
conditions or assistance as otherwise may be required under this Sales
Agreement.
-7-
<PAGE> 8
ARTICLE 9. INSURANCE AND RISK OF LOSS
Upon delivery of the Equipment at the Worksite, and until Acceptance of
the Equipment, Purchaser shall, at its expense, take out and maintain
"installation floater" insurance in an amount at least equal to the Purchase
Price covering all risks of loss of the Equipment and any and all associated
expenses. Such installation floater insurance shall name Seller as an insured
party and shall provide for an insurer's waiver of subrogation in favor of all
insured parties. Upon Acceptance of the Equipment, Purchaser shall be
responsible for and shall bear any and all risk of loss or damage to the
Equipment except as may otherwise be provided for in this Sales Agreement.
Notwithstanding the foregoing, this Article 9 does not apply when Worksite is
Seller's Plant.
ARTICLE 10. COMPLETION, CHANGES, DELAYS, ERRORS
At any time prior to final payment, Purchaser may request in writing any
substitutions, deviations, additions, or deletions in the Equipment, Work and/or
Specifications (hereinafter referred to as "Changes") and Seller must comply
with the same. If any Change results in an increase or decrease in the time or
expense required for the Work not then performed in accordance with the Sales
Agreement, the parties will equitably adjust schedules for performance of such
Work and/or the Purchaser Price to reflect the increase or decrease. All the
terms and conditions of this Sales Agreement shall apply to such Changes. If by
any such Changes or by other causes within control of Purchaser Seller's
performance is delayed or prevented by Purchaser, Purchaser agrees to reimburse
Seller for its reasonable, documented, out-of-pocket expenses incident to such
delay which may include, without limitation, the costs of storing, maintaining,
repairing, and refurbishing Equipment, demurrage, labor and material escalation
and pull out charges. In such event, Purchaser also agrees to excuse the delay
and accept Seller's performance at an appropriately deferred completion date.
Where Seller's performance under this Sales Agreement is delayed as above, the
Purchase Price shall be revised to reflect any changes in labor wage rates,
material costs and other costs caused by such delay and actually incurred by
Seller in its performance.
ARTICLE 11. PURCHASE AND SALE; PURCHASE PRICE; PAYMENT
The Purchaser shall purchase the Equipment and Work from Seller, and
Seller shall sell and provide the Equipment and Work to Purchaser, as provided
below:
(a) Consideration: Seller shall sell and provide the Equipment and/or
Work, as applicable, to Purchaser as provided in and in accordance with this
Sales Agreement. In full consideration of Seller's sale and provision of the
Equipment and Work to Purchaser, Purchaser shall pay Seller the Purchase Price
as set forth in, and subject to, this Article 11.
-8-
<PAGE> 9
(b) Payment Terms: Unless otherwise specified in the Proposal, Seller
shall submit to the Purchaser [*] invoices for [*] payments for labor and
material expended or purchased for that month. The amounts constituting (or as
applicable, the method(s) for determining the amounts constituting) the [*]
payments, retention, or other payments applicable to this Sales Agreement, or
the amounts constituting (or as applicable, the method(s) for determining the
amounts constituting) such other payment structure as may be reflected in the
Proposal, will be as set forth in the Proposal. Seller's monthly invoices shall
contain a certification regarding the accuracy and completeness of the amounts
invoiced and that such amounts are consistent with the procedures agreed to in
the Proposal.
(c) Retention Rights: Notwithstanding Article 11(b), payment of the
amounts referred to therein shall be subject to a retention amount as specified
in the Proposal. The retention amount specified in the Proposal shall not become
due until (1) Acceptance has occurred, and (2) Seller submits to Purchaser, for
both monthly and final invoices, receipts, releases and waivers of liens arising
out of this Sales Agreement, to the extent and in such form as may be designated
by the Purchaser; provided that payment of such retention amount is subject to
reduction as set forth in Article 11(d). If any subcontractor or supplier
refuses to furnish a release or waiver required by the Purchaser, the Seller may
in lieu thereof furnish at the Seller's expense a bond satisfactory to the
Purchaser to indemnify the Purchaser against any such lien. If any such lien
remains unsatisfied after all payments are made, the Seller shall refund to the
Purchaser all monies that the latter may be compelled to pay in discharging such
lien, including all costs and reasonable attorney's fees.
(d) Retention Reduction: If all the conditions of payment set forth in
Article 11(c) have been met (except for minor punch list items or claims of
non-material deficiencies in the Work, the value of which items or claims will
be mutually determined in good faith by Purchaser and Seller), Seller will
invoice Purchaser for the retention amount less twice the determined value of
such items or claims. Upon the correction or elimination of such items or
claims, Seller will invoice Purchaser for the balance of the retention amount.
(e) Invoicing: Purchaser shall make payment of properly invoiced amounts
within thirty (30) days from receipt of invoice at the following address:
Amazon.com, Inc.
Attn: Jimmy Wright
215 Columbia Street
Seattle, Washington 98104
- ---------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
-9-
<PAGE> 10
(f) Subcontractor Liens or Releases: Upon receipt of funds from the
Purchaser, Seller will sign and furnish a lien waiver to the Purchaser covering
the Work, Equipment and payment described in the applicable invoice and will
send the same to the Purchaser with the next invoice. The Seller will either
obtain lien waivers and releases from suppliers and subcontractors on behalf of
whom such payment was sought by the Seller or furnish Purchaser with a bond
satisfactory to Purchaser to indemnify Purchaser against any claim by lien or
otherwise by Seller's suppliers or subcontractors. The Purchaser is authorized
to withhold from any invoice, without interest, monies due the Seller equal to
the amount of monies previously disbursed to the Seller with respect to which
Seller fails to furnish Purchaser with supplier or subcontractor lien waivers
and releases or a bond as provided in this Sales Agreement.
(g) Purchaser Right of Invoice Rejection or Revocation: The Purchaser
may (1) decline to approve the Seller's invoice in whole or in part or (2)
nullify the whole or any part of any invoice previously approved, in each case
to such extent as may be necessary to protect the Purchaser from loss because
of:
o Defective Work not remedied;
o Failure of the Seller to make payments properly to subcontractor or
suppliers for labor, materials or Equipment;
o Reasonable evidence that the Work cannot be completed for the unpaid
balance of the Purchase Price; or
o Damage to the Purchaser's or its Affiliate's property or another
contractor's work.
ARTICLE 12. SOFTWARE
License Grant: Title to the Seller Software remains at all times with
Seller. Seller hereby grants Purchaser a nonexclusive right and license to use
Seller Software and documentation associated with it on the Equipment in the
manner contemplated by the Proposal or as otherwise permitted under this Sales
Agreement. Additionally, Purchaser may make backup and archival copies as
reasonably deemed necessary by Purchaser, provided that Seller's copyright
notice and other proprietary markings are reproduced in such copies.
Restricted Use: Each copy of Seller Software provided under this license
may be used only on the Equipment on which the Seller Software is delivered and
installed or on other equipment approved by Seller in writing. Use of the Seller
Software in a network environment is authorized under the license only to the
extent reasonably necessary for the Purchaser's or its Affiliates internal
purposes with respect to the Equipment or as otherwise specified in this Sales
Agreement. No other use of the Seller software is authorized unless specifically
agreed to in a writing signed by Seller.
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Copies and Modifications: Purchaser shall not use, copy, rent, lease,
sell, modify, prepare derivative works of, decompile, disassemble, otherwise
reverse engineer, or transfer Seller Software except with Seller's prior written
consent or otherwise as permitted under this Sales Agreement.
Source Code; Escrow Agreement: Seller shall at all times keep and
maintain a complete master, reproducible copy of all Source Code of all Seller
Software installed at the Worksite in escrow in accordance with the terms and
conditions of the Escrow Agreement attached hereto as Exhibit A (the "Escrow
Agreement") and which agreement is hereby made part of this Sales Agreement,
being incorporated herein by this reference. Seller will promptly update the
Source Code in escrow to reflect all Upgrades installed at the Worksite.
In the event that (i) a Major Failure occurs (as defined under Article
17 b)) related to Seller Software and Seller fails to respond to and perform its
warranty or maintenance obligations under this Sales Agreement, or Seller (or
any Seller Affiliate, if applicable) fails to respond to and perform its
obligations under any Maintenance or Software Support Agreement, in each case in
connection with the occurrence of such Major Failure, and Seller does not cure
such failure to respond and perform within five (5) business days after written
notice thereof from Purchaser, (ii) Seller fails to offer maintenance or
software support services to Purchaser as reasonably required by Purchaser for
it to continue its use of the Equipment as contemplated by this Sales Agreement
and on terms no less favorable than those offered to Seller's similarly situated
customers for similar services, (iii) this Sales Agreement is terminated by
Purchaser pursuant to Article 16(a)(1), or (iv) Seller (1) becomes insolvent or
bankrupt or makes an assignment for the benefit of creditors, (2) has a receiver
or trustee in bankruptcy is appointed for it, or (3) has any proceeding in
bankruptcy, receivership or liquidation instituted against it which is not
dismissed within thirty (30) days following the commencement thereof, Purchaser
shall be entitled to the Source Code as provided for in the Escrow Agreement.
Seller hereby grants to Purchaser, effective upon the occurrence of any
of the events set forth in any of the clauses (i) through (iv) of the
immediately preceding paragraph, a perpetual, non-exclusive, right and license
to (a) use, copy, modify, adapt and create derivative works of the Source Code,
and (b) decompile, reverse engineer or disassemble any Seller Software or
modify, adapt or create derivative works of Seller Software or its
documentation, in each case solely in connection with Purchaser's and its
Affiliates' and their respective contractors' use, maintenance and support of
the Software in accordance with their respective rights under this Sales
Agreement. Notwithstanding each of the clauses (a) and (b) above, the Source
Code referred to above is hereby deemed to be Seller Software for purposes of
Purchaser's continued compliance with the terms of Articles 12 b) (except that
Purchaser's rights under clauses (a) and (b) above may be performed in its test
and development areas and equipment for the purposes set forth in this
paragraph), 12 f) and 12 i) hereof.
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Any Source Code delivered under this Article will be provided on an "as
is" basis, without any representation, warranty or liability of Seller
whatsoever, except that Seller hereby represents and warrants to Purchaser that
the Source Code in Escrow at all times is the Source Code of the latest version
of the Seller Software (including all Upgrades) installed at the Worksite.
Further, Seller disclaims any representations, warranties or liabilities
relating to modifications to, or adaptations or derivative works of, the Source
Code, Software or its documentation created by or for Purchaser and/or its
Affiliates pursuant to the immediately preceding paragraph; provided, however,
that nothing in this paragraph will limit any of Seller's representations or
warranties under this Sales Agreement with respect to the unmodified Software or
its documentation.
Term: The term of the licenses granted pursuant to this Article 12 shall
be perpetual, subject to termination only in accordance with Article 16d). Upon
any such termination of this license, Purchaser shall return the Seller Software
and all copies of it and all documentation to Seller.
Trade Secret Protection: Purchaser understands and agrees that Seller
Software and all documentation related thereto constitutes the valuable
technology, know-how and trade secrets of Seller. Purchaser agrees during the
term of this Agreement and thereafter to hold the Seller Software, including any
copies of it and any documentation related to it, in confidence and to not
permit any person or entity to obtain access to it except as required for
Purchaser's and its Affiliates' own internal use and provided such person or
entity has agreed in writing to hold such in confidence.
Software Upgrades: Except as may be otherwise agreed to in a Maintenance
or Software Support Agreement, or otherwise required under this Sales Agreement,
Seller shall have no obligation to provide Upgrades to Purchaser due to later
versions or revisions introduced into the marketplace. Materials, installation,
and customization to implement such Upgrades will be made available to Purchaser
at prices normally offered to Seller's preferred customers. Notwithstanding the
foregoing, Seller will provide and Purchaser will not be charged for, any
Upgrades required in order to correct Software to meet applicable Specifications
pursuant to Seller's obligations under the Sales Agreement or any Maintenance or
Software Support Agreement.
Seller Software Warranty Performance: As part of Seller's warranty of
the Equipment, but not in limitation of Purchaser's rights under this Sales
Agreement, Purchaser agrees that Seller may perform Seller Software warranty
service remotely via a modem in addition to other reasonable means. The Seller
Software warranty is void if the Seller Software has been altered, modified or
changed in any way from the original delivery configuration, without the written
authorization of Seller, unless so altered, modified or changed by or on behalf
of Seller or as may otherwise be permitted hereunder.
Software Markings: The Seller Software and users manuals, logos, product
names and other support materials, if any, are either patented, copyrighted,
trademarked, or
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otherwise proprietary to Seller. Purchaser agrees never to remove any such
notices and product identification.
Third Party Software: Software delivered to Purchaser pursuant to this
Sales Agreement may contain Third Party Software. Seller hereby assigns to or
otherwise transfers to the benefit of Purchaser all of Seller's right, title and
interest in and to all warranties, indemnities, product guaranties and other
representations made by third party manufacturers which Seller may have with
respect to Third Party Software, and will at its expense take any and all
actions as may be necessary to enable Purchaser to exercise rights thereunder
and realize the benefit thereof to the fullest extent possible; provided that
nothing in this Sales Agreement shall have the effect of extending or otherwise
expanding upon any of such third party warranties, indemnities, product
guarantees or representations assigned or otherwise transferred by Seller to
Purchaser. Seller hereby represents and warrants to Purchaser that Purchaser and
its Affiliates will have all rights necessary to use Third Party Software
delivered under the Sales Agreement as contemplated in this Sales Agreement
(including, without limitation, the Specifications).
Purchaser's Affiliates. All rights and obligations of Purchaser under
this Article 12 shall extend to each of Purchaser's Affiliates, and Purchaser
shall ensure that each of Purchaser's Affiliates complies with the provisions of
this Article 12 in connection with its exercise of its rights hereunder.
ARTICLE 13. DELAYED PAYMENTS
In the event that Purchaser fails to make due and punctual payments for
the Equipment and/or Work as provided herein, interest shall accrue on the
amount due and unpaid at the rate of one percent (1%) per month for each full
calendar month or part thereof during which such amount shall be outstanding,
such interest to commence to accrue on the thirtieth (30th) day after such
amount is due and payable hereunder. If the interest rate provided herein
exceeds the maximum interest rate permitted by law, then the interest payable
shall be at such maximum permissible rate.
ARTICLE 14. CONTINGENCIES
In the event of any condition or contingency, existing or future, which
is beyond the reasonable control and without the fault or negligence of either
party which prevents or delays the performance by such party of this Sales
Agreement ("Event of Force Majeure"), such party shall be entitled to an
appropriate extension of time for performance of this Sales Agreement. Events of
Force Majeure shall include, without limitation, acts of God, fire, floods,
transport delays, strikes, labor disputes and interference by civil or military
authorities. If an Event of Force Majeure occurs, the affected party shall take
measures to mitigate and minimize the effect of such event in order to continue
with the performance of its obligations under this Sales Agreement. If the
period of such an event extends beyond six
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(6) months, then either party may terminate this Sales Agreement under Article
16(a)(3) below.
ARTICLE 15. MAINTENANCE OR SOFTWARE SUPPORT
Seller will throughout the warranty period and for a period of five (5)
years thereafter offer maintenance services to Purchaser as reasonably required
by Purchaser for it to continue its use of the Equipment as contemplated by this
Sales Agreement and on terms no less favorable than those offered to Seller's
similarly situated customers for similar services. To the extent maintenance
services are not provided for in the Proposal or elsewhere as part of this Sales
Agreement, Seller and Purchaser will subsequent to the date hereof, at
Purchaser's option, negotiate in good faith as to Seller's provision of the same
to Purchaser.
ARTICLE 16. TERMINATION
(a) This Sales Agreement may be terminated upon the occurrence of any of
the following events:
(1) Other than as provided for in Article 16(a)(2), in the event
that either party shall breach or fail to comply with any provisions of this
Sales Agreement and such breach or failure shall continue for a period of thirty
(30) days after the giving of written notice thereof by the other party, the
other party may terminate this Sales Agreement immediately upon the giving of
written notice thereof to the defaulting party.
(2) Notwithstanding the foregoing, if Purchaser shall have failed to
make any payment due under this Sales Agreement within forty-five (45) days
after having been so notified by Seller, Seller may terminate this Sales
Agreement immediately after the expiration of the forty-five (45) day period by
giving notice of such termination to Purchaser.
(3) If an Event of Force Majeure occurs and continues for a period
greater than six (6) months, either party may terminate this Sales Agreement
upon giving written notice thereof to the other party. In such event, the amount
to which Seller shall be entitled shall be determined as per Article 16(b).
(b) In addition to the foregoing, Purchaser may terminate this Sales
Agreement or any portion thereof without cause effective thirty (30) days after
written notice thereof is received by Seller. If Purchaser terminates this Sales
Agreement pursuant to this Article 16(b), then Seller shall be reimbursed by
Purchaser for Seller's reasonable, documented costs incurred through the
termination date in its performance and/or termination of the terminated portion
of this Sales Agreement, plus Seller's expected profit with respect to the
terminated portion as contemplated in the Proposal, less any progress or other
payments received by Seller before termination. Seller's Chief Financial Officer
shall certify as to the accuracy and completeness of such costs incurred and
expected profit invoiced to Purchaser. Purchaser shall pay Seller net thirty
(30) days after receipt of invoice and certificate from Seller. Seller
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will keep its regularly maintained corporate books and records related to this
Sales Agreement for five (5) years following a termination hereunder. During
such period, and only to the extent necessary to support Seller's reimbursement
under this Article 16 b), Seller will make its books and records as necessary to
support Seller's reimbursement available for audit to an independent public
accountant, selected by Purchaser and at Purchaser's sole cost and expense,
under terms of confidentiality applicable to this Sales Agreement; provided that
if any such audit reveals a discrepancy in favor of Seller in excess of five
percent (5%), then Seller will reimburse Purchaser for the costs of such audit.
Any such audit will be conducted in a manner which will not unreasonably
interfere with Seller's operations.
Upon receipt or delivery (as applicable) of a termination notice under
paragraph 16(a), or upon receipt of Purchaser's termination notice under Article
16(b) above, Seller shall take the following actions:
Stop work to the extent relating to the terminated portion of this Sales
Agreement;
Take all commercially reasonable actions to limit amounts for which
Purchaser may be responsible in connection with this Article, including
terminating all subcontracts to the extent they relate to the terminated portion
of this Sales Agreement;
Assign to Purchaser all of Seller's right, title and interest to all
Third Party Software and Third Party Hardware and deliver the Equipment or
components thereof (regardless of status of completion) consistent with Seller's
progress or other payments received by Seller before and pursuant to
termination; and
Deliver, assign and otherwise transfer, in the manner contemplated by
this Sales Agreement, title to any Work and other drawings, plans and documents
(regardless of status of completion) that, if this Sales Agreement had been
completed, would have been furnished to Purchaser.
d) Notwithstanding anything to the contrary contained in this Sales
Agreement, the licenses granted under Article 12 may not be terminated except
upon the occurrence of a substantial, material breach of this Sales Agreement by
Purchaser that (i) is not cured within twenty (20) days after Purchaser receives
written notice from Seller of the breach, and (ii) is of such a nature that
Seller cannot reasonably be made whole through an award of monetary damages.
Following any termination of this Sales Agreement that does not involve a
termination of the licenses granted under Article 12, Purchaser's and its
Affiliates' and contractors' use of the Seller Software will remain subject to
the restrictions contained in Article 12.
ARTICLE 17. WARRANTY
a) Standard Warranty: Seller hereby warrants that the Equipment shall
(i) be free from all liens, charges or encumbrances, except any lien of the
Seller in respect of any unpaid
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portion of the Purchase Price; (ii) be free from defects in materials and
workmanship and shall conform to the provisions and specifications of this Sales
Agreement (including without limitation the Specifications); (iii) be new and,
if no quality is specified, of a quality consistent with the Seller's usual and
normal production; and (iv) conform with OSHA regulations in force at the time
of Acceptance of the Equipment. Seller shall use its reasonable best efforts to
as soon as practicable obtain for Seller's own benefit Third-Party Hardware and
Third-Party Software warranties that are at least co-extensive with Seller's
warranty obligations to Purchaser under clause (ii) of the immediately preceding
sentence with respect to the Equipment. Notwithstanding the foregoing, if
Seller, after so using its reasonable best efforts, fails to obtain for Seller's
own benefit such warranties, then Seller shall immediately notify Purchaser in
writing of the nature and extent of such failure, and the parties shall
negotiate in good faith as to (a) adjustment of schedules for performance of the
Work in order for Seller to secure such warranties, (b) Seller's limited release
from its warranty obligations under clause (ii) of the immediately preceding
sentence with respect to such Third-Party Hardware or Third-Party Software,
and/or (c) a reduction or increase in the Purchaser Price to reflect the changed
schedule and/or lessened warranty obligations, as applicable. Any agreement
between the parties resulting from such negotiations must be in writing.
Seller's failure to notify Purchaser as required above shall constitute Seller's
waiver of its renegotiation rights in the preceding sentence, and the provisions
of this Article 17 shall remain in full force and effect. Seller shall, at its
option, repair or replace (replacement parts to be shipped F.O.B. Worksite) any
defective Equipment or component thereof; provided, however, that Seller is
given written notice of any defect during the Warranty Period (as defined
below). For purposes of Articles 17a) and b), the warranty period shall commence
on the earlier of the date of first commercial use of the Equipment by Purchaser
or the date of Acceptance of the Equipment, and the warranty period shall end
one year after such commencement date ("Warranty Period"). Purchaser shall give
Seller prompt reasonable written notice of any claim under the foregoing
warranty within the Warranty Period and permit Seller to inspect the Equipment
in order to verify the defect or nonconformity. Seller shall promptly and
reasonably respond to verify and correct the defect. Purchaser's remedies and
Seller's obligations in connection with any claim made under this warranty shall
be limited to repair or replacement at Seller's expense of the Equipment or part
thereof which is defective. Labor performed at the Worksite with regard to such
claims is not included in this warranty. Purchaser shall be responsible for the
normal maintenance and repair of the Equipment and shall perform the same in
accordance with generally accepted maintenance procedures or such other
reasonable procedures as are set forth in maintenance and repair manuals
provided by Seller to Purchaser. Seller shall not, under this Article 17, be
responsible for or obligated to pay or to reimburse Purchaser for (a) any work
or repairs performed on the Equipment by third parties (other than on behalf of
Seller and except for mutually agreed subcontractors), (b) any materials
furnished by third parties (other than on behalf of Seller) for use in
connection with the Equipment if the same was undertaken or furnished without
mutual prior written consent or (c) any loss or damage arising from improper
operation or maintenance of the Equipment by Purchaser or from ordinary wear and
tear.
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b) Major Failure Warranty: Notwithstanding other provisions of this
Article 17, in instances of a Major Failure during the Warranty Period, Seller
will provide all necessary parts and labor to correct the defect. A "Major
Failure" is defined as failure of the Equipment or portion of the Equipment to
operate as described in the Proposal or the applicable Specifications, which
significantly impacts Purchaser's ability to use the affected Equipment or
portion thereof, and which Purchaser's maintenance personnel or available
contractors cannot remedy without significant expense or effort. Seller will
respond to a Major Failure by immediately dispatching such servicemen by
commercial air carrier, or by responding as otherwise agreed between the
parties, upon request and notification of a Major Failure by Purchaser as may be
necessary to promptly correct the defect, and such servicemen shall thereafter
diligently and continuously perform such services as may be necessary to
promptly correct such defect until corrected. Should it later be reasonably and
mutually determined in good faith by Seller and Purchaser that the necessary
corrective services rendered by Seller were within the capabilities of the
Purchaser's maintenance personnel or available contractors without the
expenditure of significant expense or effort, the Purchaser will reimburse
Seller for the labor and expenses of the service trip.
Year 2000: Seller hereby represents and warrants that the Equipment,
when used in accordance with its associated documentation, shall perform
properly and without change in operations related to the advent of the new
century (defined as commencing at 12:00 am, January 1, 2000), including but not
limited to, by accurately processing date data (including without limitation by
calculating, comparing and sequencing) within, from, into and between centuries
(including, but not limited to, the twentieth and twenty-first centuries), and
by properly calculating leap years, except to the extent that any failure of the
Equipment to so perform is directly attributable to (i) the failure of other
technology, systems or interfaces, Third Party Software, or Third Party Hardware
to properly exchange date data with the Equipment, (ii) a change in the
operating environment not contemplated in this Sales Agreement, including
without limitation the Specifications, or (iii) any addition to or modification
of the Equipment by or on behalf of Purchaser or any of its Affiliates that has
not been authorized in writing by Seller or made by or on behalf of Seller or
any of its Affiliates. In the event of any material failure of the Equipment to
operate as warranted above, Purchaser's sole remedy, and Seller's sole
obligation, shall be to promptly respond and diligently and continuously work to
correct until corrected (or provide a functionally equivalent work around for)
any reproducible error or failure reported by Purchaser in writing to Seller on
or before January 1, 2001. If Seller is unable to remedy such error or failure
within a reasonable time, Seller and Purchaser shall enter into good faith
discussions to agree to reductions in Purchase Price or other equitable
adjustments to account for such delay or inability to remedy said failure.
Seller agrees to use its reasonable best efforts to incorporate a statement in
all purchase orders that Seller issues under this Sales Agreement that requires
any Third Party Software delivered hereunder to be Year 2000 compliant
consistent with the minimum requirements of this Article 17c). The remedies
provided in this paragraph are exclusive remedies for failure of the Equipment
to perform as warranted hereunder.
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Third Party Software and Third Party Hardware: The foregoing warranties
in Article 17a), b) and c) specifically exclude warranties relating to Third
Party Software or Third Party Hardware to the extent specified in such Articles.
Seller hereby assigns and otherwise transfers to the benefit of Purchaser all of
Seller's right, title and interest in and to all assignable or transferable
warranties with respect to Third Party Software and Third Party Hardware and all
assignable or transferable rights of Seller against any manufacturer or supplier
thereof, including without limitation with respect to all indemnity agreements,
and will at its expense take any and all actions as may be necessary to enable
Purchaser to exercise rights thereunder and realize the benefit thereof to the
fullest extent possible. To the extent any of such warranties, indemnities or
rights are not assignable or transferable, Seller agrees to exercise for the
benefit of Purchaser any and all claims, rights, remedies, warranties,
representations and indemnities against or obtained from any such third party
manufacturers or suppliers.
Disclaimer: OTHER THAN AS SPECIFICALLY SET FORTH ABOVE, SELLER MAKES NO
OTHER WARRANTIES, WHETHER WRITTEN, ORAL OR IMPLIED, INCLUDING WITHOUT
LIMITATION, WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OR MERCHANTABILITY.
ARTICLE 18. USE OF INSTALLED PORTIONS OF THE EQUIPMENT
Whenever, as determined by Seller, the installation of any portion of
the Equipment has been completed, Seller may make available such portion for
Purchaser's use, provided, however, that Seller and Purchaser shall mutually
agree on the terms and conditions of such use. Except as otherwise agreed by
Seller and Purchaser (including where appropriate, an adjustment in the Purchase
Price and/or schedule otherwise provided for in this Sales Agreement), such use
shall not interfere with the installation of the remainder of the Equipment.
Seller shall not be liable for the cost of repairs, rework or replacement which
may be required due to ordinary wear and tear resulting from such use.
ARTICLE 19. INSURANCE BY SELLER
Seller will maintain insurance coverage covering its operation and its
obligations pursuant to Article 20, in at least the following amounts:
Commercial General Liability - Bodily Injury and Property damage - $1,000,000
Per Occurrence.
Personal Injury Liability - $1,000,000 Limit.
Business Auto - Bodily Injury & Property Damage - $500,000 Combined Single
Limit.
Umbrella Liability - $20,000,000 Limit of Liability
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Worker's Compensation - Coverage A - Statutory
Coverage B - Employer's Liability; $100,000 each accident; $100,000 each
employee; $500,000 Policy Limit
Foreign Products Liability - $1,000,000 Per Occurrence.
Insurance shall be purchased from companies having a rating of A-VII or
better in the current BEST'S INSURANCE REPORTS published by A. M. Best Company.
Policies of insurance shall name Purchaser as an additional insured, provide for
an insurer's waiver of subrogation in favor of all insured parties, and provide
that they will not be canceled or materially changed without reasonable prior
written notice to Purchaser. Certificates of insurance evidencing coverage shall
be submitted in advance of or concurrent with the execution of the Work, and on
each insurance policy renewal thereafter. Seller shall, at Purchaser's request,
provide copies of requested insurance policies. If Seller does not provide
Purchaser with such certificates of insurance, then Purchaser will so advise
Seller. Thereafter, if Seller does not furnish evidence of acceptable coverage
within fifteen (15) days, then Purchaser shall have the right, in its sole
discretion, to (i) withhold payments from Seller until evidence of such
acceptable coverage is provided, or (ii) immediately terminate this Sales
Agreement. Failure to obtain and maintain required insurance shall not relieve
Seller of any obligation contained in this Sales Agreement. Additionally, any
approval by Purchaser of any of Seller's insurance policies shall not relieve
Seller of any obligation contained in this Sales Agreement.
ARTICLE 20. INDEMNIFICATION
Seller shall indemnify, defend and hold Purchaser harmless from and
against any and all expenses, losses, costs, claims, demands, causes of action,
and damages of whatever kind, (a) which result from injuries at the Worksite
during the installation, or testing of the Equipment, (b) which are due to the
negligence or willful misconduct of Seller or its employees or contractors, or
(c) to the extent otherwise related to any claim, action, suit or proceeding
involving the Equipment which is based upon injuries to persons (including
death) or property arising from or relating to (i) the use of the Equipment in
accordance with Seller's operation, maintenance and other related manuals and
documents delivered to Purchaser by Seller hereunder, or (ii) the design or
manufacture of the Equipment as contemplated in the Proposal (including, without
limitation, the Specifications), including without limitation, product liability
claims. Purchaser shall indemnify, defend, and hold Seller harmless from and
against any and all expenses, losses, costs, claims, demands, causes of action,
and damages of whatever kind which result from the negligent or willful use or
operation of the Equipment by any person (other than Seller or Seller's
employees or contractors) other than in its normal and intended manner, and
removal or modification of safety features unless Purchaser notifies Seller and
such removal or modification is approved by Seller or made by or on behalf of
Seller or any of its Affiliates.
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ARTICLE 21. LIMITATION OF LIABILITY
Notwithstanding any other provision of this Sales Agreement, except to
the extent constituting a third party claim (or portion thereof) subject to
indemnification under Article 3 or Article 20 (such portion of such claim
subject to indemnification under Article 20 being a "Third-Party Non-IP
Consequential Damage Indemnified Claim"), neither party shall be liable to the
other party or anyone claiming through such other party for any special,
indirect, incidental or consequential damages of any kind whatsoever, including
without limitation loss of profit or reputation incurred by either Party,
whether such damages arise out of the use, inability to use, failure of, delay
in delivery of, or nondelivery of, the Equipment, or out of any termination of
this Agreement, or otherwise. Notwithstanding any other provision of this
Agreement, each party's aggregate liability under Article 20 for Third-Party
Non-IP Consequential Damage Indemnified Claims shall not exceed the greater of
[*].
ARTICLE 22. WAIVER
Except as otherwise expressly provided in this Sales Agreement, no
failure on the part of either party to exercise, and no delay in exercising, any
right, privilege, or power under this Sales Agreement shall operate as a waiver
or relinquishment thereof; nor shall any single or partial exercise by either
party of any right, privilege or power under this Sales Agreement preclude any
other or further exercise thereof, or the exercise of any other right, privilege
or power. Waiver by any party of any breach of any provision of this Sales
Agreement shall not constitute or be construed as a continuing waiver, or as a
waiver of any other breach of any provision of this Sales Agreement.
ARTICLE 23. ENTIRE AGREEMENT
This instrument, together with any attachments specifically made a part
of this Sales Agreement and any documents incorporated in such attachments by
reference, embodies the whole agreement of the parties relating to the subject
matter of this Sales Agreement and supersedes any and all prior oral or written
specifications, communications and agreements by or on behalf of the parties.
This Sales Agreement may not be varied by any purchase order, acknowledgment,
confirmation, invoice, or shipping document issued by either party. Any
amendments or modifications of this Sales Agreement must be in writing and
signed by an officer or General Counsel of Purchaser and an officer or General
Counsel of Seller to be binding.
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[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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ARTICLE 24: CONFIDENTIALITY AGREEMENT
With respect to information received by either party as a result of or
in connection with this Sales Agreement, the parties will abide by the terms and
conditions of following Mutual Nondisclosure Agreements, as applicable (but only
to the extent that the information constitutes "Confidential Information" as
defined in the Mutual Nondisclosure Agreement):
The Buschman Company: Agreement signed with Amazon.com dated January 14, 1999
Real Time Solutions: Agreement signed with Amazon.com dated January 19, 1999
White Systems, Inc.: Agreement signed with Amazon.com dated January 19, 1999
ARTICLE 25. GOVERNING LAW
This Sales Agreement shall be governed by and interpreted in accordance
with the laws of the State of Washington, without regard to its choice of law
provisions.
ARTICLE 26. PUBLICITY
Neither party shall disclose the terms of this Sales Agreement or the
existence or nature of any relationship between the parties (including, without
limitation in any press release or public communication) to any third party
without the prior written consent of the other party.
ARTICLE 27. SOLICITATION
Seller and Purchaser agree that, for the period commencing with the
commencement of Work hereunder (whether of not prior to the date hereof) until
one year following Acceptance, or any earlier termination of this Sales
Agreement, neither party will, except with the other party's written approval,
offer or seek to offer or solicit employment to the other party's employees or
staff. Notwithstanding the foregoing, the parties agree that general
solicitations or advertisements (by any means or media) shall not constitute
prohibited offers or solicitations for purposes of this Article 27.
Notwithstanding any other provision of this Sales Agreement, each party's
exclusive remedy for a violation of this Article 27 is recovery of such party's
direct damages and/or specific performance in connection therewith, as
applicable. The parties agree that under no circumstances shall a violation of
this Article 27 give rise to a right to terminate this Agreement.
ARTICLE 28. SURVIVAL
Articles 3, 12, 15, 17(c), 20, 21, 24 and 27 (together with all other
provisions that reasonably may be interpreted as surviving termination or
expiration of this Sales Agreement) will survive the Acceptance of the
Equipment, the performance of the Work and performance of Seller's warranty
obligations hereunder.
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<PAGE> 22
ARTICLE 29. DISPUTES
Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, ("Claim") shall be resolved in accordance with this
Article 29.
Any Claim shall first be submitted by the claiming party to the other
party in writing within a reasonable period after the event giving rise to it,
which writing shall include a description of such Claim, the proposed remedy for
such Claim and data supporting such Claim. If the parties are unable to resolve
the Claim informally, either party may submit the Claim for joint consideration
by and between Purchaser's senior logistics officer and Seller's Chief Executive
Officer.
Arbitration. Claims that have been properly raised and considered in the
above procedures but have not been resolved shall be resolved exclusively by
arbitration before a panel of three arbitrators in Seattle, Washington or in
such other location as may be reasonable given the facts and circumstances
involved in such Claim. The arbitration shall be conducted in accordance with
the applicable rules of the American Arbitration Association currently in effect
unless the parties mutuality agree otherwise.
Notice of the demand for arbitration shall be filed in writing with the
other party to the Sales Agreement and in accordance with the applicable rules
of the American Arbitration Association and shall be made within the statutes of
limitation that are applicable to the Claim.
The parties shall apply to the arbitrators for relevant discovery
consistent with the Federal Rules of Civil Procedure, which the arbitrators
shall be authorized to order. Either party may request that the arbitrators'
award include findings of fact and conclusions of law.
The arbitrators shall not be empowered to grant exemplary or punitive
damages. The award rendered by the arbitrator or arbitrators shall be final, and
judgment may be entered upon it in accordance with applicable law in any court
having jurisdiction thereof.
Within 30 days of receipt from the of the written findings of fact and
conclusions of law, either party will have the right to file with the
arbitrators and serve on the other party a written motion to reconsider. The
arbitrators may request the nonmoving or responding party to file a written
response within 10 days after receipt of that request, and the arbitrators
thereupon will reconsider the issues raised by the motion and response (if any)
and either confirm or alter their decision, which will then be final, binding
and conclusive upon the parties. The cost of such motion for reconsideration and
written opinion of the arbitrators, including attorneys' fees, will be awarded
against the moving party if it does not substantially prevail on its motion.
Upon demand of either party, the arbitration shall include, by
consolidation, joinder or third party claim, any person or entity (a) that is
substantially involved in a common
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<PAGE> 23
question of fact or law, (b) where the presence of such person or entity is
required if complete relief is to be accorded in the arbitration, or (c) who is
alleged to be liable to a party for all or part of a claim in the arbitration.
The agreement herein among the parties shall be specifically enforceable
under applicable law in any court having jurisdiction thereof.
Each party agrees that all aspects of any arbitration are "Confidential
Information" under the Mutual Non-disclosure Agreement referred to in Article
24.
Seller shall diligently carry on the Work, and Purchaser shall continue
its duties under this Agreement, during any dispute resolution proceedings,
unless otherwise agreed in writing. The requirements of this paragraph cannot be
waived with respect to any Claim except by an explicit written waiver signed the
party against whom the Claim is brought.
Notwithstanding the foregoing, nothing in this Article 29 will preclude
either party from seeking provisional remedies (including, without limitation,
temporary restraining orders and preliminary injunctions) from any court of
competent jurisdiction to protect its rights pending resolution as provided for
above. Further, unless otherwise agreed by the parties in writing, this Article
29 will not apply to disputes relating to the enforceability of, or a party's
rights under, any United States or foreign patent or other intellectual property
right.
ARTICLE 30. TRANSFER OF TITLE AND RESERVATION OF SECURITY INTEREST
Upon Acceptance, title to the Work shall transfer to Purchaser. For the
avoidance of doubt, notwithstanding the transfer of possession of the Equipment
by Seller to Purchaser, Seller shall retain legal title to, and hereby reserves
a purchase money security interest in, the Equipment until Acceptance. Seller
shall have the rights of a secured creditor under the Uniform Commercial Code
for the jurisdiction applicable during such period. Purchaser hereby authorizes
Seller to file, and to sign on behalf of Purchaser as the debtor, any financing
statements or other documents with State or local recording offices which may be
required to perfect such security interest. In circumstances where Acceptance
has occurred and the Equipment is thereafter stored at Seller's Plant, Seller
hereby authorizes Purchaser to file, and to sign on behalf of Seller any
financing statements or other documents with State or local recording offices
which may be required to perfect Purchaser's security interest in the Equipment
so stored.
ARTICLE 31. NOTICES
All notices, requests, demands, applications, services of process, and
other communications which are required to be or may be given under this Sales
Agreement shall be in writing and shall be deemed to have been duly given if
sent by telecopy or facsimile transmission, answer back requested, or delivered
by courier or mailed, certified first class
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<PAGE> 24
mail, postage prepaid, return receipt requested, to the parties to this
Agreement at the following addresses:
If to Purchaser: Amazon.com, Inc.
1516 2nd Avenue
Seattle, WA 98101
Attn: General Counsel
Fax: 206-834-7010
With a copy to: Amazon.com, Inc.
1516 2nd Avenue
Seattle, WA 98101
Attn: Chief Logistics Officer
Fax: 206-694-2004
If to Seller: ______________________________
______________________________
______________________________
Attn: The President
Fax: _________________________
With a copy to: The Buschman Company
10045 International Boulevard
Cincinnati, Ohio 45246
Attn: General Counsel
Fax: 513/881-5144
or to such other address as either party shall have furnished to the other by
notice given in accordance with this Article. Such notice shall be effective (i)
if delivered in person or by courier, upon actual receipt by the intended
recipient, or (ii) if sent by telecopy or facsimile transmission, on the date of
transmission unless transmitted after normal business hours, in which case on
the following date, (iii) if mailed, upon the date of first attempted delivery.
ARTICLE 32. HEADINGS
Headings used in this Sales Agreement are for convenience and ease of
reference only, are not part of this Sales Agreement and shall not be relevant
to or affect the meaning or interpretation of this Sales Agreement.
-24-
<PAGE> 25
ARTICLE 33. INTERPRETATION
Except where otherwise expressly provided or unless the context
otherwise necessarily requires: (i) references to a given law or rule are
references to that law or rule as amended or modified as of the date on which
the reference is made, (ii) reference to a given agreement or instrument is a
reference to that agreement or instrument as originally executed, and as
modified, amended, supplemented and restated through the date as of which
reference is made to that agreement or instrument, and (iii) accounting terms
have the meanings given to them by U.S. generally accepted accounting principles
applied on a consistent basis by the accounting entity to which they refer.
ARTICLE 34. ATTORNEY'S FEES AND COSTS
If any suit is brought, or an attorney retained to collect any money due
under this Sales Agreement, or to collect a judgment for breach of this Sales
Agreement, the prevailing party shall be entitled to recover, in addition to any
other remedy, reimbursement for attorneys' fees, court costs, investigation
costs and other related expenses incurred in connection therewith.
ARTICLE 35. SEVERABILITY
This Sales Agreement will be enforced to the fullest extent permitted by
applicable law. If for any reason any provision of this Sales Agreement is held
to be invalid or unenforceable to any extent, then such: (i) provision will be
interpreted, construed or reformed to the extent reasonably required to render
the same valid, enforceable and consistent with the original intent underlying
such provision; (ii) provision will be void to the extent it is held to be
invalid or unenforceable; (iii) provision will remain in effect to the extent
that it is not invalid or unenforceable; and (iv) such invalidity or
unenforceability will not affect any other provision of this Sales Agreement or
any other agreement between the parties.
ARTICLE 36. REMEDIES
Except as otherwise expressly provided in this Sales Agreement, each and
all of the rights and remedies provided in this Sales Agreement, and each and
all of the remedies allowed at law and in equity, will be cumulative, and the
exercise of one right or remedy will not be exclusive of the right to exercise
or resort to any and all other rights or remedies provided in this Sales
Agreement or at law or in equity.
ARTICLE 37. RELATIONSHIP
The Parties are independent contractors under this Sales Agreement. Each
party acknowledges and agrees that it is not and will not be during the term of
this Sales Agreement, be an employee or an agent of the other party. Each party
and its employees,
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<PAGE> 26
subcontractors, and agents shall not be entitled to or eligible for any of the
benefits that the other party provides for its employees. Each party shall be
solely responsible for withholding and paying its and its employees',
subcontractors' and agents' taxes and other charges, including without
limitation, federal, state and local income and social security taxes, workmen's
compensation and unemployment insurance. Nothing in this Sales Agreement will be
deemed to constitute, create, give effect to or otherwise recognize a joint
venture, partnership, franchise or business entity of any kind. Nothing in this
Sales Agreement will be construed as providing for the sharing of profits or
losses arising out of the efforts of the parties hereto.
ARTICLE 38. USE OF MARKS; PRESS RELEASES
Seller will not use any trade name, trademark, service mark or logo of
Purchaser (or any name, mark or logo confusingly similar thereto) in any
advertising, promotions or otherwise, or otherwise make any press release or
disclosure concerning this Sales Agreement or the activities contemplated
hereby, without Purchaser's prior written consent.
ARTICLE 39. PERMITTED DISCLOSURE
To the extent either party is required to disclose information that
otherwise requires the other party's prior written consent under Articles 26 or
38 of this Sales Agreement, each party hereby consents to the other party's
disclosure to the extent that such disclosure is (i) required by law (provided
that the disclosing party (a) gives the other party prior written notice
sufficient to allow the other party to seek a protective order or other
appropriate remedy, (b) discloses only such information as is so required, and
(c) and uses commercially reasonable efforts to obtain confidential treatment
for any information so disclosed), or (ii) necessary in connection with (aa)
such party's performance of this Sales Agreement, (bb) such party's standard
accounting disclosure obligations, or (cc) the proposed sale or reorganization
of such party's business or the like, provided in each of cases (aa), (bb) and
(cc) that each person to whom such information is disclosed has a need to know
the same, and is bound to keep the same confidential to at least the same extent
as required herein (including pursuant to any applicable confidentiality
agreement between the parties hereto). In both cases (i) and (ii) above, the
disclosing party shall, within the earliest possible time under the
circumstances (or, if the disclosure is to be made under case (ii)(cc) above to
a person or entity which may reasonably be deemed to be a competitor of the
non-disclosing party (or any of its affiliates), then in advance of any such
disclosure), notify or advise the other party of such disclosure, the
information disclosed or to be disclosed, and the identity of recipient of such
information.
IN WITNESS WHEREOF, the parties hereto have caused this Sales Agreement
and all annexes, exhibits and attachments thereto to come into effect on the
last date appearing below:
AUTHORIZED FOR PURCHASER BY:
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<PAGE> 27
Amazon.com, Inc.
Signature /s/ Jimmy M. Wright
-------------------------
Name Jimmy M. Wright
------------------------------
Title V.P./C.L.O
-----------------------------
Date 3/11/99
------------------------------
AUTHORIZED FOR SELLER BY:
The Buschman Company
Signature /s/ James R. McCarthy
-------------------------
Name James R. McCarthy
------------------------------
Title President
-----------------------------
Date 3/11/99
------------------------------
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<PAGE> 28
ATTACHMENT 1
PRICING; PAYMENT SCHEDULE
The pricing set forth in this Proposal is fixed pricing, based on a
building configuration/layout which has been mutually developed between Bushman
and Amazon.com, and which is assumed to be typical of buildings which may be
located and leased or purchased by Amazon.com in the near future. The Equipment
will be engineered based on such standard configuration/layout, manufactured and
placed into storage (if required). Once a specific building has been located and
purchased by Amazon.com, the standard configuration/layout will be modified to
suit the specific building parameters. Once this has been accomplished, a change
order to this Proposal will be developed to reflect the building-specific
configuration/layout, as well as necessary changes for travel, local labor, and
freight based on the site of the specific building.
Storage and handling costs for Equipment are not included in the
pricing. Storage and handling costs will be invoiced monthly as they are
incurred.
The Purchase Price shall be paid as follows: [*].
- ---------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
-28-
<PAGE> 29
ALLIANCE PRICING SUMMARY FORM- STANDARD
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
DESCRIPTION HOURS LIST PRICE/COST MULTIPLE SELL PRICE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[ * ]
- --------------------------------------------------------------------------------------------------------
TOTAL $ 26,893,390
- --------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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<PAGE> 30
PRICE BREAKDOWN
[ * ]
TOTAL................................................. $ 26,893,390
- ---------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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<PAGE> 31
BUYOUT SUMMARY
The following is a summary of the Buyout equipment and the categories
that they have been assigned.
Major Purchases - [*].
o Tilt-tray
o Mezzanine
Major Purchases - [*].
o Belt Curves
o Shrink-Wrap Tunnels
o Carton Erectors
o Extendable Conveyors
Major Purchases - [*].
o Scales
o Tapers
o Chutes
o Printer/Applicators
o Air Compressors
o Structural Steel
o Trolley Carriers
o Packing Tables
o Platforms/Catwalks/Stiles
o Pick-to-light shelving
o Reject pullers
o Netting
- ---------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
-31-
<PAGE> 32
PROVISIONS
o Prices do not include any state, local sales/use taxes and Performance
Bond costs.
o Installation services are based on using nonunion labor during regular
working hours. Buschman uses overtime labor, as applicable, to make any
tie-ins that would affect operations.
o Electrical installation is performed under license.
o This price is a total price for the conveyor system. The equipment being
manufactured and stored, based on the blanket order, will be applied and
the price deducted as necessary.
o Other services including ongoing Operational Audits, Slotting, Labor
Standards, and Equipment Maintenance will be priced at a later date if
requested.
o The price does not include trash compactors.
o Freight estimate is based on shipping to [*]. Actual freight charges
will be determined once the job has been chosen and will then be
adjusted accordingly.
o Local labor rate will be adjusted accordingly to the city and state
selected for each site.
- ---------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
-32-
<PAGE> 1
EXHIBIT 10.5
SALES AGREEMENT
This Sales Agreement, hereinafter called "Sales Agreement," made by and
between Amazon.com, Inc., a Delaware corporation (hereinafter called
"Purchaser"), and The Buschman Company, an Ohio corporation (hereinafter called
"Seller"), constitutes the agreement of the parties as follows:
A) CONTRACT DOCUMENTS
In addition to the Standard Terms and Conditions set forth in Part B
below, the following documents ("Additional Contract Documents") are also part
of this Sales Agreement and are hereby incorporated by reference herein. To the
extent any such Additional Contract Document contains any term or condition
inconsistent with the Standard Terms and Conditions below, the Standard Terms
and Conditions shall govern. The Additional Contract Documents, copies of which
are appended hereto, are as follows:
1. The Standard Proposal for Amazon.com, Inc. dated February 5, 1999,
except that Section 4 thereof is hereby deleted and replaced in its entirety
with the pages attached to this Sales Agreement as Attachment 1, and that for
purposes hereof such proposal shall apply to "Site C" yet to be determined
(including and as amended by such amendments thereto as may later be
specifically agreed in writing(s) signed by both Seller and Purchaser from time
to time, the "Proposal").
B) STANDARD TERMS AND CONDITIONS
ARTICLE 1. DEFINITIONS
When used in this Sales Agreement, the capitalized terms listed below
shall have the following meanings:
"Acceptance" shall mean the mutual agreement between the parties in
writing that (i) all Work has been completed (except for minor punch list items
or claims of non-material deficiencies in the Work), (ii) all Equipment has been
delivered to Purchaser and properly installed at the Worksite or stored at the
Worksite, as applicable, and (iii) the Equipment successfully meets all elements
of the Acceptance Test.
"Acceptance Test" shall mean the terms and conditions under which
Purchaser will accept tender of the Equipment, including the criteria concerning
the design, engineering, performance, functional, feature, and other
specifications or requirements which the Equipment must meet in order to be
accepted, all as agreed in the Proposal and/or the Specifications.
"Affiliate" shall mean, (i) with respect to Seller, any corporation,
partnership or other entity that is in or under the control of Seller, and to
the extent specified in the Proposal, any
<PAGE> 2
corporation, partnership or other entity that is under the control of Seller's
parent corporation, Pinnacle Automation Company, Inc., and (ii) with respect to
Purchaser, any corporation, partnership or other entity that controls, is
controlled by, or is in or under common control with, Purchaser. For purposes of
this definition, "control" means, with respect to a corporation, partnership or
other entity, the beneficial ownership of ownership, profits, voting or similar
interests (including any right or option to obtain such an interest)
representing at least 50% of the total interests of the pertinent entity then
outstanding, or the possession, directly or indirectly, of the power to direct
or cause the direction of the general management and policies of such
corporation, partnership or other entity, whether through the ownership of
voting securities, by contract or otherwise.
"Equipment" shall mean all the equipment, machinery, parts, vendor
components, Software, and other goods and items intended to be installed at the
Worksite pursuant to this Sales Agreement, excluding for the avoidance of doubt,
Seller's tools, equipment and other items which are not deliverables under the
Proposal.
"Maintenance or Software Support Agreement" shall mean any agreement
that may be entered into between Purchaser and Seller or any of Seller's
Affiliates pertaining to the maintenance and/or support of the Equipment.
"Proposal" shall have the meaning ascribed to it under Article A hereof.
"Purchase Price" shall mean the total compensation to be paid to the
Seller in consideration for the sale of the Equipment and the performance of the
Work (which may include, without limitation, the installation of the Equipment)
as set forth in the Proposal.
"Sales Agreement" shall have the meaning ascribed to such it in the
preamble and Article A hereof, and including, without limitation, all
Specifications.
"Seller Equipment" shall mean all Equipment which is not Third-Party
Equipment.
"Seller Software" shall mean all Software which is not Third-Party
Software.
"Seller's Plant" means any plant or facility (i) at which any Seller
Equipment is designed, developed, made, inspected or tested by or for Seller or
(ii) at which any Equipment is stored by or for Seller, as applicable.
"Software" shall mean all computer programming code or programs, in
machine readable object code form, that is developed or furnished by or on
behalf of Seller or any of Seller's Affiliates as a deliverable to Purchaser, or
caused to be developed or furnished by Seller or any of Seller's Affiliates to
Purchaser as a deliverable under this Sales Agreement, and all Upgrades thereto.
For the avoidance of doubt, "Software" shall not include any Source Code.
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<PAGE> 3
"Source Code" shall mean, with respect to Seller Software, (i) the
human-readable form of computer programming code thereof as prepared and written
by the programmer(s) who developed the Seller Software, together with (ii) any
build tools (e.g. compilers, linkers and other related tools), compile/link
scripts, program comments, installation scripts and related system
documentation, including all comments and any procedural code such as job
control language, necessary for any reasonably skilled programmer to recompile
such source code into fully functioning object code of the Seller Software, to
the extent that the items listed in this clause (ii) exist.
"Specifications" shall mean the design, engineering, performance,
functional and other criteria, feature descriptions and other specifications or
requirements for any Equipment and/or Work that are contained in this Sales
Agreement, including, without limitation, the Proposal, or in any documents
contemplated hereby or thereby or other documents delivered by Seller pursuant
hereto or thereto and in each case agreed to by Purchaser.
"Third-Party Hardware" shall mean that portion of the Equipment which is
not developed, manufactured or owned by on behalf of Seller or any of Seller's
Affiliates, provided that the same is identified as "Third-Party Hardware" in
the Proposal, and provided further however that "Third-Party Hardware" shall not
include any Third-Party Software. To the greatest extent possible, Third-Party
Hardware manufacturers shall be identified in the Proposal.
"Third-Party Software" shall mean that portion of the Software which is
not developed, manufactured or owned by on behalf of Seller or any of Seller's
Affiliates, provided that the same is identified as "Third-Party Software" in
the Proposal. To the greatest extent possible, Third-Party Software
manufacturers shall be identified in the Proposal.
"Upgrade" shall mean each and every revision, enhancement, modification,
amendment, upgraded version and future release of the Software (including,
without limitation, versions and releases correcting programming errors, beta
versions as well as versions containing materially increased functionality)
delivered by Seller or any of its Affiliates to Purchaser pursuant to this Sales
Agreement or any Maintenance or Software Support Agreement.
"Work" shall mean all the Equipment and other items (including without
limitation, materials, supplies, drawings and data), and manufacturing,
installation, integration and other services, to be supplied or performed by or
on behalf of Seller hereunder.
"Worksite" shall mean the location or destination where the Equipment is
to be installed or, in the case of purchases of Equipment for storage and later
installation, stored, as applicable.
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<PAGE> 4
ARTICLE 2. PERMITS; COMPLIANCE WITH LAWS
Prior to the installation of the Equipment, Purchaser shall procure and
pay for all building, erection and other licenses, permits, authorizations and
inspections required in connection with the Worksite, excepting Seller's Plant.
Seller shall be responsible for the procurement of and payment for all other
licenses, permits, authorizations and inspections associated with the Work.
Seller shall comply, and shall cause all of its consultants and subcontractors
to comply, with building, electrical or other laws, codes or regulations of
local, state or federal agencies or authorities in regard to the Work, and shall
otherwise comply with all other applicable laws, regulations, rules, orders and
other requirements of governmental authorities having jurisdiction with respect
to the Equipment or Seller's performance of the Work.
ARTICLE 3. INTELLECTUAL PROPERTY INDEMNIFICATION
Seller shall defend, indemnify and hold Purchaser and its Affiliates
harmless from and against any and all expenses, costs, claims, demands, causes
of action and damages of whatever kind which Purchaser may incur in connection
with any suit or claim of infringement of any patent, copyright or trademark, or
misappropriation of any trade secret or other intellectual property right
resulting from (i) Purchaser's or its Affiliates' use of any portion of the
Equipment as contemplated in the Proposal and otherwise in accordance with this
Sales Agreement or applicable Equipment documentation delivered by Purchaser by
Seller hereunder, or (ii) performance of the Work, except, in each case with
respect to each of the foregoing clauses (i) and (ii), to the extent directly
attributable to Third-Party Hardware or Third-Party Software. Seller shall
receive written notice from Purchaser within ten (10) days after proper legal
service is received by Purchaser of any such suit or claim, provided that
failure to receive such notice shall not relieve Seller of its obligations under
this Article 3 except to the extent that Seller's ability to defend such suit or
claim is materially impaired due to such failure. Seller is hereby authorized by
Purchaser to, at Seller's expense, appear in and assume the defense of, and be
given the complete control of the settlement of, any such suit or claim;
provided that (a) if Purchaser or any of its Affiliates wishes to participate in
the defense and settlement of the claim, Purchaser or any of its Affiliates may
do at its own cost, (b) Purchaser is kept timely informed of all material
actions taken by Seller in connection with any such settlement, suit or claim
(including, without limitation, of settlement offers and responses (to the
extent the delivery of such information does not require Seller to waive work
product immunity or attorney/client privilege or otherwise violate the terms of
any protective order between Seller and any third party plaintiff or
defendant)); and (c) Seller shall not enter into or acquiesce to any settlement
admitting to or stipulating to any guilt, fault, liability or wrongdoing on the
part of Purchaser or any of its Affiliates without Purchaser's prior written
consent. In the event that Purchaser's right or ability to use the Equipment is
threatened or impaired as a result of any such suit or claim, Seller shall, at
its own expense, do one of the following, (1) diligently procure for Purchaser
the right to continue using the Equipment, or (2) modify the Equipment or, if
necessary and
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<PAGE> 5
by mutual agreement, substitute functionally equivalent Equipment, to the extent
necessary to avoid infringement or misappropriation; provided in each case that
if such modified or substituted equipment fails to comply with all
Specifications applicable to the original, unmodified Equipment, Purchaser shall
be entitled to equitable compensation with respect to such noncompliance. Seller
hereby assigns to or otherwise transfers to the benefit of Purchaser all of its
right, title and interest in and to any intellectual property right infringement
or misappropriation indemnification or defense rights Seller may have with
respect to Third Party Software and Third Party Hardware, and will, at its
expense, take any actions as may be necessary to enable Purchaser to exercise
such rights and realize such benefit to the fullest extent possible. It is
mutually agreed that the provisions set forth herein are Seller's only
obligations with respect to infringement of any patent, copyright or trademark,
or misappropriation of any trade secret or other intellectual property right.
ARTICLE 4. LABOR AND PERSONNEL
Seller shall furnish all labor and personnel required for the
installation of the Equipment at the Worksite. All Work (including without
limitation all labor and other services) will be performed in a timely,
first-class and professional manner. All labor and personnel performing Work at
the Worksite (excluding Seller's Plant) shall comply with Purchaser's or its
Affiliates then-applicable policies, rules and regulations with respect to such
Worksite. If labor or personnel performing Work hereunder fail to so comply with
such policies, rules and regulations, or otherwise fail to perform Work in a
timely, first-class and professional manner, Purchaser in its discretion may
request removal of any such labor or personnel, and Seller shall remove such
labor or personnel from the applicable Worksite in accordance with each such
request. Seller will manage the transition of replacement personnel to minimize
impact on the project. Seller will be responsible for all acts, omissions,
negligence and misconduct of labor or personnel performing Work. For the
avoidance of doubt, Seller's subcontractors, as more fully discussed in Article
5 hereof, are labor and personnel for purposes of this Article 4.
ARTICLE 5. SUBCONTRACTORS AND ASSIGNMENTS
(a) Seller may assign or subcontract any of its obligations under this
Sales Agreement to any supplier, builder or other contractor which Seller, in
its good faith discretion, reasonably considers qualified; provided, however,
that (i) Seller may not so assign or subcontract any of its obligations under
this Sales Agreement to any contractor which will perform Work or supply
Equipment hereunder representing in excess of twenty percent (20%) of the
Purchase Price without the Purchaser's prior written consent (which consent may
be evidenced by Purchaser's written acceptance of Seller's Proposal to the
extent such Proposal clearly identifies such potential subcontractor and the
scope of Work it will perform), and (ii) in any event Seller remains primarily
liable for the performance of all of Seller's obligations under the terms and
conditions of this Sales Agreement. The restriction set forth in clause (i) of
the proviso of the preceding sentence does not apply to Seller's procurement of
raw materials or purchases of goods or other Equipment components from
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<PAGE> 6
Seller's routine vendors and subcontractors from whom Seller routinely procures
the same as part of its standard manufacture of Equipment.
(b) Except as provided in Article 5(a), neither Seller nor Purchaser may
assign their respective rights to or delegate their duties arising from this
Sales Agreement without the prior written consent of the nonassigning or
nondelegating party, which consent shall not be unreasonably withheld; provided,
however, that, if Seller or Purchaser consents to any assignment or delegation,
the assignee or delegatee shall, as a condition to such assignment or
delegation, agree to be subject to the terms and conditions of this Sales
Agreement. Notwithstanding the foregoing, Purchaser may assign this Sales
Agreement to any of its Affiliates or in connection with any merger,
consolidation, reorganization, sale of all or substantially all of its assets or
similar transaction without the prior written consent of Seller; provided that
the assignee or delegatee is financially capable of performing its obligations
hereunder and/or Purchaser remains primarily liable for the performance of all
of Purchaser's obligations under the terms and conditions of this Sales
Agreement.
ARTICLE 6. TAXES
Unless otherwise indicated, the Purchase Price contains no provision for
sales, use, excise, or other similar taxes. It is Purchaser's responsibility to
pay any such taxes should they be levied upon Seller. If such taxes are included
as part of the Purchase Price and the rate or base of the tax is increased or
decreased, or if Seller receives any tax credits related to the Work, Purchaser
will pay any such increased taxes and Seller will give credit for any tax
decrease or credit. Seller will pay any taxes specified in this paragraph and be
reimbursed by Purchaser within thirty (30) days after receipt at the address
specified in Article 11(e) of a separate invoice therefor from Seller. Purchaser
shall be solely responsible for the prompt payment of any and all personal
property taxes of any kind that may become due or payable with respect to the
Equipment at any time following delivery thereof to the Worksite. For the
avoidance of doubt and notwithstanding any other provision of this Sales
Agreement, (a) in no event shall Purchaser have any liability or obligation to
(i) pay taxes in respect of Seller's income or gross revenues, or (ii) reimburse
Seller for or otherwise pay any taxes with respect to which Purchaser is exempt
and Purchaser provides Seller a certificate of exemption, and (b) should
Purchaser challenge any taxes specified in this paragraph, Seller will at its
expense provide Purchaser with reasonable assistance in so challenging the same
and, if Seller receives funds or credits in connection with any such contest,
promptly refund the amount of such refund or credit to Purchaser.
ARTICLE 7. INSPECTION; SHIPMENT; REJECTION
Seller will furnish Purchaser, upon its request, with safe and
sufficient access to Seller's Plant for the purposes of conducting in process
inspections and tests to determine Seller's and the Equipment's compliance with
this Sales Agreement, including without limitation the Specifications. No
inspection or test, delay or failure to inspect or test, or failure to discover
any defect or noncompliance will (i) relieve Seller of any of its obligations
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under this Sales Agreement, or (ii) impair Purchaser's rights under Article 7(c)
or any other right or remedy afforded to Purchaser. Purchaser shall conduct such
in process inspections and tests in a manner as to not interfere with Seller's
planned performance.
Seller shall ship Equipment in accordance with the delivery terms
specified in the Proposal. If Seller has manufactured Equipment to meet
Purchaser's schedule and Purchaser requests delay in shipment, Seller shall have
the right to store such Equipment at Purchaser's expense. Seller shall obtain
approval from Purchaser's Project Manager for each shipment release to ensure
the readiness of the Worksite to accept such shipment.
Notwithstanding any other provision of this Sales Agreement, Seller
acknowledges and agrees that Purchaser may reject, refuse acceptance of or
revoke acceptance of any Equipment, or any tender thereof, which does not
strictly comply with the requirements of this Sales Agreement including without
limitation all applicable Specifications. Purchaser shall notify Seller of any
such rejection, refusal or revocation. In any such event, Purchaser may, with
respect to such noncompliance, elect to: (a) retain any or all of such Equipment
for repair, replacement or other correction by Seller, or (b) retain any or all
of such Equipment without correction by Seller. Seller shall promptly comply
with any direction by Purchaser for correction. Purchaser shall be entitled, in
addition to all other remedies available to Purchaser at law or in equity, to
recover from Seller, by price reduction, credit, offset, invoice or otherwise,
an equitable amount for the diminished value of any uncorrected Equipment and
all reasonable costs and expenses incurred by Purchaser in connection with
Equipment which is rightfully rejected or with respect to which acceptance is
refused or revoked by Purchaser (including, but not limited to, reasonable costs
and expenses to return Equipment to Seller for correction to the extent not
otherwise disclaimed or limited under this Sales Agreement).
ARTICLE 8. SITE CONDITIONS AND PROVISIONS BY PURCHASER
Seller shall not be liable to Purchaser for any failure to deliver and
install any Equipment in accordance with this Sales Agreement, to the extent
that such failure results solely from Purchaser's failure to provide at the
Worksite reasonable means of access to a minimum of dock doors, the availability
of a dock leveler, and a completely enclosed building to protect Seller's
Equipment from the elements, with a water-tight roof and such electric current,
water, heat, ventilation, light and other utilities and facilities as may
reasonably be required for the installation of the Equipment. Purchaser shall
allow Seller reasonable access to the Worksite for inspection of compliance with
these requirements, prior to commencement of the installation. Seller shall
promptly notify Purchaser in writing of any failure by Purchaser to provide any
of the access, availability, items or conditions set forth above or any other
failure by Purchaser to provide access, availability, items, materials,
conditions or assistance as otherwise may be required under this Sales
Agreement.
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ARTICLE 9. INSURANCE AND RISK OF LOSS
Upon delivery of the Equipment at the Worksite, and until Acceptance of
the Equipment, Purchaser shall, at its expense, take out and maintain
"installation floater" insurance in an amount at least equal to the Purchase
Price covering all risks of loss of the Equipment and any and all associated
expenses. Such installation floater insurance shall name Seller as an insured
party and shall provide for an insurer's waiver of subrogation in favor of all
insured parties. Upon Acceptance of the Equipment, Purchaser shall be
responsible for and shall bear any and all risk of loss or damage to the
Equipment except as may otherwise be provided for in this Sales Agreement.
Notwithstanding the foregoing, this Article 9 does not apply when Worksite is
Seller's Plant.
ARTICLE 10. COMPLETION, CHANGES, DELAYS, ERRORS
At any time prior to final payment, Purchaser may request in writing any
substitutions, deviations, additions, or deletions in the Equipment, Work and/or
Specifications (hereinafter referred to as "Changes") and Seller must comply
with the same. If any Change results in an increase or decrease in the time or
expense required for the Work not then performed in accordance with the Sales
Agreement, the parties will equitably adjust schedules for performance of such
Work and/or the Purchaser Price to reflect the increase or decrease. All the
terms and conditions of this Sales Agreement shall apply to such Changes. If by
any such Changes or by other causes within control of Purchaser Seller's
performance is delayed or prevented by Purchaser, Purchaser agrees to reimburse
Seller for its reasonable, documented, out-of-pocket expenses incident to such
delay which may include, without limitation, the costs of storing, maintaining,
repairing, and refurbishing Equipment, demurrage, labor and material escalation
and pull out charges. In such event, Purchaser also agrees to excuse the delay
and accept Seller's performance at an appropriately deferred completion date.
Where Seller's performance under this Sales Agreement is delayed as above, the
Purchase Price shall be revised to reflect any changes in labor wage rates,
material costs and other costs caused by such delay and actually incurred by
Seller in its performance.
ARTICLE 11. PURCHASE AND SALE; PURCHASE PRICE; PAYMENT
The Purchaser shall purchase the Equipment and Work from Seller, and
Seller shall sell and provide the Equipment and Work to Purchaser, as provided
below:
(a) Consideration: Seller shall sell and provide the Equipment and/or
Work, as applicable, to Purchaser as provided in and in accordance with this
Sales Agreement. In full consideration of Seller's sale and provision of the
Equipment and Work to Purchaser, Purchaser shall pay Seller the Purchase Price
as set forth in, and subject to, this Article 11.
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<PAGE> 9
(b) Payment Terms: Unless otherwise specified in the Proposal, Seller
shall submit to the Purchaser [*] invoices for [*] payments for labor and
material expended or purchased for that month. The amounts constituting (or as
applicable, the method(s) for determining the amounts constituting) the [*]
payments, retention, or other payments applicable to this Sales Agreement, or
the amounts constituting (or as applicable, the method(s) for determining the
amounts constituting) such other payment structure as may be reflected in the
Proposal, will be as set forth in the Proposal. Seller's monthly invoices shall
contain a certification regarding the accuracy and completeness of the amounts
invoiced and that such amounts are consistent with the procedures agreed to in
the Proposal.
(c) Retention Rights: Notwithstanding Article 11(b), payment of the
amounts referred to therein shall be subject to a retention amount as specified
in the Proposal. The retention amount specified in the Proposal shall not become
due until (1) Acceptance has occurred, and (2) Seller submits to Purchaser, for
both monthly and final invoices, receipts, releases and waivers of liens arising
out of this Sales Agreement, to the extent and in such form as may be designated
by the Purchaser; provided that payment of such retention amount is subject to
reduction as set forth in Article 11(d). If any subcontractor or supplier
refuses to furnish a release or waiver required by the Purchaser, the Seller may
in lieu thereof furnish at the Seller's expense a bond satisfactory to the
Purchaser to indemnify the Purchaser against any such lien. If any such lien
remains unsatisfied after all payments are made, the Seller shall refund to the
Purchaser all monies that the latter may be compelled to pay in discharging such
lien, including all costs and reasonable attorney's fees.
(d) Retention Reduction: If all the conditions of payment set forth in
Article 11(c) have been met (except for minor punch list items or claims of
non-material deficiencies in the Work, the value of which items or claims will
be mutually determined in good faith by Purchaser and Seller), Seller will
invoice Purchaser for the retention amount less twice the determined value of
such items or claims. Upon the correction or elimination of such items or
claims, Seller will invoice Purchaser for the balance of the retention amount.
(e) Invoicing: Purchaser shall make payment of properly invoiced amounts
within thirty (30) days from receipt of invoice at the following address:
Amazon.com, Inc.
Attn: Jimmy Wright
215 Columbia Street
Seattle, Washington 98104
- ---------------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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<PAGE> 10
(f) Subcontractor Liens or Releases: Upon receipt of funds from the
Purchaser, Seller will sign and furnish a lien waiver to the Purchaser covering
the Work, Equipment and payment described in the applicable invoice and will
send the same to the Purchaser with the next invoice. The Seller will either
obtain lien waivers and releases from suppliers and subcontractors on behalf of
whom such payment was sought by the Seller or furnish Purchaser with a bond
satisfactory to Purchaser to indemnify Purchaser against any claim by lien or
otherwise by Seller's suppliers or subcontractors. The Purchaser is authorized
to withhold from any invoice, without interest, monies due the Seller equal to
the amount of monies previously disbursed to the Seller with respect to which
Seller fails to furnish Purchaser with supplier or subcontractor lien waivers
and releases or a bond as provided in this Sales Agreement.
(g) Purchaser Right of Invoice Rejection or Revocation: The Purchaser
may (1) decline to approve the Seller's invoice in whole or in part or (2)
nullify the whole or any part of any invoice previously approved, in each case
to such extent as may be necessary to protect the Purchaser from loss because
of:
o Defective Work not remedied;
o Failure of the Seller to make payments properly to subcontractor or
suppliers for labor, materials or Equipment;
o Reasonable evidence that the Work cannot be completed for the unpaid
balance of the Purchase Price; or
o Damage to the Purchaser's or its Affiliate's property or another
contractor's work.
ARTICLE 12. SOFTWARE
License Grant: Title to the Seller Software remains at all times with
Seller. Seller hereby grants Purchaser a nonexclusive right and license to use
Seller Software and documentation associated with it on the Equipment in the
manner contemplated by the Proposal or as otherwise permitted under this Sales
Agreement. Additionally, Purchaser may make backup and archival copies as
reasonably deemed necessary by Purchaser, provided that Seller's copyright
notice and other proprietary markings are reproduced in such copies.
Restricted Use: Each copy of Seller Software provided under this license
may be used only on the Equipment on which the Seller Software is delivered and
installed or on other equipment approved by Seller in writing. Use of the Seller
Software in a network environment is authorized under the license only to the
extent reasonably necessary for the Purchaser's or its Affiliates internal
purposes with respect to the Equipment or as otherwise specified in this Sales
Agreement. No other use of the Seller software is authorized unless specifically
agreed to in a writing signed by Seller.
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<PAGE> 11
Copies and Modifications: Purchaser shall not use, copy, rent, lease,
sell, modify, prepare derivative works of, decompile, disassemble, otherwise
reverse engineer, or transfer Seller Software except with Seller's prior written
consent or otherwise as permitted under this Sales Agreement.
Source Code; Escrow Agreement: Seller shall at all times keep and
maintain a complete master, reproducible copy of all Source Code of all Seller
Software installed at the Worksite in escrow in accordance with the terms and
conditions of the Escrow Agreement attached hereto as Exhibit A (the "Escrow
Agreement") and which agreement is hereby made part of this Sales Agreement,
being incorporated herein by this reference. Seller will promptly update the
Source Code in escrow to reflect all Upgrades installed at the Worksite.
In the event that (i) a Major Failure occurs (as defined under Article
17 b)) related to Seller Software and Seller fails to respond to and perform its
warranty or maintenance obligations under this Sales Agreement, or Seller (or
any Seller Affiliate, if applicable) fails to respond to and perform its
obligations under any Maintenance or Software Support Agreement, in each case in
connection with the occurrence of such Major Failure, and Seller does not cure
such failure to respond and perform within five (5) business days after written
notice thereof from Purchaser, (ii) Seller fails to offer maintenance or
software support services to Purchaser as reasonably required by Purchaser for
it to continue its use of the Equipment as contemplated by this Sales Agreement
and on terms no less favorable than those offered to Seller's similarly situated
customers for similar services, (iii) this Sales Agreement is terminated by
Purchaser pursuant to Article 16(a)(1), or (iv) Seller (1) becomes insolvent or
bankrupt or makes an assignment for the benefit of creditors, (2) has a receiver
or trustee in bankruptcy is appointed for it, or (3) has any proceeding in
bankruptcy, receivership or liquidation instituted against it which is not
dismissed within thirty (30) days following the commencement thereof, Purchaser
shall be entitled to the Source Code as provided for in the Escrow Agreement.
Seller hereby grants to Purchaser, effective upon the occurrence of any
of the events set forth in any of the clauses (i) through (iv) of the
immediately preceding paragraph, a perpetual, non-exclusive, right and license
to (a) use, copy, modify, adapt and create derivative works of the Source Code,
and (b) decompile, reverse engineer or disassemble any Seller Software or
modify, adapt or create derivative works of Seller Software or its
documentation, in each case solely in connection with Purchaser's and its
Affiliates' and their respective contractors' use, maintenance and support of
the Software in accordance with their respective rights under this Sales
Agreement. Notwithstanding each of the clauses (a) and (b) above, the Source
Code referred to above is hereby deemed to be Seller Software for purposes of
Purchaser's continued compliance with the terms of Articles 12 b) (except that
Purchaser's rights under clauses (a) and (b) above may be performed in its test
and development areas and equipment for the purposes set forth in this
paragraph), 12 f) and 12 i) hereof.
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<PAGE> 12
Any Source Code delivered under this Article will be provided on an "as
is" basis, without any representation, warranty or liability of Seller
whatsoever, except that Seller hereby represents and warrants to Purchaser that
the Source Code in Escrow at all times is the Source Code of the latest version
of the Seller Software (including all Upgrades) installed at the Worksite.
Further, Seller disclaims any representations, warranties or liabilities
relating to modifications to, or adaptations or derivative works of, the Source
Code, Software or its documentation created by or for Purchaser and/or its
Affiliates pursuant to the immediately preceding paragraph; provided, however,
that nothing in this paragraph will limit any of Seller's representations or
warranties under this Sales Agreement with respect to the unmodified Software or
its documentation.
Term: The term of the licenses granted pursuant to this Article 12 shall
be perpetual, subject to termination only in accordance with Article 16d). Upon
any such termination of this license, Purchaser shall return the Seller Software
and all copies of it and all documentation to Seller.
Trade Secret Protection: Purchaser understands and agrees that Seller
Software and all documentation related thereto constitutes the valuable
technology, know-how and trade secrets of Seller. Purchaser agrees during the
term of this Agreement and thereafter to hold the Seller Software, including any
copies of it and any documentation related to it, in confidence and to not
permit any person or entity to obtain access to it except as required for
Purchaser's and its Affiliates' own internal use and provided such person or
entity has agreed in writing to hold such in confidence.
Software Upgrades: Except as may be otherwise agreed to in a Maintenance
or Software Support Agreement, or otherwise required under this Sales Agreement,
Seller shall have no obligation to provide Upgrades to Purchaser due to later
versions or revisions introduced into the marketplace. Materials, installation,
and customization to implement such Upgrades will be made available to Purchaser
at prices normally offered to Seller's preferred customers. Notwithstanding the
foregoing, Seller will provide and Purchaser will not be charged for, any
Upgrades required in order to correct Software to meet applicable Specifications
pursuant to Seller's obligations under the Sales Agreement or any Maintenance or
Software Support Agreement.
Seller Software Warranty Performance: As part of Seller's warranty of
the Equipment, but not in limitation of Purchaser's rights under this Sales
Agreement, Purchaser agrees that Seller may perform Seller Software warranty
service remotely via a modem in addition to other reasonable means. The Seller
Software warranty is void if the Seller Software has been altered, modified or
changed in any way from the original delivery configuration, without the written
authorization of Seller, unless so altered, modified or changed by or on behalf
of Seller or as may otherwise be permitted hereunder.
Software Markings: The Seller Software and users manuals, logos, product
names and other support materials, if any, are either patented, copyrighted,
trademarked, or
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otherwise proprietary to Seller. Purchaser agrees never to remove any such
notices and product identification.
Third Party Software: Software delivered to Purchaser pursuant to this
Sales Agreement may contain Third Party Software. Seller hereby assigns to or
otherwise transfers to the benefit of Purchaser all of Seller's right, title and
interest in and to all warranties, indemnities, product guaranties and other
representations made by third party manufacturers which Seller may have with
respect to Third Party Software, and will at its expense take any and all
actions as may be necessary to enable Purchaser to exercise rights thereunder
and realize the benefit thereof to the fullest extent possible; provided that
nothing in this Sales Agreement shall have the effect of extending or otherwise
expanding upon any of such third party warranties, indemnities, product
guarantees or representations assigned or otherwise transferred by Seller to
Purchaser. Seller hereby represents and warrants to Purchaser that Purchaser and
its Affiliates will have all rights necessary to use Third Party Software
delivered under the Sales Agreement as contemplated in this Sales Agreement
(including, without limitation, the Specifications).
Purchaser's Affiliates. All rights and obligations of Purchaser under
this Article 12 shall extend to each of Purchaser's Affiliates, and Purchaser
shall ensure that each of Purchaser's Affiliates complies with the provisions of
this Article 12 in connection with its exercise of its rights hereunder.
ARTICLE 13. DELAYED PAYMENTS
In the event that Purchaser fails to make due and punctual payments for
the Equipment and/or Work as provided herein, interest shall accrue on the
amount due and unpaid at the rate of one percent (1%) per month for each full
calendar month or part thereof during which such amount shall be outstanding,
such interest to commence to accrue on the thirtieth (30th) day after such
amount is due and payable hereunder. If the interest rate provided herein
exceeds the maximum interest rate permitted by law, then the interest payable
shall be at such maximum permissible rate.
ARTICLE 14. CONTINGENCIES
In the event of any condition or contingency, existing or future, which
is beyond the reasonable control and without the fault or negligence of either
party which prevents or delays the performance by such party of this Sales
Agreement ("Event of Force Majeure"), such party shall be entitled to an
appropriate extension of time for performance of this Sales Agreement. Events of
Force Majeure shall include, without limitation, acts of God, fire, floods,
transport delays, strikes, labor disputes and interference by civil or military
authorities. If an Event of Force Majeure occurs, the affected party shall take
measures to mitigate and minimize the effect of such event in order to continue
with the performance of its obligations under this Sales Agreement. If the
period of such an event extends beyond six
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<PAGE> 14
(6) months, then either party may terminate this Sales Agreement under Article
16(a)(3) below.
ARTICLE 15. MAINTENANCE OR SOFTWARE SUPPORT
Seller will throughout the warranty period and for a period of five (5)
years thereafter offer maintenance services to Purchaser as reasonably required
by Purchaser for it to continue its use of the Equipment as contemplated by this
Sales Agreement and on terms no less favorable than those offered to Seller's
similarly situated customers for similar services. To the extent maintenance
services are not provided for in the Proposal or elsewhere as part of this Sales
Agreement, Seller and Purchaser will subsequent to the date hereof, at
Purchaser's option, negotiate in good faith as to Seller's provision of the same
to Purchaser.
ARTICLE 16. TERMINATION
(a) This Sales Agreement may be terminated upon the occurrence of any of
the following events:
(1) Other than as provided for in Article 16(a)(2), in the event
that either party shall breach or fail to comply with any provisions of this
Sales Agreement and such breach or failure shall continue for a period of thirty
(30) days after the giving of written notice thereof by the other party, the
other party may terminate this Sales Agreement immediately upon the giving of
written notice thereof to the defaulting party.
(2) Notwithstanding the foregoing, if Purchaser shall have failed to
make any payment due under this Sales Agreement within forty-five (45) days
after having been so notified by Seller, Seller may terminate this Sales
Agreement immediately after the expiration of the forty-five (45) day period by
giving notice of such termination to Purchaser.
(3) If an Event of Force Majeure occurs and continues for a period
greater than six (6) months, either party may terminate this Sales Agreement
upon giving written notice thereof to the other party. In such event, the amount
to which Seller shall be entitled shall be determined as per Article 16(b).
(b) In addition to the foregoing, Purchaser may terminate this Sales
Agreement or any portion thereof without cause effective thirty (30) days after
written notice thereof is received by Seller. If Purchaser terminates this Sales
Agreement pursuant to this Article 16(b), then Seller shall be reimbursed by
Purchaser for Seller's reasonable, documented costs incurred through the
termination date in its performance and/or termination of the terminated portion
of this Sales Agreement, plus Seller's expected profit with respect to the
terminated portion as contemplated in the Proposal, less any progress or other
payments received by Seller before termination. Seller's Chief Financial Officer
shall certify as to the accuracy and completeness of such costs incurred and
expected profit invoiced to Purchaser. Purchaser shall pay Seller net thirty
(30) days after receipt of invoice and certificate from Seller. Seller
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<PAGE> 15
will keep its regularly maintained corporate books and records related to this
Sales Agreement for five (5) years following a termination hereunder. During
such period, and only to the extent necessary to support Seller's reimbursement
under this Article 16 b), Seller will make its books and records as necessary to
support Seller's reimbursement available for audit to an independent public
accountant, selected by Purchaser and at Purchaser's sole cost and expense,
under terms of confidentiality applicable to this Sales Agreement; provided that
if any such audit reveals a discrepancy in favor of Seller in excess of five
percent (5%), then Seller will reimburse Purchaser for the costs of such audit.
Any such audit will be conducted in a manner which will not unreasonably
interfere with Seller's operations.
Upon receipt or delivery (as applicable) of a termination notice under
paragraph 16(a), or upon receipt of Purchaser's termination notice under Article
16(b) above, Seller shall take the following actions:
Stop work to the extent relating to the terminated portion of this Sales
Agreement;
Take all commercially reasonable actions to limit amounts for which
Purchaser may be responsible in connection with this Article, including
terminating all subcontracts to the extent they relate to the terminated portion
of this Sales Agreement;
Assign to Purchaser all of Seller's right, title and interest to all
Third Party Software and Third Party Hardware and deliver the Equipment or
components thereof (regardless of status of completion) consistent with Seller's
progress or other payments received by Seller before and pursuant to
termination; and
Deliver, assign and otherwise transfer, in the manner contemplated by
this Sales Agreement, title to any Work and other drawings, plans and documents
(regardless of status of completion) that, if this Sales Agreement had been
completed, would have been furnished to Purchaser.
d) Notwithstanding anything to the contrary contained in this Sales
Agreement, the licenses granted under Article 12 may not be terminated except
upon the occurrence of a substantial, material breach of this Sales Agreement by
Purchaser that (i) is not cured within twenty (20) days after Purchaser receives
written notice from Seller of the breach, and (ii) is of such a nature that
Seller cannot reasonably be made whole through an award of monetary damages.
Following any termination of this Sales Agreement that does not involve a
termination of the licenses granted under Article 12, Purchaser's and its
Affiliates' and contractors' use of the Seller Software will remain subject to
the restrictions contained in Article 12.
ARTICLE 17. WARRANTY
a) Standard Warranty: Seller hereby warrants that the Equipment shall
(i) be free from all liens, charges or encumbrances, except any lien of the
Seller in respect of any unpaid
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<PAGE> 16
portion of the Purchase Price; (ii) be free from defects in materials and
workmanship and shall conform to the provisions and specifications of this Sales
Agreement (including without limitation the Specifications); (iii) be new and,
if no quality is specified, of a quality consistent with the Seller's usual and
normal production; and (iv) conform with OSHA regulations in force at the time
of Acceptance of the Equipment. Seller shall use its reasonable best efforts to
as soon as practicable obtain for Seller's own benefit Third-Party Hardware and
Third-Party Software warranties that are at least co-extensive with Seller's
warranty obligations to Purchaser under clause (ii) of the immediately preceding
sentence with respect to the Equipment. Notwithstanding the foregoing, if
Seller, after so using its reasonable best efforts, fails to obtain for Seller's
own benefit such warranties, then Seller shall immediately notify Purchaser in
writing of the nature and extent of such failure, and the parties shall
negotiate in good faith as to (a) adjustment of schedules for performance of the
Work in order for Seller to secure such warranties, (b) Seller's limited release
from its warranty obligations under clause (ii) of the immediately preceding
sentence with respect to such Third-Party Hardware or Third-Party Software,
and/or (c) a reduction or increase in the Purchaser Price to reflect the changed
schedule and/or lessened warranty obligations, as applicable. Any agreement
between the parties resulting from such negotiations must be in writing.
Seller's failure to notify Purchaser as required above shall constitute Seller's
waiver of its renegotiation rights in the preceding sentence, and the provisions
of this Article 17 shall remain in full force and effect. Seller shall, at its
option, repair or replace (replacement parts to be shipped F.O.B. Worksite) any
defective Equipment or component thereof; provided, however, that Seller is
given written notice of any defect during the Warranty Period (as defined
below). For purposes of Articles 17a) and b), the warranty period shall commence
on the earlier of the date of first commercial use of the Equipment by Purchaser
or the date of Acceptance of the Equipment, and the warranty period shall end
one year after such commencement date ("Warranty Period"). Purchaser shall give
Seller prompt reasonable written notice of any claim under the foregoing
warranty within the Warranty Period and permit Seller to inspect the Equipment
in order to verify the defect or nonconformity. Seller shall promptly and
reasonably respond to verify and correct the defect. Purchaser's remedies and
Seller's obligations in connection with any claim made under this warranty shall
be limited to repair or replacement at Seller's expense of the Equipment or part
thereof which is defective. Labor performed at the Worksite with regard to such
claims is not included in this warranty. Purchaser shall be responsible for the
normal maintenance and repair of the Equipment and shall perform the same in
accordance with generally accepted maintenance procedures or such other
reasonable procedures as are set forth in maintenance and repair manuals
provided by Seller to Purchaser. Seller shall not, under this Article 17, be
responsible for or obligated to pay or to reimburse Purchaser for (a) any work
or repairs performed on the Equipment by third parties (other than on behalf of
Seller and except for mutually agreed subcontractors), (b) any materials
furnished by third parties (other than on behalf of Seller) for use in
connection with the Equipment if the same was undertaken or furnished without
mutual prior written consent or (c) any loss or damage arising from improper
operation or maintenance of the Equipment by Purchaser or from ordinary wear and
tear.
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<PAGE> 17
b) Major Failure Warranty: Notwithstanding other provisions of this
Article 17, in instances of a Major Failure during the Warranty Period, Seller
will provide all necessary parts and labor to correct the defect. A "Major
Failure" is defined as failure of the Equipment or portion of the Equipment to
operate as described in the Proposal or the applicable Specifications, which
significantly impacts Purchaser's ability to use the affected Equipment or
portion thereof, and which Purchaser's maintenance personnel or available
contractors cannot remedy without significant expense or effort. Seller will
respond to a Major Failure by immediately dispatching such servicemen by
commercial air carrier, or by responding as otherwise agreed between the
parties, upon request and notification of a Major Failure by Purchaser as may be
necessary to promptly correct the defect, and such servicemen shall thereafter
diligently and continuously perform such services as may be necessary to
promptly correct such defect until corrected. Should it later be reasonably and
mutually determined in good faith by Seller and Purchaser that the necessary
corrective services rendered by Seller were within the capabilities of the
Purchaser's maintenance personnel or available contractors without the
expenditure of significant expense or effort, the Purchaser will reimburse
Seller for the labor and expenses of the service trip.
Year 2000: Seller hereby represents and warrants that the Equipment,
when used in accordance with its associated documentation, shall perform
properly and without change in operations related to the advent of the new
century (defined as commencing at 12:00 am, January 1, 2000), including but not
limited to, by accurately processing date data (including without limitation by
calculating, comparing and sequencing) within, from, into and between centuries
(including, but not limited to, the twentieth and twenty-first centuries), and
by properly calculating leap years, except to the extent that any failure of the
Equipment to so perform is directly attributable to (i) the failure of other
technology, systems or interfaces, Third Party Software, or Third Party Hardware
to properly exchange date data with the Equipment, (ii) a change in the
operating environment not contemplated in this Sales Agreement, including
without limitation the Specifications, or (iii) any addition to or modification
of the Equipment by or on behalf of Purchaser or any of its Affiliates that has
not been authorized in writing by Seller or made by or on behalf of Seller or
any of its Affiliates. In the event of any material failure of the Equipment to
operate as warranted above, Purchaser's sole remedy, and Seller's sole
obligation, shall be to promptly respond and diligently and continuously work to
correct until corrected (or provide a functionally equivalent work around for)
any reproducible error or failure reported by Purchaser in writing to Seller on
or before January 1, 2001. If Seller is unable to remedy such error or failure
within a reasonable time, Seller and Purchaser shall enter into good faith
discussions to agree to reductions in Purchase Price or other equitable
adjustments to account for such delay or inability to remedy said failure.
Seller agrees to use its reasonable best efforts to incorporate a statement in
all purchase orders that Seller issues under this Sales Agreement that requires
any Third Party Software delivered hereunder to be Year 2000 compliant
consistent with the minimum requirements of this Article 17c). The remedies
provided in this paragraph are exclusive remedies for failure of the Equipment
to perform as warranted hereunder.
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<PAGE> 18
Third Party Software and Third Party Hardware: The foregoing warranties
in Article 17a), b) and c) specifically exclude warranties relating to Third
Party Software or Third Party Hardware to the extent specified in such Articles.
Seller hereby assigns and otherwise transfers to the benefit of Purchaser all of
Seller's right, title and interest in and to all assignable or transferable
warranties with respect to Third Party Software and Third Party Hardware and all
assignable or transferable rights of Seller against any manufacturer or supplier
thereof, including without limitation with respect to all indemnity agreements,
and will at its expense take any and all actions as may be necessary to enable
Purchaser to exercise rights thereunder and realize the benefit thereof to the
fullest extent possible. To the extent any of such warranties, indemnities or
rights are not assignable or transferable, Seller agrees to exercise for the
benefit of Purchaser any and all claims, rights, remedies, warranties,
representations and indemnities against or obtained from any such third party
manufacturers or suppliers.
Disclaimer: OTHER THAN AS SPECIFICALLY SET FORTH ABOVE, SELLER MAKES NO
OTHER WARRANTIES, WHETHER WRITTEN, ORAL OR IMPLIED, INCLUDING WITHOUT
LIMITATION, WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OR MERCHANTABILITY.
ARTICLE 18. USE OF INSTALLED PORTIONS OF THE EQUIPMENT
Whenever, as determined by Seller, the installation of any portion of
the Equipment has been completed, Seller may make available such portion for
Purchaser's use, provided, however, that Seller and Purchaser shall mutually
agree on the terms and conditions of such use. Except as otherwise agreed by
Seller and Purchaser (including where appropriate, an adjustment in the Purchase
Price and/or schedule otherwise provided for in this Sales Agreement), such use
shall not interfere with the installation of the remainder of the Equipment.
Seller shall not be liable for the cost of repairs, rework or replacement which
may be required due to ordinary wear and tear resulting from such use.
ARTICLE 19. INSURANCE BY SELLER
Seller will maintain insurance coverage covering its operation and its
obligations pursuant to Article 20, in at least the following amounts:
Commercial General Liability - Bodily Injury and Property damage - $1,000,000
Per Occurrence.
Personal Injury Liability - $1,000,000 Limit.
Business Auto - Bodily Injury & Property Damage - $500,000 Combined Single
Limit.
Umbrella Liability - $20,000,000 Limit of Liability
-18-
<PAGE> 19
Worker's Compensation - Coverage A - Statutory
Coverage B - Employer's Liability; $100,000 each accident; $100,000 each
employee; $500,000 Policy Limit
Foreign Products Liability - $1,000,000 Per Occurrence.
Insurance shall be purchased from companies having a rating of A-VII or
better in the current BEST'S INSURANCE REPORTS published by A. M. Best Company.
Policies of insurance shall name Purchaser as an additional insured, provide for
an insurer's waiver of subrogation in favor of all insured parties, and provide
that they will not be canceled or materially changed without reasonable prior
written notice to Purchaser. Certificates of insurance evidencing coverage shall
be submitted in advance of or concurrent with the execution of the Work, and on
each insurance policy renewal thereafter. Seller shall, at Purchaser's request,
provide copies of requested insurance policies. If Seller does not provide
Purchaser with such certificates of insurance, then Purchaser will so advise
Seller. Thereafter, if Seller does not furnish evidence of acceptable coverage
within fifteen (15) days, then Purchaser shall have the right, in its sole
discretion, to (i) withhold payments from Seller until evidence of such
acceptable coverage is provided, or (ii) immediately terminate this Sales
Agreement. Failure to obtain and maintain required insurance shall not relieve
Seller of any obligation contained in this Sales Agreement. Additionally, any
approval by Purchaser of any of Seller's insurance policies shall not relieve
Seller of any obligation contained in this Sales Agreement.
ARTICLE 20. INDEMNIFICATION
Seller shall indemnify, defend and hold Purchaser harmless from and
against any and all expenses, losses, costs, claims, demands, causes of action,
and damages of whatever kind, (a) which result from injuries at the Worksite
during the installation, or testing of the Equipment, (b) which are due to the
negligence or willful misconduct of Seller or its employees or contractors, or
(c) to the extent otherwise related to any claim, action, suit or proceeding
involving the Equipment which is based upon injuries to persons (including
death) or property arising from or relating to (i) the use of the Equipment in
accordance with Seller's operation, maintenance and other related manuals and
documents delivered to Purchaser by Seller hereunder, or (ii) the design or
manufacture of the Equipment as contemplated in the Proposal (including, without
limitation, the Specifications), including without limitation, product liability
claims. Purchaser shall indemnify, defend, and hold Seller harmless from and
against any and all expenses, losses, costs, claims, demands, causes of action,
and damages of whatever kind which result from the negligent or willful use or
operation of the Equipment by any person (other than Seller or Seller's
employees or contractors) other than in its normal and intended manner, and
removal or modification of safety features unless Purchaser notifies Seller and
such removal or modification is approved by Seller or made by or on behalf of
Seller or any of its Affiliates.
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<PAGE> 20
ARTICLE 21. LIMITATION OF LIABILITY
Notwithstanding any other provision of this Sales Agreement, except to
the extent constituting a third party claim (or portion thereof) subject to
indemnification under Article 3 or Article 20 (such portion of such claim
subject to indemnification under Article 20 being a "Third-Party Non-IP
Consequential Damage Indemnified Claim"), neither party shall be liable to the
other party or anyone claiming through such other party for any special,
indirect, incidental or consequential damages of any kind whatsoever, including
without limitation loss of profit or reputation incurred by either Party,
whether such damages arise out of the use, inability to use, failure of, delay
in delivery of, or nondelivery of, the Equipment, or out of any termination of
this Agreement, or otherwise. Notwithstanding any other provision of this
Agreement, each party's aggregate liability under Article 20 for Third-Party
Non-IP Consequential Damage Indemnified Claims shall not exceed the greater of
[*].
ARTICLE 22. WAIVER
Except as otherwise expressly provided in this Sales Agreement, no
failure on the part of either party to exercise, and no delay in exercising, any
right, privilege, or power under this Sales Agreement shall operate as a waiver
or relinquishment thereof; nor shall any single or partial exercise by either
party of any right, privilege or power under this Sales Agreement preclude any
other or further exercise thereof, or the exercise of any other right, privilege
or power. Waiver by any party of any breach of any provision of this Sales
Agreement shall not constitute or be construed as a continuing waiver, or as a
waiver of any other breach of any provision of this Sales Agreement.
ARTICLE 23. ENTIRE AGREEMENT
This instrument, together with any attachments specifically made a part
of this Sales Agreement and any documents incorporated in such attachments by
reference, embodies the whole agreement of the parties relating to the subject
matter of this Sales Agreement and supersedes any and all prior oral or written
specifications, communications and agreements by or on behalf of the parties.
This Sales Agreement may not be varied by any purchase order, acknowledgment,
confirmation, invoice, or shipping document issued by either party. Any
amendments or modifications of this Sales Agreement must be in writing and
signed by an officer or General Counsel of Purchaser and an officer or General
Counsel of Seller to be binding.
- ---------------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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<PAGE> 21
ARTICLE 24: CONFIDENTIALITY AGREEMENT
With respect to information received by either party as a result of or
in connection with this Sales Agreement, the parties will abide by the terms and
conditions of following Mutual Nondisclosure Agreements, as applicable (but only
to the extent that the information constitutes "Confidential Information" as
defined in the Mutual Nondisclosure Agreement):
The Buschman Company: Agreement signed with Amazon.com dated January 14, 1999
Real Time Solutions: Agreement signed with Amazon.com dated January 19, 1999
White Systems, Inc.: Agreement signed with Amazon.com dated January 19, 1999
ARTICLE 25. GOVERNING LAW
This Sales Agreement shall be governed by and interpreted in accordance
with the laws of the State of Washington, without regard to its choice of law
provisions.
ARTICLE 26. PUBLICITY
Neither party shall disclose the terms of this Sales Agreement or the
existence or nature of any relationship between the parties (including, without
limitation in any press release or public communication) to any third party
without the prior written consent of the other party.
ARTICLE 27. SOLICITATION
Seller and Purchaser agree that, for the period commencing with the
commencement of Work hereunder (whether of not prior to the date hereof) until
one year following Acceptance, or any earlier termination of this Sales
Agreement, neither party will, except with the other party's written approval,
offer or seek to offer or solicit employment to the other party's employees or
staff. Notwithstanding the foregoing, the parties agree that general
solicitations or advertisements (by any means or media) shall not constitute
prohibited offers or solicitations for purposes of this Article 27.
Notwithstanding any other provision of this Sales Agreement, each party's
exclusive remedy for a violation of this Article 27 is recovery of such party's
direct damages and/or specific performance in connection therewith, as
applicable. The parties agree that under no circumstances shall a violation of
this Article 27 give rise to a right to terminate this Agreement.
ARTICLE 28. SURVIVAL
Articles 3, 12, 15, 17(c), 20, 21, 24 and 27 (together with all other
provisions that reasonably may be interpreted as surviving termination or
expiration of this Sales Agreement) will survive the Acceptance of the
Equipment, the performance of the Work and performance of Seller's warranty
obligations hereunder.
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<PAGE> 22
ARTICLE 29. DISPUTES
Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, ("Claim") shall be resolved in accordance with this
Article 29.
Any Claim shall first be submitted by the claiming party to the other
party in writing within a reasonable period after the event giving rise to it,
which writing shall include a description of such Claim, the proposed remedy for
such Claim and data supporting such Claim. If the parties are unable to resolve
the Claim informally, either party may submit the Claim for joint consideration
by and between Purchaser's senior logistics officer and Seller's Chief Executive
Officer.
Arbitration. Claims that have been properly raised and considered in the
above procedures but have not been resolved shall be resolved exclusively by
arbitration before a panel of three arbitrators in Seattle, Washington or in
such other location as may be reasonable given the facts and circumstances
involved in such Claim. The arbitration shall be conducted in accordance with
the applicable rules of the American Arbitration Association currently in effect
unless the parties mutuality agree otherwise.
Notice of the demand for arbitration shall be filed in writing with the
other party to the Sales Agreement and in accordance with the applicable rules
of the American Arbitration Association and shall be made within the statutes of
limitation that are applicable to the Claim.
The parties shall apply to the arbitrators for relevant discovery
consistent with the Federal Rules of Civil Procedure, which the arbitrators
shall be authorized to order. Either party may request that the arbitrators'
award include findings of fact and conclusions of law.
The arbitrators shall not be empowered to grant exemplary or punitive
damages. The award rendered by the arbitrator or arbitrators shall be final, and
judgment may be entered upon it in accordance with applicable law in any court
having jurisdiction thereof.
Within 30 days of receipt from the of the written findings of fact and
conclusions of law, either party will have the right to file with the
arbitrators and serve on the other party a written motion to reconsider. The
arbitrators may request the nonmoving or responding party to file a written
response within 10 days after receipt of that request, and the arbitrators
thereupon will reconsider the issues raised by the motion and response (if any)
and either confirm or alter their decision, which will then be final, binding
and conclusive upon the parties. The cost of such motion for reconsideration and
written opinion of the arbitrators, including attorneys' fees, will be awarded
against the moving party if it does not substantially prevail on its motion.
Upon demand of either party, the arbitration shall include, by
consolidation, joinder or third party claim, any person or entity (a) that is
substantially involved in a common
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<PAGE> 23
question of fact or law, (b) where the presence of such person or entity is
required if complete relief is to be accorded in the arbitration, or (c) who is
alleged to be liable to a party for all or part of a claim in the arbitration.
The agreement herein among the parties shall be specifically enforceable
under applicable law in any court having jurisdiction thereof.
Each party agrees that all aspects of any arbitration are "Confidential
Information" under the Mutual Non-disclosure Agreement referred to in Article
24.
Seller shall diligently carry on the Work, and Purchaser shall continue
its duties under this Agreement, during any dispute resolution proceedings,
unless otherwise agreed in writing. The requirements of this paragraph cannot be
waived with respect to any Claim except by an explicit written waiver signed the
party against whom the Claim is brought.
Notwithstanding the foregoing, nothing in this Article 29 will preclude
either party from seeking provisional remedies (including, without limitation,
temporary restraining orders and preliminary injunctions) from any court of
competent jurisdiction to protect its rights pending resolution as provided for
above. Further, unless otherwise agreed by the parties in writing, this Article
29 will not apply to disputes relating to the enforceability of, or a party's
rights under, any United States or foreign patent or other intellectual property
right.
ARTICLE 30. TRANSFER OF TITLE AND RESERVATION OF SECURITY INTEREST
Upon Acceptance, title to the Work shall transfer to Purchaser. For the
avoidance of doubt, notwithstanding the transfer of possession of the Equipment
by Seller to Purchaser, Seller shall retain legal title to, and hereby reserves
a purchase money security interest in, the Equipment until Acceptance. Seller
shall have the rights of a secured creditor under the Uniform Commercial Code
for the jurisdiction applicable during such period. Purchaser hereby authorizes
Seller to file, and to sign on behalf of Purchaser as the debtor, any financing
statements or other documents with State or local recording offices which may be
required to perfect such security interest. In circumstances where Acceptance
has occurred and the Equipment is thereafter stored at Seller's Plant, Seller
hereby authorizes Purchaser to file, and to sign on behalf of Seller any
financing statements or other documents with State or local recording offices
which may be required to perfect Purchaser's security interest in the Equipment
so stored.
ARTICLE 31. NOTICES
All notices, requests, demands, applications, services of process, and
other communications which are required to be or may be given under this Sales
Agreement shall be in writing and shall be deemed to have been duly given if
sent by telecopy or facsimile transmission, answer back requested, or delivered
by courier or mailed, certified first class
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<PAGE> 24
mail, postage prepaid, return receipt requested, to the parties to this
Agreement at the following addresses:
If to Purchaser: Amazon.com, Inc.
1516 2nd Avenue
Seattle, WA 98101
Attn: General Counsel
Fax: 206-834-7010
With a copy to: Amazon.com, Inc.
1516 2nd Avenue
Seattle, WA 98101
Attn: Chief Logistics Officer
Fax: 206-694-2004
If to Seller: _______________________________
_______________________________
_______________________________
Attn: The President
Fax: __________________________
With a copy to: The Buschman Company
10045 International Boulevard
Cincinnati, Ohio 45246
Attn: General Counsel
Fax: 513/881-5144
or to such other address as either party shall have furnished to the other by
notice given in accordance with this Article. Such notice shall be effective (i)
if delivered in person or by courier, upon actual receipt by the intended
recipient, or (ii) if sent by telecopy or facsimile transmission, on the date of
transmission unless transmitted after normal business hours, in which case on
the following date, (iii) if mailed, upon the date of first attempted delivery.
ARTICLE 32. HEADINGS
Headings used in this Sales Agreement are for convenience and ease of
reference only, are not part of this Sales Agreement and shall not be relevant
to or affect the meaning or interpretation of this Sales Agreement.
-24-
<PAGE> 25
ARTICLE 33. INTERPRETATION
Except where otherwise expressly provided or unless the context
otherwise necessarily requires: (i) references to a given law or rule are
references to that law or rule as amended or modified as of the date on which
the reference is made, (ii) reference to a given agreement or instrument is a
reference to that agreement or instrument as originally executed, and as
modified, amended, supplemented and restated through the date as of which
reference is made to that agreement or instrument, and (iii) accounting terms
have the meanings given to them by U.S. generally accepted accounting principles
applied on a consistent basis by the accounting entity to which they refer.
ARTICLE 34. ATTORNEY'S FEES AND COSTS
If any suit is brought, or an attorney retained to collect any money due
under this Sales Agreement, or to collect a judgment for breach of this Sales
Agreement, the prevailing party shall be entitled to recover, in addition to any
other remedy, reimbursement for attorneys' fees, court costs, investigation
costs and other related expenses incurred in connection therewith.
ARTICLE 35. SEVERABILITY
This Sales Agreement will be enforced to the fullest extent permitted by
applicable law. If for any reason any provision of this Sales Agreement is held
to be invalid or unenforceable to any extent, then such: (i) provision will be
interpreted, construed or reformed to the extent reasonably required to render
the same valid, enforceable and consistent with the original intent underlying
such provision; (ii) provision will be void to the extent it is held to be
invalid or unenforceable; (iii) provision will remain in effect to the extent
that it is not invalid or unenforceable; and (iv) such invalidity or
unenforceability will not affect any other provision of this Sales Agreement or
any other agreement between the parties.
ARTICLE 36. REMEDIES
Except as otherwise expressly provided in this Sales Agreement, each and
all of the rights and remedies provided in this Sales Agreement, and each and
all of the remedies allowed at law and in equity, will be cumulative, and the
exercise of one right or remedy will not be exclusive of the right to exercise
or resort to any and all other rights or remedies provided in this Sales
Agreement or at law or in equity.
ARTICLE 37. RELATIONSHIP
The Parties are independent contractors under this Sales Agreement. Each
party acknowledges and agrees that it is not and will not be during the term of
this Sales Agreement, be an employee or an agent of the other party. Each party
and its employees,
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<PAGE> 26
subcontractors, and agents shall not be entitled to or eligible for any of the
benefits that the other party provides for its employees. Each party shall be
solely responsible for withholding and paying its and its employees',
subcontractors' and agents' taxes and other charges, including without
limitation, federal, state and local income and social security taxes, workmen's
compensation and unemployment insurance. Nothing in this Sales Agreement will be
deemed to constitute, create, give effect to or otherwise recognize a joint
venture, partnership, franchise or business entity of any kind. Nothing in this
Sales Agreement will be construed as providing for the sharing of profits or
losses arising out of the efforts of the parties hereto.
ARTICLE 38. USE OF MARKS; PRESS RELEASES
Seller will not use any trade name, trademark, service mark or logo of
Purchaser (or any name, mark or logo confusingly similar thereto) in any
advertising, promotions or otherwise, or otherwise make any press release or
disclosure concerning this Sales Agreement or the activities contemplated
hereby, without Purchaser's prior written consent.
ARTICLE 39. PERMITTED DISCLOSURE
To the extent either party is required to disclose information that
otherwise requires the other party's prior written consent under Articles 26 or
38 of this Sales Agreement, each party hereby consents to the other party's
disclosure to the extent that such disclosure is (i) required by law (provided
that the disclosing party (a) gives the other party prior written notice
sufficient to allow the other party to seek a protective order or other
appropriate remedy, (b) discloses only such information as is so required, and
(c) and uses commercially reasonable efforts to obtain confidential treatment
for any information so disclosed), or (ii) necessary in connection with (aa)
such party's performance of this Sales Agreement, (bb) such party's standard
accounting disclosure obligations, or (cc) the proposed sale or reorganization
of such party's business or the like, provided in each of cases (aa), (bb) and
(cc) that each person to whom such information is disclosed has a need to know
the same, and is bound to keep the same confidential to at least the same extent
as required herein (including pursuant to any applicable confidentiality
agreement between the parties hereto). In both cases (i) and (ii) above, the
disclosing party shall, within the earliest possible time under the
circumstances (or, if the disclosure is to be made under case (ii)(cc) above to
a person or entity which may reasonably be deemed to be a competitor of the
non-disclosing party (or any of its affiliates), then in advance of any such
disclosure), notify or advise the other party of such disclosure, the
information disclosed or to be disclosed, and the identity of recipient of such
information.
IN WITNESS WHEREOF, the parties hereto have caused this Sales Agreement
and all annexes, exhibits and attachments thereto to come into effect on the
last date appearing below:
AUTHORIZED FOR PURCHASER BY:
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<PAGE> 27
Amazon.com, Inc.
Signature /s/ Jimmy M. Wright
-------------------------
Name Jimmy M. Wright
------------------------------
Title V.P./C.L.O.
-----------------------------
Date 3/11/99
------------------------------
AUTHORIZED FOR SELLER BY:
The Buschman Company
Signature /s/ James R. McCarthy
-------------------------
Name James R. McCarthy
------------------------------
Title President
-----------------------------
Date 3/11/99
------------------------------
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<PAGE> 28
ATTACHMENT 1
PRICING; PAYMENT SCHEDULE
The pricing set forth in this Proposal is fixed pricing, based on a
building configuration/layout which has been mutually developed between Bushman
and Amazon.com, and which is assumed to be typical of buildings which may be
located and leased or purchased by Amazon.com in the near future. The Equipment
will be engineered based on such standard configuration/layout, manufactured and
placed into storage (if required). Once a specific building has been located and
purchased by Amazon.com, the standard configuration/layout will be modified to
suit the specific building parameters. Once this has been accomplished, a change
order to this Proposal will be developed to reflect the building-specific
configuration/layout, as well as necessary changes for travel, local labor, and
freight based on the site of the specific building.
Storage and handling costs for Equipment are not included in the
pricing. Storage and handling costs will be invoiced monthly as they are
incurred.
The Purchase Price shall be paid as follows: [*].
- ---------------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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<PAGE> 29
ALLIANCE PRICING SUMMARY FORM- STANDARD
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
DESCRIPTION HOURS LIST PRICE/COST MULTIPLE SELL PRICE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[ * ]
- --------------------------------------------------------------------------------------------------------
TOTAL $ 26,893,390
- --------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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<PAGE> 30
PRICE BREAKDOWN
[ * ]
TOTAL................................................ $ 26,893,390
- ---------------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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<PAGE> 31
BUYOUT SUMMARY
The following is a summary of the Buyout equipment and the categories
that they have been assigned.
Major Purchases - [*].
o Tilt-tray
o Mezzanine
Major Purchases - [*].
o Belt Curves
o Shrink-Wrap Tunnels
o Carton Erectors
o Extendable Conveyors
Major Purchases - [*].
o Scales
o Tapers
o Chutes
o Printer/Applicators
o Air Compressors
o Structural Steel
o Trolley Carriers
o Packing Tables
o Platforms/Catwalks/Stiles
o Pick-to-light shelving
o Reject pullers
o Netting
- ---------------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
-31-
<PAGE> 32
PROVISIONS
o Prices do not include any state, local sales/use taxes and Performance
Bond costs.
o Installation services are based on using nonunion labor during regular
working hours. Buschman uses overtime labor, as applicable, to make any
tie-ins that would affect operations.
o Electrical installation is performed under license.
o This price is a total price for the conveyor system. The equipment being
manufactured and stored, based on the blanket order, will be applied and
the price deducted as necessary.
o Other services including ongoing Operational Audits, Slotting, Labor
Standards, and Equipment Maintenance will be priced at a later date if
requested.
o The price does not include trash compactors.
o Freight estimate is based on shipping to [*]. Actual freight charges
will be determined once the job has been chosen and will then be
adjusted accordingly.
o Local labor rate will be adjusted accordingly to the city and state
selected for each site.
- ---------------------
[*] = omitted, confidential material, which material has been filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
-32-
<PAGE> 1
EXHIBIT 10.6
LEASE AGREEMENT
THIS AGREEMENT OF LEASE (the "LEASE") made this [*] day of [*] (herein
the "EFFECTIVE DATE") by and between TGFW II, L.L.C., a Kansas limited liability
company, having a principal place of business at 8100 East 22nd Street North,
Building 1900, Suite 402, Wichita, Kansas 67226 (hereinafter called "LESSOR"),
and AMAZON.COM.KSDC, INC., a Delaware corporation, having a place of business at
Coffeyville Industrial Park, North Highway 169, Coffeyville, Kansas (hereinafter
called "LESSEE").
WITNESSETH, that in consideration of the rent and covenants herein
reserved and contained on the part of Lessee to be paid, performed and observed,
the Lessor does hereby demise and lease unto Lessee the following property, to
wit:
A building area containing a floor area of approximately [*] square
feet, as such square footage will be expanded pursuant to the Building A
Expansion described below (herein "BUILDING AREA A"), an office area
(herein "BUILDING AREA B"), a building area containing a floor area of
approximately [*] square feet (herein "BUILDING AREA C"), and a building
area to be constructed containing approximately [*] square feet (herein
"BUILDING AREA D") all of which are located on that certain parcel of
land located in Montgomery County, Kansas, consisting of approximately
[*] acres, as more fully described and depicted in Exhibit "A" hereto
(the "LAND"). The construction of Building Area D (herein "LESSOR'S
IMPROVEMENTS") and certain other modifications to Building Area B and
Building Area C (herein "ADDITIONAL BUILDING Modifications") shall be
constructed by Lessor in accordance with the plans listed on Exhibit "B"
hereto and the applicable portions of the specifications attached hereto
as Exhibit "C" (herein the "SPECIFICATIONS"). Certain alterations to
Building Area A (the "BUILDING A EXPANSION") will be constructed by
Lessor in accordance with the plans listed on Exhibit "B" and the
applicable portions of the Specifications. The Land, Building Area A,
Building Area B, Building Area C and Building Area D are collectively
hereinafter called the "LEASED PREMISES". Building Area A, Building Area
B, Building Area C and Building Area D may sometimes be referred to
hereafter collectively as the "BUILDINGS". The parties currently
anticipate that the Buildings, with all expansions complete, shall
contain approximately the following floor areas: Building Area A - [*]
square feet; Building Areas B and C - [*] square feet; and Building Area
D - [*] square feet, with the total floor area of all Buildings being
[*] square feet.
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants set forth herein, the parties agree as follows:
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confidential treatment.
<PAGE> 2
1. LEASE TERM AND LEASEHOLD IMPROVEMENTS.
(A) Lessor hereby agrees to rent to Lessee and Lessee hereby agrees to
rent from Lessor the Leased Premises for an initial term which shall commence on
the later of: (i) [*], and (ii) with respect to Building Areas A, B and C, the
date when the improvements described in subsection 1 (C), items (i), (ii),
(iii), (iv), (vi), (ix), (x), (xi), (xiii) and (xiv) hereof are substantially
complete [without regard to the definition of "substantially complete" set forth
in subsection 1 (H) hereof], and with respect to Building Area D, the date when
the Lessor's Improvements are substantially complete as defined in subsection 1
(H) hereof (the "COMMENCEMENT DATE") and which shall expire on [*] (the
"EXPIRATION DATE"). Lessee may occupy all or any portion of the Leased Premises
prior to the Commencement Date as contemplated by Section 1(B). All of Lessee's
obligations hereunder shall commence upon such occupancy except that the
obligation to pay base rent, taxes, insurance and perform maintenance, as
provided in this Lease, shall commence only on the Commencement Date for the
applicable Building Area.
(B) Lessor hereby agrees to construct with diligence, in compliance with
all applicable laws, and in a good and workmanlike manner Lessor's Improvements.
Lessor shall cause Lessor's Improvements to be substantially complete on or
before [*]. To the extent not inconsistent with the construction process, Lessor
will allow Lessee to occupy and operate from the Leased Premises on or before
[*]. Lessor has presented to Lessee, and Lessee has heretofore approved the
plans and specifications for Lessor's Improvements attached hereto as Exhibits
"B" and "C"(the "APPROVED PLANS"). Lessor shall begin construction based on the
Approved Plans. Promptly after they have been developed, Lessor shall submit
full construction drawings and specifications, necessary to complete the work
including, without limitation, foundation plans, and architectural plans ,
including HVAC, plumbing, structural, mechanical, civil and electrical plans and
specifications for Lessee's approval, which approval shall not be unreasonably
withheld or delayed. Lessee shall promptly review the documentation so submitted
for consistency with the Approved Plans. Lessee shall, within five (5) business
days of receipt of such documentation either approve the same or indicate in
writing the specific reasons for the Lessee's failure to approve. Lessee shall
be required to approve the documentation unless: (i) it is inconsistent with the
Approved Plans; (ii) does not comply with applicable law; or (iii) the parties
agree to a change order as provided below. Lessee's failure to respond within
the required time frame shall be deemed to be an approval of the documentation
as submitted.
(C) Lessor hereby agrees to substantially complete construction of the
following items, which are part of the Additional Building Modifications, in
accordance with all applicable laws, in a good and workmanlike manner and in
accordance with the following schedule:
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(i) The existing lighting, plumbing and doors in Building Areas A, B
and C shall be placed in good working order on or before [*].
(ii) Remove the existing racking and racking sprinklers shall be
removed from Building Area C on or before [*].
(iii) The carpet in Building Area B shall be replaced, the interior of
Building Area B shall be painted and any damaged floor tile
replaced on or before [*].
(iv) The HVAC system in Building Area B shall be replaced on or before
[*]. The existing HVAC system for Building Area B will not be
removed until Lessor is ready to commence installation of the new
system.
(v) An additional 277 parking spaces shall be completed on or before
[*].
(vi) The mezzanine in Building Area C, and the ducts, air handling
equipment and boilers in Building Areas A and C shall be removed
on or before [*].
(vii) Modification to the existing HVAC system in Building Areas A and
C to give 4 air rotations per hour shall be completed on or
before 100 days after the Effective Date.
(viii) Two (2) new openings (each 12' wide by 12' high) in the east wall
of Building Area C will be cut in locations to be determined by
Lessee on or before fourteen (14) days after the roof over the
area of the west side of Building Area D has been completed.
(ix) The existing warehouse parking lot shall either have a new
topcoat installed or shall be resealed and re-striped, as needed,
on or before [*], adverse weather permitting.
(x) All ceiling tile in Building Area B will be replaced on or before
[*].
(xi) A protected shell for Building Area A Expansion (exterior walls
and roof completed either permanently or by temporary enclosure)
shall be completed on or before [*].
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with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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(xii) Installation of 20 loading docks on the west side of the Building
Area A expansion shall be completed on or before [*].
(xiii) Install 400 amp electrical service (pursuant to the
Specifications) to the existing computer room in Building Area B
by [*].
(xiv) Provide temporary fans for air movement in Building Areas A and C
by [*].
(D) Lessor hereby agrees to construct with diligence, in compliance with
all applicable laws, and in a good and workmanlike manner the Building A
Expansion on the Land. Lessor has presented to Lessee, and Lessee has heretofore
approved the plans and specifications attached hereto as Exhibit "B" and "C"(the
"APPROVED NB PLANS"). Lessor shall cause the Building A Expansion to be
substantially complete on or before [*]. Lessor shall begin construction based
on the Approved NB Plans. Promptly after they have been developed, Lessor shall
submit full construction drawings and specifications necessary to complete the
work including, without limitation, foundation plans, and architectural plans,
including HVAC, plumbing, structural, mechanical, civil and electrical plans and
specifications for Lessee's approval, which approval shall not be unreasonably
withheld or delayed. Lessee shall promptly review the documentation so submitted
for consistency with the Approved NB Plans. Lessee shall, within five (5)
business days of receipt of such documentation either approve the same or
indicate in writing the specific reasons for the Lessee's failure to approve.
Lessee shall be required to approve the documentation unless: (i) it is
inconsistent with the Approved NB Plans; (ii) does not comply with applicable
law; or (iii) the parties agree to a change order as provided below. Lessee's
failure to respond within the required time frame shall be deemed to be an
approval of the documentation as submitted.
(E) In the event Lessee desires to change any portion of the Lessor's
Improvements, Additional Building Modifications, or the Building A Expansion,
Lessee shall submit a written change order to Lessor. Lessor will provide Lessee
with any increase in construction costs incurred by Lessor, or any savings
realized by Lessor, from performing such change order (as applicable, the
"Change Cost/Savings"), and the effect that the same will have on the
construction schedule, if any, along with such other detail and information as
may be requested by Lessee as soon as practicable, but in any event within five
(5) business days. Lessor shall obtain competitive bids with respect to change
orders if and as requested by Lessee. If Lessee delivers to Lessor its written
approval of such Change Cost/Savings and change in the construction schedule, if
any, within five (5) business days after Lessee's receipt thereof, then (a)
Lessor will perform such change order in accordance with the same, and (b) the
Rental Rate (as defined below) will be adjusted, effective upon substantial
completion of the Building to which the change order relates, up (if a cost) or
down (if a savings), as applicable, by an amount equal to (i) the Change
Cost/Savings, multiplied by (ii) 11%, divided by (iii) the aggregate square
footage of the Buildings as set forth in the plans and specifications
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with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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<PAGE> 5
attached as Exhibits B and C (approximately [*] square feet). Notwithstanding
the foregoing, no change in Rental Rates will be made pursuant to the
immediately preceding sentence to the extent that any change order relates to
changes required for the Buildings (or any of them) to comply with any
applicable law, regulation or code or subsections 1 (B), (C) and (D) or
otherwise for Lessor to comply with its construction obligations as contemplated
in Exhibits "B" and "C" hereto (to such extent, a "Required Change Order").
Lessor shall include in its contract with its general contractor a provision
giving Lessor and/or Lessee, or their representatives, the right to inspect the
books and records of the general contractor with respect to the design and
construction activities contemplated by this Lease. In addition, throughout the
design and construction process, Lessor shall make available to Lessee for
inspection all books and records, as well as contracts, bills, vouchers, and
checks, and such other documents as are necessary for Lessee to properly audit
all design and construction costs. Notwithstanding any of the foregoing to the
contrary: (a) Lessor shall not be required to accept or perform any change order
which causes the cost of construction for the applicable change order, together
with the cost of construction of all prior change orders, to exceed, in the
aggregate, the sum of [*] ($[*]) Dollars; (b) any change in the construction
schedule set forth in an approved change order shall automatically modify the
other applicable provisions of this Lease relating to Lessor's obligations with
respect to meeting the construction schedule with respect to the item in
question; (c) for purposes of determining the dates on which Lessee must
commence to pay base rent and additional rent, delays in the construction
schedule attributable to any change order initiated by Lessee and which is not a
Required Change Order shall not be taken into consideration; and (d) Lessee
shall have the right to elect to pay directly the cost of construction of any
change order, in which case, there shall be no adjustment in the Rental Rate
with respect to such change order.
(F) The parties acknowledge that the Leased Premises is located outside
the city limits of Coffeyville, Kansas, and that, as a consequence, Lessor
represents to Lessee that no building permits, certificates of occupancy or
other governmental approvals or permits are required with respect to
construction of the Additional Building Modifications, Building A Expansion or
the Lessor's Improvements.
(G) Notwithstanding anything to the contrary contained in this Lease,
other than the provisions of Section 30 hereof, if Lessor fails or is unable to
cause Lessor's Improvements, the Additional Building Modifications and the
Building A Expansion to be substantially completed by the applicable dates set
forth above and such failure materially and adversely affects Lessee's ability
to use the Leased Premises and if such failure is not attributable to any delay
or fault of Lessee or from any of the causes set forth in Section 30 hereof,
Lessee shall be entitled to $[*] for every day of such delay.
(H) For purposes of this Agreement, the Lessor's Improvements and/or the
Building A Expansion, as applicable, shall be deemed to be substantially
complete when: (i) they are
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with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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<PAGE> 6
sufficiently complete in accordance with the contract documents so that Lessee
can occupy or utilize the Lessor Improvements and/or the Building A Expansion,
as applicable, for their intended use; (ii) Lessor's architect, Carter Burgess,
Inc. of Fort Worth, Texas, has delivered to Lessee a certificate of substantial
completion confirming that the Lessor's Improvements and/or the Building A
Expansion, as applicable, have been substantially completed in accordance with
the Approved Plans or the Approved NB Plans, as applicable; and (iii) all
building systems, equipment and utilities installed as part of the Lessor's
Improvements and/or the Building A Expansion, as applicable, are properly
installed and functioning in all material respects. Lessor shall give Lessee at
least fifteen (15) days prior written notice of the anticipated date of
substantial completion of Lessor's Improvements and/or the Building A Expansion,
as applicable.
(I) Lessor shall complete the punch list items (described in Section 10
hereof) for Lessor's Improvements, Additional Building Modifications and/or the
Building A Expansion, as applicable, promptly after conclusion of the walk
through described in Section 10 hereof.
(J) Lessor warrants to Lessee that the Lessor's Improvements, Building A
Expansion and the Additional Building Modifications shall, upon and after
substantial completion of the applicable improvements, be free from defects in
workmanship and materials, and, notwithstanding anything to the contrary
contained in this Lease, Lessor shall, at Lessor's sole cost, promptly correct
any defects in workmanship or materials with respect to the Additional Building
Modifications, the Building A Expansion or Lessor's Improvements; provided,
however, the foregoing warranty shall expire and be of no further force or
effect one (1) year from and after the date of the walk through (described in
Section 10 hereof) for the applicable improvements. In order to preserve any
claim after expiration of the one (1) year warranty period, Lessee must give
Lessor written notice of such claim prior to expiration of the one (1) year
warranty period, specifically setting forth the details of the claim. Any claim
which has been made during the one (1) year warranty period in accordance with
the immediately preceding sentence shall continue to enforceable until resolved.
(K) Notwithstanding any other provision in this Lease to the contrary,
Lessor shall be deemed to have constructed the improvements described above in
this Section 1 in accordance with subsections 1 (B), (C) and (D) and Exhibits
"B" and "C" hereof so long as such improvements do not contain any material
deficiency beyond the customary and normal deviations associated with such work
taking into account the specifications developed by Lessor's architect.
2. BASE RENT
(A) Subject to increase or decrease pursuant to subsection 1(E) hereof,
Lessee covenants with Lessor to pay base rent for the Leased Premises (a) at the
rate of $[*] per square foot per year with respect to the period commencing on
the Commencement Date through [*], (b) at the rate of $[*] per square foot per
year with respect to the period commencing on [*] through [*], and (c) at
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confidential treatment.
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<PAGE> 7
the rate of $[*] per square foot per year with respect to the period commencing
on [*] through [*] (such rate as in effect from time to time, the "Rental
Rate"). All such yearly base rental payments shall be calculated on the basis of
the total number of square feet constituting the Buildings (other than Building
Area D until such time as Building Area D has been substantially completed), and
shall be prorated for any partial months as applicable. The yearly rent shall be
paid monthly, in installments, each equal to one-twelfth (1/12) of the yearly
rent. The first such monthly rental payment shall be payable on the Commencement
Date, with each remaining monthly rent payment payable on the first day of each
month thereafter as set forth below. Notwithstanding the foregoing, and in
addition to any Rental Rate reductions pursuant to Section 1(E), if the square
footage of the Building A Expansion is less than [*] square feet upon its
substantial completion, then each of Lessee's monthly rent payments due under
this Lease shall be reduced by an amount equal to (a) $[*] multiplied by (b)
such shortfall in the number of square feet.
(B) Each installment of rent due pursuant to this Lease shall be paid in
advance for receipt by Lessor (or, if requested by Lessor, by Lessor's
mortgagee) on or before the first day of each and every calendar month during
the term of the Lease. Rent not received when due (without regard to any
applicable grace period) shall bear interest at a rate per annum which is Three
percentage points higher than the "prime rate" of interest as published in the
Wall Street Journal. In addition, a late charge equal to [*]% of the amount due
shall be payable with respect to any monthly installment of rent which is not
paid within ten (10) days after Lessor gives Lessee written notice that such
payment is past due. If Lessee fails to perform any of its obligations under
this Lease after notice from Lessor, if required, and after the lapse of the
applicable cure period, if any, Lessor may, but shall not be required to,
discharge such obligations and the reasonable cost thereof shall be paid by
Lessee to Lessor as additional rent on the due date of the next monthly rental
payment. Notwithstanding the foregoing to the contrary, if Lessee, on two (2)
occasions in any twelve (12) consecutive month period, fails to pay any rent
within ten (10) days after the same is due and notice thereof from Lessor, the
[*] percent ([*]%) late charge shall be due and owing with respect to any rental
payment which is past due at any time during the twelve (12) consecutive month
period immediately following the second such time Lessee fails to pay rent
within ten (10) days after it is due.
3. OPTION TO RENEW. Lessee shall have the right to renew this Lease for
[*] ([*]) renewal terms of [*] ([*]) [*] each, upon the same terms and
conditions as herein set forth, except there shall be no additional options to
extend after the [*] renewal term and the annual rental during the first renewal
term shall be [*] ([*]%) percent over the annual rent payable during the last
year of the initial term, and the annual rental during the [*] renewal term
shall be [*] ([*]%) percent over the annual rent payable during the first
renewal term. To exercise each such renewal option, Lessee must give Lessor
written notice of its intention to renew at least ten (10) months before the
scheduled expiration of the then current term of this Lease. Time shall be of
the essence in connection with the exercise by Lessee of its renewal rights as
provided for in this Section.
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with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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<PAGE> 8
4. SECURITY DEPOSIT. [*]
5. HOLDOVER TENANCY. If Lessee retains possession of the Leased Premises
or any part thereof after the termination of this Lease, without Lessor's prior
written consent, Lessee (without prejudice to any of Lessor's other rights and
remedies) shall pay to Lessor (i) an amount per month equal to [*]% of the rent
payable with respect to the Leased Premises during the last month of the term,
(ii) all additional rent for such period, (iii) all direct damages sustained by
Lessor by reason of such retention of possession by Lessee.
6. UTILITIES. Lessee shall be solely responsible for all charges for
heat, water, gas, electricity and other utilities used or consumed on the Leased
Premises. Except for interruptions or curtailments caused by the negligent acts
or willful misconduct of Lessor, Lessor shall not be liable to Lessee for
interference in or interruption of any utility service, nor shall any
curtailment or interruption constitute a constructive eviction or grounds for
rental abatement in whole or in part hereunder.
7. TAXES. Lessee shall be liable for all taxes levied against personal
property and trade fixtures placed by Lessee in the Leased Premises. Lessee
shall, commencing [*], and continuing thereafter through the initial term and
any extended term of this Lease, pay before any interest or penalties begin to
accrue, all real estate taxes, special assessments and governmental charges of
any kind and nature whatsoever levied or assessed against the Leased Premises or
any part thereof. Lessee shall deliver to Lessor, within ten (10) days prior to
the date interest and penalties would begin to accrue, proof satisfactory to
Lessor that such taxes, assessments and charges have been timely paid. Lessee
shall not be liable for any interest or penalty due to a delay in payment caused
by Lessor.
Taxes, water rents, rates and charges, sewer rents and other
governmental impositions and charges, assessed during the term, including the
initial year thereof, or subsequently assessed for the term, but payable in
whole or in installments shall be adjusted and prorated and Lessee shall pay the
prorated share thereof only for the period of the term of this Lease. Any
imposition which may be payable in installments, as permitted by law or
agreement with the appropriate governmental authority, may be paid in that
manner except that each installment thereof becoming due and payable subsequent
to the term of this Lease but assessed for such term and any interest thereon
shall be paid by the Lessee prior to the expiration or sooner termination of
this Lease. Lessee shall be under no obligation to pay interest on any mortgage
on the fee of the Leased Premises, any franchise or income tax payable by
Lessor, or any gift, inheritance, transfer, estate, or succession tax payable by
Lessor by reason of any present or future law which may be enacted during the
term of this Lease.
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with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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If Lessee shall desire to contest the validity or amount of any payment
herein required to be made by it as additional rent to any person other than
Lessor, Lessee shall promptly notify Lessor of its intention to do so, and may
thereupon defer such payment so long as the validity or amount thereof shall be
contested by Lessee in good faith and by appropriate legal proceedings provided
that the holder of any first mortgage on the Leased Premises shall consent to
such postponement. During any such contest Lessee will prevent any divesting of
Lessor's title, reversion or other interest in or to the Leased Premises and
will further prevent the enforcement or public sale on any lien for such payment
and the enforcement of any court or administrative order preventing or delaying
the payment of any installment of rent. Lessee agrees that such contest shall be
diligently prosecuted, that it will pay, and save Lessor harmless from and
against any and all losses, judgments, decrees and costs (including all
reasonable attorneys' fees and expenses) in connection therewith, and that
promptly after the final determination of such contest it will fully pay and
discharge the amounts which shall be levied, assessed, charged or imposed or be
determined to be payable therein, together with all penalties, fines, interest,
costs and expenses resulting therefrom.
8. MAINTENANCE. (A) It is the intention of the parties that this is a
"triple net" lease; that is, Lessee shall pay any and all taxes, assessments,
costs of insurance, costs of repairs including interior and exterior [excluding
those structural portions of the Leased Premises which are to be maintained by
Lessor in accordance with Section 8 (B) hereof, provided such structural repairs
are not necessitated because of Lessee's acts] and all operating and maintenance
expenses and costs with respect to the Leased Premises, including taxes,
assessments, costs and expenses of every nature except as specifically otherwise
provided for in this Lease. Except for items of maintenance covered by the
guarantees provided for in this Lease and except for structural repairs which
are to be made by Lessor, as hereafter provided in Section 8 (B) hereof (unless
necessitated by Lessee's acts), Lessee agrees, at its own expense, to make all
necessary repairs to the Buildings, including but not limited to, all interior
and exterior portions thereof and to do all other necessary maintenance in
connection with the Leased Premises while this Lease is in effect (commencing on
[*]) to the end that the Leased Premises are kept and maintained in a good and
safe condition at all times. Lessee also agrees, from and after [*], to perform
and pay for all maintenance and repair expenses with respect to all lawn, yard,
shrubbery, snow removal and sprinkler system charges. Lessee further agrees at
its own expense to maintain or replace all minor and major components of or
entire systems of the Leased Premises, such as the plumbing, electrical, heating
and air conditioning, if any, to the end that such components and systems are in
good operating condition at all times. Notwithstanding the foregoing to the
contrary, Lessor warrants that with respect to the existing roofs, plumbing,
electrical, heating, dock doors, air conditioning and other operating systems
and building and site components which are not to be replaced by Lessor pursuant
to Section 1 hereof, the same shall be in good working condition as of [*], and
the parties shall conduct a walk-through on or about [*], in order to prepare a
punch list of any defects in such systems that will be promptly repaired by
Lessor.
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confidential treatment.
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(B) Lessor shall, during the entire term of this Lease and at its sole
cost and expense, keep and maintain in good order, condition and repair the
roofs, exterior walls, foundations and other structural portions of the
Buildings unless necessitated by the acts or negligence of Lessee or Lessee's
employees, agents, invitees, sublessees or contractors.
9. CASUALTY INSURANCE. Subject to Lessee's right to furnish insurance as
hereafter provided, Lessor, at the cost and expense of the Lessee, shall provide
and keep in force "all-risk" fire insurance with an extended coverage
endorsement including vandalism, malicious mischief and any loss arising out of
sprinkler damage, upon the Buildings during the entire term of this Lease in an
amount equivalent to not less than one hundred percent (100%) of the full
replacement cost of the Buildings, exclusive of foundations, but in no event
less than the amount required by any regular lending institution now or
hereafter holding a mortgage on the premises. The full replacement cost shall be
first determined by Lessee and Lessor at the initial signing of the Lease and
shall periodically be mutually redetermined by Lessor and Lessee in a good faith
manner based upon an appraisal of the Leased Premises, the cost of which shall
be born by the Lessee. Any insurance coverage shall also provide insurance
against loss of rents for a period of one (1) year and against loss or damage by
explosion of steam boilers, pressure vessels or similar apparatus, now or
hereafter installed in the building on the Leased Premises and against such
other risks and with such limits as may be reasonably determined by the Lessor
from time to time, on the basis of the types and limits of insurance customarily
carried by prudent owners of similar properties in the region in which the
Leased Premises are located; provided, however, Lessor shall not have the right
to require an increase in the limits of the liability insurance during the first
five (5) years of the Lease unless Lessee materially changes its use of the
Leased Premises. Lessee agrees that Lessee shall be solely responsible for
property insurance covering its contents and all of Lessee's Improvements.
Within ten (10) days of receipt of an invoice or statement therefor,
such premiums shall be paid by the Lessee either directly or by reimbursement to
Lessor as Lessor shall request and, in the former case, Lessor shall be
furnished with satisfactory evidence of such payment. Lessee's obligation to pay
such premiums shall commence [*], and shall continue thereafter through the
initial term and any extended term of this Lease.
All policies of insurance required to be maintained by the Lessee or the
Lessor shall be rated not lower than A-/X by Best's Insurance reports or such
higher rating as may be required by Lessor's Mortgagee and shall name the Lessor
and the Lessor's mortgagees and any other party in interest as the insured as
their respective interests may appear. All policies shall contain an agreement
by the insurers that such policies shall not be canceled without at least thirty
(30) days prior written notice to the Lessor and/or to the holder of any
mortgage to whom losses hereunder may be payable.
After receiving the prior written consent of Lessor, which consent shall
not be unreasonably withheld, and subject to any required consent of Lessor's
mortgagee, Lessee may elect to provide
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with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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<PAGE> 11
the insurance required by this Section 9 through Lessee's insurance carrier
provided that the quality of the insurer and the scope of the coverage fulfills
the requirements of this Section 9.
10. ACCEPTANCE OF PREMISES. Promptly after the Additional Building
Modifications and the Building A Expansion are substantially complete and again,
promptly after Lessor's Improvements are substantially complete, Lessor and
Lessee shall jointly walk through the Leased Premises in order to inspect the
Additional Building Modifications, the Building A Expansion and Lessor's
Improvements, whichever is applicable, and to develop a punch list of items to
be completed and/or repaired by Lessor. Lessee acknowledges that as of the date
of the applicable walk-through, it will have inspected the Leased Premises and
will be renting same "as is", with the exception of: (i) the punch list items
which Lessor shall be obligated to complete and/or repair; and (ii) defects in
material or workmanship that are discovered during the one (1) year warranty
period described in Section 1 (J) hereof. Lessee shall have the right to add
mechanical, but not cosmetic, problems to the punch list for ninety (90) days
following the applicable walk-through. The Leased Premises shall be delivered in
broom clean condition with all mechanical equipment in good working order and
the roof free of leaks. Furthermore, Lessor shall assign to Lessee all
assignable warranties and guarantees, if any, received by Lessor in connection
with the Leased Premises (other than those which relate to the portions of the
Leased Premises which Lessor is obligated to maintain), and Lessor shall notify
Lessee as to any warranty or guaranties that, to Lessor's actual knowledge, are
not assignable, and shall use its best efforts to enforce non-assignable
warranties and guarantees, if any, in connection with the Leased Premises, at
Lessee's request and on Lessee's behalf. If Lessor is requested to enforce a
warranty or guaranty on behalf of Lessee, Lessee shall be solely responsible for
any reasonable consultants' or attorneys' fees incurred by Lessor in connection
therewith, provided that Lessor advises Lessee of Lessor's estimate of the
maximum amount of such expenses prior to incurring same and obtains Lessee's
written consent to such expenditure. At the point when Lessor's expenses equal
or exceed the maximum amount approved by Lessee, Lessor shall have the right to
discontinue its efforts to enforce such non-assignable warranties or guaranties.
At the end of the term or other expiration of this Lease, Lessee will
surrender and deliver up the Leased Premises to Lessor in substantially the same
condition delivered to Lessee, reasonable and ordinary wear and tear,
alterations installed by Lessee (unless Lessee is required to remove the same as
hereafter provided), condemnation and damage by fire or casualty excepted.
11. LIABILITY INSURANCE; INDEMNIFICATION. Lessee, at its expense, shall
maintain liability insurance for injuries to any person or persons and property
with combined single limits of [*] ($[*]) Dollars and a deductible in a
commercially reasonable amount and furnish a certificate of insurance evidencing
such coverage to Lessor, naming, as additional insureds, Lessor and Lessee, as
their interests may appear, and if requested by Lessor, any mortgagee or holder
of any mortgage which may be or become a lien upon any part of the Property. The
certificate shall specify thirty (30) days written notice to all insureds of
cancellation or material changes in the policy. Lessor agrees that it will
promptly advise Lessee of any claims against Lessor in connection with
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[*] omitted, confidential material, which material has been filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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<PAGE> 12
the Leased Premises so that Lessee may assume the defense of the same in a
timely manner if Lessee is obligated to assume such defense in accordance with
the provisions of this Lease. Prior to the commencement of the term hereof,
Lessee shall provide Lessor with the aforementioned certificates or copies of
the policy or policies of insurance above referred to, with evidence that the
premiums have been paid in full for the policy periods. Lessee shall also
furnish to Lessor throughout the term hereof replacement certificates or copies
of renewal policies, together with evidence of like paid premiums at least ten
(10) days prior to the expiration dates of the then current policy or policies,
or within such other time period as Lessor and Lessee may agree. All the
insurance required under this Lease shall be issued by insurance companies
authorized to do business in the State of Kansas with a financial rating of at
least an A-/X as rated in the most recent edition of Best's Insurance Reports
and in business for the past (5) years.
Lessee shall indemnify, hold harmless and defend Lessor from and against
any and all costs, expenses (including reasonable counsel fees), liabilities,
losses, damages, suits, actions, fines, penalties, claims or demands of any kind
and asserted by or on behalf of any person, independent contractor or
governmental authority, arising out of or in any way connected with, and Lessor
shall not be liable to Lessee on account of (i) any failure by Lessee to perform
any of the agreements, terms, covenants or conditions of this Lease required to
be performed by Lessee, (ii) any failure by Lessee to comply with any applicable
statutes, ordinances, regulations or orders of any governmental authority with
respect to the Leased Premises or Lessee's use thereof, (iii) loss or damage
caused by the negligence of Lessee, or (iv) any accident, death or personal
injury, or damage to property, which shall occur in the Leased Premises except,
in each case, as the same may be caused by the negligence or willful misconduct
of Lessor, its employees or agents or to the extent arising out of Lessor's
failure to perform its obligations set forth in this Lease. Lessee shall also
assume the burden and expense of defending all such suits, whether brought
before the expiration of this Lease or thereafter and commenced to recover for
injuries occasioned by such accidents. This obligation of Lessee shall extend to
both injuries to persons and to property, and its obligation to hold Lessor
harmless therefrom shall extend to claims arising from such accidents which are
either valid or groundless.
12. DESTRUCTION OF PREMISES. In the event the Buildings or any part
thereof, shall, during the term of this Lease or during any period during which
Lessee is in possession thereof as permitted by this Lease, be destroyed or
damaged by fire, explosion, the elements or other casualty, Lessee shall give
prompt notice thereof to Lessor. Upon receipt of such notice, Lessor shall cause
the damage to be repaired within a reasonable time unless either party shall
terminate this Lease as provided below. If the Leased Premises or any part
thereof shall have been rendered untenantable for their intended use as
reasonably determined by the parties, then from the time of the damage until the
completion of said repair and restoration there shall be an equitable reduction
in the rental during such period of repair and restoration until said Leased
Premises are so repaired and again ready for occupancy. Within forty-five (45)
days after the occurrence of damage or destruction, Lessor shall determine the
extent of damage or destruction to the Building or Buildings and the time
required for repair and shall notify Lessee of such matters. If Lessor
reasonably
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<PAGE> 13
estimates that the work required to complete the repairs shall take in excess of
twelve (12) months, Lessor shall have the right to terminate this Lease by
giving written notice of its intention to do so within fifteen (15) days after
the date of Lessor's notice. Furthermore, if the Leased Premises are damaged to
the extent of more than fifty (50%) percent of the replacement cost thereof
during the last year of the term of this Lease, both Lessor and Lessee shall
have the right to terminate this Lease by giving the other party written notice
of its intention to do so within fifteen (15) days after receipt of Lessor's
report of the extent of the damage to the Leased Premises.
13. EMINENT DOMAIN. In the event the Leased Premises, or a substantial
portion thereof which renders the balance economically unusable by Lessee for
the conduct of its business, are taken under the power of eminent domain for any
public or quasi-public use, then Lessee may terminate and cancel this Lease by
giving Lessor notice in writing, by registered or certified mail, within
forty-five (45) days of Lessee's receipt of notice of the condemnation from
Lessor. If Lessee so elects to terminate this Lease, said termination shall be
effective upon the date that the condemning authority takes possession of the
condemned property and thereupon both parties shall be relieved of any further
obligation under this Lease, except that the parties shall fulfill all of their
obligations hereunder to be performed to the date of such termination. In the
event this Lease is not terminated and canceled after a condemnation of a
portion of the Leased Premises, the rent due hereunder shall be reduced to a
reasonable sum proportional to the value of the Leased Premises after the
condemnation.
Lessee hereby waives all rights to any award in condemnation, including,
without limitation, rights arising from termination of all or any part of
Lessee's leasehold interests. Lessee may, however, file a separate claim for any
leasehold improvements constructed by Lessee or constructed at Lessee's expense,
its trade equipment, machinery and fixtures and relocation expenses.
If the Lease is not terminated as provided hereinabove, Lessor shall use
its best efforts to promptly and diligently restore the Leased Premises, or the
building in which they are located, to a condition as similar as possible to
that existing prior to the taking, but shall have no obligation to restore any
improvements made by Lessee.
14. ALTERATIONS. Lessor agrees that Lessee may at its own expense, from
time to time during the term hereof, make such interior alterations and changes
in and to the Leased Premises, as it finds necessary or convenient for its
purposes, provided that such interior alterations, additions or changes shall
not materially and adversely affect any of the Buildings; provided, however,
that Lessee shall not make any structural changes or alterations, including the
removal of any bearing or non-bearing walls without the prior written consent of
Lessor. Such consent may be conditioned on a requirement that the Leased
Premises be restored at the end of the lease term. If not so stated in the
consent, any structural alterations, additions and changes shall, at Lessor's
option, either be removed and the Leased Premises restored at the Lessee's
expense, or remain on the Leased Premises at the end of the term of this Lease,
or any renewal term hereof, in which event such alterations, additions and
changes shall be considered as improvements to and become a part of the
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<PAGE> 14
real estate of Lessor. Lessee agrees that any interior alterations, additions
and changes aforesaid made by it will be erected or made in a first class, good
and workmanlike manner and all shall be subject to the terms and conditions of
this Lease. Lessee may not expand the Leased Premises without the prior written
consent of Lessor.
It is understood and agreed, however, that all trade equipment,
machinery and fixtures of every kind and description placed in and upon the
Leased Premises by Lessee during the term of this Lease shall be and remain
personal property belonging to Lessee, and, at the expiration of the term of
this Lease, or any renewal hereof, Lessee shall have the right, and at Lessor's
option, shall have the obligation, to remove such personal property from the
Leased Premises, restoring and repairing at its expense any damage to the Leased
Premises directly caused by the removal of such items of personal property.
15. LESSOR'S ACCESS TO LEASED PREMISES. Lessor or its agent may so often
as is reasonable and upon not less than 24 hours advance notice, enter upon the
Leased Premises during the initial or any renewal term of this Lease for the
purpose of inspecting the same, to show the Leased Premises for purposes of
financing or refinancing same, for purposes of placing signs thereon or offering
the same for lease after Lessee's term or for purposes of showing the Leased
Premises to prospective purchasers; provided, however, that Lessor shall only
show the Leased Premises to prospective tenants and shall only place signs
thereon during the last twelve (12) months of the term of this Lease. In case of
emergency, Lessor shall give such notice, if any, as is reasonable under the
circumstances. When entering the Leased Premises, Lessor shall not unreasonably
interfere with Lessee's use and enjoyment of the Leased Premises, and Lessor
shall comply with Lessee's reasonable requirements with respect to
confidentiality and security (including, but not limited to, being escorted at
all times by an employee of Lessee, signing a reasonable non-disclosure
agreement, and agreeing to prevent access to prospective purchasers or tenants
who are or may reasonably be suspected to be competitors of Lessee).
16. QUIET ENJOYMENT AND PERMITTED USE. Lessor covenants and agrees that
Lessee, upon paying the base rent, additional rent and all other charges herein
provided for and performing and fulfilling the covenants, agreements, and
conditions of this Agreement on the Tenant's part to be performed and fulfilled,
shall peaceably and quietly hold, occupy and enjoy the Leased Premises during
the term of this Lease without hindrance or molestation by the Landlord or any
person(s) claiming through the Landlord, subject, however, to the terms and
conditions of this Lease; provided, however, that Lessee shall not, without the
prior written consent of Lessor, permit the Leased Premises to be used for the
storage, treatment or holding of any amount of hazardous waste or environmental
contaminants beyond such amounts which Lessee may reasonably require to use and
store on the Leased Premises for the conduct of its business thereat [and Lessor
acknowledges that Lessee may use customary and reasonable amounts of cleaning
compounds, solvents, fuel for forklifts and other materials for purposes of
operating, maintaining, cleaning and repairing the Leased Premises and the
property located therein in connection with its business (herein the "PERMITTED
MATERIALS")]. Lessee agrees that its use and storage of all such hazardous
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<PAGE> 15
materials shall be in strict compliance with all applicable laws, regulations,
codes, ordinances and statutes. Lessee warrants to Lessor that, except for the
Permitted Materials, neither it nor any of its permitted assignees or subtenants
will conduct a business at the Leased Premises which involves the storage or
distribution of any hazardous substance.
17. ASSIGNMENT AND SUBLETTING. [*].
18. DEFAULT. If Lessee shall fail to pay to Lessor the rent and/or other
sums of money payable to Lessor as and when due and payable hereunder and such
default shall continue for a period of ten (10) days after Lessor has given
Lessee written notice of such default, or if Lessee shall fail to comply with
any other provisions or conditions of this Lease agreement, upon its part to be
kept and performed, and such default shall continue for a period of thirty (30)
days after written notice thereof shall be given to Lessee by Lessor, (provided
however, that if such default cannot through the exercise of due diligence, be
cured within thirty (30) days and if Lessee promptly commences the cure, the
thirty (30) day period shall be extended as reasonably required to effect the
cure) or if Lessee shall be adjudged bankrupt, or shall make an assignment for
the benefit of creditors, or if a receiver of any property of Lessee in or upon
said Leased Premises or for all or part of Lessees' interest hereunder be
appointed in any action, suit or proceeding, by or against Lessee and such
adjudication, assignment or appointment shall not be vacated or annulled within
ninety (90) days, or if the interest of Lessee in the Leased Premises shall be
sold under execution, or other legal process, it shall be lawful for Lessor to
enter upon said premises, and again have, repossess and enjoy the same as if
this Lease had not been made, and everything herein contained on the part of
Lessor to be done and performed shall cease and determine, and Lessor may, at
its option, declare this Lease terminated. The foregoing rights are without
prejudice, however, to the right of Lessor to recover from Lessee all damages
incurred by Lessor as a result of Lessee's breach and additionally Lessor may
retake possession of and relet said Leased Premises for the remainder of said
term for the highest rent reasonably obtainable and may recover from Lessee any
deficiency between the amount so obtained and the rent herein reserved plus all
costs incurred by Lessor as a result of Lessee's default, including without
limitation reasonable attorneys' fees, brokerage commissions (pro rated through
the balance of the term); provided, however, Lessor shall be obligated in such
event to make full and diligent effort to mitigate its damages by reletting said
Leased Premises for the best rent reasonably obtainable; and Lessor may pursue
any or all rights and remedies in equity or at law, the foregoing rights and
remedies set forth being by way of example only and not by way of limitation or
restriction. Notwithstanding the foregoing to the contrary, if Lessee, on two
(2) occasions in any twelve (12) consecutive month period, fails to pay any rent
within ten (10) days after the same is due and notice thereof from Lessor,
Lessee will be in default under this Lease during the twelve (12) consecutive
month period immediately following the second such time Lessee fails to pay rent
within ten (10) days after it is due without the necessity of Lessor giving
Lessee written notice of such failure to pay.
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[*] omitted, confidential material, which material has been filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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<PAGE> 16
19. STATUTORY AND ENVIRONMENTAL COMPLIANCE. To the best of Lessor's
actual knowledge, the Leased Premises have never and do not currently contain,
nor are they contaminated by, any hazardous or toxic waste materials in
violation of any applicable environmental law or regulation, including, but not
limited to Section 103 of the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. 9601, et seq, or applicable Kansas environmental
laws and regulations. In addition, to Lessor's actual knowledge, no "cleanup"
(as such term is used in applicable environmental laws) of the Leased Premises
has occurred pursuant to any applicable federal or state environmental laws or
regulations, nor have same been ordered with respect to the Leased Premises.
Except as to any condition of the Leased Premises which exists prior to
the time Lessee takes possession of any portion of the Leased Premises and which
does not comply with any applicable statutes, ordinances, rules, orders,
regulations or requirements of the Federal, State or Municipal Government and
any and all of their Departments and Bureaus, in effect as of the such date,
Lessee shall promptly comply with all statutes, ordinances, rules, orders,
regulations and requirements of the Federal, State or Municipal Government and
of any and all their Departments and Bureaus applicable to the Leased Premises
for the correction, prevention and abatement of nuisances, violations or other
grievances, in, upon or directly related to the Leased Premises or Lessee's use
thereof during the term of this Lease; and shall also promptly comply with and
execute all rules, orders and regulations of the Board of Fire Underwriters for
the prevention of fires, at the Lessee's own cost and expense. Provided
specifically that it shall be Lessee's responsibility to comply with any and all
present and future environmental statutes and any regulations promulgated
thereunder (hereinafter collectively referred to as "Environmental Provisions"),
to the extent the same apply to the Leased Premises as a result of the Lessee's
occupancy thereof or which are triggered as a consequence of Lessee's use
thereof or any environmental condition developing or coming into existence
during the term of this Lease on the Leased Premises, which are attributable to
acts or omissions of Lessee, its employees, agents, invitees, contractors or
representatives; provided, however, that the foregoing shall not apply with
respect to matters arising as a result of acts or omissions of Lessor, its
agents, employees, invitees or representatives or Lessor's predecessors or
successors. This responsibility shall include, but not be limited to, the
submission of all information required thereunder by any governmental authority
and the development and implementation of any cleanup plan required because of
any spill or discharge of a hazardous substance or waste on the Leased Premises
which occurs during the term of this Lease arising from acts or omissions of
Lessee, its employees, agents or representatives.
Lessee shall provide Lessor with copies of any notice which Lessee may
receive regarding any failure or alleged failure of either Lessee (to the extent
the same relates to Lessee's use or occupancy of the Leased Premises) or the
Leased Premises to comply with any statute, ordinance, rule, order, regulation
or requirement of any applicable authority. Such notice shall include a copy of
any written communication received by Lessee from any such applicable authority
and a verbal communication to Lessor of any oral notifications Lessee may
receive with respect to a material violation. In any case such notice shall be
given promptly upon Lessee's receipt thereof.
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<PAGE> 17
If for any reason, Lessee has not complied with all of its obligations
under this Section 19 prior to the termination of this Lease or expiration of
the term of this Lease, Lessee's responsibilities under this Section 19 shall
survive such termination or expiration of this Lease and shall continue to be
enforceable.
Lessee shall indemnify, defend and hold Lessor, its successors and
assigns harmless with respect to all matters arising out of or in any way
connected with (i) any spills or discharge of hazardous substances or wastes at
the Leased Premises which occur during the term of this Lease (unless
attributable to Lessor or its employees, agents or representatives), (ii)
Lessee's failure to provide all information, make all submissions and take all
actions required by any governmental agency in connection with the Leased
Premises or Lessee's use thereof, or (iii) any other failure to comply with the
provisions of this Section 19. Lessee's obligations and liabilities under this
Section shall continue so long as Lessee remains responsible for any spills or
discharges of hazardous substances or wastes at the Leased Premises which occur
during the term of this Lease. Lessee's failure to abide by the terms of this
Section shall be restrainable by injunction.
Lessor shall indemnify, defend and hold Lessee, its successors and
assigns harmless with respect to all matters arising out of or in any way
connected with any environmental condition occurring on the Leased Premises
(including, without limitation, any underground tanks) which (a) was in
existence prior to the time at which Lessee took possession of any portion of
the Leased Premises (except to the extent such conditions are attributable to
Lessee or its employees, agents or representatives), or (b) which are
attributable to acts or omissions of Lessor, its employees, agents or
representatives. Lessor's obligations under this Section shall survive
expiration of this Lease.
Notwithstanding the foregoing to the contrary, no alleged violation of
any governmental law, ordinance, rule or regulation by Lessee shall constitute a
breach of covenant under the provisions of this Lease so long as Lessee is
contesting in good faith the validity of such law, ordinance, rule or regulation
or the existence of its alleged violation thereof provided Lessee shall hold
Lessor harmless from any liability or expense by reason of any such contest or
litigation concerning any such governmental law, ordinance, rule or regulation,
or any alleged violation thereof by Lessee.
The indemnification provisions contained in this Section shall include
all costs, fines, penalties, damages, liabilities (whether statutory or
otherwise), claims and actions of any kind, cleanup costs, reasonable
consultants', experts' and attorneys' fees and any other reasonable expenses
incurred in connection with the claim by the party entitled to indemnification
hereunder. The parties hereby acknowledge and agree that the provisions of this
Section shall survive the termination or expiration of this Lease and shall
remain enforceable in accordance with the terms hereof.
20. NON WAIVER. No failure to insist on performance in any instance of
any obligation hereunder shall be deemed a waiver of such performance, or any
subsequent performance of such obligation or of the performance of any other
obligation hereunder, and no waiver in any
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<PAGE> 18
instance of the performance of any obligation hereunder shall be deemed a waiver
of any subsequent performance of such obligation or of the performance of any
other obligation hereunder.
21. NOTICES. All notices required or permitted under this Lease shall be
in writing and shall be given by either Certified Mail, Return Receipt Requested
or by Federal Express (or other overnight courier). Such notice shall be deemed
given four (4) business days after mailing as aforesaid or one (1) business day
after delivery to the courier, whichever is applicable. For all purposes
hereunder, including notices and the payment of rentals, the addresses of the
parties hereto are as follows:
Lessor: TGFW II, L.L.C.
8100 East 22nd Street North
Building 1900, Suite 402
Wichita, Kansas 67226
FAX:
Lessee: Amazon.com.ksdc, Inc.
Amazon.com, Inc.
1516 Second Avenue
Seattle, WA 98101
Attn: Director of Global Real Estate
with a copy to: Amazon.com.ksdc, Inc.
Amazon.com, Inc.
1516 Second Avenue
Seattle, WA 98101
Attn: General Counsel
Either party may change the foregoing address by notice given pursuant to this
Section at least ten (10) days prior to the effective date of such new notice
address.
22. SUBORDINATION. This Lease and all of the rights of Lessee hereunder
are and shall be subject and subordinate to the lien of any mortgage or
mortgages hereinafter placed on the Leased Premises or any part thereof, except
Lessee's property or trade fixtures, and to any and all renewals, modifications,
consolidations, replacements, extensions or substitutions of any such mortgage
or mortgages (all of which are hereinafter termed the mortgage or mortgages),
provided, nevertheless, that each or all of such mortgages, shall contain a
provision to the effect that so long as Lessee is not in default under this
Lease, or any renewal hereof, no foreclosure of the lien of said mortgage or any
other proceeding in respect thereof shall divest, impair, modify, abrogate or
otherwise adversely affect any interests or rights whatsoever of Lessee under
the said Lease.
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<PAGE> 19
Such subordination shall be automatic, without the execution of any
further subordination agreement by Lessee. If, however, a written subordination
agreement, consistent with this provision, is required by mortgagee, Lessee
agrees to execute, acknowledge and deliver the same within twenty (20) days of
Lessor's written request so long as the form thereof is in accordance with
commercially reasonable standards applied by the lending industry in loans of
the type and amount sought by Lessor and such agreement provides for the
non-disturbance of Lessee in the event of foreclosure so long as Lessee is not
in default of the performance of its obligations under this Lease beyond any
required notice and applicable cure period. In the event of Lessee's failure to
so execute such a subordination agreement within the time provided, such failure
shall constitute a default by Lessee under this Lease.
Lessor represents and warrants to Lessee that, as of the Effective Date,
Lessor is the sole owner, in fee simple, of the Leased Premises. Lessee's
obligations under this Lease are contingent upon Lessor obtaining and delivering
to Lessee, on or before [*], a non-disturbance agreement, upon terms and
conditions reasonably satisfactory to Lessee from American Bank, who Lessor
represents is the only holder of a mortgage encumbering the Leased Premises. In
the event Lessor fails to timely deliver such agreement or cause the existing
mortgage to be released, Lessee shall have the right to terminate this Lease by
giving Lessor written notice of termination on or before [*].
23. LIENS. If, because of any act or omission of Lessee or anyone
claiming through or under Lessee, any mechanic's or other lien or order for the
payment of money shall be filed against the Leased Premises or the Leased
Premises, or against Lessor (whether or not such lien or order is valid or
enforceable), Lessee shall, at its expense, cause the same to be canceled and
discharged of record or bonded against (and if bonded against, Lessee shall have
the right to contest the matter in appropriate proceedings), if permitted by
applicable law, within thirty (30) days after the date of notification, and
shall also indemnify and hold harmless Lessor from and against any and all
costs, expenses, claims, losses and damages (including reasonable attorneys'
fees) in connection therewith.
24. INTEGRATION. It is expressly understood and agreed by and between
the parties hereto that this Lease sets forth all the promises, agreements,
conditions and understandings between Lessor and Lessee relative to the Leased
Premises and that there are no oral promises, agreements, conditions, or
understandings between the parties with respect thereto.
25. SHORT FORM LEASE AND ESTOPPEL CERTIFICATE. The parties will, at any
time upon the request of either one, promptly execute duplicate originals of an
instrument, in recordable form, which will constitute a short form of this Lease
setting forth a description of the Leased Premises, the term of this Lease and
any portion hereof, excluding the rental provisions.
- --------
[*] omitted, confidential material, which material has been filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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<PAGE> 20
In the event that either party requires an Estoppel Certificate
confirming the terms of this Lease, the other party shall provide same, in the
form reasonably requested by the other party, within ten (10) business days of
such party's request.
26. SUCCESSORS AND ASSIGNS. This Lease and all the covenants, provisions
and conditions herein contained shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
27. BROKERS. Lessor agrees to pay a commission to Colliers International
and Tower Properties (collectively "Brokers") pursuant to a separate agreement.
If this Lease transaction is not consummated, then no commissions shall be
earned or owed. Lessee and Lessor covenant and represent to each other that
except as set forth above, no party is entitled to be paid a fee or commission
in connection with the transaction contemplated by this Lease, and neither
Lessee nor Lessor has had any dealings or agreements with any other individual
or entity requiring the payment of such a fee or commission. If any individual
or entity, other than Brokers, shall assert a claim to a finder's fee, or
commission, or other similar fee against either Lessee or Lessor on account of
an alleged employment, arrangement or contract as a broker or a finder, then the
party who is alleged to have retained such individual or entity shall and does
hereby agree to indemnify and hold harmless the other party from and against any
such claim and all costs, expenses, liabilities and damages incurred in
connection with such claim or any action or proceeding brought thereon.
Notwithstanding any other provision of this Lease to the contrary, the indemnity
and hold harmless provisions contained in this Section shall survive the
execution of this Lease and if this Lease is terminated, the termination of this
Lease.
29. GOVERNING LAW; TIME OF ESSENCE. This Agreement shall be governed,
interpreted and construed in accordance with the laws of the State of Kansas.
Time limits stated herein are of the essence of this Lease.
30. FORCE MAJEURE. In the event either Lessor or Lessee shall be delayed
or hindered or prevented from the performance of any obligation required under
this Lease (other than Lessee's obligation to pay rent or other charges under
this Lease) by reason of industry wide strikes or lockouts, inability to procure
materials, power failure, fire or other unavoidable casualty beyond such party's
reasonable control, acts of God, adverse weather conditions which would delay
the work of any prudent contractor performing similar work in the same
geographical area, governmental laws or regulations not in effect as of the
Effective Date, riots, insurrection, war or any other reason not within the
reasonable control of such party, as the case may be, then the performance of
such obligation shall be excused for the period of such delay and the period for
the performance of any such act shall be extended for a period equivalent to the
period of such delay; provided, however, that in the event of any construction
delay caused by any of the events set forth above, Lessor shall use its best
efforts to adhere to the original construction schedule with respect to the work
so delayed (including, but not limited to, by utilizing overtime labor and such
actions as may be required) to the extent Lessee agrees to pay any increase in
costs incurred by Lessor with respect thereto. The
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<PAGE> 21
affected party shall use all reasonable diligence to remove the force majeure as
quickly as possible but neither party shall be required to make any concession
or grant any demand or request to bring to an end any strike or other concerted
act of workmen.
31. SIGNS. Lessee shall obtain Lessor's prior consent, which shall not
be unreasonably withheld or delayed, prior to placing any sign on or about the
Leased Premises. Any such sign must conform with all applicable municipal
ordinances, regulations and rules of Lessor.
32. LIMITATION ON LESSOR'S LIABILITY AND EXCEPTIONS TO DEMISE. As used
in this Agreement, the term "Lessor" is limited to and includes only the owner
of the Leased Premises at the time in question. In the event that the owner of
the Leased Premises transfers title thereto, then upon such transfer, the owner
conveying title shall be automatically relieved as of the date of such transfer
of any and all liabilities or obligations with respect to this Lease other than
obligations arising prior to the date of such transfer.
The leasehold interest created by this Lease is subject to all
easements, covenants and other encumbrances of public record affecting the
Leased Premises and all applicable governmental laws, regulations, and codes.
Lessor represents to Lessee that Exhibit E is a list of all such easements,
covenants and other encumbrances of record affecting the Leased Premises other
than applicable governmental laws, regulations, and codes. Lessor warrants that
true and correct copies of the easements, covenants and other encumbrances of
record affecting the Leased Premises have been delivered to Lessee.
33. APPORTIONMENT OF CHARGES If the Leased Premises constitute less than
all of the improvements and interest in the Land, the real estate taxes and
other charges assessed against the Leased Premises and the remainder of the Land
shall be allocated to the Leased Premises as Lessor and Lessee shall reasonably
agree, but, failing agreement, on the basis of the amount of square feet of
floor area of the Leased Premises vis a vis the square feet of floor area of all
improvements on the Land.
34. SUBROGATION. Lessor and Lessee each hereby release each other from
responsibility for, and waive any and all claims of recovery for any damage or
loss arising from the any cause covered by the policies of insurance required by
this Lease, and claims submitted thereunder. Each party shall provide notice to
its insurance carrier or carriers of this mutual waiver and release and shall
cause its respective insurance carriers to waive all rights of subrogation
against the other.
35. CAPTIONS. The captions and headings used in this lease are for the
purpose of convenience only and shall not be construed to limit the meaning of
any part of this lease.
36. BOND FINANCING. Lessor and Lessee agree to fully cooperate with each
other in connection with obtaining the most desirable bond financing available
with respect to the Leased
- 21 -
<PAGE> 22
Premises that allows the City of Coffeyville to grant a partial or
complete real property tax abatement with respect to the Leased Premises. Lessor
agrees, with Lessee's assistance, to use its best efforts to obtain such
financing. If tax-exempt or taxable bond financing is obtained, Lessor shall pay
all costs, expenses, underwriting fees and reasonable attorney fees incurred in
obtaining such bond issue and Lessee shall reimburse Lessor for such fees up to
the amount of $[*] within fifteen (15) days after the bond(s) are issued.
[The remainder of this page is intentionally left blank.]
IN WITNESS WHEREOF, the parties have hereunto set their hands the day
and year first above written.
"LESSOR"
TGFW II, L.L.C.
By: /s/ Herbert L. Krumsick
-----------------------------
Herbert L. Krumsick, Manager
"LESSEE"
AMAZON.COM.KSDC, INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
- ----------
[*] omitted, confidential material, which material has been filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
- 22 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
AMAZON.COM, INC. FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 5,248
<SECURITIES> 1,437,717
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 45,236
<CURRENT-ASSETS> 1,525,278
<PP&E> 79,385
<DEPRECIATION> 18,785
<TOTAL-ASSETS> 1,812,984
<CURRENT-LIABILITIES> 201,585
<BONDS> 1,533,862
0
0
<COMMON> 1,614
<OTHER-SE> 75,923
<TOTAL-LIABILITY-AND-EQUITY> 1,812,984
<SALES> 293,643
<TOTAL-REVENUES> 293,643
<CGS> 228,852
<TOTAL-COSTS> 228,852
<OTHER-EXPENSES> 120,695
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,688
<INCOME-PRETAX> (61,667)
<INCOME-TAX> 0
<INCOME-CONTINUING> (61,667)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (61,667)
<EPS-PRIMARY> (0.39)
<EPS-DILUTED> (0.39)
</TABLE>
